126 Wis. 538 | Wis. | 1906
The following opinion was filed January 9, 1906:
There are many decisions of this court as regards the status of one who has for a consideration moving to him from another agreed to pay the latter’s debt to a third person, such third person being a stranger to the transaction, such as the agreement involved here where the grantee of realty assumed and agreed to pay the indebtedness of his grantor or some other party secured upon such property as consideration in whole or in part for the conveyance. The subject was last fully discussed by this court in Tweeddale v. Tweeddale, 116 Wis. 517, 93 U. W. 440, the most significant
In those jurisdictions where the nature of the relations between the promisor and a third person is held to be the same as it is here, in respect to the former being equitably and legally liable to the latter, it has been held that a variance of the original contract between a third person and the debtor without the consent of the original debtor discharges the latter from all liability, where a similar variance by agreement between any principal obligor and obligee would discharge the surety, it being said in terms or in effect that the third person upon being informed of the relations between the parties to the transaction affording him the additional security becomes in duty bound to protect the interest of the original debtor to the extent of dealing with the person who has agreed
“Where such is held to be the relation of the parties, the consequence must follow that any subsequent agreement of the mortgagee with the grantee, without the consent of the grantor, extending the time of the payment of the mortgage debt, discharges the grantor from all personal liability for that debt.”
In Wayman v. Jones, supra, it was said that “there is no distinction between a suretyship created with the consent o-f the creditor and that which arises by operation of law. The principle is applicable alike in both cases, as is abundantly shown by the authorities.”
The learned counsel for appellant as a basis for their claim that appellant was discharged from all liability for the payment of the mortgage indebtedness by the transaction mentioned in the statement between O’Heam and the owner of such indebtedness, contend that the law is as above stated, and to that extent it seems that counsel’s position is sound. Therefore,-at the time of the alleged extension of the time for
We do not overlook the criticism of counsel upon the failure of the trial court to find distinctly as to whether respondent bought the note, leaving no enforcible claim against appellant, except upon the note itself, and the importance of the statute of Imitations, if such were the fact, or whether he paid it under compulsion, creating a liability upon the part of appellant to contribute his proportionate share as co-surety. The findings in this respect, and in general, as regards the judicial duty under sec. 2863, Stats. 1898, as explained in Farmer v. St. Croix P. Co. 117 Wis. 76, 93 N. W. 830, are deficient. They are considerably incumbered with mere evi-dentiary matters, instead of such matters being entirely omitted, as they should be, and only facts in issue and pleaded facts and the resulting conclusions of law being included. ’Bindings should never be put in the form of a résumé of the evidence, as they often are, nor should they include matters of argument in support of the conclusions. Mischief in that regard, in the opinion of the writer, is the natural result of permitting counsel for the prevailing party to formulate the manner in which the court shall pronounce its decision.
On the point raised by counsel as to whether respondent came by the note and mortgage by purchase with the idea of making an investment, it seems from the evidence and findings that his whole purpose was to protect himself against loss, so far as practicable, by taking up the securities and resorting to the mortgaged property and the liability of his co-sureties for reimbursement. He did not act in the matter until the persons primarily liable were in default, nor until he was pressed for payment by the holder of the note and menaced with the probability of his property being taken in some way to discharge the debt, if he did not provide for it. 'True, the transaction was in the form of a bargain and sale and respondent testified repeatedly that he bought the securities, but he also said over and over again, in terms or in effect, that he acted under advice of counsel and had only in mind protection of himself against loss. There is nothing to indicate that he bought the paper as an investment, or paid it voluntarily. It seems very clear that, as regards the liability of .his co-sureties as contributors, his act in taking up the note •and mortgage extinguished the original debt.
True, it was not permissible for respondent to voluntarily
The learned counsel for respondent fails to make clear in his brief the theory, as he views the matter, upon which the liability of appellant was adjudged, respecting whether the learned trial court held that respondent paid the note or bought it as an investment relying upon the verbal promise of' appellant to pay his due proportion. The findings are very indefinite in respect to the matter. We agree with the learned counsel for appellant as to its being very difficult to see clearly from the decision the supposed underlying principles of it. The recovery cannot be sustained upon the mere-obligation of appellant to respondent as co-surety, without there was, in effect, at least, a payment of the indebtedness by-
It is suggested by counsel that appellant was released by laches of the holder of the note and mortgage, in that he did not proceed with diligence to collect the indebtedness after the same became due. The conclusive answer to that is, as counsel for respondent suggests, the payee of an instrument having a principal obligor and surety owes no duty of active vigilance to the latter to enforce collection of the indebtedness. The way is open to the surety at any time after default of his principal to pay the debt and reimburse himself by enforcing the obligation of such principal and the co-sureties, if there be such. Harris v. Newell, 42 Wis. 687; Updike’s Adm’r v. Lane, 78 Va. 132; Alexander v. Byrd, 85 Va. 690, 8 S. E. 577.
“The surety has no right to say that he is discharged from the debt ... if all he rests upon is the passive conduct of the creditor in not suing. He must himself use diligence, and take such effectual means as will enable him to call on the creditor either to sue, or to give him, the surety, the means of suing.” Lord Eldon in Eyre v. Everett, 2 Russ. 381.
So, as it is said, the duty of activity is imposed by law on the surety to protect himself rather than on the creditor to protect him.
The foregoing covers all the matters discussed in the briefs of counsel which are considered of sufficient importance to warrant special mention in this opinion, except the question of whether there was a valid extension of the note, in view of the conclusion we have reached in respect to that matter. It is conceded that, waiving other questions which have been decided adverse to appellant, he cannot recover unless his obligation of suretyship was discharged by a valid extension of the time for payment of the note by the agreement between O’Hearn and the Superior & Duluth Loan & Debenture Company.
Reference is made to the fact that some days after the transaction, as regards the extension, was concluded between the parties, without the knowledge and in the absence of 0’IIeam, and without any subsequent notice to him thereof,, an indorsement was placed on the back of the note in these-words: “This note, by mutual agreement, is extended for one year from April 15, 1893, at eight per cent, payable semiannual, interest having been paid to April 15, 1893, and all coupons surrendered,” and that subsequently interest _was
The point is made that the transaction was in effect an exchange of promises, the one being the consideration for the other, — a promise on the one hand to keep the money for an additional year at the same rate of interest, as before indicated, and a promise on the other to loan the money for such additional year at such rate, Nelson v. Flagg, 18 Wash. 39, 50 Pac. 571, and Benson v. Phipps, 87 Tex. 578, 29 S. W. 1061, being referred to iü support thereof. There are many such authorities. A pretty full discussion of them is to be found in Reed v. Tierney, 12 App. D. C. 165. There are still more authorities to the contrary, which, according to substantially the universal judgment of text-book writers, establish the better rule.
The reasoning in support of the first theory, as above indi
On a matter where there is such a direct and irreconcilable conflict as we find on the one under discussion there is very little to be gained by a lengthy review and analysis of authorities. There is not much that can well be done but to take a position on one side of the conflict or the other, being guided by what appears to be the weight of authority. It seems that such weight is significantly against the proposition contended for by appellant. The following distinctly hold that a request for an extension of the time of payment of a note at the contract rate of interest and consent thereto, is not binding because not supported by a new and independent consideration. Hughes v. Southern W. Co. 94 Ala. 613, 10 South. 133: “It requires an additional valuable consideration ... to bind the promisee to an observance of even an express promise to indulge.” Woolford v. Dow, 34 Ill. 428: It was mutually agreed to extend the time of payment of the note at ten per cent, interest. That involved no new consideration. “The note by its terms drew ten per cant, interest, and this agreement made no change in its terms as to the rate of interest. . . . The agreement to extend the time of payment . . . was a mere nudum pactum." Crossman v. Wohlleben, 90 Ill. 531, 542: “A mere promise made by a creditor to indulge the debtor for a given length of time, upon the payment of interest, does not bind him to such extension, because the payment of interest is already secured by the terms of the original note
We are not unmindful of the fact that there are instances where it has been said in legal opinions that the weight of authority is contrary to what we assert. Reed v. Tierney, supra (12 App. D. C. 165) is one of such instances. But to
While, as before indicated, there is no decision of this court precisely on the point, so none interfering with the judicial policy here being established in harmony with the view-pressed upon our attention by the learned counsel for appellant, it is believed that the contrary one has been, generally,, in business transactions accepted as correct in this state. No-good reason is perceived why what seems to be the decided weight of authority in respect to- the matter should not be followed. The decisions here, so far as they go, are in harmony therewith. They are to the effect that a valid agreement for-the extension of the time of payment of a note must have all the essentials of a binding contract; that it must be reasonably definite as to time and there must be an agreed equivalent for the extension: such a consideration as will so tie the hands of the obligee as to disable him from enforcing the obligation until the expiration of the time agreed upon. Riley v. Gregg, 16 Wis. 666; Ready v. Sommer, 37 Wis. 265; Meiswinkle v. Jung, 30 Wis. 361; Irvine v. Adams, 48 Wis. 468, 4 N. W. 573; Hamilton v. Prouty, 50 Wis. 592, 7 N. W. 659; Fay v. Tower, 58 Wis. 286, 16 N. W. 558. That equivalent must be something other than what the law would award to the obligee in case of a mere extension of the time of performance, regardless of any pretense of a contract to- do so. It must be something separate from, and entirely additional to, what would accrue in favor of the obligee if he merely allowed the note to run from day to day.
Testing the transaction respecting the alleged extension in question by the foregoing, it was not binding on the holder of' the note. There was never a moment of time after it fell due-in which such holder was not perfectly free to enforce payment, nor in which the appellant and his co-sureties, or either-of them, or the parties primarily liable for the debt, or either-of them, could not have discharged the debt by payment of it..
By the Court. — The judgment is affirmed.
The following opinion was filed January 16, 1906:
While I agree with the judgment of affirmance in this case, I do so on the ground that, in the dealings between the principal debtor and the mortgagee resulting in the so-called extension of time, I can find no agreement on the part of the debtor to refrain from payment during the term of such extension. To my mind the whole transaction is consistent with mere indulgence on the part of the creditor, and in no wise inconsistent Avith a continuation of the privilege, always resting in a debtor, to pay an overdue debt. The proposition declared in the court’s opinion as a basis for the conclusion reached, that, even if such a promise on the part of the debtor were in fact made, it would not constitute such consideration for the promise of the creditor to extend as to give it validity, is, however, in my view, so opposed both to reason and authority that I cannot yield it my assent. I agree fully with the rule laid down, and the authorities cited in support of it, that a mere promise by a creditor to grant extension of time, hoAvever definite, is of no validity unless there be some new consideration therefor, either a benefit to the creditor or
Examining the cases cited in the opinion as conflicting with the rule that a definite promise to retain the money at interest during a specified term is sufficient consideration to support an agreement by the creditor to extend, for which I contend, I find them to go no further than to declare the proposition that a mere promise to pay interest at the rate fixed by the former contract so long as the creditor forbears collection, is no consideration, because it is the legal obligation already resting on the debtor, and his promise, therefore, adds nothing of detriment to him or benefit to his creditor; with which I fully agree. True, some of these cases are based upon agreements which might be construed to include agreement of the debtor that he would retain the money, but in none of these-is any such construction declared nor its effect to validate the-extension at all discussed. In Illinois, however, whence are taken most of the citations, the distinction is clearly drawn. Thus, in Crossman v. Wohlleben, 90 Ill. 537, in dealing with a promise to extend upon a promise to pay interest at the old rate, it is said:
“It is essential that both parties shall be bound by the contract. ... In the case at bar there is no consideration shown either by a promise on the part of the debtor to keep the money for any given time cmd pay interest for that time or-*558 by paying the interest in advance.” (Italics mine.) Heenan v. Howard, 81 Ill. App. 629, 634, is entirely similar. But in Dodgson v. Henderson, 113 Ill. 360, 364, where the -debtor did expressly agree to keep the money, the court held:
“The agreement to keep' the money another year and pay the interest thereon was a sufficient consideration for the promise of the payee to extend the time of payment.” Approved in English v. London,181 Ill. 614, 54 N. E. 911.
In Mississippi, too, whence is cited Roberts v. Stewart, 31 Miss. 664, which fully adopted the rule of Reynolds v. Ward, 5 Wend. 501, and of the Indiana cases, the distinction for ■which I contend was at once recognized as nowise inconsistent in Brown v. Prophit, 53 Miss. 649. The Wisconsin cases go no further than to demand generally that an agreement for an extension, like any other contract, must have a consideration either of benefit to the creditor or disadvantage to the debtor. That a promise waiving the debtor’s option to pay at will, when evidenced by a new promissory note, is such a consideration, is expressly held in Omaha Nat. Bank v. Johnson, 111 Wis. 372, 87 N. W. 237, and that a verbal promise to forego payment is also, was assumed, as already stated, in Templeton v. Butler, supra.
When a proposition is supported by unassailable reasons and by all the authority speaking expressly on the subject, I-think it should not be repudiated but adhered to.