First National Bank v. Stanley , 46 Mo. App. 440 ( 1891 )

Gill, J.

This is an action on a promissory note, negotiable in form, for $175, executed by defendant on August 22, 1889, and payable to H. A. Eberle, M. D., on or before April 22, 1890. Plaintiff’s title to the note comes by virtue of an alleged assignment from Eberle to Bohart and Bohart to it, all made as it is claimed for value in good faith and before maturity. The defense rests upon a claim of a fraud practiced on defendant Stanley by Eberle ; that said Eberle at the date of the note came to the defendant at his farm in LaFayette county, and negotiated with defendant in reference to curing him and his wife of certain ailments. Terms for an assured cure were agreed upon, and a contract was produced which defendant says was to be signed in duplicate, the one to be signed by Eberle and retained by Stanley, and the other to be signed by defendant and held by said Eberle. Defendant admits the signature to the note in suit, but says he signed the samé under the belief that it was the duplicate copy of the contract. However this may be, Bohart claims that when he purchased the instrument he had no notice or knowledge of the alleged fraud, and that any fraud in its execution cannot be used to impeach his, or the plaintiff’s, title. At the trial in the circuit court before a jury evidence was adduced on the part of defendant tending to prove Eberle’s fraud in securing the note, and that Bohart had notice thereof when he purchased the same, while the evidence on the part of plaintiff tended to establish the contrary. A verdict and judgment was had for defendant and plaintiff appealed.

I. The errors, manifest in this record, are such that the judgment cannot stand. We proceed to notice the more serious of these. First, as to the evidence in the case: Proctor, a hotel keeper at Odessa, Missouri, was permitted, over plaintiff’s objection, to relate to the jury what occurred at his house near 'the date of this note, when and where it seems that other parties had some violent talk with Eberle in relation to other notes; that Eberle became frightened and fled the hotel -in the night-time, etc. It is difficult to comprehend upon what theory this testimony was admitted. Any controversy that Eberle may have had with others had no possible bearing on the issues of this case. There was no connection shown or pretended between the two acts. The introduction of such evidence could only serve to inflame and prejudice the minds of the jury. Permitting such evidence was clearly error, and almost necessarily harmful, too.

Again the defendant produced at the trial a letter purporting to be written by Bohart. He denied its execution, but said his son wrote the letter and signed his name. Now (for the purpose, I suppose, of contradicting Bohart and to show that he, in person, wrote the signature ) defendant’s counsel called his, Bohart’s, attention to another letter written by said Bohart to Charles H. Pool, and he, Bohart, admitted the signature thereto to be his. Thereupon the court permitted the jury to take the two letters (the one confessed and the one denied) and compare the signatures, with the view of determining whether or not said Bohart wrote the disputed signature. This was also an error. The Pool letter had nothing whatever to do with the case; its contents were wholly foreign to every issue then being tried. The rule in this state seems now well settled, that “papers not a part of the case, and not relevant, as evidence, to the other issues, are excluded, and mainly on the grounds that, to admit such documents, would, lead to an indefinite number of collateral issues,” etc. A standard of comparison cannot thus be established in an issue of non est factum. Rose v. Bank, 91 Mo. 399; Edmonston v. Herring, 44 Mo. App.

II. Neithér do we feel satisfied with the court’s action in regard to instructions. There are two theories for the defense to this action, and it is not entirely clear which was relied on. If the defendant while exercising due and proper care was yet by the fraud and artifice and deceit of Eberle induced to sign the note in question, when he thought he was executing another and different paper, then it would seem the plaintiff could not recover, regardless of its bonafides or want of notice. Shirts v. Overjohn, 60 Mo. 305 ; Frederick v. Clemens, 60 Mo. 315 ; Cannon v. Moore, 17 Mo. App. 92; 1 Dan. Neg. Inst., sec. 849, 850. However, the courts have exacted a rather high degree of care on a party signing a negotiable promissory note under the belief that he was affixing his name to another instrument. In Shirts v. Overjohn, supra, the rule gathered from the best-considered cases is said to be, “that where it appears that the party sought to be charged intended to bind himself by some obligation in writing, and voluntarily signed his name to what he supposed to be the obligation he intended to execute, having full and unrestricted means of ascertaining for himself the true character of such instrument before signing the same, but by the failure to inform himself of its contents, or by relying upon the representations of another as to the contents of the instrument presented for his signature, signed and delivered a negotiable note in lieu of the instrument intended to be signed, he cannot be heard to impeach its validity in the hands of a bona fide holder.” In defending then such a note in the hands of an innocent holder, purchased for value before maturity, it is not enough to prove merely a signing the wrong paper by mistake or inadvertence, or even, that the character of the obligation was misrepresentéd by another. The law respects too highly the character of commercial paper, as well as the rights of the holder thereof, to permit such a defense in the hands of an innocent third party. The courts give full scope to the rule, that, if one of two innocent parties must suffer, the loss will be visited upon him whose negligence has brought it about. Now, it is clear from defendant’s own statement that he was not sufficiently careful when signing this note. He evidently relied upon Eberle’s statement without investigating for himself. He will not be permitted to shut his eyes and blindly put his name to a negotiable note, send it out to the world, and then defend a suit brought thereon by a bona fide holder on the grounds that he did not mean to put his name to that kind of an obligation. As we read the evidence brought up in this record, then, we find no ground for a defense on this note, if in the hands of a bona fide holder.

The only way to defeat this suit is, first, to establish Eberle’s fraud in procuring the note, and, then, by showing Bohart’s knowledge thereof at the time of the purchase, destroy plaintiff’s position as an innocent holder. If this is done, then the same defense can be made against the plaintiff as if the suit was prosecuted by Eberle, the payee. It is not enough however that Bohart may have purchased the note from Eberle under such circumstances as would likely arouse suspicion as to the integrity of the note, or that Bohart bought under such circumstances as would put a prudent man on inquiry; but before his title can be impeached on this account, he must have had actual notice of the facts which impeach the validity of the paper. Hamilton v. Marks, 68 Mo. 167; Mayes v. Robinson, 93 Mo. 122. Plaintiff ’s' third instruction correctly declared this feature of the law. It seems doubtful, however, if the last clause of that instruction has any place in this case. It declares that the burden of showing Bohart’s bad faith in the purchase of the note rests with the defendant. It is true that the mere possession of a negotiable instrument indorsed by the payee imports, prima facie, that the holder acquired it tona fide, for value, before maturity, and without notice of any facts impeaching its validity. “But when the maker proves that the instrument had its origin in fraud, it is incumbent then upon the holder' to prove that he received it tona fide, before maturity, and for value.” Johnson v. McMurray, 72 Mo. 282. Again, if Bohart, in good faith and for value, purchased from Eberle the note in suit before maturity, and if said Bohart subsequently assigned the same to the plaintiff bank, then plaintiff acquired the same title possessed by Bohart, even though the bank at the time of the purchase may have then had notice of Eberle’s fraud in procuring the note. Craig v. Zimmermun, 87 Mo. 478. Hence plaintiff’s instruction, numbered 8, should have been given, since it correctly declares this feature of the law.

Judgment reversed and cause remanded.

All concur.