Waters v. Simpson

The Opinion of the Court was delivered by Treat, J.* .By virtue of the fifteenth paragraph of the eighteenth section of the “diet.to establish and maintain a general system of Internal Improvement,” approved February 27th, 1837, the county of Pope became entitled to, and received a portion of the sum of $200,000 appropriated therein. By the. direction of the County Commissioners’ Court, this fund was loaned out on personal security for the term of one year, at an interest of twelve per centum per annum. On the 24th of November, 1824, Thomas H. Thompson borrowed $100, and gstve his note, with Waters, Read, and Freeman, as securities, to the County Commissioners, for the sum df $112, payable in twelve months, and bearing interest after maturity at the rate of twelve- per, centum per annum. At the March term 1839, of the County Commissioners’ Court, an order was made and entered on its records to the effect, that the loans previously made should be extended to the 4th of March, 1841, on the conditions that the borrowers should keep the 'county secure in the payment of the notes, arid should pay, the interest annually. In March, 1845, the County Commissioners commenced an action of debt against Thompson and his.securities. .The declaration was on the note before mentioned. The securities were alone served with process. They pleaded, first, that the loan was made without authority of law, and, therefore, the note was made and executed without any good or valuable consideration; second, payment of the note, concluding with a verification; third, that the order of March term 1839, was made without their knowledge or consent, and that Thompson, without their knowledge or consent, availed himself of, and complied with the terms and conditions of the order, to? which the County Commissioners assented, and therefore they were released and discharged; and, fourth, substantially as in the third plea, with the additional averment, that. Thompson had become insolvent. There was a replication to the second plea, concluding to the country, to which no similiter was added by the defendants. The Court sustained a demurrer to the first, third, and fourth pleas, and the defendants abided thereby. Thereupon, without noticing the second plea, the Court rendered judgment by nil dicit, against the defendants for the debt, $112, and $60-10 damages, by the clerk assessed. The defendants prosecuted an appeal to this Court, and they now assign for error, the decision of the Circuit Court sustaining the demurrer to the first, third, and fourth pleas. The defence interposed by the first plea cannot be sustained. The County Commissioners had the power to loan the fund, and take security for its payment. This was a matter of discretion on their part, and there is no just or valid objection to the manner in which it was exercised. This question was directly settled by this Court in the case of Kitchens v. Greene Co., 4 Scam. 485, and we are entirely satisfied with the principles of that decision. The third and fourth pleas are in substance alike, and intended to present one and the same defence, and both will be considered together. It is insisted, that these pleas show a valid and operative agreement between the county and Thompson, by which the time for the payment of the note was postponed beyond the period fixed, when the note was executed and the securities incurred their responsibility. If this position be correct, the conclusion contended for is inevitable, and the defence must be sustained. It is a well established principle of the law, that the contract of a surety is ■to be. construed strictly, and he is not to be held responsible ■beyond the precise terms.-of his undertaking. His risk is not to be increased or his responsibility extended without" his assent. The creditor is not permitted to vary the terms of the contract, for if allowed to do it without consulting • the surety and obtaining his consent, he might thereby add to the liability and increase the hazard. A binding agreement between the creditor and the principal debtor, which materially changes-the terms of the original contract, and to which the surety has not expressly or tacitly consented, has the effect to discharge the surety both at law and in equity. And when this has been done, Courts will not stop to inquire whether the surety has been damnified or not. A new contract has been made, and he is absolved from all liabilty. This doctrine was asserted by this Court in the cases of Davis v. The People, 1 Gilman, 409, decided at the last term-; and The People v. McHatton, decided at the present term, and has been repeatedly recognised by the highest judicial tribunals of the country. It is not, however, every agreement to extend the time of payment, which will produce •this result. The agreement must be founded on a good consideration, and binding in law on the parties to it. A promise to give a further day of payment, which is not based on some' new and adequate consideration, is a mere nudum pactum, and because it does not precludé the creditor from sueing the principal, the surety is not discharged. The agreement must be of such a character, that the creditor’s right to prosecute the ‘debtor and enforce the performance of the contract is suspended; such that the debtor may take advantage of by way of defence, to defeat a prosecution instituted on the .original contract in violation of the agreement. Such an agreement will release the surety, for while it suspends the right of action cn the part of the creditor, it equally suspends the right of the surety to make payment, and then resort to his principal for indemnity. Admitting that these principles must govern ms. in the decision of this case, we proceed to inquire whether the allegations of the pleas present, an available defence. The note was to become due in twelve months, and if not promptly paid, was to b.ear the highest rate of interest allowed by the law. The securities bound themselves to pay the amount of the note, and the interest which might accrue after it became due. On the default of Thompson to make payment at the expiration of the year, the county had an undoubted right of action against him and his securities, and the securities the reciprocal right to release themselves by paying the note, and making the principal their debtor for money- paid to his use. It is contended, that their rights were alike suspended by the order of the Commissioners’ Court, made between the date and maturity of the note. The order, per se, could have no such effect. It was not a contract, but a mere declaration, subject to revocation at the pleasure of the Court. It left the rights and remedies of the parties unimpaired-; the county had still the power to sue, and the surety the right to pay. At the time the loans were made, the Commissioners did not contemplate the loaning of the fund for a longer period than one year, and they probably then intended to call it in at the expiration of the year, and apply it directly to the purposes for which it was granted by the Legislature. In the mean time, they became convinced it would be more conducive to the interests of the county, to continue to loan the fund, and expend the income on the objects designated by the ’ grant. The order, ho doubt, was intended by them as a public expression of this opinion, and an official declaration for the guidance and direction of the agents specially charged with the loaning and receiving of the fund, and the safe keeping of the securities. As the fund was to be kept out on interest, the Commissioners were willing that those who had borrowed it should continue to retain it, so long as the interest should be punctually paid, and the ultimate pay» ment of the debt should not be hazarded. Where this was the case, there could Be no reason 'for insisting oh prompt payment of the obligation, for if collected, the proceeds would again be loaned. The sole objects of the Commissioners were to keep the fund secure from loss, and b;e in the receipt of the accruing interest; and while these objects were attained, it was a matter of indifference who were the debtors to the fund. Notwithstanding this order, the Commissioners reserved an absolute control over the loans. If the interest was not paid, or the debt became insecure, the county was at full liberty to institute proceedings for the fulfilment of the contract. This case differs essentially from the cases before referred to. In those cases the Legislature, by express laws, extended the time for payment beyond the period provided for when the obligations were executed by the sureties. The laws were binding on the State, and prohibited the officers charged with the superintendence of the revenue, from instituting proceedings against the collectors till the extension had expired. There is nothing on the face of the pleas which, in the opinion of the Court, shows that any binding agreement was made between the Commissioners and Thompson respecting the payment of the note. They simply allege that Thompson accepted of the conditions of the order, and complied with them. It is difficult to determine what was intended by these general allegations. This is left to conjecture. The quo modo of the compliance should have been stated. It is very clear that no binding contract could grow out of the payment of the interest. The Ínote already bore interest, and the rate could not be increased. The payment of the interest would be doing nothing more than was required of the principal and sureties by the ^original contract. This would not be a sufficient consideration to support a promise to forbear the collection of the note. Such a promise would be a mere gratuity, and could not be enforced. On this point the authorities are abundant. Pabodie v. King, 12 Johns. 426; Fulton v. Mathews, 15 do. 433; Oxford Bank v. Lewis, 8 Pick. 458; Reynolds v. Ward, 5 Wend. 501; Gahn v. Niemcewicz, 11 do. 312. The giving of additional security by the principal, might be a good consideration to sustain an agreement to extend the time for payment. The pleas both fail to aver that this was done. It is not a fair inference from the allegations of the pleas, but the inference rather is, that the Commissioners were satisfied with the contract as it stood, and, therefore, failed to require further security. If fresh security was accepted, and in consequence thereof, further forbearance of the debt was given, the pleas should have stated it specifically. The note was made payable to one set of Commissioners, and the suit was brought in the names of their successors in office, who do not aver in the declaration that the note was indorsed to them. This was assigned for error. It was, however, abandoned on the. argument, and we are not called on to decide whether the suit was properly brought in the names of the appellees. Again, it is assigned for error, that the judgment is not only against the securities, but against Thompson, who was not served with process, and who did not submit his person to the jurisdiction of the Court, An inspection of the record does not sustain this assignment of error. The record shows that the judgment was only rendered against the parties who had pleaded. It is also assigned for error, that the Court erred in rendering judgment before disposing of the issue on the second plea. There was, technically, no issue op that plea. The plaintiffs in their replication tendered an issue, and expressed their willingness to submit the question of payment to the jury, and it was then the duty of the defendants to have made it complete by adding the similiter. Until the similiter was added, the Court was not bound to notice the plea. After judgment on demurrer, a joinder in demurrer-will be presumed. Wilcox v. Woods, 3 Scam. 51. So the want of a similiter is aided after- verdict, Hays v. McKee, 2 Blackf. 11. But these intendments are in favor of the judgment of the inferior Court. When objections of this character are interposed by the party who has caused the omission, we think a different rule should be adopted, To sustain this error and reverse the judgment, would be t@ allow the defendants to take advantage of their own wrong, a thing the law abhors. On a review of the whole case, we do not hesitate to affirm the judgnient of the Circuit Court. Judgment affirmed with costs. Judgment affirmed. Footnotes [*] Wilson, C. J., did not sit in this case.