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Rogers et al. v. Burr, administratrix

Supreme Court of Georgia1895-10-05
97 Ga. 10

Summary

Holding. The court affirmed the judgment, determining that the declaration as amended stated a valid cause of action and that the demurrer was properly overruled. The guarantors' unconditional guaranty of dividend payments required no prior notice of default, and subscribers could exercise their stock redemption right within a reasonable time after the three-year period fully expired.

Subscribers to stock in the Barnesville Manufacturing Company entered into a contract guaranteeing an eight percent annual dividend on invested capital. The contract also granted subscribers the right to sell their shares back to the company at par value, exercisable after three years from the initial subscription date. The company failed to pay the guaranteed dividends, and subscribers brought suit against the guarantors.

The court addressed two main issues. First, the contract language allowing stock redemption "at the expiration of three years" was interpreted to mean subscribers could exercise their redemption right after the three-year period had fully elapsed, not before. The word "at" in this context is equivalent to "after," giving subscribers a reasonable time to exercise their election following the deadline. Second, the guarantors argued they could not be held liable without notice of the company's dividend default. The court rejected this defense, holding that an absolute and unconditional guaranty requires no notice condition. The guarantors bore the burden of monitoring the company's performance and could have obtained information through inquiry.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Interpretation of "at the expiration" as meaning "after" expiration in determining when a contractual right may be exercised
  • Whether notice of default is required to enforce an absolute and unconditional guaranty
  • The burden on guarantors to monitor principal performance without an express notice requirement

Procedural posture

The plaintiffs in error appealed from a judgment sustaining the defendant's demurrer and allowing the declaration to proceed as amended.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Janes, Judge.

1. The official report sets out fully the declaration as amended, the demurrer, and the contract sued on. This contract, on the faith of which the administrator of Chambers subscribed for sixty shares of stock in the Barnesville Manufacturing Company, stipulates that if, at the expiration of three years from December 1st, 1889, the subscriber desires no longer to carry the stock, the plaintiffs in error will, “with thirty days notice,” pay such subscriber par value for the same. This provision gave to the subscriber the right, at the expiration of three years from the time stated, to elect whether he would keep the stock, or turn it over to plaintiffs in error, and require them to pay him therefor its par value. He had no right to make this election before the expiration of the time. The time for such election expired at midnight on November 30th, 1892, and it could not have been made until the full expiration of the time. The position that the election ought to have been made on the last moment of the last day is too absurd to seriously consider. It follows that the time for the exercise of the right was after the expiration of the three years. The word “at” in this contract is equivalent in meaning to “after.” It was held in Annon v. Baker, 49th N. H. 169, cited in American and English Encyclopedia of Law, vol. 1, first edition, page 893, note, that, “At the end of one year,” means “at the expiration of one full and entire year,” and that “at” is equivalent in meaning to “after.” If the word “after” is substituted for “at” in the contract under review, there can be no doubt about the correctness of the construction given to it in the head-note. As the election could be made after the expiration of the time limited, of course a reasonable time was allowable for this purpose.

2. Plaintiffs in error in their contract guarantee the payment of an annual dividend, equal to eight per cent, per annum from December 1st, 1889, on the money paid into the company on the stock. It is alleged in the declaration that no dividends have been received, but there is no allegation that any rotice was ever given to plaintiffs in error of the failure by the company to pay such dividends. They contend that such notice was necessary in order to make them liable on their guaranty. The guaranty is absolute and unconditional, and there is no stipulation whatever in the contract requiring the subscribers for the stock to notify the gTiarantor of the company’s failure to pay dividends. It was the duty of the plaintiffs in error to know of the default of the company, and information could have been easily obtained by inquiry of tbe company or of defendant in error. In tbe case of an absolute guaranty, no condition being annexed to tbe contract, no condition is implied by law requiring notice to tbe guarantor of tbe default of tbe principal. Having guaranteed unconditionally tbe performance of a contract by a third person, tbe guarantor must atbis peril see that tbe contract is performed. Tbe authorities on this question in other States are numerous and somewhat conflicting. See Heyman v. Dooley, Lawyers Reports Annotated, Book 20, page 257. But be this as it may, tbe rule above enunciated is sustained by tbe decisions of this court in Wright v. Shorter, 56 Ga. 72; Gammell v. Paramore, 58 Ga. 54.

3. Tbe defects in tbe declaration pointed out by tbe demurrer are cured by tbe amendments; and tbe declaration as amended contains a good cause of action. There was no error in overruling tbe demurrer. Judgment affirmed.