CHAPTER IX. creditor's place (g); but if the other creditors are not parties to such agreement for a reservation of remedies against the surety, the agreement seems to be invalid as a fraud upon them, unless the surety thereby deprives himself of any remedy over against the principal debtor (h); and even then the case seems not quite free from doubt, when the effect of the composition is to extinguish the debt (i). In cases of this nature it is incumbent upon the surety, when sued by the creditor, to prove want of knowledge, on the part of the other creditors, of the agreement for the reservation of remedies against the surety (k). Liability of Limitation of liability by express stipulation. Effect of recitals. In the absence of stipulation to the contrary, a guaranty, the consideration for which is given once for all, cannot be determined by the surety, and does not cease at his death; but it would seem that if the guaranty is for a present loan and future advances, the surety, or his representatives after his death, may, by notice, determine the liability in respect of advances made after the notice has been given (7). It is, of course, competent for the surety to stipulate in the instrument of guaranty that on notice he shall be discharged from all future liability (m). In the case of a guaranty of several sureties, which is joint only, the death of one guarantor puts an end to the guaranty, unless the survivors expressly or by implication from conduct agree that it shall continue (»). The parties to a contract of suretyship may limit the liability of the surety as to duration of time, or as to amount, or other matters, or may make the liability depend on conditions precedent, the fulfilment of which will be necessary to give rise to the liability (0). In order to ascertain the intention of the parties the instrument of guaranty must be considered as a whole; and for this purpose the operation of the instrument may be controlled by the recitals (p). (g) Kearsley v. Cole, 16 M. & W. 128. And see note to Lewis v. Jones, 16 L. J. 115, supposed to have been written by Holroyd, J., 4 B. & Cr. 506, 515, or by Cresswell, J., L. R. 7 C. P. 14. (h) Note to Lewis v. Jones, sup.; 519. (i) See Lewis v. Jones, sup. C. A. See Re Silvester, Midland Rail. (m) Calvert v. Gordon, 3 Man. & Ry. 124, 128. (n) Ashby v. Day, 54 L. T. 408, C. A. (0) Burton v. Gray, L. R. 8 Ch. A. 932. (p) Glyn v. Hertel, 8 Taunt. 208; Pearsall v. Somerset, 4 Taunt. 593. See also Lord Arlington v. Meyricke, 2 Wms. Saund. 813; Bamford v. Iles, 3 Exch. 380; Peppin v. Cooper, 2 B. & Ald. 431; Kitson v. Julian, 4 E. & B. 854; A guaranty of the whole debt, with a limit on the surety's liability in point of amount, is to be distinguished from a guaranty of part only of the debt (g). CHAPTER IX. Suretyship for whole debt with liability less sum. Where one of several partners gives the collateral security of limited to a his own separate real estate for future advances, to be made to the firm, to a certain amount, the collateral security will determine on the death of any one of the partners as to any advances not then made, unless the guaranty be clearly intended to be a continuing one (); so a surety for a customer with a bank, who has there a running account, is discharged by any change in the banking firm, as to any sums not actually due at the time of such change (s). This does not apply to changes in the members of a company (t). A security may expressly (u), or by implication from the circumstances (x), extend to advances and transactions made or entered into after a change in the firm (y). And a security given to or by a banking company may be shown to be intended to be a continuing security notwithstanding a change in the firm (≈). SECTION IV. OF THE RIGHTS OF A SURETY. surety to com pel principal to pay debt. i. Rights of Action, &c.-Before the surety has paid or has Right of been called upon to pay anything under his guaranty, he is entitled, so soon as the principal debtor has made default, at all events if the creditor refuses to exercise his right to sue the principal debtor (a), to obtain relief in equity by compelling the principal debtor to pay off the debt and so discharge his liability (6). "Although the surety is not troubled or molested Hassell v. Long, 2 M. & S. 362; cases of guarantees on appointments to offices. (q) Ellis v. Emmanuel, 1 Ex. D. 157. (r) Bank of Scotland v. Christie, 8 Cl. & F. 214. (s) Pemberton v. Oakes, 4 Russ. 154; Wright v. Russell, 3 Wils. K. B. 530; Barker v. Parker, 1 T. R. 287; Myers v. Edge, 7 T. R. 254; Bodenham v. Purchas, 2 B. & Ald. 39; Dance v. Girdler, 1 B. & P. N. R. 34; Exp. Marsh, 2 Rose, 239; Eyton v. Knight, 2 Jur. 8; Strange v. Lee, 3 East, 484; Exp. Kensington, 2 V. & B. 79; Exp. (t) Metcalf v. Bruin, 12 East, 400, (u) Strange v. Lee, sup. (z) Pease v. Hirst, 10 B. & C. 122. CHAPTER IX. for the debt, yet at any time after the money becomes payable on the original bond, this Court will decree the principal to discharge the debt, it being unreasonable that a man should always have such a cloud hanging over him "(c). In a recent Irish case (d), it has been held that, to support such an action, it is not necessary that the creditor should have refused to sue the principal debtor. Right of surety to compel creditor to It would seem that the surety may also, before he has been. called upon to pay anything under his guaranty, upon default sue principal. of the principal debtor, bring an action against the creditor to compel him to enforce his remedies against the principal debtor (e). Other rights of surety who has not paid anything. Right to damages for principal's default. Rights of surety when called on to pay. Right to set off debt due from creditor to principal. Right to sign judgment against principal. Though the surety has not himself paid anything, if the debt has been satisfied aliunde in equity, he may, since the Judicature Act, 1873 (ƒ), rely on such satisfaction as a defence to any action which might, but for that Act, have been brought against him in respect of his continuing obligation at law. He may also obtain a declaration discharging him from liability, where dealings between the creditor and the principal debtor have operated as a release (g); and, in a case of this nature, the Court ordered the instrument under which the surety's liability arose to be set aside and cancelled (). If the principal debtor gives to the surety a counter-bond or covenant to pay the amount due to the creditor on a specified day, and makes default, the surety can bring his action for damages on the bond or covenant (¿). If a surety is called upon to pay a debt under his guaranty, he is entitled to compel the creditor having another fund which the surety, if he pays the debt, cannot make available, to resort to that fund in the first instance (k). A surety who is being sued by the creditor may set off a debt due by the creditor to the principal debtor arising out of the transaction on which the liability arises (7). A surety having from his principal a special promise to indemnify him against "any risk, damage, or costs which might (c) Ranelaugh v. Hayes, 1 Vern. 189, per Ld. North, K. (d) Mathews v. Saurin, 31 L. R. Ir. (e) Wright v. Simpson, 6 Ves. 714, (g) Wilson v. Lloyd, 21 W. R. 507. See Exp. Bishop, Re Fox, Walker & Co., 15 Ch. D. 400, C. A. (h) Blest v. Brown, 4 De G. F. & J. 367. (i) Penny v. Foy, 8 B. & C. 11; Loosemore v. Radford, 9 M. & W. 657. (k) Exp. Kendall, 17 Ves. 514. (1) Bechervaise v. Lewis, L. R. 7 C. P. 372. arise to him as surety" is entitled, on being sued by the CHAPTER IX. creditor, to sign judgment against the principal under R. S. C., Ord. XVI. r. 55, before he has actually paid anything in discharge of the liability (m). off debt and his reme So soon as the appointed time of payment arrives, but not Right of before, the surety may, without the assent of, or notice to, surety to pay the principal debtor, voluntarily pay off the debt; and if he voluntarily, does so, he will acquire the same rights and remedies as against dies therethe principal debtor, the creditor and his co-sureties, if any, upon. respectively, as if he had made the payment on the demand of the creditor (n). payment to After the surety has actually made any payment on account Rights of of the debt guaranteed by him, he may at once sue the prin- surety after cipal debtor for repayment of the amount so paid. "Where recover from one person is surety for another, and compellable to pay the principal. whole debt, and he is called upon to pay, it is money paid to the use of the principal debtor, and may be recovered in an action against him for money paid, even though the surety did not pay the debt by the desire of the principal" (o). The right of the surety to sue the principal to recover money paid by him arises as soon as he has paid anything on account of the debt (p). In order, however, to entitle the surety to recover from the Guaranty principal, the guaranty must have been given at the request of must be at the principal (9). request of principal. between them unnecessary. It is not necessary, however, that there should be any con- Consideration sideration moving from the principal debtor to the surety in order to render the contract of suretyship valid, so as to entitle the surety to his remedies against the principal (→). tract for of surety. ii.-Right to Indemnity.-In the absence of any express Implied concontract to the contrary, a principal is liable, upon an implied indemnity promise, to indemnify his surety from any loss that he may sustain in that character (s). This liability will continue notwithstanding the acceptance by the creditor of a composition (m) English and Scottish Mercantile Investment Trust v. Flatau, 36 W. R. 238. (n) Davies v. Humphreys, 6 M. & W. 153; Newton v. Chorlton, 10 Ha. 646, 652. (0) Per Ld. Kenyon, C. J., in Exall v. Partridge, 8 T. R. 308, 310. See Warrington v. Furbor, 8 East, 242. (p) Davies v. Humphreys, 6 M. & W. 153, at p. 167. (q) Jones v. Broadhurst, 9 C. B. 173, 193 et seq.; James v. Isaacs, 12 C. B. 791; Cook v. Lister, 13 C. B. N. S. 543, 594; Kemp v. Balls, 10 Exch. 607. (r) Exp. Minet, 14 Ves. 190. (8) Toussaint v. Martinnant, 2 T. R. 100; Pownalt v. Ferrand, 6 B. & C. 439. See Duffield v. Scott, 3 T. R. 374. CHAPTER IX. from the principal, if by the composition deed the creditor reserves his rights against the surety (†). Formerly A surety who discharges the liability shall be entitled to A surety paying off a debt formerly became a simple contract creditor only of the principal debtor for the amount so paid, and was not entitled to the benefit of any personal obligation of the nature of a specialty existing between the principal and the creditor by virtue of any covenant or otherwise (u). So, although the surety might recover of the principal the sum he was obliged to pay, yet he could not require the assignment of a bond for that purpose (x). But now, by the Mercantile Law Amendment Act, 1856 (y), it is enacted as follows: "Every person who, being surety for the debt or duty of another, or being liable with another for any debt or duty, shall pay such debt or perform such duty, shall be entitled () to have assigned to him, or to a trustee for him, every judgment, specialty, or other security which shall be held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security shall or shall not be deemed at law to have been satisfied by the payin the place of ment of the debt or performance of the duty, and such person an assignment of all securities held by the creditor, and to stand the creditor, and use his shall be entitled to stand in the place of the creditor, and to use all remedies, and, if need be, upon a proper indemnity, to use the name if necesname of the creditor in any action or other proceeding at law or sary, in order in equity, in order to obtain from the principal debtor or any to obtain indemnification. Co-surety, co-contractor, or co-debtor, as the case may be, indemnification for the advances made and loss sustained by the person who shall have so paid such debt or performed such duty, and such payment or performance so made by such surety shall not be pleadable in bar of any such action or other proceeding by him: Limitation of Provided always, that no co-surety, co-contractor, or co-debtor shall be entitled to recover from any other co-surety, co-contractor, or co-debtor by the means aforesaid, more than the just proportion to which, as between those parties themselves, such last-mentioned persons shall be justly liable." amount re coverable from any cosurety, &c. Assignment of securities not necessary. Act applies to co-debtors. The right of a surety who has paid off the principal's debt to stand in the place of the creditor is not affected by the fact that the surety has not actually obtained an assignment of the securities for the debt (a). This statute applies to a co-debtor as well as to a surety, and gives a right to an assignment of a judgment against the (t) Close v. Close, 4 De G. M. & G. 176. (u) Copis v. Middleton, T. & R. 224. See Robinson v. Wilson, 2 Madd. 434; Jones v. Davids, 4 Russ. 277; Hodgson v. Shaw, 3 My. & K. 183. (x) Gammon v. Stone, 1 Ves. Sen. 339; Woffington v. Sparks, 2 Ves. Sen. 569. (y) 19 & 20 Vict. c. 97, s. 5. (z) See Phillips v. Dickson, 8 C. B. N. S. 391. (a) Lightbown v. M'Myn, 33 Ch. D. 575. |