Sulter v. Citizens Bank & Trust Co.

• Citation: 181 S.E. 694,51 Ga.App. 798
• Decision Date: 21 September 1935
• Docket Number: 24482.
• Parties: SULTER v. CITIZENS BANK & TRUST CO.
• Court: United States Court of Appeals (Georgia)

181 S.E. 694

51 Ga.App. 798

SULTER v. CITIZENS BANK & TRUST CO.

No. 24482.

Court of Appeals of Georgia, First Division

September 21, 1935

Syllabus by the Court.

1. The death of a guarantor and knowledge or notice of such death to the guarantee revokes the guaranty as to future transactions where the guaranty is a continuing one based on a divisible consideration, if the contract of guaranty itself does not express a contrary intention. The contract in the present case is a special continuing guaranty, being one not limited to a particular transaction, but intended to cover future transactions during the lifetime of the guarantor.

2. "There is a difference between an undertaking which guarantees a loan and one which guarantees the payment of a negotiable instrument. The former covers the debt; the latter the evidence thereof."

3. "The taking of a promissory note for an antecedent liability does not constitute a payment of the debt, in the absence of an agreement to that effect, or evidence that such was the intention of the parties."

4. The taking of a demand note is not such an extension of time as would release the guarantor in this case, for a demand note is instantly due, and the moment delivered can be sued upon.

5. Under the facts of this case, the taking of a demand promissory note for a preexisting liability which was covered by the guaranty did not constitute a payment of the debt and thereby release the guarantor.

Error from City Court of Savannah; Davis Freeman, Judge.

Suit by the Citizens Bank & Trust Company against A. W. Sulter, as executrix of the estate of Mrs. Bertha Schroder, deceased. Judgment for plaintiff, and defendant brings error.

Affirmed.

Donnelly & Fleetwood, of Savannah, for plaintiff in error.

Gazan Walsh & Bernstein, of Savannah, for defendant in error.

MacINTYRE Judge.

The Citizens Bank & Trust Company filed suit against the estate of Mrs. Bertha Schroder, deceased, on a certain contract of guaranty as follows: "For a valuable consideration to the undersigned in hand paid by you, the undersigned hereby guarantees to you the payment of any and all debts and/or liabilities of Martin Schroder & Co., incurred prior to the signing of this guaranty and now outstanding, or which are now due or which may be from time to time hereafter created contracted, or incurred, however and in whatever manner the debts or liabilities of Martin Schroder & Co. to you may have been or may be created, contracted, incurred, or evidenced also any and all renewals, in whole or in part, of any and all obligations, present or future, of Martin Schroder & Co. This guaranty is and shall be an open, unconditional, and continuing one to the extent, at any and all times, of $10,000.00, and shall not be considered as wholly or partially satisfied by the payment at any time of any sum of money for the time being due on any debt or liability, and shall stand as an absolute, unconditional, and continuing guaranty at all times up to amount named, until ten days after written revocation by undersigned has been received by you, but said revocation shall not affect this guaranty as to any debt or liability existing prior to the expiration of said ten days. The undersigned agrees that you may grant time or other indulgence to or compound with Martin Schroder & Co., or any person or persons, partnership, or corporation, liable on any bill, note, or other paper or obligation or guaranty held by you, without affecting or impairing this guaranty; and any and all amounts received by you may be applied as payments in gross, without any right on the part of the undersigned to stand in your place, until you have received the full amount of all your claims against Martin Schroder & Co., which are covered by this guaranty. And for the consideration aforesaid the undersigned hereby waives all notice of the acceptance of this guaranty or the beginning or ending of credit which you may have given or may give in the future to Martin Schroder & Co., under this guaranty; also notice, demand, protest, and notice of protest, and agrees that suit may be entered by you against the undersigned in the same action with Martin Schroder & Co., or without joining Martin Schroder & Co., and without first exhausting your remedies against Martin Schroder & Co., or any other party. When signed by more than one person this guaranty is joint and several."

The plaintiff alleged that Mrs. Schroder died on June 23, 1933, and that at the time of her death Martin Schroder & Co. were indebted to plaintiff in the sum of $7,560, guaranteed by said contract and evidenced by four promissory notes set out and described in the petition; that since the death of Mrs. Schroder, Martin Schroder & Co. have paid to plaintiff the sum of $1,480; and that there remains a balance of $6,080 due plaintiff by reason of said contract of guaranty. Defendants answered, in effect, that the contract of guaranty was executed, but that all the indebtedness guaranteed therein had been paid and discharged by reason of the fact that on August 23, 1933, two months after the death of Mrs. Schroder, the plaintiff received from Martin Schroder & Co. a demand note for $7,080, the proceeds of which note were credited to the account of Martin Schroder & Co., and thereupon Martin Schroder & Co. gave to plaintiff a check for $7,720.94, which check paid the entire amount due, principal and interest, on the four notes; that this note was a new obligation of Martin Schroder & Co., was accepted as such, and after the death of the guarantor was discharged by the acceptance of the demand note under section 3543 of the Civil Code of Georgia, which amounted to a change in the obligation, which could not be made binding on guarantor after the death of the guarantor, and the acceptance of the demand note amounted to a discharge of the surety or guarantor. It was also pleaded that such demand note, by an oral understanding of the parties, was in effect a contract of extension for a definite time.

In the evidence and agreed statement of facts the contract of guaranty was admitted, as well as the date of the death of Mrs. Schroder, and the facts that Martin Schroder & Co. were indebted to the plaintiff on the four notes described, that on August 23, 1933, Martin Schroder & Co. executed and delivered to the plaintiff a demand note for $7,080, and that on that date Martin Schroder & Co. gave to the plaintiff a check for the total amount of principal and interest due on the four notes, amounting to $7,720.94, and had credited to its account the amount of the demand note, without which credit as a deposit with the plaintiff Martin Schroder & Co. would not have had sufficient funds to pay the check of $7,720.94. The plaintiff retained the old notes of Martin Schroder & Co., all of which were given to plaintiff in Mrs Schroder's lifetime, as collateral security upon the demand note, which notes were described in the demand notes as collateral for the same. After the making of the demand note there was paid on said indebtedness $1,000 principal and the interest due thereon, leaving a balance due of $6,080. The vice president of the bank testified that Martin Schroder gave his check, and the amount...