Court Opinion

ID: 4925864
Source: CourtListenerOpinion
Date Created: 2021-09-24 00:56:40.017174+00
Date Added: 2024-06-11T08:14:20.128739
License: Public Domain

Weston J.
delivered the opinion of the court.
There is no question but the note in controversy was made by the defendant with a fraudulent intent; but it is urged that it does not'sufficiently appear that this was known to George Smitht the original payee. The report states the ground upon which the note was really made ; that it was antedated, and that a fictitious consideration was pretended. Of the two latter facts the payee could not be ignorant ; and knowing these, especially considering the relation in which the parties stood to each other, his knowledge of the fraudulent motives, by which the maker was actuated, might well be presumed. The jury were instructed by the judge, that George, the payee, knowing the intent with which the note was given, was a party to the fraud ; and that therefore it could not be enforced by him, or by the plaintiff, against whom the same defence might be sustained. That George, knowing the fraud, is a party thereto, is tantamount í o saying, if George knew the fraud ; and the jury, under this *419instruction, returning a verdict for the defendant, must be under» stood to have found this fact.
It is essential to the validity of a contract that it be founded on a good and sufficient consideration. The want of it, however, cannot be averred against an instrument under seal ; a consideration being implied from the solemnity of its execution. A negotiable note, for value received, carries with it ‘prima facie, but not conclusive evidence of a consideration, subject however to he impeached and disproved between the original parties. But after it has been negotiated, and goes iuto the hands of a bona fide indorsee, except under certain circumstances, where a note is declared by statute to be absolutely void, it cannot by law be defeated, upon the ground of a want or defect of consideration. This rule is adopted, that the free circulation of negotiable paper which is found to answer the most valuable commercial purposes, may not be impeded. If, however, the indorsee knew or might have known the circumstances under which the note was given, the rule does not apply. In the case of Brown v. Davis, cited in the argument, Ld. Kenyon intimated an opinion that to let in a defence of this nature against an indorsee, he must be proved to have had a knowledge of the facts, upon which it was founded ; but the opinion given by Justice Duller, and by the other members of the court, that this defence may be sustained against him whenever the note had been dishonored before it was negotiated, had ever since been regarded as set-tied law. And this upon the ground, that the receiving of a note thus circumstanced, by which his suspicions as to its geuuiuess, or its existing validity, ought to have been awakened, may he considered as evidence either of a knowledge on his part, if he made inquiry, or of negligence, if he did not. It rarely happens in cases to which this rule is applied, that the holder is injured ; he being often the mere instrument of the payee, or where he is not, having an adequate remedy against him.
The counsel for the plaintiff has contended that, by the principles of law and the adjudged cases, the generality of the rule before stated is so modified that no defence can be sustained a gainst an indorsee, not proved to have had actual knowledge of *420the circumstances under which the note was made, except what may be regarded as equitable. But we do not understand the principle to be thus limited. We find that a defence arising from proof of an illegal or fraudulent consideration, has been received against an indorsee, who became such after the dishonor of a note, as well as a want or failure of consideration, or payment before the negotiation of the note.
In Thurston v. McKown 6 Mass. 428, cited in the argument, Parsons C. J. says, “ It is certainly a correct principle of law, that if the indorsee purchase a note, when from the length of time in which it has been payable, there is reasonable cause to suspect that it has been dishonored, he shall not deprive the maker of any defence, which would avail him against the prom-isee.” And in Ayer v. Hutchins 4 Mass. 372, he says, if the indorsee receives the note under circumstances, which might reasonably create suspicions that it,was not good, he ought, before he takes it, to inquire into the validity of the note; and if he does not, he must take it subject to any legal defence, which might be made against a recovery by the promisee.”
The defence arising from the averment and proof of an illegal consideration, operates as an exception to the maxim, that no one shall take advantage of his own wrong, or be permitted to allege his own turpitude. It is with a view to suppress illegal and fraudulent contracts, by withholding from them all legal remedies, by which they might be enforced. The purity of the law is thus preserved ; and it is relieved from the imputation of ministering to the consummation of a fraud.
It is of great public importance that the law in regard to negotiable paper, being once settled, should be steadily adhered to. It has been settled, and it is very generally known, that where a note has been indorsed after it is due, it is open to every ground of defence, which could have been sustained between the original parties. To qualify this rule by distinctions and refinements, would destroy its simplicity, and render it less easy to be understood. It tends to the furtherance of justice and the suppression of fraud, and leaves the holder to look, as he ought to do, to the party of whom he received it,for his indemnity, where *421¿here is no secret trust and confidence between them, which is not unfrequently the case.
The opinion of the court is, that the jury were properly instructed at the trial, and that there must be

Judgment on the verdict.