State Bank v. Central Flour & Feed Co.

• Decision Date: 21 November 1939
• Docket Number: 44875.
• Citation: 288 N.W. 614,227 Iowa 596
• Parties: STATE BANK v. CENTRAL FLOUR & FEED CO. et al.
• Court: Iowa Supreme Court

288 N.W. 614

227 Iowa 596

STATE BANK v. CENTRAL FLOUR & FEED CO. et al.

No. 44875.

Supreme Court of Iowa.

November 21, 1939

Appeal from District Court, Webster County; T. G. Garfield, Judge.

Suit at law by the plaintiff, as the endorsee of three negotiable trade acceptances, drawn by the United Sales Company, a trade name of C. E. Adrian, upon and against the Central Flour & Feed Company, owned and operated by the defendant Sam Rabiner. There was a judgment for the plaintiff, on a verdict by the jury, on two of the instruments, and against it on the other one. The plaintiff, alone, appealed, from the judgment against it, and from the denial on its motions, for judgment notwithstanding the verdict, and, for new trial.

Reversed.

Mitchell & Loth, of Fort Dodge, for appellant.

Edward Robinson, of Fort Dodge, for appellee.

BLISS Justice.

Sam Rabiner is the only defendant concerned in this appeal. The defendants and endorsers, United Sales Company, Tim Lake Laboratories, Inc., made no defense. The jury found that the defendant Alf L. Rabiner was not a member of the Central Flour & Feed Company.

On January 8, 1938, the United Sales Company, which we will hereinafter refer to as Adrian, and the Central Flour & Feed Company, hereinafter referred to as Rabiner, executed a written contract, by which Rabiner became the exclusive wholesale jobber for six months, in designated counties, of certain poultry feeds distributed by Adrian. This contract was prepared by Rabiner's lawyer. The important provisions of the contract, with respect to this appeal, are the following:

" 4. First party hereby agrees to furnish, provide and maintain at his own expense, without contribution from second party, at least one salesman to call on all purchasers and prospective purchasers in said territory, to solicit and take orders and do all things necessary and proper to secure and close sales for the products herein mentioned, and to co-operate in every respect with second party to the end that such products may be sold and distributed to the greatest extent possible and with the utmost possible speed. * * * 6. In connection with the sale and delivery of said products second party agrees to execute to first party trade acceptances or promissory notes as evidence of the purchase price. In the event second party has not sold and disposed of all such products on hand on June 1, 1938, first party on written request, will repurchase all products then remaining unsold, at the price originally paid therefor by second party to first party. * * *"

As evidence of the purchase price of the first shipment of merchandise to Rabiner, the United Sales Company, as the seller, on January 11, 1938, drew two trade acceptances upon and against the Central Flour & Feed Company, for $282 each, payable to the order of the United Sales Company, respectively, on the 15th and 30th of April, 1938. These acceptances, Exhibits " A" and " C", were sued upon in counts 1 and 2 of appellant's petition, and judgment was recovered on each by appellant.

The third trade acceptance, identical with Exhibits " A" and " C", in every respect, except that the amount was $564, and it was payable April 25, 1938, was executed on January 12, 1938. It was accepted by Rabiner on the same day. This acceptance was sued upon in count 3 of the petition, as Exhibit " B", and judgment thereon was for the defendant-appellee. It is the only acceptance involved in this appeal.

In its petition, plaintiff alleged that it had acquired the three instruments from Adrian, on January 14, 1938; that two of them, Exhibits " A" and " C", had been purchased at a discount of $11.22, and the other, Exhibit " B", had been taken as collateral to Adrian's note for $564. In his answer, the appellee admitted the execution of the instruments, and his acceptance thereof, but denied that they were effective, because, as he alleged, they were delivered on condition that they were to become effective only when the goods ordered reached him at Fort Dodge, and that they were never delivered.

The record shows, without dispute, that the merchandise was all received, and was sold or retained by him, and that the contract was never rescinded. Plaintiff, in its reply, denied this allegation, and alleged that it acquired each of the acceptances for value, without notice of any infirmity or condition or defense, and after consultation with Rabiner, who orally advised it that the acceptances were valid, upon which advice it relied. Rabiner amended his answer, during the trial, and alleged that plaintiff had knowledge of his contract with Adrian, before acquiring the acceptances, and that " the pretended trade acceptances were delivered to the United Sales Co. on the condition that they were to become effective only in the event of performance of said agreement by said Sales Co." The amendment also claimed fraud on the part of the Sales Company in procuring the acceptances, and that delivery of the acceptances was conditioned on their not being transferred, and on other conditions.

Plaintiff moved to strike the said italicized allegation, because such condition was not provable under, and would violate the parol evidence rule, and it was inconsistent with the contract and the acceptances. The motion was denied. Plaintiff raised the same objection in its motion to direct. In overruling this motion, the court said: " Motions to withdraw defenses are sustained, except that the court will submit the defense of delivery of the acceptances conditioned on the performance of the contract; and the only evidence of any breach thereof which would prevent the acceptances taking effect is as to failure to furnish a salesman on the territory. Except for that, all defenses are withdrawn from consideration of the jury."

All of the issues were set out by the court in its first instruction. After stating therein the execution of the acceptances, and the negotiation thereof to the plaintiff, the court said: " Defendants admit the execution of the acceptances by Sam Rabiner. They say, however, that on January 8, 1938, they entered into a certain written contract with the United Sales Co. That the acceptances were delivered to United Sales Co. upon the condition that they were to become effective only in the event of the performance of the contract. This contract contains the following provisions: ‘ First party hereby agrees to furnish, provide and maintain at his own expense, without contribution from second party, at least one salesman to call on all purchasers and prospective purchasers in said territory, to solicit and take orders and do all things necessary and proper to secure and close sales for the products herein mentioned, and to co-operate in every respect with second party to the end that such products may be sold and distributed to the greatest extent possible and with the utmost possible speed.’ Defendants say that the Sales Company failed to perform the above quoted provision of the contract, and therefore the condition on which the trade acceptances were to become effective was not performed, and they never became valid instruments. Defendants further say that they orally notified plaintiff through its vice president, C. W. Gadd, of such condition."

The court further peremptorily instructed the jury that the acceptances were executed by the defendants; that they were complete and regular on their face; that the plaintiff bank acquired them before maturity and paid substantially full value therefor; and that the fact that it held Exhibit " B" as collateral, rather than as owner, did not affect the right, if any, to recover thereon.

The jury found for the plaintiff on the two acceptances, Exhibits " A" and " C", and for the defendant Rabiner on the acceptance, Exhibit " B" ....