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Bitker v. Rosenberg

December 21, 1933


Appeal from the District Court of the United States for the Eastern District of Wisconsin; Evan A. Evans, Judge.

Author: Alschuler

Before ALSCHULER, SPARKS, and FITZHENRY, Circuit Judges.

ALSCHULER, Circuit Judge.

Upon a directed verdict the District Court gave judgment against Bitker, who appeals. Federal jurisdiction is predicated on diversity of citizenship -- Rosenberg, plaintiff, of California, and Bitker, defendant, of Wisconsin. The suit was brought on a guaranty by Bitker of the collection of a note of United Investment Company,*fn1 a Wisconsin corporation, and held by Rosenberg. The note coming due and being unpaid, Rosenberg brought suit against the maker in the state court of Wisconsin, recovering a judgment for its face and unpaid interest, which judgment remaining unpaid, this action was brought against Bitker.

The answer denied diversity of citizenship, alleging that during all the times in question Rosenberg was a citizen of Wisconsin; denied that the note was ever delivered to him (Bitker), and alleges that it was delivered by United Investment Company directly to Rosenberg at Rosenberg's request; admits that Bitker executed the guaranty, but says it was merely as an accommodation to Rosenberg; alleges that the words "interest payable monthly" appearing on the note were added thereto after the note and the guaranty thereon had been executed and delivered and without Bitker's knowledge or consent; and alleges as a separate defense that when Bitker executed the guaranty it was upon condition that Rosenberg obtain the signature of one Julius Jacobson to the guaranty, and that it had been agreed by Rosenberg that Bitker's guaranty was made only upon condition that Jacobson would join as a coguar-antor, and that, if he did not so join, Bitker's guaranty would be null and void, and that Jacobson never signed the guaranty.

As to diversity of citizenship, there was practically no evidence to support appellant's contention that Rosenberg was a citizen of Wisconsin when his suit was brought. Federal jurisdiction clearly appears.

Respecting the issues on the merits, appellant contends there was evidence fairly tending to support his side of the controversy, and it was error for the court to direct the verdict for appellee. As to the claim of material alteration after delivery to Rosenberg of the guaranteed note, Bitker's testimony is relied on to support the contention. He said: "The words 'interest payable monthly' in the note, I am positive must have been added after awhile -- after I signed the note." Upon so important an issue, requiring clear and satisfactory proof to maintain it, his testimony does not indicate that certainty and positiveness as would meet this requirement. But the entire evidence affords scarcely a scintilla to support the proposition. The note was not prepared by Rosenberg. It was upon a simple form which it seems plain was obtained from Bitker's son Bruno, who was an attorney at Milwaukee. It also fairly appears that it was prepared upon Bruno's typewriting machine, and, from our inspection of the note, that the typewritten words of the note, including the words in question, were written upon the same machine.

It appears further that on a previous note for $18,000 given by appellant to appellee (which will hereinafter be referred to) the interest for the entire two-year period of that note was paid by Bitker to Rosenberg monthly, and that for three months next following the date of the note in question the interest thereon was in fact sent to Rosenberg monthly. It further appears from Bitker's testimony that a short time after Rosenberg began a suit in the Wisconsin state court to recover unpaid monthly installments of interest on the note in suit, Bitker began a suit against Rosenberg seeking cancellation of the same note, upon the sole ground, as stated in the complaint sworn to by Bitker, that "said plaintiff's guaranty of collection and endorsement was to be conditional upon the defendant obtaining the like guaranty and endorsement from one Julius Jacobson," which was never obtained. That so important a defense as a material change in the terms of the note after its delivery was not then in the mind of Bitker is manifest from the fact that, in setting out the note as part of Bitker's answer in that cause, not only is it set out in the exact words as it appears above, including the provision respecting monthly payment of interest, but, with attention so challenged to this provision of the note, no mention is made nor defense then asserted on this subsequently alleged material alteration of the note. Bitker testified to knowing of the monthly payments of interest which had been made on the note (indeed, he, his son Bruno and Jacobson owned all the stock of United Investment Company), and to receiving from the Burlington bank (which evidently held the note) a "lot of letters" demanding monthly interest payments; and that some time before May 28, 1931, he told the bank he would see to it that the monthly interest then unpaid was paid at once, interest which, but for the monthly interest clause of the note, would not have been due until January 2, 1932. Such complete and admitted acquiescence in the expressed stipulation for monthly interest payments, coupled with the other overwhelming proof that the clause was in the note when delivered, so effectively neutralizes Bitker's half-hearted and insufficient testimony that the clause was not in the note when guaranteed and delivered that, in our judgment, the trial court properly concluded there was no substantial proof of the alleged alteration.

Respecting Bitker's contention of an agreement that unless Rosenberg secured Jacobson's signature as a coguarantor Bitker's guaranty should be void, the fact situation is very much the same. Late in 1928, after negotiations extending over a considerable time, Rosenberg sold to Bitker for $18,000 certain shares in corporations wherein both held stock, taking Bitker's note for that amount payable in two years, with interest at 6 per cent. per annum. It does not definitely appear what interest-paying dates that note specified, beyond the uncontroverted fact that for the two years Bitker paid the interest to Rosenberg monthly. The best we can make out of Bitker's contention is that he and Rosenberg had a verbal understanding, before the first note was given, that if Bitker bought the stock he might at any time tender it back to Rosenberg and Rosenberg would return the note; and that, pursuant to such understanding, after the first note matured, Bitker elected to take back his note and return Rosenberg the stock, and that this was done; that thereafter Rosenberg sold the stock to United Investment Company for $18,000, and that at Rosenberg's request the corporation made its note to Bitker, who in turn indorsed it to Rosenberg with his (Bitker's) guaranty of its collection, to be valid only if Jacobson also signed the guaranty, and that this guaranty was for Rosenberg's accommodation only.

This circuitous alleged transaction was evidently intended to make plausible Bitker's claim that the original transaction was then wholly ended -- with Rosenberg again holding the stock, and Bitker's note delivered up and canceled -- in order that it would appear there was no relation between that transaction and the one which followed.

Bitker was in California in 1927, and while there Rosenberg besought him to find a buyer for the stock, which Bitker undertook to do. Nothing was accomplished up to Bitker's return home, and thereafter negotiations were carried on by correspondence. The letters clearly indicate that Bitker had some prospective purchasers for the stock, and that, when the asked price was low enough, he proposed to buy the stock himself, which he did. The letters themselves, of which the relevant portions are printed in the margin,*fn2 indicate close bargaining on both sides, resulting in the acceptance of Bitker's final offer for the stock, without suggestion of any condition upon the sale, or of any option in Bitker to return the stock and get back his note.

It does not appear that United Investment Company paid anything for the stock beyond giving its note for the same amount for which Bitker gave his note when he acquired the stock. Quite naturally Rosenberg would not release Bitker in exchange for the corporate liability alone, and so the guaranty by Bitker of the corporate note to Rosenberg was a transaction in which it might reasonably have been expected the parties would enter.

That this was in fact the transaction is apparent from Bitker's letter to Rosenberg written just after the note in question was delivered. This letter was prepared by Bruno and is shown in the margin.*fn3 Assuming that therein Bitker stated the truth, it is apparent that the guaranty was but a form for continuing Bitker's original liability to Rosenberg.

Besides, the form of the guaranty on the note is in the first person singular. appellant's counsel urges that this should have no weight, since in the use of forms it is not controlling whether the singular or plural is employed, as often the one may be employed and the other intended. But it happens that in this guaranty, which is stamped on the back of the ...

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