General Petroleum Corp. v. Seaboard Terminals Corp., 6077.

• Decision Date: 28 April 1938
• Docket Number: No. 6077.,6077.
• Citation: 23 F. Supp. 137
• Parties: GENERAL PETROLEUM CORPORATION v. SEABOARD TERMINALS CORPORATION.
• Court: U.S. District Court — District of Maryland

23 F. Supp. 137

GENERAL PETROLEUM CORPORATION v. SEABOARD TERMINALS CORPORATION.

No. 6077.

District Court, D. Maryland.

April 28, 1938.

Hargest, LeViness, Duckett & McGlannan (Edw. E. Hargest Jr., and O. Bowie Duckett, Jr.) of Baltimore, Md., for plaintiff.

Barton, Wilmer, Bramble, Addison & Semans (by F. Fulton Bramble and Wm. R. Semans), of Baltimore, Md., for defendants.

CHESNUT, District Judge.

The controlling question in this case is whether the defendant's contract of guaranty, the cause of action in the case, is to be treated as a sealed or simple contract. If sealed, the plaintiff is entitled to a verdict, but if only a simple contract the suit is barred by limitations. The question was discussed but not decided in a former opinion dealing with the subject matter as it arose on the pleadings only. D.C., 19 F.Supp. 882. The case has now been tried and submitted for final decision on testimony and argument, a jury having been waived by the parties in writing.

The form and contents of the contract of guaranty, and its apparent relation to the main contract which it guaranteed and to which it was physically annexed, were set out in the former opinion and will not be here repeated. It was therein indicated that whether the guaranty constituted a "specialty" under the applicable Maryland Statute of Limitations, Code Pub.Gen. Laws Md.1924, art. 57, § 3, should be determined by the Maryland Judicial decisions to the extent that they were decisive.¹ The question as to whether extrinsic evidence would be admissible was referred to but was also not then decided.

In addition to the relevant facts appearing in the former opinion, the testimony taken has established the following. The main contract, which was guaranteed by the defendant, was between the plaintiff and the Seaboard Midland Petroleum Corporation which was a wholly owned subsidiary of the defendant, Seaboard Terminals Corporation. The latter was engaged chiefly in the storage of gasoline and similar products and owned a substantial plant and equipment on the Baltimore waterfront. The business of its subsidiary, the Seaboard Midland, was chiefly that of buying and selling gasoline. The particular contract which was guaranteed was for the purchase from the plaintiff, engaged in California in the production and sale of gasoline, of practically the whole supplies of the Seaboard Midland for the year 1927. The particular contract of purchase and sale, and the guaranty attached thereto, was one of a sequence of such contracts apparently all in generally similar form, in force between the plaintiff and the defendant and the Seaboard Midland, for similar supplies for a part of the year 1925, for the year 1926 and for 1927 and similar to one for 1928. The contract for the year 1927, dated September 3, 1926, was the result of negotiations between the parties over a period of four months beginning in May 1926 in California and being concluded September 3, 1926 in New York. These negotiations were conducted principally by the plaintiff's District Sales Manager for New York, Mr. Chester T. Crawford, and the defendant's president, Mr. James H. Foster. The earlier contracts and guaranty it appears had originally been prepared by Cleveland counsel for the Seaboard Companies and approved by California counsel for the plaintiff. The particular contracts dated September 3, 1926, however, were prepared by Mr. Crawford, following the general form and style of the former contracts with appropriate changes as to quantity, price and deliveries as finally agreed upon. He had four copies of the final agreement prepared and sent them to Seaboard Midland by letter dated September 1, 1926, saying: "This contract is our final decision on this matter and the contract as written must be accepted or rejected * * * before 12 o'clock noon September 7, 1926." On September 3, 1926, Mr. Crawford called at the New York office of Mr. Foster and the four copies of the contract, with the guaranty annexed thereto, were signed by Mr. Foster as President and by M. M. Fennell, as Assistant Secretary, they being officers of both Seaboard Companies. And the seals of the respective Seaboard Companies were at the same time impressed upon the contract and the annexed guaranty in the presence of Mr. Crawford. The four copies of the contract and guaranty so executed by the Seaboard Companies were then delivered to Mr. Crawford who forwarded them to California where the purchase contract was signed by officers of the plaintiff and its corporate seal affixed. Thereafter two copies of the contract and guaranty so fully executed were re-delivered to Mr. Foster.²

In the performance of the contract gasoline was sold and delivered from time to time by the plaintiff to the Seaboard Midland Company at an aggregate price of nearly $6,000,000; but some considerable time after completion of the deliveries the plaintiff claimed that it had not been fully paid by the purchaser and made demand on it with contemporaneous notice to the defendant guarantor; and thereafter sued the Seaboard Midland Company in the Court of Common Pleas of Baltimore City and obtained a judgment on June 24, 1934 in the amount of $14,244.70, which judgment it has not been able to collect. About the same time it brought suit against the guarantor in one of the Maryland State Courts in Baltimore City, and after obtaining a verdict in the case a motion for a new trial was granted on the ground that the whole evidence both intrinsic and extrinsic, relating to the form of the guaranty, did not show that it was a sealed instrument. Thereafter the plaintiff dismissed that suit on the guaranty without prejudice and has re-instituted the suit in this court. Here its counsel contends that extrinsic evidence relating to the guaranty is fuller and more complete than in the former trial.

The testimony here also showed that the guaranty by the Seaboard Terminals Corporation was made a vital condition by the plaintiff to the making of the contract of sale, the reason therefor being that the Seaboard Midland was considered by the purchaser to be of slight financial substance, while the Seaboard Terminals, the guarantor and the parent company of the Seaboard Midland, was much stronger financially. The former company is not now operating and is said to be out of business. The making of the contract for 1927 was formally expressly authorized by the directors of the defendant corporation and subsequently expressly ratified by them, and it appears that the form of the contracts were submitted and approved but there was no express reference to the seal on the paper. It also appears that the directors of the parent company authorized generally the guaranty of all contracts made by its subsidiary.

Defendant's counsel objected to the introduction of practically all of the extrinsic evidence establishing these facts, on the ground that the ultimate question to be determined, whether the corporate seal affixed to the guaranty constituted it a sealed instrument, must be determined solely from the face of the paper. This position is based chiefly on the supposed authority of the Maryland case of Smith v. Woman's Medical College, 110 Md. 441, 72 A. 1107. But, if it be assumed that what appears on the face of the papers is insufficient to constitute the guaranty a sealed instrument, I am of the opinion that the extrinsic evidence was admissible for the purpose of showing the relationship of the parties to the subject matter and how and when and under what circumstances the corporate seal was affixed to the instrument. And if it be further assumed that this question as to evidence must also be decided in accordance with the Maryland judicial decisions, I do not find that they have announced any rule definitely to the contrary. The case of Smith v. Woman's Medical College, 110 Md. 441, 72 A. 1107, arose on the pleadings only, the question of extrinsic evidence was not involved, and the general language of the court should, I think, be properly limited to the situation with which it was dealing. That extrinsic evidence of intention to use the corporate seal as a general seal and thus create a specialty is admissible in a case such as we are here dealing with is generally recognized. See cases hereinafter cited. And some of the Maryland cases at least imply that extrinsic evidence of intention as to the use of the seal is admissible. See Metropolitan Life Ins. Co. v. Anderson, 79 Md. 375, 379, 29 A. 606; Hamburger v. Miller, 48 Md. 317, 323.

As a result of consideration of all the evidence in the case, both the form and appearance of the guaranty itself, its obvious relation to the contract which it guaranteed, and the extrinsic facts showing the situation of and the relationship of the parties to the subject matter, I reach the conclusion that the guaranty sued on must be treated as a sealed instrument. The more important particular factors which impel this conclusion are:

1. The seal is without question the regular recognized and formal corporate seal of the defendant guarantor;

2. It was affixed to the guaranty in the place where...