Court Opinion

ID: 8504749
Source: CourtListenerOpinion
Date Created: 2022-11-23 01:26:01.443488+00
Date Added: 2024-06-11T16:50:50.274268
License: Public Domain

Parker, C. J.
We have repeatedly recognized the rule, originating in equity, but now generally held to be equally a rule at law, that a binding contract for farther delay of the time of payment, made between the creditor and the principal, without the assent of the surety, discharges the latter from the obligation of the contract; and it follows, almost as a matter of course, that we should, so far as we may consistently with the forms of proceedings at common law, apply other principles of equity which regulate the relation of principal and surety. 7 Johnson 337, People vs. Jansen. Among these, as we have had occasion to notice in other cases, is one which requires a creditor, who has an obligation, executed by principal and surety, and who has also a collateral security from the principal, to appropriate the avails of the security to the payment of the debt, or to hold it for the benefit of the surety, who, if he pay the debt, will be subrogated to the rights of the creditor. This being the duty of the creditor, if he surrenders such collateral security without the knowledge' of the surety, the latter will be discharged entirely, or pro tanto, according to the value of the security thus surrendered. 4 Vesey 824, Law vs. East-India Co.; 8 Pick. R. 122, Baker vs. Briggs; 1 Story's Eq, Ju., § 326; 9 Verm. R. 147, McCollum *123vs. Hinckley; 13 Verm. R. 315, Bank of Manchester vs. Bartlett; 8 Serg. § Rawle 457, Commonwealth vs. Vanderslice; 13 Serg. § Rawle 157, Lichtenthaler vs. Thompson. But if the surety assent to the surrender, it will not affect his liability.
In the present case, the note of Leighton was given up without the assent of the defendant, and, upon the principles above stated, he would be discharged to that extent, if there had been no subsequent transactions affecting his liability.
It is true that other sureties were added at the time to the note to the plaintiffs, in lieu of the collateral security which was surrendered. But this substitution could not preclude the defendant from availing himself of the discharge.
The additional security thus taken may or may not be as good or better than the note of Leighton, which was surrendered. But it is not a security of the same kind, and possibly might of itself be found objectionable, aside from the surrender. It introduces a new party to the contract itself, upon which the defendant was surety; and, if the defendant is not discharged thereby, would make him liable either as principal in relation to those wdio have thus become promisors upon the note without his assent, or as co-surety with them. If the new signers are to be regarded, as they appear upon the face of the note, as co-sureties with the sureties who originally signed it, then those original sureties might, on a failure of the principal, derive a benefit from an addition to the number of those who were to boar the loss. But the operation of that state of the case would be to make them liable to an action for contribution to those with whom they never consented to associate as sureties. If, on the other hand, those who thus signed as sureties upon the surrender of the Leighton note, are to be regarded as the sureties of all who signed it originally, it places the original sureties “ in communication” with the new ones in the character of principals ; a relation which was certainly new, and might not operate beneficially to them. It is not quite clear that the original sureties might not say, non in hcaefcadera venimus, and claim a discharge, because other sureties were added without their concurrence, aside from their claim to a discharge on account of the surrender *124of the Leighton note. But as the mere addition of other sureties is ordinarily for the benefit of those who are already liable, this may deserve farther consideration. It is not necessary to, settle it at this time.
The reception of the interest in advance, at several times, furnished evidence of a contract to delay, and there is no evidence of a reservation of a right to sue on any of those occasions. This also would have operated to discharge the defendant, if without his assent, and there had been no subsequent transaction to which he was a party. Crosby vs. Wyatt, 10 N. H. Rep. 818.
The defendant, however, cannot avail himself in this case of any of the principles which we have stated, because, on the 17th of April, 1840, in consideration of farther forbearance for the term of four months, he agreed along with others to be holden for the term of six years longer, unless the note should sooner be paid. If no one had been liable upon the note at that time, forbearance to prosecute a claim which had no legal foundation would not have constituted a sufficient consideration. 4 East 464, Jones vs. Ashburnham; 1 Bing. R. 164, West vs. Ashdown ; 2 Hall’s Sup. C. Rep. 266, Gould vs. Armstrong. But if the defendant and the other sureties might have claimed a discharge at this time, by reason of the previous proceedings, here is a good consideration for the promise to continue hable, because Brackett was not discharged, and the forbearance is to be granted to him as well as to the rest. It is not like a case of a new promise, or acknowledgment of liability, without any consideration; and we are of opinion that, in the absence of any fraudulent concealment, such new promise must be held to be binding, even if the parties had no actual knowledge of the previous transactions which operated to discharge him. Before he enters into a new agreement upon a new consideration, he should inquire, at the peril of being held thereby to have waived his right to insist upon the discharge, if he neglects the inquiry. This imposes no greater liability upon him than he would have assumed by a promise in writing to be holden for the debt in ¿consideration of forbearance to the maker, if he had not previ*125ously been held as surety. And, in the absence of fraudulent concealment, he cannot claim to stand in a better situation because he was originally surety, even if he had been discharged.
Again : If it were necessary to show that the defendant had knowledge of the previous surrender of the security, of the addition of the new sureties and of the contract for delay, in order to bind him by the new promise, there is sufficient evidence upon all these points to authorize a jury to find such knowledge. He had express notice of the addition of the new sureties, for their names are inserted in the new contract as signers of the note, and this should certainly put him upon inquiry how this happened. If he had made such inquiry, he must have learned that they were substituted instead of the Leighton note, which had been surrendered. The new promise not only contains the names of the new signers to the note, but specifies that $70 had been paid upon it. These things tend to show that the note was present at the time, or at least that those who signed the new promise had probably seen it after the new signatures were added, and before the last promise was made. And the case not only shows that along with the indorsements of the $70, under date of August 21, 1837, there was an indorsement of the interest up to the 17th of December following ; but it shows also that at the time of the new promise the interest was paid in advance, and that afterwards the defendant participated in such payments; all which furnishes evidence of his knowledge and assent to what had been done, and to that mode of transacting the business ; and if he had that knowledge, he would be bound by the new promise without any new consideration. 2 N. H. Rep. 340, Ladd vs. Kenney; 5 Ditto 378, Whitney vs Abbot; 12 Wheat. R. 183, Thornton vs. Wynn; 12 Mass. R. 52, Hopkins vs. Liswell; 8 Pick. R. 1, Martin vs. Ingersoll; 17 Pick. R. 332, Creamer vs. Perry; 2 Swanst. 185.
Without knowledge and without a new consideration, the new promise would not be obligatory. 7 N. H. Rep. 271, Farrington vs. Brown; 10 Ditto 359, Woodman vs. Eastman ; [12 Ditto 320, Merr. Co. Bank vs. Brown;] 1 Bing. 164, West vs. Ash-*126down; 1 D. § E. 712, Goodall vs. Dolley; Pitman on Principal § Surety 166.
There is not only all this evidence, tending to show a knowledge of the real state of the facts, but there is no evidence whatever of any concealment on the part of the plaintiffs. There is nothing, therefore, on which to leave a question of fraud to the jury. For these reasons there must be a

New trial.