Robertson v. Smith , 18 Ala. 220 ( 1850 )

DARGAN, C. J.

The facts tipem which the .liability of the defendant depends, appear tobe these: H. N.- Spooner, being desirous to raise money, signed his name to a note for five thousand dollars, leaving the date and time of payment, and probably the name of the payee, in blank. The note in this condition was endorsed by the defendant and one Jones, and then delivered to Rhea, Sykes & Co., to be discounted at one of the Banks of Tennessee, for the accommodation of Spooner. The note was not discounted, and therefore was retained by Rhea, Sykes & Co., who, however, did not claim it as their own, or look upon it as creating any obligation on the part of the maker or endorsers. Rhea, Sykes & Co. afterwards failed and left the State, being indebted to James Perrine, who wasalso under liabilities on their account. After Rhea, Sykes & Co. left the State, Perrine applied to one Horton, their clerk and agent, for indemnity, who filled up the blanks, inserting the date-.and time of payment, and probably the name of the payee, and passed the note to Perrine, as a security for the debt due him and the liability he was under for Rhea, Sykes & Co., but told him at the time, that he did not know whether any thing was due to Rhea, Sykes, & Co. on the note or not, and that he must inquire of the parties to the note. It was shown, also, that Rhea, Sykes & Co. never authorised Horton to transfer the note, unless such authority could be implied from the fact that he was their clerk and agent to settle their affairs. Perrine endorsed the note to the plaintiff, who claims to be a bona Jide holder for a valuable consideration without notice; and the question is, if be be such, is he entitled to reeover?

It is not denied byr the ‘defendant’s counsel but that the plaintiff could recover, conceding him to be a bona Jide bolder, if Rhea, Sykes &'Co. had transferred the note to Perrine. But they take a distinction between the act of Horton in filling up and transfering the-note, and the act of Rhea, Sykes & Co. had it been done by them, and insist, that as no confidence was placed in Horton by the parties to the note, nor authority given him, they cannot be bound by his act. We, however,‘think that the rule of law is this; that if one signs his name to a blank bill or note, intending that it should be filled up for a particular purpose, and thereby become a valid seburity, and parts with its possession, and it gets into market, and finally into’ the bands of a bona, Jide holder for a valuable consideration without notice, the matter must be held to its payment, without regard to the person who filled up the blanks. In the case of Coulstely v. Clarence, 2 M. & S. Rep., it appeared that the bill was drawn by the defendant in Jamaica, upon Henry Mann of London, leaving a blank for the name of the payee. The bill was afterwards negotiated in Erigía nd by one Vashon, who endorsed it to the plaintiff) and. the plaintiff inserted his own name as payee. Lord Ellenborough said, that as the defendant had sent the bill into the world in this-form, the world ought not to’ be deceived by it; The defendant, by leaving the blank,-undertook to be answerable for it when filled up in the shape of a bill. In this case it did not appear to whom the. defendant delivered the bill, nor whom he-had empowered to fill it up; his liability was not therefore put upon that ground, but on the ground that he had permitted- his blank bill to get. into market, which gave any bona Jtde holder-the. right to fill-it up. In the case of Putnam et al. v. Sullivan, 4 Mass. R. 45, the facts were, that orie member of of a firm had left with a clerk of the house several blank notes* having the firm name signed to some as promissors, and others having, the name of the firm written on the back as endorsers. The clerk was told to let the promissor of the note sued on have one of the blanks to renew a note, which the firm had endorsed for him, but instead of letting him have one, the promissor, by his fraudulent representations, procured four, and filled up the bne on which the suit was brought for another purpose, but used one of the blanks for the purpose of extending the debt on which the firm was liable as endorsers. It was shown that the plaintiffs wete-bona fide holders o'f the noté, and the’court held they were entitled to recover.

Parsons, C. J., in delivering the opinion of the court, said: ThU note was carried into market endorsed in blank, and it stands on the same footing as a note payable to bearer, or a bank note, which-is 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 has obtained possession, whether by fraud, accident, or even robbery, and any holder having given a valuable consideration for the note, without notice of the fraud, accident, or robbery, may recover against the drawer, acceptor, or endorsor in blank.” Again, in the case of Herbert v. Huie, 1 Ala. 18, the facts were, that the defendant gave .his blank note to John G. Porter, to be filled up for one thousand dollars, for the accommodation of Porter & Ryan. Porter-& Ryan passed off the blank to- Ross & Ford, who had it filled up for five thousand dollars, and then passed it oft' to a horn, fide holder. It was objected that the maker had given Ross and Ford no authority to fillup the note, nor had he reposed any confidence in them, and therefore he was not bound, but this court overruled the objection and held him liable.

The broad principle on which the maker or endorsers of blank bills or notes are held liable to a bona fide holder is this, that when one of two innocent persons must suffer, he who is most in fault must bear the loss. Let us apply this test to the parties in the case before us. The defendant permitted his name to go out on a blank note. It was entrusted to Rhea, Sykes & Co., for a special purpose, but that purpose failing, it was permitted to remain in their possession, that was neglect. Rhea, Sykes & Co., removing from the country, the note was left within the power of their clerk to pass it off. This too, was neglect, but the defendant is chargeable with it, for he put the note in their possession. Thus, through the neglect of the parties to the note, and those to whose custody they entrusted it, the note is thrown upon the market, and is purchased by a bona fide holder. "Who is most in fault ? The answer is plain ; the one has been guilty of no neglect, the other has. He therefore must bear the loss.

It has, however, been contended that the evidence is not of such a character as to show that the plaintiff is a bona fide holder for a valuable consideration, without notice. With this question we have nothing to do in the present condition of the record. That will be a question for the jury upon another trial. The testimony was sufficient to warrant the charge requested, if it even had failed to satisfy the jury, that the plaintiff was a bona fide holder. Nor do we think it necessary to lengthen out. this opinion by adverting to the authorities refered to' by the counsel for the defendant in error, for we think they are inapplicable, and although the principles recognised in them cannot be denied, yet the case before us must turn on a different principle, and one which we think equally well settled.

After the defendant had closed his testimony, the plaintiff, for the purpose of showing that he had paid a valuable consideration for the note, proved that he and Perrine had a settlement in reference to the hire of some negroes, and that he gave Perrine his two notes for over two thousand dollars each, falling due after the note sued on, and the amount that Perrine was indebted to him made up the balance between the notes given by the plaintiff to Perrine and this note. The witness, however, who spoke of the settlement, and who was present when it was made, knew nothing of the amount due from Perrine to the plaintiff, except what was stated by the parties at the time of the settlement. The defendant objected to the admission of the parties made at the settlement, although the plaintiff offered other proof to show that Perrine as his agent had hired out his slaves, and had collected the hire. The objection was sustained and the admissions of the parties rejected'. *

' It is not universally true, that the acts of third persons cannot be received as evidence against one who is not a party to them. For instance; ia the case before us, to entitle the plaintiff to recover, he must show that be is a bona fide holder. This he cannot do without proof of a contract between himself and Perrine, by which he purchased the note and paid value for it. The contract and the payment are therefore facts, which are evidence against him, although be was not an actual parly to the act; indeed no party at all, further than this, that the note which he had endorsed was one of the subjects of the contract. As the facts of the contract and the payment of the consideration are evidence, it follows that every thing, inseparably connected with these acts to make them complete, is evidence, for it is part of the act itself; that is, it is part of the res gestee. For instance; when it was shown that Perrine had received money belonging to the defendant, in reference to which they had a settlement, the amount they ascertained to be due to the plaintiff in that settlement was part of the settlement itself, it was not, therefore, hearsay or mere declarations of third parties, but was part of the res gestee, and therefore was admissible. It is not, however, to be understood that the admissions of one or both of the parties to the settlement, made after it was complete, or before it was begun, would be admissible evidence; but their admissions, made at the time it was going on for the purpose of ascertainig how the accounts stood between them, cannofbe rejected. Such admissions, however, are by no means conclusive; they are liable to abuse, and must be weighed by the jury, who will give such credence to them as they think them justly entitled to. Let the judgment be reversed and the cause remanded.