DeCamp v. Hamma ( 1876 )

McIlvaine, J.

Having shown that the signature to the note sued, on was the genuine signature of Zaeharias Hamma, and that it had been delivered as a complete instrument by the maker to the payee ; and also that it was afterward and before maturity, by indorsement and delivery, transferred to them for a valuable consideration, and without notice of any fraud or infirmity as between the original parties, the plaintiffs in error claim that the judgments below should have been in their favor, notwithstanding it was found by the jury that the maker was ignorant of the true character of the instrument, and did not intend to sign a promissory note, but was deceived, without any fault or negligence on his part, and induced to sign and deliver the same through the false and fraudulent representations of the payee as to the character of the instrument.

Unquestionably the plaintiffs, as indorsees in the usual course of business, should be protected against any defense on account of any fraud in the transaction which merely affected the consideration of the contract. But the fraud here relied on as a defense affected the execution and delivery of the instrument itself. The obligation of a negotiable instrument, like other writings obligatory, depends upon their due execution and delivery. The delivery of such instruments, as a general rule, in order to create an obligation, must be voluntary. And to be voluntary it is essential that the character of the instrument be known to the maker, as well as that the act itself should be intended by the party. If the manual act of delivery be not voluntary, the instrument is a nullity, in whose hands soever it may come, unless the maker has so acted in respect thereto as to estop him from denying its validity. As the voluntary act of delivering a negotiable instrument estops the maker from denying the consideration, or averring fraud in its procurement, as .against a bona fide holder for value, so negligence or want of proper care in making and delivering an instrument will estop the maker from denying that he had knowledge of its true character. But where the maker is deceived ¿s to the true character of the instrument signed and delivered, and the deception can not be attributed in whole or in part to his negligence or want of proper caution, there is no more reason why he should be obligated thereby, than if his signature had been forged.

It is true that, in determining whether proper caution was exercised in any particular case, the necessities and usages of trade and commercial intercourse in respect to the validity of negotiable paper in the hands of bona fide holders for value, must be considered. Such paper on its face shows that it is intended for circulation, and therefore great care should be taken that innocent holders of such securities may not be disappointed in their reasonable expectations.

Indeed, a recent author (Daniel on Negotiable Instruments, see. 850) doubts whether there can be a ease where a person who possesses the ordinary faculties and knowledge, and signs a bill or note upon the assurance that it is an instrument of a different kind, can be without such negligence as would bind him to' a bona fide holder for value. It does not appear, however, in the ease before us, that Hamma was a person possessing the ordinary faculties and knowledge, it being simply found in the spepial verdict that he was not guilty of any negligence or want of ordinary care. But in order that we may not be misunderstood in relation to the amount of care required in such cases, it is well to add that there can be no doubt that a person possessing the ordinary faculties, and being able to read and write, who relies solely on the representation of the other contracting party as to the character of the instrument, should be regarded as negligent as against an innocent indorsee before maturity and for value.

On this question there appears to be an unbroken line of recent decisions, both in England and in this country. The leading case, following a suggestion of Chief Justice Parsons in Putnam v. Sullivan, 4 Mass. 45, is Foster v. Mackinnon, 4 Law R. (C. P.) 704. Foster, to whom the bill had been indorsed before maturity, and without notice of any fraud, sued Mackinnon, a prior indorser. At the spring assizes, 1869, Bovill, C. J., instructed the jury that if the indorsement had the genuine signature of the defendant, and was obtained upon the fraudulent representation that it was a guarantee, and the defendant signed it without knowing it was a bill, and under the belief that it was a guarantee, and if the defendant was not guilty of any negligence in so signing the papers, he was entitled to a verdict. The verdict was for defendant. On a rule for a new trial, the instruction was held to be light. A new trial was awarded, however, on another ground.

Among the more recent cases is Frederick v. Clemens, 60 Mo. 313. The rule is thus stated : “ "Where one voluntarily signs a promissory note supposing it to be an obligation of a different character, but has full means of information in the premises, and neglects to avail himself thereof, relying on the representations of another, he can not set up such ignorance and mistake as a defense against an innocent holder for value before maturity. If, however, his signature was procured without negligence on his part, and through artifice or fraudulent representations, the rule is different, and the jury should be left under appropriate instructions to determine these facts.”

The same general doctrine is maintained in the following cases, in some of which judgment was rendered in favor of the innocent holder and in others against him. But in all the test of right was whether or not the defendant had been guilty of negligence in not ascertaining the true character of the paper which he had signed. Whitney v. Snyder, 2 Sans. (N. Y.) 477; Gibbs v. Linabury, 22 Mich. 479; Walker v. Egbert, 29 Wis. 227; Abbott v. Rose, 62 Me. 194; Chapman v. Rose, 44 Howard (Pr.), 364, and the same case in the court of appeals, 56 N. Y. 137; Chipman v. Tucker, 38 Wis. 43; Cline v. Guthrie, 42 Ind. 227 ; Douglass v. Matting, 29 Iowa, 498; Briggs v. Ewart, 51 Mo. 251; Martin v. Smyle, 55 Mo. 577; Corby v. Weddle, 57 Mo. 452 ; Shirts v. Overjohn, 60 Mo. 305 ; Garrard v. Hadden, 67 Penn. St. 82; Bank v. Smith, Supreme Court of N. H., reported in 4 Amer. L. Rec. 434; Nance v. Lary, 5 Ala. 370.

Judgment below affirmed.