"Where communication does take place between the creditor and the surety, the duty of the creditor cannot be better illustrated than by the case of the assured; but, in the case of an insurance, communication necessarily takes place between the assured, or his agent, which is the same thing, and the insurer, but such communication does not always take place between the creditor and the surety. The question arises, whether the party through whose instrumentality the guaranty or suretyship obligation is created is to be considered as the agent of the creditor, the party to be insured, and, therefore, affecting the principal; or, if not, how far the validity of his security is affected, if it shall have been obtained by fraud, or by misrepresentation or suppression; or, in other words, does a creditor entirely escape responsibility by desiring his debtor, or party contracting with him, to procure the suretyship contract, - the material fact known to both. In both cases it is difficult to see why the concealment is not a breach of trust, if the fact creditor declining, or, at all events, abstaining from communication with the surety? In this case the bill contains no statement leading to the conclusion that any communication took place between the plaintiffs and the defendant, except that, in regard to some of the bills, it is alleged that they were delivered or deposited by the defendant and Bowers with the plaintiffs. The answer contains no statement of any communication between the plaintiffs and the defendant, beyond the allegation that the defendant was once or twice at the banking-house, and that the managing clerk frequently visited her. It does not set forth what took place upon any of those occasions affirmatively; but it expressly denies that she was ever informed of Bowers's being indebted to the plaintiffs, or that any application was ever made to her, until 1849, upon the subject of the notes or bills, or of the debt owing to the plaintiffs. In Pidcock v. Bishop, 3 B. & C. 605, there does not appear to have been any communication between the creditor and the surety; and in that case the guaranty was held to be void, in consequence of the debtor having forborne to inform a surety of a condition in the contract between the creditor and the debtor, for the performance of which the surety became bound. The case of Pidcock v. Bishop was a distinct decision; but there is an obiter dictum of a different import in Stone v. Compton, 5 Bing. N. C. 142. In that case the suretyship contract was held void by reason of an alleged misrepresentation by the creditor to the surety, through his agent. But in the course of the judgment Tindal, C. J., said that ' a creditor was not responsible for the misrepresentation or non-communication of material circumstances by the debtor, where there is no communication between the creditor and the surety.' The present occasion does not call for the expression of an opinion upon this important question; and before the hearing, the case may be relieved of the question by the evidence which may be given in the cause. It is enough, therefore, to say, at present, that the facts, as they now stand, present a strong probability that the defendant was induced to undertake the responsibility, sought to be enforced against her, by misrepresentations, or suppression of the important circumstances in the case; and if that fact shall remain unaltered, a very serious question as to the legal effect of such fact upon the validity of the securities must arise at the hearing." This case was carried up to the House of Lords in 1854 (25 Eng. Law & Eq. 1; 4 H. L. C. 997), and the decision was confirmed, although the principal ground, that a creditor cannot give time to his principal debtor without discharging the surety, was not acquiesced in. Lord Cranworth says: "Without saying that in every case a creditor is bound to inquire under what circumstances his debtor has obtained the concurrence of a surety, it may safely be stated that if the dealings are such as fairly to lead a reasonable man to believe that fraud must have been used in order to obtain such concurrence, he is were so material that the guarantor, had he known it, would not have given the guaranty; but if such fact were bound to make inquiry, and cannot shelter himself under the plea that he was not called on to ask, and did not ask, any questions on the subject. In some cases wilful ignorance is not to be distinguished in its equitable consequences from knowledge. If a person abstain from inquiry because he sees that the result of inquiry will probably be to show that a transaction in which he is engaged is tainted with fraud, his want of knowledge of the fraud affords no excuse. Now, here, not only were the circumstances such (I take them, of course, solely from the answer) as made the inquiry natural, but they made the abstaining from inquiry unnatural." ..."I am aware that the grounds on which my opinion rests are not those, or not exclusively or mainly those, on which Lord Truro relied; he did not, indeed, refer to them; but obviously the main ground of the judgment now under appeal was that a creditor who has given time to his principal debtor cannot effectually reserve his right against the surety, or, at all events, that the nature of the deeds and transactions in this case prevented the plaintiffs from doing so.
"The view which I have taken of the facts here makes it unnecessary for me to go into this question; but I should be doing wrong if I did not state, with all deference to the very able judge whose decision is now under review, that I cannot participate in his doubt. So far as relates to the general question, it may possibly be that here the giving of the bond, and the very special nature of the arrangements, may have created difficulties taking this case out of the general rule; on this point I give no opinion; but that a general rule exists such as is contended for by the plaintiffs, I should, but for the high authority of the judgment now under appeal, have thought to be a matter beyond doubt. I should have thought, on principle as well as on authority, that it must be competent to a creditor to contract with his principal debtor to give him time, so far as he can lawfully and effectually do so without prejudicing his right against the surety; if he may do this by a contract in these express terms, the question in every case must be whether the contract, however worded, has not that meaning. I must, therefore, guard myself against being thought to acquiesce in the opinion that such a reservation against the sureties is not effectual." Stone v. Compton, 5 Bing. N. C. 142, was a case of positive misrepresentation.