Case ID: mass_25/html/0235-01.html
Source: Caselaw Access Project
Author: {"author": "Wilde J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Thomas H. Perkins et al. versus Robert H. Gilman.
    A covenant by the payee of a promissory note not to sue the maker within a limited, time, cannot be pleaded in bar to an action brought within the time by a person to whom the note was indorsed after it became due.
    Assumpsit. The action was brought on the 24th of July, 1826, the service being by an attachment of the defendant’s interest in certain real estate.
    The sixth count was upon a promissory note dated at New York, March 26th, 1825, for 787 dollars and 50 cents, payable in six months to T. G. & W. F. Cary, and by them indorsed to the plaintiffs.
    The defendant pleaded, that after the making of the note and before it was indorsed to the plaintiffs, viz. on the 15th of October, 1825, T. G. & W. F. Cary, by a letter of license of that date signed with the partnership name by T. G. Cary, and sealed with his seal, in consideration of the defendant’s inability to pay his debts, agreed to give him one year from that date to arrange his affairs and collect his debts, and engaged not to attach his goods nor sue or molest him in the mean time; that T. G. & W. F. Cary were at that time the holders of the note, and that they had no other demand against the defendant ; and that within the year given by the letter of license, viz. on the 20th of July, 1826, they indorsed the note to the plaintiffs, who afterwards within the year commenced the present suit.
    
      June 9th.
    
    
      June 27th.
    
    To this there was a general demurrer.
    By the other pleadings it appeared, that the note was given by the defendant upon the purchase of goods consigned by the plaintiffs to T. G. & W. F. Cary, commission merchants at New York, for sale ; but the defendant alleges that he did not know, before the letter of license was executed, that the goods belonged to the plaintiffs.
    
      W. H. Gardiner,
    admitted that the same defence might be made against the plaintiffs as against the payees of the note, but he contended that a covenant not to sue within a limited time could not be pleaded in bar to the note. Harrison v. Close, 2 Johns. R. 448; Cuyler v. Cuyler, ibid. 186; Bac. Abr. Covenant, L, and Release, A 2; Deux v. Jeffries, Cro. Eliz. 352; 2 Wms’s Saund. 48a, note; Davey v. Prendergrass, 2 Chit. Rep. 342; Chandler v. Herrick, 19 Johns. R. 134; Gibson v. Gibson, 15 Mass. R. 112.
    
      S. Hubbard and W. J. Hubbard, contra,
    
    said the defendant could have no remedy on the covenant; not against the plaintiffs, because they were not parties to it ; nor against the payees, because they did not bring this action ; so that if this plea is not sustained, the defendant is without remedy. The letter of license is a contract, not merely between a creditor and the debtor, but virtually between all .the creditors who signed it ; and if one creditor recovers his whole debt, all the others are injured.
   Wilde J.

delivered the opinion of the Court. It is a well settled principle, that a covenant never to sue an existing demand is equivalent to a release ; not that such a covenant is in fact a release, but it is allowed so to operate, to avoid circuity of action. But a covenant not to sue for a limited time does not operate as a release, nor can it be pleaded in bar in an action upon an obligation or other demand. Bac. Abr. Covenant, L; Ayloffe v. Scrimpshire, Carth. 64; S. C. 1 Show. 46 ; S. C. 2 Salk. 573; 2 Saund. 48, in notis; Gibson v. Gibson, 15 Mass. R. 112. And in an action of assumpsit, a paroi agreement not to sue has a similar operation, and for the same reason. Dow v. Tuttle, 4 Mass. R. 414. But if there is a covenant or agreement not to sue within a limited time, and a stipulation that the demand shall be forfeited if sued within the time limited, such an agreement not to sue and stipulation of forfeiture, may be pleaded in bar of an action on the demand brought within the period of limitation ; because such a stipulation is considered as an agreement for liquidated damages commensurate to the amount of the demand ; whereas, without such stipulation, the-damages to be recovered for the violation of an agreement not to sue, are not to be measured by the amount of the debt or demand, but may be more or less, according to circumstances. White v. Dinghy, 4 Mass. R. 433.

According to these principles, the plea in bar to the sixth count would be bad if the action had been brought in the names of the original promisees, and a fortiori in an action in the name of a boni fide indorsee. The letter of license or agreement not to sue, was made by T. G. & W. F. Cary, without any authority from the plaintiffs, so that no action would lie against the plaintiffs on that agreement. The defendant’s remedy for the violation of that agreement, is by action against T. G. & W. F. Cary, and the principle adopted to avoid circuity of action is not applicable.

If an obligee gives a release to one of several obligors, all the obligors are thereby discharged ; yet if the obligee covenants not to sue one of several obligors, it will not operate so as to discharge the other obligors, for the covenant is not a release ■*-" its nature, but only by construction, to avoid circuity of action.

We are therefore of opinion, that the plaintiffs are well entitled to judgment on the sixth count; and the other pleadings are immaterial. 
      
       See Clopper v Union Bank of Maryland, 7 Har. & Johns. 92; Hoffman v. Brown, 1 Halsted, 429; Fullam v. Valentine, 11 Pick. 159; Winnans v. Huston, 6 Wendell, 471.
     
      
       See Lane v. Owings, 3 Bibb, 247; Shed v Peirce, 17 Mass. R. 623-Walker v. M‘Culloch, 4 Greenleaf, 421.