Bonner Oil Co. v. Gaines

McMEANS, J. The Bonner Oil Company brought this suit against the Lake r Austin Canal Company, a coiporation, and John W. Gaines, on two promissory notes alleged to have been executed to it by the defendants, each for the sum of $445.20, dated February 3, 1914, bearing 8 per cent, per annum interest and maturing 60 and 90 days after date, respectively. The defendant Lake Austin Canal Company failed to appear and answer. The defendant Gaines answered, pleading want of consideration on his part for the execution of the notes which he alleged were given for a debt due by the canal company to plaintiff, and that he was not interested in such debt except as a stockholder in the defendant canal company. Plaintiff, in reply, pleaded that the execution of the notes by defendant Gaines was done for the purpose of securing an extension of time for the payment of the debt due by the canal company, and that therefore there was a valid consideration. To this the defendant Gaines replied that there was no specific agreement for the extension of time for the payment of the debt due by the canal company at the time he signed the notes, and that the plaintiff never requested him to sign the notes, and that the same were signed by him without request and without consideration. He also pleaded that the purpose of executing the notes was to settle all controversy as to the amount and validity of the debt due plaintiff by the canal company, and not for the purpose of securing an extension of time, or to limit the time within which plaintiff could sue on the debt. The case was tried before the court without a jury and resulted in a judgment by default against the defendant Lake Austin Canal Company for $990.40, together with $49.38 interest and $100.93 attorneys’ fees, aggregating $1,143.67, and in favor of defendant John W. Gaines. From the judgment in favor of defendant Gaines, the plaintiff has prosecuted a writ of error to this court. Appellant by several assignments of error complains, in different ways, of the action of the court in rendering judgment in favor of defendant Gaines; the gravamen of the complaint being that the undisputed evidence shows that the act of said Gaines in signing the notes sued upon was based on a sufficient consideration to render his promise to pay them a binding obligation upon his part. The following is a statement of the material undisputed facts as shown by the record : The Lake Austin Canal Company was a corporation duly chartered under the laws of Texas, and at the time at which plaintiff’s cause of action arose was, and so far as the record shows is now, a going concern. Its capital stock was $18,000, and was owned in equal amounts by defendant John \V. Gaines, his son, C. M. Gaines, and Ed Savage. John W. Gaines was its president, and Ed Savage its secretary and general manager. The Bonner Oil Company, plaintiff, was engaged in selling lubricating oils; and in endeavoring to make sales to the Lake Austin Canal Company, its agent, Mr. J. H. Bland, called upon Mr. Savage and solicited him to buy, and was referred by Savage to Mr. Gaines, and after talking the matter over with Mr. Gaines the latter told the agent to go back to Mr. Savage and tell him to order what he wanted. Savage thereafter ordered from time to time oil in such quantities as he desired, the value of which amounted to $890.40, no part, of which was ever paid. Afterwards the Bonner Oil Company began trying to collect this sum, and to this end its said agent, Bland, went to Bay City, where the principal office of the corporation was located, and where the defendant Gaines lived, to see Mr. Gaines with ref [688] erence to payment; but Mr. Gaines was away, and Bland did not then see him. Later be again went to Bay City for tbe purpose of mating a collection, bis purpose being to either collect tbe amount due, or a part of it, or to close tbe account with notes, and carried with him blank notes to be filled out and executed, in tbe event tbe amount was not paid. He called upon Mr. Gaines at his office,' and the latter, after’ Mr. Bland bad stated that his purpose in calling was to get some money on tbe debt, stated to Bland that tbe corporation bad not sold its rice at that time, and that they bad bad bad luck, whereupon Bland presented tbe blank notes which were filled out for equal amounts, aggregating tbe amount of tbe debt, and were signed by tbe corporation by Mr. Gaines as its president and also signed by him in his individual capacity, and as thus signed were banded to Mr. Bland. Bland testified that when be banded tbe notes to Gaines for execution be said to bim, in substance: “Mr. Gaines, we would be glad to have the notes, because they will help us out with the bank; we might be able to handle the notes at the bank, and get the money, and if we can accommodate you, we will do it in that way.” He further testified that, when Gaines returned the notes to bim after signing them, he stated: “Mr. Bland, I am' doing this for you, I don’t for the company; I don’t often do this, or this is something I haven’t often done, or something to that effect, and I thanked him for it, and said I appreciated it very much that he did do it.” Pie further testified: “If Mr. Gaines had simply given me two notes of the corporation, and had not executed the notes himself, I would not have accepted them.” He did not request Mr. Gaines to sign the notes individually, nor did be tell him that he would not accept the notes of the corporation without his individual signature. Mr. Gaines, testifying as to the circumstances under which he signed the notes, stated: “Mr. Bland came into the office and told me, as he stated, that the company needed the notes, or could ■' use the notes, or something to that effect, and they asked to close the account with a note, or two notes, divided into two equal amounts, and make them payable 60 and 90 days after date, and after discussing it a little while we agreed'to that. The purpose, as stated by Mr. Bland, was just to enable them to use the paper as collateral at the bank, that they might do it; he didn’t say they would do it; he said they might need them, and that if they did they could use them to hypothecate them with the bank to obtain advances. That was the sole reason assigned for wanting the account settled by notes.” Pie further testified: “I have been puzzled several, times myself just why I did sign the paper at the time, to tell you the honest truth, and I couldn't tell you to this day why I did it. . I don’t know why I indorsed that paper. * * * It , is a mystery to me.” After the noté, which matured 60 days after its date, fell due,, defendant Gaines wrote to the plaintiff asking for a further extension of time in which to pay the same. In this letter, which is dated April 27, 1914, be says: ' | “In this connection I wish to say that if you will do so (extend time of payment until fall) the Lake Austin Canal Company will very much appreciate you carrying this account over until fall, as it is practically impossible for them to pay it at this time, and get through this season's work. I will re-indorse this paper, payable in the fall, and if you will do as above suggested, it will be a great accommodation to me and to the canal company.” It is undisputed tbat the debt was due at the time the notes were executed, and that tbe time of payment was extended 60 and 90 days by the giving of the notes. Under the facts as above stated, the court held that the signing of the notes by John W. Gaines was without consideration, and upon this view rendered judgment in his favor; and in so doing, we think, committed error. [1] When Mr. Bland accepted the notes by which the time of payment of the debt was extended 60 and 90 days, Mr. Gaines had signed his name thereto as surety. Mr. Bland did not request him to become surety upon the notes in so many words, hut that he expected Mr. Gaines to sign them is shown by his uncontradicted testimony that he would not have accepted them had not Mr. Gaines so signed them.' The corporation desired further time for payment, and hence was willing to execute the notes which bore 8 per cent, interest in lieu of the debt which drew less interest, if any at all. Mr. Gaines, for his corporation, desired tbat the extension be granted, and was willing to and did sign his name to the notes which effectuated the extension. That he considered himself bound as a surety is conclusively shown, we think, by his letter written after the note first maturing fell due, in which he requested a further extension of time of payment until fall and agreeing to re-indorse tbe note if the corporation would grant such extension. [2] It seems to be well settled that the extension of time of past-due indebtedness will support a contract of suretyship. The plaintiff made no express promise to Gaines to forbear to sue, or to extend the time of payment. The negotiations were brief, consisting of a demand upon Gaines, as president of the debtor corporation, for payment of a past-due debt, a statement by him of the inability of the corporation to pay it and the reason why, the production of the notes and their execution' by Gaines for his principal and himself, and the return to and acceptance thereof by Bland. The execution of the notes amounted to an extension of time by the plaintiff, but the notes would not have been accepted and the time extended if .Mr. Gaines had not signed them individually. By accepting the notes the plaintiff conclusively bound itself not to collect [689] tlie debt until the maturity of the notes. It parted with its absolute right to sue and collect at once. Hannay v. Moody, 31 Tex. Civ. App. 88, 71 S. W. 325. In 2 Pars. Con. (6th Ed.) p. 5, it is said: “If the original debt or obligation is already incurred or undertaken previous to the collateral undertaking, then there must be a new and distinct consideration to sustain the guaranty. * * * It is not necessary that any consideration pass from the one receiving the guaranty to the party giving it. If the party for whom the guaranty is given receive a benefit, or the party to whom it is given receive an injury, in consequence of the guaranty, and as its inducement, this is a sufficient consideration.” So in 1 Pars. Cont., p. 443, it is said a waiver of any legal or equitable right is a sufficient consideration for a promise. In Hannay v. Moody, supra, a case quite similar in many of its material facts to the present, this' court said : “By the acceptance of the notes, which, by their terms, were not payable until the lapse of 90 days, Moody & Co. effectually bound themselves not to collect it earlier, and thus abandoned their legal right to proceed at once against their debtor. The inference from these facts is a conclusion of law which they could not be heard to question except on the ground of fraud or mistake. That they might have proceeded in attachment sooner than the due date, if sufficient grounds existed, can make no difference. They parted with their absolute right to sue and collect at once, and had left to them the right to sue only under extraordinary conditions.” And it was held that the contract of the sureties, who signed the notes there sued upon, was binding upon them, although the only consideration therefor was the extension of time of payment of the past-due indebtedness of their principal. In Thompson v. Gray, 63 Me. 230, cited in Hannay v. Moody, after holding that a promissory note given by one person for the antecedent debt of another is not void for want of consideration, if it is made payable at a future day, says: “Such a note necessarily operates as a suspension of the right of the creditor to enforce payment of his debt till the note matures; and it is a rule of law too well settled to require the citation of authorities in support of it that such a suspension of the right of the creditor to enforce payment of his debt is a sufficient consideration for the promise of a third person to pay it. Tt is not necessary that there should-be an express agreement for delay. The taking of a new security payable at a future day, by operation of law, and without any special agreement to that effect, imposes upon the creditor the duty of waiting for his pay till the new security matures.” To the same effect are York v. Pearson, 63 Me. 587; Fulton v. Loughlin, 118 Ind. 289, 20 N. E. 796; and Bank v. Bridgets, 98 N. C. 67, 3 S. E. 826, 2 Am. St. Rep. 317. In Fulton v. Loughlin, supra, it is said: “But a promissory note negotiable according to the law merchant, is not void for want of consideration, if it be given for the antecedent debt of a third person and be made payable at a future day. Such a note operates to satisfy' the debt, prima facie, or at least to suspend the right of the creditor to enforce payment until the note matures, and an express' or implied agreement to delay the collection of a precedent debt is a sufficient consideration to support the promise of a third’person.” From the facts stated and, the authorities quoted it follows, we think, that John W. Gaines, by executing the notes for the debt of the Lake Austin Canal Company, bound himself, upon a sufficient consideration, to pay them, and therefore that the judgment in his favor was erroneous, and should be set aside, and that judgment should be here rendered in favor of the Bonner Oil Company against him on said notes for the principal, interest, and attorneys’ fees, and it has been so ordered. Reversed and rendered. Footnotes [1] <&wkey;>For other oases see same topic and KEY-NUMBER in all Key-Numbered big'ests and Indexes [2] i&wkey;'For other eases see same topic and KEY-NUMBER in ail Key-Numbered Digests and Indexes