O.C.G.A. § 10-7-45 (2019)

Annotations

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION PROOF APPLICATION NOTICE General Consideration Purpose of section. - This section was enacted for the purpose of protecting the securities on bonds, notes, or other contracts. Bank of St. Marys v. Mumford & Tyson, 6 Ga. 44, 1849 Ga. LEXIS 7 (1849). Basis for section. - Rule laid down in this section rests primarily upon the reason that when there is in fact a contract of suretyship and this is made to appear, the relative rights of the makers’ interests can be fixed and the surety given the surety’s right of subrogation generally without affecting the rights of the holder of the note. Hill v. Driskell, 15 Ga. App. 458, 83 S.E. 859, 1914 Ga. App. LEXIS 294 (1914). “Delay”, as used in this section, is such as arises from fault or negligence of the surety. Whitley v. Hudson, 114 Ga. 668, 40 S.E. 838, 1902 Ga. LEXIS 755 (1902). Section only applies when surety seeks to enforce rights against principal. - This section applies only when the defendant seeks to establish the defendant as a surety, not by way of a defense to an action against the defendant on the contract, but for the purpose of enforcing the defendant’s rights as a surety against the defendant’s principal. Brown v. Merchants Trading Co., 26 Ga. App. 331, 106 S.E. 208, 1921 Ga. App. LEXIS 137 (1921). Statutes and cases barring a cosigner from introducing parol evidence that the cosigner signed the note as a surety are applicable only when the defense of suretyship is asserted by one who is primarily obligated on the note in an action brought by the payee or the cosigner’s assign to

collect on the note. That prohibition does not apply when the note was paid from the proceeds of a life insurance policy the cosigner had assigned to the creditor, the creditor assigned the note and security deed to the creditor’s estate, and the maker then sued the creditor and the cosigner’s executor to cancel the security deed. Aultman v. United Bank, 259 Ga. 237, 378 S.E.2d 302, 1989 Ga. LEXIS 180 (1989). Right to control judgment. - Law allows sureties to make “special defense,” i.e., to show that they are sureties for the purpose of acquiring the right to control the judgment under Laws 1826, Cobb’s 1851 Digest, p. 593 (see now O.C.G.A. § 9-13-77), and to do this even after judgment. Brown v. Harris, 20 Ga. 403, 1856 Ga. LEXIS 71 (1856). Proof This section allows proof of suretyship by parol. Decatur Coca-Cola Bottling Co. v. Variety Vending Corp., 277 F. Supp. 393, 1967 U.S. Dist. LEXIS 7477 (N.D. Ga. 1967). Use of parol evidence. - If the fact of suretyship does not appear on the face of a note, it may be proved by parol; and the relative position of the makers’ names is immaterial, if one is surety of the other. Trammell v. Swift Fertilizer Works, 121 Ga. 778, 49 S.E. 739, 1905 Ga. LEXIS 70 (1905). When a written contract for the sale of personalty is executed by two persons ostensibly as purchasers, it may be shown by parol that one of such persons executed the contract, not as a principal obligor, but as a surety only. Nunnally v. J.B. Colt Co., 34 Ga. App. 247, 129 S.E. 119, 1925 Ga.

App. LEXIS 202 (1925); West v. Nottingham, 71 Ga. App. 282, 30 S.E.2d 651, 1944 Ga. App. LEXIS 335 (1944). One who signs a note ostensibly as a coprincipal may in fact be a surety, and this may be established by parol. Campbell v. Rybert, 46 Ga. App. 461, 167 S.E. 924, 1933 Ga. App. LEXIS 101 (1933); Levinson v. American Thermex, Inc., 196 Ga. App. 291, 396 S.E.2d 252, 1990 Ga. App. LEXIS 852 (1990). One who signs a note with another apparently as a joint principal may, in an action by the payee, plead and prove that the payee had no interest in the paper and was only surety for the accommodation of the other and principal signer, and that the plaintiff took the note with knowledge of such facts. Benson v. Henning, 50 Ga. App. 492, 178 S.E. 406, 1935 Ga. App. LEXIS 188 (1935). Even though the notes did not show that defendant signed as surety and not as principal, the defendant could establish by parol evidence that the defendant signed the notes as surety and not as principal. Wofford v. Waldrip, 80 Ga. App. 562, 56 S.E.2d 816, 1949 Ga. App. LEXIS 879 (1949). Although the contract recites that the contract is made for “value received” and is prima facie a contract of guaranty, parol evidence is admissible to show that there was no independent consideration flowing to those signing as guarantors and the contract is one of suretyship. Wolkin v. National Acceptance Co., 222 Ga. 487, 150 S.E.2d 831, 1966 Ga. LEXIS 525 (1966); Kennedy v. Thruway Serv. City, Inc., 133 Ga. App. 858, 212 S.E.2d 492, 1975 Ga. App. LEXIS 2313 (1975). (As to abolishment of distinction between contracts of suretyship and guaranty, see O.C.G.A. § 10-7-1 and the Editor’s note thereto). Burden is on surety to prove relationship and knowledge of creditor. - When a married woman signs a note ostensibly as a maker jointly with her husband when in fact she is a surety only, before she can establish the fact of her suretyship as against the payee of the note, it must be made to appear, despite her apparent relationship as principal, that the payee, with knowledge

of the facts which would constitute her a surety, contracted with her as a surety. Bennett v. Danforth, 36 Ga. App. 466, 137 S.E. 285, 1927 Ga. App. LEXIS 109 (1927). When the wife signs the note as an apparent principal, the burden is on her to prove that she signed as surety only, and that the payee of the note, with knowledge of the facts which would constitute her a surety, contracted with her as a surety. Lovelady v. Moss, 50 Ga. App. 652, 179 S.E. 168, 1935 Ga. App. LEXIS 260 (1935). In an action by the payee against all the makers as joint principals it may be shown by parol evidence that some of the makers are sureties for others, the burden being on those setting up suretyship to establish it; and when they claim to be discharged by some act increasing their risk as sureties, they must further show that the payee knew they were sureties at the time of the occurrence of such act. Northcutt v. Crowe, 116 Ga. App. 715, 158 S.E.2d 318, 1967 Ga. App. LEXIS 935 (1967). Establishment of suretyship requires proof payee knew signer of note was obligating signer to pay another’s debt. - In order to establish as a fact that the ostensible maker of a promissory note executed the note as surety only and not as a principal, it must be shown that the payee contracted with the principal as a surety; and if the payee did not at the time know that the person signing the note was obligating oneself for the payment of the debt of another, it is not established that the payee contracted with the obligor as a surety. Northcutt v. Crowe, 116 Ga. App. 715, 158 S.E.2d 318, 1967 Ga. App. LEXIS 935 (1967). Prayer for relief. - Surety’s pleading must contain an appropriate prayer for independent affirmative relief. Morrison v. Citizens & S. Bank, 19 Ga. App. 434, 91 S.E. 509, 1917 Ga. App. LEXIS 138 (1917). Nature of transaction is jury question. - Whether a note and deed to secure debt or mortgage were made by the wife as a part of a transaction to secure a debt of her husband or for the purpose of paying the debts of her husband is for the jury, and it may be shown by parol that the wife signed the note as surety. Almond v. Mount Vernon Bank, 53 Ga. App. 565,

Proof (Cont’d) 186 S.E. 581, 1936 Ga. App. LEXIS 318 (1936). New trial proper when surety denied right to prove alleged suretyship. - If a party defendant to an action upon a contract by the defendant’s answer alleges that the defendant signed the paper as a security and is by an erroneous ruling denied the right to establish before judgment the fact thus set up, the defendant is entitled to a new trial, and granting the new trial will not violate that portion of this section which declares that in such a case the creditor is not to be “delayed in his remedy.” Whitley v. Hudson, 114 Ga. 668, 40 S.E. 838, 1902 Ga. LEXIS 755 (1902); Ryle v. Farmers’ & Merchants’ Bank, 33 Ga. App. 459, 127 S.E. 233, 1925 Ga. App. LEXIS 531 (1925) (ruling held harmless under circumstances). Suretyship shown in contract as pled need not appear in judgment. - When the fact of suretyship sufficiently appears upon the face of the contract as pled, it is probably unnecessary for the defendant’s protection for the fact to be made to appear in the judgment. Loewenherz v. Weil, 33 Ga. App. 760, 127 S.E. 883, 1925 Ga. App. LEXIS 715 (1925). Application Self estoppel by party. - When the written assignment of the note signed by the payee recites that, for value received, the payee transferred and assigned the note with full recourse on oneself, the payee was estopped from testifying that as a matter of fact the payee was an accommodation endorser only. This section is clearly not applicable to such facts. Phillips v. Bridges, 20 Ga. App. 489, 93 S.E. 115, 1917 Ga. App. LEXIS 944 (1917). Presumption that signers of note are principals may be rebutted. - When two or more persons sign a note apparently as joint principals, and there is nothing in the instrument indicating that some of the makers are principals and others sureties, the presumption of law is that all are joint principals. This presumption, however, may be rebutted,

and in an action by the payee against all the makers as joint principals it may be shown by parol evidence that some of the makers are sureties for others, the burden being on those setting up suretyship to establish it. Hill v. Driskell, 15 Ga. App. 458, 83 S.E. 859, 1914 Ga. App. LEXIS 294 (1914); Duckett v. Martin, 23 Ga. App. 630, 99 S.E. 151, 1919 Ga. App. LEXIS 245 (1919); Bank of Lumpkin County v. Justus, 150 Ga. 286, 103 S.E. 794, 1920 Ga. LEXIS 144 (1920); Seymour v. Bank of Thomasville, 157 Ga. 99, 121 S.E. 578, 1923 Ga. LEXIS 371 (1923); Northcutt v. Crowe, 116 Ga. App. 715, 158 S.E.2d 318, 1967 Ga. App. LEXIS 935 (1967). Judgment is not void if plaintiff consents to proof of suretyship without notice. - Judgment against one signer of a note as principal and another as surety is not absolutely void and subject to collateral attack, although no pleading alleging suretyship was filed or any notice of intention to make proof thereof was given to the principal, when by consent of the plaintiff’s attorney one of the signers was permitted to show that the signer was only security on the note. Freeman v. Bank of LaFayette, 20 Ga. App. 334, 93 S.E. 34, 1917 Ga. App. LEXIS 888 (1917). Co-debtor was not a surety of a debtor within the meaning of O.C.G.A. §§ 10-7-1, 10-7-45, and 10-7-57 as: (1) the note was executed so that both parties could buy a tract of land; (2) both parties received an equal benefit; (3) the debtor was solely liable for that portion of the loan that represented the payout of the previous mortgage on the debtor’s property, and both parties were required to put up property in addition to the land they bought with the borrowed money; and (4) there was nothing in the agreement showing any intent by the parties that one was signing as the principal debtor and the other was signing as a surety. Johnson v. AgSouth Farm Credit, 267 Ga. App. 567, 600 S.E.2d 664, 2004 Ga. App. LEXIS 713 (2004). Notice Notice of intention to prove suretyship must have been given principal. - Surety’s pleading setting up the fact of suretyship and praying that the

judgment be molded accordingly must also show that previous notice had been given the principal of the surety’s intention to make such proof. Johnson v. Georgia Fertilizer & Oil Co., 21 Ga. App. 530, 94 S.E. 850, 1918 Ga. App. LEXIS 389 (1918). Notice when suretyship appears on face of contract. - This section requires notice of an intention to prove suretyship only when the fact of suretyship does not appear upon the face of the contract. Taff v. Larey, 29 Ga. App. 631, 116 S.E. 866, 1923 Ga. App. LEXIS 147 (1923). Notice when suretyship is raised as defense. - Prior to 1979, a female defendant whose name appeared as a principal on the face of the contract sued on could plead in defense that she was in fact a surety only and that, being a married woman at the time she entered into the contract, the contract of suretyship was void; and it was not necessary to the validity of such defense that it appear that notice was given to the alleged principal, as required by this section, of her intention to make such defense. Brown v. Merchants Trading Co.,

26 Ga. App. 331, 106 S.E. 208, 1921 Ga. App. LEXIS 137 (1921) (decided under former Code 1933, § 53-503, repealed in 1979). An apparent maker of a note is not limited by the provisions of this section to relief over against a principal after payment of the debt, nor in a suit by the payee, when the apparent maker pleads that the maker is surety only and alleges grounds of discharge of liability to the payee, have the provisions of this section prescribing notice to the principal any application to such defense. Seymour v. Bank of Thomasville, 157 Ga. 99, 121 S.E. 578, 1923 Ga. LEXIS 371 (1923). Creditor has no interest in notice. - It is obvious from the language of this section that the statute’s provision as to notice applies solely to a collateral issue between the principal and the principal surety in which the creditor has no interest, and it is therefore no concern of the principal whether the surety, in a case covered by this section, gives notice to the principal of the surety’s intention to make proof of suretyship. Bank of Lumpkin County v. Justus, 150 Ga. 286, 103 S.E. 794, 1920 Ga. LEXIS 144 (1920).

RESEARCH REFERENCES Am. Jur. 2d. 74 Am. Jur. 2d, Suretyship, § 136. C.J.S. 72 C.J.S., Principal and Surety, §§ 193, 194.