Hillsdale Nat. Bank v. Sansone, A--757

• Decision Date: 22 January 1951
• Docket Number: No. A--757,A--757
• Citation: 78 A.2d 441,11 N.J.Super. 390,24 A.L.R.2d 1374
• Parties: , 24 A.L.R.2d 1374 HILLSDALE NAT. BANK v. SANSONE.
• Court: New Jersey Superior Court — Appellate Division

Page 390

11 N.J.Super. 390

78 A.2d 441, 24 A.L.R.2d 1374

HILLSDALE NAT. BANK v. SANSONE.

No. A--757.

Superior Court of New Jersey

Appellate Division.

Argued Jan. 8, 1951.

Decided Jan. 22, 1951.

Gordon Haviland Brown, Ridgewood, argued the cause for appellant (Harry Randall, Westwood, attorney).

Joseph Grossman, Passaic, argued the cause for respondent (Grossman & Kampelman, Passaic, attorneys).

Before Judges McGEEHAN, JAYNE and WM. J. BRENNAN, Jr.

The opinion of the court was delivered by

JAYNE, J.A.D.

It is expedient in the introduction of the subject matter of this litigation to reproduce here the agreed statement of facts which accompanies the present appeal. Rules 1:2--22 and 4:2--6.

'1. The plaintiff-appellant is the holder of a promissory note in the amount of $1,158.48 made by the defendant-respondent.

'2. The following is a true and complete copy of the note:

'$1158.48

August 2, 1948

No. 7665

'For value received, I/we the undersigned, jointly and severally, promise to pay to the order of Economizer Products, Inc. the sum of Eleven Hundred fifty-eight and 48/100 Dollars ($1158.48) as follows:

'36 equal successive monthly installment of of $32.18 each and a final installment of $--- beginning September 15, 1948 and the remaining installments on the same date of each month thereafter until paid, with interest at 6 per cent after maturity, at the office of The Hillsdale National Bank, Hillsdale, New Jersey. For each dollar of payment in arrears more than five days, the undersigned promises to pay to the holder hereof the sum of Five Cents as compensation for the damage and expense occasioned by such delay. We hereby waive demand notice and protest. In the event of the death, insolvency, bankruptcy or failure in business of any of the undersigned, or, in the event any installment of this note is not fully paid as herein specified, or in the event that any of the terms and conditions of a conditional sales contract dated as of even date between the maker(s) and the payee of this note are not fully complied with, this note shall, at the option of the holder hereof, become due and payable without demand and notice. We hereby agree in case of default to pay costs, including reasonable attorneys' fees, for necessary court process.

'It is agreed that all principal payments on this note need not be endorsed upon this note, but are to be recorded on an individual liability record held at the above mentioned bank.

'John Sansone (seal)

'Endorsed on back of note:

'For value received, pay to the order of The Hillsdale National Bank, Hillsdale, New Jersey.

'Economizer Products, Inc. (Seal)

'By Maurice A. Silver, Pres.

'3. The note was duly endorsed by the payee thereof and was negotiated to the plaintiff-appellant on or about August 31, 1948.

'4. The plaintiff-appellant paid the sum of $950.00 for the note.

'5. At the time the defendant-respondent made the note, he was insane.

'6. The plaintiff-appellant received the note in good faith without notice of the insanity of the defendant-respondent and without notice of any facts indicating the insanity of the defendant-respondent.

'7. The note was given in payment for an Economizer Bar Dispenser unit, which unit was sold and delivered under a conditional sales contract bearing the same date as the note.

'8. The defendant-respondent never used the aforesaid unit and has offered to return the unit to the seller or to the plaintiff-appellant, and at the time of the trial, tendered himself ready, willing and able to return said unit to the aforesaid parties.

'9. The defendant-respondent never ratified the conditional sales contract, or the note; and nothing has been paid on account of the note.'

Final judgment was entered in favor of the defendant. 8 N.J.Super. 497, 73 A.2d 362 (Law Div.1950).

There are four features of this case that attract our immediate observance. The one, that the article intended to be sold by the payee pursuant to the conditional sales agreement was not within the category of necessities. R.S. 46:30--8, N.J.S.A. Vide, Van Horn v. Hann, 39 N.J.L. 207 (Sup.Ct.1877); Waldron v. Davis, 70 N.J.L. 788, 58 A. 293, 66 L.R.A. 591 (E. & A.1904); Hurey v. Leavitt, 93 N.J.L. 299, 107 A. 457 (Sup.Ct.1919); In re Ganey, 93 N.J.Eq. 389, 116 A. 19 (Ch.1921), affirmed 94 N.J.Eq. 502, 119 A. 925 (E. & A.1923). Another, that although the plaintiff had no knowledge of the defendant's mental incompetency, yet from the note itself it had knowledge that the instrument was associated with a contract. We do not resolve from the latter circumstance that the reference in the note to the conditional sales contract destroyed the negotiable character of the instrument. Superior Finance Corp. v. John A. McCrane Motors, Inc., 115 N.J.L. 401, 180 A. 842 (Sup.Ct.1935), affirmed 116 N.J.L. 435, 184 A. 828 (E. & A.1936); see, Eastern Acceptance Corp. v. Kavlick, 10 N.J.Super. 253, 77 A.2d 49 (App.Div.1950). It was, however, indicative to the plaintiff that the note originated from a contemporaneous contractual engagement in which the defendant had entered. Cf. General Contract Purchase Corp. v. Moon Carrier Corp., 129 N.J.L. 431, 29 A.2d 843 (E. & A.1943). The third, that the defendant has not ratified either the sale or the note and has offered to return the property delivered to him. Vide, Miller v. Barber, 73 N.J.L. 38, 62 A. 276 (Sup.Ct.1905). The fourth, that it is acknowledged that the defendant was insane at the time he executed the contract, and the note in suit, and that except for the absence of the appointment of a guardian we are to regard the stipulated fact of his insanity with the same significance as if it had been adjudicated.

Moreover counsel for both parties desire us to recognize the writing in suit as a negotiable instrument within the purview of our Negotiable Instruments Law (R.S. 7:1--1, N.J.S.A.) and to determine whether the insanity of the maker of a promissory note in the stipulated circumstances is a defense against a Bona fide holder in due course.

It has always been interesting to recall that Lord Coke in Beverley's Case, 4 Co.Rep. 123b, 76 Eng.Reprint 1118 (King's Bench 1603), announced the rule that a lunatic could not be permitted by plea to show the invalidity of his acts because to do so would be to stultify himself. It is doubtful if that reasoning prevails in any jurisdiction at the present time. Parsons on Notes and Bills, sec. VI, p. 149. While the law may itself create by implication civil obligations, it seems fantastic in recognition of the fundamental idea of a contract which requires the mutual and voluntary assent of two minds, a meeting of the minds, that such an indispensable element can exist in a transaction with a lunatic. We would more reasonably suppose that a person Non compos mentis has nothing which the law recognizes as a mind. Dexter v. Hall, 15 Wall. 9, 21 L.Ed. 73 (U.S.1873); P. Ballantine & Sons v. Gulka, 117 N.J.L. 84, 186 A. 722 (Sup.Ct.1936); 17 C.J.S., Contracts, p. 479, § 133a.

Justice Story in his work on promissory notes stated: 'Every contract presupposes that it is founded in the free and voluntary consent of each of the parties, upon a valuable consideration, and after a deliberate knowledge of its character and obligation. Neither of these predicaments can properly belong to a lunatic, an idiot, or other person Non compos mentis, from age, or imbecility, or personal infirmity. Hence it is a rule, not merely of municipal law, but of universal law, that the contracts of all such persons are utterly void.' Story, Prom. Notes, 107, sec. 101.

To embark upon an exploration of the adjudications of more recent years and to discuss whether in the present nomenclature of the law, contracts of a lunatic should be catalogued as 'void' with the several exceptions, or 'voidable' somewhat akin to those of an infant, would be a time-consuming undertaking. Vide, Eaton v. Eaton, 37 N.J.L. 108 (Sup.Ct.1874). Cf. Matthiessen & Weichers Refining Co. v. McMahon's Adm'r, 38 N.J.L. 536 (E. & A.1876); 1 Williston (Rev.Ed.) 739, et seq., sec. 250, 251. We accordingly confine ourselves to the consideration of the present case.

Singularly, there is a paucity of adjudications relative to the liability of an insane maker or indorser of a negotiable promissory note to a Bona fide holder in due course under the Uniform Negotiable Instruments Law. We find none in our own state reports.

A reference to 28 Am.Jur. 691, et seq., §§ 55, 56, 8 C.J. 774, § 1040, 10 C.J.S., Bills and Notes, p. 1114, § 506d, Beutel's Brannan Negotiable Instruments Law (7th ed). 756, et seq., § 55, 1 Williston on Contracts (Rev.Ed.) § 250, et seq., discloses the editorial or commentators' views with citations of cases either decided before the enactment of the uniform act or inapplicable to the precise circumstances of the present case.

The decision of Chief Justice Williams of the Supreme Court of Ohio in Hosler v. Beard, 54 Ohio St. 398, 43 N.E. 1040, 35 L.R.A. 161 (Sup.Ct.1896) displays a very deliberate consideration of the subject. It was therein determined that the insanity of the maker of a negotiable instrument is a defense against a holder in due course. In accord: 2 Paton's Digest 2001, 4D; 4; Barnes v. McCarthy, 132 S.W. 85, 87 (Tex.Civ.App.1910). It is noted that the latter decision although rendered in 1910 preceded the adoption of the Uniform Negotiable Instrument Law in Texas. But see, Brumley v. Chattancoga Speedway & Motordrome Co., 138 Tenn. 534, 198 S.W. 775 (Tenn.Sup.Ct.1917). Anent extreme intoxication, Green v. Gunsten, 154 Wis. 69, 142 N.W. 261, 46 L.R.A., N.S., 212 (Wis.Sup.Ct.1913).

Counsel for the appellant conceded at the argument that in the existing state of the admitted facts, if the instrument in its relation to the liability of the defendant is either void or voidable, the judgment for the defendant should be affirmed.

In considering the case in the light of the law merchant we decline to indulge in...