State Bank of Freeport v. Cape Girardeau & Chester Railroad Co.
| Decision Date | 08 April 1913 |
| Parties | STATE BANK OF FREEPORT, Respondent v. CAPE GIRARDEAU & CHESTER RAILROAD COMPANY, Appellant |
| Court | Missouri Court of Appeals |
Appeal from Cape Girardeau Circuit Court.--Hon. Charles B. Faris Judge.
AFFIRMED.
Judgment affirmed.
Giboney Houck and Davis & Hardesty for appellant.
(1) The court erred in construing the contract and in excluding evidence relevant thereto. Greenlief on Evidence (16 Ed.) sec. 288, 277, 278, 280, 295a; 7 Cyc. 582; 9 Cyc. 588, 578 582, 583, 587, 588, 590; McManns v. Gregory, 16 Mo.App. 375. (2) The court erred in excluding evidence as to the defects constituting a breach of the guaranty. Buckley v. Kansas City, 95 Mo.App. 188; Cogen v. Railroad, 101 Mo.App. 179; Reed v. City of Mexico, 101 Mo.App. 155. (3) The court erred in excluding evidence on the issue of bad faith and in refusing to submit such issue to the jury. Dixon v. Bank, 149 Mo.App. 585; Bank v. Schaumberg, 38 Mo. 243; Cotton Mills v. Indian Orchard Mills, 17 N.E. 496; Story on Agency, sec. 140; Purdy's Beach on Corporations, sec. 769; Lowndes v. Bank, 22 L. R. A. (N. S.) 414; Re-Carew, 31 Beav. 39; Loring v. Brodie, 134 Mass. 453; R. S. 1909, secs. 9999, 10024, 10025, 10026; Coleman v. Stocke, 159 Mo.App. 43; Goodman v. Simonds, 61 U.S. 343; Bank v. Diefendorf, 10 L. R. A. (N. Y.) 676; Richmond v. Ashcraft, 137 Mo.App. 191; Hamilton v. Marks, 63 Mo. 167; Link v. Jackson, 158 Mo.App. 63; Whaley v. Neill, 44 Mo.App. 316; Studebaker v. Dixon, 70 Mo. 272; Edwards v. Thomas, 66 Mo. 468; Cass Co. v. Green, 66 Mo. 498; Bank v. Phillips, 22 Mo. 85; 8 Cyc. 36; Gamache v. Grim, 23 Mo. 39. (4) The court erred in excluding evidence on the issue of notice and in refusing to submit such issue to the jury. Bank v. Phillips, 22 Mo. 85; Henry v. Sneed, 99 Mo. 423; Secs. 9999, 10024, 10026, R. S. 1909; Link v. Jackson, supra; 7 Cyc. 948; 8 Cyc. 36; Whaley v. Neill, 44 Mo.App. 316; Studebaker v. Dixon, 70 Mo. 272; Edwards v. Thomas, 66 Mo. 468; Cass Co. v. Green, 66 Mo. 498; Gamache v. Grim, 23 Mo. 38; Bank v. Schaumburg, 38 Mo. 243; Mills v. Mills, 17 N.E. 496. (5) The court erred in peremptorily directing the verdict for plaintiff. Black v. Epstein, 221 Mo. 286; Buckley v. Kansas City, 95 Mo.App. 188; Cogen v. Railroad, 101 Mo.App. 179; Reed v. City of Mexico, 101 Mo.App. 155; Link v. Jackson, supra; Hamilton v. Marks, 63 Mo. 80; Secs. 10025-10029, R. S. 1909; Dyer v. Tyrell, 142 Mo.App. 467; Dunlap v. Chemical Works, 159 Mo.App. 49.
Stearns & Zipe and Oliver & Oliver for respondent.
(1) A note transferred before maturity to a holder in due course, as collateral security for a preexisting debt, is transferred for value, and the holder takes it free from defenses or set-offs existing between the original parties. Ogden on Negotiable Instruments, sec. 128; Bank v. Morris, 156 App. 43; Trust Co. v. Marker, 179 F. 764; Sec. 9996, R. S. 1909; Melton v. Bank & Trust Co., 190 F. 126. (2) Neither suspicion of defect of title, circumstances which in a prudent man would excite suspicion, nor gross negligence, will defeat the title of one who takes negotiable paper for a valuable consideration. This result can be obtained only by proof of actual knowledge or bad faith. Sec. 10026, R. S. 1909; Reeves v. Letts, 143 Mo.App. 195; Ringling v. Kahn, 4 Mo.App. 62; Bank v. Leeper, 121 Mo.App. 688. (3) Plaintiff who took these notes as a holder in due course could not be affected by any subsequent notice of defendant's rights, even of the most positive character. Fitzgerald v. Barker, 96 Mo. 663; Hagerman v. Sutton, 91 Mo. 532. (4) Whether or not a "guaranty" existed in this case depends upon the construction given to the so-called "car agreement;" the construction of that agreement was a question of law for the court and the court by its rulings held that there was nothing in the agreement that could be tortured into a "guaranty" or warranty. In so holding the court did not err. State to use, Early v. Lefaivre, 53 Mo. 470; Chapman v. Railroad, 114 Mo. 542; Rogers v. M. B. A., 131 Mo.App. 353; Goodman v. Simmons, 61 W. S. 343, 15 L.Ed. 941. (5) The so-called car agreement (Exhibit 1) does not contain, set out, mention nor refer to any guaranty. To have so construed the agreement as to have held that there was incorporated within it a guaranty would have been the making of a new contract between the parties. The ruling of the trial court in this question was clearly correct. Keaton v. Broughton, 83 Mo.App. 165; Meyer v. Christopher, 176 Mo. 594; Walker v. Automobile Co., 124 Mo.App. 636. (6) Knowledge obtained by an officer of a corporation in a capacity other than that in which he is the agent of or representing the corporation, is not the knowledge of or notice to the corporation. This is the rule though the officer obtaining the knowledge was, at the time, the managing officer of the corporation. Bank v. Fitze, 70 Mo.App. 356; Bank v. Froman, 129 Mo. 427; Benton v. Bank, 122 Mo. 339; Investment Co. v. Bruce, 132 Mo.App. 257. (7) Since there was no substantial evidence to show the existence of a guaranty, the peremptory instruction for plaintiff was proper. Strauss v. Chewing Gum Co., 134 Mo.App. 110; Gregory v. McCormick, 120 Mo. 657; Malloy v. Sweazea, 123 Mo.App. 179. (8) Where at the close of the case both parties ask for a peremptory instruction in their favor without more and the court gives one of said instructions and directs a verdict, each party waives the question of whether or not there was any issue of fact which should have been submitted to the jury and makes the instruction of the court a conclusive finding on every question of fact at issue in the case, and is limited in the appellate court to the sole question of whether there was substantial evidence in the record upon which to support the verdict as directed. Melton v. Bank & Trust Co., 190 F. 128; Benttell v. Magone, 157 W. S. 154; United States v. Bishop, 125 F. 181; Crescent Mfg. Co. v. Patterson Mfg. Co., 195 F. 382.
--This is an action upon two negotiable promissory notes, each for the sum of $ 1000, 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 six 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 above mentioned 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 $ 2000 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 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...
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