J. R. Watkins Company v. Brewer

1. The court did not err in overruling the demurrer of the defendant sureties to the petition.

2. The court did not err in sustaining the plaintiff's demurrer to a portion of the defendants' answer, answer, and in disallowing the proffered amendment to the answer.

3. The court erred in directing a verdict in favor of the sureties and in overruling the plaintiff's motion for new trial.

DECIDED NOVEMBER 27, 1945. REHEARING DENIED DECEMBER 19, 1945. On November 10, 1943, the J. R. Watkins Company sued George D. Halstead, principal, and B. C. Brewer and C. V. Powell, sureties, in the superior court of Schley County, to recover $699.93, with interest thereon from November 16, 1937.

The petition alleged substantially that: 1. The defendants are all residents of Schley County, Georgia. 2. S. B. Halstead, one of the original securities, is dead, and "there was no representation of his estate." 3. On December 24, 1935, said defendants "jointly and severally promised . . to pay the plaintiff . . $504.30, and . . for additional merchandise sold and delivered by the plaintiff to . . George D. Halstead during the life of said written contract. A copy of said agreement is hereto attached, marked exhibit 1." 4. The "plaintiff duly complied with all the terms and conditions, and fully performed all of the things required of it in said written agreement . . , and in the performance thereof sold and delivered to . . George D. Halstead, its goods . . to the value of $619.65. That beginning with January 24, 1936, said principal paid on goods purchased the sum of $489.15, leaving a balance due upon goods purchased under the contract of 1935, . . $130.50, making a total indebtedness of $634.80 due September 24, 1936." 5. On December 24, 1936, the plaintiff and "George D. Halstead and said sureties entered into a renewal and extension contract to April 1, 1938, in which . . contract said parties acknowledged and contracted to pay $634.80 . . a copy of which is hereto attached marked exhibit 2." 6. The plaintiff duly complied with all the terms and conditions required of it in said renewal contract until November 16, 1937, at which time it terminated said contract. Under said extension contract the plaintiff sold and delivered to George D. Halstead merchandise to the value of $193.16, all of which was paid by said Halstead except $65.13. This last sum plus the $634.80 acknowledged to be due and owing, as stated in paragraph 5, supra, totalled $699.93. 7. Said contract of December 24, 1936, was modified on April 23, 1937, by a written agreement signed by all the parties to the contract of December 24, 1936, so as to limit the liability of the sureties to $700. (The copy of said writing attached to the petition as exhibit 3 provides that the contract of December 24, 1936, was changed in no way except as to the limitation of the liability of the sureties, and shall "remain in full force and effect.") 8. Under said contract of December 24, 1936, the plaintiff sold and delivered to George D. Halstead merchandise to the amount of $193.16. On the purchase-price of said goods, "said Halstead, during December, 1936, and on throughout to November 9, 1937, paid . . $128.03, leaving a balance of $65.13 in excess of the payments made." 9. "That on May 23, 1938, said G. D. Halstead wrote on the statement of the account from December 24, 1936, to November 16, 1937, the following language: "The above account is correct. I owe The J. R. Watkins Company $699.93, this May 23, 1938. Signed, G. D. Halstead.' A copy of which account stated is hereto attached and marked exhibit 4." (It may be noted here that the last sentence of this paragraph was subsequently amended to read, "A copy of which account as stated, etc.") 10, 11. On November 16, 1937, the plaintiff notified the defendants that it had terminated said contract, and demanded full payment of the amount due. 12. By virtue of said termination of said contract, George D. Halstead's indebtedness to the plaintiff became due and payable. 13. Though oftentimes requested thereto, the defendants failed to pay the indebtedness. 14. "That on September 30, 1938, petitioner brought suit against George D. Halstead, principal, and S. B. Halstead, B. C. Brewer, and C. V. Powell, sureties, for the recovery of said sum due as aforesaid. Said suit was brought and returnable to the city court of Ellaville." 15. "That on February 2, 1943, said suit was, by the judge of said city court, dismissed for want of proper service." 16. Before bringing the present action the plaintiff paid all costs in the former suit. "Defendants and each of them are jointly and severally indebted to . . plaintiff in the sum of $699.93, principal, besides interest . . from November 16, 1937, at 7 per centum per annum." (This paragraph was later amended by adding after the words, "per annum," at the end of the paragraph the following: "Under and by virtue of the contract sued upon, and prays that it may have judgment against the defendants for said indebtedness.")

The material parts of the contract dated December 24, 1936, and attached to the petition as exhibit 2, follow: "This agreement made in Winona. Minnesota, this 24th day of December 1936, between The J. R. Watkins Company, a corporation, hereinafter called ``the Company,' and George D. Halstead, hereinafter called ``the Purchaser,' witnesseth, 1. That . . the Company agrees . . to sell and deliver to the Purchaser, at its current wholesale prices, free on board cars at Winona, Minnesota, . . such goods and other articles manufactured or sold by it, as the Purchaser may reasonably require for sale, from the date hereof, until the first day of April, 1938. . . 2. The Purchaser agrees to buy from the Company the goods reasonably required by him as aforesaid; and . . to furnish to it complete, regular, weekly, written reports, showing separately the amounts of each cash sale, time sales and collections. . . 3. The Purchaser . . agrees to pay the Company its current wholesale prices for the goods . . sold to him, as herein provided, and also the prepaid transportation charges thereon, if any, by remitting the Company each week at least sixty percent of the amount received by him from his cash sales, and from his collections on sales previously made . . in accordance with the provisions of the weekly report blanks . . ; and at the expiration or termination of the agreement, to pay the whole amount . . remaining unpaid; or the Purchaser may pay for such goods in cash, less the usual cash discount allowed for such payments; but such payments, or any of them, may be waived or extended by the Company without notice to the sureties hereon, and without prejudice to the rights or interests of the Company. 4. If the Purchaser shall not pay cash for said goods . . sold and delivered to him, and the payments at the time and in the manner hereinbefore provided are insufficient to pay therefor, or if the Purchaser shall fail to pay on the indebtedness expressed herein, amounts satisfactory to the Company from time to time during said term, the Company may in its discretion thereafter either limit the sales . . to be made, or from time to time suspend the same, or require cash with each order, or cash upon delivery, until such indebtedness is . . paid or reduced as the Company may require. 5. The Purchaser may, within thirty days after the expiration or termination of this agreement, return . . any goods purchased by him from the Company . . ; and the Company agrees to purchase such goods . . and pay or credit the Purchaser therefor at the then prevailing wholesale prices. . . 6. The Purchaser shall have no power . . to make any . . representation, or to incur any debt, obligation, or liability . . in the name of, or for, or on account of the Company. 7. The Company shall have no interest in the accounts due for goods sold by the Purchaser. . . 8. It is also mutually agreed that this is the complete, entire, and only agreement between the parties, and that it shall not be . . modified . . except in writing executed by the parties hereto; and that either of the parties hereto may terminate this agreement at any time, if desired, by giving the other party notice thereof in writing by mail. 9. The Purchaser promises to pay the Company at Winona, Minnesota, from time to time, after thirty days from the date of acceptance of this agreement, in amounts satisfactory to the Company, the indebtedness he now owes the Company, and at the expiration or termination of the agreement, to pay any balance thereof then remaining unpaid, payment of which indebtedness is hereby so extended. 10. The Purchaser and the Company, for the purpose of settling and determining the amount of the indebtedness now owing from the Purchaser to the Company, hereby mutually agree that the said indebtedness is the sum of Six Hundred Thirty-four and 80/100 dollars, which sum the Purchaser agrees to pay, and the Company agrees to receive, and payment of which is extended as above provided." This agreement was signed by the plaintiff and George R. Halstead.

Immediately following the above contract, and on the same page with it, was this writing: "In consideration of the execution of the foregoing agreement by The J. R. Watkins Company, which we have read, or heard read, and hereby agree and assent to, and its promise to sell, and the sale and delivery by it, to the Purchaser, as vendee of goods and other articles, and the extension of the time of payment of the indebtedness owing by him to said Company . ., we, the undersigned sureties, do hereby waive notice of the acceptance of this agreement, notice of default or nonpayment . .; and we jointly, severally, and unconditionally promise, agree, and guarantee to pay said indebtedness, the amount of which is now written in said agreement, or if not written therein, we hereby authorize the amount of said indebtedness to be written therein; and we jointly, severally, and unconditionally promise to pay for said goods and other articles, and the prepaid transportation charges thereon, at the time and place, and in the manner in said agreement provided. And we further severally agree that, in case of the death of one or more of us, the undersigned sureties, before the expiration or termination of this agreement, the liability of the surviving sureties, shall continue until notice of the death of the deceased surety, or sureties, is given the Company at Winona, Minnesota, by registered mail." This contract of suretyship was signed by S. B. Halstead, B. C. Brewer, and C. V. Powell. Neither the contract between The J. R. Watkins Company and George D. Halstead nor the above suretyship contract was under seal.

The contract, attached to the petition as exhibit 1, and dated December 24, 1935, is identical with the contract set out above, except as to date and the amount of indebtedness therein stated, which was $504.30. The contract of suretyship, following the contract of December 24, 1935, is also identical with the contract of suretyship following the contract of December 24, 1936.

The material part of the writing which was pleaded in paragraph 7 of the petition, and a copy of which was attached as exhibit 3, is as follows: "The liability of the sureties under this agreement shall not exceed the sum of $700, and . . said agreement, as so changed and modified, shall be and remain in full force and effect, and in all other respects, continue the same as if no such change or modification had been made. This April 23, 1937." This modification agreement was signed by the plaintiff, George D. Halstead, and the three sureties who signed the two suretyship contracts hereinabove referred to.

The writing, a copy of which was attached to the petition as exhibit 4, follows: "Statement

Winona, Minn. May 3, 1938.

George D. Halstead,

Ellaville, Ga.

In account with The J. R. Watkins Company. Dec. 24, 1936.

Balance agreed upon in contract .................. $634.80.

Charges: 1937.

Jan. 22. Mdse. .......................... 49.05. Mar. 29. Mdse. .......................... 45.75. June 1. Mdse. .......................... 19.60. June 22. Mdse. .......................... 25.80. Aug. 2. Mdse. .......................... 30.59. Oct. 11. Mdse. .......................... 22.37.

Total charges since date of contract .... 193.16.

Credits: 1936.

Dec. 29. Cash ........................... 20.

1937.

Mar. 12. Cash ........................... 10. June 15. Cash ........................... 19.60. July 12. Cash ........................... 25.60. Aug. 24. Cash ........................... 30.63. Nov. 9. Cash ........................... 22.20.

Total credits since date of contract ...... 128.03.

Excess charges .......................... 65.13.

1938, May 2.

Balance due ............................... 699.93.

The above account is correct. I owe The J. R. Watkins Co. $699.93. This May 23, 1938. G. D. Halstead."

The sureties demurred to the petition on the grounds: that it was based on three separate and distinct causes of action, to wit, the contract dated December 24, 1935, the contract dated December 24, 1936, and the account stated, dated May 23, 1938, and was multifarious; that the suit was barred by the statute of limitations; that the account, dated May 23, 1938, and signed by G. D. Halstead, was a novation of the other contracts, and the sureties were not bound thereby, as they did not sign it, and the suit on the account was barred; that S. B. Halstead, one of the sureties, was dead, and his estate or personal representative was not made a party to the suit, and there was a non-joinder of parties. There were other special demurrers as set out in paragraphs 9, 10, 11, 12, and 13, which will be referred to later. The court overruled the demurrers to the petition, and the sureties filed exceptions pendente lite to that order.

The defendant principal filed no answer to the suit. The defendant sureties filed an answer consisting of 18 paragraphs. The plaintiff demurred generally and specially to the answer, the court sustained the demurrers to paragraphs 10 to 18 inclusive, and struck these paragraphs, and the sureties excepted. The assignments of error on the overruling of the demurrers to the petition and the sustaining of the demurrers to the answer are set forth in the cross-bill of exceptions filed by the defendant sureties, and will be dealt with hereinafter.

On the trial, the plaintiff introduced evidence, but none was offered by the defendants. The court directed a verdict for the plaintiff against George D. Halstead for the amount sued for, and in favor of the sureties. The plaintiff made a motion for new trial, which was overruled, and it excepted. 1. It is contended by the defendants in error in paragraphs 1 and 5 of the cross-bill that the court erred in overruling the demurrers to the petition, on the ground that the suit was based on three separate and distinct causes of action and was multifarious.

This suit was brought to recover $699.93, and interest thereon from November 16, 1937; the principal sum being made up of $634.80, which was set out in paragraph 10 of the contract of December 24, 1936, and which is an account stated as of the date of that contract (J. R. Watkins Co. v. Ellington, 70 Ga. App. 722,727, 29 S.E.2d 300), and an additional item of $65.13, this being a balance alleged to be due for goods sold under said contract. It is true that a statement showing this $65.13 balance was attached to the petition as exhibit 4, but the petition shows that the goods were sold under and by virtue of said 1936 contract. The contract of December 24, 1935, was also attached to the petition, but the amount of indebtedness stated therein, $504.30, and the additional indebtedness due under that contract, $130.50, were brought forward and renewed in the contract of December 24, 1936, and the two amounts just mentioned make up the $634.80 written into the December 24, 1936 contract. All of the defendants signed the contract of December 24, 1936, and thereby jointly and severally obligated themselves to pay the amount written in the contract, and in addition thereto to pay for goods and merchandise sold by the plaintiff to George D. Halstead until the expiration or termination of the contract. The amount of the liability of said parties under this contract was limited to $700 by the additional agreement entered into by them on April 23, 1937, which is attached to the petition as exhibit 3. The action, as we construe it, was based on the contract of December 24, 1936, and the petition was not subject to demurrer on the ground that it was based on three separate and distinct causes of action and is multifarious.

2. Error is assigned by the defendants, in paragraphs 2 and 3 of the cross-bill of exceptions, on the order of the court overruling paragraphs 4 and 5 of their demurrer to the petition, on the ground that the action was barred by the statute of limitations. The contract of December 24, 1936, was terminated on November 16, 1937, and the indebtedness therein stated and the indebtedness authorized to be incurred thereby for the sale of additional merchandise by the plaintiff to the principal defendant became due and payable when the contract was terminated. This was a simple contract in writing, not under seal, and the action thereon would not become barred until six years after the termination of the contract. Code, § 3-705, provides: "All actions upon promissory notes, bills of exchange, or other simple contracts in writing shall be brought within six years after the same shall have become due and payable." The present suit was brought on November 10, 1943, which was within the six-year period from the termination of the contract, and, consequently, the petition was not subject to the demurrer that the action was barred by the statute of limitations.

3. The ruling made in No. 2 above also applies to the item of $65.13, which was the balance due for merchandise sold and furnished by the plaintiff to George D. Halstead under the contract and before its termination, and which amount the defendants were obligated to pay under the terms of said contract. This ruling relates to paragraph 4 of the cross-bill, which assigns error on the overruling of paragraph 6 of the demurrer to the petition.

4. It is contended in paragraph 6 of the cross-bill that the petition shows that S. B. Halstead, one of the sureties on the contract, was dead and there was no representative of his estate; it being further contended that the burden was on the plaintiff to see that a representative was appointed and made a party to the suit, and failure of the plaintiff to do this rendered the petition subject to demurrer on account of a nonjoinder of parties defendant. The contract declared upon was a joint and several obligation, and the holder thereof was authorized to sue the obligors jointly and severally. Johnson v. Georgia Fertilizer c. Co., 21 Ga. App. 530 (3) (94 S.E. 850); Barnett v. Ferris, 39 Ga. App. 206 (146 S.E. 345); Hartsfield Co. v. Whitfield,71 Ga. App. 257 (30 S.E.2d 648); Thomasson v. Farmers Merchants National Bank, 170 Ga. 555 (153 S.E. 419). The petition was not subject to demurrer on the ground of a nonjoinder of parties.

5. Paragraph 7 of the cross-bill assigns error on the overruling of paragraphs 9, 10, 11, 12, and 13 of the special demurrer. These special demurrers were entirely without merit, and the court did not err in overruling them.

6. We now come to the assignments of error in the cross-bill complaining of the sustaining of the demurrers to paragraphs 10 to 18 inclusive of the defendants' answer.

(a) Paragraphs 10 and 11 of the answer alleging that the contract of December 24, 1936, was fraudulently procured, in that the agent of the plaintiff company went to Ellaville, Schley County, and solicited the two surety defendants to sign the contract, pointing out to them that it would not expire until April 1, 1938, and that George D. Halstead was doing a good business, and the agent of the company assured them that, if they would sign the contract with him, the agent said he felt quite sure that Halstead would have no trouble in collecting enough to pay the amount in full before the expiration of the contract, and he further promised them that, if they would sign the contract, the account of Halstead thereunder should never exceed $700, and that he would send them statements frequently, showing the condition of Halstead's account with the company — failed to set out any valid defense, and the court did not err in sustaining the demurrer thereto. The case of W. T. Rawleigh Co. v.Oliver, 67 Ga. App. 748 (21 S.E.2d 490), relied on by the defendants in error to support this contention, is distinguishable on its facts from the case at bar and does not authorize or require a ruling in the present case different from the one now being made on this question.

7. The allegations in paragraph 12 of the answer — to the effect that the plaintiff, after the contract was signed, urged George D. Halstead to sell goods to customers on a credit — do not show a breach of the contract or increase the risk of the sureties so as to release them from liability under the contract, and the court did not err in sustaining the demurrer to the same.

8. The allegations contained in paragraphs 13 and 14 of the answer — to the effect that the signing of the account, dated May 23, 1938, by George D. Halstead, constituted a material change in the contract of December 24, 1936, so as to release the defendants from liability under said contract — amounted to no valid defense to the present suit, and the court did not err in striking the same on demurrer.

9. The contract sued on was joint and several, and the fact that one of the sureties to the contract had died and his personal representative was not made a party to the present suit would not release the other two sureties. Consequently, the court did not err in sustaining the demurrer to paragraph 15 of the answer. In support of this ruling, see the authorities cited in division 4 above.

10. It follows that the court did not err in overruling the defendants' demurrers to the petition and in sustaining the demurrers to paragraphs 10 to 18 inclusive of the defendants' answer.

11. We will now deal with the main bill of exceptions. The plaintiff in error excepts to the overruling of its motion for a new trial, and contends that the court erred in directing a verdict in favor of the sureties. The plaintiff introduced in evidence: the contract of December 24, 1936, and the written agreement signed by all of the parties, modifying this contract and limiting the liability of the sureties thereunder to an amount not exceeding $700; the statement of account, dated May 23, 1938, signed by G. D. Halstead, showing the total amount of charges for merchandise since the date of the contract of December 24, 1936, as $193.16, and the total credits thereon amounting to $128.03, leaving a balance of $65.13, which, added to the $634.80, the amount written in the contract, made $699.93, the amount for which the suit was brought; and the reports made by G. D. Halstead to the plaintiff showing the sales, collections, and amounts remitted to the plaintiff.

The case was in default as to the principal debtor. The answer of the sureties amount to a denial of any indebtedness on their part to the plaintiff. They admitted in their answer that they signed the contract, and alleged that it was signed by them as sureties; but they introduced no evidence. G. D. Halstead, the principal, was introduced as a witness by the plaintiff. He testified, among other things: "I have no way of telling whether or not I have paid anything on the amount that I owe Watkins Company named in that contract, the balance of $634.80; the money I sent in was to be given credit for it, and I did not know whether it would be credited on that or the goods I was selling or what; I probably did not send in as much as I bought because I put a lot of the stuff out into sales like they insisted that I do; I signed that [referring to the contract]. . . I did not complain about the correctness of their account with me; I can not say how much my account increased between December 24, the date of that contract, and April 1; according to their figures it had increased; I did not keep books; I have not much education; I don't know whether or not I owed them more on April 1, 1937, than I did on December 24, 1936; I don't remember that far back; it was six or seven years." The witness then testified that he had made payments on the account from $10 up to $50, and that he had made reports showing the money that he sent to the company; and he identified the reports that were introduced in evidence by the plaintiff, and said that those were the reports to which he was referring, but he did not know whether they constituted all of the reports that he sent in. He further testified that the did not know what amount he owed the Watkins Company, that he had no way of knowing.

The contract sued on is one of suretyship. Watkins MedicalCo. v. Marbach, 20 Ga. App. 691 (93 S.E. 270). The obligation of a surety is accessory to that of the principal, and the balance due on a contract of suretyship will determine the amount due by the surety thereon. Gartrell v. Johns, 15 Ga. App. 671 (2) (84 S.E. 175). When the sureties entered into and signed the contract of December 24, 1936, they not only obligated themselves to pay the amount then acknowledged to be due and written in the contract, but they also promised and obligated themselves to pay for the goods and merchandise sold and delivered by the plaintiff to G. D. Halstead until the expiration or termination of the contract. The amount written in the contract at the time it was signed by the defendants was an account stated. "An account stated is an agreement between persons who have had previous transactions, fixing the amount due in respect of such transactions, and promising payment." Ward v. Stewart,103 Ga. 260, 262 (3) (29 S.E. 872); Moore v. Hendrix,144 Ga. 646 (87 S.E. 915); Borders v. Gay, 6 Ga. App. 734 (65 S.E. 788). Bouvier defines an account stated as "An agreed balance of accounts. An account which has been examined and accepted by the parties." "An account stated establishes the creditor's claim and entitles him to bring an action on it as a liquidated demand; and in the absence of fraud or mistake an account stated is conclusive upon the parties." Phillips v.Ableson, 60 Ga. App. 558, 559 (4 S.E.2d 411). "A party will not be allowed to impeach an account stated, on the ground of fraud or mistake, if he assented to it with full knowledge of the facts and circumstances attending it, or if, with ample means of knowledge at hand, he failed to ascertain the facts." 1 C. J. S. 731, § 51 (d).

There was no pleading or evidence that any payments had been made reducing the amount expressed in the contract. Under the pleadings and the evidence, the plaintiff was entitled to a directed verdict against the sureties for $634.80. And if the principal debtor admitted in writing that he was due the additional sum of $65.13, which the plaintiff contends he did, as shown by the account attached to the petition and introduced in evidence, then the sureties would also be liable for this amount, under the terms of the contract and the applicable principles of law above stated. D. B. Halstead testified that he signed this statement of the account, but said, "If that language ``the above account is correct — I owe the J. R. Watkins Company $699.93' was up there when I signed it, it wasn't visible because I did not see it." He did not deny that the statement of the account which he had signed was correct, but said that he did not know what amount he owed the plaintiff. The plaintiff contends that the credits shown by the reports signed by Halstead and introduced in evidence are identical in date and amount with those shown in the statement of the account signed by Halstead. The burden was on the plaintiff to make out its case. Under the pleadings and the evidence, the plaintiff was entitled to a directed verdict against all of the defendants for $634.80, this being the amount written in the contract when it was signed by the defendants. The issue as to the balance due for merchandise sold and delivered by the plaintiff to the defendant Halstead, after the contract was signed and before its termination, should have been submitted to the jury to pass on.

In paragraph 8 of the contract sued on, it was provided that "either of the parties hereto may terminate this agreement at any time, if desired, by giving the other party notice thereof in writing by mail." It is contended by counsel for the defendants in error that, where a person who has the right to terminate a contract and elects to do so, as the plaintiff in this case did, he can not partially terminate it, but must terminate it in toto and cannot thereafter assert the contract or any part of it for any purpose. This contention can not be sustained here, and the authorities cited and relied on by counsel for the defendants in error (13 C. J. 608, § 639, and McMillen v. Benfield,159 Ga. 457 (4), 126 S.E. 246) to support this contention are not applicable under the facts of the present case. But the following principle of law in this respect is applicable here: "Where under the contract a party may terminate it at his option, he is not liable after termination for further transactions thereunder, but obligations which have already accrued are not affected. Stipulations in the contract as to the rights of the parties on termination will ordinarily be enforced according to their terms." 13 C. J. 608, § 640; 17 C. J. S. 893, § 404. The plaintiff was entitled to enforce its rights under the contract against the defendants after its termination on November 16, 1937, in the same manner as it could have done had the contract expired under its terms on April 1, 1938.

The court erred in directing a verdict in favor of the two sureties, and in overruling the plaintiff's motion for a new trial.

Judgment reversed on the main bill of exceptions, andaffirmed on the cross-bill. Felton and Parker, JJ., concur.