Page v. Krekey

• Decision Date: 28 February 1893
• Citation: 33 N.E. 311,137 N.Y. 307
• Parties: PAGE v. KREKEY.
• Court: New York Court of Appeals Court of Appeals

137 N.Y. 307

33 N.E. 311

PAGE

v.KREKEY.

Court of Appeals of New York.

Feb. 28, 1893.

Appeal from supreme court, general term, first department.

Action by Carroll S. Page against Joseph Krekey on a guaranty. From a judgment of the general term (17 N. Y. Supp. 764) affirming a judgment for plaintiff, defendant appeals. Reversed.

Johnson & Johnson, (Edward W. S. Johnston, of counsel,) for appellant.

Simpson, Thacher & Barnum,(Philip G. Bartlett, of counsel,) for respondent.

O'BRIEN, J.

The judgment from which this appeal is taken was recovered upon a guaranty, signed by the defendant, and sent to the plaintiff, a resident of Vermont, by mail. The plaintiff had business transactions with one Bernard Thinnes prior to the guaranty. The latter was a tanner in Brooklyn, and the plaintiff, a dealer in green calf skins, had shipped to him skins at various times to tan, and, unless he elected to buy them at a certain price, then to return them, so tanned, to the plaintiff, or deliver them according to his order. The following is the instrument upon which the action was brought: ‘Brooklyn, N. Y., March 14, 1889. Mr. C. S. Page, Hyde Park, Vt.: I am well acquainted with B. A. Thinnes, tanner, of this place. I believe him to be a good tanner, honorable and straightforward in his dealings, and attentive to business, and if you will from time to time send hides and skins to him I hereby guaranty that he will not convert or misappropriate them, but will well and faithfully tan them, and, if he does not buy and pay you for them within the time agreed upon between you, I agree that he shall deliver them at Rose, McAlpin & Co.'s, New York city, N. Y. Notice of your acceptance is hereby waived. Joseph Krekey. P. O. address, 248 Freeman St.’ It was shown at the trial that the defendant was an illiterate man, who could not read nor write, except possibly to sign his name. That he signed the paper at the request of Thinnes when in a state of intoxication, and under the false representation that it was an application for a license under the excise law. The principal part of the instrument was in print, probably prepared by the plaintiff, or under his direction. At all events, it was presented to the defendant by Thinnes, the representations as to its character were made by him, and when he procured the defendant's signature he sent it to the plaintiff, who, so far as appears, never met or had any personal transaction with the defendant. The plaintiff's claim against Thinnes, exclusive of interest, was $2,122.79 for skins shipped to him under six written contracts, bearing various dates between May 1, 1889, and July 1, 1889. All of these contracts provided that in case of failure to pay for the goods they should be delivered to the firm of Myers & Gordon. The only question submitted to the jury was whether the defendant, in signing the paper, observed proper care and caution, or was chargeable with negligence. In determining the legal effect of this paper and the obligation thereby created against the defendant, we must assume that he signed it when intoxicated; that he was unable to read it; that he was ignorant of its contents; and that he fixed his signature to it upon the false representation that it was an application for a license.

There can be no doubt that, as between the parties to this transaction, the instrument was void. It was also invalid in the hands of any person who received it with knowledge or notice of the circumstances under which the defendant's signaturewas obtained. Sometimes releases, discharges, and other instruments are procured by the fraud of a third person, without the knowledge or participation in the fraud of the party to be benefited, who, nevertheless, will not be permitted to reap the benefit of a fraud, though he was himself innocent. The case of Bedell v. Bedell, 37 Hun, 419, is an example of this class of cases. The decisions in these cases rest upon principles obviously just and reasonable. When the fraudulent act is not imputable to the person claiming the benefit of the instrument upon the principle of agency, he is generally debarred from enforcing it upon the ground of the fraudulent origin of the paper, and the fact that he has lost nothing upon the faith of it. Without examining all the cases cited by the learned counsel for the defendant, it may be assumed that in other jurisdictions the courts have held that in a case like this the instrument could not be enforced any more than if the signature of the defendant had been forged. That is the principle which is invoked in behalf of the defendant to relieve him from all liability, but it has not received the sanction of the courts of this state. While it has been quite uniformly held here that an instrument procured by fraud, trick or artifice, or executed by a party in such a state of intoxication as to be incapable of consenting or contracting, is invalid as between the parties to the transaction, these facts do not always constitute a defense as against an innocent person, who is himself free from any fraud or negligence, and who has advanced money or property to another upon the credit afforded by an instrument like this. But even in such a case the person who has signed the paper is not liable upon it unless it is found that he failed to observe proper care and caution, and was chargeable with negligence in attaching his signature. If he actually signed the paper, though procured to do it by fraud, and is chargeable with negligence, he is liable to an innocent party who acted to his prejudice upon the faith of the instrument. Such cases are not governed by the rules applicable to the bona fide holder of negotiable paper procured by fraud, but by the equitable rule that, where one of two innocent parties must suffer, he who has put it in the power of a third person to commit the fraud must sustain the loss. If the defendant is to be held liable in this case, it must be upon the principle that by his misplaced confidence in Thinnes he enabled him to obtain property from the plaintiff, who is an innocent third party. McWilliams v. Mason, 31 N. Y. 294;Western N. Y. L. Ins. Co. v. Clinton, 66 N. Y. 326;Powers v. Clarke, 127 N. Y. 417, 28 N. E. Rep. 402; Casoni v. Jerome, 58 N. Y. 315; Baylies, Sur. 214; Burge, Sur. 218. If this instrument had been a negotiable promissory note, the defendant's liability to the plaintiff would depend upon the question of negligence, and there does not appear to be any sound reason for a different rule in this case. Chapman v. Rose, 56 N. Y. 137; Whitney v. Snyder, 2 Lans. 477; Bank v. Veneman, 43 Hun, 241; Fenton v. Robinson, 4 Hun, 252.

The general principle of law upon which the case was disposed of at the trial and upon review at general term was, in this respect, favorable enough to the defendant. The guaranty contemplated a contract between the plaintiff and defendant's principal. All the goods sent to Thinnes were in pursuance of contracts in writing. The instrument which the defendant signed guarantied the performance of these contracts only in case they...