Kinna & Ming v. Woolfolk , 4 Mont. 318 ( 1882 )

Wade, C. J.

This is an appeal from a judgment of non-suit. The complaint alleges that on the 16th day of September, 1874, the plaintiffs and defendant entered into a contract in writing, as follows:

“ Helena, September 16, 1874:

“Whereas, John Kinna and John H. Ming have this day joined with me in borrowing the sum of ($2,572.10) twenty-five hundred and seventy-two and Wo dollars for the purpose of paying R. S. Hale the balance of eight thousand dollars due him under private agreement with said Ming, Kinna and Woolfolk, in order for their release from certain notes executed by them to said Hale as security for the Park Ditch Company; and whereas the Park Ditch Company has pledged the note of William Chessman to it, and its claim against Felix Poznainsky, and any other demands due it, to the extent of repaying to the said Ming, Kinna and Woolfolk the sum of $2,572.10, this day borrowed: Now, therefore, the said Woolfolk does hereby agree that if he should collect any of the above amounts, or shall, from any resources whatever of the Park Ditch Company, receive any other sums, after deducting all costs, charges and expenses, to apply the same in payment of said note, and also another note executed to R. S. Hale for taxes, amounting to between six and seven hundred dollars, until said notes shall be fully paid; said payment to be made by the said Woolfolk after his return from the east next spring, and as soon thereafter as the amounts shall be received; but the said Woolfolk does not assume to pay said note only to the extent that he shall receive such amounts from the resources of the Park Ditch Company, as aforesaid.

(Signed) “A. M. Woolfolk.”

Which agreement was then delivered to the plaintiffs. And it is further alleged that, as an inducement to the plaintiffs to join Woolfolk in borrowing said sum -of .money, and thereby to procure the release of the plaintiffs and defendant from certain notes by them jointly executed, and to pay said Hale the sum mentioned in the agreement as due to Hale, the defendant, prior to and at the time of the receipt of the agreement by plaintiffs from the defendant, and the borrowing of the sum' of $2,572.10 by them, stated and represented to the plaintiffs that the Park Ditch Company had passed a resolution in conformity with the recitals in the agreement, and relying upon the truth of the representations so made by the defendant, and solely induced thereby, the plaintiffs did execute, together with the defendant, their promissory note for the sum of $2,572.10, and borrowed that sum, which was paid to Hale. And the plaintiffs further aver that until long after the maturity of such note and payment thereof by them, they were ignorant of the fact that the representations of the defendant were untrue and that no such resolution had been passed by the Park Ditch Company, which the defendant well knew, and he is therefore estopped from denying and proving that, in fact, no such resolution had been passed. The plaintiffs further aver that at the maturity of the note • for $2,572.10, they paid two-thirds of the amount thereof, together with interest thereon, amounting to the sum of $1,810.14, and also paid two-thirds of the note mentioned in the agreement as due Hale for taxes, amounting to the sum of $445.50. The complaint further charges that the defendant returned from the east in May, 1875,. entered into and took possession of the. Ditch Company, and received for water sold therefrom for that season, and from the Chessman note, the sum of $3,500, which he should have applied in payment of the sums of money so paid by plaintiffs to Hale, and that he failed to do so; wherefore the plaintiffs demand judgment against him for the sum of $2,255.64.

The answer of the defendant admits the execution of the agreement, but denies that there was any valuable consideration therefor, or any consideration except as in the agreement set forth, and specifically denies each and every other allegation contained in the complaint.

Upon the trial, Ming, one of the plaintiffs, testified as follows: “I am one of the plaintiffs. I know Alex. M. Woolfolk. He was the chief manager of the Park Ditch Company in the fall of 1874. I do not know that he was superintendent. Kinna and myself had a conversation with him the day before, or on the same day of the date of the agreement mentioned in complaint. The conversation took place in my office, in the rear of my store in Helena, Montana territory. Defendant said that the balance of the $8,000 which we owed Mr. Hale was due, and that the Ditch Company had not the money to pay it, and that he had a plan to propose, or a proposition to . make, by which we could pay it without incurring any loss to ourselves. That if we would join him and give a note to the First National Bank, and borrow the money, he would get the company to turn over the receipts for water to be sold the following season, and any other sums they might be able to collect to reimburse us in the amount, which was $2,572.10, and also a note which had been given for taxes of over $600. I told the defendant that we could not get the receipts from the ditch, if it was sold in January under the mortgage, as it would be, probably. He then explained to us the provisions of the redemption law, giving us six months to redeem in, after the sale, and said that we could hold the ditch for that time, and that two months of it would be the best of the water season, in which he could collect sufficient money, after paying all expenses, to reimburse us and pay us back fully the sums mentioned. We agreed to do this, if the company would pass a resolution pledging us the receipts for 1875 for this purpose. The defendant then left, but returned the same day, and brought us the contract set forth in the complaint, signed by himself, and told us that the company had held a meeting and passed a resolution in accordance with his proposition and this agreement. Kinna was present at this time, and we then signed the note for $2,572.10, which note we afterwards paid, and also the note for $605 given for taxes. Kinna, Woolfolk and myself each paid our part of these notes. Defendant returned in the spring of 1875, and, I think, took charge of the Park ditch. The only knowledge I have of the receipts of the Park ditch for the year 1875 was contained in a written proposition made by the defendant to Mr. R. S. Hale, which statement is now lost. I saw it once. It was in the handwriting of the defendant, with which I am well acquainted. In that writing it was stated that the net receipts of the ditch for the year 1875 were $3,500, or about that sum. At the time of borrowing the money, I accepted the statement of the defendant that the company had passed the resolution pledging the water receipts of 1875 to us as true, and I relied upon them, and in consequence thereof executed the note. I did not learn that this statement was false until the following season, when! ascertained that defendant had attempted to pledge the receipts of that season to Mr. Geo. W. Pox, to secure a private indebtedness of his own. I accepted this representation as true, and was thereby induced to sign the note to raise the money.”

On cross-examination the witness testified as follows: “ I do not remember the date when I discovered that no such resolution had been passed by the company, but it was upon the occasion named. At the time of giving our note to the bank we were responsible to Mr. Hale for between $16,000 and $18,000. We had an agreement with him that if we paid him $8,000, of which this $2,572.10 was the balance, he would release us from all liability. At the time we made the agreement with Hale for the payment of $8,000, and our release from all lia,bility to him, I regarded the Park Ditch Company as hopelessly insolvent. There was a mortgage of $6,000, and one of $3,600, to Hale upon the ditch, bearing interest at two per cent, per month from 1871 or 1872, the principal and interest on the notes due Hale amounting to about $15,000, which was secured by mortgage upon the ditch. Mr. Hale held other notes of the company, amounting to between $16,000 and $18,000, for which Kinna, Woolfolk and myself were security. We had no security except all indemnity mortgage on the ditch, which was subordinate to the other mortgages to Hale upon the ditch which I have mentioned. This indebtedness for which we were security was bearing interest at the rate of two per cent, per month. In the fall of 1873 Mr. Kinna and myself were uneasy on account of our large liability for the Company for which we felt we had no security. We notified Hale at that time that he must take steps at once to collect this indebtedness against the Park Ditch Company, and that if he did not do so, we would be no longer responsible to him as sureties upon the notes. After we gave this notice there was a meeting of the trustees of the Ditch Company, to which I communicated a conversation which I had had with Hale, in which Hale proposed that if the company would assign the receipts of the season of 1871 to him, and we would during said season pay to him from the resources of the company the sum of $8,000 upon the indebtedness for which we were sureties, and would then sell the Park ditch under our indemnity mortgage, that Hale would bid at the sale of the ditch a sum sufficient to pay the amount for which we were security, and would discharge us from further liability to him thereon. Kinna and myself were in favor of this arrangement and Wool-folk also consented to it. The trustees of the company then passed a resolution in accordance with that proposition, pledging the receipts of 1871 to Hale, and Kinna, Woolfolk and myself made an agreement with Hale with reference to the $8,000 payment and our release upon .selling the ditch thei’eafter under our mortgage. My recollection is that Mr. Hudnall, as agent of Mr. Hale, was to collect the receipts under the agreement, which were all the receipts of the Park ditch, and one-third of the receipts of the Tucker Extension, the remaining two-thirds of the Extension receipts belonging to Woolf oik. During the year 1874, the total net receipts of the Park Ditch Company only amounted to about $3,500. This amount was increased by the sum of about $2,000, which I had formerly collected as treasurer and accounted for at this time. The total still lacked $2,572.10 of paying the .$8,000 to Hale, in order to secure our release under the agreement. The receipts of the ditch in 1874 were not. sufficient to pay the interest on the company’s indebtedness. We were bound to pay this $2,572.10 in order to secure our release from the indebtedness for which we were still security to Hale, and which amounted, after deducting the payments then made, to about $11,000 or $12,000. We would have paid this $2,572.10 to Hale, as it was necessary to secure our release from our indebtedness to him, whether the receipts of 1875 had been assigned to us or not. We might not have borrowed the money if the statements of Woolf oik had not been madé to us. If we had not borrowed the money, we would have simply walked up to Mr. Hale and paid him the money instead of borrowing the amount. We would have been compelled to pay him in some way, for he had our notes and we desired to be released. There was an agreement by the Park Ditch Company to make no defense to our action of foreclosure. I do not remember why the ditch was not sold until the 20th of January.”

Pinna, plaintiff, testified as follows: “Ming, Wool-folk and myself were securities for the Park Ditch Com.pany for $16,000 or $18,000 to P. S. Hale. Hale had agreed that if the Park Ditch Company would pay him that season $8,000 on the debt, he’would release us as sureties, or would buy in the ditch so as to release us, if we sold it under our mortgage of indemnity. The Park Ditch Company had paid, at the end of the water season of 1871, all of the $8,000 but this $2,572.10, and we borrowed this amount from the National Bank in order to pay the balance of the $8,000 and thus secure our release. If we had not paid this amount, we would have had to pay the balance of the $16,000 or $18,000 for which we were liable as security to Hale for the company. Wé were compelled to pay the $2,572.10 out of our own pockets, or else have remained responsible for $11,000 or $12,000, the balance for which we were responsible as security to Hale. To a considerable extent I was induced to join in borrowing this money in order to be released from our liability to Hale as sureties. I did not consider the Park Ditch Company solvent. I did not consider that the mortgage of indemnity to us from the company was any security to us for the indebtedness for which wé were liable as its sureties. I can’t say, as Mr. Ming says, that I would have paid my part of the $2,572.10 in cash if no representations had been made by defendant. As I was not very flush in funds at that time, I should probably have borrowed my portion of the money to make up the $S,000 to Hale, if no representations had been made by Woolfolk. Of course, my principal object in borrowing the $2,572.10 was to get released from the $16,000 or $18,000 security debt to Hale. I did not relinquish any security I held against the Park Ditch Company in consequence of the representations of Woolfolk ■or the paper sued on. We still held our mortgage of indemnity, which was the only security we had. I was very glad to get the matter settled, and get out of our liability to Hale. I considered that in paying the $2,572.10 I was paying what I had to pay, and was saved, by doing so, from paying a larger sum to Hale. I think the note for $2,572.10 was paid by us shortly after its execution. I do not know what motive Woolfolk had in making the representations that the water receipts of 1875 had been pledged to us by the company. He owned the largest interest in the company, and I suppose wanted to hold on to it as long as possible. I don’t know why he wanted to close it out to Hale in order to get released from his third of the liability to him.”

The foregoing was all the testimony in the case tending to show any consideration for the agreement sued on, • and all in relation to any representations by defendant whereby plaintiffs were induced to enter into said agreement. At the conclusion of the testimony, the defendant moved for a non-suit for the reasons, among others: First, that there was no sufficient case made to go to the jury. Second, that there was no consideration shown for the execution of the agreement. Third, because no damage had been shown by reason of the alleged misrepresentations. Fourth, because the testimony shows that the plaintiffs, alike with defendant, were benefited and not injured by the $2,572.10 paid; and fifth, that the parties were under a legal obligation to pay said $2,572.10, and gave up no securities, placed themselves in no worse condition, and were in no way injured by the payment thereof or by reason of misrepresentations, if any were made.

The court granted the motion for non-suit, and this motion is assigned as error.

1. Was there any consideration for the agreement?

From the testimony it will be seen that in the fall of 1873 the Park Ditch Company was indebted to Hale in the sum of $16,000 or $18,000, for the payment of which the plaintiffs and defendant were sureties. The company was insolvent. They — the plaintiffs and defendant — had no security that was of any value. They were uneasy and wished to be released from their liability. They notified Hale to proceed against the company at once or they would be no longer responsible to him .as sureties upon the notes he held against- the company. Hale proposed that if the company would assign the receipts of the season of 1874 to him, and the plaintiffs and defendant would make up to him what such receipts fell short of making the sum of $8,000 upon the indebtedness for which they were sureties, then upon a sale of the ditch upon their indemnity mortgage Hale would bid at the sale a sum sufficient to pay the amount for which they were sureties, and discharge them from any further liability to him. This arrangement was consummated. The receipts of the ditch for 1874 were assigned to Hale, and the plaintiffs and defendant agreed to pay to him what such receipts fell short of making the sum of $8,000. This is the agreement referred to in the contract sued on.

It will be observed that this $8,000 was a payment upon the indebtedness for which the plaintiffs and defendant were sureties, so that, in whatever part of said $8,000 they paid, they were simply discharging a legal obligation and liability that was upon them before the contract mentioned in the complaint had been made. Before said contract was made, the $2,572.10 named therein might have been collected from them, and in paying that sum they were paying a debt that they could not escape paying, and that the contract did not in any manner affect. In entering into this agreement with Hale, to make up what the water receipts for 1874 fell short of making the sum of $8,000, they were contracting to pay so much on an indebtedness they already owed, and by the payment of which they made good their mortgage and relieved themselves from an indebtedness of $16,000 or $18,000. In borrowing this $2,572.10 and making this payment, the same was as much for the benefit of plaintiffs as the defendent, and all the basis that the contract sued on has is the fact that they borrowed that sum for the purpose of making such payment. The promise of the defendant to refund the money so borrowed was a mere naked promise without consideration. The contract which ■is made the basis of this action, and which expresses the consideration upon which the plaintiffs rely, is as follows, to wit:

“Whereas, John Kinna and John H. Ming have this day joined with me in borrowing the sum of $2,572.10, for the purpose of paying R. S. Hale the balance of $8,000 due him under private agreement with said Ming, Kinna and W oolf oik, in order for their release from certain notes executed by them to said Hale as security for the Park Ditch Company.”

There is nothing in this but that three equal debtors "joined together to borrow, and did borrow, money to pay a debt for which they were severally and jointly liable. It is not possible that so far there is any promise of or liability for Woolfolk to repay to Kinna and Ming their share of the money so borrowed and paid on their joint indebtedness.

The contract further recites: “And whereas the Park ' Ditch Company has pledged the note of William Chessman to it, and its claim against Felix Poznainsky, and any other demands due it, to the extent of repaying the said Kinna, Ming and Woolfolk the sum of $2,572.10, "this day borrowed.” This is vague and uncertain; but if anything can be ascertained in favor of plaintiffs, it is that the Park Ditch Company had theretofore pledged to ■ Kinna, Ming and Woolfolk the notes therein mentioned to repay them the sum of $2,572.10 that day borrowed. Blit it is riot seen, and cannot be seen thus far, wherein Woolfolk promised to pay anything to Kinna and Ming.

The contract continues: “Now, therefore, the said Woolfolk does hereby agree that if he shall collect any of ' the above amounts, or shall, from any resources of the 'Park Ditch Company, receive any other sums, after de-'ducting all costs, charges and expenses, to apply the sainé in payment of said note, and also another note executed to R. S. Hale for taxes, amounting to between six and ' seven hundred dollars, until said notes shall be fully paid.” It is apparent from plaintiffs’ complaint that the note.for $600 to Hale was paid off by Kinna, Ming and Woolfolk. But it is said, “in payment of said note.” What note ?• It could not be a note of Woolfolk to Kinna and Ming, or they would proffer it or show cause of its absence. Where the contract says, “said note,” and also another note executed to R. S. Hale, the legal intendment is that both notes were the property of Hale; but this cannot be. so, or these plaintiffs would not sue to recover on it without so stating in their complaint. From this examination of the latter clause of the contract, it is again seen conclusively that the whole matter was without consideration and void. And if the defendant did promise to pay “said note,” and another note, in what does the consideration consist ? None is mentioned in the writing. It was a mere naked promise for the payment of an uncertain amount out of uncertain proceeds, to uncertain parties in an uncertain manner, and at an uncertain time, without consideration in law and void.

2. Appellants, in their brief, rely upon the fact that: “ This case has once before occupied the attention of this court (see 3 Mont. 380), and this identical contract was then subjected to judicial consideration and interpretation. It would be a little singular, to say the least of it, if this contract was in fact without consideration, that this court upon that appeal should have overlooked the matter, and remanded a case which was based upon a mere barren agreement in writing, to the district court for a new trial.”

Appellants further say: “Although there is nothing expressly said in the opinion of the court concerning the sufficiency of the consideration, it was a matter within the issues, and which the court must have found in favor of appellants.” The matter of the consideration could not have been an issue in this case, for whatever were the real facts in the case, the learned judge who delivered the opinion in the case, after setting out the contract, says: “Said Ming and Kinna brought this áction to recover from said Woolf oik the sums that are mentioned in the contract, and were paid by them to Hale.”

Again, the opinion states, on page 385: “It appears that the appellants and respondent borrowed of R. S. Hale the sum of $2,572.10,” etc.

It is not necessary to proceed further in a comparison of the cases, to see that a different case would exist if the money had in fact been borrowed from Piale, and respondent had agreed to pay the note which was given as the evidence of the debt. This is not the case.

Judgment is affirmed, with costs.

Judgment affirmed.