Garfield Trust Co. v. Teichmann

• Decision Date: 20 February 1953
• Docket Number: No. A--128,A--128
• Citation: Garfield Trust Co. v. Teichmann, 95 A.2d 18, 24 N.J.Super. 519 (N.J. Super. App. Div. 1953)
• Parties: GARFIELD TRUST CO. v. TEICHMANN et al.
• Court: New Jersey Superior Court — Appellate Division

Page 519

24 N.J.Super. 519

95 A.2d 18

GARFIELD TRUST CO. v. TEICHMANN et al.

No. A--128.

Superior Court of New Jersey Appellate Division.

Argued Feb. 9, 1953.

Decided Feb. 20, 1953.

Murray A. Laiks, Passaic, argued the cause for the plaintiff-appellant (Arthur J. Messineo, Garfield, attorney).

Archibald Kreiger, Paterson, attorney for respondents John Rento and Michael Vigorito, argued the cause for the defendants-respondents.

Edward A. Harmon, Newark, attorney for respondent Helena Teichmann.

Harry F. Weiss, Paterson, attorney for respondents Joseph Denequolo and wife.

Charles S. Joelson, Paterson, attorney for respondents Charles Pascale and wife.

Before Judges EASTWOOD, BIGELOW and JAYNE.

The opinion of the court was delivered by

EASTWOOD, S.J.A.D.

The plaintiff, Garfield Trust Company (hereinafter referred to as 'Garfield'), appeals from a judgment of dismissal at the conclusion of the plaintiff's case in favor of the defendants-respondents.

Garfield instituted an action against the defendants, who were stockholders and former stockholders of the Paramount Finishing Co., Inc. (hereinafter referred to as 'Paramount'), to enforce a written 'Continuing Guaranty' executed and delivered by them to Garfield, guaranteeing 'direct or contingent' obligations then existing or thereafter arising, owing by Paramount, therein called 'the Borrower.'

Under the first count of the complaint, Garfield sought recovery from all the defendants of three unpaid notes executed and delivered by Paramount to Roco-Tex Chemicals, Inc. (hereinafter referred to as 'Roco-Tex'), two of which were in the respective amounts of $1,036.13 and $1,036.22, in payment of merchandise sold by Roco-Tex to Paramount, and the other note in the amount of $1,036.22, dated March 5, 1951, being a renewal of a prior note; all three notes having been discounted by Roco-Tex with Garfield and Roco-Tex having received the proceeds thereof.

Under the second count, Garfield sought recovery from the defendants Joseph Denequolo, Lucia Denequolo, Joseph Pascale and Briggie Pascale, under their continuing guaranty, of three unpaid promissory notes of Paramount to Roco-Tex aggregating the sum of $1,839.35, all three notes having been successfully negotiated for discount by Roco-Tex with Garfield and Roco-Tex having received the proceeds thereof.

Under the third count of the complaint, Garfield sought the recovery from the defendants Joseph Denequolo, Lucia Denequolo, Charles Pascale and Julius DiRocco, of an open account consisting of accounts receivable due from Paramount in the amount of $994.80, which accounts were assigned by Roco-Tex to Garfield.

On February 14, 1951 Teichmann, Rento and Vigorito executed an agreement with defendants, Joseph Denequolo and Charles Pascale, providing for the sale of their shares of stock in Paramount and for retirement from the company. Under the terms of the agreement Denequolo and Pascale assumed and agreed to pay certain obligations of the sellers of the stock to various named creditors, including Garfield, undertaking to indemnify the sellers from liability in the event of breach.

On the same day the sellers, Teichmann, Rento and Vigorito, delivered a communication to Garfield, terminating the agreement of guaranty dated December 28, 1950. Garfield acknowledged receipt thereof on February 14, 1951, agreeing that from that day the guaranty was no longer operative so far as Teichmann, Rento and Vigorito were concerned.

In connection with an application of Paramount to Garfield for an extension of credit, the defendants Denequolo and Pascale, the purchasers of the stock, together with their wives, executed written continuing guaranties identical in form with that previously made by defendants Teichmann, Rento and Vigorito, to Garfield.

On February 19, 1951 Paramount, then controlled by its new stockholders, executed three notes to Roco-Tex in the respective amounts of $613.11, $613.12 and $613.12, which notes were discounted by Garfield for Roco-Tex.

Between February 19, 1951 and March 6, 1951 Paramount made purchases from Roco-Tex aggregating the sum of $994.80, which account was assigned by Roco-Tex to Garfield.

The defendants filed answers denying liability for the obligations sued upon under the terms of the aforementioned written guaranties and asserting other defenses. Cross-claims were filed by the defendants Helena Teichmann, as executrix of the estate of her husband, Curt Teichmann, since deceased, John Rento and Michael Vigorito, against defendants, Charles Pascale and Joseph Denequolo, alleging that they had breached their indemnity agreement.

On motion of the defendants at the conclusion of the plaintiff's case the court directed a judgment of dismissal in favor of the defendants, on the ground that the obligations sued upon were not direct loans of Paramount and, therefore, they were not within the terms of the guaranty agreements.

Garfield contends that the court erred in dismissing its complaint for the reasons that: (1) the ground of dismissal was beyond the scope of the pleadings and pretrial order, and (2) plaintiff had established a prima facie case against the defendants.

The pretrial order, in addition to particularizing the legal positions of the respective parties, provided that 'the issues in this case are to be tried upon the pleadings as filed and as herein amended.' At the time of the trial Rule 3:16, as amended on June 7, 1951, was effective and provided that the pretrial order with the pleadings 'controls the subsequent course of action, unless modified at the trial to prevent manifest injustice.' The ground upon which the trial court dismissed the complaint was based upon a construction of the guaranty agreements and a determination that all of the loans upon which Garfield instituted its action were made by way of an extension of credit to Roco-Tex, and not to Paramount; that under the guaranty agreements the defendants' liability for obligations of Paramount to the bank could be enforced only with respect to such loans as were made directly by the bank to Paramount. We fail to see the force of the appellant's argument that the pretrial order, not having specifically set forth the defense upon which the complaint was dismissed, is controlling in that it was filed later than the answers. In view of the answers filed denying liability under the guaranty agreements, it is elementary that it became the duty of the plaintiff to prove a prima facie case that the obligations sued upon were within the contemplation of the guaranty agreements. We know of no rule that, where the issue has been created, would relieve the plaintiff of its responsibility to prove a prima facie case. The question was not a new issue raised for the first time at the trial; liability was denied in the pleadings and appellant being charged with that knowledge, it was its duty to prove a prima facie case of liability. A pretrial conference is, of course, designed to prevent surprise and eliminate maneuvering, but it was never intended to be used to establish a case of liability where, as here, no liability initially appears under the terms of the contract in issue. See Woodhouse v. Woodhouse, 20 N.J.Super. 229, 235, 236, 89 A.2d 707 (App.Div.1952). Cf. Hodgson v. Pohl, 16 N.J.Super. 87, 83 A.2d 783 (App.Div.1951), 9 N.J. 488, 89 A.2d 24 (1952).

Considering, now, the second ground advanced by appellant for reversal, namely, that the liabilities sued upon were continuing guaranties and embraced the notes and accounts receivable discounted with Garfield, for a more thorough understanding of the issue, it is essential that we set forth the guaranty agreement, to wit:

'Continuing Guaranty

'Garfield, N.J., 12/28 1950

'To The Garfield Trust Company, Garfield, N.J.:

'For Valuable Considerations, and to induce you to loan money and extend credit in reliance hereon, I hereby guarantee, unconditionally, the payment, when due, of each and every obligation, direct or contingent, now existing or hereafter arising, owing to you by Paramount Finishing Co. Inc. hereinafter called the Borrower.

'This Guaranty is a continuing guaranty, and shall remain in...