Western Investment & Land Co. v. First Nat. Bank of Denver

• Decision Date: 14 October 1912
• Citation: 128 P. 476,23 Colo.App. 143
• Parties: WESTERN INVESTMENT & LAND CO. v. FIRST NAT. BANK OF DENVER. [d]
• Court: Colorado Court of Appeals

128 P. 476

23 Colo.App. 143

WESTERN INVESTMENT & LAND CO. v. FIRST NAT. BANK OF DENVER. ^[d]

Court of Appeals of Colorado

October 14, 1912

Appeal from District Court, City and County of Denver; Greeley W Whitford, Judge.

Action by the First National Bank of Denver against the Western Investment & Land Company. From a judgment for plaintiff defendant appeals. Reversed and remanded for new trial.

E.W. Smith, Sidney H. Smith, and L. Ward Bannister, all of Denver, for appellant.

Harry E. Kelly and Charles H. Haines, both of Denver, for appellee.

KING, J.

Appellee brought its suit against the appellant, a Colorado corporation, and Frank J. Macarthy, upon a promissory note for the sum of $3,850, executed by the said Macarthy and payable to the order of appellant. The note bore the indorsement in blank of the appellant's corporate name by the said Macarthy as president. It was alleged in the complaint that the note so indorsed was, in due course of business, delivered by appellant to one E.A. Colburn, and that thereafter appellee became the owner "by delivery of said note to it by said Colburn." Macarthy made no defense. Appellant denied delivery of the note to it as well as its indorsement and delivery to Colburn in due course of business or otherwise, put in issue the bona fides of the bank as the holder of said note, and alleged that appellant was a corporation organized under the laws of Colorado, with limited powers, without authority to execute or indorse promissory notes for accommodation; that said Macarthy, at the time of the execution, indorsement, and delivery of said note, was president of the appellant company, but with limited power to act for it; that he had no authority to indorse or deliver the note in the name of or for the company, and that the corporation at no time received or was the owner of the note; that the indorsement was without consideration moving to appellant; that it had no knowledge of the existence of the note or the indorsement until the day before its maturity when, upon receipt of written notice thereof from Colburn, it promptly repudiated the transaction. It further alleged that the note was executed, indorsed, and delivered by Macarthy to Colburn in the purchase of an automobile from Colburn for the private use of Macarthy and upon his sole and individual liability; that without authority or knowledge of the company he so made, indorsed and delivered the note, assuming to obligate the company for the payment of his private debt that appellant was in no way liable for the indebtedness represented by the note.

The cause was tried to a jury. At the close of the testimony, the court directed a verdict for the plaintiff, to which action of the court, as well as to the verdict and judgment, appellant duly excepted. The chief error assigned and relied upon by appellant is that of the court in directing a verdict in favor of the plaintiff, and the conclusion reached by the court upon that objection is decisive of the case here, and renders any extended discussion of other assignments unnecessary, but some of them will be first disposed of. In view of Colburn's testimony that he had not sold the note to the bank, but only delivered it for collection, the case will be considered as if commenced and prosecuted by Colburn.

1. Defendant objected to the calling and examination of Macarthy as if under cross-examination, and assigns as error the overruling of such objection in view of Macarthy's default in making any defense. Macarthy was "a party to the record," and we think came within the provisions of the statute permitting such examination by the adverse party. The court did not err in permitting him to be so examined.

2. Error was assigned to the action of the court in admitting statements made by Macarthy to Colburn at and prior to the time of the purchase as to his agency and extent of authority. It is well settled that neither the fact of agency nor the extent of authority can be proved by the declarations of the alleged agent; and it is equally as well established that, when an agent makes a contract or does any act representing his principal, his declarations made at the time explanatory of the act are admissible in evidence on behalf of either party. R.E. Lee S.M. Co. v. Englebach et al., 18 Colo. 106, 31 P. 771; Burson v. Bogart, 18 Colo.App. 449, 72 P. 605; Wales v. Mower, 44 Colo. 146, 96 P. 971. By the admissions in the pleadings and upon the trial that Macarthy was the president and general manager of the company and substantially in exclusive control of the company's affairs in Colorado, his agency was established, and his declarations made at the time were, under the authorities cited, admissible. Thompson on Law of Corporations, § 4850.

3. Had Macarthy, as president and general manager, authority to purchase the machine in question and obligate the company for the purchase price, and did the court err in directing a verdict in favor of the plaintiff? The determination of these questions requires an investigation of the evidence. Certain pertinent facts are undisputed, namely, that appellant was a corporation organized for the purpose of, and engaged in, buying and selling irrigated farm lands; that it had offices in Des Moines, Iowa, and in Denver, Colo.; that Macarthy was its president and general manager, and at the time of the execution and delivery of the note was, and for a long time prior thereto had been, practically in exclusive control and management of its business in Colorado; that its chief business had been buying and selling lands located near Greeley, Colo., and that prospective purchasers arriving from the East were received at Denver and conveyed to and from the lands by automobiles, and that advertising matter sent out from Des Moines headquarters so advised the public; that at first autos were hired, but later Macarthy bought and used for the purpose a number (six or more), some of which were owned or claimed by him, but whether any belonged to the company is in dispute. The expense of maintaining and operating the cars was paid by the company. The business had been so carried on for about a year at the time Macarthy first opened negotiations with Colburn, who was a dealer in automobiles. In July, 1905, at a meeting of the directors of the company in Des Moines, a by-law was adopted limiting the authority of its president and general manager to bind the company by contracts of purchase involving the sum of $1,000 or more until submitted to and approved and ratified by the board of directors. This by-law was not brought to the notice of Colburn. Ninety-seven per cent. or more of the stock of the company was owned by Macarthy and J.K. Gilcrest, his father-in-law, who resided in Des Moines; the interests of the other stockholders and directors being nominal.

Colburn testified that in June, 1906, Macarthy approached him with regard to the purchase of a Locomobile "for the use of the Western Investment & Land Company," stating that he was president of said company and had full authority to carry its business on, and wanted an automobile for the purpose of taking passengers to and from the land as they came from the East; that he wanted to buy the machine on credit, and offered to give in payment one note due in six months and one due in a year. Colburn made some inquiry about the standing of the company, and thereafter offered to sell the car on time if both the land company and Macarthy were bound. When Macarthy offered the notes, they were in the form shown by the note sued upon in this case, namely, executed by Macarthy, payable to the land company, and indorsed in blank in the company's name by Macarthy, its president. Colburn objected to the notes in that form, but accepted them upon Macarthy's insisting that such was customary in the execution of notes by his company, and that he wanted them that way. Colburn testified that at that time Macarthy told him that he was president of the company and had full authority to carry on the...