
    German National Bank, Respondent, vs. Barber and another, Appellants.
    
      November 19 —
    December 8, 1914.
    
    
      Bills and notes: Principal and surety: Surrender of security: Discharge of surety: Reviving liability by giving new note: Consideration: Banks and banking: Corporate stock: Conversion.
    
    1. Where a surety gives his note to take up one on which he is liable as a surety, with full knowledge that the property of his principal held by the payee of such note to secure payment thereof has been released and the right thereto relinquished, the surety’s obligation continues and the note so given by him becomes a valid .obligation; and such recognition of his liability does not require a new consideration.
    2. Although a bank, which for the protection of itself and indorsers of the note held certificates of its own stock as security for payment of a note given by a subscriber for the amount unpaid on such stock, delivered the certificates to said subscriber without requiring payment of the note and without the knowledge or consent of the indorsers, and thereafter the stock was transferred to one of the officers of the bank, such facts did not show a fraudulent conversion of the stock which would entitle the in-dorsers to recover the value thereof from the bank, where the hank did not receive the proceeds of the transfer.
    Appeal from a judgment of the circuit court for Winnebago county: Geo. W. Burnell, Circuit Judge.
    
      Affirmed.
    
    This action was brought by the plaintiff to recover on four promissory notes made by the defendants. There is no dispute concerning them except as to the note made on April 1, 1910, for $670.
    On the 21st day of March, 1892, one S. W. Plallock subscribed for five shares of the stock of the plaintiff bank and agreed to pay therefor the sum of $1,500. The defendant's agreed with the officers of the bank that Plallock should give his note for $1,000 and the defendants should indorse the same. This was done and from time to time renewal notes indorsed by the defendant's were given, and the note was reduced by payments of Halloek until in 1906 'it amounted to only $635. At tbe time tbe original note was given it was agreed that tbe certificates of stock for tbe five shares should not be delivered to Iiallock, but should be held by tbe plaintiff bank as security for tbe protection of itself and tbe defendants as indorsers, and this was done. On March 30, 1896, tbe plaintiff bank by its cashier, E. B. Evans, without the knowledge or consent of tbe defendants or without requiring tbe payment of tbe note by Halloek, at bis request delivered tbe certificates of stock held as security for tbe plaintiff and defendants to him. On June 27, 1896, tbe plaintiff transferred ■said stock on tbe books to one G. W. Washburn, without tbe knowledge or consent of tbe defendants and without requiring payment of tbe note. In 1906, after Halloek bad removed to New Mexico, at tbe request of the plaintiff bank tbe defendants gave their own personal note to tbe plaintiff to take the place of tbe old note given by Halloek and indorsed by defendants. Tbe referee found that tbe defendants at this time bad notice that tbe certificates of stock bad been delivered up to Halloek more than one year prior to tbe execution of this note to tbe bank, and'that tbe defendants thereafter, with full knowledge of such release of this security by tbe bank, from time to time gave renewal motes and paid tbe interest thereon and a part of tbe principal. Tbe referee found that tbe plaintiff was entitled to recover tbe amount due on this note as well as tbe other notes sued on, and awarded judgment against the defendants for tbe sum of $3,671.18, together with all costs and disbursements in tbe action.
    Motions were made by tbe plaintiff to confirm and by tbe defendants to set aside tbe report of the referee relative to this so-called Halloek note. The motion of tbe plaintiff for judgment was granted and that of tbe defendants denied, and judgment for the plaintiff in accordance with the findings of the referee was entered. Erom such judgment this appeal is taken.
    
      Eor the appellants there was a brief by Barter Bros., attorneys, and Charles Barter and H. I. Weed, of counsel, and oral argument by. Charles Barter.
    
    They contended, inter alia, that upon the undisputed evidence these defendants were voluntarily released by the bank from any obligation as in-dorsers on the note of Hallock when the bank surrendered the collateral without their knowledge or consent. The transfer of the Hallock stock to Washburn was not only the voluntary act of the plaintiff bank, but its deliberate act, and there can 'be no revival of a debt by subsequent promise when the creditor has voluntarily released the debtor, for the reason that there is no such moral consideration as will support a promise to pay. Warren v. Whitney, 24 Me. 561; Ingersoll v. Martin, 58 Md. 67; Valentine v. Foster, 1 Met. 520; líale v. Rice, 124 Mass. 292; Grant v. Porter, 63 N. H. 229. Defendants had a right to recover from the bank for a conversion of the stock, or for a breach of contract' in disposing of the same, or to have an accounting for the value of -the stock and the dividends upon it. Whether the bank received money or not upon the sale of the stock, is immaterial. If it' neglected to get the purchase price of the stock, that was a matter which concerned it alone. So far as defendants are concerned the case stands in exactly the same position as if the bank had received the money and held it in lieu of the stock.
    Eor the respondent there was a brief by Williams & Williams, and oral argument by George E. Williams.
    
   SiebecKER, J.

Upon the facts found by the referee the question is, Has the bank the right' to enforce the note in question against the defendants ? There is no dispute but that the bank surrendered to Hallock his stock without the knowledge and consent of the defendants. The surrender by the bank of the stock held by it to secure payment of Hal-lock’s note, which the defendants indorsed as an accommodation, without the knowledge and consent of the defendants, undoubtedly operated to release the defendants from their obligation as indorsers of the ITallock note, had they insisted thereon when it came to their knowledge. They however did not insist on being released from their obligation on the note after having acquired knowledge of the. release of the ITallock stock by the bank. A year from the time they were informed of the release of this security by the bank they continued their obligation by giving their personal note to the bank for the amount due on the original debt secured by their indorsement of the Plallock note. It is established in the law that if a surety gives his note to take up the one on which he is liable as a surety, with full knowledge that' the property of his principal held by the payee of such note to secure payment thereof has been released and the right thereto relinquished, then the surety’s obligation continues and the note so given by him becomes a valid obligation. 32 Cyc. 162, Waiver of defenses; First Nat. Bank v. Jones, 92 Wis. 36, 65 N. W. 861; Mastin Bank v. Hammerslough, 72 Mo. 274. Such recognition of his liability does not require a new consideration to sustain it. Porter v. Hodenpuyl, 9 Mich. 11; Hooper v. Pike, 70 Minn. 84, 72 N. W. 829.

The appellants contend that the release of the certificates of stock by the bank without their consent and the purchase thereof from Plallock by Washburn, one of the bank officers, constituted a fraudulent conversion of the stock and hence entitles them to recover the value thereof from the bank, for it presumably had the benefit of such value. This contention cannot prevail because the evidence sufficiently shows that the bank did not receive the proceeds of the transfer of the Plal-lock stock. The appellant's’ contention to the effect that the original debt of ITallock was fully discharged and satisfied by the surrender of the stock as shown by the evidence is not well founded. The referee’s finding to the contrary must be accepted as a verity on this question. Whatever right the appellants had to insist on their release from liability as sureties ■on Hallock’s note on account of the relinquishment of, this stock by the hank "was waived by them when they gave their note to the bank, continuing their liability, with full knowledge that the stock had been so relinquished as security for its payment. Under the circumstances shown the promise evidenced by the note in question binding on the defendants, and the plaintiff is entitled to recover on the note.

By the Court. — Judgment affirmed.  