Waterproof Paper & Bd. Co. v. Van Buren

• Decision Date: 12 February 1924
• Citation: 182 Wis. 640,197 N.W. 338
• Court: Wisconsin Supreme Court
• Parties: WATERPROOF PAPER & BOARD CO. v. VAN BUREN.

182 Wis. 640

197 N.W. 338

WATERPROOF PAPER & BOARD CO.

v.VAN BUREN.

Supreme Court of Wisconsin.

Feb. 12, 1924.

Appeal from Superior Court, Douglas County; Solon L. Perrin, Judge.

Action by the Waterproof Paper & Board Company against F. Van Buren. From a judgment dismissing the complaint, plaintiff appeals. Reversed, with directions.

The appeal is from a judgment dismissing the complaint.

This is an action on a promissory note given by the Crescent Baking Company, a corporation, to the plaintiff and indorsed by the defendant. The Crescent Baking Company became insolvent after the giving of the note, and entered into a composition agreement with its creditors, which the plaintiff signed, thereby releasing the corporation.

The defendant, Van Buren, was president of the Crescent Baking Company, and held a majority of its stock. At the time the corporation became involved with its creditors, the defendant employed one L. H. Dow, an attorney, of Duluth, to adjust its matters, and gave him general authority to act for the corporation with its creditors. Dow later acted for most of the creditors as well as for the corporation. The winding-up proceedings started about July 1, 1921, and continued for some time. Prior to the insolvency of the corporation, and on February 1, 1921, the note herein sued on was given to the plaintiff. Prior to that time the plaintiff had sued the corporation and garnisheed its bank account. A note was given in settlement of the claim and indorsed by the defendant, to secure a release of the garnishee proceedings.

There were approximately 83 creditors in the composition agreement, and at a meeting of the creditors called by Dow for the purpose of securing the composition the plaintiff was represented by its attorney, J. G. Nye; the plaintiff corporation being located at Cincinnati, Ohio. At that meeting of the creditors Mr. Nye expressed a willingness on behalf of his clients to enter into the composition agreement so far as the corporation was concerned, reserving the liability of the defendant as an indorser of the note. Mr. Dow agreed to and did report this matter to the defendant, and thereupon reported back to Mr. Nye that the defendant would execute a new note for the balance due but would have to have a considerable extension of time in which to pay the same, and suggested January 1, 1922. This was communicated by Mr. Nye to his clients at Cincinnati, who thereupon agreed to the proposition and signed the composition agreement, which it forwarded to its attorney, Mr. Nye, at Duluth, with a letter of instruction which read, in part, as follows:

“You are to agree, in our name, to accept settlement for our claim of $1,088.53 in the following manner:

15 cents on the dollar in cash.

51 cents on the dollar in preferred stock.

Mr. Van Buren's personal note for the balance, which note shall include interest on the total amount of our claim, in accordance with the original note.

If the exact provisions of the preferred stock referred to have not as yet been settled, we suggest that you endeavor to have the Flour State Baking Co. make this cumulative as to dividends.

We are handing you herewith the note in question of the Crescent Baking Co. for $1,088.53, dated February 1, 1921, payable August 1, 1921, with interest at 6 per cent., the same having Mr. F. Van Buren's personal indorsement, and indorsed by us to you. This will facilitate your handling of the matter.”

Carrying out his instruction, Mr. Nye, in a letter addressed to Attorney Dow, said:

“We are herewith inclosing duplicate of agreement between the Crescent Baking Company, Lawrence H. Dow and various creditors of said Crescent Baking Company, which has been duly executed by the Waterproof Paper & Board Company.

We understand that this agreement is signed by our clients with the understanding that when it is determined the pro rata amount, both in cash and in preferred stock of the Purity Baking Company that will be divided among the creditors, that Fred Van Buren is individually to execute a note for the balance then found to be due the Waterproof Paper & Board Company, including interest on the present note, which...