Nelson v. Hudgel

• Decision Date: 06 February 1913
• Parties: LOIS NELSON, Appellant, v. C. R. HUDGEL, Respondent
• Court: Idaho Supreme Court

130 P. 85

23 Idaho 327

LOIS NELSON, Appellant, v. C. R. HUDGEL, Respondent

Supreme Court of Idaho

February 6, 1913

FRAUD-FALSE REPRESENTATIONS AND STATEMENTS-EVIDENCE-EFFECT OF FALSE AND FRAUDULENT REPRESENTATIONS-CHECK-INNOCENT PURCHASER.

1. Fraud is never presumed; it must be established by clear and convincing evidence, and this is especially true where a party assails the integrity of a written contract.

2. Where parties entering into a contract are mutually cognizant of the facts which enter into said contract, and each stands on the same footing with reference to the contract and the facts and circumstances under which such contract was entered into, and there is no fiduciary relation between them, the law will not aid or help either one of the parties upon the ground that he has not himself used diligence and common sense, if the means of information is equally open to both and there has been a mistake without fraud or falsehood.

3. Where N. sues H. upon a check issued by H. upon a bank payable to S., and it is shown that as a consideration for said check S. made certain statements and representations as to securi- ties which would be deposited by S with H. as security for the debt for which the check is given, and S. indorses and delivers said check to N. for a valuable consideration, and both N. and H. heard the same statements and representations made by S., and neither of said parties knew that such representations were false and made for a fraudulent purpose, and a written contract was made between H. and S. as to the deposit of the securities and it was upon that instrument that H. issued and delivered the check, N. became the owner and holder of said check free from defenses available to prior parties among themselves, and may enforce the payment of the instrument for the amount thereof.

APPEAL from the District Court of the Third Judicial District for Ada County. Hon. Carl A. Davis, Judge.

Action to recover upon a bank check. Reversed.

Judgment reversed, and a new trail granted. Costs awarded to appellant.

Morrison & Hindman and Harry S. Kessler, for Appellant.

The burden of proof in establishing fraud is always on the party alleging it. Fraud is never to be presumed. It can only be established by clear and convincing evidence. (Cent. Dig., Fraud, secs. 46, 47; Dec. Dig., Fraud, 50.)

And this is especially true where the integrity of written instruments is attacked. (Pickle v. Lincoln Co. State Bank, 61 Wash. 545, 112 P. 654.)

The law of fraud does not contemplate that a person can recklessly and carelessly place his negotiable instrument on the market, knowing that it will be negotiated to innocent parties, and later, when he finds that he has permitted himself to be defrauded through his own gross negligence, set up a third party's fraud to avoid liability on the instrument. (Vaughn v. Johnson, 20 Idaho 669, 119 P. 879, 37 L. R. A., N. S., 816; Murray v. Lardner, 2 Wall. (U. S.) 110, 17 L.Ed. 857.)

A party who has put his promissory note on the market and allowed a consideration to be paid therefore is estopped from varying its terms and escaping liability by proof of parol agreements made before its delivery. (McIntosh-Huntington Co. v. Rice, 13 Colo. App. 393, 58 P. 358.)

Robert R. Wedekind, and Davidson & Bacon, for Respondent.

A principal cannot ratify that part of a contract which may be beneficial to him and repudiate the remainder. If he accepts the benefits of a contract, he must take it with its burdens. (Clarke & Skyles on Agency, sees. 108, 140, 141; Graves v. Spier, 58 Barb. (N. Y.) 349; Bennett v. Judson, 21 N.Y. 238; Castle v. Bullard, 23 How. (U. S.) 172, 189, 16 L.Ed. 424; First Nat. Bank v. Shaw, 157 Mich. 192, 121 N.W. 809; Rogers v. Empkie etc. Co., 24 Neb. 653, 39 N.W. 844.)

The burden of proof was upon the plaintiff to show that she was a holder of the check in good faith, and as to whether this question was successfully met was one of fact to be decided by the court. This question the court decided against the appellant upon the evidence, which was clearly sufficient, and the findings will not be disturbed. (Winter v. Nobs, 19 Idaho 18, Ann. Cas. 1912C, 302, 112 P. 525; Winters v. Hutchins, 20 Idaho 749, 119 P. 883; Cedar Rapids Nat. Bank v. Myhre Bros., 57 Wash. 596, 107 P. 518; City Nat. Bank v. Jordan, 139 Iowa 499, 117 N.W. 758; Shellenberger v. Nourse, 20 Idaho 323, 118 P. 508.)

Ordinary prudence and diligence do not require a person to test the truth or representations made to him by another as of his own knowledge, and with the intention that they shall be acted upon if the facts are peculiarly within the other party's knowledge or means of knowledge, though they are not exclusively so, and though the party to whom the representations are made may have an opportunity of ascertaining the truth for himself. (Watson v. Molden, 10 Idaho 570, 79 P. 503; 18 Am. & Eng. Ency. of Law, 120; Fischer v. Hillman, 68 Wash. 222, 122 P. 1016, 39 L. R. A., N. S., 1140; Madden v. Caldwell Land Co., 16 Idaho 59, 21 L. R. A., N. S., 332.)

STEWART, J. Sullivan, J., concurs.

OPINION

STEWART, J.

The appellant instituted this action against the respondent to recover upon a check issued by the respondent dated December 23, 1910, upon the Boise City National Bank, requiring the bank to pay to the order of M. A. Swift $ 1,293.75. It is alleged that the check was indorsed and delivered to the plaintiff and presented for payment and refused.

The defendant admits in his amended answer that the check was executed and delivered and not paid, and also alleges as a defense that, on December 23, 1910, the husband of the plaintiff applied to T. A. Bisby to procure a loan of $ 1,500 for the use and benefit of M. A. Swift and the plaintiff. That Charles H. Nelson, husband of plaintiff, falsely, fraudulently and deceitfully represented and stated to Bisby that Swift would secure the payment of the loan by the assignment and pledge of certain securities, and that Bisby stated and represented to defendant that Swift was the owner of such securities, and that such representations and statements induced the defendant to make the loan and execute the check sued upon, and that the defendant had no knowledge of the falsity of such representations; that at such time Swift was not the owner or in possession of the securities represented, and that the plaintiff had full knowledge of the falsity of the facts regarding the loan at the time the check was executed; that the check was issued and given upon the express conditions and understanding that said securities were hypothecated and pledged as security.

The cause was tried before the court and findings of fact and conclusions of law were made in favor of the respondent.

The trial court found the facts in favor of the defendant, and the particular findings involved on this appeal are in substance: That on December 21, 1910, M. A. Swift was indebted to the plaintiff in the sum of $ 1,500 upon a promissory note given by Swift to the plaintiff, which was past due, and upon demand of payment Swift stated that she did not have the money, but that she had certain securities which she would deposit as collateral to secure her note given to anyone who would loan her sufficient money to pay the note due; that on December 23, 1910, Charles H. Nelson, the husband of plaintiff, applied to T. A. Bisby to procure a loan of $ 1,500 for the use and benefit of M. A. Swift and the plaintiff; that the said Nelson represented and stated to Bisby that Swift would secure the payment of the loan by the assignment and pledge of certain securities, and that Bisby stated and represented to the defendant that Swift was the owner of such securities, and that such representations and statements induced the defendant to make the loan and execute the check sued upon, and that the defendant had no knowledge of the falsity of such representations; that at such time Swift was not the owner or in possession of the securities represented, and that the plaintiff had full knowledge of the facts regarding the loan at the time the check was executed; and that the check was issued and given upon the express conditions and understanding that said securities would be hypothecated and pledged as security; and that a written contract was entered into between M. A. Swift and C. R. Hudgel wherein "C. R. Hudgel agrees to loan to M. A. Swift $ 1,700.00 for 6 months at 12 per cent per annum. M. A. Swift agrees to give a note for same and further agrees to give the following described papers as additional security. A contract from the state of Idaho for one hundred and fourteen acres of school land. One $ 2,500.00 note. About $ 8,000 worth of piano contracts. Contracts and money to be exchanged at the Boise City Nat. Sat. Dec. 24th at 10:30." That at the time of making the representations as to the personal property owned and possessed by Mrs. M. A. Swift, Charles H. Nelson did not know of the truth or falsity of such representations, but relied upon the statements made by Swift; that such statements made by M. A. Swift were false; that neither the plaintiff, plaintiff's agent nor the defendant in this case knowingly participated in any fraudulent dealings.

The court also found that Swift was not the owner of said property and that she did not present and deliver to the bank or to the defendant the securities mentioned in the agreement.

Other findings were made but the foregoing findings of fact are the particular findings of the court that are involved upon this appeal. Judgment was...