Wilson-Ward Co. v. Farmers' Union Gin Co.

• Decision Date: 14 March 1910
• Citation: Wilson-Ward Co. v. Farmers' Union Gin Co., 126 S.W. 847, 94 Ark. 200 (Ark. 1910)
• Parties: WILSON-WARD COMPANY v. FARMERS' UNION GIN COMPANY
• Court: Arkansas Supreme Court

126 S.W. 847

94 Ark. 200

WILSON-WARD COMPANY v. FARMERS' UNION GIN COMPANY

Supreme Court of Arkansas

March 14, 1910

Appeal from Craighead Chancery Court, Lake City District; Edward D Robertson, Chancellor; reversed.

Decree reversed.

Murphy Coleman & Lewis, for appellant.

In order to reform a written contract or instrument, the evidence must be clear, unequivocal and decisive; a mere preponderance is not sufficient. 71 Ark. 616; 5 Mason, 577; 72 Ark. 546; 75 Ark. 75; 79 Ark. 256; 81 Ark. 166; Id. 420; 83 Ark. 131; 84 Ark. 349; 85 Ark. 62; 89 Ark. 309.

Lamb & Caraway, for appellees.

1. The evidence in this case proves a clear case of fraud and is convincing. 75 Ark. 382; 73 F. 574.

2. Oral evidence was admissible to show that appellees signed as directors to bind the Gin Company, and not themselves individually. 91 N.W. 473; 75 Ark. 240.

3. Courts of equity always relieve where there is a mistake induced by the fraudulent conduct of the other party. 42 Ark 240; 75 Ark. 382; 41 Ark. 494; 89 Ark. 309; 28 Wis. 637; 60 Minn. 491; 64 S.W. 403; 146 Ind. 322; 21 Mont. 277; 24 Ore 341; 13 Minn. 246; 93 Tex. 334; 10 Vt. 185; 98 Ga. 413; 8 Wheat. (U. S.) 174; 102 U.S. 564; 123 Cal. 681; 21 N.E. 354; 28 N.W. 471.

OPINION

MCCULLOCH, C. J.

This action was instituted at law by the Wilson-Ward Company, a Tennessee corporation, against the Farmers' Union Gin Company, a domestic corporation, and nine other defendants as joint makers of a promissory note, executed to plaintiff for the sum of $ 5,750, dated April 21, 1906, and payable January 1, 1907, with interest from date. The note, which was exhibited with the complaint, is in the following form, and the signatures appear in the following order:

"$ 5,750.00.

Lake City, Ark., April 21, 1906.

"January 1, 1907, after date, we promise to pay to the order of Wilson-Ward Company fifty-seven hundred fifty and no-100 dollars, for value received, negotiable and payable without defalcation or discount, and with interest from date at the rate of 8 per cent. per annum until paid, payable at the office of the Wilson-Ward Company, Memphis, Tenn.

"Farmers' Union Gin Company,

"A. E. Thompson, President."

The following names were indorsed on the back of the note: A. E. Thompson, W. H. Vinson, James E. Bebb, G. W. Clements, Jr., S. R. Bibb, J. P. Thorne, T. Stotts, H. Chamberlain, F. H. Varner.

The defendants, other than the gin company, filed their joint answer and cross complaint, and moved to transfer the case to the chancery court, which was done. In the answer and cross complaint the defendants deny that they executed the writing set forth in the complaint, either as makers, sureties or indorsers, but admit that they did join in the execution of another note to plaintiff for that amount, and they set forth the following state of facts with reference to the transaction:

"On said April 21, 1906, said gin company was, and for a long time prior thereto had been, insolvent and execution-proof, which fact was well known to the plaintiff and these defendants, and these defendants say that upon the face of said note, and after the same had been signed by said gin company, and below said signature, they subscribed their names to said note, but say that they did not sign the same as indorsers, principals, or sureties, and at the date of the execution of said note, and at and prior to the time of subscribing their names thereto they positively refused to become liable upon said note in any manner; that it was then and there agreed and understood by and between the plaintiff and these defendants that by subscribing their names to said note they should not become personally, severally or jointly, or in any manner liable for the payment of said note. That they were directors and officers of said gin company; that each and all of them were farmers and inexperienced in the transaction of commercial business, and ignorant of the rules, laws and regulations applicable thereto; that, after said note had been signed by said gin company, the plaintiff, through its agent, officer and representative, Ward, stated and represented to these defendants that the said note signed by said gin company without their signature or signatures would not be a valid and binding obligation, even as against said gin company; that the only manner in which said note could be made a valid and binding note and obligation against said gin company was for each of these defendants as officers and directors of said gin company to subscribe their names to said note, following the signature or name of said gin company thereto; that to so sign said note would and should not to any extent or for any purpose make them personally, severally or jointly liable upon said note in any manner, nor obligate them to pay the same; that by so signing said note they were only obligating the said gin company to pay said note.

"That said Ward at the time said note was executed was skilled and experienced in the transaction of business and familiar with the rules, laws and regulations relating to commercial paper, and the execution thereof by corporate bodies, and knew that the representations so made by him were false; that he made the same for the purpose of inducing and procuring these defendants to subscribe their names to said note not in manner to bind said gin company only, but for the purpose of binding and obligating these defendants to pay said notes.

"That said Ward further stated, at the time they subscribed their names to said note, that neither he nor the plaintiff wanted or desired that any of these defendants should become liable upon said note or obligated to pay the same, and that in subscribing the same these defendants did not believe that they were assuming any personal liability thereon.

"That in signing said note of said gin company, in manner and form as hereinbefore stated, and so as to make them apparently liable as principals and sureties thereon, the same was done by mutual mistake of the plaintiff and said Ward and each and all of these defendants.

"That if, in making the statements and representations hereinbefore stated, the said Ward did not make the same in good faith and was not mistaken, as these defendants and each of them were, as to the effect which their signatures to said note would have upon their liability thereon, then defendants say that the statements and representations of said Ward were made for the deliberate purpose of deceiving, cheating and defrauding these defendants, and each of them."

The prayer of the cross complaint is for reformation of said instrument of writing, so as to correctly express the intention of the parties, and in such manner as to show that the signatures of the individual defendants were given for the sole purpose of making the instrument a valid obligation of said corporation. On final hearing of the case the chancellor found that "all of the defendants signed the note introduced in evidence; that at the time of signing the same it was agreed and understood, by and between the plaintiff and defendants, that only a note of defendant Farmers' Union Gin Company, as a corporate body, was being executed; that all the individual defendants signed said note only as representatives and directors of said corporation; that it was agreed and understood by and between plaintiff and all the defendants that none of said defendants would or should become personally liable upon said note for the payment thereof, nor incur any personal liability by signing the same, and that said defendants as individuals are not personally liable upon said note; that plaintiff is entitled to recover of and from the defendants, Farmers' Union Gin Company, the amount of the note sued upon and offered in evidence, and that the individual defendants are entitled to the relief prayed for by them." A decree was rendered in favor of plaintiff against the gin company, and a reformation was decreed as to the other defendants, and as to them the complaint was dismissed for want of equity. The plaintiff appealed.

The note was executed at Lake City, Ark., and Ward, the president of plaintiff corporation, and all of the defendants except Chamberlain and Varner were present. Ward came over from Memphis by appointment for the purpose of adjusting the indebtedness of the gin company, and the others, who were directors in that corporation, met him for that purpose. The gin company owed plaintiff $ 5,560, or about that amount on open account for borrowed money, and the...