American Nat. Bank v. Trinidad Bean & Elevator Co.

The complaint alleges that defendant entered into an arrangement and agreement with Ward by which the defendant (appellant) "appointed, constituted and designated the said H.J. Ward its agent within and for the City of Tucumcari and County of Quay, New Mexico, for the purpose of buying wheat for it, the said Trinidad Bean Elevator Company."

The trial court, viewing the course of dealing disclosed by the evidence and the written admission of defendant that: "When our arrangement was made with Mr. Ward to buy wheat for us, a wire was sent to you," etc., found: "That Ward was the agent of defendant, and acted as such."

In view of the rule stated in Davis Carruth v. Valley Merc. Banking Co., 33 N.M. 295, 265 P. 35, 37, that on a demurrer to the evidence the appellate court is required to assume that "all of the evidence before the court which tends to establish the plaintiffs' case is true with all reasonable inferences to be drawn therefrom, and to view such evidence in the aspect most favorable to the plaintiff," I conclude that the trial court's finding is supported by substantial evidence:

The complaint proceeds to allege:

"III. That in order to carry out the terms of its contract with the said Ward and to enable him to purchase grain and pay for the same, the defendant agreed to guarantee to pay to said H.J. Ward, 100% for wheat purchased at quotations to be furnished by The Trinidad Bean Elevator Company, and further agreed with thisplaintiff to pay this plaintiff the drafts drawn by the saidWard, subject only to the condition that Ward guaranteed to it,the defendant, any discrepancies in weights or grades of wheatpurchased.

"IV. That such guaranty and agreement with this plaintiff on the part of the said defendant, consisted of telegrams and letters, as will be hereinafter set forth."

Mr. Foyil, President of the plaintiff bank, testified among other things that Ward had exhibited to him a written contract between himself and defendant elevator company, and:

"A. I didn't feel exactly satisfied regarding the contract, and I realized that would become necessary for the purpose of cashing a draft drawn on the Trinidad Bean and Elevator Company, and I called the Company over long distance and talked with them. Mr. Ward said there was wheat at different places ready to be bought, and exhibited forms of drafts, etc., that he was to draw for funds on the Bean and Elevator Company, and as I recall —

"Q. (interrupting). That is, you told them that in the telephone conversation? A. Yes sir, If they would pay the drafts, yes sir. Mr. Ward wanted to buy wheat during the day and draw in the afternoon on the Bean Company for the full amount of wheat bought that day. So I didn't have any way of verifying these transactions in the day, so in the conversation with the party at the other end of the line presumed to represent the Bean Company,they said it was the intention he should draw each day for thewheat bought that day, to draw a draft. And he exhibited theform of draft to be used, stating the quantity, one of these drafts to be deposited in his Company's name, on which he had been drawing checks for the payment of wheat in small lots." (Italics mine.)

He also testified that 17 similar drafts were drawn by Mr. Ward and were paid by appellant before any were refused, and that, when the refused ones were first presented, the only reason assigned for the refusal was that signature of Ward to the certificate was missing. He also testified that the drafts were all of the same type as to form, and were printed, and were presented to him for examination by Mr. Ward.

It is very apparent that the telegram does not fully "define the nature and qualities of the subject matter, the situation and relation of the parties, and all the circumstances."

The majority have found it necessary to indulge in inferences and look to the pleading of plaintiff and the admissions of defendant in order to relate the writings to the handling of drafts. Minus these inferences, pleading, and admissions, the writings "started nowhere in particular and arrived where they started."

The complaint was attacked by demurrer; the attack being based in part upon the ground that the cause of action was based upon the telegram and letter. The demurrer was overruled, and the defendant answered principally by way of denials, denying specifically that Ward was the agent of defendant and that defendant made any agreement with plaintiff to pay any drafts that might be drawn by the said Ward. If any error was committed by the trial court, it was in not sustaining defendant's demurrer to the complaint. Since the defendant did not stand upon its demurrer, but went to trial on the issues of agency of Ward and the direct promise by the defendant to the plaintiff to pay drafts drawn by the defendant through its agent, the question presented by such demurrer is not now open to review.

A similar question was again presented when plaintiff offered testimony of an oral agreement and understanding between plaintiff and defendant. It was urged that such oral agreement and understanding was not within the issues, and that it varied the terms of a written contract. The first of these grounds, having been previously decided by the ruling on the demurrer, requires no further discussion. I accept as reasonable the construction placed upon the pleadings by the trial court. I think the trial court properly concluded that the lawsuit was not an action upon a written instrument, in the sense that one brings a suit to recover upon a note, any more than one seeking to establish a water right under the Irrigation Code, and who sets out in his pleading a copy of the permit to appropriate water issued by the state engineer, as being an important and perhaps essential part of his cause of action, may be said to be suing upon a written instrument. Doubtless, the writings in the case at bar were important as a part of plaintiff's cause of action, but they were not the whole thing. Counsel for plaintiff would be convicted of great temerity to assert in the complaint that they relied on proving the issues of agency of Ward and a promise of defendant to pay such agent's drafts by the telegram and letter alone.

There seems to have been some confusion at the trial, but it seems to me that the majority have taken too technical a view. In Locke v. Murdoch, 20 N.M. 522, 151 P. 298, 300, L.R.A. 1917B, 267, the parol evidence rule was under consideration, and we said: "The courts seem to agree that the question at bar presents a recurring difficulty, not because of the rule itself, but because of the application of the exceptions which appellee invokes," and adopted the definition found in Jones on Evidence as being well settled.

"The general rule under discussion is not violated by allowing parol evidence to be given of the contents of a distinct, valid, contemporaneous agreement between the parties which was not reduced to writing, when the same is not in conflict with the provisions of the written agreement. The exception is thus stated somewhat more guardedly by Mr. Stephen: ``The parties may prove the existence of any separate oral agreement as to any matter on which a document is silent, and which is not inconsistent with its terms, if, from the circumstances of the case, the court infers that the parties did not intend the document to be a complete and final settlement of the whole transaction between them.'"

In Strickland v. Johnson, 21 N.M. 599, 157 P. 142, 144, we quoted with approval as follows:

"Where the agreement between the parties is one and entire, and only a part of this is reduced to writing, it would seem that the residue may be proved by extrinsic evidence." 2 Parsons on Contracts, § 553.

In Schwentker v. Hubbs, 21 N.M. 188, 153 P. 68, we decided:

"Parol evidence is admissible, in the construction of contracts, to define the nature and qualities of the subject-matter, the situation and relations of the parties, and all the circumstances, in order that the courts may put themselves in the place of the parties, see how the terms of the instrument affect the subject-matter, and ascertain the signification which ought to be given to any phrase or term in the contract which is ambiguous or susceptible of more than one interpretation, and this, although the result of the evidence may be to contradict the usual meaning of terms and phrases used in the contract, but, if the words are clear and unambiguous, a contrary intention may not be derived from the circumstances."

The majority say: "The writings are plain and unambiguous. They do not require explanation."

My inability to agree with this view, and my inability to see the writings as a complete contract with the plaintiff, is the cause of this dissent.

When the telegram was offered in evidence, it was objected to because it did not throw any light on the issues in the case, and did not establish any responsibility of the defendant, and did not establish the agency of Ward or in any way bind the defendant to the plaintiff, or authorize the payment of any funds or advancing of any money. When the letter was offered, it was objected to for the same reasons.

The testimony as to the "arrangement" existing as shown by the oral conversations was objected to because the whole agreement was expressed in the telegram and letter.

In appellant's brief it is stated: "The telegram was for the purpose of communicating certain information to the plaintiff without delay. The letter was for the purpose of making more definite the same information. The telegram was effective only until the letter was received by the plaintiff. It was clearly the intention that the letter should cover the entire situation and that after the receipt of the letter the telegram was to be no longer considered. That the letter did cover the entire situation can hardly be questioned. The letter and the telegram are quoted in full in the Statement of Facts in this brief."

Again appellant says: "Looking at this letter from a common sense point of view, what is its reasonable meaning? It can mean just one thing; that it was assurance that the Elevator Company would pay Ward in full for wheat purchased at their quotations and sold them in accordance with their contract with Ward."

In other words, what the defendant did guarantee was the performance of its own contract with Ward guaranteeing to do the thing they would be legally bound to do without any letter or telegram to the Bank. And yet the defendant put its own construction upon the letter and telegram, saying in a letter to the bank: "A wire was sent to you which was confirming my letter in which we guarantee to pay drafts drawn on us by Mr. Ward which covered the purchase of wheat."

Again, in the brief of appellant, it is said: "This letter and telegram remind us of an eight-year old boy running on an errand for his mother. The writer started nowhere in particular and arrived where he started."

I think these writings do require explanation, and that the oral testimony as to the subject-matter, the situation and relationship of the parties and the surrounding circumstances is essential to such explanation. Also the rule should not be invoked so strictly in case of writings unilateral in form. Jones on Ev. § 1491.

Another thing worthy of note is that, though appellant states twenty-four "Points Relied Upon for Reversal," the reception of the evidence by the trial court which is now excluded by the majority is not one of them. Appellee expresses some chagrin in its reply brief at not having made a point of it, and explained that the reason for the omission was that it did not consider it material, and, having changed its mind, devotes some attention to it. If the oral testimony in question is not excluded, it appears from all the evidence and inferences to be drawn therefrom that Ward was defendant's agent, that as such he presented printed forms of drafts either prepared by or acquiesced in by the defendant, upon which appeared a certificate as follows:

"Certificate "The undersigned certifies that the above grain is now on hand in his possession and is now the property of The Trinidad Bean Elevator Co., and is being held subject to their order.

"__________."

Each of the drafts also bore a memorandum as follows: "This draft is not valid unless attached certificate is properly filled out," and that defendant elevator company agreed to pay the drafts drawn by Ward, its agent, for the purchase of wheat. And that it agreed to the methods of handling the drafts, that is, that Ward should draw a draft each day for the wheat bought that day, and further that the elevator company fixed its own evidentiary test as to whether the wheat had been bought by prescribing a form of certificate attached to each draft, which Ward was to sign. This certificate likewise afforded the protection demanded in the telegram, and letter, "that Mr. Ward guarantee weights and grades on all shipments in accordance with our contract." In view of the evidence of the course of dealing wherein it is shown that the elevator company paid seventeen drafts under such arrangement, and then, when it first refused to pay two of the four drafts in question, the refusal was based solely upon the ground that the form of certificate did not contain Mr. Ward's signature, I find it easy to agree with the trial court that, when the bank had procured the execution of this certificate by the defendant's agent Ward, that this discharged the burden upon the bank that Ward had purchased wheat and guaranteed weights and grades thereof, and that there was no duty upon the Bank's officers to exercise a surveillance over Ward, the defendant's agent. This agent of the defendant drawing a draft represented that he had purchased wheat. I think the principal was bound by the representations of the agent and that the Bank had a right to rely upon such representations without inquiring further.

Appellant cites a number of cases dealing with what is, and what is not, acceptance of drafts by the drawee. We need not go into that because of the element of agency which is established in the case at bar. In First Nat. Bank v. Home Insurance Co.,16 N.M. 66, 113 P. 815, the territorial Supreme Court decided: "In an action brought to recover on a draft, the complaint alleged that the draft was drawn by an agent on his principal by authority of the principal, that the draft was presented, payment refused, and that same is still unpaid. Held, to be good on a demurrer for failure to state facts sufficient to constitute a cause of action, for the reason that ``a draft drawn by an agent on his principal by authority of the principal is equivalent to a draft drawn by the principal himself, and need not be accepted by the drawee in order to bind it.'"

After a careful consideration of the entire record, I find myself unable to yield acquiescence to the view that the judgment of the trial court should be reversed. I therefore dissent.