| Ill. | Jan 15, 1862
The doctrine, that giving further time to the principal debtor, by a valid agreement, without the assent of the surety, releases him from the contract, seems to be universally admitted and acted upon. Tet a diversity in the practice, as to the mode in which the surety may avail himself of the defense, exists in different courts. In some it is held, that the remedy is alone in chancery, unless it appears upon the face of the instrument, that he bears that relation to the contract, whilst in others it is held, that the fact that he is a surety may be averred and proved, although he appears as a principal.
In Great Britain the former rule appears to prevail, but on this side of the Atlantic, every defense which discharges the surety in equity, has generally been recognized as admissible in courts of law. There are, however, some of our courts that follow the English practice, although compared with the others, they are few in number. To render such a defense available, it is nécessary that the contract extending the time for payment, should be such as would prevent the creditor from maintaining an action, on the original agreement, before the expiration of the extended time. To have that effect, it must be based upon a sufficient consideration, and must be for a definite period. Gardner v. Watson, 13 Ill. 341" date_filed="1851-12-15" court="Ill." case_name="Martin v. People">13 Ill. 341. But possessing these requisites, it must also have been entered into, between the principal debtor and the creditor, without the consent of the surety, or his subsequent ratification, to constitute a valid defense. And this defense is based on the principle, that the surety can only be held to perform the precise terms of his contract. He cannot be charged by the acts of others, beyond the terms of his agreement.
When he has agreed, that his principal shall pay money, or perform any other act, by a specified day, the change of time to a different day, is not the agreement into which he entered, and to enforce its performance, would be to permit other and unauthorized persons to make for him a contract. The principle is universally recognized, that any unauthorized alteration of an agreement, will release all parties, not assenting to or ratifying the change. And the surety must undeniably have the same right to interpose the same defense, when the terms of the agreement into which he has ■ entered have been changed by other parties.
Again, any alteration, by which the rights of a surety are impaired, or the possibility of his resorting to them is delayed, places him in a different situation from that which he originally occupied. It might also impose upon him the whole burthen of the obligation, and deprive him of resorting to means of indemnity to which he looked, if the principal should in the meantime become insolvent. After the time for the performance has elapsed, the surety has the right to resort to equity, to compel the principal to proceed to the enforcement of the contract, or he may himself discharge it and look to his principal for indemnity. These are his legal rights, and to which he is supposed to look, when he assumes his liability, and to deprive him of them, might work great injustice and flagrant wrong. The necessary consequence of so extending the time, is the release of the surety, whatever the form of the contract, and whether the extension has been made before or after a breach. Warner v. Campbell, 26 Ill. 282" date_filed="1861-04-15" court="Ill." case_name="Warner v. Campbell">26 Ill. 282. And we have seen that it is held by the greater number of the tribunals of this country, that such a defense may be made in a court of law.
This rule can work no injustice, as the creditor, if unwilling to release the surety, has only to refrain from entering into an agreement to give further time without the assent of the surety. The mere neglect to sue at the maturity of the contract, or even giving further time by an agreement not binding on the creditor, does not produce a release of the surety, as he may still compel the creditor to proceed to the enforcement of the agreement, or. may discharge it, and resort to his remedy against his principal for his ultimate indemnity. By such an agreement he is deprived of none of his remedies, and is subjected to no new conditions, hazards or losses outside of his original undertaking.
Then was the agreement, to postpone the payment in this case, of such a character as released the defendant Keys ? The evidence satisfactorily shows, that he was only a surety, and that the payee was aware of that fact at the time the instrument was executed. He admitted, that the money was loaned to defendants Mudd & Hughes, before Keys executed the note. He likewise admitted in the same conversation, that he had extended the time of payment. It also appears, that there was indorsed on the back of the note this memorandum : “ Received of Mudd & Hughes, payment in full, for the intererest on the within note, to the 28th day of March next, at which time this note is to be due and payable; if not paid at that date, to draw interest according to the force and tenor of said note. St. Louis, August 6th, 1857.”
It is manifest from this evidence, that defendant Keys was only a security on the note. And we think it equally clear, that the advance interest was paid as the consideration, and to procure an extension of time, until the 28th of March, 1858. Morgan admitted an extension of time, and this memorandum found upon the back of the note, shows that such was the fact, as well as the period to which it was extended. It is, however said, that it was not signed by the payee, and is for that reason not binding. No one will for a moment doubt, that it is a sufficient receipt for the interest which accrued, -prior to the 28th of March following. And why ? Because it comes from the possession of the holder, and if it was untrue or improper, it would have been obliterated. It was in the possession and under the control of the person against whom it operated, and it must be supposed to be correct. And for the same reason the presumption must apply to every part of the indorsement unless rebutted, which has not been done.
At the time this interest was paid, the note had just matured, and it was not designed as a payment on the principal, because it was limited to the accruing interest. This excludes the inference that it was designed, or may be treated as a payment on the principal. This interest paid to the creditor in advance, was a benefit to him, and was therefore a sufficient consideration, to support the agreement to extend the time of payment. Had suit been instituted for the collection of the principal before the expiration of the time, this agreement would have defeated a recovery. And if so, Keys had no legal means of -compelling Morgan to proceed for its collection, or to have himself paid the money, and proceeded against the principal debtors for indemnity, before the time had elapsed. By this agreement he was effectually prevented from resorting to those remedies, which he doubtless had in contemplation when he became a surety. Upon this entire record, after a careful examination, we are unable to perceive any error for which the judgment should be reversed, and it is therefore affirmed.
Judgment affirmed.