M. & J. Finance Corp. v. Rinehardt

Seawell, J. In this case the plaintiff made numerous objections and exceptions to the admission and exclusion of evidence, which we have carefully examined and are unable to sustain. The main contentions of the plaintiff relate to the instructions to the jury, the more serious of which contentions, as we gather from the oral •argument and the brief, are addressed to the instructions about “fraud in the treaty” and “fraud in the factum,” and the bearing of each, if found, upon the rights of parties. There can be no point in numbering these exceptions in this opinion, since they are not set out above in detail. ”W"e have given enough of the proceedings in the trial court, we think, to •make the application of our remarks reasonably plain. In the judge’s effort to enlighten the jury as to the effect of fraud upon the rights of the parties, it was proper for him to describe the character and effect of such fraud, if any, as might be disclosed by the ■evidence' — whether it tended to show a fraud practiced on the defendants in the terms of the agreement, or whether a fraud in the procurement of its execution, and we regard the instructions as addressed to this •difference. The distinction is still important in considering transactions under the Negotiable Instruments Law. “Fraud in the treaty” concerns the terms of the instrument itself and mot merely the act or fact of its execution and the procurement thereof. [385] Recovery may be bad by an innocent bolder of a negotiable instrument without notice, notwithstanding the fraud. Finance Co. v. Mills, 195 N. C., 337, 338, 142 S. E., 26; Medlin v. Buford, 115 N. C., 260, 20 S. E., 463. “Fraud in the facium” concerns the making or the execution of the instrument. The following from Furst v. Merritt, 190 N. C., 397, 401, 130 S. E., 40, is apposite to the facts of this case: “As a general rule, it may be said that fraud in the factum, arises from a want of identity or disparity between the instrument executed and the one intended to be executed, or from circumstances which go to the question as to whether the instrument, in fact, ever had any legal existence, as, for example, where a grantor intends to execute a certain deed, and another is surreptitiously substituted in the place of it (Nicholls v. Holmes, 46 N. C., 360), or where a blind or illiterate person executes a deed when it has been read falsely to him on his request to have it read (2 Blk. Com., 304; Manser’s Case, 2 Coke’s Rep., 3), or where some trick, artifice or imposition, other than false representation as to the meaning and content of the instrument itself, is practiced on the maker in effecting the execution of the instrument.” See list of supporting authorities following this excerpt in the cited case; see, also, Finance Co. v. Mills, supra. Upon the principle fraus vitiat omnia such a fraud, if found, would make the notes and contracts void in the hands of any holder, since they were void from the beginning, and would make a good defense in the present action. The evidence, as we analyze it, tended to show “fraud in the factum,” rather than “fraud in the treaty,” and the court was justified in instructing the jury to give their consideration to the latter. The court is certainly not required to submit an alternative issue in order to give the jury the opportunity to label the fraud, or choose between the two; and the plaintiff was not harmed by the refusal of the judge to submit the issue of fraud in the treaty, notwithstanding his extensive reference thereto, since if it were found, either way — “yes” or “no” — non constat, that there was not also fraud in the factum, and nothing further appearing, the rights of the parties would have remained undetermined. Upon these considerations, we find No error.