G.C. Riordan & Co. v. Thornsbury

• Decision Date: 11 December 1917
• Citation: 178 Ky. 324,198 S.W. 920
• Parties: G. C. RIORDAN & CO. v. THORNSBURY ET AL.
• Court: Kentucky Court of Appeals

198 S.W. 920

178 Ky. 324

G. C. RIORDAN & CO. v. THORNSBURY ET AL.

Court of Appeals of Kentucky.

December 11, 1917

Appeal from Circuit Court, Pike County.

Action by G. C. Riordan & Co. against J. K. Thornsbury and others. Judgment for defendants, and plaintiff appeals. Affirmed.

Harry B. Mackoy and Mackoy & Mackoy, all of Cincinnati, Ohio, and Auxier, Harman & Francis, of Pikeville, for appellant.

Stratton & Stephenson, of Pikeville, for appellees.

CLARKE J.

The First Methodist Episcopal Church of Pikeville, Ky. was building a new church edifice during the years 1912 and 1913 when and for some time thereafter J. A. Lewis was its pastor. On January 8, 1913, the appellants, partners doing business under the firm name of G. C. Riordan & Co., sold to the church, through its pastor, the glass for its windows including several memorial windows, for which payment was to be made in cash. The account was not paid when due, and about February 10, 1913, a note for the amount of the account, due in 30 days, was executed and delivered to G. C. Riordan & Co. This note was not paid when due, and a renewal note, due in 60 days thereafter, was executed and delivered. Neither of these notes is in the record, and there is some doubt as to whether they showed upon their face that they were the notes of the church, or of the trustees as individuals. However for this same indebtedness, another renewal note was executed, which is as follows:

$572.00. Pikeville, Ky. July 1st, 1913.

"Four months after date we promise to pay to the order of G. C. Riordan & Co., five hundred and seventy-two dollars, at First National Bank, Pikeville, Kentucky, with 6% interest. Value received.

J. K. Thornsbury (Trustee)

H. S. Damron (Trustee)

P. B. Stratton Trustee

R. O. Honaker Trustee

G. S. Thornsbury Trustee."

This note not having been paid at its maturity, the payee filed this action on October 27, 1914, against J. K. Thornsbury and others who signed the note, seeking judgment against them personally for the amount of the note, with interest and costs. The defendants answered, denying individual liability, and alleging that, at the time the note was executed, they were trustees of the church; that, as such, they signed and delivered the note to plaintiff; that the debt for which the note was given was the debt of the church; and that the note was intended by them and accepted by plaintiffs as the note of the church, and not as their individual obligation, and by oversight and mistake it was written "we promise to pay," instead of "the church promises to pay." Plaintiffs filed a reply, denying the material allegations of the answer as to the mistake in the execution of the note, and pleaded that the mistake, if any, was upon the part of the defendants only and due to their negligence, and that the mistake was not mutual. The affirmative allegations of the reply were traversed by rejoinder. Several other pleadings were filed by the parties but, as they do not materially change the issues as indicated, they need not be referred to. The issues thus presented were, by consent, tried by the court without the intervention of a jury. Judgment was rendered in favor of the defendants and dismissing the petition, and from that judgment this appeal is prosecuted.

1. For reversal, counsel for appellants rely upon section 20 of the Negotiable Instruments Act, which reads as follows:

"Where the instrument contains, or a person adds to his signature, words indicating that he signs for or on behalf of the principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as agent, or as filling a representative character without disclosing his principal, does not exempt him from personal liability."

It is insisted that, as the Negotiable Instruments Act covers the entire subject of negotiable instruments and is a complete body of law upon that subject, controlling in all cases to which it is applicable, as has been held by this court in Wettlaufer v. Baxter, 137 Ky. 362, 125 S.W. 741, 26 L. R. A. (N. S.) 836, First State Bank of Nortonville v. Williams, 164 Ky. 143, 175 S.W. 10, Southern National Life Realty Corporation v. People's Bank of Bardstown, 178 Ky. 80, 198 S.W. 543, and as section 20 expressly provides that the mere addition of words describing the maker as an agent, of filling a representative character without disclosing his principal, does not exempt him from personal liability, the defendants, having merely added the word "trustee" to their signatures without disclosing their principal, are liable.

The note sued on is, by its terms, a negotiable instrument, and the act does apply whether or not the note was, in fact, negotiated, as was held in Wettlaufer v. Baxter, supra; and, although the act does unquestionably apply to all negotiable instruments, whether actually negotiated or not, it just as certainly does not apply, with equal force, to negotiable instruments that have been issued, but not negotiated, and to such as have been negotiated. In the two very recent cases of First National Bank of Central City v. Utterback, 177 Ky. 76, 197 S.W. 534, and Southern National Life Realty Corporation v. People's Bank of Bardstown, supra, it was held that the act rendered negotiable paper, after negotiation, free from all defenses available to prior parties among themselves, and at the same time reserves to the maker all defenses against the original payee or a holder, other than a holder in due course. The effect of this holding is that, as among the original parties to the instrument, the provisions of the act simply declare the prima facie effect of the instrument; whereas, in the hands of a holder in due course, the declared legal effect is against prior parties absolute. While section 20 of the act provides that a maker, who signs a negotiable instrument such as the note sued on, as did appellees, who added to their signatures the word "trustee" without disclosing their principal, is, by the terms of the instrument, personally liable thereon, yet, nevertheless, this declaration of the act, as between the original parties to the instrument, is but a declaration of prima facie liability, which becomes absolute only after negotiation and in the hands of a holder in due course. Clearly, therefore, as the note had not been negotiated and appellants are not holders in due course, but are original parties, section 20 of the act is simply declaratory of the prima facie liability of appellees on the face of the instrument; and they had the right, as against appellants, to interpose any defense allowable against a negotiable instrument under section 58 of the act.

Formerly, there was much confusion in the decisions as to whether or not extrinsic evidence is admissible to show the intention of the parties in signing such an instrument. In many jurisdictions, it was held that such evidence is not admissible, although in this state, for a long time if not always, it has been the rule that the inquiry to ascertain the proper intention of the parties was not confined to what appeared in the instrument itself, but that resort might be had to extrinsic evidence by the payee or the maker. Pack v. White, 78 Ky. 243; Warford v. Temple, 73 S.W. 1023, 24 Ky. Law Rep. 2268. In Newman's Pleading, Practice and Forms (3d Ed.) § 160b, it is said:

"If such a note be signed by one who adds to his signature the words 'as administrator' or 'executor,' this addition is but descriptio personæ, and the writing is prima facie his individual obligation."

In 3 R. C. L. 1095, after noticing and commenting upon the lack of harmony that formerly obtained in the decisions on this question, the authors say:

"While it is conceded that there is anything on the face of the paper which suggests a doubt as to the party bound, or the character in which any of the signers has acted in affixing his name, parol evidence is admissible between the original parties to establish the real intent, yet the view which obtained formerly with all courts, apparently, and still persists in some jurisdictions, deems instruments of the class herein considered not to show such an ambiguity as to warrant the introduction of extrinsic evidence. It is better in these cases, however, to hold that the signature is ambiguous, and hence subject to explanation by extrinsic evidence; and this is the modern view. According to sounder doctrine while, where one signs as agent of another, the prima facie presumption is that the words

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