1844.

Ex parte
SHARP.

received in different payments a sum more than sufficient to discharge the debt due upon the bond at the time of the death of the deceased partner, the bond was to be considered as paid. Now, we contend, in this case, that the money paid by the sureties must go in discharge of that part of the debt which was provable, and not of the portion which could not be proved; and that the sureties have a right to insist upon the payments being so appropriated. [The Chief Judge. Here the surety pays the whole sum for which he is liable. How is he then to have a right to insist upon any appropriation as to the payment?] If the payment would extinguish the whole debt of the principal debtor, it would, of course, be needless to insist upon such right; but when the payment is only in discharge of a small portion of that debt, we submit that the surety has a right to insist upon the payment being applied in the way most beneficial to himself. Thus in Marryatt v. White (a), where security had been given by a surety for goods to be supplied to his principal, and not in respect of a previously existing debt, and goods were subsequently supplied, and payments were from time to time made by the principal, in respect of some of which discount was allowed for prompt payment; it was held, that it was to be inferred, in favour of the surety, that all these payments were intended in liquidation of the latter account. But, in the present case, there has been, in effect, an appropriation by the petitioners of the money paid by the sureties, towards the discharge of the provable portion of the debt, by the petitioners offering no opposition to the proofs of the sureties under the fiat.They also cited Clements v. Langley (b), where it was held that one of several co-sureties, who is compelled to

pay the debt of the principal, after the bankruptcy of the other co-surety, cannot prove for contribution under his

commission.

1844.

Ex parte
SHARP.

Mr. Wigram, in reply. The terms of the guarantee January 17. are, that the guarantor shall guarantee "each and every portion" of the debt. The person guaranteed, therefore, had a right to appropriate the payment to what portion of the debt he chose. In Marryatt v. White (a), which has been cited by the other side, the decision was founded on an implied agreement, from the conduct of the parties, that the payment made in that case was to be appropriated in favour of the surety. [The Chief Judge. That is certainly a strong case, as to the appropriation of the payment towards the liquidation of the debt, for which the surety was liable. I observe that the previous case of Plomer v. Long (b) is there referred to, to which is appended a note, that seems to have an important bearing upon the present question.] The guarantee, however, is very different in the present case, being not only for each and every part of the debt, but with the express stipulation that the guarantor was to have no benefit of any dividends.

V. C. KNIGHT BRUCE, C. J.-It is agreed on all hands, that on the 28th of December an act of bankruptcy was committed, by the assignment of all the bankrupt's property to the petitioners, and that at that time the guarantors had no notice of such act of bankruptcy. I must assume, also, that when the guarantees were entered into, and when the payments were made, the guarantors had no such notice. If, however, the (a) 2 Star. 101. (b) 1 Star. 133.

1844.

Ex parte
SHARP.

January 24.

January 30.

petitioners are desirous of offering evidence on this point, they are at liberty to do so; and the case may stand adjourned to this day week, to enable them to decide whether they will adduce such evidence or not.

The counsel for the petitioners declined to offer any such evidence, and referred the Court to Philpot v. Jones (a), and Stone v. Compton (b).

They

V. C. KNIGHT BRUCE, C. J. now delivered the following judgment.-The order, in point of time, of the two portions of debt from the bankrupt to the petitioners, may, of itself and simply, deserve much attention in this case. But it is not all. On the 28th of December 1842, (which was previous to the guarantee), an act of bankruptcy was committed by the bankrupt, of which the petitioners had at the time actual notice. were, in truth, directly associated with it. The petitioning creditor's debt having been incurred before that time, and having been then due, this act of bankruptcy is material for the purposes of the fiat, which was issued on the 22nd of February following. It is not proved, or alleged, that any one of the guarantors, when he gave his guarantee, or when he paid the amount of it to the petitioners, had notice of this act of bankruptcy. I cannot possibly assume that there was any such notice; especially since the petitioners have declined the opportunity, which the Court offered to give them, of producing evidence on the point. The assignees contend, that, unless the payments of 501. each, which the guarantors made in full discharge of their liability under the guarantees, were made in respect of the portion of the debt (6) 5 Bing. N. C. 142.

(a) 2 A. & E. 41.

which was due before the act of bankruptcy of December, (to which, as well as to the other portion of the debt, both parties agree in construing the guarantees to extend), the proofs made by the guarantors under the fiat were improperly made, and ought not to stand. The assignees may, or may not, be right. But it being, at best, reasonably arguable that they are right in so contending, I cannot hold that it was a matter of indifference to the guarantors, whether, when they gave, or when they paid on, the guarantees, they were informed, or left in ignorance, of the act of bankruptcy of December; especially as they have already judged it to be for their interest to prove under the fiat.

Upon these facts, I think, that neither when the guarantees were given, nor when the payments under them were made, were the guarantors on equal terms with the petitioners; and if those payments were to be held applicable to the portion of the debt that was incurred after the act of bankruptcy of December, and the consequence of that were to be to render their proofs liable to be expunged, I apprehend that justice would not be done, as between the petitioners and the guarantors. This, though the guarantors are not here, is not, I think, to be disregarded upon the present occasion.

Under all the circumstances, (although it may not be certain that the validity of the proofs of the guarantors depends on the petitioners' failure in the question now before me, and although the petitioners are strangers to those proofs), I am of opinion, that the justice of this case will be best satisfied by not disturbing what the learned Commissioner has done, that is, by applying the 4501. received from the guarantors towards the earlier

1844.

Ex parte SHARP.

portion of the debt. I have read the cases which were mentioned to me, and some others, with reference to the present. The report of Stone v. Compton (a) refers to Pidcock v. Bishop (b), where I found, that in my original note on this petition, I had unintentionally borrowed an expression of Mr. Justice Holroyd, who says there," the plaintiff and defendant therefore were not on equal terms;" that distinguished judge goes on to say, "the former, with the knowledge of a fact, which necessarily must have the effect of increasing the responsibility of the surety, without communicating that fact to him, suffers him to give the guarantee. That was a fraud upon the defendant, and vitiates the contract." Mr. Justice Bayley commences his judgment on the same occasion thus: "It is the duty of a party taking a guarantee, to put the surety in possession of all the facts likely to affect the degree of his responsibility; and if he neglect to do so, it is at his peril." He ends it with these words, "Here the contract to guarantee is void, because a fact materially affecting the nature of the obligation created by the contract was not communicated to the surety." That case is specifically very different from the case between the petitioners and the guarantors here. Nor do I mean to intimate any opinion as to the validity, or invalidity, of the guarantees, the money secured by which has been received by the petitioners; but I may say, that the principle on which Pidcock v. Bishop proceeded seems not very foreign from the matter before me.