Case Name: Hale, respondent, v. Forbis, appellant
Court: Montana Supreme Court
Jurisdiction: Montana
Decision Date: 1879-01
Citations: 3 Mont. 395
Docket Number: 
Parties: Hale, respondent, v. Forbis, appellant.
Judges: Wade,' C. J., concurred.
Reporter: Montana Reports
Volume: 3
Pages: 395–409

Head Matter:
Hale, respondent, v. Forbis, appellant.
Surety on promissory note — release by extending time of payment — reduction of interest. A. and B. made a promissory note September 1, 1873, and promised to pay G. a certain sum nine months after date, with interest at the rate of two per centum per month. A. paid the interest until November 1, 1874, when he signed the following memorandum on the note : “ In consideration of further time being granted, I agree to pay one and one-half per cent interest per month on the within note until paid.” A. was adjudged a bankrupt in 1875. Upon the trial B. offered to prove that he was a surety upon the note, and that A. and C. entered into an agreement, without his knowledge, to extend the time for the payment of the note until the spring of 1875, and reduced' the rate of interest to one and one-half per cent per month. The court excluded tlie testimony, and entered judgment against Br Held, that there was no consideration for the extension of the time of the payment of the note hy 0., and that B.’s evidence did not establish a defense to the action.
Appeal from Third District, Lewis and Clarice County.
The action was tried before "Wade, C. J., with a jury.
WoolfolK & Bullard and E. W. & J. K. Toole, for appellant.
A valid contract between the principal and payee of a note extending the time of payment for any period, without the consent of the surety, will release him. The payee must keep in a condition to proceed on the note according to its terms. If he ties up his hands without the consent of the surety he releases him. 1 Story’s Eq. Jur., § 326; Edw. on Bills, *355, 572, 573 ; 2 Am. L. C. 308, 309 ; King v. Baldwin, 2 Johns. Oh. *560; Bangs v. Strong, 7 Hill, 250.
It is not necessary that the security appear on the face of the note as such, if payee knew he was so in fact. Edw. on Bills, *573; Suydam v. Westfall, 2 Nenio, 205 ; LaFarge v. Her ter, 3 id. 157; Chester v. Bank of Kingston, 16 N. Y. 336; M ’ Gee v. Prouty, 9 Mete. 547.
Bywaters did not promise to pay the same or a less rate of interest than he was already under a legal obligation to pay, and the cases cited by respondent are inapplicable. Respondent and Bywaters agreed to cancel the obligation of the note to pay interest at the rate of two per centum per month, before By waters agreed to pay interest at the rate of one and one-half per cent per month. Bywaters did not promise to pay what he was under legal obligation to pay, because this rate would have been ten per cent per annum. Bywaters made for forbearance by respondent a new promise to pay eight per cent per annum more than he was compelled to p'ay, and this was a good eopsideration for the extension of the time. The old note in this case was not in force when Bywaters made the new agreement. The authorities say, that in cases of novation, when the new obligation is substituted for the old one, which is canceled, a good consideration for forbearance is created. Bouv. L. H., “NovationTudor v. McLean, 1 B. Mo nr. 322; Ellis v. McGormick, 1 Hilt. 313; Bangs v. Strong, 7 Hill, 250; 10 Paige, 11; People v. Russell, 4 Wend. 570. Appellant was released bj novation.
Respondent extended tlie time and reduced the interest, and Bywaters agreed to keep the money until the spring of 1875, and pay interest at one and one-half per cent per month. This was an agreement to do something By waters was under no legal obligation to do. The agreement to keep the money for a specified time beyond the maturity of the note, at any rate of interest, furnished a valuable consideration for forbearance, and released the surety. 2 Am. L. C. (3d ed.) 308.
Respondent has sued on the new promise.
The agreement on the back of the note is not a voluntary reduction of interest’by respondent. It is signed by Bywaters and is his promise. Appellant never assented to this agreement of Bywaters.
The note sued on was joint. Hpon the death of Forbis, his estate was discharged in law and equity. Bradley v. Burwell, 3 Denio, 61; United States v. Price, 9 How. (U. S.) 92 : Getty v. Bmsse, 49 N. T. 385 ; Wood v. Fish, 63 id. 245.
Our statute making all contracts joint and several was not designed to prevent parties from making joint contracts, or alter their expressed intentions. If the statute is so construed as to make for these parties a contract they did not intend, and create a liability beyond the terms of the contract itself, it would impair the obligation of contracts and be unconstitutional and void. Story on Const., § 1385 et seg.
Chumasero & Chadwick, for respondent.
The agreement on the hack of the note is the one that must be considered by this court. The note bore interest at the rate of two per cent per month.after maturity. The agreement of By-waters is ■nudum pactum, without any consideration and for no definite time. Respondent could have sued on the note the day after the agreement was made, or Bywaters could have tendered the money and stopped the interest.
There was no consideration for Bywaters’ agreement. Reynolds v. Ward, 5 Wend. 501; Kellogg v. Olmsted, 25 N. Y. 189 ; Pa/rmélee v. Thompson, 45 id. 58; Abel v. Alexander, 45 Ind. 523; Ires v. Bosley, 35 Md. 262.
The authorities show that where the interest agreed to be paid is the same as the note would have drawn originally, or less, there is no consideration.
The agreement is void because there is no definite period of time for the extension of the time, and respondent could have commenced his action at once. 2 Pars, on Notes and Bills, 250 ; Oxford Bank v. Lewis, 8 Pick. 457 ; Blaekstone Bank v. Kill, 10 id. 132; Central Bank V. Willard, 17 id. 150; Shriver v. Lovejoy, 32 Cal. 574.

Opinion:
BláKE, J.
The respondent brings this action against the makers of the following promissory note :
" Helena, Mon., September 1, 1873.
" $745^%. Nine months after date, for value received, we promise to pay to the order of Robert 8. Hale the sum of seven hundred forty-five and dollars, negotiable and payable at his business house at the city of Helena, M. T., without default or discount, with two per cent interest per month from maturity until paid, both before and after judgment.
"E. E. BYWATERS,
" J. F. FORBIS."
The complaint alleges that the interest had been paid to November 1, 1874; and that the respondent then agreed that the rate of interest should be reduced to one and one-half per cent per month from November 1, 1874, until the payment of the note. During the pendency of this action, Bywaters was adjudged a bankrupt and his assignee paid, August 15, 1876, on account of the note, $246.55. The following memorandum was indorsed upon the note, November 1, 1874: "In consideration of further time being granted, I agree to pay one and' one-half per cent interest per month on the within note until paid.
"E. E. BYWATERS.
" November 1, 1874."
The answer of Forbis alleges that he signed the note as security for Bywaters; that the respondent and Bywaters agreed that the time for the payment of the note should be extended until the spring of 1S75 ; that the rate of interest should be reduced to one and one-half per cent per month from November 1, 1874, until the note should be paid ; that Bywaters then signed said memorandum ; that the note was canceled under this agreement; and that Forbis had no knowledge of this agreement for the extension of the time of payment, and never .consented to or ratified the same.
Jorbis died before the trial, and his administratrix, the appellant, was made a party defendant. Upon the trial she offered testimony tending to prove the allegations of the answer of Forbis, but the court excluded it. The jury were instructed that the agreement, which was indorsed upon the note, was void for want- of consideration, and its failure to fix a certain period of time for the payment of the note and interest; and that the appellant, or the estate of Forbis, had not been released from liability on the note. Judgment was entered on the verdict for Hale.
How were the rights of Forbis affected by the memorandum of Bywaters upon the note. This note was payable June 1, 1874, and the facts which are set forth in the answer of Forbis Occurred five months afterward. The written agreement does not extend the time of payment for a definite space of time, and does not restrict some rights of the parties to the note. As soon as it was signed, Bywaters and Forbis could tender the amount remaining unpaid on the note and demand its surrender or cancellation, and Hale, the payee, was not prohibited from commencing an action to enforce its payment. " To discharge the surety, the contract for new credit must be such as will prevent the holder of the note from bringing an action against the principal." Blackstone Bank v. Hill, 10 Pick. 129; Oxford Bank v. Lewis, 8 id. 458. " The .indulgence, to have the effect of discharging the surety, must be for a definite time." 1 Pars, on Notes and Bills, 240, and cases there cited; 2 Dank on Neg. Inst., § 1319.
W e think it is clear that the memorandum of By waters did not defeat the right of the respondent to maintain this action. But the appellant sought to introduce oral evidence tending to show that the time for the payment of the note was extended for a certain period. Although the agreement was written upon the back of the note, it is not an indorsement within the legal meaning of the term, and, therefore, is not subject to the same rules. The instrument, it is obvious, contains a part of the contract between the respondent and Bywaters, and the remainder may be supplied orally, so that the entire stipulation can be adjusted. " This is not constructing a new bargain, but authenticating and throwing light upon the old." 2 Pars, on Notes and Bills, 514. It was competent for the appellant to show that the words, "further time," expressed one portion of the agreement, and that the respondent promised to extend the time of payment until the spring of 1875. In Abel v. Alexander, 45 Ind. 523, the court holds that'the agreement of the holders of a promissory note to postpone the time for the payment of the principal sum "until the summer, " and afterward, "until the fall," could be made certain by oral evidence, and that the time was extended until June 1 and September 1.
The other question for our investigation relates to the consideration of the agreement of Bywaters and the respondent. By the terms of the note, Bywaters and Forbis promised to pay interest at the rate of two per cent per month until paid, " both before and after judgment." On November 1,1874, according to the agreement of Bywaters and the respondent. Bywaters promised to pay interest at the rate of one and one-half per cent per month "until paid." Most of the cases and authorities, to which our' attention has been invited, interpret contracts which were entered into by the parties before the note became due, and we are inclined to deny their applicability to the case at bar, in which the agreement was made five months after the note was payable. But waiving this consideration, and placing the appellant in the most favorable situation, we intend to assume, in our treatment of this subject, that Bywaters and the respondent entered into this contract on or about June 1, 1874. The following rule is undoubtedly sound. If there was a sufficient consideration for the prom ise of Bywaters, Forbis was released from liability on the note; and, if there was no consideration therefor, the rights of the parties have not been suspended.
Upon this matter the decisions are conflicting, and we desire to apply the best principle that can be found in the books. The classes of consideration, which appear in the reports, comprise promises to pay the same rate of interest which is mentioned in the note; or interest in .excess of that specified in the note ; or interest in advance for a certain time; or a certain sum in addition to the interest; and also promises to perform work or deliver goods besides the payment of the interest. In the limited number of authorities at our command we have not observed a case in which the maker and payee made an agreement for the payment of interest at a rate below that named in the note.
In Oxford Bank v. Lewis, 8 Pick. 458, a promissory note was signed by two persons, as the principals, and two sureties, and, after the note was overdue, the principals paid in advance the same rate of interest for sixty days. The court held that the receiving of this interest did not disable the owner and holder from bringing an action on the note at any time, and that the sureties were not discharged. The courts of Massachusetts have adhered to this doctrine.
In Reynolds v. Ward, 5 Wend. 501, it is held that a promise by the maker of a promissory note to pay the interest during the time the creditor did not enforce its collection forms no consideration for the agreement to enlarge the period for its payment when the debtor was compelled to pay the interest. In the opinion, Mr. Justice Maeoy says; "It was said on the argument that there was an obligatory act in this case by which the plaintiff was bound to delay ; that there was a consideration for the promise to forbear. What was that consideration ? The promise by Plumb (the maker) to pay interest on the debt so long as the plaintiff should delay. This was a promise to do precisely what he was bound to do without a promise. If the debtor's promise to pay interest creates no additional obligation, it is no consideration for a contract to delay." In support of these views the court refers to the following authorities; Pabodie v. King, 12 Johns. 426; Arundle Bank v. Goble, Chitty on Bills, 298, note; Philpot v. Briant, 4 Bing. 717. The case of Reynolds v. Ward, supra, is cited with approval by the supreme court of the United States in Creath v. Sims, 5 How. 192. In Kellogg v. Olmsted, 28 Barb. 96, the answer contained many allegations which are similar to those in the answer of Forbis. The court, by Mr. Justice MaeviN, says : " The debtor's promising to pay interest will be no more than the law will compel him to do, without the promise. If he agrees to pay more than the interest for the forbearance of the debt, the agreement will be void for usury." This case was affirmed by the court of appeals (25 N. Y. 189), and Mr. Justice SutheelaND refers to " the well-settled principle that an agreement by a creditor to postpone the payment of a debt due, until a future day certain, in consideration of no' other or further consideration than the agreement of the debtor to pay the debt with interest on that day, is void for want of consideration." In Parmelee v. Thompson, 45 N. Y. 58, Mr. Justice AlleN says: " If the only consideration for the promise of the creditor is the performance by the debtor, or a promise to perform some act which the latter is legally bound to perform, the promise is without consideration." The case of Clark v. Sickler, 64 N. Y. 231, is directly in point. Mott, the principal in a promissory note, " some time after the note was due, went to the holder with the. money to pay it, which the latter declined to receive, giving asa reason that he had no use for the money, and requested that Mott would keep it. Mott was then solvent, and afterward became insolvent." Sickler's intestate- signed the note as surety for Mott. The court held that these acts did not discharge the surety.
In Abel v. Alexander, supra, the authorities are reviewed, and the court holds that an agreement by the principal to continue to pay the same rate of interest specified in a promissory note, which- is higher than the legal rate, is not a sufficient consideration to sustain a promise to extend the time of payment, and that such an agreement does not discharge the surety. In Hunt v. Postlewait, 28 Iowa, 427, it is held that forbearance given to the principal in a promissory note after the same became due, upon the payment of the usurious interest originally agreed upon and accrued, was insufficient to release the surety. " Mere delay, even where the holder insists on interest, will not discharge the surety." 2 Danl. on Neg. Inst., § 1316. Prof. Parsons says that " wherever the holder's act does not amount to a binding agreement, as his receiving interest for a stipulated time after maturity, in short, whenever the holder has not disabled himself from suing the principal, the other parties to the paper are not discharged." 2 Pars, on Notes and Bills, 533, note d.
We do not deem it necessary to review the cases which state different rules from those that have been laid down. At the time when Bywaters entered into the contract with the respondent, he was bound to pay, under the statutes of the Territory, interest at the rate of two per cent per month during the time of forbearance, which has been defined. If this contract had provided for the payment of the same rate of interest, it would be without a sufficient consideration, and the surety would be discharged. We know of no legal reason for the omission to apply the same principle to the case at bar, in which Bywaters promised to pay a lower rate of interest than the law required. The agreement of Bywaters and the respondent; was nudum gaetum, but the respondent in the complaint does not demand interest in excess of the rate of one and one-half per cent per month, and the judgment is consistent therewith.
Wade,' C. J., concurred.