This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The term "blank," as used with reference to the effect of filling in blanks, is used in two senses, which need not be distinguished in some jurisdictions, since the legal effect is the same in each case, but which must be distinguished in some jurisdictions, since the legal effect is different in the two cases. In the sense in which it has been used,1 the term "blank" is used to indicate a space which is left in the instrument for the purpose of being filled in later by the party to whom the maker has intrusted the instrument. If the maker of a negotiable instrument has executed it in such form as to make it easy to alter it so that the alteration can not be detected by a transferee, some courts hold that in such cases the maker is estopped from setting up such alteration as a discharge or from denying that he executed the instrument in its altered form. This principle applies most clearly when blanks are left which the maker does not fill out at all,2 such as a blank for the date,3 or for the place of payment,4 or a blank for the interest,5 even if in a non-negotiable note.6 In such cases it is possible to explain the decision on the theory that whatever the secret intention of the maker as to such blank, he must be presumed, as to a holder in due course, to have given authority to fill in such blanks. This presumption is usually a sheer fiction, since the holder in due course usually knows nothing of the condition of the instrument when it is delivered; and accordingly he has not, in fact, relied on any apparent authority to fill such blanks. The term "blank" is also used to indicate a space which is left, usually by the negligence of the maker, which the maker does not intend to be filled in, since the instrument which he delivers is a complete instrument, but which nevertheless gives an opportunity to alter the instrument, without erasing any part thereof, in such a way as to deceive a reasonably prudent man.
W. 42; Johnston v. Knipe, 260 Pa. St. 504, L. R A 1918E, 1042, 103 Atl 957.
An accommodation indorser is not liable for an amount for which an incidental space on the note is filled in. National Exchange Bank v. Lester, 194 N. Y 461 21 L. R. A. (N.S.) 402, 87 N. E. 779.
3 Lloyd's Bank v. Coake [10071, 1 K. B. 794; Smith v. Prosser , 2 K. B 735; Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 97 Am. St. Rep. 426, 66 N. E. 646; Tower v. Stanley, 220 Mass. 429, 107 N. E. 1010; Hartington Nat. Bank v. Wiebelhaus, 88 Neb 47, 31 L. R. A. (N.S.) 130, 128 N. W. 659.
4 Smith v. Prosser , 2 K. B. 735.
5 Hartington National Bank v. Wiebelhaus, 88 Neb. 47. 31 L. R. A. (N. S ) 130, 128 N W. 659.
1 See Sec. 3082 et seq.
2 Porter v. Hardy, 10 N. D. 551, 88 N. W. 458.
See Sec. 3084.
3 First State Savings Bank v. Webster, 121 Mich. 149, 79 N. W. 1068.
Whether the maker of an instrument of this sort is bound by the instrument as he delivered it, or whether he is bound by the instrument in its altered form, as in the hands of a bona fide holder, is a question upon which there has been a conflict of authority. The original English theory was that the maker of such an instrument was bound by the instrument in its altered form, if in the hands of a bona fide holder,7 at least if the instrument was negotiable. This theory has been adopted by a number of the courts of the United States, and the maker has been held liable on the instrument in its altered condition where he has inserted some appropriate words in the blank in question, but has done it so negligently that it is possible to add words in the residue of the blank, materially changing the legal effect of the instrument.8 The courts which reach this result generally base it on the theory that the maker is estopped, by reason of his negligence, from denying that the instrument in the hands of the bona fide holder is the instrument which he executed.
4 Cason v. Bank, 07 Ky. 487, 53 Am. St. Rep. 418, 31 S W. 40.
5 Weidman v. Symes, 120 Mich. 657, 77 Am St. Rep 603, 79 N. W. 894.
6 Searles v. Seipp, 6 S D. 472, 61 N. W. 804.
7 Young v. Grote, 4 Bing. 253.
8 Alabama. Holmes v. Ft. Gaines Bank, 120 Ala. 493, 24 So. 959.
Illinois. Harvey v. Smith, 55 III 224; Seibel v. Vaughan, 69 III. 257; Merritt v. Boyden, 101 111. 136, 85 Am. St. Rep. 246, 60 N. E. 907.
Indiana. Bowen v. Laird, 166 Ind. 421, 77 N. E. 852.
Kansas. Lowden v. Bank, 38 Kan. 533, 16 Pac. 748.
Kentucky. Blakey v. Johnson, 76 Ky. (13 Bush.) 197, 26 Am. Rep. 254.
Missouri Scotland County National Bank v. O'Connel, 23 Mo. App. 165.
Pennsylvania. Garrard v. Haddan, 67 Pa. 82, 5 Am. Rep. 412; Brown v Reed, 79 Pa. 370, 21 Am. Rep. 75.
Wisconsin. Johnston Harvester Co. v. McLean, 57 Wis. 258, 46 Am. Rep. 39, 15 N. W. 177.
This principle does not operate as against an accommodation indorser. National Exchange Bank v. Lester, 194 N. Y. 461, 21 L. R. A. (N.S.) 402, 87 N. E. 779.
The English courts have abandoned the original rule; and they have held that the maker is not liable, even to a holder in due course, where he has inserted words in blanks so negligently that an opportunity is given to insert other words.9 In many of the American jurisdictions the same result was reached, often before the English courts had abandoned their original rule; and the maker was held not to be liable on the instrument in its altered condition,10 on the theory that the maker has done nothing to mislead subsequent holders, and that the doctrine of estoppel should not apply, since the maker ought not to be held to anticipate unauthorized alteration of the instrument, which is usually criminal.
Other cases of alteration have been considered by the courts with the same difference of opinion. In some courts the maker is held though the contract has been materially altered, if he made such alteration possible by his negligence.11 If the maker signs a note written in part in lead pencil so that it can be easily erased, and it is found as a fact that he was negligent in so signing such contract, he is liable to a bona fide holder.12 Even if the maker signs a note separated by a perforated line from the rest of the contract it is held that he is not necessarily negligent.13
9 Imperial Bank v. Hamilton Bank , A. C. 49; Scholfield v. Londes-borough , A. C. 514 [affirming (1895), 1 Q. B. 536, which affirmed (1894), 2 Q. B. 660] (referring in the opinion in the lower court to Young v. Grote, 4 Bing. 253, as a "fount of bad argument").
10 Arkansas. Fordyce v. Kosminski, 49 Ark. 40, 4 Am. St. Rep. 18, 3 S. W. 892.
California. Walsh v. Hunt, 120 Cal. 46, 39 L. R. A. 697, 52 Pac. 115.
Iowa. Knoxville Nat. Bank v. Clark, 51 la. 264, 33 Am. Rep. 129, 1 N. W. 491; Conger v. Crabtree, 88 la. 436, 45 Am. St. Rep. 249, 55 N. W. 335.
Kansas. Herington Bank v. Wan-gerin, 65 Kan. 423, 59 L. R. A. 717, 70 Pac. 330.
Maryland. Burrows v. Klunk, 70 Md. 451, 14 Am. St. Rep. 371, 3 L. R. A. 576, 17 Atl 378.
Massachusetts. Greenfield Savings Bank v. Stowell, 123 Mass. 196, 25 Am. Rep. 67.
Michigan. Holmes v. Trumper, 22 Mich. 427, 7 Am. Rep. 661.
Mississippi. Simmons v. Atkinson, etc., Co., 69 Miss. 862, 23 L. R. A. 599, 12 So. 263.
Missouri. Middaugh v. Elliott, 61 Mo. App. 601.
Nebraska. Bothell v, Schweitzer, 84 Neb. 271, 133 Am. St. Rep. 623, 22 L. R. A. (N.S.) 263, 120 N. W. 1129.
New York. Albany National Exchange Bank v. Lester, 194 N. Y. 461, 21 L. R. A. (N.S.) 402, 87 N. E. 779.
South Dakota. Rochford v. McGee, 16 S. D. 606, 61 L. R. A. 335, 94 N. W. 695.
11 Phelan v. Ross, 67 Pa. St. 59; Garrard v. Haddan, 67 Pa. St. 82.
12 Harvey v. Smith, 55 III. 224.
In some of the American states, a distinction has been made between a blank in which nothing was written, in which the maker meant to have nothing written, and a blank in which something is written although the blank is not completely filled. In the former case, the maker is held to be bound by the instrument in its altered state, although he did not intend the blank to be filled;14 and in the latter case, it is held that the maker is not bound by the instrument in its altered condition, although he left sufficient space for the addition of words which might vary the legal effect of the instrument.15
Even where the theory of estoppel is invoked, it is limited to cases in which a reasonably prudent man who received the instrument would be misled thereby; and if the alteration is made by defacing the instrument in such a manner as to be readily apparent on its face, the doctrine of estoppel can not be invoked.16 The doctrine is, furthermore, apparently something different from the pure doctrine of estoppel, since it does not seem to apply to non-negotiable instruments.17 If the only basis for holding the maker liable were that of estoppel alone, no distinction ought to be made between the negotiable and the non-negotiable instrument, since the basis of estoppel is the same in either case. It is evident that considerations of negotiability, as well as considerations of estoppel, enter into the result.