DOUGHERTY v. SALT, N.Y., Judgment, Law, casemine.com

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Attorney(S)

Abraham Levitt and Charles Oechler for appellant. Walter B. Raymond and Victor C. Cormier for respondent.

Judges

Benjamin N. Cardozo

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Smart Summary

Factual and Procedural Background

An eight-year-old boy received from his aunt a $3,000 promissory note payable at her death or before. The guardian’s testimony showed that the aunt intended to provide the child with a bounty and directed that the note be prepared and delivered to him. [1]

The trial court submitted consideration to the jury, then set aside the plaintiff’s verdict and dismissed the complaint. The Appellate Division, by a divided court, reversed and reinstated the verdict, concluding that the note sufficiently evidenced consideration. [2]

Legal Issues Presented

Whether the note’s printed recital of “value received” established consideration despite testimony showing that it was given as a voluntary gift. [1][3]
Whether the trial court properly set aside the verdict and dismissed the complaint, or instead should have ordered a new trial. [4]
Whether evidence that the note’s signature was forged was admissible under an answer denying execution, even though forgery was not separately pleaded. [5]

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Strickland v. Henry, 175 N.Y. 372	Distinguishing evidence supplied by defense witnesses to disprove consideration.	The court distinguished this case because the evidence disproving value came from the plaintiff’s own witness. [3]
Harris v. Clark, 3 N.Y. 93	A voluntary, unenforceable promise of an executory gift is not supported by consideration.	The note was characterized as an executory gift. [3]
Holmes v. Roper, 141 N.Y. 64, 66	Principle concerning voluntary promises of executory gifts.	The court relied on it in holding the note unenforceable for lack of consideration. [3]
Fink v. Cox, 18 Johns. 145	A promise conferring a bounty is not payment of a debt or supported by consideration.	The aunt was conferring a bounty rather than paying a debt to the child. [3]
Philpot v. Gruninger, 14 Wall. 570, 577	Nothing constitutes consideration unless both parties regard it as consideration.	The parties’ shared purpose was a gift, so the note was not given for value received. [3]
Fire Ins. Assn. v. Wickham, 141 U.S. 564, 579	Consideration must be regarded as such by both parties.	The printed recital could not create consideration inconsistent with the transaction’s actual purpose. [3]
Wisconsin M. Ry. Co. v. Powers, 191 U.S. 379, 386	Consideration depends on the parties’ understanding of the transaction.	The court applied this principle to reject the note’s printed “value received” language. [3]
DeCicco v. Schweizer, 221 N.Y. 431, 438	Consideration must be treated as such by both parties.	The court concluded that neither party treated the promise as supported by consideration. [3]
Blanshan v. Russell, 32 App. Div. 103	A printed contractual formula cannot prevail over facts demonstrating the contrary legal conclusion.	The “value received” recital was treated as an erroneous conclusion contradicted by the conceded facts. [3]
Kramer v. Kramer, 181 N.Y. 477	Principle concerning the legal effect of a recital inconsistent with the transaction’s actual facts.	The court relied on the principle in rejecting the note’s recital of consideration. [3]
Bruyn v. Russell, 52 Hun, 17	Principle concerning the insufficiency of an inconsistent recital to establish consideration.	The note’s printed language could not overcome the evidence that it represented a gift. [3]
Schwarz v. Oppold, 74 N.Y. 307	Evidence challenging execution is admissible under a denial of execution.	The court held that forgery evidence was admissible because the answer denied execution. [5]
Farmers' L. T. Co. v. Siefke, 144 N.Y. 354	A denial of execution permits evidence of forgery without a separately pleaded forgery defense.	The trial court erred by excluding the defendant’s forgery evidence. [5]

Court's Reasoning and Analysis

The court held that the inference of consideration ordinarily arising from the note’s form had been fully rebutted. The decisive evidence came from the plaintiff’s own witness, whose account admitted only one interpretation: the note was a voluntary and unenforceable promise of an executory gift. [3]

The child was not a creditor, and the aunt was not paying a debt; she was conferring a bounty. Because neither party regarded the promise as an exchange for value, the printed words “value received” could not establish consideration. [3]

The plaintiff’s evidence therefore disproved consideration under the Negotiable Instruments Law, and the jury’s verdict was contrary to law. The trial judge correctly set the verdict aside. [3][4]

The court nevertheless concluded that dismissal of the complaint was improper. Because the trial judge had denied, rather than reserved ruling on, the defendant’s motion for nonsuit or a directed verdict, the proper disposition after the verdict was to grant a new trial. [4]

A new trial was independently required because the trial court improperly excluded evidence that the signature was forged. The answer denied execution, and that denial was sufficient to make the forgery evidence admissible. [5]

Holding and Implications

HOLDING: The Court of Appeals reversed the Appellate Division’s judgment and modified the Trial Term judgment by granting a new trial; as modified, the judgment was affirmed, with costs in all courts to abide the event. [6]

The direct consequence was that the plaintiff’s reinstated verdict did not stand, but the complaint was not dismissed and the matter was remanded for a new trial. The opinion discusses no broader implications and set no new precedent beyond applying the cited principles to this transaction. [4][6]

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CHARLES N. DOUGHERTY, an Infant, by SUSAN M. TEVES, His Guardian ad Litem, Respondent, v. EMMA L. SALT, as Executrix of HELLENA M. DOUGHERTY, Deceased, Appellant.

CARDOZO, J.

The plaintiff, a boy of eight years, received from his aunt, the defendant's testatrix, a promissory note for $3,000 payable at her death or before. Use was made of a printed form, which contains the words "value received." How the note came to be given, was explained by the boy's guardian, who was a witness for his ward. The aunt was visiting her nephew. "When she saw Charley coming in, she said `Isn't he a nice boy?' I answered her, yes, that he is getting along very nice, and getting along nice in school, and I showed where he had progressed in school, having good reports, and so forth, and she told me that she was going to take care of that child, that she loved him very much. I said, `I know you do, Tillie, but your taking care of the child will be done probably like your brother and sister done, take it out in talk.' She said: `I don't intend to take it out in talk, I would like to take care of him now.' I said, `Well, that is up to you.' She said, `Why can't I make out a note to him?' I said, `You can, if you wish to.' She said, `Would that be right?' And I said, `I do not know, but I guess it would; I do not know why it would not.' And she said, `Well, will you make out a note for me?' I said, `Yes, if you wish me to,' and she said, `Well, I wish you would.'" A blank was then produced, filled out, and signed. The aunt handed the note to her nephew with these words, "You have always done for me, and I have signed this note for you. Now, do not lose it. Some day it will be valuable."

The trial judge submitted to the jury the question whether there was any consideration for the promised payment. Afterwards, he set aside the verdict in favor of the plaintiff, and dismissed the complaint. The Appellate Division, by a divided court, reversed the judgment of dismissal, and reinstated the verdict on the ground that the note was sufficient evidence of consideration.

We reach a different conclusion. The inference of consideration to be drawn from the form of the note has been so overcome and rebutted as to leave no question for a jury. This is not a case where witnesses summoned by the defendant and friendly to the defendant's cause, supply the testimony in disproof of value ( Strickland v. Henry, 175 N.Y. 372). This is a case where the testimony in disproof of value comes from the plaintiff's own witness, speaking at the plaintiff's instance. The transaction thus revealed admits of one interpretation, and one only. The note was the voluntary and unenforcible promise of an executory gift ( Harris v. Clark, 3 N.Y. 93; Holmes v. Roper, 141 N.Y. 64, 66). This child of eight was not a creditor, nor dealt with as one. The aunt was not paying a debt. She was conferring a bounty ( Fink v. Cox, 18 Johns. 145). The promise was neither offered nor accepted with any other purpose. "Nothing is consideration that is not regarded as such by both parties" ( Philpot v. Gruninger, 14 Wall. 570, 577; Fire Ins. Assn. v. Wickham, 141 U.S. 564, 579; Wisconsin M. Ry. Co. v. Powers, 191 U.S. 379, 386; DeCicco v. Schweizer, 221 N.Y. 431, 438). A note so given is not made for "value received," however its maker may have labeled it. The formula of the printed blank becomes, in the light of the conceded facts, a mere erroneous conclusion, which cannot overcome the inconsistent conclusion of the law ( Blanshan v. Russell, 32 App. Div. 103; affd., on opinion below, 161 N.Y. 629; Kramer v. Kramer, 181 N.Y. 477; Bruyn v. Russell, 52 Hun, 17). The plaintiff, through his own witness, has explained the genesis of the promise, and consideration has been disproved (Neg. Instr. Law, sec. 54; Consol. Laws, chap. 43).

We hold, therefore, that the verdict of the jury was contrary to law, and that the trial judge was right in setting it aside. He went too far, however, in dismissing the complaint. He might have dismissed it if he had reserved his ruling on the defendant's motion for a nonsuit or for the direction of a verdict (Code Civ. Pro. secs. 1185, 1187). Instead of reserving his ruling, he denied the motion absolutely. Upon the return of the verdict, he should have granted a new trial.

A new trial was also necessary because of error in rejecting evidence. The defendant attempted to prove that the signature to the note was forged. The court refused to hear the evidence, because forgery had not been pleaded as a defense. The answer did deny the execution of the note. The evidence of forgery was admissible under the denial ( Schwarz v. Oppold, 74 N.Y. 307; Farmers' L. T. Co. v. Siefke, 144 N.Y. 354).

The judgment of the Appellate Division should be reversed, and the judgment of the Trial Term modified by granting a new trial, and as modified affirmed, with costs in all courts to abide the event.

HISCOCK, Ch. J., CHASE, COLLIN, HOGAN, CRANE and ANDREWS, JJ., concur.

Judgment accordingly.

DOUGHERTY v. SALT