Merrimack Valley Nat. Bank v. Baird
| Decision Date | 08 June 1977 |
| Citation | 363 N.E.2d 688,372 Mass. 721 |
| Parties | MERRIMACK VALLEY NATIONAL BANK v. G. Stewart BAIRD, Jr. (and three companion cases 1 ). |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Richard J. Sheehan, Jr., Haverhill, for plaintiff.
Stephen M. Lalikos, Danvers, for defendants.
Before HENNESSEY, C.J., and QUIRICO, BRAUCHER, WILKINS and ABRAMS, JJ.
This is a consolidated appeal involving four contract actions which were tried together. A judge of a District Court found for the defendants, and the plaintiff appealed to the Appellate Division of the District Courts, Northern District, which dismissed its report. Thereafter the plaintiff appealed to this court. We conclude that there was error and that the order dismissing the report must be reversed.
The evidence showed that the defendants signed 2 and delivered to the Merrimack Valley National Bank (bank) a standard form guaranty contract on which one guarantor-signer had written, 'For $10,000.00 Nov. 12, 1969 For 120 days.' Under the standard form contract the defendants guaranteed '(f)or valuable consideration,' all obligations of Bliss/Pack, Inc., 'now existing or hereafter arising, which are incurred prior to the receipt by the Bank of written notice of the revocation of this guaranty.' They also waived 'notice of any loans made, extensions granted, or other action taken in reliance hereon and . . . assent(ed) to any renewal, extension or postponement of the time of payment or any other indulgence.' A typewritten insertion in the contract form stated that maximum liability thereunder was 'as detailed below.' See note 2 supra.
After delivery of the instrument, the bank and Bliss/Pack, Inc. (Bliss/Pack), executed a demand note for $19,700. Between November 21, 1969, and February 27, 1970, the bank made additional loans to Bliss/Pack of $73,000.
On January 3, 1972, the bank for the first time made demands on the defendants as guarantors for payment of Bliss/Pack's loans. Subsequently the defendants were notified that there were insufficient funds available, under a bankruptcy proceeding against Bliss/Pack in the United States District Court, to pay outstanding Bliss/Pack loans, and that the bank looked to the defendants for payment of $10,000 in accordance with the terms of their personal guaranties. The defendants refused to pay this sum.
The trial judge in the instant cases decided that the defendants intended to limit the time of their guaranty by adding the restrictive phrase, 'For $10,000.00 Nov. 12, 1969 For 120 days,' to the guaranty contract. The judge concluded that the defendants were not liable to the bank under their guaranty contract because the bank failed to demand repayment from them within the contract period of 120 days. In addition, the judge ruled that the bank's involvement (without the defendants' consent) in the attempted reorganization of the bankrupt corporate promisor as matter of law discharged the defendants of their obligations as guarantors.
As shown by the language of its written opinion, the Appellate Division based its decision essentially on reasoning that the handwritten language in the contract limited in time all obligations of the defendants, and that their potential liability was ended when the bank failed to make demand of the defendants within the 120-day period.
The bank disputes these conclusions. It argues that the restrictive phrase added to the guaranty contract imposed a limit on the time during which it could extend credit to Bliss/Pack in reliance on the defendants' guaranty. If further maintains that the defendants waived their right to claim discharge of their obligation due to the bank's reorganization dealings with the corporate promisor in the guaranty contract and because the defendants themselves had knowledge of Bliss/Pack's attempt to reorganize under C. 11 of the Bankruptcy Act. The bank seasonably filed appropriate requests for rulings raising these matters, and the requests were denied by the judge.
After examination of the record before us, we conclude that the phrase 'For 120 days' did not limit the duration of the guaranty but, instead, limited the period during which the bank could extend credit in reliance on the guaranty. In addition, we conclude that the defendants waived the necessity for assent to changes in the payment schedule established by the bank and the corporate promisor. Consequently, we hold that the judge below erred in ruling the defendants not liable to the bank on their guaranty contract.
1. The defendants' liability as guarantors is ascertained from the terms of the written contract. Schneider v. Armour & Co., 323 Mass. 28, 30, 80 N.E.2d 34 (1948). When the words of a contract are clear they alone determine the meaning of the contract but, when a contract term is ambiguous, its import is ascertained from the parties' intent as manifested by the guaranty's terms and the circumstances surrounding its creation, such as relationship of the parties, actions of the parties and established business usages. Zeo v. Loomis, 246 Mass. 366, 368, 141 N.E. 115 (1923). See Schneider v. Armour & Co., supra; Standard Plumbing Supply Co. v. LaConte, 277 Mass. 497, 499, 178 N.E. 611 (1931). Clearly the language 'For 120 days' created ambiguity, particularly since it contradicted language in the printed contract which provided that the guaranty extended to all loans made prior to written notice of revocation by the guarantors. However, the record in these cases sheds no light on the parties' intent with regard to the term 'For 120 days.' 3 Contrast Sullivan v. Arcand, 165 Mass. 364, 43 N.E. 198 (1896) (). Therefore, we look to the rules of contract construction to establish the legal meaning of the term 'For 120 days' as employed in this contract.
As a general rule, a writing is construed against the author of the doubtful language, Wright v. Commonwealth, 351 Mass. 666, 673, 223 N.E.2d 666 (1967), if the circumstances surrounding its use and the ordinary meaning of the words do not...
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