Fordyce v. Kosminski

• Decision Date: 02 April 1887
• Parties: FORDYCE v. KOSMINSKI
• Court: Arkansas Supreme Court

3 S.W. 892

49 Ark. 40

FORDYCE v. KOSMINSKI

Supreme Court of Arkansas

April 2, 1887

APPEAL from Miller Circuit Court, L. A. BYRNE, Judge.

Judgment reversed.

B. W Johnson for appellant.

The raising of a negotiable instrument, without the consent of the maker, avoids it even in the hands of an innocent holder for value. 2 Daniel Neg. Instr. (3 ed.), secs. 1347, 1373; 13 Pick. 165; 100 Mass. 379; 2 Taunt., 328; 38 Ark. 127; 30 id 590; 8 Ark. 378; 9 id., 122.

Scott & Jones for appellees.

When a check is raised by the insertion of words and figures in a blank left in the original by the carelessness or negligence of the maker, and passes for value to an innocent purchaser there being nothing on the face of the cheek to excite suspicion of an ordinarily prudent man, the maker is liable for the amount as altered. Young v. Grote, 4 Bingham, 253; 63 Ill. 321; 2 Dan. Neg. Inst., secs. 1405, 1659; 101 Pa. 57; 13 Bush. 197; 34 Iowa 440; 8 Cal. 109; 67 Pa. 82.

OPINION

BATTLE, J.

This action is founded on a check drawn by the officers of the Texas and St. Louis Railway Company on the Commercial bank of St. Louis, payable to Peter Vaught or bearer. As originally signed and prepared it was a check for $ 8.40, and was so drawn as to leave space between the figures "8" and "40" in one corner thereof sufficient for the insertion of a cipher, without crowding, and in the body of the check where the amount was written, sufficient space was left after the word "eight" and the word following, for adding to the word "eight" the letter "y" without giving it the appearance of being added after the check was written. After the execution and delivery of the check without the authority, consent or knowledge of the drawer, a cipher was inserted between the figures "8" and "40," and the letter "y" was added to the word "eight," and the amount of the check was thereby fraudulently changed from $ 8.40 to $ 80.40, and in that form and with no mark or indication of alteration observable by a man of ordinary prudence, was negotiated to appellees, before maturity, for a valuable consideration, in due course of trade, and without notice of the forgery.

It is contended by appellees that appellant is liable to them upon the check for the full amount of the same as altered. This contention is sustained by many authorities, which lay it down as a general principle of the law merchant, "that when the drawer of a bill or the maker of a note has himself, by careless execution of the instrument, left room for any alteration to be made, either by insertion or erasure, without defacing it or exciting the suspicion of a careful man, and the opportunity which he has afforded has been embraced, and the instrument filled up with a larger amount or different terms than those which it bore at the time he signed it, he will be liable upon it as altered to any bona fide holder without notice." But upon this proposition there is an irreconcilable conflict of authority; and the authorities which sustain the doctrine are not agreed as to its basis. In casting about for some principle on which it could be based, several have been suggested which we will notice.

1. It is said by some that the true principle upon which this doctrine rests is, "that the party who puts his paper in circulation invites the public to receive it of any one having it in possession with apparent title, and he is estopped to urge an actual defect in that which, through his act, ostensibly has none." It is true, as between the maker of negotiable paper, which he has voluntarily and intentionally executed and placed in circulation, and an innocent party acting upon the faith of the paper, the maker, as a general rule, would be precluded from showing that the paper was not intended to have the effect its face indicated, for it is upon the representation he has made by his paper he has authorized and induced, the innocent party to act. But this reason only applies to paper as made and issued by him, or as authorized by him to be made or issued. When the paper is a complete legal instrument as issued he does not thereby make any representations that he will be bound by any alteration made without his authority. "To hold him bound by the contract, as altered by such forgery, involves the idea that the person committing the forgery was his agent in committing it (a ludicrous absurdity), or at least he had authorized innocent third parties so to treat him."

2. Some authorities sustaining the doctrine contended for by appellees say it is based on the ground that the maker is estopped to allege that the paper has been altered. This idea originated in a misconception of Young v. Grote, 4 Bingham 253. "That was the case of a check drawn by a customer upon his bankers. The plaintiff, Young, having occasion to be absent, left with his wife certain printed checks upon the bankers, signed by him in blank, to be filled up by her and drawn as his business might require. She delivered one of these checks, so signed, to the plaintiff's clerk, to be filled up by him with the sum of fifty pounds (and some shillings and pence). The clerk filled out the check, beginning the words 'fifty' with a small letter, and in the middle of the blank line left for the same, and showed it to the plaintiff's wife, who directed him to draw the cash. Before presenting it to the bankers this clerk altered the check by inserting before the word 'fifty' the words 'three hundred and,' thus making it a check of three hundred and fifty, instead of fifty pounds, all in the same handwriting, and then himself presented the check to the bankers, and drew the whole larger sum. The action against the bankers was not, of course, brought Young upon the check, but for the money which he claimed had been paid out by the bankers without authority. Under the circumstances stated, the court held the plaintiff was not entitled to recover."

In commenting upon that case in Swan v. North British Australasian Co., 2 H. & C., Exch., 175, Chief Justice COCKBURN said: "The case of Young v. Grote, on which so much reliance has been placed, and which is supposed to have established this doctrine of estoppel by reason of negligence, when it comes to be more closely examined, turns out to have been decided without reference to estoppel at all. Neither the counsel in arguing that case, nor the judge in deciding it, refer once to the doctrine of estoppel. The question arose on a disputed item in an account between a banker and his customer, which had been referred to arbitration, and the question raised by the arbitrator was on whom the loss which had arisen from payment of a check, in which, by the carelessness of the customer, an opportunity had been afforded for increasing the amount, should fall. It was held, not that the customer was estopped from denying that the check was a forgery, but that as the loss, which would otherwise fall on the banker, who had paid on a bad check, had been brought about by the negligence of the customer, the latter must sustain the loss. As the question arose on an account submitted to arbitration, the matter was decided without reference to any technicality; but I am disposed to think that, technically looked at, the matter would stand thus: The customer would be entitled to recover from the banker the amount paid on such a check, the banker having no voucher to justify the payment; the banker, on the other hand, would be entitled to recover against the customer for the loss sustained through the negligence of the latter. Possibly, to prevent circuity of action, the right of the banker to indemnity in respect of the loss so brought about would afford him a defense in an action by the customer to recover the amount." "And in Halifax Union v. Wheelwright, L. R., 10 Exch., 183, 192, which was very similar in its facts to Young v. Grote, and in which the alteration of certain drafts was made by a clerk...