Glenn v. Union Bank & Trust Co.

• Decision Date: 03 October 1921
• Docket Number: 136
• Citation: 233 S.W. 798,150 Ark. 38
• Parties: GLENN v. UNION BANK & TRUST COMPANY
• Court: Arkansas Supreme Court

233 S.W. 798

150 Ark. 38

GLENN v. UNION BANK & TRUST COMPANY

No. 136

Supreme Court of Arkansas

October 3, 1921

Appeal from Independence Circuit Court; Dene H. Coleman, Judge reversed.

STATEMENT OF FACTS.

The Union Bank & Trust Company sued E. H. Glenn to recover the sum of $ 1,390 alleged to be due plaintiff on a promissory note executed by the defendant and others.

As a defense to the action the defendant stated that he had signed said note as surety for J. C. Sheperd and J. R. Wilson, who were the principals, and that after the note became due he wrote and mailed to the bank the following letter or notice:

"Denver Col., June 10, 1920.

"C D. Metcalf, Batesville, Ark.

"Dear Charley: I am just in receipt of yours of the 7th relative to the Sheperd and Wilson note.

"My advice would be for you to take the legal steps to collect the debt, advertise and sell the truck, etc., applying that on the debt, and getting a judgment for the balance."

We quote from the answer of the defendant another paragraph, as follows:

"Further answering plaintiff's complaint, defendant says that on the 4th day of August, 1919, his co-defendant, J. C. Sheperd made an assignment of his 'war minerals claim' against the government of the United States, under the 'War Minerals Relief Act,' which assignment was in writing, and that in consideration of said assignment being made, and to secure further loans from plaintiff bank, it was agreed between the defendant, Sheperd, the defendant, E. H Glenn, and D. D. Adams as president of said bank, that this defendant should and would be released from all liability on said note aforesaid."

The plaintiff filed a demurrer to these two paragraphs of the answer, which was sustained by the court. The defendant refused to plead further, and, upon final judgment being entered against him on the demurrer, duly prosecuted an appeal to this court.

Judgment reversed and cause remanded.

W. M. Thompson, for appellant.

1. Appellant had the right under the law to require the appellee to bring suit against the principal debtor. C. & M. Dig. § 8287. The statute must be strictly construed. 82 Ark. 407; 124 Id. 48; 127 Id. 462; 128 Id. 221. If, after notice by the surety in writing to the creditor to sue the principal debtor, the creditor fails to bring suit within thirty days, the surety is discharged. 48 Ark. 254; 82 Id. 407; 124 Id. 48. The statute does not prescribe any form of notice; therefore, substantial compliance is sufficient. 124 Ark. 48; 29 Id. 579.

2. The court erred in sustaining the demurrer to the second paragraph of the amended answer. The consideration for releasing the surety by the bank, on the assignment of the war claim, was sufficient under the facts set out in the second paragraph. An oral release from the terms of a written contract is binding. 94 Ark. 165. See also, as to consideration, 112 Ark. 503; 75 Id. 360; 34 N.J.L. 54; 2 Met. 283; 12 L. R. A. 463; 5 Id. 856; 43 U.S. 2 How. 426, 11 Law. Ed. 326.

Samuel M. Casey, for appellee.

1. The notice in the form of a letter advising appellee to "take the legal steps to collect the debt" was not a compliance with the requirements of the statute. C. & M. Dig. § 8287. It should be strictly construed. 82 Ark. 247; Id. 207; 113 Id. 198. A mere failure to sue a surety on a note or to enforce collateral security is no defense to the surety. 50 Ark. 229; 74 Id. 241; 88 Id. 108; 128 Id. 222; 35 Id. 469.

2. The second paragraph to which the demurrer was sustained fails to show any consideration to appellee for releasing appellant. 52 Ark. 174; 136 Id. 204. The purported agreement to release the appellant as surety was not such a contract as the president of the bank would be authorized to make, unless he was acting by authority of the board of directors. 62 Ark. 33; C. & M. Dig. § 683. The payment of a sum of money by one who is legally bound to pay the same is not a valid consideration for a contract.

OPINION

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, 102 S.W. 201, 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. 663; Rice v. Simpson, 56 Tenn. 809, 9 Heisk. (Tenn.) 809; Parrish v. Gray, 1 Hum. 88; Kennedy v. Falde (Dak.), 4 Dak. 319, 29 N.W. 667; Benge v. Eversole (Ky.), 156 Ky. 131, 160 S.W. 911, and Edmonson v. Potts (Va.), 21 Ann. Cas. 1365.

It is also contended that the judgment should be reversed because ...