Burke v. Moore

• Decision Date: 01 January 1852
• Citation: 8 Tex. 66
• Parties: BURKE AND OTHERS v. CRUGER AND MOORE. (Note 16.)
• Court: Texas Supreme Court

8 Tex. 66

BURKE AND OTHERS

v.CRUGER AND MOORE. (Note 16.)

Supreme Court of Texas.

1852.

Whatever diversity of opinion there may have been upon the question whether a party who has signed a joint and several bond or other specialty with another can, at law, and as against the obligee, aver and prove that he was but surety where he appears upon the instrument as principal; that he may do so in equity is well settled; so here he may do so for the purpose of availing himself of any equitable defense to which as a surety he may be entitled.

If the creditor, without the knowledge and consent of the surety, expressly or tacitly yielded, give time to the principal by a valid and binding agreement enlarging the credit beyond the period mentioned in the contract, the surety will be discharged, both in law and equity; but the mere giving of time, without a binding agreement to that effect, will not discharge the surety. (Note 17.)

The taking of a merely collateral security, as, for example, a mortgage, will not extinguish the original debt nor suspend the remedy upon it, and the time when the new security becomes due does not vary the effect and operation of it upon the old, and therefore the taking of such a new security, without stipulating that it shall extinguish the original or suspend the remedy upon it, will not release the surety.

In order to discharge a surety in consequence of the variation of a contract or a deprivation of his equitable rights and remedies, not only the fact of suretyship must exist, but it must be known to the creditor at the time of the act complained of. If the fact appears on the face of the security, that is enough; if not, the knowledge of it must be brought home to the creditor by the surety clearly and satisfactorily, because, as all parties appear upon the instrument as principals, it is deceptive and calculated to mislead. The surety, therefore, should be holden to strict proof.

The court said: The defendant McGown not having appealed, and standing in the undisputed character of a principal debtor, we see no reason for disturbing the judgment as to him; but, because the court erred in excluding the evidence offered by the other defendants, the judgment as to them is reversed and the cause remanded for further proceedings.

Appeal from Harris. The appellees and the appellants, jointly with Andrew J. McGown, in April, 1851, on a contract under seal, which contained, among others, the following stipulations, viz, that the party of the first part, Cruger and Moore, should print a weekly religious paper, to contain editorial and other matter, which Andrew J. McGown, “editor and proprietor,” should furnish; in consideration of which the party of the second part, the said McGown, Burke, Bailey, and Bagley, were to pay at the rate of $900 a year in quarterly payments. The contract was signed by all the parties as principals, and bears date the 29th day of May, 1847.

The defense mainly relied on by Burke, Bailey, and Bagley was, that they executed the contract as sureties for McGown; that the plaintiffs, knowing this, had, without their knowledge or consent, given an extension of the time of payment to McGown, and that they were thereby released from their obligation.

The defendant McGown made no defense.

On the trial the other defendants offered to prove, by the production of certain accounts and by the testimony of a witness, that they were but sureties to McGown in the contract, and they offered in evidence a mortgage upon land, given by McGown to the plaintiffs on the 4th day of December, 1849, containing a power to sell in case of the non-payment of the sum intended to be secured, and a condition of defeasance as follows: “That if the said party of the first part pay to the said parties of the second part the balance due for the publication of the ‘Texas Presbyterian’ within two years from date, and the sum of thirteen hundred and fifty-four dollars and ninety-six cents, with interest at the rate of ten per cent. from date until paid, unto the said party of the second part, then these presents or writing obligatory to be null and void.” The evidence offered was objected to by the plaintiffs, and excluded by the court on the ground that, having executed the contract as principals, it was not competent for the defendants to prove that they were sureties for the purpose of letting in the defense that the plaintiffs had, by giving time to their principal, released them from their obligation.

It was in proof that the work was concluded under the contract about the 4th of March, 1849. There was a verdict for the plaintiffs, and judgment rendered against all the defendants, and those of them who had pleaded to the action appealed.

E. A. Palmer, for appellants.

C. B. Sabin, for appellees.

WHEELER, J.

The principal inquiry is, whether parol evidence was admissible to prove that the defendants, who pleaded to the action, executed the contract as sureties; and if so, whether the evidence offered conduced to prove that the plaintiffs had given an extension of time to the principal by which the sureties were discharged from their undertaking.

Whatever diversity of opinion there may have been upon the question whether a party who has signed a joint and several bond or other specialty with another, can at law, and as against the obligee, aver and prove that he was but surety where he appears as principal upon the instrument, that he may do so in equity appears to be well settled. (2 Phil. Ev., 363, n. 299, and cases cited, 3d edit.)

In a court of equity parol evidence is always admissible to prove the relationship subsisting between the joint contractors, whatever the form of the instrument, for equity does not regard the form of the instrument. “I take the principle to be” (said Johnson, J., in giving the opinion of the court in Smith v. Tunno, 1 McCord R., 451) “that the relationship which subsists between the joint obligors is a matter wholly extrinsic of the written contract, and may therefore be proved by parol, without any violation of the rule which prohibits the introduction of parol evidence to contradict or vary a written agreement.”

It is immaterial what may be the form of the instrument, whether a simple contract in writing or a specialty, and though all appear upon the instrument as principals in equity parol evidence is admissible to prove that one or more of the joint makers or co-obligors signed the instrument in the character of surety. “In equity parol evidence is admissible to show who is principal and who surety.” (Burge on Suretyship, p. 212, 1st Am. ed.; 3 Texas R., 215.)

It is also perfectly well settled that “if the creditor, without the knowledge and consent of the surety, expressly or tacitly yielded, give time to the principal by enlarging the credit beyond the period mentioned in the contract, the surety is discharged both in equity and at law.” (3 Wash. C. C. R., 75.)

The law on this subject is thus stated by Mr. Justice Nelson in Gahn v. Niemcewicz, (11 Wend. R., 312:) “The principle is well established that giving time by a valid and binding agreement by the creditor to the debtor, without the assent of the surety, operates to discharge him both at law and in equity. The reason of the principle is that the contract between the parties is varied and the risks of the surety enhanced,” &c. (Id., 317.) “The doctrine is” (said Chancellor Kent in Ring v. Baldwin) “that the surety is bound by the terms of his contract, and if the creditor, by agreement with the principal debtor, without the concurrence of the surety, varies these terms by enlarging the time of performance, the surety is discharged, for he is injured and his risk is increased.” (2 John. Ch. R., 559.) And even though it be shown that the extension of time has worked no injury to the surety,...