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that the obligation created by an instrument, shall be discharged by an instrument of equal force, Nihil tam conveniens est naturali Æquitati, unum quodque dissolvi eo ligamine quo ligatum est (a); and though equity will interfere, and grant relief (6), it is no defence at law, to an action against a surety on a bond, or other instrument under seal (c) or where the cause of action arises upon matter of record, as a recognizance(d), that by parol agreement time has been given to the principal.
In a case of a replevin bond, however, a court of law is, by the 23rd section of the stat. 11 Geo. 2, c. 19, empowered, upon an application to the equitable jurisdiction of the Court, “ to give such relief to the parties upon such bond, as may be agreeable to justice and reason” (e).
2. Where the creditor compounds with, or releases, the principal.
The principles which discharge a surety, where time has been given to the principal debtor, apply with equal, if not greater, force, to a case where the creditor, without the consent of the surety, releases the principal, by accepting a composition in discharge of his debt (f). And the creditor's right of proceeding against the surety will equally be destroyed, where for a good and valid consideration, he agrees to discharge the principal (g).
(a) And see Littler v. Holland, Bing. 341; Hallett v. Mount Ste3 T. R. 590.
phen, 2 Dowl. & Ry. 343; Woos(6) Blake v. White, 1 You. & nam v. Price, 1 Cr. & Mees. 352; Coll. 420; Bowmaker v. Moore, 3 Ashbee v. Pidduck, 1 Mees. & W. Price, 214; S. C. 7 Price, 723; 564. and see Heath v. Key, 1 You. & J. (d) Bulteel v. Jarrold, 8 Price, 434; Combe v. Woolfe, 8 Bing. 467. 156.
(e) Archer v. Hale, 4 Bing. 464; (c) Davey v. Prendergrass, 5 B. and see the observation of Tindal, & Ald. 187 ; Rees v. Berrington, 2 C. J., in Aldridge v. Harper, 10 Ves. Jun. 540; Bulteel v. Jarrold, Bing. 118. 8 Price, 467; Donnelly v. Dunn, (f) Ex parte Wilson, 11 Ves. 2 Bos. & P. 45; Moore v. Bow- 420; ex parte Smith, 3 Bro. C. C. maker, 6 Taunt. 397; S. C. 2 1; ex parte Glendinning, Buck, Marsh. 81; Aldridge v. Harper, ex parte Carstairs, Buck, 10 Bing. 118; and see Littler v. 560 ; English v. Darley, 2 Bos. & Holland, 3 T. R. 590 ; Hayford v. P. 61; Lewis v. Jones, 4 B. & Andrews, Cro. Eliz. 697 ; Field v. Cress. 506; and see Thompson v. Robins, supra; Cocks v. Nash, 9 Harrison, i Cox, 344.
The rule, however, above referred to, does not apply in a case where the surety bas, previously to the release given by the creditor, paid part of the debt and given a security for the remainder (thereby making it his own individual debt): in which case, the creditor, notwithstanding the release, will, in the absence of evidence of an intention to the contrary, retain his right against the surety for the remainder of the debt (h).
If the effect of the instrument is to release the surety, it is no sufficient answer to the surety's claim to be discharged (where no fraud has been practised by the surety), that by accepting a composition from the principal, everything substantially had been done for the benefit of the surety (i): or even that the composition originated in a mistake (j): thus, where the holder of a bill of exchange, under the belief that the acceptor (who was residing at Hamburgh), had become bankrupt, and that a dividend had been set apart in respect of his bill, had directed his agent to receive the dividend under his supposed bankruptcy, and it proved to be a composition, instead of proceedings in the nature of a commission of bankruptcy, and the agent on the part of his principal signed a deed of composition : it was held sufficient to exclude the holder from going against the other parties to the bill; the consequence of not knowing what the act was, being decreed to fall upon the person who did the act (k).
(g) See ante, p. 167.
(h) See Hall v. Hutchons, 3 Myl. & K. 426. (1) Ex parte Smith, supra;
Lewis v. Jones, 4 B. & Cress. 506 ; and see ante, p. 171.
(1) Ex parte Wilson, 11 Ves.
420; and see Lord Eldon's judgment in ex parte Carstairs, Buck, 560; and Lewis v. Jones, 4 B. & Cress. 506.
(k) Ex parte Wilson, 11 Ves. 420.
So where the holder of a promissory note signed an agreement to accept from the maker 5s. in the pound in full of his demand, on having a collateral security for that sum from a third person (which was accordingly given to him), and also upon the faith of representations made to him by the agent of the maker of the note, that notwithstanding the signing of the agreement for composition by the holder, an indorsee (who had indorsed the note for the accommodation of the maker) would continue liable for the residue of the debt secured by the note: it was held, that the execution of the agreement had the effect of discharging the surety, and that the representations made to the holder, being as to the legal effect of the instrument which he signed (and which every man is supposed to know), were immaterial, and had not the effect of avoiding
The creditor may, however, when he enters into a composition with the principal, stipulate for the reservation of his remedies against other persons, and those persons will remain liable, though the effect of such reservation may be to defeat the object of the composition itself; as where the creditor has in his hands bills of exchange, accepted by a third party for the accommodation of the principal, sufficient to cover the creditor's debt, over and above the composition money : the creditor by reserving to himself the power of enforcing the security in his hands, may proceed against such accommodation acceptor, who, when he has paid the bills, may go against the principal to recover the money so paid by him, and thus the principal may eventually have to pay 20s. in the pound, and derive no benefit from the composition deed: but such a reservation must clearly and distinctly appear upon the face of
(1) Lewis v. Jones, 4 B. & Cress. 506.
the instrument (m). If the instrument of composition be silent as to the securities in the hands of the creditor, and the instrument operate as an extinguishment of the original debt, it puts an end to the agreement between the principal and surety (n); and consequently the right of the creditor to proceed against the surety (in all cases where the relation of principal and surety appears upon the security) is gone, as well at law as in equity (7).
It has been settled, that the signature by the creditor of the certificate of the principal, when the latter has become bankrupt, does not discharge the surety, either at law or in equity (O); even after notice given by the surety to the creditor, not to sign such certificate, and though the consequence of doing so, is to release the person of the principal from the arrest of the surety, and his future effects from execution (p): such an act not ranging itself within those voluntary acts of the creditor which release the surety, and over which the surety has no control, or the injury which he thereby receives being one which he has no mode of preventing; for the surety, upon payment of the debt of his princi
(m) See ante, p. 181, et seq. v. Parry, 2 Dowl. & Ry. 337 ; in) Lewis v. Jones, supra. and see ante, p. 96.
(0) Browne v. Carr, 2 Russ. (p) Browne v. Carr, 2 Russ. 600; S. C. 7 Bing. 508; Langdale 600; S. C. 7 Bing. 508.
(7) It is hardly necessary to observe, that the general effect of a release of the drawer of a bill of exchange, where the acceptance is upon the credit of effects in the hands of the acceptor, and consequently where the drawer is not primarily liable, will not (where the release is silent as to the securities in the hands of the creditor, and the creditor is in possession of a bill of exchange so accepted) release the acceptor; for it would be pro tanto, releasing the acceptor, and no benefit to the drawer (see the observation of Lord Eldon, C., in Mawson v. Stock, 6 Ves. 300 ; and see Thomas v. Courtnay, 1 B. & Ald. 1). But if the instrument of composition contains a clause, by which the creditor relinquishes his right to the securities in his hands, then the creditor's right to proceed upon the bill of exchange is to be considered as given up in favour of the drawer, or person compounded with (Stock v. Mawson, 2 Bos. & P. 286).
pal, may stand in the place of the creditor where he has proved, or may go in under the commission and prove
the debt himself where the creditor shall not have proved, and if the surety voluntarily lie by (9), or absent himself (r), or do not choose to take the course which would enable him to assert his rights, he must be considered (notwithstanding the notice) to have assented to the act.
The act of one partner is binding on his co-partners, in all cases where the act done is incident to the relation of partners ($); and though, as a general rule, one partner cannot bind the rest by deed, unless expressly authorized by the articles of partnership (t), yet it would seem, compounding with and releasing the principal, is an act which one partner may do on behalf of the others (u), and that a release executed by one partner concludes the firm, and will discharge the surety at law and in equity (v).
(9) Browne v. Carr, 2 Russ. and see ante, p. 79. 600; S. C. 7 Bing. 508.
(t) Harrison v. Jackson, 7 T. R, (r) Langdale v. Parry, 2 Dowl. 207. & Ry. 337.
(u) See Hawkshaw v. Parkins, (s) Per Lord Eldon, C., in ex 2 Swanst. 539. parte Hall, 1 Rose, 2; and see ex (v) See Hawkshaw v. Parkins, parte Hodgkinson, 19 Ves. 391;
(8) In this case, a demurrer had been put in to a bill in equity filed by a surety, which bill stated that two partners having agreed to execute a release to the principal, in consideration of an assignment of his effects, one alone executed the release, and the bill prayed that the instrument by which the surety was bound (which was a bond), might be delivered up to be cancelled.
In support of the demurrer, it was contended, that a release of partnership debts executed by one partner, was good against all, and that the surety had a defence at law. In support of the bill, it was contended, that a release executed by one partner is not binding on his co-partners, unless the articles of partnership expressly authorized the partner executing to bind his co-partners by deed, and Harrison v. Jackson, was referred to. Lord Eldon observed, that the effect of making a grant by one partner on behalf of all (which was the case in Harrison v. Jackson), was very different from the effect of a composition and release, and seems to have been of opinion, that the latter act was such, as one partner might do on behalf of the others. The bill, however, prayed relief which could not be obtained at law, namely, the delivery of the bond to be cancelled, and the demurrer was overruled.