Marret v. Scott

• Decision Date: 14 March 1994
• Docket Number: No. A93A1742,A93A1742
• Citation: 441 S.E.2d 902,212 Ga.App. 427
• Parties: MARRET et al. v. SCOTT et al.
• Court: Georgia Court of Appeals

Page 902

441 S.E.2d 902

212 Ga.App. 427

MARRET et al. v. SCOTT et al.

No. A93A1742.

Court of Appeals of Georgia.

March 14, 1994.

Dupree, Johnson & Poole, Hylton B. Dupree, Jr., Mark A. Johnson, Marietta, for appellants.

Stevens & Associates, Ronald S. Stevens, Atlanta, for appellees.

COOPER, Judge.

This is the fourth appearance of this contract action before this court. See Scott v. Thompson, 193 Ga.App. 487, 388 S.E.2d 371 (1989), aff'd, 260 Ga. 164, 393 S.E.2d 447; Scott v. Thompson, 201 Ga.App. 443, 411 S.E.2d 508 (1991); Scott v. Thompson, 202 Ga.App. 746, 415 S.E.2d 508 (1992). The case was initially filed against ten guarantors to enforce two promissory notes in the total principal amount of $250,000. The jury returned a verdict for plaintiffs against the ten guarantors in the principal amount plus interest and attorney fees; however, the trial court ordered a new trial based on the jury's failure to determine the guarantors' obligation under certain capital gains provisions. In the first appeal, this court affirmed the trial court's grant of a new trial on the issues of capital gains, interest and attorney fees but held that a new trial was unnecessary on the issue of the principal amount of the notes. Scott, 193 Ga.App. at 488, 388 S.E.2d 371.

After receipt in the trial court of the remittitur but prior to entry of any judgment thereon, four of the ten guarantors entered into a "COVENANT NOT TO SUE AND NOT TO ENFORCE JUDGMENT" with plaintiffs, settling the claims against them in consideration of a payment of approximately $197,000. Thereafter, the trial court certified a judgment of $250,000 as final pursuant to OCGA § 9-11-54(b) and a writ of fieri facias was issued against all guarantors. The six non-settling guarantors then moved the court to set aside the judgment on the grounds that the order did not delineate between joint and several and proportional liability and plaintiffs' receipt of $197,000. As a consequence, the trial court entered an order, superseding its previous judgment, which established proportional liabilities as to all of the guarantors ("the November 26 judgment").

Prior to the retrial, the six non-settling guarantors moved unsuccessfully for summary judgment on the ground that the Covenant not to Sue and Not to Enforce Judgment with the four settling guarantors amounted to a release of all remaining guarantors. On the eve of retrial, the four settling guarantors were voluntarily dismissed from the action, and the case proceeded against the six remaining guarantors. The second jury returned a special verdict in favor of guarantors, finding that the agreement amounted to a novation, composition and release of their liability as to the capital gains provision, interest and attorney fees. On appeal, however, the judgment rendered on that verdict was reversed because of evidentiary errors during the trial. Scott, 201 Ga.App. at 445, 411 S.E.2d 508.

During the third trial, the six guarantors again argued that plaintiffs' agreement with four of the guarantors also released them. The trial court denied motions for directed verdict on this issue, and the jury returned a verdict for plaintiffs against each guarantor, apportioning liability. From the final proportional judgment entered only against the six remaining guarantors, appellants, bring this appeal. Appellants are four of the six non-settling guarantors, and appellees are the original plaintiffs.

1. Appellants enumerate as error the denial of their motion for directed verdict on the issues of release, composition and novation and upon the theory that, as a matter of law, the agreement is a promise not to enforce a judgment rather than a covenant not to sue.

(a) Appellants contend that appellees' acceptance of less than the total sum owed under the notes was a composition which discharged them as co-sureties on the notes. OCGA § 10-7-20 provides in part that the "release of or compounding with one surety shall discharge a cosurety." " 'To "compound" ... is "to compromise, to effect a composition, to obtain discharge from a debt by the payment of a smaller sum." ' [Cit.]" Spencer v. Southtrust Bank, etc., 208 Ga.App. 538, 539, 430 S.E.2d 853 (1993). However, in this case, each guarantor is a limited surety, liable only for a proportionate share of the underlying debt. Co-sureties within the meaning of OCGA § 10-7-20 are those who are "joint sureties ... to the same obligation." (Emphasis supplied.) Black's Law Dictionary (4th ed. 1951). Accord Daprano v. Sherwin-Williams Co., 166 Ga.App. 811, 812, 305 S.E.2d 655 (1983). Appellants here are concatenated limited sureties. The November 26 judgment established that the sum of their total individual liabilities equals the principal amounts of the notes, but no one surety is jointly liable with another for the same portion of the debt. As appellants are not jointly liable, they are not co-sureties within the meaning of OCGA § 10-7-20 and so were not discharged by the settlement agreement entered into by appellees with fewer than all of the limited guarantors.

(b) Appellants urge that the settlement agreement, entered into without their knowledge and consent, amounted to a novation which released them as sureties. "Any change in the nature or terms of a contract is called a 'novation'; such novation, without the consent of the surety, discharges him." OCGA § 10-7-21. However, because appellants are not jointly liable for the same portions of the total debt to appellees, any novation by virtue of the settlement agreement would not operate to release them from their own individual limited liabilities. "We are well aware of the long standing rule urged by [appellants].... This rule is based on the rationale that such a release causes injury or impairment to the obligation of the co-maker or co-guarantor. The injury generally arises because the co-guarantor is both jointly and severally liable on the entire note. In the instant case we have a different situation. Although the note in question is jointly guaranteed, each guarantor has specifically limited his liability thereon to his own interest. Under these circumstances, there can be no injury to [appellants] by the [settlement with the covenantees as to their own individual proportionate liability]." (Indention omitted; emphasis supplied in part.) Holcombe v. Eng, 163 Ga.App. 343, 344, 294 S.E.2d 568 (1982). The trial court did not err in denying appellants' motion for directed verdict on the grounds of composition or novation.

(c) Appellants contend that the agreement is a promise not to enforce a judgment rather than a covenant not to sue. " 'A covenant not to sue is not a release, but it is to be distinguished from a release, and the distinction, although technical or artificial, is clear. The difference is one of intent and grows out of the construction placed on the terms of the instrument, since a covenant not to sue is not a present abandonment or relinquishment of a right or claim but merely an agreement not to enforce an existing cause of action, and, although it may operate as a release between the parties to the agreements, it will not release a claim against joint obligors....' [Cit.]" (Emphasis supplied.) Mercantile Nat. Bank v. Founders Life Assur. Co. of Fla., 236 Ga. 71, 73(1), 222 S.E.2d 368 (1976). See also Crim v. Jones, 204 Ga.App. 289, 291, 419 S.E.2d 130 (1992). On the other hand, OCGA § 9-13-74 provides: "An agreement for a valuable consideration never to enforce a judgment or execution shall release the judgment or execution." (Emphasis supplied.) Appellants rely on Weems v. Freeman, 234 Ga. 575, 216 S.E.2d 774 (1975) for the proposition that the agreement must be construed as an agreement never to enforce a judgment.

In Weems, during the pendency of an action for nuisance and...