Parrish v. Terre Haute Sav. Bank

• Decision Date: 09 February 1982
• Docket Number: No. 1-181A31,1-181A31
• Parties: Clyde F. PARRISH, Shirley H. Parrish, John A. Roshel, Jr., William G. Kessel, Clifford G. Schultz, Betty L. Schultz, Kenneth E. Borders, Irene R. Borders, Robert G. Clouse, and Bonnidell A. Clouse, Appellants-Defendants, v. TERRE HAUTE SAVINGS BANK, An Indiana Corporation, Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 132

431 N.E.2d 132

Clyde F. PARRISH, Shirley H. Parrish, John A. Roshel, Jr. William G. Kessel, Clifford G. Schultz, Betty L. Schultz Kenneth E. Borders, Irene R. Borders, Robert G. Clouse, and Bonnidell A. Clouse, Appellants-Defendants, v. TERRE HAUTE SAVINGS BANK, An Indiana Corporation, Appellee-Plaintiff.

No. 1-181A31.

Court of Appeals of Indiana, Fourth District.

Feb. 9, 1982.

Robert A. Hutchens, Patrick, Gabbert, Wilkinson, Goeller & Modesitt, Terre Haute, for appellants-defendants.

Arnold H. Brames, Brames, Bopp & Haynes, Terre Haute, for appellee-plaintiff.

CONOVER, Judge.

Defendants-appellants Parrish et al., Shareholders of R.P.S. Industries, Inc. (R.P.S.) appeal from a judgment entered in favor of plaintiff-appellee Terre Haute Savings Bank (Bank) pursuant to a jury's verdict. The Bank sued the shareholders who had individually signed a promissory note payable to the bank when the corporation defaulted in making the payments provided in the note.

We affirm in part and reverse in part.

FACTS

On September 11, 1978, Clyde Parrish, President of R.P.S. directed a letter "to whom it may concern" to the Bank requesting a short term capital loan of seventy-five thousand dollars for operating expenses of R.P.S.

After reviewing financial statements of R.P.S. and its shareholders, the Bank sent a letter to Parrish dated September 22, 1978, advising him the Bank approved the loan. The letter further stated, "This approval is also subject to personal signing of the note by the following: Clyde F. Parrish and wife On the same day all shareholders and their spouses, except Mr. and Mrs. Jerse who were out of the country, signed the promissory note. All the signers were well versed in business transactions, having signed similar notes for R.P.S. on prior occasions. None of the signers tried to add conditions to the note regarding his personal liability prior to signing. The terms "I promise to pay to Terre Haute Savings Bank" appeared on the face of the note they signed.

Shirley, John A. Roshe, Jr., Clifford G. Shultz and wife Betty, Kenneth Borders and wife Irene, William G. Kessel, Robert G. Clouse and wife Bonnidell, Frank W. Jerse and wife Dorothy when they return to Terre Haute." The Bank did not require R.P.S. to sign the note. The loan was to be retired by quarterly payments of principal and interest.

Following Parrish's instructions the Bank then made a check for the proceeds payable to R.P.S. Industries, Inc. The shareholders understood R.P.S. was to pay off the loan. Later, the note went into default and the bank sued the ten shareholders and their spouses who had signed it.

The ten appellants raised several defenses at trial. They claimed the loan was not a personal loan; rather, they had signed only as guarantors of R.P.S. Therefore, R.P.S. should be principally liable on the note. Next, they alleged the note was incomplete on its face as it was not signed by Frank and Dorothy Jerse or R.P.S. Therefore, the note was null and void as to them. Lastly, they contended that the signatures of all the shareholders had been a condition precedent to the approval of the loan, and such a condition could not have been unilaterally waived by the Bank. After hearing the evidence, the jury returned a verdict for the Bank, awarding damages of $78,205.30 and attorney fees of $5,000. From this judgment defendants appeal.

ISSUES

On appeal, defendants-appellants raise the following issues:

1. Where the signing shareholders believe all shareholders of a corporation and their spouses personally will sign a promissory note payable to the promissee bank to induce it to pay the proceeds of the loan to their corporation, but less than all of the shareholders and spouses actually do so and default occurs, whether the persons who signed the note are jointly and severally liable thereon.

2. Whether the signers of such a note are liable if the signing thereof by all shareholders and their spouses was made a condition precedent to the making of the loan to their corporation by the promissee bank, but less than all of them actually sign it.

3. Since the proceeds of the loan were paid to the corporation, whether there was adequate consideration to bind the signing shareholders when the note went into default.

4. Whether the instrument was materially altered because the signatures of one shareholder and his wife were not obtained on the note.

5. Whether the jury's verdict as to attorney fees was supported by sufficient evidence.

DISCUSSION

I.

The first issue raised concerns the failure of all contemplated parties to sign the promissory note. Appellants contend the failure of Frank and Dorothy Jerse to sign the note makes it incomplete on its face. Since it is incomplete, appellants argue, the note is ineffective to bind those parties who did not sign. We disagree with appellants' contention.

In Curtis v. Hannah, (1981) Ind.App., 414 N.E.2d 962, we said the intent of the parties determines whether the signers are liable where less than all the proposed parties execute the document in question. We must look to the language used by the parties in light of the surrounding circumstances and the practical and mutual construction placed thereon as shown by their acts and conduct before any controversy arose. Curtis, supra, at 963-64 quoting from Kaneko v. Okuda, (1961) 195 Cal.App.2d 217, 225, 15 Cal.Rptr. 792, 796-97.

Even where it appears that it was intended that others sign an agreement, it is not necessarily invariably true that all must sign before any are bound. This depends upon whether part of the consideration was that others would also sign and be bound jointly with those who did sign. It can be assumed that the parties signing an agreement are bound thereby, unless it affirmatively appears they did not so intend unless others also signed. Curtis, supra, at 964, quoting Cox v. Berry, (1967) 19 Utah 2d 352, 357, 431 P.2d 575, 579. Unless there is an express intention to the contrary, the instrument is valid and effective against appellants.

The facts most favorable to the Bank show Parrish knew all the signatures had not been obtained, yet he still urged approval of the loan. After the Bank agreed to accept only ten signatures, Parrish directed the check to be made out to R.P.S. Industries and the Bank complied. This benefited both the corporation and the individual shareholders. At no time did any of the appellants tell the bank they would not be bound by the note if less than the twelve signatures appeared thereon. This was sufficient evidence for the jury to find the appellants intended to be bound by the note even if less than all the intended signatories executed it.

Appellants argue it was error for the trial court to deny their tendered instruction number 10. Defendants' instruction 10 states:

"A promissory note which has not been signed by all of the parties for whom signature lines are provided on the note is incomplete and imperfect, and is of no force and effect."

"Accordingly, if you find that the promissory note in question has not been signed by all of the parties for whom signature lines have been provided, then the defendants would not be liable on Count I of plaintiff's Complaint."

This instruction eliminates the question of whether the parties intended the note to be binding if less than all of the proposed parties signed it. This is a question for the jury to determine. The trial court properly refused to give defendant's instruction 10.

II.

The second issue raised in appellant's brief is whether a party who signs an instrument is bound if other contemplated parties fail to sign the instrument when the signature of all parties was a condition precedent to the loan.

At various times throughout the day of September 22, 1978, each of the ten appellants came into the bank to sign the promissory note. No signer mentioned any conditions under which they were signing. None of the defendants testified to seeing the note beforehand, but no one objected to the form of the instrument.

Parrish signed the note last. When the bank officer realized that the Jerses had not signed the note he explained to Parrish that the loan committee would have to reconvene to agree to give the loan on only ten signatures. Parrish, however, as President of R.P.S. Industries convinced the bank officer, a member of the loan committee, that he would have the Jerses come in and sign the note when they returned to the country. Upon this assurance by Parrish the bank official advanced the loan with only ten signatures.

The Bank contends this advancement of the loan on ten signatures indicated that it thereby waived its initial request for twelve signatures. Further the Bank argues, by accepting and using the funds involved, the shareholders agreed to this waiver of the initial terms of the loan. We agree with the Bank's contentions.

A condition in a contract, including a condition precedent may be waived by the conduct of a party thereto. Johnson v. Bucklen, et al., (1894) 9 Ind.App. 154, 36 N.E. 176. Furthermore, once a condition precedent has been waived, and such waiver has been acted upon, the failure to perform the condition cannot be insisted upon as a forfeiture of the contract. Farley v. Farley, (1860) 14 Ind. 331.

Acceptance and immediate use of the loan by R.P.S. tends to show that the shareholders accepted the contract according to its tenor at the time it was signed, and they expected to be bound accordingly. In fact, Parrish stated at trial that he only considered the note to be ineffective due to the lack of the Jerses' signatures later, after talking to his attorney. We find sufficient evidence whereby the jury could reasonably conclude the parties waived the condition requiring all twelve individuals to sign the note.

The shareholders claim the Court's Final Jury Instruction 11 was improperly given. Instruction 11 states:

"A condition precedent is one which is to be performed before the...