Oilwell Division, U.S. Steel Corp. v. Fryer
| Decision Date | 10 January 1973 |
| Docket Number | No. B--3087,B--3087 |
| Citation | 493 S.W.2d 487 |
| Parties | OILWELL DIVISION, UNITED STATES STEEL CORPORATION, Petitioner, v. R. J. FRYER, Respondent. |
| Court | Texas Supreme Court |
Strasburger, Price, Kelton, Martin & Unis, Royal H. Brin, Jr., Dallas, for petitioner.
Griffith & Lumpkins, Lynn B. Griffith, Waxahachie, for respondent.
The defendant, Fryer p Willis Drilling Company, a corporation, purchased two oil well drilling rigs, equipment therefor, and other supplies from the Oilwell Division of United States Steel Corporation, hereinafter referred to as USS. The codefendant, R. J. Fryer, signed a written guaranty which, on its face, is an unlimited personal guaranty for the payment of the debts of Fryer & Willis Drilling Company. The latter corporation defaulted in its payments. A judgment was entered against it, and nothing is before us as to the corporation. Our opinion will deal only with the liability of Fryer.
As the case reaches us, this is a suit on the unlimited guaranty of R. J. Fryer. He concedes that he guaranteed the payment for the first drilling rig up to $100,000.00. He denies personal liability as to the balance. He admits signing the guaranty and agrees that, on its face, the guaranty is unlimited. He pleads the affirmative defense of fraud.
Trial was to a jury which answered some of Fryer's special issues as to fraud by USS in the negative. The trial court entered judgment on the jury's verdict for the plaintiff USS. The court of civil appeals affirmed the judgment against Fryer for the price of the first rig, but it reversed the judgment of the trial court as to Fryer's personal liability on the guaranty for purchases of the corporation on open account and for the second oil rig purchased by the corporation. That court rendered judgment that Fryer was liable only for the price of the first rig. 472 S.W.2d 857. The court of civil appeals held against Fryer on his other points dealing with the foreclosure sale of the oil rigs. Those points were not brought to this court. What is before us is the holding of the court of civil appeals that 'without need of reference to the statement of facts,' USS was guilty of fraud and that the finding of the jury that the representations of the agent of USS was not made For the purpose of inducing Fryer to sign the guaranty was immaterial. We are of the opinion that the intermediate court was in error as to such holding. Accordingly, we reverse its judgment and affirm the judgment of the trial court.
Since the court of civil appeals was of the view that the record showed that the representations of the agent of USS were false 'without need of reference to the statement of facts,' it is necessary to set out in detail some of the testimony, including evidence which would support the jury's answer to the issue which found, in effect, that the representations of the agent of USS were not made for the purpose of inducing Fryer to sign the guaranty.
Mr. Fryer had been in the oil well drilling business for many years. His operations had been in various parts of the United States. He had dealt with USS and its agent, L. L. Mitchell since at least 1944. Fryer had formed at least two drilling corporations. In 1947, Fryer desired to purchase equipment from USS. He formed a Delaware corporation named Standard-Fryer Drilling Company to have its home office in Illinois. In connection with the purchase from USS of oil well equipment by that corporation, Fryer signed a letter to USS which, among other things, provided that USS could extend credit to Standard-Fryer Drilling Company, 'and my liability in this connection is unlimited, for which this shall be a continuing guaranty.' At this trial, Fryer at first denied that he had ever given any unlimited guaranty. When shown the above guaranty, he said that he had forgotten about it. In connection with the present guaranty, he said he did not know what an unlimited guaranty was when he gave the guaranty with a blank dollar amount in it.
As to the present guaranty, Fryer testified that the Fryer & Willis Drilling Company was to be formed, and was formed, to do some drilling in the Ohio area. Fryer (the corporation) needed to buy a drilling rig and supplies, and there was a need to purchase them mainly on credit. Fryer picked out the rig he wanted in Oklahoma City, and the negotiations for its purchase from USS occurred in Fryer's office in Dallas.
At the time of such negotiations and when the guaranty was signed, the Fryer & Willis Drilling Company had not been formed. It was to be a West Virginia corporation and was to have a total capital stock of $10,000. This first rig and equipment cost in the neighborhood of $108,000. It was proposed that the corporation's entire $10,000 would be used as a down payment (which it was), and the balance would be for credit. Except for the $10,000, the corporation had no other established credit.
The testimony, most of which was introduced without objection, is conflicting as to what was said when the guaranty was executed by Fryer. Only a few people were present in Fryer's office. They included Fryer and his sister, Mrs. Willis, who was secretary for the corporation and Fryer's personal secretary. Also present were agents of USS, L. L. Mitchell and Jack Slaughter.
The written guaranty provided in part that in consideration of credit given by USS to Fryer & Willis Drilling Company, Fryer unconditionally guaranteed to USS the payment of all debts which the corporation might owe USS. It provided,
'This guaranty shall be revolving and continuous to the extent of $ , plus interest, costs, and expenses, all as hereinafter provided, And in the event the amount of the liability is not limited in the space provided, then this guaranty shall be unlimited.' (Emphasis ours.)
The guaranty also provided,
'It is hereby warranted and represented that this guaranty has not been executed upon any statement or representatio not contained herein, and that this guaranty upon any statement or representation not USS and the undersigned as to its subject matter and shall not be modified except with the approval in writing signed by an authorized executive officer of USS.'
L. L. Mitchell, treasurer of the Oilwell Division of USS, testified that Fryer approached him to buy a rig and supplies mainly on credit. Mitchell testified to his previous experience with Fryer and the previous corporation, the Standard-Fryer Drilling Company. Mitchell said that under no circumstances would he have sold the equipment to a newly formed corporation with only a $10,000 capital without Fryer's personal guaranty, and that he did not represent to Fryer that his guaranty would be limited.
Jack Slaughter, the credit manager for the Oilwell Division of USS, gave testimony that supported that of Mitchell: that Fryer was not told that the guaranty signed was temporary or limited to the purchase of the first...
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