Hall v. Constant — 2 N.Y. Super. Ct. 185

Majority

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James Hall and Jacob G. Montross versus Lewis Constant.

Headnote

The payment of a part of a debt dm is no consideration to support a promise to give further time for the payment of the balance.

An agreement for delay, without consideration, made between the principal debtor and his creditor, will not discharge a surety. An agreement to have that effect must be a binding agreement, or one to the prejudice of the surety.

A negotiation for delay upon terms not finally accepted, does not discharge the surety, though there is actual delay; there being no binding contract to prevent a suit against the principal at any time.

A debtor who pays money to his creditor, being liable to him upon more accounts than one, has a right to direct the application of the payment to whichsoever subject he may choose : and where the jury neglected or refused to follow this rule, the Court granted a new trial.

The declaration in this case was upon a promissory note for $404.90, bearing date the 6th of Nov. 1826, drawn by a certain firm bearing the name of Haight & Carpenter, in favour of the defendant, and endorsed by him to the plaintiffs, payable sixty days after date. The common money counts were also added to that upon the note. The defendants pleaded the general issue, and payment, and gave notice of a set-off.

The cause was tried before Mr. Justice Hoffman ; and at the trial the plaintiffs proved the making of the note, a demand when due and regular notice to the defendant, the endorser.

The defendant on his part then called Haight, one of the makers, as a witness,—who, having produced a full discharge from the defendant, testified that the note in question was drawn and endorsed for the accommodation of his firm. That when the note became due, he called upon the plainrifls to obtain time for its payment, but had with him a sum sufficient to take it up. That the said firm were also, at that period, still further indebted to the plaintiffs upon another note for $368.94, payable directly to the plaintiffs on demand. That the plaintiffs were willing, on

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receiving $200, on account of their claims and notes for the balance, to give time for the payment of both demands, to the extent of three and six months. With reference to the notes to be given, they were to be drawn by the defendant alone, (the plaintiffs having some objection to Carpenter;) and to have good endorsers. The witness proposed the defendant, Jjut the plaintiffs replied, “ they had him already.” It was finally arranged, that the witness should give his own notes, with such endorsers as should be satisfactory to one William Nelson. Upon this arrangement, the witness paid the plaintiffs two hundred dollars, to be applied on the note endorsed by the defendant; and it was so understood by him at the time. The plaintiffs, thereupon, gave the witness a receipt in the following words—“ Received, New-York, 15th January, 1827, from Wm. Haight two hundred dollars, endorsed on Haight & Carpenter’s note. (Signed) James Hall & Co.”

The witness supposed that the receipt referred to the note endorsed by the defendant; but at the trial it appeared that the money had been endorsed on the other note for $368.94.

After this arrangement was made, Carpenter told Haight that he would not gratify the plaintiffs by procuring endorsers upon the new notes : and thereupon the individual notes of the witness were drawn and enclosed to the plaintiffs, as he believed. The witness did not, however, enclose nor forward them himself, and he knew not whether they had ever been received by the plaintiffs as they never made any admissions upon the subject. The witness, however, saw his partner writing to the plaintiffs and supposed, that he enclosed the notes.

When the above arrangement was made and the money paid, there was a general statement made by the witness, and handed to the plaintiffs, embracing both notes then due, with the interest thereon, and carrying the notes into one account.

Upon this evidence the Judge charged the jury that if an extension of the original credit was actually made by an agreement between the plaintiffs and the drawers of the note, (without the participation, knowledge or assent of the endorser, for a good and valuable consideration,) such an agreement

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would discharge the endorser from his liability. The jury were to determine whether the agreement as stated by the witness, . , had been complied with by the drawers; and that, if it was in fact made and completed, then there was a sufficient consideration to support it.

If the two hundred dollars were paid upon the note in question, the Judge further charged the jury, that the defendant was entitled to the benefit of that payment; but if it was carried into the statement, as a general credit on the whole claim embracing both notes, then the defendant was at least entitled to the benefit of a • pro rata portion of it, to be applied to the note endorsed by him.

To this charge, the counsel for the plaintiffs excepted, upon the ground, that there was no consideration for the agreement, and that the payment could not be apportioned in favour of the defendant. The jury, however, gave a verdict in favour of the plaintiff for $485.87, being the whole amount of his claim. It was then agreed between the parties, that the facts should be stated in the form of case, which each party had the right of turning into a bill of exceptions.

The defendant now moved for a new trial, and Mr. Seely in his behalf contended,

I. That the verdict was against law and evidence. The giving of time to the drawers discharged the endorser. [He cited Chit, on Bills, 290. Sel. JV*. P. 272. 1 T. R. 169. 3 Bos. and Pul. 61. 3 lb. 385. 8 East. 576. 13 lb. 177.]

II. The damages were excessive. The defendant was entitled to the benefit of the two hundred dollars, which were paid, as the witness expressly swore, on the note in question.

III. The verdict was against the charge of the Court, which instructed the jury at all events, to allow a portion of the payment for the benefit of the defendant.

Mr. P. A. Cowdry, contra, for the plaintiffs, contended,

I. That the endorser of a promissory note is discharged by the giving of time to the drawer, in those cases only, where the credit is extended by an express agreement, which is binding in law

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upon the parties. [12 Wheat. R. 556. Chit. on Bills, 296. 3 Price's R. 532.]

II. No consideration was proved, that would have supported such an agreement. [12 J. R. 426.]

III. Whether any agreement was made by the plaintiffs with the drawers of the note declared on, extending the time of payment, was a question of fact for the jury to determine.

IV. Where a debtor pays money to his creditor, who has demands against him on two accounts, the creditor may place the payment to which account he pleases, unless the debtor directs its application.

V. What the understanding between the parties was, in relation to the credit of the payment of the two hundred dollars, was also a question of fact for the jury to determine.

It is well settled, that the payment of a part of a debt due is no consideration to support a promise to give further time for the payment of the balance. [Peabody v. Knox, 12 J. R. 426.] And it has also been decided, that an agreement for delay, without consideration made between the principal debtor and his creditor, does not discharge the surety. An agreement to have that effect, must be a binding agreement, or one to the prejudice of the surety. [12 Wheat. R. 556, McLoman v. Penell.] So also a negotiation for delay, upon terms not "finally accepted, does not discharge the surety, though there is actual delay, there being no binding contract to prevent a suit against the principal at any time. [3 Pri. Ex. Rep. 521, Badnall v. Samuel.]

In this case, the court does not perceive any such binding agreement, nor that the endorser was in any way prejudiced. The general foundation of the action is therefore well laid, and the plaintiffs are entitled, at all events, to a verdict.

There is another question, however, as to the amount to be recovered, which is certainly in favour of the defendant. It is a

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familiar principle, that a debtor, who pays money to his creditor, being liable to him upon more accounts than one, has a right to direct the application of the payment to whichsoever subject he may choose. If he neglect to do this, the creditor may direct the application, and in the absence of any appropriation by either of the parties, the payments will either be applied to the claims first due, or in such way as to do justice between the parties.

In this case it is clear, that the debtor did apply the payment of the two hundred dollars either to the note in question, or that he paid it on the general account of both notes. Upon this point, the Judge’s charge was perfectly correct, and the jury have found against the charge and the law. There must, therefore, be a new trial, to reduce the amount of the verdict. At the new trial, the jury must apply either the whole payment to the defendant’s note, or they must give him credit for such a relative proportion as the payment bears to the endorsed note, according as they shall find, that the payment was in fact made on this specific note, or on the general account of both. It is very evident, that the makers never intended to apply the whole payment to the note, which was not endorsed, nor could it have been so understood by the plaintiffs at the time. The payment was not made generally without any appropriation, and the jury must therefore say to what subject it was applied.

New trial granted.

[P. A. Cowdry, Att’y for plffs. W. A. Seely, Att’y for deft.]

Vide p. Wendell’s Rep.