Baird v. Publishers' National Service Bureau

199 N.W. 757 | N.D. | 1924

This is an appeal from a judgment dismissing the plaintiff's action on a promissory note. The facts are as follows: On or about October 1, 1919, one Cahill, cashier of the Peoples State Bank of Leith, an unnamed agent of the Publishers' National Service Bureau, and the four individual defendants, William Clausen, Robert Franzen, W.B. Noyes and H.A. Seely, met at William Clausen's place near Carson and had some discussion relative to certain indebtedness owing to the Leith Bank on account of the operations of the Grant County Publishing Company, publisher of a paper known as the Grant County Leader. During the conference the note in suit was executed, which is in words and figures as follows:

No. 544. October 1st, 1919.

On or before the 1st day of March 1920, without grace we promise to pay to the order of The Peoples State Bank of Leith, Eight Hundred Forty-Seven and 30/100 ................. Dollars. Value received, with interest at the rate of 10 per cent per annum from date until paid. Payable at the Peoples State Bank of Leith. The respective makers and endorsers hereof severally waive presentment for payment, protest, notice of nonpayment, and of protest of this note.

Publishers National Service Bureau. $847.30. By W.W. Liggett,

General Manager. Endorsement: Wm. Clausen, Robert Franzen, W.B. Noyes, H.A. Seely.

Some time later the Peoples State Bank failed and the above note was found among its assets. This action is brought by the receiver. The complaint is in the usual form. The answer of the defendants is, in effect, a general denial to which is added an affirmative defense as follows: The defendants "deny that they ever intentionally, knowingly or otherwise indorsed or subscribed their names to the note as individuals, but, on the contrary, allege that they subscribed their names to the instrument for the sole purpose of affixing the liability of the corporation to it, the Grant County Farmers Press (meaning Grant County Publishing Company), as an indorser of said note; that these answering defendants were induced to attach their names to the said note under the following circumstances: That it was represented to these answering defendants by the Publishers' National Service Bureau, and its servants and agents, and by the plaintiff, and its agents and servants, that the said Bureau and the plaintiff Bank, desired and required the indorsement of the Grant County Farmers Press, a corporation, on said note, and that in order to affix the indorsement and liability of the said Grant County Farmers Press on said note, it was necessary for those answering defendants, who were then and there officers and directors of the said Grant County Farmers Press, to subscribe their names on the back of said note; that these answering defendants relied upon and believed said representations, and believed that it was necessary for them, as directors, to subscribe their names on said note in order to affix the indorsement and liability of the Grant County Farmers Press as an indorser on said note; and that these answering defendants, so believing and so relying, did subscribe their names; that the plaintiff at all times knew that these defendants were not attaching their names to said note for the purpose of binding themselves individually or personally, but for the sole purpose of affixing the liability of the Grant County Farmers Press; that at the time these answering defendants so affixed their signatures to said note they were they duly elected, acting and qualified directors of the said Grant County Farmers Press; that these answering defendants at no time received any consideration for affixing their signatures to said note, and specifically allege that they are in no manner liable personally as indorsers or otherwise on said note."

At the trial evidence was adduced over objection to establish the facts thus alleged. Each of the individual defendants admitted his signature on the note as indorser and each likewise testified that the conference at Clausen's place was a meeting of the directors of the Grant County Publishing Company; that during the meeting it was explained to them by Cahill, the cashier of the bank, that he desired this note to be executed for the credit of the publishing company and that he desired them as directors to indorse the note for the publishing company, representing to them that the directors, by indorsing their individual names, would affix the liability of the company. This evidence was disputed by Cahill who testified that the note in suit was taken as a renewal of the three notes which had been given from time to time by certain of these defendants individually, the proceeds of which went to the publishing company with the exception of a small amount; that he desired to reduce the publishing company's indebtedness; that he would not have accepted as a renewal of the three notes, upon which certain of the defendants were liable personally, the note of the Publishers' National Service Bureau indorsed by the Grant County Publishing Company. Under instructions to the effect that the facts pleaded would constitute a defense to the action, the jury returned a verdict for the defendants dismissing the plaintiff's action and upon this verdict the judgment appealed from was entered.

The determining question in the case is whether or not the facts pleaded constitute a defense. It is the contention of the respondents that the evidence submitted under the answer is sufficient to sustain the verdict as establishing the defense of (1) mistake, (2) fraud in misrepresentation of fact, and (3) fraud in misrepresentation of law. It is said that through the assertions and statements of Cahill they were induced to believe that in signing their individual names they were merely effecting the execution of the indorsement by the corporation; that Cahill knew they were acting under such mistaken belief and that consequently there was a mistake in the capacity in which they appear to be bound upon the instrument. None of the defendants were deceived with respect to the character of the instrument which they were signing. If there was any mistake, it was simply an erroneous belief as to the legal effect of the act of signing their individual names as indorsers. Then it is said that the same facts constitute fraud and misrepresentation of fact in that Cahill represented to the defendants, according to their testimony, that he desired the indorsement of the corporation, when, according to his testimony, he, in fact, desired their signatures as individuals. It is urged that if Cahill had represented to the defendants his desire and aim to secure their individual obligation, he would not have obtained their signatures and that hence the misrepresentation of his aim and desire is a misrepresentation of fact. This argument impresses us as being nothing more or less than an attempt to state, in terms of misrepresentation of fact, that which at most is a misrepresentation of the legal effect of the defendants' acts in signing their names as they did. If the corporation were solvent and the individual directors indorsing insolvent, what would be thought of the converse proposition? Would the bank be able to hold the corporation on the strength of these individual signatures if the cashier had relied upon the statements of the directors to the effect that they were intending thus to affix the liability of the corporation and that they had represented to Cahill that they so intended? The sophistry in the argument lies in this: the individual aims and desires of a party entering into a contract is of no concern to the other contracting party. This is elementary. Hence, a misrepresentation of one's individual aim or desire in entering into a contract is not a misrepresentation of a material fact.

If Cahill stated to the defendants that by indorsing their individual names they were assuming no individual liability but were binding the corporation of which they were directors, his statement amounts to no more and no less than a misrepresentation of the legal effect of their act, and this, the respondents contend, treated as a misrepresentation of law, constitutes a defense to the note. We are not in this case dealing with a situation where there is any fiduciary relation (Orth v. Procise, 38 N.D. 580, 165 N.W. 557), nor with a situation in which one of the parties may be presumed to have superior knowledge with respect to that which he represents. We must assume that the defendants are of equal intelligence with the bank's agent, Cahill. We must assume that they were as capable of transacting the business of the corporation of which they were directors in the manner in which they desired to transact it, as Cahill was to transact the business of the bank, and that they knew as well how to bind their corporation as Cahill would know how to bind the bank. At any rate there is nothing in this record to justify the defendants in relying upon any advice that might have been volunteered by Cahill as to how they might bind their corporation as indorsers, or as to how they should sign to negative personal liability. It is elementary law that no one is bound on a negotiable instrument whose name does not appear thereon, § 18, Neg. Inst. Law, § 6903, Comp. Laws 1913, and, according to the overwhelming weight of authority, evidence is not admissible to establish that a person signing his individual name to an instrument did so in order to bind another whose name does not appear. See 8 C.J. 157. There is no indication on the note in suit that the defendants signed in any representative capacity. Hence, the provisions of § 20 of the Negotiable Instruments Act, § 6905 of the Comp. Laws of 1913, do not apply and the authorities construing that section are not applicable. It is to be noted, however, that the last clause of the section, which is to the effect that the addition of words indicating an agency without disclosing a principal does not exempt one from personal liability, strongly implies that a personal liability shall attach, although the one signing is, in fact, an agent and although the principal might have been known to the other party but not disclosed in the instrument.

Our conclusion is that one who knowingly places his signature upon a negotiable instrument must be held to intend the legal consequence of his act and that he cannot be heard to say that the other party, with whom he was dealing at arm's length, had contributed to or induced a misunderstanding by him as to the legal effect of his own act. Any other rule would be destructive of the safety that should attach to business transactions evidenced by written contracts or instruments in general use; for parol understandings, if admissible for the purpose of defeating liability as against the clear legal intendment of the contract, should be equally admissible to enlarge it.

Being of the opinion that the facts stated and the evidence introduced do not establish a defense, it follows that the plaintiff is entitled to judgment for the amount due on the note, with interest. The judgment is reversed and the cause remanded with directions to enter an appropriate judgment.

NUESSLE, CHRISTIANSON, and JOHNSON, JJ., concur.

BRONSON, Ch. J., concurs in result.