North Avenue Savings Bank v. Hayes

Braley, J. If the defendant as one of the makers of the note was jointly and severally liable for its payment, yet it was open to him by way of defence to prove that between the debtors themselves he was a surety, and as this relation fully appears in the body of the instrument, the plaintiff was charged with notice of the fact. Fitchburg Savings Bank v. Torrey, 134 Mass. 239. The note is in the ordinary form without any recitals to show that its payment was secured, and when it was delivered originally there does not appear to have been any agreement to which the defendant was a party that security was to be given for its payment. As the pledge made by the co-surety was either voluntary, or at least without any understanding with the defendant, the course pursued subsequently by the plaintiff in dealing with the collateral cannot be treated as an alteration of the original contract which in itself operated to discharge him. Cambridge Savings Bank v. Hyde, 131 Mass. 77, 79. Sanderson v. Aston, L. R. 6 Ex. 73. By virtue of his suretyship, and not because of his contract, upon paying the note he would have been subrogated to the rights of the plaintiff in any securities pledged to secure its payment, though, as in this case, furnished by a co-surety. Guild v. Butler, 127 Mass. 386. Duncan v. North & South Wales Bank, 6 App. Cas. 1, 19. But as the equitable right on which this defence rests either at law or in equity is, that a surety shall not lose the benefit of any security held by the creditor if at any time he chooses to pay the debt, this indemnity does not extend beyond the actual damage he may be found to have suffered. Worcester Mechanics' Savings Bank v. Thayer, 136 Mass. 459, 462. Boston Penny Savings Bank v. Bradford, 181. Mass. 199. If the plaintiff without his consent surrendered such security, or permitted it to be lost or impaired in value, the defendant would be discharged to the extent of any financial loss he thus is shown to have suffered. Beacon Trust Co. v. Robbins, 173 Mass. 261, 272. [138] The only fact upon which the defendant relies as working his discharge is, that without his knowledge or assent a promissory note of the face value of the principal debt, and held as collateral security for its payment, not having been paid at maturity, was surrendered by the plaintiff with the assent of the co-surety, who was the payee and pledgor, and a renewal note for a similar amount taken in substitution. Beyond the mere recital of the taking of one note in place of the other, the agreed facts contain no statement upon which this defence can be put. This is significant, for before the defendant can be exonerated from making payment according to his promise it must be made apparent that by the conduct of the plaintiff in accepting the substitution he suffered an actual, and not a speculative injury. Coates v. Coates, 38 Beav. 249. State Bank of Lock Haven v. Smith, 155 N. Y. 185. It is not stated that the exchange was made otherwise than in good faith, or that at the time it was not a prudent arrangement entered into for the benefit of all parties in interest. ' Neither is it shown that the acceptance of one note for the other resulted in any wrong to the defendant, for the value of the collateral held in either form depended upon the ability of the maker to meet his obligation. If the original note had been retained, it does not appear that it would have been paid within the time covered by the note taken in renewal, or that during that time the solvency of the maker had become impaired, although later, upon suit being brought, only a portion of the note was collected. By reason of the absence of any affirmative proof that the plaintiff’s action deprived him of a benefit that might have arisen if the collateral note had been retained, the defendant fails upon the agreed facts, under which the case is submitted, to make it manifest that he has suffered any monetary loss, and consequently he is not released. Coleman v. Lewis, 183 Mass. 485. State Bank of Lock Haven v. Smith, ubi supra. Eaton v. Waite, 66 Maine, 221. Bull v. Coe, 77 Cal. 54, 62. Merchants Ins. Co. v. Herber, 68 Minn. 420, 428. Judgment affirmed.