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.
(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.)
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) (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 and13-4-80), and will not be enforced. Kent v. Hair, 60 Ga. App. 652, 4 S.E.2d 703 (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).
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).
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).
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 and10-7-21 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).
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).
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., Ga. App. , 844 S.E.2d 894 (2020).
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).
Cited in Benson v. Henning, 50 Ga. App. 492, 178 S.E. 406 (1935); Hurt v. Hartford Fire Ins. Co., 122 Ga. App. 675, 178 S.E.2d 342 (1970); Howell Mill/Collier Assocs. v. Gonzales, 186 Ga. App. 909, 368 S.E.2d 831 (1988).
RESEARCH REFERENCES
Am. Jur. 2d.
- 74 Am. Jur. 2d, Suretyship, § 56 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.