at p. 95, 24 L. ed. 343. In the last case cited, Justice Clifford quotes with approval this passage from Story on Promissory Notes, § 479: "Judge Story says that the interpretation ought to be just such as carries into effect the true intention of the parties, which may be made out by parol proof of the facts and circumstances which took place at the time of the transaction. If the party intended at the time to be bound only as guarantor of the maker, he shall not be an original promisor; and if he intended to be liable only as a second indorser, he shall never be held to the payee as first indorser." It is said in Parson on Bills & Notes, § 520: "In a suit between the original parties it is considered that the blank name of the indorser means nothing of itself, but its purpose must be shown, aliunde." And in Fullerton v. Hill,

48 Kan. 558, 18 L.R.A. 36, 29 Pac. 583, it is held, in regard to the liability upon a blank indorsement, that "parol evidence is received to rebut the presumption [arising from the indorsement being in blank] and show what liability it was intended [by the parties] he should assume, and what relation he should sustain to the paper." The opinion in that case is a well-considered one, and in the notes to it many cases are cited that support the text. In order to show that the great weight of authority favors this view, we add the following cases: Johnston v. Schnabaum, 86 Ark. 82, 17 L.R.A. (N.S.) 838, 126 Am. St. Rep. 1082, 109 S. W. 1163, 15 Ann. Cas. 876. Pike v. Street, 1 Moody & M. 226 (Lord Tenterden); Riley v. Gerrish, 9 Cush. 104; Hays v. May, Wright (Ohio) 80; Houck v. Graham, 106 Ind. 198, 55 Am. Rep. 727, 6 N. E. 594; Drummond v. Yager, 10 Ill. App. 382, citing our cases; First Nat. Bank v. Crabtree, 86 Iowa, 731, 52 N. W. 559; Forepaugh v. Delaware, L. & W. R. Co. 128 Pa. 217, 5 L.R.A. 508, 15 Am. St. Rep. 672, 18 Atl. 503; Tankersley v. Graham,

8 Ala. 247; Roads v. Webb, 91 Me. 414, 64 Am. St. Rep. 246, 40 Atl. 128; Taylor v. French, 2 Lea, 257, 31 Am. Rep. 609; Goodrich v. Stanton, 71 Conn. 419, 42 Atl. 74; Hirsch v. Kaufman, R. I., 81 Atl. 66; Chapeze v. Young, 87 Ky. 480, 9 S. W. 399; True v. Bullard, 45 Neb. 412, 63 N. W. 824; Doll v. Getzschmann, Ann. Cas. 1913A, 882, and note (90 Neb. 370, 133 N. W. 417); 2 Randolph, Com. Paper, § 778.

Moffitt v. Maness, 102 N. C. 457, 9 S. E. 399, is relied on by plaintiffs, but the principle there announced has no application, and Justice Shepherd, who wrote the opinion in that case, said, in the later case of Southerland v. Fremont, 107 N. C. 570, 22 Am. St. Rep. 900, 12 S. E. 237: It is well settled "that the agreement upon which the blank indorser of another's ob

ligation signed, and the liability which he intended to assume, may (at least, between the original parties or those parties and a holder with notice) be shown by parol evidence, and he will be held only according to such agreement and intention."

On the same theory that parol evidence is admissible as between the first parties to

with notice.

assignee.

the blank indorse--transferee ment, it is also applicable as against subsequent holders with notice. 8 Cyc. 266; Davidson v. Powell, 114 N. C. 575, 19 S. E. 601. An assignee under a general assignment acquires the property of his assignor, Assignmentsubject to all equi- right of ties against him. 4 Cyc. 219; Wallace v. Cohen, 111 N. C. 103, 15 S. E. 892; Carpenter v. Duke, 144 N. C. 291, 56 S. E. 938. While such a trustee is a purchaser for value under 13 and 27 Eliz. (Revisal 1905, §§ 960, 961), "he takes the property subject to any equity, or other right, that attached to the same in the hands of the debtor," as said by Justice Shepherd in Wallace v. Cohen, supra. See also Potts v. Blackwell, 56 N. C.

(3 Jones, Eq.) 449; Small v. Small, 74 N. C. 16; Day v. Day, 84 N. C. 408; Brem v. Lockhart, 93 N. C. 191, and Southerland v. Fremont, 107 N. C. 565, 22 Am. St. Rep. 900, 12 S. E. 237.

Bills and notes -assignment

after maturity

equities.

It may be added that plaintiffs acquired the notes by the assignment to them, after their maturity, and therefore, in in law, with notice of all equities and other rights of the indorser Everett and consequently, in law, took subject to them. Causey v. Snow, 122 N. C. 326, 29 S. E. 359; Battery Park Bank v. Loughran, 126 N. C. 814, 36 S. E. 281; Taylor v. Lauer, 127 N. C. 157, 37 S. E. 197; Brooks v. Sullivan, 129 N. C. 190, 39 S. E. 822. So that plaintiffs, as trustees of Mr. Farthing, are bound by the agreement between defendant and him to the same extent as he was himself.

Pledge-effect of

What, then, was this agreement? It is true, as argued by defendant's counsel, that the taking of collateral security does not taking collater suspend the right al security. of action upon the principal debt, in the absence of any stipulation to that effect. Jones, Collateral Security, § 590. But that is not the question, by any means, as the agreement did not consist merely in the transfer of collaterals. It was distinctly understood and agreed that Mr. Farthing would not look to Mr. Everett for payment until he had exhausted the Annin estate. This was a valid agreement, and Mr. Farthing Bills and notes- is bound by it, and look to collater- his trustees as well. It bears a close resemblance to a guaranty of collection. We said in Cowan v. Roberts, 134 N. C. at p. 418, 65 L.R.A. 729, 101 Am. St. Rep. 845, 46 S. E. 979: "A guaranty is a promise to answer for the payment of some debt, or the performance of some duty, in case of the failure of another person who is himself, in the first instance, liable to such payment or performance. Carpenter v. Wall,

agreement to

al-effect.

20 N. C. 279 (4 Dev. & B. L. 144). There is a well-defined distinction between a guaranty of payment and a guaranty for the collection of a debt, the former being an absolute promise to pay the debt at maturity, if not paid by the principal debtor, when the guarantee may bring an action at once against the guarantor; and the latter being a promise to pay the debt upon condition that the guarantee diligently prosecuted the principal debtor for the recovery of the debt, without success. Jones v. Ashford, 79 N. C. 172; Jenkins v. Wilkinson, 107 N. C. 707, 22 Am. St. Rep. 911, 12 S. E. 630." See also Mudge v. Varner, 146 N. C. 147, 59 S. E. 540. A surety undertakes primarily to pay if the debtor does not; Principal and an indorser under- urety-obligation of surety. takes to do do the same thing, after due notice of dishonor, while a guarantor undertakes to pay if the Bills and notesdebtor cannot. Ran- obligation of dolph, Com. Paper,

indorser.

2d ed. 849, note 2; Rouse v. Wooten, 140 N. C.

guarantor.

557, 111 Am. St. -obligation of Rep. 875, 53 S. E. 430, 6 Ann. Cas. 280. The distinction may be further illustrated by the statement that a surety is considered as a maker of the note; a guarantor is never a maker. The surety's promise is to pay a debt, which becomes his own, as between him and the creditor, when the debtor fails to pay it; and he may be sued upon it as soon as it is due and dishonored. and dishonored. 2 Parsons, Bills & Notes, 1871 ed. at page 118. The contract of Mr. Everett is, therefore, analogous to a guaranty of collection, as we have said, and though a party to the note and the indorsement, he nevertheless has contracted, as does such a guarantor, that he will pay, not if the Annin estate does not, but if it cannot, or not until it is first exhausted, and to the extent only that it does not pay, collateral. after being made to pay whatever it can. That this parol

-exhaustion of

agreement is valid, see also Bresee v. Crumpton, 121 N. C. 122, 28 S. E. 351.

The cases relied on by plaintiffs, holding that a creditor having collateral security for his note may, notwithstanding this fact, sue the debtor without first resorting to the collateral and exhausting it (Jones, Collateral Security, § 686; Silvey v. Axley, 118 N. C. 959, 23 S. E. 933), are clearly not in point, because here the indorser has not only deposited the collateral, but required a further agreement that his indorsee should not proceed against him until it is exhausted; nor are the cases of Barnard v. Martin, 112 N. C. 754, 17 S. E. 536, and Hinsdale v. Jerman, 115 N. C. 152, 20 S. E. 294; as it was found in those cases that the collateral had become worthless, and the creditor "was not required to do so vain a thing as to seek recovery from an insolvent person, who was liable primarily for the debt, or to enforce payment out of valueless and unsalable stock." Nor is the doctrine as to extension of time, where there is no consideration therefor, for payment, applicable to the facts of this case. Here the time was as definitely fixed as was practicable, they not knowing exactly when the estate would be settled, and the stipulation for the exhaustion of the Annin estate was founded upon a sufficient consideration, it being the same one which look to collater- supported the enal-consider- tire contract of indorsement and its several parts, the promises being mutual and reciprocal. Mr. Farthing is presumed to have known what he was doing, being sui juris, and able to take care of himself, the parties standing "at arm's length." He thought he was getting a good investment for his surplus money, and it may yet turn out to be so. The agreement was a lawful one, and there is no reason why he should not be bound by it. The ruling below would imply that the contract was thought to impose up

-agreement to

ation.

on Mr. Everett the duty of exhausting the Annin estate, whereas it is plainly stated that Mr. Farthing must assume that burden. Mr. Everett promised to employ and pay attorneys to assist in the matter, and he has done so. He has performed fully his part of the contract, and it is now incumbent upon his indorsee to do his part, by either exhausting the Annin estate and realizing what he can by law, or by showing that the estate is insolvent. All that appears is that "the end of the settlement of that estate is not in sight," but this may be due to a lack of diligence on his part, and is not to be imputed to Mr. Everett as the consequence of any default by him. If Evidenceit would be futile burden of proof to proceed further insolvency of against the estate

because of its insolvency, the plaintiffs should have shown it, as the burden was upon them and not upon the defendant. Plaintiffs, in their brief, state that there was no exception to the evidence or the findings of fact, but only to the conclusions of law therefrom, and this being the case, they cannot recover, as they have not performed their assignor's part of the contract, which, as we have shown, is valid and binding. The judgment of the court was based entirely upon the wrong theory, and it had no right in law to impose terms upon defendant and require him to exhaust the Annin estate by a fixed time, as the agreement authorizes no such requirement of him.

Fraud-opinion

estate.

What defendant said as to the time within which the estate could be settled is not material, as there statements as is no allegation or to settlement of contention that there was any false and fraudulent representation. It was merely the expression of his opinion or "expectation," and it may have been a correct one, if proper diligence had been used in prosecuting the case against the estate. He is not responsible for the delay. Besides,

the court had proceeded upon the theory that the contract is valid, by allowing him more time for the settlement, to which he would not be entitled if there had been any fraud or other equitable ground upon which to set it aside.

This view of the case is not only in accordance with good law, but good morals and manifest justice. When Mr. Farthing accepted the notes from Mr. Everett, he did so with an express agreement, as found by the referee. That agreement was definite and binding, to wit, that Everett should be ultimately responsible if there was failure on the part of the Moores to pay, and on the part of the estate of John Annin to make good the liability. He agreed to bear the expenses of suing them, and has done so. It is now found as a fact that the estate of John Annin has not been wound up, and of course has not been exhausted. It is not even found as a fact that it is insolvent,

and we were told on the argument that, as a matter of fact, it is not. Then why should the terms of the agreement entered into between Mr. Everett and Mr. Farthing be varied by the court, in order to accelerate the time for payment by the defendant? If Farthing had sued the defendant Everett upon these notes, and this agreement had been shown, the court would not have sustained his action.

It must be declared that there was error, and the judgment will be reversed and the action dismissed.

1

NOTE.

The decision in the reported case (SYKES V. EVERETT, ante, 751) that parol evidence is admissible to vary or explain the contract implied from the indorsement of a bill or note is in accord with the rule followed in a few jurisdictions; the great weight of authority holds such evidence inadmissible as shown in the note, post, 764.

ment.

2. The indorsement of a bill or note is a fresh and substantive contract, embodying all the terms of the instrument in itself.

[See 3 R. C. L. 1150.] -engagement of indorser.

3. One indorsing a promissory note engages that the instrument is gen

uine, and will be paid according to its purport upon due presentment, demand, and notice.

[See 3 R. C. L. 1148.]

-time of making effect.

4. The contract of indorsement is the same between indorser and indorsee, whether it is made before or after maturity.

[See 3 R. C. L. 1151.]