O.C.G.A.

O.C.G.A. § 10-7-20 (2019)

Effect of release of or compounding with surety

✓ O.C.G.A. — 2019 edition (Public.Resource.Org Release 73)

Code text and O.C.G.A. statutory annotations on this page reflect the 2019 Official Code of Georgia Annotated (Public.Resource.Org Release 73, 2019-08-21; public domain per Georgia v. Public.Resource.Org, 2020). The Syfert case-law annotations in Notes of Decisions, below, are current.

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The creditor may release or compound with the surety without releasing the principal, but the release of or compounding with one surety shall discharge a cosurety.

History

Orig. Code 1863, § 2129; Code 1868, § 2124; Code 1873, § 2152; Code 1882, § 2152; Civil Code 1895, § 2970; Civil Code 1910, § 3542; Code 1933, § 103-201.

Annotations

Cross references. Effect of commercial paper article of Uniform Commercial Code, § 10-7-27.

JUDICIAL DECISIONS “Compound” defined. - To “compound” is to compromise or make a composition whereby a creditor discharges the creditor’s debtor on payment of a smaller sum than that actually owing. Williams-Thompson Co. v. Williams, 10 Ga. App. 251, 73 S.E. 409, 1912 Ga. App. LEXIS 446 (1912) (no compounding shown). Foreign statute denying release conflicts with policy of this state. - Tennessee statute providing that the release of a cosurety or coobligor does not release the other surety or obligor when the parties, other than those not released,

stipulate that such other surety or obligor ws not released, was contrary to the public policy of this state as expressed by former Code 1933, §§ 20-910 and 103-201 (see now O.C.G.A. §§ 10-7-20 and 13-4-80), and will not be enforced. Kent v. Hair, 60 Ga. App. 652, 4 S.E.2d 703, 1939 Ga. App. LEXIS 130 (1939). Section only applies to release without consent of cosureties. - When the novation of a contract by the release of one surety and the substitution of another was done with the consent of the sureties, derived from the provisions of the contract of suretyship, the provision

of this section for the discharge of cosureties by the release of a surety must be construed, in pari materia with former Code 1933, § 103-202 (see now O.C.G.A. § 10-7-21), so as to apply only when such release is done without the consent of such cosurety or co-sureties. Overcash v. First Nat’l Bank, 115 Ga. App. 499, 155 S.E.2d 32, 1967 Ga. App. LEXIS 1144 (1967). Unenforceable attempt to release surety does not release cosurety. - Release of or compounding with one surety discharges a cosurety under this section, but an attempt to release one of the sureties does not have this effect when the attempted release is unenforceable for lack of consideration. Williams-Thompson Co. v. Williams, 10 Ga. App. 251, 73 S.E. 409, 1912 Ga. App. LEXIS 446 (1912). Individually liable guarantors not cosureties. - Nonsettling guarantors of promissory notes who were individually, not jointly, liable were not cosureties under O.C.G.A. § 10-7-20; thus, they were not discharged by plaintiff’s acceptance from other guarantors of less than the total sum owed under the notes. Any novation by virtue of the settlement agreement would not operate to release the nonsettling guarantors from their individual limited liabilities. Marret v. Scott, 212 Ga. App. 427, 441 S.E.2d 902, 1994 Ga. App. LEXIS 286 (1994). Guarantor who admitted forging co-guarantor’s signature estopped from pleading discharge. - Husband/guarantor was equitably estopped from arguing that a licensor’s discharge of his co-guarantor and wife discharged him pursuant to O.C.G.A. §§ 10-7-20 and 10-7-21 because he signed an affidavit that he had forged his wife’s signature on the guaranty without her

knowledge, and the affidavit resulted in the wife’s dismissal from the licensor’s suit. Noons v. Holiday Hospitality Franchising, Inc., 307 Ga. App. 351, 705 S.E.2d 166, 2010 Ga. App. LEXIS 922 (2010), cert. denied, No. S11C0654, 2011 Ga. LEXIS 423 (Ga. May 16, 2011). Guarantor bound by contract. - As there was some evidence to support a determination that a guarantor did not intend that contractual guaranty obligations were contingent upon another individual signing the guaranty as a co-surety, the failure of such signature was not a change in the contract terms or a release that discharged the guarantor from liability. Fletcher v. C. W. Matthews Contr. Co., 322 Ga. App. 751, 746 S.E.2d 230, 2013 Ga. App. LEXIS 604 (2013). Guarantor discharged. - In a foreclosure action, the property owner was discharged as a guarantor when the lender compromised with and released the owner’s co-guarantors. Pollard v. Queensborough Nat’l Bank & Trust Co., 356 Ga. App. 223, 844 S.E.2d 894, 2020 Ga. App. LEXIS 349 (2020), cert. denied, No. S21C0012, 2021 Ga. LEXIS 342 (Ga. Apr. 19, 2021). Waiver of defense by terms of guaranty documents. - Even if a corporation president was released from the president’s personal guarantee of a corporate loan, O.C.G.A. § 10-7-20 did not apply to release the co-guarantors from liability when, by virtue of the terms of their guarantee documents, the guarantors had expressly waived any defense the guarantors might have which was related to the guarantors claim under § 10-7-20. Baby Days, Inc. v. Bank of Adairsville, 218 Ga. App. 752, 463 S.E.2d 171, 1995 Ga. App. LEXIS 875 (1995), cert. denied, No. S96C0260, 1996 Ga. LEXIS 269 (Ga. Jan. 26, 1996).

RESEARCH REFERENCES Am. Jur. 2d. 74 Am. Jur. 2d, Suretyship, §§ 55 et seq., 79 et seq. C.J.S. 72 C.J.S., Principal and Surety, § 149 et seq.

ALR. Release of payee from warranty constituting a part of the consideration for a note as releasing a surety, 7 A.L.R. 1605. Incapacity of principal to contract as

affecting liability of guarantor or surety, 24 A.L.R. 838; 43 A.L.R. 589. Endorsing payment upon note before maturity as releasing surety or endorser, 37 A.L.R. 477. Construction and effect of provision in bond purporting to protect contractee in building contract against release of surety, 77 A.L.R. 229.

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.

Notes of Decisions

Cited in 16 cases, 1988–2020 · leading case: York v. Res-ga Ljy, LLC, 799 S.E.2d 235 (Ga. 2017).

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York v. Res-ga Ljy, LLC, 799 S.E.2d 235 (Ga. 2017). · cites it 4× “]” They argue that “suretyship defenses” is a term of art for statutory defenses codified at OCGA §§ 10-7-20 to 10-7-27 and OCGA § 11-3-605 (c)-(f).”

Noons v. Holiday Hosp. Franchising, Inc., 705 S.E.2d 166 (Ga. Ct. App. 2010). · cites it 6× “On appeal, Noons challenges summary judgment for Holiday Inn and against him, contending that the trial court erred: (i) in estopping him from arguing discharge of his obligations under the Guaranty under OCGA § 10-7-20; (ii) in concluding that the liquidated damages provision…”

Baby Days, Inc. v. Bank of Adairsville, 463 S.E.2d 171 (Ga. Ct. App. 1995). · cites it 6× “Moreover, appellants assert that the obligations of Mary Emma Holmes and Edison Industries are affected by appellee’s failure to confirm the sale of the Adairsville property because they are co-sureties with John J.”

Hendricks v. Davis, 395 S.E.2d 632 (Ga. Ct. App. 1990). · cites it 4× “OCGA §§ 10-7-20; 10-7-21; see Overcash v.”

Fletcher v. C. W. Matthews Contracting Co., 746 S.E.2d 230 (Ga. Ct. App. 2013). · cites it 2× “See OCGA §§ 10-7-20; 10-7-21. But this argument assumes that there was an agreement that Neely act as *755 co-surety, or that Neely was a co-surety.”

Equifax, Inc. v. 1600 Peachtree, L.L.C., 601 S.E.2d 519 (Ga. Ct. App. 2004). · cites it 2× “” Deciding that the clear and unambiguous terms of the contract established that it is not a guaranty, the trial court also found that “Equifax is not protected by the statutory discharge protections contained in OCGA§ 10-7-20 et seq.” Equifax appeals and Landlord cross-appeals…”

Marret v. Scott, 441 S.E.2d 902 (Ga. Ct. App. 1994). · cites it 6× “Appellants enumerate as error the denial of their motion for directed verdict on the issues of release, composition and novation and upon the theory that, as a matter of law, the agreement is a promise not to enforce a judgment rather than a covenant not to sue. (a) Appellants…”

Howell Mill/Collier Assocs. v. Gonzales, 368 S.E.2d 831 (Ga. Ct. App. 1988). · cites it 2× “See also OCGA §§ 10-7-20; 10-7-21. Although appellee states in his brief that at the hearing on appellant’s motion for summary judgment appellant admitted that he had settled with Lee and Marett, that fact has not been established by proper evidence in this record, since no…”

Panasonic Indus. Co. v. Hall, 399 S.E.2d 733 (Ga. Ct. App. 1990). · cites it 2× “1 For the first time on appeal Panasonic asserts that the trial court should have relied on Article 3 of Chapter 11, the Commercial Paper provisions of Georgia’s Uniform Commercial Code, instead of the provisions relating to suretyship, OCGA § 10-7-20 et seq. However, “Article 3…”

York Et Al. v. Res-ga Ljy, LLC, 784 S.E.2d 96 (Ga. Ct. App. 2016). · cites it 2× “6 See OCGA § 10-7-20 et seq. 7 See OCGA § 10-7-1 (‘‘The contract of suretyship or guaranty is one whereby a person obligates himself to pay the debt of another in consideration of a benefit flowing to the surety *256 or in consideration of credit or indulgence or other benefit…”

The Hardaway Co., Plaintiff-Counter-Defendant-Appellant v. Amwest Sur. Ins. Co., Defendant-Counter-Claimant-Appellee, 986 F.2d 1395 (11th Cir. 1993). “Code 1933 § 103-201, recodified at O.C.G.A. § 10-7-20). Hendricks could have been decided solely on the Overcash ground that the creditor had released a co-surety; thus, the Hendricks holding that release of the principal also discharged the *1400 surety was at best an…”

Gunter v. True, 416 S.E.2d 768 (Ga. Ct. App. 1992). “However, OCGA § 10-7-27 specifically provides that “Code Sections 10-7-20 through 10-7-26 shall be superseded to the extent of any conflict by the provisions of Article 3 of Title 11, the ‘Uniform Commercial Code — Commercial Paper,’ relating to the discharge of any party to a…”

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