Parker v. . Thomas

BROGDEN, J. The dominant question of law presented is, whether or not the transaction constituted fraud in the factum or fraud in the treaty. If the transaction constituted fraud in the factum, the note and the deed of trust held by the defendant bank is a nullity and void. If, upon the other hand, the evidence discloses only fraud in the treaty, the note and deed of trust would be voidable as between the original parties thereto, but binding in'the hands of a third person who was the innocent holder thereof. The rule is stated thus in Medlin v. Buford, 115 N. C., 260: “The first question to be considered is whether the mortgage executed by the defendants to the plaintiff is absolutely void by reason of fraud in the factum. If such be the case, it would be immaterial whether the plaintiff is an innocent party, since the deed being a nullity, no rights could be asserted under it in favor of any person whomsoever.” The line of demarcation between fraud in the factum and fraud in the treaty is frequently obscure and in a measure dependent upon the attendant facts and circumstances. There are, “ however, certain well recognized indicia of fraud in the treaty or negotiations between the parties. These may be classified as follows: *803 1. Where there is misrepresentation as to the contents of the instrument and the person signs the identical instrument which he intended to sign. 2. Where there is undue influence exerted upon the party signing an instrument; provided, of course, he has legal capacity. 3. Where the complaining party can read the instrument which he signs, seals and delivers, but fails, refuses or neglects to do so. There are also well marked indicia of fraud in the factum, which may be classified as follows: 1. Surreptitious substitution of one paper for another. 2. The false reading of a deed or other instrument, upon request, to a blind or illiterate person. 3. Fraud, imposition or artifice practiced upon the person signing an instrument by means of which his signature to the instrument is procured. 4. Where the execution of the instrument is procured by trick, artiflee or imposition other than false representations as to the contents of the instrument. 5. Want of identity between the instrument executed and the one intended to be executed. McArthur v. Johnson, 61 N. C., 317; Medlin v. Buford, 115 N. C., 260; Dixon v. Trust Co., 115 N. C., 274; Cutler v. R. R., 128 N. C., 478; Griffin v. Lumber Co., 140 N. C., 519; Lanier v. Lumber Co., 177 N. C., 200; Curry v. Malloy, 185 N. C., 206; Furst v. Merritt, 190 N. C., 397. The plaintiff contends that the answer of the jury to the first issue is a finding of fraud in the factum. If this be true, the plaintiff was entitled to the judgment tendered by her and which was refused by the court. There was sufficient evidence of fraud in the factum to be submitted to the jury, but an examination of the charge of the court will disclose that this phase of the case was not presented to the jury. If there was fraud in the factum, the note and deed of trust never existed in contemplation of law, and the defendant bank could not recover. If, upon the other hand, there was fraud in the treaty, and the bank was an innocent holder, as defined by law, it could recover the amounts properly disbursed by it. Under these circumstances it was the duty of the trial judge to draw the distinction between the two principles and to declare and explain the law arising on the evidence as required by C. S., 564. In Nichols v. Fibre Co., 190 N. C., 1, Connor, J., says: “A failure to comply with the statute must be held as error. The error was not waived in this case by failure of the defendant to request special instructions.” *804 Tbe record in tbis ease now before ns discloses tbe identical situation tbat existed in tbe case of Furst v. Merritt, supra. In tbat case, tbe plaintiff was a third party, claiming to be an innocent bolder of tbe instrument in controversy. There was evidence tending to establish fraud in tbe factum and fraud in tbe treaty. Stacy, C. J., speaking for tbe Court, said: “Tbe charge of tbe court, as sent up, is defective in tbat it fails to draw tbe distinction between tbe two pleas, and thus falls short of a declaration and explanation of tbe law arising on tbe evidence.” In tbis case all parties are entitled to have all issues of fact and tbe law arising thereon clearly and definitely presented to tbe jury. Tbe record does not disclose that tbis was done and a new trial is awarded. New trial.