Miles City Bank v.

Askin
Case number 9170– 1947
J. Freebourn

Topic: Holder in Due Course – Complete and Regular

Doctrine: Should jury find that the instrument had been materially altered after execution delivery, but nevertheless bank be a
holder in due course, not a party to alteration, then should still be allowed to recover according to its original tenor. Should the
jury find that the alteration was so obvious as to impart notice on the bank, then it might as well be concluded as bad faith
toward Askin, and therefore, amounting to gross negligence

Petitioner: Miles City Bank

Respondents: George Askin

Case Summary: Askin and Clark were playing Black-jack and twenty-one. After losing, Askin wrote 2 checks to Clark in the
amounts of $150 and $1,000. Clark presented the check to Miles City Bank, but at this time, the amount written on the check was
already $5,000. Upon presentment of the check, Askin stopped payment. The bank then sued Askin for such stop payment. The
lower court sided with the bank, and noted that they were correctly held as a holder in due course, and acting on good faith that the
writings on said check were altered by Mr. Askin during the time he wrote the check. However, the Court in this case declared that
the case should be remanded and tried by the jury, with proper examination as to when the alteration was made and who made it.
This is because if the alteration was made by Mr. Askin during the time he wrote it, then the bank may be held a holder in due
course. But if the alteration was made by another person, after the check was issued by the drawer, and if there was negligence on
the part of the bank who encashed it, through the lack of checking for validity of an instrument that looked suspicious, then said
bank cannot recover the money that they released.

Facts:
 January 5-6 1945: In a black-jack or twenty-one game at Leon Par, a resort in Miles City, Montana, George Askin paid
his losses to J.W. Clark by two checks  one for $150 and the other for $1,000, each signed by Askin as Drawer,
payable to Clark’s order and drawn on the Bank of Baker Montana
o Askin signed his own name and inserted the numerals in lead pencil
 Subsequently, Askin stopped payment  he was then sued on the check; the date remained the same, but it called for
$5,000 at the time it was negotiated to plaintiff bank
o The Court found that upon examination of the check, it was seen that it had been altered or changed after
having been written
 Written words and figures $5,000 were obviously written with a different pencil
o The jury, however, sided with Plaintiff bank

Issues + Held:

1. W/N the court erred in ruling in favor of Miles City Bank – YES
 The Lower Court ruling is based on the presumption that the bank was a holder of the check in due course
o However, in view of the suspicious circumstances surrounding the presentment of the check, a serious question
is presented as to whether it can be considered as a holder in due course
o Among the circumstances is that Clark was not a depositor of the bank, and that the check for a big amount
was written in pencil; that the teller was not acquainted with Mr. Clark and ignorant of the nature of Clark’s
business, background, financial responsibility, etc.
 Despite all of these circumstances, the teller still cashed the check without making inquiries one
would naturally do
 The Negotiable Instruments Law provides that:

Sec. 52. What constitutes a holder in due course. - A holder in due course is a holder who has taken the instrument under the
following conditions:chanroblesvirtuallawlibrary
(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it has been previously dishonored, if
such was the fact;
 (c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of
the person negotiating it.
Sec. 56. What constitutes notice of defect. - To constitutes notice of an infirmity in the instrument or defect in the title of the
person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or
knowledge of such facts that his action in taking the instrument amounted to bad faith.

Sec. 124. Alteration of instrument; effect of. - Where a negotiable instrument is materially altered without the assent of all parties
liable thereon, it is avoided, except as against a party who has himself made, authorized, or assented to the alteration and
subsequent indorsers.
But when an instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration, he
may enforce payment thereof according to its original tenor.
 The Court posed a question: Could it be said that the check is “regular upon its face” and that the bank had no notice of
any infirmity and therefore took it in good faith? If and only if the answer is in the affirmative, then that is the only time
the bank may be considered a holder in due course
o Under the circumstances, this question should have been determined by a jury
o The ancient rule of evidence was that alterations and erasures of written instruments were presumed to have
been made at or prior to the time of their execution  however, when an alteration or erasure appears
suspicious on its face – for example when a different ink was used at the point of erasure from that elsewhere
used, then that demands an explanation
 In the case at bar, the alteration is apparent on the face of the instrument because of the different ink used  bank stated
that it had been altered by Askin himself when he wrote it, but Askin claims that the date had been changed after he
signed it
o The burden would be on the bank to offer evidence tending to explain such alteration  if it fails, then it failed
to make a prima facie case
 The Court then concluded that the ultimate question of whether or not the bank was a holder in due course is a question
that must be determined by a jury – such determination to be based on findings as to where (1) check was, in fact
materially altered subsequent to execution and delivery, and (2) if so, was such alteration so manifest and visible as to
reasonably impart notice to bank of an irregularity and infirmity in the check
o Should jury find that the instrument had been materially altered after execution delivery, but nevertheless bank
be a holder in due course, not a party to alteration, then should still be allowed to recover according to its
original tenor
o Should the jury find that the alteration was so obvious as to impart notice on the bank, then it might as well be
concluded as bad faith toward Askin, and therefore, amounting to gross negligence
 For the reasons above, we hold that the evidence was insufficient to sustain the verdict and judgment

Ruling: Judgment is reversed and cause remanded for a new trial