Rockville National Bank v. Holt

Andrews, C. J. The L. B. Smith Rubber Company, a corporation doing business at Setauket, New York, being indebted to the defendant gave him three promissory notes, and accepted three bills of exchange, representing such indebtedness and aggregating in the whole something more than five thousand dollars. All of the notes and bills were payable to the order of the defendant, were by him indorsed, and at his request were discounted for his benefit by the plaintiff. Shortly thereafter the Rubber Company failed. That failure compelled the defendant to go into insolvency. The plaintiff presented its claim against his insolvent estate and received a dividend thereon. The defendant having since that time acquired other property, the plaintiff brought this suit and attached such other property. Since the bringing of this suit the plaintiff, in common with nearly all the creditors of the L. B. Smith Rubber Company, including the defendant, signed an agreement which is fully set out in the finding, but which it is not necessary here to repeat. For the purposes of the present discussion it is sufficient to say that that agreement provided, among various other things, that the creditors of the Rubber Company should assign their claims to certain persons called a reorganizing committee, and that this committee should proceed to reorganize the company and should issue to each of the several creditors in payment for their respective claims the stock of the reorganized company, which the creditors agreed to accept. When the plaintiff signed the agreement it added to its signature :—•“ reserving all rights against R. G. Holt, or against his estate, or assignee for the benefit of his credi [531] tors.” These words did not appear in the body of the instrument. The defendant insists that by signing the agreement the plaintiff assigned all its claim against the L. B. Smith Rubber Company to the reorganizing committee, and that as he is liable to the plaintiff only as a surety for that company the assignment of the claim against the principal debtor discharges him. That an unqualified release of a principal debtor will be a discharge also of the surety is admittedlj good law. The plaintiff, however, claims that by the reservation appended to its signature it is not affected by that rule. The defendant cites two cases, either of which by its terms fully supports his contention. But the authority of each of these cases is greatly weakened, if not entirely overturned, by later decisions in the same jurisdiction. Webb v. Hewitt, 3 Kay & Johnson, 438, is substantially overruled by Green v. Wynn, L. R., 7 Eq. Cas., 31, and L. R., 4 Ch. Appeals, 204; and Farmers Bank v. Blair, 44 Barbour, 641, by Morgan v. Smith, 70 N. York, 545, Colvo v. Davies, 73 N. York, 211, Nat. Bank v. Bigler, 83 N. York, 51, and Shutts v. Fingar, 100 N. York, 539. It is stated in De Colyar on Principal & Surety, 418, that such a reservation as was made by the plaintiff prevents there being any discharge of the surety, and gives as authority Kearsley v. Cole, 16 Mees. & Wels., 128; Wyke v. Rogers, 1 De G. M. & G., 408; Boaler v. Mayor, 19 C. B. N. S., 76, 84; Owen v. Homan, 4 H. L. Cases, 997; and Close v. Close, 4 De G. M. & G., 176. See also Tobey v. Ellis, 114 Mass., 120; Kenworthy v. Sawyer, 125 id., 28; Bank v. Lineberger, 83 Nor. Car., 454; Morse v. Huntington, 40 Verm., 493; Hagey v. Hill, 75 Penn. St., 108; Mueller v. Dobschuetz, 89 Ill., 176. The weight of authority seems to us to he strongly adverse to the defendant’s claim. There is another view of the case which makes it clear that the defendant is not entitled to a discharge by reason of the plaintiff’s signing the agreement. Whenever a creditor gives time to, or makes a new contract with, the princi [532] pal debtor, of which new contract the surety has knowledge and to which he assents, he is not thereby discharged. Adams v. Way, 32 Conn., 160; Corlies v. Estes, 31 Verm., 653; Smith v. Winter, 4 Mees. & Wels., 454. The composition agreement was beneficial to all the creditors of the L. B. Smith Rubber Co., provided all entered into it. The defendant and his trustee in insolvency signed it before the plaintiff did. It .was obviously for the advantage of each that the other should sign. Without some such arrangement neither could ever hope for any payment from that company. With such an arrangement there was a chance that they might both be paid in full. The plaintiff signed with the knowledge that the defendant and his trustee had previously signed. A composition deed implies not only an agreement of the debtor with each of his creditors, but also an agreement by each creditor with each of the others. The signing of such a deed by any creditor is in some measure a request to all the others to sign also. The circumstances of this case show pretty clearly that the defendant knew of and assented to the act of the plaintiff in signing the agreement. There is no error in the judgment complained of. In this opinion the other judges concurred.