Court Opinion

ID: 6637390
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:42:13.192844+00
Date Added: 2024-06-11T15:59:06.042373
License: Public Domain

KNOWLES, J.,
dissenting. I do not agree entirely with the opinion expressed by a majority of the court in this case, and will as briefly as I can express my views for dissenting therefrom.
In the following matters I agree with the majority of the court.
1. A joint maker of a promissory note may show by parol in an action thereon, if the holder knew the fact, that he was only a surety.
2. An agreement for a valid consideration, for an extension of time of payment thereof to a definite and certain period, will release a surety on such an obligation if he is not a party thereto.
*4043. Where the indorsement on the back of a note shows that there was an agreement to extend the time of the payment thereof it may be shown by parol to what time the extension was made, if it was for a definite period.
Upon the following propositions, I do not agree with the majority of the court. I hold that, an agreement to pay interest at a fixed rate, if payment of a note is extended to a definite period, is a good consideration therefor. •
I hold that the contract has been altered in this case, and if done without the consent of the surety, he was discharged from any liability thereon.
The principal ease cited to sustain the views of the court is. that of Reynolds v. Ward, 5 Wend. 501. In that case Ward was a surety for Plumb. Plumb, before the note became due, made an agreement with the payee thereof, Reynolds, to extend the time of the payment until such time as he, Reynolds, should build a house in Rochester, and then he was to pay principal and the interest due thereon. No rate of interest was fixed. The court held in that case that there was no consideration for the agreement to extend the time. It bases its opinion upon this reasoning. The payee of a note can consent or agree to forbear the collection of a note or the payment thereof. If there is no consideration for this agreement it is a nudum pactum. During this forbearance interest according to law will run on this note. If the agreement is only for legal interest the law gives this, and hence no consideration by virtue of this agreement does pass. The court says this case is not to be distinguished from that of the case of Pabodie v. King, 12 Johns. 426, or that of Fulton v. Mathews, 15 id. 433.
In the case of Pabodie v. King, the principal paid $50 on his debt and the payee agreed to extend the time. The court say there was no consideration for this agreement. The principal was owing this money and hence I am satisfied no consideration did pass for the agreement to extend the time. The authorities, however, are not unanimous in support of this decision. In the case of Fulton v. Mathews, the time of the payment of a note was extended by agreement and there was no pretense of any *405consideration for this agreement. 1 think most courts would be able to distinguish between these cases and that of Reynolds v. Ward. The court in this case failed to draw the distinction between interest which a person contracts to pay and that which the law awards. They do not depend upon the same rule. Parsons on Notes and Bills, 2d vol., 392, in-speaking of interest, says : “ "When expressed the words used by the parties determine their rights.53 Id. 394. “ Interest is to be considered as a part of the debt where it is expressed, for in such cases it enters into the understanding of the parties and it is declared by them to be a part of their bargain.35 Id., note p, on page 395, shows that interest when agreed upon is a part of the contract. Id. 394. £{ Where interest is not expressed by the parties but is given by the law here, it is certainly to be taken as damages for the non-payment.” Under our statute upon the subject of interest, and I suppose under most statutes, interest is only allowed by law after a demand is due, where there is no agreement therefor. This must be considered as damages provided by law for the non-payment of the same then. But when a person agrees to pay interest on a note or contract to pay money before the same becomes due then there must be some consideration for this agreement to pay interest, and it is usually use of money for a time. “ Interest is the compensation which is paid by the borrower of money to the lender for its use, and generally by a debtor to his creditor in recompense for his detention of the debt.55 Bouvier’s Law Diet., “ Interest.55 When a person then agrees to pay another interest for the use of money for a certain time, and there is an agreement on the part of the latter that the former shall have this time in which to use the money, there is certainly a contract and it is a valid contract. The interest is given for the use of the money for a definite time, and the promise to allow the use of the money for that time is a good consideration for the interest. In the case of Reynolds v. Ward there was a contract for the use of money for a certain time, or for a time that could have been rendered certain, and an agreement to pay interest for the use of that money for-that time. If that was not a valid contract I do not know what one is. Be*406cause the law would have given Reynolds the same interest as damages that he was to- receive by contract for the use of his money, should not induce a court to say such a contract was void. To hold thus would be to say that whenever a merchant should settle up an account with a customer, and find the amount due thereon, and then should take a promissory note payable in a certain time therefor, with legal interest, that such a note was a nudum pactum. The debt was due when the note was given; the interest is only just what the law would allow as damages for the non-payment of the debt from the time of settlement. The rule that a promise to pay the legal rate of interest is a good consideration for an agreement to extend the payment of an obligation for a reasonable time is supported by the cases of McComb v. Kittridge, 14 Ohio, 347; Blizer v. Bundy, 15 id. 57.
In quite a number of cases it is held that a contract to pay usurious interest is a sufficient consideration for an’ agreement to extend the time of the payment of an obligation. Kelly v. Gillespie, 12 Iowa, 55; Currelle v. Allen, 13 id. 289.
In the case of Rose v. Williams, 5 Kans. 483, it was held that the payment of interest in advance was a good consideration for an extension of the time of the payment of a promissory note. Other cases, however, maintain a different rule. The rule in Kansas, however, I think, the correct one, for the promise to pay interest is a good consideration for the use of money.
The reason, as I have said, which was assigned in the case of Reynolds v. Ward, for the holding that the promise to pay interest was no consideration for an extension of time of payment, was that the interest agreed upon was the same the law would have given for the forbearance to sue on the demand. No such reason, however, can be assigned in this case. The note Forbis signed bore two per cent per month interest. The law would imply, I suppose, at least I will take it for granted, that the note after due would bear two per cent per month interest. Certainly it would not imply that it bore one and one-half per cent per month interest. The contract in this case was that the note should, from November 1, 1874, until the following spring, bear one and one-half per cent per month interest, and the plaintiff, *407in consideration of that interest, agreed to extend the payment thereof for that time. That is what we must consider as proven. The reasoning in that case does not apply to this case. Here was an agreement for a different rate of interest from what the law would declare collectible without the agreement.
Hale and Bywaters made a new contract. The plaintiff recognizes this, for he brings his action, it is evident, on the contract as modified. The judgment in this case, it is evident, rests upon this new contract, and yet the reason given for sustaining it is, that it is not a valid contract. To show that this action is brought on the new contract, I have but to present the allegations of the complaint. First, the original promissory note is set forth, and an allegation that no part of the principal has been paid 5 then an allegation that the interest was paid until November 1, 1874; then this allegation: “ That on the said 1st day of November, 1874, the said plaintiff agreed with the said defendants to reduce the said rate of interest named in the said promissory note to one and one-half per cent per month from the day last aforesaid until the said note should be paid.”
The interest on the note is calculated in the allegation of the amount due at the rate of one and one-half per cent per month. The prayer in the complaint is for one and one-half per cent interest per month on the principal. There is no allegation that the note was, from that time, to bear two per cent per month. In fact, there is nothing that can be called an allegation that the defendants ever agreed to pay any other interest than one and one-half per cent per month, unless the copy of a promissory note should be treated as allegations of all it recites, which I do not think good pleading.
Again s The 'contract in this case has been changed. It is not the contract Forbis signed. In the answer of the defendant For-bis it is alleged that the change was made ; that he never signed this new contract; never consented to it or knew of its existence. And this, in his replication, the plaintiff does not deny, only that he did not agree to extend the time until spring. This Forbis offers to prove, and was not allowed to, and the ruling excluding this evidence is assigned as error.
*408“ When to a note already complete a memoranda is added, or words inserted varying the legal effect of its stipulations, the alteration is material.” 2 Pars, on Bills and Notes, 545.
‘ ‘ An indorsement on the back of a note may be a part and parcel of the original instrument.” Id.
There cannot be any,'doubt but that the indorsement on the back of this note became a part of the original note. It varied a stipulation therein, in regard to interest. From November 1st, 1814, up to this time, that has not been the same instrument in regard to interest. The plaintiff has not treated it as the same instrument, but as I have shown, a different instrument.
If a promissory note be made payable with lawful interest, and after it is signed, there be added, without the assent of the maker, in the corner of the note, words expressing a different percentage of interest, the addition is fatal. 2 Pars, on Notes and Bills, 545.
- In the ease of Birckhead v. Brown, 5 Hill, 641, the court uses this language: “ Courts are not at liberty to speculate upon the question whether the surety has or has not been injured by a departure from the terms of his contract.” Again: He has a right to say u that is not my contract.” “ And as long as he can give this answer truly, he cannot be charged with the debt of his principal.”
When a contract is changed or varied that releases all parties to the same who do not consent to such change. Smith v. United States, 2 Wall. 219; Miller v. Stewart, 9 Wheat. 681; Leggett v. Humphreys, 21 How. (U. S.) 66.
Many cases might be cited to show that a surety has the right to stand on the strict letter of his contract and can only be bound by it. The plaintiff acknowledges that he has changed the contract in regard to interest, without the consent or knowledge of Forbis, the surety.
If this is not a material change of a contract, I do not know what is a material change. And being a material change in the contract, the surety was discharged.
My opinion is most firmly fixed that for the reasons I have named, the judgment of the court below should be reversed. *409The points I have presented were presented in the briefs of appellant. If I were disposed to raise points outside of the briefs of appellants, I think I could show that the complaint herein does not’ state facts sufficient to constitute a cause of action.

Judgment affirmed.