Scott v. Saffold

Walker, J. The general rule as to the liability of a surety is forcibly expressed by this Court in Bethune vs. Dozier, 10th Ga. R., 238. Says Judge Lumpkin, in this case: “The undertaking [389] of the surety being one stricti juris, he can not, either at law or in equity, be bound farther or otherwise, than he is by the very terms of his contract.” Nor is it of any consequence that the alteration in the contract is' trivial, nor even that it is for the advantage of the surety. Non in hceo /cederá veni is an answer in the mouth of the surety from which the obligee can never extricate his case, ib., and numerous cases cited and examined. Says Lord Chancellor Loughborough, in the leading case of Rees vs. Barrington, 2 Vez. 540; “ there shall be no transaction with the principal debtor, without acquainting the person who has a great interest in it. The surety only engages to make good the deficiency. It is the clearest and most evident equity, not to carry on any transaction without the privity of him who must necessarily have a concern in every transaction with the principal debtor. You cannot keep him bound and transact his affairs (for they are as much his as your own) without consulting him. You must let him judge whether he will give that indulgence contrary to the nature of his engagement.” “It is well settled by a number of decisions, greater, perhaps, than exist on any other point of law, that any act of the creditor, by which he precludes himself from demanding performance of the principal, or entitles the latter to claim an exemption from performance during an appreciable interval of time, however small, will inure as a discharge of the surety.” 2 W. & T. Lead. Cas. in Eq. 2 Pt. 380, (Ed. 1852). If the creditor, by agreement with the principal, without the concurrence of the surety, varies the terms of the contract, as by enlarging the time, or does any act by which the surety is injured, and his risk increased, he is discharged. Curon vs. Colbert, 3d Ga. R., 248; Worthan vs. Brewster, 30th Ga. R., 114; Stallings vs. Johnson, 27th Ga. R., 564. In this case the note was due the 24th of August, 1858. No interest was then due. On that day Johnson, the maker, without the assent of Saffold, the endorser, gave his note for one year’s interest to become due at ten per cent, compounded at that rate. This interest note, including legal, and usurious interest compounded, was paid before the interest became [390] due under an agreement that the holder would wait with the principal until he, the holder, should return from Europe. The payment of this note, including legal and usurious interest, certainly was a valuable consideration. It was not only a contract for usurious interest in advance but the payment of such interest in advance. 1. How what was the effect of this payment of interest, in advance ? “ Where a bond creditor, by agreement with his debtor, takes interest on his debt by anticipation, that will in effect be giving time to the debtor, and will discharge the surety; since a Court of Equity would restrain proceedings on the bond until the expiration of time for which the creditor had received interest on the bond.” White vs. Blake, 1 Y. & C. Exch. Cas., 420; 2 W. & T. Lead. Cas. in Eq., 2 Pt. top p. 362, (Ed. 1852). The very idea of payment of interest in advance presupposes that delay of the payment of the principal is to be given for the time. The payment of the interest is the consideration for an agreement implied from the transaction itself if not distinctly expressed, to give time on the principal. The general rule is that the reception of interest in advance upon a note is prima facie 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 agreement of the parties. The payment of the interest in advance is not of itself a contract to delay, but is evidence of such a contract, and while this evidence may be rebutted, yet in the absence of any rebutting evidence it becomes conclusive. Crosby vs. Wyatt, 10th N. H. Rep., 318. There may be cases found conflicting with this rule, but we think this sustained by the better reason and adopt it. 2. The contract between Johnson and Cardwell for forbearance, then, being valid, and made without the assent of Saffold, necessarily released' the indorser from liability. It is insisted, however, that while the general rule may be as here laid down, yet the peculiar phraseology of the note sued on takes this transaction out of the rule. The note is a [391] promise to pay, twelve months after date, $4,733.07, interest payable annually at ten per cent., or otherwise counted as principal. The argument is that as the note contemplates interest to be paid “ annually,” that there is an authority given by the endorser to the maker and the holder to agree for forbearance. The difficulty in the way is that there is no authority to pay interest in advance and thereby tie up the hands of the holder from proceeding to collect the note at any time after it fell due. The contract was that the interest should be paid annually as it should fall due, “ or otherwise counted as principal.” It was an agreement, in case the note should lie over for a year after it should fall due, that the maker would pay the interest due at the end of the year, and in case of default then such interest, from that time, would become principal and bear interest, without the necessity of giving a new note for the interest. The interest could in this way be converted into principal as was decided by this Court in Pinckard vs. Ponder, 6th Ga. R., 256. Whether such a contract as this is will be enforced by the Courts was left undecided by the case in 6th Ga. 3. We have looked into the authorities and are satisfied that a contract to pay money at a subsequent period, with interest to be paid annually, and if the interest be not paid annually then the interest to become principal is a valid and binding contract, and will be enforced by the Courts. It is neither usurious, unconscionable nor contrary to public policy. If the interest be not paid when due, suit may be maintained to collect it. Some cases may be found where Courts of Equity have refused to carry into effect such contracts on the ground that they savor of usury; but the weight of modern decisions, as well, perhaps, as of the older ones at law, is in favor of the enforcement of such contracts. In LaGrange vs. Hamilton, 4 T. R., 612; when a sum of money was due by bond, with quarterly payments, and at the end of each year, the year’s interest due was to be added, and the credits then deducted, and the balance to remain as principal, it was held not to be usurious. This case was carried into the Exchequer Chamber in error, and affirmed. 2 [392] Hen. Bl. Rep., 144. The cases are reviewed in 1 Am. L. C., p. 522, (Ed. 1852), and the annotaters say the better opinion is that an agreement to pay interest on interest is not usurious nor illegal; and that such an agreement made either at or after the time of the original contract will be enforced. We think the Court charged right in relation to the custom sought to be set up in favor of this private banker or broker. We are not aware of any authority which will make the habits of dealing of an individual a part of the laws of the land. Under the facts of this case the jury very properly found in favor of the endorser. Judgment affirmed.