Grayson's Appeal , 1885 Pa. LEXIS 357 ( 1885 )

Mr. Justice Clark

delivered the opinion of the court, March 30th, 1885.

It is contended in this case by Grayson, the appellant, that he is relieved from his liability to Kitchen, by the agreement of the latter with McMichael, to extend the time for payment of the note, upon which Grayson was the surety. The effect of such an agreement, when founded in a valid consideration, is not only to preclude the creditor from collection, but the debtor from a discharge of the debt, during the period of extension ; and, as the surety’s right of substitution in equity is by this means affected, sometimes defeated, he is rightly relieved from the debt.

It is well settled, however, by the decisions of this Court, that part payment of a debt, either principal or interest, after maturity, is not a sufficient consideration to support an agreement to give time upon the residue. It is then the duty of the debtor to pay the whole debt, and the right of the creditor to receive the whole, and no appreciable injury to the one or advantage to the other accrues from payment of part. It is equally well settled that payment of usury is, in the law, a payment on account of the debt, and, therefore, when made after maturity, it can create no valid consideration for a promise of extension.

This is the doctrine declared in Hartman v. Danner, 24 P. F. S., 36, where the subject is very fully discussed. .But the Court below erred, we think, in determining the case in hand upon the ruling of the ease referred to. In Hartman v. Danner, the consideration was the payment of usury only, not interest, after maturity of the obligation, in advance for further time; but, as the law at once applied the usury to the debt overdue, there remained no valid consideration for the contract.

Here, however, time was given, in consideration.of interest, paid in advance, covering the period of extension. The note became due the 18th of June, 1883; on the 7th of July following, McMichael obtained an extension until the 18th of July, 1883, by paying the interest for thirty days from the date of the note’s maturity, at the rate of 9 per cent, per annum. On the 6th of August he paid the interest in advance at the same rate for thirty days, and the time was in consideration thereof again extended; this carried the day for payment of the note to the 18th of August, 1883. Both of these extensions were effected without the knowledge of Grayson; and it is admitted that McMichael, at the maturity of the note, had a large amount of personal and real property, from which the debt could easily have been made, but that he is now insolvent.

It is a matter of no consequence that the interest was computed and paid at a usurious rate; the excess was, of course, applicable to the debt, the same as if it had been thus intended by the parties at the time.

The distinct question which this record presents, therefore, is whether or not a contract for further time upon a matured debt on payment of the lawful interest in advance, is a contract founded in a valid consideration. Of this, we think, there can be no doubt. The payment of the interest in advance is such a payment as by the terms of the obligation the debtor is not bound to make; it is also an appreciable advantage to the creditor, and a corresponding disadvantage to the debtor, the extent of which, of course, depends upon the magnitude of the debt.

In Hartman v. Danner, supra, relied upon by the appellee as authority against the opening of this judgment, we find the following language by Mr. Justice Sharswood:—

“ It may be that when there is a contract to pay interest for a specified period on a debt already due, so that the debtor, without the consent of the creditor, is thereby precluded from paying the debt and interest until the term expires, there is an appreciable benefit to the creditor, as well as injury to the debtor: Chute v. Pattee, 37 Maine, 102.....It may appear to be a very refined technicality that a part payment on account of a debt twenty-four hours before it is due, will, and twenty-four hours after, will not, form a sufficient consideration for an agreement to extend the time. We must remember, however, that the law pays no regard to the adequacy of consideration. There must be some legal benefit to the one party or injury to the other, though it may be of the slightest kind. It must be a benefit or injury which the law can recognize and appreciate, not the performance in part .or in whole of that which is already an ascertained and matured obligation.”

Although payment of interest in advance is the strongest circumstance showing a renewed credit, it does not necessarily tie the hands of a creditor; if the interest is paid in accordance with a regular usage, known to the parties and acquiesced in bv them, for a continuance of the loan, or if the right to sue is reserved, the surety cannot complain, as his rights are in no way invaded. But in this case the interest appears to have been paid with a view to an extension, the parties so seem to have understood it, and no right to proceed bv suit was reserved.

We are of opinion, therefore, that the Court misconceived the force and effect of the ruling of this Court in Hartman v. Danner, Shaffer v. Clark, and 'other kindred cases, and erred in discharging the rule to open the judgment.

The decree discharging the rule is therefore reversed, and it is now ordered that the said rule be- made absolute, and that the appellee pay the costs of this appeal, and that- the record be remitted for further proceedings.