Opinion
September Term, 1862
H.R. Selden, for the appellants.
Charles Danforth, for the respondent.
I cannot avoid thinking that this case presents an ingenious attempt on the part of the appellants, to avoid the application of the well settled principle, that an agreement by a creditor to postpone the payment of a debt due, until a future day certain, in consideration of no other or further consideration than the agreement of the debtor to pay the debt with interest on that day, is void for want of consideration.
It has been decided over and over again, if the creditor whose debt is due, receives part payment of it, and in consideration of such payment, promises to postpone or extend the time of payment of the balance, that such promise is void for want of consideration. ( Miller v. Holbrook, 1 Wend., 317; Gibson v. Renne, 19 id., 390; Pabodie v. King, 12 John., 426; Reynolds v. Ward, 5 Wend., 501; Fulton v. Mathews Wedge, 15 John., 433.)
These cases certainly assume, that a promise by a creditor, no part of whose debt is paid, to extend the time of payment of the whole debt to a future day certain, in consideration of the promise of the debtor to pay the debt with interest on that day, would be void.
A creditor promising to extend the time of payment until a certain day, would not expect or ask his debtor to make a formal express promise in consideration of such extension, to pay his debt on that day, and not before that day; nor would the debtor, relying on such promise of extension, be very apt to make any such formal express promise; but if the promise of extension on the part of the creditor were held valid, such a promise on the part of the debtor would necessarily be implied. It would be implied from his acceptance of and reliance on the promise of the creditor. No court would ever hold the promise on the part of the creditor valid and binding without holding that there was a corresponding obligation on the part of the debtor to pay at the time fixed by the promise of extension, and not to pay before; that is, in the language of the defendant's answer, to keep the money until the day fixed by the promise of extension. Hence the cases before cited necessarily assume, that the agreement, or mutual agreements, specially set up in the defendant's answer would be nudum pactum and void, and would not have been a defence if proved; for these cases must have been decided on the assumption, if the promise on the part of the creditor to extend the time of payment was valid, or should be held valid, that there was or would be a corresponding valid obligation or promise on the part of the debtor not only to pay at the time fixed by the agreement of extension, but also not to pay before. These cases then, in effect, decide, if a creditor whose debt is due, in consideration of the payment of a part of it, and of a promise on the part of his debtor to pay the balance on a certain future day, and not before, promises to extend the time of payment of such balance until that day, that such promise is without consideration and void.
In this case, the defendants paid no part of the debt. The sole alleged consideration of the plaintiff's promise to extend the time of payment of the whole debt, until the 1st of April, 1857, was a promise, on the part of the defendants, to pay the debt with interest on that day, and not before that day. The promise on the part of the defendants is not stated in the answer, in these precise words, but is substantially this.
But upon principle, and without reference to cases, the counsel for the appellants concedes, that their promise to pay interest was no consideration for Covil to delay payment, because, if Covil had delayed payment without such promise, he would have been entitled to such interest; but he insists that their promise not to pay the principal until the 1st of April, and then to pay it, was a sufficient consideration for the promise of delay on the part of Covil, because it deprived them of the right to pay the money at any time, and secured to Covil the right to compel the defendants to keep the money until the 1st of April. This, I think, is fanciful. The appellants were to pay only legal interest for the use of the money. The rate of interest, or value of the use of money, being fixed by law, the law cannot hold the delay of payment to be either a disadvantage to the debtor, or an advantage to the creditor; the one paying, and the other receiving the legal rate of interest for the use of the money only. The law cannot hold it to be a disadvantage to a man, to agree to keep the money of another for a time certain, for the use of which he is only to pay the rate of interest fixed by the law.
My conclusion is, that the judgment of the Supreme Court should be affirmed, with costs.
WRIGHT, GOULD ALLEN and SMITH, Js., concurred.
The question presented for decision is, whether the agreement offered in evidence was founded on a sufficient consideration. I am unable to see why not. It was undeniably a benefit to the holder of the note to invest his money for a further term of six months at lawful interest, and it is not clear that it was a disadvantage to the defendants to pay that rate of interest for that term. Money lenders regard it as advantageous to themselves to loan their money securely, and the benefit to them seems to me to be a sufficient consideration for a promise to permit the lender to have it a given length of time, he paying the lawful interest thereon. Such contracts and agreements are frequently made, and the benefit or injury to the lender or borrower depends mainly upon the state of the money market. When the current rate of interest is less than the lawful rate, the benefit is to the lender and the injury to the borrower.
The two cases cited from the New Hampshire Reports are in point, and sustain the position of the defendants. In Wheat v. Kendall ( 6 N.H., 504), PARKER, J., says: "We are not prepared to accede to the argument that a contract to delay for legal interest would not be on a sufficient consideration because the original contract gave that, if nothing further had been agreed to be paid. The security which the creditor would acquire by such agreement, that the payment should be delayed, and that he should receive interest for the whole of the extended time, might well form a sufficient consideration." In Bailey v. Adams ( 10 N.H., 162), the court are more emphatic and pointed. The court say the agreement to pay simple interest may be a sufficient consideration for such a contract to delay, if there is in the contract for delay a stipulation by which it is secured to the creditor for any specified time. As for instance, if the creditor, the note being due, should agree with the principal to delay the payment six months on the consideration that the principal promised to pay the interest for that period of time, this would be a contract upon a sufficient consideration. The promise to pay the interest under such circumstances would bind the principal to the payment of it for the period agreed on, and thus secure the creditor a right beyond what he had before, even if the note contained a promise to pay interest; because the debt being due, the principal or surety, before the new agreement, might pay it at any time, and the original contract did not therefore secure the creditor interest for a single day to come." The reasoning of the court in these cases is satisfactory and conclusive to my mind. I have examined the cases referred to in the opinion of the Supreme Court, and I do not find anything there which would lead to a different result.
I incline to reverse the judgment of the Supreme Court and order a new trial.
DENIO, Ch. J., also dissented.
Judgment affirmed.