Case ID: abb-pr-ns_5/html/0011-01.html
Source: Caselaw Access Project
Author: {"author": "Scrugham, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

MECHANICS’ BANK against STRAITON.
    
      Court of Appeals ;
    
      January Term, 1867.
    Bills, Notes and Checks.—Pleading.
    The words “ or order,” “ or bearer,” and "bearer,” in notes, bills, and checks, are words of negotiability, and the use of either of them makes the paper negotiable, although impersonal words are used in place of naming a payee.
    
      In an action against the maker' of negotiable paper, payable to bearer, it is sufficient, after alleging that the defendants drew it, to allege that it was transferred and delivered to the plaintiff, without saying by whom, if it be also alleged that the transfer was for value, and that the plaintiff is the owner.
    Appeal from a judgment on demurrer.
    This action was brought by the Mechanics’ Bank of tire city of Mow York, against John Straiton, Charles GK Sanford, and Thomas J. Raynor, on a check drawn by the defendants.
    The allegations of the complaint were as follows :—
    That said plaintiff is a banking association duly organized under and pursuant to the laws of the State of Mew York, and is now, and for several years last past has been engaged in business as such banking association at the city of Mow York.
    The plaintiff further states, on information and belief, that at the time of the drawing of the bank check, or draft hereinafter mentioned, the above-named defendants were copartners in business in said city of Mew York under the firm-name or style of Straiten, Sanford & Co.
    That at the city of Mew York, on the 4th day of June, 1860, the said defendants by their said firm-name of Straiten, Sanford & Co., drew their certain bank check or draft, of which the following is a copy :
    “Mo. 4,oil. Mew York, June 4th, I860.
    “Bank of the Republic,—
    “Pay to bills payable, or order, one thousand three hundred dollars.
    “ 01,800. “ Sthaitox, Saxpoizd & Co.”
    That said check or draft was afterwards, for a valuable consideration, transferred and delivered to the plaintiff, whereby said plaintiff became, and is now the holder and owner thereof.
    That the said check was, after such transfer to the nlainliff, and on its .behalf, duly presented lor payment at the said Bank of the Republic to the paying-teller of said bank, and payment thereof was then and there demanded, which was refused, and the same was not paid, whereupon the said check was protested for non-payment, of which said presentment, demand, refusal, non-payment, and pretest, notice was given to the said defendants, as the plain iff is informed and believes.
    That the said defendants have not, nor has either of them, paid the said check, or any part thereof, but the whole amount thereof remains due, owing, and unpaid, from said defendants to said plaintiff, which amount, with interest, the plaintiff claims from the above defendants.
    Wherefore, &c.
    The defendants demurred to the complaint on the grounds:
    “ First.—That the alleged bank clieik or draft, of which a copy is set forth in the complaint, is an irregular instrument, not negotiable, and void
    " Second.—That the said complaint does not state facts sufficient to constitute a cause of action.”
    The demurrer was overruled at a special term in the 2nd district, and, the judgment having been affirmed at a general term, the defendants appealed to the court of appeals.
    
      James C. Carter, for the defendants, appellants.
    —I. It is a necessary averment that defendants not only drew the check, but delivered it. It is not the mere making of a negotiable instrument that binds the maker. He must deliver it also. Non constat, for aught that appears in this complaint, but that it was stolen.
    II. The paper upon which the action is brought is a mere irregular instrument, void on its face. It fails to comply with the fundamental requisite of a bill or check, namely, that the payee should be designated in it, or it be made payable to bearer (Chilty on B., 156 ; Byles on B., 60 ; Douglass v. Wilkeson, 6 Wend., 637). (1.) It is for the very reason that such privileges are attached to these instruments, that the law rigidly requires that they should exactly conform to certain rules, among which is the one before mentioned. (2.) That the instrument in question is not payable to any designated person, is plain on its face. That it is not payable to bearer, is equally plain. It is made expressly payable to order. (3.) That a person holding a bill or check, payable to order, who cannot identify himself as the payee named in it, nor show indorsement by the payee, can yet recover upon it as a mere bearer, would seem too preposterous to require refutation, were there not some show of authority in its favor. An authority to this effect, however, is found in Willets v. Phoenix Bank, 2 Duer, 121. (4.) The facts in that case are so essentially different from the case at bar, in the very particular upon which the judgment of the court turned, that it is no authority for the plaintiffs here. (5.) There was another point in the case, which was made the principal one, both in the arguments of counsel and the opinion of the court, and the present question seems to have received but little consideration. The opinion of the court upon it is founded entirely upon the case of Minet v. Gibson, 3 Term, 481; S. C. in Error, 1 H. Bl., 569. (6.) The doctrine declared in Minet u. Gibson was itself an invasion of the principles of the law merchant, and is certainly not to be extended beyond the limits which were then assigned to it. The dissenting opinion of Lord Chief Baron Eyre was unanswerable; and Lord Ellenborough subsequently distinctly intimated his disapproval of the decision, and his determination not to extend it (See opinion of Eyre, L. C. B., 1 H. Bl., 598; Burnet v. Farwell, 1 Camp. N. P., 130; S. C., on motion for new trial, Id., 180, c; for a statement respecting the Livesay frauds, see Byles on B., 62). (7.) The doctrine declared in Minet u. Gibson furnishes no authority for the decision in Willets Phoenix' Bank. The facts upon which all the reasoning in it turns are just the ones which are absent from the latter case. Iii Minet v. Gibson, the acceptors knew when they accepted the bills that the payee was fictitious, and that no valid title could be made to them hy the holders, and that the holders were ignorafefc of such fact, and had paid value for the bills. This essential feature was not presented in Willets ». Phoenix Bank. The bank knew no more about the checks when they were certified than the holder did. The checks were in fact just what they purported to be, nothing less and nothing more. Lord Kenyon (who concurred in the decision in Minet v. Gibson) held that the doctrine .was not applicable to a case where the party taking the bills knew as much as the acceptors did about them (Hunter v. Jeffrey, 1 Peake, Add., 146). (8.) The considerations already presented show that the case of Willets v. Phoenix Bank was- erroneously decided. The same considerations apply with increased force to the case at bar, for the action is not against a bank on a certified check, but against the drawers, without any allegation that they received value for it, or negotiated it. (9.) The case of Willets v. Phoenix Bank is no authority for the plaintiffs here, inasmuch as the decision is put on the express ground of an estoppel on the bank, arising out of their certificate. There is nothing in the mere drawing of a check, without negotiating it, to furnish the materials for such an estoppel as is requisite to the plaintiffs’ case. (10.) Estoppels are preclusions from showing the truth in matters of fact; but they never preclude a man from availing himself of the truth when it appears on his adversary’s own case. When a plaintiff has made a good case in pleading, the defendant is sometimes es-topped from-pleading something which vitiates that case; but there is no instance in the range of the law where a man has been estopped from demurring. So when a plaintiff makes out a prima facie case hy proof, the defendant is sometimes estopped from proving some fact which would vitiate it; but the defendant is not estopped from moving to nonsuit", or taking such other step as might be necessary to test the law as it stood on the plaintiffs’ own case. (11.) Our statutes have partially extended the doctrine declared in Minet v. Gibson, as to bills, to promissory notes, but the maker of a note, payable to a fictitious payee, cannot be charged by the bearer, unless the maker negotiated it. (12.) A bill, payable to “Ship Fortune, or bearerhas been held to be good and negotiable. The decision would have been the other way had it been payable to “Ship Fortune, or order (Grant v. Vaughan, 3 Burr, 1516).
   Scrugham, J.

—The rules which establish the negotia- ' bility of commercial paper apply to bank checks- as toother bills of exchange, and the doctrine that when such instruments are made payable to the order of a fictitious payee, they are to be construed and treated as payable to bearer, is too well settled to admit of serious question. In the great case of Gibson v. Minet (1 H. Bl., 569), the determination proceeded upon the ground that, according to the true intent and meaning of the parties, the bill was intended to be made payable to bearer.

The words, “or order,” “or bearer,” and “bearer,” in notes or bills, are words of negotiability, without which or other equivalent words the instrument will not possess that quality, and therefore the use of either of these expressions by the drawer of a bill or maker of a note, must be regarded as indicating his intentions that the paper shall be negotiable.

By naming the persons to whose order the instrument is payable, the maker manifests his intention to limit its negotiability by imposing the condition of indorsement upon its first transfer. But no such intention is indicated by the designation of a fictitious or impérsonal payee, for indorsement under such circumstances is manifestly impossible ; and words of negotiability, when used in connection with such designations, are capable of no reasonable interpretation except as expressive of an intention that the bill shall be negotiable without indorsement,—i. e., in the same manner as if it had been made payable to bearer.

It was not, before the Code, necessary for the holder of an instrument payable to bearer, to allege or prove in an action against the maker the transfers through which he derived his title (2 Greenl. on Ev., § 161, and cases there cited ; 3 Phill. on Ev., 4 Am. ed., 191); and it certainly is not now.

The engagement is to pay to the bearer ; and that the plaintiff is such is one of the material elements of his cause of action.

The fact must, therefore, be stated in his complaint, and its statement will be a sufficient allegation of his title; for it is the fact, and not evidence of the fact, which is required to be pleaded.

It is not only stated in the complaint in this action that the plaintiff is the holder and owner of the check, but also that.it was transferred and delivered to him for a valuable consideration, and that he became its owner and holder by virtue of that transfer and delivery. This cannot be true unless the drawer of the check transferred and delivered it directly to the plaintiff, or to some other person by or through whom it was transferred to the plaintiff ; and this averment, if an allegation of a transfer and delivery by the drawer is necessary, is sufficient on demurrer, within the cases of People ex rel. Crane v. Ryder (12 N. Y. [2 Kern.], 433), and Prindle v. Caruthers (15 N. Y., 425).

The judgment should be affirmed.

All the judges concurring, judgment affirmed.