Lincoln v. Transamerica Inv. Corp.
| Decision Date | 26 January 1978 |
| Docket Number | No. 44794,44794 |
| Citation | 89 Wn.2d 571,573 P.2d 1316 |
| Parties | Earl LINCOLN and Gloria J. Lincoln, husband and wife, Respondents, v. TRANSAMERICA INVESTMENT CORPORATION, a Washington Corporation, Transway Recreational Corporation, a Washington Corporation, Richard T. McClain and Jane Doe McClain, husband and wife, Fred Mowry and Jane Doe Mowry, husband and wife, Eugene Stock and Harriet Stock, husband and wife, Peter Lind and Jane Doe Lind, husband and wife, Appellants. |
| Court | Washington Supreme Court |
Eugene A. Stock, Marysville, for appellants.
Walgren, Sexton & McCluskey, Gary H. Sexton, Andrew W. Olsen, Bremerton, for respondents.
This action, brought against a corporation which borrowed $20,000 from the plaintiff and against its corporate and individual guarantors, was commenced in Kitsap County, residence of the plaintiff. A timely motion to change the venue to King County, where the corporate defendants had their offices and where some of the individual defendants resided, was denied, as was a subsequent motion to change the venue for convenience of witnesses. An additional motion, made the same day, to change the venue to Mason County was also denied. After a trial to the court, judgment was entered for the plaintiff against the borrower and the guarantors.
On appeal, it is first contended that the court erred in entering judgment against the individual guarantors, their theory being that they were released from liability by virtue of the fact that the respondent extended the time for payment of the debt without their written consent. The debt had been due 3 weeks after the loan was made in October 1974. The Superior Court found that the individual guarantors, who were officers of the corporate defendants, had knowledge of the extension and consented to it. The evidence showed that two of the individual appellants were present at the board meeting at which an offer was made to the respondents to pay an additional $1,000 if they would forbear suit for 1 month. The others, upon learning of the extension, made no objection. According to the evidence and the findings, they were all aware that the corporate debtor did not have the funds to pay the debt.
During the ensuing months, only the sum of $1,500 was paid on the debt. In July 1975, this suit was instituted.
The appellants draw attention to the fact that courts tend to regard the uncompensated surety as a favorite of the law. The liability of such a surety is confined to his express undertaking. The rule is that if a creditor, by positive contract with a principal debtor and without the consent of an uncompensated surety, extends the time of payment without reserving his rights against the surety, he thereby discharges the surety. J. R. Watkins Co. v. Brund, 160 Wash. 183, 294 P. 1024 (1931); Van de Ven v. Overlook Mining & Dev. Co., 146 Wash. 332, 262 P. 981 (1928); Tupper v. Hartman, 121 Wash. 142, 208 P. 1103 (1922); Nelson v. Flagg, 18 Wash. 39, 50 P. 571 (1897); Restatement of the Law of Security § 129(1) (1941). See Annot., Guarantor of nonnegotiable obligation as released by creditor's acceptance of debtor's note or other paper payable at an extended date, 74 A.L.R.2d 734 (1960).
The reasons usually given for this rule are that an extension of time alters the surety's contract and that it deprives him of the right to pay the debt and proceed against the principal as soon as the debt becomes due, as a consequence of which his right of subrogation may be adversely affected.
The guarantor, however, is not released if he consents to the extension of time. The lower court in this suit found, upon substantial evidence, that the guarantors consented to the extension. The appellants do not seriously challenge this finding, but contend that the consent was not valid because it was not in writing. No authority is cited for the proposition that written consent is required if the surety is to be held.
The extension "agreement" itself was not in writing. It is not clear that the respondents entered into a binding agreement to extend the time of payment. All that the record actually discloses is that someone, supposedly speaking on behalf of the debtor corporation, offered to pay the respondents an additional $1,000 if they would forbear suit for an additional 30 days. We are not called upon to determine whether this verbal transaction resulted in a binding obligation on the part of the respondents to extend the time of payment, since we approve the Superior Court's finding that the guarantors consented to the arrangement. Insofar as we can ascertain, the courts have never required that consent to an extension must be evidenced by a writing, and we are shown no reason why such a requirement should be imposed.
While not making an argument that the fact is determinative, the respondents point out that the individual guarantors were all principal stockholders and/or officers of the debtor and guarantor corporations. There is a line of cases which holds that a principal stockholder who signs a note with a corporation intending to be bound only as a surety is not entitled to the same liberality of treatment which the law accords to a voluntary surety, and that where an extension of time is granted to the corporation for a consideration, the stockholder, although he did not consent to the extension, is not released, unless he suffered some actual injury as a result of the extension. The leading case is First Nat'l Bank v. Livermore, 90 Kan. 395, 133 P. 734 (1913), and the cases are noted in W. Shattuck, Washington Materials on Suretyship at 19-3 (rev.1964). These cases proceed upon the theory that both the loan and the extension of the time of payments benefit the corporation's officers and stockholders by reason of their interest in the debtor corporation, making them akin to the compensated surety, who, according to the general rule, is not released by an extension. Restatement of the Law of Security § 129(2) (1941).
In this case, there is no contention that the appellants lost any advantage or suffered any injury as a result of the extension of time to the debtor.
The doctrine of First Nat'l Bank v. Livermore, supra, which would appear to be grounded upon an assumption which is generally valid, strengthens the inference of consent which the trial court drew from the appellants' acquiescence in the extension of time.
During the presentation of findings, the appellants asked the court to amend the pleadings to conform to the proof which, they maintained, showed the transaction was usurious. Error is assigned to the denial of that motion. The appellants concede that usury is an affirmative defense, which under CR 8 must be pleaded. While they rely upon the rule that pleadings will be deemed amended to conform to the proof, they do not point to any evidence establishing the fact that the "finder's fee" of $1,000 which the guarantors agreed to pay, in addition to the $20,000 loaned, was usurious interest and not payment for services. Furthermore, they offer no legal argument that the transaction, or the subsequent offer to pay an additional $1,000 if suit was not instituted for 30 days, was usurious. We cannot hold this transaction usurious on its face.
Every amount paid to a lender is not necessarily a charge for the use of the money. The courts of this state have recognized that payment for services is not payment for the use of money (Peoples Nat'l Bank v. National Bank of Commerce, 69 Wash.2d 682, 420 P.2d 208 (1966) ) and that a "finder's fee" may indeed be referable to services rendered rather than to compensation for the loan of money. Maynard v. England, 13...
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...cases are rarely grounds for relief without a showing of prejudice to the losing party. For example, in Lincoln v. Transamerica Investment Corp., 89 Wash.2d 571, 573 P.2d 1316 (1978), we held that a successful posttrial challenge to venue required the challenger to show prejudice, on the gr......
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...126, 639 P.2d 240 (1982). The trial court's decision will be upheld absent an abuse of discretion. Lincoln v. Transamerica Inv. Corp., 89 Wash.2d 571, 577, 573 P.2d 1316 (1978). The trial court denied Denny's claim based upon Doyle v. Planned Parenthood, apparently finding the mutual mistak......
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...P.2d 352 (1998) (citing Herron v. Tribune Pub'g Co., Inc., 108 Wn.2d 162, 165, 736 P.2d 249 (1987)). 31. Lincoln v. Transamerica Inv. Corp., 89 Wn.2d 571, 577, 573 P.2d 1316 (1978) (citing Weihs v. Watson, 32 Wn.2d 625, 203 P.2d 350 (1949)). 32. State v. Stenson, 132 Wn.2d 668, 701, 940 P.2......