Case ID: wis_172/html/0627-01.html
Source: Caselaw Access Project
Author: {"author": "Owen, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Loveland and another, Appellants, vs. Hanson, Respondent.
    
      October 21
    
    November 16, 1920.
    
    
      Corporations: Notes signed by director: Authority: Fraud: Personal liability: Appeal: Fact not determined■ by special verdict: Presumption, from judgment.
    
    1. Under sec. 2858m, Stats., the court, in rendering judgment on'a special verdict, will be deemed to have determined a fact omitted from the special verdict in conformity with the judgment.
    2. To hold a director, who was also an employee, of a corporation personally liable on notes of the corporation which he has signed, there must be some element of deceit or fraud in that which he did, or an express or implied warranty on his part that he had authority to bind the corporation.
    3. Where such director signed notes of the corporation- because of representations of the payee’s agent that other directors had assented thereto, the agent knowing that such director had no authority to execute the notes, he was not personally liable.
    Appeal from a-judgment of the- circuit court for Columbia county: Chester A. Fowler, Circuit Judge.
    
      Affirmed.
    
    Action to recover on promissory notes. The plaintiffs are copartners engaged in the business of selling a copyrighted advertising campaign, with offices at Iowa City, Iowa. The Hanson Company is a corporation engaged in the general mercantile business at Rio, Wisconsin. L. A. Hanson was a director of the company and a clerk in its store.. He had power to make purchases of goods required to replenish the stock- in trade, but further than that he had no power to bind the company or pledge its credit. The by-laws forbade officers or employees pledging the company’s credit without'the authority of the board of directors.
    . On' the 3d day' of August, 1916, a representative of the plaintiffs called at the store.of the Hanson Company and solicited its order for their copyrighted advertising campaign. He talked with L. A. Hanson, who told him that he could not do anything without the consent of the rest of the directors; that he was willing if the rest of the directors were. He told the representative of the company who the rest of the directors were, and he (the salesman) spent the remainder of that day and a portion of the next interviewing the other directors. Sometime during the day of the 4th of August the representative returned to the store and told L. A. Hanson that he had interviewed the other directors and that they all consented to his signing notes for the advertising campaign. Hanson signed'the notes, to recover the amount of which this action was brought. The next day he learned that the directors had not consented and that several of them were opposed to the venture. He wrote to the plaintiffs canceling the order.
    The action was brought against the Hanson Company and L• A. Hanson. The jur}*- returned a special verdict, by which it found (1) that the plaintiffs’ agent, in order to induce L. A. Hanson to sign the notes -and contract, represented to him in substance that the directors at Rio had all consented to his signing them; (2) that such representations were false; (3) that L. A. Hanson believed said representations; (4) that L. A. Hanson was induced by said representations to sign the notes and contract; (5) that L. A. Hanson, in signing the notes in question, did not intend to be personally liable thereon; and (6) that L. A. Hanson was not authorized to sign the notes and contract in question for and in behalf of the Hanson Company. Upon this verdict the court rendered judgment in favor of both defendants. The plaintiffs appeal from that part of the judgment in favor of L. A. Hanson.
    
    The cause was submitted for the appellants on the brief of Rogers & Rogers of Portage, and for the respondent on that of Grady & Farnszvortk of Portage.
   Owen, J.

The principal argument made by the appellants is that L. A. Hanson was not justified in relying upon representations made by the agent of the plaintiffs that the directors of the company had all consented to his signing the notes. An examination of .the record convinces us that this was a jury question. True, the specific question of whether L. A. Hanson was justified in relying upon such representations was not submitted to the jury. But in submitting the fourth question to the jury the trial judge said:

“To be induced by a representation one must rely upon it, and a person is not justified in relying upon a false representation unless under all the circumstances it is of such a nature that a prudent man, in the transaction of his important business, is warranted in relying thereon. The false representations, to be considered as an inducement, must be of such a character and made under such circumstances that the person claimed to have been deceived was justified in relying upon them.”

In view of this instruction the jury could not have answered the fourth question, “Was L. A. Hanson induced by such representations to sign the notes and contract,” in the affirmative unless it was also found that he was justified in relying upon such representations. Furthermore, by virtue of the provisions of sec. 2858m, Stats., if such fact is essential to sustain the judgment it shall be deemed to have been determined by the court in conformity with its judgment. However, we do not deem this question'very material. To hold L. A. Hanson personally liable upon the notes there must be some element of deceit or fraud in that which he did, or an express or implied warranty on his part that he had authority to bind the Hanson Company. Outagamie County Bank v. Tesch, 171 Wis. 249, 177 N. W. 6, and cases there cited.

The- record discloses no element of deceit or fraud on Hanson’s part, and the agent of the company was fully advised concerning his authority or lack of authority in the premises. As said by the learned trial' judge:

“That L. A. Hanson had no actual authority to sign the note, is- clear. But the plaintiffs’ agent knew as well as he did that he was without such authority. And the signature, as the jury found upon sufficient evidence, was- induced by the false and fraudulent representation of the plaintiffs’ agent that he, the agent, had procurecl from all the resident directors their assent to the making of the note. It is also clear that neither the plaintiffs nor L. A. Hanson contemplated that L. A. Hanson should be personally liable. Were the law to hojd L. A. Hanson liable it would not only make a contract which the parties never contemplated, but would enable the plaintiffs to profit by the fraud of their agent. It would be a monstrous injustice, in view of the findings of the jury, for the law to do .either.”

By the Court. — Judgment affirmed.