St. Louis Nat'l Bank v. Ross

• Decision Date: 07 December 1880
• Citation: 9 Mo.App. 399
• Parties: ST. LOUIS NATIONAL BANK, Appellant, v. WILLIAM P. ROSS, Respondent.
• Court: Missouri Court of Appeals

9 Mo.App. 399

ST. LOUIS NATIONAL BANK, Appellant,

v.WILLIAM P. ROSS, Respondent.

St. Louis Court of Appeals, Missouri.

Dec. 7, 1880.

1. Where notes are executed to a factor, and goods are shipped to him to be sold and the proceeds applied to the payment of the notes, a pledgee who takes the notes and the goods as collateral for advances, with notice that the pledgeor is a factor, is bound to apply the proceeds of the goods to the payment of the notes; and these facts constitute a defence to an action on the notes by the pledgee against the maker.

2. Where the cause is tried upon the material questions at issue between the parties, if these issues are made by the instructions, the question that they were not properly made by the answer cannot be raised for the first time in the appellate court. In such a case the defects in pleading do not constitute any jeofail after verdict.

3. The admissions of a stranger to the suit need not necessarily be excluded where the mutual rights of the stranger to the record and a party to the suit are necessarily involved in the issues tried.

4. Testimony of the factor's customers that they purchased of him by sample, and were sent to the bank, the pledgee in this case, to pay the purchase-money and receive in exchange the warehouse receipts, was competent as tending to show notice to the bank.

5. Goods may be pledged by the delivery of the warehouse receipt, though it be not indorsed.

APPEAL from the St. Louis Circuit Court, THAYER, J.

Affirmed.

HITCHCOCK, LUBKE & PLAYER, for the appellant: Under the Practice Act of this State, a defendant sued upon a contract is not permitted to set up, by way of defence thereto, as distinguished from counter-claim, a claim against the plaintiff for damages for a tort alleged to have been committed by plaintiff in respect of defendant's property.--Rev. Stats. sects. 3521, 3522; Gordon v. Bruner, 49 Mo. 572; McAdow v. Ross, 53 Mo. 203-207. Such a claim by defendant as above mentioned is not pleadable as a set-off, not being a debt; a fortiori, it is not equivalent to a plea of payment.-- McAdow v. Ross, supra; May v. Kellar, 1 Mo. App. 385. A defence of new matter, not pleaded by way of counter-claim in accordance with the statute requirements above mentioned, and which does not go to the plaintiff's right of action, but merely sets up in opposition thereto facts pleadable (if at all) only by way of counter-claim, is no defence in law. To such a defence plaintiff need file no reply; and instructions which proceed on the theory that such new matter (not being pleadable and properly pleaded by way of counter-claim), if proved, can support a verdict for the defendant, are based upon an immaterial issue, and erroneous.--Bliss on Code Pl., sect. 368; Tarwater v. Hannibal, etc., R. Co., 42 Mo. 196; Jamison v. City of Springfield, 53 Mo. 231 (par. 2); Rapp v. Vogel, 45 Mo. 524. The testimony of Southworth, Picton, Paton, and other buyers, as to the manner in which they purchased cotton from Dowell & Co., was also irrelevant. And the ruling of the court made in presence of the jury as to the value and effect of such testimony was grave error, as in effect directing the jury to draw certain conclusions of fact from said evidence.-- The State v. Smith, 53 Mo. 267; Jones v. Jones, 57 Mo. 138; Rothschild v. American Central Ins. Co., 62 Mo. 356; The State v. Elkins, 63 Mo. 159; Corby v. Wright, 4 Mo. App. 452.

SILAS B. JONES, for the respondent: Goods may be assigned by the delivery of the warehouse receipt.-- Erie, etc., Dispatch v. Compress Co., 6 Mo. App. 172; Rice v. Cutter, 17 Wis. 351; Skilling v. Bollman, 6 Mo. App. 76. Where the payee of a negotiable promissory note, payable to his order, transfers the same by delivery only, without indorsement, his transferee is not clothed with the rights of an indorsee of negotiable paper, but he holds the same subject to the rules applicable to the case of an assignment of any mere chose in action. As a consequence, a note so transferred is open to every defence which the maker has against it at the time he becomes aware of the transfer; and hence a payment to the payee, before notice of such transfer, discharges the note.-- Patterson v. Cave, 61 Mo. 439; Boeka v. Naella, 28 Mo. 180; Hedges v. Sealy, 9 Barb. 214; Jones v. Witter, 13 Mass. 304, 307; Hackett v. Martin, 8 Me. 79; 1 Dan. Neg. Inst., sect. 741 et seq. Possession of the bill of lading for the goods by the factor does not give him any greater powers as to third persons than possession by him of the goods.-- Newsom v. Thornton, 6 East, 17; Martini v. Coles, 1 Mau. & Sel. 140; Skilling v. Bollman, 6 Mo. App. 76, 80. A factor cannot pledge his principal's goods.-- Benny v. Rhodes, 18 Mo. 147; Benny v. Pegram, 18 Mo. 191. That he has advanced money upon them gives him no such right.-- Howard v. Smith, 56 Mo. 314; Warner v. Martin, 11 How. 209. One who is aware that one offering to pledge a warehouse receipt is a factor, is not an innocent purchaser.-- Buckner v. Jones, 1 Mo. App. 538; McDaniel v. Wood, 7 Mo. 543; Benoist v. Siter, 9 Mo. 657; Renshaw v. Wills, 38 Mo. 201; Mechanics' Bank v. Schaumburg, 38 Mo. 228.

BAKEWELL, J., delivered the opinion of the court.

This is an action upon five negotiable promissory notes made by respondent, payable to the order of J. H. Dowell & Co. The notes were dated at various periods between September, 1877, and September, 1878; were payable in periods ranging from ninety days to six months, and were for various amounts, aggregating about $2,800. The petition alleged that these notes were each indorsed and delivered to plaintiff for value before maturity. The answer admitted the execution of the notes, but denied all other allegations of the petition, specially that the notes in question were acquired before maturity and for value; and alleged that all the notes were paid by the maker whilst they were in the possession of the payee. And as an affirmative defence, the answer set up that after the notes came into possession of plaintiff, defendant consigned to Dowell & Co., the payees, who were cotton-factors in St. Louis, a large amount of cotton, the property of defendant, with instructions to them to sell this cotton and apply the proceeds to the payment of these notes; that Dowell & Co., on receipt of the cotton, in violation of plaintiff's instructions and of the duty of Dowell & Co., delivered all of said cotton to plaintiff; that plaintiff, on receipt of this cotton, caused it to be sold, and received the proceeds, which were more than enough to fully pay these notes; that plaintiff, instead of applying the proceeds of the cotton to the payment of the notes, applied the proceeds to the payment of debts due by Dowell & Co. to plaintiff, in which defendant had no concern; that plaintiff was well aware at the time that said cotton belonged to defendant, and was consigned to pay these notes; and that Dowell & Co. were guilty of a breach of trust in turning the cotton over to plaintiff to sell and apply the proceeds to the payment of indebtedness of Dowell & Co. to plaintiff; that Dowell & Co. informed defendant that the proceeds of the cotton had been applied to the payment of the notes, and that the notes had been cancelled, all which plaintiff knew; that plaintiff well knew at the time that defendant did not become aware that said notes had not been cancelled until long afterwards, and after the firm of Dowell & Co. had dissolved and had become insolvent; and that neither Dowell & Co. nor plaintiff have paid to defendant any of the proceeds of the cotton received and sold as aforesaid by plaintiff. After pleading these facts as a defence to the action, defendant sets them up in his answer by way of counter-claim, setting forth that the proceeds of the cotton thus received by plaintiff were $16,000, of which Dowell & Co. paid to defendant $8,000, leaving $8,000 due, for which defendant asks judgment.

On the trial of the cause, it appeared from the evidence that defendant kept a country store in Arkansas, where he dealt to some extent in cotton. Dowell & Co., in St. Louis, were his factors, and all the cotton of defendant was shipped to them for sale. The firm of Dowell & Co. was dissolved on March 12, 1879, by the death of Dowell. Prior to that date they had been doing a large business as cotton-factors. The notes sued on were given by defendant to Dowell & Co. for moneys and supplies furnished by them to him, on the understanding that defendant would ship cotton to Dowell & Co., which they were to sell as his factors, and out of the proceeds of which sales they were to pay these notes. The notes were charged by Dowell & Co. to defendant in their running account with him, as they matured, and the net proceeds of the sales of his cotton were credited to him on the same account. From time to time statements of account were furnished by Dowell & Co. to defendant; and at the date of Dowell's death the balance in favor of defendant, after applying the proceeds of cotton to these notes and the advances of Dowell & Co., was about $700. It was not until after Dowell's death, at the institution of this suit, that defendant learned that the notes which he had given to Dowell & Co., and which, by the statements of account forwarded to him, appeared to be all paid, had never been cancelled, but were held by plaintiff as a claim against him.

The banking business of Dowell & Co. had been done with plaintiff for many years before Dowell's death. It was in evidence that they had a course of dealing with plaintiff during the cotton season beginning in September, 1878, up to Dowell's death, by which Dowell & Co. pledged to plaintiff all the cotton they received--about twenty thousand bales. The bills of lading of the customers of Dowell & Co., who resided for the most part in Arkansas and Texas, were forwarded to St. Louis, and were by Dowell & Co. deposited with the plaintiff, who would thereupon make loans to Dowell & Co. at the...