thereto attaching. of paper payable to bearer, and transferable by delivery ": Challiss v. MeCrum, 22 Kan. 157, 161; 31 Am. Rep. 181; Hannum v. Richardson, 48 Vt. 508; 21 Am. Rep. 152; Watson v. Chesire, 18 Iowa, 202; 87 Am. Dec. 382, and note 389; Dumont v. Williamson, 18 Ohio St. 515; 98 Am. Dec. 186; Epler v. Funk, 8 Pa. St. 468; Rice v. Stearns, 3 Mass. 225. In Hecht v. Batcheller, Mass. (not yet reported), the payees and owners of a promissory note received by them in the ordinary course of business sold it "without recourse," through a broker, to the plaintiffs in that suit. Two hours prior to the sale, the makers of the note made a voluntary assignment for the benefit of their creditors, which fact was not known at the time of the sale by any of the parties to the sale. A suit was thereafter brought by the holder of the note against the payee or seller thereof to recover the sum paid therefor; and the court said: "The offer of a note for sale without recourse to the seller does not involve any representation as to the solvency of the parties to it, or as to its value. . . . . The defendants sold the note in good faith. So far as the evi dence shows, neither party, at the time of sale, spoke of or inquired about or knew anything about the failure of the makers. They stood upon an equal footing, and they had equal means of knowing the standing of the maker. It was understood that the defendants were selling the note without recourse to them. They did not expressly warrant the value of the note; and we are of the opinion that no warranty could fairly be inferred, from the circumstances, of the solvency of the maker, or that they continued in business"; and recovery was denied.

"It makes the transaction the equivalent of a delivery

PAROL EVIDENCE TO VARY CONTRACT OF INDORSEMENT. - As a general rule, oral evidence is inadmissible to change the contract of indorsement: Barnard v. Gaston, 23 Minn. 192; Day v. Thompson, 65 Ala. 269; Preston v. Ellington, 74 Id. 133; note to Dewey v. Warriner, 22 Am. Rep. 93; or to show an agreement that the indorser should not be held liable as such: Courtney v. Hogan, 93 Ill. 101. This rule, however, is not in force under Bome of the decisions to the full extent here given: Ross v. Espy, 66 Pa. St. 481; Smith v. Morrill, 54 Me. 48; Mendenhall v. Davis, 72 N. C. 150, and cases herein post. The general rule relates to restrictive indorsements, and extended, it applies to indorsements without recourse. Hence it has been held that an indorser may not, as against a subsequent bona fide indorsee for value, defend upon the ground that the words "without recourse were verbally agreed between him and the indorsee's agent to be written over the indorsement, and that his indorsement was only made in view of such agree. ment, and for the sole purpose of transferring the title to that indorsee: Lewis v. Dunlap, 72 Mo. 174; Hill v. Shields, 81 N. C. 250, 254; Commissioners of Iredell v. Watson, 82 Id. 308; and other cases hold that parol evidence is inadmissible to change a simple indorsement of a promissory note into an indorsement without recourse: Note to Stack v. Beach, 39 Am. Rep. 116; Doolittle v. Ferry, 20 Kan. 230; 27 Am. Rep. 166, citing 1 Daniel on Negotiable Instruments, sec. 719; 1 Greenl. Ev., sec. 276, note 2; Lee v. Pile, 37 Ind. 107; Wilson v. Black, 1 Blackf. 509; Bartlett v. Lee, 33 Ga. 491; Woodward v. Foster, 18 Gratt. 205; Bank of Albion v. Smith, 27 Barb. 489; Fassin v. Hubbard, 55 N. Y. 465; United States Bank v. Dunn, 6 Pet. 51; Howe v. Merrill, 5 Cush. 80; Prescott Bank v. Caverly, 7 Gray, 217; Wright v. Morse, 9 Id. 337; Biglow v. Colton, 13 Id. 310; Goudy v. Harden, 7 Taunt. 159; see also Skinner v. Church, 36 Iowa, 91; Union Bank v. Crine, 33 Fed. Rep. 809. Dale v. Gear, 38 Conn. 15; 9 Am. Rep. 353; and in Charles v. Denis, 42 Wis. 56, 24 Am. Rep. 383, the same rule was stated with a limitation to cases

where there was no fraud or mistake. But as to subsequent holders with notice, examine Van Valkenburgh v. Stupplebeen, 49 Barb. 99. In Lee v. Pile, 37 Ind. 107, the rule has been extended in its strictness, and it is there held that even between the immediate parties, it is no sufficient defense that there was an agreement that the note should be without recourse, and that parol evidence was inadmissible to show such agreement: See also Smith v. Caro, 9 Or. 278, and cases cited therein; Mason v. Burton, 54 Ill. 349; Courtney v. Hogan, 93 Id. 101. But contra, there are decisions which hold that parol evidence that the indorsement was merely made to transfer the title is admissible, and amounts to an indorsement without recourse, where the paper is held by the indorsee, and has not been put in circulation: Davis v. Brown, 94 U. S. 423; see also Mendenhall v. Davis, 72 N. C. 150; Lewis v. Dunlap, 72 Mo. 174; Breneman v. Furness, 90 Pa. St. 186; Hill v. Shields, 81 N. C. 250, 254; Commissioners of Iredell v. Watson, 82 Id. 308; Lewis v. Williams, 4 Bush, 678; Harrison v. McKim, 18 Iowa, 485; James v. Smith, 30 Id. 55; Patten v. Pearson, 57 Me. 428; Smith v. Morrill, 54 Id. 48; Lynch v. Goldsmith, 64 Ga. 42. So it may be shown that the indorsement was made to the agent of the indorser, or in trust for collection: Lewis v. Dunlap, 72 Mo. 174; Donner v. Chesebrough, 36 Conn. 39; and in Moore v. Cross, 19 N. Y. 227, it is held that a blank indorsement by the payee may be made to conform, even on trial, to an actual agreement to indorse without recourse, if the right so to indorse appears, the actual doing so being regarded as a matter of form.

PRICE V. DIME SAVINGS BANK.

[124 ILLINOIS, 317.]

When a third person

DISCHARGE OF PROPERTY HELD AS COLLATERAL. pledges his property as security for the payment of a debt or obligation of another, such property will stand in the position of a surety of the debtor, and any change in the contract of suretyship which will discharge a surety will release and discharge the property so held as collateral. This rule also applies to mortgages made by one person to secure the debt of another.

SURETY WILL BE DISCHARGED if creditor by valid and binding agreement without the assent of surety gives further time for payment to the prin cipal debtor.

SURRENDER AND CANCELLATION OF OLD NOTES SECURED BY COLLATERAL IS SUFFICIENT CONSIDERATION FOR NEW NOTES, and the holder by such surrender and cancellation puts it out of his power to sue on the indebtedness or enforce its collection until the maturity of the new notes. PRACTICE TO REMAND CAUSE GENERALLY is proper if decree is reversed for variance between the allegations of the bill and the proofs, or for any reason not going to the merits of the cause; otherwise, where upon the merits there can be no recovery.

F. P. Snyder, and Mayo and Widmer, for the appellants.

Allan C. Story, for the appellees.

SHOPE, J. There can be no question that the certiñcate of fifty shares of stock in the Dime Savings Bank was the prop

erty of William K. Reed, and that Kelsey had notice of that fact when he accepted the same as collateral security for the payment of Henry C. Reed's note of November 30, 1872, in lieu of the Buehler note and mortgage. When a third person pledges his property as a security for the payment of a debt or obligation of another, such property will stand in the position of a surety of the debtor, and any change in the contract of suretyship which would discharge a surety will release and discharge the property so held as collateral. This rule also applies to mortgages made by one person to secure the debt of another: Burnap v. National Bank of Potsdam, 96 N. Y. 125; Rowan v. Sharp Rifle Mfg. Co., 33 Conn. 18; White v. Ault, 19 Ga. 551; Barnes v. Mott, 64 N. Y. 397; 21 Am. Rep. 625; Christner v. Brown, 16 Iowa, 130; Ryan v. Town of Shawneetown, 14 Ill. 20; Crawford v. Richeson, 101 Id. 351; Bank of Albion v. Burns, 46 N. Y. 170; Colebrook on Collateral Securities, sec. 239.

The rule is well settled in this state, that if a creditor by a valid and binding agreement, without the assent of a surety, gives further time for payment to the principal debtor, the surety will be discharged: Dodgson v. Henderson, 113 Ill. 360; Davis v. People, 1 Gilm. 409; Waters v. Simpson, 2 Id. 570; Crossman v. Wohlleben, 90 Ill. 537; Myers v. Bank, 78 Id. 257; Danforth v. Semple, 73 Id. 170; Montague v. Mitchell, 28 Id. 481; Kennedy v. Evans, 31 Id. 258. See also Brandt on Suretyship, secs. 301, 304, 307; Bayliss on Sureties and Guarantors, 240 et seq.

The surrender of the old notes, and their cancellation, was a sufficient consideration for the new notes given, and the holder, by such surrender and cancellation, put it out of his power to sue on the indebtedness or enforce its collection until the maturity of the new notes. After the pledging of the certificate of the bank stock in October, 1874, as collateral security, Kelsey, the creditor, on December 1, 1876, had a settlement with Henry C. Reed, the debtor, on which it was found there was a balance of four thousand six hundred dollars due from the latter to the former upon the original indebtedness, and new notes, extending the time of payment for five years, were taken by Kelsey for such balance, and the note for the payment of which this collateral was pledged was canceled and surrendered. To this William K. Reed is not shown to have consented, or that he had any knowledge of it, or notice that his stock was pledged for the payment of the

new notes. It is not shown that he authorized Henry C. Reed or any one else to make such new pledge of his property. But if he had made or authorized the making of said pledge of his property in October, 1879, it appears that two years before the maturity of the last of these notes, Kelsey surrendered them. to the maker, and again extended the time of payment to his debtor by accepting in lieu four other notes, the first for three hundred dollars, due on demand, and the other three for one thousand dollars each, due in one, two, and three years, respectively, from their date, the last of which did not fall due until in October, 1882. This material change in the terms of the contract, without the consent of William K. Reed, was sufficient to release the undertaking that his property should stand as security. As before said, the record fails to show that he had any knowledge of or assented to any of these extensions, or authorized Henry C. Reed or any other person to use his bank stock as a pledge for the performance of such new contract.

It is, however, urged that the pledge of the bank stock was made by William K. Reed on a valuable consideration moving from Henry C. Reed; that it was substituted for the Buehler note and mortgage of one thousand dollars, the property of Henry C. Reed, and therefore the bank stock is to be treated as the property of the latter; and therefore the various extensions given to him would not operate to release the collateral. It is true that if a debtor pledges collaterals of his own as security for his note or bill, the extension of the time of payment will not extinguish his creditor's lien on the collaterals. If Henry C. Reed owned the Buehler note and mortgage, and consented to its exchange for the bank stock, this rule might be invoked, and become decisive of the question being considered. Did he own such note and mortgage? In October, 1874, Kelsey held in his hands various collaterals to secure the payment of the Henry C. Reed note of $7,331, among which was the Buchler note and mortgage for $1,000, payable to Walter Lister, dated July 11, 1873, payable two years after the date thereof. This note was indorsed by Lister, and its payment guaranteed by him. The record fails to show how it came into the hands of Kelsey; but it is fairly inferable, from the evidence, that Henry C. Reed procured the note and mortgage from or through his brother, William K., and pledged the same to Kelsey. It appears, from the testimony of George W. Reed and that of L. B. Shattuck, that this note

AM. ST. REP., VOL. VII.—24

and mortgage were, on February 2, 1874, taken by the Illinois Land and Loan Company in part payment of a debt due from Walter Lister, the payee, and that this company, on May 16, 1874, sold the same to the Dime Savings Bank, with which bank William K. Reed was connected, and of which he was an officer.

On August 2, 1874, as appears by the correspondence, Henry C. Reed requested William K. Reed to send to him (Henry) the mortgage he had spoken of, and two hundred dollars in money. That this was the Buehler mortgage is apparent from the letter of Henry C. Reed acknowledging its receipt, and the subsequent correspondence between William K. and Kelsey, and the letter of the latter to Henry C. Reed. William K. Reed wrote to Levi Kelsey, of the date of October 16, 1874: "Michael Buehler, whose note and mortgage you hold as collateral to H. C. Reed's agreement, wishes to take up his note of one thousand dollars, and have the mortgage released. I send you certificate No. 12 of the Dime Savings Bank for fifty shares stock belonging to me." This shows that its hypothecation was known to William K. Reed, and tends to strengthen the view that it had originally come from him to Kelsey. This letter was received by Kelsey; for, in his letter of October 17, 1874, to Henry C. Reed, he says: "Henry, I have just received a letter from William K. Reed, asking me to send him the last mortgage that you left with me, etc. William sends me fifty shares Dime Savings Bank, to hold in lieu of it. Shall I do it?" The note and mortgage were sent October 23, 1874, to William K. Reed, by Kelsey. It also appears from the note, duly proved, that it was paid to "William K. Reed, cashier," and that, on the same day of its payment, Buehler procured a loan on the same property from the Dime Savings Bank. The record nowhere shows that William K. Reed or the bank was ever called upon to account for the money received on this Buehler note and mortgage. If, as shown, this note and mortgage belonged to William K. Reed, no accounting would be expected; but if it belonged to Henry C. Reed, or to some other person, and had been accounted for, it could have in some way been made apparent. It does not appear that Kelsey, when this note and mortgage were pledged to him, had notice that they belonged to William K. Reed. Henry C. Reed, being the holder and clothed with the evidence of ownership of said note and mortgage, and the same being indorsed in blank by the payee, Lister, might have