Hulett v. Marine Savings Bank, Docket No. 71

Docket No. 71 | Mich. | Mar 5, 1906

Grant, J.

(after stating the facts). That a gross fraud was perpetrated upon the complainants is fully established by the evidence. No one disputes their version of the representations made to them by Smith and Wilson, and the manner in which their signatures were obtained. Smith and Wilson were not produced by the defendants as witnesses. Their absence is unaccounted for. Probably, like all criminal birds of passage, they had flown. Complainants were induced to sign written instruments which were a part of one contract, or were so attached as to appear so, but were afterwards separated so as to appear valid promissory notes. Smith and Wilson resorted to representations and devices to prevent the papers being read by the complainants before signing, and while they were signing arranged to cover the written and printed parts above so that they should not be observed by the signers. It is not easy to determine the mysterious manner in which these signatures were obtained without the signer's obtaining information of just what they were signing. Criminals of this sort always work in mysterious ways, and resort to methods and schemes often difficult to understand. They are undoubtedly familiar with the decisions of the courts on papers obtained by fraud, and. practice the greatest ingenuity and shrewdness to avoid the decisions, and to enable purchasers to say that they obtained them in good faith.

The scheme, as represented to the complainants under-their testimony, was reasonable. Twelve men were required to constitute the syndicate or organization. No one of the 12 knew anything about the stallion. Only one, Fenstermacher, ever had seen him. Smith and Wilson were strangers to them. If their representations as to the character, quality, and value of the horse were true, each was willing to put in $200 in the purchase of the stock of the syndicate. If 12 such men were found they were then to-meet, examine the horse, and if found as represented they would then form the syndicate, take the stock and purchase the horse. The scheme as found in the agreement and notes is utterly unreasonable, and it is diffiult to conceive that even the most ignorant and unwary would knowingly make such an agreement. Persons of even less than average common sense do not buy property without seeing it, especially from total strangers, and that a. piece of property of so much greater value than usual. Besides, it is altogether improbable that these men would have signed a note on which each was individually liable-for the whole amount. The object of the conspirators, was to prevent the examination of the property and the instruments they were signing, and to secure the names of the complainants to promissory notes which they could dispose of as such. VVe are not so concerned with the mysterious methods by which this was accomplished as we are by the fact that it was accomplished. The defense is good unless complainants are estopped to assert it by their own gross negligence. The law governing such, transactions is well settled by the decisions of this and other courts. The only difficulty arises in applying the law to the facts of the particular case. The first case upon this subject in this court is Gibbs v. Linabury, 22 Mich. 479, wherein the court quoted with approval the English case of Foster v. Mackinnon, L. R. 4 C. P. 704, in which it was said:

* ‘ The defendant never intended to sign that contract [a bill of exchange] or any such contract. He never intended to put his name to any instrument that then was or thereafter might become negotiable. He was deceived, not merely as to the legal effect, but as to the actual contents of the instrument.”

This court in that case where three papers were signed said:

“ Now, when a party never designed to put or cause to be put any sort of negotiable paper in circulation, when the thought of doing so never entered his mind, when he has never bargained to do so, when he' has never consciously been privy to any attempt to set such paper afloat, how can it be said that his will in any way assented to the concoction of such a contract so as to make him an object of the rule ? ”

In Anderson v. Walter, 34 Mich. 113" court="Mich." date_filed="1876-06-06" href="https://app.midpage.ai/document/anderson-v-walter-7928287?utm_source=webapp" opinion_id="7928287">34 Mich. 113, the defendant signed two papers which he had only heard read, and neither was a note. The court say:

“No man has a right to suppose that a crime is about to be committed, or that he is going to be defrauded by having a paper of an entirely different tenor substituted in the place of one he has just heard read and is about to sign, nor that a negotiable promissory note will be lurking in the depths of an instrument like those referred to. And he is not therefore required to take any steps to guard against such a contingency.”

In Soper v. Peck, 51 Mich. 563" court="Mich." date_filed="1883-10-24" href="https://app.midpage.ai/document/soper-v-peck-7931333?utm_source=webapp" opinion_id="7931333">51 Mich. 563, the court, speaking through Justice Cooley, said:

“It cannot be disputed that defendants’ evidence tended to show that he had had a fraud practiced upon him and that very probably he had been made to put his name to a note when he supposed he was signing something different. If the jury believed this he was entitled to their verdict, unless his negligence was so gross as to preclude his making the defense as against a bona fide purchaser of the paper.”

It is true that there are some discrepancies in the testimony of the witnesses who were subjected to a rigid cross-examination. One testified that he read the papers, but he also testified that the papers produced were not like the ones that he signed. The learned circuit judge found that the representations testified to by complainants were made by Smith and Wilson; that they were deceived thereby; that the papers were not what Smith and Wilson represented them to be; and that they were free from such negligence as would bar their defense. We think his conclusions in this respect were correct. Mr. Lyons was not a witness for the defendants, but was called in rebuttal by the complainants. Smith and Wilson were acting for him as he testified, and he is responsible for their acts. Mrs. Lyons was the mere willing stool pigeon for her husband, or the conduit through which he and Wilson succeeded in making the arrangement with the bank. He testified:

“I arranged with Mr. Carmon [the cashier] in my second interview that he would let me have $1,400, that I would have to have my wife sign a note to that amount, and to turn over these notes as collateral.”

She is financially responsible. The bank is not the absolute owner of the notes. They were taken simply as collateral. It is quite probable that Mrs. Lyons and Mr. Wilson, finding-that the bank would not purchase the notes with their indorsement, and having been unable to dispose of them at Kingsley, resorted to the scheme of getting them into the hands of the bank as collateral, hoping in this way to make the bank bona fide holder. Mrs. Lyons is not a bona fide holder. The notes were never assigned to her. She never had them in her possession or control. She knew of the alleged sale of the stallion to the farmers. She was connected in the livery business with her husband; he owning some of the horses and she others.

It is unnecessary to determine the doubtful question whether the bank is a bona fid,e holder. Mr. Carmon (its -cashier) was cognizant of several things which might be held to put a reasonably prudent man upon inquiry. But the bank cannot suffer. Mrs. Lyons is financially responsible, and the bank only holds the notes as collateral security. It is urged that Fenstermacher and Hulett were as active in procuring the signatures of the other complainants as were Smith and Wilson, and that they were as guilty of fraud practiced upon the others as were Smith and Wilson. It is true that they went around with Smith .and Wilson to see other parties; that Fenstermacher took them around with a team from his livery. We find no evidence that they participated in the false representations, or that they themselves knew or had good reason to know that the representations were false and fraudulent.

We think the decree of the court was correct, and it is affirmed, with costs.

McAlvay, Ostrander, Hooker, and Moore, JJ.} concurred.