Foster v. Featherston

• Decision Date: 28 February 1935
• Docket Number: 3 Div. 121
• Citation: 160 So. 689,230 Ala. 268
• Court: Alabama Supreme Court
• Parties: FOSTER v. FEATHERSTON.

160 So. 689

230 Ala. 268

FOSTER v. FEATHERSTON.

3 Div. 121

Supreme Court of Alabama

February 28, 1935

Rehearing Denied April 11, 1935

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Action on promissory notes by J.W. Featherston against Heirston L Foster. From a judgment for plaintiff, defendant appeals.

Transferred from Court of Appeals under Code 1923, § 7326.

Reversed and rendered.

Heirston L. Foster and Hill, Hill, Whiting, Thomas & Rives, all of Montgomery, for appellant.

Ball &amp Ball, of Montgomery, for appellee.

FOSTER Justice.

This is an action against appellant personally on notes signed by him in the following words: "The estate of H.W. Fancher, deceased, by Heirston L. Foster, as executor." Fancher had borrowed the money from appellee, and had given a mortgage on real estate, due September 7, 1928. The debt was extended by mutual agreement to September 7, 1931." Fancher died before it matured on the latter date. Appellant, as such executor, and appellee agreed to extend it to September 7, 1932. On that day the notes sued on were executed. The mortgage was later foreclosed, and this is a deficiency suit for the balance of the amount after crediting the purchase price at foreclosure sale.

On September 7, 1932, the debt as a personal claim against the estate was barred by nonclaim. Section 5830, Code, was not complied with. Decedent's will gave him no such authority.

The general rule in Alabama is that when an executor executes a note which purports to be the obligation of the estate, and he is not authorized to bind the estate, he is himself personally liable on the note, and cannot be relieved because there was a mutual intention only to bind the estate. Whiteside v. Jennings, 19 Ala. 784; Vann v. Vann, 71 Ala. 154; Gillis v. White, 214 Ala. 22, 106 So. 166; McCalley v. Wilburn, 77 Ala. 549; Pointer v. Farmers' Fertilizer Co. (Ala.Sup.) 160 So. 252; Soper v. Pointer (C.C.A.) 67 F. (2d) 676; section 9048, Code.

But we think it is also well settled that such rule does not apply when the payee has knowledge of the fact that the executor has no such authority, and the note shows clearly that it was the intention of the parties that it was not the personal obligation of the executor, but only that of the estate. Schloss v. McIntyre, 147 Ala. 557, 41 So. 11; Ware v. Morgan, 67 Ala. 461; 2 Corpus Juris 809, and cases in notes; Eliason State Bank v. Montevideo Baseball Ass'n, 160 Minn. 341, 200 N.W. 300; Hunt v. Adams, 111 Fla. 164, 149 So. 24.

We do not think that section 9048, Code, means that the executor is necessarily bound if the principal is not. That is not its language. It is not inconsistent with the theory that neither may be bound, and is not when the payee knows that the executor has no authority to bind the estate, and the note shows, or the intention is otherwise made to appear in a legal manner, that the estate only was to be bound. Eliason State Bank v. Montevideo Baseball Ass'n, supra.

There is no evidence whether appellee had notice that section 5830, Code, had not been complied with. But appellee, the creditor, must present the claim as required by section 5815, Code, amended by Gen.Acts 1931, p. 840, or its payment or allowance is prohibited. He is responsible for a failure in this regard whether he knows the law or not, or knows whether it has been presented by his agent or attorney. So that when the notes sued on were executed he knew that the estate was not liable and could not be made liable, and that the executor could not use the funds of the estate to pay the debt, except that the property on which appellee had a mortgage could be subjected without a presentation under section 5815, Code. Arbo v. State Bank of Elberta, 226 Ala. 52, 145 So. 318.

If with such knowledge appellee accepts a note which purports to bind the estate only, he knows he is not getting a valid obligation, is not deceived or misled, and cannot hold the executor personally liable.

We think that the court trying the case without a jury should have rendered a judgment for appellant. We will therefore reverse the judgment and render one in his behalf.

Reversed and rendered.

ANDERSON, C.J., and GARDNER and BOULDIN, JJ., concur.

On Rehearing.

FOSTER Justice.

Our cases had, prior to the adoption of the Negotiable Instruments Act and section 9048, Code, as a part of it, held that when an agent, guardian, executor, or administrator executes a note which on its face purports only to bind the principal, ward, or estate, but fails to do so, for want of authority, the agent is himself personally liable as if he were named as principal. Whiteside v. Jennings, 19 Ala. 784; McCalley v. Wilburn, 77 Ala. 549, 552; Ware v. Morgan, 67 Ala. 461, 468; Steele v. Steele's Adm'r, 64 Ala. 438, 38 Am.Rep. 15; Vanderveer v. Ware, 65 Ala. 606; Gillis v. White, 214 Ala. 22, 106 So. 166; Lutz v. Van Heynigen Brokerage Co., 199 Ala. 620(7) 627, 75 So. 284.

Those authorities show clearly that guardians, executors, and administrators are thus held on the same principles which apply to agents, and are governed in this, as in some other respects, by the same rules.

Many state courts and the modern trend of authority followed the common-law principle that under such circumstances the agent or executor was not liable on the obligation but only for damages on an implied warranty in the nature of deceit, resulting from the agent's misrepresentation of authority or concealment of a want of it. New Georgia National Bank v. J. & G. Lippman, 249 N.Y. 307, 164 N.E. 108, 60 A.L.R. 1344; Christensen v. Nielson, 73 Utah, 603, 276 P. 645; Mendelsohn v. Holton, 253 Mass. 362, 149 N.E. 38, 42 A.L.R. 1307, note 1310, 1312; 2 Corpus Juris 806; Pointer v. Farmers' Fertilizer Co. (Ala.Sup.) 160 So. 252.

But the Uniform Negotiable Instruments Act (section 9048, Code) has been construed to change the rule in those states, and by construction merely to adopt what had been so declared in Alabama. The statute mentioned does not so expressly state, but its proper interpretation puts at rest a controversy as to whether there is a personal liability, though there is ambiguity as to the intent, when the instrument indicates that it is executed for a named principal, or in a representative capacity. New Georgia National Bank v. J. & G. Lippman, supra.

There is no occasion to suppose that the rule of liability under such circumstances is not subject to the limitations which had theretofore been approved in Alabama, Schloss & Kahn v. McIntyre, 147 Ala. 557, 41 So. 11, 12; Ware v. Morgan, 67 Ala. 461; McQuiddy Printing Co. v. Head, 7 Ala.App 384, 62 So. 287; Wolfe & Sons v. McKeon, 2 Ala.App. 421, 57 So. 63, and which exists in other jurisdictions, 2 Corpus Juris 809; Eliason State Bank v. Montevideo Baseball Ass'n, 160 Minn. 341, 200 N.W. 300; Hunt v. Adams, 111 Fla. 164, 149 So. 24.

Or that such rule of liability is not set up for the reasons controlling in its adoption in Alabama. In our case of Ware v. Morgan, supra, such reason is thus stated:

"An agent having in fact no authority, and yet assuming to bind his principal, incurs a personal liability. If, with knowledge of the want of authority, he represents himself as leaving [having] it to one ignorant of the facts, and dealing on the faith of the representation, he is guilty of deliberate fraud, and of his liability for the resulting injury there is no doubt. And if not having authority, yet with an honest belief that he has it, he deals with another, he is liable for the resulting injury. The difference in the two classes of cases, is in the degree of moral wrong only, and not in the degree of injury to the other contracting party relying on his representation. The true principle on which the liability of an agent for an authorized [[unauthorized] contract rests is that he has been guilty of a wrong, or omission, depriving the party dealing with him of the benefit of the liability of the principal, for which he contracts.--Smoot v. Ilbery, l0 Mees. & Wels. 1. When he is guilty of no wrong or omission, when there is a full and honest disclosure of the nature and extent of his authority; when the party dealing with him has all the knowledge and information which the agent possesses, there is no liability resting on him, though his act or contract proves to be ultra vires.--Jefts v. York, 10 Cush. [ Mass.] 392; Newman v. Sylvester, 42 Ind. 106." Lutz v. Van Heynigen Brokerage Co., 199 Ala. 620(7), 627, 628, 75 So. 284.

It is said in Schloss & Kahn v. McIntyre, supra: "Where all the facts are known to both parties, and the mistake is one of law as to the liability of the principal, the fact that the principal cannot be bound is no ground for charging the agent." Also, "that in all the cases in which an agent has been held personally responsible 'it will be found that he has either been guilty of some fraud, has made some statement which he knew to be false, or has stated as true what he did not know to be true, omitting at the same time to give such information to the other contracting party as would enable him, equally with himself, to judge as to the authority under which he proposed to act.' " In Wolfe & Sons v. McKeon, 2 Ala.App. 421, 57 So. 63, the same principles are given application to similar situations.

Under our decisions it is the result of...