Court Opinion

ID: 6544496
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:18:28.768475+00
Date Added: 2024-06-11T15:55:55.723878
License: Public Domain

BtjNN, C. J., (dissenting). This is a suit originally on the renewal promissory note mentioned in the opinion of. the majority of this court, and was at law. While pending on the law side, the defendants filed their answer,. in which their defense was, mainly, that the consideration of the note was in fact money borrowed for the use of the Manufacturing Company, by the officials thereof, who signed the two original notes in 1892, and, of course, was the consideration of the renewal note sued on. Most of the testimony in the case was for the'purpose of showing this to be a fact; and, this being established, it was seemingly thought to be an easy matter to conclude that the Manufacturing Company alone was the real maker of the notes. The taking of so much proof to establish this point was a work of supererogation, for it will not be questioned that the consideration of the notes was for the use of, and was used in, the business of the Manufacturing Company. But, all that being admitted, it does not follow that appellees are not individually bound, and that they alone are bound upon the note as written. Indeed, this conclusion seems to have forced itself upon the appellees; and hence their amended answer and cross-bill, and motion to transfer, which was granted. The additional defense set up in the amended answer and cross-bill is that, in the first place, the Manufacturing Company is solvent; and then, immediately following, they say that it would be an irreparable injury to them if the courts should compel them to pay off the note sued on, and this is one of the equitable grounds upon which they are permitted to seek relief in equity. But it will strike the disinterested reader as passing strange that, if the appellees are made to pay the note, the injury to them will be irreparable, since they are the sole managers and controllers of the company, and have it within their power to appropriate its assets (and it has sufficient assets if solvent, as they say it is) to the payment of its debts, and can thus readily indemnify themselves for any moneys they may pay out for the company. This seems to be a matter where the allegations are not only too much, but where they are conflicting with each other. The other ground for equitable relief is set up in their answer and cross-bill, upon which they ask a reformation of the note sued on, so as to make it express the real intention of the parties, and thereby let them out of the liability which appears on the note as written. The proof they adduce goes to show that J. M. Phelps, as president of the plaintiff bank, perfectly understood that these persons who signed the note (appellees) were not personally liable, and that it was not the intention of any of the parties that they were not to be held personally liable at all. The plaintiff bank is thus brought in to show that the mistake in signing the note as it was signed was a mutual mistake. The principal and the important evidence on this point is the testimony of J. M. Phelps himself, who, appellees say, was president of the bank, and spoke and acted for it, and bound it by his acts. The evidence of Phelps is really of little importance in itself, and moreover he was one of the obligors on the original notes, and was the vice president of the Manufacturing Compaq, and one of the signers of the note sued on, and, in so far as his evidence may tend to the benefit of appellees, it also tends to benefit himself personally. He is not, therefore, the representative of the bank in a matter like this. The evidence on the part of the appellees was intended to show that the note was intended to be executed so as to make only the Manufacturing Company bound for' its payment. That is, the effort is to abrogate two well-established rules; one of law, to the effect that oral testimony is inadmissible to vary a written contract, or, more properly speaking, to make this case an exception to the rule. The prayer of the appellees, also, if granted, is a violation of a business rule, which by usage has become almost as binding as law itself. That is, a note or other obligation to make payment, with only one obligor, is not bankable paper. If these appellees, who signed the note, are to be released from their individual obligations, and the obligations are thus to be cast upon the company, then the bank officials would be regarded as very careless and incompetent trustees to manage the affairs of the bank for the benefit of stockholders and depositors and other persons interested in the bank. The question is, is oral testimony admissible, on any kind of showing, to bring about such a result as this in any given transaction? It is a question, not so much what is determined by the testimony of witnesses, but whether or not (if they can .say no more) they will be permitted to swear at all to accomplish such a purpose as this. The courts, in my opinion, should hold firmly to .the rule, and suffer a.modification or variance of it only in the extremest-cases; and this case to me is far from coming in the category of the exceptions sometimes held permissible in the courts. ' - The complaint is not, after all, that Mr. Phelps wrote differently from what was intended, but it is that the words “as,” before the respective official titles, and “of the Manufacturing Company,” after these titles, were not inserted, and the note is asked to be reformed, so as to show the intent that would have been truly expressed if these omitted words had been included. There is no testimony whatever that Phelps, as president of the bank or otherwise, influenced the signing of the notes as they were signed. That was altogether a work of the appellees themselves. Phelps did not stand by and cause them to sign as they did. The manner of signing the note perfectly conformed to all that he said to them on the subject. The doctrine of the courts and jurists narrows the cases in which ignorance of law may be relieved against in equity down to such a small number that it is confessedly impossible to state any general rule on the subject. This restrictive scope of the exception to the general rule — for that is all that it is — cannot be better illustrated than by a close examination of the cases cited by the court in support of its decree in this case. In the ease of Snell v. Insurance Company, 98 U. S. 85, “A., a member of the firm of A., B. & Co., who were owners of cotton, communicated the facts touching its ownership, situation, value, and risk, so far as he knew them, to C., a duly accredited agent of an insurance company; and thereupon the company, through C., entered into a verbal agreement with A., acting for and on behalf of the firm, to insure for a certain period the cotton for its whole value against loss by fire, at a premium which was subsequently paid to the insurance company. A. assented that the insurance be made in his name, upon the representation and agreement of C. that the entire interest of the firm in the cotton would thereby be fully protected. The cotton was burnt within the specified period. The policy was then issued and delivered to A., who, being at once advised by his attorney that it in terms covered his.interest, but not that of the firm, forthwith requested the company to correct it, so that it should conform to the agreement. The company having declined to do so, A., B. & Co. filed against it this bill, praying that the policy be reformed, and that the value of the cotton be awarded to them. Reid, 1. That the acceptance of the policy was not such as waived any right of A., B. & Co. under the agreement covering their interest in the cotton, which A. in their behalf had made with the company, and that they were entitled to the relief prayed for. 2. That a mere mistake of law does not, in the absence of other circumstances, constitute any ground for the reformation of a written contract.” The firm was no party to the writing purporting to express the contract between their agent, A., and the-agent of the insurance company, until a delivery and acceptance of the same by the said agent, A., and it appears that, immediately upon its being nominally delivered to him, A. examined it through his attorney, and found it defective and not in conformity with their verbal agreement, and the firm requested the company to make the proper correction, which it, with right, declined to do. The written policy was never accepted, it having-been rejected in a reasonable time after presentation for acceptance or rejection, for that is the meaning of it. There was therefore no mistake of law, but a simple neglect or fraud on the part of the agent of the insurance company in writing up the policy to meet the agreement of the' parties, or. bad faith in the company in attempting to cheat the firm by a trick, — a question of fact-; for the cotton was insured for its whole value, and we infer that the full premium was paid to the insurance company. In Griswold v. Hazard, 141 U. S. 260, “one Durant, a citizen and resident of the state of New York, was arrested under a writ of no exeat, while temporarily at Newport, Ehode Island. To obtain a release from under the writ, he executed a bond, with Gris-wold ' and Bradford as sureties, the condition of which was that Durant should abide and perform the orders and decrees of the supreme court of the state of Ehode Island in the suit in equity of Isaac P. Hazard and others against the said Durant, then pending in said court. In that suit a decree was, fourteen years after-wards, obtained for a very large sum for plaintiff; and thereupon an action at law was brought on the bond against Griswold, and judgment recovered. Pending this common law action on the bond, bills in equity were filed by Griswold for injunction to restrain the proceeding at law. It was alleged in these bills that Griswold had intended to sign, and believed at the time that he signed, a bond which simply bound him for the appearance of Durant, and that its execution in its actual form was the result of mistake. The supreme court held (reversing the decree below) that the alleged mistake was clearly established by the proofs; that under the circumstances Griswold was entitled to relief against the mistake of law; and that the action on the bond should be perpetually enjoined. The court said there was no mistake as to the mere words of the bond; for it was drawn by one of Hazard’s attorneys, and was read by Griswold before signing it. But, according to the great weight of evidence, there was a mistake, on both sides, as to the legal import of the terms employed to give effect to the mutual agreement. In short, the instrument does not express the thought and intention which the parties had at the time of its execution. And this was attended by circumstances that render it inequitable for the obligees in the bond to take advantage of it. The instrument was drawn by one of Hazard’s attorneys, and was presented and accepted as embodying the agreement previously reached. Griswold was unskilled in the law, and took the word ‘perform’ as implying performance in the sense of Durant’s becoming amenable to the process of the court.” In other words, he thought he was signing a bail bond for the personal appearance of Durant in the court, and not a bond to abide the judgment of the court on the matter in litigation. The attorney on the opposite side had caused him to sign a bond of the latter class, instead of a mere bail bond, either by his own want of skill, negligence or wilful fraud, but as the court, in effect, found, by the mistake also of the attorney as to the legal effect of the bond written by him. Durant was arrested on his landing at Newport on the same day the writ was issued, and hurried at once to jail. His friends, together with the plaintiff’s attorneys, assembled at the jail about 12 o’clock at night of the same day, it being Saturday, and the matter was discussed as to how he could be released from jail, so as to be permitted to return to New York on urgent business. The writ from the court commanded the sheriff to make the arrest, and “to take bail from Durant in the sum of $53,736, conditioned that he would not go or attempt to go into parts beyond the state without leave of the court.” The sheriff had no authority to demand from Durant any bond having a different effect. The parties at the jail had all assembled there to arrange for the release of Durant from the jail. Nothing else seems to have been contemplated. Griswold was a stranger to Durant, but was induced to sign the bond by his nephew, who was a friend of Durant. A reading of the full statement of the case and the language of the decision, alone, can give the best understanding of the real meaning of the decision. The bond, as written, did not comply with the order of the court embraced in the writ, and was not such as the sheriff was really authorized to take. His authority was to take bail and release, and not to take a supersedeas or other bond binding the bondsmen to abide the judgment for the debt. Griswold signed what he supposed was the proper bail bond, written out by attorneys for plaintiff; and really there was some question that the bond was not in fact á mere bail bond for the appearance of the principal in court, and that he would not depart the state without the leave of the Court. It was held that the bond be reformed according to the understanding of the parties at the time of its execution. To insist upon the liability of the bondsmen for the debt was simply an evidence of the fraudulent intent and unconscionable desire of the plaintiff. There does not appear to have been any mistake of law on the part of Griswold. He simply signed it, not dreaming it was anything but a bail bond, as to give bail was what they had all assembled at the jail at that hour of the night to do, and nothing else. The text writers cited in the opinion all agree that a mere mistake of law cannot be relieved against, but that, in rare cases, where one is misled by the negligence, fraud or imposition of the opposite party to make the mistake of misconstruing and thereby of signing a paper not expressing his meaning at the time, he may have relief in equity. But what is the case at bar? Is it stich that any of these cited eases are applicable at all? Let us see. It is, or (since there is no testimony on the subject) it may be, the custom of banks in dealing with these weak corporations, especially when starting business, to require their notes and other obligations to be signed by the managers of such concerns; for in no other way can the rules of banking be observed. And it may be the rule to require these persons to annex their official titles respectively, not to show that it is paper of the concern, but, as to future holders, that these persons were in control of the concern’s offices, and therefore would be the more likely to so manage to honor tire paper when presented for payment, seeing that, if not so honored, they were liable themselves. That is probably the rule, and a more reasonable supposition on this kind of question is all that the holder is called upon to show. The note sued on is signed by four different persons, one styling himself “president,” another “vice president,” another “secretary,” and the fourth “treasurer.” Why this string of names to bind a corporation, no one with a particle of business sense can conceive of. A corporation is generally bound by one person authorized by its charter or by-laws so to do. All the officers are nowhere required to sign the obligations of a corporation, in order to make it the corporation’s obligation. The gravamen of the complaint of appellees is that Phelps had superior knowledge, and that they were unacquainted with the law. pertaining to such -matters. To admit testimony of this character from gentlemen who set themselves up as capable of managing the affairs of a manufacturing corporation is to stretch the exceptions to indefinite bounds. There does not appear to me to be any proper application of the citations to the facts in the case at bar.