Strauss v. Hensey

Mr. Chief Justice Alvey delivered the opinion of the Court: It is doubtless the well settled doctrine that the transferrer by delivery merely of a bill or note is liable for failure of consideration, if it turn out that it was fictitious, or originally forged, or subsequently altered either in the signatures, or in the amount, so as to invalidate the instrument. If a party sells a bill or note, and it is not what upon its face it purports to be, and what he by implication affirms it to be, he is in justice, and by implied assumpsit, liable to the vendee for what he has received from him as the price of the bill or note, on the ground of failure of consideration. In such case, it may be said that the vendor or transferrer of the paper warrants its genuineness and validity; and receives the price for the transfer upon that condition. This is now clearly the settled doctrine upon this subject, both by English and American authorities. Gurney v. Womersley, 4 El. & B. 133 ; 1 Dan. Neg. Inst., sec. 731, and the cases there cited. In Story on Promissory Notes, sec. 118, the general principle is clearly stated, and amply supported by authority. The author says, that “ unless it be expressly otherwise agreed, the holder so transferring the note is not exempt from all obligations or responsibilities ; but he incurs some, although they are of a limited nature. In the first place, he warrants by implication, unless otherwise agreed, that he is a lawful holder, and has a just and valid title to the instrument, and a right to transfer it by delivery; for this is implied as an obligation of good faith. In the next place, he warrants, in the like manner, that the instrument is genuine and not forged or fictitious.” In editions of the work, published since the death of Judge Story, some editor has inserted in the text, in brackets, after the passage we have quoted, the qualification, “ unless where the note is sold, as other goods and effects, by delivery merely without indorsement, in which case it has been decided that the [293] law respecting the sale of goods is applicable, and that there is no implied warranty.” For this are cited the cases of Baxter v. Duren, 16 Shepley (Me.) 434, and Ellis v. Wild, 6 Mass. 321. The cases just mentioned have been virtually overruled by the courts in which they were decided. This is shown by the cases of Merriam v. Wolcott, 3 Allen, 258 ; and Hussery v. Sibley, 66 Me. 192. And the case of Fisher v. Fie-man, 12 Md. 497, cited by the appellant, being founded upon the decisions in the cases of Baxter v. Duren, and Ellis v. Wild, cannot be relied upon to support a principle opposed to the general doctrine we have stated. In the case of Otis v. Cullum, Receiver, 92 U. S. 447, in regard to the Topeka bonds declared invalid by the Supreme Court of the United States in Loan Association v. Topeka, 20 Wall. 655, it was held that, by a general transfer of the bonds bo?ia fide, there was no implied warranty. “ The seller,” said the Supreme Court, “ is liable ex delicto for bad faith ; and ex contractu there is an implied warranty on his part that they belong to him, and that they are not forgeries. Where there is no express stipulation there is no liability beyond this. If the buyer desires special protection, he must take a guaranty.” But, notwithstanding this general principle, it is equally certain that the contract of sale or transfer, to say nothing of payment, may be made in such form, or under such circumstances, as to exclude the warranty of genuineness, which would be otherwise implied by law. This has been held by repeated decisions. Bell v. Dagg, 60 N. Y. 530 ; Ross v. Terry, 63 N. Y. 615. If, therefore, it be true as stated by the defendant in his affidavit, that the money paid to him in taking up the notes by the plaintiff, was paid in settlement and satisfaction of the notes, so far as the defendant was concerned, and that the money was paid by the plaintiff as the agent of Henderson, in settlement and satisfaction of the notes — he, Henderson, under the assumed name of Basil Jackson, [294] having made or put in circulation the notes — these are facts sufficient to and would exclude any implied warranty of genuineness of the notes on the part of the defendant. The implied warranty is necessarily founded in good faith, and it will not attach except where the party relying upon such warranty has acted in good faith. If then the plaintiff in taking up the notes was acting for or in collusion with Henderson, the party who made or put in circulation the notes in the assumed or fictitious name of Jackson, though the plaintiff may have been deceived, and sustained loss, he cannot indemnify himself for any loss that he may have sustained, by reclamation against the defendant. As against Henderson, and those acting for him, the defendant received for the notes nothing more than he was entitled to receive. The court cannot question or traverse the truth of the facts stated in the defendant’s affidavit. Those facts the court is bound, for the purposes of securing to the defendant the right of trial, to assume as true, and that, too, without reference to what the plaintiff may have stated in his affidavit. If the facts stated by the defendant, by any reasonable or fair construction, will constitute a defence to the action or claim of the plaintiff, within the scope of the pleas, pleaded, it is the absolute constitutional right of the defendant to have that defence regularly tried and determined, in due course of judicial investigation. No rule, however beneficial it may be thought to be, as means of preventing the use of sham or feigrred defences, or desirable for the expedition of business, can deprive the defendant of this right. The affidavit in this case we think sufficient to entitle the defendant to trial. It is unnecessary for us to pass upon the question of the right of the appellant to maintain an appeal from the order of the court refusing to strike out the judgment entered under the rule. But, being of opinion that the affidavit of defence is sufficient under the rule to entitle the defendant to trial of the issues made by his pleas, we think there was [295] error in entering judgment under the rule as for want of a sufficient affidavit; and the judgment must therefore be reversed, and the cause be remanded that the same may be tried in regular course of proceeding. Judgment reversed and cause remanded.