Schroyer v. Thompson

Opinion by

Mr. Justice Frazer,

Plaintiffs’ action is founded on two demand notes signed by one defendant, as principal, and the others as sureties, and assigned by the payees to plaintiffs. The sureties each filed an affidavit of defense alleging release from liability, owing to a memorandum endorsed on the back of the notes, subsequent to their execution and without consent of the sureties, stating “all overdue int. to bear int. to be compounded semiannually.” A rule for judgment for want of a sufficient affidavit of defense was discharged and plaintiffs appealed.

It is not denied the agreement to pay interest on interest is a material alteration affecting the sum payable for interest within the meaning of the 125th Section of the Negotiable Instrument Act of May 16, 1901, P. L. 194. Plaintiffs contend, however, the memorandum is without effect so far as the sureties are concerned, because not on the face of the instrument and, consequently, not an alteration of its terms, but merely a separate agreement between maker and payee. Discussing or deciding this question, is unnecessary, since, under the view we take of the case, the decree of the. court below must be reversed for a different reason.

A surety has a right to require strict performance of the contract and an agreement between the principals varying its terms in a material part without the consent of the surety will release him from liability: Bensinger v. Wren, 100 Pa. 500; Nesbitt v. Turner, 155 Pa. 429; Robbins v. Robinson, 176 Pa. 341. It must be conceded that an agreement between tbe principals having the effect of altering the written terms of the contract must be based upon a sufficient consideration, that is, must be a valid and enforceable contract. The affidavits of defense filed contained no averment of an extension of time for payment of interest, nor do they set up other facts capable of being construed as a consideration for the agreement to pay compound interest. No consideration appears in the memorandum unless it be an extension of the time for payment of interest implied by the recognition of nonpayment from time to time by reason of the provision that it should bear interest. Nothing is said specifically as to extension of time, or concerning an agreement not to enforce payment of interest for a definite or indefinite period. While forbearance to sue has always been recognized as an adequate consideration for a promise made in reliance thereon, there must be an agreement to that effect; mere forbearance without an agreement has been held not a good consideration because of there being nothing to prevent the bringing of suit at any time: Clark v. Russel, 3 Watts 213; Sidwell v. Evans, 1 P. & W. 383; Cobb v. Page, 17 Pa. 469; Saalfield v. Manrow, 165 Pa. 114. While it has been said that actual forbearance at the instance of a defendant may also be sufficient (Clark v. Russel, supra) yet, in such case, the burden is on the one relying thereon to show by clear and satisfactory proof that the request to forbear was, in fact, the inducing cause of the act of forbearance: Clark v. Russel, supra. In the present case the court below in discussing this question stated there was an actual forbearance in the enforcement of the payment of interest for a period of nearly four years and such forbearance was sufficient consideration for the agreement to pay compound interest. The difficulty with this view of the case is that the record fails to show the delay of four years in collecting the interest was pursuant to a request or promise made by the payee to the maker. Under the circumstances there was no valid agreement to pay compound interest, the sureties are not prejudiced and there is nothing to affect their discharge from liability.

The judgment is reversed and the record remitted to the court below with directions to enter judgment against defendants for such sum as to right and justice may belong unless other legal or equitable cause be shown to the court below why such judgment should not be entered.