Court Opinion

ID: 7367525
Source: CourtListenerOpinion
Date Created: 2022-07-27 23:53:08.046417+00
Date Added: 2024-06-11T16:20:48.729334
License: Public Domain

de GRAFFENRIED, J.
On December 1, 1910, W. D. Smith, M. Y. Coffey, A. J. Montgomery, and T. D. Yarbrough made a note to the Bank of Moulton for $281.18. The Bank of Moulton transferred, for value, without recourse, the note to Long. Long transferred the note, for value, without recourse, to A. J. Mont*441gomery and M. Y. Coffey, two of the makers of the note. A. J. Montgomery and M. Y. Coffey transferred the note to E. B. Downing, “without recourse on us in law or equity.” Downing transferred the note to the plaintiff. W. D. Smith was the principal on said note, and Coffey, Montgomery, and Yarbrough were sureties only. But for the fact that when A. J. Montgomery, and M. V. Coffey assigned the note they did so Avithout recourse on them either “in law or equity,” we might be able to hold (but this we in no way decide) that the note was after this assignment binding on all the parties.
The reissuance of the note was, however, with the stipulation that Montgomery and Coffey were not to be liable thereon. As Downing was of a mind to take it upon these conditions, they are, of course, binding on him.—Wilkerson v. Daniels, 1 G. Greene (Iowa) 179.
Were we to hold that the reissuance of the note operated to hold Montgomery and Coffey as makers, we destroy all meaning to the indorsement “without recourse in laiv or in equity.” A promissory note is a joint and several obligation of its makers, and if, when Downing bought the note, Montgomery and Coffey transferred an obligation on which they remained after the indorsement, jointly and severally liable to pay money, then they did an absurd and useless thing Avken they indorsed the note without recourse on them. The effect of their indorsement was, however, to destroy their liability on the note, and, when they so indorsed it, they also released their co-surety, Yarbrough, from liability on the note. Yarbrough was entitled to the right, upon the payment of the note by him, against his cosureties to contribution. This right of contribution was destroyed Avhen the transfer was made Avithout recourse. The character of the obligation, in so far as *442Yarbrough is concerned, was materially changed, and, upon every principle of law, Yarbrough was discharged.
2. The above principles, however, do not affect the liability of Smith, the principal debtor. The signature of the sureties to the note was for his accommodation merely. His obligations to pay the note are now just what they were on the day he made the note. We see no reason why a surety may not buy and have a note, on which he is surety, assigned to him and keep it alive as against his principal. We see no reason why such a surety may not, after such a purchase, bring a suit against the principal and recover judgment thereon just as if he was a stranger to the note. The note, in such a case, evidences, not the surety’s debt, but the principal’s debt, and there can therefore be no injury to a principal, if such a course is pursued.
We think that the evidence shows conclusively that, when Montgomery and Ooffey bought the note and had it transferred to them, they did not pay it, but that, in their hands, before its issuance, it was certainly as between them and the principal, Smith, a binding obligation on Smith.—Wilkerson v. Daniels, supra; Hopkins v. Farrell & Scott, 32 N. H. 425; Davis, Adm’r, v. Stevens, 10 N. H. 186.
. 3. The above being our conclusion, it follows that the judgment of the trial court must be reversed, and the cause remanded -for further proceedings in the court below.
Reversed and remanded.
McClellan, Sayre, and Gardner, JJ., concur.