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Spitler v. James.

having overdrawn his account, was refused any further advance without an indorser acceptable to the plaintiff. Upon this, Galley applied to the defendant, and he indorsed his name on five copperplate checks, made in the form of promissory notes, but in blank, no sum, date or time of payment being mentioned in the body of the note. Galley afterward filled up the blanks for different sums and dates as he chose. The plaintiff knew that the notes were blank at the time of their indorsement. In a suit upon these five notes, Lord MANSFIELD said: "The indorsement on a blank note is a letter of credit for an indefinite sum. The defendant said, 'trust Galley for any amount, and I will be his security.' It does not lie in his month to say the indorsements were not regular."

The case of Awde v. Dixon, supra, was where the defendant agreed to join his brother in making a promissory note for his accommodation, provided R. would also join. The defendant accordingly signed an instrument in the form of a promissory note, a blank being left for the name of the payee. R. refused to join, and afterward the defendant's brother delivered the imperfect instrument to the plaintiff for value, representing that he had authority to deal with it, and the plaintiff's name was inserted as payee. The court admit "the position, that a person who puts his name to a blank paper impliedly authorizes the filling of it up to the amount that the stamp will cover," but insist that the plaintiff could not recover, because the prima facie power to complete the instrument was coupled with a condition unknown to the plaintiff. In plain langnage, a party may clothe another with all the indicia of authority to complete an instrument to which he has attached his name in blank, and yet avoid liability, on the ground that he had imposed secret instructions upon the agent, limiting his apparent general

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The peculiar practice of the English bar, which sustains suggestive interruptions from the bench, furnishes here an instancerare one, we trust- in which the law comes from the counsel, the sophism from the court.

The counsel assert, "where a person, intrusted with a negotiable instrument for a special purpose, delivers it to another, the mere contravention of the trust will not prevent the latter from recovering, if a bona fide holder for value, and without notice." PARKE, B., responds, "This is a false instrument." The fraternal faith that trusts a blank form, duly signed, to a brother's keeping. where such

Spitler v. James.

possession furnishes prima facie proof of a power to complete the instrument, m.y challenge our admiration for the confidence displayed, but that admiration would be chilled were we told that it involved no hazard, save to the stranger who trusted to the prima facie evidence of power this possession involved; that the brother whose confidence was betrayed, was held harmless by the 'aw, and the stranger who reposes no confidence, but acts upon what the law admits is prima facie evidence, must alone suffer.

But this doctrine of forgery, as applied to a plain case of fraud, or breach of trust, was discussed by Chief Justice PARSONS, in Putnam v. Sullivan, 4 Mass. 45, where it was held, that when one indorsed a blank paper, with the intention that some thing should afterward be written to which the name should apply as an indorsement, the writing of the wrong thing was not a forgery, but a breach of trust, and he who had reposed the confidence must suffer alone when it was violated and the rights of an innocent party involved. In that case the defendant, a merchant, had intrusted his clerk with his blank indorsements, and one, by false pretenses, obtained them from the clerk and used them; and it was decided that the filling of the blanks was not a forgery, nor was it such a fraud as would discharge the indorser against the indorsee who had paid value for the paper; and the liability was placed upon the grounl, that where one of two innocent parties must suffer, the loss should be sustained by him who has given the confidence, and thus enabled the fraud to be perpetrated.

In Orrick v. Colston, 7 Grat. 189, it was held, that a paper, signed in blank and indorsed in blank, may be filled up either as a common promissory note or a negotiable note, and the person who indorsed it in blank will be liable on his indorsement to a holder for value.

In Michigan Ins. Co. v. Leavenworth, 30 Vt. 11, the rule was stated, that a bona fide holder of a bill of exchange had the power implied to fill all the blanks in the bill. So it was held in Mechanics' and Farmers' Bank v. Schuyler, 7 Cow. 337, that, in the hands of a bona fide indorsee, the indorser cannot question the transaction, though the blanks may have been filled in a manner entirely different from the understanding and expectation of the indorser when he put his name upon the note.

In Fullerton v. Sturges, 4 Ohio St. 529, where F. and others, sureties for C., signed an instrument payable to S. or order, in blank as to date, amount and time of payment, but with a private agreement VOL. II.-43.

Spitler v. James.

that it should not be filled for more than $1,000 or $1,500, and delivered it to C., the principal, to procure the discount, and the instrument was presented by C. to S., the payee, and filled up for the sum of $10,000, it was declared that one who intrusts his name in blank to another, to procure a discount, is liable to the full extent to which such other may see fit to bind him, where the paper is taken in good faith, without notice, actual or constructive, that the authority given has been exceeded; that such blank signature has the effect of a general letter of credit, and the rule is founded as well upon that principle of general jurisprudence which casts the loss, when one of two innocent persons must suffer, upon him who has put it in the power of another to do the injury, as, also, upon the rule of the law of agency which makes the principal liable for the acts of his agent, in violation of his private instructions, when he has held the agent out as possessing more enlarged authority. This case was approved in Holland v. Hatch, 12 Ohio St. 464. Parsons says of this prima facie evidence of authority to fill the blanks, that, as between the immediate parties and all others who have notice of any limitation in the authority, this presumption may be rebutted, but as to bona fide purchasers without notice, it is conclusive. 1 Bills and Notes, 109. To the same effect is Edwards on Bills, 92, et seq.

Upon the question of what constitutes a bona fide holder, the law seems now well settled.

In Michigan Bank v. Eldred, 9 Wall. 544, it is said that where "it clearly appeared that the plaintiffs were indorsers [indorsees] for value at the date of the note, in the usual course of business, without notice of any equities between the antecedent parties, such a party is regarded, in the commercial law, as a bona fide holder of the negotiable instrument, and the rule is irrepealably established by the decisions of this court, that the indorser [indorsee], under those circumstances, takes the title, unaffected by any equities between the antecedent parties to the instrument, and may recover thereon, although, as between the antecedent parties to the same, the transaction may be without any legal validity." The rights of the holder are to be determined by the simple test of honesty and good faith, and not by mere speculation as to his probable diligence or negligence. Magee v. Badger, 34 N. Y. 247; Belmont Branch Bank v. Hoge, 35 id. 65; Lord v. Wilkinson, 56 Barb. 593.

The principle controlling the case of Holland v. Hatch, 11 Ind.

Spitler v. James.

497, is not in conflict with the authorities we have cited. It is there stated that "all blanks may be filled which are necessary or proper to make the instrument a perfect and complete bill of exchange or promissory note, as the case may be." It is denied that the addition of the words" without relief from valuation or appraisement laws," was necessary or proper to complete the bill, and their addition is held to avoid the instrument. This case was questioned in Holland v. Hatch, 15 Ohio St. 464, so far as it held the bill void by reason of the additional stipulation.

In this case it was proper to complete the note and render it negotiable by the law merchant, to make it payable at a bank. There was sufficient space for that purpose, and whatever question there may have been while the note remained in the hands of a party having notice of the limitation on the authority of the maker, imposed by the indorser, no defense can be based upon such limitation when the paper has passed into the hands of a bona fide holder. The principle which excludes defenses against instruments negotiable by the law merchant, in the hands of a purchaser before due, for value, and without notice of defects, would be violated by every exception introduced, and the value of such securities greatly lessened in the market.

The sole questions which should present themselves to one receiving such paper in the regular course of business are, whether the signatures are genuine and the paper unaltered. It is doubtless often convenient to indorse such instruments in blank and deliver the paper to the maker, but the act gives authority to the holder to fill the blanks in conformity to the general character of the paper, and involves confidence in the integrity of the person to whom this general authority is given. If, in violation of such trust, ther be written within such blanks any stipulation, usual to paper of the class indicated by the blank form, a bona fide holder will be protected. It is not to be supposed that a court which has rigidly enforced the liability of a surety under circumstances involving the same principle in the case of an official bond, should hesitate in its application to a negotiable note.

We have held, that where the obligee accepts an instrument perfect in form and execution, which comes to him from the person who should have possession of the instrument for t. e purpose of such delivery, the obligee may accept it without further inquiry. The entire transaction, so far as the obligee is involved, is according

Spitler v. James.

to the ordinary and natural course. The surety, however, while he executes the instrument and places it in the usual channel for delivery, departs from the ordinary course of procedure by circumscribing the general authority by a condition unknown to the obligee. The condition is disregarded, a fraud is accomplished, and he who has not scrupled to trust his principal with the semblance of a general authority to make the delivery, must stand the hazard he has incurred. The State ex rel., etc. v. Pepper, 31 Ind. 76. See, also, Deardorff v. Foresman, 24 Ind. 481, where the rule was applied to a note negotiable under the statute.

It appears by the complaint and answer that the note was indorsed in a blank form, and, without alteration, erasure or interlineation, was filled up as a note negotiable by the law merchant, and in that condition was, before due, and in the ordinary course of business, for value, transferred to the plaintiff. The act of the decedent enabled the maker to put the paper in this condition into the market, and the consequences must rest upon his estate. The demurrer was properly sustained to the paragraph, as it constituted no defense to the second paragraph of the complaint.

The judgment is affirmed, with costs.

NOTE. It has recently been decided, in the exchequer chamber, that if a deed be delivered and a blank left therein be afterward improperly filled up (at least if this be done without the grantor's negligence), it is not the deed of the grantor. Swan v. The North British Australasian Company, 2 Hurls. & C. 175. But this principle, when applied to negotiable instruments, has been limited in its application. These instruments are not only assignable, but they form part of the currency of the country. It has, therefore, been uniformly held that where a man writes his name across the back of a blank bill or note, and parts with it, and it is afterward improperly filled up, he is liable as indorser; if he write it across the face of the bill he is liable as acceptor; or if he sign his name to a blank note he is liable as maker, provided, in either case, the instrument has once passed into the hands of an innocent indorsee, for value, before maturity.

The English cases cited, as holding the improper filling up of a blank instrument to be forgery, were, most of them, criminal prosecutions. For the purpose of obviating the incongruity of allowing a recovery upon an instrument which was itself a forgery, the courts of this country, in civil actions, have placed the liability of the author of the blank signature on the ground of estoppel.

The question was much discussed in Van Duzer v. Houe, 21 N. Y. 531, where a blank acceptance had been filled with a sum exceeding that fixed by the acceptor, and the acceptor's liability was rested solely on the ground of estoppel. The principle that when one of two innocent parties must suffer, he should bear the lots whose act has caused the injury, has also been generally relied upon in the cases, and in some of them has ruled the decision. Ingham v. Primrose, 7 C. B. 82.

The paper at delivery may be entirely blank above the signature, or in the ordinary form of a printed bill or note, with the material parts in blank, and if it be filled up consistently with the purport or tenor of the form signed or indorsed, the signor of Indorser will be liable. Orrick v. Colston, 7 Grat. 189; Visher v. Webster, 8 Cal. 112; ves v. Bank, 2 Allen, 236; Moody v. Threlkeld, 13 Geo. 155; Mitchell v. Culver, 7 Conn.

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