Robenson v. Vason

Warner, C. J. The error assigned to the judgment of the Court below in this cause, is the dissolution of the injunction. As the bill is retained for a hearing upon its merits between the original parties, we shall express no opinion upon the facts involved in it, except so far as the same may relate to the order dissolving the injunction. The injunction was granted to restrain the sale of the mortgaged property under a power contained in the mortgage. The main question in the cause which was made on the argument before this Court, is whether Ross & Son were bona fide holders of the notes and mortgage under the provisions of the Revised Code, and entitled to be protected. It is insisted that the notes and mortgage were procured by fraud, as between Vason and Robenson, and that being so, although Ross & Son may have become' the holders thereof before due, for a valuable consideration,' [79] and without notice of any fraud in the procurement of the same, as between the original parties to the transaction, — yet under the peculiar language of the Code, they cannot be protected as bona fide holders thereof for value. The 2743d section of the Revised Code declares that “ The bona fide holder for value of a bill, draft or promissory note, or other negotiable instrument, who receives the same before it is due and without notice of any defect or defence, shall be protected from any defenses set up by the maker, acceptor or endorser, except the following: 1st, Non est factum ; 2d, Gambling, or immoral and illegal consideration; 3d, Fraud in its procure-m'ent.” The 2745th section of the Revised Code further declares that “ The holder of a note is presumed to be such bona fide and for value; if either fact is negatived by proof, the defendants are let in to all their defenses; such presumption is negatived by proof of any fraud in the procurement of the note.” It is insisted that the words “ fraud in the procurement of the - note,” should be interpreted to mean fraud in the procurement of the note as between the original parties to the transaction; that if the note is fraudulently procured by the original payee from the maker, no one can be a bona fide holder thereof, with or without notice of the fraud. To give to the Code this interpretation, the effect would be greatly to impair if not to destroy the negotiability of commercial paper. We can hardly suppose that the legislature intended to do that. Construing the Code in the light of the common-law, with a view to its practical effect, we hold that fraud in the procurement of the note, as used in the Code, means fraud in the procurement of the note by the holder thereof, and not fraud in the procurement of the note as between the original parties, of which the holder for value had no notice. This construction makes a party responsible for his own fraudulent conduet, and does not make an innocent party responsible for the fraudulent conduct of others, of which he had no knowledge. This question, however, is not entirely free of difficulty, but in our judgment, the construction which we have given to the Code, is the best and safest, in & practical point of view. As a general proposition, [80] the power to mortgage would seem to include in it a power to authorize the mortgagee to sell, on default of payment, — Wilson vs. Troup, 7th John. Chan. Rep., 32. In this case, there is an express power given by the mortgagor to the mortgagee or his assignee, to sell the mortgaged property in default of payment, upon giving thirty days notice. In our judgment, Ross & Son being the innocent holders of the notes and mortgage for value before due, they are entitled to be protected as such, and that there is .no error in the judgment of the Court below in dissolving the injunction. Let the judgment of the Court below be affirmed.