Court Opinion

ID: 3633077
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:12:03.478196+00
Date Added: 2024-06-11T13:45:13.336247
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 255 
[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 256 
It is undisputed that these bonds, with the indorsement thereon of the name of the payee, were negotiable by delivery, like promissory notes and bills of exchange. A thief or a finder could give title to them to a bona fide purchaser for value; and the same rules are applicable to *Page 258 
them which apply to other negotiable paper. (Bank of Rome v.Village of Rome, 19 N.Y., 20; Birdsall v. Russell,29 N.Y., 220; Brainerd v. New York and Harlem Railroad Company,
25 id., 496.)
The indorsement of these bonds by the payee did not unalterably fix their character, so as to make them negotiable by mere delivery. Any lawful holder could fill up the blank indorsements by making them payable to his own order or the order of another person, and then they could not pass by mere delivery. And any person owning them could have erased the indorsement of Roll. This would not have destroyed the bonds but would have destroyed the indorsements, and then they could have been negotiated again only after the genuine indorsement of Roll was again procured. Any lawful owner of such paper can, without avoiding the paper itself, erase and thus cancel, any or all the indorsements thereon, without affecting his title to the paper or his right to resort to any of the names thereon prior to those erased. (Dollfus v. Frosch, 1 Denio, 367; Chitty on Bills, 230; Story on Promissory Notes, § 142; 2 Parsons on Notes and Bills, 29.) Any intentional, material alteration of such paper, by the owner thereof, will destroy it, so that he cannot maintain an action thereon against any of the parties thereto. But an accidental destruction or mutilation thereof, or an unintentional alteration thereof, by the owner, will not have such effect; and neither will the destruction, mutilation or alteration thereof by a stranger have such effect. In such cases secondary evidence can be resorted to, to establish the paper, and a recovery had upon it as it was originally made. (1 Greenleaf's Evidence, 566; 2 Parsons on Notes and Bills, 574.)
The general rule applicable to personal property is, that the seller, although in possession of the property, can give no better title than he has. From the operation of this rule negotiable paper is excepted. The exigencies of business and commerce are such as to require the free circulation of such paper. It takes the place and performs, to a large *Page 259 
extent, the office of money. It is used for the transaction of much the largest part of the business of mankind. It would be most embarrassing, therefore, if every taker of such paper was bound, at his peril, to inquire into the title of the holder, and if he was obliged to take it with all the imperfections and subject to all the defences which attach to it in the hands of the holder. It has, therefore, for more than 200 years, been the settled law of England and this country, that a thief, or any other person having possession of such paper, fair upon its face, can give, a bona fide purchaser for value, a good title to it, against all the parties thereto, as well as the true owner. To have this quality it must be fair and regular upon its face; it must be payable to bearer, or to order and indorsed by the payee. A forged indorsement, no matter how cautious the purchaser may be, will give no title. (Graves v. American Exchange Bank,17 N Y, 205.)
Upon what theory is it that a holder, without title, can transfer title to such paper? It is said it is because the law arbitrarily gives him the capacity to transfer title to such paper to a bona fide holder for value. I apprehend that a better statement of the theory is, that he has capacity to give the title, because he is the apparent owner of the paper. Every holder of such paper is presumed to be the owner. Unless he be the apparent owner, he cannot give title even to a bona fide
purchaser for value, and unless the purchaser relies upon the apparent ownership, he cannot be a bona fide purchaser. Mr. Justice CLIFFORD, in Goodman v. Simonds (20 How. [U.S.], 365), speaking of such paper, says: "The title and possession are considered as one and inseparable, and, in the absence of any explanation, the law presumes that a party in possession holds the instrument for value until the contrary is made to appear." In Central Bank of Brooklyn v. Hammett (50 N.Y., 158), it is said, by the court, that "one who obtains the transfer of negotiable paper before maturity, and for full value, without notice of any defect in the title of the apparent owner, acquires all the rights of a bona fide holder by title derived *Page 260 
from the actual owner. The possession of a bill or note, payable to bearer or indorsed in blank, by one not a party to the instrument, is presumptive evidence of ownership." In BelmontBranch Bank v. Hoge (35 N.Y., 65), Judge PORTER says: "One who, for value, obtains from the apparent owner a transfer of negotiable paper before it matures, and who has no notice of any equities between the original parties, or of any defect in the title of the presumptive owner, is to be deemed a bona fide
holder."
The thief, in this case, was not the apparent owner of the bonds. He came to the defendant with two bonds, payable to the order of Roll, without his indorsement upon them. It matters not that he personated Roll, and the defendant believed him to be Roll. The defendant is in no better position as to title than he would have been if he had known who the thief was. He did not take paper, fair and regular upon its face, from a person having possession of such paper, and apparently the owner thereof. The false personation and forgery give him no title He did not rely upon anything that appeared upon the bonds, and was not deceived or misled by them. But, he relied upon the representations of the thief, and was deceived by them. Against such deception the laws, applicable to negotiable paper, were not intended to guard. It is their purpose to facilitate the circulation of paper, fair and regular upon its face, and to protect the bona fide purchasers of such paper. The exigencies of business and commerce do not require that paper, payable to order, should circulate freely without indorsement. The reason which lies at the foundation of the laws, in reference to the transfer of negotiable paper, does not apply to such a case, and the maxim, cessante ratione legiscessat ipsa lex, should be applied.
In further illustration, suppose the thief of negotiable paper entirely destroys it, can he make a fac simile and give any one a cause of action upon the original instrument? This will not be claimed, and yet the owner has lost none of his rights. He must treat the paper as if it had not been *Page 261 
destroyed. He must make demand and protest for non-payment, and bring suit upon the original instrument, and give secondary evidence of its contents. The thief cannot, by false personation or forgery, give title to the cause of action upon the original instrument, because he is not the possessor or apparent owner thereof. Suppose a thief should erase the name of the maker or drawer of a note or bill of exchange, and then forge the same signature, could he give a bona fide purchaser for value, title to the paper? I am clearly of opinion that he could not. The paper is not fair upon its face. There is a forgery, and although the purchaser may be ignorant of it, the law-merchant does not protect him against such ignorance. He must know at his peril that the signatures are genuine. We are asked, suppose the name of the payee, indorsed upon mercantile paper, fades out so as to be invisible, does it affect the negotiable character of the paper? Most certainly it does. The title and rights of the owner remain the same as before; but a thief could give no title to such a paper to any one, because he cannot be the apparent owner thereof, and there is nothing on the face of the paper to induce belief that he is the owner.
But there is another course of reasoning, equally conclusive, it seems to me, which defeats the defendant's claim. The thief was not in every sense a stranger to the bonds; he was such as to the plaintiff, and whenever she has reclaimed them, she will hold them unaffected by anything which the thief has done to them. But was he a stranger as to the defendant? Assuming that he may be treated as a bona fide purchaser, all the title he claims he got from the thief. As to him, the law treats the thief as the owner; he dealt with him upon the assumption and presumption of his ownership. It is not for him to say that the thief was not the owner, and while he claims that he was competent to give him title, he cannot deny that he was competent to destroy the paper by its mutilation or alteration. As to him, the thief had the same power, while he held the paper, to erase the indorsement and thus make it non-negotiable by mere delivery, as the true owner would *Page 262 
have had. One who buys such paper from a thief must take it in the condition it is when it leaves the hands of the thief, and he can take it in no other way. I can perceive no reason for awarding a purchaser from a thief, a better position than he would occupy if he had purchased from the same person being the true owner. Suppose the thief had altered these bonds by raising them to $3,000, and had not erased the indorsement, how would that have affected the bonds? As to the plaintiff, it would have been a mere act of spoilation and would have had no effect. But as to a purchaser from the thief, it would have destroyed them. He could neither enforce them for $3,000 nor $300. It cannot be the policy of the law to facilitate the free circulation of forged, altered or mutilated paper. The purchaser of such paper must take the risk of its genuineness. The law protects him only in the purchase of genuine commercial paper, in good faith.
It follows, that the order of the General Term must be affirmed, and judgment absolute ordered against the defendant, with costs.