Belding v. Vaughan

• Court: Arkansas Supreme Court
• Writing for the Court: MCCULLOCH, C. J.
• Citation: Belding v. Vaughan, 157 S.W. 400, 108 Ark. 69 (Ark. 1913)
• Decision Date: 28 April 1913
• Parties: BELDING v. VAUGHAN

157 S.W. 400

108 Ark. 69

BELDING v. VAUGHAN

Supreme Court of Arkansas

April 28, 1913

Appeal from Pulaski Circuit Court, Second Division; Guy Fulk, Judge affirmed.

Judgment affirmed.

J. W Blackwood, John W. Newman and H. H. Myers, for appellants.

1. As the contract stands it is appellee's personal note. There is no ambiguity nor doubtful meaning in it, and the court will construe it as made, without supplying or rearranging its words. 150 S.W. 858. If there is any doubt as to its meaning or if it is susceptible of two constructions, it should be construed most strongly against appellee, a practicing lawyer, who wrote it. 153 S.W. (Ark.), 101, 103.

2. One who describes himself and deals as agent of a corporation not in existence is personally liable. 1 Thompson on Corporations (2 ed.), § 83; Id. §§ 416, 424; 2 Cook on Stocks, etc., § 705; Alger, "The Law of Promoters and the Promotion of Corporations," § 199; 39 S.W. 966; 60 Mich. 26; 26 N.W. 801; 35 Ark. 144; 168 F. 187; 22 L. R. A. (N. S.), 1153; 108 S.W. 948; 23 Am. & Eng. Enc. of L. 237.

Had the Title Guaranty Company been at the time a going concern and appellee its duly authorized agent, he would still be personally liable for the reason that apt words were not used to bind the principal.

Persons who sign their individual names to promissory notes are prima facie liable thereon, though they are described therein as trustees or other officers of corporations. 21 L. R. A. (N S.), 1058, 1059, note, and cases there cited; see also 21 Cyc. 1414; Id. 1554; 12 L. R. A. (N. S.), 1190; 10 Ark. 446; 41 Ark. 399, 400; 5 Pet. 349.

3. The promise to pay on "May 1, 1907, or earlier upon the organization of the company," made the payment due at all events on that day, the only condition affecting the time of payment being that it would become due earlier if the company was organized earlier. 4 Am. & Eng. Enc. of L. 92, 93; 4 Heisk. (Tenn.), 668; 3 Hawks (N. C.), 458; 103 Ala. 479; 85 Ill. 523; 61 Ia. 166; 47 Am. Rep. 808; 54 Ind. 164; 23 Am. Rep. 639; 74 Pa.St. 13, 7 Cyc. 857.

Vaughan & Akers, Ratcliffe & Fletcher, Hal L. Norwood and W. H. Rector, for appellee.

1. The words used in the agreement sued on and the facts attending its execution show that the personal liability of appellee was not intended. Parol testimony was admissible to show the circumstances leading up to and following the execution of the writing in order to throw light upon the intention of the parties. 53 Ark. 58, 66; 70 Ark. 232, 238; 96 Ark. 320, 324; 97 Ark. 532; 80 Ark. 363, 369; 99 Ark. 115; 94 N.W. 1044; 50 N.W. 925; 23 Ark. 585-6; 28 Ark. 282; 52 Ark. 73-5; 94 Ark. 419; 2 Devlin on Deeds, § 840; Id., § 843.

2. The conduct of the parties subsequent to the signing of the agreement show that appellee acted as a representative and not in a personal capacity. If in drawing the agreement personal liability had been intended, it could easily have been expressed in plain terms, and certainly the words "as trustee and agent" would have been omitted. 44 P. 854; 46 Ark. 129; 55 Ark. 414-417; 88 Ark. 363, 369; 95 Ark. 499; 98 Ark. 421, 425.

3. After April 2, 1907, appellants were equally interested with appellee in the work of promoting the Title Guaranty Company, and are estopped by their conduct from invoking the rule of the personal liability of the promoters.

The signing of the agreement at Hot Springs and the signing by appellants of the subscription contract were simultaneous acts and so closely interrelated as to constitute one contract. 70 Ark. 232. See also 30 Ark. 186; 64 Ark. 627; 1 Thompson on Corporations, § 85; Id. § 83; 62 Minn. 332, 64 N.W. 826.

4. The lease agreement and the subscription agreement together constitute a single executory contract or option. 18 Ark. 65, 76; 52 Ark. 30; 45 Ark. 17; 96 Ark. 320; 19 Ark. 262; 22 Ark. 158; 30 Ark. 187; 90 Ark. 272, 276.

By the agreements the completion of the organization of the corporation was a condition precedent to the going into effect of the lease agreement as well as of the stock subscription. 2 Watts & S. 227, 228; 98 Mass. 131; 13 A. 468, 474; 119 Pa. 439; 12 P. 665, 667; 14 Ore. 356; 37 Ia. 503, 508.

OPINION

MCCULLOCH, C. J.

Appellants sued appellee in the circuit court of Pulaski County to recover, upon written contract, the sum of $ 3,000 for the lease of a patented machine or device called a "Rectigraph," used in photographing records.

Appellee denied personal liability under the contract, and the case was tried before a jury. Both sides, without asking that the disputed questions of fact be submitted to the jury, requested the court to give a peremptory instruction in their respective favor, and the court gave a peremptory instruction in favor of appellee.

The case stands here, therefore, upon the sole question of the legal sufficiency of the evidence to sustain the verdict in appellee's favor. St. Louis S.W. Ry. Co. v. Mulkey, 100 Ark. 71, 139 S.W. 643.

In March, 1907, appellee and certain other persons joined in an effort to organize a corporation, with a capital stock of $ 25,000, to engage in the business, at Little Rock, of abstracting titles to real estate in Pulaski County. A subscription contract was reduced to writing, dated March 28, 1907, whereby the subscribers agreed to take stock for the organization of the corporation, to be known as the "Title Guaranty Company," and stipulated that the subscriptions were conditioned upon their being bona fide subscriptions for at least $ 20,000 to the capital stock. Several persons, including appellee, signed the contract as subscribers; but the subscriptions did not amount to $ 20,000, the stipulated sum. Appellants owned or controlled certain territory, including Pulaski County, Arkansas, for the use of the Rectigraph, and on April 2, 1907, appellants and appellee entered into the following written contract:

"This indenture, witnesseth, that George Vaughan, as agent and trustee for the Title Guaranty Company, a corporation to be organized under the laws of Arkansas, for the purpose of doing an abstract business in Pulaski County, Arkansas, this day agrees to and with George R. Belding and J. A. Stallcup, owners of Lease No. 23 of the Rectigraph Company of Oklahoma City, for the use of the Rectigraph for Pulaski County, Arkansas, to pay to said Belding & Stallcup on May 1, 1907, or earlier upon the organization of said corporation the sum of three thousand dollars, for said lease. And the said Belding & Stallcup, in consideration of the said agreement, have this day subscribed for forty shares of stock in the said corporation. Witness our hands in duplicate this 2d day of April, 1907. (Signed) Geo. Vaughan, Geo. R. Belding, J. A. Stallcup."

Upon the execution of this contract appellants signed the subscription contract, whereby they took forty shares of the capital stock of the proposed corporation.

Efforts were continued to procure subscribers, but there was not enough obtained to raise the requisite amount of $ 20,000; therefore the plan failed and was finally abandoned. The effort was, however, continued during a considerable period of time, and in the meantime there was much correspondence between the parties hereto concerning the matter. The manufacturers of the machine sent one to Little Rock, where it was set up and demonstrated by their agent, sent for that purpose, and it remained here in possession of appellee. After the abandonment of all effort to organize the new corporation there was an effort made to dispose of the machine, or, rather, the lease thereof, to another corporation engaged in the business of abstracting titles, and considerable correspondence took place between the parties hereto with respect to that, but nothing came of it, and appellants demanded payment of appellee, which being refused this action was instituted.

It is insisted that the written contract amounts to a personal obligation on the part of appellee to pay to appellants the sum of money named on a certain date, "or earlier upon the organization of said corporation," and that parol evidence is inadmissible to vary or contradict the terms of the written instrument by showing that it was not intended as a personal obligation of appellee.

Our conclusion is that the two instruments hereinbefore referred to, that is to say, the written subscription list and the contract for the lease of the Rectigraph, were executed contemporaneously so far as the parties to this controversy are concerned, and should be considered together in interpreting the meaning of the contract sued on. No rule of evidence is violated in considering the two together in determining the true intention of the parties. Vaugine v. Taylor, 18 Ark. 65; Railway Co. v. Beidler, 45 Ark. 17; Ford Hardwood Lumber Co. v. Clement, 97 Ark. 522, 135 S.W. 343. When thus considered, it is manifest that this contract was not intended as a personal obligation, unconditional, of appellee Vaughan, but rested upon the condition that the proposed corporation should be organized.

Appellants invoke the familiar rules that one becomes personally liable who acts as agent for an undisclosed principal, or who assumes to act for a...