Grafton Bank v. Woodward

| Superior Court of New Hampshire | Nov 15, 1829

The opinion of the court was delivered by

Richardson, C. J.

The plea, in this case, contains some redundant matter. Whatever rules and regulations the bank may have adopted in relation to the collection of the notes it received, those rules and regulations must have been made for its own convenience, without any intent to control the express provisions of any contract, to which it might be a party, and might be enforced, or not, at its pleasure, without varying the liability of the principal, or sureties, in this case. All the allegations in the plea, relating to such rules and regulations may then be considered as mere surplusage.

The note is alleged to be payable on demand, with interest after sixty days. 1't seems to be generally understood, that the principal in such a note is payable on demand, and that the words, “ after sixty days,” refer only to the interest. 5 Pick. 15, Loving v. Gurney.

But however this may be, it is clear, that the note was, upon any construction which can be put upon its terms, payable at the time the contract, upon which the defendant relies, for his discharge, was made with the principal.

It is averred, that the defendant is a surety merely, and that this was known to the plaintiffs.

It is then, in substance alleged, that on the 28th January, 1824, the plaintiffs, for a valuable consideration, agreed with the principal without the knowledge, or consent of the defendant, to forbear to collect the note, and to give to the principal further day of payment for the term of sixty days. This agreement must be understood from the terms, in which it is averred to havehecn absolute and unconditional. Wc have been at a loss to conjecture the motive, which could have induced the bank to make such a contract. The note was originally payable on demand, although probably interest was paid for sixty days in advance, with an understanding between the parties that the money was not to be demanded within that time, unless the safety of the debt, or the situation of the affairs of the bank should make a demand necessary. And the interest might have been paid in advance at any subsequent period, on the same terms, and with a like understanding, without doing any wrong to the surety, and without discharging him from his liability upon the note. But the plea alleges an absolute and unconditional agreement to give day of payment for the term of sixty days, and this allegation is admitted by the demurrer.

We consider it as now settled by a long series of decisions on grounds the most satisfactory, that if a creditor, knowing there is a surety, gives time to the principal debt- or, under an express and absolute agreement for that purpose, made for a valuable consideration, without the consent of the surety, in so doing he discharges the surety, and that this is a good defence for a surety in a court of law.

It has been suggested in the argument, that this rule of law is founded on the right which a surety has in a court of equity to demand to sue the principal in the name of the creditor, and that as we have no such court, no such right can exist, and the rule can have no just foundation in this state. But that is a mistake. For even where t here arc courts of equity, the surety has a right to pay the debt when due, and sue the principal in his own name ; and there is as good a reason why the surety should be discharged, if deprived of this right by a contract between the principal and the creditor, as if he were deprived of the right to sue in the name of the creditor.

In this state the surety has a right to pay the debt" when due, and then call upon the principal. If the creditor by a valid contract gives the principal day of payment without the assent of the surety, the low does not permit the surety to interfere, but lie is discharged, and - in this way the rights of ail -concerned are secured.

It has been further urged, that the rule, by which a surety is discharged when a new contract for delay is made between the creditor and the principal without the consent of the surety, does not apply, where the surety is jointly and severally bound. But the cases to which we have been referred, do not support this distinction : nor do we see any thing in the nature of such a contract, which can render this circumstance at all material.

It is also said, that the surety is not discharged unless the principal becomes insolvent within the time of the extended credit. But we find no case which sanctions this limitation of the rule. On the contrary, it seems always to have been understood, that the new agreement, ipso facto, exonerated the surety.

Another objection, which has been made to the plea in this case, is, that the consideration on which the - agreement by the bank to extend the credit is alleged to have been made was illegal. This objection is well founded in fact. The consideration paid for the forbearance is averred to have been interest at the rate of twelve per cent per annum. This was illegal. But it is well settled, that in this state a promise founded upon an usurious consideration is not void. ! Ie who takes or secures more than six per cent for giving day of payment, is made liable to certain forfeitures which, in a suit upon the contract, may be deducted from the debt, and a promise to pay more than six per cent is held to be invalid as to all above six per cent. And where illegal interest has been, paid, it may be recovered back in an action for money had and received. 2 N.H. 333" court="None" date_filed="1821-02-15" href="https://app.midpage.ai/document/willie-v-green-8503309?utm_source=webapp" opinion_id="8503309">2 N. H. Rep. 333, Willie v. Green; Ibid, 410, Young v. Berkley, To this extent, and bo farther,-is a contract affected by usury in this state. A promise to give day of payment founded upon a usurious consideration is certainly not void.

It only remains to enquire, whether the contract between the principal in this case, and the bank, that further day of payment should be given, was such that no suit could have been maintained upon, the note by the bank until the further day of payment arrived ?

The contract to give time is not averred to have been in writing, and we have no doubt that it must be considered in this plea as a contract not in writing. T. Ray. 450, Case v. Barber; T. Jones, 158, S. C. ; 1 Saund. 276, a, note 2 ; Buller’s N. P. 279.

But there is no statute, that requires such a contract to be in writing ; and a contract not in writing has the same validity as the same contract would have, if reduced to writing.

All agreements in writing, not under seal, are considered as parol agreements. Philip’s Ev. 444.

Where a contract is in an instrument under seal, it seems to be settled in England, that it cannot be varied by a subsequent parol contract. 5 B. & A. 187 Davey v. Prendergrass; 3 D. & E. Littler v. Holland ; 1 East, 619.

But it has been decided in New-York, that the time of the performance of the condition of a bond maybe enlarged by a parol agreement of the parties. 3 Johns. Rep. 528, Fleming v. Gilbert.

With respect to written contracts, not under seal, the law seems to be well settled, that their terms maybe varied by a subsequent parol contract.

Thus Starkie says, “ if an agreement be reduced to writing, parol evidence is admissible to show, that the parties without writing afterwards varied the terms.” 4 Starkie, 1048.

Chitty says, “ a subsequent parol agreement not contradicting the terms of the original contract, but merely in continuance thereof, and in dispensation of the performance of its terms as in prolongation of the time of execution is good, even in the case of a contract reduced to writing, under the statute of frauds.” Chitty on Contracts, 27.

There are many cases in the books which recognize the same principle. 5 B. & A. 187; ante, 45, Robinson v. Batchelder. 1 Johns. Cases, 22, Keating v. Price. And it is believed, that no case can be found in which it has ever been questioned.

■ It seems to be well settled, both in courts of law and in courts of equity, that an executory agreement in writing, not under seal, may, before breach, be discharged by a subsequent unwritten agreement. Philips’ Ev. 444-448; Com. Dig. “action on the case in Assumpsit,” G. ; 1 Camp. 85, Whatley v. Tricker ; Chitty on Bills, 157 ; 9 Vesey, 250 ; 17 ditto, 364 ; 1 ditto, 402 ; 1 Johns. C. R. 429 — 430 ; 2 ditto, 416, Chitty on Contracts, 292.

If a written contract can be discharged altogether by a subsequent HSTeement, not in writing, it will be difficult to conceive, it is imagined, any good reason why its terms may not be altered by such an agreement. If the contract can be varied, no action can be sustained on the original contract in contravention of the new agreement.

We are, on the whole, of opinion, that the plea is in law a sufficient answer to the declaration.