Union Inv. Co. v. Schonebaum

• Decision Date: 16 December 1919
• Docket Number: 4356
• Citation: 42 S.D. 350,175 N.W. 357
• Parties: UNION INVESTMENT COMPANY, Plaintiff and respondent, v. MARTIN SCHONEBAUM, et al., Defendants and appellants.
• Court: South Dakota Supreme Court

42 S.D. 350

175 N.W. 357

UNION INVESTMENT COMPANY, Plaintiff and respondent,

v.

MARTIN SCHONEBAUM, et al., Defendants and appellants. South Dakota Supreme Court Appeal from Circuit Court, Gregory County, SD Hon. William Williamson, Judge #4356--Affirmed P. J. Donahue, M. L. Parish, G. M. Caster Attorneys for Appellants. Boyce, Warren & Fairbank Attorneys for Respondents. Opinion filed December 16, 1919

POLLEY, J.

This action is brought to recover on a promissory note. The note is dated at Bonesteel, February 16, 1905. It is payable to "Emmetsburg Importing Company," at the Palo Alto County Bank at Emmetshurg, Iowa, on the 2d day of October, 1906, with interest at 6 per cent. per annum, payable annually. The Emmetsburg Importing Company was a copartnership, doing business at Emmetsburg, Iowa. On the 18th day of April, 1905, the Emmetsburg Importing Company indorsed and transferred said note to McLaughlin Bros., a co-partnership, doing business at St. Paul, Minn. This transfer was an absolute sale of the note for its full face value, and it was taken by McLaughlin Bros. without knowledge of any defects or defenses as against the original payee of the note. McLaughlin Bros. retained the note until the 6th day of July, 1966, when this note and two others—amounting in all to $2,400—were indorsed by them and delivered to plaintiff as collateral security for a loan of $2,466 that day made by plaintiff to McLaughlin Bros. For how long a time this loan was to run does not appear from the evidence, neither does it appear when it was paid; but the evidence shows that it was paid some time after October, 1906—"probably in the spring or summer of 1907." At the time this loan of $2,466 was made to McLaughlin Bros. by plaintiff, McLaughlin Bros. were already indebted to plaintiff to the extent of several thousand dollars, and it is also a fact that, from some time prior to the 6th day of July, 1966, down to the time of the trial, McLaughlin Bros. had been indebted to the plaintiff in an amount greatly in excess of said loan. These advances were evidenced by the promissory notes of said firm and secured by promissory notes that were owned by said firm which they put up as collateral security for such advances. The note involved in this case was not returned to McLaughlin Bros. when the debt it had been pledged to secure was paid, but was held by plaintiff as a part of the security for all other debts owned by McLaughlin Bros. to plaintiff. This, it is claimed, was done pursuant to an understanding, or agreement, between them that any collateral that came into its hands should be held as security for any and all debts owing from McLaughlin Bros. to plaintiff.

Defendants pleaded, and undertook to prove, that the note sued on was obtained from them by fraud and misrepresentation, and that the consideration therefor had failed. Plaintiff, to save the time of the court, admitted the facts pleaded as constituting a defense, and admitted that such facts would have constituted a valid defense to the action as against the original payee of the note, and stood strictly upon its rights as a "holder in due course." Upon this state of the case, the trial court took the case from the jury, made findings of fact and conclusions of law favorable to plaintiff, and entered judgment accordingly. From this judgment and an order overruling their motion for a new trial, defendants appeal.

At the trial, a question of practice arose over a request to permit plaintiff to file an amended complaint. The trial court allowed the amendment, and appellants assign error. Under the circumstances, we believe the trial court was warranted in allowing the...