Lee v. Butler

• Decision Date: 12 January 1897
• Parties: LEE v. BUTLER.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

167 Mass. 426

46 N.E. 52

LEE v. BUTLER.

Supreme Judicial Court of Massachusetts, Berkshire.

January 12, 1897

The report is as follows: "The administrator's intestate, John Swann, executed the contract of guaranty, a copy of which is hereto annexed marked 'A.' The original may be referred by either party. At that time a negotiation was pending between the claimant, Lee, and Swann, who acted as the representative of the Phoenix Iron & Coal Company, a corporation established under the laws of Georgia in the United States of America for a loan of money by the claimant to the corporation to be secured by mortgage bonds on property in Georgia. It was proposed that the claimant and others should advance moneys as a temporary loan, and should receive as security bonds to an amount much larger than the sum lent, and that the claimant should be paid interest at the rate of ten per cent per annum upon the principal, and also a bonus of twenty per cent. of the principal. The claimant declined to make an advance unless Swann would give his personal guaranty for the payment of the principal and interest. Swann thereupon executed a guaranty, and inclosed it to the claimant, on March 18, 1873, in a letter, a copy of which is hereto annexed, marked 'B.' Subsequently the claimant advanced to Swann, for the corporation, under this arrangement, £4,500, and took Swann's receipt for it, a copy of which is hereto annexed, marked 'C.' The stipulation referred to in the guaranty by the words 'as stipulated' was oral. Interest at ten per cent. was paid on the loan for two years by the corporation, according to the stipulation, and the corporation paid nothing afterwards. In 1880 an arrangement was made between the plaintiff and Swann that Swann should pay interest at the rate of 21/2 per cent. from that time on the principal of the loan until some adjustment of the matter should be made, and he accordingly paid £56. 5s. 0d. semiannually as per the credits given in the account, until a short time before his death, in 1890. Bonds of the corporation amounting in the aggregate to £20,000, being 100 bonds of £200 each, issued by the corporation, bearing date July 1, 1873, and payable July 1 1878, with interest at ten per cent. per annum, secured by a mortgage on real estate in Georgia, and being part of an issue amounting to £100,000, were received from the corporation as security for the claimant's loan and for a loan of £>500, made by one Bailey, a friend of the plaintiff. These bonds were never in the claimant's hands, but were allowed by him to remain in the hands of Swann, as his agent, in whom he had great confidence. Swann and one James M. Smith were the mortgagees to whom the conveyance was made as trustees for the bondholders. Smith resigned his trust, and Swann, as sole trustee, at the request of bondholders, in 1884 proceeded to foreclose the mortgage, and under an order of court sold the mortgaged property to himself as an individual for the nominal sum of $5,000, and held the title in his own name without anything of record to disclose the existence of a trust until his death. In fact, however, he was acting for the bondholders in all the proceedings. No money was paid as a consideration for the sale, and he always recognized the rights of the bondholders as cestuis que trustent. Since his death proceedings have been commenced by the claimant and others, and carried to a final decree, in the court in Georgia, whereby the claimant and others are put in possession of the property as trustees for all the bondholders. So far as the claimant's rights are concerned, it was understood by Swann that what he did in procuring a foreclosure and holding and managing the property was without prejudice to his obligation, if any existed, under his guaranty. At one time, when the claimant signed his consent to a proposed conveyance after the foreclosure, it was done under an express stipulation that he should not thereby be affected in his rights under the guaranty, and Swann in different ways recognized his obligation to the claimant under the guaranty during the last years of his life, and never denied it. The contracts relied on by the claimant were made in England between English subjects. There was no writing to show the contract between the claimant and the corporation in regard to the loan. When the guaranty was received by the claimant, the sum written in it was £>8,000. At some time he crossed out the figures '£8,000,' and inserted '£6,000.' On April 16, 1880, the claimant wrote a letter, a copy of which is hereto annexed, marked 'D.' A copy of the affidavit he filed with the commissioners regarding his claim is hereto annexed marked 'E.' He testifies as follows: 'I altered the sum named in the guaranty from £8,000 to £ 6,000, as it seemed to me that Mr. Swann had made a mistake. I think I must have included Mr. Bailey's £500, which of course, was a mistake on my part. The sum should be £5,400, as shown already, being the money actually advanced with bonus.' I find that the claimant is a man of honorable position, and of good purposes; but, beyond the fact that the change was made by him under the circumstances disclosed, I make no finding in regard to it, as there is no additional affirmative evidence to aid me in determining the claimant's motive which led to the change. The defendant contended that the guaranty showed that the £6,000 had been altered from £5,000. There was no evidence to that effect unless the guaranty itself discloses it. There was no evidence before me to show the value of the property in Georgia now held by the claimant and others as trustees for the bondholders. At the time of the foreclosure, the bonds were surrendered into court, and the title made by the sale under the order of court was absolute. The administrator contends that the contract of guaranty cannot be enforced, because the writing does not contain all the terms and provisions of the contract necessary to determine the rights of the parties, and that, if it was ever enforceable, the claimant made a material alteration in it, which deprived it of binding force; also that parol evidence cannot be received to show what the stipulation was to which the guaranty relates. He also contends that by the foreclosure in Georgia and the subsequent proceedings there the claimant is deprived of any previously existing right to maintain an action upon the guaranty, and in that connection he relies upon the fact that the contract was made in England, and he put in evidence the cases of Lockhart v. Hardy, 9 Beav. 357, and Kinnaird v. Trollope, 39 Ch.Div. 636, to show the law of England. The mortgage and the copies of the records of the proceedings in the court in Georgia may be referred to by either party. The computations made by the commissioners are to be taken as correct. The case is reserved for the consideration of the full court for the determination of the questions of law involved. Such judgment is to be entered as law and justice require. If the court finds that the claimant is entitled to recover £>5,400, and interest at 10 per cent. down to such time as 21/2 per cent. was paid, he is entitled to $39,204; if £4,500, and interest as aforesaid, he is entitled to $32,670."

"A.

"5 Fredericks Place, Old Jewry, E.C., London, 18 March, 1873. Dear Lee: If your principal (£6,000) & interest at 10 per cent. is not paid as stipulated, I hereby make myself responsible for its payment. Yours, sincerely, John Swann.

"W.B. Lee, Esq."

"B.

"5 Fredericks Place, Old Jewry, E.C., London, 18 March, 1873. Dear Lee: The security offered for the temporary loan to the Phoenix Company consists of the bonds of the company to the amount of £100,000. As the price paid by the company for the property involved is $1,000,000, this speaks for itself. I propose to go to New York myself, and I shall, of course, decline to hand over the money unless satisfied that the bonds are right and sound. If the whole issue of bonds are delivered to the lender, he becomes first mortgagee upon a freehold property worth fifty times the amount of the advance. I am willing to make myself responsible for the payment of principal and interest as you request it. It is not my rule, & I should strongly object to do it if I thought there was a shadow of a risk. I am, however, quite satisfied to make myself so responsible, as I should not only be able to sell bonds at once to the amount of your advance, but should have the whole property of the company to fall back on. I am personally acquainted with the land, and know its value. Yours, sincerely, John Swann.

"W.B. Lee.

"P.S. I inclose mem. to the effect above mentioned."

"C.

"London, 30th April, '73. Received of W.B. Lee, Esq., the sum of four thousand & five hundred pounds (£4,500) for investment according to arrangement. John Swann. [ Stamp.] £4,500."

"D.

"North Bradley, Nr. Trowbridge, Wiltshire, April 16th, 1880. My Dear Swann: I have been thinking a good deal over the Phoenix matter. The words of your guarantee are, 'If your principal and interest at the rate of 10 per cent. is not paid as stipulated, I hereby make myself responsible for its payment.' The stipulation was that the interest should be paid half-yearly, and the principal in 1875 (September). I never asked you to do anything till August, 1877, when we had received no interest for over two years, and I was seriously hampered by your failing to keep your engagement. I wrote again in May, 1878, and again in May, 1879, but you did not answer beyond acknowledging the letters. I do not write now to reproach you again with this, but to point out that it is now 1880, and that five years is a long time to allow for 'reasonable delay.' The interest guarantied us by you is £540 per annum, and I

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