Court Opinion

ID: 6637389
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:42:13.190141+00
Date Added: 2024-06-11T15:59:06.039246
License: Public Domain

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.”
*399The 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 *400not 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*401ise 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 *402Johns. 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, *403upon 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.