Groendyke v. Musgrave

• Decision Date: 11 April 1904
• Citation: 99 N.W. 144,123 Iowa 535
• Parties: JAMES C. GROENDYKE, Appellee, v. E. C. MUSGRAVE, Appellant
• Court: Iowa Supreme Court

99 N.W. 144

123 Iowa 535

JAMES C. GROENDYKE, Appellee, v. E. C. MUSGRAVE, Appellant

Supreme Court of Iowa, Des Moines

April 11, 1904

Appeal from Polk District Court.--HON. W. H. MCHENRY, Judge.

ACTION at law upon a contract of guaranty. Judgment for plaintiff and defendant appeals.

Affirmed.

Dunshee & Dorn and Dudley & Coffin for appellant.

Chas L. Powell for appellee.

OPINION

WEAVER, J.

In May, 1901, the Economy Manufacturing & Supply Company was a corporation in the city of Des Moines doing business as a dealer in agricultural implements and binding twine. At the same time the plaintiff herein was a wholesale dealer in similar goods at Chicago, Ill. The plaintiff's traveling representative, under date of May 6, 1901, obtained a written order from said corporation for a quantity of binding twine, described as "25,000 lbs. sisal at 7 1/2 c. per lb, and 25,000 lbs. Standard at 7 7/8 c. per lb." As originally written, the order provided that a note for the amount of the purchase price should be given plaintiff, to become due October 1, 1901. On receipt of the order, plaintiff, not being satisfied with the financial standing of the corporation, returned it to the agent, requesting him to take it to Des Moines and get it indorsed by defendant, who was understood to have some interest in the Economy Manufacturing & Supply Company. Defendant was therefore approached by the agent, and his guaranty requested, and, after some conversation, acceded to the request by signing a memorandum upon the order as follows: "We hereby guarantee the payment under this contract for twine purchased of Jas. C. Groendyke. [Signed] E. C. Musgrave." Before this guaranty was executed, the terms of payment were changed by making one-half of the amount fall due October 1, and the other half November 1, 1901. It is shown without dispute that this was done with the knowledge of the defendant, and that with such knowledge he signed the contract of guaranty. Upon the order thus secured, the quantity of twine named therein was shipped and duly received. Later in the season it was discovered that the twine described in the order as sisal was of an inferior quality, and, after considerable correspondence between the plaintiff and the Economy Manufacturing & Supply Company, the matter was adjusted by a return of the inferior twine to plaintiff, who gave full credit for the same at contract price, including freight. Notes for the balance of the purchase price were not promptly given. Plaintiff, having prepared such notes, sent them to Des Moines to be executed. On being presented to defendant, he objected to making or indorsing any note, saying his guaranty on the contract was sufficient; and, in the end, the corporation sent in its own notes for the amount. During the month of October the company remitted to plaintiff the sum of $ 800, and, after giving due credit therefor, there was left a balance due the plaintiff of $ 1,380.85, which remains due and unpaid, and the corporation has since been adjudged a bankrupt. The only defense to plaintiff's right of recovery argued by counsel is based upon the allegation that the twine shipped by plaintiff, or a part of it, did not correspond with the sample exhibited at the time the order was given; that it was rotten and unmerchantable; and that, by the return of a part of the twine without his consent, the contract contained in the order was materially changed. This claim is stated with numerous variations, but the substance is as above given.

I. Did the fact that a part of the twine was not such as ordered, or that a part, proving of defective quality, was returned to the seller, without notice to or consent of the defendant, operate to release the latter from his contract of guaranty? It is undoubtedly true, as urged by counsel, that the guarantor may avail himself of any defense which is open to his principal, but this rule does not seem to afford any relief for this appellant. It is quite clear, upon the undisputed facts, that, if this were an action against the Economy Manufacturing & Supply Company upon the order for twine, it could not successfully interpose the defense of which the guarantor seeks to avail himself. It purchased two distinct quantities and qualities of twine. One of these proved to be satisfactory, and was made use of by the purchaser. The other proved unsatisfactory, and was returned to the plaintiff, and full credit given therefor; thus reducing the debt by nearly one-half. But suppose this defective twine had not been returned and suit had been brought against the company for the entire purchase price. The company could have set up the breach of the implied warranty by way of counterclaim only, and not as a defense; and, after applying the damages assessed by the jury, the plaintiff would have had judgment for the unpaid remainder. In such case is there any rule or principle of the law of guaranty which would relieve the appellant from liability for this unpaid remnant of the purchase price, simply because the creditor has been unable to establish a right of recovery against the principal to the full extent of his claim? Counsel have cited us to no authority so holding, and the proposition lacks the essential element of justice which should appear to warrant us in establishing such a precedent. So far as the purchaser is concerned, if there be any defense to a recovery for the agreed price of the twine actually used, it is not suggested. It is also true that a guarantor is not to be charged with liability beyond the terms of his contract. In other words, his liability is not to be enlarged by implication. Brandt on Suretyship, section 80; Congower v. Association, 94 Iowa 499, 63 N.W. 192. But what was appellant's contract? Had he seen fit to make his guaranty conditional upon the delivery to his principal of twine of a certain quality, he might then be heard to plead and rely upon a failure to perform such condition precedent. Under such a state of facts, the rule applied in Harney v. Laurie, 13 Ill.App. 400, cited in the argument, would be available. In that case the guaranty was, "If you sell Mr. Harmon a sheller and it works satisfactorily, we will see that it is paid for." The sheller did not work satisfactorily, and, although Harmon failed to return it according to the terms of his purchase, and thereby lost the right to defend against an action for the agreed price, it was held that the guarantor was not liable. He was relieved, however, not simply because there was a failure of the warranty made to Harmon, but because, by the express terms of the contract of guaranty, his liability was conditioned upon the satisfactory work of the sheller. Had the language of the guaranty been, "If you sell Mr. Harmon a sheller, we will see it paid for," a very different question, and one in point with the case before us, would have been presented. The appellant's agreement is to "guarantee the payment under this contract for twine purchased of James C. Groendyke." In other words, it unconditionally undertakes that the Economy Manufacturing & Supply Company will perform its contract embodied in the written order, and will pay to the plaintiff whatever sum may legally become his due according to its terms, whether that sum be the full contract price, or such lesser amount as upon an adjustment of the account between the parties, according to the terms of the order and the law applicable thereto, he shall be found entitled to recover.

Let us assume that the entire shipment had been defective, or of such inferior grade that the company might properly have refused to receive it, or, having received it, to return it to the plaintiff, yet, owing to the state of the market and demand for the goods, it could make profitable use of the twine, and therefore consented to waive this objection. No one will deny that in such case the purchaser would be liable to the plaintiff to pay for the goods, either in full or with proper abatement for damages. Its liability to pay this amount is a liability arising upon the terms of the written order, and is the very liability which the appellant has undertaken to secure by his guaranty. So long as the contract secured by...