Meyer Milling Co. v. Strohfeld

• Decision Date: 12 July 1929
• Parties: MEYER MILLING COMPANY, APPELLANT, v. H. F. STROHFELD, RESPONDENT
• Court: Missouri Court of Appeals

20 S.W.2d 963

224 Mo.App. 508

MEYER MILLING COMPANY, APPELLANT, v. H. F. STROHFELD, RESPONDENT

Court of Appeals of Missouri, Springfield

July 12, 1929 ^[*]

Appeal from Lawrence County Circuit Court.--Hon. Chas. L. Henson Judge.

REVERSED AND REMANDED (with directions).

Judgment reversed and remanded.

Mann & Mann and Jno. W. Miller for appellant.

(1) The telephone conversation testified to by the witness, A. J Howard, was not admissible. It was in the nature of hearsay evidence, it was not sufficiently and definitely enough shown with whom the conversation was had. Strack v. Telephone Company, 216 Mo. 601; Young v. Transfer Company, 33 Wash. 225, 74 P. 375; 99 Am. St. Rep., 946; Stearns Lumber Company v. Howlett et al., 157 N.E 82, 52 A.L.R. 1125, 1143; Hirsch v. Sherman, 205 N.Y.S. 434; Hospital Company v. Chalmers, 157 N.Y.S. 1000; Cheese Company v. Moore Brothers, 180 N.Y.S. 481; Barrett v. Magner, 127 Am. St. Rep. 546, 105 Minn. 118, 117 N.W. 245; Murphy v. Jack, 142 N.Y. 215, 40 Am. St. Rep. 590; American Trust Company v. Moore, 248 S.W. 983; Hunter v. Gasoline Engine Company, 260 S.W. 970, 237 S.W. 819; Bank v. Equipment Company, 285 S.W. 779; Makinson v. Meletio Fish & Oyster Co., 241 S.W. 959, 6 L.R.A. (N.S.) 1185 (Note); 3 Wigmore on Evidence, p. 2923, 17 L.R.A. 440 and 441.

C. W. Hamlin and Rex McPherson for respondent.

(1) The trial court committed no error in admitting the testimony of witness Howard detailing the telephone conversation which he had with someone who said it was the "Meyer Milling Co. of Springfield speaking." Wolfe v. Mo. Pac. R. R. Co., 97 Mo. 473, 481; Meeker v. Union Electric Co., 279 Mo. 574, 603, 216 S.W. 923 and 933; Globe Printing Co. v. Stahl, 23 Mo.App. 451; Star Publishing Co. v. Warehouse Co., 123 Mo.App. 13; J. E. Hood & Co. v. McCune, 235 S.W. 158, 160 Par. 6; Miller v. Phoenix Fire Ins. Co., 9 S.W.2d 672, 673; Gen. Hospital Society v. New Haven Rendering Co. (Conn.), 9 Am. & Eng., Annot. Cases 168; Conklin v. Standard Oil Co., 116 N.W. 823; American & British Mfg. Corp et al. v. New Idria Quicksilver Min. Co., 293 F. 509. (2) In order to convict one of bad faith in the purchase of negotiable paper, it is not necessary to prove that he knew of the exact fraud or other defects in the title but it is sufficient to show that the holder had notice that there was something wrong with the titles to the paper. Paike v. Perry et al., 114 N.E. 830, 832 Par. 5; Ozark Motor Co. v. Horton, 196 S.W. 395; Davis v. First National Bank, 229 P. 391.

BAILEY, J. Cox, P. J., and Smith, J., concur.

OPINION

BAILEY, J.

This is an action on a promissory note by the holder against the maker. The suit was filed in Christian county returnable to the May term, 1926, of the circuit court thereof, and was sent to Lawrence county on application for change of venue, where the case was tried, verdict directed for plaintiff and appeal taken to the October term, 1927, of this court. The cause was by this court reversed and remanded for new trial. [Meyer Milling Company v. Strohfeld, 4 S.W.2d 864.] A new trial was had to a jury, resulting in a verdict and judgment for defendant and plaintiff has appealed.

The note in suit was dated October 29, 1924, and payable to the order of "George W. Wilson, Trustee." The note was procured from defendant by one F. E. Smith, and was to be used in the purchase of certain mill properties. This note was turned over to George W. Wilson and retained by him until the project failed to materialize. He thereupon returned this particular note, together with other notes, to F. E. Smith. The latter sold the notes to plaintiff under circum-stances hereinafter set forth. A more detailed understanding of the principal facts may be had from a reading of the Strohfeld case, supra, which facts need not here be re-stated. In the former appeal we held the word "trustee," following the name of the payee in the note, was no notice of defective title in an action between the maker and endorsee and that such circumstance did not, in itself, destroy plaintiff's position as a holder in due course. We further held that the evidence indicated fraud and defect of title in Smith. In reversing and remanding the case, we stated our understanding of the law to be as follows:

"We think the record fully sustains the view that there was substantial evidence tending to prove the title of Smith was defective within the meaning of section 841, Revised Statutes 1919. The answer seems to plead that fact, and under such circumstances the burden of evidence was upon plaintiff to prove its good faith in the transaction by showing all the facts and circumstances under which it acquired the note. [Section 845, R. S. 1919; Downs v. Horton, 287 Mo. 414, 230 S.W. 103.]

"We therefore hold that, although the word 'trustee' following the name of the payee in the note was not in itself notice of a defective title, and did not affect the negotiability of the note, nevertheless, upon proof that the title of Smith was defective, not merely as to failure of consideration, but because of fraudulent breach of trust, it became plaintiff's duty to go forward with proof that it purchased the note in good faith and without notice of the fraud or breach of trust on the part of Smith. It follows that the trial court committed error in directing a verdict for plaintiff. If upon a new trial plaintiff's evidence reveals all the facts connected with its purchase, and tends to establish that it purchased the note in good faith, without notice of the defective title of Smith, then, in the absence of further proof of actual knowledge on the part of plaintiff, a directed verdict for plaintiff would be proper." [Meyer Milling Co. v. Strohfeld, supra, 4 S.W.2d 864, 866-867.]

The case was re-tried on the same pleadings as in the former trial. Plaintiff, in order to comply with this court's requirement that it go forward with proof that it purchased the note in good faith, offered evidence showing the circumstances under which it purchased the note. On that issue, Mr. L. S. Meyer testified that he was vice-president and general manager of the plaintiff company and as such handled the matters leading up to the acquisition of the note in suit; that the note was gotten from F. E. Smith on a deal to sell to Smith, or the Billings Milling Company, plaintiff's mill at Republic. The terms of the agreement were set forth in a written contract dated February 3, 1925. As to the consideration for this transfer the contract provided as follows: "Party of the second part (Smith) agrees to deliver to the parties of the first part notes now owned by the Billings Milling Company to the amount of fifty-two hundred dollars ($ 5200), and the parties of the first part agree upon approval of the said notes to pay to the party of the second part twenty-five hundred dollars ($ 2500) in cash--the balance of twenty-seven hundred dollars ($ 2700) to be applied upon the purchase price of the one hundred and fifty (150) shares of stock or the total capital stock of the Republic Custom & Merchant Mill, leaving a balance of seventy-three hundred ($ 7300) dollars to be paid for as above stated in good bankable notes."

Thereafter possession of the Republic Mill was delivered to Smith who operated it for several months. Plaintiff paid Smith $ 2500 cash; at that time Smith tendered plaintiff certain notes, among them being the Strohfeld note in suit. L. S. Meyer further testified as follows:

"I did not know anything at all about that consolidated mill they have been talking about at that time. In December, 1924, I did not know anything about these notes or know they were in existence. I didn't have any deal up about this mill or anything else connected with them then at all. Mr. Strohfeld's note was among the fifty-two hundred dollars worth of notes described in the contract and offered to us at that time.

"After I got the notes I made inquiry before I approved them. I wrote to Senator Sullivan and Mr. Brahaus at Billings. Senator Sullivan was a lawyer at Billings and well acquainted with all the farmers and men that signed the notes, and I considered him a good authority to pass on the value of the notes. Mr. Brahaus is a merchant at Billings, lived there for a good many years. I got a favorable reply from both of these men. Plaintiff's Exhibit 'C' is the letter I addressed to Mr. Sullivan and contains his reply right on the letter about these notes. It is dated February 3, 1925."

The foregoing, we think, sufficiently indicates the circumstances under which the note was purchased. No contention is now made that plaintiff did not pay full value for the note in suit.

The real issues in the case, as developed at the second trial, are thus stated by defendant in his brief, viz., "We think that it can fairly be said that just two principal questions are involved on this appeal; First, did the trial court rule correctly in permitting witness Howard to testify on behalf of the defendant, to a certain telephone conversation that he had with somebody relative to certain notes of which the one in suit here was one? Second: If the court did rule properly in admitting that evidence, was it of such a character as would convict plaintiff of bad faith in purchasing said note without first making an investigation?"

The telephone conversation referred to was offered by defendant as evidence of notice to plaintiff of defective title to the note in Smith and is the only evidence, if any, tending to prove such fact. The evidence in question was given over plaintiff's objection by defendant's witness A. J. Howard, a banker at Billings, who testified in part as follows:

"Sometime in the latter part of '24, I think in December, someone called on the telephone and I answered and...