Roberts v. McGrath

LYON, J. That a bona fide holder for value of a negotiable promissory note, before,maturity, takes the same free from equities between'the original parties thereto, is a general elementary rule of the law merchant, which none will deny. But, to bring an instrument within this rule, it must be the negotiable paper of the party by. whom it purports to have been made. It is not sufficient that.it has the form — that it is in the similitude — ■ of such paper; it must be such in fact. If it never had an inception or legal existence, the party sought to be charged upon it may always, unless estopped by his own negligence, defend successfully against it, without regard to the time when, or the circumstances under which, the holder acquired it. This court so held in Walker v. Ebert, 29 Wis., 194; in Kellogg v. Steiner, id., 626; and in the cases of Chipman v. Tucker and Roberts v. Wood, decided herewith. That an instrument in the form of a negotiable promissory note, which has not been delivered by the alleged maker thereof, never had an inception and has no legal existence as such, cannot be doubted. Thomas v. Watkins, 16 Wis., 549. In Walker v. Ebert will be found an able discussion of. this whole subject by DIXON, C. J., in which he cites and comments upon many of the cases bearing upon it; and it is not deemed necessary to go*over the ground again. The cases just cited must be regarded as settling the law in this state on thé subject under consideration. Neither is it necessary to refer at [58] length to the numerous cases in other states cited by the learned counsel for the plaintiff in support of the opposite doctrine. These may be dismissed with the single remark, that we believe it will be found, on examination, that in a very large majority of them the instruments in question were delivered, but were attacked for fraud, failure of consideration and the like, or that the alleged makers' were fairly chargeable with negligence in allowing the same to get into circulation, and were estopped thereby to deny the inception • and existence thereof. , We do not forget the claim, and the argument founded upon it, that Walker v. Ebert is unlike the present case in its facts. It is undoubtedly true that the facts of the two cases are different. But the principle upon which the former case was decided is directly applicable here. The principle is, that the protection which the law merchant extends to the bona fide holder of negotiable paper who acquired it for value before maturity, does not extend to a case where the instrument never had an inception or lawful existence as such, and where the party sought to be charged is free from negligence. The record in this case contains abundant evidence that the instrument in suit was never delivered by the defendant to the payee (the railroad company), or to any person for it. It was not even delivered or placed in escrow, but was lodged in the safe of Mr. Scott subject to the order and legal control of the defendant alone. Applying to the case the principles above stated, it must necessarily follow that the instrument is not the note of the defendant, and that he is not liable thereon to any person, not even to a bona fide holder who purchased the same for value before maturity, unless it got into circulation by' means of his negligence. The court refused to give the jury the following instruction prayed for on behalf of the defendant,.and gave no instruction equivalent thereto: “ To make the defendant liable on the note, it must have been intended to be put in circulation by [59] delivery, or so put in circulation through some negligence or fault on his part, which contributed to, or did, put the same in. circulation.” There was considerable controversy on the argument, as to whether, the certificate of the circuit judge thereto shows that the bill of exceptions contains all of the evidence introduced on the trial. Whether it does or not, the record contains sufficient of the evidence to show that the proposed instruction was material and pertinent to the case. And it necessarily results from the views above expressed, that the same should have been given. The court instructed the jury as follows: “ If Powers, after placing the same [the note] in the safe, although protesting that he had no authority to do so, directed the person in charge of the safe to deliver the note to the agent of the payee, the plaintiff, if an innocent holder for value before maturity, is entitled to recover.” We find no evidence in the record that Mr. Powers had any authority whatever to direct a delivery of the securities, or that he gave any directions to deliver the same. If all the evidence is before us, this instruction (which was duly excepted to) was clearly erroneous, there being no testimony to support it. It would be improper to indicate here any- opinion on the question of the alleged negligence of the defendant. That will be for the jury to determine when the cause shall be again tried. By the Court. — The judgment is reversed, and the cause remanded for another trial.