O.C.G.A. § 10-7-2 (2019)

Annotations

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION SURETY’S OBLIGATION DISCHARGE OF SURETY DISABILITY OF PRINCIPAL General Consideration This section is but an affirmance of the common law upon this subject. Phillips v. Solomon, 42 Ga. 192, 1871 Ga. LEXIS 35 (1871); Schwitzerlet-Seigler Co. v. Citizens & S. Bank, 155 Ga. 740, 118 S.E. 365, 1923 Ga. LEXIS 161 (1923). Judgment against surety does not preclude setting up defense. - If, for any cause, the surety failed to set up a defense and judgment went against the surety, the surety would not be precluded by that judgment, from showing this fact and protecting the surety, at least to this extent. Norris v. Pollard, 75 Ga. 358, 1885 Ga. LEXIS 133 (1885). Surety on bond for tax commissioner not liable for excess funds from tax sale. - Trial court did not err in granting a surety summary judgment in a lienholder’s action under O.C.G.A. § 15-13-3 to recover excess funds from a tax sale because as the surety on the bond for the tax commissioner, the surety had no liability when the tax commissioner had none, O.C.G.A. § 10-7-2, and the tax commissioner was not liable. Brina Bay Holdings, LLC v. Echols, 314 Ga. App. 242, 723 S.E.2d 533, 2012 Ga. App. LEXIS 169 (2012), overruled in part, DLT List, LLC v. M7VEN Supportive Hous. & Dev. Group, 335 Ga. App. 318, 779 S.E.2d 436, 2015 Ga. App. LEXIS 769 (2015). Surety’s Obligation Surety’s liability governed by intent of parties as expressed in instrument. - Ordinarily, as a matter of construction, liability of surety on bond which is plain and unambiguous is governed, like any other contract, by intention of parties as expressed in the instrument. Sims’ Crane Serv., Inc. v. Reliance Ins. Co., 514 F. Supp. 1033, 1981

U.S. Dist. LEXIS 9561 (S.D. Ga. 1981), aff’d, 667 F.2d 30, 1982 U.S. App. LEXIS 22211 (11th Cir. 1982). Surety’s obligation is predicated on bond. - While the obligation of a surety is accessory to that of the surety’s principal, still regardless of the underlying cause, the liability of the surety is predicated on the bond and not on a tort. Fidelity-Phenix Ins. Co. v. Mauldin, 123 Ga. App. 108, 179 S.E.2d 525, 1970 Ga. App. LEXIS 1390 (1970). Principal and surety are joint and several obligors. - When an obligation, joint in form, is executed by one party as principal and another as surety, they are to be deemed joint and several obligors, since by this section the obligation of the surety is accessory to that of the principal. Smith v. Moore, 45 Ga. App. 708, 165 S.E. 765, 1932 Ga. App. LEXIS 665 (1932). Accommodation endorsers. - An obligation in the form “we promise to pay,” but signed by one party as maker and endorsed by another as an accommodation endorser, is a joint and several obligation, since the endorser is a mere surety. Smith v. Moore, 45 Ga. App. 708, 165 S.E. 765, 1932 Ga. App. LEXIS 665 (1932). Balance owed by principal determines amount owed by surety. - By virtue of this section, the balance due by a principal on a contract of suretyship must determine the amount due by the surety thereon. Gartrell v. Johns, 15 Ga. App. 671, 84 S.E. 175, 1915 Ga. App. LEXIS 33 (1915). Surety is liable for no greater amount than is found to be due from the principal; the surety’s liability cannot be extended beyond that of the principal. This follows from the very nature of the contract. Norris v. Pollard, 75 Ga. 358, 1885 Ga. LEXIS 133 (1885). Surety not liable when principal not liable. - Trial court properly dismissed the counterclaim filed by the

Surety’s Obligation (Cont’d) Georgia Department of Corrections (GDOC) against a roofing company’s surety because it was found that the roofing company was not liable to the GDOC; thus, the surety was not liable to the GDOC. State Dep’t of Corr. v. Developers Sur. & Indem. Co., 324 Ga. App. 371, 750 S.E.2d 697, 2013 Ga. App. LEXIS 847 (2013), aff’d, 295 Ga. 741, 763 S.E.2d 868, 2014 Ga. LEXIS 732 (2014). Surety’s promise is presumed to continue to amount agreed until revocation. - When an absolute promise is made to become responsible for a certain amount with no limitation as to time and there is nothing in the circumstances surrounding the execution of the contract to evince a contrary intention, it will be presumed that the promise was to continue until revoked, and the promisor will be held liable to the extent of one’s guaranty, notwithstanding the principal may have, during the existence of the contract, contracted debts to an amount equal to or greater than the sum named in the guaranty. Manry v. Waxelbaum Co., 108 Ga. 14, 33 S.E. 701, 1899 Ga. LEXIS 176 (1899); Brock Candy Co. v. Craton, 33 Ga. App. 690, 127 S.E. 619, 1925 Ga. App. LEXIS 685 (1925). Extension of credit beyond limit does not release surety. - Extension of credit to the principal in excess of the sum named in the contract of suretyship will not release the surety, the limit thus named being merely as to the surety’s liability and not as to the credit to be extended. Brock Candy Co. v. Craton, 33 Ga. App. 690, 127 S.E. 619, 1925 Ga. App. LEXIS 685 (1925). Obligations may be determined in light of surrounding circumstances. - Although, standing alone, a letter signed by the defendants is ambiguous, the intention of the parties may be ascertained by viewing the circumstances under which the letter was written, and under such circumstances it constituted a continuing guaranty of loans as they were made after the receipt of the letter. Roberson v. Liberty Nat’l Bank & Trust Co., 88 Ga. App. 271, 76 S.E.2d 522, 1953 Ga. App. LEXIS 1063 (1953).

Want of due care by a payee bank is no defense to the willful misconduct of the principal for the faithful performance of whose duties the surety obligated itself. American Sur. Co. v. Citizens’ Bank, 48 Ga. App. 448, 172 S.E. 801, 1934 Ga. App. LEXIS 100 (1934), aff’d, 180 Ga. 827, 180 S.E. 635, 1935 Ga. LEXIS 571 (1935). Accommodation party held liable without endorsement. - If one signs as maker a note payable to oneself and another signs the note as surety only, the maker’s endorsement converts the note into a negotiable instrument, and the transfer of the note binds the surety, notwithstanding the absence of an endorsement by the surety. Jordan v. First Nat’l Bank, 19 Ga. App. 118, 91 S.E. 287, 1917 Ga. App. LEXIS 6 (1917). Surety on fiduciary’s bond only liable as to official acts. - Surety on the bond of an administrator or executor is liable only for acts of nonfeasance or misfeasance on the part of such representative in respect to one’s official acts. Watson v. Watson, 61 Ga. App. 825, 7 S.E.2d 614, 1940 Ga. App. LEXIS 278 (1940). Alleging executor’s fraud in employing puffer does not state cause of action. - Petition against executor and executor’s bond to recover an amount in excess of actual value the plaintiff was required to pay for lands sold by an executor at public outcry by reason of fraudulent conduct of an executor in securing a puffer to bid with the understanding that such person would not have to comply with one’s bid did not set out a cause of action against the defendants. Watson v. Watson, 61 Ga. App. 825, 7 S.E.2d 614, 1940 Ga. App. LEXIS 278 (1940). Guarantor is not conclusively bound by judgment or amount admitted due by one’s principal as such amount is only prima-facie evidence of liability to the creditor. But, when such evidence has been introduced, it does establish prima facie the liability of the guarantor then the burden shifts to the guarantor to rebut the correctness of the amount. Peterson v. Midas Realty Corp., 160 Ga. App. 333, 287 S.E.2d 61, 1981 Ga. App. LEXIS 3061 (1981).

Surety or guarantor may assert all but personal defenses principal would have to contract. Peterson v. Midas Realty Corp., 160 Ga. App. 333, 287 S.E.2d 61, 1981 Ga. App. LEXIS 3061 (1981). Discharge of Surety Generally, discharge of the principal debtor also discharges the surety. Hendricks v. Davis, 196 Ga. App. 286, 395 S.E.2d 632, 1990 Ga. App. LEXIS 902 (1990), cert. denied, No. S90C1451, 1990 Ga. LEXIS 571 (Ga. Sept. 4, 1990). Section does not include discharge of principal by operation of law. - This section does nothing more than to announce the general law applicable to principal and surety and does not include that class of cases when the principal debtor is discharged by operation of law; the more especially when that law which discharges the principal debtor expressly declares that it shall not operate to discharge the surety. Phillips v. Solomon, 42 Ga. 192, 1871 Ga. LEXIS 35 (1871). Discharge under bankruptcy law. - By the words “from any cause” as used in this section is meant any cause dependent on the act or negligence of the creditor and not such a cause as the discharge of the principal under the bankruptcy law, Title 11, U.S.C., which is beyond the control of the creditor, and by force of the laws of the land. Phillips v. Solomon, 42 Ga. 192, 1871 Ga. LEXIS 35 (1871). Discharge of principal by party’s act discharges surety. - If the principal is discharged from liability by the act of the party procuring the contract, or by the party seeking to enforce the contract, and this was done without the knowledge of the surety, the surety will also be discharged, under this section. Langston v. Aderhold, 60 Ga. 376, 1878 Ga. LEXIS 475 (1878); Richardson v. Allen, 74 Ga. 719, 1885 Ga. LEXIS 388 (1885); Patterson v. Gibson, 81 Ga. 802, 10 S.E. 9, 1888 Ga. LEXIS 350 (1888). If the maker of notes with sureties thereon executes a deed of assignment for the benefit of one’s creditors, with a provision therein that the acceptance of any benefits thereunder by one’s creditors will

be a full satisfaction of the claims of the creditors against such maker, the acceptance, by the payee of such notes, of benefits under the assignment terminates the liability of the maker of such notes and would likewise discharge the sureties thereon, if done without their knowledge and consent. Schwitzerlet-Seigler Co. v. Citizens & S. Bank, 155 Ga. 740, 118 S.E. 365, 1923 Ga. LEXIS 161 (1923). Sureties not discharged when creditor reserves rights. - When the creditor reserves all rights against the sureties, or it appears from the whole transaction that the sureties should remain bound, the sureties would not be discharged. Schwitzerlet-Seigler Co. v. Citizens & S. Bank, 155 Ga. 740, 118 S.E. 365, 1923 Ga. LEXIS 161 (1923). Knowledge of continued liability on assigned notes. - When the holder of the notes accepted benefits under the assignment with the knowledge of the sureties and under an express understanding with the sureties that their liability on the notes was to continue, the sureties were not discharged from liability on the notes, although the acceptance of such benefits was a full satisfaction of the notes so far as the maker was concerned. Schwitzerlet-Seigler Co. v. Citizens & S. Bank, 155 Ga. 740, 118 S.E. 365, 1923 Ga. LEXIS 161 (1923). Debt does not become extinct merely because the debt has become barred by limitation. Franklin v. Mobley, 202 Ga. 212, 42 S.E.2d 755, 1947 Ga. LEXIS 417 (1947). Verdict for principal discharges surety. - Verdict of the jury in favor of the principal, discharging the principal from liability, extinguished ipso facto the obligation of the sureties. Schlittler & Johnson v. Deering Harvester Co., 3 Ga. App. 83, 3 Ga. App. 86, 59 S.E. 342, 1907 Ga. App. LEXIS 558 (1907); Marietta Fertilizer Co. v. Gary, 22 Ga. App. 604, 96 S.E. 711, 1918 Ga. App. LEXIS 620 (1918). Verdict against surety only in joint action discharges surety and principal. - If the principal and the principal’s surety on a promissory note, which is joint and several on its face, are sued in the same action and verdict and

Discharge of Surety (Cont’d) judgment are taken against the surety only, both the principal and the surety are discharged. Fricks v. Rome Mercantile Co., 49 Ga. App. 431, 175 S.E. 807, 1934 Ga. App. LEXIS 430 (1934). Effect of dismissal without prejudice from case. - Dismissal without prejudice of a principal from a case sub judice is not equivalent to the extinction of the principal’s obligation so as to render relevant the provisions of O.C.G.A. § 10-7-2. Gowdey v. Rem Assocs., 176 Ga. App. 83, 335 S.E.2d 309, 1985 Ga. App. LEXIS 2226 (1985). Disability of Principal Duress is, or, rather, it imposes, a disability. Patterson v. Gibson, 81 Ga. 802, 10 S.E. 9, 1888 Ga. LEXIS 350 (1888). Duress of principal unknown to surety is good defense. - Bond executed under the duress of the principal is void as to the surety also if the surety acted without knowledge of the duress; and knowledge of the fact of imprisonment does not necessarily involve knowledge of its want of legality. Patterson v. Gibson, 81 Ga. 802, 10 S.E. 9, 1888 Ga. LEXIS 350 (1888). Disability known to surety is no defense to surety. - Any disability of

the principal in a bond or recognizance which is known to the bail will not prevent the bail from being bound by their undertaking, they being instrumental in causing the principal to be discharged from arrest, and delivered into their friendly custody. Weldon v. Colquitt, 62 Ga. 449, 1879 Ga. LEXIS 553 (1879). General rule is inapplicable if surety knew surety had no remedy against principal. - Whatever discharges the principal also discharges the surety; but this rule does not apply when the principal binds oneself knowing the principal has no remedy over against the principal. Patterson v. Gibson, 81 Ga. 802, 10 S.E. 9, 1888 Ga. LEXIS 350 (1888). Supreme Court has jurisdiction of claim Constitution prevents enforcement against principal. - Supreme Court and not the Court of Appeals has jurisdiction when surety seeks to be held free of liability on grounds of constitutional provisions which made the obligation unenforceable against the school system as principal. Franklin v. Mobley, 202 Ga. 212, 42 S.E.2d 755, 1947 Ga. LEXIS 417 (1947).

RESEARCH REFERENCES Am. Jur. 2d. 74 Am. Jur. 2d, Suretyship, §§ 1 et seq., 10 et seq. C.J.S. 72 C.J.S., Principal and Surety, § 19 et seq. ALR. Agreement by principal to pay compound or additional interest, as releasing surety, 2 A.L.R. 1569. Right of surety to avoid contract for fraud on principal, 3 A.L.R. 868. Right to judgment against surety where action fails against principal, 5 A.L.R. 594. Incapacity of principal to contract as affecting liability of guarantor or surety, 24 A.L.R. 838; 43 A.L.R. 589. Right of obligee in surety bond to fill

blank as to amount, 37 A.L.R. 1395; 48 A.L.R. 741. Taking of demand note in renewal as releasing surety or endorser, 48 A.L.R. 1222. Ignorance or mistake as to character of instrument signed as affecting liability of surety or guarantor, 66 A.L.R. 312. Right to contribution or indemnity of executor, administrator, guardian, testamentary trustee, or sureties against a cofiduciary or sureties, in respect of losses or defaults for which the fiduciaries are answerable, 66 A.L.R. 1147. Liability of grantee assuming mortgage debt, to grantor, 76 A.L.R. 1191; 97 A.L.R. 1076. Liability of guarantor of obligations to bank as affected by limitation of amount

which bank may legally loan, 92 A.L.R. 341. Guaranty as covering renewals, after revocation, of claims within coverage at time of revocation, 100 A.L.R. 1236; 58 A.L.R.5th 325. Acceptance of construction work as releasing contractors or sureties on bond conditioned for performance of construction contract or guaranteeing completed work, 109 A.L.R. 625. Liability of sureties on bond of tax collector for illegal or unauthorized acts of latter toward individual taxpayer, 127 A.L.R. 857. Creditor’s reservation of rights against surety in releasing or extending time to principal debtor, 139 A.L.R. 85.

Right to join principal debtor and guarantor as parties defendant, 53 A.L.R.2d 522. Duty of construction contractor to indemnity contractee held liable for injury to third person, in absence of express contract for indemnity, 97 A.L.R.2d 616. Liability of surety on infant’s contract or obligation, where contract is disaffirmed by infant, 44 A.L.R.3d 1417. Change in name, location, composition, or structure of obligor commercial enterprise subsequent to execution of guaranty or surety agreement as affecting liability of guarantor or surety to the obligee, 69 A.L.R.3d 567.