Breman Sav. Bank v. Branch-Crookes Saw Co.

• Decision Date: 19 May 1891
• Citation: 104 Mo. 425,16 S.W. 209
• Parties: BREMAN SAV. BANK v. BRANCH-CROOKES SAW CO.
• Court: Missouri Supreme Court

16 S.W. 209

104 Mo. 425

BREMAN SAV. BANK v. BRANCH-CROOKES SAW CO.

Supreme Court of Missouri, Division No. 2.

May 19, 1891.

NEGOTIABLE INSTRUMENTS — ACTIONS ON — BONA FIDE HOLDER — CORPORATIONS — PARTNERSHIP.

1. B. executed a note to plaintiff bank, signing his own name as maker, and as indorser the firm name of B. C. "and" Co., under which he did business alone. The note was from time to time renewed until B. organized defendant corporation, the B. C. "Saw" Co., nearly all the stock in which he owned, and of which he was president and his son vice-president and secretary and treasurer. All property owned by him in the old business was transferred to defendant, which did not, however, agree to pay the debts of the old business. Afterwards the note was three times renewed, B, signing his own name as maker and defendant's as indorser. It was then protested, and notice given defendant's book-keeper, who was also a director, but no steps were taken by defendant to disclaim liability. Afterwards a new note was given by B. at plaintiff's request, with defendant's name as maker and his own as indorser. Held, in an action on the note, that if plaintiff was induced by defendant's conduct, under the circumstances, to believe in good faith that defendant had assumed to pay the debt, though it did not in fact assume it, he could recover.

2. Such liability may be established under a general denial to an answer which admits execution of the note by defendant, but seeks to avoid payment by averring that it was an accommodation note of B., given by him for his individual debt, without authority.

3. Where one does business alone under a firm name his debts in such business are his individual debts, and the creditors have no preference over any of his other creditors.

4. Where a person enters into a contract with another by which the latter is to receive a certain salary and a percentage of the profits, while the former is to own the entire capital, no partnership exists.

5. Where one doing business alone under the firm name of "Branch, Crookes & Co.," after borrowing money on the credit of both that and his own name, organizes a corporation called the "Branch-Crookes Saw Co.," and transfers all his assets to it, the presumption is strong that the corporation assumed the debt.

Appeal from St. Louis circuit court; DANIEL DILLON, Judge.

Lubke & Muench, for appellant. Samuel N. Holliday and Boyle, Adams & McKeighan, for respondent.

THOMAS, J.

This is a suit at law on a promissory note dated October 10, 1887, signed by the Branch-Crookes Saw Company as maker and Joseph W. Branch as indorser, for $6,500. The corporation defends the suit on the ground that it is a business corporation, organized under the provision of our statute relating to manufacturing and business companies; that its name was employed by Joseph W. Branch, the then president of the corporation, in signing said note, for his own accommodation; that it was so signed by him for the purpose of paying or satisfying an individual, antecedent obligation of his own; and that the same was done by him without any consideration moving to the corporation therefor, and that the bank knew, when it accepted the signature of the corporation, the foregoing facts to be true. Such, in substance, is the corporation's answer. To this answer the bank filed a general denial only. Joseph W. Branch, the other defendant, suffered default. The facts in the case are substantially as follows: In 1876 Joseph W. Branch entered into an agreement with two persons, named Schulte and Fosburg, for the purpose of carrying on the business of manufacturing saws. The substance of this agreement is as follows: Branch was always to own the entire capital. Schulte and Fosburg were to receive a certain sum of money and 5 per cent. of the profits as their salary. Fosburg and Schulte were only in the employ of Joseph W. Branch, who owned the entire assets of the concern, and who adopted the name of Branch, Crookes & Co. as his trade-name for the purpose of carrying on the particular business contemplated by this arrangement. Mr. Branch at that time, and for a long time thereafter, was largely interested in many other kinds of business. In 1880, while the arrangement aforesaid was in existence, Mr. Branch borrowed $8,000 of the bank, and gave his own note therefor, signed by himself individually as maker, and by his trade-name of Branch, Crookes & Co. as indorser. The proceeds of this first note were used by Mr. Branch in other business than that conducted by him in the name of Branch, Crookes & Co. Neither Schulte nor Fosburg ever had any knowledge of the note or the indebtedness represented by it until some time after the corporation was formed. The officers of the bank say that they believed at that time that Branch owned the entire business of Branch, Crookes & Co., and that he alone was doing business under that name; that both names were used on the note, because of a rule of their bank that all discounted paper must have two names upon it. This indebtedness ran along, being renewed every three months by giving a new note, from November 15, 1880, until October 1, 1886. During these years the note was renewed in all cases with Joseph W. Branch and his other name, Branch, Crookes & Co., either maker or indorser, and no other names were on the paper. In July, 1886, the corporation Branch-Crookes Saw Company was organized under and pursuant to the laws of the state of Missouri governing manufacturing and business companies. The capital of the corporation was 1,500 shares of the par value of $100 each. Schulte subscribed for and took 100 shares, Fosburg 50 shares, J. C. Branch 50 shares, Medairy 1 share, and Joseph W. Branch the remainder. When the corporation was formed it took a transfer to itself of that part of the property of Joseph W. Branch which before that time he had owned in connection with the business carried on by him under the trade name of Branch, Crookes & Co., and the corporation issued its stock in consideration of that transfer. There was no agreement made at the time requiring the corporation to pay the debts of Mr. Branch, or even those obligations of his outstanding in connection with the business of Branch, Crookes & Co. The following is the paper which represented the idea of the parties at that time, that is to say: "In consideration of the issuance to me of 1,500 shares of the capital stock of the Branch-Crookes Saw Company, full paid, I hereby sell, assign, and transfer to said company $150,000.00 of the assets and property of Branch, Crookes & Company, whereof I am sole owner. The particular assets hereby assigned appear on the books of said Branch, Crookes & Company, and of said Branch Crookes Saw Company. In witness whereof I have hereunto set my hand and seal this 10th day of July, 1886. [Signed] JOSEPH W. BRANCH." On the 1st day of October, 1886, the old note had to be paid, or again renewed. It had at that time been reduced to $7,000. Joseph W. Branch renewed the note on that day by signing his own name as maker and the Branch-Crookes Saw Company as indorser. The note was again renewed in the same way on the 3d day of January, 1887, and on the 6th day of April following. When the note became due in July, Joseph W. Branch was financially embarrassed. He had been president of the defendant corporation all the time, and continued to be such up to the time of the trial of this case in the circuit court. His son Joseph C. Branch was vice-president, and R. L. Fosburg was treasurer and secretary. Fosburg, however, retired from the concern in June, 1887, both as stockholder and officer, and was succeeded in the offices of treasurer and secretary by Joseph C. Branch; so that on July 8, 1887, when the note renewed April 6, 1887, became due, Joseph W. Branch was president, Joseph C. Branch vice-president, treasurer, and secretary, and Medairy a director and book-keeper of this corporation. A meeting of the board of directors of the plaintiff bank was held a short time before this note became due, and Joseph W. Branch was called and appeared before it. The bank held his obligation on accounts other than the note in controversy. He said to the board he could not pay the other notes, and added: "I cannot pay anything, but that note is good because that company is good. It has no other debts than this note, and it ought to be paid." On the 8th day of July, 1887, the note was duty protested for non-payment, and notice of non-payment served on Medairy at the company's office in St. Louis. Mr. Joseph W. Branch went to the director's room of the bank, and Prange, the president, and Nacke, the vice-president, said to him, "The note ought to be paid by the company," to which Mr. Branch replied, "Yes, it ought; or at least renewed." Mr. Prange said that if it was renewed he would like to have the corporation become maker, because Branch and Crookes originally got credit for it. Mr. Branch at first objected to this, but finally consented, saying, "Any way you please; any way you please." Branch drew a check in the name of defendant corporation for $500 as a payment on the note, and then executed a note for $6,500, payable 90 days after date, signing the name of defendant as maker and his own name as indorser. The bank delivered to Branch the old note. The note fell due October 10, 1887, and was again renewed by Joseph W. Branch in the same way for 90 days, and the old note was delivered to Branch. This note dated October 10, 1887, is the one now in controversy. On October 10, 1887, Joseph W. Branch made a general assignment for the benefit of his creditors.

At the instance of defendant company, and against the objection and exception of plaintiff, the court granted the following instructions: "If the court, sitting as a jury, finds the facts to be that on November 15, 1880, Joseph W. Branch presented his note to the plaintiff for $8,000, made by him, and indorsed by Branch,...