Collins v. Throckmorton

Decision Date05 December 1980
Citation425 A.2d 146
PartiesRobert T. COLLINS and Gladys Collins, Defendants Below, Appellants, v. Philip J. THROCKMORTON, Plaintiff Below, Appellee.
CourtSupreme Court of Delaware

James F. Kipp (Argued) of Trzuskowski, Kipp, Kelleher & Pearce, P. A., Wilmington, for defendants below, appellants.

Jerome O. Herlihy (Argued) of Herlihy & Herlihy, Wilmington, for plaintiff below, appellee.

Before DUFFY, McNEILLY and HORSEY, JJ.

McNEILLY, Justice:

The defendants below appeal from a money judgment for the plaintiff entered by the Superior Court after a non-jury trial. The basic facts underlying the controversy are as follows:

Plaintiff Philip Throckmorton and defendant Robert Collins were the sole stockholders (as well as the officers and directors) in Central Ceilings, Inc. (hereinafter referred to as "Central"). On March 26, 1973, Central borrowed $10,000. from the Wilmington Trust Company ("the bank"); a demand note therefor was executed by the corporate officers. On the back of the note, the plaintiff, his wife and the defendants (then husband and wife) signed a provision unconditionally guaranteeing payment of the note on behalf of Central. 1 Subsequent to this transaction, relations between Mr. Throckmorton and Mr. Collins deteriorated to the point where, in August, 1973, Mr. Collins left the employ of Central and ceased to be actively involved in the management of the company. Although the Central stockholders discussed terms whereby Mr. Collins was to completely sever his relationship with the company, no agreement was ever reached.

After Mr. Collins' departure from Central, the plaintiff continued to operate the business. However, by mid-1975, Central had become insolvent and simply ceased to do business. The record clearly shows that Central's financial woes, particularly certain problems with the Internal Revenue Service, began before Mr. Collins' departure from the company and continued more or less unabated until the company went out of business.

Apparently Central made no payments on the demand note after 1973. By May, 1975, the bank had become sufficiently concerned about Central's ability to pay the note to institute certain protective actions. Central's assets on deposit with the bank were frozen and demand made on the Throckmortons to satisfy various debts owed by Central to the bank, including the balance on the 1973 note which they and the defendants had guaranteed. On May 30, 1975, pursuant to negotiations between the Throckmortons and the bank, the plaintiff and his wife took out a loan in the amount of $15,402. All of these proceeds were used to satisfy Central's debts to the bank. Of the total, $9,668.73 was paid to satisfy the 1973 note, i. e., $8,800. in unpaid principal plus $868.73 in interest at eight and three-quarters percent per year as specified in the note. In return, the bank assigned its rights under the 1973 note to the plaintiff, individually.

On June 4, 1975, the plaintiff demanded that the defendants reimburse him in full for the amounts he paid in satisfaction of the 1973 note; the defendants refused. The plaintiff subsequently, in his complaint and at trial, reduced his claims against each defendant to one-quarter of the amounts thus paid by him. The Superior Court entered judgment against each defendant in the amount of $3,492.86 allocated as follows: $2,417.18 representing the proportionate one-quarter share of each defendant on the demand note as paid by the plaintiff on May 30, 1975; $909.35 representing interest on such proportionate shares at the rate of eight and three-quarters percent per year from June 15, 1975 to November 1, 1979 (the Trial Court order was entered in November, 1979); and $166.33 representing awards of attorney fees at the rate of five percent of the amounts otherwise assessed against each defendant.

Several arguments are raised by the defendants on this appeal attacking the judgment in its entirety as well as each of the individual components thereof. We address these contentions seriatim.

I

Essentially the defendants' first argument is that the evidence below was insufficient to support the judgment. The argument runs thusly:

Subsequent to Mr. Collins' departure from the company, and during the period when Central paid nothing on the 1973 note, the plaintiff was solely in control of the management of Central's affairs. During this period Central's financial status was shakey and the company eventually became insolvent. Under these facts the plaintiff owed a fiduciary duty to the stockholders and the company's creditors to preserve Central's assets for the payment of Central's debts. Therefore, before the plaintiff could require proportional contribution by the defendants (who, as co-guarantors on the 1973 note, were contingent creditors of the company) for his payment of the 1973 note, the defendants contend he had to prove that Central had no assets with which to pay the bank at the time the plaintiff paid off the note. Moreover, they argue that under the circumstances of this case the plaintiff had to show that Central's insolvency and inability to pay the note in 1975 were not due to wrongful appropriation of Central's assets by the plaintiff for his own use.

At this point in their argument the defendants seek support from an evidentiary presumption which they claim arises from the plaintiff's failure to produce certain documentary evidence relating to his conduct of the company's business. In October, 1977, two years prior to trial, the defendants filed a request for production of certain corporate documents relating to the plaintiff's conduct of Central's business. Although the plaintiff never complied with this formal request, the defendants never followed it up, i. e., no motion to compel production was filed. Moreover, the defendants did not engage in any other discovery directed to eliciting facts concerning the plaintiff's conduct of Central's affairs. They did not attempt to depose the plaintiff or other witnesses who might have had knowledge of the pertinent facts, and they did not file any interrogatories.

Despite their failure to diligently pursue all available avenues of discovery, the defendants insisted at trial that they were entitled to a presumption that the documents which the plaintiff failed to produce would have been unfavorable to him, i. e., they would have tended to show that the plaintiff "milked" the company by somehow wrongfully disposing of its assets. The defendants contend that had they been given the benefit of this presumption the Trial Court could not have granted judgment to the plaintiff. We find the defendants' arguments on this point as unpersuasive as they are elaborate.

In rejecting the defendants' arguments, we do not embrace the plaintiff's counter-argument that the records sought were immaterial in this case. The right of a surety or guarantor, upon being compelled to pay more than his just proportion of the principal's debt, to be reimbursed by his fellow guarantors for the excess is grounded on equitable principles. Stearns Law of Suretyship § 11.18 (5th ed. 1951). Equity requires that "where one of two or more obligors in suretyship aids in the commission of a default by the principal, either by his negligence or his active misconduct, he cannot assert a claim in contribution." Id. at § 11.24; see also Restatement of the Law of Security § 161 (1941). Obviously, the corporate records sought by the defendants might have provided information relevant to the question of whether Central's default on the 1973 note was somehow caused by wrongful conduct by the plaintiff. We also recognize the general rule that where a litigant intentionally suppresses or destroys pertinent evidence, an inference arises that such evidence would be unfavorable to his case. See Equitable Trust Co. v. Gallagher, Del.Supr., 77 A.2d 548 (1950); see also Larsen v. Romeo, Md.Ct.App., 254 Md. 220, 255 A.2d 387 (1969).

Acceptance of these legal propositions does not, however, aid the defendants in the case at bar. There was absolutely no evidence presented to show that the plaintiff had intentionally destroyed the corporate records sought by the defendants. Rather, the only evidence on this issue was that the records had been lost through no fault of the plaintiff when Central's accountant, who was then holding the records for the company, died shortly after the defendants' request for production was filed. Moreover, even if the defendants were entitled to some kind of inference from the plaintiff's failure to produce the records, "this inference does not amount to substantive proof and cannot take the place of proof of a fact necessary to the (defendants') case." Larsen v. Romeo, supra, 254 Md. 220, 255 A.2d at 391 (citation omitted). The defendants relied at trial on unsupported allegations of misconduct by the plaintiff which supposedly prevented Central from meeting its obligations under the 1973 note. The nature of this alleged misconduct has never been specified, and the defendants did not present a scintilla of evidence in support thereof at trial. The plaintiff, on the other hand, testified extensively at trial as to his considerable efforts during the two years after defendant Robert Collins' departure from Central to keep the company financially afloat. It was well within the Trial Judge's discretion, sitting without a jury, to find the plaintiff's testimony on these matters credible. Having done so, the Trial Judge was entitled to conclude, as he did, that the plaintiff had established a prima facie case of entitlement to proportional contribution by the defendants as co-guarantors on the 1973 note, which the defendants simply failed to rebut. Given the total absence of evidence to support the defendants' claims, we find no error in the conclusions of the Trial Court in this regard.

II

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  • Terracino v. Gordon, 29837.
    • United States
    • Connecticut Court of Appeals
    • 22 Junio 2010
    ...share of the total outstanding debt. Restatement (Third), Suretyship and Guaranty §§ 55 through 57 (1996); Collins v. Throckmorton, 425 A.2d 146, 151-52 (Del.1980); Albrecht v. Walter, 572 N.W.2d 809, 812-13 (N.D.1997). The plaintiffs are guarantors who, in a prior action, have been held li......
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    ...(trial court clearly has power to employ adverse inference as sanction for intentional destruction of evidence); Collins v. Throckmorton, 425 A.2d 146, 150 (Del.1980) (adverse inference allowed); State v. Langlet, 283 N.W.2d 330, 333 (Iowa 1979) (fact finder may draw inference that evidence......
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    ...or destroys pertinent evidence, an inference arises that such evidence would be unfavorable to his case." Collins v. Throckmorton, Del.Supr., 425 A.2d 146, 150 (1980) (citing Larsen v. Romeo, Md.Ct.App., 254 Md. 220, 255 A.2d 387 (1969)). This inference is a product of the legal maxim omnia......
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