State Bank of Freeport v. Cape Girardeau & C. R. Co.

• Decision Date: 08 April 1913
• Citation: 172 Mo. App. 662,155 S.W. 1111
• Court: Missouri Court of Appeals
• Parties: STATE BANK OF FREEPORT v. CAPE GIRARDEAU & C. R. CO.

155 S.W. 1111

172 Mo. App. 662

STATE BANK OF FREEPORT v. CAPE GIRARDEAU & C. R. CO.

St. Louis Court of Appeals. Missouri.

April 8, 1913.

Rehearing Denied April 22, 1913.

1. SALES (§ 261) — CONSTRUCTION OF CONTRACT — WARRANT — "SPECIFICATIONS."

A motor car company's offer to sell a car to defendant was accompanied by a separate list of specifications designating the details of the construction of the car, and by reference to its letter to defendant it guaranteed renewal of every part of the mechanism on the car which proved defective during the first year of service, and it also sold a second car to defendant by an instrument providing that the car was "to be built in accordance with specifications heretofore agreed upon." Held, that the word "specifications," as used in the last contract, was not intended to include all the terms and conditions specified in the first contract, including the guaranty, but referred only to the separate list of particulars respecting the construction of the first car by which the second car was to be built, so that there was no warranty as to the second car.

2. BILLS AND NOTES (§ 363) — BONA FIDE PURCHASER — NOTICE OF CONSTRUCTION BY PARTIES.

The construction of a contract by the seller and the buyer, as shown by their subsequent correspondence or acts concerning it, is not binding upon the transferee of the buyer's note, who has no notice of such construction.

3. BILLS AND NOTES (§ 358) — BONA FIDE PURCHASER — CONSIDERATION — COLLATERAL SECURITY — PRE-EXISTING DEBT — "HOLDER IN DUE COURSE."

Under Rev. St. 1909, § 10029, providing that the holder of a note is prima facie a holder in due course, section 10022 providing that a holder in due course is one who has taken an instrument complete and regular on its face before maturity, and in good faith and for value, without notice of previous dishonor or any defect in the title of the transferror, section 9996 declaring that a pre-existing debt constitutes value, and section 9998 declaring that, where the holder has a lien on an instrument, he is the holder for value to the extent of his lien, the holder of notes taken as collateral security for a pre-existing indebtedness in excess of the notes was a holder for value to the entire amount due upon the notes.

4. BILLS AND NOTES (§ 339) — BONA FIDE PURCHASER — NOTICE — CONSTRUCTIVE NOTICE — STATUTES.

Under Rev. St. 1909, § 10026, providing that, to constitute notice of a defect in the title of the transferror, the transferee must have had actual notice of such defect or knowledge of such facts as to make his taking of the note amount to bad faith, a mere suspicion of such defect or knowledge of facts which would ordinarily put one on inquiry is not sufficient, but it must appear that the holder had actual knowledge thereof.

5. BILLS AND NOTES (§ 342) — BONA FIDE PURCHASER — NOTICE — RELATION TO CONTRACT OF TRANSFERROR.

A bank taking notes given to the seller of goods, accompanied by the contract of sale, is chargeable with any infirmity in the note or any equity existing in favor of the buyer growing out of such contract.

6. BILLS AND NOTES (§ 340) — BONA FIDE PURCHASER — GOOD FAITH.

The mere fact that the cashier and one director of a bank became directors of a motor car company as representing an estate of which they were executors, and that the third executor was one of the attorneys for both the bank and the motor car company, had no tendency to prove bad faith on the part of the bank in taking defendant's note to the estate, accompanied by the contract under which it had sold a car to defendant.

7. SALES (§ 88) — CONTRACTS — CONSTRUCTION — QUESTION FOR JURY.

The interpretation of a contract of sale is for the court and not for the jury.

Appeal from Circuit Court, Cape Girardeau County; Chas. B. Faris, Judge.

Action by the State Bank of Freeport against the Cape Girardeau & Chester Railroad Company. Judgment for plaintiff, and defendant appeals. Affirmed.

Giboney Houck and Davis & Hardesty, all of Cape Girardeau, for appellant. Stearns & Zipf, of Freeport, Ill., and Oliver & Oliver, of Cape Girardeau, for respondent.

ALLEN, J.

This is an action upon two negotiable promissory notes, each for the sum of $1,000, both executed by the defendant on September 26, 1908, payable to the Stover Motor Car Company, and each bearing interest from its date at the rate of 6 per cent. per annum. One note was due and payable on or before June 6, 1909, and the other on or before September 26, 1909. Both parties to the record are corporations. Plaintiff, suing as indorsee and holder of the notes, recovered thereon, and defendant prosecutes the appeal.

The petition, which is in the usual form, is in two counts, one upon each of the abovementioned notes. The answer admits the corporate existence of both plaintiff and defendant, the execution of the notes, and the delivery thereof to the payee therein named, but denies generally the other allegations of the petition. And, further answering, defendant avers that, if the payee of the notes assigned same to plaintiff for value, nevertheless there existed, prior to such assignment, certain equities in favor of defendant and against the payee of the notes; that the notes, together with $2,000 in cash, were delivered to said payee in consideration of a certain motor car, called "motor car No. 2," at the time sold and delivered to defendant by the payee in said note, with a "guaranty" from said payee to the defendant to the effect that the payee guaranteed to replace and renew any part or parts of such car that might prove to be defective during the first year of service thereof. It is averred that during the first year of service of the car there was a total failure of consideration for the notes, because of a breach of the covenant of "guaranty" alleged to have been executed to defendant by the payee therein; that various parts of the car proved to be defective during the first year of its use; defendant alleging, with great particularity, various parts of the mechanism thereof which it says proved, within one year, to be defective in the various respects mentioned. Notice to the payee of all these defects is alleged; and it is averred that the payee, the vendor of the car, failed and refused to perform and carry out its covenant of "guaranty." It is further alleged in the answer that, at the time of the assignment of each of the notes to plaintiff, plaintiff had full knowledge of the equities existing in favor of defendant and of all the facts averred in the answer, and that plaintiff received and accepted the notes, and prosecutes the suit thereon in bad faith for the purpose of aiding the payee to collect the same. The reply is a general denial of the new matter set up in the answer.

To sustain the issues on its part, the plaintiff offered the notes in evidence and rested. The defendant then offered a great deal of testimony, much of it by way of depositions, and numerous exhibits, in support of the allegations of its answer. Much of the testimony, and many of the exhibits, were excluded by the trial court upon the objections of plaintiff's counsel. Defendant's evidence was directed to an effort to show that the motor car, for which these notes had been given in part payment, was sold to defendant by the Motor Car Company, the payee in the notes, under the "guaranty" alleged in its answer; that the latter had not been kept and performed, and that plaintiff bank had notice of the "guaranty" and defendant's equities in the premises at the time that it took the notes. The written contract by which the motor car No. 2 was sold to defendant, of date September 9, 1908, was admitted in evidence. It is quite lengthy, and it is unnecessary to say more in respect to it than that the only clause contained in it, which appellant's counsel seeks to show was intended to incorporate therein a "guaranty," is the following: "The said vendor hereby agrees to sell to said vendee, and the vendee hereby agrees to purchase from said vendor a 20-passenger gasoline motor car, to be built in accordance with specifications heretofore agreed upon, subject to inspection and approval of said vendee." (The italics are ours.)

The evidence disclosed that earlier in the same year the defendant had purchased of the Stover Motor Car Company a car known as motor car No. 1. The written contract itself, under which car No. 1 was purchased, which was of date June 22, 1908, contained no contract of guaranty with respect to the car. The instrument, however, referred to a letter of the vendor, by a clause therein as follows: "The said vendor hereby agrees to sell to said vendee, and the vendee hereby agrees to purchase from said vendor, a 20-passenger gasoline motor car, as specified in letter of said vendor, dated February 3, 1908, subject to inspection and approval by said vendee." (Italics ours.) This letter of February 3, 1908, from the Stover Motor Car Company to the manager of defendant railway company, concerning motor car No. 1, was admitted in evidence. It constituted a proposal to furnish a motor car in accordance with plans and specifications thereto attached, and contained the following "guaranty" of the vendor, viz.: "We hereby give you a guaranty that will cover renewal of any part of the mechanism on car which may prove to be defective during the first year that the car is in service." The specifications accompanying the letter described in detail the construction of the car, referring to the various parts of the mechanism thereof, such as motor, lubrication, ignition, transmission, frame, wheels, axles, etc. The letter calls attention to certain particulars of the attached specifications, contains the provision above quoted and various other terms under which the vendor offered to sell the car.

It appeared that the Stover Motor Car Company, the payee of the notes, did its banking business at plaintiff bank; that D. C. Stover, president of the Stover...