Glenn v. Union Bank & Trust Co.
233 S.W. 798
Ark.
1921
Check Treatment
Hart, J.

(after stating the facts). It is insisted by counsel for the defendant that the court erred in sustaining the demurrer to the first paragraph of his answer because he notified the plaintiff after the note became due to sue the principal on the note forthwith,and that,the bank not having brought the suit within thirty days after the notice was given, the defendant is exonerated from liability on the note under the statute.

Section 8287 of Crawford & Moses’ Digest requires that a surety on a note in order to exonerate himself from liability shall, after the note becomes due, by a notice in writing, require the person having the right of action to forthwith commence suit against the principal debtor and other party liable. The following section provides that, if such suit 'be not commenced within thirty days after the service of the notice, the surety shall be exonerated from liability to the person notified.

In Wilson v. White, 82 Ark. 407, the court held that the statute, being in derogation of the contractual rights of the parties, must be strictly complied with by the surety before he can claim exoneration from liability on the obligation sued on.

Under the language of the statute the requirement to sue must be unconditional. It contemplates a peremptory requirement of the surety to the creditor to commence suit forthwith.

The notice in the present case is advisory merely. The language is, “My advice would be for you to take legal steps to collect the debt # * * and getting judgment for the balance.” The surety only advises the creditor to bring suit. The notice does not contain a demand or requirement for the creditor forthwith to commence suit. Not having shown a clear requirement or demand to the creditor to institute suit forthwith upon the note, the notice is insufficient because it is merely advisory, or at most a request to collect from the principal, and, if he fails to do so, to bring suit.

This view of the statute is taken in the early case of Bates & Hughes v. State Bank, 7 Ark. 394. In that case the surety gave notice to and requested the bank “to put the obligation in a train of collection,”.and the court held that the notice was not sufficient under the statute. The court said that the statute gave the surety the right to require the plaintiff to commence suit forthwith, but that, if he wished to exonerate himself from liability, he must give such notice as to leave no option with the plaintiff. To the same effect see 32 Cyc. 104; Baker v. Kellogg, 29 Ohio St. Rep. 663; Rice v. Simpson, 9 Heisk. (Tenn.) 809; Parrish v. Gray, Humph. (Tenn.) 87; Kennedy v. Falde (Dak.), 29 N. W. 667; Benge v. Eversole (Ky.), 160 S. W. 911, and Edmonson v. Potts (Va.), 21 Ann. Cas. 1365.

It is also contended that the judgment should be reversed because the court erred in sustaining a demurrer to the second paragraph of the answer, and in this contention we think counsel for the defendant is correct.

Counsel for the plaintiff seeks to uphold the judgment on the rule laid down in Smith v. Spradlin, 136 Ark. 204, and cases cited, to the effect that th@ payment of a sum of money by one who is already legally bound to pay the same is not a valid consideration for a contract. Counsel claims that, inasmuch as the defendant was already bound to pay the note, there was no consideration for the contract whereby he was released from the payment of it, and that the case calls for the application of the well-known rule just announced. We do not think, however, that the rule contended for has any application to the facts of the present case. According to the allegation of the answer, the parties entered into a new contract with essentially different terms and imposing additional obligations upon the bank and the principal debtor.

In Weaver v. Emerson-Brantingham Implement Co., 146 Ark. 379, the court held that the parties to a written contract may, subsequent to its execution, rescind it in part, or in whole, and substitute a new oral agreement therefor. Hence the parties had a right to make the new agreement. According to the allegations of the answer, which must be taken as true on demurrer, J. C. Sheperd, the principal debtor, made an assignment in writing of his war minerals claim against the United States to the bank, and it was agreed between Sheperd, the principal debtor, Glenn, the surety, and the cashier of the bank that the surety should be released from liability on the note.

The assignment of JjSheperd’s claim against the United States to the bank constituted additional security to the bank. The bank had the right to accept this new security in lieu of the surety, and its action in doing so was sufficient consideration for making the new contract. The president of the bank doubtless thought that the assignment of Sheperd’s claim against the United States was better security for- the bank than the signature of Glenn to the note, and for that reason máde the contract. In any event he had the right to make the agreement with Sheperd and Glenn that the latter should be released from liability on the note in consideration that Sheperd would assign his claim against the United States to the bank. See Kilgore Lumber Co. v. Thomas, 98 Ark. 219, and Phoenix Cement Sidewalk Co. v. Russellville Water & Light Co., 101 Ark. 22.

It is also insisted that the demurrer to the answer should have been sustained because the answer does not allege that the president of the bank had authority to make the contract in question. The authority of the president to make the contract would come up upon the proof in the case, and was not required to be alleged in the answer.

For the error in sustaining the demurrer to the second paragraph of the answer, the judgment must be reversed, and the cause remanded for a new trial.