Garlitz v. Runnels County Nat. Bank

RICE, J.

This suit was instituted by the appellee against appellant alone to enforce the collection of a note for the sum of $600, payable to it, alleged to have been executed by appellant and one W. S.. Davis, Jr.; the latter being at the time of the filing of this suit without the jurisdiction of the court. Appellant defended on the ground of a failure of consideration, and specially answered under oath that his signature to said note was obtained by fraud and false representations made to him by said Davis, the assistant cashier of appellee,' who, it is alleged, acted for and in behalf of the bank in obtaining said signature. Appellee filed a supplemental petition containing a general demurrer; and replied specially that, if said Davis obtained appellant’s signature to said note through fraud and false representations, he was acting for himself in obtaining said note, and not for appellee, who acquired same for value without notice before maturity. The case was submitted to the jury upon special issues, two of which required the jury to determine whether or not the note was obtained by Davis through fraud, as alleged, to' wit, questions 2 and 4. Question No. 2 was: “At the time the defendant signed the $600 sued upon, did he know that it was for $600?” No. 4: “Did W. ,S. Davis, Jr., represent to the defendant that the note sued upon was for $600, and, if so, did the defendant rely upon such representations, if any, and was he induced thereby to sign said note?”- After retirement and consideration of the case by the jury, they returned into open court with answers to all of said .questions except Nos. 2 and 4. Whereupon the court called their attention to the fact that said questions were unanswered, and sent them back for further deliberation, after which they again returned into court and informed the court that they were divided among themselves and could not agree to any answer to said questions Nos. 2 and 4, as to which they were hopelessly “hung.” Whereupon the court, with the consent of the parties, discharged the jury, but entered judgment for appellee, over the protest of appellant, on the partial verdict so rendered. Appellant assigns error on the action of the court in discharging the jury, and rendering judgment upon such partial verdict, over his protest, contending that the two issues which were not answered were material to his defense.

It is shown by the evidence that said Davis was the assistant cashier of the bank, and had been.for several years prior to this transaction. At the time of the execution of the note appellant testified that Davis asked him to sign a note for $100; that there was no one in the bank at the time, and Davis represented to him that the note was for $100; that he was a German, unable to read and.write English; that he had confidence in Davis, with whom it was shown that he had had frequent business transactions, and relied upon what he stated, believing his representations to be true; that if he had known the note was for $600 he would not have signed it; that the signature to the note in question was his, hut he was induced to sign the same under the belief that the note was only for $100.

[1] If questions 2 and 4, which were not answered, were material to the inquiry under investigation, then it was improper for the court under the circumstances to have rendered a judgment upon a verdict not answering them. See Paschal v. Acklin, 27 Tex. 173; Moore v. Moore, 67 Tex. 293, 3 S. W. 284; Newbolt v. Lancaster, 83 Tex. 271, 18 S. W. 740; Silliman v. Gano, 90 Tex. 637, 39 S. W. 559, 40 S. W. 391; Mabry v. Citizens’ Lumber Co., 47 Tex. Civ. App. 443, 105 S. W. 1156. In the case of Moore v. Moore, supra, Judge Gaines, in rendering the opinion, said: “It is the right of the parties to have the jury pass upon all the facts controverted by the pleadings, and when they have omitted to 'do this, however clear and undisputed the evidence upon the issues not found, the court cannot render judgment without usurping, in part, the functions of the jury, and thereby infringing a right guaranteed by the Constitution and laws.” We think, however, that if these questions were immaterial then, notwithstanding the same may have been incorporated in the charge, the court had the right to accept the verdict rendered disregarding such questions ; so that the question for our determination is whether or not said questions presented a material inquiry, and should have been answered by the jury. If the testimony of appellant is true (and this was a matter for the sole determination of the jury), then it seems that the note was procured by fraud and was not in fact his note.

[2] In 8 Cyc. p. 38, it is said: “While fraud in procuring the execution of an instrument may, of course, be shown between the original parties or parties with notice, it is a rule adopted for the protection of negotiable instruments in general, that the maker, indorser, or acceptor of a negotiable instrument procured through. fraud may be held liable to a purchaser for value before maturity without notice, and he will not be allowed to set up the defense of fraud to relieve himself of such liability.” This rule, however, is not without its limitations, and the same author says: “In some of the states fraud or circumvention in obtaining a note is a good defense, even as' against a bona fide holder, where there has been no culpable negligence on the part of the maker.. This on the ground that the note is illegal in its inception,, and is not the note or act of the party sought to be charged.” In note 38, same volume, page 40, it is said: “An instrument in the form of a negotiable promissory note signed by a person under circumstances devoid of any negligence on his part and delivered by him in ignorance of its true character and by means of fraud will be regarded as a forgery, and cannot be enforced, even in the hands of a bona fide purchaser” —citing, in support thereof, Green v. Wilkie, 98 Iowa, 74, 66 N. W. 1046, 36 L. R. A. 434, 60 Am. St. Rep. 184. See, also, Griffiths v. Kellogg, 39 Wis. 290, 20 Am. Rep. 48.

In Green v. Wilke, supra, a case in which the facts were somewhat similar to those of the present, it is said: “There are numerous cases in which parties intending to sign a contract have, through fraudulent representations, placed their signatures to negotiable instruments which have fallen into the hands of innocent purchasers. There is a very respectable line of authorities holding that, in the absence of negligence, the maker of such instrument is protected.” Further it is said, the writer quoting from Chipman v. Tucker, 38 Wis. 43, 20 Am. Rep. 1: “The inquiry in such cases goes back of all questions of negotiability, or of the transfer of the supposed paper to a purchaser for value, before maturity, and without notice. It challenges the origin or existence of the paper itself, and the proposition is to show that it is not; in fact or in law, what it purports to ,be, namely, the promissory note of the proposed maker.” The court says: “The facts of this case come within the rule of the Wisconsin cases, and do not contravene any rule announced in our own state. The 'defendant was an illiterate, man, who could not read nor write, except that he could barely write his.own name.” The court holding, as stated in the syllabus, that the illiterate maker of a note and mortgage for $1,000, who was fraudulently induced to sign them, supposing that he was signing a lease and a, note for $100 to a different payee, is not liable on the note, even when it is in the hands of an innocent purchaser, unless he was guilty of negligence in making it, since he was never a party to such contract.

In Griffiths v. Kellogg, supra, it is said: “Where an instrument, in the form of a negotiable promissory note of the defendant was not voluntarily made by her, but her signature'was procured by the fraud practiced upon her under pretense of getting her to sign a different note for a less sum, it was not her note, and she is not liable upon it, even to an innocent holder.” The same doctrine has been held in Stacy v. Ross, 27 Tex. 3, 84 Am. Dec. 604. See, also, 2 Rose’s Notes, p. 89.

For a more full discussion of the rule and its application to particular cases, see Daniel on Negotiable Instruments, vol. 1, § 847, p. 859 et seq.. After full consideration we are of the opinion that the defense presented by appellant’s plea, and which was embraced in issues Nos. 2 and 4, should have been passed upon by the jury, and that the court erred in rendering judgment on such partial verdict; and this, we think, is so irrespective of whether Davis, the payee therein, at -the time of the execution of the note, was representing himself or the bank-, be; cause, if appellants’ defense is true, the .fraud shown in obtaining it went to the very heart of the transaction, and rendered the note fraudulent and void from its inception; and this defense should prevail, if there was no negligence upon the part of the maker in executing the same, even against an innocent holder for value without notice under such circumstances. While we recognize the doctrine announced in the case of National Bank v. Carper, 28 Tex. Civ. App. 334, 67 S. W. 188, and other cases cited by appellant in support thereof, still we do not think the same is applicable here.

For the reasons above indicated, the' judgment of the court below is reversed, and the cause remanded.

Reversed and remanded.