Story Case

Joseph Beal said to his son Francis: "Son, give Gould my promissory note due in one month for that last delivery of hay." With a lead pencil, Francis wrote on a slip of paper as follows: "$30.

I will pay Gould's order, thirty dollars, on June 15, 1915. (Signed) Beal."

He delivered the paper to Thomas Gould, who indorsed and delivered it to Joseph Story for value. In a suit on the instrument brought by Story, Beal attempted to maintain in defense that Gould had defrauded him in the sale of hay. Story contended that this defense could not be introduced, since the suit was on a negotiable instrument. Is this correct?

Ruling Court Case. Butchers' & Drovers' Bank Vs. Brown, Volume 6 Hill's New York Reports, Page 443

The Butchers' & Drovers' Bank sued Brown as the indorser of a bill of exchange. Brown contended that he was not liable as indorser because no name was written and the indorsement was made with a lead pencil and in figures, thus, "1. 2. 8." Evidence showed that the figures were in Brown's handwriting, and that he meant they should bind him as indorser, although he was able to write.

Decision: A negotiable instrument, or any signature thereto, may be in ink or by pencil, as the person making or signing may choose. Furthermore, a person may be shown to have adopted a figure or fictitious name in signing. Thus, here, the figures, though in pencil, shown to have been adopted by Brown as his name, bind him as indorser.

Mr. Chief Justice Nelson said: "It has been expressly decided that an indorsement written in pencil is sufficient; and also that it may be made by a mark. In a recent case, it was held that a mark was a good signing within the statute of frauds; and the court refused to allow an inquiry into the fact whether the party could write, saying that would make no difference." Judgment was given for Butchers' & Drovers' Bank.

Ruling Law. Story Case Answer

It is not required by law that a negotiable instrument should be written in ink. It may be written in pencil, or printed. However, when a person draws an instrument in pencil, he makes it easy for some unscrupulous holder to alter or change it, and thereby renders himself liable to irreparable loss through his negligence. As a matter of safety, a negotiable instrument should never be written or signed with a pencil. In the Story Case, Beal is liable to Story on the negotiable note, and he cannot introduce his defense.