Frishman v. Canadian Imperial Bank of Commerce

• Decision Date: 09 May 1968
• Docket Number: No. 21325,21332.,21325
• Citation: 132 US App. DC 169,407 F.2d 299
• Parties: Bernard Lyon FRISHMAN, Appellant, v. CANADIAN IMPERIAL BANK OF COMMERCE, a Corporation, Appellee. CANADIAN IMPERIAL BANK OF COMMERCE, a Corporation, Appellant, v. Bernard Lyon FRISHMAN, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

132 US App. DC 169, 407 F.2d 299 (1968)

Bernard Lyon FRISHMAN, Appellant, v. CANADIAN IMPERIAL BANK OF COMMERCE, a Corporation, Appellee.

CANADIAN IMPERIAL BANK OF COMMERCE, a Corporation, Appellant, v. Bernard Lyon FRISHMAN, Appellee.

Nos. 21325, 21332.

United States Court of Appeals District of Columbia Circuit.

Argued March 13, 1968.

Decided May 9, 1968.

William L. Kaplan, Washington, D. C., with whom Karl G. Feissner, Washington, D. C., was on the brief, for appellant in No. 21325 and appellee in No. 21332.

Benjamin W. Dulany, Washington, D. C., for appellee in No. 21325 and appellant in No. 21332.

Before BAZELON, Chief Judge, PRETTYMAN, Senior Circuit Judge, and LEVENTHAL, Circuit Judge.

PRETTYMAN, Senior Circuit Judge:

These cases are cross-appeals from the same judgment and were consolidated here for argument and disposition. In the early part of 1963 the Abel Construction Co., Ltd., negotiated a loan in the amount of $185,000 from the Canadian Imperial Bank of Commerce. As security for the loan the Bank demanded assignment of the Company's accounts receivable and the personal guarantees of its four shareholders. On March 20, 1963, the parties met to consummate the transaction. The Company signed a demand promissory note and made an assignment of its receivables, but it delivered only three of the four required guarantees. The Bank credited the Company's account with the face amount of the loan. Thereafter, on March 25, 1963, the guarantee of the fourth stockholder, Mr. Bernard Frishman (party to the present litigation), was signed and delivered to the Bank. In June the Bank, pursuant to its custom when guarantees are not executed before an officer of the Bank, wrote Mr. Frishman requesting him to place his signature on a copy of the guarantee to assure that he had indeed signed the original personally and understood its import. Mr. Frishman replied that he guaranteed only ten per cent of the loan and that amount for a period of only one year. The Bank responded with a rejection of these conditions, and Mr. Frishman then authenticated a copy of the guarantee.

The guarantee was not limited to the amount of the original loan but included all future indebtedness to the Bank incurred by the Company. Subsequently the Company experienced financial difficulty and made an "overdraft" at the Bank to meet its payroll, which the Bank accepted in the amount of $12,432.59. In October, 1963, the Bank became concerned about its investment and called the note. The Company took bankruptcy. The Bank then made a demand on Mr. Frishman for $198,273.99 upon his guarantee, which figure represented the original loan of $185,000 with interest, plus the overdraft. Mr. Frishman declined payment, and the Bank sued him. Judgment was entered against him in the District Court in the sum of $12,042.00, plus interest on that amount from October 23, 1963, plus costs, and in his favor on the balance of the claim. That judgment is the matter now before us.

On the trial several defenses to the claim of the Bank were submitted by Mr. Frishman, but principally he said that his guarantee, having been executed after the loan had been made, was without consideration and therefore of no binding effect upon him. The Bank rejoined that the document had been executed under seal, which purported consideration, and that therefore no independent consideration was needed. On this point a question of fact arose as to whether the seal which appeared on the document when it was presented in court was placed there before, at the time of signing, or at a later time by someone other than Mr. Frishman. The trial judge, quite properly, submitted this question to the jury, which answered in a special verdict to the latter effect.

The Bank says its forbearance to call the note of the Company, it being a demand note, constituted a valid consideration for the guarantee bond. Therefore, it says, the question of the seal is really immaterial and the guarantee should be enforced as a simple contract.

There is a doctrine, dating from at least a hundred years back in the common law,¹ that a forbearance asked and given may constitute a consideration for a guarantee. But, so far as we can ascertain, such a forbearance has always been actual; the transaction of guarantee has been treated as a contract, a forbearance of value given for a guarantee of value. The subject is discussed at some length in the Canadian case² cited by the appellant Bank in the case now before us.

This concept of the transaction before us would be that Frishman guaranteed the loan in consideration of the forbearance of the Bank in not calling it. This would be a valid contract. As such it would be binding both ways, binding on Frishman and binding on the Bank. The argument encounters several difficulties.

The first difficulty is that the record contains no evidence of such an agreement. No witness said the Bank agreed to forbear or intended to forbear. We are shown no evidence of an undertaking on the part of the Bank that it forbear from calling the loan. On the other hand the guarantee bond specifically recited that the Bank might grant extensions and otherwise deal with the borrower "as the Bank may see fit". The circumstances of the execution of the guarantee were described by witnesses for both plaintiff and defendant. No mention of forbearance as a factor was made. The guarantee was described by all as intended to be part of the formalities of the making of the loan. The plan went awry in its schedule.

The manager of the Bank testified that, to the best of his knowledge, there was no correspondence or verbal discussion between the Bank and Mr. Frishman during the period March 20th (the date the loan was made) and March 25th (the date of the execution of the guarantee bond). It seems to us that, if a contract of such size and importance were being negotiated, some communication between the...