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advanced,) gives his promissory note to the creditor for the sum of £1,500 : such security in the hands of the creditor is void at law, on the ground of fraud (u). So where the creditors of P. agree to accept a composition in discharge of their demands, upon having the composition money secured to them by a third party, and one of the creditors privately prevails upon P. to give him security for the residue of his debt (v): such agreement is void as a fraud upon such surety, since the debtor has not the benefit of the contract which the surety intended he should have.
And it makes no difference, that the security is given to the creditor by the principal, after the deed of composition is executed, if it was in respect of the demand which existed before, and was so given in pursuance of an agreement entered into previously to the execution of the deed (w). In Knight v. Hunt (x), one William Watson, being in bad circumstances, proposed to compound with his creditors for 10s. in the pound, and the plaintiff, to whom he owed £300, refused to accede to the proposal, whereupon John Watson, William Watson's brother, went to the plaintiff, and spontaneously agreed, at his own cost, to supply the plaintiff with coals to the amount of £150, if he would sign the agreement for William Watson's composition, to which arrangement the plaintiff assented, and then signed the agreement to take 10s. in the pound, to be paid with the other creditors. For the 10s. in the pound, the plaintiff afterwards agreed to take the joint and several promissory note of William Watson, and of the defendant and another
(u) Stone v. Compton, 5 Bing. N. C. 142.
(0) See Middleton v. Lord Onslow, 1 P. Wms. 768; Cecil v. Plaistow, 1 Anstr. 202; and the
observation of Buller, J., in Nerot v. Wallace, 3 T. R. 17.
(w) See Cecil v. Plaistow, supra. (w) 5 Bing. 432.
as his sureties.
The note was given, and John Watson furnished the plaintiff with coals to the amount agreed on : in an action, afterwards brought against the defendant upon the note, it was held, that the plaintiff could not recover, upon the ground that he had, by the amount in coals delivered by John Watson, received as much as the other creditors, and that any contract for more, was a fraud on them.
(2ndly.) Where the surety is a party to the secret agreement.
Upon the ground of public policy, a surety will not be held responsible, though he be particeps criminis, the relief being given on account, not of the individual, but of the public; as where one of several creditors refusing to concur with the others in executing a composition deed, unless the debtor privately secure to him the whole, or some portion of his debt, over and above what the other creditors would receive under the composition deed (y) : or, where being satisfied with the composition money, he requires, in like manner from the debtor, not a larger sum, but better or additional security (%), and in consequence thereof, S., on behalf of such debtor, with knowledge of these facts, but unknown to the other creditors, gives to the individual creditor the required security : such private agreement is a fraud upon the rest of the creditors, being an attempt to get a preference, where they had all bargained for, and supposed they were anticipating in,
an equality of benefit and a mutuality of security, and the security given by the surety is
(y) Jackman V. Mitchell, 13 & P. 286; but see the observation Ves. 581 ; Coleman v. Waller, 3 of Lord Tenterden, C. J., in Jones You. & J. 212; and see Cockshott v. Yates, 9 B. & Cress. 532. v. Bennett, 2 T. R. 763; Jackson (z) Leicester v. Rose, 4 East, v. Lomas, 4 T. R. 166; Morgan v. 372 ; overruling Feize v. Randall, Bruen, Lloyd & G. temp. Sug. 6 T. R. 146; and see ex parte 180; and the observation of Bul- Sadler & Jackson, 15 Ves. 52. ler, J., in Stock v. Mawson, i Bos.
void (5). So where D., an insolvent, having petitioned the Court for the Relief of Insolvent Debtors to be discharged out of custody, and having been brought up before that court to be examined, was opposed by C., a creditor, and remanded to a future day, and before that day arrived, A., who acted as the attorney of D., in consideration of C.'s withdrawing his opposition to D.’s discharge, undertook that C. should be the sole assignee of D.'s estate, and guaranteed that C. should, as assignee, receive £100 out of it, within three months from his appointment : it was held, that this agreement was contrary to the policy of the Insolvent Act, and therefore void (a). So where an insolvent debtor, having given to one of his creditors his promissory note as an inducement to withdraw his opposition to his discharge under the act, and having been, subsequent to his discharge, arrested by the creditor for non-payment of such note, settled the action by giving a warrant of attorney, (in which the debtor's brother joined,) to confess a judgment for the debt, costs and interest, to be paid by instalments : the court, on motion, set aside this warrant of attorney, even after payment of the first instalment (6).
Still less will the suręty be held liable to his engagement, where the object for which he gave his security does not take effect, if the agreement entered into between him and the creditor was fraudulent in
(a) Murray v. Reeves, 8 B. & Cress. 421.
(6) Rogers v. Kingston, 2 Bing. 441.
(5) Where a creditor refused to sign a composition deed, until he had been passured by the party who had guaranteed the rincipal's responsibility, that he would pay him the remainder of his debt, which the surety having done, he drew a bill for the amount paid by him to the creditor, upon, and which was accepted by, the principal; it was held, that the surety could not recover from the principal the amount of the acceptance, it being nothing more than a circuitous mode of securing to the creditor, the full amount of his debt (Bryant v. Christie, 1 Stark. 329).
its creation; as where a creditor (being one of several creditors) receives the promissory note of the surety, as an inducement to prevail upon the other creditors to discharge the debtor, by entering into a composition with him, and with the understanding that the note is to be kept a secret from the debtor's other creditors, and which object the debtor endeavours in vain to accomplish (c). And a court of equity will, upon the application of the surety, order all securities which he may have given to the creditor to be delivered up to be cancelled : but will not, in a case where the surety is particeps criminis, give the surety his costs of setting aside the illegal transactions (d).
II. Of the surety's discharge, by operation of law.
A surety may be discharged from his liability, by virtue of the statutes passed for the relief of bankrupts and insolvents, and also by the statutes passed for the limitations of actions.
The cases in which the surety will, or will not, be discharged upon his becoming bankrupt, or insolvent, have already been considered (e), and it only remains therefore to consider when the surety shall be discharged by virtue of the statutes of limitations.
By the 3rd section of the statute 21 Jas. 1, c. 16, it is enacted, that all actions upon the case (other than slander), shall be commenced and sued within six years next after the cause of such actions, and not after. And by the 40th section of the recent statute 2 & 3 Wm. 4, c. 27, it is enacted, that no action or suit or other proceeding shall be brought to recover any sum of money secured by any mortgage,
(c) Wells v. Girling, 1 Brod. & B. 447.
(d) Morgan v. Bruen, Lloyd & G. temp. Sug. 180; Debenhám v.
Ox, i Ves. 276; and see Eastabrook v. Scott, 3 Ves. 456.
(e) See ante, p. 101, et seq.
judgment, or lien, or otherwise charged upon or payable out of any land or rent, at law or in equity, but within twenty years next after a present right to receive the same shall have accrued to some person capable of giving a discharge for or release of the same, unless in the meantime some part of the principal money, or some interest thereon, shall have been paid, or some acknowledgment of the right thereto, shall have been given in writing, signed by the person by whom the same shall be payable, or his agent, to the person entitled thereto, or his agent: and in such case, no such action or suit or proceedings shall be brought but within twenty years after such payment or acknowledgment, or the last of such payments or acknowledgments, if more than one, was given.
If the promise of the surety be a promise of indemnity, the statutes begin to run as against the surety, when the party to whom the promise is given is damnified (f); for then legal proceedings may be instituted against the surety.
If a surety consent to become answerable for the debt which is then due from the principal to his creditor, in consideration of such creditor's extending to the principal the period of two years and upwards for the liquidation and settlement of his debt, the liability of the surety accrues, when the principal makes default after two years and upwards, and if (where the surety's promise is by a writing not under seal) an action be not brought against the surety within six years from the expiration of the two years, the surety may claim the benefit of the first-mentioned statute (g). So if the surety engage to become responsible for the debt of his principal, upon condition that no application shall be made to him, till after failure of the creditor's ut
(f) See Huntley v. Sanderson, i Cr. & Mees. 467.
(g) Holl v. Hadley, 2 Ad. & Ell. 758.