Losee v. Bissell , 2 Foster 385 ( 1875 )

Mr. Justice Sharswood

delivered the opinion of the court, January 4th 1875.

It appeared by the evidence that the defendant below had endorsed his name on. the back of a note drawn to the order of McFarland, at his, McFarland’s, request, and upon the assurance that it was a mere matter of form, and he would not negotiate it. The defendant’s endorsement was in law upon the condition that McFarland should assume the position of first endorser: Schafer v. Farmers’ and Mechanics’ Bank, 9 P. F. Smith 148. At the time it was first presented to the plaintiffs for discount, it may have been in that position, and if it was, it bore on its face distinct, unequivocal evidence that it had not been negotiated in the ordinary course of business. To make such negotiation, it should have appeared that McFarland had endorsed to Losee, and Losee back again to McFarland, in whose hands the note was when it was offered for discount. But the most important link in the chain was wanting — the first endorsement by McFarland. For him to negotiate the note without such endorsement was to attempt a fraud on Losee, and it was of itself sufficient to put the plaintiff upon inquiry. Such inquiry would have developed the fact that there was no consideration as between McFarland and Losee, and that McFarland was negotiating the note contrary to his express agreement. The learned judge below thought that if the endorsement by McFarland was made after discount and before maturity, it established the bona fides of the endorse!; but not after maturity. Why not? Bissell & Co. had notice of the irregular character of the paper when they took it, and if that can be helped by putting it afterwards into regular shape, it might be done as well after maturity as before. Endorsements may be filled up in full or stricken out on the trial, so as to conform to the declaration. If there had been no defence as between McFarland and Losee, the endorsement in question might have been made on the trial. But to determine the character of the endorsee as a bond fide holder for value without notice, the point of time at which he parts with his money is the important fact. If the paper was then on its face irregular — out of the usual course of business — the effect of that knowledge on the endorsee could not be prevented by subsequently putting it in a regular shape. We think, therefore, that the second assignment of error must be sustained.

Judgment reversed, and a venire facias de novo awarded.