Evans v. Lawton

• Decision Date: 05 March 1888
• Parties: EVANS et al. v. LAWTON et al.
• Court: U.S. District Court — Eastern District of Missouri

34 F. 233

EVANS et al. v. LAWTON et al.

United States Circuit Court, E.D. Missouri, Northern Division.

March 5, 1888

Frank Hagerman, for complainants.

Smoot &amp Pettingill, for respondents.

THAYER J.

This is a bill for an accounting, brought by complainants against defendant Lawton, who at one time acted as their agent in selling lumber, and also against defendant Kellogg, who assumed the liability of a guarantor for the performance by Lawton of his duties as agent. The agreement under which Lawton acted as agent was entered into December 3, 1880. By the terms of the agreement Evans & Sheppard appointed Lawton their agent at Memphis, Mo., to conduct a lumber-yard. They agreed to supply the yard with lumber, laths, shingles doors, etc., which Lawton was to sell for account of Evans and Sheppard on the following terms, to-wit, sales were to be made for cash in all cases. Lawton was to render full and true accounts of all sales made, and of all moneys received and on the 15th and 30th days of each month he was to remit to Evans & Sheppard whatever moneys were in his hands received from the sale of lumber, etc. Lawton was to account to his principals for the wholesale price of the lumber shipped to him, and for his services, and for all expenses of running the lumber-yard, including freight, he was to receive whatever the lumber sold for in excess of the wholesale price at which it was billed to him. On the back of the agency contract was indorsed the following guaranty:

'In consideration of Evans & Sheppard now entering into the above contract, and in further consideration of one dollar to me paid by said Evans & Sheppard, the receipt whereof is hereby acknowledged, I do hereby guaranty the due performance on the part of said George H. Lawton, Senior, of his obligations in the above contract, and particularly that he shall duly account for any pay over to said Evans & Sheppard all moneys which shall be received by or paid to said George H. Lawton, Senior, for lumber and other merchandise hereafter furnished by Evans & Sheppard and sold and disposed of by said Lawton, Senior. Signed at the same time as the above contract, to which this guaranty refers, as witness my hand.

(Signed) 'A. A. KELLOGG.

(Signed) 'L. MOTT.'

The principal question for determination is whether Kellogg has been discharged from all liability by reason of a change in the terms of the agreement between Evans & Sheppard and the their agent, made without his (Kellogg's) consent. The agreement requires sales to be made for 'cash in all cases.' Defendant Kellogg insists that the agreement was subsequently modified without his knowledge or consent, so as to permit Lawton to sell on credit, and that he did so sell to a large extent. On this ground he founds his claim to be discharged from all liability.

Preliminary to a discussion of the main issue it is necessary to dispose of some incidental questions. It is suggested by complainants' counsel that Kellogg has not pleaded his right to a discharge on the ground above stated. This point, I think, is not well taken. All the facts on which the defense depend are clearly stated, and in view of such facts, and other matters also alleged, defendant Kellogg asks to be discharged without day. This is sufficient to render the defense available. Furthermore, it is said that 'the guaranty was twofold,' and that Kellogg 'absolutely bound himself to pay all money received by Lawton,' and the case of Benjamin v. Hilliard, 23 How. 149, is cited in support of the position. This statement is rather mystifying, and is not elaborated. The case cited does not explain what is meant. In that case a guaranty was given which counsel insisted should be read in the alternative as requiring the guarantor to stand responsible for the doing of one of two things. The court, however, construed it, not in the alternative, but as requiring the performance of both obligations. I fail to see that the case referred to has any application to the case at bar. The guaranty involved in this case is one by which Kellogg agrees generally that Lawton will duly perform all the obligations imposed upon him by the contract creating the agency, and particularly that he will account for and pay over all money received for lumber, etc. The last clause with reference to accounting for and paying over money did not impose any obligation in addition to that imposed by the first clause of the guaranty. As the agency contract made it the duty of Lawton to pay over whatever money was received from the sale of lumber, (or rather to pay over the wholesale price,) the first clause of the guaranty was as effectual as the last to secure the performance of that duty. The last clause of the guaranty was really unnecessary, and was probably inserted, not as imposing an additional obligation, but merely out of abundant caution. It will be observed from the form of the guaranty that the guarantor did not bind himself with Lawton to discharge all or any of the duties imposed by the agency contract. He guarantied that Lawton would duly perform all of the obligations assumed. Kellogg's undertaking was purely collateral. He was not a joint promisor; and it goes without saying that he was only bound for the due performance by Lawton of the precise contract to which the guaranty referred; and if that has been changed or modified to any extent without Kellogg's consent, he is discharged. Permission given by the complainants to their agent to sell lumber on credit to any extent, instead of for 'cash in all cases,' as the contract originally required, would clearly discharge the guarantor. The authorities on this point are, of course, numerous. I only mention Miller v. Stewart, 9 Wheat. 680; Grant v. Smith, 46 N.Y. 93; Baylies, Sur. 260, and cases cited.

This brings me to the main controversy,-- whether the agency contract was modified by the parties thereto without the guarantor's consent. It appears from the testimony, without contradiction, that a large quantity of lumber was sold by Lawton on credit. Such sales began shortly after the agency was established, and continued for a period of several years, and until the agency was terminated. During almost the entire period complainants had knowledge that he was selling lumber on credit. That they had such information appears from their correspondence at an early period of the agency, and the fact is otherwise expressly admitted by them. There is a further admission by the complainants that in some few instances they expressly authorized sales to be made on credit. It is also admitted by one of the complainants that in conversation with Lawton he told him that 'he must be cautions in the manner in which he gave credit,' and that 'he must watch his book-accounts, and keep them closely collected. ' Complainant's counsel contends, however, that mere knowledge of the fact that sales were being made on credit is something entirely different from a formal consent given that sales might be so made, and does not prove an alteration of the contract. In this he is right. The obligation to sell for 'cash in all cases' was an obligation assumed by Lawton. If he violated that undertaking in some instances, and complainants were aware of the fact, they were not bound to terminate the agency on that account, or to sue him for breach of the contract. They had a right to overlook occasional violations of the contract of that nature, and to continue further business relations under the contract, and by so doing the contract was not altered, or the guarantor discharged. So much may be conceded. Kirby v. Studebaker, 15 Ind. 45. But in this case the evidence shows something more than knowledge on the part of complainants that their agent was selling lumber on credit. In the light of the testimony it will not do to say that they were merely passive observers of occasional or repeated violations of the contract, which they were privileged to overlook without impairing their right to hold the guarantor. Lawton, as before stated, made a practice for several years of selling on credit; and such practice was not only known to the complainants, but on certain occasions they warned him 'to be cautions in giving credit, ' and 'to watch his book-accounts, and keep them closely collected. ' Only one inference, as it appears to me, can be drawn from such a course of dealing, and from such language, and that is that they were willing to allow him to sell on credit if he exercised caution, and sold to trustworthy persons, and was vigilant in making collections. To this extent, in my judgment, the evidence shows that the contract was modified by consent of the parties thereto. Then, again, the plaintiffs admit that on several occasions they in express terms authorized lumber to be sold on credit, which appears to have been consigned to Lawton to be sold and accounted for under the terms of the agency contract; that is to say, he was to have all that was realized over and above the wholesale price at which the lumber was charged to him by complainants. This, as it appears to me, was also a departure by consent from one of the provisions of the contract, which required sales to be made for 'cash in all cases.' Upon the whole, and especially in view of the general permission which seems to have been given to sell to trustworthy persons on short credit, I conclude that Kellogg cannot be held under his guaranty. It is not a question whether he was prejudiced by the manner of making sales, but whether there was in point of fact such change assented to by the complainants, and not assented to by Kellogg. Of this I entertain no doubt, and accordingly dismiss the bill as to the guarantor.

From what has been said it follows that in stating the account between complain...