41 N.H. 414 | N.H. | 1860
That the case presented is clearly one of duress, there can be no question. The abuse of any process, either civil or criminal, to compel a party, by imprisonment, to do any act against his will except to pay the debt for which he is arrested, is entirely illegal, and the act .may be avoided on the ground of duress. Richardson v. Duncan, 3 N. H. 508; Severance v. Kimball, 8 N. H. 386; Shaw v. Spooner, 9 N. H. 197 ; Burnham v. Spooner, 10 N. H. 523; Breck v. Blanchard, 22 N. H. 303. Here the arrest was without any warrant or lawful authority. Such duress is a perfect defence, upon all the authorities, to an action between the original parties.
The note in this ease was not only void as between the original parties, on the ground of duress, but was given to
I. Is this note absolutely void in the hands of any holder, however innocent, who has paid a valid consideration for it before it was due.
¥e find that the law holds certain persons to be incompetent parties to make contracts, on account of want of capacity. It has, therefore, wisely taken care of the interests of those who either have not judgment to contract, as in the case of infants, or who, having judgment to contract, cannot in law have any funds or property to enable them to perform the contract, as in the case of a feme covert; and therefore it has in general rendered the contracts of infants voidable, and those of married women absolutely void. Oh. on Bills 18. By our law an infant has not capacity to bind himself absolutely by a promissory note, as maker or indorser. Story Prom. Notes, sec. 78. So a married woman is incapable, in any case, of becoming a party to a note or bill so as to charge herself with any obligation whatever ordinarily arising therefrom. So contracts made with an alien enemy are absolutely void, upon
Contracts, therefore, purporting to be entered into by either of the above parties, are either void, or voidable, as the case may be, alike as against the other party to the original contract, and also, where the contract is assignable, they are void as to such incompetent parties, or are voidable by them, in the hands of any assignee or indor-see. These rules of law are founded upon the most common principles of natural justice and of public policy.
There are numerous other contracts, which, though made between competent parties on both sides, are nevertheless void as between such original parties. A contract made on Sunday, where the transaction of such business is prohibited, is an illegal contract, and void as between the parties. So a contract based upon an illegal consideration — as usury, gaming, spirituous liquors sold without license contrary to law, the compounding of a felony, &e. —is void as between the parties. So a contract without consideration, nudum pactum, and one where the consideration has failed, as between the immediate parties, is void or voidable. So a contract entered into by compulsion
And it may be laid down as the general rule, as the general principle applying to this class of cases, that such a note, thus negotiated and in the hands of such a holder,
1. When a statute not only prohibits the making of a contract, but provides that the same shall be void to all intents and purposes; or where the law provides that any contract made or securities given upon any illegal consideration’shall be absolutely void, then the note which embodies such contract, or is based upon such consideration, is held void every where and in the hands of every holder. In England, and in most of the United States, there are or have been laws against usury, which not only, by a general.prohibition of usury, made that an illegal consideration for a note, but also provided that all bills or notes founded upon such a consideration should be absolutely voidl Such, however, is not the law in this State on that subject, and it is believed that we have no statutes with similar provisions. Hence, here usury may be a good defence to a note as against the original party, but not as against an innocent indorsee, for value, &c.
2. When the note is a forgery, it is void every where.
3. When the maker belongs to a class of persons who are ordinarily, and as a general rule, on grounds of public policy, held incompetent to contract at all, such as infants, married women, alien enemies, and insane persons, including spendthrifts and others under guardianship, who have been by some statute declared incompetent to contract.
4. Notes signed by agents without authority.
In none of these eases (except the first, which, as we have seen, does not apply in this State) is a note valid in the hands of any one; and the party who discounts such paper is bound to inquire, at his peril, whether the note offered to him is signed by a party capable and competent in law to bind himself, or by an agent duly authorized to bind his principal. Beside this, he is bound to inquire whether the party from whom he receives it is competent
If there is a failure in either of these points of capacity or authority, it will not avail the party that he is a bond fide holder, for value, without notice. He must look to his indorser if he has one, and if he has not he must suffer loss.
5. Another case might be mentioned, which has been made an exception to the general rule above stated by express provisions of the statute, — as where a note is attached by the trustee process. There, by operation of the statute, the maker of a note may have a perfect defence against an indorsee, for value, without notice, and before due. So notes discharged by operation of insolvent laws might afterward be transferred, by possibility, so as to form another exception, where the indorsee, holding the note bond fide, &c., might be met with a perfect defence on the part of the maker. But these last cases throw no light upon the question we are considering. These are the principal, perhaps all the exceptions to the general rule above stated, that no defence is available against an innocent indorsee, for value paid before due. But where the contract was illegal, being prohibited by law, or the consideration was illegal, as usury, wagers, compounding a felony, restraint of trade or of marriage, &c., or where there was a want or failure of consideration, and even where the note has been paid, — all these defences, and many more, cannot be made against the note in the hands of such a holder. And the question here raised is, whether, in case of duress, or fraud, where there is mala fides, but it is all on one side, and the other party to the note has been induced to sign it by force or by fraud, and is in every respect an innocent party, such defence shall avail him as against such a holder, for value, &c., who seeks to collect it.
And we think such a defence cannot avail the maker against such an indorsee of the note. The authorities
He here speaks evidently of the contract as between the original parties to it, or of contracts in general as distinguished from negotiable notes and bills ; because he devotes another chapter especially to a consideration of bills and notes, in which he says, in speaking of the right of the holder (vol. 3, pages 79, 80), that a bond fide holder can recover upon such note, though it came to him from a person who had stolen or robbed it from the true owner, provided he took it innocently in the course of trade, for a valuable consideration, and under circumstances of due caution ; and he need not account for his possession of it unless suspicion be raised. This doctrine is founded on the commercial policy of sustaining the credit and circulation of negotiable paper. Suspicion must be cast upon the title of the holder by showing that the instrument had got into circulation by force or fraud, before the onus is east upon the holder of showing the consideration he gave for it.
Chitty says (Ch. on Bills 72), “In general there will be a sufficient defence between the original parties when the bill or note was obtained by duress, or by fraud, or by circumvention,” &c. . But he nowhere intimates that any of these defences would be good against an innocent indor-see; but, on the contrary, he expressly says (page 79), “The circumstance of a bill or note having been obtained without adequate consideration, or even by duress or fraud, or misapplied by an agent to his own use, affords no de-
So in Edwards on Bills and Promissoiy Notes (page 825), it is said, that “ between the immediate parties it may be shown, by way of defence, that a bill or note was obtained by duress, or by fraud, or by circumvention,” &c.; but he no where intimates that any of those circumstances would constitute an exception to the rule which he states (page 56), that the bond fide holder of negotiable paper, who has paid value for it before its maturity, or who has relinquished some available security or valuable rights on the credit thereof, is entitled to protection, and may recover thereon notwithstanding some of the previous holders procured the same by fraud.
So in Story on Promissory Notes (section 188), it is said, under the head of want of consideration, that notes obtained under duress are void; but it is also said (section 191) that the want or failure of consideration, or mere fraud between the antecedent parties, will be no defence or bar to the title of a bond fide holder of the note, for value, &c. Now we are not able to see what distinction there could be in fact, between anote, the signature to which was obtained by fraud, and one where the signature was obtained by •duress. Both are equally void as between the original parties ; and there can be no better reason in the one case for holding the note Void in the hands of a bond fide holder, than in the other. “ It is requisite to the validity of every agreement that it be the result of a free and bona fide exercise of the will.” 2 Kent Com. 453, ante. TJpon this ground, fraud in obtaining the signature would be fatal to precisely the same extent as would duress; there would be no “free and bond fide exercise of the will” in the one case more than in the other.
In Doe v. Burnham, 31 N. H. 431, the rule is laid down very broadly, and without those qualifications and excep
Now this rule, in the general and broad terms in which it is here laid down, is at once seen to be incorrect, because in case of notes forged, or signed by an agent having no authority, or by an infant, a married woman, an alien enemy in time of war, or an insane person, exceptions to this rule have been seen to exist necessarily. But if the intention was merely to state a general rule, subject to such limitations and exceptions as general rules are usually subject to, it is undoubtedly correct; and in that view it is broad enough to cover our present case, because in this case the signature to the note is genuine, and no forgery. No question of agency or authority arises, nor does the signer belong to either of the classes whom the law holds incompetent to contract.
Suppose an individual, then, were about to purchase a note payable to bearer, before it was due, and pay a fair equivalent for it, with a view of collecting it of the maker, and where he is to have no indorser to rely upon, — what would be his duty in order to proceed safely ? First, he must assure himself of the genuineness of the signature, or, if it purported to be signed by an agent, he must assure himself that the agent was duly authorized to bind his principal in that particular; secondly, he must make such inquiries, which, ordinarily, he may easily do, as to ascer
But, suppose that after being satisfied upon all these points, and having purchased the note, it should prove that it was an illegal contract, or was for an illegal consideration, — who shall suffer? the maker, or the indorsee? This is settled on the best of authority. The original parties stood upon equal ground, both being in fault, and could neither of them enforce the contract; yet neither shall be allowed to take advantage of his own wrong as against an innocent indorsee.
And suppose it should turn out that his note was obtained of the maker by fraud or by duress, a case in which the maker was in no fault, — what rule shall be applied here ? — the long established one, that where one of two innocent persons must suffer, the loss should fall upon him who has suffered a negotiable security, with his name attached to it, to get into circulation, and thereby mislead the indorsee. Such rules, and such an application of them, are necessary to give security to negotiable paper.
The defendant’s counsel claim that the same rule that would hold the maker of a note, who signed it under duress, to pay it to the innocent holder, for value, would hold infants, and others who are incompetent to contract, to pay their notes when thus held; but this is neither a legal nor a logical sequence. The infant belongs to a class, all of
Take also the case of a slave. There the general rule is, that he is incompetent to contract; and if a man were about to purchase a note, and, upon inquiry as to who the signer was, should learn that he was a slave, that would be sufficient notice to him that the note was void, because all contracts made by all slaves usually are so, because, while in that condition they must necessarily be constantly under duress of body, mind, and will. But when it is ascertained that the signer is a free man, then the presumption is that he is never under duress, and there are only rare exceptions to this general rule; and to say that in such exceptional cases the maker shall be allowed to stand upon such a defence against an innocent holder for value, taking it in the ordinary course of mercantile business before the matui’ity of the note, would be to overthrow all confidence in negotiable paper, and entirely reverse the policy of the whole system of mercantile law. The exception to the ruling of the court upon this point must be sustained; but we shall find that the numerous authorities which bear upon the next question to be considered, have also a direct bearing upon this point.
H. Next let us inquire, upon whom is the burden of proof, after duress, or fraud, or illegality of consideration is proved ? Must the defendant not only prove that he had a per-
In Collins v. Martin, 1 B. & P. 651, Eyre, C. J., says, “No want of consideration, or other ground to impeach the apparent value received, was ever admitted in a case between an acceptor or drawer, and a third person holding the bill for value; and the rule is so strict, that it will be presumed that he does hold for value till the contrary appears ; the onus probandi lies on the defendant.” This case is cited approvingly in Doe v. Burnham, 31 N. H. 432, though the question we are now considering was not there raised. But the case of Collins v. Martin goes further than this, and holds that where the defendant has first proved that the note or acceptance had been obtained by felony, by fraud, or by duress, that so far tended to throw' suspicion upon the indorsement as to call on the plaintiff, the indorsee, to prove that he paid value for it.
This is unquestionably the correct rule, as also stated by Parker, J., in Heath v. Sansom, 2 B. & Ad. 291, although the majority of the court in that case came to a somewhat different conclusion, and held that “in all cases where, from defect of consideration, the original payees cannot recover upon the note or bill, the indorsee, to maintain an action against the maker or acceptor, must prove consideration given by himself, or a prior indorsee.” The same doctrine is held in Brown v. Philpot, 2 M. & Rob. 285.
But these decisions were soon overruled, so far as amere want or failure of consideration was concerned.
In Bailey v. Bidwell, 13 M. & W. 73, it was held by the Court of Exchequer, that if, to an action on a bill or note,
And in Smith v. Braine (in tbe Queen’s Bench, 3 E. 1. & E. 379), Campbell, C. J., says, “But since tbe new rules, judges have, with entire approbation, directed juries tbat where tbe bill was illegal in its inception, or where the immediate indorser to tbe plaintiff obtained possession of it by fraud, tbe want of consideration as between him and tbe plaintiff may be presumed.”
In Duncan v. Scott, 1 Camp. 100, whieb was an action by tbe indorsee against tbe drawer of a bill, tbe defendant bad given the bill without consideration, and while under duress. Lord Ellenborough held tbat upon these facts being proved by tbe defendant, tbe plaintiff' must prove tbat be gave value for it before be could recover, even though it was indorsed to him before it became due.
Rees v. Headfort, 2 Camp. 574, was an action by an in-dorsee against the acceptor of a bill. The drawer bad received no consideration, but bad been tricked out of tbe bill by a gross fraud. Upon proof of these facts by tbe defendant, Lord Ellenborough held tbat it was incumbent
Bayley, in his work on bills (page 372), says, “In many cases the plaintiff is compellable to prove that either he, or some preceding party, took the note bond fide, or for value, —as in case of a bill or note originally given without consideration, and while the person giving it was under duress, or in case of a bill or note obtained by fraud, or in case of a delivery by a person not entitled to make it, as in the instance of bills or notes that have been stolen or lost.”
In Mills v. Barber, 1 M. & W. 425, Lord Abinger, C. B., says, “ Where there is no fraud nor any suspicion of fraud, but the simple fact is that the defendant received no consideration for his acceptance, the plaintiff is not called upon to prove that he gave value for the bill; but if the bill be connected with some fraud, and a suspicion of fraud be raised from its being shown that something has been done with it of an illegal nature, or that it has been clandestinely taken away, or has been lost or stolen, the holder will be required to show that he gave value for it.” And (page 432) “ if, in an action by an indorsee against the acceptor of a bill, the ground of defence be that the bill was obtained illegally from the defendant, and indorsed to the plaintiff without consideration, the defendant will be bound in his plea to aver both the illegality and the want of consideration ; and if, at the trial, he proves the illegality, such proof will, according to the rule above stated, throw upon the plaintiff the onus of showing that he gave consideration for the bill.” The same doctrine is held in Bingham v. Stanley, 2 A. & E. (N. S.) 117; Berry v. Alderman, 24 E. L. & E. 318.
In De La Chaumette v. Bank of England, 9 B. & C. 208, where the defendant had proved that the bill was stolen, it was held that it was incumbent on the plaintiff to show that the foreign merchant, who assigned it to him, gave full value for it.
In accordance with the doctrine of these cases last cited, is Greenleaf on Evidence (section 172), where it is said, “In an action by the indorsee against the original party to the bill, if it is shown on the part of the defendant that the bill was made under duress, or that he was defrauded of it, or if a strong suspicion of fraud be raised, the plaintiff will then be required to show under what circumstances and for what value he became the holder. It is, however, only in such cases that this proof will be demanded of the holder; it will not be required where the defendant shows nothing more than a mere absence or want of consideration on his part.” See also Bramah v. Roberts, 1 Bing. N. C. 469; Low v. Chifney, 1 Bing. N. C. 267.
So in 2 Phill. Ev. (4 C. & H.) 8, it is said that in some cases the plaintiff) in an action upon a bill of exchange or
And in Smith’s Mercantile Law 320, it is said that the defences of duress, fraud, &c., will not prevail against a bond fide holder.
The same doctrines very generally prevail in this country, wherever the subject has received judicial consideration. Munroe v. Cooper, 5 Pick. 412; Woodhul v. Holmes, 10 Johns. 231; Vallett v. Parker, 6 Wend. 615; Small v. Smith, 1 Den. 583; Worcester Co. Bank v. D. & M. Bank, 10 Cush. 488; Wyer v. D. & M. Bank, 11 Cush. 52; Rockwell v. Charles, 2 Hill 499; Bissell v. Morgan, 11 Cush. 198; Crosby v. Grant, 36 N. H. 273. So in Smith on Oont., 3d Am. Ed. 277 (*187), in a note by Rawle, it is said that in New-York it has been held that, as soon as the defendant shows there has been usury between the prior parties, he casts on the plaintiff the burden of proving that he is a holder for value, — as is the case in every instance'where fraud, duress, or illegality is shown between the prior parties.
These authorities would seem conclusive, that the plaintiff’s exception, — that the evidence offered would have been no defence unless it were proved that he was not the bond fide holder, — must be overruled. When the defendant had proved the duress, he had made a good defence as against the original party; and because of the legal presumption that in such cases the payee, being guilty of such
These authorities also bear directly upon the first point taken by the defendant that duress is a defence against any holder, however innocent he maybe, and however valuable a consideration he may have paid for the note; and if other authorities on this point were needed, they are not wanting. In Bowers v. Ball, 27 Vt. 662, Redfield, C. J., says, “ Illegality, duress, fraud, and want or failure of consideration, are no defences as against a bond fide holder for value.” See also St. Albans Bank v. Dillon, 30 Vt. 122 ; Ellicott v. Martin, 6 Md. 609; Minell v. Reed, 26 Ala. 730; Norris v. Langley, 19 N. H. 423; Knight v. Pugh, 4 Watts & Serg. 445. The verdict must be set aside, and
A new trial granted.