F. M. Deuchler & Co. v. Hampton

• Decision Date: 18 October 1960
• Docket Number: No. 30299,30299
• Citation: 339 S.W.2d 499
• Parties: F. M. DEUCHLER AND COMPANY (Plaintiff), Respondent, v. Arthur J. HAMPTON (Defendant), Appellant.
• Court: Missouri Court of Appeals

Page 499

339 S.W.2d 499

F. M. DEUCHLER AND COMPANY (Plaintiff), Respondent, v. Arthur J. HAMPTON (Defendant), Appellant.

No. 30299.

St. Louis Court of Appeals, Missouri.

Oct. 18, 1960.

Edmund C. Albrecht, Jr., and J. J. Thyson, St. Louis, for appellant.

Wm. H. Dahman, Tenney, Dahman & Smith, St. Louis, for respondent.

RUDDY, Judge.

This is an action on a promissory note, payable on demand, in the principal amount of $1,896.66. A jury trial resulted in a finding and judgment for defendant. Thereafter, the trial court sustained plaintiff's motion to set aside the jury verdict and judgment and have judgment entered in accordance with its motion for a directed verdict. Pursuant to the action of the court in sustaining said motion, the verdict of the jury and the judgment thereon were set aside and judgment was entered in favor of plaintiff and against defendant in the sum of $1,896.66, plus interest thereon in the sum of $366.69. Plaintiff also filed an alternative motion for a new trial and the court in ruling thereon directed that in the event on appeal it may be determined that judgment notwithstanding the verdict should not have been entered, then plaintiff's motion for a new trial was sustained on certain grounds set forth in said motion for a new trial. Defendant has appealed from the ruling of the trial court.

The petition filed by plaintiff is in the conventional form. Defendant in his answer admits that he signed the note but denies that the signing of same was for a good and valuable consideration. In addition to failure of consideration, defendant alleges that the execution and delivery of said note was induced and procured through fraudulent misrepresentations.

It was further alleged in said answer that plaintiff took the note from the payee therein with knowledge of the facts and the purpose of its execution and that, therefore, plaintiff is not a holder in due course.

Whether or not plaintiff is a holder in due course has been extensively briefed by the parties. Defendant contends that plaintiff corporation had actual knowledge of the alleged infirmities in the execution and procurement of the note. We need not resolve this issue because we find the competent evidence in the case fails to reveal any infirmities that would absolve defendant from liability on the note.

All of the evidence offered by defendant was admitted by the trial court over the objection of plaintiff. Defendant's evidence showed that in 1953 F. M. Deuchler was the sole proprietor of a business wherein he operated as an insurance broker. In September 1953 defendant had a discussion with Deuchler concerning defendant's employment with Deuchler. Defendant testified that an oral agreement was then entered into whereby he was to attend a training school for insurance salesmen at Baltimore, Maryland, and that he would use his own savings account to support himself until his training was completed. He said his savings account amounted to $1,500. Defendant paid all expenses in connection with attending the training school. After the training course was completed, the agreement provided that defendant would place all his insurance business through Deuchler's office. Defendant attended the training school and completed the course of instruction. He then began selling insurance and placed his business through Deuchler's office. In December 1953 it was further orally agreed between defendant and Deuchler that if in any month defendant's commissions earned were below $300, Deuchler would advance to defendant each month the difference between the commissions defendant earned and the sum of $300. In this connection defendant said that the payment of the sum each month by Deuchler, of the difference between earnings and $300, was to be considered an advance or loan to defendant by Deuchler. It was further agreed that these advances would be paid back by defendant to Deuchler out of defendant's insurance commissions whenever they exceeded $300 per month, the agreed arrangement being, that one-half of the excess of commissions over $300 'would apply to what he (Deuchler) had loaned me (defendant) prior.' Defendant said it was agreed that it would take from three to five years for defendant to become self-sustaining and that Deuchler agreed to carry him on the aforesaid basis at least three years and up to five years. Defendant stated that this agreed arrangement was put into effect and continued approximately fourteen months.

In January or February of 1955 defendant and Deuchler had several discussions about the formation by Deuchler of a corporation to carry on the insurance business. About a week or ten days prior to March 1, 1955, Deuchler asked defendant to sign a note for $1,896.66, payable to Deuchler individually, to cover the account of the advances made. Defendant testified that he asked Deuchler why he should sign a note and that Deuchler answered: 'Well, we are starting this corporation and I need this note as a memorandum of this previous account in order to transfer it into the corporation.' Defendant in his testimony admitted that there was an open account at that time against him on Deuchler's books representing the advances that had been made to him by Deuchler.

In another place in his testimony defendant testified that Deuchler said the note 'was necessary for the purpose of entry into visible item, for purpose of entry into the corporation.' Defendant then asked Deuchler if demand could not be made on defendant immediately after he signed the note and that Deuchler said, 'Well certainly I could, but this does not alter our agreement prior to this time and this is just purely a method of transferring an asset to the corporation.'

In his cross-examination defendant said that he did not want to sign the note and that he told Deuchler he wanted to take the note home and show it to his father-in-law. This he did and the father-in-law told him there was nothing wrong in signing the note. Defendant then said he subsequently signed it. He further said that 'he knew what a promissory note was' and knew that 'it could be collected at any time * * *'; adding that Deuchler told him he would not have to pay it 'because it was a memorandum' of the debt 'and not an instrument for anything other than to transfer an asset to the corporation, was its only function.' At another place in his cross-examination defendant testified that the purpose of the note was for Deuchler 'to turn it in as a visible asset' to the corporation about to be formed. Defendant admitted that no part of the $1,896.66 has been paid.

In March 1955 plaintiff corporation was formed and said corporation continued the business previously operated by Deuchler as an individual. The note signed by the defendant was transferred to the corporation and constituted part of the assets turned into the corporation by Deuchler for which he received stock in the new corporation. Defendant attempted to show through the testimony of an auditor for the corporation that the note was not turned over to the corporation at the time of incorporation. Our evaluation of the auditor's testimony shows the contrary. He said that while he did not verify the existence of the note in his audit of 1955 business, he was told at that time that there was a note securing the account due from defendant.

Deuchler in his testimony said that he told defendant he could obtain stock in the new corporation whenever defendant would make good and would establish himself in the insurance business.

Defendant further testified that following the signing of the note and the formation of the corporation he continued to write insurance contracts and placed them through the new corporation. He further said that after the corporation was formed further funds were advanced to him by the corporation, stating that $150 had been paid him on March 15th and $150 on March 30th. Following these two payments no other payments were made to the defendant by the corporation. Defendant stated that when no further checks were paid to him by the corporation, he did nothing about it for several days and, thereafter, he asked Mr. Deuchler if something was wrong and Mr. Deuchler said 'Yes, you are not going to get any checks.'

Defendant said Deuchler told him that the advances were stopped because he (defendant) did not follow the rules. There were complaints by Deuchler about defendant's failure to collect premiums. As a result, Deuchler prepared an agreement which defendant signed, wherein defendant had to collect all premiums that became delinquent according to the agreement, within thirty days after the delinquency or the premiums would be charged back against the commissions credited to defendant's account. Defendant said that on the occasion when he asked Deuchler about not receiving a check there was no discussion about buying stock in the company. However, defendant remained with plaintiff corporation. On a later date, namely, in August or September, defendant asked Deuchler when he was going to be able to purchase some stock. He said he was told then by Deuchler that he would never own stock in the corporation. However, defendant admitted that Deuchler told him he would talk with him about buying stock in the corporation when he paid the substantial amount he owed the corporation. Within a short time thereafter defendant told Deuchler he was leaving the plaintiff company on October 1, 1955.

Deuchler in his testimony, in connection with defendant's right to purchase stock, said he told defendant that if he made good an interest in the corporation would be available. He said that later defendant walked in to his office and said, 'Where's my stock.' Deuchler then told defendant, 'You certainly don't expect us to give you that stock' and further told defendant, 'you are owing this corporation considerable money. Even if you wanted to buy it, how can you buy stock and owe the company as much money as you are owing.'...