Walker v. Traylor Engineering & Mfg. Co.

• Decision Date: 12 April 1926
• Docket Number: No. 6951.,6951.
• Citation: 12 F.2d 382
• Parties: WALKER et al. v. TRAYLOR ENGINEERING & MFG. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

12 F.2d 382 (1926)

WALKER et al. v. TRAYLOR ENGINEERING & MFG. CO.

No. 6951.

Circuit Court of Appeals, Eighth Circuit.

April 12, 1926.

G. C. Spillers, of Tulsa, Okl. (E. J. Doerner, of Tulsa, Okl., on the brief), for plaintiffs in error.

A. J. Biddison and Harry Campbell, both of Tulsa, Okl., for defendant in error.

Before KENYON and VAN VALKENBURGH, Circuit Judges, and YOUMANS, District Judge.

VAN VALKENBURGH, Circuit Judge.

Defendant in error, a corporation organized and existing under the laws of the state of Delaware, brought suit in the District Court for the Eastern District of Oklahoma against plaintiffs in error, upon a promissory note for the sum of $5,330.43, executed by the Choctaw Portland Cement Company, a corporation. On the back of said note are the indorsements of plaintiffs in error. The petition charged that said plaintiffs in error, "at the time of the making and execution of said note, and prior to the delivery thereof, indorsed, respectively, their respective names upon the back of said note with the intent and to the effect of thereby becoming liable thereon as makers of said note before delivery." Defendant in error was the payee named in the note, and the petition alleges that ever since the execution and delivery thereof it had been and still was the owner and holder of the note, no part of the principal of which had been paid. By their answer, plaintiffs in error charged that defendant in error had no legal capacity to maintain this suit, for the reason that it is a foreign corporation doing business within the state of Oklahoma, and has neglected and failed to comply with the laws of that state, in that it has failed to appoint a resident agent upon whom service of process might be had, has not filed a copy of its charter with the secretary of state, and has not filed a copy of the appointment of a resident agent with the county clerk wherein the said agent, if any, resides, as provided by law.

The answer admits that the Choctaw Portland Cement Company did make and deliver to defendant in error the promissory note upon which the suit was brought, but alleged that thereafter plaintiffs in error indorsed or wrote their names across the back of said note. The answer further states "that the said indorsement was wholly without consideration between the defendants and the plaintiff herein, and that nothing of value passed between the plaintiff and the defendant, and that there was no consideration for the placing of the signatures of these defendants on the back or reverse side of said note.

"Answering further, defendants state that they did not indorse the said note contemporaneously with the making of same, and that their signatures across the back thereof, as indorsers, were placed there without any consideration, and at a time subsequent to the making, execution and delivery of said note to the plaintiff by the said Choctaw Portland Cement Company."

For further defense, the answer alleges that the note itself was without consideration; that it was made as a part of the original consideration or purchase price paid defendant in error by the cement company for a rock crusher, which was represented to be worth the sum of $14,000, and to be in a suitable and fit condition to perform the services for which it was designed; that it was in fact defective, in that one of the large rollers was cracked, and that said crusher was worthless and of no value as a rock crusher.

The answer further states that the note sued on was procured by the plaintiff through fraud and misrepresentation, in that it was stated by a representative of defendant in error that the rock crusher was properly constructed out of suitable material and reasonably fit and suitable for the purpose of crushing rock for the cement company in the course of its business; that defendant in error at the time knew that said crusher was defective and utterly worthless as such, and, in order to deceive and defraud the cement company, painted the cracked portion of the machine with a heavy coat of paint in order to conceal the crack and defective condition thereof; that thereby the cement company was deceived into purchasing and receiving the same, and did not discover the defective condition of the machinery until the early part of the year 1922. The note in question was dated April 21, 1920, and this suit was filed April 29, 1924. Further on in the answer it is again stated that, relying on the representation aforesaid, the cement company purchased the machine and that the same was utterly worthless; that thereafter, as a part of the consideration for the purchase, the note sued on was given, and plaintiffs in error were, without consideration, at the request of defendant in error, induced to sign said note, "which had been obtained by fraud and false representations of the said plaintiff, as hereinabove set forth."

The plea of partial payment is next made in the following language: "Defendants further state that they are informed and believe, and state the facts to be, that the said Choctaw Portland Cement Company has paid certain sums on the said note not thereon credited, and that there is not due on the said note the sum herein sued on."

The answer then concludes as follows: "Defendants further state that, if for any reason the said plaintiff should prevail in this cause, and obtain a judgment against the defendants herein, or any of them, that they should have a judgment over and against the Choctaw Portland Cement Company for any amount so recovered against defendants, or any of them; that, by reason of the fraud practiced by the plaintiff in procuring the said note, as hereinabove set forth, and by reason of the fact that defendants herein were accommodation indorsers on the said note, the said Choctaw Portland Cement Company, or its legal representative, should be made a party to this suit, in order that all parties may be before the court, and that exact justice may be done between the parties hereto. Wherefore, having answered fully, defendants pray that plaintiff take nothing by its action herein, that the said Choctaw Portland Cement Company, or its legal representative, be made a party to this suit and that upon a final hearing of this cause, defendants be allowed to go hence and recover their costs herein expended."

This answer was unverified. Defendant in error at first replied denying the allegations of new matter contained in the answer, and thereafter filed an amended reply in which it set out a provision of the contract to the effect that no officer, agent, or salesman had any authority to obligate the company by any terms, stipulations, or conditions not in said contract expressed, and, further, that by the contract the company agreed to repair or replace any material or part of its machine which, within one year after shipment, is proven to have been defective when shipped, provided the purchaser gives the company immediate written notice of such defect. The amended reply further alleged that no written notice, or any notice, had ever been given that any part of the said rock crusher was defective either when shipped or at any other time, and that the same was received by the cement company within thirty days of the date of the note sued on in this action. The reply further pleads that the cement company would be, and is, estopped by the conditions of the contract, and that plaintiffs in error have no right or authority to set up this defense.

Some time between the giving of the note in suit and the bringing of this action the Choctaw Portland Cement Company had been duly adjudged a bankrupt. Plaintiffs in error moved that the referee in bankruptcy be made a party and be permitted to file an answer and cross-petition. A like motion was filed by the referee himself; the latter motion alleged that the Choctaw Portland Cement Company was in bankruptcy, had a full and complete defense to the action on said note, and was a proper and necessary party to a full and complete determination of the issues; both applications were by the court denied. Thereafter, the cause coming on for trial, upon the issues joined, a jury was impaneled, to which counsel for plaintiff and defendants made their opening statements. At the conclusion of the statement of counsel for defendants, counsel for plaintiff moved the court for a judgment in favor of the plaintiff and against the defendants on the pleadings and on the statement of counsel for defendants.

As stated in the judgment entry: "The court, after reading the pleadings and hearing the arguments of counsel, and being fully advised in the premises, sustains the motion of the plaintiff for a judgment against defendants on the pleadings without regard to the statement of counsel for defendants to the jury."

Judgment was accordingly entered in the sum of $6,440 for principal and interest, and the further sum of $654 for attorneys' fees as provided in the note. The rulings of the court in rendering judgment on the pleadings and in refusing to permit the referee in bankruptcy to intervene and file answer and cross-petition are assigned as error. As will be seen, the case turns largely on questions of pleading, and these questions must be determined by the laws of the state of Oklahoma regulating the practice and pleadings in the courts of that state. Rush v. Newman (C. C. A. Eighth Circuit) 58 F. 158-161, 7 C. C. A. 136; Cold Blast Transp. Co. v. Kansas City Bolt & Nut Co. (C. C. A. Eighth Circuit) 114 F. 82, 52 C. C. A. 25, 57 L. R. A. 696; Coffey v. United States, 117 U. S. 233, 6 S. Ct. 717, 29 L. Ed. 890.

The first contention is that defendant in error had no legal capacity to sue by reason of the failure to comply with the laws of the state of Oklahoma regulating foreign corporations doing business in that state. Without reference to the merits involved, it is the holding of the Oklahoma courts that its statute does not apply to corporations engaged in...