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WATSON v. LEHIGH VALLEY WOOD WORK CORP.

October 23, 1961

Charles O. WATSON, individually and trading as Watson Millwork Lumber Company, and S. S. Jaksick, individually and trading as White Pine Sales Company
v.
LEHIGH VALLEY WOOD WORK CORP., Inc. and Lloyds and Lloyds, Inc., and William R. Schmerling



The opinion of the court was delivered by: CLARY

This is an action based upon an alleged oral contract of guaranty, tried before this Court, without a jury. From the pleadings and proof, the Court makes the following.

Findings of Fact

 1. Plaintiff, Charles O. Watson, is a citizen of Nevada, engaged in the lumber business, trading as the Watson Millwork Lumber Company. Plaintiff, S. S. Jaksick, is a citizen of Nevada, trading as the White Pine Sales Company.

 2. Defendant, Lehigh Valley Wood Work Corp., Inc., at the time the complaint in this action was filed, was a Pennsylvania corporation engaged in the wooden moulding and related products business. Defendant, Lloyds and Lloyds, Inc., is a Pennsylvania corporation engaged in the business of a del credere agent or factor. Defendant, William R. Schmerling, is a citizen of Pennsylvania, and a shareholder and director of Lloyds and Lloyds, Inc., as well as Lumico Sales Company. *fn1"

 3. The amount in controversy exceeds $ 3,000 exclusive of interest and costs.

 4. Lehigh was incorporated in February of 1956 and was adjudicated a bankrupt subsequent to the transactions here involved.

 5. Lloyds financed Lehigh pursuant to a factoring agreement providing for a specified interest rate on the amount advanced plus a service charge of 1% On Lehigh transactions with suppliers and customers.

 6. In the early part of May, 1956, Watson agreed to sell, and Lehigh agreed to buy certain amounts of lumber. Upon inquiry by Watson, a Mr. Wilkinson of Lehigh referred Watson to Lloyds for the guaranteeing of payment by Lehigh.

 7. On June 19 and June 29, 1956, Watson wrote to Lloyds and requested a written guaranty of payment. These letters were never answered by Lloyds nor did Watson ever receive the written guaranty he requested.

 8. Commencing on June 20, 1956, and ending on August 17, 1956, Watson shipped to Lehigh 19 cars of lumber for a total price of $ 68,512.62.

 9. After Lehigh paid $ 39,588.66 of this debt, it defaulted. Thereafter, Lehigh was placed in bankruptcy and dissolved without any distribution to creditors, leaving a balance due to Watson of $ 29,216.12. Judgment by default was entered against Lehigh on September 9, 1957.

 10. On July 17, 1956, Schmerling told Watson in a telephone conversation that he would forward a letter of guaranty. However, no such letter was forwarded to Watson.

 11. On four separate checks remitted by Lehigh to Watson, Lehigh deducted 1%, a total of $ 192.69, from the invoices submitted and credited this amount to Lloyds on the face of the checks.

 12. Lloyds thereafter received from Lehigh the 1% Deducted.

 13. Lehigh informed Watson that the 1% Was being deducted as a commission for the guarantee of the accounts of Lloyds and was being paid to Lloyds. Lloyds, however, thought that Lehigh had persuaded Watson to absorb the 1% Service charge which was to be paid by Lehigh to Lloyds under the factoring agreement.

 14. Lloyds never received an additional 1% From Watson.

 15. On August 22, 1956, at the request of Watson and for his accommodation, Lloyds transmitted a telegram to the Nevada Bank of Commerce in which Lloyds guaranteed payment of $ 16,000 covering invoices of Watson to ...


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