J. R. Watkins Medical Co. v. McCall

Brown, J. The facts in this case are substantially as follows: Plaintiff is a corporation engaged in the business of manufacturing and selling patent medicines and household remedies of various sorts. The sales of its products are made through representatives located in different parts of the state and elsewhere. In 1904 plaintiff entered into a contract with defendant McCall, in and by the terms of which plaintiff sold and agreed to deliver to McCall such of its products as he might from time to time order, to be by McCall sold from house to house within the territory mentioned in the contract. By the terms of the contract McCall was designated as the “traveling salesman” of plaintiff, but the products delivered to him became his property, and he was given the option of two methods of making payment therefor: (1) By remitting weekly as1 sales were made; or (2) by paying in cash within ten days from date of the bill of goods shipped, receiving in that case a discount of three-per cent. The contract extended for one year, and expired about January 1, 1905. Defendants Schweitzer, Schroeder, and Murphy guaranteed the faithful performance of the contract by McCall, and agreed to become responsible for the payment of any indebtedness incurred by him thereunder. This guaranty was in writing, attached to and made a part of the contract. At the expiration of the contract a new one of the same import was entered into for the ensuing year; defendants Schweitzer, Schroeder, and Murphy being guarantors as before. That contract contained the provision: “At the expiration of this contract, the J. R. Watkins Medical Company hereby agrees to make a new contract with said traveling salesman, without requiring his account to be paid in full at the time, provided the amount of his business — 392 — and the conduct of the same has been satisfactory to said company.’’' Before the expiration of that contract, a third one was entered into,, in, the same form as the preceding contract, and defendants again became guarantors. The contract of guaranty was in the following-language: “Bor and in consideration of the appointment of the-above-mentioned traveling salesman, we hereby agree to be jointly and severally responsible to said The J. R. Watkins Medical Company for the faithful performance of this contract on the part of said traveling salesman, as, outlined on back of this agreement, and; for the payment of any balance that may be due said company by-him at date of acceptance of this contract.” At the time- this third1 contract was entered into, McCall was indebted to plaintiff for-goods received under prior contracts, then due and unpaid, in the sum of $8-48.37, which was reduced by payments during the life of the third contract to the sum of $813.79. This action was brought to recover that amount, with interest, and the action is predicated, as to defendants Schweitzer-, Schroeder, and Murphy, upon their guaranty attached to and made a part of' the third contract. The guarantors, Schweitzer, Schroeder, and Murphy, alone answered, setting up several defenses, and the questions raised thereunder will be disposed of in their order. Plaintiff had a verdict, and defendants appealed from an order denying-their alternative motion for judgment or a new- trial. 1. It is contended that the court below erred i-n not dismissing-the action'at the close of the plaintiff’s case, and in refusing to direct a verdict for defendants, because the evidence failed to show an acceptance by plaintiff of defendants’ contract of guaranty. We do not sustain this contention. Whether the formal acceptance of a contract of’ guaranty like that involved in the case at bar, as applied to sales of goods upon, credit in the future, is essential to the validity of the contract, is a. question upon which the courts are hopelessly in conflict. In a note to Wm. Deering & Co. v. Mortell (S. D.) 16 L.R.A.(N.S.) 352, numerous authorities are collected, showing the diversity of opinion upon the subject. The case of Winnebago Paper Mills v. Travis, 56 — 393 — Minn. 480, 58 N. W. 36, is in line with those courts which hold tc. the rule that acceptance and notice thereof by the guarantee is necessary. And while the rule requiring-notice of acceptance is applied’, in the abstract by probably a majority of the courts, the existence-of certain facts in respect to the contract is held to render the-, formal acceptance unnecessary — for illustration, the receipt of a-valuable consideration. And the courts also distinguish between-, the conditional and the absolute undertaking on the part of the-guarantor, applying the rule of acceptance only to the conditional! agreement; but contracts substantially in the language of that at bar have been treated by some courts as conditional and by others as; absolute engagements. But it is unnecessary to further- pursue the-subject. The question is not involved in the case no.w before us. It may be conceded, under the authority of the Winnebago Mills, case, that as to future sales of goods -to McCall under the contract in question the guaranty of defendants was conditional, and notice of acceptance was necessary. But no claim is made for goods sold subsequent to the time the contract was entered into-. On the contrary, the action is founded upon that part of the contract by which-, defendants guaranteed the payment of any indebtedness due to plaintiff from McCall under the prior contracts. The contract of guaranty in this respect made defendants responsible for the payment of the existing indebtedness, and is clearly independent of that part of the guaranty having reference to future sales to be made to McCall. This distinction was made in the Winnebago Mills case; the-, court there holding that as to future sales an acceptance was necessary, but as to the existing indebtedness, which the guarantors there-agreed to pay, no recovery could be had, for the reason that by a proper application of payments subsequently made by the debtor-that indebtedness had been paid and discharged. There can bé no-serious question in this case but that defendants’ guaranty of payment of the existing indebtedness was an absolute and not a conditional undertaking, and as to that no notice of acceptance was necessary. Lehigh Coal & Iron Co. v. Scallen, 61 Minn. 63, 63 N. W. 245; 20 Cyc. 1408, and cases cited in note 64. Nor is it material that the amount of the- existing indebtedness-» — 394 — was not made known to defendants at the time they signed the contract. The indebtedness referred to, and of which they guaranteed the payment, arose out of the prior contracts to which they were parties, and represented an unpaid balance due from McCall to plaintiff. Defendants could have readily ascertained the amount by inquiring of McCall, at whose instance they signed the guaranty, and it was a fact definitely known at the time, though not communicated to defendants. There was, therefore, no such uncertainty as to render the contract a nullity. The consideration for the promise was sufficient as a matter of law. As expressed in the writing it was, in substance, in consideration of the appointment of McCall as traveling salesman we guaranty payment of the existing debt. By the same instrument and on the faith of the guaranty McCall was appointed and continued thereafter as plaintiff’s traveling salesman. It follows, therefore, since the guaranty was an absolute and unconditional promise to pay, was based upon a sufficient consideration, and was in all respects valid, that plaintiff may recover thereon, unless the further contentions of defendants be. resolved in their favor. 2. The contract between plaintiff and McCall definitely and specifically defined the terms of the agency thus created. It provided for the sale of plaintiff’s goods to McCall,, and appointed McCall as traveling agent for the sale thereof* from house to house. McCall had the option of making payment by weekly remittances, or by cash within ten days after receipt of a particular order of goods, .and he specifically obligated himself faithfully to perform the contract, and to make weekly reports and remittances as therein required. It is contended by defendants that plaintiff failed and neglected to require of McCall the performance of the second year contract, and that without notice to or knowledge of defendants it consented to and permitted a material departure, therefrom, in this: That McCall was permitted to retain of the proceeds of sales made by him the sum of $188 for his personal use, in violation of the terms of the .contract requiring weekly remittances for sales made. And de — 395 — fendants insist that this departure from the express terms of the contract amounted in law to a release and discharge of their obligations as guarantors. The contract of guaranty in cases like that at bar, where the guarantors become responsible for the faithful performance of a contract entered into by a sales agent'for the future sale of goods for the guarantee, so clearly resembles in many respects the contract of suretyship that the authorities, in determining the rights and liabilities of the parties, apply the same rules of law to both relations. 20 Cyc. 1400. And it is generally held, in contracts of guaranty, that any material departure from the terms of the contract between the guarantee and the agent, or in the manner of its execution, will release the guarantor. 20 Cyc. 1443; Fidelity Mutual Life Assn. v. Dewey, 83 Minn. 389, 86 N. W. 423, 54 L.R.A. 945; Morrison v. Arons, 65 Minn. 321, 68 N. W. 33; Osborne v. Van Houten, 45 Mich. 444, 8 N. W. 77; Evans v. Lawton (C. C.) 34 Fed. 233; Weed v. Winchel, 107 Ind. 260, 7 N. E. 881. Within the rule stated, it may be conceded, for the purposes of the case, that, had this action been founded upon the guaranty attached to the second year contract, under which the departure complained of was permitted by plaintiff, no recovery could be had. But the action is not founded upon that contract, .and the rule stated has no application. There is no controversy .that at the end of the second.year McCall was actually indebted to plaintiff under the former contracts in the amount already stated, and that this indebtedness existed when the contract in suit was entered into. By this third and last contract defendants guaranteed the payment of that debt, and upon that guaranty the present action is based. . It was a new and independent contract, and, conceding a Valid defense, had the other contract been sued on, defendants by making the new promise waived the same, and cannot now be heard to assert it. Hooper v. Pike, 70 Minn. 84, 72 N. W. 829, 68 Am. St. 512. For the same reason, if the consent of plaintiff to the withholding by McCall, of moneys for goods sold amounted to an extension of the time of payment which, within the law of principal and surety, would discharge the latter, the new promise was a waiver thereof and subjected defendants to a new and original liability. — 396 — 3. It is further claimed that there was a valid extension of the time of payment of this debt given by plaintiff to McCall after the-present guaranty contract was entered into, which released defendants. The trial court charged the jury that there was no evidence-of any such extension, and the instruction is assigned as error. We-concur with the trial court in its view of the evidence as applied to the facts disclosed. At the time the contract of guaranty was. signed by defendants, the debt agreed to be paid was due and payable, and, though plaintiff appears to have been indulgent and agreed not to press for immediate payment, its action in the premises was not, within the law of principal and surety, an extension of the time of payment, which released the sureties. First State Bank of Montgomery v. Schatz, 104 Minn. 425, 116 N. W. 917. At no time subsequent to plaintiff’s consent to the delay in payment, was it prevented from maintaining an action to recover the debt. In other words, the alleged extension would not have constituted a defense, had such an action been brought. Mason v. Edward Thompson Co. 94 Minn. 472, 103 N. W. 507. 4. On the trial the court instructed the jury to deduct the amount, of money which plaintiff permitted McCall to retain from the proceeds of sales made by him from the amount of the original indebtedness, and, if they found the other issues in favor of plaintiff* to return a verdict accordingly. Plaintiff excepted to this instruction, and subsequently moved for judgment notwithstanding the verdict ; the claim being that plaintiff was entitled to the whole amount and that the deduction was unauthorized. The court denied this motion, and plaintiff appealed. The appeal is dismissed. The motion was not in the alternative, .for judgment or a new trial, but was limited to an application for judgment. An order made upon such a motion is not appealable. Oelschlegel v. Chicago Great Western Ry. Co. 71 Minn. 50, 73 N. W. 631; 4 Notes on Minn. Cases, 352. This covers' all that is necessary to be said, and results in the conclusion that the trial court properly disposed of the questions presented by defendants, the evidence sustains the verdict, and the record jiresents no reversible error. Order affirmed. Footnotes [1] [Note] Necessity of notice of acceptance to bind guarantor, see note in 33 L.R.A. (N.S.) 960.