Dr. Koch Medical Tea Co. v. Poitras ( 1916 )

Bruce, J.

(after stating the facts as above). This opinion is written after a rehearing. The main question which is presented revolves .around the following instruction to the jury:

“There has been some testimony offered and received in this lawsuit with regard to representations made by Mr. Duroeher and Mr. Poitras to Mr. Marion and Mr. Tetrault with reference to whether or not this was simply a recommendation rather than a guaranty of payment. I ■say to you now you will pay no attention to that evidence. I am convinced now I should not have admitted evidence on that subject, because neither Mr. Poitras nor Mr. Duroeher, under the evidence in this case, were agents of the plaintiff in any respect in the getting of this agreement, and it doesn’t make any difference what kind of representations they made to these men in order to get them to sign it, — that the plain-. tiff, not knowing anything about the matter, would not be bound by that at all; and the plaintiff having acted upon that agreement as signed in the form that it is in without any knowledge of any representations or misrepresentations made by Mr. Durocher or Mr. Poitras, if they did make any such, is an innocent party in this mátter, and is not bound by any such representations at all, so you will pay no attention to those matters.”

We think that, under the circumstances of the case, the above instruction was incorrect, and that a new trial should be ordered.

The learned trial judge, no doubt, proceeded under and sought to apply the general rule of law that “fraud practised by the principal upon the surety, ... to which the creditor or his agent was in ho sense a party, will not as a rule, affect the liability of the surety to the creditor.” Spencer, Suretyship, § 55; note to 39 Ann. Cas. 501; note to 21 L.E.A. 409.

The case, however, which is before us is a peculiar one. At least the contract which is before us is peculiar. It bears upon its face the-evidence of being cunningly drawn, and of an attempt on the part of a foreign corporation to obtain the services of agents, but at the same time to avoid responsibility for their acts.

Instead of the usual contract of guaranty which, under the earlier cases.at any rate, requires a notice of acceptance to be binding (see W. T. Rawleigh Medical Co. v. Laursen, 25 N. D. 63, 141 N. W. 64, and note-in 48 L.R.A.(N.S.) 199), it contained a direct contract between the-defendants Marion and Tetrault and the medical company. This contract recited a consideration of $1 as passing between the said guarantors and the said company.

At the bottom of the document, as a whole, was a paragraph or provision by -which some parties were to recommend the principal and the guarantors, and which was so closely connected with the guaranty itself' that one might be easily misled into believing that when he was signing-the one he was signing the other.

This contract, according to plaintiff’s own testimony, is put into the-hands of the would-be purchaser or new agent (Poitras), “with instructions about getting recommendations and sureties, and if he does that satisfactorily it is accepted.”

Poitras then was acting in a dual capacity. He was not merely getting a guaranty for the proper performance of his own contract in regard to the purchase of the medicine, but for the payment of a past debt of Durocher’s, which he had assumed and which had no real connection with that transaction, and which itself was several years old. He was, according to the terms of the contract of guaranty, paying into the hands of the sureties and for and on behalf of the plaintiff medical company, the beneficiary, the sum of $1. He was making a direct contract between them and that company. He was not even engaged in transmitting an offer from the sureties to the company which had to be accepted in order .to become binding, but in making a final and consummated contract. This, indeed, we are justified in believing was the very purpose of the wording of this peculiar instrument. It was to avoid any possible defense that there was merely an offer of suretyship and which had not been accepted. See discussion in W. T. Rawleigh Medical Co. v. Laursen, supra.

Not only is this so, bnt the agency was ratified by the company. By shipping the goods and suing on the contract and guaranty, it'ratified the payment of the dollar and the making of the direct contract.

Such being the case, the plaintiff was bound by and responsible for the fraudulent acts of Poitras and Durocher. If the defendants were induced to sign the guaranty on account of the false representation that it was merely a testimonial as to the honesty of Poitras, the contract was void. Note in 21 L.H.A. 410.

And this even though the defendants did not read it or have it read to them before signing. One of them did not have his glasses with him, so could not read. The other could not read English.

It was, at the most, for the jury to say whether they were negligent in not having the contract read to them, and whether the plaintiff suffered any detriment by that negligence.

Even if it had been read, the contract was so drawn, and the position of the clauses such, that they might easily have signed the guaranty, thinking that they were signing the recommendation clause only.

The plaintiff is hardly in an equitable position in this case, and it is on this theory only that the failure by an illiterate man to have a contract read to him precludes a defense. It is on the equitable theory that “where one of two innocent parties must suffer, he whose act or negligence first makes the loss possible must bear the burden.” Here we have .a paper cunningly drawn, which contains a contract, a guaranty, and a recommendation, all so closely printed together that one might easily sign the one thinking that it was the other. Here, if the defendants’ testimony is to be believed, the agent of the company tells the signers that the instrument is merely a recommendation. The defendants sign an original agreement of guaranty and a direct contract between them and the beneficiary. The consideration of this, among other things, is the sum of $1 given to them by the beneficiary. The agreement is made then, not for the accommodation of the principal only, but for that of the beneficiary; for he pays for it.

It is not a case where one is called upon to sign an instrument of a •certain nature, and is sought to be held to a knowledge of all that it may reasonably contain, and that is germane to its subject. It is a case rather where one, by fraud and misrepresentation of the nature of the instrument, induces another to sign a totally different instrument than that which was contemplated by him. In such a case the fraud can •certainly be pleaded in an action between the original parties to the contract. Schuylkill County v. Copley, 67 Pa. 386, 5 Am. Rep. 441.

We are not unaware of the case of Saginaw Medicine Co. v. Batey, 179 Mich. 651, 146 N. W. 329. We are satisfied, however, that in that •ease the court failed to consider the reason for an effect of the consideration of $1 for the guaranty, and the fact that, if a binding contract is made, which shall bind the guarantor without further acceptance hy the medicine company, someone must act for that company in the making •of the contract, and that someone can only be the person who pays the money and obtains the guaranty.

But it is claimed that the defendant is precluded from asserting ' agency on the part of Poitras and Durocher on account of the fact that the theory of the case which was adopted by the trial court, and which was that such agency was not proved and was necessary for the defense, was acquiesced in by him.

The court, however, failed to realize that the agency had been proved, .•and that by the plaintiffs themselves, and the position of counsel was forced upon him by the erroneous rulings of the court.

It is true that, iu seeking to have his evidence admitted, he largely accepted the theory of the court, but he really had no other option. lie had to admit that, as far as he was concerned, independent proof of ■agency was not possible, as Poitras was absent from the state. Since the court had ruled that proof of agency was necessary on his part to the introduction of evidence of the facts surrounding the signing of the ■document, he was driven to the expedient of seeking to introduce it on another theory. The evidence, at any rate, was afterwards admitted, and agency having been proved, it was error for the court to instruct the jury not to consider it.

The judgment of the District Court is reversed and a new trial is -ordered.