Holdsworth v. Blyth & Fargo Co.

Citation23 Wyo. 52,146 P. 603
Decision Date08 March 1915
Docket Number809
PartiesHOLDSWORTH v. BLYTH & FARGO CO
CourtWyoming Supreme Court

ERROR to the District Court, Uinta County, HON. DAVID H. CRAIG Judge.

The material facts are stated in the opinion.

Affirmed.

W. A Muir, for plaintiff in error.

The court erred in permitting the admission of oral testimony tending to vary the terms of a written contract. (Amer. Eng Ec. Vol. 4, Pg. 146; Walker v. Crawford, 56 Ill. 444, (Am. Rep. 701); Stewart v. Albuquerque National Bank, 30 P. 303; Forsyth v. Kimball, 91 U.S. 294; Brown v. Spofford, 95 U.S. 474; Burnes v. Scott, 117 U.S. 582, 29 L.Ed. 991; Genesee Savings Bank v. Kindt, 7 Wyo. 321; Burke v. Dulaney, 153 U.S. 226-228.) Plaintiff in error was a bona fide holder in due course and the court erred in rendering judgment for a sum less than the face value of the note. Where failure of consideration is alleged the burden of proving such failure and that plaintiff, who received the note before maturity had notice of such defense, was upon defendant. (Sections 3214, 3215, 3216 and 3217, Compiled Stautes 1910; Mitchell v. Deeds, 49 Ill. 416, 95 Am. Dec. 621; Regan v. Jones, 1 Wyo. 210; Farrell v. Lovett, 68 Me. 326, 28 Am. Rep. 59.) Even where fraud was practiced in securing the execution of a note, a bona fide holder may recover, if the maker was negligent in signing the instrument. (Amer. Eng. Enc. Vol. 4, Pg. 327; Ruddel v. Fhalor, 72 Ind. 533; Ross v. Doland, 29 Oh. St. 473; Pruty v. Roberts, 52 Am. Dec. 761; Bigelow on Neg. Insts. 222.) Generally, evidence of alleged misrepresentations or fraud in securing the execution of a note is not admissible against a bona fide holder. (Swift v. Tyson, 41 U.S. 166, 10 L.Ed. 871.)

P. W. Spaulding, for defendant in error.

The allegations of fraud and misrepresentation in defendant's answer were not controverted by a reply and must be taken as true. (Section 4401, Comp. Stats. 1910.) The third assignment of error, as to the admission of testimony, is insufficient. (Iowa State Bank v. Henry, 136 P. 863, 864 (Wyo.) An objection that offered evidence is immaterial, irrelevant and incompetent is insufficient to present a question as to whether the evidence offered tends to vary the terms of a written contract. (Iowa State Bank v. Henry, supra.) The note having been secured by fraud, the title of the negotiator was defective. (Sec. 3213, Comp. Stats. 1910.) When this was shown, the burden of proof was placed on the holder to prove that he was a holder in due course. (Sec. 3217, Comp. Stats. 1910.) A holder in due course is defined by Statute. (Sec. 3210, Comp. Stats. 1910.) There was no evidence offered by plaintiff on this point; hence, he was in no better position, than the original payee, as to defenses of fraud and misrepresentation. Parol evidence of an agreement not to negotiate a note and that a subsequent violation of such an agreement worked a fraud upon the maker is admissible. (McKnight v. Parsons, 136 Iowa 390, 22 L. R. A. N. S. 719, and see note at pp. 721 and 722; Citizens Bank v. Houtchens, (Wash.) 116 P. 867, 868.) The holder should have pursued the Puritan Mfg. Co., who was the original payee and endorser, and his failure to do so under the circumstances is in evidence of bad faith. (Union Inv. Co. v. Rosenweig, 139 P. 875-876.)

POTTER, CHIEF JUSTICE. BEARD, J., and SCOTT, J., concur.

OPINION

POTTER, CHIEF JUSTICE.

The plaintiff in error, H. N. Holdsworth, brought this action to recover from the defendant, the Blyth and Fargo Company, a corporation, the sum of $ 1,000 and the legal rate of interest thereon from March 3, 1911, alleged to be due to the plaintiff, as the owner and holder of a promissory note reading, with the indorsements thereon, as follows:

"CHICAGO., ILL., March 18, 1910.

For Value Received, the undersigned promises to pay at Chicago, Ill., to the order of Puritan Mfg. Co. One Thousand Dollars as follows:

$ 1,000.00

12 Mos. after date.

$

Mos. after date.

$

Mos. after date.

$

Mos. after date.

$

Mos. after date.

$

Mos. after date.

A discount of six per cent will be given if the full amount of this instrument is paid at maturity of first installment. Non-payment of any installment for more than 30 days after maturity renders remaining installments due at holder's option.

P. O. Evanston, Wyo. THE BLYTH & FARGO CO.

By THOS. BLYTH."

Indorsements: "Apr. 11, 1910." "Puritan Mfg. Co., by M. H. Taylor," "H. N. Holdsworth." "Pay any Bank or Banker, or order, Johnson County Savings Bank, Iowa City, Iowa. GEO. L. FALK, Cashier."

It is alleged in the petition that the note was indorsed by the payee named therein to the plaintiff in due course of business before maturity and for a valuable consideration. That averment is denied by the answer, which, also, denies that there is anything due to the plaintiff from the defendant upon said note, and alleges in substance that by means of fraudulent representations as to the quality of certain articles of merchandise the defendant was induced to enter into an agreement in writing with the Puritan Manufacturing Company for the purchase of said articles, which agreement is set out in full in the answer, and that the note sued on was executed for the purchase price and as a part of the contract, and further, that the note was negotiated, if at all, by the said Puritan Manufacturing Company, in breach of faith, in violation of an agreement that the note should not be negotiated, sold or transferred to any person whatever, but should at all times be and remain the property of and under the control of said Puritan Manufacturing Company for the protection of the defendant in its right under the contract to return at the end of one year all of the goods so purchased and remaining unsold, and receive credit therefor. The case was tried to the court without a jury and judgment was rendered in favor of the plaintiff for $ 141.06, upon a finding that the defendant had executed and delivered the note and that there was due thereon the said sum. A motion for new trial was filed by the plaintiff, stating the following grounds: 1. That the court erred in finding for the plaintiff in the sum of $ 141.06 instead of for the full amount claimed in the petition. 2. That the court erred in its findings, and that the judgment is contrary to and against the law and evidence. 3. That the court erred in allowing evidence to be introduced over the objections and exceptions of the plaintiff. The motion was denied, the plaintiff excepted to the ruling, and he is here seeking a reversal of the judgment, assigning as error the specific grounds stated in the motion for new trial, and the ruling denying that motion.

Upon the trial the plaintiff offered the note in evidence and it was admitted upon proof tending to show that the signature of the maker thereof was that of Thomas Blyth, the president of the Blyth and Fargo Company. And no further evidence was produced or offered in the case on behalf of the plaintiff, except that upon cross-examination of the attorney for the plaintiff, who testified as to the signature of the maker of the note, he stated that he received the note after its maturity from an attorney residing at Iowa City, Iowa, representing the plaintiff; that the plaintiff resided in that city, and that it was, also, the place of business of the Puritan Manufacturing Company, and that he had no personal knowledge of the execution of the note, nor of any facts concerning it prior to the time he received it, and no personal knowledge of the indorsement of the note to the plaintiff.

The evidence for the defendant established the following facts The Puritan Manufacturing Company, represented in its contract with the defendant presently to be referred to as not incorporated, and as a manufacturer of jewelry and novelties, with its factory located at Iowa City, Iowa, and branch offices at Chicago, Winnipeg and Toronto, and furnishing the manufactured articles from the factory direct to the retailer, solicited, through its agent and salesman, who represented himself to be also a partner in the concern, an order from the defendant, a corporation conducting a mercantile business at Evanston, in this state. The order was solicited for goods to be selected from samples exhibited at the time, and to be furnished by the selling company upon certain warranties, conditions and agreements stated in a printed form of contract, under a plan or scheme described or referred to therein as the "Piano Advertising Campaign," the details of which plan are not material here, but it may be said that it involved the furnishing by the selling company of certain advertising material in addition to any goods that might be ordered. Thereupon, on the 18th day of March, 1910, the defendant ordered from said company a list of goods amounting in price to $ 1,000 and entered into a contract with the company, using the printed form aforesaid, stating the terms and conditions of the order and sale, which contract recited the terms of payment to be 12 months from date, and contained among other provisions the following: "In consideration of purchaser complying with all the conditions of this order at the time and manner stated herein, and promptly meeting any obligation entered into with the Puritan Mfg. Co. and using ordinary diligence in the sale of these goods and reporting quarterly, itemizing goods on hand and unsold, The Puritan Mfg. Co. hereby guarantees that the purchaser's gross profits from the sale of goods bought under this order shall not be less than 50 per cent of the amount of this order for a period of one year from the date hereof, and the Puritan Mfg. Co. further agrees and holds itself bound at the end of said period, to buy back at the purchase price, at the expiration of...

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