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Schaffran v. Mt. Vernon-Woodberry Mills Inc.

April 19, 1934


Appeal from the District Court of the United States for the District of New Jersey; Guy L. Fake, Judge.

Author: Woolley

Before BUFFINGTON, WOOLLEY, and THOMPSON, Circuit Judges.

WOOLLEY, Circuit Judge.

On April 23, 1930, Thomas Foxhall entered into a written agreement of guaranty which, with the critical words emphasized by our italics, reads as follows:

"Whereas Winston Converting Company * * * is desirous of increasing its credit limit with Mount Vernon-Woodberry Mills, Inc.

"And Whereas Mount Vernon-Woodberry Mills, Inc. is willing that this credit limit should be increased provided the present indebtedness of Winston Converting Company to it is guaranteed and also that the new credit limit be guaranteed by good and sufficient sureties.

"Now Therefore This Agreement * * * between Thomas Foxhall * * * and Passaic Engraving Company * * * parties of the first part, and Mount Vernon-Woodberry Mills, Inc. * * * party of the second part, witnesseth * * *.

"The party of the second part agrees to extend to Winston Converting Company a credit limit of Five Thousand ($5,000) Dollars.

"The parties of the first part do hereby jointly and severally guarantee the payment by Winston Converting Company of all its present indebtedness to Mount Vernon-Woodberry Mills, Inc., amounting to $3,659.01. (Recovery on this phase of the guaranty is not involved in the suit.)

"And said parties of the first part do further agree that they will jointly and severally guarantee the payment of all orders of Winston Converting Company accepted by Mount Vernon-Woodberry Mills, Inc." and "waive any right to notice of nonpayment by said Winston Converting Company to which they may be entitled under the laws of this or any other state."

Conceiving that Foxhall had breached his contract, the Mount Vernon-Woodberry Mills, Inc. brought this suit, setting forth in its complaint (after amendment) two writings between itself and Winston Converting Company whereby the latter concern agreed to purchase from the former certain quantities of army duck, deliveries to be ordered from time to time, and alleging that Winston Company had refused to order out, or take delivery, or pay for the material so ordered or contracted for, with the result that the plaintiff was compelled to re-sell the goods at a loss of $5,408.57 for which it asks recovery from the defendant guarantor. Foxhall, by his answer, admitted the execution of the contract of guaranty but denied the allegations of the complaint imputing liability to him. He died before trial. His executrix appeared as defendant and adopted his answer.

The contract of guaranty calls for construction, as do also the instruments by which the goods were ordered or contracted for and on which the primary defaults were made. The question before the District Court, and now before this court on appeal, was whether the guaranty is for "payment" for goods which the Winston Company should "order" and actually receive up to the credit limit of $5,000 or is for performance by the Winston Company of "contracts" for goods, covering liquidated damages for breaches of the contracts.

Early in the pendency of the suit the defendant moved to strike the complaint as not showing a cause of action, thus raising that question on the pleadings. The judge, then sitting, construed the contract as one guaranteeing performance and denied the motion. Later the case proceeded to trial before another judge of the same district, who, though personally inclined to an opposite opinion, regarded himself bound by the construction of the first judge on the motion to strike as res judicata and accordingly construed the contract of guaranty as one not restricted to payment for goods ordered and received but as extending to performance of contracts entered into, for breach of which the guarantor is liable in damages. On cross-motions for directed verdicts, the learned trial judge embodied this construction of the contract in a judgment for the plaintiff for the sum of $5,525. The defendant appealed.

Although at the conclusion of the trial the parties recognized that the facts were practically undisputed and the issues were narrowed down to the question involved on this appeal, there was, as we read the record, no stipulation, written or oral, that a jury should be waived and the case submitted to the court under Rev. St. §§ 649, 700 (28 USCA §§ 773, 875). Instead, both parties moved for directed verdicts in their favor, respectively. Clearly that brought the case within the rule of Beuttell v. Magone, 157 U.S. 154, 15 S. Ct. 566, 39 L. Ed. 654. The court, however, instead of directing the jury to render a verdict for one party or the other, dismissed the jury and entered judgment for the plaintiff. This, though an unusual way of putting into effect the Beuttell-Magone rule, is supported by some authorities. However, as the plaintiff, of course, ...

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