Freeman's National Bank v. Savery
| Decision Date | 27 June 1879 |
| Citation | 127 Mass. 75 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | Freeman's National Bank v. William Savery & others |
[Syllabus Material]
Argued March 19, 1878; March 20, 1878
Suffolk. The second case was on a similar promissory note, dated December 20, 1876.
At the trial in the Superior Court, before Colburn, J., the same facts appeared as in the first case, except that the note in this case was brought to the plaintiff bank by Charles H Demerritt, a member of the firm of Charles F. Parker & Co., and known to the plaintiff to be such member, by whom the indorsement of that firm's name was made.
The judge ruled that the plaintiff was, as matter of law, affected with notice of the defence existing to the note on the part of the defendants other than Law, and ordered a verdict for them. The plaintiff alleged exceptions.
New trial ordered.
W. G. Russell & H. M. Rogers, for the plaintiff.
E. Avery, for the defendants.
OPINION
The defendants, partners doing business under the name of John Savery's Sons, are sued as second indorsers of a note made by Alexander Law, payable to the order of C. F. Parker & Co., and by them indorsed in blank. Law, at the time the note was made and negotiated, was a member of the firm of C. F. Parker & Co., and also of the firm of John Savery's Sons. It is agreed that the name of the defendant's firm was indorsed on the note by Law, without the knowledge or consent of the other partners, and in fraud of the rights of the firm. The name of the firm of C. F. Parker & Co. was indorsed by Charles H. Demerritt, a member of the firm, who, before its maturity, offered it to the plaintiff bank for discount. The note was at once discounted by the bank on the credit of the parties to it, and the avails paid to Demerritt. The bank had no knowledge or notice that the partnership name of the defendant's firm was indorsed on the note by Law without the authority and in fraud of the other members of the firm, other than what is to be inferred from the form of the note, or the facts above stated.
It is contended that the fact that the note was signed by Law, indorsed in the name of the defendant's firm by him, and then discounted for Demerritt, who was a member of the firm of C. F. Parker & Co., payees and prior indorsers, was conclusive notice to the bank that the defendants were accommodation indorsers and sureties; and that, in the absence of proof that the signature of the firm name by Law was authorized, or ratified by the other members of the firm, all the defendants except Law, are entitled to a verdict in their favor. This is the only question for our consideration.
It is settled that one who takes a negotiable promissory note for value, before maturity, in good faith, and without knowledge of any defect of title, may recover upon it, although facts are offered in evidence which impeach its validity between antecedent parties. A suspicion that there is a defect of title, or a knowledge of circumstances which might excite suspicion in the mind of a cautious person, or even gross negligence, not amounting to evidence of fraud, or bad faith, will not defeat the title of the purchaser. Goodman v. Simonds, 20 HOW 343. Murray v. Lardner, 2 Wall. 110. Hotchkiss v. National Banks, 21 Wall. 354, 359. The rule has been often approved by this court. Spooner v. Holmes, 102 Mass. 503. Smith v. Livingston, 111 Mass. 342.
When the defect or infirmity of title to the bill or note however, appears on its face at the time of the transfer, it was said in Goodman v. Simonds that the question whether a party who took it had notice or not, was a question of construction, and must be determined by the court as a matter of law; as, where a person, who took a bill which upon its face appeared to be dishonored, was held not to have the rights of a bona fide holder; Andrews v. Pond, 13 Pet. 65; or where one taking a note so marked as to show for whose benefit it was to be discounted was presumed to have knowledge of what the note imported. Fowler v. Brantly, 14 Pet. 318. Brown v. Taber, 5 Wend. 566. A party must be presumed to know the contents and true meaning of a written instrument which he takes as evidence of title, or of contract, and, when it is in the form of negotiable commercial paper, to know the construction which must be given to it, with reference to the time when it is transferred to him, and the order of the several names then upon it. National Bank of Commonwealth v. Law, ante, 72. If the attempt is to impeach the title by facts accruing between other parties, independent and outside of the instrument itself,...
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