MACOMBER v. GOLDTHWAITE, 22 F.2d 638

HUNT, Circuit Judge (after stating the facts as above). Plaintiff filed numerous assignments of error.

Several are based upon rulings admitting testimony to which rulings exceptions were reserved; others upon the law as stated in the opinion of the District Judge; others upon several of the findings of fact to which no exceptions were taken before the final action of the court; another upon the ground that the court failed to make a finding as to a matter alleged to be material; others upon certain of the conclusions of law, and one upon the award of judgment in favor of defendant on the ground that the notes sued upon were collateral security to the claim of the Maeomber Company.

But, of the matters included in the assignments, few are before us for review, for it is thoroughly well established that, where a jury is waived and trial is had to the court and special findings are made, in the absence of a request for special findings of fact and of exceptions reserved, based on the ground that special findings made by the court have no evidence to support them, and of exceptions to the conclusions of law drawn by the court from the facts found, the appellate court cannot review the decision of the trial court upon the merits. Fleishman v. United States, 270 U. S. 349, 46 S. Ct. 284, 70 L.

Ed. 624; Southern Pacific Co. v. Kalbaugh (C. C. A.) 18 F.(2d) 837; Danberg Land & Live Stock Co. v. Day (C. C. A.) 247 F. 477; Pabst Brewing Co. v. Horst Co. (C. C. A.) 264 F. 909; Allen v. Cartan & Jeffrey Co. (C. C. A.) 7 F.(2d) 21; First Nat. Bank v. Litteer (8 C. C. A.) 10 F.(2d) 447; Thompson-Starrett Co. v. La Belle Iron Works (2 C. C. A.) 17 F.(2d) 537. Equally well settled is it that the opinion of the judge giving the reasons for his conclusions is not a special finding of facts. Java Cocoanut Oil Co. v. Bank (C. C. A.) 300 F. 305.

Plaintiff seeks, to avoid the force of these rules by arguing that defendant by setting up that his contract was one of guarantyship or suretyship and that payment was made, raised an equitable defense which called for equitable relief, and therefore that the court should ignore irregularities of procedure, take account of the substance only, and render such a judgment upon the record as law and justice require.

But the action was properly brought as one at law, and Goldthwaite’s answer that the promissory notes executed by him, though absolute in form were in fact given as security, and that the performance of the principal obligation discharged the notes, presented a legal defense of payment.

One, sued by the . payee on a promissory note which the defendant admits he made, can set up as a defense that the note was given as security for the performance by defendant of an oral contract entered into with plaintiff, and was to be returned to defendant upon compliance with-the terms of the contract, and he may rely upon parol evidence to show that he is in fact a surety and that the note has • been paid. Such testimony is not offered to repudiate the written instrument, nor to vary or alter its terms, nor to avoid payment thereof, but to show that in fact payment has been made and the contract fulfilled.

The recent ease of Silva v. Gordo, 65 Cal. App. 486, 224 P. 757, clearly states the law as it prevails in California, where the contract was made and was to be performed. Farmers’ & Citizens’ Bank v. Sherman, 33 N. Y. 69. In Mock v. Stoddard, 177 F. 611, this court held, citing Salmon Falls Mfg. Co. v. Goddard, 14 How. 446, 14 L. Ed. 493, that parol evidence was admissible to show that members of a firm who signed a note individually did so in fact for and on behalf of the firm, and that the note was made for a firm obligation. Juilliard v. Chaffee, 92 N. Y. 531; Kirchdorfer v. Watkins, 198 Ky. 69, 248 S. W. 251.

Our opinion being that the issue was of payment, tho parties were right in treating the action, as they did in the lower court, as one of law, to be disposed of accordingly. Our review, therefore, is confined to assignments based upon rulings admitting testimony to which exceptions were saved during the progress of the trial and to the inquiry whether the findings made support the judgment. C., R. I. & P. v. Barrett (C. C. A.) 190 F. 118; Philadelphia Casualty Co. v. Fechheimer (C. C. A.) 220 F. 401, Ann. Cas. 1917D, 64.

On cross-examination plaintiff was aSked whether or not, just before the notes wore signed, or at any time, there was any argument between him and defendant as to whether the Macomber Company would put its claim in the hands of the Board of Trade. Counsel’s objection was that any conversation had before tho notes were signed, or at that time, would bo an attempt to vary the terms of a written agreement by parol evidence.

Counsel for defendant disavowed any intention of varying the written contract, and contended that the circumstances preliminary to the contract constituting the groundwork upon which the contract was based could bo inquired into.

Witness answered that, shortly before the notes were executed, defendant wanted him to consent to the Macomber Company putting its claim with the Board of Trade with the rest of the creditors; that at that time the Maeomher Company' had practically quit business, and that he did not consent to the Macomber Company claim being filed with the Board of Trade until after plaintiff and defendant had concluded their agreement, and defendant-had given plaintiff the notes sued upon.

Considering that the courf had before it for construction a written agreement made shortly before the notes sued on were given, which directly related to the transactions concerning which the notes were made, there was no error in receiving testimony of the circumstances under which the notes were made, including the situation of the parties to the notes.

Section 717, Oregon Laws. Nor was it error to permit the defendant to testify that in February, 1920, before the notes were executed', he and Macomber met and discussed the accounts, and that defendant agreed to approve the account on behalf of the Modoc Company, and that Macomber raised no question whether he represented his company or himself personally. The testimony bore upon the question of tho beneficial ownership of the notes.

Objection is urged to tho action of the court in allowing defendant to answer tho general question whether there was any consideration given for the execution of the notes other than the facts set forth in tho answer filed. Witness said there was not. Tho objection was that defendant had not pleaded failure of consideration, and that by the question defendant sought to vary the contract.

But the answer sets forth that there was an agreement between defendant and plaintiff and their respective companies, by which the Macomber Company was to assign its claim for inclusion in a second mortgage, and that in consideration thereof tho Modoc Company would approve the claim as stated, and that in addition thereto defendant would guarantee payment to the extent of $50,000 by giving the notes sued on, and that all payments on the debt of tho Modoc Company were to be credited against the personal notes; that the notes were made and accepted as company matters, solely upon the considerations mentioned, and upon the understanding that defendant was a surety and guarantor, and that such arrangement was carried out.

The pleading, therefore, justified the ruling made. Our view, already expressed, that it was competent for the defendant to show the circumstances leading up to the contract, and to explain certain references in the writings made in connection with the execution of the notes, refutes the argument that an answer to the question propounded would vary the writings sued upon.

Disposition of the only remaining question is made by saying that, after carefully considering the findings of fact, we are satisfied that they accord with the judgment and tho principles already stated governing the law of contracts by way of negotiable instruments. The judgment is affirmed.