Scott v. Saffold

Judge Harris did not preside in this case. 1. The reception of interest in advance on a note is prima facie evidence of a binding contract, to forbear and delay the time of payment; and no suit can be maintained against the maker during the period for which the interest has thus been paid, unless liberty to sue ho reserved by the agreement of the parties. 2. Where J. gave to C. a promissory note, with S. as an accommodation endorser, due twelve months after date; “interest to he paid annually at 10 per cent., otherwise counted as principal,” and when the note fell due, J. gave to C. a new note for the amount of interest on the note in advance for one year at 10 per cent. ; and ten months thereafter, J. paid C. said interest note, in consideration that C. would give time to J. until he, C., should return from Europe ; and all these arrangements were made without the knowledge or assent of S., the endorser : Held, that the giving of such note for legal and usurious interest in advance, and the payment thereof, under the circumstances, was a binding contract on the part of the holder to give time to the maker, and therefore discharged the endorser. 3. A contract to pay money at a subsequent period, with interest to be paid annually, and if the interest he not paid annually, then to become principal is valid; it is neither usurious, unconscionable, nor contrary to public policy; and the Courts will enforce such a contract. If the interest accruing be not paid when due, suit may be maintained to collect it.

Complaint on note. Trial before Judge Wm. M. Reese. Morgan Superior Court. September adjourned Term, 1866. This case was argued at December Term, 1866, of the Supreme Court. It was held up on account of the death of Judge Lumpkin, and the incompetency of Judge Harris, from relationship to one of the parties, and argued by brief at December Term, 1867. It was based upon the following promissory note: “ $4,733.07 Madison, Ga., August 24, 1857. Twelve months after date I promise to pay to the order of William O. Saffold, forty-seven hundred and thirty-three dollars and fifty-seven cents, interest to be paid annually, at 10 per cent., otherwise counted as principal — value received. David S. Johnson.” Endorsed : “ W. O. Saffold, C. Campbell.” “ August 24th, 1858, received note for the interest to the date of August 24th, 1859.” The defendant plead usury; averring that he endorsed the note for accommodation only, and it was on the same day negotiated by the maker, for. his own benefit, to John W. Cardwell, in consideration of $4,264.03; these facts were admitted to be true. For further plea, the defendant averred that without his knowledge, or consent, Cardwell, on the 24th of August, 1858, received from the maker his individual note for $473.30, and for which note said endorsed credit was made, and said Cardwell, in consideration of said note, agreed that he would not sue the maker before the 24th of August, 1859, and that this discharged defendant from liability on the original note. Plaintiff read the note to the jury and closed. The maker testified that on the 24th of August, 1857, he borrowed from Cardwell such a sum of money as that, when ten per cent, for twelve months was added to it, and then ten per cent, to that, the gross sum would be $4,733.07; that defendant was only an accommodation security, and knew not of the usury in the loan ; that on the 24th August, 1858, witness gave his note, at one day for the interest on $4,733.07 at ten per cent.; that defendant did not consent to, or know of this arrangement; that in May or June, 1859, when Cardwell was about to leave for Europe, witness paid him said interest note, in consideration that he would indulge witness on the original note till Cardwell returned from Europe. Here defendant rested his case. Plaintiff, in rebuttal, examined John B. Walker and others to show Cardwell’s custom as to loaning money, and read the answers of Johnson to a set of interrogatories to show he contradicted himself, but no point was made on this in the bill of exceptions. It was admitted that Cardwell died in Paris, France, late in the summer, or early in the autumn of 1859, without having returned from Europe. The testimony closed and argument had, plaintiff’s attorneys requested the Court to charge the jury: 1st. That where J, made his note payable to the order of S., at twelve months after date, for $4,733.07, the interest to be paid annually at 10 per cent., otherwise to be counted as principal, and S. and C. endorsed it, and the note was negotiated by J., it is a legal presumption, that it was not the expectation of the endorsers that it would be paid at maturity, that the terms of the note imply the assent of the endorsers to the postponement of its payment from year to year, upon the maker’s complying with the conditions as to interest. 2d. That the acceptance by the holder of a sum of money or a note, as interest, in advance, was not the acceptance of a new contract and security for the debt, nor did it deprive the endorsers of any right to order a suit against the maker nor bind the then holder, or any transferee of the note, not to sue before the expiration of the twelve months from the date of the payment. 3d. That when a payment on a note has been made for usurious interest, whether already accrued, or to accrue, and the amount paid is ascertained, it must stand as an ordinary credit at its date; and the entry of such payment proves nothing of an intention or contract between the maker and the holder of the note beyond what is expressed in the writing. _ . _ The Court gave the first request with the qualification that it must be taken in connection with what he should thereafter charge as to the legal import of the note. He refused to charge the 2d and 3d requests, giving as a reason therefor that the acceptance of a sum of money as interest, in advance, was a fact from which the jury might infer that the holder had, in consideration thereof, agreed to wait with for the principal. After rehearsing the terms of the note the Court stated that it was due 24th August, 1858, and the maker could have been sued after that time if he failed to pay, that it was not true that every promise by a creditor to give time to the principal, without the consent of the security, would discharge the security, but that, to have such effect, the promise must be based on a sufficient consideration. Such promise "based on a sufficient consideration not only binds the creditor so that he cannot sue, but he is not obliged to receive any money secured by such agreement, until the time stipulated for has transpired; the debtor is bound so that he cannot pay within the time limited. Time given to the debtor, upon such consideration, without the consent of the security, discharges him. An agreement to pay simple interest may be a sufficient consideration upon a contract to give time, if there is in the contract for time a stipulation by which the debtor secures simple interest to the creditor for the specified time: ex. gr., if the creditor, his note being due, agree with the principal to delay payment for six months, in consideration that the principal pay the interest for that time, the promise to pay the interest under such circumstances would bind the principal to the payment of it for the period agreed upon, and thus secure the creditor a right beyond what he had before, even if the original note with reference to which the promise was made contained an agreement to pay interest; because the debt being due, the principal or security might, before the new promise, or agreement, sue at any time and the original contract, therefore, did not secure the creditor his interest any longer than it pleased the debtor to let the same accrue. A mere promise by the creditor to delay payment to a future time without a promise by the debtor to pay interest, except that contained in the note itself, does not bind the creditor. Ordinarily when a debtor pays interest upon a note in advance he does so for the purpose of procuring delay, and it is generally understood between the parties, when such payment in advance is made, (there being no reservation to the contrary,) that the creditor has no right to call for the debt until the time has elapsed in which so much interest would accrue. Payment of interest in advance is a sufficient consideration for an agreement to give time, which may be inferred from the proof though not expressed. So, also, a note given for interest in advance is a sufficient consideration for an agreement to give time. We may safely say as a general rule that the receipt of interest in advance, or securing the same in advance by anote, is prima fade evidence of a binding contract to delay the time of payment, and no suit can be commenced against the debtor during the time for which interest has been paid or secured. If a security to an obligation which has been delayed by such agreement assents to the arrangement he will be bound by it, but unless it appears by evidence that he did give his assent thereto, he will be thereby wholly discharged. After applying this charge to the facts of the case, the Court charged at plaintiff’s request, that the new contract must be without the consent of the endorser, and to wait till a day certain .and be so binding that the holder could be enjoined from suing before that day. The verdict was for the defendant. The bill of exceptions assigns as error so much of the charge as authorized the jury to infer a contract for indulgence from the payment of interest in advance on said note after it was due.