Roe v. Jerome

Williams, Ch. J. The first question arises on the motion of the defendant for a new trial, in which it is claimed, that by the laws of the state of New-York, this plaintiff cannot recover at all, having purchased the note with intent to sell it, contrary to the laws of that state. The plaintiff is an attorney and counsellor at law of the state of New-York; and by statute, the purchase of a note or bill, &c., by an attorney or counsellor, &c., with the intent and for the purpose of bringing a suit upon it, is prohibited ; and it is a misdemeanor, punishable by fine and imprisonment ; and he is to be removed from office in the several courts in — 149 — which he is licensed. Other sections of the statute provide as to the nature of the defence which may be given, and for calling upon the plaintiff to disclose upon oath ; and upon his refusal, that he shall be non-suited. It is admitted here, that the plaintiff purchased this bill with intent to put it in suit, in the state of Connecticut; but the plaintiff claims, that this does not bring it within the statute of New-York. The words of the act are very broad — broad enough, we think, to reach this case. The bill was bought with intent to sue it; but not with intent to sue it in that state, but in another. Is the case, then, within the spirit and meaning of the statute 1 To determine this, we must look at the object of the statute, and also at the means of enforcing it. It was intended to regulate the conduct of their attorneys, &c., licensed by their courts. The purchase of bills or notes is not of itself criminal or improper, according to the present course of business. But certain persons, from their situation or profession, may do this for such objects as to render it improper. Attorneys, justices of peace, constables, &c., may have inducements to such a course, not common to other persons. They, from their situation, are interested in litigation ; they derive, in a greater or less degree, their living from it; of course, they have an inducement to purchase notes and bills, which others have not, and thus to accumulate costs unnecessarily. The statute, therefore, makes it penal in them to do what it permits in others. It was evidently designed to meet the temptation which their profession held out to purchase chases in action, with the view to the costs of suit arising thereon. It was only because they acted in this capacity,_ therefore, that the prohibition mas made. Aside from the costs arising to them on the suit so commenced, there could be no more inducement for lawyers or officers to purchase such instruments, than any individuals in the community. But attorneys, or constables, or justices of New-York, are not attorneys, justices, or constables in another state or nation: of course, the only reason for the distinction ceases ; and as to such purchases, in other states or nations, they stand upon the same ground as other men. As an attorney has no inducement, from his profession, to — 150 — make purchases with a view to sue in other states, more than any other person, there seems then no reason why he should be deprived of the privilege of other citizens. And when the penalties affixed to this law are taken into consideration, we cannot believe, that it ought to be extended beyond its spirit. Again, the provisions of the statute all show, that the suit contemplated, was a suit in the state of New-York. The 75th section of the act allows the defendant to give notice of a defence, founded upon such purchase. The 76th section allows him to call upon the plaintiff, or his attorney, to testify in relation to such purchase. The 77th section authorizes the defendant to apply to a judge for an order on the plaintiff to attend the trial, that he may be examined as a witness. The 81st section directs, that if he refuse to answer, he be non-suited. These provisions can have no effect in other states, and were not so intended, but merely to regulate the business of their own courts, in relation to their own officers. These provisions were evidently intended to reach the cases provided for in the former section of the statute ; and we think it fair to infer, that they intended to reach all the cases of suits brought in contravention of the statute. It is said, this court is not called upon to execute the criminal laws of New-York, or the peculiar mode of carrying into effect this statute, but to regard the principles of the statute. We only look at these provisions of the act to aid us in determining the extent, and how it ought to be construed. It is also claimed, that the object of the statute, was, to preserve the purity of the bar, and that this will be effected in the same manner, whether the note or bill be bought with intent to sue it in that state or another. That this might be one object of the statute, is doubtless true. The great object, however, seems to us to have been, to protect the community from the expenses of litigation naturally following from the allowing such a practice. A similar provision is made to prevent a justice of peace or a constable from buying chases in action to sue before a justice. 2 Rev. Stat. 267, It seems as if it would not be claimed, that as this statute was intended to guard the purity of these officers, it could be extended to claims bought with no intent to sue in New-York, but in some other state. In both cases the acts are designed to regulate the conduct — 151 — of their own officers, as affecting their business as officers ; and of course, in those places, where they are officers, and act-in that capacity. It is evident, that the inducement of the attorney or constable to purchase a note or bill in another state, cannot differ greatly from the inducement of other citizens, and therefore there is little more danger, if any, to the public from such purchases, than when made by others. The constable is not constable over the line of the state, nor is the attorney an attorney, unless by courtesy. When they speak, therefore, of purchases by them, with intent to sue, we infer that they speak of them in relation to their official characters. Suppose the legislature of this state should prohibit the purchase of liquor to sell in small quantities upon the premises, (as we now have a law against selling,) could it be claimed that if one of our citizens should make such a purchase with a view to retail on his premises in New-York or Tecas, that such a purchase was within the law ? The case has been compared to that of forgery; and it is said, no matter where the person lived, whom it was designed to defraud, whether in the state where the forgery was committed, or in another state. There the act is malum in se, and the temptation as strong to defraud one out of the state as in. The offence is not founded upon an inducement arising from the particular profession or circumstances of the delinquent; and of course, reflects but little light upon the question here arising as to the intent of the legislature. The case cited from 1 Pick. 415. only proves, that champerty, being an offence at common law, is presumed to be an offence in another state. The court is of opinion, that the law of New-York contemplates only such practices as are intended to lay the foundation of suits in that state. Of course, the other questions which have been discussed in this part of the case, do not require examination by the court, whatever may be our opinion upon them. We think, for the reasons given, that the defendant is not entitled to a new trial. Upon the plaintiff’s motion for a new trial, it is claimed, 1. that the declarations of Merrills, the former holder of the bill, ought not to have been given in evidence. If the suit was in Platt’s favour, and he took the bill bona fide, in the course of business, the declaration of the former holder cannot be evi — 152 — dence against him ; for even payment to him could not affect -the rights of such a person, much less his assertions. Hedger v. Horton, 3 Car. & Pa. 179. (14 E. C. L. 261.) But if the bill was fraudulently obtained by the holder, or if he is identified in interest with the indorser, it may be otherwise. Were it so that the declaration of a prior holder, could be admitted to affect the bill in the hands of a Iona fide owner, who took it before it was due, it would destroy, or greatly impair, the currency of such bills. In this case, the claim was, that Merrills, now dead, had fraudulently obtained this acceptance ; and that Platt knew of it, or took it under such suspicious circumstances, as should have led him to enquiry ; and that the plaintiff, having taken it after due, was in no better situation than Platt himself would have been. If this claim was supported, Platt ought to stand upon no higher ground than Merrills himself would have stood ; and by receiving the bill under such circumstances, it would seem as if he bdfcame identified with Merrills in the fraud. The objection to this evidence was, not that it was inadmissible on account of the source from which it was derived, but because Platt had no knowledge of such declaration. Whether he had knowledge of the declaration or not, was of very little consequence, if he had knowledge of the fraud. The objection, however, it is supposed, was intended to be placed upon the ground that Platt had no knowledge of the fraud. If so, the reason given by the court, that it was not to affect the plaintiffs, unless it was proved that Platt had knowledge of the fraud when he purchased the bill, is satisfactory. There is a case in the recent decisions of the courts of Great Britain, where an offer was made to prove a fraud in the holder of a note, in putting it off to a bona fide purchaser, when given him to get discounted, by the letters of such original owner ; and it was holden, that in the absence of any evidence directly or indirectly connecting the plaintiff with such holder, who was then alive, those letters were not evidence. In that case, the court, in answer to the claim that the letters would have shown fraud, and brought the plaintiffs into privity with the writer, say, that whatever is a preliminary necessary to the admissibility of evidence, must be proved — 153 — aliunde, before such evidence is admissible. Phillips v. Cole, 10 Ad. & El. 106. (37 E. C. L. 62.) As the objection here was not placed upon that ground, and as the jury were informed, that these declarations were not to affect the plaintiff, unless it was shown that Platt had .knowledge of the fraud when he purchased the bill, we see no reason to grant a new trial on this ground. 2. As to the charge in relation to the certificate given by the defendant. That certificate is a declaration to the world, that any notes offered by the bearer for discount, signed by him, said Jerome, and payable to the order of Merrills_ dated March 1st, 1844, are good business notes. This writing is applicable to notes only, but it is agreed, that there were similar declarations, applicable to bills, so that the question fairly arises, what is to be the effect of such declarations or certificates. And the rule of law founded upon the soundest principles of morality, is, that where one, by his words or conduct, causes another to believe in the existence of a certain state of things, and thus induces him to act on that belief, so as injuriously to affect his previous position, he is concluded from averring a different state of things, as existing at the time. Packard v. Sears, 6 Ad. & El. 477. (33 E. C. L. 155.) And even if a party negligently and silently stands by, and allows another to contract on the faith and understanding of a fact, which he can contradict, he cannot afterwards contradict that fact as against that person who may be injured thereby. Gray v. Wells, 10 Ad. & El. 90. (37 E. C. L. 54. 58.) Watson, ex’r. v. McLaren, 19 Wend. 563. Dazell v. Odell, 3 Hill, 215. Reynolds v. Lounsbury, 6 Hill, 536. Sanderson v. Collman, 4 Man. & Gran. 209. (43 E. C. L. 115.) Welland Canal Company v-. Hathaway, 8 Wend. 483. Bushnell v. Church, 15 Conn. R. 419. Brown v. Wheeler, 17 Conn. R. 346. The same doctrine was in effect advanced, by this court, in the case of Starr v. Knox, where it is said, no principle is more fully established, or more equitable, than that a man should be responsible according to the character he holds out to the world. 2 Conn. R. 223. And whether this is a technical estoppel, or whether it is in nature of an estoppel, is of little importance. It would be gross injustice to permit an individual thus to trifle with his own assertions, to the ruin or the injury of another. This general prin154 ciple was not denied, by the counsel for the defendant, and -was asserted in the charge. And the consequence must be, that as Jerome had asserted, that this was good business paper; he could not now be permitted to deny it, as against a person who had received it upon the credit of such assertion. It was however claimed, in the present case, that another fact was proved, which delivered this from the foregoing general principle, viz., that Jerome had been induced, by the fraud of Merrills, to give this certificate, and therefore that it ought not to bind him ; and with this qualification the case was put to the jury. That fraud will vitiate a contract, is certainly true, in many cases ; but yet it is not every fraud, which will, as between the parties, vitiate every contract ; much less is it every fraud which will vitiate every contract, where third persons are concerned, so as to affect such third persons ; and least of all, where such a fraud is to affect the bona fide holders of negotiable paper. The defendant, in this case, does not deny, that he executed the certificates, with a full knowledge of their contents ; nor that he executed them with an intention to give greater currency to the bills and notes referred to. He says, however, that his only object was, to prevent the operation of the statute of usury upon this paper. But unless that object was made known, by the paper itself, third persons surely cpuld not be affected, by the secret object of the maker : they would look only at the bill itself, and the certificate accompanying it, to regulate their conduct. As to the fraud in this case, how should it affect these parties? It is not denied, that the plaintiff has the rights, and stands in the situation of Platt; and Platt received the bill before it was due, with the declaration of the drawer, that it was a good business transaction. This was his inducement to take it. But now the drawer comes in to say to Platt, this fact is not so — it was not, as I declared, a good business transaction ; but I was induced to say this, by the fraud of Mer-rills : and he claims, as a consequence, that Platt, or his as-signee, shall suffer the loss occasioned by Merrills' misconduct, rather than himself. In the support of this position, an expression falling from one of the court, in the case of Dazell v. Odell, 3 Hill 219. is cited, where it is said, in reference to — 155 — an estoppel in pais, that if the defendant was drawn into the admission by fraud, or perhaps by gross mistake of fact, he may avail himself of it in his defence. But the judge did not define the nature of that fraud, which will afford him a de-fence. We are then left to consider whether the facts here claimed, if true, constitute a fraud, which will avail this defendant against the holder of this bill. They are, that Merrills had received the notes and bill, as advances to raise money on, to purchase wool, upon his agreement, before they fell due, to save Jerome harmless therefrom, and had further given him the guaranty of Martin <§• Co. for his performance; that at the time, Merrills and Martin Co. were all bankrupts, which was unknown to the defendant; that in fact, Merrills had no design to purchase wool, but his object was to defraud the defendant; that the notes and bills were thus procured from him ; and that the certificates were a part of the original fraud, drawn from the defendant upon the fraudulent representation that such evidence was necessary to enable Merrills to negotiate said bills and notes, without danger from the usury laws. For the purposes of this case, we are to consider these facts as true; and they show, that the defendant has been drawn into this situation, by the most gross fraud and misrepresentations. The question then arises, who is to suffer from these representations — the man who gave credit to them upon his knowledge of the character of the men who made them, or the person who never knew or heard of that man, but relied upon the word and character of the defendant himself? If the defendant is right in his statement, he has, by the artifice of a swindler, been drawn in to give his name to a falsehood, by which an innocent man has been led to do what, without it, he never would have done. The defendant has told the world, that these notes and bills were actually good business paper, on the strength of which the plaintiff claims to have received it; and now he wishes to deny it, because he was cheated into it — he gave credit to the story of another man. Whether the man who thus deceived him, was worthy of any credit or not — whether he was a man of such character that a cautious man would have listened to his declarations or not, we are not informed ; but we are required to transfer the consequences of one person’s credulity to another person, — 156 — who has put confidence in him, and not in Merrills. We can see no justice in this. Had Jerome put upon paper, what he would have the court in effect now attach to it, what credit would it have gained ? Suppose he had said, this is good business paper, if Franklin Merrills makes good his promises to me, or has not deceived me; it would then have led to enquiry as to Merrills and his character ; and the purchaser would have known what he was purchasing — that he was taking it on the credit of Merrills, not of Jerome. Now, he takes it on the credit of Jerome's name ; and it is attempted to turn him over to Merrills. The whole object of this certificate was, to give a currency to this paper, greater than the paper itself would command ; and that object would have been entirely defeated, had the certificate stated the facts, which it is now claimed ought legally to affect it; and now, when the certificate has had the effect it was intended to produce, to the injury of a third person, the defendant claims that this person ought to suffer, rather than himself, because he was deceived. We see nothing more in the transaction between Merrills and the defendant, than what occurs every day, in relation to negotiable paper. A draft is presented for acceptance ; it is accepted ; it proves to have been a forgery. The acceptor was imposed upon most grossly ; but still he must bear the loss, rather than an innocent holder. A clerk is sent with a note to the bank, to get it discounted for his employer, but he sells it, and keeps the money ; or the maker of an accommodation note, makes a new note, and procures his indorser to indorse it, to take up the former, and instead of doing so, sells it in market. These are cases of gross imposition ; but no one can suppose they would constitute a defence against a suit by a bona fide holder, A case occurred similar in principle to tins. A merchant, going abroad, left blank indorsements with his clerk, to renew outstanding notes. One of the promisers of the notes called upon the clerk, procured one of the blanks, and then, under pretence of some mistake, procured another blank, pretending to burn the first; and by like artifices, procured a third and a fourth, one of which was in suit in the hands of a bona fide purchaser. Parsons, Ch. J., in giving the opinion of the court, says — “ The counsel for the defendants agree, that generally — 157 — an indorsement obtained by fraud, shall hold the indorsers according to the terms oí it; but they make a distinction between the cases, where the indorser, through fraudulent pretences, has been induced to indorse the note he is called on to pay, and where he never intended to indorse a note of that description, but a different note, and for a different purpose. Perhaps there may he cases in which this distinction ought to prevail ; as if a blind man had a note falsely and fraudulently read to him, and he indorsed it, supposing it to be the note read to him. But we are satisfied, that an indorser cannot avail himself of this distinction, but in cases where he is not chargeable with any laches or neglect, or misplaced confidence in others. Putnam v. Sullivan, 4 Mass. R. 45-54. If a lost or stolen bill of exchange is available in the hands of an innocent indorsee ; if the law be so, that a holder, coming fairly by a bill or note, has nothing to do with the transaction between the original parties, as has been long since settled; (Peacock v. Rhodes, Doug. 633.) we do not know upon what principle it can be said, that in a case of this kind, the holder of this paper can be answerable for the frauds practiced by Merrills upon the maker. Such a doctrine would greatly impede, if it did not destroy, the circulation of such notes or bills, and would reverse all the rules of law in relation to negotiable paper. The cases alluded to are cases where the person injured has done nothing, except to refuse confidence in another, who was unworthy of it; but here the defendant, (though probably without any intention to injure another,) has been led directly to affirm that which was not true in fact, “ that this was good business paper.” We will suppose he did this, with the most pure intentions, and was induced to do it, by the acts of a most designing villain ; who ought to suffer, if any one must suffer, the man who has lent his name and influence unwarily and incautiously, to such a swindler, or the person who has been drawn in, by his means ? If you say the latter, we suffer the former, who has been the means of the misfortune, to load another with the burden of his imprudence or credulity. We know no principle of law, which will justify this. On the contrary, the whole class of cases, where fraud is claimed to have been used in obtaining hegotiable paper, shows the party claiming to take advantage of it, must prove, that the holder — 158 — of the paper was privy to the fraud, or took it under suspi-cious circumstances. Peckham v. Potter, 1 Car. & P. 232. (11 E. C. L 377.) These principles were recognized, by this court, as well settled, in the case of Scribner v. Brush, 11 Conn. R. 390. and as the law of the land. Apply them to the present case. Jerome has had the misfortune to have confidence in a man who has deceived him. Trusting to him, he has been induced to declare, that certain paper with which he had entrusted him, was good business paper. Platt, believing Jerome, has taken it as such. Jerome cannot be permitted, at the expence of his own veracity, and to the damage of another, to say, it is not true. On this point, therefore, we cannot concur in the opinion given at the trial. 3. The next question is, in regard to the damages. And it cannot, we think, be doubted, (we believe it was not denied,) that the charge on this point was in conformity to the decisions in the state of Neio-York, where this transaction took place. The decisions so often made, and so recently recognized, in that state, we feel bound to regard as the law of that state. Stalker v. McDonald, 6 Hill 93. It certainly differs from what in this state has been supposed to be the common law. But we do not enquire upon what principle it is settled in the state of New-York. We only ask, what is the law of that state, and then whether it ought, upon principles of comity, to be applied in the case before us. The first question, we think, is to be by us considered as settled ; as we said in Scribner v. Brush, 11 Conn. R. 406. Then, are we to adopt it as applicable to this case 1 It is claimed, that it is contrary to the common law, and that in commercial cases we must follow that law, in preference to any deviation from it, by courts of a particular state. And in support of this, the opinion of the supreme court of the United States is adduced. It certainly is desirable, that in these states the commercial law should be the same; and perhaps it would be desirable, that the common law of all the states should be the same ; but this is rather to be desired than expected. The supreme court of the United Slates may, perhaps, do somewhat to effect it. But, we believe, that the comity hitherto practiced by the courts of the several states towards the decisions of each other, is the proper course for these tribunals to preserve. It has not been intentionally de — 159 — parted from, by this court. On the contrary, we have, in several instances, followed the decisions of the courts of other - states, in regard to contracts subject to their laws, where we should have come to a different conclusion. Van Buskirk v. The Hartford Fire Insurance Company, 14 Conn. R. 583. Brush v. Scribner, 11 Conn. R. 388. When the supreme court of the United States have decided a constitutional question, we feel bound to follow implicitly their decision. But when they have given an opinion upon a question of common law, the courts of the states claim a right to settle that law for themselves; and in this very case, or one nearly allied to it, that right is claimed, by the supreme court of New-York. 6 Hill 93. So long, therefore, as the courts of New-York insist upon it, that this is their law, we do not feel at liberty to deny it, although even the supreme court say, that such is not the common law. But it is also said, that this is not a question to be regulated by the laws of New-York, any more than the damages in an action of trover, in which case, though the property was converted in the state of New-York, we should not go there for the rule of damages. But it seems to the court, that the damages in this case, are part of the law of the contract itself. Were the question, what interest the plaintiff should recover, or what was the rule of damages on a protested bill, we should look to the state where the contract was made and to be performed. The Philadelphia Loan Company v. Towner & al. 13 Conn. R. 249. 257. And we do not see why that principle should not be applied to this case. The plaintiff, residing in New-York, purchased of a man in New-York this bill; and by the laws of that ¡state, under certain circumstances, he shall recover no more than he has paid for it. We do not see why that is not as much a part of the law of the contract, as the rate of interest in the other case. In each case, the law of the state has said how the violation of the contract shall be punished; in other words, what shall be a compensation to the party aggrieved ; and the party who buys a note or bill, is supposed to be as cognizant of the law, in the one case as the other. Had the rule been settled by statute, in the one case as in the other, it would seem to us there eopld be no possible difference in the cases; nor can we — 160 — see how the fact that the one is settled by the courts, can . . , .y , . change its enect or operation. In both cases, it seems to us, a part of the law of the contract; and if upon that contract plaintiff could, in his own state, recover only what he paid, we do not think he ought to recover more, by coming into this state for his remedy. But as upon one point, we think the charge wrong, a new trial must be advised. In this opinion, Church, Stores and Hinman, Js. concurred.