Case ID: ky_40/html/0322-01.html
Source: Caselaw Access Project
Author: {"author": "Chief Justice Robertson", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Tudor vs Goodloe.
    Chancery. Case 99.
    Error to the Madison Circuit.
    
      May 26.
    
      Principal and surety. Novation. Release.
    
    The case sLated.
    When there is no legal novation, actual fraud, or injurious surrender of lien, surely is not released by obligeegiving indulgence to principal.
   Chief Justice Robertson

delivered tlie Opinion of flie Court.

This is a suit in Chancery seeking the exoneration of a surety in a bond, on the ground that, after the debt became due, the creditor, without his knowledge, indulged the principal obligor upon his promise to pay twelve per cent, interest for the forbearance. The Circuit Court having decreed the relief sought by the bill, the only question we shall consider is, whether such indulgence released the surety in equity.

It is now well settled by a series of modern adjudications, in England and in this country that, when there has been no legal novation, or actual fraud, or injurious surrender of lien, the true principle of equity as to a surety’s exoneration in consequence of indulgence given by the creditor to the principal debtor, without the surety’s consent, express or implied, is, that the creditor had, by a valid contract, changed the'original attitude of the parties, by tying his own hands or otherwise obstructing the legal or equitable rights of the surety.

Obligation of surety by the eommonlaw, not accessorial and. consequential only; heis equally bound. _

It is Iris duty as well as that of principal to discharge the obligation when due. Simple forbearance by creditor whether from mere passiveness or in consequence of a void promise, does not interfere with, any of the rights of surety, & will not operate his exoneration.

According to the common law, the obligation of a surety is not, as under the civil code, merely accessorial and consequential, to be enforced or fulfilled only after a fruitless “discussion” of the principal obligor: but, so far as the obligee is concerned, the principal and surety, bound by the same agreement and at the same time, are equally liable, and it is the duty of each of them to discharge the obligation punctually. Hence there is, in such a case, no implied agreement that the obligee will coerce the principal promptly, or look to him alone in the first instance, or that he will not indulge him ex gratia. It is the surety’s duty to the obligee to discharge the obligation when it becomes due, and for his own security, it is his privilege to do so then or at any time afterwards, so as to be either subrogated to the rights of the creditor or enabled otherwise to proceed forthwith against the principal obligor; and he has an equitable right also to require the creditor to sue. If, by any new contract, made without his consent, he is denied any of his rights or obstructed in any of bis remedies, legal or equitable, his attitude having been thus essentially changed, in invitum, he is no longer bound by his contract.

But, as simple forbearance by the creditor, whether resulting from his mere passiveness or from a gratuitous or void promise to indulge, cannot have any such disabling effect on the surety, that alone will not entitle him to exoneration from his obligation. In such a case he can have no just ground for complaint, unless he had been fraudulently deluded by the creditor into false security; for he might have discharged the obligation and proceeded at once against his principal, or resorted to any other of his various remedies, without any obstruction or delay, interposed either by the creditor’s passiveness or by an agreement binding on none of the parties: Orme vs Yañcy, Holt’s N. P. C. 84; Philpol vs Bryant, 1 M. & P. 754; The Arundel Bank vs Goble, cited in a note to the 8th Ed. of Chitty on Bills; Sneed’s executors vs White, 3 J. J. Marsh. 525; McLemore vs Powell et al. 6 Cond. Repts. S. C. U. S. 636; Theobald on Surety, passim.

A promise by principal to pay usurious interest in future for forbearance is utterly void, and does not interfere with orsuspend any of the lights of the patties, and therefore does not operate to exonerate surety.

In Orme vs Yancy, Chief Justice Gibbs, speaking of a new contract which would discharge a surety, said, “it is “the act of the creditor depriving himself of the power “of sueing, by something obligatory, which prevents the “surety from coming into a Court of Equity for relief— “ because the principal having tied his own hands, the “surety cannot release them.”

In Philpot vs Bryant the Court of Common. Pleas of England decided that indulgence in consequence of an agreement between the holder and the executor of the acceptor of a bill, in consideration of her assumpsit to pay the debt out of her own pocket, did not release the drawer, because the new agreement was not enforcible; and in that case, Chief Justice Best said — “The time of “payment must be given by a contract that is binding on “the holder of the bill — a contract without consideration “is not binding on him; the delay of sueing is, under “such a contract, gratuitous; notwithstanding such con- “ tract he may proceed against the acceptor when he “pleases, or receive the amount of the bill from the “drawer or endorsers; as the drawer or endorsers are “not prevented from taking up the bill by such delay, “their liability is not discharged by it; to hold them discharged under such circumstances, would be to absolve “them from their engagements without any reason for so “doing.” And in McLemore vs Powell et al. the Supreme Court of the United States said — “in order to “produce such a result, (a surety’s release,) the agree“mentmust be one binding in law upon the parties and “have a sufficient consideration to support it: an agree“ment without consideration is utterly void and does not “suspend, for a moment, the rights of any of the parties.”

. The agreement in this case, for the future payment of usury, being prohibited by the statute, was “utterly void,” and therefore, did “not suspend for a moment, the rights of any of the parties.” And a promise to pay six per cent, which was no addition to what the law gave, would have been unavailing for want of a valuable consideration: Arundel Bank vs Goble, supra.

Turner for plaintiff: Owsleij for defendant.

It seems to us, therefore, to be a plain result from both principle and authority that, as the agreement for indulgence upon a void contract did not suspend any 'of the rights of the surety in this case, he is not, by the indulgence thus given, entitled to exoneration from, the obligation in which he bound himself with his principal to the obligee; and that, consequently, the Circuit Court erred in decreeing relief to him on that ground.

Decree reversed and cause remanded, with instructions to dissolve the injunction with damages, and dismiss the bill with costs.