Court Opinion

ID: 6467662
Source: CourtListenerOpinion
Date Created: 2022-06-26 14:08:02.596731+00
Date Added: 2024-06-11T15:53:43.555876
License: Public Domain

ON REHEARING. OPINION OF THE COURT. WRIGHT, J. The original opinion filed in tin's cause shows that there was an issue of fact as to whether or n,ot the defendant Charles Lewis had signed the note sued on as a result of fraud. As pointed out in that opinion the trial court recognized the existence of the issue and was about to send the case to the jury as' to the defendant Lewis when plaintiff dismissed its action as to him, resulting in a judgment for plaintiff against the remaining defendants. The original opinion filed in this cause holds that the plaintiff had the right to dismiss as to Lewis and to proceed against the other defendants. The attention of the court, however, is called by a motion for a rehearing to a contention raised upon appellant’s brief but nor dealt with by the court, which contention appellant claims is decisive of this appeal. It is to the effect that assuming, as the trial court held and as this court has also held in the original opinion, that Lewis, one of the signers, was induced to • sign by fraud, then this fact whether Lewis was or was not a party to the suit or whether judgment was or was not sought against him, constitutes a defense to the action available to the other signers under Section 55, of the Negotiable Instrument Act. (Laws of 1907, Oh. 83, Sec. 55.) Impressed with rhe importance of this contention the case was restored to the docket for further argument and has therefore been reargued to the court upon this point. Section 55, of the Negotiable Instrument Act, is as follows: “The title of a person who negotiates an instrument is defective within the meaning of this act when he obtained the instrument, or n'm; signature, thereto, by fraud, duress, or. force, fear or other unlawful means or for an illegal consideration or when he negotiates it, breach of faith, or any such circumstances as amount to a fraud.” The only cases hearing upon this section so far as cited in the briefs and so far as disclosed in Brennan’s Negotiable Instrument Law (ed. of 1911) are from Wisconsin, being the cases of Hodge v. Smith, 130 Wis. 326, 110 N. W. 192, and Aukland v. Arnold, 13 Wis. 64, 11 N. W. 212. In both of these cases it is held that where one of the signatures is obtained by fraud it is a defense available to all signers. In the latter case, after quoting the Wisconsin section which embodies in precisely the same language that is contained in our Section 55, it is said: “The first clause of this section was considered and interpreted in the recent case of Hodge v. Smith, 130 Wis. 326, 110 N. W. 192. It was there held that the title of a person who negotiates commercial paper is defective when he has obtained any signature thereto by fraud, and that if the parties so defrauded be relieved from liability thereon, then such fraud makes such paper voidable by all other persons who signed it, though they did not participate in and were ignorant of such fraudulent conduct at the time they signed it. This conclusion was reached upon the ground that, when several persons assumed such an obligation it is material and important that all who join as makers should .share equally in bearing the burden of its payment, and if, 'through the fraud of the person holding it, such equality of burden is disturbed and the burden increased as to some of the persons signing it, such fraud renders the title defective as to all of the persons who signed it.”  1 For an intelligent understanding of 'the effect of this section of the Negotiable Instrument Law upon the case at bar it is necessary to make a further brief statement of the facts supplementary to that contained i|n the original opinion. The complaint sets out in full the notes sued on with the usual allegations of nonpayment, etc. The answer, after denying any indebtedness on account of said notes, sets up fraud in the obtaining of certain of the signatures to such notes thereby seeking to avoid liability as to each and every one of. the'defendants. The sufficiency of the allegations of fraud was questioned in the lower court. This question however was disposed of in the original opinion and will not be discussed further upon a rehearing. Upon a trial of the issues the plaintiff introduced the notes in evidence, proved that the same were due and unpaid and then rested. The defendants then offered evideneee to show that the signatures of three of the defendants, and particularly the defendant Lewis, were obtained by the plaintiff through fraudulent representations. It developed in the course of the trial that the signatures of the defendants Broyles, Schmidt, Story and Grossman were placed upon the notes at one time and that those of the defendants Lewis, Anderson and Evans at a later date after the notes in question had been sent up to Albuquerque and either sent back to Broyles or brought by the witness Johnson, the agent of the plaintiff. It also appeared from the evidence, as stated in the original opinion, that the defendants Brown, Evans-and Anderson had previously signed notes for Broyles for similar amounts and that the notes involved herein were executed for the purpose of taking up the former notes. There is no evidence whatever in the record as to whether the defendants Schmidt, Story and Crossman or any of them had any knowledge that there were to be any other signers than themselves. There is a complete silence in the record as to whether they knew anything about Lewis, Evans, Anderson or even Brown as co-signers of these notes. In discussing the effect of fraud upon the signers of a note it is held in the original opinion that the defense of fraud alleged and proven in the case at bar is not available where the instrument induced by fraud simply retires a preexisting valid obligation of the same gmount and of like tenor and this for the reason that such, signer has not in contemplation of law been misled to his injury. We are of the opinion that the section of the Negotiable Instrument Law (cited) does not change this rule, nor is there anything in the two Wisconsin cases (cited)'which is in conflict with the rule laid down in the original opinion. It only remains to consider what effect, if any, the fraud practiced upon other co-signers had upon the defendants Schmidt, Story and Crossman who were new signers upon the notes involved herein. It is apparent from the record that -the defendants Schmidt, Story and Crossman having established the fraud as to Lewis, relied upon the provisions of Section 56, of the Negotiable Instrument Act, to relieve them from liability without any necessity on their part of any further showing of injury to themselves. If Schmidt, Story and Crossman had signed the notes after the signatures of the other co-signers against whom fraud was practiced had been attached to the same, it is undoubtedly true under the reasoning of the court in the Wisconsin cases that they should have rested without any further showing of injury, since the release of any of such co-signers would have disturbed the equality of the burden as to them, (namely, the defendants Schmidt, Story andCrossman) they having the right in the absence of any proof to the contrary, to assume that each and every one of the signers of the note who signed before them signed the same unconditionally and that each signer in event of the other having to pay for said note would be liable to the same extent as they themselves.  2 In the ease at bar, however, the signers against whom fraud was practiced signed the notes several days after their execution by. Schmidt, Story and Crossman. So far as the record in this case shows the notes were complete and binding obligations upon Schmidt, Story and Cross-man at the time they executed the same with no contemporaneous agreement of any kind that such notes were to have further or other signers. Such being the terms of their contract the release of any subsequent co-signers, because of fraud in the obtaining of the signatures of such subsequent co-signers, would not disturb the equality of burden as to Schmidt, Story or Crossman. It was incumbent therefore upon the defendants Schmidt, Story and Crossman to have proven injury to themselves be-cause of the fraud practiced upon their subsequent cosigners in order to relieve themselves from liability' because of such alleged fraud. This they failed to do so far as the record in this case discloses. Except as herein modified, the original opinion is therefore adhered to.