Atterbury v. Carpenter

Decision Date14 August 1963
Docket NumberNo. 18403.,18403.
Citation321 F.2d 921
PartiesH. E. ATTERBURY, Appellant, v. A. S. V. CARPENTER, Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Duncan, Brophy, Wilson & Duhaime and Robert B. Duncan, Medford, Or., for appellant.

Roberts, Kellington, Branchfield & Heffernan, G. W. Kellington and George M. Roberts, Medford, Or., for appellee.

Before ORR, JERTBERG and MERRILL, Circuit Judges.

MERRILL, Circuit Judge.

Appellant Atterbury pledged stock as security for a loan made to another. The borrower defaulted. Atterbury (with jurisdiction founded upon diversity of citizenship) has brought this action to restrain the pledgee from selling the stock. He contends that he has been discharged as surety because of changes made in the loan agreement without his consent. The district court held that Atterbury was an indemnitor and not a surety, and therefore was not entitled to be discharged. The basic question upon this appeal is whether the district court erred in that holding.

The borrower is the Southern Oregon Moulding Company, hereinafter called "Somco." In 1956, through past business dealings, Somco owed Atterbury $44,200, and Atterbury owed $60,000 to Wells Fargo Bank of San Francisco. Somco gave its note to Wells Fargo in the amount of $60,000, secured in part by a pledge of securities by Atterbury. By 1958, Wells Fargo was pressing for payment. Atterbury wished his stocks to be released from pledge and insisted that Somco pay off its $44,200 share of the bank obligation or be liquidated. Somco then got in touch with appellee Carpenter who, it knew, had engaged in the business of corporate financing. Its obligations as a result were refinanced as follows:

$45,000 was borrowed by Somco from the United States National Bank of Portland, Oregon, at 4½% interest, with Carpenter endorsing the note and giving a pledge of securities. Wells Fargo was then paid off, Somco paying $44,200 of the principal plus all interest charges, and Atterbury paying the balance of principal. Atterbury's pledged securities were then released to him.

To compensate Carpenter for his risks and services as endorser and surety, it was agreed that he was to receive one quarter of one per cent of the loan per annum. As an additional inducement, and to reduce his risk, Atterbury, on July 15, 1958, entered into an agreement pledging certain of his securities "to insure A. S. V. Carpenter that Southern Oregon Moulding Incorporated will repay to the United States National Bank of Portland (Oregon) the sum of $45,000 borrowed by it from said bank, and to further insure and protect A. S. V. Carpenter against any loss in connection therewith." Minutes of a meeting of the directors of Somco incorporated by reference as part of the pledge agreement explained the consequences of the transaction as follows: "* * * in the event that the corporation fails to repay said $45,000 loan or any part thereof, said shares will be sold in accordance with the pledge agreement to pay any balance still owing to Mr. A. S. V. Carpenter." Somco agreed to hold Carpenter harmless from any loss arising out of his endorsement and guarantee of the note and to hold Atterbury harmless from any loss arising out of his pledge.

Somco's business affairs thereafter did not prosper. After about a year, changes in management occurred. Those with whom Atterbury had dealt and who he was willing to accommodate retired to advisory positions. Carpenter was elected to the board of directors. The company then considered making pine or fir moulding in addition to cedar, which would require additional investment in cutting tools and inventory, and thus require additional financing. In June, 1959, additional financing was secured. On Carpenter's guarantee the loan from the United States National Bank was increased to $95,000. Interest was increased to 5 per cent per annum, and later to 5½ per cent. All of these changes occurred with Carpenter's active participation, but without any consultation with Atterbury, or consent by him.

In July, 1960, on demand of the bank, Somco being unable to do so, Carpenter paid the total sum due. He then demanded payment by Atterbury and this litigation ensued. The issues involving the controversy between Atterbury and Carpenter were segregated for separate trial. That trial resulted in the judgment from which this appeal is taken.

Carpenter concedes that Atterbury's obligation could not, without his consent, extend to the increase in the loan, and that Atterbury's stock is on pledge only to the extent of the original $45,000 loan.

Atterbury, however, contends that under well recognized principles of the law of suretyship the changes in Somco's principal obligation...

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9 cases
  • Zuni Const. Co. v. Great Am. Ins. Co.
    • United States
    • Nevada Supreme Court
    • 11 d1 Maio d1 1970
    ...So.2d 528 (La.App.1969); Ore-Ida Potato Products, Inc. v. United Pacific Ins. Co., 87 Idaho 185, 392 P.2d 191 (1964); Atterbury v. Carpenter, 321 F.2d 921 (9th Cir. 1963); Restatement, Security § 82(i) (1941); 3 Corbin, Contracts § 559, at 266 (1960). Where there is a compensated surety, th......
  • AJ Kellos Const. Co., Inc. v. Balboa Ins. Co.
    • United States
    • U.S. District Court — Southern District of Georgia
    • 12 d3 Março d3 1980
    ...is an original undertaking. See 41 Am.Jur. § 4, at 689. Furthermore, as succinctly stated by Judge Merrill in Atterbury v. Carpenter, 321 F.2d 921, 923-24 (9th Cir. 1963): "The indemnitor's promise is not conditioned upon another's nonperformance of duty." Arant on Suretyship, § 17 (1931). ......
  • Moya v. Fidelity & Cas. Co. of New York
    • United States
    • New Mexico Supreme Court
    • 27 d1 Setembro d1 1965
    ...Company, 132 Cal.App.2d 10, 281 P.2d 571; Fidelity & Deposit Co. of Maryland v. Hobbs, C.C.A., 10 Cir., 144 F.2d 5; Atterbury v. Carpenter, U.S.C.A., 9th Cir., 321 F.2d 921. It is obvious that the finding that the well was plugged at a proper time and in a proper manner refers to the actual......
  • Gellis v. S. Gellis & Co., Inc.
    • United States
    • Court of Chancery of Delaware
    • 21 d5 Junho d5 1974
    ...of executing surety contracts for an actuarially-computed premium. Restatement of Security, § 82, Comment (i); Atterbury v. Carpenter, 9th Cir., 321 F.2d 921, 924 (1963). However, there is also a well established line of cases which treats shareholders and directors who act as sureties for ......
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