Exchange Bank of Marcus v. Schultz
| Decision Date | 21 October 1914 |
| Docket Number | 29589 |
| Citation | 149 N.W. 99,167 Iowa 136 |
| Parties | EXCHANGE BANK OF MARCUS, and EDMONDS & LONDERGEN, Appellants, v. J. E. SCHULTZ, Appellee |
| Court | Iowa Supreme Court |
Appeal from Woodbury District Court.--HON. JOHN F. OLIVER, Judge.
ACTION at law upon five promissory notes, executed by the Glendell Dairy Company, by Henry O. Harstad, president, and defendant J. E. Schultz. Defendant pleaded a mutual mistake in the signing of the notes, in that his signature was appended thereto, not for the purpose of assuming a personal liability, but for and on behalf of the dairy company, and as its secretary; and he asked that the notes be reformed so as to express this intent. The case was transferred to the equity docket and tried to the court, resulting in a judgment dismissing the petition as to two of the notes and plaintiffs appeal.--Reversed and Remanded.
Reversed and Remanded.
Sargent Strong & Struble, for appellants.
E. J Stason, for appellee.
OPINION
The Exchange Bank is a partnership doing business under that name, and composed of plaintiffs Edmonds & Londergan. The Glendell Dairy Company was a corporation, doing business under that name, at the town of Marcus, and at the time material to our inquiry Henry O. Harstad was its president and defendant Schultz was its secretary.
On the 19th day of December, 1911 the dairy company and defendant Schultz executed and delivered to plaintiff three promissory notes for the aggregate sum of $ 1,500, and on July 15, 1912, they executed two more notes, aggregating the sum of $ 545. Each of these notes was signed: This action is upon these notes, each of which is due and unpaid. Schultz is the sole defendant, and he pleaded that he did not sign the notes in his individual capacity; that while he signed in the manner indicated it was solely as secretary of the company, and to bind the corporation and no one else; that he was not indebted to plaintiff and received no consideration for signing the notes; that if they, as signed, impose any legal liability upon him, it was due to his mistake in signing the same without using the words "by" before his name, and "secretary" afterward; and that the failure to use the words was due to a mutual mistake of both payor and payee. He also alleged:
That the plaintiffs by their statements and representations and by the statements and representations of the said Henry O. Harstad, the president of the Glendell Dairy Company, he, the defendant, was led to believe that his signature was to be attached to the said notes for the purpose of completing the corporate signature on account of the fact that he was its secretary, and for no other purpose; that he attached his signature for such purpose and for no other, and if the plaintiffs and the said Harstad sought and did secure his signature to the said notes for any other purpose, it was with the intention of procuring his signature by fraud, and with the intention of perpetrating a fraud upon him, and the obligation he incurred, if any, is fraudulent and void, and the defendant is not bound or liable in any manner personally.
The notes as signed by their terms impose a personal obligation on Schultz, and to escape liability he must show by the testimony that they were signed by him as they now appear, through a mutual mistake of the parties, or that the payee obtained his signature thereto through fraud and misrepresentation; the burden being upon defendant to show the mistake or fraud by clear, satisfactory, and convincing testimony. Hunt v. Gray, 76 Iowa 268, 41 N.W. 14.
Again, the mistake must have been a mutual one, or of the defendant alone coupled with such fraud on the part of the payees in taking advantage of the mistake, as in equity will relieve him of responsibility because the payees knew of the mistake on the part of the maker, and fraudulently took advantage thereof. Marshall v. Westrope, 98 Iowa 324, 67 N.W. 257.
These propositions are well understood, and the only question in the case is: Has defendant proved the mistake or fraud pleaded by him? The trial court found the defendant liable on the first three notes, amounting to $ 1,500, but relieved him from liability on the last two, and plaintiffs alone appeal. As the case is triable de novo, the only question for our consideration is the correctness of the finding that these last two notes should be canceled, either because of mistake or fraud.
The issues are of fact, and the case is triable anew here, so we must take the testimony as we find it and render such judgment or decree as the trial court should have rendered.
Defendant testified regarding these two notes substantially as follows:
I never saw Exhibits D and E since I signed them. I signed them on the date they were drawn. Mr. Londergan brought the filled in notes to Mr. Harstad and I for our signatures. I went with Mr. Londergan to Mr. Harstad's house. They were the notes for $ 272.50 each, and they were signed at Mr. Harstad's house in Sioux City. Mr. Harstad signed the notes first and I signed them afterwards. I was at the house with Mr. Londergan at the time they were signed, and Mr. Londergan, Harstad, and myself were present. The Glendell Dairy Company's name to these notes was attached by Mr. Harstad. I saw him write the name. After that he signed his own name, then the notes were passed over to me for my signature, and I put my name there as I supposed it was in the capacity of the office, and nothing was said in regard to signature, how it should be signed, or what way it should be signed. Not a word was said by Mr. Harstad or Londergan as to the manner in which I should attach my signature, and nothing was said by either of them as to my signing as surety. When I signed these notes, I did not intend to bind myself personally. I intended to sign as an officer and not as an individual. . . . None of this money represents cash borrowed and put on deposit, and I did not personally receive any portion of the proceeds of the notes, and no demand was made on me for the payment of the notes, but demand had been made of the company. . . . With regard to the two notes of $ 272.50 each, the matter was talked over at Mr. Harstad's residence by Mr. Londergan, myself, and Mr. Harstad. Mr. Londergan came to the office of the Glendell Dairy Company, and said he wanted the matter cleaned up in some way; but there was nothing said about the notes at that time. Q. At that time, he wanted you and the company to pay the indebtedness that existed against the company to Edmonds & Londergan, didn't he? A. Yes, sir. Q. That is what he was after, was the payment of it? A. Yes, sir. Q. What did you say to him with regard to the ability of the company at that time to pay? A. I told him we would go and see Mr. Harstad, as he had the run of the business, and he was not there, and we would go up to his house. We went to the house shortly after noon. Mr. Londergan came into the office right around 11 o'clock and stayed there perhaps thirty minutes, and he fixed the time when he should come back. Mr. Londergan and I went to Mr. Harstad's house together. Mr. Harstad's house was on the west side. After we got to Mr. Harstad's house, Mr. Londergan was talking and getting this book account straightened out, and finally proposed the notes as I understand. I cannot recall the words used about wanting me to pay it. Q. Did he ask you to pay it? A. Yes, that is the idea, that he would like to get his money. Q. What was said and done with reference to the signing of the notes at that time? A. Nothing said, nothing more done; only the notes were signed up and passed over to me for my signature. Mr. Londergan drew the notes up there. The notes were not drawn up at our office, and both of the notes were signed by Mr. Harstad there at that time. Mr. Harstad signed first and I afterwards. I saw the letters which came from the Exchange Bank of Marcus, relative to the payment of these notes. There was no demand, at any time, ever made on me to pay the notes until the commencement of this suit. No one had said anything to me about paying the notes individually, until the suit was commenced. . . . The notes were signed by me and were signed on the bottom of the notes, a legal form, and were also signed on the back, guaranteeing payment. The notes, after I became secretary, I signed as secretary, and this note was turned over and I wrote my name on the back. In signing these notes, A, B, C, D, and E, there was never a word mentioned to me about my becoming surety on them. I never knew it until I seen the first notes and got notice in court that they commenced suit against me. That is the first I heard they held me as security for the notes. That is the first time I knew it. The first time I had knowledge that they were holding me for these notes was when they served notice of this suit. I knew they held me liable on these notes at the time Mr. Henderson had the papers and called me up one day that was before suit was brought.
Harstad testified in substance:
I brought notes to Mr. Schultz to sign. I wanted him to sign because all our papers were signed by the secretary and president of the company. It was customary for us to have the papers signed by the president and secretary, and he was secretary at that time. It was not my intention for him to sign so as to bind himself personally. I first saw the two notes for $ 272 when Mr. Londergan brought them up here. I was sick at that time and signed the notes up here on the table. Schultz was here, and he signed them at the same time as those. The intention in having him sign his name was to...
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