Schaffran v. Mt. Vernon-Woodberry Mills

• Decision Date: 08 June 1934
• Docket Number: No. 5236.,5236.
• Parties: SCHAFFRAN v. MT. VERNON-WOODBERRY MILLS, Inc.
• Court: U.S. Court of Appeals — Third Circuit

94 ALR 543, 70 F.2d 963 (1934)

SCHAFFRAN v. MT. VERNON-WOODBERRY MILLS, Inc.

No. 5236.

Circuit Court of Appeals, Third Circuit.

April 19, 1934.

Rehearing Denied June 8, 1934.

Edward R. McGlynn, of Newark, N. J., for appellant.

Pitney, Hardin & Skinner, of Newark, N. J. (Shelton Pitney and Edward K. Mills, Jr., both of Newark, N. J., of counsel), for appellee.

Before BUFFINGTON, WOOLLEY, and THOMPSON, Circuit Judges.

WOOLLEY, Circuit Judge.

On April 23, 1930, Thomas Foxhall entered into a written agreement of guaranty which, with the critical words emphasized by our italics, reads as follows:

"Whereas Winston Converting Company * * * is desirous of increasing its credit limit with Mount Vernon-Woodberry Mills, Inc.

"And Whereas Mount Vernon-Woodberry Mills, Inc. is willing that this credit limit should be increased provided the present indebtedness of Winston Converting Company to it is guaranteed and also that the new credit limit be guaranteed by good and sufficient sureties.

"Now Therefore This Agreement * * * between Thomas Foxhall * * * and Passaic Engraving Company * * * parties of the first part, and Mount Vernon-Woodberry Mills, Inc. * * * party of the second part, witnesseth * * *.

"The party of the second part agrees to extend to Winston Converting Company a credit limit of Five Thousand ($5,000) Dollars.

"The party of the first part do hereby jointly and severally guarantee the payment by Winston Converting Company of all its present indebtedness to Mount Vernon-Woodberry Mills, Inc., amounting to $3,659.01. (Recovery on this phase of the guaranty is not involved in the suit.)

"And said parties of the first part do further agree that they will jointly and severally guarantee the payment of all orders of Winston Converting Company accepted by Mount Vernon-Woodberry Mills, Inc." and "waive any right to notice of nonpayment by said Winston Converting Company to which they may be entitled under the laws of this or any other state."

Conceiving that Foxhall had breached his contract, the Mount Vernon-Woodberry Mills, Inc. brought this suit, setting forth in its complaint (after amendment) two writings between itself and Winston Converting Company whereby the latter concern agreed to purchase from the former certain quantities of army duck, deliveries to be ordered from time to time, and alleging that Winston Company had refused to order out, or take delivery, or pay for the material so ordered or contracted for, with the result that the plaintiff was compelled to re-sell the goods at a loss of $5,408.57 for which it asks recovery from the defendant guarantor. Foxhall, by his answer, admitted the execution of the contract of guaranty but denied the allegations of the complaint imputing liability to him. He died before trial. His executrix appeared as defendant and adopted his answer.

The contract of guaranty calls for construction, as do also the instruments by which the goods were ordered or contracted for and on which the primary defaults were made. The question before the District Court, and now before this court on appeal, was whether the guaranty is for "payment" for goods which the Winston Company should "order" and actually receive up to the credit limit of $5,000 or is for performance by the Winston Company of "contracts" for goods, covering liquidated damages for breaches of the contracts.

Early in the pendency of the suit the defendant moved to strike the complaint as not showing a cause of action, thus raising that question on the pleadings. The judge, then sitting, construed the contract as one guaranteeing performance and denied the motion. Later the case proceeded to trial before another judge of the same district, who, though personally inclined to an opposite opinion, regarded himself bound by the construction of the first judge on the motion to strike as res judicata and accordingly construed the contract of guaranty as one not restricted to payment for goods ordered and received but as extending to performance of contracts entered into, for breach of which the guarantor is liable in damages. On cross-motions for directed verdicts, the learned trial judge embodied this construction of the contract in a judgment for the plaintiff for the sum of $5,525. The defendant appealed.

Although at the conclusion of the trial the parties recognized that the facts were practically undisputed and the issues were narrowed down to the question involved on this appeal, there was, as we read the record, no stipulation, written or oral, that a jury should be waived and the case submitted to the court under Rev. St. §§ 649, 700 (28 USCA §§ 773, 875). Instead, both parties moved for directed verdicts in their favor, respectively. Clearly that brought the case within the rule of Beuttell v. Magone, 157 U. S. 154, 15 S. Ct. 566, 39 L. Ed. 654. The court, however, instead of directing the jury to render a verdict for one party or the other, dismissed the jury and entered judgment for the plaintiff. This, though an unusual way of putting into effect the Beuttell-Magone rule, is supported by some authorities. However, as the plaintiff, of course, has not appealed and as the defendant did not except and has filed no assignment pointing to error in this procedure, we shall pass it by without further comment and shall address ourselves to the judgment as it stands.

Preliminarily to the real issue, we hold against the contention of the plaintiff-appellee that the denial of the first judge to strike the complaint was res judicata or became the law of the case and is not reviewable on this appeal, and in consequence the meritorious question — that of construing the contract — is not before the court. Clearly, the order of the first judge was not a final judgment and therefore was not appealable. His refusal to strike, instead of being a final judgment, was merely an interlocutory order signifying that the case, as made in the complaint, should go to trial and there be decided on the evidence, which would, of course, include the contract and might also include the circumstances under which it was entered into. Newcomb v. Kloeblen, 77 N. J. Law, 791, 74 A. 511, 39 L. R. A. (N. S.) 724; Ryer v. Turkel, 75 N. J. Law, 677, 70 A. 68; Reed v. Merchants' Mut. Insurance Co., 95 U. S. 23, 24 L. Ed. 348; 4 Page, Law of Contracts, (Ed. 1920) § 2060. And this is what happened. Evidence bearing on the subject matter of the contract and the standing of the parties thereto was introduced — mainly by the plaintiff itself. We are therefore constrained to hold that the order of the first judge, refusing to strike the complaint, was not res judicata; and that his interpretation of the contract did not become the law of the case. We also hold, under New Jersey law as well as under federal law, that, although an appeal will not lie directly from an interlocutory order (unless expressly permitted by statute), such an order is reviewable as a part of the proceedings on appeal from the final judgment, if not involving a matter of discretion. Shipman on Common Law Pleading (Ballantine's Third Edition 1923) 537, also Footnote 29; Tomlinson v. Armour & Co., 75 N. J. Law, 749, 70 A. 314, 19 L. R. A. (N. S.) 923; Defiance Fruit Co. v. Fox, 76 N. J. Law, 482, 70 A. 460; Allgair v. Hickman, 82 N. J. Law, 369, 372, 81 A. 752; Ulman v. Greenwood, 84 N. J. Law, 284, 86 A. 411; 3 Corpus Juris, 432. An opposite practice would produce the odd situation of a court sustaining, on appeal, an obviously bad final judgment because ruled by an unappealable bad interlocutory order. The trial judge was free to construe the contract and decide the case without hindrance by the previous order. So the question before him was, as we have stated, whether the contract of guaranty is for payment for goods ordered and received by the Winston Company or for performance of its contracts to purchase goods.

The plaintiff-appellee plucks one sentence from the contract and, regarding it as the single operative expression of the parties, interprets it as a guaranty of performance by the Winston Company of its engagements to purchase goods, and even then without limit as to amount. It ignores the $5000 credit limit appearing elsewhere. The one...