Vilter Mfg. Co. v. Loring
| Decision Date | 21 June 1943 |
| Docket Number | No. 8254.,8254. |
| Citation | 136 F.2d 466 |
| Parties | VILTER MFG. CO. v. LORING et al. |
| Court | U.S. Court of Appeals — Seventh Circuit |
David Freedkin, of Chicago, Ill., and Maurice Weinstein, of Milwaukee, Wis., for appellant.
Richard A. Beck, Preston Boyden, and Cassius M. Doty, all of Chicago, Ill. (Taylor, Miller, Busch & Boyden, of Chicago, Ill., of counsel), for appellees Cruttenden and Johnston.
Abe R. Peterson, Owen Rall, and J. Hayden MacDonald, all of Chicago, Ill. (Eckert & Peterson, of Chicago, Ill., of counsel), for appellees Loring and Gilbert.
Before SPARKS, KERNER, and MINTON, Circuit Judges.
This action involves the construction of a written contract between the Molly-O Bottling Company, an Illinois corporation, and six individuals, including the four appellees. The action was brought by appellant against all the parties to the contract. The Bottling Company and one individual defendant were defaulted; another defendant was not served and did not appear.
Appellant did not sign the contract and was not specifically named therein, but sued as a third party beneficiary thereunder, as a creditor of the Bottling Company. Appellees filed motions to dismiss the complaint for the reason that the appellant was neither a party to the contract nor a third party beneficiary thereunder. The court sustained the motions and dismissed the complaint, and from these rulings this appeal is prosecuted.
The contract is an exhibit to the complaint and substantially is as follows:
In consideration of 5,000 shares of the capital stock of the Bottling Company, the receipt of which is acknowledged, the six individual parties to the contract, called the guarantors, unconditionally guaranteed to the Company, its successors and assigns as follows:
1. That they will lend to the Company, or cause to be lent to it upon their personal endorsements or personal guarantees, the sum of $35,000 when the same shall be needed by the Company for use in paying for any and all needed manufacturing equipment, such loan or loans to be made on reasonable and customary terms and to be repaid in monthly payments extending over a period of two years.
2. That, at any time after the making of such loan, or any part of it, when payment by the Company or any due portion of such loan or any payment of any kind due to anybody on equipment, which shall have been purchased, contracted for or obligated for within one year from date hereof, would cause the Company's balance of cash on hand in the bank to fall below $5,000 after payment of any and all past due obligations, then the guarantors guarantee to immediately make such payment or payments in the debtor's stead on behalf of the Company and to accept an equal amount of the Company's authorized and unissued capital stock at par in exchange for any and all such monies so disbursed by them.
3. The guaranty was made by the guarantors severally and not jointly and was limited to the respective percentages of the whole as indicated by the percentage figures set opposite their respective names. (Then follow the names and percentages of liability.)
4. It is further agreed that this agreement of guaranty may be used by the Company as a means of insuring the Company's financial stability in connection with that Company's relations with Molly-O Corporation and Grindrod Process Corporation. (The latter two corporations are distinct entities from the Bottling Company.)
5. The guarantors expressly waive notice of the acceptance of this guaranty, presentment for payment, notice of presentment and of nonpayment, protest and notice of protest, and consent that the time or times for the payment of any and all of the obligations of the Company covered by this guaranty may be determined between the Company and its creditors without notice to or further consent from the guarantors.
6. It is further agreed that applications for insurance policies on the lives of the guarantors shall be made covering the term of this guaranty, naming the Company as beneficiary in each case in the respective amounts as follows: (The names of the individuals are set forth and the respective amounts of insurance for which applications shall be made) and that the cost of such insurance shall be borne by the Company. In the event of death of any guarantor or guarantors during the term of this guaranty, receipt of the death benefit or benefits from such insurance shall relieve the estate of such guarantor or guarantors of further liability hereunder. Signed by the guarantors on March 25, 1941.
The question presented for decision is whether the complaint alleges a cause of action against appellees. Its theory is that the instrument was signed by them to insure the extension of credit generally to the Bottling Company; that the instrument was submitted to appellant for that purpose, and in reliance thereon appellant sold machinery on credit to the Bottling Company for which it was never paid. It is elemental that all well-pleaded facts are admitted, but alleged facts which are inconsistent with the basic contract are not well pleaded and of course are not admitted. Cohen v. United States, 8 Cir., 129 F.2d 733.
One entering into a contract of guaranty may select his own conditions on which he will become liable, and before there can be a liability upon such contract there must be a violation by the guarantor of some one or more of those conditions. LeRoy State Bank v. J. Keenan's Bank, 337 Ill. 173, 169 N.E. 1. The liability of a guarantor must be strictly construed in his favor, Phoenix Mfg. Co. v. Bogardus, 231 Ill. 528, 83 N.E. 284, and he must be given the benefit of all reasonable doubts with respect thereto. Bruner v. Wolford's Estate, 356 Ill. 514, 191 N.E. 70.
One may be a direct beneficiary under a contract of guaranty, or he may be a mere incidental beneficiary. If he belongs to the former class he may recover, but if to the latter he may not. A contract made by one person to another, from the...
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