Dodd v. Axle-Nut Sign Company

• Decision Date: 30 October 1916
• Docket Number: 227
• Citation: 189 S.W. 663,126 Ark. 14
• Parties: DODD v. AXLE-NUT SIGN COMPANY
• Court: Arkansas Supreme Court

189 S.W. 663

126 Ark. 14

DODD v. AXLE-NUT SIGN COMPANY

No. 227

Supreme Court of Arkansas

October 30, 1916

Appeal from Marion Chancery Court; T. H. Humphreys, Chancellor affirmed.

STATEMENT BY THE COURT.

Appellee which is a corporation organized and doing business under the laws of the State of Kentucky, instituted this action in the chancery court against appellant to recover an amount alleged to be due on a promissory note and to foreclose a mortgage on real estate situated in Marion County, Arkansas, given to secure it. Appellant defended the action on the ground of a failure of the consideration, and also on the ground that the note sued on was given for patent right territory and was not executed in conformity with the provisions of section 513 of Kirby's Digest, and is therefore void. The material facts are as follows:

Appellee is a corporation organized and doing business in the State of Kentucky, and was the owner of a patented advertising device known as the Axle-Nut Sign. J. H. Ditto was the selling agent of the corporation for said device. On the 22d day of July 1911, Ditto and the appellant, Dodd, met in the city of St Louis, in the State of Missouri, and there entered into a written contract whereby the former sold to the latter a one-third interest in the advertising device above referred to, for the State of Kansas, and about one-half of the State of Missouri, for the sum of $ 2,000, and also agreed to lend appellant the sum of $ 500. It was also agreed that Ditto should organize a corporation for the purpose of selling the patented device in said territory and that the appellant should have one-third of the capital stock of the corporation to be organized. Appellant executed to Ditto his note for $ 2,500 and gave him a mortgage on a tract of land owned by him in Marion County, Arkansas, to secure it. Appellant was at the time a resident and citizen of the State of Arkansas, but the contract was entered into and the note and mortgage executed in the city of St. Louis. Ditto assigned and transferred the note and mortgage to appellee. Appellant was unable to pay the note when it became due and asked and obtained an extension of time on his indebtedness. He executed a new note and mortgage in place of the old one, and the old note and mortgage were surrendered to him. The new note and mortgage were executed at Dodd City, Arkansas, on January 22, 1912. The note was payable six months after date. As above stated, the present action was instituted to foreclose the mortgage and to recover judgment on the note which was due and unpaid.

The chancellor found in favor of appellee and from a decree entered in its favor appellant prosecutes this appeal.

Decree affirmed.

S. W. Woods, for appellant.

The note being given for patent right territory, by a citizen of Arkansas, is void under section 513-514, Kirby's Digest. Neither the contract nor the account was assigned to appellee, hence it could not sue on same. Kirby's Digest § 6000. The payee of the note was not a party to the suit. The note being void as to $ 2,000 of the amount, the deed of trust given to secure it is also void.

Had Ditto's contract been valid, the suit should have been brought in the law court on an action for debt. 70 Ark. 200; 97 Id. 19. In any event Ditto should have been made a party.

The note being void, the only action that could be maintained would be one on an oral contract. 97 Ark. 19; 106 Id. 102; 102 Id. 568.

The note in suit was only a renewal of the first note, which was void, and therefore no liability existed on the note sued on.

Appellant offers to confess judgment for $ 200, the amount which he received as a loan.

Williams & Seawel, for appellee.

1. The note in suit was not executed in payment of a patent right nor patent right territory, but was to cover purchase price of stock in corporations, together with a loan of $ 500, and appellant secured all the benefits from its execution. 65 Ark. 204; 89 Id. 239.

2. The note was not an Arkansas, but a Missouri contract, and is governed by the laws of that State. 66 Ark. 77; 47 Id. 54; 60 Id. 269; 44 Id. 230; Const. U.S. Fourteenth Amendment, section 1.

3. It is immaterial whether the note is valid or void. It was only an evidence of the indebtedness which did not destroy the debt. 70 Ark. 200; 97 Id. 19; 102 Ark. 568. The indebtedness still existed and the deed of trust was security therefor. 46 Ark. 70; 96 Id. 604.

4. Transfer of the case to the law court was not asked and the chancery court had jurisdiction. 102 Ark. 326; 60 Ark. 510.

5. Ditto was not asked to be made a party to the suit, and that issue was waived. 95 Ark. 32-38. The contract and note were properly assigned and appellee was the proper party to bring this suit. 43 Ark. 275; 26 Id. 152; 31 Id. 140; 5 C. J. 948, section 124.

6. Appellant is estopped to assert the invalidity of the note because he waived any defense he might have had to the original note by executing the renewal. 118 Ark. 465; 111 Id. 358; 62 Id. 362.

OPINION

HART, J., (after stating the facts).

It is first insisted by counsel for appellant that there was a failure of consideration, and for that reason appellee is not entitled to recover on the note, and to have a foreclosure of the mortgage given to secure it. He bases his contention on the fact that Ditto agreed to lend him $ 500, and only let him have $ 200, and that he also agreed to organize a corporation for the purpose of selling the patented device in the territory described in the contract and that he failed to do so. The record shows that appellant knew that his note had been transferred to appellee, and that he sought and obtained a renewal of his note with the knowledge that there had not been a compliance with the contract in the matters that he now complains of. Even if it be considered that these matters amounted to a total failure of consideration, appellant is not entitled to defeat a recovery on this ground. In Stewart v. Simon, 111 Ark. 358, 163 S.W 1135, and Haglin v. Friedman, 118 Ark. 465, 177 S.W. 429, the court held that one who gives a note in renewal of another note with the knowledge at the time of the partial failure of the consideration for the original note is estopped from setting up the defense of failure of consideration, in an action on the renewal note. ...