Ford v. Ford Roofing Products Co.

• Decision Date: 01 June 1926
• Docket Number: No. 19365.,19365.
• Citation: 285 S.W. 538
• Parties: FORD v. FORD ROOFING PRODUCTS CO.
• Court: Missouri Court of Appeals

285 S.W. 538

FORD v. FORD ROOFING PRODUCTS CO.

No. 19365.

St. Louis Court of Appeals. Missouri.

June 1, 1926.

Appeal from St. Louis Circuit Court; George E. Mix, Judge.

"Not to be officially published."

Action by Flora L. Ford against the Ford Roofing Products Company. Judgment for defendant, and plaintiff appeals. Affirmed.

Abbott, Fauntleroy, Cullen & Edwards, of St. Louis, for appellant.

Sears Lehmann and Lehmann & Lehmann, all of St. Louis, for respondent.

BENNICK, C.

This is an action on two promissory notes, each for $2,000, executed by defendant in favor of John W. Ford, Jr., dated December 31, 1920, and due June 1, 1923. Originally a separate action was instituted upon each note; the first being brought by plaintiff, and the second by H. C. Cook Company, a corporation. By leave of court, Flora L. Ford was substituted as party plaintiff in the latter suit, and by stipulation both cases were consolidated and treated as a single action in two counts. The case was tried to a jury, resulting in a verdict and judgment for defendant on both counts, from which plaintiff has appealed.

The petition was in the usual form. In the answer it was alleged that the notes were without consideration; that at the time they were executed John W. Ford was president of, and in control of, defendant company, and that as such president he arranged that defendant company should execute such notes to him without consideration; that he held said notes until after maturity; that the suit was being maintained by Ford in his wife's name; that he, while president of defendant company, purchased certain property at York, Pa., with defendant's funds, and then fictitiously purported to turn over said property to defendant for a fictitious credit to himself, for which fictitious credit he caused defendant to issue said notes to him; that said notes were fraudulent and void; and that plaintiff was not a bona fide purchaser for value before maturity.

By way of set-off it was further stated that Ford, while president of defendant, and by virtue of such position, drew from defendant various sums of money; that he bought property at York, Pa., with defendant's funds, and wrongfully credited himself personally with $96,000 on the company's books; that he was indebted to defendant at the maturity of the notes, and before he turned them over to his wife, if he did ever turn them over to her; that said indebtedness amounted to over $43,000; and that to determine the exact amount due required an accounting, for which defendant prayed.

For her reply plaintiff stated that defendant knew all the facts relating to the alleged sale of the York property to defendant, and with such knowledge had ratified the same, accepted the benefits thereunder, and waived all right, if any it ever had, to ask redress on account of same. Further replying, plaintiff stated that the matters set up in defendant's answer had occurred more than five years before the filing of the suit, and that such defense was barred by the statute of limitations.

It appears that defendant was a family corporation. At the time the property in York, Pa., was purchased, John W. Ford was president, his brother, Walter 0. Ford, was vice president and secretary, and a third brother, Louis M. Ford, was treasurer. These three brothers owned 90 per cent. of the stock, and the other stockholders were another brother, Edward M. Ford, and their mother, Mary E. Ford. The stock owned by the mother, however, was preferred stock, which carried no voting rights with it. At the time the notes sued on were issued John W. Ford was president, E. R. Litsinger, a brother-in-law, who had become a stockholder in January, 1920, was vice president and treasurer, Louis M. Ford was first vice president, and Edward M. Ford was secretary. In the early part of January, 1923, Litsinger was elected president, and John W. Ford became chairman of the board of directors, which position he was still holding at the time of the trial. Plaintiff was the wife of John W. Ford.

In March, 1918, John W. Ford, Walter O. Ford, and Louis M. Ford, who at the time were the only directors of the company, purchased certain property in York, Pa. John W. Ford testified that the company's business had increased to the point that it was necessary that it have a plant in the East. The evidence disclosed that the sum of $22,000 was paid for this plant, said sum being obtained (or, in the language of Ford, "borrowed") from defendant in the form of two checks, one for $1,000, payable to the American Roofing & Manufacturing Company, which owned the York plant, and the other for $21,000, made payable to John W. Ford on account of the purchase of said plant. At the same time an entry was made in the books of defendant charging these three brothers for such sum in the ratio of the stock-holdings of each; John W. Ford being charged with the sum of $9,787.80. Defendant had commenced the operation of this plant one month before the actual purchase was made. Certain improvements were made at the plant; plaintiff's evidence tending to show that they were made by the three brothers, and defendant's evidence disclosing that they were paid for by defendant, as were also the operating expenses. In August, 1918, a second entry was made on the books purporting to show a purchase by defendant of the York plant for the sum of $150,000 through the vote of the three brothers who alone constituted the board of directors, for which sum the three brothers were given credit on a pro rata basis, John W. Ford being credited with the sum of $56,735. Walter O. Ford was credited with the sum of $39,846.40. He died, however, in November, 1918, and after his death his credit was divided between the two remaining brothers who were parties to the transaction, giving John W. Ford an additional credit of approximately $26,000, so that his net credit on the York transaction was $82,649.60. All entries were made at the direction of John W. Ford.

This book credit in favor of John W. Ford was liquidated by a number of payments, and finally settled by the issuance of a series of eight notes in the sum of $5,000 each. It happened that the officers of the company had drawn larger salaries for the year 1920 than they were permitted to draw by virtue of a bondholders' mortgage on the property, John W. Ford's overdraft amounting to $30,251.54, and to pay this sum back he returned to defendant all of such notes except one and the interest accrued thereon, which amounted to the sum of $9,748.46. On December 31, 1920, defendant issued five notes to John W Ford in lieu of the note outstanding; four of them being for $2,000 each, and one for $1,748.46. Two of the $2,000 notes are the ones for the collection of which this action was brought. Plaintiff testified that both of these notes were sold to her by her husband in the fall of 1921, and were indorsed to her by him at that time, and that defendant was notified by Ford of the sale. The money to pay for them was obtained from the sale of bonds which she owned and was keeping in a safe deposit box in Chicago, Ill. She testified that at the time she acquired the notes she knew nothing about the circumstances under which they were executed; that she had never talked to any one except her husband concerning the notes; and that she had not been informed prior to the institution of this action that defendant claimed that they were acquired by her husband fraudulently or were without consideration. She testified further that some of the interest on the notes was paid to her and some to her husband. On the other hand, witness Arthur L. Paulson, who was treasurer of defendant company at the time of the trial, testified that the interest was paid to John W. Ford.

At the maturity of the notes, plaintiff's husband made demand upon defendant for their payment; plaintiff testifying that he was acting as her representative. Defendant's evidence to the contrary was that Ford had never disclosed that his wife owned the notes, and that he had presented them to defendant shortly after maturity, and had asked that payment be made to him. Paulson and Litsinger, the president, both testified that they were not apprised of plaintiff's claim of ownership until the action on the notes was instituted. Litsinger further testified that he talked with plaintiff in May, 1923, in regard to the differences existing between him and her husband, and that she said nothing to him at that time about owning the notes.

It will be recalled that the action on one of the notes was originally instituted by the R. C. Cook Company of Chicago, Ill. Plaintiff's evidence disclosed that she purchased an automobile from this company in August, 1923, and at that time indorsed the note to said company in payment for the car. She admitted that her husband transacted the business with reference to the purchase of the car, but in so doing acted as her representative, The Cook Company was unable to collect the note, with the result that Ford took the note back, and in return gave the company his own personal note, which he claimed was later paid by his wife. Mr. R. C. Cook, called as a witness for defendant, testified that the note was in the possession of Mr. Ford when he first saw it; that he did not know that suit had been instituted in the name of his company against defendant on the note; that h...