Opinion
Decided June 2, 1936.
The surety on a probate bond given by a trustee is discharged, if after breach of the bond and without the consent of the surety an agreement is made between the trustee and the beneficiaries whereby notes of the trustee and his transfer of the trust property are accepted by them in full payment and discharge.
DEBT, upon the bond of Thomas F. Dwyer, conditioned upon the faithful performance of his duties as trustee under the will of Dorrance B. Currier. The defendant and Frank W. Musgrove were the sureties on the bond. Transferred without ruling by the court (Burque, J.) upon an agreed statement of facts.
The plaintiffs in interest are the beneficiaries of the trust. There was a breach of the condition of the bond by the embezzlement of assets. Without the knowledge or consent of the defendant, the plaintiffs in interest, the trustee and the co-surety made an arrangement which resulted in the settlement of an account in the probate court charging the trustee with a balance of $63,725.
The trustee thereupon paid to the plaintiffs in interest the sum of $3,000 in cash and gave them a note for $8,000, with sureties, which was afterwards paid. Musgrove, the co-surety, paid to the plaintiffs in interest the sum of $25,000 in cash, in return for which they gave him a release and a covenant not to sue him on the bond.
Dwyer, the principal, incorporated his insurance and real estate business and gave to the plaintiffs in interest demand notes aggregating $21,971.31, secured by a transfer to them of the corporate stock, with the understanding that after those notes were paid the stock was to be held by Musgrove as security for the repayment by Dwyer of the $25,000 paid by the co-surety.
Dwyer became the manager of the incorporated business for the plaintiffs in interest, upon a weekly salary, and it was agreed that the net profits of the business should be applied to the liquidation of the notes for $21,971.31.
The purpose of these transactions was to enable the trustee to balance his final account, to procure his discharge and to terminate the trust. The trust was terminated by decree of the probate court, the trustee conveyed the real estate of the trust to the plaintiffs in interest, and they gave to the trustee a receipt for $63,725, which was filed in the probate court.
Dwyer subsequently mismanaged the business, in consequence of which the corporate stock proved to be worthless. Attaching creditors of the business procured a sheriff's sale of the property of the corporation, but the proceeds of the sale were insufficient to pay their claims in full.
The notes aggregating $21,971.31 were not paid, and the plaintiffs in interest sued Dwyer upon them and obtained judgment. The present action was brought to recover from Campion such portion of this judgment against Dwyer as he may be liable to pay.
Neither Campion nor Musgrove received any compensation or other consideration for signing the probate bond.
Henry N. Hurd, for the plaintiffs in interest.
John F. Cronin and Wyman, Starr, Booth, Wadleigh Langdell (Mr. Wyman orally), for the defendant.
The defendant's contention is that the acceptance of the notes amounting to $21,971.31 and the other transactions operated as a release of the defendant. The plaintiffs in interest claim that the notes were not pro tanto payment of the obligation of the trustee, but were mere evidences of his indebtedness as such, a continuing indebtedness from the time the amount of the obligation was ascertained, as well after as before the notes were given and the receipt was passed.
It is significant that the plaintiffs obtained their judgment against Dwyer upon the notes (to which the defendant was not a party) instead of upon the bond (to which he was a party). Their counsel, moreover, frankly admits that they wished to terminate the trust and to get title to the real estate from the trustee. To obtain those ends, it is also admitted, the settlement of a final account in the probate court was a pre-requisite. The decree upon the account established the amount of Dwyer's liability, and the plaintiffs in interest acknowledged payment of that amount in full with the apparent intention that the receipt should be filed in the probate court. Under the circumstances the intention seems to have been clear to discharge the trustee as such and to satisfy the obligation of his bond by the payment of certain sums in cash and Dwyer's promissory notes.
A release of the principal from his obligation without the surety's assent usually operates as a discharge of the surety. It is possible to reserve rights as against the surety, but the facts found do not show any such reservation as would avoid the inference that the surety was discharged. Brandt, Suretyship and Guaranty (3d. ed.), s. 164. The release, though not under seal, was given upon good consideration — Dwyer's furnishing the beneficiaries with evidences of title to his business, and his conveyance to them of the real estate of the trust. The fact that the creditors gave the co-surety a covenant not to sue, while giving the defendant nothing, is not significant. Except for the doubtful evidence of a reservation as against Musgrove furnished by his participation in the principal's transactions with the plaintiffs in interest, Musgrove would have needed a formal individual release as little as Campion did.
The obligation of the bond was that the principal should "adjust and settle his account with the judge, and pay and deliver over all balances, money and property with which he has been intrusted." P. L., c. 309, s. 1 (iii). Compliance with the conditions would result in the discharge of all parties liable on the bond. The first condition (the settlement of the account) was strictly complied with.
But the plaintiffs in interest now say that to the extent that notes were taken in lieu of cash the condition was not complied with. If they in fact received the notes as payment, the defendant, as well as the trustee, was discharged. Burque v. Brodeur, 85 N.H. 310, 315. Whether or not payment was intended is a question of fact. Foster v. Hill, 36 N.H. 526, 528. There is no specific finding of fact, but the evidentiary facts agreed to permit no conclusion other than that such was the intention. In effect the creditors had to express such an intention when they asked the probate court to approve the trustee's final account, accept their receipt for the balance found due to them and terminate the trust. They could have declined to take the notes and deliver the receipt; they could have proceeded against the defendant. Instead, actuated by motives admitted by themselves, they had no commerce with the defendant, took the notes and gave the receipt.
As far as appears, none of the notes was void so as to negative satisfaction of the original obligation (M'Crillis v. How, 3 N.H. 348; Wentworth v. Wentworth, 5 N.H. 410; Burnham v. Spooner, 10 N.H. 165, s. c. 10 N.H. 532; Pecker v. Kennison, 46 N.H. 488; Hartshorn v. Hartshorn, 67 N.H. 163), and thus leave the surety liable upon the bond (Williams v. Gilchrist, 11 N.H. 535; Goodall v. Richardson, 14 N.H. 567). The notes, being valid and having been given in payment without reservation of rights against the defendant, discharged him. Jones v. Pierce, 35 N.H. 295, 301; Stearns, Suretyship, s. 102. If the transactions constituted no more than a compromise payment or a conditional payment, the fact that the defendant did not assent to them discharged him from liability to the creditors (Exeter Bank v. Gordon, 8 N.H. 66, 80, 81; Woodman v. Eastman, 10 N.H. 359), in spite of the fact that a compromise payment made by the co-surety might not have discharged him from contribution (Currier v. Baker, 51 N.H. 613).
Even if Dwyer had not been discharged as trustee, it would seem that there must be found such an alteration of the contract without the defendant's consent as would discharge him as surety. Watriss v. Pierce, 32 N.H. 560; Weare v. Sawyer, 44 N.H. 198; Cross v. Rowe, 22 N.H. 77, 82; Wheat v. Kendall, 6 N.H. 504; McCann v. Dennett, 13 N.H. 528; New Hampshirec. Bank v. Colcord, 15 N.H. 119. Upon the record as it stands, there must be
Judgment for the defendant.
All concurred.