Sedalia, W. & S. R. Co. v. Smith

• Decision Date: 24 October 1887
• Parties: THE SEDALIA, WARSAW & SOUTHERN RAILWAY COMPANY, Appellant, v. MARTHA E. SMITH, Respondent.
• Court: Kansas Court of Appeals

27 Mo.App. 371

THE SEDALIA, WARSAW & SOUTHERN RAILWAY COMPANY, Appellant, v. MARTHA E. SMITH, Respondent.

Court of Appeals of Missouri, Kansas City.

October 24, 1887

APPEAL from Pettis Circuit Court, HON. JOHN P. STROTHER, Judge.

Affirmed.

Statement of case by the court.

This was an action on a written contract against the defendant as one of sixty-two parties who had executed it. The contract was as follows:

" Sedalia, Mo., September 29, 1879.

We, the undersigned, hereby guarantee to the Sedalia, Warsaw &amp Southern Railway Company that the sum of fifty-five thousand dollars shall be paid to said company out of the subscriptions to the stock of said company, made in Pettis county, and agree that we will severally pay to said company our pro-rata part of any deficit that may be found to exist in such payments of said subscription; provided that no subscriber hereto shall in any event be liable hereon for a greater sum than one hundred dollars ($100.00); and provided further, that this obligation shall not be enforced until ninety days after the railroad of said company is built and in operation to the southern line of Pettis county, at which time the amount of the deficiency shall be ascertained and then be divided pro rata among and paid by the subscribers hereto."

Most of the so-called subscriptions to the capital stock of the plaintiff were, in an action brought by plaintiff against one of the so-called subscribers to recover his subscription held to be invalid, and the subscriber was held to be not liable on such subscription. Railroad v. Wilkerson, 83 Mo. 235.

This case was tried by the court sitting as a jury. The court clearly found in accordance with the seventh declaration of law given for the defendant. That declaration of law was as follows:

" 7. Although the court may find under the other instructions that there was a sufficient consideration for said contract of guarantee, yet the court declares the law to be that none of the alleged subscriptions to the capital stock of the plaintiff were binding on the parties making such subscriptions except those made on the articles of association, and the only liability of the defendant would be 1-62 of $1,000.00 (that being the amount admitted to be unpaid on the articles of association), with six per cent. interest from the commencement of this suit."

As the court's finding was made in accordance with the law as declared in said declaration of law, the only question for our determination is the correctness of that declaration of law. We need not notice the other questions presented in the record.

W. S. SHIRK and DRAFFEN & WILLIAMS, for the appellant.

I. It is immaterial to this case whether the original subscriptions to the capital stock of the plaintiff corporation were valid or invalid. The guaranty sued upon was a separate and independent undertaking. It is no defence that the subscriptions guaranteed were not obligatory upon the parties who signed them; the defendant had the right to guarantee their payment notwithstanding. The court, therefore, erred in giving defendant's instruction on this point and refusing that asked by plaintiff. Jones v. Thayer, 12 Gray [Mass.] 443; Veasy v. Willis, 6 Gray [Mass.] 90; Mason v. Nichols, 22 Wis. 360; Remsen v. Graves, 41 N.Y. 471; Mann v. Eckford's Executors, 15 Wendell [N. Y.] 502; McLaughlin v. McGovern, 34 Barbour [N. Y.] 208; Kimball v. Newell, 7 Hill [N. Y.] 117.

II. The court erred in giving defendant's second instruction. The fact that plaintiff company was organized to build the railroad at the time the guaranty sued upon was made, or even that, in the absence of such agreement, the road would have been built, will not defeat an action upon defendant's promise upon the ground that it was without consideration. Stevens v. Corbitt, 33 Mich. 458.

III. If there was a sufficient consideration for the guaranty as an independent agreement between its signers and the plaintiff company, then the only remaining defence is that the defendant's agent was induced to sign the agreement through the fraud or false representations of the plaintiff or its agents. No actual fraud is claimed. No representations of any kind were, in fact, made, as is testified by Mr. Wilkerson. The paper was presented to him by J. H. Bothwell, Esq. The record does not show that he had any connection with, or was acting for, the company, and we understand that as a matter of fact he was not. It is not pretended that any information was withheld from Mr. Wilkerson that if he had known would have caused him to act differently. He says he was as anxious for the road as any one, and frankly states, that when he signed the paper, he expected his principal would have to pay the amount specified therein. The fraud, upon which it is sought to avoid this contract, is simply that the plaintiff company failed to disclose the date of its incorporation, when no such information was asked, and in the absence of any evidence that the plaintiff's officers or agents knew that the defendant or her agent was in ignorance as to the matter, and was relying upon it for advice in that behalf, and that, too, when the date of its incorporation was a matter of public record, surely there was no fraud, actual or constructive, in this that would avoid the contract.

IV. In the case at bar the plaintiff was induced to undertake the building of the railroad by the guaranty sued upon. The defendant, a large property owner of the city of Sedalia, believed that it would be of great benefit to said city and would enhance the value of her property. The road was built and she has derived all the advantages arising from its construction. Her agent says that he expected, when she signed it, that she would have it to pay. She was willing to do it to secure the road. Upon the faith of her contract the plaintiff company has done all that was required of it. The defendant has reaped all the advantages that resulted from the plaintiff's performance of its agreement. Instead of its operating as a fraud upon defendant to compel payment of the sum due, it would be an injustice upon plaintiff, after having complied with its agreement, for the defendant to escape hers upon the objection urged in this case.

V. The defendant's ninth instruction was erroneous. (a ) An instruction should not be given in the absence of evidence upon which to predicate it. (b ) There was no evidence that any officer or agent of the plaintiff corporation solicited the defendant, or her agent, to sign said guaranty. Upon the contrary, the evidence shows that the soliciting was done by the citizens of Sedalia, under the belief that this was essential to secure the road, which was regarded as of great importance to the property owners of said city. (c ) The instruction omitted an important element. In the absence of any request for information about the date of the incorporation of the plaintiff (which was a matter of public record, and could have been easily ascertained), certainly the defendant cannot avoid her contract for the failure of plaintiff to give such information unsought, unless its officers and agents at least knew that defendant was ignorant as to the matter, and was relying upon plaintiff. Gillett v. Bank, 56 Mo. 306; Morrison's Administrator v. Ins. Co., 18 Mo. 262; 2 Pomeroy's Eq. Jur., sect. 902.

VI. The only way in which this court can determine the theory of the trial court is by an examination of the instructions given and refused. If the action of the court in this particular was erroneous, it is immaterial that the trial was by the court without a jury. Lee v. Porter, 18 Mo.App. 377. The defendant's agent, according to his own testimony, expected to have to pay the amount of the guaranty. The road was built in reliance upon the agreement, and defendant has had the benefit of a performance by plaintiff, and should not now be permitted to escape liability upon such inequitable ground.

JOHN MONTGOMERY, JR., and B. G. WILKERSON, for the respondent.

I. None of the alleged subscriptions were binding on the parties making such subscriptions, except those made on the articles of association, and the court so properly declared the law in instruction number seven, given at the instance of the defendant. Rev. Stat., sect. 764; Railroad v. Wilkerson, 83 Mo. 235.

II. The contract sued on is a guaranty; that is a collateral undertaking, and not a separate and independent undertaking as appellant's counsel contend. " A guaranty is an undertaking...