Kelly v. Industrial Operating Co.

• Decision Date: 11 February 1932
• Docket Number: 28144
• Citation: 46 S.W.2d 181,329 Mo. 629
• Parties: Jesse Kelly v. Industrial Operating Company, Appellant
• Court: Missouri Supreme Court

46 S.W.2d 181

329 Mo. 629

Jesse Kelly v. Industrial Operating Company, Appellant

No. 28144

Supreme Court of Missouri

February 11, 1932

Appeal from Jackson Circuit Court; Hon. Fred W. Coon Judge.

Reversed.

Grant I. Rosenzweig and Harry Howard for appellant.

(1) Usury is forbidden and criminal. Secs. 6492, 6496, 6495 3680, 3679, R. S. 1919. (2) Things prohibited and criminal are void from the outstart. Downing v. Ringer, 7 Mo 585; Publishing Co. v. McNichols, 170 Mo.App. 722; Parke-Davis v. Mullett, 245 Mo. 168; Tri-State v. Amusement, 192 Mo. 423; Sawyer v. Sanderson, 113 Mo. 18; Morris v. White, 83 Mo.App. 194; Higginbotham v. McGready, 183 Mo. 96; Farmers v. Reed, 192 Mo.App. 344; Ex parte Berger, 193 Mo. 16; Bernard v. Lupping, 32 Mo. 341; Peltz v. Long, 40 Mo. 532; Kitchen v. Greenebaum, 61 Mo. 115; Sprague v. Rooney, 104 Mo. 349; Hagerty v. Ice Co., 143 Mo. 247; Snoddy v. Bank, 88 Tenn. 573. (3) On appeal, evidence must be re-weighed by appellate court in equity cases. Shelton v. Franklin, 224 Mo. 342; Davis v. Keiser, 246 S.W. 899; State v. Phillips, 185 Mo. 185; Weltmer v. Bishop, 171 Mo. 110; Champagne v. Hamey, 189 Mo. 709. (4) Badges of fraud or bad faith. 22 C. J. 56; Link v. Jackson, 158 Mo.App. 1; Speck v. Riggin, 40 Mo. 406; Mason v. Black, 87 Mo. 341; Rhodes v. Autault, 48 Mo. 370; Chouteau v. Nuckols, 20 Mo. 447; Ames v. Gilmore, 59 Mo. 549; Small v. Harrison, 104 Mo. 188; Barber v. Nunn, 205 S.W. 14.

John C. Nipp, B. B. Anderson and Leon L. Handley for respondent.

The judgment was for the proper party. Johnson v. McMurray, 72 Mo. 282; Woods v. Woods, 13 S.W.2d 569; Cuthbert v. Holmes, 14 S.W.2d 444; Exchange Bank of Novinger v. Turner, 14 S.W.2d 425.

OPINION

Atwood, J.

This case has been twice heard here and comes to the writer on assignment after rehearing. We acknowledge our indebtedness to the writer of the opinion first submitted, for a painstaking, unchallenged statement of the case, from which we shall freely draw without use of quotation marks.

Jesse Kelly brought suit against Industrial Operating Company, a corporation, and Kansas City Laundry Service Company, a corporation, on ten promissory notes, each given in the principal sum of $ 496.60 and dated February 26, 1916, five of them being due one year after date, five due two years after date, and all made payable to the order of J. B. Schmeltz. Each of the notes was signed "Woolf Bros. Laundry, by L. B. Reynolds," and each bore the endorsement "Pay to Jess Kelly or order, J. B. Schmeltz."

The petition was in ten counts and charged that defendant Industrial Operating Company, a corporation, at and prior to the transactions leading up to the making of these notes, owned and operated a number of laundries and among them one operated under the name of Woolf Brothers Laundry in Kansas City; that said Industrial Operating Company was under the personal supervision of L. Reynolds, its principal stockholder and managing officer, who conducted the laundry, transacted all business done under the name of Woolf Brothers Laundry, and executed the notes in question; and that plaintiff purchased the notes for value and before maturity. The petition further alleged in each count that after the execution and delivery of these notes the said Reynolds, as principal owner and manager of said Industrial Operating Company, joined in the organization of the Kansas City Laundry Service Company, and that all the properties of the Industrial Operating Company were taken and accepted for stock in the Laundry Service Company, and that this was done without making any provision for the payment of the notes sued on; that the property so absorbed by the Kansas City Laundry Service Company became a trust fund in its possession for the payment of the indebtedness due plaintiff and that said Kansas City Laundry Service Company was liable to plaintiff for the amount due on the notes.

The answer of the Kansas City Laundry Service Company was merely a general denial. The Industrial Operating Company by its separate unverified answer, made general denial of the allegations of the petition, and denied the execution and delivery of the notes sued on, and alleged that all the indebtedness at any time existing to J. B. Schmeltz, or plaintiff Kelly, had been fully paid long before the filing of the suit. The answer further pleaded want of any consideration for said notes; that the notes were founded solely on usury on the part of J. B. Schmeltz, and that usury was the sole basis and consideration for each of said notes; that plaintiff was not the real party in interest; that the transfer to him was without consideration, and was made in an endeavor to defeat proper defenses of defendant Industrial Operating Company, and that the notes were acquired by Kelly in bad faith and were void. The answer further alleged that the notes resulted from a large number of transactions, all involving usury and covering a period of more than four years; and defendant asked that Schmeltz be made a party to the suit, that defendant have an accounting with plaintiff and said Schmeltz, that the notes be declared void and be cancelled, that defendant have judgment for any amount of overpayments because of said usury, and have judgment for attorney's fees, and "for all other relief, which, to the court, may seem just and proper." The reply was a general denial.

The suit was filed in the Circuit Court of Jackson County, December 21, 1918, but was not tried until February, 1926. Schmeltz was not made a party to the suit. The cause was tried by the court, and at the close of all the evidence plaintiff dismissed as to the Kansas City Laundry Service Company with prejudice. The defendant asked certain declarations of law which were refused, and certain others which were given. The defendant also in writing requested the court to state in writing his finding of facts and conclusions of law, and the request was marked as granted. The case was taken under advisement by the court, and afterward, in September, 1926, judgment was rendered for plaintiff upon each count in the sum of $ 893.88, upon a general finding under each count. After unsuccessfully moving for a new trial and in arrest of judgment defendant Industrial Operating Company appealed.

Upon the trial it was admitted that the Woolf Brothers Laundry was one of the plants operated by the Industrial Operating Company. The plaintiff offered the notes sued upon and they were admitted in evidence. Plaintiff then took the stand in his own behalf and testified that the endorsement on each of the notes was the endorsement of J. B. Schmeltz. He then put in evidence a letter written by him, sent by registered mail, dated February 17, 1917, addressed to Woolf Brothers Laundry and L. Reynolds, at Kansas City. In this letter he gave notice to the addressees that he had purchased and was the owner of the ten notes, describing them, and stated that if the makers paid the notes to any one else he would hold them responsible therefor, and that if the amount of the five notes due on February 26, 1917, was not remitted to him, suit for their collection would be brought without further notice.

Plaintiff was cross-examined at length concerning his acquisition of the notes, and he testified that he was forty-one years old, had been in the restaurant business in Kansas City for about fifteen years and had known Schmeltz for about twenty years; that Schmeltz had a store at 1231 1/2 Grand Avenue where he dealt in jewelry, watches and clocks, and that he had a sign on the window and also a sign over a clock in the place reading, "Money to lend." Plaintiff's restaurant was situated about two blocks from the Schmeltz establishment. Plaintiff said he had occasionally made purchases from Schmeltz of jewelry and other articles to an amount as high as $ 150. He testified that at the time of buying the notes there was a vacant room back of his restaurant, and he conceived the idea that if he had the money he would open up the room and enlarge his restaurant; that he talked to Schmeltz about it and Schmeltz asked what security he had, and plaintiff told him he had real estate coming to him from his father's estate which he would put up, an interest in a farm in Clay County, and Schmeltz told him he had some notes coming due in February that he would trade; that they went over to Clay County and looked at this farm, and that Schmeltz "seemed pretty well satisfied;" so that, along about the 7th or 8th of February they made a trade.

The farm consisted of forty acres with improvements, but the improvements were not shown to be of a particularly valuable character. Plaintiff owned a one-ninth-interest therein by inheritance, and had bought the one-ninth interest of a brother, and the one-ninth interest of a sister, paying to each of them $ 300 for such interest. Plaintiff said that he turned over to Schmeltz one of the deeds he had received so that Schmeltz could prepare a deed to be executed by plaintiff and his wife to Schmeltz; that Schmeltz prepared a deed which plaintiff signed, but not before a notary; that Schmeltz lost this deed and also the deed given him for use in preparing it; that they went over to Liberty and he and his wife there executed and delivered a deed of conveyance of his three-ninths interest in the forty acre farm, to Schmeltz. The consideration recited in this deed was $ 2,000, but plaintiff gave no clear explanation of the amount of the consideration recited, or what instructions, if any, were given on that subject. This deed was executed on the 24th day of February, 1917, which was two days before the maturity of the five notes first maturing, and seven days after the date of the letter written by plaintiff to the Laundry notifying the Laundry he...