Gage v. Sharp , 24 Iowa 15 ( 1867 )

Cole, J.

1. promissory note : latent infirmities, The note sued upon, is on its face the joint and several note of the defendant, and one A. G;. Christie, It appears in evidence, however, that the _ . r _ defendant as surety for (Jimstie, signed the note with the date and amount in blank, and delivered the same to Christie for negotiation after Christie should execute a mortgage to secure defendant for his liability thereon. Christie filled up the note with the sum agreed upon, but negotiated it contrary to the agreement, without first making the mortgage. The fact that the note after being intrusted to Christie for particular purposes, was negotiated before the condition on which Christie was authorized to negotiate it happened, or after filling the blanks with a different date or amount than authorized, does not constitute any defense against a bona fide holder. This rule of law is well settled. 1 Parsons on Notes and Bills, 110 to 115 and authorities cited.

2. — stamps, Nor does the fact that the note was not stamped by defendant when intrusted to Christie, affect the right of a bona fide holder. Blackwell v. Denie, 23 Iowa, 63.

3. — payable gotiation to another than payee. There is one other point made by the counsel for appellant. It is this: The note was made payable to Wood-bury and Abell or bearer at the First National Bank of Marshalltown, and with the intention , ^ 1 or being used m the bank, and nence, that no other person than Woodbury and Abell could become a bqna fide holder thereof, when receiving the same directly from Christie. It would seem that this proposition might be negatived upon reason alone. For, if it was the intention of the makers that it should be negotiated only to Woodbury and Abell, then it would have been made payable to them .or order ; but since it was possible they might not advance the money, and as if purposely to leave the door open for the sale or negotiation of the note to (mother, it was made payable to them or hearer. It was held by this court in Lane v. Krekle (22 Iowa, 399), that the indorsee of a note made to a payee named, or bearer, need not deduce title through the payee; but that, although he had an apparent title through an indorsement of the payee, by an agent whose authority was not shown, he might disregard the indorsement and recover as hearer. It would seem to follow upon the authority of that case, that the naming of a payee could not affect the right of another person to take, hold and claim the note as hearer.

The rule as to what should open the door to defenses based upon the loss, larceny or tortious transfer of paper negotiable by delivery, has undergone material changes. It was laid down by Lord Kenyon in Lawson v. Weston (4 Espinasse, 56) [A. D. 1801], that it was not enough to defeat the right of a holder to prove that he had not been properly diligent in inquiring as to the title of his transferrer ; that actual mala ficles would alone destroy his title. In Gill v. Cubitt (3 B. & C. 446), S. C. (1 Car. & P. 487 [A. D. 1824]), it was held (per Abbot, Oh. J.), that the holder of negotiable paper would not be protected where he acquired it under circumstances which ought to have excited the suspicions of an ordinarily prudent person, and the case of Lawson v. Weston, was overruled. Afterward in Crook v. Jadis (5 B. & Ad. 909 [A. D. 1824]), it was held (per Lord Denman), that the holder might recover, unless he had been guilty of gross negligence in taking the paper. And still later in Goodman v. Harvey (4 A. & E. 870 [A. D. 1835]), it was held (also per Lord Denman), that gross negligence alone would not defeat a recovery, but that actual mala fides must be proved; and it was stated that gross negligence might be evidence of mala fides, but is not the same thing. And in Bank of Bengal v. Fagan (7 Moore, P. C. 71 [A. D. ]) it was held (per Lord Brougham), that negligence of the holder does not fix him with the defective title of' the party passing it to him, and Gill v. Oubitt, and cases following it were in turn overruled, and the doctrine of Lord Kenton in Lawson v. Weston, re-affirmed.

And Mr. Parsons, in his work on Notes and Bills (vol. 2, p. 279), states the doctrine to be, that the title of a bona fide holder of a lost, stolen, or tortiously transferred note or bill transferable by mere delivery, not overdue or dishonored, for a valuable consideration in the usual course of business, and who has taken it without notice of the loss or fraud, is not defeated by proof that he was negligent or even grossly negligent in taking it, and omitted to make inquiries which common prudence would have dictated.

Of course, when the paper bears upon its face evidence of its own infirmity, the taker thereof is chargeable with notice of the defects and consequences growing out of or attaching to that infirmity. McCramer v. Thompson et al., 21 Iowa, 244.

We therefore hold, upon principle and authority, that the fact that a note payable to a payee or bearer is negotiated to another than and not to the payee, is not of itself sufficient to charge the taker with notice of a defect therein as against the maker.

So far as the proof shows the taker to have been a resident of the same city with the co-maker, from whom he received the note, and who was in insolvent circumstances at the time, and left the city soon after, these are facts proper for a jury, or the court when tried to the court as a jury, to take into consideration in determining the notice of the defect or mala fides of the taker or holder. And the finding of the court like that of a jury-can only be set aside when clearly against the weight of evidence. The finding in this case is not so.

Affirmed.