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tween the parties, effect a release, or even a suspension of the action (m), unless there be a provision that it may be pleaded in bar (n).

CHAPTER
XVII.

We have already seen (o) that the creditor's appointment Appointment of of his debtor as executor amounts in law to a release. And debtor executor. that the same consequence follows if one of several joint debtors be appointed executor. But a debtor's appointment

of his creditor to be executor is no release unless there be assets (p).

The release of a debt is a release of the right to hold any Right to hold securities that may have been given for the debt (9).

(m) Thimbleby v. Barron, 3 M. & W. 210.

(n) Walker v. Neville, 34 L. J.,

73, Exch.

(0) Ante, p. 54.

(p) See Lowe v. Peskett, 16 C.

B. 500.

(g) Cowper v. Green, 7 M. & W. 633.

securities for released debt.

CHAPTER XVIII.

OF THE LAW OF PRINCIPAL AND SURETY IN ITS
APPLICATION TO BILLS AND NOTES.

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CHAPTER
XVIII.

General principles of the law.

OUR law of principal and surety is in substance the same as the Roman law: not perhaps so much derived from it, as flowing from the same natural equities between creditor, principal debtor, and sureties. "Pro eo qui promittit solent alii obligari, qui fidejussores appellantur; quos homines accipere solent dum curant ut diligentius sibi cautum sit" (a). A party liable on a bill sometimes bears to the holder the relation of principal debtor, sometimes of surety only.

(a) Inst. 3, 20. See as to the Roman, Dutch law, and the old French law, M'Donald v. Bell, 3

Moore, P. C. C. 315; Bellingham v. Frere, 1 Moore, P. C. C. 333.

The contract of suretyship is a contract uberrimæ fidei. Therefore, where there is any misrepresentation, or any fraudulent concealment of any material fact, which fact if known might have induced the surety not to enter into the contract, that contract is void from the beginning, as between the creditor and the surety (b). But mere non-disclosure of the state of accounts by the creditor to the surety will not avoid the contract (c).

It is a general rule of law, that a discharge of the principal is a discharge to the surety. For the engagement of the surety, being but an accessory to the principal's agreement (d), terminates with it. If, notwithstanding this release of the principal debtor, the creditor could sue the surety, he would evade the effect of his own discharge to the principal, and regain a debt which he may have relinquished for a valuable consideration, or at least by his deliberate act. Besides, were the surety obliged to pay the creditor, the surety must either be allowed to resort to his principal, or he must not. If he may, then the principal will lose the benefit of that discharge which he received from the creditor; if he may not, the loss occasioned by the creditor's stipulation with the principal will fall on the surety. Further, it is a doctrine of equity that the surety is entitled to all the remedies which the creditor has against the principal, and the creditor by releasing the principal would prejudice those remedies. It is evident, from these considerations, that the only rational and equitable rule is, that which is well established both in law and equity, namely, that a discharge to the principal is a discharge to the surety.

CHAPTER
XVIII.

subject.

In inquiring into the effect of a discharge or indulgence Division of the by the holder, to parties liable on a negotiable instrument, let us consider,-1st. What parties to a bill or note are principals, and what parties are sureties; 2ndly. What conduct of the holder will discharge the surety; 3rdly. How the discharge of the surety may be prevented; 4thly. How it may be waived; 5thly. What conduct of the creditor to the surety will discharge the principal debtor; and, lastly, add a few words on the rights of sureties.

(b) See Oren v. Homan, 4 H. of L. Cas. 997; Hamilton v. Watson, 12 C. & F. 109; North British Insurance Company v. Lloyd, 10 Exch. 523.

(c) Hamilton v. Watson; North British Insurance Company v. Lloyd, supra. But see Railton v. Matthews, 10 C. & F. 934, and

B.

the observations of Parke and
Alderson, BB., thereon in North
British Insurance Company v.
Lloyd.

(d) Nam fidejussorum obligatio
accessio est principalis obliga-
tionis, nec plus in accessione po-
test esse, quam in principali re.
Instit. 3, 20, 5.

R

CHAPTER
XVIII.

WHAT PAR-
TIES TO A
BILL ARE

PRINCIPALS,

AND WHAT

SURETIES.

First. What parties to a bill are principals, and what parties are sureties.

Suppose the bill to have been accepted and indorsed for value. The acceptor is the principal debtor, and all the other parties are sureties for him, liable only on his default.

But though all the other parties are, in respect of the PARTIES ARE acceptor, sureties only, they are not, as between themselves, merely co-sureties, but each prior party is a principal in respect of each subsequent party. For example, suppose a bill to have been accepted by the drawee, and afterwards indorsed by the drawer and by two subsequent indorsers to the holder. As between the holder and the acceptor, the acceptor is the principal debtor, and the drawer and indorsers are his sureties. But as between the holder and the drawer, the drawer is a principal debtor, and the subsequent indorsers are his sureties. As between the holder and the second indorser, the second indorser is the principal, and the subsequent or third indorser is his surety. A discharge, therefore, to the prior parties, the principals, is a discharge to the subsequent parties, the sureties; but a discharge to the subsequent parties, the sureties, is not a discharge to the prior parties, the principals (e).

Where a bill is payable to the order of a third person, the payee is a subsequent party, and so a surety for the drawer. He stands in the same situation as the first indorsee and second indorser of a bill drawn payable to the indorser's order (f).

It follows, therefore, that a discharge to the acceptor is a discharge to all the parties to the bill; for, if they were still liable, they could either sue the acceptor or they could not. If they could, the discharge to the acceptor would be frustrated; if they could not, they must pay the bill without a remedy over, which would extend their liability beyond their contract. So, a discharge to an indorser is no discharge of the prior indorsers, for they have no remedy against the discharged indorser; but it is a discharge of the subsequent indorsers, for if the holder could notwithstanding recover against them, and they could recover against the prior dis

(e) Where a bill of exchange is drawn by one person upon another, and a third party subscribes his name under that of the drawer, adding the word "surety" to his signature, it has been held in America, that the undertaking of such third party is with the payee

or subsequent holder, that the bill shall be accepted and paid, but he incurs no obligation to the drawees. See Byles on Bills, 5th American ed. 378.

(f) Claridge v. Dalton, 4 M. & Sel. 226.

charged indorser, his discharge would be frustrated; if they could not, they must pay the bill without a remedy over (g).

CHAPTER
XVIII.

tion bills.

It was formerly held, that where a bill was accepted on accommodawithout consideration for the accommodation of the drawer, the drawer was to be considered the principal debtor, and the acceptor as his surety; and, therefore, that time given to the drawer would discharge the acceptor (h), but time given to the acceptor would not discharge the drawer (i). But this distinction has since been overruled (j); and in Courts of Law at least the acceptor, in all cases of accommodation bills as well as others, is considered as the principal debtor, though the holder, at the time of making the agreement, or even of taking the bill, knew the acceptance to have been without value (k). It is otherwise in equity where the holder had notice, and the equitable doctrine is available under an equitable plea (1).

notes.

As the acceptor is at law in all cases the principal debtor On promissory on a bill, so the maker is at law the principal debtor on a note, though it be given by the maker to the payee without consideration (m), and the holder take it with notice of the absence of consideration (n).

The indorsers of a note severally stand, as principals or sureties, in the same situation as the indorsers of a bill.

(g) Smith v. Knox, 3 Esp. 46; Claridge v. Dalton, 4 M. & Sel. 232; Hall v. Cole, 6 Nev. & M. 124; 4 Ad. & El. 577; 1 Har. & W. 722, S. C.

(h) Laxton v. Peat, 2 Camp. 185; see Yallop v. Ebers, 1 B. & Ad. 698.

(i) Collott v. Haigh, 3 Camp.

281.

(j) Fentum v. Pocock, 5 Taunt. 192; 1 Marsh. 14, S. C.; Carstairs v. Rolleston, 5 Taunt. 551; 1 Marsh. 207, S. C.; Smith v. Jones, 2 E. & B. 50, note.

(k) "I think," says Parke, J., "that the decision in Fentum v. Pocock was good sense and good law." Price v. Edmunds, 10 B. & C. 578; Harrison v. Courtauld, 3 B. & Ad. 36; Nichols v. Norris, 3 B. & Ad. 41. The doctrine laid down in Fentum v. Pocock has, however, been doubted in equity by Lord Eldon. Ex parte Glendinning, Buck. 517; Bank of Ireland

v. Beresford, 6 Dow, 233; and by
the late Master of the Rolls, Sir
John Leach. As to the rule in
equity, see however Hollier v.
Eyre, 9 Clark & F. 45; Strong v.
Foster, 17 C. B. 201; Davies v.
Stainbank, 6 De G., Mac. & G.
679. An accommodation acceptor
who pays the creditor is, it seems,
entitled to all instruments and
securities given by the principal
debtor. Dowbiggin v. Bourne,
You. 115; Wodehouse v. Fare-
brother, 25 L. J., Q. B. 22; 5 E.
& B. 277, S. C.; and see now the
statutable rule 19 & 20 Vict. c. 97,
s. 5; Pearl v. Deacon, 24 Beav.
186; 1 De G. & J. 461; 26 L. J.,
Chan. 761, S. C.

(1) Bailey v. Edwards, 34 L.
J., Q. B. 41; 4 B. & S. 761, S. C.
(m) Carstairs v. Rolleston, 5
Taunt. 551; 1 Marsh. 207, S. C.
(n) Nichols v. Norris, 3 B. &
Ad. 41.

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