Bank of Ozark v. Hanks

• Decision Date: 07 February 1910
• Citation: 142 Mo. App. 110,125 S.W. 221
• Parties: BANK OF OZARK v. HANKS.
• Court: Missouri Court of Appeals

125 S.W. 221

142 Mo. App. 110

BANK OF OZARK v. HANKS.

Springfield Court of Appeals. Missouri.

February 7, 1910.

1. BILLS AND NOTES (§ 520) — ACTIONS — EVIDENCE — FRAUD.

In a suit by the assignee on notes, evidence held to sustain a finding that the notes were procured by the original payees by fraud and misrepresentation.

2. BILLS AND NOTES (§ 497) — BONA FIDE PURCHASERS — HOLDER IN DUE COURSE — BURDEN OF PROOF.

Under Negotiable Instruments Act (Laws 1905, p. 250 [Ann. St. 1906, § 463-59]) § 59, providing that when it is shown that the title of any person who has negotiated an instrument was defective, the burden is on the holder to prove that he or some person under whom he claims was a holder in due course, and section 52, defining a "holder in due course" as one who took the instrument when it was complete and regular on its face, and before it was due, without notice of dishonor or infirmity or defect in the title of the person negotiating it, and in good faith and for value, in a suit on notes by the assignee where defendant showed that they were procured by fraud and were without consideration, the burden was on plaintiff to show that it was a holder in due course.

3. APPEAL AND ERROR (§ 1001) — REVIEW — QUESTIONS OF FACT — VERDICT.

In an action on notes by the assignee, where there was evidence that plaintiff had actual knowledge that the notes were procured by fraud sufficient to take the question to the jury, the court on appeal cannot, under the Constitution, disturb their finding.

4. CONTRACTS (§ 108) — VALIDITY — PUBLIC POLICY.

A power of attorney to an agent having a contract to sell certain articles, to appoint other managing agents on the same terms, and furnish them with similar contracts, with power to appoint yet other managing agents in an endless chain, was void, as contrary to public policy.

5. BILLS AND NOTES (§ 103) — FRAUD — ILLEGAL CONTRACT AS CONSIDERATION FOR NOTE.

In a suit by the assignee on notes, executed in payment for a contract giving the maker the right to sell window locks in a certain county, and a power of attorney to sell to others similar contracts, under which they in turn were entitled to sell the articles and contracts to others, and so on indefinitely, the court properly instructed that, if the right to sell locks in the county constituted a substantial part of the consideration for the notes, the transaction was not fraudulent, but as the power of attorney was void as against public policy, if it was the real consideration for the notes, the right to sell being only an incident, then the transaction was fraudulent, and the plaintiff cannot recover, unless it purchased the notes for value before maturity and without notice of the fraud in their execution.

6. BILLS AND NOTES (§ 327) — ASSIGNMENT OR SALE — NOTICE.

The maxim of caveat emptor applies as well to purchasers of negotiable paper as to the purchasers of any other species of property.

7. BILLS AND NOTES (§ 525) — ACTION — EVIDENCE — SUFFICIENCY.

In an action on notes by a bank as assignee, evidence held sufficient to sustain a finding that the officers of the bank had sufficient notice to put them on their guard as to the fraudulent transaction in which the notes were given.

Appeal from Circuit Court, Webster County; Argus Cox, Judge.

Action by the Bank of Ozark against Emery Hanks. From a judgment for defendant, plaintiff appeals. Affirmed.

This was an action by the Bank of Ozark, appellant, as assignee without recourse on two promissory notes, each for $144. The case was commenced in Christian county, but on change of venue was sent to Webster county, where on trial the respondent obtained judgment, and the case is here on appeal.

The facts out of which this action arose are substantially as follows: Some time in April, 1906, Mark Lowthorp and W. F. Payne arrived at the city of Ozark, strangers, ostensibly for the purpose of selling a patent window-sash lock. They traveled over the country, making themselves agreeable to the well to do farmers, staying for dinner and putting up window-sash locks. They represented that their business was a profitable one, and that they were making from $4 to $10 a day from the sale of these locks; they exhibited rolls of money, and a bank book showing large deposits in the Bank of Ozark, but in which, during the three months he was there, Lowthorp only deposited something less than $100. They placed locks on public buildings, mostly on trial, to be returned if called for, and most of which were never called for or returned. They represented that they intended to make Ozark a distributing center for their wares, and that they had already arranged with Adams and Taylor, the cashier and assistant cashier of the plaintiff bank, to take charge of their general office. They stated that in such business they would need a large number of managing agents to have charge of the salesmen, look after supplies, and so forth. By means of their industry, quite an interest was aroused in the business by June 1st, at which time they brought on C. S. Lowthorp and one Fox to assist in gathering in their ripening harvest, Lowthorp having an interest as owner in the patent on the lock. In the meantime, they had taken pains to have the plaintiff bank write to Hope, Ark., procuring letters concerning the character of C. S. Lowthorp. The plan on which the scheme was to be operated was that each of the persons selected as managing agent was required to buy a so-called "contract," for the price of $288; the price, however, was not made offensively prominent, and from some customers was altogether concealed. When a managing agent obtained a "contract," he was furnished with a book of 48 coupons of $6 each. Each of these coupons was good for an order for locks in any county in the United States. He was also given a power of attorney to appoint other managing agents on the same terms and furnish them with similar "contracts" and power of attorney to appoint yet other managing agents, giving them the same power of attorney. Any one making a sale of a "contract" was to receive one-half the proceeds, and they had placed all the counties in the United States at the same price. They made a contract with the plaintiff bank for it to collect for such sales as might be made by their managing agents, and referred all persons to whom they wished to sell contracts to Adams and Taylor, and all persons who made inquiry of Adams and Taylor were informed by them that C. S. Lowthorp came highly recommended, saying to one victim — who had a stormy scene with Fox, and who was talking with Lowthorp in plaintiff bank — that they (Adams and Taylor) had wired to Arkansas, and, according to their knowledge, these men were all right. Several days before the plaintiff bank bought any of the notes, Adams and Taylor were shown the "contract," power of attorney, and so...