Albrecht v. Rathai

185 N.W. 259, 150 Minn. 256, 1921 Minn. LEXIS 777
CourtSupreme Court of Minnesota
DecidedNovember 4, 1921
DocketNo. 22,492
StatusPublished
Cited by18 cases

This text of 185 N.W. 259 (Albrecht v. Rathai) is published on Counsel Stack Legal Research, covering Supreme Court of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Albrecht v. Rathai, 185 N.W. 259, 150 Minn. 256, 1921 Minn. LEXIS 777 (Mich. 1921).

Opinion

Dibell, J.

Action on a promissory note for $1,800. A verdict was directed for [258]*258the plaintiff. The defendants appeal from the order denying their motion for a new trial.

On August 2, 1919, the defendants, Ignatz Eathai and Elizabeth Eathai, husband and wife, contracted to sell to one Ol-ark their farm of 240 acres at $165 per acre, or $39,600. Of this amount $1,000 was paid in cash, $9,000 was to be paid on March 1, 1920, and the balance in seven years from that date: One Brecht was the agent of the defendants in procuring Clark as a purchaser and was to have as his commission all above $150 per acre for which he could sell the land, or, as the sale turned nut, $3,600. Two notes of $1,800 each were given by the defendants^ to Brecht, due on March 1, 1920, one of which was indorsed to the plaintiff and is the-note in suit.

Tiie defendants claim that the notes were procured from them by fraudulent representations as to the nature of the contract, that they did not believe that they were signing promissory notes, -and that they were not negligent in signing as they did. They claim, further, that Brecht fraudulently made use. of Clark, as vendee, to get the commission notes, with no intention that the sale would be completed. The evidence as to this defense was stricken. The plaintiff offered no evidence in rebuttal. R. claims that no case of fraud, within or apart from the statute, was made, and, further, that the defendants waived the fraud or ratified the notes.

1. By G. S. 1913, § 6015, it is provided:

“No person, nor the heirs or personal representatives of any person, whose signature is obtained to any bill of exchange, promissory note, or other paper negotiable under the law merchant, shall be held liable thereon if it be made to appear that the signature was obtained by fraudulent representation, trick, or artifice as to the nature and terms of the contract so signed, that at the time of signing he did not believe it to be a bill of exchange, promissory note, or other paper negotiable under the law merchant, and that he was not guilty of negligence in signing such paper without knowledge of its terms. The question of negligence in any -suit on such contract shall in all cases be one of fact for the jury, and the person sought to be charged thereon shall be entitled to have the question of his negligence submitted to a jury.”

[259]*259This section, was not repealed by the Uniform Negotiable Instruments Act. G. S. 1913, § 6007.

The purchaser in good faith of a note executed under the conditions-defined by the statute, is not protected as a bona fide purchaser, but takes subject to the defense. Farris v. Koplan, 113 Minn. 397, 129 N. W. 770; Stevens v. Pearson, 138 Minn. 72, 163 N. W. 769; National Farmers Bank v. Nygren, 141 Minn. 49, 169 N. W. 228.

To make a defense within the statute, the signature must be obtained by a fraudulent representation as to the nature and terms of the contract signed, the signer must not believe it to be a negotiable instru-. ment, and he must not be guilty of negligence in signing. This much but no more is required, and the good faith of the purchaser does not avail him.

2. Both defendants were born in Poland. Ignatz was 73 years of age at the time of the transaction, and had lived in this country 45 years. R. and his wife spoke German. Neither could read nor write English. R. spoke and understood English so as to get along in his business matters. She was less proficient. Brecht spoke German. The negotiations between him and the defendants were in German. Both Ignatz and his wife say that they did not know that ihey were signing a promissory note; that nothing was said about a note; that Brecht told them to sign the papers, .and that they thought they were signing papers which constituted the contract of sale and nothing more. Mrs. Ratbai wanted to delay until their son, who was somewhere about town, came. Brecht refused, saying that he had to make a train. The papers •were hurriedly signed. It can be inferred that Brecht knew that the defendants were ignorant of English. R. was acquainted with them. R. was their agent and owed them active good faith. The evidence had a tendency to sustain the defendants’ claim of fraud, want of belief that they signed a promissory note, and absence of negligence in signing. There was no evidence in rebuttal of it. A verdict should not have been directed for the plaintiff upon the issues made material by the statute.

3. The statute does not change the rule that knowledge in the pur: chaser of fraud in the payee in securing the execution of a note defeats [260]*260a recovery. Hinkley v. Freick, 112 Minn. 239, 127 N. W. 940. It makes a new defense, in certain cases, against a purchaser. Before the Negotiable Instruments Act, fraud being shown, the purchaser had the burden of proving himself an innocent holder. 1 Dunnell, Minn. Dig. § 1040. The same rule prevails under the act. When the payee’s title is defective, as that word is used in the act, because of fraud, as. provided in G. S. 1913, § 5867, a purchaser seeking a recovery must take the burden of proof of good faith. First Nat. Bank v. Denfeld, 143 Minn. 281, 173 N. W. 661; G. S. 1913, § 5871.

There was evidence of fraud, and, though the defendants were found negligent, so that the statute was not a defense, still, if the jury found fraud, the burden was on the plaintiff to prove that he was an innocent purchaser, and he offered no evidence. A verdict should not have been directed for the plaintiff, though an element essential to a defense against an innocent purchaser under G. S. 1913, § 6015, was wanting.

4. The plaintiff claims that the defendants waived the fraud and ratified the notes. Clark sued to recover the $1,000 paid upon the ground that the title was defective. This suit was dismissed on the merits on December 4, 1919. On the same date the defendants acknowledged a second contract, dated August 1, 1919, the same date as the first one, and acknowledged by the plaintiff on August 7, 1919, embodying the general terms of the first, but supplying certain omissions. At the time the defendants acknowledged, that is, August 7, 1919, they had information that a note or notes were outstanding. The plaintiff claims that the execution of the new contract constituted a waiver of the fraud or a ratification of the notes as a matter of law. We do not think so. The contract was between Clark and the defendants. Brecht did not participate in it. Neither contract said anything about notes. Clark was not concerned with the notes. The fraud did not concern the contract of sale with Clark, but the notes to Brecht. The defendants, though fraud had been practiced upon them by Brecht in securing the notes, might wish to have the contract with Clark carried out, for, if $9,000 was paid on March 10, 1920, when the two notes became due, they could pay Brecht’s commission and avoid trouble. Tinder such circumstances it cannot be said that there was a waiver [261]*261or ratification as a matter of law, if indeed it could be rightly found as a fact. See First Nat. Bank v. Holan, 63 Minn. 525, 65 N. W. 952.

5. The defendants claim that Brecht did not intend that the contract with Clark would be completed, but through the device of a sale to Clark fraudulently contrived to get and make use of their notes which were greatly in excess of the cash payment made.

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Cite This Page — Counsel Stack

Bluebook (online)
185 N.W. 259, 150 Minn. 256, 1921 Minn. LEXIS 777, Counsel Stack Legal Research, https://law.counselstack.com/opinion/albrecht-v-rathai-minn-1921.