"The
horse in question was purchased by defendants who were
farmers living near Mountain Grove, Missouri, for breeding
purposes, each defendant purchasing one or more shares in the
horse but giving a joint note. The pleadings in the case are
so framed that defendants charged in their answer and
plaintiff admitted by reply that this note was procured by
fraud, the fraud being that the agent of Tuck & Co. gave two
or three prominent farmers or stockmen without consideration
an interest or share in the horse for the purpose of
representing, as he did represent to defendants, that such
persons were purchasers of such shares for cash, thereby
inducing these defendants to believe that such prominent
farmers and stockmen were joint purchasers of
the horse with them. The nature of the fraud perpetrated and
admitted will be fully seen by reference to the case of
Ozark Motor Co. v. Horton, 196 S.W. 395.
"The
sole issue is whether the plaintiff is a holder in due course
as defined by the Negotiable Instrument Law, Section 10022,
Revised Statutes 1909, in which case the defense of fraud is
not available. The title of Tuck & Co. who negotiated this
note to plaintiff being admitted to have been defective, the
burden was cast on and assumed by plaintiff to prove that he
acquired the title as holder in due course as provided by
Section 10029, Revised Statutes 1909.
"The
plaintiff's evidence is to this effect: The note is dated
July 18, 1911, due October 1, 1915, at seven per cent
interest, payable annually. Plaintiff purchased this note and
another from T. P. Tuck June 26, 1912. Plaintiff was then a
banker at Carl Junction, Jasper County, where he had lived
many years and had previously been in the mercantile
business. He became acquainted in a business way with T. P
Tuck in 1911. Tuck then and thereafter lived in Springfield,
Mo., and was engaged in selling imported stallions. Tuck
desired to have plaintiff or his bank handle some of his
commercial paper and at that time offered to sell plaintiff a
note on some parties in Arkansas. Plaintiff wrote to the Bank
of Greene County at Springfield, getting the name of this
bank from a bank directory, as to Tuck's financial and
business standing. This bank replied that Tuck was not one of
its customers and it had no 'line on him,' and
referred plaintiff to the State Savings Bank of Springfield.
Replying to plaintiff's inquiry the cashier of this bank
said Tuck was worth from $ 6,000 to $ 10,000 and
'concerning the financial responsibility, etc., of Mr. T.
P. Tuck of this city, beg to say that I have had considerable
business dealings with Mr. Tuck in the last seven years, and
I have always found him to be absolutely reliable and honest
in all dealings I have had with him.'
"This
was in August, 1911, and after further inquiry plaintiff
bought the Arkansas note which was later paid.
In January, 1912, Tuck offered to sell plaintiff or his bank
the present note. The plaintiff then wrote a letter of
inquiry to the Frst National Bank of Mountain Grove as to the
financial responsibility, integrity, etc., of the makers of
this note, these defendants. This bank replied by its cashier
not unfavorably but somewhat indefinitely. Not being
altogether satisfied plaintiff wrote a similar inquiry to E.
H. Farnsworth, an attorney at Mountain Grove, who replied
giving the property and worth of each of the defendants in
detail, the purport being that two of the makers are
"all O. K." being worth $ 3,000 to $ 5,000 above
exemptions, others worth less but "considered
good," "honorable and industrious," etc.
Another letter of inquiry was sent to and answered by J. M.
Hubbard, president of the First National Bank at Mountain
Grove, in which he was asked in confidence as to the
financial standing of each maker of the note and his
"candid opinion of the loan as an investment." His
answer is that he would have loaned each maker his
proportional part of the note and "they are all good
farmers and part of them are patrons of this bank. Now I
consider each separately good for his proportionate part, but
I don't consider either one single good for the whole
amount, for they are not able or worth the amount, but each
is good for his proportionate part at this time and I hope
the future will prove a verification of these
indications.'
"This
note was then three months old; that plaintiff stated that he
understood it was given in part payment of a horse and no
intimation is made by any of these persons that anything is
wrong with the note or that any party thereto was thinking of
contesting it. It is not shown when the defendants discovered
the fraud of which they complain but neither the bank
officers nor Mr. Farnsworth, living in the same neighborhood,
indicated that they had then heard of anything wrong. It is
true that J. H. Hubbard is one of the parties who had been
given a share in the horse (plaintiff not knowing this
however) and he might be friendly to Tuck but not so of the
others.
"The plaintiff did not buy the note at this
time and in May, 1912, Tuck again offered him this note and a
Texas note in a letter saying: 'As to the Mountain Grove
notes I would endorse them as I am confident they are all O.
K. The horse is doing extra good and they are extremely well
satisfied with him and that is the keynote to horse paper.
That alone makes it good when everything else fails. The
Texas paper is strong enough that collection can be forced on
it. I would consider it quite an accommodation and a personal
favor if you could place these two sets of notes for me.'
"The plaintiff then bought the notes mentioned, the face
value of which aggregated $ 1626.68, and paid therefor $
1586.68. His profit was $ 40 and the accrued interest not
then due. There is no question as to plaintiff having paid
this amount for these two notes as this was proven not only
by plaintiff but by documentary evidence. The Texas note was
later paid without trouble. The notes in question were
assigned to plaintiff 'without recourse' as Tuck
stated that he did not and would not endorse any of the paper
sold by him. There was a credit on this eight hundred dollar
note of $ 266 made on the same date as the date of the note
of which plaintiff knew when it was first offered to him, but
nothing was said as to this credit and plaintiff made no
inquiry as there was nothing unusual. The plaintiff testified
positively that when he bought the note he had no knowledge
or information or even suspicion of any fraud in its
procurement.
"The
defendants offered no evidence, except some of the defendants
testified that they had never paid anything on the
note. The defendants state the facts most favorably to them
in these words: 'The plaintiff purchased the notes,
amounting to one-third of all he had, on statements from men
that knew the makers of the notes and which statements the
plaintiff himself in his letter to J. M. Hubbard said would
lead him not to consider the notes and took them from Tuck
endorsed without recourse, when Tuck before had written him
that he would endorse them; took them endorsed without
recourse by a man that he believed to be
solvent; took them on men that lived one hundred and seventy
miles from him and men that he had not heard of prior to the
purchase of notes; did not know whether they were
farmers or not, whether they were worth a thousand dollars or
nothing, and whether they existed or not and endorsed by the
only man he believed to be solvent without recourse.'
"The
evidence has...
