Despres v. Hough Drug Co

• Decision Date: 15 November 1920
• Docket Number: 21266
• Citation: 86 So. 359,123 Miss. 598
• Parties: DESPRES, BRIDGE & NOEL v. HOUGH DRUG CO
• Court: Mississippi Supreme Court

86 So. 359

123 Miss. 598

DESPRES, BRIDGE & NOEL v. HOUGH DRUG CO

No. 21266

Supreme Court of Mississippi

November 15, 1920

October 1920

1. BILLS AND NOTES. Breach of maker's contemporary agreement no defense against bona fide holder.

A promissory note, executed after the adoption of the Negotiable Instrument Law of 1916 when sold before maturity to a purchaser for value without notice of defenses, cannot be defeated on the ground that the original payee had not complied with the terms of a contemporary agreement, which constituted the consideration of such note.

2. BILLS AND NOTES. Failure of consideration no defense against bona fide purchaser.

Where a note, executed under the Negotiable Instrument Law, is assigned to a third person, a valid consideration is presumed, and in the hands of a holder for value before maturity is not subject to a defense on the ground of failure of consideration.

3. BILIS AND NOTES. Investigation of original payee by postal department insufficient to destroy bona fides of buyer.

Where a maker of a negotiable promissory note is sued by an assignee who acquired the note before maturity in good faith, the mere fact that the Post Office Department conducted an investigation of the payee with a view of issuing a fraud order against such payee, and that the assignee knew of such investigation when it acquired the note, is not sufficient to destroy the bona fides of the buyer of such note, where there is nothing to show fraud as to the particular note in such investigation, and the knowledge thereof.

4. BILLS AND NOTES. Failure of corporation payee to file charter as condition to doing business no defense against bona fide holder.

Where the maker of a promissory note executes and delivers a note to a corporation, and such corporation has assigned the note to a purchaser for value before maturity, a defense by the maker that the payee corporation had not filed its charter in the State where the note is made and where it is payable is not maintainable under the Negotiable Instrument Law.

HON. H H. ELMORE, Judge.

APPEAL from circuit court of Sunflower county, HON. H. H. ELMORE Judge.

Action by Despres, Bridges & Noel against the Hough Drug Company. Verdict for defendant, motion for new trial was overruled and plaintiff appeals. Reversed and rendered.

Judgment reversed.

Percy Bell, for appellant.

We submit that the Partin Manufacturing Company was not doing business within the state of Mississippi within the meaning of chapter 24 of the Code of 1906, and therefore was not subject to its provisions. The whole question hinges on the meaning of "doing business."

We refer the court to the following decisions from which the court concluded and we also, that the Partin Manufacturing Company did not violate the state of Mississippi: "The expression 'doing business,' as used in Laws of Tenn., 1877, chapter 31, and Laws 1891, chapters 97, 122, regulating foreign corporations 'doing business' in the state, is to be interpreted with regard to something more than the mere linguistic signification of the words used to the ordinary ear, and it has acquired in legal terminology a much narrower meaning than that usually given to it. A corporation is to be considered as 'doing business' in the state only where it becomes in a sense domesticated therein, subject to be sued in the courts of the state, and responsible to its citizens, as are domestic corporations. Caesar v. Campbell (U. S.), 83 F. 403, 422."

"'Doing business' as used in Pennsylvania laws imposing a tax on foreign corporations 'doing business' within the state, means the employment by the corporation of some of their capital in the state, or at least, the establishing of a place of business therein. The mere fact that a foreign corporation entered into a contract with some of their stockholders who resided in Pennsylvania to buy certain articles would not constitute a "doing business" within the meaning of the act. Kilgore v. Smith, 15 A. 698, 699, 122 Pa. 48."

"A foreign manufacturing corporation which merely places its products in the hands of local merchants to be sold on commission is engaged in interstate commerce, and hence may sue for wrongful conversion of such products without having filed its articles with the secretary of state, as required of foreign corporations doing business within the state. Allen v. Tyson-Jones Buggy Co., 40 S.W. 393-395, 91 Tex. 22."

"'Doing business' as employed in Acts Tenn. 1887, chapter 226, p. 386, relative to foreign corporations doing business in the state, means any transaction with persons or any transaction concerning any property situated in the state, through any agency whatever acting for it within the state. Romaine v. Union Ins. Co. Co. (U. S.), 55 Red. 751, 754."

From the above decisions, we submit that the conclusion unescapable is that as the Partin Manufacturing Company had no place of business within the state of Mississippi and merely went into contract with its citizens, that it was not violating its statute. The matter has, however, been further gone into by this court in the case of Quartette Music Company v. Haygood, 67 So. 211, in which the court held, in substance that to be subject to the statute there must be some local domicile or branch house within the state of Mississippi.

FRAUD OF PART IN MANUFACTURING COMPANY.

We submit that there is nothing in the proof whatsoever establishing any fraudulent intent upon the part of the Partin Manufacturing Company, nor does the proof sustain the allegation of the special plea that the contract was not in any way performed.

Under our Negotiable Instrument Law, Despres, Bridges & Noel were plainly innocent purchasers for value and could collect the notes even though they had known that the Partin Manufacturing Company was crooked and did crooked business as will be shown by authorities hereinafter cited. These same authorities show that no matter what they may have known of the contract or the various other dealings of the Partin Manufacturing Company, that unless actual notice was brought home to them of actual fraud in connection with these particular notes, they could still recover on the notes. Of course no such notice was ever brought to them.

We submit that there is no proof of fraud in connection with these notes and fraud must be proved with certainty. See Locke v. Fieldman, 90 Miss. 3.

We submit that no matter what other notes may have proven worthless or been withdrawn for any other reason, that these notes were discounted and discounted for value. Authorities: Third Ruling Case Law, page 1067, section 272, and 273. "The title of one who buys ordinary commercial paper in good faith and before its maturity is not vitiated by the fact that there were suspicious circumstances which might have put him upon inquiry."

"The courts universally hold that knowledge that a note was given in consideration of the executory agreement or contract of the payee, which has not been performed, will not deprive the indorsee of the character of a holder in due course, unless he also has notice of the breach of that agreement or contract. So knowledge of a warranty on a sale in which a note was given is held not to affect the rights of a purchaser of the note for value before maturity, if he had no knowledge of the breach of the warranty. A recital in the instrument respecting such agreement or warranty is not sufficient of itself to advise him that there was, or would necessarily be, a failure of consideration, the presumption of law would be that the contract would be carried out in good faith, and the consideration performed as stipulated." Third Ruling Case Law, page 1071, sections 277 and 278; McNair v. Cooper, 4 Ala. 660 (1853); Waterhouse v. Kendall, 63 Mass. (11 Cush.) 128 (1853); Traver v. Stevens, 65 Cush. 167 (1868); Hodgkins v. Moulton, 100 Mass. 309 (1875); Backus v. Spaulding, 116 Mass. 420, 45 N.Y.S. 111, 16 A.D. 141, affirmed; Desmond--Dunne Co. v. Friedman-Doscher Co., 56 N.E. 995, 162 N.Y. 486; 8 C. J., page 196, section 327; 8 C. J., page 517, section 726; U. S. National Bank v. Floss, 62 Pacific, 751; Hodgkins v. Moulton, 100 Mass. 309; Waterhouse v. Kendall, 65 Mass. 128.

We direct the attention of the court to the note 13 in 29 L. R. A. (N. S.) 380, et seq., in which there are a number of opinions which we will not quote sustaining the position of this brief. Backus v. Spaulding, v16 Mass. 418; Siegel v. Chicago Trust and Savings Bank, 7 L. R. A. 537; Jennings v. Todd, 24 S.W. 148; Bank of Sampson v. Hatcher, 66 S.E. 308; Marlin v. Fitzgerald, 120 N.W. 388; Miller v. Ottaway, 45 N.W. 665; Rubble v. Daris, 51 N.W. 135; Bank of Commerce v. Barrett, 95 Am. Dec. 384; Splavillo v. Patten, 99 Am. Decisions, 358.

The crux of the whole case is whether or not the defendant proved that there was notice to Despres, Bridges, and Noel of fraud in November, 1917, when the notes were purchased or whether they had guilty knowledge of and complicity in the fraud. We submit that there is no proof on this point at all.

The court, in Vaughan v. Brant, made the following wise observation: "The frequency with which such defenses as the one set up in this case are being pleaded reminds us that there is either a grave need of invoking the criminal statute of this state against persons who are prosecuting the execution of negotiable paper through fraudulent deceptions and misrepresentations or else there is gross negligence on the part of many who are executing such paper and sending it broadcast in the channels of commerce." Vaughan v. Johnson, 119 Pacific, 879.

We submit that the record did not present any evidence justifying the submission of the case to the jury; that the peremptory instruction should have been granted...