Cowles Publishing Co. v. McMann , 25 Wash. 2d 736 ( 1946 )

¹ Reported in 172 P.2d 235. The plaintiff brought this action upon the following contract of guaranty:

"UNCONDITIONAL GUARANTY — In consideration of the awarding of this Contract, the undersigned, jointly and severally, guarantee unconditionally at all times full payment of any and all sums now due or which may hereafter become due from the Distributor named in said Contract to the Cowles Publishing Company, upon the failure of said Distributor to pay promptly the full amount thereof when due, I hereby waive notice of default and agree that time of payment may be extended without notice to me or consent from me. The undersigned jointly and severally promise to pay such indebtedness, together with a collector's fee of at least Ten Dollars ($10.00), and in the event that suit is brought hereon, a reasonable attorney's fee in addition to costs allowed by statute. No bonus or discount that may be given Distributor by the Cowles Publishing Company shall in any way affect this guarantee."

The complaint alleged that, on January 9, 1944, one Richard Baker entered into a written contract with the plaintiff to distribute the Spokane Spokesman Review; that, concurrently, as part of the same transaction and in consideration of the awarding of the distributor's contract to Baker, the defendants executed and delivered to plaintiff the above guaranty; that, as of the date of the complaint, the sum of $1,899.04 was due and owing on the distributor contract by Baker to plaintiff; that demand and notice had been given.

Defendant answered by a general denial and three affirmative defenses, the first of which sounded in fraud and was abandoned before trial. The second affirmative defense alleged that the defendants McMann had not executed the guaranty as a community, while the third affirmative defense set up lack of consideration for the defendants' promises. All matters contained in the amended answer was denied by the reply, and, upon issues so joined, trial before the court and jury resulted in judgment dismissing the complaint.

The defendants McMann are Baker's mother-in-law and father-in-law. The defendants Bodine are his insurance brokers but otherwise are mere casual acquaintances.

The contract of guaranty, which was executed in duplicate, was printed below the distributorship contract upon the same sheet of paper. The only date of the execution of the instrument is to be found in the upper left-hand corner of the distributor contract. The guaranty contract contains no date. The distributor contract contains eighteen paragraphs, one of which, paragraph eleven, provides that

". . . upon breach by the Distributor of any of the terms of this Contract, the Company may immediately terminate it and give notice to the Distributor to that effect."

Plaintiff introduced the contracts into evidence, together with evidence as to their execution and delivery, and then rested on its theory that they were executed concurrently, with the result that the contract of guaranty was supported by the same consideration as the distributor contract.

In the negotiations between Baker and the plaintiff, the latter was represented by its circulation manager, D.H. Wagner. At the time he signed the contract, on January 8, 1944, Baker was told by Wagner that he would be required to post a cash bond and to obtain guarantors. This he agreed to do, although no mention was made as to the identity of the prospective guarantors. The next day was a Sunday. It was imperative that the plaintiff have its papers distributed in the area in question. On that day, Baker commenced performance of his contract. The plaintiff furnished and charged him with newspapers, set up a "draw" account and other bookkeeping records pertaining to his territory.

Baker was never out of the "red." Plaintiff's records show that at the end of the first accounting period, January 31, 1944, Baker was indebted to them in the amount of $1,107.33. At the end of the second period, February 28, 1944, the indebtedness amounted to $2,495.15. On August 17, 1944, Baker owed them $3,378.36. Exercising the right reserved to it by paragraph eleven of the distributor contract, plaintiff, on that day, terminated the contract. Thereafter, certain sums were collected by the plaintiff and credited to Baker's account, leaving a net indebtedness of $1,899.04, for which, together with interest and attorney's fees, plaintiff seeks recovery.

The defendants introduced evidence to show that, at the time the distributor contract was signed by Baker, on January 9, 1944, they had no knowledge of the guaranty, and that, in fact, it was not submitted to them for signature until, at the earliest, the latter part of February. While it is uncontested that the guaranty was executed and delivered subsequent to the execution and delivery of the distributor contract, the actual date of delivery of the guaranty to Wagner was sharply disputed, the plaintiff contending that delivery took place on January 22, 1944, while the defendants placed the date as much later.

Plaintiff's motion for a directed verdict and challenge to the sufficiency of the defendants' evidence were denied. At the close of the trial, the case was submitted to the jury, which found for the defendants. The plaintiff's motion for judgment n.o.v. or a new trial was likewise denied, whereupon it prosecuted this appeal.

Denial of its various motions is assigned as error, as well as the court's refusal to adopt appellant's requested instruction No. 3. The court's instructions Nos. 2 and 3 are also assigned as error. All of the assignments of error present the same general question, viz.: whether, although the guaranty was admittedly executed and delivered subsequent to the awarding of the principal contract, there was a consideration moving from the appellant to either the respondents or to Baker which would support the contract of guaranty.

[1] Appellant seeks to apply the following rule, laid down in 24 Am. Jur. 906, Guaranty, § 50:

"Although it may have been executed at a time subsequent to the creation of the principal obligation, a contract of guaranty is founded upon a consideration if its execution is the result of previous arrangement, the principal obligation having been induced by or created on the faith of the guaranty."

In substance, the appellant's position is that the distributor's contract was awarded upon the strength of Baker's promise to supply guarantors, and that subsequently, when the respondents signed as such, the consideration for the distributor's contract attached to and supported their promise of guaranty.

At the time the distributor contract was executed, respondents had made no offer of guaranty, either to appellant or to Baker. There is nothing in the record to show any agency between Baker and respondents by which Baker might have offered their promise of guaranty to appellant. There is no showing that it was contemplated by Wagner and Baker that these particular people would become guarantors, nor had appellant at any time previous to the execution of the guaranty by respondents, indicated to them that it contemplated them as present or prospective guarantors.

A review of the cases makes it apparent that the rule contended for by appellant has been limited in its application to situations where at the time the principal obligation is entered into: (1) the guarantor has offered or promised the debtor to guarantee the debt for him, and the debtor communicates this information to the creditor, who executes the principal contract in reliance thereon, (2) or the guarantor makes such promise direct to the creditor with the same result, (3) or the debtor gives the creditor an assurance that, if he later deems the debt insecure, he might look to a certain person, then named by the debtor, to guarantee the debt. See Paul v. Stackhouse, 38 Pa. 302; Standley v. Miles Adams, 36 Miss. 434; McNaught v.McClaughry, 42 N.Y. 22, 1 Am. Rep. 487; Kennedy Shaw Lbr. Co.v. S.S. Const. Co., 123 Cal. 584, 56 P. 457; Williams v.Perkins, 21 Ark. 18; Case Threshing Mach. Co. v. Patterson,137 Ky. 180, 125 S.W. 287; Williamson Co. v. Ragsdale,170 Tenn. 439, 95 S.W.2d 922; Garland v. Gaines, 73 Conn. 662,49 A. 19, 84 Am. St. 182; Brandon v. Pittman, 117 Fla. 678,158 So. 443.

The cases clearly show that the basic premise of the rule relied upon by the appellant is that the creditor, in entering into the principal contract, relied upon an existing offer orpromise of the guarantor to bind himself at some future date. There was no such offer or promise here, and thus the rule has no application. [2] It is contended further by appellant that, by provisions of paragraph eleven of the distributor contract, it was entitled, at the time the contract of guaranty was entered into, to have treated Baker's then existing indebtedness as a breach of the distributor contract and could at that moment have terminated its contract with Baker. Appellant then argues that its forbearance to do so gave rise to a new consideration, which attached to and supported the guaranty contract. The flaw in this argument is at once apparent. Mere forbearance, without an agreement to forbear, is not sufficient.

As stated in 1 Brandt on Suretyship and Guaranty 68, § 25:

"An agreement on the part of the creditor for general indulgence toward the principal, without any definite time being specified, with proof of actual forbearance for reasonable time, is sufficient. An agreement for delay in consideration of further forbearance means forbearance for a convenient or reasonable time. But in order that forbearance by the creditor towards theprincipal may be a sufficient consideration, there must be anagreement on the part of the creditor that he will forbear. Mere forbearance or omission on the part of the creditor to exercise his legal right without any agreement to that effect is not sufficient, because he may at any moment, and at his own pleasure, proceed. There must be promise for promise." (Italics ours.)

See, also, 38 C.J.S. 1167, Guaranty, § 261, and 24 Am. Jur. 908, Guaranty, § 52.

There was no such agreement here. The appellant made no agreement either with Baker or the respondents to forbear termination of Baker's contract. It could have, so long as Baker was in default, "at any moment and at his [its] own pleasure" proceeded to terminate the distributorship contract.

[3] Finally, appellant has assigned as error the fourth paragraph of the court's instruction No. 3, which paragraph reads as follows:

"On the other hand, if you find from a preponderance of the evidence that the awarding of the distributor's contract reffer[r]ed to in plaintiff's Exhibit 1-A and 1-B was not made to the said Baker in reliance on said guaranty, but was independent thereof, then there would be no consideration for such guaranty, and if you find from the preponderance of the evidence that there was no such consideration, then your verdict should be for defendants."

for the reason that, by leaving it as a question of fact for the jury to determine whether the distributorship contract was awarded in consideration of obtaining the guaranty, the court violated the parol evidence rule in permitting the terms of an unconditional written guaranty to be contradicted by oral evidence.

In Lazear v. Nat. Union Bank of Maryland, 52 Md. 78, 36 Am.Rep. 355, it was held reversible error not to submit this question to the jury. As there stated:

"The guaranty of the appellant is shown to have been executed by him and accepted by the appellee, and the subsequent discounting of paper, of which Lazear Brothers were drawers, or which they had endorsed, furnishes prima facie evidence that such discounts were made upon the faith of the guaranty. But suchprima facie evidence may be rebutted by other proof offered by the guarantor, or by facts and circumstances put in evidence by the appellee. Whether the money was parted with by the appellee on the faith of the guaranty or otherwise, is a question exclusively for the determination of the jury, and there are some facts and circumstances appearing in the evidence, as contained in the record, which should have been submitted to the consideration of the jury, whose duty it is to determine to what weight, if any, they are entitled. We are of opinion, therefore, that there was error in rejecting the appellant's fourteenth prayer."

See, also, Currie Fertilizer Co. v. Byfield, 9 Ind. App. 180,34 N.E. 451, 36 N.E. 438. The question was properly one for the jury.

Upon this question, the date of the execution of the guaranty became material.

[4] Parol evidence is admissible to contradict the date of a written instrument. Shelton v. Dunn, 6 Kan. 128; Gately v.Irvine, 51 Cal. 172; Levy v. Dusenbery, 32 Cal. App. 411,163 P. 231; McFall v. Murray, 4 Kan. App. 554, 45 P. 1100; Randolph v. Mullen, 73 Okla. 199, 175 P. 512.

[5] Furthermore, it is always competent to show by parol evidence that the date inserted in a written instrument was not the date of delivery. Rupert Nat. Bank v. Insurance Co. of NorthAmerica of Philadelphia, 40 Idaho 530, 234 P. 465.

Such evidence does not contradict or vary the language of the contract. As stated in 3 Jones Commentaries on Evidence (2d ed.) 2757, § 1511:

"By operation of law, a written agreement merges within itself all prior negotiations which it purports to cover. Since the writing thus becomes the sole material fact, evidence concerning negotiations becomes wholly irrelevant and immaterial, and the courts will hear none of it. The rule of merger does not purport to apply except in connection with writings which have become legally complete and effective or binding. Accordingly it may of course be shown by parol or otherwise that there was no proper execution or delivery of an apparent agreement. The general rule that antecedent and contemporaneous oral stipulations cannot be received to alter or vary the term of a written contract ``has no application when the execution of the writing is the subject of inquiry. It presupposes the due execution and delivery of the writing in a way to bind both parties to its terms.'"

Respondent affirmatively pleaded irregularity of execution. Under the issues of the case, the evidence was clearly admissible.

The judgment is affirmed.

MILLARD, BLAKE, JEFFERS, and CONNELLY, JJ., concur.