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is to provide for it. C. then enters into an agreement to give time to X. This discharges the acceptor of the bill."

12. A note is made by a limited company, and is indorsed by three directors in succession. It appears that they all agreed to indorse the note to guarantee the company's debt. They are liable inter se as co-sureties, and not in succession according to the order of their indorsements.

Principal and Surety. Formerly it was held at law that where a party's name appeared on a bill as principal, e.g., as acceptor, he could not be shown to be a surety, for that was a contradiction of the written instrument. This doctrine was afterwards modified in cases where it could be shown there was a contemporaneous agreement that he should be treated as a surety," and now it is clearly established that the rights of the surety arise independently of the form of the instrument. For the purpose of enforcing the debt the principal debtor on the instrument may be treated as such ;- but, apart from this, as soon as the creditor is affected with notice that the apparent principal was and is only a surety, the ordinary consequences which flow from that relationship ensue, and the creditor disregards them at his peril. Any such dealing with the real principal or other sureties as would ordinarily discharge a surety discharges the party liable on the bill. But where a real principal debtor, by subsequent arrangement with his co-principal, becomes only a surety, he cannot alter his relationship with the creditor without the latter's assent.7

As to the circumstances under which a surety is discharged, there is nothing peculiar to bills or bill transactions, and the reader is referred to De Colyar on Guarantees, and other works on principal and surety. But the following salient points may be noted.

Though a binding agreement to give time to the prin

Giving time.

? Oriental Corp. r. Overend (1871), L. R. 7 Ch. 142 ; affirmed (1874), L. R. 7 H. L. 348.

2 Macdonald v. Whitfield (1883), 8 App. Cas. 733, P. C. ; as to admissi. bility of parol evidence to explain the transaction, see at p. 748.

3 Pentum v. Pocock (1813), 5 Taunt. 192.
4 Manley v. Boycott (1853), 2 E. & B. 46.
5 Cf. Batson v. King (1859), 28 L. J. Ex. 327, at p. 328.

6 Greenough v. M'Cleland (1860), 30 L. J. Q. B. 15; Oriental Corporation v. Overend (1874), L. R. 7 H. L. 348, see at p. 360.

7 Swire v. Redman (1876), 1 Q. B. D. 536, at p. 542.

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cipal discharges the surety, whether he be injured thereby or not,' mere delay in suing the principal or pressing him for payment does not discharge the surety. “I am far from saying,” says Tindal, C. J., “that there may not be an extreme case of laches amounting to fraud, and fraud would be a defence to the action, but not mere negligence.'

The agreement to give time must be a binding agreement, and founded on consideration. Thus, where the executrix of the acceptor of a bill verbally promised to pay the holder out of her own estate if he would forbear to sue, and paid him interest for so forbearing, it was held that, as her promise was void, the drawer was not discharged by the delay.3

Again, the agreement to give time must be made with the principal debtor, and not with a third party. Thus, where the indorsee of a bill sued the drawer, it was held to be no defence that the indorsee, without the drawer's consent, had agreed with X., who was not a party to the bill, to give time to the acceptor in consideration of X.'s promise to see the bill paid.*

Although mere delay in pressing the principal does not discharge the surety, yet it may do so if it be in contravention of the original contract. Thus, the defendant signed a joint and several note on demand as surety for the other maker, on the terms that the payee should demand payment of the note from the other maker within three years. The payee did not demand payment within three years, and the other maker became insolvent. Held, that the defendant was discharged. So, too, in the ordinary case, when the acceptor of a bill is the principal debtor, the drawer and indorsers are discharged, if it be not presented for payment on its due date, for such presentment is part of the original contract.

If in giving time to the principal the creditor expressly reserves his rights against the surety, the latter is not discharged : see the reason given by Lord Hatherley.

| Polak v. Everett (1876), 1 Q. B. D. 669, at p. 673, C. A.

? Goring v. Edmonds (1829), 6 Bing. 94, at p. 99. See, too, Bell v. Banks (1841), 3 M. & Gr. 258 ; Black v. Ottoman Bank (1862), 15 Moore, P. C. 473, at p. 484 ; Carter v. White (1883), 25 Ch. D. 666, at p. 672, C. A. So, too, in Scotland, Hay and Kyd v. Powrie (1886), 13 Sess. Cas. 777.

3 Philpot v. Briant (1828), 4 Bing. 717 ; cf. Petty v. Cooke (1871), L. R. 6 Q. B. 790.

Fraser v. Jordan (1857), 26 L. J. Q. B. 288. 5 Lawrence v. Walmsley (1862), 31 L. J. C. P. 143. 6 Oriental Corporation v. Overend (1871), L. R. 7 Ch. App. at p. 150.

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Unless the creditor reserves his rights against the surety, it is clear that discharging the principal must discharge the surety, for the accessory obligation falls with the main obligation. Thus, if the holder of a bill agrees to accept a composition from the acceptor, the drawer will be discharged, unless it be a composition or scheme under the Bankruptcy Act, when the discharge is regarded as being effected by operation of law.1

Where two or more sureties contract severally, the creditor, by releasing one, does not discharge the others; but “when the creditor releases one of two or more sureties who have contracted jointly and severally, the others are discharged, the joint suretyship of the others being part of the consideration of the contract of each." 2

“A surety," says the Privy Council, “is entitled to the benefit of all securities in the hands of the creditor, whether, when he became a surety, he knew of them or not. Thus, in Pearl v. Deacon, where the plaintiff was surety in a promissory note for a sum lent by the defendants to their tenant, and a mortgage was subsequently taken by the defendants on the tenant's furniture for the same debt; they afterwards, under a distress, took the same furniture for arrears of rent; it was held that, inasmuch as the produce of the furniture was first applicable to the payment of the note, the landlord could not, as against the surety, apply it to the payment of the rent, and that the surety was discharged, not, it is to be observed, absolutely, but pro tanto. It has been held in other cases that when a creditor wastes or improperly deals with a security, the surety is released pro tanto." 3. It was formerly thought that the creditor was entitled to the benefit of collateral securities given by the debtor to the surety, but this is not so.4

Where a bill or note is part of the machinery for creating an ordinary contract of suretyship, the doctrine of the surety's right to securities applies in its entirety ; but in the

1 Megrath v. Gray (1874), L. R. 9 C. P. 216 ; In re Jacobs (1875), L. R. 10 Ch. App. 208, at p. 214.

p. 764.

9 Ward v. National Bank of New Zealand (1883), 8 App. Cas. 755, at

3 Ward v. National Bank of New Zealand (1883), 8 App. Cas. 751, at p. 765, citing Pearl v. Deacon (1857), 26 L. J. Ch. 761. As to waste of security, see Wulff v. Jay (1872), L. R. 7 Q. B. 756 ; Rainbow v. Juggins (1880), 5 Q. B. D. 422.

4 Re Walker, (1892) 1 Ch. 621.

case of an ordinary bill the drawer and indorsers are not § 64. strictly sureties, but are in the nature of sureties for the acceptor, and their equity to securities held for the bill only attaches when the bill is dishonoured.

“This equity,” says Lord Selborne, “will not incapacitate bankers who hold a bill, accepted by their customer and indorsed by a third party, from carrying on their dealings with that customer by varying the securities received from him according to the ordinary course of those dealings, as long as he remains solvent, and before the acceptance has been dishonoured. But it is an equity which does attach when the bills, overdue and dishonoured, and the securities are found together in the hands of the secured creditor at the time when he requires payment from the indorser; when the creditor has then no other transactions depending with the customer, and no claim upon the securities except for the bills themselves.” 1

The machinery of a bill transaction will not be allowed to defeat the rules in bankruptcy as to valuation of securities. Thus, the acceptor deposited certain wool with the drawer to secure payment of the draft. The drawer indorsed the bill away, and the acceptor then became bankrupt. The indorsee, by arrangenient with the drawer, proved for the full amount of the bill. The drawer claimed to retain the security for the difference between the divi. dend and the amount of the bill, but it was held he could not do so.

A contract of suretyship may be severable. Thus, where Severable a surety guaranteed payments for goods, to be delivered by

contracts. instalments, and the creditor took the debtor's promissory uote for one instalment, it was held that the surety was only released as to that instalment.3

In a case in 1866 it was held that where the debtor obtained two loans from a money club, the surety on the first note could not claim that all moneys subsequently paid in by the debtor should be credited to the first note.*

į Duncan v. N. & S. Wales Bank (1880), 6 App. Cas. 1, at p. 13, reversing S. C., 11 Ch. D. 88, C. A.

Baines v. Wright (1885), 16 Q. B. D. 330, C. A. Compare Ex parte European Bank (1871), L. R. 7 Ch. App. 99, as to double proof.

3 Croydon Gas Co. v. Dickinson (1876), 2 C. P. D. 46, C. A.

4 Wright v. Hickling (1866), L. R. 2 C. P. 199; cf. Jones v. Gretton (1853), 8 Exch. 773. See Re Sherry (1884), 25 Ch. D. 692, C. A., as to appropriation of payments.

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Effect of renewal

When a bill is given in renewal of a former bill, and the holder retains such former bill, the renewal, in the absence of special agreement, operates merely as a conditional payment thereof

. If the renewal bill be paid in due course or otherwise discharged, the original bill is likewise discharged ;? but if the renewal bill be dishonoured, then, subject to the preceding rule as to principal and surety, the liabilities of the parties to the original bill revive and they may be sued thereon.3

Renewing a bill or note operates as an extension of the time for paying it. Hence, if a bill be renewed without the assent of all parties liable thereon as sureties, the parties so liable are discharged; see ante, p. 218. When there is an agreement to renew, the application for renewal must be made within a reasonable time of the maturity of the original bill, but it need not be made before its maturity.5 When the holder of a renewed bill could not have maintained an action on the original bill because there was no consideration for it,® or the consideration was illegal,” or because he was privy to some fraud connected therewith, he cannot sue on the renewed bill. A bill given in renewal of another bill operates in the same way as a bill given in respect of any other debt. The ordinary effect of giving a bill is that the remedy for the debt is suspended

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1 Cf. Lewis v. Lyster (1835), 2 C. M. & R. 704 ; Lumley v. Musgrave (1837), 4 Bing. N. C. at p. 15.

2 Dillon v. Rimmer (1822), 1 Bing. 100 ; cf. Soward v. Palmer (1818), 2 Míoore, 274 ; Lumley v. Hudson (1837), 4 Bing. N. C. 15.

3 Ex parte Barclay (1802), 7 Ves. jr. 597; Norris v. A ylett (1809), 2 Camp. 329 ; cf. Kendrick v. Lomax (1832), 2 Cr. & J. 405; Sloman v. Cox (1834), 1 c. M. & R. at p. 472 ; Penton v. Blackwood (1874), L. R. 5 P. C. 167.

* Jagger Iron Co. v. Walker (1879), 76_New York R. 521. As to the construction of a guarantee for renewal, see Barber v. Mackrell, W. N. 1892, at p. 133, C. A.

5 Maillard v. Page (1870), L. R. 5 Ex. 312; cf. Innes v. Munro (1847), 1 Exch. 473 ; Torrance v. Bank of British North America (1873), L. R. 5 P. C. 246, as to construction of agreements to renew.

6 Southall v. Rigg (1851), 11 C. B. 481 ; cf. Edwards v. Chancellor (1888), 52 J. P. 454.

7 Chapman v. Black (1819), 2 B. & Ald. 588 ; Hay v. Ayling (1851), 16 Q. B. 423.

8 Lee v. Zagury (1817), 8 Taunt. 114.

9 See, however, two apparent but not real exceptions, Mather v. Maidstone (1856), 18 C. B. 273; Flight v. Reed (1863), 1 H. & C. 703.

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