paid on account of that draft and credited to the separate account, but there is no debit of the $200 draft. This system of accounting must have been known to McGuire, to whom the statements were rendered. There was no communication with Hutton respecting the accounts.

The other remark I have to make is, that the promissory notes or acceptances given by McGuire from time to time. were generally on account of the aggregate balance of the two accounts, that is to say, after July, 1877. Before that time they were on the old joint account. I refer to those notes which are shewn in the statements. There were others given by McGuire from time to time as he purchased goods, beginning on 3rd November, 1876, but these do not appear in the statements until he began to make default in his payments.

I say the notes, &c., were generally given on account of the aggregate balance, because there are two or three instances, shewn by the special statements to which I have alluded, in which he appears to have closed particular transactions by notes or acceptances on those special

accounts.

In the ordinary mode of giving the notes, no distinction was made between the two accounts. I believe there is no instance amongst these aggregate statements of the two accounts in which the notes were given for the exact balance. They appear to have been nearly always under the gross amount, in two or three cases being taken for exactly $100 short of it. I may have to speak more particularly of the way the notes were taken when I come to discuss the question of the discharge of Hutton. At present I merely wish to say that although the notes were often taken for irregular amounts, and nearly always for amounts which did not quite cover the debt, it is not in my opinion proper to call them accommodation notes. They are, in all the documents, said to be given or held on account of the debt. Take, for example, the statement of 8th November, 1878. After shewing the aggregate balance of $3,480.08, it continues thus:

Promissory notes to account, $3,145.67. "Nov. 1. By draft at thirty days, $150.

*

"Dear Sir-Please accept our draft on you for $150 on account of overdue balance. The premiums paid out for insurance, $70, please refund by special remittance."

I have been particular in thus referring to the character of the statements rendered, because a great deal of the argument before us on the question of the application of payments was based upon the analysis of the accounts.

I do not think it can be fairly said that the plaintiffs actually appropriated to the old account any payments beyond those for which the arbitrator has given credit to the defendants. On the contrary, I take the fair result of the documents to be that, so far as any action of the plaintiffs is concerned, the other payments have been appropriated to the new account. I do not think that anything turns on the difference between the two classes of statements which were rendered. If I am correct in understanding that nothing is definitely credited but what is paid in money, and that the memoranda respecting current notes, whether in the form of credits or in the form of mere memoranda, were neither meant by the plaintiffs nor understood by McGuire to be anything but memoranda, there is no room for the contention that any of the payments for which Hutton now claims credit were applied or intended to be applied by either the plaintiffs or McGuire on the old

account.

If the defendant Hutton can maintain the right he claims to have them so applied, it must be because the account of the old firm and the new account with McGuire were blended so as to form but one account, and not kept distinct as two separate debts. If the debts were kept distinct the plaintiffs would clearly be entitled to apply general payments to whichever account they pleased. But if they were blended into one account, the rule acted upon in Hooper v. Keay, L. R. 1 Q. B. D. 178, and other cases cited at the Bar following Clayton's case, 1 Mer. 172, will

apply, and the payments will be appropriated by law to the items of account in the order of their date. In the Court below Mr. Justice Cameron considered that a blending of the two accounts had taken place, and he rested that opinion upon grounds the force of which I feel. The union of the two accounts in the plaintiffs' books is a strong circumstance, but as it was not made known to the defendants it cannot be regarded as conclusive. In Hooper v. Keay Blackburn, J., said: "Had this account been only in the plaintiffs' ledger it would not have bound them; but they sent the copy to Keay." In this case no copy of the ledger account was sent, but in every account rendered the two debts were treated as distinct. The general statement of securities held on the gross amount due by McGuire cannot, for the reasons I have already given, be taken to neutralize the assertion which the same paper always contained, and which McGuire must have always assented to, that the plaintiffs regarded the two debts as retaining their separate existence. Therefore I cannot see my way to hold that the defendant Hutton has accomplished the task, the onus of which was upon him, of shewing that there was such a blending of the accounts as to bring the case in this respect within the rule acted upon in Hooper v. Keay.

But Hutton contends that, although he and McGuire were, at the time of the dissolution of their partnership, jointly liable as principal debtors for the balance then due, yet after that date they were principal and surety; and that the plaintiffs, by giving time to McGuire the principal debtor, have discharged Hutton the surety.

That such a change of relationship may, even at common law, take place, seems so evident that one would scarcely expect to find an express decision on the point. There is, however, a case of Rogers v. Maw, 4 D. & L. 66, in which, referring to circumstances not unlike those before us, but where the continuing partners had not covenanted in express terms with the outgoing partner to pay the debts, Pollock, C. B., remarked: "We have no doubt that the agreement of the two plaintiffs to take all the debts on

themselves, and to release the defendant from his liability as to the joint concern, amounted to a covenant to pay the debts, and that as between the plaintiffs and the defendant the defendant became surety only." See also Musson v. May, 3 Ves. & B. 194, where the plaintiff and the intestate who had been his partner had become as between themselves surety and principal, although the plaintiff remained legally liable to the creditor. That the new relation was in fact constituted is conclusively shewn by the deed of dissolution.

The plaintiffs did not agree to release Hutton and accept McGuire as their sole debtor. They were, however, fully acquainted with all the arrangements between the parties, the plaintiff Bell, if I apprehend the evidence correctly, having taken an active part in bringing them about. After the dissolution, I think they must be held to have recognized the fact that McGuire had become principal debtor and Hutton his surety, and to have sometimes dealt with them on that footing, notwithstanding that on one or two occasions they asserted the contrary.

Let us glance at the correspondence which is in evidence in connection with what can be gathered from the accounts:

On 3rd November, 1876, we find the following letter from the plaintiffs:

Dear Sirs,-As arranged when Mr. McGuire was here, we pass our drafts on you to cover notes due to-morrow as shewn in statement above.

Please accept when presented and oblige, dear Sir,

Yours truly

T. B. & B.

The drafts must have been accepted by McGuire, for we find them credited under date 30th November, in the ledger account. McGuire paid the one for $319.45. The other was retired by the plaintiffs and again debited in the ledger account. So far the old firm was treated as still in

existence.

Soon after this the plaintiffs appear to have drawn up a letter for Hutton to sign, agreeing to continue his responsibility upon renewals of the paper of McGuire & Hutton; but he would not sign the document. His refusal produced the following letter from the plaintiffs:

HAMILTON, ONT., 16th November, 1876. Mr. William Hutton, Wingham.

You

and

DEAR SIR, Mr. McGuire informs us that you refuse to sign the letter which we drew up for you, by which you agreed to continue your responsibility upon any renewals we might have to give of the existing paper of McGuire & Hutton. We cannot see what you are to gain by this. are responsible of course upon the existing paper, if we cannot get renewal of it, then we must proceed to collect. We have nothing to do with the arrangements that may exist between McGuire and yourself. We can proceed against either or both of you, so long as we hold the firm's signature for a dollar of indebtedness, and we shall do it, if you persist in your present course. We think you had better take advice in this matter. We are asking nothing unreasonable, but what, on the contrary, is to your interest as well as ours, if you look at it carefully. In any case let us know your final decision.

We are, dear sir, yours truly,

11-VOL. VII A.R.

THOMSON, BIRKETT & BELL.