Mercantile-Commerce Bank & Trust Co. v. Howe

• Decision Date: 26 August 1940
• Docket Number: No. 11690.,11690.
• Citation: 113 F.2d 893
• Parties: MERCANTILE-COMMERCE BANK & TRUST CO. v. HOWE.
• Court: U.S. Court of Appeals — Eighth Circuit

113 F.2d 893 (1940)

MERCANTILE-COMMERCE BANK & TRUST CO. v. HOWE.

No. 11690.

Circuit Court of Appeals, Eighth Circuit.

August 26, 1940.

R. B. McCulloch, of Forrest City, Ark., for appellant.

J. G. Burke and G. D. Walker, both of Helena, Ark. (John I. Moore, Jr., of Helena, Ark., on the brief), for appellee.

Before WOODROUGH and THOMAS, Circuit Judges, and BELL, District Judge.

BELL, District Judge.

This is an action brought by appellant as plaintiff against W. H. Howe, individually, and as trustee of the Presbyterian Church of Helena, Arkansas, the appellee, as defendant, to foreclose a mortgage, a deed of trust in form, on the property of the church and to obtain a deficiency judgment against Howe personally. On the death of Howe, subsequent to the trial of the case, Eva M. Howe, administratrix of the estate of W. H. Howe, deceased, was substituted as appellee.

The church is an unincorporated religious association of which S. C. Moore, S. A. Wooten, G. L. Davidson and W. H. Howe were the trustees. The trustees on behalf of the church negotiated a loan of $43,000 from the Mercantile Trust Company, now the Mercantile-Commerce Bank & Trust Company, appellant, to pay certain indebtedness and bills incurred in the construction of a church edifice.

At a meeting of the adult members duly held on March 29, 1925, a resolution was adopted authorizing and directing the trustees to execute and deliver to appellant certain notes for and on behalf of the church and to execute and deliver a first deed of trust in the nature of a mortgage conveying the church property to the plaintiff as security for the loan.

Pursuant to the negotiations for the loan and the resolution, eighty-six promissory notes for $500 each due serially from April 1, 1926, to April 1, 1940, and a deed of trust were executed April 1, 1925, and signed by the four persons named as trustees of the church. Notes maturing on and prior to April 1, 1933, aggregating $19,000 were paid. Notes maturing April 1, 1934, to April 1, 1938, inclusive, aggregating $10,000 were not paid, whereupon the entire unpaid balance of $24,000 plus accumulated interest was accelerated and declared due in accordance with the provisions of the deed of trust.

This suit was commenced on September 24, 1938, at which time W. H. Howe was the only surviving member of the Board of Trustees of the church. Neither he nor the church made any defense to the suit for foreclosure, and a decree therefor was duly entered. Howe, as an individual, presented a motion to dismiss the case insofar as it sought to hold him personally liable on the grounds that the complaint, as amended, did not allege facts sufficient to constitute a cause of action, and that the cause of action alleged was barred by the statute of frauds. The motion was sustained and, from an order dismissing the case as to him individually, this appeal is taken.

The question is whether a trustee of an unincorporated religious association becomes personally liable on a note and mortgage signed by him as such trustee with authority to act.

Section 20 of the Uniform Negotiable Instruments Law, Section 10178, Pope's Digest of the Statutes of Arkansas, provides: "Where the instrument contains or a person adds to his signature words indicating that he signs for or in behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent or as filling a representative character, without disclosing his principal, does not exempt him from personal liability."

The appellee contends that the trustee signed the instrument in his representative capacity with full authority to do so and that under the statute he incurred no personal liability. The appellant contends that the Presbyterian Church had no capacity to authorize the execution of the instruments and that the statute therefore does not apply.

The notes and deed of trust show conclusively that the trustees signed in their representative capacity. The deed of trust recited:

"This indenture, made and entered into this first day of April, A. D. 1925, by and between S. C. Moore, S. A. Wooten, G. L. Davidson and W. H. Howe as trustees of the Presbyterian Church, Helena, Arkansas, a non-incorporated religious body * * * called the grantors * * * convey (the property described) * *."

"The authority for the creation of the debt hereby secured and the execution of this deed of trust was duly conferred by a meeting of the members of said church, held on the 29th day of March, A. D. 1925 * * *."

"* * * grantors hereby covenant and agree that at the delivery hereof they are, as such trustees, the lawful owners of the premises conveyed * * *."

"* * * the word grantors shall be held and construed to mean and include (again naming the four trustees), as trustees of the Presbyterian Church of Helena, Arkansas, and the lawful successors and assigns of the grantors, being owners for the time being of the premises hereby conveyed."

In describing the notes to be executed, the deed of trust provided that they should be signed by "* * * the said church trustees, as trustees * * *." The notes, likewise the deed of trust, were so signed and the notes recited that the four parties named "as trustees of the Presbyterian Church of Helena, Arkansas, * * * acknowledge themselves as such trustees to be indebted * * *."

The deed of trust provided for giving notice of default "to the trustees of the Presbyterian Church, Porter and Columbia Streets, Helena, Arkansas." There was no provision for a notice to the trustees or their successors individually. Moreover, it is significant that there is not an express provision in the notes or deed of trust that the trustees shall be liable for the debt, jointly, severally, individually, or in any manner except as trustees of the church.

The trustees were clothed with full authority to sign the instruments in their representative capacity if it were possible for an unincorporated religious association to confer such authority. The resolution adopted by the adult members of the church recited the fact that appellant had agreed to make the loan and the terms and conditions thereof, and expressly authorized and directed the trustees to execute and deliver to appellant the notes for and on behalf of the church, to execute and deliver a first deed of trust conveying the church property to appellant as security for the loan, to perform any other acts and things necessary to fully consummate the loan, and to apply the proceeds of the loan to the payment of the indebtedness of the church and the bills incurred in the erection of the church edifice.

The capacity of the church to authorize the trustees to execute the notes and deed of trust should be considered in the light of the Arkansas Statutes. Pope's Digest of the Statutes of Arkansas, Section 11368¹ authorizes a religious society to hold realty in the name of duly elected or appointed trustees; section 11369² authorizes the trustees of a religious society to prosecute and defend suits for the protection of its property; section 8874³ authorizes the trustees of a religious organization on making a contract for...