W. R. Grace & Co. v. Taylor

• Decision Date: 29 October 1965
• Citation: 398 S.W.2d 81,55 Tenn.App. 227
• Parties: W. R. GRACE & COMPANY, Appellant, v. Walter TAYLOR et al., Appellees.
• Court: Tennessee Court of Appeals

Page 81

398 S.W.2d 81

55 Tenn.App. 227

W. R. GRACE & COMPANY, Appellant, v. Walter TAYLOR et al., Appellees.

Court of Appeals of Tennessee, Middle Section at Nashville.

Oct. 29, 1965.

Certiorari Denied by Supreme Court Jan. 17, 1966.

Lewis D. Pride, Nashville, for appellant.

Solon Fitzpatrick, Clint Beasley, Carthage, for appellees.

HUMPHREYS, Judge.

W. R. Grace & Company sued Walter Taylor and Woodrow Wilburn, alleging that through one of its divisions, Davison Chemical Company, it entered into a contract of limited agency with the Smith County Farmers Cooperative of Carthage, Tennessee, whereby the Cooperative agreed to take complainant's fertilizer on consignment and sell and remit for it. That on the back of the contract, a full and absolute guaranty of due performance was given to complainant by defendants. That Smith County Farmers Cooperative was indebted to complainant in the amount of $2,251.19. The prayer was for a decree for this amount.

Appellees pleaded res judicata on the ground a bill on the same cause of action had previously been filed by complainant in November of 1961, but had been dismissed by decree of September 3, 1962, for want of prosecution.

The Chancellor overruled the plea of res judicata, holding there had been no trial upon the merits, and that the order of dismissal, even though it did not recite it was without prejudice, was not res judicata.

The appellees then answered the petition. Their defenses, insofar as the same are relevant to this appeal were, that the appellant had abandoned the contract of guaranty, and that the contract between Smith County Farmers Cooperative and appellant required that notice be given in writing that the contract had been accepted and that appellees were never notified to this effect.

The Chancellor first dismissed the suit on the ground notice of acceptance of the guaranty contract should have been given appellees by appellant; that failure to give this notice was a good defense. However, upon a petition to rehear, the Chancellor reconsidered and dismissed the suit on the ground of abandonment.

W. R. Grace & Company has prayed and been granted a broad appeal, and assigns as error the dismissal of its suit on the ground of abandonment, and Taylor and Wilburn have assigned as error the refusal of the Chancellor to sustain their defense of lack of notice, and their plea of res judicata.

We have concluded W. R. Grace & Company's assignment with respect to abandonment is good, and that the assignments on the res judicata and notice issues are not.

The res judicata assignment is based on the fact that W. R. Grace & Company in October 1961, prior to the filing of the present suit on October 24, 1962, filed another bill in the same court against the defendants for the same matter in demand and to the same effect, and for like relief. The plea recited, further, that on the third day of September, 1962, the court made a decree in the case as follows:

'This case came on this third day of September, 1962, before the Honorable A. F. Officer, Chancellor, the defendants announced ready for trial, the complainant failing to appear, they were duly called out and failed to appear and prosecute the suit.

'It is therefore, ordered, adjudged and decreed by the Court that complainants' suit be dismissed for want of prosecution. Complainants and its sureties will pay the costs of this cause for which let execution issue.'

The plea relies on this decree as one on the merits and as res judicata of the present suit.

Appellees contend on authority of Long v. Kirby-Smith, 40 Tenn.App. 446, 292 S.W.2d 216, and Parkes v. Clift, 77 Tenn. 524, that since this decree contained no recitation that it was 'without prejudice', it necessarily operated as res judicata. While, appellant contends on authority of Mabry v. Churchwell, 69 Tenn. 416; First National Bank of Lenoir City v. Ivie, 41 Tenn.App. 187, 293 S.W.2d 34; Bankhead v. Alloway, 1 Tenn.Ch.R. 207; Harris & Cole Bros. v. Columbia Water & Light Co., 114 Tenn. 328, 85 S.W. 897; Donalson v. Nealis, 108 Tenn. 638, 69 S.W. 732, and Beard v. Beard, 10 Tenn.App. 52, that the original English rule with respect to the effect of a decree of dismissal containing no stipulation against prejudice, (which was that such a decree was with prejudice) has not been the rule in Tennessee for many years, at least since Mabry v. Churchwell. In the Mabry case we find the following statement:

'The other question is, that a bill similar to this had been filed before the present one was prepared for hearing, and the case taken up and probably being heard, when complainants voluntarily dismissed the same, which was decreed by the Chancellor on their motion. It seems formerly in England this decree would have been final as res adjudicata, unless the bill had been dismissed without prejudice. But such has not been the rule in Tennessee. 'It is only a decree on the merits,' says this court in Hurst v. Means, 2 Sneed , 548, 'that is a bar to a subsequent suit." 69 Tenn. 424.

But, regardless of what may have been said in prior cases, we think this question is now ruled by Flournoy v. Brown, Tenn., 391 S.W.2d 617, and under this opinion the assignment of error is not good.

We have considered the differences between the Flournoy case and the one we have under consideration, but we end up of the opinion that Flournoy simply recognizes and applies what practically every lawyer thought, and still thinks is the rule, that where it appears on the face of a decree of dismissal that it was not upon the merits, as in this case where it appears from the face of the decree the dismissal was based on want of prosecution, that a suit on the same grounds may be reinstituted at anytime within one year, and that such a decree is not res judicata. As pointed out in the Flournoy case, this result is in keeping with and required by T.C.A. 28-106.

We are of opinion the assignment of error with respect to notice is not good, and must be overruled on authority of Hassell-Hughes Lumber Co. v. Jackson, 33 Tenn.App. 477, 232 S.W.2d 325. In that case, which reviews extensively many of our cases on guaranty, and the question whether notice of acceptance of the guaranty is necessary it is held that notice of acceptance of an absolute guaranty is not necessary.

The guaranty stipulation signed by the appellees is in this language:

'In consideration of the execution of the within contract by Davison Chemical Co., Div. of W. R. Grace & Co., I hereby guarantee the due performance by Smith County Farmers Coop named as distributor, of all the covenants and agreements on his part herein contained, and the payment of all damages, costs, and expenses which by virtue of the said contract may be recovertable from him by Davison Chemical Co., Div. of W. R. Grace & Co.

Dated 1-5-55

By s/ Walter Taylor

s/ Woodrow Wilburn'

It is plain this is an absolute guaranty, so that all that was required to make it binding under the Hassell-Hughes Lumber case was that W. R. Grace & Company act on it, which it did.

Appellees are more or less prepared to agree that notice of acceptance of an absolute guaranty is not required in Tennessee. They say that even though this may be the law, the contract in this case contains an express stipulation for notice, which they never received, so there never was any contract of guaranty consummated.

This contention is based on a stipulation in the limited agency contract to this effect:

'8. CONSTRUCTION:

This contract is to be construed according to the laws of the State of Tenn. This document contains the full understanding between the parties and it is hereby certified there are no other understandings or agreements between us. This contract shall not be binding upon us until confirmed in writing by one of our duly authorized officials.'

We do not think this contention is sound. Because, the stipulation is clearly for the benefit of complainant, and is between complainant, W. R. Grace & Company and the Smith County Farmers Cooperative. To illustrate: The contract opens with these words:

'Nashville, Tenn. Plant

Date 1-5-1955

To Smith County Farmers Coop

P.O. Carthage County Smith State Tenn.

Shipping Point Carthage

Dear Sir:

We hereby agree to consign to you for sale, on commission and for our account, such quantities and brands of our fertilizer products as may be mutually agreed upon from time to time, upon the following terms and conditions:' The contract then goes on to set out the terms and conditions, and concludes with Paragraph 8, in pertinent part as follows:

'This contract shall not be binding upon us until confirmed in writing by one of our duly authorized officials.

s/ John D. Bracey

Salesman

Accepted and Agreed to this 5th day of Jan. 1955

s/ Smith County Farmers Coop

(Seal) Agent

s/ William Richardson, V. P.

Agent

________

Agent'

Very truly yours,

DAVISON CHEMICAL COMPANY

Division of W. R. Grace & Co.

Nashville, Tenn. Plant Location

Confirmed Jan. 25, 1955

by s/ C. H. Kirkham

Branch Manager.

As we interpret this contract, it consists, first, of an invitation by W. R. Grace & Company to Smith County Farmers Coop for it to offer to contract with Grace on certain terms and conditions, but the contract not to become an executed contract until this offer is accepted by Grace. This is what the language means. And, this is implicit in the transaction, as this would allow Grace & Company to pass on the credit of the proffered guarantors before the contract would become binding on it. So, this stipulation was not an agreement that the guarantors would be notified in writing of the acceptance of the guaranty.

Further evidence this stipulation was not made for the benefit of appellees is found in the guaranty. It states, 'In consideration of the execution of the within contract by Davison Chemical Company, Division of W. R. Grace & Company' the signers will be bound as guarantors. By this, appellees agreed to...