Marx v. Luling Co-Op. Ass'n.

• Decision Date: 02 December 1897
• Citation: 43 S.W. 596
• Parties: MARX et al. v. LULING CO-OP. ASS'N et al.<SMALL><SUP>1</SUP></SMALL>
• Court: Texas Court of Appeals

43 S.W. 596

MARX et al. v. LULING CO-OP. ASS'N et al.¹

Court of Civil Appeals of Texas.

December 2, 1897.

Appeal from district court, Galveston county; William H. Stewart, Judge.

Action by Marx & Blum against the Luling Co-operative Association, Ed. Dickenson, H. L. Rodenberg, J. L. Dickenson, Jr., W. P. Bell, E. P. Hill, A. Beversdorf, T. W. Pierce, and Wilson Bell. From a judgment in favor of defendants Ed. Dickenson, H. L. Rodenberg, J. L. Dickenson, Jr., W. P. Bell, E. P. Hill, A. Beversdorf, and Wilson Bell, plaintiffs appeal. Reversed.

Spencer & Kincaid, for appellants, Burgess & Hopkins and Hume & Kleberg, for appellees.

WILLIAMS, J.

This action was begun on the 16th day of November, 1895, by appellants against the association, a private corporation, upon two promissory notes, of date March 29, 1895,—one for $536.67, due October 15, 1895, and one for $536.88, due November 10, 1895,—both bearing 8 per cent. interest from maturity, and stipulating for the payment of 10 per cent. additional, as attorneys' fees in case they were placed in the hands of attorneys for collection, and against the other appellees individually, as guarantors upon the following instrument:

                                       "Luling, March 30th, 1895
                

"Messrs. Marx & Blum, Galveston, Texas —Gents: We hereby agree, as guarantors, to be responsible and liable to pay you, at your office in Galveston, Texas, any and all indebtedness now or hereafter owing to you by the Luling Co-operative Association of Luling, Texas, whether upon open account or otherwise, secured or unsecured, principal and interest, with the interest thereon at the rate of 8 per cent. per annum from this date. We further agree that, without notice to us, said indebtedness, or any part thereof, may be changed in form and terms of payment as often as may be agreed on by you with the said Luling Co-operative Association, and the same shall still be covered by this guaranty, and that no change of partners, whether by retirement or coming into your firm or in that of the said Luling Co-operative Association, shall effect this guaranty, but the same shall hold good, and be for the benefit of your firm, notwithstanding such changes, and until we notify you of our purpose to be no longer held as guarantors.

                  "Value received.                  Yours, truly
                "Ed. Dickenson,                  T. W. Pierce, Mgr
                "H. L. Rodenberg,                      Wilson Bell
                "J. L. Dickenson, Jr.,          As Board of Directors
                "W. P. Bell,
                "E. P. Hill,
                "A. Beversdorf,"
                

The association and Pierce defaulted, and judgment was rendered against them. The other defendants, by their answer, set up as defenses: (1) That, with plaintiffs' knowledge and at their instance, they executed the guaranty in their collective capacity, as board of directors of the association, and not as individuals, and that their intention and purpose was not to bind themselves individually, but to more securely bind the association and its property, and that the instrument was that of the association, and not of themselves. This plea was made under oath. (2) That they were induced to sign the instrument, in the manner shown, by the representation of T. W. Pierce, the agent of plaintiffs, that plaintiffs desired them to do so only to more securely bind the association, and not to make them personally liable. (3) That they so signed upon this express stipulation, and on condition that Pierce sign as manager of the corporation, which he did, they signing thereafter as board of directors; and that, at the instance and contrivance of plaintiffs, the instrument had been altered by the erasure of the word "Manager," affixed to Pierce's name. (4) That plaintiffs had refused to accept the guaranty so signed, and demanded that defendants sign it in their individual capacity, so as to make them personally liable, which they refused to do. (5) That the instrument was void and without consideration, for that it was made upon condition that plaintiffs would extend further credit, and grant indulgence to the association on a debt which it owed them, and that plaintiffs had never accepted the guaranty upon such condition, and had not notified them of its acceptance. (6) That the association on the 12th day of October, 1895, had made a conveyance to a trustee of all its property, to secure its creditors, and that, upon a suit brought by plaintiffs, such conveyance had been adjudged to be a deed of assignment for the benefit of all creditors, and that the estate was being administered for their benefit; that, by such action, plaintiffs became accepting creditors, and are thereby debarred from prosecuting the suit, until such estate shall have been fully administered. The case was tried before the court, without a jury, and judgment was rendered in favor of the defendants, except Pierce and the association. Several of the assignments of error are based upon the overruling of exceptions taken by plaintiffs to the answer, but it will be more convenient to examine the merits of the defense presented under the exact facts developed by the evidence, since it is obvious that, if those facts establish a defense, the pleading is sufficient to admit proof of it.

The evidence, in which there is very little conflict, shows that the Luling Co-operative Association was engaged in the mercantile business, and that Pierce was its general manager, and the other defendants were stockholders, and composed its board of directors. Previous to the execution of the notes and guaranty, it had traded with the plaintiffs and the firm of L. & H. Blum, and was indebted to both firms in considerable sums, most of which were past due. The association applying to both firms for an extension of time, and desiring further credit from L. & H. Blum, Charles Frenkel, an agent representing the two firms, investigated its financial condition, and went to Luling, and had an interview with Pierce, and informed him that the indulgence and credit could not be granted unless the association would give a guaranty, signed by responsible parties. Frenkel states, in substance, that Pierce thereupon offered to get the members of the board of directors to sign a guaranty, to which he agreed. Pierce states that Frenkel suggested to him that the signatures of these persons be obtained, and requested and authorized him to do so. The court below seems to have accepted Pierce's version of this, and we accordingly adopt it. It was agreed between the two that, if the guaranty should be signed by the members of the board of directors, the credit and extension of time asked for should be allowed. Frenkel prepared and left with Pierce, for signature by the members of the board, the paper sued on, and, for signature by the corporation, the notes sued on, which allowed the time for payment as agreed upon; also like papers for L. & H. Blum. It was agreed between them that, as the directors lived in different parts of the county, Pierce should attend to the matter at their meeting, which was to take place on the 29th day of March. On that day Pierce presented the matter to five of the directors present at the meeting, who discussed it, and declined to become individually responsible for the debts, and at first refused to sign the instrument; but, after persuasion by Pierce and further discussion among them all, it was agreed that the instrument should be signed by Pierce as manager, and by the others as board of directors, and this was done, as appears on the guaranty. By doing this, it was understood among them all that no individual liability was assumed, and that their object was only to make the corporation responsible. All of the parties knew of the indebtedness of the corporation to plaintiffs and L. & H. Blum, and of the presence of the notes to be executed by the corporation, and that the purpose of the transaction was to secure the debts. There is no evidence that there was any misrepresentation of any fact by Pierce, or by any one else, at the meeting. Frenkel went to Luling on the same day, and Pierce showed him the guaranty signed as stated, and, upon Frenkel's inquiring as to the purpose of the affixes to the names, stated that, whenever they signed papers, he and the directors signed that way. He also stated that both he and the directors understood that they were individually liable. Two of the directors, Bell and Beversdorf, had not been present at the meeting, and had not yet signed the guaranty, and Frenkel gave it back to Pierce, with instructions to get their signatures. They signed their names along with the others above the affix. When Pierce returned with it, signed, Frenkel again asked him about the word "Manager," and he replied that it did not amount to anything, and offered to scratch it out, and did so. Thereupon Frenkel expressed himself as satisfied, and told Pierce that the time would be extended, and the goods ordered from L. & H. Blum would be forwarded, all of which was done. Frenkel and the directors did not meet. Frenkel returned to Galveston with the notes and guaranties, and delivered them to the respective firms. They were taken and kept by the firms, and the credit and extension of time were granted. The manager of L. & H. Blum raised a question as to the affixes to the signatures; and on April 20, 1895, the two firms wrote the following letter: "Galveston, Texas, April 2nd, 1895. T. W. Pierce, Mgr., Luling, Texas—Dear Sir: Our agent, Mr. Frenkel, has returned and handed us the notes you gave him for our respective amounts, payable next fall, and also a guaranty for each of us, duly signed by yourself and the several directors of your association, which is all satisfactory, and we much appreciate your kindness in the matter. We notice the word `Manager' is written after your name, and erased, and the words `as Board of Directors' is added to some of the other signatures, which rather complicates the meaning of it. Mr. Frenkel has explained that you and...