Olmstead v. . Latimer

53 N.E. 5, 158 N.Y. 313, 12 E.H. Smith 313, 1899 N.Y. LEXIS 676

Opinion

Parker, Ch. J.

The defendants Latimer, as heirs at law of the mortgagor, were respectively liable under section 1813 of the Code, for the debts of the said mortgagor decedent to the extent of their interest in the real property that descended to them from him. The premises covered by the mortgage were primarily liable to pay the mortgage debt. As there was no personal estate the defendants were secondarily liable, and they were properly made parties in the action of foreclosure by virtue of section 1627 of the Code, which provides that “ any person who is liable to the plaintiff for the pay ment of the debt secured by the mortgage, may be made a defendant in the action; and if he has appeared, or has been personally served with the summons, the final judgment may award payment by him ” of any deficiency. The judgment as it comes to us decrees that the defendant Frederick B. Latimer shall pay one-quarter of the deficiency, but it has been held that the effect of the conveyance of the premises to the defendant Frederick by his brothers in the years 1888 and 1889, together with the fact that he informed the plaintiff of such conveyance, and thereafter made an agreement to extend the time of payment of the bond and mortgage, had the legal effect of making Frederick the principal debtor and his brothers sureties, and hence that the effect of the agreement, extending the time of payment, operated to release the sureties from all liability to the plaintiff on account of the indebtedness evidenced by the bond. Assuming, but not deciding, that the effect of the conveyance, and that which subsequently happened, was to change the obligation of the defendants other than Frederick towards the plaintiff, from that of principals to that of sureties, we come to the question whether the agreement to extend the time of payment was invalid for want of consideration.

There are several decisions in this court in which the question has been considered, and they are in harmony with one another. In Kellogg v. Olmsted (25 N. Y. 189) the action was on a promissory note by the transferee of the payee. The answer alleged that after tire note became due it was mutually agreed between the holder thereof, the payee and the defendants, “ that in consideration that the defendants would keep the principal sum of the said note until the first day of April, 1857, and pay the same with interest on that day, he, the said payee, would extend the time of payment of the principal of said note until the first day of April, 1857; that the said defendants then and there assented to such proposition, and then and there agreed to and with said Oovil to keep said principal sum of said note until the first day of April, 1857, and to pay the same with interest on that day.” On the trial of the action the referee excluded evidence offered by the defendants to establish the defense so specially set up, and exceptions were taken thereto that presented the question to this court. It was held that an agreement by a creditor to postpone payment of a debt until a future day certain, without other or further consideration than the agreement of the debtor to pay the debt with interest, is void for want of consideration, the court citing in support of its position Miller v. Holbrook (1 Wend. 317); Gibson v. Renne (19 Wend. 390); Pabodie v. King (12 John. 426); Reynolds v. Ward (5 Wend. 501); Fulton v. Matthews (15 John. 433).

A dissenting opinion was written by Judge Davies, who two or three years later wrote the principal opinion in Halliday v. Hart (30 N. Y. 474). In that case the action was brought to recover against the maker and two indorsers on a promissory note. The indorsers defended on the ground that the plaintiff had, for a valuable consideration, and in writing, extended the time of payment for a period of some months, and claimed that the effect of such extension was to discharge the sureties from liability. The authorities bearing upon the question were very carefully considered, and the court decided tha$ a partial payment by the maker on account of an overdue note, is not a valid consideration for a promise of forbearance as to the residue so as to discharge the indorsers-. A concurring opinion was written by Judge Hogeboom, in which he says: “ The sureties were not discharged. There was no valid agreement for the extension of the time of payment. There was no payment of any sum which the party paying was not obliged to pay. The performance of an unqualified legal obligation by payment of part of a sum due upon a note, is not a valid consideration for the extension of payment of the remainder.”

The next case in this court was Lowman v. Yates (37 N. Y. 601). The action was upon a bond given by Ely as principal, with Parmenter as surety, conditioned that Ely should, before a given date, take up and deliver to the plaintiff two mortgages executed by him, amounting to ten thousand dollars. The action was brought against the personal representatives of the surety, the principal having died. The defense relied upon was that the plaintiff, without the surety’s consent, took from, the principal four negotiable promissory notes, to be applied upon the bond for the payment in the aggregate of about seven thousand dollars of principal, three, three and one-half, four and five years after date,- and indorsed the same upon the bond, thereby extending the time of payment and discharging the defendant as surety. The court recognizing the principle that a creditor by a valid and binding agreement between himself and the principal debtor, extending the time of payment without the consent of the surety, thereby discharges the latter from liability,. said that in order that an agreement shall accomplish that result, it must have a sufficient consideration, so as to prevent the prosecution of the debt by the owner, and to prevent the surety from compelling him to enforce it. It was claimed by the plaintiff that he was induced to enter into the agreement, and take notes extending the time of payment, by the fraudulent representations made by the principal debtor, and it was held that the court properly left .it to the jury to determine whether the notes were imposed on the plaintiff by fraud, and if so that their receipt by the plaintiff under the agreement did not operate to ex@bnd the time of payment of s'o much of the amount of the bond as their face value represented. It was also held thát the judge properly charged that in any event the extension of the time of payment did not discharge the surety as to the residue of the bond beyond the amount of the notes. In Parmelee v. Thompson (45 N. Y. 58) one of the makers of a promissory note after maturity paid to the' payee a sum .equal to the amount due thereon and took possession of the note. Subsequently he brought suit against another maker, who gave evidence tending to show that while the payee held the note an action was brought thereon in the Supreme Court, and that it was agreed between the defendants and the plaintiff therein that the suit should be discontinued, the defendant to pay the costs and have until the ensuing December to pay the note; that the costs were paid and the suit discontinued, after which, the plaintiff became the owner of the note and brought the action before the expiration of the time agreed upon, and the trial judge held that there was no valid agreement to extend the time of payment. The judgment was affirmed in this court, the opinion being written by Judge Allen, in which he said :■ “ It is competent for the parties, by a parol agreement, to enlarge the time • of performance of a simple contract. * * * But a promise to extend the time of payment, unless founded on a good consideration, is void. A payment of a part of the debt, or the interest already accrued, or a promise to pay interest for the future, is not a sufficient consideration to support such promise.” (Citing Miller v. Holbrook, Gibson v. Renne and Kellogg v. Olmsted, supra.)

In Powers v. Silberstein (108 N. Y. 169) the action was brought upon a promissory note made by the firm of Joy & Bowman and indorsed by the defendant Silberstein, who alone answered, setting up as a defense that the note was indorsed by him for the accommodation of the makers, and that the time of payment was extended by an agreement, made 'without his consent, between the makers and the plaintiff. The plaintiff had judgment in the trial court, which was affirmed at the General Term, but reversed in this court on the ground that there was evidence tending to establish that the plaintiff, after the maturity of the note, agreed with the makers, Joy & Bowman, to forbear the collection. of it if they would continue plaintiff’s son in their employment, and that Joy & Bowman consented and did retain him in their service upon this consideration. In the course of the opinion the court cited Lowman v. Yates (supra), upon the proposition that a mere indulgence by a creditor of the principal debtor will not discharge the surety, and that the agreement for an extension, made without the consent of the surety, must be upon a valid consideration, such as will preclude the creditor from enforcing the debt against the principal, but argued that the plaintiff did not deny that the employment of his son was an inducement to the original loan, or that the subject of his con tinning employment was referred to in his conversation with the makers of the note after maturity, and that, taken in consideration with the fact that the loan was allowed to remain standing for three years after the maturity of the note, presented a question for the jury as to whether there was an extension of the time upon a good consideration.

Our attention has not been called to any authority in this court in hostility to the position taken in the decisions we have referred to. The rme laid down by them has been followed in many cases in the trial courts and among them may be found the comparatively recent cases of Manchester v. Van Brunt (19 N. Y. Supp. 685) and Babcock v. Kuntzsch (85 Hun, 615). The reasons assigned by the learned justice who wrote for the Appellate Division, in favor of overthrowing the doctrine of these cases, while presented with marked ability and clearness, are not at all new. They were advanced in the dissenting opinion by Judge Davies in Kellogg v. Olmsted (supra), the first case in which the question received attention in this court, so far as we are advised. Whether the reasoning of the prevailing or dissenting opinion seems the better, it is not profitable to inquire, for the question was settled by the decision of this court, and has by later adjudications become so firmly grounded that it may not now be questioned.

' The judgment should be reversed as to the defendants Henry A. and Brainard G. Latimer, and that of the Special Term modified by striking out the direction to the referee to pay costs to Brainard G. and Henry A. Latimer, and so further modified as to adjudge that the defendants, Frederick B. Latimer, Henry A. Latimer and Brainard G. Latimer, each pay to the plaintiff one-quarter of any deficiency that may arise on the sale of the mortgaged premises under said judgment, and as thus modified affirmed, with costs.

All concur.

Judgment accordingly.