Bomud Co. v. Yockey Oil Co.

• Decision Date: 30 June 1956
• Docket Number: No. 40202,40202
• Parties: , 58 A.L.R.2d 1265 The BOMUD COMPANY, a Corporation, Appellant, v. YOCKEY OIL COMPANY, Inc., a Corporation, and R. B. Osborn, Appellees.
• Court: Kansas Supreme Court

Page 72

299 P.2d 72

180 Kan. 109, 58 A.L.R.2d 1265

The BOMUD COMPANY, a Corporation, Appellant, v. YOCKEY OIL COMPANY, Inc., a Corporation, and R. B. Osborn, Appellees.

No. 40202.

Supreme Court of Kansas.

June 30, 1956.

Syllabus by the Court.

1. A guaranty is a contract by two or more persons, founded upon a valid consideration, by which one person promises to answer to another for the debt, default or miscarriage of a third person, and, in a legal sense, has relation to some other contract or obligation with reference to which it is a collateral undertaking.

2. A guarantor, to be relieved of his obligation to pay, must establish one of three facts: (1) the debt has been paid or extinguished; (2) a valid release or discharge; or (3) the bar of the statute of limitations as to himself.

3. The contract of a guarantor is his own separate contract in the nature of a warranty by him that the thing guaranteed to be done by the principal shall be done, and is not an engagement jointly with the principal to do the thing.

4. The original contract of a guarantor's principal is not his contract and he answers only for the consequence of the default of the principal.

5. When default occurs on the part of the principal, the guarantor's liability becomes primary and is absolute.

6. When a buyer purchases drilling mud and supplies from a seller upon an open account, and a third person enters into a written contract of guaranty with the seller to guarantee payment of such open account in case of default on the part of the buyer, in an action by the seller against the buyer upon the open account and the guarantor upon his written guaranty to recover the amount due on the open account, the running of the statute of limitations in favor of the buyer does not effect a discharge or release of the guarantor from his obligation to pay the amount due under this written guaranty, since his liability became primary and absolute before the statute had run in favor of the buyer.

7. The record in an action to recover money upon an open account against a buyer and against a guarantor upon his written guaranty examined, considered and held: That the trial court committed error when it rendered judgment in favor of the guarantor upon a motion for judgment on the pleadings.

T. Hillas Eskridge, Tulsa, Okl., argued the cause, and Marvin E. Thompson, George W. Holland and Clifford R. Holland, Jr., Russell, and Bradford J. Williams, Fenelon Boesche, Richard B. McDermott and Franklin D. Hettinger, Tulsa, Okl., were with him on the briefs for appellant.

D. A. Hindman, Stockton, argued the cause, and Stanley Krysl, Stockton, was with him on the briefs for appellees.

FATZER, Justice.

This was an action to recover money from Yockey Oil Company, Inc., upon its open account, and from R. B. Osborn upon a written contract entered into with plaintiff March 30, 1951. Yockey Oil Company, Inc., contended that the statute of limitations barred recovery against it; Osborn contended that pursuant to his contract he was a guarantor for the principal debtor, Yockey Oil Company, Inc., and that since the action was barred as to the principal, it was therefore barred as to himself, as guarantor. The trial court sustained Osborn's motion for judgment on the pleadings, and plaintiff has appealed.

Yockey Oil Company, Inc., hereafter referred to as Yockey, owned interests in certain oil and gas leases and managed the leases for the other interest holders. In connection with such management it purchased drilling mud and supplies from plaintiff, hereafter referred to as Bomud, between March 10, 1951, and August 1, 1951, on open account totaling in the sum of $4,926.18.

On March 30, 1951, Osborn, the president and a stockholder of Yockey, entered into a written contract with Bomud to secure credit for Yockey, or the extension or the renewal of such indebtedness, and agreed to pay such indebtedness if Yockey defaulted as hereinafter more fully set forth. At that time Yockey was indebted to Bomud in the sum of $1,039.91, and Bomud had no security for the debt. Subsequent to the execution of the contract Bomud sold on open account and delivered to Yockey drilling mud and supplies totaling $3,886.27. No claim was made these products and supplies were not delivered to the various oil and gas leases managed by Yockey. As each delivery was made a representative of Yockey signed a delivery ticket receipting for the merchandise.

Omitting the signature and formal portions thereof, Osborn's contract with Bomud is summarized and quoted, as follows: The first paragraph recites that Yockey (designated as party of the first part) was desirous of purchasing on credit from Bomud merchandise, tools, machinery and materials, and of opening an account with Bomud, which could be settled by notes and which could be extended or renewed from time to time as might be agreed upon by Yockey and Bomud.

The second paragraph reads, in part, as follows:

'Now in consideration of One Dollar, and the giving of credit or the extension or renewal of said indebtedness, if such indebtedness is renewed or extended, to the said party of the first part by the said The Bomud Company, we the undersigned, and each of us (Osborn), do hereby jointly and severally covenant and agree to and with the said The Bomud Company that the said party of the first part shall promptly pay to the said The Bomud Company any and all sums of money that shall become due it from the said party of the first part upon said account, and upon any and all notes given by the said party of the first part in settlement thereof, and of any and all renewals of the same, as the same shall become due. * * *'

and the guarantee also included all accounts then or thereafter owing by Yockey for merchandise, tools, machinery and materials theretofore sold and delivered or contracted to be sold and delivered, and all notes or renewals thereof in settlement of said account.

The third paragraph recites that Osborn waived the giving of all notice of acceptance of the guarantee by Bomud, or of the sale or delivery of any merchandise, tools, machinery and materials to Yockey, or of the giving of credit to Yockey, or of the giving of any notes by Yockey in settlement of such account, or of any extension or renewal of such notes. He also waived the giving of any notice of the non-payment of any accounts, notes or renewals thereof as they became due and any demands therefor, and all other notices or demands, 'the want of giving which to us (Osborn) by the said The Bomud Company might in any way prejudice the right of The Bomud Company to recover from us (Osborn) the amount of any claim or claims it may have against us (Osborn) by reason of this guarantee.'

The fourth paragraph of the contract reads:

'And we (Osborn), the undersigned, do further agree that it shall not be necessary for The Bomud Company in order to enforce the payment of such account or notes above referred to against us, or either of us (Osborn), to first institute suit or exhaust its remedies against the said first party or other parties liable on such account or notes or other evidence of debt arising out of the dealings between the said first party and The Bomud Company, and we (Osborn) expressly agree that in case of default on the part of the said first party, that The Bomud Company may bring its action immediately against either or all of the undersigned (Osborn) to recover the amount due and owing by the said first party.'

The fifth paragraph recites that the provisions of the guarantee would extend to the successors and assigns of Bomud, and that Osborn would pay the cost and expense including reasonable attorneys fees which might be incurred by Bomud in any suit to enforce payment of the indebtedness against either Yockey or Osborn.

The sixth paragraph of the agreement reads:

'It is understood that this guarantee is for an amount not exceeding $5,000.00 which may exist at any one time and that it shall be continuous so long as The Bomud Company shall continue to sell merchandise, tools, machinery and materials to the said party of the first part.'

By addenda Osborn stipulated that the contract was to terminate one year from date.

On September 21, 1954, Bomud filed this action, which was more than three years after the date of the last purchase by Yockey. When the suit was filed Yockey was insolvent. However, during the time materials and supplies were sold and delivered to Yockey, two oil and gas leases it owned interests in had producing wells on them but Bomud did not file a materialman's lien against Yockey's interest or take other steps to collect the debt except to make demands upon both Yockey and Osborn.

Bomud contends that the trial court erred in...