Cummings v. Thompson

• Decision Date: 01 January 1873
• Citation: 18 Minn. 228
• Parties: ISAAC J. CUMMINGS v. LARS THOMPSON.
• Court: Minnesota Supreme Court

Page 228

18 Minn. 228

ISAAC J. CUMMINGS

v. LARS THOMPSON.

Supreme Court of Minnesota.

Appeal by defendant from a judgment of the district court, Winona county.

The action was on a promissory note executed by defendant to one Ensign, by him indorsed to Grant & Lalor, and by them to plaintiff.

The defense was that Ensign obtained the note through fraud, and without consideration, and that the several indorsees had notice thereof. On trial, the court below directed a verdict for plaintiff.

Thomas Wilson, for appellant.

Mitchell & Yale, for respondent.

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, 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 such proof being given it is incumbent on the plaintiff to show himself to be a holder bona 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 v. Blackstock, 3 Watts, 20; Knight v. Pugh, 4 Watts & S. 445; Fitch v. Jones, 5 El. & Bl. (85 E. C. L.) 238.

The reason of this rule is found in Fitch v. 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 indorse 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 defense relied on must, under our system of pleading, be set up in the answer. The defense relied on 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 alleged 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 $200, 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 false, 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 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 he did so under a misapprehension of its contents, and misled by the false and fraudulent practices of said Ensign aforesaid."

As to the representations in regard to the note, we think they are not sufficient to constitute a fraud in law, of which the defendant can take advantage upon a defense to the note. The representations, as alleged, must be taken to be representations as to the legal effect of the note, and not as to the contents of the writing.

The contract, which the answer alleges was in fact made between the defendant and Ensign, is essentially different from the written instrument signed by the parties. There would seem to be no doubt that the note sued upon, and the contract really made between the parties, whatever was its character, were parts of the same transaction, and as between the parties at least, must qualify each other. Nor perhaps will it be disputed that, if the contract set up in the answer is, as the defendant avers it to be, the real contract entered into at the time, and the defendant is permitted to prove such fact, that the entire want of consideration in the note would be established. But want of consideration alone between the maker and payee is not sufficient in an action by an indorsee, to whom the note has been regularly transferred, to require proof from such indorsee that he gave value for it. There must also be the 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 the same transaction, and the contract enters into the consideration of the note, so that the note is without consideration if the contract is void, then, if through the fraud of the payee the contract is void, the fraud taints...