sensitized paper and a protectograph which are in common and usual use by banks, the payee of the drafts was enabled thereby to alter them, and drawer bank should therefore be chargeable with the loss.

HOKE, JUSTICE,

"the complaint alleges that these checks for the smaller amounts were executed on the ordinary paper of the bank with lithograph forms, the spaces are filled out by writing in ink, signed by the president of the defendant bank, and delivered to the payee as completed instruments. And on these controlling facts in the transaction, the great weight of well considered authority on the subject is against the liability which plaintiff now seeks to enforce [citing cases]."

[The court goes somewhat extensively into a review of the cases which hold that an issuer of a completed negotiable instrument is under no duty to cancel spaces that are not filled up by the writing; and that, therefore, a holder in due course who purchases the instrument after the spaces have been fraudulently filled in, has no case against the issuer, except upon the instrument as originally drawn. The court concludes that these cases are in accordance with the great weight of authority, and concludes that upon their authority the defendant bank in this case is not liable upon the facts presented. Chief Justice Clark delivered a strong dissenting opinion.]

(Note: The weight of authority is, as the above case sets forth, that if a person issuing negotiable paper which is complete in form, that is, is without blanks that are intended to be filled up by the holder, but which has spaces in it which are uncancelled and in which a person may write additional words, such person is not liable upon the instrument as fraudulently altered by the filling in of such spaces. While this is the weight of authority and is supported by three recent cases which are decided under the Negotiable Instruments Act, it seems to the writer that the minority view is the sounder and better view, and that the courts who do adopt the majority view are

not recognizing a very great evil in our national life which strenuous efforts are required to overcome. It is well known that the losses by forgery and alteration run annually into vast sums of money. Bankers and business men all recognize the fact that issuers of negotiable instruments should exercise great care in the drawing of the paper. Rules are promulgated such as "Cancel out all blank spaces," etc. But comes along the Court and says: "You do not have to cancel them out; you do not have to presume that a forgery will be committed. You are entitled to presume that men are honest and will not fraudulently alter your paper." The New York Court says: "It would be a stigma and reflection upon the character of the mercantile community and constitute an intolerable reproach of which they might well complain as without justification in practical experience or the conduct of business. That there are miscreants who will forge commercial paper by raising the amount originally stated in the instrument is too true."

Well, if it be too true, let us seek to overcome it. Surely it is little to ask of one who puts out paper that is intended to circulate that by a flourish of his pen he cancel out spaces that "miscreants" may otherwise fill in. Alteration cannot be prevented; but the ordinary precaution of erasing spaces is not a hardship on any one. Surely if a corporation puts out a bond issue we would expect skill and good workmanship in the form and appearance of the bond. Negotiable instruments are bond. issues, and a little care in their execution to meet the well known and growing evil of alteration may well be expected of those who issue negotiable paper. The law ought to be progressive and do its part in fostering sound business customs.

The argument that a person need not anticipate that a crime will be committed, and that it is the alteration and not the leaving of the spaces which is the proximate cause of the loss would seem to apply equally to other situations to which it is never applied. If one places a certificate of stock indorsed in blank with a depositary for safe keeping, and the depositary sells it in violation of his trust, why could it not be said and with as great a show of indignation that the owner does not need to anticipate such breach of trust? But it is said in such cases the owner has clothed the other with apparent ownership or apparent authority. True, but need he anticipate a breach of trust or the commission of a crime? Yes, he must, and he loses by that breach of trust or crime. If so, there, why not here?)

§ 486. (Nego. Instru., Sec. 94.) Fraud in execution.

Case 510. Auten v. Gruner, 90 Illinois, 300.

Facts: Suit by indorsee of a note signed by defendant. The payee of the note was a traveling peddler, selling churns for $10.00, one of which defendant purchased and was asked to sign a note for ten dollars at six months as the price thereof. He read the note twice and saw that it was for ten dollars. By some trick, that he could not explain, a note for $300 was inserted in the stead of the note read by the defendant, and his signature thereby obtained.

Point Involved: Whether fraud in the execution or procurement, i. e., in the nature of a trick, by which the signature is obtained to a different instrument than one meant to sign, is a good defense against a holder in due

course.

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MR. JUSTICE SCOTT: Adhering as we do to what has been said in our former decisions, as to the degree of caution to be observed by the maker of negotiable paper before he will be permitted to defend against his note in the hands of an innocent assignee before maturity on the ground it was obtained by fraud and cireumvention, still, we think the evidence in this record does not show defendant omitted to observe due care, or that he was guilty of such negligence as ought, equitably, to estop him from defending against the note in suit. He' bought a churn from a stranger for the use of his family, for the sum of $10, and supposed he was giving his note for that amount. Observing unusual care he twice read the note and could discover nothing wrong about it. That he was tricked into signing the note in controversy was no fault of his, and he does not even know how it was done."

Question 510: What is fraud in the execution? Is it a good defence against a holder in due course? What duty or care is on the maker?

(Note: Where a person is induced to sign a negotiable instrument upon representations that it is an instrument of a

different character, the rule in most states is, under statute in some of them, that he is not liable if he was not negligent. This is variously termed "fraud in the procurement, "fraud in the execution," "fraud in the inception." What contsitutes negligence is not so easy to state. Not reading it when one could have read it, or not having it read, when one who cannot read could have had it read by a third person, is generally considered negligence. But there are tricks and devices which precaution cannot avail against. In some states, one is liable in any event without regard to care on the principle that if loss must fall upon one of two innocent parties, let it fall upon the one who made it possible. First Nat. Bank v. Johns, 22 W. Va. 520.)

§ 487. (Nego. Instru., Sec. 95.) Illegality which under statute makes instrument void in every person's hands.

Case 511. Alexander v. Hazelrigg, 123 Kentucky Reports, 677, 97 S. W. 353.

Facts: Hazelrigg delivered to Desha Lucas the following instrument:

"1,592.90. Mt. Sterling, Ky., September 14, 1904. Sixty days after date we jointly and severally promise to pay to Desha Lucas or order, fifteen hundred and ninety-two and 90/100 dollars, negotiable and payable at the Montgomery National Bank, Mt. Sterling, Ky., value received, with interest at six percent per annum. (Signed) John W. Hazelrigg."

Geo. Alexander & Co. bring suit upon this instrument alleging that this note was indorsed by the payee, Desha Lucas, and negotiated to plaintiff as a holder in due

course.

Defendant, Hazelrigg answers that "the note sued on herein was executed to Desha Lucas in payment of a bet or wager which was lost upon the result of a horse race, and the consideration for the execution thereof under the law of Kentucky, is vicious, illegal and void, and which defendant relies on and in bar of any recovery herein." Plaintiff demurred to this plea, that is, questions its legal sufficiency. The court sustained the plea and entered judgment in favor of defendant. Plaintiff appeals.

NUNN, J.: It has been the policy of this state to suppress gaming, and the statutes making gaming contracts void are founded upon what the Legislature has for many years deemed to be sound policy. It is inconceivable that the General Assembly, in the passage of the Act of 1904 [the Uniform Negotiable Instruments Law] for the protection of innocent holders of negotiable instruments intended to or did repeal Section 1955, Ky. St. 1903, which declares all gaming contracts void. In our opinion, the disappointment now and then of an innocent holder of a negotiable instrument would not be as hurtful and injurious to the best interests of the state as the removal of the bar from gaming contracts.

"For these reasons the judgment of the lower court is affirmed."

Question 511:

in due course? Why?

Was the plaintiff in the above case a holder
What defense was made? Did it prevail?

(Note: It is the general rule that a defense of illegality that does not appear on the face of the note cannot be availed of against a holder in due course. However, if the statute declares the instrument void, it is not enforceable in any person's hands. See Notes for Collection of Authorities in 4 American and English Annotated Cases, p. 353 and 11 Idem. 1181.

The policy of these acts may well be questioned. To hold that an innocent person who has bought an innocent looking negotiable instrument can be confronted by the guilty party with a complete defense seems to the editor the acme of injustice.)