Nalty v. Cohn

• Decision Date: 18 March 1918
• Docket Number: 20003
• Citation: 78 So. 3,117 Miss. 190
• Court: Mississippi Supreme Court
• Parties: NALTY v. COHN ET AL

78 So. 3

117 Miss. 190

NALTY v. COHN ET AL

No. 20003

Supreme Court of Mississippi

March 18, 1918

Division B

APPEAL from the chancery court of Lincoln county, HON. O. B. TAYLOR Chancellor.

Petition by Louis Cohn as assignee of the Commercial Bank & Trust Company and others against J. B. Nalty. Demurrer to the petition was overruled and an appeal granted to settle the law of the case.

The facts are fully stated in the opinion of the court.

Decree reversed, demurrer sustained, and bill dismissed.

Price &amp Price, for appellant.

This is one of the main contentions in the demurrer. J. B. Nalty is not liable for the debts of the East Union Lumber &amp Manufacturing Company and before he can be held for its debts, he must obligate himself in writing under the statute of frauds. It is not a case under section 909 for anything due for unpaid stock.

Section 4775, provides, that certain contracts must be in writing and no action should be brought whereby to charge the defendant, or other person, first, upon any special promise to answer for the debt, default or miscarriage of any other person; second, upon any contract for the sale of lands, tenements, etc., or the making of any lease thereof for a longer term than one year, unless, in each of said cases, the promise or agreement upon which such action may be brought, or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith, etc.

The state of Mississippi, from its earliest decisions as we read them, has held steadfastly to the rule that it will ingraft no exceptions upon the statute for the prevention of fraud and perjuries and it has continuously assigned as a reason therefor, that while a strict construction of the statute may produce results, in some exceptional cases that was not in contemplation of the legislative mind, yet a loose construction of the statute or a departure from the law as written will produce more evil than the strict construction will exclude. Gumble v. Koon, 59 Miss. 264; Beaman v. Buck, 9 S. & M. 207; Fisher v. Kuhn, 54 Miss. 480.

We insist that the bill filed by the East Union Lumber & Manufacturing Company and Baggett & Cohn, Assignees, and the decree of the court thereon in June, 1914, is not an agreement in writing of J. B. Nalty individually to stand for the debts of the Lumber Company and nothing therein can be so construed, and any allegation in the bill that undertakes to explain or otherwise lay a foundation for holding J. B. Nalty, for debts of the lumber company is void under this statute. Bowers v. Andrews, 52 Miss. 596; Holmes v. Evans, 48 Miss. 248; McGuire v. Stevens, 42 Miss. 742; Scherck v. Moyse, 94 Miss. 259, 73 So. 869; 2 Elliott on Contracts, p. 463, sec. 1227; 79 Conn. 41; 134 Ill. 561; 37 Mich. 184; 50 Penn. 39; Wright v. Payne, 2 Tenn. Chan. 175; Bloom v. McGrath, 53 Miss. 249, 20 Cyc., 172; Flynt v. Pierce, 99 Mass. 48, 20 Cyc., 192, 49 So. 116.

Appellee claims that the promise made when the first bill was filed binds J. B. Nalty and it is on this promise made in the first bill that this suit is based.

There is nothing in this record to show that J. B. Nalty ever assumed to pay anything individually for the East Union Lumber & Manufacturing Company and unless the petition filed by the lumber company and Cohn & Baggett, Receivers, and the decree rendered upon such petition binds Nalty individually under the law to pay the debts of the lumber company, then that is an end to this case.

The allegations in the bill filed against Nalty that he agreed to mortgage Louisiana lands to pay the debt, is without consideration, collateral, and is void, because a promise to pay and mortgage real estate cannot be made verbally to settle obligations of other concerns.

It is a general rule, that when a decree is taken upon a bill, everything not included is excluded, and what could have been included and was not, upon a second suit is res adjudicata. There was never any novation in this case and the East Union Lumber & Manufacturing Company was never discharged from its liability. Craft v. Loft, 87 Miss. 590.

An oral promise to indemnify one on a bail bond is within the statute. May v. Williams, 61 Miss. 125. In Turnpike Co. v. Gooch, 73 So. 869, the court holds, that a letter from the company's treasurer to the plaintiff, merely expressing an expectation to pay all claims, was not a sufficient written promise to pay the debt, as required by the statute of frauds.

There is no allegation in the bill, and none can truthfully be made, that J. B. Nalty ever collected anything for his own personal account, but everything was collected for the account of the lumber company, and as a matter of fact was paid over to the bank. It is conclusive from the record that the debt spoken of in the pleadings was the debt of the East Union Lumber & Manufacturing Company to the bank.

It is conclusive that no consideration was paid to J. B. Nalty to assume any part of the debt of the lumber company. It is equally certain that J. B. Nalty did not obligate in writing to pay the debts of East Union Lumber & Manufacturing Company. The record is conclusive of the fact that the bank continued to hold the lumber company for the debt, and we think the record stripped of the allegations that cannot be proven by parol makes it absolutely conclusive that J. B. Nalty has never obligated in writing to pay the debts of the East Union Lumber & Manufacturing Company.

That the allegations of the bill, that J. B. Nalty agreed to mortgage property in Louisiana was void under the statute, and this will not, we apprehend, be seriously questioned. That he can be held upon such a verbal promise for the one thousand dollars laid in the bill, of the debts of the East Union Lumber & Manufacturing Company is equally unfounded in law.

We submit that the decree of the chancellor should be reversed the demurrer sustained, and the bill dismissed.

J. W & H. Cassidy, for appellee.

It is too well settled to admit of any lengthy citation of authority that an officer of a corporation committing a tort in the business of his principal to the detriment of a third person is personally liable therefor, although he may not receive any personal benefit therefrom. 7 R. C. L. 486, and authorities; Clark v. Dunham Lumber Co., 5 So. (Ala.) 560.

In the last case cited, the Statute of Frauds is mentioned in the following words: "Every special promise to answer for the debt, default or miscarriage of another is void under the Statute of Frauds, unless reduced to writing, and the consideration is therein expressed. Code, 1886, section 1732. The established doctrine of the English courts, however, has always been, since the case of Pasley v. Freeman, 3 Term, 51, decided by the King's bench in 1789, that an action would lie for a false and fraudulent representation, knowingly made as to the solvency or credit of a third person, acted on by the plaintiff to his damage. That case settled the doctrine, based on broad principles of honesty and commercial morality, that a false affirmation, made by the defendant with intent to defraud the plaintiff to his damage is the ground of an action on the case for deceit--this rule was followed by Chief Justice KENT in Upton v. Vail, 6 Johns, 181 (decided in 1910), and has generally prevailed in this country. The effect of the Statute of Frauds was by these decisions confined to cases of contract, and the statute was held not to include causes of action based on fraud; for, as has been well observed, "it would be a manifest perversion of the Statute of Frauds to make it a shield for a deliberate wrong done.' 2 Smith Lead. Case., pt. 1, note 104."

In this case Nalty did not assume to pay the debt of the East Union Lumber & Manufacturing Company. The debt owing by that company to the Commercial Bank & Trust Company but he had the East Union Lumber Company to undertake to have him pay the one thousand dollars and to indorse a note for three thousand nine hundred and one dollars and seventy-seven cents and mortgage his own property to secure the same and he acted for the East Union Lumber & Manufacturing Company, as president, and signed his name to the agreement.

The situation is ridiculous in the extreme. Nalty, the president of the company, acting for the company wrongfully collects collateral which he knows belongs to another and appropriates the proceeds of this collateral to the company of which he is president. When called to task, Nalty, as president of the company promises that the company will substitute the collateral by the payment of one thousand dollars to represent that much of the converted collateral, and by a new, independent. note for three thousand nine hundred and one dollars and seventy-seven cents to be indorsed by himself and secured by a mortgage on property belonging to himself. He leads the company then into the chancery court and obtains an order of the court that this arrangement may be carried out. Who is to carry out the promise to the court? The East Union Lumber & Manufacturing Company. Who is to move for the East Union Lumber & Manufacturing Company? J. B. Nalty, its president. Who promises to do these things? J. B. Nalty president. Had the matter remained in statu quo who would have been responsible for the value of the securities wrongfully appropriated? J. B. Nalty and the East Union Lumber & Manufacturing Company beyond any question of a doubt. The estate of the bank undoubtedly lost the value of the securities, because they had been collected and the East Union Lumber & Manufacturing Company through Nalty, got the money. In lieu thereof, the assignees of the bank and the court got a promise, which J. B. Nalty alone could carry out in the nature of things, and which he did not...