Majority
p. 301MARSHALL S. P. POLLARD, Plaintiff and Respondent, v. HERMAN ROCKE, Defendant and Appellant.
Headnote
Promissory Note.—Negotiable Paper.1. Principle, that where a note has been stolen, or obtained by fraud or duress, or fraudulently misapplied or diverted, the holdei', in order to recover, must show that he is a boná-Jide holder for value,
HAS HO APPLICATION
where the defendant (being the maker) defends on the ground that the note was given to A. for the purchase-money of certain property sold byA. to him, which A. represented belonged to himself, but which did not in
p. 302Before Monell, Curtis, and Sedgwick, JJ. Decided November 29, 1873.
fact belong to A., but belonged to B., for whom A. was acting as agent, and that A. had fraudulently and wrongfully passed the note to the plaintiff.
The action was upon a promissory note made "by the defendant and payable to the order of one J. T. Miller, who, it was alleged had before maturity, and for a valuable consideration, endorsed it to the plaintiff.
The defendant denied that the plaintiff received the note before maturity or for a valuable consideration, and alleged that it belonged to said Miller. That the note was given to Miller in part payment for certain malt sold by Miller to the defendant, and which malt Miller represented belonged to him. That the malt did not belong to Miller, but belonged to one Ernst, for whom Miller was acting as agent, and that the plaintiff had full knowledge of all these facts when he received the note.
The defendant testified that he purchased the malt of Miller, giving the no,te in suit for a part of the price. He supposed the malt was Miller’s. Afterwards Ernst claimed the malt belonged to him. The latter testified that the malt belonged to him; • that Miller was his agent for its sale. He was asked, “What was he (Miller) to do with the proceeds of the sale of the malt?” He answered, “ He was to return it to me after he had collected it.” Q. “After he had sold it?” A. “After he had sold, and coEected the money.’ ’
There was no evidence impairing plaintiff’s claim to. be a ~bona-ftde holder. The court directed a verdict for the plaintiff, and the defendant excepted and appealed from the j udgment.
George Carpenter, of counsel for appellant, urged:
To recover on a note which has been lost, stolen, or
p. 303
fraudulently misapplied or diverted, or to which the transferrer has "by reason of fraud no title, the holder is "bound to show affirmatively, upon such facts being established; first, that he received the note in the usual course of his business, or gave full value; and second,. in good faith, and without knowledge of the facts.
It must also appear that there were no circumstances which ought reasonably to have put him upon his inquiry (Bailey v. Bidwell, 13 Mees, and Wes. 73; approved in Smith v. Braine, 3 Eng. L. and Eq. 379, and in Hassey v. Tomes, 4 Id. 531; see also Case v. Merchants B. A., 4 Comst. 166, and end of p. 168 ; Farmers & C. N. B. v. Noxon and al., 45 N. Y. 762 , 765; Edwards on Bills, 319; Wardell v. Howell, 9 Wend. 170 ).
For aught that appears, plaintiff may have been perfectly cognizant of all the facts, and taken the note with full knowledge, and simply to cover up the fraud of Miller.
If plaintiff had knowledge of the facts and the fraud of Miller, then he is only an accomplice of and in • privity with Miller, and could not recover upon the note, any more than Miller could if he had not transferred it.
If plaintiff had no knowledge of the fraud of Miller, and received the note in good faith, and gave value for it, it would have been a simple matter for him to have proved it.
Stephen D. Stephens, attorney, and of counsel for respondent.
This was at most, I think, a case of mistaken confidence. Miller was entrusted to sell the malt and collect the price of the sale. He was bound to account for such price to his principal. Having failed to do so, it seems to me the latter alone
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must suffer. There was nothing in the facts disclosed by the evidence bringing the case within the principle, that when a note is procured by duress or fraud, the burthen rests upon the holder tó show title. In that class of cases, the maker having shown that the note was obtained from Mm by frand or duress, he is in a position to call on the holder to establish the bona-fide of his possession.
In this case there was no pretence that the note had been procured- from the defendant in any improper manner. It was merely attempted to show that Miller, the agent, had cheated, or was endeavoring to cheat, hi s' principal. The defendant had purchased the malt, and his note was for part of the price; and he cannot claim that because Ernst was the principal and the owner of the malt, it is a defence to his note. Miller’s authority to sell and collect covered, certainly as to other persons, authority to sell on credit and to take notes in payment.
The plaintiff was presumptively the bona-fide holder of the note, and nothing was shown removing such presumption, so as to put any burthen on him of strengthening his title.
The judgment is correct and should be affirmed.
Curtis and Sedgwick, JJ., concurred.
Cases cited
- Farmers' & Citizens' National Bank v. Noxon 45 N. Y. 762 at 765 p. 303
- Wardell v. Howell 9 Wend. 170 p. 303