Fowle v. . Kerchner

The contract which is the basis of the action, being in writing and its terms therefore fixed, his Honor rightly treated its construction as a matter of law, the determination of which rested with the court. But we are constrained to (56) say that we cannot concur in the interpretation which he placed upon it.

The legitimate aim of all interpretation is not to make a contract for the parties, or to modify the one they have made for themselves, but simply to ascertain their intentions and to give them effect, if not inconsistent with some policy of the law; and in the effort to arrive at their intentions, it is always proper for the court to consider not only the precise terms of the instrument, but the circumstances under which it was made, the situation of the parties, and the manner in which they have borne themselves with reference to it. Omitting the question as to the defendants' lack of authority to contract for the "Journal Publishing Company," and for the present supposing them to have been duly authorized, and considering only the terms in which they have expressed their intentions, and the concomitant circumstances, there would seem but little room to doubt, that according to the understanding of the parties, then existing, the defendants contracted in their representative character as trustees, and that their own personal responsibility did not enter into the expectation of any of the contracting parties.

It is true their signatures affixed to the instrument are without any qualification, and in many doubtful cases, this circumstance has been seized upon by the courts as tending, prima facie, to show a purpose, on the part of the parties signing, to oblige themselves personally. But the signatures apply to the entire context of the instrument, and if from this it be plainly seen that the undertaking is in behalf of another then the courts without regard to the form of the signature must so construe it, and not treat it as the personal contract of the party signing it.

In 1 Parsons on Contracts, 54, it is said "that the more recent cases and the better reasoning, are, for determining in each instance and with whatever technical inaccuracy the signature is made, from the facts and the evidence, that a party is an agent or a (57) principal in accordance with the intention of the parties to the instrument."

In De Wolf v. Insurance Company, 8 Pick., 56 Chief Justice PARKER declared that the rule that the agent to bind his principal must sign the name of the principal, applies only to deeds, but that, as to other instruments, their effect must depend upon the intention with which they are made, and if from the whole instrument it can be ascertained that the party signing it intended to act for another, and not for himself, then he will not be bound.

In other words the courts now regard the particular form of executing a contract, not under seal, by an agent, as being wholly immaterial, provided the context of the instrument, and the circumstances under which it was executed, show that it was a ministerial act on his part.

Recurring then to the contract now under consideration, we see that not only did the proposition which the defendants submitted to the plaintiffs, and which upon their acceptance became the contract between the parties, expressly purport to be made as trustees, and in behalf of the projected company; but, as if to exclude by express provision all possibility of personal liability on their part, the defendants indicate the company's property as that which should be given in mortgage for the debt, and the company's funds as the source of its ultimate payment, and if to this we add the further fact disclosed in the correspondence between the plaintiff, Fowle, and the witness, Saunders, that at one time he insisted that the mortgage upon the company's property should be endorsed by parties "known to be good," but that he finally, upon being assured by Saunders, that the proposition as submitted was as advantageous as could be had, agreed to accept it "unendorsed," it would seem, if we are to adopt the intentions of the parties as the governing rule of construction, absolutely to (58) exclude all thought of responsibility on the part of the defendants personally.

Indeed we understand plaintiffs' counsel to admit so much as this, when in their brief, they say, that they do not mean to assert that the contract in terms bound the defendants to pay the amount of the purchase money out of their own pockets, but that it "operated as a guaranty by the defendants to the plaintiffs of the success of the scheme for organizing the company, and that it would perform what the defendants had agreed in its behalf."

But we find no such stipulation in the writing; nothing beyond a proposition as trustees to purchase for the benefit of the company: an agreement to mortgage the company's funds; a refusal to procure any indorsement of the mortgage, and the consent of the plaintiffs to accept it without such indorsement.

It is too apparent that all parties with equal opportunities for information were inspired with confidence in the successful organization of the proposed company, and that they dealt with each other on the footing of this assurance; and that their contract, not contemplating a failure of the scheme, did not provide, and was not intended to provide, for such a state of affairs — and for the court, now to make it do so, would be to go outside of the intentions of the parties, and to make and not to interpret the contract.

Neither do we feel at liberty, so plainly have the parties manifested their intentions, to vary this construction of the contract, because of the fact that the defendants had no principal capable of conferring upon them the authority to act as its agents — it being apparent, both from the pleadings and the proofs, that the plaintiffs had full knowledge of their want of authority.

It is unquestionably true that all the authorities concur in saying, that when upon a written contract in which mention is made of both principal and agent, he who is styled the principal, should not (59) be bound, it furnishes a strong argument for holding the agent to be bound. The rule, as one of construction, has been applied to those cases in which upon the face of the instrument, it was left doubtful whether the named principal, or the party signing, was intended to be bound, and a fortiori, would it apply to a case in which like the present, it appeared that there was no principal to be bound — that is to say — if there could be the least doubt in the minds of the court, arising from the terms of the contract or the circumstances surrounding the case, as to the party intended to be charged.

The rule however is, as we have said, one of construction, and by no means a legal conclusion. The parties having entered into a contract are presumed to have contemplated a performance of its stipulations by some one, and since the principal cannot be held to such performance, it must have been the intention of the parties that the agent should be — the maxim being ut res magis valeat quam pereat. But the rule itself has no application to a contract in which there is a clear manifestation of a purpose to bind the principal, and the principal only, accompanied with a refusal on the part of the agent to obligate himself.

When the form of the instrument clearly indicates it to be done in behalf of another, the courts must give it the construction that it is not the personal contract of the party signing the instrument, and no consideration respecting the plaintiff's remedy against any other party should prevail with the court to change the contract — say the courts in Rice v. Gove, 22 Pick, 158; McBeath v. Maldimand 1, Term Rep., 172.

It is just this distinction that has been taken in the case of an agent contracting in behalf of a foreign principal. There, if the language of the contract is at all ambiguous, so as to leave it doubtful to whom the credit was given, the principal or the agent, the circumstance that the principal is resident abroad may be taken into consideration in determining that question — it being reasonable, in a case (60) admitting of doubt, to suppose that the other contracting party trusted the agent residing at home and subject to the laws and process familiar to himself, rather than one living beyond the reach of domestic laws.

But still it is a question of intention, and if the contract be in writing, and its terms clearly manifest a purpose to bind the principal, though a foreigner, it must be deemed to be the final repository of the intention of the parties, and its construction and effect should not be varied so as to charge the agent in consideration of its unreasonableness or inconvenience. Bray v. Kettell, 1 Allen, 80.

The general rule is that whenever a party assumes to act as agent for another, if he have no authority or if he exceed his authority, he will be held to be personally liable to the party with whom he deals, for the reason that by holding himself out as having authority, he misleads the other party into making the engagement. But this rule is founded upon the supposition, say the court of appeals of Kentucky in Murray v. Caruthers, 1 Met., 71, that the want of authority is unknown to the other party, or if known, that the agent undertakes to guaranty a ratification of the act, and when the want of authority is known, and it is clear that the agent did not undertake to guaranty a ratification, it results that the agent is not personally bound.

Here, it is manifest both from the pleadings and the proofs that the plaintiffs had full knowledge of the nonexistence of the "Journal Publishing Company" as a corporation; and the terms of the written contract, as read in the light of the conduct of the parties, leave not the least reason to suppose that there was any undertaking on the part of the defendants to become sponsors for the proposed new company. Indeed they preclude any such hypothesis.

In Story on Agency, Sec. 265, is is said, there are exceptions (61) to the rule that persons contracting, as agents, are held personally responsible when there is no principal to whom resort can be had, and as an illustration is cited the case of an agent who should declare that he had no authority to contract for his principal, and yet refused to bind himself personally; and again in section 287, the case is put of a voluntary society, the members of which having subscribed for some charitable purpose engage an agent to procure supplies, and he should do so with an understanding on the part of those furnishing them, that they should rely for their reimbursement solely upon the funds that should from time to time be subscribed. In such cases the author declares there could be no doubt, that neither the subscribers nor the agent would be personally liable.

In Smout v. Ilberry, 10 M. W., 1, an agent, to whom no fraud was imputable and who had assumed no personal obligation, was held not to be responsible, though as the court declared they felt themselves "pressed with the difficulty that if the agent were not liable, there was no one that could be liable on the contract."

In Wake v. Harrop, 1 H. C. (Exchequer), 200, the court say, they are not bound to say whether the intended principals are liable; it is enough that the intention was that the defendants (the agents) should not be personally liable, and that even if the principals were not liable, there could be no good reason for suing the agents when there was an agreement that they should not be personally liable.

In the absence of all agreement, express or implied, to be personally bound, there can be found no case, we apprehend, in which an agent has been held responsible who has not been guilty of fraud, either actual or constructive. If, having no authority and so knowing, he yet contracts as though he had, then upon the plainest principles of right he should be held responsible because of his positive fraud; and so, if honestly believing himself to have authority while in fact (62) he has none, he contracts, he will likewise be held responsible, for though not acting mala fides he has still stated to be true what he did not know to be true, and if his wrong should work an injury to an innocent person, who has relied upon his assertion of authority, it is but just that he should make compensation.

The true principle derived from all the cases, is, that an agent can be made liable upon a contract made for his principal, only, upon the ground that he has agreed to be responsible or that he has been guilty of some wrong or omission of right; and since as we have seen neither of these circumstances attach to the contract made by these defendants, it follows that they cannot be responsible.

Independently of any agreement on their part, and without reference to any question of authority or fraud, the defendants most undoubtedly would have been liable if the consideration or benefit had moved to thempersonally. But their contract was made as trustees, and as such they received and used the property delivered to them by the plaintiffs; and, so far as the case discloses, not a particle of personal benefit did they or either of them derive from it. This distinction we think clearly exists and was recognized by this court in Hite v. Goodman, 21 N.C. 364.

Judgment reversed and venire de novo.

Error. Venire de novo.

Cited: Hicks v. Kenan, 139 N.C. 344; Basnight v. Jobbing Co.,148 N.C. 357; Perry v. Surety Co., 190 N.C. 291; Yarn Mills v. Armstrong,191 N.C. 129.