Citizens Bank of Edina v. Kriegshauser
| Decision Date | 18 September 1922 |
| Parties | CITIZENS BANK OF EDINA, Appellant, v. WILLIAM KRIEGSHAUSER, Respondent |
| Court | Missouri Court of Appeals |
Appeal from the Circuit Court of Scotland County.--Hon. N. M Pettingill, Judge.
REVERSED AND REMANDED.
Judgment reversed and cause remanded.
F. E Robinson for appellant.
Claude M. Smith and James C. Dorian for respondent.
This is an action upon a negotiable promissory note for the sum of $ 2000 and interest, executed by the defendant on March 30, 1917, payable to the order of one E. E. Nance two years after the date thereof, and which was by the payee transferred by indorsement to the plaintiff bank. The petition is in the usual form. The answer admits the execution of the note by defendant, denies generally the other allegations of the petition, and specifically denies that plaintiff became the holder of the instrument in due course.
The answer further alleges that there was no consideration for the execution of the note by defendant, and that plaintiff acquired the same with full knowledge thereof. It is then alleged that at the time plaintiff claims to have purchased the note, Nance, the payee therein, was the president of plaintiff bank and also a large stockholder in the Edgar W. Kirk Soap & Cleanser Company, a corporation; that the assets of said corporation had been exhausted, that its stock was worthless and the company in a failing condition and unable to meet its obligations, including a debt to the plaintiff of $ 6000 and interest; and that plaintiff knew these facts, knew that said company was insolvent and its stock of no value. It is alleged that Nance was indebted to the plaintiff bank, and that "with the knowledge and consent of plaintiff and with the intention to cheat and defraud this defendant," and for the purpose of liquidating his obligation to the bank, Nance represented to defendant that owing to his position as president of plaintiff bank and as one of the chief officers of the soap company he knew of certain facts, not known to the general public, that would insure the success and prosperity of the soap company and make its stock valuable; that relying upon said false and fraudulent statements, and being deceived thereby, defendant, on March 30, 1917, entered into a contract with Nance consisting of two instruments, one being the note sued on and the other a contract filed with the answer and marked "Exhibit One" and that "by the terms of their mutual agreement certain shares of said Soap Company stock were sold to defendant, upon condition that they were not to be paid for in money unless they proved valuable, and that on condition that if said stock was worthless and that said factory was to be a complete failure, then the said Nance was to cancel said notes and the said defendant was to return said stock, but that said stock was never delivered to the defendant or transferred to him, and the full and complete contract between the said Nance and this defendant was evidenced by said contract consisting of the two written instruments herein referred to and taken together constituting the entire contract between them." And it is alleged that the stock was worthless and defendant received nothing of value for the note sued on; that the plaintiff was fully informed of the facts pleaded concerning the purchase of the note, and acquired the same with knowledge thereof and of the fraud alleged to have been practiced upon defendant, and took the note subject to the equities existing between the original parties. It is further alleged that Nance is now deceased and his estate insolvent.
The reply is a general denial of the new matter in the answer.
The suit was instituted in the circuit court of Knox county where, upon a trial had, the jury were unable to agree upon a verdict. Thereafter the cause went on change of venue to the circuit court of Scotland county where a trial, before the court and a jury, resulted in a verdict and judgment in favor of the defendant, and the plaintiff appealed.
The evidence shows that at the date of the execution of the note sued upon, to-wit, March 30, 1917, E. E. Nance, the payee therein, was president of plaintiff bank, of Edina, Missouri, and was indebted to the bank in the sum of $ 1200 on two notes. The Edgar W. Kirk Soap & Cleanser Company, a corporation with a capital stock of $ 300,000, had its factory and principal place of business at Edina. It appears that the corporation was in financial difficulties, was not then operating its factory, and had many obligations, including a debt of $ 6000 to the plaintiff. Nance was a stockholder thereof, as was also the defendant. On said March 30, 1917, Nance and defendant entered into a written contract for the purchase by defendant from Nance of certain shares of stock of the Soap Company. This contract, omitting formal parts, is as follows:
The note in suit is one of the notes for $ 2000 mentioned in the contract and executed cotemporaneously therewith. This note was transferred to the bank by Nance on the following day, March 31, 1917. On the same day Nance resigned as president of the bank, and his resignation was accepted at a meeting of the board of directors held that day. The bank's records show that on that day Nance, having transferred the note to the bank, placed the sum of $ 2000 to his individual credit, and by check paid his indebtedness to the bank. According to the testimony of the bank's cashier, this transaction took place between five and six o'clock in the afternoon, after the meeting of the directors; the cashier, in behalf of the bank, agreeing with Nance to buy the note in suit. The record of the directors meeting of that day, purporting to show the indebtedness of the officers and directors to the bank, shows nothing owing to the bank by Nance.
There is much testimony in the record concerning the "Soap Company" which need not be here detailed. It will suffice to say that prior to the maturity of these notes the assets thereof were sold under a deed of trust to another company, the stockholders receiving nothing upon their stock.
Over plaintiff's objections, the defendant was permitted to testify to a conversation which he had with one Buster, then the cashier of plaintiff bank. He testified that two or three days after the execution of the contract and notes, Buster came to his place of business and said: "We have bought one of your notes that you gave Mr. Nance." When asked what Buster said about the contract, the witness said: "He said they knew of the contract but it didn't amount to anything." Buster, as plaintiff's witness, denied that anything was said about the contract.
At the close of all the evidence in the case plaintiff offered a peremptory instruction, directing a verdict for the plaintiff, which the court refused. The refusal of this instruction is assigned as error.
It is true, as argued by learned counsel for plaintiff, appellant here, that the allegations of fraud in the answer are not supported by the evidence. We need not consider the contention made that the allegations of the petition are insufficient to charge fraud, for it is quite clear that there is no evidence of any fraud on the part of Nance in obtaining the note.
It is also true that the evidence fails to support the averments of the answer that the note was without consideration. The note was executed in consideration of the sale of the stock by the payee, under the terms of the written contract in evidence. Obviously both parties realized that this stock was of doubtful value. That it ultimately proved to be worthless does not in any wise alter the fact that there was a valid consideration for the execution of the note.
The attempted defenses of fraud and want of consideration are therefore out of the case. But the answer pleads as a defense of cotemporaneous written contract entered into between the parties, and avers that the stock in fact became worthless and the soap company's business and factory a complete failure; and that plaintiff purchased the note with knowledge of this contract, and is consequently bound thereby. It is entirely clear, we think, that under the evidence adduced the written contract would have afforded a complete defense to an action by the payee against defendant on this note. And plaintiff's right to recover, as the transferee of the note, must depend upon whether plaintiff is a holder in due course, under the statute. It is argued that though it be conceded, arguendo, that the plaintiff bank had knowledge of the existence of the cotemporaneous written contract between the defendant and Nance, nevertheless plaintiff's right to recover as a holder in due course is in no wise affected...
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