Johnson v. Downing

McCuuuoch, J., (after stating the facts.) According to the pleadings and testimony in the case, the Cox note was delivered by appellee to appellants as collateral security for debt owing by the former to the latter. The note bears date of September 27, 1898, and was payable in forty-nine days after date, and therefore fell due on November 15, 1898. The evidence is conflicting as to whether appellants presented this note to the makers, and in due time notified appellee of its nonpayment; but it is undisputed that the note was indorsed and delivered to appellants by appellee before maturity, or at least some time before the date of the execution of appellee’s note to appellants, December 13, 1898. This being true, appellants cannot be held liable for a failure to make demand of payment and give notice of nonpayment. Appellee, by subsequently executing to appellants his note and mortgage for the full amount of his debt, waived any liability of appellants to him as indorser by reason of their failure to have made demand and given notice of nonpayment. If he intended to insist upon a credit of the amount of the Cox note, he should have claimed it before executing his note to appellants for the full amount of his debt. By retaining possession of the Cox note as collateral security to appellee’s note to them, appellants were bound only to use reasonable diligence to collect it, and are liable only for negligence in failing to take the proper steps to collect the note and protect appellee from loss. Colebrooke on Col. Securities, §114; Jones on Pledges & Col. Securities, § § 692, 693; 22 Am. & Eng. Enc. Law, pp. 901, 902; Hanover Nat. Bank v. Brown (Tenn.), 53 S. W. 206; Reeves v. Plough, 41 Inch 204; Cooper v. Simpson, 41 Minn. 46, 42 N. W. 601, 4 L. R. A. 194, 16 Am. St. Rep. 667. The evidence in this case does not show (the burden of proof being upon the appellee to establish that fact) that appellants failed to exercise due diligence to collect the note, or that any loss resulted from appellants’ alleged failure to present the note for payment and promptly notify appellee of the nonpayment. Appellants were not liable for mere delay in enforcing the collateral, especially where there has been no demand upon them to sue the makers of the note. Colebrooke on Col. Securities, § 208; Friend v. Smith Gin Co., 59 Ark. 86; 26 S. W. 374. Appellee had a perfect right to pay off the debt to appellants at any time, and require a surrender of the collateral note; but, having failed to do this, or make demand upon appellants to sue on the note, he cannot complain of mere delay on the part of appellants in forcing payment of the collateral note. The same may be said of the Cahoon note. The evidence does not show that appellants ever accepted the note as a pro tanto payment, or otherwise than as collateral security, or that they ever consented to a sale of the mortgaged chattels. At most, they were only guilty of delay in bringing suit to enforce the security. We think the chancellor erred in allowing appellee credit for either of these notes'. The note sued on stipulated that it should bear “interest from date at the rate of ten per cent, per annum,” without any stipulation for interest after maturity.. Under the rule established by many decisions of this court, interest must be computed at the rate of ten per cent, from date to maturity, and thereafter at six per cent. Newton v. Kennedy, 31 Ark. 626, 25 Am. Rep. 592; Pettigrew v. Summers, 32 Ark. 571; Gardner v. Barrett, 36 Ark. 476; Johnson v. Myer, 54 Ark. 437, 16 S. W. 121. Computing interest according to this rule, and after allowing appellee all credits for payments made, including the payment of $56.09 made since the commencement of this suit, we find that appellee is still indebted to appellants in the sum of $124.38, with interest at six per cent, per annum from February 4, 1902, the date of the last payment. The decree is therefore reversed and remanded, with directions to enter a decree in favor of appellants for the above amount and interest aforesaid, .and costs of suit, and that the mortgage be foreclosed.