Jennings v. Todd

• Decision Date: 27 November 1893
• Citation: Jennings v. Todd, 118 Mo. 296, 24 S.W. 148, 40 Am. St. Rep. 373 (Mo. 1893)
• Parties: JENNINGS et ux. v. TODD et al.
• Court: Missouri Supreme Court

24 S.W. 148

118 Mo. 296

JENNINGS et ux. v.TODD et al.

Supreme Court of Missouri, Division No. 1.

November 27, 1893.

NEGOTIABLE INSTRUMENTS — BONA FIDE PURCHASERS — FRAUD — ESTOPPEL.

1. The consideration of negotiable paper in the hands of a bona fide holder for value cannot be inquired into, though he had notice of facts which should have put him on inquiry.

2. A collateral contemporaneous agreement, providing that the note shall not be paid if an executory contract forming the consideration of the note is not performed, will not affect the validity of the note in the hands of an indorsee taking it with notice of the agreement, if without knowledge of a breach thereof.

3.It was agreed by the payee of certain notes that the maker should not be liable unless the payee performed a certain executory contract which formed the consideration of the note.Subsequently the note was sold to a third person, who, having told the maker of his intended purchase, was told by him merely that he"would as soon he would have them as anybody else."Held, that the maker was not estopped to set up the invalidity of the notes, if at the time of such statement there had been no breach of the executory contract of the payee, and the maker had no reason to expect one.

4.One C. induced plaintiff to agree to sell books for him, and obtained from him a note for books to be delivered to him.He did the same with other persons, and then absconded, without delivering the books.Defendant, who purchased from C. plaintiff's note, paying therefor nearly its face value, had introduced plaintiff to him, and received $50 from C. for so doing.Plaintiff knew that defendant would be paid for the introduction, and subsequently received a like commission for introducing another person to C.Defendant told him that if he failed to get the books he would not suffer, since it was stipulated that in such case the note would be void.Held, that defendant was not a purchaser in bad faith.

Appeal from circuit court, Boone county; John A. Hockaday, Judge.

Suit by James I. Jennings and wife against W. C. Todd and others.From a decree for plaintiffs, defendants appeal.Reversed.

Sam C. Major and W. C. Todd, for appellants.Gordon, Gordon & Bass, for respondents.

MACFARLANE, J.

This is a suit in equity to restrain defendant Todd, as trustee, from selling under a deed of trust certain real estate belonging to plaintiffs, and to cancel a note made by them to Potter, Chase & Co. or order, and held by defendant Bush as assignee.The petition charges, in substance, that on the 23d day of October, 1888, plaintiffJames I. Jennings entered into a contract in writing with Potter, Chase & Co., through C. J. Chase, a member of the firm, by which the said company appointed him agent to control and manage the sale of an illustrated edition of the New Testament, and they agreed to furnish him 500 books as they might be called for at Kansas City, at $1 each, and reciting that he had given his note for $500, or $1 each on said books.In consideration for the purchase of said books on said day plaintiffs executed and delivered to said C. J. Chase their negotiable promissory note for $500, payable to said Potter, Chase &Co. 18 months after date, with 8 per cent. interest from date, to secure which they gave a deed of trust on their said estate, with defendant Todd as trustee.That by the terms of said contract the note was not to be paid, and should be void, if the company did not fulfill every requirement of the contract.The petition charges further that said company did not perform and fulfill the contract in any particular, but wholly refused to supply the books, as needed and demanded by plaintiff; that plaintiff was induced to make the contract by false and fraudulent representations; and that defendant Bush purchased said note with full knowledge and notice of the fraudulent means by which it was procured, and of the stipulation in the contract by which the note might become void.The answer of defendant Bush was: First, in substance, a general denial; second, a plea of estoppel; and, third, that he was an innocent purchaser of the note.In the plea of estoppel it was charged that said defendant"purchased said note at the special instance, solicitation, and request of plaintiff, who told him he wished he would trade for it; that if he would he would consider him an innocent purchaser; and that, relying upon these representations to him by plaintiff, he purchased said note."Said defendant further answered that he was the purchaser of said note before maturity, in good faith, for value, and without notice of any infirmity.The evidence leaves no doubt that the scheme into which plaintiffs were led by C. J. Chase was a gross fraud and swindle, which was also worked on others, as was incidentally shown.It is unnecessary to set out the contract in full.It is not at all intelligible, but was doubtless made clear and very beneficial by the representations of Chase.It contained the following clause: "He having settled for one outfit and book; also by note for five hundred dollars, the same being payment of ($1) one dollar each for 500 books, which he has this day purchased, leaving a balance due of one dollar on each book when ordered or delivered, from time to time, in such quantities as the said James I. Jennings may desire."On the back of the contract was the following indorsement: "Centralia, Mo., Oct. 23, 1888.The company hereby agrees that the note corresponding to the within contract shall be null and void whenever the company does not fulfill every point of the contract as signed.[Signed]C. J. Chase.For Potter, Chase & Co."The contract furnishes sufficient evidence that the books were to be shipped to Jennings from Kansas City whenever ordered, and that they were never furnished, though often ordered by Jennings.

Plaintiff testified that Chase promised not to assign the note.It appeared, however, from the evidence, that soon after its execution he indorsed and delivered it to Gahan Bros. as collateral security for a note made by Chase to them, who afterwards themselves indorsed it in blank.Without further indorsement it went into the hands of one or two other parties, and finally to defendant Bush before its maturity, who paid for it nearly its face value.It appears at this time that neither the fraud nor breach of contract had developed.It appears further that on the 2d day of October, 1888, plaintiffs executed and delivered to Chase another note, payable to the same company eight months after date.This note was also for books under a similar contract, but not containing the indorsement.Defendant Bush also held this note by purchase at the same time.

The only questions of fact or law for our determination on this appeal are whether defendant was a purchaser of the note in good faith and for value, and whether plaintiffs, by their acts, conduct, and representations, are estopped to dispute its validity.The questions of fact on both propositions were found by the circuit court against the defendant.The evidence of plaintiff and defendant Bush was in direct and irreconcilable conflict.Each were corroborated by direct evidence of witnesses and by circumstances.Plaintiff testified in the most positive terms that he read the contract and indorsement to defendant before he purchased the note; and Roberts testified that he was present and heard them read, and there were other corroborating circumstances.On the other hand, defendant testified that he had no recollection of plaintiff reading either the contract or indorsement, and the fact that he paid near the face value for the note is a circumstance tending to corroborate his evidence on that question.On the question of estoppel, defendant testified that he purchased the notes on December 8, 1888.Before he bought them he went to Mr. Jennings, and told him that the notes had been offered him."When I asked him should I trade for the note, he said, `Yes, I wish you would.'He said: `Then they will be right here, and as soon as my family is able I will make the money, and pay them off.I will be glad if you will purchase them.It will not be like that other circumstance.I will consider you an innocent purchaser.'I bought them on his representation.I had no knowledge of the existence of any such paper as Mr. Jennings had."William Walker testified that he afterwards heard Jennings say that he considered defendant an innocent purchaser.On this question plaintiff himself testified: "Mr. Bush talked to me about the purchase of the notes.I told him if anybody was to get them I would as soon have him purchase them as anybody."The evidence shows that defendant purchased the note, and it was delivered to him on the 15th day of December, 1888, and the contract and indorsement were read to him on the 13th of that month, and it was prior to this date that defendant had asked plaintiff about buying the note.At the time of these transactions plaintiff had made no order for books under this contract.

The following facts may be taken as established by the evidence: (1)Defendant purchased the note for value before maturity; (2) that he was aware of the terms of the contract and the indorsement when he purchased; (3) that plaintiff encouraged defendant to purchase the note.The court found for plaintiff, and granted the relief sought and defendant appealed.

1.That defendant purchased the note for value before maturity is not questioned, either under the pleadings or evidence.The good faith of the transaction is the only subject of inquiry on this branch of the case.Defendant insists that, though the contract may have been fraudulent in its inception, and he may have been aware of the questionable methods...