Case Name: Western Wheeled Scraper Company v. J. M. McMillen et al.
Court: Nebraska Supreme Court
Jurisdiction: Nebraska
Decision Date: 1904-04-21
Citations: 71 Neb. 686
Docket Number: No. 13,497
Parties: Western Wheeled Scraper Company v. J. M. McMillen et al.
Judges: Letton and Kirkpatrick, 00., concur.
Reporter: Nebraska Reports
Volume: 71
Pages: 686–691

Head Matter:
Western Wheeled Scraper Company v. J. M. McMillen et al.
Filed April 21, 1904.
No. 13,497.
1. Promissory Note: Execution by Agent. The court is fully committed to the doctrine that, in order to exempt an agent from liability upo'n a negotiable note executed by him within the scope of his agency, he must not only name his principal, hut he must express by some form of words that the writing is the act of the principal though done by the hand of the agent.
2. -: Reformation : Parol Evidence. Though the language of a note executed by directors of a corporation imports a personal obligation, it may be shown by parol evidence, on an issue oi reformation, that the intention of both the makers and the payee was to execute an instrument binding the corporation only, and that, though the language was that which they intended, it did not express their true purpose.
Error to the district court for Thomas county: James N. Raul, Judge.
Reversed with directions.
G. H. Ho'lnornb, for plaintiff in error.
11, M, HuUivan, contra.

Opinion:
Duffie, 0.
Plaintiff in error brought suit against the defendants in error npon three promissory notes, all in the following-form:
"$84. Ti-iedfoRD, Nebraska, November 20,1893.
"One year after date we promise to pay to the Western Wheeled Scraper Company, or order, at Thedford Bank of Thedford, Nebraska, eighty-four and no-100 dollars, with interest- at seven per cent, per annum, payable annually, for value received, and if action is commenced hereon, attorney's fees for collection. (Sign officially.)
"J. M. McMillen,
"G- W. Miller,
"G-. L. Matthews,
"Directors of Thedford Irrigation & Power Go.
" (limited)."
McMillen and Matthews alone answered. Their answer consists, first, of a general denial. Second, they allege that the notes sued on were executed and delivered to the; plaintiff by, for and on behalf of the Thedford Irrigation & Power Company (limited), a corporation organized under the laws of Nebraska, by their then duly qualified and acting board of directors, of whom the defendants were at that time members, and were signed by them in their official capacity, and for the purchase of a grading-machine bought of the plaintiff for the use and benefit of the Thedford Irrigation & Power Company (limited); that the defendants never had or claimed any interest in said machine except as members and stockholders of said irrigation company, and that the consideration for said notes moved from said Western Wheeled Scraper Company to the said Thedford Irrigation & Power Company (limited), and that the plaintiff had always so considered and treated said notes; that defendants never received any value for said notes except as members of said corporation, and have never assumed or agreed to assume any personal liability on said notes. To this answer there was a reply which is, in effect, a general denial of the allegations of the answer. The evidence tended to show that the defendants were members of the board of directors of the Thedford Irrigation & Power Company (limited) at the time of the execution of said notes; that, prior to the making of the notes, defendants negotiated with an agent of the plaintiff for the purchase, for the use of the irrigation company, of a. wheeled scraper to be used in the construction of its ditch; that it was finally agreed a scraper should be sent for and tested, and, if it worked as represented by the agent, the irrigation company would purchase the same, giving notes of the company therefor; that the test proved satisfactory to the directors, who purchased the machine for the company, and executed the notes in suit in the form above set out, supposing that they were binding the company and with no intent to make themselves individually responsible for their payment, and that the agent of the plaintiff taking said notes so understood.
The court, in its seventh instruction,' told the jury:
"You are further instructed that if you should believe from a preponderance, of all the evidence in this case that the three notes set out in plaintiffs petition were made and executed by the Thedford Irrigation & Power Company (limited), and if said notes were signed by said defendants with the intention and understanding to bind the Thed-ford Irrigation & Power Company (limited), and not the signers of said notes as individuals, and if you should find from a preponderance of all the evidence that it was so understood by and between the agent of plaintiff and these defendants, at the time said notes were executed and delivered, then your verdict should be for the defendants, 'No cause of action.' "
The jury returned a verdict for the defendants, and the plaintiff has brought the record to this court for review.
The petition in error, among other matters, alleges "that the court erred in permitting the defendants to in troduce oral testimony tending to prove a different contract than that set out in the written contract, namely, the notes sued upon," and in giving the instruction above quoted and other instructions which it is unnecessary to discuss. The general rule undoubtedly is that, on account of the qualities which the law annexes to negotiable instruments, none are hound except those who appear on the face of the instrument as bound, and, accordingly, extrinsic evidence can not be admitted to charge parties whose names do not appear on the face of the instrument. In 4 Thompson, Corporations, sec. 5141, it is said:
"The modern doctrine seems to be that, where individuals subscribe their proper names to a promissory note, they become prima facie liable personally upon the same, although they add a description of the character in which the note is given; but such presumption of liability may be rebutted by proof that the note was in fact given by the makers as agents of a corporation, for a debt of the corporation, due to the payee, and that they were lawfully authorized to make such note as agents of the corporation; and such facts may be pleaded in bar of the action against the makers personally, averring knowledge on the part of the payee." He states further: "It is no objection to such a defense that the name of the corporation is not correctly stated in the description attached to the signature; it is enough if it appear that the makers did not intend to be personally bound. Rut it should be shown that the payee of the note had knowledge, or at least the full means of knowledge, that the makers of the note were promising as agents, duly authorized, of the corporation; for 'it is well settled that a man, contracting with another, can not shield himself as agent, unless he give notice at the time, that he is so, or it be knoAvn in some other way to the person with whom he deals.' "
It is undoubtedly true that the modern cases are more liberal than was formerly the case in allowing one vTho signs a negotiable instrument, designating himself as agent or trustee, to show by parol evidence that he was acting for another, who received all the benefits of the consideration for which the note was given. Keidan v. Winegar, 95 Mich. 430, 20 L. R. A. 705, is a case in point; and other cases referred to in the notes of the editor will furnish examples of the relaxation of the rule adopted by the courts at an earlier date upon this question. If this court had not put itself on record, we should be disposed to follow the modern decisions, but as early as 1886, in Webster v. Wray, 19 Neb. 558, the court, after a full review of the authorities, held that "no party can be charged as principal upon a negotiable note or bill of exchange unless his name is thereon disclosed," and it was further held in that case that parol evidence was not admissible to show that one who appeared upon the face of the notes to be the maker was in fact acting as agent for another, or as the officer of some corporation which had received the benefit of the consideration. This case was followed by Andres v. Kridler, 47 Neb. 585, where suit was brought upon a note made and signed substantially in the manner of those in suit, and it was held that, "where; the pleadings disclose a cause of action against a defendant personally, superadded words, such as 'agent/ 'executor,' or 'director' should be rejected as dcscriptio personep."
We think this court is now fully committed to the doctrine that in order to exempt an agent from liability upon an instrument executed by him within the scope of his agency, he must not only name his principal, but he must express by some form of words that the writing is the act of the principal, though done by the hand of the agent. If he expresses this, the principal is bound and the agent is not; but a mere description of the general relation or office which the person signing the paper holds to another person or to a corporation, without indicating that the particular signature is made in the execution of the office and agency, is not sufficient to charge the principal, or to exempt the agent from personal liability. There wa.s evidence which would fully support a finding that, in executing these notes, the defendants did not intend to bind themselves personally, and tliat the plaintiff's agent was not only fully aware of that fact and understood that he was taking the notes of the corporation, but assisted and advised as to the form in which the notes should be drawn in order to make them the obligation of the corporation. This being the case, the defendants, upon a proper plea, would be entitled to have the notes reformed to express the real intention of the parties. Western Wheeled Scraper Company v. Stickleman, 122 Ia. 396, and authorities there cited.
We recommend, therefore, that the case be reversed and remanded to the district court, with directions to allow the defendants to amend their answer if they so elect, otherwise to enter judgment for the plaintiff for the amount due upon the notes.
Letton and Kirkpatrick, 00., concur.
By the Court: For the reasons stated in the foregoing opinion, the judgment is reversed and the cause remanded to the district court, with direction's to allow the defendants to amend their answer if they so elect, otherwise to enter judgment for the plaintiff for the amount due upon the notes.
REVERSED.