Atlanta National Bank v. Douglass

McCay, Judge. 1. There is no real dispute between the parties as to the material facts upon which arises the legal question made in the record. Both sides agree that it -was part of the agreement, at the time these notes were taken, that a mortgage should be executed by "Wise to the plaintiff upon his (Wise’s) stock of goods. The plaintiff’s witness insists that this was a mere favor by him to the security, _ while the security insists that it was a sine qua non for his action, and that he would not have agreed to the arrangement at all except for this agreement. We do not think the difference is material. The fact is undisputed that a suit was pending in favor of the bank against the defendants, the one as principal and the other as security; that it was agreed that the suit should be dismissed; that the present notes, each for $100 00, should be given in lieu of the old debt, and that Wise, the principal, should give the mortgage. The giving of the.mortgage was a part of the contract at the time the notes were taken, just as truly whether it was agreed to as a favor to Douglass, or whether Douglass made it a condition on which he agreed to the new arrangement. At least, the contract, if stated truly, was that the pending suit should be dismissed, that the notes now sued on (upon which Douglass is, in terms, only security) should be taken in lieu of the old debt and that a mortgage should be executed by Wise to the plaintiff on his stock to secure the debt. This mortgage was in fact executed and the plaintiff put in possession of it. He not only failed to record it, but gave it up to Wise without the knowledge and consent of Douglass and took another to suit himself. We think under the provisions of the Code this was a discharge of the indorser, and that under the facts of the case the charge of the judge was right. Section 215J of the Code provides that any act of the creditor which injures the surety, exposes him to greater liability or increases his risk will discharge him.” [209] 2. It is contended in this case that as there was evidence going to show that the surety was nbt in fact hurt by this act of the plaintiff, the judge should have eharged the jui-y that the surety was not discharged if he was not injured, or at any rate, that he was only discharged pro reda, according to the amount of injury. But the Code very certainly means more than this; it does not stop at the words “ injures the security,” it adds, “increases his risk or exposes him to greater liability.” It is insisted, however, that as the Code only purports to be a re-enactment of the old law, that these broad words are to be qualified by the settled rules as existing previously to the codification, and we admit that there is much good sense in this view of the meaning of this section. Ordinarily, if a creditor gets new security and loses it by his laches or fault, the security is only discharged pro tanto, and only if he be actually damaged, and this upon the common sense prin7 ciple that the amount of his real hurt ought, injustice, to be the measure of his redress — no more, no less. At first sight, the case in 37 Georgia, 428, Toomer vs. Dickerson, would seem to militate against this rule, and it was so insisted'at the hearing of the case at bar. But in that case, as in this, the mortgage was part of the original contract, and the fact that it was made, was one of the considerations inducing the security to act, to make the contract of securityship. It was not a case of a subsequent security as a new collateral, etc. When the additional security is part of the original contract, the surety has a right to stand on its terms. The failure of the principal to record, the loss of the lien, in this case the destruction of the mortgage, is a change in the terms of the security’s undertaking. He only guarantees the notes as secured by the mortgage, and when the mortgage was destroyed his contract was no longer existent; its terms were broken. The contract that he entered into was altered. The amount of that alteration and the effect of it is immaterial. Even if his risk was lessened by it he is discharged : Bethune vs. Dozier, 10 Georgia, 235. Judgment affirmed.