Creameries of America v. Benton
| Decision Date | 10 June 1941 |
| Docket Number | 37423 |
| Citation | 152 S.W.2d 1049 |
| Parties | CREAMERIES OF AMERICA, Inc., v. BENTON |
| Court | Missouri Supreme Court |
Rehearing Denied July 25, 1941.
Glenn A. Thomas and William I. Potter, both of Kansas City, for appellant.
August F. Behrendt and Walter A. Raymond, both of Kansas City, for respondent.
WESTHUES, Commissioner.
Plaintiff, Creameries Of America, Inc., a Delaware corporation, filed this suit against Charles E. Newman to collect the balance due on a note of $ 4,429.80, executed by Newman and made payable to Dairies Incorporated, also a Delaware corporation. Pending the suit Newman died and Carlton R. Benton was substituted as defendant, being the administrator of the estate of Newman.
The defendant administrator filed an amended answer wherein he set up a failure of consideration as a defense to the note. He also filed a counterclaim wherein he sought damages in the sum of $ 48.229.50 for an alleged breach of contract. The plaintiff filed a motion to strike out portions of the answer and also the counterclaim. The trial court sustained the motion and defendant refused to file any other pleading or to amend his answer or counterclaim. The plaintiff thereupon filed a motion for a judgment on the pleadings. This motion was sustained and a judgment was entered in the plaintiff's favor in the sum of $ 3,961.20, being the balance due on the note. The court also entered a judgment against the defendant on his counterclaim, whereupon the defendant appealed.
The question for our determination is whether the ruling on the motion to strike was correct. We will first consider the motion to strike out the answer setting up a failure of consideration. The note in question reads as follows:
'$ 4,429.80 St. Louis, Mo.,
'November 30th, 1930.
'On demand after date I promise to pay to the order of Dairies Incorporated four thousand four hundred twenty nine and 80/100 Dollars
'For value received negotiable and payable without defalcation or discount with interest at the rate of 6 per cent per annum from date. Payable at 4424-30 West Papin St., St. Louis, Mo.
'100 Shares Southwest Dairy
'Prod. Co., stock collateral
'Chas. E. Newman'
The petition alleged, and the note disclosed, that $ 1,956.05 had been paid on the principal. The last payment was made on December 31, 1932. The petition also alleged that plaintiff became the owner of the note by reason of a consolidation of plaintiff company with Dairies Incorporated. In substance the answer alleged that the payee in the note, Dairies Incorporated, was a subsidiary of the plaintiff company and wholly owned by it at the time the note was executed, and therefore plaintiff was in fact the real payee of the note. The answer further alleged that the Southwest Dairy Products Company, also a Delaware corporation, owned and operated a chain of ice cream and dairy products plants in various cities and states as did the plaintiff company; that the president of the Southwest Company was also a director in the plaintiff corporation; that prior to the execution of the note plaintiff, its officers and directors, were active in the acquisition of the outstanding stock of the Southwest Company to their own hands or in the hands of persons friendly to a merger of the two corporations; that Newman at the time was employed and acted as manager of Dairies Incorporated; that the plaintiff, its officers and directors, induced Newman to borrow from Dairies Incorporated the principal sum of the note sued on, and to use the proceeds in acquiring stock of the Southwest Company; that as an inducement for him to acquire such stock a promise was made to merge the Southwest Company with the plaintiff company. The answer then alleged as follows:
'Defendant states that Newman had no interest whatever in buying the outstanding stock of the Southwest, and only executed the note and used the proceeds for that purpose because requested by his employer to do so, and in reliance upon the promise of plaintiff's officers and directors that said merger would and could be effected; that Newman knew that if said merger were effected as promise that the resultant value of the stock acquired by him with the proceeds of said note, would save him from loss by reason of execution of said note.'
The answer then stated that Newman had performed his part of the contract, but that the defendant company failed to merge the Southwest Company into plaintiff corporation and that by reason thereof the stock in the Southwest Company became worthless, therefore the consideration for the note failed.
That answer was stricken out on the theory that the allegations thereof disclosed there was a consideration for the note and therefore the answer stated no defense. That ruling of the trial court must be sustained. By the answer the defendant admitted that Newman, the deceased, received $ 4,429.80 for the note from Dairies Incorporated. With that cash Newman purchased stock in the Southwest Company, which was issued to him and which he pledged as collateral security for the payment of the note. Newman paid $ 1,956.05 on this note. It is evident that if Newman had paid the full amount, the Southwest Company stock, which was pledged as collateral, would have been returned to him. These facts conclusively show that there was a valuable consideration given for the note. Defendant in his answer stated that had the merger been accomplished between the plaintiff company and the Southwest Company the stock would have been ample to secure Newman against loss on the note. If there was a breach of contract Newman may have had a cause of action thereon, but that and a failure of consideration are two separate and distinct matters. See Patt v. Leavel, 161 Mo.App. 242, 143 S.W. 833 loc. cit. 835 (4). Suppose the Southwest Company stock had advanced in value subsequent to the time Newman purchased it, who would have claimed the stock and who would have been the owner of it? Under the facts pleaded in the answer it is evident the stock would have been Newman's. We must rule, therefore, that the answer does not state facts sufficient to plead the defense of failure of consideration.
The counterclaim was based upon an entirely different transaction from that which the defendant relied upon as a defense of no consideration. The...
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