McCornick & Co., Bankers, v. Tolmie Brothers

• Decision Date: 05 January 1926
• Citation: 243 P. 355,42 Idaho 1
• Parties: MCCORNICK AND COMPANY, BANKERS, a Corporation, Respondent, v. TOLMIE BROTHERS, a Copartnership, Consisting of GEORGE E. TOLMIE, JOHN A. TOLMIE, and DONALD TOLMIE, and GEORGE E. TOLMIE, JOHN A. TOLMIE and DONALD TOLMIE, Appellants
• Court: Idaho Supreme Court

243 P. 355

42 Idaho 1

MCCORNICK AND COMPANY, BANKERS, a Corporation, Respondent, v. TOLMIE BROTHERS, a Copartnership, Consisting of GEORGE E. TOLMIE, JOHN A. TOLMIE, and DONALD TOLMIE, and GEORGE E. TOLMIE, JOHN A. TOLMIE and DONALD TOLMIE, Appellants

Supreme Court of Idaho

January 5, 1926

TRIAL-MOTION FOR DIRECTED VERDICT-EFFECT-PROMISSORY NOTE-FAILURE OF CONSIDERATION - POSSESSION-OWNERSHIP-INDORSEMENT FOR COLLECTION-ACTION BY INDORSER-WITNESSES-OFFICER OF CORPORATION - BOOK ENTRIES-PRINCIPAL AND AGENT-EVIDENCE - DECLARATIONS OF AGENT - ESTOPPEL OF UNDISCLOSED PRINCIPAL - ESTOPPEL OF AGENT - ADOPTION OF TRANSACTION BY UNDISCLOSED PRINCIPAL-EFFECT.

1. A motion for a directed verdict admits the truth of all the evidence in favor of the adverse party, and every inference of fact that may legitimately be drawn therefrom, and should be denied unless there is no substantial evidence whatever on any question of fact about which reasonable minds might differ, which, if found in favor of the adverse party, would support a verdict for him.

2. The fact that capital stock of a corporation, for which a promissory note was given, subsequently became of little or no value, is not proof of a failure of consideration.

3. Possession of a promissory note is prima facie evidence of ownership.

4. An indorsement of a promissory note for collection does not prevent an action thereon by the indorser.

5. Evidence given by the secretary of a corporation, of entries in the books of the company, is admissible where it is shown that the witness had personal knowledge of the entries testified to, that they were in his own handwriting, and that, at the time the witness had the books of account before him.

6. While agency cannot be established by the declarations of the alleged agent, declarations as to the identity of his principal are admissible in evidence to show that those with whom he transacted business understood they were dealing with such alleged principal, and are competent as representations tending to establish an estoppel of the undisclosed principal, who has adopted the acts of the agent and the fruits of the agency.

7. One who professes to act as agent for another in a particular transaction may be estopped, as against both the supposed principal and third persons interested in the transaction, to deny the agency.

8. An undisclosed principal, adopting the transaction of his agent steps into the position of the one whom the agent falsely claimed to be his principal, and is bound by all the representations made by the agent and the law applicable to established facts, as much as the alleged principal would have been had he in fact been such principal.

APPEAL from the District Court of the Sixth Judicial District, for Bingham County. Hon. Ralph W. Adair, Judge.

Action on promissory note. Judgment for plaintiff. Reversed and remanded.

Reversed and remanded. Costs to appellants.

Miller & Ricks, for Appellant.

An instruction which directs a verdict has the same effect as an order sustaining a motion for nonsuit, in that it admits the truth of the adversary's evidence and every inference of fact that may be legitimately drawn therefrom. In effect it instructs the jury that there is no evidence to support the claims of the party against whom such verdict is directed. ( Moody v. Morris-Roberts Co., 38 Idaho 414, 226 P 278, and cases cited.)

In case of a note given for securities sold in violation of the blue sky law, the title of the payee is defective, since the consideration therefor is illegal. (Weisendanger v Lind, 114 Kan. 523, 220 P. 263; Merriam v. West, 114 Kan. 131, 216 P. 1102.)

Oscar A. Johannesen and Gustin and Pence, for Respondent.

If a purchaser receives exactly what he has contracted for, and if he stipulated originally for a thing of value, he cannot avoid the contract because it does not prove as advantageous to himself as he had anticipated, or because the thing for which he bargained and which he has received proves to be substantially worthless in fact. (Page on Contracts, 2d ed., sec. 2978; Hurlbut v. Kephart, 50 Colo. 353, 115 P. 521.)

The adequacy of the consideration is immaterial, and courts will not ordinarily go into equality or inequality of considerations. (6 R. C. L., p. 678; Page on Contracts, 2d ed., sec. 635; 6 Cal. Jur., sec. 128.)

The "blue sky law" is not applicable to the sale of stock by a stockholder of a corporation, of stock standing upon the records of the company in his name, or in the names of members of his family, and a sale of such stock by such persons is not a violation of the law. (Dursum v. Benedict, 209 Mich. 115, 176 N.W. 459; Gutterson v. Pearson, 152 Minn. 482, 189 N.W. 458.)

Agency cannot be proved by the declarations of the alleged agent. ( Missouri P. R. Co. v. Johnson, 55 Kan. 344, 40 P. 641; Santa Cruz, etc., v. I. X. L. Lime Co., 5 Cal. Unrep. 495, 46 P. 382; Gregory v. Loose, 19 Wash. 599, 54 P. 33; Pepper v. Cairns, 133 Pa. 114, 19 Am. St. 625, 19 A. 336, 7 L. R. A. 750.)

TAYLOR, J. William A. Lee, C. J., and Wm. E. Lee, J., concur. GIVENS, J., Budge, J., dissenting.

OPINION

TAYLOR, J.

Plaintiff, respondent, brought this action upon a promissory note, and alleged its purchase of the note from one Thomas L. Matkins, who, it alleged, claimed to be the owner of the note. The defendants, after a specific denial sufficient to tender an issue as to the complaint, set up three affirmative defenses, and, as a first paragraph of each, alleged--

"That the promissory note set out in plaintiff's complaint was executed by the defendants at Shelley, Bingham County, Idaho, and was then and there delivered, endorsed in blank, to the Pingree Sugar Company, as the purchase price of ten shares of the capital stock of said Pingree Sugar Company, and not otherwise."

Defendants' first affirmative defense alleged false and fraudulent representations made by "the said Pingree Sugar Company, its officers, agents and representatives," to induce the purchase and execution of the note, with allegations of defendant's reliance thereon and the falsity thereof, and the return by them of the certificate of stock to the Pingree Sugar Company.

The second defense alleged a failure of consideration in this, that the sugar company "was insolvent and without assets and had no credit or property, and the capital stock of the Pingree Sugar Company was valueless, and the said ten shares of the capital stock of said company issued to defendants as the consideration for said note (were) worthless and of no value to defendant. . . ."

The third defense alleged that the Pingree Sugar Company was a California corporation, subject to the provisions of C. S., secs. 5305-5324, the so-called blue sky law; that it had not complied therewith; and that, by reason of such failure, and by reason of the fact that "the said promissory note (is) non-negotiable, and is founded upon an unlawful transaction, the said plaintiff is estopped from recovering on said note."

Plaintiff pleaded that the note was purchased by it in Utah with other facts to avoid the possible application of Idaho decisions that the note was non-negotiable. The form of the note has been determined by this court to render it non-negotiable. ( Sanderson v. Clark, 33 Idaho 359, 194 P. 472; Union Stock Yards Nat. Bank v. Bolan, 14 Idaho 86, 125 Am. St. 146, 93 P. 508.)

The defendant active in the purchase and who signed the note testified that Ross B. Matkins, who made the sale, represented that he was an agent of the Pingree Sugar Company, and was selling stock of the company for the company, and also testified as to other representations made and their falsity. As to the falsity of the representations, he was supported by the evidence of another witness. It was stipulated that the Pingree Sugar Company was a California corporation, subject to the provisions of C. S., c. 206, secs. 5305-5324, the so-called blue sky law, and had not complied therewith. Witnesses for the plaintiff, including Ross B. Matkins, testified that he was the person who made the sale, with such representations as were made; that he was the agent of, and was selling the stock of, his brother Thomas L. Matkins in the company, and was not the agent of the Pingree Sugar Company, or selling stock for or owned by the company. A deposition was read in evidence by plaintiff, made by the secretary of the Pingree Sugar Company, showing that the stock sold was part of 1,000 shares of stock transferred by Pingree, the president of the Pingree Sugar Company, to Thomas L. Matkins. This evidence shows that a certificate for 1,000 shares standing in the name of Pingree was surrendered and divided into 100 certificates of presumably 10 shares each, issued in the name of Thomas L. Matkins, and that it was one of these certificates which was surrendered and a new one for 10 shares issued to the defendants. The surrender of this certificate by Pingree and the transfer to Thomas L. Matkins, were not made upon the books until September 10, 1919, and the certificate issued to defendants October 1, 1919, the first transaction being 16 days after the sale of the stock to defendants.

At the close of all the evidence, the court on motion directed a verdict for the plaintiff, and entered judgment thereon. The appeal is from that judgment.

The directed verdict can be sustained, of course, only upon the ground that there was no evidence sustaining the defense either in defendants' evidence or in the whole case, The motion for a directed verdict admits the truth of all the evidence in favor of the defendants, and every inference of fact that may legitimately be drawn therefrom (Moody v. Morris-Roberts Co., 38 Idaho 414, 226 P. 278), and should have been denied unless...