Berg Metals Corp. v. Wilson
| Decision Date | 22 May 1959 |
| Citation | 170 Cal.App.2d 559,339 P.2d 869 |
| Court | California Court of Appeals Court of Appeals |
| Parties | BERG METALS CORPORATION, a corporation, Plaintiff and Respondent, v. Harry R. WILSON, Jeanette Reif Snyder, also known as Janet Reif Snyder, Alford P. Olmstead, Nathan Hochman, Bruce Irwin Hochman, individually, and International Steel, Inc., a corporation, Defendants, Harry R. Wilson, Jeanette Reifsnyder and Alford P. Olmstead, Appellants. Civ. 23375. |
Wendell P. Hubbard and Alford P. Olmstead, Los Angeles, for appellants.
J. George Bragin, Hollywood, and Sidney Munshin, Beverly Hills, for respondent.
Plaintiff, as successor in interest to Berg Metals Company, recovered judgment for $14,374.58 from defendants-appellants Harry R. Wilson, Jeanette Reifsnyder (frequently written Reif Snyder in the record), and Alford P. Olmstead upon a written guaranty. Other guarantors were Nathan Hochman and Bruce Irwin Hochman, but they were not served with summons.
Appellants raise two major points, (1) that the guaranty was not a continuing one and did not cover the indebtedness upon which the judgment is based, (2) that the guaranty was one of collection and the defendants were released by failure of plaintiff to proceed diligently in an effort to collect from International Steel, Inc., the principal debtor.
Berg Metals Company and International Steel, Inc., were both engaged in the business of buying, preparing and selling scrap iron and steel, the former acting as broker for the latter. In January and February, 1950, they made two written agreements which constituted Berg Metals the sole broker for International Steel, provided for certain advances to be made by Berg to International and specified that such indebtedness be paid by application thereto of one dollar per ton for each ton of scrap sold by International through Berg. Bruce Irwin Hochman, Jeanette Reifsnyder, Harry R. Wilson and Alford P. Olmstead, owned all the stock of International, which needed additional operating funds. Acting principally through Olmstead, who was an attorney and an officer of International, they induced Berg Metals to make the two contracts and to furnish such additional funds to International. The agency and authority of Olmstead to act for the other stockholders, especially the appellants, is not questioned.
The first agreement is dated January 3, 1950, signed by International, all of its stockholders and Berg Metals. At that time Berg Metals was already acting as broker for International, which was indebted to Berg, the debt having arisen through brokerage transactions as follows: When a car of scrap was shipped or about to be shipped by International it would notify Berg Metals which would forthwith advance 90 per cent of the estimated selling price (dependent upon ultimate weight) to International, later reimbursing itself from the proceeds of sale when received from the buyer. Some of these advances were made against bills of lading, some upon oral advice from International. This course of business had been established at the time the contracts under consideration were made. Later it developed that in certain instances the shipment was not actually made or was rejected by the buyer.
The agreement of January 3, 1950 (which counsel term the indemnity agreement) starts with these recitals: 'Whereas, International Steel, Inc., has from time to time borrowed money from Berg Metals Co., and is now indebted to it on account of said loans; and Whereas, International Steel, Inc., desires to borrow additional sums of money from Berg Metals Co., the total indebtedness of which at any one time shall not exceed Fifteen Thousand ($15,000.00) Dollors; and Whereas, Berg Metals Co. has agreed to lend International Steel, Inc., a sum of money up to the extent of Fifteen Thousand ($15,000.00) Dollars, provided the monies and sums already loaned and the monies to be loaned shall be secured as hereinafter provided for in this agreement.' These are followed by a recital of the stock holdings in International. Next are recitals as to the ownership of the land and plant on and in which International was doing business, it being stated that same were owned by the estates and heirs of J. C. Wilson, deceased, and Robert Wilson, deceased, and certain others including defendants Harry R. Wilson and Jeanette Reifsnyder; that it was intended upon the closing of those estates that the land and plant would be transferred to International for a price that would be represented by a first trust deed and chattel mortgage for approximately $75,000; that this would be done as soon as said estates were closed and that an estimated period of six months from date would be sufficient time to accomplish same; that the stockholders of International desired Berg Metals to make said loans to International 'so that the latter may better continue its operations to the benefit of the undersigned.' It was therefore agreed 'as an inducement and consideration to Berg Metals Co. to make the additional loans to International Steel, Inc.': 1. That the stockholders would cause said transfer to be made to International in exchange for a first trust deed and chattel mortgage of $75,000 or thereabouts; 2. International agrees with Berg immediately upon receiving title to said land, buildings and equipment, to execute in favor of Berg a second lien trust deed and chattel mortgage, subject to said $75,000 lien, which second liens 'shall be executed for the purpose of securing payment of the Fifteen Thousand ($15,000.00) Dollar indebtedness to Berg Metals Co. herein referred to, and which indebtedness shall be repaid in the manner and at the times as is set forth in an agreement of even date hereof entered into between Berg Metals Co. and International Steel, Inc.' Paragraph 3 provides that in the event of failure of International to pay its indebtedness 'as provided for in the said agreement between International Steel, Inc. and Berg Metals Co.,' or should the holders of the first liens be compelled to foreclose, thereby rendering the second liens valueless, Berg should receive an assignment of an interest in the first liens 'sufficient to protect it * * * from any loss for any money or sums remaining unpaid pursuant to the loans up to Fifteen Thousand ($15,000.00) Dollars herein referred to.' Emphasis added.) Paragraph 4 provides that if International should fail to receive complete title to the plant property 'or in the event International Steel, Inc. for any reason whatsoever fails to deliver and give to Berg Metals Co. a Second Trust Deed and Second Chattel Mortgage as hereinbefore mentioned within six (6) months hereafter, that then, and in either one of said events, Alford P. Olmstead, Bruce Irwin Hochman, Janet Reif Snyder, Harry R. Wilson and Nathan Hochman hereby agree to personally and individually indemnify Berg Metals Co. and hold it harmless from any loss or damage that it may sustain thereby, limiting, however, said loss and damage to the extent of any unpaid balance owing by International Steel, Inc. to Berg Metals Co.' Paragraph 5 states that in the event of inability of the undersigned (meaning the guarantors) to cause the Wilson estates to perform the acts designated for them, then 'Alford P. Olmstead, Bruce Irwin Hochman, Janet Reif Snyder, Harry R. Wilson and Nathan Hochman do hereby agree to personally and individually indemnify Berg Metals Co. and hold it harmless for any loss or damage that it may sustain thereby, limiting, however, said loss and damage to the extent of any unpaid balance owing by International Steel, Inc. to Berg Metals Co.'
The reference in paragraph 2 to 'an agreement of even date hereof' is inaccurate; there is no other agreement bearing that date, but the proof plainly shows that this language referred to a so-called brokerage agreement which bears date January 6, 1950, and was actually executed and delivered in the month of February, on or after the 15th.
That agreement recites that 'International Steel has heretofore borrowed certain monies from Berg Metals and now requires an additional amount of money, the total of the monies heretofore borrowed and presently to be borrowed, totalling Fifteen Thousand ($15,000.00) Dollars, which sum International Steel requires to operate its business.' It was therefore agreed that 'in consideration of the sum of Fifteen Thousand ($15,000.00) Dollars loaned by Berg Metals to International Steel, receipt of which is hereby acknowledged by International Steel';
Parenthetically it should be observed that the $15,000 had not been advanced in a single sum on January 6, 1950, or at any other time; that the debt on that date was $16,783.43, all of which had been built up through a series of advances made against shipments. Likewise, the reference to a promissory note of even date evidencing a $15,000 debt is a false one, for there never was any such note and the attorneys who handled the matter for the respective parties (i. e., Mr. Bragin for Berg Metals, and Mr. Olmstead for appellants) agreed that a note would be impractical because of the fluctuating amount of the debt. They also expressly agreed that the guaranty would pertain only to advances up to $15,000 and for anything beyond that amount 'they would not be responsible for under the guaranty.'
Paragraph 2 of said agreement dated January 6, 1950 specifies that Berg shall be International's exclusive broker in the sale of scarp iron and steel so long as any part of the loan should remain unpaid. 'For the purpose of repaying the aforementioned Fifteen Thousand ($15,000.00) Dollar loan,...
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