Lanier v. Wyman — 28 N.Y. Super. Ct. 147

Majority

p. 147

James F. D. Lanier, plaintiff and appellant, vs. Luther B. Wyman et al. defendants and respondents.

Headnote

1. A written contract can be reformed only when the mistake is mutual. Both parties must understand it alike.

2. In an action against sureties, to recover rent, the defendants alleged in their answer, and proved that they understood they were to be sureties as for a rent of $900, and that the guaranty was executed by them under a mistake of facts; but it was not averred in the answer, or proved, that the plaintiff had the same understanding of the agreement; Held that neither the matter set up in the answer, nor the proof, was sufficient to authorize a reformation of the contract, so as to conform it to the understanding of the defendants.

3. The plaintiff, by lease, dated April- 29, 1862, leased certain premises to a tenant for the term of one year from the last day of April, 1862, at a yearly rent of $100, payable quarterly. The defendants thereupon executed an instrument whereby, in consideration of the letting of such premises to such tenant, they covenanted with the lessor that if default should at any time be made by such tenant “in the payment of the rent and performance of the covenants before contained on her part to be paid and performed,” they would pay “ the sum of $800 of the said rent, or any arrears thereof that might remain due, to the lessor to that extent, and no more." On the 14th of March, 1863, the plaintiff again leased the premises to the same tenant for the term, of one year from the 1st of May, 1863, at the yearly rent of $1100, payable quarterly; and the defendants executed another instrument which recited such lease, whereby they covenanted that in case of default by the lessee in the payment of rent, they would “ pay $900, or any arrears thereof that remain due, unto the ” lessor, “ and also all damages ” that might “ arise in consequence of the nonperformance of said covenants, or either of them, without requiring notice of any such default from the ” lessor. The tenant paid three quarters of the rent due on the second lease, amounting to $825. In an action to recover a quarter’s rent, amounting to $275, due on the 1st of May, 1864, not paid by the tenant; Held that the defendants undertook by their covenants, that if the tenant was in default at any time in the'payment of her rent, whether of the whole or only a portion, or for the first or last quarter, they would pay such arrears to the extent of $800, for the first year, and $900 the second. And that consequently the plaintiff was entitled to recover the whole of the rent in arrear at the end of the term, as the sum due did not exceed $900.

4. The words of a guaranty are to be taken" as strongly against the party giving it as the sense of them will admit; and care should be taken to hold the party bound to the full extent of what appears to be his engagement. Ter Monell, J.

(Before Robertson, Ch. J., and Monell and Garvin, JJ.)

Heard June —, 1867;

decided-, 1867.

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The plaintiff leased to Laura A. Shepherd, by lease dated April 29, 1862, certain premises at Clifton, Staten Island, for the term of one year from the last day of April, 1862, at the yearly rent of $1000, payable quarterly. The defendants signed and delivered to the plaintiff an instrument as follows: -

“In consideration of the letting of the premises before mentioned to the aforesaid Laura A. Shepherd, we do hereby covenant and agree to and with the party of the first part, before named, or his legal representatives,, that if default shall at any time be made by the said Laura A. Shepherd, the party of the second part, in the payment of the rent and performance of the covenants before contained on her part to be paid and performed, that we will well and truly pay the sum of $800 of the said rent, or any arrears thereof that may remain due, to the party of the first part, to that ' extent and no more.”

On the 14th of March, 1863, the plaintiff again leased to Shepherd the same premises for the term of one year from the 1st of May, 1863, at the yearly rent of $1100, payable quarterly, The defendants again signed and delivered to the plaintiff an instrument as follows:

“In consideration of the letting of the premises above mentioned to the above named Laura A. Shepherd, we do hereby covenant and agree to and with the party of the first part, above named, or his legal representatives, that if default shall at any time be made by the said Laura A. Shepherd in the payment of the rent and performance of the covenants above contained, on her part to be paid and performed, that we will well and truly pay $900, or any arrears thereof that remain due, unto the said party of the first part, and also all damages that may arise in consequence of the non-performance of said covenants, or either of them, without requiring notice of any such default from the said party of the first part.”

Shepherd paid three quarters of the rent, amounting to $825. On the 1st of May, 1864, a quarter’s rent, amounting

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to $275, became due and payable, to recover which the action was brought against the defendants upon the instrument executed by them.

The defendants set up in their answer that when the first lease and guaranty were signed, it was agreed between the defendants and the plaintiff that the defendants would become sureties to the extent of the yearly rent or sum of $800, so that they should1 be and become only liable for any deficiency or arrears of rent, upon the basis of such yearly rent of $800; and that their obligation was not to extend beyond the amount of any such arrears or deficiency. That when the second lease and guaranty were signed, it was agreed that the defendants would again become sureties to the extent of the yearly rent or sum of $900; so that, as while between Shepherd and the plaintiff, she was liable to pay the yearly rent of $1100, as between the defendants and the plaintiff, they were to be liable only upon the yearly rent of $900; their liability being limited to making good any deficiency or arrears of said yearly sum of $900; and that they were in no event to be called on to pay any greater sum than the difference between such sum as Shepherd should pay and the sum of $900. That, thereupon, they signed the guaranty which they supposed truly set forth the said agreement; and they aver that so far as said instrument differs or varies from or is inconsistent with the agreement, the same was executed by them under a mistake of facts, and was procured by the plaintiff to be executed by them under such mistake; and that, in so far as said instrument differs or varies from the said agreement, it does not truly set forth the agreement, and should be reformed by the court so as to express the said agreement. The defendants denied any liability to the plaintiff.

The action was tried before Justice Garvin and a jury.

The defendants were allowed to prove, against the plaintiff’s objection, conversations between themselves and the plaintiff’s agent, tending or designed to prove the agreement set forth in the answer. And the declarations of the

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agent were proved to the effect, that the plaintiff had agreed to accept security for a rent of $800, taking the risk of Mrs. Shepherd for $200, for the first year; that the rent was $1000; hut if the defendants would become security in a rent of $800, the plaintiff would rent the premises; that they asked the agent what the guaranty meant, and he said if the defendants would hold themselves liable to the amount of $800, the plaintiff would take the risk of the other $200 from Mrs.. Shepherd. The defendants were allowed further to prove, against the plaintiff’s objection, that on the last year Mrs. Shepherd called on the defendants, with the plaintiff’s agent, saying the rent was increased $100, and wishing them to become security to the amount of a rent of $900, adding $100 to the year previous, which • they agreed to do on the same conditions; that the plaintiff’s agent told them the conditions were precisely the same as the year before, except there was $100 in addition to the rent, and that the plaintiff would require them to become responsible to add $100 to their liability. The plaintiff’s objection's to all the evidence were overruled, and she excepted.

It was proved by Wyman, one of the defendants, that he read the instrument before signing; Whitney, the other defendant, said that he was in doubt whether he did so.

The justice charged the jury, that the construction of the surety clause in the first lease, as matter of law, was, that the defendants were liable up to the amount of $800, and no more; when that sum was paid, either by the tenant or by them, no matter how much rent might remain due to the plaintiff afterwards, the defendants were not liable for any further sum. It was submitted to the jury to say whether the defendants read and understood the last paper; they were instructed that if the defendants relied entirely upon the verbal arrangement made between themselves and the plaintiff’s agent, and did not read the paper sufficiently to see that it varied from .the former contract, and supposed it expressed the same thing, then they would be liable for

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$87.75 only. That if the parties mutually understood what was put down on the paper, and took the printed form and signed it, inserting $900 instead of $800, without considering what its effect would be, believing the contract to be the same in terms as the first one, then the contract should be made to conform to the first one.

Several requests t® charge were made, substantially the converse of what was charged, which were refused.

The plaintiff duly excepted to the charge and refusal. He also objected to any evidence in support of the answer, on the ground that it did not constitute a defense. The objection was overruled, and the plaintiff excepted. The jury gave the plaintiff a verdict for $87.75. The plaintiff moved for new trial on the judge’s minutes, which was denied, and then appealed from the order.

Weeks Forster, for the appellant, plaintiff.

I. The express admission in the answer concludes the defendants, and it contains no- defense against that admission. No mistake of fact is disclosed, neither is any mutuality of mistake alleged. To entitle a party to a decree of a court of equity reforming ,a written instrument, a plain mutual mistake must be clearly made out, and it must be shown that the part omitted or inserted was omitted or inserted contrary to the intent of both parties, and under such mistake. (Nevens v. Dunlap, 33 N. Y. Rep. 676 .) The answer fails in these requirements. The plaintiff’s objections were well taken, and his exceptions should be sustained.

H. The parol testimony objected to by the plaintiff was incompetent. The contract of guaranty under seal could not be so modified; it would be a violation of the rule as to parol testimony. (Sinclair v. Jackson, 8 Cowen, 543, 588. Alston v. Mechanics’ Mutual Ins. Co., 4 Hill, 341 . Durgin v. Ireland, 14 N. Y. Rep. 322 . Lamott v. Hudson River Fire Ins. Co., 17 id. 199, note. Norton v. Coons, 6 id. 41. Pattison v. Hull,. 9 Cowen, 754. Halliday v. Hart, 30 N. Y. Rep. 493 .)

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IH. The defense claimed a reformation of the guaranty, which was.a matter of equitable jurisdiction, and for the court alone; the rulings on that point were therefore erroneous.

IV. The single question on which the court left the case to the jury was not in the case. Wyman read the guaranty before he signed it, at his own office. Whitney saw Wyman’s name before he signed it, and he understood that by the first guaranty that they “ were liable for $800 of the rent,” and that the second guaranty added $100 to their liability. There is not a word of representation by Mr. Phillips, or any one else as to the form of the papers. There was no mistake as to that; the only pretense is, that there was a misunderstanding as to the legal effect;- that is the most that can be claimed from the defendants’ testimony. A mistake by a party as to the effect of a transaction, as to the liability he incurs by executing a paper, is only an error of law, and no defense for non-performance. ■

V. The construction which the court put upon the first guaranty was erroneous. The court should have charged as to. that as secondly requested, that the guaranty was a continuing one. (Gates v. McKee, 3 Kern. 232. Rindge v. Judson, 24 N. Y. Rep. 64 .) Had the guaranty been in that form, for $900 instead of $800, the $275 sued for would be within the limitation under those authorities, and the cases cited in the opinion of the Court of Appeals.

VI. The limitation of the liability of the defendants in the charge, to their understanding of the meaning of the guaranty was error.

VII. There is no foundation for claiming that the limitation was of the rent to be paid by Mrs. Shepherd, as held by the court below. Where there is a limitation, it is of the liability of the guarantor. So long as the guarantors are not called on to pay beyond the amount limited, they would have the benefit of any payments made., In this case they are only called on for $275, Mrs. Shepherd having, herself paid the first three quarters’ rent. Their guaranty

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was not only to pay all arrears of the rent, but also all damages arising from the non-performance of any covenant. For the breach of the covenant to pay rent, the unpaid rent is the damages, which they thereby agreed to pay.

Wm. Allen Butler, for the respondents, defendants.

¿ The defendants were entitled .to set up the equitable defense averred in the answer, and to claim as affirmative relief upon the facts therein alleged, the reformation of the contract upon which the plaintiff sought to charge them. (Crary v. Goodman, 12 N. Y. Rep. 266 . Auburn City Bank v. Leonard, 20 How. Pr. 193 . Traphagen v. Traphagen, 40 Barb. 537 .)

II. In support of the equitable defense interposed by the answer, the evidence of the arrangement between the plaintiff and the defendants, out of which their original contract and liability as sureties arose, and of the facts and circumstances under which such liability was continued, was clearly admissible. (Despard v. Walbridge, 15 N. Y. Rep. 374 ,178. Hodges v. Tenn. Insurance Co., 8 id. 416 . Dobson v. Pearce, 12 id. 156.)

ITT. The evidence clearly showed that the writing sued upon did not truly express the agreement of the parties; that the understanding upon which their minds met was, that the arrangement of the previous year should be continued in reference to the renewed term with the addition of $100 of liability. The evidence on this subject was uncontradicted, and the verdict of the jury establishes the fact. It is, therefore, a plain case for reforming the contract so as to express the intention of the parties. (Stoddard v. Hart, 23 N. Y. Rep. 556 , 562. Bidwell v. The Astor Mut. Ins. Co., 16 id. 263.)

IV. Under the original agreement subjoined to the lease, dated April 29, 1862, and by its express terms, the defendants were only liable to pay any arrears of the sum of $800 rent of the demised premises, and were not liable to make good any deficiency or arrears of any greater sum, and the

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court correctly held and instructed the jury that the suretyship of the defendants did not extend to any unpaid rent beyond that agreed sum. The undertaking of the defendants by this agreement was, that the plaintiff should receive $800 of the rent, and whenever the rent paid reached that sum they stood discharged of all liability. This was what all parties understood, and the first writing expresses their intent. .

Y. Whether the arrangement between the parties was to renew and continue the old agreement, with the increased amount of $900 instead of $800, and whether the defendants in signing the new agreement, relied on the statements of the plaintiff’s agent, and supposed in good faith that the writing presented by him did, as he represented, impose no greater liability than the former writing, were questions of fact which the court properly left to the jury, and there is no reason for disturbing their verdict.

YI. There was no error in any of the rulings of the court, nor in any of the several propositions of the charge to which the plaintiff excepted.

So far as the defense depended upon a reformation of the contract to conform it to the understanding of the defendants, of what the agreement was, neither the matter set up in the answer nor the proof given on the trial, were sufficient for the purpose.

A written contract can be reformed only when the mistake is mutual. Both parties must understand it alike. (Pennell v. Wilson, 2 Abb. N. S. 466. Nevius v. Dunlap, 33 N. Y. Rep. 676 .) The allegation in the answer is that the defendants understood they were to be sureties as for a rent of $900; and that the guaranty was executed by them under a mistake of facts. The proof was to the same effect. It was not averred in the answer, or proved, that the plaintiff had the same understanding of the agreement. The extent of the evidence was the declaration of the plaintiff’s agent, that the second guaranty was “ precisely the name

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as the year before, except there was $100, in addition to the rent;” and the plaintiff would require the defendants to become responsible, in case Mrs. Shepherd had the house another year, to add $100 to their liability; and this does not differ from the tenor of the written instrument.

There does not seem to have been any misunderstanding respecting the first guaranty; and the second guaranty would have been satisfactory had it been of the same tenor as the first; and the complaint was that it did not correspond to the first, with an amount of $100 added. This was not, therefore, a case for a reformation of the contract;, and so much of the defense as demanded such reformation, should have been excluded.

As I understand, the learned justice put a different construction upon the two instruments. Upon the first, that the defendants were liable up to the amount of $800, and no more; when that sum was paid. by the tenant or by themselves, no matter how much rent might remain due, the defendants were not liable for it. Upon the second guaranty, his construction was, that by its tenor and effect, the defendants were liable for the full amount of any deficiency of rent at the end of the year, up to the sum of $900. I cannot discern what question there was for the jury. It was not a case for reforming the contract; and it was not proper to vary the contract by parol proof. It was, therefore, to be taken as expressing the intent of the parties. Its construction was for the court, and as construed by the court, the plaintiff was entitled to recover the full amount claimed; and a verdict accordingly should have been directed.

I agree to the construction which the learned justice put upon the second contract or guaranty. It is quite clear that it was an engagement on the part of the defendants, that if Mrs. Shepherd made default in the payment of the rent and performance of the covenants, they would pay $900, or any arrears thereof that remained due, to the plaintiff. They intended to limit their responsibility to

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$900. The words “or any arrears thereof/'referring to any arrears of the rent, are significant, and favor the construction that the guaranty was of the whole rent, with a limitation as to the amount of responsibility; as if they had said, “ if Mrs. Shepherd does not pay her rent, we will pay all arrearages, but not more than $900 in all.”

The principle of the case of Gates v. McKee, ( 13 N. Y. Rep. 232 ,) is applicable. There the guaranty was “ I will be responsible for what stock M. E. McKee has had or may want hereafter, to the amount of five hundred dollars;” and it was held that the limit of $500 qualified the responsibility of the guarantor, and not the amount of McKee’s future transactions with the plaintiff.

To the same effect is Rindge v. Judson, ( 24 N. Y. Rep. 64 ,) where the guaranty was, “ I will be accountable to you that Mr. Butler will pay you for a credit on glass, paints, &c. which he may require in his business, to the extent of fifty dollars;” and which was held to limit the responsibility, and not the amount of dealings; so that, putting the defendant’s guaranty in the form of the guaranties in the above cases (a form, I think, stronger for the defendants than the one they signed,) namely, that the defendants would be responsible for the rent of Mrs. Shepherd to the extent of $900, and it is brought directly within the principle decided in those cases.

' What is the reasonable interpretation of the guaranty in this case? It seems to me to be, that the defendants"engaged to be responsible to the amount of $900 for the rent of. Mrs. Shepherd. It could not have been the intention of the plaintiff" that the defendants should be relieved of responsibility if Mrs. Shepherd paid the first three quarters of the rent, which would be about equal to the limit of responsibility the defendants had fixed. Security for the payment of "the last quarter’s rent was needed much more than for the previous quarters. If either of the first three quarters were unpaid, the plaintiff could gain possession of his premises, which right had in it the elements of security.

Concurrence

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Landlords have more fear of losing the last than any of the previous quarters’ rent; and it is fair to presume that the plaintiff in this case attached more importance to getting security for the last quarter’s rent, than to any of the previous quarters. '

The rule is, that the words of a guaranty are to be taken as strongly against the party giving the guaranty as the sense of them will admit, [Mason v. Pritchard, 12 East, 227; Douglas v. Reynolds, 7 Peters, 113, 122;) and care should be taken to hold the party bound to the full extent of what appears to be his engagement.

I am not able to discover a difference in legal effect between the first and second guaranties, as suggested by the learned justice who tried the action. The first guaranty, as I read it, if anything, is stronger against the defendants than the second. In it, the defendants agreed that if default was made by Mrs. Shepherd in the payment of the rent, &e. they would pay the sum of $800 of the said rent, or any arrears thereof that might remain due; and the words “to that extent and no more,” were intended merely to emphasize the extent of the responsibility.

In short, the defendants undertook that if Mrs. Shepherd was in default at any time in the payment of her rent, whether it was the whole or only a portion, the first or the last quarter, they would pay any arrears to the extent of $800 the first year and $900 the second.

I am, therefore, of the opinion that the plaintiff was entitled tó recover the whole of the rent in arrear at the end of the term; and that the instructions of the learned justice to the jury were erroneous.

The order denying a new trial should be reversed, and a new trial ordered, with costs to abide the event.

I entirely concur with my brother Monell in his views as to the absence of all right by the defendants to a. reformation of the contract in this case. There was no fraud, and no misrepresentation as to the

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contents of the agreement in question. The rule that all ■prior negotiations are merged in a written contract, would be frittered away by allowing mere mistakes by one party, as to the meaning of such contract to be proved by his own oath, to do away with it, after the other party had acted on the faith of it.

Theré was no difference (except as to the amount) as to the legal effect of the first and second contract of surety-ship, signed by the defendants. ' The first bound them to pay, in case of default of Mrs. Shepherd in paying the rent, $800 of “ or any arrears thereof,” (that is, of the rent,) that might remain due to the plaintiff. The second, in case of like default, to pay “ nine hundred dollars or any arrears ' thereof that remain due unto ” the plaintiff.' So that although in the last one the term “thereof” may be grammatically-confined to the sum so designated and not construed so as to extend to the rent eo nomine, yet, under it, if Mrs. Shepherd should fail to pay any of her rent, the defendants would be liable to the extent of $900, for the part of her rent whieh should remain unpaid, or of so much of that sum as should be Bo payable on that amount, and remain unpaid.

I do not perceive that the parol evidence, when admitted, benefited the defendants at all. It established only that when called upon to sign the first guaranty, they asked the plaintiff’s agent what it meant, and that he said that if they “should hold themselves-liable to the amount of $800, the. plaintiff would take the risk of the other $200 from Mrs. Shepherd,” which was exactly its legal effect. On the next occasion the same agent and Mrs. Shepherd called on the defendants, and upon the latter’s “saying the rent was increased $100, and wishing them to become security to the • amount of a rent of $900, adding $100 to the year previous, which they agreed to do, on the same condition,” such agent said “the conditions were precisely the same as the year before, except there was $100 in addition to the rent, and that the plaintiff would require them to become responsible to add $100 to their liabilitywhich was exactly true, and was what

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was effected by the second instrument. This is directly adverse to any inference that any such agreement was made as was set up in the answer, in regard to either instrument, as to the amount of rent to be paid by Mrs. Shepherd. There is, therefore, no evidence in the case of any mistake or misrepresentation. The instruction, therefore, to the jury “ that if the defendants relied entirely upon such verbal arrangement, and did not read the paper sufficiently to see that it varied from the former contract * • * they would be liable for $87.75 only,” was clearly, in any view, erroneous. Eor, taking the agent’s interpretation as the law of construction of such agreement in this case, to wit, making the defendants liable for $900, the plaintiff taking the risk of the other $200 from Mrs. Shepherd, the former w.ere liable for so much of the rent reserved which she did not pay as did not exceed $900 (being $275 and interest.)

Oases of guaranties to a certain amount, where the extent of dealings between the guarantee and the party to be trusted is not limited, .are not exactly applicable to cases of this kind, where the extent of the liability of the latter party is fixed and defined, and the portion of it assumed by the sureties is equally so. This presents the case of a definite indebtedness partly secured and partly not. Mrs. Shepherd had a perfect right, if she chose, to pay the money she did on account of the rent, in discharge of the liability of her sureties, leaving her own liability for the unsecured part to remain, and if the plaintiff had accepted it on that account, it would have gone in discharge of their liability pro tanto. Or if she, being bound to indemnify them, had made a legal tender of the whole amount for which they were liable, on their ■ behalf, as their agent, although of her own money, it would probably have been a good defense, since she might prefer to relieve them. But she made no such application of the money, and the plaintiff, therefore, became entitled to apply it as he thought proper, and first to the discharge of the unsecured part of the rent, leaving the defendants liable for the residue. (Clark v. Burdett,

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2 Hall, 197 .) Moreover, their liability was posterior in time, as it did not arise until default in the payment of the rent by Mrs. Shepherd, and therefore the moneys paid by her were to be first applied to discharge the unsecured liability. (Truscott v. King, 6 N. Y. Rep. 147 . Allen v. Culver, 3 Denio, 284 . Baker v. Stackpoole, 9 Cowen, 420.

I, therefore, concur in thinking the judgment and order denying a new trial should be reversed, and a new trial granted, with costs to .abide the event.

Cases cited

Auburn City Bank v. Leonard 20 How. Pr. 193 N.Y. Sup. Ct. p. 153
Traphagen v. Traphagen 40 Barb. 537 N.Y. Sup. Ct. 1863-12-14 p. 153