Michigan Insurance v. Estate of Leavenworth

30 Vt. 11 | Vt. | 1856

The opinion of the court was delivered by

Bennett, J.

This is a case of very considerable importance, and has received a full and matured consideration from the counsel engaged in it; and it may be thought to be a case not entirely, perhaps, free from difficulty. No question has been raised in argument in this court, but what there was a seasonable and a due protest and notice of the non-payment of the bill, to the estate of Mr. Leavenworth, to charge it with the payment of the bill. It is found in the bill of exceptions, that Mr. Leavenworth died on the 10th day of May, 1854, and the material facts upon which the defense arises, are contained in the deposition of K. K. Sawyer, the plaintiffs’ cashier. Those facts are, that this bill on which the action is predicated, was, for the first time, found by the plaintiffs in the hands of Wm. Roelofson, of the firm of Roelofson, Hatch & Co., and by him presented to the plaintiffs for discount on the 12th day of June, 1854. The paper or bill was then in the same condition it now is in, excepting that the date and time of payment were in blank. These were then filled by the plaintiffs’ cashier at the request of Roelofson, so that the bill now bears date the 12th of June, 1854, and is made payable forty-five days after date; and after these blanks were filled, it was discounted by the plaintiffs in the ordinary course of business, they relying upon the indorsement of Mr. Leavenworth; and the proceeds of the discount were placed at the control of Roelofson, Hatch & Co., who on the same day drew out the deposit. Though Mr. Leavenworth died some thirty days or more before the bill was presented for discount, yet it is a part of the case that the plaintiffs had no notice or suspicion of the existence of such a fact at the time ; and that, if they had had any such suspicion, they would not have discounted the bill.

The first question arising in the case, is whether the issuing and indorsement of such a bill carries with it evidence of an implied authority on its face, to a bona fide holder, to fill the blanks in the manner in which they were filled in this case P It is well settled law, that an indorsement on a blank note, without sum or date or time of payment, will bind the indorser to pay any sum, payable at any time, which the person to whom the indorser intrusts it chooses to insert. See Russell v. Langstaff, Douglass 496; Snaith v. Mingay, 1 M. & S. 87; Violett v. Patton, 5 Cranch 147; Putnam v. Sullivan et al., 4 Mass. 45; Norwich Bank v. Hyde, 13 Conn. 281; Mitchell v. Culver, 7 Cowen 336; and Mechanics’ and Farmers’ Bank v. Schuyler et al., 7 Cowen 337, (note a). If a man gives the use of his name to another in blank, it operates, as was said by Lord Mansfield in the case in Douglass, as a letter of credit to an indefinite amount; and if the name of the payee is simply left blank, a bona fide holder may insert his own name as payee. Collis v. Emmett, 1 Henry Blackstone 313; Cruchley v. Clarence, 2 M. & S. 90. In the case in 13th Conn., the sum in the body of the note was left blank, but it had a marginal mark of two hundred dollars, and the court held that a bona fide holder of it might fill the blank with any sum not exceeding the marginal mark. These cases all go upon the ground of an implied .power, which is indefinite unless there is something in the case to limit it; and if there is an implied power to fill all the blanks, which may be left in a note, it must follow, as was held in the two cases cited in 7 Cowen 336, 337, that it must equally exist to supply the blank, if only one be left. In the present case, the date and time of payment only were left blank. The sum was limited to five thousand dollars. It is well settled that a date is not essential to the validity of a bill or note, and the time of its execution, when necessary, may be inquired into by parol; and it will be computed from the day the note or bill was issued. Neither is it necessary that a time of payment should be expressed in the note or bill. If none is fixed, they are payable on demand.

Although this bill, when indorsed by Leavenworth, may have had on its face all the essential requisites of a valid bill, though without date and without any time of payment expressed in it, yet it is evident the parties did not intend to put it in circulation in the condition it was then in, but something further was to be done. It being indorsed with a blank date and a blank for the time of payment, carried with it evidence of an authority from the parties to the bill, to a Iona fide holder of it to fill the blanks as he should find necessary ; and this was, no doubt, the ground upon which the plaintiffs’ cashier acted in filling the blanks at the suggestion of Roelofson. Until the blanks were filled the instrument was inchoate, and was not what the parties intended it should become before it was put in circulation; and hence there is no ground to claim that the filling of the blanks was such an alteration of the bill, as would invalidate it in the hands of the plaintiffs. This, no doubt, was contemplated by Mr. Leavenworth when he indorsed the bill.

This implied power might have been well found as a fact by the county court, who tried the cause. The bill of exceptions says, “ the court, among other things, found the facts stated in the depositions attached to the case to be true.” It may well be intended that the county court found any fact which there was evidence tending to prove, and which may be necessary to sustain their judgment. This case cannot stand upon the ground that the bill is one payable on demand and without date. No such bill was intended to be indorsed or delivered to the plaintiffs ; and it was clearly the intention of the parties that no such bill should be received. If the plaintiffs assume the ground that the bill was a perfected instrument, and nothing further to be done with it, before the blanks were filled, it would result that the alteration would avoid the paper. But the important question in the case is, whether Roelofson, Hatch & Co. could, after the death of Leavenworth, cause the blanks to be filled in the manner in which it was done, and pass the title in the bill to the plaintiffs by their indorsement, in such a way as to bind the estate of Leavenworth.

It may be true that if Roelofson, Hatch & Co. had been sued upon their indorsement of the bill, they could have made no objection to the action on the ground of the previous death of Leavenworth ; but the question now is, what should be the effect of the death of Leavenworth upon the liability of his estate ? It is to be assumed upon the face of this bill that Leavenworth was an accommodation indorser, as much so as if the sum, date and time of payment had all been left blank. He, in effect, by his blank indorsement, gave a letter of credit to Roelofson, Hatch & Co. for a limited amount, and as this was the effect of the instrument on its face, it carried notice with it to the plaintiffs — at least sufficient to put the party on inquiry — that Leavenworth stood upon the paper as an accommodation indorser, and it was upon this ground no doubt, that the plaintiffs’ cashier assumed the right to fill the blanks. The cashier acted in good faith, and in ignorance of the fact of Leavenworth’s decease, and the plaintiffs paid value for the bill; but still the question is, what must be the effect of his previous death ? This being accommodation paper, no one would claim that Eoelofson, Hatch & Co. could maintain an action against the estate of Leavenworth on his indorsement; and the question is, do the plaintiffs, being chargeable with notice, from the face of the paper, that Leavenworth was but an accommodation indorser, stand upon any better ground. In the case of Dogan v. Dubois, 2 Richardson (S. C.) Eq. Rep. 85, it was held that an accommodation indorser of a note to be discounted in bank, may before the note is discounted, recede from his agreement, and direct the bank not to receive the note, and that such indorser will not be liable to a third person, who takes the note with such notice. That case is based upon principle, and goes upon the ground that the power conferred by the indorsement, was in its nature counter mandoble, and that when countermanded, no one, with notice, had a right to act upon the hypothesis that the power still existed. I think no one will question but what, as between Leavenworth and Eoelofson, Hatch & Co., his death, per se, operated to revoke the authority to fill the blanks and to subsequently put the paper in circulation. It is a common principle that an authority conferred by a letter of attorney, is revoked by the death of the principal, unless it be in cases where the authority is coupled with an interest. In the present case, the power conferred upon Eoelofson, Hatch & Co. by the indorsement, to fill blanks and negotiate the paper, as between the immediate parties, is clearly a naked power, conferred without consideration, and not being coupled with an interest, there can be no ground to claim it would survive after the death of Leavenworth. Though it may be true that when a power is revoked by the act of the party, notice may be necessary, yet when revoked by his death, the revocation at once takes effect, and if an act is subsequently done under the power, though without notice of the death of the party, the act is void, and there is the best reason in the world for this fundamental distinction. It is an event of which each party has equal means of knowledge, and must take notice of it at their peril. If the plaintiffs had been apprised of the death of Leavenworth at the time they took the paper, it could hardly be claimed they would have acted in good faith in taking it, relying upon his indorsement; and their rights should not, in such an event, be superior to the rights of Roelofson, Hatch & Co.; but as they took the hill without such notice and-paid value for it, it is an important question in commercial law, which of the present parties must sustain the loss. In the case of the Michigan State Bank v. Estate of Leavenworth, 28 Vt. 210, the intestate in conjunction with Wilkins and Catlin, addressed to the plaintiffs in that action a letter of credit, authorizing Roelofson, Hatch & Co. to draw on them or either of them through their bank, to an amount not exceeding thirty thousand dollars, which they jointly and severally agreed to accept and see paid, if nO|t paid by the drawers at maturity. Leavenworth was a mere surety, and it was held that his death operated to determine the right to draw upon him or upon his responsibility, although the bank had no notice of his death, and the time in which Roelofson, Hatch & Co. were allowed to draw by the terms of the letter of credit,'had not then, in point of fact, expired. To show what is the doctrine of the law in relation to the determination of an authority by the death of the person from whom the authority emanates, and when the authority is so coupled with an interest, that it will not expire with the death of the person creating it, the following cases may be referred to. See Bacon Ab. Title Authority, F.; Houstoun v. Robertson, 6 Taun. 448; Lepard v. Vernon, 2 Veasy & Beames 51; Blades v. Free, 9 Barn. & Cress. 167; Smout v. Ilbery, 10 M. & W. 1; Burgess et al. v. Bennett, 1 Caine’s Cases in Error 15; Knapp v. Alvord, 10 Paige 205; Hunt v. Rousmaniere’s Adm’rs, 8 Wheat. 174; S. C., 1 Pet. 1; Galt v. Galway, 4 Pet. 344. Although the answer to the question, when will the authority be so coupled with an interest that it will survive the person from whom it emanates, may be in some little confusion in the books, yet we think this is a case of a naked authority, beyond any doubt, voidable by the grantor of it, at his pleasure in his lifetime, and was absolutely revoked by his death before there had been any action under it. The paper being indorsed as accommodation paper, and not for value paid by Eoelofson, Hatch & Co., they had no interest connected with the power and consequently no interest to be affected by the revocation. We see no sufficient reason why the case of the Michigan State Bank in 28 Vt. 209, must not govern this as to this point. The paper was strictly commercial paper in that case, and the .bank discounted it relying upon the letter of credit, and it had no notice of the death of Leavenworth until after the discount of the bills then in question.

The court considered that the bills drawn after the death of Leavenworth by Eoelofson, Hatch & Co., were drawn, so far as he was concerned, without authority, and that his estate could not be charged with the payment of such bills, though the bank were bona fide holders of the bills and paid value for them. In the case of Usher v. Dauncey, 4 Campb. 97, a partnership used to draw bills with blanks for sums and dates to raise money upon. One of the partners drew a bill on the 28th day of February to his own order, and indorsed it in blank, and died on the 15 th of March. On the 22d of April the clerk to the surviving partners filled the blank for a date with February 27th, and also filled the blank for the amount at the same time, and an agent of theirs got the paper discounted.

In a suit against the surviving partners it was claimed that the death of the partner who drew the bill payable to his order, and by him indorsed blank as to date and sum, countermanded all authority in the clerk to fill the blanks, and that the bill was void. But it was held by Lord Ellenborough that the clerk’s authority emanated from all the partners, and that, when the clerk filled up the blanks in the bill on account of the surviving partners and for their use, he acted as their agent, and bound them, and that the case was within the principles of the case of Russell v. Langstaff. The court of King’s Bench affirmed the ruling at nisi prius. That case proceeded upon the ground that the objection would have been well taken, if the suit had been against the estate of the deceased partner as an indorser of the bill. In Clarke v. Sigourney, 17 Conn. 510, it was held that an executor had no authority to deliver a note, as a note indorsed by the testator, after his death, from the fact that the note was among his papers with his name indorsed blank upon it.

In reply to the position that an authority was to be implied from the payee to his executrix to deliver the note after his death, as a note indorsed by him, Stokes, J., who delivered the opinion of the court says (p. 523), that such an inference can not justly be made, and if it could, “ any such authority must have been determined by his death.” See Galt et al. v. Galway, 4 Peters 332, 344. In Clarke v. Boyd, 2 Ohio 56, it was held that an executor had no power to deliver a note to the plaintiff which was found among the papers of the payee, and by him-indorsed to the plaintiff so as to transfer a title in the note to him. See also Brimage v. Lloyd, 1 Exch. Rep. 32, a case very full on this point. In the case of Woodward et ux. v. Dorwin, 3 Vt. 32, it was well held that a note signed by a partnership, but not delivered to the payee until after the dissolution of the firm, did not bind it, and that a note only takes effect from the time of its delivery. See also Chamberlain v. Hopps, 8 Vt. 94.

Delivery by the indorser is as essential to the validity of the transfer of an indorsed note as it is to a promissory note between the maker and payee. This bill being treated as accommodation paper in the hands of Roelofson, Hatch & Co., there existed in Leavenworth a right to countermand their authority to put the bill in circulation in his lifetime, and the effect of his death was in law a countermand of it; and as a result, Roelofson, Hatch & Co. had no power to transfer a title in the paper to the plaintiffs, as against the estate of Leavenworth, and could not bind his estate, either in law or equity. Though notice would have been necessary in case of a personal countermand of the authority by Leavenworth, yet the plaintiffs were bound to take notice of his death at their peril. Smout v. Ilbery, 10 M. & W. 1; Blades v. Free, 9 B. & C. 167; and the case does not fall within the principle of those cases where a power has been given by implication to fill blanks, and negotiate paper, and there has been an abuse of the power, while it was still out standing. In such a case the rule is applied, that where one of two innocent persons must suffer, the loss should fall on the indorser on account of his negligence or misplaced confidence, rather than on an innocent and Iona fide holder, who is not chargeable with any neglect. In the case of Perry v. Crammond, 1 Wash. C. C. Rep. 100, advances were made upon the faith of a bill for the use of the drawer to his agent, who had possession of the bill, and it was indeed held, that the agent, after the death of the drawer, might transfer the bill to the person making the advances, só as to give him a right of action against the estate of the drawer. In that case, the advances being for the benefit of the drawer, the power, as I think, was coupled with an interest; and of course, not revoked by the death of the drawer. The case of Passmore v. North, 13 East., is quite unlike the case at bar. In that case the drawer of the bill was the defendant in the action, and the plaintiff, as an indorsee, claimed title to the bill through the payee, who indorsed it for a valuable consideration. The bill was in fact drawn and delivered to the payee on the 4th of May, but post dated the 11th, and was indorsed to the plaintiff by the payee on the 5th of May, who died the same day, and of course, before the bill bore date. The only point decided in that case was, that the post dating of the bill would not vitiate it, or nullify the effect of a prior indorsement by the payee. The bill was a perfect one at the time the payee indorsed it, on the 5th of May, and the post date to it only regulated the time of its payment, it being payable sixty-five days from date, which of course meant its actual date upon the face of the paper. The effect of the indorsement being perfect at the time it was made on the 5th of May, could be in no way controlled by the post date.of the bill, being subsequent to the death of the indorser. The case of Cutts, Administrator v. Perkins, 12 Mass. 206, to which the plaintiffs’ counsel have referred us, was not decided upon the ground that the draft was a valid bill of exchange by the law merchant; but it operated as an assignment of the money, that should become due for the freight; and that the death of the drawer, before the bill came to the hands of the payee would not operate to defeat its effect, as an assignment of the money to become due for the freight, and that the drawee was fully justified in accepting and paying the di'aft after the death of the drawer. But in that case, it might well be inquired whether the power conferred by the drawer upon the drawee, might not be said to have been coupled with an interest. The drawee was debtor to the drawer for freight and the payee was a creditor of the drawer.

The power was given for the purpose of raising money for paying a debt due from the drawer to the payee, by a transfer of a debt due from the grantee of the power to the drawer.

The case of Snaith et al. v. Mingay et al., 1 M. & S. 37, has been much relied upon by the plaintiffs’ counsel, but we apprehend that case will not warrant a judgment for the plaintiffs in this case. The bills were signed and indorsed in the name of the firm in Ireland by a house established in business there, and two of the members of the firm lived in Ireland, leaving blanks for the date, sums, times when payable, and the names of the drawees. These copperplate blanks were sent to the other partner in London, who lived there, and to be used by him for his individual use. The bills when sent had the appropriate Irish stamps upon them, for the respective sums inserted in them, but were not legal stamps, if treated as bills drawn in England. It was held that when these bills were filled up in England in pursuance of the authority given to the correspondent of the drawers, the instruments became Irish bills of exchange. There was no pretense of any design to defraud the stamp laws of either country. We see no objection in referring the acts in that case in filling the blanks, which created the bills perfect instruments, to the place where they first had their inchoate existence. The party to whom the bills were sent in England to be filled, acted in pursuance of an authority conferred upon him by the signature attached to the blanks in Ireland, where the house was located, and the acts in filling the blanks which rendered them j>erfect bills, having emanated from the house in Ireland, may well be referred to the place where the paper had its incipient existence. This is all which that case decides.

What is said by Bayley, J., in regard to the estate of the drawer being liable to an innocent indorsee, in case of his death while the bill was on its way to London, is only by way of argument on supposition. But suppose it be granted that if the blanks had been filled and the bills negotiated to an innocent indorsee, the estate of the drawee would have been liable, notwithstanding the drawer died while the bills were on their passage, that would not decide this case. In such a case as was supposed by Justice Bayley, the indorsee would be chargeable only with notice of such facts as appeared upon the face of the bill. The bill when taken by the indorsee, would have been a perfect bill upon its face and to be taken as one drawn for value; while, in the case at bar, Mr. Leavenworth stood as an accommodation indorser, and the present holders, from the face of the paper, were chargeable with notice of such fact.

The case of Baker et al. v. Sterne, 9 Exch. Rep. 684, cited by the plaintiffs’ counsel is, in principle, like the case of Snaith v. Mingay, 1 M. & S. 87. A blank form of a bill of exchange was signed by a house in Bavaria, and sent to a commission house in London, who were in the habit of receiving consignments of goods from the drawer. The commission house having been advised of a consignment of goods, filled up the blanks by inserting the date, amount, etc., and got the bill accepted by the defendant, and indorsed it bona fide to the plaintiffs for value, and applied the avails to their own use. It was objected that the commission house in London had only authority to fill up the blanks to obtain payment of the goods consigned to them, and that it was in effect a bill drawn in London, and therefore required a stamp; but, it was held, this was not an inland bill, and did not require a stamp. The objection of course assumed that the plaintiffs were bona fide holders of the bill for value, and not chargeable with notice of any instructions to fill up the blank form for any particular purpose. This was well considered to be a bill of exchange from the time of the signing the blank in Bavaria, and that no stamp was necessary.

The case of Billing v. Devaux et al., cited from 42 Common Law 297, seems to have little or no bearing upon the case before us. The action in that case was brought by the payee of a bill against the drawers, and the case finds that there was an absolute promise on the part of the drawees to pay the bill, which constituted a valid acceptance. It is clear that in, such a case, the death of the drawer of the bill before an acceptance, can not vary the rights and liabilities of the parties thereto. The liability of the defendants by means of their promise to pay the bill, does not rest upon a question of agency but upon a promise, and it is well said by Maulé, J., in this case, that if a man, when he enters into a contract, does not intend to be bound in the event of the death of the party with whom he contracts, he should introduce such a stipulation into the contract.

"We think the right of Roelofson, Hatch & Co. to fill the blanks and negotiate the paper as against Leavenworth, rests in a question of agency, and that his death, ipso facto, determined the agency; and that, consequently, no right of action in the paper was transferred against the estate of Leavenworth to these plaintiffs.

Judgment affirmed with costs.