Court Opinion

ID: 6120916
Source: CourtListenerOpinion
Date Created: 2022-02-04 18:45:10.195462+00
Date Added: 2024-06-11T08:23:15.994519
License: Public Domain

LearNed, P. J.
(dissenting):
The following facts were proved and not disputed: Tbe plaintiffs were tona, fide holders, for full value, of a negotiable promissory note, made by Marshall and transferred to them, before it was payable. They had no knowledge of Marshall’s alleged lunacy. After the note was due, and after this action had been commenced, and after Marshall had put in a verified answer, not averring lunacy, proceedings in the nature of a writ de lunático were had, and Marshall was declared to be a lunatic, and to have been a lunatic for a year and a-half previous. This time included the date of the note. No'other fact was proved. There was then no question for the jury. The court directed a verdict for the plaintiff. The defendants appeal. If the court was in error, then it follows that the verdict should have been directed for the defendants.
We have then this question: When a negotiable promissory note is made by a person, against whom no proceedings de hmatico have been taken, and that note, before it is payable, has passed into the hands of a Iona fide holder, for full value, who has no knowledge of the maker’s alleged lunacy, is proof of such lunacy, without any proof of the payee’s knowledge of the same, and without .any proof of fraud upon the maker, a defense to the note ? I think it is not.
In Brown v. Joddrell (1 Moo. & M., 105), it is said: “The defense (of lunacy) will not avail unless it te shown that the plaintiff imposed on the defendant.”
In Dana v. Lady Kirkwall (8 C. & P., 679): “ It is not enough that Lady Kirkwall was of unsound mind, you must be satisfied that the plaintiff knew it and took advantage of it.”
In Molton v. Camroux (2 Exch., 487; affirmed 4 id., 17), it is said that where a person, apparently of sound mind and not known to be otherwise, enters into a contract which, is tona fide and which is executed and completed, and the property which is the subject of the contract cannot be restored so as to put the parties in statu quo, the contract cannot be set aside for alleged lunacy. (To the same effect, Baxter v. Portsmouth, 5 B. & C., 170.)
In Elliot v. Ince (7 De G., M. & G., 475), the chancellor said: “ The result of the authorities seems to be, that dealings. of sale and purchase by a person apparently sane, though subsequently *332proved to be insane, will not be set aside against those who have dealt with him on the faith of his being a person of competent understanding.”
The same doctrine may be found in the courts of this country. “No contract,” say the court in Young v. Stevens (48 N. H., 133), “ can be rescinded, until both can be restored to the condition in which they were before the contract was made.”
In Beals v. See (10 Penn. State, 56), it was decided that an executed contract by a merchant, for the purchase of goods, is not avoided by proof of lunacy, unless there was fraud by the vendor, or knowledge of the lunatic’s condition.
The court cites the familiar doctrine that, when one of two innocent parties must suffer, the loss should fall on him by whose act it is occasioned. This was not a purchase of necessaries.
In Lancaster Co. Bank v. Moore (12 Alb. Law Jour., 185), a case in the same State, the plaintiff was allowed to recover upon the note of the defendant, who had been adjudged a lunatic. The court say: ■ “ The bank had, in good faith, loaned the money; the contract was executed, so far as the consideration is concerned; it would be derogatory to law and good morals that the defendant should He allowed to retain the money.”
In Behren v. McKenzie (23 Iowa, 343), an action was brought upon an injunction bond, which, of course, was not an action for “ necessaries.” This was held to be an executed contract, and the plaintiff recovered. And the court say: “But, with respect to executed contracts, the tendency of modern decisions is to hold them (persons of unsound mind) liable in cases where the transaction is in the ordinary course of business, is fair and reasonable, and the mental condition was not known to the other party, and the parties cannot be put in statu quo.”
In the present case there is no evidence that the payee, Hunt, knew or suspected Marshall to be a lunatic. It is positively proved that the plaintiffs knew nothing of his lunacy. The parties cannot be put in statu quo, because the plaintiffs have paid their money to Hunt, the payee of the note.
This is the case of an executed contract. . The note recites, and isjprima facie evidence of a good consideration, received by the maker. (Edwards Prom. Notes, 56.) Indeed, as to Iona fide hold*333ers, like the plaintiffs, it is conclusive evidence, as a general rule, of such good consideration. On the proof as it stands, Marshall must be presumed to have received a good or valuable consideration. Iiis lunacy is no evidence to the contrary. The plaintiffs are entirely without fault. Even if Marshall be equally innocent (which is the most favorable supposition for him), yet it is his act which occasioned the loss, and, on that ground, he should bear it.
But, in order to defeat the plaintiffs, we must presume that Marshall received nothing; or, at least, must presume that Hunt knew that Marshall was a lunatic; and not only this, but further, we must presume that Hunt defrauded him. This is to reverse the rule that fraud is not to be presumed.
It will be seen, by several of the cases above cited, that the liability of the lunatic is not confined to an indebtedness for necessaries. (See, also, Campbell v. Hooper, 3 Sm. & G., 153.) And therefore it is not necessary for the plaintiffs to show that the debt was contracted for that cause.
In 1 Parsons on Bills, 150, it is said, on the authority of Sentance v. Poole (3 C. & P., 1), that the note of one, known to the payee to be insane, is void, even in the hands of a bona fide holder. The case cited hardly goes to that extent. But there is no evidence in the present case that Hunt knew or suspected Marshall’s lunacy. In the absence of all proof on the subject, it is a reasonable presumption that no man is suspected of lunacy by those who deal with him, prior to the taking of proceedings de limatico.
The innocent holders of negotiable paper are, I think, entitled to the benefit of that presumption. They have a right to call on the defendant, before he can successfully defend this action, to show not merely his lunacy, but Hunt’s knowledge or suspicion of it, and the fraud, if any, ¿practiced upon him. If he was not defrauded, he ought to pay.
Present — LeabNed, P. J., Boabdmae and Bogues, JJ.
New trial granted, costs to abide event.