Case Name: Vathir v. Zane
Court: Supreme Court of Appeals of Virginia
Jurisdiction: Virginia
Decision Date: 1849-07
Citations: 6 Gratt. 246
Docket Number: 
Parties: Vathir v. Zane.
Judges: 
Reporter: Virginia Reports
Volume: 47
Pages: 246–267

Head Matter:
Lewisburg.
Vathir v. Zane.
1849. July Term.
(Absent Cabell, P. and Brooke, J.)
1. The maker of a negotiable note proving fraud in the procurement of the note by the payee ; the holder to entitle himself to recover, must prove that he is a bona fide holder for value.
2. In an injunction to a judgment upon a note procured by fraud, the bill charges only the fraud in the procurement of the note by the payee, and the assignment to the holder, who had recovered a judgment thereon; but does not charge that the holder was an endorsee without value, or that he had notice of the fraud. The defendant in his answer avers that he is a holder for value without notice of the fraud, and states the consideration which he gave for the note. Held : That as this statement of the answer is not responsive to any allegation of the bill, it must be proved.
3. The written agreement between the maker and the payee of the note, in relation to the contract in pursuance of which the note was made, having been lost at the time the judgment was recovered on the note, and without which agreement the maker could not make his defence at law. Held : That is ground for the jurisdiction of a Court of equity.
In August 1840, Platoff Zane obtained from one of the Judges of the General court an injunction to a judgment recovered against him in the Circuit court of Ohio county, by John L. Vathir. In his bill he alleged that in the winter of 1836-7, being then young and inexperienced in business, he met with a certain James R. Johnson, in the City of Philadelphia, who induced the plaintiff to purchase from him eighteen lots of ground situate in what was called South St. Louis ; an addition to the City of St. Louis in the State of Missouri. That to induce the plaintiff to make the purchase, said Johnson represented that the lots were of great value, adjoining the City of St. Louis, and must become a part thereof; and that his title to the lots was good, and he could make an unincumbered title to the purchaser. That confiding in the truth of these representations, the plaintiff agreed to purchase the eighteen lots aforesaid, at the price of about 14,000 dollars, with interest thereon payable semi-annually; and to give his promissory notes therefor, payable at different periods, within from two to three years from the time of the purchase. That he did give his notes for the purchase money; and at the same time, gave him his notes for the interest on each of the payments as they respectively fell due. And thereupon Johnson gave to him a title bond for said lots, by which he bound himself to execute to the plaintiff a good and sufficient deed in fee simple for said lots, upon the payment of the last instalment of the purchase money, and interest; which paper, the plaintiff had lost or mislaid.
The bill further alleged, that the representations aforesaid of said Johnson were utterly false. That the lots were from two to four miles below St. Louis; were not, and in all probability never could become a part of the city, or be valuable as town lots, or for any other purpose. That Johnson derived his title to said lots from the City of St. Louis; that he had not paid the purchase money for the same, or complied with his contract with the said city in relation to said property; that his title thereto was wholly defective ; and that he could not make, or procure to be made to the plaintiff, a title to said lots. That notwithstanding these things, said Johnson had assigned one of the notes aforesaid, bearing date the 28th day of November 1836, payable two years after date, to said Johnson’s order, for 652 dollars 50 cents, to John L. Vathir. That Vathir had brought a suit upon the said note, against the plaintiff, and had recovered a judgment at the spring term 1839, of the Circuit court of Ohio county.
The bill made Vathir and Johnson parties defendants ; and prayed for an injunction, and for general relief.
Vathir answered the bill. He alleged that some time in the year 1838, and before the note mentioned in the bill, became due, Johnson, for full value paid to him by the defendant, endorsed and delivered the note to the defendant. That the note was made in the City of Philadelphia in the State of Pennsylvania, and that by a statute of that State, (which was set out in the answer,) the said note was put upon the footing of bills of exchange. That the said note was endorsed and delivered by Johnson to the defendant, in the City of Cincinnati in the State of Ohio ; and that by a statute of that State, (which was also set out in the answer,) the endorsement vested the property in the note in the defendant; and authorized him to bring a suit thereon in his own name. That he had no knowledge of the transactions set out in the bill, upon which the said note was founded, and he could not therefore either admit or deny them.
By the leave of the Court, the plaintiff, in March 1842, amended his bill, and stated that when the original bill was filed, the agreement between Johnson and himself for the purchase of said lots, was lost or mislaid; but that it had since been found: and he exhibits it with his bill. The plaintiff again amended his bill in June 1843, and alleged that whilst the action at law of Vathir against him was pending, the said article of agreement was mislaid or lost, and could not be found, and was not found until long after the rendition of the judgment and the filing of the original bill in this case. And that pending said action at law, and long after, the plaintiff did not know where said Johnson was; nor during that time did he know, or have reason to believe, even if he had found said Johnson, that he would have submitted to be examined as a witness in the said action at law; and that without the said article of agreement, or the evidence of said Johnson, the plaintiff did not know of any means by which he could prove what was the consideration of the note on which the said action was founded: and for this reason the plaintiff did not set up the defence of fraud in the procurement of the said note in said action. And, moreover, his counsel was of opinion that the defence could be made in equity if not made at law.
Vathir answered the amended bill, and alleged that in the fall of 1838, Johnson being indebted to him in the sum of 600 dollars, offered in payment of his indebtedness, to endorse and assign to this defendant the note of the plaintiff for the sum of 652 dollars 50 cents, dated the 28th November 1836; and the defendant consented to receive said note in full satisfaction and payment of said debt so due to him from Johnson; and the defendant was induced so to do from the belief that Johnson was utterly unable to pay this defendant the amount of his claim in any other mode. And he insisted that he became the holder of said note of the plaintiff for a full and valuable consideration, without notice of fraud or other equity, and before the same became due and payable..
Johnson also answered the bill. He admitted the sale of the lots in South St. Louis, by himself to the plaintiff; and that the note on which the judgment enjoined in this case was founded, was one of the notes executed to him by the plaintiff on account of the said purchase. He alleges that he never did sell and transfer any of said notes of the plaintiff to any person, for a valuable consideration received at the time; but that being indebted to the firm of Ramsay & Vathir of Cincinnati, he endorsed one of the plaintiff’s notes for 652 dollars 50 cents, in part payment for his indebtedness to said firm, and at the same time assigned two other notes, one against J. W. Davis and one against H. Powers, amounting to about 1750 dollars, and delivered them to John L. Vathir on account of his said indebtedness : Said notes were assigned for the payment of a debt due said firm prior to said assignment, on account for collection and collateral security, in part payment tor the amount that respondent was then owing said firm.
After stating how he held the lots sold to the plaintiff, and the grounds on which he expected at the time he made the sale, to be able to make a good title to the lots, he stated that he had been unable to comply with his contract with the City of St. Louis, of which he had purchased the lots; and in consequence of his failure, they had reverted to the said city; and it was therefore out of his power to make a title to the plaintiff to the whole or any part of the lots for which the plaintiff’s notes were given.
The agreement between Johnson and Zane, described Johnson as of St. Louis in the State of Missouri. and Zane as of Wheeling in Virginia. It was executed in Philadelphia, and bore date on the 28th of November 1836. It set out the sale of the lots by numbers in South St. Louis, by Johnson to Zane, for the sum of 14,590 dollars, to be paid one fourth in one year from the date ; and the remaining three fourths in ten years, with interest thereon so long as they remain unpaid, payable annually in advance; and that Zane had executed his negotiable notes for the principal of the purchase money, and also his several negotiable notes for the amount of interest which would annually accrue according to the agreement. And then Johnson covenants with Zane, that as soon as the said several notes for principal and interest are paid, he will execute and deliver to Zane a good and sufficient deed for the said lots, with a covenant of warranty against himself and the City of St. Louis, and against all persons claiming under him or the said City of St. Louis. The loss of this agreement as stated in the bill, and the finding of it after the filing of the original bill, was proved.
The note on which the judgment enjoined was founded was dated at Philadelphia, November 28th, 1836, and by it Zane promised to pay James R. Johnson, two years after date, 652 dollars 50 cents, without defalcation, for value received; and it was endorsed by Johnson to J. L. Vathir or order.
The proofs made it abundantly clear that a gross fraud was practised on Zane by Johnson, in the sale of the lots. And it was made equally clear that Johnson had not complied with his contract with the City of St. Louis, under which he held the said lots ; and that they had been forfeited, and resumed by the city authorities, in the mode prescribed by the statute of the State of Missouri, under which they had been disposed of by the city.
Among the witnesses examined was Charles D. Gillespie of St. Louis. He stated that about the month of December 1836 or January 1837, he met Johnson in the City of New York, where witness understood he had made large sales of lots in South St. Louis, for merchandize, or in fact for any thing he could get. That on the return of the witness to St. Louis, he met Johnson in Pittsburg, Pennsylvania, and Johnson then told witness he had made large sales of said lots in South St. Louis to the plaintiff Zane; and wanted to negotiate or trade off the notes which he had taken for lots sold to said Zane, for goods, wares and merchandize in Pittsburg.
Johnson w'as examined as a witness by the plaintiff. He stated that the note on which the judgment enjoined was founded, was one of the notes given by Zane, for the interest of the purchase money of the lots in South St. Louis. He also stated that the note was not passed to Vathir, either as payment of or security for the debt he owed Vathir, but that this and two other notes were given to him for collection, either one of which he said he would pass to witness’ credit when it was collected. But the credibility of this witness was impeached, not only by the evidence of his fraudulent conduct in connexion with his sales of lots in South St. Louis, but by the testimony of witnesses called to speak to his general character, and all of whom said that from his general character they would not believe him when on oath.
It was agreed that any book purporting to be the statute law or decisions of either the State of Pennsylvania or Ohio should be received without further authentication.
The cause came on to be heard in the Circuit court in June 1846, when that Court perpetuated the injunction to the judgment, but with costs to the defendant Vathir. And thereupon he applied to this Court for an appeal, which was allowed.
The cause was argued in writing by Patton, for the appellant, and Russell and Price, for the appellee.
For the appellant :
In the petition of appeal it was said that “ it is probable, (though not otherwise proved than by the testimony of Johnson, who is unworthy of credit,) that the note in question was given for part of the purchase money.”
It was not intended to waive the objection to the decree, that this vital fact was not made out in proof by the plaintiff. The defendant in his answer, says he has no knowledge of the transactions between Zane and Johnson, and cannot admit the allegation that the note was given as part of the consideration of the fraudulent sale of St. Louis lots. The plaintiff is thus put on the proof of this essential fact. There is no proof but Johnson’s, and that is admitted to be unworthy of credit. It is attempted to supply this proof by reference to the agreement or title bond of Johnson, as it is called.
The only fact derived from the title bond in favour of the hypothesis, is, that the note is dated the same day that the title bond is dated; all the other speculations are contradicted by the title bond. Dividing the 14,590 dollars, into four instalments, each instalment would be 3647 dollars 50 cents; and 652 dollars 50 cents, would not be the interest on one instalment, or two instalments, or three instalments, or four instalments, either for one year, or two years, or any other number of years. The title bond expressly states that Zane had given his notes for the instalments, payable at the time specified (in the bond), and also his note for the annual interest on said instalments.
It is impossible, then, that this note can be for interest under that agreement according to this evidence.
The fact then stands upon the unproved allegation of the plaintiff, and is one which ought to be very clearly made out by a party who is himself exacting the strictest proof from the holder of a negotiable note, that he gave value for it; and this on the ground that he has himself done what is necessary to entitle him to demand such proof of the holder of the note, who would otherwise be deemed a holder for value without proof.
It is erroneous, therefore, to assume, as the appellee’s counsel does in his note, that “the appellant, in his petition, concedes that there was fraud in the procurement of the note.” It is not controverted that Johnson fraudulently sold land to Zane ; but that this note was part of the consideration given for that purchase, is not conceded.
2d. But suppose the fact were established, then the question principally argued by the counsel for the appellee is this, that while he does not deny that the appellant as holder of this paper, is protected from liability for, or loss by reason of such fraud, and that every holder of negotiable or commercial paper, and especially of such a note as this, executed in Philadelphia, is pre sumed in general to be a holder for value ; yet he insists that when the drawer has proved fraud, that then the holder must prove that he has given full value, and took the note bona fide.
If it be admitted, for the sake of the argument, that where a note is proved to have been procured by fraud, that in a suit at law, by the holder against the maker, the plaintiff would be bound to prove that he gave value for the note, it is to be observed that this is not an action at law, and it is deemed clear that the authorities cited do not apply.
The plaintiff at law has obtained judgment. The defendant comes into equity to be relieved from the judgment. It is submitted that it is essential for him to aver every thing which shews his title to relief. He is as much bound to negative facts which would entitle the plaintiff at law to recover, as to affirm those which are necessary for himself to prove. It is as necessary for the plaintiff in equity to aver that the plaintiff at law did not give value for the note, as it is for him to aver that it was procured by fraud. It is necessary, on the most familiar rules of equity pleading, to allege every thing in the bill which is necessary to shew a title to relief; otherwise the fact is not in issue. A defendant in equity cannot be deprived of the benefit of his response to the allegations of the bill, by the plaintiff omitting to aver and calling on him to answer to the truth or falsehood of any fact, negative or affirmative, essential to the plaintiff’s right to relief. The right to answer, and the benefit of the answer, is inherent in proceedings in equity. Any such averment which is omitted is not in issue, and all evidence applicable to it would be irrelevant. Thompson v. Jackson, 3 Rand. 504; Thornton v. Gordon, 2 Rob. R. 719. It is not, therefore, admitted that apart from Vathir's answer, the appellee is entitled to relief.
On the contrary, as the bills (neither amended nor original) aver that the note was transferred to Vathir without value, there is an inherent vice in the plaintiff’s case, which deprives him of all title to the aid of the Court. And this is especially so when he comes into a Court of equity to be relieved from a judgment at law. He must shew, in such case, that wrong and injustice is done by the judgment; and this, upon the concession of the argument on the other side, has not been shewn, if the plaintiff at law was a holder for value. The fact that he was not, is not averred, and therefore is not put in issue : and the averment in his answer that he was, was wholly superfluous.
No equity appears on the face of the bill, by reason of the omission of the above essential averment in the bill. Tapp's adm'r, &c. v. Rankin, 9 Leigh 478 ; and the case there cited.
To perpetuate the injunction, becáuse of the absence of proof of what is not denied, would be a surprise on the defendant.
It is conceded by the counsel for the appellee, that the endorsement of negotiable paper is of itself prima facie evidence, in general, that the endorsee has paid value for it. But it is contended that when the payee of a negotiable note, has proved that the note was procured by fraud, the general presumption of the holder having given value is rebutted; and ho may be called on to prove that he gave value for it. It is certainly true that many of the authorities cited by the counsel, seem to go to establish this; and it was a strange doctrine, in connexion with what seems to be universally conceded, that a mere failure or want of consideration, although proved to be absolute and total, will not throw any burden of proving such payment of value on the holders. But in this case the defence is a failure of consideration, and not a case of a note procured by fraud in the proper sense of the authorities.
But the doctrine of the cases cited by appellee’s counsel, seems to be novel both in England and this country; and has never yet received the sanction of this Court. It has, for the first time, to say whether this inconvenient, and (as it seems to me) mischievous restraint on commercial paper, shall be adopted here.
That the doctrine was otherwise a long time held, I refer the Court to the cases cited in the opinion of Senator Tracy, in 14 Wend. R. 585, (cited on the other side;) and to that very lucid and able opinion, for a strong argument against the rule insisted on upon the other side. The case in 5 Binney, and indeed most of the cases cited on the other side, are cases where the note was put into circulation by fraud, not by the voluntary act of the drawer. And it is to that class of cases, as when a note is lost or stolen, or when it is fraudulently used for a purpose different from that for which it was made, and not when it is issued voluntarily, and for the purchase of property, the title of which fails, that a person to whom it has been endorsed can be required to prove he gave value for it. This would be to subject the holder to be affected by equities between the original parties; or to subject every endorsee of commercial paper, to preserve evidence of the consideration he gave for the note.
The case of Swift v. Tyson, 16 Peters’ R. 1, is a direct authority in point, and in most of its features, similar to the case at bar. That was a bill accepted in consideration of a purchase of property, the title of which was defective, and the acceptor induced to purchase by fraudulent representations of title and value. It was held by the Supreme court, that the holder of the bill was to be presumed to have given value for it. And further, that the plaintiff, on being called on to say what he had given for the bill, admitting by his answer that he took it for a pre-existing debt, did not rebut the legal presumption, but confirmed it.
On the merits of the case, then, the case stands thus: The plaintiff has given a promissory note in Philadelphia, to be paid “ without defalcation for value received ;” and the consideration has failed, or it was procured by fraud. But it has been transferred by endorsement to one who is a bona fide holder for value, before it became due; and who is not even alleged to have had knowledge of any fraud or want of consideration. And by the laws of the State where the note was made and where it was endorsed, such an instrument is made negotiable, and put on the footing of commercial paper; and the appellant, as a holder of the note for value, holds it discharged from any defence legal or equitable, which the drawer would have against the payee, both by the plain terms of the Pennsylvania statute, and its interpretation as expounded by its Courts. Cromwell v. Arrott, 1 Serg. & Rawle 180; Smyth v. Hawthorn, 3 Rawle’s R. 355.
For the appellee:
Upon the first and principal question which relates to the merits, the appellant, in his petition, concedes that there was fraud in the procurement of the note, and relies only on the advantage he supposes himself to possess by reason of the negotiable character of the paper, and his own relation to it as a holder for value without notice. The evidence of fraud, in fact, is too strong to be controverted.
Upon the general principle, then, that fraud violates a contract, this note is of no validity ; and Plane could not be held liable upon it. But the appellant has undertaken to establish, that his case stands upon an exception to this general principle.
It is not denied that the exception exists in point of law, or that, by virtue of the act of Pennsylvania, it is applicable to this particular paper. But it rests upon the appellant to prove the facts which entitle him to the benefit of this exception. If he would avoid the consequences resulting, by general principle of law, from the fraud in the origin of the note, he must prove not merely that the note is negotiable, and that it has been endorsed to him, but that in fact he paid value for it before it fell due, without notice of the fraud.
It has already been suggested that there is no proof in the cause touching this point, except the testimony of Johnson. He proves that the note was given to the appellant as collateral security for a pre-existing debt, which would be insufficient to take the case out of the general principle that contracts procured by fraud, are void. If Johnson really required Vathir (as the latter alleges,) to take the note as full payment, and not as collateral security for the debt, it is singular that he did not require him to take it “ without recourse,” instead of giving a blank endorsement. But Vathir insists upon rejecting the testimony of Johnson, (which we cannot defend,) and relies solely on the effect of his own answer.
He has not thought proper to offer a tittle of proof tending to shew how Johnson became indebted to him; how much he owed; when he gave him this note; or for what consideration. He has not even set forth the particulars' of this transaction in his own answer as fully as his own interest might have prompted him to do, if the particulars would bear scrutiny.
In the absence of what only Vathir could supply, the case must rest on the answers he has filed, and on the presumptions arising from established facts. Apart from Vathir's answers, it must be admitted that the appellee was entitled to relief. It is true that the endorsement of a negotiable note is of itself prima facie evidence in general, that the endorsee has paid value for it. But when it has been shewn that the payee procured the note by fraud, this general presumption is rebutted ; and the holder cannot recover without proving that he paid value. It is not necessary in such a case, for the maker to go beyond the proof of fraud, and prove also that the holder had notice of the fraud, or paid no value for the endorsement; but the burden devolves on the holder to prove that he did pay value. “ The holder (says Chitty on Bills 69, 5 Am. edi. 1842,) is not bound to prove that he gave value, until the defendant has first made out a case of fraud, or suspicion of fraud, upon establishing which, the holder must then prove that he received the bill or note before it was due, and that he gave value for it.”
In Munroe v. Cooper, 5 Pick. R. 412, which was an action by an endorsee against the maker of a note, the Court below rejected evidence of fraud in the inception of the note, for the reason that the defendants did not offer to prove that the plaintiff took the note over due, or with notice of fraud. But the Supreme court granted a new trial to let in the evidence of fraud; and said, “ this fact being established, will throw upon the plaintiff the burden of proof to shew that he came by the possession of the note fairly, and without any knowledge of the fraud.” The rule is broadly stated by Nelson, J. in delivering the opinion of the Court in Rogers v. Morton, 12 Wend. R. 484. “ A promissory note imports a valuable consideration on its face, and possession is presumptive evidence of property rightfully acquired: but when the maker shews that it was obtained from him and put into circulation by force or fraud, all the above intendments of law are rebutted, and proof becomes necessary. The cases are full on this point.” And see 14 Wend. R. 575, 580. In Bailey v. Bidwell, 13 Mees. & Welsb. 73, which was an action by an endorsee against the maker of a note, the defendant pleaded that the consideration of the note was illegal, and that the plaintiff had not paid value for it. Illegality having been proved, the Court held that the onus then fell on the plaintiff to prove that he paid value for it. Parke, B. said, “ it certainly has been, since the late cases, the universal understanding, that if the note were proved to have been obtained by fraud, or affected by illegality, that afforded a presumption that the person who had been guilty of the illegality would dispose of it, and would place it in the hands of another person to sue on it; and that such proof casts upon the plaintiff the burden of shewing that he was a bona fide endorsee for value.” And see observations of Alder son, B. in the same case, and in 13 Mees. & Welsb. 665. See also Story on Prom. Notes 196; Bailey on Bills 492; Rees v. Marquis of Headfort, 2 Camp. R. 574, and other authorities referred to in the above cases.
According to the general law Merchant, it seems to be sufficiently clear, that it was incumbent on Vathir in this case, to prove that he was an innocent holder for value before the note fell due.
Zands liability, however, is governed by the local law of Pennsylvania, as expounded by its Courts. Story on Conf. of Laws 317, 332; Story on Prom. Notes 172; Story on Bills, § 158, &c.
The statute of Pennsylvania applicable to paper of this kind, is quoted in one of the answers of Vathir. According to the exposition of the Courts of that State, it places this paper on the footing of bills of exchange, and subjects it to the general rules of the commercial law. Cromwell v. Arrott, 1 Serg. & Rawle 180. “ It was meant (said Yeates, J. in that case, p. 185,) that notes of a certain description, when endorsed, should be placed in the situation of bills of exchange, and subjected to the restrictions of commercial usage.”
And the particular rule of the law Merchant upon which we have insisted, has been adopted and applied to promissory notes by the Courts of Pennsylvania. Holme v. Karsper, 5 Binn. R. 469, was an action by the holder of a note against the endorser; and evidence was offered by the defendant to shew that the maker of the note had fraudulently put it into circulation ; the defendant having given notice that he would require proof of the value paid by the holder. The evidence was rejected by the Court below; and for that reason the judgment was reversed by the Supremo court. Tilghman, C. J. said: “ It lies on the defendant, therefore, to shew some probable ground of suspicion before the plaintiff is expected to do any thing more than produce the note on which he founds his action. But this being done, it is reasonable that the holder should be called on to rebut the suspicion. All that is asked of him, is to shew that he has acted fairly and paid value. The defendant offered to prove that the note endorsed by him had been put in circulation by the drawee, by fraud and falsehood. If he had proved this, enough would have been done to throw on the plaintiff the proof of the manner in which he came to the possession of the note, and what ho paid for it. But from this evidence, he was precluded,” &c. See also Beltzhoover v. Blackstock, 3 Watts’ R. 20; Knight v. Pugh, 4 Watts & Serg. 445; Whart. Bills, § 26. It may therefore be regarded as settled, that after Zane had established the fact of fraud in the inception of the note, Vathir could only recover upon it by proving affirmatively, that he paid value for the note before it became due.
It is equally clear, in point of fact, that he has offered no such proof, unless his answers are to be received as evidence on this point. But the answers are not in this respect responsive to any allegation in the original or amended bills. The original bill simply states that the note in question was assigned by Johnson to Vathir, but when, or for what consideration, the bill does not aver or suggest; nor is the defendant Vathir called upon to disclose. The amended bills are wholly silent about the matter. The plaintiff contents himself, as he has a right to do, with the averment of such fraud as in general vitiates a contract, and of the fact that a security fraudulently obtained, has come to the possession of Vathir by assignment: leaving the holder to set up and prove any matter, if he can, which in his particular case avoids the effect of the fraud. Vathir thereupon, does in his answer, attempt to avoid the weight of the plaintiff’s case, by alleging affirmatively, that he paid value for the note before it fell due.
Is this portion of his answers evidence ? The plaintiff does not admit the truth of the answers, but has put him regularly upon the proof of them. The general rule as to the effect of an answer not responsive to the bill, is stated in a note to Daniell’s Cha. Pr. (Perkins’ edi.) p. 984. “Where the answer of the defendant is not responsive to the bill, but sets up affirmative allegations in opposition to, or in avoidance of, the plaintiff’s demand, and is replied to, the answer is of no avail in respect to such allegations; and the defendant is as much bound to establish the allegations as made, by independent testimony, as the plaintiff is to sustain his bill.” Many authorities are there referred to ; but it is unnecessary to adduce authority for a proposition so familiar.
Although, therefore, the appellant appears to point with complacency to the circumstance that the plaintiff does not even suggest that Vathir is not a bona fide holder for value without notice; yet the absence of such a suggestion in the bills, and of all independent proof in support of the answers, leave Vathir without any ground to stand upon.
A Court of equity had jurisdiction to give the relief. The plaintiff alleges and proves the loss of the agreement between Johnson and himself, and its being found after the filing of the original bill. Marine Ins. Co. v. Hodgson, 7 Cranch 332; Gainsborough v. Gifford, 2 P. Wms. 424; 2 Story’s Eq. Jur. § 879.

Opinion:
Allen, J.
The appellee alleges in his bill, that by the false and fraudulent representations of a certain James R. Johnson, he was induced to enter into a contract for the purchase of a number of lots in what was called South St. Louis, an addition to the City of St. Louis in the State of Missouri; and that the promissory note in the proceedings mentioned was given for part of the purchase money. The note was made in the City of Philadelphia, and the laws of Pennsylvania, applicable to such an instrument, place it on the footing of bills of exchange. Before the note fell due it was endorsed by the payee Johnson, to the appellant. This, according to the answer of the appellant to the amended bill, occurred in the fall of 1838. The appellant claiming to be a bona fide holder of the note, denies all knowledge of the transactions on which it is alleged to have been founded. This denial devolves on the appellee the burden of proving that the note was given for part of the purchase money of the lots, which Johnson the payee contracted to sell to him, under the circumstances set forth in the hill. The answer of the payee admits that the note was given for the consideration charged in the bill, and the fact is distinctly proved by his deposition. But his answer is not evidence against his co-defendant; and his credit as a witness has been so successfully assailed by the appellant, that the counsel of the appellee admits he is unworthy of credit.
The charges of fraud and imposition practised upon the appellee in the sale of the lots in question, and the want of title in Johnson to the property he agreed to sell, seem not to be controverted, and are fully made out by the testimony. But that the promissory note, the subject of controversy, was given in consideration of that purchase, is not conceded, and must be proved. The evidence upon this point, rejecting the testimony of the payee, is not perfectly clear: still in the absence of all opposing proof, enough is disclosed by the record to satisfy the mind, that the note was given in consideration of the lots agreed to be purchased. It bears date on the same day with the article of agreement for the sale of the lots. Neither the maker or payee appears to have been a resident of Philadelphia, where the contract was made and note executed. The agreement recites that the purchase money of 14,590 dollars, was to be paid in instalments, one fourth part thereof in one year, the residue at future periods, with interest on the said instalments as long as they remain unpaid, annually in advance; and that the said Zane had given to said Johnson his negotiable notes for the instalments, and also his several negotiable notes for the amount of interest which will annually accrue according to the agreement. It is proved by a witness that in the year 1836 or '37, Johnson spoke of the sale of lots he had made to Zane, and wished to trade off the notes given by Zane for the purchase money. At that time he must have been the holder of the note in question, as according to the appellant's answer, it was not endorsed by Johnson to him until the fall of 1838. These circumstances, in the absence of evidence of any other dealing or transaction between the parties, raise the presumption that this note was given in part for the purchase money of lots ; and probably was given for the interest on one of the deferred instalments, which may not have been for the precise three fourths of the purchase money.
The consideration for which the note was made, being proved, and the fraud practised on the maker, and the entire failure of the consideration fully established, there can be no doubt that as between the payee and the maker, the latter would be entitled to relief. But the note has passed by endorsement into the hands of a third person; and the question arises whether under the pleadings and proofs in this cause, the maker has shewn himself entitled to relief against the endorsee. In con sidering this question, it becomes necessary to ascertain what were the precise allegations of the bill; and what facts it became necessary for the appellee to establish, to make out a prima facie case in his favour. The bill alleged the fraud of the payee, in the sale of the lots : That the note was given for part of the purchase money, and that the note had been assigned by the payee to the appellant, who had brought suit and recovered a judgment for the amount. But there is no allegation that the appellant was an endorsee without value, or that he had notice of the fraud. As a general rule, the endorsement of a negotiable note is of itself prima facie evidence that the endorsee has paid value for it. But the authorities referred to in the argument, shew, that where the payee has procured the note by fraud, this general presumption is rebutted, and the holder cannot recover without proving that he has paid value. The reason on which this exception to the general rule rests, is briefly stated by Parke, B. in Bailey v. Bidwell, 13 Meeson & Welsby 73. "It certainly," he says, "has been the universal understanding since the later cases, that if the note were proved to have been obtained by fraud, or affected by illegality, that afforded a presumption that the person who had been guilty of the illegality, would dispose of it, and would place it in the hands of some other person to sue upon it; and that such proof casts upon the holder the burden of shewing that he was a bona fide endorsee for value." The same principle has been acted on in Massachusetts, in Munroe v. Cooper, 5 Pick. R. 412; in New York, in the case of Rogers v. Morton, 12 Wend. R. 484; and more especially in Pennsylvania, where this note was made, in the case of Holme v. Karsper, 5 Binn. R. 469. Nor is the requisition for such proof, confined to cases in which the note was put into circulation by fraud, as where it has been lost or stolen. In the case of Rogers v. Morton, 12 Wend. R. 484, the note was voluntarily given for an assumed balance, on a settlement of accounts. The balance was in part made up by a charge for a draft of which the creditor was never holder; and proof of this fraud committed on the makers at the time the note was given, was held sufficient to throw upon the plaintiffs the burden of shewing that they were bona fide holders for value. To the same effect is the case of Thomas v. Newton, 2 Carr & Payne 606. Swift v. Tyson, 16 Peters' R. 1, does not touch this question. There it appeared in evidence that the bill had been taken in payment of a pre-existing debt, and the Court decided that a pre-existing debt was a fair and valuable consideration within the protection of the general rule. It would seem, therefore, that where, as in this case, the fraud in the procurement of the note is averred and proved, the maker has brought himself within the exception to the general rule. The onus probandi is shifted, and it devolves upon the holder to shew that he has paid value. Whether the receiving the note in payment of a pre-existing debt, constitutes such a valuable consideration as to bring the party within the protection of the general rule, need not be enquired into.. In this case the appellant rests upon the affirmative allegations of his answer, and the presumption arising from the mere endorsement. The latter we have seen is not sufficient after the proof of fraud; and the allegations of the answer not being responsive to the bill, must be proved. The only testimony bearing upon this point, is the deposition of the payee; and the appellant has proved that he is unworthy of credit.
It is insisted, that as the appellant has obtained a judgment at law, and the appellee comes into equity for relief, he is as much bound to negative facts, which would entitle the plaintiff at law to recover, as to affirm those which it is necessary for himself to prove. This would be against all the rules of pleading in chancery, and would be imposing on the plaintiff an impracticable duty. He may not be cognizant of the facts upon which the plaintiff at law relies, to entitle himself to recover, notwithstanding the matter relied upon by the party seeking relief in equity might, if standing alone, make out a proper case for the interposition of that Court. The appellee had a right to rest his case upon the averment of such fraud as vitiates the contract; and of the fact that the security so fraudulently procured, had come to the possession of the holder by assignment. If the circumstances under which the holder acquired the paper, are such as still entitle him to recover from the maker, they must be shewn in his answer; and not being responsive to any allegation in the bill, must be proved.
This case rests upon the presumption arising from the endorsement alone. I therefore think, that under the state of facts appearing in the record, the appellee has shewn himself entitled to the relief prayed for.
As to the objection made, not in the answers, but in this Court, to the jurisdiction of the Court to grant relief, it seems to me that the accidental loss of the agreement between the appellee and Johnson, furnished a sufficient excuse for the failure to make the defence at law. That agreement was necessary to prove the consideration of the note; and the accident of its loss at the time, justifies the interposition of a Court of equity.
I think the decree should be affirmed.
The other Judges concurred in the opinion of Allen, J.
Decree affirmed.