Tower v. Stanley

Braley, J. The plaintiff’s promissory notes described in the second and third suits having been materially altered after delivery and before maturity, without his knowledge or consent, by one Williams, of whom he hired the money, raising the amounts, and also in two of them inserting a clause for interest and in the other two by increasing the rate of interest, the defendant at common law could not enforce either note against the maker. Greenfield Savings Bank v. Stowell, 123 Mass. 196,198, and cases cited. But under R. L. c. 73, § 141, this rule was changed and “when an instrument has been materially altered and is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original tenor.” The defendant, whose testator was upon the record an innocent purchaser for value, accordingly could recover on the first two notes the amounts for which they were originally given with interest thereon at five per cent, the rate agreed upon by the plaintiff and Williams. R. L. c. 73, § 69. Thorpe v. White, 188 Mass. 333. Pierce v. Boston Five Cents Savings Bank, 129 Mass. 425, 434. R. L. c. 73, § 3. But under the finding that when the two last notes were signed and delivered the name of the payee was in blank and Williams was authorized only to fill in his own name as payee, the plaintiff contends that the defendant is not a holder in due course. If they had been filled as authorized and then negotiated, the defendant would have held in due course instruments complete and regular upon their face without notice of any infirmity, as defined in R. L. c. 73, §§ 69, 73. The notes, however, under § 25, requiring that “where the instrument is payable to order the payee must be named or otherwise indicated therein with reasonable certainty,” were incomplete instruments, not regular upon their face. Shaw v. Smith, 150 Mass. 166, 167. Colson v. Arnot, 57 N. Y. 253, 259. [436] It was well settled before the statute that the plaintiff having issued these notes, with the intent to become bound for the amounts stated, any bearer who came regularly by them could fill the blanks with his own name. The maker, having put his commercial paper in circulation, was estopped to set up the defect and a holder in good faith and for value is deemed to have been given implied authority to fill the blanks with appropriate terms. Ives v. Farmers’ Bank, 2 Allen, 236, 240. Burgess v. Blake, 86 Am. St. Rep. 78, 107, 108, where many of the cases are collected. By § 31 this rule was changed. While the person in possession has authority prima fade to complete it by filling up the blanks therein, it cannot when completed be enforced against any person who became a party thereto prior to completion, unless filled up in accordance with the authority given, and within a reasonable 'time. Hartington National Bank v. Breslin, 88 Neb. 47. The general purpose of the statute was to make the law of negotiable instruments uniform, and we are unable to perceive any sufficient reason why §§ 25, 31 and 69, should not be construed in conformity with their express meaning. It is therefore plain that the defendant, while a holder for value, is not a holder in due course and having purchased with notice upon their face that when delivered by the maker they were in an inchoate state, he was put upon inquiry as to the authority of Williams, and the plaintiff is not bound by the notes in the defendant’s possession. Boston Steel & Iron Co. v. Steuer, 183 Mass. 140. Thorpe v. White, 188 Mass. 333. Fillebrown v. Hayward, 190 Mass. 472. Liberty Trust Co. v. Tilton, 217 Mass. 462. R. L. c. 73, §§ 69, 73, 75. By the first bill the plaintiff further asks that the policy of life insurance he assigned to Williams as collateral security for the payment of the first notes, and which they subsequently agreed should be held to secure the second notes, but fraudulently transferred by Williams to the testator when he purchased the first notes, may be delivered to him and the assignment cancelled. We assume in the defendant’s favor from the findings of the single justice, that when delivered by the plaintiff the name of the assignee had not been inserted. While upon the record Williams had no authority to insert any [437] name but his own, or to add the name of the witness, or write in the consideration, and the insertion of the name of the testator as assignee was in furtherance of the fraud practiced upon the plaintiff, yet the assignment had been given for the amounts he actually had borrowed. It was unnecessary that it should be attached to the policy, and if it had been completed and after-wards was altered materially it could have been avoided. Bacon v. Hooker, 177 Mass. 335. The plaintiff however was not obliged to deliver an incomplete instrument. It recites that “upon payment of loan with interest by me at any time, policy is to be returned to me and this assignment to be then null and void,” and by leaving the name blank the testator, who acted in good faith, was misled into the belief that Williams, who had possession of the policy, also had the right to deal with the assignment by filling in the blank in connection with the first notes, the regularity of which upon their face was unquestioned. The plaintiff is precluded from now contending that the instrument is invalid. Scollans v. Rollins & Sons, 179 Mass. 346, 352. Russell v. American Bell Telephone Co. 180 Mass. 467, 470. Westlake v. Dunn, 184 Mass. 260, 262. Herman v. Connecticut Mutual Life Ins. Co. 218 Mass. 181. The first notes being valid for their original tenor the plaintiff concedes that he must pay the amounts, and it would follow that upon payment he would be entitled to a cancellation of the assignment and a return of the policy. The transaction of the second loan to the plaintiff was not in any way connected with the first loan. At that time, but unknown to the plaintiff, the policy which he agreed should be held as collateral security for the second loan, had been assigned to the defendant’s testator. The assignment had passed from Williams’s possession and it had ceased to be an instrument in blank, nor does it appear that the defendant knew of its original condition. The right of the defendant to retain the assignment as security for the second notes accordingly depends upon the scope of the agency of Williams, and the plaintiff is not estopped from showing, as the single justice found, that he had no authority to borrow of the defendant or to make the pledge. McNeil v. Boston Chamber of Commerce, 154 Mass. 277, 285. Nourse v. Jennings, 180 Mass. 592. [438] It is urged, citing Joslyn v. Wyman, 5 Allen, 62, that, having acted in good' faith, it would be inequitable to allow the plaintiff to redeem without paying the amount of the original loans. It was there held that, although a mortgage could not be enforced as security for a debt not within its terms, yet as the parties had made an oral agreement that it should stand as security for a further loan, the mortgagor could not have it discharged in equity without payment of the money lent. But as the plaintiff never agreed that the policy should be transferred to the defendant as security for the payment of any sum whatever, the present case is not within that decision or the cases which have followed it. Nourse v. Jennings, 180 Mass. 592. Whitney v. Metallic Window Screen Manuf. Co. 187 Mass. 557, 560. The jurisdiction of a court of equity to afford complete relief is unquestioned. Busiere v. Reilly, 189 Mass. 518. Rice v. Winslow, 182 Mass. 273. And the defendant, as executor, upon payment with interest of the first notes, is to deliver not only the policy and assignment duly cancelled but, as executor and individually, the second ■ notes to the plaintiff, who is to recover but one bill of costs. Smith v. Everett, 126 Mass. 304. Ordered accordingly.