Opinion
33411.
DECIDED JUNE 12, 1951.
Complaint on note; from Dougherty Superior Court — Judge Crow. November 4, 1950.
Jesse W. Walters, for plaintiff in error.
Roland M. Arthur, contra.
The verdict was contrary to the law and the evidence and the court erred in overruling the motion for a new trial, based solely upon the general grounds.
DECIDED JUNE 12, 1951.
Mrs. J. F. Johnston brought an action against John Heard Arnold in February, 1950, to recover the balance due on a certain promissory note. She prayed judgment in the principal sum of $2,931.55, plus interest, and ten percent of the principal and interest as attorney's fees. The promissory note, payable to Mrs. J. F. Johnson six and one-half years from date, July 10, 1943, in the sum of $3109.05, signed and sealed by John Heard Arnold, and showing credited payments on the note in the sum of $177.50 was attached to the petition.
The defendant filed his answer in the nature of a general denial and by way of plea alleged: "[The] defendant admits that he did execute and deliver a note to the plaintiff, but that said note was given for a pre-existing debt and contemporaneously with the execution, delivery and acceptance of said note said parties entered into an agreement that said note was not to be sued on, said agreement being written and made a part of said note."
By agreement between counsel for the plaintiff and the defendant, the case was submitted to the judge without the intervention of a jury.
Upon the trial of the case, the note was identified and introduced in evidence and the note was shown to have the following memorandum written on the back of it: "This note is not a mortgage on any property or personal belonging of the signee; and it is agreed, that in no event will it be sued."
Mrs. Johnston testified: "I loaned him [the defendant] some money to go into a business which failed. I was never repaid and I took the note in question from him. I did not ever enter into any agreement with Mr. Arnold that I would not sue him in the event he did not pay this note. I had no security for the note. . Mr. Arnold borrowed the money from me in 1938. The statement on the back of the note was there when I received the note in 1943; the note has been in my possession since I received it and I knew the statement was there when I received it, but I did not tell him that I would not sue him. . . Mr. Arnold made out the note; he explained the statement that was on the back, but I did not agree to it. There was no consideration given for the promise not to sue. . . I knew the statement was on the back of the note, but I did not tell him I would not sue, he has never paid me a penny; I did get some clothes from the store. Mr. Arnold did not try to hide the statement from me, I knew it was there (the back of the note) when I accepted it (the note), but I did not tell him that I would not sue."
Mr. Arnold testifies: "I borrowed some money from Mrs. Johnson to open a department store in Ashburn, Ga., in 1938. I was supposed to repay the money from the business, but the business failed and I was unable to repay the money. Mrs. Johnston had no interest in the business. In 1943, Mrs. Johnston came to me and wanted a note which would serve as a record. I explained to her that the only type note that I could give her was one that would not in anyway make me liable to suit. She told me that would be all right. I made out the note and carried it to her and in the dining room of [the] hotel in Ashburn, Georgia, explained the provision that was on the back of the note and told her that I did not think the note was any good and again explained to her that I could not be sued and again told her that was the only way that I would give her the note. With this understanding she accepted the note. . . I borrowed the money from Mrs. Johnston; I admit owing the money; I did not promise to get two other co-signers. Two other people were in the discussion about the loan but not in my behalf."
On being recalled to the stand, Mrs. Johnston testified: "I heard Mr. Arnold explain how he borrowed the money from me. Mr. Tison and Mrs. N. Smith agreed to sign the note as co-signers. After the money was borrowed and spent I could not get them to do anything, so I took the note in question from John H. Arnold, but I never told him that I would not sue him. . . Mr. Arnold borrowed the money to go into the clothing business; he put the money into the clothing business and the business failed. The note was all I could get so I took it. I didn't know whether or not I could sue Mr. Arnold. Mr. Arnold read the memorandum that was on the back of the note; I understood him and I knew the memorandum was on the back of the note. I accepted the note with this knowledge, because that was all he would give me.
The court found in favor of the plaintiff in the amount prayed, together with interest and attorney's fees. The defendant's motion for a new trial, based solely upon the general grounds, was overruled and he excepted.
Where, in an action on a promissory note, the defendant maker of the note admits a prima facie case and as a defense pleads an express covenant not to sue, and it appears from the evidence introduced before the judge without the intervention of a jury, that, at the time the note was executed and delivered by the defendant to the plaintiff, the following memorandum, signed by the defendant, was written on the back of the note: "This note is not a mortgage on any property or personal belongings of the signee [signor?] and it is agreed that in no event will it be sued," and it also appears that the plaintiff knew of the presence of such memorandum on the note and had had it explained to her by the defendant before her acceptance of the note, her action in accepting the note under such circumstances made the memorandum so much a part of the note as to estop her to deny that she agreed not to sue on the note. "The meaning placed on the contract by one party, and known to be thus understood by the other party, at the time, shall be held as the true meaning." Code, § 20-703. The debt for which the note was given was already barred by the statute of limitations at the time the note was executed, and the defendant's agreement to execute the note containing the covenant not to sue was sufficient consideration for the plaintiff's agreement not to sue on the note. See Martin v. Monroe, 107 Ga. 330, 333 ( 33 S.E. 62), where it is said: "If a covenant never to sue is relied upon as a release of a pre-existing obligation to pay, then such covenant would not be binding unless founded upon a sufficient consideration; but this is not true when the covenant never to sue comes into existence contemporaneously with the obligation to pay."
The note, containing the covenant not to sue, was not such a new promise, within the contemplation of Code § 3-904, as to revive or extend the original liability, which, as we have said, was barred by the statute of limitations, and whether, under the pleadings and evidence, this case be considered as one on the note or on the original agreement, the plaintiff was not entitled to verdict in her favor, and the court erred in overruling the motion for a new trial.
Judgment reversed. Gardner and Townsend, JJ., concur.