St. Louis Brewing Ass'n v. Hayes

After stating the case as above, PARDEE, Circuit Judge, delivered the opinion of the court. This is the third appearance of this case in this court. On the first writ of error the question presented was whether an arrangement between the brewing- association and the principal on the bond by which the brewing association was to furnish beer on credit, operated to release the sureties from liability on the bond, and this court held that such outside arrangement did not operate an entire release of the sureties. See Association v. Hayes, 17 C. C. A. 634, 71 Fed. 110. On the second‘writ of error, the questions passed upon were whether the [401] failure of tlie principal, Hayes, to sign the bond under the circumstances shown in the evidence, operated to relieve the sureties from liability thereon, and whether the delivery of the bond sued on, which was denied by the pleadings, was necessary to be proved by direct evidence. See Association v. Hayes, 38 C. C. A. 449, 97 Fed. 859. On the third trial the defense relied upon was that the sureties were released because, while the contract required that Hayes, the principal^ should pay for the beer upon receipt of the bills of lading, the brewing association had given him large and extensive credit, and upon the application of the sureties to the brewing association and its agents for the information as to Hayes’ accounts the sureties had been misled and deceived by representations that said Hayes was in all things keeping and complying with and fulfilling the terms of his contract, when in fact he was then indebted for more than the amount of the bond, whereby the sureties were lulled into security and lost all opportunity to protect themselves, the said Hayes being at the time possessed of sufficient means and property to have fully paid off his liabilities. On this last presentation, counsel for plaintiff in error presents some twelve assignments of error, the first four of which are altogether too general to demand attention, and the last seven are based upon the refusal of the court below to give some eight special instructions, offered, refused, and excepted to en bloc, some of which are unquestionably bad, and therefore the whole offering was properly refused. Without further criticism of the assignments of error, we notice that while they challenge the rulings of the court on admissions of evidence, object to the general charge of the court, and challenge the rulings refusing the special charges asked, they practically present one question only, — that is, whether the sureties were released from their obligations on the bond by reason of misrepresentations made by the agents of the association to the sureties in regard to the state of the accounts between Hayes, the principal on the bond, and the association. The major proposition submitted by counsel for plaintiff in error, on which the whole case hangs, is as follows: “The liability of the sureties did not and could not accrue until the year ended oh October 18, 1891, or Hayes finally stopped buying beer under the contract for year ending November 18, 1894, and it was irrelevant and misleading to the jury to allow evidence as to what the traveling auditor said Hayes owed in April or June, or evidence as to what property Hayes owned in April or June, 1894.” On the last hearing in this court it was held that the contract of appointment of Hayes and the bond given in pursuance thereof were parts of the same transaction, and must be construed together as one instrument. See Association v. Hayes, 38 C. C. A. 449, 97 Fed. 859. This being the case, if we turn to the contract of appointment, we find that Hayes was to pay cash on receipt of bill of lading, and to keep strict account of all packages, kegs, or half barrels received, as well as empties returned; and by reference to the bond we see that the sureties bond themselves that Hayes should pay or cause to be paid to the association any and all sums of money that may be or become due to said association [402] by said Hayes on account of shipments of beer made to him or his order from November 18, 1893, to November 18, 1894, all such payments to be made promptly in the ordinary course of business. Under this contract the failure on the part of Hayes to pay cash for each shipment upon receipt of the bill of lading was a breach of the contract, and gave the association the right to immediately proceed by suit against Hayes and his sureties to enforce the collection of its debt then due; and it seems to be idle to contend that under the contract between the parties Hayes could buy beer for a whole year, neglect to pay, embezzle, or otherwise waste the proceeds, and, during the whole year, the association and the sureties' should stand idly by, unable to protect themselves. The association had the right to demand payment for each consignment as soon as it was received by Hayes, and, in case, with the consent and nonaction of the association, Hayes was neglecting to pay, and yet receiving large consignments of goods, the sureties would have a right to protect themselves; and, if the sureties had a right to protect themselves whenever Hayes’ conduct became such as to imperil their interests, then we think it is clear that if, by misrepresentations on the part of the association, the sureties were lulled into security, and thereby their condition made worse than it would have been if they had been truthfully informed as to the facts, they would thereby be discharged. As to the matter of the state of Hayes’ account, the inquiries made by the sureties, the representations made by the association and its agents, the authority of the agents to speak for the association, and whether or not the sureties’ condition was worse in June than in October, when suit was finally instituted, are questions all raised by the pleadings, and, under evidence tending to establish the same, were, in a fair, lucid charge by the court, submitted to the jury. It may be that, if the case were now before us upon the same facts, we would find a different verdict, but as the record stands we find no reversible error in the proceedings of the circuit court, and its judgment is affirmed.