ciples by which they should be guided in determining the case." Question 504: (1) Does a partner in a trading partnership have apparent authority to bind the firm for firm purposes on negotiable paper? If such paper is issued for other purposes, can this be set up against a holder in due course? (2) When can a holder in due course hold a partner in a non-trading partnership on negotiable paper wrongfully issued by his partner? § 481. (Nego. Instru., Sec. 89.) Lack of authority of corporate officer. Case 505. Alton Manufacturing Co. v. Garrett Biblical Institute. (Set out under § 757, post.) B. Defenses Available Against a Holder in Due Course -Real Defenses. § 482. Real defenses defined. § 483. Personal incapacity of defendant. § 484. Forgery. § 485. Material alteration. § 486. Fraud in execution. § 487. Illegality which under statute makes instrument void in every person's hands. § 482. (Nego. Instru., Sec. 90.) In general. (Real defenses are called real (re-al) "because they attach to the res, i. e., the instrument itself, regardless of the merits or demerits of the plaintiff. A purchaser for value without notice. is therefore powerless against a real defense." (Ames, Cases on Bills and Notes, Vol. II, p. 811.) The real defenses are defenses that go not to the merits or equity of the transaction but consist in some extrinsic claim-lack of capacity, forgery, alteration, etc. They are, we may say, unusual defenses if we speak comparatively.) § 483. (Nego. Instru., Sec. 91.) Personal incapacity of defendant. Case 506. Hosler v. Beard, 54 Ohio St. 398. Facts: Beard 'while insane, but not yet so declared judicially, gave a promissory note to one Glathart who sold it in due course to Hosler, the present plaintiff. Defense, insanity at the time of the execution of the note. Point Involved: Whether the maker of a note may defend against a bona fide holder that he was insane when he gave the note. WILLIAMS, C. J.: "The material question then is whether that rule of commercial law which protects negotiable paper in the hands of a bona fide holder, who has acquired it before its maturity, for value, is applicable to such paper signed by persons who at the time were non compos mentis, where there has been no ratification of it; and that it is not, is well settled. Such paper being invalid, except to the extent that it is founded upon a consideration of necessaries, or other valuable consideration, actually furnished, an action dissociated from such consideration cannot be maintained upon it, when the incapacity of the maker is shown; and the quality of negotiability does not attach to it, though made negotiable in form; and every holder of such paper is chargeable in law with notice of the status of the maker as it existed at the time of its execution, and stands, therefore, in no better position, so far as his right of action against the maker is concerned, than the payee from whom he obtained it; and a want of actual knowledge, when he received the note, of the maker's mental condition when it was signed, makes no difference in that respect. So far as we have been able to discover, the authorities uniformly maintain that the paper of persons non compos [insane], infants, and feme coverts [married women] at common law, all resting upon much the same principle, is not within the commercial rule which protects a bona fide holder of a negotiable note, received before it became due, from the defenses which the maker might have made against the payee; and that, in defense to such paper in the hands of such a holder, the maker's incapacity to execute it may be shown." Question 506: What was the point at issue in this case? Did it prevail? Why? (2) Suppose the maker in this case had been a minor. Would the defense have prevailed! § 484. (Nego. Paper, Sec. 92.) Forgery. Case 507. Ehrler v. Braun, 120 Illinois, 503. * * are forgeries we think is established by the decided weight of evidence. Conceding, then, as we must, that the notes in the hands of the appellant are forgeries, it is very clear that the fact that she is a bona fide holder for value cannot avail her anything unless appellee has so acted in respect to them as to estop him. from interposing their original infirmity as a defence, * * #99 Question 507: Is forgery a good defense against a holder in due course? Might there be circumstances under which the defense would not be good? § 485. (Nego. Instru., Sec. 93.) Material alteration. Case 508. Merritt v. Boyden, 191 Ill. 136. Facts: Suit was brought on a promissory note, reading as follows: "1300. Kewanee, Illinois, Oct. 4, 1897. One year after date I promise to pay to the order of ourselves thirteen hundred dollars at Kewanee, Ill. Value received, with interest at the rate of seven per cent per annum. Indorsed on back: "L. Silverman. (sd.) L. SILVERMAN, H. CLAY MERRITT." Boyden & Son paid $1300 for the note, acquired it before maturity and had no notice of any alteration. The defense was based on the alternative of two theories: (1) That the note as originally delivered contained the figures "$100" in the margin, and the words "one hundred dollars" in the body of the note, and that the figures "$100" were altered to read "$1300," and the word "one" before "hundred" was erased, and the word "thirteen" inserted in its stead; or (2) That the word "one" was not in the body of the note, but that there was a blank space in which the word "thirteen" had been inserted. The Court in the course of its opinion said: "First, If the note was altered by (the first method) then the alteration amounted to a forgery and appellant is not liable on the note, even though appellees were, bona fide purchasers thereof for value without notice or knowledge of the change. If the amount named in the note is raised by erasing what is written, such alteration is a material one, and the note is thereby vitiated so as to become void. Where a note is complete at the time when it is signed by the maker, its subsequent alteration by raising the amount thereof through obliteration of the same by the use of any chemical process, or other ingenious device, without the knowledge or consent of the maker, will discharge him from liability upon the note. (The Court found * was this theory unsupported by the evidence.) "The second theory of the defense that, when he signed and endorsed the note, there was a blank space before the word 'hundred' and that this blank space was subsequently filled by inserting the word 'thirteen' therein without the knowledge or consent of the appellant. When the maker of the note has, by careless execution of the instrument left room for an alteration to be made by insertion without defacing the instrument or exciting the suspicion of a careful man, and the instrument by reason of the opportunity thus afforded is subsequently filled up with a larger amount than that which it bore at the time it was signed, the maker will be liable upon it as altered to any bona fide holder without notice." (This left the contention that the marginal figures had been altered to be disposed of. For even though the makers of the note were negligent as to the body of the note, the marginal figures must have been erased and changed. As to that the Court said :) "The marginal figures have been held to be not part of the instrument, but to be intended merely as a convenient index, and as an aid to remove ambiguity or doubt in the instrument itself. The alteration or erasure of the marginal figures is an immaterial alteration and will not affect the rights of the holder of the instrument." Question 508: (1) What were the theories of the defense? How were they disposed of? (2) What did the Court say with reference to the duty of a maker of negotiable paper to fill in blank spaces, so that the check could not be easily altered? (For another view, see the next case and note following same.) Case 509. Broad Street Bank v. National Bank of Goldsboro, 112 S. E. (N. S.) 11, 22 A. L. R. 1124. Facts: One Massey, a man of business affairs and living in Richmond, Virginia, well known there and known to some of its banks, among them the Broad Street Bank, on or about the 18th of June, 1918, was in Goldsboro, and after regular banking hours went to the defendant bank, the National Bank of Goldsboro and requested Norwood as President of such Bank to issue to him for New York Exchange checks for $2, $6, $2 and $3 respectively, payable to said Massey. Norwood wrote out said amounts in ink on ordinary bond paper, not sensitized and without use of protectograph. That Massey raised these drafts to the total sum of $40,000, using a protectograph himself and negotiated the drafts so altered to plaintiff bank (the Broad Street Bank) for value. The Broad Street Bank sues the National Bank of Goldsboro on the ground that in not using 1 |