Cummings v. Thompson

By the Court. McMillan, J. In an action upon a promissory note, the general >rule is that the possession of the note regularly transferred to the plaintiff, is prima facie evidence of ownership in him, and that he is a holder for a-valuable consideration ; nor is he required, to give any other evidence of such facts until the defendant has shown that the note was never delivered by him, or was obtained from him, or some intermediate party, through some undue means, as by fraud, felony, duress, or the like. 2 Greenl. Ev., § 172 ; Story on Prom. Notes, § 196. “But when negotiable paper has been stolen, or lost, or obtained by duress, or procured, or put in circulation by fraud, proof of these, circumstances may be given against the plaintiff, and on su$h proof being given, it is incumbent on the plaintiff to show himself to be a holder Iona fide, and for a valuable consideration; otherwise he is considered as standing in no better situation than the former holder, in whose .hands the instrument received the taint.” Beltzhoover vs. Blackstock, 3 Watts, 20 ; Knight vs. Pugh, 4 Watts, 445; Fitch vs. Jones, 5 Ell. & Bl. [85 Eng. Com. L.] 238. The reason of this rule is found in Fitch vs. Jones, the case last cited, which was an action by an indorsee against the maker of a note. “ Proof that a negotiable instrument was affected with fraud or illegality in the hands of a previous holder, raises a presumption that he would endorse it away to an agent, without value, and consequently calls on the plaintiff for proof that he gave value.” In order, however, to admit this proof on part of the defendant, the facts constituting the defence relied on, must, under our system of pleading, be set up in the answer. The defence — 253 — relied oil in this case by the defendant, the maker of the note, is that the note was obtained from him by Ensign, the payee, through fraud, and without any consideration. The facts relied on as constituting the fraud and want of consideration as to the payee of the note, are, substantially, the following: That at the same time the note was executed, a contract was entered into between the defendant and Ensign, by which defendant was to become the agent of Ensign for the sale of a certain “ seeder and cultivator;” that the note was executed in pursuance of, and in consideration of said contract. The contract, as verbally made and agreed upon, is fully set up in the answer. The answer also alleges, that at the time of executing the note, a writing, which is Exhibit “A” in the answer, purporting to be the contract between the parties, was signed by each of them; that the writing does not truly set forth the contract, but that the contract as made between the parties is that set forth in the answer as the verbal contract. The alleg•ed fraud is, first, “ That the said Ensign also represented at the same time, that a paper which he presented to the defendant for his signature was in accordance with the said contract, and in pursuance thereof, and only made the defendant liable to pay him the sum of two hundred dollars when one half the profits on the sale of said {seeder and cultivator’ should, in the aggregate, amount to that sum; that said representations were intentionally falsé, and by the said Ensign intended to deceive and mislead the defendant, and the defendant misled and deceived thereby, signed the paper presented to him as aforesaid, which is the promissory note set out in the complaint.” Second, that this contract, as made and agreed upon between the parties, was as alleged in the answer, and that the writing exhibit “ A ” aforesaid, does not truly set forth the said contract; “ that said Ensign fraudulently and intentionally misread said writing to defendant and misstated to him — 254 — the contents thereof, and the defendant, relying on and believing said misstatements as to the contents of the writing, and his reading of the said writing, signed the same; that be did so under a misapprehension of its contents, and misled by tbe false and fraudulent practices o‘f said Ensign aforesaid.” As to tbe representations in regard to tbe note, we think they are not sufficient to constitute a fraud in law of which tbe defendant can take advantage upon a defence to tbe note. Tbe representations, as alleged, must be taken to be representations as to tbe legal effect of the note, and not as to tbe .contents of tbe writing. Tbe contract which the answer alleges was in fact made between tbe defendant and Ensign, is essentially different from tbe written instrument signed by the parties. There would seem to be no doubt that tbe note sued upon, and tbe contract really made between tbe parties, whatever was its character, were parts of the same transaction, and as between tbe parties, at least, must qualify each other. Nor perhaps will it be disputed, that if tbe contract set up in tbe answer is, as tbe defendant avers it to be, tbe real contract entered into at tbe time, and tbe defendant is permitted to prove such fact, that tbe entire want of consideration in tbe note would be established. But want of consideration alone, between tbe maker and payee, is not sufficient in an action by an indorsee to whom tbe note has been regularly' transferred, to require proof from such indorsee that be gave value for it. There must also be tbe further element of fraud, or illegality between the original parties for that purpose. Fitch v. Jones, supra. If the note and contract are parts of tbe same transaction, and the contract enters into tbe. consideration of tbe note, so that the note is without consideration if tbe contract is void, then, if through tbe fraud of tbe payee tbe contract is void, tbe fraud taints tbe consideration of tbe note, and under tbe — 255 — rule above stated, proof thereof calls upon the indorsee for proof that he gave value for the note. Upon the trial of the cause, the defendant having testified that at the time of making the note in question he signed the contract, exhibit “A,” in the answer, his counsel asked the witness this question, “Is the written contract in accordance with the agreement which you entered into with Ensign l” to which the plaintiff objected as immaterial, irrelevant, and because there is no foundation laid for it in the pleadings. The objection was sustained and defendant’s counsel excepted. The counsel for the defendant then offered to prove by this witness, among other things: “First; that this witness-is a. Norwegian, and cannot read the English language, except imperfectly, and not at all, when written by.an ordinary penman. Fourth; that Ensign falsely and intentionally misstated the contents and terms of said Written contract (attached to the answer as exhibit £A,’) to him, and misread said contract to him, and that relying on said misstatement and false reading, the defendant signed the. writing. Fifth; that the contract in fact entered intt> between the parties was in terms and in fact as alleged in the answer, and that the terms and language of the writing, as read to and stated to defendant by Ensign, corresponded to and agreed with the verbal contract set up in the answer. Sixth; that he, defendant, could not without great difficulty, and taking much time, read said'note and contract.” To each of these offers the plaintiff’s counsel separately objected as being immaterial and inadmissible under the pleadings; and the court sustained the objection as to each, and the defendant excepted to the ruling • of the court, made as aforesaid, as to each offer. The facts alleged in the answer, and which it is claimed constitute a fraud upon the part of Ensign, are that he fraudulently and intentionally misread the contract, and misstated — 256 — to the defendant the contents thereof. There can be no doubt that these allegations refer to the contract in fact, that is, to the very words and contents of the instrument, and not to its legal effect. Nor is there any necessity to argue that the facts alleged in the answer constitute an intentional, actual fraud upon the part of Ensign, which will vitiate the contract, if Johnson, the defendant, might rely upon them. The defendant might rely upon Ensign’s reading of the contract, and his representations as to its contents, in two cases: first, if he had not equal means of knowing, or ascertaining their falsity; second, if Ensign acted in such a manner as to induce him to forbear making inquiries. Story on Contracts, § 510; 1 Story’s Eq. § 199; Vernon v. Keyes, 12 East, 632. The answer distinctly avers that the defendant did rely upon and believe Ensign’s reading of ihe contract, and his representations as to the contents of the instrument, and was deceived thereby. But it does not aver specifically any inability of the defendant to read the English language, except imperfectly, or otherwise. The plaintiff contends that in the absence of such averments, proof of such, facts were not admissible; $nd in order that misrepresentations may constitute a valid defence, it must appear, not only that the injured party did in fact rely on the fraudulent statements, but that he had a right to rely upon them. It is true that where fraud is alleged, a general charge of fraud is insufficient, and that the material facts constituting the fraud must be stated, but a general statement of the matters of fact constituting the fraud, is all that is required ; and it is not necessary to charge minutely all the circumstances which may conduce to prove the general charge, for these circumstances are properly matters of evidence, which need not be stated in order to let them in as proof. Story’s Eq. Pl., §§ 28, 252 ; Chicot v. Lequesne, 2 Ves. 318. — 257 — It is also true, that under a general allegation of fact, the specific facts and circumstances admissible in support of such general averment, must be such as the injured party may legally rely upon; but as they need not be particularly stated it can only be necessary that this characteristic ' be apparent in the evidence. ■ It was clearly not necessary, within this rule, to state in the. answer the manner of the misreading, or any of the circumstances surrounding the parties, or the particular representations made by Ensign ; all these facts would be admissible under the general allegations in the answer, and the representations and reading- being in their nature representations of fact, it may well be that proof of all the facts (excluding for the present the defendant’s inability to read) may show, that the defendant might, and did rely upon the misreading of the ' contract, and the misrepresentations of its contents, and was induced thereby to forego the reading of the instrument himself. So far, therefore, as the question put to the witness, and the proof of the’facts embraced in the fourth and fifth offers of the defendant are concerned, they were proper, and should have been allowed. We are also of opinion that under the allegation that the defendant relied upon and believed the false reading and misrepresentations of the contract by Ensign, .and was misled thereby, it was competent for the defendant to prove the facts offered to be proved relating to his inability to read. The averment that the defendant relied on, and-believed the read-, ing of the contract, and the representations of its contents by Ensign, is an allegation of fact, and essential to constitute a fraud. -If the defendant could notread the contract, or could not read it without great difficulty, and taking much time, it would tend to show that he had not equal means with Ensign of knowing, or ascertaining the falsity of the reading — 258 — and representations of the latter, as well as that the defendant was induced to forbear further inquiries, and rely upon Ensign’s statements and might therefore, properly rely upon such statements and representations. And it would seem to be apparent, that the evidence offered of the inability of the defendant to read, in connection with the facts that he executed the contract without reading it, or further inquiry, would tend directly to show that in thus executing the instrument, he did in fact rely upon, and was misled by Ensign’s reading and misrepresenations of it. The defendant’s inability to read is, therefore, merely a specific fact which goes to support the general allegations in the pleadings, and need not be specially stated. The question arising in this case is clearly distinguishable from a case in which a special disability is relied on to defeat a voidable instrument; there such special disability must be pleaded. The court, therefore, erred in excluding the evidence offered by the defendant, relating to his inability to read. We are not to be understood in this-case, as intimating an opinion, whether or not, other things being equal, the intentional misreading of an instrument by one party to the other, in an essential matter, with intent to deceive such party, will of itself constitute a fraud which the law recognizes; that question does not arise. . The evidence upon the question of fraud as between the maker and payee of the note having been excluded by the court, all inquiry as to a mere want of consideration between subsequent indorsees of the note, was, of course, properly excluded. The answer alleges, That as to each and every statement, allegation, matter or thing in the complaint set up except as hereinbefore admitted, the defendant alleges that he has not — 259 — sufficient knowledge or information to form a belief, and, therefore, denies the same. That if the said note has been transferred to Grant & Lalor, as charged, or to said plaintiff, as charged, this defendant alleges on his information and belief, that each of them, at the time of transfer to him, had notice that it was obtained by fraud' and false representations, and without any consideration as aforesaid.” These allegations are sufficient to admit affirmative proof by the defendant, that the indorsees, including the plaintiff, had notice of the fraud of the payee in the making of the note; and if such fraud and notice should be established, a complete defence to the note, as between the defendant and plaintiff, would be made out. The evidence offered by the defendant tending to show fraud on the part of Ensign, the payee, in the making of the note, was, therefore, admissible ; first, for the purpose of calling upon the plaintiff for proof that he is a holder for value, and, second, for the purpose of enabling the defendant to follow it by proof that the indorsees, including the plaintiff, had notice of the fraud, and thereby establishing a complete defence to the note. The judgment must be reversed, and a new trial granted.