Ormsbee v. Howe

[186] The opinion of the court was delivered by Veazey J. The plaintiff, an attorney, brought these suits in his own name in behalf of one Healey, who purchased the notes before due of one Preston, the payee. Preston by fraud obtained orders of the defendants respectively for a lot of wire clothes line, and after filling the orders according to their terms, demanded through an agent payment of the defendants. They at first ¿refused on account of the fraud, not knowing until the demand that they had signed such orders, and not in fact having signed them understandingly, and having been induced to sign them through fraud ; but the orders being produced and suits threatened, they gave the- notes in question. Where a claim is wholly without foundation and known by the parties to be such, a promise to pay it is without consideration. There is in such a case nothing to be settled, therefore the settlement is no consideration for the promise. See authorities cited in defendant’s brief. This case discloses a scheme to get this wire clothes line on to people in a fraudulent way. It was first to get an order from a man by the use of all the fraud necessary for that purpose, and then by confronting him with the order, and by threats of suit get a settlement. The scheme as originally concocted, extended through to the obtaining of the note. The order being obtained by fraud, no debt was created. There was nothing to found a settlement or compromise upon. Preston had no right to fill the order by forwarding the goods, and his doing so did not change or affect the transaction. That was a part of the scheme. The scheme was to bring about a disposition of his goods in the form of a sale by the use of fraud. The iniquity of the conception is carried out in the execution without discovery by the other party until the demand for settlement. The fact that the defendant yields to the demand and threats, and promises to pay, or gives a note with knowledge of the fraud, cannot help the promissee, because the note is but the fruit, the outgrowth of Preston’s original fraudulent conception and act. His soiled hands have not thereby become clean. The compromise of a doubtful right is a sufficient consideration for a promise, and it does not matter on whose side the right ultimately turns out to be. But where the promise is ex [187] torted hy threats to sue on a claim which the party knew was wholly unfounded and which he was making for the purpose of extorting money, the contract is utterly void. McKinley v. Watkins, 13 Illinois, 140, and the other cases cited by defendants. We think the case discloses that Healey understood Preston’s methods; that he knew that Preston deliberately proposed to practice fraud, if necessary, to get rid of his wares through the forms of sale, and that he became a general purchaser of his notes, knowing his fraudulent purpose and the likelihood that such pur.' pose would often have to be carried out in "order to get the notes. He was not only put upon inquiry, but we think upon the facts found that he bought the notes in bad faith. He was not an innocent purchaser under the rule as contended for by the plaintiff. Justice SwAYNEsays in Murray v. Lardner, 2 Wal. 121: “The rule perhaps may be said to resolve itself into a question of honesty or dishonesty, for guilty knowledge and wilful ignorance alike involve the result of bad faith.” To buy notes generally that Healey knew would to some extent be likely to be infected with fraud, was not an honest act. He practically lent himself for a profit to Preston to enable him to carry out his fraudulent purpose. The judgment of the County Court in both cases is reversed, and judgment is rendered for the defendants respectively to recover their costs.