148 S.W. 290 | Tex. | 1912
On April 11, 1907, E.F. Bray and Erminia C. Bray, his wife, executed and delivered to the Red River National Bank of Clarksville, Texas, their two promissory notes, payable to the bank, aggregating $4,133.30, principal, the first maturing October 15, 1907, and the other December 15, 1907, to secure the payment of which they at the same time granted a deed of trust lien upon certain real estate, situated in Clarksville, the separate property of Mrs. Bray. Neither of the notes was paid at maturity, but between October 15, 1907, the date of the maturity of the first note, and July 7, 1908, payments amounting to $1,500.00 were made upon that note. Request was made by Bray for an extension of the maturity of both notes, and finally, on July 7, 1908, in consideration of the payment in advance of the interest that would accrue on them to October 1, 1908, the bank agreed with Bray to extend their time of payment to that date. Upon default then made in their payment the bank attempted to enforce its deed of trust by a sale of the property under the power afforded by its provisions. Thereupon Mrs. Bray, joined by her husband, brought this suit to enjoin such foreclosure proceedings upon the ground that the extension of the maturity of the notes was without her consent, whereby her property was released as security for the debt. The bank, among *315 other things, answered that it had been induced to grant the extension by certain fraudulent and false representations made to it by Bray for the purpose of effecting the release of Mrs. Bray's property as security for the debt by duping it into an agreement for the extension. By cross-action it sought recovery for its debt and foreclosure of its lien. Judgment in the trial court resulted, through a peremptory instruction, in favor of Mrs. Bray, cancelling the deed of trust lien, and denying to the bank recovery upon its notes because of bankruptcy proceedings instituted by Bray and then pending. The Court of Civil Appeals has affirmed that judgment, holding in its opinion that there was no evidence that Mrs. Bray consented to the extension. It further finds that there was evidence sufficient to raise the issue that the bank was deceived into agreeing to the extension by a fraud practiced upon it by Bray, as was alleged by the bank, but holds that the operation of the agreement to extend, notwithstanding the practice of a fraud in its procurement, was not otherwise than to work a release of the wife's property as security, inasmuch as an agreement so induced was not void in the sense that a stranger would be entitled to disregard it, but at most was merely voidable at the instance of the bank as between itself and Bray.
The established rule of law is that if, without the consent of the surety, a binding agreement is made between the creditor and the principal debtor for an extension of the maturity of the debt, the surety is released; and the effect is the same as to property that stands in the relation of a surety, as did the property of Mrs. Bray in this case. The reason of the rule demonstrates its justness as a principle as well as its necessity in the business affairs of the people, for at any time after the maturity of the debt the surety, for his own protection, should possess the right to pay it and proceed against the principal for indemnity, and such right is impaired if the creditor enter into a valid contract with the principal for an extension of the time of payment. The law therefore visits upon the creditor the deserved consequence of his so impairing the right of the surety by releasing the surety from liability. Benson v. Phipps,
The Court of Civil Appeals, as stated in its opinion, recognizes that if this were a contract merely between the bank and Bray, the bank would be entitled to be heard upon its plea, and that as between them the agreement was subject to be avoided by the court because of the fraud alleged to have been perpetrated by Bray in its procurement. If it was thus subject to be set aside as between the bank and Bray, it was not a binding agreement between them, and can not be held operative to release the surety. The surety can not invoke for his release an agreement by which the creditor is not bound, regardless of whether it is binding upon the principal. It is only an agreement for a new maturity which is binding upon the creditor and prevents enforcement of the principal's liability that impairs the surety's right. If the creditor is not bound by the agreement and the principal's liability may still be enforced, what possible ground of complaint can the surety have, and how is he is any wise prejudiced? It is not necessary that the agreement of extension be void and not merely voidable, as is held by the learned judge writing the opinion of the Court of Civil Appeals. The effect of a judgment in favor of the bank upon the issue would be to make the agreement void ab initio and of no effect whatever. This court held in Benson v. Phipps, supra, in discussing the right of a surety under an extension agreement, *317 that "if the creditor is not bound by the promise to extend, it is clear there is no release," which we deem the correct rule.
If the fraud of the principal is sufficient to absolve the creditor from an agreement induced by it, as between himself and the principal, it ought to be sufficient, and we think it is, to prevent the surety from profiting by it to the destruction of the creditor's security. In the well considered opinion of Judge Key, in the case of Officer v. Marshall, 9 Texas Civ. App. 428[
Reversed and remanded.
