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Post, Administrator, v. Losey et al.
474; Dicker8on v. Board, etc., 6 Ind. 128 ; Harbert v. Dumont, 3 Ind. 346.
Citing the case of Tiernan v. Woodruff, supra, Judge Story, in his work on Promissory Notes, at section 415, in speaking of an extension of the time of payment by the creditor, said: "Or, if being for a valid consideration, it be of such a nature that the maker can by law obtain and entitle himself to the same delay without the consent of the holder (as where the holder had been already discharged from the note in bankruptcy), then the agreement will not operate as a discharge of the endorsers, for the reason that the endorsers can not, under such circumstances, be injured by the delay, or if injured, it is by operation of law, and not dependent upon the act of the holder."
Citing that case, also, Mr. Daniel, in his work on Negotiable; Instruments, at section 1313, said: "The reason why extension of time of payment discharges the surety is that he would be entitled to the creditor's place by substitution; and if the creditor, by agreement with the principal debtor, without the surety's assent, disables himself from suing when he would be otherwise entitled to do so, and thus deprives the surety, on paying the debt, from immediate recourse on his principal, the contract is varied to his prejudice— hence he is discharged. But this principle on which sureties are released 'is not a mere shadow without substance. It is founded upon a restriction of the rights of the sureties by which they are supposed to be injured.' Therefore, when there is a legal impossibility of injury, the principle does not apply. This was decided to be the case where the maker of a note was a discharged bankrupt; and an agreement between him and the holder for two months' delay, although on a valid consideration, it was held did not discharge the endorser, because the latter could not, by making payment, have recourse against him."
If the rule releasing sureties by an extension of the time of payment rested upon the reason above mentioned, and Post, Administrator, v. Losey et aL
upon none other, it would, perhaps, be the duty of the court to hold here, that the mortgage by Emma J. was not released by the agreement made and endorsed upon the back of the note. But the rule, we think, rests also upon another reason, quite as important and controlling as that already named, and that is, that a valid and binding agreement between the creditor and the principal debtor, without the consent or knowledge of the surety, for an extension of the time of payment, is a modification or alteration of the contract for the performance of which the surety obligated himself, or bound his property.
That reason is recognized, if not asserted, in some of our own cases. The general doctrine, with an exception which we need not here notice, as declared by all of the authorities, is, that in order to release the surety, there must be a new contract between the creditor and principal debtor, fixing the time of payment at a different date from that fixed in the original contract; that the contract for extension must be based upon a new and sufficient consideration, and that the extension must be to a fixed time, so that the contract may embody the necessary elements of certainty; in short, that the contract for extension must embody the necessary elements of a valid and binding contract. See Wingate v. Wilson, supra; Chrisman v. Perrin, 67 Ind. 586; Hogshead v. Williams, 55 Ind. 145; Coman v. State, ex rel., 4 Blackf. 241; Harter v. Moore, 5 Blackf. 367.
In the case of Pierce v. Goldsberry, 31 Ind. 52, it was said, in speaking of the release of sureties by an extension of the time of payment: "It takes from the surety a right which he had under the contract into which he entered, the exercise of which may be essential to his indemnity." And, again: "Sureties are favorites, and will not. be held beyond the strict scope of their engagements."
In Daniel on Negotiable Instruments, at section 1312, it is said: "The principle that whatever discharges the principal discharges the surety is of extended application, and it is Post, Administrator, i. Losey et aL
operative whenever anything is done which relaxes the terms of the exact legal contract by which the principal is bound, or in anywise lessens, impairs, or delays the remedies which the creditor may resort to for its assurance or enforcement."
In Story on Promissory Notes, at section 414, is this: "On the other hand, the endorsers, by such an agreement for credit or delay for a prolonged period without their concurrence, would, if the doctrine were not as above stated, be held iiable lor a period beyond their original contract, and might suffer damage thereby; or, at all events, would be bound by a different contract from that intc which they had entered."
In stating the reason of the rule releasing sureties by an extension of the time of payment, Mr. Brandt, in his work on suretyship, at section 296,said: "The reason is, that the suretv is bound only by the terms of his written contract, and if those are varied without his consent it is no longer his contract, and he is not bound by it. It therefore follows, that the fact that the principal is insolvent, or that the extension would be a benefit to the surety if he remained bound, makes no difference in the rule. Moreover, the surety has a right when the debt is due, according to the original contract, to pay it, and immediately proceed against the principal for indemnity, and he is deprived of this right by such un extension of the time of payment."
In the case of lde v. Churchill, 14 Ohio St. 372 (383-4), Judge RANNEY said: "Every contract is composed of the material terms and stipulations embraced in it, and, among these, none is more important than the time of performance. It follows, from the principles already stated, that whatever changes any of these material terms and stipulations, so as to destroy the identity of the obligation to which the surety acceded, necessarily discharges him from liability. An engagement to pay money in six months, is not the same as one to pay it in twelve months; and if the creditor, by a valid agreement with the debtor, extends the time of performance Post, Administrator, v. Losey et aL
from the shorter to the longer period, he supersedes the old obligation by the new, and can not enforce payment until the longer period has elapsed. If the surety is sued upon the old agreement, to which alone his undertaking was accessory, he has only to show that that has ceased to exist, and no longer binds his principal; and if he is sued upon the substituted agreement, he is entitled, both at law and in equity, to make the short and conclusive answer—Non hcec in fader a veni. But such an agreement between the principal parties is perfectly valid and legal; and until some method can be devised for depriving the principal of the benefits of a valid agreement, or of binding the surety to an agreement to which he never acceded (a work hitherto thought not to be within the powers of either courts or Legislatutes),the discharge of the latter must ensue. I am very well aware, that this discharge has been often thought to rest upon the injurious consequences of such arrangements, either real or possible, upon the rights ami interests of the surety; and, undoubtedly, in most cases, such would be their necessary tendency. But if it rested upon this ground alone, it would be very difficult, upon equitable principles, to extend the relief beyond the actual injury; while it is universally agreed that they work a total discharge, and extend to cases where no possible injury to the surety, could have ensued."
In line with the above case, see Valley National Bank v. Meyers, 17 N. B. R. 257; Huffman v. Hulbert, 13 Wend. 375; Schnewind v. Hacket, 54 Ind. 248.
In the case of Haden v. Brown, 18 Ala. 641, it was held, as in the Ohio case, supra, that the surety was discharged by an extension of the time of payment, because such an extension was a change and alteration of the contract.
A surety is bound only by the strict terms of his engagement.
He assumes the burdens of a contract without sharing its benefits. He has a right to prescribe the exact terms upon which he will enter into an obligation, and insist upon his Post, Administrator, ti. Losey et aL
discharge if those terms are not observed. It is not a question whether he is harmed by a deviation to which he has not assented. He may plant himself upon the technical objection, non haec in faedera veni—this is not my contract. Marldand Mining and Mnfg. Co. v. Kimmel, 87 Ind. 560; Weed Sewing Machine Co. v. Winchel, 107 Ind. 260; City of Lafayette v. James, 92 Ind. 240 (47 Am. R. 140).
In the case before us, Emma J. mortgaged her separate property as security for the performance of the contract between her husband, the debtor, and appellant's decedent, the payee, as that contract was evidenced by the note. That contract, as thus evidenced, measured and fixed the manner and extent to which her property was to become liable. Irwin v. Kilburn, 104 Ind. 113; Weed Hewing Machine Co. v. Winchel, supra.
If, then, there has been a modification or alteration of that contract, the mortgage can not be foreclosed. If there has been such a change or modification, the property of Emma J. can not be made liable as security for the original contract, because it no longer exists as originally made, nor as security for the contract as changed, because that would be to make the surety liable beyond the scope of the contract. The note is not the contract, but the evidence of it. In some of the cases above cited, it was expressly held that an agreement between the creditor and principal debtor for an extension of the time of payment, not endorsed upon the note or written instrument, so far as appears, operated as a modification and change of the contract as evidenced by the note or written instrument.
Here, Losey, the principal debtor, and the payee, not only agreed that the time of payment should be extended beyond the time as originally agreed upon and named in the note, but also agreed upon a rate of interest for the future different from that originally agreed upon and named in the note. Not only that, but they endorsed the agreement upon the note. The agreement thus endorsed upon the note operated