Ludwig v. Iglehart

Bartol, C. J., delivered the opinion of the Court. In this case, several questions have been argued, arising upon the pleadings, which are not material to be considered in disposing of this appeal, which we think depends upon the legal sufficiency of the second plea, as a defence to the action. The suit is by the appellant, as endorsee and holder of a promissory note, against the appellee as endorser. The note was drawn by James I. Waddell and Jacob Ludwig, dated September 29th, 1810, for $981.52, payable six months after date, to the order of the appellee and by him endorsed.

The making and endorsement of the note, its protest for non-payment and due notice thereof were admitted, by the agreement of the defendant’s attorneys appearing in the record. ⁴² It appears that the drawers were partners, doing business in the name of Waddell & Ludwig. Being in embarrassed circumstances in March, 1871, before the maturity of the note in question, they proposed to assign all their property, as well partnership as individual, to a trustee with authority to him to dispose of the same, and to distribute the proceeds among their creditors ; on condition that if the proceeds of their assignment should pay to the creditors not less than 50 cents in the dollar of their respective claims, the same should be in full satisfaction of all claims and demands against them. This proposition was accepted by the creditors who signed the following paper: Baltimore, March 16, 1871. “We, the undersigned, creditors of the said Waddell & Ludwig, do hereby agree and bind ourselves to accept the terms of the assignment proposed by them, and when said terms have been fully complied with, we do, each of us, covenant to release said Waddell & Ludwig, and each of them, in due form, of and from our respective claims and demands against them, and each of them.” This was signed and sealed hy a number of creditors, among whom were hoth the plaintiff and the defendant. The assignment was executed, and Barry the assignee went into possession, and proceeded to execute his trust.

These facts are alleged in the plea, which further avers that the property so assigned and received by the trustee, was .more than sufficient to pay fifty cents in the dollar, &e. It is contended on the part of the appellee, that the release operated to discharge the appellee from liability as endorser upon the note. The, general principle is well settled, that if the holder of a promissory note, without the consent of the endorser, release or compound with the drawer, the endorser is ⁴³ thereby discharged. This is elementary law, and the reason is that the endorser, who is a mere surety, is thereby deprived of his right of recourse upon the note against the drawer, who is the principal debtor.

It is equally well settled, that if such release or composition be made with the consent of the surety, he will not be discharged. This also is elementary law, for which no authorities need be cited. Now it seems to us that the papers set out in the plea, show upon their face that the composition was entered into by the appellant, and the release executed by him with the consent of the appellee. The latter was a party to the agreement of composition and release, which could have effect only by the mutual consent and co-operation of all the parties to the arrangement.

Besides, it is very clear that the appellee by signing the release, discharged the drawers from all liability to himself upon the note in question. They were released by his own act. The reason therefore upon which the rule is based ceases to exist. He was in no manner prejudiced by the act of the appellant, and cannot claim exemption from responsibility on that account.

It is true the note had not then matured, or been paid by him; but it was a subsisting debt or liability from the drawers to him, upon which his release operated, and he was thereby precluded from all recourse against the drawers, although he might afterwards pay the note; and this not by the act of the appellant; but as we have before said, by his own act in signing the release. That this is the effect of the appellee’s release appears to be conceded by the