This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 488.— A note was discounted by a bank on which were two joint promissors, one of the two, to the knowledge of the bank, having added his name as a surety for the other. At maturity the bank renewed the bill for the debtor, taking a note signed by himself alone, but retaining the original note as collateral security. This was done without notice to the guarantor. Is the latter released by this extension of time?
Answer.—The position of the parties in a case of this kind was fully discussed in the judgment of the Supreme Court of Canada in Gorman v. Dixon. The whole question involved in the present case is whether there was an understanding between the bank and the debtor that, notwithstanding the time given, the bank's claim against the surety was to be retained. The fact of the retention of the joint note seems to indicate this, and if such were the understanding, Smith would, under the ruling in the case referred to, still remain liable.