Anderson v. Ladd

• Decision Date: 20 April 1938
• Docket Number: No. 2156-7074.,2156-7074.
• Parties: ANDERSON v. LADD et al.
• Court: Texas Supreme Court

Page 608

115 S.W.2d 608

ANDERSON v. LADD et al.

No. 2156-7074.

Commission of Appeals of Texas, Section A.

April 20, 1938.

Error to Court of Civil Appeals of Second Supreme Judicial District.

Suit by W. T. Ladd and others against Mrs. Ella Anderson and another to cancel indorsements of four notes payable to named defendant, who sought recovery thereon as against codefendant and plaintiffs by cross-action. A judgment for cross-complainant was reversed as against plaintiffs, and judgment rendered in their favor by

the Court of Civil Appeals, 89 S.W.2d 1041, and cross-complainant brings error.

Judgment of Court of Civil Appeals reversed, and that of trial court affirmed.

Greenwood, Moody & Robertson, Thos. B. Greenwood, Dan Moody, and J. B. Robertson, all of Austin, and Perkins & Culbertson and T. P. Perkins, all of Fort Worth, for plaintiff in error.

Robert M. Rowland and Leroy A. & Van Zandt Smith, all of Fort Worth, for defendants in error.

HARVEY, Commissioner.

This suit was originally instituted in a district court of Tarrant county, on March 27, 1933, by W. T. Ladd, B. H. Martin, Dr. J. W. Irion, and Mrs. George E. Cowden, and by W. T. Ladd and B. H. Martin as independent executors of the estate of W. G. Turner, deceased, against Mrs. Ella Anderson, a widow, for the cancellation of the unqualified indorsements of Ladd, Martin, Irion, Mrs. Cowden, and W. G. Turner which are borne by four promissory notes of the Hub Furniture Company, payable to Mrs. Anderson, and which she held. The plaintiffs, in their petition, sought and obtained a temporary injunction restraining Mrs. Anderson from negotiating the notes pending the suit. The Hub Furniture Company was by the plaintiffs' petition made a party defendant in the suit. The grounds for cancellation alleged by the plaintiffs will be more fully shown in discussing the several contentions of the plaintiffs, who are the defendants in error here. A few days later, Mrs. Anderson answered in the suit, and by cross-action sought recovery on all four notes as against the Hub Company and all the indorsers, including W. T. Ladd and B. H. Martin as independent executors of the estate of W. G. Turner, deceased — Turner having died in January, 1933. The four notes were for $5,000 each, and will be fully described later. A trial before a jury on special issues resulted in a judgment for Mrs. Anderson against the Hub Company, and Ladd and Martin, individually and as executors of the estate of W. G. Turner, deceased, for the amount of all four notes, and against Irion and Mrs. Cowden on three of the notes. All the indorsers appealed, and the Court of Civil Appeals reversed the judgment of the trial court in so far as same was against any of the indorsers, and rendered judgment in their favor. 89 S.W. 2d 1041.

The controversy here is between Mrs. Anderson, the plaintiff in error, and the indorsers, Ladd, Martin, Irion, Mrs. Cowden, and the estate of W. G. Turner. The controversy goes to the validity of the four notes, as promissory notes payable according to their terms, and to the liability of the indorsers. The defendants in error contend that they never became liable as indorsers, first, because the notes were never delivered for the purpose of putting them into effect according to their terms; secondly, the notes are not supported by a valuable consideration; thirdly, the indorsers are accommodation indorsers. The substance of the testimony upon which these several contentions are founded is to the following effect:

In November, 1928, the Hub Company was in debt to the extent of approximately $300,000, and was unable to pay its debts in regular course. Some of the debts were pressing for payment. Turner had organized the company some years before, and was a stockholder and member of the board of directors. Ladd, Martin, Irion, and Mrs. Cowden were also stockholders and directors. At the time mentioned, Turner orally agreed with the board of directors to loan the company sufficient money with which to pay its debts which were pressing for payment, and agreed that the loan was not to be repaid until the company paid all its other debts and became able to pay the loan from profits earned. In pursuance of this oral agreement, Turner, during the next few weeks, loaned the company the aggregate sum of $90,000, all of which went to pay off debts of the company. According to the oral agreement, the loan was to bear interest at the rate of 6 per cent. per annum from date of the loan until same was repaid — the interest was to be paid monthly as same accrued. At the time of the oral agreement and at the time Turner advanced the money, the parties did not contemplate that any note or notes should be executed for the loan. Some time in the latter part of April, 1929, Turner requested Ladd, who was general manager of the company, and chairman of the board of directors, to make out and give him the company's notes to represent the loan which had been made in pursuance of said oral agreement. Complying with this request, Ladd, acting for the company, made out and signed three notes for the company — one for $50,000 and the other two for $20,000 each. One of the notes for $20,000 is the only one which has special relevancy to this controversy. The other two will not be further noticed. This last-mentioned $20,000 note bore date May 1, 1929, purported to be payable January 1, 1931, and purported to bear interest at the rate of 6 per cent. per annum, payable monthly. Mrs. Anderson, who was Turner's sister, was named as payee in this note. This was done at Turner's request. Turner gave this note to her about the date same purports to have been executed. He indorsed same in blank. It was understood between Ladd and Turner, at the time the three notes were drawn up, signed, and put into the hands of Turner, that same were not to become effective according to their terms, but were merely memoranda of the prior oral agreement between Turner and the company. Some seven or eight months after Turner had given the $20,000 note to Mrs. Anderson, he requested Ladd, Martin, Irion, and Mrs. Cowden to indorse the note. A meeting of the board of directors had just adjourned, when Turner produced the note and asked the four last-named persons to indorse it as a personal favor to him, saying further: "I want you all to feel that I am asking you to do this for me and that it doesn't mean anything to you, and if there is any liability I am assuming any liability that may be incurred — I just want my sister to feel more comfortable with the situation." Ladd, Martin, Irion, and Mrs. Cowden each indorsed the note in reliance on these statements of Turner. The Hub Company regularly met all monthly payments of interest up to the time renewal notes were given as hereinafter stated. About September 1, 1931, the Hub Company, through its president, W. T. Ladd (who had in the meantime become its president and was also general manager), executed to Mrs. Anderson four renewal notes for the principal sum of $5,000 each, due respectively September 1, 1932, 1933, 1934, and 1935, bearing interest from date until paid at the rate of 6 per cent. per annum, payable monthly. Each note provided that if any one of them was not paid at maturity, the others, at the election of the holder, would become mature. All four notes were indorsed by Turner, Ladd, Martin, Irion, and Mrs. Cowden. The circumstances immediately attending the signing and indorsing of these several notes are disclosed by the testimony of Ladd, which is to the following effect: Turner called Ladd into his office and said that the note for $20,000, held by Mrs. Anderson, was running past due, and that he, Ladd, had better split the amount into four parts of $5,000 each, and make four renewal notes payable September 1, 1932, September 1, 1933, September 1, 1934, and 1935, respectively. Turner said that this would give the company "more time to get in shape to take them up." Ladd drew up the notes and, as president, signed them for the Hub Company. He indorsed them in reliance on statements by Turner, made at the time, that the indorsement of the notes would mean nothing — would create no liability — and that if "there is any liability whatever," he, Turner, would assume same. Turner indorsed the four notes, and requested Ladd to take them to each of the other indorsers (Martin, Irion, and Mrs. Cowden) and ask them to indorse the renewal notes, and repeat to each of them, for Turner, the same statements which the latter had made to Ladd. Ladd did this, and Martin, Irion, and Mrs. Cowden each indorsed the renewal notes in reliance on said statements of Turner. The notes were then delivered to Mrs. Anderson, who surrendered the old note for $20,000.

It is contended that the delivery of the renewal notes to Mrs. Anderson was not an effectual delivery, but was a delivery "for a special purpose only" as contemplated by section 16, article 5932, Rev.St.1925, the Negotiable Instruments Law. The pertinent provisions of this statute read as follows: "Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, * * * the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument."

Regardless of what character of evidence is legally competent to show that a promissory note which has been delivered to the payee is merely a token of some prior or contemporaneous oral agreement between the parties, the statute undoubtedly regards the delivery as having been made for the purpose of giving effect to the instrument according to its terms, unless it be shown that by agreement of the parties,...