Depot R. Syndicate v. Enterprise B. Co., 87 Or. 560 (OR 1/22/1918)

• Decision Date: 22 January 1918
• Court: Oregon Supreme Court
• Parties: DEPOT REALTY SYNDICATE v. ENTERPRISE BREWING CO.<SMALL><SUP>*</SUP></SMALL>

Page 560

87 Or. 560

170 Pac. 294

171 Pac. 223

DEPOT REALTY SYNDICATE v. ENTERPRISE BREWING CO.^*

Supreme Court of Oregon.

Argued December 20, 1917.

Modified January 22, 1918.

Rehearing denied March 5, 1918.

Corporations—Guaranty of Lease of Customer.

1. A brewing corporation can legally guarantee the performance of any condition in a lease to a saloon-keeper who stipulates exclusively to sell such corporation's beer.

Guaranty—Liability of Guarantor—Landlord and Tenant.

2. An indorsement on a lease, "for valuable consideration we hereby guarantee the faithful performance by the above lessees of all their obligations," makes the obligation joint and several, and the landlord can sue the guarantor for rent without making effort to collect from the lessee.

Corporations—Acts of Officers Beyond Authority—Ratification—Silence.

3. Where an agent for a brewing corporation guarantees payment of rent by a saloon-keeper without authority, but the landlord writes the officers of the corporation as to the fact, asking if it is all right, silence on the part of the brewing company renders it liable for subsequently accruing rent, but not for prior rent, it being the duty of the principal to immediately deny the authority of the agent if it desires not to be bound.

Corporations—Powers of Managing Officers—Contracts of Guaranty.

4. The managing officers of a brewing corporation have the power to authorize an agent to guarantee the conditions in leases to saloon-keepers, or to ratify such a guaranty, without a resolution of the directors; such officers of a corporation having power coextensive with those of the principal, except as to matters over which the stockholders alone have control, and power to adopt any reasonable means that might tend to advance the interests of the corporation.

Corporations—Guaranty—Authority of Agent—Sufficiency of Evidence.

5. Evidence held insufficient to support a finding that a state agent for a brewing corporation had authority to guarantee payment of rent by a saloon-keeper to a landlord.

ON PETITION FOR REHEARING.

Estoppel—Equitable Estoppel—Silence.

6. One is usually required to hastily refute oral declarations, made in his presence, affecting him injuriously, but this does not generally apply to letters, except where acted upon or invited.

[As to silence as ratification of act of strangers, see note in Ann. Cas. 1912B, 151.]

Principal and Agent—Unauthorized Acts of Agent—Silence of Principal—Ratification.

7. Where unauthorized contract of agent is brought to the knowledge of the principal, either orally or by letter, the principal must hastily disavow it or he will be held to have ratified it, and particularly so if the failure to do so might impose loss or injury upon the other party.

[As to liability of principal for unauthorized act of agent, see notes in 22 Am. St. Rep. 189; 88 Am. St. Rep. 779.]

Principal and Agent—"Ratification" of Contract—"Estoppel in Pais."

8. A clear distinction exists between ratification of contract by a principal and estoppel in pais; ratification following the unauthorized act, and estoppel being based on principal's inducement to another to act to his prejudice.

From Multnomah: CALVIN U. GANTENBEIN, Judge.

Department 2. Statement by MR. JUSTICE MOORE.

This is an action by the Depot Realty Syndicate, an Oregon corporation, against the Enterprise Brewing Company, a California corporation doing business in this state, to recover $1,450 as arrears of rent reserved in a lease executed by the plaintiff to John Ralson, the payment of which sum is alleged to have been guaranteed by the defendant. A demurrer to the initiatory pleading on the ground that it did not state facts sufficient to constitute a cause of action having been overruled, an answer was filed denying the material averments of the complaint. The cause was tried without the intervention of a jury and when the plaintiff had introduced its evidence and rested, a motion for a judgment of nonsuit was interposed and denied. The defendant's counsel then declined to offer any evidence, whereupon findings of fact and law were made in conformity with the averments of the complaint, and based thereon a judgment was rendered as demanded therein and the defendant appeals.

MODIFIED.

For appellant there was a brief over the name of Messrs. Dolph, Mallory, Simon & Gearin, with an oral argument by Mr. Joseph Simon.

For respondent there was a brief over the names of Messrs. Wood, Montague & Hunt and Mr. Donald M. Graham, with an oral argument by Mr. Richard W. Montague.

MR. JUSTICEMOORE, delivered the opinion of the court.

1. It is contended that though the defendant may have been benefited by the contract which forms the basis of this action, a corporation cannot legally guarantee the performance of any condition, and for that reason an error was committed in overruling the demurrer. It is conceded that the defendant is engaged at San Francisco, California, in manufacturing beer, which product is disposed of at wholesale to saloon-keepers the payment of whose rent has, in some instances, been guaranteed by the officers of the corporation. The general rule that an ordinary corporation cannot become a surety is subject to the well-recognized exception that such legal entity has implied power and may encourage legitimate undertakings by advancing money, extending credit, or becoming surety for any of its independent agencies, when by doing so it is reasonably expected that the business in which the corporation is engaged will be advanced by such appropriate means: 3 Thompson, Corp. (2 ed.), § 2207. Thus in Winterfield v. Cream City Brewing Co., 96 Wis. 239 (71 N. W. 101), a headnote reads: "It is not ultra vires for a corporation organized to make and sell beer to guarantee the rent of a customer." To the same effect see Timm v. Grand Rapids Brewing Co., 160 Mich. 371 (125 N. W. 357, 27 L. R. A. (N. S.) 186); Blue Island Brewing Co. v. Fraatz, 123 Ill. App. 26; Holm v. Claus Lipsius Brewing Co., 21 App. Div. 204 (47 N. Y. Supp. 518); H. Koehler & Co. v. Reinheimer, 26 App. Div. 1 (49 N. Y. Supp. 755); Horst v. Lewis, 71 Neb. 365 (98 N. W. 1046, 103 N. W. 460).

The securing of saloon-keepers who would stipulate exclusively to sell the defendant's beer tended to expand its competition and enhance the scope of its business, and this being so, the corporation could lawfully guarantee the payment of rent of buildings occupied by its customers while keeping the terms of such agreement. No error was committed as to the rule invoked in this particular.

2, 3. It is maintained that the alleged guaranty is not an undertaking for the payment of another's debt, but is in effect a contract for indemnity merely, which obligation is collateral and no liability attaches until an effort has been made to collect from the principal, and since the complaint contains no averments in respect to such matter, an error was committed in overruling the demurrer. A text-writer in discussing this subject remarks:

"When, by the terms of the contract, the obligation of the surety or guarantor is the same as that of the principal, then, as soon as the principal is in default, the surety or guarantor is likewise in default, and may be sued immediately and before any proceedings are had against the principal": Brandt, Suretyship Guaranty (3 ed.), § 110.

Thus in Redfield v. Haight, 27 Conn. 31, the defendant's son signed a writing as follows:

"And the said Joseph Haight hereby further agrees, in consideration of the premises, to assume, and does hereby assume, the payment of the liabilities and debts of the firm of Redfield & Haight,—that is, the liabilities of the said firm contracted for goods, wares, and merchandise for said business, and the liabilities and debts of the said Edwin Redfield, contracted and incurred for goods for the said business so conducted by him alone, a schedule of which debts and liabilities is hereto annexed."

To this contract was appended, upon the same paper, a memorandum upon which the suit was brought as follows:

"In consideration of one dollar, to me in hand paid, I hereby guarantee the full and fair performance of the covenants and agreements mentioned in the foregoing instrument on the part of Joseph Haight.

"Dated August 8, 1854.

                                        "DESIRE W. HAIGHT."
                

It was held that the defendant's contract was not a mere indemnity, but an absolute guaranty, and that upon the breach of the principal's agreement the obligee could immediately maintain an action against the guarantor.

In Garey v. Hignutt, 32 Md. 552, it was ruled that a creditor was not required to exhaust his remedies against a principal before resorting to the surety for payment of a debt for which both principal and surety were equally bound.

In Geddis v. Hawk, 1 Watts (Pa.), 280, it was decided that a creditor was not bound to resort to the principal for the collection of his debt, in the first instance, but that he might sue and recover from a surety.

"Where a contract of suretyship is joint and not several all the obligors must be joined as parties defendant. Where it is joint and several all or less than all may be sued as plaintiff elects": Brandt, Suretyship Guaranty (3 ed.), § 829.

It will be seen from an inspection of the undertaking hereinafter set forth that the person signing the writing stipulated that Ralson would faithfully perform all the conditions of the lease, thereby making the engagement of the guarantor the same as that of the principal. One of these obligations was to pay the rent reserved. The guaranty is therefore a joint and several express engagement to pay monthly in advance the sums of money specified. Thus in Gile Grocery Co. v. Lachmund, 75 Or. 122 (146 Pac. 519), a headnote reads:

"A guaranty is an absolute undertaking to pay the debt when due, and is not discharged by the failure of the creditor to exhaust his remedy against the principal debtor."

To the same effect...