Metropolitan Rubber Co. v. Ohrndorf

THAYER, Circuit Judge, after stating the case as above, delivered the opinion of the court. The sole question presented by this record which requires consideration is whether the evidence produced on the trial of the case conclusively showed that the guaranty sued upon was canceled by the guarantors, as to future purchases, on June 5, 1895, and from that time forward was held by the plaintiff below simply as security for the payment of the four notes and the sight draft, which were on that day executed in its favor by the Supply Company to settle the indebtedness which it then owed? So the trial court appears to have held, and its ruling to that effect is the only point which is dial longed by the assignment of errors. It may be conceded that prior to June 5,1895, a proposition bad been made by the plaintiff company, and had been accepted by the Supply Company, which contemplated the cancellation and surrender of the guaranty. This proposition, as at first: made and accepted, required the Supply Company to pay $1,000 in cash, and to execute three notes in equal amounts at 30, 60, and 90 days, which were to be indorsed by tbe board of directors of the supply company individually, in settlement of the then existing indebtedness of the Supply Company, amounting to about $5,744. A modification of this proposition seems to have bien subsequently proposed and assented to, by virtue of which the indorsement of the notes by the directors was waived, but: tbe guaranty was to remain in force as a security for tlieir payment. This arrangement, however, was wholly executory, at least until June 5, 1895, and even then it does not seem to have been carried out according to its terms. Eour notes were executed by the Supply Company at 1, 2, 3, and 4 months, in lieu of three notes at 30, 60, and 90 days, and a sight-draft was drawn for the balance of the indebtedness, instead of paying the same in cash. Moreover, the agreement in question, which contemplated a surrender of the guaranty after the notes given in settlement of the accrued indebtedness had been paid, was negotiated by Charles C. Peters, as president of the Supply Company, and there is no evidence in this record tending to show that he was acting in that behalf by direction of the guarantors, to secure their release from further liability, or that they were even aware of what was being done in [352] their interest. If the guarantors were aware of what had been done in their behalf prior to Peters’ departure for New York, and if they supposed that he went there to consummate a settlement with the plaintiff company, which would relieve them from responsibility for future purchases, the evidence contained in this record fails to disclose such facts. Neither is there any testimony that the guarantors ever notified the plaintiff company that they desired to be released from the guaranty, or that they would not be responsible on the same for further sales. There was evidence, however, which established the following facts, namely: That when Peters went to New York, in June, 1895, and executed the notes heretofore mentioned in settlement of the old account, he endeavored to make further purchases from the plaintiff company; that the plaintiff declined to make sales to the Supply Company on its own credit, and that, after endeavoring to obtain goods elsewhere, Peters finally represented to the plaintiff’s president that he had communicated with his people in St. Louis, and that they were willing to let the guaranty stand as security for future purchases. On the strength of this representation, and without knowledge or notice that the president of the Supply Company was acting without the consent of the guarantors, further goods were sold and delivered to the Supply Company during the months of June and July, 1895. It does not appear that when such goods were received the guarantors disclaimed individual liability for the indebtedness so contracted. Testimony was also introduced to the following effect: That as late as the middle of July, 1895, Peters, at the office of the Supply Company in the city of St. Louis, and in the presence of Ruane, one of the guarantors, made application to the secretary of the plaintiff company to purchase additional goods for the Supply Company on credit, and was then informed in Ruane’s presence that such additional goods could only be obtained on the credit of the existing guaranty. To this statement the defendant Ruane appears to have paid no attention and to have made no reply. It was also shown that Peters, Ruane, and Ohrndorf were the sole members of the board of directors of the Supply Company, and that Peters acted as general manager of the company’s business. In view of the foregoing facts we are constrained to hold that the court erred in directing a verdict in favor of the plaintiff for the sum of $957.12, and in holding as matter of law that there could be no recovery in excess.of that sum and the accrued interest thereon. The guaranty in suit being unlimited as to time, the delivery of the four notes and the sight draft in settlement of the indebtedness which had occurred prior to June 5, 1895, did not discharge the guarantors from liability for further purchases made by the Supply Conrpamf on the credit of the guaranty, unless the notes and draft were delivered and accepted in pursuance of an understanding by both parties that the delivery of the notes and draft should have that effect; and whether such was the understanding and intent of the parties when the notes and sight draft were delivered, was properly a question for the jury. The burden rested upon, the defendants to show that they had been released from liability on' their guaranty for all goods bought by the Supply Company after June 5, 1895, and it cannot be said that at the conclusion of the trial that fact was so well established that the jury [353] could not reasonably have found to the contrary. The notes as executed and delivered were not drawn in accordance with the terms of the agreement that is disclosed by the correspondence, while there was no direct evidence that the plaintiff company consented to a modification of the terms of that agreement at the time they were delivered. We think, therefore, that it was the province of the jury to infer and find, from all the circumstances attending the transaction, whether the notes and draft were in fact accepted by the plaintiff company with the understanding that the guaranty should be thereafter retained only as a security for their payment, and not as a security for future purchases. But, even if we are mistaken in this view of the case, and if the trial court was right in holding, as matter of law, that the plaintiff accepted the notes and drafts in question under the terms of the agreement evidenced by the correspondence, and that it thereby acknowledged that that agreement had been fully executed, yet it is nevertheless true, we think, that there was some evidence before the jury which tended to show that the defendants, subsequent to June 5, 1895, consented to the further use of the guaranty as security for future purchases. As has been stated heretofore, one witness for the plaintiff testified without objection that in June, 1895, Charles C. Peters, the president of the Supply Company, represented to the plaintiff company that the guarantors had consented to let the guaranty stand as security for future purchases, and that all goods thereafter-sold to the Supply Company were sold on the credit of the guaranty. Neither of the defendants testified that they did not give such consent to the use of the guaranty as a means of obtaining credit, subsequent to June 5, 1895; and, even if they had done so, the issue concerning such consent should have been submitted to the jury under proper instruction. It results from these views that the judgment below must be reversed, and the cause remanded for a new trial. It is so ordered.