(218 S.W.) wife was to go to the grantor's daughter, Mary A. Franklin, or her children. [3] Of course, the adopted child, Felmer Spurrier Brown, cannot take under the deed, as a child of G. R. Brown; the rule being that where a conveyance is made by one who is a stranger to the adoption, to a person for life with remainder to his children, but in case he has no children then to others, the word "children" does not include an adopted child unless the language of the instrument makes it clear that it was so intended. Woodcock's Appeal, 103 Me. 214, 68 Atl. 821, 126 Am. St. Rep. 291; In re Leask, 197 N. Y. 193, 90 N. Since G. R. Brown did not take the fee but only a life estate in the property, and since Felmer Spurrier Brown is not a child of G. R. Brown within the meaning of the deed, it necessarily follows that she has no interest in the property, and that the court should have adjudged that the daughter and grandson of Mary A. Franklin were the owners of the property subject to the life estate of Arzella Brown Savells. Judgment reversed, and cause remanded, with directions to enter judgment in conformity with this opinion. YOUNG v. BANK OF SWEETWATER. Appeal from Circuit Court, Jefferson County, Chancery Branch, Second Division. Suit by the Bank of Sweetwater against M. W. J. Young. From judgment for plaintiff, defendant appeals. Affirmed. Henry J. Tilford and O'Neal & O'Neal, all of Louisville, for appellant. John Bryce Baskin and Baskin & Vaughan, all of Louisville, for appellee. CARROLL, C. J. On January 5, 1915, D. C. Young, with M. W. J. Young, as surety, executed a promissory note to the Bank of Sweetwater, Tenn., payable in six months. D. C. Young died in July, 1917, and in February, 1918, this suit was brought by the appellee bank against M. W. J. Young, the appellant. For defense to the note, M. W. J. Young set up that the note sued on had been satisfied on September 19, 1916, by the execution on that day of a new note in place of the original, which new note, as alleged, was accepted by the bank and the original note indorsed paid. After the pleadings had been made up and evidence taken, the case was submitted, and from a judgment in favor of the bank this appeal is prosecuted by Young. [1] The correctness of the judgment depends on the question whether the note sued on was satisfied by the execution of the new note on September 19, 1916. It is admitted that on September 19, 1916, a new note for (Court of Appeals of Kentucky. Feb. 17, 1920.) the amount of the note sued on was executed IN 1. WITNESSES 164(8) PLAINTIFF'S DORSEMENT OF "PAID" ON DECEDENT'S NOTE NOT EXPLAINABLE BY PLAINTIFF, BEING TRANSACTION WITH DECEDENT. In bank's action against surety on the note of a decedent, where defense was that note had been indorsed "paid" by plaintiff bank, testimony of plaintiff's president that, when decedent called at the bank with the new note, he mis takenly understood plaintiff had come to pay the original note and so went into another room and got the original note and stamped it paid, was incompetent under Civ. Code Prac. § 606, subd. 2, to meet the prima facie evidence of payment furnished by the "paid" indorsement; for, although such indorsement was not made in decedent's presence or with his knowledge or direction, it should be treated as a transaction with the decedent. [Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Paid.] 2. BILLS AND NOTES 499 EVIDENCE OVER COMING PRESUMPTION ARISING FROM IN Evidence, consisting of retention by creditor of note claimed to have been paid, entries on creditor's books failing to show payment, etc., held to overcome presumption of payment arising from indorsement of "paid" on the note. by D. C. Young, payable to the bank, and that the bank retained possession of this new note, on which there also appeared as surety the name of M. W. J. Young. It is also admitted that on September 19, 1916, the bank put on the face of the original note, with a stamp, these words: "Bank of Sweetwater, paid September 19, 1916, Sweetwater, Tennessee." The bank, however, for reasons that will be later stated, contends that the indorsement on the face of the original note and its retention of the new note did not amount to its acceptance of the new note in satisfaction of the original. On the other hand, M. W. J. Young contends that the new note was accepted in the place of the original, and that the indorsement on the original note and the retention of the new note established this fact. [2] M. W. J. Young, in his own behalf, testified that he signed as surety for D. C. Young, who was his brother, the note dated January 5, 1915; that D. C. Young, the principal in the note, died on July 3, 1917; that he was first notified that the note sued on was unpaid on August 8, 1917, at which time payment was demanded of him. For the bank, S. T. Jones, who was president, cashier, and also a stockholder, tes For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes his explanation of the circumstances under which he made the indorsement on the original note. He testified, as we have seen, that this indorsement was not made in the presence of, or with the knowledge of, or by the direction or consent of, D. C. Young, nor does it appear that D. C. Young ever saw the indorsement or knew that it had been made; and the importance of this indorsement unexplained lies in the fact that it furnished prima facie evidence of the payment of the note, but of course this prima facie evidence would be easily overcome by the evidence of Jones if it was competent. tified that the interest on the note was paid | Young, was not, of course, competent ; nor was every six months from the time it was due in June, 1915, up to August 28, 1917; that D. C. Young died in July, 1917; that on September 19, 1916, D. C. Young came into the bank and offered him a new note for $1,500, with the name of M. W. J. Young signed to the note, but he declined to accept the new note in satisfaction of the original, because the name of M. W. J. Young had not been signed by himself to the new note; that D. C. Young left the new note at the bank and promised to get another note with the name of M. W. J. Young signed to it in person, but did not do SO. He further testified that when D. C. Young called at the bank on September 19, 1916, he understood that he had come for the purpose of paying the original note, and that he then went into another room in the building and got the original note and indorsed on it with a stamp the words that appear on the face of the note. He further said that "I stamped the note in that way by mistake. It was done in the main banking room. No one was present at the place where I was when I put the stamp on, but at other places in the bank there were some of the regular employés of the bank. Neither of the Youngs, I mean D. C. Young and M. W. J. Young, were present in the room. D. C. Young was not present and did not see me stamp those words and figures upon that note. That after stamping the note, he took it back in the room where D. C. Young was, when he discovered that he did not intend to pay the original note, but only the interest on it." Dora E. Young, a lawyer at Sweetwater, Tenn., and who was a partner of D. C. Young, testified that he paid for D. C. Young the interest, indorsed as credits, on the note in 1917; that he was executor of the estate of D. C. Young, and, after the death of D. C. Young, the bank presented to him, as executor, the original note, with the stamp indorsement on it showing its payment; that it was attached to the new note executed on September 19, 1916; that the bank explained that the original note had been stamped paid by mistake, and that the new one had been retained in the expectation that another note properly signed would be received from M. W. J. Young. Clarence E. Young testified that he was the bookkeeper and assistant cashier of the Bank of Sweetwater, but not a stockholder; that the bank books showed that no payments had been made on the original note except the interest payments indorsed on the note. It may also be here said that it does not appear that any entry of the new note dated September 19, 1916, was ever made on the bank books, nor was any interest ever credited on this note. The evidence of S. T. Jones, the president and cashier, who was also a stockholder in the bank, as to conversations with D. C. We had a question as to the competency of evidence like this in the case of Vannatta v. Willett's Adm'r, 103 Ky. 355, 45 S. W. 85, 20 Ky. Law Rep. 59. In that case Vannatta filed a note properly proven for $5,000 against the estate of Willett. On the back of the note were these indorsements: "Received on the within note $600.00, September 29, 1893. "Received interest on the within note up to September 22, 1893." Vannatta contended that these two indorsements were for the same thing, namely, the payment of the interest to September 22, 1893; that they were made by himself by his own mistake in the absence of Willett. The court, however, holding that his evidence was not competent, under subsection 2 of section 606 of the Civil Code of Practice, to explain the credits, said: "We are of opinion that these credits indorsed upon the note must be held to be transactions with decedent, and concerning which appellant could not testify under the section of the Civil Code above. The mere fact that these indorsements may have been made by appellant himself, and are alleged to have been made in the absence of decedent, cannot alter the case. These credits are prima facie evidence of the payments as against appellant, and we do not understand how he could testify concerning their correctness without necessarily also testifying as to the actual payments by decedent." To the same effect is Cornelius' Adm'r v. Miles, 53 S. W. 517, 21 Ky. Law Rep. 947; Northrip's Adm'r v. Williams, 100 S. W. 1192, 30 Ky. Law Rep. 1279. It seems to us that there is no material difference between the evidence held incompetent in the Vannatta Case and the evidence offered by Jones in this case. In the Vannatta Case the indorsement of credits on the note was held to be prima facie evidence of payments made, and in this case the indorsement on the note would be prima facie evidence that it had been paid. It may be true that the decedent had no connection whatever with the indorsement made on the note by the bank, and that it was made without his knowledge or direc tion; but nevertheless it should be treated (218 S.W.) as a transaction with the decedent within one attached, was presented to him. The the meaning of the Code. The indorsement showed that the note had been paid, and the presumption would be that it had been paid by the decedent. So that when Jones, an interested party, undertook to explain away the effect of this indorsement, he was inferentially testifying to a transaction with the decedent, and concerning a matter prejudicial to the interest of the estate. In the Northrip Case, supra, in considering the evidence of a witness who testified that a person against whose estate she had presented a claim for services was helpless and required a great deal of attention, the court, in holding this evidence incompetent, said: "It being argued that this evidence did not relate to any verbal statement made by or transaction with or act done or omitted to be done by the deceased. In a limited sense this is correct. But this Code provision should not be given a narrow or strained construction to permit persons having claims against the estates of deceased persons to testify with reference thereto. If the language of the Code was strictly confined to statements of actual transactions with or positive acts done or omitted to be done, * the reason and purpose of this Code provision would be seriously impaired, if not destroyed. No person will be permitted to give testimony in his behalf against the estate of a deceased person that will have a tendency to strengthen or make good his claim, or that will leave the impression upon the court or jury that his demand must be just and reasonable, because in substance and effect this would be testifying, although indirectly, to transactions with and acts done or omitted to be done by the deceased." We have then the note sued on indorsed paid by the bank, thus putting on the bank the burden of overcoming the prima facie evidence of the payment of the note it is seeking to collect. Now, let us see what facts and circumstances there are in the record to overthrow this presumption of payment. We find several: (1) The possession of the note by the bank is a circumstance tending to show that the note was not paid at the time the indorsement was made, as it is customary for persons who pay notes to take possession of them. (2) The entries on the books of the bank were competent evidence, and these entries showed that the original note, that is, the one sued on, appeared on the books of the bank without any indorsement or credits, except those credits about which there is no dispute, and this is very persuasive evidence that the original note was never paid, especially when considered in connection with the further persuasive fact that the new note was never entered on the books of the bank. (3) The bank, soon after the death of D. C. Young, demanded payment of the old note of the executor, and the executor testified that, when payment was demanded, the old note, with the new executor also related the statements made to him by the bank when payment was demanded, explaining how the note happened to be indorsed paid, but we do not think these statements competent. (4) M. W. J. Young admits that he signed the old note as surety, but in his evidence does not mention the new note, or say that he signed or authorized his name to be signed to it, thus in effect admitting that he did not sign the new note, and this admission leaves the inference that his failure to sign it was the reason that the bank did not accept it in lieu of the old note to which his name was regularly signed. If he had signed the new note, there could scarcely be any reason assigned why the bank would not have taken it and surrendered the old note. It is also plain that the only reason why M. W. J. Young is trying to make the bank look to the new and not to the old note is because he is liable on the old and not on the new note. On the whole case, we think the evidence, direct and circumstantial, is sufficient to overcome the presumption created by the indorsement and to establish that the bank never accepted the new note in place of the old one. The judgment is affirmed. MUELLER & MARTIN v. LIBERTY (Court of Appeals of Kentucky. Feb. 13, 1920.) 1. BANKS AND BANKING 138-CHECK PAYABLE TO PAYEE NOT INTENDED TO BECOME PARTY IN THE TRANSACTION, WHERE SUCH FACT IS KNOWN TO "PERSON MAKING IT SO PAYABLE," PAYEE IS A "FICTITIOUS PERSON." Where check drawn with authority from maker named as payee one who had no interest and was not intended to become a party in the transaction, the drawee bank was authorized to make payment to bearer, regardless of whether prior indorsements were genuine, and without inquiry; the payee being a "fictitious person" within Negotiable Instruments Act. § 9, subd. 3 (Ky. St. § 3720b, subd. 9), making instrument payable to bearer when payable to order of a "fictitious ** * person and such fact was known to the person making it so payable," the words "person making it so payable" referring to the person drawing the check and not to the nominal maker, where the two are not the same. [Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Fictitious Name.] 2. BANKS AND BANKING 138 CHECK TO PERSON NOT INTENDED TO BE A PARTY IN THE TRANSACTION DEEMED MADE TO A FICTITIOUS PERSON AT COMMON LAW. At common law, a check naming a payee who had no interest in the check and who was For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes not intended to become a party in the transaction was deemed payable to a fictitious person, and where made under authority from maker authorized the bank to pay check to bearer out of maker's funds, regardless of whether prior indorsements were genuine, and without inquiry. building association in the amount thereof and had no business with it; that the check was not executed in pursuance of a business transaction, but was simply a scheme or device of George L. Martin to secure the several sums for his own private purposes and uses; that defendant paid the checks with 3. PRINCIPAL AND AGENT 181-PRINCIPAL the indorsements thereon without authority NOT CHARGEABLE WITH NOTICE OF ACTS OF A principal is not chargeable with notice of his agent's acts done in the apparent scope of his authority, but with a purpose to defraud the principal. 4. COMMON LAW 14-NEGOTIABLE INSTRU MENTS LAW DECLARATORY OF LAW MERCHANT. The Negotiable Instruments Laws are always construed as declaratory merely of the law merchant, unless plainly a change was intended. 5. ESTOPPEL 72-MAKER HAVING AUTHORIZED PERSON TO DRAW CHECKS MUST BEAR LOSS RESULTANT FROM FRAUD OF SUCH AGENT IN APPLICATION OF FUNDS. Where person who drew check to a fictitious person had authority from maker to so do, the maker rather than the innocent holder should in good conscience bear the loss resultant upon the perfidy of the maker's chosen agent in the application of the funds. Appeal from Circuit Court, Jefferson County, Common Pleas Branch, First Division. Action by Mueller & Martin against the Liberty Insurance Bank. Judgment of dismissal, and plaintiff appeals. Affirmed. Baskin & Vaughan, of Louisville, for appellant. Wehle & Wehle, of Louisville, for appellee. CLARKE, J. Appellant, Mueller & Martin, is a corporation. George L. Martin had authority to sign its name to checks against its account with appellee bank. He drew seven checks, aggregating $2,972.50, on appellee bank, payable to the German Savings Fund Company Building Association and signed appellant's name thereto. He was also secretary of the building association, but had no authority to sign or indorse its name to checks or receive payments thereof. He did, however, indorse on all of said seven checks with a rubber stamp the name "the German Savings Fund Company Building Association." Below that indorsement he signed or stamped his own name, and drew the money out of the bank on same. These checks appellee charged against the account of Mueller & Martin. In this action Mueller & Martin seek to recover of the bank the amount of these checks, with interest. A demurrer was sustained to the petition and same dismissed. Plaintiff appeals. In addition to the above facts the petition alleges with reference to each check that Mueller & Martin was not indebted to the in law out of funds belonging to plaintiff, and refused to refund same. The lower court held that the checks were made payable to a "fictitious person," as the term is used in subsection 3 of section subsection 9 of section 3720b, Kentucky Stat9 of the Negotiable Instruments Act, being utes, and were by the terms of that act payable to bearer; that, therefore, the checks having been issued under authority from the maker, the bank was authorized to pay same to bearer out of the maker's funds, regardless of whether prior indorsements were genuine or not, and without inquiry. [1, 2] This conclusion is fully sustained by many cases decided both before and after enactment of negotiable instruments acts identical in terms on the subject with our act. That this was the accepted rule at com. mon law and before the passage of negotiable instruments acts is sufficiently attested by the following authorities: In Samuel Foster v. Nathaniel Shattuck, 2 N. H. 446, it was held: We "When a note, however, is made payable to the name of some person not having any interest and not intended to become a party in the transaction, whether a person of such name is or is not known to exist, the payee may be deemed fictitious. The name is assumed merely to give form to the instrument. are inclined to adopt this construction to prevent the note from becoming a mere nullity when founded on a full and fair consideration. Such construction injures nobody, and is no more forced than to hold that when the name of the payee is left blank 'it is the same thing as if "the defendant had made the bill payable to bearer."' Coggill v. American Exchange Bank, 1 N. Y. 113, 49 Am. Dec. 310: intended that he should ever become a party to "As the payee had no interest, and it was not the transaction, he may be regarded, in relation to the matter, as a nonentity; and it is fully settled that when a man draws and puts in circulation a bill that is payable to a fictitious person the holder may declare and recover upon it as on a bill payable to bearer." Bartlett v. First National Bank of Chicago, 247 Ill. 490, 93 N. E. 337: "The drafts drawn by R. L. Walsh in the name of the appellants against themselves were all made payable to some person who resided there were such individuals as payees the payees near Reddick, or bearer, and in the sense that named in the draft were not fictitious persons. At the time, however, Walsh drew said drafts For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes (218 S.W.) be did not intend that the persons whose names were inserted as payees in said drafts should have any interest in said drafts or that said drafts should ever be delivered to said payees, or that said payees should indorse said drafts in order to receive payment therefor or for the purpose of negotiating the same. In the eye of the law, therefore, the payees named in the drafts were not bond fide payees but mere fictitious persons. Said drafts were, therefore, in law, payable to bearer, and were transferable, therefore, by delivery, and upon their receipt by appellee payment thereof could be enforced against the appellants by the First National Bank of Chicago without claiming through the said forged indorsements, but as the holder of negotiable paper made payable to bearer." Not only was this the common-law rule, but statutes containing the identical terms of our Negotiable Instruments Act have been construed to have this effect. The English Bill of Exchange Act, enacted in 1882, has been largely copied into negotiable instrument laws adopted in this country. Section 9 of our act is a literal copy of section 7 of that act. In construing this section it was held by the House of Lords in Bank of England v. Vagliano, L. R. 1 A. C. 107, that "Whenever the name inserted as that of the payee is so inserted by way of pretense merely, without any intention that payment shall only be made in conformity therewith, the payee is a fictitious person within the meaning of the statute, whether the name be that of an existing person or of one who has no existence, and that the bill may in each case be treated by a lawful holder as payable to bearer." The Negotiable Instrument Law of Pennsylvania (Laws 1901, p. 194) contains the identical provision as section 9 of our act. In Snyder v. Corn Exchange National Bank, 221 Pa. 599, 70 Atl. 876, 128 Am. St. Rep. 780, a case arising under that law, the facts were entirely analogous to those of the case at bar. Greenfield, a clerk for Harrison Snyder & Son, had authority to draw checks against its account with the Corn Exchange National Bank. He drew checks payable to Chas. Nieman, a man who had no business relations with the firm, and forged Nieman's indorsement. The bank paid the checks and charged them against the firm's account. The firm sued to recover just as has appellant here. The court held the firm could not recover because the payee was a fictitious person and the check payable to bearer within the meaning of the Negotiable Instrument Act. To the same effect is Trust Co. of America v. Hamilton Bank, 127 App. Div. 515, 112 N. Y. Supp. 84, construing the similar provision of the New York act (Laws 1897, c. 612, § 28). These authorities would seem conclusive of this case, especially as counsel for appellant admit they can find none to the contrary, but they earnestly insist the very terms of our act, upon a point not discuss ed in either the Pennsylvania or the New York case, supra, require a different construction. Our act, in so far as applicable, is as follows: "The instrument is payable to bearer: "Third. When it is payable to the order of a fictitious or nonexisting person, and such fact was known to the person making it so payable." It is insisted, conceding the payee to be a fictitious person, as the term is used, the check is not payable to bearer unless also "such fact was known to the person making it so payable." [3] Appellant would have us construe this clause, “and such fact is known to the person making it so payable," as applicable to the maker of the bill rather than "the person making it so payable"; that is, that Mueller & Martin must be chargeable with notice that the checks were made payable to a fictitious person before the checks can be considered as payable to bearer. If this were its meaning, then the whole provision would be ineffective in practically every case check was fraudulent, since where such is where the purpose of the person drawing the his purpose his principal is not chargeable with notice of his agent's acts done in the apparent scope of his authority but with a purpose to defraud the principal. Ohio Valley Banking & Trust Co. v. Citizens' National Bank, 173 Ky. 640, 191 S. W. 433. Such, however, is not its meaning, as is plain from the very language employed as well as the evident intent of the enacting power. The words "the person making it so payable," given their ordinary meaning, refer to the person who actually drew the bill, whether he be the nominal maker or not. Had the Legislature intended that this should refer not to the person drawing the check but to the nominal maker, more fitting language certainly would have been employed, as might easily have been done. Not only so, but to give the clause the strained construction urged by appellant rather than the ordinary meaning of the language employed would pervert the very purpose of the provision. [4] The enactment was to make negotiable and with safety to those handling it a bill which otherwise would have been quite difficult, if not impossible, of negotiation. Purposely made payable to a nonexistent or fictitious person by the person who drew it in that shape for his own convenience, how could it be validly indorsed and put in circulation by such a payee? Its payment by the maker might be defeated most easily, if not always, by simply denying the validity of the indorsement the bill carried when presented. Hence even before negotiable instruments acts were adopted, indorsements |