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15. A note payable to the order of "A. B. trustee for C. D." § 7. is a good promissory note: Downer v, Read, 17 Minn. 493




3. Where the payee is a fictitious or non-exist- If payee is ing person, the bill may be treated as payable to bearer. Imp. Act, s. 7 (3).

Formerly in England it was only as against a party to the bill who knew that the payee was a fictitious person, that a bona fide holder could treat the bill as one payable to bearer Chitty, p. 113; Minet v. Gibson, 3 T. R. 481 (1789).

Chalmers says, p. 21:-" This sub-section was inserted in committee in place of a clause working out in detail the effect of the cases. The words "or non-existing" seem superfluous; but they were probably intended to cover the case of Aspitel v. Bryan, illustration 6 below."

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'Before the Act it appears that even a holder in due course could not enforce a bill which he held under the indorsement of a fictitious person, except as against parties who were privy to the fiction; the exception that bills drawn to the order of a fictitious or non-existing payee might be treated as payable to bearer was based uniformly upon the law of estoppel, and applied only against the parties who at the time they became liable on the bill were cognizant of the fictitious character or non existence of the supposed payee: Vagliano v. Bank of England (1889) 23 Q. B. D. 243, at p. 260, per Bowen, L.J., reviewing the cases: Story on Bills §§ 56, 200.”

"But the Act has swept away the former qualifications,. and now any holder who could recover if the bill had been drawn payable to bearer can recover if the payee be fictitious. Where a bill is payable to the order of a fictitious person, it is obvious that a genuine indorsement can never

§ 7. be obtained, and in accordance with the language of the old cases and text-books the Act puts it on the footing of a bill payable to bearer. But inasmuch as a bill payable to one person, but in the hands of another, is patently irregular, it is clear that the bill should be indorsed, and perhaps a bona fide holder would be justified in indorsing it in the payee's name. It might have been better if the Act had provided that a bill payable to the order of a fictitious person might be treated as payable to the order of any one who should indorse it, or, in other words, as indorsable by the bearer. Though the bill may be payable to bearer, it is clear that a holder who is party or privy to any fraud acquires no title. What the Act has done is to declare that the mere fact that a bill is payable to a fictitious person is not of itself a bar to proceeding against parties who were ignorant of the fact."

Vagliano's case. The case of Vagliano and the Bank of England above mentioned is the most striking one that has arisen under the Imperial Act, and is of special interest not only on account of the number and magnitude of the forgeries in question, but also on account of the skilful manner in which they were perpetrated, and the great diversity of judicial opinion upon the questions of law involved. The following are the leading facts of the case. Vagliano, the plaintiff, was a London merchant, who kept his account with the Bank of England and made his bills payable there. These each year numbered about 4,000 and amounted to three or four million pounds. Among his foreign correspondents was Vucina, an Odessa merchant, who for several years had drawn a large number of bills upon him, several of them being to the order of C. Petridi & Co., of Constantinople. During 1887, up to the 12th of October, Vucina's drafts upon him numbered over 700, aggregating about £340,000. Vagliano had a

clerk named Glyka, who committed the forgeries in § 7. question. His plan was as follows:-He would forge Vucina's name to a draft in favor of C. Petridi & Co., place it among the genuine bills left for acceptance, forge a letter of advice from Vucina, procure Vagliano's acceptance, have it entered among the bills payable, and then steal the bill. The Bank would be notified in due course, and Glyka would forge the indorsement of C. Petridi & Co., present the bill, and get the money. Between the 4th of February, 1887, and the 12th of October of that year when his forgeries were discovered, he had forged no less than 43 such bills, which aggregated £71,500. The Bank charged these bills to Vagliano, and the action was brought by him to recover that amount.

The case was tried before Charles, J., without a jury. It was conceded that by section 54 of the Act, Vagliano was precluded from denying the genuineness of the signature of Vucina. The questions remained whether the case came within sub-section 3 of section 7, and what effect the conduct of the parties had upon their respective rights and liabili ties. The decision was in favour of the plaintiff, the judge holding that C. Petridi & Co. the payees were not "fictitious or non-existing persons" within the meaning of this sub-section, and the bank was not entitled to treat the bills in question as payable to bearer; that Vagliano had not been guilty of negligence immediately connected with the transactions, so as to disentitle him to recover; and that on the authority of Robarts v. Tucker, 16 Q. B. 560 (1851), embodied in section 24 of the Act, the bills being payable to order, the bank had no right to pay to one who had not become the holder by genuine indorsement: 22 Q. B. D. 103 (1888).

The case went to the Court of Appeal where it was In appeal. heard by six judges. The decision of Charles, J., was

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§ 7. affirmed by the majority, Lord Esher, M.R., dissenting: $ 23 Q. B. D. 243 (1889). It was held that although the instruments in question might not really be bills of exchange at all, there being no real drawee and no real payee, the bank, in view of their acceptance by plaintiff and his letters directing their payment, was justified in dealing with them as if they were actual bills; that the payees were not fictitious or non-existing, but a real and existing firm; that "fictitious" meant fictitious to the knowledge of the party sought to be charged upon the bill; and that the bank was not justified in paying upon a forged indorsement. Lord Esher was of opinion that the instruments were not bills of exchange at all, but that Vagliano was estopped from saying that they were not bills; that the Bills of Exchange Act altered the law so that it was not necessary that Vagliano should know that the payees were fictitious in order to make the bills payable to bearer, and that in this case the payees were really fictitious and the bank consequently justified in paying the bills to the bearer.

Final judgment.

In the House of Lords these decisions were reversed by the Lord Chancellor, Lords Selborne, Watson, Herschell, Macnaghten and Morris, while Lords Bramwell and Field were in favor of the plaintiff: (1891) A. C. 107. The majority however did not agree in the grounds upon which the judgment should be based. Lords Watson, Herschell, Macnaghten and Morris held that this sub-section applied, an opinion in which the Lord Chancellor reluctantly concurred, while Lord Selborne thought that the payees were not fictitious or non-existing. The Lord Chancellor and Lord Selborne thought that as Vagliano had accepted the bills, and had advised the bank that he had done so, and had seen the payments entered in his passbook, he was estopped from claiming that the payments

were unauthorized, an opinion in which Lords Watson and § 7. Macnaghten alone partly concurred. The divergence of opinion was such that it would seem almost to justify the somewhat caustic remark of Lord Bramwell regarding the dissenting opinion of himself and of Lord Field, when he said: "It is some comfort to me to think that the headnote of our opinion may be expressed very shortly, and in the most abstract form-namely, a banker cannot charge his customer with the amount of a bill paid to a person who had no right of action against the customer, the acceptor. But I think the head-note which will represent the decision of your lordships should be in a strictly concrete form stating the facts and saying that on them it was held that judgment should be for the appellants."

Estoppels as to payee. The acceptor is precluded from denying to a holder in due course the existence of the payee and his capacity to indorse at the time of acceptance: section 54 (3). The drawer is also precluded from denying to a holder in due course the existence of the payee and his capacity to endorse at the time the bill is drawn section 55 (b). The onus is on the holder to prove that the payee is fictitious or non-existing. The holder of such a bill, if he desires to negotiate it, should indorse it in the name of the fictitious payee. The signature of the name of a fictitious payee in such a case must be distinguished from the forgery of the signature of a real person, and also from the case of a real payee using a business or fictitious. name instead of his own. In France a bill with a fictitious payee is void in the hands of a holder with notice: Nouguier, § 277. In the United States it is looked upon with disfavor Daniel, §§ 136-140.


By section 34, s-s. 3, the provisions of the Act relating to a payee apply with the necessary modifications to an indorsee under a special indorsement.

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