Lascelles v. Clark

90 N.E. 875, 204 Mass. 362, 1910 Mass. LEXIS 925

• Court: Massachusetts Supreme Judicial Court
• Decided: January 8, 1910
• Status: Published

Opinion

Loring, J.

1. The demurrer was rightly overruled.

The defendant’s first contention in support of his demurrer is that the written offer declared on could not be accepted by a promise to continue the account current with DaCosta for the next month; that by its terms the written offer could be accepted only by the continuance in fact of the account current for the next month. If that had been so the guarantor would have been at liberty to withdraw the offer at any time within the month, for example after the plaintiffs had continued the account current for twenty-nine days relying on the guaranty. It cannot be supposed that the parties meant that. The case is within the decision in Lennox v. Murphy, 171 Mass. 370. This disposes also of the fourth, fifth and sixth exceptions to the master’s report.

The other cause of demurrer argued by the defendant was: “ That the plaintiffs did not within a reasonable time give this defendant notice of the acceptance of the guaranty set out in their bill nor of the furnishing of goods or credits thereunder.”

The defendant has argued in support of this cause of demurrer that even if the guaranty was accepted on the day of its date the plaintiffs cannot hold the defendant under it by reason of the account current having been continued after the expiration “ of the next month ” unless notice of that fact was given within a reasonable time; and he relies on Whiting v. Stacy, 15 Gray, 270, and on what was said in Welch v. Walsh, 177 Mass. 555, 561.

We do not think that that argument is open under that assignment. We shall consider that question in dealing with the defendant’s exceptions to the master’s report.

2. No error was shown in the admission of the defendant’s notes of his trial in the end of August, 1905. They are well taken and show that he understood fully what then took place. The book came from the defendant’s possession and the part relied upon appeared to be in his handwriting. We have no means of knowing that the Standard Life Assurance Company did not distribute diaries for 1906 in Jamaica, in August, 1905.

3. The third exception is not well taken. The letter of September 23,1905, purports to set forth the defendant’s promise. It did not purport to be a reduction into writing of the whole agreement then made, including the promises of the plaintiffs and of DaCosta.

4. The next question presented by the exceptions to the master’s report is whether the defendant’s liability was discharged by the renewals of DaCosta’s indebtedness.

There is no question of the general rule. A guarantor is discharged by an extension of time granted by the creditor to the debtor without the knowledge of the guarantor. A guarantor is in the same position as a surety in this respect. He has a right to decide for himself when the debt guaranteed by him comes due whether he will or will not pay it then and proceed against the principal debtor. By giving the principal debtor time, the creditor deprives the guarantor of that right, and for that reason he is discharged when the time for payment is extended by the creditor without his knowledge. Chace v. Brooks, 5 Cush. 43. Carkin v. Savory, 14 Gray, 528. Bishop v. Eaton, 161 Mass. 496.

But while contracts of guaranty must be construed strictly, we are of opinion that the guaranty in the case at bar, construed in the light of the facts stated in the report, must be taken not only to contemplate but to be a request for the renewals which were made.

The statement of these facts in the master’s report is meagre, but enough appears to enable us to come to a satisfactory determination as to the true construction of the defendant’s letter of guaranty.

The master found that: “ The only outstanding indebtedness of DaCosta to the plaintiffs on September 23, 1905, was the above-mentioned acceptance for £47 Os. 2d. (item 41) and acceptance by DaCosta for £348 4s. 6d. which was a renewal of eight smaller items. This latter item was renewed on Sept. 29th and again on Dec. 29th, and still again on April 2nd. The latter renewal also included other items. I find that such renewals were made in the usual and ordinary course of business between the plaintiffs and DaCosta, and that this custom had prevailed prior to Sept. 23, 1905.”

It appears from the account annexed to the bill, which was found by the master to be correct, that the plaintiffs charged to DaCosta in their account with him the discount and stamps paid to the bank on drafts and on renewal drafts, both before and after September 23, 1905. This, taken with the master’s finding that the renewals made after September 23,1905, were made in the usual course of business between DaCosta and the plaintiffs, and that this course of business prevailed before as well as after that day, leads us to the conclusion that the course of business which resulted in the renewal of the two acceptances of £47 Os. 2c?., and £348 4s. 6c?. outstanding on September 23, 1905, was as follows: The plaintiffs drew on DaCosta time drafts for the price of goods supplied to him by them ; Da-Costa accepted the drafts and the plaintiffs, to put themselves in funds, discounted the drafts in bank; in case these acceptances were not paid at maturity the plaintiffs kept themselves in funds by taking renewal acceptances which again were discounted in bank; the discount and stamps on the drafts being paid by DaCosta or charged to him in account. We also infer from the findings of the master above set forth and from the account annexed to the bill and found by the master to be correct, that in drawing a renewal draft on DaCosta the plaintiffs included in the new draft all items due on DaCosta’s account at the date of that draft.

The occasion of the defendants giving the guaranty here in question was that the plaintiffs had refused to extend to DaCosta further credit and had decided to “ close him out.” It was to. enable DaCosta to go on with his business conducted in the manner stated above that the defendant made the promise set forth in his letter of September 23, 1905. The plaintiffs’ promise in consideration of the defendant’s promise set forth in that letter was to continue the account current for “ the next month.” It was then stated by the plaintiffs that they would not agree to continue the account current beyond a month, because they had not then had an opportunity to verify the defendant’s statements as to the security he had given them and to satisfy themselves of its value. It was also stated by the plaintiffs that during “ the next month ” they would make the necessary investigation and that they expected to continue the account current beyond “ the next month ” if they were satisfied that the security given them by the defendant was good.

It is found by the master that DaCosta’s acceptance for £348 4s. 6c?. was renewed on September 29, 1905, six days after the date of the defendant’s guaranty. We infer that it was renewed when due.

It appears therefore that the purpose of the defendant’s guaranty was to secure an extension of this acceptance for ¿£348 4s. 6c?. due six days later and extensions not only for a month but for such longer time as the plaintiffs were willing to grant them, and that such extensions, if necessary, would and in fact were known to require a renewal and renewals of acceptances from time to time. We can have no doubt that the words “any future indebtedness whether in respect of account current or otherwise” include renewals made in the ordinary course of business so long as the plaintiffs were willing to grant renewals on the defendant’s security. The seventh and eighth exceptions to the master’s report were rightly overruled.

5. The tenth exception to the master’s report is in these words: “ Because the master found for the plaintiffs after finding that there was no notice to this defendant that any goods had been furnished to DaCosta or that any credit had been given DaCosta upon this defendant’s guaranty at any time after the execution of said guaranty on September 23, 1905.”

We have already held that the plaintiffs promised to continue the account current for one month, and that a binding contract thereby came into existence at that time. But the obligation of the plaintiffs under that contract did not extend beyond “ the next month.”

The necessity of a notice to the guarantor usually has arisen in case of offers of guaranty as distinguished from contracts of guaranty, that is to say, in cases where the question for decision was whether the offer which was to be accepted by performance of the thing in respect to which the creditor was to be guaranteed had or had not become a contract. See Bishop v. Eaton, 161 Mass. 496; Davis v. Wells, 104 U. S. 159.

But in cases where there is a binding obligation to do the thing (in respect to which the creditor is to be guaranteed) there is authority for the proposition that notice that the guaranty has become operative must be given within a reasonable time. See Hoar, J., in Whiting v. Stacy, 15 Gray, 270. That question was left open in Welch v. Walsh, 177 Mass. 555, 561 ; and by reason of the terms of the guaranty in question in Davis v. Wells, 104 U. S. 159, it did not have to be decided in that case.

So far as the guaranty related to continuing the DaCosta account after the expiration of the “ next month ” the defendant’s guaranty was in the nature of an offer. The rule in case of offers is that notice is necessary only where the act to be done is of such a kind that knowledge of it will not quickly come to the guarantor. Bishop v. Eaton, 161 Mass. 496, 499, 500. In the case at bar the plaintiffs were told by the defendant at least twice in the course of the conversations which led up to the letter of guaranty that he expected to go into business with DaCosta. He in fact left Jamaica on November 28. But there is nothing to show that this came to the knowledge of the plaintiffs. Under these circumstances no notice to the defendant was necessary that the account current had been continued beyond “ the next month,” and it is not necessary to consider whether the notice given on May 15, 1906, was given within a reasonable time.

6. The remaining question raised by the defendant is upon his right to a trial by jury.

This is not a bill of equitable attachment under R. L. c. 159, § 3, cl. 7, by which the plaintiffs seek to reach and apply in payment of a legal claim due to them property which could not be come at in an action at law. It is a bill to enforce the rights of property given to the plaintiffs by the defendant’s letter of September 23, 1905. By that letter the defendant agreed that the plaintiffs should be paid out of the property owned by him under the will of his mother. The right of property which he then had under his mother’s will was a right in equity only. He had no right of property at law. Until the defendant reached the age of thirty years on the eighteenth of the following December, the legal title was vested in Mr. Brackett and the defendant had a right in equity to support and maintenance out of one half of the income, any surplus of that one half of the income being accumulated and paid to the defendant when he was to receive one half of the principal. And on attaining thirty years of age he was to receive one half of the principal.

In many cases there is no difference in the practical result between a bill to enforce a charge on an equitable right of property and a bill of equitable attachment to collect a debt out of equitable rights. But in their nature they are essentially different. When A. for valid consideration agrees that B. shall be paid a certain sum out of an equitable right of property, or, as it is put in the case at bar, charges that sum due to B. upon an equitable right of property, B. becomes entitled to be paid that sum out of that property. But the property being property which is recognized in equity and only in equity, his right is an equitable one only and for that reason the subject of a suit in chancery. In case of a bill of equitable attachment the plaintiff has no rights in the property which he thereby seeks to reach and apply. He has a right to a sum of money and resorts to equity for the collection of it because he does not find any property of his debtor which can be reached in satisfaction of his debt by use of the machinery available in an action at law.

The character of the bill now before us was not changed by the amendment, as the defendant seems to assume. The amendment set forth that although duly notified of the plaintiffs’ rights Mr. Brackett transferred and conveyed to the defendant his one half of the trust property on the day on which he became thirty years of age, that this transfer and conveyance was without consideration, and that the defendant retransferred and reconveved the property to Mr. Brackett (also without consideration) on the same day. The plaintiffs alleged that these transfers and conveyances were a fraud upon their rights of property in the trust estate and therefore void so far as those rights were concerned. That did not change the character of the suit and convert it into a bill to reach and apply in equity property conveyed in fraud of creditors, as was the case in Powers v. Raymond, 137 Mass. 483, and Merchants’ National Bank v. Moulton, 143 Mass. 543, relied upon by the defendant.

The suit before us is a suit based upon a claim to an equitable right of property. Such a suit is within the sole jurisdiction of a court of chancery, and the defendant had no constitutional right to a jury. Parker v. Simpson, 180 Mass. 334.

We see no reason for overruling the conclusion reached by the judge, as matter of discretion, that issues to a jury should not be granted.

Decree affirmed.