Case ID: mass_4/html/0046-01.html
Source: Caselaw Access Project
Author: {"author": "Parsons, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Jesse Putnam and Al. versus John L. Sullivan and Al.
    In an action by an endorsee against an endorser of a promissory note, the plaintiff is not held to prove a demand on the promisor, if it appears that he had absconded before the note is payable.
    Where a merchant intrusts his clerk with his blank endorsements, and one by false pretences obtains and uses them, such fraudulent use of them is not a forgery, — nor is it such a fraud as will discharge the endorser against the endorsee.
    Case by the endorsees against the endorsers of a promissory note, dated December 1, 1804, payable to the defendants or their order. The action was tried at the last November term, before Parlcer, J., when a verdict was given for the plaintiffs for the amount of the note and interest, subject * to the opinion of the [ *46 ] Court, whether, upon the facts proved, and which were to be reported by the judge, the action could be maintained. If the Court should be of that opinion, judgment to be entered according to the verdict, with additional damages for interest to the time of the judgment; if the Court should be of a different opinion, a new trial to be granted.
    Those facts were in substance, that the note was payable in 90 days from the date with grace; that the plaintiffs were innocent endorsees, having received the note endorsed in blank, and paid a valuable consideration for the same. The hand-writing of the promisor and endorsers was admitted, the latter being the hand-writing of W. B. Sullivan, a partner of the house doing business under the firm of Jno. L. Sullivan & Co. The note being lodged in the Boston Bank for collection, notice was left at the lodgings of the promisor by the messenger of the bank, on the 28th of February, 1805, and on the 3d day of March following, the said W. B. S., one of the endorsers, was notified that the note was unpaid. It was also in evidence that the promisor had absconded before the note fell due, and that this fact was known to all the parties at the time.
    One of the defendants being abroad in Europe, and the other, about the 1st of December, 1804, having occasion to make a journey from Boston to Philadelphia, intrusted with an apprentice or clerk of the house a number of papers, on which one of the house had written the name of the firm in blank, some to be used as notes endorsed by the house, and others as notes in which the house were to be promisors. These papers were intrusted to a clerk of the defendants, to be used when money was to be advanced on the sale of goods by the house on commission, or to renew the notes of the house when due at the banks. The clerk was directed to be careful of the blanks left with him, and not to use any for the advance of money on the sale of goods on commission without consulting a brother of the partners. He was further directed to deliver one of the blanks to the promisor upon the note sued in this action, to enable him to renew a note signed by him then in the bank, of which the house were endorsers, and for which he had requested a blank to be * left. The [ * 47 J promisor called on the clerk for the blank endorsement left for him, and one was delivered to him; afterwards, pretending that by some mistake it had become useless to him, and feigning to burn, in the clerk’s presence, the name of the firm endorsed, procured another blank, and by a similar pretension and contrivance he obtained a third and a fourth blank endorsement, the last of which was in fact used for the purpose, for which the house had directed a blank endorsement to be given him. The promisor had used one of the prior blank endorsements for making the note sued in this action; which had been negotiated, with the endorsement remaining in blank, to the plaintiffs.
    The cause was argued upon these facts by the Solicitor-General, Davis, and C. Davis, for the plaintiffs, and by Deader and Sullivan for the defendants.
    
      Sullivan
    
    said the defence relied on rested on two grounds, the first of which was, that the note, being payable in ninety days with grace, was not due until the days of grace were expired, and that the demand upon the promisor, being made before the time of payment, availed nothing.
    Upon this point he was prevented from arguing by the Court, who observed to him that it had been fully argued in the case of Jones <$i Al. vs. Fales, the present term, and he was directed to confine his observations to
    The second point, which he made for the defendants, which was, that the names of the defendants being obtained by fraud, without the knowledge or consent of either of them, and without any consideration paid, no right of action could arise out of the transaction against the defendants.
    All the cases found in the books of bills held good against the acceptor, though attended with fraud, relate to bills originally good, but coming through a fraudulent channel to the holder; and the reason given is, that the acceptor is in all events bound to pay it to some one. But in the present case the note originated in fraud, and was never made or intended for the benefit of the promisor. The defence, as to this point, rests on the same ground as that in the case of Mead vs. Young, 
       where it was held to be com- [ *48 ] petent to the defendant, * who had accepted a bill, to give evidence that the person who endorsed it to the plaintiff was not the real payee, though he were of the same name.
    But we contend, further, that this was an actual forgery, which is said  not so much to consist in the counterfeiting a man’s hand and seal, which may often be done innocently, but in the endeavoring to give an appearance of truth to a mere deceit and falsity, and either to impose that on the world as the solemn act of another, which he is no way privy to, or at least to make a man’s own act appear to have been done at a time when it was not done, and by force of such a falsity to give it an operation which in truth and "ustice it ought not to have. Thus, where one finding another’s name at the bottom of a letter, at a considerable distance from the other writing, caused the letter to be cut off, and a general release to be written above the name, and then took off the seal and fixed it under the release, it was held to be forgery. 
    
    C. Davis
    
    observed that he held it unnecessary to make any observations as to the first point made in the defence. He would just notice, however, that, whether the demand was made on the maker of the note on the proper day or not, w.as very immaterial, as, before the note came to maturity, he had absconded, and as no benefit could have accrued to the defendants from a mere idle ceremony, so no damage had arisen, or could arise, from its omission.
    Upon the second point, he contended that it was not competent to the defendants, to impeach this note in the hands of innocent endorsees, however the transaction may have been between the maker of the note and the defendants.
    If this note had been stolen by the promisor, and had come duly into the hands of innocent endorsees for a valuable consideration, it would have been good against the defendants. 
    
    Where one of two innocent parties must suffer, he who gives the confidence, not he who believes the false affirmation, must suffer It was exclusively the act of the defendants, or rather their gross negligence, which enabled the promisor to commit the fraud in this case.
    * The Solicitor-General
    
    insisted that in this case nothing [ * 49 j more was disclosed than merely a breach of confidence. The clerk of the defendants was their agent, transacted all their business in their absence, received this paper of them for the express purpose that it should be delivered to the promisor, and he delivered it accordingly. All this shows a transaction very distinct from forgery. The case of Mead vs. Young was wholly different from the case at bar ; and in that of Master & Al. vs. Miller, there was the alteration of a paper — a complete technical forgery. In the case before the Court, it cannot be pretended that the promisor could be indicted for the conduct here disclosed.
    This note was carried into the market endorsed in blank, and it stands on the same footing as a note payable to bearer, or a bank note, which are transferable by delivery only. Possession carries with it the property.  And in such case the transfer may be made by any person who, by any means, whether accident, fraud, or even robbery, has obtained the possession ; and any holder having given a valuable consideration, without knowledge of the accident or theft, may recover against the drawer, acceptor, or endorser in blank. 
    
    The case of Russell vs. Langstaffe 
      
       was, in its prominent facts, extremely like the case at bar. The defendant there had endorsed, for one Galley, his name on five blank copperplate checks made in the form of promissory notes in blank, i. e., without any sum, date, or time of payment, being mentioned in the body of the notes. Galley afterwards filled the blanks as he chose, and the plaintiff discounted them. The defendant at the trial objected that these notes were not, at the time of the endorsement, promissory notes, and that no subsequent act of Galley could alter the original nature or operation of the defendant’s signature, which, when it was written, was a mere nullity. The defendant obtained a verdict; and upon a motion for a new trial, the Attorney-General, Lee, [ *50 ] one of his counsel, gave up the point, relying *on another respecting the notice to the endorser. Lord Mansfield, delivering the opinion of the court, said, “ The endorsement on a blank note is a letter of credit for an indefinite sum. The defendant said,1 Trust Galley to any amount, and Iwillbe his security.’ It does not lie in his mouth to say the endorsements were not regular.” A new trial was granted; but the reporter adds that the defendant submitted without going to a second trial.
    In the case before the Court, there was extreme negligence on the part of the defendant. Suppose this clerk had knavishly issued the whole of the blanks left in his keeping for any sums his fancy or his avarice might have suggested, and sent them to market; who ought in such a case to be the sufferers ? Certainly they who, by a misplaced confidence, had enabled the party to hold out false colors to the world ; and not the honest and unsuspecting purchaser, who had no means of detecting the fraud. In the case of Lickbarrow vs. Mason, 
      
       Ashurst, J., says, “ We may lay it down as a broad principle, that, whenever one of two innocent persons must suffer by the acts of the third, he who has enabled such third person to occasion the loss, must sustain it.”
    
      Dexter, in closing for the defendants,
    said he was disposed to controvert very little of what had been urged for the plaintiffs. It is agreed that a note originally genuine, and made payable to bearer, or if to order, endorsed in blank, and lost or stolen, if it come into the hands of an innocent holder, shall be good against promisor or endorser. This amounts to nothing more than that a person who has promised to pay a sum certain to the bearer, shall be holden.
    
      But yielding this principle is not conceding that one is bound to fulfil a supposed and fictitious duty, which he not only never undertook to do, but which he in truth never heard of. Here the defendants never did the act described in the declaration ; they never made the promise alleged ; never endorsed the note declared on. It is true the signature is genuine, but they never consented to the use made of it. They authorized the use of that signature for a specific note assuring a particular sum, and for no other purpose. * If such a note had been written as they [ * 51 ] had authorized, they would virtually have been endorsers of such a note, though written afterwards. But when a contract, wholly different, was fraudulently and falsely written on that paper, they say, and they are well grounded in saying, that they never endorsed that contract. The only reason why an endorser of a blank paper is held, is, that the law presumes his consent to the contract afterwards written. But the facts negative such a presumption in the present case.
    But we consider this a forgery, for which the promisor may be indicted. Forgery is the fraudulent making or alteration of a writing, with the intent to prejudice another man’s right. No misappropriation of a writing already made amounts to more than a breach of trust, but the alteration of a contract made does. The contract made by the defendants, when they put their names on this paper, was, that they would be responsible for a certain given sum. A contract of a different kind was written on the paper, with an intent to prejudice them. It is not possible to distinguish this transaction, as to its legal or moral guilt, from the case in 3 Inst., of one misusing the signature to a letter. If the writing superadded to the signature be in conformity to the intent of the party whose signature it is, then it cannot be said to be done to the prejudice of another’s right; but if contrary to such intent, it comes within the. legal description of forgery.
    Suppose the defendants to have endorsed a note of 5000 dollars, and it should be afterwards altered by the promisor, before he uses it, to a note of 10,000 dollars; this would be forgery, beyond all question. What constitutes the difference between such a transaction, and that disclosed in the case at bar ? The note in this case was either fraudulently made to the prejudice of the defendants, or, if it be supposed made previously to their endorsement, it can be only supposed made as they intended it to be made, and then it was fraudulently altered with the intent to prejudice them.
    It was said that the defendants were guilty of gross neg 'igence, and that, therefore, they must suffer rather than the plaintiffs, to whom nothing is imputable. But the defendants [* 52 ] * are not. chargeable with negligence in any legal sense.
    It is true they placed a great confidence in their clerk, and, from long experience of his fidelity, it is presumable they thought him entitled to it. There are many cases, where a person is the cause of a wrong act, or furnishes the opportunity for committing it, and yet is not chargeable, in law or morals, with the consequences; such, for instance, as the case of subscribing one’s name to a letter at such a distance from the writing as to give room for the fraudulent writing of a promise or release over the name. The defendants in this case placed but a common confidence in their clerk, and if he, without their assent, and beyond their intention, made an unjustifiable use of that confidence, the defendants are still as innocent as the innocent third person. If the clerk had, as the Solicitor-General put a possible case, issued all the papers left with him for his own gain, he would certainly be justified in saying that the defendants had not used due diligence, and that they ought, on every principle, to be the sufferers. But it is not the negligence or misconduct of the clerk of which the defendants complain, or of which they wish to avail themselves in their defence. It was the misuse of a paper intrusted to the promisor, then in good standing, and which was delivered to him in a customary manner, and for a specific purpose. No other discretion in him was confided in, than that he would write a particular specific contract on the paper delivered to him. Of this misconduct, this gross fraud on his part, the plaintiffs wish to avail themselves.
    Unless it appears that this was the individual paper delivered by the defendants to their clerk, to be handed to the promisor, he delivered it without their authority, and he was not their agent.
    If this was not a legal and technical forgery, yet the defendants are not chargeable in this action. The note in this case was never obtained from them. It was never made nor endorsed by them. It was not received by the plaintiffs either from the maker or the endorsers. There never was a moment when the defendants con serited to become sureties for the promisor on this note. [ * 53 ] There could, then, be * no contract on their part; and the principle relied on by the plaintiffs respecting a note originally good and valid, coming by wrong into the possession of an innocent third person for a valuable consideration, is not applicable to the case.
    
      
       4 Term Rep. 28. See also Master & Al. vs. Miller, ibid. 320.
    
    
      
       2 Bac. Abr. Forgery, A.
    
    
      
       3 Inst. 171.
    
    
      
      
        Miller vs. Race, 1 Burr. 452.
    
    
      
       1 Salk. 126. — 2 Show. 235. — 3 Burr. 1516. — 1 W. Black. S. C.
    
    
      
      
        Kyd, 102, cites Miller vs. Race, 1 Burr. 452, and Peacock vs. Rhodes & Al Doug. 632.
    
    
      
       Doua. 514.
    
    
      
       2 Term Rep. 70.
    
   The opinion of the Court was afterwards delivered as follow's by

Parsons, C. J.

The first objection made by the defendants is founded on a want of a demand of payment on the promisor when the note was payable. As to this objection, the facts are, that, on the first day of grace, which was the last day of February, notice was left at the lodgings of the promisor, that the note would be due on the last day of grace, with a request to pay it then; but it also appears that before that time it was known to the parties, that he had absconded, and, when the note was payable, he was not to be found. The condition on which an endorser of a note is holden, is, that the endorsee shall present the note to the promisor when due, and demand payment of it, if it can be done by using due dill gence. Now, it appears that when the note in this case was due, it could not be presented to the promisor for payment, and that there was no neglect in the endorsers. We are all, therefore, satisfied that the endorsers are holden on their endorsement in this case, notwithstanding there was no demand on the promisor.

The second objection is, that the defendants did not, in construction of law, endorse this note.

On the facts in this case we are to decide who shall suffer the loss of the money, — the plaintiffs, who, it is agreed, are innocent endorsees, or the defendants.

It is objected that this note ought to be considered as a forgery of the names of the endorsers; because a note was afterwards written on the face of the paper by the promisor, not only without the direction or consent of the defendants, but against their express instruction ; and therefore that it was a false and fraudulent alteration of a writing, to the prejudice of the endorsers.

This objection would have great weight, if, when the endor sers put the name of the firm on the paper, they had * not intended that something should afterwards be writ- [ * 54 ] ten, to which the name should apply as an endorsement; for then the paper would have been delivered over unaccompanied by any trust or confidence. If the clerk had fraudulently, and for his own benefit, made use of all the endorsements for making promissory notes to charge the endorsers, we are of opinion that this use, though a gross fraud, would not be in law a forgery, but a breach of trust. And for the same reason, when one of these endorsements was delivered by the clerk, who had the custody of them, to the promisor, who by false pretences had obtained it, the fraudulent use of it would not be a forgery; because it was delivered with the intention that a note should be written on the face of the paper by the promisor, for the purpose of negotiating it as endorsed in blank by the house. And we must consider a delivery oy the clerk, who was intrusted with a power of using these endorsements, (although his discretion was confined,) as a delivery by one of the house; whether he was deceived, as in the present case, or had voluntarily exceeded his direction. For the limitation imposed on his discretion was not known to any but to himself and to his principals.

It is further objected that, if the writing of this note under these circumstances is not a forgery, yet it is such a fraud as will discharge the endorsers against an innocent endorsee. The counsel for the defendants agree that generally an endorsement obtained by fraud shall hold the endorsers according to the terms of it; but they make a distinction between the cases where the endorser, through fraudulent pretences, has been induced to endorse the note he is called on to pay, and where he never intended to endorse a note of that description, but a different note, and for a different purpose.

Perhaps there may be cases in which this distinction ought to prevail; as if a blind man had a note falsely and fraudulently read to him, and he endorsed it, supposing it to be the note read to him. But we are satisfied that an endorser cannot avail himself of this distinction, but in cases where he is not chargeable with any loches or neglect, or misplaced confidence in others. Here one [ * 55 ] of two innocent * parties must suffer. The endorsees confided in the signature of the defendants, and they could have no reason to suppose that it had been improperly obtained The note was openly offered to the plaintiffs by a broker, and when they objected on account of the absence of both the endorsers, they were answered, on the information of the promisor, whose character then stood fair, that blank endorsements had been left with the clerk, and that the endorsers had before endorsed a number of notes for the same person, which had been negotiated by a broker. On the other hand, the loss has been occasioned by the misplaced confide nee of the endorsers in a clerk too young or too inexperienced to guard against the arts of the promisor. It is to be regretted that the blank endorsements had not been deposited with the brother of the partners, who was directed to be consulted as to the use of them ; for then no innocent person would have been a sufferer.

From a view of all the facts, as they are presented to us, it is our opinion that the endorsers must be holden, and that judgment must be entered according to the verdict, with the additional interest agreed.

In forming this opinion, we have been necessarily led to consider the effect of a different opinion on the commercial part of the com munity. How far it is common for merchants to intrust their clerk with blank signatures or endorsements, is not known. But when merchants are in the habit of endorsing for each other at the banks, it is very common to put their names on blank paper, and deliver them to the party to be accommodated, for the express purpose of obtaining a renewal of certain notes, when they become due. And if the party having these signatures should employ them as names to other negotiable securities not contemplated, and the signatures should for that reason be void, much injury might result to innocent endorsers, or the bank discounts would be greatly embarrassed. 
      
       [No demand on the maker is necessary, in order to charge the endorser, when, after the making of the note, and at the time when it becomes due, the maker is residing out of the state or government where it was made. McGruder vs. The Bank of Washington, 9 Wheat. 598. — Gist vs. Lybrand, 3 Ohio Rep. 319. — Cromwell vs Hynson, 2 Esp. N. P. 511. — Cummings vs. Fisher, Anth. N. P. 5. — Anderson vs Drake, 14 Johns. 117. — Ed.]