but the influence of chancery modified the common law so that a surety was discharged only to the extent to which contribution was denied by the release of a co-surety.81

If the creditor in releasing one surety reserves his rights against the co-surety, no discharge of any amount can be claimed.82 While a covenant never to sue is construed as a release, a covenant not to sue for a limited time is not so construed, but the obligor's remedy, if sued within the time, is upon the covenant.88 The modern tendency is against construing such an agreement as a release, even though technical words are employed, but to hold the remaining sureties to the obligation they assumed, as if the right to proceed against them had been reserved.8 84

Whether contribution may be recovered by a paying surety against a co-surety who has been discharged by the creditor, is a question on which the courts are divided. It would seem on principle that the implied contract of a surety to contribute should not be more binding than his duty to the obligee, and if released by him, whether by contract or by act in releasing securities, he is released as to all.85 However, there is authority which permits contribution against a co-surety who has been discharged from his principal obligation.86

82 Thompson et al. v. Lack (1846) 3 C. B. 540, 136 Eng. Rep. Reprint 216.

81"It seems also to be well set- v. Board of Commissioners of Altled that the release of one or more bany County (1876) 1 Wyo. 302. sureties without the assent of the co-sureties will operate at law to discharge the latter, because it is a cardinal principle of suretyship that the surety has the right to stand by the very terms of the contract, and the creditor will not be permitted to change or alter the contract without concurrence of all parties to it."'

"In equity, however, the rule is different, and the release of one or more sureties will not be construed to have this effect, unless it subjects the co-sureties to an increased risk or liability." Smith et al. v. State to Use of County Commissioners (1877) 46 Md. 617, 619. Accord: State of Missouri v. Midgett et al. (1869) 44 Mo. 305. See Trabing

83 Foster v. Purdy (1843) 5 Met. (Mass.) 442.

84 Bradford v. Prescott (1893) 85 Me. 482, 27 Atl. 461, 463.

85 Brown v. McDonald (1835) 8 Yerg. (Tenn.) 158, 29 Am. Dec. 112.

86It is very clear that co-sureties are liable to contribution among themselves; and that the discharge of one of them from his principal obligation, if the others are not discharged, will not release him from the liability to contribute for their indemnity." Hoar, J., in Clapp et al. v. Rice et al. (1860) 15 Gray (Mass.) 557, 77 Am. Dec. 387.

§ 106. Judgment in favor of the principal. A surety or guarantor cannot be liable unless the creditor has a right of action against the principal. Of course, in case of a personal defense to the principal, such as infancy or coverture, the surety may be bound when the principal is not.87 But if there is a real defense, and judgment is in favor of the principal, the undertaking being joint and several, no action can be maintained against the surety. Although the surety was not a party to the action brought against the principal, the latter's liability cannot be relitigated in an action brought against the surety.88 If judgment is obtained against the guarantor and subsequently the principal is discharged because of defenses inherent in the transaction between him and the obligee, or because of the act of the creditor, the guarantor can prevent the enforcement of the judgment against him by proceeding in equity.89

§ 107. Addition of parties to an instrument. So far as a non-negotiable instrument is concerned, any addition of parties made after its completion discharges all who have not consented, except the principal. The rule in the case of deeds governs such undertakings, and prior to the Negotiable Instruments Law applied in the same manner to negotiable instruments.90 After it is signed by the principal and surety, and accepted by the obligee the instrument is binding. Ordinarily, any undertaking is effective from the date of delivery rather than from the date it is made. It frequently happens that the surety signs at the request of the principal who delivers the instrument to the obligee. In doing this, the surety constitutes the principal his agent to make delivery.91 The addition of another surety by

87"Where a party becomes the surety of a married woman, an infant, or other person incapable of contracting, he is bound, although the principal is not." Brandt on Suretyship (1905, 3d Ed.) Sec. 171.

88 Stevens V. Carroll, County Treasurer, et al. (1906) 131 Ia. 170, 105 N. W. 653; McCloskey, Bigley & Co. v. Wingfield & Bridges et al. (1877) 29 La. Ann. 141; Everding

& Farrell v. Toft et al. 82 Ore. 1, 160 Pac. 1160.

89 Michener et al. v. Springfield Engine & Thresher Co. et al. (1895) 142 Ind. 130, 40 N. E. 679, 31 L. R. A. 59; Ames v. McClay et al. (1862) 14 Ia. 281.

90 Bank of Limestone v. Penick (1827) 5 T. B. Mon. (Ky.) 25, 32. 91 Thomas v. Bleakie (1884) 136 Mass. 568.

procurement of the obligee relieves the first surety who signed because (a) the addition of the second surety is an alteration, and (b) the first surety may choose those with whom he desires to deal as co-obligors. Even though the creditor subsequently cancels the signature of the second surety, leaving the undertaking as originally executed, the first surety is discharged, for the reason that:

"A payee should not be allowed, thus at his mere will, however honest his motive, to tamper with a contract which should be kept entire and unmutilated, and which frequently, and indeed, generally, is the best and only evidence of the rights, equities and liabilities of all the parties to it. The policy of the law is, to look to and secure this integrity, and especially when it is assailed by the payee himself, without looking beyond to ascertain whether there has been actual injury or fraud." 98

Additional, separate undertakings by other sureties, however, will not release those who have guaranteed the performance of the principal by independent instruments at a prior time. The subsequent obligations are to secure protection, and so long as they do not change the prior contract, they do not release sureties on prior separate bonds.94

The surety who signs subsequent to the delivery of the completed instrument to the obligee is not discharged even though the prior sureties are no longer liable to the obligee and no contribution can be recovered from him.95

The addition of a surety prior to the delivery of the instrument to the obligee will not discharge the prior sureties even though they did not consent to others signing with them. The

92 Berryman v. Manker (1881) 56 Ia. 150, 9 N. W. 103. But see Anderson et al. v. Bellinger et al. (1889) 87 Ala. 334, 6 So. 82, 4 L. R. A. 680, 13 A. S. R. 46; Sampson v. Barnard (1867) 98 Mass. 359.

98 Hall's Adm'x V. McHenry (1865) 19 Ia. 521, 525-526, 87 Am. Dec. 451.

94 Evans et al. v. Illinois Surety Co. (1920) 220 Ill. App. 216, affirmed in (1921) 298 Ill. 164, 131 N. E. 268.

95 Rhoades et al. v. Leach et al. (1895) 93 Ia. 337, 61 N. W. 988, 57 A. S. R. 281. See State v. Paxton et al. (1902) 65 Neb. 110, 90 N. W. 983.

instrument is not complete until its delivery and acceptance by the obligee, and until it becomes a contract, it cannot be said to be altered.96

Obviously, the addition of a new principal-maker changes the entire effect of any undertaking; and the signature of another principal after delivery adds to the burden of the surety which he did not assume. 97 However, the addition of another guarantor, whether prior or subsequent to the delivery of the instrument will not affect the principal, or discharge him. He is primarily liable for the debt, and can look to no one else for reimbursement or contribution. The reasons which discharge a surety by the addition of a subsequent co-surety without his consent are not available to the principal.98

§ 108. The creditor's duty to the principal's collateral. While a creditor is not, in the absence of an express agreement or a statute, required to exercise any diligence to collect the debt due him, nor is he under any obligation to resort to collateral possessed by him, nevertheless he must not trifle with such securities pledged for the payment of the debt, or release them. While such collateral is possessed by the creditor for the purpose of discharging the debt, it is not for the protection of the creditor alone. The surety or guarantor has rights in it, which prevent the creditor from destroying it or disposing of it.99

96 Graham v. Rush et al. (1887) 78 Ia. 451, 35 N. W. 518; Mattingly et al. v. Riley (1899) 20 Ky. Law Rep. 1621, 49 S. W. 799; Ward v. Hackett et al. (1883) 30 Minn. 150, 14 N. W. 578, 44 Am. Rep. 187; Babcock v. Murray et al. (1894) 58 Minn. 385, 59 N. W. 1038.

97 Wallace et al. v. Jewell (1871) 21 Oh. St. 163, 8 Am. Rep. 48.

98 Mersman V. Werges et al. (1884) 112 U. S. 139, 28 L. Ed. 641, 5 Sup. Ct. 65; Miller v. Finley et al. (1872) 26 Mich. 249, 253, 12 Am. Rep. 306.

99 Hubbard, Adm'r v. Pace et al. (1879) 34 Ark. 80; Day v. McPhee et al. (1907) 41 Colo. 467, 93 Pac.

670; Bedwell et al. v. Gephart (1885) 67 Ia. 44, 24 N. W. 585; New England & Mutual Life Insurance Co. v. Randall (1890) 42 La. Ann. 260, 7 So. 679; Ferguson v. Turner (1841) 7 Mo. 497; Kiam v. Cummings et al. (1896) 13 Tex. Civ. App. 198, 36 S. W. 770; First National Bank of Cumberland et al. v. Parsons et al. (1896) 42 W. Va. 137, 24 S. E. 554.

Where the principal reacquires the security by fraud, see Sternbach v. Friedman et al. (1898) 23 Misc. Rep. 173, 50 N. Y. S. 1025, as modified in 34 App. Div. 534, 54 N. Y. S. 608.

"It is well settled in this and other jurisdictions that when a creditor receives security for a debt for which a surety is bound, the security inures to the benefit of the surety, whether it is obtained at the time of or subsequent to the surety's assumption of liability, or with or without the surety's knowledge.

"It is equally well settled that when the creditor, or principal obligor with the consent of the creditor, relinquishes, substitutes, or misapplies the security without the consent of the surety, the latter is thereby released from his obligation to the extent he is injured; that is to say, he is released in an amount equal to the decrease in the value of the security by reason of its manipulation. If the manipulation of the security does not have the effect of changing the contract of suretyship and does not injure the surety, however, his liability is not affected thereby, and he will be bound as originally contemplated." 100

The security cannot be applied to another debt owing the creditor by the principal. But the fact that the principal has a general deposit in a creditor-bank after the maturity of his obligation, which is not applied to the one to which the surety is a party, does not release the surety, because there has been no tender by the principal, and the bank is the owner of the money. The debtor-creditor relation exists between the principal-depositor and the obligee-bank.2

.100 Hatch et al. v. First State Bank of Bracketville (1925) Texas Ct. Civ. App. 270 S. W. 1093.

1 Pearl v. Deacon (1857) 3 Jurist, N. S. 879. See report of the same case 24 Beav. 186, 53 Eng. Reports Reprint 328.

2 Highland Park Bank v. Sheahen (1909) 149 Ill. App. 225; National Mahaiwe Bank v. Peck (1879) 127 Mass. 298, 299; National Bank of Newburgh v. Smith (1876) 66 N. Y. 271, 23 Am. Rep. 48; Farmers' State Bank of Colgan v. Kvamme (1924) 50 N. Dak. 549, 197 N. W. 143. Contra: Franklin Savings & Trust Co. of Pittsburg v. Clark (1925) 283 Pa. 212, 129 Atl. 56.

In no case does it appear the bank owes a duty to apply a deposit to the discharge of a debt if it is made after the maturity of a debt. First National Bank of Lock Haven v. Peltz (1896) 176 Pa. St. 513, 35 Atl. 218, 36 L. R. A. 832, 53 A. S. R. 686.

In Pickering v. Day (1867) 3 Houston (Del.) 474, 95 Am. Dec. 291, 309, the duty of the creditor to apply payments made to him is thus stated: "If there be several debts due from a person, and he pays money to his creditor, the debtor has a right to appropriate the payment to which debt he pleases. But he must make the appropriation at the