Facts of the Case
- A bill is made payable to X or order.
- The bill is stolen by Y, who forges X’s endorsement.
- Y then negotiates the bill to Z.
- Z takes the bill in good faith and for consideration.
Issues in the Case
- Can a forged endorsement confer valid title to a negotiable instrument?
- Does Z acquire a bonafide title if he takes the bill for value and in good faith?
- What is the legal effect of forgery in the negotiation of order instruments?
Principles Associated With It
- A bill payable to “order” must be endorsed by the payee (X) for valid negotiation.
- Forgery passes no title under the law—a forged endorsement is a nullity.
- Even a holder in due course cannot acquire title through a forged endorsement.
- Section 58 of the Negotiable Instruments Act states that a person who obtains a negotiable instrument through forged endorsement acquires no title, even if obtained in good faith and for value.
Judgement
- Since the endorsement by Y was forged, the bill was never properly negotiated.
- Z, although acting in good faith and for value, does not obtain a valid title.
- Therefore, Z cannot claim as a holder in due course.
- The true owner X retains the title, and Z has no right to enforce payment on the bill.