§ 22. Parties and their capacity-In general. In this chapter we shall consider parties to bills, notes and checks and the capacity of such parties. It may be stated that the general rules governing contracts will apply as to the capacity of persons to make and indorse bills, notes and checks,1 and also as to the effect of the various forms of legal disability, as infancy, insanity, coverture and alien enmity, upon the rights of the parties. Paper executed by persons who are under any of the above disabilities, is either void or voidable. Others, as partnerships, corporations, and agents, who have capacity to make simple contracts also have capacity, to certain extent, to execute and transfer bills, notes and checks. We shall consider in turn the capacity of all these parties to execute negotiable instruments, or bills, notes and checks. 1 Bromwich v. Loyd, Lutw. 1582; Hodges v. Steward, 12 Mod. 36; Sarsfield v. Witherley, 2 Vent. 292. For convenience, parties and their capacity may be considered under two main divisions or heads, viz., 1st-those parties partially or wholly incapacitated, and 2nd-those parties not incapacitated. § 23. Parties partially or wholly incapacitated-In general. Parties partially or wholly incapacitated may be classified either as parties lacking mental capacity, such as infants, lunatics, drunkards and spendthrifts; or as persons lacking legal capacity other than mental, such as married women, the bankrupt or insolvent payee and alien enemies. § 24. Same-Persons lacking mental capacity-Infants. There is a difference of opinion in the decisions of the various states as to whether a negotiable instrument made, accepted or indorsed by an infant, that is, by one under twenty-one years of age, is absolutely void or is merely voidable. The better opinion is that such note is voidable and may be ratified by the minor after reaching his majority But before reaching his majority and ratifying the instrument the infant cannot bind himself absolutely as drawer, indorser, acceptor or maker of a bill of exchange or promissory note.4 If an instrument is given by an infant for necessaries, the better opinion is that the instrument is voidable and if repudiated by the infant, he may be recovered against not on the note but for the value of the articles supplied, or service rendered, that is, in actions known technically as “quantum valebat" and "quantum meruit," respectively. A note, bill or check made payable to an infant is enforceable by the infant against the maker or acceptor, as the privilege of 2 Tyler v. Gallop, 68 Mich. 185, 35 N. W. 902, 13 Am. St. Rep. 336; Little v. Duncan, 9 Rich. (S. C.) 55, 64 Am. Dec. 700; Askey v. Williams, 74 Tex. 294, 11 S. W. 1101, 5 L. R. A. 176. See note 18 Am. St. Rep. 606-611. Contra, Wentworth 3 Heady v. Boden, 4 Ind. App. 475, 30 N. E. 1119; Whitney v. Dutch, 14 Mass. 457, 7 Am. Dec. 229; Minock v. Shortridge, 21 Mich. 304. 4 Fetrow v. Wiseman, 40 Ind. 148; Minock v. Shortridge, 21 Mich. 304; Little v. Duncan, 9 Rich. 55, 64 Am. Dec. 700; Stern v. Meikleham, 56 Hun (N. Y.) 475, 10 N. Y. S. 216. 5 Morton v. Steward, 5 Ill. App. 533; McCrillis v. How, 3 N. H. 348; Swasey v. Vanderheyden, 10 Johns. (N. Y.) 33. But see, Earle v. Reed, 10 Metc. (Mass.) 387; Aaron v. Harley, 6 Rich. (S. C.) 26; Bradley v. Pratt, 23 Vt. 378. Guthrie v. Morris, 22 Ark. 411; Munson v. Washband, 31 Conn. 303, 83 Am. Dec. 151; Askey v. Williams, 74 Tex. 294, 11 S. W. 1101, 5 L. R. A. 176. avoiding the contract lies with the infant and is for his benefit.7 The one who pays should use due care in paying lest payment should be made to the guardian rather than to the infant. An infant's indorsement, that is, his writing his name on the back and making the instrument payable to some one else, is voidable, not absolutely void. He may choose to disaffirm it, and by returning the consideration received, compel the maker or acceptor to pay him, although the money has already been paid to the indorsee or the one to whom the infant indorses it; or the infant may disaffirm the indorsement, notify all the parties, and if payment has not been made to the indorsee, destroy his title to the bill or note.8 In case of the indorsement of the note or bill by the infant payee, the maker or acceptor is liable, as the fact that they make the instrument payable to an infant estops or precludes them from denying his capacity to indorse the instrument. It would be absurd to allow one who has made an instrument payable to an infant, or his order, to refuse to pay the money to one to whom the infant had ordered it to be paid, in distinct violation of his promise." The Negotiable Instruments Law provides:10 "The indorsement or assignment of the instrument by a corporation or by an infant passes the property therein, notwithstanding that from want of capacity the corporation or infant may incur no liability thereon." The above section of the law does not take away the infant's right to disaffirm his indorsement and recover the instrument even against an innocent indorsee for value.10a As the instrument of an infant is not absolutely void, but voidable only at his election, it follows that, after reaching full age, the then adult may ratify and affirm his bill or note executed while he was an infant. Unless a written ratification is required by statute, a verbal ratification is suffcient. In some states by statute it is required that this ratification be in writing. 7 Garner v. Cook, 30 Ind. 331; Dulty v. Brownfield, 1 Pa. St. 497; Grey v. Cooper, 3 Dougl. 65; Bunker's Cases, 331. 8 Hardy v. Waters, 38 Me. 450; Nightingale V. Withington, 15 Mass. 272, 8 Am. Dec. 101; Story Prom. Notes, § 80. Frazier v. Massey, 14 Ind. 382, 15 Hardy v. Waters, 38 Me. 450; 10 Neg. Inst. Law, § 22, where all cases directly or indirectly bearing upon or citing the Law are grouped. 10a Murray v. Thompson, 136 Tenn. 118, 188 S. W. 578, L. R. A. 1917 B, 1172. § 25. Same-Persons lacking mental capacity-Lunatics and imbeciles. The bill or note of a lunatic, imbecile, idiot, or other persons non compos mentis, from age or personal infirmity, is, subject to the conditions set out below, not binding on such persons during the period of incompetency.11 There is a conflict of authority in the various jurisdictions as to whether one ignorant of the incompetency of a person with whom he contracts will be protected. The better opinion would seem to be that he will be protected if he has acted in good faith and taken no undue advantage of the afflicted person.12 That is, he will be protected if the note was obtained or the contract entered into in good faith, in ignorance of the want of capacity of the insane person to contract, and for a full and adequate consideration of money paid, or property delivered to him. As to whether a bill or note given for necessaries binds one under such incompetency, the more just rule would seem to be to place such an instrument upon the same footing as the bill or note of an infant given for necessaries, as discussed in the previous section.13 Contracts with a person who has been adjudged judicially to be insane and for whom a committee or guardian has been appointed to care for his interests are not valid and cannot be enforced if disaffirmed or avoided. If the insanity of a party to a contract is known, the contract is absolutely void.14 11 15 Am. Dec. 361 note; Mussleman v. Cravens, 47 Ind. 1; Ellars v. Mossbarger, 9 Ill. App. 122; Hale v. Browne, 11 Ala. 87; Milligan v. Pollard, 112 Ala. 465, 20 So. 620; Burke v. Allen, 29 N. H. 106, 61 Am. Dec. 642; Carrier v. Sears, 4 Allen (Mass.) 336, 81 Am. Dec. 707; American Trust Co. V. Boone, 102 Ga. 202, 29 S. E. 182, 66 Am. St. Rep. 167, 40 L. R. A. 250. See note 11 Am. St. Rep. 320. 12 Memphis Nat. Bank v. Sneed, 97 Tenn. 120, 36 S. W. 716, 56 Am. St. Rep. 788, 34 L. R. A. 274; Snyder v. Lanback, 7 Wkly. Notes Cases (Pa.) 464 note; Mussleman v. Cravens, 47 Ind. 1; Hosler v. Beard, 54 Ohio St. Rep. 398, 43 N. E. 1040, 56 Am. St. Rep. 720, 35 L. R. A. 161. Contra, American Trust Co. v. Boone, 102 Ga. 202, 29 S. E. 182, 66 Seaver v. Phelps, 11 Pick. 304, 22 Contra, Milligan v. Pollard, 112 Ala. 465, 20 So. 620; Davis v. Tarver, 65 Ala. 98; McKee v. Purnell, 18 Ky. L. Rep. 879, 38 S. W. 705. 14 American Trust, etc., Co. v. Boone, 102 Ga. 202, 29 S. E. 182, 66 Am. St. Rep. 167, 40 L. R. A. 250; Hughes v. Jones, 116 N. Y. 67, 22 N. E. 446, 15 Am. St. Rep. 386, 5 L. R. A. 637; Schramek v. Shepeck, 120 Wis. 643, 98 N. W: Such persons of unsound mind may be payees of bills or notes and may compel payment to them or a return of the consideration. As payees they may indorse the paper and the indorsee may recover of the maker or acceptor, and the latter are estopped from denying the payee's capacity to indorse if the payee was incompetent when the bill or note was executed.15 It has been held, that the insanity of the indorser may be pleaded by the maker of a note in an action brought against him by the indorsee.16 But the better doctrine is as above stated that the contract of indorsement by an insane person is voidable and not void, and such contract is binding upon all prior parties to the instrument who are of sound mind.117 No action will lie on an accommodation indorsement of a promissory note by a lunatic, even in favor of an innocent holder.18 There is a presumption that every person is of sound mind and capable in that respect of contracting a liability on a bill, note or check until the contrary appears.19 If a person contracts such a liability with a third person whom he knows to be insane, it is not valid, for unsoundness of mind would be a good defense, if it could be shown that the defendant was not of capacity and the plaintiff knew it.20 But where a person as above in good faith contracts with another, without notice of any such insanity as affects his capacity to contract, the ordinary presumption of sanity prevails, and the contract is valid, unless undue advantage was taken of the lunatic.2 21 § 26. Same-Persons lacking mental capacity-Drunkards and spendthrifts. If a person became so drunk as to be deprived of understanding and reason and in such a condition signs a bill or note, either as maker, drawer, indorser or acceptor, the 213; Coleman v. Farar, 112 Mo. 54, 20 S. W. 441. But see, Kimball v. Bumgardner, 16 Ohio Cir. Ct. 587, 9 Ohio Civ. Dec. 409. 15 Carrier V. Sears, 4 Allen (Mass.) 336, 81 Am. Dec. 707. 16 Walker v. Winn (Ala. 1905), 39 So. 12; Burke v. Allen, 29 N. H. 106, 61 Am. Dec. 642. 17 Carrier V. Sears, 4 Allen (Mass.) 336, 81 Am. Dec. 707. 18 Van Patton v. Beal, 46 Ia. 62; Edwards v. Davenport, 20 Fed. 756; Smith v. Mirsack, 6 C. B. 486. But see, Memphis Nat. Bank v. Sneed, 97 Tenn. 120, 36 S. W. 716, 56 Am. St. Rep. 788, 34 L. R. A. 274; Bechtel's Appeal, 133 Pa. St. 367, 19 Atl. 412. 19 Jackson V. Van Dusen, 5 Johns. 144; 1 Parsons on Notes and Bills 150. 20 Hannahs v. Sheldon, 20 Mich. 278; Lincoln v. Buckmaster, 32 Vt. 652; Hughes v. Jones, 116 N. Y. 67, 22 N. E. 446, 15 Am. St. Rep. 386, 5 L. R. A. 637. 21 Mutual Life Ins. Co. v. Hunt, 79 N. Y. 541; Hosler v. Beard, 54 Ohio St. Rep. 398, 43 N. E. 1040, 56 Am. St. Rep. 720, 35 L. R. A. 161; Behrens v. McKenzie, 23 Ia. 343. |