21 Iowa 244 | Iowa | 1866
We are left to presumption as to the time the erasure was made. That it was made before the note was delivered to the payee, is one of the conceded facts of the case. If the alteration or erasure had taken place after its issue, after the note had come to plaintiff’s hands, very different questions would arise. Hall v. McHenry, 19 Iowa, 521. Made before, he having knowledge that it was made at some time prior and by some one, the question is, whether, as a prudent man, he was justified in taking the note without making other and further inquiries than he did; and whether, taking under the circumstances disclosed in the testimony, he is protected as an innocent holder. And this involves the somewhat correlative inquiry,' whether, after the sureties had signed the note and intrusted its delivery and the consummation of the contract to the principals, they must suffer the consequences
In the examination of these questions we shall treat plaintiff as a holder for value, or place him in the same attitude as though he had, at the time the note was delivered, paid a full consideration for the same. Whether, under the facts, he should be so regarded, we need not determine. For, conceding this much, our opinion is, that the verdict was nevertheless wrong, and that a new trial should have been ordered.
. And this conclusion we reach without entering upon the much controverted question of what would be plaintiff’s right, if there had been no change in the signatures after the sureties had signed the note, or if it stood alone upon the effect of the representations made by the principals that they would procure other sureties before delivering the note to the payee. We need hardly rem ark that upon this question there is an irreconcilable conflict in the authorities; and "while the writer of this opinion, at least, inclines to concur in the view that the payee of negotiable paper, taking it without notice of such representations or understanding or anything to put him upon inquiry, would not be bound nor affected thereby, and as a consequence that such defense could not avail; yet, as the question does not arise, it is left open for future consideration. In some of the recent cases, it has undergone a very full discussion. Among others we refer to Willet v. Parker, 2 Metc. (Ky.), 608; Bank of Missouri v. Phillips, 17 Mo., 29; Dardoff v. Forseman, 24 Ind., 481, all holding that such defense would not be available. Contra, see People v. Bostwick, 43 Barb., 9; S. C., 32 N.
Some of these cases relate to official bonds, some to ^acceptances in blank, some to bonds of guardians or administrators, others to deeds delivered to third persons
All the eases of tlie latter character recognize more or less fully the principle stated in Lickbarrow v. Mason, 2 L. R., 70; that whenever one of two innocent persons must suffer by.the act of a third, he.who has enabled such person to occasion the loss must sustain it. In some of them, however, its applicability is denied; while in others, each party claimed that he was innocent, and that the other had enabled the third person to occasion the injury or loss. In others again, it is insisted that a surety may hand a note to the -principal -to be delivered to the payee only when others named 'and agreed upon shall sign it; that in the hands of the principal -it is an escrow; and that a delivery before the compliance with such - conditions is void, and that the payee is not protected. Others,-as it seems to me with more reason, deny that a note can thus be held sis an escrow; maintaining that the promisors are one party, the promisee the other, and that an instrument can only be delivered as an escrow to some- third person. .All of the cases, however, where the question arose, hold that if the payee had knowledge of such an arrangement, he would be bound by it, and that the defense would avail those who signed
"Whether the principal violates his agreement to obtain the other names promised; whether he* fills a blank acceptance for more than was ' agreed; whether he appropriates the note, to the sureties’injury, to another purpose than that contemplated; in any or all these cases, it must be conceded that as between them it would be manifestly unjust and inequitable to hold the surety liable. The surety may most truthfully say “ nonveniinhoc vinculo.” The difficulty in all such cases arises when the -rights of third persons intervene.
When we come to consider these, however, it must be remembered that the law imposes the obligations of good faith and diligence, upon a payee as well as upon a promisor or obligor. Neither can protect himself from the consequences of his own negligence. And where.one has acted in good faith and exercised due diligence, and the other is fairly and naturally put upon inquiry and fails to follow it up, the latter cannot say we are equally innocent. If he accepts an instrument incomplete upon its face and giving clear indications that it has been changed, he cannot in justice and truth say, I am innbeent, and that the surety must recover for any injury he has sustained against the principal for any fraudulent misconduct.
In our investigations we have found no case precisely like that before us. Upon principle, however, the analogy is clear enough. Here was a joint note. When presented to the payee, one of the names was obliterated or erased. This could be seen, was seen and talked about. This name was prior in place to those of the present appellants. It was there clearly and unquestionably when they signed
The note then being in this condition, he was put upon inquiry. Thus situated, did he manifest the diligence required by law? He inquired of the principal, who advised him “ that the parties had consented to it.” This was untrue, and plaintiff was not justified in relying upon such representations. If the act of erasing the name of .one, of the sureties, without the consent of the others, would not conclude those not assenting, most clearly a representation of this kind would not. Plaintiff’s duty, being put upon his guard, was to go to a source where he could certainly learn the truth — to those who, failing to indicate their dissent, would be thereby estopped.
But if he could simply rely upon the assertion of the principal under the circumstances, so he might if the appellants’ names had been forged, and he had relied upon the principal’s averment that they were genuine. We have found no case going so far as to conclude the other promisors by the act or representation of one where the instrument contains upon its face matter calculated to put the payee upon inquiry. And it must be very clear that to hold them so bound would destroy all right or protection resulting to them from the incomplete nature
The foregoing views of the law are based upon the supposition that plaintiff knew at the time he received the note that appellants were but sureties, and that kfonett and Chipman were the principals. "Whether he had this knowledge is a question of fact which should be submitted to the jury under the testimony. The instructions do not seem to have regarded this inquiry as very material, nor to have discriminated with entire clearness between appellants’ rights, if known, as sureties, instead of standing as principals in common with the other makers. And in a case so important to the parties, involving questions so difficult and somewhat novel in this State, we have had the less hesitation in ordering a new trial, that' the attention of the jury might, under proper instructions, be directed to this distinction and to these inquiries.
If plaintiff or his agent, when taking the note or before, knew that appellants signed the note as sureties, then the rules above stated and recognized should be given to the jury for their guide. Of course, if this was not known, but as far as he knew or had reason to know they were all principals, then this erasure would not operate to discharge appellants entirely, but only pro tanto. That is to say, they would still be liable for their proportion of the debt, and to that extent plaintiff would be entitled to recover.
We only remark in conclusion that there was no evidence tending remotely to show that appellants, or either of them, had made any payment upon this note. The instructions based upon such assumption were therefore erroneous.
Reversed.