First National Bank of Nephi v. Foote

42 P. 205, 12 Utah 157, 42 P.R. 205, 1895 Utah LEXIS 15

• Court: Utah Supreme Court
• Decided: November 6, 1895
• Docket: No. 593
• Status: Published

Opinion

MERRITT, C. J.:

The respondent brought suit against the appellants and Hague and Tingey upon a promissory note for $3,000. At the conclusion of the evidence the court below instructed the jury to return a verdict for the respondent for .the face of the note, without interest. The facts in the case, either proven or proposed to be proven, were as follows: In the month of.January, 1890, certain citizens and property owners of the town of Nephi, among whom were the appellants, Foote and Bryan, and Tingey and Hague, entered into a contract with one Francis Tiernan, acting for the Utah, Nevada & California Railroad Company, by the terms of which, in consideration of the location and building of a railroad to and through the town •of Nephi, the said citizens were to purchase not less than •oner-half block of ground for depot purposes, within 30 •days from the date of the contract, said land to be approved ■by Tiernan. About the 21st of May, 1890, the defendant Hague, who was the cashier , of the respondent's bank, and ■continued to be such cashier until after the 17th day of -January, 1894, came to the appellants separately, and represented to them that he, acting for the citizens and property owners, had procured title to a certain half block of land known as the “Midgley Block;" that the bank had advanced $2,500 to pay for the land, and that, if Tiernan ■did not take the land pursuant to the contract, he, Hague, would take the land and pay the bank; that the said sum '•of $2,500 stood in an awkward way on the books of the bank, and he desired to have a note payable to the bank for bookkeeping purposes, so that the accounts could be balanced, and he desired that the appellants and the defendant Tingey should join him and George C. Whitmore, president of the bank, in a note to the bank for that sum. ’J’he appellants were each assured that the note would be .signed by Whitmore, and that Whitmore understood all about the matter. With this understanding they signed the note to the ■ bank on the 21st day of May, 1890, for the sum of $2,625, being $2,500, with interest until maturity computed and added. .Whitmore never signed the note, but the same was delivered to the bank without his signature. The testimony showed that, before the execution of the note by either Foote or Bryan, the defendant Hague had signed it. It was shown that the land had been actually bought and deeded to one William Pax-man, who was the first signer of the contract between the citizens and property owners of Nephi and Tiernan. At the time of the trial in the lower court, the legal title to the land was still in Paxman. Before the trial Paxman had informed the appellants that the land had been purchased and deeded to him in pursuance of this contract. It seems reasonably clear from the testimony that Paxman took the land, and still holds it, in trust for the signers of the contract with Tiernan. It was also in evidence that, the money had been advanced by the bank to pay for the land. The appellants, upon like representations from Hague that Whitmore would sign with them, executed from time to time a number of renewal notes; the last, being the one in suit, for $3,000, executed January 17, 1894. None of these notes were signed by Whitmore, but. were each delivered to the bank without his signature. Hpon these facts the following questions are presented for our decision: First, was the note invalid in the-hands of the bank because of the representations of Hague-that the note was simply intended as a matter of form, that the appellants would not be called upon to pay it? Second, was the note unenforceable for want of consideration? And third, was the note invalid in the hands of the bank because of the delivery thereof without the signature of Whitmore?

1. So far as the first proposition is concerned, it is determined in the negative upon well-settled principles. By the terms of the note the appellants agreed positively to pay the respondent a certain sum of money at a certain time. Hague’s statements to them in effect negatived this written promise. The rule is well settled that in an action upon a promissory note, as in all other actions upon written contracts, parol testimony cannot vary, qualify, contradict, add to, or subtract from, its written terms. A citation of authorities upon a proposition so fundamental would seem to be useless. 3 Band. Com. Paper, § 1931; 1 Daniel, Neg. Inst. § 80; Bank v. Dunn, 6 Pet. 51; Davis v. Randall, 115 Mass. 547; Wright v. Remington, 41 N. J. Law, 48. “ A person who is so ill advised as to execute a written contract in reliance upon the assurance that it will not be literally enforced must submit to the loss if he is deceived, and cannot ask that a principle of great moment to the community shall be made to yield for the sake of relieving him from the consequences of his indiscretion.'”

2. The affirmative defense of the want of consideration may also be disposed of in a very few words. It is doubtful whether there is a sufficient plea of the want of consideration in the answer. The note itself imports consideration. The circumstances under which the note was given are set forth in detail, but there is no plea that there was no other or different consideration. 2 Estee, Pl. & Prac. § 3547. Waiving the question as to whether or not there was proof of consideration moving directly to the appellants, there was no proof that there was no consideration to the other defendants, Hague and Tingey. Prpof that one or more of the joint makers had signed without consideration as between themselves and the payee would not be sufficient to destroy the presumption of consideration arising from the note itself. It must be also> affirmatively shown that there was no consideration moving to either of the other joint makers. Abb. Tr. Ev. 442; Kinsman v. Birdsall, 2 E. D. Smith, 395; 2 Band. Com. Paper, § 447.

3. The third question is the one most argued and relied on by appellants. Their position is that the agreement between Hague and the appellants was that the note was not to become complete until signed by Whitmore; that the bank took it charged with Hague’s knowledge of this agreement; that, even if respondent was not bound by Hague’s representations, because of his individual interest in the transaction when the note was received, Hague’s knowledge is to be imputed to it; that, even if this be not so, the note having been delivered in violation of the condition that Whitmore should sign, it devolved upon the respondent to show that it was a holder in good faith, for value, without notice of the note’s infirmity. The general rule is well established that a principal is bound by the representations of his agent, made in the transaction of the principal’s business, within the real or apparent scope of his authority, and that the knowledge of the agent concerning the business which he is transacting for his principal is to be imputed to his principal. There are, however, exceptions to the general rule no less well established. No person can act as an agent in regard to a contract in which he has any interest, or in which he is a party on the opposite side to his principal. 2 Daniel, Neg. Inst. § 1611; Story, Ag. § 210; Claflin v. Bank, 25 N. Y. 293; Voltz v. Blackmar, 64 N. Y. 440; West St. Louis Sav. Bank v. Shawnee Co. Bank, 95 U. S. 557. In the case at bar, Hague, although cashier of the respondent bank, and empowered to represent it, and speak for it generally in such transactions, was himself a party to the note on the side opposite to respondent. If it should be held that he represented and spoke for the bank in that transaction, as its agent, he would be permitted to occupy exactly that adverse and inconsistent relation which the law forbids. He had no power .or authority to act or speak for the respondent in that matter. He stood upon one side, with bis comakers, the appellants, and tbe bank stood upon the other side. They dealt with each other, not as principal and agent, bnt as payor and payee, representing adverse interests, and occupying adverse positions. In such a case the representations of Hague to his comakers were not binding on the bank, and his knowledge o'f such representations could not be imputed to the bank without violating rules of' law well settled both upon principle and authority. Innerarity v. Bank, 139 Mass. 334, 1 N. E. 282; Mechem, Ag. §§ 723, 729; Frenkel v. Hudson (Ala.) 2 South. 758; Wickersham v. Zinc Co., 26 Am. Rep. 786.

The case of Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268, 17 N. E. 496, was referred to and much relied on by appellants. The facts of that case clearly distinguish it from the case at bar. It announces the doctrine that an agent’s knowledge of his own fraud is to be imputed to the principal in a transaction where the agent alone represents the principal. This is a distinction which seems to us less substantial than technical, and we cannot give it our assent. The rule of law which imputes the knowledge of an agent to his principal, according to most of the authorities, is based upon the presumption that the agent will communicate to his principal whatever he knows concerning the business he is transacting, and the exceptions to the rule upon the contrary presumption, that the agent will not communicate to his principal his knowledge of his own independent frauds, committed in the course of transacting the principal’s business, and that he will not communicate to his principal his knowledge in a transaction where he is interested upon the opposite side. In a case where the presumption arises that an agent will not communicate his knowledge to his principal, or to another acting for the principal, it would seem to be unreasonable to hold the principal responsible for the knowledge of the agent solely because the agent in the particular transaction appeared himself for the principal. The presumption would naturally be, in such a case, that he would fail to act upon such knowledge as the principal would act, just as he would fail to impart his knowledge in a case where another appeared for the principal. It is contended, however, that Hague's representations to appellants that Whitmore would sign the note before it should become complete were ratified by accepting the fruits and bringing suit on the note. It is clearly not a case for the application of the law of ratification. As already shown, Hague was forbidden to act as the agent of the bank in this particular transaction. The respondent, by taking the note, apparently complete upon its face, for which it had parted with full value, without knowledge of the condition that it was to be signed by Whitmore, did not thereby ratify the representations of one maker to his comakers, nor become responsible therefor. Nichols v. Bruns (Dak.) 37 N. W. 752, and authorities cited; Wheeler v. Sleigh Co., 39 Fed. 347; Mechem, Ag. §§ 148, 149. The note having been received by the bank without knowledge of the condition, .the appellants were bound. 1 Daniel, Neg. Inst. § 854; Jordan v. Jordan, 43 Am. Rep. 294, and cases cited.

The evidence shows that the respondent was a Iona fide holder for value, in due course. While there is some conflict, the rule seems to he established by the great weight of authority that it is only necessary for the holder of a negotiable instrument tainted with fraud to show that the note was transferred to him for value before maturity. A presumption then arises that it was acquired in good faith, without notice of the fraud, because it is not likely that he would give full value for a note which he believed to be fraudulent, taking the hazard upon himself, and because it would be difficult to prove good faith in any better way. 1 Daniel, Neg. Inst. § 819, and cases cited. The respondent brought itself clearly within these requirements, and, having done so, it devolved upon the defendants to prove actual knowledge of the condition constituting the infirmity of the note, and this they did not do.

There is an additional reason why the appellants should be bound under the circumstances of this case. They knew when they signed the note that Hague was a comaker upon it, that he was jointly liable with them for the full amount. They were bound to know that an agent could not properly act for his principal and himself in such a case, and it was their duty to ascertain for themselves whether or not the representations which he made to them were authorized by the respondent. Mechem, Ag. § 290; Hurley v. Watson (Mich.), 36 N. W. 726; West St. Louis Sav. Bank v. Shawnee Co. Bank, 95 U. S. 557; Farrington v. Railway Co., 150 Mass. 406, 23 N. E. 109; Anderson v. Kissam, 35 Fed. 706. As was said by the supreme court of the United States in the case of West St. Louis Sav. Bank v. Shawnee Co. Bank, supra, the very form of the paper itself carried notice of a possible want of power to make the representations; and, if the appellants failed to avail themselves of this notice, and obtain the information thus suggested, it is their own fault, and, as against an innocent party, they must bear the loss. The judgment of the lower court is therefore affirmed, with costs to respondent.

Baetch, J., concurs.