Davis v. McEwen Bros.

HANFORD, District Judge (after stating the facts as above).. [1] The first assignment of error relates to testimony given by the plaintiff in error on the trial of a case which he was active in prosecuting to establish a lien as security for the debt involved in the present action, and was admissible in evidence because it contained important admissions by him of facts in issue relating to the performance of their contract by McEwen Bros., copartners. Therefore it was not error to overrule the objection to that evidence. [2] The objection to the introduction of any evidence referred to in assignment 2 was an attack upon the complaint upon which issues had been joined by the answer and raised only questions which might have been raised by a demurrer. The specific grounds for disputing the sufficiency of the complaint are that it fails to set forth any consideration for the alleged guaranty, fails to show that any guaranty was entered into that could apply to the account sued on, fails to show that McEwen Bros, complied with the terms and conditions of their contract, and lacks pertinent allegations to evade the specific defense of failure and lack of consideration for the promissory note. The complaint sets forth the promissory note by its tenor. The note contains an acknowledgment of value received. There is no omission of formal allegations of jurisdictional facts and of possession and'ownership of the note and nonpayment. Therefore the note as it is pleaded is prima facie valid, and it was not necessary for the pleader to anticipate and negative possible defenses. Therefore the first count of the complaint is not defective as a statement of facts sufficient to constitute a cause of action. [3] In stating the second cause of action the complaint sets forth the writings constituting the guaranty by their tenor, the terms of which import a consideration, and is full and complete in alleging the necessary jurisdictional facts, the relationship of the parties, the making of the contract, its modification, performance of their undertaking by McEwen Bros., the request for, giving and acceptance of the guaranty, and nonpayment of the debt for which it was given as a security. Considered by itself alone, the guaranty would be ambiguous and uncertain as to the debt intended to be secured; but as a link in a chain of facts, as it is pleaded, its applicability to a particular debt is certain. Therefore we hold that the complaint is [311] not deficient, and that the objections to the introduction of evidence to sustain it were properly overruled. [41 Assignments 3 and 11 to 21, inclusive, merely challenge the sufficiency of the evidence to sustain the complaint and contradict the court’s findings of facts. A jury having been waived, the findings of the trial court have the same efficacy as a verdict. The findings determine, conclusively, all controverted questions of fact unless unsupported by competent evidence. After having read the evidence studiously, we affirm that the finding's in this case as to every material fact are well supported by evidence, and they are adopted as the premises upon which our conclusions must rest. Nevertheless, to elucidate some of the points, reference will he made in this opinion to certain items of the evidence. [5] The question referred to in assignment 4, which lias been quoted in the statement preceding this opinion, is obviously obnoxious to an elementary rule governing the introduction of evidence which prohibits the propounding of leading questions in the examination in chief of a witness, and for that reason the court did not err in sustaining the objection to it on the ground that it called for a conclusion. There is another sufficient reason for approving that ruling. An affirmative answer to that question would have added unnecessary cumulative evidence adverse to the plaintiff in error, and a negative answer would have been a transparent prevarication that would not have been of any advantage to him. He was permitted to testify that he had no information or knowledge of the existence of a corporation named “McKweu Bros.” until a time subsequent to the execution and delivery of the note, and that fact is the supposed basis for a denial of the execution and delivery of the note. [8] When the note was given, the plaintiff in error knew that, as a guarantor, he was responsible for the payment of a debt; the corporation was then existing and by a valid assignment was then the holder of the guaranty and entitled to receive payment of that debt; the defendant in error intended to give a note as a substitute pro tanto for his obligation under the guaranty, and with that intention he did sign the note and did transmit it by mail addressed so that possession of it was transferred from him to the corporation. The proposition that, the plaintiff in error being ignorant of the facts that the corporation existed and was the holder of his guaranty, the note which he signed is not a note, and the transfer of possession of it: from him to the corporation was not a delivery, is sophistical. In legal effect the transaction is similar to one in which a contract made and entered into, whereby one party dealing with an agent, in ignorance of the agency, becomes obligated to an undisclosed principal. In such a case the law does not avoid the obligation, but entitles the principal to enforce it. 1 Am. & Eng. Enc. of Law (2d Ed.) 1168. 1169, 1170: New Jersey Steam Nav. Co. v. Merchants’ Bank, 6 How. 380, 12 L. Ed. 465; Ford v. Williams, 21 How. 287, 16 L. Ed. 36; Darrow v. Produce Co. (C. C.) 57 Fed. 463. The actors who were pressing the plaintiff in error to meet his obligation under the guaranty-, and who received and accepted the [312] note, were agents of the corporation which was the holder and legal owner of the guaranty, the plaintiff in error intended to give a valid note, he would not have acted differently if he had been informed that his guaranty had, by assignment thereof, become the property of McEwen Bros., a corporation, and we hold that the relationship of the corporation to the transaction is that of an undisclosed principal; that it was apparently and legally the payee, as well as the actual holder of the note when this action was commenced; and that the plaintiff in error is legally obligated to pay it. [7] It is the opinion of this court that the allegation in the amendment to the complaint referred to in the fifth assignment is not material, and for that reason the order of the court allowing the amendment to be made after the introduction of the evidence upon the trial was, at the most, a harmless error. What will be said in this opinion touching the grounds of defense relied upon in the arguments of counsel will be the decision of this court of all questions involved in the conclusions of law referred to in assignments 6, 7, 8, 9, and 10, and in the general assignments numbered 24 and 25. .[8] Assignment 22 alleges error of the trial court in disallowing the counterclaim for expenses of litigation in attempting to establish a lien which culminated in a judgment in favor of McEwen Bros, against the M. P. & P. Co. which remains unsatisfied. That litigation was instigated and carried through by the plaintiff in error for his own benefit, and it wquld impair the rights of the guarantee to saddle upon it the expenses of litigation for the collection of a debt which the plaintiff in error was obligated to pay. [9] Assignment 23 alleges error of the trial court in not allowing a credit in favor of the plaintiff in error for one-lialf of the debt for the reason that the plaintiff (defendant in error) “looked to Altenbrand for his Half of the obligation and accepted the promissory note of Davis in full for his half thereof.” No claim for a credit on account of the guaranty, by reason of liability of the co-guarantor, can be found within the issues made by the pleadings, and it is not permissible to raise new issues in the assignments of error. The defenses to the action urged in the arguments are multifarious. It is contended that there was no consideration for either the guaranty or the promissory note; that the guaranty was not accepted; that notice of acceptance of the guaranty was not given immediately to the guarantors; and that the guarantee did not complete performance of the contract in full compliance with its original specifications. Upon all of these grounds it is insisted that no obligation attached to the guarantors. Inconsistently with a plea of non est factum, it is also contended, in avoidance-of liability under the guaranty, that both of the guarantors were released, as a legal consequence of the negligence of McEwen Bros, in failing to inform the plaintiff in error that the contract had been modified and fulfilled, as modified, by delivery of the materials to the carrier on or prior to the 8th day of June, 1900, because by withholding that information he was misled and hilled by a false assurance of safety, so that he delayed to file [313] the notice and claim of lien in time to make it effective, and by the lapse of time a valuable security which would have been available for the protection of the guarantors was sacrificed; that the contract was materially changed in its terms subsequently to the date of the guaranty without the consent of the guarantors, and the legal effect of such modification of the contract is to release the guarantors from their obligation. It is also contended that by acceptance of the note, and by promises made to enforce the guaranty against the co-guarantor, the plaintiff in error was released from liability under the guaranty and remained obligated only for the amount of his note. And, finally, it is contended that the findings made by the trial court are inconsistent and insufficient to support the judgment. [10] When the guaranty was given, the contract between McEwen Bros, and the M. P. & P. Co. was executory. In demanding security for payment before incurring additional expense in the manufacture of the materials required to fulfill their contract, McEwen Bros, exercised ordinary business prudence, their demand was not unreasonable, and it was necessary to comply with it in order to avoid a controversy and delay in the performance of the contract, which would have been injurious to the M. P. & P. Co. In view of those conditions, the guaranty was given for the accommodation of the M. P. & P. Co. and was effective in relieving that concern from embarrassment, because possible vexatious contentions were avoided and the materials were delivered by McEwen Bros., without receiving full payment of the contract price therefor, in reliance upon it as a basis of credit. The consideration contemplated by the guarantors, as expressed in the guaranty itself, was a future delivery of goods, and we hold that the actual delivery of the materials constituted a valid consideration. M’cFarlane v. Wadhams, 176 Fed. 82, 99 C. C. A. 602. [11] The letter of McEwen Bros, to the plaintiff in error dated June 11, 1900, the material part of which is quoted in the preceding statement, cannot be misconstrued as a notice of rejection of the guaranty. The plaintiff in error did not misunderstand it. 3Tis response to it is conclusive evidence that he deemed it to be a sufficient and timely notice of acceptance of the guaranty and of performance of the contract in reliance upon it. It served the purpose of a notice, and that which proved to be actually sufficient, fulfilled all requirements of the law, as to acceptance and notice thereof. [12] Whether the contract was, or was not, modified previous to the date of the guaranty, the M. P. & P. Co. had the right to accept part performance of the original contract with an abatement of the price, and did so. By receiving the materials as delivered, the M. P. & P. Co. incurred a debt for the unpaid part of the price, and it is for the payment of that debt that the guarantors promised to be responsible. The guaranty contract does not, by its terms, make it conditional, so that its obligation would attach only upon complete fulfillment of the original contract. On the contrary, by its terms the guarantors assumed responsibility for payment within a specified time — “after delivery of goods.” Therefore delivery of the materials [314] fulfilled the only condition precedent, upon which the obligation of the guarantors was made to depend. [13] Delay in filing the lien notice was not caused by any fault on the part of Mc'Ewen Bros., in concealing facts or failure to communicate true information to the plaintiff in error. That document was verified by the plaintiff in error himself, and it states that a lien was claimed for materials delivered on the 18th day of June, 1900. That is the date on which the materials were received at Manhattan. In their letter to him dated June 11, 1900, to which he made response under date of June 18, 1900, McEwen Bros, informed the plaintiff in error that the)*- had “hurried up shipment of the balance of tanks as fast as possible after you guaranteed the account.” These letters proved that he, necessarily, knew that the materials had been shipped from Wellsville prior to June 11th, so that he could not have been misled by the withholding of true information as to the date from which time vfould commence to run against the right to file a lien. By the decision of the Supreme Court of Montana, it appears that the lien was defeated by computing the time within which the notice should have been filed, from the date of delivery of the materials to the carrier at Wellsville, and the lapse of more than 90 days between that date and the date of the filing. McEwen Brothers v. Union Bank & Trust Co., 35 Mont. 470, 90 Pac. 359. The record does not contain any allegation in pleading or proof of an agreement, express or implied, to release the co-guarantor from any part of his obligation, nor to accept the promissory note given by the plaintiff in error for one-half of the debt and not exact from him fulfillment of his obligation for the whole debt; on the contrary, by their letter acknowledging receipt of the first note given in May, 1901, McEwen Bros, informed him in clear and explicit terms that he would still be held to his obligation as guarantor of the whole debt. The findings are articulated in 22 paragraphs, and, without extending the length of this opinion by a detailed analysis, we deem it sufficient to say that they appear to be comprehensive and positive in the statement of all the material facts essential to support the judgment and to be free from contradictions or inconsistent statements. On consideration of the whole case, it is the opinion of the court that the record ';scloses no error of the trial court for which the judgment shorn., be reversed. Therefore it is affirmed.