van Syckel v. Egg Harbor Coal & Lumber Co.

• Decision Date: 17 October 1932
• Docket Number: No. 124.,124.
• Parties: VAN SYCKEL v. EGG HARBOR COAL & LUMBER CO.
• Court: New Jersey Supreme Court

162 A. 627

VAN SYCKEL

v. EGG HARBOR COAL & LUMBER CO.

No. 124.

Court of Errors and Appeals of New Jersey.

Oct. 17, 1932.

Syllabus by the Court.

The holder of a note payable to order cannot recover on his possession alone, but must prove the genuineness of the indorsement by the payee, where the issue is raised.

The CHANCELLOR, DONGES and BROGAN, Justices, and VAN BUSKIRK and WELLS, Judges, dissenting.

Appeal from Supreme Court.

Action by Claude S. Van Syckel against the Egg Harbor Coal & Lumber Company. Judgment for the plaintiff, and the defendant appeals.

Reversed.

S. Rusling Leap, of Camden, for appellant.

Walter S. Keown, of Camden, for respondent.

BODINE, J.

The defendant appeals from a judgment in favor of the plaintiff in an action on three promissory notes differing only in amount.

The form and indorsement of the notes were precise with the following:

"$2500

"Egg Harbor City, N. J. December 7, 1929. "For Months after date We Promise To Pay To The Order of Max Orocofsky at The Egg Harbor Commercial Bank, Egg Harbor City, JN. J., $2500.00 And 00 Cts Dollars With Defalcation for Value Received.

"Egg Harbor Coal & Lumber Co.

"Arthur Mueller [Signed] Pres.

"Kate Mueller [Signed] Pres. "No. 37220 Due Apr. 5."

Reverse side:

"Max Orocofsky by J. G., pr. att'y.

[Signed]

"Without recourse "C. S. Van Syckel, Att'y. [Signed]"

The plaintiff testified that he purchased the notes before maturity from one Joseph Ginsberg, and that they had not been paid, and that the amounts therein stated were duo and owing.

The defendant's liability upon the notes appears to have been perfectly clear if the same were properly indorsed. The maker's signature was admitted. Section 1, Negotiable Instruments Act (hereinafter referred to as N. I. L.), 3 Comp. St. 1910, p. 3734; Penbrook Trust Co. v. Wiegand & Co., 100 N. J. Law, 353, 126 A. 404.

The case is, however, barren of any proof of the genuineness of the signature of the payee which, we think, was an essential part of the plaintiff's case. At common law, one who sues upon a written contract is obliged, in the absence of admission, to prove the signature of the defendant before the instrument can be received in evidence. Robertson v. Burstein, 105 N. J. Law, 375, 378, 146 A. 355, 65 A. L. R. 324. Similarly, the plaintiff, when not named in the contract, has always been required to show the right on which he stands. The notes in suit were not payable to bearer, but were order notes, and title did not pass until indorsed by the payee. We think the proof of the signature of the payee was a necessary part of the plaintiff's case, unless the fundamental rule of the common law has been changed by statute or the N. I. L. We have no statute changing the law of evidence in this respect. The N. I. L. was intended as a codification of the common-law rules relating to negotiable instruments, and is, for the most part, declaratory of the common law. Brannan (5th Ed.) N. I. L. 651.

The learned trial judge took the view that the proofs showed that the plaintiff was the holder of the instrument, and that under section 59 of the N. I. L., 3 Comp. St. 1910, p. 3741, the duty was cast upon the defendant to show a defect in title to overcome the presumption arising from possession. Section 59 of the act is as follows: "Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course; but the lastmentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title." This section of the statute appears under article 4, which is entitled, "Rights of the Holder." A holder means the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. Section 191, N. I. L. (3 Comp. St. 1910, p. 3756, § 191). There was no proof of the payee's signature, or the authority of the person who purported to act as agent to make the same. Section 19 (3 Comp. St 1910, p. 3737, § 19) provides: "The signature of any party may be made by a duly authorized agent; no particular form of appointment is necessary for this purpose; and the authority of the agent may be established as in other cases of agency."

"Where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved." Section 16, N. L L. (3 Comp. St. 1910, p. 3737, § 16).

"Where a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party, against whom it is sought to enforce such right, is precluded from setting up the forgery or want of authority." Section 23, N. I. L. (3 Comp. St 1910, p. 3738, § 23).

The court and jury had no evidence before them that the signature upon the back of the note was the signature of the payee, or that the agent purporting to sign the same was authorized so to do. It seems that such proof would be necessary, in view of sections 16, 19, and 23, before a presumption would arise of a valid and intentional delivery.

Since note obligations do not arise save by the signature of the maker, it would seem to equally follow that the signature of the payee by way of indorsement is the foundation of the rights of a holder in due course, subsequent to the payee. Upon the proof of the genuineness of the necessary signatures the holder's rights arise as specified in article 4 of the act, but in the absence of such proof there was nothing to indicate that the instruments in suit had been negotiated, or that the person possessed of the physical paper had title thereto, or the right to the proceeds thereof. That proof of the genuineness of the indorser's signature is essential has long been recognized in banking practice. The ordinary bank check is never cleared through correspondent banks, except upon the written guaranty of all prior indorsements. See, also, sections 65 and 06, N. I. L. (3 Comp. St. 1910, p. 3743, §§ 65, 66).

A note payable to order is negotiated by the indorsement of the holder completed by delivery. Section 30, N. I. L. (page 3738, § 30). In this instance, the holder, prior to indorsement, was Max Orocofsky. Section 191, N. L. L. (page 3756, § 191). His signature was a sufficient indorsement. Section 31, N. I. L. (page 3739, § 31). There was, however, no proof of the authority of the person purporting to act as agent to affix the signature.

The case therefore failed because of the lack of proof of the validity of a necessary signature essential to the establishment of plaintiff's rights. The question seldom arises, since banks and others engaged in the purchase or discount of paper do so on the faith of their customer's signature, well known and easily proved. Besides, the liability of the last indorser is firmly fixed by law. If a prior indorsement were not genuine there could be a recovery on the warranty of title.

The troublesome words in section 59 are: "But when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course." Section 55 (page 3741, §...