Janes v. Citizens Bank

Opinion of the court by Hatner, J.: It appears- from the record in this case that the plaintiff in error, Fred R. Janes, the defendant in the court below, offered to- prove by parol testimony that he was the secretary of the Enid Town company; that he was acting for said' company and not for himself in signing the note in controversy, and that at the time of the execution of said mote it was understood between the parties that he d'id not intend to- bind himself by his signature, but intended, to- bind the corporation. It appears that this evidence was introduced, but was not considered; in fact it was- ignored by the court on the ground that the terms of the said note could not be varied by par'd testimony, and this is the only question presented by the record and urged by counsel for our consideration-. It is earnestly contended by the learned counsel for the defendant in error that the identical question at issue was pas-sed upon and settled by this, court in the case of Keokuk Falls Improvement Company v. Kingsland and Douglas Manufacturing Company, 5 Okla. 32, 47 Pac. 844. The note sued upon in that action is as follows: “$700.00. Oklahoma, O. T., Oct. 31, 1891. “On the first day -o-f March, 1892, for value received, we promise to. pay to- the order of Kingsiamd & Douglas *553 Manufacturing C'o>., ($700.00) seven hundred and no one-hundredths dollars, at the First National Bank, Oklahoma City, O. T., with interest from date until paid at the rate of 8 per cent, per annum, and exchange on St. Louis. [Signed] “Kiookuk Falls Improvement Co., “A. G-. Crum, “Perry Rodkey, “A. B. Hammer.” And on the back of said note appear® the following: “For value received we guarantee payment of the within note, waiving demand, notice and protest. “A. B. Hammer, “Perry Rodkey, “C. P. Walker, “H. C. Jones, “O. A. Mitscher, “As Directors Keokuk Falls Improvement Co. “A. B. Hammer, “Perry Rodkey, “Ed. J. Beale.” The question at issue was whether the directors, individual, or the Keokuk Fallís Improvement company, were liable on said guaranty, and whether parol testimony. could be introduced to show that it was the intention to bind the Keokuk Falls Improvement company. The court decided that parol testimony was inadmissible, and based its conclusions upon two grounds: (1) That where a person acting in a private capacity, as an agent in signing a promissory note, fails to disclose his agency, but where he describes himself merely as a director or trustee or agent for the person or corporation for whom he is signing, and there *554 -5s nothing- in the body of the note showing that it is the obligation of his principal, he is personally bound upon the instrument; and where a suit is brought against him individually, he will not be permitted to1 avoid his liability by parol proof showing- tlhat he signed the note in his agency capacity. (2) Where upon the face of a' note such an ambiguity exists as makes it impossible for the court to say what the contract does express, parol evidence may be admitted to explain the- contract, but not to modify or Change it so that the maker may avoid his liability. . We cannot agree with the reasoning or the conclusions reached by the court, it appearing that the .in-dorsers and guarantors having- signed their names on the back of the note, “as directors, Keokuk Falls Improvement company,” suggested a doubt or ambiguity as to the character of their signatures — that is, whether their signatures to the note were in a representative or individual capacity. It -seems that the court took the view that as no- doubt or ambiguity existed upon the face of the note, that parol evidence was therefore inadmissible to explain in what capacity the guarantors had indorsed the note. The object of the introduction of parol testimony was not to vary or change, the terms of -the note, but solely for the purpose of showing in what capacity the guarantors had -signed'the instrument. The ruling of the trial court in thle case now under consideration in excluding or declining to- consider the •testimony effered on behalf of the defendant, Fred R. Janes, to sustain the matters pleaded in his answer, was based upon this decision. *555 It is an elementary principle of evidence that a written instrument cannot be explained or varied by evidence of a parol agreement entered into between the parties, before or at the time of the execution of such instrument, and hence parol evidence of an oral agreement allegled to have been made a.t the time of the execution of a bill of exchange or promissory note, is inadmissible to vary or contradict the terms of such written instrument. But, this general rule is subject to the reasonable ■exception, that where anything appears on the face of the instrument which suggests a. doubt or ambiguity as to the party bound, or the character in which any of the persons w”ho signed the instrument acted, parol testimony is competent as betweten the original parties, for the purpose of showing the true intent and meaning of. the parties. And while the adjudicated cases are not entirely harmonious upon this subject, we think that this is the sound doctrine, and is supported by the better weight of modern authorities. Mr. Mechem, in his work on Agency, section MB, lays down the following rule: “Between the immediate parties to a bill or note,- parol evidence is permissible to show: That by a course of dealing between the parties, that form of exe-' cntion has become to be the recognized and adopted form by which the obligation of the principal is entered into;” also that it is admissible to' show, “That the instrument wfa®, to the knowledge of the panties, intendel to be the obligation of the principal, and not of the agent, and that it was given and accepted a® such.” *556 Parson® in bis work on Contracts', in discussing this /subject, says: “But the recent cases and the best reason® are for determining in each instance, and with whatever technical inaccuracy tihfe signature is made, from the facts and the evidence, that a party is an agent or a principal, in accordance with the intention of the parties to the contract, if the word» are sufficient to hear the construction. * * If upon the face of thle instrument, there are indications .suggestive of agency, such a® the addition of words of office or agency to the .sigpmture, or the imprint of the corporate title on the paper, parol evidence is competent to show who the parties intended should be bound of benefited.” . In Metcalf v. Williams, 104 U. S. 93, the supreme court of the United States held that if a person merely adds to the signature of Ids name, the word, '“agent,” “trustee,” “treasurer,” etc., without ’disclosing hi® principal,' he is personally bound. The appendix is regarded a® a clescriptio personae; it does not of itself make third person® chargeablé with notice of any representative relation of the signer. But, if be be in fact a ine-ue agent, trustee, or officer of some principal, and is in the habit of expressing in that way, his representative character in his dealings with a particular party, who .recognize® him in that character, the documents thus made and nsed will not he construed as his personal obligations, contrary to the intent of the parties. Mr. Justice Bradley, in discussing this subject, said: “It is unnecessary to determine whether the form of the document in this case was sufficient to charge innocent holders of the check with notice of its character. The *557 fact that it bore two official Signatures, that of the complainant, as vice president, and of Aisfrop as secretary, is so unusual on the hypothesis of its being an individual transaction, and points so distinctly to an official origin, that it may very well be doubted whether any holder could claim to be immocently ignorant of its true character. But, in the present case, the party claiming to have the beneficial interest in the check was a fellow agent in the company, on whose account it was drawn, actually knew its origin and could not pretend that he took it foir anything else than a check of the corporation. The plea that t-hie name of the principal was not disclosed on the face of the paper cannot be made by him for he knew all about it.” The remarks of Mr. Justice Johnson in delivering the opinion of the court in the case of Mech. Bank v. Bank of Columbia, 3 Wheat. 326, aa*e apposite to this cane. There the cashier of the hank drew a check and signed it with his individual name without any official designation; but the name of the bank was printed‘as part of the date. The justice said: “The question is, whether a certain 'act done by the. cashier of a' bank, was done in his official or individual capacity. Had the draft signed by Patou, borne no marksi of an official character on the face of it, the case would have presented more difficulty. But if marks of an official character not only exist on the face, but predominate, the case is really a familiar one. Evidence to fix its true character becomes indispensable.” Again, in reference to the ambiguity raised on the face of the check as to whether ■ it was personal or official the justice said: “It is enough for the purposes- of th|e defendant to establish that there *558 ‘.existed cm the face of the paper circumstances from which it might reasonably be inferred that it was either «me or the other. In that case it became indispensable to resort to> extrinsic evidence to remove the doubt. The evidence resorted' to for this purpose was the most oo-vious and reasonable possible, rix: That tbiis was the appropriate form of an official-check; that it was in fact cut out of thle official check book of the bank, and noted on the margin; that the money was. drawn in behalf of and applied to the use of tire Mechanics bank; and by ail the banks and all the officers of the banks through which it passes, recognized as an official transaction.” In Brockway v. Allen, 17 Wend. 40, where the makers of a note appended to their signatures the words, “Trustees of the Baptist Society,” the supreme court of New York held that they were entitled to show by proof that there was a corporation called .the Trustees of the First Baptist Society of the Village of Brockport, that they were its trustees, and that the note was given by them in their official capacity, and that the plaintiff, the payee, knew this fact. In Kean v. Davis, 1 Zab. (21 N. J. L.) ,683, the bill was signed “John Kean, President Elizabeth and Somerville R. R. Co.” The court of errors and appeal® of New Jersey, in an elaborate opinion by Chief Justice Green, decided that parol proof was admissible to .show that the bill was the bill of the company .and not of the defendant individually; and held that, although where a written instrument is not ambiguous or uncertain on its face, parol proof cannot be resorted to, to show'what was the real intention of the parties; yet that in eases *559 of ambiguity, on the face of the instrument, as in that case, it might be introduced to explain which, of two doubted constructions wag the intent of the parties. “The ordinary rule undoubtedly is, that if a person merely adds to the signature of his name the word agent, trustee treasurer, etc., without disclosing his principad, lile is personally bound. The appendix is regarded .as a mere descriptio personae. It does not of itself makje third persons changeable with notice of .any representative relation of the signer. But if he be, in fact, a,mere agent, trustee or officer of some principal, and is in the habit of expressing, in that way, his representative character in his dealings with a particular party, who recognizes him in that character, it would he contrary to justice and truth to construe the documents thus made and used as his personal obligations, contrary to the intent of the parties.” In Case Manufacturing Company v. Soxman, 158 U. S. 431, it was held that -where the plaintiff alleges that Ms acceptance of the notes of a limited liability company, was thro.ugh a mistake, parol evidence that defendants proposed to organize a corporation with limited liability, and that its obligations were to be given for the purchase out of which the debt arose, is admissible to show that the subsequent acceptance of such notes was within the meaning of " the contract. Mr. Justice Brewer, in delivering the opinion of the court upon this subject, said: “Further than that, the original contract upon its face suggested corporate rather than personal liability. The signatures' were ‘Latrobe Milling Company. P. H. Soxman, Pres’t., H. C. *560 Best, Sec’y. D. J. Soxman, Treas.’ While if there were no corporation such signatures might impose personal liability, yiet the purport a,nd notice of -such .signatures was corporate and not individual liability. When to that is added the knowledge of the plaintiff as to the character of the proposed corporation, and its acceptance of the notes of the corporation, in fact organized, can it be doubted that the plaintiff knew the significance of these signatures, or that it was knowingly dealing with/ a contemplated corporation, and knowingly accepted the notes of such corporation as a fulfillment of all the contract obligations assumed by this instrument? The idea that the plaintiff supposed it was dealing with individuals, and contemplated personal liability, is also negatived by the letter of October 29, 1884, which shows that it understood that it was dealing -with a corporation, and that, by the- laws of Pennsylvania, corporate liability extended not beyond the -assets of the corporation,1 and cast no burden upon the individual stockholders. The parol testimony thus admitted was not to contradict the language -of the written contract, but to explain any doubt as to its meaning, and to fortify the claim of the defendants that the subsequent acceptance of the notes of the limited liability company was no departure from the thought of the original contract, but a well understood and intentional recognition of its real meaning. We see no error in the admission of this testimony.” ■ In Kline v. Bank of Tescott, 31 Pac. 688, the supreme court of Kansas held that where a note is executed by a corporation, and is, -signed by its president and' -secretary, and its directors write their names, upon the back thereof, as directors, .before delivery, extrinsic evidence is. admis *561 sible between the original parties or any .subsequent holder of the note accepting the same as collateral with full notice of all the facts and circumstances connected with the execution and delivery thereof, not only to show that the president and secretary executed the instrument in their official capacity as officers of the corporation, but also that the directors signed the note on the back thereof solely as officers of the corporation and to bind the corporation only. Mr. Chief Justice Horton, in delivering the opinion of the court, uses the following language: “The trial court held that the note upon it® face, was the note of the Kanopolis Creamery company, and that Waite and Wooley executed it in their .official capacity only, but that the parties who signed upon the back were liable personally a® guarantors. If extrinsic evidence were not admissible, the ruling of the trial court would be correct. Under the authorities, if the parties who signed thie note on the back, and who. composed the board of directors of the Kanopolis Creamery company, had signed the note upon its face, they could show they made it only in their official capacity, as directors, of the corporation. 'Where individuals subscribe their proper names to a promissory note, prima facie, they are personally liable, though they add a diescription of the character in which the note is given; but such presumption of liability may be rebutted, as.’ between the original parties, by proof that the note was. in fact given by the makers as agents, with the payee's knowledge.’ (Byles Bills, 27, note 1; Hail v. Pierce, 32 Md. 327; McWhirt v. McKee, 6 Kan. 412; Talley v. Burtis, 45 Kan. 147; 25 Fac. 603.) In this case it is claimed that, if extrinsic evidencie had been received, it would have shown the creditors of the Kanopolis Crteamery company — the corporation — signed their names at the instance of F. F. *562 Scidmore, one of the members of thje Western Creamery-Building and Supply company, -on the back of the note, ■as officers of the corporation, and for the corporation only. It is claimed thalt F. F. Scidmore assured these directors tlrnt the only way to make corporation note was for the officers a,nd directors of the corporation to align their names and affix their official position® thereto, and that flhe note was thus signed under life direction to Lind the corporation, but not the officers individually. If the pártales who wrote their names on the back of' the note -as directors- had signed their names upon the face -thereof, they could have -shown by extrinsic evidence that they were acting for the corporation cnly; and we perceive no reason why, a-s between the original parties or any subsequent holder of the note, accepting the same as collateral, with full notice -of all thfe facts and circumstances connected with the execution and delivery thereof, the same rule will not apply when -such signatures are upon the back of the instrument before delivery. In Fullerton v. Hill, (Kan.) 29 Pac. 583, it was ruled tha-t a ‘stranger to a promissory note, who writes-his name across the back thereof before it is delivered to the payee, incurs, prima facie, the liability of the guarantor. But, parol proof may be received to show the-exact liability of such endorser, by -showing the agreement and understanding of the parties a.t the time of such indorsement.’ ” In Benham v. Smith, (Kan.) 36 Pac. 997, a certain ■ promissory note payable to S. am-d signed: “Wm. M. Benham, President Odd Fellow®’Hall Association. A. T. Lea,, Secretary,” was sued upon by S., the original payee, to hold Benham and Lea personally liable. Tire answer -alleged that the n-ot-e wa.s- the obligation of the Odd Fellows Hall association, and referred to- a mortgage given by the association to S. upon certain real estate to secure the note. The mortgage concluded as follows: *563 “In witness whereof, the said party of the first part has consented this deed to he signed by its president, and Attested by its secretary, and its corporate seal to. be hereto affixed, the da.y and year first aforesaid,W. M. Ben-bain, president Columbus Odd Fellows Hall Association.. Attest: A. T. Lea, Secretary.” Held, that B. and L., the president and secretary of the association, could in-, trodnce the mortgage and also parol evidence to show they signed for the association only, and that it was the intention of all parties to the note to make it the obligation of the association. In the course of the opinion Mr. Chief Justice Horton said: “If it is not clear from the face of the note whether Benham and Lea contracted on behalf of the Odd Fellows association or for themselves, then, as between the 'original parties, extrinsic evidence may be introdced to show in fact' it was the intention of all the parties, a.t the time of the execution of thle note and its acceptance, to bind the association only, not to. malee Benham and Lea personally liable. (Fullerton v. Hill, 48 Kan. 558, 29 Pac. 583; Kline v. Bank, 50 Kan. 91, 31 Pac. 688.) The answer stated a sufficient defense, and the trial court committed error in sustaining a motion for judgment on the pleadings.” In Bean v. Pioneer Mining Co., 6 Pac. 86, the supreme court of California held that in .an action on a note, parol evidence is admissible to. show that the signature attached to it was miadje in the capacity of agent for a company, and that the consideration passed to the company; and in such case, if the payee knew that the note was given by the agent of the company, as such, in settle- *564 'rnent of an indebtedness of the company, such agent is not bound on the note though he had no power a,s such ■agent to execute it. Mr. Justice McKinstry, in discussing this-subject, said: “Whether, in the case before us., the note was the promise of Malson, or the promise of the company by Mason, claiming to act as its agent, was ambiguous at least, and an inquiry into the circumstances might render it certain whose promise if any person’s, it was. (Metcalf v. Williams, 104 U. S. 93.) It is perhaps unnecessary to • inquire whether the form of the note was sufficient to charge innocent holders with notice of its character. Here the payee named in the note is plaintiff, and we think evidence was admissible that it was understood by plaintiff to be the note of the company, and that the consideration for which it was given passed to the company. For the purpose of showing the real party to a contract, (where the contract suggests the existence of circumstances which render it doubtful,) conversations of parties to the transaction at the time of making the paper, and at the time of creating the consideration for ijhe bill or note, are admissible ais a part of /the res gestae.” In Bank v. Colby, 28 Pac. 118, the supreme court of California held that where a certain note was signed: “G. A. Colby, Pres’t Pac. Peat Coal Co. D. K. Tripp., Sec. pro tern.;” and it was indorsed by G. A. Colby and several others', that prima facie it is the note of .the coal company. The rule announced by the supreme court of .California in -the case of Hobson v. Hassett, 76 *565 Cal. 208, 18 Pac. 320, does not overrule the doctrine announced in the case of Bank v. Colby and Bean v. Pioneer Mining Company. In Hobson v. Hassett, the case turned upon a question of fact, and the trial court, after hearing all the evidence, found the note in question was the individual note of the defendant, and not of the- corporation, and thereupon the court entered judgmjent in favor of the plaintiff. And the court expressly declared that the doctrine announced was not in conflict with the rules announced in Bank v. Colby and Bean v. Pioneer Mining Company. In Martin v. Smith, (Miss.) 3 So. Rep. 33, in an action on a bill of exchange drawn in the ordinary form but signed by the defendant with the word “treasurer” following his name, it was held by the supreme court of Mississippi, that parol evidence was admissible to' show that it was intended to bind the principal, and that the fact®-pleaded, if true, werle sufficient to relive the party from personal liability. Mr. Justice Arnold, in delivering the opinion of the court, said: “It is tru|e that, generally, extrinsic testimony is not admissible to vary or explain negotiable instruments, but one exception to the rule is that where anything appears on the face of the paper to suggest a dloubt as to the party bound, or the character in which any of the signers acted in affixing his name, parol testimony may be admitted as between the original parties to show the true intent and meaning of the parties.”' An instrument reading: “If the Marsh Harvester don’t work to his satisfaction, he (W. Thom-,) can return the machine to me and I will return his mofles to *566 Mm. A. M. Schnell, Agent,” was held open to prove by parol that it was intended to bind- Ms principal and not himself. (Deering v. Thom, 29 Minn. 120, 12 N. W. Rep. 350; Bingham v. Stewart, 13 Minn. 106.) In a case .where a note in the usual form was signed: “W. T. Boutell, Pres-.,” it was. held that the prima faoia character of the liability might be overcome by parol evidence, and the obligation shown to be that of the corporation. (Collender Co. v. Boutell, 45 Minn. 21, 47 N. W. Rep. 261; Peterson v. Homan, [Minn.] 46 N. W. Rep. 303.) A' note in the usual form was payable to A. J. Board-man, treasurer, and -signed “Minneapolis Eng. and Machine Works, by A. L. Crocker, Secy.” and was endorsed. “A. J. Boardman, Treasurer.” It was held parol evidence was admissible to show that Boardman indors d it in his official capacity, as treasurer of a corporation .(Bank v. Boardman, [Minn.] 48 N. W. Rep. 1116.)' In the case of a note signed, “John Kean, President Elizabethtown and Jonesville R. R. Co.,” the court says: “It is not clear who was the contracting party, whether the obligation was assumed by the agent, or whether he contracted on behalf of his principal. * * The question is, who is the contracting party, — whose language is it?” — and it was held parol evidence was admissible. The court quoted the following language from Lazarus v. Shearer, 2 Ala. 718: “'When however it is doubtful from the face of the contract whether it was intended to operate as the personal engagement of the party signing i't, or to impose an obligation upon .some third person as hi® principal, parol evidence is -admissible to show *567 the true character of the transaction.” (Kean v. Davis, N. J. Law. 683; Railroad Co. v. Snead 19 Grat. 354; Rendell v. Harriman, 75 Me. 497.) In Miller v. Way, 59 N. W. Rep. 467, the supreme court of South Dakota, in a recent case, has adopted the following rule: “As between the original parties*, paroil evidence that does not tend to contradict the terms of a written instrument is admissible to show the true intent and meaning of the persons entering into the same, when there is something on the face of the instrument that suggests a doubt a,s to the parties bound, and the court cannot by inspection determine the question from the paper creating the obligation.” Mr. Justice Fuller, after reviewing the authorities, said': “The note in suit at lieaist suggests upon its face the existence of the corporation, and that the defendants were officers thereof; and parol evidence tending to prove that it was not the individual note of the defendants, but the 'obligation of the corporation, and that it was so undenstood by all the parties a,t the time the same was executed, did not necessarily tend to vary its terms, but to explain ambiguities, to make certain that which was doubtful, and to give effect to- and carry out the intention of the parties,. We think the evidence offered on the part of the defendants should have been considered, as the court seems to have been unable to- determine from the note itself the capacity in which the same was executed, and witnesses upon both sides wiere allowed to testify quite fully upon that issue, raised 'by the pleadings.” We think the remarks of Judge Fuller are apposite to this case. *568 Applying these well settled principles to tbe case under consideration, we think that the note here in question, on its face, at least, sugests and indicate® that it was ■ signed by James in a corporate'capacity, and that it was intended to bind the corporation which hte represented, and not to bind himself individually. The evidence offered in .support of the allegations contained in the answer, which was first excluded by the court, and after wards admitted, but was not considered, and therefore, admission of such testimony was tantamount to its exclusion, — showed • that it was the intent of the parties to bind the corporation, and not to bind the defendant Janes, individually. We are, therefore, clearly of the opinion that the admission of parol evidence under such circumstances is not violative of the general rule that such evidence is not admissible to. vary or change the terms of a written instrument. The question for the court to. decide is not what the contract was, but, whose contract it was. In other words, the sole question for the court to determine isj on whose behalf was the note executed, and who. was1 the real party bound thereby? Under such circumstance® we are clearly of the -opinion that parol testimony is competent and admissible to remove what is uncertain and ambiguous and thus to enable the court to charge a® payor, the person or corporation which it wais intended should be bound when the note was executed. We think that this rule is not only in consonance with sound’ legal principles but is just and equitable in its scope and operation. The rule as stated in the case of Keokuk Falls Improvement Co. v. Kingsland and Douglas Manufacturing Co., is hereby overruled. *569 For the -reasons herein stated, the judgment oif the /district court is reuerised and- the cause remanded with directions to grant a new trial, and proceed in conformity with this opinion. M-cAtee, J., hating presided in the court below, not sitting; all of the other Justices concurring.