Smith v. Kimble

McCQY, P. J. Plaintiff instituted this, action -to, recover -the sum of $2,000 from defendant upon a written contract of guaranty. It appears that one Harvey, a son-in-law of defendant, was engaged in the retail, mercantile business, and that, defendant, by written contract, guaranteed to plaintiff, a wholesale dealer in merchandise, the payment of Harvey’s indebtedness to the extent of $2,opo. Plaintiff’s -complaint contained the . allegation that said guaranty was, on the 19th ;day of November,-. 1908, accepted, by plaintiff through its agent who took 'the same, apd the same was mailed to plaintiff at Omaha, .Neb., .and received by -it on November 21, 1908, and bn said date -accepted by it, and on said date a letter .written -and mailed-to -defendant accepting the same. It also appears that plaintiff extended credit to and sold to- said Harvey merchandise, for which Harvey became indebted to plaintiff, to the amount of about $4,600; that said Harvey thereafter became bankrupt; -and' that dividends in said bankruptcy -proceedings -have been applied upon said indebtedness of Harvey sufficient to reduce the said indebtedness -to about $2,300. . As a defense to recover}., upon said contract of guaranty, defendant by hi-s answer admitted that he bad signed a contract of. guaranty of indebtedness of said Harvey, but alleged that at the time -of .-signing said written guaranty it was -expressly understood- and agreed by the agent of the plaintiff, who w-as there present, that plaintiff would not at any time -extend- to Harvey any credit in excess of $2,000, and that upon -such condition defendant agreed to sign a guaranty for said Harvey guaranteeing the payment of a-ny credit, extended to him -to the -amount of $2,000, but that -he would not sign any guaranty, only upon ¡the aforesaid condition; that said agent of plaintiff then prepared the written contract -of guaranty -and represented to- this- -defendant -that he had prepared- it in accordance with said oral agreement, and that, 'believing and relying upon said representations of -said agent, this defendant -signed said written guaranty believing- that it was . in substance according to the aforesaid oral agreement between defendant and plaintiff’s said -agent, and that, if be signed said written guaranty, he did. so by mistake and through the false representations and -deceit of -plaintiff’s said agent, and that he was -induced- to sign the -same -by the said representations -of said -agent, and that s-aid agent made said representations for the fraudulent purpose of deceiving an-d misleading — 28 — this defendant and inducing him to sign said guaranty by the representation of said agent that it was just as they had talked and agreed upon .as hereinbefore stated; that if plaintiff had not extended to Harvey any credit in excess of $2,000 the property and istock of said Harvey 'would have been ample to have paid said indebtedness, and the amount which plaintiff seeks to recover from defendant upon his said guaranty is for .credit extended to said Harvey in excess of $2,000, and this defendant refused to sign any guaranty for said Harvey for any credit' or any balance in excess of $2,000. Defendant also denied that he ever received any notice from plaintiff by letter or otherwise of the acceptance by plaintiff of the guaranty which defendant signed' and delivered •to plaintiff’s said agent. At the close of all the testimony plaintiff moved the court for ;a directed verdict in its favor on the ground that the matters and allegations contained in the .answer, and under the issues set forth in- -the pleadings, even if true, constituted no' defense to the cause of action set forth in ..plaintiff’s complaint; and for the further reason that under the undisputed testimony the plaintiff is enitled to a verdict for the reason that no trick, artific, or deceit has been shown by defendant, practiced by plaintiff, or its agent, upon the defendant, which constitutes any fraud on the part of plaintiff, or its- agent; and for the further reason that defendant is estopped tp question in any way the terms and provisions of the written instrument which he admits was executed by him under the circumstances as testified to by him arid by the agent of plaintiff. The motion of plaintiff was granted, and to which ruling of the court defendant duly excepted. A verdict was then rendered for plaintiff under the direction of the court, and judgment entered thereon. Defendant appeals, assigning as error, among others, the direction of said verdict, and contends there was a dispute or conflict in the testimony upon two material issues of such a nature as to require the case to be sent to the jury to determine said disputed questions of fact. [1] We are of the opinion that appellant is right in this contention. We are of the opinion that the answer, although loosely and inar.tificially drawn, states a good defense against the cause of action alleged in plaintiff’s complaint. Alfred Shrimpton & Sons v. Philbrick, 53 Minn. 366, 55 N. W. 551; Maxwell v. Schwartz, 45 — 29 — Minn. 150, 47 N. W. 448, 10 L. R. A. 606; Eggleston y. Advance Thresher Co., 96 Minn. 241, 104 N. W. 891; Krenz v. Lee, 104 Minn. 455, 116 N. W. 832; Cole Bros. & Hart v. Williams, 12 Neb. 440, 11 N. W. 875; Lotter v. Knospe, 144 Wis. 426, 129 N. W. 614; Providence Jewelry Co. v. Crowe, 113 Minn. 209, 129 N. W. 224; Western Mfg. Co. v. Cotton & Long, 126 Ky. 749, 104 S. W. 758, 12 L. R. A. (N. S.) 428; Cummings v. Ross, 90 Cal. 68, 27 Pac. 62; Burlington Lumber Co. v. Evans Lumber Co., 100 Iowa, 469, 69 N. W. 558; Fargo Gaslight Co. v. Fargo Electric Right Co., 4 N. D. 219, 59 N. W. 1066, 37 L. R. A. 593; Albany City Sav. Inst. v. Burdick, 87 N. Y. 40; National Cash Register Co. v. Pfister, 5 S. D. 143, 58 N. W. 270. The defendant was called as a witness in his own behalf, and, among other things, testified that he met Mr. Hutchinson, the agent of plaintiff, at the hotel in Mitchell, and “he said to me: T came to see you about a guaranty. We have -been selling Harvey some goods and do not feel like selling him' any more unless we can get a guaranty.’ And I said to him, ‘How much guaranty do you want?’ and he said, ‘We want $4,000,’ and I said:, ‘That is too much for a country store. I cannot give that at all.’ And we talked back and' forth, and I told him I would not give a guaranty, and he put very forcible- arguments to me, and we had quite a lot of .talk, and finally I told him that I would -stand good for $2,000 — .they could limit the amount of goods to $2,000 and no more, and- if it wa-s not paid within a reasonable time I would see it paid, and .he said, ‘We will 'have to -have it in writing,’ and I told him, ‘All right,’ and he wrote, and says: ‘This is just as we talked. Do you want ¡to read- it?’ And I said,, ,‘I ain’t got my glasses,’ and the reason I didn’t I suppose I was dealing with a friend and the instrument would be just as we talked exactly. He .did not read it over to me, and -I did not ask him- to either. He said it was just as .we talked. I relied on what he said. Pie -said: ‘If the company accepts this — -this ain’t what they were looking for — if they accept it, you will hear from them in a few days’ I never heard a word from them until Mr. Keller, plaintiff’s attorney, came to see me.as he1 stated- here today. I never received any letter from' -the plaintiff after I.had that talk with Mr. Hutchinson.” • In Shrimpiton & Sons v. Philbrick, supra, the Supreme Court — 30 — of Minnesota; speaking through' Mitchell',''J., said': “This action was, brought t'cv recover' the purchase price of certain merchandise, the principal item of which was four great gross of papers-of pins, which plaintiffs claim defendant ■ ordered, arid which they shipped to him, but'which he refused to accept, on the'ground that he haid ordered only fotir gross. ■ Defendant’s-written -order read ‘four great gross’; but he alleged that the actual contract, as orally agreed on between him and plaintiff’s' agent, was for only four gross-, but that the agent, who voluntarily assumed- to reduce the contract to writing, with intent -to chea-t and' defraud -the defendant, wrote i-t for ‘four great gross,’ and then falsely represented to him -that it was written in accordance with the actual, agreement, and that, .relying on these false and fraudulent. statements, -the defendant signed the order without reading it, believing that it.was for only four gross, as they had agreed. If the defendant established these allegations, it would be a good defense, notwithstanding that he might have been negligent in- relying on.the representation -of plaintiffs’ agent and in signing the order without reading it.’’ The only fraudulent aot of plaintiff -in that- case was in making the order read.“four .great gross” instead of “four gross” as orally agreed upon, and. then representing to .defendant that the written order, -presented to defendant to sign was the same as the oral agreement. In principle that case seems to be exactly in point with the case at bar.. [2] In the case present the alleged fraud on the part of plaintiff’s agent was in omitting 'the condition of the oral agreement limiting -the credit to be extended1 -to- Harvey to $2,000 and no more from the written agreement 'presented to defendant ¡to sign, and in ’representing to> defendant that the written agreement thus presented was the same as -the oral agreement' made between them. If this were'true as alleged and testified to by defendant, and defendant, relying upon such -representation, neglected to read said written guarantty, or have it read, it constituted a fraud on defendant which would' avoid- a recovery on said written ■ guaranty signed by defendant under such circumstances, for the reason 'that the written contract pfi guaranty sued' upon in this case contained no such condition, 'and defendant never consented thereto in its present state. The defendant’s testimony was denied by the agent cf plaintiff, who testified- that he read 'said contract ;of guar — 31 — anty over .to- defendant before it- -wa-s-' signed. • The testimony of the defendant, on this v-ery material -point, was in direct conflict with the testimony of plaintiff’s agent, and which conflict it was the sole province ¡of the jury to, decide.' In the very recent -case of Providence Jewelry Co. v. Crowe, 113 Minn. 209, 129 N. W. 224, -the Supreme Court of Minnesota, speaking through Start, C. J., said: “An -examination--of the record «satisfies us itha-t ¡the 'evidence was sufficient t-o--require the submission of th-e-case -to the. jury. • There was -evidence" tending to show that the written - contract for the -purchase of the goods wa-s obtained from defendant by fraud-of plaintiff’s agent. It is- true that the -defendant was a business-’ man, and could read, and that he -signed- the purchase contract.- The evidence, however, tends to show that the actual contract made by-the parties-was an -oral one, whereby -the -plaintiff agreed to f-urnish the ■ -defendant, without -cost to him, -certain -goods for advertising purposes-, which were to be given by the plaintiff to customers as - premiums; that after they had so -agreed -defendant -sa-id he would accept -the advertising -proposition -and sign th-e order; and thereupon- the agent -handed to him a printed - instrument for «his -signature, and he signed it without reading it, or knowing- whether it was in accordance with ¡the -oral contract. The instrument wa«s .not in fact an advertising proposition, but -an elaborate contract, -containing an advertising -plan, and also- -an order for -the «purchase -of goods at the agreed price of $340.35. If the rights of third -parties were here involved, the «defendant’s want «of -ordinary business prudence in signing th-e contract without reading it would present a serious obstacle -to the maintenance of «his «defens-e. However this may be, the fact remains that there are here n-o third or innocent'parties. The presentation of the written contract by the plaintiff to the defendant for his signature was a representation that -i-t was- the same in effect as the oral contract as to the advertising scheme.' Th-e plain-tiff knew ¡that it was a fal-se representation,- for it had prepared -the -printed contract in advance.. I-t is also- apparent that the defendant reli-ed upon--this representation to hi-s injury, an-d plaintiff cannot escape from- the consequences -of its -fraud by- asserting that ifche -defendant - ought not to- have -confl-ded in its integrity; for as between the original parties-to a-written contract a party-.whose signature ¡thereto is-obtained by fraud-may .avoid-it, — 32 — although (he was lacking in ordinary business prudence in the premises.” This last-cited case -bases the fraudulent acts -of -the plaintiff’s agent upon much narrower ground than is comprehended by the allegation of defendant’s answer and the testimony -of the defendant in this casefor in. the case at bar we have -the direct testimony of the defendant -that the plaintiff’s agent expressly stated that the written contract was the -same as the oral -contract talked between said agent and defendant, and that defendant relied on th-e said 'statements of said agent. To the same -effect are -the cases of Maxfield v. Schwartz, supra, and Eggleston v. Advanced Thresher Co., supra, also Minnesota cases. In the case of Cummings v. Ros, 90 Cal. 68, 27 Pac. 62, the Supreme Court of California, where the parties bad first made a lead- pencil draft of a contract, and one of the -panties assumed the duty of reducing -this lead' pencil draft to writing and then represented' to the -other party -that the written -contract was the same as th-e lead pencil draft, and the other party, relying upon said statement and representation as being true, signed the written contract without reading it, and it afterwards turned out that tibte written contract was not th-e same .as -the lead pencil draft, it was held that the party who signed the written contract had a good and competent defense against said written -contract, and- -the court said: “On-e cannot be made to stand on a contract he never intended to make — it would certainly be competent in defense to show that the instrument was fraudulent.” In the case of Lotter v. Knospe, 144 Wis. 426, 129 N. W. 614, the Supreme Count of Wisconsin- -said: “The appellant contends that it was the legal duty of plaintiff to read the alleged receipt that was handed to- him, and that he was chargeable with knowledge of its contents, whether he read it or not, and that, knowing its contents, he 'assented -thereto- ’by his failure to repudiate the instrument because it d-i-d not correctly embody the oral agreement. Where a party is induced to refrain from making an examination of a paper given him by -another through- misrepresentation a-si to its purport, it wo-uld- -be an -extreme case that would warrant a court in -holding -that there was an assent to the contents of the -document before such contents- were in fact known.” In- this Case, last -cited-, a portion of an oral contract embodied in a receipt had been omitted by -the party who drew the — 33 — receipt and then represented to' the other party that the receipt was in accordance with the oral contract. In the case of Albany City Sav. Inst. v. Burdick, 87 N. Y. 40, the New York Court of Appeals held that: “One who has intrusted the other party to a contract with the duty of reducing it to writing according to their oral agreement may rely on his representation that he has done so accurately; one who has perpetrated a fraud should not be permitted to say to the defrauded party that he ought not to have believed or trusted' him; and that a party to a deed was not bound by the provisions thereof, where the same was not drawn in accordance with 'the previously agreed upon oral contract of the panties thereto which resulted in a fraud upon the party signing such deed.” [3] Where ia written instrument has not passed, from the hands of the original holder, it does not lie in his mouth to say that the defendant was not in law defrauded, 'because he was careless in trusting to the representations made by him which induced its execution. Mackey v. Peterson, 29 Minn. 298, 13 N. W. 132, 43 Am. Rep. 211; Cole Bros. et al. v. Williams, 12 Neb. 440, 11 N. W. 875; Nebeker v. Cutsinger, 48 Ind. 436; Spurgin v. Traub, 65 Ill. 170. The question involved on this branch of the case goes to the very existence of the contract itself. One of the vital essentials of a contract is the consent of the parties thereto. Under the testimony of the defendant in this case he never consented to the contract of guaranty sued upon. [4] The rule that one is conclusively bound by all the terms and conditions -of a written contract, which he has executed in writing, is not applicable when- his signature to such written instrument was obtained by or through the fraud of the original holder of such instrument and the .right's of innocent third parties without notice do not intervene. The plaintiff in this case is such holder, an'd the testimony of plaintiff, if true, raised á question of fraud in relation to the existence of said contract that should have been determined by the verdict of the jury, and it was therefore error for the trial court to direct a verdict with such testimony in the record. The case of National Cash Register Co. v. Pfister, 5 S .D. 143, 38 N. W. 270, though not directly in' point,'seems to_ bear out the conclusions reached herein. — 34 — [5-7] We are also of the opinion that the case should have been sent to the juiy on the question of whether or not defendant was notified of plaintiff’s acceptance of said guaranty.- It will be observed that defendant testified that plaintiff’s agent - first said, “We want a guaranty for $4,000,” and defendant replied that he would not give a guaranty for $4,000, but, after sonje talk, defendant said he would' give a guaranty to the amount of $2,000 on certain conditions. The agent then wrote the guaranty, and said to defendant: “This is not what the company was looking for. If they accept it, you will hear from them in" a few days.” This testimony, if true, tends to show that this was no more than an offer of guaranty, and was so treated by plaintiff. If was, under ■such circumstances, necess'ary that notice of acceptance be given in order to constitute the transaction an absolute contract of guaranty, and defendant was certainly entitled to notice of plaintiff’s acceptance to the end that he might know that plaintiff was looking to him to pay the bills of Harvey, and also to' the end that defendant might, if he so 'desired, protect himself against his liability on such guaranty by making arrangements for security with H&rvey. The test as to whether an instrument purporting to be a guaranty is merely an offer to become a guarantor, or an absolute contract of guaranty, is whether or not there has been a mutual meeting of the minds of the parties necessary to constitute such instrument an absolute contract of guaranty -or not. This question may be determined from the surrounding facts and circumstances of the transaction as well1 as from the instrument itself. When defendant made the statement that he would guarantee to the amount of $2,000, that constituted a- new proposition from him which must be accepted by the plaintiff, and notice thereof given to defendant, in order to constitute such transaction an absolute guaranty. When the agent said to defendant: “This is not what plaintiff is looking for. If plaintiff accepts it, you will hear -from them in a few days”- — tends to show that the 'agent did not treat the transaction as an absolute guaranty, but as an offer of guaranty only. The fact that plaintiff claims, by its testimony and also by its oomplaint in this action, to have notified defendant of such acceptance on the 21st day of November, 1908, two days after the execution thereof, also tends to corroborate defendant, and also tends to show that plaintiff treated said transaction as an offer to — 35 — guarantee instead of an absolute guaranty. Defendant testified that he never received any notice of acceptance. Plaintiff’s testimony tended to show that he did. With testimony of this character in -the record, we are of the opinion the court erred in directing said verdict. This view seems to be sustained by the following cases; Standard Sewing Machine Co. v. Church, 11 N. D. 420, 92 N. W. 805; Davis Sewing Machine Co. v. Richards, 115 U. S. 524, 6 Sup. Ct. 173, 29 L. Ed. 480; Deering v. Mortell, 21 S. D.,159, 110 N. W. 86, 16 L. R. A. (N. S.) 352; and by Rev. Civ. Code, § 1954. This court by this decision must not be understood as expressing any opinion as to the truthfulness of any of the testimony referred to herein. That is a question solely for the jury. The judgment appealed from is reversed, and the cause remanded for a new trial. HANEY, J., took no part in this decision.