Frevall v. Fitch

The opinion of the Court was delivered by Gibson, C. J. It is clear that recourse to the defendant, cannot be had on his endorsement. Bearing the corporate seal of the bank on its face, though framed in other respects as a promissory note, the instrument is a specialty; and no obligation arose from the endorsement of it either by the statute or the custom of merchants. But under the circumstances of the transfer, may not the money paid for it be recovered back on the money counts'! The defendant must abide by the representation of the broker who represented him. The note, as it is called, with the defendant’s endorsement of it, was handed by him to his partner to raise money on it on the best terms that could be had; and there was consequently no limitation of his authority. The partner put it into the hands of his broker, without instructing him that there was to be no recourse to the defendant, and without restriction as to conditions. Thus the broker became the defendant’s general agent to dispose of the particular security; and nothing is better established than that, even in the absence of express restriction, the defendant would have been bound by an express guaranty, had the broker entered into one. In Fenn v. Harrison, (4 Term Reports, 177,) it was settled that the guarantee of an agent employed by endorsees of a bill to get it discounted, binds the employers to refund in case it be dishon-oured. But there was no formal guaranty; and as the law of warranty arising on a sale of chattels, is inapplicable to the transfer of a chose in action, the case could not be brought within the principle of those modern decisions, even did we approve of them, which have, in England and some of the American states, turned every representation into a warranty, in derogation of the actual meaning and intent. Still if this note was purchased under an erroneous impression received from even an innocent misrepresentation of the seller, it will not be said that the bargain may not be treated as a nullity, and the price be recovered back as so much paid without consideration, and consequently to the plaintiff’s use. It is an elementary principle that an agreement founded in a false conception, is a nullity in respect to the party who misconceived, because he assented to it, not absolutely, but on a condition not verified by the event. 2 Powell on Contracts, 196. What are the facts here"? Mr. Curcier, the plaintiff’s agent for investment, tells a broker of whom he is inquiring for an eligible fund, that the rate of interest is a secondary consideration but that the' security must, in his own phrase, be first chop; on which the broker produces the note in [332] question, and points to the name of his principal as a guaranty. The next day he repeats what he had said, and adds an assurance of the defendant’s sufficiency. Now it is fallacious to say that any part of this was not within the scope of his authority. If the defendant did not intend that the note should be negociated on the responsibility of his name, why did he endorse it 1 To hold out his endorsement as a bait, knowing the paper not to be negociable, would be to meditate a fraud which would make short work with any bargain made on the faith of it; and the most favourable construction that can be made of his conduct, is to assume that he actually intended to incur the responsibility of an endorser. The presumption is that every man who puts his name on paper thrown upon the market, does so to add to its credit; and the defendant either meant to sell on the faith of his endorsement, or he intended to commit a fraud. It is not to be doubted, then, that in the apprehension of the plaintiff’s agent, the bargain rested on an assumption of the defendant’s responsibility; and, that the endorsement failing, the bargain goes with it. It is insisted, however, that a bargain can be set aside only for a misconception of fact, and not of law with which every one is bound to be acquainted. That position is disproved by Lansdown v. Lansdown, (Mosely, 364,) in which a deed exec.uted on the mistaken advice of a school master in regard toa point of law, was set aside and the party ordered to convey. This principle is not peculiar to equity; for being of the essence of every contract, it is equally enforced at law whenever the Court can look at the consideration, and when a chancellor has not exclusive jurisdiction. How the cause may appear at a second trial, it is impossible to say; but as it appears in our paper book, it presents no obstacle to a recovery. It has been objected that the money was paid to the use of the partners for whom it was raised; but it was paid to the defendant’s agent in the first instance, and, by consequence, to the defendant himself, with whom alone the plaintiff stood in privity; and his subsequent advancement of it to the firm, cannot discharge his obligation to refund. The cause is therefore sent to another jury. Judgment reversed and a venire de nova awarded.