Massachusetts Nat. Bank v. Snow

• Decision Date: 04 January 1905
• Citation: 72 N.E. 959,187 Mass. 159
• Parties: MASSACHUSETTS NAT. BANK v. SNOW.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

187 Mass. 159

72 N.E. 959

MASSACHUSETTS NAT. BANK v. SNOW.

Supreme Judicial Court of Massachusetts, Suffolk.

January 4, 1905

COUNSEL

Carver & Blodgett, for plaintiff.

Whipple Sears & Ogden, Sherman L. Whipple, and Edwin M. Brooks, for defendant.

OPINION

KNOWLTON C.J.

This is an action of contract on three promissory notes, signed 'H. G. & H. W. Stevens,' payable to the order of the defendant, indorsed by him in blank, and discounted by the plaintiff. They severally bear date December 9, 1897, and the rights of the parties are accordingly governed by St. 1898 p. 492, c. 533, sometimes called the 'Negotiable Instruments Act,' which is now embodied in Rev. Laws, c. 73, §§ 18-212, inclusive. In referring to different provisions of this statute, it may be convenient to cite the sections of the Revised Laws, rather than the original act.

The maker of the notes, H. W. Stevens, who did business under the name of H. G. & H. W. Stevens, has deceased; and the defendant introduced evidence tending to show that, after the defendant had indorsed the notes, they were taken from his possession by the maker, without his knowledge or consent, and discounted at the plaintiff bank, and that they were altered by the insertion of the words 'seven per cent.' after the words 'with interest.' The defense is founded on this evidence. The defendant's counsel stated that he made no contention that the bank had actual knowledge of any infirmity in the instruments, or defect in the title to them, or that it took them in bad faith. Nor was it contended by the defendant that in discounting the notes the bank acted otherwise than in the regular and usual course of business. But upon the defendant's testimony it might be found that the notes were given to him by the maker in payment of indebtedness; that, after he had indorsed them in blank, and put them in his desk for collection or discount, he was called out of his office, leaving the maker, Stevens, there; and that Stevens then took them without right, and three days later carried them to the plaintiff bank, and caused them to be discounted for his own benefit.

The plaintiff made many requests for rulings, which were refused, subject to its exception, among which were the following:

'First. That, on all the evidence, judgment should be for the plaintiff for the full amount declared upon in its declaration, with interest at seven per cent. from December 9, 1899.'

'Fourth. If the plaintiff shows it took the notes declared upon in its declaration as a holder in due course, judgment should be entered for the plaintiff for the full amount of said notes, with interest at the rate stated in the same from December 9, 1899.

'Fifth. That, when an instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him, so as to make them payable to him, is conclusively presumed.'

'Eighth. That the notes declared upon by the plaintiff in its declaration are complete and regular, and were taken before they were due and for value.

'Ninth. That a holder of a note is deemed prima facie to be a holder in due course, and that to constitute notice of an infirmity in the instrument, or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.'

'Fifteenth. That there is no evidence in the case to warrant a jury in finding that the plaintiff was possessed of facts which put it upon its guard as to the title of the person delivering the notes declared upon, or which ought to have led the plaintiff to inquire concerning the same.'

'Nineteenth. That when an instrument has been materially altered, and is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original tenor.'

'Twenty-Third. That even if the jury should find that the words 'seven per cent.' were added to the face of said notes after they were indorsed by the plaintiff, and without his authorization or revocation, yet, on all the evidence in the case, the verdict must be for the plaintiff for the full amount of said notes, with interest at six per cent. from December 9, 1899.'

The plaintiff also excepted to the following instructions given at the request of the defendant:

'Fourth. That if the jury find that the notes were taken from the defendant wrongfully, and that the same were never delivered by the defendant to Stevens, the plaintiff gained no title to the notes by the negotiation of the same by Stevens, and the plaintiff cannot recover.

'Fifth. The burden is upon the plaintiff to show that the notes were delivered by the defendant to Stevens, or some other person authorized to negotiate them at the plaintiff bank.'

'Seventh. Or, in the alternative, if the jury find that the notes in question were altered by the addition of the words 'seven per cent.' thereto after the same were indorsed by the defendant, such an alteration is a material and wrongful one, destroying the validity of the notes, and upon the notes, or any one of them, thus altered, the plaintiff cannot recover.'

The notes, being indorsed in blank, were payable to bearer, within the meaning of the statute. Rev. Laws, c. 73, § 26(5). When the notes were taken to the plaintiff for discount, Stevens was the bearer. Rev. Laws, c. 73, § 207. The presentation of such notes for discount raised a presumption of fact that the bearer was the owner of them. Pettee v. Prout, 3 Gray, 502, 63 Am. Dec. 778. Upon the undisputed evidence, and upon the defendant's admission that the plaintiff took them in good faith, and discounted them without knowledge of any infirmity in them or defect of title in Stevens, the plaintiff became a holder in due course, within the definition of the statute. Rev. Laws, c. 73,§§ 69-76; Boston Steel & Iron Company v. Steuer, 183 Mass. 140, 66 N.E. 646, 97 Am. St. Rep. 426. There was not even anything to put the plaintiff upon inquiry, for the rate of interest was the same that Stevens had been paying on his loans from the bank for two years. The uncontradicted evidence, as well as the defendant's admission, makes it plain that the plaintiff had no notice of any infirmity in the instruments, or defect in the title of Stevens, under the rule prescribed by the statute. Rev. Laws, c. 73, § 73. This rule, namely, that, to constitute such notice, the person to whom the note is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith, is the same as prevailed in this commonwealth before the enactment of the statute. Smith v. Livingston, 111 Mass. 342; Lee v. Whitney, 149 Mass. 447, 21 N.E. 948; International Trust Co. v. Wilson, 161 Mass. 80-90, 36 N.E. 589.

The defendant's contention that, after the notes had been delivered to the defendant and indorsed...