Court Opinion

ID: 3881213
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:12:39.032768+00
Date Added: 2024-06-11T14:15:19.444829
License: Public Domain

The appellant has filed a petition for rehearing of so much of this case as pertains to the liability *Page 166 
of the estate of Abe Levi, deceased, upon the ground that the Court in its opinion overlooked material questions of law and fact which, if they had not been overlooked, would have led the Court to conclude that the estate of Levi is liable under his guaranty despite the release of Purdy and Bland from their guaranty upon the same bond.
I. In its opinion, under the authority of Massey v. Brown,4 S.C. 85, the Court announced the rule that in equity the discharge of one surety operates to discharge all others "in the like relation to the debt," unless it be shown by competent testimony that the parties intended otherwise, and stated that "in the present case * * * there is nothing in the record to indicate that the parties intended that the release should not extend, according to the general rule, beyond Purdy and Bland and discharge the other guarantor."
In the Massey Case, the Court, speaking to this point, said:
"The proposition of the appellant, that a release by the debtor of one of the joint and several sureties does not operate to discharge the other, cannot be maintained. At law, a discharge of one surety by the creditor will bar a recovery against all in the like relation to the debt. Burge on Suretyship, 156; Nicholas v. Revell, 4 Ad.  Ell., 675. The same rule will generally prevail in equity. The argument before us, insisting on a contrary doctrine, relies for its support onEx parte Gifford, 6 Ves., 805, in which Lord Eldon held that the discharge of one surety did not release the other sureties, and although Mr. Justice Story, in note to page 572 of his first volume on Equity Jurisprudence, interposes to defend the distinguished chancellor from the strictures to which his decision has been subjected, it must be admitted that his conclusion has not been accepted as the ruling authority on the question. Nicholson v. Revell, 6 Nev. 
Mann., 192, 200; Evans v. Brembridge, 35 Eng. L.  E.R., 398." *Page 167 
It is declared, however, that the above statement in theMassey case of the rule at law generally prevailing in equity is inconsistent with the following language used by the Court in that case:
"Equity construes a release according to the intention of the parties, and will give it no operation beyond the design of the purpose it was intended to accomplish."
When the entire language is considered together we think that the inconsistency is more imaginary than real. The Court states (1) what the rule is at law, (2) that the same rule generally prevails in equity, but (3) that in equity the intention of the parties when shown will control, and that in such cases the release will not operate beyond the design or purpose to be accomplished.
The Court said:
"The principle is so fully enforced by Chancellor Kent inKirby v. Taylor, 6 John. Ch. (N.Y.), 242, that any further reference to authority in support of the rule is unnecessary. It is certainly in strict consistency with the doctrine of equity, which always seeks, if possible, to give effect to the intent which induced the act, if it can be ascertained withouta violation of the rules of law." (Italics added.)
In the Massey case, the declarations of Brown, made at the time of the execution of release, were admitted in evidence, not to vary the terms of the release, but to show the intention of the parties, Massey and Brown, that while Brown should be discharged from further liability on the bond, Massey's rights as to the other surety, Barnes, should not be affected by the release. The release in that case, as in the case at bar, contains no reference to the release or non-release of the other surety or guarantor. Hence it is clear that the Court, by reason of the release of the surety Brown, would have declared, under the general rule stated, that his cosurety Barnes was likewise discharged, if the evidence offered and admitted in the case had not shown *Page 168 
that it was the intention of the parties, at the time of the execution of the release, that the other surety should be released.
The appellant, in the case at bar, submits that the record shows that the parties intended that the release should not extend to Levi and cites certain testimony of Isaac Schwartz, the guardian, in support of this contention. We have again examined this testimony, and it shows only that the guardian did not in terms release, or "sign any release of," the estate of Levi, a fact about which there is no dispute; the testimony is a mere recital of actual occurrences and does not show that the parties had any intention that the general rule as to the release of a coguarantor should not apply in this instance.
II. It is also urged that the guardian's release of Purdy and Bland was a compounding of the debt by the creditor with Purdy and Bland, and that under Section 5598 of Volume 3 of the 1922 Code the release of Purdy and Bland did not release Levi. Section 5598 is as follows:
"Any joint debtor may make a separate composition with his creditor as prescribed in this section. Such composition shall discharge the debtor making it, and him only. The creditor must execute to the compounding debtor a release of the indebtedness or other instrument exonerating him therefrom. * * * An instrument specified in this Section shall not impair the creditor's right of action against any other joint debtor or his right to take any other proceeding against the latter unless an intent to release or exonerate him appears affirmatively upon the face thereof."
Section 5600, with reference to the same matter, provides:
"* * * And the debtor who has not compounded with his creditor may set up by way of discount against such creditor the amount compounded by his joint debtor." *Page 169 
The appellant cites the case of Symmes v. Cauble, 72 S.C. 330;51 S.E., 862, and Meyer v. Bouchier, 107 S.C. 254;92 S.E., 471, in support of his contention; but these cases do not control. In the Symmes case all the debtors had been reduced to the same rank by a judgment procured against them by the creditor, and so the question of suretyship was not involved. The Meyer case affirmed the Caublecase, but is not parallel to the case at bar.
We apprehend that joint guarantors would be included under the term "joint debtors" as used in the Statute and would be governed by the same rules as other joint debtors, where it is shown that the Statute applies.
Black in his law dictionary has defined the word "compound" as follows: "To compromise; to effect a composition with a creditor; to obtain discharge from a debt by the payment of a smaller sum." This Court in the Meyer case,supra, with reference to what is meant by "the amount compounded," said: "Evidently it does not mean the whole debt. That construction would make the Statute of no effect at all."
We do not think the transaction here involved constituted a "compounding" of the debt, for two reasons: (1) The circumstances of the case show that the release of Purdy and Bland was made by the guardian in good faith in order that the loan might be continued as an investment for the ward. The guarantors, Purdy and Bland, offered to pay the indebtedness in full. The guardian refused to accept payment and instead executed a release in favor of Purdy and Bland. Payment of the entire indebtedness having been tendered to him and having been refused, the retention of the bond after the release of Purdy and Bland was in effect a new loan, without guaranty. The transaction is just the same as if the loan had been paid and a new loan of the same amount made to the same debtor upon the same security, but without guaranty. (2) There was no compromise of a liability by *Page 170 
the payment of a smaller sum nor any part payment of the debt as a credit upon the debt, to which the guarantor not specifically released could look to ascertain the amount of credit which he could set up by way of discount against the creditor. If it should be asked how much Purdy and Bland paid on the debt and, therefore, how much Levi would be entitled to have credited on the debt when it came his time to pay, it is seen that no such fixed sum can be arrived at, and therefore the terms of the Statute allowing the noncompounding debtor a credit of the amount paid on the debt by the compounding debtor would be of no effect. There was no "compounding" of the debt by Purdy and Bland, but a tender of the amount due, which tender was refused by the guardian.
III. The appellant also contends that Levi was a several rather than a joint guarantor, but an examination of the instrument containing the guaranty, in the light of all the circumstances surrounding its execution and of the other purposes intended to be served by the instrument, shows the guaranty to be a joint one.
The petition for rehearing is dismissed, and the order staying the remittitur revoked.