1934 Present: Garvin S.P.J. and Poyser J.

AMERESINGHE v. PERERA.

338-D. C. Negombo, 5,259.

Surety-Party to a mortgage bond-Partial loss of security through act of creditor-Surety's right to have his liability reduced.

Where a person has bound himself as surety under a mortgage bond and where, by the act of the creditor, a part of the securities hypothecated for the debt have been lost the surety is entitled to claim that his liability be reduced by the amount which might have been realized by the sale of the securities so lost.

APPEAL from a judgment of the District Judge of Negombo.

N. E. Weerasooria (with him Aluwihare), for second defendant, appellant.

C. V. Ranawake, for plaintiff, respondent.

Cur. adv. vult.

January 26, 1934. GARVIN S.P.J.-

By a bond bearing No. 5,612 dated July 18, 1928, the first defendant as principal and the second and third defendants as sureties bound themselves to pay to the plaintiff and one Cecilia Fernando or either of them the sum of Rs. 1,750 with interest at 13 1/2 per cent, per annum. For securing the payment of the said sum the first defendant in and by the said bond hypothecated three parcels of land. Interest was paid up to July 17, 1929, and on September 15,, 1930, a further sum of Rs. 300, being the proceeds of sale of two of the three aforesaid parcels of land released by the plaintiff for the purpose, was paid. The plaintiff then brought this action praying for judgment for the sum of Rs. 1,975 being principal and balance interest payable up to March 17, 1931.

The first defendant did not file answer. The second and third defendants however did file answer and pleaded that they as sureties were absolutely discharged from their obligations by the act of the plaintiff in releasing two out of three lands hypothecated by first defendant as security for the payment of the debt.

The learned District Judge gave judgment for the plaintiff as prayed for less a sum of Rs. 200 which represents the measure of relief to which the Judge thought the second and third defendants were entitled on what appeared to him to be the broad, equitable ground that the lands released being worth Rs. 500 and not Rs. 300, the plaintiff should not have released them in consideration of a payment of Rs. 300 to the prejudice of the sureties who, he thought, were entitled to ask that they should be credited with the full value of the security thus released.

The second defendant has appealed from this judgment.

It was urged in support of this appeal-

(a) that the second and third defendants were sureties and only liable as such and not as principles ;

(b) that they were discharged from their obligation as sureties when the plaintiff released the two parcels of land above referred to from the hypothecation and thereby disabled himself from ceding to them all his actions against the first defendant.

The first of these points does not present any great difficulty. The bond shows that the second and third defendants bound themselves in terms " as sureties hereto for further securing the payment of principal and interest, we hereby renouncing the benefits which sureties are legally entitled to and also without distinction as to debtor or surety ".

The passage is not well drafted but it is reasonably clear that though the second and third defendants bound themselves as sureties they renounced all the benefits appertaining to persons who become sureties so that there should be in the matter of the obligation created by the bond no distinction between the principal debtor and the sureties.

It is apparently in this view the District Judge held that the second and third defendants were in effect principal debtors on the bond.

Although the interpretation of the language employed discloses an intention on the part of the sureties to renounce all the benefits to which sureties are entitled, it is well settled that such a general renunciation i