construction which would give an estate in fee. There is in the present case a devise of land to an executrix. And I do not think that an estate of freehold only, i.e., an estate for life only, is expressly or by necessary implication given to her. There is no question of a term of years. These reasons have led me to the conclusion, which is, I have no doubt whatever, in accordance with the testator's actual intention, that there is not an intestacy. The motion must therefore be refused. Solicitors for applicant: Hart, Flower & Drury. GRIFFITH, C.J. 5th, 6th, 19th September, 1895. SOUTH AUSTRALIAN LAND MORTGAGE AND AGENCY co., LTD. . M'INNES. Joint and several covenants-Release of one of two joint debtors-Liability of remaining debtor as principal debtor, and as surety. A transfer and charge executed by M. and G., over a piece of land in favour of plaintiffs, contained joint and several covenants by M. and G. for the repayment, at a fixed date, of £10,000, with interest. Shortly after the execution of the transfer and charge, M. and G. transferred their equity of redemption in the land to third parties. M. and G. having died, and default having been made, plaintiffs sued G.'s executors, in the Supreme Court of Victoria, for the whole amount due under the covenants. The executors denied all liability and resisted the claim, and it was finally agreed that plaintiffs should receive £750, and £19 16s. costs, in full satisfaction of their claim against G.'s estate in respect of the charge. The executors agreed on their part to transfer all their estate and interest in the transfer and charge and in the land to plaintiffs. Instruments to that effect were executed and interchanged between the parties. The plaintiffs in the release given to G.'s executors, specially reserved their rights under the covenants against M. The plaintiffs then sued M.'s executor for the whole amount due under this covenant. Held, that the release given by the company to G.'s executors operated as a release of M.'s liability for half of the debt for which as between himself and G. he was surety for G., but did not release M. from his liability as a principal debtor for the other half of the amount due under the covenant. U TRIAL before Griffith, C.J., without a jury. This was an action by the South Australian Land Mortgage Co., Ltd., against Donald M'Innes, as executor of John M'Innes, deceased, to recover £10,109 10s., due under a covenant contained in a transfer and charge duly executed by John M'Innes and Hugh Gillies, in favour of the company. The facts appear fully in the judgment of the learned judge. Feez and Lilley for plaintiffs: The agreement with Gillies's executors was that, in consideration of their paying plaintiffs £750, and £19 costs, and transferring their interest in the mortgaged property to plaintiffs, plaintiffs would refrain from suing Gillies's estate for the debt. There was no intention on plaintiffs' part to discharge any portion of the debt, and the release only amounted to a covenant not to sue with a full reservation of plaintiffs' rights against M'Innes. The interest in the mortgaged property, purporting to be transferred by Gillies's executors to the plaintiffs, was non-existent, since both Gillies and M'Innes had previously sold their equity of Therefore the redemption in the property. transaction could not be set up as an accord and satisfaction of the debt, or even of half the debt. The intention of the parties was that the plaintiffs should refrain from suing Gillies's estate in consideration of the £750 paid them. The plaintiffs were, therefore, entitled to proceed against M'Innes' estate for the whole amount. 633), They cited Cheetham v. Ward (1 B. & P., Hutton v. Eyre, 6 Taunt, 289), Solly v. Forbes (2 B.& B., 38), Price v. Barker (24 L.J., Q.B., 130), Willis v. De Castro (27 L.J.C.P., at p. 246) Green v. Wynn (L.R. 4 Ch., 204), Bateson v. Gosling (L.R. 7 C.P., 9), Duck v. Mayhew (1892, 2 Q.B., 511), Commercial Bank of Tasmania v. Jones (1893, A.C. 313, 316), Wolmerhausen v. Gullick (1893, 2 Ch., 514), Kaye v. Dutton (7 M. & G., 807), Cowper v. Green (7 M. & W., 633), Watters v. Smith (2 B & Ad., 889). Byrnes, A.G., and Shand for defendant. The agreement and the release operated as a discharge Feez, in reply: The plaintiffs' covenant with Gillies' executors was a covenant not to sue Gillies' estate for the debt, and not a covenant to release the whole debt or to relinquish their claim against M'Innes. In any case plaintiffs are entitled to recover from defendant his half of the mortgage debt. He cited Ford v. Beech (11 Q.B., 866), Ex parte Good (5 Ch.D., 46), Wegg Prosser v. Erans (1895, 1 Q.B., 108), Re Salmon (42 Ch.D., 351), Blore v. Ashby (Ib. 682), Williams v. Buchanan (7 T.R., 226), Williams' Executors, 1536, 1834. C.A.V. of the whole debt. The attempted reservation of Ex parte Snowdon (17 Ch.D., 44), Stirling v. the plaintiffs' rights against M'Innes was wholly Forrester (3 Bligh, 591). inconsistent with other portions of the agreement. Had the plaintiffs taken the action against Gillies' executors to judgment, that judgment would have been a complete bar to any action against M'Innes' estate. As the case stood, the plaintiff's had taken property, money, and money's worth from Gillies' executors, and there had therefore been an accord and satisfaction of the whole debt. Without the express reservation of their rights against Gillies there would have been a complete discharge of the debt, and the reservation being inconsistent with the rest of the instrument ought to be rejected. The release of one of several persons jointly and severally liable for a debt operates as a release of all (Wolmerhausen v. Wolmerhausen, 62 L.T., 41). The intention of the parties was clearly that the transaction should operate as a discharge of the debt for which the action was brought against Gillies' trustees-that is, for the whole amount due under the covenant. They also cited Webb v. Hewitt (2 K. & J., 438), Muir v. Crawford (2 H.L.Sc., 456-9), Steeds v. Steeds (22 Q.B.D., 537-540), Haigh v. Brookes (10 A. & E., 309). King v. Hoare (13 M. & W., 494), Kendall v. Hamilton (4 App. Cas., 501), Haigh v. Brookes (10 A. & E., 334), Re Wolmerhausen (62 L.T., 541), Robinson v. Walker (7 Mod., 153). Rutledge and Groom, for Simon Fraser and Robert Mailer, executors of H. C. Gillies, third parties, from whom defendant claimed indemnity. We adopt the arguments of the learned counsel for the defendant as to the release of defendant from all liability by the release of his co-debtor, but if that argument fails the claim for contribution against the third parties is untenable, as defendant's utmost liability is only for half the whole amounts due under the covenants. Moreover, even if defendants were not completely released from liability under the charge, the clear intention of the parties at the date of the release of Gillies' estate was that that estate should be entirely exonerated from all claims in respect of the covenants. They cited GRIFFITH, C.J.: This is an action on a covenant contained in a memorandum of transfer and charge dated December 9, 1887, by which plaintiffs transferred to defendants' testator, Donald M'Innes, and the third parties' testator, H. C. Gillies (by the name of Hugh Gillies) as tenants in common, certain land in Brisbane, subject to a charge for £10,000, and by which M'Innes and Gillies convenated to pay that sum to the plaintiffs, on December 14, 1892, with interest at 6 per cent. Shortly afterwards, M'Innes and Gillies transferred the equity of redemption to other persons. Default having been made in payment, and Gillies being dead, the plaintiffs brought an action on the covenant in the Supreme Court of Victoria against his executors. Negotiations took place, which resulted in the execution of two instruments under seal, dated May 9, 1894, which were exchanged between the parties. I find upon the evidence that these two instruments formed part of the same transaction, and together embody the agreement between the parties to the negotiations. By one of these instruments, which was executed by the plaintiffs, and which recited that plaintiffs claimed to be creditors of Gillies's estate under the covenant; that the action was pending against Gillies's executors, who denied their liability; and that plaintiffs had agreed to accept £750 and £19 16s. for costs in satisfaction of "the alleged claim" against Gillies's estate by virtue of the covenant; construction of the deeds of May 9, 1894, executed by plaintiffs and Gillies's executors respectively. It is the duty of the court to ascertain the intention of the parties from the language they have used, and to give complete effect to that intention, unless the court is precluded by some established rule of law or binding authority from doing so. Before examining the language of the deeds it may be convenient to consider for a moment the respective rights and liabilities of the parties when they were executed. As between plaintiffs and the mortgagors each of the latter was liable as a principal for the whole amount of the mortgage debt, and was entitled upon payment of the debt to the benefit of the security. As between themselves, each of the mortgagors was liable as principal for half only of the mortgage debt; as to the other half, his liability as between himself and his co-mortgagor was that of surety only and upon payment of his own half of the debt he was entitled to the benefit of one-half of the security. If called upon to pay more than half he was entitled to be recouped by his co-mortgagor, and in aid of that right to the benefit pro tanto of the other half of the security. The equity of redemption having, however, been transferred, the only benefit which the mortgagors could derive from the security was to stand in the place of the mort agees, and to be recouped by them out of the proceeds of the land to the extent of any payments made by them if the security proved sufficient. Each of the parties was entitled to deal with his own rights in any way that he might think fit. plaintiffs released all their claims and rights of determination is, in my opinion, entirely one of action against Gillies's executors and his estate in respect of anything contained in the memorandum of transfer and charge, and agreed to discontinue the action. These words of release were followed by a proviso that nothing in the deed should prejudice the plaintiffs' rights and powers under the transfer and charge other than as aforesaid, and that the plaintiffs "expressly retain and reserve all their rights and remedies against John M'Innis, a party, jointly and severally with the said H. C. Gillies, to the said recited memorandum of transfer and charge." The other instrument was executed by Gillies's executors and delivered to plaintiff's, by whom it was produced at the trial. By this deed, after reciting the memorandum of transfer and charge, the death of Gillies, the default in payment, and that Gillies's executors "have agreed to enter into these presents in consideration of the estate of the said H. C. Gillies being exonerated and discharged from payment of the said moneys," . . . . it was witnessed that in consideration of the release by the plaintiff's of even date and of 10s. . .. Gillies's executors agreed to sell to plaintiff's all Gillies's and their own interest in the mortgaged land and in and under the memorandum of transfer and charge. They also covenanted for further assurance. Plaintiffs then brought the present action against defendant, as executor of M'Innes, and claim to recover the whole amount of the mortgage debt and interest from him. The defendant claims that the effect of the instruments of May 9, 1894, being to discharge one of two joint debtors by way of accord and satisfaction, the other joint debtor is consequently also discharged. If, however, the defendant is not discharged, he claims to be entitled to contribution from Gillies's executors, whom he has brought in as third parties. The plaintiff's contend that the release operates only as a covenant not to sue, and that the contemporaneous instrument does not alter its effect, and that they are consequently entitled to maintain an action for the full amount of the mortgage debt against the defendant. The real question for It is settled that a release of one of two joint debtors, without more, discharges his codebtor (Mercantile Bank of Sydney v. Taylor, 1893, A.C. 317). It is also settled that an instrument which is in form a release of one of two joint debtors, but which contains a reservation of rights against the other co-debtor, does not operate as a release, but as what is called "a covenant not to sue." The principle is that the intention of the parties is to be collected from the whole instrument, and that if effect cannot be given to that intention by construing the instrument as a release, it will not be so construed (Price v. Barker, 24 L.J., Q.B., 130. 4 E. & B. 760). The name by which the instrument is designated is of course unimportant. The effect, not the name, is material. If therefore one of two joint debtors is sued by the creditor after such a qualified release given to his co-debtor, the instrument cannot be pleaded by him as a release of the debt. Whether it could under the old system of pleading have been pleaded at law by the debtor in whose favour it was executed, may be doubtful. (Solly v. Forbes, 2 B. & B., 38; Ford v. Beech, 11 Q.B., 852, 871.) The release in the present case, if it stood alone, would clearly fall within this principle. It would not therefore operate of itself as a complete discharge of the debt. In some of the cases it appears to have been assumed that such a reservation of rights in a release given by a creditor to one of two co-debtors leaves the creditor free to recover the whole debt from the other co-debtor, and leaves the latter free to recover from the former his share of the debt. It is to be observed, however, that in none of the cases was the extent of the liability of the unreleased debtor in question. The point raised was whether the debt was or was not extinguished altogether. The view that the effect of such a qualified release is to discharge the unreleased debtor to the extent to which, but for the release, he would be entitled to call for contribution from his co-debtor is quite consistent with the actual decision in all the cases, though not perhaps with some of the obiter dicta, and seems a natural inference from the equitable doctrine of contribution between joint debtors now embodied in s. 4 of The Mercantile Act of 1867. It is, I think, clear that the creditor cannot deprive the unreleased debtor of his right as a surety to contribution from his co-debtor, and that if he does any act which would deprive the unreleased debtor of that right, his own claim against him is pro tanto discharged. If the release of one of two joint debtors with a reservation of rights against the other has not the effect of discharging any part of the debt as against the unreleased debtor, it would, in fact, be a mere covenant by the creditor not to directly enforce payment by an action in his own name, but with full liberty to do so indirectly by calling upon the other debtor for payment in full. I should hesitate before holding that such a construction expresses the real intention of the parties to such an agreement. It is not however, I think, necessary to decide what would be the effect of the release in the present case if it stood alone. The contemporaneous instrument expressed in the plainest language the intention of the parties that Gillies's executors and his estate should be exonerated from the debt, and that plaintiffs should acquire all the rights which the executors had under the security. These rights would have included a right to receive back out of the proceeds of the security, if sold for a sufficient amount, the sum of £750 which they paid. The release also expressed in the plainest language the intention of the parties that M'Innes should not be discharged. It is not, I think, open to doubt that the intention of the parties was that all the liability of Gillies's estate in respect of the whole mortgagor's debt should be absolutely discharged, and that some liability on the part of M Innes should remain. I have already pointed out the twofold nature of the liability of each of the mortgagors. In my opinion the parties had this twofold liability in contemplation, and intended to treat the liability of the mortgagors as two distinct liabilities in respect of the respective halves of the debt for which they were as between themselves primarily liable. I think that the true construction of the deeds, read together, is that they operate as an agreement that the primary liability of Gillies's estate in respect of his half of the debt should be absolutely discharged; that the liability of his estate as surety for M'Innes's half should also be discharged; that the mortgagees should stand in the place of Gillies's executors so far as regarded their right to any part of any surplus proceeds of the security; and that M'Innes's primary liability for his moiety should remain. Any more limited construction would fail to give effect to some one or more of the express stipulations in the instruments. It may be doubtful whether it was actually intended to discharge M'Innes's liability as surety for Gillies's half of the debt, but that discharge necessarily follows from the discharge of the liability of his principal (Webb v. Hewitt, 3 K.& J.,439). It was contended for the defendants that the complete discharge of the liability of Gillies's estate necessarily operated in law as a discharge of M'Innes. This construction would, of course, give no effect to the express words of the reservation in the release. The answer to the argument is that the parties did not agree to discharge the whole debt, but only the liability of Gillies's estate, which they treated as a distinct liability, separable (as indeed it was in equity) from that of M'Innes. If the equity of redemption had remained in the mortgagors, and Gillies's share in it had been transferred to the mortgagees in consideration of the release, there is, I think, no room for doubt that the effect of the transaction would, even without an express reservation of rights against the co-mortgagor, have been the same as that which I think the parties intended in this case. And I do not think that the circumstance that the interest of Gillies's executors was confined to a possible and limited right of recourse to surplus proceeds of the land makes any difference. This being the intention of the parties, as I collect from their written agreements, and knowing of no rule of law which prevents me from giving effect to it, I am of opinion that the defendant has no answer to the action so far as regards half the debt due on May 9, 1894, but that his liability as surety for Gillies in respect of the other half is discharged. It was further contended that the defendant is entitled to contribution from Gillies's estate as surety in respect of anything that he may be called upon to pay. The right of a surety to contribution from a co-surety does not arise till the surety has paid more than his share of the debt (Ex parte Snowdon, 17 Ch.D. 44.) The same principle applies, I think, to co-debtors. And as defendant cannot be called upon to pay more than his share of the original joint debt, I think he has no claim for contribution from the third parties. The £750 paid by Gillies's executors must be attributed to Gillies's share of the joint debt. The other half of the debt subsisting on May 9, 1894, remained due by M'Innes. That half has been increased by interest since accrued, and after deducting the net amount of the moneys received by plaintiffs as mortgagees in possession, amounts to £5,715 7s. 3d., for which sum plaintiffs are entitled to judgment. Defendant admits assets to the amount of £5,000, which is not enough to satisfy the whole claim. Before giving formal judgment I will advert to the question of costs. I think that the third parties were properly brought in, and properly appeared to resist the claim, and that they must be considered as successful litigants, and entitled as such to their costs from the defendants, who brought them into the action. I think also that the action should be considered as an action in respect of two distinct claims, as to one of which plaintiffs succeed, while they fail as to the other. I think that the costs occasioned by defendants bringing in the third parties naturally flowed from the unfounded claim. I think, therefore, that plaintiffs are liable to pay to defendant his costs so far as they have been increased by the third party proceedings, including the costs to be paid by defendant to the third parties. The defendant may, therefore, deduct the amount of these costs from the amount of admitted assets. The plaintiffs will have judgment for £5,715 7s. 3d., and their costs of action except so far as they have been increased by the third party proceedings, and after setting off the costs which they are liable to pay to defendant. Of this amount the judgment will be against the defendant personally for the balance of the £5,000 after the deduction already mentioned, and judgment for the balance will be against M'Innes's assets quando acciderint. Defendant is, of course, entitled on payment of the debt to the benefit of one-half of the security. On the application of the Attorney-General, his Honour allowed the defendant out of the estate his costs not already provided for. Solicitors for plaintiff: Macpherson & Feez. |