United States Printing & Lithograph Co. v. Powers

• Decision Date: 07 March 1922
• Parties: UNITED STATES PRINTING & LITHOGRAPH CO. v. POWERS et al.
• Court: New York Court of Appeals Court of Appeals

233 N.Y. 143

135 N.E. 225

UNITED STATES PRINTING & LITHOGRAPH CO.

v.POWERS et al.

Court of Appeals of New York.

March 7, 1922.

Action by the United States Printing & Lithograph Company against Patrick A. Powers, impleaded with Harry M. Warner and anothers. From judgment of the Appellate Division (196 App. Div. 934,187 N. Y. Supp. 957) unanimously affirming a judgment of the Trial Term entered upon a verdict, defendant Powers appeals.

Judgment reversed, and new trial granted.

See, also, 196 App. Div. 967,188 N. Y. Supp. 955.

Cardozo, J., dissenting in part.

Appeal from Supreme Court, Appellate Division, First Department.

Samuel F. Moran, John D. Monroe, and Carl A. Rood, all of New York City, for appellant.

Manfred W. Ehrich, Howland O. Walter, and Lucille C. Bunzl, all of New York City, for plaintiff respondent.

Abel Cary Thomas and Avron M. Jacobs, both of New York City, for defendants respondents.

HISCOCK, C. J.

On, prior, and subsequent to August 26, 1913, the plaintiff was a corporation engaged in the business, amongst other things, of printing posters and lithographs for those engaged in the motion picture business; the Warners Features, Incorporated, was a conporation engaged in producing motion picture films; and the individual defendants were officers of and interested in said latter corporation. This corporation was a reorganized successor to another corporation which had become indebted in the amount of several thousands of dollars to plaintiff for work and materials and it had assumed such indebtedness. Prior to the date in question, there had been negotiations between the two corporations looking to a contract under which the plaintiff should print and produce such posters as might be needed by the Warners Features, Incorporated, in its business, and on said date three written contracts were executed by and between them. One was an agreement whereby the plaintiff was to supply to the Warners Features, Incorporated, and said latter corporation was to purchase from the plaintiff at prices and on terms therein set forth all the posters needed during a period of three years, and a second one in effect made the first one optional with the plaintiff giving it the right to furnish or not as it saw fit said posters; a third one was the contract which has become the subject of this litigation. It provided for a loan of $25,000 by plaintiff to the Features Corporation to be paid as therein specified, for certain protection to plaintiff in the way of representation on the board of directors of said latter corporation, inspection of its books, an option to purchase stock, subordination to its claims of any claims which the individual defendants might have against the Features Corporation, and then contained a clause of guaranty of indebtedness by the individual defendants which has become the subject of construction and controversy in this litigation. Said clause read as follows;

‘The parties of the third, fourth and fifth parts (Powers and the two Warners) guarantee the performance of this contract by the Film Company (Warners Features, Incorporated) and the payment of any and all of its indebtedness to the Lithograph Company (plaintiff) granting to the Lithograph Company the privilege of extending such indebtedness from time to time as it may see fit and taking or surrendering security therefor.’

Under the contracts thus executed, the plaintiff loaned to the Features Company the sum of $25,000 as provided, and in addition manufactured and sold to it posters and materials of the value of many thousands of dollars and whereof the purchase price had not been paid at the time the vendee finally defaulted on its obligations and went into bankruptcy. Thereafter this action was brought by plaintiff seeking to recover from defendants under their guaranty not only the indebtedness existing and assumed by the Features Company at the time the agreements mentioned were executed and the sum of $25,000 loaned as therein provided, but also the indebtedness for posters thereafter supplied under and in accordance with the terms of the contract at that time made. The defendants admitting that their guaranty covered said sum of $25,000 and, as we understand the position of appellant at the present time, also the pre-existing indebtedness assumed by the Features Company, denied that said guaranty covered the indebtedness due to the plaintiff for posters and materials supplied after the instrument of guaranty was executed.

Under these circumstances, three issues were contested or involved upon the trial. These were the ones: First, whether the guaranty was simply a joint one or was several as well as joint; second, whether it covered the indebtedness arising for materials sold by the plaintiff to the Features Company after it was executed; and third, whether an agreement had been made by plaintiff releasing the Warners from liability on this guaranty either with or without the consent of the appellant, Powers.

The jury found a verdict against all of the guarantors for the full amount of the indebtedness claimed by plaintiff, thus including the disputed items for materials sold after the guaranty was executed and necessarily thereby finding that the Warners had not been released. A course of procedure was then adopted by the trial court and by the plaintiff which has given rise to additional questions presented upon this appeal. The court set aside the verdict against the Warners on the ground that it was against the weight of evidence upon the issue of their alleged release, and granted a new trial generally as to them, but refused to set it aside as against the appellant, and plaintiff's counsel thereupon entered a judgment for the full amount of the verdict against the appellant, Powers. The result is that it is now claimed by the latter, first, that the verdict was upon a joint cause of action and could not be set aside as to the Warners and sustained as to him, and, second, that the act of the plaintiff in entering judgment upon the verdict against him alone has merged the entire cause of action on the guaranty, has released the Warners, has destroyed appellant's right to contribution against them, and, therefore, finally, placed plaintiff where it can only have judgment against him for his one-third share of the indebtedness covered by the guaranty. We pass to the consideration of these questions.

[1] In reaching an interpretation of the meaning of the instrument of guaranty and a determination of the question whether it did cover indebtedness arising after it was executed, the trial court held that the language of the agreement was ambiguous, that it was therefore proper to permit evidence of the acts of the parties before, after, and at the time said agreement was executed for the purpose of showing their intent and the sense in which the words were used and then permitting the jury to find the meaning of the words which were employed. The action of the trial justice in taking this course was sufficiently challenged by objections and exceptions which have survived so that the correctness of his course becomes a subject for consideration upon this appeal. We think that he pursued a proper course. We do not think that, when the defendants guaranteed ‘the performance of this contract (the one in question) by the Film Company and the payment of any and all of its indebtedness to the Lithograph Company (plaintiff),’ it can be said as matter of law that this language limited the guaranty to the sum of $25,000 then agreed to be loaned and did not include indebtedness thereafter arising for materials furnished by plaintiff. The contract of which defendants guaranteed performance did provide for the loan by and a repayment to plaintiff of this sum of $25,000. But it also provided for certain protection in the way of directors and inspection of the books ‘so long as the Film Company shall be indebted to the Lithograph Company in any amount,’ and ocntemporaneously with the execution of this instrument there had been executed the other one already referred to which contemplated the manufacture and sale of posters by plaintiff to the Features Company. It seems to have been conceded by defendants that this guaranty covered a pre-existing indebtedness assumed by the latter company, although it was not mentioned in the instrument of guaranty. Under all of these circumstances, we believe that there was enough of ambiguity and uncertainty in the meaing of the words ‘payment of any and all’ indebtedness so that it was proper to permit the introduction of parol evidence explanatory of the intent and meaning with which those words were used and then to allow the jury to find their meaning. Utica City Nat. Bank v. Gunn, 222 N. Y. 204, 118 N. E. 607;Lamb v. Norcross Bros. Co., 208 N. Y. 427, 102 N. E. 564.

[2] We think that the guaranty executed by the defendants was joint only and not joint and several. It is a general rule, so well established as not to require extended discussion, that promises by two or more persons create a joint duty unless the contrary is stated. It is a general presumption of law that, when two or more persons undertake an obligation, they undertake jointly; words of severance being necessary to overcome this primary presumption. The fact that the interests of the obligors in the contract are diverse does not prevent the duty from being joint. Williston on Law of Contracts, vol. 1, § 322; Parsons on Contracts, vol. 1 (9th Ed.) 11.

Starting out, therefore, with the presumption that when the defendants executed this contract of guaranty they intended simply a joint obligation unless words were used indicating a contrary intention, we fail to find any words fairly indicating such intention. It is true, as urged by plaintiff's counsel, that the guarantors are separately described as parties respectively of the third, fourth, and fifth parts, and that there is acknowledgment of the receipt of one dollar...