Schlozer v. Heckeroth
| Decision Date | 08 June 1928 |
| Docket Number | No. 26587.,No. 26586.,No. 26585.,No. 26588.,26585.,26586.,26587.,26588. |
| Citation | 219 N.W. 921,174 Minn. 525 |
| Parties | SCHLOZER et al. v. HECKEROTH et al. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Ramsey County; Hugh O. Hanft, Judge.
Four actions by E.F. Schlozer and others against Edward Heckeroth and others tried together. Verdicts for plaintiffs. From an order denying their alternative motions for judgment non obstante or a new trial, defendants Edward Heckeroth and others appeal. Affirmed.
Kerr, Nelson, Burns & Mohan, of St. Paul, for appellant Heckeroth.
Orr, Stark & Kidder, of St. Paul, for appellant Bayer.
Douglas, Kennedy & Kennedy, of St. Paul, for appellant Reichenberger and others.
F.W. Foote, of St. Paul, for respondents.
These four actions were tried together. They rest upon the same facts, present the same questions, and are submitted upon the same record and briefs. The plaintiffs are holders of bonds issued by the United States Cereal Company. The bonds were secured by a trust deed executed by the cereal company to the St. Paul Trust & Savings Bank as trustee, and also by a guaranty printed thereon bearing the signatures of twenty directors of the cereal company. The names of the guarantors are not given in the body of the instrument and appear only in the signatures thereto. The guaranty recites, among other things, that the cereal company has authorized the issuance of the bonds and executed a trust deed to secure their payment, that the undersigned are directors and stockholders of the cereal company and interested in its success, and then sets forth the obligation which the signers assume in the following words:
"Now, therefore, the undersigned do hereby guarantee the payment of said bonds above described and all thereof, and of the interest coupons attached thereto and all thereof, upon the day and days when the same and each thereof, become due and payable, severally and proportionately, that is to say, that the signatures of each of said guarantors hereto shall be held and considered a guaranty of payment by him of one-twentieth (1/20) of the total amount of principal and interest of the said bonds and coupons and all thereof."
Each bond bears the certificate of the trustee that it is one of the series secured by the trust deed, and that the guaranty thereon is a true copy of the original guaranty filed with the trustee. The actions were brought upon this guaranty and resulted in verdicts for the plaintiffs. The verdicts specified the amount to be recovered by each plaintiff from each defendant, as the guaranty created a several and not a joint liability. Seven of the defendants appealed from an order denying their alternative motions for judgment non obstante or for a new trial, and the term "defendants" as used hereafter will refer to the appellants.
Defendants contend that they were induced to sign the guaranty by false representations made to them by W.D. McLean, the president of the cereal company and its active representative in the matter of issuing the bonds. The trial court ruled that these false representations were not available as a defense against the plaintiffs. The ruling was correct. The plaintiffs had no part in procuring the guaranty and knew nothing of the representations. The defendants were directors of the company and it was their duty to know, and they are presumed to know, the nature and extent of the transactions in which the company was engaged and the means adopted for accomplishing the purposes of the company. But this aside, it is well settled that false representations made by or on behalf of the principal obligor or debtor to induce others to guarantee payment of his obligation are not imputable to the obligee, he having no part in procuring the execution of the guaranty. This question was fully considered and determined in two late cases. W.T. Rawleigh Co. v. Hoffman, 162 Minn. 57, 202 N.W. 54; National Surety Co. v. Becklund, 169 Minn. 177, 210 N.W. 882. Other cases to same effect are cited in Ann. Cas. 1916A, note at page 505.
Defendants further contend that the bonds had not matured and were not due when the actions were brought. There was a default in the payment of interest, and the question is whether the acceleration clause in both bonds and trust deed authorized the plaintiffs to declare the principal due. Defendants cite cases beginning with White v. Miller, 52 Minn. 367, 54 N.W. 736, 19 L.R. A. 673, and ending with Kiewel Securities Co. v. Knutson, 169 Minn. 291, 211 N.W. 1, in which it is held that where a mortgage contains an acceleration clause but the note secured by it does not, the principal may be declared due in a proceeding to foreclose the mortgage but not in an action brought on the note. Here the bonds themselves provide:
"In case of default in the payment of interest on any of said bonds, the principal and all thereof may be declared due in the manner and with the effect provided in said mortgage deed of trust."
The bonds further make specific reference to the deed of trust, "for the rights and privileges of the holders of this bond." These provisions made the acceleration clause a part of the bonds; and where it is a part of the note or bond an action may be maintained thereon for the principal as well as the interest. Northwestern Mut. Ins. Co. v. Allis, 23 Minn. 337; St. Paul T.I. & T. Co. v. Thomas, 60 Minn. 140, 61 N.W. 1134.
Defendants further contend that after they had executed the guaranty an alteration was made therein without their knowledge or consent which released them from liability thereon. This contention is predicated upon the following facts: The guaranty was originally signed by twenty-one directors and was printed upon the bonds with the twenty-one names appearing as obligors thereon. At the demand of one of the signers made to McLean, president of the cereal company, his name was erased from the original instrument. This was done before the trustee certified the bonds, and the certifying officer, for that reason, erased this name from the bonds by drawing an ink line through it at the time he certified them. Defendants would infer that this name was erased from the original instrument by the trustee, but the evidence will not justify such an inference. The trustee had nothing to do with the preparation or sale of the bonds. The cereal company had them prepared and sold them through its own agents appointed for that...
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