Hyperlawhypertext legal database Chauncey N. Shipman & Co. v. Kelley 74 N.Y. St. Rep. 225

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Chauncey N. Shipman & Co. v. Kelley

74 N.Y. St. Rep. 225 Court N.Y. Sup. Ct. English

Delivered by LAMBERT, J.

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p. 225
Chauncey N. Shipman & Company et al., Pl'ffs, v. Thomas Kelley, Def't.
(Supreme Court, Erie Trial Term,
Filed January, 1896.)

Headnote

1. Note—Extension op time.
The taking of a note or written obligation of the debtor for a pre-existing debt, and as a representative of the debt, conditioned for future payment, raises the presumption that the same was given and accepted pursuant to an agreement that the time for the enforcement of the collection of such debt is postponed until the maturity of such note or obligation.
2. Same.
The drawing of a draft at three days’ sight by the creditor and the acceptance thereof by the debtor has the effect to bar the right of action om the original debt until default in the payment of the draft.
3. Same—Surety.
In such case, the giving of the note and the drawing of the draft operate as an extension of credit of the debt and are effectual to discharge a surety therefor.
Wood & Gibbons, for pl’ffs; F. E. Stone, for deft.

— The defendant is a and the limit of bis liability must be ascertained from the terms of the written undertaking. He assumed a burden without sharing in the benefits of the subject of the contract, and therefore had the right to prescribe the exact terms upon which he entered into the obligation,—to limit his liability either as to time, amount, or parties, —and, having done this, he has a right to insist on his discharge from legal liability in case the terms imposed have not been observed. The meaning of the language used in the contract of guaranty is both clear and ascertained, and the defendant is entitled to the application of a strict rule of construction. His liability depends upon whether or not the plaintiffs have, without his assent, done anything, either directly or by necessary implication, which may be said to have varied the terms of the principal contract for which he stood sponsor. If the plaintiffs have so far departed from the terms of the original agreement by giving terms of credit not contemplated -by the terms of the contract, then the defendant, even though he may have sustained no injury thereby, will be relieved from liability. By the terms of the undertaking,

p. 226
the defendant guarantied the payment of all bills for coal, to the-amount of $1,500 per month. The shipment of coal, the rendering of a bill therefor, and the nonpayment thereof by Haywood & Irish, subjected the defendant to an action for the recovery of the purchase price of the coal, provided the term of credit did not .extend beyond the period of three months.

By the terms of this condition we are brought to the only question urged by the defendant in exoneration of liability. Did the taking of the debtors’ notes for the bill rendered for coal, and the renewals thereof, for balances remaining unpaid, from time to-time without the consent of thesurety, discharge him from liability? If the giving of these notes, from time to time, suspended the plaintiffs’ right of action against Harwood & Irish for any given period, that would be such a departure from the terms of the defendant’s undertaking as would discharge him from liability. Dorlon v. Christie, 39 Barb. 610 ; Railroad Co. v. Burkhard, 36 Hun, 57 ; Place v. McIlvain, 38 N.Y. 96 ; Parmelee v. Thompson, 45 N. Y. 58 ; Hubbard v. Gurney, 64 Id. 458; Bank v. Hunsiker, 72 Id. 252; Iron Co. v. Walker, 76 Id. 521; Van Giessen v. Bridgford, 83 Id. 348; Bank v. Phelps, 86 Id. 484.

Many of the cases cited hold that the giving and acceptance of the debtor’s note, due in the future, have the legal effect to extend the term of credit of the original indebtedness, and bar a right of action thereon during such period; while the cases of Parmelee v. Thompson, supra, and Graham v. Negus, 55 Hun, 440 ; 29 St. Rep. 114 , decided that the mere acceptance of a note of the debtor, representing a pre-existing debt, in the absence of an express agreement that the same be taken in extinguishment of the original debt, or any new consideration for the acceptance of the note, does not operate as an extension of the term of payment so as to bar a right of action thereon. Undoubtedly, the rule that the taking of the note for a pre-existing debt, or as substitute therefor, operates as an extension of time, must have its foundation in contract, express, or implied from the transaction, and this seems to the doctrine of all the cases. The conflict arises upon the consideration of what constitutes a valid contract for the extension or substitution. We see no substantial reason why the taking of a note or written obligation of the debtor for the amount, and as a representative of the debt, conditioned for future payment, should not give rise to the presumption that the same was given and accepted pursuant to an agreement that the time of the enforcement of the collection of such debt be postponed until the maturity of such note or obligation. A debt being due, with the right of immediate action for its collection, the debtor tendering, and the creditor accepting, his negotiable promissory note for the amount thereof, due at a future-day, there seems to ‘be no substantial reason, in law or justice, why it should not be inferred, as matter of fact, that the debtor requested, and the creditor granted, forgiveness of immediate payment.

Assuming the inference of contractual relation from the transaction of the delivery and acceptance of the note or obligation of the debtor, the reason then assigned to defeat the validity of such

p. 227
a contract, by some of the cases cited, is that there is an absence of present consideration to support it; that, in giving such a note or obligation, there is wanting the resulting benefit or disadvantage essential in the law to support a promise. In this conclusion we are unable to agree. While the debtor might be made liable for the debt under prior contract relations he could not be compelled to acknowledge his indebtedness by a higher grade of evidence, such as is furnished by a written obligation. In this the creditor might be benefited. Again, the availability of a negotiable note over that of an ordinary debt for sale or discount must be considered an advantage to the creditor. It is not essential to the validity of a promise that the advantage to the party for whose benefit the promise is made should be equal to the benefit or injury to be sustained by the other. It is sufficient that an advantage or benefit is to he derived by the party who is the recipient of such promise. Regardless of these considerations, if the case of Place v. Mcllvain, supra, is to be followed, the acceptance and retention of the notes given by Harwood k Irish to the plaintiffs would operate as an extention of credit of the debt that would be effectual to discharge the surety. Certainly, under the case last cited, the drawing of the draft at three days’ sight by the plaintiffs, and the acceptance thereof by Harwood k Irish, had the effect to bar the right of action upon the original debt until default in the payment of the draft.

The complaint in this case should be dismissed,.

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