Case ID: monaghan_1/html/0759-01.html
Source: Caselaw Access Project
Author: {"author": "Per Curiam,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Hey v. Frazier.
    
      An offer of evidence which contains substantial averments not contained in the notice of special matter, is inadmissible.
    In an action on a promissory note, where the defendant seeks to overthrow the presumption that the plaintiff obtained it in good faith and in the regular course of business before maturity, he must give the plaintiff distinct notice to show title, and it seems that it is not sufficient to give notice of want of consideration or that the note was negotiated contrary to the agreement of the parties to the note.
    It seems that the defendant, in addition to showing that the note was negotiated contrary to the agreement of the parties, to complete his ■defense, must also prove that the plaintiff was not a bona fide holder for value, or that there was fraud in its execution, or that the plaintiff received it from a finder or a thief or from one who acquired it fraudulently.
    Jan. 30, 1885.
    Error, No. 121, July T. 1884, to C. P. No. 3, Phila. Co., to review a judgment on a verdict for plaintiff in an action of assumpsit on a promissory note by Chas. Erazier et al. against John Hey, at March T. 1882, No. 256. Before Mercur, C. J., Gordon, Paxson, Trunkey, Sterrett, Clark and Green, JJ.
    The narr. was upon a promissory note for $500, dated Dec. 28, 1880, at twelve months, made by Jacob S. Culbertson to the order ■of the defendant and by him endorsed. The pleas were non assumpsit, payment, set off, with leave, etc.
    The defendant gave the following notice:
    “You will please take notice that on the trial of the above case the defendants will give in evidence the following special matter, to wit: The note, a copy of which is filed in this case, was given under the following circumstances: Jacob S. Culbertson, the maker, had been concerned with Adam Forepangh in the building operation, in which the said Forepaugh was represented by his agent, William Holloway. Upon the settlement of the accounts between the said Forepaugh and Culbertson, it appeared that the said Culbertson was indebted to the said Forepaugh in the sum of $500, which said sum it was agreed between the parties should be paid by the work and labor to be done by the said Culbertson.
    
      “ The said Forepaugh desired to have some security that the said Culbertson would perform work and labor to the said amount, and the said Forepaugh, by his agent, the said Holloway, requested the defendant to become security for the said Culbertson, that the said work would be done by him when requested. That the defendant consented to become security, and, in order to put the obligation of the defendant in wilting, the note aued on in the present case was prepared and signed by the said Culbertson, and endorsed by the defendant. That at the time of said endorsement by the defendant, it was expressly agreed by and between the defendant and the said Forepaugh, through his agent the said Holloway, that neither the said Culbertson, nor the defendant were to be called upon to pay the said note in money, but that the said note was given merely to secure the said Forepaugh that the said Culbertson would perform work to the amount of $500 when requested. That neither the said Forepaugh, nor the said Holloway, nor any one acting for either of them, has ever requested the said Culbertson to perform any work on account of the said $500, and the said Culbertson has at all times been ready and willing to perform such work whenever requested. That the defendant endorsed the said note simply for the accommodation of the said Culbertson, and without receiving any consideration whatsoever, and because defendant believed and still does believe that the said Culbertson would perform the said work whenever requested.
    “ That the plaintiffs in this suit are not bona fide holders for value of the said note, but that they hold the same simply as agents of the said Forepaugh, he being at present the real owner thereof, and that this suit is brought in the name of the plaintiffs simply for the purpose of endeavoring to avoid the defence which the defendant has to the said note.”
    The plaintiff offered in evidence the note and rested.
    The defendant called as a witness Jacob S. Culbertson, and offered to prove by him as follows, upon the trial before Yeekes, P. J. r
    “ The note sued upon and read in evidence was given under the following circumstances: Jacob S. Culbertson, the maker, had been concerned with Adam Forepaugh in a building operation in which the said Forepaugh was represented by his agent, william Holloway. Upon the settlement of the accounts between the said Forepaugh and Culbertson, it appeared that the said Culbertson was indebted to the said Forepaugh in the sum of $500, which said sum it was agreed between the parties should be paid by the work and labor to be done by the said Culbertson.
    
      
      “ The said Forepaugh desired to have some security that the said Culbertson would perform work and labor to the said amount;; and the said Forepaugh, by his agent, the said Holloway, requested the defendant to become security for the said Culbertson that the said work would be done by him when requested. That the defendant consented to become security and in order to put the obligation of the defendant in writing, the note sued on in the present case was-prepared and signed by the said Culbertson and endorsed by the said defendant. That at the time of the said endorsement by the defendant, it was expressly agreed by and between the defendant and the said Forepaugh through his agent, the said Holloway, that neither the said Culbertson nor the defendant were to be called upon to pay the said note in money, but that the said note .was given merely to secure the said Forepaugh that the said Culbertson would perform work to the amount of $500 when requested. [That the said Forepaugh at the time of the giving of the said note agreed by his said agent that the said Forepaugh would hold the said note till the end of the year for which it was drawn as such security.] That neither the said Forepaugh, nor the said Holloway, nor any one acting for either of them, has ever requested the said Culbertson to-perform any work on account of the said $500, and the said Culbertson has at all times been ready and willing to perform such work whenever requested [and within the said year repeatedly offered himself for that purpose]. That the defendant endorsed the said note simply for the accommodation of the said Culbertson and without receiving any consideration whatsoever, and because the defendant believed that the said Culbertson would perform the said work whenever requested.” It was agreed by counsel for the plaintiffs- and defendant that the notice given was sent under the rules of the Court by the defendant to the plaintiffs’ counsel.
    Counsel for the plaintiffs objected to the admission of the said evidence: 1, because the notice was not sufficient; 2, because the evidence, if admitted, was not sufficient to put the plaintiffs on proof of consideration. The court sustained the objection upon the ground that the said evidence would not put the plaintiffs upon proof of the consideration of the transfer of the said note. Exception.
    
      The assignment of error specified the action of the court in refusing to admit the defendant below to prove as contained in the-offer, quoting the offer, but not the objections or ruling.
    
      Theodore F. Jenkins, for plaintiff in error.
    When a note or bill is originally infected with fraud, invalidity or illegality, on proof of that, the holder must show that either he, or some one through whom he claims, has given value for it. Byles on Bills, 118; Chitty on Bills, 100.
    Fraud in this sense means such a violation of an agreement between the original parties, in relation to the note, or such voluntary change of the status one bears to the other, as will work an injury or wrong to one of them. And whenever a note is negotiated in violation of an agreement relating to its negotiation, on proof of tbe same, the holder, in order to recover, must show that he paid value bona fide.
    “"Where a promissory note, endorsed by the payee for the accommodation of the maker, is negotiated by the latter in violation ■of an agreement between them, the holder cannot recover against such payee unless he received the note in good faith for a valuable consideration and without notice of the arrangement.” Small v. Smith, 1 Denios, 583; Lenheim v. Wilmarding, 55 Pa. 73.
    “ In an action on a bill, proof of any such circumstances of suspicion as might be left to the jury as evidence of fraud in the original negotiation of the bill, will be sufficient to call upon the plaintiff to prove that he is a holder for value.” Hill v. Featherstone, 3 H. & N. 284.
    Where it was found that an acceptance was by one partner in fraud of the partnership, and contrary to the partnership articles, the onus is cast on the holder of the bill of showing he gave value. Hogg v. Skeen, 18 C. B., N. S., 426.
    Evidence that a note signed in the name of a co-partnership was made by one of the partners for his own benefit and not on •account of the co-partnership business, nor with the knowledge of the partners, was held sufficient to throw the burden of proof upon the holder that he was a bona fide holder for value, as the note had been fraudulently put in circulation. Munroe v. Cooper, 5 Pick. 412; Bank v. Gilliland, 23 Wend., 311; Dickson v. Primrose, 2 Miles, 366; Porter v. Gunnison, 2 Gr. 297.
    “ Where the immediate endorser of a bill to the plaintiff has. parted with the bill in violation of good faith, want of consideration ■as between him and the plaintiff is presumed so as to throw upon the latter the onus of proving consideration.” Smith v. Braine, 16 Ad. & E. 244.
    
      Samuel W. Cooper, with him W. W. Montgomery and Samuel Wagner, for defendants in error.
    -The court must disregard the portions of the offer of evidence in brackets, as they did not appear in the notice of the special matter. The rule that the allegata and probata must agree applies to a notice of special matter. Thomas v. Mann, 28 Pa. 520.
    The fraud which affects the distant holder of a note must exist at the inception of the paper. If, after transferring the note, Forepaugh violated any agreement, it could not affect the holder of the note, who is presumed to have taken it for a good consideration and in good faith. See Ellicott v. Martin, 1 Md. 509.
    An offer to prove that the note was not to be paid in money was an offer to contradict the written instrument by parol evidence, which the law does not allow. Hill v. Gaw, 4 Pa. 495 ; Anspach v. Bast, 52 Pa. 356; Wharton v. Douglass, 76 Pa. 273.
    Evidence that the note was accommodation paper, is not sufficient to put plaintiffs on proof of their consideration. The law will still presume that the plaintiff received the note for value. Parsons on Notes and Bills, 184, citing many cases. The defend■ant must still show that the holder took without consideration. Parsons on Notes and Bills, 192; Byles on Bills, 122; 2 Greenl. Ev. p. 199, ed. of 1883 ; Daniel’s Neg. Inst. 174 et seq.
    The rule is not changed by a notice from defendant to plaintiff that he will be called upon to show consideration on the trial of the case. Reynolds v. Chettle, 2 Camp. 596; Knight v. Pugh, 4 W. & S. 445.
    The fact that the maker is a mere surety and received no consideration, which was known to the plaintiff, and plaintiff had agreed to give time to the principal, will not relieve him from liability. Manley v. Boycot, 2 E. & B. 45.
    In King v. Milsom, 2 Camp. N. P. 5, it was held that the facts that a Bank of England note was lost, payment stopped and advertised in a paper taken by defendant, who first said he did not remember how it came into his possession, but afterward stated that he had given change for it over a liquor bar, did not require title to be shown.
    Under the English decisions, in an action by an endorsee of a promissory note against one of the original parties, the law will presume that the plaintiff received the note for value, until the ■defendant proves that it had its inception in such a state of fraud, force, or felony, as would cast a taint on the paper. Whitaker v. Edmunds, 2 W. & R. 366; Bassett v. Dodgin, 10 Bing. 40; Mills v. Barber, 1 M. & W. 425; Smith v. Martin, 9 M. & W. 304.
    Ellicott v. Martin, supra, is on all fours with this case. It was there held that the fact that the drawer of a draft had not placed the defendants in funds or goods to meet the draft upon its maturity, as he had promised to do, was not a case of fraud. See also 6 Md. 509; Morton v. Rodgers, 14 Wend. 585; Swift v. Tyson, 16 Pet. 1; Goodman v. Simonds, 20 How. 348.
    In Knight v. Pugh, supra, the facts offered to be proved were substantially as in the present case. That was the case of a failure to convey land which was the consideration for the note. See also Brown v. Street, 6 W. & S. 221; Albrecht v. Strimpler. 7 Pa. 477; Gray v. Bank, 29 Pa. 366; Callen v. Fawcett, 58 Pa. 113; Phelan v. Moss, 67 Pa. 67.
    Before the holder of negotiable paper can be required to prove his bona fides, it must appear, either by direct evidence or circumstances, that the instrument was obtained originally or was put in circulation subsequently by fraud or undue means. Want or failure ■of consideration, or even that an agent or broker, to whom it was intrusted for negotiation, had fraudulently misappropriated the proceeds of its discount, will not be sufficient for that purpose. Sloan v. Bank, 67 Pa. 472; Dingman v. Amsink, 77 Pa. 114; Barnet v. Offerman, 7 Watts, 130.
    In Third Nat. Bank v. McCann, C. P., 11 W. N. C. 480, it was held that a note which had been obtained by false representations was not tainted with fraud. This decision is supported by Battles v. Laudenslager, 84 Pa. 451.
    Nothing but clear evidence of knowledge or notice or mala tides can impeach the prima facie title of a holder of negotiable paper taken before maturity. The commerce of the country requires it. Moorehead v. Gilmore, 77 Pa. 123.
    Express notice was necessary. Beltzhoover v. Blackstock, 3 Watts, 21; Holme v. Kasper, 5 Bin. 471; Abietz v. Mellon, 37 Pa. 367; Albrecht v. Strimpler, 7 Pa. 476.
    Feb. 9, 1885.
   Per Curiam,

The offer of evidence contains several substantial averments not contained in the notice of special matter furnished by the plaintiffs in error. This reason was sufficient to justify the exclusion of the evidence offered. The suit was on a negotiable note. The presumption therefore is that the holder obtained it in good faith and in the regular course of business before its maturity. If such presumption is to be overthrown, and the holder is required to show the consideration which he gave for the note, it is not sufficient to give notice to him of the want of consideration, or that it was negotiated contrary to the agreement of the parties to the note. The plaintiff in the action is entitled to distinct notice that he will be called on to show his title on the trial. Beltzhoover v. Blackstock, 3 Watts, 20; Knight v. Pugh, 4 W. & S. 445.

Still further the defendant below did not offer to prove that the plaintiffs were not bona fide holders for value of the note, or that there was any fraud in its execution; nor was it averred that they received it from a finder or a thief or of one who acquired it fraudulently.

Judgment affirmed.