Stevens v. Pendleton

| Mich. | Nov 21, 1890

Ohamrlin, O. J.

On December 21, 1886, William H. Stevens entered into a contract in writing, by which he agreed to loan and advance to William E. Pendleton not exceeding $10,000, for the purpose of erecting a hotel or road-house, including barns, outhouses, sheds, etc., on land belonging to Stevens, to be built according to the plans and specifications of the architect under the supervision of Pendleton. When it was completed and ready for occupancy, Stevens was to lease the buildings to Pendleton for a period of 10 years from the date of the lease, and he was to pay Stevens 6 per cent, interest on whatever sum the buildings cost, not exceeding $10,000, from the date of the advances until May 1, 1887. As soon as he commenced to occupy, Pendleton was to pay, for a period of five years, as rental, a sum equal - to 6 per cent, of the total cost, and for the four acres of land upon which it was erected a rental equal to 6 per cent, on $2,000, and for the next five years a rental equal to seven per cent, of the total cost of the buildings and improvements, and on the value of the land as aforesaid; and he was to keep the buildings insured to three-fourths of their value, fof the benefit of Stevens, and pay the taxes assessed thereon. The rent was to be paid quarterly .on the first day of each and every quarter.

The following agreement was annexed to or underwritten .-such contract, viz.:

“In consideration of the erection of said buildings, and the leasing of the premises above described, and for the sum of one dollar to us in hand paid, we do hereby become surety for the punctual payment of the interest and Tent and the performance of the covenants in the above-written agreement and lease mentioned, to be paid and performed by said W. E. Pendleton, as therein specified; and, if default shall at any time be made therein, we do hereby promise and agree to pay unto the said W. H. Stevens the said rent, or any arrears thereof, that may be due, and fully satisfy the conditions of the said agreement or lease, and all damages that may accrue by reason of the non-fulfillment thereof, without requiring' notice or proof of demand being made.

“G-iven under our hand and seals, this 21st day of December, A. D. 1886.

[sd] “Wit. E. Pendleton.

[sd] “Wit. D. Morton.”

A written lease was entered into, dated May 1, 1887, between Stevens and Pendleton, fixing the annual rental, and requiring it to be paid quarterly, on the last day of each and every quarter. This action was brought, based upon the agreement above set out, to recover rent which the plaintiff claims was due and unpaid.

After the suit was begun, Stevens filed a bill in chancery in the circuit court for the county of Wayne against' Pendleton, in which Morton was not made a party, to reform the lease so as to provide that the rent should be due and payable on the first day of each quarter, instead of the last day, basing his right to such decree upon the agreement above set forth and a mistake in drafting the lease. This suit was not defended, and a decree pro oonfesso was entered on December 13, 1888, in which it was decreed that the lease should be and was thereby reformed, “ so that, by the terms thereof, the rental therein agreed to be paid by the said defendant shall be payable quarterly on the first day of each and every quarter during the term of said lease, instead of on the last day of each and every quarter during the term of said lease.” The bill of complaint and decree were introduced in evidence without objection.

There were several questions raised upon the trial, but which we do not .consider it proper for us to pass upon, as only one question necessarily disposes of the case. Counsel for defendant Morton took the position in the court below that their client was absolutely discharged from all liability on his agreement of suretyship, for the reason that the time of payment of rent was changed, without his knowledge or consent, from the first day of each quarter to the last day, and no decree of court made in a suit where he was not a party could, by reforming the lease, impose a liability upon him from which, by the act of the plaintiff and the principal, he had been discharged. This leads to the inquiry whether there has been a change of the terms of the lease from that which Morton agreed to answer as surety. The law is settled that if the parties to a contract alter the terms of the agreement for which a 'surety has become bound, so that it is materially different from what it originally was, the surety will be discharged. There are exceptions •fco the rule which need not be noticed here. But it must be borne in mind that such alteration, to have the effect to discharge the surety, must have been an intentional act of the parties. If it was done by mistake, and without an intention to vary the terms of the agreement, the surety is not discharged. The decree of the court in this case has settled that question, as between the parties to that suit, that the time 'of payment in the lease was, by mistake, made to read the last instead of the first day of the quarter.

But it is urged that the surety was a proper, if not a. necessary, party to the suit to reform the lease. This is undoubtedly true. If he had been made a party he might have interposed the defense that the change was intentionally made, and hence be discharged from liability. The decree, therefore, is not conclusive upon him, and the same defense is open to him in this suit as would have been in the chancery suit. He may show that the variance was intentional; and his defense is prima facie made out when the lease is introduced. But this again was rebutted when the proceedings, including the decree, in the chancery suit were introduced in evidence. This was evidence of the mistake, and conclusive between the parties, and, while not conclusive as against defendant Morton, it was prima facie evidence of the fact, and the burden was upon him to show that the minds of the parties met as to time of payment specified in the lease. He did show by the witness Pendleton, who was a party to the lease, that the rent was payable at the last of the quarter, according to its terms. In addition to this, the agent of plaintiff, Fremont Woodruff, was sworn, and testified on behalf of the plaintiff as to the rent due upon the lease; being, as he testified, the rent due for the balance of the quarter ending October 31, 1887, for the quarters ending January 31, 1888, April 30, 1888, and July 31, 1888. These dates correspond with the times specified in the lease before it was reformed. There was no testimony contradicting these two witnesses, and consequently the court was right in holding the surety discharged and directing a verdict for defendants.

The judgment is affirmed.

The other Justices concurred.