Court Opinion

ID: 9679579
Source: CourtListenerOpinion
Date Created: 2023-08-24 06:57:23.685835+00
Date Added: 2024-06-11T18:17:15.160169
License: Public Domain

OPINION ON PETITION TO REHEAR
FONES, Justice.
Guarantors, Evans and Gose have filed a petition to rehear urging reconsideration of the Court’s rulings adverse to them on the guarantee agreement and their third party complaint against Star-Line, et al.
We are satisfied that we have correctly construed the liability of guarantors under the written contract of guarantee. Evans and Gose owned the corporation and were its officers at the time they agreed to guarantee the future indebtedness of Star-Line to Hickory Springs Manufacturing Company, for the purpose of enabling Star-Line to purchase materials on credit. The contract was an absolute continuing guarantee, until such time as guarantors might give written notice by registered mail, of revocation, which revocation would not have affected any indebtedness existing at the time of any such revocation. Evans and Gose acknowledged that they had not attempted to revoke the guarantee at any time. Their obligation was not a mere suretyship undertaking for which the law prescribes the scope of liability and defenses thereto, but an express contractual agreement to be bound for the full amount of the indebtedness in the event of a compromise settlement with Star-Line for a lesser sum. They were not accommodation guarantors, as the corporation they owned received a continuing line of credit not available without their guarantee. Evans, as president of the corporation was continuously aware of the amount of the debt. Jarnagin testified that Evans was told that negotiations were being conducted with Hickory Springs to settle the indebtedness for less than the full amount, prior to the purchase of Evans stock. The financial condition of Star-Line and the history of the Jarnagin groups negotiations with Evans to purchase his one hundred (100%) percent stock interest, provide almost conclusive inferences that Evans was aware of the negotiations. There was no contradiction of Jarnagin’s testimony that he told representatives of Hickory Springs that his group could not purchase Star-Line unless the debt was reduced and that if they “walked out” the company faced almost certain bankruptcy with the prospect of five cents on the dollar for creditors. These facts could not have escaped Evans’ attention and the consummation of the settlement was obviously of benefit to him as he received fifteen thousand ($15,000) dollars *101for his stock, that was on the brink of total disaster.
Guarantors mistakenly assert that we rejected their third party subrogation action on the authority of Uzzell v. Mack, supra. The result of that ease was to allow Uzzell, the surety, to pursue the purchase money lien held by Howser, the holder of the note paid by Uzzell, after the principal maker defaulted. However, the opinion states the principle that when a surety discharges a judgment, it is extinguished and there is nothing to which he can be substituted. That statement is analogous to the statements in the text of our opinion preceding the citation of Uzzell, and we used the uniform citation1 signal cf. to so indicate.
Guarantors rely upon T.C.A. § 25-323 et seq. Those code sections applicable to suretyship have no relevance where a contract of guarantee authorizes a compromise settlement of the principal’s debt, and expressly retains the liability of the guarantor for the balance. Such a contract permits the extinguishment of the principal debt and although, to the extent of payment, the guarantor stands in the shoes of the creditor, there is nothing — no cause of action — to which he can be substituted, because the right of subrogation equitable or by statute has been contracted away.
Finally, this Court cannot award any relief to the third party plaintiffs, Evans and Gose. No petition for the writ of certiorari was filed on their behalf. The petition of Hickory Springs and our grant of the writ brought only the original action to this Court.
The petition to rehear is denied.
COOPER, C. J., and HENRY, BROCK and HARIBSON, JJ., concur.

. A Uniform System Of Citation, Eleventh Edition, Published and Distributed by The Harvard Law Review Association.