Morris Canal & Banking Co. v. Van Vorst's Admr'x

21 N.J.L. 100

• Court: Supreme Court of New Jersey
• Decided: April 15, 1847
• Status: Published

Opinion

Carpenter, J.

(with whom Justice Whitehead concurred), delivered the following opinion:

The third plea is clearly insufficient, as a plea of accord and satisfaction, supposing such plea may be pleaded to this action, because it docs not aver that the plaintiff accepted and received the sum alleged to have been paid in satisfaction.

The fourth plea-coutaius an averment that the note therein specified was not only given, but accepted in full satisfaction, &c. It is therefore not liable to the objection taken to the preceding plea. It seems to be no objection to the plea, if otherwise valid, that the satisfaction proceeded only from one of the joint obligors, for an accord and satisfaction by one of several joint obligors, or joint trespassers, is good and available to all. Strang v. Holmes, 7 Cow. 224; Dufresne v. Hutchinson, 3 Taunt. 117. The real question on this plea is, whether accord and satisfaction can be pleaded to this'action. At common law, according to the old authorities, it seems settled that it could not. The rule was, that a specialty contract could not be discharged by any matter in pais, short of performance, nor could it be altered : it could be altered or discharged only by an instrument of equal force. Broom’s Legal Maxims, 408. An obligation by record at common law could only be discharged by release under seal. Lit. § 507; Sewell v. Sparrow, 16 Mass. 26. Therefore accord and satisfaction was held no plea where the duty accrues by deed only, for as is said, the deed ought to be avoided by matter of as high a nature; as in debt on a single bond or bill for the payment of money only. Com. Dig. “Accord” (A. 2). But even at common law, in case of a bond with condition for the payment of money, accord and satisfaction before the day may be pleaded, but not after; (Com. Dig. “Accord,” A. 1; Anon. Cro. El. 46); but the plea must be pleaded in satisfaction of the money or condition, and not of the deed or obligation. Preston v. Christmas, 2 Wil. 86; Neale v. Sheffield, Yelv. 192. Since the statute of 4 and 5 Ann C. 16, it has been reasonably held in this country, that accord and satisfaction, as well as ¡payment, may be pleaded in satisfaction of the condition, even after the day. Strang v. Holmes, 7 Cow. 224.

This distinction was taken by the old lawyers, that if the condition of the bond be not to pay a sum certain, but to perform some collateral act, as for personal services, to yield a true account and the like, then accord with execution for money or other thing is no satisfaction to save the forfeiture of the condition. The doctrine is thus stated by Lord Coke: “There is a diversitie, when the condition is for the payment of money; and when for the delivery of a horse, a robe, a ring and the like; for wffiere it is for the payment of money, there if the feoffer or obligee accept a horse, &c. in satisfaction this is good ; but if the condition were for the delivery of a horse, a robe, there, albeit the obligee or feoffer accept money or other thing for the horse, &e. it is no performance of the condition.” Co. Lit. 212 b. The reason given by the judges, when the question was made by the sergeants in Peytoe’s Case (9 Co. 77 b.), is that money may be satisfied by a horse ; but a horse cannot be satisfied by money — res per pecuniam estimatur ; et non pecunia per res. The answer is curious and not very satisfactory, and now since such bonds, as well as bonds for the payment of money, have become at law as in equity, mere securities for the damages actually sustained by the non-performance of the condition, there seems to be but little reason for the maintenance of this distinction. Sound sense would seem to permit an obligee to liquidate his damages, and by accord take what he might please to take, in satisfaction of them. It would seem, too, that this plea of accord and satisfaction to the damages on such bond may be admitted without any real and substantial infringement of the rule as to contracts under seal. The bond is not disaffirmed, as the plea goes to the damages, and not in discharge of the bond. Now in the case of covenant after breach, where amends are to be recovered, accord and satisfaction has been held to be a good plea. In Kaye v. Waghorne (1 Taunt. 428), it was held as clear upon the old authorities, that a covenant under seal before breach, could not be discharged by parol agreement; though after breach, accord and satisfaction would be a good defence to the damages: such defence not proceeding on the ground of discharging the covenant, but simply of a satisfaction accepted for the damages. In such cases as these this defence is by no means equivalent to setting up a parol contract in contravention of the specialty contract, the action being founded not merely on the deed, but on the deed and the subsequent wrong, which wrong is the cause of action, and for which damages are recoverable. Blake’s Case, 6 Co. 44 a; Peytoe’s Case, 9 Co. 77 b. Here the action is for amends simply, and I am willing, since the bond has become but security for the damages, to waive the ancient distinction, and upon the principles applied to the case of simple covenants last alluded to, sustain the fourth plea, in satisfaction, not of the bond, but of the damages.

The defence that time was given to A. B. is presented by the fifth plea and the eighth notice, both of which, it will therefore be convenient to consider and dispose of, in the present connection. This defence is an attempt not to discharge the damages merely, but to alter the contract — not to shew the bond or rather its condition to have been satisfied, but to avoid it altogether. It comes directly within the well settled principle, that a specialty contract cannot be altered by any mere parol agreement, whether verbal or written. I find it treated as clear, that at law a subsequent parol agreement, that is, any agreement not under seal, dispensing with, or varying the time or mode of performance, cannot be pleaded in bar to an instrument under seal, for non-performance of the act in the manner therein prescribed. And however it may be as to satisfaction of the damages consequent upon a breach of the condition, yet that as the bond cannot be discharged at law (short of performance), but by something of equal dignity, it follows, and so it has been hpld, that it is no defence to an action upon a bond against a surety, that by a parol agreement time has been given to the surety. Davey v. Prendergrass, 5 B. & Ald. 187, 2 Chit. R. 336. Abbott, C. J. in delivering his opinion said: “ If a parol agreement is entered into to give time to the parties, supposing it not the case of a surety, but simply the case of a common bond conditioned for the payment of money at a certain day, it will not prevent the surety from proceeding at law immediately, whatever the consideration of delay may be. And if that be so, how can the giving time to a third person by such an agreement, prevent the obligee of the bond from proceeding at law against the surety. There may, indeed, be such a consideration for the agreement as may induce a court of equity to direct that the party shall not proceed to enforce his remedy at law. But a parol agreement of this nature can never operate to control the obligation of this bond in a court of law. The decisions which have taken place in the courts of equity in cases of this nature, have always, as I understood them, proceeded on the notion that at law, the thing prayed for could not be done.”

In U. S. v. Howell 4 Wash. C. C. R. 620, this defence was overruled at law by Judge Washington, who, in delivering his opinion, said that he entirely agreed in the decision of that case, (Davey v. Prendergrass), and in the application of the principle stated to it. He overruled this defence at law on demurrer to the plea; but I am able to state what does not appear by the printed report, that the sureties having filed a bill on the equity side of the court, and raised the defence in that mode, he after-wards decreed a perpetual injunction against all proceedings at law on the bond.

In Combe v. Woolf 8 Bingh. 156, Tindall C. J. said : “ Except when a surety has entered into a bond, for payment in default of the principal debtor, courts of law as well as courts of equity have always held the surety to be discharged, where, without his assent, time has been given to the principal debtor. Where the surety has entered into such bond, and by a parol agreement time has been given to the principal debtor, the surety is compelled to resort to a court of equity, because by the rules of law a parol agreement cannot be pleaded in discharge of an instrument under seal.” See also Rees v. Berrington, 2 Ves. Jr. 540; Littledale J. in Price v. Edmonds, 10 B. & C. 578 ; Aldridge v. Harper, 10 Bingh. 118; Pitman on Surety, 184; Ib. 231.

* In my judgment it is clear upon these principles that this plea is not good (nor is the notice), because it sets up a new agreement between the company, and the principal in the bond by which the legal effect and operation of the bond, as a written contract under seal, is abrogated and destroyed. As stated by G. J. Abbott, a parol agreement by the obligee, in case of a common money bond, to give time to the principal, would not prevent an immediate action on the bond ; and how then can time so given by such agreement form any defence for the surety and prevent proceeding at law against- the surety ? I think so much is conclusive against the validity of this defence as here attempted to be raised.

There are many cases upon bail and replevin bonds that may seem inconsistent with this principle, and indeed they form an exception. The courts exercise an equitable jurisdiction over them under statutory authority, but the remedy even there is by special application, and not by plea. Donnelly v. Dunn, 2 B. & P. 45; Aldridge v. Harper, 10 Bingh. 118; Whitehead J. 4 Harr. R. 115.

The fifth plea, in my judgment, is also bad in point of form. It does not directly aver that the note was given and received, which appears only by implication. It seems to me also that this plea offers no defence, because it does not show that the company gave time to A. B. on the bond. The averment in the plea is, that the company gave time to A. B. for five years to make payment of the note without the consent of the sureties.

The subsequent pleas, from the seventh to the tenth inclusive, all raise substantially the same defence. They set up the passage (subsequent to the date of the bond), of several specified acts of the Legislature, passed, as alleged, at the instance of the said company, and without the consent of the sureties ; whereby the company was authorized to borrow money to increase it capital stock and to increase its circulation, all of-which it accordingly did; and that the duties and responsibilities of the cashier, and the risk of his sureties were thereby greatly increased. Undoubtedly the liability of sureties is not to be extended by implication beyond the terms of the contract; and there is a class of cases, commencing with Wriglit v. Russell, in regard to bonds conditioned for the good conduct of clerks and agents, in which the strictness of courts in scanning these contracts is strongly exemplified. Thus in the case of an indemnity bond given to partners by name, it has been constantly held, that the undertaking stopped upon the admission of a new partner. So if one of the partners should die, such bond would not be available in respect of transactions afterwards by the survivors. So if the bond be conditioned for the good conduct of a clerk or agent in any particular business, the surety undoubtedly would not be held liable beyond the scope of his contract, if the obligee should employ such clerk or agent in a different business. The contract must take effect according to its terms, and cannot be extended or changed by implication. The surety is not to be charged beyond the express words of the bond into which he has entered. But iu these instances, and others that might be cited, it is the intention of the parties that must govern, to be gathered from the terms of the instrument itself. The question must be as to the fair meaning of the terms used. In Metcalf v. Bruin, 12 East. 400, the bond being taken to trustees, and there being no legal difficulty as to the persons entitled to sue, the condition of the bond of indemnity was held to secure the faithful services of a clerk to an unincorporated company, daring the actual existence of a body of persons carrying on the same business under a designated name, notwithstanding any intermediate change of the original members of the company by deed or transfer; the intention of the parties to the instrument being apparent, to contract for services to be performed to the company as a fluctuating body. I do not perceive that the case now before the court comes within the principles settled in the cases cited for the defence. There has been no change of parties to whom the bond was given, for the plaintiff is an incorporated company with unlimited succession. There has been no change of business such as can take the case out of the express words of the condition. The question is simply whether an increase of business will discharge the sureties to an indemnity bond. The same question seems to be presented by the case of an incorporated company as in that of an individual. Can it be that a trader who takes a clerk, under a bond conditioned for faithful service, discharges the sureties by increasing his business above the amount at which it stood at the time of giving the bond ? The bond here contains nothing from which such a limitation can be inferred. On the contrary, I apprehend, as urged by the counsel of the plaintiff, that in the case of a corporation like the Morris Canal, erected for a great public purpose and to subserve the public convenience, an increase of its business must have been contemplated,' and it was not necessary for the company to stand still in order to keep this bond. The result to which I have arrived is, that these pleas and the first and second notices in which they are combined, present no legal defence: that therefore the pleas should be overruled and the notices stricken out.

The eleventh plea alleges that the company, after the bond was given, removed a great portion of its banking operations to New York, contrary, &c. and that A. B. had to carry notes and money back and forth, &c. whereby the risk was increased, &c.

The eighteenth section of the act incorporating the company Harr. Comp. 101, enacts “ that the banking house of the said company shall be situated, and their banking operations be conducted in Jersey City.” Perhaps this plea does not meet the whole condition of the bond. It does not allege that the whole of the banking operations of the company were removed to the city of New York, supposing such allegation to form any defence, but simply that a great portion was removed. Does not the condition of the bond still cover, under such supposition, the duties of cashier to be performed at Jersey City? But passing by this difficulty, I think the plea cannot be supported. Is the direction of the statute so imperative that any contract made by the company in the city of New York must be treated as void ? Whatever right the state might have to inquire into the conduct of this company, and to call upon it to shew that it had exercised it's franchises according to the directions of the charter, I do not suppose that individuals, when clauses directory are not strictly pursued, can treat its acts as unlawful and void. There is a well settled distinction between the cases when a statute prescribes certain requisites as essential to the validity of an act, and a statute directory only. In the former case the act, if not in accordance with the statute, is void. In the latter it may be valid, and if it relate to a contract, binding on individuals. A clause of a statute has been held directory when the provisions contain mere matter of direction, and no more; though otherwise, when they are followed by words of positive prohibition. 1 Smith’s L. .Cases 170, note (285 Am. Ed.) and cases cited; Rex v. St. Gregory, 2 Ad. & Ell. 106; Park J. in Gwynne v. Burnell, 2 Bingh. N. C. 39; Rex v. Justices of Leicester, 7 B. & C. 7; U. S. v. Wyngall, 5 Hill 21; Rex v. Birmingham, 8 B. & C. 29; Jones v. Woollam, 5 B. & Ald. 769; Hurlstone on Bonds, 16 (Law Lib. Ed.)

Whether, therefore, for this misbehavior of the company the state might not have instituted proceedings, and by due process of law have seized upon its franchises, is not now before us. But I apprehend that such failure to follow a clause, merely directory of the charter, is not such an illegal act as will against it avoid its contracts ; and that it has not discharged the cashier or his sureties from the condition of his bond faithfully to serve the company as cashier, whether employed in Jersey City or elsewhere.

The third notice is substantially the same as the eleventh plea, and that plea being held insufficient, the notice must be stricken out for the same reasons. So much disposes of all the pleas demurred to, and of the first, second, third, and eighth notices.

The fourth and fifth notices present substantially the same allegation, that if any loss has accrued to the plaintiff, it has been owing to mistake and accident from the unreasonable accumulation of business, and not from any wrongful act, or wilful omission or neglect of the cashier. As I understand the condition of this bond, it is conditioned for the honesty and faithfulness, and not for the ability of the cashier. It is, that he shall well and faithfully serve, &c. and the sureties stipulate to indemnify the company from any loss from any malfeasance, misfeasance, wilful omission, neglect, or wrongful act of the cashier, and as I take it, are consequently not responsible for any loss arising from mistake or accident. Breach of trust and dishonesty are necessary to forfeit this bond. Union Bank v. Clossey, 10 John. R. 271. The plaintiff must shew some breach of trust, some act of dishonesty, some misfeasance, and it is therefore no answer to such an assignment to say that the loss, if any, accrued from accident or mistake. This defence may be raised under the second plea, and perhaps in strictness should be stricken out, for it has been decided that the same matter cannot be presented in the double form of a special plea, and also of notice; and that a notice, which amounts only to the general issue, is bad, because it could not be specially pleaded. 3 Halst. R. 24; 3 Ib. 89; 7 Ib. 18. Still, as the notice of this special matter simply notifies the plaintiff that such defence will be raised, I am willing to permit so much of the fourth and fifth notices to stand — immaterial, it is true — so far as they will enable the defendant to set up any special matter in his defence.

With regard to so much of the sixth and seventh notices as states that the company knew of the default and did not give notice to the sureties, or proceed for four years and until A. B. became insolvent, mere delay, when the obligee does not disarm himself, will not discharge sureties. Forbearance, or mere passiveness for any length of time, independent of concealment or fraud, will not discharge sureties, even should the person for whom the sureties were bound, in the meantime become insolvent. It was lately so held in the Court of Errors and Appeals of this state, in the case of Pintard v. Davis, affirming the judgment of this court, (a) See Peel v. Tatlock, 1 B. & P. 419; Goring v. Edmonds, 6 Bingh. 94; Theobald on Surety, 135, and cases cited.

The ninth and tenth notices also present the question of laches, in relation to the by-laws, and the neglect of the company and its officers to examine the accounts of the cashier, &c.; and by the allegation that if any injury has accrued by the default of the company it has been by this neglect. Such defence was sustained at law in the case of The People v. Jansen (7 John. R. 332); but I think that decision was clearly against the rules of law, and it has been since in a groat degree, if not entirely, overruled in the state of New York. It is a case that has been disclaimed once if not oftener in this state. It contravenes the principle that laches cannot be imputed to the government from the negligence of its officers, and it has been repeatedly overruled on this ground. Statutory directions that agents shall account, are for the security of the government, but they constitute no part of the contract with the surety. U. States v. Kirkpatrick, 9 Wheat. 720; U. S. v. Vanzant, 11 Ib. 184; U. States v. Nicholl, 12 Ib. 505; Dox v. The Postmaster General, 1 Pet. R. 318; People v. Russell, 4 Wend. 570. But the case cannot stand upon principle independent of the fact that the suit was brought by the government. In the case of the U. S. v. Kirkpatrick, Mr. Justice Story, who delivered the opinion of the court said: “ It is admitted, that mere laches unaccompanied by fraud, forms no discharge of this nature between private individuals. Such is the clear result of the authorities. Why, then, should a more rigid principle be applied to the government?” This position of the learned Judge will be found to be fully sustained by the authorities. Sheppard v. Beadier, 2 P. Wms. 288, and The Trent. Navigation Company v. Harley, 10 East. 34, will be found directly in point. There is the less ground for this defence in the present case, as the notices do not state that these by-laws were antecedent to the giving of the bond, and it cannot be inferred that the contract was enlered into upon any confidence based upon the diligence required by them for the security of the company. In my judgment these notices must also be stricken out

■Randolph, J. This action is on a bond with special condition for the faithful service of the plaintiff by A. B., and in case of his default, for indemnity therefor by his sureties, of whom the defendant’s intestate was one, the defendant has filed a number of pleas, to the first, second, and sixth, issues in fact are taken; to the others plaintiff demurs, and gives notice to strike out the notices appended to the first plea.

The third plea sets up the payment in satisfaction of the sum of money therein specified, but as it does not aver the acceptance of the same in full satisfaction and discharge by the plaintiff, I think for that cause, without determining the other points raised, the plea is bad — it is neither good as a plea of payment, nor as an award and satisfaction. 2 Greenl. Ev. § 28; 1 Saund. P. & E. 27. In Drake v. Mitchell, 3 East. 251, a similar plea was held bad for want of such an averment, and in Johnson v. Brownson, 5 John. R. 269, the form of this plea was adopted, and held to be sufficient; but then it expressly states that the plaintiff accepted in full satisfaction and discharge the sum alleged to have been paid.

To the fourth plea it is objected, that it is an accord and satisfaction of a specialty by parol, and by a sum less than is alleged or inferred from the plea itself, to be due on the bond. In Cumber v. Wane, 1 Strang. 426, which was assumpsit for £15, a plea of a promissory note for £5, given and received in satisfaction was held to be bad, because a less sum was no satisfaction of a greater, nor one simple contract a discharge .of another— Ch. J. Pratt in his opinion remarking that “ it is not his (the party’s) agreement alone that is sufficient, but it must appear to the court to be a reasonable satisfaction, or at least the contrary must not appear.” It might be supposed that a party was capable of judging for himself what was a reasonable satisfaction,- and that when he had once agreed to that, if there were no fraud in the matter, the court would enforce it against him without'inquiring whether in their judgment it- was reasonable or not. Cvmiber v. Wane, however, has long been considered a leading, and to some extent a settled, case; but the rule of this case in its full extent, says Nelson, J. in Kellogg & al. v. Richards & al. 14 Wend. 116, “is technical, and not very well supported by reason. Courts, therefore, have departed from it upon slight distinctions.” And so Dewey J. in Brooks v. White, 2 Metcalf 283: “ This rule, which obviously may be urged in violation of good faith, is not to be extended beyond its precise import, and whenever the technical reason does not exist, the rule itself is not to be applied.” In a very recent case in the Exchequer, Sibree v. Tripp, 15 M. and W. 23, both the doctrine and the authority of Camber v. Wane, were treated, to say the least, with very little respect. The fact is, the rule and the case itself have become so overburthened with exceptions, and nice distinctions, and equivocal approbations by the numerous cases decided in the English and American courts, that it is sometimes difficult to ascertain what the law is as applicable to a particular case. Thus, if satisfaction or a discharge be under seal, the rule does not apply. 4 Mad. 88. The payment of a less sum before the day, or at a different place, will be sufficient. 5 East. 230; 3 Bingh. N. C. 454; so the payment of a less sura will be held a satisfaction when the amount is unliquidated. Longridge v. Dorville, 5 B. & A. 117. Or, where it is received by way of composition by creditors, or where upon a dissolution of a firm, the creditor agrees to take the continuing and discharge the retiring partner. 5 B. & Adol. 611; 4 Mylne & Craig 109. It has also been held that the giving a negotiable note of a third person, and its being accepted in satisfaction and not as collateral, will be an exception to the rule. Booth v. Smith, 3 Wend. 66, and to the same effect is the opinion of Ch. J. Marshall in Sheeby v. Mandeville, 6 Cranch. 253, where it is said a note of one of the parties, or of-a third person, given and received iu satisfaction by express agreement, will be considered a satisfaction and discharge of the original demand. The American editor of Smith’s leading cases (whore most of the English and American authorities are collected), sums up the general result of the cases thus: “Any thing of legal value, in possession or in action, i. e. any legal interest or right which the creditor had not before, agreed to be received, and actually received in full satisfaction of the debt, is a full satisfaction without regard to the comparative magnitude of the satisfaction with the original debt, and may be pleaded in bar as accord and satisfaction.” These principles apply as well to debts or claims arising under specialties as by simple contract; for, although a plea of accord and satisfaction of a bond by matter enpais would be held bad, yet if in discharge of a condition of a bond it would be good. 2 Greenl. Ev. § 28; Blake’s Case, 6 Co. 43; Preston v. Christmas, 2 Wils. 86; Strang v. Holmes, 7 Cow. 224; and in the New York State Bank v. Fletcher, 5 Wend. 85, it was held that a promissory note, taken by express agreement in payment of. a judgment, is an extinguishment of the precedent debt. Marcy, J. in delivering the opinion of the court says : “ The established rule here is, that a negotiable note is not payment of a pre-existing debt, unless it is expressly agreed to be accepted as such. I take the law to be, that it is a payment, if expressly accepted as such, whatever be the grade of the pre-existing debt.”

If the case presented by the plea now under consideration, did not come under the exception of being an unliquidated demand, which I think it does, abundant authority has been adduced to show that the condition of a bond may be discharged by parol, though it be on payment of a less amount than the sum arising, or due under the condition. When the party accepts the same in satisfaction, or when he accepts in satisfaction any other matter or thing to which before he had no right, the law will not be wiser or more circumspect than the parties, but will adjudge the matter or thing so accepted to be a satisfaction ; this I take to be the common sense and the correct view of the matter. The allegation in this plea is, that one of the obligors, the principal in the bond, gave his note for a definite sum, payable at a particular time, in full satisfaction and discharge, and as such it was accepted and received by the plaintiff. If the defendant can sustain this plea, it ought to bar this action, and the plea must therefore be good.

The fifth plea is that the plaintiff, upon receiving A. B.’s note and accepting it in full satisfaction, &c. gave time to A. B. for five years to make payment of said note, without defendant’s knowledge or consent. This plea is bad in form. The matters are not distinctly set forth and averred, but are put in an argumentative form, or by way of reference to something else; and the time alleged to have been given is on the note, and not on the original claim on the bond, leaving that as an inference, and not a distinct averment, so that a denial of the plea might lead to an issue wholly immaterial.

In connection with this branch of the defence may properly be considered the sixth, seventh, and eighth notices. A notice must contain in substance what might constitute a special plea. The same strictness in form is not required. It-may be hypothetical. 2 Green 48; 3 Halst, 8.

The sixth notice is multifarious, and sets forth in itself no legal ground of defence.

The seventh notice sets forth no legal ground of defence. No fraud is alleged, and mere delay in bringing suit until after the principal has become insolvent, is no defence by a surety, though he may have given notice to creditor, and requested him to bring suit. Pintard v. Davis, 1 Spenc. 205.

The eighth notice is given to apprise the plaintiff that the defendant claims to be discharged of the bond, on the ground that the plaintiff gave time to A. B. the principal- — that he and the other obligors in the bond stood in the character of principal and surety to each other, can admit of no doubt; and it is well settled in courts of equity, that the surety is discharged by an agreement of the creditor with the principal, which without the surety’s consent alters his situation for the worse, and increases his risk by postponing the time of payment or otherwise. 2 Stark. Ev. 777. Rees v. Barrington, 2 Vesey Jr. 540; Nesbit v. Smith, 2 Bro. C. C. 579; 3 Bro. C. C. 1; 4 Vesey Jr. 324; 4 Harr. 115. The principles are the same both at law and in equity, when the facts are ascertained or can be got at by pleading. 2 Vesey Jr. 542; 3 Wash. C. C. 75; 7 John. R. 332. Merely taking other, or collateral security without postponing the time on the original demand, will not discharge the surety. 11 Wend. 320. Nor will enlarging the time without consideration, between the creditor and the principal, discharge the security. The agreement must be such as will discharge the principal from the terms of the original contract, and tie up the hands of the plaintiff from suing him thereon. Reynolds v. Ward, 5 Wend. 503; McLernon v. Powell; 12 Wheaton 554.

Under this defence we again meet with the technical difficulty, that a specialty cannot be discharged by mere matter of parol, having disposed of that objection so far as it relates to the plea of accord and satisfaction under the fourth plea, I see no sufficient reason why it should prevail here. In Davey v. Prendegrass 5 B. & A. 187, and in other English cases, the court takes pretty decided ground in favor of the technical rule; yet in that case the defendant had made himself a principal for the payment of the money, by the terms of his bond, which was forfeited, and the money due before the time was given, and that was given only by a mere naked promise to the obligor in the original bond, and was not operative either on him or the surety. This case seems to have been much relied on in the argument of the U. States v. Howell, 4 Wash. C. C. 622. But Judge Washington, whilst he recognizes the law of Davey v. Prendegrass as applicable to that case, insists that the principle does not apply to a mere surety in a bond for the performance of the acts of the third person — such surety may discharge himself by parol, or acts enpais, by showing that the creditor occasioned the non-performance. “If,” says the Judge, “ the court in J). v. P. meant to lay it down as law that a surety in a bond, conditioned for the payment of money, or the performance of certain acts by a third person, cannot be discharged from his obligation except by some instrument of equal dignity,-1 must be permitted to dissent from such a doctrine, and to maintain that it is insupportable by a single authority.”

The notice now under consideration is not very definite or clear, yet it is substantially sufficient to apprise the party of the proposed defence; and if under that the defendant can prove such a giving of time as the oases and principles referred to contemplate, I see no reason why it should not bar the action. How far the giving the note will sustain this ground of defence, must depend upon the evidence when presented. I think the motion to strike out this notice should not prevail.

The 7th, 8th, 9th, and 10th pleas, and the 1st and 2d notices, set up several acts of the Legislature, by which the plaintiffs were authorized to borrow money, and to extend their capital, and to.increase their amount of bank issues, by all of which it is insisted, that the risk of the sureties was increased, and they thereby discharged. A surety is not to be bound beyond the scope of his engagement, and the change of a firm by the addition of another partner, will discharge the surety of a clerk for unfaithfulness, under the mere firm. 3 Wils. 539. So he will not be held liable when the executor continues the business, and the clerk is unfaithful under him. 1 T. R. 289. Nor will a letter of credit upon a mercantile or banking house be valid, after a change in either firm, by death or withdrawal. 7 T. R. 254; 3 East. 484; and in the U. States v. Kirhpatrick & al. 9 Wheaton 720, it was held that the sureties on a collector’s bond were only liable for breach of duties and obligations created by laws passed anterior to the giving of the bond. But none of these eases comes within the case set up by either of these pleas or notices. The laws were all passed by the Legislature for the purpose of enabling the plaintiffs the better to carry on their works and execute the powers vested in them by their charter, and were within the general scope of their powers and business as they existed at the time the bond was given. The condition of this bond is of a general character ; it specifies no particular office or business as it might have done, and thereby restricted the defendant’s liability, but it is simply that “ whereas the said A. B. is, and is to be retained and employed ” by the plaintiff, and “if he shall well and faithfully serve” them, and if the sureties shall well and faithfully indemnify and save harmless the plaintiffs from any loss, &c. Had A. B. quit the service of the plaintiff, and set up the extension of their business and his own labors, it is possible these pleas and notices, or some of them, might have been available in defence, bat he continued his services, and the complaint is not incapacity, but infidelity in the discharge of his duty, in answer to which the surety cannot avail himself of the matter herein set, forth. Aud I do not see but the sam e objection must operate not only against these pleas and notices, but also against the 11th plea and 3d notice. The bond does not restrict the business of the plaintiff, nor the service of the principal; wherever the one acted for the other, he was “ faithfully to serve,” and we cannot inquire how much the temptation and danger were increased by the removal of part of the plaintiff’s business to New York, or whether it was all done strictly within the corporate powers, and if we could, it would afford no answer to the charge of want of faithfulness.

The 4th and 5th notices set up matters by way of defence which are included in the second plea, so far as they can be used for defence. The bond was for the fidelity of A. B., and not for his capacity or accuracy. 10 John. R. 271. And if the plaintiff cannot shew in his breaches and proof a want of fidelity and damages arising therefrom, then there is no breach sustained, and no damage can be recovered.

The 9th and 10th notices contain no matters of defence. The by-laws of the corporation form no part of the condition of the bond ; they are for the security and protection of the company, and not of its officers. In the U. States v. Nicholls, 12 Wheaton 505, it was held that the laws which require of officers under the government that settlement of their accounts should be made at short and stated periods, provisions created by the government for its own security and protection, and to regulate the conduct of its own officers — are merely directory to such officers, and constitute no part of the contract with the surety.

I am therefore of opinion that the several pleas and notices must be overruled, except the fourth plea, and the fourth, fifth, and eighth notices.

Nevius, J. To the third plea the plaintiffs demurred for the following causes, to wit: “That it does not answer the whole gravamen of the declaration, as no satisfaction is alleged to have been paid or received for any malfeasance, misfeasance, &c. of the said A. B. by him committed during the time he was retained, &c. according to the condition of said bond; which was the occasion of injury and loss to the plaintiffs, after he, the said A. B. had left their employ. And that it is not averred in said plea, that the defalcation óf the said A. B. amounted to no more than $28,223.47. Nor what was the whole amount of moneys and securities, which were lost to the plaintiff by the delinquency of the said A. B. Nor that the plaintiff accepted and received the said money in satisfaction. And for that, a greater sum of money than that named, for all that appears by said plea may have been due to the plaintiffs from the said A. B. by reason of the breaches.”

I think the demurrer to this plea is well taken, and for all the causes assigned. Every plea in bar should be a full answer tu all it assumes to answer. This plea professes to answer the breaches assigned, by alleging the payment of a .sum of money, in satisfaction of all moneys and securities unpaid and unaccounted for, and of all claims against the principal while in the plaintiff’s employ. If this sum of $28,223.47 was paid in satisfaction of a sum of money due and liquidated, on account of moneys or securities received and unaccounted for by the cashier, the plea should have set forth what that sum of money was; for the payment of a less sum of money is no satisfaction of a greater sum liquidated and due. Or it ought to have averred, that there was no more due than was actually paid. 5 John. R. 271. 1 Saun. P. & E. 28; Smith’s Leading Cases, 146; 1 Strange 426. And although the payment is alleged to be in satisfaction, not only of all liquidated claims, but also of all other claims, still it should have named the amount of liquidated claims, that it might appear that such claims did not exceed the payment. Again, as the plea professes to be a bar to the whole demand, it ought to have been as broad as the condition of the bond in order to be a full answer. It should have averred that this payment was in satisfaction of all claims and demands accruing to the plaintiff, by means of any wrongful act or acts of the said A. B., while retained in the plaintiff’s employment. 4 Wash. C. C. C. Rep. 680. For loss and injury might have accrued to the plaintiffs, after such employment had ended from an act .or omission of duty by the cashier during the time of his employment. Another objection to the plea is, that it professes to be a plea of accord and satisfaction, and fails to aver that the sum paid was accepted in satisfaction. This I apprehend to be necessary. 1 Saun. P. & E. 28 ; 1 Strange 573; 3 East 256. It is not true that satisfaction necessarily implies acceptance. The party who pays, or delivers, a chattel, may intend it to be in satisfaction ; but it will not necessarily follow, that he who receives it accepts it in satisfaction. It may not always be necessary to prove a verbal or a written acceptance, in direct and positive terms; this may be proved by the circumstances of the case; but I apprehend it is necessary to aver it.

The demurrer to the 4th plea assigns the same causes as are assigned to the former, and the following in addition, to wit: “ that the defendant by said plea seeks to set up a parol undertaking in satisfaction of an instrument under seal; and by said plea relies upon the facts therein stated to show, that the plaintiff gave time to the principal obligor, and thereby discharged the sureties. Whereas it appears by the said plea, that the condition of the said bond had already been broken, and the penalty already incurred, by all the obligors, before the giving of said note.”

It is a.general and well settled rule, that the giving a promissory -note by a debtor, for the amount due on a bond, will not extinguish a bond, or even a prior simple contract; but the creditor may, notwithstanding such note, maintain his action upon the original contract. But where the debtor gives the note of a third person, or his own note endorsed by a third person, and it is accepted in satisfaction of a debt, it will be a good bar to an action for such debt, 3 Wendell 66; and that too, where the note is for a less sum than the original debt, 20 John. R. 76, 1 Wendell 164. But I apprehend, where one of several obligors gives his own note, and it is accepted in satisfaction of unliquidated damages, occasioned.by a breach of the condition of a bond, it will be a good bar to an action on such bond. There may be many considerations, which would induce the holder of such bond to liquidate his damages, and accept a promissory note in satisfaction of his bond, or rather of the condition of his bond. In Sheely v. Mandeville, 6 Crunch 264, Ch. Jus. Marshall said, “that a note by one of the parties, or of a third person, may by agreement be received in payment of an original contract. That the doctrine of nudum pactum does not apply to such a case; for a man may, if he will, discharge his debtor without any consideration. But if it did apply, there might be inducements to take a note from one partner liquidating and evidencing a claim on a firm, which might be a sufficient consideration for discharging the firm.” So in this case, the consideration of liquidating and evidencing the amount, claimed for breaches of this bond, may have been a sufficient inducement for the cashier to give his note, and for the plaintiff to accept it in satisfaction of the bond. But it is said, a bond can only be discharged by an instrument of equal solemnity, and not by parol. In Strang v. Holmes, 7 Cow. 224, it was decided, that a parol accord and satisfaction of the condition of a penal bond, after the day of payment, is a good bar to an action on such bond. The plea is, that the note was given and accepted, not in satisfaction of the bond, but of all damages by reason of any breach in the condition of the bond. Iu Preston v. Christmas, 2 Wil. 86, the court adopted the position of counsel, that where there is a condition to a bond for the payment of money, an award without deed may be pleaded in satisfaction of the condition, but not of the deed. It is not necessary to notice the other ground of demurrer to this plea, to wit, that the plea relies upon the fact that time was given to the principal obligor, for the defendant does not in this plea put herself upon that ground. I think this plea ought to be sustained and the demurrer to it overruled.

To the 5th plea the plaintiff demurs for all the causes assigned in his demurrers to the 3d and 4th pleas; and also “ for that this plea does not allege by express averment, but only by implication, not necessarily belonging or attached to the words used, that any note was ever given by the said A. B. to the plaintiff; whereas the giving such a note is a material part of the matters of fact, attempted to be set up as a defence in said plea.”

The only questions raised by this demurrer, which have not already been considered, are 1st, whether the giving time to A. B. to pay his note, or the amount of money agreed on, without the knowledge or consent of the defendant or her intestate, constitutes a bar to the action ; and this is matter of substance. And 2d, as to the form of the plea.

As to the first of these questions, the plea distinctly avers, that the plaintiff gave time to the principal to liquidate and pay his note, which they had received and accepted in satisfaction and discharge, &c. of this bond, without the knowledge or consent of the surety, and have thereby discharged the surety from liability on this bond. Is this so ? The defendant’s intestate was undoubtedly a surety upon the bond, upon which A, J>. was principal; and no action could be brought against the surety, until the principal had failed in the performance of the trust. Now if after the forfeiture of the bond, the plaintiff had released the principal, such release would have inured to the benefit and discharge of the surety; for the plain reason, that it would have deprived the surety of his remedy over against the principal. .But will the giving of time to the principal discharge the surety? It has recently beén decided in this court, that a mere neglect, or refusal to prosecute a bond for the payment of money only, at the request of sureties will not discharge them, Pintard v. Davis, 1 Spen. 205. And,in The People v. Russell, 4 Wend. 570, it was decided that mere delay, even for a number of years, to prosecute a bond conditioned for the faithful performance of the office of commissioner of loans, would not discharge the surety. Both these .cases hpwever differ from the one before us, in that there was no contract to delay a prosecution. But in the case of Manning v. Shotwell, 2 South. 584, a majority of the court held, that where time had been given by express agreement to the principal on a sealed bill, the surety was not discharged. This opinion however was strongly controverted by Justice Southard, who held that no new contract could be made for the surety without his consent. But admitting the correctness of the decision in that case, it differs from the present in this, that the surety there stood in the relation of principal to the holder, upon an instrument for the payment of a specific sum of money, and could at any time, notwithstanding the agreement, have liquidated the debt and maintained his action against his principal for the amount. That case too may be likened to Reynolds v. Ward, 5 Wend. 501, where the same doctrine was held; but upon the ground, that there was no adequate consideration to support the promise to delay. The contract for delay here, I have shown, is not a mere nudum pactum, but founded on a good and lawful consideration, to wit, the liquidation of damages and the evidencing of the claim. In Davis v. The People, 1 Gilm. R. 409, it is said that the law is well settled, that if a creditor, by a valid and binding agreement, without the assent of the surety, give further time for payment to the principal, the surety is discharged, both at law and in equity; and that whether he was actually damnified or not; and that the surety is not permitted to discharge the debt, unless the principal can be legally called upon for payment. From a careful examination of all the authorities, this principle is clearly to be extracted, that where the obligee defeats or changes the condition of his bond, by any new and binding contract, or increases or varies the risk of the surety, he-thereby discharges him. The giving time to the principal by a binding and lawful contract, restraining the plaintiffs from their suit against him on this bond, and the surety from his action against the principal, is such a change of the terms of the original contract, and so varies the risk of the surety, as to operate to discharge him. The next objection to this plea is as to its form. I think it well enough. The objection is, that the plea does not state that the note was given by A. B. to the plaintiffs, it does state that the plaintiffs received and accepted a note, drawn by A. B. payable to them, in satisfaction and discharge, &c. Here is the minor degree of certainty, to wit: certainty to a common intent, and that is sufficient. Necessary circumstances will in general be intended in a plea. 1 Chit Pl. 517. If the note was drawn !>v A. B., payable to the plaintiffs and accepted and received by them, the court will intend that it was accepted and received from A. B., or in other words, that he gave it to the plaintiffs. I am of opinion that the demurrer to this plea should be overruled.

The 7th and 8th pleas set up by way of defence, “that after the execution of the bond, the legislature, at the instance of the plaintiffs, passed several acts, whereby they were authorized to borrow $500,000; and they did borrow it, and the duty and responsibility of A. B., and the risk of the sureties, were thereby greatly increased and changed, and without the consent or approbation of the defendant or her intestate.”

To these pleas, the plaintiffs have filed a general demurrer; which, I think, is well taken. They contain no answer to any breach of any condition in the bond. The intention of the parties was to secure the fidelity of the cashier, in the execution of his duties to the plaintiffs as their clerk or agent; and the increase or diminution of their capital or business, was not in itself calculated to increase or vary the risk of the sureties, in that respect. If these pleas are good, as has been well argued by the plaintiffs’ counsel, any increase of capital or business by the obligee would discharge the sureties, a doctrine which would destroy this species of security. The case is not like the one cited from 3 Wils. 530, or 1 Term R. 257, where the service was obligated to be performed to one person, and afterwards the business, in which the service was rendered, was continued in the name of a firm, or in the name of the executor of the oblio-ee. A man might well be willing to be surety for the fidelity of A., while in the employ of B.; and yet be unwilling to incur the same responsibility for him, when in the employ of B. and C., or of B’s. executors. But even a change of partners will not always discharge a surety; it must depend upon the intention of the parties. 1 Term R. 293, note. The same remarks will apply to the 9th and 10th pleas, which set up as a defence the increase of the capital stock, and of the circulation of the notes of the plaintiffs; to which general demurrers are also filed, all of which I am of opinion ought to be sustained.

The only question raised by the 11th plea and demurrer is, whether the plaintiffs could lawfully conduct any of their banking operations in the city of New York; for if they could, it was lawful for them to send their agent there, to manage and conduct such operations. The 13th section of their charter requires their banking house to be situate, and their banking operations to be conducted, in the city of Jersey. But I do not find any provision in the charter, prohibiting the plaintiffs from conducting business, connected with their bank, and which may come under the denomination of banking operations in the city of New York. Indeed I cannot conceive of a bank in full operation, on the border of that city, conducting .its operations entirely and wholly at its banking house. Its lawful business of exchanges, at least, must- be conducted with the neighboring banks ; and if the plaintiffs saw fit to establish an office in New York, to facilitate this portion of their operations, without removing their bank or their main business of banking, I do not see that they have either forfeited or violated their charter. It is a well known public fact that the plaintiffs, for a series of years, had an office in the city of New York, where they transacted business connected with their bank; and I am unwilling upon this demurrer to declare, that all business there transacted was null and void, and in contravention of their charter; and that it absolves the sureties on this bond, from all liability. If such a decision'is to be made, it must come before this court in another shape. The demurrer to this plea, I think, should be sustained. In addition to these several pleas, the defendant has filed 10 notices of special matter, to be given in evidence on the trial of the cause. These the plaintiffs move to strike out j and they now call for our consideration.

The first notice is the same in substance as the seventh plea; and the 2d the same in substance as the 8th, 9th, and 10th pleas ; and the 3rd substantially the same as the 11th plea : and for the reasons assigned in sustaining the demurrers to those pleas, these notices must be stricken out.

The 4th and 5th notices embrace like matters, and may be considered together. I do not see the necessity of these notices ; all the matters they contain may be given in evidence, under the plea of performance. If the duties required of the cashier were such as he could not perform, it was no breach of his bond not to perform them. The law requires no man to do impossible things. Nor are the sureties on this bond responsible for losses occasioned by accident, or mistake of the cashier, where there was no wilful neglect or omission, or wrongful act. Although I deem these notices unnecessary, I am willing they shall stand, as they advise the plaintiffs specially of one ground of defence, upon which the defendant means to rely.

Under the 6th and .7th notices I think the defendant has a right to show that she was prejudiced by an omission on the part of the plaintiffs, to give notice of defaults by A. B., known to them. Such defaults could not be known to the surety without notice from the plaintiffs; and if they knew of them, it was their duty instantly to advise the surety of them, that he might secure himself against the consequences. If they failed to do so, they failed in an essential part of their duty; and if the surety has been prejudiced, be has a right to this defence. If there be negligence on the part of the obligee, which results to the injury of the surety, the latter has a right to show it. 13 John. R. 384. These notices, in my opinion, ought to stand.

The 8th notice is in substance the same as the 5th plea, and for that reason I should be willing to strike it out; but as the majority of the court have overruled the plea for defect in form, I think the notice should be retained.

The 9th and 10th notices are “ that the plaintiffs did not hold weekly meetings of their Board of Directors, and did not require A. B. to exhibit from time to time his accounts and balance sheets, as by their by-laws was provided; and that if there was any default, it was occasioned by their wilful omission or neglect ; and that the examining committee did not every three mouths examine the state of the bank, as by another by-law it was their duty to do.”

If this were all true, it will constitute no justification or excuse for any misfeasance, malfeasance, wilful omission, neglect, or wrongful act or acts of the cashier. If by means of such omissions and neglect, the cashier was unable to execute the duties of his office as required of him, the defendant may show the fact under her second plea. Let these notices also be stricken out. '

The fourth plea, and the fourth and fifth notices were sustained by a majority of the court; and the eighth- notice was sustained, by an equal division of the court; the demurrers to the third, fifth, seventh, eighth, ninth, tenth, and eleventh pleas were sustained, and all the notices except the eighth stricken out.

Cited in Mor. Can. & Bk’g Co. v. Van Vorst, 3 Zab. 107; Line v. Nelson, 9 Vr. 361.

The law is so stated in the late learned treatise of Mr. Burge. On this point there seems to be no doubt or discrepancy in any of the treatises on the subject. See Burge on Surety, p. 212.

Note (a). Spencer’s R. 205. The doctrine of that case, that refusal or neglect to sue principal after request of surety will not discharge surety, is a position on which American decisions differ widely. In New York the contrary doctrine was established in Pain v. Packard, 13 J. R. 174 — a case decided at bar without argument, and as usual in such cases without much consideration, neither of the only two authorities cited supporting the decision. Chancellor Kent in King v. Baldwin, 2 J. C. B. 554, questioned that case and held the contrary doctrine. King v. Baldwin was reversed in the Court of Errors, 17 J. R. 384, by the casting vote of the Lieut. Governor; Pratt J. who had concurred in Pain v. Packard, voting for affirmance. Since then, the doctrine of Pain v. Packard has been held settled law in New York—10 Wend. 162; 13 do. 377; 4 Hill 650. And in Pennsylvania, Geddis v. Hawk, 10 S. & R. 33; Lichtenhaler v. Thomson; 13 do. 157, and 15 do. 28.

The doctrine of Pintard v. Davis was held in Frye v. Barker, 4 Pick. R. 28; Hogaboom v. Herrick, 4 Verm. R. 131; Dennis v. Rider, 2 McLean R. 451, and in Leavitt v. Savage, 4 Sharp. 72.