to indemnify an accommodation indorser, it has been held to inure in equity to the benefit of the holder, so that it cannot be released by the indorser.306 But if a mortgage secures several notes, and one of them is transferred by the payee to A., and the mortgage is afterwards released by the payee, without A.'s knowledge, and the property sold to a purchaser without notice, A. will be estopped from denying the release, after allowing the mortgagee to retain legal title and control of the mortgage.307 If a note is made to a partnership, A. & B., and A. agrees with the maker to take up the note on a sale of lumber by the maker to the firm, it will not amount to a release of the maker by the firm.808 And a member of an insolvent firm cannot credit his individual indebtedness to the maker, on a note held by the firm, as against the creditors of the firm.309 Where a note is transferred, however, before its maturity, fraudulently, to avoid a defense, the payee will be bound by a release executed by his indorsee.310 § 1845. It is no defense to an action, brought by the holder of a check, that a settlement had been made between the drawee and the bankrupt drawer.311 And, in general, a release made by an indorser will not bind his indorsee.312 So, a release by the payee of a nonnegotiable duebill or draft will not (as against his assignee) discharge the maker, if he has notice of the transfer.313 In like manner, the pledgee of a note will not be bound by a release by the pledgor to the maker, 670. Unless the mortgage was made only for his personal indemnity. Hartford & N. Y. Transp. Co. v. First Nat. Bank of Hartford, 46 Conn. 569. 306 Dick v. Mawry, 9 Smedes & M. (Miss.) 448. 307 Swartz v. Leist, 13 Ohio St. 419. 308 Lewis v. Westover, 29 Mich. 14. See, too, Webber v. Alderman, 102 Mich. 638, 61 N. W. 57. 309 Mayer v. Garber, 53 Iowa, 689, 6 N. W. 63. 310 Atkinson v. Runnells, 60 Me. 440. 311 State Sav. Ass'n v. Boatmen's Sav. Bank, 11 Mo. App. 292. 812 Butler v. Chapin, 28 Ill. 230. Especially after notice to the maker of the transfer, Russel v. Cornwell, 2 Root (Conn.) 122. And although the latter did not take up the note until afterwards. Brown v. Williams, 4 Wend. (N. Y.) 360. And by statute such release is of no effect as against the owner in DELAWARE (Rev. Code, c. 63, § 8). 313 Kimball v. Huntington, 10 Wend. (N. Y.) 675. And the good faith of such release is a question for the jury. Stevens v. Parker, 3 Allen (Mass.) 256. where the maker has notice of the pledge.814 And if the maker of a note pays part of the amount to his indorsee, on his agreement not to bring suit against him for the balance, and a judgment is afterwards obtained, and levy made by the indorsee against the indorser, and subsequently assigned to a third party, who agreed to obtain a discharge for the maker, it will not prevent the indorser from recovering against the maker the amount paid by him on such judgment.315 And if the holder discharges the acceptor from a ca. sa., the release cannot be set up against the purchaser, who took the bill after maturity, from an indorser who took it up before the release was given,316 Release to Prior Party. § 1846. A release given to the drawee before he has accepted the bill, or incurred any liability, is of no effect.317 So, the release of an insolvent maker before maturity will not discharge either the maker or indorser from his contingent liability to a bona fide purchaser who holds the note at maturity.318 If the holder releases the maker, he will thereby discharge an intermediate accommodation indorser.319 But his release of the maker's real property from execution will not be an absolute discharge of an accommodation indorser.320 And a release given to the maker without any consideration is of no effect, and will not discharge the indorser.321 A valid release to an indorser releases subsequent indorsers,322 but not prior parties.323 And even 314 Wheeler v. Wheeler, 9 Cow. (N. Y.) 34. 317 Byles, Bills, 243; Chit. Bills, 351; Drage v. Netter, 1 Ld. Raym. 65; Hartley v. Manton, 5 Q. B. 247. But release of acceptor discharges drawer. First Nat. Bank v. Day, 64 Iowa, 118, 19 N. W. 882. 318 Keeler v. Bartine, 12 Wend. (N. Y.) 110. 319 In re Wilder, 3 Fed. 859. And see & 769, supra. 820 Dunn v. Parsons, 40 Hun (N. Y.) 77. And the release from execution of the bankrupt maker, as a fraudulent preference under the statute, will not release the indorser, although it bars the holder's proof of claim against the maker. Streeter v. Bank, 147 U. S. 37, 13 Sup. Ct. 236. 321 Crawford v. Millspaugh, 13 Johns. (N. Y.) 87; Hutchins v. Nichols, 10 Cush. (Mass.) 299. 322 Newcomb v. Raynor, 21 Wend. (N. Y.) 108; Brewer v. Boynton, 71 Mich. 254, 39 N. W. 49. 823 Bank of Kentucky v. Floyd, 4 Metc. (Ky.) 159. a release to the payee and indorser, for whose accommodation the note was made, will not discharge the maker, if his accommodation character is not known to the holder.324 § 1847. If collateral is surrendered to the principal debtor without the knowledge of his surety (the accommodation maker), the latter will be discharged pro tanto, if the real relation of the party is known to the releasor.325 So, the drawer of a bill will be discharged by a release of the acceptor.326 But an acceptor will not be discharged by a release to the drawer, although he has overestimated the value of the consignment on the strength of which he accepted the bill.327 An accommodation acceptor will be discharged, however, if the holder knowingly receives another bill from the drawer, and agrees not to sue on the original bill, if the latter is paid.3: But a release of the drawer will not discharge subsequent parties, if it contains an express reservation of all other rights of the holder. 329 328 Release to Joint Debtor. § 1848. A release to one joint maker,330 or even to one joint and several drawer or maker, in general, releases all.3 And where a 331 324 Carstairs v. Rolleston, 5 Taunt. 551, 1 Marsh. C. P. 207; First Nat. Bank of Auburn v. Marshall, 73 Me. 79. But see, contra, where his character is known, Flour City Nat. Bank of Rochester v. McKay, 86 Hun, 15, 33 N.. Y. Supp. 365. 325 Guild v. Butler, 127 Mass. 386, although the contrary was held in a former trial, on proof that the holder's knowledge of the release of the parties was obtained before the release, but after he purchased the note. Id., 122 Mass. 498. As to the effect on a surety of the release of his principal, see § 940 et seq., supra. 326 Unless the bill was drawn without funds. Sargent v. Appleton, 6 Mass. 85. Notwithstanding an express reservation of the drawer's lien on certain property of the acceptor. First Nat. Bank of Decorah v. Day, 64 Iowa, 118, 19 N. W. 882. 327 Farmers' & Mechanics' Bank v. Rathbone, 26 Vt. 19. 328 Overend, Gurney & Co. v. Oriental Financial Corp., L. R. 7 H. L. 348. 329 Muir v. Crawford, L. R. 2 H. L. Sc. 456; Stewart v. Eden, 2 Caines (N. Y.) 121; First Nat. Bank of Auburn v. Marshall, 73 Me. 79. And see § 770, supra. 330 Maslin's Ex'rs v. Hiett, 37 W. Va. 15, 16 S. E. 437. But not a release to an infant maker after his repudiation of the contract on coming of age. Young v. Currier, 63 N. H. 419. 331 Byles, Bills, 243; Chit. Bills, 353; Nicholson v. Revill, 4 Adol. & E. 675, joint and several note is taken in payment of the several liabilities of the makers, and one maker is afterwards released, it will revive the original liabilities for which the note was given.332 But a release of one joint maker will not discharge his co-maker from a several mortgage and covenant made by him as collateral.333 The release of a surety will discharge his co-surety.334 A But the effect of releasing a joint debtor may be restricted by the bill itself; 335 or by a recital or reservation in the release.336 formal release cannot, however, be defeated by a verbal agreement of different purport.337 And the release of one joint maker, on his paying part of a note, has been held to be without consideration, and of no effect as a discharge of his co-maker.338 So, an agreement, in consideration of part payment, that the holder should not sue one of the makers, but should sue the others for the joint debt of all.3 339 And if the holder releases an infant joint maker, after he had already disaffirmed the contract, it will not discharge his comaker. 340 In Vermont, the statute provides expressly for a release of one joint maker without discharge of the other. 341 And, in Virginia, this is the case, except that the other debtors are released to the extent of the share of the party released.342 In Tennessee, such re 6 Nev. & M. 192; Evans v. Bremridge, 2 Kay & J. 174; Crawford v. Roberts, 8 Or. 324; Hochmark v. Richler, 16 Colo. 263, 26 Pac. 818. But see, contra, Bradford v. Prescott, 85 Me. 482, 27 Atl. 461. So, where the note is several only. Latta v. Miller, 109 Ind. 302, 10 N. E. 100. 332 Chit. Bills, 353; Cocks v. Nash, 4 Moore & S. 162, 9 Bing. 341. 333 Walls v. Baird, 91 Ind. 429. 334 Gordon v. Moore, 44 Ark. 349. 335 Brooks v. Stuart, 1 Perry & D. 615, 9 Adol. & E. 854; Cocks v. Nash, 9 Bing. 341; Price v. Barker, 4 El. & Bl. 760. 336 Payler v. Homersham, 4 Maule & S. 423; Simons v. Johnson, 3 Barn. & Adol. 175; Shaw v. Pratt, 22 Pick. (Mass.) 305. 337 Lacy v. Kynaston, 2 Salk. 575, 2 Saund. 47dd, note; Cheetham v. Ward, 1 Bos. & P. 630; Brooks v. Stuart, 9 Adol. & E. 854, 1 Perry & D. 615. 338 Ruggles v. Patten, 8 Mass. 480. Especially if the rights against other parties are reserved. Potter v. Green, 6 Allen (Mass.) 442. 339 Bank of Catskill v. Messenger, 9 Cow. (N. Y.) 37. 340 Young v. Currier, 63 N. H. 419. 341 VERMONT (V. S. §§ 1174-1176). 342 VIRGINIA (Code, §§ 2856, 2857). lease is made a question of intention, and it must appear that the other parties consented, and agreed to be liable for the whole debt.343 Set-Off Unliquidated Damages. § 1849. In general, only ascertained money demands can be used by the defendant as a set-off.344 If the set-off proved exceeds the plaintiff's demand, judgment may be rendered for the excess in the defendant's favor, where it would be recoverable in an action between the same parties.345 But unliquidated damages, although arising ex contractu, cannot be set off.348 So, a fortiori, damages recoverable in an action of tort, such as trespass or trover; or resulting from the plaintiff's negligence." But unliquidated damages, arising even out of another contract, may be set up in equity, 348 Richardson v. McLemore, 5 Baxt. 586. 348 347 344 Byles, Bills, 367; 2 Pars. Notes & B. 605; Collins v. Collins, 2 Burrows, 820; Lee v. Lester, 7 C. B. 1008. For American statutes as to set-off see § 1882, infra. 345 Chit. Bills, 681; Tuck v. Tuck, 5 Mees. & W. 109; Moore v. Butlin, 7 Adol. & E. 595, 2 Nev. & P. 436. This is now regulated by statute in most of the states. 346 Loring v. Otis, 7 Gray (Mass.) 563; Pitts v. Holmes, 10 Cush. (Mass.) 92; Mahan v. Ross, 18 Mo. 121; Pratt v. Menkens, Id. 158; Smith v. Smith, 1 Ind. 476; West v. Hayes, 104 Ind. 251, 3 N. E. 932; McSmithee v. Feamster, 4 W. Va. 673; Bolinger v. Gordon, 11 Humph. (Tenn.) 61; Moore v. Weir, 3 Sneed (Tenn.) 46; McCord v. Williams, 2 Ala. 71. But see, contra, Phillips v. Lawrence, 6 Watts & S. (Pa.) 150; Kaskaskia Bridge Co. v. Shannon, 6 Ill. 15. 347 Schweizer v. Weiber, 6 Rich. Law, 159; Central Ohio R. Co. v. Thompson, 2 Bond, 296, Fed. Cas. No. 2,550; Griffin v. Lawton, 54 Ga. 104; Clause v. Press Co., 118 Ill. 612, 9 N. E. 201; Blue v. Bank, 145 Ind. 518, 43 N. E. 655; First Nat. Bank of Arkansas City v. Hasie, 57 Kan. 754, 48 Pac. 22; Riddle v. McKinney, 67 Tex. 29, 2 S. W. 748. But damages for the conversion by the plaintiff of the note sued upon may be set off. Gunn's Adm'r v. Todd, 21 Mo. 303. And, in a suit for penalties under the usury provision of the National Bank Act, the defendant may set off exchange, expenses, and other debts. Barrett v. Bank, 20 Cent. Law J. 133. In an action for the conversion of a note, however, an account cannot be set off. Keaggy v. Hite, 12 Ill. 99. 348 Either in presenting the bill, Harrison v. Wortham, 8 Leigh (Va.) 296; or preserving the collateral deposited, Winthrop Sav. Bank v. Jackson, 67 Me. 570; or insuring the premises mortgaged as collateral, according to agreement, Brighton Five Cents Sav. Bank v. Sawyer, 132 Mass. 185; or in another mat |