Durham v. Greenwold

• Citation: 3 S.E.2d 585,188 Ga. 165
• Decision Date: 15 April 1939
• Docket Number: 12675.
• Parties: DURHAM v. GREENWOLD et al.
• Court: Supreme Court of Georgia

3 S.E.2d 585

188 Ga. 165

DURHAM v. GREENWOLD et al.

No. 12675.

Supreme Court of Georgia

April 15, 1939

Judgment Adhered to After a Rehearing June 14, 1939.

Syllabus by the Court.

1. An agreement entered on the back of a renewal note, stating that 'for value received, and in consideration of' other stated alleged benefits, the signer does 'guarantee the payment of the within note,' is prima facie a contract of guaranty, and not of suretyship. Paris v. Farmers & Merchants Bank, 143 Ga. 324, 85 S.E. 126; Baldwin Fertilizer Co. v. Carmichael, 116 Ga. 762, 42 S.E. 1002; Fields v. Willis, 123 Ga. 272, 51 S.E. 280; Watters v. Hertz, 135 Ga. 814, 70 S.E. 343; Baggs v. Funderburke, 11 Ga.App. 173, 174 S.E 937.

2. The Code, § 53-503, declares that 'while the wife may contract, she may not bind her separate estate by any contract of suretyship, nor by any assumption of the debts of her husband.' Thus, while no legal inhibition prevents the wife from assuming, by a separate and independent contract based on a valid consideration flowing to her, the debt of another person, unless such debt be that of her husband, she is nevertheless prevented from lending her credit as surety by joining in the obligation of the principal debtor, so as to render herself directly and primarily liable with him on his original undertaking. In the first instance she becomes a guarantor (Sims v Clark, 91 Ga. 302(2), 18 S.E. 158; Holmes v. A. J. Schwab, 141 Ga. 44, 80 S.E. 313), which the law does not prohibit (Wilson Bros. v. Heard, 46 Ga.App. 497, 167 S.E. 913), and in the latter case she seeks to bind herself as surety, which the law expressly forbids.

3. In the instant case the petition was not subject to demurrer by the defendant. In the absence of extrinsic evidence going to show that her signing 'for value received' as guarantor was without independent consideration to her, the agreement was prima facie one of guaranty, on which she was liable. Pitts v. Allen, 72 Ga. 69; Reviere v. Evans, 103 Ga. 169, 29 S.E. 756; Brewer v. Grogan, 116 Ga. 60, 42 S.E. 525; Baggs v. Funderburke, supra.

The defendant, a married woman, signed the following agreement, which was entered on the back of a note executed in favor of the plaintiffs: 'For value received and in consideration of the benefits flowing to me as owner of all the stock in the E. B. Durham Jewelry Company, a corporation [the maker of the note], and in consideration of the extension of time of payment of the within indebtedness according to the terms of the note, I, Mrs. Fannie Durham, do hereby guaranty the payment of the within note.' In a suit against her on this agreement the defendant pleaded non-liability on the ground that her contract was in fact one of suretyship, but, regardless of whether she was a surety or a guarantor, that she as a married woman incurred no legal liability. She further sought by a cross-petition to have her deed, given to secure her undertaking, cancelled as a cloud upon her title. She also filed demurrers, raising these defenses to the petition, and excepted to the overruling of them.

Burress & Dillard, of Atlanta, for plaintiff in error.

Dillon & Rose, of Atlanta, for defendants in error.

JENKINS Justice.

The Code, § 103-101, provides as follows: 'The contract of suretyship is one whereby a person obligates himself to pay the debt of another in consideration of credit or indulgence or other benefit given to his principal, the principal remaining bound therefor. It differs from a guaranty in this, that the consideration of the latter is a benefit flowing to the guarantor.' Although the distinction between a surety and a guarantor is thus plainly set forth by the Code, it would seem that the line of demarkation as there drawn is not absolutely all-inclusive, since an original undertaking by which one induces the subsequent furnishing of goods to a third person by guaranteeing payment therefor has been uniformly recognized as an independent contract of guaranty, and not of suretyship; and this is true although no independent consideration flowing to the guarantor is apparent. Sims v. Clark, 91 Ga. 302, 18 S.E. 158; Holmes v. A. J. Schwab, 141 Ga. 44, 80 S.E. 313, supra; Baggs v. Funderburke, 11 Ga.App. 173, 74 S.E. 937, supra. Thus we must look deeper for what is the true and fundamental distinction between the two kinds of contracts, which the earmark given by the Code does not always unerringly disclose. A contract of suretyship is where, in consideration of the benefit extended to the principal debtor, one lends his credit by joining in the principal debtor's obligation, so as to render himself directly and primarily responsible with the principal on the same contract, and without any reference to the solvency of the principal. In such a case, the promise of each being one and the same, one consideration, the one flowing to the principal debtor, is all that is required, although there may be additional consideration flowing to the surety. Their liability being joint and several, they may be joined in the same action. Heard v. Tappan & Merritt, 116 Ga. 930, 43 S.E. 375. A contract of guaranty exists where one lends his credit for the benefit of another, but under an obligation which is separate and distinct from that of the principal debtor, by which he renders himself secondarily or collaterally liable on account of any inability of the...