Stein v. Steindler

This action is dgainst the defendant as payee indorser of a promissory note for $740, made by one Regina Mayer on December 3, 1889, at four months, and due on April sixth, and upon which $600 had been paid prior to May 9, 1890, leaving the balance of $140 sued for herein. It appears that on September 10,1890, an agreement for valuable considerations and under seal was made between said Regina' Mayer as party of the first part, and this plaintiff, who was then the holder of said note, as party of the second part, and which recited among other things, that “ whereas the parties hereto have this day adjusted and settled all matters in controversy between them except certain notes mentioned and described in the schedule annexed, marked schedule A., which last mentioned notes are still in force, and it appears that, in addition to the notes mentioned in said schedule, the party of the first part is indebted to the party of the second part in the sum of $2,140.15,” and that she should pay him $60 in cash and give her note for $2,080.15 payable on December 28, 1890, with interest, and she further agreed to pay him, not*415withstanding the terms of the note for $2,080.15, three installments of $135 each, on account thereof on October 23, November 23 and December 23, 1890; and he in turn agreed to accept a renewal note for the balance after such payments, but in case of default in any of such payments, the original note was to become due five days thereafter, and there were similar covenants as to third and fourth renewal notes, and it contained the following covenant: “And it is further agreed by

and between the parties hereto, that no action shall be taken by the party of the second part on the notes mentioned in schedule ʻ A ’ until the party of the first part has fully paid off and discharged the notes hereinbefore specified, except that in case the party of the first part shall make default in any of said payments, then in that case the party of the second part shall be at liberty to prosecute the notes me), .tinned in schedule A.” There were four notes mentioned in schedule “A,” and one of them was the note made by Regina Mayer to the order of and indorsed by Isaac S. Steindler, this defendant, and then held by Philip Stein, the plaintiff, and now sued upon by him in this action, and he covenanted in that agreement of September 10, 1890, with Mrs. Mayer, the maker, that “no action shall be taken by him ” on the note until she defaults in certain payments, the first of which was to be made on October twenty-third, following, and that he was only “at liberty to prosecute ” this note after such default, and hence this defendant, the payee and indorser of that note contends that the payment of the same was extended from September tenth, to December twenty-third, the day upon which the third payment was to be made by Mrs. Mayer under that agreement, as it was admitted at folio thirty-four, that she had made the two first payments therein provided for, but whether these two payments were made or admitted or" not, she could not be in default until the first payment became due on October twenty-third. This covenant by the holder of a note “that no action shall be taken ” by him on the note and “ that he shall not be at liberty to prosecute ” the same until the maker thereof shall make default in a certain specified payment, which by the *416terms of the agreement containing this covenant is made payable on a day subsequent thereto and thereby fixed, is undoubtedly a covenant to extend the payment of such note until such day. A covenant not to sue upon a note or other debt for a fixed period, is an extension of payment of same for such period. The holder of a note who took from the maker a warrant of attorney to confess judgment for the amount of the note, and at the same time, stipulated not to issue execution if the maker paid a fixed sum in sixty days and continued to pay a like sum every sixty days thereafter until judgment was satisfied, thereby released the surety on the note. Bower v. Tiermann, 3 Denio, 378. The liability of an indorser in an action by a subsequent indorser or holder who has given the maker an extention as to payment of the note, is to be determined by the rules governing the relation of principal and surety.

And the rule as to sureties is, that if the creditor has bound himself by any transaction with the principal debtor, which prevents the surety upon payment, from immediately prosecuting the principal debtor, the former is discharged. Any valid or binding agreement whereby the surety may be deprived of, or delayed in the assertion of his equitable claim to pay the debt, and to become subrogated to the rights and remedies of the creditor, if made without the assent of the surety, will discharge him. An agreement for an extension, hut for a day, of a secured debt, made without the consent of the surety, upon a valid consideration, which precludes the creditor meanwhile from enforcing the debt against the principal, thereby changing the position of the surety, will release the surety. And every extension to the principal debtor of payment of the debt thereby changes the position of the surety, and will release him unless the remedies of the creditor against the surety are expressly reserved, and in consequence, his resulting rights also reserved, but the stipulation to reserve the rights of the creditor against the surety must be plainly seen from the agreement between the principal debtor and the creditor, and if nothing is mentioned about the reservation of *417these rights, it will not be implied. However, the appellant contends that plaintiff’s rights, as holder of the note as against the defendant indorser, were expressly reserved by the recitals in the preamble to the agreement of September tenth; that they (the holder and the maker) “ have this day adjusted and settled all matters in controversy between them, except ” the four notes made by her, one of which is this note in suit; that these four notes “ are still in force,” and that she is indebted to him, “ in addition to ” these four notes, “ in the sum of $2,140.15.” But for this exception, the plaintiff would have . lost forever his cause of action on the note, both against her and the indorser, and the effect of this exception in the preamble is to save the note from being included in the adjustment and settlement of all matters in controversy between them, as there was no controversy in reference to it. As the note was then due, had the parties stopped right here, the plaintiff would then have had an immediate right of action thereon against both her and the indorser, and this immediate right would have continued had he not expressly covenanted in the agreement with her to extend the payment of the note, and even then he could have expressly stipulated to reserve his rights as against the indorser, but he did not so stipulate, and such stipulation to reserve his rights as against an indorser cannot, under the law of this state, be implied. The judgment and order appealed from are reversed and a new trial granted, with costs to appellant to abide the event. The plaintiff may be able to show on the new trial, that the note was given to the defendant as an accommodation, and that he subsequently procured its discount and retained the proceeds thereof, which would make his liability, as between him and the maker, primary, and hence he could not invoke the regulations as to subrogation and suretyship.

McCarthy, J., concurs.

Judgment and order reversed; new trial granted, with costs to abide event.