Story Case

Henry Judson was the manager of the Kenesaw Coal Company. As such officer, and with the authority of the company, he executed a promissory note and signed it, "Henry Judson, manager of the Kenesaw Coal Company". Later, the coal company was sued on the note, and it put in the defense that liability did not exist, since it was not named as a party in the instrument. Will the defense stand as a bar to recovery against the company?

Ruling Court Case. Webster Vs. Wray, Volume 19 Nebraska Reports, Page 558; Volume 56 American Reports, Page 754

In this case, T. B. Webster, acting as agent for E. D. Webster, made and delivered certain promissory notes to Wray. These notes were signed by T. B. Webster, and the name of E. D. Webster did not appear in them at all. Wray sues the principal, E. D. Webster, upon the theory that the acts of an agent bind his principal, so long as the agent does not exceed his real or ostensible authority. He wished to introduce evidence to show that T. B. Webster acted for E. D. Webster. The evidence was excluded.

Cobb, Jr., delivered the opinion of the Court, and quoted, with approval, the following: "The rule is general, if not universal, that neither the legal liability of an unnamed principal to be sued, nor his legal right to sue on a negotiable instrument, can be shown by parol evidence, even as between the immediate parties to the transaction." This rule "is derived from the nature of negotiable paper, which is made for the purpose of being transferred from hand to hand, and of giving to every successive holder as strong a claim upon the maker as the original payee has." Accordingly, it was held that the defendant, E. D. Webster, was not liable upon these notes, even though they were made by his agent, while acting within his authority.

Ruling Law. Story Case Answer

An agent, who signs his own name to a negotiable instrument without inserting the name of his principal, is bound, and no liability, whatsoever, attaches to the principal. In such a case, an agent should always sign: "P, by A, his agent"; and so, in the Story Case, the plaintiff cannot recover against the Kenesaw Coal Company, for it is not named as a party to the instrument, although its name appears thereon. It should have appeared as the one making the promise. As it is, the name appears only as descriptive of Henry Judson.