Keith v. Thomas

• Decision Date: 28 March 1929
• Citation: 165 N.E. 679,266 Mass. 566
• Parties: KEITH et al. v. THOMAS.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

266 Mass. 566

165 N.E. 679

KEITH et al.

v.THOMAS.

Supreme Judicial Court of Massachusetts, Suffolk.

March 28, 1929.

Appeal from Superior Court, Suffolk County; Greenhalge, Judge.

Bill in equity by Lewis W. Keith and others against Mary M. Thomas. From a decree dismissing the bill, the complainants appeal. Affirmed.

S. H. Batchelder, of Boston, for appellants.

E. F. McClennen, of Boston, for appellee.

CROSBY, J.

This bill in equity for the reformation of a written contract of guaranty, and to recover damages resulting from its alleged breach, is before this court on the plaintiffs' exceptions to the ‘memorandum of findings, rulings and order for decree’ made by the trial judge and their appeal therefrom, and on appeal from the final decree dismissing the bill. The suit was originally brought at law and afterwards was amended into a bill in equity upon motion of the plaintiffs.

The defendant executed a written instrument which reads as follows: ‘February 8, 1922. Keith & Floyd Dear Sirs: I hereby guarantee all accounts for purchase of leather from your concern made by Mr. Claude B. Thomas. Very truly yours, Mary M. Thomas.’ It appears from the record that Claude B. Thomas was the defendant's son, and that he was the president, treasurer and a stockholder in the C. B. Thomas Company, a corporation which, on the date of the above instrument, was indebted to the plaintiffs, a partnership, to the extent of about $6,000 for leather purchased. The plaintiffs had refused to extend any further credit to the corporation unless a substantial guaranty was furnished, whereupon Claude B. Thomas procured from his mother the guaranty above set forth which was accepted by the plaintiffs as satisfactory. There was no communication between the plaintiffs and the defendant either before or at the time of the execution of this instrument; it was mailed to the plaintiffs by Claude B. Thomas, and all negotiations respecting the guaranty occurred between the plaintiffs and the defendant's son. After the receipt of the guaranty by the plaintiffs they extended credit to the C. B. Thomas Company far in excess of the amount due them at that time, until June, 1923, when the corporation failed to meet its obligations. It then owed the plaintiffs $27,224.05. After an assignment for the benefit of creditors the plaintiffs received a dividend of $7,032.95, which reduced the indebtedness of the corporation to the plaintiffs by that amount. The plaintiffs by a prayer in the bill sought to have the contract of guaranty reformed by inserting the words ‘for the C. B. Thomas Company’ immediately after the phrase ‘Mr. Claude B. Thomas,’ and prayed that the instrument as so reformed be enforced against the defendant by awarding damages to the amount of the unpaid balance with interest.

The trial judge found that ‘Both the plaintiffs and the defendant at the time of the execution and delivery of the guaranty intended and believed that the instrument was to apply to the account of the C. B. Thomas Company, and Thomas thereafter never made or proposed to make any purchases of leather except on behalf of the company. There was no evidence that Thomas communicated to the defendant the statement of the plaintiffs that the guaranty was to cover not only past but subsequent purchases of leather, and the plaintiffs never had any direct communication with the defendant either before or after the execution of the guaranty until June, 1923, and never gave her any notice of its acceptance by them * * * that both the plaintiffs and the defendant were honestly mistaken as to the effect of the guaranty and that the defendant intended to execute and deliver and the plaintiffs intended to accept a guaranty of purchases made by Claude B. Thomas for the C. B. Thomas Company’; and he ruled that the plaintiffs were ‘entitled to reformation as prayed for.’

As the bill seeks to recover the full amount of the unpaid balance of the account with interest, the judge ruled that the language of the guaranty was not clear and required a construction as to its meaning; ‘that it is proper to consider what facts were known to the parties with reference to which the guaranty was given.’ He found that the defendant knew the company was indebted to the plaintiffs in the sum of $6,000, and that no purchases of leather could be made without a guaranty of some kind; and stated, ‘but upon all the evidence, and in the absence of words which plainly import future purchases to an unlimited extent, it seems to me that the circumstances were such as to be at least as consistent with a guaranty of an existing indebtedness only as with a purpose to establish a general line of credit to an unlimited extent, and for an indefinite period.’ He accordingly ruled that the instrument signed by the defendant was not a continuing guaranty but was limited to the indebtedness of the C. B. Thomas Company existing before February 8, 1922. In his findings and rulings he concludes: ‘As it was conceded at the trial that such indebtedness had been fully discharged prior to the default in payment by the company in June, 1923, the plaintiffs, upon this construction of the guaranty, are not entitled to recover, even if the instrument should be reformed in accordance with the prayer of the bill.’ A decree was ordered dismissing the bill with costs.

[1] It is plain that it was the intention of the parties that the guaranty was intended to apply to the indebtedness of the corporation to the plaintiffs. It was the corporation and not Claude B. Thomas from whom the debt was due. Thomas individually owed...