Lobdell v. Baker

Shaw, C. J.

It appears to the court that little more remains, in the decision of this case, than to reaffirm the principies adopted in the former decision of the case, previous to the last trial. 1 Met. 193. The declaration has been amended, so as to charge that the defendant, knowing that Swan was an infant, put into circulation a note with the name of Swan as indorser, &c. and that the plaintiff, relying on Swan’s name, as indorser, purchased the note. This we think is introducing no new cause of action, but stating the same cause of action somewhat more accurately, and that it was properly allowed as an amendment.

The ground upon which the court decide, being substantially the same as before stated in the same case, is this : The de fendant, having the note indorsed in blank, for sale, as appears by his afterwards in fact selling the same, caused a minor and clerk in his employment to put his name upon it in blank, as indorser. Every man is presumed to intend all the necessay, natural and probable consequences of his own acts, conduct and language. The ordinary purpose, for which a person indorses a note not due, is to give it currency. He is held out as one who has been the holder and proprietor of the note, and indorses it for the double purpose of transferring title to another, and giving the conditional undertaking, which an indorsement implies, to pay it if dishonored by the promisor. This is the implied representation of an accommodation indorser, and he cannot show that he did not intend to be bound. His contract is inferred from his act. When therefore a man, for a valuable consideration, puts into circulation a note, bearing the name of a blank indorser, with nothing to'rebut the natural inference to be drawn from it, he by necessary implication affirms that the indorser i? a person capable of indorsing, and binding himself by such indorsement. Such inference may be repelled by matter accompanying ; as if a note were given by a husband payable to his wife or her order, and she should indorse as wife ; any body taking the neto would see that the indorsement was made by a feme covert, who as attorney could pass the note, but, as a feme covert, could not bind herself. But, unexplained, such a person is represented to be one capable of being an indorser with the usual consequences.

There is a manifest difference in such case, between a minor, one not bound by a contract, and a person who, though his pecuniary responsibility is not such as adds much strength to the security, does yet bind himself. Whoever takes a negotiable security is understood to ascertain for himself the ability cf the contracting parties ; but he has a right to believe, without inquiring, that he has the legal obligation of the contracting parties appearing on the bill or note. Unexplained, the purchasei of such a note has a right to believe, upon the faith of the security itself, that it is indorsed by one capable of binding himself by the contract which an indorsement by law imports. It is an averment to that effect, on the part of him who procures such an indorsement and puts the note bearing it into circulation.

In the present case, the defendant procured such án indorsement on the note, and put it into circulation, unexplained. He thereby affirmed to any one who should take it, that it was so indorsed. He knew it was not so indorsed. If he supposed it immaterial, and believed the note good without it, he might not be actuated by any motive of gain to himself, or any actual ‘n-tent to injure another. Still the fact remains,'that he has made a representation, which to his knowledge is untrue. Then the principle applies, that if one makes a representation which is not true, and another, acting upon the faith of its being true, is injured' by it, he has his remedy against the party so making the false representation. Polhill v. Walter, 3 Barn. & Adolph. 114. He may not be liable for vindictive or exemplary damages, as in case of fraud in fact; but it is a fraud in law, by which another suffers, and for which the party suffering has a right to look to him for indemnity. We think this was the rule laid down before, and it governs the present case.

Another point that has been strongly pressed in the argument is this : That if the defendant, when he delivered the note to Winslow, the broker, to be negotiated, told him that the name of Swan added nothing to the validity of the security, and that no one should rely upon it; or if, in the sale by Winslow to Stearns, the same caution was given to the latter; the defendant had done his duty, and was no farther responsible for the consequences. There was contradictory evidence as to the fact. But supposing it to be fully proved that such caution was given, we think it would not relieve the defendant from his responsibility to the plaintiff. Persons successively taking a negotiable note, during the time it has to run, and without actual notice of what has previously taken place, are not affected by any knowledge in regard to the note, which prior holders may have had. Each takes with notice only of what is .apparent upon it — in the absence of actual notice to himself. This principle is essential to the security and free currency of negotiable instruments. It follows, therefore, that a representation, borne upon the instrument itself, is a representation to each successive holder, when about to take it in the due course of business, without actual notice. This is fully established in the case already cited. A person, not authorized to accept a bill of exchange for another, did accept it by procuration. This was held to be a representation that he was authorized so to accept, made to each one who should take the acceptance; and being a false representation, the ultimate holder had his remedy in this form of action, although a prior holder, who held it at the time of the acceptance, and procured the acceptance, was informed by the defendant that he had no authority to accept. Polhill v Walter, 3 Barn. & Adolph. 114.

Judgment on the verdict.