Security Finance Co. v. Ozark Hardware Co.

289 S.W. 761, 172 Ark. 562, 1927 Ark. LEXIS 13
Supreme Court of Arkansas·Decided January 17, 1927·Published

Opinion

Wood, J.

This action was brought by-the appellant against the appellee in the justice court to recover judgment on six separate promissory notes, dated April 22,1924. Five of the notes were for the sum of $87 each and one for the sum of $84.26. The notes were executed by the appellant in favor of the Brenard Manufacturing Company. They were given in payment for certain graphophones which, the appellant claims, were sold and delivered to the appellee by that company. The appellant alleged that the notes were later assigned to it by the Brenard Manufacturing Company for value before maturity, and that it was therefore an innocent purchaser of the notes, and entitled to recover judgment thereon in the aggregate sum of the principal and interest shown to be due on the notes, for which it prayed judgment.

The appellee claimed that it had a good defense to the notes. There was no formal answer filed in either justice or circuit court, but the testimony developed on the trial in the circuit court shows that the appellee predicated its defense on the ground that the notes were executed by the appellee’s secretary and treasurer without authority, and through fraud perpetrated by the Brenard Manufacturing Company on him, and that the appellant was not an innocent purchaser for value of the notes. The testimony on behalf of the appellant tended to prove that the Brenard Manufacturing Company, hereafter called the Brenard Company, was a- partnership, doing business in Iowa City, Iowa. On April 24, 1924, the appellee signed a printed order, dated at Berry-ville, Arkansas, which came into the hands of the Brenard Company through the mail on April 25, 1924. *The Brenard Company accepted the order. The order was for talking machines, and the company inspected it and approved it, and wrote the appellee a letter to that effect, inclosing an exact copy of appellee’s order and the notes which it had signed. The records and printed matter ■ called for in the order were delivered to the American Bailway Express Company at Iowa City, Iowa, April 30, 1924, and consigned to the appellee at Berryville, • Arkansas. The order was sent in to the Brenard Company by its solicitor, W. E. Howe, a traveling salesman. He was employed by the company to call upon merchants to take orders for the company’s line of goods on blanks furnished him for that purpose. He was to send the orders to the Brenard Company at Iowa City, Iowa, for approval, as soon as he procured them. He was instructed by the company not to make any reference or statement other than was contained in the order blank. The Brenard Company inspected the orders as they came in. and, when found satisfactory, it approved them. The Brenard Company then paid the salesman his commission. When the order was received by the company, there came with it a report of the salesman, in which he said he made no verbal or written agreement in securing the order other than was shown in the original order.

The notes in controversy were executed at the time the order was executed, and were given in settlement of the terms of the order. The Brenard Company detached the notes, as the order provides, and sold them to the appellant for cash, May ”31, 1924. The notes were dated April 22, 1924, and were due two, three, four, five and six months after date. None of the notes were due when they were sold to the appellant. The Brenard Company, owning the notes, had no interest in the appellant company which purchased the notes. There was no connection, either direct or indirect, between them. The appellant purchased the notes of the Brenard Company on May 31, 1924, in the total sum of $3,003.52, and gave the Brenard Company its check for same in the*sum of $2,600.

There was testimony by the witnesses for the appellant to the effect that the general attorney for the appellant is also the attorney for the Brenard Company, and had his office in the same building with the latter company. The Brenard Company began selling its commercial paper to appellant on August 31, 1923. Up to June 15, 1925, the appellant had purchased of the Brenard Company commercial paper of the total value of forty or fifty thousand dollars. It had purchased several thousand dollars’ worth of such paper August 31, 1923, and May 31,1924. The paper so sold and purchased was similar to the paper in controversy. All these notes had been detached from the contracts before being offered to the appellant. The notes had perforated edges, showing that they had been detached from contracts. On the notes purchased from the Brenard Company between August 31, 1923, and May 31, 1924, the appellant had to bring a number of suits. Tbe witness stated- that be bad been a witness for tbe appellant a dozen times on paper wbicb bis firm bad sold to tbe appellant prior to May 31, 1924. The notes on wbicb these actions were brought were given to the Brenard Company for phonographs on agency contracts similar to that in the present case. Tbe notes sold appellant were all taken from tbe Brenard Company’s customers, and were all of tbe same general form, but for varying amounts. Tbe notes involved bad been detached from contracts similar to tbe notes and contracts tbe Brenard Company used in dealing with tbe appellee. Tbe president of the appellant might have known that tbe notes sued on bad been detached from a contract. There was no secret about it. The notes were perforated at tbe ends and sides, showing that they bad been detached from something. Tbe president of tbe appellant, in bis testimony, corroborated tbe testimony of tbe manager of tbe Brenard Company. Tbe appellee bad to sue tbe Brenard Company twenty or thirty times on notes purchased of them. Some of tbe suits were on paper bought from tbe Brenard Company prior to May 31, 1924. Those actions were on notes similar in size, design and printed matter to those in controversy. Witness knew tbe notes bad been detached from an order, contract, or other paper; witness knew, when he purchased the notes in controversy, that tbe Brenard Company was selling phonographs under some agency contract and taking customers’ notes therefor. After buying tbe notes in controversy, appellant did not correspond with tbe appellee about collecting them. Appellant did not investigate appellee’s financial.standing; supposed it was good.

Tbe above is substantially tbe testimony of appellant’s own witnesses.

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Security Finance Co. v. Ozark Hardware Co., 289 S.W. 761, 172 Ark. 562, 1927 Ark. LEXIS 13 (Ark. 1927).

289 S.W. 761 (Security Finance Co. v. Ozark Hardware Co.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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