[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 236 I am well satisfied, upon a long line of authorities, that the insertion of the place of payment in this note did not avoid it in the hands of a bona fide holder for value.
The defendant made his note perfect in form except the place of payment, and intrusted it to Istel for a special purpose. If the word "at" had not been inserted in the note it would have been a complete note without the insertion of other words. But with that word in, preceding a blank, it carried upon its face an implied authority for any bona fide *Page 238 holder to insert the place of payment. In such case, if the note be used, or the blank filled up contrary to the agreement or intention of the original parties, the maker is held to any bonafide holder for value, upon the principle that, where one of two innocent parties must suffer by the fraud or wrong of a third person, the one who put it in the power of such third person to commit the fraud or wrong must bear the loss. The liability of the maker in such case has also, sometimes, been placed upon the principle of estoppel; he, having put his paper in circulation, and thus invited the public to receive it of any one having apparent title, is estopped to urge the actual defect of title against a bona fide holder. Upon one or both of these principles the defendant must be held liable. In Mitchell v.Culver (7 Cowen, 336), the note was made and indorsed on the twenty-seventh day of November, payable in sixty days, with the day of the month in blank, and the maker delivered it to the plaintiff in the suit, who, by the direction of the maker, filled the blank with the fifth day of November. It was held that, where the indorser of a note commits it to the maker with the date in blank, the note carries on the face of it an implied authority to the maker to fill up the blank. To the same effect is Page v.Morrell (3 Keyes 117). In Van Duzer v. Howe (21 N.Y., 531), the defendant, Howe, wrote his acceptance upon three drafts, all in blank as to the amount, and delivered them to the drawee with directions to fill up the blanks for sums not exceeding in the aggregate $1,000, to which the drawee assented. He filled up one of them, the draft sued on, for $1,200. It was held that, a party who intrusts another with his acceptance in blank is responsible to a bona fide holder, although the blank be filled with a sum exceeding that fixed as a limit by the acceptor; and, that though the filling of the blank, in violation of the agreement of the parties, be a forgery, the acceptor is estopped from setting up the fact. In Vallett v. Parker (6 Wend., 616), it was held, that the fact that the note was delivered as an escrow, and fraudulently put in circulation, was no defence to it in the hands of a bona fide holder. *Page 239 In Garrard v. Hadden (67 Penn., 82), the maker signed a printed note in the blank of which was written "one hundred," leaving a blank space between that and "dollars," which was in print. This, after delivery, was filled with "fifty." It was held that he was liable for the face of the note to a bona fide holder for value, upon the principle that, if one, by his acts, or silence, or negligence, misleads another, or affects a transaction whereby an innocent party suffers, the blamable party must bear the loss. In Younge v. Grote (4 Bingham, 253), a customer of a banker delivered to his wife certain printed checks, signed by himself, but with blanks for the sum, requesting his wife to fill the blanks up according to the exigency of his business. She caused one to be filled up with the words, "fifty pounds, two shillings," leaving a space before the word "fifty." In this state she delivered it to her husband's clerk to receive the amount, whereupon he inserted at the beginning of the line, before the word "fifty," "three hundred and." The banker having paid the whole amount, it was held that the loss must fall upon the drawer on the ground of his negligence.
In Kitchen v. Place (41 Barb., 465), it was held, that where a blank space is left in a promissory note after the word "at," in the place where the place of payment is usually mentioned, the holder of the note is authorized by an implied authority to fill the blank; that the word "at" implies that the blank space which succeeds it may be filled before the note is delivered with a designated place of payment.
If a note be obtained from a maker by fraud, even if the fraud amount to a felony, under the statute against false pretences; if it be made for one purpose and used by the holder for another; if it be delivered in blank, with an agreement that the blank shall be filled in one way, and it be filled in another, in all these cases the maker is liable to a bona fide holder for value. The maker, rather than such holder, must suffer from his negligence or misplaced confidence. The learned counsel for the appellant claims, however, that the rule is different where the note, as in this case, is *Page 240 delivered not to be used or filled up in any way. I can perceive no difference founded upon any principle. In the one case the note is delivered to be used or filled up in a particular way, and it is used or filled up in an entirely different way. In the other case, the note is made and delivered not to be used in any way. In each case there is the same wrong to the maker, the same misplaced confidence, and the same breach of trust. In either case, justice as well as the public policy, which lies at the foundation of the laws as to commercial paper, requires that the loss shall fall upon the maker rather than on the innocent holder.
In this case the liability of the defendant could be based upon his negligence. He gave a note to operate as a receipt, a purpose to which it is no way adapted. He made the note payable to his own order, and if he had stopped there it would have been just as useful as a receipt, and could not have been used against him as a note. But he made it negotiable by indorsing it, thus enabling Istel to perpetrate the fraud. He must therefore be held liable.
These views are not in conflict with the case of Benedict v.Cowden (49 N.Y. 396), to which our attention has been called. In that case defendant was applied to to become agent for "George N. Palmer, Rohe Lidder." He consented, and it was agreed that he should sign a note for $200 with a contract in it that the note should be paid out of the profits of the machines when sold. A note was presented for $200 and interest, payable to George N. Palmer or bearer one year from date. At the bottom of the note were these words: "The above note to be paid from the profits of machines when sold." There was not room below this to sign; defendant was advised that it would be the same if he signed above or below this memorandum; he therefore signed above it, and delivered the note with the memorandum thereon. Subsequently this memorandum, without the knowledge or consent of defendant, was cut off and the note *Page 241 sold to plaintiff for value without notice. In an action upon this note, the judge submitted to the jury the question whether the words at the bottom were designed by the parties as a part of the contract. They found for the defendant. The court, upon appeal, held that this memorandum was a substantial part of the contract, and qualified it the same as if inserted in the body of the instrument, and with it constituted a single contract, and that the severance of it without the consent of the maker was a material alteration, which destroyed the note even in the hands of an innocent holder for value. The same force and effect was given to the memorandum, as if it had been written above the signature; and hence it was a part of a complete instrument and its severance upon well recognized principles was clearly a material and, hence, destructive alteration. The question, whether the defendant by his act, negligent or otherwise, enabled this forger to commit the forgery, and perpetrate a fraud upon an innocent purchaser of the note was not raised at the trial, and hence was not involved in the decision of the appeal.
The stamp was omitted from this note simply that it might not be used as a note. There was no intention to defraud the revenue, and hence the omission of the stamp did not render the note invalid. (Green v. Halway, 101 Mass. 243; Burnap v.Losey, 1 Lans., 111; Vaughan v. O'Brien, 57 Barb. 492.) It matters not that the stamp was intentionally omitted so long as it was not omitted for the fraudulent purpose.
The order of the General Term must therefore be affirmed, and judgment, absolute, ordered against the defendant with costs.
All concur.
Order affirmed and judgment accordingly. *Page 242