Promissory note — Signature obtained by means of fraudulent representations — Negligence.
The question, whether one who has been induced by fraudulent representations, without negligence on his part, to sign a promissory *Page 600 note or bill of exchange, supposing it to be a contract of an entirely different character, is liable on the note or bill to one who has purchased it in good faith for value, before due, has been considered within a few years in quite a number of the states; and the decisions seem to have been nearly uniform that he is not.
Several of the cases holding this doctrine are referred to in the able brief furnished us by counsel for the defendant; and an examination of those cases shows, as it seems to me, that the doctrine stands on a very firm basis of reason and legal principle. The same question was decided in the same way by the English court of common pleas in 1869. Foster v. Mackinnon, Law Rep., 4 C. P. 704.
That was an action by indorsee against indorser of a bill of exchange, of which the plaintiff became the holder before it became due, and without notice of any fraud.
The defendant, who was a gentleman far advanced in years, was induced to put his name on the back of the bill by fraudulent representations, under the following circumstances: One Callow had been secretary to a company engaged in the formation of a railway, in which the defendant was interested, and the defendant had at some time previously, at Callow's request, signed a guaranty for 3,000l., in order to enable the company to obtain an advance of money from their bankers.
Callow took the bill in question to the defendant, and asked him to put his name on it, telling him it was a guaranty; whereupon the defendant, in the belief that he was signing a guaranty similar to that which he had before given (and out of which no liability had resulted to him), put his signature on the back of the bill as indorser.
BOVILL, C. J., before whom the cause was tried at nisi, prius, directed the jury that "if the defendant's signature to the document was obtained upon a fraudulent representation that it was a guaranty, and the defendant signed it without knowing it was a bill and under the belief that it was a guaranty, and if he was not guilt, of any negligence in so signing the paper, he was entitled to the verdict. The full bench held that this was a proper direction.
BYLES, J., who delivered the judgment of the court, in the course of his opinion (p. 711) says — "It seems plain, on principle and on authority, that if a blind man, or a man who cannot read, or who for some reason (not implying negligence) forbears to read, has a written contract falsely read over to him the reader misreading to such a degree that the written contract is of a nature altogether different from the contract pretended to be read from the paper which the blind or illiterate man afterwards signs, then, at least, the signature so obtained is of no force.
And it is invalid, not merely on the ground of fraud where fraud exists, but on the ground that the mind of the signer did not accompany the signature; in other words, that he never intended to sign, and, therefore, in contemplation of law, never did sign, the contract to which his name is appended." I have seen but one case — Douglass v. Matting, 29 Iowa 49 — where the rule has been directly held the other way; and I should be prepared to dispose of this case by the application of a doctrine which appears to be so sensible and so well sustained by authority, if the facts found *Page 601 by the referee stopped here; but he found, in addition, that it was a negligent act on the part of the defendant to sign the note without ascertaining whether it was what the payee represented, or something else; and this, I think, puts a very different face upon the matter.
That the defendant cannot be held by virtue of any actual contract or promise is very clear, because he never made any contract; but that he should be estopped by his own negligence from denying, as against an innocent holder for value, the usual legal effect of his signature to a negotiable instrument, or be discharged from liability for the proximate consequences to such innocent holder of his own negligent act, seems to be equally clear both upon reason and authority.
See Swan v. North British Co., 7 H. N. 603, S.C. in error; 2 H. C. 175, and cases referred to.* But the defendant claims that the finding of negligence by the referee is wrong, and that his report ought to be revised in that particular by the court here. I do not think that can be done. The motion to recommit the report for the purpose of a further hearing on this point, or that the question of negligence be tried by jury, should be addressed to the circuit court.
If the motion for a re-trial of the facts, either by the referee or a jury should be denied in the circuit court, I am of opinion there must be judgment on the report for the plaintiff. * And see Shirts v. Overjohn, decided by the supreme court of Missouri, May term, 1875, and a valuable note thereon, in the Central Law Journal of July 2, 1875, pp. 423-426. REPORTER.
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