Fort Dearborn National Bank v. Carter, Rice, & Co.

Field, J. It is clear that the first ruling made by the court is correct, and that the first and second rulings requested were [37] rightly refused. Arpin v. Owens, 140 Mass. 144. Neuertematte v. Morris, 101 N. Y. 63. When the draft with the defendant’s acceptance upon it was delivered by the defendant to the Freeman’s National Bank, which was the agent of the plaintiff, the contract of acceptance between the plaintiff and the defendant became complete, and the acceptance could not after that be revoked unless the defendant had the right to rescind the contract. The second ruling, therefore, is correct, and the fourth ruling requested was rightly refused, if these rulings relate to a revocation as distinguished from a rescission. The third ruling requested suggests that possibly the defendant’s counsel had it in mind to contend that the letter of the 17th of January from the Clark & Longley Company to the defendant corporation, upon which it relied in accepting the draft, contained a representation that the company was solvent; that this representation was false; and that therefore, when the defendant discovered that the representation was false, it had the right to rescind the contract of acceptance, unless the plaintiff had after the acceptance “ made an advance on the draft to the drawer.” Although the Clark & Longley Company suspended payment on the 21st of January, the exceptions do not state that the company was not solvent on the 17th of January, and it is doubtful if the letter can be construed as containing any positive representation of solvency, assuming that its contents are correctly stated in the bill of exceptions. This third request, moreover, does not distinctly assume that the defendant was deceived by any representations which the drawer made, and was thereby induced to accept the draft. We have some doubt whether the judge, who tried the case without a jury, understood that any question of law was raised concerning the right of the defendant to rescind the contract of acceptance on account of any fraudulent misrepresentations of the drawer of the draft; still we will consider the question. Whatever may be the distinction between such a case as the Merchants’ National Bank v. National Bank of the Commonwealth, 139 Mass. 513, and the case of Merchants’ Ins. Co. v. Abbott, 131 Mass. 397, it is manifest that the making of a contract, or the pavment of money under a mistake of fact, as these words [38] are used in the law, is not always followed by the same consequences as the making of a contract, or the payment of money, by reason of the fraudulent misrepresentations of a third person. Certainly the general rule is, that a contract made between two persons on a valuable consideration cannot be rescinded by one of the parties on the ground that a third person, at whose request the party entered into the contract, made fraudulent misrepresentations to him on which he relied, if this third person was not an agent of the other party, and the other party had no knowledge of the fraud. See Fairbanks v. Snow, 145 Mass. 153. The contract of acceptance was made by-the defendant with the plaintiff on what the law considers a valuable consideration ; namely, the consideration paid by the plaintiff to the Clark & Longley Company in anticipation of the acceptance. The Clark & Longley Company in inducing the defendant to accept the draft acted on its own account and for its own benefit, and the plaintiff is innocent of any knowledge of or participation in any fraud of that company. There are practical reasons of great weight why the rule we have stated should be applied to negotiable paper. Acceptors of bills of exchange should not be permitted to vary their liability from that which is apparent on the face of the bills, by setting up against bona fide holders for value, who took the bills before maturity, statements made by the drawers to the drawees whereby they were induced to accept the bills; and we have been unable to find that any distinction has been taken in this respect between holders of bills who took them before acceptance and those who took them afterwards. Exceptions overruled.