(i) 3 App. Cas. 1004, 1026 ; 48 L. J. (Ch.) 179, 189. This case affirmed In re British Farmers' Pure Linseed Cake Co., 7 Ch. D. 533; 47 L. J. (Ch.) 415, where the C. A. held that a company having issued certificates that certain shares were fully paid up, were afterwards estopped, as was also the liquidator of the company, from showing that nothing had been paid, as against a purchaser for value without notice of any irregularity.
The next peculiarity in a contract by deed is its effect in creating a merger. This happens when an engagement has been made by way of simple contract, that is, by words in writing not under seal, and afterwards the very same (k) engagement is entered into between the same parties by a deed. When this happens, the simple contract is merged, lost, sunk, as it were, and swallowed up in that under seal, and becomes totally extinguished (/). Suppose, for instance, I give my creditor a promissory note for £50, and then a bond for the same demand, the note is lost, swallowed up in the bond, and becomes totally extinct and useless (m). Or, if a devisee, in trust to sell lands and pay debts of the devisor out of the proceeds, borrow money for *that purpose, and by indenture between him and the lender charges the land with the amount, and covenants to pay the money borrowed out of such money as shall come to his hands as such trustee, the claim of the lender is upon the covenant, and the simple contract which arose from the borrowing is sunk in the special agreement (n). But the engagement by deed must be so completely identical with that by the simple contract, that the remedy upon the deed must be coextensive with the remedy upon the simple contract, else there is no merger (o).1 Thus, where a banker takes quent one, but not by merger, which works a dissolution not of the debt, but of the original security, whose existence sinks into that of the succeeding one, and for that purpose the union must be so intimate that the one cannot be separated from the other. In a case of merger, therefore, the debt is the same, though the old evidence of it melts into the new one, and the creditor merely gains a higher security without having an indivisible debt of different degrees, but such a result is not obtained where the debt is compounded of new responsibilities, as it must be where all the parties were not originally bound. When the debtor is bound with a stranger, or for a different sum, his responsibility is changed in more respects than the quality of the security. The difference, on the whole, consists in this, that in a case of merger there is a change only of the security; but, in a case of satisfaction by substitution, there is a change of the debt."
(k) See Yates v. Aston, 4 Q. B. (45 E. C. L. R.) 182.
(I) Price v. Moulton, 20 L. J. (C. B.) 102; 10 C. B. (70 E. C. L. R.) 561.
(m) Bayley on Bills, 6th edition, 334.
(n) Matthew v. Blackmore, 26 L. J. (Ex.) 150; 1 H. & N. 76.
Barb. 208; Ridgway v. Morrison, 28 Ind. 201; Moore v. Bowman, 47 N. H. 494; Darrah v, Bryant, 56 Pa. St. 69; Young v. Foute, 43 111. 33; M'Cabe v, Raney, 32 Ind. 309-s.
(o) Ansell v. Baker, 15 Q. B. (69 E .C. L. R.) 20. See Boaler v. Mayor, 34 L. J. (C. P.) 230.
1 Curson v. Monteiro, 2 Johns. 308; Bray v. Bates, 9 Mete. 250; and see passim the notes to Cumber v. Wane, in 1 Smith's Lead. Cas. The operation of this principle of law, and the distinction between a merger and a satisfaction of a debt, have been thus ably pointed out by Gibson, C. J., in Jones v. Johnson, 3 W. & S. 277: "There is a substantial distinction, which I have not seen particularly noticed, between cases of extinguishment by merger of the security, and cases of extinguishment by satisfaction of the debt. These classes, though depending on different principles, have usually been confounded, and hence a perceptible want of precision in the language of those who have written or spoken of them. In the first of them the original security is extinguished, but the debt remains: in the second, the debt as well as the security is extinguished by the acceptance of another debt in payment of it. Extinguishment by merger takes place between debts of different degrees, the lower being lost in the higher, and, being by act of law, it is dependent on no particular intention; extinguishment by satisfaction takes place indifferently betwen securities of the same degree or of different degrees, and, being by act of the parties, it is the creature of their will. No expression of intention would control the law which prohibits distinct securities of different degrees for the same debt; for no agreement would prevent an obligation from merging in a judgment on it, or passing in rem judicalam. Neither would an agreement, however explicit, prevent a promissory note from merging in a bond given for the same debt by the same debtor; for, to allow a debt to be, at the same time, of different degrees, and recoverable by a multiplicity of inconsistent remedies, would increase litigation, unsettle distinctions, and lead to embarrassment in the limitation of actions, and the distribution of assets. But as the existence of a promissory note as a concurrent security for a book debt produces no such consequences, it operates no extinguishment by act of the law; and it depends on the absent of the parties, tacit or explicit, whether the new evidence of the debt is accepted in discharge of the old one. It is true there are presumptions which operate even in cases of intention, as prima facie evidence on the one side or the other; for instance, that a bond given by a stranger after the debt incurred was accepted as collateral security. These, however, are legal presumptions of mere facts to be drawn by the jury under the direction of the court, and not, as in merger, presumptiones juris et dejure, which are so absolute that they cannot be rebutted.
"But, merger takes place only where the debt is one, and the parties to the securities are identical. Hence there is no extinguishment where a stranger gives bond for a simple contract debt, or confesses a judgment for a debt by specialty. In either case the original debt may be extinguished by the subsefrom a customer and a surety a bond for payment of all sums advanced, or to be advanced, to the customer, there is no merger, for the special contract differs from the simple in securing the payment of other and additional moneys, and also from another and additional person (p). So also when two out of three simple contract debtors gave a specialty security for the debt, it was held, that the simple contract liability was not merged in the specialty, and that an action lay on the simple contract (q).