U.S. Nat. Bank of Johnstown v. Evans
| Decision Date | 15 April 1929 |
| Docket Number | 1 |
| Citation | 146 A. 126,296 Pa. 541 |
| Parties | United States National Bank, Appellant, v. Evans, Administratrix |
| Court | Pennsylvania Supreme Court |
Argued March 22, 1929
Appeal, No. 1, March T., 1929, by plaintiff, from judgment of C.P. Cambria Co., Dec. T., 1926, No. 280, on verdict for defendant, in case of United States National Bank of Johnstown v. Mary J. Evans, administratrix of estate of Harvey Evans, deceased. Reversed.
Assumpsit on judgment note. Before REED, P.J., orphans' court specially presiding.
The opinion of the Supreme Court states the facts.
Verdict and judgment for defendant. Plaintiff appealed.
Error assigned, inter alia, was refusal of judgment for plaintiff n.o.v., quoting record.
The judgment is reversed and is here directed to be entered for the plaintiff for the full amount of its claim with interest.
Harry Doerr, with him Philip N. Shettig, for appellant. -- It is no defense to a note for the maker to show that when it was executed and delivered there was an understanding different than that indicated by the terms of the writing itself, in the absence of proof that the signature to the note was secured by fraud, accident or mistake, or induced by a promise that the note should not be used, and, but for which promise, the note would not have been signed: Phillips v Meily, 106 Pa. 536; Ziegler v. McFarland, 147 Pa. 607; Jackson v. Payne, 114 Pa. 67.
The testimony of a single witness unsupported by corroborating circumstances is insufficient to vary the terms of a written contract: Jones v. Backus, 114 Pa. 120; Sylvius v. Kosek, 117 Pa. 67; English's App., 119 Pa. 533; Mifflin Co. Nat. Bank v. Thompson, 144 Pa. 393; Pioso v. Bitzer, 209 Pa. 503; Fuller v. Law, 207 Pa. 101; Dorris v. Coal Co., 215 Pa. 638; Thomas & Sons v. Loose, 114 Pa. 35.
In the case of Gandy v. Weckerly, 220 Pa. 285, the decision stresses the point that the parol understanding had at the time of signing the agreement must have constituted the inducement which led the party to sign, and that when such parol inducement exists, evidence thereof is permitted to vary the terms of the writing. This case is contrasted with the other decisions hereinabove recited for the reason that its facts placed it within the exception to the parol evidence rule.
F. J. Hartman, with him Charles S. Evans, for appellee. -- The circumstances under which plaintiff acquired the note in question, being aware of the conditions and agreements made at the time of the signing thereof by Harvey Evans, as well as the time when it was acquired by it, are material facts and should be considered: Cullmans v. Lindsay, 18 W.N.C. 509; Cake v. Bank, 116 Pa. 264; Martz v. Wilcox Co., 57 Pa.Super. 169; Potter v. Grimm, 248 Pa. 440.
It is our contention that the agreement made at the time of the execution of the note in suit that it would be used as collateral, and appellant being aware of this agreement and promise, cannot now be permitted to repudiate the agreement and understanding because it induced the maker of the note to execute it: Kerr v. McClure, 266 Pa. 103; Malone v. Grocery Co., 65 Pa.Super. 586; Faux v. Fitler, 223 Pa. 568; Federal Sales Co. v. Farrell, 264 Pa. 149; Greenawalt v. Kohne, 85 Pa. 369; Bown v. Morange, 108 Pa. 69; Gandy v. Weckerly, 220 Pa. 285.
Before MOSCHZISKER, C.J., FRAZER, WALLING, SIMPSON, KEPHART, SADLER and SCHAFFER, JJ.
A corporation, known as the Johnstown Terminal Warehouse Company, was formed, and a large number of individuals purchased stock; in many cases paying by notes. The corporation also placed upon the property a mortgage of $300,000. Many of the subscribers failed to comply with their obligations, and the funds received were insufficient to complete the construction of the proposed building. After efforts had been made to collect from those owing, it was found that a large part of the obligations given could not be realized upon, and that, at the most, the makers of $60,000 could be successfully forced to respond. In order that the building might be finished, and the investment already made conserved, the directors of the warehouse company met on September 22, 1924, and considered the feasibility of giving the corporation's note to one of the Johnstown banks for the amount required, to insure payment of the building contractors, upon which the directors of the warehouse company should become individually liable as endorsers.
After considering the situation, it was determined to increase the indebtedness of the company by creating a second mortgage, thus increasing the bonded indebtedness to $550,000. It was further resolved that the directors should assume personal liability by executing individual notes, in proportion to the amount of their respective interests, aggregating $62,000, to be delivered to the bank, which would extend credit and insure the builders of payment, if they proceeded with the work. It was further agreed that, in case the makers were subsequently compelled to comply with their obligations, the company would reimburse them with monies collected from defaulting subscribers for stock; or, if no such fund materialized, to issue stock or second mortgage bonds to an amount equal to the sums they were compelled to pay. One of the directors of the warehouse company, Ott, was also a director of the United States National Bank of Johnstown, which agreed to discount the individual paper of the directors, executed as a result of this plan of refinancing. Evans, now deceased, and whose administratrix is defendant in the present proceeding, signed a note for $5,000, the proportion of liability which he agreed to assume. It was dated September 22, 1924, and, though delivered, was not actually discounted until later, when payments to the contractor became due. The interest thereafter accruing was advanced by the warehouse company, but the individual obligation remained unpaid at the time of his death, and it was to recover the amount thereof that this action of assumpsit was brought.
The defense offered at the trial was based on an alleged contemporaneous parol agreement, made at the time of the giving of the note, that Evans should not be held liable upon his obligation, but that the same should be paid by the warehouse company. The resolution, already referred to, provided that if the individual makers, including Evans, were compelled to pay they should be reimbursed in the manner already noted. The court below submitted to the jury the question as to whether or not the note was an individual obligation of Evans, or was merely signed under an agreement that it should be held as collateral for a note of the warehouse company, and that the latter would provide for its satisfaction.
Ott was a director of the warehouse company and also of the bank, and was present when the resolution of the former corporation was adopted, thus acquiring knowledge of what had occurred. He had a conversation with the president of the plaintiff institution explaining the plan of paying the building contractor determined on, and the method to be followed to secure the necessary credits. No evidence was offered to show that the bank promised to relieve from individual responsibility any of the makers of the notes agreed to be discounted; on the contrary, it was testified by Martin, the cashier, that he saw the demand note signed by Evans, took it into his possession, and finally accepted it as his personal obligation, receiving it "on the full strength that Harvey Evans would pay it." This statement is corroborated by the testimony of Davies, Kinzey, Ott, Williams and Harding, all of the other witnesses examined at the trial, except the administratrix, who was merely called to show that she knew nothing of the note until after the death of her husband, and had paid no interest thereon.
Neither of the executive officers of the bank mentioned would have the right to nullify the paper given and accepted as the individual note of Evans, unless the directors of the bank had so agreed. The knowledge of a single director, Ott, acquired in another transaction, would be insufficient to bind it to any such agreement, even if made. "Notice to a director is not notice to the corporation, unless he be constituted an organ of communication between it and those who deal with it [1 Savidge on Corp., 668, and it] is not bound by the knowledge of one of its officers or agents derived from outside sources and not in connection with the exercise of the authority conferred by the corporation": 1 Savidge on Corp., 669. Particularly is this true where Ott was a party personally interested. "The great weight of authority supports the view that knowledge of a bank director is not chargeable to his bank with respect to discounts and other matters in which he is interested, for the presumption is that he will not communicate them, since his purpose would be best served by maintaining silence; and the same rule has been considered applicable where a director of a bank is also an officer or director of a company dealing with the bank": 7 C.J. 537.
To show that the bank looked solely to the warehouse company for payment, and not to the individual makers, defendant rests on a statement made by Harding, who was present at the meeting of the corporation when the arrangements for personal obligations were made, and who testified that the parties were ...
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