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*WAY v. HEARN. Jan. 27.

A., at the request of B., and on his promise that he would share any loss or liability he might thereby incur, accepted a bill at three months for the accommodation of C. At the maturity of the bill, C. being unable to meet it, it was agreed between the holders and A. and C. (without the knowledge of B.) that another bill should be drawn for the amount, in substitution of the former acceptance. A. having been obliged to pay the second bill, sued B. on his indemnity: -Held, that B's liability on his undertaking was not discharged by the renewal of the bill,— the parties not standing in the position of creditor and principal and surety.

THE first count of the declaration stated, that, in consideration that the plaintiff, at the request of the defendant, would lend his name to one Robert Read on a bill of exchange for 1107. payable three months after the 24th of October, 1859, that is to say, by the plaintiff accepting the said bill, the proceeds thereof to be applied in discharge of a certain amount then payable to the sheriff of Hampshire, the defendant undertook and promised the plaintiff to share with him any loss or liability which he the plaintiff might incur in respect of such bill; and that, although the plaintiff did then lend his name to the said Robert Read on the said bill, and then accepted the same for the purpose and on the terms aforesaid, and the proceeds of the said bill were applied in discharge of the said amount so payable to the said sheriff as aforesaid, and the plaintiff afterwards did incur a certain loss or liability in respect of the said bill, by being compelled to pay and paying the amount thereof, that is to say, 1107., in discharge and in respect of the same, and all things had happened and been done and performed, and all times had elapsed which were necessary to have happened and to have been done and performed and to have elapsed, to entitle the plaintiff to have the defendant share with him the said loss or liability, and to be paid by the defendant one moiety of the said sum of 1107, and to maintain this action, yet the defendant did not nor would share with the plaintiff the said loss or liability, or pay him a moiety of the said sum of 1107., or any part thereof.

There was also a count for money paid and for money found due upon accounts stated.

*775] The defendant pleaded,-first, to the first count, *that he did not undertake and promise as therein alleged, secondly, to the first count, that the plaintiff did not incur a loss or liability as in that count alleged,-thirdly, that before action the plaintiff's claim was satisfied and discharged by payment,-fourthly, to the first count, that the supposed promise in that count mentioned was obtained and procured from him by the plaintiff and one Robert Read in collusion with him by fraud and misrepresentation.

Fifth plea to the first count,-"as and for a plea on equitable grounds," that the defendant made the supposed promise in that count mentioned at the request of one Robert Read and in consideration that the said Robert Read should draw and the plaintiff should accept the said bill of exchange in that count mentioned, payable three months after date, as in that count alleged, and not otherwise; that the said bill of exchange, at the time it became due, was unpaid by the said Robert Read and dishonoured, and that the plaintiff, with notice of the premises, gave no notice of the dishonour of the said bill to the defendant; that thereupon, to wit, on the 21st of January, 1860,

and after the said bill became due as aforesaid, it was agreed by and between the plaintiff, the said Robert Read, and the joint stock banking company called the National Provincial Bank of England, the then holders of the said bill of exchange, for a certain good and sufficient consideration, without the defendant's consent or knowledge, in order to give the said Robert Read time for the payment of the amount due on the said bill of exchange in the first count mentioned for a certain period, to wit, until another bill of exchange thereinafter mentioned should become due according to the tenor and effect thereof, and for and on account thereof, that the plaintiff should accept a certain other bill of exchange, to be drawn by the said Robert Read and *accepted by the plaintiff, bearing date the 30th of January, [*776 1860, for the amount of the first-mentioned bill, payable a certain time, to wit, four months, after the date thereof, to the said Robert Read or order; that, in pursuance of such agreement, the said Robert Read, without the consent or knowledge of the defendant, drew the last-mentioned bill of exchange, and the plaintiff, with knowledge of the premises, accepted the same in that behalf for securing the payment of the amount due upon the said bill of exchange in the first count of the declaration mentioned, and for and on account thereof; that the last-mentioned bill of exchange, so accepted by the plaintiff as last aforesaid, was delivered to and accepted by the said banking company, the holders of the bill in the first count of the declaration mentioned, for and on account of the said bill in that count mentioned, and all moneys due thereon, on the terms aforesaid; and by reason of the premises time was given to the said Robert Read to pay the bill in the first count of the declaration mentioned without the defendant's consent or knowledge; that the defendant did not at any time consent to, approve of, or ratify the said agreement so made between the plaintiff, the said Robert Read, and the then holders of the said bill in the first count mentioned, but was ready and willing, at the time the bill of exchange in the first count of the declaration mentioned became due and payable, to share with the plaintiff any loss or liability which the plaintiff might or should incur in respect of the last-mentioned bill of exchange; and that, after the bill of exchange in the first count of the declaration mentioned became due and payable as aforesaid, and before the bill of exchange secondly above mentioned became due and payable, the said Robert Read became a bankrupt, within the meaning of the statutes in force concerning bankrupts, and that *he [*777 was at the time of the commencement of this suit, and still is, an uncertificated bankrupt.

There was a further plea, to the residue of the declaration, of never indebted.

The plaintiff took and joined issue on all the pleas; and he also demurred to the fifth plea, the ground of demurrer stated in the mar gin being," that the facts alleged in the plea do not show that the defendant was in the position of a surety who was discharged by reason of time having been given by his creditor to the principal debtor, and discloses no answer in law to the declaration." Joinder. Holl, in support of the demurrer.(a)-The defendant was not in the

(a) The points marked for argument on the part of the plaintiff were as follows:"1. That the fifth plea does not show that the defendant was in the position of a surety who was discharged by time having been given by his creditor to the principal debtor:

position of a surety who was discharged by time given to the principal debtor. The original bill was drawn by Read: the plaintiff became the acceptor at the request of Hearn, the defendant. As between the plaintiff and Read and the defendant, the relation of creditor and principal and surety never *arose. It appears that the plaintiff *778] became surety at the request of the defendant. When Read made default in payment of the bill, the plaintiff was not in the position of a creditor, as against Read; nor could he be until he paid the bill. The plaintiff, having thus become surety for Read, became liable to pay the bill on Read's default, and the defendant became liable to contribute; but the plaintiff would have no right of action against Read, or claim on the defendant for contribution, until after he had paid the bill. As between the three, therefore, the relation of creditor and principal and surety never arose. [WILLES, J.-It is enough to say that the defendant's promise was an original promise to pay half what the plaintiff should become liable to pay on account of the bill.] 2. Upon the dishonour of the first bill, the plaintiff was not a creditor of Read, but a joint debtor with him to the holders of the bill, and therefore could not give time to Read. All he could and did do was, to consent to the holders giving time to Read. There are many cases which show that a creditor may give time to the principal debtor without prejudicing his right against the surety, provided he expressly reserves such right. It is so laid down in Owen v. Homan, 4 House of Lords Cases 997. [WILLIAMS, J.-So thought Lord Cranworth; but Lord Truro thought otherwise.] Lord St. Leonards, in Wyke v. Rogers, 1 De Gex, M'N., & G. 408, says that "all the cases prove, that, where an instrument is taken which might otherwise. operate as a discharge of the surety, there will be no discharge if the remedies against the sureties are preserved." In Byles on Bills, 7th edit. 217, it is said: "It has been repeatedly held, and is now well established, that a discharge by the creditor to the principal debtor will not discharge the surety, if there be an agreement between the creditor and the principal that the surety shall not be thereby

*779] discharged, albeit the surety himself is no party to the stipula tion; and the surety's remedy over against the principal is intact, whether the surety be or be not a party." The authorities referred to in support of that position are, Burke's Case, 6 Ves. 809 n., Boultbee v. Stubbs, 18 Ves. 20, Ex parte Glendinning, Buck B. C. 517, Ex parte Carstairs, Buck B. C. 560, Harrison v. Courtauld, 3 B. & Ad. 36 (E. C. L. R. vol. 23), Nichols v. Norris, 3 B. & Ad. 41 n., Cowper v. Smith, 4 M. & W. 519,† Smith v. Winter, 4 M. & W. 454,† North v. Wakefield, 13 Q. B. 536 (E. C. L. R. vol. 66), Owen v. Homan, 4 House of Lords Cases 997, and Kearsley v. Cole, 16 M. & W. 128.†

"2. That, at the time when the first bill was renewed, the plaintiff was a debtor upon such bill to the holder thereof, and had no right of action or claim against Read, and that he was not a creditor giving, but a debtor obtaining, time:

"3. That, in equity, the plaintiff and the defendant were in the position of joint sureties for the said Robert Read: that both therefore were equally bound to ascertain and see to the payment of the bill, and that the defendant, having neglected so to do, cannot now discharge himself from contribution, by showing that he had no notice of the dishonour thereof, or the plaintiff's consent to the renewal thereof:

"4. That it does not appear by the said plea that the defendant has been delayed or prejudiced by any act of the plaintiff."

And see Davies v. Stainbank, 6 De Gex, M'N., & G. 679, cited in Pooley v. Harradine, 7 Ellis & B. 437-440 (E. C. L. R. vol. 90). The right of suing the surety being reserved by the agreement, no fraud is committed, the surety having his right over against the principal. [WILLIAMS, J.-If the position of the surety is deteriorated, it is difficult to understand why the reservation of the creditor's right as against him should prevent his being discharged by time being given to the principal debtor.] The arrangement for the renewal of the bill could not prejudice or release the defendant. No time was actually given by the plaintiff to Read. He was in the position of a person himself obtaining time from the creditor. 3. If the defendant is to be treated as a surety, he and the plaintiff are in equity in the position of joint sureties. It was the defendant's duty to provide a moiety of the amount of the bill, on Read's failure to pay it. Having made default, he cannot complain of his co-surety having consented to postpone the day of payment. In Dunn v. Slee, Holt N. P. C. 399 (E. C. L. R. vol. 3), it was held, that, though time given to the principal will, under certain circumstances, exonerate a surety, yet time given to a surety without the privity of his co-surety, will not, upon his paying *the debt, affect his right of action for contribution against such co-surety. [WILLIAMS, J.-Is this a case of co-surety- [*780 ship?] In equity, it is submitted, it is.

Cooke, contrà.(a)-Substantially the fifth plea is a good answer to the first count of the declaration. The defendant made the promise stated in the first count solely as surety for Read: and by time given to Read without his privity and consent, the defendant was damnified, and consequently discharged from his suretyship. [ERLE, C. J.-Way does not give, he obtains time.] He goes behind the back of Hearn, and consents that time shall be given to Read, the principal debtor, for payment of the bill. Hearn's position is thus materially altered. His liability was as surety for Read, not on an original promise. It is not contended that time given to Read would have the effect [*781 *of discharging either Way or Hearn at law; but in equity it has. In Greenough v. M'Clelland, 30 Law J., Q. B. 15, it was held, that, if one maker of a promissory note signs as surety only for the other, and the payee has notice of this when he takes the note as security for money advanced to the principal, he cannot give time to the principal without the consent of the surety: if he does, the surety is discharged in equity, although the payee has never agreed to treat

(a) The points marked for argument on the part of the defendant, were as follows:--

1. That the fifth plea is a good answer to the cause of action in the first count of the declaration:

2. That the defendant made the promise in the first count as surety for and at the request and for the sole benefit of one Robert Read as the intended principal debtor, and not otherwise; that the defendant was to incur liability only in case Read, the principal debtor, failed to duly pay the amount of the bill of exchange mentioned in the declaration, and not otherwise; and that, after such bill became due, the defendant was discharged from his promise to the plaintiff by time having been given to Read, the principal debtor, and by an agreement having been made between Read, the plaintiff, and the then holder of the said bill, without the knowledge or consent of the defendant, whereby an alteration in Read's liability took place, and time was given to Read for the payment of the amount of the said bill, and whereby the defendant's remedies against Read were suspended:

3. That the defendant's promise in the declaration was discharged by the plaintiff's act."

him otherwise than as a principal party liable upon the note, for, an equity arises from the relation of principal and surety and notice thereof to the payee; and, if the surety is sued upon the note after such time given, he may set up the defence by way of plea on equitable grounds. If, therefore Hearn had been a surety on the bill itself, the agreement between the banking company and the principal debtor would clearly have discharged him, Way knew that Ilearn was surety for the principal debtor, and therefore Way would have stood in the same position as the creditors, if Hearn had been a party to the bill. Hearn consented to guaranty or indemnify Way against a moiety of the loss, in the event of the dishonour by Read of a three months' bill. If on the happening of that event, Hearn had been called upon to contribute, he might have sued Read. Way, however, behind his back, enters into an arrangement whereby Hearn's hands are tied for four months longer. His position, therefore, is materially and prejudicially altered. If Way had not been party to the arrangement for renewing the bill, he would have been discharged. Hearn's liability to him would then have ceased. [WILLES, J.-Hearn's liability accrued directly upon the dishonour of the first bill.]

Holl, in reply, was stopped by the Court.

*ERLE, C. J.-It is a well-recognised rule of law, that, if two *782] persons are sureties for the performance of an act by a third on a given day, and time is given by one without the consent of the other, the latter is discharged. It is contended on the part of the defendant that the facts stated in the fifth plea bring this case within that rule. It seems to me, however, that the facts stated distinctly negative that relation between these parties. Read being in want of money, Hearn asks Way to be party to a bill at three months for the purpose of raising it, agreeing to share with him any loss or liability he might incur in the transaction. A bill is accordingly drawn at that date for 1107. by Read upon Way, which Way accepts upon the faith of Hearn's promise. The bill is not met at maturity by Read, and is in the hands of the National Provincial Bank of England. The plaintiff, Way, might have incurred loss, and Hearn would have been bound to recoup him as to a moiety, if the bank had pressed for immediate payment. But they give time to Read and to Way, without any communication with Hearn: and the question is whether this was a giving time to the principal debtor without the consent of the surety, so as to discharge the latter. So far from this arrangement operating to the prejudice of Hearn, it was manifestly for his benefit; for, it gave Read a chance of meeting the claim, and so exonerating both Way and Hearn from responsibility in respect of it. At all events, I am of opinion that the obtaining of time by Way for himself and Read for the benefit of Hearn, does not bring the case within the category on which the defendant rests his defence.

The rest of the Court concurring,

Judgment for the plaintiff.

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