Bridges v. Miller Rubber Co.

Walsh, J., delivered the opinion of the Court. The question to be determined in this appeal is whether John S. Bridges, the appellant, is liable to the Miller Rubber Company of New York, the appellee, to the extent of $30,-000 on two bonds of $15,000 each, signed by him and dated respectively January 1st, 1920, and January 1st, 1922, as contended by the appellee, or whether, as contended by the appellant, he is only liable to the extent of $15,000, on the theory that the second bond was simply a renewal or continuation of the first bond, and also on the theory that the second bond was void because the appellee failed to disclose certain facts to the appellant at the time he signed it. The practically undisputed facts of the case are that, prior to January 1st, 1920, G. R. Schumann, a son-in-law of the appellant, and R. Oator Robinson, were partners trading as the Star Sales Company, which company was engaged in the tire business in Baltimore City and handled, among others, the products of the appellee. The Star Sales Company bought direct from the appellee and the payment for these purchases was guaranteed by the appellant.

In December, 1919, the appellant, under this guaranty, was compelled to ³ pay the appellee $5,888.24, which sum, however, wa!s repaid to him early in 1920 from the proceeds of the sale of the business and assets of the Star Sales Company. On January 1st, 1920, G. R. Schumann and R. Oator Robinson, hereinafter called the agents, entered into a: two-year contract with the appellee to handle its products exclusively in Baltimore Oity and in certain surrounding' territory in Maryland, Virginia, West Virginia and Delaware. Under the terms of this contract the tires, tubes and other articles to be sold by the agents were sent to them on consignment, title being retained by the appellee, the agents assumed all the expenses of the agency, such as. rent, clerk hire and other overhead, guaranteed the payment of all accounts within thirty days from the date the goods were sold, and were to be paid as full compensation for their services the difference between the list price of the goods and the prices at which they were actually sold. In addition the contract provided that the agents should make a full daily report to the appellee of all sales, should deposit in a designated bank in the name of the ‘appellee all money received from such sales, or on account, and send duplicate deposit slips to the appellee, and should also, on the first day of each month, make a complete report to the appellee showing! all stock on hand, all accounts receivable, and the total of accounts whose collection was considered doubtful because of the bankruptcy or1 insolvency of the debtors.

The contract also provided that the ag’ents should furnish a surety Ixmd in the penalty of $15,000, conditioned upon the faithful performance of the contract and guaranteeing the payment of all accounts for goods sold by the agents. This bond, which, was dated January 1st, 1920, was signed by the appellant, John S. Bridges, as surety, and after providing for the faithful performance of the contract of even date, which contract was attached to and made a part of the bond, it continued as follows: “It is agreed by and between the parties hereto that the liability of the surety on this bond shall not become absolute as to any account for goods sold by said Schumann & Robinson, of Baltimore, Md., under said ⁴ contract, unless said account or any part thereof shall remain unpaid for thirty (30) days after the maturity thereof (the terms of sale to he thirty days net), and said surety consents to any extensions of time of payment, or extensions of credit that may he given by said Schumann & Robinson or said The Miller Rubber Oo. of RT. Y., to any customer of it, and waives notice of any default on the part of said Schumann & Robinson, of Baltimore, Md., in collecting and accounting for the proceeds of any sales, and waives all notice of nonpayment of any and all customer’s accounts at maturity.” Upon the expiration of the two-year period, namely, on January 1st, 192'2, a new contract was entered into between the agents and the appellee for another, period of two years. This contract made several changes in the territory covered, and also contained a new clause providing for the advancement of money by the appellee to the agents, and its repayment upon the demand of the former.

Otherwise the two contracts were substantially the same. This contract was sent to the agents on December 17 th, 1921, with the following letter: “Gentlemen : “We are enclosing herewith a new contract, which upon execution will become effective January 1st, 1922. “Kindly execute the contract and have a bond signed by yourself as principal and Mr. Bridges as surety, or such surety as you may elect, and whom you know will prove acceptable to this company. “Your immediate attention to this matter, in view of the early expiration date of your present contract, will be appreciated.” On December 27th, 1921, the agents replied to this letter as follows: “Subject- — -RTew Cootteact. “We are just in receipt of the above, but note that you have not filled same in. As we would like very much to have this instrument in as definite form as ⁵ possible before submitting it to Mr. Bridges or airy-other surety, we thought it best to get in communication with you at once with reference to the term of it. As the contract which is about to expire was drawn for two years, we would like to make the new one for the same period, and trust that this will be satisfactory to your company.

As we feel here tbat the turning point is now past and we are about to see some real business, wo believe that a contract for this length of time would be the most equitable one for all concerned. “We would appreciate your advices with reference to this question so that we may fill out the bond and contract and have same executed and returned to you without any undue delay.” And. on January 10, 1922, they wrote as follows: “Sub j eot — C'oetkact. “Just as soon as Mr. Bridges returns to Baltimore, we will have our contract duly executed and returned to you immediately. He is now attending the automobile show in How Tork, and is expected back within the next few days. We are sorry of this delay, but will endeavor to get this through to you just as soon as possible.” Shortly afterwards this bond, the penalty of which was $15,000, and the terms of which were practically identical with those in the bond’ of January 1st, 1920, was executed by tlxe agents as principals and tbe appellant as surety, and delivered to the appellee. In December, 1922, R. Cator Robinson decided to withdraw from the firm of Schumann & Robinson, and in March, 1923, after be bad withdrawn, a new contract was entered into between G. R. Schumann, tbe remaining partner, and the appellee.

This contract was substantially similar to tbe preceding contracts heretofore mentioned:, but no bond was ever executed in connection with it, Schumann having undertaken but failed to deposit certain collateral in lien of a bond. ⁶ In December, 1923, the indebtedness of the old. firm of Schumann & Robinson, the agents, to the appellee, amounted to over $100,000, and during that month the appellee discovered that a great part of that indebtedness was the result of misappropriations. The appellee thereupon notified the appellant of the situation, G. R. Schumann -admitted the misappropriations, and after a full statement of the appellee’s losses had been submitted to the appellant, demand wa's made upon him for $30,000, the full penalty of both bonds. Mr. Bridges declined to pay this amount, and, when suit at law was entered against him on the bonds in the Superior Court of Baltimore City, he filed his bill of complaint in this case, alleging that the bond of January 1st, 1922, was simply a renewal of the bond of January 1st, 1920, and was so understood by the parties to it, and asking that, if the bonds as executed appeared to be separate and distinct obligations, they be reformed so as to express this actual intention of the parties. The bill further asked for a discovery of the books, papers, accounts, correspondence and other matters showing the course of dealing and state of accounts between Schumann & Robinson -and the Miller Rubber Company, for the enjoining of the pending suit at law between the parties, the determination by the court of the amount, if any, which Bridges owed the Miller Rubber Company, and for other relief.

The answer of the Miller Rubber Obmpany denied that it was the intention of the parties that the bond of January 1st, 1922, was a renewal of the bond of January 1st, 1920, but alleged that each bond was a separate obligation covering different contracts and-different periods of time, stated that all matters covering its transactions with Schumann & Robinson had been offered for inspection to the attorneys for Mr. Bridges, and agreed to have the question of his indebtedness as surety determined by the equity court in which the bill was filed. Testimony was taken in open court, and after a full hearing the learned court below found that Mr. Bridges was indebted to the Miller Rubber Company in ⁷ the sum of $30,000, and from a decree so stating, and dismissing the hill of complaint, Mr. Bridges has appealed. There is little difficulty in disposing of the appellant’s contention that the bonds, properly construed, are but one contract, the second being a renewal of the first. They are distinct and separate instruments, guaranteeing distinct and separate contracts, which not only cover different periods of time, but which also differ in the precise territory which they assign the agents, and, in the second contract, there is a clause regarding the advancement of money by the appellee to the agents, which is not contained in the first contract at all.

In addition to this, there is not a word in the second bond or contract which refers to their being a renewal or continuation of the first ones. Under these circumstances, there ca'n he no doubt that, looked at in themselves, each bond is a separate obligation. Rot do we think there was such a. mutual mistake by the parties regarding the effect of these instruments as would justify a court of equity in ordering their reformation. The appellant appears to have clearly thought and understood that lie was merely executing a’ renewal bond.

He testified that his son-in-law, G. R. Schumann, so advised him, and his subsequent conduct hears out his contention in this regard. But, on the other hand, it is equally apparent from the record that the appellee intended and understood that the second bond was not a mere renewal, but was a new, separate and additional obligation. Mr. Wetzel, who was general credit manager for the appellee, and had charge of the Schumann & Robinson contracts, testified positively to this effect, and stated that the requiring of additional bonds covering- each additional contract for a new period of time was the usual practice of the appellee. And the request in his letter of December 17, 1921, that the second bond be executed by “Mr. Bridges as surety, or such surety as you may elect, and whom you know will prove acceptable to tbis company,” certainly substantiates this part of his testimony.

There were several other matters mentioned in the testimony which ⁸ have some bearing one way or another on the point under discussion, but as none of them are, in our judgment, sufficient to justify a conclusion different from that just announced, we will not unduly lengthen this opinion by a recital of them. Being of the opinion then that there was no mutual mistake, but only a mistake by one of the parties about these two bonds, it follows, under all the authorities, that there can be no reformation of the bonds on this ground alone. Aetna Indemnity Co. v. B. & O. R. R. Co., 112 Md. 389 ; Coggins v. Carey, 106 Md. 217 ; Gaver v. Gaver, 119 Md. 636 ; Childs on Suretyship and Guaranty, 117, 21 R. C. L. 995, sec. 43 ; Cohen v. Numsen, 104 Md. 679 ; Stiles v. Willis, 66 Md. 555 ; Dulany v. Rogers, 50 Md. 524 . The appellant, however, insists that the failure of the appellee to advise him of its views about this second bond, after he had intimated in a letter written on April 3rd, 1922, that he was only obligated to the extent of $15,000, estops the appellee from now asserting that he is responsible for $30,000.

The letter in question covers more than a .page of the printed record, and, with the exception of the last paragraph, it is devoted entirely to soliciting the appellee to transfer its Baltimore bank account to the Atlantic Trust Company, and in stating the soundness and strength of this trust company. The reference to his own liability is found in the last paragraph, which reads as follows: “It is certainly true that if I can risk fifteen thorn sand dollars ($15,000.00) on two individuals, without any security whatever that you should not hesitate dealing with a bank and trust company of the size and guarantee of the Atlantic Trust Company of this city.” The appellee, through Mr. Wetzel, replied to this on April '18, 1922, as follows: “Your letter of April 3rd. has not been neglected, but response thereto has been delayed by reason of the writer’s continual absence from the office. You will hear further from us within the next few days.” ⁹ Later on, without further correspondence, the appellee’s banking account, or part of it, was transferred to the Atlantic •Trust Company, hut the appellant was not advised by anyone that his liability was $30,000 instead of $15,000. We do not think this estops the appellee.

The subject-matter of the appellant’s letter wa's the transfer of a bank account, and the reference to his liability as surety for Schumann & Robinson was merely incidental, so that the explanation of Mr. Wetzel that it never occurred to him to take up the question of the appellant’s entire liability is quite reasonable, in addition, this Court stated, in the case of Biggs v. Steue ler, 93 Md. 112 , that “there is no rule of law which requires a person to enter into a correspondence with another in reference to a matter in disputo between them, or which holds that silence should be regarded as an admission against the party to whom the letter is addressed.” And we apprehend chat this rule would apply with particular force to a, case like the present, in which the matter mentioned had been fixed several months before by the execution and delivery of so solemn an instrument as a bond, and in which the mention of the matter was purely incidental. This brings us to the appellant’s final and most serious contention, which is that the appellee, by failing to disclose to the appellant the actual condition of affairs existing between it and the agents at the time the second bond was executed in January, 1922, and particularly by failing to advise the appellant about the account of one Steinsnyder, at that time a bankrupt, rendered the second bond null and void. This position was not maintained in the bill of complaint, but it is pressed now under the prayer of the bill for general relief, the appellant contending that, until the accounts, papers and other data showing the course of dealing between the appellee and the agents were exhibited to his counsel, after the filing of the hill, he did not know of the existence of the facts on which this final position is based. The disclosures above mentioned showed that, at the expiration of the first contract period on December 31st, 1921,- ¹⁰ the agents owed the appellee $55,596.79, that a year later they owed something over $80,000, and that when the firm of Schumann & Robinson was dissolved in March or April, 1923, and the entire agency taken over by G. R. Schumann, the old firm owed the appellee in the neighborhood of $100,-000.

It further appeared that in 1920 the net sales of the agents totalled $116,607.13, on which the agents’ commissions amounted to $15,566.35, that in 1921 the sales were $126,971.43, on which the commissions were $17,194.73, and that in 1922 the sales were $103,705.58, on which me commissions were $11,640.46. And the