J. R. Watkins Co. v. Beyer

• Citation: 233 N.W. 442,203 Wis. 397
• Parties: J. R. WATKINS CO. v. BEYER.
• Decision Date: 12 November 1930
• Court: United States State Supreme Court of Wisconsin

203 Wis. 397

233 N.W. 442

J. R. WATKINS CO.

v.BEYER.^a1

Supreme Court of Wisconsin.

Oct. 18, 1930.

Dissenting Opinion Nov. 12, 1930.

FOWLER, J., dissenting.

Appeal from a judgment of the Circuit Court for Price County; G. N. Risjord, Circuit Judge.

On rehearing.--[By Editorial Staff.]

Mandate heretofore entered vacated and set aside, and judgment appealed from affirmed.

For former opinion, see 230 N. W. 615.Bundy, Beach & Holland, of Eau Claire, for appellant.

D. E. Tawney and J. M. George, both of Winona, Minn., and Linderman, Ramsdell & King, of Eau Claire, for respondent.

ROSENBERRY, C. J.

In this case a motion for rehearing was made and granted. The case has been reargued and reconsidered. Upon a reconsideration of the whole case the court is of the opinion that it was in error in holding that Menning was the plaintiff's agent in procuring the defendant Beyer's signature to the contract in question. This determination will make necessary the consideration of some matters not dealt with in the former opinion (230 N. W. 615), and will require a supplemental statement of the facts.

It should be said that the original agent Cronce had a right to return the goods in his possession at the termination of his contract and be credited with the list price therefore, or he might procure a new dealer satisfactory to the plaintiff and dispose of the goods directly to the new dealer, in which event the new dealer could pay him for the goods, or, as was done in this case, the plaintiff might accept as its debtor the new dealer in lieu of Cronce, the retiring dealer. Negotiations were opened in this case about March 22, 1922. Cronce, the retiring dealer, inclosed an application blank signed by Menning along with a letter in which he said: “I have decided to sell my Watkins business to Robert Menning of Mattoon, Wis., providing he can get his bondsmen and furnish you the Watkins Company with a satisfactory contract.”

It appears that the application blank which Cronce inclosed was not filled out, but prior thereto Menning had sent one directly to the company.

There was further correspondence in which the plaintiff endeavored to persuade Cronce to continue the business. On April 26, 1922, Cronce wrote in part as follows: “I have decided to sell my Watkins business and I have picked you a good man to take my place.”

Under date of May 5, 1922, plaintiff wrote Cronce as follows:

“Understanding that you and Mr. Robert Menning have made mutually satisfactory arrangements in regard to taking over your interests in the locality where you have been selling, we are today sending him a contract describing that locality.

If his contract proves satisfactory, we would prefer that a cash arrangement be made for your interests, including unsold goods, etc., and in such case the transaction would be entirely between yourselves. As an accommodation however, in case Mr. Menning wishes these goods charged to his account and you arrange with him to transfer them instead of returning them according to your agreement, we attach a special blank upon which you and he may invoice the goods he wishes to take over, then sign it, having your signatures witnessed, in the manner provided.

On receipt of this blank properly filled out in all respects and after our acceptance of Mr. Menning's contract, we will credit the goods at wholesale prices to your account and charge his account. This transfer of course cannot become effective until after formal acceptance of Mr. Menning's contract and you would not be warranted in turning the goods over to him until that time. The balance due us, if any, we will expect you to arrange to pay promptly.

If your wagon is one which was originally purchased from us and your man wishes to charge it to his account, we will be willing to transfer that also at a price mutually agreed upon between you and him, not to exceed the original cost and on condition that his sureties execute a memorandum authorizing such a transfer.”

Under date of May 5, 1922, Cronce and Menning made an itemized statement of the goods which Cronce had on hand on blanks furnished by plaintiff, which was signed by Cronce and Menning. According to this statement the aggregate amount of the merchandise according to the wholesale price list was $1,187.78. Under date of May 5, 1922, the plaintiff company sent to Menning a contract duly executed by it, asked him to execute the same and procure two sureties in accordance with the terms of the contract which he proceeded to do. That guaranty was signed by Frank Gotz and Paul A. Janke. Menning commenced business under the contract, purchased goods and made payments, and on or about March 1, 1923, plaintiff prepared a new contract covering the period from March 26, 1923, to March 1, 1924. Menning signed the contract and sent the company a statement in which he acknowledged receipt of the contract of March 26, 1923, admitted that the contract showed the amount of indebtedness due from him to J. R. Watkins Company to be $1,794.90, and that he had carefully verified the same by his books. ApparentlyMenning had some difficulty in procuring guarantors under the new contract. The same was not completed until some time about May 15, 1923. The second contract was signed by the defendant Beyer and O. B. Wick as guarantors. The amount inserted in the second contract as constituting the past-due indebtedness is claimed by the plaintiff to be $1,794.90. Plaintiff contends that this amount was inserted in the contract prior to its execution by it and its receipt by Menning. The defendant Beyer claims that the amount was left blank both in the contract and in the guaranty, and that Menning represented to him that he was just commencing business and did not owe the company anything. With respect to this contention as has already been stated, the jury found in fayor of the defendant Beyer. At the time of the trial both Menning and O. B. Wick were deceased.

Under date of May 18, 1923, the plaintiff wrote the defendant Beyer as follows: “We are pleased to inform you that we have received and accepted the contract of Mr. Robert N. Menning, dated Mar. 26th, 1923, which you have signed as surety.” The plaintiff company had difficulty in procuring payments on the past-due indebtedness, and about July 7, 1923, terminated its contract with Menning, and on that day wrote the defendant Beyer as follows: “In re: Your surety for Robt. Menning. Balance $1,798.11,” and requested the defendant Beyer to assist them in procuring a settlement of the amount due. Upon the trial it was stipulated that the plaintiff had furnished goods under the new contract in the amount of $296.12, Menning had made payments of $440.22, leaving $144.10 to be applied on the goods purchased under the contract of May 5, 1922.

In a letter to Menning dated March 26, 1923, transmitting the contract in suit, the plaintiff stated:

“We enclose herewith your new contract expiring March 1st, 1924, properly filled out and signed by us. When executing this contract sign it yourself in ink and obtain the signatures (in ink) of two sureties. (Directions as to execution not material here.)

As you will note, we have inserted in the contract the amount of your indebtedness to us on March 26, 1923, namely Seventeen Hundred Ninety-four and 90/100 Dollars, which amount is also inserted in the statement at the bottom of this sheet.”

It is not claimed, however, that this letter was exhibited to either of the sureties who signed the contract of March 26, 1923. It is a noteworthy circumstance that, although the plaintiff notified the defendant Beyer on July 7, 1923, of the state of the account and asked his assistance in procuring a settlement, it had no notice that the defendant Beyer claimed that there was any fraudulent misrepresentation until the answer in this case was served on April 6, 1927, almost four years afterward. This action was begun against the sureties to recover the amount due from Menning at the time the contract was terminated in July, 1923, being $1,670.80, with interest.

We have referred to the plaintiff without attempting to distinguish between the plaintiff as a Delaware corporation and a corporation of the same name organized under the laws of the state of Minnesota. Apparently the transfer of the business from one corporation to the other was made in December, 1922. This fact, however, is only material in relation to a matter which will be subsequently treated.

It becomes apparent that the sole basis of a claim that Menning in procuring the signature of the defendant Beyer to the contract of March 26, 1923, was the agent of the plaintiff, is that the contract was sent to Menning by plaintiff, executed by the plaintiff, with the request that he execute the same and procure the signatures of two sureties, and that it recited a consideration of $1 paid and received. Does the first party to a contract by sending a contract executed on its part to the second party to the contract, with the request that he execute it and procure sureties, thereby clothe the second party with apparent authority to make representations to the sureties as to the state of the account between the parties to the contract?

[1] The general rule of law is that fraud practiced by the principal upon a surety, without any knowledge or participation on the part of the obligee by means of which fraud the surety is induced to sign the contract, does not affect the liability of the surety to the obligee. 50 C. J. 61, par. 104, and cases there cited.

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