Tross v. Bills' Ex'x

Citation224 S.W. 660,189 Ky. 115
PartiesTROSS v. BILLS' EX'X.
Decision Date28 September 1920
CourtCourt of Appeals of Kentucky

Appeal from Circuit Court, Jefferson County.

Action by Henry E. Bills against Fred Tross on a promissory note. Judgment for plaintiff, for whom his executrix was substituted after his death subsequent to the trial, and defendant appeals. Affirmed.

Henry J. Gilford and O'Neal & O'Neal, all of Louisville for appellant.

Bruce &amp Bullitt, of Louisville, for appellee.

HURT J.

This was an action by Henry E. Bills, now deceased, against the appellant, Fred Tross, upon a negotiable promissory note, for the sum of $6,000, and which was executed by the Globe Furniture Company, on April 5, 1911, to Bills, and by which it promised to pay the sum named four months thereafter, and was indorsed by Tross and one John Rohrman. The principal obligor in the note and Rohrman, one of the indorsers, have since the execution and delivery of the note both received discharges in bankruptcy, and hence the action for recovery upon the note was instituted against Tross alone. Tross filed an answer and counterclaim on June 17, 1916, and an amended answer and counterclaim on November 27, 1917, and after the conclusion of the evidence at a trial had on January 15 1918, he offered a second amended answer, which the court refused to permit to be filed. At the conclusion of the evidence, the court directed a verdict for the plaintiff, and from the judgment rendered upon the verdict Tross has appealed. Since the trial Bills has died, and the action has been revived in the name of his executrix. The complaints made of the trial court by the appellant are that it erred to the prejudice of appellant: First, by refusing to permit the amended answer offered on January 15, 1918, to be filed; second, by peremptorily directing a verdict for the plaintiff.

To an understanding of the questions involved, a statement of the facts, alleged as a defense and counterclaim, as well as the evidence offered in support, will necessarily be considered. The original answer and counterclaim was set out in four paragraphs, but the matters alleged in the first and third paragraphs were either withdrawn or eliminated, and hence the cause went to trial upon the second and fourth paragraphs of the original answer and counterclaim and the amendments to same of November 27, 1917, and the denials of same made by Bills in his replies thereto. The same state of facts was pleaded in the second paragraph of the original answer and counterclaim and its amendment, as a defense in bar of recovery upon the note, as was pleaded in the fourth paragraph of the original answer and counterclaim and its amendment as a counterclaim against Bills. The facts averred in the original answer and counterclaim as a bar to recovery upon the note, and, also, as a counterclaim, were that the original note for the money sued for was executed either in 1909 or 1910, and that it underwent a great many renewals the last one of which was the note sued on, and that when the original note was executed, and thereafter until after the note sued on was executed, and until the principal obligor in the note, the Globe Furniture Company, which was a corporation, passed into bankruptcy, the plaintiff Bills, the defendant, Tross, John Rohrman, and Albert S. Phillips were directors and principal stockholders of the corporation, and that Bills owned stock of the par value of $10,000, and Tross, Rohrman, and Phillips each owned stock of the par value of $3,000. The corporation was financially distressed, when Bills agreed to loan it the sum of $6,000 upon the note of the corporation, if Tross, Rohrman, and Phillips would severally guarantee the payment of such portion of the note, as was in the proportion, which the stock owned by them bore to the entire stock of the corporation; while Bills agreed that he would guarantee the payment of such part of the note as was in the proportion of the stock owned by him in the corporation. Tross, Rohrman, and Phillips would thus each be responsible for 3/19 of the note, if not paid by the Globe Furniture Company, and Bills would pay to himself 10/19 of the note. This proposition was agreed to, the money was loaned by Bills to the corporation, the note was executed and indorsed by Bills, Tross, Rohrman, and Phillips, and, not being paid at maturity, was thereafter regularly renewed under the same terms and conditions, and that Bills procured Tross to indorse the note sued on by expressly representing that he himself would indorse the note, and would also procure Rohrman and Phillips each to indorse it, and that in the event the principal obligor did not pay it each of the indorsers would be responsible for only such a part of it as the stock owned by him was in proportion to the entire stock of the corporation, and that the note should not become obligatory and would not be used by him (Bills) until it had been indorsed by himself; and by Rohrman and Phillips, and that such representations of Bills which were relied upon, by Tross and Bills' indorsement of the note, constituted the entire consideration for the indorsement by Tross, but that Bills fraudulently failed to indorse the note sued on, or to obtain the indorsement of Phillips, and that these facts wrought a release of Tross' obligation as an indorser of the note. In the counterclaim Tross further averred that at the time of the execution of the note and its indorsement by him and at the time of its maturity, Bills, Tross, Rohrman, and Phillips were each solvent, but since the furniture company and Rohrman have each been adjudged bankrupts, and that the wrongful failure of Bills to indorse the note and to secure the indorsement of Phillips rendered defendant liable for the payment of the entire note, to his great damage. Tross, by the amendments of November 27, 1917, averred that he was mistaken in the allegations made in the original answer and counterclaim touching Phillips, and that the agreement which Bills made with him at the execution of the original note was that he would indorse the note and obtain its indorsement by Rohrman, and that in the event it was not paid by the principal obligor that Bills, Tross, and Rohrman should be responsible each for such part of it as the stock owned by him in the corporation was to the entire stock of the corporation--that is, Tross and Rohrman would be liable for 3/16 of the note each, and Bills for 10/16 of it--and the renewals of the note, thereafter, including the note sued on, were made under the same terms and conditions, except that at several of the last renewals Bills promised to obtain the indorsement of Crawford, who was also a stockholder, and that he secured the defendant to indorse the note sued on by representing to him that his liability would be only as above stated, which with the indorsement of Crawford would be for 3/17 of the note, and that he (Bills) would indorse the note, and obtain the indorsements of Rohrman and Crawford, and that defendant's indorsement would not become binding upon him until Bills, Rohrman, and Crawford indorsed the note, but Bills fraudulently failed to indorse it himself or to obtain the indorsement of Crawford, who was solvent at all the times mentioned and at the time the note was sued on. The amended answer of January 15, 1918, which was rejected by the court, withdrew the amended answer and counterclaim of November 27, 1917, and alleged that Crawford was when the original note was executed, and at all times thereafter, a stockholder of the Globe Furniture Company, and that Bills had at the time of the execution of the original note, and at the time the note sued on was executed, agreed, represented, and warranted to Tross that the note should not become obligatory upon him, and that he would not use the note until the...

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