Blumer v. Schmidt
| Citation | 146 N.W. 751,164 Iowa 682 |
| Parties | FRED BLUMER, Appellee, v. CHARLES SCHMIDT, JR., Appellant |
| Decision Date | 11 April 1914 |
| Court | United States State Supreme Court of Iowa |
Appeal from Pottawattamie District Court.--HON. THOMAS ARTHUR Judge.
ACTION upon a promissory note for $ 1,100, executed by the defendant to John Blumer, as payee, and transferred by the payee to the plaintiff. An affirmative defense of mistake and failure of consideration was pleaded. There was a directed verdict for the plaintiff, and the defendant appeals.
Affirmed.
A. L Preston, for appellant.
I. D Shuttleworth and G. W. Cullison, for appellee.
The affirmative answer of the defendant was voluminous and consisted of several amendments. The following quotation from the first amendment will be sufficient to indicate the general nature of the defense:
That prior to April 29, 1909, one John Blumer and defendant and one Charles Schmidt, Sr., and one E. L. Schmidt were stockholders in the Schmidt Department Store, a corporation organized under the laws of Iowa and that each of said four parties owned an equal amount of the stock of said corporation. That said corporation was engaged in the general mercantile business in Avoca, Iowa. That on or about April 29, 1909, the said corporation, by and with the consent of all the stockholders, traded their stock of goods and merchandise to one Johnson for three-quarter sections of land in the state of South Dakota. That the title to said land, by agreement of all the stockholders, was taken in the name of this defendant as trustee for all the stockholders with the understanding that the same should be sold on the market, the accounts of the different stockholders should be adjusted and balanced, and the proceeds from the sale of said real estate distributed among the stockholders in proportion to their respective shares, after the adjustment of individual accounts and after the payment of other indebtedness of the said company for wholesale accounts and moneys borrowed. That thereupon the said corporation went out of business. That at the time the said corporation had large amounts of money outstanding against the customers of the business, and the said accounts were by agreement of all stockholders left in the hands of this defendant for collection, with the agreement and understanding that collections made by this defendant should be accounted for to the respective stockholders and taken into account in the final distribution of the proceeds from the sale of said real estate after the payment of the indebtedness of the company. That the note in suit was given by this defendant to said John Blumer as the estimated value of the net interest of the said John Blumer in the said real estate and accounts. That the said South Dakota real estate has not been sold because of the poor condition of the real estate market in South Dakota, but still stands in the name of this defendant. That a large amount of the outstanding accounts referred to remain uncollected and are uncollectible. That this defendant has paid a large amount of the indebtedness of the said corporation out of his own individual funds, of which amount the said John Blumer should pay his proportionate share. That this defendant has spent much time and money in collection of accounts belonging to the said corporation, and that he is entitled to a reasonable compensation therefor. That $ 600 would be a fair and reasonable compensation for such services, of which amount said John Blumer should stand his proportionate share. That the net value of the interest of said John Blumer in the assets of the said company after the payment of the company's indebtedness does not exceed $ 2,000. That, at the time said company went out of business, the said John Blumer was indebted to the company on his individual account in the sum of $ 860.68, which amount, with interest thereon amounting to $ 100, making a total of $ 960.68, should be deducted from the $ 2,000 above named, leaving a balance of $ 1,039.32. That, at the time of giving the note in suit, this defendant paid to said John Blumer the sum of $ 500 in cash, to be applied on the amount coming to him out of the company's business, and at the same time gave his other note for $ 500 for the same purpose, which note has been paid. That, after deducting the $ 1,000 so paid and the amount of this defendant's counterclaim set out in count 2 of the original answer, it will be found that the said John Blumer has received more than his entire share in the property of said corporation. That, because of the facts above stated, this defendant says that the consideration of the note in suit has wholly failed, and that nothing is due thereon. Defendant further states: That the note in suit was transferred by the said John Blumer to the plaintiff herein without consideration and before maturity and for the purpose of defrauding this defendant. That this defendant has at all times stood ready and willing to make full accounting for the property in his hands belonging to the said stockholders of the said Schmidt Department Store and to pay whatever amount may be found due to the respective stockholders.
The note sued on contained the clause "transferable to Fred Blumer only." The trial court held that this clause opened the note to the defendant's defense as against the plaintiff, as transferee thereof. Over appropriate objections, defendant introduced his own oral testimony tending to support the allegations of his affirmative answer. The substance of such testimony was that the note was not intended as a promise to pay but was intended only to evidence a tentative estimate of what would become due to the payee out of the proceeds of property of the Schmidt Department Store; that, in the light of subsequent events nothing was due such payee; but that, on the contrary, he had been overpaid. It...
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