Strong v. . Sheffield Case Brief
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tl;dr: A wife indorsed her husband’s demand note securing his overdue debt. The creditor promised to wait only until he wanted payment and actually waited about two years. Because that promise supplied no consideration for her indorsement, the court affirmed the reversal and directed judgment for her.
Legal Significance: The case distinguishes actual forbearance performed in response to a request from performance under an exchange of promises. When the parties intend mutual promises, a creditor’s promise to wait only as long as he elects supplies no consideration, despite subsequent forbearance.
Case Facts & Court Holding
Key Facts & Case Background
The defendant’s husband owed the plaintiff an overdue debt. At her husband’s request, the defendant indorsed his demand note, which was delivered to the plaintiff as security for that antecedent debt. The plaintiff testified that he expressly agreed not to transfer the note or place it in a bank for collection, but to hold it until he wanted his money and then demand payment. The defendant indorsed upon this alleged agreement. The plaintiff actually forbore collection for about two years. He then brought this action on the note. The trial court refused to rule that the indorsement lacked consideration. The General Term reversed the judgment, and its order came before the court for review.
Court Holding & Legal Precedent
Issue: Did the creditor’s promise to hold a demand note until he wanted payment provide consideration for the defendant’s indorsement when he actually forbore collection for about two years?
The defendant’s indorsement lacked consideration. The creditor’s express promise permitted him to sue immediately because doing so would signify that he wanted payment. Since the parties intended mutual promises, consideration depended on their agreement, not the creditor’s subsequent forbearance. The court affirmed the General Term’s order reversing the judgment and directed judgment absolute for the defendant on the stipulation, with costs in all courts.
IRAC Legal Analysis
Legal Issue
Did the creditor’s promise to hold a demand note until he wanted payment provide consideration for the defendant’s indorsement when he actually forbore collection for about two years?
Conclusion
The case establishes that discretionary forbearance cannot support a third person’s obligation when the parties intend an exchange of binding promises. It preserves the separate rule that requested and performed forbearance for a reasonable time may supply consideration.
Legal Rule
A creditor’s agreement to forbear collection of a presently due debt supplies consideration for a third person’s undertaking concerning that debt. A request followed by actual, reasonable forbearance in reliance on the undertaking may also suffice without a reciprocal promise, unless the parties intended an immediate exchange of binding promises. Morton v. Burn, 7 A. & E. 19; Wilby v. Elgee, L. R., 10 C. P. 497; King v. Upton, 4 Maine, 387. When no time is specified, a reasonable time ordinarily is intended. Oldershaw v. King, 2 H. & N. 517; Calkins v. Chandler, 36 Mich. 320. But an express promise to forbear only as long as the creditor elects supplies no consideration in an intended exchange of mutual promises.
Legal Analysis
Because the action was between original parties to the note, the rule protecting bona fide holders for value before maturity did not preclude inquiry into consideration. The husband’s antecedent debt left the asserted forbearance arrangement as the only claimed consideration for the wife’s indorsement.
The court distinguished a request followed by reasonable forbearance from an intended exchange of promises. The authorities including Morton v. Burn supported consideration through requested performance without an enforceable reciprocal promise. Oldershaw v. King and Calkins v. Chandler supported implying a reasonable period when no period is specified.
Here, however, an express agreement governed the transaction. The creditor promised to wait only until he wanted payment, leaving the duration entirely to his election. Immediate suit would therefore have complied with his promise. The court could not imply a fixed or reasonable period contrary to that express arrangement.
The note itself supplied no extension: it was payable on demand. Although its interest provision was consistent with an expectation of delay, it did not prevent immediate suit on the note or the original debt, as reflected in Merritt v. Todd, 23 N. Y. 28, and Shutts v. Fingar, 100 id. 539. The parties’ possible expectations and the approximately two years of actual delay could not cure the absence of consideration in their intended exchange of promises.
The Opinion
Summary
- A promise to forbear collecting a debt is valid consideration only if it is for a definite or reasonable time.
- A creditor’s promise to forbear for “such time as I want my money” is an illusory promise and is not valid consideration.
- The existence of consideration is determined by the substance of the agreement itself, not by the subsequent actions of the parties.
Full text
Complete unedited opinion text as published by the court
The contract between a maker or indorser of a promissory note and the payee forms no exception to the general rule that a promise, not supported by a consideration, is nudxvm paobum. The law governing commercial paper which precludes an inquiry into the consideration as against tona fide holders for value before maturity, has no application where the suit is between the original parties to the instrument. It is undisputed that the demand note upon which the action was brought was made by the husband of the defendant and indorsed by her at his request and delivered to the plaintiff, the payee, as security for an antecedent debt owing by the husband to the plaintiff. The debt of the husband was past due at the time, and the only consideration for the wife’s indorsement, which is or can be claimed, is that as part of the transaction there was an agreement by the plaintiff when the note was given to forbear the collection of the debt, or a request for forbearance, which was followed by forbearance for a period of about two years subsequent to the giving of the note. There is no doubt that an agreement by the creditor to forbear the collection of a debt presently due is a good consideration for an absolute or conditional promise of a third person to pay the debt, or for any obligation he may assume in respect thereto. Hor is it essential -that the creditor should bind himself at the time to forbear collection or to give time. If he is requested by his debtor to extend the time, and a third person undertakes in consideration of forbearance being given to become liable as surety or otherwise, and the creditor does in fact forbear in reliance upon the undertaking, although he enters into no enforcible agreement to do so, his acquiescence in the request, and an actual forbearance in consequence thereof for a reasonable time, furnishes a good consideration for the col \*395 lateral undertaking. In other words, a request, followed by performance is sufficient, and mutual promises at the time are not essential, unless it was the understanding that the promisor was not to be bound, except on condition that the other party entered into an immediate and reciprocal obligation to do the thing requested. (Morton v. Burn, 7 A. & E. 19; Wilby v. Elgee, L. R., 10 C. P. 497; King v. Upton, 4 Maine, 387; Leake on Con. p. 54; Am. Lead. Cas. vol. 2, p. 96 et seq. and cases cited.) The general rule is clearly, and. in the main accurately, stated in the note to Forth v. Stanton (1 Saund. 210, note b). The learned reporter says: “ And in all cases of forbearance to sue, such forbearance must be either absolute or for a definite time, or for a reasonable time ; forbearance for a little, or for some time, is not sufficient.” The only qualification to be made is that in the absence of a specified time a reasonable time is held to be intended. (Oldershaw v. King, 2 H. & N. 517; Calkins v. Chandler, 36 Mich. 320.) The. note in question did not in law extend the payment of the debt. It was payable on demand, and although being payable with interest it was in form consistent with an intention that payment should not be immediately demanded, yet there was nothing on its face to prevent an immediate suit on the note against the maker or to recover the original debt. (Merritt v. Todd, 23 N. Y. 28; Shutts v. Fingar, 100 id. 539.)
In the present case the agreement made is not left to inference, nor was it a case of request to forbear, followed by forbearance, in pursuance of the request, without any promise on the part of the creditor at the time. The plaintiff testified that there was an express agreement on his part to the effect that he would not pay the note away, nor put it in any bank for collection, but (using the words of the plaintiff) “ I will hold it until such time as I want my money, I will make a demand on you for it.” And again: “No, I will keep it until such time as I want it.” Upon this alleged agreement the defendant indorsed the note. It would have been no violation of the plaintiff’s promise if, immediately on receiving \*396 the note, he had commenced suit upon it. Such a suit would have been an assertion that he wanted the money and would have fulfilled the condition of forbearance. The debtor and the defendant, when they became parties to the note, may have had the hope or expectation that forbearance would follow, and there was forbearance in fact. But there was no agreement to forbear for a fixed time or for a reasonable time, but an agreement to forbear for such time as the plaintrS should elect. The consideration is to be tested by the agreement, and not by what was done under it. It was a case of mutual promises, and so intended. We think the evidence failed to disclose any consideration for the defendant’s indorsement, and that the trial court erred in refusing so to rule.
The order of the General Term reversing the judgment should be affirmed, and judgment absolute directed for the defendant on the stipulation, with costs in all courts.
All concur, except Gray and Bartlett, JJ., not votings and Haight, J., not sitting.
Ordered accordingly.