First National Bank v. How

Knowles, J.

The only points presented in this case are the sufficiency of the answer of the defendants, and the refusal of the court below to permit the defendants to file an additional amended answer.

The defendants admit the execution of the note sued, and deny that John S. Atchison, cashier, assigned, for a valuable consideration, this note to plaintiff, or delivered the same to it. This denial would, perhaps, be sufficient to raise an issue as to whether the assignment was for a valuable consideration. The defendants, however, in another part of their answer, aver that they “ executed and delivered to the said John S. Atchison, as cashier and agent of plaintiff, and for the sole use and benefit of plaintiff, the said promissory note sued on.” Admitting this averment to be true, and the plaintiff is the rightful owner of the note, and under our statute the proper party plaintiff, although the assignment of the note to plaintiff may not have been for a valuable consideration.

We come now to the consideration of whether the answer sets up other facts which constitute a defense to tbe action on the said note.

Both plaintiff and defendants seem disposed to treat, in their arguments, the allegations of the answer as setting up the defense of fraud. We do not feel disposed to enter into the discussion as to whether this defense is an equitable one or not, and, therefore, inadmissible, under our organic act, to be interposed to this action on a promissory note. Undoubtedly fraud can be set up as a defense to an action at law on a promissory note, that is, any fraud that would impeach the consideration for which the note was given. The fraud presented in this case by the* answer of the defendants is, that the plaintiff sold the defendant How certain quartz mill machinery, for which, as a security for the payment of the consideration, this note was given, but that plaintiff had no title to said property. That the same was owned by a corporation known as the Cole Sanders Mining Company, incorporated under'the laws of the State of Missouri. That plaintiff purchased this property from Cole Sanders, an agent of the said corporation, and that he had no authority to sell the same. That at the time of the sale plaintiff knew that it had no title to said property, and that the said Cole Sanders had no authority to sell the same.

The answer shows that plaintiff agreed to prosecute an action to declare the title to the said property to be in plaintiff, and not in said corporation, and that a suit was pending for that purpose when plaintiff sold defendant How this property, but that plaintiff, disregarding this agreement, fraudulently dismissed said action.

When a party sets up fraud, he must come into court with clean hands and show that he is entitled, to avail himself of the fraud alleged. As we have seen, the defendants show by their answer that they had been apprised that there was some dispute about this property, that an action was pending, concerning the same, against the Cole . Sanders Mining Company.

The defendants aver “ that the Cole Sanders Mining Company, by virtue of their said superior title', has demanded and claimed possession of said property from defendant How, and that said defendant How has released, relinquished and conveyed to said corporation all his title and possession and right of possession of the said property derived under and by virtue of the said sale.”

This was not a proper course for the defendant How to have pursued on a simple demand from the Cole Sanders Mining Company, for said property, although that company may have had the best title to the same. The proper action on the part of the defendant How would have been to have delivered or offered in good faith to deliver back the property to the plaintiff, as soon as he discovered that the plaintiff had no title to said property, and that a fraud had been committed upon him, unless in some manner he was prevented from so doing. He had no right to pursue such a course as to place the plaintiff in a more unfavorable position in regard to the property than he would have been had he never sold the same to him. The mere demand of the Cole Sanders Mining Company was not sufficient to have prevented the defendant How from delivering or offering to deliver the possession of the property back to plaintiff, much less was it sufficient to compel the said How to not only deliver the possession of said property, but to make a conveyance of the same to the said company of his title and interest. Possession of property is of some value. The possessor of property may never be compelled to deliver the same to the one holding the paramount title. The conduct on the part of How we hold was such as will preclude him and his sureties from coming in and setting up the fraud complained of. The said How has committed a wrong against the plaintiff by his conduct in the premises. It may be urged that, as the answer must be taken as true, there was no wrong in the action of the defendant How, because the plaintiff had no title to the property as appears by the answer. The reply to this is that the defendant How, having received the possession of this property from the plaintiff, had no right unless by a legal compulsion to deliver the property to the other contestant therefor. That although the plaintiff may have had no title to the property, it had the possession thereof and How had no right to act in such a manner as to deprive it of regaining this. Such a proceeding as that of the defendant How would be but a short way of taking property from the possession of one claimant and delivering it to another, and then force the one who had been deprived of the possession of the same and the use and enjoyment thereof to litigate the title to the property on an action on the promissory note given as a security for the payment of the consideration therefor. No court would be warranted in supporting such a proceeding. It is inconsistent with fair dealing on the part of the defendant. He must have his hands clean to entitle him to set up the fraud complained of.

It does not appear how the defendants were damaged by a failure to prosecute the suit to test the title to the property between the plaintiff and the Cole Sanders Mining Company. The dismissal of the suit may have been the natural result of the plaintiff parting with the possession of the property and its title to the same. The mere allegation that such dismissal was corruptly and fraudulently done amounts to nothing without showing the fraud. The facts that constitute fraud must be- set forth.

It is claimed in the argument of appellants that the allegations of the answer amount to the setting forth of a failure of consideration. We should be more inclined to treat the answer as setting forth such a defense did it not contain the allegations that the plaintiff knew it had no title to said property at the time of the sale of the same, that it purchased the same from an agent of the Cole Sanders Mining Company, who had no authority to sell the same, which the plaintiff well knew.

Treating this answer, however, as an attempt to set up failure of consideration, namely, failure of title of the property for which the note sued on was given in consideration, and does the answer present a complete defense of this kind?

It does not appear that, by any legal action, the plaintiff had been adjudged to have no legal title. It does not appear that the Cole Sanders Mining Company had obtained the possession of said property through any legal process. All that does appear is, that the said mining company demanded possession of one of the defendants, John How, of said property, and that in pursuance of this demand he not only delivered possession thereof to said company, but he conveyed to it all his right, title and interest thereto. We-hold that this does not show a failure of consideration. To warrant a party in delivering possession of property to a claimant thereof, that he has received possession of from another by virtue of a sale, there must be some legal necessity for him to do so. That he cannot act thus on a simple demand and then claim that the title has failed. It has frequently been held, in cases of the sale of lands, that the defendant, in an action on the consideration therefor, cannot set up a failure of title as a defense to the action without showing an eviction. Personal property comes under the same rule as real estate when a defendant seeks to aváil himself of a failure of title. We do not hold, however, that it is actually necessary for a defendant, in such an action, to show an eviction, but we do hold that the title must have failed and that possession can no longer be maintained, or that he has delivered, or offered to deliver, the property back to his vendor, or show some good reason for not doing so. Although the defendants may have been apprised of an outstanding title, and may have believed that this was the paramount title, and, in fact, it may have been, they had no right to deliver' possession of the property to this claimant without some legal necessity for it. No such necessity existed at the time and there may never have been such a necessity.

For these reasons we think the answer of the defendants did not state facts sufficient to constitute a defense, and that the plaintiff was entitled to a judgment on the pleadings.

The refusal of the' court below to permit the defendant to file an amended answer is assigned as error.

The refusal to allow a party to amend his pleadings rests in the sound legal discretion of the court to whom the application is made, and this court can only review that ruling when it appears that there has been some abuse of that discretion. It appears that the defendants had obtained permission before to amend their answer, and that the answer in this cause was filed in pursuance to that permission.

The attorneys for the defendants make affidavit on their second application to amend their answer, that the defendants, in their judgment, have a good defense to the action, but these affidavits do not show what that defense is, and why it was not interposed before, although from their affidavits it would appear that such defense must have been within their knowledge.

Under such circumstances we can see no abuse of discretion in refusing to allow this second amendment of defendants to their answer.

For these reasons the judgment of the court below is

Affirmed.