Security Finance Co. v. Mills

Civil action to recover the amount due on six negotiable promissory notes executed by the defendant to the Brenard Manufacturing Company for a number of radio machines, said notes having been endorsed and sold to the plaintiff, according to its evidence and contention, in good faith, before maturity, for value and without notice of any infirmity in said notes or defects in the title of the party negotiating them.

The execution of the notes is not denied, but defendant alleges that he was induced to sign them, together with an agency contract, by the false and fraudulent representations of the agent of the Brenard Manufacturing Company, in that it was stated by said agent, with intent to deceive the defendant, that each of the radio machines sold to the defendant was equipped with a patent static rejecter or remover which would eliminate all static and enable the operator to pick up foreign broadcasting stations with ease, at any time of the day or night; whereas in fact no such rejecter exists.

The contract signed by the defendant at the time of the execution of the notes in suit contains the stipulation that "no verbal or other agreement not appearing herein shall be binding on you" (Brenard Manufacturing Company). There is no mention in said contract of a static rejecter of any kind. The defendant testified that he was able to read and write; that he did read the contract and notes before signing them, and that he knew their contents.

Upon denial of liability and issues joined, the jury returned the following verdict:

"1. Did the plaintiff purchase the notes sued on before maturity and in good faith, and for value without notice of any infirmity in the notes or defects in title of the persons negotiating them? Answer: No.

"2. Was W. H. Mills, trading as Mills Tire Company, induced to buy the radio sets and inducted to sign the contracts and notes in question by any fraudulent representations? Answer: Yes.

"3. What amount, if anything, is the defendant indebted to the plaintiff? Answer: Nothing."

Judgment on the verdict for defendant; plaintiff appeals, assigning errors. The validity of the trial is called in question by numerous exceptions and assignments of error, but we shall not consider them seriatim, as it is necessary to award a new trial for failure of the court to instruct the jury as requested by the plaintiff in one of its special prayers, that if they found the facts according to the evidence or as it tends to show, the first issue should be answered in favor of the plaintiff.

Notwithstanding the defendant's plea of fraud in the treaty, and evidence tending to support it (Furst v. Merritt, 190 N.C. 397,130 S.E. 40), we find no competent evidence on the record of notice to the plaintiff of such fraud prior to the purchase of the notes in suit. Bank v.Burgwyn, 108 N.C. 62, 12 S.E. 952. However, as the case goes back for another hearing, the defendant may yet show, if he can, such notice. Bankv. Burgwyn, 110 N.C. 267, 14 S.E. 623.

There is this important distinction between fraud in the treaty and fraud in the factum: Instruments procured by means of the former are voidable as between the original parties and binding in the hands of innocent third persons, while those induced by means of the latter are void. Medlin v. Buford, 115 N.C. 260, 20 S.E. 463. Nothing can be founded on an instrument that is absolutely void, whereas from those which are only voidable, fair titles may flow. Furst v. Merritt, supra.

New trial.