Majority
p. 411Williams, President of the Market Bank, v. Townsend et al. (Before Bosworth and Woodruff, J.J.) Heard, June 18; decided, June 27, 1857.
Headnote
Taking the note of a debtor, or a transfer of property from him, as collateral security only, without any agreement to extend the time of payment of -the original debt, does not operate to suspend the remedy on the original debt, either against such debtor or his sureties.The new security being a note of the original debtor at twelve months, secured by his mortgage of real estate, the whole effect, of taking them as collateral security merely, is, that such mortgage cannot be foreclosed until the twelve months’ note becomes due.
Mere delay to sue the principal, however long continued, does not discharge the surety.
This action is brought by R. S. Williams, as President of the Market Bank, against E. W. Townsend and George Williams, as makers of one note and endorsers of another, and against James B. Townsend, as endorser of the first note and maker of the last.
It was tried on the 18th of March, 1857, before Chief Justice Oakley and a jury, and comes before the General Term on a verdict taken subject to the opinion of the Court.
The first note is dated January 8, 1855; is for the sum of $5,000; is payable 45 days after its date, to the order of James B. Townsend, and is made by “ E. W. Townsend & Williams.” The second note is dated January 26, 1855; is for the sum of
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$7,000; is payable 30 days after its date, to the order of “ E. W. Townsend & Williams;” and is signed by “James B. Townsend.” ■ The complaint alleges the mating and endorsement of each note, and the delivery of it to the plaintiff before its maturity, and that before “ it became due and payable, protest of said note was expressly waived ” by the maker thereof; that no part of either has been paid, and prays judgment for their aggregate amount and interest.
James B. Townsend did hot appear ini the action. E. W. Townsend & Williams put in an answer, in which they alleged, that , they made the first and endorsed the second note without consideration, and for the accommodation of James B. Townsend; that the plaintiff knew this before he took either note; and that before either note became due they so notified the plaintiff, and that he must look to James B. Townsend for payment. It also alleges, that at dr about the time “the said notes became due and payable, the said james B. Townsend paid the same to the plaintiff by giving his own (the said James B. Townsend’s) note for the sum of twelve thousand dollars, payable in twelve months from the date thereof, which said date was the 25th' day pf February, 1855, and at the same time executing and' delivering to the plaintiff a mortgage upon property and real estate in the city of Hew York, for the purpose of securing the payment of said note last mentioned, which said mortgage was recorded in the office of the Register of the city and county of Hew York, in Liber 476 of Mortgages, page 658, on the 2d day of March, 1855, and which said note and mortgage last above described were accepted and received by the said plaintiff in payment and satisfaction of, and for the said two notes mentioned and set forth in the plaintiff’s complaint.” That this was done without the knowledge, consent, or assent of said defendants. That, by accepting and receiving said note of $12,000 from Janies B. Townsend, and said mortgage, these defendants were discharged from all liability on each of said notes.
On the trial the plaintiff produced and read the two notes in evidence, and rested his case. The following proceedings were then had:
“ The counsel for the defendant, after stating his defence to the court and jury, called as a witness—
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Robert H. Haydoclc, who testified:—I am the cashier of the Market Bank, and was at the times the notes in suit were taken and when they became due; these notes were renewals of original notes held by the bank, endorsed by the firm of Walter B. Townsend & Go.; when the notes in suit fell due they were not paid; about that time I received a note for $12,000 from James B. Townsend, and a mortgage for the same amount, as collateral security for the payment of these two notes; (the mortgage and note received in evidence,) Neither Mr. E. W. Townsend nor Mr. Williams were present at the time; there was nothing said about extending time that I recollect; nothing was said about time on the notes in suit; we wanted more security, and we took what we could get.
Being cross-examined, he said: .Nothing was ever realized from the note and mortgage-taken from James B. Townsend as security; the mortgage was the third one on the property, the first one was foreclosed, and there was not enough to satisfy that.
The defendants’ counsel here announced to the Court, that he abandoned all defence, as far as the note for $5,000 was concerned.
The plaintiff’s counsel offered to show that at the time this indebtedness accrued to these defendants, the money received on account of the note for $7,000 was for E. W. Townsend & Williams, and that James B. Townsend made the note for their accommodation.
The defendants’ counsel objected to this being shown. The Court overruled the objection, and defendants’ counsel duly excepted.
Cross-examination resumed: I learned from James B. Townsend, the maker, that this note was for the benefit of E. W. Townsend & Williams.
(The defendants’ counsel objected, on the ground, that admissions of James B. Townsend were incompetent evidence to this testimony. Objection sustained.)
James B. Townsend was a member of the firm of E, W. Townsend & Williams; he became so in March, 1854.
(Defendants’ counsel objected, because the complaint set up that the copartnership consisted but of two members. The Court held that the description in the complaint of E» W.
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Townsend and Williams, as co-defendants, did not "bind the plaintiffs as to the number of members in the firm. Defendants’ counsel excepted.)
To the Court: I understood, from James B. Townsend, that he was a special partner, and had an interest of $15,000 in the firm.
The following testimony was taken subject to the objections of defendants’ counsel, as before taken.
Cross-examination continued: He told me he was a special partner at a time he wished to borrow $1,000 for the firm; he said that the old firm of Walter B, Townsend $ Co., consisting of Walter B. Townsend, E. W. Townsend, & Williams, were indebted to him in the sum of about $15,000; that when Walter B. Townsend died, the other members of the old firm formed a new partnership, consisting of E. W. Townsend & Williams; and that they took him in as a special partner, by crediting the sum of $15.000 due the old firm to him on their-books.
Both sides rested.
The Court directed the jury to find a verdict for the plaintiffs for $13,727 Ty„ (the amount claimed, and interest), subject to the opinion of the Court at General Term, and to be heard there in the first instance, with liberty to the Court to annul, or modify the verdict as to the $7,000 note, as they may be advised. Judgment suspended in the meantime. Verdict accordingly.”
A. Wakeman, for plaintiff.
A. Dickinson, for defendants, made and argued the following points.
' First.—By giving time to the maker, without the consent of the endorsers, the endorsers were discharged.
People v. Jansen, 7 John. 332 ; Rathbone v. Warren, 10 John. 587 ; King v. Baldwin, 2 John. Ch. 554.
Second.—The taking of collateral security, payable at a future time, is, in the absence of proof to the contrary, an agreement to wait until the security becomes due. (Wood v. Jefferson Co. Bank, 9 Cow. 194 .) Third, the plaintiff’s offer to . show that at the time the indebtedness accrued to these defendants,
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the money received on account of the note for $7000 was for E. W. Townsend and Williams, even if such fact were shown by competent evidence, amounts to nothing, as it is shown that the note was in renewal of another, endorsed by Walter B. Townsend & Co.; and even if it were not so, time given to an accommodation maker discharges the endorser. The ruling of the judge, in permitting the evidence, was erroneous. Fourth, the testimony of witness Haydock, as to the statement made by James B. Townsend, is incompetent to charge the defendants E. W. Townsend and George Williams as to co-partnership, and should not have been admitted. (Whitney v. Ferris, 10 John. R. 66; Mitchell v. Roulstone et al., 2 Hall’s R. 351 , 357.) Fifth, the complaint alleges that the firm of E. W. Townsend & Williams consisted of but the two persons; and, under such circumstances, the plaintiffs certainly cannot drag a third party into the firm upon alleged statements of such third party, and then, by alleged admissions of such third party, bind the firm of E. W. Townsend & Williams.
James B. Townsend was competent to testify to such facts as might charge his co-defendants, and the evidence of his statements to a third party, though sufficient to charge himself (James B. Townsend,) were insufficient to charge his co-defendants.
The testimony of Robert H. Haydock, objected to by the defendants, and admitted subject to such objection, was erroneously admitted, and should have no weight in determining the amount of recovery.
A new trial should be granted or judgment given for the plaintiff for the $5,000 note alone.
The delivery, by Jas. B. Townsend, of a note made by him, for $12,000, payable 12 months from its date, for the amount of the two notes in suit, with a mortgage to secure the payment of it, and the acceptance by the plaintiff of such note and mortgage, merely as collateral security for the payment of the two notes in suit, did not operate jper se to suspend all right of action against Townsend, upon the two notes, until the maturity of the $12,000 note.
Unless they were accepted upon an agreement, to extend the time of payment of the two notes to Jas, B. Townsend, until the
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new note matured, or for some other period of time, it was in the power of the plaintiff to sue him, at any time, on returning the new note and mortgage; perhaps such a surrender would not be necessary. (Hughes v. Wheeler, 8 Cowen, 77; Frisbe v. Larned, 21 Wend. 450 -453; Day v. Leal, 14 J. R. 404; Gahn v. Niemcewicz, 11 Wend. 320 -321.)
The rule seems to be settled, that taking the note of the debtor, or a transfer of property from him, merely as collateral security, without any agreement to extend the time of payment of the original debt, does not operate to suspend the remedy against the principal upon the original debt, or against his surety. (Twopenny & Boys v. Young, 3 Barn. & Cres. 208.)
This case and the rule which it declared, and other cases holding the same doctrine, were cited, and the rule itself was declared as absolutely in Gahn v. Niemcewicz, as we have stated it. See Hubbell & Curran v. Carpenter, 1 Seld. 171; Pitts v. Congdon, 2 Coms. 352; Bangs v. Strong, 7 Hill, 250 .
The defendants, regarded merely as sureties, on paying the two notes, might be entitled to an assignment of the collateral security.
Whether they or the plaintiff, as a condition to their right to recover against J. B.-Townsend on his original liability, before the collateral note matured, would be obliged to surrender the collateral note and mortgage, is a question, which does not now arise. I think they would not. The whole effect of taking the new note at 12 months, if taken merely as collateral security, would be this. The mortgage could not be foreclosed until that note fell due. The effect is the same, as if only a mortgage had been given at 12 months, and had been given and taken as fur-, ther security, without any agreement to extend the time of payment of the original liability.
The proposition that, mere delay to sue the principal, however long continued, does not discharge the surety, is so firmly settled, that no authorities need be cited in its support.
There must be a judgment for the plaintiff' on the verdict. Judgment was so entered.
Cases cited
- Frisbie v. Larned 21 Wend. 450 p. 416