Bank of Hale v. Linneman

• Decision Date: 05 December 1921
• Docket Number: No. 14149.,14149.
• Citation: 235 S.W. 178
• Parties: BANK OF HALE v. LINNEMAN.
• Court: Missouri Court of Appeals

235 S.W. 178

BANK OF HALE v. LINNEMAN.

No. 14149.

Kansas City Court of Appeals. Missouri.

December 5, 1921.

Appeal from Circuit Court, Chariton County; Fred Lamb, Judge.

"Not to be officially published."

Action by the Bank of Hale against F. J. Linneman. From a judgment for defendant, plaintiff appeals. Reversed and remanded.

S. J. & G. C. Jones, of Carrollton, and U. A. House, of Sumner, for appellant.

E. W. Henry, of Glasgow, for respondent.

BLAND, J.

This is a suit in three counts, each upon a promissory note for $1,000 executed by defendant, and made payable to "myself." Each of the notes contained the following indorsement:

"There are no conditions offsetting this note, and any bank, banker, corporation, or individual has my permission to purchase the same.

                                   F. J. Linneman."
                

Upon indorsing these notes defendant delivered them to one J. E. Purtell, who sold them to the plaintiff bank. The first of these notes was due in 90 days, the second in 4 months, and the third in 6 months after date, all bearing 7 per cent. interest until due and S per cent. thereafter, and providing 10 per cent. attorney's fee if placed in the hands of an attorney for collection.

The answer pleads that these notes were procured by Purtell from defendant by false and fraudulent representations; that Purtell represented to defendant that the capital stock of the Revere Motor Car Corporation was worth $25 per share, and that before the notes would become due the stock would be worth $50 per share; that Purtell would hold the notes which were given for said stock until he sold the stock for $50 per share, and he would then return the notes and one-half of the proceeds of the sale of the stock to the defendants; the truth being that at the time of these representations the company was capitalized for $3,500,000, divided into shares of the par value of $10 each; the company's assets were only $1,000,000 and it had never declared a dividend; that plaintiff, when it became possessed of "said notes" from Purtell, "had knowledge of said facts and representations sufficient to amount to taking said notes in bad faith, and therefore is not a holder in due course"; that plaintiff had actual knowledge that the stock for which the notes were given was not delivered to defendant, and that the "plaintiff has actually knowledge that said stock, nor any portion of it, has yet been delivered to defendant."

There was a trial before a jury, which resulted in a verdict for the defendant, and plaintiff has appealed. Defendant, over plaintiff's objection, testified that Purtell came to his farm when defendant was planting corn, and said:

"I could use my credit for 90 days and make $1,000, and that I was a fool for not doing it. So I thought I would take a chance at $2,000; and along about 6 or 7 days, somewhere along there—I couldn't tell exactly the date—he come back. I purchased about $13,000 worth. He said I would clean up a real bunch of money. That the Revere Motor Car Company stock was going to raise from $25 to $50 a share; so I gave him a whole bunch of notes, and he was supposed to sell them and refund the money back to me."

He relied upon Purtell's statements. He further testified that the three notes sued upon were a portion of the $13,000 in notes that he gave Purtell; that Purtell gave him back $10,000 of the notes; that Purtell represented to him that the shares were worth $25; that he discovered that they were not worth that amount on the 3d or 4th of September, 1920, when he received a letter from the Revere Motor Car Company in reply to his letter, the former stating that "at a near-approaching date the price of Revere shares will be $15.00 each," and, further, that a special offer was soon to be made to old shareholders, and that at a later date the defendant would be more fully advised of the advanced price; that from this letter, together with other inquiries he made about the same time, one of which inquiries was of the Franklin Motor Car Company of St. Louis, he determined that the value of the stock had been misrepresented to him.

At the time of the purchase of the stock defendant entered into a written contract purchasing the same at $25 per share, and reciting that he gave his promissory note, dated May 18, 1920, in the sum of "$3,000, due in 3 and 6 months, with interest at 7 per cent. per annum. Said stock is to be attach. ed to and pledged as collateral security for said note until the same is paid in full." The contract recited that said "note" was given for the balance of the purchase price of the stock.

Plaintiff purchased the notes from Purtell 3 or 4 days after they were executed. On June 2, 1920, defendant was advised by letter that his stock was sent to plaintiff bank to be held as collateral. The contract mentioned was delivered to the bank, and the stock sent by, the Revere Motor Company to the bank as collateral for the payment of the notes. Before purchasing the notes plaintiffs cashier called up the People's Bank of Salisbury, and asked them if they knew defendant, and the bank told him that they did. Plaintiff's cashier asked if they would consider a note signed by defendant for $3,000 "absolutely a good bankable note"; they replied in the affirmative. He also called Mr. Ingram "in the other bank," and asked him if he knew the defendant. Mr. Ingram was not "sure which Linneman it was, but said that practically all of the Linnemans were good; that they were nice people, and paid their debts, and that he would consider the notes good."

At the time defendant signed the notes sued upon Purtell procured from him a statement showing that defendant's assets over and above his liabilities were $78,500. Plaintiff bank also had this information when it purchased the notes. Plaintiff's cashier testified that defendant and Purtell were strangers to him; that he did not know the value of. the assets of the Revere Motor Car Company ; that he had talked to some of his customers who had bought stock in this corporation concerning it; that in purchasing the notes he relied upon Mr. Ingram's statements and the information he had obtained from the People's Bank of Salisbury. The bank gave Purtell $2,850 for the notes. This was paid by "a little money, some cash, a small draft, I think for $150 or $200, the rest in time certificates, one due in 6 months and two due in 9 months."

On May 24, 1920, plaintiff's cashier wrote the defendant that it had purchased the three notes of $1,000 each that he had given to Purtell, and that it did not purchase the notes until it had called up the Bank of Salisbury, who stated to it that

"Your notes were absolutely good, which, of course, we had to know before we would consider buying them, as you are a stranger to us. 0 * 0 I might say that several of our customers have made a like purchase to yours —namely, buying stock in the Revere Car Corporation Company, and they all feel they have made a good investment, and it does look good. I trust it will prove to be a good big money maker for you."

The letter also said that defendant could pay the note or all of the notes at any time, and "save interest." Defendant made no reply to this letter.

On September 21, 1920, plaintiff's cashier went to see defendant in regard to the payment of the notes. At that time defendant was in possession of the facts which he claims constituted fraud on the part of Purtell. At this time defendant gave plaintiff his...