Paulson v. Boyd

• Decision Date: 21 December 1908
• Citation: 118 N.W. 841,137 Wis. 241
• Parties: PAULSON ET AL. v. BOYD ET AL.
• Court: Wisconsin Supreme Court

137 Wis. 241

118 N.W. 841

PAULSON ET AL.

v.BOYD ET AL.

Supreme Court of Wisconsin.

Dec. 15, 1908.

Dissenting Opinions Dec. 21, 1908.

Appeal from Circuit Court, Ashland County; John K. Parish, Judge.

Action by John A. Paulson and another, as receivers of the Surety Savings Bank, against L. T. Boyd, impleaded with J. S. Ellis. Judgment for defendant Boyd, and plaintiffs appeal. Affirmed.

This is an action upon a promissory note by the receivers of the Security Savings Bank, Incorporated, against the maker of the note and the former owner of the note as indorser. L. T. Boyd is the maker of the note, and J. S. Ellis is the payee and indorser. It appears from the evidence of Boyd and Ellis that the note was given to Ellis by Boyd as a part of a transaction concerning the sale of some mining stock. Boyd was to give his note to Ellis for $2,500, the purchase price of the stock. The note, dated October 17, 1902, was for six months, and was to be renewed twice for the same length of time. The testimony of Boyd as to the terms of the parol agreement is admitted by Ellis to be correct; and the agreement, in effect, is embodied in Boyd's evidence, set out in the record as follows: “Shortly prior to the date of the first note, he persuaded me as a good friend of his to go into this deal with him and take some of his mining stock. I told him then that I had no money, and that I was in debt and couldn't afford to take the chance. He said he wouldn't urge me to do this if he didn't know all about it. I stated that I didn't have any money to buy it with, and he said, ‘That doesn't make any difference’ and he said, ‘I will carry it with the bank, I will carry it 18 months if you will pay the interest.’ Then I said: ‘Suppose at the end of 18 months, I can't pay it?’ He said: ‘Then I will take it off your hands; but I am sure that you will have realized enough on it to pay it, and make a good profit.’ I said, ‘I don't see any reason why you should do that for me’; and he said, ‘I know you have been up against it pretty hard, and I would like to see you make some money,’ and I said, ‘That is very friendly of you, and I will accept the offer,’ and in that case I took the stock conditionally, and signed the note which he was to renew twice, and at the expiration of the 18 months, if I didn't want the stock, he would take it off my hands.” There was no actual delivery of the certificates of stock by Ellis to Boyd. At the time of this agreement Ellis conducted a private banking business under the name “Security Savings Bank.” Pursuant to the provisions of chapter 234, p. 351, Laws 1903, the Security Savings Bank was incorporated for the purpose of succeeding to the business and assets of the private bank of the same name previously conducted and managed by J. S. Ellis. The new bank was incorporated August 21, 1903; the incorporators and stockholders being Ellis and his relatives. J. S. Ellis, his brother, E. H. Ellis, and his sister, Mrs. Loranger, each took a quarter of the entire capital stock. Mrs. Kennedy, a sister of J. S. Ellis, took the remaining quarter, with the exception of one share taken by her son Ellis. At the stockholders' meeting which succeeded the meeting of the incorporators the stockholders were elected directors and by-laws were adopted. The record of this meeting shows the following: “On motion it was ordered that the board of directors be and are directed to assume the liabilities of the private bank heretofore known as the Security Savings Bank of Ashland, Wisconsin, in consideration of the transfer of the assets of said bank to their corporation.” At the directors' meeting J. S. Ellis was elected president, E. H. Ellis, his brother, vice president, and Ellis Kennedy, a nephew and former employé of the president, was elected cashier. Under the agreement between Boyd and Ellis, three notes were given by Boyd to Ellis and deposited by Ellis at the bank. All were payable to the order of Ellis. Two of them were made before the incorporation of the bank, and one, the note in suit, thereafter. In each instance Boyd and Ellis conducted these transactions. The note in suit was received by Ellis as president and turned over to the cashier with instructions. The mining stock was always in the possession of Ellis and the transfer of the stock on the books of the corporation was not made until after the execution of the last note. The certificate of stock then made out was sent to Ellis and held by him. Boyd offered to transfer any interest in the shares of mining stock to which the agreement between him and Ellis referred, and renewed this offer at the trial. Plaintiffs refused to accept his offer of a written assignment. Both parties moved for the direction of a verdict. The court granted the motion of the defendant, and judgment was entered in accord with the verdict so ordered. This is an appeal from the judgment.

Timlin, Marshall, and Kerwin, JJ., dissenting.Sanborn, Lamoreux & Pray and Horace B. Walmsley, for appellants.

Winkler, Flanders, Bottum & Fawsett (James G. Flanders, of counsel), for respondents.

SIEBECKER, J. (after stating the facts as above).

At the trial the defendant Boyd relied upon an agreement between him and Ellis, the payee in the note given by the defendant. The transaction between the defendant and Ellis for the purchase of mining stock is admitted by Ellis to have constituted the agreement for which the notes were given. The primary question is: What was the parol agreement between these parties? The evidence of it is not voluminous or contradictory, and is, in effect, that Ellis undertook to assist Boyd in securing the advantages of an interest in a mine, if it should prove a profitable enterprise at the expiration of 18 months. To accomplish this, Boyd contracted for the purchase of some mining stock from Ellis at an agreed price of $2,500 upon the following arrangement: Since Boyd had no available means to make such a purchase, Ellis made him an offer for such purchase, under which Boyd was to give him a note for the amount, which Ellis was to carry and renew for 18 months. If the stock had not then realized enough to pay the purchase price, and Boyd did not then want the stock, then Ellis was to take it off his hands, and cancel the note. The stock realized nothing, and Boyd insists that, under the parol agreement with Ellis at and before the delivery to Ellis of the first note, the notes never went into effect as completed contracts. He contends that he was to have the right at the expiration of 18 months to elect whether he wanted the stock. We are of the opinion that the facts sustain this claim and show such an agreement between the parties. An examination of the evidence, in view of the relations of the parties and the considerations which induced him to make and deliver the note, leads us to the conclusion that it was not intended and agreed by them that the note should be a present binding agreement, but that it was delivered to Ellis upon the condition that, if Boyd paid interest on the sum for 18 months, Ellis was to renew the notes, as agreed, and, if at the expiration of that time Boyd did not want the stock, the agreement to purchase was to be terminated at Boyd's election, and the note canceled. The significance of the terms of the transaction, as shown by the evidence of the situation, is that Boyd had the right at the expiration of 18 months to elect whether he would accept a transfer of the stock at the price fixed and evidenced by the note. The elements of the agreement constitute an arrangement under which the note delivered to Ellis did not become a completed contract in præsenti, but was to take effect as a completed contract only in the event that Boyd, under the agreement, elected to take a transfer of the stock within the time agreed on. Such oral agreements are not contradictory of the written instrument. This rule was declared and fully discussed in the recent case in this court of Hodge v. Smith, 130 Wis. 326, 110 N. W. 192, where it was held: “It is familiar law, notwithstanding some conflict in the authorities, that a person may manually deliver an instrument, though it be in the form of commercial paper, to another, on its face containing a binding obligation in præsenti of such person to such other, with a contemporaneous verbal agreement that it shall not take effect until the happening of some specified event, and that the paper, as between the parties, will have no validity as a binding contract till the condition shall have been satisfied; and that proof of such condition does not violate the rule that a written instrument cannot be varied by a contemporaneous parol agreement; that such evidence only goes to show that the instrument never had vitality as a contract”--citing cases. It is there also held that this principle is recognized in the negotiable instrument law (section 1675-16, Sanborn's St. Supp. 1906) by providing that: “Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than a holder in due course, * * * delivery may be shown to have been conditioned, or for a special purpose only, and not for the purpose of transferring the property in the instrument.” In the case of Burke v. Dulaney, 153 U. S. 228, 14 Sup. Ct. 816, 38 L. Ed. 698, the circumstances of the transaction are in their main features very like the instant case, and it was held by the court that a note covering the price for the sale of property by the payee to the maker, which had been delivered under an oral agreement between the parties, to the effect that the note should represent the price if the maker should determine to retain the interest in a mine after having worked and inspected it, under such circumstances, there was not such a delivery of the note as to make it unconditionally binding upon the...