Court Opinion

ID: 8795770
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:10:19.350558+00
Date Added: 2024-06-11T17:03:37.241407
License: Public Domain

WARD, Circuit Judge
(dissenting). The decree appealed from was-entered upon an order granting a motion to dismiss the bill. Accord*279ingly we must take all its allegations of fact to be true. They are substantially that the Manufacturing Company, on applying to the Sales Company and subsequently to Whitcomb to act as surety for the faithful performance by the Sales Company of its contract with the Manufacturing Company, represented that it (the Manufacturing Company) had large experience in manufacturing vending machines, with a body of expert workmen, that it would manufacture at its own plant machines like the Plumb model, which statements were wholly false, the Manufacturing Company having no such plant, nor body of expert workmen, and being unable itself to manufacture the machines, and capable only of assembling parts manufactured by others; lhaf Whitcomb relied upon these representations, and would not have executed the contract of suretyship, hut for his belief that they were true.
If these allegations could have been proved in the action at law, I do not see how Whitcomb could have been held as surety. The court seems to think that if the principal, the Sales Company, could not set aside the contract, Whitcomb could not be discharged as surety, and that false representations, to be availed of by him, must have been as to the Sales Company and its contract, and not as to the Manufacturing Company. The Sales Company has not been sued on the contract, and there is nothing to show whether it could set it aside or not. Generally speaking, the rights of the surety are the same as those oí the principal; if the latter is bound, the former is bound. But clearly a surety may have rights entirely independent of the principal or of his contract; for instance, if one is induced to act as surety on the assurance of the obligee that the principal is owner of property which he does not own, the surety would be discharged; so, if he agreed to act on payment of a premium by the obligee which was not paid, or upon the assurance that the obligee had given the principal debtor six months’ credit, whereas he had really given him credit for a year, or that a cosurety would be provided. Many other instances of representations made by the obligee to the surety might be mentioned, in no way connected with the principal or with the transaction between the obligee and the principal, which, if false, would discharge the surety.
It is said that, because the Manufacturing Company was held in the action at law to have furnished machines like the Plumb model, it performed its contract and the surety was therefore bound by his engagement. In that action the surety pleaded that the Manufacturing Company had not performed the written contract with the Sales Company. I quite agree that upon the contract alone the Manufacturing Company was properly held to have the right to use parts manufactured by other persons. The covenant that it would “manufacture” did not imply that it would personally make all the parts; but the surety also pleaded as a defense the matters set up in this bill, and he was not allowed to prove them, on the ground that the contract had not been rescinded, nor any objection made for a year,after it had been in operation. This reason could only apply to the Sales Company, which was not a party to the action. Surely the surety could not have rescinded the contract. The testimony was, however, properly ex-*280eluded, because such a defense could not be maintained in an action at law upon a sealed instrument. Hogg v. Maxwell, 218 Fed. 356, 134 C. C. A. 164. If proof of the facts alleged had been admitted, the construction of the contract between the Manufacturing Company and the Sales Company would have been, or might have been, different. These detailed representations as to its qualifications would have been wholly unnecessary, if it intended only to supply a machine like the model. Had these allegations been continued as a recital in the contract actually executed, the construction of the word “manufacture” would, or at least might, have been different. Certainly the surety, setting up these false representations made to him, would not necessarily have been bound by the written contract between the Manufacturing Company and the Sales Company.
It seems to me a remarkable result that the judgment in the action at law, where the defense of false representations was properly excluded, should defeat the surety’s right to rely upon the same facts in the suit in equity. It should be given its day in court to try out this question. I agree that the court has-jurisdiction in the action on the supersedeas bond, but think that the decree in each case should be reversed.