German American Bank v. Smith
| Decision Date | 04 March 1919 |
| Citation | 208 S.W. 878,202 Mo.App. 133 |
| Parties | GERMAN AMERICAN BANK, Appellant, v. THOMAS SMITH, Respondent |
| Court | Missouri Court of Appeals |
Argued and Submitted January 9, 1919.
Appeal from the Circuit Court of Warren County.--Hon. James D Barnett, Judge.
REVERSED AND REMANDED (with directions).
STATEMENT.--The German American Bank, a banking corporation organized under the laws of the State of Illinois and located at Bloomington in that State, brought this action against Thomas Smith, the defendant, on a note for $ 1200, dated at Warrenton, this State, February 5, 1913, payable six months after date to the order of the Pioneer Stock Powder Company, at the Citizens' Bank of Warrenton, located in that city, in Warren County, this State. It is a negotiable note and fell due August 5, 1913. It was endorsed by the Pioneer Stock Powder Company, hereafter for brevity called Powder Company to the order of the German American Bank by its president. Not being paid, it was duly protested.
The petition avers that before maturity of the note the Powder Company indorsed the same in writing and delivered it to plaintiff for value, whereby it became the owner and holder in due course, and that no part of it has been paid.
The answer begins with the averment that defendant denies all the allegations in the petition except the following, namely; It admits that defendant signed the note and that plaintiff is a corporation existing under the laws of Illinois, engaged in banking business in Bloomington, in that State, and that defendant is a resident of Warren County, this State. Then follows these defenses:
A denial that the note was ever sold to plaintiff, and the averment that for the purpose of depriving defendant of making a defense against the payment of the note, and "a few days before the maturity thereof," an officer of the payee voluntarily, and without request from plaintiff delivered it to plaintiff as alleged collateral security for notes then owing by the Powder Company to plaintiff; that this was not in good faith, or in due course of business but merely made for the purpose of preventing defendant from setting up a defense against the note in the hands of the original payee; that the plaintiff took the note with full knowledge and notice that defendant had a valid defense against it, and merely took it for the purpose of making it appear that it is the holder thereof in due course; that plaintiff is not entitled to recover or to maintain this action, for the reason that since the institution of this suit the notes for which it was put up as collateral have been fully paid off and satisfied, and that plaintiff is not now the holder of the note as collateral security for any note or notes owing by the Powder Company and that it holds it as collateral for obligations made and created since the institution of this suit and cannot recover.
Another defense is to the effect that the Powder Company is a foreign corporation, organized under the laws of the State of Illinois, with principal office in Bloomington, that State that on February 5, 1913, and prior thereto, the Powder Company was engaged in transacting business in this State, in selling stock powder, stock feed and stock dip in various counties in this State; had agencies established in a number of different counties in this State, with agents in charge who were engaged in selling and delivering to the public at large in this State the products of the Powder Company; and that the note here sued on was given by defendant for stock powder purchased by him from the Powder Company; that on February 5, 1913, and prior thereto, the Powder Company had failed to comply with the provisions of the laws of this State, requiring for eign corporations to be licensed to do business in this State, and had no license authorizing it to do business within this State. Hence it is claimed that the note is and at all times was void, unenforcible and uncollectible, and that plaintiff is not entitled to maintain this action and recover on it.
For the final defense it is set up that the note was procured by fraud and false and fraudulent representations made to defendant by one Doty, agent and representative of the Powder Company, under the following facts, namely: That for the purpose of inducing defendant to purchase 40,000 pounds of stock powder from the Powder Company, at six cents per pound Doty falsely and fraudulently stated and represented to the defendant that the stock powder contained great medicinal virtues and values; that if fed to live stock and poultry it would cure and prevent all diseases to which live stock and poultry were ordinarily and usually subject; that it was especially valuable as a worm expeller and would expel worms from live stock and poultry; that it contained certain ingredients, and that Doty, in furtherance of his fraudulent scheme and for the purpose of inducing defendant to purchase the 40,000 pounds of stock powder from the Powder Company, exhibited to defendant a lot of worms in bottles, which Doty falsely and fraudulently represented were samples of worms which had been expelled from live stock which had been fed this stock powder; that in order to carry out this scheme to defraud and induce defendant to purchase the stock powder, Doty promised and agreed that if defendant would purchase from the Powder Company 40,000 pounds of the powder, that the Powder Company would appoint defendant their sole agent to represent the Powder Company in the sale of its products in Warren County, and that the Powder Company, at its own expense, would send a number of traveling salesmen and experts into Warren County to assist defendant in selling "his 40,000 pounds of stock powder," and further agreed with defendant that if he would purchase the stock powder, the Powder Company would assist him in securing subagents in each of the several townships in Warren County. Charging that all these statements made by Doty were untrue and known by Doty to be false, fraudulent and untrue, and made by Doty for the purpose of inducing defendant to buy stock powder, but that defendant believed them to be true and relied thereon, but was deceived thereby, and that, relying on these false and fraudulent representations and statements of Doty, he was induced to purchase and did purchase 40,000 pounds of said stock powder from the Powder Company, at six cents per pound, and in evidence of the purchase was induced to execute to the Powder Company two notes for the principal sum of $ 1200 each, one of them being the note in suit; that when the powder arrived defendant received and receipted for it and tried to make sales thereof as he had been directed by Doty; that he did sell a small amount thereof, not to exceed in value $ 150, but that all the powder he had received from the Powder Company and sold to others was useless and valueless for the purposes and uses for which defendant had bought and sold it to his customers, and that the powder which defendant still has on hand unsold is useless and worthless for the purposes and uses for which it was sold by the Powder Company to him; that he has frequently offered to return to the Powder Company, at his own expense, the stock powder he has on hand remaining unsold, and offered to pay for the powder which he had sold to others; that these offers had been made in good faith by defendant before the Powder Company ever turned over the note in controversy to plaintiff, but that the Powder Company refused to accept the offers; that the Powder Company rendered him no assistance in trying to sell the powder he had bought of it; did not send any representative to Warren County, or anybody to assist him in making sales and did not send anybody to Warren County to assist defendant in procuring sub-agents to help him sell the powder; that plaintiff is not the holder and owner of the note sued on in due course; "that a few days before said note matured the Pioneer Stock Powder Company, through one of its officers, took said note and turned the same over to plaintiff as alleged collateral to secure an indebtedness owing to plaintiff by the Pioneer Stock Powder Company; that the plaintiff bank, in order to enable the Pioneer Stock Powder Company to recover on the note in controversy, together with a large number of other notes which were given to the Pioneer Stock Powder Company by various individuals, and which were without consideration, or were secured by fraud, entered into a fraudulent agreement with the Pioneer Stock Powder Company," that it might from time to time turn over and indorse to the bank, as alleged collateral for alleged debts owing by the Powder Company to plaintiff, such notes as the Pioneer Stock Powder Company had in its possession, and which were tainted with fraud, or had been executed without consideration, and that the plaintiff bank should and would claim to be the holder of these notes in due course; that in pursuance of this fraudulent agreement the note in controversy was delivered to plaintiff by an officer of the Powder Company "just a few days before its maturity," for the sole purpose of enabling plaintiff bank to bring suit on the note, as holder thereof in due course; that this note was not hypothecated with the plaintiff bank by the Powder Company in good faith and was not accepted by the bank in good faith, to secure the payment of any debt owing by the Powder Company to plaintiff bank, but that this hypothication of it is a mere sham and subterfuge on the part of plaintiff bank and the Powder Company in order to make it appear that plaintiff bank is the holder of the note in due course, and defendant avers that the bank is not a holder in due course and that it took it by way of hypothication in furtherance of...
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