Rice-Stix Dry Goods Company v. Montgomery

• Decision Date: 05 May 1924
• Docket Number: 352
• Citation: 261 S.W. 325,164 Ark. 161
• Parties: RICE-STIX DRY GOODS COMPANY v. MONTGOMERY
• Court: Arkansas Supreme Court

261 S.W. 325

164 Ark. 161

RICE-STIX DRY GOODS COMPANY v. MONTGOMERY

No. 352

Supreme Court of Arkansas

May 5, 1924

Appeal from Pope Circuit Court; J. T. Bullock, Judge; affirmed.

Judgment affirmed.

Hawthorne Hawthorne & Wheatley, for appellant; Lyon & Swarts, of counsel.

Fraud is never presumed, but must be proved. 144 Ark. 87; 33 Ark 425; 9 Ark. 482; 22 Ark. 184; 37 Ark. 145; 55 Ark. 148; 92 Ark. 509; 82 Ark. 20; 40 Ark. 417. See also on the facts of the case 104 Ark. 395; 108 Ark. 350. A debtor is presumed to be solvent. 63 So. 687; Jones on Evidence, § 57; 80 P 504; 85 S.W. 761 (Ky.). Subsequent insolvency is not evidence of insolvency at a given past time. 85 S.W. 761; 157 P. 1179; 61 N.W. 942. The law raises no presumption of knowledge from the mere fact that the representation is false. 27 C. J. 48. Failure to prove any one of the essential elements of fraud is fatal. 27 C. J. 47. The scienter must be proved. 22 Ark. 454. See also 143 Ark. 477; 27 Cyc. 44; 12 R. C. L. 350. This court will render judgment where one should have been directed by the trial court. 122 Ark. 451; 136 Ark. 52; 139 Ark. 294; 147 Ark. 402. See also 134 Ark. 543. A presumption of good faith prevails until fraud is proved. 45 Ark. 492; 22 C. J. 146; 27 C. J. 44; 111 S.W. 67. Instruction No. 2 was abstract, and calls for a reversal. 148 Ark. 278; 154 Ark. 547; 88 Ark. 454. Instruction No. 4 was erroneous. This instruction deals with the degree of proof required to show fraud. See 41 L. ed. 425; 106 N.W. 1074, 115 Am. St. Rep. 1010.

A. S. Hays and J. B. Ward, for appellee.

Different conclusions might have been drawn from the evidence adduced, and it was proper to submit same to the jury. 76 Ark. 88. See also 120 Ark. 206; 140 Ark. 356. The agent of appellant owed to appellee the duty to disclose such facts as were peculiarly in his possession, and not to do so was a fraud. 135 F. 621; 149 N.W. 882. Fraud vitiates a contract both at law and equity. 3 R. C. L. 318; 30 Ark., star p. 374; 22 Ark. 517. Appellant did not specifically object to any instruction given, nor did it ask a proper instruction, and it is now too late to complain. 78 Ark. 27; 112 Ark. 477; 13 Ark. 341; 157 Ark. 609; 123 Ark. 119; 141 Ark. 346; 129 Ark. 95.

OPINION

WOOD, J.

This is an action by the Rice-Stix Dry Goods Company, a corporation of Missouri, hereafter called appellant, against W. A. Montgomery, hereafter called appellee. The appellant alleged that the appellee is an indorser on a note executed by Gibson Bros., bankrupts, on November 10, 1920, for the sum of $ 1,797.12. The appellee answered, and admitted that he executed the note, but denied that he was liable, and averred that Gibson Bros., soon after the note was executed, were adjudged bankrupt; that the appellant filed its claim covered by the note in suit before the referee in bankruptcy. Appellee further averred that his indorsement of the note was procured by fraud and misrepresentation of the appellant, in that the appellant represented to the appellee, prior to securing his indorsement, that the firm of Gibson Bros. was solvent; that appellant was their just creditor, and that Gibson Bros. would be financially able to meet their obligations, thereby relieving the appellee of any liability because of his indorsement of the note; that appellee, relying on this statement of the appellant as to the financial ability of Gibson Bros., was induced to indorse the note; that the statements made by the appellant as to the financial condition of Gibson Bros. were false and fraudulent, and made for the purpose of procuring the signature of appellee to the note; that the appellant knew, at the time the statements were made, that they were false, and knew that Gibson Bros. were hopelessly insolvent and would not be able to avoid bankruptcy proceedings. The appellant introduced the note in evidence.

The appellee testified that he lived at Atkins. He signed the note. He did not owe appellant anything, and was not interested in the mercantile firm of Gibson Bros. Mr. Gibson asked witness to sign the note with him, but witness did not sign the note on Gibson's mere request. Witness first had a conversation with a man by the name of Boldt with reference to witness' signing the same. Witness refused to sign until he had talked with Boldt. Witness walked in (the business house of Gibson Bros.), and this conversation took place. Boldt said, "They say you are all right." I said, "Well, I generally pay anything I owe," and I further said, "You have gone over these books, and how is this business?" He said, "It is all right," and so he wrote the note, and made the date the first of October, and he read it over, and I said, "Now in this cotton country sometimes it is a late fall, and that is too early to pay a debt--to collect money." He said, "Well, I will make it the fifteenth." I said, "That is all right--make it the fifteenth of October instead of the first." Witness signed the note. He would not have signed the note at that time, or at any other time, but for the representation of Mr. Boldt. Witness knew that a man by the name of Boldt was in there, making an investigation. Witness said to Boldt, "You have made an audit of these books, and they are all right, are they?" He said "Yes," and I said, "How are the books?" and he said, "All right." Witness had known the Gibson brothers twenty-six years. Witness had never loaned them any money and had never indorsed any paper for them before. It was late in the evening when this occurred. Just before train time. It was witness' understanding that Boldt left on the afternoon train.

Sam Gibson testified that he had lived in Atkins thirty years. He was a member of the firm of Gibson Bros. The other brother was William Gibson, and he and his brother had been in the mercantile business in the town of Atkins two years. The note was executed on the 20th of October. Suit was filed against the firm on the last of November, and it was thrown into bankruptcy on the second or third of December following. At the time it was thrown into bankruptcy the firm owed about $ 40,000. Boldt, representing appellant, came to Atkins one morning, and was there until late the next evening--practically two days. He made a complete investigation of the business before he made the statements in regard to the business. He audited the books of the firm. There had been a dispute between the firm and the appellant about a shipment of goods, and witness thought Boldt's business there was to see about that. Boldt audited the books two days. He said appellant was the biggest creditor. He said that the firm of Gibson Bros. was in good condition; that it was solvent. These statements were made after he had audited the books and before he asked the witness to get Dr. Montgomery or somebody to sign the note. Witness would not have tried to secure an indorsement on the note if Boldt had not stated that the firm was solvent. Witness went to appellee to secure his indorsement. Appellee talked to Boldt in the presence of witness. Appellee walked into the office, and Boldt said to him, "You must have lots of confidence in those boys," and appellee replied, "Yes, I have. " Appellee asked Boldt, How is their business?" and Boldt replied, "It is all right." Appellee said, "If the business is all right, I will sign the note." Appellee knew at the time, and asked Boldt if he had audited the books. On that day Boldt took part of the goods out of the store, amounting to something over $ 1,000, for which he gave Gibson Bros. credit on their account for these goods, which were bought of appellant. Boldt didn't tell appellee, before he signed the note, that he had taken these goods and given Gibson Bros. credit for same. The appellant filed its claim against Gibson Bros. with the referee in bankruptcy, but appellant was not permitted to participate in the division of the assets.

On cross-examination the witness stated that Boldt told us, after he had gone over the books, that if we would get out and do some collecting we would be all right; that our condition of affairs depended upon our collections and general business conditions in the fall. Witness told appellee what Boldt said--that the firm of Gibson Bros. was in good condition--was solvent.

The appellee, on being recalled, testified that, at the time he signed the note, he didn't know that the appellant had taken out of the stock of Gibson Bros. twelve or fourteen hundred dollars' worth of goods, for which appellant gave the firm a credit of between $ 1,000 and $ 1,100.

Witness Huey testified, for appellant, that he was the bookkeeper for Gibson Bros. when Boldt went over the books. Boldt worked in the morning and most of the afternoon, and a few minutes the next morning, but he did it all practically in the afternoon.

Boldt testified, for the appellant, that he was its auditor and adjuster. He made no representation to the appellee to influence him one way or the other. Witness' transaction was with Gibson Bros. They made the necessary arrangements with the appellee. The only conversation witness had with appellee was the usual greeting of one man to another upon meeting. Witness had entered into an agreement with Gibson Bros. whereby appellant was to carry the amount covered by the note in question until the fall of 1921 provided they would give good security. They thought they could get the appellee to indorse the note. Witness went to the banks and made inquiry as to appellee's financial standing, and satisfied himself that appellee's indorsement would make a good note. Witness came back, and told Gibson Bros. that appellant would grant the extension requested upon the appellee's indorsement of their note. Up to this time witness had not seen the appellee. One of the...