Brown v. Bamberger, Bloom & Co. , 110 Ala. 342 ( 1895 )

Mc'.CLELLAN, J.

This is an action by Bamberger, Bloom & Co. against “ Edward J. Oden and Walter S. Brown, late partners under the firm name of Oden & Brown,” on three promissory notes alleged to have been made by the defendants on August 21st, 1890, each for $186.35, payable severally 30, 60 and 90 days after date, and the complaint avers that all said notes bore interest at the rate of 8 per cent per annum from the date of their execution. It is also alleged that each of said notes cont ain a stipulation to pay a reasonable attorney’s fee for collection thereof if not paid at maturity, and that such fee is ten per cent on the amount of said notes. And there is a further averment that "in and by said notes the defendants waived their right of exemption to personal property under the laws and constitution of the State of Alabama.” The suit was instituted on December 26, 1890. On January 23, 1891, the following verified pleas were filed : 1. ‘ 'And now comes Edward J. Oden, one of the late partners under the firm name of Oden & Brown, and for answer to * * the complaint in said cause, after having been duly sworn, deposes and says that they, Oden and Brown, do not owe the said sum of money in manner and form as alleged in thé complaint, and that neither of them owe the said sum of money mentioned in plaintiff’s complaint.” 2. ‘'And now comes Edward J. Oden, one of the late partners under the firm name of Oden & Brown, and for answer to * * * the complaint in said cause, after having been duly sworn, deposes and says that they, Oden & Brown, do not owe the said amount of money, or any part thereof, in manner and form as in the said complaint alleged.” On June 14, 1893 additional pleas were filed as follows : “Comes the defendant Walter S. Brown and for plea to the plaintiff’s complaint says :

“1st. That he does not owe the debt sued upon, nor any part thereof.

“2nd. That the allegations of said complaint are untrue .

‘ ‘3rd. (As amended) That said notes were not executed by him, nor did he authorize any one else to execute the same in his name, or in the name of Oden & Brown.

“4th. That he did not agree in writing to waive his rights under the laws of Alabama to have any personal property exempt from levy and sale under legal process as against the payment of said notes.

“5th. That he did not consent or agree in writing, or otherwise, before the commencement of this suit to pay apy attorney’s fees for the collection of said notes.

“ 6th. That defendant did not execute the notes sued on, and that he does not know positively who did, but he is informed and believes t(iat the name Oden & Brown were signed thereto by Edward J. Oden with whom the defendant had been in. partnership, but the said partnership had been dissolved prior to the alleged date of said notes; and at no time after said dissolution did the defendant ever authorize the said Edward J. Oden to sign the defendant’s name to the notes sued on.

“7th. (As amended) That on the claim sued on there had been paid two hundred and fifty dollars, without a knowledge by this defendant of the contents of said notes : that said payments were made as follows, to wit: Oct. 18, 1890, $100 ; November 25, 1890, $50 ; December 28, 1890, $100. Defendant remitted said sums to Lane & White, plaintiffs’ attorneys, and were paid by check and were intended to be applied to what Oden & Brown owed plaintiffs for goods ; and the last remittance was made before this defendant had any knowledge of the institution of this suir, the check therefor being dated Dec. 26,1890.”

These pleas except the last (No. 7) were verified.

The plaintiffs filed special replications to the 3rd, 4th, 5th, and 6th pleas set out next above, separately, and jointly to them all, alleging “that after said notes were executed the said defendant, Walter S. Brown, with full knowledge of the execution of said notes ratified the execution thereof by promising to pay said notes and also by partial payments made by him.”

Brown’s demurrer to these replications being overruled he rejoined -thereto as follows :

“1st. That he never at anytime ratified the execution of said notes sued on.

“2nd. That the allegations in said replications are untrue .

“3rd. That at the time of any payments or promises, he did not know that said notes contained stipulations for attorney’s fees and a clause waiving the right of exemption of the makers thereof.

“4th. This defendant says that he never promised or agreed in writing to waive his exemptions in said notes either before or after they were made.

“5th. This defendant, further says that after the making of said notes he signed no writing, noy did he authorize any one else to sign any writing, waiving or evidencing an intention to waive his right of exemptions as against any debt evidenced by said notes.

“6th. This defendant further says that prior to the institution of this suit he did not know that said notes were waive notes, or that they contained stipulations to pay attorney’s fees.”

The sufficiency of these rejoinders were not challenged by demurrer. The judgment entry, after disposing of certain motions made by the defendant Brown, and passing upon demurrer to the pleas ' interposed by Brown', and overruling Brown’s demurrer to the replication, continues : “and thereupon issue being joined let a jury come; whereupon came a jury &c. &c. who &c. &c. on their oaths do say, ‘we, the jury, find for the plaintiffs and assess their damages’ ” &c. &c.

It thus appears that the only pleas ‘of non eat factum in the case were those interposed by Brown numbered 3, 4, 5, and 6. The plaintiff did not take issue on either of these pleas, but confessed and attempted to avoid them by averring in effect that although it was true that Brown had not executed said notes and that they had not been executed for him through another thereunto authorized by him, yet he had ratified their unauthorized subscription in his name by another in that he had promised to pay them and had made partial payments on thém. To this, as we have seen Brown rejoined, among other things, “that after the making of said notes he signed„no writing, nor did he authorize any one else to sign any writing, waiving, or evidencing an intention to waive, his right of exemptions as against any debt evidenced by said notes. This rejoinder was made as a full answer to the replications that Brown was bound by the notes, though he did not sigh them, nor authorize another to execute them for him, because he ratified this unauthorized execution by another. By taking issue upon it, instead of testing its sufficiency by demurrer, the plaintiff confessed that the rejoinder, if true, avoided the replications, and showed that Brown was not liable on the notes ; for if the defendant proved this rejoinder, the replication was eliminated and the case stood with the pleas of non est factum confessed without avoidance. This rejoinder was fully proved by uncontroverted evidence : the testimony of Brown shows that after the making of said notes he signed no writing, nor authorized any one else to sign any writing waiving, or evidencing an intention to waive, his right of exemption as against any debt evidenced by the notes, and he is not at all contradicted on this point. On this state of the pleadings and proof, the court should have given, and erred in not giving, the affirmative charge (2) requested by Brown, to find in his favor if the jury believed the evidence. This necessitates a'reversal of the judgment and remandmentof the cause.

We find no error in the rulings of the court on defendants several motions to quash the service of summons and complaint on Brown, to suppress the depositions of Knefiler and Cohen', and to require the - plaintiffs to give, security for the costs of the suit.

Oden’s insolvency was not an issue, nor pertinent to any issue in the case. The question propounded to him on that subject was improper; and as it will not be propounded on another trial, the further question as to the right of counsel to comment on his manner &c., when being interrogated as to his solvency, will not again arise.

The proposed evidence as to Brown having recovered a judgment against Oden for deceit was properly excluded.

The partnership between Oden and Brown had been dissolved long before the notes sued on were executed. Oden, therefore, had no authority as a partner simply to sign the name of Brown along with his own to the notes sued on. If there was any arrangement between them whereby the power of a partner to sign the firm name was continued after dissolution, or, if as testified by Oden, Brown was present when the notes were signed by Oden for both, and directed, acquiesced in or even knew of the fact that Oden had so signed the names of both,then,on this, without more, of course, Brown is liable at least on the promise to pay the debt contained in the notes. If there was such general arrangement — that either party, or Oden should continue after dissolution to close up the firm’s indebtedness by executing notes in the name of the firm — a note signed by one of them for both, only upon such general authority, would bind the other to no greater extent than the authority, i. e., as upon a promise to pay the firm debt. An attorney’s fee for collecting the debt is not a part of the debt; such authority would not cover a stipulation to pay such fee, and only the party actually signing would be bound by such stipulation. And so, as has been frequently decided, such authority would not cover a stipulation waiving the exemptions of the parties, and such stipulation, if inserted, would operate only against the party signing his own and the other debtor’s name. But, if as further testified by Oden, Brown brought the notes to him to be signed for both, or if Brown had previously had or seen the notes or knew what they contained, and Oden signed the names of both, or the firm name, in his presence or by his direction or with his assent, expressed or implied, then all the stipulations, of the papers — for attorney’s feos arid waiving exemptions, as well as the rest — would be equally binding upon both.

The statute provides that a waiver of exemptions as to personalty may be included in any promissory note executed by the party entitled to it — Code, § 2568. The word “executed” has no peculiar meaning in this section. If the signing of the note is not by an agent or the like, or if by an agent, no quest on of excess of authority in including the waiver arises, whatever would amount" to execution as respects the promise to pay would, also, be efficacious as to the waiver. Indeed, the note proper, the promise to pay, is itself the thing executed, and the stipulation for waiver is operative because embraced in the paper promising to pay. So that with the stipulation in, we repeat, it is binding'whenever there has been such execution of the note as binds the person purporting to have made it to pay the sum therein agreed to be paid. The signing and the delivery of the note is its execution ; yet the signature need not be by tlio hand of the maker, nor by one thereunto authorized-in, or even without, writing. It is no less the putative maker’s signature for being made by another wholly without authority, if it be adopted or ratified by the former ; and by efficient adoption or ratification the note becomes “executed” within the meaning of the statute, and a waiver of exemptions included in it is as binding on the maker as if he had put his own hand to the paper.

But to the efficient ratification of an unauthorized signature to a promissory note or other contract, it is essential that the party sought to be charged on account of such ratification should be fully advised of' the stipulations of the note or other contract. If the undertaking alleged to have been ratified bó a note, and the party sought to be charged upon it as a promise to pay a certain debt, simply knew of its existence with his name to it (but without his authority), and with this knowledge promised to pay it, or made partial payments upon the debt evidenced by it, this would be sufficient to charge him upon the note, but only upon it as a mere promise to pay the debt) a promissory note, because knowing of ■the note he knew the paper contained everything essential to its being a note ; all that is. necessarily involved in the existence of a note. But while knowledge of the note is knowledge of every stipulation contained in the paper essential to that sort of contract, it is not knowledge of stipulations, which though sometimes embraced in or added to written promises to pay a certain sum on or upon a specified time, are not necessary to the paper as a note, constitute no necessary or even proper part of the promise to pay that sum, and are not involved in the concrete idea of the contents of a paper known only as a promissory note. The doctrine of constructive knowledge, or imputation of knowledge from mere notice, does not obtain in this connection. It is what the party sought to be charged knows and not what he has mere legal notice of, that is to be considered in determining whether there has been a ratification. He is charged on full knowledge, and not because he ought to have known, but did not, not because he had notice which should have incited him to an inquiry, which if properly prosecuted would have brought knowledge. As said by Judge Story: “The principal, before a ratification [of the unauthorized act of an agent] becomes effectual against him, must be shown to have had previous'knowledge of all the facts and circumstances in the case, and if he assented to or confirmed the act of his agent, while in ignorance of all the circumstances, he can afterwards when informed thereof, disaffirm it. And the principal’s want of such knowledge, even if it arises from his own carelessness in inquiring or neglect in ascertaining facts, or from other causes, will render such ratification invalid. His knowledge is an essential element.’’ — Story on Agency, § 231, n. 1. So if a principal ratify a sale made by his agent without knowledge of a warranty given by the agent, though it would seem clear that the duty of inquiry as to warranty was upon the principal, he is not bound by such ratification.—Smith v. Tracy, 36 N. Y. 79. And for the purposes of ratification the party sought to be charged will not be held to have knowledge of deeds on record.—Billings v. Morrow, 7 Cal. 171; s. c. 68 Am. Dec. 235. The receipt by the principal of the proceeds of sale of property by an agent is not a ratification if the principal is ignorant of the facts.—Bott v. McCoy, 20 Ala. 578. Agent, with power to purchase goods for cash, bought on credit, and principal received the goods without knowledge that the purchase was on credit. Held, that the acceptance and use of the goods by the principal did not operate as a ratification.—Manning v. Gasharie, 27 Ind. 399. So where the agent has defrauded a buyer, the mere reception or retention of the purchase money by the principal will not operate as a ratification.—Herring v. Skaggs, 73 Ala. 446. And the law on this subject with special reference to partners is thus stated in 17 Am. & Eng. Ency. of Law, p. 1050 : “Acts relied upon-as a ratification of the unauthorized act of a partner, must have been d.me with full knowledge on the part of the ratifying partner of such unauthorized act, and assent to such an act is not to be presumed on slight and inconclusive circumstances.” Hence, knowledge by Brown that notes had been signed in his name by Oden wa<s knowledge of all the. stillulations contained, in the papers so signed which were necessary and proper to make them promissory notes simply; but, while in some relations Brown would also be charged with knowledge of other stipulations foreign to the promise to pay the debt contained in the papers, when the question is, as here, whether he ratified Oden’s subscription of his name to papers containing such other stipulations, his ignorance of the existence of these matters extraneous to the paper as a promissory note merely is a defence against such stipulations, though the duty of inquiry may have been upon him, and his ignorance may be tile result of his negligence in not prosecuting such inquiry.

The stipulations of these notes for attorney’s fees and for a waiver of exemptions were such maoters — extraneous to the papers as promissory notes ; and if when Brown promised to pay the notes or made partial payments upon them he did not know they included an undertaking to pay attorney’s fees and a waiver of exemptions, his promise or payment was not a ratification of such undertaking and waiver, and he is now bound by either or both only as it shall appear to the jury that he knew of one or the other or both at the time of his alleged ratification. Of course what is here said is to be taken in connection with the principles declared above in respect of that phase of the case presented by the evidence of Oden : In that aspect Brown is bound by all the stipulations of the papers, and if Oden be believed no question of ratification need be considered.

The foregoing will fully advise the circuit court of our views upon the law of this case, and we deem it essary to discuss or pass on the several rulings city court upon requests for instructions. o O p H* P g ®

Reversed and remanded.