Central Bank v. Lyda

• Citation: 191 S.W. 245
• Decision Date: 18 December 1916
• Docket Number: No. 12007.,12007.
• Parties: CENTRAL BANK, COLUMBIA, MO., v. LYDA.
• Court: Court of Appeal of Missouri (US)

191 S.W. 245

CENTRAL BANK, COLUMBIA, MO., v. LYDA.

No. 12007.

Kansas City Court of Appeals. Missouri.

December 18, 1916.

Rehearing Denied January 29, 1917.

Appeal from Circuit Court, Boone County; D. H. Harris, Judge.

"Not to be officially published."

Suit by the Central Bank, Columbia, Mo., against Paul C. Lyda. From a judgment for defendant, plaintiff appeals. Judgment reversed, and cause remanded for new trial.

Finley & Sapp, of Columbia, for appellant. N. T. Gentry, of Columbia, for respondent.

TRIMBLE, J.

Plaintiff brought suit upon three notes of $500 each executed by defendant to J. N. Booth, the petition alleging in each count that said Booth before maturity indorsed the note therein sued on, and at the same time wrote the name "Columbia Guarantee Abstract Company" across the back thereof and delivered said note to plaintiff for value, whereby plaintiff became, and still is, the owner of said note and entitled to payment of the amount mentioned therein.

The answer to each count was: First, a general denial; next, an admission that defendant executed the note to Booth with an allegation that it was executed without any consideration, and, by reason of certain false and fraudulent representations made by Booth to defendant and relied upon by him, all of which were known to plaintiff; third, a denial that said note was indorsed to plaintiff, the answer alleging that it was handed to plaintiff after the latter had paid certain checks or drafts drawn by Booth which had later gone to protest, and that whatever right or title plaintiff acquired to said note was subject to the defenses therein set up by defendant; fourth, a denial that plaintiff was the owner of said note.

Plaintiff dismissed the third count and filed a reply which was a general denial. At the trial plaintiff's evidence disclosed that plaintiff was not the owner of said notes as alleged in the petition, but was claiming to hold the notes as collateral security for the payment of drafts drawn upon "Wilkinson & Co." by Booth which plaintiff had cashed, and which, as stated, afterwards went to protest. No doubt it was because the total of the three notes exceeded the amount of said drafts that the bank dismissed the third count.

It seems that J. N. Booth came to Columbia and organized a corporation known as the Columbia Guarantee Abstract Company. Booth was general manager thereof, and the corporation was engaged in making a set of abstract books of Boone county. He claimed that Wilkinson & Co. of Muskogee, Okl., of which he was a part, owned 40 or 50 abstract plants throughout Oklahoma, Arkansas, and Missouri. He comported himself as a man of ample means, set up an imposing looking abstract office, fitted up with the latest devices for taking off the records and for making photographic copies thereof, and began making abstracts. By skillful and glowing representations made to young Lyda, the defendant, concerning the wealth and standing of Wilkinson & Co. and the extent of their business, Booth interested him in the idea of buying $2,000 worth of stock in the abstract company, the proposition apparently being that Lyda buy the stock and Booth would make him vice president of the company, and it would enter into a contract to employ Lyda for a long term, he to eventually receive a salary of $125 per month. Lyda applied to Stone, plaintiff's cashier, for a loan and told him of the proposition of Wilkinson & Co., and of how the stock therein was owned; that Booth had paid for the common stock and the company had large sums on deposit in banks. Stone says Lyda applied to him for a loan of the whole $2,000 in order that he could go into the deal and purchase $2,000 of the stock of the abstract company. Stone further says he refused to lend him $2,000, but promised that he would help him (Lyda) as much as he could if Lyda thought it was a good thing, but advised him to "think over it a couple of days and investigate around." Lyda says he did not ask to borrow the whole $2,000, but told Stone of the contract and that he was going to buy $2,000 of the stock, and had given four notes of $500 each, and that he wanted to get a loan of $500 to meet the first one, which would fall due November 1st. Thereupon Stone lent him $500, taking Lyda's note with the latter's mother thereon as security. (This note was duly paid by the mother.) The evidence is ample that Stone, the cashier, knew that the notes given by Lyda to Booth were for the purchase of stock in the abstract company, and of the contract made with Lyda by Booth, and of his representations as to Wilkinson & Co. being behind the whole enterprise, and that Lyda bought said stock upon the faith of such representations and the allurements held out by Booth.

Lyda went to work for the abstract company, but was never made vice president, nor was any certificate of stock issued to him. During the short time the abstract company was in business in Columbia and Lyda was working for it, Stone asked Lyda to get Booth to place an account with them. Lyda did as requested, and Booth on November 25, 1914, sent to the bank a draft for $1,000 drawn by Columbia Guarantee Abstract Company, per J. N. Booth, on "Wilkinson & Co.," Muskogee, Okl. Stone accepted said draft and placed $1,000 to the credit of the abstract company. On November 30, 1914, Booth sent another draft on Wilkinson & Co., drawn in the same way for $2,000, and this the cashier promptly cashed by placing the amount thereof to the credit of the abstract company and subject to check. On December 1st Booth drew a similar draft for $250, payable to his order, on Wilkinson & Co. The cashier obligingly treated this as cash by placing it to Booth's credit, as an account subject to check. Between November 27th and December 3d, both inclusive, the bank allowed Booth, through checks of the abstract company, to draw $1,645 out of the company account, of which amount $1,120 was on a check paid December 2d and $35 was on a check paid December 3d, both of said checks being drawn payable to "cash," and the remainder was on checks for various sums. It is not shown when Booth checked on his $250 credit, but at some time, presumably after December 1st, since that was the date it was placed to his credit, the bank allowed Booth to check out of it the sum of $232.97. On December 3d, about noon, Stone got a telegram informing him that the $1,000 draft, being the one he had received on November 25th, had gone to protest. Stone says he called up Booth by telephone as soon as he got the telegram and asked him what was the matter. He says Booth told him Mr. Wilkinson had been out of town and there was nobody in the office to take care of any business except the stenographer, but the bank had left the notice there, but the draft had not been paid by the time the bank closed that evening. The cashier accepted the explanation and says it sounded very plausible to him, though how Booth knew Wilkinson was not in Muskogee and that the draft was not paid for that reason does not appear. He made no demands on Booth of any nature, and, so far as the evidence goes as to what passed between them then, the matter seems to have been allowed to rest with Booth's explanation. But Stone says that later on the same day, the 3d, Booth, by one of the women in the abstract office, sent four notes, three of which were the notes sued on, down to the bank inclosed in an envelope along with two letters from Booth, in one of which, dated December 3d, he wrote that he inclosed the three Lyda notes of $500 each, which both he and the abstract company have indorsed, and asked Stone to accept the notes and put the amount to the credit of the company. The letter also stated that, if the bank desired additional security, Mr. Lyda's mother would indorse the notes. In the other letter, which stated that it had been written since the other, but which was not dated, Booth wrote that he inclosed four notes for $500 each, three of which were on Paul C. Lyda, "which please hold as collateral to any unpaid drafts. As soon as I hear from them I will call you." It is apparent that the notes were not sent to the bank according to any agreement or conversation between Booth and the cashier, since the latter says when the woman brought the envelope to him he asked what was wanted to be done with it, and the woman replied that she thought Mr. Booth wanted credit for them. To this the cashier says he replied, "We can't give credit for these notes now." He says he dropped the envelope containing the letters and the notes in a wire basket, and did not enter the notes on the bank books as collateral, but explains this by saying he treated the drafts as cash items, and that he was expecting, when the drafts went through, to return the notes to Booth, or was expecting to hold them only for a few days.

On the afternoon of the next day, December 4th, Stone got another telegram saying the $2,000 draft had been protested. Stone says he called up Booth, told him it had been refused, and asked him what about it. Booth replied that he would get in communication with Mr. Wilkinson over the long-distance telephone, to which Stone replied, "All right." Later on Booth telephoned to Stone that Mr. Wilkinson had been out of town and the stenographer in the office at Muskogee had neglected the matter entirely, and that Mr. Wilkinson would send the money up immediately, but in the meantime he sent the notes to secure any unpaid drafts.

All of the drafts came back protested. No such firm or company as Wilkinson & Co. existed. The large assets and business claimed by Booth had no existence, and the abstract company was insolvent. A suit was brought against the abstract company in Columbia December 1st to recover $900, the price of supplies and a rectigraph machine used for making copies of records. The Columbia Daily Tribune, a paper having a large circulation, published an article in its columns on the same day, December 1...