Munster and Leinster Bank v France

• Jurisdiction: Ireland
• Judgment Date: 01 February 1889
• Date: 01 February 1889
• Docket Number: (1887 — H. No. 60.)
• Court: Chancery Division (Ireland)

Appeal.

Before LORD ASHBOURNE, C., and FITZ GIBBON, BARRY, and NAISH, L. JJ.

(1887 — H. No. 60.)

MUNSTER AND LEINSTER BANK

and

FRANCE

Ansell v. Baker 15 A. & E. 20.

Holmes v. BellUNK 3 M. & G. 213.

Twopenny v. YoungENR 3 B. & C. 208.

Pryce v. BuryENR 2 Drew. 41.

Price v. MoultonENR 10 C. B. 561.

Hall v. Cole 4 A. & E. 577.

Baker v. WalkerENR 14 M. & W. 465; 3 D. & L. 46.

Overend Gurney & Co. v. Oriental Financial CorporationELR L. R. 7 H. L. 348.

Higgens's CaseENR 6 Coke, 344.

Price v. MoultonENR 10 C. B. 561.

James v. WilliamsENR 13 M. & W. 828.

Pring v. ClarksonENR 1 B. & C. 14.

Twopenny v. YoungENR 3 B. & C. 208.

Eyre v. EverettENR 2 Russ. 381.

Gordon v. CalvertENR 4 Russ. 581.

Boaler v. MayorENR 19 C. B. (N. S.) 76.

Wykie v. RogersUNK 1 D. G. M. & G. 408, 414.

Bell v. BanksUNK 3 M. & G. 258.

Sharpe v. GibbsENR 16 C. B. N. S. 527.

Ansell v. Baker 15 A. & E. 20.

Boaler v. MayorENR 19 C. B. (N. S.) 76.

Sharpe v. GibbsENR 16 C. B. (N. S.) 527.

Ansell v. Baker 15 A. & E. 20.

Blake v. White 1 Y. & Col. Ex. 420.

Bill of exchange — Mortgage — Collateral security — Giving of time to principal debtor — Discharge of surety.

MUNSTER AND LEINSTER BANK v. FRANCE (1). (1887-H. No. 60.) Bill of exchange-Mortgage-Collateral security-Giving of time to principal debtor-Discharge of surety. C., being indebted to a Bank on foot of the overdraft of his current account in a considerable sum, indorsed to the Bank a bill of exchange for £2000, accepted by the defendant, and payable three months after date. Before the bill arrived at maturity C., without the knowledge of the defendant, executed a deed of mortgage to the Bank to secure the sum of £8800, which was the total amount then due by him on foot of his overdraft. The deed recited a previous equitable mortgage by deposit by C., to secure overdrafts of his current account, and contained a covenant by C. for the payment of the prinÂcipal sum of £8800, and interest, on a day three months subsequent to the date of the mortgage : Held, that the taking of the mortgage by the Bank constituted a giving of time to the principal debtor, and therefore that the defendant was discharged from liability. APPEAL by the defendant from an order of the Exchequer Division, allowing the cause shown by the plaintiffs against a conditional order for a new trial obtained by the defendant. The facts of the case material to this report are sufficiently stated in the judgment of the Lord Chancellor. Carton, Q. C., Houston, Q.C., and Sugrue, for the appellants,: The legal mortgage taken from Coatsworth during the currency of the bill had the effect of discharging him from liability on foot of the bill. This mortgage was a distinct security in substitution for the bill, and was not a collateral security. There was an extinguishment of the debt on foot of the bill, so far as Coatsworth, the principal debtor, was concerned, and therefore the surety was VOL. MP.] Q. B. & EX. DIVISIONS. 83 discharged. Coatsworth, if sued on the bill would have had a plea Appeal. in bar. 1889. There clearly was a giving of time here without the consent 1/7E ,,,8„T„TR: of the surety, and therefore he is discharged. The equitable mort- BANK gage by deposit is quite distinct and different from the legal mort- FRANCE. gage. The equitable mortgage by deposit was an ordinary bank mortgage to secure a floating balance ; the legal mortgage was given to secure a definite sum. The remedy by suing on the bill became merged in the covenant in the mortgage. The present case differs from the ordinary class of cases illustrated by Ansell v. Baker (1), where either the security given recognised the existence of the bill or the contract amounted to a joint and several contract, and not two several contracts, so that the remedy on the specialty was not eo-exÂtensive with the remedy on the bill. It differs also from the class of eases illustrated by Holmes v. Bell (2), where the debt was the same, and where it was evident on the face of the security that it was identical. Thus, in Twopenny v. Young (3), the deed stated that it was a further security. In the legal mortgage in the present case there is a covenant to pay, and Pryce v. Bury (4) decides that in the absence of express agreement this covenant cannot be imÂplied in an equitable mortgage by deposit. A covenant given to secure an existing debt operates in law as a merger of the remedy on the simple contract : Price v. Moulton (5). If the plaintiffs can only sue on the covenant in the mortgage then time is given to the principal debtor, and the surety is discharged : Byles on Bills of Exchange (14th Ed.), pp. 267, 314; Bayley on Bills of ExÂchange (6th Ed.), p. 334; Parsons on Bills of Exchange (2nd Ed.), pp. 232, 247 ; Chitty on Bills of Exchange (10th Ed.), p. 208 ; Hall v. Cole (6). To summarize :-1. The mortgage-deed was not a collateral security, but created a new debt giving the plaintiffs new and additional rights. The character of the security was altered. 2. There was a merger, so far as Coatsworth was conÂcerned, or a suspension of the remedy against him, which amounted to a giving of time, and therefore the surety is discharged. (1) 15 A. & E. 20. (4) 2 Drew. 41, (2) 3 M. & G. 213, (5) 10 C. B. 561. (3) 3 B. & C. 208. (6)...