Benson v. Phipps

• Decision Date: 04 March 1895
• Citation: 29 S.W. 1061
• Parties: BENSON v. PHIPPS.
• Court: Texas Supreme Court

Page 1061

29 S.W. 1061

BENSON v. PHIPPS.

Supreme Court of Texas.

March 4, 1895.

Error to court of civil appeals of Fourth supreme judicial district.

Action by L. Phipps against H. L. Benson and others. From an affirmance (28 S. W. 359) by the court of civil appeals of a judgment for plaintiff, defendant Benson brings error. Reversed.

Tarleton & Altgelt, for plaintiff in error. J. D. Crenshaw, for defendant in error.

GAINES, C. J.

The plaintiff was a surety for one Hosack, the principal maker upon a promissory note payable to the defendant in error. Some days after the note fell due Hosack wrote defendant in error requesting an extension, to which request the defendant replied, by letter, as follows: "I will extend the time of payment one year, and look with confidence for the accrued interest within 60 days, hoping it will not inconvenience you. After that, if it is your pleasure to make the interest on the extension payable semiannually, it will help me." The defendant in error testified to having received the letter from Hosack, requesting an extension, and that the foregoing was his reply, but the contents of Hosack's communication were not otherwise shown. He also testified that he was paid nothing for the extension, and that Hosack never paid the accrued interest. Suit having been brought on the note by the payee against all the makers, the plaintiff in error pleaded his suretyship; and, the facts as stated above having been proved, the trial court gave judgment for the plaintiff in that court. That judgment, upon appeal, was affirmed by the court of civil appeals.

It is the right of the surety, at any time after the maturity of the debt, to pay it, and to proceed against the principal for indemnity. This right is impaired if the creditor enter into a valid contract with the principal for an extension of the time of payment. The obligation of the surety is strictly limited to the terms of his contract, and any valid agreement between the creditor and the principal, by which his position is changed for the worse, discharges his liability. For this reason it is universally held that a contract between the two, which is binding in law, by which the principal secures an extension of time, releases the surety, provided the surety has not become party to the transaction by consenting thereto. If the creditor is not bound by his promise to extend, it is clear there is no release. In order to hold him bound by his promise, there must be a consideration. Whether a mere agreement for an extension by the debtor is sufficient to support a promise to extend by the creditor is a question upon which the authorities are not in accord. We are of opinion, however, that the question should be resolved in the affirmative, at least in cases in which it is contemplated by the contract that the debt should bear interest during the time for which it is extended. If the new agreement were that the debtor should pay, at the end of the period agreed upon for the extension, precisely the same sum which was due at the time the agreement was entered into, the case might be different. But a promise to do what one is not bound to do, or to forbear what one is not bound to forbear, is a good consideration for a contract. In case of a debt, which bears interest either by convention or by operation of law, when an extension for a definite period is agreed upon by the parties thereto, the contract is that the creditor will forbear suit during the time of the extension, and the debtor foregoes his right to pay the debt before the end of that time. The latter secures the benefit of the forbearance; the former secures an interest bearing investment for a definite period of time. One gives up his right to sue for a period, in consideration of a promise to pay interest during the whole of the time; the other relinquishes his right to pay during the same period, in consideration of the promise of forbearance. To the question why this is not a contract, we think no satisfactory answer can be given. It seems to us it would be a binding contract, even if the...