Guaranty Trust Co. of New York v. Koehler

• Decision Date: 30 March 1912
• Docket Number: 3,648,3,667.
• Parties: GUARANTY TRUST CO. OF NEW YORK v. KOEHLER et al. KOEHLER et al. v. GUARANTY TRUST CO. OF NEW YORK.
• Court: U.S. Court of Appeals — Eighth Circuit

195 F. 669

GUARANTY TRUST CO. OF NEW YORK v. KOEHLER et al.

KOEHLER et al. v. GUARANTY TRUST CO. OF NEW YORK.

Nos. 3,648, 3,667.

United States Court of Appeals, Eighth Circuit.

March 30, 1912

(Syllabus by the Court.)

No objection or exception is required to present to an appellate court the question whether or not a special finding of facts made by a court upon the trial of an action at law warrants the judgment, because, like the question whether or not the verdict sustains the judgment upon it, this is an issue of law which arises upon the face of the record.

Legal issues other than those specifically presented for determination may properly be considered and decided by an appellate court where they naturally arise and are pertinent to the questions at issue and to farther proceedings in the trial court.

A principal is not relieved of liability upon a separable part of a contract which he authorized his agent to make by the fact that the latter undertook in excess of his authority to bind him to another part of the agreement.

Principals authorized their agents to guarantee the payment of $22,500 and interest thereon.

Held they were not released from that guaranty by the fact that their agents also guaranteed by the same contract the payment by them of interest on $40,000 more.

The failure of some of the obligors named in the body of a contract of guaranty to execute it constitutes no defense to the liability of other obligors named therein, who, with knowledge that the former are not bound, execute and deliver the contract to the obligee, and thereby induce him to part with the consideration thereof.

Agents authorized to make a guaranty for their principals executed it for them and for another party named in the guaranty as an obligor without any authority from the latter at the same time that they made it for their principals, and they then delivered it to the obligee.

Held the principals who authorized the agents to make the guaranty were bound by it.

Where one agrees to guarantee the payment of money at stated times and fails both to guarantee and to pay, an action lies on the contract to recover the amount past due and unpaid, although no farther guaranty was made.

A prospective principal debt and prospective principal debtors that may be identified by the contract and subsequent events are as effectual to sustain a guaranty as an existing debt and debtor.

The practical interpretation of a contract by the parties to it while they are engaged in its performance, and before any controversy concerning it has arisen, is one of the most satisfactory tests of its meaning, and courts may generally adopt that construction with safety.

When the main object of the guarantors is not to answer for the debt, default, or miscarriage of another, but is to obtain substantial benefits or advantages for themselves which actually inure to them, their guaranty is also their own original agreement, and no writing is essential to its validity under the statute of frauds.

Full knowledge by the principal of all the material facts is indispensable to a ratification by him of the unauthorized acts of his agent.

It is only when the knowledge acquired by an agent in a previous transaction is legally presumed or clearly proved by circumstances or other evidence to have been in his mind at the time of a subsequent transaction that it can be imputed to his principal therein.

A depositor may not recover his general deposit of his creditor after his debt in excess of his deposit has become due unless he first pays his debt.

Debtors remitted $7,500 to their creditor to pay their debt and requested him to hold it as a special deposit for a short time until they could try to arrange a suit by the creditor against them and other co-obligors. The creditor acceded to their request, but they never arranged the suit and some months afterwards the creditor applied the deposit to the payment in part of his debtors' matured obligation.

Held, the debtor had no cause of action to recover back the $7,500.

T. F. Chaplin and Herbert Barry (Julien T. Davies and Eliot, Chaplin, Blayney & Bedal, on the brief), for Guaranty Trust Company.

James C. Jones and Thomas B. Harlan (Reynolds & Harlan and Jones, Jones, Hocker & Davis, on the brief), for Koehler and others.

Before SANBORN, ADAMS, and CARLAND, Circuit Judges.

SANBORN Circuit Judge.

These writs of error challenge a judgment on the merits in favor of the defendants below, Hugo A. Koehler, Henry Koehler, Jr., and American Brewing Company, for their costs in an action at law brought against them by Guaranty Trust Company of New York upon a contract between them and that company dated June 14, 1905. The plaintiff below complains that a judgment was not rendered against these defendants for $5,943.71, and the defendants that a judgment was not rendered against the plaintiff for $7,500 on their counterclaim. The parties by a written stipulation waived a jury, and agreed that the case should be referred to Hon. Jesse A. McDonald to hear the evidence, to make a special finding of the facts, to state his conclusions of law, and to report them to the court, that the court might approve or disapprove, or modify, the report, and might enter such a finding and judgment as it deemed proper, and that the finding of facts and conclusions of law when adopted by the court should be deemed the findings and conclusions of the court. The referee made a special finding of facts which was approved and adopted by the court. He stated conclusions of law which led him to recommend a judgment against the defendants, both on the plaintiff's cause of action and on the defendants' counterclaim. The court disapproved some of the referee's conclusions of law, and rendered a judgment for costs against the plaintiff. The result is that the special finding of facts made by the referee became the special finding of the court, and the writs of error present the question whether or not this finding warrants the judgment below, and, if not, what judgment it does warrant.

The opinion of the court below contains a statement of the pleadings and a copy of the contract in suit, and it is unnecessary to set them forth here in full again. Guaranty Trust Company v. Koehler (C.C.) 187 F. 192, 199. Counsel for all the parties have requested this court to review and decide this case on the merits. No objection or exception is required to present to an appellate court the legal issue whether or not a special finding of facts made by the court upon the trial of an action at law warrants the judgment, because, like the question whether or not a verdict sustains the judgment upon it, this is an issue of law which arises upon the face of the record. Webb v. National Bank of Republic, 146 F. 717, 719, 77 C.C.A. 143, 145, and cases there cited.

Legal issues other than those specifically presented for determination may properly be considered and decided by an appellate court where they naturally arise and are pertinent to the questions at issue and to further proceedings in the trial court. Collin County National Bank v. Hughes, 155 F. 389, 83 C.C.A. 661. An examination of the record in the light of these propositions of law has convinced us that the issue whether or not the finding of facts sustains the judgment in this case is properly presented for our determination, and that its decision involves the determination of every material question presented for hearing in this case and without more we proceed with its consideration.

The contract in suit was made on June 14, 1905, in Manila. The parties to it were the plaintiff on one side and on the other side the defendants, American Brewing Company, a corporation Hugo A. Koehler, and Henry Koehler, Jr., all of St. Louis, Mo., hereafter called the local defendants, and William Wolff, under the name of William Wolff & Co., F. H. Hilbert, C. H. Hilbert, and Pacific Oriental Trading Company, a corporation, all of San Francisco, Cal. While all these defendants were parties to this action, none but the local defendants were served with process or appeared in the case. The agreement recited that the plaintiff had advanced $48,500, more or less, in connection with the property of the Philippine Lumber & Development Company, and it agreed to advance $14,000 more to enable the defendants to bid at a proposed sale of that property under an order of the Court of First Instance of Manila, and that, in consideration of those advances, the defendants agreed that a mortgage should be given by those who acquired the property at the proposed purchase on all the assets they should get by virtue of the sale to secure the plaintiff for its advances made and to be made; that these advances should draw interest payable monthly at 7 per cent. per annum, and should be secured to the amount of $40,000 by a first mortgage on the property to be acquired and to the amount of $22,500 principal, and the interest on the entire $62,500, by the joint and several guaranty of the defendants that the advances should be paid back at the rate of $3,750 on account of the $40,000 and $3,750 on account of the $22,500 annually, that the mortgage should be prepared by the solicitors of the plaintiff, and should be given when the necessary power of attorney arrived in Manila, and that the defendants should cause the plant, buildings, timber, and other property to be acquired to be kept insured by the owners for the security of the plaintiff. The defendants made this contract, not for the pecuniary benefit of the prospective purchasers or others, but for their own benefit. The property of the Lumber Company was for sale for $62,500, and they believed that it was worth, and they were subsequently offered, $90,000 for...