Schwitzerlet-Seigler Co. v. Citizens & Southern Bank

155 Ga. 740 | Ga. | 1923

Hines, J.

(After stating the foregoing facts.)

Under the terms of the deed of assignment made by the maker of the notes sued on, the acceptance by the plaintiff of any benefits thereunder was a full satisfaction of these notes; and as the plaintiff did receive a benefit under the assignment, in the shape of a payment by the assignee on these notes, the acceptance of such benefit terminated the liability of the maker on these notes, which thereby, under the terms of the deed of assignment, became fully satisfied. A creditor can not both affirm and disaffirm the assignment, and when he once affirms it he is bound by its terms and provisions. 5 C. J. 1256, § 414. The obligation of the sureties on these notes was accessory to that of the maker; and when the obligation of the latter, from the assent of the bank to the assignment and its acceptance of benefits thereunder, became extinct, the obligation of the former ceased (Civil Code (1910), § 3539; Brown v. Ayer, 24 Ga. 288; Phillips v. Solomon, 42 Ga. 192; Rutherford v. Rountree, 68 Ga. 725; Patterson v. Gibson, 81 Ga. 802 (10 S. E. 9, 12 Am. St. R. 356); Cason v. Heath, 86 Ga. 438 (12 S. E. 678); 32 Cyc. 151), unless what was done by the bank was done with the knowledge and consent of the sureties, and by an agreement between them and the bank that their obligation as accommodation indorsers or sureties on these .notes was to continue.

The general rule undoubtedly is, that the release of the principal debtor, without the consent of the surety, releases the surety, unless the right to go against the surety is reserved in the instrument of release, or it appears, from the whole transaction that the surety should remain bound. 32 Cyc. 154, 165; Stallings v. Bank of Americus, 59 Ga. 701; Brown v. Ayer, 24 Ga. 288 (4). So where the creditor reserves all rights against-the surety, the latter is not discharged by a release of the principal debtor by the creditor. So where the holder of the notes of an insolvent corporation, indorsed by a third person, signs a composition deed by which creditors assign their claims to a reorganizing committee, and agrees to take in payment the stock of the reorganized company, but upon signing the deed adds a reservation of all rights against the indorser, the indorser is not discharged from his liability as surety. Rockville Nat. Bk. v. Holt, 58 Conn. 526 (20 Atl. 669, 28 Am. St. R. 293). Under such circumstances the release will not discharge the surety. McAllister v. People, 28 Col. 156 (63 Pac. 308); Clagett v. Salmon, 5 G. & J. (Md.) 314; Boatman’s Savings Bk. v. Johnson, 24 Mo. App. 316; Stirewalt v. Martin, 84 N. C. 4; Weddington v. Jones, 41 Tex. Civ. App. 463 (91 S. W. 818); North v. Wakefield, 13 Q. B. 536, 13 Jurist, Part 1, p. 731; Wyke v. Rogers, 21 L. J. (N. S.) 611; Crim v. Fleming, 123 Ind. 438 (24 N. E. 358). Thus giving time or accepting a composition does not discharge the surety, if all remedies against him are reserved. Wagman v. Hoag, 14 Barb. (N. Y.) 232. Section 3539 of the Civil Code (1910) is but an affirmance of the common law upon this subject. Phillips v. Solomon, supra.

But in this case there is the express assent of the sureties to the discharge of the principal, and an express understanding between them and the holder of the notes that their obligation as sureties upon these notes was to continue. This makes a stronger 'case than one of the release or discharge of the principal (debtor with reservation of all rights against the surety. The ordinary holding is, that if the surety, with knowledge of the facts operating to discharge him from liability, does any affirmative act which contemplates the continued existence of his status as a surety, be thereby waives the right to claim that he is discharged. Williams v. Pacific Coast Cas. Co., 79 Wash. 164 (140 Pac. 74, Ann. Cas. 1915C, 678). Thus a new promise by a surety after discharge, with' knowledge of the facts discharging him, is binding without any new consideration; aliter if he has no such knowledge. N. H. Sav. Bk. v. Colcord, 15 N. H. 119 (41 Am. D. 685); Thornton v. Wynn, 12 Wheat. 183 (6 L. ed. 595). This case is much stronger. Here the sureties, to induce the creditor to assent to the assignment, and to settle with the .principal debtor, expressly agree that their obligation as sureties shall continue. To hold them bound, under these circumstances, comports with fair dealing and common honesty. While there is force in the view that, if the creditor actually releases the principal debtor, there can not ordinarily be an effectual reservation of remedies against the surety, it is sufficient to say that this case does not present that situation for our consideration. Here the reservation of remedies against the sureties was with their knowledge and consent, and with the express understanding that they were to be still liable. The principal debtor may have a good defense, and yet the surety will be bound. Thus, while duress of the principal is an available defense for the surety, yet if the surety acted with knowledge of the duress, he will be bound, though the principal debtor would not. Patterson v. Gibson, supra. So we are of the opinion that the sureties were not discharged by the acceptance by the plaintiff of benefits under the assignment; and the court below did not err in overruling the grounds of the demurrer based upon the contention that they were' discharged.

The other grounds of demurrer are without merit, and need not be discussed at length.

Judgment affirmed.

All the Justices concur, except Gilberts J., disqualified.