206 A.D. 114 | N.Y. App. Div. | 1923
The action is brought upon a guaranty contained in a written contract entered into between the plaintiff and the defendants on the 26th day of August, 1913.
The plaintiff is a foreign corporation organized under the laws of the State of Ohio and doing business in the State of New York under due authority. The plaintiff was engaged in manufacturing and selling lithographs and posters, and for some time prior to the making of said contract, furnished posters for a moving picture corporation known as Warners Features Film Company. The film company was owned and controlled by the defendants Harry M. Warner and Albert A. Warner. On August 26, 1913, the aforesaid corporation was indebted to the plaintiff for a balance due for posters in the sum of $10,859.38. Prior thereto the defendants Warner and Powers and one Louis J. Selznick organized a new corporation known as Warner’s Features, Inc., which succeeded to the business of the old company and assumed its liabilities. The defendant Powers was made president of the new company, the defendant Harry M. Warner treasurer, and Selznick eventually became its manager. Prior to August 26,1913, preliminary negotiations were had between the parties relating to the continuation of business with the new company. The new company made a request to the plaintiff for a loan of $25,000, and there is evidence to the effect that it was the understanding between the parties that, if the loan was made, the plaintiff should do all the lithographing work for Warner’s Features, Inc. On August 26, 1913, the parties met and three agreements were prepared and executed. The business was transacted in the office of Crocker & Wickes, attorneys. These contracts were offered in evidence. One of these agreements provided that for a period of three years the plaintiff should have the option to do all of the lithograph work for Warner’s Features, Inc., at fair and reasonable rates. The second contract is between the plaintiff and Warner’s Features, Inc., and provides that, in consideration of the payments therein agreed to be made, the plaintiff should print and furnish to the company printed matter
Since issue joined the case has been twice before this court. The first appeal thereafter was from an order sustaining a demurrer to the third amended complaint. This court held (183 App. Div. 513) that the guaranty clause above quoted was ambiguous; and that, without evidence of the surrounding circumstances tending to show the purpose and intent of the parties, it was impossible to say whether the guaranty applied to the indebtedness for which the action was brought, or was limited to the indebtedness specifically mentioned in the instrument. The complaint was then again amended, and the case coming on for trial, a verdict was rendered in favor of the plaintiff against all of the defendants for the sum of $50,437.22, the full amount of the plaintiff’s claim. The trial justice set aside this verdict on the ground that it was against the weight of the evidence in respect to the issue of an alleged release of the defendants Warner, and granted a new trial. The case was then retried and a verdict rendered against all of the defendants for the full amount claimed. The trial justice set aside this verdict as to the defendants Warner, on the ground that it was against the weight of evidence on the issue of their alleged release. The verdict was permitted to stand as against the defendant Powers. Judgment was entered upon this verdict, and an appeal was taken to this court, where the judgment was unanimously affirmed. (196
Later, upon the request of counsel for the defendant Powers, the court charged: “ If the defendants were guarantors of claims and demands arising for advertising matter furnished, they had a right to revoke their guaranty at any time and thus limit their liability to the claims then accrued; ” with the following modification: “ But they would be liable up to the time of their act and then it would become the duty of the plaintiff to minimize the damages as much as possible.”
The court further charged: “ That if you find that Powers took the position at any time that he was not personally liable, the plaintiff could not recover for any goods furnished after that date;” and that “ The defendants are entitled to have payments made applied in payment and satisfaction of the oldest items of account. * * * Any payments made would have to go in liquidation of the oldest account.”
It is claimed by the defendants that a certain transaction occurred on or about January 29, 1914, which amounted to a notification to the plaintiff by the defendant Powers to the effect that he would not carry the account any further, and was in no respect liable for the payment of advertising matter furnished by the plaintiff to the new company. The jury brought in the following verdict:
*118 “ We find for the plaintiff and that the Warners are not released. We also find the liability of the defendants was limited [to] the amount of the account as of January 29, 1914, with interest.”
After this verdict was rendered a discussion arose between counsel and the court in respect to the amount due on the aforesaid date. The court suggested, and counsel agreed, that the jury should be discharged, and that the amount of recovery should be determined by the court after hearing counsel on both sides, and that the amount so determined should be directed by the court in the absence of the jury in the same manner as though the jury was present. The amount found due the plaintiff was thereafter inserted in the verdict.
It having been determined that the contract of guaranty was a continuing one and given to secure future indebtedness without limitation, and that the defendants Warner were not released from liability thereunder, and no appeal having been taken by the defendants from the judgment, it is necessary to determine on this appeal only the question respecting the right of the defendants to terminate their liability under the aforesaid guaranty, and as to whether or not such liability was so terminated.
Although the case has been tried twice and an appeal taken to this court and the Court of Appeals, the plaintiff has not before contended that the defendants did not have the right to terminate their liability at any time. In fact, the plaintiff, prior to the last trial, strenuously insisted that the defendants could have terminated their liability at any time. Such argument was advanced by counsel for the plaintiff on the theory that such fact strengthened the plaintiff’s case. The appellant contends, however, that even though it be the law of this State that, upon a breach of a contract by a principal, the surety may require the guarantee to terminate his contract with the principal and limit his claim to the amount of damages then recoverable, there is no evidence that the defendant Powers did this, and further that, even if it had been shown that Powers had attempted to terminate his liability on the aforesaid date, the damages allowed by the court were insufficient. The appellant further contends that the claim of the defendant Powers that his liability was limited was a matter of defense which could in no event be available to the defendant unless pleaded.
The case of Hunt v. Roberts (45 N. Y. 691) is the leading case upon the question of the right of a surety to terminate a contract of guaranty. In that case, as in the case at bar, the principal was in default, and the court said: “ Without now determining how far a surety can, before a breach of the engagement of his principal, protect himself from future defaults, we are clearly of opinion that, after a breach which will justify a termination of the contract,
In McKecknie v. Ward (58 N. Y. 541) the decision in the Hunt case was approved, and the court said: “ It is settled, then, that the appellant in this case, on the default of Barnes to pay at the end of any month, had the right to ask for the termination of his obligation, and to revoke the same, being liable only for the amount then payable to the plaintiffs, not to exceed the penalty of the bond."
In Emery v. Baltz (94 N. Y. 408) the action was upon a bond executed by the defendants as sureties for the faithful performance of the duties of an agent, and the rule respecting the right of a surety to terminate his liability was stated as follows: “A surety bound for the fidelity and honesty of his principal, and so for an indefinite and contingent liability, and not for a sum fixed, and certain to become due, may revoke and end Ms future liability, in either of two cases, viz.: first, where the guaranteed contract has no definite time to run; and, second, where it has such definite time, but the principal has so violated it and is so in default that the creditor may safely and lawfully terminate it on account of the breach. (Hunt v. Roberts, 45 N. Y. 691; McKecknie v. Ward, 58 id. 541; Burgess v. Eve, L. R. 13 Eq. Cases, 450; Phillips v. Foxall, L. R. 7 Q. B. 666; Sanderson v. Aston, L. R. 8 Exch. 73.) ” The following cases are also in point: Picker v. Fitzelle (60 App. Div. 451); Mamerow v. National Lead Co. (206 Ill. 626).
The appellant upon tMs appeal concedes the general rule that, when a principal does not perform his contract, the surety need not stand by and permit the guarantee to carry his contract to completion, and thus make the surety liable for the full amount. The appellants contend, however, that the defendant Powers did not legally terminate his liability under the contract. No written notice of any kind was served upon the plaintiff by any of the defendants, wMch in any way referred to the termination of the defendants’ liability as guarantors under the contract. The defendants rely entirely upon the testimony of Frank L. Crocker, an attorney, called by the plaintiff to identify a copy of certain minutes of a meeting of the board of directors of Warner’s Features, Inc., held on January 31, 1914. As above stated, the court charged the jury that, if Powers took the position at any time that he was not personally liable, the plaintiff could not recover for any goods furnished thereafter. It is obvious, however, that the position taken by Powers, to be effective, must have been final and definite and brought to the knowledge of the plaintiff in such a way as to amount to a notice that he intended to terminate his liability as
It is the well-settled law of this State that, in order to bind a corporation, notice must be given to an officer or agent acting within the scope of his authority. (Butler v. Michigan Mutual Life Ins. Co., 184 N. Y. 337; Henry v. Allen, 151 id. 1; Comey v. Harris, No. 1, 133 App. Div. 686; affd., 200 N. Y. 534; Corrigan v. Bobbs-Merrill Co., 228 id. 58.) There is also authority to the effect that, although an agent of a corporation may have knowledge of certain facts, such knowledge does not amount to notice to the corporation, if the agent is also acting for his own benefit or for other persons whose interests are in conflict with those of the corporation. (Brooklyn Distilling Co. v. Standard Distilling & Distributing Co., 193 N. Y. 551; Benedict v. Arnoux, 154 id. 715.)
It follows that the evidence will not sustain the verdict of the jury. Such being the case, it is unnecessary to consider the point
The judgment and order appealed from should be reversed and a new trial granted, with costs to the appellant to abide the event.
Clarke, P. J., Dowling, Smith and McAvoy, JJ., concur.
Judgment and order reversed and new trial "granted, with costs to appellant to abide the event. Settle order on notice.