Poole v. Bradham

I am impressed by the position taken by the petitioner, that although Purdy and Bland may have been discharged by the release executed by the guardian Schwartz (as held in the opinion which has been filed), the release of them does not discharge the executor of the will of Abe Levi, the third guarantor of the note and mortgage in question (the opinion holding to the contrary). There is no doubt as to the proposition, that atlaw, the voluntary release by the obligee of a cosurety or coguarantor discharges the other. It is held, however, inMassey v. Brown, 4 S.C. 85, that the rule in equity is quite different:

"Equity construes a release according to the intention of the parties, and will give it no operation beyond the design or the purpose it was intended to accomplish."

The statement in the Massey case, "The same rule [referring to the rule at law], will generally prevail in equity," is clearly inconsistent with the rule as stated above. It is impossible that the rule at law which absolutely discharges the unreleased debtor is the same as the rule in equity, which is based upon the intention of the parties.

When the plaintiff sues upon a guaranty he makes out aprima facie case by proof of the guaranty. The guarantor who claims a discharge must establish it by proof of the release of a coguarantor, and that the intention of the parties in the transaction was to release him; it is a part of his defense. It is questionable whether there is the slightest evidence in the case tending to show that the guardian, in releasing Purdy and Bland, intended to release Levi. The transaction was between him and the released guarantors, not between him and Levi; the latter was not consulted in the matter, and was not put in a worse plight by the release of the others — in fact, he was benefited by it. The modern equity rule is that the release of one guarantor is a discharge of the other guarantor only to the extent that the release guarantor was liable. This seems to me the just and equitable rule regardless of the matter of intention. Of course the release of the principal on a note discharges the surety, for the reason that if the surety should be required to pay, his right of reimbursement by the principal would have been annihilated.

The equity rule is a concession to the unreleased joint obligor, for it holds him, not to his original obligation to pay the whole, but only to his obligation pro tanto, for the reason that his right to contribution by his coguarantor is protected; he is only made liable for what he would have been if he had paid the whole and got back half from the other.

"Under the common-law rule, when cosureties were bound jointly a release of one discharged all; but in equity the cosureties remained liable for their proportionate shares, and under the modern law a covenant not to sue, or a release of one cosurety, does not discharge the other, but he remains liable for his proportionate share of the indebtedness, especially if the surety released has paid his own proportionate part." 32 Cyc., 156.

In Singleton v. Shepherd, 196 Mo. App., 505;183 S.W., 1077, the Court said:

"Each of two sureties owes the entire debt to the creditor, and if he release one he releases the other for one-half the debt; but, as between themselves, each owes one-half the debt, and if one settles his half at a discount, we do not see why the other should ask him to come in and help settle the other half."

In Darland v. First Nat. Bank, 177 Ky., 261;197 S.W., 826, the Court said:

"This is a case where a levy was made on a cosurety's property, and afterwards either the lien was discharged or the levy released by the act of the creditor. In such a case the discharge of the lien or the release of the levy merely relieves the other cosurety to the extent of the proportion of the debt equitably due from him whose property was released. [Citing cases.] As between themselves, appellant and Wm. Derringer, whose property was released, were equally liable to the bank, and, appellant having been released from all liability to pay Wm. Derringer's one-half of the execution debt, interest, and costs, it follows that his prayer should have been granted to that extent."

In Gillespie v. Smith (D.C.), 299 F., 760, the syllabus is:

"While, under ordinary conditions, the rule of stricti juris. or even strictissimi juris, is properly invoked in behalf of sureties, and they should be released from their obligation by any dealings which operate to change or increase their liabilities, a release by plaintiff of one of the joint and several sureties on the bond of his father's executor from liability released the other sureties only to the extent to which the released surety would have been liable upon the ultimate ascertainment of the sum to be paid by the solvent and responsible sureties, as the sureties stood in the same fiduciary relation to plaintiff as the executor."

See Smith v. State, 45 Md., 617, which is abstracted in note L.R.A., 1918-E, at page 96, and numerous other cases cited on pages 97 and 98.

In Poullain v. Brown, 80 Ga. 27; 5 S.E., 107, the syllabus is:

"In an action against the sureties of a former administrator by the administrator de bonis non, defendants cannot plead a release of their liability by reason of the plaintiff having, as administrator of one of their cosureties, paid out the assets of such cosurety's estate to his heirs, as such action, if a discharge at all, as to the defendants, was only sopro tanto."

In Lewis v. Armstrong, 80 Ga. 402; 7 S.E., 114, the syllabus is:

"A judgment against defendant having been affirmed, he obtained, without the consent of the surety on his superseders bond, an injunction restraining further proceedings. Held, that a release of the surety on the injunction bond released the surety on the superseders bond, at least to the extent of the property owned by the other surety."

In Hallock v. Yankey, 102 Wis. 41; 78 N.W., 156; 72 Am. St. Rep., 861, the syllabus is:

"If one of two sureties on a note is discharged from liability by reason that the time of payment thereof has been extended without his consent, his cosurety is thereby released from liability for one-half of the amount of the note."

"The release of one surety operates to release other sureties on the same contract or undertaking only to the extent of his aliquot share of the whole liability." Note to 72 Am. St. Rep., 861, citing Saint v. Wheeler, 95 Ala., 362;10 So., 539; 36 Am. St. Rep., 210.

See, also, 2 Story Eq. Jur. (14th Ed.) § 676.

It seems to me that at best the rule at law which would discharge a joint obligor because another had been released is an unreasonable conclusion unless the unreleased obligor was damnified by the release. If, as the equity modern rule holds, the unreleased obligor is released only pro tanto, he has no right to complain. In fact he has been benefited to that extent, as otherwise he would have been liable for the whole.

There is another view that might be taken of the matter: The opinion which has been filed, very correctly, I think, states:

"We are satisfied that all parties acted in good faith in the matter; there is no doubt, as is disclosed by the testimony, that the investment without the guaranty (of Purdy and Bland) was a good one — in fact it is doubtful whether a better one could have been secured by the guardian at that time — and that if the guardian had then applied to the Court for permission to release the guarantors and be allowed to retain the investment, the Court would have granted the request. And no reason appears why the Court should not give effect now to what it would have done then."

I think this is the proper ground upon which to base the release and discharge of Purdy and Bland. It has often happened that a trustee of any kind has committed a strictly irregular act, but one which ordinary care would suggest as being in the interest of his charge; this being made to appear, the Court would confirm nunc pro tunc the action of the trustee. But in doing so the trustee runs the risk of such later confirmation.

The action of the guardian in this case must be viewed in this light, and unquestionably, as held in the opinion, the Court would have approved of the release of Purdy andBland; but non constat does it appear that in the approval of the release of these guarantors who offered something substantial for the release, the Court would have ordered the release of Levi, who was not at all concerned in the transaction and doubtless knew nothing of it.

It has been held in many cases that ``a release of one coobligor by order of Court, as an act of the law, stands on different principles than does a release by the voluntary act of the obligee." Note L.R.A., 1918-E, 95. Ulrich v.Hoefling, 23 Tex. Civ. App. 289; 56 S.W. 199.

For these reasons I think that there is sufficient ground seriously to doubt the correctness of the opinion discharging the estate of Levi, as to justify a reargument of the case upon this ground alone.