McSparran v. Neeley

Mr. Justice Woodward delivered the opinion of the court, As between the maker and the payee of the note in controversy, it is not to be doubted that the facts found by the referee would have been amply sufficient to sustain the defence to the plaintiff’s claim. Williamson, the maker, at the time when the note was signed, was in a state of extreme physical and mental weakness, brought on by habits of intemperance. His sight had become — 23 — impaired and his body had been partially paralyzed. The note was written by J. L. Lawrence, in whose favor it was made, and purported on its face to be for the sum of $737.37. The amount really due from Williamson was $37.37. After the note was written, he asked that it should be read to him, as he was not able to read it himself. Lawrence read it as purporting to be a promise to pay $37.37, the sum for which it was intended to be given. Williamson signed it, in his own phrase, “ mechanically.” He was under the influence of liquor, at the time. Robert Torbert, who was present, testified, according to the printed notes of evidence, that he “was partly drunk.” The statement as quoted in the report was, that he “was pretty drunk.” Testimony was given before the referee, tending to show that Neeley, the plaintiff below, had knowledge of the fraudulent character of the note before he bought it. Asa Jones swore that Neeley and Lawrence, about the year 1872, pressed him to buy a note for what he regarded as a large amount, although he could not recollect what the amount was. He said he “ would call five or six hundred dollars a good deal under the circumstances,” but whether the note equalled or exceeded that sum he could not state. The witness could not recall the maker’s name. There was testimony also that Neeley, about the time of Williamson’s death, had a conversation in relation to this note, with L. W. Finley, in which Neeley said, that in case he collected it, there might be something in it for Finley, who was a creditor of Williamson. Although it was drawn and signed on the 24th of January 1872, the date as written was the 24th of January 1871. It was left unstamped when made, and it was not until the 9th of November 1872, that the proper stamps were affixed, at the request of Neeley, by whom the statutory penalty was paid. Under these general features of the cause, the ground was taken, on behalf- of the' defendant in the argument here, in the first instance, that the referee erred in finding that the fact of knowledge by the plaintiff, of the fraud perpetrated by Lawrence, had not been established. The defendant’s counsel insisted also, that it was the duty of the referee to find that Williamson had been in a condition of such utter imbecility, superinduced by gross and long-continued intemperance, as, under the rule adopted in Sentance v. Pool, 3 C. & P. 1, to avoid, even in the hands of an innocent endorsee, “ the note which he had been induced to sign by fraud and imposition.” And it was further urged that in the circumstances of the case — in the mistake in the date, making the note apparently overdue, and in the absence of a stamp — there was enough to put the plaintiff upon an inquiry, which would have disclosed to him the true nature of the transaction; and that, failing to inquire, he was chargeable with all the consequences of actual and complete knowledge. — 24 — But with all the evidence before him, the referee reported that the plaintiff obtained the note for a valuable consideration, bona fide, and without notice that any fraud or imposition had been practised upon the maker. This question was one of fact, and whatever opinion this court might form upon the evidence, if they were required to pass upon it, in the first instance, it is clear that no such palpable mistake .has been made as to justify them in overruling the decision of the referee. His report, under the express terms of the Act of the 9th of April 1868, had “the effect of the verdict of a jury,” and could be set aside only for eauses that would require the setting aside of such a verdict. Did the facts reported establish such a condition of mental imbecility so complete, as to avoid this note in the hands of an innocent endorsee? The finding was in the following words: “John G. Williamson, before he acquired habits of intemperance, was a man of intelligence and vigorous intellect. During the latter period of his life, his vision became, by reason of gross intemperance, impaired, his body, partially paralyzed, and his mental powers, weakened. ■ When, however, he was sober, he was capable of transacting his business affairs in a proper manner, until within a short time previous to his decease.” The testimony of Torbert was recited as explanatory of the circumstances under which the note was signed. The witness had said: “ On the morning of January 24th 1872, J. L. Lawrence came to the house of John G. Williamson, and had with him a number of gallons of liquor. Williamson was sober early in the morning when Lawrence was there. Williamson, Lawrence and another drank together. Williamson was pretty [partly] drunk. Lawrence wanted his note. _ Williamson said he could not see to write. Lawrence drew the note himself. Williamson said he would sign it mechanically. It was read by Mr. Lawrence. 1% called for thirty-seven dollars and some odd cents. Williamson asked me to hear it read. By the time Lawrence went away, Williamson was very tight — drunker than he was before.” The evidence certainly did not make out the existence of insanity or a state of absolute incapacity. Nor did it make out a case beyond the operation of the rule by which The State Bank v. McCoy, 19 P. F. Smith 204, was decided. There, fraud on the part of the payee of a note was set up by the maker, in a suit by the endorsee, and it was alleged, that when he signed the note, the defendant was so intoxicated as to be unconscious of the act. In delivering the opinion of the court, Judge Williams said: “If a man voluntarily deprives himself of the use of his reason by strong drink, why should he not be responsible to an innocent party for the acts which he performs when in that condition? It seems to me that he ought, on the principle, that where a loss must be borne by one ■of two innocent persons, it shall be borne by him who has occa — 25 — sioned it. * * * But there is another and controlling reason for holding the maker liable to the endorsee in such case, founded on principles of public policy and the necessities of commerce. The exigencies of trade require that there should be no unnecessary impediments to the ready circulation and currency of negotiable paper, but that it should be left free to pass from hand to hand like bank notes, and perform the functions of money, untrammelled by any equities or defences between the original parties. If, then, it should be held that the drunkenness of the maker avoids the note in the hands of the endorsee, it is obvious that such a rule would greatly clo¿ and embarrass the circulation of commercial paper, for no man could safely take it without ascertaining the condition of the maker or drawer when it was given, although there might be nothing suspicious in its appearance or unusual in .the character of the signature.” Nothing need be added to these well-considered views. Upon the broad question of the effect of Lawrence’s fraud on the note in the hands of the endorsee, the authorities collected and the principles stated in Phelan v. Moss, 17 P. F. Smith 59, are conclusive. That case expressly recognised the ruling in Miller v. Race, 1 Burr. 452, that bank notes, though stolen, become the property of the person to whom they are delivered bona fide and without knowledge of the larceny, and the ruling in Lawson v. Weston, 4 Esp. 56, that if a bill has been lost, and the loser has advertised it in the newspapers, and it is discounted for the person who found i-t, and so came fraudulently by it, this entitles the person discounting it to recover the amount, if done bona fide and without notice of the way in which the holder became possessed of it. The defendant relied on the authority of Green v. North Buffalo Township, 6 P. F. Smith 110, and Schuylkill County v. Copley, 17 Id. 386. Both cases were actions on specialties, and both between the parties to the instruments. And in both it was held that where a .misrepresentation of the contents of a specialty is made to an illiterate person who executes it, it is not his deed, and he may avoid it. In Unger v. Boas, 1 Harris 601, the action was on a note for a gambling debt; and in Bowman v. The Cecil Bank, 3 Grant 33, the bill sued upon had been discounted by the agents of a bank in Maryland, doing business outside this state. In each instance, the contract was in defiance of a prohibitory statute, and each was ruled in accordance with the principle recognised in Peacock v. Rhodes, Doug. 636, excepting such a case from the operation of the law relating to negotiable securities. None of these precedents, in circumstances or in principles, are applicable in this inquiry. In Worrall v. Gheen, 3 Wright 388, the holder sued the accommodation endorser of a forged note. It had been drawn for $50, and after endorsement by the defendant, the maker had so altered it as to make it read as if drawn for $150. To the — 26 — extent of the sum covered by the forgery, the defence was sustained. But here the instrument itself was not tampered with. It passed to the plaintiff in the precise form in which it left the maker’s hands. Phelan v. Moss has been uniformly followed, since it was decided. In Garrard v. Haddan, 17 P. F. Smith 82, it was held that if one by his acts, silence or negligence, misleads another, or effects a transaction whereby an innocent party suffers, the blamable party must bear the loss ; and it was said in Zimmerman v. Rote, 25 P. F. Smith 188, that the maker of a note must guard the public against frauds and alterations by refusing to sign negotiable paper in such form as to admit of fraudulent practices with ease and without ready detection. The wrong done to Mr. Williamson was flagrant, but the plaintiff is not therefore to be denied the rights of an innocent holder of commercial paper to which he is entitled under a long-established and firmly-settled legal system. As a final ground of defence, the irregularities appearing on the face of the note have been urged as sufficient to defeat the plaintiff’s claim. By mistake it was ante-dated, and it was not stamped until after it was negotiated. It was conceded that the validity of an instrument is not affected by an error in the date, even if it is not dated at all; the time will be computed from the day when it was issued or made, or, if thr' ‘ 1— ' ' 1 Promissory Notes, sect. 45. No dated. In both cases they will be valid in point of law, unless some statute exists to the contrary; and where the purposes of justice require it, the real date may be inquired into, and’.effect given to the instrument: Id. sect. 48. But while this has been conceded, it has been argued that the error should have created suspicion and led to inquiry. In Beltzhoover v. Blackstock, 3 Watts 20, Judge Sergeant concurred in the position taken in Gill v. Cubit, 3 B. & C. 466, that if an endorsee takes a note heedlessly, and under circumstances which ought to have excited the^suspicions of a prudent and careful man, the maker or endorser may be let into a defence.. In Phelan v. Moss, however, it was expressly declared that Gill v. Cubit was not law in Pennsylvania, and it was decided that the existence of suspicious circumstances alone will not defeat an endorser’s right to recover, but that in order to defeat his title mala fides on his part must be proved. So in The State Bank v. McCoy, supra, Judge Williams held, that even “ if the evidence had made out a case of gross carelessness on the part of the bank that alone would not have been sufficient to defeat, his title to the note. There must have been proof that the bank took it maid fide or with notice of the fraud.” And it was said in Moorehead v. Gilmore, 27 P. F. Smith 118, that “the latest decisions, both in England and this country, have set strongly in favor of the principle that nothing but clear evidence of knowledge or notice, from the day when its existence — 27 — fraud or malafdes can impeach the prima facie title of the holder of negotiable paper taken before maturity.” The facts found here show neither knowledge by the endorsee, notice to him, nor fraud or bad faith on his part, and the apparent defects in the note cannot stand in the place of requisite affirmative proof Judgment affirmed.