Henry Waterhouse Trust Co. v. Rawlins

33 Haw. 876, 1936 Haw. LEXIS 17

Opinions

OPINION OF THE COUBT BY

COKE, C. J.

(Circuit Judge Metzger, dissenting.)

Henry Waterhouse Trust Company, Limited, plaintiff, instituted its action in the court below against Millie F. Rawlins, defendant, to recover on a promissory note alalleged to have been executed by defendant to plaintiff as payee and upon which at the date the suit was instituted, to wit, September 19, 1933, there was a balance of $6625.25 due, with interest at seven per cent from November 21, 1930. The note bears the date of November 21, 1925, and was originally for $7085.25.

To the complaint defendant interposed an answer pleading the -general issue and giving notice of reliance also upon the special defenses of fraud and payment. The defendant included within its answer a setoff in the sum of $1800, together with interest at seven per cent from November 21, 1925, which she alleged was then on deposit or should have been on deposit with plaintiff as trustee of the defendant, and for which amount she demanded judgment against plaintiff.

The cause was tried in the court below with a jury and at the conclusion of the introduction of the evidence by both parties plaintiff moved the court for a directed verdict in favor of plaintiff for the full amount of its claim and a verdict against the defendant upon the demand contained in her setoff. The motion ivas granted and under the instructions of the court the jury returned its Aerdict in favor of plaintiff and against the defendant on all issues. Judgment upon the verdict was rendered and the defendant brings the cause to this court for review on a writ of error.

The trust company proved the execution and delivery of the note by defendant to plaintiff, the consideration therefor, demand and nonpayment of the balance owing thereon, with interest, all as alleged in plaintiff’s complaint. As against this showing the defendant offered no evidence. Indeed it is admitted by defendant that plaintiff made out a prima facie case on the cause of action set forth in its complaint. Therefore at the close of the case it became the legal duty of the trial judge to grant plaintiff’s motion for an order directing a verdict for plaintiff in the full amount of its claim against defendant provided defendant had failed to prove her cause of action alleged in her offset by evidence amounting to more than a scintilla. The evidence of the defendant in support of her setoff is confined almost wholly to her own testimony. This evidence is to the effect that the plaintiff for many years prior to February 16, 1931, was engaged in the usual trust company activities, having a stock and bond department, also a real estate department; the capital stock was owned by R. W. Shingle, A. N. Campbell, and others, but in what proportion the record fails to disclose.

The only evidence introduced at the trial identifying any of the officers of the trust company was that in the year 1909 R. W. Shingle was president and A. N. Campbell was treasurer; that some twenty-one years later, to wit, in 1930, John K. Clarke was treasurer. There is no showing of any kind who the officers or directors of the trust company Avere during the years 1923, 1924 and 1925, the period within which the transactions made the bases of defendant’s setoff are alleged to have occurred. During the year 1923, and for a long period prior thereto, the defendant Avas an employee in the real estate department of the trust company and continued in that capacity until 1931. During the same period F. E. Steere was manager of the real estate department. Mr. James Laird, in 1923 — 1925, Avas an employee in the stock and bond department of the trust company. In 1923 the officers of the Kaimuki Land Company were A. N. Campbell, president and director; P. E. Steere, vice-president and treasurer; W. A. White, treasurer; James Laird, secretary and director; and R. W. Shingle, auditor and director. In the latter part of 1923 the land company, through its sales representative the trust company, placed on the market a certain tract of land owned by it, situated at Palolo, City and County of Honolulu. In November of that year the defendant purchased the property from the land company through the trust company for the consideration of $3200. According to the testimony of the defendant, shortly following this transaction Mr. Steere informed her that he had been told by Mr. A. N. Campbell that a Mr. Newton complained to him that the property had been sold to the defendant below the market value and that Newton had made an offer of $8000; that Campbell desired to know if the defendant was willing to deed the property back to the land company so that it, in turn, would be in a position to "convey to Newton for the increased consideration. The defendant further testified that she thereupon had a conversation with Campbell in which he related certain recent criticism of the Water-house Trust Company in connection with other transactions and suggested to the defendant that, to avoid further talk, the defendant reconvey the property to the' land company and it would then accept the Newton offer. Miss Rawlins testified that she advised Campbell of her willingness to sell the property for a consideration of $8000 and with that understanding in view she prepared and executed a deed conveying the property to the land company, the consideration therein named being $3200; that shortly thereafter the land company conveyed the property to Newton for the consideration of $8000. The evidence further shows that after the transaction with Newton was concluded, the original consideration paid by the defendant for the property, namely, $3200, was returned to her and the balance of the Newton consideration, that is, $4800, less realtor’s commission of ten per cent retained by the trust company as selling agent, was distributed to Shingle and Campbell, the owners of the capital stock of the land company. These payments were made through the trust company^ it having received the money paid by Newton as agent for the land company. The defendant testified that shortly following the conclusion of these transactions and in the latter part of January, 1924, and because she contemplated making an investment, she notified Steere that she wished to withdraw the sum of $4800 which she claimed was on deposit to her credit with the trust company. Steere thereupon conferred with Campbell and advised defendant that Campbell had informed him that she had no money on deposit. The defendant then personally interviewed Campbell whose conversation was confined to the mere statement : “I sold you that land too cheap.” Campbell then took refuge in the company’s directors’ room and closed the door. A few days Subsequent the defendant again spoke to Campbell who said that he would talk the subject over with Shingle. Shortly after that Campbell advised defendant that Shingle said they would pay her nothing in excess of $500. The subject was never discussed again between defendant and Campbell but according "to defendant’s testimony, when some two years later she was negotiating with the trust company, through Laird, to purchase certain corporate stock and executed to the company the promissory note involved in this suit, her alleged account with the trust company was discussed with Laird. She testified at the trial: “Q Now do you remember the occasion, Miss Rawlins, of the execution of this particular note in question? A I do. Q I want you to to tell me with whom, if anyone, you talked relative to the purpose of this indebtedness and the borrowing of this money; who was the first one you talked to? A Mr. Laird. Q And Mr. Laird at that time was an employee of the Henry Waterhouse Trust Company, was he? A Yes, sir. Q And he was also a secretary of the Kaimuki Land Company? A Yes, sir. Q And what did Mi*. Laird say to you? A He approached me and asked me if I wanted to buy some Hawaiian Sumatra. Q What did you say? A I said 'Well, you know the circumstan ces. I haven’t any money just now.’ Q What did he say? A He said ‘You can buy the stock if you want it.’ He said ‘I will write out a note and you can have the stock.’ Q What else was said? A I said I had no money to pay for it. Q What else Avas said by he or you? A I said I had no money to pay down and he said it Avas not necessary, with credit, and I said ‘You know the circumstances of this money here,’ and he said ‘You can pay it off as you see fit.’ ” The defendant continued to make periodic payments on her promissory note, having kept the interest paid up until the year 1930, and, while the defendant asserts that in 1923 an express trust was created in her favor and that the trust company as trustee was in possession of $4800 belonging to her, she makes no claim that the subject was even mentioned by her or any person connected with the trust company from November, 1925, until she interposed her setoff in the present action in the month of April, 1934, although during six years of that period she was an employee in the office of the trust company. Defendant insists that she proved the averments of her setoff by evidence sufficient to entitle her to go to the jury on the issues; that she made out a prima facie case and the trial court committed reversible error in ordering the jury to find against defendant on her setoff.

As we vieAV this appeal it is immaterial Avhether the defendant’s claim is predicated upon an alleged express trust or what is referred to in the statute as an open, current and mutual account. Of course if it falls within the latter category the statutory period of limitations would not start to run until the last item of account (see R. L. 1935, § 3911). It is unnecessary to invoke the statute of limitations. The evidence shoAvs that the land company and not the trust company owned the property which was sold to the defendant and by her subsequently reconveyed to the land company and that the purchase price obtained for the premises belonged to the land com pany and that the trust company had no interest whatsoever therein except its realtor’s commission amounting to ten per cent of the purchase price. The evidence further shows that out of the consideration paid by Newton for the premises, to wit, $8000, the trust company retained $480, the balance of the commission due it, returned to the defendant the $3200 which she had originally paid for the property, and disbursed the balance of the fund, to wit, $4000, to Shingle and Campbell, the owners of the capital stock of the land company. If, as contended by defendant, the trust company obligated itself to pay defendant the sum of $4800, such an outlay would be a mere gratuity for which the trust company received' no consideration.

Defendant argues that because it was shown that Campbell was the treasurer of the trust company in 1909, under the rule that a condition once shown to exist is presumed to continue until it is negatived, it was within the province of the jury to assume that Campbell was still the treasurer in 1923 — 1925. This rule, however, is by no means without its exception. In fact the rule applies only to permanent and continuing conditions. Evidence of the fact that the wind blows from the east today creates no presumption that it was blowing from the east on the same day of the past week or that it will blow from the same direction a week hence. “The laAV as to the presumption of the continuance of things or conditions shown to have once existed is frequently stated in such general terms as to be confusing and misleading. The application of a presumption of continuance of the condition of things depends upon Avhat they are. If the things are such as in their nature are not continuous, then there is no presumption. The presumption, itself depending on the nature of things, should never be alloAved such application as will oppose the nature of such things. Certain conditions in the affairs of men, or things, may he renewed from time to time, and have no continuity. Others are likely, in the general order, to continue, and usually do continue, for a longer or shorter period, and the force or persuasiveness of the presumption of their continuance depends upon information, observation, and experience.” Fifth-Third Nat. Bank v. McCrory, 177 S. W. 1058, 1059. (See, also, Dunn v. Neustadtl, 129 N. Y. S. 161, 162; Lincoln Court Realty Co. v. Kentucky Title S. B. & T. Co., 185 S. W. 156, 160; Sargent v. Waterbury, 163 Pac. 416, 418; Burris v. Titzell, 177 N. W. 557, 563; Doran v. United States Building & Loan Ass’n., 20 Pac. [2d] 835, 837.) In Merchants’ Nat. Bank v. Carpenter, 165 Atl. 909, 910, where it was shown that the note involved in the litigation was in the possession of the plaintiff bank just before it became due, the jury might safely indulge in the inference that it continued to remain in the possession of the bank until its maturity five days later. The court said: “We will infer that a particular fact continues to exist as long as such fact usually, as a matter of experience, continues to exist (Smith v. Martin, 93 Vt. 111, 129).” It is a matter of common • knowledge that local banking corporations, trust companies, etc., customarily call stockholders’ meetings annually at which boards of directors are elected; the board, in turn, selects officers for the ensuing annual period. While this custom may not have been observed in all instances, we think it fair to assume that no trust company actively engaged in business in this Territory would under any circumstances defer the election of a board of directors and its officers for a period of fourteen years. The evidence in this case afforded no basis upon which the jury, acting reasonably, might have inferred that Campbell was the treasurer of the trust company during the period 1923 — 1925, nor that Laird was other than an employee of the stock and bond department of the trust company during that period, wholly lacking authority to obligate the trust company to pay defendant the sum in question. Even had it been shown at the trial that Campbell and Laird were officers of the trust company in 1923 — 1925, it would not follow from that fact, nor could it have been presumed, that they were empowered to transfer $4800 of the funds of the trust company to the defendant as a mere gratuity nor to have created an indebtedness of the trust company to the defendant for a similar purpose. As a general rule a corporation is bound by such contracts, and such contracts only, of a corporate officer or agent as the latter is either expressly or impliedly authorized to make. Another rule generally recognized is that “it is not within the power of the officers or agents of a corporation to give away its assets or property.” 14A C. J. 420. (See also Bassick v. Aetna Explosives Co., 246 Fed. 974; Rankin v. Bates County Inv. Co., 141 S. W. 718.)

We are not unmindful of the doctrine of the law which prescribes that where a motion for a directed verdict is presented, the trial judge must look upon the evidence adduced in the light most favorable to the movee with every reasonable inference which may be drawn from the evidence resolved in his favor. If, having done so, there is, as a matter of law, evidence of that substantial character amounting to more than a scintilla, the case is for the jury and the motion must be denied. (Schoening & Co. v. Miner, 22 Haw. 196, 203; Leong Chung v. Hee, 29 Haw. 18; Chun Quon v. Doong, 29 Haw. 539.) The rule is stated in Bishop & Co. v. Hawaii Soap Co., 28 Haw. 180, as follows: “The plaintiff was entitled to a directed verdict only if there was not evidence sufficient to support a verdict in favor of the defendant. If there was evidence, more than a mere scintilla, from which the jury could as reasonable men find a verdict in conformity with law favorable to the defendant, then a direction such as that requested would be out of place.” But the record before us is devoid of evidence amounting to more than a scintilla or of any evidence showing or tending to show that either Campbell or Laird or any other person was authorized by the trust company to create a trust account or a mutual current account payable to defendant out of the funds of the trust company. Neither express nor implied authority was shown to exist authorizing the alleged donation to the defendant as averred in her setoff. During the trial, while the defendant was on the witness stand reciting the transactions between herself and Laird at the time she obtained the loan from the trust company and executed the note involved in this action, her counsel made the following offer of proof: “We offer to prove by this Avitness if the court please that at that time, the witness imposed as a condition upon the purchase of HaAvaiian- Sumatra Plantations, Limited, that she would only buy the stock and Avould only borrow the money for the purpose of purchasing the stock; that when she had reduced the indebtedness because of the note to the amount of the unliquidated or rather the disputed demand of $4800, that the note should be canceled and discharged, and that she should be released and discharged from all further obligations thereunder; and that relying upon the said conditions, which Avere acceptable to Mr. Laird and relying upon such conditions and solely induced thereby, she placed the order and signed the promissory note.” The trial judge denied the offer of proof and this ruling is made the subject of one of defendant’s assignments of error.

While equity will afford relief against fraud, accident or mistake and under proper allegations will receive parol testimony to alter or even annul a written document, it is, Ave think, universally the laAV of negotiable instruments that a defendant may not, in an action at law, shoAV a collateral parol agreement to vary the written term of a promissory note. A contemporaneous oral agreement Avill not be received in evidence to contradict that which is written. Nalitzky v. Williams, 237 Fed. 802, involved an action to recover on a promissory note. The court said: “The second defense asserts that Avhen the note Avas made the bank agreed that the debt might be paid off by small installments, $50 ox* $75 — an agreement that would be violated if recovery were now permitted. Evidence to this effect was offered, but was correctly rejected; no authority need be cited for the proposition that the unqualified terms of the note cannot be thus varied by parol testimony.” (Smith v. Lee Chee, 27 Haw. 122. See, also, Pang See & Co., Ltd., v. Aloha Motors, Ltd., ante, p. 861; Commercial Nat. Bank v. Hutchinson Box Board & Paper Co., 158 Pac. 44; Downing v. Brennan, 122 N. E. 729; Naftalin v. La Salle Holding Co., 186 N. W. 128.) In denying defendant’s offer of proof,- the trial judge merely adhered to the long established parol evidence rule.

J. V. Hodgson (E. G. Peters on the briefs) for plaintiff in error. M. E. Winn (G. M. Nowell with him on the briefs) for defendant in error.

After giving careful consideration to all of defendant’s assignments of error, we conclude that the judgment appealed from should be and the same is sustained.