Ozark Motor Co. v. Horton

• Decision Date: 16 June 1917
• Docket Number: No. 2002.,2002.
• Parties: OZARK MOTOR CO. v. HORTON et al.
• Court: Missouri Court of Appeals

196 S.W. 395

OZARK MOTOR CO. v. HORTON et al.

No. 2002.

Springfield Court of Appeals. Missouri.

June 16, 1917.

Appeal from Circuit Court, Wright County; C. H. Skinker, Judge.

Action by the Ozark Motor Company against J. E. Horton and another. Judgment for plaintiff, and defendants appeal. Reversed and remanded.

Hiett & Scott and Lamar & Lamar, all of Houston, for appellants. Allen & Allen, of Springfield, for respondent.

STURGIS, J.

This is a suit on a promissory note, the defendants being makers and the plaintiff a purchaser by mesne indorsements from the payee. The defense is that the note was procured by fraud. This the plaintiff denies, and also claims that he is a purchaser for value and in good faith with no knowledge of the alleged fraud. The plaintiff prevailed in the trial court, and defendants appeal.

The note in question represents part of the purchase price of a certain stallion sold by Tuck & Co. to the defendants. The stallion was sold under a written guaranty that if he failed to prove a good breeder he could be returned within a specified time, and Tuck & Co. would furnish another horse of the same value and quality. It is practically conceded that the horse did prove worthless in this respect, and was returned within the time specified. No other horse was furnished, or at least accepted, by the defendants. The horse was returned as worthless while the note in question was yet owned by Tuck & Co., or their agent, Shook, who negotiated the sale to defendants.

The fraud in procuring the note, alleged and proved and on which the case went to the jury, is that Shook, acting for Tuck & Co., represented to defendants and each of them that he was selling this horse for $2,400, divided into shares of $200 each, and that certain well-known business and stock men of that vicinity, Mountain Grove, Mo., of ability, influence, and knowledge of horses, had, after seeing and examining the horse, bought shares in such horse at that price and paid cash therefor; that in fact Shook had made an agreement with said men to give them such shares for nothing, on condition that he might, with their assistance and approval, represent to defendants that they had made such purchase for cash, and thereby influence and induce defendants to buy shares therein, which they did and gave this note in payment; that defendants believed such representations to be true, and, having faith in the ability, experience, and sound judgment of such men, were induced by such false representations to take shares in such horse and execute the note in question, which they would not otherwise have done. The evidence shows that some of these men of influence gave checks in ostensible payment of their shares in this horse, but in reality for exhibition to prospective buyers, and which were destroyed or turned back after such purpose was accomplished. For example, one King, who was most active in aiding Shook in finding purchasers, testified that Shook gave him a share under an agreement that he, King, would represent to citizens of that vicinity that he had purchased a share in said horse for the purpose of inducing others to purchase shares; that he, along with Shook, did so state and represent to others, inclusive of defendants, or some of them; that he paid nothing for such share but got it for making such representations.

The defendants each testified that they were informed and believed that each of these men of influence, three in number, had purchased shares in the horse in good faith, and were induced, wholly or in part, to purchase shares by reason of such fact. The fact that one or two of such defendants stated on cross-examination that they relied to a large extent on their own judgment as to the value of the horse, and would not have seriously objected had the horse proven a good breeder, does no more than make the question of their having been deceived and influenced thereby to execute the note one for the jury, as will be seen by the cases below cited.

The plaintiff makes the point that the representation that these third parties had bought and paid for shares in the horse does not constitute fraud, since the horse, or defendants' interest in the same, would have been no more and no less valuable if such third persons had paid for their shares; and hence defendants were not damaged by the false representations. The law, however, does not take that view of such transactions, but requires joint purchasers of property, as well as the seller, to deal fairly and in good faith with each other, and does not allow the seller and a part of such purchasers to conspire to make the other purchasers pay the entire purchase price. Elgin City Banking Co. v. Hall, 119 Tenn. 548, 108 S. W. 1068; King v. White, 119 Ala. 429, 24 South. 710; Kimber v. Young, 137 Fed. 744, 70 C. C. A. 178; Hinton v. Ring, 111 Ill. App. 369; Link v. Jackson, 164 Mo. App. 195, 147 S. W. 1114; Garrett v. Wannfried, 67 Mo. App. 437, 441. In this last case the court said:

"In the formation of such joint enterprises there is a mutual trust between the parties and a mutual confidence begotten in the success of the undertaking by the risk that each is willing to take in the outlay of his capital. Here defendant offered to take plaintiff into the mining enterprise he was forming, and stated as a fact that the land cost him $200 per acre, and that the plaintiff should come in with him at that figure. This was not a representation of value, or an expression of opinion. It was a breach of faith, a representation as to a material fact concerning that which formed the subject-matter of the enterprise, and is a good foundation for an action."

Under the Negotiable Instruments Act the title to this note of the person who first negotiated it was therefore defective, since he had obtained the instrument by fraud (section 10025, R. S. 1909), and the question for determination is whether plaintiff became a holder in due course, that is, "that he took it in good faith and for value; that at the time it was negotiated to him he had no notice of any * * * defect in the title of the person negotiating it." Section 10022, R. S. 1909. When it is shown, as it was here, that the title of Tuck & Co. and of their agent, Shook, was defective, then the burden was cast on plaintiff as holder to prove that he or some person under whom he claims acquired the title in due course as just defined. Section 10029, R. S. 1909.

The note bears the indorsement of Tuck & Co., the payees, and of Shook, their agent, under date of August 10, 1913, and of F. C. Garrett under date of August 25, 1913. These indorsements were made prior to the due date of the note. There is nothing shown as to how or for what consideration F. C. Garrett obtained the note, and no attempt was made to show him to be a holder in due course. The plaintiff obtained the note from him in part payment of an automobile. All the indorsements, including that of Garrett to plaintiff, are without recourse. It was shown, however, that Garrett was required to and did give plaintiff a written guaranty of the payment of the note. Plaintiff and its manager lived in Springfield, and knew nothing and made no inquiry as to who were the makers of the note or as to their financial worth, except that Garrett told him they were substantial farmers near Mountain Grove. Plaintiff's manager knew Tuck & Co., also of Springfield, and the nature of their business. There are other facts not necessary to enumerate which made it a question for the jury to say whether plaintiff had discharged the burden of proof that he was a holder in good faith. Moreover, it has been ruled, on the authority of Gannon v. Gas Co., 145 Mo. 502, 46 S. W. 968, 47 S. W. 907, 43 L. R. A. 505, that, since the burden is on plaintiff to prove his being a holder in due course, which includes his want of notice that the note was procured by fraud, his verbal evidence to that effect, though uncontradicted and all the evidence introduced on the subject, might nevertheless be discredited by the jury, and merely created an issue of fact exclusively for the jury. Hill v. Dillon, 151 Mo. App. 86, 92, 131 S. W. 728; Hill v. Dillon, 176 Mo. App. 192, 200, 161 S. W. 881. To the same effect are Phillips v. Eldridge, 221 Mass. 103, 108 N. E. 909; Joy v. Diefendorf, 130 N. Y. 6, 28 N. E. 602, 27 Am. St. Rep. 484.

In presenting the question of plaintiff being a holder in due...