Towle v. Maxwell Motor Sales Corporation

• Decision Date: 01 May 1928
• Docket Number: No. 7835.,7835.
• Parties: TOWLE v. MAXWELL MOTOR SALES CORPORATION.
• Court: U.S. Court of Appeals — Eighth Circuit

26 F.2d 209 (1928)

TOWLE v. MAXWELL MOTOR SALES CORPORATION.

No. 7835.

Circuit Court of Appeals, Eighth Circuit.

May 1, 1928.

Glenn N. Venrick, of Omaha, Neb. (Francis H. Mayo, of Omaha, Neb., on the brief), for plaintiff in error.

Harold R. Smith, of Detroit, Mich. (David A. Fitch, of Omaha, Neb., and Harry C. Bulkley, of Detroit, Mich., on the brief), for defendant in error.

Before WALTER H. SANBORN and BOOTH, Circuit Judges, and MUNGER, District Judge.

MUNGER, District Judge.

The plaintiff in error brought suit to recover damages because of alleged false representations made by the agent of defendant in error. The case was tried to a jury, but at the close of the plaintiff's evidence the court directed a verdict in favor of the defendant. The correctness of that ruling is the only question presented by this record. Briefly stated, the plaintiff claimed that he was induced to guarantee the debts and running expenses of a firm (and its successor) which dealt in automobiles, because he believed the statements made by the defendant's agent, and, as the result of a long conduct of this business, the plaintiff was compelled to pay the losses of these dealers. The plaintiff, an experienced business man, was one of the owners of a business building in Omaha, Neb. This building was occupied by two tenants who were engaged in the sale of automobiles. For some time they had been in arrears in the payment of rents for the building. The plaintiff was desirous of a continued occupancy of the building by tenants who would agree to pay the current rental of $1,200 per month. The tenants learned that they might secure an agency for the sale of Maxwell and Chalmers automobiles, if they could furnish acceptable guarantors for their purchases. After a conversation with Mr. Page, an agent of the defendant, the plaintiff agreed to furnish the money and credit needed to conduct the agency. For that purpose he signed a continuing guaranty of any debts that the agents should incur. One of the terms of the guaranty contract was that the guarantor could at any time terminate his liability for obligations of the partnership executed thereafter, by giving notice. The two tenants and a third person thereupon entered into a partnership to conduct the agency, and made a contract with the defendant, dated July 12, 1922, by which it acquired a right to sell at Omaha, Neb., and adjacent territory such Maxwell automobiles as it should order until July 1, 1923. A rate of discount from current list prices was agreed upon. This contract provided that either party could cancel it upon 15 days' notice. At the same time the partnership entered into a similar contract with the Chalmers Motor Car Company for the sale of Chalmers automobiles. The partnership bought and sold a number of these automobiles, and furnished repairs and mechanical services. It continued business until December 15, 1922. One of the partners then withdrew from the firm, and a new partner was added. The loss from the conduct of the business to that time was $2,036.37. The plaintiff, on December 16, 1922, signed an agreement guaranteeing the obligations of the new partnership on the same terms as in the former guaranty. The new partnership leased additional room, and it added an agency for the sale of the Jordan automobile, which continued until July, 1923. The new partnership continued to lose money, but on July 3, 1923, it renewed the contracts with the defendant and with the Chalmers Motor Corporation, whereby it continued its agency for another year. The losses continued and increased each month. On July 1, 1924, a corporation was formed to succeed to the partnership, and it took an assignment from the partnership of the agency contracts. The plaintiff gave promissory notes for the amount of the partnership debts to that time. The corporation continued the business at a loss, and in August, 1924, it made a new contract with the defendant to continue to sell the automobiles made by it. Some time later the agency was discontinued.

In the trial of this case, it was the theory of the plaintiff that the defendant was liable for the amount of all net losses the partnership suffered in conducting the business during 1922 and 1923 to the extent that the plaintiff had guaranteed such losses and had paid or had become obligated to pay them, because of false representations made to him by the defendant's agent, on which he had relied in signing the guaranties.

Of the misrepresentations relied upon, the first is that the defendant's agent, on July 7 or 8, 1922, stated that the company which held the agency at Omaha for the Maxwell and Chalmers automobiles was doing a good and profitable business. In attempted disproof of this statement, an auditor of that company testified that the company's business had been conducted at a loss from December, 1921, to October, 1922. The representation relied upon fixed no specific time to which it applied, but a reasonable interpretation of the words used is that it applied to the period recently elapsed before the conversation. The proofs in the record seem to indicate that the spring and summer months are the most favorable for the sale of automobiles, and that a business of that nature, which...