The judgment is affirmed substantially for the reasons expressed in the Appellate Division opinion, 60 N.J.Super. 299 (1960). The nature of the case is such, however, that some additional observations are desirable.
Plaintiff relied in large measure on Colonial Discount Co. v. Bures, 8 N.J. Misc. 124 (Sup. Ct. 1930), affirmed o.b. 107 N.J.L. 374 (E. & A. 1931), to sustain the right to recover. It cannot escape attention that the per curiam opinion there, which cites no cases or authorities, contains no discussion of the defense of fraud in the factum. We have examined the original record and briefs in the case and find no circumstances set forth in the affidavits of the defendant on the motion for summary judgment which would sustain such a defense. Moreover, the facts recited in the moving papers demonstrate as a matter of law that defendant was negligent in failing to ascertain that he was executing a note. Consequently, the decision cannot be regarded as authority against the rule adopted in this case.
The principle expressed in the opinion of the Appellate Division, and which we adopt, is that the defense of fraud in the factum is available against any holder of a negotiable instrument provided the maker was not negligent in failing to ascertain the actual character of the instrument. Since fraud and negligence are fact issues, the question arises as to the burden of proof with respect to their establishment.
In cases involving a holder in due course absence of negligence on the part of the maker is part and parcel of the defense of fraud in the execution of the note. If he knew, or because of lack of ordinary care did not know, the character of the instrument he was putting into circulation, then his claim of fraud can have no legal substance. Knowledge, actual or imputed on the part of the maker, must deprive misrepresentations of the essential quality which gives them efficacy as a defense against a holder in due
For affirmance — Chief Justice WEINTRAUB, and Justices JACOBS, FRANCIS, PROCTOR, HALL and SCHETTINO — 6.
For reversal — None.