Court Opinion

ID: 6230448
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:20:42.750106+00
Date Added: 2024-06-11T08:57:50.603118
License: Public Domain

The opinion of the court was delivered by
Woodward, J.
That the paper in suit was carelessly made by Gray, and the proceeds of it unfairly used by Jones & Co., is apparent from the affidavit of defence, the sufficiency of which is the only question on the record. Still it was negotiable paper, and the presumption of law is that the endorsee received it bona fide, in due course, and for a valuable consideration. To put him to proof of his title the defendant must make out a prima facie case, that the bill was obtained by undue means, as by fraud, felony, or force, or that it Avas lost: 4 W. & S. 445; 6 W. & S. 221; 6 Barr 168; 7 Barr 476. Mere want or failure of consideration is not enough, as Avas satisfactorily shown by Judge Sergeant in the first named of the above cases.
But it is said the affidavit discloses a case of fraud, similar to that which in Hutchinson v. Boggs & Kirk, 4 Casey 294, was held sufficient to shift the burthen of proof on to the shoulders of the plaintiff. We do not think so. That was a case of cheating with false pretences, which is a fraud that the law denounces as a crime, and *368for which the guilty party may be punished with the penitentiary, and the paper in suit there was obtained in the perpetration of that crime. It was as if it had been stolen. But here the acceptances sued on were voluntarily made in pursuance of a precedent contract, and for the purpose of giving negotiability to the bills. The acceptor expected them to pass by the endorsement of Jones & Co., and held himself out to the world as responsible for them into whosesoever hands they might come. The affidavit does indeed allege that, according to the contract between the parties, the proceeds of the acceptances were to be applied to the taking up of prior notes and acceptances of Gray, and that Jones & Co. were guilty of a breach of that contract, for they did not so apply the proceeds. The fraud consisted in misapplying the proceeds of the paper, but that in the very nature of the case imparted no taint to the paper itself. The purpose for which the bills were made and put into circulation, was to furnish Jones & Co. with funds to be applied according to their contract with Gray. That was an honest and fair purpose. How could the purchaser of the bills be expected to have any knowledge of the private agreement between the original parties ? And if he had, how could it be expected that he would see to the application of the funds he paid for the bills ?
It was for Gray himself rather than for the purchaser to look to this, and if he was content to confide in Jones & Co. he has no reason or right to charge the consequences of his over-confidence against the endorsee. To permit an acceptor to set up such a breach of confidence against an endorsee of negotiable paper — a breach or fraud if you please so to call it, occurring after the rights of the endorsee have fully vested — would be against the plainest principles of equity as well as subversive of the commercial law.
To require the holder in such a case to prove the consideration, would, we think, “ be putting a clog on the circulation of negotiable securities, which would tend to impair their use and employment.”
We are therefore of opinion that there was nothing in the affidavit of defence which tended to impeach the plaintiff’s title, or to rebut the presumption which the law makes in his favour, and therefore that the judgment was well entered.
Judgment affirmed.