Hudgins Produce Co. v. J. R. Beggs & Co.

In its answer appellant alleged that it bought the potatoes of the Gaines-Ramage Company believing that company to be the owner of same, and that it paid the Gaines-Ramage Company for the potatoes in full at a time when it had no notice of the fact that appellees owned them. If it appeared from the proof made that appellant did that, then the judgment should not have been in appellees' favor, for the law is that one who purchases from an agent property an undisclosed owner has intrusted to him to sell, in good faith, relying upon the ownership being in the agent, is entitled, when sued by the owner for the purchase price, to assert against him any defense which existed in his favor against the agent at the time when he (the purchaser) became chargeable with notice of the rights of the owner. 2 Clark Skyles on Agency, § 884; 19 Cyc. 171; Baxter v. Sherman, 73 Minn. 434, 76 N.W. 211, 72 Am.St.Rep. 631, a case in many respects like this one; Henderson v. Johnson,22 Tex. Civ. App. 381, 55 S.W. 35; Winslow v. Staton, 150 N.C. 264,63 S.E. 950; Gardner Sager v. Allen, 6 Ala. 187, 41 Am.Dec. 45; Feinstein v. Ritter, 88 Misc.Rep. 559, 150 N.Y.S. 903. Had the suit been by the Gaines-Ramage Company as the owners of the potatoes, it is clear that proof by appellant that it had paid the purchase price to that company would have been a complete defense. The trial court found as a fact that at the time appellant purchased the potatoes it had no notice that they were not the property of the Gaines-Ramage Company. This finding should be treated by us as one establishing, in its legal effect, that appellant in good faith believed, and had a right to believe, when it purchased the potatoes, that the Gaines-Ramage Company was the owner thereof. The court further found that appellant, after paying the carrier the amount of its charges against the shipment, credited an account it had against the Gaines-Ramage Company with the balance remaining of the purchase price of the potatoes. Had appellant by proper pleadings asked the court to set off the account so credited against appellees' demand, it would appear clear enough that the court, on the findings made by him and the undisputed evidence, should have allowed the set-off and have rendered judgment in appellant's favor, and that he did not do so because of an erroneous view he entertained of the law applicable to the case; for the testimony conclusively established that the account credited covered transactions which occurred at a time when, according to the other finding of the court specified above, appellant had no notice that the Gaines-Ramage Company did not own the potatoes, and, further, that the balance in appellant's favor shown by the account was a sum in excess of that it owed for the potatoes. But appellant did not plead the indebtedness due it by the Gaines-Ramage Company as an offset against appellees' demand, as the law required it to (articles 1325, 1326, and 1907, Vernon's Statutes), and therefore it has no right to complain of the failure of the trial court to allow its account as an offset As stated above, the defense pleaded by appellant was that it had paid GainesRamage Company for the potatoes at a time when it had no notice of the fact that that company did not own them. In support of its plea, which was a general one, it was entitled to prove a payment in money only; but, instead, it proved, without objection on appellees' part, that at the time it purchased the potatoes there were mutual accounts between it and the Gaines-Ramage Company; that within about a week after the purchase it presented to the Gaines-Ramage Company for payment its account against that company for a sum greater than the balance due by it for the potatoes; and that, at the instance and request of the Gaines-Ramage Company, it then credited the account with that balance. The effect of such proof was, we think, to show that appellant paid the Gaines-Ramage Company for the potatoes. 30 Cyc. 1187. It is true that the witness Gaines, who, it seems, acted for the GainesRamage Company in the transaction, testified that he "never had a settlement" with appellant with reference to the potatoes; but he further testified: "It is a fact that the settlement between the Gaines-Ramage Company and the Hudgins Produce Company simply had the effect of satisfying a debt which they claim was due them by the Gaines-Ramage Company, and in payment of the car of potatoes they simply gave credit on the amount they claimed was due them." As we construe his testimony, Gaines did not mean to be understood as denying that his company, as the witness Offenhauser testified it did, directed appellant to credit its account with the balance due on the potatoes, but to deny that the credit was on account of transactions between the GainesRamage Company and appellant which *Page 341 occurred after the latter purchased the potatoes. It is apparent from the record that the case was tried and decided by the court on the erroneous theory that if the credit given by appellant on its account against the GainesRamage Company was against an indebtedness of that company which existed in appellant's favor at the time it purchased the potatoes, the fact that it may have operated as a payment between appellant and that company was not a reason why appellees should not recover as they prayed for against appellant. In other words, upon the theory that appellant could defend against the suit of appellees only upon the ground that it occupied the position of an innocent purchaser of the potatoes, and must show not only that it had no notice of appellees' rights, but also that it paid what in law was a valuable consideration for the property. An examination of the authorities cited above will show that it was not incumbent on appellant to prove that it paid such a consideration, but that it was entitled to protection against appellees' demand if it paid for the potatoes by crediting an indebtedness which existed in its favor against Gaines-Ramage Company at the time of the purchase, or which arose in its favor before it was chargeable with notice of appellees' rights. We have reached the conclusion that the findings of the court referred to above should be construed, when the testimony is kept in mind, as findings that appellant purchased the potatoes at a time when it believed and had a right to believe that the Gaines-Ramage Company owned them, and paid that company in full for them by crediting, at that company's request, an indebtedness that company owed it, at a time when it had no notice of appellees' rights. This conclusion requires a reversal of the judgment and a rendition here of judgment in appellant's favor. On Motion for Rehearing. Further consideration of the record in connection with the motion has convinced us that we should have remanded the cause for a new trial after reversing the judgment of the court below, instead of rendering judgment here. Therefore the judgment heretofore rendered by this court will be set aside in so far as it is in favor of appellants, and the cause will be remanded to the court below for a new trial.