Overcash v. First Nat. Bank of Atlanta, s. 42587

• Decision Date: 24 February 1967
• Docket Number: No. 1,42601,Nos. 42587,s. 42587,1
• Parties: E. H. OVERCASH v. FIRST NATIONAL BANK OF ATLANTA et al. C. D. HAYNIE v. FIRST NATIONAL BANK OF ATLANTA et al
• Court: Georgia Court of Appeals

Page 32

155 S.E.2d 32

115 Ga.App. 499

E. H. OVERCASH v. FIRST NATIONAL BANK OF ATLANTA et al.

C. D. HAYNIE v. FIRST NATIONAL BANK OF ATLANTA et al.

Nos. 42587, 42601.

Court of Appeals of Georgia, Division No. 1.

Feb. 24, 1967.

Rehearings Denied March 10 and March 29, 1967.

Certiorari Denied May 4, 1967.

Syllabus by the Court

The alteration, by the plaintiff creditor bank, of the contract of suretyship by the release of one of the three original sureties and the substitution of a new surety therefor did not discharge the other two original sureties, defendants, since such novation was authorized by a provision in the contract to the effect, that the bank could surrender any kind of security it held and substitute any kind of collateral for the indebtedness without notice to or further consent of the sureties. The petition stated a cause of action against the appellants, the two original sureties; therefore, the demurrers were properly overruled.

The First National Bank of Atlanta brought an action against E. H. Overcash, Clyde D. Haynie and Herman E. Wilson as sureties for the indebtedness of E. H. Overcash & Associates, Inc. on a continuing, written agreement. The petition alleges substantially as follows: On May 11, 1964, defendants Haynie and Overcash, together with R. H. Williams, executed the agreement (Exhibit 'A') whereby they guaranteed and agreed to pay all indebtedness of the principal. Thereafter, with the knowledge and consent of defendants Haynie and Overcash, the name of Williams was stricken and defendant Wilson executed the agreement. The principal is now indebted to the plaintiff on three promissory notes (Exhibits 'B,' 'C,' and 'D') in the principal amounts of $10,000. each, dated December 10, 1965, and January 20 and 23, 1966, and bearing the respective due dates of March 10, April 20 and February 23, 1966. The notes are now past due, the maker, E. H. Overcash & Associates, Inc., has defaulted in payment thereof and the defendants, upon demand, have failed and refused to pay them in accordance with the terms of their agreement. On April 21, 1966, the defendants were given the statutory notice for the recovery of attorney's fees in connection with the suit. The court overruled the general demurrers of defendants Haynie and Overcash and the latter's special demurrer to the petition, from which judgment they appeal.

Robert B. Harris, Nancy Pat Phillips, Atlanta, for appellant.

Sanders, Mottola & Haugen, Charles Van S. Mottola, Newnan, for appellant.

Hansell, Post, Brandon & Dorsey, Hugh M. Dorsey, Jr., McChesney H. Jeffries, Atlanta, for appellees.

FELTON, Chief Judge.

The release of one surety shall discharge a cosurety. Code § 103-201. 'Any change in the nature or terms of a contract is called a novation; such novation, without the consent of the surety, discharges him.' (Emphasis supplied.) Code § 103-202. Although the petition alleges that the novation was made with the knowledge and consent of defendants Haynie and Overcash, they contend that their consent must also be in writing, as a modification or amendment to the original agreement which, under the Statute of Frauds, was required to be in writing. Hawkins v. Studdard, 132 Ga. 265(6), 63 S.E. 852; 131 Am.St.Rep. 190; Jarman v. Westbrook, 134 Ga. 19(2), 67 S.E. 403; Gulf Oil Corp. v. Willcoxon, 211 Ga. 462(1), 86 S.E.2d 507; Smith v. Huckabee Properties, Inc., 111 Ga.App. 451(2), 142 S.E.2d 320.

The suretyship contract contained the following printed provision: 'The undersigned hereby consent and agree that the bank may at any time, either with or without consideration, surrender any property or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account securing any indebtedness or liability covered by this agreement or substitute any collateral so held by it for other collateral of like kind, or of any kind, without notice to or further consent from the undersigned, and such surrender or substitution shall not in any way affect the liability of the undersigned hereunder.' (Emphasis supplied.) The contract thereby entitled the creditor bank to surrender any kind of security it had on the principal's indebtedness and to substitute any kind of collateral for that it had-both without either notice to or further consent of the sureties. The terms 'security' and 'collateral,' or collateral security, include the obligations of the defendant sureties under the contract of suretyship. See 79 C.J.S. Security; Securities, pp. 941, 942, nn. 68, 69, 70; definitions of 'security' in Bouvier's Law Dictionary, Black's Law Dictionary, and Websters New International Dictionary, 2d ed., unabridged (definition 3, b); definitions of 'collateral' and 'collateral security' in 14 C.J.S. Collateral, pp. 1317-1319, (applying the term to obligations, as well as incorporeal property); 7A Words and Phrases, Collateral Security, catchwords 'Additional to debtor's personal obligation' and cases annotated thereunder; James Employees Credit Union v. Hawley, 2 Wis.2d 490(6, 7), 87 N.W.2d 299; Collins v. National Fire Ins. Co. of Hartford (Fla.App.1958) 105 So.2d 190(6, 7). 'A surety is not discharged by any act of the creditor or obligee to which he consents. Consent may be given * * * in advance, as at the time the contract of suretyship is entered into.' 72 C.J.S. Principal and Surety § 158, p. 644, nn. 15, 18. The...