Hyperlawhypertext legal database Matson v. Blossom 2 N.Y.S. 551

← Cases

Matson v. Blossom

2 N.Y.S. 551 Court N.Y. Gen. Term Decision date 1888-10-19 English

Delivered by Bradley, J.,

Contents

Majority

p. 551
Matson v. Blossom.
(Supreme Court, General Term, Fifth Department.
October 19, 1888.)

Headnote

1. Gaming—Gaming Contracts—Bohemian Oats Note.
A contract for the sale of 34 bushels of Bohemian oats, at $15 per bushel, secured by the buyer’s note, payable in 13 months, the seller undertaking, by a bond, to sell for the purchaser, within a year, 68 bushels of like oats, at $15 per bushel, and render to him the proceeds, less 33% per cent, commission, is not a gaming contract, within the meaning of 3 Rev. St. N. Y. (7th Ed.) 1968, rendering all wagering contracts void.
2. Contracts—Public Policy.
Such contract is not void, as against public policy, on the ground that the undertaking on the part of the seller cannot be carried out without practicing deception, or is impossible of performance, though it is stipulated that the price is fictitious, for speculative purposes.
p. 552
3. Negotiable Instruments—Fraud—Bona Fide Holders—Province of Jury.
■ _ The undertaking of the company selling the oats appearing on its face impracticable, and there being evidence that the company was represented to be responsible, and to have a capital of §100,000, while only 10 per cent, of that amount was paid in, and also representations as to profits made by others, and that the plaintiff was not a bona fide holder of the purchaser’s note sued on, the case should have been submitted to the jury on the-question of fraud, and it was error to 'direct a verdict for plaintiff.
Appeal from circuit court, Orleans county.
The action was brought against the appellant, Justin Blossom; as maker, and Luther Collamer, as indorser, of a promissory note of date October 26, 1886, for $510, payable to J. M. Orcutt or bearer, in 13 months from its date, with interest. The consideration of the note was a sale to the maker of 34 bushels of Bohemian oats, at the price of $15 per bushel, and the delivery to him of a written instrument, of which the following is a copy:
“Ho. Capital Stock, $100,000.
“Home Office, Ypsilanti, Mich.
“A Bond from the Bohemiam Oat and Cereal Company. “Incorporated under the laws of the state of Michigan, December 21,1884. Know all men by these presents, that the Bohemian Oat and Cereal Company do hereby agree to sell 68 bushels of oats for Mr. J. Blossom, at $15 per bushel, in cash, or by note, for which said J. Blossom is to pay 33J per cent, commission for selling, said commission to be paid in notes for which said grain is sold; said grain to be sold on or before October 26, 1887,—the price on this grain being a fictitious value, for speculative purposes. In testimony whereof the said Bohemian Oat and Cereal Company has caused this bond to be signed and sealed by the superintendent of said company this 26th day of October, 1886. This company is not to bd held responsible for any outside contracts made by agents other than those expressed on face of this bond. This bond is void without the company seal and signature of superintendent.
[l. s.] “J. M. Orcutt, Superintendent.”
Among other matters, is alleged the defense that the note was obtained ■¡from the defendant by fraud. The verdict for the plaintiff was directed by :the court; and from a judgment entered on the verdict, and an order denying a motion for new trial, defendant appeals.
Argued before Barker, P. J., and Haight, Bradley, and Dwight, JJ. Thomas & Desmond, for appellant. W. E. Hobby, for respondent.

(after stating the facts.) The note and bond having been made at the same time, and pursuant to the same agreement, they must, as between the parties to them, be construed together, and treated as parts of the contract, to the effect (in view of the extrinsic attending facts) that the defendant agreed to and did purchase of the Bohemian Oat & Cereal Company 34 bushels of Bohemian oats, at $15 per bushel, making $510, secured by his note, payable in 13 months; and the company agreed and by its bond undertook to sell for him within 1 year, 68 bushels of like oats, at $15 per bushel, and render to him the proceeds of the sale, less 33J per cent, commission. The first inquiry is whether the transaction itself, represented by what then occurred, was in its character illegal, or as between the parties, for any reason, furnished to the defendant means of defense against liability on the note. The defendant was at liberty to pay or promise to pay that price for the oats; and, if he could find a buyer, to sell oats for a like price, although they were actually worth no more than thirty cents per bushel. He evidently made the purchase, and promised to pay that large price, with a view to the profit he expected to realize out of the contract from the performance by the company of the undertaking of its bond, to sell for him double the quantity of his purchase, at the same price; which, being done before the maturity of his note, would enable him to pay it, and leave him a profit of $170, less the accrued

p. 553
interest on the note. This was the advantage the defendant was induced to rely upon as the result of the transaction. The contract was not a gaming one, within the meaning of the statute, and is not void as such. 1 Rev. St. 662, § 8; 3 Rev. St. (7th Ed.) 1962. While it is true that the sale which the company undertook to make depended upon its ability to do so, and was a matter of uncertainty, it was not in terms an agreement to pay differences dependent upon the condition of the market. It purported to be an agreement that one party should furnish-to the other the property which the latter should sell at or not less than a specified price. The company, apparently by it, took the hazard of a market which should permit performance, and of liability for damages in case of default; yet the terms of it do not import that the parties were speculating upon the ability of the company to sell with a view simply to the payment of a sum to represent the difference between the price the company agreed to and could obtain for the property within the time specified. Bigelow v. Benedict, 70 N. Y. 202 ; Story v. Salomon, 71 N. Y. 420 ; Yerkes v. Salomon, 11 Hun, 471 . The construction applicable to this •contract is clearly distinguishable from that of the agreement upon which was brought the action in Hall v. Bergen, 19 Barb. 122 . There the price to be paid for a horse was made dependent upon the speed it made in a race against time, which was held to be in the nature of a wager; while in the case at bar the agreement to give the defendant the benefit of a sale at a particular price was unqualified. It contravenes no statute of this state to which our attention has been called. The defense founded on the alleged illegality must therefore rest upon the common law for its support; and, if any part of the consideration may be characterized as illegal, it vitiates the contract, and, as between the parties to it, would defeat a recovery on the note.

It is contended that the agreement in question was against public policy. This proposition involves the inquiry whether it was repugnant to good morals, prejudicial to the public welfare, or in violation of some principle of law. We are now dealing with the legal import of the terms of this contract, and in that view it is difficult- to see that it is obnoxious to any rule of law, or void as against public policy. It is true that the stipulated value of the oats, •and the price for which the company undertook to sell them for the defendant, was fictitious, and purposely made so “for speculative purposes.” This was declared in the bond, and so understood by the parties to it. The consummation of the expressed purpose might be produced by unfair means, it might require deception, and its use result in prejudice to the innocent and unwary, but not necessarily so. This is the consequence of requiring exorbitant prices for property of any kind. The offer of the oats in the market for the price the company undertook to sell might not find the response of .a purchaser. It very likely would not,—a wise one; but that does not neces■sarily bring the undertaking within legal inhibition. As a rule, men of full .age and understanding have the liberty of contracting, and their contracts, when entered into voluntarily, are ordinarily held binding, unless they are -contrary to public policy, or in violation of some rule of law. Printing Co. v. Sampson, L. R. 19 Eq. 462, 465, 12 Moak, Eng. R. 841. If the undertaking of the company was impossible of performance, that fact would be an ■effectual defense to an action on the note, because an impossible consideration will not support a promise. 1 Pars. Cont. 382. To be such, the impossibility must exist in the nature of the thing to be done. The difficulty or improbability of doing it is not sufficient to defeat its effect as a consideration. This case, we think, is not brought within that rule.

In the view taken of the case, the only ground upon which the defense can rest is that the note was obtained from the defendant by fraudulent means, and that the plaintiff was not a holder of it in good faith. The inquiry in this respect relates to the purpose and intent of the party or parties who in the transaction dealt with the defendant, and obtained from him his note.

p. 554
The contract was a remarkable one, and, in view of the actual value of the-property which was the subject of the deal, the undertaking of the company, and its performance, were apparently impracticable as a business engagement. The oats purchased by the defendant furnished no adequate consideration for-the note he gave. This he understood. The main inducement and consideration of the note was the agreement of the company to sell for him oats at a price nearly or quite 50 times their value, which he was induced to believe was made in good faith, and would be so performed as to make his investment a profitable one. With the aid of these facts, the inference from the-instrument itself was permitted that the superintendent who made the bond, or the company he represented, did not, at the time it was made, intend to perform the undertaking expressed in it, but that it was made as an inducement to the defendant to give his note, and with the intent to cheat and defraud him. It might be difficult to understand how a man of ordinary sagacity could be led into such a contract, if it had not in the past been historically recorded and demonstrated to observation that belief in representations quite unreasonable is too frequently supported by misplaced confidence in those whose purpose is to circumvent their confiding victims. There was also evidence tending to prove, and permitting the conclusion, that, for the purpose of inducement to the defendant to enter into the contract, it was represented: to him that the company had a capital of $100,000; and was abundantly responsible, and that this was not true, but, on the contrary, that, while the capital stock was nominally such, the amount paid in was only 10 per cent., and that may have been represented by notes. It is not deemed necessary to make specific reference to the fortifying circumstances employed, and which the operators in the name of the company had produced by previous transactions with two or three persons in the town, who are said to have profited by the performance. It may be that such fact, with the aid of those persons, in support of the representations of the principal actors in the transaction, may-have had some influence upon the defendant and others who entered into like-contracts. Whether this pioneer enterprise in the town tends to indicate-good faith on the part of the agents of the company in making the contract in. question, or was designed as a leader preparatory to a business of this character more extended there, and disastrous to their customers, is a matter-which maybe entitled to some consideration, with the other facts bearing-upon the question of the purpose and good faith of the parties who conducted the transaction with the defendant. The evidence presented a question of' fact for the jury; and upon it the conclusion was warranted that the company, through its agents, did not at the time it was made intend to perform, its undertaking expressed in the bond, and that the defendant was by fraud, on their part induced to enter into the agreement, and make the note in question. Sutton v. Beckwith, 36 N. W. Rep. 79 ; Mace v. Kennedy, Id. 187 ; McNamara v. Gargett, Id. 218 .

But the fact so found would not defeat the right of the plaintiff to recover-unless he was charged with notice of such fraud. The note was negotiable. . He in the outset has the benefit of presumption that he became the holder of' it in good faith, for value; and the duty was not imposed upon him of inquiry into the circumstances under which the note was given. The rule in respect: to commercial paper is such that a party taking it in regular course of business, for value, before maturity, has the right to assume that it is valid, and: it will be so treated in his hands until it is shown to have been void by force-of some statute, or until it is made to appear that when he received it he was. chargeable with notice of facts which, as between the parties to it, would be available as a defense to defeat recovery upon it. Welch v. Sage, 47 N. Y. 147 ; Seybel v. Bank, 54 N. Y. 288 ; Insurance Co. v. Hachfield, 73 N. Y. 228 ; Parker v. Conner, 93 N. Y. 127 . The evidence given on the subject tends to prove affirmatively that the plaintiff purchased the note before ma

p. 555
turity, and paid value for it; and there is also evidence tending to prove that before he purchased it he was advised of the deal and contract pursuant to which the note was given, that he had notice of the nature and terms of the-bond given by the company, and, further, that he understood, by reading articles published in a newspaper of the county upon the subject, that the transactions of the character of that in question, conducted in the name of the Bohemian Oat & Cereal Company, were fraudulent on the part of the agents of the company, and that their purpose in making the contracts, and obtaining the notes of the farmers, was to swindle, cheat, and defraud them. There is also some evidence to the effect that in talking upon the subject the plaintiff had expressed his opinion that those transactions were “a gambling scheme, and that somebody would be the loser.” Without referring more specifically to the evidence bearing upon the question of plaintiff’s knowledge of the consideration of the note, the circumstances under which it was obtained, and of his information, and the reason he had to suppose that in the transaction the agents of the company, in dealing with the defendant, and obtaining his note, acted in bad faith, and with the intent to defraud him, the-evidence was sufficient to present the question to the jury as one of fact, and to permit the finding that, when the plaintiff purchased the note, he was chargeable with notice of such facts and fraudulent intent, and as a consequence the benefit and character of a purchaser or holder of the note, in good faith was denied to him. The consideration, however, of this question of fact, by the jury, is dependent upon the finding by them of the one before mentioned in the affirmative. Otherwise the question whether or not the plaintiff is a holder mala fide will not arise. If these views are correct, the conclusion follows that the case should have been submitted to the jury, and that the exceptions to the refusal of the court to do so, and to the direction of a verdict, were well taken. The judgment and order should be reversed,, and a new trial granted; costs to abide the event.

Barker, P. J., and IIaight and Dwight, JJ„ concur.

Cases cited