Bank of Montreal v. Richter

• Decision Date: 29 November 1893
• Docket Number: No. 8358.,8358.
• Citation: 55 Minn. 362
• Parties: BANK OF MONTREAL <I>vs.</I> PETER RICHTER <I>et al.</I>
• Court: Minnesota Supreme Court

55 Minn. 362

BANK OF MONTREALvs.

PETER RICHTER et al.

No. 8358.

Supreme Court of Minnesota.

Argued October 25, 1893.

Affirmed November 29, 1893.

Appeal by plaintiff, Bank of Montreal, from an order of the District Court of Wadena County, G. W. Holland, J., made April 8, 1893, denying its motion for a new trial.

On June 8, 1889, E. Bennett & Son of Topeka, Kansas, sold to the defendants, Peter Richter and nine others of Wadena, a stallion

named Stoneclink for $2,400 and took their promissory notes for the price, one for $500 due in one year, one for $900 due in two years, and one for $1,000 due in three years, all bearing interest at eight per cent. a year. E. Bennett & Son indorsed and transferred the notes on June 29, 1889, at Chicago, Ill., to the Bank of Montreal as collateral security to their indebtedness to it. The notes fell due and remained unpaid. The Bank brought this action upon the note for $1,000 against the ten makers thereof. The defendants answered that E. Bennett & Son on the sale knew the horse to be unsound and sick with an incurable disease, and fraudulently represented to them that he was sound, and well and all right. That defendants did not know or have notice that he was unsound or sick or not all right, and believed and relied upon the representations and were induced thereby to purchase and give the notes. That the horse was in fact worthless and afterwards died of the disease. They denied the other allegations of the complaint, but did not allege that plaintiff had knowledge or notice of the fraud when it obtained the note. Plaintiff replied, denying the representations and fraud and alleging that it had no notice or knowledge of any representations or fraud or of the consideration for the note when it obtained it. On the trial December 14, 1892, plaintiff read the note in evidence and rested. Defendants then offered evidence to prove the allegations of their answer. The plaintiff objected, but was overruled and it excepted and the evidence was received. Defendants gave no evidence of any notice to, or knowledge of the plaintiff of the fraud, at or before the transfer of the note to it. Plaintiff then asked the Court to instruct the jury to return a verdict for the plaintiff. This was refused and it excepted. Plaintiff then read in evidence depositions tending to show that it took the note in the due course of business without notice of the fraud or of the consideration for the note, but the evidence was not full or complete. The jury returned a verdict for defendants. Plaintiff moved for a new trial, but was denied and it appeals.

A. G. Broker, for appellant.

Coppernoll & Willson, for respondents.

VANDERBURGH, J.

The promissory note sued on was given for the purchase price of a stallion, and the defendants, in their answer, in addition to denials, set up as a defense that they were induced to make the purchase and to execute the note by the false and fraudulent representations of the agent of the payees, who were the owners of the horse. On the trial the plaintiff objected to the admission of any evidence under the answer, on the ground that, in addition to the charge of fraud, it did not allege that the plaintiff had notice thereof when it took the note. We think it is the usual practice to insert such allegations in the answer in such cases, but in this case the defect, if any, is cured by the reply, which shows, in substance, that plaintiff's information on the subject was obtained after it acquired the note. In no event could the plaintiff be prejudiced by the ruling of the court.

Upon proof by the defendants of the fraud as alleged, the plaintiff was required to assume the burden of proving that it took the note for value, and without notice of the fraud. Under the code system, it is held, in some of the states, — and, as I think, properly, — that the plea of fraud is a good defense by itself, and it is not necessary for the defendant, in addition thereto, to allege in his answer, in such cases, that plaintiff had notice of the fraud in the inception of the note. See First Nat. Bank v. Ruhl, 122 Ind. 279, (23 N. E. Rep. 766.) And this rests upon the ground that the existence of the fraud raises the presumption that the plaintiff's title is not bona fide, and the burden, in consequence, shifts, and it is incumbent on the holder of the note to...