Story Case

William McKinlock delivered the following instrument to Henry Hulbert in payment for an automobile: "$400. I promise to pay to your order, in thirty days, four hundred dollars, for the Chicago car. (Signed) William McKinlock."

Hulbert indorsed and delivered this paper to William Church, who paid value for it, knowing that it was given by McKinlock in payment for an automobile.

When Church demanded the money after thirty days, McKinlock refused to pay, on the ground that the automobile was not as Hulbert had represented it to be. Church contended that though this were true, it could not now be put in defense, since he is the purchaser of a negotiable note upon which the suit is brought. Is this correct?

Ruling Court Case. Rex Vs. Randall, Russel And Ryan English Reports, Page 195

Eandall was tried upon an indictment for forging and transferring a navy pay bill. It purported to be drawn by George Sidley, as master of the " Eoyal Sovereign." It was made payable in blank, that is to say, it contained the name of no payee. He resisted the prosecution on the ground that he had not committed a forgery, because this was no bill of exchange, since it contained the name of no payee.

Decision: The court at first held him guilty, thinking it was payable to any one who drew it. But later, the court held that the contention was wrong. The judges were of opinion that it was not a bill of exchange because there was no payee. An instrument, whether a note or a bill, is not a complete instrument without a payee. The prisoner Randall was acquitted.

(See 13 Mass. 158.)

Ruling Law. Story Case Answer

A negotiable instrument may be payable to the order of a particular person, or it may be made payable to bearer. The person to whose order the bill is made payable is known as the "payee." An instrument which is made payable neither to a particular person, nor to bearer, is an incomplete instrument and confers no rights upon a subsequent holder of the instrument. The Negotiable Instruments Law provides: "Where the instrument is payable to order, the payee must be named, or otherwise indicated with reasonable certainty. "

But when a person draws a negotiable instrument and does not insert the name of a payee, and sends it out in this incomplete state, he impliedly authorizes any holder to fill in the blank. But until this blank has been filled in with the name of a payee, the instrument is not a negotiable instrument. Hulbert, the payee in the note of the Story Case, was not named. Therefore, the instrument was not a negotiable instrument and any defense effective against Hulbert was effective against Church, his assignee.