MANDAT.—PAIEMENT.—GARANTIE

PRivy CouNcoIL, 16th may 1837.

Present : Lord WyNFokp, Lord BRouGHAM, Mr Justice Bo-

SANQUET, and the CHIEF JUDGE of the Court of Bankruptey.

SIDNEY BELLINGHAM und JAMES WALLIS, uppellants, and Noah FREER, respondent,

By the old law of France, where the dealing between 4 principal and his debtor is of such a nature, as to operate simply as a prolongation oftime for the payment of the debt, ifthe surety is not precluded by such dealing, from suing the debtor for his indemnity, he will not be discharged; but if such dealing, between the principal and his debtor, amounts to a present, though but pro téempore payment, as the surety cannot then sue the principal debtor, he is discharged from his guaranteeship. A bill of exchange operates, by the law of France, as a real contract, between the drawer and the drawee, and is effet, within the meaning of art, 2055 of the Code Civil. Where, therefore, a party became surety upon an agreement for securing certain advances, bÿ future consignments of West-India produce, and after such advances, but before any consignments, the party having contracted to make the same accepted bills to the amount of the advances :

Held : That, inasmuch as such acceptances operated as a pro tempore payment of the sums advanced under the agreement, the surety was discharged,

This was an appeal from the judgment of the Court of Appeals for Lower Canada, pronounced on the 15th november 1834, affirming a previous judgment of the Court of King's Bench for the district of Quebec, of the 20th of june 1834, with costs, under the following circumstances: Previous to january 1833, Augustus Charles Freer and Charles Adolphus Holt carried on business, as merchants, and traded at Quebec, in co-partnership, under the style and firm of A. C. Freer & Co., and continued so to do, during the transactions which gave rise to this appeal. Appellants, during the same time, carried on business, as merchants, at Montreal, in co-partnership, under the style and firm of Bellinghaun & Wallis. On the 7th february 1833, in pursuance OÙ à previous memorandum of the 30th january 1833, the

wwing agreement was entered into, and signed by A. C. Creer & Co and respondent : “ Bellingham & Wallis agree to “advance, within one week, to A. C. Freer & Co. from 1,500 ‘1 to 2,000 [., as they may require, upon West India produce,

be consigned to them for sale, on the arrival of the ‘spring vessels, to the extent, at least, of one-third more than such advance, to 0e sold by them, and sales guuranteell ‘at 3h per «cct. commss. with interest on advance. (Signed)

“A. C. Freer & Co. Quebec, 7th february 1833. TL hereby “uuarantee the fulfilment of the above agreement on the “ part of A. C. Freer & Co. (Signed) Noah Freer.” On the 12th october 1833, appellants commenced an action against respondent, the guarantee, under the above agreement, for the recovery of 1,626 1. 125. 4 d. currency, alleged by appellants to be due to them by respondent, for the non-execution, on the part of Freer & Co. of the agreement. The declaration stated the original memorandum and agreement, and avered, that, on the 1st may, appellants, Bellingham & Wallis, in pursuance of the agreements, paid and advanced to Freer & Co. divers sums of money, amounting to 2217 1.9s. 94. But that Freer & Co. had not consigned to dt for sale, any West Indin produce, upon the terms and conditions of the agreements, but therein made default; and that the sum of 22171 96 9d. was entirely due to Bellingham & Wallis, from Freer & Co., who had been requested to pay the same, Yet, thut Noah Freer, although often requested, had not paid to Bellingham & Wallis the said sum of 2,217 1. 9s. 9 d, or any part” thereof. Respondent pleaded, first, à special demure, which was overruled; and, secondiy, the general issue, on which proof was ordered. One witness only (Holt, a partuer in the house of Freer & Co.) was called for appellants, who proved the guarantee, by the written documents, as exhibited in the case. He proved the charges on the debit side of an account, between Bellingham & Wallis and Freer & Co. amounting to 2,596 1. 58. 9 d. (with the exception of some trifling sums, amounting to 317$. 6 d.), and also, the proceeds, on the credit side of the same account, amounting to 9591. 125. 4d. to be correct: That Bellingham & Wallis udvanced notes and money to Freer & Co., as stated in the account, and that the advances Were made in virtue of the written documents referred to : That consignments were not made in may and june, because the cargoes expected were not received, none of any consequence having been received until the 20th july: That, upon being asked by respondent whether Freer & Co. intended sending any more West India produce, où his guarantee, the witness said that they hu accepted three drafts of Bellingham & Wallis, for 500 I. ench, and should send them enough to cover the balance in their favour, being about 800 ï. or 900 1, ani which he accordingly did. Several letters of Freer & Co. expressing their desappointment at not being able to nake consignments, by reason of the non-arrival of ships, which they had expectell were also given in evidence. The three drafts mentioned by the witness, dated respectively, Montreal, the 25th june, Ist july, and 10th july 1833, were drawn by Bellingham &

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Wallis, at 90 days, and were, on the 6th of july, returned to Bellingham et Wallis, accepted by Freer & Co. enclosed in the following letter: “Quebec, 6th july 1833. Gentlemen, ‘your favour of the 2nd was daly handed to us this evening : “and we may liere remark, we should receive them more regularly should ;'ou omiit enclosing them to Thomson. We ‘return you the three drafts accepted, amounting to 1,500 I. ‘ You have undoubtedly been disappointed in not receiving ‘consignments from us, and we feel much grieved in con- ‘ sequence, But yonr disappaintment cannot be equal to ours, “ We have bills of lading, dut 7th may, and not à vessel in “yet. They cannot remain out much longer. Yours truly, ‘ A. C. Freer & Co.” Freer & Co. failed, and became insolvent, in august, and the bills were not paid when due. No witness was called, on the part of respondent. The cause having come on to be heard before the Court of King's Bench, the action was dismissed, with costs. Upon which, Bellingham & Wallis appealed to the Court of Appeals for the province of Lower-Canada, by which court, the judgment of the Court of King's Bench was affirmed, with costs of suit. From that judement of affirmance, the present appeal was made to the King in Council. Appellants relied, for the reversal of the judgment of the court below, upon the following reasons : 1. Because the contract made between A. C. Freer & Co. and appellants, though ultimately resolting in a peculiar demand, was, in its origin, à contruct to deliver goods, to be sold by appellants on commission. 2. Because the contract had neither been performed, or released, but the original debtors still remain liable upon it. 3. Because the transaction relating to the three bills of exchange, accepted y À. ©. Freer & Co., was wholly collateral to the original contract, and neither discharged or suspended it. 4 Because the transaction cannot amount to more than giving an extension of the time of payment to à principal debtor, which does not, by the law of Canada, extinguish the obligation of surety. Lastly, becuuse, at any rate, the bills of exchange could only be taken as a payment pro tunto, and not as an extinguishment of the whole demand. Respondent, on the other hand, contended, that the judgments of the courts below ought not to be disturbed, for the following reason : Because respondent was, by default of appellants, placed i in n worse situation than he would otherwise have been in. And because the judgment of the court below, was fully warranted by the circumstances of the case, us they appeared in evidence.

Mr Sergeant STEPHEN and BURGE, K. C. for appellants : This is purely a question of law, whether there has been such

a dealing, between the creditor and principal debtor, as to discharge respondent, the guarantee : in other words, whether appellants concluded the guaranteeship of respondent, by drawing on Freer & Co. and receiving the acceptances for 1,500 1, instead of waiting the arrival of the consignments, according to the terms of the agreement of the 7th of february 1833. It will be said, on the other side, that bills of exchange having suspended the right of action against the principal, they must also against the surety : and that, that is such a giving of time as discharges the latter from his liability. That depends upon the nature of the obligation in the first instance, and upon the law of France, respecting the release of trustees. By the agreement, appellants were, in consideration of certain advances, to have certain consignments. Now that is a special agreement, and, if a breach of it is committed, would entitle them to an action on the case, and ax verdict for unliquidated damages. How can it be argued, that the drawing and acceptance of these bills, could be à bar to such an action. That would be, to hold that the bills so drawn were for a precedent, and special right of action ; that they might be pleaded in bar, or as à set-off to an action for special damages, for breach of the agreement : such a position is as contrary to the old law of France as to our law here. There is no pretence for saying that the surety has been, by the transactions in question, placed in à worse situation than he was previously; that alone constitutes the ground of ls release. By the old law of France, a surety may bring an action quid timet (1); it follows, therefore, that he cannot be released by the mere giving of time. By the civil law, which is the foandation of the old French law, an act of substitution, or, as it is called in the Digest, novation, is never to be presumed (2); the same doctrine is laid down by Pothier (2), Domat (4), Perezius (5), and Vinnius (6); and has been followed in forming the Code Civil, which is in strict conformity with those authorities. By the Code Civil of France, it is declared, that the simple prolongation of the term allowed by the creditor to the principal debtor does not discharge the surety, who may, in such case, sue the debtor,

(1) Domat’s Treat. on Civ. Law, trans, by Strahan, A. D. 1722, 1 vol.. B. III, tit. 4, sec. 3, art. 3; Pothier,-Trans., by Evan, 1 vol., 260.61.

(2) Codex, Lib, VITE, tit. 42, sec. 8,

(3) 1 vol., p. 385.

(4) 1 vol., 401, &c.

(5) Lib. VIII, tit. 45, sec, 556.

(6) Jur, Quaest., Lib. IT, ch. 42,

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in order to compel payment (1). There is no evidence that appellants ever contemplated altering the terms of the agree-

ment, and thereby releasing the surety, by the drawing of these bills of exchange, even if they amount to a giving of time; there is, therefore, no such discharge as is required by the law of France ; and there being no proof of any intended novation, ot substitution, of the agreement, the contrary must be presumed. Appellants were, therefore entitled to recover in the court below, and ought now to have their appeal allowed, with costs.

Mr WIGHTMAN, for respondent : The decision of both the courts below is consistent with tke French and English law upon the subject. The original contract is for advances, on account of goods to be delivered, and is an ordinary mercantile transaction, payment being secured by sale of the goods consigned. The guarantee is for the fultilment of that contract. Before the goods are delivered, and, therefore, before the contract is fultilled, time is given for its completion, by appellant's drawing three successive bills of exchange, and procuring their acceptance by Freer & Co. This is à material a fatal variation of the original contract. For, the Lills being available securities, are, for the time they have to run, payment, and are, therefore, not only a substitution for the means of payment provided by the agreement, viz. the sale of the consignments, but are, so long as they are available, payment itself. Now the time they have to run is not defeasable, because, having been accepted, they are available securities, and the postponement, therefore, of the time for the completion of the original contract, has been extended by the drawing and acceptance of the bills ; so that it is not as if the creditors had merely said, we give you time, but it is an actual engagement not to sue upon the contract until the bills become due. That is an engagement to give time, and releases the surety. It is expressly stated, by Pothier, ont, where a debtor assigns his estate to his creditor, that is a release to the surety, because that is a payment (2). This is à payment pro tempore, and must, therefore, operate as ax release to the surety ; even though the bills should turn out eventually to be worthless, and become dishonoured, yet, so long as they have to run, they are payment. It is not necessary to argue this as a euse of novation or substitution, it is simply one of giving time, which according to all the authorities, : is à pr'o lenpore payment and, therefore, a release to the surety (3).

(1) Art, 2039.

(2) Pothier, pl. 406, n. 2, &c.

(3) Æowell v, Jones, 1 Crow., Mees, & Ros., 97 ; Wynne v. Raikes, 5F. R.,

THE CHIEF JUDGE IN BANKRUPTCY : The principal questions in this case, are two, one of fact and the other of law : viz. ist. Whether there is sufflcient evidence to authorize the conclusion, that the bills for 500 1. each were accepted by Freer & Co. on account of their engagement to make consignments to Bellingham & Wallis, for the purpose of covering the advances of Bellingham & Wallis to them ? 2. Whether, supposing the acceptances to have been given upon that account, Nonh Freer, the surety, was, thereby, discharged from his liability, as surety, to the amount of these acceptances ? It has indeed, been argued, on the part of plaintiffs, that whatever may be the decision upon these questions, appellants are entitled to a judgment in their favour to a certain amount, since all the proceeds of consignments, amounting to 969 |. 138. 4d., where added to 1500 1. the amount of the bills fall short of the debit side of the account, viz. 2596 1. 5s. 94. But it is to be observed, that the declaration states the amount of the advances made in pursuance of the agreements at 2217 |. 9s. 94. and no more. And this is the sum which plaintiffs seek, by their declaration, to recover of defendant, as œuaranteed by him. The consignments, to the amount of 9691. 13s. 4d., were made to cover the advances, and if to this sum 15001. the amount of the bills, be added, the amount of both will exceed 2,217 1. 9s. 94. by 2521. 3s. 7d. On the purt of defendant ulso, it has been contended, that the advances do not appear to have been made in strict conformity with the terms of the agreement, and, consequently, that defendant is not bound to make them gond. But itis stated in the evidence of the only witness called, and à partner in the house or Freer & Co., that the advances made by Freer & Co. were made in virtue of the written documents referred to, Their Lordships, therefore, do not place any reliance upon this objection, in coming to the conclusion, that the judgment of two courts below ought to be affirmed. Where two courts have concurred in a conclusion of fuct, from the evidence before them, or sitting in a part of the King's foreign dominions, have concurred in a matter of foreign law in force there, a court of uppeal, in this country, ought to be fully satisfied that their decision is erroneous before it pronounces à judgment of reversal., Upon the question of fact, whether the bills for 1500 1 were accepted by Freer & Co. on account of their engagement to make consignment to Bellingham & Wallis, for the purpose of covering the advances of Bellingham & Wallis to them, the relation in which Freer & Co. and Bellinghaun & Wallis, stood to each other, at the time when the bills were sent by Bellingham & Wallis, for acceptance, and were accepted and returned by Freer & Co. to them, is mate-

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rial to be considered. In the origin of the transaction between these parties, Freer & Co. were in want of pecuniary assistance from Bellingham & Wallis, who were to make advances for their accommodation, and Freer & Co. engaged to consign produce for their security. Freer & Co. having been disappointed in the expected arrival of cargoes, and, consequently, unable to fulfil their part of the engagement, they accept bills, sent to them by Bellingham & Wallis, drawn by the latter in favour of themselves. And it is contended, on the part of Bellingham & Wallis, that these bills must be considered as accepted for their accommodation, and not on account of the default of Freer & Co. to fulfil their engagement. But this view of the case supposes an entire reversal of the situntion of the parties ; and that Freer & Co., who stood in need of accomodation from Bellingham & Wallis, when they were in contident expectation of receiving produce, were in a situation to be asked for, and afford accommodation to Bellingham & Wallis when this expectation had failed. The letter of Freer & Co. which covered the acce:.' ‘nces, leads to a very different conclusion; for, immediately after saying, “we return you the three drafts accepted, amounting to 1500 1.” they add, “ you have undoubtedly been disappointed “in not receiving consignment from us, and we feel much “ grieved in consequence. But your disappointment cannot be “equal to ours.” Is ît not evident, from these sentences, following each other, that the bills were accepted on account of the disappoinement ? Accordingly, Holt, the partner in the house of Freer & Co., and the only witness in the case, and who was called on the part of plaintitfs, states in his evidence, that, when asked about sending goods upon the defendant’s guarantee, he said that he had accepted bills for 500 1. each, and should send, and did send, enough to cover the balance ; thereby treating the sum due, after deducting 15001. as the balance remaining to be covered by consignments ; which acceptances he appears to complain had not been paid to the credit of Freer & Co. in the account, as they ought to have been, On this point, therefore, their Lordships are of opinion, that sufficient evidence was given to justify the conclusion of fact, that the bills were accepted on account of the insufficiency of consignments to cover the balance of advances. IL The remaining and most material question is, whether Bellingham & Wallis, by taking the acceptances, discharged Noah Freer, the surety, from his liability to pay the balance ? This question must be decided by the principles of the French law, which differs, in some respects, from the law of England. There is one rule, however, which is equally recognized by both, namely, that the surety ought not to suffer by the

arrangement which has taken place between the creditor and the principle debtor: Memo ex alterius facto prægravari debet. But the condition of the surety may be differently affected by the same circumstances, under the onc law and under the other. In endeavouring to ascertain the bearing of the French law upon the case, we cannot resort to more satisfactory authority than that of Pothier, in whose writings we not only find the principles of the civil law,upon which the law of France is based, illustrated and explained, but are informed of the extent to which those principles have bcen admitted, and the modifications which they have undergone. By the French law, a surety is allowed, in certain cases, to proceed against the principal debtor for his own indemnity, before he has discharged the debt. Pothier, Traité des Obligations, part. 2, chap. 6, sec. 7, art. 2, no 442, states four cases in which this is allowed : 1. When the surety is sued by the creditor. 2. When the principal debtor is in embarrassed circumstances, en déroute ; in which case, the surety, though he bas not paid, may attach the goods of the principal debtor, in order that they may be answerable for the guarantee which he has entered into. 3. When the principal debtor has bound himself to bring the surety a discharge of his guarantee, within a time certain, which has expired. 4 When, though the principal debtor has not bound himself to discharge the surety from his guarantee within a certain term, yet, if the obligation has continued a considerable time, the security may compel the principal debtor to procure his discharge. This time has since been fixed by the Code Givil at ten years, where the principal obligation has no fixed time. This rule, however, does not prevail, if the principal obligation is such, as in case of guardianship, that it is not of a nature to be extinguished before a determinate period. In these cases, a surety, under the English law, would have no such power to protect himself, It has, therefore, been very fairly argued, that a surety under the French law is not entitled to the same indulgent consideration as a surety under the English law. He cannot, indeed, in all cases, proceed again-t the principal debtor for his own indemnity, before he has paid the debt, but he may do so, if he perceives that the debtor is falling into embarrassment, though he has not paid, or been called upon to pay. The next thing to be considered is, the relation which subsists between the drawer and acceptor of a bill of exchange. Pothier, Traité du Contrat de Change, part. 1, chap. 4, art. 3, no 91, says that the contract between the drawer and drawee of a bill of exchange is considered as a real contruct of mandate mandatum solvendæ pecuniæ, which takes pluce and is contracted by the acceptance of the

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bill by the drawee. This contract, he says, is tacitly contracted when the drawee is a banker, who has received funds of the drawer, for the acceptance and payment of his bills. And, further, at no 92, that he had been assured by all the merchants, with whom he had conversed, that it was the constant custom, among merchants, that a creditor, for a liquidated sum, in a commercial transaction, may, without waiting for the express consent of his debtor, draw upon him a bill of exchange for the amount; and that, in default of paying it, he (the debtor) is chargeable with costs of protest, reexchange, &c. He says, indeed, that he was surprised to find this practice; but, in justification of it, he adds, that, it being the practice of commerce, one merchant who contracts with another x liquidated sum, in a commercial transaction consents that his creditor may draw for it, upon him, by a bill of exchange, and, though he has not expressed his assent, is considered to have tacitly agreed to it, according to the rule of law, t contractibus tucitè veniunt quæ sunt moris et consuetudinis. But this, he says, must be confined to commercial transactions. In no 97, spenking of the rights of action of the drawee against the drawer, to be reimbursed what he may have udvanced for the drawer, for the payment of the bill, he says : “ The acceptor shall not have this action, if the funds have been remitted to him by the drawer, or if he was the debtor to the drawer to that amount or more, but, nevertheless, in this case, the drawee obliges himself to the acceptor, his debtor, not to exact from him, before the bill becomes due, the amount of the debt, which, to the acceptor, ought to stand in the place of security for the indennity of the obligation which he has contracted for the drawer by the acceptance.” According to this passage, Freer & Co. the debtors of Bellingham & Wallis, to a certain amount, in a commercial transaction, having accepted the drafts of Bellingham & Wallis, the latter contracted an obligation not to sue for the debt, to the amount for which the bills were drawn, until they had become due: de ne point exiger de Lui, avant l'échéance de la lettre,la somme qu'i Lui doit: qui doit tenir lieu à l'uccepteur de sûreté de l'indemnité de l'obligation qu'il « contractée pour le tireur par l'acceptation. To answer this question, it is necessary to state rather fully some parts of the first article of the Traité des Obligations, Part. IT, chap. VI, no 407, on the manner in which guarantees are extinguished, According to which, the obligation, which results from à gunrantee, is extinguished—1st. By all the different means by which all obligations are extinguished. 2dly. The extinction of the principal obligation, draws after it the extinction of the guarantees, and discharges the sureties.