Case Name: New York Life Insurance Company, Appellant, v. John Casey, Respondent, Impleaded with Others
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1904-04-26
Citations: 178 N.Y. 381
Docket Number: 
Parties: New York Life Insurance Company, Appellant, v. John Casey, Respondent, Impleaded with Others.
Judges: 
Reporter: New York Reports
Volume: 178
Pages: 381–391

Head Matter:
New York Life Insurance Company, Appellant, v. John Casey, Respondent, Impleaded with Others.
1. Mortgage — Acceptance of Interest in Advance Prima Facie, Mot Conclusive Evidence of Extension of Time of Payment. A valid extension of the time of payment of a bond and mortgage, such as will discharge one standing in the relation of surety for the payment of the mortgage debt, is not established as matter of law by the mere receipt from the grantee of the premises of interest three days in advance, where there is no other proof of an agreement, express or implied, for such extension, and two and a half days of the three were legal holidays.
3. Insufficiency of Evidence to Establish an Agreement for a Change in Rate of Interest Which Will Discharge Surety. While a valid agreement between the mortgagee and the grantee of the mortgaged premises to change the rate of interest, made without the knowledge or consent of the surety, would operate to discharge him, such an agreement is not established as a matter of law by proof that the mort ga gee directed an increase in the rate, which the grantee thereafter volun tarily paid and the mortgagee received for a short period, when the former rate was restored, in the absence of any other evidence establishing or tending to establish such an agreement.
2few Tork Life Ins. Go. v. Oasey, 81 App. Div. 93, reversed.
(Argued March 31, 1904;
decided April 26, 1904.)
Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered July Y, 1903, upon an order reversing as to the respondent herein a judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term.
This action was commenced to foreclose a mortgage, executed by the defendant, John Casey, to the plaintiff to secure the payment of his bond for the sum of $24,000, and cover-» ing certain real property situated in the city of New Tork. The bond was to become due on April 5th, 1902, and Lore interest at the rate of five per cent per annum, payable on the first days of January and July.
Casey conveyed the mortgaged premises, subject to the mortgage, to one Friedberg; who, in turn, conveyed them to one Nordenschild. In September, 1893, while Nordenschild was the owner of the property, the finance committee of the plaintiff directed that the rate of interest on the bond and mortgage should be increased to six per cent on and afte” October 1st, 1893. On December 29th, 1893, Nordenschild paid to the plaintiff the interest from July, 1893, to January 1st, 1894, at the rate of five per cent from July to October and at the rate of six per cent from October 1st to January 1st. It is admitted that the increase in the rate of interest and the payment of such increase were made without the knowledge or consent of the defendant Casey. It was,- also, admitted that the value of the mortgaged property in 1893 was equal to the amount of the mortgage and accrued interest. On December 15th, 1893, the rate of interest was ordered to be restored to the original rate of five per cent from January 1st, 1894.
The trial court found: “ That there was no agreement on the part of the plaintiff to change the rate of interest, or to extend the time of payment of the bond and mortgage, and that the fact that plaintiff accepted a different rate of interest than that provided in the bond and mortgage does not prove an agreement to change the rate of interest, and that no consideration for such an agreement was shown.” Judgment was directed in favor of the plaintiff and that judgment, on appeal to the Appellate Division in the first department, has been reversed as to the defendant Casey. The order of reversal being silent as to its grounds, the determination of that learned court must be presumed to have been upon the law, solely.
Andrew Hamilton for appellant.
The mere acceptance of interest three days before it was due did. not of itself constitute an extension of the mortgage thereby discharging the mortgagor on his bond. (Scott v. Stockwell, 65 How. Pr. 249 ; Mack v. Anderson, 66 N. Y. S. R. 836 ; Cary v. White, 52 N. Y. 142 ; Thayer v. King, 31 Hun, 437 ; M. L. Ins. Co. v. Davis, 12 J. & S. 172 ; Lowman v. Yates, 37 N. Y. 601 ; Vilas v. Jones, 10 Paige, 76 ; Draper v. Romeyn, 18 Barb. 166 ; Olmstead v. Latimer, 158 N. Y. 313 ; Powers v. Silberstein, 108 N. Y. 169 ; Schweppel v. Shaw, 3 N. Y. 446 ; Goldsmith v. Brown, 35 Barb. 484 ; M. Ins. Co. v. Hinman, 34 Barb. 410.) Assuming that Casey’s obligation could only be chargeable with interest at five per cent, even after the mortgage and his bond were past due, then the change in the race of interest was not made by a valid agreement of binding force and did not discharge him from his obligation on his bond. (Lowman v. Yates, 37 N. Y. 601 ; Reynolds v. Ward, 5 Wend. 502 ; Draper v. Romeyn, 18 Barb. 166 ; Mack v. Anderson, 66 N. Y. S. R. 836 ; M. L. Ins. Co. v. Stimpson, 28 App. Div. 544 ; Olmstead v. Latimer, 158 N. Y. 313 ; Thayer v. King, 31 Hun, 437 ; Cary v. White, 52 N. Y. 148 ; Sanford v. Story, 15 Misc. Rep. 536 ; Bank for Savings v. Webster, 1 Monthly Law Bull. 70.)
Jacob Steinhardt for respondent.
The undisputed evidence shows that a valid agreement had been entered into by the plaintiff, without the knowledge or consent of the defendant John Casey, increasing the rate of interest on the bond and mortgage from five per cent to six per cent. (Powers v. Silberstein, 108 N. Y. 169 ; Brooks v. Wright, 13 Allen, 72 ; Kane v. Cortesy, 100 N. Y. 132 ; Dodge v. Crandall, 30 N. Y. 294 ; Thomson v. Poor, 147 N. Y. 402 ; Antisdel v. Williamson, 37 App. Div. 167.) The defendant John Casey was discharged from all liability under his bond and mortgage by the valid agreement increasing the rate of interest from five per cent to six per cent, made without his knowledge or consent. (Antisdel v. Williamson, 165 N. Y. 372 ; Murray v. Marshall, 94 N. Y. 611 ; Spencer v. Spencer, 95 N. Y. 353 ; Page v. Krekey, 137 N. Y. 307 ; Paine v. Jones, 76 N. Y. 274 ; Livingston v. Moore, 15 App. Div. 15 ; Grant v. Smith, 46 N. Y. 93 ; Harsh v. Klepper, 28 Ohio St. 200 ; Bangs v. Strong, 7 Hill, 250 ; Ducker v. Rapp, 67 N. Y. 464.) The defendant Casey was. discharged from all liability under the bond and mortgage in suit by a valid agreement extending the time of the payment of the principal thereof, made without his knowledge or consent. (McNulty v. Hurd, 86 N. Y. 547; W. Bank v. Truesdell, 55 Barb. 602 ; Blake v. White, 1 Y. & C. 420 ; Crosby v. Wyatt, 10 N. H. 318 ; Warner v. Campbell, 26 Ill. 282 ; N. H. S. Bank v. Colcord, 15 N. H. 119 ; N. H. S. Bank v. Ela, 11 N. H. 335 ; People's Bank v. Pearsons, 30 Vt. 711 ; Hitchcock v. Frankelton, 116 Mich. 487 ; Hollingsworth v. Tomlinson, 108 N. C. 245.)

Opinion:
Gray, J.
This appeal presents the question whether the defendant, Casey, standing as surety for the payment of the mortgage debt, was discharged' from his liability upon liic bond by the transactions, which took place between the plaintiff and Uordenschild. If such was their effect, of course, a judgment for any deficiency arising upon a sale of the mortgaged premises could not be entered against him, as was the case here. The finding of fa,ct by the trial court was that there was no agreement on the part of the plaintiff to change the rate of interest upon, or to extend the time of payment of, the bond. With respect to so much of the question as turns upon the existence of any agreement by the plaintiff to extend the time of payment, I concur with what was said below by the dissenting justices, through Mr. Justice Ieobaham, and with what is said by Judge Webeee in his opinion, and I shall not continue that discussion. I agree with the view that there was, in the evidence, sufficient to sustain the finding that no such agreement was made out and, therefore, that it was error for the Appellate Division to reverse upon such a ground. But I am, also, of the opinion that the reversal by the court below cannot be sustained upon the other ground, that there was an agreement to change the rate of interest, whereby Casey's liability was discharged. The finding of fact is to the contrary and to affect its conclusiveness, upon this review by us of the order of the Appellate Division, we have nothing in the findings of the decision of the trial court, unless it be found in the language, that " the fact that plaintiff accepted a different rate of interest than that provided in the bond and mortgage does not prove an agreement to change the rate of interest." It is not pretended that there was any evidence of the making of such an agreement, other than in the action of the plaintiff's finance committee, in ordering an increase in the rate of interest, during the six months' interest period from July to January, to be paid from October 1st, and in the payment by the owner of the mortgaged property of the increased rate for the last three months of that interest period. Does that prove any agreement and, if it should be considered as tending to prove one, what sufficient consideration was there ? It is clear that an agreement, which was unenforceable for want of any consideration, would not discharge the surety. The plaintiff did not bind itself to do anything in consideration of receiving an increased interest and the defendant does not appear to have received any benefit. There were no mutual promises disclosed. If hiordenschild chose to pay more than the bond and mortgage obligated him to pay, in the way of interest, that would not discharge Casey; if there was no valid agreement changing the contractual obligation. The court is not to imply some agreement, merely because there was a consideration, upon which one might have rested. The agreement, which was to affect the principal contract, must be proved clearly. The plaintiff might have covenanted with Hordenschild to extend the time of payment, or might have granted some indulgence, upon such a consideration; but it did not do so and that is what the- trial court found as a fact. I- am quite unable to agree in the view that the action of the plaintiff's finance committee and the voluntary payment by the debtor, under the circumstances disclosed, furnished the facts for an inference of an agreement. The debtor "was not bound to pay at the increased rate for the three months of the interest period and he came under no apparent obligation to pay it thereafter. As matter of fact, the action of the finance committee appears to have been annulled and the fixed contract rate re-established for the ensuing interest period.
For the reasons stated, I think that the reversal of the judgment of the trial court was erroneous and I advise that the judgment of the Appellate Division should be reversed and that the judgment of the Special Term should be affirmed ; with costs to the appellant in this court and in the Appellate Division.