Latham v. Houston Flour Mills

Willie, Chief Justice.

In the view we take of this case it will not be necessary for us to determine whether or not the rule of the common law, that when a contract is joint only the estate of a surety is discharged by his death, has been in force in this State since the adoption of the Revised Statutes. The note upon which the suit is brought is as follows:

“Houston, Texas, Aug. 20th, 1885.

“One year (with privilege of two) after date we promise to pay to the order of Dr. D. F. Stuart five thousand dollars ($5,000) at our office in Houston, Texas, with interest at rate of ten (10) per centum per annum from date until paid — interest payable semi-annually.”

It is signed “Houston Flour Mills Co., D. P. Shepherd, president.”

This manner of signing the obligation of a corporate body has been frequently recognized to be the same as if the word “by” was inserted between the name of the corporation and the name of the officer signing the contract. It is the separate obligation of the corporation, and not the joint promise of the corporation and the individual who has evidently signed its name as an officer authorized so to do.

The signature of the corporation has to be made by some one of its officers or agents, and the fact that the office of the individual signing next to the corporate name, is stated, shows that he is the officer by whom the signature was made for the corporation, and that he did not intend to become .personally bound for the payment of the note. (Atkins v. Brown, 59 Maine, 90; Castle v. Belfast Foundry Co., 72 Maine, 167; Draper v. Mass. Steam Heating Co., 5 Allen, 338.)

That this is the character of the note in suit, is made more clearly to appear by the use of the words “at our office” in designating the place of payment. In the connection in which these words are used they must mean the office of the company, and do not presumptively include both that and the private office of Shepherd. They show further that the person executing the note treated the corporation as being of the plural number.

If the instrument had been the note of a natural person, signed by him alone, the use of “we” instead of “I” would not have rendered it anything else but the separate contract of the maker. The instrument would have been the same in every respect as if the pronoun “I” had been used. (Whitmore v. Nickerson, 125 Massachusetts, 496; Holmes v. Sinclair, 19 Illinois, 71.)

As the separate and sole contract of the corporation, the note must be construed as if it read “We, the Houston Flour Mills Company, promise to pay at our office,” etc., and was signed “Houston Flour Mills Co., by D. P. Shepherd, president.”

This being the nature of the contract between the payee and the corporation, the question is, what was the character of the obligation assumed by Shepherd and Latham when they placed their names upon the back of the note? This was done before delivery, and their names appear before that of the payee upon the back of the instrument. In such cases the obligation assumed is considered open to explanation by parol evidence, and may be proved to be of any character consistent with the nature of the transaction. (Cook v. Southwick, 9 Texas, 615; Moies v. Bird, 11 Massachusetts, 436.)

When the proof is not otherwise, our decisions seem to treat such indorsers as original promissors or sureties, entitled to the same rights and subject to the same liabilities. (Cook v. Southwick, supra; Carr v. Rowland, 14 Texas, 275.)

The proof in this case shows that Shepherd and Latham did intend in indorsing the note to become sureties for its payment by the corporation.

We have, then, the case of the note of one individual indorsed by two sureties, and the question for determination is, what is* the liability of these parties to the payee? If this note was the obligation of a natural person, and the promise was made in the singular number, and the names of two sureties were signed to it along with the principal, it would be the joint and several note of the three makers. (1 Daniel on Neg. Ins., sec. 94.) If the note purported on its face to be what the law construes it to mean, i. e., the individual contract of the Houston Flour Mills 'Company, and the names of Shepherd and Latham were signed to it as sureties, a like construction would be given the instrument, for in this respect there can be no distinction drawn between natural and artificial persons.

With the present reading of the note, were the names of other parties, whether sureties or principals, signed to it in addition to that of the corporation, the note might be construed as joint •only. But whilst the indorsement of a note by a stranger may subject the indorsers to as great a liability as if their names were written at. the foot of it, such an indorsement does not change or modify the obligation assumed by the principal on the face of the instrument. His contract is evidenced by the language of the note; the contract of the irregular indorsers is what may be written above their names consistently with the transaction. What may be there written is that which the law implies from the indorsement, or which the parties have agreed on as to the liability of the indorsers. This can not affect the individual liability of the maker, for what he has agreed to do is written in the note itself, and not inferred to be different by reason of any contract either express or implied made between others, and contained in another writing or resting in parol. It is on the ground that the contract of the indorsers is not to be found in the note alone, that it is held subject to proof by extrinsic evidence. If parol testimony is admissible to show that, by reason of the indorsement of the sureties, the maker is not liable to the same extent, in the same manner or in the same capacity as the note fixes his liability, then his written contract is varied by parol evidence, which is against a cardinal principle of law. If two or more parties make a joint and several note, and two others indorse it with an agreement either verbal or written, that the makers shall be only jointly bound with them for its payment, this would not affect the several character of the note. If one party makes a note and another indorses it, they in law become jointly and severally liable for its payment. (Good v. Martin, 5 Otto, 91; Story’s Prom. Notes, sec. 8.)

But suppose the indorsers should contract that their liability should be joint only, we think this would not release the maker from his several liability, It is perfectly plain that this could not be done by parol or by implication in either of the supposed instances, which is sufficient for the purposes of this case. The-present note, being the individual contract of the corporation, was not changed by the indorsement of Shepherd and Latham into a joint contract of these parties and the corporation. The-pronoun “we,” which, by the terms of the note—these being the terms of the contract between the company and the payee— meant "the company alone, can not have a different meaning given to it by reason of any obligation assumed by the sureties alone. It must still be referred to the party signing the note, and not to it as well as to others whose contract it does not fully establish.

Opinion delivered March 11, 1887.

- But there was parol evidence admitted which tended strongly to show that the true state of the contract of the indorsers was in accordance with our construction. Shepherd himself, testifying for the defendants, said that they were sureties for the payment of the note, and that “we” in the note referred to the-corporation alone. Without attempting to pass upon the effect of this evidence as to the corporation, it certainly tended to show what contract the indorsers intended to make with the payee of the note. They did not intend to be embraced within the term “we,” but to bind themselves as in case of irregular indorsers, upon the note of a single individual. They did not propose to vary the obligation of the principal, had it been in their power to do so, from an individual note to that of one made jointly with another; but their intention was to become severally as well as jointly bound with the principal, as certainly as if such had been the agreement written above their names. We think that this was the effect of the contract, and that Latham’s estate was not relieved from that obligation by reason of his death. The court below was correct in finding for the plaintiffs against all the defendants in the judgment, and.it is affirmed.

Affirmed.