party is surety merely, it is only just to require of him that in any subsequent action he may take regarding the debt, he shall not lose sight of the surety's equities.

That Smith and Owen were sureties for Place, and the latter was principal debtor after the dissolution of the co-partnership, seems to us unquestionable. It was then the duty of Place to pay this debt and save them from being called upon for the amount. But if the creditors, having a right to proceed against them all, should take steps for that purpose, the duty of Place to indemnify, and the right of Smith and Owen to demand indemnity, were clear. Every element of suretyship is here present, as much as if, in contracting an original indebtedness, the contract itself had been made to show on its face that one of the obligors was surety merely. As already stated, it is immaterial how the fact is established, or whether the creditor is or is not a party to the arrangement which establishes it.

This view of the position of the parties indicates clearly the right of Smith and Owen to the ordinary rights and equities of sureties. The cases which have held that retiring partners thus situated are to be treated as sureties merely, have attempted no change in the law, but are entirely in harmony with older authorities which have only applied the like principle to different states of facts, where the relative position of the parties as regards the debt was precisely the same. We do not regard them as working any innovation whatever. The cases we particularly refer to are: Oakley v. Pasheller, 4 Cl. & Fin., 207; Wilson v. Lloyd, Law R., 16 Eq. Cas., 60; and Millerd v. Thorn, 56 N. Y. 402.

And it follows as a necessary result from what has been stated, that Smith and Owen were discharged by the arrangement made by the creditors with Place. They took his note on time, with knowledge that Place had become the principal debtor, and without the consent or knowledge of the sureties. They thereby endangered the security of the sureties, and as the event has proved, indulged Place until the security became of no value. True, they gave but very short time in the first instance; but, as remarked by the vice chancellor in Wilson v. Lloyd, L. R., 16 Eq. Cas. 60, 71, "the length of time makes no kind of difference. The time was the same in Fellows v. Prentiss, 3 Denio 512, where the surety was also held discharged. And see Okie v. Spencer, 2 Whart. 253. But that indulgence beyond the time fixed was contemplated when the note was given is manifest from the fact that it was made payable with interest. In a legal point of view this would be immaterial, but it has a bearing on the equities, and it shows that the creditors received or bar

gained for a consideration for the very indulgence which was granted, and which ended in the insolvency of Place. When they thus bargain for an advantage which the sureties are not to share with them, it is neither right nor lawful for them to turn over to the sureties all the risks. This is the legal view of such a transaction, and in most cases it works substantial justice.

The judgment must be reversed, with costs, and a new trial ordered.

The other Justices concurred.

$285. The Requirement of Good Faith on Part of Creditor.Suretyship, as this case suggests, is largely a matter between co-sureties. To the outside world, sureties are merely debtors. Nevertheless, where notice is given that one of the parties is a surety, good faith requires that the creditor be careful in his dealings with the principal debtor not to prejudice the position or increase the danger of the surety.

Should extension of time unaccompanied by actual damage discharge a corporate surety for profit? See People v. Traves (1915), 188 Mich. 415, holding the negative in the case of a surety company.

Should an extension of time by a creditor accompanied by an express reservation of his rights against the surety discharge the surety? It is well settled that the surety is not discharged in such a case. See Exchange Building, etc., Co. v. Bayliss (1895) 91 Va. 134.

$286. Suretyship in Negotiable Instruments under the N. I. L. Note in 28 Harv. L. Rev. 102.-"The defendant signed a joint note as surety for his co-maker. The payee knew of the suretyship relation, but made a binding contract with the principal maker, extending the time of payment, without the knowledge of the defendant, and now sues him. Held, that the plaintiff may recover. Cowan v. Ramsey, 1914. 15 Ariz. 533; 140 Pac. 501.

A surety co-maker will be discharged, at common law, by a binding extension of time given the principal debtor by a holder with notice of the suretyship relation. Pooley v. Harradine, 7

E. & B. 431; Horne v. Bodwell, 5 Gray (Mass.) 457. The principal case decides that the Uniform Negotiable Instruments Law abrogates this rule and permits recovery against the surety. Section 120 of the Act enumerates the different modes of discharging a party secondarily liable, including the case of extension of time to the principal debtor. But it is obvious that a surety co-maker, being 'by the terms of the instrument absolutely required to pay the same,' is primarily liable under section 192. Section 119 gives five ways of discharging the instrument without mentioning discharge by extension of time to the principal. It is argued, therefore, in the principal case that since the provision as to discharge by extension of time is included in the section dealing with the discharge of parties secondarily liable and omitted from the section as to the discharge of the instrument, and hence parties primarily liable, the legislative intent was not to discharge parties primarily liable in this manner. Union Trust Co. v. McGinty, 212 Mass. 205, 98 N. E. 679; Cellers v. Meachem, 49 Ore. 186, 89 Pac. 246. Such an inference would not seem necessary, however, since §119 deals not with the discharge of parties to the instrument, but with the discharge of the instrument itself, and the discharge of the surety co-maker would not be a discharge of the instrument. Hence the omission of the provision as to extension of time would have no significance. By §196, cases not provided for by the Negotiable Instruments Law are governed by the law merchant. The ordinary rules of suretyship would, therefore, apply to the principal case and the surety co-maker should be discharged by the extension of time. This result seems permissible by a fair construction of the statute, and would avoid overthrowing the established law of suretyship. Farmers' Bank of Wickliffe v. Wickliffe, 134 Ky. 627, 121 S. W. 498. See Brannan, Negotiable Instruments Law, p. 117. [At p. 314 in 3d ed.]"

$287

ERFURTH v. STEVENSON.

Supreme Court of Arkansas, 1903. [71 Ark. 199.]

BATTLE, J.: .

Were John Schapp and S. A. Wil

liams, sureties on the bond of Erfurth & Seibert for the per

formance of their contract to erect a building for E. H. Stevenson, discharged by the alteration of the contract?

In O'Neal v. Kelley, 65 Ark. 550, this court held that any material alteration in the contract for the performance of which a surety is bound, without his consent, discharges the surety, and that "this is so, even if the alteration be for the benefit of the surety, for, although the principals may change their contract. to suit their pleasure or convenience, they cannot thus bind the surety."

In the contract before us Stevenson, for whom the building was to be erected, was vested with the power to require alterations to be made in the construction of the building and in the arrangement or finish of the work, as specified in the contract and specifications, plans and drawings referred to therein. He could do so without the consent of the contractors, Erfurth & Seibert. But they were not compelled to do the additional work, or furnish the materials made necessary by the alterations. If they refused to do so, or failed to agree with Stevenson as to price, the contract provided that Stevenson might employ other parties to do such work and furnish the materials. But nevertheless, as said in Miller-Jones Furniture Co. v. Fort Smith Ice & Cold Storage Co., "the fact that these alterations . could be made without the consent of the contractors forces us to the conclusion that the alterations referred to were such minor changes as owners often wish to make in the plan of buildings while they are under construction, and which do not greatly affect the undertakings of the contractor." Any other construction of the contract would place the contractors in the position of agreeing that alterations might be made in their contract which would be materially injurious to them, which would be unnatural and unreasonable.

The right to make the alterations that were made in the contract depends upon the following clause: "The party of the first part (Stevenson), through his architect, may require alterations to be made in the construction, arrangement or finish of the work from that herein, and in said specifications, plans or drawings, expressed." The alterations made were not in the arrangement or finish of the work, as they consisted entirely of a change of materials. Were they made in the construction? In the construction of what? A two-story brick residence, with stone basement, and with roof covered with Oregon cedar shingles. Did Stevenson have the right to so alter the contract as to substitute a residence of granite for the brick residence? Certainly not.

166 Ark. 287; 50 S. W. 508.

Why then could he substitute a slate for a shingle roof? Such a change would not be in the construction of a shingle roof, which the contractors agreed to make, but a substitute for it, which was not authorized by the contract. The evidence shows that such was not the intention of the contract. Stevenson, the party of the first part, had under consideration, before entering into the contract with Erfurth & Seibert, the building of the residence with a slate roof, but abandoned it because it was too expensive, and decided to use Oregon cedar shingles instead of slate.

The price which the contractors, Erfurth & Seibert, were to receive for the building under their contract with Stevenson, before it was altered, was $2,670, and the alterations were worth and cost at least $320, which increased the cost more than eleven per cent. The change made in the building by the amended. contract materially increased the cost of it beyond the original contract price, and, if binding on the sureties on the contractor's bond, increased their liability to the same extent. But the change was unauthorized by the original contract, and was made without the consent of the sureties, and discharged them from liability on their bond.

[Do you agree with the court's interpretation of the clause. regarding alterations?-Edrs.]

$288

C. MORTGAGES AND CONDITIONAL SALES.

TRIMM v. MARSH.

New York Court of Appeals, 1874. [54 N. Y. 599.]

This was an action for an accounting as to the amount due upon a bond and mortgage, and for the recovery of the possession of the mortgaged premises, upon payment of the amount due.

In 1858 one Ridgway, being the owner of certain premises situate in the City of New York, mortgaged them to an insurance company to secure $2,000; the insurance company assigned the mortgage to the defendant, Sarah A. Marsh. Ridgway afterward conveyed the premises to the plaintiff Brown, who subsequently, in October, 1865, entered into an agreement with plaintiff, Trimm, to convey the same to him. In 1861 the defendant, Sarah, commenced an action to foreclose this mortgage, making plaintiff Brown and others parties defendant, and obtained judgment of foreclosure. The premises were sold under the judgment in 1862, and defendant, Sarah A. Marsh, became the purchaser, and received a sheriff's deed. Immediately after