Hagey v. Hill

The opinion of the court was delivered, February 19th 1874, by Mercur, J. This suit was against the endorser of a promissory note. The first assignment of error raises the question as to whether he was discharged by reason of an agreement between the holder and the maker, after the note became due, extending the time of payment. It is a well-recognised rule that an extension of time by a valid agreement between the creditor and the principal, will, as a general rule, discharge the endorser. The reasons therefor are these: The liability of the endorser to the holder is secondary and contingent. On his paying the note, he has a right of action against the principal, or of subrogation to the rights of the creditor. Hence, if time has been given, or an act has been done by the creditor which prejudices these equities in the endorser, he will be discharged. It has, however, been repeatedly held in England and in this country, that a discharge by the creditor of the principal debtor will not [111] discharge the surety, if there be an agreement between the creditor and the principal that the surety shall not be thereby discharged: Byles on Bills 316; Ex parte Glendenning, 1 Buck B. C. 517; Ex parte Carstairs, Id. 560; Ex parte Gifford, 6 Vesey, Jr., 805; Boultbee v. Stubbs, 18 Vesey, Jr., 20; Nichols et al. v. Norris, 3 Barn. & Ad. 41 (23 E. C. L. R.); Kearsley v. Cole, 16 Mees. & Wels. 127; Boaler et al. v. Mayor et al., 19 Com. B. N. S. 70 (115 E. C. L. R.). It was said, however, by Lord Chancellor Eldon, in Ex parte Glendenning, vide supra, “Ever since Mr. Richard Buck’s case, the law has been clearly settled, and is now perfectly understood, that unless the creditor reserves his remedies, he discharges the surety by compounding with the principal, and 'the reservation must be upon the face of the instrument by which the parties make the compromise; for evidence cannot be admitted to vary or explain the effect of the instrument.” - It was held'in Wyke v. Rogers, 1 De G., Mac. & G. 408, that parol evidence might be given to show that an agreement, which would by itself operate to release the surety, was not to have that effect. The ground upon which an agreement to give time to the maker, made by the holder without the consent of the endorsers, upon a valid consideration, is held .to be a discharge of the endorsers, is solely this, that the holder thereby impliedly stipulates not to pursue the endorsers, or to seek satisfaction from them in the intermediate period. It can never apply to any case where a contrary stipulation exists between the parties. Hence, if the agreement for delay expressly saves and reserves the rights of the holder in the intermediate time against the endorsers, it w'ill not discharge the latter. In such case the very ground of the objection is removed, for their rights are not postponed against the maker, if they should take up the note: Story on Prom. Notes, sect. 416. The same rule is recognised in Viele v. Hoag, 24 Vt. 46 ; Morse v. Huntington, 40 Id. 488; Clagett et al. v. Salmon, 5 Gill & Johns. 315. The whole course of Chancellor Walw'orth’s reasoning in Bangs v. Strong, 10 Paige’s Chan. Rep. 11, leads to the same result. The endorser was not a party to the contract between the holder and the maker. He was not thereby precluded from paying the note at any moment. Having paid it he would have had an immediate right of action against the maker. None of his rights were in the slightest degree impaired. Neither the search of counsel nor our own examination has resulted in finding that the precise point has ever been decided by this court. When not in conflict with our own precedents, it is desirable that we conform to what seems to be the general rule of the commercial world. The ease of Manufacturers’ Bank v. Bank of Pennsylvania, 7 W. & S. 335, has been cited in opposition to this rule. Such is not the case. The point there decided is [112] merely that an endorser may be discharged by the holder giving time to the maker, after judgment has been obtained against him; that .the creditor must no more impair the rights of the endorser after he has obtained judgment against the maker than before. The written instrument executed by the plaintiff below, by which he agreed with the maker to extend the time of payment, expressly declares, “ Provided further, That no delay of demand shall interfere with any claim I may have upon the endorsers of said note.” The case is thus clearly brought within the rule, and we hold that the extension of time to the maker in a manner which preserved all the rights of the endorser, did not discharge the latter. The second and third assignments have no merit. The acceptance of the conveyance of land, in the absence of the plaintiff below, by one acting without authority, and so known by the defendant below, and repudiated by the holder of the note, cannot prejudice his rights against the endorser. The learned judge was correct in instructing the jury to find in favor of the plaintiff below. Judgment aflirmed.