
    Forbes & King v. Espy, Heidelbach & Co.
    M. for the purpose of defrauding the general government out of its revenues, assumed the name of C., and in that name purchased goods of W. 1). & Co., in Canada, on credit, and smuggled them into the United States at Detroit. From Detroit he shipped them to O. H. & Co., at Cincinnati, to be sold on commission; at the same time advising C. H. & Co., by letter, postmarked at Detroit, signed 0., and requesting them to remit the proceeds. C. II. & Co. haviug sold the goods, purchased a bill of exchange from the defendants, bankers at Cincinnati, on their correspondent at New York, for the net amount of the proceeds of the goods, and having indorsed it, payable to C. or order,” remitted the bill by mail to Detroit, addressed to 0, whore M, received it, and having indorsed it in blank, thus: — C, delivered it to W. D. & Co., in payment for the goods, from whom the plaintiffs received it in good faith, for lull value and before dishonor. Afterwards O. H. & Co., under the revenue laws of the United States, were compelled to pay to the general government the full value of the smuggled goods; and at their instance, the bill was dishonored when presented to the drawee for payment. Neither 'W.'D. & Co., nor C. H. & Co., had any knowledge of M. other than in the above transaction, nor that his name of C. was assumed, nor of his fraudulent practices against the general government. O. H. & Co., in their correspondence supposed that O. was the true name of their correspondent. 'W. D. & Co., at the time they received the bill, had no knowledge of the correspondence between C. II. & Co., and M. In a suit on this bill by the holders against the drawers, — held, that the defendants are estopped from denying that the legal title to the bill of exchange is in the plaintiffs, and from setting up as a defense against the plaintiffs, the fraud practiced by M. upon C. H. & Co.
    Error to the superior court of Cincinnati.
    The original action was brought by the plaintiffs in error, against the defendants in error, upon a draft for $168.82 drawn by the defendants upon their correspondent in New York city, in favor of Cochran, Holmes & Co., and by them indorsed to Charles Clark, (a fictitious name) and in that name indorsed in blank. The draft was presented, payment refused, by previous directions of the defendant, and protested, and due notice given to defendants.
    The issues joined by petition and answer were submitted to the court below upon an agreed statement of facts, in substance as follows :
    On the first day of February, 1867, the firm of Cochran, Holmes & Co., commission merchants, doing business in the city of Cincinnati, Ohio, received by express two boxes of nutmegs from Detroit, Michigan, and the same day a letter post-marked Detroit, Michigan, advising them of the shipment of the nutmegs, and asking them to sell them at the best possible price, and remit proceeds; the letter being signed Charles Clark, and this being the first time they had heard of Charles Clark.
    The nutmegs were sold at the market price, and after deducting expenses, commission, &c., there was left in the hands of Cochran, Holmes & Co., the sum of $168.32, for which they bought a draft from Espy, Heidelbach & Co., on the City National Bank of New York, for $168.32, in current funds, payable to the order of Cochran, Holmes & Co., and indorsed by that firm “ pay to order of Charles Clark,” and was inclosed in a letter addressed to Charles Clark, Detroit, Michigan, and the letter was deposited in the post office. At that time Cochran, Holmes & Co. did not know there was no such person as Charles Clark.
    The letter containing the draft was received at Detroit, Michigan, by one William Mara, who indorsed the draft in blank, “ Charles Clark,” and delivered the same to Wreford, Dillon & Co., at Toronto, Canada West, who delivered the same, without indorsement, to the plaintiffs.
    On the 8th day of March, 1867, payment of the draft was stopped by Espy, Heidelbach & Co., at the request of Cochran, Holmes & Co., on the ground of forgery and fraud ; and, on the 18th day of March, payment was demanded, and protest made, and notice given.
    Wreford, Dillon & Co. are grocers, doing business in Toronto, Canada West, and sold the nutmegs on credit to Mara, supposing his name to be Charles Clark, and Mara smuggled the nutmegs into the United States without paying the import duty imposed by law of the United States on the importation of nutmegs. Mara sent the smuggled nutmegs to Cochran, Holmes & Co., who received them Feb. 1st, 1867. Cochran, Holmes & Co. did not know Mara, or that he sent the nutmegs; they did not know anything about him until told of him by United States officers, on or about March 1st, 1867.
    Mara wrote and signed the letter signed “ Charles Clark,” and indorsed the name “Charles Clark” on the draft. There is not, and never was, any such person as “ Charles Clark.” Mara was not known, and did not transact business as “ Charles Clark,” but was at the time of the receipt of the letter containing the draft, and for a long time previous, doing a legitimate business as express messenger, running between Detroit, Michigan, and Canada West, and was known as Wm. Mara; but he represented himself to Wreford, Dillon & Co. as being Charles Clark, and they did not know the contrary.
    The laws of the United States make any person, however inuocent, who may have possession of smuggled goods, liable for the duty and penalty on the goods. These goods were forfeited to the United States by the entry without payment of duty. By virtue of said law the firm of Cochran, Holmes & Co. were liable to the United Stales for the import duty and penalty on the nutmegs; and on or about March 1st, 1867, were compelled by law to pay to the United Stales, on account of the nutmegs being smuggled, their full appraised value, which was much more than they had received from the sale of the nutmegs.
    Before the 8th day of March, 1867, Wreford, Dillon & Co. deposited the draft with Forbes & King, the plaintiffs, who are bankers at Toronto, Canada West, and Forbes & King, in ignorance of the foregoing facts, gave credit for the same to Wreford, Dillon & Co. as cash, and honored their checks therefor.
    So, both Wreford, Dillon & Co. on the one hand, and Cochran, Holmes & Co. on the other, were deceived by a man named William Mara, who represented himself to both to be Charles Clark.
    The court below gave judgment for the defendants ; and this proceeding is to reverse that judgment.
    
      Hoodly, Jackson & Johnson for plaintiffs in error :
    The superior court, in special and .general term, held that the indorsement by Mara, in the name of Clark, was, in law, a forgery, so that no title passed thereby.
    We claim, on the contrary, that Forbes & King are bona fide holders for value, without notice, before maturity, and that the indorsement and delivery by Cochran, Holmes & Co. to William Mara in the fictitious name “ Charles Clark,” was, in law, equivalent to an indorsement in blank, or one payable to bearer.
    In order that this case may be correctly decided, it is necessary to distinguish carefully the effect on the rights of the parties, produced by the fraud practiced by Mara on Cochran, Holmes & Co. in concealing the fact that the nutmegs had not paid duty, from the consequences of the use of a fictitious name to do business in by Mara.
    1. As to the first of these. No fraud practiced by an indorsee in getting the paper from his indorser can be objected to bona fide holders, such as Forbes & King were.
    If it be objected that this bill being payable on demand or at sight, was already dishonored, by lapse of time, when Forbes & King got it, the answer is easy. Wreford, Dillon & Co., who were also bona fide holders for value, had it before March 8, and March 8 was only fifteen days after its date, no unreasonable period for keeping such a bill in circulation. 7 Cowen, 705 ; 3 Wend. 75 ; 20 Johns. 146 ; 3 Hill. 582 ; 18 Conn. 361 ; 4 Johns. 224; 2 Mich. 401; 45 Maine, 430 ; 1 Metcalf, 369.
    In England, it is held that such paper, at least when payable with interest, is never so dishonored as to charge the indorsee with notice of the equities between the prior parties. 4 Barn. & Cress. 325 ; 9 Mess. & Welsby, 15.
    2. Leaving out of view the alleged fraud, and coming to the consideration of the fictitious name used by Mara, and its effect upon the rights of the parties, we must, to deal justly, treat the case as if the motives for the use of the fictitious name were laudable or indifferent. Suppose, for instance, that there had been no smuggling, and that Mara had assumed the name of Clark because he did not wish the express company, in whose employment he was, should know that he was trading on his own account, or for any other reason not fraudulent, could Espy, Heidelbach & Co. defend successfully ? If not, neither can they now. If they could, it must be for one of two reasons : First, because the indorsement to the fictitious person is void, or — Secondly, because the indorsement by the fictitious name is void.
    As to the first category, no case has held that the indorsement to the fictitious name is void. On the contrary, the case of Chenot v. Lefevre, 3 Gilman, 637, shows that the party intended by the indorsement, may sue in his real name, alleging the facts, and that the indorsement was intended for him.
    As to the second category, the effect of an indorsement by the fictitious name, if held void, would be to leave the draft still owned by the party using such name, though he has parted with its possession, and indorsed in the fictitious name with the intention of passing title to the bill.
    Whatever the law may be in England, the rule in this country is, that a bill or note, payable or indorsed to a fictitious name, is payable to bearer. 2 Parsons on Notes and Bills, 592; Edwards on Bills and Notes, 251; Plets v. Johnson, 3 Hill, 112 ; Foster v. Shattuck et al. 2 N. H. 446 ; Chenot v. Lefevre, 3 Gilman, 637 ; Smith v. Mechanics' and Traders' Bank, 6 La. An. 624; Bolles v. Stearns, 11 Cushing, 320.
    The legal title passed by the indorsement of Cochran, Holmes & Co. to the person whom they intended by the name Charles Clark, and to whom they delivered the draft. And that person, by indorsing it by the name in which he owned it, and delivering it to Wreford, Dillon & Co., innocent parties who paid full value, passed the title to them, who sold and delivered the draft to the plaintiffs.
    The fact that Mara defrauded Cochran, Holmes & Co. out of this bill, cannot bear upon the question at issue. For the subsequent and present holders being bona fide holders for value, without notice, and before maturity, the question of fraudulent consideration between them and Clark, or Mara, cannot be raised to the prejudice of Forbes & King.
    If Cochran, Holmes & Co., or Mara, own this bill now, the same result would follow in the absence of such fraud. And it must be because of one of two possible rules of-law : either first, because the indorsement by Cochran, Holmes & Co. being to a fictitious name is itself void, or secondly, because the indorsement by Mara in the fictitious name is a forgery, and he still the owner. But ihe-first supposition is inadmissible on the authorities Ave have cited. The second supposition is no more admissible, though such may be the English rule ; for it enables the rogue to reassert ownership, or at least legal title to the note or bill, though he has parted Avith it intentionally, and for value, on the assertion that Charles Clark is his name. Surely, he is estopped, if any one ever is.
    Again, the rule is, that between íavo innocent parties, he who has caused the loss shall bear it. Now, clearly, Espy, Heidelbach & Co. must pay this money, either to Cochran, Holmes & Co., or Forbes & King, But Cochran, Holmes & Co., by indorsing the bill to Mara by the name of Charles Clark, have affirmed to him,and to all to whom, in ignorance of his real name, he shall exhibit the bill, that his name is Charles Clark. Hence, they have enabled him to perpetrate a fraud on Wreford, Dillon & Co., and Forbes & King. Had they not indorsed the bill thus, he could never have so indorsed it. It may be said that Wreford, Dillon & Co. AArere guilty of the first Avrong in trusting him in the name of Charles Clark with the nutmegs. But that did not hold him out to others as Charles Clark. The indorsement to him, by that name, did so hold him out. It represented to the Avorld that that was his name, by which, as he received, he might Avell part Avith the bill.
    
      J. C. Thomas, for defendants in error:
    1. The bill sued on was not payable to bearer, and title could not be had through Mara, either by indorsement or delivery.
    The character of every note or bill is given it by the drawer or indorser, — in this case by the indorsers, Cochran, Holmes & Co., who certainly did not try to make the bill payable to bearer: on the contrary, they made it payable to the order of “Charles Clark;” and the fact that there was no such person as Charles Clark, does not change the character of the bill, without the firm of Cochran, Holmes & Co. knew, at the time of signing the bill, that there was no such person, or, in other words, that they were making the bill payable to the order of a fictitious person. Story on Bills, secs. 56, 200, and cases cited in notes; Byles on Bills [61]; Vere v. Lewis, 3 T. R. 182; Minet v. Gibson, 3 T. R. 481; Tatlock v. Harris, 3 T. R. 174; 1 Parsons on Bills, 33; 2 Ib. 48, 50; Stevens v. Strong, 2 Saudford, 138; 3 Hill, 112; Maniort v. Roberts, 4 E. D. Smith, 83; Bennett v. Farnell, 1 Camp. 130, 180.
    Cochran, Holmes & Co. did not know that they were making this bill payable to a fictitious person, and without their intention or knowledge they did not make the bill payable to bearer, and title could not pass by delivery. The title to this bill never left Cochran, Holmes & Co., and they are now entitled to possession of it.
    Mara certainly had no right to this bill. He had given no consideration for it, and had no legal or equitable claim against Cochran, Holmes & Co. But if the bill had been payable to bearer, or to Mara, a bona fide purchaser for value would have a right of action on it. But the bill was not payable to bearer or to Mara’s order, and he was not known as Charles Clark, and he could not sell the bill so as to give the purchaser a right of action against us. The case would not have been different if Mara had stolen a draft from a real Charles Clark, and had represented himself to Wreford, Dillon & Co. as Charles Clark. In that case he certainly would have been guilty of forgery, and the- bill could not be collected. Mara had no more right to this draft than if he had stolen it; and it was not such a draft as, if stolen, could be sold for value and collected.
    2. “To sign the name of a fictitious or non-existing person is forgery.” Byles on Bills [262]; Hex v. Francis, Bayley (6th ed.,) 572; Rus. & Ray. 209; Lockett’s case, 1 Leach, 94; Taft's case, Ib. 172; East P. C. 940-959; 2 Parsons on Notes and Bills, 585, and cases cited.
    The bill was in fact payable to a fictitious person, and Mai-a indorsed this fictitious name, and by doing so was-guilty of forgery, and conveyed no interest to Wreford, Dillon & Co.
    If Wreford, Dillon & Co. had used the caution in this1 case they should, and that Cochran, Holmes & Co. did,, they would have discovered the fraud. They cannot throw on others the consequences of their own negligence. The-plaintiffs, Forbes & King, took this bill under very suspicious circumstances, without the indorsement of Wreford, Dillon & Co. It is not customary for bankers to take bills-payable in distant cities without indorsement, and they were-negligent in doing so.
    They have, however, recourse on Wreford, Dillon & Co., if they paid value. Story on Bills, sec. Ill; Byles on Bills [125,] and notes and cases cited.
   McIlvaine, J.

There is no objection made as to the-length of time this bill was in circulation before it was transferred to plaintiffs; and it is admitted that they received it without any knowledge of the fraudulent practices of Mara,, and that they paid full value for it.

The question, then, in the case, is this: Can the defendants, as against the plaintiffs, who are bona fide holders for value, set up the fraud practiced by Mara upon Cochran, Holmes & Co. as a defence to this action ? It is conceded, that the defendants may do so if Cochran, Holmes & . Co. could set it up if the action were against them; and it is also-conceded that if the legal title to the bill is in the plaintiffs such defence cannot be sustained.

It appears from the agreed statement of facts, that all the parties (except Mara) to the transactions stated, acted in good faith and in the usual mode of doing such business. But Mara, for the purpose of defrauding the general government out of its revenues, and shielding himself from detection, assumed the name of “Charles Clark.” And, in that assumed name, he bought the nutmegs from Wreford, Dillon & Co., in Canada, and smuggled them into the United States, at Detroit; and in that name shipped them from Detroit to Cochran, Holmes & Co., at Cincinnati, to be sold by them on commission, and asked for return of sales and proceeds. Cochran, Holmes & Co. made return of sales to him, and having indorsed this bill to “Charles Clark,” remitted it to Detroit to that address. Mara received it, and afterward, indorsing it in the name of “Charles Clark,” delivered it, for a valuable consideration, to Wreford, Dillon & Co., from whom the plaintiffs received it. It is, also, conceded that Wreford, Dillon & Co. had no knowledge of Mara’s fraud, or that his name of Charles Clark was assumed.

Now, the judgment below must be reversed, if either of the following propositions can be maintained, to wit:

1. That the legal title to this bill passed from Cochran, Holmes & Co. to Wreford, Dillon & Co., by the indorsement of the former to Mara under his assumed name of “ Charles Clark,” and by his subsequent indorsement by the same name to Wreford, Dillon Co. ; or

2. That Cochran, Holmes &. Co. are estopped, as against the plaintiffs, from denying that the title so passed.

The first proposition we deem it unnecessary to resolve, as an affirmative solution of the second is decisive of this case.

We cannot, however, dismiss the case without remarking, that, by the weight of English cases, and by some American decisions, the indorsement, by Mara, of the name “ Charles Clark,” upon this bill, at the time he delivered it to Wreford, Dillon & Co., was a forgery. Byles on Bills [262] ; 6th ed. of Bayley on Bills, 572; Rus. & Ey. 209; 1 Leach, 94 and 172; East P. C. 940-959 ; 2 Parsons on Bills, 585, and cases cited in notes. Nor can it be doubted, as a general rule, that the title to a bill cannot be transferred by a forged indorsement.

It is well settled, however, both in England and America, that a note or bill knowingly made, drawn, or indorsed to a fictitious person, is to be regarded as made, drawn or indorsed to bearer, and may be transferred by delivery merely. Byles on Bills [61]; 3 T. R. 174, 182, 481; 4 E. D. Smith, 83; Story on Bills, 56 and 200, and notes.

True, this is not such a case; nor is this a case where a bill was intended to be indorsed to a particular person, and the person intended was not in existence, as if, for instance, he were dead, and that fact was not known, and a person, other than the one intended to take, fraudulently indorsed the bill over by using the name of such fictitious person. Such last mentioned indorsement would be a forgery, and ineffectual to transfer title. The title in such case would remain in the first indorser.

But in this case the person intended as indorser, by Cochran, Holmes & Co., was a real person, in actual existence, but designated by a false or assumed name, of which last fact they were ignorant. It matters not whether they were induced to adopt that name, through the fraud of Mara, or by mistake. The person so intended by such false or assumed name, subsequently, by using the same name, indorsed and delivered the bill to an innocent purchaser.

It is questionable whether this last indorsement be a forgery. 22 Iowa, 379. But if it be; it may still be doubted whether it falls within the general rule above stated. Ibid.

If, however, the legal title did not pass from Cochran, Holmes & Co., because there was no “Charles Clark” to take under their indorsement; or to Wreford, Dillon & Co., because Mara’s indorsement was a forgery; still the second proposition, above stated, must be resolved, viz : are the defendants, or Cochran, Holmes & Co., estopped from denying the plaintiffs’ title ?

“The principle of estoppel in pais has a very extended and just application in the law of bills and notes, the doctrines of which are designed to give credit and circulation to negotiable securities, and, to that end, throw its protection around the honest and fair holders thereof.” See 14 Ind. 382 ; 114 Eng. C. L. 426, 432 ; 15 New York, 575 ; 5 Cowen, 688, 711; 22 Iowa, 404; 1 Parsons on Notes and Bills, 560, 589, 244 ; Story on Notes, sec. 80; Edw. on Bills, 250; and Phillips v. Thurn, 114 E. C. L. 694.

Cochran, Holmes & Co., having indorsed this bill to “Charles Clark,” delivered it to William Mara. And, if facts are more significant than words, they intended to indorse it to Mara, as they certainly intended to deliver it to him. By the transfer of the bill, their purpose was to pay for the nutmegs, and they intended to make payment to the person from whom they i*eceived them. Mara was that person. They were ignorant of his true name, and supposed it to be Clark. He had deceived them as to his name, but not as to his identity. He was, in fact, the identical person from whom they had received the nutmegs, and for whom they intended the bill, when they indorsed it to “Charles Clark.”

Suppose Cochran, Holmes & Co., in the presence of Wreford, Dillon & Co., had indorsed the bill to “ Charles Clark,” and delivered it to William Mara, saying this is the amount due you on account of your nutmegs, and Mara had, then and there, indorsed and delivered it to Wreford, Dillon & Co. ? The case would have been, on all fours, with the present; and we think that, under such circumstances, Wreford, Dillon & Co. might well have relied upon the conduct of Cochran, Holmes & Co. as a representation that Mara’s name was Clark, although they had no interest in the transaction between them. It must be kept in mind, that Cochran, Holmes & Co. thus put in circulation a negotiable security, and invited the world to give it credit. We cannot resist the conclusion, that the indorsement, by Cochran, Holmes & Co., to Charles Clark, and their delivery, as part of the same transaction, must be regarded as an affirmation to all persons not otherwise informed, that there was such a person as Charles Clark, and that Mara was that person.

And, if this be so, it follows, upon the plainest principles of right as well as policy, that the defendants should not be permitted, as against an innocent holder for value, and before dishonor, to aver or prove to the contrary.

Judgment reversed, and cause remanded for further proceedings.

Welch, C. J., and White, Day and West, JJ., concurred.  