Fairmont Creamery Co. v. Collier

JeNkins, J. (After stating the foregoing-facts.) 1. 'While many courts and legislative bodies refer to a debt, from the liability of which the debtor has been discharged in bankruptcy, as having been extinguished, such expressions are not entirely exact and literally correct, since the discharge, strictly speaking, only operates as a bar to an action on the debt, and thus goes merely to the remedy. Black on Bankruptcy, § 710. If the existence of the debt and the moral obligation to pay it did not remain, there would be no consideration upon which a subsequent promise to pay could be founded, as is provided for by the Civil Code (1910),.§ 4384. Under this provision such a promise must bé in writing, and it has. been held by our Supreme Court that in order to be effective it must be clear, express, distinct, unequivocal, and without qualification or condition. Moore v. Trounstine, 126 Ga. 116 (54 S. E. 810, 7 Ann. Cas. 971). If after a discharge from the debt in bankruptcy Spratling had made a payment thereon in consideration of his moral obligation, suit would not lie in his behálf to recover the payment thus actually made, although of course, in the absence of a clear and distinct new written promise to pay, suit could not be maintained for the debt so discharged. The plaintiff in error does not' take the position that Spratling by his agency contract created a lien on his unearned commissions on future sales.. Such an attempted assignment of wages earned after the filing of the petition could not be enforced after the bankrupt had been granted a discharge. In Re Home Discount Co., 17 Am. Bk. R. 169, 180 et seq. (147 Fed. 538); Collier on Bankruptcy, 9th ed. 362, 363, 364; In Re Har [91] rington, 29 Am. Bk. R. 669 (200 Fed. 1010); In Re Sims, 23. Am. Bk. R. 899 (176 Fed. 645); In Re Lineberry, 25 Am. Bk. R. 164, 166 (183 Fed. 338); Loveland on Bankruptcy, § 288. What the plaintiff does insist upon is, that, since an adjudication in bankruptcy does not sever contractual relations as such, but since they continue in force except in so far as they may have become merged into provable claims (Remington on Bankruptcy, §§ 541, 2675, 2729), and since the contract was not taken over by the trustee, nor any liability thereunder liquidated and the contract discharged, the executory contract of employment as originally made continued in full force and effect, and that if the contract of employment continued of force at all, it remained operative in all of its terms and provisions, including the one requiring ..that a certain portion of the commissions be applied on the. pre-existing debt. This they urge must be the ease, since courts can not" make new contracts by cutting out particular provisions and leaving others. We can not think that this position of the plaintiff as applied to the instant case is altogether sound, and that such a contract should be treated as remaining of full effect in the sense that courts- would enforce continued compliance. The consideration of the contract as affecting the defendant became altered by the discharge in bankruptcy from the pre-existing debt, since the payments which were to be made thereon as originally provided went in payment of a legal debt; whereas subsequent to the discharge they would go merely in satisfaction of a moral obligation. In this particular case, the contract being a continuous one specifying no time at which it was to terminate, and no time being fixed by law or usage, it could have been terminated at the will of either party with notice. Electric Ry. Co. v. Coal Co., 98 Ga. 190, 192 (26 S. E. 741); Bearden Mercantile Co. v. Madison Oil Co., 128 Ga. 695, 703 (58 S. E. 200). But suppose it had been a contract which by'its terms was to remain of force for a definite term embracing a number of years, could it be said that after the discharge of the indebtedness, the payment of which supplied a part of the consideration of the agreement, the contract should be subsequently enforced and made to continue because the discharged indebtedness still existed merely as a moral obligation ? We do not think this should be the rule. But- while it would thus seem that after the discharge-of such a pre-existing [92] debt as a legal obligation the defendant might in any ease repudiate the contract of employment where payments on the debt constituted a part of the contract of employment, still we can see no reason why the parties to the agreement might not, if they both see fit, continue its operation; and in so far as they might actually do so by acquiescence in its terms and performance of its conditions, we think such conduct amounts to an election to treat the contract as valid and still subsisting. This appears to have been done in the instant case, since after bankruptcy Spratling continued in the employ of the company as usual, received his statement each month containing the item “Credited to your account -dollars,” as theretofore, cashed his check with the one half cent per pound deducted by the company, and made no complaint or suggestion that because of bankruptcy he no longer was under obligation to have the one half cent per pound thus applied, until after the termination of his contract with plaintiff on September 14, 1914. We think this amounted to such acquiescence and performance on the part of each of the parties as would operate to keep the original contract of force. If the effect of such acquiescence could be taken as setting up a new agreement upon the same terms as the old, and so performed, the effect would be the same, at least so far as the principal defendant is concerned. Under this view of the law, it was error when the skilled and eminent judge ruled as a matter of law that plaintiff could not recover for the item of $298.85. 2. We think the plea of discharge entered by the surety was meritorious. The evidence of Spratling showed that “The effect in the change of the terms of the contract whereby I was authorized to sell on the lower margin enabled me frequently to double my sales. I made collections for the sale under that contract.” He also testified that the change in the contract “enabled me to price it to the customer at a less price, and I was enabled to sell about twice as much butter.” In Little Rock Furniture Co. v. Jones, 13 Ga. App. 502 (79 S. E. 375), this court said: “A change of the nature or terms of a contract is called a novation. Such novation, without the consent of the surety, discharges him. Civil Code (1910), § 3543; Bethune v. Dozier, 10 Ga. 235. This rule will not be altered by the fact that the change in* the contract, which was made without the knowledge or consent of the [93] surety, nevertheless inured to the benefit of the principal and the surety. If the change is made without the knowledge or consent of the surety, the surety’s complete reply is non hsee in foedera veni. Hill v. O’Neill, 101 Ga. 832 (28 S. E. 996). The above stated rule applies to guarantors as well as to sureties; and any material alteration in the original contract, without the knowledge or consent of the guarantor thereof, would relieve him from the guaranty. Johnson v. Brown, 41 Ga. 498.” See also Civil Code (1910), §§ 3540, 3544. The contract of employment as originally made purported to state the precise terms under which sales should be made; it allowed for no variation or alteration by subsequent authority which might be given the agent. This was the contract which Collier undertook to guarantee, whereas the alleged shortage arose from sales made under a different and subsequent agreement, and without the consent of the surety. Counsel for the defendant in error in the cross-bill urge that the lowering of prices authorized by the contract of employment did not discharge the surety on the bond, since the bond itself did not obligate plaintiff to maintain any fixed price for the sale of the goods by Spratling, and the letter of March 20th, 1913, by which the terms of employment were made and the prices fixed, was not made a part of the bond. Since, however, the bond was executed in accordance with the stipulations of the letter, and since the bond refers to the contract as actually made, we think the provisions of the contract are relevant to a suit on the bond. International Harvester Co. v. Morgan, 19 Ga. App. 716 (92 S. E. 35). Indeed, were no recourse had to the terms of the contract, there is nothing in the bond itself which could be taken to hold the surety in any way liable for a failure to remit the amounts payable on the.old indebtedness; and were he not bound by this provision, it is probable that there would be no remaining liability under the bond. Judgment reversed on main and cross-hill of exceptions. Wade, O. J., and Luke, J., concur.