Equitable Discount Corp. v. Trotter

• Decision Date: 20 March 1961
• Docket Number: No. 5-2318,5-2318
• Citation: Equitable Discount Corp. v. Trotter, 344 S.W.2d 334, 233 Ark. 270 (Ark. 1961)
• Parties: EQUITABLE DISCOUNT CORPORATION, Appellant, v. Dennis TROTTER, Appellee.
• Court: Arkansas Supreme Court

Page 334

344 S.W.2d 334

233 Ark. 270

EQUITABLE DISCOUNT CORPORATION, Appellant, v.Dennis TROTTER, Appellee.

No. 5-2318.

Supreme Court of Arkansas.

March 20, 1961.

J. Loyd Shouse, Harrison, for appellant.

Villiness & Doshier, W. S. Walker, Harrison, for appellee.

HARRIS, Chief Justice.

Appellant, a New York corporation, instituted suit against appellee, Dennis Trotter, who operates a grocery--feed store near Harrison.The complaint alleged that Trotter had executed his three negotiable trade acceptances to Ohmlac Paint and Refining Company, Inc., said instruments being given for the purchase of paint by Trotter from Ohmlac.The trade acceptances were in the amount of $365.50 each, and appellant alleged that it had purchased the instruments, in the due course of business, from Ohmlac, and was the owner thereof; that demand had been made for payment, but same was refused.Judgment was sought in the amount of $1,096.50, together with interest from the date of maturity.Trotter answered, and pleaded, inter alia, that fraud was exercised in the procuring of the execution of the instruments, and appellant was not an innocent purchaser for value.On trial, appellant's proof consisted solely of the deposition of Joseph Goodwin, president and treasurer of Equitable Discount Corporation, such testimony being taken by interrogatories, and appellee's presentation consisted of the testimony of appellee, and three other merchants of Harrison and neighboring communities.The jury returned a verdict for appellee, and from the judgment dismissing the complaint, appellant brings this appeal.

Appellant contends that it was entitled to a directed verdict because it was a holder in due course of the negotiable paper, and the contract was breached by appellee, rather than the Ohmlac Company.As stated, appellee's defense was based on the defense of fraud, and the alleged fact that appellant was not an innocent purchaser in due course.

The contract provides that Trotter have an exclusive franchise to sell Ever Plastik Paint, and Trotter contended that Edwards Grocery, operated by Frank Edwards, was sold paint and likewise given an exclusive franchise, by the same salesman, which was purportedly from another company, but actually was a part of the same operation.Edwards testified that he entered into a similar contract in 1956 for paint, with a person representing himself as a salesman for Sterling Materials Company.¹¹Eulis McEntire, operator of a store at Everton, entered into a contract in June, 1959, for the purchase of paint with the Sterling Materials Company, and Eugene Allen, operator of a grocery in Summit, Arkansas, in the same month, entered into a contract with Wurtzilite Corporation for the sale of paint in Marion County.All of these companies, Ohmlac, Sterling, and Wurtzilite, have store addresses in Long Island City, New York.The operators gave a general description of the salesman who sold them the paint, and the descriptions bore considerable similarity.The contracts offered in evidence were very much alike, several paragraphs being identical with the Trotter contract.Appellant contends that the testimony of these witnesses was inadmissible; points out that the transactions with witnesses McEntire and Allen were nearly three years subsequent to the contract herein involved, and argues that these contracts were with third companies, and in no way connected with any party to this litigation.We think this testimony was admissible as pertinent to appellee's defense of showing a fraudulent scheme to sell paint to various stores, under different brand names, and purportedly from different companies, wherein all the merchants would be given an exclusive franchise.The record reflects that the Allen and McEntire contracts were entered into within three days of each other; both bore several almost identical provisions, and both included an exclusive franchise for Marion County.Incidentally, the McEntire contract also reflects another interesting fact in connection with Trotter's allegation that the exclusive listing given him by Ohmlac had been violated because Frank Edwards had also been given an exclusive listing by the Sterling Materials Company(Trotter contending both named companies were actually the same organization).Though Edwards gave a different New York address for Sterling at the time of his purchase, the address of Sterling in the McEntire contract is the same address listed on the 1956 contract between Ohmlac and Trotter.This may, or may not, have significance; the address could refer only to the location of a building housing several different businesses or companies.Be that as it may, had Ohmlac instituted this suit instead of the finance company, the evidence heretofore mentioned in support of appellee's defense, would have been sufficient to have made a jury question.

Of course, though it be established that Ohmlac, Sterling, and Wurtzilite were all the same, and selling the same paint under different company names in order to attract additional customers, this would not affect appellant's right of recovery if it were a bona fide holder of the trade acceptances, in due course of business.Mr. Goodwin, president of Equitable Discount Corporation, testified that there was no connection of any kind between his company and the Ohmlac Company except that, from time to time, his company buys negotiable paper from Ohmlac.He testified that Ohmlac likewise sold to other finance companies and banks in New York, and that his own company purchases negotiable instruments from other businesses.He stated that none of the officers, tr...