Hangen v. Pinkston

• Decision Date: 11 February 1922
• Docket Number: 23,491
• Citation: 204 P. 675,110 Kan. 463
• Parties: CHARLES P. HANGEN, Appellee, v. O. H. PINKSTON, Appellant
• Court: Kansas Supreme Court

204 P. 675

110 Kan. 463

CHARLES P. HANGEN, Appellee, v. O. H. PINKSTON, Appellant

No. 23,491

Supreme Court of Kansas

February 11, 1922

Decided January, 1922

Appeal from Kiowa district court; LITTLETON M. DAY, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. PROMISSORY NOTE--Oral Agreement as to Manner of Payment Inadmissible. The rule followed that a promissory note in the usual form cannot be contradicted by evidence of an oral agreement that it was to be paid only out of the profits of a certain business carried on by the payee.

2. SAME--No Available Defense Stated. Under the allegations of the answer and the opening statement of the defendant's counsel it is held that the defense indicated by the preceding paragraph could not be successfully urged as against the payee, and hence could not avail the defendant as against the indorsee of the note sued on.

J. D Beck, C. H. Bissitt, and Arthur W. Hershberger, all of Greensburg, for the appellant.

O. G. Underwood, of Greensburg, for the appellee.

OPINION

WEST, J.:

This action was brought upon a promissory note payable to the order of J. H. Taylor, signed O. H. Pinkston, and indorsed J. H. Taylor, per C. A. T. Plaintiff alleged that he was the holder and owner in due course.

The answer, after a general denial, alleged that the plaintiff was not the owner and holder of the note, but that he was the agent and tool of C. A. Taylor and W. S. Taylor, and a bank employee in a bank where they transacted business. It admitted the execution of the note, but alleged that it was procured in the following manner:

"That at the time this note was executed C. A. Taylor and W. S. Taylor were the principal stockholders and managers of the United Stores Company, a corporation doing business at Greensburg, Kansas, engaged in the general mercantile business; that at that time the United Stores Company held a promissory note against this defendant of similar amount executed by this defendant to said United Stores Company, the consideration for which note was a certificate of stock in said corporation for one hundred dollars. That this original note to the United Stores Company provided in substance on its face, that said note should not be paid in cash but that the profits and dividends accruing upon said certificate for stock should be credited from time to time upon said promissory note till it should be paid and satisfied. That said C. A. Taylor and W. S. Taylor falsely, fraudulently induced this defendant to execute the note sued upon herein upon a representation that the execution of this note was merely a renewal of the original note to the United Stores Company and that it should be subject to the same terms, conditions and privileges and that the maker, this defendant, and that this defendant should have all the rights, privileges and benefits under this renewal note as he had under the original note to the United Stores Company."

The answer alleged, further, that the Taylors' excuse for not using the original form of note was that they were out of that form and that--

"They desired new fresh notes for the purpose of using the same temporarily at the local banks as collateral in borrowing money to operate the store owned by the United Stores Company, and further represented and promised this defendant that the renewal note should not be negotiated or transferred or used for any other purpose than as collateral and that temporarily. And that said renewed note should remain the property and in the possession of the United Stores Company."

Further, that the Taylors so manipulated the writing on the note as to make it payable to J. H. Taylor--

"For the secret and fraudulent purpose of negotiating the same and of converting the said note to their own use and benefit, and preventing this defendant from having, and enjoying the said benefits, privileges and rights therein as were provided in the original note as aforesaid. That there was no consideration for said note to J. H. Taylor. . . . That the said plaintiff Chas. P. Hangen is not the holder and owner of said note in due course and did not obtain the said note from the said Taylors for a good and valuable consideration nor in good faith."

The court having placed the burden of proof upon the defendant, counsel in his opening statement said: "The evidence will develop that this note was given in renewal of another note, a former note. I think it was renewed twice." Also, that there was organized in Kiowa county the United Stores Company to take over the business of Taylor & Taylor, who were engaged in the general mercantile business in Greensburg, a corporation purporting to be cooperative, the profits to go to the stockholders after the expenses were paid; that the organizers went out among the people and sold stock to ninety or a hundred people and collected money or took notes--in most cases taking notes.

"They promised the shareholders, and it was printed in the note or written in the note, that the stockholders and giver of the note should be a sharer in the profits of that corporation and concern, and that the note, while it was given for a definite time . . . was not to be paid in money at the time set on the face of it, but the profits and dividends coming back to the shareholders out of the profits of this store as they traded there should be credited on this note until this note was finally paid. . . . The note was given, however, for a definite length of time. . . . About the time it became due, . . . they went out to these farmers and said, here, your note on the face of it is due; that is, the time mentioned in this note when it should be paid has arrived, but we don't want you to pay the note in money but we do want a new note so these notes on the face of them will be live notes and not past due notes, and in most instances they got renewal notes. In this instance they got a renewal note from O. H. Pinkston, for certain length of time, written on the same kind of a form that the first note was written on and made payable to the United Stores Company, a corporation. Then they came back to him again after that had run along some time, . . . and said, here, we want you to renew this note again, and want you to make us another note that will be due sometime later on the face of it. . . . He said, I don't want to sign a straight negotiable note; I want to sign the kind of a note I gave in the first instance; . . . Taylor & Taylor said to him, we are out of that printed form of note; we are just out of them; we haven't got any more of them now and so we will just take it on this form of note. . . . Mr. Pinkston objected and said, 'I don't like to give that kind of a note because it might be negotiated and transferred, then I would have to pay the cash...