Holcomb v. People's Trust Co.

• Decision Date: 07 May 1913
• Docket Number: 2,331.
• Citation: 205 F. 491
• Parties: HOLCOMB et al. v. PEOPLE'S TRUST CO.
• Court: U.S. Court of Appeals — Sixth Circuit

205 F. 491

HOLCOMB et al. v. PEOPLE'S TRUST CO.

No. 2,331.

United States Court of Appeals, Sixth Circuit.

May 7, 1913

The Trust Company recovered against Holcomb and Latimer a judgment, based upon their guaranty of a loan made by the Trust Company to the Crescent Oil Company. The preliminary agreement bore date March 9, 1905. It recited that the Oil Company (second party) desired to borrow $100,000, and that the Trust Company (first party) was willing to make the loan upon receiving the assurances contemplated by the agreement that the subscribers (third party), who should sign, would severally guarantee the repayment to the Trust Company of the amounts set opposite their respective names; and that the agreement to loan the $100,000 should not be binding on the Trust Company until guarantors satisfactory to the Trust Company had signed the agreement to the amount of $100,000. Holcomb and Latimer each signed this for $10,000, Peters for $25,000, Roycroft for $20,000, Conners for $25,000, and Mills for $10,000. The Trust Company eventually refused to accept Mills as a guarantor. Under date of March 25, 1905, the Oil Company executed its note to the Trust Company for $100,000 but no substitute for Mills was furnished. and $90,000 was the total ever loaned on the note. Under the same date, March 25, 1905, all the third party subscribers to the preliminary agreement signed also a separate paper, by which they made the guaranty which they had agreed to make. This debt was not paid, and was repeatedly extended, for six months each time. Holcomb and Latimer consented in writing to each extension. March 26, 1906, two of the guarantors, Peters and Roycroft paid up their $45,000 liability, Peters later paid the Conners $25,000, but Holcomb and Latimer paid nothing. May 23, 1906, by contract between Peters, Conners, and the Trust Company, Peters was fully substituted for Conners, and the latter released. Finally the Oil Company enterprise was abandoned and this suit was brought.

It is claimed on behalf of Holcomb and Latimer that Peters was the promoter and chief spirit in the Oil Company enterprise; that they joined in the guaranty purely for his accommodation that they were acquainted with Conners, and had great confidence in his ability and judgment; that they were induced to sign because of the representation by Peters that Conners was interested and would sign for $25,000, and because of their belief that it would be safe to take risks in the enterprise with which Conners was connected and in which he was willing to take risk; and that their various consents to extension of time were also upon representation by Peters and upon the supposition that Conners was approving the same extensions and that they were safe in following his judgment. It was also claimed by Holcomb and Latimer that in truth (though not discovered by them until after the last extension) Conners, while he did sign the guaranty, as it was represented he would do, did so as a mere dummy for Peters, and had, in fact, no interest in the enterprise and took no risk; that the amount, so apparently guaranteed by Conners, was, before some of the last extensions, assumed by Peters, so that, at the last extensions, Conners had become an entire stranger, both in fact and in form, to the whole transaction.

Based upon these claims, Holcomb and Latimer presented three defenses in the District Court, all of which were overruled, and all of which they have endeavored to preserve and to urge in this court. They are: (1) The $90,000 loan, which was made to the Oil Company, was not the $100,000 loan, the payment of which they had guaranteed. (2) It was a condition of their liability that Conners was in good faith a party, and this condition was broken. (3) It was a condition of their consent to the last extension that Conners also should consent, and this he did not do. As bearing upon these defenses, it should be further stated that the successive extensions and consents signed by all parties were in similar form, except as each brought the recital of events down to date. The latest will sufficiently indicate their character. Its material parts are as follows:

'This agreement, made this 26th day of September, 1908, by and between the People's Trust Company, a corporation organized under the laws of the state of New York (hereinafter called the 'Trust Company'), party of the first part, the Crescent Oil, Asphalt & Gas Company, of Chicago, a corporation organized under and by virtue of the laws of South Dakota (hereinafter called the 'Oil Company'), party of the second part, and the subscribers to an underwriting agreement between the parties hereto, dated March 26, 1905 (who are hereinafter called the 'Underwriters'), parties of the third part:

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