Case Name: SWANSON, Respondent v. SANDERS, Appellant
Court: South Dakota Supreme Court
Jurisdiction: South Dakota
Decision Date: 1953-06-02
Citations: 75 S.D. 40
Docket Number: File No. 9304
Parties: SWANSON, Respondent v. SANDERS, Appellant
Judges: SMITH, SICKEL and LEEDOM, JJ., concur.
Reporter: South Dakota Reports
Volume: 75
Pages: 40–45

Head Matter:
SWANSON, Respondent v. SANDERS, Appellant
(58 N. W.2d 809)
(File No. 9304.
Opinion filed June 2, 1953)
J. H. Bottum, Jr., Rapid City, for Plaintiff and Respondent.
Parker & Parker, Deadwood, for Defendant and Appeallant.

Opinion:
ROBERTS, P. J.
This is an action on a promissory note. It is made payable six months after date in the sum of $2,500 to the order of E. G. Swanson, and bears date of April 2, 1948. The note was signed, "Wm. Brown, Pres. Redwing Paint Inc." and "W. Ray Sanders". The action is against Sanders only. There appeared on the back of the note when delivered the following memorandum:
"Rapid City, S. Dak.
"April 2, 1948
"It is understood and agreed that the undersigned William Brown will issue or cause to be issued twenty five hundred shares of his personal stock in the Red Wing Paint Co. of the Red Wing Paint Co. of Wyo. to Mr. E. G. Swanson for the use of this loan as a bonus for the loan and that he shall also have twenty five hundred shares of stock in the proposed company to be organized under the laws of S. Dak.
"Wm. Brown."
Defendant admits signing the note, but denies that he ever received any consideration. He alleges that the parties to the action and others were interested in the formation of a corporation known as Red Wing Paint Inc.: that the note was executed by defendant as an officer of the corporation together with Wm. Brown as president with the knowledge and consent of plaintiff; that the amount of the note was paid to Brown for the purpose of financing in part the project; and that plaintiff was to receive stock in the corporation when organized for the amount advanced.
Plaintiff introduced the note in evidence and rested his case. Evidence offered by defendant tendered to show that the parties to this action and the aforementioned Wm. Brown and one Glen Ghere planned to organize a corporation to engage in the business of manufacturing paint; that articles of incorporation were prepared but were never executed; that it was understood that Brown was to be president and managing officer and that the parties to this action were to serve as members of the board of directors; that plaintiffs check for $2,500, payable to Brown and bearing a cancellation showing that it had been paid by the bank, was received in evidence; that the note in suit was executed and delivered to plaintiff in his favor for a like sum; and that defendant had advanced and paid to Brown $1,500 and agreed to furnish a site for the construction of a factory. Glen Ghere at the same time paid to Brown $1,000 and received a note signed by the same parties with a like memorandum on the back. Defendant testified over objection that there was an understanding that if plaintiff wanted payment in money the note would be paid from corporate profits.
Plaintiff contends that the evidence does not show a want or failure of consideration; that the note,in suit leaves no -doubt as to the meaning and intention of the parties and that in the absence of fraud or mutual mistake of fact evidence tending to contradict its terms was inadmissible; and that notwithstanding the admissibility of such evidence there were no facts to indicate that defendant executed the note as an agent or corporate officer or that it was other than the joint obligation of the makers.
Under the Negotiable Instruments Law, SDC 46.0201, "Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value."
A memorandum placed on the back of a note at the time of the execution thereof with the intention of making it a part of the note is as binding on the parties as if it were within the body of the instrument. National Bank of Commerce of Pierre v. Feeney, 9 S.D. 550, 70 N.W. 874, 46 L.R.A. 732, and on subsequent appeal, 12 S.D. 156, 80 N.W. 186. It is said in 7 Am.Jur., Bills and Notes, § 56, citing the above case: "It is a general rule, well supported by authority, that marginal notations or memoranda, placed on a bill or note at the time of the execution thereof with the intention of making them a part of the contract, constitute a part of the contract, and must be construed with the body of the instrument to arrive at the true agreement existing between the parties." We do not so decide, but for purpose of decision will assume that the evidence would sustain a finding that the parties intended to make the memorandum on the back a part of the note.
There is no language in the, body of the note or in the memorandum on the back to indicate that the signature of defendant was affixed only as an agent or an officer of a corporation and that he was not to be personally bound. Defend ant admits that the corporation in behalf of which he claims to have acted was, in fact, never incorporated. Manifestly, a corporation before its organization can have no agent or enter into a contract.
Defendant unquestionably received valuable consideration for signing the note. Any consideration sufficient to support a simple contract is value for a negotiable instrument. SDC 46.0202. It was not necessary that the consideration move directly to defendant. Conley v. Seligman, 47 S. D. 239, 197 N.W. 293. A consideration is valid though it moves to a third person. It was sufficient that defendant's comaker received consideration from the plaintiff.
We are in accord with the determination of the trial court that the evidence adduced required direction of verdict for the plaintiff.
The judgment appealed from is therefore affirmed.
SMITH, SICKEL and LEEDOM, JJ., concur.
RUDOLPH, J., dissents.