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ceptor, his debtor, not to exact from him, before the bill becomes due, the amount of the debt which, BELLINGHAM to the acceptor, ought to stand in the place of security for the indemnity 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'il lui doit; qui doit tenir lieu à l'accepteur de sureté de l'indemnité de l'obligation qu'il a 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 II. chap. VI. No. 407, on the manner in which guarantees are extinguished. According to which, the obligation, which results from a guarantee, 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.

3dly. The guarantee is discharged where the creditor, by his own act, has put it out of his power to transfer his rights of action against any one of his principal debtors, in the transfer of which the surety is interested.

4thly. The author asks, when the creditor has

FREER.

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v.

FREER.

voluntarily received of the debtor any estate (hériBELLINGHAM tage) in payment of a sum of money due to him, is the guarantee discharged, though a long time after he be evicted of that estate? As to which case, the ground of doubt, he says, is, that the payment is not valable, not having transferred to him to whom it was made the property in the thing; consequently the principal obligation remains; whence it seems to follow, that the obligation of the surety ought to remain also; and Barnage reports a case so adjudged. But notwithstanding these reasons, and though it cannot be denied that the payment in this case is not valable, and that the principal obligation remains, it has been adjudged, says Pothier, by cases reported by Barnage, (Traité des Hypothèques) that the creditor in this case is not allowed to sue the sureties, if in the mean time the principal debtor has become insolvent. The decision in this case is founded on the rule of equity, Nemo ex alterius facto prægravari debet. The surety ought not to suffer by the arrangement which has taken place between the creditor and the principal debtor. Now if in this instance the creditor were allowed to sue the surety, he would be prejudiced by the arrangement by which the creditor has taken the estate. The creditor, by this arrangement, having taken from the surety the power, by paying the creditor while the debtor was solvent, of recovering from the debtor the sum for which he had become responsible. He then goes on further to ask, whether, if the creditor had simply given a prolongation of the term of payment to the debtor, and, pending this prolongation, the debtor had become insolvent, the surety could resist the payment? Vinnius, he says, holds the negative. This instance,

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says Pothier, is very different from the preceding. In the former instance, the gift of the estate in BELLINGHAM payment having, until the time of the eviction, caused the debt to be apparently paid, such an arrangement had taken from the surety all means of providing for indemnity against his guarantee, even when he might perceive that the affairs of the debtor were beginning to be deranged; for he could not demand of the debtor the discharge of his guarantee, which, as well as the principal debt, appeared to be acquitted; but the simple prolongation of the term given by the creditor to the debtor, which does not cause the debt to be apparently acquitted, does not take from the surety the means of providing for his indemnity, and of suing the principal debtor, if he perceives that his affairs are beginning to be deranged; si bona dilapidare cœperit. The surety, therefore, cannot pretend that the prolongation of the term given to the debtor does him any harm, since, on the contrary, he profits by it.

The principles here laid down by Pothier, are clear and intelligible; and they are briefly summed up in the Code Civil, Tit. Cautionnement, chap. iii., which, though not an authority binding in Canada, may be considered, as has been justly argued, in the nature of a commentary on the French law, as laid down by Pothier, respecting those matters in which there is no apparent intention to introduce alteration. We there find it stated, Art. 2037: "La caution est déchargée, lorsque la subrogation aux droits, hypothèques et priviléges, du créancier ne peut plus, par le fait de ce créancier, s'opérer en faveur de la

caution."

2038. "L'acceptation voluntaire que le créancier a faite d'un immeuble, ou d'un effet quelconque, en

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paiement de la dette principale, décharge la caution, BELLINGHAM encore que le créancier vienne à en être évincé."

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2039. "La simple prorogation de terme, accordée par le créancier au débiteur principal, ne décharge point la caution, qui peut, en ce cas, poursuivre le débiteur pour le forcer au paiement."

We have seen that the creditor, by taking acceptances of his debtor, contracts with him, not to sue for the amount of the debt until the bills become due. He cannot, therefore, transfer to the surety any right of suit while the bills are running. But does this prevent the surety himself from suing the principal debtor for his own indemnity, si bona dilapidare cœperit? If taking the accepted bills operates as a simple prolongation of the time of payment given to the debtor, the surety may proceed against him; but if taking the accepted bill operates as an apparent payment of the debt due to the drawer, so long as the bills are running, the surety could not commence any suit against the principal debtor; and as the principal debtor in the present case became insolvent, in the interval between the acceptance and the maturity of the bills, the surety would be discharged.

Pothier holds that the gift of an estate (héritage) in payment of a debt, is an apparent payment till eviction; and from the expression in Art. 2038 of the Code Civil, "d'un immeuble, ou d'un effet quelconque, we can have no hesitation in concluding, that the word "héritage," employed by Pothier, was put by way of example only; and that his doctrine applies to property of any sort, given in payment, which is attended with a similar result.

There can be no doubt that bills of exchange are property, and that they come within the meaning

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of the word "effet." The bills given in the present case, when received by Bellingham & Wallis, BELLINGHAM became their property, transferable by them to all persons at their pleasure; and the acceptors became bound to pay them, when due, to the holders, whoever they might be.

No restriction was imposed upon the negotiation of the bills; nothing appears to show that they were given as mere collateral securities. On the contrary, one of the bills appears, by the indorsements, to have been actually put in circulation by Bellingham & Wallis. They were property of value at the time of the acceptance, and were taken on account of the debt due. That debt, therefore, was, according to the French law (with which the law of England agrees in this respect), apparently paid, until the bills were dishonoured by non-payment at maturity. The consequence of which is, that the surety is discharged.

Their Lordships are, therefore, of opinion, that the judgment of the Court of Appeal of the Province of Lower Canada, affirming the judgment of the Court of King's Bench, ought to be affirmed, with costs of the appeal.

VOL. I.

END OF PART II. VOL. I.

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