Story Case

To aid her husband, Morris Folsom, Mrs. Folsom executed a note payable to him, signing her name Anna Vandewater Folsom. Mrs. Folsom belonged to a wealthy family and had a large personal fortune. The note was readily discounted, and was later transferred for value to an investor, Alfred W. Green, who did not know the original parties, but relied primarily upon his indorser. In making the necessary presentment for payment, Green discovered the identity of the maker of the note, and brought suit. Now in very many states, the statutes giving married women the capacity to contract do not extend to contracts made with the husband, but these are expressly excepted from their operation. This was presented by the defendant, Mrs. Folsom, as a defense upon this note, since it was made payable to her husband. Green answered that he was an innocent holder, that he did not know of the relationship of the parties, and that the defense was, therefore, not good against him. Can Green recover, or should the incapacity of the defendant to make this contract result in a judgment in her favor?

Ruling Court Case. Hosier Vs. Beard, Volume 54 Ohio State Reports, Page 398

Beard made a promissory note payable to one, Aaron Gladhart, who, thereafter, indorsed it to Hosier. Hosier now brings this action against Beard and his guardian.

The guardian, on behalf of Beard, contended that the latter is not liable upon this note because he was insane when he made it.

Mr. Chief Justice Williams said: "In Story on Promissory Notes it is said: ' Every contract presupposes that it is founded on the free and voluntary consent of the parties, upon a valuable consideration, and after a deliberate knowledge of the character and obligation. Neither of these conditions can properly belong to a lunatic, an idiot, or other person non com-pos mentis. Hence it is a rule, not merely of municipal law, but of universal law, that the contracts of all such persons are utterly void.' It has, accordingly, been held that a note signed by a lunatic is void as against him in the hands of every holder, however innocent." Judgment was given for Beard.

Ruling Law. Story Case Answer

A real defense is some defect in the bill which may be raised, by the person sought to be charged, against any one, whether immediate or remote; the defense may be raised against a bona fide purchaser for value, who knew nothing of this defect when he purchased the instrument. Thus, if the person sought to be charged has absolutely no contracting capacity, any negotiable instrument made by such person is void, and this will constitute a good defense against any person who takes the instrument, even though such person be a bona fide purchaser for value, without notice of the incapacity of the party liable thereon.

Begardless of the good faith of Green, he can not recover on the note of Mrs. Folsom. The original rule of the Common Law, having been left unchanged by the statute in this particular case, was that a married woman could not bind herself by contract. She did not exist as a legal person. Therefore, this is not an existing legal obligation, and no person can enforce it. Lack of capacity is not a personal defense, but prevents the very creation of a liability. Since married women could not contract with their husbands, a note made payable to the husband was void, and judgment must be given for the defendant, Mrs. Folsom.