Saunders v. Bank Of Mecklenburg

• Citation: 71 S.E. 714,112 Va. 443
• Court: Supreme Court of Virginia
• Decision Date: 08 June 1911
• Parties: SAUNDERS et al. v. BANK OF MECKLENBURG et al.

112 Va. 443

71 S.E. 714

SAUNDERS et al.

v.BANK OF MECKLENBURG et al.

Supreme Court of Anneals of Virginia.

June 8, 1911.

1. Bills and Notes (§ 106^*)—Validity.

The taking of a note by a bank, pending proceedings for its dissolution, to secure a preexisting indebtedness, was not engagins in new business, as affecting the right to enforce the note.

[Ed. Note.—For other cases, see Bills and Notes, Dec. Dig. § 106.*]

2. Corporations (§ 608*)—Dissolution—Enforcement of Contracts.

Generally no defense can be made to a suit by a corporation on a contract made with it, that it has forfeited its charter for acts of non-user or misuser, or that it has been dissolved, until such forfeiture or dissolution has been determined in a proceeding brought for that purpose.

[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 2416-2419; Dec. Dig. § 608.*]

3. Frauds, Statute of (§ 108*)—Obligation fob Another.

A note in ordinary form, payable to a bank and given pending proceedings for dissolution, to secure a pre-existing overdraft by a third party, is sufficient, within statute of frauds (Code 1904, § 2840). requiring a promise to answer for another's debt to be in writing.

[Ed. Note.—For other cases, see Frauds. Statute of, Cent. Dig. §§ 216, 218; Dec. Dig. §

4. Trtal (§ 296*)—Instructions.

Under a defense to a note that it was given to avoid "indictment and prosecution" of a cashier, an instruction predicating the defense on a "prosecution or trial" was not reviewable error, where other instructions show that the terms "indictment" and "prosecution" were used synonymously.

[Ed. Note.—For other cases, see Trial, Cent. Dig. §§ 705-713; Dec. Dig. § 298.^2-*]

5. Contracts (§ 71*)—Assumption of Another's Obligation—Consideration.

Mere forbearance to sue, without agreement to that effect, is not sufficient consideration for a third person's promise to pay the debt, though forbearance be induced by the promise; but an agreement to forbear may be implied from conduct of the parties and the nature of the transaction.

[Ed. Note.—For other cases, see Contracts, Cent. Dig. §§ 295, 290, 298, 316-324; Dec. Dig. § 71.*]

6. Bills and Notes (§ 538*)—Instructions-Consideration.

Under a defense of want of consideration for a note given to secure a debt of another, an instruction which authorized recovery without finding of an agreement, express or implied, that plaintiff should forbear to sue the original debtor, but merely on finding that plaintiff did so forbear, was erroneous.

[Ed. Note.—For other cases, see Bills and Notes, Dec. Dig. § 538.*]

7. Appeal and Error (§ 263*)—Review—Instructions—Exceptions—Necessity.

An instruction to which no exceptions were taken will not be reviewed.

[Ed. Note.—For other cases, see Appeal and Error, Cent. Dig. §§ 1516-1532; Dec. Dig. § 263.*]

8. Judgment (§ 184*)—On Motion—Notice.

Since pleadings on a motion for a judgment for money after notice, under Code 1904, § 3211, are intended to be very informal, except where statutes require otherwise, as under section 3299, authorizing special pleas of failure of consideration, etc., instructions offered by defendant on the ground that the terms of the notice of the motion for judgment are not such as to warrant recovery on a note made and delivered as collateral to secure payment of a debt to plaintiff from a third party were properly refused.

[Ed. Note.—For other cases, see Judgment, Cent. Dig. § 340; Dec. Dig. § 184.*]

Error to Circuit Court, Mecklenburg County.

Proceeding by notice and motion, under Code 1904, § 3211, brought by the Bank of Mecklenburg and others against Mrs. A. A. Saunders and others to recover judgment on a note. Judgment for plaintiffs, and defendants bring error. Reversed and remanded.

John A. Lamb and Samuel A. Anderson, for plaintiffs in error.

E. P. Buford and W. E. Homes, for defendants in error.

BUCHANAN, J. This is a proceeding by notice and motion, under section 3211 of the Code of 1904, to recover a judgment on a promissory note for $10,000, made by the plaintiffs in error, Mrs. A. A. Saunders, Mrs. Clara C. Saunders, and Mrs. Neva S. Prince, payable to the defendant in error the Bank of Mecklenburg, dated April 28, 1908, and due 12 mouths after date.

The Bank of Mecklenburg suspended business on the 13th of April, 1908, on account of its insolvency. It had been in business from the year 1872 or 1873, with a principal office at Boydton and a branch office at Chase City. The insolvency of the bank seems to have resulted from the action of the cashier at Boydton in permitting one of its customers, who became insolvent, to overdraw his account by more than $100,000, and the action of the cashier at Chase City in allowing the Kershaw Manufacturing Company, another of its customers, which was also insolvent, to overdraw its account to the extent of some $29,000. When the stockholders ascertained the condition of the bank, one-fourth or more of them in interest, who were also creditors, filed their bill in the circuit court of Mecklenburg county, pursuant to the provisions of section 1105a, subsec. 15, Code Va. 1904, for the purpose of winding up and dissolving the corporation, and enjoining the bank, its officers, and directors from disposing of its assets, and praying for the appointment of a receiver or receivers to take charge of its affairs, to collect the debts due and payable to it, for such disposition of its assets as might be just and equitable, and for general relief.

The bank filed its answer, in which it admitted the allegations of the bill. As prayed for, the court granted an injunction and appointed receivers. Afterwards, on the 28th day of April, 1908, the note sued on was made.

Upon the trial of the cause, there was a verdict and judgment for the plaintiff bank for the benefit of its receivers. To that judgment this writ or error was awarded.

The principal errors assigned, in substance, are: (1) That the bank, at the time the note was made, was a dissolved corporation, and could not be legally made the payee thereof; (2) that if the note was a promise to pay the debt of another, it is not a sufficient promise in writing under the statute of frauds; (3) that it was given for an illegal consideration; (4) that the note was without consideration.

The questions involved in these assignments of error were raised in the circuit court by pleas, objections made to evidence, instructions given and refused, and by a motion to set aside the verdict as contrary to the law and the evidence. The assignments of error will be considered, for the most part, without reference to the manner in which the questions involved were raised.

As to the first assignment of error: It is true that at the time the note sued on was made the makers thereof were not indebted to the plaintiff bank; but it was ex-ecuted in part payment, or as collateral for the payment, of the debt due from the Kershaw Manufacturing Company by overdraft, before the bill for winding up the affairs and dissolving the bank was filed. The taking of the note, however, was not in any sense engaging in new business, as is argued on the part of the bank, but was merely a means of securing the payment of an existing indebtedness. While the object of the proceeding under section 1105a, subsec. 15, Code Va. 1904, was to wind up the business and dissolve the bank corporation because of its insolvency, no decree, when the note sued on was made, had been, or so far as the record shows has ever been, made dissolving the corporation.

The general rule (and there is nothing in the statutes under which the bill was filed to wind up and dissolve the corporation to change that rule) is that no defense can be made, to an action by a corporation on a contract made with it, that it has forfeited its charter for acts of nonuser or misuser, or that it has been dissolved, until after such forfeiture or dissolution has been judicially determined in a proceeding instituted for that purpose. See Banks v. Poitiaux, 3 Band. 136, 15 Am. Dec. 706; Crump v. Mining Co., 7 Grat. 352, 56 Am. Dee. 116; Pixley, etc., v. Roanoke Nav. Co., 75 Va. 320; 1 Min. Inst. 637; 2 Cook on Stockholders, § 637; 2 Clark & Marshall, § 324; 10 Cyc. 1345.

The next question to be considered is whether or not the note for the payment of the debt of another is sufficient, under section 2840 of the Code, which provides, among other things, that no action shall be brought "to charge any person upon a promise to answer for the debt, default or misdoings of another * * * unless the promise, contract, agreement, representation, assurance, ratification, or some memorandum or note thereof be in writing and signed by the party to be charged thereby or his agent; but the consideration need not be set forth or expressed in the writing, and it may be proved (where a consideration is necessary) by other evidence."

Our statute does not require, as did the fourth section of the English statute of frauds, that a writing evidencing a promise to pay the debt of another shall show on its face the agreement between the parties in order to be valid. The difference between the two statutes is commented upon by the judges delivering opinions in the case of Colgin v. Henley, 6 Leigh, 85. At that time there was no provision in our statute that the consideration for the promise need not be stated in the writing, but could be shown by parol evidence. In that case the court seemed to think that the statute was satisfied if the promise to pay the debt of another was in writing.

In the case of Packard v. Richardson, 17 Mass. 122, 9 Am. Dec 123, in which the Massachusetts statute (substantially the same as the English, it seems) was construed, it was said by Chief Justice Parker that the object of the statute was to secure certain and definite evidence of the existence and terms of the promise sought to be enforced against the defendant, and it ought not to be carried further by arguments founded upon the technical meaning of the word "agreement." It was...