XX.

a release of all. But if it appear on the face of the deed CHAPTER that it was the paramount intention of the parties that the others should be held liable, this intention will be carried into effect by disregarding the form of the deed and construing the release as a covenant not to sue (g).

But a general covenant not to sue discharges the sureties, Covenant not for that will enure as a release (h); or a covenant not to to sue. sue within a particular time (i), though it do not in law amount to a release, or suspend the action (k).

So also will a release in law. Therefore, if the holder Release in made the acceptor his executor, the indorsers were discharged law. at law, though it might be otherwise in equity.

A written or verbal agreement, on good consideration (1), Agreement not to sue the acceptor at all, or not to sue him within a not to sue. specified time, discharges the drawer and indorsers (m); but if such agreement be without consideration, or not made with the principal or otherwise void, the indorsers are not discharged (n). Giving time to an apparent surety,

(g) Solly v. Forbes, 2 Bro. & Bing. 38: 22 R. R. 641; Henderson v. Stobart, 5 Exch. 99; Price v. Barker, 4 E. & B. 760; Bateson v. Gosling, L. R., 7 C. P. 9; 41 L. J., C. P. 53.

(h) Com. Dig. Release.

At law, a parol agreement by the creditor not to sue the principal is no discharge to the surety of a liability he has contracted by deed. Davey v. Prendergrass, 5 B. & Al. 187, recognized in Price v. Edmunds, 10 B. & C. 582; Bulteel v. Jarrold, 8 Price, 467; Cocks v. Nash, 9 Bing. 346; 2 M. & Sc. 434 ; 35 R. R. 547 ; sed vide Archer v. Hale, 4 Bing. 464; 1 M. & P. 285. But, in equity, the creditor's giving time to the principal, although by a parol agreement, is a discharge to the surety of a liability created by deed. Rees v. Berrington, 2 Ves. jun. 540; 3 R. R. 3; Bulteel v. Jarrold, 8 Price, 467; et vide Combe v. Woolf, 8 Bing. 161; 1 M. & Sc. 241 34 R. R. 659; Bowmaker v. Moore, 3 Price, 214; 7 Price, 228; 21 R. R. 758 ; Blake v. White, 1 Y. & C. Exch. Ca. 420. As to circumstances under

which a Court of equity would
interfere, see Heath v. Key, 1 Y.
& J. 434. But a covenant not to
sue upon a simple contract for a
limited time, is not pleadable in
bar to an action on the contract
against the principal debtor.
Thimbleby v. Barron, 3 M. & W.
210.

(k) Quare, as to the effect of
indulgence as to part of the sum
due. See Mayhew v. Crickett, 2
Swanst. 189; 19 R. R. 57.

(1) The Court will not estimate the value of the consideration. That would be to inquire whether the bargain were a good one or not. Moss v. Hall, 5 Exch. 50.

(m) Ibid.

(n) Arundel Bank v. Goble, K. B. 1817; Chitty, 9th ed. 413; 2 Chit. 335; Willison v. Whitaker, 2 Marsh. 383; 7 Taunt. 53; Brickwood v. Annis, 5 Taunt. 614; 1 Marsh. 250; Philpot v. Briant, 4 Bing. 717 ; 1 Moo. & P. 754; 3 C. & P. 244 ; 29 R. R. 710; Clark v. Birley, 41 Ch. D. 422. See the American authorities in Byles on Bills, 6th American ed. p. 381.

CHAPTER
XX.

Renewing a bill.

Misappropria

who is really the principal, will discharge the acceptor, who, though apparently the principal, is only the surety to the knowledge of the creditor (0).

The taking of a new bill from the acceptor, payable at a future day, discharges the indorsers (p).

Misappropriating or misusing, or losing any security for tion of securi- the debt held by the creditor, discharges the surety (q).

ties.

Inability to

recover.

Discharging

from execution.

Where the creditor was unable to recover against the principal debtor on account of a set-off existing between them, an equitable plea stating these facts was held to be a good defence in an action against the surety (r).

Discharging the acceptor or a prior indorser from execution against the person, discharged the other indorsers; but discharging a subsequent indorser from execution afforded no defence to a prior indorser (s). A second execution against the person of the same debtor who had been once discharged was not absolutely void, and therefore a man might be taken again if he had so agreed (t). And it is conceived that where the holder of a bill has seized the acceptor's goods in execution, he is in the position of a creditor holding the security of a principal debtor, and may so conduct himself as to discharge the sureties (u).

(0) Oriental Finance Co. v. Orerend, Gurney & Co., L. R., 7 Chan. Ap. 142; L. R., 7 H. of L. 348. But as the Code by s. 28 makes accommodating parties liable on the instrument to a holder for value, whether he had notice or not, and presumably in their respective characters thereon, it seems that the accommodating acceptor must be the principal debtor on the bill.

(p) Gould v. Robson, 8 East, 576; 9 R. R. 498; English v. Darley, 2 B. & P. 62; 3 Esp. 49 ; 5 R. R. 543.

(4) Pearl v. Deacon, 24 Beav. 186; 1 De G. & J. 461; 26 L. J., Ch. 761; Wulff v. Jay, L. R., 7 Q. B. 756; 41 L. J. 322.

(r) Bechervaise v. Lewis, L. R. 7 C. P. 372; 41 L. J. 161.

(8) Hayling v. Mulhall, 2 W. Bla. 1235. In the marginal note of this case, the words "prior"

and "subsequent" are transposed. See English v. Darley, 2 B. & P. 62; 3 Esp. 49; 5 R. R. 543.

(f) Atkinson v. Bayntun, 1 Bing. N. C. 444; 1 Scott, 404.

(u)"It is," says Lord Eldon, "a question fit to be tried at law, whether, if a party takes out execution on a bill of exchange, and afterwards waives that execution, he has not discharged those who were sureties for the due payment of the bill. The principle is, that he is a trustee of his execution for all parties interested in the bill." Mayhew v. Crickett, 2 Swanst. 190; 19 R. R. 57, and see Smith v. Winter, 4 M. & W. 467; Lake v. Brutton, 25 L. J., Ch. 842.

But it has been decided that the withdrawing of an execution against the goods of an acceptor will not discharge the drawer, against whom judgment had been

Part payment by the principal or by the surety will only CHAPTER discharge the surety (x) pro tanto.

A mere offer to give time to the acceptor not acted will not discharge the drawer (y).

XX. Part payment.

Offer to give time.

The taking a cognovit (or as it now is, judgment by con- Cognovit, sent) or warrant of attorney or judge's order from the warrant of acceptor, though payable by instalments, will not discharge attorney, or the indorsers, provided the last instalment be not postponed judge's order. beyond the period when, in the ordinary course of the action, judgment and execution might have been had (2). But the instrument must be executed with the statutory formalities (a).

The obtaining of a judgment against any one party, Judgment. without satisfaction, is no discharge of any other party (b).

If the acceptor become bankrupt, the holder may prove Bankruptcy. and receive a dividend without prejudice to his remedies against other parties, for the acceptor is, in case of bankruptcy, discharged, not by the act of the holder, but by act of law (c).

CHAPTER

XX.

Liquidation

and compounding.

Collateral security.

It is now decided, both at law and in equity, that whether a debtor be released by bankruptcy, liquidation, or involuntary composition, he is discharged by operation of law, and his co-debtor or surety still remains liable (d), and the law was the same under the old insolvent acts (e).

Though the taking of a fresh bill from the acceptor in lieu of the dishonoured bill discharges the other parties, it will not have the effect, if the second bill or second security, whatever it be, were given as a collateral security (f). Where a bill having been dishonoured, the acceptor transmitted a new bill for a larger amount to the payee, but had not any communication with him respecting the first, and the payee discounted the second bill and indorsed the first to the plaintiff; it was held, that the second bill was merely a collateral security, and that the receipt of it by the payee did not amount to giving time to the acceptor of the first bill, so as to exonerate the drawer. "In cases of this description," says Abbott, C.J., "the rule laid down. is, that if time be given to the acceptor, the other parties to the bill are discharged; but in no case has it been said, that taking a collateral security from the acceptor shall have that effect. Here the second bill was nothing more than a collateral security" (g). B., being indebted to A., procured C. to join with him in giving a joint and several

(d) Megrath v. Gray, L. R., 9 C. P. 216; 43 L. J. 63; Er parte Jacobs, L. R., 10 Ch. Ap. 211; Ellis v. Wilmot, L. R., 10 Ex. 10; Simpson v. Henning, L. R., 10 Q. B. 406; 44 L. J. 143; Bankruptcy Act, 1890, s. 3 (19). Where a joint and several note had been given by partners, who subsequently became bankrupt, it was held that acceptance of a composition on the joint debt was no discharge of the separate debt. This rule, however, seems not to apply, if the separate debts are discharged in bankruptcy liquidation. Er parte Hammond, L. R., 16 Eq. 614. If the holder voluntarily accepted a composition, the indorsers were discharged. Ex parte Wilson, 11 Ves. 412; 8 R. R. 194; Er parte Smith, Co. B. L. 189; Ellison v. Dezell, 1 S. N. P. 11th ed. 385.

or

(e) Nadinv. Battie, 5 East, 147 ;

1 Smith, 362; and see English v. Darley, 2 B. & P. 62 ; 3 Esp. 49 ; 5 R. R. 543. If a creditor executed a deed of composition, having indorsed away bills on the debtor, the deed was no defence to an action on the bills when they were returned to the creditor. Margetson v. Aitken, 3 C. & P. 338; Dans. & Ll. 157. Where a man has been discharged from a debt on a note under the Insolvent Act, a new note for the old debt would not bind, though given to procure time for a surety on the old note. Erans v. Williams, 1 C. & M. 30; 3 Tyr. 226.

(f) Gordon v. Calvert, 4 Russ. 581; 28 R. R. 175; Calvert v. Gordon, 7 B. & C. 809.

(g) Pring v. Clarkson, 1 B. & C. 14; 2 Dowl. & R. 78. See the observations on this case. Bayley, 6th ed. 347.

XX.

promissory note for the amount, and afterwards having CHAPTER become further indebted and being pressed by A. for further security by deed reciting the debt, and that for a part a note had been given by him and C., and that A. having demanded payment for the debt, B. had requested him to accept a further security, assigned to A. all his household goods, &c., as a further security, it was held, that this did not affect the remedy on the note against C. (h). So, where one of the three partners, after a dissolution of partnership, undertook by deed made between the partners to pay a particular partnership debt on two bills of exchange, and that was communicated to the holder, who consented to take the separate notes of the one partner for the amount, strictly reserving his right against all three, and retained possession of the original bills, the separate notes having proved unproductive, it was held, that he might still resort to his remedy against the other partners, and that the taking, under these circumstances, the separate notes, and even afterwards renewing them several times, did not amount to satisfaction of the joint debt (i).

A warrant of attorney may be only a collateral security (k). Warrant of

Though the drawee should not have accepted the bill, yet it is conceived that the holder, by giving up the bill to him and taking from him a substituted bill at a longer date, would discharge the prior parties, though he have given due notice of dishonour. It is true the drawee is not the principal debtor, nor at law a debtor to the holder at all, but he is the debtor of the drawer; and, if a man be referred to his own debtor's debtor for payment, and instead of taking cash elects to take a bill, he discharges his own debtor (). If, however, the holder, being unable to obtain cash, take a bill from the drawee as a collateral security, and keep the original bill, his remedies on the original bill would not be affected, and as between himself and the drawee there would be a good consideration for the new bill (m).

(h) Twopenny v. Young, 3 B. & C. 208; 5 Dowl. & R. 259.

(i) Bedford v. Deakin, 2 B. & Al. 210; 2 Stark. 178.

(k) Norris v. Aylett, 2 Camp. 329; Bell v. Banks, 3 M. & G.

258.

(1) Strong v. Hart, 9 D. & R.

189; 6 B. & C. 160; 30 R. R.
272; Smith v. Ferrand, 7 B. & C.
19; 9 D. & R. 803; but see
Robinson v. Read, 9 B. & C.
449; 4 M. & R. 349.

(m) Vide the Chapter on CON-
SIDERATION, DEBT OF A THIRD
PARTY.

attorney.

Discharge of prior parties by giving drawee who has not accepted.

time to