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JULY 1829. only the substance of the material allegations of the bill,

and the admissions of the answer, express or implied.

The answer denies knowledge as to the fact whether Bibb. complainant was originally bound in the capacity of secu

rity only, or otherwise; but the deed of trust exhibited by the complainant, to which the defendant is a party, and which in his answer he admits to be valid, shews that complainant was a security merely. Defendant admits he made the new contract with Pettus as charged, but says "he does not admit that it was without the knowledge or consent of the complainant; on the contrary he believes that it was with the full knowledge, privity and consent of the complainant; as he afterwards expressed himself to this defendant, and to others, well satisfied with the arrangement and security obtained; and also stated it would lessen his responsibility, and be a security to him as well as to the defendant, from said Pettus." Me denies he ever considered the complainant released from his liability on the original note; but says, when he heard that W. & F. Pettus had absconded with all the property contained in the deed of trust, he became uneasy about said debt; and was anxious to have it better secured than it then was by the liability of the complainant alone; and with the aid of counsel, and by extending the time of payment, and abating part of the debt, he succeeded in making an arrangement with the complainant, by which he obtained his notes with personal security, &c. He admits payments made in part satisfaction of the notes, to about the amount charged in the bill. In answer to the charge, that the complainant, under the circumstances described, contracted his latter liability under a mistaken impression as to his legal responsibility, as well with reference to the amount which was recoverable on the original note, as to the question whether he was not entirely discharged by means of the new contract between Pettus and defendant, the latter responds in substance, that he cannot deny the complainant's ignorance as charged.

With regard to the essential fact, whether complainant consented to the modification of the contract with his principal, or had at the time knowledge of it, the remark is due, that in connexion with the averment of the answer that the defendant believed the complainant had full knowledge of the arrangement, and that it was made with his privity and consent, he adds the reasons for this belief; which are, that the complainant afterwards expressed him

JULY 1829.



self well satisfied with the arrangement and security obtained, and also said it would lessen his responsibility, and be a security to him as well as the defendant, from Pettus. The grounds of the belief do not sustain the presumption of the complainant's privity and consent; they only prove that at a subsequent period he was not dissatisfied with what had been done, and thought his situation had been rendered more secure thereby. His absence to a distant part of the state is not denied, and the admission that the communication was made to him afterwards, sufficiently implies that it was not done before. At any rate, as complainant was not consulted on the arrangement, nor gave his consent at the time, or previous to its being entered into, be the other facts as they may, they can have no stronger operation on him than his still later contract of compromise, the effect of which remains to be considered.

On this state of facts, the Circuit Court having dissolved the injunction and dismissed the bill with costs, their decree is assigned as the cause of error.

The record and argument present the following questions: 1. In what amount were the parties to the original note bound in respect to the stipulated premium? 2. Was the complainant discharged by means of the new contract between defendant and Pettus, in which other security was taken and the time of credit extended? 3. If once discharged, was the complainant's subsequent undertaking valid against him in reference to his mistake of law, and to what extent was it founded on a sufficient consideration? 4. Was the contract of compromise usurious? 5. Can chancery entertain jurisdiction and afford relief?

1. On the first point, it is sufficient to remark that the principle adopted at the June term 1924, of this Court, in what were called the “Penalty questions,” and repeatedly recognized since, has fixed a standard by which the true amount legally due, on similar contracts, is to be computed; and with which I continue to feel entire satisfaction. The rule was, that the exorbitant rate of premium as stipulated, should be allowed until the maturity of the note, where, as in this case, it had been absolutely promised from the date of the contract; but that at the expiration of the agreed term of creditor forbearance, when anextinguishment of the debt was contemplated by the contract, and the debtor became subject to the coercion of the law, with the costs of suit; and when, as forbearance was no longer agreed, the premium could not retain the protection of the

JULY 1829,


V Bibb.

deleterious provisions of the statute of 1818, entitled “An act to regulate the rate of interest,” that then the conventional premium ceased, and the common rate of interest, as established by law, should be subsequently allowed. And as to the specific consideration, whether cash actually loaned, a pre-existing debt, Mississippi Stock, or any other valuable and sufficient consideration, I hold to be perfectly immaterial; as was my opinion in the decisions referred to, and which has been strengthened and confirmed by subsequent examination and reflection.

2. The next question relates to the effect of the new contract between the defendant and principal debtor. The assumption of the fact is conceived to the well authorized from the bill and answer, that the other security was taken, and the term of credit extended, by instalments of one and two years, without the knowledge or consent of the complainant, who was bound only as security.

The doctrine is believed to be well established on principle and authority, that debtors, especially securities, can only be bound by the terms of their contracts, whether express or implied; that the responsibility of a security cannot be materially varied without his privity and consent; his safety may especially depend on the limited term of credit to which he has assented. If, when the debt falls due, the creditor be disposed to grant passive indulgence, should the security believe his principal in failing circumstances, and that delay in prosccuting the debt would tend to his prejudice, the law has provided means to which he can resort for greater safety; but if the creditor has surrendered the dominion of his debt by extending the term of credit, the security is thereby deprived of the means of relief, and the debtor, during the extended term, is placed beyond the reach of either creditor or security.

The principle that such circumstances will operate as a

discharge of the security is maintained by Lord Loughboa Vesey Jr. rough, in Kees v. Berrington.a In that case, he said such

interference with the contract constituted a breach of the security's obligation in honor and conscience, as well as in point of law; and refused to inquire what injury might result to the security, for that, he said, would lead to a vast

variety of speculations on which no sound principle could 0 10 John. 587. be built. In the case of Rathbone v. Warren, the author

ity of the above stated case was acknowledged, and a similar decision made. The circumstances were a little dissimilar, but the principle is the same. The relief sought


JULY 1829.


V. Bibb.

for was in favor of the bail, where the creditor, having obtained judgment, contracted with the defendant, by a written agreement, that he would not issue execution against him for the purpose of fixing the bail until after a certain day;there, actual injury would have resulted to the security, in consequence of the defendant's going to sea before the day on which execution could issue; but the decision did not rest alone on the actual injury; it recognized the broad principle, that if an obligee does any act to the injury of the surety, or varies the terms of the obligation, or enlarges the time of performance, without his consent, the surety will be discharged. In that case, it was contended in argument, that the law does not extend the same degree of protection to bail that it does to securities; the converse of the proposition has perhaps never been contended for; the Court, however, held that there was no difference.

In the case of Comesys & Pershouse v. Cox &. Harris,a al Stewart's this Court acted on the same rule, and discharged a secu

R. 262 rity under circumstances less favorable to relief than the present case. This doctrine is believed to be so well established at the present day, as to render a particular review of the various adjudications upon it unnecessary. And from the facts as presented in this case, injury, if material, may well be supposed to have resulted from this extension of credit, as the debtor, during the time, absconded with his property. Whether he would otherwise have risked the attempt, or could have succeeded if he had, is equally uncertain. But it is, at most, sufficient that he eluded justice, under a state of the contract entirely favorable to the effort, and to which the security had not given his consent.

3. I am next to examine the validity or equitablc effect of the complainant's compromise, after he had been discharged from liability on the former contract by reason of the unauthorized alteration of its terms by the payee. The attitude in which the complainant stood, was peculiar in the extreme. The extension of the term of credit, without his knowledge or consent, had absolved him from all legal obligation to pay any thing. If the alteration of the terms of the contract had a necessary tendency to increase his liability, he was also discharged from all the moral obligation. But I think it a fair presumption, that at the time of entering into the arrangenient, the defendant supposed its tendency would be to make the debt more secure, at least against the principal; and that the complainant aiterwards, qut previous to the absconding, on being informed what

JULY 1929.



had been done, entertained the same opinion. This conclusion is warranted from the language of the bill and answer on this branch of the case. Hence I am of opinion that a sufficient moral obligation existed in this case, to sustain a subsequent promise to pay the true amount of the defendant's debt. It is also worthy of remark, that this original debt had been contracted under a statute sui generis, and which had not at that time received the same judicial exposition that has since been given it, so that the amount due depended on principles of construction which were novel and dislicult; and which have since been so established as to allow on contracts of the kind much less than at that time had been allowed in private settlements, or held to be due by the decisions of the Circuit Courts.

Under these circumstances, and the advice and persuasions of counsel employed by himself and the defendant, he became fearful of his responsibility, contrary to what he says were his former impressions as to the effect of the alteration of the contract; and this influence, together with the consideration of the assignment of the original note and deed of trust, induced him to give his notes for the sum mentioned, which was less than the defendant contended was due on the original contract. The probable value of the note and deed of trust deserves slight notice, as they contribute to the singularity of the transaction. That the complainant could never have sustained an action on the note against any one after it was thus discharged, is believed to be true, as contended in argument. The discharge of the debt by giving notes for it, and the assignment to one of the payors, was, in legal acceptation, a satisfaction of the original note. Nor was the deed of trust an instrument legally assignable, especially after the debt which it was intended to secure had been satisfied; even by the security. It could convey no legal title to the property to the complainant. His interest derivable from these assignments, could amount to nothing more than an cquitable demand against Pettus, to be prosecuted, if at all, in a foreign government.

But it is contended the complainant entered into this contract with a full knowledge of all the facts; that it was in the nature of a compromise of a doubtful right, fairly stipulated between the parties; that if there was any hardship, disappointment or mistake as to the inducement or consideration of the compromise, it proceeded from ignorance of the law, and as each one is charged with a knowl

a Tindall v.
Minor's Ala.
Rep. 103.

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