Traders' Securities Co. v. Dutsch

MOUTON, J. An exception of no cause of action was maintained in this case by Judge Prentiss Carter which was overruled by this court, 14 La. App. 591, 130 So. 361, remanding the case for trial on the merits. The following opinion was rendered on the merits by Judge Ott, the successor of Judge. Carter on the district bench, quoting: “It is also urged by defendant that, as the plaintiff sues in the name of the Traders Securities Co., Inc., a corporation organized under the laws of Missouri, and the copy of the charter filed in evidence shows that the-correct name is, Traders Securities Company, [76] that plaintiff has no right of action to recover on these acceptances. Article 432, Civil Code, provides that corporations must sue in their corporate names, but that a slight alteration is not ihaterial. See, also, Town ex rel. Thompson v. Andrus, 37 La. Ann. 699. As plaintiff shows that it is the holder of the obligations sued on, this slight variation in the name given in the petition and that shown by the charter is not material. “Defendant in his testimony says that he thought he was signing an order for the jewelry;’ that he did not read the documents which he signed,, although it appears that he can read and write; that he imagined that the contract was attached to the drafts that he signed or accepted; that he paid the first draft because he had not then found out it was all a fake; that later on he shipped the jewelry back to the Arch Mfg. Co. as it was no good. “The testimony of Prank Coffman, was taken for plaintiff by deposition. He is President and Treasurer of the corporation, and he testifies that he purchased these four trade acceptances on April 26th, 1928, together with one other, from the Arch Mfg. Co. as a matter of investment, with a discount of ten per cent., that the first acceptance was paid; that his company is the holder and owner of these acceptances for value and before maturity in good faith; that neither he nor his company had any knowledge- when the purchase was made of any defect in these negotiable instruments; that the four acceptances sued on have not been paid; that he looked up the rating of defendant and found that his credit standing was good; that the acceptances were purchased without recourse on the Arch Mfg. Co. because of the liberal discount which he received. He annexed to his deposition the acceptances, a copy of the charter, and the original cancelled check which his-company gave in payment of the acceptances. • “There is nothing in the testimony to show that plaintiff is a holder in bad faith without value, other than mere suggestions in the answer and some slight suspicious circumstances connected with the appearance of the drafts indicating that they might have been detached from another paper by perforated lines, and the further fact that plaintiff purchased without recourse against the original holder. The cancelled check produced by plaintiff and filed in the record shows that the plaintiff paid cash for the drafts on April 26th, 1928, the sum of $268.20. This is' the exact amount of all five acceptances, less the 10% discount allowed plaintiff. It is therefore, clear that plaintiff is a holder for value. The mere fact that paper is purchased without recourse, does not make the holder in bad faith. Joyce- Defenses to Commercial Paper, Second Ed Par 647. The taking of -commercial paper endorsed without recourse, does not in itself render the purchaser in bad faith nor deprive him of the rights of a holder in due course. “The only other circumstance is the claim that the drafts show on their face that they were detached from a contract or some other paper. The defendant signed his name at least five times, and admits that he did not know the nature of' the documents signed, but thought he was signing an order for jewelry. He imagined that these drafts were attached to the contract, but cannot testify positively to that effect. He was clearly negligent in failing to read the documents signed. However, inequitable it may appear to shut out the defense which the defendant has as against the vendors of the jewelry, the courts are powerless to give him relief against the plaintiff who appears to be the holder of the negotiable paper signed by defendant, in due course and for value. The plain terms of the negotiable instrument law will not permit it to be done. Sections 51 to 59, Act No. 64 1904. “The case of Guaranty Finance Corp. v. Mire, 2 La. App. 794, presented many features as appear in this case. The defendant in that case refused to sign the trade acceptances annexed to or forming part of the contract of purchase, and a line was drawn across the face of the drafts to make them non-negotiable before defendant would sign. The Court of Appeals first held that the plaintiff was holder in due course, but on rehearing reversed the ruling, and held the plaintiff was not a holder in due course in good faith. The opinion on rehearing was based on the fact that the defendant proved in that case that the trade acceptances were part of the contract when signed and that they were detached for the purpose of placing plaintiff in the position of holder in due course of a negotiable instrument. In the present case, there is no proof of this in the record, and no copy of the contract which defendant signed. In that case the evidence further showed that lines had been run through the drafts, which, the court held, was an indication, of something wrong, and sufficient to take plaintiff out of the category of holder in due course. Besides in that case the original vendor-transferor of the drafts had written defendant after the maturity of the drafts stating that all they wanted was their interest protected in the drafts which they held. From this the court concluded that the plaintiff acquired after maturity. See, also, another pertinent case recently decided, Stevens v. Brown, 9 La. App. 463.” In that opinion, Judge Ott has given a fair recital of the pertinent facts, and has correctly applied the law to the issues involved herein. The trade acceptances, referred to in the opinion, were made payable to the Arch Man [77] ufacturing Company. They are indorsed to the order of plaintiff, the Traders’ Securities Company, Arch Manufacturing Company, per W. A. Blackstad. The proof shows that Blackstad, Inc., was a Missouri corporation engaged in the wholesale jewelry business in 1928, when these trade acceptances were given by defendant. It also appears that the Arch Manufacturing Company was simply a trade-name used by the Blackstad Corporation. Counsel for defendant contends that the Arch Manufacturing Company had no existence, and could not have appeared in a court of this state to prosecute its claim against defendant. In the case of Smith v. Williams, 152 La. 948, 94 So. 859, M. M. Smith sued under a trade-name. The court, in reviewing sections 2668 and 2669, Revised Statutes, also Act No. 64 of 1918, on this subject, said: “A person may transact business and execute his contracts under any name he may choose to adopt, provided, of course, no fraud be committed.” •The exception was overruled the court saying: “Whether there was any fraud committed by plaintiff in entering into a contract under an assumed name is a matter of defense and does not arise on exception of no cause of action.” It is therefore obvious that business done under an assumed or trade-name is not for that reason stricken with nullity, so as to preclude any recovery in such a case. To the same effect, see Kent v. Mojonier, 36 La. Ann. 259; Wolfe v. Joubert, 45 La. Ann. 1104, 13 So. 806, 21 L. R. A. 772; In re Pelican Ins. Co., 47 La. Ann. 935, 17 So. 427. Suit could therefore have been brought under the trade-name of Arch Manufacturing Company, subject, however, to the defense of fraud by defendant against recovery for the jewelry. Plaintiff in this case is not the Arch Manufacturing Company, but appears as the purchaser of these trade acceptances before maturity and for value. It is shown that plaintiff company is a corporation distinct from the Arch Manufacturing Company or the Blackstad Corporation, with which it had no connection whatsoever and no business relations, except as the purchaser of these trade acceptances. . Frank Coffman, president and treasurer of plaintiff company, testifies that the Arch Manufacturing Company and Black-stad, Inc., are one and the same, the trade-name of Arch Manufacturing Company being used by Blackstad merely to carry out its business operations. As before stated, the indorsements on these trade acceptances had been made by William A. Blackstad for the Blackstad Corporation. Coffman says, he saw the by-laws of his company which gave him the authority' to make these indorse-ments, and, it may be appropriate to say here, that there is no evidence in the record to show that these statements of Coffman are not true. It seems to us, under the facts above related, that the transfer of these acceptances was properly authorized, and conveyed title. Coffman testifies that before making the purchase he consulted the rating book of the mercantile agencies, Bradstreet and Dun, where he found that defendant was rated by one of the agencies at from $10,000 to $20,000, with “first rate of credit”; that by the other he was rated from $3,000 to $5,-000 “net worth with fair credit.” Basing himself on that rating, he says, he bought the paper of defendant believing that at a discount of 10 per cent, he was making a good investment for his company. The proof is that he gave the check of his ' company for the acceptances, less the discount. It majr be said that the discount appears small, but if, on the other hand, he had gotten a liberal discount, it might have been argued that he had obtained the transfer because the acceptances had no value, and were not collectable. The policy of the law is favorable to the holder of a negotiable paper, and co-» gent evidence is required to convict him of' bad faith. New Orleans Canal and Banking Company v. Samuel Templeton, 20 La. Ann. 141, 96 Am. Dec. 385. Negotiable notes in the hands of a third person are presumed to have been acquired in good faith, until the contrary is made to appear. Hillard v. Taylor, 114 La. 883, 38 So. 594. It is a well-recognized fundamental principle that good faith is presumed in all contracts, not only in those affecting negotiable instruments. Fraud is never presumed. Fraud, it is true, may be implied, when the evidence justifies such an inference. The facts and circumstances, above related, at most, might create a suspicion, but' cannot justify this court to imply that plaintiff is not entitled to recover because of the fraud and collusion, urged by defendants a defense, but which is not sustained. The judgment in favor of plaintiff for the amount claimed with legal interest is therefore affirmed, with all cost of court against defendant.