Opinion
No. 33690.
May 1, 1939. Suggestion of Error Overruled May 29, 1939.
1. JOINT ADVENTURES.
A bank, which discounted note executed to corporation pursuant to a joint adventure to establish garment factory in city and accepted renewal notes, did not become a party to joint adventure, so that it could not sue other parties for losses incurred, even though some of bank's officers personally participated in joint adventure.
2. JOINT ADVENTURES.
Joint adventurers may become liable to each other for debts and losses incurred pursuant to the joint adventure if the assumption of such liability is agreed to by them.
3. BILLS AND NOTES.
A note executed to corporation by makers whose signatures disclosed that they were acting as a "committee for local shareholders" and discounted by bank, renewal notes payable to bank signed "committee for local shareholders" and signed or indorsed by original makers, and other renewal notes signed by corporation by its president and indorsed by original makers, charged makers and indorsers with personal liability to bank.
4. BILLS AND NOTES.
A bank was not estopped to contend that indorsers of renewal notes executed to bank were liable for payment of notes on ground that it was understood that indorsers were not to be held personally liable where understanding, if any, was among persons who had guaranteed sale of stock of company to which original note which bank had discounted was payable, and bank was not a party thereto.
5. EVIDENCE.
The legal effect of a note cannot be varied by a prior or contemporaneous oral agreement.
6. BILLS AND NOTES.
A bank was not estopped from collecting a renewal note executed by certain guarantors of corporate stock subscription on ground that bank negligently failed to collect notes executed by purchasers of stock, placed with bank for collection, and collected and applied in part payment of series of renewal notes under guarantors' direction, where purchasers' notes were not delivered to bank as collateral security for renewal notes, and bank was not authorized and did not agree to coerce purchasers into paying them.
7. BILLS AND NOTES.
As respects rights of indorsers, a bank which discounted note payable to corporation for balance of stock subscription was not required to collect renewal notes from persons who had guaranteed sale of stock because notes were given in carrying out guaranty, where guaranty did not run to bank, and bank made no agreement to look thereto and had no interest therein.
8. BILLS AND NOTES.
The mere fact that three persons indorsed original notes did not of itself alone make indorsements of two of those persons on renewal notes conditional on the third original indorser's continuing to indorse renewal notes.
9. BILLS AND NOTES.
In suit on note providing for a reasonable attorney's fee, 15 per cent of principal and interest was added to decree for plaintiff to cover attorney's fee, where the only evidence concerning a reasonable fee was that it would be 15 per cent of the principal and interest.
APPEAL from the chancery court of Pike county; HON. R.W. CUTRER, Chancellor.
Roach Jones, of McComb, and W.S. Henley, of Hazlehurst, for appellant.
No joint adventure was established. A joint adventure has been aptly defined as a "special combination of two or more persons, where in some specific venture a profit is jointly sought without any actual partnership or corporate designation."
33 C.J. 841; Peterson v. Nichols, 90 Wn. 398, 156 P. 406; Fletcher v. Fletcher, 206 Mich. 153, 172 N.W. 436.
To constitute a joint adventure two parties must combine their property, money, efforts, skill or knowledge in some common undertaking.
Wilson v. Maryland, 152 Minn. 506, 189 N.W. 437.
A venture is an undertaking attended with risk; a business speculation.
McRee v. Quitman Oil Co., 16 Ga. A. 12, 84 S.E. 487.
In other words, a joint adventure is the same thing as a partnership except that it is limited as to duration and scope. It would require the same character of proof to establish a joint adventure as it would a partnership.
As a matter of fact, if there was any joint undertaking in this instance, its scope would be limited only to the extent of the operations of the garment manufacturing plant and the time would appear to have no special limitation thereon, and it would be equally as reasonable to contend that the Mechanics State Bank and the Tuf-Nut Garment Manufacturing Company and their directors were engaged in a partnership as to contend that they were in a joint venture.
Contracts for loans have been repeatedly held to exclude the idea of joint adventure.
33 C.J. 842; McLean v. City State Bank, 210 Fed. 21, 126 C.C.A. 601; National Surety Co. v. Winslow, 143 Minn. 66, 173 N.W. 181; Curry v. Fowler, 87 N.Y. 33, 41 Am. Rep. 343; Meehan v. Valentine, 36 L.Ed. 835; Boston and Colorado Smelting Co. v. Smith, 43 Am. Rep. 3; Waverly National Bank v. Hall, 30 A.S.R. 823.
Parol agreement contradicting written terms of note is inadmissible.
One of the fundamental principles of commercial law, and on the faith of which the commerce of the country is carrier on, is that a written instrument or contract is not subject to contradiction or alteration by a contemporaneous parol agreement.
It has long been a fundamental law that a person is not permitted to deny a promise contained in a note to pay by testifying that there was an oral agreement that this promise was to be of no force and effect.
Carolina National Bank v. Wilson, 150 S.E. 765; Hartman v. Citizens' Bank Trust Co., 171 S.E. 195; First Natl. Bk. of Hooversville v. Sagerson, 129 A. 323.
Evidence fails to establish any agreement that makers and enforcers of note would not be held personally liable.
Bank did its best to collect notes and properly accounted for the funds collected.
The bank had no right, authority or power to sue on the notes. The notes were not payable to the bank, were not pledged to the bank or assigned to it, and, if the notes had been sued on in the name of the bank, such suits would have been filed without authority.
Ellis Jones Drug Co. v. Williams, 139 Miss. 170, 103 So. 810; Aldridge v. Rice, 161 Miss. 879, 138 So. 570.
The bank is not estopped to collect notes by its conduct.
The bank is not estopped by failure to secure endorsement of L.Z. Dickey on renewal notes.
F.D. Hewitt and R.B. Reeves, both of McComb, and Green, Green Jackson, of Jackson, for appellees.
The joint adventure was established and the bill was properly dismissed. As we understand it from the authorities a joint adventure is not necessarily a partnership nor does it have any corporate designation, but it is a combination of persons or corporations, or persons and corporations in the hope that there may be mutual profit, but from which of course there may be mutual losses. We call attention to the following authorities demonstrating that the record in this case brings to the conclusion that only a joint adventure was here undertaken from which one of the joint adventurers may not profit at the expense of two others, especially when the forty guarantors were released through the acts of the complainant, appellant here.
33 C.J., pages 841, 865, 867 and 868; Rauch v. Donovan, 126 App. Div. 52, 110 N.Y.S. 690; Keiswetter v. Rubenstein, 235 Mich. 36, 209 N.W. 154, 48 A.L.R. 1049; Connell v. Mulligan, 13 S. M. 388.
In Fulton v. Woodman, 40 Miss. 593, the court held that equity had complete jurisdiction of an action between joint adventurers for rescission of the contract and to state an account between the parties.
Toff v. Duncan, 45 Miss. 48; Chandler v. Cooke, 163 Miss. 147, 137 So. 496.
As we understand it one partner cannot sue another for an indebtedness arising out of the operation of the partnership unless it be an ascertained balance of a separate account, or a general balance of accounts previously determined between the partners.
Bonnafee v. Fenner, 6 S. M. 212; Murdock v. Martin, 12 S. M. 660; Thornton v. McNeill, 23 Miss. 629; Sturges v. Swift, 32 Miss. 239; Anderson v. Robertson, 32 Miss. 241 ; Hunt v. Morris, 44 Miss. 314; Evans v. White, 31 So. 833.
There are, as we understand it, a number of exceptions to the general rule that parol evidence is inadmissible to vary the terms of a written contract, particularly where waiver and estoppel and fraud in law are charged, as in the case here. In other words we take the position that the complainant in this case was estopped by act and deed, by agreement, by course of action and by equity from asserting any personal liability of Mr. Kramer and Mr. Denman. We also in our amendment to the bill of complaint and subsequent testimony thereon taken set up and urged facts to show that to permit a recovery against Mr. Kramer and Mr. Denman where there had been a release of Mr. Dickey and of the Tuf-Nut Garment Manufacturing Company, a corporation, without the knowledge, acquiescence and consent of Mr. Kramer and Mr. Denman would be a fraud in law and in equity, and, under these charges and the proof to sustain the same the exceptions to the parol evidence rule are available.
Jones on Evidence (3 Ed.), sec. 494; Armstrong v. Employer's Liability Assurance Corp., 125 Miss. 570, 88 So. 163; Schlater Mercantile Co. v. Brinley Hardy Co., 109 Miss. 300, 68 So. 444; Ohio Pottery Glass Co. v. Pickle, 108 Miss. 51, 66 So. 321.
It is specially held in Boyd v. Kelley, 111 Miss. 629, 71 So. 897, that parol evidence is admissible to show reasons for extensions and renewals of notes especially to secure the endorsement of persons who are financially able to pay said note.
Mackie v. Dale Sons, 122 Miss. 430, 84 So. 453.
In London G. A. Co. v. Miss. Central Railroad Company, 97 Miss. 165, 52 So. 787, our court specifically holds as it has for many years that parol evidence is admissible to demonstrate a waiver and estoppel, and this rule was just recently followed on Monday, September 12, 1938, by the Supreme Court of Mississippi in the case of U.S. F. G. Co. v. Yost, Administrator of Payne, 183 So. 260, wherein parol evidence formed the basis of the decision in setting aside the solemn written provisions of a contract of insurance in which it was determined most correctly that waiver and estoppel had been evidenced by the acts, word and deed of the party claiming under the written contract.
Dilworth v. Federal Reserve Bank, 154 So. 535.
The bank is estopped by failure to collect stock notes.
Appellant is estopped by its conduct to treat said notes as valid personal debts of Kramer and Denman. Estoppel arises from some word spoken, some act done, or some failure to speak when called on to speak.
Canal, etc., Bank v. Brewer, 108 So. 424; La Rosa v. Nichols, 92 N.J.L. 375, 105 A. 201; 10 R.C.L. 841; 21 C.J. 1116; Thomas v. Romano, 82 Miss. 256, 33 So. 969; Drexel v. Barney, 122 U.S. 241, 30 L.Ed. 1219.
There was a conditional delivery of said notes.
The release of the signature of Tuf-Nut Garment Manufacturing Company, a corporation, and of L.Z. Dickey without the agreement of the other endorsers released and discharged Kramer and Denman.
Sec. 2776, Code of 1930; Thompson v. Gore, 178 So. 81; Carter v. Jennings, 134 Miss. 263, 98 So. 687; Gresham v. State Bank, 131 Miss. 20, 95 So. 65.
The case of Upton v. Bush et al., 141 Miss. 660, 107 So. 284, is directly in point, and approves the early case of Simmons v. Atkinson Lampton Company, 69 Miss. 862, 12 So. 263, 23 L.R.A. 599, to the effect that any change in the note which the endorser intends to endorse voids the entire transaction and releases and discharges the endorser from any liability.
State v. Allen, 69 Miss. 508, 10 So. 473, 30 A.S.R. 563; Hamilton v. State, 66 Miss. 217; Cotes v. Pontotoc Lbr. Co., 164 Miss. 779, 146 So. 302.
Argued orally by W.S. Henley, for appellant, and by Forrest B. Jackson, for appellee.
This case began as an action at law by the appellant on a promissory note, and was, by request of the appellees, transferred to the chancery court. It was there tried on bill, answer and proof, resulting in a decree dismissing the bill of complaint.
The note sued on was executed on January 31, 1932, payable to the appellant, is signed by the appellee garment company and endorsed by the appellees Denman and Kramer. The evidence for the appellees is to this effect: In May, 1927, an arrangement was made by the McComb City Chamber of Commerce with the Tuf-Nut Garment Manufacturing Company of Arkansas to establish a branch of its manufacturing business at McComb City, provided that $50,000 of new stock to be issued by it should be purchased by citizens of that city. At a meeting of McComb City citizens on May 31, 1927, forty persons, among whom were Denman and Kramer, signed an agreement reading as follows: "Witnesseth: That we, the undersigned Guarantors hereby contract and agree to underwrite $50,000.00 sale of stock in the Tuf-Nut Garment Mfg. Company of Little Rock, Arkansas, said stock to consist of four hundred (400) shares of 7% preferred Stock and four hundred (400) shares of Common Stock of no par value, the stock to be sold in units of one share at $125.00 per unit." Two or three of the signers of this instrument were officers of the appellant bank, though that fact does not appear from their signatures. On the same day, another instrument was signed by the Tuf-Nut Garment Mfg. Company of Arkansas and a committee representing these guarantors, which, among other things, set forth that the garment company would establish a branch of its firm at McComb City, add to its board of directors two members to be elected by the McComb City subscribers to its capital stock; and that in event it should discontinue its McComb City business, it would repurchase its capital stock sold pursuant to the agreement. One of the stipulations being that: "as to the payment of the $50,000.00 of stock in said Company, that said amount is to be paid in as follows: $10,000.00 on July 1, 1927, or as soon thereafter as the machines arrive, and the residue of the remaining $40,000.00 to be paid in eight equal installments of $5,000.00 or more each month thereafter consecutively until paid." About $35,000 of the $50,000 of stock was sold, and in order to raise the remainder of the money so that the garment company would begin business at McComb, a meeting of these guarantors was held and a committee consisting of L.Z. Dickey, W.T. Denman and X.A. Kramer, was appointed to execute a note or notes for this balance to the garment company. Dickey was president of the appellant bank. Three short time notes were executed to the garment company by the members of this committee, their signatures disclosing that they were acting as a "committee for local shareholders." These notes were endorsed by the garment company and sold by it to the appellant for their face value. On March 28, 1928, there was a balance due on these notes of $6880, and a new ninety day note was executed therefor payable to the appellant, signed by Dickey, Denman and Kramer, without their signatures indicating that they were acting in any representative capacity. The note was renewed several times by notes for varying amounts signed "committee for local shareholders, Tuf-Nut Garment Company," and either signed or endorsed by Dickey, Denman and Kramer. In the meantime, the Tuf-Nut Garment Mfg. Company of Arkansas became involved in financial difficulties, its interests at McComb City were taken over by the local shareholders, and vested in a new Mississippi corporation of the same name.
On February 10, 1930, the last of the above notes was renewed by a ninety day note to the appellant for $6162.74 signed Tuf-Nut Garment Company by "L.Z. Dickey, Pres.," and endorsed by Denman and Kramer. Thereafter, renewal notes for the same amount, signed and endorsed as was the one on February 10, 1930, were executed every ninety days, the last note, the one sued on, being dated January 31, 1932.
The decree does not indicate on which of the several claimed defenses to this note the court below based its decree, all of which will be here discussed.
The appellees say that the plan devised for securing the establishment of a garment factory at McComb City was a joint adventure of those participating therein, and consequently as the appellant was a party thereto it has no cause of action against any of the other parties thereto for losses incurred by it pursuant to the joint adventure. We will assume, but merely for the purpose of the argument, that such a joint adventure here appears, and that the appellant had the power to become a party thereto. Nevertheless, the contention must fail.
A. The only connection which the appellant is shown to have had with this joint adventure was to discount the note executed to the Tuf-Nut Garment Mfg. Company, and to accept renewal notes for the debt evidenced thereby. So doing did not make it a party to the joint adventure. It is true that some of the appellant's officers personally participated in this joint adventure, but their so doing did not make the appellant a party thereto.
B. Joint adventurers may become liable to each other for debts and losses incurred pursuant to the joint adventure if the assumption of such liability is agreed to by them. The original note discounted by the appellant and its renewals charged the makers and endorsers thereof with personal liability to the appellant therefor, on the faith of which they were accepted by the appellant. Chandler v. Cooke, 163 Miss. 147, 137 So. 496.
2. According to the evidence for the appellees, which was contradicted by evidence for the appellant, when these notes were executed, it was understood and agreed that the endorsers thereon were not to be held personally liable for the payment thereof. This agreement, the appellees say, was valid, and estops the appellant from claiming that these endorsers are liable for the payment of the notes. The evidence discloses that this agreement or understanding, if such there was, was among the persons who had guaranteed the sale of the stock of the garment company, but not that the appellant was a party thereto. Moreover, the legal effect of a promissory note cannot be varied by a prior or contemporaneous oral agreement.
3. A portion, probably the greater part, of the McComb City purchasers of stock in the Tuf-Nut Garment Mfg. Company of Arkansas executed promissory notes in payment therefor. Many of these notes were placed with the appellant for collection. A portion of these notes were collected and applied under the direction of the guarantors committee in part payment of the initial and probably one or two of the renewal notes. The makers of the remainder of these notes declined to pay them. The appellees say that the appellant negligently failed to collect these notes, which, we will assume, if collected, would have produced sufficient money to pay off the notes here sued on, and because of this negligence, the appellant is estopped from collecting the note sued on. These notes were not delivered to the appellant as collateral security for the series of notes of which the one sued on is a part, and the appellant was not authorized, and did not agree, to coerce the makers thereof into paying them.
4. In this connection, also, the appellees say that the appellant should have collected the notes from the persons who guaranteed the sale of stock in the garment company, the notes having been given in carrying out that guaranty. This guaranty did not run to the appellant, it made no agreement to look thereto, and had no interest therein.
5. Finally the appellees, Denman and Kramer, say that they cannot be held liable on their endorsement of these notes for the reason that the renewal note of April 24, 1929, and the notes executed prior thereto bore the endorsement of L.Z. Dickey, whose endorsement does not appear on the note executed July 24, 1929, or on any of the subsequent renewal notes. They say that when they endorsed these notes they did so on the assumption that Dickey would also endorse them. When they endorsed the notes nothing was said to them as to who would or would not endorse them, and they made no inquiry relative thereto. Such being the case, they can not complain that the appellant accepted the notes without Dickey's endorsement. Had the notes been endorsed and delivered conditioned on the bank's obtaining Dickey's endorsement thereof, a different question would arise, but the mere fact that Dickey had endorsed the previous notes does not of itself alone make the endorsements of Denman and Kramer conditional on his continuing to endorse the renewal notes.
The note sued on provides for a reasonable attorney's fee, and the only evidence as to what a reasonable attorney's fee would here be is that it would be fifteen per cent of the principal and interest of the note.
The decree will be reversed and a decree rendered here for the appellant for the principal and interest on the note; to which will be added fifteen per cent thereof to cover the attorney's fee.
So ordered.