Schneider v. Armour & Co.

• Citation: 323 Mass. 28,80 N.E.2d 34
• Court: United States State Supreme Judicial Court of Massachusetts
• Decision Date: 04 June 1948
• Parties: HARRY W. SCHNEIDER & another v. ARMOUR & COMPANY & others.

323 Mass. 28

80 N.E.2d 34

HARRY W. SCHNEIDER & another v. ARMOUR & COMPANY & others.

Supreme Judicial Court of Massachusetts, Suffolk.

June 4, 1948

April 8, 9, 1948.

Present: QUA, C.

J., DOLAN, RONAN WILKINS, & SPALDING, JJ.

Exoneration. Equity Jurisdiction, Exoneration.

Contract, To pay debt of another.

Equity had jurisdiction to enforce a contract in writing by which a purchaser of shares of stock in a corporation had agreed with the seller to pay outstanding obligations of the corporation.

A promise made by a purchaser of corporate stock to the seller stockholder to assume and pay an outstanding debt of the corporation payment of which the seller had guaranteed to the creditor did not include payment of an attorney's fee as well as the amount of the debt and interest, although payment of that fee had been included in the seller's guaranty to the creditor.

In a suit in equity by a seller of capital stock of a corporation against the purchaser, who, as a part of the transaction, had agreed with him to pay outstanding obligations of the corporation, and also against a creditor of the corporation who had brought an action against the plaintiff on a guaranty by the plaintiff of payment of the creditor's claim with an attorney's fee, the proper decree would have been that the claim of the creditor be established, that the purchaser pay to the plaintiff the amount of the creditor's claim without the attorney's fee, and that the plaintiff pay to the creditor the amount of such claim with the attorney's fee.

BILL IN EQUITY filed in the Superior Court on October 28, 1947. The suit was heard by Brogna, J., and there were entered an interlocutory decree overruling a demurrer by the individual defendants; and a final decree adjudging that the plaintiffs were indebted to the defendant Armour & Company for $461, with interest of $13.83, and an attorney's fee of $69.15, a total of $543.98, and that the individual defendants were jointly and severally indebted to the plaintiffs for $543.98, and dismissing the bill as against the defendant Better Foods, Inc. The individual defendants appealed.

C. F. Hathaway, for the defendants Robinson, Kennedy and Jones.

S.

H. Rudman, for the plaintiffs.

RONAN, J. The bill alleges that the plaintiffs and two others, being all the holders of the capital stock of Better Foods, Inc. hereinafter called the corporation, in accordance with a written contract under date of June 18, 1947, amended on June 19, 1947, (a copy of which is attached to the bill), with the individual defendants, hereinafter called the defendants, sold their stock to the defendants for $18,000, the consideration being the assumption of and the promise upon the part of the defendants to pay the obligations of the corporation, including bills for merchandise, amounting to $13,402.04 and the payment of the balance of $4,597.96 in cash. At the time of the transfer of the stock, the corporation owed the defendant Armour & Company, hereinafter called Armour, $461 for goods sold, and the plaintiffs had guaranteed the payment of this account together with interest and an attorney's fee. Armour brought an action against the plaintiffs upon their guaranty. The plaintiffs requested the defendants to pay this indebtedness of the corporation to Armour but they refused to do so. The plaintiffs then brought this bill in equity to enjoin Armour from prosecuting the action against them, and to order the defendants jointly and severally to pay Armour the amount which the corporation owes it. A demurrer of the defendants alleging want of equity was overruled.

The defendants by the amended written contract with the plaintiffs assumed the obligations of the corporation and agreed to pay its creditors including Armour. That was an absolute and unconditional promise of the defendants and formed the major consideration for the transfer of the stock. The undertaking of the defendants was not one merely to indemnify or reimburse the plaintiffs, if they paid Armour, but was an obligation to pay Armour forthwith, as the bill alleged that this indebtedness was then due. The plaintiffs were not required to satisfy their obligation to Armour before they could compel the defendants to pay them. Furnas v. Durgin, 119 Mass. 500. Locke v. Homer, 131 Mass. 93 .

Alexander v McPeck, 189 Mass. 34 . Nutter v. Mroczka, 303 Mass. 343 . By the contract as amended the defendants became bound to relieve the plaintiffs from their obligation to pay Armour. It therefore appears from the face of the bill that, as between the plaintiffs and the defendants, the plaintiffs were under a secondary liability for the satisfaction of Armour's indebtedness which the defendants, for a consideration moving to them from the plaintiffs, had assumed and agreed to pay. Consequently the defendants became the principal debtors who ought to be compelled to pay Armour and thus free the plaintiffs from a burden which ought ultimately to be borne by the defendants. The bill therefore alleges a suit calling for the application of the equitable doctrine of exoneration, and the demurrer alleging only the want of equity, Baker v. Langley, 247 Mass. 127; Carleton & Hovey Co. v. Burns, 285 Mass. 479 , was properly overruled. Cotting v. Otis Elevator Co. 214...