Hollingsworth v. . Tomlinson

Shepherd, J.: The only issue submitted to the jury was as follows: “Was there any arrangement between the plaintiff and the principal debtor, Tomlinson, unknown to and not agreed to by the sureties by which the sureties are released from their obligation upon the note ? ” His Honor held that there was no evidence of any such agreement, and the issue was answered in the negative. It is true that the witness Tomlinson (the principal in the note) did not testify in express terms that there was an agreement to forbear for any definite time, but, considering the whole testimony, we think that there was sufficient evidence to have warranted an affirmative finding of the issue. The note matured on the 5th of February, 1887, and Tomlinson testified that at that time he paid the plaintiff interest in advance, when an endorsement was made upon the note. The endorsement is as follows: “Interest paid up to May 5th, 1888.” “The general rule is that the reception of interest in advance upon a note is prima fade evidence of a binding contract to forbear and delay the time of payment, and no suit can be maintained against the maker during the period for which the interest has been paid, unless the right to sue be reserved by the agreemént of the parties. The payment of the interest in advance is not of itself a contract to delay, but is evidence of such contract; and while this evidence may be rebutted, yet, in the absence of any rebutting evidence, it becomes conclusive.” Brandt on Suretyship, 305. The fact that, when the interest was paid, nothing was said *248 about the principal, does not of itself rebut the “prima facie evidence of the binding contract” of forbearance; for such a contract “ need not be in express terms, nor proved by direct evidence. * * * It is sufficient if a mutual understanding and intention to that effect are proved. If the parties act upon the terms of an implied agreement to that effect it will be sufficient.” Brandt, supra, 304. The testimony as to the dealings between the plaintiff and the principal debtor, so far from rebutting, very strongly sustains the prima facie evidence of an agreement to forbear, resulting from the payment of the interest- in advance. His Honor was, perhaps, influenced in his ruling by the case of Bank v. Lineberger, 83 N. C., 454, in which it was held that usurious interest, either promised or actually paid, would not support a contract of forbearance. The ruling in that case was modified in Carter v. Duncan, 84 N. C., 676, the attention of the Court not having been called to Scott v. Harris, 76 N C., 205, and other previous- decisions. So it is now well settled that “the exoneration of the surety is the same when the contract of forbearance is usurious in terms, and especially when the . consideration has been paid.” Forbes v. Sheppard, 98 N. C., 111. For the foregoing reasons we think there should be a new trial. Error.