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bill or note may have legal effect, it must have passed out of the possession of the maker or drawer. A note found among the maker's papers after his death imposes no obligation upon him or his estate. But, if in any manner a completed instrument passes out of the possession of the signer into that of the payee or bearer, the instrument imposes a legal obligation on the maker or drawer. The mere involuntary parting with possession gives the instrument its inception as a bill or note. The inception of the instrument may thus result from a theft or forcible taking by the payee or bearer from the signér, or from fraud or duress practiced by the former upon the latter, as well as from an intentional delivery by the maker or drawer.
$ 50. Position of fraudulent payee or bearer. The payee or bearer, who has secured possession of the instrument by theft, fraud, duress, or under such circumstances, that, to his knowledge, the maker does not intend the instrument to operate for the payee's benefit, is not permitted personally to enforce it. This is not because the stolen instrument is not the obligation of the signer, but because the payee, in view of the manner in which he secured the instrument is compelled on obvious grounds of justice to hold it, or its proceeds, for the defrauded signer. It would be profitless to permit the thief to sue the maker on the note, when the maker himself is entitled to recover from the thief either the instrument or any money which the thief has received upon it.
$ 51. Position of payee in case of conditicnal delivery. Similarly, if the maker or drawer deliver the instrument to the payee, upon condition that it shall not be enforced except upon the happening of a certain contingency, it is not enforceable by the payee until the condition is fulfilled. Thus, in McFarland v. Sikes (5), the defendant had delivered a promissory note for $300, payable to the plaintiff, upon condition that the instrument was to be returned when demanded. The defendant demanded the instrument, but the plaintiff refused to return it and brought action on the note. It was held that the plaintiff could not recover. The real reason for the decision is that were the plaintiff allowed to recover on the note, the defendant could turn about and recover from the plaintiff for breach of his contract to return the note on demand. The parties would then be, after two actions, in the same position as if no recovery had been allowed in the first instance.
That the reason why a payee or bearer cannot recover, if he has obtained possession of a bill or note from the maker or drawer by theft, or fraud, or duress, or upon condition that he will not enforce it, is the one suggested, and not that the instrument has not had an inception, is made clear by the cases discussed below. In those cases, had the paper not been the existing obligation of the maker or drawer in the thief's hands, the thief's transfer to the plaintiff would have vested no right against the maker or drawer in the plaintiff; and the case would be like the sale of a stolen watch which vests no rights in the purchaser.
(5) 54 Conn. 250.
§ 52. Position of innocent purchaser of the instrument. If the thief, or fraudulent payee, or the payee who holds the note subject to a condition, sells the instrument to a purchaser who knows nothing of the wrong of the payee, the purchaser is entitled to recover upon the instrument from the maker. Thus, in Shipley v. Carroll (6) it appeared that the defendant made and signed the note in suit as a matter of amusement, with no design of delivering it to the payee, and that the payee stole the note from the maker and sold it to the plaintiff, who had no notice of the theft. It was held that the note was an obligation of the maker's, and that the plaintiff who bought the note innocently was guilty of no wrong, or breach of duty, or injustice in enforcing it. In Clark v. Johnson (7), the same rule was applied. In that case the maker, who had signed a note complete in form, was about to insert a condition in it before delivery, when the payee snatched the note from the maker's hands, made off with it, and sold it to the plaintiff, an innocent purchaser. The maker was held liable. The same result has been reached under the N. I. L. (8) which provides as follows:
Sec. 16. Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than a holder in due course, the delivery, in order to be ef
(6) 45 Ill. 285. (7) 54 Ill. 296.
(8) Greeser v. Sugarman, 76 N. Y. Supp. 922; Massachusetts Bank v. Spow, 187 Mass. 159.
fectual, 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. But where the 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 liable to him is conclusively presumed.
$ 53. Incomplete instruments. If a person signs a promissory note or bill of exchange incomplete in some particular, as, for example, the amount or date of payment; or a blank printed form for a note or bill; or puts his signature on a piece of paper wholly blank; and delivers it to another with authority to fill in the blank or blanks, so as to make a complete instrument, the signer is bound on the bill or note if the blanks are filled in in accordance with his authority by any holder, exactly as he would have been had he himself filled up the blanks before delivery. Furthermore, the signer of the incomplete instrument is assumed to have authorized any holder to fill in the blanks in any manner he desires, and, in an action against the signer upon the instrument, he must prove that the authority he gave has actually been exceeded if that is the fact. In the words of the N. I. L. (9):
“When 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 for any amount. In order, however, that any such instrument, when completed, may be enforced
it must be filled up strictly in accordance with the authority given and within a reasonable time."
For example, in Cruchley v. Clarance (10), the defendant drew a bill on M, payable to the order of --,' and delivered it to Vashon, who transferred it to the plaintiff. The plaintiff inserted his own name in the instrument as payee and sued the defendant. It was held that the plaintiff must be assumed to have authority to fill in the blank as he saw fit, the defendant not having shown that he had limited Vashon's authority in respect to the filling of the blank; and the plaintiff prevailed. An illustration of the other aspect of this rule is Awde v. Dixon (11). In that case the defendant signed a note, blank as to date and payee, and delivered it to his brother, authorizing him to fill the blanks and negotiate it after one Robinson had signed the note as co-maker with the defendant. Without securing Robinson's signature, the brother took the note to the plaintiff, who bought it in good faith and filled in the date and his own name as payee. It was held that the plaintiff could not recover. It appearing that the defendant had authorized the filling of the blanks, only in the event of Robinson's signing, the presumption of au
(10) 2 Maule & S. 90. (11) 6 Esch, 869.