Millsaps v. Merchants' & Planters' Bank

• Decision Date: 30 October 1893
• Citation: 71 Miss. 361,13 So. 903
• Parties: R. W. MILLSAPS v. MERCHANTS' & PLANTERS' BANK OF GREENVILLE
• Court: Mississippi Supreme Court

13 So. 903

71 Miss. 361

R. W. MILLSAPS v. MERCHANTS' & PLANTERS' BANK OF GREENVILLE

Supreme Court of Mississippi

October 30, 1893

FROM the circuit court of the first district of Hinds county, HON J. B. CHRISMAN, Judge.

The case is stated in the opinion.

Judgment Reversed.

Nugent & Mc Willie, for appellant.

l. It was error to exclude the unsigned memorandum of liabilities. It was an admission that the debts were corporate liabilities. Besides, it formed the basis of the negotiation.

2. The real inquiry was, what was the margin of value between the corporate assets and liabilities? Whether a debt was legally the debt of the corporation or not, if it was treated as such in the negotiation, it should be considered in determining the amount of the corporate liabilities.

3. It was error to refuse leave, on the trial, to file an additional plea that certain property, treated as corporate property in the negotiation, was incumbered. As the margin of value was the thing sold, it would be destroyed either by increasing the debts or diminishing the assets. It is no answer to say that the incumbrances were for the private debts of Johnson. He was the sole owner of the stock, and no one not a creditor of the corporation could complain. Surely the appellee, who stands in Johnson's shoes, cannot occupy a better position than he did.

4. The warranty having been broken when made, subsequent payment of debts by Johnson could not cure the breach. 3 W. & M., 529; 35 Ind. 475; 3 Gray, 580; 1 Allen, 305; Toxoda v. Camp Walker (Miss.), 150.

Calhoon & Green, for appellee.

1. The defense is in the nature of a recoupment for damages for breach of a warranty. As Johnson paid off all the excess of the debts before the time for consolidating the railroads Millsaps sustained no damages. Although there may be a breach of warranty as soon as made, the subsequent performance cured the breach, just as the acquisition of the outstanding title by the grantor cures a breach of warranty of title.

2. On the point that the note was given for negotiation, we submit that the replication falls within Hawkins v. Neal, 60 Miss. 257; Mandeville v. Bank, 9 Cranch, 9.

3. Millsaps bought capital stock, not property. The sole warranty was as to the consolidated corporate debts. The July contract does not refer to existing debts, but guarantees that the total debts shall not exceed the sum stated. For this reason, the memorandum of liabilities was properly excluded. The contract itself was the only evidence of the price of the stock. The elements that went to make up the price were immaterial. The bases for negotiation, whether by colloquium or written, are all merged in the contract.

4. It was proper to refuse leave to amend on the trial. It was too late. Besides, to have gone into the question of what properties the companies owned would have been to try a case never suggested. There was no warranty as to property. The July contract differed from that of September. The latter contained a warranty as to then existing liabilities, and an undivided interest in stock was bought, subject to the pledge to Gunn. Hence, the negotiations leading to the former contract were irrelevant. It is evident that Millsaps did not accept Johnson's representations as to the debts, since he took a guaranty that the aggregate did not exceed a fixed sum. The criterion as to the existence of corporate debts was, in respect to time, September 20; in respect to the character of debts, that they should be corporate. The memorandum merely showed what debts Johnson expected to be paid; but Millsaps had the right to reject any not corporate. The memorandum was not an admission that the debts were corporate.

5. If any of the debts were not corporate, Johnson had no power to use the corporate property to pay them. Johnson was not the owner of the roads, but of corporate stock. Millsaps, by his purchase, became a stockholder, and Johnson could not devote corporate property to pay his own debts. Any such contract was void. Field on Corp., §§ 173, 174. Even the assumption of such a debt by mortgaging the corporate property to secure it, could not bind the corporation. Such a mortgage debt would not be a corporate liability.

Argued orally by W. L. Nuqent, for appellant, and M. Green for appellee.

OPINION

MAYES, Special J.

This is an action on a promissory note for $ 2,916.67, executed by the appellant to the order of Harry K. Johnson, and by said Johnson indorsed in blank, and transferred to the appellee before maturity. The note was given as part of a contract between the parties thereto, of date twentieth of September, 1890. That contract is set forth in full in the opinion of this court, rendered on the former appeal in this case, and reported in 69 Miss. 918, 13 So. 837.

Construing that contract, we held that, looking through the mere verbiage of the transaction to its real substance, what Johnson sold and Millsaps bought was one-third in a margin of value between the worth of all the property of all the street railways, placed at $ 45,450, and the sum of all their debts, warranted not to exceed $ 36,700 on the twentieth of September, 1890; that the fifth plea of the defendant, which averred that the debts of the said companies in fact amounted at that time to $ 44,825, and perhaps more, was good, because it in effect alleged the non-existence of the very thing bought and sold, to wit; the margin.

The case was therefore sent back for a new trial. On this second trial the court below again gave a peremptory instruction for the plaintiff, and this appeal seeks a reversal of that action. The course of the trial was such as to render necessary herein a statement of all the material facts of the case.

In the town of Greenville were four distinct street railways --the Greenville Street Railway, the Greenville Electric Street Railway and Power Company, the Star Line Street Railway and the Suburban Street Railway. Johnson was sole owner of all these concerns, except that about one-tenth of the stock of the Greenville Street Railway was outstanding in other hands. No stock had been actually issued by any of the companies except the last named. On the twenty-second of July, 1890, Johnson and Millsaps made the following written contract:

"This agreement witnesses that Harry K. Johnson sells to R. W. Millsaps a one-third interest in the stock of the Greenville Street Railway Company, of Greenville, Mississippi, held by Harry K. Johnson, being twenty-two thousand six hundred dollars, face value, a total capital stock of twenty-five thousand dollars, and also a one-third interest in the total capital stock of the Suburban Railway Company, and a one-third interest in a total capital stock of the Greenville Electric Street Railway and Power Company, and a one-third interest in the total capital stock of the Star Line Street Railway Company, of Greenville, Mississippi, for a total price of fifteen thousand one hundred and fifty dollars, and the said Harry K. Johnson guarantees that the total indebtedness of whatsoever kind of all of said roads shall not exceed thirty-six thousand seven hundred dollars on the twentieth day of September, 1890, and that he will deliver said stock on the twentieth day of September, 1890, and the said R. W. Millsaps agrees to pay for said interest said sum of fifteen thousand one hundred and fifty dollars to said Harry K. Johnson on the twentieth day of September, 1890, and said Johnson shall bear all expenses and take all profits from said roads up to said twentieth day of September, 1890. The price above agreed to be paid by said Millsaps represents one-third of a total capitalization of all of said roads of forty-seven thousand eight hundred and forty dollars, and from the price to be paid by him is to be deducted the one-third of the indebtedness of all of said roads, above guaranteed not to exceed the first sum above named.

"Witness our signatures, this twenty-second day of July, 1890. "HARRY K. JOHNSON,

"R. W. MILLSAPS."

The plan was that the $ 36,700 of debts were to be settled by placing a consolidated bonded mortgage on the entire property of the railways, which were also to be consolidated, and by taking up the debts with those bonds or their proceeds.

While this bargain was negotiating, and, as is claimed by Millsaps, "as the basis for the negotiation," Johnson gave to Millsaps certain unsigned memoranda of assets and liabilities. In the list of assets appear these two items:" Four lots, Belle Air, $ 3,000; sixteen lots, Park Side, $ 8,000." The list of liabilities aggregates $ 36,700, and in it appear these items: "Wilczinski note, $ 4,000; Dr. Walker, $ 1,100; Deaton & Skinner, $ 1,500." These memoranda Millsaps retained.

It seems that the stock in the Greenville Street Railway had been purchased by Johnson, on a credit, from one Gunn; that Johnson still owed some $ 19,000 of the purchase-money, and the stock was held in pledge to secure the payment of that debt. For this reason, when the twentieth day of September arrived, Johnson, not having the stock certificates in possession, and not being able to pay the debt to Gunn, could not deliver the stock according to his contract. Millsaps waived that point, and the written supplementary contract which is set forth in the former opinion of this court was made. Millsaps executed the note sued on, in purchase of one-third of the margin, making the same payable in sixty days, by which time it was understood that the bonds could be prepared, the mortgage executed, and all of the $ 36,700 of liabilities, including the Gunn debt, which was listed as one of the debts, could thereby be liquidated, and the enterprise put on a substantial basis, and all of the roads be then consolidated.

There...