Court Opinion

ID: 5204780
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:59:19.417098+00
Date Added: 2024-06-11T08:27:15.982394
License: Public Domain

McLaughlin, J. (dissenting):
I am unable to agree with the other members of the court that the judgment appealed from should be affirmed. I am of the opinion that ■ the written agreement signed by the plaintiff, the typewriter company and the subscribers should be read iuto the notes, and as I understand the opinion of Mr. Justice Houghton, he has reached the same conclusion. If this be done, then the words, “ subject to agreement,” etc. relate not only to the deposit of shares of stock, but to every provision of the notes. The written words in the notes referring to the agreement were entirely unpunctuated, and were in the only available space in' the printed form used, and it would be a forced and ungrammatical construction to hold that reference might be made to the agreement as regards the deposit of shares, but for no other purpose. If it be true, as the referee seemed to think, that the words “ subject to agreement,” etc., were susceptible of different meanings, then he was correct in admitting parol evidence to show the meaning in which the words were used. (Kitching v. Brown, 180 N. Y. 414; Evansville National Bank v. Kaufmann, 93 id. 273; Springsteen v. Samson, 32 id. 703 ; Solomon Tobacco Co. v. Cohen, 95 App. Div. 297.) The evidence thus admitted showed beyond question that the intention of the parties was to make every provision in the notes subject to the agreement, and that these words were inserted for that purpose. If the agreement be thus read into the notes for the purpose stated, then the question presented, by applying well-settled rules, is not difficult of solution. Where a printed form of contract is used, written words therein will prevail over the printed words, if there be provisions which are repugnant, irreconcilable or inconsistent. (Kratzenstein v. Western Assurance Co., 116 N. Y. 54; Clark v. Woodruff, 83 id. *654518 ; Collins v. Knuth, 51 App. Div. 188.) As was said in Clark v. Woodruff (supra) : “ The language of printed blanks is easily assumed to be appropriate, without careful examination, while the written. words more safely and. more nearly indicate the intention of the' contracting parties.” In the present case, when the first loan was made, no form of note had been prepared, so that'the printed form of' collateral note used by the trust company was adopted, and the words j “subject to agreement,” etc., written in. If I am-correct in the conclusion -that these words had the effect of incorporating in the notes the entire agreement, then the printed provisions of the' notes repugnant to or inconsistent with the terms of the agreement may be disregarded. The effect of this is not, as the respondent' contends, to make the notes payable to the typewriter company and indorsed by it, but to identify them as those given under the agreement, though not in the exact form provided. But it is suggested ■ that if the agreement be read into the notes, in the manner and with. the effect indicated, the result would be that they would be non-' negotiable and that the agreement provided for negotiable notes.' It is true that in the 1st paragraph of the agreement the typewriter' company agreed to make “ its negotiable promissory notes, as pro- ¡ vided in paragraph III of • this agreement,” but it is evident from. paragraph 3 and the other provisions of the agreement that the. notes were to be non-negotiable. Paragraph 3 does not refer to.' tlie notes as negotiable, and provides that tire typewriter company might renew such amounts as remained unpaid at the end of the year for an additional six months. Paragraph 4 provides that the' typewriter company should deposit with the trust company twenty. dollars for each machine sold by it, to be kept in a special sinking fund account held'as security for the notes. When and'as this fund amounted to $2,000 it was to be applied to the payment of' interest then due on all the notes and the remainder to the principal of the earliest note then unpaid. If those- deposits were not made the,trust company might declare all the notes to be then due and demand and receive payment.. These provisions and some others indicate that negotiable notes were not contemplated in the agreemént. In Roblee v. Union Stockyards Nat. Bank (95 N. W. Rep. 61) the Supreme Court of Nebraska had occasion to pass upon the negotiability of a note under somewhat similar conditions. In that' *655case the note was secured by a mortgage of cows, and one of the provisions was that the mortgagor should deliver the milk from the cows to the mortgagee, who was to. apply the proceeds of the buffer derived therefrom to the payment of the note. The court held that this rendered the note non-negotiable and the reference in that note to the mortgage was by no means as clear as the reference to the agreement in the present case. Here, it is conceded, as it must be, that the trust company could not have negotiated the notes, even if they had been in the precise form provided in the agreement. It 'might have declared them due and after payment by the guarantors have turned them over to them.
If it be true that the agreement should be read into the notes and that rendered them non-negotiable, then but a single question remains as to whether the fact that the notes were made payable to the trust company instead of the typewriter company and indorsed by it, was such a variance as to discharge the guarantors. It is unquestionably true that the contract of a guarantor is 'strictissimi juris and that a variance is not to be tested by the effect .on the guarantor. It must, however,, be something more than form. It must go to the substance of the contract, either as to the guarantor or the jirincipal. A variance which does not alter the obligation of the principal, or increase the liability of the guarantor, will not discharge the latter. (Western New York Life Ins. Co. v. Clinton, 66 N. Y. 326 ; Kingsbury v. Westfall, 61 id. 356 ; American Copper Co. v. Lowther, 38 App. Div. 134; affd., 165 N. Y. 625 ; Standard Underground Cable Co. v. Stone, 35 App. Div. 62.)
In American Copper Co. v. Lowther (supra) the plaintiff agreed to advance $25,000 in cash to the Fairfield Copper Company, the latter giving a bond, payment of which was guaranteed by the defendants. One Wood had theretofore advanced $3,000 to the. copper company in anticipation of this loan. He was indebted to the plaintiff in an amount in excess of this sum, and with the consent of the copper company the plaintiff credited him with $3,000-on his debt to it as part of the $25,000 advanced. It was held that although the terms of the guaranty agreement and the recitals in the bond provided that the whole amount was to be advanced in cash, the guarantors Were not released. In disposing of the question the court said: “ If the Fairfield Company had received from *656plaintiff on November 26, 1894, its check for $3,000; which that-company had at once delivered to Wood in payment of his. debt; even a guarantor would admit that the -transaction was an advance, of money such as would’ satisfy this contract. But this was the: same thing in substance. It was not even in point of.fact a.modifiq cation of the agreement between the principal parties, but the con-v tract they made was carried out. * * * We think, therefore,) that there was no modification, of the contract of the principals,■ and that the defendants as guarantors are liable.” •;
The variance in the 'case now before us as to form of the notes is equally inconsequential. Whether the typewriter company made its notes payable to its ow-n order, and indorsed them, or‘ whether it made them payable to the trust company, is not of the slightest importance, because its obligation and that of the guarantors were precisely the same. (Madison Square Bank v. Pierce, 137 N. Y. 444.) In legal effect, therefore, there was no modification of the agreement. The variance was in a mere • matter ■ of' form. It is true the notes, as made, would require the indorsement, of the trust company to transfer them, while if they had been made payable to the typewriter company and indorsed by it they could be given to the guarantors without further indorsement. But the objection that the trust company -under such circumstances might have refused to indorse them “ without recourse ” or otherwise, so as to transfer .title to the guarantors, is of. no weight whatever. If they had been in the other form the trust company might equally as; well have refused to give them up. The .obligation assumed by the; typewriter company is precisely the same in either ■ case, and' it is that obligation which the guarantors undertook to guarantee. As to that the contract has not been varied in the slightest degree. This being-so; the guarantors are liable. • Their liability has neither been increased nor diminished in any particular. They are in precisely, the same position they would have been 'if the notes had been payable to and indorsed by their, principal.
In conclusion, it is to be observed that whether the words- “ subject to agreement,” etc., relate, as I think they do,, to every provision of the notes, they certainly relate to the deposit of the shares of stock — as.to this we áre all agreed — which means that such shares were to be held in. accordance with the agreement and sub*657ject to it. This disposes of one of the contentions of the respondent and one of the objections to the form of the notes stated in the prevailing opinion, which is that by the subsequent printed provisions of the notes the shares could be held as security for the loans made»by the trust company in excess of $80,000; The agrees ment specifically provides that the shares'should be deposited to secure loans not' in excess of $80,000. The claim then that the trust company could hold these shares as security for loans by it to the typewriter company in excess of that amount,, aggregating Over $20,000, is wholly unfounded. Not more than $80,000 could be advanced under the agreement, it is true, but there is no provision that further agreements for further advances might not be made, nor can one be implied. If the typewriter company had borrowed the further amoimts from other parties, pledging its equities in the stock as security for payment,, no one would seriously contend that this constituted a- violation of the agreement, and if it could borrow from third parties it could borrow from- the trust company.
The judgment appealed from should be reversed and a new trial ordered before another referee, with costs to appellant to abide event.
Laughlin, J., concurred.
Judgment affirmed,, with costs.