Howell v. Commercial National Bank

Mr. Justice Robb delivered the opinion of the Court: It is assigned as error that the court declined to rule that there was a variance between the cause of action and the proof, by reason of the declaration stating an indorsement of the note [376] to the plaintiff. This assignment is without merit. The defendant’s indorsement was in blank, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery. Code See. 1338 [31 Stat. at L. 1399, chap. 854]. The holder of a negotiable instrument may, at any time, strike out an indorsement which is not necessary to his title. Code, sec. 1352. In Vanarsdale v. Hax, 47 C. C. A. 31, 107 Fed. 878, it was held by the circuit court of appeals for the eighth circuit that the holder of a note indorsed in blank by the payee may, at the trial, strike out all subsequent indorsements and recover on the instrument as an indorsee under a blank indorsement. Numerous decisions are there cited to sustain this proposition. It is conceded by the defendant that if the plaintiff was a holder of the note in due course, it was rightfully permitted to recover. Sec. 1356 of the Code declares a holder in due course to be one who has taken an instrument that is complete and regular upon its face, before maturity, without notice of previous dishonor, in good faith and for value, and without notice of any infirmity in the instrument or defect in the title of the person negotiating it. The note in suit was complete and regular upon its facé, was acquired by the plaintiff before it was overdue, and for full value. It is insisted by the defendant that one who acquires a. note from the maker thereof does not acquire it in due course, that is, in the ordinary course of business, because, it is urged, such an instrument would naturally have passed from the maker to the payee or indorser. This amounts to a contention that the transaction was so irregular upon its face as to put the plaintiff upon notice and inquiry. The test is, “would a business man of ordinary intelligence and capacity receive commercial paper, when offered for the purposes for which this was transferred, as money, and upon its credit part with his property? Or woxild he at once suspect the integrity of the paper itself, and the credit and standing of the party offering it?” Roberts v. Hall, 37 Conn. 205, 9 Am. Rep. 308, See also 7 Cyc. 924. The note had been indorsed in blank and was therefore negotiated by delivery. It was presented by Halstead long before maturity, and we see no reason for indulging [377] a presumption that it had been paid. We think the more reasonable presumption to be that it had not. Eckert v. Cameron, 43 Pa. 120; Lincoln v. Stevens, 7 Met. 529. In the latter case, which was an action against the indorser of a note by an indorsee who received it from the maker, as here, the court said: “This, to a great extent, is the usual course of business^ where the maker would raise money upon his own note secured by an indorser. This fact, therefore, indicates nothing unusual, nor was it calculated to excite the attention of the indorsee; nor can it affect his legal rights.” The ruling in that case is sustained by the uncontradicted evidence in this of the custom of banks to discount such notes for the maker. Even though the defendant had been a mere accommodation indorser, he would have been in no condition to complain, for such an indorser may not escape liability on such'an instrument to a holder for value. Code, sec. 1333. But he was more than that. By his act in indorsing this note in blank and delivering it to Halstead, he constituted Halstead his agent to negotiate the note, and anyone receiving that note in good faith and for value might recover thereon. “It may be asserted, as a general principle, that where a party to a negotiable bill of exchange of promissory note intrusts it to the custody of another, when it is without date, whether it be for the purpose to accommodate the person to whom it was intrusted, or to be used for his own benefit, such bill or note carries on its face an implied authority to fill up the blank; and, as between such party to the bill or note and innocent third parties, the person to whom it was so intrusted must be deemed the agent of the party who committed such bill or note to his custody, and as acting under his authority, and with his approbation.” Goodman v. Simonds, 20 How. 343, 361, 15 L. ed. 934, 939. The court further declared that if an instrument be indorsed in blank so as to be transferable by delivery, and is misappropriated by the one to whom it is intrusted, or even if it be lost or stolen, and afterwards negotiated to one having no knowledge of these facts, for a valuable consideration and in the usual course of business, his title would be good. In Massachusetts Nat. Bank v. Snow, 187 Mass. 159, [378] 72 N. E. 959, it was held that if the maker of a promisory note wrongfully obtains possession of it, after it has been indorsed in blank by the payee, and presents it at the bank for discount, the fact that the bearer is the maker does not put the bank upon inquiry or prevent it from becoming a holder in due course, if it discounts the note in good faith, without any knowledge of its infirmity. A similar ruling was made in Voss v. Chamberlain, 139 Iowa, 569, 19 L.R.A.(N.S.) 106, 130 Am. St. Rep. 331, 117 N. W. 269. The relations existing between the plaintiff’s president and Halstead cannot affect the result. He was not interested in the business transacted, or alleged to have been transacted, by Halstead for the defendant, and there is no evidence that he had any knowledge either, of Halstead’s insolvency or of his alleged lack of good faith towards the defendant. The record shows that the reason assigned by Halstead when he tendered the note in suit to the plaintiff was that Mr. Lynn, the indorser of the maturing note, having died, it would be necessary for him to carry that note as overdue paper until the settlement of the Lynn estate, unless the note in suit was accepted in partial liquidation. There is no evidence that the Lynn note was not perfectly good, and no circumstances were developed by the proofs tending to excite the suspicion of the plaintiff, much less implying guilty knowledge or wilful ignorance on its part. AVe think the defendant’s position is somewhat inconsistent. He delivered this note to Halstead for the purpose of enabling Halstead to negotiate it, and that is precisely what Halstead did. His contention, therefore, amounts to this: That the bank should have known more about his actual relations with Halstead, that is, of Halstead’s alleged duplicity, than he himself. This position is not sustainable. Judgment affirmed with costs. Affirmed.