
    Van Duzer v. Howe and others.
    
      Usury.—Blank acceptance.—Amendment.
    
    The payment to an accommodation indorser of a sum exceeding seven per cent, for the loan of his credit, the procuring of another indorser, and obtaining a discount of the bill, does not amount to usury.
    Steel v. Whipple, 21 Wend. 103, said by Denio, J., to have been questioned, if not overruled by subsequent cases.
    One who intrusts another with his blank acceptance, is liable to a bond fide holder, though filled up for a sum exceeding that limited by the acceptor, and this, it seems, on the ground of estoppel.
    In an action on a bill of exchange, the want of an averment of a negotiation of it to the holder, may be supplied by amendment; the propriety of the allowance of such amendment is not reviewable in the court of appeals.
    Appeal from the general term of the Supreme Court, in the first district, where judgment in favor of the plaintiff upon a verdict had been affirmed.
    This was an action by Van Duzen, the plaintiff, President of the New York Exchange Bank, as indorsee of a bill of exchange, against O. B. Howe & Co., the acceptors. The bill in question, bearing date the 9th June 1855, was drawn by H. L. Webb upon the defndants for $1200, payable to the order of the drawer, and was indorsed by James L. Dewey and Adam Smith. The answer denied the drawing and acceptance of the bill, and set up the defence of usury.
    It appeared on the triaj, that the defendants accepted the draft in blank, for the accommodation of the drawer, and also two other drafts of like import, with instructions to fill them up for sums not exceeding $1000 in the whole. *Webb filled up the draft in question for $1200, and procured Dewey to indorse it and get it discounted, for which he agreed to pay Dewey the sum of $50. Prior to the negotiation of the bill, Webb borrowed $150 from Dewey, without reference to the draft. Dewey indorsed the bill, procured Smith’s indorsement, and had it discounted at the plaintiff’s bank. He paid over the proceeds to Webb, deducting the loan of $150, and also the $50 for his services.
    The defendants contended, that the acceptance was a forgery; and, if not, that the bill Avas usurious in its inception. The judge held, that the acceptance Avas not a forgery; and that the draft Avas not affected Avith usury, unless originally negotiated to Dewey. The defendants’ counsel excepted; and a verdict having been rendered for the plaintiff, and the judgment entered thereon affirmed at general term, the defendants took this appeal. There Avas also a question of an amendment in the case, which is sufficiently stated in the opinion of the court.
    
      Beynolds, for the appellant.
    
      Porter, for the respondent".
   *Denio, J.

There is no pretence, on the evidence, for the allegation of usury. Both Avitnesses "avIio spoke of the loan of $150, by Dervey to Webb, stated that it Avas not made on the security of the bill; and the evidence is uncontradicted, that Dewey acted, in what he did, as Webb’s agent, and not as the purchaser or holder of the paper. It is true, that, in making title to the bill, when pleadings were technical, the plaintiff Avould have set out an indorsement and delivery by Webb to DeAvey, and by the latter to the bank, and Avould thus have stated, in effect, that Webb avrs at one time the holder, and then, inasmuch as he had $50 for his connection with its negotiation, it might be said, that the bill was infected with usury. But, in inquiring at what stage of a transaction respecting a negotiable bill or note, it became operative as commercial paper, successive indorsements are not necessarily regarded as separate transfers of the paper; but the inquiry is, in whose hands it first became available, in a sense which would enable that party to maintain an action upon it against the prior parties. One who indorses for the accommodation of a prior party, does not thereby become the holder of the bill, nor can he maintain an action upon it, until he has taken it up, by paying the amount to a subsequent purchaser, The fact that the plaintiff placed the proceeds of the discount to the credit of Dewey was of no materiality, after it was shown that the latter acted, in procuring the discount, as the agent of Webb, and not as the owner of the paper.

The defendants’ counsel relies upon the case of Steele v. Whipple (21 Wend. 103), as showing that, under circumstances precisely like those here disclosed, the paper would be usurious in the hands of the bank; and it must be admitted, that the reporter’s note favors that conclusion. But, on looking into the case, it will be seen that the note overlooks the true point decided. A note had been discounted by a bank, an indorser on which for the accommodation of the maker, had been paid a sum of money for indorsing it; but the action was not by the bank, nor on that note. Another note had been given to the indorser, a part of the consideration of which was *the premium which had been paid him for indorsing the first-mentioned ,paper; that note he transferred to the plaintiff in the suit, and upon it the action was brought. The court, considering the exacting the premium for indorsing the first note to be in its nature usurious, and the note sued on having been given to the indorser, in part to secure that premium, held the last-mentioned note usurious in the hands of the plaintiff. The note of the reporter leads to the'inference that the first note was held usurious in the hands of the bank; but in the opinion of the court, delivered by Judge Cowen, it is expressly said, that there was no usury in the bank. “ Had the original note,” he says, “ rested there [in the bank], or in the hands of a bond fide transferee of the bank, and either had brought an action on the original note, or a substituted one, such action would lie.” The principle really decided has been questioned, if not overturned, by subsequent cases; but, as the point is foreign to the present question, it is unnecessary to pursue the subject. (See Ketchum v. Barber, 4 Hill 224; s. c., 7 Id. 444; More v. Howland, 4 Denio 264.)

The court, in the present case, left it to the jury to say whether Dewey became the holder of the note, by means of the loan to Webb, while it was in his hands; and they found it did not. I doubt, whether the evidence would have justified the submission; but the defendants have no cause to complain of it.

The defendants wrote their acceptance on the bill, and intrusted it to Webb, while it was in blank as to the amount, relying upon his promise that he would not fill the blank for a greater sum than $1000. He violated his promise, by inserting $1200, and causing it to be negotiated for that amount; the plaintiff discounted it, without any knowledge of the fraud, and paid the whole proceeds to the agent of Webb; and the question now is (if it can be said to be a question), which party is to suffer on account of the misplaced confidence reposed in W ebb. It was the defendants, Avho, by intrusting their blank acceptance to the disposition of Webb, enabled him to commit the fraud. The plaintiff relied upon the defendants’ §em™6 ^signature attached to an instrument of a definite legal character; no want of caution is imputable to him, for it is the constant practice of business men, to rely upon the genuine handwriting of others, when found attached to commercial paper, without inquiring as to the circumstances under which it was written. Upon general principles, therefore, the defendants ought to encounter the loss, rather than the plaintiff; hut the point has Been settled by a long course of decisions.

In a case in the court of king’s bench, decided in 1780, the action was upon a promissory note, by the indorsee against the indorser; the note was made by one Galley, who, being desirous of raising money, had procured tho defendant to indorse his name upon five engraved notes, in blank as to the date, amount and time of payment; (¡¡•alley filled them up with different sums and dates, as he chose, and the plaintiff, a banker, discounted one of them,' which was the note sued on. The defendant insisted, that the signature of the defendant, when attached to tho note, was a mere nullity, and that Galley had no power to change its character; and upon this position, he prevailed at the trial; but on a rule to show cause, the court determined that the defendant was liable as indorser. “ There is nothing so clear,” said Lord Mansfield, C. J., “ as this point; the indorsement of a blank note is a letter of credit for an indefinite sum; the defendant said, ‘ trust Galley to any amount, and I will be his security;’ it does not lie in his mouth, to say the indorsements were not regular.” (Russel v. Langstaffe, 2 Doug. 495.) . The case is stronger than the present, in one respect, for it appeared, that the plaintiff knew that the indorsement had been written on a blank note.

A similar case is reported in 1 H. Black. 313. The defendant wrote his ngme on a piece of paper entirely blank, and delivered it to Livesay & Co., for the purpose of drawing a bill of exchange for such sum, payable at such time, and to such person and persons, as they should see fit; a bill for over 1500Z. was accordingly written on the paper, the defendant’s name standing for the drawer, and Livesay & Co. becoming the acceptors, which was negotiated - to the plaintiffs; and *they were allowed to recover the amount, though aware, at the time they received the bill, of the circumstances attending the signature of the drawer. (Collis v. Emett.)

It did not appear, in either of these cases, that the blank paper had been filled up and negotiated in violation of the agreement between the party sought to be charged and the one to whom he had intrusted his signature; but in Schultz v. Astley (2 Bing. N. C. 544; 29 Eng. C. L. 414), a person desirous of raising money, wrote his name across ten slips of stamped blank paper, and intrusted them to an advertising money-lender; several of them were filled up by a stranger, as bills of exchange for 500?. each, with a drawer and indorser, in such manner, that the blank signature stood for the name of an acceptor, and were negotiated to the plaintiff for a cargo of wheat. The defendant was held to be liable as acceptor, though he never received a farthing for the bills, and had no interest in or knowledge of the transaction upon which they were negotiated. The principle was assumed to be, that a party is bound by his acceptance, written on a blank piece of stamped paper, to the extent of such sum as the stamp will cover. The court said, a blank acceptance was an acceptance of the bill which might be afterwards put upon it, and that it did not lie in the mouth of the acceptor,'to say that the drawing and indorsing of the bill Avere irregular.

So, in Montague v. Perkins (22 Eng. Law & Eq. 516), the defendant Avas sued as acceptor of a bill; it appeared, that he had intrusted his blank acceptances to one Swinburn, to take up other bills Avhich he had accepted for his accommodation; this Avas in and prior to 1840, and twelve years afterwards, in September 1852, Swinburn wrote a bill of exchange for 200?. on one of the blank acceptances, payable to his OAvn order, and it Avas negotiated to the plaintiff. The jury found that the blank was not filled up Avithin a reasonable time, and gave their verdict for the defendant; leave was reserved to the plaintiff to move to enter a verdict in his favor; and it was held, after elaborate argument, that the defendant was liable on the acceptance, and judgment was given accordingly. The defendant's counsel ^argued, that tlio authority to Swinburn was to fill up the bill within a reasonable time; but the chief justice said this was not the case Avith reference to the rights of a bond fide holder for value he added:—“ The rules applicablo to the question of authority, on this bill of exchange, do not differ from those Avhich ought to govern the question, if it arose in the ordinary case between principal and agent. In the case of a blank acceptance, primd facie, the person giving it gives tho person to Avhom it is given an opportunity to fill it up fat the amount and for the time limited by the stamp laAvs. As between these íavo, there may be secret stipulations binding upon them, but not binding as betAveen the public and the person giving the blank acceptance.” There are several Other cases to the same general effect in the English books, and the principle, as has been remarked, seems perfectly settled. (See Cruchley v. Clarence, 2 M. & Selw. 90; Atwood v. Griffin, Ry. & Mood. 425.) The doctrine has been folloAved in this country. (Violett v. Patton, 5 Cranch 151; Putnam v. Sullivan, 4 Mass. 45.)

In this state, the courts have fully recognised the principle. Mitchell v. Culver (7 Cow. 360), and Mechanics’ and Farmers’ Bank v. Schuyler (Id., in a note), Avere both cases of indorsements of notes, in blank as to their date; and the dates Avere filled up, Avithout the knowledge of the indorsers, of a day prior to that on Avhich they Avere draAvn and indorsed, so that the d’ay of payment arrived earlier than could have been contemplated by the indorsers. The supreme court, on the authority of the cases to which I have referred, held the defendants liable, and laid down the rule, that an indorsement on a blank note, without sum or date or time of payment, will bind the indorser for any sum, payable at any time which the person to whom the owner intrusts it chooses to insert.

The defendants’ counsel relies upon several adjudica1 tians in the criminal courts in England, in each of which it is held, that a person, having a blank signature of another, which he was authorized to fill up with a check or bill for a limited amount, and who wrote one for a larger amount, was guilty of forgery. (Rex v. Hart, 7 C. & P. 652; Reg. v. Wilson, *2 C. & K. 527; Reg. v. Bateman, 1 Cox 186.) The difficulty which the doctrine of these cases presents, does not seem ever to have been urged by counsel, or noticed by the court, in the civil actions brought upon such paper, though it would seem incongruous, to hold that any recovery could be had upon an instrument which was in itself a forgery. The positions of the two classes of cases can only be reconciled, by holding the authors of the blank signatures estopped from setting up against a bond fide holder, who has paid value, that the paper was not his genuine act. A fiction of nearly the same kind must be resorted to, to sustain an action in favor of the bond fich holder of negotiable paper which has been stolen and put in circulation by the thief; such holder must make title through a felony, and yet nothing is clearer than that an action may be maintained upon paper thus circumstanced. (Peacock v. Rhodes, 2 Doug. 611; Miller v. Race, 1 Burr. 452.) The principle which lies at the foundation of these actions, I think, is, that the maker, who, by putting his paper in circulation, has invited the public to receive it of any one having it in possession with apparent title, is estopped to urge the actual defect of title against a bond fide holder.

Our statute provides that xhe right of action of any person injured by any felony shall not, in any case, be merged in such felony, or be in any manner affected thereby. (2 R. S. 292, § 2.) This would enable the plaintiff to recover against Webb, though his act in filling up the bill was a forgery; but the provision does not seem sufficiently broad to enable him to recover against the defendants, who have not been guilty of any crime, and to whom the doctrine of merger would never have been applicable. But, if the two apparently hostile positions which the cases present are really incapable of being reconciled, I am in favor of sustaining those which uphold the civil action. The decisions of that class are so numerous and consistent, and the principle is so uniformly and confidently acted on by business men, that it would be eminently dangerous to depart from it. It is better that the wrongdoer should go unpunished, until the legislature shall have provided a suitable penalty for his illegal act.

”The defendants’ counsel claim that a fatal error was committed by the supreme court, in allowing the complaint to be amended on terms. In the first instance, it did not contain any allegation to show that the bill had been negotiated to the plaintiff’s bank, though he named himself as president of the association. The intention to enforce a claim in favor of the bank was plain enough to a common intent, though the pleading was probably insufficient in the point suggested. The court allowed the plaintiff to amend, on payment of costs; issue was then joined on the amended complaint, and the case was afterwards tried. The order Avas, no doubt, right; but, if it Avas not, the question being one of dis-' cretion, it would not be reviewable here. The case of Davis v. New York (14 N. Y. 506), on which the defendants rely, has no application. There, after a trial, in which it appeared that the plaintiffs could not succeed on the evidence-, another party, in whose favor the evidence disclosed that a right of action existed, was allowed to be introduced, and judgment was given in his favor. We held this to be erroneous, on the ground that no discre? tian existed in the. case.

None of the defendants’ positions appearing to be-, well taken, the judgment of the supreme court, must be. affirmed.

Judgment affirmed. 
      
       See Kitchel v. Schenck, 29 N. Y. 515; Elwell v. Chamberlin, 31 Ibid. 611; Chatham Bank v. Betts, 37 Ibid. 356; Bank of Gioversville v. Wells, 15 Hun 51.
     
      
       Garrard v. Haddan, 67 Penn. St. 82; Zimmerman v. Rote, 75 Ibid. 188; Brown v. Reed, 79 Ibid. 370.
     
      
       And see Page v. Morrell, 3 Keyes 117; Chauncey v. Arnold, 24 N. Y. 334; Redlich v. Doll, 54 Ibid, 234; Kitchen v. Place, 41 Barb. 465; Hardy v. Norton, 66 Ibid. 527; Waggoner v. Millington, 8 Hun 142.
     
      
       In McWilliams v. Mason, 31 N. Y. 299, it is said by Davies, J., that Yau Duzer ®. Howe proceeded upon the doctrine of estoppel, rather than upon any distinctive rules applicable to commercial paper.
     