Browne v. Institute of Business & Accounting , 63 Ga. App. 871 ( 1940 )

1. Where a contract is executed by two joint obligors, one of whom is a minor, and this fact is known to the other obligor, the contract, by reason of its voidability as to the minor obligor, is not lacking in consideration as to the other obligor. Nor as to the latter obligor is the contract lacking in consideration because the consideration flows to the minor alone.

2. A rescission of the contract by the minor by his suing the opposite party, the obligee, and recovering what the minor had paid to the obligee under the contract, and the obligee's refunding to the minor what the minor had paid under the contract, but where nothing was restored to the obligee, does not release the other obligor.

3. Assuming that the minor's co-obligor was a surety, the refunding to the minor, as the result of a lawsuit by the minor against the obligee, by the obligee of the funds which the minor had paid the obligee under the contract, was not an act which increased the surety's risk, or which exposed the surety to greater liability. This is true because the act of the obligee was not voluntary, and also because, by reason of the voidability of the minor's contract, the surety's risk by the minor's release, since the minor was not bound, was not increased, and the surety was not exposed to greater liability.

DECIDED DECEMBER 5, 1940. Mrs. Mary Browne filed a petition for the writ of certiorari to be directed to the presiding judge of the Fulton division of the civil court of Fulton County. In the petition the following appears: On October 20, 1937, the Institute of Business and Accounting, a corporation, instituted in the municipal court of Atlanta, now the civil court of Fulton County, a suit against Mrs. Mary Browne, and alleged that the defendant was indebted to the plaintiff in the sum of $122.50 represented by a note dated March 23, 1937, for $140, on which there was a credit of $17.50, which appeared to have been executed by the defendant and Joe Browne as joint obligor makers, that the note was given in connection with a contract signed by the defendant and Joe Browne as joint obligors, whereby they agreed to pay the plaintiff $150, payable $10 down, $10 May 5, 1937, and $7.50 a month thereafter, in consideration of the plaintiff's agreeing to furnish to Joe Browne its "complete accounting and C. P. A. coaching" course, together with certain instructions and materials and services. Copies of the note and contract were attached to the petition. It was also provided in the contract that the Institute of Business and Accounting upon evidence satisfactory to itself that if the party to whom the services were to be furnished would be unable to continue the course of study contracted for, the institute would consent to a cancellation of the contract upon payment for "the work covered on a basis proportionate to the entire course." The contract also provided for a refund of the money paid to the institute under the contract if the student after completion of the course "is not entirely satisfied with the high grade and practical character of the services and instruction, . . and if he is not thoroughly convinced that he has received full value and more."

The defendant, in her plea and answer, in effect admitted the execution of the note and contract, both of which appear to have been signed by her and Joe Browne, as joint makers, but denied liability to the plaintiff under the contract, and as specific grounds for defense alleged that Joe Browne was the maker of the contract, and was a minor, and had, on October 25, 1937, rescinded the contract on the ground of his minority by giving written notice to the plaintiff to this effect and demanding the return of moneys which had been paid by him on the contract, amounting to $27.50, less any reasonable amount for a partial use of books and materials which had been furnished him by the plaintiff under the contract; that as to both the defendant and Joe Browne the contract was without consideration; that the note sued on is merely the evidence of indebtedness as shown in the contract; that the original contract which the defendant entered into was without any consideration, was a nudum pactum, is "unenforceable at law and thereby does not impose or subject defendant to any liability out of the same in any manner." The defendant alleged further that the note sued on was in the possession of the plaintiff the original payee thereof; that the plaintiff therefore holds the note subject to all defenses and equities between it and the other parties thereto.

The case proceeded to trial before a jury, and resulted in the direction of a verdict by the court for the plaintiff in the amount sued for. The defendant moved for a new trial, on the general grounds, and on the ground that the court erred in directing the verdict for the plaintiff. To the judgment overruling the motion for new trial the defendant appealed to the appellate division of the civil court of Fulton County. To the judgment of the appellate division affirming the judgment overruling the defendant's motion for new trial the defendant excepted by petition for certiorari. To the judgment overruling the certiorari the defendant excepts in the bill of exceptions brought to this court.

The following is the brief of the evidence presented in the appeal to the appellate division as appears in the record here, which purports to be the evidence adduced on the trial of the case: "Mrs. Mary Browne, the defendant, having been first duly sworn, testified as follows: that she was the defendant in the case; that she signed the contract and note sued on, and [at?] the request of the plaintiff's agent; that she was not to receive the course sold and described in the contract, but that her son was to receive it; that he signed the contract and note first and then she signed them; that she knew that the principal on the contract and note, her son, Joe Browne, was a minor at the time that she signed the contract and note while the plaintiff's agent was in her home and immediately after her son Joe Browne had signed them. She testified that she had testified on a previous trial of the case, and, at a trial of a case brought against the Institute of Business and Accounting by Joe Browne, that she herself paid $10 on the contract to the plaintiff's agent at the time the contract and note were signed, but that the money paid was the money of her son, Joe Browne, and was not her money. Further, that she had brought the suit against the Institute of Business and Accounting for Joe Browne, as next friend, who was still a minor at the time of the institution of the suit, and that as a result of said suit, which was a repudiation of the contract by the said Joe Browne, by reason of his minority, that the Institute of Business and Accounting had paid to her as next friend of Joe Browne, all of the money that had been paid to the Institute of Business and Accounting on said contract and note, including the original $10 that she had herself originally paid on the contract from funds belonging to Joe Browne. That she received nothing herself by reason of signing the contract and was to receive nothing. That her son Joe Browne was to receive the course described in the contract.

"Joe Browne was sworn as a witness for the defendant and testified: That he was the Joe Browne who signed the contract and note sued on. That the plaintiff's agent told him that his mother would have to sign the contract and note with him. That he and plaintiff's agent then presented the contract and note to his mother, Mrs. Mary Browne, and she signed the contract and the note sued on. That all understood that he was to get the course; that plaintiff's agent told him that in order for him to get the course, it was necessary for his mother to sign the contract and note. That she signed the contract and note immediately after he had signed and that $10 was paid by his mother to the agent at that time. That the $10 paid by his mother to the agent on the contract and note was his money. He testified that he was under twenty-one years of age at the time the contract and note were executed, and that he was under twenty-one years of age at the time the suit was brought; and, further, that his mother had brought suit against the Institute of Business and Accounting for him, as next friend, for the return to him of the sum of $27.50 paid on said contract and note by himself, including the $10 paid by his mother at the time the contract and note were signed. That he repudiated the contract and note by reason of his minority, and recovered from the plaintiff the $27.50, and that said sum has actually been paid to his mother, as next friend for him, by the Institute of Business and Accounting. The original note and contract were tendered in evidence by the plaintiff." This is a suit by the Institute of Business and Accounting against Mrs. Browne, to recover on a note executed by her and Joe Browne, which is evidence of an indebtedness arising out of a contract between the plaintiff of one part and Mrs. Browne and Joe Browne of the other part, by which the plaintiff was to furnish certain described help and instructions to Joe Browne in consideration of a cash payment and certain periodic payments to be made thereafter. Joe Browne was not joined as a party defendant. The suit proceeded solely against Mrs. Browne. Mrs. Browne alleged in her plea that the original contract was without any consideration, and that Joe Browne, the other party thereto with her, was a minor, and that on October 25, 1937, he had rescinded the contract by demanding of the plaintiff the return to him of the moneys which had been paid to the plaintiff under the contract in the amount of $27.50, which had been paid out of funds belonging to Joe Browne, less a reasonable amount to be retained by the plaintiff for the partial use of the materials which the plaintiff had furnished to him.

It appeared from the evidence that $27.50 had been paid on the contract by and out of funds belonging to the minor Joe Browne, and that Joe Browne through his mother, Mrs. Browne, the defendant here, as next friend, had filed suit against the institute to recover $27.50 which had been paid to the institute out of funds belonging to the minor Joe Browne, and that as a result of this suit this sum of money, namely, $27.50 had been paid by the plaintiff, the institute, to Mrs. Browne as next friend of Joe Browne. This suit by Joe Browne to recover against the institute the moneys which had been paid to the institute on the contract out of Joe Browne's funds was evidently filed after the present suit on the note by the institute against Mrs. Browne was filed. Whether it went to judgment or not does not appear. This, however, is immaterial. It appears that the contract, whether by compulsion on the institute or as the result of a lawsuit against it or by the institute's voluntarily refunding to Joe Browne the moneys which had been paid to it under the contract by him, was rescinded as to Joe Browne. It is contended by Mrs. Browne that this rescission of the contract between the plaintiff, the institute, and the minor Joe Browne, the party with her to the contract, operated as a release of her from liability under the contract. Whether the status of the defendant Mrs. Browne be that of surety or principal, the contract is not lacking in consideration by reason of the fact that the consideration for which her promise was given flowed to the other party to the contract, her minor son Joe Browne. Neither is a contract of suretyship nor one as principal void for lack of consideration merely because the consideration for the party's promise does not flow to him from the promisee but flows to another. The fact that the obligation of the institute was to furnish help and instruction to Joe Browne and therefore the consideration for Mrs. Brown's promise did not flow to her (if it did not flow to her) does not render the contract void as to her for lack of consideration. If she were under an obligation to support him as being her minor son, the consideration could not be said as not flowing to her. While an extinction of the obligation of a principal might under some circumstances release the surety, yet, as provided in Code, § 103-102, "If . . the original contract of the principal was invalid from a disability to contract, and this disability was known to the surety, he [the surety] shall still be bound." It appears that Mrs. Browne who is the mother of Joe Browne, a principal to the contract, knew when she entered into the contract of his disability to contract on the ground of his minority. Therefore there is no merit in the contention that she is not bound by the contract as originally made on the ground that if she were a surety her promise was lacking in consideration by reason of the fact that her principal was a minor and under a disability to contract.

If Mrs. Browne is to be considered as a joint obligor with her minor son Joe Browne to the contract, although the consideration for her promise may have flowed entirely to him, the contract still was not lacking in consideration as to her by reason of the minority of Joe Browne her joint obligor. As provided in Code, § 3-302, "In all cases against joint obligors or promisors, any one or more of the parties may plead infancy; if such plea shall be sustained, the action shall not abate, but the court shall award judgment, as in cases of nonsuit, in favor of the party or parties so pleading, and permit the plaintiff to proceed against the other defendant or defendants without further delay or costs." It appears that Mrs. Browne and the minor Joe Browne are, as parties to both the contract and the note, joint obligors. Their obligations are not severable. Much more, however, would Mrs. Browne be liable, notwithstanding the minority of the other obligor Joe Browne, if her obligation was a severable one from his. There therefore is no merit in the defendant's plea that the original contract and her obligation thereunder are unenforceable and void for lack of consideration for her promise.

It is insisted by Mrs. Browne that by virtue of the cancellation clause in the contract it was void as lacking in mutuality. While the contract contains provisions that, upon proof satisfactory to the plaintiff, the party to whom it contracts to give the services, instruction, etc., is unable to continue the course, the plaintiff will cancel the contract, and the actual services rendered by the plaintiff will be paid for proportionate to the entire course, this does not render the contract lacking in mutuality. It is a concession for the benefit of the obligors under the contract. Notwithstanding this provision the contract is one by which the institute agrees to furnish certain services and the other parties agree to pay therefor. Each promise is a consideration for the other. The contract therefore is not lacking in mutuality. The provision in the contract that the institute will, after the completion of the contract by performance by it of its obligation thereunder, and the payment by the obligors of their obligation, refund to the obligor to whom it has furnished the services the money paid if the obligor is not entirely satisfied, has no effect whatsoever upon the contract as one containing mutual obligations and promises.

Does the rescission of the contract between the institute and the other obligor, Joe Browne, by virtue of his notice of rescission to the plaintiff of the contract on the ground of his minority, and his suit against the plaintiff to recover the moneys which he had paid to the plaintiff on the contract, and which the plaintiff refunded to him, operate to release Mrs. Browne, whether as a surety or principal, of her obligation under the contract? As a surety to the contract, assuming, for the sake of the argument that she was a surety, she would not be released unless the so-called rescission of the contract was the result of some voluntary act on the part of the institute which increased Mrs. Browne's risk under the contract, or exposed her to greater liability thereunder. It does not appear undisputed and conclusively and as a matter of law from the evidence that the rescission of the contract between the institute and Joe Browne was due to any voluntary conduct on the part of the institute or agreement by the institute with Joe Browne. It appears that whatever was done in this connection was done by the institute as a result of a lawsuit instituted against it by the minor Joe Browne to recover what he had paid on the contract, and that he did recover it on the ground of the invalidity of the contract by reason of his minority. It not appearing that the refund by the institute to Joe Browne of the money which he had paid to the institute under the contract was voluntary by the institute, or was due to any voluntary contract or agreement made between it and Joe Browne, it does not appear that the refunding of this money, although it might increase the amount which might be due by Mrs. Browne on the contract, was the result of any voluntary act by the institute. The rescission of the contract as a result of the transaction between the institute and Joe Browne, even if it had been done as the result of the voluntary act and conduct of the institute, in so far as it might release Joe Browne from liability under the contract, in no way increased the risk of Mrs. Browne or exposed her to any greater liability than that which rested upon her under the contract. Since Joe Browne was a minor and was not liable under the contract, any release of him by the institute of whatever obligation of his existed under the contract amounted to nothing in so far as relieving him of liability, and therefore did not increase the risk of Mrs. Browne or expose her to greater liability.

Since, as appears in the Code § 3-302, where a joint obligor is a minor, a sustaining of his plea of minority in a suit against him and the other obligor would not release the latter, it necessarily follows that a release of the minor by the obligee, by any contract or as the result of any lawsuit, from his obligation on the ground of his minority would not release the other obligee. It was held in Young v. Currier, 63 N.H. 419, that the release of an infant joint obligor, after he has repudiated the contract, will not release the other obligors. See also, to the same effect, Baker v. Lovett, 6 Mass. 78 (4 Am. D. 88); note in 5 L.R.A. 596. The same reasoning would necessarily apply if Mrs. Browne and the minor Joe Browne were severable obligors. There is no merit in the contention that, by virtue of the rescission of the contract between the institute and Joe Browne on the ground of his minority, Mrs. Browne was relieved of liability under the contract and note sued on.

This case is distinguishable from those cases where one of several obligors of a contract, such as a minor, has repudiated or rescinded the contract by restoring to the obligee the consideration of the contract, such as property bought from the obligee and for which the obligors had promised to pay, and an acceptance of the return of the property by the obligee, in which it has been held that such rescission releases a co-obligor or surety. These decisions are predicated on equitable principles that where the obligee has taken back the property from a principal obligor he can not retain it and at the same time compel payment therefor by a co-obligor or surety. In this case it does not appear that the obligee has received back from any of the obligors anything which the obligee may have delivered to the obligor by virtue of the terms of the contract. It does not appear that the obligee received back any material which it had furnished to the minor, Joe Browne. On the contrary it appears that the obligee refunded to the minor obligor what the latter had paid to the obligee under the terms of the contract.

The verdict finding the defendant liable on the contract was demanded under the law and the evidence. There being no question raised as to the amount sued for, and represented in the note sued on, after credit given for the payments which had been made on the contract, although they had been refunded to Joe Browne, the court did not err in overruling the certiorari brought by Mrs. Browne excepting to the judgment of the appellate division of the civil court of Fulton County affirming the judgment of the trial judge overruling the defendant's motion for new trial.

Judgment affirmed. Sutton and Felton, JJ., concur.