Depot Realty Syndicate v. Enterprise Brewing Co.

• Citation: 170 P. 294,87 Or. 560
• Parties: DEPOT REALTY SYNDICATE v. ENTERPRISE BREWING CO.
• Decision Date: 22 January 1917
• Court: Oregon Supreme Court

170 P. 294

87 Or. 560

DEPOT REALTY SYNDICATE v. ENTERPRISE BREWING CO.

Supreme Court of Oregon

January 22, 1917

Department 2.

Appeal from Circuit Court, Multnomah County; C. U. Gantenbein Judge.

Action by the Depot Realty Syndicate, a corporation, against the Enterprise Brewing Company, a corporation. Judgment for plaintiff, and defendant appeals. Modified and remanded, with directions.

Judgment affirmed on petition for rehearing, 171 P. 223.

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.

Joseph Simon, of Portland (Dolph, Mallory, Simon & Gearin, of Portland, on the brief), for appellant. R. W. Montague, of Portland (Wood, Montague & Hunt and Donald M. Graham, all of Portland, on the brief), for respondent.

MOORE J. (after stating the facts as above).

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, Cal., 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. (2d 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 A.D. 204, 47 N.Y.S. 518; H. Koehler & Co. v. Reinheimer, 26 A.D 1, 49 N.Y.S. 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.

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 (3d 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 and Guaranty (3d 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 P. 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 see, also, Weiler v. Henarie, 15 Or. 28, 13 P. 614; Delsman v. Friedlander, 40 Or. 33, 66 P. 297.

No error was committed in this particular.

The remaining question to be considered is whether any evidence was received at the trial tending to show that the defendant's agent was authorized to guarantee the payment of the rent in such a manner as to bind his principal, or whether it, by any act or omission of its officers, is liable for the payment of any part of the rent. It appears from a transcript of the testimony that the defendant on January 1, 1906, entered into a contract with Henry Meister whereby the latter was appointed its agent and given the exclusive right to sell in Oregon the manufactured product of that corporation. Meister in March, 1906, with the defendant's consent, sold all his interest in such agency to C. B. Williams. Alex Sweek, an attorney of Portland, Or., testified as plaintiff's witness that he was present when such bargain was concluded; that U. Remensperger and P. Windeler, respectively the president and secretary of the defendant, were also there on that occasion and advised that it was not necessary to write a new contract, but that a transfer of Meister's agreement with slight modifications was sufficient; that thereupon the witness made on such writing the notations "O. K." which is identified as indicating some of the clauses of the contract that were continued in force. In referring to the writing Mr. Sweek testified:

"It was delivered to Mr. Williams as his evidence of authority, and the agreement between all of us was that the contract was to be handed to Mr. Williams, and he would have all of the authority disclosed by that contract, but no greater."

The original agreement was received in evidence and has been sent up with the transcript. An examination of the writing shows that clauses thereof numbered 1, 2, 4, 5, and 6 have written at the left of each on the margin of the paper the letters "O. K." The remaining paragraphs of the writing are not thus marked, but words and figures have been substituted in some instances instead of others as originally employed. The third clause has two crossed lines indicating that such paragraph had been set aside so far as it related to Williams' authority. A red line is drawn through each word of the ninth clause, which was originally as follows:

"It also authorizes and empowers its said agent to expend not to exceed the sum of $350 in fitting up a saloon for a person who will sell its beer for a term of years, upon the condition that if the person so agreeing shall fail or neglect so to sell said beer to the exclusion of all beer for the time agreed, that is, keg beer, then the sum expended to become immediately due and payable."

The paragraph...