Sachleben v. Heinze

• Decision Date: 06 November 1893
• Parties: SACHLEBEN v. HEINZE.
• Court: Missouri Supreme Court

24 S.W. 54

117 Mo. 520

SACHLEBEN v. HEINZE.

Supreme Court of Missouri, Division No. 1.

November 6, 1893.

NEGOTIABLE INSTRUMENTS — ACTION ON NOTES — CONSIDERATION — MISREPRESENTATION AS A DEFENSE — KNOWLEDGE.

1. Under the Missouri Code, recognizing and applying legal and equitable rights and remedies in the same proceeding, the maker of a note may avoid it by showing that its execution was materially induced by an innocent but substantial misrepresentation of the other party thereto.

2. Misrepresentations touching the consideration of a note do not constitute a defense to it, when the maker, at the time of delivering it, is fully advised of the true state of the facts respecting which the representations were made.

3. He who takes the benefit of a transaction, with full knowledge of its true nature, must bear its burdens.

(Syllabus by the Judge.)

Appeal from St. Louis circuit court; D. D. Fisher, Judge.

Action by Henry Sachleben against Charles F. Heinze on promissory notes. Judgment for defendant. Plaintiff appeals. Reversed.

H. A. Haeussler, Edw. J. O'Brien, and Cecil V. Scott, for appellant. Lee & Ellis, for respondent.

BARCLAY, J.

The action was begun March 4, 1889, upon seven promissory notes, all made by defendant to order of plaintiff, February 27, 1888, for various sums, aggregating $5,281, maturing at different periods, the longest being one year after date. The answer sets up, in substance, that the notes were given under a contract for the sale to defendant and others of an interest in a patent for a machine to manufacture barbed wire, and that defendant was induced to execute them by reason of certain false and fraudulent representations, the nature of which will appear further along. The reply denied the new matter. A trial by jury resulted in a verdict and judgment for defendant. Plaintiff appealed, after the usual motions and exceptions necessary to bring the case here for review. The defendant took the affirmative at the trial, and from his own evidence showed this case: Plaintiff and a Mr. Crecelius held United States letters patent for a barbed-wire machine. Defendant and two others engaged in the wire business were brought into negotiations with those owners, with a view to the purchase of an interest in the patent, and other rights under it. These negotiations culminated May 23, 1887, in a written contract signed by all the parties mentioned. Its general features are that Sachleben and Crecelius transferred to defendant and associates (whom we shall hereafter, for convenience, call Heinze & Co.) "the sole * * * right to manufacture, sell, and use machines constructed under * * * said letters patent, and to sell the product made by said machines," in consideration of $10,000, in several notes, executed by the purchasers individually, payable at various dates, (the longest, nine months after May 23, 1887,) and also of the payment to S. and C. of a royalty of 10 cents on each 100 pounds of barbed wire manufactured and sold by Heinze & Co., or their licensees, during a term of five years from the contract date, which royalty was guarantied by H. & Co. to reach $85,000. It was also stipulated that on or before October 23, 1887, H. & Co. would cause to be put up and operated not less than 20 of the machines described in the patent, and would "run the same to their full capacity, unless prevented by legal process, or other unavoidable circumstances." There were a number of other provisions respecting expense of litigating the validity of the patent, and a forfeiture of rights under the contract in the event of noncompliance with its terms, but they need not be copied here. The notes of Heinze & Co. were delivered as called for in the contract. Two of them, at six and nine months, respectively, were signed by defendant, Mr. Heinze, alone. They both were unpaid at maturity of the longer one, and the notes now in suit were issued to plaintiff, in renewal of them, February 27, 1888. The misrepresentations on account of which, it is claimed, these notes may be avoided, consist of alleged statements by Crecelius during the negotiations which led up to the contract. Putting them in the form most favorable to defendant, as appears by his own testimony, they amounted to this: That a certain machine made after this patent, and personally exhibited by Crecelius to defendant and his associates, could produce between 2,500 and 3,000 pounds of barbed wire in 10 hours, and that it had turned out 280 pounds of wire in one hour. These statements were first made 30 or 40 days before the contract was signed. The parties were at the shop of Crecelius, where defendant and his associates had gone to examine the machine. One of the defendant's party timed the running of the wire through the machine then, and defendant said that he "saw it run about three-quarters of an hour; * * * the wire was all right, and the barbs were all right. There was nothing hidden or concealed from us. * * * Don't know that I asked a longer test to be made. Crecelius refused nothing about the running of the machine, or anything about it, that was asked him." Defendant went three or four times to the shop, to inspect the machine, before signing the contract; declared that the former "was put in operation for us, and kept in operation as long as we wanted it to run, until we had seen enough of it." Defendant also took the opinion of Mr. Bennett, an attorney in New York, on the patent, before closing the contract. When the latter was finally executed, Heinze & Co. took possession of the first machine, and proceeded to make the 20 new machines called for by their agreement. They were ready by October, 1887, and were immediately put into operation, and kept running until February 8, 1889. Defendant testified that these machines were subjected to a five-days test under the most favorable conditions, and the highest output of each was from 2,300 to 2,400 pounds of wire a day of 10 hours, and that the average of each was from 1,200 to 1,500 pounds a day, while in ordinary use. He and several other witnesses positively...