Court Opinion

ID: 6120392
Source: CourtListenerOpinion
Date Created: 2022-02-04 18:40:09.194464+00
Date Added: 2024-06-11T08:22:45.013635
License: Public Domain

E. Darwin Smith, J.:
The offer of the defendant’s counsel to show that the arrangement made by the plaintiff with Brown, the maker of the said promissory note, was made without the knowledge or consent of the defendant, I think was improperly overruled. The arrangement referred to, embraced in the assignment of the $600 bond and mortgage and the receipt therefor, was a contract, as held by the judge, and involved upon the face of the transaction an extension of time for the payment of said note during the period the said bond and mortgage had to run before maturity. The note was then past due, and an extension of the time for the payment thereof without the consent of the indorser, would discharge such indorser. It was, therefore, the right of the defendant to make this proof, if he was able to do so. It is doubtless true that the mere taking of collateral security for a debt, without an agreement to extend the time of payment, does not discharge a surety. (Bank of Utica v. Ives, 17 Wend., 502; Van Etten v. Troudden, 3 N. Y. S. C., 604; Cary v. White, 52 id., 144.) But it is not necessary *358that the agreement to extend the time of payment be in express terms.
The contract in this case unavoidably, and by clear implication, includes such an agreement. The debtor sells and assigns to his creditor a bond and mortgage for $600, having six months to run, for the consideration of $525, and interest on the mortgage which was paid and to be paid, as follows: $100 in cash was paid in hand, and the note, amounting to the sum of $241.78, making $341.78. In addition to this sum, the defendant, on the payment of the bond and mortgage, was to retain from the proceeds thereof an amount sufficient to make up the sum of $525, and pay the balance to the said debtor, with the condition therein contained, that if said Brown should pay the amount of said note and the cash advanced, before the said mortgage became due, the sum of thirty dollars was to be deducted from the amount the plaintiff was otherwise entitled to receive out of said mortgage. In other words, if Brown should pay the cash advanced and the amount of said note, he might redeem said mortgage by the payment of $495, these sums included, instead of the said sum of $525.
The arrangement provided for the payment of said note, absolutely, if not immediately, by the assignment of said bond and mortgage, out of the proceeds of said bond and mortgage, and implied a necessary extension of the time of payment thereof till the maturity of said bond and mortgage. The assignment of the bond and mortgage was absolute, with a condition in favor of Brown, allowing him to redeem the same. If he did not redeem, the plaintiff was entitled, by the contract, to retain the said sum of $525 out of the proceeds of said bond and mortgage. This was not the mere taking of collateral security for the payment of the note. It was, on the contrary, an agreement providing for the payment of said note at the expiration of six months, and paying the plaintiff, for such extension of time, a bonus of $183 besides interest; and, in any event, in case Brown redeemed the mortgage, a bonus of $153.22. In this way the plaintiff was paid, or agreed to be paid, a very large bonus for the extension of the time for the payment of said note. He could not have sued this note during the period of six months, if he was entitled to retain it; and if the defendant had applied to .him to pay the same, he could not have *359transferred to him the said note, with a right to immediately enforce payment thereof.
This is precisely the case stated in the opinion of Judge Allen, in Cary v. White (supra), where he says: “If the legal implication is that by taking of collateral security, payable in future, the creditor agrees to forbear to sue upon the original indebtedness for a time, then, in all cases, sureties would be discharged.”
It was error, I think, to deny the motion for a new trial. The order denying such motion should, therefore, be reversed, and a new trial granted, with costs to abide the event.
Present — Mullin, P. J., and Smith, J.
Order reversed and new trial granted, costs to abide event.