Vander Ploeg v. Van Zuuk

• Citation: 112 N.W. 807,135 Iowa 350
• Parties: VANDER PLOEG v. VAN ZUUK ET AL.
• Decision Date: 03 July 1907
• Court: United States State Supreme Court of Iowa

135 Iowa 350

112 N.W. 807

VANDER PLOEG

v.VAN ZUUK ET AL.

Supreme Court of Iowa.

July 3, 1907.

Appeal from District Court, Mahaska County; Byron W. Preston, Judge.

Action on a promissory note. Plaintiff appeals from judgment on a directed verdict in favor of the defendants. Affirmed.H. H. Sheriff and William G. Vander Ploeg, for appellant.

C. Ver Ploeg, for appellee B. Van Zuuk.

P. H. Bousquet, for appellee Albertus Van Zuuk.

McCLAIN, J.

The facts, established practically without dispute, are that the note for $2,000, naming the plaintiff as payee, and the two defendants as joint makers with one Pothoven, on which this action is brought, was signed by these two defendants before it was fully completed, being at the time their signatures were affixed thereto a mere blank printed form; that these defendants so signed their names at the request of Pothoven, who was a partner of one of them in a mercantile business, on the representation that he might within a short time find it necessary to raise $150 or $200 for temporary use in the business; that Pothoven, being indebted on his individual account to plaintiff on a note for about $2,000, inserted plaintiff's name as payee, $2,000 as the amount to be paid, and the rate of interest, and delivered the instrument, filled out by him without authority, to the plaintiff, who thereupon surrendered to him the past-due obligation. It appears in the evidence that the date was filled in by one W. G. Vander Ploeg, who frequently transacted business for the plaintiff, his father, and who knew of the filling of the name of the payee and the amount by Pothoven before the note was delivered to plaintiff; but the final delivery was made directly by Pothoven to plaintiff, and there is a conflict in the evidence as to whether the son had any authority to act for the plaintiff in this particular transaction, or whether plaintiff had any knowledge that his son had so acted for him. If it were material to charge the plaintiff with the knowledge which his son had as to the act of Pothoven in filling out the note, the question should have been submitted to the jury, and we shall therefore dispose of the case without taking into account any knowledge of or participation in the act of Pothoven in filling out the note, on the part of W. G. Vander Ploeg.

We have, then, the simple case of a note wrongfully filled out and delivered by one of the makers to the payee, without notice to the payee that the instrument as delivered is not filled out in accordance with the authority given by the other makers to the one who thus fills it out and delivers it. With reference to the filling of blanks in an instrument after the affixing of his signature by the maker sought to be charged, the negotiable instruments acts (Acts 29th Gen. Assem. p. 81, c. 130; Code Supp. 1902, § 3060a) contains the following section: “Sec. 14, Blanks--when may be filled. Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. But if any such instrument, after completion, is negotiated to a holder in due course it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time.” It is apparent from the last sentence of this section that, if plaintiff is to be regarded as “a holder in due course,” then the instrument is effectual in his hands for all purposes as though it had been filled up strictly in accordance with the authority given by defendants to Pothoven, i. e., defendants would not be allowed to contend as against a holder in due course that Pothoven did not have authority to fill the instrument out for $2,000; but, under the sentence immediately preceding the last, if plaintiff is not to be treated as a holder in due course, then, as defendants became parties thereto prior to its completion, they are not liable to plaintiff, because it was not filled up in accordance with the authority given. By section 191, the term “holder” is defined as meaning “the payee or indorsee of a bill or note who is in possession of it, or the bearer thereof,” and by section 52 a “holder in due course” is defined as one who has taken the instrument complete and regular upon its face, before maturity, without notice of previous dishonor, in good faith and for value, and without notice that at the time it was negotiated to him there was any infirmity or defect in the title of the person negotiating it. By section 59, “every holder is deemed prima facie to be a holder in due course,” and by section 57 “a holder in due course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.” It seems to us under these definitions and the applications thereof the plaintiff was a holder of the note, but not a holder in due course. The latter term seems unquestionably to be used to indicate a person to whom after completion and delivery the instrument has been negotiated. In the ordinary case the payee of the instrument is the person with whom the contract is made, and his rights are not in general dependent on any peculiarities in the law of negotiable instruments. The peculiarities of that law distinguishing negotiable instruments from other contracts relate to a holder who has taken by negotiation, and not as an original party. This is the construction put on the same phrase used in the English negotiable instruments act by Lord Russell, C . J., in Lewis v. Clay, 67 L. J. Q. B. 224, in which he says:

“A holder in due course is a person to whom after its completion by and as between the immediate parties the bill or note has been negotiated. In the present case, the plaintiff is named as payee, on the face of the promissory notes, and therefore is one of the immediate parties. The promissory notes held and sued on (by the person named as payee therein) have in fact never been negotiated within the meaning of the act.” In Herdman v. Wheeler, 1 K. B. (1902) 361, this language of Lord Russell is said to be dictum, and it evidently is so, for in the further course of the opinion he points out that, without regard to the definition of that term which he gives, the result would be the same. But the court, in Herdman v. Wheeler, holds that if the delivery of a note by one to whom it has been intrusted by the maker for the purpose of delivery after the filling in of the name of the payee, which has been left blank at the time of the affixing of the maker's signature,does not constitute a negotiation, then the payee whose name is thus filled in cannot be a holder in due course. In other words, we think that “holder in due course” should be construed as applicable only to one who takes the instrument by negotiation from another who is a holder. Certainly, in the case before us, Pothoven was not a holder of a promissory note, for as the instrument was delivered to him it was not a note at all, but only a blank form of a note with the makers' names affixed. In Guerrant v. Guerrant, 7 Va. Law Reg. 639, a case at nisi prius, it is held that the holder filling a blank left in the instrument at the time of delivery acts...