Court Opinion

ID: 6574475
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:32:57.417896+00
Date Added: 2024-06-11T15:57:02.098633
License: Public Domain

The opinion of the court was delivered by
Kellogg, J.
1. The first question presented by the bill of exceptions is, whether the agreement made by the plaintiff and the principals to the note, to extend the payment of the same, supposing it a valid agreement, founded upon sufficient considerations does in law discharge the sureties, — the agreement being made without the knowledge and consent of the sureties, and the note being at the time overdue.
That such an agreement, if made before the note comes to maturity, is sufficient to discharge the sureties, it is believed all the au*147thorities agree. We find it laid down in the elementary works and in many reported cases, in general terms and without any qualification as to whether the note is due, or not, that an agreement, founded upon sufficient consideration, and entered into between the payee and principal, without the assent of the surety, extending the time of payment beyond the time limited by the original contract, does, in law, operate as a discharge and release of the surety. Some of the cases, however, seem to attach some importance to the question of whether the agreement for delay is made before the contract falls due, and appear to countenance the idea, that there is a distinction between such agreements made before and those made after the contract becomes due. While in the former they regard its effect to be a discharge of the surety, in the latter they hold it to be inoperative, at least not a release of the surety.
There are howevever, numerous authorities, of the highest respectability, where no such distinction is taken, or even suggested, which we can hardly suppose would have escaped the observation of courts and counsel, if such a distinction were well founded. Nor can we discover any sound principle., upon which the distinction can be maintained. It is indeed said, that where the agreement for delay is made after the note becomes due, it does not suspend the creditor’s right of action.; and that consequently the agreement does not operate to the prejudice of the surety. This is assuming, that the agreement is inoperative, for all the purposes, for which it was made. Without stopping to discuss the question, whether such an agreement can be pleaded as a temporary bar to a suit brought in violation of it, (which we ar.e inclined to think may well be done,) can it be doubted, that, upon proper application to a court of chancery, the suit would be enjoined! That such would be the result we apprehend there can be no doubt. If we are right in this conclusion, it is equally prejudicial to the surety, whether the extension of payment be given upon an agreement made before or after the note comes to maturity.
2. The second question raised by the exceptions inyolves an enquiry as to the validity of the agreement, by force of which the sureties claim, that they are released from their liability upon the note. It is said, that the agreement is void for want of sufficient consideration, — that the consideration for the promise of forbearance by the *148plaintiff is usurious, and that such consideration is insufficient to uphold the promise.
We do not see, but the consideration must be conceded to be usurious. It is true, that the payment of the sixty five dollars was to Boynton and Burritt, who are not parties to the note in suit; but the payment was by the procurement of the plaintiff, for his benefit, and to discharge his liability to them ; and the only consideration for this payment was the promise of the plaintiff to,give farther time for the payment of the note in suit. It was therefore the same as a payment of the sixty five dollars to the plaintiff. The payment of one dollar to the plaintiff at the time the agreement was made was of the same character and for the same object, — to obtain an extension of time for paying the note of four hundred dollars. Does this render the agreement invalid 1
Upon this point it must be admitted, that the adjudged cases are somewhat conflicting. The recent cases in New York hold such contracts void, not only while they remain executory, but after they are executed. Such is the doctrine laid down in Vilas et al. v. Jones et al., 1 Comst. 286. It seems, that the same has been held in Kentucky, 1 B. Munro, to this extent, that a promise to pay usury was void, and therefore was no consideration for a promise of the creditor to forbear, and that the surety was not by such agreement released. In a subsequent case, in the same volume, the same court held, that where the usury was paid at the time the creditor promised to forbear, it discharged the surety, Kenningham v. Bedford, 1 B. Munro, 325. It would seem, from the cases above referred to, that in Kentucky the law is settled thus, — while the contract is executory, it is void and does not discharge the surety; but when executed, by the debtor, by payment of the usury at the time of the promise to forbear, it is binding on the creditor and discharges the surety, and is like the case of Austin v. Dorwin, 21 Vt. 38.
The cases of Oxford Bank v. Lewis, 8 Pick. 458, and Blackstone Bank v. Hill, 10 Pick. 129, ean have no bearing upon the question; for it does not appear in either of the cases, that there was any promise by the creditor to forbear. The court held, that mere delay to collect the note when due, did not discharge the surety, and that the payment of interest in advance, and beyond the time limited in the note for payment, was not evidence of an agreement to forbear. To *149the same effect is the case of Freeman’s Bank v. Rollins, 1 Shepl. 208. It is an adoption of the law, as laid down in the above cases in Pick. The court, however, say, in the last case, that they do not intend to overrule the case of Kennebeck Bank v. Tuckerman, in which they say, “ there was a direct affirmative agreement to give farther creditand in which case I infer, that they held the surety was discharged. The case of Reynolds v. Ward, 5 Wend., is cited to show, that a promise to pay interest upon the demand during the time of forbearance is no sufficient consideration for an agreement to forbear. The converse of this, however, is held in Bailey v. Adams, 10 N. H. 162.
In Grafton Bank v. Woodward, 5 N. H. 99, and Wheat v. Kendall, 6 N. H. 594, it is expressly held, that the payment of usurious interesáis a sufficient consideration to sustain a promise to forbear, or give farther credit; and that an agreement for forbearance for a specified time, founded upon such consideration, and entered into by the creditor without the consent of the surety, is binding upon the creditor and operates as a discharge of the surety. The same doctrine is held in Austin v. Dorwin, 21 Vt. 38, and the New Hampshire cases are there cited with approbation.
It is to be borne in mind, that the agreement in the case at bar, so far as the interest of the plaintiff was concerned, was fully executed by the defendants B. & H. Boynton, at the time the agreement was made. The one dollar was paid to and accepted by the plaintiff, and, upon the principals undertaking to pay the sixty five dollars to Boynton and Burrett, the latter then discharged the plaintiff of all liability by reason of his having before received that amount, as usurious interest, of Boynton and Burrett. And although the sixty five dollars was not endorsed upon the note, which B. & H. Boynton held against Boynton and Burrett, until some short time after the agreement was made, yet we do not see, that this circumstance can affect the liability of the plaintiff; for the sixty five dollars was made available to him by the discharge of Boynton and Burrett. Nor do we see, how B. & H. Boynton could avoid performing their undertaking to Boynton and Burrett. The latter had a just and legal claim against the plaintiff, which they were induced to release upon the promise of payment of the amount by B. & H. Boynton. *150They had relied upon that promise, and the defendants could not have avoided performing it, had they been disposed.
It is said, that the authority of Austin v. Dorwin is somewhat impaired by the fact, that the case of Miller v. McCan, 7 Paige, 451. Vilas v. Jones, 10 Paige 76, which are supposed in some measure to have influenced the decision, have since been overruled by the court of appeals in New York. 1 Comst. 274. How much influence those cases had upon the decision in Austin v. Dorwin it is impossible to say. Those cases, as also the case in Comstock overruling them, were decided by able courts, for whom we entertain the highest respect. It is not to be denied, that the question is one of some difficulty, and upon which eminent jurists have differed in opinion. The case in Comstock is elaborately discussed and with great ability. The ground, upon which the cases proceed, that hold agreements for extending the time of payment, founded on an usurious consideration, to be invalid is, that such contracts are void; and stress is laid upon the fact, that the statute declares them void,— that while the contract remains executory, the creditor cannot enforce it, — and if it is executed by the debtor, by payment of the usurious consideration, he can recover it back ; and so the creditor in no event can derive any benefit from the contract; and consequently that he ought not to be bound by it.' Such is the reasoning of the court in the case cited from Comstock.
It is said that this provision of the law, which enables debtors, who have paid usurious interest, to recover it back, is for the benefit and protection of debtors. But certainly the debtor is not bound to avail himself of this privilege. He may waive or release it. In this case, certainly none but the defendants can recover back the usurious interest, which was paid, and if they do not see fit to avail themselves of that privilege, but by their acts and conduct place it beyond their power to recall the payment thus made, is it the right of the creditor, after having received and appropriated to his use the consideration of the contract, to repudiate it 1 We think not. The defendants B. & H. Boynton cannot recover of Boynton and Burrett the amount paid, for, so far as they were concerned, the contract was not tainted with usury. If, then, the defendants can recover it at all, it must be from the plaintiff. But do not the defendants, by causing the agreement to be set up and established as a de*151fence to this suit, deprive themselves of the right to recover back the consideration, upon which the agreement was founded ? Under such circumstances, it seems to us, that the defendants would be es-topped from claiming the usurious interest, which was paid as consideration for the agreement to delay payment of the note.
But however that may be, we think the question of the sufficiency of the consideration, upon which this agreement rests, was virtually decided in Austin v. Dorwin, and we are not disposed to depart from the doctrine of that case.
The judgment of the county court is reversed and new trial granted.