Johnson v. Graff

• Decision Date: 03 August 1942
• Docket Number: 8506
• Citation: 68 S.D. 562,5 N.W.2d 33
• Parties: F. D. JOHNSON, Respondent, v. A.N. GRAFF, Appellant
• Court: South Dakota Supreme Court

68 SD 562, 5 NW2d 33 (1942)

F. D. JOHNSON, Respondent v. A.N. GRAFF,

Appellant

South Dakota Supreme Court

Appeal from Circuit Court, Minnehaha County, SD

Hon. Lucius J. Wall, Judge

#8506—Reversed.

Danforth & Danforth, Sioux Falls, SD

Attorneys for Appellant.

Jones, Matthews & Fitzpatrick, Sioux Falls, SD

Attorneys for Respondent

Opinion filed Aug 3, 1942

RUDOLPH, P.J.

The facts in this case are not in dispute. A, N. Graff, the administrator of the estate of Lars Engebretson, deceased, wished to pay a certain judgment which had been obtained against the estate. There were no available estate funds. Mr. Graff borrowed from the Corn Exchange Bank $1,500 for this purpose. The facts surrounding the making of this loan are as follows: Mr. Graff consulted Mr. Meyhaus, the president of the bank, with whom he conducted his personal business, and Mr. Meyhaus, after being told the purpose of the loan, advised Mr. Graff, that he, Mr. Graff, could not afford to be personally responsible for this loan; that he should get an order from the County Court authorizing the loan, and thereby avoid personal responsibility. The County Court order was obtained and the loan made. To evidence the indebtedness Mr. Graff gave to the bank a promissory note signed, “Lars Engebretson Estate, by A. N. Graff Adm.” This action is based upon the note, and seeks to hold Mr. Graff personally liable thereon. The trial court entered a judgment in favor of the plaintiff and the defendant has appealed.

The trial court found as a fact that the bank made the loan in reliance upon the signature of A. N. Graff. If such is a finding of ultimate fact, we are convinced it has no support in the record. Certainly the manner in which the note was signed does not lend any support to the finding. Mr. Graff did not purport to sign the note in a personal capacity, and the undisputed facts above stated refute any thought that the bank was looking to the personal responsibility of Mr. Graff. We think it clear from the record that the bank as well as Mr. Graff intended the note to be an obligation of the estate, and not the personal obligation of Mr. Graff.

Respondent relies upon SDC 46.0125, which is Section 20 of the Uniform Negotiable Instruments Act, as follows: “Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized.” Respondent contends that Mr. Graff was without authority as administrator of the Engebretson estate to make this loan from the bank, and that the County Court was without power to authorize such loan. It is contended that the only authority of an administrator to borrow money for an estate is contained in the statutes which permit and authorize an administrator to mortgage property of the estate. SDC 35.1119, 35.1120. For the purpose of this opinion we may concede the above contention of respondent, i.e., that under the law of this state and the facts presented Mr. Graff was without authority as administrator to make this loan for the estate. It is respondent’s further contention that Mr. Graff, being without authority as administrator to make the loan, and he having signed the note in a representative capacity, the statute makes him personally liable upon the note.

The now generally accepted construction of this statute is found in the opinion written by the late Judge Cardozo in the case of New Georgia Nat. Bank of Albany, Ga., v. J. & G. Lippmann et al., 249 N. Y. 307, 164 N. E. 108, 109, 60 ALR 1344. The statute as construed places personal liability on the note upon one, who without authority signs in a representative capacity, by means of an inference arising from the proviso “if he was duly authorized”, contained in the statute. We quote from the opinion: “Whenever the form of the paper is such as fairly to indicate to the eye of common sense that the maker signs as agent or in a representative capacity, he is relieved of personal liability if duly authorized. ......