LINICK

v. NUTTING CO.
J. Burr
Doctrine
Summary
Facts

Ratio/Issues

Held

1910

140 App. Div. 265 (N.Y. App. Div. 1910)

"Where an incomplete instrument has not been delivered it will not, if completed and negotiated, without authority, be a valid contract in
the hands of any holder, as against any person whose signature was placed thereon before delivery."
A blank check was stolen and subsequently indorsed. The drawer of the check then sued the indorsee to collect the amount of the check. The
Court held that the check cannot be considered as a valid contract, and thus defendant did not acquire any title to it.
20 July 1909 Plaintiff signed his name to a blank check
David Ryckoff and Benjamin Silberman stole the check, and filled in
o
F.A. Mann as payee
o
Sum of $147.87
o
Presented it to State Bank (where plaintiff kept his account)
o
Indorsed the check and passed it to defendant for value

Defendant collected the amount thereof from the bank

Plaintiff now sues defendant as for money had and received for the amount of the check

Municipal Court: Defendant obtained title to the check, and is a holder in due course.
W/N defendant obtained any title to the check (which, as against the plaintiff, was a valid obligation for $147.87)
NO. The theft or wrongful seizure of the paper cannot create a valid contract on the part of the maker against his will, where non existed
before.

One can only part with title to personal property by his voluntary act, or by conduct sufficient to create estoppel

Commercial paper: when by voluntary act, a party intrusts another with such paper with a blank thereon designed to be filled up with a
stipulated amount, such party is liable to a bona fide holder of the instrument, although the amount inserted was larger than that
agreed upon.

If the place of payment is left blank when the maker delivers it, the insertion of a different place of payment than that agreed upon will
not avoid such paper in the hands of an innocent holder for value.
o
Implied authority conferred by the maker upon the person to whom it was delivered to fill in the blanks, OR upon estoppel by
reason of negligence

Upon neither of these grounds can plaintiff be charged in this case

o
Implied authority grows out of the relation of principal & agent, and there is no such relation between a thief and his victim.

Vast difference between the rule of liability upon negotiable instruments between:

Where possession has been parted with by the affirmative act of the maker in an incomplete state

Where his parting with such possesion is the result of a crime

The rule of implied authority to supply the omission only applies where the maker, by his own act or the act of
another, authorized, confided in or invested with apparent authority by him, put the instrument in circulation as
negotiable paper.
o
Plaintiff cannot be charged with negligence giving rise to an estoppel

unless a man is guilty of negligence in writing his name upon a piece of paper which by some possibility may
afterwards be stolen from him, which paper comes into the hands of a third person who is an entire stranger to the
transaction, with words written over the signature which are sufficient in form to make it a check or note.

Actionable negligence involves:

Existence of a duty

Omission to exercise ordinary & reasonable care in connection therewith

Injury resulting in consequence thereof

Where the maker of a completed negotiable instrument has parted with its possession, but it is in such form that it
is possible to make alterations in it, he is not guilty of negligence in this delivering it.

He is not bound to assume that the person to whom he delivers it will be likely to commit a crime
because it is apparently easy to do so.

The drawer of a check is not bound so to prepare it that nobody else can successfully tamper with it.

Much less can he be held liable for negligence because it is possible that he may be deprived of the
possession of an incomplete negotiable instrument by a crime.

Where the note had never been delivered and therefore had no legal inception or existence as a note, the question is whether he is liable
to pay at all, even to an innocent holder for value. The wrongful act of a thief or a trespasser may deprive the holder of his property in a
note which has once become a note, or property, by delivery, and may transfer the title to an innocent purchaser for value. But a note in
the hands of the maker before delivery is not property, nor the subject of ownership, as such; it is, in law, but a blank piece of paper.

"Where an incomplete instrument has not been delivered it will not, if completed and negotiated, without authority, be a valid contract
in the hands of any holder, as against any person whose signature was placed thereon before delivery." (Neg. Inst. Law, 34)

The delivery of a promissory note by the maker is necessary to a valid inception of the contract. The possession of such a note by the
payee or indorsee is prima facie evidence of delivery, but if it appears that the note has never been actually delivered and that without
any confidence, or negligence, or fault of the maker, but by force or fraud, it was put in circulation, there can be no recovery upon it,
even when in the hands of an innocent holder.
Judgment of the Municipal Court reversed and new trial ordered, costs to abide the event.

Prepared by: Nicole [Nego|Jacinto]