Liberty Trust Co. v. Tilton
| Decision Date | 20 May 1914 |
| Citation | 105 N.E. 605,217 Mass. 462 |
| Parties | LIBERTY TRUST CO. v. TILTON. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
E. M. Shanley, of Boston, for appellant.
Albert Mehlinger, of Boston, for appellee.
One Perley G. Tilton signed a note to the order of the plaintiff and presented it complete in every respect except its amount which was blank, to the defendant Frank B. Tilton, who for the accommodation of Perley G. Tilton signed it in blank on the back upon the express representation and agreement by Perley G. Tilton that the defendant's signature should not be operative nor be delivered unless and until one Leonard Grant also should sign on the back and that then it should be filled out for $200, and no more. Leonard Grant did not sign the instrument, the amount of $400 was filled in and the instrument, without the knowledge or authority of the defendant and in violation of the agreement between him and Perley G. Tilton, was delivered complete in form to the plaintiff, the payee, who took it for value in good faith and without knowledge of the agreement between the maker and defendant. The question is whether the defendant is liable to the plaintiff.
This point has not been decided in Massachusetts.
It is plain that prior to the enactment of the Negotiable Instruments Act the plaintiff could recover. The payee could be a bona fide holder for value without notice. Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 143, 66 N.E 646, 97 Am. St. Rep. 426, and cases cited. The signing in blank authorized the filling of the blank by the one to whom the signer delivered it, although the specific directions might not have been followed. Androscoggin Bank v Kimball, 10 Cush. 373. This is the general common-law rule. See cases collected in Hartington Nat. Bank v. Breslin, 88 Neb. 47, 128 N.W. 659, 31 L. R. A. (N. S.) 130, Ann. Cas. 1912B, 1008-1011; Vander Ploeg v. Van Zuuk, 135 Iowa, 350, 112 N.W. 807, 13 L. R. A. (N. S.) 490, 492, 124 Am. St. Rep. 275. But although the point now in issue has not been decided expressly in this commonwealth, in principle it is covered by Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 145, 66 N.E. 646, 97 Am. St. Rep. 426. In that decision this case was put: The maker handed a check complete in every respect to her husband upon express instructions to deliver to the payee on her own account, but the check fraudulently was handed by the husband to the payee in payment of a debt due from him to the payee, and it was accepted in good faith by the payee. It was held that the payee under these circumstances was a holder in due course within R. L. c. 73, § 69. That case has been followed to the point that the payee of a negotiable instrument may be a holder in due course, in J. G. Brill Co. v. Norton & Taunton St. Ry., 189 Mass. 431, 437, 75 N.E. 1090, 2 L. R. A. (N. S.) 525, and Lowell v. Bickford, 201 Mass. 543, 545, 88 N.E. 1. See, also, Fillebrown v. Haywood, 190 Mass. 472-480, 77 N.E. 45. The point there decided, viz., that a payee may recover of a party whose signature was put upon the instrument in its complete form, but whose instructions as to the delivery of the instrument have not been followed, does not reach precisely the facts in the present case. The point there decided in substance was that under section 33 of the act, where the instrument when signed by the party sought to be charged was complete as to its form, a payee might be a holder in due course, although the delivery was contrary to the instructions.
The effect of that decision was to hold that the words 'immediate parties' as used in section 33, viz., 'as between immediate parties, and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument,' did not necessarily include the payee. Hence, 'immediate parties' in that connection excludes a party who is a holder in due course. In such case these words must be confined to parties who are 'immediate' to the conditions or limitations placed upon the delivery in the sense of knowing or being chargeable with notice of them. A payee who is a holder in due course is not an immediate party in the sense of that section. This result follows from holding that a payee may be a 'holder in due course' as defined in section 69, because he could become such holder only on condition '(4) that at the time it was negotiated to him he had no notice of any infirmity in the instrument.' Thus he could not be such holder unless the paper was 'negotiated' to him. Therefore the word 'negotiated' was held to describe the means by which a payee might acquire a note. It was given its common legal significance of concluded by bargain or agreement. Palmer v. Ferry, 6 Gray, 420, 423; Everson v. General Accident, Fire & Life Assurance Corps., Ltd., 202 Mass. 169, 172, 88 N.E. 658. A promissory note complete as to form and payable to a named person may be negotiated to that person by being sold to him or taken by him for value. This is the common and popular signification of the word. It was the sense in which it was used in the law merchant prior to the Negotiable Instruments Act. Its meaning has not been changed by the act. That was in substance the decision in Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N.E. 646, 97 Am. St. Rep. 426.
The soundness of that decision in this respect is confirmed by other provisions of the act. Negotiation is defined by section 47, whereby it is provided that 'an instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof.' 'Holder' is defined in section 207 to be 'the payee or indorsee of a bill or note who is in possession of it.' The remaining sentence of section 47, viz., 'If payable to bearer it is negotiated by delivery; if payable to order it is negotiated by the indorsement of the holder completed by delivery,' was not intended to include all the ways in which an instrument might be negotiated, nor to restrict the comprehensive terms of the preceding sentence. Plainly under...
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