Dundas v. Sterling ( 1846 )

Coulter, J.

After "stating the agreement,- the counsel for the plaintiffs in error contends that judgment ought to have been entered for the plaintiffs, because there was no consideration moving from the defendant to the bank, he having been fixed by a regular protest and notice for- the amount of the note, and because the engagement of Sterling, not to take advantage of the delay-that might'be' given to Huey, was'absolute and unconditional, and also because .the bank made no engagement that the note should be reduced' every sixty, days.. .The testimony establishes that Huey, who probably proposed the arrangement to the bank, was directed by the institution to'its attorney, for the-purpose of having a writing drawn, that would prevent Sterling from taking • advantage of the delay. The attorney .of the .bank-drew'up a paper which was presented to Sterling, who refused to sign it on the ground of its fixing no time when his responsibility should cease,.and interlined the provision that the note should be reduced from five to ten per-cent, every sixty daysthe instrument 'was then presented to. the gentleman that acted as attorney for the bank, who agreed- to the paper as .altered by-’Sterling, and .it was afterwards taken to him,-and under the impression that the ingredient of reduction of the note was.the-c'ondiiion of his engagement, he executed it. ■ The paper was then delivered to the bank, which accepted it, and acted upon it, and has retained it-since that period. .It will.not do, under such circumstances, to saythát the-contract is' obligatory on Sterling for -the benefit of the bank, and . not 'against the .-bank'as to those stipulations which were intended for.the safety of Sterling. By-an irresistible implication, the paper as to these stipulations became' the contract of the bank aS effectually as if.it had been signed by its'proper officer, and Sterling, reposing on'its faith, had a right to believe that the note would be regularly reduced at .each-renewal until the debt- should be extinguished—an impression as clearly justified by the terms of the written contract as by the parol testimony. It was strongly urged in the argument of the. cause, .that the-bank had .ho inducement to bind itself on the subject matter,.as Sterling was already fixed for the debt. : It is of nq consequence in this cause, what inducement the bank had for entering into the arrangement. It doubtless considered it- in some .way advantageous; as institutions óf that description usually'act with a special regard to’-th'eir own interests. It probábly considered.Huey at that-'time a good.customer, and that the interest and reductions being paid according to the understanding of the parties, would afford a profitable employment of the money'., Be that as it may, the agreement was consummated, and there' was a sufficient consideration to support the .contract. Any forbearance of a money right at law- or equity, if done at the request, express or implied, of the other party, imports a consideration. There is a distinction between a merely voluntary engagement and one on the faith of which the other party does some act or enters into some engagement. Now, Sterling did agree to forbear a' right which he had. inequity to enforce the creditor to proceed on the protested note; and he waived his right to pay it bft himself, and proceed against the principal.. He thus disarmed himself of two important legal rights, at ,a time when, by pursuing either, he might have made, himself perfectly safe; for it’ appears by the testimony, that- Huey-was then in all probability, of sufficient ability to have paid the note, and -he thus disabled himself at the instance of the bank, which requested the paper to be drawn for that very purpose. These' stipulations on the part, of Sterling afforded the consideration on. which the.-bank agreed to the provision,, introduced by Sterling himself, that the note should be reduced from five to’ ten per cent., every sixty'days, and that engagement on the part of the-bank was the consideration or condition of the engagement made on the.part of Sterling not to take advantage .of the delay. The contract' was then mutually obligatory. ■ •

The next inquiry is, has it been fairly and justly performed on the .part of the bank. . • -

In every contract of suretiship,-the law requires the most exact good faith on the part of the creditor throughout the whole transaction-. Any concealment-of a material fact, or any'undue advantage taken of the surety by withholding from him proper information, ar.e grounds of relief in equity. ' If any arrangement is made between the creditor and principal debtor, and not communicated to the surety for his assent, inconsistent with the contract, it will operate as a discharge of the surety. 2 Johns. Ch. Rep. 554. The bank renewed the note of Huey when it first fell due, without exacting any reduction. This was clearly inconsistent with, and a departure from, the contract. The note was renewed, periodically, up till 2d of January,- 1844, without a reduction equal to five per cent, on any renewal, except twice,-, and sometimes with no reduction. During all which time there is no evidence.that the bank communicated the facts to Sterling, or requested his assent to this new arrangement. And thus having departed from the contract, and having concealed the fact from the surety, he would on that ground alone be entitled to relief. - "

When the first note of Huey fell due, and he failed to pay the reduction, the bank was bound, in the exercise of good faith and due diligence, to have brought suit on that note, and to communicate the fact to the surety. But instead of doing that, the creditor thought proper .to extend the time, ‡0 impose risks on the surety not contemplated at the time of the contract, to make a new arrangement with the principal debtor according to his own pleasure; and yet seeks to recover from the surety after the principal is insolvent. Justice forbids it. It is the duty of the courts to enforce the obedience of good faith, and with this cardinal principal in view, this court can perceive no error in the judgment of the court below.

The judgment is affirmed.