giving notice to the surety of any embezzlement which he may have discovered,
{Shepherd v. Beecher, 2 P. Wms. 288; Peel v. Tatlock, 1 Bos. & P. 419 ;
Trent Navigation Company v. Barley, 10 East, 34 ; Goring v. Edmonds, G
REES V. BERRINGTON. 543
Bing. 94-98 ; Mactaggart v. Watson, *10 Bligh, 618 ;) unless there r*oqo-i
has been an industrious, that is to say, a fraudulent concealment of
the embezzlement on the part of the employer, (Peele v. Tatlock, 1 Bos. & P.
419-423; Goring v. Edmonds, 6 Bing. 99.)
Taking further security from the debtor, unless it be in lieu of the original
security, thereby preventing the creditor from proceeding upon it, will not
have the effect of discharging the surety. Thus, in Gordon v. Calvert, 4
Russ. 581, B., being hired as a clerk to A. & Co., but not for any definite
period, C. and D. joined with him in a bond to secure his duly accounting for
his receipts. C. died, and his executrix gave a written notice to A. & Co.
that she would no longer remain surety. A. & Co. communicated this notice
to B., and required and obtained from him the bond of another surety. D.
died, and also the new surety, and, four years and a half after the death of C,
B. died, when deficiencies were found in his accounts, subsequent to the
notice. It was held by Lord Lyndhurst, that, as there was nothing to show
that the obligees acquiesced in the wish of the executrix to be released, and
there was no ground on which the Court could say, that, when the second
bond was executed, there was an intention to give up the first ; and, as it was
reasonable to require a further security, as the executrix of C. would be an-
swerable only to the extent of the assets, the executrix of C. had no equity to
restrain A. & Co. from proceeding at law on the bond. See S. C, 2 Sim. 253
Calvert v. Gordon, 7 B. & C. 809 ; and see Eyre v. Everett, 2 Buss. 381
Bank of Ireland v. Beresford, 6 Dow. 233 ; Hodgson v. Nugent, 5 T. R. 277
Melvill v. Glendinning, 7 Taunt. 126; Twopenny v. Young, 3 B. & C. 208.
Where, however, the creditor takes a second security in satisfaction of the
first, the surety will be discharged: Clarice v. Henty, 3 Y. & C. Exch. Ca.
187.
As a surety on payment of the debt is entitled to all the securities in the
hands of the creditor, whether he is aware of their existence or not, {ante, vol.
1, pp. 86, 87,) if the creditor, who has had, or ought to have had, them in
his full possession or power, loses them, or permits them to get into the pos-
session of the debtor, the surety will, to the extent of such security, be dis-
charged : Capel v. Butler, 2 S. & S. 457 ; Ex parte Mure, 2 Cox, 63 ; Liw v.
The East India Company, 4 Ves. 824; Williams v. Price, 1 S. & S. 581;
Philips v. Astling, 2 Taunt. 206. In the recent case, however, of Newton v.
Chorlton, 10 Hare, 646; 2 Drew. 333, it was held by Sir W. Page Wood, V.
C, that a creditor who, after the contract of suretyship, has taken a further
security from the *principal debtor, and subsequently parts with that r *ooq-i
security, does not thereby, either wholly or partially, release the surety.
This case, however, was afterwards compromised ; and, in Lake v. Brutton, 2
Jur. N. S. 839, Lord Justice Knight Bruce and Lord Justice Turner,
although it was not actually necessary to determine the point, seem clearly to
have disapproved it. See also an able article in the Jurist, Vol. 3, Part 1,
N. S. p. 457.
Although it seems to be settled at law, that a release or discharge of one
544 DISCHARGE OF SURETY.
surety by the creditor, even when founded on a mistake of law, operates as a
discharge of the others, (Cheetham v. Ward, 1 B. & P. 633; Nicholson v.
Bevill, 4 A. & E. 675 ; S. C, 6 N. & M. 200 ; Rex v. Bayley, 1 C. & P. 435 ;
Cocks v. Nash, 4 M. & Sc. 162,) this at one time was not considered to be
the case in equity. Thus, in Ex parte Gifford, 6 Ves. 805, Marshall and
Haig, creditors of Bedford upon a promissory note, requiring a further secu-
rity, Bedford, Niblock, Burgess, and Baylis joined in a promissory note as a
collateral security. Bedford, Niblock, and Burgess, became bankrupts. Mar-
shall and Haig proved the whole debt under each commission, and afterwards
brought an action against Baylis, who entered into a composition with his
creditors, under which Marshall and Haig received a dividend of 4s. in the
pound, and gave Baylis a receipt in full for the said debt, and all other
demands from him. The dividend paid by the estate of Bedford was 4s. in
the pound, and that by the estate of Niblock and Burgess, 5s. A petition
was presented, praying that proof against the estate of Niblock and Burgess
might be expunged. Lord Eldon dismissed the petition. " The principal,"
observed his Lordship, " is to discharge all the obligations of all the sureties ;
but they stand, with regard to each other, in a relation which gives rise to
this right, among others, that, if one pays more than his proportion, there shall
be a contribution for a proportion of the excess beyond the proportion, which,
in all events, he is to pay. The party has a right to say for himself, he will
not consider the relation, but will take 6s., though the surety is liable to pay
10s. He may say, he will be passive as to the other 4s. ; or he will discharge
the whole debt, and at his own risk, as to the remedy against the other surety;
or he may reserve the remedy against the co-surety expressly. It depends
upon the effect and terms of the bargain actually entered into. It might be
prudent in this very case, for Baylis, Bedford's son-in-law, to say he would
pay 4s. in the pound, recollecting that Niblock and Burgess must pay more
than 10s. in the pound before any demand could be made by them against
P8341 baylis, aQ d recollecting the remedies against Bedford. The *question,
therefore, is, under the circumstances, what did they mean ? As to
the receipt, the creditor contends there is no difference whether there is an
express reservation of the remedies against the co-sureties. But that distinc-
tion has been taken. At the time of Mr. Richard Burke's case, Lord Thur-
low admitted, that, if there is a reserve of the remedies against the others,
there is consent of the party with whom the composition is made; and if, out
of that, a demand arises against him, it is a demand which began to exist with
his consent, expressed in the terms of the contract, and, under some circum-
stances, wisely and prudently given ; for the party would not have entered into
the contract unless he was allowed to contract for that remedy over against
the co-sureties. If Niblock and Burgess should not pay more than their
moiety, the contract would be a beneficial contract for Baylis; for, though
paying more than Baylis, they would not pay enough to bring an assumpsit
against him. That would not, therefore, be an imprudent bargain for Baylis
to make. It may, however, never be necessary to decide this, as it depends
REES V. BERRINttTON. 545
upon what dividends the estates of Bedford and of Nfblock and Burgess pay.
But I have a strong opinion, that under the circumstances, the other persons
liable upon this note are not discharged, because Baylis was contented to
make a bargain, the effect of which leaves him to his chance as to his ultimate
liability between him and his co-surety ; and, therefore, that relief cannot be
given even to the extent to which it is now modified."
The principle upon which this case appears to be decided is this, that, since
a creditor, who has given a discharge to one surety for the proportion which
he was liable to contribute towards the payment of the general debt, has no
right to proceed against the other sureties for more than their proportion of
it, no injury is done to them by the discharge of their co-surety. In Stirling
v. Forrester, 3 Bligh, 591, Lord Redesdale says, " If the creditor discharges
one of the co-parceners, he cannot proceed for the whole debt against the
others : at the most they are only bound for their proportions." The principle
as to co-sureties is the same. The doctrine, however, of Lord Eldon is treated
by Sir W. Page Wood, V. C, in Evans v. Bremruhje, 2 K. & J. 183; as
expressly overruled by Nicholson v. Revill, 4 A. & E. ; N. & M. 192, 211 ;
and see Kearsley v. Cole, 10 Mee. & W. 128, 136. A release, however, may
be so qualified as to prevent its operating as a discharge of a co-surety.
Thompson v. Lack, 3 C. B. 540, 552; Price v. Barker, 4 Ell. & B. 700;
and see Sully v. Forbes, 2 Brod. & B. 38; Payler v. Homersham, 4 r*go 5 -.
*M. & S. 423; North v. Wakefield, 13 Q. B. 530. [A discharge of
one surety will not free another from his share or proportion, either at law or
in equity, unless it would extinguish the debt or obligation, if they were co-
contractors merely, and not sureties; Dodd v. Winn, 27 Missouri, 501; 2
American Leading Cases, 355, 4th ed. And while a release of one of the obli-
gors in a bond, or makers of a note, will extinguish the contract, and with it
the liability of all who are answerable for its fulfilment, either as sureties or
principals, a covenant not to sue an obligor who is a principal, cannot bar a suit
against another who is a surety, on common law rules, or without the aid of
equitable principles ; ante, vol. 1, p. 100. See 2 Amer. Lead. Cas. 393, 4th ed.]
A subsequent promise by a surety to pay the debt, after he is aware that
the principal creditor has given further time to the principal debtor, will re-
vive the liability from which he was discharged by the act of the principal
creditor: Mahew v. Crickett, 2 Swanst. 185; and see Id. p. 192, and cases
cited in the note.
The principle upon which the surety is discharged by certain acts of the
creditor, without his concurrence, is well stated by Lord Loughborough in the
principal case. " It amounts," he observes, "to this, that there shall be no
transaction with the principal debtor, without acquainting the person who has
the greatest interest in it. The surety only engages to make good the defi-
ciency. It is the clearest and most evident equity not to carry out any trans-
action without the privity of him who must necessarily have a concern in every
transaction with the principal debtor. You cannot keep him bound, and
transact his affairs (for they are as much his as your own) without consulting
vol. in. — 35
546 DISCHARGE OF SURETY.
him. You must let him judge whether he will give that indulgence, con-
trary to the nature of his engagement."
The liabilities of sureties are governed by the same principles at law as in
equity. And, although different doctrines formerly prevailed at law, it is at
present firmly established, that the same principles which have been held to
discharge a surety in equity, will operate to discharge him also at law. How-
ever although the same relief may be obtained in both, a court of equity will
not send a party who is suing there, to a court of law for the discharge to
which he is equally entitled in equity : Samuett v. Howarth, 3 Mer. 278 ;
Mat/hew v. Crickett, 2 Swanst. 185; Hawhshaw v. Parkins, 2 Swanst. 539,
546 : Eyre v. Everett, 2 Russ. 382 ; Mackintosh v. Wyaft, 3 Hare, 567. See
also Moore v. Bowmaker, 6 Taunt. 379 ; S. C, 2 Marsh. 81 ; Melvill v.
Glendinning, 7 Taunt. 126; Philpot v. Briant, 4 Bing. 717.
Relief, however, may sometimes be had in equity, where it could not
formerly have been obtained at law. Thus, where it did not appear upon the
face of the instrument that a person was a surety ; if, for instance, in a bond,
the priucipal debtor and surety were bound jointly and severally, the surety,
as is laid down in the principal case, could not, at late, aver by pleading that
he was bound only as surety, (Lewis v. Jones, 4 B. & C. 506,) and the re-
marks of Lord Abinger, in Ashbee v. Pidduck, 1 Mee. & W. 564 ; sed vide
Saxton v. Peat, 2 Camp. 185 ; Hall v. Wilcox, 1 M. & Rob. 58 ;) but in
equity, although they both appear as principals, parol evidence has always
.. been admissible to show that one is only a surety. The *consequence
*• is, that, upon the creditor giving further time to the principal debtor,
the surety, upon proving that fact, might have relief in equity, although he
would formerly still be held bound at law, as he would appear there only as a
principal : Craythorne v. Swinburne, 4 Ves. 160, 170 ; Clinton v. Hooper, 1
Ves. jun. 173 ; 3 Bro. C. C. 201 ; Clarke v. Henty, 3 Y. & C. Exch. Ca. 187.
Ashbee v. Pidduck, 1 Mee. & W. 564.
Since equitable pleas may be used at common law, it may be shown that a
person appearing on the face of an instrument as a principal is only a surety,
but both at law and in equity, it seems, in order that a surety may be dis-
charged by the creditor giving time, the creditor should be aware at the time
of the contract, of the existence of the relation of principal and surety between
the parties; Ilollier v. Eyre, 9 C. & F. 1, 45, 51 ; Davies v. Stainhank, 6
De G., Mac. & G. 679 ; Poolcy v. Harradine, 3 Jur. N. S. 488 ; 26 L. J.
N. S. (Q. B.) 156; Manley v. Boycott, 2 Ell. & B. 46. See and consider
Strong v. Foster, 17 C. B. 201.
Again, as, in general, an obligation created by an instrument can, at laic,
only be dissolved by one of equal force, time given by mere parol agreement,
although for valuable consideration, would not at law discharge a surety by
an instrument under seal, as a bond, (Davey v. Prendergrass, 5 B. & Aid.
187 ; Woosnam v. Price, 1 Cr. & Mee. 352 ; Ashbee v. Pidduck, 1 Mee. &
W. 564 ;) or by matter of record, as a recognizance, (Bulteel v. Jarrold, 8
Price, 467.) In equity, however, the rule of law is disregarded, and, as what
REES V. BERRINGTON.
547
is agreed to be done by a binding agreement is looked upon as done, relief
will be given : Bowmaker v. Moore, 3 Price, 214 ; 7 Price, 723 ; Blake v.
White, 1 Y. & C. Exch. Ca. 420.
A principal creditor may be beld at law to bave released a surety, wbere in
equity tbe surety would be held still liable ; as, for instance, wbere the prin-
cipal creditor has by deed, with the parol consent only of the surety, released
the principal debtor : Brooks v. Stuart, 1 Beav. 512.
Where the debt for which a person is surety becomes due, he may file a bill
in equity to compel the principal to discharge him from his liability. In the
words of an old case, where this subject was much discussed, — " Although
the surety is not troubled or molested for the debt, yet at any time after the
money becomes payable, the Court will decree the principal to discharge it, it
being unreasonable that a man should always have such a cloud hanging over
him,'' per Lord Keeper in Ranelaugh v. Hayes, 1 Vern. 188 ; and see
Antrobus v. Davidson, 3 Mer. 579 ; Lee v. Rook, Mos. 318. But where the
creditor has not a present right to sue, the surety *cannot come into r*oq7n
equity to be discharged from his liability. See Padwick v. Stanley,
9 Hare, 627, 628, where Sir George Turner, V. C, said that he considered
that the cases in which such a jurisdiction is exercised by the Court, are cases
where the creditor has a right to sue the debtor, and refuses to exercise that
right.
The Roman-Dutch law, and the old French law upon the subject of this
note were discussed before the Judicial Committee of the Privy Council in
the cases of Macdonald v. Bell, 3 Moore, P. C. C. 315 ; Bellivgham v. Freer,
1 Moore, P. C. C. 333.
It was essential in some cases, at
common law, to show that the consi-
deration of a parol contract moved
from the plaintiff. But the direction
which it took subsequently was imma-
terial ; and the obligation of the con^
tract was the same, whether it went
into the hands of the defendant or of
a third person. Thus, the material
point in an action on the case in as-
sumpsit, was, whether the plaintiff
had parted with value on the faith of
the promise, on which the suit was
brought, and not, whether the defend-
ant had received value for making it;
2 American Lead. Cas. 159. 4th ed.
In contracts under seal, the question
of consideration was immaterial for all
purposes. Its absence or failure did
not impair the validity of the contract,
and the direction in which it moved
when present, had no effect on the
rights and duties of the parties.
Equity, however, looked on the mat-
ter in a different aspect, and regarded
the mutual relations of the parties to
an agreement, as dependent, not only
upon the sacrifice made on the one
side, but upon the circumstances un-
der which the liability was incurred
on the other. Thus when a sale took
place, on the faith of a promise of pay-
548
DISCHARGE OF SURETY.
ment, made by two persons jointly,
the legal obligation of the contract
was the same, whether the right of
property vested in both the promisors,
or only in one, and whetber the pro-
mise were given in furtherance of a
common object, or was designed solely
to enable one of them to effect the
purchase, by sustaining him with the
credit of the other. In eitber case
both stood on the same footing, and
neither could set up any defence,
which would not be equally available
in favor of the other. In equity, how-
ever, the effect of joining in a promise
under such circumstances, is to create
the relation of principal and surety,
and to give birth to peculiar rights
and liabilities. The obligation im-
posed by the contract, remains un-
changed as between those who are
bound to perform it, and those who
are entitled to exact its performance,
but a new element is introduced into
the mutual relations of the obligors,
which exercises a material though in-
direct influence on the rights and du-
ties of the obligees. In all that regards
the creditor, both principal and surety
are primarily and equally bound to
fulfil the contract, but as between
themselves, the whole duty of perform-
ance rests in the contemplation of
equity on the principal. The creditor
may remain quiescent, without doing
any thing to preserve this equity, and
may enforce every power given by the
contract, even when the effect is to
subvert it ; but if he go further, and
take any unauthorized step, by which
it is impaired or destroyed, the surety
will be discharged. The equity thus
arising, is wholly independent of the
form of the contract in which it had
its origin. "Whether the surety has
made himself directly answerable for
the performance of the contract, or has
merely guarantied its performance by
th.T principal, and, whether he appears
on the face of the contract as surety,
or has entered into a primary obliga-
tion as a co-contractor or co-obligor,
he is equally within the equitable
principle, that a party who incurs a
liability for the benefit of another, is
entitled to an indemnity, and that
everyone is bound to exercise his own
rights, so as not to interfere with those
of others. The former principle ap-
plies as between the principal and the
surety, the latter, as between the
surety and the creditor, and protects
the rights conferred by the other.
Thus, the obligation of a joint note is
prima facie equal on the promisors,
both as between themselves and as it
regards the promisee. But, if it be
shown by parol evidence, that the
note was given at the request, and for
the, benefit of one of the makers, the
other will be entitled to charge him
primarily with the payment of the
whole, and will be discharged from
all liability, by the adoption of any
course on the part of the holder, after
notice of this right, which interferes
with its exercise.
The direct operation of the surety's
equity, is confined to the relations be-
tween himself and the principal, but
it has an important though indirect
influence on the creditor. The latter
is entitled to enforce the contract
against the surety, without taking any
corresponding measures against the
principal, even when the effect is prac-
tically to throw the whole burden of
the debt on the former, without any
prospect of obtaining an indemnity or
compensation from the latter. Equity
REES V. BERRINGTON.
549
may indeed direct the creditor, to
place his remedies on the contract at
the disposal of the surety, for the pur-
pose of enforcing its performance by
the principal ; but it will not compel
him to proceed against the principal,
nor restrain him from pursuing any
remedy which he holds against the
surety; Wright v. Simpson, 6 Ves.
714 ; In re Babcock, 3 Story, 393 ;
Abercrombie v. Knox, 3 Alabama,
728; Marsh v. Pike, 1 Sandford,
Ch. 210 ; Geddis v. Hawk, 1 Watts,
280; Stephenson v. Tavemers, 9
Grattan, 398 ; 2 American Leading
Cases, 363, 4th ed. ; ante, vol. 1, p.
144. But although the equity of the
surety does not control or impair the
legal right of the creditor, it is, not-
withstanding, entitled to respect, and
cannot be violated with impunity.
Although, therefore, the creditor may
enforce the contract in every particu-
lar, if he go beyond this, and do any
act unauthorized by its terms, and of
a nature to impair or destroy the
equity subsisting between the prin-
cipal and surety, he will lose his re-
course against the latter ; Hollier v.
Eyre, 9 CI. & F. 1 ; JDavies v. Stain-
bank, 6 De G. M. & G. 679 ; Pooley
v. Harradine, 7 Ellis & Blackburne,
431. This is a mere application of
the general principle referred to in
the note to Aldrich v. Cooper, ante,
vol. 2, p. 271, under which a credi-
tor, who has extinguished the remedy
against the party primarily liable for
the payment of a debt, loses all re-
course against those whose liability is
secondary. Thus, when land bound
by a mortgage, is sold in parcels to
successive purchasers, the first pur-
chaser is entitled to throw the whole
burden of the mortgage upon those of
later date, and the interference of the
mortgagee with this equity, by releas-
ing them, will deprive him of the pow-
er of enforcing the mortgage against
the first purchaser. Under such
circumstances, there is obviously no
privity of contract, and the decisions
proceed on the general principle that
every man is bound to respect the
rights of others in using his own.
This principle applies with at least
equal force in favor of the equity be-
tween principal and surety, which
grows out of a contract with the cre-
ditor, of which he has received the
benefit. But, as already stated, it
does not extend to the destruction of
the contract itself, nor preclude the
creditor from enforcing it to its fullest
extent, and is limited to prohibiting
any course which is unauthorized by
the contract, and inconsistent with
the rights of the surety.
It follows from what has been said,
that when the contract binds the
surety for its performance either by
himself or the principal, he is bound
to perform it, or to see that it is per-
formed, and is neither entitled to ne-
glect the fulfilment of this duty, nor
to impose any portion of it on the
creditor. And it has even been de-
cided, that a parol promise to proceed
against the principal immediately upon
default, will not bind the creditor,
when the contract is in writing, be-
cause it tends directly to vary its
terms ; Hanchet v. Birge, 12 Metcalf,
545 ; although it is probable that such
a promise will be binding as an equit-
able estoppel, when it has induced the
surety to omit taking measures for
his own protection. Nothing, there-
fore, is better settled, than that the
surety cannot resist a suit on the con-
550
DISCHARGE OF SURETY.
tract either at law or in equity, on the
ground that the creditor has omitted
to take measures against the principal,
and that in consequence all opportu-
nity of collecting the debt from him
has been lost ; The Adams Bank v.
Anthony, 18 Pick. 238 ; The United
States v. Simpson, 3 Penna. 437 ;
Hunt v. Bridgham, 2. Pick. 581;
Ring v. The State Bank, 4 English,
185; Carr v. Howard, 8 Blackford,
190; Alcock v. Hill, 4 Leigh, 622;
Morris Canal Co. v. Van Vorst, 1 Zab.
100 ; The Bank of Alabama v. God-
den, 15 Alabama, 61G ; 2 American
Leading Cases, 339, 4th ed. The law
was so held by Chancellor Kent in
King v. Baldwin, 2 Johnson, Ch.
554 ; and notwithstanding the rever-
sal of his decision by the Court of
Errors on a somewhat different point,
17 Johnson, 384, it has since been
followed on this throughout the Union;
Fulton v. Matthews, 15 Johnson, 433 ;
The People v. Russel, 4 Wend, 570 ;
The Commercial Bank v. French, 21
Pick. 486 ; Jordan v. Trumbo, 6 Gill
& John. 103; Joslyn v. Smith, 13
Vermont, 353 ; Sibley v. M'AUaster,