1. Should the Kraemers have to pay the full face amount to Mrs. Leber? Why or why not?

2. What other alternatives do the Kraemers have in this situation?

3. Who could the Kraemers sue for their losses in this matter if they must pay the full amount on the note to Mrs. Leber? What legal barriers might they have to overcome to successfully recover their funds in each instance?

The Kraemers needed money. They owned certain pieces of real estate in Jefferson County, Missouri, and decided to use them as collateral for a loan. To accomplish this, they went to the office of George Pickles, a real estate dealer in the area. There they executed a negotiable promissory note in the principal sum of $50,000, payable five years after date. The note bore the interest rate of 8 percent. They then executed a deed of trust on their real estate as security for the loan. The promissory note and the deed of trust were in favor of Grace A. Wheeler, the daughter of George Pickles. Ms. Wheeler was merely acting as a “straw party” for her father. As a consequence, she claimed no interest in the notes and indorsed them without recourse to her father, George Pickles. The note provided that payments thereon were to be made at the office of George Pickles. The deed of trust also allowed that the debtors could make payments in multiples of $1,000 at any time on the note. During the next three years, plaintiffs made more than $12,000 in payments on the note. Whenever these payments were made, Mr. Pickles would hand to the plaintiffs a printed form of receipt showing the date of payment, the amount paid on the principal, and the amount of the principal remaining to be paid. No indorsement of payment on the note itself was ever made.

Ultimately, Mrs. J. C. Leber purchased the note for $45,000. At that time no notice was given to her of the payments rendered by the Kraemers. Later Mr. Pickles received two other payments on the note but did not remit them to Mrs. Leber.

When Mr. Pickles died before the note matured, Mrs. Leber contacted the Kraemers and for the first time advised them that the note had been purchased by her and that she had been advised by Mr. Pickles’ business associate that now “she could do her own collecting.”

When the Kraemers and Mrs. Leber could not agree on the amount due on the note, she began foreclosure proceedings. Ultimately, the property was sold and the proceeds deposited in the office of the circuit clerk for disposition by the court. The lower court then refused to give the Kraemers full credit for their payments. They appealed.

The note was a negotiable instrument of such a character that plaintiffs were bound to have known that it could and probably would be negotiated and passed into the hands of a third party. As a consequence plaintiffs in making payments on this note should have ascertained that the person to whom payment was made either owned the note or had possession thereof for the purpose of collection.

Judgment of the lower court is affirmed as to the Kraemers not receiving credit for their payments against the face of the note.

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ECEVED Late CURRENT CHARGES bill? Bill Statement ASSENSMEN PAYARENTS/A 290080