Schmidt v. McKenzie
| Citation | 9 N.W.2d 1,215 Minn. 1 |
| Decision Date | 09 April 1943 |
| Docket Number | No. 33364.,33364. |
| Parties | SCHMIDT v. McKENZIE et al. |
| Court | Minnesota Supreme Court |
Appeal from District Court, LeSueur County; Mark Nolan, Judge.
Action by Edward A. Schmidt against George McKenzie, Jr., F. C. Westerman, and others to recover on a contract of guaranty. From a judgment entered pursuant to an order granting the motion of F. C. Westerman for judgment of dismissal on the merits of plaintiff's cause on the pleadings, the plaintiff appeals.
Judgment affirmed.
Stacker & Stacker, of St. Paul, and W. F. & W. B. Odell, of Chaska, for appellant.
Fowler, Youngquist, Furber, Taney & Johnson and Ralph H. Comaford, all of Minneapolis, and Streissguth & Gislason, of New Ulm, for respondent.
Plaintiff appeals from a judgment entered pursuant to an order granting defendant Westerman's motion "for judgment of dismissal on the merits" of plaintiff's cause upon the pleadings.
His complaint alleges that on November 29, 1939, Engesser Brewing Company borrowed $10,000 from him and on that date executed its corporate note, of which the following is a copy:
At the same time the individual defendants, including Westerman, signed the following guaranty upon the back of the note: "For value received, I hereby guarantee the payment of the within note at maturity or at any time thereafter, and hereby agree and consent to all the stipulations contained therein."
The brewing company was not made a party to this action which is one to recover upon the quoted contract of guaranty. Only Westerman has appeared, and his defense alone is involved. We shall hereafter refer to him as defendant and to the brewing company as the company.
Attached to the complaint "and specifically made a part" of it (exhibit A) is a copy of "the contract referred to on the face of the note." It recites as a preamble that the company "now has a considerable volume of sales" of its beer in "St. Paul and suburbs," delivery of which "is quite expensive from its warehouse" in North Minneapolis to its customers in the St. Paul area, and that, since "both parties believe it will be" mutually "advantageous and profitable * * * to appoint" plaintiff "its distributor for said territory because of his location in the heart of said [St. Paul] territory and his facilities for not only selling the said beer but for delivering the same economically," therefore, "in consideration" of one dollar and "other valuable consideration hereinafter referred to," the company "hereby appoints" plaintiff "its exclusive distributor" for its beer in St. Paul and South St. Paul and the suburbs of each. Plaintiff accepted the "appointment as such distributor * * * for the duration of one year." The agreed sale price to him was fixed at 88 cents per case of 24 pints, "which price shall not be altered for one year." Also, as a matter of right, he was given the option "to renew this franchise for another two years at the expiration of the one covered by this contract, and on the same basis and on the same terms, except that no further deposit of ten thousand dollars or any amount [shall] be required."
"As part of the consideration for the appointment," plaintiff "as the distributor for" the company "in the said territory and the turning over to him of an already established trade on said beer, * * * does hereby agree to advance, and does advance and loan to the said first party [the company], the sum of Ten Thousand Dollars, receipt whereof is hereby acknowledged, and for which amount said first party has executed to said second party [plaintiff] its promissory note with acceptable signers and endorsers bearing even date herewith, and due one year after date, with interest, at the rate of six per cent per annum after maturity. It is agreed between the parties hereto that the said note is to be paid and retired by the first party furnishing and supplying beer to the said party of the second part on the following basis: Commencing May 1st, 1940, said second party shall pay the said first party only one-half of the amount of such load of beer and cases, less empties, instead of the full amount until such date as is stipulated, for such length of time as is necessary to pay and retire said note and loan in full, it being the agreement and understanding between the parties hereto that this franchise and the turning over of the established business of said first party is to cost and stand the said second party nothing except the interest on the money while same is being used by said first party. The note when paid in full shall be cancelled and returned to said first party, the franchise and relationship to continue in accordance with the Agreement.
"Said party of the first part is to make every effort at all times to furnish said second party with his full requirements for beer, and guarantee to furnish up to 500 cases per day, if needed, and said second party is to use every effort to purchase and sell a minimum of 300 cases per week at all times."
Westerman's answer admits that he signed the pleaded guaranty, also that the contract attached to the complaint is a "correct copy" of the one referred to on the face of the note. In avoidance he pleaded that the contract "was not performed by the plaintiff in accordance with the terms thereof," in that "between May 1, 1940, and October 11, 1940," the company "did furnish, supply and deliver to plaintiff beer amounting, at the contract price, to $26,719.68, * * * one-half of which amount (or so much thereof as was necessary) plaintiff, by the terms of said contract, note and guaranty should have applied but did not apply to the payment of said note," and "that if one-half of said amount had been so applied by the plaintiff, said note would have been paid in full."
In his reply plaintiff "admits that between May 1, 1940, and October 11, 1940, the Engesser Brewing Company did furnish, supply and deliver to plaintiff beer amounting, at the contract price, to $26,719.68 * * * and in that connection he avers that said Brewing Company did not furnish and supply said beer on the basis set out in said contract, and refused to supply said beer on the basis set out in said contract, and it was stipulated and agreed between said Brewing Company and plaintiff on, to-wit, May 1, 1940 that said Brewing Company could not furnish and supply beer on the basis set out in the quoted portion of said contract, and plaintiff admits that he paid said Brewing Company in full for the beer so furnished and delivered." (Italics supplied.)
Defendant's position is that upon the pleadings there are no fact issues to be determined; that the only issue is one of law, as to whether he, as guarantor, was released by plaintiff's and the company's mutual stipulation set forth in the reply. He emphasizes that, since there is no allegation that he was a party to the stipulation and agreement made May 1, 1940, and since this change amounted to a new arrangement between the original parties as to the time and manner of payment of the debt, which is the only thing to which his contract of guaranty applies, therefore he has, as a matter of law, "been discharged of all liability upon said note and guarantee."
1. A guaranty has been defined as "a collateral contract to answer for the payment of a debt or the performance of a duty in case of the default of another who is primarily liable to pay or perform the same." 3 Dunnell, Dig. & Supp. § 4068.
2. The distinction between the undertaking of a surety and that of a guarantor is that the surety's obligation is a primary one, while that of the guarantor is collateral and secondary. Id. § 4069. The distinction stated is generally accepted by the courts, here and elsewhere, as will be seen by reference to 24 Am.Jur., Guaranty, pp. 874, 875, §§ 3 and 4. The author under § 4 states the rule in this form:
"The debtor is not a party to the guaranty, and the guarantor is not a party to the principal obligation. The undertaking of the former is independent of the promise of the latter; and the responsibilities which are imposed by the contract of guaranty differ from those which...
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