Hotchkiss v. English — 11 N.Y. Sup. Ct. 369

Majority

p. 369

LEVI HOTCHKISS, Respondent, v. NATHAN ENGLISH, Impleaded with J. C. CUMMINGS and others, Appellant.

Headnote

Promissory note — a/uthority to indorse—if not known to indorsee, and if parties do not hold themselves out as partners—liability where authority is exceeded,.

Defendant English, being the owner of a patent right, entered into an agreement with the defendant Perine, by which Perine was, at his own cost and expense, to sell the said right; the proceeds of such sale to be divided, share and share alike. The agreement further provided that all notes should be taken payable to the order of English & Perine, and authorized Perine to sign the name, if necessary, of English & Perine in transacting the business or anything incident thereto, and for the purpose of converting such notes into cash or other securities. Perine, without any consideration, indorsed a note of a third person with the name of English & Perine, intending thereby to defraud English. The plaintiff purchased the note in good faith for full value and before maturity. English & Perine had never held themselves out as partners, nor did plaintiff know of the agreement entered into between them at the time of purchasing the note. Held, that the agreement did not authorize Perine to indorse the note in English’s name, and that the latter was not liable thereon.

Appeal from a judgment in favor of the plaintiff, entered on the report of a referee.

The action was on a promissory note made by one J. C. Cummings, payable five months after date, for $350, to the order of English & Perine, two of the defendants. The defendant English alone defended and appealed from the judgment. The referee found as matter of fact, that the said Cummings signed said note at the instance of one Belden, who paid him two dollars for signing the same, and that one of the defendants (Perine) indorsed said note in the name of English & Perine, and delivered the same to said Belden, without any consideration, and that said Belden delivered said note to one Spaulding, who transferred it to Mills, one of the defendants, who transferred it, before maturity, to the plaintiff, who paid for it full value and consideration, and became a bona fide holder thereof without notice of the circumstances under which it was made.

The defense was that Perine had no authority to indorse English’s name upon the note, and that he did so in pursuance of a

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conspiracy to cheat and defraud him. It. was claimed that Ferine had such authority by virtue of the following agreement:

“ An agreement made and entered into this 8th day of January, 1.872, between Nathan English of the town of Greece, Monroe county, New York, of the first part, and M. B. Ferine of Nunda, Livingston county, New York, oí the second part, wituesseth:

“ That whereas the said Nathan English is the owner of a certain patent right known as Sipner’s & Hooper’s Fatent Fadlock, for the following counties, to wit: Allegany, Cattaraugus, Chautauqua, Livingston and Monroe, in State aforesaid. Now, therefore, the said English hereby agrees to engage in the sale of the said patent right with said Ferine upon the following terms and conditions, viz.: The said English to furnish said patent, and the said Ferine agrees to do all the work and labor to sell the same of the said territory, and to sell said patent right to the extent of said territory, or so much thereof as he can sell, thq said counties not to be sold for less than $300 cash, or negotiable promissory notes, payable in cash. The said Ferine agrees to bear all expenses of and attending such sales, and in consideration of such labor and furnishing such expenses the same are to offset against the said patent right, and the proceeds of such sales are to be divided share and share alike, i. e., each to have one-half thereof. If notes are taken, the same are to be payable to the order of English & Ferine, and the said Ferine is authorized to sign the name, if necessary, of English & Ferine in transacting said business or anything incident thereto, and also to the end that said notes, if taken, may be converted into cash or other securities.

“Witness the hands and seals of the respective parties this 8th day of January, 1872.

“NATHAN ENGLISH, [l. s.]

“M. B. FERINE.” [l. s.]

The referee held, as a conclusion of law, that the plaintiff was entitled to recover of the defendants the amount of said note, the sum of $395.25, besides costs, and ordered judgment accordingly.

A. J. Wilkin, for the appellant.

S. H. Terry, for the respondent.

The promissory note upon which this action was. brought was confessedly conceived in conspiracy and fraud, and was made and indorsed and put in circulation to deceive and to cheat. Passing apparently through a number of hands privy more or less to the fraud, or aware of the dishonesty of the transaction, it finally reached the hands of the plaintiff, who took it upon untrue representations in regard to it, but for a .good consideration, and without notice of the circumstances under which it was made and put into circulation. The question is, whether the defendant English, who was the purposed victim of this conspiracy and fraud, who never, in person, signed or saw said note, or heard of its existence till he received notice of protest for its non-payment, is cut off from all defense to it on the ground that the plaintiff has thus acquired the rights of a bona fide holder thereof.

In the cases in which it has been held (and they are very numerous) that the holder of negotiable commercial paper, received before maturity in the ordinary course of business and for full value, is protected from almost every species of defense except that the instrument was void by statute, the paper had upon its face the genuine signature of the maker or indorser, or party sought to be charged. Such was the case of Chapman v. Rose ( 56 N. Y., 137 ).

In Whitney v. Snyder ( 2 Lans., 477 ), and Foster v. Mackinnon (L. R. [4 C. P.], 704), in which it was held that when the party did not intend to execute a promissory note, but a different instrument, if guilty of no laches or negligence he was not bound, the paper upon its face bore the genuine signature of the defendant.

The referee finds in this case that said note was indorsed by the defendant Perine, in the name of English & Perine, and delivered by him to Belden. He does not find that English and Perine were partners, but his findings for the plaintiff upon the law were doubtless made and based upon that assumption, upon his construction of the agreement set out in his report. This agreement does not constitute them partners. It is rather a power of attorney from English to Perine, to sell his patent right in the five counties named, with a provision to account to him and pay him half the proceeds of sales as a compensation for his services, with a special

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power to convert the notes, if any were received on sales, into money by indorsement for that purpose. These parties never held themselves out to the public as partners, never did any business in a partnership name, and the fact of the making of this agreement was probably known only to the parties and to the persons concerned in getting up this note, and such persons as they may have communicated it to in furtherance of the scheme of fraud. The plaintiff testified that the defendant Mills informed him, when he transferred to him the said note, that English and Ferine were partners in the manufacture of agricultural implements, which was an untrue representation. It.is therefore clear that both the plaintiff and Mills, who are the only persons who as the holders of this note can have any pretense to be bona fide holders of it, did not take it with any knowledge of an actual partnership in fact between English and Ferine, or upon any reputation of an actual partnership between them, based upon any acts or business of theirs, or derived from any holding of themselves out as partners to the public.

. Where partners have been held liable upon negotiable paper fraudulently made or indorsed by one of the firm, the fact of the existence of such partnership has. ordinarily been undoubted and notorious. In such cases any person of the vicinity might very properly receive the partnership paper, upon the presumption that it was lawfully made and in the legitimate business of. copartnership. This presumption very reasonably protects the bona fide holders of partnership paper from any defense by the defrauded partners. But this principle will not protect the holder of negotiable paper, apparently made or indorsed by a copartnership against the forgery of such paper; and such I think the true defense to this note. Assuming that the contract between English 'and Ferine, for certain purposes, constituted them partners as between themselves, neither of them had any authority to make promissory notes, or to indorse such notes in-their joint names, except as expressly stipulated in said agreement.' The indorsement of the name of English and Ferine upon this paper was and is a simple forgery. Ferine had no authority to make such indorsement. They weré not general partners. Said note was not given or received in any partnership business. The. said.. agreement; simply authorized

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Perine to indorse notes received on the sale of patents. He had sold no patents. He did not receive this note on the sale of any patent or other consideration. He made the indorsement without the slightest pretense of right, to cheat and defraud English. At most he was the agent of English, under a special power to indorse particular notes.

In Parsons on Bills (vol. 2, 593), he says: “ Authority to draw, make, or indorse a bill, may, of course, be given to an agent. When the agent signs the name of his principal without authority and with a malicious intent, it is a forgery.” That is precisely this case. Bishop on Criminal Law (vol. 2, § 528) defines forgery as follows: “ Forgery is the fraudulent making of a false writing, which, if genuine, would be apparently of some legal efficacy.” (4 Black. Com., 247; Rex v. Taylor, 2 East P. C., 852, 853.) The false making of a note or other instrument is forgery. (Rex v. Parks, 2 Leach [4th ed.), 775, 785 ; 2 R. S., 693, § 33.) Here was the making of a false indorsement, which was equivalent to making a false instrument with intent to defraud, etc. (Rex v. Hart, B. & H. Lead. Crim. Cas., 468.) This is a “ false signature made with intent to deceive,” which is the precise case stated by Justice Eyre, in Rex v. Taylor (supra), and cited with approval in The People v. Fitch ( 1 Wend., 200 ).

The judgment should be reversed and a new trial granted, with costs to abide the event.

Present—Mullin, P. J., Smith and Morgan, JJ.

Judgment reversed, and new trial granted, costs to abide event.