Hardy v. Carter

HALL, J. On the ISth day of February, 1909, one Edward Kennedy, as a promoter, entered into a contract with certain of the citizens of Silverton, Tex., by the terms of which the said citizens, defendants in this suit, obligated themselves to pay the said Kennedy $70,000, one-seventh to be paid in cash, and the remainder upon the happening of certain contingencies not necessary to be set out here. In consideration of this undertaking, Kennedy agreed to build a railroad through Briscoe county and through the town of Silverton “within two years from said date, and as much sooner as may be possible.” Among other stipulations contained in the written contract, we find this: “The parties of the second part do hereby agree to be collectively responsible for the performance of this contract.” On April 14, 1909, the defendants in this suit, designating themselves the railway guarantee committee, drew up a constitution and set of by-laws, from which we quote the following: “Preamble. We, the railroad guarantee* committee of Briscoe county, Texas, consisting of the persons whose names hereinafter appear, in order to dispatch business, finance and meet the obligations we have assumed by the contract, with Edward Kennedy, do hereby bind ourselves, heirs, and executors to be governed by the following constitution and articles of agreement: “Section 10. Powers of Board of Directors. The board of directors shall have power to pay, out money on monthly estimates of the surveyor as per contract with Edward Kennedy or on interest and loans made by the railroad guarantee committee and recording and attorneys’ fees. They shall have power to negotiate loans for said guarantee only upon order of the committee and the signatures of the president and secretary to a note so ordered shall bind the entire railroad guarantee committee of Briscoe county, Texas; also said board of directors shall prorate each assessment among the entire number of subscribers, according to their several amounts or cash subscribers.” On February 15, 1909, 29 of the 50 members constituting the guarantee committee including appellants Harris, Daniel, and Bur-son, executed to the First National Bank of Silverton three notes in the sum of $3,000 each, stipulating for 10 per cent, interest from date, and 10 per cent, attorneys’ fees-, all three being payable on demand. This money was borrowed to pay Kennedy the cash payment under the contract. On May 22, 1909, the directors, for the purpose of paying the balance due on this loan, borrowed $6,000 from the First National Bank of Tulia for six months. Thereafter, in the same way, money was borrowed from the Silverton' Bank & Trust Company to pay the balance due the First National Bank of Tulia on the $6,000 note above mentioned, and this loan was renewed from time to time, resulting in the note here sued upon, dated March 4, 1911, for $2,524. This note is payable April 17, 1911, and contains this recital: “I, we, or either of us, jointly and severally, promise to pay to the order of the First State Bank & Trust Company, the sum of twenty-five hundred and twenty-four and no one hundred dollars.” It provides for interest, at the rate of 10 per cent, from maturity, and 10 per cent, attorneys’ fees, and is signed as follows: “Railroad Guarantee Committee of Briscoe county, Texas, J. Ed. Crawford, President, R. B. Braley, Secretary Treasurer” — and bears this indorsement: “Payable to the order of A. F. Carter, without recourse, previous indorsements guaranteed. The First State Bank & Trust Company, Silverton, Texas. A. F. Carter, Cashier. April 11, 1911.” By amended petition, plaintiff, Carter, ap-pellee herein, made each of the signers of the contract with Kennedy parties defendant. In the trial of the case, the defendants seem to have been divided into two clans. The defendants Q. E. Brown, R. L. McMurtry, J. H. Burson, and J. M. Harris and J. E. Daniel answered by general denial and plea of non est factum. They further alleged that, if they were liable on said note at all, then all the other defendants were jointly and severally liable on said note with them and prayed that if plaintiff recovered anything against them, that they recover against the other defendants herein such amounts over and above the pro rata part of the indebtedness which the said defendants would have to pay. By cross-action they allege that their •liability, if any, on said notes grew out of the constitution of the guarantee committee and of the contract made with Kennedy by said committee, and that November 6, 1909, an assessment of 35 per cent, of all subscriptions was levied, which was sufficient to include and pay up everything due by the guarantee committee at that date; that these defendants have paid said 35 per cent, assessment, and that the note in controversy was made necessary by the failure of other [1005] subscribers to pay their part of said assessment, and, bad the amounts paid on said assessment been credited on said notes and not used for other purposes, there was sufficient paid in to have paid off said note in full; but that said money was used for other purposes; that defendants Fred Biffle, R. B. Braley, Bruce Gerdes, K. E. Baine, J. L. Francis, A. P. Donald, J. Ed. Crawford, M. P. Stone, and J. B. Porter were the officers of said association and authorized to spend the money of same only in accordance with the terms and conditions of the constitution and by-laws, and that they collected on said 35 per cent, assessment enough to pay off said notes, but did not apply the same thereon, but paid it out to other and different parties than Edward Kennedy on said note, and to whom they were not authorized to pay the same, and that by reason thereof said defendants were individually liable on said note. They prayed that if plaintiff recover against them, that they have judgment against said Biffle and the other officers and directors mentioned above. The answer of appellant J. R. Hardy was the same, except that, in addition thereto, he pleaded that, at the time of the delivery and execution of the note, he was not a member of the guarantee committee, having on June 4, 1909, especially repudiated all further liability under the constitution of said committee and withdrew from any connection therewith. Defendants Biffle, Braley, and others mentioned above, constituting the directors and officers of the association, together with other members of the committee, answered by'general denial and specially that they and all of the other defendants associated themselves together as a railroad guarantee committee and executed the contract hereinbefore set out, which said agreement was placed of record in Briscoe county; that said railroad committee authorized and empowered the executive officers, among other things, to secure a sum of money necessary to assist them in the pursuance of said enterprise and in the payment of the bonus due Kennedy, and that the money borrowed from the First State Bank & Trust Company was borrowed by said officers from the First National Bank of Silverton to pay the same; and that other moneys were borrowed, until finally the note herein sued upon was executed and delivered for the purpose of paying off said original loan; that the liability of all the defendants was joint and several. In reply to the cross-action of the defendants J. R. Hardy, Q. E. Brown, J. H. Bur-son, and others, they alleged that on the 11th day of April, 1909, Edward Kennedy turned over to the Texas Construction Company his contract entered into with the committee, and that such transfer was made by and with the consent of said railroad committee, and executed by said committee, and that said Construction Company and said committee did, in all things and in good faith, attempt to carry out the terms of said original contract, and that the moneys thereafter paid out were paid by reason of all the obligations named and by reason of said transfer. A jury was impaneled, and, after the evidence closed, the court gave the special charge No. 1, requested by J. Ed. Crawford and others, peremptorily instructing the jury to • return a verdict in favor of plaintiff against all the defendants jointly and severally for the sum of $3,336.08, which should be paid by the defendants in the amounts set opposite their names. The verdict is in part as follows: “We, the jury, return a verdict in favor of plaintiff in this cause, as against the defendants, as charged by the court, jointly and severally except John A. Baine, 'for the sum of $3,336.08, which judgment, as between the defendants herein, shall be paid by the defendants named below in the amounts set opposite their names, the original members of the guarantee committee who have died, having their heirs substituted in their stead as follows, to wit.” Then follows a detailed statement of the amounts found against each member of the guarantee committee, and the verdict concludes: “And we hereby return a verdict against all the defendants on all other cross-actions herein filed.” Upon this verdict, the court entered judgment in favor of plaintiff, A. F. Carter, against the members of the guarantee committee jointly and severally, and provided as follows: “And it is further ordered, adjudged, and decreed by the court that, as between the defendants herein, judgment is hereby rendered against each, in favor of each, as set forth in the above recited and copied verdict of the jury, said judgment being made payable under the order of the court as follows, to wit: “First. Any defendant herein, shall by paying his or her proportional part of said judgment, as set forth in the verdict above copied, be entitled to have plaintiff’s execution levied upon property pointed out by the defendants who have paid their proportional part of said judgment belonging to the other defendants or either of them, who have not paid their proportional part of said judgment in favor of plaintiff. “Second. Each defendant herein who shall pay any proportion of this judgment over and above the proportion thereof that has been adjudged against the said defendant shall have execution against the other defendants hereinabove named who have not paid such proportion of the judgment as shall equalize same between said defendants. “Third. Each defendant herein who shall pay any proportion of this judgment due by any other defendant herein shall have execution in his or her favor against each of the other defendants who have not paid their proportional part of said delinquent defendant’s interest in this judgment,” etc. [1006] As between tbe bank and tbe guarantee committee, tbe members of tbe committee were principals on tbe note, provided it was executed under proper authority, or its exe-éution bad been subsequently ratified, and no question of suretyship or guaranty arises. As between Kennedy and tbe guarantee committee, tbe contract above set out was a joint undertaking in wbicb all of tbe defendants were principal obligors. Tbe contention of J. R. Hardy, Q. E. Brown, J. M. Harris, 3. H. Burson and J1. E. Daniel, et al., is, first, tbat tbe judgment, having been rendered upon tbe note for tbe full amount claimed, was without proper pleadings to support it. It is true tbat plaintiff filed suit upon tbe note, and under his petition was entitled, if at all, to a judgment against tbe guarantee committee jointly and severally for tbe full amount; but tbe defendants, by their pleadings, requested tbe court to enter a judgment giving each one tbe right of contribution against his co-obligors, and, under this state of the pleadings, tbe judgment was properly rendered, if tbe court bad the right to render judgment on the note at all. Tbe serious question . in this appeal is raised by appellant’s first proposition under tbe first assignment, wbicb is tbat tbe court erred in peremptorily instructing the jury to find for plaintiff against these appellants, because tbe evidence failed to show tbat tbe note in controversy was executed by the board of directors acting under sufficient authority from these appellants to bind them or by or with the knowledge, acquiescence, or consent of them, and fails to show that they ratified tbe same. It is contended under this proposition that, this being a voluntary association, and tbe officers thereof acting under a special and limited authority, their acts must be in strict conformity therewith, or tbe remaining members of tbe association would not be bound, and that the burden of proof rested upon tbe plaintiff to show tbe authority of tbe directors in tbe execution of the note. Tbe evidence in tbe record upon this question'is in substance as follows: “Minutes of Meeting Feb. 15, 1909. Tbe Guarantee Committee of Briscoe County, Texas. A number of citizens of Briscoe county met Monday, Feb. 15, 1909, at Silver-ton, Texas. There was a motion that there be a committee of three appointed to confer with tbe First National Bank of Silverton, Texas, to see if the committee could secure tbe first payment of money tbat is required by Mr. Ed. Kennedy. Motion carried. Mr. J. B. Porter, Mr. M. P. Stone, and Mr. P. L. Crawford were appointed upon this committee. Tbe committee made a favorable report in regard to securing tbe necessary money. There was a motion tbat three men be appointed to carry three notes for $3,000.00 each to the First National Bank of Silverton, Texas, to secure tbe $9,000 payment to Mr. Ed. Kennedy. The motion carried. Mr. P. L. Crawford, M. P. Stone, and R. B. Braley were appointed upon this committee. This committee went with others of tbe guarantee committee to tbe First National Bank and secured tbe $9,000.00 from tbe bank for Mr. Ed. Kennedy, and delivered tbe $9,000.00 to Mr. Ed. Kennedy. Adjourned to meet Feb. 17 and 20, 1909. R. B. Braley, Secretary. Accepted.” This loan was negotiated tbe same day on wbicb the guarantee contract binding tbe appellants and others to pay Kennedy tbe $10,000 cash was executed. (For some reason, unexplained in tbe record, Kennedy bad waived tbe immediate payment of $1,000 of this sum.) It is uncontradicted tbat tbe loan was authorized by the mass meeting of citizens which met on February 15th, and which gave birth to tbe contract with Kennedy, and tbat this.was two months before section 10 of tbe constitution, Wbicb limited tbe power of tbe directors to borrow money, was framed and adopted. There being no directors at tbat time, a special committee was appointed to arrange for tbe loan, and the first notes were signed, not by tbe president and secretary treasurer of tbe association, as was afterwards provided for in tbe constitution, but by 29 of those who bad signed tbe guarantee contract with Kennedy. Tbe notes were executed in this way simply to satisfy tbe bank. Each subscriber to tbe bonus of tbe enterprise, including appellants, bad made bis note to tbe guarantee committee in tbe amounts subscribed by him, but, this being tbe day of organization, no cash bad been paid by tbe subscribers, so, in order to carry out tbe purposes of the association and to meet tbe obligation to pay $10,00Q cash, this loan was effected. Appellants, having signed tbe contract, knew that tbe cash payment must be made and they were each, as individuals, responsible therefor. There being at tbat time no constitution or by-laws, tbe association had no check upon- its powers, and could adopt any means to accomplish tbe object for wbicb it was formed. 4 Oyc. 308 (II). We think tbe validity of tbe first loan and tbe execution of the three' notes therefor cannot be challenged by appellants, nor could tbe obligations to tbe bank be impaired by the subsequent adoption of article 10 of tbe constitution. This loan bad been made beforehand, and, in paying interest upon it afterwards, tbe directors did not exceed their authority even under tbe constitution, because tbe first sentence of said section 10 empowers tbe board of directors to pay out money on interest and loans. Appellants bad tbe right, upon the maturity of tbe three original notes, to pay them, and at tbe proper time to demand contribution of their co-obligors. This they failed to do. Although tbe evidence of tbe indebtedness has changed from time to time as to amount, payee, and date of maturity, tbe debt sued upon is part of tbe original [1007] obligation. We do not hold that, after the adoption of the constitution, the directors could have, as an original undertaking, negotiated a loan, in the absence of an order to that effect by the committee. While the directors borrowed from one bank to pay another, the effect of their act is simply a renewal and extension of the debt, for which all the defendants were jointly and severally liable, and does not come within the inhibition of said section 10 of the constitution. “Each member of an association is liable for the debts thereof incurred during his period of membership and which have been necessarily contracted for the purpose of carrying out the objects for which the association was formed.” 4 Cyc. 311. It cannot be successfully contended that the directors, under the constitution, could not have agreed with the first bank to extend the original notes and to pay interest upon such extensions from time to time, and that, too, without releasing their co-obligors. Giving time to one joint maker of a negotiable note does not discharge the others. Dan. Neg. Inst. (5th Ed.) § 1297. If this be true, then they had the right to secure the postponement of the debt by making new notes and to different payees. The effect is the same. Having previously consented to the loan, they cannot be heard to object to its renewal by their co-obligors, when made necessary by their failure to pay it at maturity. Meachem’s Agency, §§ 72, 74. The debt was primarily theirs. They must be held to have known the date of its maturity. Having failed to give it proper attention at that time, appellants cannot complain because their co-obligors took whatever action was necessary, and especially so when such action did not result to the injury of appellants, but, on the contrary, was beneficial to them. They knew the loan had been made and had not been paid, and they must be held to have known that its maturity had Been postponed in some satisfactory way. Having acquiesced and' accepted the benefits, there is an implied ratification of the acts of the directors. 1 Elliott on Contracts, § 459. Even if we should admit that the directors transcended their authority in the execution of the note in suit, still we think the payee bank was justified in presuming that the president and secretary treasurer were empowered to execute it. This note was a renewal of one for $2,500-previously given to the same bank, and, as heretofore stated, the debt had been renewed from time to time for more than a year. As said in 2 Page on Contracts, § 965: “Persons who do not know what the agent’s authority really is are justified in dealing with him upon the assumption that he has the authority which the principal indicates by his conduct that the agent possesses. Thus dealing with the agent, such persons may hold the principal on contracts outside the real authority of the agent but inside his apparent authority.” Note: “Persons dealing with an agent have the right to presume -that his agency is general, and not limited, and notice of limited authority must be brought to their knowl-ede before they are bound to regard it. Trainer v. Morison, 78 Me. 160, 3 Atl. 185, 57 Am. Rep. 790; quoted in Wood v. Finson, 89 Me. 459, 36 Atl. 911.” “The principles of es-toppel find application in cases where contracts are made by an agent in excess of his real authority but within the scope of his apparent authority. As a general rule, one who holds out another as his representative, authorized to act for him in a given capacity, or has knowingly or negligently permitted such other to act as his agent in a given capacity, without dissent or when his acts and the circumstances of the case are such as to reasonably warrant the presumption that such other is his agent, that authority to act in a given matter will be held as principal. Whether it involves one or more transactions, he will be conclusively presumed so far as it is necessary, to protect the rights of an innocent third person, who in the exercise of reasonable prudence, has dealt with such other in good faith to have authorized such other to act for him and will be held as principal and not heard to deny that the other was his agent, authorized to do the act performed so long as such act is within the scope of his apparent authority.” 1 Elliott, § 454. This disposes of appellant’s first, second, fifth, sixth, seventh, eighth, and ninth assignments. In view of what has heretofore ■ been said, we think there was no error in rendering judgment against appellants on the note, including attorney’s fees and interest. The pleadings of the defendants converted this suit, as between themselves, into one for an accounting and settlement, and the judgment and verdict, in apportioning the total amount due plaintiff among the several defendants, does nothing more than could have been done by separate suits for contribution. We think there was no error in this. There is nothing in the constitution of the association or in the‘contract requiring the directors to apply the funds derived from any assessment to the payment of any particular debt, and, in the absence of specific directions, they had the right to pay either Parks and Lemon or appropriate the funds to the extinguishment of the note without becoming liable to appellants. None of the appellants testified in the case, and the appel-lee’s evidence bearing upon the several issues is undisputed. As we see the record, there is no controverted issue of material fact to be submitted to the jury, and we think the court did not err in giving the peremptory instruction. The judgment is therefore affirmed,