Ross v. Drinkard's Adm'r , 35 Ala. 434 ( 1860 )

A. J. WALKER, C. J.

The charges given and refused by the circuit court present two questions. Those questions are, whether the endorsee of a bill of exchange, who obtains it before maturity, has the onus cast upon him of proving that he was a purchaser for value, when it is shown that there was either a want of consideration between the original parties to the bill of exchange, or a failure of consideration; and whether such endorsee has the onus cast upon him of proving that he paid a valuable consideration, when it is shown that the bill was procured by fraud.

It seems to be a doctrine of universal acceptance, in the English law, that where a bill has been procured by fraud, felony, or duress, the onus of proving the payment of value devolves upon the endorsee. — Duncan v. Scott, 1 Camp. 100; Rees v. Headfort, 2 ib. 574 ; Bailey v. Bidwell, 13 Mees. & Wels. 72; Berry v. Alderman, 5 J. Scott, 95, (14 C. B. 78 E. C.L.) 94; Byles on Bills, 88, (61 L. L.) 121; Chitty on Bills, 648. The American decisions are generally, and the decision by this court in Wallace v. Bank, 1 Ala. 565, to the same effect. — Holme v. Karsper, 5 Binney, 465; Rogers v. Morton, 12 Wend. 484; Vathier v. Zane, 6 Gratt. 247.

"Upon the point as to the effect of a want or failure of consideration between the original parties, the English authorities are not so uniform. We find it was decided by Lord Tenterden, in 1827, that the want of consideration for a bill being shown by the defendant, it was thrown upon the plaintiff, a second endorsee, to prove that he gave value for it, or that value was given by his immediate endorser. — Thomas v. Newton, 2 Car. & Payne, 606, (12 E. C. L. 285.) This decision was followed, in 1831, by the case of Heath v. Sanson, in the king’s bench, in which .three of the judges, including Lord Tenterden, against one dissenting, indicated the opinion, that it was incumbent upon the endorsee to prove a valuable consideration for his endorsement, whenever it appeared that the paper was taken under such circumstances as that the endorser himself could not recover. All the judges concurred in the opinion, that if the bill was originally procured by fraud, the proof of value paid by the endorsee was indispensable. — 2 Barn. & Ad. 291. This last decision was reviewed, and overruled so far as the effect of proving a want of consideration was concerned, in the latter case of Whitaker v. Edmunds, 1 Mood. & Rob. 366. — See the report of this case in Chitty on Bills, m. p. 618, note h; S. C., 1 Ad. & El. 638 ; Greenleaf’s Over. Cases, 171. The case of Mills v. Barber, 1 Mees. & Wels. 425, was decided in the exchequer, in 1836, after great consideration, and after consultation with the court of king’s bench. Two of the judges of the court of king’s bench retracted the opinions given by them in Heath v. Sanson, and the court of exchequer decided, “ that where there is no fraud, nor any suspicion of fraud, but the simple fact is that the defendant received no consideration for his acceptance, the plaintiff is not called upon to prove that he gave value for the bill.” This decision has been followed in all the later English cases. — Bailey v.Bidwell, 13 Mees. & Wels. 72; Robinson v. Reynolds, 2 Ad. & Ellis, (N. S.) 634; Smith v. Braine, 16 Ad. & El. (N. S.) 244, (71 E. C. L. 242;) Berry v. Alderman, 5 J. Scott, 95, (78 E. C. L. 94.) The doctrine asserted in Addison on Contracts,(989-990,) and Byles on Bills, (88,) is consistent with these late English decisions, and is thus stated in the latter work: “It was formerly held, that the defendant could call on the plaintiff to prove consideration, by showing the bill to be an accommodation bill, or that the defendant received no value. But it is now definitely settled by all the judges, that mere absence of consideration received by the defendant will not entitle him to call on the plaintiff to prove the consideration which the plaintiff’gave.” This may be considered a correct statement of the law on this point, as it is now understood and received in England.

The decisions in New York, Pennsylvania and Virginia, assert the same doctrine. — Morton v. Rogers, 14 Wend. 575; Rogers v. Morton, 12 ib. 484; Holme v. Karsper, 5 Binney, 465; Knight v. Pugh, 4 Watts & Ser. 445 ; Vathier v. Zane, 6 Grattan 246; Wilson v. Lazier, 11 Grattan. 477. We do not understand thejdecision in Goodman v. Simonds, (20 Howard, 843,) as affecting the questiou in hand. The opinion in that case does not touch the question of the onus of proof in reference to the endorsement.

After this review of the law as recognized in England and in some of the other States, we come to our own decisions. This court has, as may be gathered from its decisions in Wallace v. Bank, (1 Ala. 567,) Marston v. Forward, (5 Ala. 347,) Thompson v. Armstrong, (7 Ala. 258,) and Boyd and Mason v. McIver, (11 Ala. 822,) unequivocally asserted, that fraud in putting a bill in circulation, or the want or failure of consideration, would cast upon the endorsee the burden of proving the payment of value. Neither the opinion in Pond v. Lockwood, (8 Ala. 674,) nor Minell v. Reed, (26 Ala. 780,) is in conflict with those decisions. The former of those cases discusses the question as to what are the rights of a holder for value, but does not touch the question of the onus of proof as to^tlie valuable consideration of the endorsement. The latter cáse pertains to a payment made to the payee of a note after its endorsement. It is very clear that the presumption in favor of the payment of value by the endorsee could not be affected, by anything which might transpire between the original parties to the note or bill after its endorsement.

The law upon the main points of this case has been, as we have seen, the subject of adjudication in this court many years ago ; and there has been no cloud of doubt thrown over those cases by any subsequent decision. Although we find those adjudications inconsistent with the law as it now exists in England, and in several of the sister States, we deem it our duty to abide by them. To overrule them, would, perhaps, tend to give our jurisprudence a prejudicial character for instability, and interfere with subsisting rights, by establishing a rule of evidence, the anticipation of which was prevented by the decisions of this court, aud in reference to which the parties did not shape their conduct. We decide, therefore, that it is the law of this State, that when the drawer or acceptor of a bill of exchange has proved that it was procured by fraud, or that there was a want or failure of consideration, the presumption that the endorsee paid value is overcome, and it is incumbent upon him to prove that fact, before he can claim the protection which is vouchsafed by the law to a purchaser for value without notice.

[2.] We do not deem it necessary to criticise the charges, as to what would constitute a fraud in the execution of the bill. We deem it sufficient for the guidance of the court upon a future trial to say that, if the person who took the bill, procured it by a false statement that it was an ordinary note, when he knew it to be a bill of exchange; and if the parties who gave the bill, did it in ignorance that it was a bill of exchange, and, trusting in the statement made to them, wrere misled by it, — a fraud has been committed, and the defendant would be entitled to relief, to the extent of the injury done by the fraud, as against an endorsee who did not pay value. We think the law upon this point is correctly stated in Townsend & Milliken v. Cowles, (31 Ala. 428,) in the following words: “If the defendant was in fact ignorant of the law, aud the other party, knowing him to be so, and knowing the law, took advantage of such.ignorance to mislead him by a false statement of the law, it would constitute a fraud.” It is conceivable that injury might result from a fraudulent representation that a bill of exchange was an ordinary promissory note; for, under o\r law,'theincident of damages upon protest does not attach to notes, and the makers of such notes are not precluded from making defenses existing between the original parties, when they have passed into the hands of an innocent holder, as is the case with bills of exchange, which are governed by the commercial law.

The judgment of the court below is reversed, and the cause remanded.