Armstrong v. Cache Valley Land & Canal Co.

Zane, C. J.: This action was instituted on a promissory note in the words following: “$10,333.00. Ogden, Utah, Dec. 20, 1893. Six months after date, for value received, we promise to pay to the Citizens’ Bank of Ogden, Utah, or order, ten thousand three hundred and thirty-three dollars, at the Citizens’ Bank of Ogden, Utah, with interest from date at ten per cent per annum, payable annually until paid, both before and after judgment; and, if suit be instituted for the collection of this note, agree to pay ten per cent attorney’s fee. And, if interest is not paid when due, it is to become part of the principal, and bear same rate of interest. Cache Valley Land and Canal Co. Theo. Bobinson, Pres. B. H. Whipple, Sec.” And the guaranty written thereon as follows: “For value received, I hereby guaranty the payment of the within note at maturity, [454] waiving demand, notice, and protest of same. Theo. Robison. R. H. Whipple. Corey Brothers & Co.” The answer admitted the cause of action as alleged against the Cache Valley Land & Canal Company, but denied the liability of the other defendants, for the reasons, as averred, that the alleged guaranty was merely an accommodation indorsement, and without any consideration whatever. It appears from the evidence that defendant Theodore Robison was the vice president and manager of the bank, and president of the defendant corporation, at the time of the execution of the note and guaranty, and that defendant R. H. Whipple was at the same time secretary of both corporations; that in February, 1893, the defendant company borrowed of the bank $10,000, and executed a promissory note therefor similar to the one declared on, and that the other defendants guarantied its payment; that this note and guaranty were renewed twice thereafter, and that on the 20th day of December of the same year the defendant Robison accepted the note of the defendant company sued on, and $75,000 of its bonds, and $30,000 of its stock, as collateral security, and surrendered the old note. These bonds and stock the defendants Robison and Whipple testified were taken as security in the place of the guaranty on the preceding note. Assuming the transaction to be binding, its effect was to satisfy and cancel the old note, and to substitute the new one in its place, and to discharge the guarantors from further liability as such, and to make the stocks and bonds delivered the sole security for the payment of the debt. The substitution of the new note, with the col-laterals for the note surrendered, amounted to a satisfaction of the latter, if the parties so agreed. Daniel, Neg. Inst. (3d Ed.) §§ 1287,1292; Wait, Act. & Def. p. 421. It is claimed, however, that Robison, the vice president [455] and manager of tbe bank, was not authorized to accept the new note for the old, and substitute the stocks and bonds as security for the guaranty, and discharge the guarantors, without the consent of the directors. Such is the law, unless the manager habitually exercises such authority, to the knowledge of the board, and without •objection. If the board allows the manager to hold himself out as possessing such authority, it will be estopped to deny that he had the power, after third persons have, in good faith, acted on such appearances. But this trans action was conducted and consummated by officers of the bank, and we must presume that they knew the extent of their authority. The plaintiff claims, further, that the defendants Robi-son and Whipple, being officers of both corporations, could not make a valid agreement to substitute the collateral security for their guaranty, and discharge themselves. Such an agreement was voidable, but not absolutely void. The bank could repudiate such an agreement, or it could affirm and ratify it. On the trial the receiver tendered to the defendants all the stock he received, but how much that was does not appear from the record. In order to avoid the agreement, the plaintiff should have tendered back all that it received upon it that was of any value. The plaintiff retains the bonds and the new note, and has relied upon it in this case. This the bank cannot do, and insist upon disregarding the transaction, for the reason that its manager was not authorized to make it, or because, as manager of the bank, he made the agreement, and was also one of the persons with whom the agreement was made. The bank could not ratify a part of the transaction and repudiate the rest. It should have adopted the whole, or none. Bank v. Sharp, 43 Am. Dec. 470; Bank v. Blum, (Or.) 41 Pac. 659; 4 Thomp. Corp. §§ 5286, 5317. [456] The same witnesses testified further that five days after the transaction the defendant Robison said to Whipple that it would look better if the guaranty was on the new note, as it was on the old one; that the bank might wish to negotiate it. Under these circumstances, both witnesses stated, they signed the guaranty, and that they did so without any consideration whatever. Assuming these statements to be true, the guaranty is one in form simply, and has no consideration to support it. If the bank, at the time the alleged guaranty was given, had proposed to repudiate the transaction by which the note with the stocks and bonds were accepted for the note and guaranty surrendered, and the guarantors to prevent such repudiation, and the setting aside of the transaction, because its manager had no right to make it, and such purpose to repudiate and set aside had been abandoned in consideration of the execution of the guaranty sued on, a different case would have been presented. The plaintiff also insists that defendants Robison and ■Whipple were joint makers of the note with the Cache Valley Land & Canal Company; that the term “President,” that’ follows the one name, and the term “Secretary,” that follows the other, should be treated as sur-plusage. It appears from the record that the loan by the plaintiff was to the corporate defendant, and that defendants Robison and Whipple received no part of it; that, five days after the execution and delivery of the note and collaterals, they signed the guaranty on the note. These facts, as well as the use of the names of their respective offices, unmistakably indicate an intention not to execute the note as joint makers, and that they signed their names with their official designations under the name of the corporation, with an intention simply to make the note binding upon the latter. Bank v. Colby, 64 [457] Cal. 352; 4 Thomp. Corp. §§ 5134, 5135, 5138; Latham v. Houston Flour Mills, (Tex. Sup.) 3 S. W. 462. On tbe trial of tbe case tbe plaintiff offered in evidence a paper bearing date August 10,1893, in wbicb tbe plaintiff acknowledged tbe receipt of tbe $75,000 of bonds, wbicb, with tbe $30,000 stock, constituted tbe collateral security of tbe note sued on. To this offer tbe court sustained defendants’ objection, and plaintiff excepted, and assigns the ruling of tbe court as error. Tbe purpose of the evidence was to contradict tbe testimony that tbe bonds were given in part to secure tbe last note, and in lieu of tbe guaranty of Robison and Whipple. While «the ruling of the court sustaining the objection to this receipt was erroneous, we do not think it would have changed tbe result bad it been admitted, in view of tbe fact that tbe plaintiff relies on tbe note obtained by tbe transaction, and tbe same bonds, with tbe stock, were taken as collateral security for tbe note in suit. Though tbe ruling was wrong, we do not regard it as reversible error. We find no reversible error in this record. Tbe judgment is affirmed. ' Baktch, J., and McCaiity, District Judge, concur.