Despres, Bridge & Noel v. Hough Drug Co.

Ethridge, J., delivered the opinion of the court. The appellant sued the appellee on five promissory notes bearing date September 14, 1917, due and payable as folio ays : One for two hundred dollars, due four months from date; one for two hundred and tAventy-five dollars, due five months from date; one for tAvo hundred dollars, due six months from date; one for two hundred dollars, due seven months from date; and one for two hundred dollars, due eight months from date. The first note reads as folIoays : “$200. P. O., Indianola; State, Mississippi. “Date, Sept. 14 — 17. “Four months after date for value received we promise to pay to the order of Partin Manufacturing Company, Incorporated, two hundred dollars ($200) at Indianola Bank. “Hough Drug Co., by John Hough.” The other notes Avere identical in form and language, except that they Avere for 5, 6, 7, and 8 months, respectively, and in the case of the note due five months from date, the amount of the note was for two hundred and twenty-five dollars; the other notes all being for two hundred dollars each. Each of the said notes were indorsed as follows: ■ “Partin Manufacturing Co. Inc. C. H. Partin, Manager. Pay to the order1 of Foreman Bros. Banking Co.'Chicago, 111. Despres, Bridges & Noel. Pay to the order' of Any Bank or Banker, Foreman Bros. Banking Co." 2-27 Chicago, 111. 2-27. John Terborcli, Cashier.” The defendant pleaded the general issue and two special pleas. By the first special plea it is alleged that plaintiff ought not to maintain its action because the debt sued — 608 — for in this case is not a legal, subsisting, and valid demand against the defendant, because the Par-tin Manufacturing Company, to which the notes here sued on were executed, was, at the time of the execution, thereof and of the contraction of said debt, a foreign corporation, incorporated under the laws of the átate of —--, and had not, at the time of the execution of said notes and of the contraction of the alleg'ed debt, qualified to do business in the state of Mississippi, as required by chapter 24, Code 1906, and the amendments thereto; that the notes sued on were given to the Partin Manufacturing Company to represent and evidence the installment due under a certain contract executed concurrently therewith by and between the defendant and the Partin Manufacturing Company; that the Partin Manufacturing Company had its domicile in the city of-., state of-, and one of its principal offices in the city of Memphis, Tennessee, and that it was engaged in the states of Mississippi, Tennessee, Arkansas, and other states in increasing the business of mercantile concerns in the manner set forth in the contract; that said notes were given to the said corporation doing business in this state in violation of the laws and of the public policy thereof, and were void and uncollectible. A certificate was attached to this plea from the secretary of state of Mississippi, showing that the Partin Manufacturing Company had no charter in the state of Mississippi, and had not filed its foreign charter under the requirements of the law. The second plea alleges that the notes sued on were exer cuted to represent installments under a certain contract, and that under the terms of the said contract the Partin Manufacturing Company was to do and perform certain things therein stipulated, and that at the time of the execution of the contract it .was the intent and purpose of the said Partin Manufacturing Company not to comply with any part of such contract, and that it had not performed the things, or any of them, specified in the contract; that the defendant was induced to sign said con — 609 — tract by tbe Partin Manufacturing Company for tbe purpose of fraudulently obtaining said notes; that the Partin Manufacturing Company urns engaged in the business of obtaining such contracts and having executed to it notes such as here sued on, and that after the execution of said notes it Avould transfer- and assign said notes to the plaintiff-, so that the plaintiff could hold itself out as an innocent purchaser for value Avithout notice; that the plaintiff is not an innocent purchaser, and. that the Partin Manufacturing Company falsely and fraudulently induced the defendant to enter into the said contract, and that the Partin Manufacturing Company then and there knew it would not perform the things it was called upon to do and perform; that it intended to deceive the defendant, and that the defendant, relying on the false representations made to it, executed the notes sued on. At the time of. the execution of the notes here in suit, the contract, made Exhibit A to the second special plea, AAras entered into, under which the defendant placed an order with the Partin Manufacturing Company for: First, .an automobile; second, a Grand Phonola talking machine; third, a ladies’ bracelet watch; fourth, a ladies’ lavaliere and chain; fifth, a ladies’ locket and chain; sixth, one forty-two-piece hand-decorated dinner set; also certain advertising matter; the things so ordered to be used as. prizes to purchasers from the defendant, under an understanding that the Partin Manufacturing Company would increase the defendant’s sales and collections not less, than tAvelve thousand, five hundred dollars in .twelve months, under Avliich agreement the Partin Manufacturing Company was to refund ten cents on every dollar the defendant fell short of the twelve thousand, five hundred dollars increase, and agreed to send' its bond, indorsed by a bonding company to the purchaser in the sum of one thousand, two hundred and fifty dollars to guarantee this agreement. The special pleas were replied to, and the case proceeded to trial. — 610 — It appears from the record that the Partin Manufacturing Company bought from the plaintiff at various times, jewelry, and that the notes in suit were transferred to the plaintiff before the same became due, and that credit ivas given the Partin Manufacturing Company in the same way that it would be given for cash, that is to say, the notes, according to the plaintiff, were bought unconditionally. The plaintiff testified that it bought the notes on the commercial rating of the ITough Drug Company, and that it had no knowledge of the agreements and contracts between the Partin Manufacturing Company and the Hough Drug Company, and that plaintiff did not know that the Partin Manufacturing Company did with the goods ordered from it. In the deposition of the sales manager for the plaintiff he offered to permit the defendant, or any reliable representative of the defendant, to examine the books and business of the plaintiff. On cross-interrogatories to the depositions the defendant was requested to attach correspondence between the plaintiff and the makers of the notes transferred by the Partin Manufacturing Company to the plaintiff, and also the correspondence between the Partin Manufacturing Company and the plaintiff, and many letters are contained in the record; but these do not pertain to the notes in suit, and do not, in our opinion, warrant the inference that the plaintiff was engaged fraudulently in buying notes acquired from the Partin Manufacturing Company, nor does it show, in our opinion,, that they had any knowledge of any fraudulent dealings on the part of the Partin Manufacturing Company. The defendant offered the evidence of an inspector of the Post Office Department, who was directed by the Post Office Department to investigate the Partin Manufacturing Company’s method of doing business, and this agent testified that he made such an examination, and, among others, notified the plaintiff by letter, in the early part of 1917, that he was making such investigation, and requested information from them, and that he had a reply acknowledging his letter. He did not have the files containing this correspondence, and declined to produce them — 611 — or to secure them from the government. However, the letter was introduced, in evidence, and shows on its face that it was written on March 23', 1918,, instead of 1917. This letter reads as folio ays : Memphis, Tenn., March. 23, 1918. “Despres, Bridges & Noel, Chicago, 111. Please advise me whether a financial statement Avas ever furnished you by the Partin Manufacturing Company of Memphis, Tennessee, during the Avinter of 1916-17, or at any other time. If so please furnish it to me Avith the envelop in AAdiich it was received, for use in an investigation to determine AA’hether this concern or its officers violated the postal Iuavs in the conduct of its business. “Any information concerning the business transactions AA’ith tins concern will be appreciated, and any papers of value that would contain information on the subject, if furnished, Avill be returned Avlien they have served their purpose. “Please treat this inquiry as confidential and return Avith your reply. “Mery respectfully, “[Signed] G. B. Johnson, “Post Office Inspector.” The reply to the above letter reads as folloAvs: Chicago,, March 25, 11918. “Mr. G. B. Johnson, P. 0. Inspector, Memphis, Tennessee — Dear Sir: Replying to your inquiry of the 23d instant with reference to Partin Manufacturing Company, beg to advise that Ave have at no time received a financial statement from them, nor any correspondence that might be in violation of the postal laAvs. Our business transactions merely represent sales of merchandise, for Avhich we received in payment indorsed paper from their customers, and, inasmuch as they made no request for credit, we had no occasion to aslt for a financial statement. “Trusting this information will be of some sendee to you AAre remain, “Yours very truly, “[Signed] Despres, Bridges & Noel.” — 612 — The notes were acquired by the plaintiff on November 21, 1917. Subsequent to the assignment of the notes the Partin Manufacturing Company went into bankruptcy and discontinued business, being induced so to do, according to the Post Office Inspector, by an agreement with the Post Office Department that if it would discontinue business the fraud order would not be issued against the Par-tin Manufacturing Company. None of the facts or correspondence which would indicate fraud were introduced in evidence, but the attorneys for the Partin Manufacturing Company and the government reached an agreement, and the most that could be said as to any fraud of the kind charged against the Partin Manufacturing Company in its business, other than the transaction with the defendant, is that in, the opinion of the Inspector of the department the business of that corporation was fraudulent. Clearly this is not proof of fraud. The Post Office Inspector testified, further, that during March or April, 1918, he went to the office of the plaintiff1 to investigate its connection with the Partin Manufacturing Company, and that some of the officers of the plaintiff admitted that they liad some trouble in collecting previous notes assigned to them by the Partin Manufacturing' Company, and that they knew something of the business conducted by the Parti Manufacturing Company. This conversation is very indefinite as to when or under1 what circumstances or as to what notes this trouble and knowledge related. We think it is wholly insufficient to warrant submitting to the jury as evidence of fraud in the present transaction. The defendant was. introduced, and testified as to making delivery of the notes in question, and that the Partin Manufacturing Company supplied a portion of the goods ordered, but failed to furnish other goods, and failed to send a skilled advertising manager which the Partin Manufacturing Company agreed to furnish under its contract. He testified that he went to Memphis on several occasions, and urged the Partin Manufacturing Company to comply — 613 — with its contract, and that he Avas suing- the bonding compunja in Ohio on the bond given by the Partin Manufacturing Company to guarantee the fulfillment of its contract. He further testified that Avhen the first note Avas sent for collection that the notice to him did not shoAV the note to be owned by the plaintiff, but that the notice indicated that the Partin Manufacturing Company owned the note. The officers of the bank at Indianola, Miss., wore not examined, nor Avas' there any evidence to show that the note Avas sent by the Partin Manufacturing Company for collection. It does appear that'the defendant wrote the Partin Manufacturing Company that the note was presented at the Avrong bank, and that the Partin Manufacturing Company Avrote that future notes Avoulcl be sent to the right bank, and that the note Avas sent to the wrong bank by oversight. There is no shoAA-ing that the plaintiff had any lcnoAvledge of this correspondence, and the plaintiff’s proof is clear that the notes Avere sent by the plaintiff through its bank for collection. We think there was no sufficient showing of any knoAvleclge on the part of the plaintiff of any fraud on the part of the Partin Manufacturing Company in procuring the notes, nor is there any shoAving sufficient to Avarrant the conclusion that the plaintiff had any knOAAdedge of the agreements between the Partin Manufacturing Company and the defendant. The court beloAV refused a peremptory instruction for both plaintiff and defendant, and only one granted instruction appears in the record, which is for the plaintiff, and reads as follows: “The court instructs the jury that if they believe from the evidence that the plaintiff Aims an innocent purchaser of the notes in question for value, before maturity, they will find for the plaintiff for the face of said notes, six per cent, interest, from maturity, and protest fees.” . There Av.as a verdict for the defendant and a motion for a new trial, AAdiich was overruled. The present suit is governed by the Negotiable Instrument Act, being chapter 244, Laws 191G, Hemingway Code, — 614 — section 2579 et seq. The Negotiable Instrument Act is entirely different in its effect upon transactions of this kind from the provisions of our anti-commercial statute (section 4001, Code 1906; I-Temingway 'Code, section 2564), which has heretofore governed the court in its judgment in cases of this kind. The notes in question were executed and delivered to the Partin Manufacturing Company by the defendant, and on their face carry no suggestion of any other agreement or understanding, and comply with the requirements of the Negotiable Instrument Act, and it is provided in section 16 of this act: “But where the instrument is in the hands of a holder in due course, a valid delivery thereof by- all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proven.” By section 24 of the act it is provided: “Every negotiable instrument is deemed prima facie to have been issued for .a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.” By section 25 of the-act it is provided: “Value is any consideration sufficient to support a simple' contract. An antecedent or pre-existing debt constitutes value, and is deemed such whether the instrument is payable on demand or at a future time.” By section 26 of the act it is provided: “Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time.” By section 28 of the act it is provided: “Absence or failure of consideration is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto,, whether the failure is an ascertained and liquidated amount or otherwise.” — 615 — By section 60 of the act it is provided: “The maker of a negotiable instrument by making it- engages that he will, pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse.” We think this last section eliminates from consideration the plea that the note was void because the Partin Manufacturing Company had not filed its charter in this state. The several sections above quoted, Avhen applied to the evidence in this case, make the defendant liable to the plaintiff. The testimony for the plaintiff is clear and unequivocal, and the proof offered by the defendant is insufficient to require the submission of the case to the jury, and the refusal to give a peremptory instruction for the plaintiff Avas error. ■ As there is no evidence to prove fraud, and no evidence sufficient to prove notice on the part of the plaintiff of any infirmities in the papers prior to the time of their1 acquirement, the judgment of the loAver court will be reversed, and judgment AArill be entered here for the plaintiff. Beversed and judgment here for the appellant. Reversed.