Case ID: tex_8/html/0034-01.html
Source: Caselaw Access Project
Author: {"author": "Wheeler, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Burke and others v. Cruger and Moore.
    (STote 16.)
    Whatever diversity of opinion there may have been ujDon the question whether a party who lias signed a jointand several bond or other specialty with another can, at law, and as against tho obligee, aver and prove that he was but surety where lie appears upon the instrument as principal; that he may do so in equity is well settled; so here he may do so for tho purpose of availing himself of any equitable defense to which as a surety he may be entitled.
    If the creditor, without the knowledge and consent of the surety, expressly or tacitly yielded, give time to the principal by a valid and binding agreement enlarging the credit beyond the period mentioned in the contract, the surety will be discharged, both in law and equity; but. the mere giving of time, without a binding agreement to that effect, will not discharge tho surety. (Note 17.)
    The taking of a merely collateral security, as, for example, a mortgage, will not extinguish tiie original debt nor suspend the remedy upon it, and the time when the new security becomes due does not vary tne effect and operation of it upon the old, and therefore the taking of such a new security, without stipulating that it shall extinguish the original or suspend the remedy upon it, will not release the surety.
    In order to discharge a surety in consequence of the variation of a contract or a deprivation of his equitable rights and remedies, not only the fact of suretyship must exist, but it must be known to the creditor at the time of the act complained of. If the fact appears on the face of the security, that is enough; if not. the knowledge of it must be brought home to the creditor by tho surety clearly and satisfactorily, because, as all parties appear upon the instrument as principals, it is deceptive and calculated to mislead. The surely, therefore, should bo holden to strict proof.
    The court said: The defendant Metrown not having appealed, and standing in the undisputed character of a principal debtor, wo see no reason for disturbing tho judgment as to him; but. because tho court erred in excluding the evidence offered by tho other defendants, the judgment as to them is reversed and the cause remanded for further proceedings.
    Appeal from Harris. The appellees ancl the appellants, jointly with Andrew J. McGown, in April, 1851, on a contract under seal, which contained, among others, the following stipulations, viz, that the party of the first part, Crnger and Moore, should print a weekly religious paper, to contain editorial and other matter, which Andrew J. McGown, alitor and proprietor,” should furnish; in consideration of which the party of (he second part, the said Mc-Gown, Burke, Bailey, and Bagley, were to pay at tho rate of $900 a year in quarterly payments. The contract was signed by all the parlies as principals, and bears date the ü9th day of May, 1S4-7.
    The defense mainly relied on by Burke, Bailey, and Bagley was, that they executed the contract as sureties for McGown ; that the plaintiffs, knowing this, had, without their knowledge or consent, given an extension of the time of payment to McGown, and that they were thereby released from their obligation.
    The, defendant McGown made no defense.
    On the trial the other defendants offered to prove, by the, production of certain accounts and by the testimony of a witness, that they were but sureties to McGown in the contract, and they offered in evidence a mortgage upon land, given by McGown to the plaintiff's on the 4th day of December, 1849, containing a power to sell in case of the non-payment of the sum intended to be secured, and a condition of defeasance as follows : ‘‘That if the said party of the first part pay to the said parties of the second part the balance due for the publication of the ‘Texas Presbyterian ’ within two years from date, and the stun of thirteen hundred and fifty-four dollars and ninety-six cents, witli interest at the rate, of ten per cent, from date until paid, unto the said party of t he second part, then these presents or writing obligatory to be null and void.” The evidence offered was objected to by the plaintiffs, and excluded by the court on the ground that, having executed the contract as principals, it was not competent for the defendants to prove that they were sureties for the purpose, of letting in the defense that the plaintiffs had, by giving time to their principal, released them from their obligation.
    Tt was in proof that the work was concluded under the contract about the 4th of March. 1849. There was a verdict for the plaintiffs, and judgment rendered against all the defendants, and those of them who had pleaded to the action appealed.
    
      
      E. A. Palmer, for appellants.
    
      O. B. Sabin, for appellees.
   Wheeler, J.

The principal inquiry is, whether parol evidence was admissible to prove that the defendants, who pleaded to the action, executed the contract as sureties; and if so, whether the evidence offered conduced to prove that the plaintiffs had given an extension of time to the principal by which the sureties were discharged from their undertaking-.

Whatever diversity of opinion there may have been upon the, question whether a party who has signed a joint and several bond or other specialty with another, can at law, and as against the obligee, aver and prove that he was but surety where ho appears as principal upon the instrument, that he may do so iii equity appears to bo well settled. (2 Phil. Ev., 303, n. 299, and cases cited, 3d edit.)

In a court of equity parol evidence is always admissible to prove the relationship subsisting between the joint contractors, whatever the form of the instrument, for equity does not regard the form of the instrument. “ I take the principle to be” (said Johnson, J., in giving the opinion of the court in Smith v. Tunno., 1 McCord R., 451) '‘that the relationship which subsists between the, joint, obligors is a matter wholly extrinsic of the written contract, and may therefore be proved by parol, without any violation of the, rule which prohibits the, introduction of parol evidence to contradict or vary a written agreement.” '

' It is immaterial what may be the form of the instrument, whether a simple contract in writing or a specialty, and though all appear upon the instrument as principals in equity parol evidence, is admissible to prove that, one or more of the joint makers or co-obligors signed the instrument in the character of surety. “In equity paról evidence is admissible to show who is principal and who surety.” (Burge on Suretyship, p. 212, 1st Am. ed.; 3 Texas R., 215.)

It is also perfectly well settled that '‘if the creditor, without the knowledge and consent of the surety, expressly or tacitly yielded, give time to the principal by enlarging the credit beyond the period mentioned in the contract, the surety is discharged both in equity and at law.” (3 Wash. C. C. R., 75.)

The law on this subject is thus stated by Mr. Justice Nelson in Gahn v. Niemcewicz, (11 Wend. R., 312:) ‘‘The principle is well established that giving tune by a valid and binding agreement by the creditor to the debtor, u it bout the assent of the surety, operates to discharge him both at law and in equity. The reason of the principle, is that the contract, between the parties is varied and the risks of the surety enhanced.” &c. (Id., 317.) “The doctrine is” (said Chancellor Kent in Ring v. Baldwin) “that the surety is bound by the terms of his contract, and if the creditor, by agreement with the principal debtor, without, the concurrence of the, surety, varies these terms by enlarging the time of performance, the surety is discharged, for he is injured and his risk is increased.” (2 John. Ch. R.. 559.) And even though it be, shown that the extension of time lias worked no injury to the surety, the effect upon his liability is the same. (11 YVend.,-312.) It is the settled doctrine, both at law and in equity, that a surety is not, to be held liable beyond the precise terms of his contract. The creditor has no right to increase his risk without his consent, and cannot therefore vary the original contract, for that might vary the risk. (2 Caine’s Ca. in Err., 57; 5 Wend. R., 503.)

It clearly was the right of the defendants to prove by parol or other evidence that (hey were hut sureties and McGown the principal debtor, and that the plaintiffs knowing this, by a valid agreement gave to the latter without their assent an extension of time beyond that, stipulated in their contract.

The only question of difficulty in the case is whether the evidence offered, if admitted, would have established an agreement to give time, obligatory upon the plaintiffs, and by which their right of action upon (his contract was suspended. If so, and t lie defendants can prove that they were sureties, they were ‘ thereby discharged. But ii there was not such an agreement, the mere giving of time would not operate to discharge the sureties.

In Ring v. Baldwin, before cited, Chancellor Kent said:

“The established doctrine is that mere delay in calling on the principal will not discharge the surety, provided that delay be unaccompanied with any settled or binding contract for that purpose.”

“All the cases of relief of surety have gone upon the ground that time was given to the principal by contract without consent of the surety.” (2 Johns. Ch. R., 559.)

In Reynolds v. Ward the court said : “ The principle to be extracted from the case is that the creditor cannot vary the terms of the contract so as to increase the risk of the surety without discharging him, but the terms are not varied by mere indulgence. To discharge tiie surety it would seem to be necessary that there should be. some agreement by which the plaintiff’s right to prosecute and enforce the fulfillment of the contract is suspended.” (5 Wend. R., 504.)

What is the giving of time within the meaning of the rule is thus explained by Ch. J. Gibbs in Orne v. Young, Holt’s N. P. Rep., 84, cited in 15 Johns. R., 455 u. a. lie said: “What is forbearance and giving time? It is an engagement which t ies the hands of the creditor. It is not negatively refraining, not exacting the money at the time ; but it is the act of tiie creditor, depriving himself of tiie power of suing by something obligatory, which prevents the surety from coming info a court of equity for relief, because the principal having tied his own hands, the surety cannot release them.”

The authorities seem fully to have established the doctrine that there must be an agreement upon a sufficient consideration, and binding upon tiie creditor, to give time, in order to discharge the surety, unless some other circumstance (han a mere indulgence to the"debtor be shown. (15 Johns. R., 433; 13 Id., 174; 6 Sm. & Marsh, 24; 3 Id., 647; 4 Blackf. R., 241; 5 Id., 367 ; 1 Gall. R., 32.)

Tiie question in the present case is whether there was any giving of time by the plaintiffs within the sense and meaning of this exposition of' tiie rule, or whether there was any

agreement by them to give time in eonside.rasion of the additional security.

If there was, it evidently was not observed by tiie plaintiffs. On the contrary, they acted as ii no such agreement existed, for they brought suit long before the period had elapsed to which, it is alleged, the time was extended.

If the giving of tiie mortgage by MeGown was merely voluntary, for the better security of his creditors, and not in consideration of any promise or agreement on their part to give an extension of time on tiie debt due upon this contract, or, if it was given upon some other or different consideration, it could not operate to discharge the defendants of their undertaking as his sureties.

In the ease of Gahii v. "Niemeewicz, before cited, Mr. Justice Nelson said : “It is weii settled that merely taking a new security from the debtor without agreeing to give time will not discharge the surety.” (11 Wend. R., 320, and eases cited.) The learned judge cited several cases in which it liad been held that tiie taking of mere collateral security did not amount to giving time or release the security upon (he original contract, and adds: “The time when the new security becomes due do/'s not vary the effect and operation of it upon the old, as abundantly appears from the above cases. AH of them became due or could not lie, enforced until some time after they were taken ; but this circumstance implied no agreement to postpone the remedy upon the old security. These cases all turned upon the point that no agreement had been made to forbear, in consideration of the new security, at the time it was received. and that the mere receipt of it did not imply one.” (Id., 321-2.)

The taking of a collateral security, though of a higher nature, whether from the principal debtor or a stranger, does not preclude the creditor from suing upon the first contract, and, consequently, does not discharge the sureties upon it. If the original debt is not merged or extinguished by such higher security, but remains unsatisfied, it operates no discharge of the surety. (14 Johns. R., 404.) A mortgage is not a satisfaction, but is a seonrity for the payment of a debt. (3 Tex. R., 6, and authorities cited.) It does not merge or extinguish the original debt, but is a merely collateral security. (Id.)

Note 10.* — Ramo case, 11 T., 001.

Note J7. — Crugor v. Burko, 11 T., G94; Payne v. Powell, 14 T, 000; Iinapp v. Kills, 20 T.> 123: Wybrantsv. Dutch. 2t T., 309; Pilgrim v. Dykes, 24 T , 3S3; Hunter v. Clarke, 28 T., 139; Bob-errs v. Barn, 32 T., 383; Bussell v. Killer, 40 T., 501; Claiborne v. Birgo, 42 T., 08.

The taking of the mortgage in this ease, therefore, did not operate as an extinguishment of the debt, or it would seem as a suspension of the remedy, unless there was an express agreement to that effect. (11 Wend. R., 321.)

“In order to discharge a surety in consequence of the variation of a coutract, ora deprivation of his equitable rights and remedies, uot only the fact of surety-ship must exist, but it must bo known to the creditors at tho time of the act complained of. If the fact appears on the face of the security, that is enough; if not, tiie knowledge of it must be brought home to the creditors by the surety clearly and satisfactorily, because, as all parties appear upon the'iustrnmeut as principals, it is deceptive and calculated to mislead. The surety, therefore, should be holden to strict proof.” (Id.)

The principie involved in the present inquiry ig important, not only in its influence upon the rights of the parties in the present ease, hut as matter of law for the government of future eases; and as all the evidence proposed on this subject was excluded, we deem it proper to abstain from the expression of any decided opinion as to the effect of the evidence offered liad it been admitted. If the court had not excluded the evidence proposed there would, perhaps, have been other evidence introduced by the parties which would have placed the whole transaction in a clear point if view before the court and jury, and would have relieved the, questions in the case from the embarrassment which now attends their investigation. When the caso shall have been remanded the opportunity will bo afforded to the parties to introduce all the evidence, in their possession going to show tho real facts of tho case, both iu respect to the alleged suretyship of the defendants and tho extension of time. The court will then be enabled to apply the law to the ascertained facts of tho case; and it will suffice for tho present to have extracted from tho authorities the general principles applicable to the subject.

The defendant UcGowu not having appealed and standing in the undisputed character of a principal debtor, we see no reason for disturbing tho judgment as to him.

But because the court erred in excluding the evidence offered by the other defendants, the judgment as to them is reversed and the cause remauded for further proceedings'.

Judgment reversed.