Brown v. Feldwert

Mr. Ci-iief Justice Wolverton delivered the opinion. 1. There was an objection to the introduction of the note, in evidence because the words “at the rate of eight per cent per annum” appeared upon the face of it to have been erased, which being overruled, error is assigned. The execution of the note was admitted by the answer, defendants not having denied the — 366 — fact. Neither was there any controversy relative to the identity-of the instrument, nor as to its having been changed or mutilated. The fact, therefore, that-an erasure appeared, which did not vary or alter its tenor as set out in extenso in the complaint, could not serve to render it inadmissible in evidence. It was probably not necessary for the plaintiff to have introduced the note, its execution being confessed; but, being desirous of doing so, its admission was not vulnerable to objection on the ground assigned. There was no error, therefore, in the ruling of the court. The plaintiff having rested with the introduction of the note, the defendants offered evidence tending to establish their first defense, when they were met with the objection that it was not admissible because the answer stated no defense against recovery. This was coupled with another that defendants ought not to be permitted to prove such defenses until they had offered evidence tending to show that plaintiff was not an innocent 'holder for value and in due course. The objections were sustained, and defendants were not permitted to introduce any testimony whatever, and error is predicated upon the action of the court in that regard. The third separate defense was abandoned at the hearing. This leaves the first and second only to be considered. 2. The attempt of the defendants, it must be admitted, is not a good specimen of technical pleading. The purpose was, no doubt, to confess and avoid. It might be. inquired whether they have not confessed too much, so far as it relates to the first separate defense. They have confessed every allegation of the complaint by failure to deny anything. The defendants’ denial that they know that they were signing a promissory note raised no issue, because there was no allegation of that nature in the complaint. 3. But, conceding that defendants could regularly confess all in the manner they have, and yet avoid the action by their affirmative defenses, the very grave question remains whether they have stated facts that will constitute such a defense. The defense sought to be stated is that the note was procured by fraud; that is, that the defendants were induced to believe — 367 — through the deceitful and fraudulent statements of Dr. Meyers that they were signing an agreement to pay the money upon a consideration which never came to pass, and not a negotiable instrument, whereas in truth they signed the paper in question, and hence there could be no such a legal condition as a bona fide bolder of it. If we concede, as many of the cases seem to hold (a matter we do not now decide), that a' promissory note procured by fraud, the maker being misled into believing that he was signing a paper of an entirely different character, is itself a good defense against an indorser claiming to be an innocent purchaser for value, the answer falls short of stating such a defense, for it is essential that the note was so procured without the negligence of the maker. This much is established by the cases cited by appellants: Green v. Wilkie, 98 Iowa, 74 (66 N. W. 1046, 36 L. R. A. 434, 60 Am. St. Rep. 184); Shenandoah Nat. Bank v. Gravatte (Neb.), 95 N. W. 694; Keller v. Ruppold, 115 Wis. 636 (93 N. W. 364, 95 Am. St. Rep. 974); Frederick v. Clemens, 60 Mo. 313; De Camp v. Hamma, 29 Ohio St. 467. In Shirts v. Overjohn, 60 Mo. 305, it was held that “Where it appeared that the party sought to be charged intended to bind himself by some obligation in writing, and voluntarily signed his name to what he supposed to be the obligation he iu+ended to execute, having full and unrestricted means of ascertaining for himself the true character of such instrument before signing the same, but by his failure to inform himself of its contents, or by relying upon the representations of another as to the contents of the instrument presented for his signature, signed and delivered a negotiable note in lieu of the instrument intended to be signed, he cannot be heard to impeach its validity in the hands of a bona fide holder.” This case bears a marked analogy to the one at bar, and seems to state the consensus of judicial opinion upon the subject; the learned author of the note to Green v. Wilkie (36 L. R. A. 434), saying: “Most of the cases, however, hold that if a person who can read trusts to the representations of, or reading of the-paper by, a stranger, he will be guilty of negligence which will preclude his making the defense.” See, also, upon this subject, Mackey v. Peterson, 29 Minn. 298 (13 N. W. 132, 43 Am. Rep. 211); Ort v. Fowler, 31 Kan, 478 — 368 — (2 Pac. 580, 47 Am. Rep. 501); Keller v. Schmidt, 104 Wis. 596 (80 N. W. 935). The defendants have wholly failed to negative negligence on their part. The answer shows that Dr. Meyers conversed in their own language, was well dressed, and appeared to be a man of education and fair dealing, and therefore that they reposed confidence in him, and took for granted what he read to-them to be a true rendition of the instrument they were about to sign. It does not appear, however, but that they could read English, and could readily have informed themselves then and there of the. real contents of the paper; and, having not done so, they were negligent, and the defense of fraud cannot, therefore, avail them as against an innocent holder: Fisher v. Von Behren, 70 Ind. 19 (36 Am. Rep. 162). 4. The want of an allegation of the character indicated negativing negligence on the part of defendants was such an omission as was not cured by pleading over: Booth v. Moody, 30 Or. 222 (46 Pac. 884). The trial court’s refusal to admit the evidence under this answer was therefore not error. 5. The second defense of the failure of consideration could not, under any of the authorities, have been availed of as’ against an innocent purchaser., 6. Coupled with it is a denial that the plaintiff is an innocent purchaser for value. This is an attempt to deny what they have admitted to -be true by failure to traverse the allegation of the complaint that the payee “thereafter and before maturity duly indorsed, assigned, and delivered said promissory note to the plaintiff herein for value.” The matter was not in avoidance, but an attempt to deny by the separate, defense when the fact was admitted by a failure to traverse in the regular way. This raised no issue, because the fact intended to be controverted had already been admitted by the very plainest rule of pleading under the Code. It seems to be further insisted that, when any fraud or illegality is proven in connection with the utterance of a paper sufficient to render it futile between the parties, the proof; of that fact is sufficient to shift the burden of proof to the holder to show that he is an innocent purchaser for value in due course. We. have said: “If it be shown on the part of the maker that the note was made under duress, or that — 369 — it had its inception in fraud, -or if such facts be shown as will raise a strong suspicion of fraud, a further burden will thereby be cast upon the indorsee, to show under what circumstances and for what value ho became the holder; that is to say, he must then show that he acquired the paper bona fide, for value, in the usual course of business, before maturity, and under such circumstances as to create no presumption that he had knowledge of the facts which tend to impeach its validity”; Owens v. Snell, 29 Or. 483 (44 Pac. 827). See, also, Kenny v. Walker, 29 Or. 41 (44 Pac. 501). The negotiable, instruments act, adopted in 1899, prior to the execution of the note in question, would seem by its reading to require the purchaser to show affirmatively, among other things, that he had no notice of such or any other infirmities in the instrument at' the time he acquired it: B. & C. Comp. §§4446-4456 (Laws 1899, pp. 24-26, §§ 44-54). These matters, however, cannot help the defendants, for they have absolutely not denied ownership, or that it was indorsed for value before maturity, and have, failed to make- any issue or question whether the plaintiff’s purchase was with notice of the infirmities suggested. The complaint surely states a good cause of action, and, unless controverted, it stands as a prima facie case. In other words, the plaintiff, by no competent pleading on the part of the defendants, has been put to his additional proofs of having paid value in due. course] before maturity, and without notice of the infirmities. The fraud latterly spoken of must be distinguished from that which counsel claims for such as was attempted to be set up in the first separate answer; the purpose of the former being to show a state of facts that would exclude the possibility, in a legal sense, of an innocent holder of the paper, but all that is claimed for the fraud in the latter. sense is'that proof of it puts the plaintiff to the burden of showing good faith in his purchase and the want of notice of its infirmity. We say, as to this latter, the defendants’ pleadings do not present the issue they are insisting upon. 7. In this connection it is further claimed that the note on its face destroys its negotiability. The fact of its negotiability is, — 370 — however, conceded by admitting the execution, of the note in form as set out in the complaint. 8. Effort was made to introduce certain letters referred to in the record for the purpose of showing that the plaintiff was not the owner of the note in question. Here again plaintiffs ownership is admitted by failure to deny the allegation. that he acquired the same by indorsement and transfer to him by the payee. 9. Another error is assigned because the court refused leave to amend the answer by adding an allegation that plaintiff had notice of the defects set out in the first and second defenses. ’T'bis was a matter within the legal discretion of the trial court. The answer had twice, been amended, and it is not clear that the amendment requested would have helped the defendants; so that we cannot say that there was error in that particular. From these conclusions it is plain.that the court very properly directed a verdict for the plaintiff, and the judgment appealed from will therefore be affirmed. Affirmed.