Fearing v. Clark , 82 Mass. 74 ( 1860 )

Bigelow, C. J.

The defendant proved no facts at the trial which constituted a valid defence to the note declared on as against the plaintiff, who is a bona fide holder for value without notice. The rule is well settled, that when a note is transferred by a party to whom it is entrusted without authority or fraudulently, it will be valid as against the maker in the hands of a holder who takes it bona fide without notice of the special circumstances under which the note came into the possession of

the payee or agent of the maker who puts it in circulation. In such case, the maker or indorser who places it in the hands of another, for the purpose of being used in a particular way or for a special object, takes the risk of its being used in a different way, and cannot refuse to pay it to any bona fide holder into whose hands it may come. Chit. Bills, (10th ed.) 198. Sweetser v. French, 2 Cush. 309. It is undoubtedly true that, as be-t tween the original parties to a note or those who take it with notice, it is essential that there should have been a delivery of the note by the maker to take effect as a contract. In this sense, delivery is included in the allegation of making. But the rule is qualified and limited as between the maker and a bona fide holder. In such case, a valid delivery can be made by any person to whom the maker has given the note in such form as to enable him to hold himself out as absolute owner of the note. The case of Putnam v. Sullivan, 4 Mass. 45, is a strong one on this point. There the notes were delivered to a clerk to be used for special purposes only, and it was held that a delivery by the clerk, whether through deception practised on him, or by a voluntary violation of the trust reposed in him, must be deemed in law, as against a bona fide holder, a delivery by those who were liable on the notes. The rule is different in regard to a deed, bond or other instrument placed in the hands of a third person as an escrow, to be delivered on the happening of a future event or contingency. In that case, no title or interest passes until a delivery is made in pursuance of the terms and conditions upon which it was placed in the hands of the party to whom it was intrusted. But the law aims to secure the free and unrestrained circulation of negotiable paper, and to protect the rights of persons taking it bona fide without notice. It therefore makes the consequences, which follow from the negotiation of promissory notes and bills of exchange through the fraud, deception or mistake of those persons to whom they are intrusted by the makers, to fall on those who enabled them to hold themselves out as owners of the paper jure disponendi, and not on innocent holders who have taken it for value without notice. Exceptions sustained.