Sims v. Kline

Eti-iridge, J., delivered the opinion of the conrt. E. N. Sims, W. P. Kretschmar, and Harley Metcalfe, as trustees, brought suit ag’ainst the appellee, M. Kline, on three promissory notes for ten thousand dollars each, payable to the Fisher Cotton Company, or bearer, dated May 18, 1921, and maturing six, twelve and eighteen *263 months after date, respectively, payable at the Commercial Savings Bank of Greenville, Miss., which notes were indorsed in blank by the Fisher Cotton Company. It was alleged that the notes passed into the hands of the trustees and at the time of the filing of the declaration that said notes were past due; that before the maturity of he notes plaintiffs became the holders and owners of said notes for a valuable consideration, in due course, and prayed for judgment for the amount of said notes with interest and attorneys’ fees. The defendant filed a plea of the general issue, and gave notice under the general issue that he would prove that the notes were signed and delivered to the Fisher Cotton Company without consideration or anything of value moving from the Fisher Cotton Company to the defendant, and that the defendant received nothing from the Fisher Cotton Company, nothing of value for and on account of his placing his said name upon the said writings; that same were wholly without consideration and void; that the plaintiffs, each and all and severally, had full knowledge and notice before they each took or received the said writings that they were without any con-, sideration valuable or sufficient in law to support them; and that, by reason of said facts, the plaintiffs should not maintain such suit. It is further allegud that the indebtedness for which the notes were given was an indebtedness owing to the Fisher Cotton Company by Guy E. Waldrop and Joseph Fink, for which the defendant was in no wise liable, and that the Fisher Cotton Company, with-the knowledge of the Commercial Saving Bank, and through the said hank, and with notice to plaintiffs, desired to secure the indorsement of the defendant for the said Waldrop & Fink, a firm composed of the said Guy El Waldrop and Joseph Fink, and agreed that said Waldrop & Fink would sign the notes before said notes should become effective, and that the liability of the defendant was conditioned and contingent upon the signing by said Waldrop & Fink, as makers thereof, and that all of said facts were well known *264 to the Commercial Saving’s Bank, and notice was given to plaintiffs before- these notes came into their possession, and that the said Fisher Cotton Company did not secure the signatures of the said Waldrop & Fink. It is further alleged that, before the notes were signed by the defendant, the Fisher Cotton Company agreed in writing with the defendant that no suit would ever be brought on the notes against the defendant in order to collect said notes; and that, among other reasons for signing said notes and agreeing to become an indorser thereon, or surety, for the payment thereof, the defendant relied upon the written agreement of the Fisher Cotton Company not to sue on said writings; and that said agreement of the Fisher Cotton Company was known to the plaintiffs before they received delivery of said notes from the defendant. It is further alleged that the said notes were not signed or delivered to the Fisher Cotton Company by the defendant, according to the tenor of' said instruments, but that actually and in fact the notes were obtained from the defendant by fraudulent misrepresentations and inducements by the said Fisher Cotton Company, which said fraudulent misrepresentations and inducements were well known to the plaintiffs, and of which the plaintiffs had notice at the time they obtained and undertook to acquire the notes, and that, because of said fraudulent misrepresentations, the defendant is not indebted to the plaintiffs. There were also special pleas denying the execution of the notes and alleging that said notes were obtained by fraudulent misrepresentations, etc. At the conclusion of the evidence for the plaintiffs there was a motion for a peremptory instruction which was sustained by the court, and judgment rendered against the plaintiffs. The facts are long and complicated, but, as the case turns upon the sufficiency of the evidence of the plaintiffs to. go to the jury on the issues involved, a general statement of the facts will be made.' *265 The Fisher Cotton Company did a cotton business at Greenville, Miss., and surrounding country. Joe Fink and M. Kline were partners in business at Merigold, Miss., engaged, among other things, in buying cotton. Joe Fink and Guy Waldrop were also partners engaged in business, among other things in buying cotton. Kline, in addition to being a partner of Joe Fink at Marigold, Miss., was engaged on his own account in business at Alligator, Miss. In the spring of 1920 the Fisher Cotton Company secured the services of Guy Waldrop of the firm of Fink & Waldrop to buy some cotton at Helena, Ark., for the account of the Fisher Cotton Company. Some of the cotton so bought was rejected by the Fisher Cotton Company, and the cotton so rejected amounted to some thirty-seven thousand dollars. This acount was carried by the Fisher Cotton Company under the name of Fink & Kline, and the accounts were made out on the stationery of Fink & Kline and rendered to the Fisher Cotton Company. The Fisher Cotton Company was indebted to the Commercial Savings Bank of Greenville, Miss., in approximately the sum of two hundred thousand dollars, secured only in part, and the account against Fink & Kline, carried on the books of the Fisher Cotton Company, was assigned to the Commercial Savings Bank. After this assignment was made, the papers were turned over to H. J. Fisher of the Fisher Cotton Company to adjust or. collect, and were given to Fisher for such purpose prior to the closing of .the Commercial Saving Bank for liquidation, and the claim was placed in the hands of attorneys for collection or suit prior to the closing of the Commercial Savings Bank for liquidation. The Commercial Savings Bank was closed for liquidation March 18, 1921, and W. P. Kretschmar, one of the plaintiffs, was placed in charge of liquidating the bank for the state banking department. The attorneys having the claim notified Kline thereof and demanded payment and threatened suit. It was in testimony for plaintiffs that Kline thereupon went to Jake Fink, a *266 brother of Joe Fink, of the firm of Fink & Kline, to get him to adjust the matter with the Fisher Cotton Company. Jake Fink thereupon called up the attorneys having’ the claim and asked that he be allowed to take up the matter with the Fisher Cotton Company direct, which permission was granted. Thereupon Jake Fink went to Greenville, Miss., to see the Fisher Cotton Company, and it was agreed between the Fisher Cotton Company and Jake Fink that Jake Fink might also represent Fisher in the matter, and that it should be closed up on the basis of the three notes signed by Kline for ten thousand dollars each. Fisher 'also stated to Jake Fink that if it was closed up in that manner it would enable the Fisher Cotton Company to carry on its business and to get banking accommodations at Greenville, Miss., and this was communicated to Kline. It was also stated to Jake Fink and by him to Kline that, if he was not able to pay the notes at maturity, such notes could be removed, and that he (Kline) would not be pressed for payment. Mr. Kline desired this agreement to be put in writing, and the following letter was addressed to Jake Fink by the Fisher Cotton Company: “May 18, 1921. “Mr. Jake Fink, Clarksdale, Miss. — Dear Jake: ¥e inclose three notes for ten thousand dollars each, for you to get Mr.. Kline to sign, as per your settlement with him. You will note that the notes are dated six, twelve, and eighteen months. “Mr. Anderson, the state bank examiner, called me in session with him in reference to these notes, and said he would recommend the acceptance and use as collateral with the new Commercial Bank, that with those notes it would put us in the position to get the new bank to take our account. He asked that we do this at once. We told him we would go to Clarksdale and have you get the notes signed and have them here for him next week. “We have him and Mr. Kretschmar’s assurance that Mr. Kline will not be bothered with any suit, if he finds it is impossible to take the notes up when due; we told *267 them that under no circumstances would we consent to any suit in the matter, and with the comeback we have, Jake, think by the time the first one is due we will be in such shape that we can handle the notes ourselves. Mr. Anderson passed you and Mr. Kline quite a compliment; said he knew of no two more resourceful men in the delta, and that in time you both would be back where you were. “Please get the notes signed and return to us as quickly as possible, for it means whether we have a bank to bank with or not in this community. The notes will put our account in shape that the new organization will take the account over, and we can then have a bank to do business with, otherwise we will have to leave Greenville. “We are counting on you having the notes here by Monday as Mr. Anderson says he wants them by then, so he can instruct Mr. Kretschmar how to handle our account. There will be no bother to Mr. Kline; if he is unable to meet the notes when due they can be renewed. ‘ ‘ Sincerely yours, . “[Signed] Fisher Cotton Company.” The notes were thereupon signed by Kline and delivered to Jake Fink, who transmitted them to the Fisher Cotton Company, in a letter dated May 19, 1921, reading as follows: “Clarksdale, Miss., May 19, 1921. “Fisher Cotton Company, Greenville, Miss. — Dear Mr. Fisher: Just received your registered letter and at once got in touch with Mr. Kline. I assured him that you will see that he will not have to take up more than one note each year as you readily understand that this is the settlement that you and I agreed upon, but I impressed Kline that it will be an accommodation to you and indirectly will favor me. Inclosed you will find notes signed by Kline as per your request. “With best wishes, always your friend, “ [Signed] Jake Fink.” The Fisher Cotton Company thereupon took the notes to the bank and delivered them in part payment of its account. *268 Kline testified that it was understood and agreed that Joe Fink and Guy Waldrop were also to sign the notes, but that was denied by Jake Fink. The Commercial Savings Bank being in liquidation, Mr. Kretschmar took up the question of liquidating the bank through a plan of organizing a new bank to take over the accounts of the depositors, in consideration of certain of the accounts of the bank in liquidation being assigned to the -new bank to be organized, and certain other assets were to be taken over by creditors of the bank in liquidation in satisfaction of the claims of the creditor banks. This plan of liquidation was approved by Mr. Anderson of the state banking department, and the new bank was organized and took over the assets scheduled under the plan for the purpose of securing the new bank in taking over the deposits of the depositors of the bank in liquidation, and the lists of assets which were to secure the creditor banks’ claims against the bank in liquidation were turned over to the trustees. Among these assets were the notes here involved, and the claims of the creditor banks were surrendered and the liquidation procedings closed. The whole scheme of liquidation above stated was presented to and approved by 'the chancery court of Washington county having charge of the liquidation of the said Commercial Savings Bank in liquidation. Mr. Fisher of the Fisher Cotton Company testified as a witness, and stated that the contents of the letter above set forth to Jake Fink, to the effect that he had the assurance of Mr. Kretschmar that Mr. Kline would not be bothered by any suits, and that if the notes could not be paid when due no suits would be brought, were false, and that he had no such understanding with Mr. Kretschmar or with Mr. Anderson in charge of the bank in liquidation. Mr. Anderson and Mr. Kretschmar testified that they knew of no such representations on the part of the Fisher Cotton Company, and that they had no understanding with the Fisher Cotton Company to that effect, and that they took the notes in part payment of Fisher’s account *269 with the bank in liquidation, and that, when the plan and agreement was worked out in liquidation by which the trustees were to take these notes and others for the satisfaction of the claims of the creditor banks, they had the Fisher Cotton Company indorse these notes. ' Mr. Kline testified that he had nothing to do with the buying of the cotton at Helena, Ark., by Cuy Waldrop of the firm of Fink & Waldrop, and that he had no connection with the firm of Fink & Waldrop, and that he was not liable for the account, and that the Fisher Cotton Company had no authority to charge Fink and Kline with the said account. There is no contention that the creditors of the Commercial Savings Bank knew of any defenses to these notes when the scheme was worked out by which they agreed to take certain listed assets of the bank, including the three notes here involved, in satisfaction of their claims against the Commercial Savings Bank in liquidation. It will be seen from this statement of facts that the Fisher Cotton Company had an account upon its books against Fink and Kline for more than thirty thousand dollars which it had assigned to the Commercial Savings Bank as collateral security, and that this claim had been placed in the hands of attorneys for suit, and that it would be claimed in the said suit that Kline was liable to the Fisher Cotton Company on this account. Kline was desirous of adjusting the matter, and gave the notes under the circumstances above stated. A careful perusal of the letter above set out, relied upon by Kline to show that he signed the notes with the understanding that he would not have to pay them and that he would not be sued thereon, shows that it was stipulated in the letter that Kline would be allowed to renew the notes when they were due. The letter further shows'that the Fisher Cotton Company expected to be able to- take the notes up if. the arrangement was. made. But we do not think .that the letter, fairly construed, means that Kline would never be called upon to pay the *270 notes. It was shown in the face of the letter that one of the purposes of the Fisher Cotton Company in getting the notes was to place its account in such shape that the new bank would take the account over, and that they would have the new bank at Greenville to do its banking business with. Of course these notes would have to be paid at some time, and the correspondence in the record shows that the interest was to be paid .when due and the notes renewed. The stipulations in the letter show that it was expected that the notes would be taken up if Mr. Kline was able to do so without being uuduly pressed. The peremptory instruction granted proceeded in part at least upon the theory that notice to the Fisher Cotton Company was notice to the bank and to the trustees for the creditor banks of the true state of the dealings between the Fisher Cotton Company and Fink & Kline. It is clear that Fisher, representing the Fisher Cotton Company, was interested in taking care of its personal interests in these transactions. In the case of Cooper v. Robertson Investment Company, 117 Miss. 108, 77 So. 953, it is held that, where the agent was personally interested, notice to the agent under such circumstances would not be notice to the principal with whom he was dealing. In 31 Cyc., p. 1595, it is stated: “The rule that notice to an agent is notice to the principal, being based upon the presumption that the agent will transmit his knowledge to his principal, the rule fails when the circumstances are such as to raise a clear presumption that the agent will not perform this duty, and accordingly where the agent is engaged in a transaction in which he is interested adversely to his principal, or is engaged in a scheme to defraud the latter, the principal will not be charged with knowledge of the agent acquired therein.’’ In the case of Cooper v. Robertson Investment Company, 117 Miss. 108, 77 So. 953, supra, under the facts stated in the said case, the court held that, where the president of a bank gave a deed to the bank in settlement *271 of a debt due by him to it, the bank was not chargeable with the president’s knowledge of a prior unrecorded bond for title given by the president to the defendant, nor was its title affected by such bond, because of the fraudulent scheme entered into by the president and defendant, as a part of which the bond for title was executed; and, second, because the bank was a purchaser from its president for value without notice of defendant’s claim — it not being chargeable with the president’s knowledge thereof, since, where an agent is engaged in a transaction in which he is interested adversely to his principal, or is engaged in a scheme to defraud the latter, the principal will not be charged with knowledge of the ag’ent acquired therein; third, because, by agreement between the president and the defendant, the bond for title was expressly canceled, and it is not competent to vary the terms of that contract by showing a contemporaneous parol agreement that the bond should remain in force. In our opinion there is sufficient evidence for the plaintiffs to carry the case to the jury for its decision upon the issues involved, and it was error for the court below to grant the peremptory instruction for the defendant. The judgment of the court below will therefore be reversed, and the cause remanded for a new trial. Reversed and remanded.