Grooms v. Olliff & Co.

Lumpkin, Justice. Olliff & Co. brought suit in a justice’s court upon a promissory note signed by Grooms, indorsed by Outland, and payable to Donalson or bearer. The defendants pleaded that the note ivas procured by fraud, for that-it was given for the purchase of a mare sold to Grooms by one Warters, who represented that the animal was perfectly sound in every respect, when in point of fact she was, both before and at the tiriie of the purchase, 790 diseased and totally worthless, all of which was well known to Warters, who fraudulently made the representation above mentioned for the purpose of deceiving Grooms, and did thus deceive him into making and delivering the note to Nonalson. At the trial before a jury in the magistrate’s court, the plaintiffs moved to strike the plea on the ground that fraud in the procurement of a note, “ as specified in the code, meant fraud in the procurement by the holder thereof, and could not be set up against a bona fide purchaser, before due, without notice of the fraud.” The magistrate overruled this motion, and plaintiffs thereupon introduced the note and proved that they traded for it before maturity for value and without notice of any fraud or any failure of consideration. The magistrate then admitted evidence to sustain the plea, and the jury found for the defendants. The plaintiffs took the case by certiorari to the superior court, alleging that the magistrate erred in refusing to strike the plea, and in admitting evidence to support it. The judge of the superior court sustained the certiorari and gave final judgment for the plaintiffs. The defendants excepted and brought the case here for review. The judgment of the court below was right. The plea of the defendants was really a plea of failure of consideration. Although it, in substance, alleges that Warters fraudulently procured the defendant Grooms to sign the note by falsely representing that the mare was sound, when in fact she was not, in its essence it simply means that the note was given for a worthless animal, and therefore that there was a total failure of consideration. It very often happens that the eonsidertion of a promissory note totally fails because of fraud on the part of the person to whom, or at whose instance, the note is given; but the mere fact that a fraud is thus practiced does not change the real nature of the defence. 791 We are quite certain that the phrase “fraud in its procurement,” as used in section 2785 of the code, has no reference whatever to fraud in the contract out of which a negotiable security arises, or in the consideration for which it was given. This court, in Robenson v. Vason et al., 87 Ga. 66, construed the above cited section of the code, and held that fraud in the procurement of a note, as therein specified, meant fraud in the procurement 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 ruling was followed in Bealle v. The Southern Bank of Georgia, 57 Ga. 274; but on page 276, Judge Jackson said: “ We admit that such a construction does not appear to us at all clear, or even satisfactory ; and the whole subject needs legislation.” Counsel for the plaintiffs in error' sought to question the soundness of these cases. Whether sound or not is immaterial to the present controversy, they really being inapplicable to the question at issue. The fraud referred to in section 2785 of the code does not mean fraud practiced in inducing one to enter into a contract which results in the making and signing of a promissory note or other negotiable instrument, but fraud in obtaining possession of such a paper in the hands of another by procuring or inducing the latter, whether the maker or a third person, to part with it. Fraudulently inducing a person to sign his name to a paper and to willingly deliver it is quite a different thing from fraudulently obtaining from that person the possession of a paper already signed and in existence. If, for instance, one should make and execute a promissory note, intending not to deliver it except in a certain contingency, and another should fraudulently get possession of the note before the contingency arose, this would be a case of fraud in the procurement of the note. Another instance 792 would be where one, by falsely and fraudulently representing to a blind or illiterate person the contents of a writing, should induce that person to sign it, not knowing its contents and believing them to be different from what they really were. Again, if one, falsely pretending to be a collecting agent of a party whom he did not really represent, should induce a debtor of the latter to make and deliver to the pretended agent a check, promissory note or other negotiable instrument, payable to himself or his order, this would, perhaps, be another such instance. So, also, a thief who stole a promissory note, or a robber who took it by force from the possession of another, would be guilty of fraud in the procurement. Other illustrations to which the words “fraud in its procurement” would be applicable might be given, but the above will suffice. We feel very sure that the words were not intended to apply to cases of deceit, bad faith or false representations used and made for the purpose of inducing one to enter into a contract, and to make and deliver his promissory note knowingly and intentionally as an evidence of the same. It follows, we think, that fraud in these respects does not affect a bona fide holder for value who obtains a negotiable promissory note before its maturity without notice of any defect or defence. Such holder will be protected even though the note was entirely without consideration, and was given as a result of the basest fraud practiced upon the maker in inducing him to make the contract evidenced by the note. Judgment affirmed.