CHAPTER V. OF THE SURETY'S DISCHARGE. A SURETY may be discharged from his liability, I. by the act of the parties; or II. by operation of law. I. Of his discharge by the act of the parties. A surety may be discharged from his contract, when any liability has been incurred under it, by payment, or satisfaction, either by the principal, or the surety or where no liability has been incurred (and when the nature of the engagement permits it), by the determination of the contract by the principal or the surety (a) :—or by a release in law from the creditor, or party to whom the guarantee has been given :-or by acts done by the creditor, without the surety's knowledge and consent, which may be prejudicial to the surety's rights and interests. Of these modes of determining the surety's liability, it will be sufficient simply to draw the reader's attention, 1st, To the law as to the application or appropriation of payments made by the principal to the creditor; and 2ndly, To the law as to acts done by the creditor without the surety's sanction, which may operate to the entire, or partial, discharge of the surety. 1st. Of the application or appropriation of payments, made by the principal to the creditor. The surety may be liable with his principal to the creditor on one account, and the principal may at the same time be liable to the creditor on (a) See ante, pp. 41 & 52. his own individual responsibility on another account : under these circumstances, questions may arise as to the application or appropriation of payments made by the principal to the creditor. The general rule applicable to payments, seems to be this: if several debts be due from a person, and the debtor pay money to his creditor, the debtor has a right to appropriate the payments to the discharge of any one or other of those debts. Solvitur ad modum solventis. If no specific appropriation be made, or can be inferred to have been made, at the time of payment, then the right of application devolves upon the party receiving the money. Solvitur ad modum recipientis. If no appropriation be made by either party, then the payment must be applied as the law directs (b). 1. Of the application or appropriation by the principal debtor. The debtor may, at the time he pays the money, declare to what account the money shall be applied (c), but he cannot make the application afterwards (d). A party was indebted to his creditor by specialty, and also on simple contract, and having paid sums to his creditor generally, the debtor enters them in his book as paid on account of what was due by specialty it was held, that the entries in the debtor's book were not sufficient to make the application (e). If, however, a surety guarantee a person against debts to be contracted by his principal not exceeding a certain amount, and the creditor give (b) See the judgments of Sir L. Shadwell, V. C., in Bradly v. Heath, 3 Sim. 543; and of Sir N. Tindal, C. J., in Mills v. Fowkes, 5 Bing. N. C. 455; and see cases infra. (c) Wilkinson v. Sterne, 9 Mod. 427; Manning v. Westerne, 2 Vern. 606; S. C. Eq. Ca. Ab. 147, pl. 2; Peters v. Anderson, 5 Taunt. 596. (d) Wilkinson v. Sterne, supra. (e) Manning v. Westerne, 2 Vern. 606; S. C. Eq. Ca. Ab. 147, pl. 2. the principal credit beyond that amount, and the principal becoming embarrassed, assign all his effects to trustees for the payment of his creditors pro rata, the payment by the trustees of a dividend upon the whole amount of the creditor's debt, is a specified appropriation of payment to each and every part of the demand, and the creditor is not justified in deducting the whole sum received, as a dividend from the gross amount of the debt, and holding the surety liable on the guarantee for the residue of the demand up to the extent of the guarantee, but the dividend received by the creditor is to be applied rateably to the whole debt, as well the part covered by the guarantee, as the part which is left uncovered, and consequently a rateable deduction is to be made for the sum covered by the guarantee (ƒ) (6). So where P. was indebted to C. by bond, in which S. was bound as his surety, and was also indebted to C. by simple contract, and P. and C. came to a stated account for all monies owing to C. as well for what was due on the bond, in which S. was bound as surety, as for what was due to C. upon simple contract, and P. makes C. a bill of sale towards satisfaction of the whole debt; the money raised by the bill of sale shall be applied proportionably, as well for the sinking of the debt for which Š. stood bound, as towards payment in proportion of the debt due on simple contract: inasmuch as both debts had been cast into one stated account, and the bill of sale made towards satisfaction of the whole debt (g). If a specified appropriation have been made by the debtor, it is not in the power of the creditor to vary or alter such appropriation: if the creditor receive (f) Bardwell v. Lydall, 7 Bing. (g) Perris v. Roberts, 1 Vern. 489; Payley v. Field, 12 Ves. 435. 34; S. C. 2 Ch. Ca. 83. (6) The same rule applies in bankruptcy (ex parte Rushforth, 10 Ves. 409). the payment, it must be upon such terms as the debtor will pay it, however improper the application may be (h): the payment by the principal binds the surety, the latter having no control whatever as to the way in which the principal thinks proper to make his payments (i); thus, where P., who had been appointed a tax-collector, entered into a bond with S. as his surety, for the due and faithful payment to the receiver-general, according to the intent of the Act of Parliament under which he had been appointed, of all monies collected by P. upon the days and at the times appointed by the Act, and the sums received by the tax-collector for the service of the year during which S. was his surety, were, as to part, paid over by him to the receiver-general to the service of that year, and the residue of the sums so received, were paid by P. to the service of former years, during which time P. had also been taxcollector, but S. had not been his surety during those former years, it was held, that the payments by the tax-collector for the year for which S. was his surety, to the account of different years, was a breach of the condition for due payment, and that S. was liable for the amount of such payments, and that the receiver-general was justified in applying the money according to the express directions of the tax-collector, though some of those payments went in exoneration of the sureties for former years (j). But the application by the debtor, need not be expressed in terms; it is sufficient if it can be col (h) Gwynne v. Burnell, 2 Bing. N. C. 7; Bois v. Cranfield, 16 Vin. Abr. 277, tit. "payment," M. pl. 1; S. C. Sty. 239; Anon. Cro. Eliz. 68; and see the observation of Lord King, C., in Colt v. Nettervill, 2 P. Wms. 304. (i) Saunders v. Taylor, 9 B. & Cress. 35; and see Williams v. (j) Collins v. Gwynne, 9 Bing. 544; Gwynne v. Burnell, 2 Bing. N. C., 7. lected from the nature of the transaction between the parties, that the debtor intended at the time of payment, to appropriate the money paid to one account, specifically (k); thus, where A. having large demands against D. upon bill transactions with himself, and also as agent for several persons to whom D. had granted annuities secured by S., caused an attorney to make application to D. and S., on behalf of those annuitants, and D., in consequence of that application, and the remonstrances of S. the surety, paid to A. certain sums of money, without making any specific appropriation of them at the time of payment it was held, that A. must be considered as having received them on account of the annuitants, and that the surety for the due payment to the annuitants of their annuities, was entitled to have those monies divided among the annuitants in proportion to the amount of their respective demands(). So where D. being indebted to his bankers, deposited with them the promissory note of his brother-in-law as a security for the money due to them, but previous to its becoming due, informed the bankers that it was an accommodation note, and requested them to hold it over for sometime, until a demand of his with other persons was settled, to which the bankers consented, and on the day the note became due, D. paid in generally a sum of money, leaving a balance due to the bankers considerably less than the sum due on the note: D. shortly afterwards becoming insolvent, it was held, that the bankers could not make the maker of the note responsible for more than the balance remaining due at the time of such payment, although they after (k) Shaw v. Picton, 4 B. & Cress. 715; S. C. 7 Dowl. & Ry. 201; Hammersley v. Knowlys, 2 Esp. 665; Peters v. Anderson, 5 Taunt. 596; Newmarch v. Clay, 14 East, 240; Brett v. Marsh, 1 M Vern. 468; S. C. 1 Eq. Ca. Ab. 147, pl. 4; Marryatts v. White, 2 Stark. 101. (1) Shaw v. Picton, 4 B. & Cress. 715; S. C. 7 Dowl. & Ry. 201. |
