Washington Loan & Banking Co. v. Holliday

Bloodworth, J.

(After stating the foregoing facts.) The first question to be determined in this case is, was Holliday an accommodation indorser, a surety? If he was, the second question is, was he liable to the bank on the instrument sued upon in its changed *794 condition? That Holliday was merely an accomodation indorser, a surety, is borne out by the record, and is practically conceded by both parties to the suit. On the trial he swore that he “ did not get any part of the money produced by the cashing of the cheek— not a penny,” and counsel for the bank admit in their brief that “ Holliday, as now appears, was only accommodating indorser for Griswell.” Section 3541 of the Civil Code of 1910 is as follows: “ The form of the contract is immaterial, provided the fact of suretyship exists; hence, an accommodation indorser is considered merely as a surety.” Where a draft is drawn by one person on another, and a third party indorses the draft, and the indorsement is neither necessary nor proper for transmission of title to the draft in the negotiations thereof, but is for the sole purpose of guaranteeing payment of the draft, such indorser becomes a surety thereon. Preston v. Dozier, 135 Ga. 25 (1) ( 68 S. E. 793 ), and cases cited. It is therefore clear that Holliday was merely a surety. Thus’ the first question is settled and we are brought to the consideration of the second.

That the draft when signed by Holliday was for $30 only was testified by him and was not contradicted. Sections 3540, 3543 of the Code of 1910 are as follows: “ The contract of suretyship is one óf strict law, and his liability will not be extended by implication or interpretation.” “ A change of the nature or terms of a contract is called a. novation; such novation without the consent of the surety, discharges him.” In McMillan v. Heard National Bank, 19 Ga. App. 153 ( 91 S. E. 237 ), Judge Jenkins said: “The law looks with favor upon the rights of an indorser or surety, and his liability is one of strict law.” In Taylor v. Johnson, 17 Ga. 521, 522 (3), it was held: “ The liability of a surety cannot be extended beyond the actual terms of his engagement, and will be extinguished by any act or omission which alters the terms of the contract, unless it be with his consent.” In Bethune v. Dozier, 10 Ga. 238 , 239, Judge Lumpkin said: “No principle of law is better settled at this day than that the undertaking of the surety being one stricti juris, he cannot, either at law or in equity, be bound further or otherwise than he is by the very terms of Ms contract ; and that if the parties to the original contract think proper to change the terms of it without the consent of the surety (which is not disputed they have a right to do), the surety is discharged. *795 He is not bound by tbe old contract, for that bas been abrogated by the new; neither is he bound by the new contract, because he is no party to it; neither can it be split into parts, so as to be his contract to a certain extent and not for the residue, he is either bound in toto or.not at all.” In Simons v. McDowell, 125 Ga. 204 ( 53 S. E. 1032 ), Presiding Justice Cobb said: “The change in the terras of the contract releases the surety from liability as against any person, no matter how he comes into possession of the instrument. If the alteration be admitted, the contract becomes one to which the surety is not a party, and he can not be sued ‘upon a debt he never did contract.-’” See, in this connection, Denton v. Butler, 99 Ga. 264 (1) ( 25 S. E. 624 ), and cases cited; Anderson Banking Co. v. Chandler, 151 Ga. 408 ( 107 S. E. 60 ), and cases cited; 2 Daniel on Negotiable Instruments, 1551/ §1373, and eases cited in footnotes 1 and 2; 2 Cye. 154, § 2(d), and cases cited in footnote 50.

The fact that there was nothing in the way the check was drawn to arouse the suspicion of the bank, or that it had no notice of the fraudulent alteration, does not render the surety liable. In Hill v. O’Neill, 101 Ga. 836 ( 28 S. E. 997 ), Justice Atkinson said: “ If the proposition thus announced be generally true as respects joint makers of a promissory note, how much stronger the reason why this change should operate to discharge one who is confessedly a surety. The argument was pressed upon us with great earnestness by the learned counsel for the plaintiff in error, that if the surety, who was sued in the present case, signed this paper, and delivered it to the principal to be by him negotiated, he thus placed it within the power of the principal, by making the alteration, to perpetrate a fraud upon one who took it bona fide; and therefore that such a person ought, as against such surety, to be protected. In the case of Wait v. Pomeroy, 20 Mich 425 , the Supreme Court of that State, through Chief Justice Campbell, in a well-considered opinion, holds that ‘A memorandum written under a promissory ' note and qualifying its obligation is a part of the contract; and its destruction vitiates the note, even in the hands of an innocent bona fide holder.’ Upon the argument of that case, it would seem, from the opinion, that a similar position to that assumed in this was taken by counsel who appeared in favor of the bona fide holder. In reply to that position the court says: ‘There seems at -first a *796 plausibility in the argument, that a party by signing a note with a separate memorandum beneath, puts it in the power of the holder to gain easier credit for the note, than it would be likely to gain if altered in the body. But, as it was well suggested on the argument, no one is bound to guard against every possibility of felony. And practically, it is a matter of every-day occurrence to feloniously alter negotiable paper as successfully by changes on the face as in any other way. The public are not very much more likely to be defrauded in one way than in another. There can never be absolute safety except by looking to the character and responsibility of the persons from whom such paper is received, and who are always bound to respond for the consideration if it is forged. Little v. Derby, 7 Mich. 325 . If a party makes a contract in such a manner as is authorized by law, he has a right to object to being-bound by any other. A bona fide holder before maturity is allowed to receive the genuine contract, discharged from any equities attaching to the contract itself, as between the original parties, but. he can not get a contract where none was made.” In the case from which this 'quotation is taken the rate of interest was changed from 8 to 12 per cent. In discussing this ease Justice Atkinson (p. 835) said: “ That the change was made is not questioned, but there is nothing to indicate the assent of the surety to the change. Does the instrument sued upon, in its changed condition, express the obligation of the' contract into which the surety entered ? To ask the question, it seems to us, is to answer it. The surety’s obligation, according to his real contract, was to pay a given rate per cent. The contract of the surety, according to the instrument sued upon in its changed condition, was to increase his liability, by imposing upon-him the obligation to pay a higher rate per cent. It therefore can in no just sense be said to be the contract of the surety. In so far as the same concerns the surety, it is immaterial by whom the alteration was made. If made by the transferee of the note, it requires no argument to prove the discharge of the surety, upon the well recognized and universally accepted principle/ that one who commits a forgery can not thereby impose upon the other a legal obligation to perform the contract according to the tenor of the forged instrument; and it is equally certain that a material alteration in the obligation of the contract by one who is bound as principal, made after it is signed by the surety, will *797 discharge the surety from liability to one who took the changed instrument bona fide and without notice.”

It is insisted that Holliday was negligent in indorsing the draft as originally drawn, it being so drawn that it made the forgery easy and hard to be detected, and that the rule, “ when one of two innocent persons must suffer by the wrongful act of another, he must suffer who placed it in the power of such third person to do the wrong,” is applicable. A complete reply to this proposition is that the suggested negligence of the indorser was not the proximate or effective cause of the fraud. Between the time that Holliday indorsed the draft and the time it was paid by the bank a criminal act, a forgery intervened, and the rule just quoted “has never been carried to the extent of making one person civilly liable for the crime of another, and, on principle, we think it can not be.” As was said in O’Neill v. Hill, supra, “No one is bound to guard against every possibility of forgery.”

The evidence demanded the verdict, and the court did not err in directing it or in overruling the motion for a new trial.

Judgment affirmed.

Broyles, O. J., and Lulce, J., concur.