12 Mass. App. Ct. 150 | Mass. App. Ct. | 1981
The sequence of events poses the problem: Did the defendant John H. Latshaw launch an action against indemnitors prematurely so that an accompanying attachment was similarly premature? Solving that question requires answering another: Had Latshaw sustained a loss under a stock pledge agreement when he began his law suit?
Latshaw had pledged 27,789 shares of United Servomation Corp. as collateral on January 13, 1970, to secure loans
Gemico failed to make a regular loan payment to FNB which was due January 15, 1971. On February 2, 1971, an officer of FNB notified Latshaw’s lawyer by telephone of Gemico’s default, that FNB was accelerating Gemico’s note and was transferring Latshaw’s pledged shares to itself. Latshaw’s lawyer had learned that New England Merchants National Bank (the Merchants), another creditor of Gemico, was also restive about that company’s ability to pay its debts and that the O’Days were going to give a second mortgage of their real estate to the Merchants. Allowing no grass to grow under his feet, Latshaw’s lawyer filed an action that day against the O’Days based on the indemnity agreement and secured an attachment against Mrs. O’Day’s realty. It is that action and attachment which Merchants says jumped the gun.
On the following day, February 3, 1971, FNB dispatched a letter to Latshaw informing him that the Gemico note was in default, demanding $1,049.48 on account of interest due on January 15, 1971, and advising him that the “Bank is exercising its option to transfer to itself or its nominee” the securities which had been pledged. Some two weeks later, on February 19, 1971, FNB for the first time trained its artillery on the debtor, Gemico, to which it sent a registered mail notice, with copy to Latshaw, that Gemico’s note had come due February 16, 1971. That letter demanded payment in full, failing which “we shall be forced to look to the collateral we hold for satisfaction of this debt” (emphasis supplied).
By the pledge of his stock, Latshaw stood surety for Gemico. As a surety he was entitled, even without an express agreement, to indemnity when he was injured by payment in discharge of Gemico’s liability. Ricker v. Ricker, 248 Mass. 549, 551 (1924). Wolverine Ins. Co. v. Tower Iron Works, Inc., 370 F.2d 700, 703-704 (1st Cir. 1966). Williston, Contracts § 1274, at 866-868 (3d ed. 1967). See Eliot Sav. Rank v. Aetna Cas. & Sur. Co., 310 Mass. 355, 357-358 (1941). (The significance of the written indemnity agreement in this case is that it added the O’Days, who were not principals on the loan, as indemnitors.) In their emphasis on payment of the underlying instrument, the authorities cited are consistent with the principles of § 3-415 of the Uniform Commercial Code, which provides that an accommodation party, “if he pays the instrument has a right of recourse on the instrument against” the party accommodated. G. L. c. 106, § 3-415(5).
No payment had occurred on February 2, as is evident from the bank’s subsequent letter of February 19, in which it said that it would, in the future, look to the collateral
Because the securities were not applied to discharge of Gemico’s debt on February 2, no payment of Gemico’s debt occurred and Latshaw sustained no loss.
Judgments affirmed.
See G. L. c. 223, § 106, under which a person may dispute the validity of a prior attachment.
Under G. L. c. 106, § 9-105(d), as in effect prior to St. 1979, c. 512, § 7, the term “debtor” means the owner of the collateral in any provision of art. 9 dealing with the collateral.
FNB never sold the pledged stock. Ultimately, Latshaw paid the balance due on Gemico’s note and FNB assigned to Latshaw the note and George O’Day’s guaranty of that note.