Citizens' State Bank v. Snelling

MR. JUSTICE COOPER delivered the opinion of the court. This is an action on a promissory note for $1,000 dated December 11, 1914, and due six months after date. The complaint alleges execution and delivery to Baker on December 11, 1914; its transfer to plaintiff on December 12, 1914, for a valuable consideration, and nonpayment. The answer denies its transfer and delivery to plaintiff; and alleges affirmatively that if the plaintiff purchased the note, it did so long after maturity and notice of a valid defense thereto; that some time prior to December 11, 1914, one Baker, at Roundup in Mussel-shell county, endeavoring to sell stock in the Bankers’ Hail [480] Insurance Company, a corporation about to be organized, solicited defendant to subscribe for stock in said company; and in order to obtain his stock subscription, made to him certain false and fraudulent representations, knowing them to be false, all of which defendant believed to be true, and, so believing, subscribed for $2,000 of the capital stock of said proposed corporation, and made, executed, delivered and indorsed the note mentioned, in payment of the first installment of the subscription. More particularly, the answer alleges that “said Baker further represented that the Citizens’ State Bank of Roundup, Montana, the plaintiff herein, had purchased $2,500 of the stock of said proposed corporation, and -had offered to exchange $4,000 of the stock of the Montana Life Insurance Company for an equal amount of stock in the proposed corporation.” Also that 140 other bankers in the state of Montana had subscribed for stock in said proposed company, and that each of these bankers would become an active agent for the proposed corporation in soliciting hail insurance; that agents’ commissions would be twenty per cent of the premium, and that by reason of the position of the banks in the state, and the advantage that would accrue to the proposed company thereby, the profits would be large, and that the only payment that it would be necessary for him to make, would be the first, as all other payments would be taken care of out of the profits of the corporation. It also sets forth that one John Chandler and one C. O. Tupper, acquaintances and friends of defendant, had each subscribed for $2,000 of the shares of such stock; that James Elliott, Fred Handle and Herbert Thien had also subscribed for large amounts of capital stock of such proposed company; that he (Baker) had subscribed for $9,000 of it, and was putting all the money he could get into the stock of the company, whereas, in truth and in fact, he was merely selling stock at twenty-five per cent commission, and not putting any money into it at all; and that such representations (except those referring to Chandler and Tupper) were false. It also alleges that the subscriptions claimed to have been secured from other persons were [481] grossly exaggerated, and known to be so by Baker; that Baker was in fact the representative of the organization committee of said corporation and its agent in the procurement of subscriptions; that defendant relied upon such representations, and knew nothing to the contrary. On information and belief defendant alleges that prior to the organization of the company, the sale of the note and the time plaintiff became the possessor of it, the defendant canceled his stock subscription. He also alleges that no tender of any capital stock, or anything of value for the note, was ever made by the insurance company. In his prayer, the defendant demands the cancellation and surrender of the note and relief from liability thereon. The reply to the affirmative defense consists of denials, and direct allegations that plaintiff became the owner of the note in due course before maturity, in good faith, for a valuable consideration, and without notice of the defenses referred to. At the close of all the testimony, on motion of plaintiff, the court directed a verdict against the defendant, and judgment was entered accordingly. These appeals are from the order denying defendant’s motion for a new trial and from the judgment. The making of both orders is specified as error in appellant’s brief. The foregoing, being a resume of the pleadings, and taking, as they do, a wider range than the testimony adduced at the trial, will suffice to cover and dispose of all the questions arising on these appeals. At the trial the plaintiff produced and identified the note [1] indorsed by the agent of the holder thereof, and, having shown its purchase for value the day following its execution, the burden of proving that Baker obtained the note through fraud rested upon the defendant Snelling. (Harrington v. [2] Butte & B. M. Co., 27 Mont. 1, 69 Pac. 102.) Statements, of the character of those made by the officers of the bank months after the purchase of the note for value, and having no bearing upon the original negotiations between Baker and the defendant, in no wise affected the transfer to the plaintiff, [482] This being so, the liability of the defendant was fixed, until he could, by proper and sufficient pleadings and competent and preponderating proof, show that the note was obtained by means of fraud and deceit practiced by Baker in the procuration of the subscription for which the note was given, and that the plaintiff had knowledge thereof. (Butte Hardware Co. v. Knox, 28 Mont. 111, 72 Pac. 301; Bullard v. Smith, 28 Mont. 387, 72 Pac. 761; Ott v. Pace, 43 Mont., at page 92, 115 Pac. 37.) We come, then, to the question of the sufficiency of the affirmative defense pleaded by the defendant in his answer. That it falls far short of the requirements of a pleading designed to upset a transaction entered into in apparent good faith, will be seen by a reference to cases dealing with defenses of this character. (Butte Hardware Co. v. Knox, supra; Bullard v. Smith, supra; Ott v. Pace, supra.) A reference to the evidence in the record will disclose that the alleged misrepresentations of Baker consisted of existing facts, and that the means of testing their accuracy were available to the defendant if he had chosen to investigate them for himself. With his contract, however, he seems to have been quite contented, for he testified: “I made no effort to investigate any of the statements Mr. Baker made to me.” The other statements alleged to have been made, consisted merely [3] of prophecies. Could the defendant, then, hope to successfully defend against the note if he had been able to prove to the satisfaction of the jury all that he alleges in his affirmative defense? We think not. Unfortunately for him, neither fantastic representations of things not actually existent, nor promises for the future amount in law to deceit or fraud. (Pollard v. McKenney, 69 Neb. 742, 96 N. W. 679, 101 N. W. 9; Beard v. Bliley, 3 Colo. App. 479, 34 Pac. 271; 20 Cyc. 20.) Statements no less alluring are undoubtedly made every day concerning the prospective value of mining stock, and in the promotion of enterprises of like nature; and, seductive as they may appear, without the interposition of misrepresentation, [483] with a fraudulent design, their authors are not chargeable with actionable deceit. “To be such, it must relate to a present or past state of facts.” (Milwaukee Brick & Cement Co. v. Schoknecht, 108 Wis. 457, 84 N. W. 838.) Not until the institution of suit on the note in the hands of a third person, did the defendant seek relief from what he now accounts a bad bargain. The courts cannot be called into action in aid of a party whose cupidity has outrun his business judgment. The judgment and order are affirmed. 'Affirmed. Mr. Chief Justice Brantly and Mk Justice Hollowayi concur.