Freeman v. Venner

One, to whom a mortgagee agreed to assign a note and mortgage, induced the mortgagee, by false representations as to its effect, to indorse the mortgage note without qualification. The mortgagee, upon learning the legal effect of the indorsement, desired to qualify it, which the assignee would not permit, but, against the mortgagee’s objection, transferred the note before maturity to a Iona fide purchaser for value. Held, that an action by the mortgagee against the assignee for tie conversion of the note would not lie. An action of tort for inducing the promisee of a note to indorse it in blank upon its transfer, by fraudulent representations as to the legal effect of such indorsement, cannot be sustained before actual payment by the indorser.

Tort. Writ dated December 22, 1873. The declaration alleged that on July 16, 1873, James W. Cox and Judah H. Cox made a negotiable promissory note payable to the plaintiff or order in the sum of $3500, in two years from date, secured by mortgage of land in New Hampshire; that on November 21, 1873, the plaintiff and the defendant entered into an agreement in writing, a copy of which was annexed, and which was in substance that the defendant agreed to sell and the plaintiff to purchase a parcel of land in Boston, and in payment therefor to assign to the defendant a certain mortgage held by him on land in New Hampshire for the sum of $3500, the deeds to be passed on December 1, 1873; that on that day the plaintiff assigned the mortgage mentioned to the defendant, “ and by mistake and inadvertence on his part and through the false and fraudulent representations of the defendant he indorsed said note in blank,” and that the defendant, upon request of the plaintiff, refused to allow him to qualify such indorsement, and against the objection of the plaintiff negotiated the same to Thomas P. Tenney, a bond fide holder for value, and also transferred said mortgage to him, and that he is held to pay the same. The answer contained a general denial, and alleged that the plaintiff at the commencement of the action had paid nothing and had sustained no damage by reason of such indorsement. At the trial in the Superior Court, before Pitman, J., without a jury, it appeared that at the time of indorsing the note, December 1, 1873, the plaintiff also intentionally assigned to the defendant the mortgage given to secure said note, and, by the same assignment, the note and the debt secured by the mortgage ; that, before commencing his action, or at any time before said trial, the plaintiff had made no payment on account or by reason of the indorsement; that, before the commencement of this action and before the maturity of the note, the makers thereof had become bankrupts; that since the commencement a semi-annual instalment of interest had become due; that Tenney had caused the real estate to be sold by virtue of the power contained in the mortgage, had applied a part of the proceeds of the sale in liquidation of that interest, and, since the maturity of the note, had applied the balance of the proceeds in part payment of the note, and had commenced an action against the plaintiff to recover the balance of said note (due demand having been made and notice given) which action is now pending. “ Upon this evidence, the judge found that from the agreement of the parties the defendant was not entitled to have the personal liability of the plaintiff as indorser of the note, and that the plaintiff, through inadvertence and ignorance of the law and by the misdirection of the defendant, wrote his name so as to become an unqualified indorser of said note; that, as soon as the plaintiff became aware of the obligation he had thereby assumed, and, before the defendant had negotiated the note or altered his position in any way, the plaintiff demanded that the defendant should allow him to qualify his indorsement so that it should merely transfer the title according to the agreement, that the defendant refused, and thereupon the plaintiff forbade him to negotiate the note; but the defendant notwithstanding, and in defiance, immediately negotiated the note before maturity to a bond fide holder for value.” Upon the foregoing evidence and findings, the defendant requested the judge to rule that the plaintiff could not maintain his action, but, if he could, that he was entitled to recover only nominal damages. The judge declined so to rule, and held that, upon this evidence and these findings, the defendant was liable for the conversion of the note, and that the measure of the plaintiff's damages was the amount which the plaintiff was legally compellable to pay to the holder of the note, namely, the face of the note and interest, less the amount realized from the sale under the mortgage, treating the same as a partial payment, and gave judgment for the sum of $2465.68. The defendant alleged exceptions.