Megowan v. Peterson

• Decision Date: 09 December 1902
• Citation: 173 N.Y. 1,65 N.E. 738
• Parties: MEGOWAN et al. v. PETERSON.
• Court: New York Court of Appeals Court of Appeals

173 N.Y. 1

65 N.E. 738

MEGOWAN et al.

v.PETERSON.

Court of Appeals of New York.

Dec. 9, 1902.

Appeal from supreme court, appellate division, Second department.

Action by James Megowan and others against Charles G. Peterson. Judgment for defendant was affirmed by the appellate division (70 N. Y. Supp. 1144), and plaintiffs appeal. Reversed.

Franklin Pierce, for appellants.

James P. Philip and J. Stewart Ross, for respondent.

HAIGHT, J.

This action was brought to recover of the defendant personally the amount of a promissory note, of which the following is a copy: ‘$693.19. Brooklyn, Dec. 28, 1899. Three months after date I promise to pay to the order of C. Stevens Co. six hundred and ninety-three 19/100 dollars at Kings County Bank of Bklyn., value received. Due March 28, 1900. Charles G. Peterson, Trustee.’ The plaintiffs were copartners doing business under the firm name of C. Stevens Company, and upon the trial, to establish their cause of action, introduced the note in question in evidence, the signature being admitted, and then rested. The defendant, in order to establish his defense, then introduced in evidence testimony tending to show that on the 4th day of December, 1899, the surviving member of the firm of Johnson & Peterson called a meeting of the creditors of the firm, and at such meeting the creditors assembled executed a paper by which ‘we, the undersigned creditors of Johnson & Peterson, hereby agree to and with each other and for the purpose of liquidating the business of Johnson & Peterson and the completion of the contracts of said firm, do hereby appoint Charles G. Peterson as sole agent and trustee for the benefit of all creditors to assume control and management of said business, hereby ratifying each and every act of said agent in the premises by him done or to be done; and we severally agree to forbear the prosecution and collection of our respective claims against said firm.’ Then followed the signatures of the creditors, among which is that of the plaintiffs' firm, ‘C. Stevens Co.’ This was followed by another paper of the same character, upon which appear the signatures of other creditors who were not present at the meeting. Thereupon, and at the same meeting, another paper was drawn and executed by Johnson, the surviving member of the firm, by which, in consideration of $1, the receipt of which he admitted, he bargained and sold, granted and conveyed, unto Charles G. Peterson, as trustee for the creditors of Johnson & Peterson, his successors and assigns, all the stock in trade, goods, merchandise, effects, and property of every description belonging to or owned by the said partnership of Johnson & Peterson, wherever the same may be, together with all debts, choses in action, and sums of money due and owing to said firm. He then produced oral testimony tending to show that he entered upon the discharge of his duties as such trustee, and undertook the completion of certain buildings which Johnson & Peterson had contracted to construct, and for that purpose purchased lumber of these plaintiffs under the express agreement that they would accept in payment therefor his promissory note as such trustee, and that the note in suit was given in payment for such lumber. This latter testimony was controverted by the plaintiffs, who testified that they did not know the purpose for which the lumber was purchased, and did not agree with him to accept his note as trustee for the benefit of the creditors in payment therefor. At the conclusion of the evidence, the court, upon application of the defendant's counsel, dismissed the complaint upon the ground that no cause of action had been established against the defendant, the plaintiffs asking for leave to go to the jury upon the controverted fact as to whether the plaintiffs gave credit to the defendant in his representative capacity or as an individual. An exception was taken by the plaintiffs to the direction rection of a verdict by the court.

The negotiable instruments law (Laws 1897, c. 612, § 39) provides 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; 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.’ In this case, as we have seen, the defendant signed the note, and then added to his signature the word ‘trustee.’ He did not, in the instrument itself, disclose the fact that he was trustee for the creditors of Johnson & Peterson, so that, under the provisions of this statute, he would become personally liable upon the note, unless he could show that at the time of the delivery of the note to the plaintiffs he disclosed the fact that the consideration for which the note was given was for the benefit of the creditors...