Knight v. Pugh

The opinion of the Court was delivered' by Sergeant, J.

— It .seems at one time to have been the rule, though I am not aware of any decision to the full extent, that in a suit by an endorsee of a note against the maker, the defendant is not in general permitted to put the plaintiff on proof of the consideration which the plaintiff gave for the note, unless, the defendant can make out a prima facie case against him by showing that the bill was obtained from the defendant or from some intermediate party by undue means, .as by fraud, felony or force, or that it was lost, or that he (the defendant) received no consideration. Byles on Bills 61, citing Duncan v. Scott, (1 Camp. 100); Grant v. Vaughan, (3 Burr. 1516); King v. Milson, (2 Camp. 54) ; Patterson v. Hardacre, (4 Taunt. 144); Thomas v. Newton, (2 C. & P. 606); De la Chaumette v. Bank of England, (9 B. & C. 208); Heath v. Sansom, (2 B. & Ad. 291); Bassett v. Dodgin, (10 Bing. 40). But, so far as regards the last of these positions, viz: the want of consideration, the latest authorities go to exclude it from the class of cases in which the defendant may call on the plaintiff to show the consideration. In Whitaker v. Edmunds, (1 Mood. & Rob. 366), cited in Chitt. on Bills, 649, 10th Amer. ed., the law is thus stated by Patteson, J.: “ Since the decision of Heath v. Sansom, (2 B. & Ad. 291), the consideration of the judges has been a good deal called to the subject, and the prevalent opinion amongst them is, that the courts have of late gone too far in restricting the negotiability of bills and notes. If, indeed, the defendant can show that there has been something of fraud in the previous steps of the transfer of the instrument that throws on the plaintiff the necessity of showing under what circumstances he became possessed of it. So far I accede to the case of Heath v. Sansom; for there *448 were in that case circumstances raising a suspicion of fraud: but, if I added on that occasion, that even independently of these circumstances of suspicion, the holder would have been bouiid to show the consideration which he gave for the bill, merely because there was an absence of consideration as between the previous parties to the bill, I am now decidedly of opinion that such doctrine was incorrect.” See also Low v. Chifney, (1 Scott 95, 97), S. C. 1 Bing. N. Cas. 267, (27 E. C. L. 383); Heydon v. Thompson, (1 Adol. & E. 210), S. C. 3 Nev. & Man. 319, 324; Chitt. on Bills 649, (10th Amer. ed.)

And this rule, we think, is the most consistent with justice and policy. For, in cases other than those of negotiable notes obtained or put in circulation by fraud or undue means, the maker, by its negotiable character, agrees that the payee shall put it in circulation. He has no right, therefore, to complain of his own act; and a holder, placing confidence in such paper, ought not to be compelled to prove consideration. In many cases it would be exceedingly difficult to do so, and to require it would throw a serious impediment in the way of the circulation of negotiable paper. It is otherwise where there is fraud, because there the maker gives no süch authority. He is in the light of an unfortunate, rather than an imprudent man, and protection will be given to him so far as to require of the holder proof of a valuable consideration. The policy of the law is to encourage the circulation of negotiable paper, and only interferes to require extraordinary proof from the plaintiff in order to protect one who has been imposed upon in some way or other.

Here the note was negotiable. It was to the order of Jackson, without defalcation. Knight gave it on a contract deliberately made, and Jackson was authorized to pass it by endorsement. There is no suspicion cast on the means by which Jackson got it. It was all fair, and according to contract'. The endorsement was according to the tenor of the note, and to require a holder in such case to prove the consideration, would, we think, be putting a clog on the circulation of negotiable securities, which would tend to impair their use and employment.

In Holme v. Karsper, ( 5 Binn. 469 ), the evidence offered by the defendant was to prove that the note endorsed by him had been put in circulation by the maker by fraud-and falsehood. In Beltzhoover v. Blackstock, ( 3 Watts 27 ), the former English doctrine, as laid down in Heath v. Sansom, is commented on, but not adopted, as the case turned on the insufficiency of the notice. The rule is there declared to be, as now pronounced in England, in Whitaker v. Edmunds , that “ when negotiable paper has been stolen or lost, or obtained by duress, or procured or put in circulation by fraud, proof of these circumstances may be given against the plaintiff; and, on such proof being given, it is incumbent on the plaintiff to show himself to be a holder bond fide and for a valuable consider *449 ation, otherwise he is considered as standing in no better situation than the former holder, in whose hands the instrument received the taint.” The charge of the court below, therefore, in favour of the plaintiff, was correct, and the rule applies whether there is an original want of consideration or subsequent failure.

Judgment affirmed.