Kegel v. McCormack

• Decision Date: 27 April 1937
• Citation: 272 N.W. 650,225 Wis. 19
• Parties: KEGEL et al. v. McCORMACK et al.
• Court: Wisconsin Supreme Court

225 Wis. 19

272 N.W. 650

KEGEL et al.

v.McCORMACK et al.^*

Supreme Court of Wisconsin.

April 9, 1937.

Dissenting Opinion April 27, 1937.

Appeal from a judgment of the Circuit Court for Milwaukee County; Robert S. Cowie, Judge, presiding.

Reversed.

This action was begun on July 12, 1935, by Frederick F. Kegel, executor, and Gertrude Rosenthal, executrix, of the last will and testament of Johannah Marie Kegel, to recover a balance alleged to be due on a note given by the defendants, James L. McCormack and Norman J. Savignac. The defendants answered denying liability and by way of a counterclaim asked for a reformation of the note. Upon the trial the court found in favor of the defendants, adjudged the defendants entitled to reformation, dismissed the plaintiffs' complaint, and from the judgment entered accordingly on the 11th day of August, 1936, the plaintiffs appeal.

On May 18, 1928, the plaintiffs loaned the sum of $1,710.45 for one year with interest at the rate of 6 per cent. per annum. The note read, “One (1) year after date for value received we promise to pay,” and recited that it was secured by a mortgage on real estate of even date. The note was signed:

“Jas. L. McCormack, Pres.

“N. J. Savignac, Sec. & Treas.”

Payments amounting to $1,000 were made upon the note by checks of the Nor-Mac Realty Company. There remained due at the time of the commencement of the action, principal and interest in the sum of $1,401.10.

The defendants' answer alleges that the note was executed by the Nor-Mac Realty Company and that payments were made by that corporation. Plaintiffs then moved for a summary judgment, which motion was denied. The court granted defendants leave to amend their answer. The amended answer alleges that the note was the note of the corporation; that plaintiffs knew it to be such and accepted it as such; that it was given as consideration for a deed for certain real estate to the corporation and was secured by a mortgage on said real estate executed by the corporation; that payments were made by the corporation; and alleged by way of counterclaim these and additional facts; and further, that by mutual mistake the note was not made to conform with the other documents and in accordance with the intent of the parties as shown by the signatures on the note.

The plaintiffs replied to the counterclaim, alleged among other things that the defendants had not repudiated the debt until after the corporation had conveyed away all of its assets; that the premises covered by the mortgage were held in the name of McCormack and wife personally up to the time of the conveyance of the corporate assets; and as a defense to the counterclaim the plaintiffs alleged that the defendants were not the proper parties to sue for reformation; that if a cause of action for reformation existed at all, it was not in favor of the defendants; that if a cause of action for reformation ever existed, it existed at the time the note was delivered and is barred by the statute of limitations; that the defendants were guilty of laches; that the defendants are now estopped from obtaining reformation by their conduct at the time of the delivery of the note and in the transactions had with reference thereto since that time.

Numerous procedural steps were taken in the action, but it is not necessary to set them out in detail here.

FAIRCHILD, J., dissenting.

Jos. F. Studnicka, of Milwaukee, for appellants.

Clarence P. Nett, of Milwaukee, for respondents.

ROSENBERRY, Chief Justice.

It appears from the findings of the trial court that the note in question was executed on May 18, 1928, as alleged in the complaint and was signed as therein alleged; that the note was secured by a mortgage of even date, executed by the Nor-Mac Realty Company; that in consideration of the execution of the note and mortgage plaintiffs executed a warranty deed to the Nor-Mac Realty Company, of certain premises therein described; that at the time of the execution of the note James L. McCormack and N. J. Savignac were officers of the Nor-Mac Realty Company and as such were authorized to execute the note on behalf of the company; that by mutual mistake of the plaintiffs and defendants the note was not corrected to conform with the other documents; that James L. McCormack signed in a representative capacity as president and N. J. Savignac signed in a representative capacity as secretary and treasurer of the Nor-Mac Realty Company; that “to make the said note conform to the actual intent and understanding of the parties said note should be amended and reformed and is hereby amended and reformed to add the name Nor-Mac Realty Co. to said note, immediately preceding the official signatures of the defendants James L. McCormack and N. J. Savignac.”

The court further found that the transaction with respect to said action was a part of a definite understanding to dispose of a piece of real estate owned by the Kegel estate to the best advantage which plan was understood by the parties and was known to be a transaction concerning the plaintiffs and the corporation; that no consideration of any kind moved to the defendants James L. McCormack and N. J. Savignac, by virtue of the execution of the note in question.

While the note contains a clause to the effect that it “is secured by a mortgage of even date herewith,” it does not appear how, if at all, the note was described in the mortgage; the mortgage not having been offered in evidence.

[1] The question presented for decision has not heretofore been considered by this court. It is the contention of the plaintiff that under the provisions of section 116.24, which provides, “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; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability” (this is section 20 N.I.L.), the name of the Nor-Mac Realty Company not appearing upon the face of the instrument, the defendants may not show by parol evidence that it was the intent of the parties that the company was to be bound.

Section 116.22 provides: “No person is liable on the instrument whose signature does not appear thereon, except as herein otherwise expressly provided.” (Section 18 N.I.L.)

The defendants contend, however, that section 116.21(8) is applicable. Its material provisions are as follows:

“Where the language of the instrument is ambiguous, or there are omissions therein, the following rules of construction apply: ***

“(8) Where several writings are executed at or about the same time, as parts of the same transaction, intended to accomplish the same object, they may be construed as one and the same instrument as to all parties having notice thereof.”

Subsection (8) is not a part of the N.I.L. and apparently appears only in the Wisconsin statute. However, this section by its terms has no applicability until ambiguity or omission appears. If section 116.24 makes the instrument certain and fixes the liability of a person signing in a representative capacity without disclosing his principal, then there is no ambiguity or omission and subsection (8) does not apply. This brings us back to a consideration of the principal question unaided by the provisions of subsection (8).

There is a considerable split of authority as to what section 116.24 was intended to do. Some courts have held that if after the signature of the maker there appears the abbreviation “Agt., Pres., Sec'y.,” etc. the instrument is ambiguous and that parol evidence is admissible to clear up the ambiguity as between the original parties where the payee had knowledge of the fact of agency. Phelps v. Weber (1913) 84 N.J.Law, 630, 87 A. 469;Lummus Cotton Gin Co. v. Cave (1918) 109 S.C. 213, 96 S.E. 94;Crocker Nat. Bank v. Say (1930) 209 Cal. 436, 288 P. 69.

[2] The question really turns upon the effect to be given to the words “but the mere addition of words describing him as an agent,” etc. It is argued in some cases where the statute has been considered that this opens the door to parol evidence for the purpose of showing who was intended to be bound. This seems a strained construction. Section 20 makes it clear that if a person signing an instrument adds to his signature words indicating that he signs for and on behalf of a principal, he is not liable on the instrument if he was duly authorized and discloses his principal. The last clause has been held to mean by the great weight of authority that if he adds after his name the descriptive words and does not disclose his principal, he does become liable. This construction is in accord with the great weight of authority as it stood prior to the enactment of N.I.L. and with the weight of authority in cases which have considered section 20. See cases cited 8 C.J. 157, note 75; Brannan's N.I.L. (5th Ed.) 257 et seq.; 5 U.L.A. 138 et seq.

[3] Where the name of the principal is disclosed, the weight of authority appears to be that parol evidence may be received to show that the parties did not intend the person signing as agent or in a representative capacity to be bound. This seems to be in accord with the principle of the Wisconsin cases although the precise question has not been considered.

In Frailing v. Sieber (1918) 168 Wis. 259, 169 N.W. 607, 608, plaintiff sought recovery against Hannah Sieber on the ground that the note given by her husband, John Sieber, was given as her agent and for an indebtedness for which she was liable. The court referred to section 1675-18 (now section 116.22, section 18 N.I.L.), speaking of the rule that no party can be charged as principal, quoted from Daniel on Neg. Inst. as follows: “The rule excluding parol evidence to charge an unnamed principal as a party to negotiable paper is...