Cason v. Grant County Deposit Bank

CHIEF JUSTICE PRYOR delivered the opinion of the court. Cason executed his note to Ct. W. Siddons for two hundred — 489 — dollars, payable in three months. The note, when executed, read as follows: Dolls. 200 Williamstown, Oct. 2, 1889. Three months after date I promise to pay to the order of G. W. Siddons, two hundred dollars,..................at ....................value received. Due ........... Chapman Cason. The blanks were filled by inserting the word “payable” before the word “at,” and the words “Bank of Williams-town, Ky.,” after the word “at,” making the paper “payable at the Bank of Williamstown, Ky.” With these blanks filled by the holder he discounted the note before maturity at this bank, and Cason refusing to pay, the bank instituted the present action upon the note and recovered a judgment. It is alleged that the note was executed by Cason to Siddons, and transferred to the plaintiff (the bank) by Siddons for a valuable consideration, whereby the plaintiff became the owner, etc. Cason filed an answer that in effect is a special plea of non est factum, alleging that a blank in the paper was filled in by Siddons, o-r some one else, by inserting the word “payable” before the word “at,” and the words “the bank of Wil-Uamstoicn, Ky.,” after, so as to make the note read “payable at the Bank of Williamstoicn, Ky.;” that this addition to the note was made without his authority or consent and was wholly unauthorized by him. A demurrer was filed to the answer and sustained, on the ground, as is stated in the briefs, of the failure of the defendant to allege that the bank had notice of the infirmity of the paper when it became the owner. The case was brought to the Superior Court on the question raised by the demurrer to the answer, there having been a judgment for the bank, and the court reversed the judgment below upon the ground that the demurrer pre — 490 — sented a valid defense. On the return of the case to the lower court, the demurrer to the answer was overruled and a reply filed by the bank averring in substance that it discounted the paper in good faith at the instance of Siddons before maturity, without any notice of the paper’s infirmity, or that the blanks had been filled up by Siddons, or any one else, and that the paper, when discounted, was perfect as to date, amount and where payable, that it is an innocent holder for value, etc. A demurrer was interposed to this answer and overruled, and it appearing that the paper had been discounted in good faith by the bank, with the blanks filled at the time, a judgment was again rendered for the bank. Cason then appealed to the Superior Court for the second time, and that court held that the question at issue had been settled by its- decision on the first appeal, in which it held the answer of Cason to be good, in the absence of an averment that the bank had notice of the alteration in the paper, and the question being res adjudicata, the court below should have sustained the demurrer to the reply of the bank in which the circumstances under which it became the owner are specifically alleged. > , • It is plain the bank had been given no opportunity of showing the manner in which it held the paper, or its condition at the time the discount was made, and while the answer may be good, because it is simply a plea of non est factum, and although specially pleaded, the burden was on the bank, after the defendant had shown the alteration, of showing that it became the owner for value and without notice .of the paper’s infirmity. It, therefore, became necessary for the appellee, the bank, to plead facts of which- it must have the knowledge, instead of requiring the defendant to present the bank’s defense to the plea of non est factum. So, when the case went — 491 — back with the demurrer overruled, the bank was compelled to reply, andthe court could not have intended to saythatthe bank, although an innocent holder, was without any defense to the plea, although the reversal upon the second appeal would lead to this conclusion. The case, however, is now in this court on this second appeal and the case must be considered as if this court had rendered the original opinion, or rather, this court must determine whether the opinion of. the Superior Court on the first appeal holding the answer good, precluded the bank from making the defense upon which the recovery was had. We adjudge not, for the reason already given. The bank, by its demurrer to the answer of Cason, admitted, because it had been so alleged, in that pleading, that after Cason had executed the paper and delivered it, it was, without his consent, fraudulently altered by the payee or some other person unknown to him, by inserting the words “payable at bank of Williamstown.” This admission made the answer good, and the exception to this doctrine, well recognized, must be pleaded by the holder, if innocent, for without the exception a want of notice constitutes no defense. The exception is, ‘‘if the note have blanks left in it, filling the blanks is no alteration, but filling them contrary to agreement or authority of the party who left them is an alteration which can give the one who filled the blanks no rights against him who left them, though it may bind him who left the blank to other [innocent] holders for value.” (2 Parsons on Bills and Notes, 566; Woolfolk v. Bank of North America, 10 Bush, 504; Blakey v. Johnson, 13 Bush, 197; Newell v. First Nat. Bank of Somerset, 13 Ky.Law Rep., 775.) Where one signs a paper in blank, or partly in blank, when so written when signed and delivered asto show uponits face that a blank is left to fill up as to amount, or where payable, there is an implied authority to the holder to fill up — 492 — the blanks in accordance with the general character of the instrument, and when this is done by the payee it is not such an alteration as will invalidate the paper as to one who takes it for value without notice of its infirmity. In this case the paper had been discounted by the bank and placed upon the footing of a bill. It was taken as a complete instrument. Cason was in the bank and introduced Si'ddons, the payee, to its officers, and Siddons, no doubt, went to the bank for the purpose of discounting the paper. Cason, however, states the paper was not given for the purpose of being discounted, and there was no authority from him to fill up tlie blanks, and at last what the payor and payee understood in regard to the blanks, or the authority conferred upon the holder by an express agreement, is immaterial, as no such agreement is shown to have been made. In the case of Cronkhite v. Nebeker, reported in 81 Ind., 319, where a note was executed in blank as to the place of payment, as in this case, it was held that no implied authority existed on the part of the holder to .fill up the blank so as to make it negotiable. That case, it seems to us, is a departure from the well-recognized doctrine on the subject. Mr. Daniel, in his work on Negotiable Instruments, says, “that when the drawer of a bill, or the maker of the note, has himself, by careless execution of the instrument, left room for' any- alteration to be made, either by insertion or erasure, without defacing it, or exciting the suspicions of a careful man, he will be. liable upon-it to any bona fide holder without notice, when the.opportunity which he has afforded has been embraced.” He proceeds to state, where after the word “at” a blank was left and it was filled and made payable at an unauthorized place, it was held that the word“at” implied that the blank space.succeeding it might be filled — 493 — before the note should be delivered with a designated place of payment. (2 Daniel on Negotiable Instruments, secs. 1405, 1406.) \ In Kitchen and others v. Place, 41 Barb., 466, the blank space was left after the word “at” in a promissory note. The blank was filled designating the place of payment. It was held the holder had the implied authority to fill the blank. In the case of Redlich v. Doll, 54 N. Y., 234 (13 Am. Rep., 573), the note was left blank after the word “at,” no place of payment being inserted. The maker of the note delivered it to the payee upon the agreement that the note should not be negotiated, but the holder, violating the agreement, filled the blank and negotiated the paper. The .court held the maker was liable to a bona fide holder for value. (See also Brown v. Reed, 79 Pa. St., 370.) Many cases might be cited analogous to the one before us sustaining the judgment below, and we have no doubt of the appellant’s liability to the bank. Judgment affirmed.