Case Name: DR. KOCH MEDICAL TEA COMPANY, a Corporation, Respondents, v. MOSES H. POITRAS, J. E. Marion, and J. A. Tetrault, Defendants, J. E. Marion and J. A. Tetrault, Appellants
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 1916-12-30
Citations: 36 N.D. 144
Docket Number: 
Parties: DR. KOCH MEDICAL TEA COMPANY, a Corporation, Respondents, v. MOSES H. POITRAS, J. E. Marion, and J. A. Tetrault, Defendants, J. E. Marion and J. A. Tetrault, Appellants.
Judges: Statement of facts by Bruce, J.
Reporter: North Dakota Reports
Volume: 36
Pages: 144–160

Head Matter:
DR. KOCH MEDICAL TEA COMPANY, a Corporation, Respondents, v. MOSES H. POITRAS, J. E. Marion, and J. A. Tetrault, Defendants, J. E. Marion and J. A. Tetrault, Appellants.
(161 N. W. 727.)
Principal — agent — contract — signed by agent and sureties — to and with company or principal — sale of goods — pi’ice of — payment.
1. Where a medical company sends to a would-be agent or local dealer a contract of agency or right to sell, which includes an assumption by such dealer of the debt of a third party, and requires him to sign the same and to obtain the signature of sureties thereto, who, in consideration of the sum of $1 to them in hand paid by the said medical company, shall and do agree to become such sureties, the guaranty obtained will be deemed to be a direct contract with said medical company and the dealer to be its agent in obtaining the same.
•Contract of suretyship — obligee in — fraud of itself — or agent — execution of contract — by sureties — obtaining signatures — false representations — contract void — contents of — knowledge of —lack of.
2. Where an obligee in a contract of suretyship or guaranty, either by the fraud of itself or its agent, obtains the execution of such contract by fraudulently inducing the signers to believe that it is merely a recommendation as to the honesty of the principal, such contract is void, even though it was not read to or asked to be read to the signers; one of whom was unable to read it on account of having broken his glasses and the other on account of being unable to read the English language.
Opinion filed December 30, 1916.
Rehearing denied March 17, 1917.
Action to recover upon a guaranty.
Appeal from tbe District Court of Rolette County, O. W. ButtZj J.
Judgment for plaintiff.
Reversed.
Statement of facts by Bruce, J.
Tbis is an action to recover upon a guaranty for tbe performance of a certain contract for tbe purchase of medicines.
One Durocber had tbe right for certain counties for tbe sale of certain products of tbe plaintiff medicine company. He desired to give up tbe business, but at tbe time was owing tbe plaintiff $975.49 for goods furnished to him. Tbe defendant Poitras, who1, though a defendant in this action, seems to have moved from tbe state and not to have been served with process, was induced to take-over tbe agency, and to enter into a written contract in relation thereto with tbe plaintiff company. Tbe defendants Marion and Tetrault were also induced by tbe said Poitras and Durocber to sign tbe said contract as sureties, tbe same having been sent to Poitras by tbe company for tbe purpose of obtaining satisfactory security. Tbe present action, though nominally against all of the defendants, is in fact against tbe sureties for tbe sum of $975.49, tbe old debt of Durocher’s, and for goods sold Poitras after tbe execution of the contract, less some payments which bad been made thereon, which exceeded tbe amount due for goods sold Poitras but were not sufficient to extinguish tbe Durocber debt. A verdict and judgment were rendered for tbe balance due on tbe whole account, from which tbe defendants Marion and Tetrault have appealed.
There is a claim that tbe account against Poitras was not properly proved, and an exception taken to tbe remarks of tbe court during tbe trial, but tbe main controversy is over tbe contract of guaranty, whether by executing it tbe defendants Marion and Tetrault made themselves liable for tbe debt of $975.49 which was originally owing from Durocber to tbe plaintiff company, whether in fact their principal Poitras bad ever agreed to pay that indebtedness, and therefore whether they were in turn liable therefor, whether tbe original contract, which was signed by Poitras and for which it was claimed they bad become sureties, bad not been materially altered by tbe plaintiff after its execution, so that tbe same became void and both tbe principal and sureties released therefrom, and whether as a matter of fact tbe said Marion and Tetrault signed as sureties at all, but by fraud and artifice were led into signing a guaranty when all they intended to do and thought they were doing was to sign a recommendation or testimonial as to tbe honesty and reliability of tbe said Poitras.
Tbe contract in question was as follows:'
This Agreement
Made this ... .Uth. ... day of ... .Feb.....190. .9, between
Dr. Koch Vegetable Tea Company, oe Winona, Minn., party of the first part, and . .Moses H. Poitras.... of .. . Lanreat.., in the state of .... .N. Dak......, party of the second part:
Witnesseth, that for and in consideration of the promises and agreements hereinafter contained to be kept and performed by the party of the second part, the party of the first part promises and agrees to sell and deliver to the party of the second part f. o. b. at Winona, Minnesota, in snch reasonable quantities as the party of the second part may from time to time require in his territory hereinafter described, all medicines, flavoring extracts, toilet articles, spices, and other articles manufactured and sold by it.
Upon the execution of this agreement the party of the first part shall mail to the party of the second part its regular printed price list of the goods manufactured and sold by it. All goods sold by the party of the-first part to the party of the second part under this agreement shall be paid for by him at the price shown upon such list, and in making settlements between said parties reference shall be had to such price list, and: such list shall fix the-value and price of all such goods between the parties hereto finally and conclusively, and also as to the guarantors whose guarantee is part of this agreement.
The party of the second part agrees to sell the goods furnished to him hereunder in the count, .ies.. of . .Rolette and Towner. . . . and state of ... .North Dakota......................................... or in such other territory as both parties may agree upon from the date hereof until the 1st day of March 19. . 10.., when this agreement shall terminate.
The party of the second part hereby agrees to keep a complete record of all goods disposed of in his said territory, and to make written reports of the same to the party of the first part upon blank forms to be furnished by it, such reports to be made at such times' and in such manner as the party of the first part from time to time may require, and further agrees to pay the party of the first part for all goods furnished to him from time to time as hereinbefore provided in the following manner: At the time of making each such report, he shall pay to the party of the first part one half of the total amount of cash received by him as shown by such reports, provided such amount does not exceed the amount then due from him for goods previously purchased by him from the party of tbe first part, but tbe time of making such payments or any of them may be extended by the party of the first part without notice to the guarantors hereon without prejudice to the interests of said first party.
At the expiration of this agreement the party of the first part agrees to enter into a new contract with the party of the second part, and, if this contract is not renewed, it will receive from him goods which it has sold to him and which he has left on hand, and will credit his account with the same at the price originally charged therefor, provided such goods are in the same condition as when first shipped and the freight charges thereon to Winona are prepaid. If they are not in such condition a reasonable deduction will be made by the party of the first part for putting them into marketable condition: Provided that both of the foregoing provisions of this clause of this agreement are made upon the express condition that the amount of business done by the party of the second paz*t and his conduct of the same have been satisfactory to the party of the first part.
Upon the termination of this agreement, unless a new contract is made by the parties hereto, the party of the second part shall pay to the party of the first part the full amount of his indebtedness to it.
Either party hereto shall have the right to terminate this agreement at any time prior to the 1st day of March 19. . 10. ., by giving sixty days’ notice in writing to the other party of such termination.
The party of the second part hereby acknowledges that he is indebted to the party of the first paid in the sum of . . 9l5.4%oo • • • • dollars, the same being the balance now due to it from Alphonse Durocher under a previous contract between it and him. In consideration of the- execution of this agreement by the party of the first part and its release of its claim against said .... Alphonse Durocher.... arising as aforesaid, the second party hereby assumes and agrees to pay said indebtedness.
In witness whereof, the parties hereto have caused this agreement to be executed by the duly authorized officers of the party of the first part, and by the party of tbe second part in person, tbe day and year first above written.
Moses H. Poitras.
Dr. Koch Vegetable Tea Company,
By Carl Gericher Sec’y-Treas.
In consideration of tbe sum of $1 to us in band paid by tbe party of tbe first part, and in further consideration of the execution by it of the above agreement, and tbe sale and delivery of its goods as therein provided to tbe party of tbe second part, we, tbe undersigned, jointly and severally guarantee to tbe said party of tbe first part, its successors, and assigns, tbe full and complete payment of all indebtedness of the-party of tbe second part to tbe party of tbe first part arising under said agreement, according to tbe terms and conditions thereof, at tbe time and in the manner provided therein. This guaranty shall take'effect at tbe date of tbe above agreement.
Two responsible sureties sign here.
J. E. Marion.
J. A. Tetrault.
This is to certify that I am well acquainted with tbe party of tbe second part to tbe above agreement, and know him to be an honest, sober, and industrious person, and I also know sureties to be responsible and trustworthy in every respect.
Signed as references by
A. Cbarlebois,
E. M. Jacobsen,
R. E. Rognas.
Outhberi & Smythe, for appellant.
Where a company appoints a local dealer as agent for tbe sale of its goods, and such local dealer or agent, in order to consummate and as a part of tbe transaction, gives to such company a suretyship bond or contract signed by tbe agent and by two sureties, and which contract recites a nominal consideration, and tbe signatures of tbe sureties are obtained by fraud and misrepresentation as to what tbe instrument they are signing is, and also as to its effect, and even though it is not read to them, and they not having asked that it be read, and being unable to read themselves, such instrument is void as to them. 31 Oyc. 1219, ¶ 0, 1221.
The instructions to the jury on the question of the alteration of the contract are so prejudicial to appellants that a mere casual reading of them is sufficient. The indebtedness which they were purporting to assume was no consideration for the execution of the contract. 32 Oyc. 56, 59; 2 Oyc. 151, ¶ B.
The authority of a person in whose hands an incomplete instrument comes, to fill in blanks, is confined to the insertion of only such things and parts as are necessary to make the instrument intelligible, and does not vest such person with authority to materially alter the obligation or liability of the surety. 2 Oyc. 161, 169, ¶ 0,195, ¶ 6, 216.
Any entries in a book or other permanent form, in the usual course of business contemporaneous with the transaction to which they relate and as a part of or connected with such transaction, made by persons authorized to make the same, may be received in evidence, when shown to have been so made upon the testimony either of the person who made them, or, if he is beyond the reach of a subpoena of the trial court or insane, of any person having custody of the entries and testifying that they were made by authority, identifying the handwriting, and also that they are true and correct to his best knowledge and belief.
This case is entirely lacking in any such proof of the account which the court allowed in and which went to the jury. Gomp. Laws 1913, § 7909.
It is error for the trial judge to express or intimate, in the presence of the jury, what has been or has not been proved, or otherwise comment on the value of the testimony, hypothetically or otherwise, and such error alone is reversible error. Atlantic Coast Line R. Oo. v. Powell, 127 Ga. 805, 9 L.R.A.(N.S.) 769, 56 S. E. 1006, 9 Ann. Oas. 553; Coffin v. Brown, 94 Md. 190, 55 L.R.A. 732, 89 Am. St. Rep. 422, 50 Atl. 567; Gerrard v. La Crosse City R. Co. 113 Wis. 258, 57 L.R.A. 465, 89 N.’W. 125; Booren v. McWilliams, 26 N. D. 570, 145 N. W. 410, Ann. Cas. 1916A, 388.
Flynn ■& Traynor, for respondent.
Appellants cannot be allowed to try their case on one theory in the lower court and then present an entirely different theory in the higher court, abandoning the former and relying upon the latter. Delaney v. Western Stock Co. 19 N. D. 630, 125 N. W. 499; Casey v. Eirst Nat. Bank, 20 N. D. 211, 126 N. W. 1011; Crisp v. State Bank, 32 N. D. 263, 155 N. W. 78; 2 Cyc. 670.
The contract here was for a sale of goods in Minnesota, to be shipped into North Dakota. It is not a contract of agency. Dr. Koch Vegetable Tea Co. v. Malone, — Tex. Civ. App. —, 163 S. W. 662; Granite Roofing Co. v. Casler, 82 Mich. 466, 46 N. W. 728; Aspinwall Mfg. Co. v. Johnson, 97 Mich. 531, 56 N. W. 932; Norwegian Plow Co. v. Clark, 102 Iowa, 31, 70 N. W. 808; Ross v. Northrup, K. & Co. 156 Wis. 327, 144 N. W. 1124; Saginaw Medicine Co. v. Batey, 179 Mich. 651,146 N. W. 329.
The original contract was direct between plaintiff and defendants for the sale to them of plaintiff’s goods. Defendants were to obtain two sureties. They did so by securing the execution of the contract as such by appellants.
. It matters not how or in what manner defendants obtained the execution of the contract by the sureties — the appellants — so far as plaintiff is concerned so long as plaintiff had no part in and was ignorant of how or under what circumstances the sureties executed the instrument. Saginaw Medicine Co. v. Batey, 179 Mich. 651, 146 N. W. 329 ; Metropolitan Loan Asso. v. Esche, 75 Cal. 513, 17 Pac. 675; McConnon & Co. v. Laursen, 22 N. D. 604, 135 N. W. 213; W. T. Rawleigh Medical Co. v. Laursen, 25 N. D. 63, 48 L.R.A.(N.S.) 198, 141 N. W. 64.
This court has held that a contract of guaranty, similar to the one here, is a good, valid, and enforceable contract, supported by good and sufficient consideration, even where the $1 mentioned therein was not paid, and even though the signature of the principal had not been proved, and the guarantors had not been notified of acceptance by the company. McConnon v. Laursen, 22 N. D. 604, 135 N. W. 213; W. T. Rawleigh Medical Co. v. Laursen, 25 N. D. 63, 48 L.R.A.(N.S.) 198, 141 N. W. 64.
The law with reference to authority to fill in blanks, and that the filling in of the same does not constitute an alteration of the instrument, is well settled. 2 C. J. 1242.
If one signs a bill or note with blanks not filled, and delivers the same to the proper party, such delivery is authority to fill in the blank spaces in conformity with the original agreement. The filling in of blanks is a question of authority, and not one of alteration. This rule applies with equal force to sureties and guarantors. 32 Cye. 67; 2 O. J. 1245.
But appellants were repeatedly notified by letters from plaintiff of their liability and statements of account rendered to the sureties. The .appellants, with full knowledge thereof, made no objection and permitted plaintiff to go on furnishing goods to defendants in good faith and in reliance upon such guaranty. The appellants therefore acquiesced in the charge of the Doracher account to Poitras as part of their contract •of guaranty. Styles v. Theo. P. Scotland & Co. 22 N. D. 469, 134 N. W. 708; Porter v. Hardy, 10 N. D. 551, 88 N. W. 458; Friends v. Yahr, 126 Wis. 291, 1 L.R.A.(N.S.) 891, 110 Am. St. Rep. 924, 104 N. W. 997; Montgomery v. Dresher, 90 Neb. 632, 38 L.R.A.(N.S.) ■423,134 N. W. 251.
No “excerpts from account books” were admitted in evidence. The sales book was not a complete record of the entire account, but only a memorandum of the shipments alone, which -shipments are positively proved by the original evidence represented by the orders, invoices, and ¡shipping receipts. These, together with'the ledger, the only original book showing the items, both debits and credits, made a continuous and ■conclusive chain of proof of the account by the best evidence. 17 Cyc. 377; State v. Stephenson, 69 Kan. 405, 105 Am. St. Rep. 171, 76 Pac. 905, 2 Ann. Cas. 841; 2 Ene. Ev. 621; McConnon v. Laursen, 22 N. ,'D. 608,135 N. W. 213.
“Even though remarks made in ruling on evidence are improper, the judgment will not be reversed where it is apparent that no prejudice resulted.” 38 Cyc. 1320.

Opinion:
Bruce, J.
(after stating the facts as above). This opinion is written after a rehearing. The main question which is presented revolves .around the following instruction to the jury:
"There has been some testimony offered and received in this lawsuit with regard to representations made by Mr. Duroeher and Mr. Poitras to Mr. Marion and Mr. Tetrault with reference to whether or not this was simply a recommendation rather than a guaranty of payment. I say to you now you will pay no attention to that evidence. I am convinced now I should not have admitted evidence on that subject, because neither Mr. Poitras nor Mr. Duroeher, under the evidence in this case, were agents of the plaintiff in any respect in the getting of this agreement, and it doesn't make any difference what kind of representations they made to these men in order to get them to sign it, — that the plain-. tiff, not knowing anything about the matter, would not be bound by that at all; and the plaintiff having acted upon that agreement as signed in the form that it is in without any knowledge of any representations or misrepresentations made by Mr. Durocher or Mr. Poitras, if they did make any such, is an innocent party in this mátter, and is not bound by any such representations at all, so you will pay no attention to those matters."
We think that, under the circumstances of the case, the above instruction was incorrect, and that a new trial should be ordered.
The learned trial judge, no doubt, proceeded under and sought to apply the general rule of law that "fraud practised by the principal upon the surety, . to which the creditor or his agent was in ho sense a party, will not as a rule, affect the liability of the surety to the creditor." Spencer, Suretyship, § 55; note to 39 Ann. Cas. 501; note to 21 L.E.A. 409.
The case, however, which is before us is a peculiar one. At least the contract which is before us is peculiar. It bears upon its face the-evidence of being cunningly drawn, and of an attempt on the part of a foreign corporation to obtain the services of agents, but at the same time to avoid responsibility for their acts.
Instead of the usual contract of guaranty which, under the earlier cases.at any rate, requires a notice of acceptance to be binding (see W. T. Rawleigh Medical Co. v. Laursen, 25 N. D. 63, 141 N. W. 64, and note-in 48 L.R.A.(N.S.) 199), it contained a direct contract between the-defendants Marion and Tetrault and the medical company. This contract recited a consideration of $1 as passing between the said guarantors and the said company.
At the bottom of the document, as a whole, was a paragraph or provision by -which some parties were to recommend the principal and the guarantors, and which was so closely connected with the guaranty itself' that one might be easily misled into believing that when he was signing-the one he was signing the other.
This contract, according to plaintiff's own testimony, is put into the-hands of the would-be purchaser or new agent (Poitras), "with instruc tions about getting recommendations and sureties, and if he does that satisfactorily it is accepted."
Poitras then was acting in a dual capacity. He was not merely getting a guaranty for the proper performance of his own contract in regard to the purchase of the medicine, but for the payment of a past debt of Durocher's, which he had assumed and which had no real connection with that transaction, and which itself was several years old. He was, according to the terms of the contract of guaranty, paying into the hands of the sureties and for and on behalf of the plaintiff medical company, the beneficiary, the sum of $1. He was making a direct contract between them and that company. He was not even engaged in transmitting an offer from the sureties to the company which had to be accepted in order .to become binding, but in making a final and consummated contract. This, indeed, we are justified in believing was the very purpose of the wording of this peculiar instrument. It was to avoid any possible defense that there was merely an offer of suretyship and which had not been accepted. See discussion in W. T. Rawleigh Medical Co. v. Laursen, supra.
Not only is this so, bnt the agency was ratified by the company. By shipping the goods and suing on the contract and guaranty, it'ratified the payment of the dollar and the making of the direct contract.
Such being the case, the plaintiff was bound by and responsible for the fraudulent acts of Poitras and Durocher. If the defendants were induced to sign the guaranty on account of the false representation that it was merely a testimonial as to the honesty of Poitras, the contract was void. Note in 21 L.H.A. 410.
And this even though the defendants did not read it or have it read to them before signing. One of them did not have his glasses with him, so could not read. The other could not read English.
It was, at the most, for the jury to say whether they were negligent in not having the contract read to them, and whether the plaintiff suffered any detriment by that negligence.
Even if it had been read, the contract was so drawn, and the position of the clauses such, that they might easily have signed the guaranty, thinking that they were signing the recommendation clause only.
The plaintiff is hardly in an equitable position in this case, and it is on this theory only that the failure by an illiterate man to have a contract read to him precludes a defense. It is on the equitable theory that "where one of two innocent parties must suffer, he whose act or negligence first makes the loss possible must bear the burden." Here we have .a paper cunningly drawn, which contains a contract, a guaranty, and a recommendation, all so closely printed together that one might easily sign the one thinking that it was the other. Here, if the defendants' testimony is to be believed, the agent of the company tells the signers that the instrument is merely a recommendation. The defendants sign an original agreement of guaranty and a direct contract between them and the beneficiary. The consideration of this, among other things, is the sum of $1 given to them by the beneficiary. The agreement is made then, not for the accommodation of the principal only, but for that of the beneficiary; for he pays for it.
It is not a case where one is called upon to sign an instrument of a •certain nature, and is sought to be held to a knowledge of all that it may reasonably contain, and that is germane to its subject. It is a case rather where one, by fraud and misrepresentation of the nature of the instrument, induces another to sign a totally different instrument than that which was contemplated by him. In such a case the fraud can •certainly be pleaded in an action between the original parties to the contract. Schuylkill County v. Copley, 67 Pa. 386, 5 Am. Rep. 441.
We are not unaware of the case of Saginaw Medicine Co. v. Batey, 179 Mich. 651, 146 N. W. 329. We are satisfied, however, that in that •ease the court failed to consider the reason for an effect of the consideration of $1 for the guaranty, and the fact that, if a binding contract is made, which shall bind the guarantor without further acceptance hy the medicine company, someone must act for that company in the making •of the contract, and that someone can only be the person who pays the money and obtains the guaranty.
But it is claimed that the defendant is precluded from asserting ' agency on the part of Poitras and Durocher on account of the fact that the theory of the case which was adopted by the trial court, and which was that such agency was not proved and was necessary for the defense, was acquiesced in by him.
The court, however, failed to realize that the agency had been proved, .•and that by the plaintiffs themselves, and the position of counsel was forced upon him by the erroneous rulings of the court.
It is true that, iu seeking to have his evidence admitted, he largely accepted the theory of the court, but he really had no other option. lie had to admit that, as far as he was concerned, independent proof of agency was not possible, as Poitras was absent from the state. Since the court had ruled that proof of agency was necessary on his part to the introduction of evidence of the facts surrounding the signing of the document, he was driven to the expedient of seeking to introduce it on another theory. The evidence, at any rate, was afterwards admitted, and agency having been proved, it was error for the court to instruct the jury not to consider it.
The judgment of the District Court is reversed and a new trial is -ordered.