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Hamilton Trust Co. v. Shevlin

156 A.D. 307 Court Second Department, Decision date 1913-04-11 Docket Appeal No. 1; Appeal No. 2 English

Delivered by Burr, J.:

Contents

Majority

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Hamilton Trust Company, Appellant, v. James Shevlin, Respondent. Hamilton Trust Company, Appellant, v. James Shevlin, Respondent.
(Appeal No. 1.)
(Appeal No. 2.)
Second Department,
April 11, 1913.

Headnote

Guaranty and suretyship — guaranty strictly construed — contract guaranteeing repayment of loans made to five persons—no recovery for individual loans — demurrer construction of written contract not admitted — leave to pl%ad over.
A guarantor is bound only, by the strict letter or precise terms of his contract, and the claim against him is strictissimi juris.
Where a written contract under seal is unambiguous, parol evidence of surrounding circumstances and facts is inadmissible to determine its meaning, for that may not be interpreted which needs no interpretation:
A complaint against a guarantor which in substance alleges that the plaintiff loaned certain sums of money to four persons named which are due, and sets forth a written contract whereby the defendant, having acknowledged that sums of money differing in amount from those alleged by the plaintiff had been loaned to five persons named and that these persons desired to borrow more money of the plaintiff up to a certain sum, guaranteed the payment of the loans already made and those which might be made to said five persons in the future, fails to state a cause of action to recover moneys subsequently loaned to four of the five persons named in the defendant’s contract.
The contract of guaranty having been set forth at length in the complaint, a demurrer does not admit any construction put upon it by the " pleader.
Leave to plead over after a demurrer has been sustained is not a matter of absolute right but of favor, and it is not an abuse of discretion to deny such leave where the plaintiff has already twice attempted to state a cause of action without success. Especially is this so where an action on the instrument in suit is not barred by the Statute of Limitations, and the judgment sustaining the demurrer is not upon the merits.
A second application to serve an amended complaint should be denied where the proposed complaint does not state a cause of action in that it does not seek to reform the contract of guaranty upon which the suit is brought, and which has been held to be insufficient to charge the defendant with liability.
Appeal by the plaintiff, the Hamilton Trust Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Kings on the
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6th day of September, 1912, upon the decision of the court, rendered after a trial at the Kings County Special Term, sustaining- a demurrer to the amended complaint and dismissing the same, and also from an order entered in said clerk’s office on the 9th day of May, 1912,. denying the plaintiff’s motion for leave to further amend the complaint.
• Also an appeal by the plaintiff, the Hamilton Trust Company, from an order of the Supreme Court, made at the Kings County Special Term and entered in the office of the clerk of the county of Kings on the 24th day of December, 1912, denying the plaintiff’s motion to vacatb and set aside the final judgment above appealed from and denying a second application to serve an amended complaint.
Frank Sullivan Smith [Edward J. Connolly with him on the brief], for the appellant.
Augustus Van Wyck, for the respondent,

Plaintiff appeals from a final judgment, granted May 9,1912, but not entered and filed until September sixth of the same year, which sustains a demurrer to its amended complaint upon the ground that it did not state facts sufficient to constitute a cause of action. It also appeals from an order made May 9, 1912, denying a motion for leave to serve a second amended complaint. Plaintiff also appeals from an order made Decem- . her 24, 1912, denying a second motion for leave to serve a further amended complaint. As part of the relief then sought for,'plaintiff asked that the judgment above referred to be vacated.

. The amended complaint, declared insufficient by said judgment, set forth that on June 14,. 1900, plaintiff loaned to John Keenan the sum of $65,000; that on February 1, 1901, it loaned to John McCarty the sum of $5,000; that on June 27, 1900, it loaned and advanced to Michael J. Coffey the sum of $10,000, and that on July 18, 1900, it loaned and advanced to Fred 0. Cocheu the sum of $7,000. It further alleged that each of these loans matured and became payable prior to the com

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mencement of this action, and prayed for judgment for the balance remaining unpaid upon these various . loans, with interest from the dates of the maturity thereof. It states as the ground of defendant’s liability that on December 20, 1899, he, together with one P. H. Flynn, executed and delivered an agreement in writing and under seal, in form following:
“ Whereas, John McCarty, Michael J. Coffey, Fred C. Cocheu, Michael J. Kennedy, John Keenan, have applied for and have received from the Hamilton Trust Company certain sums of money, to wit: $50,000.00 on Bonds of the Jersey City Water Supply Company, $70,000.00 par value, and $30,000.00 on the Guarantee Trust' Company certificates of the Nassau Electric Railroad, $35,200.00 par value, and
“ Whereas, the said parties intend to ask from the said Hamilton Trust Company for (sic) other loans from time to time, not to exceed in the aggregate the sum of $250,000.00 —
“ Now therefore, this memorandum witnesseth; that in consideration of the premises and other good consideration, we Patrick H. Flynn and James Shevlin .of the Borough of Brooklyn, do hereby jointly and severally guarantee to the said Hamilton Trust Company and its successors and assigns, the payment of the said loans already made as aforesaid, and all other loans which may be made to the said parties, to the sum of $250,000.00 with interest according to the terms of the said loan; to which guarantee and payment, we hereby bind ourselves, our heirs and assigns.”

It will be observed that the subject-matter of said agreement may be resolved into two parts, that which relates to loans previously made by plaintiff, amounting in the aggregate to $80,000, and that which relates to loans subsequently to be made by plaintiff, not to exceed in the aggregate $250,000. Each of the loans for which recovery is here sought falls within the latter class. The agreement of guaranty, construed apart from any circumstances surrounding its execution, clearly contemplates liability on the part of the obligors, for loans made to five persons jointly, and not a loan or loans made to one or more of them individually. An analysis of its provisions demonstrates this. The 1st paragraph, which relates wholly to loans then, existing and which have since been paid,, except

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as the recital therein may throw light upon the subsequent provisions thereof, is of no materiality. The 2d paragraph begins as follows: “ Whereas, the said parties,” etc. To ascertain to whom reference is made, we must look to the parties previously named, and substituting for the words “said parties ” the proper names used in the preceding clause, the agree-. ment then reads: “ Whereas, John McCarty, Michael J. Coffey, Fred 0. Cocheu, Michael J. Kennedy, John Keenan, intend to ask from the said Hamilton Trust Company for (sic) other loans from time to time,” etc. “Now Therefore, * * * we * * * do hereby jointly and severally guarantee to the said Hamilton Trust Company * * * the payment of * * * all other loans which may be made to the said parties,” etc. The words “ said parties ” must necessarily refer to those previously named, with like effect as if the names had been repeated.

The rule is well settled that a guarantor is bound only by the strict letter or .precise terms of his contract, and that the claim against him is strietissimi juris. (Creamer v. Mitchell, 162 N. Y. 477 ; Guardian Trust Co. v. Peabody, 122 App. Div. 648 ; affd., 195 N. Y. 544 .) So a guaranty given for advances to be made to a firm will not cover advances made to individual members thereof. (De Coly. Guar. [3d ed.] 291; Brandt Sur. [3d ed.] § 134; Cremer v. Higginson, 1 Mason, 323.) In that case the guaranty was in the form of a letter, as follows: “The object of the present letter is, therefore, to request you; if convenient, to furnish them [Messrs. Stephen and Henry Higginson] with any sum they may want, as far as fifty thousand dollars; * * *. We shall hold ourselves answerable to you for the amount.” In that case Justice Story, in charging the jury, said: “If there be anything clear in this case, it is, that the advances are to be made to Stephen Higginson, Jr., and Henry Higginson, then copart- • hers in trade, under the firm of S. & H. Higginson. It follows, therefore, that it covers only advances made to them jointly on their joint credit, and not advances made to them severally upon their several credit. Unless then it shall be completely establishéd, that the advances were made on the joint account of the firm, there is an end of the plaintiffs

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case.” So, also, it has been held that a guaranty for advances to be made to a firm will not apply after change in the membership thereof (Burch v. De Rivera, 53 Hun, 367 ; Penoyer v. Watson, 16 Johns. 100 ), nor will a. guaranty to pay for supplies furnished by an individual apply to supplies furnished by a firm of which he is a member. (Barns v. Barrow, 61 N. Y. 39 ; Holmes v. Small, 157 Mass. 221 .) As the court said in Barns v. Barrow (supra), “no person can be added to or subtracted from the apparent number.” After naming certain persons, defendant guaranteed to pay loans made to them, describing them as “said parties.” As Lord Ellen-borough said in Strange v. Lee (3 East, 484): “Now who are ‘them’ but the persons before named. * * * The words will admit of no other meaning.” Appellant, while conceding that when the subject of the contract is finally ascertained a guarantor has the right to this strict construction, contends that in determining what is the subject thereof the contract should be fairly construed according to the reasonable rules for the interpretation of contracts. (Ulster County Savings Inst. v. Young, 161 N. Y. 23 ; Guardian Trust Co. v. Peabody, supra.) But when the words of a written contract under seal are unambiguous, parol evidence of surrounding facts and circumstances is not admissible. (McShane Co. v. Padian, 142 N. Y. 207 .) That may not be interpreted which requires no interpretation. We hold this contract to be of such a character. But if otherwise, the allegations contained in the complaint under consideration are insufficient to justify any other construction. The only allegation of fact bearing upon the construction of the contract, outside of the written words thereof, is “ That at divers times prior to the making of the said agreement loans had been made by plaintiff for various sums to each of four of the parties mentioned in said agreement, namely, the said McCarty, the said Coffey, the said Cocheu and the said Kennedy. ” There is no allegation that defendant knew of that fact, or that he had contracted with reference thereto. But if such were the case, inasmuch as in addition to the said four parties, the contract of guaranty in naming the parties added a. fifth, to whom no loan had been previously made, to wit, John Keenan, and then undertook the
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payment of loans to “ said parties,” if any inference is to be drawn from this circumstance it is that defendant did not undertake to guarantee the payment of loans to individuals, but limited his liability to loans in which not only the four persons named, but a fifth person, Keenan, should be liable as principals. The succeeding allegations that the “ agreement was given to secure those-loans,” referring to the loans to the four individuals, and to “guarantee their payment and the payment of any other loans that might be made subsequent thereto to the said parties mentioned therein, or to any or either of them,” and that such loans, were “for the benefit of the defendants and with their knowledge, consent and authority,” and that the various loans specified were made “pursuant to the terms of said agreement, and on the strength thereof, and in reliance thereon ” are neither of them allegations of fact, but conclusions of law. And the contract itself having been set forth at length in the complaint, a demurrer thereto does not admit any construction put upon said contract by the pleader, nor the correctness of any inference drawn by him from the facts alleged. (Greeff v. Equitable Life Assurance Society, 160 N. Y. 19 ; Bonnell v. Griswold, 68 id. 294; Hirsch v. New England Navigation Co., 200 id. 263.) The judgment sustaining the demurrer was, therefore, properly granted.

The order of May 9, 1912, denying a motion to serve a further amended complaint was properly made. Leave to plead over after a demurrer has been sustained, while frequently granted, is not a matter of absolute right, but of favor. The discretion exercised by the court at Special Term in this instance was not improperly exercised. Twice before plaintiff had attempted to state a cause of action against the defendant without success. No proposed second amended complaint was made a part of 'the motion papers from which the court might determine whether plaintiff had finally succeeded in its effort. Plaintiff is not prejudiced by. the denial thereof. The action being upon a sealed instrument, the Statute of Limitations has not run upon plaintiff’s claim, if it has any (Code Civ. Proc. § 381), the judgment is not an adjudication upon the merits, and if plaintiff has to pay the. costs awarded thereby before commencing a new action, these are no greater in amount

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than are ordinarily imposed when permission to plead over is given.

We think also that the order of December 24, 1912, denying a second application to serve an amended complaint, should also be affirmed. Such a motion had been once made and denied, and no permission had been given to renew the same. But upon the merits this order was also properly made. In this instance a proposed amended complaint was made a part of the motion papers, This also we deem insufficient. The plaintiff does not seek to reform the agreement of guaranty on the ground either of mutual mistake or fraud. It does seek to set up certain alleged facts which it claims bear upon the construction and interpretation thereof. If we are right in our previous conclusion, such evidence would be inadmissible upon the trial. But, even if evidence of these facts should be admitted, it is insufficient to sustain plaintiff’s contention. The additional facts set forth in the third proposed amended complaint are that the loans of $50,000 and $30,000, mentioned in the said agreement as having been made prior to the execution thereof, were individual loans made to one of the parties mentioned in the said agreement, to wit, the said Cocheu, and that defendant ratified and confirmed the said agreement by consenting in writing on February 8, 1902, to the release by plaintiff of certain securities which had been deposited with plaintiff for individual, loans to Michael J. Coffey, and again in February, 1902, by consenting to the . release of certain other securities deposited with plaintiff for individual loans made to John McCarty. There is no allegation that defendant knew of these facts, and he interposes an affidavit in opposition, asserting that he had no such knowledge. But if we read that fact into the agreement, it does not enlarge its scope. It would then read substantially as follows: “Whereas, Fred C. Cqcheu has applied for and received from the Hamilton Trust Company certain sums of money, to wit, $50,000 and $80,000, and whereas John McCarty, Michael J. Coffey, Fred C. Cocheu, Michael J. Kennedy and John Keenan, intend to ask from the said Hamilton Trust Company for other loans,” etc., and the contract of guaranty would then be to pay the loans already existing made to Cocheu, “and all other

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loans .which may he made to the said parties:” It well might he that defendant was willing, in view of the security deposited for the existing loans, to guarantee Cochéu’s individual debt, whereas he would not be willing to guarantee future loans which might be made with or without security, unless all of the parties named, were liable as principals for the payment thereof. This we think Was the clear intention. Again, defendant’s consent to the release of certain- securities held as indemnity for individual loans to Coffey and McCarty, could not be deemed a practical construction upon his part of the terms of said agreement, to the effect that he would be responsible for any loan made to either of the parties up to the amount of $250,000. There is no suggestion that either of the loans for which recovery is sought in this action was among those for which such securities had been given, and if it were the fact, there is no allegation that defendant knew that these loans had been made to Coffey and McCarty as individuals, and not to the entire number of persons for whom defendant became surety, each of whom would still remain liable for the payment thereof.'

The judgment appealed from should he affirmed, with costs, and each of the orders above referred to should also be affirmed, with ten dollars costs and disbursements.

Thomas, Carr, Rich and Stapleton, JJ., concurred.

On the first appeal judgment affirmed, with.costs, and order of May 9, 1912, affirmed, with ten dollars costs and disbursements. On the second appeal order affirmed, with ten dollars costs and disbursements.

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