Waddell v. Cary

February 26, 1930. The opinion of the Court was delivered by This action by the plaintiff, John M. Waddell, against the defendants, Fannie S. Cary, M.S. Ball, E.C. Dye, and F. Jordan, is an action of foreclosure and was commenced in the Court of Common Pleas for Greenville County, February 26, 1927. Service was made upon all of the defendants, except the defendant M.S. Ball, and it appears that he had no interest in the subject-matter of the action, and no personal judgment was asked against him. The defendants, Fannie S. Cary, L.H. Cary, and F. Jordan, filed an answer to the complaint, but the defendant E.C. Dye did not answer. Upon issues being joined, the cause was referred to the master for Greenville County to take the testimony and report his findings of fact and law. From the report of the master, holding that the defendants Fannie S. Cary and L.H. Cary were liable for a deficiency judgment, in the event the mortgaged premises did not bring enough to pay the obligation in question, these defendants, Fannie S. Cary and L.H. Cary, appealed to the Circuit Court. The cause was heard by his Honor, Judge M.L. Bonham, who, after hearing argument by counsel and after giving the matter careful consideration, confirmed the master's report, and gave judgment against the defendant Fannie S. Cary and L.H. Cary for the amount of the obligation involved, less the sum derived from the sale of the mortgaged premises. From the decree of his Honor, Judge Bonham, and the entry of judgment thereon, these defendants, Fannie S. Cary and L.H. Cary, have appealed to this Court, upon exceptions to which we shall hereinafter advert.

The note and mortgage in question were executed by the defendant M.S. Ball to the defendant Fannie S. Cary, May 11, 1920, which obligation became due May 11, 1921. On the 16th day of October, 1920, the defendant Fannie S. Cary duly assigned the note and mortgage to the defendant E.C. Dye, and at the time of the assignment the defendant L.H. Cary indorsed the said note, guaranteeing payment thereof to the said E.C. Dye and his assigns. October 19, 1920, the defendant M.S. Ball conveyed the lot of land covered by the mortgage to the defendant E.C. Dye. Later, May 11, 1921, the date the obligation became due, the note and mortgage were assigned by the defendant E.C. Dye, to John M. Waddell, the plaintiff herein, who at the time of the said assignment to him paid to the defendant E.C. Dye the full amount due on the said note and mortgage. At the time of said assignment unto the plaintiff by the defendant E.C. Dye, he (the said E.C. Dye) wrote the following letter to the plaintiff: "This is to agree to pay you eight per cent. interest, payable semi-annually on note of M.S. Ball for $1,500.00, which I have assumed, the same being dated May 11, 1920, and interest being paid thereon May 11, 1921."

It is the contention of the appellants, Fannie S. Cary and L.H. Cary, that the writing of this letter by Dye, agreeing to pay a higher rate of interest, discharged them from all obligations on the contract, and in their appeal to this Court, their exceptions, which are as follows, raise no other question:

"1. The Circuit Judge erred in holding that the agreement signed by E.C. Dye changing the rate of interest on the note from 7 to 8 per cent. was not such a material alteration as to release the parties secondarily liable.

"2. That the Circuit Judge erred in not holding that when E.C. Dye signed the agreement to change the rate of interest on the note from 7 to 8 per cent. that this was a material alteration of these defendants' contract.

"3. In not holding that any material alteration of a note after execution and delivery will destroy it as to all parties not consenting to such alteration."

As stated, the sole question presented to this Court for consideration by the exceptions is, Did the letter written by Dye to Waddell agreeing to pay Waddell a higher rate of interest, discharge the defendants, Fannie S. Cary and L.H. Cary, from their contract as guarantors on the note in question? The note in question, a negotiable instrument, executed by M.S. Ball and made payable to Fannie S. Cary, or order, was sold, assigned, and transferred by Fannie S. Cary to Dye, and being indorsed by her, Fannie S. Cary, as payee, she became liable as guarantor. L.H. Cary also indorsed the note as guarantor. This fact was alleged in plaintiff's complaint and admitted in the answer of the Carys. The letter upon which the defendants, Carys, rely, as constituting an agreement that discharged them from liability on the note in question, constituted an independent contract between Dye and Waddell and in no way affected the rights or liability of the Carys who indorsed the note as guarantors. The letter was written by Dye to Waddell. It was not attached to the note, but was wholly disconnected from it, and there was no change or alteration whatever in the note itself, and the letter did not in any way affect the original contract entered into between the original parties. It was binding only on Dye who wrote the letter. In our opinion the following rule stated with reference to a surety, 21 R. C.L., 1006, is applicable to the question now under consideration:

"A surety is not discharged by an independent contract between the principal parties, although it may be contemporaneous with and relate to the same subject as the sureties' contract, without varying the terms thereof. To discharge the surety such variation must be in the terms of the contract by which the surety is bound. * * *

"Again, it has been held that where a bond for the payment of money was without interest, a separate agreement by the principal, subsequently entered into under seal, that the amount of the bond should bear interest, does not avoid the liability of the sureties."

The agreement contained in the letter of Dye to Waddell being an independent collateral agreement between them (Dye and Waddell), the above-stated principle is clearly applicable and governs the question under consideration. The agreement of the Carys was to guarantee to all of the transferees payment of the amount stated in the note, with interest at 7 per cent. The Carys were bound by this contract at the outset and they are bound by this contract at this time. The independent collateral agreement between Dye and Waddell, growing out of the letter from Dye to Waddell, in no way affects the rights and liability of the Carys.

The cases of Sloan v. Latimer, 41 S.C. 217,19 S.E., 491, 691; Harrell v. Parrott, 50 S.C. 16, 27 S.E., 521;Greenville v. Ormand, 51 S.C. 121, 28 S.E., 147; Sandersv. Bagwell, 32 S.C. 238, 10 S.E., 946, 7 L.R.A., 743;Gardner v. Gardner, 23 S.C. 588, and other cases to which our attention has been called, in our opinion, are not in point. In the case of Sloan v. Latimer, supra, there was analteration on the face of the note made by the payee, extendingtime of payment, which is a different state of facts from the facts involved in the case at bar. In the case of Harrellv. Parrott, supra, the maker of the note several years after its execution signed his name to an indorsement on the backof the note providing for the note to draw a certain rate of interest, but the question now before this Court was not raised in that case. In the case of Sanders v. Bagwell, supra, there was an addendum on the lower end of the note, and it was concerning this addendum on the note that a question was raised. In the case at bar there was no addendum to the note and nothing attached thereto. In the case of Greenvillev. Ormand, supra, the Court did not pass upon the question involved in the case at bar. Neither are the other cases to which reference has been made applicable. In our opinion the contract of the Carys, guaranteeing the payment of the note and mortgage in the hands of any one who might come into possession of the same by purchase, was not altered in any way by the letter from Dye to Waddell, and that said contract is in full force and effect, in accordance with the holding of the Circuit Judge.

As to the contention that there was a merger and extinguishment of the debt when Dye purchased the land covered by the mortgage, we deem it sufficient to state that the appeal to this Court does not raise that question. The question of merger was raised in the answer of the Carys, which issue the master decided adverse to appellants' contention, and the Circuit Judge confirmed the master. There was no appeal from the Circuit Judge on this issue, and therefore that matter has been adjudicated and is not before this Court. As to the proposition that the debt was extinguished, such issue was not raised in the pleadings, was not raised before the master nor the Circuit Judge, and is not referred to in the exceptions presented to this Court. The motion of appellants before this Court, which was made after the case was heard, to be allowed to enlarge the exceptions so as to raise such question, was refused.

The exceptions are overruled and the judgment affirmed.

MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES BLEASE and STABLER concur.