L. L. Satler Lumber Co. v. Exler

Opinion by

Mr. Justice Moschzisker,

This was an action brought to recover on a written contract in which the defendant agreed to become guarantor on certain promissory notes of the American Box Company. The verdict was for the plaintiff and the defendant has appealed.

The L. L. Satler Lumber Company (the plaintiff), and the American Lumber and Manufacturing Company, two separate and distinct corporations, had each sold lumber to the American Box Company, and each held a series of notes of the latter company representing their respective claims; but they had no connection with one another in such sales or in the dealings which gave rise to the case under review. On November 20, 1907, the claim of the plaintiff amounted to about $3,000 and that of the other lumber company to about $3,200. The defendant, Joseph Exler, likewise was a large creditor of the box company, for moneys loaned to it during the summer of 1907, aggregating about $23,000, and in addition thereto he had endorsed one of its notes in the sum of $2,000. Exler held an unrecorded mortgage on the plant of the box company for $20,000 and a judgment note for $3,000, on which one Theodore Geiselhart was liable as a joint-maker; this note had not been entered of record.

The testimony, viewed in the light most favorable to the plaintiff, as the verdict shows it was, entirely justifies, the following abstract from the appellee’s statement of the case: — “The notes of the plaintiffs had matured a few days prior to November 20, 1907, and they had been again asked to renew, which they refused to do. They were then asked by the book-keeper of the box company to meet its stockholders on November 20th to see what could be done. A stockholders’ meeting had been called for that date to consider the question of increasing the capital stock, and to acquaint the stockholders with its condition; a financial statement had been prepared by the book-keeper. The stockholders met in Senator Kline’s office (president of the box company), and proceeded to consider the matter. At this meeting the above-mentioned financial statement was submitted and carefully and thoroughly examined and discussed. Senator Kline testified that defendant was present at this meeting. During the progress of the meeting Mr. Johnston and Mr. Satler, representing the plaintiff companies, arrived and remained in the outer office until its conclusion, when the stockholders, bringing with them the financial statement, came out and met them. This statement was then presented to Johnston and Satler, the stockholders urging them to renew their notes and showing them their financial condition from the statement. The parties present, including the defendant, sat around a large table and thoroughly discussed the statement. This statement......a considerable portion of the time lay upon the table with full privilege on the part of anyone to examine same if he so desired. The statement was read by Johnston, who analyzed it and commented upon it. The substance of his analysis and comments on the statement...... was that it showed the company to be in good financial condition if they had more ready cash, and that with proper management, if they had the lumber which the statement showed, they ought to work out. Plaintiffs, after some discussion, agreed to renew their notes if defendant would endorse them. This he refused to do. After defendant’s persistent refusal to endorse any renewal notes he was told by Johnston and Satler that they had learned he held an unrecorded mortgage for $20,000 against the box company’s plant; that plaintiffs considered themselves just as much entitled to security as he, and that unless they were given security for their claims they would proceed immediately against the box company, and that his position with his mortgage would be no better than that of an ordinary creditor. Defendant then left the meeting and went to see his attorney. He returned a little later and stated that his attorney was out of the city and would not be back for some time, and asked that the matter go over until his return. Mr. Satler replied that he must go south that night to be gone for some considerable time, and that the matter must be adjusted in some way before he left. Defendant then, in company with Mr. Kline and Mr. Geiselhart, went into another room. After a short time they returned and defendant stated that he would not endorse the notes, but that he would go upon a separaté guaranty of said notes to the extent of $3,000. This proposition was accepted by plaintiff; the notes were renewed and the guaranty in question in this suit was executed by defendant.......Shortly after the renewal of the notes, and the execution of the guaranty, defendant put his mortgage on record and subsequently, on foreclosure of same, obtained the entire plant and assets of the box company to the exclusion of all other creditors. He also entered his judgment note and succeeded in collecting about two-thirds of it out of the estate of Theodore Geiselhart, who was an endorser.”

The defendant testified in a vague and general way that he was induced to sign the guaranty by false and fraudulent representations concerning the financial condition and the value of the property of the box company, made by Mr. Johnston, the president of the American Lumber Co.; that in making the alleged representations the latter acted not only for his own corporation but also for the plaintiff company. Mr. Johnston testified that he had no knowledge and never pretended to have any knowledge of the financial condition of the box company or the value of its property, other than the information which he in common with all present at the meeting obtained from the written statement, and that he had not made any declarations or expressed any opinion concerning the same, other than reading aloud the figures contained in the statement; in this he was corroborated by certain of the plaintiff’s witnesses. The issue as to whether or not Johnston had made any declarations of the character alleged, apart from the reading of the statement, was properly submitted to the jury and found against the defendant.

But, aside from the question of Johnston’s alleged independent declarations, the appellant contends that some of the figures contained in the written statement were false in that they represented inflated values, and that, inasmuch as Johnston read these figures at the meeting to show the good condition of the box company and thereby to obtain the guaranty, this in law was an adoption thereof and constituted a fraud upon him irrespective of the former’s knowledge of their falsity. As to this the learned court below in an opinion refusing a new trial, truly says, “that is not the defense set up in the affidavit.’? Under the practice in Allegheny County the issues are defined by the statement of claim and the affidavit of defense. In the defendant’s affidavit of defense there is not a single reference to the written statement prepared by the book-keeper of the box company or its use by Johnston, and no one reading the affidavit can doubt that the intention was to aver a fraud in fact, i. e., that Johnston had by Ms own independent declarations knowingly deceived the defendant. Had the defendant’s affidavit presented the defense now relied upon, the plaintiff would have had to prepare its case along different lines, in that it would have been obliged to show that the figures in the written statement were substantially correct, and it could not have depended upon Johnston’s lack of knowledge of their alleged falsity; hence, the court below was justified in taking the position it did in regard thereto. As a matter of fact the defense now so strongly pressed by counsel for the appellant, that in law Johnston was guilty of fraud “whether or not he knew the financial statement was padded and false,” so far as the record shows, was not relied upon at trial. The defendant did not request such an instruction, and after the trial judge had at great length submitted to the jury the part of the case concerning Johnston’s alleged declarations, he said to counsel, “This is all on this branch of the case. If there is something you gentlemen think I should refer to on that branch I wish you would call my attention to it now,” and at the end of his charge he again asked that any omissions be called to his attention; but counsel made no response on either occasion. The defendant presented no evidence to show the alleged falsity of the statement other than the testimony of the book-keeper of the box company, and while that witness used the word “inflation,” he explained that he merely meant thereby that certain of the figures were placed above the actual cost of the property they represented, adding, “the officers of the box company thought their property was worth that much more than the actual cost; they had spent six months or moré in building and had good will in trade, etc.”; and his testimony would indicate, at least so far as concerns the item of real estate, that there might have been some foundation for that thought. Although certain of the valuations may be unjustifiably high, it is not clear that the statement can properly be termed a false and fraudulent one; but be this as it may, it is clear that when Johnston read therefrom he had no knowledge of the alleged overvaluations. On the other hand, the defendant had received several prior statements from the box company showing its condition and containing the same valuations read by Johnston, and it was upon knowledge gained through those statements that he made his loans. More than. this,, the defendant had visited the plant and attended several stockholders’ meetings where the affairs of the corporation were discussed. The jury probably believed, as might any one reading the testimony in this case, that the defendant well knew the insecure financial condition of the box company; and they were justified in concluding, as they no doubt did, that he was not induced to act by anything that Johnston had said or read in his presence, but that the real inducement to the signing of the guaranty was his desire to take care of the box company and keep it out of bankruptcy as long as possible. In other words, the jury may well have accepted the testimony of the defendant himself when he said, “that was really the ground only that I sign it on account of that, because they will stop and not put the company in bankruptcy.” When the defendant declared in one breath that Johnston made him believe that he would take no risk in signing the guaranty, and in the next that he signed to keep the company from going into bankruptcy, to say the least, he hardly made out a defense that would justify a jury in rendering a verdict the effect of which would be to release him from the obligations of a solemn written contract.

We are not impressed that error was committed by the refusal of the offer to show that Johnston had said that his lumber company would put the box company into bankruptcy if the defendant did not sign the guaranty, and had “stated as a fact that this would destroy the lien of the defendant’s mortgage.” Concerning this, the court below properly held, “The representation that in case of bankruptcy the defendant’s unrecorded mortgage would not be a lien, if made, was a bald representation of a conclusion of law....... It is not the exceptional case where a statement of law is really one of fact, or a mixed statement of law and fact.” The mere designation of Johnston’s alleged representation as a statement of “fact,” could not change the character of the thing offered to be proved. The defendant’s offer comes down to this, — Johnston threatened to put the box company into bankruptcy, adding, that this would destroy the lien of the defendant’s mortgage. The assertion that the defendant’s lien would be destroyed by the bankruptcy of the box company, was merely a conclusion of law upon a given state of facts, and it did not involve any implied statement of other underlying facts not expressly disclosed; wherein it differs from the authorities cited by the appellant.

During the course of the trial the defendant swore that he was not a stockholder in the box company, and before the other side gave testimony to contradict this, he made an offer of the record of an equity proceeding in the United States Court between the trustee in bankruptcy of that corporation and himself, wherein it was held as a matter of law that he was not such a stockholder; the offer was refused, and this is assigned for error. The point as to whether or not the defendant was a stockholder in the box company, was a side issue. He admittedly held quite a block of the stock in his own name as collateral for his loan, and it was undoubtedly to his interest to keep the company out of bankruptcy as long as possible. But it is not necessary to determine the question of the admissibility of this record, for as offered it was merely cumulative evidence on a point which was not a main issue, and in no event could its rejection be classed as reversible error. As to the offer of the record for the purpose of showing that it had been therein, adjudicated that the mortgage held by the defendant was a valid lien on the box company’s plant, and thereby to prove that Johnston’s alleged representations concerning the effect of the latter’s bankruptcy upon the mortgage in question were not true, it is sufficient to say that at the time of the representations the facts in relation to the mortgage were materially different from those existing at the date of the alleged adjudication, and to add that we have already ruled that tlie so-called representations of fact were merely statements of opinion on the law.

We do not view the guaranty as a joint contract with the two lumber companies, and we cannot agree with the appellant’s contention that any action thereon would have to be by the companies jointly. The court below reached the proper conclusion on this branch of the case when it stated, “The contract is several....... The sum of $3,000 is......the fixed limit of liability and means not to exceed $3,000.” At the time of the execution of the guaranty each of the lumber companies held four notes of the box company; those of the plaintiff being drawn for $761 each and those of the other company for $811 each. The plaintiff’s notes were endorsed over to and held by it individually and the four belonging to the American Company were endorsed to and held by that company individually. As we construe the contract, the intention was to guarantee this paper for the benefit of the several holders thereof in the proportions to which they might respectively be entitled; it was not in any sense for the benefit of the two companies jointly. Whether a contract is joint or several depends upon the nature of the interest of the parties and the intention at the time it was made, and the rule is that if the consideration moves from the promisees separately, a promise to them is prima facie several: 2 Page on Contracts, Sec. 1142. The writings in the case consist of the notes and the contract of guaranty; the notes are specifically referred to in the contract and the defendant therein agrees to become guarantor “on the above paper”; when these writings are taken together it is apparent that the contract was not intended as a joint one. Although the lumber companies had a common interest because each held the notes of the box company, they were not connected in any way, and they had no joint interest to be protected; neither company could have renewed the notes of the other, and there was nothing to suggest that it ever was the intention that they should. As already indicated, we are of opinion that the contract was properly held to be several ; but we may add that actions were brought thereon by both the lumber companies, the two cases were tried together and each company recovered a verdict for its proportion; hence, no harm can come to the appellant through future suits growing out of the guaranty.

After a trial on the merits the prime question is not, was the case tried with strict correctness in every respect, but was substantial error committed in any material particular. We have read the well-considered argument of counsel for the appellant and all of the voluminous record, and we have examined the numerous authorities cited; while the charge is long and discursive and may be open to just criticism in some particulars, taking it as a whole we are not convinced that the trial judge fell into reversible error. The main issues were put to the jury in such a manner that they must have understood the controlling questions they had to decide, and as before noted, counsel for the appellant twice were expressly given the opportunity to have fuller statements of their position placed before the jury, but failed to take advantage thereof; under such circumstances we are not inclined to look at a charge with an overly critical eye. We shall merely add that in view of the facts in the present case we do' not think any harm was done by the trial judge in stating to the jury that the parties were “dealing at arm’s length.” This is not the. ordinary case of undue advantage taken of a surety; the parties dealt on equal terms and there was no relation of confidence between them; Johnston represented a creditor seeking to' obtain security for a debt due by a corporation which the defendant had an interest to support; the representatives of that corporation were present at the time Johnston made his alleged representations, and the facts concerning its condition were equally available to all parties. (See Fulton v. Hood, 34 Pa. 365, 371.)

The assignments of error are overruled and the judgment is affirmed.