People's Bank of Ava v. Rankin

• Decision Date: 02 March 1926
• Docket Number: No. 3685.,3685.
• Citation: 282 S.W. 91
• Parties: PEOPLE'S BANK OF AVA v. RANKIN et al.
• Court: Missouri Court of Appeals

282 S.W. 91

PEOPLE'S BANK OF AVA v. RANKIN et al.

No. 3685.

Springfield Court of Appeals. Missouri.

March 2, 1926.

Rehearing Denied March 25, 1926.

Appeal from Circuit Court, Greene County; Orin Patterson, Judge.

Action by the People's Bank of Ava against Allen M. Rankin and another. Judgment for defendants, and plaintiff appeals. Reversed and remanded.

J. S. Clarke, of Ava, and Alfred Page and Val Mason, both of Springfield, for appellant.

Lamar, Evans & Lamar, and Hiett Impey, all of Houston, for respondents.

BRADLEY, J.

This is a suit on a promissory note in the principal sum of $2,000. The cause was filed in Douglass county, but the venue was changed to Greene, where trial was had to a jury, and verdict and judgment went for defendants, and plaintiff appealed.

The petition alleges the execution of the note payable to the order of the makers, the indorsement by them, and the purchase by plaintiff.

Defendants in their answer admit signing and indorsing the note, and deny generally all other allegations. Further answering, defendants allege that defendant Allen M. Rankin is the principal maker, and that D. O. Rankin is, as between them, an accommodation party. Defendants further allege that the note was obtained by fraud and is without consideration, and that plaintiff before it bought said note had knowledge of such fraud and failure of consideration, or had knowledge of such facts that its action in purchasing said note amounted to bad faith; that said note was given for stock in a store to be established in Ava, Mo., by the Industrial Transportation Company; that V. A. Dobyns was, and for a long time had been, cashier of plaintiff bank, and was a man of influence in the community, and that defend". ants reposed confidence in him, and that the said Dobyns represented that he had subscribed for stock in said Industrial Transportation Company and induced defendants and others to subscribe; that the said Dobyns represented that the money paid on notes given for stock would be placed in plaintiff bank and held there in escrow until the store was established and in operation in Ava, and that if the store was not established the money and notes would be returned; and defendants say:

"That, having confidence in the business judgment, standing, and ability of the said V. A. Dobyns, and believing the above statements and representation to be true, and on the express promise and agreement of the said agent of said Industrial Transportation Company and of V. A. Dobyns, cashier, that the note sued on would be held by said V. A. Dobyns, cashier of plaintiff bank in said bank, and would not be delivered to said Industrial Transportation Company unless and until the said store was established, and if not established would be returned to defendant, the defendants herein, by reason of said promises and of their confidence in the business judgment and in the promises of the said V. A. Dobyns, were induced to and did execute the note sued on."

Defendants further allege that Dobyns did not in good faith subscribe for any stock, but pretended to subscribe in order to deceive and mislead defendants and others.

The reply is a general denial and allegations that plaintiff bank purchased the note "solely upon the representation, solicitations, and at the request of defendants." Also allegations in the nature of estoppel are made in the reply.

Several separate assignments are made, but all are in effect included in the assignments based on the refusal of the trial court to direct a verdict for plaintiff and on the instructions.

The note was executed January 13, 1921, due 6 months thereafter, and was payable to "myself or order," and was signed and indorsed by defendants and turned over to Leo Cornett, a stock salesman for the Industrial Transportation Company. The consideration recited in a receipt was 144 shares of preferred and 16 shares of common stock in the said Industrial Transportation Company. Plaintiff introduced the note and evidence of its purchase for value and before maturity, and the nonpayment thereof and rested.

When we use the term defendant hereinafter we have reference to defendant Allen M. Rankin. He is the defendant with whom all the agreements and promises were made, and to whom all representations were made. Defendant D. O. Rankin, the father of Allen M., had no connection with the matter except to sign and indorse the note.

Defendant Allen M. Rankin, teacher and farmer, at the time of the execution of the note, was about 22 years of age and was attending the high school in Ava. The Industrial Transportation Company was a chain grocery store concern, and in January, 1921, was supposed to be operating 127 stores in different sections of the United States, and was around Ava reputed to be worth several million dollars. Before a store was established in a community that community was required to purchase a certain amount of stock in the company. Leo Cornett, agent and stock salesman of this company, was endeavoring to sell enough stock in Ava and vicinity to establish one of the chain stores in Ava. Several persons in and around Ava subscribed for stock, and among these were V. A. Dobyns, plaintiff's cashier, T. J. Moorehouse, and defendant. Dobyns subscribed for stock to the amount of $250 and Moorehouse to the amount of $1,500, and defendant to the amount of $2,000. Dobyns gave his note for $250, and Moorehouse his two notes for $500 and $1,000, respectively. Plaintiff bank, through Dobyns, purchased these three notes, aggregating $1,750, and issued therefor time certificates of deposit maturing at the same time the notes matured. Altogether Dobyns, acting for plaintiff bank, purchased stock notes aggregating $4,625 and issued certificates of deposit in payment.

It was planned for defendant to be manager of the store to be established at Ava, and then it was planned to make Moorehouse manager at Ava, and defendant was to be manager of a store to be established at Mountain Grove. Cornett had promised defendant and all other stock purchasers that notes or money, if cash was paid, would be returned if the store was not established at Ava, or if the purchaser was dissatisfied or desired to have his note or money back. Cornett put on the stock sale in January, 1921, and the store was to be established and in operation by February 15, 1921. All of the stock notes purchased by plaintiff bank were given on and between January 10th to 26th. It does not appear just when the bank purchased these various notes except in the case of the note in suit.

Business complications arose which made Moorehouse unavailable for manager, but just at what time or at what stage of the stock sale drive Moorehouse became unavailable does not definitely appear. When Moorehouse was eliminated as manager he wanted his notes back, and Dobyns did not desire, so he testified, to invest unless Moorehouse was and also wanted his note back. On February 9, 1921, six days prior to the time when the store at Ava was to be established and in operation, Dobyns, acting for plaintiff bank, made a deal with Cornett whereby the bank became the owner of the note sued on and Dobyns and Moorehouse got their notes back. The deal was arranged in this manner. Dobyns for the bank had previously purchased his own and the Moorehouse notes, and had issued therefor time certificates of deposit aggregating $1,750 as above stated. When he made the deal with Cornett on, February 9th he received from Cornett defendants' note of $2,000 and delivered to Cornett a time certificate of deposit for $250 and took up and canceled his own and the Moorehouse notes. By this deal the bank became the owner of the note sued on and surrendered the Dobyns and Moorehouse notes. Also by this deal the bank was whole, if the note sued on was paid, and Dobyns and Moorehouse were also whole, regardless of the fortunes of the Industrial Transportation Company.

It was not generally known that Dobyns had escaped until long after February 9th, when the deal was made whereby he got his note back. On June 21, 1921, he signed a written agreement relating to the employment of an attorney who was to represent the Ava stockholders in an endeavor to get something out of the wreck of the Industrial Transportation Company, which was adjudged a bankrupt in April, 1921. This agreement recited that the attorney was to take such steps as were necessary "to recover the sums opposite our respective names heretofore invested in the common and preferred stock of the Industrial Transportation Company." The amount that appeared opposite Dobyns' name was $250, as though he then had $250 invested in said stock. The above is the history in outline of this cause. Such additional facts as may be necessary will be stated in the course of the opinion.

The answer is not very definite, but it may be said to plead: (1) That the note sued on was never delivered in the legal sense, but was to be placed in escrow in plaintiff bank and there held until the store at Ava was established; (2) that in the event the store was not established at Ava the note was to be returned to the defendant; and (3) that the bank took the note with knowledge of the agreement and is bound thereby.

Defendant in effect testified that when he signed and when the note was turned over to Cornett the understanding was that it was to be placed in plaintiff bank and there held until the store was put in at Ava, and that in the event the store was not put in the note was to be returned to him. The record shows that Dobyns and plaintiff bank were rather closely connected with and associated with Cornett during the stock sale campaign. The bank through Dobyns bought all or practically all the stock notes given in the Ava community, and gave therefor time certificates drawing 4 per cent., while the notes drew 8 per cent. But the view we take of the defense that the note at bar was to be returned to defendant in the event a store was...