Kingsbury v. Williams

E. Darwin Smith, J.

The defendant undertook in and by his agreement and guaranty, indorsed upon the lease, that Hilliard & Bourne, the lessees in said lease, should pay the rent reserved in and by said lease to the lessees, according to the terms and provisions of said lease. The rent, by the terms of the lease, was payable quarterly in the sum of thirty-two dollars and fifty cents, on the first days of January, April, July and October, amounting to $130 in each year. The proofs on the trial show that the said lessees occupied the demised promises under said lease and were in arrear for rent for two years and one quarter next prior to April 1, 1860. The lease would have expired on the first day of October, 1860, and the same was put an end to by the surrender of the premises by the lessees and a release of all claim for rent thereafter by the lessor, by the agreement of the 9th day of April, 1860.

At that time the defendant was clearly fixed and liable for the rent in arrear. This liability, could only be discharged by payment, release or other satisfaction. It is a settled rule that a right of action for a covenant broken or other legal cause, once created or existing, remains until legally discharged. The decision at the circuit was that the defendant was discharged from his liability for such rent upon his said guaranty, on the ground that the execution of the said instrument of the 9th of April, 1860, with the surrender of the term and possession of the demised premises pursuant to said instrument, without the knowledge or consent of the defendant, amounted tó a material alteration of the contract to which the said guaranty relates.

The agreement referred to clearly was not designed to have that effect. As between the piarties, the right of the plaintiff to recover for the rent in arrear is expressly retained and reserved in the contract, and if it had not been so reserved the surrender of the term by a lessee does not discharge him for any previous liability for a breach of the covenant of the lease. (2 Shep. Touch. 301.)

The defendant is a surety, and his contract confessedly is to be construed strictly, and his liability cannot be extended beyond the clear terms of the agreement, and will be discharged by any acts or omissions of the guarantee, which alter the substance or force of the contract without Ms consent. (2 Story on Contracts, 870. People v. Vilas, 33 N. Y. Rep. 460.)

Before breach, any material alteration of the contract,-it is well settled, will discharge the surety and any other party not consenting to it. The case of Miller v. Stewart, (9 Wheaton, 680,) was a case of this kind, and well illustrates the rule.' The defendants became sureties in a bond to the plaintiff' for the faithful discharge of his duty by á deputy collector appointed to collect the taxes in eight townships. After the execution of the bond, the name of another town, making the number of townships nine, instead of eight, was inserted in the bond, This was held a material alteration of the bond by which the sureties-were discharged. This was an alteration of the contract upon the face of the instrument. The alteration enlarged the liability of the sureties and the bond from the time of the alteration became voidable for that reason, as against the sureties.

There is a class of cases where the creditor did not accept the precise terms of the guaranty in contracting with the principal, or varied the terms of the contract in respect to the mode or times of payment or other risk, in which it has been held the surety was not liable.

The cases of Henderson v. Marvin, (31 Barb, 299;) Walrath v. Thomson, (6 Hill, 540;) S. C. (2 Comst. 185;) Wright v. Johnson (8 Wend, 516;) Birckhead v. Brown, (5 Hill, 634;) and Dobbin v. Bradley, (17 Wend. 422,) are cases of this kind. In this class of cases the guarantor was never fixed or bound. The terms of the guaranty were never accepted or complied with by the creditor, and the default of the principal debtor was not within the terms of the contract. The case of Bangs v. Strong, (7 Hill, 250; 10 Paige, 11; 4 Comst. 317,) presents a case like this in one important particular, that the original liability of the surety was fixed and undoubted. In this case the creditors contracted with the principal debtor, after judgment against the principal and surety, to take lands from such principal debtor in payment of the debt at the valuation of individuals, after deducting ten per cent from the appraisement. This was held such a change of rights of the surety as to discharge his liability. Judge Bronson says of it, (7 Hill, 254,) “The creditor had agreed to take land instead of money, for the whole or part of the debt.”

If the surety had paid the debt and been substituted in the place of the creditor, he would only have acquired 1 he ' right to receive payment in land. The surety was held discharged from the debt on the ground that his right to subrogation was impaired by the new contract.

In 4 Comstock, in the same case in the Court of Appeals, Judge Pratt said: “ The true ground upon which the liability of the surety is discharged is that his rights against his principal are impaired or affected.” This is the rule, I think, where the surety is clearly fixed and liable, and subsequent acts or agreements between the creditor and principal debtor are alleged to cut off’ or discharge such liability.

"While the contract is executory it isz undoubtedly true that any material change or alteration of its terms destroys . it and discharges the sureties, and enables him when sued upon the new substituted or altered contract, to say, non Tisec in fcederá venir. (Burge on Suretyship, 214, 218.)

Questions in respect to the liability or discharge oí sure- ' ties, in consequence of an alteration of the contract, have generally arisen in cases where the contract of the surety was an entire one, and the supposed variation or change of it went to the- whole consideration and the whole liability. But in this case the contract of the defendant is-divisible. He was liable for each quarter’s rent as it fell due, and when the supposed alteration of the contract was made he had become fixed by the non-payment of the rent by the lessees, Hilliard & Bourne, for nine quarters’ rent. His contract of guaranty is precisely the same, as I regard it, in legal effect, as if he were an indorser of Hilliard & Bourne upon nine promissory notes of $32.50 each, payable at the time when the said quarters’ rent in arrear repectively fell due, and had been charged as such indorser , by due demand and notice of non-payment. If in addition to nine such promissory notes, the lessor had taken and held two others of the same amount for the two quarters’ rent, payable on the first days of July and October, 1860, would the canceling and giving up to the lessees of such two last mentioned notes, not due and payable on the said 9th day of April, 1860, discharge the defendant from his liability on the said nine over due and protested notes ? If it would I agree that the discharge of Hilliard & Bourne from the payment of such rent would have the same effect. But it seems to me that such would not be the effect of the surrender of two such notes. It could not affect the defendant’s liability upon the matured and overdue paper. This, in substance and legal effect, is all that the plaintiff has done in this case. He has discharged the lessees and the defendant from the payment of the last two quarters’ rent upon the said lease. It is just the same as though he had received payment from Hilliard & Bourne of the last two quarters’ rent before they fell due, leaving the previous nine quarters’ rent unpaid. Certainly this would not discharge the defendant. There is, in fact, no alteration of the defendant’s contract. On the face of the lease and the defendant’s guaranty no alteration appears. There is no alteration of the terms of the contract apparent on the face of the instrument. The alleged alteration does not „ relate to the quarters’ rent, or either of them, left unpaid. There is no new contract relating to stich rent. Varying the terms of payment is taking away the defendant’s right of subrogation in respect to such rent, as was the case with the new contract in Bangs v. Strong, (supra.) If the plaintiff had made any new contract with the lessees varying the terms of the payment of such rent, extending the time or changing the mode of payment, such new contract would have operated to discharge the defendant within that case and within the well settled rules of law.

This case, it seems to me, is not within the principle which discharges a surety upon the ground of a variation of the contract. The defendant’s rights to substitution or subrogation are in no respect impaired by the new agreement. It simply operated to discharge him from further liability, and left the rights of the plaintiff unimpaired in respect to the rent in arrear. I think the verdict should be set aside and a new trial granted, with costs to abide the event.

James C. Smith, J.

The defense which an alteration of the contract by an unauthorized agreement with the principal gives to the surety, depends for its effect, not,on an alteration of the relations between the creditor and the surety, but of those which subsist between the latter and the principal. The surety is entitled at any moment after breach by the principal either to come into court to compel the performance-of the engagement for which he is responsible, or tofulfilfit himself and then have recourse to legal proceedings to obtain an indemnity; and any act by which these rights are impaired or the possibility of resorting to them delayed, places him in a different situation from that to which he originally looked forward, and he is therefore discharged. But an act which has no such effect does not release him from his obligation. (See 2 Am. Lead. Cas. 397.)

By the terms of the lease in the present case, the rent was payable in installments, and the claim, in suit, is for rent which accrued and became due and payable before the surrender, and while the tenant was in possession. The surrender of the lease and the release of the tenant from liability for rent for the unexpired portion of the term did not affect the relations of the surety to the principal in respect to the rents previously accrued and then due and payable. The suggestion that he may have relied on the tenant’s continuance in possession during the whole term to enable him to pay the rent, is speculative. The surety might have insisted on that condition by an express stipulation to that effect, but he did not; and in the absence of such stipulation he must be deemed to have contracted in view of the settled rule of law that a surrender of the term by the lessee, does not discharge him from any previous liability for a breach of the covenants of the lease. I do not perceive how, in any legal view; of the case, the remedies of the surety have been impaired or delayed by the surrender.

[Monroe General Term, December 7, 1868.

I am of opinion there should be a new trial.

Johnson, J. dissented.

blew trial granted.

JS. J). Smith, Johnson and J. G. Smith, Justices.]