Boatmen's Sav. Bank v. Johnson

• Decision Date: 18 January 1887
• Citation: 24 Mo.App. 316
• Parties: BOATMEN'S SAVINGS BANK, Appellant. v. E. M. JOHNSON ET AL., ADMINISTRATORS, Respondents.
• Court: Missouri Court of Appeals

24 Mo.App. 316

BOATMEN'S SAVINGS BANK, Appellant.

v.E. M. JOHNSON ET AL., ADMINISTRATORS, Respondents.

St. Louis Court of Appeals, Missouri.

Jan. 18, 1887.

APPEAL from the St. Louis Circuit Court, SHEPARD BARCLAY, Judge.

Reversed and remanded.

A. M. GARDNER, with whom are KEHR & TITTMAN, for the appellant: If the creditor, by the composition agreement, which discharges the maker or acceptor, reserves his remedies against the indorser, the latter remains liable. The debt, in such case, is not satisfied or extinguished. Bank v. Schmucker, 7 Mo. App. 171; Ex parte Glendining, Buck's Cases in Bankruptcy, 517; Kearsley v. Cole, 16 Meeson & Welsby, 127; Price v. Barker, 30 Eng. L. & Eq. R. 157; Sohier v. Loring, 6 Cush. 537; Tobey v. Ellis, 114 Mass. 120; Kenworthy v. Sawyer, 125 Mass. 28; Lysaght v. Philips, 5 Duer, 106; Wayman v. Hoag, 14 Barb. 232-9; Hagey v. Hill, 76 Pa. St. 108-10; Clagett v. Salmon, 5 Gill & J. 314-355; Morse v. Huntington, 40 Vt. 488; Williams v. Hitchings, 10 Lea. (74 Tenn.) 326; Mueller's Ex. v. Dobschuetz, 29 Ill. 176; Bank v. Lineberger, 83 N. C. 454-6; Stirewalt v. Martin, 84 N. C. 4.GEORGE H. SHIELDS, and GLOVER & SHEPLEY, for the respondents: The release, by a creditor, of a principal debtor, discharges the sureties. Hempstead v. Hempstead, 27 Mo. 187; Eggeman v. Henschen, 56 Mo. 123; Prior v. Kiso, 81 Mo. 241; The State v. Matson, 44 Mo. 308. In a release of the principal debtor by a creditor, a clause reserving right to proceed against the sureties is void. Webb v. Hewitt, 3 Kay & John. 438; Bank v. Blair, 44 Barb. 642.

THOMPSON, J., delivered the opinion of the court.

The single question presented by this record is, whether an endorser or surety is released by a composition agreement between the holder of the obligation and the maker, acceptor, or other principal debtor, which composition, in express terms, reserves every right and remedy which the holder, or obligee, has against other persons. The question must be answered upon authority, that such an agreement does not discharge the endorser or surety.

Two principles are universally conceded in respect of the rights of sureties, and are not disputed by the parties to this proceeding: (1) That a valid agreement between a creditor and his principal debtor, whereby the creditor, in consideration of the payment of a part of the debt, discharges the principal debtor, will, without more, operate to discharge a surety. (2) That an agreement between a creditor and his principal debtor, whereby the creditor agrees, for a consideration, to extend the time of payment, will, without more, operate to discharge a surety. But it is an exception to the former of these rules, equally well settled, that such an agreement will not operate to discharge a surety where the agreement itself contains an express reservation of the remedies of the creditor against sureties, or against all persons other than the principal debtor, who may be liable. Ex parte Gifford, 6 Ves. 805, 807, per Lord Eldon, L. C.; Hubbell v. Carpenter, 5 N. Y. 171; Sohier v. Loring, 6 Cush. 537; Tobey v. Ellis, 114 Mass. 120; Mueller v. Dobschuetz, 89 Ill. 176, 182; Stirewalt v. Martin, 84 N. C. 4; Morse v. Huntington, 40 Vt. 488, 496. This principle was recognized by this court in Broadway Savings Bank v. Schmucker (7 Mo. App. 171). It is an equally well settled exception to the second of these rules, that such an agreement will not operate to discharge a surety, where the agreement itself contains an express reservation of the remedies of the creditor against sureties, or against all persons other than the principal debtor who may be liable. Ex parte Glendenning, 1 Buck, 517; Boulthee v. Stubbs, 18 Ves. 20, 26; Nichols v. Norris, 3 Barn. & Ad. 41; Clagett v. Salmon, 5 Gill & J. 314; Wyke v. Rogers, 1 DeG., M. & G. 408; Melville v. Glendenning, 7 Taunt. 126; Bangs v. Strong, 10 Paige, 11; Bank v. Lewis, 8 Pick. 458; Blackstone v. Hill, 10 Pick. 132; Bank v. Lineberger, 83 N. C. 454; Vielle v. Hoag, 24 Vt. 46. Our supreme court made a ruling which rests upon similar reasons in Rucker v. Robinson (38 Mo. 154).

These two exceptions to the two rules above stated rest upon the same principle. They are grounded upon the principle that, where a contract expressly reserves the remedy of the creditor against other persons (which includes sureties), the sureties are in no way prejudiced by the agreement. By entering into such an agreement, the principal debtor impliedly consents that whatever remedies his sureties have against him shall remain open to them. They are, thereafter, at liberty to pay the debt at once, and proceed immediately against their principal for reimbursement. An examination of many decisions shows that the principles which support these two exceptions to the respective rules above stated are precisely the same. Courts adopt the same mode of reasoning in the two cases, and cite interchangeably decisions where the agreement was for a discharge of the principal debtor, and where it was merely for an extension of time to him.

This principle has been applied in a number of cases where the agreement was merely that the creditor would not sue the principal debtor within a stated period of time. Price v. Barker, 4 El. & Bl. 760, 778; C. C., 30 Eng. L, & Eq. 157; Kearsley v. Cole, 16 Mees. & W., 128, 135; Perkins v. Gilman, 8 Pick. 229; Fullman v. Valentine, 11 Pick. 156; Kenworthy v. Sawyer, 125 Mass. 28; Hagey v. Hill, 75 Pa. St. 108. In these cases, where there is a reservation of the remedies of the creditor against all other persons, or against sureties, the reasons upon which the courts refuse to discharge the sureties, are two-fold: (1) The reason above stated, that the agreement in no way prejudices the surety as to any remedy which he may have against his principal. (2) The additional reason that a covenant not to sue can not be pleaded in bar of an action, in case it is brought in violation of the covenant, the courts proceeding upon the refinement that such a covenant affords merely the ground of an action for damages. This distinction was noticed by our supreme court in Rucker v. Robinson ( supra). Whether it is well, or ill, founded, we need not now consider. Assuming that it is well founded, the defendant's position is not helped; because, in the cases where the agreement was...