
    The National Exchange Bank of Albany, Respondent, v. William Lester, Appellant.
    Third Department,
    May 8, 1907.
    Bills and notes—negligence in filling "blanks — “ raised ” paper—‘ indorser, guilty of negligence liable to holder for value.
    ■ The liability of a maker and indorser of negotiable, paper, which is drawn with, the spaces only partly filled so that the "amount" thereof can .be raised, is not ■ based upon a presumed authority to fill'out blank spaces, but rests rather upon the principle that if one by his acts or silence or negligence misleads another, or effects a transaction'.whereby an innocent party suffers,-he must bear the loss. .
    It is a recognized rule of the law. merchant that where blanks by negligence are left only partly filled and the amount of the paper is thereafter raised, the ■ party who. invites the fraud by leaving the blanks should stand the loss, rather than a holder for value. Such rule of the law merchant is. not changed by section 205 of the Negotiable Instruments Law. That section only purports to lay down-general rules as. to the alterations of instruments, and does notgovern .cases where fraudulent alterations are made possible by negligence.
    Appeal by the defendant, William- Lester,-from a judgment of the Supreme Court in. favor of the plaintiff, entered in the office of . the .clerk of the county of Albany on the 3d day of October, 1905, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 25th day of October, 1905, denying the defendant’s motion for a new trial made upon the minutes.
    
      W. A. 'Hendrickson, for the appellant.
    
      Frederick Townsend, for the respondent.
   Kellogg, J.:

The defendant was held liable as an indorser upon a promissory noté of $375. He indorsed for the. accommodation of the maker and the plaintiff is a holder for value.' It was claimed that the note as originally made and when it was indorsed was for $75 only, but had been fraudulently, altered after the indorsement and before it reached the plaintiff. That question was submitted to the jury as a question of fact. The court charged the jury that if the note was raised, if they find the forgery was aided and abetted by the carelessness and negligence of the indorser at the time of his indorsement, then still he is liable for his indorsement because he invited the condition which occurred in the raising of the note, if it was raised. Defendant’s counsel requested the court to charge that if the note was altered they could only find a verdict for the original amount,' which the court charged, “ unless they find that the defendant was guilty of negligence in leaving such spaces in the note as would allow the holder to raise it.” Exception was taken to the charge as made and to the refusal to charge.

The note is written, upon a blank form. In the body of the not§ the words “Seventy-five” are written before the printed word “ Dollars,” leaving blank about half of the line upon which the “ Seventy-five Dollars ” is written, and it is claimed the words “Three hundred” were inserted in the blank after the indorse-I ment. Upon the upper left-hand corner the dollar sign is printed, and “75 ” inserted after it in figures, leaving a space between the dollar sign and the “ 7,” in which a figure “ 3 ” was inserted. Ample space was left for the insertion of the figure “ 3 ” and the words “ Three hundred,” so that there is apparently no crowding of the words, all seeming to occupy a natural position.

It is urged that the rule which permits blanks in a negotiable instrument to be filled, and- holding the prior parties responsible therefor, is confined to eases where the instrument was left incomplete in form; and impliedly made an invitation to any one to complete it, does not apply to a case like this, where the instrument was complete in itself, but blank spaces were left which; would'permit, or perhaps invite, the raising or alteration of the. obligation. But upon such raised paper I do not think the liability of the parties rests entirely .upon 'the presumed .authority to make the alteration, but rather i^pon the principle that if one by his acts dr silence^ or negligence, misleads another, or effects a transaction whereby an innocent' party suffers, the blamabl’e party must bear the loss. In Garrard v. Haddam, (67 Penn. St. 82) a note of $100 was raised to $150 by filling in the blank spaces under circumstances , almost identical to those here, and it was held that the maker Was liable to a bona fide holder for the raised amount. ' That case was cited with approval in Redlich v. Doll (54 N. Y. 234). In Crawford v. West Side Bank (100 N. Y. 55) the court says: “ The question of negligence cannot arise unless the- depositor has, in ■ drawing his check, left blanks unfilled, or by some affirmative act of negligence has facilitated the -commission- of' a fraud by those into whose hands the check may come.”

In Critten v. Chemical. Nat. Bank (171 N. Y. 219) the obligation was. altered, certain erasures were .made.Which were written over, and it was held that the maker was not required to prepare the paper so that no one could successfully tamper -with it. The opinion is instructive, but is fairly well summed up in the head note, which in part reads: •“ While the drawer of a check may. be-liable ■ .where he draws, the instrument in such an incomplete state as to facilitate or invite fraudulent alteration, he is not bound so to prepare the check that nobody else' can successfully tamper with it.” ' The opinion quotes the above extract from the Crawford case and seems, to recognize the rule approved of in that case upon the authority of Daniels on Eegotiable Instruments (§ 1659) and Young v. Grote (4 Bing. 253). The rule is stated in Daniels on Eegotiable Instruments (5th ed. § 1659) :* “ But when the drawer has drawn his ' check in such a careless or incomplete manner that a material alteration may be readily accomplished without leaving a perceptible mark, or giving the instrument a suspicious appearance, he himself prepares the way for fraud,' and then, if it • is committed, he -and not the bank should suffer.”

I think it may be accepted as the recognized rule of the law merchant that where blanks negligently left as in this case are filled, the party .who has invited the fraud by leaving the blanks should stand the loss rather than a holder for value.

But it is claimed that the rule has been changed by section 205 of the Negotiable Instruments Law (Laws of 1897, chap. 612), which reads : “ Alteration of instrument; effect of.— Where a negotiable instrument is-materially altered without the assent of all parties liable thereon, it is avoided except as against a party who has himself made, authorized or assented to the alteration, and subsequent" indorsers. But 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.” I- do'not think this section has changed the rule. It is not necessary to say that a party who leaves blanks liable'to be filled by evil-disposed persons has thereby authorized' or assented to the alteration as mentioned in the above section. That section purports to lay down a general rule as to the alteration of instruments. It does not purport to cover a case where a blank has been negligently left and the instrument changed by filling in the blank. The question of negligence is not referred to or covered by it. Section 7 of that law provides: “In any case not provided for in this' act the rules of the law merchant shall govern.” Therefore, the rules of. the law merchant govern in a case of this kind. It is unnecessary to say whether the indorser here is held liable upon, account of his negligence,, or whether we say that his negligence is such that he is estopped from contending that the instrument was otherwise than it now appears. The result is the same. He is suffering the loss which his negligence has caused, and if it is. not visited upon, him it must fall upon an innocent party, who must suffer loss on account of the defendant’s negligence. The judgment and order should, therefore, be affirmed, with'costs.

All concurred; Chester, J., not sitting. .

Judgment and order unanimously affirmed, with costs.  