Maxwell v. Southern Fidelity Mutual Insurance

Clarkson, J. The only question necessary to be considered to determine this appeal is; Did the extension of time of payment of the amount due and payable from A. W. Couch, principal, on 10 July, 1936, and the taking of said chattel mortgage in the manner and form aforesaid, operate to discharge the defendant surety of its liability? We think not. The defendant is a paid corporate surety. In Loan Assn. v. Davis, 192 N. C., 108 (113), the following is written as a “well-settled” principle: “The law does not have the same solicitude for corporations engaged in giving indemnity bonds for profit as it does for the individual surety who voluntarily undertakes to answer for the obligations of another. Although calling themselves sureties, such corporations are *766 in fact insurers, and in determining tbeir rights and liabilities, the rules peculiar to suretyship do not apply.” See 193 N. C., 710. Citing authorities of a large majority of the states, including the above North Carolina case and United States Supreme Court cases, in 94 A. L. R., 876, the annotation is as follows: “Later cases support the statement in the original annotation, that the rule that sureties are favorites of the law does not apply to surety companies for hire as it does to a voluntary or gratuitous surety.” The surety bond given by defendant in its very terms says that during the life of the bond the Commissioner of Revenue may take from the distributor “other or additional security.” The plaintiff took from the distributor additional security by way of chattel mortgage. It was not prejudicial to the defendant for the delinquent distributor, W. A. Couch, to give to plaintiff additional security, but beneficial. Williston on Contracts, sec. 1212-A, p. 3493, says: “While the law will allow the accommodation surety to escape liability by the assertion of certain defenses even though he has suffered no harm, in general, the corporate surety may not take advantage of such defenses unless he can show injury. Thus, an extension of time or a stay of execution granted by the creditor to the principal, usually a defense to the unpaid surety, will not discharge the compensated surety unless he has been prejudiced thereby.” And in sec. 1222, p. 3515, he states that such companies are not entitled to the defense of the extension of time unless they can “show prejudice resulting therefrom.” Arant, the latest work on Suretyship, sec. 68, p. 299, says that the decisions, “Make it quite clear that the creditor’s mere extension of time does not discharge a compensated surety; such sureties are required almost invariably to show injury as a condition to discharge.” Principal and Surety, 50 Corpus Juris, sec. 252; Principal and Surety, 21 R. C. L., sec. 202. The leading case on this subject is Guaranty Co. v. Pressed Brick Co., 191 U. S., 416, 24 S. Ct., 142, 48 L. Ed., 242, cited and followed in Standard Electric Time Co. v. F. & D. Co., 191 N. C., at 659. If plaintiff had no right under the terms of the bond to take the additional security and extend the time, it was waived and, ratified by defendant. Defendant’s agent gave the sensible reason for agreeing to the additional security — “Couch would pay the State the money quicker than he would pay defendant.” In a letter of 20 March, 1937, from defendant to plaintiff, signed by its secretary and treasurer, “The surety sanctions the sale of service station property located at Creedmoor,” etc., provided the proceeds are turned over to plaintiff. It even sets forth the minimum amount of sale. In Brimmer v. Brimmer, 174 N. C., 435 (440), we find: “It is also well settled that although the agent had no authority, express or implied, *767 that tbe principle is responsible for bis acts if be ratifies tbem; that taking benefit of tbe transaction witb knowledge is a ratification (Starnes v. R. R., 170 N. C., 224), and tbat wben tbe agent acts outside of bis powers, tbe principal must adopt tbe whole transaction or repudiate tbe whole. ‘He cannot accept tbe beneficial part and reject what is left of it.’ Publishing Co. v. Barber, 165 N. C., 482.” In Bank v. Grove, 202 N. C., 143 (147), is tbe following: “Where an agent who is not authorized to do so borrows money on behalf of bis principal and applies it in satisfaction of tbe legal obligations of bis principal and tbe latter knowingly retains tbe benefits of such payments, tbe transaction constitutes as between tbe principal and tbe lender tbe relation of debtor and creditor. Having received tbe benefits of tbe unauthorized act tbe principal will be deemed to have ratified tbe act and to have barred bis repudiation of it to tbe injury of tbe other party. He cannot accept tbe benefits without bearing tbe burdens; be must duly repudiate tbe transaction or perform tbe contract in its integrity (entirety). Lane v. Dudley, 6 N. C., 119; Miller v. Lumber Co., 66 N. C., 503; Rudasill v. Falls, 92 N. C., 222; Christian v. Yarborough, 124 N. C., 72; Hall v. Giessell, 179 N. C., 657.” Jones v. Bank, 214 N. C., 794. In Principal and Surety, 50 Corpus Juris, sec. 254, p. 155, tbe rule is laid down as follows: “Since tbe right to a discharge by extension of time is a personal privilege of tbe surety, be may waive such right or lose it through ratification or estoppel. . . . Waiver may be shown by acts subsequent to tbe extension, such as tbe surety’s subsequent promise to pay tbe debts or bis acknowledgment of its continued existence, by bis giving tbe creditor written notice to sue, or by bis acceptance of security from the principal after extension. An agreement by a surety for a further extension of time of payment after a previous extension to tbe principal is a waiver of tbe latter’s defense. Acceptance of premium by a compensated surety after an extension of which it bad knowledge is a waiver of tbe discharge.” We cannot sustain any of tbe contentions made by tbe defendant, Tbe briefs of tbe litigants are able and well prepared. Tbe defendant, under tbe facts and circumstances of this case, has not been discharged from its liability on its bond. For tbe reasons given, tbe judgment of tbe court below is Affirmed.