United States Fidelity & Guaranty Co. v. Clifton

• Decision Date: 10 February 1923
• Docket Number: (No. 10148.)<SMALL><SUP>*</SUP></SMALL&gt
• Citation: 250 S.W. 1056
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. CLIFTON et al.
• Court: Texas Court of Appeals

250 S.W. 1056

UNITED STATES FIDELITY & GUARANTY CO. v. CLIFTON et al.

(No. 10148.)^*

Court of Civil Appeals of Texas. Fort Worth.

February 10, 1923.

Rehearing Denied March 10, 1923.

Appeal from District Court, Eastland County; E. A. Hill, Judge.

Action by the United States Fidelity & Guaranty Company against J. D. Clifton and others. Judgment for defendants, and plaintiff appeals. Affirmed.

Seay, Seay, Malone & Lipscomb, of Dallas, and Turner & Seaberry, of Eastland, for appellant.

Scott, Brelsford, Funderburk & Ferrell, of Eastland, for appellees.

BUCK, J.

The United States Fidelity & Guaranty Company filed suit in the district court of Eastland county against J. D. Clifton, E. L. Clifton, and P. A. Clifton, doing business under the firm name of Clifton, Clifton & Co. In substance, the plaintiff alleged that theretofore on September 27, 1920, in a suit styled the Dixie Oil & Refining Company v. J. D. Clifton et al., the plaintiff here, as surety, executed a replevin bond for the plaintiff in the former suit and payable to the defendants in this suit; that subsequently a judgment was entered in the former suit in favor of Clifton, Clifton & Co. against the Dixie Oil & Refining Company for $5,354.70, with a stay of execution for four months after the date of said judgment. Plaintiff in this suit alleged that it was not a party to the other litigation, except as a surety on the plaintiff's replevin bond, and was not represented by counsel, and was not a party to any agreement between the plaintiff and the defendants in said suit for the stay of execution; that said stay of execution was granted to the defendants in the judgment on their cross-action without consulting the present plaintiff, the surety, and without the surety's knowledge or consent; that the agreement between the plaintiff and the defendants in said former suit contemplated that the plaintiff would withdraw any defense it had against defendants' plea over, and give judgment for the defendants, if the stay of execution was granted. Plaintiff further alleged that it had reason to believe, and did believe, that if an execution and order of sale had been issued upon the former judgment, in the manner and within the time required by law, that the defendants in said suit would have realized and recovered their said judgment out of the Dixie Oil & Refining Company, by virtue of the sale of the property belonging to said plaintiff, but that all of said property belonging to the plaintiff is now in the hands of a receiver, appointed by the court, and that Clifton, Clifton & Co. should be required to follow said property into the hands of the receiver, but that, in any event, by virtue of said agreement and said judgment, extending the time of payment for the satisfaction of said judgment, the plaintiff in this suit has been released from any and all liability as surety on said bond. Hence the plaintiff prayed the court to grant a writ of injunction restraining Clifton, Clifton & Co. from selling and having sold the securities deposited with the state treasurer at Austin by the plaintiff, under the requirements of the law.

Upon the presentation of the petition to the judge of the Eighty-Eighth judicial district court of Eastland county, a temporary writ of injunction was granted as prayed for, but upon a motion to dissolve, made by the defendant in this suit, said writ was vacated and dissolved, and it was the order of the court that Clifton, Clifton & Co. recover from the Dixie Oil & Refining Company the sum of $5,354.70, and the court foreclosed the writ of attachment lien in favor of Clifton, Clifton & Co. on certain described personal property belonging to the Dixie Oil & Refining Company, and which had been replevied by it under a replevin bond, on which the plaintiff in this suit was surety, and gave Clifton, Clifton & Co. a judgment against the plaintiff in this suit on said bond.

From the judgment the plaintiff has appealed to this court.

The question for decision in this case is whether or not an agreed judgment rendered against the principal defendant and his surety on a replevin bond providing for a stay of execution is void as to the nonconsenting surety. In Bank v. Bray, the Supreme Court, speaking through Justice Phillips (105 Tex. 312, 148 S. W. 290), later Chief Justice, said:

"The established rule of law is that if, without the consent of the surety, a binding agreement is made between the creditor and the principal debtor for an extension of the maturity of the debt, the surety is released; and the effect is the same as to property that stands in the relation of a surety, as did the property of Mrs. Bray in this case. The reason of the rule demonstrates its justness as a principle as well as its necessity in the business affairs of the people, for at any time after the maturity of the debt, the surety, for his own protection, should possess the right to pay it and proceed against the principal or indemnity, and such right is impaired if the creditor enter into a valid contract with the principal for an extension of the time of payment. The law therefore visits upon the creditor the deserved consequence of his so impairing the right of the surety by releasing the surety from liability. Benson v. Phipps, 87 Tex. 578, 29 S. W. 1061, 47 Am. St. Rep. 128. The true test in every such case accordingly is whether the agreement of extension is such as to deny to the surety the exercise of this right which inheres in his relationship, and which the law places at his disposal and command as a benefit and protection immediately upon the maturing of the debt. If the agreement of extension be a binding one, its effect clearly is to deprive him of his right. But, if the agreement be not a binding one, it remains intact and unprejudiced. What the law speaks of in this sense as `a binding agreement' is an agreement that is conclusive upon both the creditor and the principal, an agreement that both effectually stays the hand of the creditor, and yields to the principal the full benefit of the indulgence, an agreement that neither can avoid, but which both must respect, and which because of its inviolable character operates to the harm of the surety."

In Turner v. National Cotton Oil Co., 50 Tex. Civ. App. 468, 109 S. W. 1112, it is said:

"The undertaking of a surety is to be strictly construed, and his liability will not be extended beyond the precise words of his agreement, either by construction or implication."

The right of a surety to consider himself discharged by an extension of time to the principal is not affected by the fact that the principal was insolvent or a discharged bankrupt, at the time of such extension, nor that the extension benefited or did not injure the surety; his contract being changed. Short v. Shannon (Tex. Civ. App.) 211 S. W. 463; Maier v. Thorman (Tex. Civ. App.) 234 S. W. 239.

In Gerlach & Bros. v. Du Bose, 210 S. W. 742, the Court of Civil Appeals at Beaumont held that the sureties on a bond given on appeal from the justice court to the county court are not relieved from liability by the fact that the appealing principal and his adversary agree upon a judgment against the principal with stay of execution, and that such agreement is made without the knowledge or consent of the sureties; the sureties' obligation being presumably assumed with a view to the control by the principal of the litigation on the appeal.

In Corpus Juris, vol. 4, § 3393, p. 1285, it is said:

"An agreement for affirmance of a judgment appealed from, made in good faith, does not excuse nor discharge the sureties on the appeal bond. And so an agreement for affirmance, extending the time of payment and staying execution, does not discharge the sureties, although made without their express consent."

In Drake v. Smythe, 44 Iowa, 410, the court said:

"The sureties became parties to the record, and were liable to any judgment rendered in the cause within the limit of their obligation. Their relation to the action was not such as gave them any control thereof; they could not dictate to defendant the course he should pursue in the case; he had the full right to do whatever the law authorized in a case where no sureties are concerned. Their position in the case was one of obligation for debts, not of rights in conflict with defendant's rights. They were bound for the judgment which should be rendered against defendant in the progress of the suit. That defendant had the right to stipulate * * * upon the rendition on the judgment cannot be questioned. The sureties, then, are bound by that agreement, and are liable upon the judgment."

In Ammons v. Whitehead, 31 Miss. 99, the court said:

"The necessary legal effect of their execution of the bonds was to confer upon the principal full power to do whatever he might deem necessary and proper in defending or determining the suits. * * * And upon the same reason he was authorized to compromise the suits upon terms advantageous to himself. This was no violation of the obligation of the sureties, nor a variation of the terms of their obligation; for that was entirely contingent and uncertain, except that the parties had, by the necessary legal effect of the act, submitted themselves to whatever might be done in the determination of the suit, by their principal, under the sanction of the court. * * * And whether the sureties be regarded as parties to the judgment, and as such bound by the proceedings in the suit, or as bound by the action of their principal by reason of the power necessarily conferred upon him by the purpose and legal effect of the bonds, it is clear that the sureties are not within the rule which discharges such parties in consequence of indulgence given to their principal."

In Montrose v. Baggott, 161 App. Div. 494, 505, 146 N. Y. Supp. 649, 657, the parties agreed to continue the case until the next term of court, at which time plaintiff was to have judgment for the amount of...