209 N.W. 869 | Minn. | 1926
The note bears date of February 4, 1924. It is the third renewal of one executed by defendant in September, 1921. The original note ran to Heinrich Chemical Company as payee and evidenced defendant's indebtedness for corporate stock of that company which he had just purchased. In defense he alleges, and his evidence tends to prove, that the then cashier of plaintiff assisted the stock salesman of the Heinrich Company and made the representations which really induced his purchase of the stock and the execution of the original note. In substance, the misrepresentations charged to the cashier by defendant are that the stock was a good investment; that it was then selling at 93 per cent of its face value and that it was paying a regular annual dividend of 8 per cent. Immediately after its execution the note was discounted with the plaintiff.
We have not given much attention to plaintiff's claim that it is a holder in due course. On the evidence for defendant, the cashier who made the representations was the only representative of the bank in purchasing the note. Therefore if we had to decide the question, it is not likely that we could hold plaintiff to be a holder in due course. The rule of State Bank of Morton v. Adams,
The original note ran for six months. It was then renewed and a payment made not only of interest but of $40 on the principal. The first renewal note ran for a year. Interest was again paid and a second renewal given in 1923. The operation was repeated in February, 1924, when the note in suit, the third renewal, was given and another year's interest paid. In the meantime and relatively soon after his purchase, defendant must have discovered the utter falsity of the representation, the principal one claimed, that the stock was paying regularly an 8 per cent dividend. To that extent *201 defendant discovered the fraud which he claims was perpetrated upon him long before his last renewal of the note and probably before one or more of the others. He was not only put upon inquiry but was advised of the fraud, if fraud in fact existed. Incidentally defendant was in touch with the home office of the Heinrich Company. Annually he received its financial statements. We take it for granted that as to defendant each of those statements was probably deceptive. They showed a substantial surplus but in order to do so carried as an asset an item for "Good will and stock bonus" of over $800,000, and another, equally suggestive of padding, referring to "Patents, Trade Marks and Formulae" of $150,000. But even upon that assumption, and as a matter of law, defendant must be charged with knowledge of the fraud, if in fact he was defrauded, before he executed as a third renewal of the original the note now in suit.
The foregoing brief resume of the case is sufficient to show that, within the rule of Thorpe v. Cooley,
Order reversed with directions to enter judgment notwithstanding the verdict for plaintiff. *202