Pelly v. Onderdonk — 40 N.Y. St. Rep. 648

Majority

p. 648

Herbert Cecil Pelly, Resp’t, v. William M. Onderdonk, Impl’d, App’lt.

(Supreme Court, General Term, First Department,

Filed October 16,1891.)

Headnote

Bills and notes—Fraud—Evidence.

In an action upon a promissory note brought by an endorsee thereof, where the defense is that it was procured by false representations, a deposition of the_ plaintiff stating that he purchased the note in good faith and for value is not conclusive evidence against the defendant of the existence of such fact, and does not preclude him from giving evidence to prove that he was induced by fraud to give the note.

Appeal from a judgment recovered on the verdict of a jury by the direction of the court.

Edward S. Clinch, for app’lt; Lucien Birdseye, for resp’t.

The verdict was recovered for the amount of a promissory note made by the defendant on the 23d day of August, 1889, for the sum of $3,553, and payable to the order of the defendant, who endorsed it to the order of Thomas Griffiths,

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and by him it was' endorsed to the plaintiff. The making and delivery of the note were not denied by the defendant, but it was alleged by way of defense that Griffiths claimed to be the owner and inventor of processes for the manufacture of different articles óf paint, and also for the manufacture of a liquid called pyrodene. These articles of paint and this liquid are stated in the answer to have been falsely represented to the defendant as to their quality, utility and the profit that could be derived from their manufacture and sale. And it is alleged that these representations were fraudulently made for the purpose of inducing the defendant and others to associate together and form a corporation which was to become the purchaser of these inventions, or processes, and to issue its stock to Griffiths for the right to manufacture and sell the articles; and that the defendant with his associates were to purchase from Griffiths 315 shares of the capital stock of the corporation, and execute and deliver notes to him with a cash payment for the par value of the shares.

It was further alleged that the corporation was formed in this manner on the 27th of July, 1889, and the stock issued to Griffiths ; and that the defendant received from him eighty-four shares of the stock, and delivered the note in suit, together with two others and a cash payment for the price of such shares; that machinery had been obtained and a manufactory established to manufacture these different articles, which had proved to be useless by reason of the articles not being of the kind or quality represented by Griffiths, and that the stock had become worthless. And the answer contained an offer to surrender the eighty-four shares sold by Griffiths to the defendant, and demanded a surren-. der of this note, the other two having previously been paid and before the discovery of the fact that these representations were false.

Upon the trial the note was produced and read in evidence, and also the deposition of the plaintiff, in which he testified that he had purchased this note from Griffiths on the 20th day of March, 1890, “for value given by me on the said date in good faith.” And he repeated again that he gave value for the promissory note.

And this is all the evidence that was given upon the trial to establish the fact that the plaintiff had acquired the title to the note in suit in good faith and for value parted with by him. The case on the part of the plaintiff was then rested. And the defendant, by his own evidence and that of William Onderdonk, proposed to prove that these representations had been made by Griffiths before the note was made and delivered. This proof was objected to by the plaintiff, and the objection was sustained, and exceptions were taken to the exclusion of the evidence.

The objections were general, and the decision of the court apparently proceeded upon the ground that the plaintiff had been proved to be a bona fide holder of the note for value in the exclusion of the offered evidence. The decision, accordingly, was

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to the effect that the statement of the plaintiff in his deposition that he had given value for the note was conclusive against the defendant, and precluded him from giving evidence to prove that he had been induced to make and deliver the note to Griffiths by means of false and fraudulent representations.

It is no doubt the law, as the counsel for the plaintiff insisted upon the argument and in his brief, that if there had been a failure of consideration the burden would not xhave been upon the plaintiff to prove that he had become theCholder of the note in good faith and for value. This general principle was affirmed by the court in Evertson v. National Bank, etc., 66 N. Y., 14 , and Dutchess Ins. Co. v. Hachfield, 73 id., 226. But the defense in this case 'did not depend upon a failure of consideration, but it was placed upon the ground that Griffiths had fraudulently obtained the note from the defendant. And where that is the defense relied upon, there the burden is placed upon the plaintiff to establish the fact that he became a holder of the note in good faith and for value before its maturity in order to deprive the defendant of the benefit of this defense. Vosburgh v. Diefendorf 119 N. Y., 357 ; 29 N. Y. State Rep., 448; Canajoharie, etc., Bk. v. Diefendorf, 123 N. Y., 191 ; 33 N. Y. State Rep., 389; First Nat. Bank v. Green, 43 N. Y., 298 ; Hale v. Shannon, 32 N. Y. State Rep., 1079; Harger v. Worrall, 69 N. Y., 370 ; Stewart v. Lansing, 104 U. S., 505 .

The testimony of the plaintiff in his deposition that he obtained the note for value, general as it was in its terms, was not conclusive evidence against the defendant of the existence of that fact. He still had the right to submit the question of the plaintiff’s credibility to the jury, and to insist upon it that this evidence did not establish the truth of the- statement made. That is the rule in all cases where a vital fact may depend upon the testimony either of a party or an interested witness. Elwood v. Western Union Tel. Co., 45 N. Y, 549 ; Kavanagh v. Wilson, 70 id., 177 ; Brooklyn, etc., Co. v. Strong, 75 id., 591 ; Rochester, etc., Co. v. Loomis, 45 Hun, 94 ; 9 N. Y. State Rep., 592; Honegger v. Wettstein, 94 N. Y., 252 , 261.

And as the evidence of the plaintiff upon this subject was not conclusive in his favor, but at most presented a question of fact to be considered and decided by the jury, the defendant, notwithstanding that evidence, still had the right to prove that the note had been obtained from him by means of fraudulent representations on the part of the endorsee Griffiths. And after that evidence had been given, then the jury would be at liberty to give full effect and force to it, notwithstanding this statement of the plaintiff that he had paid value for the note, for they would be at liberty to discredit his statement on the ground that he was a party and interested in the result of the litigation. The evidence which was offered to prove that the note had been obtained by false and fraudulent representations from the defendant should, therefore, have been received by the court. It was error to exclude it. And the exceptions to the rulings resulting in that exclusion were well taken.

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The judgment should, therefore, be reversed and a new trial ordered, with costs to the defendant to abide the result.

Van Brunt, P. J., concurs.