Henderson v. Marvin — 11 Abb. Pr. 142

Majority

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HENDERSON a. MARVIN.

Supreme Court, Third District;

General Term, December, 1859.-

Headnote

Principal and Surety.

The surety is released, if the principals vary the contract without the surety’s consent.

The shortening, by the principals, of the stipulated time of credit, discharges the the surety,—So held, where the creditor sued before the expiration of the time originally stipulated.

Appeal from judgment entered on the report of referee.

The plaintiffs (successors of Henderson, Kennedy & Kneeland, iron merchants, &c., Albany) instituted this action to recover of defendant, as surety (on contract made November 22, 1855), to pay not exceeding $500, which should be unpaid on January 1, 1857, of goods sold his principals on a credit of six. months; but which credit was, by consent of one of the principals, after

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the sale, extended beyond the six months, on part of the goods, by accepting two notes, one of which was at seven months; and subsequently, the entire credit was, by the other principal, shortened on all the goods, to less than six months from the date of the first goods sold, by giving up both notes, and accepting a note payable one day after date. The referee reported the defendant was liable to $259.88, and gave his “ reasons” for his report, thus:

“ The goods were sold on the time required by the contract, wherefore defendant became liable. He is still so, unless released by subsequent acts of plaintiffs.

“1. Subsequent extension of time of credit, releases the defendant.

“ 2. Subsequent shortening of time does not.

“ 3. Defendant is a surety.”

Defendant appealed to the general term.

Le Grand Marvin, for the appellants.

Plaintiff's assignors (Henderson, Kennedy & Kneeland), varied the time of credit by shortening the same, and thereby discharged the surety, Marvin. The referee’s conclusion, that the creditor and debtor’s “ subsequent shortening of times of credit” does not release the surety, is not consistent with equity or common sense, to say nothing of decisions. 1. The terms of a guaranty must be strictly complied with, or the surety will not be bound. If he proposes a credit, that particular credit must be given to the principal. It is not enough that the creditor waits until the time has expired before he calls for payments. He must agree to wait, so that he cannot sue in the mean time. (Walrath a. Thompson, 14 Wend., 541 , see cases there cited; S. C. in Court of Appeals, 6 Hill, 185 .) 2. If a guaranty propose a certain credit, that particular credit must be given, or the surety will not be bound; a variance of three days will be fatal, as fatal as though it were for three months. (Smith a. Dann, 17 Wend., 545 , see cases there cited.) 3. The claim against a surety is strictissimi juris, and it is incumbent on the plaintiff to show that the terms of the guaranty have been strictly complied with. (Dobbins a. Bradley, 17 Wend., 425 , and cases there cited.) 4. The surety is not to be held beyond the very precise stipulations of his contract. (Yates a. McKee, 3 Kern., 237,

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and cases cited; Birkhead a. Brown, 5 Hill, 541 ; Parsons on Contr., 3 ed., 504 and 505, and cases cited; 3 Kent Com., 112, 222; Burge on Suretyship, 1847, 214, 215; Story on Bills, 441.)

Hamilton Harris, for the respondents.

I. The plaintiffs complied strictly with the terms of the guaranty as to the time of credit, and there remaining due on the 1st of January, 1857, after making all the credits, about the sum of $800 for goods sold before December 31, 1856, the plaintiffs should have had a report for the amount for which the defendant had become surety, viz.: $500, unless they had done some act to the injury of the defendant.

II. The taking of the two notes on the 25th of February, 1856, in no way affected the January sales, amounting to $204.45 or $55.43 of the December sales, except to accelerate the time of payment a few days. The surety’s remedies against the principal were neither lost, diminished, or affected. Therefore, the the report of the referee, that the defendant was liable for those two sums, should be sustained. 1. Although a valid agreement between the creditor and principal to extend the time of performance, discharges the surety; for the reason that the creditor has put it out of the power of the surety to avail himself of his right to enforce immediate payment from the principal; yet an agreement between the creditor and principal, whereby the remedies of the surety are not diminished or affected, and still less, if they are accelerated, leaves the surety still liable, as he can sustain no prejudice. (Fulton a. Matthews, 15 Johns., 433 ; Bangs a. Strong, 7 Hill, 250 ; Burge on Suretyship, 205, 208 ; Hume a. Coles, 2 Sim. (2 Eng.) Ch. R., 12 ; Schroeppell a. Shaw, 3 Comst., 446 ; Stevenson a. Roche, 17 Eng. Com. Law, 477; Jay a. Warren, 11 Ib., 450.) 2. The cases relied upon by the appellant, are those where the condition of the guaranty has never been complied with, viz.: the exact credit has not been in the first instance given, and, therefore, the proposition tending to a guaranty has never been accepted.

III. The returning and cancelling, on the 15th of May, of the two notes, and taking of the new note for the amount of the two payable one day after date, deprived the transaction of

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February, in the taking of the two notes, of any force and effect. And the new note falling due before the time of credit of any of the sales had expired, thereby accelerating instead of diminishing the remedies of the surety, the referee should have reported due the plaintiffs the full amount for which the defendant became liable to pay under his guaranty. The cancelling of the two notes before due, and before any sale had become due, rendered their taking harmless. The surety could in no wise be injured by them. And the taking of the note in Hay, in their place, was directly for his benefit, as thereby the plaintiffs were enabled to procure judgment, and obtain alien upon the principal’s property at once.

IY. The taking of the note for the account, the same remaining in the hands of plaintiffs, and the recovery of judgment thereon, did not discharge defendant from liability to pay for the merchandise for which the note was given. These measures were an advantage, and could not be an injury to the defendant. (Curtis a. Hubbard, 9 Met., 322 ; Norton a. Eastman, 4 Green, 450.) The amount unpaid when the note was taken, and suit commenced, in Hay, was near $1,000. The defendant could only be made liable for $500. The plaintiffs had a right to proceed at once to secure the balance of the debt, and could not split the demand. And even if the demand could have been split, yet it was the right of the plaintiffs to proceed to collect the whole, as the defendant would, if a part only had been enforced, have been entitled to have the amount collected apportioned.

In this appeal from a judgment entered on the report of a referee, I do not perceive that there is any controversy about the facts. The defendant agreed to guarantee to plaintiffs and their assignees, the amount of their claims-against a third party for goods, that prior to January 1,1857,they might sell to such third party, on a credit of six months. The guaranty not to cover a sum greater than $500. Certain goods were sold, on the credit agreed, enough to bring the defendant’s liability up to his guaranty of $500. But (as the referee finds, and there is no dispute) after the original sales of these

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goods, and their delivery, the plaintiffs extended the term of credit on a part, and shortened the term of credit on a part, by taking the third party’s promissory notes therefor, having different periods of time to run. The referee found, as matter of law, that as to those goods for which the credit was extended, the surety was not liable, and did not include the amount of those in his report, and from that part of his decision there is no appeal. He, however, found that shortening the term of credit did not discharge the surety; and for the value of the goods, the credit for which had been shortened, he found for the plaintiffs; and the defendant appeals from that part of his report, and from the judgment entered thereon. And the single point submitted to us, is, the correctness or incorrectness of that conclusion of law on the part of the referee. It being true, as it is conceded, that an original sale, on any term of credit, other than one of six months, whether it varied from that term two days or two months, would not bind the surety. ( 6 Hill, 540 ; 2 Comst., 185.) I must confess, I do not see how it alters the law of the case, that the abridging of the term of credit was made after the sale. The main point, the actual shortening of the credit, was accomplished; and its effect on the term of credit was just the same as if the original credit had been given for the shorter period. The real credit was not for six months. In 6 Sill, 542, the phrase is, “ he must agree to wait, so that he cannot sue in the mean time.” And can he not “ sue in the mean time,” where having first agreed to wait the full term, he and his principal debtor afterwards (and before the expiring of that term) agreed that the term may be so shortened, that he can “sue in the mean time.” The second agreement, as to credit, abrogates the first; and, thenceforth, the credit is for the newly-agreed term, and on that, there can be no pretence that the surety is held.

In the case before us, not only could the creditor sue within the original time of the credit, but he actually did so. And it would seem a little difficult, after that, to hold the party who was surety for a credit of six months, and for no longer or shorter term. To hold any other rule, were to place the surety entirely at the mercy of the creditor, and a principal, who saw fit to help the creditor rather than his surety, if not at the mercy of the creditors alone; since the latter, by a variety of inducements

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(as to other sales), might overbear the wishes and intentions of the principal; and since, if the term of credit could be shortened at all, without releasing the surety, it would be immaterial how much it was shortened, or when the shortening process was effected. A party might one day sell on the stipulated credit of months, and the next day abridge the term to days. In short, there is no safety in attempting to vary the rule from its strictness. We must insist that, if a surety is to be held upon his contract, that contract (whatever may be done 'with any collateral matters, and many such are noted in the books) must remain unchanged, unless by his consent, and he must be held according to the tenor of that contract, or not at all.

The judgment should be reversed, and a new trial had.*

Footnotes

* Present, W. B. Wright, Gould, and Hogeboom, JJ,