Bank of Commerce v. Broyles
120 P. 670
N.M.
1910
Check Treatment

Lead Opinion

OPINION OF THE COURT.

POPE, J.

1 (After making the foregoing statement of fact.). The chief assignment of error is that there was an issue of fact which the court should have sent to the jury. At the outset we are met by the contention of appellee that this alleged error of the court in withdrawing the case from the jury cannot be considered because both sides requested a peremptory instruction and must therefore bo considered as having stipulated that there was no issue of fact for the jury. The record upon this point, as above partially indicated, shows that upon the close of the testimony plaintiff moved for an instructed verdict because tire defense as pleaded was not sufficient and was not permissible under nor in conformity with the pleadings. Defendants likewise moved for a peremptory instruction, their ground being that the notes were signed in blank with the understanding that they were to run from four to six months and that having been filled out on demand thej' were therefore not collectable under sec-lion 14 of the Negotiable Instruments Act of 1907. Upon the announcement of the court that it sustained the motion for a peremptory instruction against all of the defendants but Lewis and after the court had permitted a non-suit as to the latter, the defendants insisted that “not only Lewis but his co-defendants are entitled to a decision at the hands of the jury in this case.” This contention was overruled, and a verdict against the defendants, except the defendant Lewis, instructed by the court. We are of the opinion that upon this state of the record the request by both sides for a peremptory instruction does not preclude the assignment of error made. It is true that in Buettell v. Magone, 157 U. S. 154, it was said:

“As, however, both parties ask the court to instruct a verdict, both affirmed that there was no disputed question of fact which could operate to deflect or control the question of law. This was necessarily a request that the court find the facts and the parties are therefore concluded by the findings made by the court upon which result the instruction of law was given.”

We deem the full import of this holding developed, however, by the recent case of Empire State Company v. Atchison Company, 210 U. S. 1, where it was said:

“It was settled in Buettell v. Magone, supra, that where both parties request a peremptory instruction, and do nothing more, they thereby assume the facts to be undisputed, and in fact, submit to the trial judge the determination of the inferences proper to be drawn from them; but nothing in that ruling sustains the view that a party may not request a peremptory instruction, and yet upon the refusal of the court to give it, insist, by appropriate requests, upon the submission of the case to the jury where the evidence is conflicting or the inferences to lie drawn from the testimony are divergent.”

In McCormick v. National City Bank, 142 Fed. 132, it was pointed out that Buettell v. Magone was a case where there was no disputed question of fact,'and it was there stated:

“The decision in that case should not be extended to cases in. which, there are disputed questions of fact nor to cases in which the parties ask other instructions in the event the peremptory instructions asked by them respectively are not given.”

So in Minehan v. G. T. Ry., 138 Fed. 37, it was said: “But it would seem that the decision [Buettell v. Magone] cannot be regarded as furnishing a rule for cases where the evidence is conflicting and where the party whose request is refused has coupled with his request other requests directed to particular aspects of the case which repel the implication that the party had consented to a submission of the facts to the court.”

We think the language used by defendants' counsel after their request for a peremptory instruction had been denied was equivalent to a demand for a jury and, in the language of the case last quoted, repelled “the implication that the party had consented to a submission of the facts to the court,” and constituted, under Empire State Company v. Atchison Company, supra, ‘an insistence by appropriate requests upon the submission of the case to the jury.'

2 Believing, therefore, the question properly before us, we proceed to determine whether the court upon the testimony erred in withdrawing the case from the jury. The rule in such matters, to quote further from Empire Company v. Atchison Company, supra, is that the case is one for a jury where the evidence as to liability is con-dieting or the inferences- on that subject to be drawn from the testimony are divergent. Or as it is stated somewhat differently in McGuire v. Blunt, 199 U. S. 142:

3 “It is clear that where the-court would be bound to set aside a verdict for the want of testimony to support it, it may direct a finding in the first instance and not ' await the enforcement of its view by granting a new trial.”

4 Was there any view of the testimony under which the defendants or either of them could properly have been awarded a verdict by the jury? The defense, as we have seen, was principally that the signing of the notes was procured by fraud. There was undoubtedly evidence that the defendants Anderson, Evans, 'Brown and Lewis were told by plaintiffs representative prior to signing the notes that Broyles was solvent and were further told that plaintiff had ample collateral for the notes, and there was also evidence from which the jury might have concluded that the defendants signed the notes in reliance upon these representations. We find also upon the record room for a conclusion by the jury that these statements were untrue and that they were known when made to be untrue. Indeed the trial court recognized this, for as to Lewis, in whose favor the testimony on this point was no stronger than on behalf of Anderson, Evans and Brown, the court held that the matter was one for the jury. Eliminating therefore Lewis, as to whom there ivas a dismissal and the defendants Schmidt, Story and Crossman, in whose favor there was no testimony as to representations inducing their signature, was there ground for a verdict relieving from liability either Anderson, Evans or Broun? The testimony shows that the notes sued on, together with an additional one of ten thousand dollars of the same date and not here in controversy, took the place of overdue notes of precisely the same amounts and tenor, dated November 20,. 1907, signed by Broyles, Anderson, Evans and Broun. Upon the giving of the present notes these formei notes were surrendered by plaintiff bank and destroyed. No suggestion was made either on the trial or upon the argument before us that these first notes were not valid obligations of these three defendants nor that in retiring them by the new notes of precisely the same amounts defendants were hot simply ridding themselves of a perfect!? valid outstanding obligation of as great an amount as the new notes signed. Applying these undisputed facts to those which the proofs left in controversy, were these defendants defrauded in the making of these notes? Wert actionable fraudulent representations simply the making of false statements, knowingly to another whereby the latter is led to act, there would doubtless be here -a case for the jury. But there is of course a further essential element. The party must have been led to act io his injury. As stated in Randall v. Hazelton, 12 Allen 412, quoting 3 Bulst 95:

“It is an ancient and well established legal principle that fraud without damage or damage without fraud gives no cause of action; yet when the two do concur there an action lies.”

So in 1 Story's Eq. Jur., Section 203.

“The party must have been misled to his prejudice or injury, for courts of equity do not any more than courts of law sit for the purpose of enforcing moral obligations or correcting uneonseientious acts, which are followed by no loss or damage. It has been very justly remarked that to support an action at law for a misrepresentation there must be a fraud committed by the defendant and a damage resulting from such fraud to the plaintiff. And it has been observed with equal truth by a very learned judge in equity, that fraud and damage coupled together will entitle the injured party to relief in any court of justice.”

So in Morrison v. Lodds, 39 Cal. 385, it is said:

“It is well settled that a party to a contract cannot rescind or avoid a contract on the ground of a false representation of the other party unless he shows in addition to the false representation that he will be damaged by the performance of the contract.”

In Story v. Conger, 36 N Y. 673, 93 A. D. 546, it was said:

“Upon his own statement of the contract the defendant lias done no more than he was legally bound to do. If unjust or immoral means have been resorted to to induce' him to perform that duty there is no remedy. In its result the case stands where and as it ought to stand.”

In a later case from the same state, Deobold v. Oppermann, 111 N. Y. 531, 7 A. S. R. 760, it was held that there was no legal loss when the parties were “subjected to a liability which they agreed to assume in the event which is now alleged as the cause of their misfortune.”

In First National Bank of Skowhegan v. Maxfield, 22 Atlantic 479, the Supreme Court of Maine went to the extent of holding that a mortgage securing a just debt, even if obtained by fraud, was enforcible, the following being the language:

“The payee by giving such mortgage merely secured his own debt and the representation to him by the bank as an inducement to give the mortgage that the bill was unpaid if untrue is harmless and not fraudulent.”

Further authority to the same effect will be found in Ming v. Woolfolk, 116 U. S. 599; Parker v. Jewett, Minn., 55 N. W. 56; Pheteplace v. Eastman, 26 Ia. 446; Michigan v. Phoenix Bank, 33 N. Y. 9; Marriner v. Dennison, Cal., 20 Pac. 386; Snyder v. Heagan, 40 S. W. 693; and cases cited to support the text in the following reference works: 17 Ency. P. & P. 814; 20 Cyc. 42; 14 A. & E. Ency. Law, 2nd ed., 137, et seq.

5 We deem the present case well within the rule above declared. Even assuming the notes to have been given as the result of a wilful misrepresentation they added no new burden to these defendants. The latter were obligated thereby to no greater duty than previously rested upon them. What they are called upon to do as a result of giving the notes they were equally under obligation to perform before the notes were given. Applying the test in Morrison v. Lods, supra, they will “not be damaged by the performance of the contract,” and under the rule in Story v. Conger, supra, “the result stands where and as it ought to stand,” and under the rule in Deobold v. Oppermann, supra, they are in the matter of results simply “subjected to the liability which they agreed to assume.” Upon the undisputed facts, therefore, the jury could not have found for the defendants and the trial court was right in so holding.

6 7 It is further claimed that the cause should have gone to the jury upon an issue as to whether the blank in the note as to time of payment had been filled in differently from what was agreed to at the time of signature. The testimony for the defense taken over objection that it was not warranted by the pleadings was to the effect that the time in the notes was left blank when they were signed and that it was the agreement that these were to be filled in at six months. The plaintiff’s testimony in rebuttal was that the notes were filled out payable on demand, before-signature. But while this was over plaintiff’s objection, made an issue on tlie proofs, it is not so upon the pleadings. We find nothing in the .answer having the semblance of the defense that the notes were altered after signature or that they were filled in contrary to what was agreed at the time. It is true that the answer alleges the understanding to be that Brojdes was to be given such time within which to pay the debt “as he might require.” But this allegation would seem to go rather to the manner of enforcing collection than the form of the obligation. At most it was an allegation of an undertaking that the notes should be finally filled in for payment when Broyles got ready. But an allegation of even such an improbable provision for a promissory note is a different matter from that here quoted to the effect that the note was to be filled in at six months. It needs no argument to demonstrate the difference between an agreement to exact pajunent. at a time indefinite and one at six months. Neither is the matter aided bjr the further allegation in the answer that the defendants “were left in ignorance of the intention to make the note payable on demand.” Manifestly ignorance of an intention to make notes payable on demand is not tantamount to an agreement that they should be dated at six months. AYe are of the opinion therefore that this defense was not open to the defendants upon their pleadings and that the trial court did not therefore err in withholding from the jury the determination of an issue not properly before it. It is urged however by the appellants that the court admitted proof upon this question over plaintiff’s objection that it was not within the pleadings and that plaintiff not having taken an appeal from such ruling it -should not be heard now to sustain the judgment upon a theory held against it on the trial. Morgan v. Southern Pacific Ry. Co., Cal., 17 L. R. A. 71, and Wrangler v. Swift, 90 N. Y. 38, are cited to support this position. But how could plaintiff appeal from an adverse ruling on the testimony? Appeals, of course, lie only from final judgments and that judgment was in its favor. The defendants were notified by repeated objections on the trial — their brief says “something like one thoiisand” —that the plaintiff relied among other things upon defects in tlie pleading. Indeed one of the grounds of plaintiff’s very motion to instruct, which the court sustained, was that “the defense is not admissible under the state of the pleadings and does not conform thereto and the issues which have been raised thereby are not issues which have been raised by the pleadings.” This was a further and definite notice that inadequacy in the pleadings was claimed as against defendants’ contentions. The latter therefore in failing to amend proceeded at their peril and cannot now be heard to complain because the terms of their answer failed to justify the submission to the jury of an issue upon which defendants desired the jury’s judgment. The rule that proof mu'st be based upon ¡Headings is too well established to be made to yield to the contention here made.

8 The same observations apply to several other defenses which defendants complain the court, by giving the peremptory instruction, failed to entertain. It is contended that the notes sued on were materially altered after signature by certain of the makers, by the addition of other parties thereto. But such a defense is not even remotely hinted at in the answer. It is stated that the court failed to give credit for four payments, one made before the note was given, the other three all since the suit was brought. Clearly however, the first could not have been a payment on this note and equally clear is it that in the absence of the proper plea these last were not matters for consideration. Even if, contrary to the current of authority, it be said that the code system permits proof of payments under the general issue, it is clear that sueli proof is restricted to payments before and not after suit. Glasscock v. Ashman, 52 Cal. 495; Heigler v. Eddy, 53 Cal. 597.

These latter must be set up by answer in the nature of a plea puis darrein continuance. The universal rule is stated in Philips on Code Pleading, section 363, where it is said:

“Payments made pending the action can be asserted only as new matter and by means of -a supplemental pleading.”
SYLLABUS. 1. If defendants had. signed notes after the signatures of other co-signers against whom fraud was practiced had been attached to the same, and if the latter be relieved from liability thereon, then such fraud makes- the notes voidable as to the former, though they did not participate in, and were ignorant of, such fraudulent conduct at the time they signed the note. 2. However, if the signers against whom fraud was practiced signed the notes after their execution by their cosigners, and these latter executed the notes> with no contemporaneous agreement of any kind that such notes were to have further or other signers, the release of any subsequent co-signers, because of fraud in the obtaining of the signatures of such subsequent co-signers, does not disturb the equality of burden as to the original signers, and it was incumbent upon these original signers to prove injury to themselves because of the fraud practiced, upon their subsequent co-signers in order to relieve themselves from liability because of such fraud. The record in the case at bar fails to do so.

Some reference is made to the payment of one thousand dollars alleged to have been made between the execution of the note and the filing of the suit but aside from the matter of the absence of any answer setting up such payment we discover in the record no testimony that would have justified a finding that such payment was made.

9 The only remaining assignment of error that we 'deem material is the contention that the granting of a non-suit as to the defendant Lewis operated as a discharge of the remaining .defendants. The plaintiff however had a right under Compiled Laws 2908 to dismiss as to Lewis, the cause not having been submitted to the jury. This dismissal was simply a discontinuance of the action, not a discharge of the party. The obligations sued on both by their terms and by Compiled Laws 2894 were several. We fail to see how a non-suit as to Lewis affected the liability of his co-defendants, nor do we see how under the record it could have resulted to their benefit for his portion of the case to have been carried forward to verdict. The judgment is affirmed.

Associate Justice Mechem did not hear the argument and took no part in the decision.



Rehearing

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.