Vallett v. Parker

By the Court,

Savage, Ch, J.

There was no variance. Had the declaration stated the making of the note by the defendants, “ their own proper hands and names being thereunto subscribed,” according to some precedents, perhaps there would have been a variance; but here the only statement was, that the defendants made the note, and it being proved that it was made by one of the firm, whose name was subscribed to it, it was proved to be made by both, for the act of one partner is the act of both. 4 Wendell, 412.

To entitle a plaintiff to recover against a firm on a note made by one member of the firm in the partnership name, it is not incumbent on him, in the first instance, to shew that it was given for a partnership transaction. If it was not so given, the fact must be shewn by the defendants. When the signature of a firm is found to a note, the presumption of law is that it was given for a partnership debt. If the contrary be shewn by the defence, then the plaintiff must shew the assent of the partner who did not subscribe the note, that is, when the suit is between the original parties to the note; i when the note has passed into the hands of a subsequent bona fide holder, other considerations prevail. Whatever doubts .may- have heretofore existed, I take it to be well settled, that as between the original parties to a promissory note, the défendant may shew either the want of consideration, or the illegality of it. But when a negotiable instrument has passed in the ordinary course of business-into the hands of a bona fide holder for valuable consideration, and without notice of the consideration, the general rule is, that the defendant cannot avail himself of any such defence. There are exceptions; two instances are familiar ; the case of a note given upon an usurious consideration, or for money lost by gaming. In both these cases the notes and securities are declared "by the statute to be absolutely void. Every man, therefore, who takes an endorsed note, does so at his peril, so far as those considerations may have entered into the original concoction. But with the exception of those cases in which the statute has declared notes void, it may be laid down as a “ broad general principle, that whenever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it.” 2 T. R. 70.

As between the original parties to this note, it would be a good defence to shew that it was delivered as an escrow. 1 Strange, 674. But not so in action by a subsequent bona fide holder for valuable consideration, and without notice. " It is argued that such a note was never delivered, and therefore void; but is it more imperfect or void than an accommodation note before it is negotiated 1 While in the hands of the payee, or any agent of his, it is not a valid instrument ; there has been no valid delivery ; no suit can be sustained upon it, any more than on a note delivered as an escrow ; but the moment an accommodation note is passed bona fide to an" endorsee, who gives value for it, it becomes a valid security; and even if it is fraudulently put into circution be who has paid Value for it shall not be defrauded. But if any innocent person must suffer, it should be that one who, by his acts, has enabled the third person to commit the fraud. Woodhull v. Holmes, 10 Johns. R. 231. was substantially the case of a note delivered as an escrow j it was put into the hands of a third person for a special purpose; that purpose was to have the note discounted at a bank. In that event, the parties to the note, or one of them, would have received the money. Instead of doing so the agent passed it to a broker, and put the money into his own pocket. How does this case differ in principle 1 The note was deposited as an escrow, say the defendants, till possession of the theatre should be delivered; but the person who had it, fraudulently gave it to the payee, who negotiated it for a valuable consideration. Is not the holder in this case ih as favorable a light before this court as the broker in the case of Woodhull v. Holmes ? It would seem to follow, from the decision in that case, that the common pleas should have received evidence of the fact that the note, was delivered as an escrow, and afterwards fraudulently put into circulation; and then the plaintiff must have shewn that he came fairly by it. Had not the defendants proved that fact for the plaintiff, he must have proved it, or have failed in the suit; but if the plaintiffs in error intended to rely on that error of the court, they should not have introduced the evidence to obviate it.

The court below considered this a case in which the defendants could not shew the circumstances attending the execution of the note for the purpose of avoiding it in the hands of a bona fide holder, and that therefore unless it could be shewn, either that the plaintiff had notice of those circumstances, or took the note after it was due, the defence could be of no avail. I understand the rule in England to be, that when the legislature has declared that the illegality of the contract or consideration shall make the note void, the defendant may set up that defence, though the note be in the hands of a bom fide holder ; but unless it has been so expressly declared by the legislature, illegality of consideration will be no defence against a bom fide holder, without notice, and for sufficient consideration, unless he obtained the note after it became due. Chitty on Bills, 104, 105, and cases there cited. The rule is the same in this court. The holder of a bill or note need not, in the first instance, shew a consideration ; possession proves property ; but if there are any suspicious circumstances as to the bonafides of his possession, and the defendant has a good defence against the payee, then he must shew that he paid value for it. For instance, if the note has been lost or stolen, or fraudulently put into circulation, Sic. then the plaintiff must shew that he came lawfully and fairly by it, and paid value for it. 3 Johns. C. 260, 3. The court below therefore erred in their decision on that point; but had they decided it correctly, the only difference would have been, that the plaintiff must have introduced the same testimony which was introduced by the defendants. The judgment should not be reversed for that cause.

The next question is, whether the statute has declared a note void given for the purchase of real estate held adversely 1 The seventh section is relied on, which is, “ That all gifts and conveyances made for maintenance shall be void.” A promissory note is certainly neither a gift nor a conveyance; and I apprehend it is not competent for the court to say that a note given for such a purpose is void, because it is without consideration, or that the consideration is illegal, and that therefore the note is within the .statute. It is all important to the commercial world, that courts do not go in advance of the legislature in rendering negotiable paper void in the hands of an innocent endorsee. Wherever the statutes declare notes void, they are, and must be so, in the hands of every holder; but where they are adjudged by the court to be so, for failure, or the illegality of the consideration, they are void only in the hands of the original parties, or those who are chargeable with, or have had notice of the consideration.

Judgment affirmed, with single costs.