Sager v. Rawleigh Co.

• Decision Date: 14 November 1929
• Citation: 153 Va. 514
• Parties: GEORGE W. SAGER v. W. T. RAWLEIGH COMPANY.
• Court: Virginia Supreme Court

Page 514

153 Va. 514

GEORGE W. SAGER v. W. T. RAWLEIGH COMPANY.

Supreme Court of Virginia, Richmond.

November 14, 1929.

1. GUARANTY — Guarantor Signing in Ignorance that Paper was a Guaranty — Liability of Guarantor. — It appears that in England a guaranty signed by one who was ignorant of its contents and did not know that he was signing a guaranty at all is void for the reason that there was no consenting mind. In some States in this country the liability of the guarantor in such case turns upon the question of whether or not he was negligent. But the prevailing and better rule is that the guarantor is liable whether negligent or not under the equitable rule that where one of two innocent parties must suffer, he who has put it in the power of a third person to commit the fraud must sustain the loss.

2. GUARANTY — Liability of Guarantor — Misrepresentation or Deception Practiced by Principal or Other Third Person. — While the law requires the guarantee to act in good faith, unless he has knowledge of or participation therein, he is not responsible for any misrepresentation or deception practiced by the principal, or other third person, upon the guarantor in order to induce him to enter into the contract of guaranty. But if the guarantee participates in false representations or fraudulent concealment of facts, which operate to induce the making of a contract of guaranty, the guarantor may set up such fraud as a defense in an action upon the guaranty.

3. GUARANTY — Liability of Guarantor — Misrepresentation of Principal or Third Person that the Instrument Signed was not a Guaranty — Negligence of Guarantor — Case at Bar. — The instant case was an action against a guarantor. The guarantor was a successful business man but illiterate and he alleged that the principal had assured him that the instrument which he signed was merely a paper certifying to the principal's good character. He had already signed one such paper and it was hard to see why he should sign another. He did not require the principal to read the paper. The paper on its face was a formal document covering a full page of the record. Ordinary prudence should have suggested that it was more than a simple certificate of character.

Held: That the trial court might well have held as a matter of law that defendant guarantor was guilty of some negligence.

4. GUARANTY — Liability of Guarantor — Misrepresentation of Principal or Third Person — Knowledge of Guarantee — Case at Bar. — The instant case was an action on a guaranty. The guarantor alleged that he had signed the guaranty because of misrepresentations by the principal that the instrument was not a guaranty, but a mere certificate of character or recommendation of the principal. The guarantor could not read or write. It conclusively appeared that the guarantees accepted the guaranty in good faith at their place of business in another State and had no knowledge of the alleged misrepresentations by the principal.

Held: That the guarantor was liable.

5. GUARANTY — Misrepresentations of Third Persons or Principal as Inducement to Guaranty — Liability of Guarantor — Which of Two Innocent Parties Shall Suffer — Party Permitting Himself to be Deceived — Signing without Reading — Case at Bar. — The instant case was an action on a guaranty. The guarantor alleged that he had signed the guaranty because of misrepresentations by the principal that the instrument was not a guaranty, but a mere certificate of character or recommendation of the principal. The guarantor could not read or write. The guarantees accepted the guaranty in good faith without knowledge of the misrepresentations of the principal. As between plaintiff and defendant, the equities are with the plaintiff. It did nothing, while the defendant set in motion a series of causes, innocent though he may have been, which resulted in loss to another who had every reason to rely and did rely upon them. The weight of authority in this country and the juster rule hold with the plaintiff. Where one of two innocent parties must suffer he who has put it into the power of a third person to commit the fraud must sustain the loss. Men should learn to lend their endorsement with caution. Common prudence requires that those who are unable to read should at least not sign contracts or writings without having them first read by some disinterested party.

Error to a judgment of the Circuit Court of Rockingham county, in a proceeding by motion for a judgment for money. Judgment for plaintiff. Defendant assigns error.

The opinion states the case.

D. O. Dechert and Ralph H. Bader, for the plaintiff in error.

John Paul, for the defendant in error.

HOLT, J., delivered the opinion of the court.

The W. T. Rawleigh Company, plaintiff below, is an Illinois corporation, engaged in the manufacture and sale of merchandise. George W. Sager is a citizen of Virginia and a successful business man and orchardist, whose home is Timberville, Va.

During the year 1924, one Martin contracted with this manufacturer for the purchase of its products, and in 1925 a similar contract was made. As a condition precedent to any extension of credit Martin was required by the plaintiff to secure a guaranty from three substantial citizens. That guaranty is in writing, appears in the record and takes up a full printed page. It contains these among other provisions:

"We, the undersigned, do hereby jointly and severally enter ourselves as sureties and do hereby unconditionally promise and guarantee the full and complete payment of the balance due or owing said seller for goods previously sold and delivered to the buyer as shown by its books at the date of the acceptance of this contract of surety by the seller, and also promise and guarantee the full and complete payment of all moneys due or owing or that may become due or owing said seller and all indebtedness incurred by the buyer under the terms of the above and foregoing instrument by the buyer named as such therein; and to all the terms, provisions and agreements contained in said instrument we fully assent and agree."

This contract of guaranty was sent on to the plaintiff and accepted by it in good faith and without knowledge of any wrong perpetrated in its procurement. Credit based thereon was afterwards extended to Martin, in consequence of which he now owes $797.25. Judgment was obtained against him, but it is apparently worthless, hence this motion for judgment against the guarantor, Sager. He pleaded fraud in the procurement of the contract, and said that he was guilty of no negligence.

In lieu of evidence, this certificate of facts appears in the record:

"That the guarantee forming a portion of said contract was signed by R. T. Thornton, D. J. Campbell and Geo. W. Sager, each in person; that the said Sager is unable to read and can write only sufficiently to write his own name and that of one other person, namely, John W. Gordon; that about seven months prior to the signing of the guaranty involved in the action, said Sager, Thornton and Campbell had signed a similar paper, in like words and figures, except that the same was to cover the purchases of Frank Martin from the plaintiff during the year 1924; that the signature of each of said Thornton, Campbell and Sager to said first guaranty was obtained by said Martin by the representation to each of them that the same constituted a recommendation of said Martin as to his good character (and in the case of said Sager, as having done satisfactory work in the laying of a pipe line for him); that each of said Thornton, Campbell and Sager was assured by said Martin at the time of and immediately prior to his so signing said guaranty that the same would in no wise involve the signer in any liability financially, and that said guaranty was limited in its scope to the matter of the character of said Martin, and in the case of Sager to the matter of such good character and to the satisfactory laying of said pipe line; that said Martin was, at the time of the execution of said guaranty, and during the prior acquaintance of said Sager with him, in good repute, in the community in which they both lived, as a man of good character; that from Sager's testimony Martin read to Sager the paper, which testimony Sager afterwards modified by saying that Martin read to him `a couple of lines' of the paper with the statement that the rest of it, `I got to fill up, you have nothing to do with that'; and that the portion as read conformed to Martin's previous representation as to its contents; that no person able to read was immediately at hand, and that only two other persons were near by, in Sager's orchard, who were employees of said Sager, as to whom did not know whether they could read; that the second paper was tendered to said Sager, who signed the same relying on the representation of said Martin that its contents were exactly like those of the first guaranty, which he stated had been lost by him while on a visit to relatives; that said Martin was in no sense an agent of the plaintiff, but bought merchandise from it for the purpose of reselling the same; that said Sager is a successful business man for his community, Timberville, Virginia; that said Sager has habitually had all papers and correspondence executed and had with him read by third persons, and all letters from him written by third persons; that during the period referred in the contract sued on, and guaranteed by said Thornton, Sager and Campbell, said Martin became indebted to said plaintiff in the sum of $797.29, which remained unpaid and for which plaintiff heretofore obtained a judgment against said Martin in a court of competent jurisdiction in the State of Illinois; that plaintiff, as testified by its witnesses, upon the acceptance by plaintiff of said contracts, promptly notified each of said guarantors by letter that the same had been accepted, but the guarantors testified that none of them received such letter."...