Question 540.— A's note for $200 endorsed by B is discounted by a bank, and, upon dishonour, is paid by B the endorser. Before maturity of the note, A gives the bank a mortgage to secure this note, and another note of A's for $200, held by the bank. After B pays the note endorsed by him, the bank foreclose their mortgage security and realize $200.

Is the bank entitled to apply the whole of the $200 proceeds of the sale of the mortgage security in payment of the $200 note of A's dishonoured, but still held by the bank and unpaid, or is B entitled to receive one-half of the proceeds as being a security who has paid half of the debt for which the mortgage was given by A?

Ansiver.—If the mortgage is given as general security to the bank, B would have no claim on the realization. If given specifically as security for both notes, the realization requires to be divided pro rata.