Story Case

Mr. Lambert of Vincennes, Indiana, had an invention which he desired to place upon the market. To promote his scheme, he borrowed money from the Wymore Loan Association on a note secured by his friend, Mr. Cope. The note fell due within sixty days, and the loan association called on Mr. Cope for payment. When he refused to pay, the association sued him. At the trial, Mr. Cope showed that, without his knowledge, Mr. Lambert had secured from the company an extension of time, amounting to a fortnight; further, that the association had secretly agreed to make every possible effort to collect from Mr. Cope during this interval. Is this sufficient to excuse Mr. Cope's obligation as surety?

Ruling Court Case. Pain Vs. Packard, Volume 13 Johnson, New York Reports, Page 174

One Munson, made a note for $100, payable to the order of Pain, on demand. Packard signed the note as surety for Munson. Packard afterwards repeatedly urged Pain to sue Munson upon the note while Munson was still solvent, but Pain was indifferent to these demands. Later, Munson became insolvent, and left the state. Pain then brought this action against Packard, as surety for Munson.

Packard contended that he was discharged of his liability, because of Pain's right to sue Munson when the claim might have been satisfied.

Curiam said: "A mere delay in calling on the principal will not discharge the surety. But this is not such a case. Here is a special request, by the surety, to proceed to collect the money from the principal, and an avertment of a loss of the money as against the principal in consequence of such neglect." Judgment was given for Packard.

Ruling Law. Story Case Answer

There are certain acts, which, if committed by the third person or creditor, will discharge the surety from his obligation to stand for the debt or obligation of the principal. If the creditor enters into an agreement not to sue the principal, or gives up any security he might have, this discharges the surety; thereafter, he is under no obligation to see that the debt is paid or the obligation performed. So also the surety or guarantor will be discharged if the creditor enters into an agreement with the principal for a consideration, to extend the time of payment or performance, without the consent of the surety. Furthermore, it was held that the surety was discharged if the creditor failed to sue the principal. But this is no longer law, and now the mere failure on the part of the creditor to sue the principal does not discharge the surety.

The law's tenderness for the surety will permit Mr. Cope to escape. He has shown sufficiently in the loan association's extension of credit and its secret understanding with Mr. Lambert, to convince the court that he is being sued upon an obligation different from the one which he contemplated when he signed the note as surety. He agreed to answer for the debt of Lambert if not paid within sixty days. Now he is being sued as surety on a note, payable in eighty days. Such an extension without his consent, would alone be sufficient to excuse him of any liability.