Benson Stabeck Co. v. Farmers' Elevator Co. of Barber
| Decision Date | 15 March 1923 |
| Docket Number | 5046. |
| Citation | 214 P. 600,66 Mont. 395 |
| Parties | BENSON STABECK CO. v. FARMERS' ELEVATOR CO. OF BARBER ET AL. |
| Court | Montana Supreme Court |
Appeal from District Court, Musselshell County; Geo. P. Jones and Geo. A. Horkan, Judges.
Action by the Benson Stabeck Company against the Farmers' Elevator Company of Barber, C. V. Franson, and others. From a judgment for plaintiff, and an order denying defendants' motion for new trial, all the defendants except Franson appeal. Judgment affirmed as to defendant Franson, judgment and order reversed as to other defendants, and cause remanded, with directions to grant new trial.
Russell Madeen & Clarke, of Missoula, for appellants.
Belden & De Kalb, of Lewistown, for respondent.
The plaintiff brought this action on five promissory notes, all dated April 27, 1918, aggregating the sum of $27,000, payable January 1 following, with interest at the rate of 7 per cent per annum from date. Each bears the signature of the president and secretary of the defendant company and contains the following indorsement:
"For value received we, the undersigned, guarantee the payment of the within note at time of maturity or any time therafter, waiving demand, notice of payment and protest."
And it was signed by Henry Bartz, W. M. Nelson, John O'Toole, C V. Franson, Jacob Zeier, Fred H. Cavill, Chas. Witt, and Oscar Stageberg, the individual defendants in the action. They were all renewals of prior notes.
The complaint alleges that, contemporaneously with the execution of the notes, the defendant Farmers' Elevator Company, hereinafter called the Elevator Company, executed and delivered to plaintiff a chattel mortgage in writing upon a certain elevator situated at Barber, Mont., together with its fixtures and its contents; that, in accordance with the terms of the mortgage, after default in the payment of the notes, plaintiff foreclosed the mortgage by summary process, sold the property covered thereby on the 10th day of April, 1919, and indorsed on the notes the sum of $5,805.30, the net amount realized from the sale, after deducting costs and attorney's fees. Another paragraph in the complaint alleges that, for the purpose of securing the notes, the defendant Franson executed and delivered to plaintiff a mortgage on two lots in the town site of Barber, Mont. There is another allegation in the complaint to the effect that the individual defendants, as directors, have failed, neglected, and refused to file the annual statements required by statute, and had thereby rendered themselves liable for all the debts of the corporation, including the promissory notes mentioned. The prayer is for judgment against the defendants and each of them for the amount of the notes, interest, and attorney's fees; that the Franson mortgage be foreclosed as provided by law, the proceeds of the sale applied upon the notes, and a judgment for any deficiency remaining unpaid be rendered against all the defendants.
The answer of the defendant company for itself denies that Franson was one of its directors; admits the execution and delivery of the notes by the defendants and the giving of the mortgage by Franson, but denies that any or either of them were executed for a valuable consideration; admits that the company executed and delivered the chattel mortgage to plaintiff; admits that the mortgage was foreclosed and the elevator sold; but alleges that the consideration for the notes and chattel mortgage was illegal, fraudulent, null and void.
In a second and separate defense it alleges affirmatively that the notes and the chattel mortgage on the elevator were executed and given to plaintiff with the distinct understanding and agreement that they should stand as collateral only to any account of indebtedness that the defendant might incur "by reason of advance to be made or credit to be extended for grain purchased, and not otherwise, or as renewals of such notes so given," and that there was never any primary or other consideration therefor, and that defendant was not at the time of the execution of the notes or either of them indebted to plaintiff, and is not now indebted to plaintiff at all; that, if such indebtedness at any time existed, the same was created by plaintiff and the manager of the defendant, without the authority of the Elevator Company and illegally.
The substantive allegations of the third affirmative defense are as follows: That at the time covered by all of these transactions "the plaintiff was ostensibly engaged in the business of broker and commission agent upon the Chamber of Commerce at Minneapolis, and the Board of Trade of Duluth, Minn., dealing in grains, provisions, and other commodities, but that it was, in fact, executing contracts, options, purchases, and sales, trades, deals, and futures in grains and other commodities," wherein neither party to the transaction contemplated or intended handling or delivering the thing ostensibly purchased or sold, but did contemplate and intend that the transactions should be settled upon the basis of the public market quotations of prices upon such Chamber of Commerce or Board of Trade without a bona fide transaction; that the plaintiff and Franson contemplated and intended that their transactions might be deemed terminated when the public market quotation of prices should reach a certain figure; that between January 1, 1914, and January 1, 1918, the plaintiff executed orders for purchases, sales, or deals and trades in options and futures in grain ostensibly for the Elevator Company, but in fact for Franson personally, in excess of 475,000 bushels of grain, and failed to furnish the statement required by the provisions of section 8994 of the statute of the state of Minnesota; that all the purchases and sales thus carried on between Franson and the plaintiff were illegal and entailed losses in the sum of $41,527 and more, which losses were charged against the Elevator Company in the grain accounts of the plaintiff. For further defenses and as counterclaims the defendant Elevator Company seeks to recover of the plaintiff $12,000 for grain shipped to, and received by, it, sold and not paid for, and $10,000 damages for selling the elevator and converting the proceeds realized from the sale thereof.
The answer of the individual defendants contains admissions similar to those in the answer of the Elevator Company, and alleges affirmatively that they signed the promissory notes as guarantors with the understanding and agreement that they should stand as collateral only to any indebtedness that the Elevator Company might incur in legitimate transactions growing out of buying grain and shipping it to market for sale. It also affirmatively alleges that Franson gambled on the grain markets of Minneapolis and Duluth, the plaintiff acting as broker therein, and that plaintiff wrongfully charged the losses sustained therein up to the Elevator Company in the grain account upon its books without their knowledge or consent as directors, and that such attempted balancing of the accounts was illegal. They also deny that they failed to file the annual statement required of them as directors.
The reply puts in issue all the allegations of both answers and the counterclaims of the Elevator Company. Upon these issues the case was called for trial. Whereupon counsel for the...
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