Merchants' Nat. Bank v. Marden, Orth & Hastings Co.

• Decision Date: 26 November 1919
• Citation: 125 N.E. 384,234 Mass. 161
• Parties: MERCHANTS' NAT. BANK v. MARDEN, ORTH & HASTINGS CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

234 Mass. 161

125 N.E. 384

MERCHANTS' NAT. BANK

v.MARDEN, ORTH & HASTINGS CO.

Supreme Judicial Court of Massachusetts, Suffolk.

Nov. 26, 1919.

Exceptions from Superior Court, Suffolk County; Patrick M. Keating, Judge.

Actions by the Merchants' National Bank, by the Bank of Southport, by the Continental Trust Company and by the Palmetto Grocery Company, Incorporated, against Marden, Orth & Hastings Company, with trustee process. Verdicts for defendant, and plaintiffs except. Exceptions overruled.F.W. Eaton, and Blodgett, Jones, Burnham & Bingham, all of Boston, for plaintiffs.

R. G. Dodge and H. S. Davis, both of Boston, for defendant.

BRALEY, J.

The promissory notes in suit, which were made by the Carolina Coast Products Company and indorsed by the defendant, although differing in amount are payable either on demand or one year after date, and their execution by the maker and the indorser, and due presentment and subsequent protest, are conceded. But the answers severally aver that the defendant's indorsement was obtained--

‘in reliance upon and in consequence of certain representations made * * * with respect to the earnings and liabilities of the Carolina Coast Products Company, and that after the note had been indorsed the same was placed in the hands of one Cooper upon the condition that the indorsement should not take effect, and that he should retain possession of the said note until the defendant should have verified said representations and should have ascertained that * * * the company had a good title to certain property which it was alleged to own and until such title should be perfected, and the plaintiff if it received and holds the note declared on had notice at the time of receiving it that * * * Cooper held it upon the aforesaid conditions; thereafter the defendant learned that said representations were false and before said title was perfected demanded that said Cooper return said note and if said note was transmitted by * * * Cooper it was as the plaintiff knew so transmitted wrongfully and in violation of the conditions upon which the same was held by him, and no consideration for the transmission of said note passed between the plaintiff and * * * Cooper, and the plaintiff at the time it received said note knew that the defendant had indorsed said note in reliance upon the representations above mentioned and that said representations were false.’

The transactions having taken place in the state of North Carolina, the law of which, as shown by the statute introduced in evidence, appears to be the same in substance and effect as the law of this commonwealth relating to commercial paper, found in R. L. c. 73, the plaintiffs rest their right of recovery on the familiar ground, that having in good faith before maturity acquired the legal title for a valuable consideration in the usual course of business from one capable of transferring it, or in possession of the notes with an apparent right of transference, and without notice of any infirmity in the instrument, they are holders in due course. Smith v. Livingston, 111 Mass. 342;Mass. National Bank v. Snow, 187 Mass. 159, 72 N. E. 959;Fillebrown v. Hayward, 190 Mass. 472, 479, 480, 77 N. E. 45. See R. L. c. 73, § 68.

We do not deem it material to refer at length to the dealings between the defendant and the holders of a majority of the capital stock of the company which the defendant, in order to secure control, sought to acquire in connection with and as part of the project to purchase the plant, and to continue the business as a going enterprise. The jury upon conflicting evidence, including the evidence of the company's secretary and treasurer, and the statements of liabilities, and of notes and bills payable which were properly admitted, would have been warranted in finding that Cooper knew of its financial condition and impending insolvency when he exhibited to one Orth, the defendant's president,a paper referred to in the record as the ‘Orange statement’ showing the liabilities to be approximately ‘$11,000 less.’ While the ‘Orange statement’ used by Cooper is some 30 days subsequent to the tabulations of the treasurer, no evidence was offered by the plaintiff showing any change in conditions, and any question that the evidence was secondary was expressly waived. The receipt or letter also was to be considered by the jury with all the evidence relating to the placing of the notes with Cooper, and the plaintiffs' third request, that ‘the letter of November 14, 1914, from Thomas E. Cooper to the defendant, acknowledging receipt of the notes sued upon, is not to be construed as meaning that Thomas E. Cooper would hold the notes in his possession without negotiating them’ could not have been given. It further could be found on the testimony of Orth that, relying on the accuracy of the ‘Orange statement,’ he had been induced by Cooper to go on with the proposed trade, and to indorse the notes in question which were to be used to retire outstanding overdue notes of the company indorsed by the sellers of the stock. And notwithstanding the agreement of indemnity and the receipt or letter given by Cooper to Orth, the Jury also were to determine whether as Cooper testified there had been an unconditional delivery, or whether Orth's evidence was to be followed, that after some imperfections in the title had been discovered by defendant's counsel, he placed the notes in Cooper's hands with the express understanding, that he was to retain them until the title has been perfected, which never has been done. It follows, that if the delivery was conditional Cooper himself could not have enforced payment of the notes. Watkins v. Bowers, 119 Mass. 383;Wilson v. Powers, 131 Mass. 539;Young v. Hayes, 212 Mass. 525, 531, 99 N. E. 327.

And the plaintiffs' seven...