Sivaraman Chetty v. Ebramjee.
Present: Howard C.J.
SIVARAMAN CHETTY v. EBRAMJEE et al.
160—C. R. Colombo, 65,319.
Waiver—Action on promissory note against maker and endorsers—Waiver ofclaim against maker—Endorsers discharged from liability.
Where, after an action was instituted by the payee against the makerand endorsers of a promissory note, the plaintiff waived his claim againstthe maker,-—
Held, that the endorsers were discharged from liability unless the.waiver was made with their knowledge or consent.
HOWARD C.J.—Sivaraman Che tty v. Ebramjee.231
^^PPEAL from a judgment of the Commissioner of Requests, Colombo.
N. Nadarajah (with him V. Thillainathan), for the defendants,appellants.
J.E. M. Obeyesekere, for the plaintiffs, respondents.
February 12, 1941. Howard C.J.—
This is an appeal from a judgment of the Commissioner of RequestsColombo, in favour of the plaintiffs against the appellants, the second andthird defendants, for a sum of Rs. 230.99 together with further interestas specified in the judgment till date of payment. The plaintiffs claimedon a promissory note made by the first defendant in favour of the plaintiffsand endorsed by the appellants. On the evidence before him the Com-missioner held that the note was given for a loan of Rs. 300 advanced tothe first defendant. This finding by the Commissioner has not beenchallenged in this appeal. The action against the first defendant andthe appellants was instituted on May 11, 1940. On June 21, 1940, theplaintiffs in Court waived their claim against the first defendant and!trial proceeded against the appellants. Counsel for the appellants bothin this Court and in the Court below maintained that the waiver of theclaim against the first defendant discharged them from their liability.The learned Commissioner in his judgment stated that the liability of theparties is on a promissory note and as the maker and endorsers are jointlyand severally liable, if the plaintiffs chose to waive their claim againstthe maker, it does not necessarily mean that the endorsers are dischargedfrom liability. I am of opinion that this is not a correct statement of thelaw which is clearly stated in Chalmers on Bills of Exchange 9th ed., p. 257,in he following passage : —
“ Where a relationship in the nature of principal and surety existsbetween the parties to a bill, or the parties to a bill transaction, and theholder having notice thereof enters into a binding agreement with theprincipal to give time to him, or, of his own act, discharges the principal,the surety or sureties are discharged, unless the holder, in so doing,expressly reserves his rights against the surety or sureties, therebypreserving the remedy over. The acceptor of a bill is prima facie theprincipal debtor, and the drawer and endorsers are, as regards him, .sureties, and the drawer of a bill is the principal as regard theendorsers.”
The law as laid down in this passage is recognized in the judgment ofLord Selborne in Duncan Fox & Co. v. North and South Wales Bank Ywhere the Lord Chancellor stated as follows : —
“ The statement in Smith’s Mercantile Law (3rd ed., p. 253) is alsocorrect and is established by many authorities that ‘ in the contract bybill or note, the maker or acceptor is considered the principal, and theendorsers as his sureties; and consequently, if the holder discharge orsuspend his remedy against the former, the latter, unless they havepreviously consented to it, or afterwards promised to pay withknowledge of it, are all immediately discharged.”
1 6 A. C. at p. 14. .
Vanderstraaten v. Mrs. N. M. Perera.
The same principle is also formulated in Liquidators of Overend v.Liquidators of the Oriental Financial Corporationwhere it was held thatif, after a right of action accrues to a creditor or against two or morepersons, he is informed that one of them is a surety only, and after that,he gives tame to the principal debtor, without the consent and knowledgeof the surety, the rule as to the discharge of the surety applies. InSuppiaya Reddiar v. Mohamed et dl.‘, a local case, the principal laid downby English law was applied and it was held that, where in an actionbrought against two joint makers of a promissory note, judgment bydefault is entered against one, the action cannot thereafter be maintainedagainst the other.
In this case the appellants being endorsers are in the position of suretiesfor the first defendant, the principal debtor. The waiver of the claimagainst the latter was made without the knowledge or consent of theappellants. Nor did they afterwards in the altered circumstancesconsent to pay. Their debt is, therefore, discharged and this actioncannot be maintained against them.
For the reasons I have given the judgment of the learned Commissioneris set aside and judgment entered for the appellants with costs both in thisCourt and the Court of Requests.
SIVARAMAN CHETTY v. EBRAMJEE et al