c. Forged indorsement.- No title, legal or equitable, can be acquired to a note originally obtained by fraud and passed by means of a forged indorsement, in fraud of the rights of the maker.92 Where a check payable to the order of a payee was delivered to him, and it afterward came into the possession of one not entitled to it, who forged the payee's indorsement, and passes it to another person who received the money on it, such person is liable to the payee and not to the drawer.93 The liability of the indorsee on a forged indorsement is not affected by the fact that he acted in good faith in taking the instrument; the forged indorsement passed no title to him, and he is not entitled to any of the benefits of a bona fide holder of the instrument." Where a thief or finder of negotiable paper, payable to order, which has been indorsed and put into circulation by the payee, erases the indorsement, and subsequently personating the payee, forges his signature and transfers the paper to a bona fide purchaser for value, no title passes as against the true owner.95 A lawful custodian of a note payable to the order of a particular payee, who forges the name of the payee, cannot thereby transfer to an innocent purchaser for value, a valid title to the instrument as against

§ 129. When party is precluded from setting up forgery.

94

a. Estoppel. A party, against whom it is sought to enforce payment under a forged signature, is precluded from setting up the forgery, where he is estopped, either by conduct amounting to estoppel in pais, or by the implied warranties which attach to the act of issuing, accepting, or indorsing negotiable paper. The rule of estoppel has been laid down by Lord Denman as follows: "Where one by his words or conduct willfully causes another to believe the existence of a certain state of things and induces him to act on that belief so as to alter his own previous position, the former is concluded from averring against the latter a different

Gray (Mass.), 305; Kennedy v. State, 33 Tex. Crim. Rep. 183, 26 S. W. 78.

92. Carpenter v. Northborough Nat. Bank, 123 Mass. 66; Key v. Knott, 9 Gill & J. (Md.) 342; Wells v. Sutton, 91 Ind. 280.

93. Hensel v. Chicago, St. Paul, M. & O. R. Co., 37 Minn. 87, 33 N. W. 329.

94. Onondaga County Sav. Bank v. United States, 64 Fed. 703, 12 C. C. A. 407.

95. Colson v. Arnot, 57 Ñ. Y. 253, 15 Am. Rep. 496.

96. Roach v. Woodall, 91 Tenn. 206, 18 S. W. 407, 30 Am. St. Rep. 883. See also Buckley v. Second Nat. Bank, 35 N. J. L. 400, 10 Am. Rep. 249; Rowe v. Putnam, 131 Mass. 281,

It is generally

state of things as existing at the same time." 97 held that negligence amounting to a breach of duty supplies the place of intent.98 There are also cases where a party may be concluded from asserting his original rights to property in consequence of his acts or conduct, in which the presence of fraud, actual or constructive, is wanting, as where one of two innocent parties must suffer from the negligence of another, he, by whose agency the negligence was occasioned, will be held to bear the loss; but where the condition of affairs is known to both parties, or both have the same means of ascertaining the truth, there can be no estoppel.99

After considering the cases in relation to the doctrine of estoppel, it may be said that its essential elements are: (1) A false representation or concealment, where there is a duty to speak, of a material fact, or negligence in this respect amounting to a breach of duty; (2) the representation or concealment must be with a knowledge of the facts, or at least a reckless disregard of the facts; (3) it must have been made with the intention that the other party should act upon it or have been of such a nature that a reasonable man would take it to be true and believe that it was meant to be acted upon; (4) the other party must have been, without negligence, ignorant of the truth of the matter; (5) the other party must have acted upon the false representation or concealment.

97. Pickard v. Sears, 6 Ad. & El. (Eng.) 469, 474.

Rule of estoppel. The principle is stated more broadly by the same judge (Lord Denman) in the case of Gregg v. Wells, 10 Ad. & El. (Eng.) 90, as follows: "A party who negligently or culpably stands by and allows another to contract on the faith of a fact which he can contradict, cannot afterward dispute that fact in an action against the person whom he has himself assisted in deceiving."

The rule was further extended by Parke, B., in Freeman v. Cooke, 18 L. J. Exch. (Eng.) 114, by the following comment upon the rule as laid down in Pickard v. Sears, supra: By the term willfully,' however, in that rule we must understand, if not that the party represents that to be true which he knows to be untrue, at least that he means his representation to be acted upon, and that it is acted upon accordingly; and if, what

ever a man's real meaning may be, he so conducts himself that a reasonable man would take the representation to be true, and believe that it was meant that he should act upon it, and did act upon it as true, the party making the representation would be equally precluded from contesting its cruth; and conduct by negligence or omission, when there is a duty cast upon a person by usage of trade or otherwise to disclose the truth, may often have the same effect."

98. In Manufacturers' Bank V. Hazard, 30 N. Y. 226, it was said: "It is not necessary to an equitable estoppel that the party should design to mislead. If his act was calculated to mislead and actually has misled another acting upon it in good faith, and exercising reasonable care and diligence under all the circumstances that is enough."

99. Brant v. Virginia Coal & Iron Co., 93 U. S. 326, 23 L. Ed. 927.

It will be seen from these rules, that the doctrine of estoppel cannot be asserted to bind one by a forged signature, unless the party asserting the doctrine has parted with something or incurred a liability by reason of the false representation or concealment of a material fact. Hence a number of cases which hold that one is never bound by a forged signature except by reason of the operation of the rule of estoppel, are to the effect that where, after the holder has acquired the instrument, a person liable thereon has, without new consideration, promised to pay such instrument, this promise will be void and of no effect. The theory on which these cases proceed is that as no one can be lawfully delegated to commit an unlawful act, a subsequent ratification of such unlawful act is impossible.1 Of course, in the case of a new consideration there 1. Forged signature cannot be rati- the note, taken it upon the faith of fied. There are many well-considered these admissions, or had he at all cases to the effect that as forgery of changed his status by reason thereof, an instrument involves a crime and such facts would create an estoppel public wrong, beside being opposed to which would preclude Wright now public policy, it cannot be ratified so from his defense. This appears from as to bind the person whose name has most of the authorities cited in the been forged, in the absence of an es- case. But no foundation for an estoppel in pais, without a new con- toppel exists. All these statements of sideration for the promise. See Henry Wright, whatever they were, were v. Heeb, 114 Ind. 275, 16 N. E. 606, made after Workman became the 5 Am. St. Rep. 613; Woodruff v. Mon- owner of the paper. Workman did roe, 33 Md. 146; Workman v. Wright, not act upon them at all. He was in 33 Ohio St. 405, 31 Am. Rep. 546; no way prejudiced by them, nor did McHugh v. County of Schuylkill, 67 they induce him to do or omit to do Pa. St. 391, 5 Am. Rep. 445; Shisler anything whatever to his disadvanv. Vandike, 92 Pa. St. 447, 37 Am. tage. But it is maintained that, withRep. 702. out regard to the principle of estoppel, these admissions and promises are a ratification of the previously unauthorized act upon the well-known maxim, Omnis ratihabitio retrotrahitur et mandato priori æquiparatur.'

The leading case upon this question is that of Workman v. Wright, 33 Ohio St. 405, 31 Am. Rep. 546, which was an action upon a promissory note on which Wright's name had been forged. After Workman became the owner of the paper, Wright promised to pay the note. The court ably commented upon the cases against and in favor of the ratification of forged signatures. We here insert an extract from the opinion:

'Upon principle we cannot see how a mere promise to pay a forged note can lay the foundation for liability of the maker so promising when the promise was made, as it was, under the circumstances set forth in the rec"Under the pleadings and finding ord. In addition to the fact that there of the court below, it may be assumed are no circumstances to create an esthat the name of Calvin Wright was a toppel, there was no consideration for forgery, as there was evidence tending the promise. Wright received nothto show the fact, and we cannot say ing, and it is a simple nudum pactum. that the conclusion reached in this The consideration for a promise may respect was clearly against the testi- be either an advantage to the promisor mony. It is claimed, however, that or a detriment to the promisee, but his admissions and promises to pay here neither exists. Wright had the note ratified the unauthorized sig- signed a note, and when the one in nature. Had Workman, the owner of suit was shown him, said he would

would be a fresh contract which would presumably bind the person making the new promise.

b. Ratification. Notwithstanding the cases which hold that one is never bound by a forged signature except by reason of the operation of the rule of estoppel, there are a number of other cases, which may well be said to constitute a majority, and to control the question, that hold that a person may ratify his forged signature to a negotiable instrument so as to be bound thereby.2 In a leading Massachusetts case3 the court said: "It is, as it seems to us, equally competent for the party, he knowing all the circumstances as to the signature and intending to adopt the note, to ratify the same, and thus confirm what was originally an unauthorized and illegal act. We are supposing the case of a party acting with full knowledge of the manner in which the note was signed, and the want of authority on the part of the actor to sign his name, but who understandingly and unequivocally adopts the signature, and assumes the note as his own. It is difficult to perceive why such adoption should not bind the party whose name is placed on the note as promisor, as effectually as if he had adopted the note when executed by one professing to be authorized, and to act as an agent, as indicated by the form of the signature, but who in fact had no authority. It is, however, urged that public policy forbids sanctioning the ratification of a forged note, as it may have a tendency to stifle a prosecution for the criminal offense. It would seem, however, that this must stand upon the general principles applica

pay it, supposing it to be the one he had signed. He was an ignorant man who could not read writing, though he could sign his name, and when he saw the paper, seeing that the signature spelt his name, and being unable to read the body of the instrument, he said it was all right, and he would pay it. But the promise was without that consideration which would make it a binding contract."

2. Hefner v. Vandolah, 62 Ill. 483, 14 Am. Rep. 106; Forsyth v. Bonta, 5 Bush (Ky.), 547; Rudd v. Matthews, 79 Ky. 479; Harper v. Devene, 10 La. Ann. 724; Wellington v. Jackson, 121 Mass. 157; Cravens v. Gillilan, 63 Mo. 28; First Nat. Bank of Trenton Gay, 63 Mo. 33; Dow's Exr. v. Spenny's Exr., 29 Mo. 386; Corser v. Paul, 41 N. H. 24; Commercial Bank v. Warren, 15 N. Y. 577.

V.

3. Greenfield Bank v. Crafts, 4 Allen (Mass.), 447.

In the case of Howard v. Duncan, 3 Lans. (N. Y.) 175, a note purporting to be signed by Spencer Duncan and Smith Duncan was indorsed to the plaintiff. The name of Smith Duncan had been forged, but it was shown that after the delivery of the note Smith Duncan told the payee of the note that "it was all right." The trial court held that the act of forgery was not the subject of ratification, but an exception to this charge was sustained by the General Term in a brief opinion. The presiding justice says: "I cannot perceive any reason why a person whose name has been forged may not adopt and affirm the signature as his own act and thereby subject himself to whatever civil liability may follow from it."

ble to other contracts, and is only to be defeated where the agreement was upon the understanding that if the signature was adopted, the guilty party was not to be prosecuted for the criminal offense."

66

A distinction is to be made between a case where the admission of the forgery of a signature is made with full knowledge that the signature is forged and where the admission was made under a mistaken belief that the signature was genuine. In the latter case the person will not be bound by his admission. But in the former case he will be estopped from denying the signaturė and will be bound thereby, in accordance with the same rule, as in the case of the adoption or ratification of an ordinary act of assumed agency; that the form of the signature not bearing any indication of the fact of its being made by another hand does not prevent the person whose name is forged from being legally holden, upon proof that the signature was previously authorized, or subsequently adopted." 5 Where a party has been led to change his position, or otherwise act to his injury, by the silence of a party to whom an instrument, with his signature attached, has been shown with a request to pay the same, such silence will be competent evidence that his signature is genuine, or if not genuine that he intends to be bound thereby. One who receives the avails

4. In the case of Workman V. Wright, 33 Ohio St. 405, 31 Am. Rep. 546, which is often cited in opposition to the doctrine that a forged signature to a promissory note can be ratified by the person whose name is forged, it appeared that there were no circumstances to create an estoppel and there was no consideration for the promise, since the owner of the note had in no way changed his status by reason of the defendant's admissions; and it also appeared that the defendant had signed a note, and when the note in suit was shown to him, he said he would pay it, supposing it to be the one he had signed. It is thus apparent that this case is one where the party whose name had been forged had no knowledge that he was ratifying a forged signature, and of course could not be held thereby. See also Rudd v. Matthews, 79 Ky. 479; Corser v. Paul, 41 N. H. 24.

5. Hefner v. Vandolah, 62 Ill. 483, 14 Am. Rep. 106.

6. Corser v. Paul, 41 N. H. 24.

Failure to repudiate signature.— It has recently been held in Massachusetts, in Traders' Nat. Bank v. Rogers, 167 Mass. 315, 45 N. E. 923, 57 Am. St. Rep. 458, that a mere omission by an apparent indorser, on being shown a note, to inform the holder that the indorsement was a forgery does not amount to an affirmation of his signature, unless the indorser is shown to have received some benefit from the forgery or authorized the forger to act as his agent for any purpose. The court points out that his failure to repudiate the signature was evidence in the nature of an admission, but not conclusive, especially as under the circumstances of the case the defendant might have been surprised at finding his name upon the note and not positive whether he knew the facts.

Mere acquiescence in the sale of a note by an attorney, without knowledge that the attorney had unlawfully indorsed it, is not a ratification. Sherrill v. Weisiger Clothing Co., 114 N. C. 436, 19 S. E. 365.