Bills and Notes, Alteration, Holder in due course, Incomplete instrument. Fraud. Agency. Equity Jurisdiction, To relieve from the results of fraud. Insurance, Life: assignment of policy. Assignment. Estoppel.
If the general agent of an insurance company which is the payee in a note of one of its policy holders, given to secure a loan by it, without the knowledge of the maker fraudulently alters the note by raising its amount and erasing the name of the payee and delivers it with the place for the name of the payee blank to one who pays value for it, such purchaser because of the incomplete state of the instrument is put upon notice of the lack of authority of the agent for his acts and has not the right of recovery upon the note according to its original tenor given to a holder in due course by R.L.c. 73, § 141; and the maker is entitled to have the note delivered to him for cancellation.
If the holder of a policy of life insurance, as security for the payment of notes made by him payable to the insurance company, delivers to a general agent for the company his policy and an assignment of his rights therein, leaving blank the place for the name of the assignee and writing at the bottom of the assignment the words, "In case of death all balance over notes to be paid to my estate," and the agent agrees with him that the notes and the policy shall remain with the company and shall not be negotiated by it; and if the agent fraudulently alters the notes by raising their amounts and, as to one, erasing the name of the payee, and delivers the note with the name of the payee blank and the assignment with the name of the assignee blank and the policy to a person who pays value therefor, such person is put upon inquiry as to the authority of the agent, and the policy holder by a suit in equity can compel a redelivery of the note for cancellation, and a redelivery of the policy and of the assignment without being obliged first to pay any part of what was paid to the agent by the person who received them from the agent.
BRALEY, J.
The plaintiff's promissory note having been materially altered without his knowledge or assent by Williams, who among other changes erased the name of the payee leaving the space in blank, and raised the amount of the principal five fold, it is unenforceable according to its original tenor unless the defendant Sargent to whom after alteration it was transferred is a holder in due course. R.L.c. 73, § 141. But as the presiding judge has found that when delivered to her agents it was an incomplete instrument he is entitled to a return and cancellation of the note. R.L.c. 73, § 31. Andrews v. Sibley, ante, 10. Tower v. Stanley, ante, 429.
The plaintiff when he gave the note also executed an assignment, with the blank for the name of the assignee unfilled, of his policy of life insurance as collateral security, which was delivered by Williams to the defendant with the note in question. It is contended, that the plaintiff is estopped from recovering the policy unless he first pays the entire amount for which the defendant took it as security. But the assignment was not an unqualified transfer. The words "in case of death all balance over notes to be paid to my estate" appearing on the face are sufficient with the other evidence to warrant the judge's finding, that it was pledged for the payment of the note in its original form held by the defendant, as well as for another note of the plaintiff's retained by Williams, but declared void by the decree because fraudulently altered, from which the defendants, his executors, have not appealed. The policy is not a negotiable instrument, and if the assignment is considered apart from the notes the words quoted clearly indicate that Williams was not clothed with the absolute title, and the defendant was put upon inquiry as to the source and extent of his ownership. Tuttle v. First National Bank of Greenfield, 187 Mass. 533. Allen v. Puritan Trust Co. 211 Mass. 409, 420. 2 Pom. Eq. Jur. §§ 710, 711. It never was an independent right to property capable of being transferred separately from the notes, so that one person could hold the principal obligation, and another person would hold the policy. Whitaker v. Sumner, 20 Pick. 399. White v. Dodge, 187 Mass. 449.
The note having been uncollectible for the reasons stated, the lien on the policy has been discharged. Jarvis v. Rogers, 15 Mass. 389. Leighton v. Bowen, 75 Maine, 504, 508. Green v. Sinker, Davis Co. 135 Ind. 434. Nor under the doctrine of Joslyn v. Wyman, 5 Allen, 62, as a condition to relief should the plaintiff in equity be required to pay the amount he received. As a borrower of money he is expressly found not to have made any contract express or implied with either Williams or the defendant. Foote v. Cotting, 195 Mass. 55, 61.
The policy as well as the note must be returned to the plaintiff, and the decree is affirmed with costs.
Ordered accordingly.