Gould v. Keith

California Court of Appeal Sep 26, 1935 No. Civ. 10418Published

Before: Gould

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Holding. An agreement to modify a note's interest rate and payment terms does not release an endorser from liability if the agreement lacks consideration and is therefore unenforceable. Additionally, accepting a partial interest payment constitutes an executed gift rather than a modification of the contract terms.

Issues

Whether an agreement to reduce interest and extend payment terms releases an endorser from liability when the agreement lacks consideration.
Whether the acceptance of a partial interest payment modifies the contract terms to the detriment of a guarantor.

Disposition. Affirmed

Quotations verified verbatim against the opinion

“the acceptance by the payee of the note of $35 instead of $40 on past due interest did not change the terms of the contract with regard to the guarantor, but amounted merely to an executed oral gift by the payee of the $5.”

GOULD, J.,

pro tem.

Legal principles logically elucidated by the late Chief Justice Shaw in

Stroud

Thomas,

139 Cal. 274 [72 Pac. 1008, 96 Am. St. Rep. 111], and in

Braun

Crew,

183 Cal. 728 [192 Pac. 531], determine adversely to appellant, the points involved in this appeal. It is true that appellant as endorser of the mortgage note would be released from liability by any unauthorized alteration of the obligation assumed; but when respondent as payee of the note entered into an agreement with the maker to reduce the rate of interest and to extend time of payment, this agreement, as per the finding of the trial court, was not supported by a con

[285]

sideration and was therefore unenforceable and respondent was not thereby bound to forbear suit during the time specified in the extension. If it did not modify the original note it had no effect upon the liability of the endorser. Furthermore, the acceptance by the payee of the note of $35 instead of $40 on past due interest did not change the terms of the contract with regard to the guarantor, but amounted merely to an executed oral gift by the payee of the $5. The judgment, therefore, was properly entered against such endorser.

Judgment affirmed.

Crail, P. J., and Wood, J., concurred.

Gould v. Keith

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GOULD, J.,

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