J. R. Watkins Co. v. Beyer

230 N.W. 615, 203 Wis. 397, 1931 Wisc. LEXIS 187

• Court: Wisconsin Supreme Court
• Decided: February 10, 1931
• Status: Published

Opinions

The following opinion was filed April 29, 1930:

Foweee, J.

It is apparent that if Menning was the agent of the company in procuring defendant’s signature to the guaranty, the jury’s findings of representation by Menning that he was not indebted to plaintiff and reliance by the defendant on such representation without negligence on his part voids the contract of guaranty.

The contract in suit and many others very similar have been before the courts of several states. The contracts are cunningly devised to enable foreign corporations to evade the common statutory provisions requiring them to file their articles in a. state as condition precedent to doing business therein and to avoid liability for the acts of their salesmen on the ground that they are not agents. Many attacks upon them upon many grounds have been made by entrapped guarantors. The three courts that have passed upon the question of the peddlers’ agency here involved have taken opposite positions, one on- one side and two on the other.

The case of Saginaw Medicine Co. v. Batey, 179 Mich. 651, 146 N. W. 329, in passing upon a contract precisely the same as the one in suit, holds that the peddler who procured the signature of the guarantor was not the agent of the company, basing its ruling on the ground that - a guarantee is not bound by misrepresentations made to the guarantor by his principal, who of his own motion and for himself procures the guarantor to sign. This rule is correctly applied where the contract of guaranty is made between the principal and the guarantor. But where the guarantee procures a person, whether the principal or some disinterested person, to procure the signature of the guarantor to a contract of guaranty of payment of a past indebtedness entered into directly between himself and the- guarantor for the guarantee’s benefit, for a consideration paid by the guarantee to the guarantor, the rule upon reason should be and by adjudicated cases is otherwise. Dr. Koch M. T. Co. v. Poitras, 36 N. Dak. 144, 161 N. W. 727; W. T. Raleigh Co. v. Warren, 47 S. Dak. 319, 198 N. W. 555; Furst v. Risse (S. Dak.) 229 N. W. 293. In such case, as pointed out by Mr. Justice Beuce in the Poitras Case, supra, the principal acts in a dual capacity. He not only procures a guaranty of payment of his future purchases, but of payment of a past indebtedness, the latter not for his benefit, for he is- bound to pay it anyhow, but for the great benefit of the guarantee. The Michigan case does not mention and apparently failed to consider the force and effect of the recital in the guaranty “in consideration of the payment of one dollar by the guarantee to the guarantor, the receipt whereof is hereby acknowledged by the guarantor,” which indisputably evidences that the contract was conceived as made and in fact was made directly between the guarantee and guarantor. The principal acted for the company in procuring the signature to the guaranty of payment of the past indebtedness. The company had to act through some one in procuring this signature. The principal was as much their agent in getting it as any third person whom they might have directed to procure the signature would have been. The agent’s fraud was the company’s fraud and vitiates the contract.

The South Dakota court in the case last cited distinguishes between the validity of a contract such as is here involved as to indebtedness for future purchases and past indebtedness where both are covered by the contract, holding the contract void as to the latter but valid as to the former. It is not necessary for us to rule respecting such distinction, for the purchases made by Menning during the term of the contract guaranteed by the defendant were fully paid for by the application by the plaintiff of the defendant’s payments during the term to those purchases.

The defendant being entitled to judgment dismissing the complaint upon the findings of the verdict above stated, no reason appears for discussing any other assignments of error.

By the Court. — The judgment is reversed, with directions to enter judgment dismissing the complaint on the merits.

Appellant moved for a rehearing, which was granted, and the cause was reargued.

For the appellant the cause was submitted on the briefs of Bundy, Beach ■& Holland of Eau Claire.

For the respondent there were briefs by Linderman, Rrnns-dell & King of Eau Clajre and D, B, Tayvney and /. M, George of Winona, Minnesota, and oral argument by Mr. T awney.