Case ID: ga_48/html/0472-01.html
Source: Caselaw Access Project
Author: {"author": "*McCay, Judge. TrippE, Judge, Warner, Chief Justice,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Lemuel Kendrick, plaintiff in error, vs. J. B. O’Neil, Foster & Company, defendants in error.
    (Atlanta,
    January Term, 1873.)
    1. Partnership — Debts of — Joint Obligor’s Release. — When A, holding a written obligation made by a partnership composed of three persons, received from one of them nearly one-half of the amount due, and gave to him a written receipt for the money, “to be credited on a certain written obligation” made by the firm “now in the hands of Hillyer & Brother for collection, and in consideration of said sum I do hereby consent and agree that the other partners shall and will duly pay the balance due on said obligation without further cost or detriment to the said Thrasher.” Afterwards, the other parties failing to pay, A commenced suit on the obligation against the firm, and the firm pleaded the receipt and the covenant therein contained as a release from the debt, inuring by operation- of law to the whole firm:
    Held, That the latter clause of section 2810 of the Revised Code providing that “a bond to indemnify the debtor against his own debt, is equivalent to a release” does not apply to this receipt and agreement.
    2. Same — Same—Same.—This is not the debt of the person taking the receipt alone, but a debt on which he is jointly liable with others, and whilst a release to him would be a release of all, yet a covenant to indemnify him, may well ^consist with the continuance of the debt as an existing obligation against all, which was, upon the face of the paper, the clear intent of this receipt; besides, the other partners were not parties to this covenant, and could not sue on it, nor was this Thrasher’s own debt.
    Warner, Chief Justice, dissented.
    Release. Bond of indemnity. Covenant. Partnership. Before Judge Hopicins. Fulton Superior Court. April Term, 1872.
    Kendrick brought suit against O’Neil, Foster & Company on the following instrument:
    “Atlanta, Georgia, December 27th, 1867.
    “This writing will witness that there is a balance due of $567 31 on a note given by John W. Grantham to L. Kendrick for the purchase money of a certain gold lot, in the county of Cobb, which the said Grantham afterwards sold to us, we agreeing and binding ourselves to pay off and take up his said note to Kendrick, and giving therefor our certain obligation therefor, in writing, and having made various payments on said note, there is still due from us the balance above stated, which amount of $567 31 we promise to pay to said Kendrick,'’with interest from the 21st day of November, 1866, the date of the last credit. But it is expressly understood ¡that this promise is given and delivered to George Hillyer, Esq., as the attorney of the said Kendrick, and that John B. O’Neil, one of the undersigned partners, claims a set-off of $187 00 against said Kendrick for building a mill in the year 1860, but which, the said Kendrick-being absent, his said attorney is not authorized to allow, and this new promise is given without prejudice to either party, as to any claim of set-off the one against the other, and all former papers are delivered up and canceled.
    “J. B. O’Neil, Foster & Company, “By J. B. O’Neil.”
    The defendants pleaded the following instrument, given by plaintiff to John J. Thrasher, one of the partners composing *the firm of O’Neil, Foster & Company, as a release to all the defendants:
    
      “AtranTa, Georgia, August 7, 1869.
    “Received of John J. Thrasher $300 00, paid by him, to be credited on a certain written obligation of O’Neil, Foster & Company to Lemuel Kendrick, dated December 27, 1869, and now in the hands of Hillyer & Brother for collection, and in consideration of said sum, I, as agent for said Kendrick, do hereby covenant and agree that the other partners shall and will duly pay the balance due on said obligation, without further cost or detriment to said Thrasher.
    “George Kendrick.”
    Under the charge of the Court, the jury returned a verdict for the defendants. Whereupon, the plaintiff moved for a new trial, upon the ground that the Court erred in charging the jury, “that the legal effect of said receipt, signed by George Kendrick, was to release John J. Thrasher from his liability upon the instrument sued on, and that the release of Thrasher operated in law as a release of the other obligors, and that if the jury shall find that George Kendrick was the authorized agent, for that purpose, of Lemuel Kendrick, and that he, as such agent, gave the receipt referred to, then the other parties to the obligation were discharged.”
    The motion was overruled, and the plaintiff excepted.
    Hirryer & Brother, for plaintiff in error, submit that the case at bar is not within the operation of the principle contained in section 2810 of the Code, citing: 4 Ga., 185; 5 lb., 550; 3 Cowen, 155; 2 Johnson, 186; 8 lb., 58, 59; 20 Ga., 415, 676; 24 lb., 288; 30 lb., 731; 2 Story on Con., 994; 2 Parson on Con., 249, et seq.; 8 Mass., 480. The Code of Georgia a mere “compilation,” and in construing Code, old law looked to as a key: 37 Ga., 412; 38 lb., 510.
    Thrasher & Thrasher, for defendants.
    
      
      Partnership — Debts of — Joint Obligor’s Release. — In the case of Marietta Savings Bank v. Janes, 66 Ga. 290, where an administrator signed a note as such in renewal of a debt due by his intestate, and the payee in the note agreed that the note should “never in any way or manner prejudice” the maker individually. It was held that the agreement was a covenant never to sue, and operated to release the maker from any liability growing out of the signing of the note. Citing with approval the principal case.
      Same — Same—Same.—In the case of Powell v. Davis, 60 Ga. 70, where a plaintiff held a judgment against D. and .P., two joint defendants, and for a valuable consideration agreed with D., without the knowledge or consent of P. “to release and discharge D. from paying any more on said judgments:” It was held, the contract'being an absolute release of B. the judgment could not be enforced against P., for the legal effect of the release of one copartner is the release of all. Principal case cited with approval.
      ■ Same — Same—Same.—The case of Martin v. Monroe, 107 Ga. 333, 33 S. E. Rep. 62, cites with approval the principal case.’
    
   *McCay, Judge.

Section 2810 of our Code is as follows: “A covenant never to sue is equivalent to a release; so, also, a bond to indemnify a debtor against his own debt.” It is noticeable that this section does not say that a covenant not to sue or to indemnify one against his own debt is a release, but that it is equivalent to a release. It is noticeable also, that the latter clause of the section says, against his own debt, and does not say against his liability on a debt on which he is liable, jointly with others. And this language is very significant, for it is precisely the language of the common law. The doctrine that a covenant not to sue or a bond to indemnify one against his own debt is equivalent to a release, is found in Bacon’s Abridgment, Release (a,) and is a familiar doctrine to every student of the old books. But the decisions are, so far as I can find, uniform that this doctrine does not, in any case, apply where the covenant refers to a debt on which the covenantee is not liable alone, but is liable jointly or severally with others. In Lucy vs. Knyaston, 2 Sackield, 575; 1 Lord Raymond, 688, the Court, after laying down, in strong terms, that a covenant of A not to sue a debt he has against B, or to indemnify B against such debt is equivalent to a release, says: “Because then one should precisely recover the same damages that he suffered by the other bringing the suit. A is bound to B, and B covenants never to put the bond in suit against A; if, after, B will sue A on the bond, he may plead the covenant as a release. But if A and B be jointly and severally bound in a bond to C in a sum certain, and C covenants with A not to sue him, that shall not be a release, but a covenant only; because he covenants only not to sue A, but does not covenant not to sue B For the covenant is not a release in its nature, but only by construction to avoid circuity of action. For when he covenants not to sue one he still has a remedy, and then it shall be construed as a covenant, and no more.” This same point was decided in Dean vs. Newhall, 8 Tennessee Reports, 168, and in Hutton vs. Eyre, 8 Taunton, 280. *Chief Justice Marshall, in Garnett vs. Macon, 2 Brockenborough, 220, 225, very elaborately discusses this question, and lays down the same doctrine, and quotes with approval the words of Chief Justice Gibbs in 6 Taunton, to-wit: “We must look at the principle on which the rule has been applied, that a covenant not to sue shall operate as a release. Where there is only A on one side and B on the other, the intention of the covenant by A not to sue B must be taken to mean a release to B, who is accordingly absolutely discharged from the debt which A undertakes not to put in suit against him. The application of the principle in that case not only prevents circuity of action, but falls in with the clear intent of the parties. But in a case like the present, it is impossible to contend that by a covenant not to sue the defendant, (B,) it was the intention of the covenantors not to sue the plaintiff (the other partner) who was able to pay what his partner might be deficient in. It would have been easier and a shorter method to have given a release than to make this covenant. The only reason for adopting this course was that they did not choose to execute a release to the defendant, because that would also have operated as a release to the other partner, whereas they considered that a bare covenant not to sue the defendant would not extend to his partner; as, therefore, the terms of the covenant do not require sucn a construction, (that it is a release) and as it would manifestly be against the intent of the parties, we are decidedly of the opinion that it ought not to be permitted so to operate.” It is to be noticed that in this case the defendant was the person released, the other partner had paid the debt, and was suing him. The reply was that the covenant not to sue was a release of both, and that the payment by the other partner was' gratuitous. Judge Marshaee says:. “I can add nothing to the language of Chief Justice Gibbs,” but says in reference to the case before him, “that though it was a joint assumpsit and not a joint obligation, there is no difference in the principle as applied to the cases.”

This same doctrine is laid down in Collyer on Partnership, thus: “Although a release to one partner is generally a *release to all, yet a covenant not to sue one of several partners will not operate as a release to the others, because the use of such an instrument evinces an intention on the part of the covenantor to avoid the legal effect of a release as to co-partners;” and he refers to 4 Greenleaf, 421; 7 John, 207; 4 Wendell, 607; 19 John, 120; 21 Wendell, 424; 18 Pick, 416; 17 Massachusetts, 628; 24 Maine, 506, and other cases. A covenant to indemnify against a suit is not so strong as a covenant not to sue. A covenant to indemnify is the most that can be made of this agreement, and it distinctly reserves the right tc go on the others. Thrasher, to whom the covenant is given, has no right to use this release as a means of preventing the plaintiff from doing the very thing he contracted to do, to-wit: to make the others pay it. Nor can the others use it, (the covenant,) because it is a covenant with Thrasher alone. They could not sue on it, because they are not parties to it. What shall be the effect on this covenant of a recovery here against all, is immaterial. If the covenant is ever claimed to .be broken, the fact of breach and the damages will be for the Court and the jury to say. It is sufficient now to determine that it is not a release to any of the parties, much less to all.

Judgment reversed.

TrippE, Judge,

concurring.

Plaintiff held a claim against the three defendants as partners, amounting, principal and interest, to not quite $700 00, when Thrasher, one of the partners, paid $300 00. Plaintiff gave Thrasher a receipt for the amount so paid, reciting that it was to be credited on the claim then in the hands of his attorneys for collection, and added, that for and in consideration of said sum, “I hereby covenant and agree that the other partners shall and will duly pay the balance due on said obligation, without further cost or detriment to said Thrasher.” To a suit by plaintiff against all the partners, on the obligation, they pleaded said receipt as a discharge. They claim that the instrument given to Thrasher was a covenant not to sue him, by which *he was released, and thereby all the partners were discharged. Was this a covenant not to sue Thrasher? It was a stipulation that the other partners should pay the balance of the debt, without costs or detriment to one partner of three, who paid more than one-third of the debt. The right of the creditor to the balance was reserved, and he expressly agreed that the other partners should pay it. By this express contract with Thrasher, he had the right to demand payment of the others. The right to make this demand was of little or no value, unless he had the further right to enforce the demand. This could not be done without suit. Suit could not be brought without including Thrasher, as a defendant with the other partners. Instead, then, of this agreement being one not to sue Thrasher, it would rather appear a suit was in contemplation of the parties to it,, and if so, by necessary legal implication, all that was necessary to maintain that suit was reserved. If Thrasher agreed that the creditor should collect the balance out of his co-partners, and the right to collect carried the right to institute suit, and this involved the legal necessity to include Thrasher as a party, did not his acceptance of this agreement from the creditor amount to an assent that he might be sued, instead of its being a covenant that he never should be sued. It is impossible to deny that the creditor did not intend to give up his claim or right to the balance of the debt. Thrasher knew this and assented to it. The condition was, that the collection should be made from the other partners. Here then was a right — a right acknowledged by Thrasher. For that right there must be a remedy. The remedy would include Thrasher in a suit, if a suit be necessary. To concede or assent to the right, is to concede or assent to the remedy, or rather when the right is conceded by contract, the law gives the remedy. And if the right exists by contract, surely the remedy is not taken away by implication.

In this case, there was no express stipulation that Thrasher should never be sued. It can only be claimed by implication, and an examination of the terms of the agreement shows the implication to be rather to the contrary.

*It is further claimed that this is a covenant not to sue Thrasher, because if the creditor could obtain judgment against all the partners, and the others be insolvent, he could enforce the judgment against Thrasher and collect the judgment out of him, and this would be in violation of the agreement, and thus entitle Thrasher to recover back from the creditor the same amount he has been compelled to pay, and that the law does not permit such circuity of action. I express no opinion whether all this could be done or not. But if it can be — if the creditor in this case could, after obtaining judgment against all the partners, enforce it against Thrasher, and then Thrasher recover from him, by suit, the-same amount, it would not be as great a legal absurdity as it would be a legal wrong against the creditor, to deny him all the remedy necessary to enforce the right he expressly stipulated with Thrasher he should have, to-wit: to collect the balance of his debt out of Thrasher’s partners. If, in doing this, there may be a seeming departure from the ordinary legal mode, it is on account of an express contract with Thrasher. No harm will be done, and no one can complain.

In Couch vs. Mills, 21 Wendell, 426, Nelson, Chief Justice, in holding that the instrument, sub judiceJ was not technically a release, but only a covenant not to sue, says: “That it was well settled that in the case of two or more joint obligors, it constitutes no defense to the action.” Further held that “it was intended to protect the rights of the covenantee, which may be done by a cross-action, if he suffers.”

This instrument then is not, in my opinion, a covenant not to sue. And if it were it is made with one partner, and could only mean a covenant not to sue him. In Couch vs. Mills, above referred to, Chief Justice Nelson said where it is “only a covenant not to sue, it is well settled that in the case of two or more joint obligors it constitutes no defense to the action.” If it be no defense for the other joint obligors, there is as little reason for its being a defense for the other partners.

An unconditional release to one joint obligor or one partner is a release to all, for each obligor and each partner owes *the whole debt. It is a partnership debt, owed by each partner, and all the partners jointly, if that term may be used in that connection. This instrument is not a release. If it had been so intended surely more apt words to show that intention would have been used. It could not have been intended as a release, for that would have discharged the other partners. This the creditor and Thrasher are presumed to have known, and yet there is an express reservation of the right to demand the unpaid portion of the debt from the others. Courts will not be quick to construe an instrument into a release where a part only of a debt is paid, and all the debtors solvent, unless it plainly appears to be the intention of the parties. If I am right on the question that this is not a covenant not to sue, but rather the right to sue was from the whole scope of the instrument in the legal contemplation of the parties and impliedly reserved, would it not be a legal absurdity to say it is a release. It is a contradiction in terms to call that a release from a debt which, admits a continuing right to sue for that debt. The Code provides that a “bond to indemnify the debtor against his own debt” is equivalent to a release. I do hot think this instrument comes within either branch of that provision. That Thrasher may have ultimate rights under this instrument I do not deny, but in the language of Chief Justice Nelson, quoted above, they may be protected “by a cross-action if he suffer.”

The provisions of the Code on this question make no new principle. They mean just what they meant in the common law authorities whence they were taken, and I am satisfied that the construction the majority of this Court has given them is supported by a strong current of decisions made by the most eminent Judges.

Warner, Chief Justice,

dissenting.

The plaintiff brought his action against the defendants, as partners, using the name and style of J. B. O’Neil, Foster & Company, said partnership being composed of O’Neil, Foster and J. J. Thrasher, on a written obligation, to pay the plaintiff *the sum of $567 31, dated 27th December, 1867. The defendants pleaded a release by the plaintiff, of John J. Thrasher, one of the joint contracting parties, dated 7th of August, 1869, in the following words: “Received of John J. Thrasher, $300 00, paid by him to be credited on a certain written obligation of O’Neil, Foster & Company, to Lemuel Kendrick, dated 27th December, 1867, and now in the hands of Hillyer & Brother for collection, and in consideration of said sum, I, as agent for said Kendrick, do hereby covenant and agree that the other parties shall and will duly pay the balance due on said obligation, without further costs or detriment to said Thrasher. (Signed) George Kendrick.”

There was evidence offered at the trial as to the fact of George Kendrick being the agent of the plaintiff. The jury, under the charge of the Court, found a verdict for the defendant. The Court charged the jury, “that the legal effect of the instrument above set forth, was to release the said Thrasher from his liability on the instrument sued on, and that the release of Thrasher operated in law as a release of the other obligors.” A. motion was made for a new trial on the ground of error in the charge of the Court to the jury, which was overruled, and the plaintiff excepted.

The 2810th and 2811th sections of the Code declare, “that a covenant never to sue is equivalent to a release; so, also, a bond to indemnify the debtor against his own debt. A release sometimes results as an operation of law, as when a creditor releases another who is bound jointly with, or primarily to the debtor, or accepts from the debtor a higher security for the same debt, not intended to be collateral thereto.” The debt specified in the original obligation was a debt due by Thrasher as one of the-partners of J. B. O’Neil, Foster & Company. The plaintiff, by his agent, covenanted and agreed, in consideration of $300 00, paid to him by Thrasher, that the other parties to the obligation should and would duly pay the balance due thereon without further costs or detriment to said Thrasher. Although the word release is not used in the covenant of the plaintiff, still, the legal effect of the words employed *will operate as a release of Thrasher. The covenant that the other parties shall pay the balance due on the obligation is equivalent to saying that Thrasher shall not, besides, the plaintiff covenants, not only that the other parties shall pay the balance due on the obligation, but that they shall do so without further costs or detriment to said Thrasher, thereby, in legal effect, indemnifying Thrasher against the payment of his own debt, or any costs that might accrue in collecting the same. “Without detriment,” means without loss, damage, injury or harm. If the plaintiff could enforce the payment of the balance due on the co-partnership obligation against Thrasher by suit, or otherwise, he could subject him to loss, damage and costs, which he had expressly agreed and covenanted that he would not do. When a bond is required by law, an undertaking in writing, without seal, is sufficient : Code, section 4. The legal proposition that Thrasher was released from- the payment of the balance due on the obligation and indemnified against the payment thereof by the plaintiffs’ covenant, is too plain for discussion, under the provisions of the Code before cited.

In my judgment, there was no error in the charge of the Court to the jury, and that the judgment of the Court below should be affirmed.