Lawrence County Bank v. Arndt

• Decision Date: 22 June 1901
• Citation: 65 S.W. 1052
• Parties: LAWRENCE COUNTY BANK v. ARNDT.
• Court: Arkansas Supreme Court

65 S.W. 1052

LAWRENCE COUNTY BANK v. ARNDT.

Supreme Court of Arkansas.

June 22, 1901.

Appeal from circuit court, Lawrence county, in chancery; Frederick D. Fulkerson, Judge.

Action on a promissory note by the Lawrence County Bank against Arndt and others. From a judgment in favor of defendants, plaintiff appeals. Affirmed.

Charles Coffin and H. L. Ponder (J. C. Hawthorne, of counsel), for appellant. Joseph W. Phillips, S. D. Campbell, and Jasper N. Beakley, for appellees.

BUNN, C. J.

This suit was instituted on a promissory note on the 16th of February, 1899, and on the pleadings and testimony in the case the cause was transferred to equity. Judgment was rendered for the defendants, and plaintiff appealed.

The plaintiff is an incorporated bank doing business at Walnut Ridge, in Lawrence county, in this state; and the defendants are citizens of said place, who made their promissory note to the bank, of which the following is a copy, to wit: "$1,540.00. Ninety days after date, we, or either of us, promise to pay to the Lawrence County Bank fifteen hundred and forty dollars, negotiable and payable at the Lawrence County Bank, Walnut Ridge, Arks., for value received, with interest at ten per cent. per annum after maturity until paid. The drawers and indorsers severally waive presentation for payment, protest, and notice of protest and nonpayment of this note. [Signed] H. Arndt, President. J. M. Phelps, Vice President. Benj. F. Graff, Secretary. S. C. Dowell, Treasurer." Payment of interest to November 1, 1898, amounting to $82, was indorsed on the note. No other payments were made, and the prayer was for judgment for the $1,540, and interest from 1st November, 1898. The defendants answered, averring that the note was in fact but a renewal note of two pre-existing notes, aggregating the same amount, which the Walnut Ridge Manufacturing Company, another corporation of the same place, owed said bank, and that the defendants executed the same for no other consideration than to take up and renew said two notes and old indebtedness, and that they did not execute the note sued on in their individual capacities, nor was it the intention of the parties to it that they should be held individually liable for the same, but that, on the contrary, as the terms set opposite their signatures indicate, they executed the same as officers and directors of said manufacturing company, to bind said company alone; that the note was executed at the instance and request of said J. M. Phelps, who was the president of said bank, and at the same time vice president of said company; and that it was perfectly understood among them all at the time, and so expressed, that the note was to be regarded as the obligation of the manufacturing company, executed by the defendants as its officers and agents, and not otherwise. The two notes of which the note sued on is claimed to be a renewal appear in the record as having been similar in language to the one sued on, and signed by persons designated as "President" and "Treasurer," and other writing without official designation. The testimony in the case goes to show that the consideration of all these notes was an indebtedness originally of the manufacturing company, evidenced by note, and renewed from time to time from an indefinite time past.

The sole question necessary to be considered in this case is whether a note expressed in the language of the one sued on, and signed as it was, is subject to be explained by parol testimony. It will be observed that the Walnut Ridge Manufacturing Company is nowhere referred to in the body of the note as the payor or obligor; nor is it referred to in connection with the signers of the note, as a company of which they were officers and directors, nor otherwise. There is in fact nothing on the face of the note, nor connected with the signatures, which has any reference to said manufacturing company, which is sought to be made the obligor by the defendants. Therefore a suit on the note as this is could have no reference to said company, unless by extraneous averments, as made in defendants' answer herein. The rule as laid down in all the works of the text writers, and supported by all the decisions, with a few exceptions (and they only apparently exceptions), is that such a note is the note of the signers individually, and not of the body or company they claim to represent, and that parol evidence is not admissible to explain the intention of the parties, and show the same to have been different from that expressed in the language of the note itself. In stating the principle, it may be well, however, to say that any reference, however slight, to the alleged obligor company in the body of the note, or in the official designation of the signers, would be sufficient to let in proof of the real intention of the parties; but the difficulty in this case is that there is nothing on the face of the note, or connected with the signatures, to indicate that the manufacturing company had any connection with the transaction whatever. That being true, parol testimony to show such connection is inadmissible, under the rule, however hard that rule may appear to be; and the rule is in equity the same as at law. Tied. Com. Paper, § 123, and note thereunder, and corresponding sections in Daniel, Com. Paper, Rand. Com. Paper, and all text writers on the subject.

The case having been determined in the court below contrary to this rule, the decree is reversed, with directions to render judgment for the plaintiff.

On Motion for Rehearing.

(Dec. 7, 1901.)

BATTLE, J.

The appellees ask for a rehearing on the following among other grounds, to wit:

"Appellees believe the court overlooked the fact that the question of admissibility of parol testimony was brought into this case not as a direct defense to the note, but by their cross complaint against appellant, seeking a reformation of the note sued on to accord with mutual intent of the appellant and appellees at the time of the execution of said note, and that the failure to express the words showing on the face of the note that it was the obligation of the Walnut Ridge Manufacturing Company was a clerical mistake of the appellant, as well as of the appellees; that such mistake was induced by and was the fault of the appellant; that appellant's officers and agents induced appellees to sign said note by expressly representing to them at the time that it was the obligation of the Walnut Ridge Manufacturing Company, and not the obligation of appellees individually; that the note has always been in the hands of the original payee, and nothing has intervened to prejudice the rights of appellant by reason of such note being reformed to express the mutual intent; that the evidence in the record, as well as the cross complaint, shows the foregoing facts."

Appellees, in their answer filed in this cause in the circuit court, alleged that the note sued on was given in satisfaction of the indebtedness of the Walnut Ridge Manufacturing Company, and for the purpose of evidencing such indebtedness, and that they were not personally liable for the same. After answering in this manner they filed an amended answer (making the same a cross complaint), "alleging that at the time of the execution of the note it was agreed and understood between the plaintiff and the defendants, as the officers of the Walnut Ridge Manufacturing Company, that the note should be executed as the obligation of the company, and not as the obligation of the defendants individually, and at the time it was so understood by all the parties, and the note was executed by the defendants in their capacity as such officers, and as the obligation of said company; the word `as,' between each individual name of the signer and the name designating his official capacity, and the words `Walnut Ridge Manufacturing Company,' after the designation of the official capacity of each signer, being omitted by clerical error and mutual mistake of all the parties to the instrument."

The cross complaint prayed that the cause be transferred to equity, that the Walnut Ridge Manufacturing Company be made a party, and that the note be reformed so as to express the meaning and intent of the parties at the time of its execution.

The cause was transferred, without objection, and the Walnut Ridge Manufacturing Company entered its appearance.

The evidence adduced at the hearing "showed that the note was drawn in its present form by the officers of the bank, or at their instance, before presentation for signing, and was carried by J. M. Phelps, as president of the bank, and by Dolph Sloan, as its cashier, to the makers of the note, and that the bank officers directed the makers to sign for the Walnut Ridge Manufacturing Company, with simply the official designation after each name, in form as the same now appears; representing to the signers at the time that they were not personally liable for it, but that it was the obligation of the company."

The court found that the note sued on was given for the indebtedness of the Walnut Ridge Manufacturing Company to the bank; that appellees did not assume the indebtedness, it being the understanding of appellant and appellees that the signing of the note by appellees was in their official capacity, and that the makers were not individually or personally liable, — and rendered a decree in favor of appellees, and a decree in favor of appellant against the manufacturing company for the balance due on the note.

The question presented by the motion for rehearing is, was it the duty of the circuit court to reform the note?

Authors and courts have found it difficult to formulate a rule according to which courts of equity relieve against mistakes of law. Chief Justice Marshall, in Hunt v. Rousmanier, 8 Wheat. 215, 5 L. Ed. 600, said: "Although we do not find the naked principle that relief may be granted on account of ignorance of law asserted in the books, we find...