Court Opinion

ID: 6739434
Source: CourtListenerOpinion
Date Created: 2022-07-20 23:20:50.257907+00
Date Added: 2024-06-11T16:01:54.815898
License: Public Domain

Birdzell, J.
(after stating the facts). The principal error complained of is the direction of the verdict in favor of the plaintiff. It is contended that the contract in question is ambiguous in that it docs not clearly appear whether the defendants who are sued individually, undertook an individual liability or whether they undertook to bind *44tho corporation of which they were respectively president and directors. At the trial considerable evidence was admitted going to establish the understanding of the parties in this respect. It was the contention of both Davis and Mitchell, who were present at the meeting when the instrument was drafted and signed, that they were interested only in obtaining the signatures of the defendants rather than the whole board of directors, because they knew the defendants to be personally responsible. They testified that they stated this in substance to tho parties at the time the contract was signed. On the other hand, the testimony offered by the defendants is that a majority of the directors were requested to sign so as to bind the corporation by their action in so far as the corporation could be bound at tbe time; that they expressly refused to become personally liable for tbe obligation; that all parties understood that the corporation had not yet come into existence; and that the only liability intended to be evidenced by the contract was whatever liability tbe corporation would later assume. After admitting tbis testimony the trial court apparently came to the conclusion that it was inadmissible; that tbe contract on its face was not ambiguous and bound the defendants personally; and for that reason the verdict was directed. We are of the opinion, however, that the instrument is ambiguous in that it does not clearly appear whether the defendants undertook to hind the corporation or whether they contracted personally, using tbe description of president and director as mere words dcscripiio persones. The authorities dealing with this question are in almost hopeless confusion, and we need not discuss them at length. On one hand there are those which emphasize the parol-evidence rule to tbe point of attempting to extract from every written instrument the intention of the parties without aid from extrinsic sources. In the extreme applications of this rule by such authorities, contracts are construed as binding tbe individuals in instances where it is quite apparent that the actual intention of the parties was to bind a corporate principal. This, because tbe individuals had not adopted a form of signature showing beyond question the intent to sign the corporate name. On the other hand, there are those authorities which relax the parol evidence rule upon the slightest showing of uncertainty in the capacity in which those whose names appear are intended to be bound. In view of these conflicting authorities, par*45ticularly with respect to negotiable instruments, a provision was inserted in the Negotiable Instruments Law in the hope of measurably reconciling the conflict and producing more uniformity in the decisions. The section reads:
“Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability.” Under this statute the form of the signature is not necessarily controlling, but the contents of the instrument are to be examined to ascertain whether the agont appears to sign for or on behalf of a principal, and if he has used words describing himself as an agent without disclosing the principal he is not exempt from personal liability^ but if he does disclose the principal, as in the instant case, he is not liable provided it was the intention to bind the principal. If there can fairly and reasonably be said to be uncertainty regarding this intention it is open to inquiry aliunde to render it certain, especially between immediate parties. The parol-evidence rule has received even a more rigid construction in the case ■ of negotiable instruments than as applied to contracts generally. As this statute evidences a tendency to relax the rule somewhat with regard to negotiable instruments, there is all the more reason why it shxmld not be rigidly applied to ordinary contracts. This is the tendency of the recent authorities. 3 R. C. L. p. 1095, says:
“It is better in these cases, however, to hold that the signature is - ambiguous, and hence subject to explanation by extrinsic evidence; and this is the modern view. According to sounder doctrine while, where one signs as an agent of another, the prima facie presumption is that the words are merely descñptio persona?, and therefore that the one so signing is personally bound; yet it may be shown in an action between the original parties that it was not so intended, and that, in fact, the real intention was to bind- the principal whose name was disclosed in the signature of his agent, or who was well known by the payee to be the real party to be bound.” Megowan v. Peterson, 113 N. Y. 1, 65 N. E. 738. See also note and cases cited therein, 42 L.R.A.(N.S.) 6.
We-are of the opinion that there is sufficient uncertainty nnmifested *46011 the face of the contract in question to admit evidence of the transaction, and that the conflicting testimony relating to the capacity in which the defendants’ contracted formed a question of fact, which should have been submitted to the jury.
In view of the fact that there must be a new trial of the action, another question is presented upon the record that requires consideration. Upon such conflicting evidence as appeared upon the former trial, the jury will be called upon to determine what the true contract of the parties was, and even if it should be determined that the defendants contracted in a representative capacity, the further question would arise as to whether or not they might still be personally liable, in view of the subsequent transactions. As appears in the statement of facts above, those purporting to act for the bank repudiated this obligation as the obligation of the bank, and the stockholders have apparently determined not to complete the organization of the Farmers’ State Bank, but to continue their organization as the First National Baisk of Ashley. The question as to whether or not the defendants rendered themselves personally liable to the plaintiff by reason of their participation in this action of the stockholders, is one that is not free of difficulty.
It is elementary that a corporation is not liable upon contracts entered into by its promoters. Before the corporation comes into existence, it can have no representative, and no one is capable of acting for it. Those interested in promoting it may nevertheless contemplate the ultimate payment by the corporation of the legitimate promotion expenses. But the corporation does not become liable for such expenses, in the absence of a subsequent undertaking in some form. In the instant case the record is in an uncertain state as to the capacity in which Mitchell was originally employed, if he was employed, to undertake the work he did. It does not appear, however, that he was employed by these defendants acting together. Neither does it appear as to whether or not he was acting as the agent of each individual stockholder for the purpose of bringing about the organization of the corporation. Possibly he had an understanding with the individual stockholders for his commission, and that it was included in the subscription notes. If such were the arrangement these defendants, acting with knowledge thereof, in attempting to put their own notes be*47yond the reach of Mitchell and abandoning the original plan of incorporation, would each be severably liable to him or his assignee for the amount so included in the notes given by them. The record leaves it equally uncertain as to whether there was any undertaking, express or implied, that these defendants would co-operate to secure the completion of the organization. These are questions of fact upon which the ultimate liability of the defendants in this action may depend. They must be determined by the jury from all the evidence bearing upon the transaction. The jury, in short, must find what the actual contract relations were.
While some of the evidence has either a direct or circumstantial bearing upon some of these questions, we are satisfied that it cannot be said that they must be resolved one way or the other as a matter of law; for reasonable inferences either way may be drawn from some of the testimony. If, for instance, the jury should believe the version of the transaction as testified to by the defendants, they might also reasonably infer that Mitchell was content to take the risk of the ultimate organization of the corporation; knowing, as he must have known, the desire of the stockholders, whom he had personally solicited. In this event, it could not be said that there was any undertaking on the part of the defendants to secure the organization of the corporation, nor would they be precluded from exercising their judgment, in conjunction with the other stockholders, as to the desirability of completing the organization. Queen City Furniture & Carpet Co. v. Crawford, 127 Mo. 356, 30 S. W. 163; Landman v. Entwistle, 21 L. J. Exch. N. S. 208, 7 Exch. 632, 155 Eng. Reprint, 1101; Fletcher, Cyc. Corp. § 158. On the other hand, if these parties undertook to answer for the assumption of this obligation by the corporation and then joined in a plan to frustrate its assumption, they have, of course, repudiated their obligation, and are liable. Roberts Mfg. Co. v. Schlick, 62 Minn. 332, 64 N. W. 826; 14 C. J. § 313.
It follows from what has been said that the judgment and order appealed from must be reversed and the cause remanded for a new trial. It is so ordered.
Christianson, Oh. J., and Bronson, and Grace, JJ., concur.