Uniontown Bank v. MacKey , 11 S. Ct. 844 ( 1891 )

140 U.S. 220 (1891)

UNIONTOWN BANK
v.
MACKEY.

No. 327.

Supreme Court of United States.

Submitted April 20, 1891. Decided May 11, 1891. ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF INDIANA.

Mr. S.B. Vance for plaintiff in error.

Mr. G.V. Menzies for defendant in error.

MR. JUSTICE GRAY, after stating the case as above, delivered the opinion of the court.

It being alleged by the plaintiff, and admitted by the defendant, that Naas, one of the makers of the notes in suit, signed them as surety for the Mount Vernon Mill and Elevator Company, the other maker, and that the defendant, Mackey, endorsed the notes for the accommodation of that company, there can be no doubt that an agreement between the holder of the notes and the principal maker to extend the time of payment for a definite time, without the consent of the surety, would discharge him, and that such discharge of the surety, without the consent of the endorser, would discharge the endorser also.

The agreement in writing between the holder and the endorser, as to each note, by which the endorser "consents that the payment thereof may be extended until he gives written notice to the contrary," evidently contemplated and authorized only an extension of time which should neither discharge nor increase the liability of any party to the note. It looked to an extension consented to by both the makers of the note, and leaving them both liable to pay it at the end of the extended time; and not to an extension of time by agreement between the holder and the principal maker only, which would discharge the second maker, being only a surety, and prevent the endorser, upon paying the amount of the note, from having recourse to him, as well as to the principal.

As the first and third counts alleged an extension of the time of payment of the note by the holder by agreement with the principal maker only, without any knowledge or consent of the surety, the demurrers to those counts were rightly sustained.

But upon the second and fourth counts the case is presented in a different aspect.

Each of these counts, without alleging either the receipt by the plaintiff of any interest or other consideration from the defendant, or any agreement to renew or extend the note for a definite time, simply alleged generally that the plaintiff did not cause the note to be protested for nonpayment, and consented that it might be renewed, and forbore to sue thereon until after the death of the surety. This was not an allegation of a definite agreement to forbear to sue, but only of an actual forbearance, which would not discharge a surety or an endorser.

The defendant evidently so understood the allegations of these counts, for, instead of demurring to them, (as he had to the other counts,) he answered, setting up a definite agreement between the plaintiff and the principal maker to extend the time of payment of the note for four months from its maturity, in consideration of the payment of interest on the note during such extension of time.

But the special findings of fact wholly fail to support this defence. From those findings it appears that, the plaintiff having signified to the principal maker its willingness "to extend the credit upon renewal notes made by the same parties who executed the original notes," and the surety being too sick to join in the execution of new notes, the plaintiff sent to the principal maker, at its request, a statement of the interest for four months, as well as blank renewal notes to be signed by both makers when the surety should be able to do so; and that such interest was paid by the principal and received by the plaintiff after the surety's death, the plaintiff at that time being ignorant of his death, and expecting that the principal would procure and deliver renewal notes as before proposed, and nothing being then said as to an agreement for an extension of time, or as to the effect of the payment of interest. No present agreement for an extension of time can be inferred from the mere payment of interest under such circumstances. The necessary conclusion from the facts found is, that the plaintiff never agreed to extend payment of the old notes, except upon receiving new ones signed by both makers, which were never given; and that the payment of interest has no effect upon the case, except, as admitted in the complaint, by way of deduction from the amount that the plaintiff is entitled to recover.

Judgment reversed, and case remanded with directions to enter judgment for the plaintiff on the second and fourth counts.