Land Finance Corp. v. Grafton County Electric Light & Power Co.

• Court: New Hampshire Supreme Court
• Writing for the Court: MARBLE, J.
• Citation: Land Finance Corp. v. Grafton County Electric Light & Power Co., 83 N.H. 518, 144 A. 845 (N.H. 1929)
• Decision Date: 05 February 1929
• Parties: LAND FINANCE CORPORATION v. GRAFTON COUNTY ELECTRIC LIGHT & POWER CO.

144 A. 845

LAND FINANCE CORPORATION

v. GRAFTON COUNTY ELECTRIC LIGHT & POWER CO.

Supreme Court of New Hampshire. Grafton.

Feb. 5, 1929.

Transferred from Superior Court, Grafton County; Oakes, Judge.

Assumpsit by the Land Finance Corporation against the Grafton County Electric Light & Power Company. Verdict for defendant. Transferred on plaintiff's exceptions. Exceptions overruled, and judgment on the verdict.

Assumpsit, upon three trade acceptances, the first and second for $232 each and the third for $232.50, dated April 16, 1925, drawn on and accepted by the defendant, payable to the order of the drawer, the Autocrat Sales & Distributing Corporation 60, 90, and 120 days from date, and indorsed by the drawer to the plaintiff before maturity. On each of the instruments appeared the following notation: "The obligation of the acceptance hereof arises out of the purchase of goods from the drawer."

The defendant denied liability on the ground that it was induced to sign the acceptances through the fraud of the drawer in relation to the purchase and sale of certain dishwashing machines, which comprised the consideration for the acceptances, and that the plaintiff was not a holder in due course. Trial by jury and verdict for the defendant. The plaintiff excepted to the denial of its motion for a directed verdict, to the admission of certain evidence, and to the argument of defendant's counsel. The facts are stated in the opinion.

Fred A. Jones, of Lebanon, and George W. Pike, of Lisbon, for plaintiff.

Raymond Trainor, of White River Junction, Vt., John F. Cronin, of Lebanon, and Paul Gilioli, of White River Junction, Vt., for defendant.

MARBLE, J. 1. The defendant's general manager testified that a representative of the Autocrat Sales & Distributing Corporation approached him at his office in Lebanon with a proposal relating to electric dishwashers; that the representative stated that the defendant would take no chances whatever, that all it would have to do would be to put a machine on the floor or in the window of its salesroom and furnish the corporation a list of its customers, that the corporation would do all the advertising and send a man to sell the machines, that the defendant would not be required to pay any money until one of the machines had been sold, and that, if no sale was made within 60 days, the machines could be returned at the expense of the corporation.

The witness also testified that, relying upon these representations, he permitted the corporation to forward several machines; that he placed one of them in the window as agreed, but that no one ever appeared to sell the machines and no advertising matter was ever furnished; that no machine was ever sold; and that he notified the corporation, when the first draft was presented, that it had not fulfilled its agreement and that payment would not be made. He further stated that the agent made false representations concerning the quality and construction of the machines.

There was also testimony that the corporation had dealt similarly with at least two other electrical concerns in surrounding localities.

The Autocrat Sales & Distributing Corporation was organized in 1925, and, so far as the record discloses, the only active official connected with it was one Ainsworth, its general manager and treasurer. Ainsworth had an office in New York, but closed the office and disappeared in the summer of 1925, when suit was brought against him.

On this evidence there can be no question but that the jury was fully justified in finding that the execution of the acceptances was procured by fraud. This being so, the burden was on the plaintiff to prove that it had acquired title to them in good faith. Ensign v. Christiansen, 79 N. H. 353, 109 A. 857; Mechanics' Sav. Bank v. Feeney. 79 N. H. 267, 108 A. 295; Hallock v. Young, 72 N. H. 416, 419, 57 A. 236, and cases cited; P. L. c. 312, § 59; 18 A. L. R. 18.

The plaintiff corporation, at the time of the transactions in question, was owned and controlled by one Leopold Blumberg of New York. Its business—the purchasing of commercial paper—was conducted in Blumberg's law office, and the only persons connected with the enterprise were Blumberg and his secretary. Blumberg testified that Ainsworth came to his office in April, 1925, and desired to obtain money on certain trade acceptances which his company had taken in payment for dishwashing machines. Among these acceptances were those in suit.

Blumberg inquired if the Autocrat Corporation had ever done business with any other commercial financing company and was told that it had; that the Ætna Financial Company had taken about $60,000 of its trade acceptances and accounts and was unwilling to take more. Blumberg did not consider the corporation's statement of assets amounting to only $3,000 a good showing, but agreed to buy the acceptances if the acceptors were good. He later satisfied himself that the defendant was financially responsible.

In fixing the rate of discount, the possible difficulty of enforcing payment was taken into consideration. Only 80 per cent. of the face value of the acceptances was advanced in the first instance, although this was subject to later adjustment on the basis of an interest charge of 6 per cent. on the account current and a service charge of one twenty-fifth of 1 per cent. per day in case no expenses of collection should be incurred. If there were such expenses, the entire 20 per cent. was to be retained if required.

Blumberg tried to obtain credit insurance. He frankly stated that he "would not have bought a single piece of paper" on the drawer's financial standing; that he had never heard of the Autocrat Corporation when Ainsworth first approached him; that he did not then or later learn whether its business was manufacturing or jobbing; that he had never entered Ainsworth's office, and did not care about him or his concern. Far from expressly stating that he did not believe that the object of the drawer in disposing of the acceptances "was to cut off defenses" (Mechanics' Sav. Bank v. Feeney, 79 N. H. 267, 269, 108 A. 295), he testified that he made no inquiries as to whether the corporation was doing business honestly or fraudulently, and while he assumed that the people who did business with them knew what they were about before they made payment in acceptances, he and his company "were not interested in that at all."

Certainly the evidence on the issue of good faith was not "uniformly and convincingly in favor of the plaintiff" (Hallock v. Young, 72 N. H. 416, 421, 57 A. 236), and that issue was therefore for the jury (Ensign v. Christiansen, 79 N. H. 353, 355, 109 A. 857; Security Nat. Bank v. Porter, 79 N. H. 344, 109 A. 46; Mechanics' Sav. Bank v. Feeney, 79 N. H. 267, 108 A. 295).

2. The plaintiff excepted to the testimony of the defendant's general manager relating to the alleged fraudulent representations of the drawer apparently on the ground that this evidence contradicted the notation printed on the acceptances that the obligation arose out of the purchase of goods from the drawer. Even if the testimony of the witness is to be construed as denying a purchase and sale in the strict sense of the term, it was nevertheless admissible. "The purpose of the evidence was to prove a fact which, if proved, established that the contract...