Youle v. Fosha

• Decision Date: 08 June 1907
• Docket Number: 14,946
• Citation: 76 Kan. 20,90 P. 1090
• Parties: W. E. YOULE v. HENRY F. FOSHA
• Court: Kansas Supreme Court

90 P. 1090

76 Kan. 20

W. E. YOULE v. HENRY F. FOSHA

No. 14,946

Supreme Court of Kansas

June 8, 1907

Decided January, 1907.

Error from Riley district court; SAM KIMBLE, judge.

STATEMENT.

THIS is an action of replevin, commenced in the district court of Riley county by Henry F. Fosha, January 22, 1904, to recover the possession of a promissory note of which he was the maker. He claimed that the note was obtained by means of false and fraudulent representations, and without consideration. It had been sold, indorsed and delivered to W E. Youle, who claimed to be an innocent holder thereof. The note was sent to a bank in Riley county for collection whereupon this action was commenced. Plaintiff recovered judgment, and defendant brings the case here for review. The facts relating to the transaction involved, briefly stated are as follow:

Fosha the maker of the note, resides in Riley county. He executed the note in question April 22, 1903, payable to the order of Henry Quantic, and due nine months after date. The note was given in payment for stock of the Ashurst Oil, Land & Development Company, located at Stockton, Cal. The plaintiff was induced to execute the note by false representations made by one L. J. Abrams, then president of such company, concerning its financial standing, resources and condition. The company was represented by him to be solvent, sound and prosperous, while in fact it was worthless. The payee of the note had purchased stock in the company from Abrams, and was a friend and neighbor of Fosha. In the agreement with Abrams, Fosha refused to execute and deliver his note to the company or to Abrams, but made it payable to the order of Quantic, who was to investigate the condition of the company, and, if found to be as represented, to indorse and deliver the note to the company; otherwise, he was to return it to the maker.

Quantic afterward transferred and delivered the note to Abrams for the company. The defendant received it before due, from the company, as part of an advance payment on a contract made by it with him for drilling oil-wells on its premises. Before accepting the note the defendant made inquiry concerning the financial ability of the maker, which was found to be satisfactory. Defendant was employed by the oil company to do $ 9000 worth of drilling, and at the time he first ascertained that the validity of the note was disputed he had expended over $ 3000 in preparation for the work, and his expenses while performing the contract amounted to the sum of $ 30 per day.

Whether or not the defendant is an innocent holder of the note is the sole question presented here. Upon this point the trial court gave instructions to the jury which read:

"If you further find from the evidence that the defendant, Youle, at the time of the purchase of said promissory note, or before he had parted with anything of value thereunder, had actual knowledge of the alleged fraudulent acts and representations, if any such fraudulent acts and representations are found to exist by you, or that the defendant had knowledge of such facts and circumstances as would place a reasonable and ordinary man upon his inquiry, and from such reasonable inquiry the fraudulent representations could have been ascertained, said Youle would not be an innocent purchaser and would be chargeable with the legal effect of the fraud upon his right of possession and ownership of said note."

"I further instruct you that for the purpose of determining whether the defendant, Youle, acquired the note in controversy in this action before maturity and for value in the usual course of business you may take into consideration all the facts and circumstances surrounding such transaction as to its being usual or unusual, and all the facts and circumstances as shown by the evidence, and you are at liberty to bring to your aid that knowledge and experience which you possess in common with men in general, and if from all such facts and circumstances as shown by the evidence you shall believe that the defendant, Youle, had knowledge of sufficient facts to put an ordinarily prudent person upon inquiry, and if you should further find from the evidence that said note was obtained by false and fraudulent representations as defined in these instructions, then your verdict should be for the plaintiff, even though you may believe from the evidence that the defendant paid full value for the said note."

The defendant requested the court to give the following instruction, which was refused:

"Mere suspicion in the mind of Youle at the time he obtained the note in suit that it was subject to any defense for fraud is not sufficient to prevent him from recovering judgment in his favor in this action. In order for the plaintiff to recover in this case he must allege and prove that Youle came into the possession of the note in suit with actual notice of the infirmities claimed by the plaintiff to exist in the note or that Youle was guilty of bad faith in taking the note."

The jury returned special findings of fact, among which were the following:

"(1) Ques. Do you find that Youle, at the time he obtained the note in suit, had knowledge of the facts claimed to exist by the plaintiff, viz., that this note was not to be used or sold by the Ashurst Oil, Land & Development Company, but was to be returned to plaintiff if he demanded it? Ans. Yes. The defendant, Youle, had knowledge of sufficient facts to put an ordinarily prudent person upon inquiry, and he should have investigated, and he is presumed to know all the facts that such inquiry would have revealed."

"(3) Q. Do you find that at the time Youle obtained this note he had any knowledge of the facts alleged by plaintiff to exist, and on account of which plaintiff now seeks to recover the note? A. Same as No. 1."

Judgment reversed.

SYLLABUS

SYLLABUS BY THE COURT.

1. FRAUD--Misrepresentations--Reliance. Relief will not be granted on account of false representations not shown to have been relied upon by the party complaining thereof.

2. PROMISSORY NOTE--Purchaser for Value. Where the holder of a promissory note receives it as a part of an advance payment on a contract which obligates him to drill oil-wells for the indorser, and expends large sums of money in preparation for such work, he will be regarded as a purchaser for value.

3. PROMISSORY NOTE--Innocent Purchaser--Notice--Good Faith. Before the holder of a promissory note received for value and before...