§ 23.

Power of

partner to transfer.

Ex-partners.

and farmers, have been held non-traders.1 In Harris v. Amery, Willes, J., points out that the term "trade" is not co-extensive with the term "business." It does not seem to be decided how far the rule applies to cheques, as well as to bills and notes. The question cannot often arise, because opening an account in the firm name is evidence of actual authority. Note that authority to draw cheques is not evidence of authority to draw bills, and a post-dated cheque is a bill.s

Where a bill is payable to the order of a firm, a partner who cannot by his indorsement render his co-partners liable, may transfer the property therein by negotiating it in the firm name. Thus :

1. Bill specially indorsed to a non-trading partnership. One of the partners, without communicating with his copartners, indorses it away for a firm debt. The property in the bill passes to the indorsee.5

2. Bill specially indorsed to a firm under a wrong style (e.g., to "Smith, Brown, & Co.," whereas the proper style is "Brown & Co."). One of the partners indorses it away, using, without the assent of the rest, the wrong style. The firm is not liable on the indorsement, but the property in the bill passes to the indorsee.

When a bill payable to the order of a firm is indorsed by a partner in the firm name, in fraud of his co-partners, the property therein does not pass to an indorsee with notice, but there seem to be technical difficulties in the way of an action brought by the firm. In such case the proper course, perhaps, is to give notice to the acceptor not to pay. He could defend an action against a holder with notice.

When a bill is payable to the order of a firm and the partnership is subsequently dissolved, the indorsement of an ex-partner in the late firm name transfers the property therein and authorizes the payment thereof.8

1 Parsons on Partnership, 2nd ed. p. 99, n.

2 Harris v. Amery (1865), L. R. 1 C. P. at p. 154.

3 Forster v. Mackreth (1867), L. R. 2 Ex. 163.

4 Lindley, 5th ed. p. 131; cf. Pollock, 5th ed. p. 31.

5 Cf. Smith v. Johnson (1858), 3 H. & N. 222; 27 L. J. Ex. 363.

6 Williamson v. Johnson (1825), 1 B. & C. 146; Kirk v. Blurton (1841),

9 M. & W. at p. 287.

7 Heilbut v. Nevill (1870), L. R. 5 C. P. 478, Ex. Ch.

8 King v. Smith (1829), 4 C. & P. 108; Lewis v. Reilly (1841), 1 Q. B.

Lewis v. Reilly may be open to question, in so far as it lays down that an ex-partner, by indorsing a bill in the late firm name, renders his former partners liable as indorsers to a holder with notice of the dissolution.2

The question now turns on the true construction to be put on sect. 38 of the Partnership Act, 1890. See that section, especially with reference to the acts of bankrupt partners, discussed in Pollock on Partnership, 5th ed., p. 94.

§ 23.

unauthorized

24. Subject to the provisions of this Act, Forged or where a signature on a bill is forged or placed signature. thereon without the authority of the person whose signature it purports to be, the forged or unauthorized signature is wholly inoperative, and no right to retain the bill or to give a discharge therefor or to enforce payment thereof against any party thereto can be acquired through or under that signature, unless the party against whom it is sought to retain or enforce payment of the bill is precluded from setting up the forgery or want of authority.

Provided that nothing in this section shall affect the ratification of an unauthorized signature not amounting to a forgery.

ILLUSTRATIONS.

1. A bill is payable to the order of John Smith. Another person of the same name gets hold of it, and indorses it to D., who takes it as a holder in due course. D. acquires no title to the bill, he

1 King v. Smith (1829), 4 C. & P. 108; Lewis v. Reilly (1841), 1 Q. B.

349.

2 Cf. Lindley, 5th ed. p. 216; Kilgour v. Finlyson (1789), 1 H. Bl. 155; Abel v. Sutton (1800), 3 Esp. 108; Anderson v. Weston (1840), 6 Bing. N. C. 296. See passim Odell v. Cormack (1887), 19 Q. B. D. 223, as to dissolution.

3 For the provisions referred to, see sect. 54 (2); sect. 55 (2), as to estoppels; and sects. 60, 80, and 82, protection to bankers paying demand drafts, or collecting crossed cheques. See sect. 7 (3), as to fictitious payees; and sect. 25, as to procuration signatures.

§ 24.

cannot enforce payment against any party thereto,1 and should any party pay him, the payment is invalid.

2. A note payable to order is stolen from the payee. The thief forges the payee's indorsement, and collects the note from the maker's banker, who returns the note to the maker. The payee can recover the amount of the note from the maker in an action for conversion of the note.3

3. A bill is payable to C.'s order. His indorsement is forged. D., a subsequent holder, presents the bill for acceptance. The drawee accepts it payable at his bankers. The bankers pay D. They cannot debit the acceptor with this payment.*

4. A bill purporting to be drawn by A. to the order of C. & Co., and to be indorsed by them, is accepted by the drawee payable at his bankers, and at maturity is paid by them. A. is a customer of the acceptor's, who often drew bills payable to C. & Co. It turns out afterwards that the drawer's and payee's names and signatures were forged by a clerk of the acceptor's, who stole the proceeds of the bills. The bank can debit the acceptor's account with this payment, for the bill never having been payable to the real C. & Co., the payees were fictitious persons and the bill was payable to bearer under sect. 7 (3).5

5. A bill is payable to the order of a firm. X., one of the partners, fraudulently indorses it in the firm name to D. in payment of a private debt. The acceptor pays D. X. becomes bankrupt. X.'s co-partners and trustee can recover from D. the money he received on the bill."

6. C. specially indorses a bill to D. It is stolen before delivery to D., and D.'s indorsement in blank is forged on it. It comes into X.'s hands, and he gets his bankers to present it for payment. They receive payment, and credit X. with the amount. X. subsequently draws out the whole sum. C. can recover the amount of the bill from the bankers.7

7. Note for 1007. X. forges B.'s signature to it as maker. Before the note matures the holder finds out that B.'s signature is a forgery, and threatens to prosecute X. In order to prevent this, B. gives the holder a memorandum, which says, "I hold myself responsible for the note for 1007. bearing my signature." The ratification is invalid. B. is not liable on the note."

1 Mead v. Young (1790), 4 T. R. 28.

2 Graves v. American Bank (1858), 17 New York R. 205; cf. Ogden v. Benas (1874), L. R. 9 C. P. 513.

3 Johnson v. Windle (1836), 3 Bing. N. C. 225.

Robarts v. Tucker (1851), 16 Q. B. 560, Ex. Ch.

5 Bank of England v. Vagliano (1391), A. C. 107, H. L.; reversing Vagliano v. Bank of England (1889), 23 Q. B. D. 243, C. A.

discussed, ante, p. 23.

6 Heilbut v. Nevill (1870), L. R. 5 C. P. 478, Ex. Ch.

See this case

7 Arnold v. Cheque Bank (1876), 1 C. P. D. 578; cf. Charles v. Blackwell (1877), 2 C. P. D. at p. 157.

8 Brook v. Hook (1871), L. R. 6 Ex. 89; Ex parte Edvards (1841), 2 Mon. D. & D. 241; and cf. Williams v. Bayley (1866), L. R. 1 H. L. 200, at p. 221.

8. A. draws a bill payable to C.'s order. As between A. and C. the consideration is fraudulent. X. forges C.'s indorsement, and negotiates the bill to D., who takes it in good faith. D. finds out that C.'s indorsement has been forged, and after the bill is due he obtains a genuine indorsement from C., giving him half the value of the bill. D. cannot sue A.1

9. B.'s acceptance to a bill is forged. A holder who takes it bona fide is afterwards informed that the signature is not B.'s, and accordingly writes to inquire. B. writes back to say the signature is his. B. is liable on this acceptance.2

10. X., a partner in a trading firm, fraudulently accepts a bill in the firm name for a private debt of his own. It is negotiated to a holder for value without notice. The firm is estopped from setting X.'s fraud.3

up

11. The acceptor of a bill forges A.'s name thereon as drawer, then discounts it with a bank. The bill is dishonoured, and notice sent to A. The acceptor gets the bill renewed for a smaller sum, paying the difference in cash to the bank, and on the renewal again forges A.'s name as drawer. The renewed bill is dishonoured, and notice sent to A. A. does not repudiate the transaction for fourteen days. He is not estopped from setting up that his signature was forged."

12. X. forges B.'s acceptance. B. pays the holder.

Afterwards

X. again forges B.'s acceptance, which, unknown to B., gets into the hands of the same holder. B. may set up that his signature was forged."

13. X. forges B.'s acceptance, and, in consideration of B.'s paying it, gives him a bill of sale. A seizure under this bill of sale cannot be set aside by X.'s trustee in bankruptcy."

14. A letter of credit on a bank is granted in favour of C., whose clerk gets possession of it, forges C.'s name to a draft, and obtains the money. The bank is not discharged by this payment."

By sect. 60, post, p. 208, a banker who pays a demand draft held under a forged indorsement is protected.

$24.

Illustration 7 shows that a forgery cannot be ratified, and Ratification. the language of the Act seems to countenance this view. In the United States it has been laid down that a forgery may be ratified, but perhaps the cases might be explained

1 Esdaile v. La Nauze (1835), 1 Y. & C. 394.

2 Brook v. Hook (1871), L. R. 6 Ex. at p. 100; Wilkinson v. Stoney (1839), 1 J. & S. 509; Robarts v. Tucker (1851), 16 Q. B. at p. 577.

3 Hogg v. Skeen (1865), 18 C. B. N. S. at p. 432 ; 34 L. J. C. P. at p. 155, Willes, J.

4 M'Kenzie v. British Linen Co. (1881), 6 App. Cas. 82, H. L.

5 Morris v. Bethell (1869), L. R. 5 C. P. 47.

6 Ex parte Caldecott, Re Maplebeck (1876), 4 Ch. D. 150, C. A.

7 Orr v. Union Bank (1854), 1 Macq. H. L. 513.

8 Union Bank v. Middlebrook (1865), 33 Connect. 95; Howard v. Duncan

(1870), 3 Lans. New York, 174.

§ 24.

Estoppels.

Injunction, &c.

Fraudulent

alteration.

Foreign laws.

on the ground of estoppel. In a Scotch appeal before the Act, Lord Blackburn says that a forgery may be ratified, but the English cases were not cited, and the decision turned on the ground that the facts had not created an estoppel.

2

The word "precluded" was inserted in committee in lieu of the word "estopped," an English technical term, unknown to Scotch law. Though a forgery cannot be ratified, yet a person whose signature has been forged may by his conduct be estopped from denying its genuineness to an innocent holder (Illustration 9); and, again, a party to a bill may be estopped by his conduct, or in certain cases by the fact of becoming a party, from setting up that the signatures of other parties thereto are forged or unauthorized. Where an estoppel by negligence is relied on, it must be shown that the negligence was the direct and proximate cause of the forgery being taken as genuine.* There was formerly ground for contending that when a married woman's indorsement was forged by her husband, the property in the bill passed to a holder in due course; but since the Married Women's Property Act and this Act, it is conceived that this contention could no longer be maintained.

5

Where a bill is held under a forged signature, the court will restrain its negotiation by injunction, or order it to be given up and cancelled.

A bill held under a forged signature must be distinguished from a bill with genuine signatures which has been fraudulently altered, though such alteration may amount to the crime of forgery: see sect. 64, post, p. 213.

According to modern French law, it seems that payment without notice of a bill held under a forged indorsement, or payment made to an individual who personates the payee,

1 M'Kenzie v. British Linen Co. (1881), 6 App. Cas. at p. 99, H. L.

2 Arnold v. Cheque Bank (1876), 1 C. P. D. 578; Patent Safety Gun

Cotton Co. v. Wilson (1880), 42 L. J. C. P. 713, C. A.

As to drawer, see sect. 55 (1); maker of note, sect. 88 (2); indorser, sect. 55 (2); acceptor, sect. 54; acceptor for honour, sect. 66, note; fictitious payee, sect. 7 (3); fictitious drawee, sect. 5 (2).

Arnold v. Cheque Bank (1876), 1 C. P. D. 578; cf. Bank of England v. Vagliano (1891), A. C., 107.

Dawson v. Prince (1858), 27 L. J. Ch. 169, L.JJ.

6 Esdaile v. La Nauze (1835), 1 Y. & C. 394; Seton on Decrees, 4th ed. pp. 281-283.