Munroe v. Stanley

Braley, J. The third and fourth of the promissory notes referred to in the bill and specifically set forth in the schedule annexed to the answers of the defendant Stanley, each of which purports to be signed by the plaintiff as maker, having been forged by Williams, are mere nullities. Wade v. Withington, 1 Allen, 561. Mackintosh v. Eliot National Bank, 123 Mass. 393. Rowe v. Putnam, 131 Mass. 281. The first and second notes, although they bear the plaintiff’s genuine signatures, were incomplete instruments when delivered to Williams as the name of the payee was left in blank, and the blank remained unfilled when Williams fraudulently raised the principal of each note and delivered them to the defendant, who wrote in as payee of the first note the name of the estate of which he was administrator, and in the second note his own name as executor of the will of the testator. But as the plaintiff, who has not appealed from the decree, apparently concedes that the defendant can enforce the notes according to their original tenor it is unnecessary to decide on this branch of the case whether under R. L. c. 73, §§ 31, 141, he is a holder in due course. Holbrook v. Schofield, 211 Mass. 234, 237. The plaintiff also as part of the transaction having delivered as collateral security for payment of the notes his policy of life insurance in the defendant company, with an assignment under seal, absolute upon its face, and the name of the assignee in blank, which Williams subsequently delivered with the first note to the defendant’s agent who thereupon filled in the name of “Harry R. Stanley, Admr. of Estate of Charles R. Stanley, Boston, Mass.,” the defendant contends, that he can treat the notes as evidence of the indebtedness, and retain the policy until repaid the full amount of the moneys advanced. It is plain from his own evidence as well as from the evidence [443] of his agent, and the indorsement on the face of the second note, that at the time of transference the policy was understood to be held as security for the first note. It was to be surrendered and the assignment discharged upon payment. If, as the defendant urges, the notes are treated as wholly avoided, there is no precedent obligation or debt binding on the plaintiff which must be satisfied before relief can be decreed. The distinction between the enforcement of a mortgage where the debt is barred by the statute of limitations as in Thayer v. Mann, 19 Pick. 535, and Jeffrey v. Rosenfeld, 179 Mass. 506, and the present case is obvious. The statute of limitations does not extinguish the debt, it merely bars the remedy. While it could be found on the testimony of the plaintiff, that Williams had authority upon negotiation to fill in the blank necessary to complete the notes, he had none to change for his own gain what was shown by their written terms. And at common law they would be wholly void even in the hands of a purchaser for value without notice, and under the statute enforceable only for the amount for which they were originally given. Greenfield Savings Bank v. Stowell, 123 Mass. 196, 202, 203, and cases cited. R. L. c. 73, §§ 31, 141. The defendant furthermore as between himself and the plaintiff is not a purchaser for value of the first note. It was not taken in payment of any antecedent debt of the plaintiff, but was applied at Williams’s request in satisfaction of an outstanding loan made by the defendant to another party whom he purported to represent. Goodwin v. Massachusetts Loan & Trust Co. 152 Mass. 189, 199. Clark v. Flint, 22 Pick. 231, 243. Railroad Co. v. National Bank of the Republic, 102 U. S. 14. See Peoples’ Savings Bank v. Bates, 120 U. S. 556. The obligation of the plaintiff for money lent having rested solely on the notes, the debt or obligation incurred by Williams to the defendant as distinguished from the original consideration cannot be enforced through retention of the policy. Wheelock v. Freeman, 13 Pick. 165. Adams v. Frye, 3 Met. 103. Stoddard v. Penniman, 108 Mass. 366. Greenfield Savings Bank v. Stowell, supra. Mackintosh v. Eliot National Bank, supra. Burnes v. New Mineral Fertilizer Co. 218 Mass. 300. It is also contended that, having left the place for the name of the assignee unfilled, the plaintiff is estopped from showing the [444] actual transaction and the agency of Williams. Herman v. Connecticut Mutual Life Ins. Co. 218 Mass. 181. The defendant is not a purchaser for value of a non-negotiable contract, from one who apparently is the owner of the legal title, but of negotiable paper for which it was accepted as collateral security even if not physically attached to the notes. The record contains no representations relating to the policy or to the notes, and under the circumstances its possession by Williams did not raise a conclusive presumption that he was vested with the absolute ownership. Commercial National Bank v. Bemis, 177 Mass. 95, 98. The question of estoppel by conduct, or equitable estoppel, is a question of fact if more than one inference can be drawn from the testimony. Snow v. Hutchins, 160 Mass. 111, 116. The presiding judge, who ordered a decree for the plaintiff, was warranted on the record in finding that the defendant in discounting the notes and making the loans dealt with him as the plaintiff’s agent, and not as a borrower on his own account, and that the money was lent to the plaintiff secured by a pledge of the plaintiff’s policy. The evidence moreover leaves no doubt, that the transaction in question was similar in character to other transactions, in which the defendant discounted notes presented by Williams upon the understanding that he was acting for the makers. The uncompleted notes were sufficient to put the defendant upon inquiry as to Williams’s authority, and upon communication with the plaintiff and maker, the fraud would have been easily discovered. Record v. Littlefield, 218 Mass. 483. Tower v. Stanley, ante, 429. R L. c. 73, § 31. It also should be noticed that the second note, which until changed bore the same date as the first note, was delivered to the defendant more than fifteen months after Williams received it from the plaintiff, and although by § 31 the holder could fill in the name of the payee, its insertion does not appear to have been within a reasonable time. We prefer, however, to rest our decision on the grounds previously stated. Nor can the claim, that the plaintiff pledged the policy to Williams who repledged it for his own purposes to the defendant, be sustained. The plaintiff did not borrow from Williams. The money when procured was to be applied in payment of the plaintiff’s overdue notes for like amounts running to the insurance [445] company as payee, with the policy as collateral, which remained in Williams’s possession and control as its general agent. The defendant having failed to bring himself within the principle, that a purchaser for value in good faith from one entrusted with the apparent title and absolute ownership of personal property is protected from the prior right of the true owner and pledgor, because the pledgor is estopped from showing the true state of the title, or that where one of two innocent parties must suffer from the fraud of a third party, the party whose negligence has caused the wrong must bear the loss, the decree is affirmed with costs. Russell v. American Bell Telephone Co. 180 Mass. 467. Gardner v. Beacon Trust Co. 190 Mass. 27, 28, 29. Ordered accordingly.