Welch v. Walsh

• Decision Date: 26 February 1901
• Citation: 177 Mass. 555,59 N.E. 440
• Parties: WELCH et al. v. WALSH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

177 Mass. 555

59 N.E. 440

WELCH et al. v. WALSH.

Supreme Judicial Court of Massachusetts, Suffolk.

February 26, 1901

COUNSEL

Shepard, Stebbins & Stores, for plaintiffs.

Brandeis Dunbar & Nutter and William H. Dunbar, for defendant.

OPINION

LORING J.

The evidence which was excluded would have warranted a finding that the plaintiffs conducted themselves in the matter of collecting the rent now sued for without that care which a man of ordinary prudence would have devoted to it, and that the defendant has suffered from not knowing that the rent was not paid by the tenant for 23 months before the plaintiffs made a demand upon him for it; but it would not have warranted a finding of fraud, or facts tantamounts to fraud. The defendant contends that those facts would have made out a defense to the action, and relies upon a statement in the opinion of Wells, J., in Vinal v. Richardson, 13 Allen, 521, 532. He also relies upon Bank v. Haynes, 8 Pick, 423, and the numerous cases in this commonwealth which have recognized or followed that case; and also upon Douglas v. Reynolds, 7 Pet. 113, 8 L.Ed. 626; Reynolds v. Douglas, 12 Pet. 497, 9 L.Ed. 1171; and the opinion of Matthews, J., in Davis v. Wells, 104 U.S. 159, 161, 26 L.Ed. 686. It is true that there is a statement in the opinion of Mr. Justice Wells in Vinal v Richardson which supports the defendant's contention. In that case he said: 'Formal notice is not necessary in order to charge the guarantor with liability. All the cases agree that in this respect there is a distinction between an indorsed and a guarantor. Negligence of the holder of the guaranty in permitting the claim to slumber when the guarantor might reasonably suppose it had been paid when due, or in the usual course of business, is the real ground on which the guarantor is exonerated. It is delay without notice, not the bringing of a suit without notice, that is fatal to the holder of the guaranty.' But that proposition, which was obiter in Vinal v. Richardson, is not consistent with Insurance Co. v. Simmons, 131 Mass. 85, not cited at the argument in the case at bar, unless a distinction is to be drawn between a guarantor of rent to be paid each month and sureties on a bond conditioned for the monthly payment of sums to be collected by the principal of the bond. Insurance Co. v. Simmons, was a case where suit was brought against the sureties on a bond, with the condition which I have just stated, and the defense set up was that the plaintiff had failed to notify the sureties that for 13 months before a demand was made upon them the principal and failed to make payment in full of the sums collected by him. It was held that this was not a defense, and on the ground that 'the creditor owes no duty of active diligence to take care of the interest of the surety. It is the business of the surety to see that his principal performs the duty which he has guarantied, and not that of the creditor.' The defendant's difficulty in this case is to make out that a lessor owes any duty to one who has guarantied the payment of rent. It was settled in Vinal v. Richardson, after deliberate consideration, that notice to the guarantor that the tenant has not paid the rent is not a condition on which the guarantor's liability depends. The defendant now contends that, though the guarantor becomes liable upon the default in payment of the rent without notice of it, yet, if the lessor subsequently fails to give notice of that default to the guarantor, and the guarantor suffers damage therefrom, the guarantor is discharged. Where no duty is owed there cannot be negligence, as was lately decided by this court in Lumber Co. v. Eldridge, 171 Mass. 516, 51 N.E. 9, 41 L. R. A. 617. See, also, Gun-Cotton Co. v. Wilson, 49 Law J. Q. B. 713. The defendant has undertaken to make out that there is a duty on the creditor to give notice to the guarantor. He has undertaken to establish this, in the first place, on general principles, which are common to all cases, where persons are secondarily liable. His proposition is that in every such case a creditor is bound so to conduct himself in dealing with one primarily liable as not unnecessarily or unreasonably to injure one secondarily liable. But no such duty is owed to those secondarily liable. The duty owed them is a much narrower one. It is to do no act which affects the rights to which the surety is subrogated on meeting his guaranty either in property held by the creditor as security for the debt guarantied, or to bring suit against the principal debtor. If the creditor abstains from doing such an act, he has performed his whole duty to the surety. There is not duty upon a surety to take active measures to collect the debt from the principal debtor, or to notify the person secondarily liable that the principal debtor is in default. No authority beyond Bank v. Sawyer (Mass; Jan., 1901) 59 N.E. 76, and Insurance Co. v. Simmons, 131 Mass. 85, need be cited to that point.

There was nothing in the terms of the contract of guaranty in the case at bar which cast upon the lessor the duty of giving to the guarantor notice that the rent had not been paid. The terms of the guaranty in this case were that the defendant does 'hereby guaranty to the said lessors, their heirs and assigns, the true and punctual payment of the rent taxes, and interest reserved at the times and in the manner mentioned, and, in default thereof, promise to pay the same on demand.' That is an absolute, unconditional guaranty that the rent shall be paid, coupled with a promise to pay the same on demand being made upon the guarantor, in case there is a default in the payment of rent by the lessee. If, therefore, there was any duty upon the lessor to give notice to the guarantor that the rent was in default, it must be found in the nature of the contract of a guarantor; and, after the decision in Insurance Co. v. Simmons, in the nature of the contract of a guarantor, as distinguished from the contract of a surety on a bond, such as was before the court in that case. The difference between the contract of a guarantor and the contract usually entered into by a surety is that in case of a guarantor the promise of the person secondarily liable is a collateral promise to pay in case default is made by one who is primarily liable for the thing guarantied, while a surety contracts directly as a principal to pay the sum of money for which he is secondarily liable. See Bigelow, J., in Allen v. Herrick, 15 Gray, 274, 285. So far as this difference is concerned, the contract of the surety upon a bond conditioned for the payment of sums collected by a third person partakes of the nature of the contract of a guarantor, and not of the contract of a surety. Moreover, in one of the eariliest cases in England in which it was held that notice to a guarantor was not a condition precedent to his liability, the decision was put upon the ground that no such duty was owed by the creditor to the guarantor. It is the case of Brookbank v. Taylor, in the exchequer chamber, and reported in Cro. Jac. 685. That was a writ of error brought in an action to...