after see) it discharges sureties, does not, as between the parties, effect a release, or even a suspension of the action.(k)

We have already seen(7) that the creditor's appointment of his debtor as executor, amounts in law to a release. And that the same consequence follows if one or several debtors is appointed exe

cutor.

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

*CHAPTER XVIII.

[*189]

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

A PARTY liable on a bill sometimes bears to the holder the relation

of principal debtor, sometimes of surety only.

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

(7) Ante, p. 41.

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

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, terminates with it. If notwithstanding this release of the principal debtor, the creditor could sue the surety, he would evade the effect of his discharge to the principal, and regain a *debt which he may have relinquished for [*190] a valuable consideration, or by his deliberate act and deed. Besides, were the surety obliged to pay the creditor, he 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. 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.

In inquiring into the effect of a discharge or indulgence 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; 2dly. What arrangements between the holder and the principal debtor will discharge the surety; 3dly. How the discharge of the surety may be prevented; 4thly. How it may be waived; and 5thly. What conduct of the creditor to the surety will discharge the principal debtor.

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 the other parties are, in respect to the 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, 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 the principal debtor, and the 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. (1)

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.(a)

[*191] It follows, therefore, that a discharge to the acceptor is a discharge of 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 discharged indorser, his discharge would be frustrated; if they could not, they must pay the bill without a remedy over.(b)

It was formerly held, that where a bill was accepted without 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 the time given to the drawer would discharge the acceptor, (e) but time given to the acceptor would not discharge the drawer.(d) But this distinction has since been overruled ;(e) and in Courts of Law the acceptor, in all cases of accommodation bills as well as other, is considered as the principal debtors, though the holder,

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

(b) Smith v. Knox, 3 Esp. 36; Claridge v. Dalton, 4 M. & Sel. 232; Hall v. Cole, 6 Nev. & M. 124; 4 Ad. & El. 577; 1 Har. & W. 722, S. C.

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

(d) Collott v. Haigh, 4 Camp. 281.

(e) Fentum v. Pocock, 5 Taunt. 192; 1 Marsh. 14, S. C. Carstairs v. Rolleston, 5 Taunt. 551; 1 Marsh. 207, S. C.

(1) 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, 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. Griffith v. Reid, 21 Wend. 502.

at the time of making the agreement, or even of taking the bill, knew the acceptance to have been without value. (ƒ)(1)

As the acceptor is at law in all cases the principal debtor 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,(g) and [*192] the holder take it with notice of absence of consideration. (h) The indorsers of a note severally stand, as principals or sureties, in the same situation as the indorsers of a bill.

When of a joint and several note one maker is in reality principal and the other surety, it is doubtful whether, in any case, evidence is admissible at law to show that one is principal and the other is surety; and, consequently, that the surety is discharged by time given to the principal.() But such evidence is admissible in equity.

(f) "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, 2 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. 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. Rep. 115.

(g) Carstairs v. Rolleston, 5 Taunt. 551; 1 Marsh. 207, S. C. (h) Nichols v. Norris, 3 B. & Ad. 41.

(i) Price v. Edmunds, 10 B. & C. 578; Perfect v. Musgrave, 6 Price, 111. But evidence to that effect has been admitted. Garratt v. Jull, 1 S. N. P. 9th ed. 387; Hall v. Wilcox, 1 M. & Rob. 58. In Clarke v. Wilson, 3 M. & W. 208, it was intended to have raised the question, but on demurrer to defendant's plea judgment was given for the plaintiff. The question, therefore, whether one of two makers of a joint and several promissory note can show by parol that he is liable to surety only, was not decided. In Rees v. Berrington, 2 Ves. jun. 540. Lord Loughborough says, that "where two are bound jointly and severally, the surety cannot aver by pleading that he is bound as surety." See Ashbee v. Pidduck, 1 M. & W. 564, and Thompson v. Clubley, 1 M. & W. 212. But, in equity, a surety may aver and prove that he was only a surety, though the bond was joint and several. Heath v. Key, 1 Y. & J. 434; Nisbett v. Smith, 2 Bro. C. C. 581; Skip v. Hucy, 3 Atk. 91. The authorities are contradictory; but, on principle, it should seem that, at law at least, such evidence is inadmissible as against the creditor; for it is parol evidence to make a written contract conditional, which, on the face of it, is absolute. The evidence does not show absence of consideration, as in the case of an accommodation acceptance. Besides, the introduction of such evidence might affect an innocent

(1) Walker v. Bank of Montgomery, 3 Grattan, 356. Stiles v. Eastman, 1 12 Serg. & Rawle, 382. Lewis v. Hanch- Kelly, 205.

man, 2 Barr, 416. Hansbrough v. Gray,

Secondly. As to what transactions between the creditor and the principal debtor will discharge the surety.

The creditor must not conceal from the surety any stipulation in the original contract, disadvantageous to the principal debtor. Such concealment is a fraud, and releases the surety.(j)

The holder is not obliged to use active diligence in order to [*193] *recover against the acceptor.(k) He may defer suing him as long as he pleases; he may even promise not to press him, or not to sue him. Thus, where the executrix of an acceptor verbally promised to pay the holder out of her own estate, provided he would forbear to sue, and he forbore accordingly, it was held that, the agreement being invalid under the Statute of Frauds, the drawer was not discharged.(?)

But, if the holder once destroy or suspend, or contract to destroy or suspend, his right of action against the acceptor, the drawer and indorsers are at once discharged, unless the agreement giving time contain a stipulation that the holder shall, in case of default, have judgment at a period as early as he could have obtained judgment if hostile proceedings had continued. (m) But if the agreement contain no stipulation that a judgment shall be given, it is not necessary to aver in a plea disclosing such an agreement that the time within which the plaintiff might have obtained judgment was postponed.(n) That it was not must either be specially replied, or may possibly (if the form of the averment in the plea admits of it) be proved under a traverse of an actual forbearance.(1)

indorsee with stipulations of which he had no notice. But it should further seem, that when the question arises not between the creditor and his debtors, but between those debtors themselves, which was principal and which was surety, parol evidence is admissible at law, as in such a case it clearly is in equity. Craythorne v. Swinden, 14 Vesey, 170; see p. 6.

(j) Pidcock v. Bishop, 3 B. & C. 605; 5 D. & R. 505, S. C.; Mayhew v. Crickett, 2 Swan. 193; Stone v. Compton, 5 Bing. N. Ca. 142; 6 Scott, 816, S. C.; Jackson v. Duchaire, 3 T. R. 551; Cecil v. Plaistow, 1 Ans. 202; Middleton v. Lord Onslow, 1 P. Wms. 768; Brown v. Wilkinson, 13 M. & W. 14.

(k) Orme v. Young, Holt, N. P. 84; Eyre v. Everest, 2 Russ. 381; 3 Mer. 278; Trent Navigation v. Harley, 10 East, 34.

(7) Philpot v. Briant, 4 Bing. 717; 1 M. & P. 754; 3 C. & P. 214, S. C.

(m) Kennard v. Knott, 4 M. & Gr. 474; Michael v. Myers, 6 M. & Gr. 702. (n) Kennard v. Knott, 4 M. & Gr. 474; Isaac v. Daniel, 15 L. J. 149, Q. B.; 8 Q. B. Rep. 500.

(1) If the holder of a bill or note do any thing, the effect of which is to sus

pend or impair or destroy the right of the prior parties to indemnity from those