17 Ga. App. 170 | Ga. Ct. App. | 1915
The Empire Cotton Oil Company brought suit against Hancock on a promissory note signed by him, payable to the order of Carr, Boyd & Company, and indorsed “Carr, Boyd & Company,
On the trial of the ease the note sued upon was offered in evidence without objection by the defendant, and appeared to have been signed by the defendant, to be payable by its terms to the order of Carr, Boyd & Company, to be dated June 17, 1912, and due January 1, 1913, to provide for interest from maturity at the
On redirect and re-cross examination it appeared that some time after the execution of the two notes, one of which is the note sued upon, Carr, Boyd & Company gave to the defendant the note referred to in his redirect testimony as a “counter-note,” designed to evidence the liability of Carr, Boyd & Company to the defendant for the amount of the two notes signed by him in blank and delivered to Carr for Carr, Boyd & Company, and to indemnify the defendant against any loss thereon. The defeifdant again expressly denied that he had ever invested Carr with any authority to fill out the note for $750 (which was actually filled out for $856.25, and thereafter sued upon by the plaintiff), unless Carr should be further empowered by him to do so, and if he allowed Carr to use the note at all, that he was to use it for $750 only. He said: “I did. not use any counter-note. I did not get any note from Carr, Boyd & Company at the time this other note was given. At another time I did give Carr, Boyd & Company another note, which they did use; I didn’t get a counter-note at the time, but later I did get a counter-note.” He said further that at the time he took the counter-note he did not know that the note sued upon was outstanding, but thought it had been destroyed; that then he “took a note from Carr, Boyd & Company covering these notes.” He added that it was not his “intention” to take the note given to indemnify him against loss to cover “this $850 note sued on;” that he had “never realized any sum whatever out of any counter note; never realized anything out of the mules or note; . . didn’t intend to take that note to cover the $850 note,” as he did not know the note sued upon was outstanding, and did not Imow the other note was outstanding ; that he gave two notes, but thought they both had been destroyed; “I don’t remember that I took the counter-note to cover this note — I didn’t think I did.” This witness further said that one Lyle, who appears from the record to have been connected with
It was admitted that Carr, Boyd & Company went into bankruptcy on the 12th of November, 1912, and the defendant testified that he had no knowledge until the latter part of October of that year that the note sued upon “had the blanks filled in in any way.” Elsewhere in his direct testimony he testified as follows: “When I first handed him the' notes I gave him no authority to fill in the blanks, not until he heard from me. I instructed him not to fill in the blanks until he heard from me. In parting with this paper to Mr. Carr I did not intend to deliver that to him as his note. I did not consider it his note until he heard from me.” The defendant nowhere stated in his evidence the amount of the note given him by Carr, Boyd & Company, which he denominated a counter-note.
There was testimony from one Hendrix that he was traveling representative for the Empire Cotton Oil Company, and was working for that corporation during the year 1912, and that in July, 1912, the plaintiff company made a seed contract with Carr, Boyd & Company, to purchase seed at Maysville, Georgia, and the plaintiff received the note sued upon from Carr, Boyd & Company as security for a loan made them on June 9, 1912, and that he “did not know anything about its being an accommodation paper when it «was taken;” that the note was delivered in the office of the plaintiff by mail, and this he knew of his own knowledge, as he opened the mail himself, and about $3,000 of collateral'papers came with this note; that the plaintiff was a corporation, and he was unable to say, of his own knowledge, how many stockholders there were or what the other stockholders .knew about the note in question, though he himself did not know anything about the nature of the
This concluded the testimony, and, on motion of counsel for the plaintiff, the court directed a verdict against the defendant for the full amount of the note sued upon;' whereupon the defendant excepted.
From the undisputed evidence it appears that the note sued upon was an accommodation note, executed and delivered to (or placed in the possession of) B. F. Carr, of Carr, Boyd & Company, as shown by the testimony of the defendant; and one of the controlling questions in the case is whether the title to this note passed to the plaintiff as a bona fide holder, so as to preclude the defendant from setting up as against the holder the secret understanding between himself and Carr at the time the note was signed. It is unnecessary to say that the holder of a note is presumed to be such bona fide and for value, but if either fact is negatived by proof the defendant would be let in to all his defenses. Civil Code, § 4288. Nor is it necessary to refer to the fact that the note sued upon in this case appears, under the evidence, to have been transferred to the plaintiff as security for a pre-existing debt, since the holder of a note as collateral security for a debt stands upon the same footing as a purchaser of such a note. Civil Code, § 4289. “The holder of a note as collateral security, who takes it without notice stands upon the same footing as any other innocent purchaser without notice.” (Bonaud v. Genesi, 42 Ga. 639), and one who takes collateral security for a pre-existing debt, is a holder for value. See 2 Enc. Dig. Ga. Rep. 404 (&); Harrell v. National Bank, 128 Ga. 504 (57 S. E. 869). It is settled by numerous adjudications of our Supreme Court that ordinarily an indorsee of a negotiable instrument is presumed, in the absence of any proof to the contrary, to have become the bona fide holder of the instrument for value and before maturity. See 2 Enc. Dig. Ga. Bep. 405 (6).
Our code-provides that “an indorsement or assignment of any bill, bond, or note, when the same is sued on by the indorsee, need not be proved unless denied on oath.” Civil Code, § 4299. In the absence of any legal and sufficient plea of non est factum as to
In Harrell v. National Bank, supra, the Supreme Court, in discussing the well-established doctrine that fraud in the procurement
Again, it is well settled that if a person indorses or signs in blank a negotiable instrument and delivers it to another in order that the latter may raise money thereon, he authorizes the person to whom the note is so delivered to fill in all blanks which are necessary and proper in order to make the instrument a perfect promissory note; and if anything remains to be done in order to give validity to the paper, the blank signature carries with it authority for the holder to render the instrument perfect and effectual. And it has been settled, by numerous adjudications, that where a party to a commercial paper intrusts it to another with blanks not filled, whether it be for the purpose of accommodating the person to whom it is intrusted or of using it for his
The conveniences and the necessities of commerce require that negotiable instruments should be protected by the same rule which, in-the absence of fraud on the part of the holder, confers title to currency or coin by its mere possession. There are additional reasons, arising from or dependent upon relations between parties, which may also shield an innocent holder from defenses based on infirmities in such an instrument and from defects in the title
The general rule, already stated, that when a loss has happened which must fall upon one of two innocent persons, it should be borne by him who was the occasion of the loss, even though no positive fault was committed by him, and more especially if there was any carelessness on his part which caused or contributed to the misfortune, is confined to cases where the party who is made to suffer the loss reposed a confidence in the third person whose acts occasioned the loss, or in some other intermediate person, whose acts or negligence enabled such third person to occasion the loss; and the party has been held responsible upon grounds analogous to those which govern the relation of principal and agent. It is held that the party thus reposing confidence in another, with respect to transactions by which the rights of others may be affected, constitutes that person, as to them, his agent in some sense; and, having held him out as such, or trusted him with papers or indicia of ownership which had enabled him to appear to others as principal, or owner, or as possessed of certain powers, the person reposing the confidence is, as to those who have been deceived by his agent thus constituted, held liable. “The reason is obvious. The maker ought rather, to suffer, on account of the fraudulent act of one to whom he intrusts his paper, or who is made his agent in respect 'of it, than an innocent party. The law esteems him in fault in thus putting it in the power of another to perpetrate the fraud, and requires him to bear the loss consequent upon his negligence;” 3 E. C. L. 1000, § 209.
It may be said that the cases hold, with little, if any, conflict, that at common law an innocent payee, or other person in whose hands a note has its inception as a contract, may recover against one who signs it in blank and delivers it to a third person, who fills up the blanks in a manner different from or in excess of his authority. Some of the eases put the rule on the ground that the payee is a bona fide holder and entitled to protection as such, and others upon the ground of common-law estoppel. In Moody v. Threlkeld, 13 Ga. 55, the defendant was held liable on the ground that the payee was a bona fide holder. In Weidman v. Symes, 120 Mich. 657 (77 Am. St. R. 603, 79 N. W. 894), and in Johnston
It was held in Moody v. Threlkeld, 13 Ga. 55, that “If A signs his name to a blank joaper, and delivers it to B, to be filled up by him,' for that purpose, A constitutes B his general agent, quoad the filling up the note. And A will be .bound, as to a bona fide holder, though B should not act in accordance with the private understanding between A and himself.” In Wooten v. Inman, 33 Ga. 41, it was held that “The transferee of a negotiable paper, who receives the same before it is due, can not be affected by any agreement or understanding between other parties to the paper, unless notice of such agreement or understanding is brought home to the transferee.” In Wilkes v. Pope, 4 Ga. App. 36 (60 S. E. 823), this court held: “If A signs his name to a'blank note and delivers it to B, designating- the payee to be filled in the note by B, A constitutes B his agent for that purpose, and A "will be bound to a bona fide holder of the note who becomes such before maturity, although B violated the private understanding between A and himself with reference to the note. Moody v. Threlheld, 13 Ga. 55.
Of course where a note is signed by one as maker or indorser and delivered to the payee with the agreement that it shall not become operative unless some other person or persons shall likewise sign it, such a note in the hands of an original" payee may be defended. In the case of Heitmann v. Commercial Bank of Savannah, 6 Ga. App. 584 (65 S. E. 590), the original payee brought suit on the contract and a plea was interposed setting up a parol condition precedent that the note was not to be completed or binding until an additional indorser had signed "it, and this court held that plea to be good. The point has been many times ruled upon in similar cases. "In Bonner v. Nelson, 57 Ga. 433, a suit upon a promissory note was resisted by a surety who signed it and left it with his principal, believing and expecting that another surety was to sign also, but whose signature was not procured, the note being delivered by the principal without it. It was held that to make this defense available it must be shown, not only that the instrument was incomplete, but also that the payee had notice of this fact at the time that it was delivered to him.” Moore v. Farmers’ Mutual Insurance Asso., 107 Ga. 199-206 (33 S. E. 65). ""When the • maker of a negotiable paper deposits it with a third person to be delivered on a certain contingency, or for a specific purpose not apparent upon the paper, and such third party violates the trust, and wrongfully makes delivery, the bona fide indorsee before maturity, and without notice, may recover from the maker. If a promissory note be deposited with a third person as an escrow, and delivered to the payee without the maker’s knowledge and consent, and without the happening of the condition on which it was to be delivered, the maker is, nevertheless, liable to an innocent holder for value.” 3 E. C. L. 1013, § 221.
It is unnecessary to further call attention to the distinction between a note in the hands of the original payee, who received it
In Hansford v. Freeman 99 Ga. 376 (27 S. E. 706), the agent who delivered the note was the agent of both parties, and received it with the understanding that he was to hold it for delivery until the happening of a particular event, and that if that event did not happen, he was not to deliver it at all. He delivered it to the payee, who, through the knowledge of her agent, had knowledge of the condition under which only the note was to be delivered, and the court held that the maker of the note might set up as against her (not, however, against some innocent holder to whom the payee 1 might have transferred the note) the fact that it had never been de' livered, and the conditions under which it was alone to be delivered. The case of Dixon v. Bristol Savings Bank, 102 Ga. 461 (31 S. E. 96, 66 Am. St. R. 193), cited by the plaintiff in error, is entirely different from the case at bar on its facts. In that case a deed to land, left in escrow, was obtained from the depositary by a fraud practiced upon him by the grantee, who had not performed the condition upon which delivery was to be made, the depositary being innocent of any wrong or bad faith, and the court held that no title passed to the grantee or to an innocent purchaser from the grantee. One who signs or indorses a note as surety can not in defense to an action thereon, either by the innocent payee or any other bona fide holder for value, set up that the principal maker, to whom he intrusted the note, delivered it in violation of a condition that a certain other person or persons should first sign or indorse it. Clarke v. Bryce, 64 Ga. 486; Bonner v. Nelson, 57 Ga. 433; Young v. Ward, 21 Ill. 223; Deardorff v. Foresman, 24 Ind. 481; Smith v. Moberly, 10 B. Mon. 266 (52 Am. D. 543); Bank of Missouri v. Phillips, 17 Mo. 29; Massman v. Holscher, 49 Mo. 87; Merriam v. Rockwood, 47 N. H. 81; Passumpsic Bank v. Goss, 31 Vt. 315; Dixon v. Dixon, 31 Vt. 450; Farmers’ Bank v. Humphrey, 36 Vt. 554 (86 Am. D. 671). “A bona fide holder may recover upon a negotiable instrument although it was deposited with a person to be delivered only upon the happening of a certain event or the ful
In the case under consideration, it is undisputed that the defendant Hancock signed his name to a printed note and turned it over to B. E. Carr with express instructions that Carr should not fill in for any amount or use it until authorized by the maker . to do so. Nevertheless, Carr was placed in possession of an instrument purporting to be a note, even though the amount was left blank, and thus was invested by the signer of the note with the necessary indicia of ownership, and placed in a position where he might perpetrate fraud upon an innocent person; and hence, under the great weight of authority which we have referred to above, and tinder the rulings in Moody v. Threlkeld and Wilkes v. Pope, supra, the indorsee who accepted the note with no knowledge even (so far as appears) that it was an accommodation paper, and, so far as the record discloses, with absolutely no knowledge that Carr had exceeded his authority in filling in the note and transferring it, must be treated as an innocent holder and protected against the alleged fraudulent act of Carr in completing the note and transferring it without authority. In the case of Wilkes v. Pope, supra, the defendant admitted at the trial that he signed the note in question, and offered to testify that he agreed with another person to become accommodation security for the wife of this person at a certain bank for $70 only, and signed the note with the understanding that she was to sign it as principal above his signature, and the note was to be filled in for the sum of $70 payable to a certain named bank, blank spaces being left for that purpose. The agent thus appointed by the defendant disregarded his instructions and agreement, filled in his wife’s name as payee instead of that of the bank, and she thereafter transferred the note before maturity, for her own benefit, to another person, for value and without notice. In the case of Moody v. Threlkeld, supra, the person whose name appeared as the maker of a negotiable instrument pleaded that he signed it as security, with the understanding that, before delivery to the payee, another should sign it as maker; or, in other words, the person to whom he delivered the note, and who he understood was to sign it as maker, had absolutely no authority whatever to deliver it unless it should be completed in accordance with the agree
The rule may appear a harsh one, and yet it is founded on the fairest principles of justice and equity. Under a contrary rule, if a solvent person were permitted to put in circulation accommodation paper for the benefit of his friends or any others, whom for business reasons or reasons of policy he might desire to assist, without himself incurring liability, all that would be necessary would be to sign such paper, leaving blanks therein to be filled, with the express understanding and agreement that the person accommodated should not fill in or use such paper until further notice from the maker. Then if the maker, after so delivering the blank accommodation paper, were to direct that it be not used, but fail, as in this case, to obtain possession of the paper, or to take any steps which might effectually rescind it, persons so accommodated might fraudulently put the paper in circulation, transfer or discount it for a cash consideration, or as collateral security for a pre-existing debt, and thus obtain valuable extensions of time in their indebtedness, and holders who acquired it, relying on the fact that his name was affixed thereto and that he was financially solvent, might be brought to ruin upon proof by the maker that he had never empowered the original payee and fraudulent indorser to complete the