Court Opinion

ID: 6956797
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:38:58.016214+00
Date Added: 2024-06-11T16:08:18.595008
License: Public Domain

Mr. Justice Scholfield delivered the opinion of the Court: The rule at common law was, that fraud could not be pleaded or given in evidence as a defense to an action on a specialty, unless it vitiated the execution of the instrument, and that the defendant in such action was not allowed to show that he was induced to execute it by fraudulent representations as to the nature or value of the consideration. This rule, however, is materially modified by our statute relating to ¡Negotiable Instruments, by which it is provided that in actions upon bonds for the payment of money or the performance of covenants, as well as upon bills and notes, it may be set up as a defense that the instrument was executed without any good or valuable consideration, or that the consideration has failed in whole or in part. Under this statute it is competent to show that the defendant was induced to execute the instrument by false and fraudulent representations, as that is one mode of showing a failure of consideration. White v. Watkins, 23 Ill. 482 ; Greathouse v. Dunlap, 3 McLean, 304; Case v. Bangton, 11 Wend. 108 ; Leonard v. Bates, 1 Blackford, 172 ; Fitzgeral v. Smith, 1 Ind. 310 ; Chambers v. Gaines, 2 Greene, 320. And, for this purpose, it may be shown that the consideration expressed in the instrument is not the real consideration which induced its execution, but that it was, in fact, entirely different. G. W. Ins. Co. v. Rees, 29 Ill. 272. In that case, speaking of the statute referred to, and admitting parol evidence to explain the consideration, it was said: “It is impossible that this statute can be made effective in any other way than by receiving such proofs; and in receiving them, the old rule, that written contracts can not be varied by parol, becomes, in all such cases, ineffective. “The ruling of this court, therefore, in Lane v. Sharp, 3 Scam. 566, and in all subsequent cases founded upon that, is to be considered as having no application to a case where no consideration, or a partial or total failure of consideration, is properly pleaded in an action brought upon an instrument of writing for the payment of money or property, or the performance of covenants, or conditions to an obligee or payee.” No necessity is now perceived to overrule that case, or modify the rule there announced. In the present case, however, the pleas do not, in our opinion, sufficiently show either a want or failure of consideration to constitute a defense to the plaintiff’s cause of action. The facts alleged in each plea are, substantially, the same, the only difference being in stating the legal inference to be drawn from the facts. The only existing fact alleged to have been represented by the plaintiff to induce the defendant Gage to sign the bond, is, that the assets of Carhart, Lewis & Co. were ample to pay all the debts of the firm ; but it is nowhere alleged, in direct terms, that this representation was known to be untrue at the time it was made, or that it was, in fact, untrue. There is a general allegation that all the representations proved to be false, but this is argumentative, and entirely too indefinite. Besides, it seems, from the succeeding explanation showing why the representations proved to be false, that it was only intended that this allegation should apply to the other representations, which will be hereafter noticed. The pleas were, in this respect, clearly defective. Sims v. Kline, Breese (Beecher’s ed.) 302; Slack v. McLagan, 15 Ill. 248 ; White v. Watkins, supra. The other representations, upon the faith of which it is alleged the defendant Gage signed the bond, do not constitute such a fraud as, in the law, renders the consideration void. They are, in substance, that the plaintiff promised and agreed, to and with the defendant, that if the defendant would sign the bond the plaintiff would retire from and forever quit carrying on the wholesale hat, cap, fur and buck goods business in Chicago, and would, in no manner, compete with the new firm, of which the defendant was to become a member, in such business; and that the defendant, wholly relying upon such representations and promises, and for no other consideration whatever, did, etc. It can not be said that these representations and promises were false when made, for, until the proper time arrived, and plaintiff refused to comply with them, it could not positively be known that- they would not be performed. Even if, at the time they were made, it was not intended to comply with them, it was but an unexecuted intention, which has never been held, of itself, to constitute fraud. If they legally amount to anything, they constitute a contract. “As distinguished from the false representation of a fact, the false representation as to a matter of intention, not amounting to a matter of fact, though it may have influenced a transaction, is not a fraud at law.” Kerr on Fraud and Mistake, 88. So it is said in Bigelow on Estoppel, 481: “The representation or concealment must, also, in all ordinary cases, have reference to a present or past state of things; for if a party make a representation concerning something in the future, it must generally be a statement of intention or opinion, uncertain to the knowledge of both parties, or it will come to a contract, with the peculiar consequences of a contract.” In Gallagher v. Brunel, 6 Cowen, 346, this question is fully and carefully discussed, and it is there held, that to warrant an action for a deceitful representation, it must assert a fact or facts as existing in the present tense. A promise to perform an act, though accompanied, at the time, with an intention not to perform, is not such a representation as can be made the ground of an action at law. The party should sue upon the promise, and if this be void he has no remedy. Treating the representations alleged in the plea as amounting to a contract between the plaintiff and the defendant, we fail to perceive a want or failure of consideration. The allegation is, that, relying upon these representations and promises, and for no other consideration, the defendant did, etc. These representations and promises, then, were the consideration, and the misfortune with the defendant is, not that he did not have them, or that anything has since transpired whereby he is not permitted to resort to them, but merely that he has not received the benefit from them which he was authorized to expect. In other words, he signed the bond! upon the faith of a contract with the plaintiff, which the plaintiff has since failed to keep. The case would, in principle, have been nowise different had plaintiff agreed to have paid him a sum of money by a given day, in consideration of his signing the bond, and when the day arrived failed to make, payment. It could scarcely be claimed in such a case, while the defendant would have had his remedy upon his contract, that there was no consideration, or that it had failed. This case is plainly distinguishable from the class of cases where, in the sale and delivery of personal property, or the purchase of real estate, the title fails, it is held, that such failure may be interposed as a defense to a suit brought for the recovery of the purchase money. In those cases the consideration is the title to the property, while here it is the representation and promise of the party to do an act in the future. The principle is clearly and concisely stated in 1 Parsons on Notes and Bills, 203, thus : “We must, however, discriminate between a failure of consideration and a failure of benefit resulting from it. A promises B to do a certain thing, and B makes his note to A in consideration of this promise. Then A fails entirely to perform his promise, but sues B on his note. If B retains A’s promise, or if the contract is such that A is always and permanently held on his promise, B can not defend against the note on the ground of a failure of consideration; but if B cancels A’s promise, and A accepts this, the contract is so far canceled and annulled, and then the consideration for the note fails.” See, also, Willets v. Burgess, 34 Ill. 498. The demurrer to the pleas was properly sustained.- The objection taken to the sufficiency of the declaration is not well founded. The condition of the bond is, “that if the said Carhart shall pay all of said debts, claims and demands due or to become due, by the said firms of Carhart, Lewis & Co., and Carhart, Lewis & Tappan, to any and to all persons whatsoever, * * * * and save, indemnify and keep harmless the said Charles A. Lewis therefrom,” etc. The reasonable construction of this language is, that the debts should be paid when they became due; and as to those that were then overdue, the law required payment to be made immediately. Churchill v. Hunt, 3 Hill, 321. It was not necessary that plaintiff should have been compelled to pay these debts by a course of legal proceedings. It was sufficient that the debts were due, that he was liable to pay, and that he did pay. Webb v. Pond, 19 Wendell, 423. It has ever been held, that where a bond is given, intended as a bond of indemnity, but containing a covenant that the obligor will pay certain debts, for the payment of which the obligee is liable, and the obligor fails to perform, an action lies for the breach, and the obligee is entitled to recover the sums agreed to be paid, although it is not shown that he has been damnified, unless, from the whole instrument, it manifestly- appears that its sole object was a covenant of indemnity. In the matter of Negus, 7 Wendell, 499 ; Webb v. Pond, supra ; Thomas v. Allen, 1 Hill, 145; Gilbert v. Wiman, 1 Comstock, 550; Churchill v. Hunt, 3 Denio, 321. Ho notice of the default of Car hart in paying the debts was necessary. It is a general rule, that where one guaranties the act of another, his liability is commensurate with that of his principal, and he is no more entitled to notice of the default than the latter. Both must take notice of the whole, at their peril. Somersall v. Barnaby, Cro. Jac. 287; Atkinson and, Wolfe’s case, 1 Leon. 105; Douglass v. Howland, 24 Wendell, 35; Hammond v. Gilmore’s Admr. 14 Conn. 479; Duffield v. Scott et al. 3 Term R. 374. The objection urged to a portion of the payments, made by the plaintiff by giving his individual notes in lieu of the original indebtedness, can not be sustained. It has been long since settled, by the decisions of this court, that such a mode of payment is sufficient where the individual note is received, as the evidence in this case shows the plaintiff’s notes were, as a full satisfaction of the original indebtedness. Ralston et al. v. Wood, 15 Ill. 171; Smalley v. Edey, 19 id. 207 ; Hitt v. Sharer, 34 id. 9. We perceive no force in the remaining objection urged as a ground for reversal, that James L. H. Smith, one of the original obligors upon the bond, was not made a party. Smith is not declared against as one of the makers of the bond, and the declaration is strictly in conformity with the directions given in Cummings et al. v. The People, 50 Ill. 132. The declaration in the present ease differs from the declaration in that case in this: there, it was alleged that Argo was one of the makers of the bond, and it was not alleged that he was dead; here, it is not alleged that Smith was one of the makers of the bond. The copy of the bond filed with the declaration is no part of the declaration, and can not be considered in connection with this objection. The judgment is affirmed. Judgment affirmed.