Bond v. John V. Farwell Co.

• Decision Date: 19 July 1909
• Docket Number: 1,921.
• Citation: 172 F. 58
• Parties: BOND et al. v. JOHN v. FARWELL CO.
• Court: U.S. Court of Appeals — Sixth Circuit

172 F. 58

BOND et al. v. JOHN v. FARWELL CO.

No. 1,921.

United States Court of Appeals, Sixth Circuit.

July 19, 1909

[Copyrighted Material Omitted]

This was an action at law upon two instruments of guaranty. It was tried upon the second and third counts of the declaration with nine separate pleas, and replication; demurrer to the first count having been sustained, and demurrer to the eighth plea having been overruled. All questions arising at the trial were determined by the court, except the one of amount. Motion for a new trial was overruled and the cause brought to this court upon proceedings in error.

The first instrument of guaranty was as follows:

'For and in consideration of the sum of one dollar to the subscriber in hand paid by John V. Farwell Company, the receipt whereof is acknowledged, and for the further consideration that said John V. Farwell Company sell and deliver unto Bond-Penn Dry Goods Company of Jackson, Tenn., goods, wares and merchandise on credit, on and after the date hereof, . . . . do hereby guarantee payment unto the said John V. Farwell Company for all goods, wares and merchandise so sold and delivered from time to time, and for any balance or balances of account such goods, wares and merchandise so sold and delivered, and for interest on such account or sales at the rate of 7 per cent. per annum after maturity.

'This guaranty shall extend to all sales of goods, wares and merchandise made on and after this date, by the said John V. Farwell Company, to the said Bond-Penn Dry Goods Company, and shall continue until notice of its discontinuance as to further liability therein is given by the subscribers, in writing, to the said John V. Farwell Company, but the liability of the subscriber, upon this guarantee shall not exceed the sum of one thousand dollars and we do also waive notice of purchase and maturity of bills.

A. K. Jobe.

'B. F. Bond.

'Dated Jackson, Tenn., November 18, 1904.'

The second guaranty was the same as the first, except that the city and state mentioned in the body and at the end of the first paper are omitted in the second, and the word 'we' was inserted in the second at the blank line appearing in the first; and, further, the second paper was dated January 27, 1905, and limited to $1,500. A. K. Jobe died, and Annie L. Jobe was appointed his executrix.

Special instructions to the jury were asked by defendants below and refused. The court charged the jury thus:

'I instruct you that these contracts are not Tennessee contracts, but they are Illinois contracts, and are governed by the laws of the state of Illinois, and that they are such contracts as are provided for by the laws of Illinois which are here in proof that may bear 7 per cent. interest and that under the proof as adduced here that these defendants are liable for whatever amount, not exceeding $2,500, that Bond-Penn Dry Goods Company owed these people after these guaranties were executed, that they were continuing contracts, and that they were valid and binding until notice was given by the guarantors that they no longer stood for them.'

The subjects of the special instructions requested and of the assignments of error may, so far as necessary to notice, be summarized thus: That no consideration passed between guarantee and guarantors, and no notice of acceptance was given, and that the papers sued on are Tennessee contracts and void under the usury statutes of that state; and, if Illinois contracts, are in conflict with the interest statutes of Illinois.

W. H. Biggs, for plaintiffs in error.

W. G. Timberlake, for defendant in error.

Before LURTON, SEVERENS, and WARRINGTON, Circuit Judges.

WARRINGTON Circuit Judge (after stating the facts as above).

Under the pleadings and proofs it is clear that the instruments sued on were signed by Jobe and Bond, and that the sum stated in the judgment represented the balance due for merchandise sold and delivered by the Farwell Company on the faith of those instruments to the Bond-Penn Company, with 7 per cent. interest from commencement of suit. The questions claiming our attention are: (1) Whether, under the guaranties, there was lack either of consideration moving from the Farwell Company to Jobe and Bond, or of notice of acceptance; and (2) whether those instruments were intended to be made as contracts of Tennessee or Illinois, and how the interest laws of the one state or the other, as the case may be, affected the contracts.

Each instrument is commenced:

'For and in consideration of the sum of one dollar to the subscriber in hand paid by John V. Farwell Company, the receipt whereof is acknowledged, * * * do hereby guarantee * * * .'

Proof was offered and properly excluded, tending to show that the $1 mentioned was not in fact paid or received. After the guarantee has parted with his goods, it is too late for the guarantor to complain that he has not received the consideration. He may recover it; but he is estopped to deny receiving it. In Davis v. Wells, 104 U.S. 159, 167, 26 L.Ed. 686, in passing upon a guaranty containing a similar clause, Mr. Justice Matthews said:

'It is not material that the expressed consideration is nominal. That point was made, as to a guarantee, substantially the same as this, in the case of Lawrence v. McCalmont, 2 How. 426, 452, 11 L.Ed. 326, and was overruled. Mr. Justice Story said: 'The guarantor acknowledged the receipt of the $1, and is now estopped to deny it. If she has not received it, she would now be entitled to recover it."

The contention made that no notice of acceptance was given by the Farwell Company to Jobe and Bond is quite as effectually disposed of by the decision just cited, as is the question of consideration. The claim made here, like that urged in Davis v. Wells, is that these guarantors made merely an offer which could not bind them until accepted by the guarantee. In Davis v. Wells, the guaranty was given by Davis and Patrick to Wells, Fargo & Co., and was not different in the respect now under discussion from the guaranty in question. Mr. Justice Matthews said (page 167 of 104 U.S. (26 L.Ed. 686)):

'We think that the instrument sued on is not a mere unaccepted proposal. It carries upon its face conclusive evidence that it had been accepted by Wells, Fargo & Co., and that it was understood and intended to be, on delivery to them, as it took place, a complete and perfect obligation of guaranty. That evidence we find in the words, 'for and in consideration of one dollar to us paid by Wells, Fargo & Co., the receipt of which is hereby acknowledged, we hereby guarantee,' etc.

How can that recital be true, unless the covenant of guaranty had been made with the assent of Wells, Fargo & Co., communicated to the guarantors? Wells, Fargo & Co. had not only assented to it, but had paid value for it, and that into the very hands of the guarantors, as they by the instrument itself acknowledged.'

It is true that in the present case neither instrument was delivered in person by either Jobe or Bond to the Farwell Company; but the instruments were signed by Jobe and Bond, and were each turned over by Jobe to the manager of the Bond-Penn Company for the purpose of delivery. Upon this question, then, the instruments must, we think, be treated the same as if they had been personally given by the guarantors to the guarantee, and the consideration had at that time been in fact paid and received. Thus a privity and an obligation were created.

In Davis Sewing Machine Co. v. Richards, 115 U.S. 524, 6 Sup.Ct. 173, 29 L.Ed. 480, relied on by counsel for plaintiffs in error, the guaranty did not state whether the person guaranteed or the person in whose behalf the guaranty was given paid the consideration, and consequently the instrument was treated as a mere proposal, requiring notice of acceptance before a privity or an obligation could be said to have been established. The distinction between the two classes of instruments was elaborated by Mr. Justice Matthews in Davis v. Wells, and was approved by Mr. Justice Gray in Davis Sewing Machine Co. v. Richards.

It is to be observed, further, that, at the times these papers were signed and delivered, both Jobe and Bond were stockholders and directors of the Bond-Penn Company, a Tennessee corporation. Jobe was its president, and Bond its assistant treasurer. Jobe owned one-third of the capital stock, and was so far in active control of the company as to dominate the manager, F. E. Bond. True, the other guarantor, B. F. Bond, owned only a nominal interest in the stock, and did not remember that he had been assistant treasurer; but the important fact remains that he and Jobe were interested in the company, both financially and officially. As evidence of their interest in securing credit for their company, it will be observed that they agreed that the guaranties should continue until notice of discontinuance was given by them in writing, and that they waived 'notice of purchase and maturity of bills.'

Jobe died after the goods were delivered. A representative of the Farwell Company testified that Jobe acknowledged after bankruptcy of the Bond-Penn Company that the guaranties would have to be met, but that he wished the claim to be first presented to the trustee. This was done and credit given of the amount received. Jobe's testimony does not appear to have been taken. The other guarantor, Bond, testified that he did not know of the delivery and receipt of the goods. Both of these corporate directors and officials knew, however that the instruments of guaranty had to be executed in order to obtain the goods. Why, then, should they not be chargeable with knowledge of the receipt of the goods, and, for that additional reason, with knowledge that...