Burson v. Huntington

21 Mich. 415, 1870 Mich. LEXIS 106

• Court: Michigan Supreme Court
• Decided: October 11, 1870
• Status: Published

Opinion

Christiancy, J.

The defendant below haying appeared before the Justice and pleaded to the plaintiff’s declaration, and twice obtained adjournments of this cause, it was too late, on the trial of the appeal in the circuit, to make any objection for want of proper service of the summons. After joining issue upon the merits, it was immaterial whether there had, in fact, ever been a summons issued.

There was no error, therefore, in overruling the defendant’s objection to the introduction of evidence upon this ground.

The note declared upon was filed with the Justice at the time of declaring; and by the statute (Comp. L., § 8767,) the plaintiff was therefore entitled to read the note in evidence without proving its execution, unless defendant denied its “execution on oath” at the time of pleading.

Defendant pleaded the general issue, with a notice that he would prove that the note was obtained from him by fraud and without consideration, and other facts substantially the same as set forth in his affidavit made and filed with the plea and notice. This affidavit simply denied the delivery of the note by the defendant, or any other person on his behalf, to the payee or any other person for him, or that defendant ever placed any stamp upon it or authorized any other person to do so, or to cancel such stamp, and stated that the paper was taken from deponent’s house, in his absence from the same, by the payee, without the knowledge or consent of deponent.

It is unnecessary to determine here whether the execution of the note under this statute would include its delivery as a part of the execution; since, granting the affirmative, the signature certainly constitutes a part of its execution, and the affidavit being special, — not denying the execution generally, but merely the delivery and the affixing and canceling, of the stamp, — admits, by a very clear implication, his signature to the instrument, and clearly indicates that he intends to contest only the delivéry, the stamping and canceling of the stamp, and not his signature; otherwise, he would have denied the execution generally and brought himself within the language of the statute. The plaintiff, therefore, was not bound to prove such portion of the execution as was not denied, but admitted, viz: the signature of the defendant.

The case upon the trial stood in all respects as if the signature of the defendant had been admitted in open court. And this admission is to have at least as full effect as the clearest proof of such signature. ‘

Now proof of such signature, together with the fact that the note is in the hands of, and produced by, the plaintiff (the indorsement being proved as it was here), furnishes strong presumptive evidence of delivery by the maker to the payee; and this is, in fact, all the proof ordinarily given by the plaintiff of such delivery when the execution of the note is denied. It establishes a prima facie case upon this point; and it is for the defendant, if he contests the fact of delivery, to sustain his denial by proof.

The indorsement by the payee having been proved, there was, therefore, no error in allowing the note to be read in evidence.

We think the Court erred in striking out the testimony of the witness, Fletcher, showing what the sister of the defendant testified to on the trial of this cause before the Justice, she having since died. The ground upon' which this was stricken out seems to have been, because the witness did not recollect the precise words of the former testimony, though he stated that he recollected and gave the substance. We think the objection, under such circumstances, untenable, and that the evidence was admissible. See 1 Greenl. Mo., Sec. 166, and authorities cited. An additional ground' of objection was stated, viz: that plaintiff was shown to be a Iona fide holder of the note; but the Court could not have stricken out the evidence on this ground, as there was some evidence of circumstances tending to show he was not such Iona fide holder, and the Court left this question to the jury.

But this note was indorsed by Goldwood, the payee, to the plaintiff, before maturity, for a, valuable consideration, and, as plaintiff claims, in good faith and without notice of a want of delivery or of consideration, or any other circumstance tending to invalidate it in the hands of Gold-wood; and his evidence tended to show this, though there was evidence or some circumstances tending to show that he had notice of the circumstances under which the paper had been obtained.

There was also evidence on the part of the defendant, strongly tending to show that the note never was delivered by the defendant, but that Goldwood, to whose order it was drawn, was endeavoring to sell to the defendant a patent right, or the right of certain territory under it, and that the parties had so far progressed towards the making of an.arrangement to this end, that it was understood and verbally agreed that Goldwood was to give him a deed of certain territory, upon defendant’s executing to him a note for the amount, with some other person signing it as surety. That the parties being in the defendant’s house, and defendant’s sister being present, Goldwood wrote this note, and defendant signed it; but as a surety was to be obtained, he laid the note on the table and went out to find his uncle for that purpose, telling Goldwood, as he went out, not to touch it till he came back; but that while defendant was gone, Goldwood picked up the paper and started out doors with it; that defendant’s sister then told him to let the note be on the table till defendant should come back, to which Goldwood replied he was going to have the note, and went off with it, without giving any deed of territory or anything else for it. That the note, at this time, was not stamped, and defendant never stamped or authorized it to be stamped; that some four days after, Goldwood wrote to defendant requesting him to come immediately to Kalamazoo “and sign stamp on the note,” and saying if defendant was not there by Tuesday evening “ I shall consider that you refuse your signature, and shall act accordingly.” The evidence also tended to show that defendant called upon Goldwood about that time, while the latter had the note, and demanded it, accusing him of stealing it, to which Goldwood replied, “Never mind, we can fix that up,” and said he was ready to do as he had agreed, and wanted defendant to get another signer, and he would give him a deed of territory; but defendant said he did not want the deed, but wanted the note. Goldwood refused to return the note, or to give a deed till he got another signer.

These facts, if found by the jury, would show, not only that, the note was never delivered to the payee, and that it therefore never had a legal existence as a note between the original parties, but that there was yet no completed or binding agreement of any kind, and was not to be until defendant should choose to get a surety on the note, and the payee should give him a deed of territory. Until thus completed, the defendant had a right to retract.

As a general rule, a negotiable promissory note, like any other written contract, has no legal inception or valid existence, as such, until it has been delivered in accordance with the purpose and intent of the parties.—See Edwards on B. and N., 175, and authorities cited, and 1 Pars, on B. and N., 48 and 49, and cases cited, and see Thomas v. Watkins, 16 Wis., 549; Mahon v. Sawyer, 18 Ind., 73; Carter v. McClintock, 29 Mo., 464.

Delivery is an essential part of the making or execution of the note, and it takes effect only from delivery (for most purposes); and if this bo subsequent to the date, it takes effect from the delivery and not from the date.— 1 Pars., ubi supra. This is certainly true as between the original parties.

But negotiable paper differs from ordinary written contracts in this respect: that even a wrongful holder, between whom and . the maker or indorser the note or indorsement would not be valid, may yet transfer to an innocent party, who takes it in good faith, without notice and for value, a good title as against the maker or indorser. And the question in the present case is, how far this principle will dispense with delivery by the maker.

When a note payable to bearer, which has once become operative by delivery, has been lest or stolen from the owner, and has subsequently come to the hands of a bona fide holder for value, the latter may recover against the maker, and all indorsers on the paper when in the hands of the loser; and the loser must sustain the loss. In such a case there was a complete legal instrument; the maker is clearly liable to pay it to some one; and the question is only to whom.

But in the case before us, where the note had never been delivered, and therefore had no legal inception or existence as a note, the question is whether he is liable to pay at all, even to an innocent holder for value.

The wrongful act of a thief or a trespasser may deprive the holder of his property in a note which has once become a note, or property, by delivery, and may transfer the title to an innocent purchaser for value. But a note in the hands of the maker before delivery is not property, nor the subject of ownership, as such; it is, in law, but a blank piece of paper. Can the theft or wrongful seizure of this paper create a valid contract on the part of the maker against his will, where none existed before? There is no principle of the law of contracts upon which this can be done, unless the facts of the case are such that, in justice and fairness, as between the maker and the innocent holder, the maker ought to be estopped to deny the making and delivery of the note.

But it is urged that this case falls within the general principle which has become a maxim of law, that when one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss, must sustain it. This is a principle of manifest justice when confined within its proper limits. But the principle, as a rule, has many exceptions; and the point of difficulty in its application consists in determining what acts or conduct of the party sought to be charged, can properly be said to have “enabled the third person to occasion the loss,” within the meaning of the rule. If I leave my horse in the stable, or in the pasture, I cannot properly be said to have enabled the thief to steal him, within the meaning of this rule, because he found it possible to steal him from that particular locality. And upon examination it will be found that this rule or maxim is mainly confined to cases where the party who is made to suffer the loss, has reposed a confidence in the third person whose acts have occasioned the loss, or in some other intermediate person whose acts or negligence have enabled such third person to occasion the loss; and that the party has been held responsible for the acts of those in whom he had trusted upon grounds analogous to those which govern the relation of principal and agent; that the party thus reposing confidence in another with respect to transactions, by which the rights of others may be affected, has, .as to the persons to be thus affected, constituted the third person his agent in some sense, and having held him out as such, or trusted him with papers or indicia of ownership which have enabled him to appear to others as principal, as owner, or as possessed of certain powers, the person reposing this confidence is, as to those who have been deceived into parting with property or incurring obligations on the faith of such appearances, to be held, to the same extent as if the fact had accorded with such appearances.

Hence, to confine ourselves to the question of delivery, the authorities in reference to lost or stolen notes which have become operative by delivery, have no bearing upon the question. If the maker or indorser, before delivery to the payee, leave the note in the hands of a third person ns an escrow, to be delivered upon certain conditions only, or voluntarily deliver it to the payee, or (if payable to bearer) to any other person for a special purpose only, as to be taken to, or discounted by a particular bank, or to be carried to any particular place or person, or to be used only in a certain way, or upon certain conditions not apparent upon.the face of the paper, and the person to whom it is thus entrusted violate the confidence reposed in him, and put the note into circulation; this, though not a valid delivery as to the original parties, must, as between a dona Jide holder for value, and the maker or indorser, be treated as a delivery, rendering the note or indorsement valid in the hands of such dona fide holder; or if the note be sent by mail, and get into the wrong hands; as the party intended to deliver to some one, and selects his own mode of delivery, he must be responsible for the result. These principles are too well settled to call for the citation of authorities, and manifestly it will make no difference in this respect, if the note or indorsement were signed in blank, if' the maker or indorser part with the possession, or authorize a clerk or agent to do so, and it is done.—1 Parsons on Bills and Notes, 109 to 114, and cases cited, especially Putnam v. Sullivan, 4 Mass., 45, which was decided expressly upon the ground of the confidence reposed in the third person, as to the filling up, and in the clerks as to the delivery.

And when the maker or indorser has himself been deceived by the fraudulent acts or representations of the payee or others, and thereby induced to deliver or part with the note or indorsement, and the same is thus fraudulently obtained from him, he must, doubtless, as between him and an innocent holder for value, bear the consequences of his own credulity and want of caution. He has placed a confidence in another, and by putting the papers into his hands, has enabled him to appear as the owner, and to deceive others. Cases of this kind are numerous; but they have no bearing upon the wrongful taking from the maker, when he never voluntarily parted with the instrument. Much confusion, however, has arisen from the general language used in the books and sometimes by judges, in reference to cases where the maker has voluntarily parted with the possession, though induced to do so by fraud; when it is laid down as a general rule, that it is no defense for a maker, as against a dona fid,e holder, to show that the note was wrongfully or fraudulently obtained, without; attempting to distinguish between cases where the maker has actually and voluntarily parted with the possession of the note, and those where he has not.

We do not assert that the general rule we are discussing — that “where one of two innocent parties must suffer,” etc. — must be confined exclusively to cases where a confidence has been placed in some other person (in reference to delivery) and abused. There may be cases where the culpable negligence or recklessness of the maker in allowing an undelivered note to get into circulation, might justly estop him from setting up non-delivery; as if he were knowingly to throw it into the street, or otherwise leave it accessible to the public, with no person present to guard against its abduction under circumstances when he might reasonably apprehend that it would be likely to be taken.

Upon this principle the case of Ingham v. Primrose (7 C. B. (N. S.), 82) was decided, where the acceptor tore the bill into halves (with the intention of canceling it) and threw it into the street, and the drawer picked them up in his presence, and afterwards pasted the two pieces together and put them into circulation. See also by analogy Foster v. Mackinnon, Law Rep., 4 Com. B., 704.

But the case before us is one of a very different character, No actual delivery by the maker to any one for any purpose.

The evidence tends to show that when he left the room in his own house, the note,, being on the table, and his sister remaining there, he did not confide it to the custody of the payee, but told him not to take it, and no final agreement between them had yet been made, and no consideration given. Under such circumstances he can no more be said to have trusted it to the payee’s custody or confidence, than that he trusted his spoons or other household goods to his custody or confidence; and there was no more apparent reason to suppose he would take and carry off the one, than the other.

The maker, therefore, cannot be held responsible for any negligence; there was nothing to prove negligence, unless he was bound to suspect, and treat as a knave, a thief or a criminal, the man who came to his house apparently on business, because he afterwards proved himself to be such. This, we think, would be preposterous.

We, therefore, see no ground upon which the defendant could be held liable on a note thus obtained, even to a Iona fide holder for value. He was guilty of no more negligence than the plaintiff who took the paper, and the plaintiff shows no rights or equities superior tó those of the defendant.

Such, we think, must be the result upon principle. We have carefully examined the cases, English and American, and are satisfied there is no adjudged case in the English courts, so far as their reports have reached us, which would warrant a recovery in the present case. Some dicta may be found, the general language of which might sustain the liability of tho maker; such as that of Alderson Baron in Marston v. Allen (8 M. & W., 494), cited by Duer J., in Gould v. Segee, 5 Duer, 260, and that used by Williams, J., in Ingham v. Primrose, 7 C. B. (W. S.), 82. But a reference to the oases will show that no such question was involved, and that these remarks were wholly outside of the case.

On the other hand, Hall v. Wilson, 16 Barb., 548, 555, and 556, contains a dictum fully sustaining the views we have taken.

There are, however, two recent American cases, where the note or indorsement was obtained without delivery, under circumstances quite as wrongful as those in the present case, in one of which the maker, and in the other the indorser, was held liable to a bona fide holder for value: Shipley v. Carroll et al., Ill., 285 (case of maker) and Gould v. Segee, 5 Duer., 266. But in neither of these cases can we discover that the Court discussed or considered the real principle involved; and we have been unable to discover anything in the cases cited by the Court to warrant the decision. It is possible that the case in Illinois may depend somewhat upon their statute, and the note being made as a mere matter of amusement, and the making not being justified by any legitimate pending business, the maker might perhaps justly be held responsible for a higher degree of diligence, and therefore more justly chargeable with negligence under the particular circumstances, than the maker in the present case.

There is another case (Worcester Co. Bank v. Dorchester & Milton Bank, 10 Cush., 488), where bank bills were stolen from the vault of the bank, which though signed and ready for use, had never been yet issued, and on which a bona fide holder for value was held entitled to recover. This, we are inclined to think, was correct. The Court intimated a doubt whether the same rule should apply to bank bills as to ordinary promissory notes, and as to the latter, failed to make any distinction between the question of delivery and questions affecting the rights of the parties upon notes which have become effectual by delivery. But we think bank bills which circulate universally as cash, passing from hand to hand perhaps a hundred times a day, without such inquiries as are usual in the cases of ordinary promissory notes of individuals, stand upon quite different grounds. And, considering the temptations to burglars and robbers, where large masses of bank bills are known to be kept, and the much greater facility of passing them off to innocent parties, without detection or identification of the bills or the parties, and that the special business of banks is dealing in, and holding the custody of, money and bank bills; it is not unreasonable to hold them to a much higher degree of care, and to make them absolutely responsible for their safe keeping. We do not therefore regard this case as having any material bearing upon the case before us.

We think the Circuit Court erred in refusing to charge upon this point, as requested by the defendant below.

We do not think there was any error in refusing to charge that the want of a stamp on the note would be such circumstance of suspicion as to put the indorsee upon inquiry in taking the note. Under our decisions the note would be valid and could be enforced in our courts without a stamp.

Some other minor questions were raised, but we do not think they will be likely to arise upon a .new trial.

The judgment must be reversed with costs, and a new trial awarded.

The other Justices concurred.