are charged with notice that renewal of the original note is contemplated. Duress, § 3 statement of bank examiner's.

6. A statement by a bank examiner to a director of a bank which is in financial difficulties, that unless he and others signed an obligation to secure a loan to pay deposits "he could be and might be prosecuted and imprisoned for mismanagement of the affairs" of the bank, is not such duress as to avoid the obligation signed by him. Duress, § 1-sufficiency of knowledge of illegal act.

7. Knowledge by one benefited by the illegal act of a third person which influences the conduct of one pleading duress, that the act was committed, is not sufficient to support the plea, but he must in some way have been responsible for the act done.

[See annotation in 4 A.L.R. 864.]

error.

Messrs. R. E. L. Watkins and E. R. F. Wells, for defendants in error:

The renewal or extension of a principal note does not release or discharge the collateral deposited as security for its payment. If the collateral is the bond or note of a third person, such person is not regarded as a surety on the principal note who would be released by a renewal without his consent.

Holland Trust Co. v. Waddell, 75 Hun, 104, 26 N. Y. Supp. 980, affirmed in 151 N. Y. 666, 46 N. E. 1148; Commercial Nat. Bank v. Sanders, 132 La. 174, 61 So. 155; First Nat. Bank v. Gunhus, 133 Iowa, 409, 9 L.R.A. (N.S.) 471, 110 N. W. 611; Dayton Nat. Bank v. Merchants' Nat. Bank, 37 Ohio St. 208; Citizens' Bank & T. Co. v. Thornton, 98 C. C. A. 478, 174 Fed. 752; Williams v. National Bank, 72 Md. 441, 20 Atl. 191; Colebrooke, Collateral Securities, 2d ed. § 14; Jones, Collateral Securities, 3d ed. § 355a.

When default is made in the payment of a note for which collateral security may have been given, the holder of the note is entitled to recover

of the court.

judgment for the full amount due on the collateral, regardless of the amount due on the principal note. Of course, he cannot collect on this judgment more than the amount of money due on the principal note, but he is entitled to obtain and hold a judgment for the full amount until the principal note is actually satisfied.

Selden v. Williams, 108 Va. 542, 62 S. E. 380; Anderson v. Union Bank, 117 Va. 1, 83 S. E. 1080.

Campbell, J., delivered the opinion of the court:

This is a proceeding by notice of motion, instituted by the defendants in error, C. C. Vaughan, Jr., and Cora V. Camp, partners, doing business under the firm name and style of Vaughan & Co., against the plaintiffs in error, to recover the sum of $110,000 with interest thereon from the 21st day of March, 1921; the same being alleged to be due as evidenced by a certain bond reading as follows:

"$110,000. Franklin, Va., March 21, 1921.

"On demand, one year after date, with interest from date, for value

received, we owe, both jointly and severally and promise to pay unto Vaughan & Company, Bankers, Franklin, Virginia, the just and full sum of one hundred and ten thousand dollars.

"This obligation is to be used as collateral security for a loan to secure the deposits of the Farmers' Bank of Franklin, Franklin, Virginia, this day taken over by said Vaughan & Company, Bankers. We and each of us hereby waive the benefit of our homestead exemption as to this obligation.

"Given under our hands and seals this 21st day of March, 1921."

As a matter of convenience, the parties litigant will be referred to as plaintiffs and defendants, according to the positions occupied by them in the trial court.

The facts in the case as disclosed by the record are, in substance, as follows:

The Farmers' Bank of Franklin, of which the defendants were officers and directors, in March, 1921, found itself in financial straits, with its depositors demanding payment of the sums due them. In order to obtain a loan to meet the demand of depositors, the officers and directors of the bank applied to the plaintiffs for a loan of $110,000.

The result of the negotiations was that the plaintiffs agreed to make the loan, and on the 21st day of March, 1921, an agreement was entered into between the parties, whereby the plaintiffs agreed to deposit with themselves $110,000 to the credit of the Farmers' Bank of Franklin, to be applied to the payment of checks of depositors, and for the payment of certain other obligations of the Farmers' Bank.

Under the terms of the agreement the Farmers' Bank executed its note for the sum of $110,000 payable to the order of the plaintiffs, 60 days after date, and assigned to plaintiffs certain bonds, notes, and other evidences of indebtedness owned and held by it, as collateral security for the payment of this note of $110,000.

In addition to its note and evidences of indebtedness, the Farmers' Bank delivered to plaintiffs the note executed by the defendants, as heretofore set forth. This note executed by defendants was filled out on one of the printed forms of collateral notes used by the Farmers' Bank, with the name Vaughan & Co., Bankers, & Co., Bankers, substituted for Farmers' Bank of Franklin.

Pursuant to these negotiations, the Farmers' Bank of Franklin was enabled to pay its depositors every penny due them.

While irrelevant to the issue, it is disclosed by the evidence of Gen. C. C. Vaughan, Jr., the only witness who testified upon the trial of the case, that the plaintiffs paid on account of the Farmers' Bank in addition to the $110,000, the sum of $413.48.

On May 20, 1921, the note of the Farmers' Bank was curtailed by E. L. Beale, president thereof, to $108,848, and a renewal note was executed on that date, for that amount, payable 30 days after date. This note, after being curtailed, was renewed on June 18, 1921, for a period of 30 days from that date. Again on July 18, 1921, this note, amounting to $108,800, was renewed by the execution and delivery of a 30day note. This was the last renewal.

These renewal notes were similar in form to the original note and contained a recital that the bond of

defendants and certain bills receivable were held as collateral security.

On May 12, 1922, the plaintiff docketed their notice of motion for judgment, whereupon all of the defendants appeared either generally or specially and demurred or pleaded.

The demurrer being sustained, on motion of the plaintiffs, they were permitted by the court to file an amended notice of motion as follows:

"Take notice, that on the 19th day of June, 1922, the undersigned, C. C. Vaughan, Jr., and Cora V. Camp, partners doing business un

to collect the said $110,000 from the Farmers' Bank of Franklin, or from the collateral security put up by said Farmers' Bank of Franklin, and that reasonable effort had not thus been made by Vaughan & Co. prior to the institution of this action.

To the filing of this plea the plaintiffs objected and the court sustained said objection.

Thereupon a trial was had before a jury, upon the issue joined, which resulted in a verdict for the plaintiffs, upon which the court rendered a judgment against all of the defendants. To that judgment this writ of error was awarded.

The following errors are assigned: (1) The overruling by the court of the demurrers filed by the defendants to the amended notice.

(2) The ruling of the court in rejecting defendants' plea No. 2.

(3) The ruling of the court in granting instructions requested by the plaintiffs.

(4) The ruling of the court in refusing the instructions requested by the defendants.

(5) The ruling of the court in overruling motion of defendants to set aside verdict and enter judgment for defendants.

In addition to the foregoing assignments of error, the defendant I. Q. Wiggins files other assignments which will be discussed after the general assignments are disposed of. The determination of the issues involved in the instant case depends upon the answer to the question whether or not the contract entered into between the plaintiffs and defendants was a definite, unconditional promise under seal to pay money, or whether the same was a contract of guaranty. As the disposition of all five of the assignments of error depend upon the answer to the foregoing query, we will consider them together.

Upon the part of the defendants it is earnestly contended that the bond is clearly a guaranty; that upon its face it is expressly declared to be a "collateral security" for the

loan; that it does not contemplate absolute liability, but a secondary or contingent liability only. If this contention be sound, then it necessarily follows that the further contentions of the defendants as to the alleged errors committed by the trial court should be upheld and the case reversed.

It will be observed that the words "guaranty" or "guarantee" or "guarantors" do not anywhere appear in the bond sued upon. It is therefore necessary to determine from the circumstances surrounding the transaction whether the contract is one of original promise or of guaranty merely.

There

As to what constitutes a guaranty we find the rule laid down in 20 Cyc. p. 1397, as follows: "A guaranty is a collateral undertaking by one person to be answerable for the payment of some debt or the performance of some duty or contract for another person who stands first bound to pay or perform. can only be a contract of guaranty where there is some principal or substantive liability to which it is collateral; if there is no debt, default, or miscarriage of a third person either present or prospective, there can be nothing upon which to base a contract of guaranty. The chief characteristic of a guaranty being that it is collateral to some other contract or duty, if it can be seen that the person sought to be held is primarily liable, prior to the breach of the contract or duty by some one else, the conclusion at once follows that the contract in question is not one of guaranty; and, although a contract is in form to answer for the debt or default of another, if its leading purpose is to secure some benefit to the promisor or to promote his interest, it will be regarded as an original undertaking. On the other hand, although the word 'guaranty' may be used when the engagement is an original and absolute one to pay the debt when it becomes due, that construction is put upon it only when it is plain that such was the intent of the