American Button-Hole, Overseaming & Sewing Machine Co. v. Gurnee

TatloR, J. Upon this appeal this court may review the decision of the court below overruling the demurrer of the appellant to the complaint of the respondent, such order having been duly excepted to by the appellant. This court held in this case, upon a former appeal, that, after final judgment, the only way of reviewing the correctness of the order overruling a demurrer was by an appeal from the judgment, and if an appeal were taken from the order after final j udgment was entered, such appeal must be dismissed. American Button-Hole, Overseaming and Sewing Machine Company v. Gurnee, 38 Wis., 533. See, also, Tronson v. Union Lumbering Company, id., 202. The questions to be decided on this appeal are: 1. Does the complaint state a cause of action against the appellant? 2. If it does not state a cause of action against the appellant, and does state a cause of action against Reynolds, can the appellant, after having joined with his codefendant in a demurrer to the complaint on the ground that the complaint does not state facts sufficient to constitute a cause of action, which demurrer was properly overruled by the court below for the reason that the complaint states a cause of action against his codefendant — upon an appeal from the final judgment against both defendants, reverse the judgment as to himself because the complaint does not state a cause of action as to him as well as against his codefendant? In determining these questions, we hold that the complaint must be treated as an action to recover against both of the defendants, for a breach of the condition of the bond set forth in the complaint, and which was in fact executed by both of them. It would seem but reasonable and just to so hold in an action claiming a joint judgment against both defendants for the same sum of money, when it is clear that, unless the action be upon the bond set — 60 — forth, there is no pretense of a right' to recover against the appellant. The respondent has very clearly indicated in the complaint that the action is on the- bond. It is true, he sets forth the contract, and alleges that there was money duo on it from Neynolds to the plaintiff, for which notes were given by him, and that the notes are past due and unpaid; but he further alleges a demand of payment by the appellant of the amount due from Neynolds, and a refusal to pay, and that an action has accrued to the plaintiff in the premises against said defendants therefor. The judgment entered is against both the defendants, and it recites, “ that the defendants, by their demurrer, admitted the breaches of the bond sued on as alleged in the complaint, and that the notes therein mentioned were not paid, which notes were given for goods to secure the payment of which said bond was given, and that more than five hundred dollars is due on account of said breaches of said bond, and the court adjudges the damages ascertained at the sum of five hundred dollars, and execution is hereby awarded for five hundred dollars damages and costs,” etc. After these allegations and claims in the complaint, and recitals in the judgment rendered, it is too late for the respondent to say that the complaint and judgment, so far as it affects the defendant Neynolds, may be considered a judgment upon the claim of the respondent either upon the notes or for the purchase price of the goods delivered under the contract. Does the complaint state a cause of action against the appellant? We think not. First, upon the ground that the complaint clearly shows that the respondent, contrary to the agreement made with the defendant Neynolds, by the terms of which he was to settle monthly, and either pay in cash for the goods sold to him or give his note for the amount unpaid at four months, took notes due in six months, and there is no allegation that this was done with the knowledge or consent of the appellant, nor is it alleged that there was any agreement between the respondent and the defendant Neynolds, — 61 — that the notes foi’ six months were taken as collateral security for other notes which had been given payable in four months, or that they were given as collateral for like sums of money for which notes ought, by the terms of the contract, to have been given for four months, and were not given. According to all the cases, an extension of credit given to the principal debtor beyond the time fixed by the contract for the payment of the debt, which suspends the right of bringing an action against him until the expiration of the extended term, when done without the consent of the surety in such contract, releases the surety. This rule has been held by this court to apply to the sureties in a bond similar to the one upon which the present action is founded. Weed Sewing Machine Company v. Obbrreich, 38 Wis., 325. The counsel for the respondent do not controvert the rule of law laid down in the case above cited, nor that the law is as above stated, but insist that, by the terms of the contract between the respondent and Eey-nolds, for the performance of which the appellant gave his bond as surety, the respondent had the right to extend the credit beyond the four months in his discretion; and they make a very able argument to sustain their position, based upon the following clause in the contract: “ Said party of the second part may have any reasonable line of credit, for which is furnished satisfactory security.” It is urged that these words modify the previous agreement that Eeynolds “shall settle monthly with cash or notes at four months,” etc. The point made is, that the words “ line of credit ” mean time of credit, and do not refer to' the quantum, of goods which may be purchased on credit. Notwithstanding the force of the argnment made by the respondent’s counsel, we are inclined to hold that the words “ line of credit,” as used in this contract, have reference to the quantum of goods to be furnished, and were not intended to change the express provision for credit just before fixed in the contract. We are the more inclined to do this, as this phrase, as well as the phrase “ line of — 62 — goods,” are mercantile ones, not long in use, and, so far as we have been able to ascertain, the phrase “line of goods” is used by merchants when speaking of the variety and quantity of goods, or the variety and quantity of some particular kind of goods they have on hand for sale; and the words “reasonable line of credit ” ought, in like manner, to be construed as applicable to quantity or amount of credit, rather than length of credit, and especially in this contract, in which a fixed limit to the credit is prescribed in the same part of the contract. ’ It is also argued that there is no evidence that the notes given at six months were not given as collateral to the debt due the respondent, and did not therefore extend the time of payment. As stated above, there is no allegation in the complaint that other notes were given due in four months, for which these six months’ notes were given as collateral, nor that they were given as collateral security for the payment of like sums due in four months, for which no notes at four months were given. It is fairly to be inferred from the allegations of the complaint, that these notes, which both bear date the first of the month, were given on monthly settlements, instead of the notes which the contract called for at four months. If they were so given, then we think there can be no doubt that, under the provisions of this contract, no action could be brought for the value of the goods sold, and which were unpaid for at the date of the settlement, and for which value these notes were given, until the notes became due. The contract provides that Reynolds shall make monthly settlements for goods purchased, and pay with cash or notes at four months. Now if he settles, and gives, and the respondent accepts, a' note for six instead of four months, then the claim of the respondent for the sum due at the time of settlement is fully adjusted, and the time for its payment fixed by the note given. If A. has a current account against B., and they meet and settle the account, and B. gives A. his note — 63 — payable in six months or a year for tbe balance found due, would there be any doubt that A. could not bring an action to recover the amount admitted to be due on such account, until the note became due? "We are clearly of the opinion that he could not. This is not in conflict with the decisions of this court which hold that the giving of a note by a debtor to his creditor is not a payment of the debt, unless it be expressly agreed by the parties that it shall be received as payment. An examination of the cases will show that this court holds-that, unless the note be expressly given and received as a collateral security for the debt, no action can be brought upon the original debt until the note given has become due; the rule being, that the giving and accepting of the note does not' extinguish the original debt, but suspends the right to bring an action upon the same until the note becomes due. In the case of Paine v. Voorhees, 26 Wis., 530, Justice Cole says: “ There are certain securities which are said to imply an agreement for the suspension of the remedy on the original debt on account of which they are taken. Thus, if a note is given on a simple contract debt, during the currency of the security the original remedy is suspended.” See cases there cited. In Blunt v. Walker, 11 Wis., 354, Chief Justice Dixon says: “ It is a mistaken idea of counsel that the giving of a promissory note by the debtor operates as an absolute payment or extinguishment of the original debt, or changes its nature. This is not so. Unless the note be expressly given and accepted in satisfaction and disch arge of the debt, it only suspends the remedy upon it during its currency, and, upon its dishonor or nonpayment, if in the hands of the payee, it maybe disregarded, and suit brought for the original indebtedness.” In Matteson v. Ellsworth, 33 Wis., 502, the court say: “ The taking of the note only suspends the action on the contract until the note is due. Rut when the term of credit has expired, the creditor may bring his action and recover either upon the original consideration or on the note, as he — 64 — may elect.” Some of tbe cases bold tbat wben tbe original debt is due upon a sealed instrument, tbe taking of a note payable at a future day does not prevent an action upon tbe sealed instrument during tbe currency of tbe note. In this case, however, although the contract appears to be sealed, it especially provides that notes shall be given for the sums which may be due thereon monthly upon settlement. When, therefore, a settlement is made under the contract, and a longer credit given, there can be no doubt tbat tbe parties intended to extend the credit. The authorities sustaining this proposition are both numerous and satisfactory. Myers v. Welles, 5 Hill, 463; Kendrick v. Lomax, 2 Cromp. & Jer., 405; Walton v. Mascall, 13 M. & W., 452; Baker v. Walker, 14 id., 465; Price v. Price, 16 id., 232; Fellows v. Prentiss, 3 Denio, 518; Putnam v. Lewis, 8 Johns., 389; U. S. v. Howell, 4 Wash., 620. The complaint showing tbat the respondent did take the notes of the defendant Reynolds upon monthly settlements, due in six months, for the sums he now seeks to recover of the appellant upon his bond as security for the performance of the contract by Reynolds, without affirmatively showing that he did not extend the time of payment and suspend his right of action against Reynolds during the currency of the notes, the presumption is that his right of action was suspended, and thereby the appellant was released. The appellant argues with great force, that, construing the contract and bond strictly against the respondent, in favor of the surety, there is no breach of the bond shown in the complaint. It will he seen by an examination of the complaint, that it is nowhere alleged that Reynolds did not make monthly settlements as provided for in the contract, nor does it allege any other breach of the contract, unless a failure to pay the notes taken upon the settlements is a breach. Is the failure to pay the notes giveu on settlement a breach of the bond? The condition of the bond is, in brief, that Reynolds shall perform, in all respects, bis contract upon which the bond is in — 65 — dorsed. Is there any agreement in tbe contract tbat Eeynolds will or shall pay the notes given at maturity? It is urged with great force, that when Eeynolds has made his settlements and given his notes, he has, so far as the contract requires him to make payments for the goods purchased, performed his contract; that after the notes are so given and received, there is no further remedy against him upon the contract; and that the only remedy of the respondent thereafter is by action upon the notes. We are strongly inclined to hold that this is the proper construction of the contract, and that, under the terms of the contract, the notes received are received in payment of the sums found due and unpaid upon the monthly settlements. The terms of the contract indicate that it was the intention of the parties that the notes should be payments. The notes are to be made payable at a bank, with exchange on Philadelphia. The contract provides for a credit only upon condition that notes are given. It would be clear that if Eey-nolds refused to give the notes, an action could be brought immediately. The contract requires that settlements should be made monthly, and, upon settlement, the notes are to be given. These words “ monthly settlements ” would seem to intend a complete adjustment of the account, and payment either in money or notes. The contract says, “settlements with cash or by note.” If the settlement be with cash, that ends it —it is fully paid and discharged. Was it not clearly intended that the settlement by note should also be a payment and final adjustment of the account to date, and a close of the same, and that the respondents would thereafter rely solely upon the notes? Suppose, in this case, notes had been given for four months as provided in the contract, and the statute of limitations had run against the notes: could the respondent have brought the notes into court and sustained an action upon the sealed contract, and claimed that the action was not barred by the statute? We think not. It will be noticed that there are no provisions in the contract by which the respondent — 66 — agrees in terms to sell goods to Reynolds upon a credit of four months, and that notes shall be given for the amount so sold on credit. It simply provides that for all goods sold, monthly settlements shall be made by cash or notes at four months, etc.; and again, that when monthly settlements are made in cash, in place of notes, an additional discount of five per cent, will be allowed. No distinction is made between settlements with cash or with notes, except that when a note at four months is given, interest is in fact to be paid at the rate of fifteen per cent, per annum. All the language used would indicate that the parties intended that their transactions should be closed at the end of each month; and that the bond was given to secure this regularity of settlement, and for no other purpose. The provision that, if settlements are made with notes, the purchaser shall absolutely agree to pay, at the end of four months, five per cent, more than if made in cash, or at the rate of fifteen per cent, per year, strengthens the argument in favor of the construction that the notes.were to be in payment of the debt. Some of the provisions in the third clause of the contract strengthen this view of the case. It is there provided how the contract may be ended by the parties. It may be ended by mutual consent, or by notice of either party to the other; and the respondent may put an end to it if it appears that Reynolds is not likely to meet his obligations at maturity. “ Obligations ” undoubtedly refers to his notes given. This lessens the force of the argument, that if Reynolds gave his notes he could get a large amount of goods during the first five months, for which the bond of the respondent would be no security. If, after the first settlement, it should appear that Reynolds was not likely to succeed in the business, the respondent had the power to put an end to the contract, and refuse to furnish more goods. We are clearly of the opinion that the construction above given to the first clause of the contract is strictly according to the letter of it, and does not — 67 — do violence to its spirit, and that the appellant, who is a surety, is entitled to have that construction given to it. It is urged that if, -under the first.clause of the contract, Reynolds would haye performed on his part by settling and giving his notes, yet under the second clause he expressly agrees to pay the notes. One answer to this is, that the words used in the second clause are superfluous in order to fix the obligation of Reynolds to pay his notes. When he gives the notes he expressly promises in the notes themselves to pay them. A second and more conclusive answer is, that the words in the second clause, “ will settle and pay for all purchases made of the party of the first part, in accordance with the tenor and condition of this agreement,” evidently refer to the settlements and payments referred to in the first clause, viz.: that he will make monthly settlements, and pay in cash or notes, as prescribed in the first clause of the contract. If, under the first clause, the notes are to be received as payment, the second clause does not change its meaning or-add to the contract, except that Reynolds there expressly promises to do what is before stipulated for in the first clause. Interpreting the contract as above indicated, no breach of the contract is shown in the complaint as against either of the defendants, and the demurrer should have been sustained as to both. Admitting, however, that this interpretation of the contract is wrong, especially as against Reynolds, and that by its terms he not only promised to give his notes on settlement, but to pay them at maturity, and that there is therefore a breach of the condition of the bond as to him shown in the complaint, is the appellant estopped, on this appeal from the final judgment, from alleging that no cause of action is stated in the complaint against him, because he united in the demurrer to the complaint with Reynolds, stating as one ground of demurrer that the complaint does not state facts sufficient to constitute a cause of action, which demurrer was properly — 68 — overruled for the reason that it states a cause of action against Reynolds? Can this court consistently hold that the order overruling the demurrer was rightly made, because the complaint stated a cause of action against Reynolds alone, and at the same time reverse the judgment as to the appellant, against whom no cause of action is stated? It has been held in this court repeatedly, that, even after an appearance and answer, and without talcing any exception, if the complaint does not state a cause of action against the defendant, or against any one of two or more defendants, on an appeal to this court exception for that cause may -be taken for the first time, and the judgment will be reversed as to those parties against whom the complaint does not state a cause of action. K- v. H-, 20 Wis., 239; Smith v. Weage, 21 id., 410; S. C., 22 id., 438. We.hold that one of two or more defendants, who has appeared in the court below and joins with other defendants in a demurrer to the complaint because it does not state a cause of action against all the defendants, and whose demurrer is overruled because the complaint does in fact state a cause of action against some defendant or defendants other than himself, is not estopped, upon an 'appeal ' from a final judgment against him, from alleging as error that the complaint does not state a cause of action against him. The ruling upon his first demurrer was rightly made, because it was too broad; but it is in no sense res ad/juMcata that the complaint states a cause of action against him. The first ruling was simply that a cause of action was stated against some one or more of the defendants, not that it stated a cause of action against all of them. The party demurring in that case admits, for the purpose of the trial of the issue of law raised, that the allegations of the complaint are true, and, according to the rule of law applied by the courts to such a joint demurrer, it must be overruled if the facts state a cause of action against any one of .a dozen defendants, if there be so many. The .party so demurring does not ask the court to pass upon the question as — 69 — to whether the complaint states a cause of action against him alone. Under our statute regulating- pleadings, it is provided that this objection to the complaint is not waived by omitting to demur in form to the defective pleading, but that the objection may be taken ore óemis on the trial. I suppose it would hardly be urged, if, when the plaintiff opened his case at the trial, the counsel should make an objection, for all the defendants jointly, when there were two or more, that the complaint was defective because it did not state a cause of action against the defendants, and the judge should overrule the objection and hear the evidence, that upon the close of the case the judge would not hear an objection from one of the defendants, that the complaint did not state a cause of action as to him, on the ground that he had already decided that it did. If the objector went further, and objected that no cause of action was proved against him, clearly the court would have to decide upon this last question without regard to the former decision as to what the complaint stated. In the case at bar, the appellant has simply admitted the facts set out in the complaint. The court has not decided that they state a case against him, but simply that they state a case against his co-_ defendant. No proof is offered except the defendant’s admissions; and the plaintiff demands judgment on this evidence. May not the defendant object now that judgment should not be rendered against him because the evidence proves no cause of action against him? We are clearly of the opinion that he may, and that the court has no right to refuse to hear that objection because of his objection to the sufficiency of the complaint as against all the defendants. “ It is an admitted principle, that a demurrer admits all the facts well pleaded, and demands the judgment of the law upon those facts. And when the judgment is pronounced, it must be conclusive upon the parties, and as effectually determine the litigation as if judgment had been rendered on a verdict. But there is this difference to be observed between judgments — 70 — on verdicts .and judgments on demurrer: tbe former are certain as to wliat was intended to be decided, however inarti-fieially drawn, whereas the latter are often of very doubtful construction, leaving it difficult to determine whether the judgment was intended to sustain the demurrer as to all the matter demurred to, or only partially. In a judgment on demurrer, if the reason to be collected from the record appears to have been matter of form, it cannot be pleaded in bar; when a judgment is rendered on demurrer, and the parties are still left in court, it must be obvious that such judgment cannot be available as an estoppel, nor preclude a trial on the merits.” Herman’s Law of Estoppel, pp. 99, 100. Applying this rule to the case at bar, we see no reason for holding that the appellant is estopped from alleging that neither the complaint nor the evidence shows or proves a right to judgment in favor of the plaintiffs against him. The court below overruled his demurrer because of the technical rule, that, by joining with the other defendant in his demurrer, it must be overruled as to him as well as to the other. The question whether it states a cause of action against him as well as against the other, is still an open question for the decision of this court. The judgment must be reversed as to the appellant.