iTXT^ ^^S3r51Hl'i^iCT; i-'irlif*^^'*" ' ■ '- '•■'''■■' Law Library Cornell Law School THE GIFT OF Date Cornell University Library KF 957.A4S64 1922 Cases on the law of bills and notes, sele 3 1924 018 846 471 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924018846471 CASES ON THE LAW OF BILLS AND NOTES SELECTED FROM DECISIONS OF ENGLISH AND AMERICAN COURTS BY ' ^' HOWARD Lf §MITH PRCrtnBSSOR OP law in the university of WISCONSIN AND . WM. UNDERHILL MOORE PROFESSOR OP LAW IN COLUMBIA UNIVERSITY AMERICAN CASEBOOK SERIES WILLIAM REYNOLDS VANCE GENERAL EDITOR SECOND EDITION ST. PAUL WEST PUBLISHING COMPANY 1922 COPTKIGHT, 1922 BY WEST PUBLISHING COMPANY (2dEd.Sm.&M.B.&N.) THE AMERICAN CASEBOOK SERIES The first of the American Casebook Series, Mikell's Cases on Crim- inal Law, issued in December, 1908, contained in its preface an able argument by Mr. James Brown Scott, the General Editor of the Se- ries, in favor of the case method of law teaching. Until 1915 this preface appeared in each of the volumes published in the series. But the teachers of law have moved onward, and the argument that was necessary in 1908 has now become needless. That such is the case becomes strikingly manifest to one examining three im- portant documents that fittingly mark the progress of legal education in America. In 1893 the United States Bureau of Education pub- lished a report on Legal Education prepared by the American Bar As- sociation's Committee on Legal Education, and manifestly the work of that Committee's accomplished chairman, William G. Hammond, in which the three methods of teaching law then in vogue — that is, by lectures, by text-book, and by selected cases — were described and com- mented upon, but without indication of preference. The next report of the Bureau of Education dealing with -legal education, published in 1914, contains these unequivocal statements : "To-day the case method forms the principal, if not the exclusive, method of teaching in nearly all of the stronger law schools of the country. Lectures on special subjects are of course still delivered in all law schools, and this doubtless always will be the case. But for staple instruction in the important branches of common law the case has proved itself as the best available material for use practically ev- erywhere. * * * The case method is to-day the principal method of instruction in the great majority of the schools of this country." But the most striking evidence of the present stage of development of legal instruction in American Law Schools is to be found in the special report, made by Professor Redlich to the Carnegie Foundation for the Advancement of Teaching, on "The Case Method in American Law Schools." Professor Redlich, of the Faculty of Law in the Uni- versity of Vienna, was brought to this country to make a special study of methods of legal instruction in the United States from the stand- point of one free from those prejudices necessarily engendered in American teachers through their relation to the struggle for supremacy so long, and at one time so vehemently, waged among the rival sys- tems. From this masterly report, so replete with brilliant analysis and discriminating comment, the following brief extracts are taken. Speaking of the text-book method Professor Redlich says : "The principles are laid down in the text-book and, in the profes- sor's lectures, ready made and neatly rounded, the predigested essence (iii) IV PREFACE of many judicial decisions. The pupil has simply to accept them and to inscribe them so far as possible in his memory. In this way the scientific element of instruction is apparently excluded from the very first. Even though the representatives of this instruction certainly do regard law as a science — that is to say, as a system of thought, a group- ing of concepts to be satisfactorily explained by historical research and logical deduction — they are not willing- to teach this science, but only its results. The inevitable danger which appears to accompany this method of teaching is that of developing a mechanical, superficial in- struction in abstract maxims, instead of a genuine intellectual probing of the subject-matter of the law, fulfilling the requirements of a science." Turning to the case method Professor Redlich comments as follows : "It emphasizes the scientific character of legal thought ; it goes now a step further, however, and demands that law, just because it is a science, must also be taught scientifically. From this point of view it very properly rejects the elementary school type of existing legal edu- cation as inadequate to develop the specific legal mode of thinking, as inadequate to make the basis, the logical foundation, of the separate legal principles really intelligible to the students. Consequently, as the method was developed, it laid the main emphasis upon precisely that aspect of the training which the older text-book school entirely neg- lected — the training of the student in intellectual independence, in in- dividual thinking, in digging out the principles through penetrating analysis of the material found within separate cases ; material which contains, all mixed in with one another, both the facts, as life creates them, which generate the law, and at the same time rules of the law itself, component parts of the general system. In the fact that, as has been said before, it has actually accomplished this purpose, lies the great success of the case method. For it really teaches the pupil to think in the way that any practical lawyer — whether dealing with writ- ten or with unwritten law — ought to and has to think. It prepares the student in precisely the way which, in a country of case law, leads to full powers of legal understanding and legal acumen ; that is to say, by making the law pupil familiar with the law through incessant prac- tice in the analysis of law cases, where the concepts, principles, and rules of Anglo-American law are recorded, not as dry abstractions, but as cardinal realities in the inexhaustibly rich, ceaselessly fluctuating, social and economic life of man. Thus in the modern American law school professional practice is preceded by a genuine course of study, the methods of which are perfectly adapted to the nature of the com- mon law." The general purpose and scope of this series were clearly stated in the original announcement: "The General Editor takes pleasure in announcing a series of schol- arly casebooks, prepared with special reference to the needs and limi- PREFACH V tations of the classroom, on the fundamental subjects of legal educa- tion, which, through a judicious rearrangement of emphasis, shall pro- vide adequate training combined with a thorough knowledge of the general principles of the subject. The collection will develop the law historically and scientifically; English cases will give the origin and development of the law in England ; "American cases will trace its ex- pansion and modification in America ; - notes and annotations will sug- gest phases omitted in the printed case. Cumulative references will be avoided, for the footnote may not hope to rival the digest. The law will thus be presented as an organic growth, and the necessary con- nection between the past and the present will be obvious. ■'The importance and difficulty of the subject as well as the time that can properly be devoted to it will be carefully considered so that each book may be completed within the time allotted to the particular sub- ject. * * * If it be granted that all, or nearly all, the studies re- quired for admission -to the bar should be studied in course by every student — and the soundness of this contention can hardly be seriously doubted — it follows necessarily that the preparation and publication of collections of cases exactly adapted to the purpose would be a genuine and by no means unimportant service to the cause of legal education. And this result can best be obtained by the preparation of a systematic series of casebooks constructed upon a uniform plan under the super- vision of an editor in chief. * * * "The preparation of the casebooks has been intrusted to experienced and well-known teachers of the various subjects included, so that the experience of the classroom and the needs of the students v/ill furnish a sound basis of selection." Since this announcement of the Series was first made there have been published books on the following subjects: Administrative Lazv. By Ernst Freund, Professor of Law in the University of Chicago. Agency. 'By Edwin C. Goddard, Professor of Law in the University of Michigan. Bills and Notes. Second Edition. By Howard L. Smith, Professor of Law in the University of Wisconsin, and Underbill Moore, Pro- fessor of Law in Columbia University. Carriers. By Frederick Green, Professor of Law in the University of Illinois. Conflict of Laws. Second Edition. By Ernest G. Lorenzen, Pro- fessor of Law in Yale University. Constitutional Law. By James Parker Hall, Dean of the Faculty of Law in the University of Chicago. Contracts. By Arthur L. Corbin, Professor of Law in Yale University. VI PREEIACH Corporations. By Harry S. Richards, Dean of tlie Faculty of Law in the University of Wisconsin. Criminal Law. By William E. Mikell, Dean of the Faculty of Law in the University of Pennsylvania. Criminal Procedure. By William E. Mikell, Dean of the Faculty of Law in the University of Pennsylvania. Damages. By Floyd R. Mechem, Professor of Law in the University of Chicago, and Barry Gilbert, of the Chicago Bar. Equity. By George H. Boke, formerly Professor of Law in the Uni- versity of California. Equity. By Walter Wheeler Cook, Professor of Law in Yale Uni- versity. Volume 1. Volumes 2 and 3 in preparation. Evidence. By Edward W. Hinton, Professor of Law in the Universi- ty of Chicago. Insurance. By William R. Vance, Professor of Law in Yale Uni- versity. International Law. By James Brown Scott, Lecturer on International Law and the Foreign Relations of the United States in the School of Foreign Service, Georgetown University. Legal Ethics, Cases and Other Authorities on. By George P. Costigan, Jr., Professor of Law in the University of Cahfornia. Partnership. By Eugene A. Gilmore, Professor of Law in the Uni- versity of Wisconsin. Persons (including Marriage and Dizvrcc). By Albert M. Kales, late of the Chicago Bar, and Chester G. Vernier, Professor of Law in Stanford University. Pleading (Common Law). By Clarke B. Whittier, Professor of Law in Stanford University, and Edmund M. Morgan, Professor of Law in Yale University. Property (Future Interests). By Albert M. Kales, late of the Chicago Bar. Property (Personal) . By Harry A. Bigelow, Professor of Law in the University of Chicago. Property (Rights in Land). By Flarry A. Bigelow, Professor of Law in the University of Chicago. Property (Titles to Real Property). By Ralph W. Aigler, Professor of Law in the University of Michigan. Property (Wills, Descent, and Administration). By George P. Costi- gan, Jr., Professor of Law in the University of California. Quasi Contracts. By Edward S. Thurston, Professor of Law in Yale University. Sales. By Frederic C. Woodward, Professor of Law in the University of Chicago. PRBFACB VU Suretyship. By Crawford D. Hening, formerly Professor of Law in the University of Pennsylvania. Torts. By Charles M. Hepburn, Dean of the Faculty of Law in the University of Indiana. Trade Regulation. By Herman Oliphant, Professor of Law in Colum- bia University. Trusts. By Thaddeus D. Kenneson, Professor of Law in the Univer- sity of New York. Casebooks on other subjects are in preparation. . It is earnestly hoped and believed that the books thus far published in this series, with the sincere purpose of furthering scientific training in the law, have not been without their influence in bringing about a fuller understanding and a wider use of the case method. WiWAM R. Vance, General Editor. TABLE OF CONTENTS INTRODUCTION '»» Page Negotiability 1 PART I Form and IncEptiow CHAPTER I FoBM 0-F Bill akd qv Note ^ 1. Negotiable and Nonnegotiable Bills and Notes^Words of Negotia- bility 14 2. Writing : 36 3. The Promise 38 4. The Order 49 5. Character of the Order or Promise 55 I. As to Conditions 55 II. As to Certainty 79 III. As to Medium of Payment 121 6. Parties 133 I. Maker and Drawer 133 II. Payee . . . ^ 158 ni. Drawee 183 CHAPTER IL ACOKPTANCB 1. General and Qualified Acceptances 192 2. Form of Acceptance 199 3. Constructive Acceptance 223 CHAPTER III Dklivxbt 233 CHAPTER IV CONSIDERATIOli > 276 PART II, Negotiation, chapter i Teansiee 1. Who may Transfer 300 2. Form of Indorsement 307 Sif .& M.B.& N. (2d £}d.) (is) X TABLE OF CONTENTS Section P|f« 3. Transfer by Indorsement *^-^ I. Blank and Special Indorsements 324 II. Restrictive Indorsement 336 III. Qualified Indorsement 352 IV. Conditional Indorsement '• 354 4. Transfer by Delivery 355 CHAPTER II Holder in Due Course 1. Value ., 378 2. Notice ^2 3. Equities ^6' PART III Liability of Parties chapter i Maker and Aoceptob 501 CHAKTER II Drawee and Indorseh 1. In General 556 2. Presentment for Acceptance 590 3. Presentment for Payment 611 I. Day 611 II. Hour 642 III. Place 64T 4. Protest 665 5. Notice of Dishonor 668 6. When Presentment and Notice of Disbonor Unnecessary 696 CHAPTER III Transferbob 716 PART IV Discharge 1. Payment and Renunciation ' 730 2. Cancellation 771 3. Alteration 776 APPENDIX NEaoiiABL£ Instruments Law 801 TABLE OF CASES Cases printed in ordinary type are the cases reported as the text of this rolume. Cases printed in italics are found in the footnotes and in text ; they ire included in this table either because they are stated and discussed, or secause they are printed in other casebooks and have become known to many teachers and students, who will thus be enabled to use this table as a supple- mentary index. Page Adams v. King 179 Allaire v. Hartshorne 408 Allen V. Sea, Fire & Life Assur. Co 188 AlUson V. Hollembeak 58 Almy V. Winslow 189 American Exch. Nat. Bank v. American Hotel Victoria Co.. .. 688 Aniba v. Yeomans 315 Atlas Bank v. Doyle 416 Attenborough v. Mackenzie 738 Awde V. Dixon 269 Ayrey v. Feamsides 79 Bacon v. Burnham 578 Bailoy v. Bidwell '. . 481 Bailey & Co. v. Southwestern Ve- neer Co 231 Baker v. Walker 283 Banlc of England v, Vagliano Bros. 528 . Bank of Indian Territory v. First Nat. Bank 351 Bank of Metropolis v. New Eng- land Bank 338, 339 Bank of Orleans v. Whittemore. . 649 Bank of Sandusky v. Scovijle 381 Bank of Syracuse v. HoUister. . . 644 Bank of Troy v. Topping 284 Bank of U. S. v. Carneal 647 Bank of Vttca v. Bender 684 Bank of Utica v. Davidson 684 Bank of Vtica v. Phillips 683 Bank of Whitehouse v. White 94 Barkley v. MuUer 323 Barough v. White • 424 Barron v. Vandvert 17b Barton v. Baker 696 Bavins v. London, etc., Bank 71 Baxendale v. Bennett 263 Baxter v. Little 469 Bay V. Coddington 378 Bicknall & Skinner v. Waterman. 716 Bird V. State 169 Page Bishop V. Hayward 556 Bitzer v. Wagar 21 Black V. Bank 415 Black V. Ward 127 Blaine, Gould & Short v. Bourne & Co » 338 Blanckenhagen v. Blundell 16S Blanckenhagen v. Blundell 169 Blenn v. Lyford 762 Bloomingdale v. Bank 21 Blue Ribbon Garage v. Baldwin. . 679 Boehm V. Garclas 192 Bogue v. Melick 580 BoUes V. Stearns 302 Boot & Bentley v. Franklin 647 Borne v. First Nat. Bank 606 Borough of Montvale v. Bank. . . . 243 Boston Steel & Irou Co. v. Steuer 270 Bowers v. Burd 276 Boylston v. Greene 758 Bradley v. Davis 688 Bradley v. Louisville Food Prod- ucts Go 592 Brainerd v. Railroad Co 23 Bray v. Hadwen 669 Brewster v. MeCardell 425 Bright V. Furrier 596 Bromage v. Lloyd '. 324 Brooklyn City & N. R. Co. v. Na- tional Bank of the Republic. . . . 392 Brooks V. Blaney 653 Broion, In re 25 Brown V. Davies 422 Brown v. Perera 4 Burbridge v. Manners 730 Burch V. Daniel 332 Burson y. Huntington 244 Caldwell v. Cassidy 505 Callow V. Lawrence 766 Campbell v. Pettengill 195 Canal Bank v. Bank of Albany. . . 514 Carlos V. Fancourt 56 Carpenter v. Famsworth 169 Sm.&M.B.&N.(2dEd.) (xi) TABLE OP CASES Page Carrier v. Sears 472 Caulkins v. Wliisler 262 Chatham Nat. Bank v. Gardner. . 154 Cheever v. Pittsburgh R. Go 450 Chicago Heights Lumber Oo. v. Miller 211 Citizens' State Bank v. Hendrix. . 700 Citizens' Trust Co. v. Wa/rd 351 Clark V. Pease 473 Clark V. Thompson 321 Clark V. "Walker 325 Clarke v. Johnson 249 Clayton v. Bank of East Chatta- nooga 420 Gierke v. Martin 15 CoggiU V. American Exch. Bank. . 519 Co ff gill V. American Exch. Bank. . 529 Coicord V. Banco De Tamaulipas 215 Collins V. Martin 380 Colonial Fur Ranching Co. v. First Nat. Bank 458 Columbia-Knickerbocker Trust Co. V. Miller 660 Columbian Banking Co. v. Bowen 634 Commercial Bank y. BYench 180 Commercial Bank v. Norton & Fox 281 Convmeroial Bank v. Vamum 668 Commercial Bank v. William H. Barksdale & Co 665 Commercial Nat. Bank v. Zimmer- man 637 Commercial Jfat. Bank of Pennsyl- vania V. Armstrong 351 Cooke V. Colehan 88 Cooke V. Horn 108 Coolidge V. Payson 202 Copeland v. Burke 311 Cowan V. Hallack 44 Creamer v. Perry 698 Cruchley v. Clarance 266 Currie v. Misa 387 Dana v. Sawyer 643 Deahy v. Choquet 582 De Silva 7. Fuller 730 Dicken v. Hall 686 Dickinson v. Marsh 228 Dike V. Drexcl 450 Dimon v. Keery 757 Ditch & Bros. v. Western Nat. Bank 351 Dollfus V. Frosch 333 Dotson V. Skaggs 166 Downey v. O'Eeefe 584 Drum V. Drum 779 Dnimmond v. Drummond 134 Dugan v. V. 8 334 Dunavan v. Flynn 226 Duncan v. Scott 482 Dunham v. &ra/nt 178 Page Easterly v. Barber 558 Easton V. Pratchett 278 Ecliert V. Cameron 442 E. D. Fisher Lumber & Coal Co. V. Bobbins 319 Edie & Laird v. East India Co.. . 336 Bdmisten v. Henry Herpolsheimer Co 629 Ellsworth V.' Varney 315 EguitaHe Marine Ins. Co. v. Adams 584 Ereskine v. Murray 199 Essex Co. V. Edmands 509 Estabrook v. Smith 303 European Bank, In re 484 Evans v. Freeman 315 Evans V. Underwood 88 Evertson v. Miles 722 Fake V. Smith 720 Farmers' Nat. Bank v. Venner. . . 507 Farrelly v. Ermgrant Savings Bank 170 Farris v. Wells 373 Far Rockaway Bank v. Norton. . . 581 Payette Nat. Bank v. Smnmera. .. 351 Fearing v. Clark 242 Ferns v. Harrison 724 Pillebrown v. Hay ward 454 Finley v. Smith 115 First Bank v. Bank 124 First Bank v. Hall 182 First Bank v. Slette 124 First Nat. Bank v. First Nat. Bank 351 First Nat. Bank V. Greenlee 29 First Nat. Bank y. Leach 604 First Nat. Bank v. Lightner 66 First Nat. Bank v. Uttertock 541 First Nat. Bank v. Wallis 149 First Nat. Bank v. Whitmore 229 Pisher t. Ellis 176 Fisher Dumber ■& Coal Co. v. Rob- bins 319 Forward v. Thompson 1S4 Foster V. Dawber 752 Fox V. Citizens' Bank & Trust Oo. 460 Fultz V. Walters 371 Funk V. BabUtt 190 Gaar v. Louisville Banking Co.. . . 82 Gage V. Kendall 357 Gale V. Mayhew 315 Oarnett v. Woodcock 645 Garrard v. Haddan 786 Gaul V. Willis 411 Gay V. Rooke 47 Geary v. Physic 36 Gemport v. Bartlett 721 Gerard v. MoCormiok 450 Germania Nat. Bank v. Mariner.. 315 TABLE OF CASES Xlll Page GifCord V. Harden 625 Gill V. Cubit 431 Gillet V. Averill 647 Gilley v. Han-ell 26 Gilpin V. Savage 658 Glcme V. Srmth 592 Glover v. Wesley 79 Goodman v. Simonds 434 Gordon v. Lansing State Sav. Bank 158 Gordon v. .Levine 631 Goupy V. Harden 600 Grange v. Eeigh 630 Grant v. Vaughan 18 Oreenfleld Sav. Bank v. Stowell. . 788 Greve v. Schweitzer 740 Griffin v. Erskme 182 Grist V. Backhouse 179 Griswold v. Morrison 402 Grocers' Bank of City of New York V. Penfield 295 Grover v. Grover 361 Guaranty Trust Co. v. Bannay & Co 71 Gulbranson-Dickinson Co., v. H6p- klns 347 Haddock, Blanchard & Co. v. Had- dock 585 Ball V. Conder 724 Halstead v. Skelton 193 Samilton v. Aston 178 Hamilton v. Spottiswopde 50 Harger v. Worrall 463 Harris v. Baker 671 Harrison v. Ruscoe 673 Hart V. Smith 611 Harvey v. Martin 223 Hatch V. First Nat. Bank 130 Hays V. Hathom 358 Heenan v. Nash 196 Begeman v. Moon 188 Berriclc v. Carman 577 Hewitt V. Thomson 672 Hiawathai Iron Co. v. John Strange Paper Co 452 Hilton V. Waring 413 Binokley v. Union Pao. R. R 732 Hodge V. Wallace 427 Hodges V. Clinton ^ 121 Hodges V. Shuler 121 Hodges V. Steward 14 Hogue V. Williamson 128 Holliday State Bank v. HofCman. . 112 Holmes v. Jaques 173 Holmes V. Kerrison 502 Holtz T. Boppe 651 Hook V. Pratt 341 Hussey v. Winslow 43 Huyck V. Meador 41 Page Ingham v. Primrose 773 Inghnm v. Primrose 248 Isnard v. Torres & Marquee 786 Israel v. Israel. 38 Jarvis v. Wilson 24 Jeffrey v. Rosenfeld 781 Jenkins v. Coomber 592 Jeune v. Ward 223 Jex v. Tureaud 613 Johnson v. Bank •. . . 182 Johnson v. Windle 732 Jones V. Council Bluffs Branch Bank 210 Jones V. Bisler 89 Jordan v. Burst 619 Josselyn v. Lacier 55 Jump V. Sparling 157 Kaufman v. State Sav. Bank 305 Keidan v. Winegar 147 Kelso & Co. V. Ellis 398 Kerr v. Anderson 466 King V. Crowell 654 King v. Thorn 301 Kinsella v. Lockwood 29 Kirk V. Blurton 197 Klots Throwing Co. v. Manufac- turers' Commercial Co 73 Knoxville Nat. Bank v. Clark. . . . 789 Lambert v. Beath 724 Lancaster Nat. Bank v. Taylor. . 367 Lay v. Wissman 418 Leadbitter v. Farrow 137 Leader v. Plante ; 109 Leask v. Dew 754 Liberty Trust Co. v. Haggerty 645 Linn v. Horton 677 Llttauer v. Goldman 718 Little v. Slackford 50 Lobdell V. Baker 723 Lombard v. Bryne 296 London Joint Stock Bank v. Mac- Millan & Arthur 792 London & River Plate Bank v. Bank 516 Loux V. Fox 627 Lowe V. Bliss SO Luff V. Pope 52 Lugrue v. Woodruff 208 Lunt V. Adams 642 Lyons V. Divelbis 315 Mabie v. Johnson 60 McBroom v. Corporation of Leba- non 182 McFarland v. Sikes 234 Macleed v. Snee 55 XIV TABLE OF CASES Page Madison Square Bank v. Pierce. . 764 Mangold & Glandt Bank v. Utter- liaclj . ., 307 Manufacturers' Commercial Co. v. Klots Throwing Co 72 Manufacturers' & Traders' Bank V. Love 139 Marion Nat. Banlc v. Harden. . . . 315, Marling v. Jones 498 Marshall v. Sonneman 692 Martens-Turner Co. v. Mackintosh 290 Rfassacbusetts Nat. Bank v. Snow 256 Master v. Miller 776 Blanran v. lyamb 355 Mechanics' Bwrilc v. Haeard 767 Mechanics' d Farmers' Hank v. Schuyler 267 Afecorney v. Stanley 567 Megowan v. Peterson 151 Merritt v. Todd 638 Mei/er v. Hihsher 649 Meyer v. Richards 726 Miller v. Race 1 Miller v. Stewart 727 Minet v. Gibson 512 Miser V. Trovinger's Ex'rs 702 l\Titchell V. Culver 267 Mohairlc Bank v. Brod0rick 604 Mnntclair v. Ramsdell 467 Montrose v. Claussen 421 Moody V. Threlkeld 177 Moore v. Cross 573 Moore v. Gross 578 Moore v. Ryder 385 Morley v. Culverwell 734 Morley v. Cnlvei-well 444 Morrison v. McCartney 620 Mt. Morris Banlc v. Twenty- Third Ward Bank 543 Miiilinan v. Be Eguino 602 Murchi.wn Nat. Bank v. Dunn Oil Mills Co 351 Murphey v. Illinois Bank 289 Musselmnn v. Oakes 169 Nance v. Lary 255 Na.'ih V. De Freville 742 Nathan v. Ogdens 72 National Bank of Commerce v. Bossemeyer 350 National Bank of Commerce v. Mechanics' American Nat. Banlc 351 National Bank of Rolla v. First Nat. Bank 351 National City Bank of Chicago v. National Bank of the Republic of Chicago 537 National Exch. Bank v. Lester. .. 784 National Newark Banking Co. v. Second Nat. Bank 622 Page National Park Bank v.. German- American Mut. Warehousing & Seciirity Co 445 National Sav. Bank v. Cable 58 Nelson v. Citizens' Bank 32 Nelson v. Nelson 208 New London Credit Syndicate v. Neale 236 Nichols V. Ruggles 62 Nickell V. Bradshaw 330 Nolan V. H. E. Wilcox Motor Co.. 705 Northfleld Bank v. Arndt 421 O'Keefe v. Dunn 597 Oriental Commercial Bank, Ex parte 484 Orthwein v. Nolker 592 Packard v. Windholz 72'i Pahlman v. Taylor 579 Parker v. Gordon 645 Parry's Estate, In re 170 Patterson v. Todd & I^emon 616 Patton V. Melville 17 1 Peacock v. Rhodes.. 3 Pcaslce V. Robhins 472 Peck V. Cochran 194 Perry v. Bigelow 2:!:^ Petit v. Benson 192 Peto V. Reynolds 1S5 Phelps V. Viseher 575 Phillips V. Mercantile Nat. Bank. 529 Pierce v. Mann 566 Pillans & Rose v. Van Mierop ■f: Hopkins 204, 205 Finer v. Brittain 298 Pinkham v. Mncy 69^ Poole, In re 663 President, etc., of Commercial Bank V. French 180 Prevot V. Abbott 361 Price V. Neal 509 Price v. Sharp 759 Prouty V. Roberts 471 Purtel V. Morehead 41 Putnam v. Crymes 23 Putnam v. Sullivan 259 Qulmby v. Varnum 768 Quinby v. Merritt 170 Rambo v. First State Bank 213 Ranger v. Cary 364 Rann v. Hughes. 286 Ransom v. Rutherforil Coxinty. . . . 169 Raper v. Birkbeck 771 Raymond v. Middleton 23 Reed v. Spear 711 Rees V. Head/ort 482 Regina v. Bartlett 163 TABLE OP CASES XV Page Regina v. Hawkea 183 Requa v. Collins 682 Rice V. Rice 89 Rider v. Taintor 335 Riker v. Corby 325 ' Rindge v. Kimball 710 Roach V. Oster 188 Roberts v. Smith 123 Roberts v. Snow 96 Robertson v. Kensington 354 Rochester & C. Turnpike Road Co. V. Paviour 447 Roscow V. Hardy 596 Ross V. Mather 722 Ross V. Terry 720 Rowe V. Tipper 676 Ruff V. Webb 49 Rumball v. Ball 501 Sabine v. Paine 496 Sanderson, v. Bowes 502 fiaunderson v. Judge 646 Sohindler v. Muhlheiser 235 Schwartzman v. Post 746 Bootland County Nat. Banlo v. O'Connel 786 Seaboard Nat. Bank v. Bank of America 523 Shaw V. Knox 557 Shipley v. Carroll 250 Shipman v. Bank of State of Neta York 630 Siegel, Cooper & Co. v. Chicago Trust & Savings Bank 63 Siffkin V. Walker & Rowlestone.. 136 Sison V. Kidman 292 Smith V. Allen 38 Smith V. Clarke 332 Smith V. Crane 86 Smith V. Haire 169 Smith V. Kendall 22 Smith V. Milton 199 Smith V. Mullett 668 Smith V. PUlbriok 650 Smith V. Willing 164 Snelling State Bank v. Clasen 77 Soltykoff, In re 484 Spaulding v. Evans. 170 Spear & Patten v. Pratt 207 Spies V. Oilmore 651 Springs v. Hanover Nat. Bank. . . 548 Stagg V. Pepoon 39 Starr V. Starr 276 Steele v. McKinlay 592 Stoesslger v. South Eastern R. Co 134 Stone V. Rawlinson 300 Storey v. Storey 238 Storm V. Stirling 170 Strong V. Sheffield 293 Page Sturdivant v. Hull 143 Sublette v. Brewington 376 Swift V. Tyson 393, 435 gykes V. Everett 326 Sylvester v. Crapo 426 Tanner v. Bean 603 Tarver v. Garlington 140 Tatam v. Haslar 461 Taylor v. Dobbins 133 Taylor v. Wilson 633 Ten Eyck v. Vanderpoel 287 Tevis V. Young 134 Thompson v. Clubley 279 Thompson v. Gray 288 Thompson v. Sloan 124 Thorogood v. Clarke 731 Thorp v. Mindeman 99 Thorpe v. Coombe 504 Thrall v. Newell 723 Title Guarantee & Trvst Co. v. Haven 512 Tolman v. Hanrahan 198 Torbert v. Montague 714 Traders' Bank of Rochester v. Bradner 382 Treuttel v. Barandon 343 Trust Co. of America v. Hamilton Bank j . 526 Union Trust Co. v. McGinty 749 U. S. V. Chase Nat. Bank 531 V. 8. Nat. Bank v. Geer 351 Venner v. Farmers' Nat. Bank. . . . 507 Walker v. Ebert 251 Walrad v. Petrie 169 Walters v. Neary 374 Ward V. Bowman 352 Warden v. Howell 383 Warren v. Scott 21 Wehb V. Odell 720 Wells V. Brigham 59 West Branch Bank v. Haines. . . . 624 Weston V. Myers 38 West St. Ix)uis Sav. Bank v. Shawnee County Bank 440 Wheeler v. Webster 187 White V. Continental Nat. Bank. . 533 White V. Miners' Nat. Bank 351 White V. Smith 91 Whiteford v. Burclc^Myer 68S Whitehead v. Walker 467 Wilkinson & Co. v. Unwin 562 Williams, Deacon & Co. v. Shad- bolt 344 WillougJiby v. Willoughby 170 Wirt v. Stubblefield 491 XVI TABLE OP CASES ^ Pag» Wisconsin Yearly Meeting of Free- will Baptists V. Babler 97 Witts V. Williams 164 Wolcott V. Van SantvoorA 505 Wolf V. American Trust & Savings Bank 488 Woodbury, Williams & English v. Roberts 93 Page Worcester Co. Bank v. Dor- oliester & Milton Banlc 249 Wynne v. Baikes 199 Yocum V. Smith 786 Zander v. New York Security & Trust Go 23 CASES ON BILLS AND NOTES INTRODUCTION NEGOTIABILITY MILLER V. RACE. ' (Court of King's Bench, 1758. 1 Burrows, 452.) It was an a ction of trover against the defendant, upon a' bank-not e, for jhe pay ment nf twenl-v-ntic pnnnds tpn s hillings, to one William Finnev^TT hearer^ nn demand. The cause came on to be tried before Lord Mansfield, at the sit- tings in Trinity term last at Guildhall, London: and upon the trial it appeared that William Finney, being possessed of this bank-note on the 11th of December, T^5t), sent it by t he general pos t, under cover, direCLed to one R prnard ( ^rlenharty at C .hipping-Nnrtnn in Oxfordshire; that on the same night, t he mail was robbed , and the bank-not e in question (amongst other notes) taken and carried awa ^ b y_tne"l-obbe r : that this bank-not e, on the 12th .of the same Uecem - ber, c ame i nto the haiTds and possession of the plain tiff, for a fu ll an d valuable consideratio n, and in the us ual course »and wav of h is b usines s, and w ithout any notice or~knQ wiprig-(» nf t1i;s__h^^iV-nr-.tp Vip;r.|T- ffil^pn cut nf fhp mail It was ad mitted and ap"ree(} that . inJJTP rpmmnn an^l Ifti^y^p >-niircP of tra de, bank-notes are paid by an d received of the holder or pos - se.ssor of them, as cash, and that in the usual way of negotiating bank-notes they pass from one person to another as cash, by delivery only, and without any further inquiry or evidence of title than what arises from the possession. It appeared, that Mr. Finney, having notice of this robbery, on the 13th of Decem ber, applied to the Bank of England "t o stop the payment of this no te;" which was ordered accordingly, upon Mr Finney s entering into proper security "to indemnify the Bank." Some little time after this, the pl aintiff applied to the Bank for the payment of thic note; and, for that purpose, delivered the note to the_ds£findaat, w ho is a clerk in the B ank; but t he defendant re- Sm.& M.B.& N.(2d Ed.)— 1 2 INTRODUCTION f iiseH either fn pay the note, or to redeliver it to the_ glaintiff. Upon which tl^s^ctiDn-Ay as brought aga i n s t the rlff ^ndantl The jury found a verdictjQILihe4iLain±iff, and the sum of £21. J ^s. damages; s ubject nevertheless to the opinion of this court upon this (^stinn— ''Wj2PtW^1iriHeji.thp rirnimstan ces of thiT'case, the pki n- T ig'iiad a suffi ripnt p^'^P^'i't}'^ in this bank-note to e nti^ejii m to r e- cover in the_present action ?" ^ : lyord M ansFi EiJ) now delivered the resolution of the court. After statmgllie case at large, he declared, that at the trial, he had no sort of doubt, but that thk _action was well broup-h t. and would lie against the defendant in the present case; upon the general co urse of h iisines s^ and from the consequences, to trade and com- m erce: wh ich_vynplrl bp mu ch incommoded by a contfaF y determm a-' tion. -^t has been very in geniously argue d by Sir Richard Lloyd, for the -d efenda nt. But the whole fallacy of the argume nL±urns upon_com- paring~Bank-notes to wh at they _do_n pt resemble, and what they oug ht n ot to "E e ~coiTipar ed_ Jo, viz. to "goods^ or to securities, or documen ts for debts! ' JNow7 ths} L are not go ods, n ot securities, no r Hncnme ntg for rlphtg, noT are so esteemed : but are treated as mone y, as cash, in the ordi- nary course and transaction of business , by the general consent of fnanlfinH ; wjiirh^pvu^ thpm— thp rrprlit and rurrenry of money, to all intents and purposes. They are as much money, as guineas them- selves are] or any other current coin, that is used in common pay- ments, as money or cash. * * * It has been quaintly said, "th at fbp rpasnn why mnpp y cannot b e followed is, because it has no ear-mark:" but this is not tru£ . The t rue reason is, upon account of the currency of it : it__^annDt--be ■ rec overed after it has p asspH in rnrrpncy. So in case of mone y sto len, the true owner cannot recover it: after it has been- paid awa y fairly and honestly upon a valuable and bona fide consideration : but before money has passed in currency, an action may be brought for the money itself. There was a case in 1 Geo. I, at the sittings, Thomas v. Whip, before Lord Macclesfield: which was an action upon assumpsit, by an administrator against the defendant, for money had and received to his use. The defendant was nurse to the intestate during his sickness ; and being alone, conveyed away the money. And Lord Macclesfield held that the action lay. Now this must be es- teemed a finding at least. Apply this to the case of a bank-note. An action may b'p again st tie finder, it is true ; (an3~it is not af all denied :) but not afte r it ha^_beeHjjaIiL jw ay in cu rrency. And this point has been determined even in the infancy ot bank-notes : for Anonymous, 1 Salk. 1Z6. M. 10 Wm. in, at nisi prius, is in point. And Lord Chief Justice 1 The arguments of counsel and a portion of the opinion are omitted. NEGOTIABILITT 3 Holt there says t hat it i.s "by reason of the course of trade; w hich creates a property in thp ?^ fhp H efendants . an d the money demanded ot t he defe ndants . The plaintiff , wljo was a mercer at Scarborough, re- ce nred -the bill fro m a ma n not known, who called himself William Brown, and, by that name, indorsed the bill tr> the plaintiff, of whom he bougjht-cloth, and other articles i n the way of the plaintiff's tra de as a mercer, in his shop at Scarborough, and paid him that bill, the value whereof the plaintiff gave to the buyer in cloth and other articles, and cash, and small bills. The plaintiff did not know the d efendants, but h ad before, in his shop, received bills draw n V thptn^ whirh iwere duly p aid.. William Ingham, to whom the bill was pay- abTe7 indorsed it: John Daltry received it from him, and indorsed it; Joseph Fisher, received it from John Daltry ; . and it was stolen from J oseph Fisher, at York , (without any indorsement or transfer there- of by him,) along with other bills in his pocket-book, whereof his pocket was picked, before the plaintiff took it in payment a.s afore- s aid. The plaintif f Hprlarpr] g.^ ^ni^nrrrn nf TnprTiotn " * 2 The arguments of counsel are omitted. 4 INTRODTTCTION Lord ManspiDLD. I am glad this question was saved, not for any diiiSculty there is in the case, but because it is important that general commercial points should be publicly decided. The h oldgr of a bill of exc hange, or promi ssory note, is not to be ^coi ^ered in t heligk of an a'ssig nee_of_th0^e. An_ assipge'Tnusr take_the th'ing_ass [gned, su b jeri to all "th e e quity to"~which tne on ginarpart y wa TsuFject . I ?" this^ ru '" ^ppH^T'tn hi11g nnrl promi s g-prv nntPS .'it w ould stop their cur rency. Thejaw_is_settl£d, that a holder, comin g fair ly by a bill or r "t«^, h?° "rvtkl n rr tn dn with the transaction be - tween the original part ies ; unless, perhaps, in the single case, (which is-ETHard one, but has been determined,) of a note for money won at play. Vide Lowe v. Waller, T. 31 Geo. Ill, 2 Doug. 736. I see np difference b fitmsea- a noto indorc c d blank,- and one p a yable to T ^are r. T hev both g" by H p Hvpry anH pn^spssinn prnvps property inToth' cases. The question of mala fides was for the consideration of the"7ury. The circumstances, that the buyer and also the drawers were strangers to the plaintiff, and that he took the bill for goods on which he had a profit, were grounds of suspicion, yery fit for their consideration. But they have considered them, and have found it was received in the course of trade, and, therefore, the case is clear, and within the principle of all those Mr. Wood has cited, from that of Miller v. Race, 1 Burrows, 452, downwards, to that determined by me at nisi prius. Th e postea to be delivered to the plaint iff. BROWN et al. v. PERERA. (Supreme Court of New York, Appellate Division, First Department, 1918. 176 N. T. Supp. 215.) Action by Franklin Q. Brown and others against Lionello Perera. JiidpTTTent fnfTfpfpndant, and plaintifff; appeal. Affirmed. . "^rfie following is the opinion of LevENTRITT, Referee, in the court below : " The pl aintiff composing the firm of Redmond & Co., bankers in the rit V nf TvTpw Vn r k,' bring <-^''" "f-tinn fnr- fVia .nllprrcf^ rrimrp^'li ' ^n bv t hC de fendant ol .fnrf'"jni m^^^y; hnu g'ht and received by him frnm t\] e plajntiflFs' dpfanltirify em plnye and ag ent. * * * There is no evidence, or even a sueeestion. that the defendant's title wa s affected by knowledge or notice that the mnneys he received ha,d , b£eri_Stolgn'. Tn Pvpry instanrp Vifl-pair^ fhf f^ll marVpf irrJnP^ and the total of the payments has been adopted by the plaintiffs as the basis of recovery. The p laintiffs' claim must ther efore rest upon the pro p- "'' j^'''nn that t^" ^"fendnnt h^ivinrr pn rrfiaqpH'frnm a t hiVf ^ obtainedin o tjtle. T hat would be so if foreign money is, in legal contemplation, • Part of the opinion Is omitted. NEGOTIABILITY a jnere commodity o r artiVlp of mprf-^anHigA The contrary would b e t rue it such money has the qualities of transfp.rafiiKty pns sps'ir"^ hy thf cir culating medium of the United States. The w hole'auestioa is whgth- e rToreign money, acquired under the rirc nrngfan?^ hpr^ PY;gtingjT|i gi- b e treated as a commodity merely, the title to which did not pass from t he owner, or is money, title to which was acquired by the innocent h older, even though he purchased it from anc. who had no titje . Upon a historical and practical consideration of the subject, it ap- pears that foreign money is not ipso facto a mere commodity. Such moneys have circulated as an actual medium of exchange in this and other countries, both with and without special statutory sanction. The United States Constitution, art. 1, § 8, cl. 5, confers authority on Con- gress "to coin money, regulate the value thereof, and of foreign coin. * * *■" Various European coins had circulated freely as. a medium of exchange in the colonies. The framers of the Constitution con- t emplated that the coins of certain European ^overnmeni-s would (; nn- sti tute a necessary p^rt r.f tl^ g <- i if,-t. nt .n^np y s nf this rnnnt ry Ac- cordingly, by chapter 5 of the act of February 9, 1793 (1 Stat. 300), Congress made the gold coins of Great Britain, France, Spain, Portu- gal, and the silver coins of- France and Spain, a legal tender at fixed valuations, and this law, as renewed from time to time, remained in force until repealed by the act of February 21, 1857 (11 Stat. 163, c. 56). ^ T ? igH r"'"" '"•" ^•^"° Tmnnoyc nf tVin rr,^«*^„\inry^ ^ r y ^ >^ i -y ^r- . c orded more positive recognition by that instrument than th^ p aper is sues of this governme nt. Such coins had a general circulation for a long period of our history, sometimes under adverse conditions. In the argument of the Legal Tender Cases, 12 Wall. 475, 20 L. Ed. at page 294, this statement was made: "Your honors will recollect how often in the days of the Spanish piece for 12% cents, we accepted 12 cents instead and took Spanish quarters with holes drilled through them equally with perfect coin." It is interesting to find that Canada has no gold coinage, and has made the gold coins of the United States and of England legal tender to all amounts. Muhleman's Monetary Systems of the World, p. 147. No one would deny that, if fni-fign mnnpy i.s a Ippl tender, it posses - s es all the attributes of money^ I s it relegated to the status of mer - rhandisp merely bj '•"^g"" "^ ^^^ <-riking ;i'"?y "f t^^f l^g-^l t''"'^'"- q"^'- ity? Much of the money of this country does not possess that quality e-x;rp. pt for rertaj n pnrpncpc nr in limited -■tnr.iin+o ^nd y et t he title to such moneys would be indisputable in the hands of one who took the m in good faith and J brjalus, in any legitimate transaction and to affy "amount. The American trade dollar for many years prior tp 1887, when its coinage was prohibited, was not a legal tender, though it must have possessed the attributes of money in the transactions in which it was .intended to be used. Foreign moneys, as well as domestic moneys, which are both legal tender, may, of course, be treated as ..money by voluntary agreement. Near the border line between two 6 INTRODUCTION nations, the moneys of both circulate with almost equal freedom. Ca- nadian coins are extensively circulated as a medium of exchange in the northern portion of our border states. In many parts of Canada the paper and silver moneys of the United States, as well as gold, are read- ily accepted. Certain European moneys, as the franc, are frequently received as a medium of exchange in countries other than that in which they are issued. It would be a startling proposition to hold that in all such cases the foreign money is a mere commodity which may be re- covered by the owner from the innocent holder. The evidence shows that in the city of New York some of the department stores receive, at certain rates in payment for goods, European moneys, such as are involved in this case, and give change in American money. The extent to which foreign money may circulate as a medium of exchange varies according to circumstances, and depends upon the needs of commerce, familiarity with the value of the money, and the certainty that it can be disposed of at the same value at which it is received. The circula- tion of money is nothing more than the aggregate of the transactions in which the individuals have been and are willing to receive that money. The legal attributes of the money can hardly be made to de- pend upon the number of these transactions. Even money of the country may not circulate. At one period in our history, when the value of gold as compared with, silver materially exceeded the establish- ed ratio of coinage, gold disappeared from circulation, and "the country retained, instead, only silver and gold coins of those countries whose gold coinage bore a true relation to the existing value of gold and silver." Argument in Legal Tender Cases, 12 Wall. 457, 20 L. Ed. 293. The plaintiffs, howeve r , rpntpnfl tint ^^n nn mmnt ic thp >4pfpr|f^-) nt pr otected, because he was the purchaser of thr forei f j-n money at a pri ce p aid in American mon ey, and that in such transaction s t^" f "'•''% " money is _t bp gnhjppt nf piirr-iiac(> onri fiio i^n-i not the medium l aiilh whichthe_p urchase a nrl ii1d not be a bill of exchan ge. T faat the mai n- t aining _ofJb£a£.artin"'= "p"" g"^^ nntpg wprp inn ovatinn.'; np ng the ruTeTofUie common law; ar id that it amounted to the setting_u p a new sort ot specialty unknow n to the common law, and invented i n Lom bard~sIreet, _ w"!Tich attempted in these matters of bills of exchang e t o give laws to Westminster Ha ll. That the continui ng t" d'"'iaf upon these nnte ^npnn the custom of merchants proceeded from ob- s tiriacv and opmionativeness, since he had always expressed his opin- ion against them, and s ince there was so easy a method, as to declar e u pon a general indebitatus assumpsit for money lent, etc. As to the case of Sarsfield v. Witherly, he said, he was not satisfied with the judgment of the King's Bench, and that he advised the bringing of a writ of error. nnmr)^ [iKitirp, said , fViat Vip HiH nnt rwrnprnhpr^ if Viq»^ firfr- j^ oAn adjudged, that a note, in which the subscriber prnmispri tn pay etc., to^Tr ^ui bea ii iL~w?s n n t - a bill nfexchange . That the bearer could not sue an action upon such a note in his own name, is without doubt; and so it was resolved betweeri Horton and Coggs, now print- ed in 3 Lev. 299, but that it was never resolved, that the party him- self (to whom such note was payable) could not have an action upon the custom of merchants upon such a bill. But Ho lt. Chief_Justice, answered, that i t i»rag i^plri-ir. the said case of "gorton v. Coggs. t hat"such a not e was not a bill nf f^.cih^r,^P- wit hin the_ customs of merchants. And afterwards in this Kaster term it was moved again, and the court continued to be of opinion against the action.- And then Mr. Branthwaite for the pl aintiff u rgfd.-that '^ tb'"" n ptp wPf' "ot a bill '•'^^''•^rhfing'' w't^'n thp r::fl2I2-"^ mprrViant-s^ tbp^ th^ p.-^i-nirf ffrrmd- Ch. 1) FORM or BILL AND OF NOTE 17 ed upon it w as_void : and then it could not he intended, that any dam - a ge was given by the jury for the breach of it. but all the damap-es rmist hp intpnAcri tQ_h ave been g iven upon the general indebitatus assumpsit. '• " "^ ■"■IloLT, Chief Justice, said, that would be true, if it had been void by reason of its being insensible; but this matter is sensible enough, though not sufficient in law to raise a promise; and therefore one cannot intend, but that damages were given for it; and consequently that judgment must be arrested. And judgment was given, quod querens nil capiat per billam, etc. by the opinion of the whole court. 3 & 4 ANNE, c. IX, § 1 (170-t). Whereas it hath been held, That notes in writing, signed by the party who makes the same, whereby such party promises to pay unto any other person, or his order, any sum of money therein men- tioned, are not assignable or indorsible over, within the custom of merchants, to any other person; and that such person to whom the sum of money mentioned in such note is payable, cannot maintain an action, by the custom of merchants, against the person who first made and signed the same; and that any person to whom such note shall be assigned, indorsed, or made payable, could not, within the said custom of merchants, maintain any action upon such note against the person who first drew and signed the same: therefore to the intent to encourage trade and commerce, which will be much advanced if such notes shall have the same effect as inland bills of exchange, and shall be negotiated in like manner ; be it enacted by the Queen's most excellent majesty, by and with the advice and consent of the lords spiritual and temporal, and commons, in this present parliament assembled, and by the authority of the same. That all notes in writing, that after the first day of May, in the year of our Lord, one thousand seven hundred and five, shall be made and sign- ed by any person or persons, body politick or corporate, or by the servant or agent of any corporation, banker, goldsmith, merchant, or trader, who is usually intrusted by him, her or them, to sign such promissory notes for him, her, or them, whereby such person or per- sons, body politick and corporate, his, her, or their servant or agent, as aforesaid doth or shall promise to pay to any other person or per- sons, body politick and corporate, bis, her, or their order, or unto bearer, any sum of money mentioned in such note, shall be taken and construed to be, by virtue thereof, due and payable to any sucli person or persons, body politick and corporate, to whom the same is made payable; and also every such note payable to any person or persons, body politick and corporate, his, her, or their order, shall be assignable or indOrsable over, in the same manner as inland bills Sm.& M.E.& N. (2d Ed.)— 2 18 FOKM AND INCEPTION (Part 1 of exchange are or may be, according to the custom of merchants; and that the person or persons, body politick and corporate, to whom such sum of money is or shall be by such note made payable, shall and may maintain an action for the same,' in such manner as he, she, or they might do, upon any inland bill of exchange, made or drawn according to the custom of merchants, against the person or persons, body politick and corporate, who, or whose servant or agent, as aforesaid, signed the same; and that any person or persons, body politick and corporate, to whom such note that is payable to any person or persons, body politick and corporate, his, her, or their or- der, is indorsed or assigned, or the money therein mentioned ordered to be paid by indorsement thereon, shall and may maintain his, her, or their action for such sum of money, either against the person or persons, body pohtick and corporate, who, or whose servant or agent, as aforesaid, signed such note, or against any of the persons that indorsed the same, in like manner as in cases of inland bills of ex- change: and in every such action the plaintiff or plaintiffs shall re- cover his, her, or their damages and costs of suit; and if such plain- tiff or plaintiffs shall be nonsuited, or a verdict be given against him, her, or them, the defendant or defendants shall recover his, her, or their costs against the plaintiff or plaintiffs ; and every such plain- tiff or plaintiffs, defendant or defendants, respectively recovering, may sue out execution for such damages and costs by capias, fieri facias, or elegit. GRANT V. VAUGHAN. (Court of King's Bench, 17G4. 3 Burrows, 1516.1 Upon shewing cause why a verdict which had been given for the defendant should not be set aside (upon payment of costs,) and a new trial granted, — the case appeared to be this — The d efendant Vanp-ban. a merrhant in London, g^ave a cash-not e U2QIi_hisJailker, t o one Bickne ll, a husband of a ship of his: which note was datedJ ^London 23d October 1763 ." and directed to Sir Charles Asgill, who was Vaughan's banker; and was worded thus — " Pay to Ship Fortune, or bearer ," so much. Bicknell, by some ac- cident, lo _st this no te. T he person who found itT^r who at least was in possession of it (however he might obtain that possession), came. four days after the note was pnyahle in London, to the shop of Grant the plaintiff , who was a tradesman at Portsmouth, and bought fTve poiinHs worth M tea of him , and gave him this note in^paymg nt. desirmg to have the change out of it. Gran t (the plaintiff) stept o ut, to make ing tujxJL'who this Vaughan might be:" And upon being informed "That he was a very good maxi, and that it was his hand- writing," he jx adilv gave the change out of the not e, retaining the price of the tea. Vaughan. upon being ap priz ed tViat Ri rW-npHVipH Ch. 1) FORM OF BILL AND OF NOTE 19 lost the not e, sent notice to Sir Charles Asgill, "Not to pav it. " WHprpiipnn ( ;rant , hwng^ refused payment, brought his action up on t he case af rainst Vaiigha n, and inserted two count s in his declara- tion; o ne, upon an inland bill of exchang e; t he other, an indebitatus a ssumpsit for money had and received to his us e. The cause was tried by a special jury of merchants; who found for the defenda nt.^ Lord Mansfield said the case o"f JNllchoIson and Sedgwick, 1 Ld. Raym. 180, was urged by the defendant's counsel at the trial: and, not being apprized of the point in question, till it came on to be tried before him, he was not fully aware of the cases which differed from it. And yet he was struck, he said, very strongly that, upon general principles that case was not agreeable to law and justice: and he then thought that the reasons, upon which that case and the other authorities relied upon by the counsel for the defendant at the trial, were grounded, were insufficient ones. That "of the goldsmith's having perhaps paid the money to the original payee himself, before notice from the bearer," can never hold: it cannot happen, in the course of business, that the money should be paid to the nominee, before notice from the bearer. Nor was any satisfactory reason given, why an action might not be brought in the bearer's own name. The reason alledged, "That then any person who finds the note accidentally, may bring an action and recover," is insufficient; because the plaintiff in such action must prove that he came by it bona fide and upon a valuable consideration. . As to the necessity of bringing the action in the name of the per- son to whom the note was originally made payable; — it was impos- sible in the present case; because there was no person originally named as the payee: it runs "Pay to ship Fortune, or bearer." However, if there had been a person named, the reason would not hold: for the person so originally named may become bankrupt; or may be indebted to the drawer of the note; so as to give the drawer a right to set off such debt against the demand of the money due upon the note. So that if the courts of law should not allow the bearer to bring the action in his own name, there might be no re- lief at all. And it can never be supposed reasonable or legal, that the banker should have it left in his discretion or choice, to pay the money to one or the other as his fancy or inclination should lead him. These thoughts occurred to me at the trial: and therefore I chose to take the opinion of the court. I left two th inp ^s to t ^"" rnnci'dpr-ifinn nf thp jvn=v. The first was, "W hether the plaintiff came to the posses sion nf this note fairly, and bon^jrae:" (which necessarily includes his not having notice of it's being a lost note.) The second was ^"Whether such draughts as this 1 Arguments of counsel and the concurring opinions of Wilmot and Tates, JJ.,' are omitted. 20 FOEM AND INCEPTION (Pari i i s, were, i" fVip rniir=;p ni trade, dealing and business, actually p aid away and negotiated, or in fact and practire n pg-ntiah1P4" and I then corrstcleral this, as leaving a plain fact to them, upon which they could have no doubt. But I am now clearlv of opinion, that I ou g; -ht not t n have left thpjattpr pnint tn them: for it 1= ^ qnpgti'nn nf law , "Whether aja ill or q ote be n egotiab le, or -aot." It appears in the books, "That these notes are, by law, negotiable." And the plaintiff's maintaining his action, or not maintaining it, de- pends upon the question "Whether such a note is negotiable, or not." It appears likewise, "That the bearer of them may maintain an ac- tion as bearer, where he can intitle himself to them on a valuable consideration." Hinton's Case, in 2 Show. 335, is this — "Case on a bill of exchange, against the drawer, (bill not being paid) and p ayable to J. b. orT:o t hg bearer . The plaintiff brings the action, as bear er. And, upon evidence, ruled by the Lor d Pemberto n, that he must intitle him self to it on a valuable consideratio n, (thoughl^among bankers they never make indorsements in such case:) for if he come to be bearer by casualty or knavery, he shall not have the benefit of it." (And it would be absurd, to indorse such bills as are made payable to bearer.) Crawley v. Crowther, 2 Freem. 257, Tr. 1702, in Chancery— "If a bill be payabl e to A. or bearer, it is likf gf muf-Vi mnnpy paiH_|n w liomsoever the note is given : that^ let what accounts or conditions soever be between the party who gives the note and A. to whom it is given, yet it shall never affect the bearer; but he shall have his whole money." S o that the whole interest is transferred to the bearer. 1 Salk. 126, pi. 5, anonymous, M. 10 Wm. III., coram Holt, Ch. J., at nisi prius at Guildhall. " A bank-bill payable to A. pr hpor^r ^ being given to A. and lost. W^" tnnnH hy g ctrangpr -H^n f-inrtarrpH it~to~Cr for a valuable consideration : C. got a new bill in his own name. Per Holt, Ch. J. A. may have trover against the stranger who found the bill ; for, he had no title, (though the payment to him would have indemnified the bank:) but A. can not maintain trove r ag ainst C. by reas on of the course of fr n de; whirVr rrfl-if"- n prnp frty in the as signee or bearer." It is negntiahlp hy rlpliyft y ]ffinerV,_J^£S, H. 31 Geo. II., 1 Burrows, 452. T he holder of a ba nk-note recovered against the cashier of the bank, th"oi!gh the ma il had been robbed ot it, and payment was st opt; it appearing, that- hp camejbjfj^ f airly and bona fide and upon a valuable considerati on. A nd. there is no distinction between a b ank-note and such a note as'this is. "The act of 3 & 4 Anne, c. 9, p uts_ £romissory notes upoji the sam e fo ot, throughout, with inland b ilTs of exchan ge. An d therefore what- e ver^ is the rule as to inland bills of exchange payable to bearer, must be sn 1ikewis£_as..to notes payable to bearer. • Gh. 1)< FORM OP BILL AND OF NOTE 21 In a case between Walmesley v. Child, 11th December, 1749, in chancery, where one of Mr. Child's notes, payable to bearer, was lost or stolen, and payment stopt by 'the true owner, who demanded that it should be paid to him; Mr. Child refused to pay it, without surety against the demands of a future bearer. The true owner brought his bill. Lord Hardwicke dismissed the bill, unless the true owner would find such security. And he went upion the principle, that no dispute ought to be made with the bearer of a cash-note, who comes fairly by it; for the sake of commerce, to Which the discrediting such notes might be very detrimental. Upon looking into the reports of the cases on this head, in the times of King William the Third and Queen Anne, it is difficult to discover by them, when the question arises upon a bill, and when upon a note : for the reporters do not express themselves, with suffi- cient precision, but use the words "Note" and "Bill" promiscuously. It appears, however, that there were different opinions about the manner of declaring upon them: Lord Chief Justice Holt got into a dispute with the city about it. He wks of opinion, that the plaintiff could not declare as upon a specialty, (where the consideration could not be disputed:) but he all along agreed, that the plaintiff might declare upon an indebitatus assumpsit. The objection was, to bring- ing an action upon the note itself, as upon a specialty: but I do not find it any where disputed, that an action upon an indebitatus assump- sit generally, for money lent, might be brought on a note payable to one or order. Great force arises from the act of Parliament of 3 & 4 Anne put- ting notes merely upon the foot of inland bills of exchange, and particularly specifying notes payable to bearer. But upon the s econd count y *^P pfpspnt ^agp i<^ giijtp rippr, hpynnH al l di^pnte:~~F5r7 undoubtedlvT an action for money had and recei ved t o the plaintiff's use, mav be brought by the bona fide bearer of a n ote made pa ya ble tQ ,^''^'"p^ There is no case to the contrary. It was certainly money received for the use of the original advancer of it: and if so, it is for the use of the person who has the note as bearer. In this case, Bicknell himself might undoubtedly have brought this action. He lost it: and it came bona fide and in the course of trade, into the hands of the present plaintiff, who paid a full and fair consideration for it. Bicknell and the plaintiff are both inno- cent. The law must determine which of them is to stand to the loss. And, by law, it falls upon Bicknell. There ought to be a new trial. * * * R ule absolute for_ aji£aL trial." 2 A Bote payable "to the bearer. A.," Is not negotiable. Bloomlngrdale V. Bank, 33 Misc. Rep. 594, 68 N. Y. Supp. 35 (1901) ; Warren v. Scott, 32 Iowa 22 (1871). But an Instrument payable to "A., or bearer," is negotiable. Bitzer v. Wagar, 83 Mich. 223, 47 N. W. 210 (1890). 22 FOKM AND INCEPTION (Part 1 SMITH V. KENDALL.. (Court of King's Bench, 1T94. 6 Term R. 123.) Assumpsit for money paid by the plaintiff to the use of the test a- tor, m6nev Tent to him, a nd on an account stated ^ ith the testator and another with the executor! The d efendant pleaded the statut e of limitations; to this the plaintiff replied that the latitat was sued out - oirtRe~26th nf Septern her_[793. and that the cause of action accrued within 6 years before that time ; on which issue was taken. •©mhe trial betore~Xord Kenyon the plaintiffg ave the followi ng note in evidence: "Three months after date i'promise to pay to MT7~^if5~Currier, £ 40 value received in trust .for Mrs. E. Th omp- son, as witness ray haiid L. Askew, 25 June 1787." The defend- aliT^bjected, IsJ. T hat this note was only evidence of mo nSTlent or paid by Mrs. Thompson and not by the plaint iff to the testator; anTlaaly, thaTlhis was not a promissory note within the statute, an d if not, t hat the cause of action accrued on the 25th of Sep tember 1 787. three months after the date of the not e, and c onsequently that 6 years had elagse d before the suing out of the w rit. The plaintiff aris wered"TEat~as thenote was payable to hirn ^it was more proper to bring the action in his name than in that nf^ rs. Thomp sonT and thaf the money when recovered by him would be recovered for her use; and in answer to the second objection, that this was a promis- sory note within the statute, in which case three days were allowed; and of course that six years had not expired when the latitat was sued out. A verdict was tak en for the defendant^ leave being giv en to the plaintiff to move to set that verdict a. side. and to enter a ver- dict for him, if this court thought he was entitled to recover. A motion was accordingly made for that purpose.^ Lord Kenyon, C. J., said: If this were res integra, and there were no decision upon the subject, there would be a great deal of weight in the defendant's objection: but it was decided in a ca se in 1>rd_R.ny mnnd (^ L d P n ym 1,'if ff)-T m Hf^tnurffr/ TtTrrt n noirjiny a ble to B. without addin g nr tr>_Viin n r Hnr nr tn hporr-r ^v ,as _ a leg al n ote within the "rf nf Parliarripnt It is also said in Marius that a note may be made payable either to A. or bearer, A. or order, or to A. only. In addition to these authorities I have made enquiries among different merchants respecting the practice in allowing the three days grace, the result of which is that t he Bank of Englan d andgtllS^ jperchants in London allow the three days grace on no tes like the present. The opinion of merchants indeed would not govern thiscouJTTrt-a question of law, but I am glad to find that the prac- tice of the commercial world coincides with the decision of a court of law. Theref ore I thi nk that it would be dangerous n ow to sh ake » Arguments of counsel are omitted. Ch. 1) FORM OF BILL AND OF NOTE 23 t hat practice, which is warranted by a solemn decision of this court. by any sper.nlative rpa ■inning- upon th e subiect: and consequently this rnle must he made ahsolntp tn enter a verdict for the plaintiff . Rule absolute. PUTNAM V. CRYMES. (Court of Appeals of South Carolina, 1840. 1 McMul. 9, 36 Am. Dec. 250.) The plaintiff in this ca gp w"" "'''^ ^^^ "i-'friml pnypo , hiit ^"'H^^-'^'' n ote by transfer to himself by delive ry. The note was made pay - a ble to Mancil Owens or holder , and the p laintiff declared a-s holrte r. and de fendants demurred, on the ground that the holder could not s ue witnout a writt£ iL-as «,cr - nm e nt . ■ I re^ard f^d JiplHgr op f-ynnnymQ ng with hearer and nverr nlfd thp drmnrrpr- ^uria, per BuTlER, J. The word " bearer" is usuallv 'Tlffr^'''^ '" " negotia ble n ote, transferable by delivery . But without it^ the maker o f a no ff may maVp it transferable by delivery, either bv circumlo- c ution, or using a word of precisely the same impo rt. As if a note were made payable to A. B., or to any one to whom he may deliver it; or to any one who might hold the same by delivery. In both cases the bearer would be sufficiently meant and designated, although the word was not used. I f it was the intention of the maker to m ake it payable t " any ""'' ™^^ grgnirep possession bv delivery, he has no ri ^ht to complain when it is presented to him without a writ teHtran s- f er. "fiolder" is a word of the same import as '"bearer ," and both maygrrjnii-'' a titir hj Inwful drli yery^ arrording to the terms of the c ontract . All the law requires is, that the paper must have neg- n- t iable wo rrls nn its tarp shn wing it tn be th p intenti on tn five^ it a transferable qu ality bv delivery: other wise the inst rument must be tiij'iKrM]TP7t~g r"writtpn endnrsement. Tr~pavahle tn order: or sued on by the original payee, if there are no negotiable words at all. The decision below is affirmed: the whole court concurring.* 4 In Brainerd v. Railroad Co., 25 N. Y. 496 (1S62), it was held that a corporate bond payable to A. or his assigns was negotiable. Denio, C. J., said (page 500): "But when such obligations are issued to secure the pay- ment of money upon time, and contain on their face an expression showing that they are expected to pass from one person to another, and thus to per- form the office of bills and notes or of money, as the words 'bearer' or 'as- signs,' or 'the holder,' or the like, the courts of this country, with a single exception, and those of this state without any exception, have concurred in attaching to them the attributes of commercial paper." Accord: Zander v. New York Security & Trust Co., 178 N. Y. 208, 70 N. E. 449, 102 Am. St. Kep. 492 (1904), semble. Compare Bank of Commerce v. Pick, 13 N. D. 74, 81, 99 N. W. 63 (1904). "The concession, therefore, may be made that if the makers of this note, having omitted the usual words to express negotiability, had said, 'Tliis note is and shall be negotiable', it would have been negotiable." Porter, J., in Eaymond v. Middleton, 29 Pa. 529. 530 (1858). See, also, Stadler v. Bank, 22 Mont. 190, 56 Pao. Ill, 115, 74 Am. St. Rep. 582 (1899). 24 FOKM AND INCEPTION (Part 1 JARVIS V. WILSON. (Supreme Oonrt of Errors of Connecticut, 187a 46 Oonn. 90, S3 Am. Bep. 18.) As sumpsit against the flpfpnrlant p s arreptnr nf an nrrjpr rlrswn oji him in favor o f th p plaintifF, hrnnp;ht to the court of common pleas of Hartford county, and tried to the court on 'the general issue before McManus, J. Facts found and j udgment rpnHprpH for the p laintiff . ]\ lotion in error by the defendant. . The case is fully stated in the opinion. LooMis, J. On the 8th of July, ISil^, one William l/Lmphy owe d the plaintiff $189.20 . and drew his c rHqT nn the dpfp.ndant in favor nffhP_p]f)JTit;ff in j.rritinor aS f ollowS : '"Mr. A. M. Wilson: Please pay Joseph Jarvis one hundred and eighty-nine dollars and twenty cents, and charge the same to me. "William Murphy." Murphy, who was then and had been for some time in the employ of tlie defendant, had been authorized by the latter to draw ord ers i n favor of his workmen^ n f whnm the defenrlant Irnpw tVip plaintiff to be one. "T he above order was dulv presented for acceptance to the defend- ant on the same day that it was given, and the defendant said it w as good, and verbally pr rimicpH tn pay it it a fterwards appeare d t hat, there was in fact due from the defendant to the drawer only $ 144.94. and thereupon the rletend ant rpfncpH tr, pay tlip plaintiff ag he had before a greed. The c ourt below upon thppp farta hpM the def endant liable to r' the full amoun t of the o rder. W j e think the j udgment must sta nd against all the objections urged in behalf of the defendant. The defendant claims, in limine, th at his u ndertaking canno t be re garded as subject to the rules applicable to bills of exchange, bu t m ust be treated as a mere promise to pay mone y. B ut we do not s ^ee why it does not conta in every essential element of the most ap - proved defanition'of a bill of exchaQ ge. It is a written order from Murphy, addressed to the defendant, requesting him to pay the plain- tiff a certain sum of money therein named. 1 Bouvier's Law Diet., Bill of Exchange; Byles on Bills, 57; Story on Bills, §§ 3, 37, 40; Edwards on Bills and Notes, 150 ; Eastern R. R. Co. v. Benedict, 15 Gray (Mass.) 292; Kendall v. Galvin, 15 Me. 131, 32 Am. Dec. 141; Michigan Ins. Co. v. Leavenworth, 30 Vt. 12. But c onceding the order to he a bill of ex change, the defendant fiirthpr_rlaim<; tha.t.-ljj>-ta-a.at-li.a.blp h»^;,,ipo. big appppfT^fce waS~Onl y hvjTarnI, yf\\pr\ it j: hnii1rl Viairp Vippn in nrritiy irr It is true, as a general rule, that to make one liable as a party to a bill or note his name should appear thereon under his own hand or that of his agent. A wise- policy may also require that the liability of an acceptor should not depend on parol evidence, and, recognizing Ch. 1) FORM OF BILL AND OF NOTE , 26 this, some states have already changed the rule of the common law as to an acceptor of a bill of exchange. In New York it is required by statute that the acceptance should be in writing, and there is a similar statute in England as applicable to an inland bill. But wher e t here is no statute to control, the rule is gnit-p gpnpral, bnth jn Eng- l and and in the I initpH Stotpg ttiat an gppp ptance of a hill of ex - chang-e ma y be by r^*""^ 1 Swift, Dig. 424; Story on Bills, §§ 242, 243, 246 ; 1 Parsons on Cont. 267 ; Edwards on Bills and Notes, 409 ; Dunavan v. Flynn, 118 Mass. 539 ; Spaulding v. Andrews, 48 Pa. 411. Thp statute nf frai^fjc >^^of r.n<- ^pply «-r> cnrh ^^ j nndertalcing -. Qne reason may be that the acceptor is reg^arrled as the primary debtor , a nd his acceptance is an undertaking^ not merely tn pay a debt di|e from the drawer to the pavee, but tn pay bis n'wn Hpht" tn tbp Hrawpr, But in this case the defendant relies nn ^^^ ^""^ *hi\t when V|g a ccepted the bill he had not in his hands sufficient funds of the draw - e r to pay the amnunt rpqiiirpH and contends that the arrpptanre should tb pfpf''"-'' pjthpr Kp r-r.ngjr]pr»/i within the statute, or should be h eld void for want of consideration . This o bjection ignores the fundampntal prinripi o t hil l 111' TTfti i nrp ^'^^\^'\ pvprytliing pggpp - ti al to the validity of the bil l, and that want or failure of considera- tion cannot be shown m a suit by the payee against the acceptor. The presumption is that every bill of exchange is drawn on account of some indebtedness from the drawee to the drawer, and that the aicceptance is an appropriation of the funds of the latter in the hands of the former. The rule of law is not unjust that prevents the ac- ceptor from show ing ^g ;i ^i»f°Tirfi nfjuimt a ""it '^ Y tne pavee a want "^ fnnd^ ^^ ^^° d-i i iv"'" '" ^'t b""dti | fnr it was his duty to a scertain before he accepted the bill whether he owed the drawer th at amoun t" This was pyc1ii.s ii'°^y v"'-h'n hjfi^knowledge, but t he piamtit^ had no means of knowing how the fact wa s. -a nd ne nad a rig^tit to asa uine that tne detendant would nnt accept the bill unless he had funds o f the drawer s ufficient to_ Tr^'^'' ^r,nA tt^^ arrp ptance , Fisher v. Beck- wi'th, 19 Vt. SI, 46'AmrDec. 174; Arnold v. Sprague, 34 Vt. 402; United States v. Bank of Metropolis, 15 Pet. 377, 10 L. Ed. 774; Grant v. EHicott, 7 Wend. (N. Y.) 227; Hoffman v. Bank of Mil- waukee, 12 Wall. 181, 20 L. Ed. 366; Parsons on Notes and Bills, 323; 1 Daniel on Negotiable Instruments, 135. There is_iio_£i]:o]:-i»-the judgment complained of.* "It la check] Is commonly though not always payable to bearer ; tout I conceive It to be still a cheek, if drawn on a bank or banker, although pay- able to a particular party only." Story, J., in He Brown, 4 Fed. Cas. 342, 846 (1843). 26 FORM AND INCEPTION (Part 1 GILLEY V. HARRELL et al. (Supreme Court of Tennessee, 1907. 118 Tenn. 115, 101 S. W. 424.) Bill by A. T. Gilley against J. R. Harrell and others. From a decree dismissing plaintiff's bill, he appeals. Affirmed.' Sansom, Special Judge. The c omtJlainan t , A. T. Gillev. appeal s to this court from the decree of the Court of Chancery Appeals dis- missing his bill. The o riginal bill in the case was file d in the chan- cery court at Murfreesboro to collect a note for $300 allet^ ^ed to _ have been executed by the defendant J. R. Har rell ^o one Ro bprt B Meeks, an3''trv— Mcck3 fririhT' i 'i '"'I ^"'^ nccT^npH tr» ttiA mmplain^nt ^ and seeki ng to foreclo se_a_mnrtg;)[Tp pr deed nf trust ^iven f" ■^prnrp the payment ot the note ^and-to set aside a previously executed tru st deed restmg upon the propert y. The bill alleges the execution and transfer nf the nntp and avers t hat the plaintiff is an innocent holder th ereof, having acquired same before maturity, for value, and in due course of trade; and it is charged that the previously executed trust deed resting upon th e property was traudulent and void. I'he defendant J. K. Harrell Hied an answer , in which he says th at h e might have executed a ""tp payable tn Meeks tor $ay o. and might have execu ted a mor tgaop tn gppnrp the paympnt therpof, hut t hat. if ~lie did so he was drunk at the time and inrppanitatprl-ffi r the tra nsaction of EiTsine ss. and t hat the note, if executed, was w ith- out consideration and obtained through fraud , and at a time when he was unable to care for or protect himself. The note sued on is in these words: "-$000. Murfreesboro, Tenn., February 5, 1903. "On the 24th day of December, 1903, I promise to pay to Robert B. Meeks the sum of three hundred ($300) dollars, with interest from date. This note secured by a mortgage on thirty-five acres of land, this day executed by me and wife to Roberi B. Meeks. "J. R. Harrell." The note is indorsed as follows: "I this day transfer and assign this note over tq._A. T. Gilley, for value received, with all the equities, this February 10, 1903. "R. B. Meeks." It should be stated that the nns wpr defsud i upon thfi ; ;rn i i nrl -*thnt tha~cQ mplainant, Gillev. is a dealer in notes an d that the j)iirrhngp of this note was vo id, because oi his not havi ngTo pay an y license as such dealer. ' "" '"^our'errors are assigned to the decree of the Court of Chancery Appeals. * * * • Part of the opinion is omitted. Ch. 1) FORM OP BILL AND OF NOTK 27 Taking up these assignments of error in order: T he court he ld t hat the note above copied was nonnegotiable, and this holding is attacked. U nder the common law the note' was not negotiab le. "When bills of exchange first came into use, as has already been explained, choses in action ^n general were nonassignable; and, in order that the intention of parties to make commercial paper assign- able and negotiable may be indicated, it became the custom to make it in express terms payable to A., or order, or bearer, or using like words giving authority to convey. So, also, when promissory notes were by the statute of Anne declared to be negotiable, like bills of exchange, notes which would fall within the statute were described as containing these [to order or bearer] or other words of negotiabil- ity." Tiedeman on Com. Paper, § 27'. I n other words, under the common law in order that a note sho uld be iiegotiable it had to be payable to order, or to bearer, and not d irecLly to the yayeer- ^ ' *" {section 3505 of Shannon's Code is in tjiese words: "Every note whereby the maker promises to pay money to any other person or order, or to the order of any other- person, shall be negotiable in the same manner as inland bills of exchange by the custom of merchants." Section 3506 of Shannon's C ode is in these words : " Every bil l, bon d or note for money ,. whether sealed or not, and whether express ed to.^ gpayable to the order nr fnr v alnp rprpivpH f7r not, shall be neg o- tiable in the same manner as promiss ory notes." It ig^ ingjgtpH -iTPry earnestly nnHpr this let ter Code provis ion, which is section 1 of chapter 4 of the Acts of 1786, t hat the note in controv e ''S ) '' in thin rmr* in n nffjoti n hk in 'i trnmp nt By Actsl899, p. 139, c. 94, entitled "A generM act, relating to negotiable instruments, being an act to establish a law uniform with the laws of other states on that subject," it is provided by article 1, § 1, as follows: " .An iTifitrnrri^ni- tn hp nPfTnti:ab1p must rnnfnrm toil ig following requk fimeatg,: (1) It must be in writing and signed by tj;£j Tiaker or drawer. (2) M ust contain an uncondition al prrmiT^p or order to p ay p gum r-prtain \p mnnpy . (3) Must be p ayable nn r\p- mapd Qcstr- a fixed -pf aetea ninable future ti me. (4) Must be payable to orde r or to bearer." By section 184 T)f this acit it is provided: "A negotiable promis- sory note, within the meaning of this act, is an unconditional promise in writing, made by one to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time, a sum certain in money, to order or to bearer." Section 8 of the act is in these words: "An instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order." 28 FORM AND INCEPTION (Part 1 By section 9 of the act it is provided as follows: "The instrument is payable to bearer (1) when it is expressed to be so payable, or (2) when it is payable to a person named therein or bearer, or (3) when it is payable to the order of a fictitious or nonexisting person, and such fact was known to the person making it so payable, or (4) when the name of the payee does not purport to be the name of any person, or (5) when the only or last indorsement is an in- dorsement in blank." The note in question in this case is not payable to either or der o r bearer. ^ -ttl Kfer thtf^ti provisions of the neg^ntiah1f > ingtrninf^pt J^w, and in or^er to be negotiable, it must be pavable in one or the o ther ot these ways, ei ther to order or to bearer. The e arnest insistence , howev er, ot appellant, is that section 3506 of the CcTde (Shanno n's), above quoted, is not repealed by the . negotiable instrument act of 1899 ; that that act does not purport to repeal this section of the Code, which does make the note in question a negotiable instru- ment. This insistence, however, is not sound: for by nece ssary im- plication, section 3506 is repealed by this act, be ca use directly in co nHict therewith, and embracing the entire subject-matter thereof. Po"evrSTate, 85 Tenn. 495, 3 iJ. W. 65S. V~*~* Ch. 1) FORM OF BILL AND OF NOTBl 29 KINSELIA V. LOCKWOOD. (Supreme Court of New York, Appellate Term, First Department, 1913. 79 N. Y. Misc. Rep. 619, 140 N. Y. Supp. 513.) Action by Clinton W. Kinsella against Traviss D. Lockwood. From a j udgment overruline defendant's demurre r that the complaint did not state a cause of action, de fendant appeal s. Reversed, and demur- rer sustained, with leave to plaintiff to plead over. BijuR, J. The complaint t>leads a^note drawn payable to the paye e, but not to order nr tr. hparpr TTriH^r .^pr-tinr. Vf) pf tV.B AT^-gnfipKU fm- struments LawiConsnl. I^ws 1909, c. 38), a note in that forin is no t negotiable- Fulton v. Varney, 117 App. Div. 572, 575, 102 N. Y. Supp. 608. , It. therefnrp rlnp.^ tin t import consideratio n. Deyo v. Thompson, 53 App. Div. 10, 65 N. Y. Supp. 459. While the complaint alleges thst it h^A h^Pn ^;,.p.. " fnr g -.raln^M p c nn^iHpratinn " .;itrli an pj lpprat jon is merely a statement of a l egal c onclusion, and not of a fact . Browning, King & Co. v. Terwilliger, 144A5p. Div. 516, 519, 129 N. Y. Supp. 431. Judgment reversed, and de murrer sustained , with leave^ haweve r. to plaintiff to plead over wit hin six days, on payment of costs of the action to date, and with costs of this appeal to appellant. FIRST NAT. BANK OF SIDNEY v. GREENLEE. (Supreme Court of Nebraska, 1918. 102 Neb. 180, 166 N. W. 559, h. R. A. 1918D, 224.) MoRRissEY, C. J. Plaintiff brought this action on a promissory n ote and recovered a judgment against apppllant Hrppnlpp as maker. a nd agamst defendan t Closman as inrlnrsp]\ Greenlee appeals . 'i"he petition alleges that, December 12, 1912, Closman executed an d d elivered to plaintiff his promissory note for the sum of $1.000 . and, as " collateral security therefor, indorsed and delivered the note in-s iiit t o plaint iff: that the Closman note and the note in suit were both du e and-unpaid. Judg ment was entered against Closman by default . De- fendant Greenlee answered, ad mitting the execution and delivery of t he n ote by him to Closman, and alleged in substance that the note w as nonnegotiable and that the consideration therefor had faile d. The answer contains a number of allegations calculated to show the trans- action between Greenlee and Closman, but their recital is unnecessary for a determination of this case. A jury was waived, and the cause tried to the court. Defendant offered to i ntroduce evidence to show the agreement b e- t wgen~the maker and the payee of the note and their understanding of the paper. This evidence was excluded, and the rulings of the court are 30 FORM AND INCEPTION (Part 1 a ssigned as err or. As the controlling question is the negotiability o f t he paper as it appears on its fac e, it is unnecessary to discuss rulings on the admission or exclusion of evidence. The note was written on a standard printed form and reads as follows : "$1,000.00. Sidney, Nebr., Dec. 9th, 1912. "One year after date I promise to pay to the order of L. F. Closman only one thousand & no/ 100 dollars at Sidney, Nebr., with interest at eight per cent, per annum from date. Value received. A. K. Greenlee." The date line is written with a pen ; the words "one year" and the personal pronoun "I" are written, in the second line, with a pen ; "L. F. Closman only," on the third line, is written with a pen ; "one thou- sand & no/100," in the fourth line, is written with a pen; "Sidney, Nebr., with interest at eight per cent, per annum from date," is 'written with a pen, as is also the signature "A. K. Greenlee." All other parts are printed, including the words "pay to the order of." There is an apparent rnnflict hetween the printed wnrds "pay to the or der of." preceding- the Tiame of the pay pp, and fhr writtrn irnH "only," following the name of the paye e. Section 5335, Revised Sta t- u tes of 1913, provide s : " Where there is a conflict between the written alid pri nted pr o viiions of the inst rument ^ the written provisions pre - vaiTT' ~~" ' ""T^ give full effect to this provision of the statute, the word "only," written with a pen, must be held to prevail over the printed words "pay to the order of." TVip npgnt'"Ti^'^''t3^ r-f thf insfnimpnt •■"?° rp^tnytprl by th e written word "only," and t he plaintiff took the note subje ct to any defense _the mak fr might havp it' it wprp i n thp hands of the orig inal payee. Appellant claims that under the pleadings and proof the judgment ought to be reversed and dismissed. We do not care to go so far as this. The negotiability of the note was somewhat clouded by the form of answer filed, and was not presented to the trial court, either by the answer or by the motion for a new trial, in the clear and concise lan- guage the question might have been presented. The answer may have misled the trial court, as well as attorneys for the plaintiff, and the ad- missions in the reply on which appellant now relies for a dismissal of the case may have been inserted because of the peculiar form of the answer. The indorsement and delivery of the note by Closman to plaintiff constituted an assignment thereof to plaintiff. As to appellant Greenlee the judgment is reversed, and the cause remanded for fur- ther proceedings. Reversed and remanded. Letton, J. (concurring). Without reference to the point discuss- ed in the opinion, in my judgment, the note is nonnegotiable on its face. Ch. 1) FORM OF BILL AND OF NOTE 31 Ross and Sedgwick, JJ.., not participating. Hamer, J. (dissenting). The note about which the controversy arose is made payable "to the order of L. F. Closman only." As the 'note is written,' it appears to me to be a negotiable instrument. The insertion of the word "only" did not, so far as I can see, change the character of the instrument, so that it became nonnegotiable. When the officer of the bank looked at it, he would see that it permitted Clos- man to indorse it. Whether the note read "to pay to the order of L. F. Closman only," or read "to pay to the order of L. F. Closman," made no difference. Jn any event, Closman could indorse the note, and there- by transfer it. I am not prepared to say that the writing 'of the word "only" might not have attracted the attention of the officer of the bank who received it, but I most strenuously insist that a note payable to the order of any payee named in the instrument is transferable only by the indorsement of such payee. S ection 534 8. Rev. St. 1913, p rovides the qualities which m ake an inst rument negot iable. The first sentence of the section reads: "An instrument is negotiable when it is transferred from one person to an- other in such manner as to constitute the transferee the holder thereof." No good reason is given why this note may 'not be transferred from one person to another, so as to constitute the transferee the holder. The closin g sentence i n the section reads : "If payable to order it is negotiated by the indorsement of th e holder completed by delivery." I t was "payable to order." it was mdorsed by ttie holder. ancTt he t itle to the bartT appears to have been made complete "bv delrsi erv." It i s difficult for me to understand why we should shut our eyes to the fact that the note was made "pay able to orden " — r uUiiiK the w or d "only'" m the note did not take away the wor3s "payab lp tn nrrlpr " Only the payee of the note could properly indorse it. Calling him by name would not seem to have made any change in the intention of the maker. 32 FORM AND INCEPTION (Part 1 NELSON V. CITIZENS' BANK. (Supreme Court of New York, Appellate Division, First Department, 1920. 191 App. Div. 19, ISO N. Y. Supp. 747.) Action by John M. Nelson against the Citizens' Bank. From judg- ment jflt-4*£eudailt'entered on a directed verdict on motions of both parties, and from an order denying his motion to set aside the verdict, the plain tiff appp als. Reverse d, and final judgment directed for plaintiff. ^ L,AUGHLINi, J.' T Tip .^irig-l p pm'nf- prpgontprl hy flip gppp^l ir nrhptih er three c e ^'fjr^*'''' "f d^pnrit jt-ii"^ by th° d"^ ° "^''nt iv°r° TifC ""^;^^^" instr ument s. * * * — On the 10th day of October, 1917. and o n the receipt of the n otes nf ri^g trvpi'''"'' tViprpfnr pursuant to the last ap-rpement. t he han l^ isshpH Vind delivprpH to the rnmpany three certificates of dppnsit for $.500 each, all of which, with the exception of the numbers, were as follows : '''No. 4857. <~ Citizens' Bank, Lexington, Tenn., Oct. 10, 1917. * "Partin Manufacturing Co. has deposited with this bank five hun- dred dollars ($500.00) payable six months without per cent, per annum interest on return of this certificate properly indorsed. -lAU^T "[Signed] John A. McCall, A. Cashier. ■^"Not subject to check." T he company soM, indorsed, an d delivered these certificates to the Co ntinental Credit Tri^s t Company on the 19th day of October7T9T7, f or the s um of ■ $1,.'^70 . T he purr ha.spr w as nnt f)|ie of fhe comp any's customers, and the form of indorsement which th e company agre ed w ith the defendant to use w a s not used or indorsed on the certificate s. T he purchaser had no nntirp or kppv yledge of the fa ct that the certifi- cates had been issued pursuant to said agreement, and no inquiry was made by the purchaser with respect thereto. Thp pnr^hp'ij ^'' on the (lOth of April, 1918, which was the date the certificates were payable, ■"i^'^^d thfm t" bp prpgpntpH ^r^ tVi p flpfpndant for payment, and pay - ment was refused onJ Jie-gFCMind thst-t hey had been transferred in v io- jatinn of the contract^^ On the 19th day of April, 1918, the p urchaser assigned the cer tifiratps to th e plaintiff, who t^^p'-paftpr tffnTVpfif fViio action thereo n. T he facts with re spect to the agreement a nd the fur- therjart !^ that the . ^rtificates -ffisrejssue a under it an d~were~fraudu- le ntly diverted by the company, and that The notes for " w Eich they wer e iss ued were not paid7 were shown by defendant under a defense pre- senting_thoseJssi:^s. ' — Ifjhecertjficates Wgre negotiable, the plaintiff's assignor, an associa- tion of individuals, were bona fide holders for value. There can be no doubt but that the certificates sufficiently conform to the require- Ch. 1) FORM OF BILL AND OF NOTH 33 ments of section 20 of the Negotiable Instruments Law (Consol. Laws, c. 38) with the possible exception of subdivision 4 thereof. That sec- tion provides: "An instrument to be negotiable must conform to the following requirements." And subdivision 4 thereof is as follows: " (4) Must be payable to order or to bearer." The rule of construction by which we are to determine whether the instrument conforms to the requirements of said section 20 is prescribed in section 29 an(J is as follows : "The instrument need not follow the language of this chapter, but any terms are sufficient which clearly indicate an intention to conform to the requirements thereof." The language of subdivision 4 of section 20 which provides that the instrument must be payable to order or bearer was not followed, and therefore the decision depends upon whether the terms used in the certificate clearly indicate an intention to conform to the requirements' of section 20. It is obvious that the defendant could easily have guard- ed against any claim that the certificates were negotiable by providing that they were only payable to the company or one of its customer* to whom it sold and failed to deliver an automobile or that -they were subject to the contract. It is evident from the agreement that it was contemplated that they might become payable to a customer of the com- pany, and that they were intended to be negotiated to a liiiiited extent. The defendant could have had the blank form of indorsement printed on them, but instead of that it trusted the company, its customer, and it used them without the form of indorsement agreed upon. The de- fendant's agreement to pay the amount of the deposit in six months on the return of the certificates "properly indorsed" cannot, as claimed by defendant, be construed as referring to an indorsement by the company for the purpose only of receiving payment thereon from de- fendant. It is argued by counsel for the respondent that the depositor being a corporation the words "properly indorsed" have reference to an au- thorized 'indorsement by the company on returning them for redemp- tion, and that those words were used to protect the company against a wrongful surrender of the certificates without authority. The agree- ment shows, however, that the certificates were intended to inure to the benefit of the customers of the company in the event that the com- pany failed to deliver the merchandise after the customers had paid the notes, and it is to be inferred that the notes were to be paid before the merchandise was to be delivered, and therefore the certificates were intended to be guaranties to the customers that the merchandise would be delivered. It follows that the words "properly indorsed" would relate,, in the event that the company failed to deliver the merchandise to the customer after the customer paid the notes, to an indorsement by such customer. In determining whether these certificates were ne- ■ gotiable, I think the fact that the defendant was a bank has a very important bearing, for it is customary for banks to issue certificate^ Sm.& M.B.& N.(2d Ed.)— 3 34 FORM AND INCEPTION (Part 1 of deposit which are intended to be negotiated and usually are nego- tiable. Pardee v. Fish, 60 N. Y. 265, 19 Am. Rep. 176. It will be observed that there is no specification in these certificates of a payee. The agreement of the bank is not to pay to the depositor, but to pay to the person presenting the certificates, providing they were properly indorsed. This requirement, I think, indicates that they were intended to be negotiable, and by the agreement it was so intended to a limited extent. I am of opinion that the certificates are to be construed the same as if they had provided that the money was payable to tlie order of the depositor, for they were issued to the de- positor and were payable on the return of the certificate properly in- dorsed, which implies that they were to be indorsed by the depositor precisely the same as if they had been payable to the order of the depositor. In the case of Forrest v. Safety Banking & Trust Co., 174 Fed. 345, Circuit Court, Eastern Circuit of Pennsylvania, it was held that a like certificate of deposit issued to an individual payable on the return of the certificate on a specified day, which was six months, less one day, from its date, "properly indorsed," was negotiable. In National Bank of Ft. Edward v. Washington County National Bank, 5 Hun, 605, it was held that a certificate of deposit issued by a bank payable to an individual, payable on the return of the certificate ''properly indorsed," was negotiable. In that case no question appears to have been raised in the points with respect to the negotiability of the certificates, but the basis of the decision was that it was negotiable, and in the opinion of Learned, P. J., concurred in by his Associates, he states that when a bank issues such a certificate it contracts to pay the money to any holder of the certificate when "properly indorsed," and that it is liable to a bona fide holder for value notwithstanding that owing to a great lapse of time, which in that case was seven years, it may have paid the money to the original depositor, and that such a 'certificate, where no time for payment is specified, is not dishonored until presented for payment. The court affirmed a judgment for the plaintiff on the certificate, and an appeal therefrom was dismissed by the Court of Appeals (72 N. Y. 606) without considering the merits. In Barnes v. Ontario Bank, 19 N. Y. 152, a certificate of deposit was , issued by the cashier of a bank, reciting that the depositor had deposit- ed with the bank a specified amount to the credit of himself, and that it was payable on the return of the certificate "properly indorsed." It was held that the certificate of deposit was a negotiable instrument, and that the bank was liable thereon to a bona fide holder for value, xjptwithstanding the fact that no consideration was received by the bank therefor and the cashier acted dishonestly. -^ In the case of Zander v. New York Security & Trust Co., 178 N. Y. 208, 70 N. E. 449, 102 Am. St. Rep. 492, there is a clear intimation in a dictum that such a certificate, payable to a depositor or his assigns, Ch. 1) , FORM OF BILL AND OF NOTE 35 would be negotiable. It has also been held that bonds payable,, not to order or bearer, but to a particular person or assigns, are nego- tiable. Brainerd v. N. Y. & Harlem R. R. Co., 25 N. Y. 496; Citizens' Saving Bank v. Greenburg, 173 N. Y. 215, 65 N. E. 978. It follows therefore that the judgment and order should be reversed, with costs to the appellant, and final judgment should be entered in favor of the appellant for the amount of the certificates, with interest and costs. Clarke, P. J., and Smith and Pagb, JJ., concur. MerrEli,, J.,' dissents. 36 FOEM AND INCEPTION (Part 1 SECTION 2.— WRITING GEARY V. PHYSIC. (Court of King's Bench, 1826. 3 Bam. & O. 234.) Assumpsit by the plaintiff as indorsee against the defendant as maker of a promissory note for the sum of £30. payable two months after date to the order of one Folder, and indorsed by him, Folder, to one Kemp, who subsequently indorsed the note to the plaintiff. At the trial before Abbott, C. J., at the London sittings after Hilary term, 1825, it appeared that the indorsement by Kemp to the plain- tiff was in pencil, and it was thereupon objected that the plaintiff could not recover; an indorsement in pencil not being such an in- dorsement as the law and custom of merchants recognizes to be sufficient to pass the interest in a bill of exchange, and promissory notes being by the statute 3 & 4 Anne, c. 9, § 1, assignable or in- dorsable in the same manner as unpaid bills of exchange are ac- cording to the custom of merchants. The Lord Chief Justice thought it sufficient, and directed the jury to find a verdict for the plaintiff, reserving liberty to the defendant's counsel to move to enter a non- suit, if the court should be of opinion that the indorsement of the promissory note in pencil was not a good and valid indorsement. F. Pollock, in last Easter term, obtained a rule nisi to enter a non- suit. He contended, first, that a writing in pencil was not a writ- ing recognized at common law; and he cited Co. Lit., 239a, where Lord Coke, speaking of a deed, says: "Here it is to be understood, that it ought to be in parchment or in paper. For if a writing be made upon a piece of wood, or upon a piece of linen, or on the bark 'Of a tree or on a stone, or the like, &c., and the same be sealed or delivered, yet is it no deed, for a deed must be written, either in parchment or paper, as before is said, for the writing upon these is least subject to alteration or corruption." For the same reasons a writing ought to be made with materials least |ubject to alteration or corruption. Now, writing made with a pencil is easily altered or obliterated, and, therefore, for the reasons given by Lord Coke, where the law requires a contract to be in writing, it ought to be in writing made with materials the least subject to alteration. Secondly, he contended, that it was not a writing according to the custom and usage of merchants. In point of practice bills of exchange were generally written in ink, and it lay upon the plaintiff in this case to show by evidence that this was a writing according to the custom of merchants. • * * Ch. 1) FOKM OP BILL AND OF NOTE 37 Suppose the indorsement on the paper had been scratched with a pin, or with the inverted end of a pencil, would that have been a writing according to the custom of merchants? Thesiger showed cause.* , Abbott, C. J. There is no authority for saying tha^ where the law requires a contract to be in writing, that writing must be in ink. The passage cited from Lord Coke shows that a deed must be writ- ten on paper or parchment, but it does not show that it must be writ- ten in ink. That being so, I am of opinion that an indorsement on a bill of exchange may be by writing in pencil. There is not any great danger that our decision will induce individuals to adopt such a mode of writing in preference to that in general use. The imper- fection of this mode of writing, its being so subject to obliteration, and the impossibility of proving it when it is obliterated, will pre- vent its being generally adopted. There being no authority to shew that a contract which the law requires to be in writing should be writ- ten in any particular mode, or with any specific material, and the law of merchants requiring only that an indorsement of bills of exchange should be in writing, (see the custom stated in Claxton v. Swift, 1 Lutw. 363, Reps.) without specifying the manner with which the writing is to be made, I am of opinion that the indorsement in this case was a sufficient indorsement in writing within the meaning of the law of merchants, and that the property in the bill passed by it to the plaintiff. BaylEy, J. I think that a writing in pencil is a writing within the meaning of that term at common law, and that it is a writing within the custom of merchants. I cannot see any reason why, when the law requires a contract to be in writing, that contract shall be void if it be written in pencil. If the character of the hand-writing were thereby wholly destroyed, so as to be incapable of proof, there might be something in the objection; but it is not thereby destroyed, for, when the writing is in pencil, proof of the character of the hand- writing may still be given. I think, therefore, that this is a valid writing at common law, and also that it is an indorsement accord- ing to the usage and custom of merchants; for that usage only re- quires that the indorsement should be in writing, and not that that .writing should be made with any specific materials. HoLROYD, J., concurred. Rule discharged.' 8 Part of the argument Is omitted. ■ "The defendant, by Issuing the instruments, for value, adopted the print- ed signature thereon as his own, and became thereby bound in the same manner, as if it had been written by himself. He thereby asserted to whom- ever might receive the instruments that the signature was binding upon him, and he is not at liberty now to retract the assertion. We think it makes no difference so far as the defendant's liability is concerned, whether he wrote his name 'in soript or Roman letters, or whether such letters were made with a pen or with type, or whether he printed, engraved, photographed or litho- 38 FOEM AND INCEPTION (Part 1 SECTION 3.— THE PROMISE ISRAEL V. ISRAEL. (Nisi Prius, before Lord Ellenborough, C. J., 1808. 1 Camp. 499.) AsgiinTj^g jf- f r.r j ii i-m nji Ipn t ^ .inrl nn .irrniint: nt ated. Plea, the gen- eral issue. It appeared, that in July last, a sett lement g i_zsxou nt c took plac e between the pa£ ties. whenl lhs-defenrlant, who is s on to the plaint iff, gave him an unstam ped s lip of s aper, with the following words writ- 'ten upon it m ms own "Hand: I j^"^ "ly fatVipr four hundred and seventy pounds. Jas. Israel." This .was now offered in evidence as proof of a debt to thafamount. The Attorney General objected, that it was to be considered either as a promissory note, or a receipt, and that in neither case was it .receivable without a stamp. Garrow & Lawes, on the other side, contended that it was merely an acknowledgment by the defendant, that upon a settlement of accounts, such a balance was due to the plaintiff; and they cited the case of Fisher v. Leslie, 1 Esp. N. P. Gas. 426. in which it had ■ debt, but an agreement to pay it, this amounts to an express con- tract. < From the writing in question, it ' is perfectly manifest that the ; debt acknowledged to be due was to be paid on demand, as fully as if the words "to be paid," or "which we promise to pay," had i been inserted next before the words "On demand." / I think, therefore, that the declaration is sufficient, and that the , cause ought to be remanded for further proceedings. The other Judges severally concurred in this opinion. Judgment reversed, and the cause remanded. STAGG V. PEPOON. (Constitutional Court of South Carolina, 1818. 1 Nott & McC. 102.) This case was tried before Mr. Justice Smith, at Charleston. It was an action of assumpsit on a duebill, made by the defendant to the plaintiffs. When produced in evidence, it was in the follow- ing words: "Due Messrs. Jacob_ D. Stagg & Co., or order, one hundred and thirty-five dollars, payable on demand. [Signed] Benj. P^poon." 40 FORM AND INCEPTION (Part 1 It appeared in evidence, that the words "or order" were not in- serted in the bill originally, and that the plaintiff had requested the defendant to permit him to insert them, with a view to negotiate it; but he expressly refused his assent. The plaintiff, notwithstanding, Tud insert them. »* Several grounds of defense were stated in the brief to have been taken on the trial, in the circuit court, and among others that the insertion of the words "or order" was such an alteration as destroyed rthe validity of the note. The jury however, under the direction of the presiding judge, found a verdict for the plaintiff, and a motion was now made for 'a new trial, on the part of the defendant, on the ground : That the insertion of the words "or order," in the bill, without the consent of the defendant, is such an alteration, in a material part, as wholly destroyed the validity of the bill, and that the plaintiff was not therefore entitled to recover. . Mr. Justice Johnson, delivered the opinion of the court. It has not been denied in the argument, and numerous authorities 'prove, that an alteration in a bill of exchange, or promissory note, in a material part, without the consent of the drawer, will discharge ■him from all liability on it. Chitty on Bills, 85. The duebill, in this 'case, as it originally stood, without the words "or order," was not 'negotiable, either by the custom of merchants or the statute of Anne. And that the negotiability of a paper, in mercantile transactions, is material and important, will not be questioned. But it has been sug- igested that even with the words "or order" the bill was not negotiable, not being a promissory note within the statute of Anne, and that, therefore, the alteration was immaterial, as it did not change the nature and character of the writing. No precise form of words is necessary to constitute a promissory -note ; it is sufficient if it amount to a promise or undertaking to pay unconditionally. A "promise to account with J. S. or order," and "I acknowledge myself indebted to A. & Co. to be paid on demand," have been held to be promissory notes within the meaning of the islatute of Anne. 1 Selwyn's N. P. 395. It appears to me impossible to distinguish the present case from the last. The word "due" is clearly an acknowledgment of a subsisting debt, and the words "payable on demand" necessarily imply a promise to pay. ^ I am therefore of opinion that the motion for a new trial ought jig prevail. Ch. 1) FORM OF BILL AND OF NOTE 41 PURTEI. V. MOREHEAD. (Supreme Court of North CaroUna, 1837. 19 N. C. 239.) This was an action of assumpsit, commenced originally by a war- rant before a single justice-xrflfte" peace. Plea, nr>n assum psit. .- On the trial, before Dick, Judge, at Roclongham, on the last cir- cuit, the pl aintiff produced and proved the following' acknowledg - ment: "Morehead and Field bought of Thomas Purtel hides to the amount of ninety-seven dollars and forty-eight cents; and paid him in leather four dollars and eight cents; leaving a balance of ninety-j three dollars and forty cents, due him at the end of three months. ^ "Burton Field, "For Morehead & Field." . The defendants on their part offered to prove that the acknowl- edgment was given as evidence of the probable amount due for a quantity of green hides at 12i/^ cents the pound, upon the supposi- tion that their weight was a certain amount; that it was agreed, at the time of giving the acknowledgment, that the hides should be weighed when dry, and accounted for at their actual weight; and' that, upon their being thus weighed, they fell short 500 or 600 pounds. His honor rejected this evidence; and, the plaintiff obtaining a ver- dict, the defendants appealed.^* Daniel, j. * * * We suppose he refused it on the belief tha^ the paper was a promissory note, and that the partial failure of con- sideration could not be admitted in evidence according to the case of Washburn v. Picot, 14 N. C. 390. But we are of the opinion that, as it contains no express promise to pay, it is not a promissory! note, but the paper must be considered as an account stated; and then the authorities mentioned in this opinion oblige us to say, that the evidence was admissible. Per Curiam. Judgment reversed. HUYCK V. MEADOR. (Supreme Court of Arkansas, 1866. 24 Ark. 191.) ClEndenin, Special Judge.^^ The appellant in this court, who was the plaintiff in the court below, commenced his a ction of assumpsit in the circuit court of Pulaski county. The declaration contamed t^a counts^ the first coun t based nn thp fnllnwing- instrument i n writing : "Due I. Huyck, "r ord p rj thf n ii"^ "^ \\\rc-t^ t^nii=anri r)jnf: hi irili^ 11 Part of the opinion is omitted. ■12 Part of the opinion is omitted. 42 FORM AND INCEPTION (Part 1 an d twenty eiVht dollars ($3.92 S) fnr V AJAJ^- V Q C c Wed of him r-and on settl ement up to dat e." C. V. Meador. TittlTRock, Ark., Feb. 16, 1865. ^-^- ,,M/jJf^^ * * * * * * * We come now to consider the other objection, raised by the record and the assignment of error. This q uestion grows out of the action ' of the court below in refusing to perm i t the plai ntiff to read as evi- ^ ^ence, o n_th£- trial, the writiry (a copy of which is given before^ in fthis opinion), and which writmg may be said to be the foundation of the suit. The first count' of the declaration avers that the defend- ant "made his certain promissory note in writing," etc., and that "he promised to pay immediately," etc. The first question to be decided ^s, was the instrument offered in evidence a promissory note? and, secondly, if it was, when was it payable? A promissory note is a written promise for the payment of money. Bayley on Bills, 1, 3. The case of Russell v. Whipple , 3 Cow. (N. Y.) 536, was upon a duebill in the following words: "Due Lawson Russell, or bearer, two hundred dojlars and twenty-six cents for value received." The court held in this case that this instrument was a promissory note. In the case of Kimball v. Huntingt_ on, 10 Wend. (N. Y.) 679, 680, -®5-Am7~Bec. 590, the court decided that an instrument similar to the one offered in evidence in this case is a promissory note. As it contains every quality essential to such paper, the acknowledgment of indebtedness on its face implies a promise to pay. So in the case of Franklin v. March, 6 N. H. 364, 25 Am. Dec. 463, it was held that a writing in these words, "Good to Cochran or order, for thirty dollars, borrowed money," is a promissory note. See, also. Smith's Mercantile Law, 363; Luqueer v. Prosser, 1 Hill (N. Y.) 259; Hitchcock V. Cloutier, 7 Vt. 22 ; United States v. White, 2 Hill (N. Y.) 59, 37 Am. Dec. 374. Holding, as we do that the instrument declared on in this case and offered in evidence is a promissory note, the inquiry next arises when, by its terms, did it become due and payable. No time of jaayment being named in the note, it is due immediately, and was so correctly described in the plaintiff's declaration. See Sackett v. -Spencer, 29 Barb. (N. Y.) 180; Thompson v. Ketchum, 8 Johns. (N. Y.) 191, 192, 5 Am. Dec. 332; Gaylord v. Van Loan, 15 Wend. ^(N. Y.) 308; Cornell v. Moulton, 3 Denio (N. Y.) 13. We are therefore of the opinion that there was no variance be- tween the note offered in evidence and that* declared on, and that the circuit court erred in not permitting the note to be read in evi- dence. * * * Reversed.^' 13 Accord: Kraft v. Thomas, 123 Ind. 513, 24 N. B. 346, 18 Am. St. Rep. 345 (1890^ Ch. 1) FORM OF BILL AND OF NOTE 43 HUSSEY V. WINSLOW. (Supreme Judicial Court of Maine, Lincoln, 1870. 59 Me, 170.) On exceptions. Assum psit _ 0" g, prr>mi'ggnn|r nntp, commenced by trustee process, in wBTCtr^iliiam Vaiinah was sinn monerl a s f'^'tPP nf tlm princip al d efendan t. The tr ustee disclosed that on the 4th day of October. 1869 . ,and be- fore the service of thp writ in this action on him, he delivered to the said Winsl ow to whom he was indebted on account, a ^ writin g, of which tne toiiowing is a copy: "Nobleboro, Oct. 4, 1869. Nathaniel O. Winslow, Cr. By labor 163^ days @ $4 per day $67 00 Good to barer. Wm. Vannah," and claimed tViaf Vip d^n nlH hp rlisrTiargpd The presiding ju dge ruled that the instrument was a negotiable pr omissory note, and that the t rustee be discharge d. Thereupon the pl aintiff alleged p xcpptinn Ei^B^RT, J. Hallack's account with Garvey, upon which the under- taking sued upon appears to have been indorsed, is an ordinary item- is The statement of the case is abridged, and a portion of the opinion omitted. Ch. 1) FORM or BILL AND OF NOTE 45 ized statement by a merchant of his account with a debtor. The language of the undertaking so indorsed is as follows: "I hereby accept this bill, in compliance with the terms of contract and specifications with Mr. H. A. Garvey, payable to E. F. Hallack thirty days after July 9, 1881. "[Signed] E. R. Cowan." The defense admitted the signature, and that no payment had been made. Aside from this, the undertaking was all the evidence intro- duced on the trial in the court below, and upon it the plaintiff re- covered judgment. Two points are inade by counsel: (1) That no consideration was alleged or proved, and that, therefore, the court erred in overruling the defendant's motion for a nonsuit; (3) that the court erred in sustaining the demurrer to the third defense. It is well understood that in an action upon a simple contract, the plaintiff, in order to recover, must allege and prove a consideration. In this connection, however, it is to be remembered — First, that the admission of a consideration by the terms of the written contract is prima facie evidence of its existence, and satisfies the rule ; second, that negotiable instruments import a consideration, and are exceptions to the rule. 1 Pars. Cont. 430; 1 Daniel, Neg. Inst. § 161; Whitney V. Stearns, 16 Me. 394. W.e do not think that the instrument sued upon contains, by its terms, an admission of such a consideration as in itself relieved the plaintiff from the necessity of making proof of a consideration. It admits a contract with Garvey to accept, but it does, not disclose any consideration for such a contract, and we are not at liberty to presume its existence. It would be illogical to treat that as a consideration which itself depends for its value and validity upon the existence of a consideration. Whether the writing imports a consideration is a more difficult question, and depends upon whether it is negotiable under the provisions of the statute concerning bonds, bills, and promissory notes. Chapter 9, Gen. St. 142. Section 3 of the act provides that "all promissory notes, bonds, duebills, and other instruments in writing, made by any person, whereby such per- son promises or agrees to pay any sum of money or article of personal property, or any sum of money in personal property, or acknowledges any sum of money or article of personal property to be due to any other person or persons, shall be taken to be due and payable to the person or persons to whom the said note, bond, bill, or other instru- ment in writing is made." Section 4 provides that "any such note, bill, bond, or other instrument in writing, made payable to iny per- son or persons, shall be assignable by indorsement thereon, under the hand of such person and of his assignee, in the same manner as bills of exchange are, so as absolutely to transfer and vest the prop- erty thereof in each and every assignee successively." Under this statute all promissory notes and instruments in writing for the payment of money are negotiable, whether so expressed or not. And whether the particular instrument contains the words "or 46 FORM AND INCEPTION (Part 1 order," or equivalent words, or not, its legal effect is the same as if it did contain such words. Thackaray v. Hanson, 1 Colo. 366; Roosa V. Crist, 17 111. 450, 65 Am. Dec. 679 ; Archer v. Claflin, 31 III. 306. To constitute a good promissory note, no precise words of. contract are necessary, provided they amount, in legal effect, to a promise to pay. In other words, if over and above the mere ac- knowledgment of the debt there may be collected from the words used a promise to pay it, the instrument may be regarded as a prom- issory note. , 1 Daniel, Neg. Inst. § 36 et seq. ; Byles, Bills, 10, 11, and cases cited. See, also, the following decisions under statutory provisions similar to our own: Bilderback v. Burlingame, 27 111. 338 ; Archer v. Claflin, 31 111. 306 ; Jacquin v. Warren, 40 111. 459 ; White v. Smith, 77 111. 351, 20 Am. Rep. 251 ; Petillon v. Lorden, 86 111. 361; Stacker v. Hewitt, 1 Scam. (111.) 207; Smith v. Bridges, Breese (111.) 18; Wilhams v. Forbes, 47 111. 148; Sappington v. Puliam, 3 Scam. (111.) 385 ; Roosa v. Crist, 17 111. 450, 65 Am. Dec. 679 ; Wilder v. De Wolf, 24 111. 190. "Due A. B. $325, payable on demand," or, "I acknowledge my- self to be indebted to A. in $109, to be paid on demand for value re- ceived," or, "I. O. U. $85 to be paid May 5th," are held to be prom- issory notes, significance being given to words of payment as in- dicating a promise to pay. 1 Daniel, Neg. Inst. § 39, and cases cited. Hallack's itemized account with Garvey, upon which the undertak- ing of the defendant is indorsed, is in no sense negotiable paper. The indorsement thereon, however, signed by the defendant, is a new undertaking; and if, under our statutes, it is negotiable, it im- ports a consideration. Bay v. Freazer, 1 Bay (S. C.) 72. The word "accepted" on a bill of exchange is an engagement to pay the bill in money when due. Indorsed upon nonnegotiable paper, as in this case, there is authority for .saying that it would not import a consideration as in the case of such indorsement upon negotiable paper, and a consideration would have to be alleged and proved. Byles, Bills, 3, note; Jeffries v. Hager, 18 Mo. 272; Richardson v. Carpenter, 2 Sweeny (N. Y.) 366. The language of the undertaking, however, must be considered as a whole, and in this case we think it clearly imports a promise upon the part of the defendant Cowan to pay Hallack, the payee, the amount of the bill upon which it is indorsed, at the time specified. 1 Daniel, Neg. Inst. § 36 et seq., and cases cited. We think the writing comes clearly within the provisions of the statute which we have quoted; that is to say, it is "an instrument in writing" made by the defendant Cowan, whereby he promises to pay in mpney, at a specified date absolute, the amount of the bill upon which the undertaking is indorsed. As such it is a negotiable instrument, and imports a consideration. Our statute in this re- spect, is substantially the statute of 3 & 4 Anne, c. 9 (1 Daniel, Neg. Inst. § 5, note; Id. § 162), the effect of which was, in an action upon Ch, 1) FORM OF BILL AND OF NOTE 47 a promissory note, to dispense with the necessity o£ either alleging or proving a consideration. Peasley v. Boatwright, 2 Leigh (Va.) 198. In this vievv, the plaintiff was entitled to recover on the evidence introduced, and the defendant's motion for a nonsuit was properly overruled. * * * Affirmed. GAY V. ROOKE. (Supreme Judicial Court of Massachusetts, Middlesex, 1890. 151 Mass. 115, 23 N. E. 835, 7 L. K. A. 392, 21 Am. St Rep. 434.) Contract on the following instrument, declared on as a promis- sory note: "Marlboro", Sept. S3, 1881. "I. O. U., E. A. Gay, the sum of seventeen dolls. ^Aoo, for value received. , John R. Rooke." Writ dated September 19, 1887. At the trial in the superior court, without a jury, before Dewey, J., the only issue was whether the plaintiff was entitled to interest from the date of the instrument, or from that of the writ, the service of which was the only demand made by the plaintiff. The plaintiff asked the judge to rule, as matter of law, that he was entitled to interest from the date of the instrument. The judge de- clined so to rule, and ruled that interest could be recovered from the date of the writ only, and found for the plaintiff for $17.05 only; and the plaintiff alleged exceptions. , Devsns, J. I g order to constitute_ g ^nnr^ prn missorv note, th ere chmilrl hp an fyprpss p rnmise on the face o f tlip in<;<-rjj ment to B .ay the^i onev. A mprp prnpiic e implied bv law, founded on an ackno wl- pdgS-i nrlebtprlnes';, will not be suffici ent. Story, Prom. Notes, § 14; Brown v. Gilman, 13 Mass. 158. While such 'promise need not be expressed in any particular form of words, the language used must be such that the written undertaking to pay may fairly be deduced therefrom. Commonwealth Ins. Co. v. Whitney, 1 Mete. 21. In this view, the instrument sued on cannot be considered a promissory note. Jt is an acknowledgment of a debt only; and, although from such an acknowledgment a promise to pay may be legally, implied, it is an implication from the existence of the debt, and not from any promis- sory language. Soiflething more than this is necessary to establish a written promise to pay money. It was therefore held in Gray v. Bowden, 23 Pick. 282, that a memorandum on the back of a promis- sory note, in these words, "I acknowledge the within note to be just and due," signed by the maker, and attested by a witness, was not a promissory note signed in the presence of an attesting witness within the meaning of the statute of limitations. In England an I. O. U., there being no promise to pay embraced therein, is treated 48 FORM AND INCEPTION (Part 1 as a duebill only. The cases, which arose principally under the stamp act, are veiy numerous, and they have held that such a paper did not require a stamp, as it was only evidence of a debt. 1 Daniel, Neg. Inst. (3d Ed.) § 36; 1 Rand. Com. Paper, § 88; Pesenmayer V. Adcock, 16 Mees. & W. 449; Melanotte v. Teasdale, 13 Mees. & W. 216 ; Smith v. Smith, 1 Post. & P. 539 ; Gould v. Coombs, 1 C. B. 543; Fisher v. Leslie, 1 Esp. 425; Israel v. Israel, 1 Camp. 499; Childers v. Boulnois, Dowl. & R. N. P. 8; and Beeching v. West- brook, 8 Mees. & W. 412. While, in a few states, it has been held otherwise, the law as gen- erally understood in this country is that, in the absence of any statute, a mere acknowledgment of a debt is not a promissory note ; and such is, we think, the law of this commonwealth. Gray v. Bowden, 23 Pick. 282; Commonwealth Insurance Co. v. Whitney, 1 Mete. 21; Daggett V. Daggett, 124 Mass. 149; Almy v. Winslow, 126 Mass. 342 ; Carson v. 'Lucas, 13 B. Mon. (Ky.) 213 ; Garland v. Scott, 15 La. Ann. 143; Currier v. Lockwood, 40 Conn. 349, 16 Am. Rep. 40; Brenzer v. Wig'htman, 7 Watts & S. (Pa.) 264; Biskup v. Oberle, 6 Mq. App. 583. Some states have by statute extended the. law of bills and promissory notes to all instruments in writing and whereby any person acknowledges any sum of money to be due to any other person. 1 Randolph, Com. Paper, § 88; Rev. St. 111. 1884, c. 98, § 3; Gen. St. Colo. 1883, c. 9, ■§ 3; Rev. St. Ind. 1881, § 5501; Rev. Code Iowa, 1873, § 2085; Rev. Code Miss. 1880, §§ 1123, 1124. We have no occasion to comment upon those instruments in which words have been used or superadded from which an intention to ac- company the acknowledgment with a promise to pay has been gather- ed, or where the form of the instrument fairly led to that conclusion. Daggett V. Daggett, 124 Mass. 149. Almy v. Winslow, 126 Mass. 342. No such words exist in the instrument sued, nor is it in form anything but an acknowledgment. The words "for value received" recite indeed the consideration, but they add nothing which can be interpreted as a promise to pay. It is therefore unnecessary to con- sider whether, if the paper were a promissory note, interest should be calculated from its date. Upon this point we express no opinion. If it is to be treated as an acknowledgment of debt only, as we think it must be, the plaintiff is not entitled to interest except from the date of the writ. Even if it was the duty of the defendant to have paid the debt on demand, yet if no demand was made, if no time was stipulated for its payment, if there was no contract or usage requiring the payment of interest, and if the defendant was not a wrongdoer in acquiring or detaining the money, interest should be computed only from the demand made by the service of the writ. Dodge V. Perkins, 9 Pick. 368; Hunt v. Nevers, 15 Pick. 500, 26 Am. Dec. 616. "In general," says Chief Justice Shaw, "when there is a loan without any stipulation to pay interest, and where one has the money of another, having been guilty of no wrong in obtaining Ch. 1) FORM OF BILL AND OF NOTE 49 it, and no default in retaining it, interest is not chargeable." Hubbard V. Charlestown Railroad Co., 11 Mete. 124 ; Calton v. Bragg, 15 East, 223 ; Shaw v. Picton, 4 Barn. & C. 723 ; Moses v. Macferlan, 2 Burr. 1005 ; Walker v. Constable, 1 Bos. & P. 306. Exceptions overruled. SECTION 4.— THE ORDER RUFF V. WEBB. (Nisi Prlus, before Lord Kenyon, 0. J., 1794. 1 E3sp. 129.) A';siimp<;i> fnr w ork and la hrnir^ with the common COUntS. Plea of the general issue. The aCti mi was brought to recover the amnnnt nf ^nr^rrpa i]^i^^ l^y the defeT3ant to the plaintiff. The plaintiff had been servant to the defendant, and, on his dis- charging him from his service, h^d given him a draft for the amount of his wages on an unstamped slip of paper, in the following words: "Mr. Nelson will much oblige Mr. Webb, by paying to J. Ruff, or order, twenty guineas on his account." This draft the plaintiff had taken, but it did not appear that he had ever demanded payment of it from Mr. Nelson, to whom it was addressed. It was given in evidence on the part of the defendant, that he lived in the country, and kept cash with Mr. Nelson in London, and that he paid all his bills in that manner, by drafts on Nelson; that the plaintiff knew that circumstance, and took the draft without any ob- jection ; and that if he had applied to Nelson, that it would have been paid. This evidence was relied on as a discharge, and bar to the action. Shepherd, for the plaintiff, contended that the only mode by which this could operate as a bar to the action was by taking the draft in question as a bill of exchange; in which case, under St. 3 & 4 Anne, c. 9, § 7, it is declared that if any person shall accept a bill of ex- change, in satisfaction of a debt, that the same shall be deemed a full and sufficient discharge, if the person so accepting such bill for his debt shall not take his due course, by endeavoring to get the same ac- cepted and paid, and making his protest for nonacceptance or non- payment; but he contended that in point of substance it was not a bill of exchange, but a mere request to pay money, not accepted, by Nelson, or such as could put the plaintiff into any better situation with respect to his demand. But, if it was taken as a bill of ex- SM.& m:,B.& N. (2d Ed.)-4 ^ FORM AND INCEPTION (Part 1 , change, that it could not be given in evidence at all, as it was not stamped. '' It was answered by the defendant's counsel that the plaintiff's hav- ing accepted the draft as payment was a waiver of every objection 1,0 it, and that he was therefore bound by it, and could not recur to the demand for wages. Lord Kenyon said he was of opinion that the paper offered in evidence was a bill of exchange; that it was an order by one person to another to pay money to the plaintiff or his order, which was in point of form a bill of exchange ; that as such it could not be given ^ evidence, without being legally stamped ; and, as the only mode in which it could operate as a discharge of the plaintiff's demand was ^s stated by the plaintiff's counsel, that the plaintiff in point of law was therefore entitled to recover. LITTLE v. SLACKFORD. (Nisi Prlus, before Lord Tenterden, C. J., 1828. Moody & M. 171.) -JDebt for money paid. The defendant, bein^ in debted to J. S. for wo rk done, gave him an unstamped paper addressed to the plamtitt m the tollow mp^ words : "^ '•\/ir I ittip plea se to let the bearer have sev en pounds, and place it to my account, and you will oblige "Your humble servant, R. Slackford." There was also some slight evidence that the defendant had ac- knowledged the debt. i. Comyn, for the defenda nt, objected that the paper produced w as a bil l of exchang e, and could iio L-b f? r r nd f o r want of a ctnm p, and the .other evidence would not warrant a verdict. ' Lord Tenterden, C. J. I think ^ ^ strirpp '"s npppggar^r Thejpaper does no t purport to be a demand made by a party having a right t o cairpii the other to pa y. The fair meaning is, "You will oblige me by doing it." Even without the paper, the other evidence would probably entitle the plaintiff to a verdict. Verdict for the plaintiff. HAMILTON V. SPOTTISWOODE. (Court of Exchequer, 1849. 4 Exch. ^00.) The parties, pursuant to the order of Parke, B., agreed to state, for the opinion of the court, the following case: On the 24th of September, 1842, Alexander Wilson and Patrick Wilson, carrying on the business of typefounders in partnership, un- der the firm of Alexander Wilson & Sons, were indebted to William Ch. 1) FORM OF BILL AND OF NOTE 51 Gentle in £6000, for money lent ty him to them, no part of which has been paid, except as hereinafter mentioned. The defendant and the firm of Messrs. Eyre & Spottiswoode, of which the defendant was a member, were partners, and had, for some time previously to the date aforesaid, dealt with Alexander Wilson & Sons, purchasing from them, from time to time, large quantities of type payable quar- terly, and for which corresponding quarterly accounts used to be sent, in by Alexander Wilson & Sons up to the 31st March, 30th June, 30th September, and 31st December in each year, and it was then exr pected that those dealings would be continued, as they afterwards were. Alexander Wilson & Sons being applied to for payment, de- livered to William Gentle the following order or authority in writing, signed by them and directed to the defendant: "To Alexander Spottiswoode, Esq. "London, 24th Sept., 1842. "Dear Sir — We hereby authorize you to pay on our account, to the order of William Gentle, Esq., the sum of six thousand pounds, at the following periods, deducting the amount from the quarterly accounts for type furnished to you and to Messrs. Eyre & Spottis- woode, viz. : 11th November, 1843 £1,000 11th November, 1844 1,000 11th November, 1845 1,000 11th November, 1846 1,500 11th November, 1847 1,500 "We are, dear sir, yours very truly, * "Alexander Wilson & Sons." The said order or authority was thereupon taken to the defendant, and underneath the same he wrote the following letter or memoran- dum, addressed to William Gentle: "Dear Sir — ^Having received the foregoing authority from Messrs. A. Wilson & Sons, I undertake to. make you the payments as above stated. Middle New-Street, Sep- tember 24, 1842. Andrew Spottiswoode" — which was then, with the defendant's consent, handed to William Gentle. * * * The question ,for the opinion of the court is, first, whether the writing dated 24th September, 1842, requires a bill of exchange or promissory note stamp.^' Poll'ock, C. B. We are all of opinion that the letters do not require a bill of exchange or promissory note stamp ; they do not import an absolute intention that the money should at all events be paid, but mere_ly authorize the defendant to pay it. As to the other point we will take time to consider. Cur. adv. vult. The judgment of the court was now delivered by 1 e The statement Is abridged, and the arguments and a portion of the opinion of Alderson, B., are omitted. 52 FORM AND INCEPTION (Part 1 Alderson, B. We intimated, at the time of the first argument in this case, our opinion that the two letters dated the 24th of Septem- ber, 1843, the first from Wilson & Sons to the defendant, and the second, written on the same paper, from the defendant to the testator Mr. Gentle, do not require to be stamped, either as a promissory note or bill of exchange, but only constitute and require to be stamped as.-an agreement. That opinion we still retain. We do not think this is an order to pay any particular sum of money at all ; but we are of opinion that it amounts to an agreement, that, if any of the speci- -^ifted portions of debt mentioned therein be at any time unpaid by Messrs. Wilson & Sons to Mr. Gentle, and if, after that event has occurred and come to the knowledge of the defendant, any quarterly accounts for type should become due from the defendant to Wilson & Sons, the defendant would, so far as those accounts would extend, pay the debt due from Wilson & Sons to Gentle, of which he might so have notice. Such an agreement, when assented to by all the parties, would be irrevocable. Then, if so, it seems to follow that the plaintiffs are entitled to recover in the present suit. * * ♦. Judgment for the plaintiffs. LUFF V. POPE. (Supreme Court of New York, 1843. 5 Hill, 413.) J On the merits, it appeared that the actJMi was brought upon the I following instrument: ^ , "New York, Dec. 9, 1838. J "Thirty days after sight pay Henry Pope or his order sixty-six Hollars and ninety-seven cents, and place the same to account of (yours, Abm. Bell. < 'To Mr. Martin Luff, New York." "-^The dr aft was presented to the defendant for acceptance two d ays "'af j-.er its d ate, and was d uly protested by a notarv for nonacceptance . The plaintiff proved that he had a demand against Bell, and, on calling for payment. Bell said he had funds in the hands of the de- fendant, and thereupon made this draft for the amount of the plain- tiff's demand. On presenting the draft the defendant said he would pay it by the 1st of February or the 1st of March; but he re- fused to accept it, or to make any promise in writing. The plaintiff gave evidence tending to show that the defendant had funds of Bell in his hands sufficient to pay the bill, and the defendant gave re- butting evidence. The defendant moved for a nonsuit, on the ground that there was no acceptance in writing, and because the defendant positively refused to accept the bill. The motion was denied by the justice, on the ground that he did not think this a bill of exchange within the meaning of the statute. He said it was known to all the Ch. 1) FORM OP BILL AND OP NOTE 53 parties that the instrument was drawn on a particular fund, and he regarded it as a transfer of a chose in action. The jury were after- wards charged that, if this was a bill of exchange within the com- mon acceptation of business men, the plaintiff could not recover for want of a written acceptance. But if it was only an order, or instru- ment in writing to transfer so much of the specific fund of Bell in the hands of Luff as would pay Bell's debt to Pope, then it was not within the statute, and the defendant was liable, provided he had funds. The jury found for the plaintiff as before mentioned. Judg- ment of affirmance having been perfected in the superior court, the defendant in the marine court brought err or .^' Bronson, j. * * * On the merits, the judgment of the marine court was clearly erroneous, and should have been reversed. There is no color for the argument that the instrument on which the plain- tiff sued was not a bill of exchange. A bill of exchan ge is a writte n o rder or request by one person to another. lor me payment, absolut e- ly and al- all evp nts. of a specified sum of money to a third person . Now what have we here? Bell requests Luff, 30 days after sight, to pay a specified sum of money to Pope., It is payable absolutely, and without reference to any particular fund; and if it be not a bill of exchange, the wit of man cannot devise one. The justice thought it was not a bill, but only "an order or instrument in writing," be-< cause it was said at the time, and the proof tended to establish the fact, that Luff had funds in his hands belonging to Bell. It would be enough to say that a written instrument, which is perfectly plain, and explicit on its' face, cannot be changed into something else by, anything which the parties said at the time of making it, nor by any inquiry into extrinsic facts. It must speak for itself. But the notion that there cannot be a bill of exchange where the drawee has funds, if it be not entirely new, cannot date back further than 1836. It contradicts the very theory, and all the right use of a bill of ex- ' change, which is always supposed to be drawn on funds. Incalcula- ble mischief has resulted from the modern practice of drawing with- ' out funds, which is little better than a fraudulent use of the instru-^ ment. And although such bills have been tolerated, we have not yet gone so far as to make it unlawful to pursue the old-fashioned honest course of drawing, where the means for payment have already been provided. Whether the payee takes the bill in satisfaction of a debt due from ' the drawer, or advances the money for it, cannot be a matter of any importance as between him and the drawee. It does not affect the nature of the instrument. The statute requires that the acceptance should be in writing. 2 Rev. St. 768, § 6. Here there is not only the want of any writing, but the defendant positively refused to accept, and the bill was pro- t IT The statement of the case is abridged, and a part of the opinion omitted. 54 FORM AND INCEPTION (Part 1 tested for nonacceptance. And yet the defendant has been held liable. An examination of this case in all its facts would go very far to confirm the policy of the statute. But it is enough that we cannot repeal it, and until that is done the plaintiff cannot recover. He must take his remedy against the drawer; and if Bell has any money in the hands of the defendant, which is very questionable, he must sue for it. It is a chose in action, which cannot be transferred so as to give the assignee a right to sue in his own name, except in the form of an accepted bill of exchange. To give a parol promise to pay the effect of a written acceptance of the bill would be no better than a device to get round the statute and defeat all the valuable ends which it was designed to accomplish. If Quin v. Hanford, 1 Hill, 83, does not support, it certainly does not conflict with this doctrine. In Har- rison V. Wilhamson, 3 Edw. 430, 438, the Vice Chancellor said: "A bill of exchange has not the effect of an assignment of the money for which it is drawn in the hands of the drawee, unless, perhaps, where it is drawn upon a particular fund, and then, indeed, by the law merchant, it loses its character as a bill of exchange." He un- doubtedly alluded to a class of cases, some of which are cited in Quin V. Hanford, where an order, either not payable in money, or else drawn on a particular fund, has, after acceptance or promise of payment, been allowed to operate as an equitable assignment of the fund. And see Morton v. Naylor, 1 Hill, 583. This has been done upon a very liberal construction of the acts of the parties, for the advancement of justice. But those cases have nothing to do with a bill of exchange proper, which is an instrument of a peculiar nature, and governed by its own laws. Although it is used for the purpose of transferring funds, and has that effect in the result, it never oper- ates as an assignment to the payee of any particular money in the hands of the drawee. If the latter accepts the bill, the payee or other holder may sue upon the contract of acceptance. But if the drawee refuse to accept, there is no contract between him and the holder, and no action will lie. And this is so, although the drawee had funds, and ought, in justice to the drawer, to have paid the bill. We think all these judgments are erroneous, and they must there- fore be reversed. Ch. 1) FORM OF BILL AKD OF NOTE 55 I SECTION 5.— CHARACTER OE THE ORDER OR PROMISE (I) As TO Conditions JOSSELYN V. LACIER. (Court of King's Bench, 1715. 10 Mod. 294, 317.) This was a writ of error upon a judgment given in the court of common pleas in an action o f assumpsit , where the plaintiff de- cl ared that Evans drew a~ bin upon Josse lyn, re tjuirinp;- l^fi i^' p~y Lacie r seven pounds every mont h Cthe first payment to begin in De- cember7 about two months after the date of the note) out of the growing subsistence of Evans, and place it to his account ; t hat Lacier carri ed th e note to Josselyn, who a ccepte d it, and p romised to pay it, secundum tenuiem billa;, "G y which acceptance firrf>'''^'"g <'^ *-^^ ''ii=- tom of merchants, he became liable; and that af terwards he refuse d to pay, elL.'" ' Tarker^ Chief Justice, delivered the opinion of the court. In this case, two points are considerable: First, w hether this hs - a good bill of exCtraHge? We are all of opinit hp'Tiippnrted ~TriaTijrr"a«;pg indeed were cited by the counsel on the other side to prove that position, to which may be added another in Lord Raymond (vide J enny y^ Herle, 2 L,d. Raym. 1361), where it was d ecided that a bill, which was not payable at al l ev ents, could not be considered a<^ a bill of exchange : and this admis- sion by the counsel for the defendant in error is decisive of this case; for there is no difference in this respect between promissory notes and bills of exchange; they both stand in pari ratione. If we were to render this point in the least doubtful, we should shake the foundation of that which has been considered as clear law ever since i the time of L,ord Holt. I am therefore clearly of opinion that this note cannot be declared upon as a negotiable instrument; at the same time I have no doubt but that an action might be framed on it as on a special agreement. The justice of the case is certainly with the de- fendant in error: but we must not transgress the legal limits of the law, in order to decide according to conscience and equity. We need have no reluctance in reversing the judgment of the common pleas, because as this was a judgment by default, that court had no op- portunity of exercising their judgment upon the question. AgTTTTTTT?c;T J Before the statute of Anne promissory notes were not assignable as choses in action, nor could actions have been brought on them, because the considerations do not appear on them; and it was to answer the purposes of commerce that those notes were put by the statute on the same footing with bills of exchange. Then they cannot rest on a better footing than bills of exchange, but must' stand or fall on the same rules by which bills of exchange are gov- erned. Certainty is a great object in commercial instruments; and unless they carry their own validity on the face of them, they are not negotiable; on that ground bills of exchange, which are only payable^ on a contingency, are not negotiable, because it does not appear on' the face of them whether or not they will ever be paid. The same rule then that governs bills of exchange in this respect must also 58 FORM AND INCEPTION (Part 1 govern promissory notes. And therefore, though this might have been declared on as a special agreement, stating the consideration for the promise, and the sale of the reversion of £4:3., yet this action camiot be maintained. This does not come within the custom of merchants respecting bills of exchange, nor is it a negotiable instru- ment within the statute of Anne, because as a bill of exchange it would not be good. Grose J. The plaintiff below could only declare either on this in- strument, as a note under the statute of Anne, or on the special con- tract that existed between the parties. He has declared on the for- mer; but this is not a negotiable instrument, because it is not payable at all events. It has been said however that there is a difference in this respect between promissory notes and bills of exchange : but no decision has been cited to warrant such a distinction ; and without such an authority I think that we ought not to establish it; for the words of the statute of Anne are "therefore to the intent to encour- age trade and commerce, which will be much advanced if such notes shall have the same effect as inland bills of exchange, and shall be negotiated in like manner &c." It clearly appears therefore to have been the intention of the Legislature to put promissory notes on the same foundation as bills of exchange. Now if this had been a bill of exchange,- the declaration drawn on it as on a bill within the custom of merchants would have been bad, because the money was only to be paid on a contingency. Then if the plaintiff below had declared on this as on a special contract, he should have shown not only that there was a consideration for the promise, but also that the reversion was sold for at least ilO. ; whereas here it is merely averred that the reversion was sold, without saying for how much. In what- ever way therefore this question is considered, I think the declaration cannot be supported. Judgment reversed.'"' 2 See Hibbs y. Brown, 190 N. T. 167, 82 N. E. 1103 (1907). In AlUson V. HoUembeak, 1.38 Iowa, 479, 114 N. W. 1059 (190S), the following indorse- ment was held to make a note nounegotiable : "This note is secured by pur- chase-money mortgage on 160 acres of land In Guthrie Co., la., and payee herein agrees to look to mortgage security for the payment of this note." In Nat. Sav, Bk. v. Cable, 73 Conn. 568, 48 Atl. 428, 429 (1901), the follow- ing instrument was held not a bill : "New Haven, Conn., Aug. 16, 99. Treas. Nat. Sav. Bk. New Haven : Pay J. O. Cable, or order, ?300, or what may be due on my deposit book. No. E632. [Signed] John D. Edwards." The court said : "It is payable out of a particular fund. It Is to pay $300, or what may be due on a specified book. The amount to be paid is made to depend upon the adequacy of a specific fund. Such an order Is conditional, and so not negotiable. Neg. Inst. Law, §§ 1, 3." Ch. 1) FOEM OF BILL AND OF NOTE 59 WELLS V. BRIGHAM. (Supreme Judicial Court of Massachusetts, 1850. 6 Gush. 6, 52 Am. Dec. 750.) ^ This was an acti on of ass umpsit, tried before Byington, J., in the" court of common~pieas. by~~the prai ntjff. as the paye e, againat_lhe def endant, as the drawee and acceptor of a draft drawn by one George Clay, dated the 2d of January, 1848, of which the follow-, ing is a copy: "Mr. Brigh am — Dear Sir: You will please pa y E Hsha Wells $30. which is due me for the two-horse wagon bou ght l ast spring, and this may be your receipt." The plaintiff declarecT on the common counts, and filed the draft as a bill of particulars. ' The defendant objected to the giving of the draft in evidence under the common counts; also that the draft did not, on the face of it, import a consideration between the payee and the drawer; and that the' plaintiff must prove such consideration afHrmatively. But the judge overruled these objections. * * * The jury found a verdict for the plaintiff and the defendant ex- cepted.^* Shaw, C. J. This is assumpsit by the payee against the acceptor,' on a draft for $30, drawn by one George Clay upon the defendant,' payable to the plaintiff. The first question is, whether this is a caghdraft, or i nland bill of exchang e; it it is, tne nature of Ihfc draft answers most of the questions whicTi have been discussed. It is not payable to the order of the payee, but that is not essential to make it a bill of exchange. The King v. Box, 6 Taunt. 335. The parties are all specially^ named, the drawer, the drawee, and the payee. The dr aft is paya ble at a ti me fixed, to wit, on demand ; on no continyen cv or f-nnriifinn, hiit ahsnlntelv: t n"r a. sum certain, out of no Special fun d, but by the drawee generally. The fact, ■ that the draft indicates a debt due to the drawer as the consideration, between drawer and drawee, does not make it the less a cash order or draft. The_drawi££, hyhh_Jl'"rfl\f ?""'?, ?'1m itS such de H, ?"rl ic pgtnpppH— to dpny it, as I against the payee. It seems to us, therefore, that t his document ^ possesses the characteri stics of a cash draft , and upon a general ac-. ce pTancrT:hereof,_ w nir.h mav Hp hy p^rnl/ hinHs the drawee to the holder. The a cceptor has n " i-'t ^ht tr> rpgnire prnnf nf rnn'-irleratinn . as betwe en the draw er and the paye e; the draft itself is proof of the holder's title: 'ihe statement ot the origin of the debt, the pur-. chase of a wagon, did not make it the less payable absolutely, and at all events, and not conditionally or out of a particular fund. Hau- soullier V. Hartsinck, 7 Term R. 733. * ♦ * ■ Exceptions overruled. 21 Part of the case relating to another point is omitted. 60 FOKM AND INCEPTION (Part 1 MABIE V. JOHNSON. (Supreme Court of New York, General Term, 1876. 8 Hun, 309.) BOARDMAN, J. This ac tion wa s JjrOUg ht itp n" a np^ ntiahlp p rnmis- s&rv note as foll gws : ^ "Guilford, Nov. 29, 1870. "For one Hinckley knitting machine, warranted, I promise to pay J. H. Wells or bearer thirty dollars one year from date with use. "Daniel Johnson." This note was transferred for value to the plaintiff, before it be- came due, without any knowledge of the transaction out of which the note arose, except what is contained therein, nor did the plaintiff have any notice or reason to suspect that the defendant had any de- fense to said note. Upon the trial before the justice, the defendant offered to prove a parol warranty of the machine in certain respects, with a view of ;-showing a breach of said warranty, and recouping the damages. This ^evidence was rejected. The county court held that such decision was erroneous upon the ground that the word "warranted" in the note was sufficient notice of the defendant's equities to put the plaintiff 'upon inquiry as to the terms of the warranty, and that he took the note subject to all damages sustained by the defendant for a breach of such warranty; that the plaintiff stood in no better situation in this respect than the payee would have done, had he brought suit on the note. , I think the learned county judge is in error in the view he took ' of the case, and that within the authorities the plaintiff was a bona fide holder of the note in suit, so as to deprive the defendant of his defense. The progress of the law on this subject is given in 1 Par- sons on Bills, 258 et seq. The result of the English decisions is there laid down to be "that the holder of negotiable paper does not lose i^his rights by proof that he took the paper negligently." That notice of facts which would defeat his recovery must not be ambiguous. The same doctrine is maintained in the American courts. Welch v. Sage, 47 N. Y. 143, 7 Am. Rep. 423; Magee v. Badger, 34 N. Y. 247, 90 Am. Dec. 691 ; Belmont Bank v. Hoge, 85 N. Y. 65 ; Lord v. Wilkinson, 56 Barb. 593, and the cases cited. In Magee v. Badger, supra, Porter, J., says: "He, the purchaser, is not bound, at his peril, to be upon the alert for circumstances which might probably Excite the suspicions of wary vigilance. He does not owe the party who puts negotiable paper afloat the duty of active inquiry tq avert the imputation of bad faith." In Lord v. Wilkinson, supra, and Raphael v. Bank of England, 17 C. B. 161 (s. c, 33 Eng. L. & Eq. 276), actual notice of the theft of the securities was given, yet it was held that the forgetting, or omitting to look for the notice, was not Ch. 1) FORM OF BILL AND OF NOTE 61 evidence of mala fides. More than negligence must be proved ; fraud, mala fides, must be shown. ' These cases seem to me to sustain the position of the justice upon the trial. The words, "f or one Hincklev kn 'tting marViinc^ waxraat-.. ed," express the consideration of the note. Giving to the words the 1)roadest meaning possible, they do not imply that there has been a breach of the warranty, by which the defendant has sustained dams- ages. They cannot be construed as notice to the purchaser, of a de- fense to the note in the hands of the payee. If they do, it must be' because the law will presume a breach wherever there i^ a warranty. That would be preposterous. There was nothing, therefore, which,; showed, or tended to show, to the purchaser, or even to excite his suspicions, that any defense to the note in suit ; existed, when he pur- chased it. He is therefore entitled to protection against defendant's counterclaim. It follows that the judgment of the county court should be re- versed, and that of the justice be affirmed, with costs. 62 FOKM AND INCEPTION (Part 1 NICHOLS V. RUGGLES. (Supreme Judicial Court of Maine, 1884, 76 CMe. 25.) Re plevin of a -haFfi<>;-hroup;ht against a rnnstahl p whn had attach ed it as the property of Tames Newcomb, on a writ in favor of C. K. Johnson. The pl aintiff claimed title und eF~the f oTlowing inst rtP ^,m entT- "B angor, Se pt. 8, 1882. I, James Newcomb, of Carm el, Maine, bought of i,emuel iNicnols, Bangor, Maine, one blac k horse, name Nig, v years old, for"!^ $80.00) eig hty dollars- and interest on same until paid lor, which 1 agr ee to pay out of my next quarte r's m ail pay, w h ich becomes _due_Jan ri. 1883. on route 184 from Carm el to Ke nduskeag, which he is now carrying. The above horse is to remai n said Nichols' until fully paid for. James Ne wcomb." "' iv DanForth, J. The only question presented by the report in this ^case is whether the instrument under which the plaintiff claims t itle to the horse replevied should have been record ed und er Rev. St. c. ^lll, § 5. i t so. the plaintiff fails m his title and in his actio n. The statute_£rovides that "rfo agreeme nt_ that person al__2roperty barg ained and delivered to anoth er, for which a note is giyen7 ~sha ll remain Jjie property nf flip paypp ti11 tlip nnte is paid, is va lid, nnlpss it is made and signed as a part of the note; nor when so made and signed in a note for more than thirty dollalts, unless it is recorded like mortgages of personal property." It is co nceded _that the instrument com p s within th e statute d e- s c ription in every re sp ect cicccpt thi t it r1npg nn t contain the n ote thergiiLXfi^uired. The objections a re that the price to be paid was no t payable in money, and t hat its payment depended upon a con tifl- gency. But an examination will show that neither of these objec- tions are well founded. The statute uses the word "note" only, omitting the qualifying adjective "promissory," and whether the construction is to be so limited as to apply only to such promissory notes as are recognized by the commercial law, with all the requisites required by that law, may well be doubted. It is certain that the term "note" without the qualification is often used in a more extensive sense than with it, and it is equally certain that when used to express a promise to pay, whether in property or money, it is equally within the mischief to be prevented. InJJli§__case, however, the prnmisp in b ot h absnliit e ^ nrlLtr , ppy in mone y. There is no condition attached to it and the amount is fixed and definite. Tt^is sniH that \\ i s to be paid from a p articular fund. This may be true; but it is evident that the intention of the p arties was_ that i ts payment was not to be confined to that fimd, but th at it was to Be paid whether the fund should fail or otherwis e. Besides 2 2 Arguments of counsel are omitted. Ch. 1) FORM OP BILL AND OF NOTE 63 the re is nothing in the; instrument- inf^irating any unrprt-ai'nty nr r-r.n. ti ngencY as to the func ^: and if there were it would not render the promise contingent. Story on Prom. Notes, § 26; Bryam v. Hunter, 36 Me. 217; Redman v. Adams, 51 Me. 429. The fund is estab- HcViP ^ hj rnntrart and !■; more than sufficient to pa^the. a.mn mTt' promis ed. The service by which it is to be produced was to be ren- dered by the promisor and if he fails to perform the service there can be no pretense that such failure would relieve him from the ob- Hgation of his promise which is unconditional in its terms. Sears v. Wright, 24 M^. 278. T he promise is also to pay in mone y. The promise to perform the service under the contract for carrying the mail is one thing; that to pay for the horse another and a very different thing. The former is for service to be performed; the latter for a definite amount and no words to indicate that it is to be paid in anything but money. Ju dgment for the defen dant and for a return of the horse re- plevied. -^^ — ~~r~r SIEGEL, COOPER & CO. v. CHICAGO TRUST & SAVINGS BANK. (Supreme Court of Illinois. Jan. 21, 1890. 131 lil. 569, 23 N. B. 417, 7 L. K. A. 537, 19 Am. St. Eep. 51.) Shope, C. J. This was an ac tion o f as sumps it, by appellee, against appellants, upon the following instrument: ' "$300.00 ■ Chicago, March 5, 1887. , "On July 1, 1887, we promise to pay D. Dalziel, of order, the sum of three hundred dollars, for the privilege of one framed advertising sign, size —[ x — inches, one end of each of 159 street-cars of the 'North Chicago City Railway Co., for a term of three months, from May 15, 1887. Siegel, Cooper & Co." — which was indorsed by Dalziel, the payee, to appellee, for value, on the day of its execution. The first question presented is, is this instrument negotiable? And this question has been answered affirmatively by the circuit and appel- late courts. The appellate court having affirmed the judgment in favor of the plaintiff, the case is brought here by appeal, upon cer- tificate of importance granted by that court.- It appears that, before the time when the privilege of advertising was to commence, Dalziel forfeited any right he may have acquired, to use the cars in the manner indicated, and the privilege specified never was furnished , appellant ; and it is insisted that the instrument is a simple contract, only, and that therefore the same defense — failure of consideration — ^is available against the indorsee of the paper for value, and before due, as might be interposed against such paper 64 FORM AND ijsiCEPTioN (Part 1 in the hands of the payee. It is also insisted that the instrument shows, on its face, that payment depended upon a condition precedent to be performed by the payee, and therefore the indorsees took it with notice, and, by the failure of the payee to perform the condi- tion, no right of recovery exists in the indorsee. It is not contended that the indorsee had any other notice than that contained in the instrument itself, and it is apparent that at the time of its indorsement, which was the day of its execution, no right 'to the consideration had accrued to the makers. It is a promise to pay a certain sum of money at a day certain, for a consideration thereafter to be rendered, and depends for its validity upon the im- plied promise of the payee to furnish the consideration at the time and in the manner stipulated; that is, it is a promise to pay a sum certain on a particular day, in consideration of the promise of the payee to do and perform on his part. A promise is a valuable con- sideratipn for a promise. But the question remains whether the statement or the recital of the consideration on the face of the instrument impairs its negotia- bility, and, in this instance, amounts to a condition precedent. The ' mere f act that the consideration for w hich a note is given is reci ted i n it, althougn it may appear thereby that it was given for or in con- sideration of an executory cont ract ui piuuiise u u the part ot the fSyee, will not destroy its negotiability, unless it appears, through the recital, tnat it qualihes the promise "to pay, and renders it con- ditional or uncertain, either as to the time of payment or the sum to be paid. Daniel, Neg. Inst. §§ 790-797; Davis v. McCready, 17 N. Y. 230, 72 Am. Dec. 461; State Nat. Bank v. Cason, 39 La. Ann. 865, 2 South. 881 ; Bank v. Michael, 96 N. C. 53, 1 S. E. 855 ; Good- loe V. Taylor, 10 N. C. 458 ; Stevens v. Blunt, 7 Mass. 240. In State Nat. Bank v. Cason, supra, it is said : "Plaintiff received the note before maturity, and before a failure of the considera- tion. Even if it were known to him that the consideration was fu- ture and contingent, and that there might be offsets against it, this would not make him liable to the equities between the defendant and payee. It cannot affect the negotiability of a note that its considera- tion is to be hereafter realized, or that, from some contingency, it may never be enjoyed." I The most that can be said of a recital in the instrument itself of the consideration upon which it rests is that the indorsee, taking it before maturity, is chargeable with notice of the recital. Such re- c ital, however, is not suffici ent, of itself, to advise him that the re w as, or would necessarily b e, a lailure oi consideration, but if. at the time of the indorsement,"Tlie cuiisideratioft has-tn-fact failed, the recital might be sufficient to put him upon inquiry, and, in connec- tion with other facts, amount to notice. Henneberry v. Morse, 56 III. 394. The case at bar does not, however, fall within the rule just Ch. 1) FOEM OF BILL AND OF NOTB 65 stated, for the assignment was made the same day the note was' made, and by the terms of the recital it was apparent the payee was required to do no act till the 15th of May following, an interval of 70 days. There is a distinction, clearly recognized in the authorities, between an instrument payable at a particular day, and one payable upon the happening of some event; and the rule is that, where the parties in- sert a specific date of payment, the instrument is then payable at all events, and this although, in the same instrument, an uncertain and different time of payment may be mentioned, as that it shall be pay-^ able upon a particular day, or upon the completion of a house, or the performance of other contracts, and the like. McCarty v. Howell, 34 111. 341, and authorities, supra. But ' the doctrine , of this and kindred cases, where there are both a certain day of payment and one more or less contingent, neea not be here invoked, for the time of payment in the instrument under consideration is not made to de- pend upon the happening or not happening of any event, but is spe-/ cific and certain, and must occur by the efflux of time alone. If, therefore, it be conceded, as it must, that a condition inserted in a promissory note, postponing the day of payment until the hap- pening of some uncertain or contingent event, will destroy its nego- tiability and render the instrument a mere agreement, yet under the authorities, if by the instrument the maker promises to pay a sum certain at a day certain to a certain person or his order, such instru- ment must be regarded as negotiable, although it also contains a re- cital of the consideration upon which it is based, and although it fur- ther appear that such consideration, if executory, may not have been performed. Here the money was payable, absolutely on the 1st day of July, 1887, a time when the contract for the advertising could not have been completed. If the instrument had remained the propert> of the payee, and upon its maturity and performance to that time, suit had been brought, it is clear that no plea of partial failure oi^, consideration could have been sustained, for the reason that the en . tire term had not then expired. No analysis of the instrument itself is necessary. The most careful examination of it will fail to disclose a condition precedent to the pay- ment of the money at the time stipulated. Nor is there anything in the recital of the consideration to put the indorsee upon inquiry at the time^ the indorsement was made. Indeed, it is clear that at that time no in- quiry would have led to notice that Dalziel would fail to comply with his- contract on the 15th of May thereafter, when the term was to com- mence. All that the recitals would give notice of was that the note was/ given in consideration of an agreement on the part of the payee that the privilege of advertisement named should be enjoyed by the makers for three months from May«15, 1887. Giving to the language em- Sm.& M.B.& N.(2d Ed.)— 5 G6 FORM AND INCEPTION (Part 1 ployed its broadest possible meaning, it cannot be construed as no- tice to the indorsee of the future breach of the contract by Dalziel. The presumption of law would be that the contract would be carried out in good faith and the consideration performed as stipulated. The makers had put their promissory note into the hands of Dalziel upon an expressed consideration which they were thereafter to receive, and for the performance of which they had seen fit to rely upon the un- dertaking of Dalziel, and we are aware of no rule by which they can hold this indorsee for value, before due and before the time of performance was to begin, chargeable with notice that the promise upon which the makers relied would not be kept and performed. Wade on Notice, § 9tta; Loomis v. Mowry, 8 Hun, 313; Davis v. McCready, supra. It is also contended that the court erred in giving the eighth in- struction in behalf of appellee, as to the meaning of the words "good faith." Without pausing to discuss the instruction, we think it clear that appellants were not prejudiced thereby, and that no inference unfavorable or prejudicial to them could have been drawn therefrom by the jury. While, therefore, the instruction may be regarded as in- accurate, it worked no injury, and appellants cannot complain. See Comstock et al. v. Hannah, 76 111. 530. Other minor objections are urged, which, it is sufScient to say, we have examined with care, but we find no prejudicial error. The judgment of the Appellate Court will be affirmed. Judgment affirmed. FIRST NAT. BANK OF HUTCHINSON v. I.IGHTNER. (Supreme Court of Kansas, 1906. 74 Kan. 736, 88 Pac. 59, 8 L. R. A, [N. S.] 231, lis Am. St. Rep. 353.) The court made the following special findings of fact and conclu- sions of law: "^'"That the Snyder Planing Mill Company enter ediritn a. contract wi th the defendan t, T.i p-htn er, f or the erection ofa~cert am parn at the contract pjjfig— of $3,50Q t- That p rior to the completion " of said /tarn, and on September 28, 1903, the Snyder Planing Mill Compa ny ^^as duly a diudicatpH bankrupt , . anH the defendant, I jghtner. wa s compelle d to and did conip lete the barn. -^n'Vi^t prir"" ''" ^h^ arl jiulirarinn o f t^p .cjnyHpr Plam'ng Mill C^m- p^"y ns bri"V.r] Pt, at the request of said company , L ightner accepte d twn_m:£jprs, one for $1.000 a nd one for $1,500 whi ch said orders and acceptances were identical with the exception oT the amounts and dates. The one for $1,500 reads as follows; Ch. 1) FOBM OF BILL AND OF NOTE G7 "'Hutchinson, Kansas, Aug. 10, 1903. " 'G. W. Ivightner, Offerle, Kansas — Dear Sir : Pay to the order of the First National Bank of Hutchinson, Kansas, on account of con- tract between you and the Snyder Planing Mill Co. $1,500. " 'The Snyder Planing Mill Cb., " 'Per J. F. Donnell, Treas. " 'Accepted. G. W. Lightner.' "Said two orders, so accepted, were by the Snyder Planing Mill Company hypothecated with the First National Bank of Hutchinson, Kan., to secure two certain demand notes drawing 10 per cent, in- terest and of even amounts with said orders ; the $1,000 ofder being hypothecated about August 22, 1903, and the $1,500 order on or about August 11, 1903. That the proceeds of said notes were at said dates duly received from said bank, and used by the Snyder Planing Mill Company. Said notes are still due and unpaid. "The said orders were so accepted by Lightner on or about August 10, 1903, and that about September 30th Lightner took up the $1,000 order by giving therefor his check for $1,000 to the cashier of plain- tiff, which was as follows: "'Kinsley, Kansas, Sept. 30, 1903. " 'The National Bank of Kinsley : Pay to E. W. Eagan, cashier, or order, $1,000.00. One thousand dollars. '"George W. Lightner.' "That said Lightner stopped payment On said check prior to its presentation, and no part thereof has been paid, nor has any part of the $1,500 order been paid. That, prior to the giving of the two orders,' Lightner paid the Snyder Planing Mill Company $1,000 upon said" contract, and that he was compelled to expend $1,624.04 to complete the barn. That there was a balance due and unpaid on said contract of $872.96 when this action was commenced. :|t* ********* "First. That said orders were nonnegotiable, and were subject to the same defenses in the hands of the First National Bank of Hutch- inson, Kan., as if they had remained in the hands of the Snyder^ Planing Mill Company. "Secpnd. That the plaintiff is entitled to judgment in this action in the sum of $970 with interest from this date at 6 per cent, per annum and for costs. Chas. E. Lobdell, Judge." Plaintiff brings the cause here upon a transcript, and alleges error in the conclusions of law upon which the judgment is based and er- ror in overruling the motion for a new trial."* Porter, J. (after stating the facts as above). The main controversy is whether the orders given by the planing mill compa ny to the ba nk, a nd adcefated by Hefendag L .ar6 negoriabife Ifisttumentj ! It is true 2 5 The statement of the case is abridged. 68 FORM AND INCEPTION (Part 1 their valiHjty 3S snrti in»;tri,irnentSr-and, whe.re no date is mention ed, t hey are payable on demand. 4 A. & E. Enc. of Law (2d Ed.) 133 and note 3 ; Douglass v. Sargent & Bro., 32 Kan. 413, 4 Pac. 861.- Each of the m, therefore, possesses all the essential elements of a bill o f exchange" unless the words quoted make them payable out of a partirnlar f^1|1d R tl^ rnndh iarnMy- ^i^ l l i Ml lilt; ari - .epLancc JS tl»^ rebv qualified. The law is well settled that a bill or note is not negotiable if made payable out of a particular fund. 1 Daniel on Neg. Inst. (5th Ed.) § 50; White v. Gushing, 88 Me. 339, 34 Atl. 164, 32 L. R. A. 590, 51 Am. St. Rep. 402. But a d istinction is recognized wh ere the instrument is simply chargeable to a pa rticular arrnnnt. |n gnrh a case it i s beyond question negotiable; payment is n ot made to de^ peftd upon th e g ufficiencv of the fund mentioned, and it is mentione d only l or the purpose of informing the drawee as to his mea ns of re- i mburseme nt. 1 Daniel on Neg. Inst. (5th Ed.) § 51 ; Tiedeman on Bills & Notes, § 20. In Ridgely Bank v. Patton et al., 109 111. 479, it is said: "A bill or note, without affecting its character as such, may state the transaction out of which it arose, or the consideration for which it was given." "So, also, the insertion into a bill or note of memoranda, explaining the nature of the business or debt, for which the instrument is given, will not make it nonnegotiable, for such a memorandum does not make the payment conditional." Tiedeman on Com. Paper, § 26. Thetestin_ex£ry- case fs said to be: " Does the instrnmenlicqrry the genefal~per sonal cred it nf thp rlrnwer nr maker, or only the cre dit of .3 partirifliOmid?" 4 A. & E. Enc. of Law, 89. A promise to pay a certain sum "out of my next quarter's mail pay, which becomes due January 1, 1883," was held in Nichols v. Ruggles, 76 Me. 25, to be an absolute promise to pay a certain sum of money. In Haussoul- lier against Hartsinck, 7 Term R. (Durnford & East), 733, it was held that an instrument promising to pay a certain sum "being a por- tion of a value, as under deposit in security for the payment hereof," was a promissory note payable at all events. In Pierson v. Dunlop, 2 Cowp. 571, an order which was to be charged "to freight" was held negotiable. A note expressed to be in payment of certain tracts of land was held negotiable. Bank v. Michael, 96 N. C. 53, 1 S. E. 855. Likewise a note which stated that it was given in consideration of certain personal property, the title of which was not to pass unless the note was paid. Chicago Railway Co. v. Merchants' Bank, 136 U. S. 268, 10 Sup. Ct. 999, 34 L. Ed. 349. This court held in Clark v. Skeen, 61 Kan. 526, 60 Pac. 327, 49 L. R. A. 190, 78 Am. St. Rep. 337, that "a note for the payment of a certain sum at a fixed date is not rendered nonnegotiable by a stip- ulation that, upon default in the payment of interest, the whole amount shall become due at the option of the holder, and then draw a greater rate of interest." In Corbett v. Clark and Another, 45 Wis. Ch. 1) FORM OF BILL AND OF NOTE 69 403, 30 Am. Rep. 763, an order to pay a certain sum "and take the same out of our share of the grain," referring to grain harvested or growing on certain farms, accepted by the drawee, was said to be a valid bill of exchange, and the order and acceptance absolute, the words above quoted merely indicating the means of disbursement. In Redman v. Adams, 51 Me. 429, a bill directing the drawee to charge the amount against the drawer's share of fish caught on a certain schooner is held valid and negotiable. One of the leading cases is Macleed v. Snee, 2 Str. 765. There a bill of exchange was dated May 25th for the payment of a certain sum one month after date, "as my quarterly half-pay to be due from 24th of June to 27th of September next, by advance." This was held a negotiable bill of exchange. In Spurgin v. McPheeters, 42 Ind. 527, an instrument in the following form was said to possess all the requisites of a bill of exchange: "Greencastle, Ind., Aug. 22d, 1870. Mr. D. M. Spurgin — Sir, please pay to Jesse McPheeters, or order, the sum of one hundred and nineteen dollars on said bill of 1% in. lum- ber, and oblige the firm of Geo. W. Hinton & Co." In Whitney v. Eliot National Bank, 137 Mass. 351, 50 Am. Rep. 316, the drafts or bills of exchange were in the ordinary form except that they contained the direction to "charge the same to account of 250 bbls. meal ex schooner Aurora Borealis." The court said: "This direction to charge the amount of the bills to a particular account, we think, does not make them payable conditionally, or out of a particular fund; they are still payable absolutely, and are negotiable, and do not con- stitute an assignment of a particular fund, or of a part of a particular fund. * * * Macleed v. Snee, 2 Str. 762; Redman v. Adams, 51 M'e. 429 ; Corbett v. Clark, 45 Wis. 403, 30 Am. Rep. 763 ; Cour- sin v. Ledlie, 31 Pa. 506 ; Spurgin v.^^McPheeters, 42 Ind. 527." The rule with regard to words which refer to the consideration is well stated in Siegel et al. v. Chicago Trust & Sav. Bank, 131 111. 569, 23 N. E. 417, 7 L. R. A. 537, 19 Am. St. Rep. 51, as follows : "The mere fact that the consideration for which a promissory note is given is recited in it, although it may appear thereby that it was given for or in consideration of an executory contract, or promise on the part of the payee, will not destroy the negotiability of the note, unless it appears through the recital that it qualifies the promise to pay, and renders it conditional or uncertain, either as tothe time of payment or the sum to be paid." The following authorities are also in point: Matthews v. Crosby, 56 N. H. 21; Shepard v. Abbott, 137 Mass. 224; Id., 179 Mass. 300, 60 N. E. 782; Schmittler v. Simon, 101 N. Y. 554, 5 N. E. 452, 54 Am. Rep. 737; Hillstrom v. Anderson, 46 Minn. 382, 49 N. W. 187 ; Bank of Kentucky v. Sanders & Wier, 3 A. K. Marsh. (Ky.) 184, 13 Am. Dec. 149 ; 4 A: & E. Enc. of Law, 89; 7 Cyc. 580. 70 FOEM AND INCEPTION (Part 1 Our negotiable instrument law (chapter 70, § 10; Gen. St. 1905, § 4543), which is merely declaratory of the common law upon the subject reads as follows: "When promise is unconditional. An un- qualified order or promise to pay is unconditional, within the mean- ing of this act, though coupled with (1) an indication of 'a particular fund out of which reimbursement is to be made, or a particular ac- count to be debited with the amount; or (2) a statement of the trans- action which gives rise to the instrument; but an order or promise to pay out of a particular fund is not unconditional." Plaintiff and defendant agree upon the abstract proposition of law involved in the controversy. Counsel for defendant concedes that an instrument, negotiable in itself, is not changed in character, or rendered nonne- gotiable "by a recital of the consideration or a direction as to how the drawee shall reimburse himself," but insists that the insertion of the words "on account of" has the same effect as the words "out of the proceeds of." The co ntroversy is thus narrowed down to wh ether the wo rds "on account of contract between you and the Sn y- der Planing MillCoT^ amount to a direction to pay out of a part icular f und, or , o n the ""other 1i fin '^j "'"'' ^^ ^f' mnsirlprprl as gimp ly inrlif-Qt- ing: .the fund from which the dra wppj.T.i ghtnerr might reimWspJiirn- s elf. Many of the cases attach but little importance to the words "ac- count of," and give the same eflfect to them as to the words "out of." 7 Cyc. 579. In the case of Pitman v. Breckenridge & Crawford, 3 Grat. (Va.) 127, cited by defendant, the phrase, "on account of brick work done," on a certain building, was held to be a direction to pay out of a particular fund. The case itself is of little value as an au- thority; it cites no cases, gives no reason, and simply holds the bill nonnegotiable. The language in Brill et al. v. Tuttle, 81 N. Y. 454, 457, 37 Am. Rep. 515 ("and charge the same to our account for la- bor and materials performed and furnished"), was held to be ambig- uous, and other circumstances were considered as controlling. The bill was held not negotiable. The following order was held not ne- gotiable, in Conroy v. Ferree, 68 Minn. 325, 71 N. W. 383, but ihe opinion merely states that the order is drawn upon a special fund without any discussion of the reasons: "Starbuck, Minn., Sept. 14, 1895. T. E. Thompson and C. L. Brevig— Pay to the order of A. G. Englund one hundred fifty dollars ($150.00) on earnings for the threshing season of 1895, whatever they may be, and charge to the account of A. H. Ferree. $150.00. Accepted Sept. 14, 1895. By C. L. Brevig." Wp arp nf fhp npininn that tlip=:p nrr|p rs cannot he rnr iytnipj^ as drawn npnn a partirnlar fiinri Beyond question, there are many au- thorities which hold similar expressions to indicate an intention to Ch. 1) rOEM OP BILL AND OF NOTE 71 charge a particular fund. See Banbury v. Lisset, 3 Str. 1211 ; Aver- ett's Adm'r v. Booker, 15 Grat. (Va.) 163, 76 Am. Dec. 203 ; Rice V. Porter's Adm'rs, 16 N. J. Law, 440 ; 7 Cyc. 578 (b). The weight of authority and reason supports the proposition that the words amount to no more than an indication of the fund from which the drawee is to reimburse himself. The words used are suhstantiallv the same as th ough the orders read '^and charge to account of con- tract _with Snyder Jr'lanmg Mill Compan y," or "credit to account of contract," etc. The $1,000 check we coQ sider4a-the-same-Iight-as the or der for which it was subs tituted. Defendant in error argues that certain collateral circumstances appearing in the evidence must be taken into consideration; among other things, the fact that the bank held these orders for a time after their execution as indicating the intention with which the orders were taken. It is argued that there being an ambiguity in the language, we must consider the construction placed upon these orders by the parties themselves. This case is here upon a transcript which, con- tains none of the evidence, merely the pleadings, findings of fact and of law, the judgment and motion for a new trial. Had the trial court rested the decision upon the existence of these outside matters the findings of fact, which are very complete, would doubtless have re- ferred to them. The conclusions of law are so framed as to leave no doubt that the court held the instruments to be nonnegotiable on ac- count of the language used in the instruments themselves. In ou r vie w they were negotiable and the language, moreover, not ev^ n anibiguous] i t tollows that defendant was not entitled' to recoup h is damages for the failure to complete th sJbsxa4^ nd the findings of th e court, therefore, require a judg ment for _plaintiff fnr_tSgarnniint- Hup upon ttie order, and the $I,0O^[rcheck. The cause will, tneretore, be reversed and remanded, with direc- tions to enter judgment in favor of plaintiff. All the Justices con- curring.^* 2* See Shepard v. Abbott, 179 Mass. 300, 60 N. E. 782 (1901) ; Waddell v. Bank, 48 Misc. Eep. 578, 97 N. Y. Supp. 305 (1905); Guaranty Trust Co. v. Hannay & Co. [1918] 2 K. B. 623 (0. A.). In Bavins v. London, etc., Banlt, [1900] 1 Q. B. 270. 275 (C. A.), the follow- ing Instrument was held not to be a check because conditional: "The Great Northern Ky. Co. "No. Accountants' drawing account. London, July 7, 1898. "The Union Bank of London, Limited, No. 2 Princes St., Mansion House, E. C. : Pay to J. Bavins J-r. and Sims the siun of 09 pounds 7 s. provided the receipt at foot hereof Is duly signed, stamped and dated. £69-7. "[Signatures.] "Received from Great Northern Ry. Co. the above named sum as per par- ticulars furnished. This receipt is not to be detached from the cheque. "[Signature] b "Dated , 189—." A. L. Smith, K J., said: "In my opinion Kenedy, J., was quite right In holding that this order was not a check within the definition given by the 72 FORM AND INCEPTION (Part 1 MANUFACTURERS' COMMERCIAL CO. v. KI.OTS THROW- ING CO. {United States Circuit Court of Appeals, Second Circuit, 1909. 170 Fed. 311, 95 C. 0. A. 203.) In Error to the Circuit Court of the United States for the Southern District of New York. NoYEs, Circuit Judge. The amended complaint states two causes of action " of which^he following is a summary of the first : (1) The defendant ^de and delivered to the Regenerated Cold Air Company this" instriTiiTi "$3,166.00/100. New York, January 15th, 1906. "Six months after date we promise to pay to the order of Regenerat- ed Cold Air Co. thirty-one hundred and sixty-six 00/100 dollars at 487 Broadway, N. Y. City, with interest at 6% per annum. Value re- ceived, subject to terms of contract between maker and payee of Oct. 25th, 1905. "No. . Due July 15th/06. Klots Throwing Co., "H. D. Klots, Prest." (2) The Regenerated Cold Air Company, for value, before maturity, indorsed, assigned, transferred, and delivered said instrument to the plaintiff, which continues to own and hold the same unpaid. Bills of Exchange Act, 1882, § 73, because it was not an unconditional order in writing for the payment of money within section 3, subsec. 1, of that act." In Nathan v. Ogdens, 93 L. T. R. (N. S.) 553 (1905), the following instru- ment was held to be an unconditional order, and to be a check: "Second and Final Bonus Distribution. "Liverpool, November 10, 1902. "The Lancashire and Yorkshire Bank, Limited: Pay Mr. H. Nathan or order one hundred and twenty-six iwunds five and five pence. Ogdens, Limited (in liquidation), "p. pro. Joseph Hood, Liquidator. "[Signed] Oswald Clement. "The receipt at back hereof must be signed, which signature will be taken as an indorsement of this check." On the back of the cheek: "November, 1902. "Received from Mr. Joseph Hood Giquldator of Ogdens, Limited), this check for £126. 5s. 5d., being ray share of the second and final bonus distribu- tlpn of the company. [Signed] H. Nathan. "H. J. Nathan." A. T. Lawrence, J., said: "I think the check was a negotiable instrument, notwithstanding the words above quoted at the foot thereof. I think the order to pay is unconditional, and that, though the words at the foot of the check are imperative In terms, they are not addressed to the bankers, and do not affect the nature of the order to them." 2 6 The part of the opinion relating to the second cause of action is omitted. Ch. 1) FORM OF BILL AND OF NOTH 73 The d efendant demur s upon the ground that sufficient facts are not stated to constitute a cause of action. The demurrer to this cause, in the opinion of the majority of the court, is not well founded. Whether the instrument in question is negotiable is not very material here. Indeed, it is not of especial im- portance whether it is, strictly speaking, a promissory note at all. It is an instrument for the payment of money for value received at a fix- ed time. It has — according to the complaint — ^been assigned for value to the plaintiff, and consequently the plaintiff has the right to recover upon it. Moreover, in suing upon the. instrument, it is not necessary to allege performance of the contract referrejrf to in it. Performance of the contract was not, either ,by the contra^ itself or by the instru- ment, made a condition precedent to the p^J^ent of the money stipu- lated in the instrument. Failure of performance in whole or in part was available, if at all, as a matter of defense or counterclaim. * * * The judgment of the Circuit Court, in so far as it sustained the de- murrer to the first cause of action, is reversed. < . f ' 7' KLOTS THROWING CO. v. MANUFACTURERS' COMMER- CIAL CO. (United States Circuit Court of Appeals, Second Circuit, 1910. 179 Fed. 813, 103 C. C. A. 305, 30 L. R. A. [N. Si] 40.) In Error to the Circuit Court of the United States for the South- em District of New York. Action by the Manufacturers* Commercial Company against the Klots Throwing Company. Judgment for plaintiff, and defendant brings error. Reversed. See, also, 170 Fed. 311, 95 C. C. A. 203. Writ of error to review a judgment entered upon a verdict directed by the court in jtatvorjoFTIie 'defendant "m error who. .was the plaintiff below. IrTlthe following stateinent and opinion the parties are desig- nated as in the Circuit Court. The action was brought to recover upon a note of which the follow- ing is a copy: "$3,166.00. New York, January 15th, 1906. "Six months after date we promise to pay to the order of Regenerat- ed Cold Air Co., thirty-one hundred and sixty-six ""/loo dollars at 487 Broadway, N. Y. City, with interest at 6 ^ per annum. "Value received, subject to terms of contract between maker and payee of Oct. 25th, 1905. "No. . Due July 15th, '06. Klots Throwing Co., "H. D. Klots, Prest." 74 FORM AND INCEPTION (Part 1 The complaint alleged that the note had been indorsed and assigned by said Regenerated Cold Air Company to the plaintiff which was the lawful owner and holder thereof. The answer alleged, among other things, that said Regenerated Cold Air Company had failed to per- form its part of the agreement referred to in the note, and set up by way of counterclaim a demand for damages for such nonperformance. Upon the trial the court ruled that the note was a negotiable instru- ment, basing its decision upon the opinion of this court reported in 170 Fed. 311, 95 C. C. A. 203, reversing a judgment in the case sustaining a demurrer to the complaint. Consequently the court further ruled that the defendant was not entitled to establish defenses available as against the payee of the note, and directed a verdict for the full amount thereof. NoYEs, Circuit Judge (after stating the facts as above). The trial judge misapprehended our former opinion in this case. We did not hold that the note in question was a negotiable note. We merely held that whether it was negotiable or not its indorsement and assignment gave the plaintiff the right to recover thereon. If the note were ne- gotiable the plaintiff would recover as indorsee; if nonnegotiable, as assignee. It was unnecessary to determine the question of negotiabil- ity. The case as now presented turns upon this question of negotiabil- ity. If the note were negotiable the trial court properly directed a ver- dict for the indorsee, for the defendant was not entitled to establish against it the defenses offered. If, on the other hand, the note were nonnegotiable, the action of the court was manifestly erroneous. In examining the question of negotiability, it is important to recog- nize at the outset the distinction between it and any question of plead- ing. The plaintiff throughout its brief insists that because a note con- tains no conditions precedent, performance of which must be alleged in suing upon it, it is a negotiable instrument. But this conclusion does not follow. The conclusion which does follow is that the plaintiff, upon proving the note, is entitled to recover the full amount thereof in the absence of defenses established by the defendant. Thus, in our (former opinion, we said that performance of the contract referred to jin the note was not made a condition precedent to the payment thereof ; that, as a consequence, it was unnecessary to plead such performance, and that nonperformance could be set up, if at all, only by way of de- fense. But, as already pointed out, we did not hold that, on account of the absence of conditions precederit, the note was a negotiable instru- ment. It is elementary that a promise to pay must be absolute and uncondi- tional to make the instrument containing it a negotiable note. If pay- ment be dependent upon a condition or contingency, the instrument is not negotiable. In many cases the contingency is expressed in the form of a condition precedent. But we do not think it necessary th^t Ch. 1) FORM OP BILL AND OF NOTE [75 it should be so expressed. In our opinion when a note contains special stipulations and its payment is subject to contingencies, it fails to possess the character of a negotiable instrument and is subject in the hands of an assignee to any defense which would be available if it were still held by the original payee. See McClelland v. Norfolk Southern R. R. Co., 110 N. Y. 469, 18 N. E. 237, 1 h. R. A. 299, 6 Am. St. Rep. 397. And, as bearing especially upon the facts in this case, we think that whenever. the payment of a note is expressly jnade subject to^e equities growing out. of , and_c[efenses based~upon, an existin^^ or con- temporaneous agreement, a person taking such 'note holds it subject to sticE equities and defenses." '"""' ' — The distinction between conditions precedent, performance of which must be alleged in bringing the action, and contingencies and equities ^ which must be set up by way of defense and which yet serve to qualify < the obligation to pay the note and deprive it of negotiability, may be shown by illustration. Thus, let us suppose that the note in suit con- tained the following stipulation : "This note in the hands of all holders is subject to all defenses which would be available to the maker based upon the contract between the maker and the payee of October, 1905, in the same manner and to the same extent as if it were held by the payee." Such a provision would not constitute a condition precedent. It would not be necessary to plead performance of the contract in a suit upon the note. And yet it could hardly be claimed that an assignment of the note would shut out the defenses which the parties had stipu- lated should exist in the case of an assignment. Any such claim, if sustained, would deprive the parties of their right to make lawful con- tracts. The obligation to pay in such a case as this would be qualified and conditional, but would not depend upon the fulfillment of any condition precedent. The real inquiry in the present case is whether the promise in- the > note should be treated as the substantial equivalent of the suppositious promise we have examined. Manifestly if the provision "subject to terms of contract between maker and payee" constitutes merely a ref- ■• erence to the agreement or a statement of the consideration for the note, it does not impair the negotiability of the latter. So, if it merely constitutes notice of the existence of the contract and not of the breach \ thereof, it would not affect negotiabihty. But the evident purpose of the parties to this note was to go further and make it subject to and to ' impress upon it the defenses to which the maker would be entitled un- der the contract. The assignee took it in that condition. To deprive the maker of those defenses, upon the ground of the negotiability of the note, would work great injustice. And we think that we are not required to reach such result. As between the maker and the payee of a note, payment is, as a matter of law, subject to existing equities and 76 FORM AND INCEPTION (Part 1 defenses even in the absence of any statement to that effect in the note. It is not too much to hold that when a promise is expressly limited by a provision in the note itself, assignees should take it subject to such limitation. In our opinion, the special stipulation in the present note limits and qualifies the obligation to pay so that it is not absolute, but is a prima facie obligation subject to be defeated by the maker's de- fenses. Authorities cited by the plaintiff as well as by the defendant support these views. Thus in Jewett v. Lyon, 3 G. Greene (Iowa), 577, re- ferred to by the plaintiff, it was said in a suit by the assignee of a promissory note containing a stipulation for a deduction from the amount thereof in a certain contingency : "The obligation to pay is in all respects a promissory note, and the stipulations attached to it do not change in any respect its character, or weaken the liability of the maker. It only provides for a certain contingency, the onus to estab- lish which lies upon the defendant. Upon the introduction of this note in evidence, the plaintiffs made out a prima facie case, and in the ab- sence of any rebutting testimony on the part of the defendant, the plaintiffs were entitled to recover, and hence the court did not err in overruling the motion for a nonsuit." So, in Gushing v. Field, 70 Me. 50, 35 Am. Rep. 293, it was held that a note payable to order on the face of which was the following indorse- ment: "This note is subject to a contract made November 13, 1874" — was not negotiable, and that an assignee took it subject to all the equi- ties between the original parties. In American Exchange Bank v. Blanchard, 7 Allen (Mass.) 333, an instrument containing a promise to pay a stipulated sum at a fixed time "subject to the policy" was held — in a suit by the indorsee — not to be a negotiable promissory note because the promise was not absolute. The court said: "Thus interpreted, it is too plain for discussion that the promise is in its nature contingent, and dependent for its fulfillment on other stipulations than those which are inserted in the body of the contract. To determine whether at its maturity any money would be- come due upon it, it would be necessary to have recourse to the policy therein referred to, and to ascertain whether any loss had occurred which would constitute a valid claim against the company in favor of the promisors, and operate as payment or set-off in whole or in part for tlie amount which the defendants had agreed by their promise to pay to the company." In McComas v. Haas, 107 Ind. 512, 518, 8 N. E. 579, 582, the note contained the following clause : "This note is given in consideration of, and is subject to, one certain contract, etc.," and the court said: "Although the note in suit was, by its terms, payable at a bank in this state, with the clause or condition quoted on its face, it was not nego tiable as an inland bill of exchange and was not governed by the law Ch. 1) FORM OF BILL AND OK NOTE 77 merchant; but the appellant, as the assignee thereof before maturity, took such note subject to all the equities existing between the appellee as its maker, and S. B. J. Bryant as the payee and assignor thereof." In Dilley v. Van Wie, 6 Wis. 209,- 212, a note contained the follow- ing provision: "Subject to the provisions contained in an agreement this day made between said Carter and myself." In a suit by the in- dorsee the court said: "The instrument in writing on which judgment was rendered is not a promissory note. Its payment is made subject to a contingency, or rather to the equities between the parties growing out of a contemporaneous agreement between the same parties. This is expressed upon the face of the (so-called) note, and deprives it of its commercial character." In Bringham v. Leighty, 61 Ind. 524, a note contained the following provisions: "This note was given for purchase money on said estate. If title defective note void." In an action on the note by an indorsee, it was held that it was not necessary to allege in the complaint that the title to the real estate referred to was not defective ; the subject of title in such connection being entirely a matter of defense. Upon principle and upon what we regard as the weight of authority, we reach the conclusion that the note in question was not negotiable, and that the trial court erred in its rulings. The judgment of the Circuit Court is reversed. SNELLING STATE BANK v. CLASEN. (Supreme Court of Minnesota, 1916. 132 Minn. 404, 157 N. W. 643, 6 A. L. R. 1663.) Action by the Snelling State Bank against Mathias Clasen. From an order denying a new trial, defendant appeals. Affirmed.'" DiBELL, C. Action upon a promissory note. The court dirgcted a ver dict for the plainti!F r~TRe" def endanFappeals from the order deny- ing "Eiilnoti^for a new trial. ~ ^ ' ■ ' ' The note was made by the defendant Clasen on February 7, 1913, to one Harris. Harris indorsed it in blank. It was delivered by the holder, one McGray, who received it from Harris, to the plaintiff, bank as collateral security to a note then owing to the bank and as col- lateral security for future advances. McGray did not indorse it. On.' the back of the note, and above the. indorsement of Harris, appear the words "as per contract." They were put on the note at the time of its execution. This note was one of four notes of equal amount given by 2 8 Part of tlie opinion is omitted. 78 FORM AND INCEPTION (Part 1 Clasen to Harris as a part of the consideration of a written contract for the sale of lands in British Columbia. On the same day another agreement in writing was made by Clasen and Harris, providing, in effect, that if upon inspection Clasen was not satisfied with the lands, or with other lands shown him, Harris would return the notes and pay back the cash payment made. Afterwards Clasen demanded the return of the notes, pursuant to this agreement, and Harris failed to return them. The sale contract accompanied the note at the time McGray gave it to the bank. The other agreement did not. 1. Under our decisions the indorsee of negotiable paper, taken as collateral security for an antecedent debt, is a purchaser for value, and has such title as a purchaser for a consideration paid at the time. Rose- mond V. Graham, 54 Minn. 323, 56 N. W. 38, 40 Am. St. Rep. 336 ; German-American State Bank v. Lyons, 127 Minn. 390, 149 N. W. 658. 2. The presence of the words "as per contract" on the back of the note did not affect its negotiability, using the word "negotiability" in its large sense as including the passing of title free of equities in favor of the maker and against the payee, as well as the transfer of title by indorsement ; that is, the right of a bona fide purchaser for value before ■maturity and in due course of business was not affected. It is essential to the negotiability of an instrument that the promise be to pay a definite sum in money, absolutely and not contingently, and generally and not out of a particular fund. Hillstrom v. Anderson, 46 Minn. 382, 49 N. W. 187. A recital of the consideration does not destroy negotiability. Wright v. Traver, 73 Mich. 493, 41 N. W. 517, 3 h. R. A. 50; Clanin v. Esterly, etc., Co., 118 Ind. 372, 21 N. E. 35, 3 E. R. A. 863 ; Hillstrom v. Anderson, 46 Minn. 382, 49 N. W. 187 ; 7 Cyc. 580. In Taylor v. Curry, 109 Mass. 36, 12 Am. Rep. 661, the words "on policy No. 33,386," written on the face of the note, were held not to affect its negotiability. To the same effect are Union Ins. Co. v. Greenleaf, 64 Me. 123; Bresee v. Crumpton, 121 N. C. 122, 28 S. E. 351 ; Kirk v. Dodge, etc., Ins. Co., 39 Wis. 138, 20 Am. Rep. 39. In First Nat. Bank v. Lightner, 74 Kan. 736, 88 Pac. 59, 8 L. R. A. (N. S.) 231, 118 Am. St. Rep. 353, 11 Ann. Cas. 596, the words "on account of contract," written on the face of the note, were held not to effect negotiability. We do not find a case like the one before us, but the conclusion we reach is right. 3. The words quoted, however, are not to be disregarded. The pur- chaser cannot overlook them and then claim that he had no notice of what an observance of them and fair inquiry would disclose. The sale contract accompanied the note and went to the bank. The bank knew its contents. It appeared from it that the note was one of four notes given upon the purchase of the British Columbia lands. Nothing in CJl. 1) FORM OF BILL AND OF NOTE 79 it affected Clasen's liability on the note. The agreement relating to the return of the notes did not go to the bank, and it was not informed of it. Nothing in the situation suggested further, inquiry, and it was not chargeable with notice of the agreement for a return of the notes. * * * Affirmed." (II) As TO Certainty AYREY V. FEAMSIDES. (Court of Exchequer, 1838. 4 Mees. & W. 168.) Debt OTLan-Jastrument (declared- on- as a-pF©miasory note) whereby the"c[efendants jointly and separately promised to gay to the plaintiffs, or order, the sum of £13. on demand, for value received, with interest at £5. per cent., "and all fines according to rule." There was also a count on an accounT state's^ i'tie deteiiaant~pteaded to the first count, payment; to the second, nunquam indebitatus ; and at the trial, be- fore the undersheriff of Yorkshire, the plaintiff had a general' verdict. W. H. Watson having obtained a rule nisi^ to_arTest the judgment, on the ground that the instrument declared on could not be considered as a promissory note within the statute, but only as an agreement, for which no consideration was shown in the declaration. Wightman showed cause. The words, "and_all fines according to rule," are altogether insensible, an3~may be rejected as surplusage; th'eirjptes£ncePtlieFefer€jldofiS not vitiate'tKe instrument, which, in_all oth er respects , is a complete promissory note. It was certainly held in Smith V. Nightinga[e7~2"SFark. N. P. 375 (which appears to be the nearest case to the present), that an instrument whereby the party promised to pay a sum certain, "and also all other sums that might be due," was not a promissory note within the statute. But there, the last words, although not capable of any definite construction, were not so insensible as that they could be rejected as surplusage, since they 27 "The note sued on contained the following recital: 'This is one of a series of notes of the same tenor and of even date herewith, said series repre- senting the balance of purchase money for a tract of land on No. 82 Kice Street, Atlanta, Ga., as fully descrihed in a bond for title of even date from payee to maker thereof, which bond for, title Is hereby referred to and made a part hereof ; and all makers hereof and indorsers and securities hereon are hereby firmly bound by all the conditions and agreements of said bond.' This was enough to put the purchaser of the note upon such inquiry as would have led him' to knowledge of the fact that the note had been fully paid off and satisfied. ♦ ♦ ♦ " Per curiam, Glover v. Wesley, 20 Ga. App. 814, 93 S. E. 513 (1917). 80 FORM AND INCEPTION (Part 1 showed that some more money was due, only they did not specify the amount with sufficient precision. But here, the words do not import any promise to pay money ; and there is nothing to show what they have reference to, or what is the nature of the hnes spoken of. Be- sides, the instrument must be either a promissory note or an agree- ment at common law; and it clearly is not the latter: for the words in question have no intelligible meaning in themselves, neither could evidence be admitted to explain them aliunde, if they were declared on as a contract. Watson in support of the rule. It does not follow that, because the precise amount or even nature of the fines referred to is not specified, the words can be rejected as surplusage. If any construction can by possibility be put upon them which can make them sensible, they can- not be rejected; and it is plain that they may refer to money due for pecuniary forfeitures, as, for instance, for violation of the rules of a benefit society, of which the parties were members. Smith v. Night- ingale is directly in point. There Lord Ellenborough says: "The in- strument is too indefinite to be considered as a promissory note, for it contains a promise to pay interest for a sum not specified, and no otherwise ascertained than by reference to the defendant's books; and, since the whole constitutes one entire promise, it cannot be di- vided into parts." So here, the instrument contains a promise to pay some amount not specified, and not to be ascertained but by extrinsic evidence. Parke, B. This instrument being declared on as a promissory note, the question ij,. whether the words, "and all fines according to rule," can be rejected as being altogether insensible, and therefore mere sur- plusage : and I think they cannot. It is quite possible that they have a meaning, and may import that certain pecuniary fines or forfeitures are to be paid by the defendants; and if so, this is certainly no prom- issory note within^ the statute, but is a specific agreement to do cer- tain things, the consideration for doing which not being.^teiea, the declaration is clearly bad. The judgment will not, however, be ar- rested altogether but on the authority of Leach v. Thomas, 2 Mees. & W. 427, which was confirmed this morning by the whole court in the case of Corner v. Shew, 4 Mees. & W. 163, a venire de novo must be awarded. Rule accordingly. LOWE V. BLISS. (Supreme Court of Illinois, 1860. 24 111. 168, 76 Am. Dec. 742.) This was an action in assumpsit. Declaration filed December 4th. Counts: (1) On a promissory note of plaintiff in error (defendant below), dated July 28, 1858, made at New York, promising "to pay Ch. 1) FORM OP BILL AND OP NOTE 81 Geo. Bliss & Co." (defendants in error), "plaintiffs, the sum of two hundred and twenty-two and *^/ioo dollars, with the current rate of ex- change on Nqw York, for value received, in ninety days after the date thereof," alleging nonpayment. (2) The common counts for goods sold, money lent, had and received, and an account stated. With declaration, copy of note sued on, as follows: "232.47. • New York, July 28, 1858. "Ninety days after date, I, the subscriber, of Aroma, county of Kankakee, state of Illinois, promise to pay to the order of George Bliss & Co., two hundred twenty-two and *'/ioo dollars, at the Kan- kakee Bank, Kankakee, 111., value received, with current rate of ex- change on New York. David N. Lowe." Defendant pleaded the general issue. The issue was tried by the court, jury waived, and finding for plaintiffs below, for $227.2?. Motion for new trial overruled, and judgment for verdict and costs, and 30 days given to file bill of exceptions.^* Walker, J. * * * The question is then presented whether this instrument was admissible under the common counts without proving a consideration. Promissory notes, bills of exchange, and sealed in- struments, all import a consideration, and when they form the basis of ■ an action, a consideration need neither be averred nor proved, but it is not so with other instruments. This instrument is not under seal, nor is it a bill of exchange. Was it a promissory note? That is defined to be "a promise or agreement in writing to pay a speci- fied sum, at a time therein limited, or on demand, or at sight, to a person therein named, or to hi& order, or to the bearer." Chit, on Bills, 516. Bayley on Bills, p. 1, defines a promissory note to be a written promise to pay money absolutely and at all events. And in the application of the rule the doctrine seems to be adhered to with entire unanimity, that a note or bill must be for a specific sum, or at least for a sum that may be ascertained by computation, independent of all extrinsic evidence. If an instrument be for a specified sum of money, and also for the payment of something else, the value of which is not ascertained, but depends upon extrinsic evidence, it would not be a bill or note. Had this promise been for the sum of money named, and for the value of four days' labor, no one would have supposed it to be a promissory note, because proof would have to be resorted to for the purpose of ascertaining the value of the labor, and consequently it would not be for a specified sum of money. Such a promise leaves the sum agreed to be paid wholly uncertain. We know that the current rate of exchange between commercial points is fluctuating, and subject to constant change, depending upon the balance of trade and other causes incident thereto. It is as sub- 2'8 The statement Is abridged, and a part of the opinion omitted- SM.& M.B.& N.(2d Ed.)— 6 82 FORM AND INCEPTION (Part 1 ject to fluctuation as the value of labor or the price of grain, cattle, or other articles of property. And it has never been held that a court may judicially fix the price of any of those commodities independent of proof, and yet to do so, would be no more unreasonable than to take judicial notice of the rate of exchange between different com- mercial places. We are aware of no decision that has ever held that a court may take notice of such facts, nor has any decision been re- ferred to which holds such an instrument to be a promissory note. Nor can it be successfully urged that custom has changed the law and rendered such instruments valid promissory notes. These in- struments owe their negotiability and evidence of the receipt of a consideration to the operation of the statute, and not to .the common law. Prior to the adoption of the statute of Anne, in^ Great Britain, and our statute regulating negotiable instruments, they, neither in that country nor in this state, possessed euch qualities. And under the British statute they must be for the payment of a certain speci- fied sum of money, and so under our statute, and not mere mutual agreements or covenants to have that effect. Unless the instrument declared upon possesses all the qualities of a bill or note, or be under seal, if declared upon specially, a con- sideration must be averred and proved, or if offered under the com- mon counts, it roust be proved, to authorize a recovery. This in- strument being a simple contract not under seal, and neither a note or bill, is subject to all the rules which are applied to other simple contracts. When it was offered under the common counts, as it imports no consideration, to authorize a recovery, a sufficient consider- ation should have been proved. When offered under the common counts, it dispensed with no proof that would have been required under a properly framed special count. It, unlike a note or bill, af- forded no evidence of either money lent, advanced, or had and re- ceived to the use of the plaintiff. * * * Judgment reversed. GAAR v. LOUISVILLE BANKING CO. (Court of Appeals of Kentucky, 1875. 11 Bush, 180, 21 Am. Rep. 209.) This suit was brought in the Louisville chancery court by appellee against appellants and others on this instrument: "Louisville, Ky., January 27, 1873. "Four months after date pay to the order of J. M. Bryant ninety- four hundred and twenty and four hundredths dollars, value re- ceived, negotiable and payable at the office of the Louisville Bank- ing Company. "$9,420.04. [Signed] W. H. Beynroth." Ch. 1) FORM OF, BILL AND OF NOTE S3 Addressed to Morris, Southwick & Co., Louisville, Ky., accepted by them, and indorsed by J. M. Bryant, H. S. Gaar, P. G. Kelsey, and J. T. Morris. On the back of that paper this agreement appears : "The drawers, indorsers, and acceptors of this bill agree to pay a reasonable attorney's fee to any holder thereof, if the same shall hereafter be sued upon, and also pay interest at the rate of ten pei' cent, per annum after maturity until paid, and all are equally bound as drawers, indorsers, as if this bill were in the form of a joint note. "[Signed] Morris, Southwick & Co. "W. H. Beynroth. "J. M. Bryant. "H. S. Gaar." The first paragraph of the petition declared on it as a bill of ex-- change. In the third paragraph, the writing indorsed on the back of the bill was set up, and judgment was prayed thereon for 10 per cent, inter- est on the amount of the bill from its maturity until paid, and for $500 as an attorney's fee. Gaar and Bryant demurred to the peti- tion; and their demurrer having been overruled they answered, and a trial was had, which resulted in a verdict and judgment against them for the amount of the bill, with interest thereon at 10 per cent, per annum from maturity until paid, and from that judgment they have appealed,''* CoFER, J. The ground of the demurrer is, that although the writ- ing declared on in the first paragraph when taken by itself is a bill of exchange, the writing indorsed on the back thereof, in which the signers agreed to pay an attorney's fee in case the bill should be sued on, destroyed its negotiability. This argument is based on the fact that the amount of the attorney's fee agreed to be paid was not as- certained, and hence it is contended that the bill was for an uncertain amount. A bill of exchange has been defined to be a written order or request by one person to another for the payment of a sum of money, ab- solutely, and at all events; and as bills are designed to take the place and perform the office of money, there must be no chance of mistake as to the amount of money of which they thus take the place. On this point therefore the adjudged cases are quite -stringent. The sum must be stated definitely, and must not be connected with any indefinite or uncertain sum. 1 Parsons on Notes and Bills, 37; Story on Bills, §§ 43-45. It has accordingly been held that an instrument in the form of a note promising to pay a specified sum at a designated place on a named day, "current rate of exchange added," was not a note, be- cause the current rate of exchange was unascertained and uncertain. 2» The statement of facts is abridged from the statement of Gofer, J. Part of the opinion is omitted. 84 FOKM AND INCEPTION (Part 1 Atkinson v. Manks, 1 Cow. (N. Y.) 707. And in Davis v. Wilkin- son, 10 Adol. & E. 98, it was held that the following instrument was not a note: "I agree to pay to D. i695. at four installments," the first on, etc., "being iSOO.," and so on, specifying three others amount- ing in the aggregate to £600. "The remaining £95. to go as a set-off for an order of R. to T., and the remainder of his debt owing from D. to him." In Cushman v. Haynes, 20 Pick. (Mass.) 133, it was held that an acceptance for an uncertain amount — to wit, "the balance of goods not then sold" — was not negotiable. Other cases to the same effect might be cited, but it is deemed un- necessary, as the rule of the law merchant undoubtedly is that it is ■an indispensable quality of a note or bill that it shall be for a definite sum in order that it may be negotiable. But it by no means follows from this conclusion that the negotia- bility of the paper sued on was destroyed by the agreement indorsed thereon that the parties would pay an attorney's fee if the debt had to be sued for. In the cases cited, and others referred to by counsel, the amount to be paid at the maturity of the note or bill was uncertain, and it was that fact which destroyed their negotiability; but in this case the amount to be paid at maturity was fixed and certain, and it was only in the event that the bill was not paid when due that any un- certainty arose. The reason for the rule that the amount to be paid must be fixed and certain is that the paper is to become a substitute for money, and this it can not be unless it can be ascertained from it exactly how much money it represents. As long therefore as it remains a substitute for money the amount which it entitles the holder to de- mand must be fixed and certain ; but when it is past due it ceases to have that peculiar quality denominated negotiability, or to per- form the office of money; and hence anything which only renders its amount uncertain after it has ceased to be a substitute for money, but which in no wise affected it until after it had performed its of- fice, can not prevent its becoming negotiable paper. Until the paper in question matured the amount due upon it was fixed and certain, and it might therefore take the place of money ; when it became overdue, that fact put an end to its career, and then for the first time the amount to which the holder was entitled became uncertain, or rather might be made uncertain by bringing an action on the bill against the parties who signed the agreement indorsed thereon. We are therefore of the opinion that the demurrer was properly overruled."* * * * 80 Contra : First Bank v. Larsen, 60 Wis. 206, 19 N. W. 67, 50 Am. Rep. 365 (1884); American Machinery Co. v. Druge Bros., 82 Vt 476, 74 Atl. 84 (1909). Ch. 1) FORM OF BILL AND OF NOTE 85 The act of March 14, 1871, which made it lawful to contract in writing for any rate of interest not exceeding 10 per cent., was in force when the bill sued on was made. A part o-f the fifth section of that act, which is nearly the same as section 4 of article 2 of chap- ter 60 of the General Statutes, is in these words: "If any rate of interest exceeding the rate authorized by the first section of this act (ten per cent.) shall be charged the whole interest shall be forfeited." It is claimed by the appellants that as the bill was to bear 10 per cent, interest after maturity, and in addition thereto the bank took their obligation to pay an attorney's fee in the event suit was brought on the bill, the bank contracted for a rate of interest exceeding 10 per cent., and thereby forfeited all right to any interest, and that the judgment for interest is therefore erroneous. Waiving the question whether the repeal of the statute then in force operated to relieve the appellant from the forfeiture denounced by that section, we are of the opinion no such forfeiture was incurred. This objection to the judgment raises the question whether the agreement to pay an attorney's fee can be regarded as an agreement to pay a rate of interest exceeding ten per cent. Interest is the pre- mium allowed by law for the use of money, while usury is the taking of more for the use of money than the law allows. If therefore the agreement to pay an attorney's fee in case the bill had to be sued on can be regarded as the taking or contracting for more than 10 per cent, for the use of the money loaned on the bill it is usurious, and the bank thereby forfeited its right to any interest. But we do not regard such a contract as an agreement to pay usury ; it was an agreement to pay a penalty in default of payment of principal and lawful interest at maturity, or before suit. Whenever the debtor, by the terms of his contract, can avoid the payment of a larger by the payment of a smaller sum- at an earlier day the contract is not usurious, but the difference between the two sums is a penalty. Blydenburg' on Usury, p. 39 ; Cutlen v. How, 8 Mass. 257 ; Moore V. Hylton, 16 N. C. 429; Tyler on Usury, 97; Jordan v. Lewis, 2 Stew. (Ala.) 436. But when he cannot discharge his contract according to its terms at maturity by the payment of the debt and lawful interest the con- tract is usurious. In this case the contract might have been discharged according to its terms at any time before suit was commenced by the payment of the principal and lawful interest, and it results therefore that the forfeiture denounced by the statute was not incurred. We have been referred by counsel to the case of Thomasson v. Townsend, 10 Bush, 114, as holding that such an agreement is usur- ious. Speaking of the agreement to pay an attorney's fee in the event the mortgage, was foreclosed, the court said: "It is in the nature of a penalty to be imposed in case the mortgagor should fail 86 FORM AND INCEPTION (Part 1 to pay off and satisfy the mortgage debt before judgment." It was also said that "such contracts are in their nature usurious." But when the whole opinion is considered together it is clear that the court did not regard the contract as usurious in fact or in law, but as a penalty merely; for it is said that, while if the debtor resists its enforcement, the court will relieve against it as a penalty ; yet "when a judgment is rendered by default in a case like this, upon a petition setting out the contract in accordance with the rules of pleading, the defendant will be without remedy. This is the extent of the rule intimated in the opinion in Smith v. Kahn & Will (MS. opinion, November 7, 1871). In this case the defendant was in court resist- ing the enforcement of the penalty." The court not only treated it as a penalty and called it by that name, but said if judgment was allowed to go by default upon appro- priate pleading the defendant would be without remedy, which can never be the case when the record shows that judgment has been ren- dered for usury. There is therefore nothing in the opinion in that case inconsistent with the conclusion reached in this case, but on the contrary that opinion is an authority in support of it.'^ * * * Judgment affirmed. SMITH V. CRANE. (Supreme C!ourt of Minnesota, 1885. ' 33 Minn. 144, 22 N. W. 633, 53 Am. Kep. 20.) Plaintiff, as indorsee for value and before maturity, brought this action in the municipal court of Mankato upon the promissory note set out in the opinion. The answer denies that the note is negotiable, denies that plaintiff is the holder and owner of the note, denies that it was transferred before maturity, alleges that it was given, with two other notes, in payment for a harvester and binder which was accompanied with a written warranty, alleges a breach of the war- ranty and a return of the harvester and binder in accordance with the provisions of the warranty, and asks that the damages for the breach be set off against the note. * * * The court also charged, against plaintiff's objection, that "the in- strument offered in evidence (the note in suit) is not a promissory note, but is subject to all equities existing between the defendant and D. M. Osborne & Co., whether it was assigned before or after maturity." Defendant had a verdict, and plaintiff appeals from an order refusing a new trial.'' 31 Contra: First Bank v. Larsen, supra; Young v. Bank (Tex. CJiv. App.) 117 S. W. 476 (1909). Bfit the plaintifC must prove the amount of his coun- sel fees. s= The statement Is abridged, and a part of the opinion omitted. Ch. 1) FORM OF BILL AND OF NOTE 87 Berry, J. "$100. Good Thunder, July 24, 1882. For value re- ceived on or before the first day of January, 1884, I, or we, or either of us, promise to pay to the order of D. M. Osborne & Co. the sum of one hundred dollars, at the office of Gebhard & Moore, in Man- kato, with interest at ten per cent, per annum from date until paid; seven, if paid when due. W. J. B. Crane." A negotiable promissory note must be certain as to amount. Jones v. Radatz, 27 Minn. 240, 6 N. W. 800. It is so certain when the sum to become absolutely payable upon it at any given time is ascertainable upon its face. 1 Daniel, Neg. Inst. § 53; Towne v. Rice, 122 Mass. 67; Jones v. Radatz, supra. The defendant's position is that the foregoing instrument is ren- dered uncertain as to amount by the interest clause, and therefore is not a negotiable promissory note. As to the legal effect of such a clause the authorities disagree. Some hold that the contract reserves the higher rate of interest, with a provision for its abatement, upon a condition to be performed, and that, therefore, the difference between the two rates is not a penalty, but the contract is to be enforced ac- cording to its literal terms. The cases holding this view rest upon Nicholls V. Maynard, 3 Atk. 519. See Walmesley v. Booth, Barn. Ch. 478, 481; Bonafous v. Rybot, 3 Burr. 1370; Waller v. Long^ Munf. (Va.) 71. Other authorities hold that the clause is the sam^]3h effect as if it had reserved the lower rate of interest, with a provisic^vthat if the indebtedness is not paid at maturity, interest shall run at a higher rate. Seton v. Slade, 7 Ves. 265. And see Stanhope v. Man- ners, 2 Eden, 197; Brockway v. Clark, 6 Ohio, 45; Longworth v. Askren, 15 Ohio St. 370; Brown v. Barkham, 1 P. Wms. 652. If this be the true construction of the clause, it is generally agreed that the difference between the two rates is to be treated as a penalty. Tal- cott V. Marston, 3 Minn. 339 (Gil. 238) ; Newell v. Houlton, 22 Minn. 19 ; and cases last cited. In our opinion the view taken' by the authorities last mentioned, as to the legal effect of the interest clause under consideration, is the more sensible, and most in accordance with what would seem to be the real object of the parties to the contract. What the payee really wants is his money at the due date of the contract, and to secure this he holds an increase of the rate of interest over the debtor's head. In other words, the increase is a penalty for the debtor's delinquency. Treating the increase as a penalty, it follows, under the decisions of the court before cited, that the note in suit will in law draw the same rate of interest before as after maturity — that is to say, 7 per cent, —and that, therefore (whatever might be the case if the interest clause were upheld according to its literal terms), the sum absolutely payable upon the instrument at any given time is thus made certain as the principal, and 7 per cent, interest. ♦ * * Order reversed, and new trial granted. 88 FORM AND INCEPTION (Part 1 COOKE V. COLEHAN. (Court of King's Bench, 1744. 2 Str. 1217.) Oil error from C. B. a n ote to pay to A. or order, six we eks after fhp fj patli r. f th° dpfpTi-^lnnt'r?^*^^^^'- ^"P rprpJvpH, wasTeM to be a neg otiable note w ithin the s tatute 3 A npe. c. 9, for there is no_con- ti figen^ , wher eby^ ]tjaay--iiey er become payab le^-JbuLiti s only unc er- t.a'Tfr-as-j535eTimer which is the case of all bills payable at so m any day^jiter- sight. In Communi Banco it held three arguments; and was held good upon a solemn resolution delivered by Chief Justice Wiw,ES. EVANS V. UNDERWOOD. (Court of King's Bench, 1749. 1 Wils. 262.) Action upon a promissory note brought by Evans the indorsee against Underwood the drawer: The note set out in the declara- tion is, "I promise to pay to George Pratt, or order, eight pounds, upon the receipt of his the said George Pratt's wages due from his majesty's ship the Suffolk, it being in full for his wages and prize- money, and short allowance money for the said ship;" the indorse- ment by Pratt is set out, and it is averred that the defendant re- ceived the said wages from the said ship. Upon non assumpsit pleaded, the jury gave a verdict 'for the plaintiflf ; and now it was moved in. arrest of judgment, that this note was not negotiable within St. 4 & 5 Anne, c. 9. Mr. Hume Campbell for the plaintiff, to show this was a nego- tiable note cited several cases, and principally relied upon Andrew s V. Frank lin, which was in Hilary term 3 Geo. I in thi? court; case upon a promissory note to pay money within two months after the ship called the Devonshire should be paid off, and the plaintiff de- clared upon the statute; it was there insisted that the note was not negotiable, the promise to pay being upon a contingency which might ^ever happen. Sed Per Curiam. T he paying off the ship was m oral- ly certain, and the note is wit hin the statute and neq^otiab le. And in ColeHairv: Cuuke, Mid rTS Geo. 11 'in C. B., J. Cooke on 27th of May, 1732, made a promissory note, whereby he promised to pay to H. Denham, or order, £150 six weeks after the death of his father J. Cooke, Esq., for value received, which was indorsed to Colehan ; J. Cooke the father died April 2, 1741. And the indorsee brought an action, and had judgment in the Common Pleas, that the note was negotiable after three arguments for their was no contingency whereby the note might never become payable, and was only uncertain as to the time; and the judgment of the C. B. was afiSrmed upon a writ of error in B. R. Mich, term, 18 Geo. II, and the court said that no certain Ch.'l) FORM OF BILL AND OF NOTE 89 precise form of words are necessary to be used in a bill of exchange or note of hapd, and that "I promise to be accountable to A. or his order, for £100 value received," would.be a good negotiable promissory note. On the other side it was said by Mr. Ford for the defendant, that the case of Andrews and Franklyn was never determined, and that in the case of Colehan v. Cooke, the payment was certain in all events, for the father must die some time or other, but it was uncertain whether the ship Suffolk would ever be paid off or not. Lee, C. J. The case of Andrews v. Franklyn is very like the present; we will look into that case and see whether it was deter- mined ; the court inclined to give judgment for the plaintiff, and after looking into the case cited, did so, ut audivi." JONES V. EISLER. (Supreme Court of' Kansas, 1865. 3 Kan. 134.) This action was brought September 11, 1863, in Franklin county district court, on a note, as follows; "$237.37. Ottawa Creek, i April 20th, 1860. For value received (in cutting stone) by Gouliep i Anders, I promise to pay when I receive it from government for losses I sustained in August, 1866, or as soon as otherwise convenient, the sum of two hundred and thirty-seven dollars and thirty-seven cents. ) John T. Jones" — which note bore the following indorsements, viz.: "April 9, 1860. Received of the within note twenty dollars." "June 18, 1860. Received of the within five dollars." "Nov. 10th. Re- ceived of the within two dollars and fifty cents"— each signed. The 83 "There is another Interesting question In the case, a brief discussion of which may be of service In the conduct of the new trial which we find it necessary to order. Under the decision of the Supreme Court of Illinois in Kelley v. Hemmlngway, 13 111. 604, it would seem that the Instrument upon which the present suit was brought Is not a promissory note at all. The instrument there under consideration r«ad as follows: 'Castleton, April 27th, 1844. Due Henry D. Kelley fifty-three dollars when he is twenty-one years old, with interest. David Kelley.' The court held that, inasmuch as the payment was conditioned upon the attainment of his majority by the payee — an event which might never happen — it was made dependent on a contingency, and therefore lacked one of the essential elements of a promis- sory note, which is that the money shall be certainly payable. This case is cited by Story and Daniel as authority for the proposition that a written promise to pay money when the payee shall come of age Is not a good prom- issory note ; 'for non constat that he will ever arrive at that period of life.' Story, Prom. Notes (7th Ed.) § 28; 1 Daniel, Neg. Inst (4th Ed.) § 46. And we do not find that the correctness of the decision has ever been questioned. Numerous judicial declarations can be cited to the effect that contingency as to payment Is fatal to the character of an Instriunent as a promissory note. As was said by Brown, J., in Camwrlght v. Gray, 127 N. Y. 92, 27 N. E. 835, 12 L. R. A. 845, 24 Am. St Rep. 424, 'the agreement to pay must not depend on any contingency, but be absolute and at all events.' " Rice v. Rice, 43 App. DlT. 458. 60 N. T. Supp. 97, 100 (1899). 90 FORM AND INCEPTION (Part 1 petition set forth a copy of the note and of the indorsements, setting forth the amount claimed due thereon, and asked judgment. ' Th e answer set up the three-year statute of Hmitatio n. A de- mu rrer to the answer was susta ined, and the defendant bringfs err or.^* Crozier, C. J. The first question presented by the record is: When did the note sued on become due? The note is not a condi- tional one. The maker owed the payee who had performed labor for him. He declares in the paper that he has received the considera- tion, which all must admit was a valuable one. The existence of the debt was not made to depend upon a condition or contingency. Ev- erything necessary to constitute a promissory note, except the time of payment, is clearly expressed. As to the time the language is peculiar. It could not have been contemplated that if Jones iiever got his money from the government, or never should be in a situa- tion when he could conveniently pay, that the money never was to be payable. Jones evidently expected, within a reasonable time to get money from the government, or failing in that, within a like time, it would otherwise be convenient to pay. After having performed work to the full amount of the note, it could not have been intended that Anders should never get his money unless Jones got his from the government, or should find it otherwise convenient to pay. The in- tention of the parties doubtless was, that it should in any event be payable in a reasonable time, and such is the legal eflFect of the in- strument. What was such reasonable time was in this case determined by the parties themselves. A payment was made June 18, 1860, about 60 days after the note was made. The parties considered this a reason- ^able time, and it would have been so in law in case a formal demand had been made. The payment was equivalent, under the circum- stances, to a demand. The money then became due, at least as early as June 18, 1860, at which time the statute of limitation would begin to run. The maker pleaded the statute, which was a good defense, unless there was a subsequent payment or written acknowledgment within three years preceding the commencement of the suit. The [petition alleges a payment on the 10th of November, without stating any year. As a matter of fact, a court or jury might infer that it was in 1860, but as a matter of allegation in pleading, the court could not interpolate those or any other figures in pleading; facts must be plainly and concisely stated, not inferentially stated. Had the peti- tion averred a payment on the 10th of November, 1860, the court or jury upon a trial might have been justified in finding as a fact, upon the production of the note with all of the indorsements, that a pay- ment had been made at that time, or parol testimony might have been "* The statement Is abridged, and the arguments and a portion of the opinion omitted. Ch. 1) FORM OF BILL AND OF NOTE 91 introduced to show it. But no proof upon that subject could have been received against the objection of the defendant, for the reason that there was no allegation of the time of the payment. The court below, therefore, erred in sustaining the demurrer to the answer, setting up the statute of limitations. * * * Reversed. i> 77 WHITE V. SMITH. (Supreme Court of Illinois, 1875. 77 111. 351, 20 Am. Rep. 251.) Mr. Justice Sheldon delivered the opinion of the court. This was an action, brought by plaintiff below, as assignee, upon the following instrument in writing: "$50.00 Monticello, 111., April, 17, 1866. "For value received, I promise to pay to the Monticello Railroad Company, or order, the sum of $50, to b e paid in such installmen ts, an d at such times as the directors of sSid company may, from time t6 ^me, asse ss or reguire. J. W. White." I The declaration averred that the directors, on the 1st of June, 1866, made an assessment of 5 per cent., which was paid; on the 7th of May, 1867, another assessment of 10 per cent., which was paid;' ■on the 7th of January, 1868, another assessment of 35 per cent., c^ which there was notice to defendant, demand, and refusal of pay-' ment; and that, on January 6, 1869, another assessment of 50 per- cent, was made, and like notice, demand, and refusal of paymentj_ the several assessments amounting to the whole sum of money in the instrument mentioned, and that afterwards the instrument was in- dorsed and assigned to the plaintiff. The court below overruled a demurrer to the declaration and ren-' dered judgment for the plaintiff. The error assigned is the overruling of the demurrer, and the ques- tion made is w h£theF- Hhe iusUmiieirt in puit io a n ^ g-otiable promis - scJiy note. /. ~TTamtiiif in error asserts it not to be, because, by its terms, it is tuicertain whether the money will ever become payable or not; that' the payment depended on an act to be performed by the directors? Arhich act might never be performed by them, or that the railroad' company, from some cause, might cease to exist before any assess-J ment had been made by the directors. The principle is undoubted, that, to constitute a valid promissory note, it must be for the payment of money which will certainly be- come due and payable one time or other, though it may be uncertain when that time will come. And where the payment depends upon a contingency, it will make no difference that the contingency does, 92 FORM AND INCEPTION (Part 1 in fact, happen afterwards, on which the payment is to become ab- solute, for its character as a promissory note cannot dei>end upon fu- ture events, but solely upon its character when created. The instrument in question does, seemingly, depend for its pay- ment upon a contingency. But there is a class of cases, says Judge Story, "which, at first view, seem to' import that payment is to be ^made only upon the occurrence of events which may never happen, and yet which are uniformly held to be absolutely payable at all events. Thus, if a note be made payable at sight, or at 10 days after sight, or in 10 days after notice, or on request or on demand, in all ■these and the like cases the note will be held valid as a promissory note and payable at all events, although, in point of fact, the payee may die without ever having presented the note for sight, or with- out having given any notice to or made any request or demand upon the maker for payment. But the law, in all cases of this sort, deems the note to admit a present debt to be due to the payee, and payable absolutely and at all events, whenever or by whomsoever the note is presented for payment according to its purport." Story, Prom. Notes, ■§ 29. We are inclined to hold that this instrument may be regarded as one falling under this class. The money here is payable to the company in such installments and at such times as its directors may from time to time require. The directors are the managing officers of the corporation, so that the money is really payable in such in- stallments and at such times as the payee may require. It was, in eiTect, payable on demand, or in installments on demand. In the case of a note payable "on having twelve months' notice," it might be said that it was not certain that notice would ever be given. In reference to a note so payable "on having twelve months' notice," Abbott, C. J., in Clayton v. Gosling, 5 Barn. & C. 360, said: "Nor is the time of payment contingent, in the strict sense of the expression, for that means a time which may or may not arrive. This note was made payable at a time which we must suppose would arrive." The same, we think, with equal truth, may be said in respect to the pres- ent note. We cannot well distinguish, in principle, this case from the one of Goshen Turnpike Co. v. Hurtin, 9 Johns. (N. .Y.) 217, 6 Am. Dec. 273. The promise there was to pay the company $125 for five shares of the capital stock of the corporation, in such manner and propor- tion and at such time and place as the president, directors and com- pany should from time to time require. It was held that the note was a good promissory note within the statute, the statute there, relative to promissory notes, being the same in substance as that of 3 & 4 Anne; that the note was payable absolutely, and not depending on any contingency; that it was, in effect, payable on demand. See, Ch. 1) FORM OF BILL AND OF NOTE 93 also, Dutchess Cotton Manufactory v. Davis, 14 Johns. (N. Y.) 238, 7 Am, Dec. 459. We are disposed to hold that there was no error in overruling the demurrer, and the judgment will be affirmed. Judgment affirmed. WOODBURY, WILLIAMS & ENGLISH v. ROBERTS. (Supreme Court of Iowa, 1882. 59 Iowa, 348, 13 N. W. 312, 44 Am. Rep. 685.) Action up on a promissory note. The cause was submitted to the ciicuil court upon the question of the negotiability of the note, uu- , der a written stipulation of the attorneys of the parties, and the courl decided that the instrument is not negotiable. Plaintiffs appeal. Beck, J. The only question in the case involves the negotiability " of the note in suit, of which the following is a copy: "$300. Dallas Township, Iowa, March 18, 1880. C "Three months after date, I promise to pay to the order of Warren\ Roberts three hundred dollars, at the First National Bank of Burling-/ ton, Iowa, value received, with interest at 10 per cent, per annum, including attorney's fees and all co.sts of collection. The makers and indorsers of this obligation further expressly agree that t he pay ee, or his assigns, may extend the time of payment thereof from time to time indenmteiy as he Of they may see fit. ' / "[Signed] Warren Roberts.'/ Indorsed on the back: "Warren Roberts." When an instrument is not certain, or is not capable of being made certain, as to the time of payment, the law does not regard it as ne- gotiable paper. By the terms of the condition of the note in suit it would never fall due, but could be indefinitely extended at the wil| of the maker and indorser, who, it will be observed, is the same partyf When the instrument was executed the time of its maturity was con-i tingent upon the option of the maker of the note. It was impossible to determine when it would become due by the assent of the maker.' The time of payment was uncertain and was not capable of being, made certain. Nothing happened after its execution to remove this uncertainty. "^ Notes which by their terms are payable on or before a fixed time or a specified event are, it is true, uncertain as to the time at which they are payable. But there is no uncertainty as to the time when they become absolutely due. Paper of this character is regarded by the courts as negotiable. But the note before us may never fall due," for payment may be extended indefinitely. The rules applicable to commercial paper were transplanted into the common law from the law merchant. They had their origin in the customs and course of business of merchants and bankers, and are 94 F0B5I AND INCEPTION (Part 1 now recognized by the courts because they are demanded by the wants and convenience of the mercantile world. Surely these rules ought not to be extended to paper, the like of which was never heard of in mercantile transactions. What business man would expect a banker to discount his paper in the form of the note in question in this case? What merchant ever offered to give or was asked to receive a promissory note containing a like condition? We may safely say that notes of this kind are unknown to commercial transactions. Why, then, extend to them the rules of the commercial law ? By regarding such paper as nonnegotiable no prejudice will re- sult to the mercantile and financial business of the country, but sharpers will be defeated in their attempts to swindle the confiding and unwary, a result in accord with sound public policy and good morals. Miller v. Poage, 56 Iowa, 96, 8 N. W. 799, 41 Am. Rep. 82, and Smith v. Van Blarcom, 45 Mich. 371, 8 N. W. 90, support the con- clusions we have reached that the note in suit is not negotiable. The case last named holds a note to be nonnegotiable which contains the precise condition found in the note before us. The judgment of the circuit court is affirmed. BANK OF WHITEHOUSE v. WHITE. (Supreme Court of Tennessee, 1917. 136 Tenn. 634, 191 S. W. 332.) I Suit by the Bank of Whitehouse against M. H. White. Judgment for defendant, and plaintiff appeals. Affirmed. jtr Williams, J. I s the negotiability r>i a nnte- dpctrfyp'^ by a__£rnvi- feio n on t he part of the obli gors that: "We authorize the holder thereo f ioextend tne payment ot th e same, or any part th ereot, without 4m - pair ing our jo int and several" liabililitiia, a nd the stireties agree to wayv e notice oi any extension ot tim e." The contention ifl-behaif of the appellant is ha§ed upon section 1, gubsec. 3, of the Negotiable Instrume nta_Act, 1899, c. 94 : Sgotiable, must conform to the following re- quirements : " * * * (3) Must bs^payable on deman d, or at a fixed or deter- mingbte-^wttirp time." "^~- -.^_ , give_assejai_toextensions that rnay iw'-^TTTTrl-^^ ^ t or- . -iflrr mntno ty^he. ditf ri whirh js se t t ortti wiffi certa inty in the no te ; or to an extension which, if made prior "to maturity, has operative effect as from the time when the note falls due according to tenor ; and we are of opinion that >¥iftei»-Bt L construed the clause should n flt _render tb ^, i^.n^*^ n"nnP2'nt'l!;^''i whether we view the question from the standpoint of principle, prece- dent, or policy. Ch. 1) FORM OF BILL AND OF NOTE ' 95 Principle: As already observed, the note as executed is stipulated to mature on a date fixed and certain. TVi e prnviginti fnr pytpn^in/ P doesnoL fut it i n t h e power of the holder to extend the note without th e concurrence of the maker, and the latter may not force an exten-' sifSn on the holder. When they concur, a new date ot maturity is tixed^ ;' and one no less certain than the original d ate. The sureties merely assent in advance thereto and bind themselves to waive the right of de-' f ense that might otherwise accrue ; or to be bound by the supplemental contract which fixes the later maturity date. There is no agreement embodied in the note operating to bind the holder to extend. There is incorporated no promise to do anything that would, of its force, affect the unconditional promise to pay on the date named in instrument. Thq re is nothing in the n "tf! th"^ i»-.nVg tnwards an indefinite extension of fime ot payment Precedent : Cases that pass on this question may be found collated in 8 Corp. Juris, 140, and in. notes to First Nat. Bank v. Buttery, 17 Ann. Cas. 55 and 16 L. R. A. (N. S.) 878; Longmont Nat. Bank v. Loukonen, Ann. Cas. 1914B, 210; Anniston Loan, etc., Co. v. Stickney, 31 L. R. A. 234; Rossville State Bank v. Heslet, 33 L. R. A. (N. S.) 738; State Bank of Halstad v. Bilstad, 49 L. R. A. (N. S.) 132. The cases which have appeared since the preparation of the last of these notes demonstrate that the above is fast becoming the settled construc- tion of the Negotiable Instruments Act. First Nat. Bank v. Stover, 21 N. M. 453, 155 Pac. 905, L. R. A. 1916D, 1280, Ann. Cas. 1918B, 145 ; First Nat. Bank v. Baldwin, 100 Neb. 25, 158 N. W. 371 ;' City Nat. Bank v. Kelly, 51 Okl. 445, 151 Pac. 1172; Davis v. McColl, 179 Mo. App. 198, 166 S. W. 1113. Policy : Such ^ provision for ex tp^s'"" nnf- i nfrequently operates to the advantag e of a sure ty in permitting the holder, at hi s_o£tioii^ safely to ^ve grace to the iiiaker, on the latter's application; when otherwise, pressure tor payment ifiight come inconveniently upon both maker and ' surety. It is common practice to embody such a provision in notes ; die, clause tends to give currency to the note, and the policy of the law should be in furtherance of the negotiability of such widely used in- struments when they fairly fall within the spirit of the provisions of the uniform act. White v. Hatcher, 135 Tenn. 609, 188 S. W. 61 ; Pemiscot County Bank v. Bank, 132 Tenn. 152, 177 S. W. 74. < 96 FORM AND INCEPTION (Part 1 ROBERTS V. SNOW. (Supreme Court of Nebraska, 1889. 27 Neb. 425, 43 N. W. 241.) Reese, C. J. This action was instituted in the district court of Holt county upon a written instrument of which the following is ■■a. copy: ■^ "Marshalltown, Iowa, July 16, 1877. I "For value received I hereby promise to pay to Peter Housel, or order, four hundred dollars ($400), with ten per cent, interest per annum, payable semi-annually in advance, and on default of prompt payment of the interest for thirty days after it is due, then this note, principal and interest, shall be due and collectible without defalca- tion or discount, together with an attorney fee of ten per cent, for collection. [Signed] B. L. Snow." "Attest: C. C. Housel." Upon the back of the instrument are the following indorsements: "Pay to the order of C- C. Housel. Peter Housel, by C. C. Hous- el, Executor of the Estate of Peter Housel, Deceased." "Pay to the order of B. F. Roberts. C. C. Housel." * * * The cause is presented to this court by plaintiff by proceeding in error, presenting a large number of assignments, but it is not deemed necessary to examine all. It appears tha-t the question under- lying the whole controversy in this case is as to the character of the instrument on which the suit was founded. It is insisted by plaintiff in error that the writing is a negotiable promissory note, and is entitled to be treated as such, with all the incidents which attach to nego- tiable paper; while upon the other hand it was contended by defend- ^nt in error that it is not a negotiable instrument, and that therefore the action by plaintiff in error could not be maintained, he not being the actual owner thereof by assignment. This contention is based upon the fact that the instrument does not fix a time certain within which the money must be paid. It is our opinion that the instrument in question falls clearly within the definition of commercial paper, and that it was payable on de- mand, at any time after its execution, and should have been treated by the district court as a promissory note payable upon demand. In 1 Randolph on Commercial Paper, § 119, it is said: "If no time of payment is expressed, which is usually the case in checks, and fre- uently so in promissory notes and drafts, the instrument is, by in- endment of law, payable on demand, and is as valid and negotiable as though the time of payment were fully expressed" — citing a large number of authorities, among which are Jones v. Brown, 11 Ohio St. 601; Holmes v. West, 17 Cal. 623; Porter v. Porter, 51 Me. 376; Keyes v. Fenstermaker, 24 Cal. 329; Bank v. Price, 52 Iowa, 570, 3 N. W. 639 ; Libby v. Mikelborg, 28 Minn. 38, 8 N. W. 903. The rule seems to be that in cases of this kind the lesral intend- Ch. 1) FORM OF BILL AND OP NOTE) 97 ment, that the notes are payable upon demand, cannot be changed by parol proof any more than could the expressed terms of a written instrument be changed. See Thompson v. Ketcham, 8 Johns. (N. Y.) 192, 5 Am. Dec. 333; Koehring v. Muemminghoff, 61 Mo. 403, 21 Am. Rep. 403 ; Self v. King, 38 Tex. 553. But it may be contended that it is shown upon the face of the note itself that such was not the intention of the parties at the time of its execution, for it is provided that the interest shall be payable semi- annually,' and that the note shall become due and collectible on the expiration of 30 days after default of the payment of the interest; but this would make no difference as far as the note was concerned. As held in Jones v. Brown, supra, the fact that the parties provided - for the payment of the interest in case the note should not be paid immediately, would not change the legal effect of the contract. Upon this subject, see Loring v. Gurney, 5 Pick. (Mass.) 15; Meador v. Bank, 56 Ga. 605 ; Holmes v. West, 17 Cal. 623. Aside from what would seem a rather inflexible rule of law, as applied to instruments of the kind under consideration, a careful ex- amination of the note in question satisfies us that no other construc- tion can be given to its language. There is nothing upon the face of the instrument itself, nor pleaded by the answer, nor submitted in the evidence in the case, which shows that any relation existed between the parties to the instrument by which it could be presumed or supposed that it was their purpose that the note should never mature. If it cannot be treated as a prom- issory note payable upon demand, then the only event which could occur by which the note could be made to mature, according to its own language, would be a default of 30 days in the payment of the semi-annual interest; and if such default should never be made, the note would never mature, and therefore could never be collected except by the voluntary payment' of the maker. This, evidently, was not the intention of the parties to the instrument. * * * Reversed and remanded. " WISCONSIN YEARLY MEETING OP FREEWILL BAPTISTS v. BABLER. (Supreme Court of Wisconsin, 190Z 115 Wis. 289, 91 N. W. 6T8.) This is an -action in equity, brought by the respondent, a corpora- tion, to set aside the sale and transfer to the appellant of a certain promissory note and mortgage, which was the property of the re- spondent, and to recover the possession of the same. The case was tried by the court, and the evidence showed that the respondent was a religious corporation organized under chapter 33 of the Private and 3 Part of the opinion is omitted. Sm.&M.B.&N.(2dEd.)— 7 , 98 FOEM AND INCEPTION (Part 1 Local Laws of Wisconsin for 1867, and had a board of six trustees, its active officers being a president, secretary, and treasurer ; that said corporation never adopted any by-laws as to the management of its affairs, and had no principal office ; that from time to time it received donations of money, which the trustees put in the care of the treas- urer, to be loaned, and the interest to be used for the support of weak churches and indigent ministers of the denomination; that one J. F. Sears was treasurer of the corporation from the year 1896 up to June 1, 1901, when he died ; that on March 15, 1901, Sears loaned to one Prisk, from the funds of the corporation, $4,800, and took a note therefor, payable to the order of "J. F. Sears, Treas., or his suc- cessor," payable five years after date, with interest at 5% per cent.; that such note contained a power of attorney, which authorized a con- fession of judgment at any time thereafter, whether due or not; and said note was secured by a real estate mortgage in which the mort- gagee is described as "J- F- Sears, Treas., or his successor in office of the Wisconsin Yearly Meeting of Freewill Baptists"; that on April 22, 1901, Sears sold and delivered said note and mortgage to appellant for the sum of $4,827.13, the appellant paying therefor $3,- 900 in checks, and turning over to Sears two notes of $500 each, which had before that time been given by Sears to the appellant for borrowed money. Sears paying back to the appellant $133.53 ; that the appellant, Babler,- could not read English, but that the note was read to him by Sears, and that the mortgage was present, and delivered at the same time, but was not read by Babler; that Sears converted the money which he received from Babler to his own use, and that the corporation has received no part of it; that the sale of the note and mortgage to the appellant was unauthorized, and without the knowledge of the trustees; that Babler neglected to make inquiry as to whether Sears had authority to sell the note in question. Upon these facts the circuit court found that the defendant was negligent in purchasing the note and mortgage without inquiry; that the note was nonnegotiable ; and that the plaintiff was entitled to a judgment setting aside the transfer of the note and mortgage, and adjudging that the same be delivered by the defendant to the plaintiff. From this judgment the defendant appeals. '" WiNSLOW, J. (after stating the facts as above). It is entirely clear from the evidence in the case and from the findings of fact that the note and mortgage in question were the property of the plaintiff cor- poration, and that no express authority had ever been given to Sears to sell them. These being the facts, the defendant, Babler, could ac- quire no title to the note by his transaction with Sears unless the note was negotiable paper, or unless Sears had either the apparent ownership or apparent authority to sell it, so that the corporation ^^ The arguments of counsel and part of the opinion are omitted. Ch. 1) FORM OF BILL AND OF NOTE 99 would be estopped to deny the act. It is quite certain that the note was not negotiable, because by the power of attorney which it con- tained judgment could be entered upon it at any time after its date, whether due or not. Thus the time of payment depends upon the whim or caprice of the holder, and is absolutely uncertain. This de- prives the note of its negotiability. Continental Nat. Bank v. Mc- Geoch, 73 Wis. 333, 41 N. W. 409 ; W. W. Kimball Co. v. Mellon, 80 Wis. 133, 48 N. W. 1100. Chapter 356, Laws 1899 (the negotiable instrument law), provides that the negotiable character of an instrumfnt is not afifected by a provision authorizing a confession of judgment if the instrument is not paid at maturity. Section 1675 — 5, subd. 2. Upon familiar prin- ciples of statutory construction this provision makes a note like the present nonnegotiable. Nor can it be said that Sears had such ap- parent ownership or authority to sell the note as would estop the plaintiff corporation from denying his act. The note, upon its face, shows that it was held by Sears in a representative capacity mere- ly. * * * Judgment affirmed. THORP V. MINDEMAN et al. (Supreme Court of Wisconsin, 1904. 123 Wis. 149, 101 N. W. 417, 68 L. It. A, 146, 107 Am. St Rep. 1003.) This is an a ction to foreclos e a nntp ^rid mPrfg^'g''' given by the defendants Mindeman and wife to one Henry Herman, the defense being an entire want of consideration. The note was a_promissory note for $6,500, dated December 11, 1900, o avable three vears alter Hate, with interest at 5 per cent, per annum, semiannually, and con- tained the following provisions inserte d before the signature: "The payment of this n"ote~is sec ured byji fhnrtp-ag -e of even date herewith on real estate^ I t detault^ ^'l bp maHp I'n tKp ppympnt pf interest, oi^ in case of failure to comply with any of the conditions or agreements of "^he mort gage collateral hereto, the n the whole amount of the prin- cipal' shall, at th^ option of the mortgagee, or his representatives or assigns, (notice of such option being hereby expressly waived), be- come due and payable without any notice whatever." The~r prirt fTa ge accompanying the note contained the following pro- visions : "P fnvirlpH^ alw ays, and these presents are upon this expres s condition, t hat if the s aid parties^o f^ the first part, their heirs, execu- tors and administrators, shalTpay or cause to be paid to the said party .of the second part, his heirs, executors, administrators or as- signs, the just and full sum of sixty-five hundred ($6,500) dollars three years after date with interest at 5 per cent, per annum, interest 100 FORM AND INCEPTION (Part 1 payable semiannually according to the conditions of one promissory note and coupons bearing even date herewith, executed by the said George Mindeman, one of the parties of the first part, to the said party of the second part, and shall moreover pay annually to the proper officers all taxes which shall be assessed on the said premises and shall deliver or exhibit receipts therefor to said party of the sec- ond part, his heirs, executors, administrators or assigns, on or before the first day of May next after such taxes shall have become due and payable, and shall insure and keep insured the buildings thereon or to be hereafter erected gainst loss or damage by fire in the sum of eight thousand dollars or over, in insurance companies to be approved by the said party of the second part, his heirs, executors, administra- tors or assigns, such insurance to be payable in case of loss to the said party of the second part, his heirs, executors, administrators or assigns, as his mortgage interest may appear, and the policy or poli- cies of insurance to be held by him, and in default thereof it shall be lawful for the said party of the second part, his heirs, executors, administrators or assigns, to effect such insurance, and the premiums and other legal expenses and charges paid for affecting the same, together with interest thereon at the rate of 10 per cent, per annum, shall be a lien upon the said mortgaged premises added to the amount of the said note, and secured by these presents until the payment of said note, then these presents shall be null and void. But in case of the non-payment of any sum of money (either principal, interest or taxes) at the time when the same shall become due, or of failure to insure said building agreeably, to the conditions of these presents, or in case of failure to deliver or exhibit such receipt as above provided, or in case of failure on the part of said parties of the first part to keep or perform any other agreement, stipulation or condition herein contained, then in each case or all such cases, the whole amount of the said principal sum shall, at the option of the said party of the second part, his "heirs, executors, administrators or assigns, which may be exercised at any time after any default, without any notice whatever to the mortgagors, or either of them, their heirs, executors, administrators, or assigns, service or giving such notice in any man- ner being hereby expressly waived, be deemed to have become due, and the same with interest thereon at the rate aforesaid shall thereupon be collectible in a suit at law or by foreclosure of this mortgage, in the same manner as if the whole of said principal sum had been made payable at the time when any such failure shall occur as aforesaid." It appeared from the testimony of the defendant Mindeman, which was taken under objection, that the note and mortgage was given to cover advances to be made to him by Herman, but that none were ever in fact made. September 11, 1903, Herman sold the note and mortgage to the plaintiff, who was an innocent purchaser thereof, and made the following indorsement upon the note: Ch. 1] FORM OP BILL AND OF NOTH 101 "For value received, I hereby sell, transfer and assign the within note and the interest coupons thereto attached and numbered four to six inclusive, (previous interest coupons having been paid and sur- rendered), to Josephine Thorp, without recourse." Findings and judgment of foreclosure were made and signed, and the Mindemans appeal from the judgment as well as from a subse- quent order appointing a receiver.*' WiNSLOW, J. (after stating the facts as above). The important, qu estion in this ■^f""' '« w hether the note in suit is r|^p^ntiahip The- appellants argue that the note and mortgage must be construed to- gether as one contract; that, so construed, the note requires the per-/ formance of other acts besides the payment of money, and is ren- dered uncertain both as to amount and time of payment, and hence is' nonnegotiable. The general rule that agreements contemporaneous- ly executed and pertaining to the same subject-matter are to be con- strued together is so familiar and so frequently acted upon that it- needs only to be stated. The question how far, if at all, this rule im- ports into a promissory note the collateral agreements contained in an accompanying mortgage, is the question to be considered in this case. The collateral agreements rnr}pinpri in thp mnrtgaorp which the ap - . peliants claim are imported into the not? and de stroy '*•" rip^ntiihiV^ij^ are: i'lrst. the ag^reement that, m case of failure by the mortgag or t Q insure the buildings in the mortgagee's favor in approved insur- ance companies, the mortgagee may insure the, same, and the prem i- u ms paid shall be a lien on the premi ses "^dded to" the amount o f< the Miote: and, s econd, the agreement that in case pf failure tn so insure , or to pay interest or taxes when due, or to deliver or exhibit tax receipts showiiig the payment of the taxes, t hen the whole prin- ^ cipal shall become due at the mortgagee's optio n, and without notice, it will be observed that the only one of these agreements which the note contains in terms is the agreement that the principal shall become _ due without notice, at the option of the mortgagee, upon failure to pay interest or comply with any of the other conditions of the mort- gage; but the argument is, in effect, that all of the collateral agree-* ments in the mortgage have become a part of the note by virtue ©ft the legal principle just stated. This is a decidedly revolutionary prop- osition. If it be true, both the business world and the courts have been sadly in error for many years. This court held at an early day^ that a note negotiable on its face retained its negotiable character' notwithstanding it was secured by a mortgage upon real estate, and,^ when transferred before due, carried the mortgage with it relieved of all equities (Croft v. Bunster, 9 Wis. 503); and that the words "secured by real estate mortgage" upon the face of the note were not sufficient to charge the assignee with notice of any defense, nor of^ &'■ Part of the opinion is omitted. 102 FORM AND INCEPTION ■ (Part 1 the terms of mortgage (Kelley v. Whitney, 45 Wis. 110, 30 Am. Rep. 697; Boyle v. Lybrand, 113 Wis. 79, 88 N. W. 904). If all the agreements contained in every mortgage are, as matter of law, imported into the note, these propositions could not be true, for the general rule (except as changed by statute) is that negotiable instru- ments cannot be bound up and fettered with collateral agreements for the doing of other things besides the payment of money, and re- tain their negotiable character. Upon the principle contended for, the most simple real estate mort- gage would deprive the note which it secures of its negotiable char- acter, because it would import into the note one or more collateral agreements which are not for the payment of money. Fortunately it is not necessary to give so violent a shock to the well-understood principles of law governing the negotiability of notes and mortgages. The appellants' contention really resuhs from a confusion of ideas. They lay down the well-understood proposition that contemporane- ous instruments relating to the same subject-matter are to be con- strued together, and conclude that it follows that a note and mort- gage, though separately executed, are one instrument, and that the note is that instrument. The rule that instruments are to be con- strued together does not lead to this result. Construing together sim- ply means that, if there be any provisions in one instrument limiting, explaining, or otherwise affecting the provisions of another, they will be given effect as between the parties themselves and all persons charg- ed with notice, so that the intent of the parties may be carried out, and that the' whole agreement actually made may be effectuated. This does not mean that the provisions of one instrument are impotted bodily into another, contrary to the intent of the parties. They may be intended to be separate instruments, and to provide for entirely different things, as in the very case before us. The note is giv^n as evidence of the debt and to fix the terms and time of payment. It is usually complete in itself — a single, absolute obligation. The purpose of the mortgage is simply to pledge certain property as security for the payment of the note. The agreements which it contains ordi- narily have no bearing on the absolute engagements of the note, but simply relate to the preservation of the security given by its terms; such as the payment of taxes, the insurance of houses, and the like. While the two instruments will be construed together whenever the question as to the nature of the actual transaction becomes material, this does not mean that the mortgage becomes incorporated into the note, nor that the collateral agreements to pay the taxes, or to insure the property, or that the mortgagee might insure in case of default by the mortgagor and have an additional lien therefor, become parts of the note. These agreements pertain to another subject, namely, the preservation intact of the mortgaged property. The promise to pay is one distinct agreement, and, if couched in proper terms, is nego- Ch. 1) FORM OF BILL AND OF NOTE 103 tiable. The pledge of real estate to secure that promise is another distinct agreen^ent, which ordinarily is not intended to affect in thf" least the promise to pay, but only to give a remedy for failure to carry" out the promise to pay. The holder of the note may discard the mort- gage entirely, and sue and recover on his note; and the fact that a mortgage had been given with the note, containing all manner of agreements relating simply to the preservation of the security, would cut no figure. A pleading alleging such facts would be stricken out as frivolous or irrelevant. This idea is well expressed in the case of Garnett v. Myers, 65 Neb. 280, 94 N. 'W. 803, where it is said : "If the terms and conditions of the mortgage are limited to the proper province of the mortgage — > that is, to provide security for the indebtedness — its provisions relat- ing solely to the security will not affect the negotiability of the note. If the holder of the note is compelled to pay the taxes or insurance' on the mortgaged property to protect the security, and is afterwards allowed to recover the amount so paid in addition to the principal indebtedness, this does not affect the amount of the indebtedness it- self." It may be added to this that provisions to that effect in the mort- gage no not affect at all the absolute character of the promise td pay contained in the note, and hence do hot affect its negotiability. A very interesting and instructive discussion of this question will be found in the opinion in the case of Frost v. Fisher, 13 Colo. App. 333, 58 Pac. 873, where the same conclusion is reached. The propositions so far laid down seem incontrovertible if the prin- ciple is to be maintained that a note negotiable in form remains ne- gotiable notwithstanding it is secured by an ordinary real-estate mort- gage. As might be expected, we are referred to no authorities which really take issue with that principle, or squarely hold that the agree- ments of every mortgage are imported into the accompanying note. The nearest approach to such a holding, perhaps, ia the case of Noell V. Gaines, 68 Mo. 649, where a provision in a deed of trust as to the time of payment of the debt was held to control the terms of the note in the hands of a purchaser with notice. A very vigorous and per- suasive dissenting opinion was filed in this case, which forms instruc- tive reading on this very question ; but, in any event, the case does not reach the proposition that agreements in a mortgage, simply relating to the preservation of the security, are ever to be considered as im- ported into the note. Starting from the fundamental proposition that the ordinary negotiable note, accompanied by the ordinary real-estate mortgage with the ordinary covenants to pay taxes, etc., form two separate contracts, both being a part of the same transaction, but each relating to its own subject-matter and not interfering with the other, just as a building contract and a bond to secure its perform- ance are separate and distinct, let us consider in what respect, if any, 104 FORM AND INCEPTION (Part 1 the note and mortgage in this case differ from the ordinary note and mortgage. As will be seen by reference to the papers themselves, the mort- gage contains conditions requiring the payment of taxes on the prem- ises by the mortgagor; the exhibition of the receipts therefor to the mortgagee ; the maintenance of insurance on the buildings in approv- ed companies, with the right to the mortgagee to insure in case of failure of the mortgagor, the expense to be a lien on the premises "added to the amount" of the note; also a provision that in case of failure to pay interest, taxes, or insurance, or to exhibit the tax re- ceipts, the principal sum shall, at the option of the mortgagee, become due without notice. Turning to the note, we find that it provides that, if default is made in payment of interest, or in case of failure to com- ply with any of the conditions or agreements of the mortgage, then the principal shall become 4ue, at the option of the mortgagee, with- out notice. It will be noticed at once that none of the collateral agree- ments of the mortgage are in terms imported into the note except the agreement that the principal shall become due, at the mortgagee's option, in case of failure to perform any of the agreements of the mortgage. It will be noticed also that the other collateral agreements contained in the mortgage are simply agreements providing for the due preservation of the mortgage security, and not affecting in any way either the time of payment or the amount of the note. These agreements are the agreement to pay the taxes and exhibit the re- ceipts, the agreement to effect and maintain insurance on the buildings for the mortgagee's benefit, and the agreement that the mortgagee may insure in case of default, and have a lien on the premises "'added" to the note for the premiums paid. There was, indeed, a claim made that the agreement that the premiums paid should constitute a lien added to the note meant that the note was to be increased by the amount paid, so that the amount of the note was thereby rendered un- certain; but we think it plain that the clause simply provides for the acquiring of a lien upon the premises in addition to the lien of the note. This meaning seems so obvious to us that we will spend no more time upon the suggestion. These last-named collateral agreements, then, being simply proper agreements for the preservation of the security, and not intended nor fitted to qualify or affect in any way the absolute promises of the note, do not, upon the principles hereinbefore laid down, enter into or change the note in the least, nor affect its negotiability. Such being the case, we have only to consider the question whether the agree- ment that the whole principal of the note shall be due at the mort- gagee's option in case of a failure to pay interest or perform any of the conditions of the mortgage renders the note nonnegotiable. Upon this question appellants place reliance upon the cases of Continental Ch. 1) FORM OF BILL AND OF NOTB 105 Nat. Bank v. McGeoch, 73 Wis. 332, 41 N. W. 409, and W. "W. Kim- ball Co. V. Mellon, 80 Wis. 133, 48 N. W. 1100. In the first of these cases, an agreement inserted in the note, pro- viding that the payee might sell collateral securities at any time if they declined in value, and apply the proceeds, less expense of sale, on the debt, and the balance should forthwith become due, was held to make the note uncertain as to amount and time of payment, and hence nonnegotiable. In the Kimball Case, an agreement that, in case of failure to pay any installment, or of any attempt to dispose of or remove the chattel for which the note was given, the holder might declare the whole amount due, and collect same by suit or sale of the property, and, if there was a deficiency after sale, it should be pay- able on demand, was held to make both amount and time of payment uncertain, and hence make the note nonnegotiable. It must be ad- mitted that both of these cases have a strong tendency to support the position of the appellants upon the proposition that the time of pay- ment is rendered uncertain by the agreement before us. Especially is this true of the Kimball Case. In that case the uncertainty as to time resulted ft;om the fact that, in case the giver of the note failed to pay an installment, or attempted to dispose of or remove the prop- erty sold, the holder might at once collect the whole. In the present case the agreement is that in case of failure to pay interest or keep taxes and insurance paid the holder may at once collect the whole. In both cases the contingency depends upon the acts or omissions of the maker of the note. We should find it quite hard, if not impossible, to differentiate the two cases were it not for the provisions of the negotiable instruments law (chapter 356, p. 681, Laws 1899), which was passed since the de- cisions cited, and prior to the giving of the note in question. This law gives the general requirements of negotiable paper in section 1675 — 1, p. 688, among which are the following: "(1) It must be in writing signed by the maker or drawer. (2) Must contain an un- conditional promise or order to pay a sum certain in money. (3) Must be payable on demand or at a fixed or determinable future time." The law then provides, in section 1675 — 2, p. 684, that the sum is certain within the meaning of the law though it is to be paid "(3) by stated installments, with a provision that upon default in payment of any installment or of interest the whole shall become due." The law further provides, in section 1675 — 4, p. 686, that an instrument is payable at a determinable future time, within the meaning of the law, which is payable "(4:) at a fixed period after date or sight, though payable before then on a contingency." These two provisions seem to cover this whole case, and leave really nothing to discuss. This note is payable at a fixed period after date, but may be made payable before that time upon the happening of certain contingencies which are within control of the maker. The latter clause quoted would seem 106 FOEM AND INCEPTION (Part 1 to have been added to meet just such cases as the present. Such agreements as we have here' are of very frequent occurrence, and it was evidently the purpose to provide for them. The case of Wisconsin Yearly Meeting of Freewill Baptists v. Bab- ler, 115 Wis. 389, 91 N. W. 678, is also somewhat relied on by ap- pellants, but it evidently has no bearing on the case. In that case it was held that a clause in a note authorizing the confession of judg- ment at any time, whether due or not, rendered the note nonnegotia- ble, because the time of payment depended entirely on the whim or caprice of the maker. As an additional reason for the ruling, the fact that the negotiable instruments law allows the insertion of a clause authorizing a confession of judgment if not paid at maturity was also referred to. While we have considered this question as absolutely settled by the negotiable instruments law, it must not be supposed that we have fail- ed to examine and carefully consider the numerous cases cited by the appellants, mostly from Western courts, as having some bearing upon this question. W-e have been unable to find that any of these cases really conflict with the general proposition laid down in the begin- ning, namely, -the proposition that the ordinary provisions of a real estate mortgage requiring payment of taxes and other acts by the mortgagor for the preservation of the mortgaged property are not im- ported into the g^ccompanying note simply because the papers are sim- ultaneously executed as a part of the same transaction. A number of them are cases decided by the Kansas Court of Appeals, and are, in substance, to the effect that, where a bond or note in terms refers to the moi'tgage, and declares it to be "a part of this contract," and the mortgage contains covenants to pay taxes, insure, keep buildings in repair, and the like, and that the entire sum shall become due in case of default in any of such agreements, this renders the bond or note nonnegotiable. Such are the cases of Lockrow v. Cline, 4 Kan. App. 716, 46 Pac. 720; Chapman v. Steiner, 5 Kan. App. 326, 48 Pac. 607, and Wistrand v. Parker, 7 Kan. App. 562, 52 Pac. 59. It goes without saying that such cases have no bearing on the present case, because here there is no clause in the note making the mortgage a part thereof, or adopting its provisions, except the provision author- izing the whole amount to be declared due upon certain contingencies. Another line of cases, from Nebraska, hold that, where a mortgage provides that the mortgagor shall pay the tax:Es levied on the mort- gagee for or on account of the mortgage, this agreement destroys the negotiability of the note, because it renders the amount uncertain. Garnett v. Meyers, 65 Neb. 280, 91 N. W. 400, 94 N. W. 803 ; Conster- dine V. Moore, 65 Neb. 291, 91 N. W. 399, 96 N. W. 1021, 101 Am St Rep. 630; Allen v. Dunn, 71 Neb. 831, 99 N. W. 680. Such seems also to be the effect of the case of Brooke v. Struthers, 110 Mich. 562, 68 N. W. 273, 35 L,. R. A. 536. Without stopping to consider whether these Ch. 1) FORM OF BILL AND OF NOTE 107 decisions should be approved or not, it is enough to say that they are not at all in conflict with the present decision. The agreement to pay taxes was to pay taxes vyhich might be levied on the mortgagee, not the taxes on the mortgaged property; hence the agreement had no connection with the preservation of the security, and was con- strued by the courts as an agreement to pay an indefinite sum as a part of the note. In the cases of Donaldsdn v. Grant, is Utah, 231, 49 Pac. 779, and Gilbert v. Nelson, 5 Kan. App. 528, 48 Pac. 207, notes containing stip- ulations very similar to those found in the present case are pro- nounced nonnegotiable upon what seems to us very unsatisfactory reasoning, which we feel no inclination to follow, especially in view of the positive provisions of our negotiable instruments law before cited. The cases of Dillfy v. Van Wie, 6 Wis. 209, and Elmore v. Hoff- man, Id. 68, are also cited as sustaining appellants' contention, but it is evident that they do not. In the Dilley Case the note contained an express clause subjecting it to the provisions of another agree- ment, made on the same day, by which it appeared that the payment was subject to certain equities between the parties. The clause was rightly held to deprive the paper of its negotiable character. In the Elmore Case it was held that a collateral agreement made between the parties contemporaneously with a note, by which the payee agreed to give day of payment on the note till the happening of a certain named contingency, was admissible in evidence to defeat an action on the note in the hands of one who purchased the note with notice of the contemporaneous agreement. We hold, therefore, that under the present negotiable instruments law the note in the present case is negotiable, and in 'so holding it is evident that the cases of Continental Nat. Bank v. McGeoch, 73 Wis. 332, 41 N. W. 409, and W. W. Kim- ball Co. V. Mellon, 80 Wis. 133, 48 N. W. 1100, are overruled so far, at least, as they hold that such agreements create an uncertainty in the time of payment. The next contention made by the appellants is that the written trans- ^ fer of the note was not a commercial indorsement, but a mere assign- ment, and hence that the transferee took it subject to all equities. We think this contention cannot be sustained. The addition of the words "without recourse" does not impair the negotiable character of the instrument. Laws 1899, p. 701, c. 356, § 1676—8. While there is ' doubtless some authority tending to support appellants' claim, we , think that there can be no doubt that the transfer in the present case must be held to be a commercial indorsement under the decisions of^ this court in the cases of Crosby v. Roub, 16 Wis. 616, 84 Am. Dec. 720; Bange v. Flint, 25 Wis. 544; Murphy v. Dunning, 30 Wis. 296. In all of these cases a negotiable note was transferred by attaching it to a negotiable bond which recited that the note was thereby "as- 108 FORM AND INCEPTION (Part 1 signed and transferred" to the holder of the bond as security for the payment of the bond, there being no indorsement on the note itself; and this was held an indorsement within the law merchant. Here there is an agreement on the back of the note itself, signed by the payee, by which he sells, assigns, and transfers the note to the plain- tiff. The intent to pass title and make the note transferable by in- dorsement and delivery afterwards seems very plain. Such, also, seems to be the current of authority. 1 Daniel, Neg. Inst. (5th Ed.) § 688c. * * * Judgment affirmed. COOKE V. HORN. (Court of Queen's Bench, 1873. 29 L. T. N. S. 369.) This was an action_U20S-3-f tfomioGory n ote, tried before Honyman, J., at the York Summer Assizes. A , verdict nf il75. 5s. lOd. was found for t he plaintiff, leave be ing reserved to th e defendant __tQ_mQye to enter~a Terdict fo r film, Qn-S g^-^'miil i-trarThp nntp iv^cnnt crn nA I'tie tfjrrnj Tj; theTTnt^ was as follows : "il70. 25th April, 1872. "Wf promise tgrny to Messrs. M. H. Cooke and Co. il70.^ with interest thereon at me rate of £5. per cent, per annum, as f ollow s : The _first payment, to wit, £40. or more, t o be made on the IsT Feb.. 1873, and £5.- jan the fir st- day of each month followinp- until this note and interest shall be fully satisfied. An d in case default shal l be made-i n payment of any of the said instalments, th e full aino unt then remaining_duein respect of the said note and interest sh alFbe forth - _wifH:5a^ble.'^~~ "^ " The note was sigaeH by the defendant and one John Horn, since deceased. J. W. Mellor, on behalf of the defendant, moved in pursuance of the leave, reserved. Thjg JTic^^-pirTif-nf ronnrtt Kp m psidprprl a prnm ig- s ory note, for it is " nf maHp frvr thp paynient nf a certain sum at a p articular d ay. If the defepHant pair! mnrp t>^aji_M pay^ anri np rr^n^^ Notes like ,tnis are common in commercial transactions, and we are not aware that their negotiable quality is ever questioned in business deal- ings.'l It is held in Curtis v. H orn, 58 N. H. 504, that a promissory not e, payable "on or before theliT^t ^^"^ " ^ ^^T "^^t " j.^ npo-nfjablp The c ourt sav in the op i_nion : "It is now the common law that, where p ayment is made to dep e nd upon an event that is certain to come, an d uncertain only m regard to the time when it will take place, the note or bill is negotiable." The court say further: "The recent Massa- chusetts cases cited by the defendant place the conclusions arrived at upon common-law grounds; yet they fail to state the reasons for. overruling Cota v. Buck, and the law as held in other jurisdictions, and we are unable to see any." The doctrine thus laid down by the courts of Michigan and New Hampshire is fully sustained by numerous authorities, of which we cite Bates v. Leclair, 49 Vt. 330 ; Riker v. Manufacturing Co., 14 R. I. 402, 51 Am. Rep. 413; Insurance Co. v. Bill, 31 Conn. 534-538; Jordan v. Tate, 19 Ohio St. 586; Dorsey v. Wolff, 143 111. 589, 38 N. E. 495, 18 L. R. A. 438, 34 Am. St. Rep. 99 ; Chicago Ry. Equip- ment Co. V. Merchants' Bank, 136 U. S. 368-285, 10 Sup. Ct. 999, 34 L,. Ed. 349 ; Ernst v. Steckman, 74 Pa. 13, 15 Am. Rep. 542. Our conclusion is that the in.gtrument here in suit i sL.a ^ valid, nego- tiable, proi iuS:Sor^r note. * * * J udgment fnr plaintiff. 112 FORM AND INCEPTION (Part 1 HOLLIDAY STATE BANK v. HOFFMAN. (Supreme Court of Kansas, 1911. 85 Kan. 71, 116 Pac. 239, 35 L. R. A. [N. S.] 390, Ann. Cas. 1912D, 1.) Action by the Holliday State Bank against C. B. Hoffman. Judg- * ment for plaintiff, and defendant appeals. Reversed and remanded.'' PoRTBR, J. The bank brought this action on a promissory note given by C. B. Hoffman to the Merchants' Refrigerating Company for shares of its capital stock. Hoffman admitted the execution of the note and alleged a total failtire of consideration. On the trial he introduced evi- dence tending to show that the stock for which the note was given was valueless, and that he was induced to purchase the same by the false and fraudulent representations of J. E. Brady, president of and acting for the refrigerating company. The plaintiff introduced evidence tend- ing to show that it purchased the note in due course, without notice of defenses. At the close of the evidence, the court directed a verdict for the plaintiff for the amount of the note, with interest. The defend- ant appeals. The case turns upon the question whether the note is negotiable. It reads as follows : "$4,500.00. No. . Kansas City, Mo., Sept. 18th, 190—. Due Six months after date for value received I promise to pay to the order of Merchants' Refrigerating Company, Kansas City, Mis- souri, forty five hundred and no/100 dollars at the office of the Mer- chants' Refrigerating Company, Kansas City, Mo., with interest from maturity until paid at the rate of six per cent, per annum. To secure the payment of this note and of any and all other indebtedness which I now owe to the holder hereof, or may owe him at any time before the payment of this note I have hereto attached, as collateral security the following: Stock certificate No. 137 of the capital stock of the Mer- chants' Refrigerating Company, calling for 50 shares of the stock ; par value $5,000. The above collateral has a market value of $6,250.00. If, in the judgment of the holder of this note, said collateral depreciates in value, the undersigned agrees to deliver when demanded additional security to the satisfaction of said holder ; otherwise this note shall mature at once. Any assignment or transfer of this note, or obligations herein provided for, shall carry with it the said collateral securities and all rights under this agreement. And I hereby authorize the holder hereof on default of this note, or any part thereof, according to the terms hereof, to sell said collateral or any part thereof, at public or private sale and with or without notice, and by such sale the pledgor's right of redemption shall be extinguished. C. B. Hoffman." The provisions of the negotiable instruments law, which it is claimed are applicable to the note, are as follows : * * * *" >» Part of the opinion is omitted. «o The court here quotes Negotiable Instruments Law, §§ 1, 2, 4, and 5. Ch. 1) FORM OF BILL AND OF NOTE 113 Tjje defendant contends that under these provisions of the statute the note is nonnegotiable for three reasons: (1) It is not for a sum certain; (2) it is not due at a fixed or determinable future time; (3) it contains promises to do acts in addition to the payment of money. If for any of the reasons suggested the note is nonnegotiable, the case should have gone to the jury on the evidence offered in support of the plea of a failure of consideration, and, on the other hand, if it be held negotiable it was error to direct a verdict in view of the defend- ant's evidence which tended to show that the bank was not a holder in due course. Although the failure to submit the issues of fact to the jury require a reversal,'it is necessary to determine the question of the negotiability of the note. In our opinion the most serious objection to the form of the note, the particular provision which most clearly destroys the negotiable charac- ter of the instrument, is the agreement as to matters other than the payment of money. This is the stipulation by which the maker agrees to deliver, when demanded, additional collateral security to the satis- faction of the holder, in default of which the note shall mature at once. It would hardly be different if the note recited that it was secured by a chattel mortgage upon certain live stock, and contained an agreement that in case their value should depreciate, and the holder should deem the security insufficient, the maker would, on demand, execute and de- liver to the holder a mortgage upon certain real estate for such amount as would satisfy the holder, and that otherwise the note should mature at once. Such an instrument would not be an unconditional promise to pay money, but would be a promise to do something in addition thereto, and would fall, as we think this instrument falls, within the principle settled by the case of Killam v. Schoeps, 26 Kan. 310, 40 Am. Rep. 313. * * * The negotiable instruments law, which is merely declaratory of the mercantile law on the subject, contains a provision which, as we con- strue it, makes the note in the instant case nonnegotiable. Section 5258 of the General Statutes of 1909 reads : "An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable." The section then enumerates certain things which are not to be regarded as falling within the inhibition. None of these exceptions cover such a promise as the one under consideration. The note is nonnegotiable for the further reason that the same pro- vision renders doubtful and uncertain the time at which it shall become due. If the maker shall fail when demanded to furnish additional se- curity to the satisfaction of the holder, the note shall mature at once. ■ It is argued that this is no different in principle from the provision that default in the payment of any installment shall accelerate the maturity of the note, and cases are cited in which we have held that a similar provision will not render the note nonnegotiable. See Clark v. Skeen, 61 Kan. 526, 60 Pac. 327, 49 L. R. A. 190, 78 Am. St. Rep. 337, SM.& M;.B.& N.(2d Ed.)— 8 114 FORM AND INCEPTION (Part 1 The negotiable instruments law itself expressly declares that a nego- tiable instrument may contain provisions of this kind. Gen. Stat. 1909, §§ 5255, 5257. The distinction between such a stipulation and the one in question lies in the fact that in the one instance the maturity is ac- celerated by the default of the maker alone, and the default is to con- sist in his failure to pay money. Here the maturity of the note is to be accelerated by the failure of the maker to do something in addition to the payment of money, and both contingencies are made to depend upon something over which he has not the absolute control. It is within the power of the holder, by refusing assent to what the maker has done, arbitrarily to make the note due at any time between the date of its execution and six months thereafter. If the holder is not satisfied with the additional security, the note matures at once, , and thus the time at which it may mature would depend upon the time at which the holder declared himself dissatisfied with the security delivered by the maker. The effect of this stipulation is to leave the time when payable uncertain and indefinite. Bank v. Bynum, 84 N. C. 24, 37 Am. Rep. 604; Brooks v. Hargreaves, 21 Mich. 254; Kimpton v. Studebaker Bros. Co., 14 Idaho, 552, 94 Pac. 1039, 125 Am. St. Rep. 185, 14 Ann. Cas. 1126; Savings Bank v Strother, 28 S. C. 504, 6 S. E. 313; Wis- consin Yearly Meeting v. Babler, 115 Wis. 289, 91 N. W. 678; Con- tinental National Bank v. McCeoch and others, 73 Wis. 332, 41 N. W. 409. See, also, Iowa National Bank v. Carter, 144 Iowa, 715, 123 N. W. 237. The law of commercial paper, like all other substantive law, is the creature of growth. Founded on the custom and usages of merchants, it is the combined result of reason and experience slowly modified by the necessities and changes in commercial affairs. The methods of modem business and the interests of maker and holder alike require the deposit of collateral securities, with the power in the holder to sell the same at maturity. The oft-repeated epigram of Judge Gibson, in the opinion in Overton v. Tyler, 3 Pa. 346, 45 Am. Dec. 645, that "a negotiable bill or note is a courier without luggage" has lost much of its aptness since 1846. The note held nonnegotiable there contained a warrant of authority in the holder to confess judgment with a release of errors and waiver of appraisement and stay of execution. The stat- ute (negotiable instruments act) provides that an instrument otherwise negotiable is not affected by a provision which "{2) authorizes a con- fession of judgment if the instrument be not paid at maturity ; or (3) waives the benefit of any law intended for the advantage or protection of the obligor." In former opinions this court has frequently referred to the conflict of authority in the decisions respecting the effect of col- lateral provisions of this character ■ in promissory notes and bills o.f exchange. Lyon v. Martin, supra ; Bank v. Gunter, 67 Kan. 227, 233, 72 Pac. 842. The adoption in recent years of the negotiable instru- ments law by so many of the states was in response to the general de- Ch. 1) FORM OF BILL AND OF NOTE 115 sire for uniformity in respect to commercial paper. The application, however, by the courts of legal principles to particular facts has not reached scientific exactness, and never will. It is hardly to be expected, therefore, that the courts of the different states which have adopted the act will always agree in the construction and application of its pro- visions. Actual uniformity in the law of negotiable instruments will remain a dream more or less iridescent; substantial uniformity is all that can be hoped for. The conclusions we have reached with respect to the instrument in question are in harmony with the former decisions of this court and accord with our view of the proper construction to be given to the language of the statute. The trial court erred in holding the instrument negotiable and in di- recting a verdict. The judgment will therefore be reversed, and the cause remanded for further proceedings in accordance with these views. FINI.EY V. SMITH, Banking Com'r. (Court of Appeals of Kentucky, 1915. 165 Ky. 445, 177 S. W. 262, L. R. A. 1915F, 777.) Action by Thomas J. Smith, Banking Commissioner, against James W. Finley. From a judgment for plaintiff, defendant appeals. Re- versed and remanded.*^ Carroll, J. On October 21, 1913, the following promissory note, purporting to have been made by the appellant, James W. Finley, was executed and delivered to the Madisonville Savings Bank: "Four months after date, for value received, the undersigned prom- ises to pay to the order of Madisonville Savings Bank, Madisonville, Kentucky, two thousand five hundred dollars, without defalcation, ne- gotiable and payable at the banking house of said bank in Madisonville, Kentucky. The undersigned having deposited with the said bank as collateral security for the payment hereof, and of any and all claims and demands of indebtedness of which the undersigned may now or hereafter be liable to said bank, whether directly or contingently, and whether as principal, surety, guarantor, or indorser, the securities named at the foot of this note, it, is further agreed by the undersigned that, in case of depreciation in the market value of the securities here- with or hereafter pledged' to secure this note, the undersigned will deposit and pledge with said bank such additional security as it may from time to time require, and, in default of such deposit and pledge for three days after notice to make the same shall be given to, or left at the place of business of the undersjgned, this note, at the option of the bank, shall becorne due and payable. And on default in payment of this note at maturity, or if it shall become payable by failure to de- 41 Part of the opinion is omitted. 116 FORM AND INCEPTION (Part 1 posit additional security, as aforesaid, or in default in the payment of any other liability of the undersigned to the said bank, said bank or its president or cashier is hereby authorized by the undersigned to sell, transfer, and deliver said securities herewith pledged, or any part thereof, and any securities which may hereafter be lodged with said bank in lieu of or in addition thereto, and any other property of the undersigned which may come into the possession of said bank for safe- keeping or otherwise. Such sale may be public or private or at any Board of Trade, and without either demand or advertisement or notice, which are hereby expressly waived, and with the right to the said bank to purchase any or all of said securities, and without any right of re- demption to the undersigned, which is hereby expressly waived, and said bank or its president or cashier is authorized to make, sign, and execute for and on behalf of the undersigned any indorsement or act of assignment or transfer necessary or proper to pass the title of the undersigned to said securities. The proceeds of such sale shall be ap- plied to pay the expenses of such sale, to the discharge of this note, and the payment of any other liabilities of the undersigned to said bank, and the surplus, if any, shall be paid to the undersigned, and, in the event this note has to be collected by an attorney, the undersigned promises to pay a reasonable attorney fee. The securities pledged herewith are as follows, viz. two certificates of the capital stock of the Harris Coal Company, being certificates numbers for $2,500 each, $5,000." Subsequently the bank became insolvent and was put in the charge of the appellee. Smith, as Banking Commissioner. Among the assets of the bank was this note, and, upon the failure of Finley to pay it, suit was brought by the Banking Commissioner, and upon a trial before a jury there was a judgment against Finley, and he appeals. One of the defenses made by Finley was that he did not sign or au- thorize in writing any person to sign his name to the note, and therefore there should have been a verdict and judgment in his favor. What is known as the Negotiable Instrument I^aw is contained in section 3720b of the Kentucky Statutes, and section 19 of this act reads: "The signature of any party may be made by an agent duly authorized in writing." * * * On a trial of the case the court instructed the jury that, if they be- lieved from the evidence "that the name of James W. Finley was signed to the note in evidence by Thomas E. Finley acting under specific or general authority from J. W. Finley to sign the same, they will find for the plaintiff." According to our view of the law applicable, this in- struction was erroneous, and the jury should have been instructed that, unless they believed from the evidence that Thomas E. Finley was au- thorized in writing by James W. Finley to sign his name to the note, they should find for the defendant. In saying the jury should have been so instructed we assume that the note was a negotiable instrument, Ch. 1) FORM OF BILL AND OF NOTE 117 and will presently set out the reasons for so holding. Of course, if the note was not a negotiable instrument within the meaning of the Negotiable Instrument Law, then the signing would be controlled by the principles of the common law as expressed in the instrument given by the court, and not by section 19 of the act. For as said in Wettlauf- er V. Baxter, 137 Ky. 362, 125 S. W. 741, 26 L. R. A. (N. S.) 804 : "If a note is not a negotiable instrument within the meaning of this act, then the rights and liabilities of the parties on it are to be determined by the law as administered with reference to nonnegotiable instruments. If it is a negotiable instrument in the meaning of the act, then the rights and liabilities of the parties to it are fixed and determined by the provi- sions of the act alone." The remaining question is: Was this note a negotiable instrument within the meaning of the Negotiable Instrument Law? *^ * * * Looking to these pertinent sections for the description of a negotia- ble instrument, the argument is made that this note is not a negotiable instrument, because, in addition to containing an unconditional promise to pay the $2,500 four months after date to the Madisonville Savings Bank, it contains the further promise that; if the collateral deposited as security for the payment of the note should depreciate in value, the maker "will deposit and pledge with said bank such additional security as it may from time to time require, and in default of such deposit * * * this note, at the option of the bank, shall become due and payable." Accordingly, it is said that the promise to pledge, if required, addi- tional security, and the condition that the note should become due upon the failure to pledge additional security demanded, take it out of the class of negotiable instruments, because it is provided in segtion 5, supra, that: "An instrument which contains an order or promise to do an act in addition to the payment of money is not negotiable." It will be observed that the note is, in the first place, an unconditional promise to pay, at a fixed time, a certain sum of money, to the order of a specified person. So that the qualities of the paper to which atten- tion is drawn as rendering it nonnegotiable are to be found in the claus- es following what we may call the terms of the note proper. This ar- rangement, however, of the matter contained in the paper, does not af- fect the question raised, because the whole of the paper must be con- sidered in ascertaining its character as a negotiable or nonnegotiable instrument. It is also true that if the independent promise to deposit and pledge additional security, and the condition that upon default in making such deposit the note should become due and payable at the option of the holder, deprive the note of its negotiable character under the Negotiable Instrument Law, it would follow that the judgment must be affirmed; ♦2 The court here quotes Negotiable Instrument Law, §§ 1, 2 and 5. 118 FORM AND INCEPTION (Part 1 for, treating the note as a nonnegotiable instrument, the promise to' pledge additional security, and the condition that the failure to do this should accelerate the maturity of the paper, did not affect the validity of the paper as a nonnegotiable instrument. It will be observed that under section 2 the fact tliat a note is pay- able in stated installments, with a provision that upon default in the payment of any installments the whole should become due, does not affect its negotiable character. It will also be noticed that section 5 provides that the negotiable character of a note is unaffected by a provision authorizing the sale of collateral security, or a provision that gives the holder an election to require something to be done in lieu of the payment of money. So that the only provision in this note that can be said not to be expressly authorized by the Negotiable Instrument Law is the clause pledging the maker to deposit on demand additional security under penalty of precipitating the maturity of the paper. We may therefore limit the inquiry involving the negotiable charac- ter of this paper to the consideration of two questions: (1) The promise of the maker to pledge, if required, additional security; and (2) the provision that the failure to do this should, at the option of the holder, accelerate the maturity of the paper. This brings before us for decision new questions in the construction of the Negotiable In- strument Law, and it is rather unfortunate that the decisions of other courts of last resort, to which these questions have been submitted, are not harmonious. The purpose of the author of this law was to secure uniform legislation throughout the United States, on the subject of commercial paper, so that a person in any one state might, by ex- amining the law on this subject in his own state, be advised as to the conditi(jn of the like law in other states. And, so far as legislation is concerned, it may be said that the desired end to be secured by uniform legislation has been accomplished. But uniform legislation on any subject necessarily loses much of its value and usefulness unless it is followed by uniform construction by the courts to which the legisla- tion is submitted for construction. This uniformity of construction, however desirable, is scarcely pos- sible of attainment, because a court of last resort, when new questions involving the construction of statutes are presented, will very reason- ably and naturally adopt that construction that it conceives to be proper, while another court of last resort in considering the same question of construction might with the same honesty of purpose reach an entirely different conclusion. This condition is forcibly illustrated in the con- flicting views of the courts upon the particular question now before us. For example, the Supreme Court of Kansas, in the case of Holli- day State Bank v. Hoffman, 85 Kan. 71, 116 Pac. 239, 35 L. R. A. (N. S.) 390, Ann. Cas. 1912D, 1, held that an otherwise negotiable note, with collateral security attached, which provided that, "if in the judg- ment of the holder of this note said collateral depreciates in value, the Ch. 1) FORM OF BILL AND OF NOTE 119 undersigned agrees to deliver wiien demanded additional security to the satisfaction of said holder ; otherwise this note shall mature at once," was rendered nonnegotiable by this additional promise, and for the fur- ther reason, as stated by the court, that the time of the maturity of the note was rendered doubtful and uncertain by the provision that t(pon the failure of the payee to deliver the additional security the note, at the option of the holder, should mature at once. On the other hand, the United States Circuit Court of Appeals for the Seventh Circuit, in Kennedy v. Broderick, 216 Fed. 137, 132 C. C. A. 381, L. R. A. 1915B, 472, ruled that a condition in i note that, "if in the judgment of the holder of this note said collateral depreciates in value, the undersigned agrees to deliver when demanded additional security to the satisfaction of said holder; otherwise this note shall mature al once" — did not affect its negotiable quality. Other cases illustrating divergent if not conflicting views of the courts upon this and kindred subjects are : Hunter v. Clark, 184 111. 158, 56 N. E. 297, 75 Am. St. Rep. 160; Raleigh County Bank v. Poteet, 74 W. Va. 511, 82 S. E. 332, L,. R. A. 1915B, 928, Ann. Cas. 1917D, 359; Fleming v. Sherwood, 24 N. D. 144, 139 N. W. 101, 43 L. R. A. (N. S.) 945 ; State Bank of Halstad v. Bilstad, 162 Iowa, 433, 136 N. W. 204, 144 N. W 363, 49 L. R. A. (N. S.) 132; Rossville State Bank v. Heslet, 84 Kan. 315, 113 Pac. 1052, 33 L. R. A. (N. S.) 738; First National Bank of Pomeroy v. Buttery, 17 N. D. 326, 116 N. W. 341, 16 L. R. A. (N. S.) 878, 17 Ann. Cas. 52; Bell v. Riggs, 34 Okl. 834. 127 Pac. 427, 41 L. R. A. (N. S.) 1111; Farmers' Loan & Trust Co. V. McCoy, 32 Okl. 277, 122 Pac. 125, 40 L. R. A. (N. S.) 177; Taylor v. American National Bank, 63 Fla. 631, 57 South. 678, Ann. Cas. 1914A, 309. Without citation of further authority, we are inclined to adopt the view that the conditions relied on as destroying the negotiable charac- ter of this note do not accomplish that purpose. The essential things pointed out in section 1 of the act are: (1) That the instrument must be in writing, signed by the maker; (2) must contain an unconditional promise to pay a sum certain in money ; (3) must be payable on demand or at a fixed future time ; (4) must be payable to the order of a speci- fied person or to bearer. And the independent promise in this note pledging the holder upon demand to put up additional collateral did not substantially affect any of these requirements. The promise to strengthen the collateral under penalty of the note maturing at once did not change the date of its maturity any more than would the provision in a note payable in installments that upon default in the payment of the installment the whole should become due. We think the promise to do an act in addition to the payment of money that will render the note not negotiable must be a promise that conflicts with some one of the essential characteristics of a negotiable note ; or, as applied to the case in hand, it must be a promise to do some- 120 FORM AND INCEPTION (Part 1 thing that would affect the unconditional promise contained in the body of the instrument as the time fixed for its maturity. The Negotiable Instrument Law, in section 2, permits a note to be made payable in installments with a provision that upon default in the payment of any installment the whole shall become due. Under this provision, if any installment of a note payable in installments at a fixed time is not paid, this delinquency precipitates the maturity of the' note and thereby changes the time fixed for its maturity as certainly as does the stipula- tion that, if the value of the collateral is impaired, other collateral should be supplied or else the note will become due. It is quite usual to pledge collateral as security for the payment of a negotiable note, and we do not think that any narrow construction of the law should be adopted that would have the effect of impairing the value of this kind of security or that would deny to the holder the right to insist that, if the value of the collateral deposited should become im- paired, the maker must strengthen it or else precipitate the maturity of the paper. This condition in the note is merely supplementary to the fixed and controlling promises and is really nothing more than ad- ditional security for the payment of the instrument. It is not, strictly speaking, "an order or promise to do an act in addition to the payment of money," but is rather an order or promise to do an act that will better secure the promise to pay the money stipulated at the time fixed in the note. If this condition or promise would disturb the negotiability of commercial paper, the effect would necessarily be to lessen the value of collateral as security, because holders of paper would not be disposed to accept collateral, much of which has a fluctuating value, if they were denied the right to insist that its value should be maintained in an amount sufficient to serve the purpose for which it was accepted. Being of the opinion that the instrument sued on was negotiable paper, the judgment is reversed, with directions for a new trial in con- formity with this opinion. Ch. 1) FORM OF BILL AND OP NOTE 121 (III) As TO Medium of Payment HODGES V. CLINTON. (Supreme Court of North Carolina, 1792. 1 N. C. 53.) Case. The jury found the following special verdict: "The jury sworn, find that the defendant did assume, find no set-off, find the defendant did not take the benefit of the act of insolvency, and assess the plaintiff's damage to £73. 16s. and 6d. costs, subject to the opinion of the court whether the note on which the plaintiff's ac- tion is grounded is a negotiable note within the statute; if it is, they find for plaintiff; if not, for defendant." The note was for £100. currency, payable in tobacco. Taylor, for the defendant, argued that no decision upon St. 3 & 4 Anne, c. 9, to which our act of 1762 was in analogy, was to be found, that gave negotiability to notes, except they were for the payment of money alone. Besides the many cases establishing the doctrine, that even notes payable in money are not negotiable if they are contingent, the case of the East India bond is in point with the present. Moore V. Venlute. And if anything else is promised besides the payment of money, the note is not negotiable. 1 Sharp. 629. The design of the act, which was to give to notes a circulation equally beneficial to commerce with bills of exchange, would be frustrated by a contrary decision. Judgment for the defendant HODGES V. SHULER. (Court of Appeals of New York, 1860. 22 N. Y. 114.) Appeal from the Supreme Court. The action was against the de- f endants as indnrsers- of the following instrument or note: "Rutland & Burlington Railroad Company. "No. 353. $1,000. "Boston, April 1, 1850. "I n four ypgrg frnm datpj for value received, the Rutland and Bur- lington Railroad C ompany pro jni'^pf; tn ppy in "Rngtnn to Messrs. W. S. & D. W. Shuler, or order, $1,000, w^tli jptprpct tViarpnn^ payable semiannually, as per interest , wa rrants Vi ^reto attac hed, as the same shall become due; o r upon the surrender of this not e, together with the interest warrants not due to the treasurer, a t any time until s ix m onths of it ri mntnrity, ha shnll issnp tn the hnldpr th^r^^f tpn Rh a r?s i n the capital stnrk in said companv in exchange therefor, in which case interest shall be paid to the date to which a dividend of profits 122 FORM AND INCEPTION (Part 1 shall have been previously declared, the holder not being entitled to both interest and accruing profits during the same period. "T. Follett, President. Sam. Henshaw, Treasurer." Judgment for plaintiff, and defendants except."^ Wright, J. The s ingle question j spaJldJiejLtbe-defendanta-caiL-be held as indnrsers. It is i nsisted that the rjL-canaotr^Qf -4h&-X£a£i3as : (1) That_thej nstrument set out in the complaint, is_neit her in term s nor legal effe c F a negotiable promissory note, hut a mere ag^reemeat: t he mdorselnent j n blank of the defendants, operating, if at all, only as a mere transfer^ agd-iiQt-as-aa^-eagage m en t to fu l filTl Eelc^tract 6i the railroad company in case of its default; and (2) th at if it be a n ote, the no tice of^ its dishonor was insufficient to charge the defe nd- ants as indorsers. Whether the blank indorsement of the defendants imports any bind- ing contract, depends on the law of Massachusetts ; in which state it is to be assumed, from the facts in the case, that the original instru- ment and indorsement were made. But the law of Massachusetts does not differ from that of this state or of England in any particular material to the present inquiry. In Massachusetts there has been ap- parently a relaxation of the common-law rule so far as to extend the remedy against indorsers to notes payable absolutely in a medium oth- er than cash; but in all other respects the legal rules applicable to negotiable paper, are the same in that state as in our own. Th e instrument on wh ich_the_action_ was hrnught has all the esse n- tial qualities of a negotiable promissory note. Tt_[g_fpr thp \inrnnA^- tig iial p a y n i ci Uo f^-C EnTrtn -s um ot money, at a ■^pprificH time, to the payee^s_Qrd£K It is not an ageement ia ^Hp a1tprnatJT,?p_j|n^jiay^jn money or railroad stock. It was not optional with th e rpakprg to pay iri UMigyrnr-sttskrahd thus fulfill their promise in either of two speci- fied ways ; in such case, the promise would have been in the alterna- tive. The possibility seems to have been contemplated that the owner of the note might, before its maturity, surrender it in exchange for stock, thus canceling it and its money promise; but that promise was nevertheless absolute and unconditional, and was as lasting as the note itself. In no event could the holder require money and stock. It was only upon a surrender of the note that he was to receive stock ; and the money payment did not mature until six months after the holder's right to exchange the note for stock had expired. We are of the opinion that the instrument wants none of the essential requisites of a negotiable promissory note. Ttj\ yac; an al > i, i. 1] ih' » \ u ] i imnn . rlH-in n- al engagement to pay money on a day fixed ; and although an elect ion was~^iven to the prpmisges, upoa-a^ urrender o f_Jh e instrument six mon_tlTs j3efore~iTs"i na±ari]SCJxt, exchange it f or stock, this^did, not al- ter its charac ter, or ma ke_the_promrse in the^ alternative ^ in the sense *3 The statement Is abridged, and a part of the opinion omitted. Ch. 1) FORM OF BILL AND OF NOTE 123' in which that word is used respecting promises to -pay. The engage- ment of the railroad company was to pay the sum of $1,000 in four years from date, and its promise could only be fulfilled by the pay- ment of the money, at the day named. * * * Judgment affirmed. ROBERTS V. SMITH et al. (Supreme Court of Vermont, 1886. 58 Vt. 492, 4 Atl. 709, 56 Am. Rep. 567.) Assumpsit. Heard on demurrer to the declaration, December term, 1885 ; Walker, J., presiding. Demurrer overruled. It was a lleged in the amended count th^^t jh" ^^pfp^d^^t "rpadp and- d£liv£red-te-t5fie J. S. King h i,s promissory note in writing in words and figures as follows, to wit : 'November 17, 1849. Twoj[ear£_fram date, for value received. Tpromise to pav Jr-Sr-Kuig or bearer,,_J3»e- ounce of gold. E. P. Smith' — and thereby promised for value received to^ay J. SrRing, or bearer, one ounce of gold two years from date, which period has elapsed before the commencement of this suit. And said plaintiff avers that thereafterwards, to wit, on the 20th day of November, A. D. 1849, at Manchester aforesaid, the said J. S. King, for a valuable consideration to him, then and there paid by said plain- tiff,' then and there sold, assigned, and transferred said note, to said plaintiff, and said plaintiff then and there became and still is the sole and absolute owner of said note, of all of which defendant then and there had notice, and in consideration of -the premises said jjef enda nt then and there specially promised th e plair itiff to pay to t he plaintiff the contents of said note according to tne tenor and effect of the same ; yet said defendant, though requested, has disregarded his said prom- ise and has not "paid the same."** Veazey, J. Although it has long been settled in this state that a written contract having the usual form of a promissory note, but paya- ble in some specific article, may be treated as a promissory note as to the form of declaring upon it, and the necessity of proof of considera- tion, and in some other respects (Rob. Dig. 92), yet such an instru- ment is not negotiable because not payable in money (Collins v. Lin- coln, 11 Vt. 268 ; 1 Dan. Neg! Inst.' 42). T he instrum ent- declar e d upon -aa g not even a pro mi se tn nay a gi v- pnciVnJ ^ ''Pf^'fi'' articles, but only to pay "one ounce .of _gold." It stands, fOT consideration, upon the question of the sufficiency of the declaration, under the demurrer thereto, as though it were a promise to pay one bushel of wheat. This suit is by a purchaser from the payee. T he plaintiff cannot stqn^ "P"" ^^'^ ^^^* rniint^ as the in<;tni- ment declared upon is not negotiable, and no promise bv -the-defend- , ant to the plaintiff is allef red. But the plaintiff i;-p1ip<; mainly upon thf ** Arguments of counsel are omitted. 124 FORM AND INCEPTION ffart 1 n ew cou nty and clainisaQ_cecpver_jhgX£Qti-a&Jtli£,as signee of j .jchose in action ^on the spe cial promise of Jhejnakei^-io^pay"-fee-^^ame "to The pleader sets out the instrument as a promissory note, and avers that the payee "for a valuable consideration" to him paid by the plain- tiff, sold and transferred the note to the plaintiff, and that the latter became and is the sole and absolute owner thereof, of which the de- fendant had notice, and "in consideration of the premises" "specially promised the plaintiff to pay" to him "the contents of said note ac- cording to the tenor and effect of the same," etc. If tlT^J jctrumpnt Vi-irl rnntainpH a pr pmisc tO paY . 3 Slim CfTta Jn in s pecific articl es, this count, so far as object ifla_ta it is nrg prl on the gr gund ot msufticien cy of the a venaajtrif rnnsir1pratiea-4ep-the de- fendantl~promise, "and of the consideration from the plaintiff to the ongmal payee, king, would be ^oo d. Smilie v. Stevens, 41 Vt. 331 ; Moar V. Wright, 1 Vt. 57. But such is not the instrument. It is b ut a promi se to pay j. that is, deliver a certam art icle of merchandise def i- fiite in amount. Be cause g ;old entersjnt o the com iiDsitkiiL of money, we canno t_assu me that "an ounce o f gnlH"_iQ mnnej^ or that it has a fixed and unvarying value. Tb£-CQfttf a:et-in- qttestiea -4a&ks,- JiQt .only thp quality j rfjiegatia-biHtyr-bnlrcertainfy and p"recision~as to the amotmt to be pai d. Upon failure to perform there would be no definite speci- fied sum due as in case of a promissory note. The_d£claxation is drawJLJU^pQnJJie-tb€0iy-febat-the-instrmneiit-^wa«-ar-praniissory; notelex- ce pt in respe ct to negotiability. No value is alleged in the thing prom- ised! The pleader-cla:ims-t©~be entitled to the value of a commodity, without alleging it has any value. It^_is_£lainty impossible to apply to this_pa£e r a form of dec laration adapted_splely tcr-a-p5QBiis§nr5'lnote. Although" it has the form of a promissory note, it ia_nnt_suGfe, and ca nnot B e~trgated-as-sttcfa in pleading. It . must he treated as a simple contractforThe~detT'vefy~of merc handise . As a declaration upon such a conf?3ct-Tt4s-n,vaTrttngTTr"pfoperaverments as to consideration, as to value, and as to breach and damages. Chit. PL tit. "Of the Declara- tion," *295 et seq. Judgment reversed; first and amended counts adjudged insufficient; cause remanded.*" THOMPSON v. SLOAN et al. (Supreme Court of New York, 1840. 23 Wend. 71, 35 Am. Dec. 546.) This was an action of assurgpsit. tried at the Erie circuit, in Jan- uary, 1839, before Hon. Nathan Dayton, one of the circuit judges. The suit was brought on a note made and dated at Buffalo, in this ^° A hill or note payable In checks or exchange Is not negotiable. First Bank v. Bank, 84 Tex. 40, 19 S. W. 334 (1892); First Bank v. Slette, 67 Minn. 425, 69 N. W. 1148, 64 Am. St. Rep. 429 (1897). Ch. 1) FORM OF BILL AND OF NOTE 125 State, on the 8th of July, 1836, for $2.500. payable 12 m n rths aftpr date, at the Commercial Bank in Buffalo, i n Canada money . The note was made by James Sloan and John Wilkeson, payable to the order of Johnson, Hodge & Co., which firm was composed of E. Johnson, P. Hodge and M. F. Johnson, by the latter of whom the note was in- dorsed in the name of the firm. Th p ,<;qit- was hrnnghf a£-ainst the m akers and in dorsers jointly. Th e declaration contained a specia l CTO nt Upon ttTe~m>Le. and also the common money coun ts. After provmg the signatures of the defendants, the protest of the note and notice to the indorsers, the pl aintiff's counsel offered to read the not e i n evidence, to which the defendant's counsel nbjectpH , insisting' tha t. bpincr payahlp ]p Canada mnnpy, it wag no t npg rntiablp ; t hat Canada m oney meant bills of the Canada banks. The plaintiff thereupon of- fered to prove that, at the time of the making of the note, Sloan and Wilkeson, the makers thereof, desired to have it drawn payable in Canada bank bills, but that he objected, and insisted that it should be made payable in Canada money, which testimony was objected to, and rejected. The plaintiff thereupon , under a written consent of the de- fendants, r ead in evidence a copy of an act of the provincial Parlia- ment of Upper Canada, passed autn April. i»ab. nxmo ^ the weight a nd r ate of certain gold and silver coin s, and declaring that the same shoul d p ass current an d be deemed a legal tender m the province, in payment oT"all debts and demands ; as thus : "The British guinea, weighing five pennyweights nine and a half grains, Troy, at one pound, five shill- lings and six pence ; the British sovereign, weighing, &c., at, &c. ; the eagle of the United States of America, coined before, &c., weighing, &c., at, &c. ; the eagle of, &c., coined since, &c., weighing, &c., at, &c. ; the British crown at six shillings ; the Spanish milled dollar, at, &c. ; the dollar of the United States of America at, &c. ; the Mexican dollar at," &c., and, after reading the same, rested. ^ The counsel for the d efendant then offered to prove the meaning of the words "Canada money." a s generally understood at Buffalo bv persons in trade there . Which evidence was objected to by the plaintiff's counsel; but the ob- jection was overruled by the judge, and the defendants thereupon called several witnesses, who p roved that Canada money was unde r- s tood at Buffalo to mean bills of the Canada banks . Upon which evi- dence thfe judge ordered a nonsuit to be ent ered. The p laintiff ask s for a new trial . "CowEN, J. A p rnmissnrv nntp must, in order to come within the statu te, like a bill of exchange, be payable in money only, in curren t specie (Bayl. on Bills, 10 [Am. Ed. of 1836] ; Ex parte Imeson, 2 Kose, 225) ; or at least in what we can judicially notice as equivalent to money. Accordingly a note payable in bills of country banks (Jones V. Fales, 4 Mass. 245), in Pennsylvania or New York paper currency, current in Pennsylvania or New York (Leiber v. Goodrich, 6 Cow. 186), in notes of the chartered banks of Pennsylvania, though 126 FORM AND INCEPTION (Part 1 the note was made and payable in the state of Pennsylvania (McCor- imick V. Trotter, 10 Serg. & R. [Pa.] 94; see Cook v. Satterlee, 6 Cow. 108, 16 Am. Dec. 432), in paper medium (Lange v. Kohne, 1 McCord [S. C] 115; see McClarin v. Nesbit, 2 Nott & McC. [S. C] 519), or in cash or Bank of England notes (Ex parte Imeson, before cited, 2 Buck, 1 S. P.), has been held without the statute. The farthest we have gone is to say that a note drawn and payable here, in New York bills or specie (Keith v. Jones, 9 Johns. 120), or in bank notes current in the city of New York (Judah v. Harris, -19 Johns. 144), is negotiable. In both cases the court went on the ground of a right to take judicial notice that New York bills, and especially bank notes current in the city of New York, were customarily con- sidered and treated as equivalent to specie. And, in the last case, they said, though the defendant might have a right to pay with foreign bills current in the city the note was still to be regarded as payable in current money. A dmitting that the nntp in qu e.stin n imports an obligatin n tn pay in g old and silver, mrrpnt in Canadq , I do not see, on what princ iple we can pronounce it to be payable in money, within the meaning of the rule. It is not pretended that coins current in Canada are, ther e- fore, so in this state. As gold and silver they might readily be re- ceTved, and so imgHtthe coin of any foreign country, Germany or Russia for instance ; but t h " r rf d it^'-' i iii ivl il j ii n! in i nnny r n s^s dnnh t- le ss would, refuse to receive them, herauij e Mgnorant of their val ue. In law the y are all c ollateral commodit ies, like mgots or diamond s, which though they rmght be received~and be in fact equivalent to money, are yet but goods and chattels. A note payable in either would, therefore, be no more negotiable than if it were payable in cattle or other specific articles. The fact of Canada coins being current here is not, at any rate, so notorious that we can judicially notice them as a universally customary medium of payment in this state ; and if not, they are no more a part of our currency than Pennsylvania bank bills. Leiber v. Goodrich, before cited. Nor do I perceive in the case any proof, or offer to prove, that such coins were of universal currency. This view of the case is not incompatible with a bill or note payable in money of a foreign denomination, or any other denomination being negotiable, for it can be paid in our own coin of equivalent value, to which it is always reduced by a recovery. Chit, on Bills, 615, 616 (Am. Ed. of 1839) ; Deberry v. Darnell, 5 Yerg. (Tenn.) 451. A note payable in pounds, shillings and pence made in any country is but another mode of expressing the amount in dollars and cents, and is so understood judicially. The course, therefore, in an action on such an instrument is to aver and prove the value of the sum expressed, in our own tenderable coin. It is payable in no other (vide Bayl. on Bills, 23 [Am. Ed. of 1836], and the cases there cited); whereas on the note in question, Canada money, a specific article, would be a law- Oh. 1) FORM OF BILL AND OF NOTD 127 ful tender. Canada coppers, for aught I see, and, under our own deci- sions, bank bills commonly current in Canada, would also be tender- able. Nor is it necessary to deny that, had this note been m ade, indnrsed , and payable in Canada, it would have been negotiable, It would then on its face have been payable in the current coin of the country where ;t was made. Th e objection is that the note w^" triaHp^ inrlnrcprl^ TnH payabl e^ here, in a foreign commodity, which the payee was entitl ed t(rc lemand specifically, and to reject gold and ■jjlvpr t-nrr^nt in th" United Sta jeg. It is of course the same thing under the extrinsic evi- dence offered by the plaintiff, and received by the judge. The Cana- dian statute merely proved what coins were current as Canada money, which could not be recognized as the money of this country. In the light of that proof, the note must be read as necessarily payable in Canada money, current by law in that province. It did not improve the case, without following it with some statute making that money, as such, current here ; or,, at least, showing that it was, in fact, so notoriously current among us, that we should be entitled to take judi- cial notice of the fact. The latter is the utmost that, by our cases, the plaintiiif could claim ; though we have gone farther than the cases de- cided in any other state or country, so far as they were cited on the argument, or have come under my observation, except a case in Ten- nessee. Deberry v. Darnell, 5 Yerg. 451. The instrument was payable in North Carolina notes, yet held negotiable. In McCormick v. Trot- ter, I fear we were somewhat justly criticised for the high ground on which we had placed all our state bills in Keith v. Jones. At any rate, Mr. Justice Duncan very truly reminded us that New York state bills- had depreciated in common with those of Pennsylvania. A remark which he made as to the note in that case, which was payable in ■ Pennsylvania bills, would, I apprehend, be- nearly applicable to our own, at some stages of our currency, viz., that "it was payable in more than forty kinds of paper of different value." * * * The motion to set aside the nonsuit, and for a new trial, is denied.** *° Arguments of counsel and a part of the opinion are omitted. In an action against the indorser of a note payable in Canada in "Canada currency" the court said: "In Thompson v. Sloan, the Supreme Court of New Torli held that a note payable in Buffalo in 'Canada money' was not negotiable. This, however, is not, as we think, in. accordance with the general current of decision. Ju^ge Story says: 'If it be payable in money, it is of no con- sequence In the currency or money of what country It is payable. It may be payable In the currency or money of England, France, Spain, Holland, Italy, America, or any country.' Story on Bills, § 43; Chitty on Bills, 153, 158. We cannot with any propriety refuse to recognize the right of every country to fix its currency, and It is impossible for any civilized govern- ment to exist without some legal standard of money. The only question here is whether a note payable, in 'Canada currency' is or is not payable in money." Black T. Ward, 27 Mich. 191, 194, 15 Am. Rep. 162 (1873). 128 FORM AND INCEPTION (Part 1 HOGUE V. WILLIAMSON. (Supreme Court of Texas, 1893. 85 Tex. 553, 22 S. W. 580, 20 L. R. A. 481, 34 Am. St. Rep. 823.) Gaines, J. This is a question certified to us for determination by the Court of Civil Appeals for the Third Supreme Judicial district. The certificate is as follows : "The plaintiff. Hogue, brought suit against defendant, Williamson, up on a written nhligation . which r e_ads as follow s : ' Saltillo. J anuary 2_5. 1888 . On_or_before_Ma3L_L 1888, I iirnmise tn pay C . C. Hogue, or order, o ne thousand Mexican silver dollar s. Geo. S. Williamson. $1,000 Mex.' The petition al leges t hat on Mayl, 1888 , Mexican dol - l ars were each worth 85 cents in 'American rnin .' and plaintiff ask s judgment for $850. He states in his petition that the note is pay- able in Mexican silver dollars. The def endant filed a g-pnpraJ-xleriial, and also averred in his answer u nder oath that the note sued on was gi ven for money which the plaintitf had won from d efendant in a g-argp wit^ rarrls. and was th erefore illegal atid -yoid;- "Upon the trial in the court below the plaintiff put in evidence the written obligation sued on, and proved that on May 1, 1888, Mexican silver dollars were worth 80 cents each. The plaintiff then rested, and the defendant introduced no testimony. The c ourt instructed the j ury to return a verdict for defendant, which was done, and judgment en- ter'ted accordingly. If' the instrum gnt -g-uod on was .a-43 romissory note , t h^s is err or. Newton v. Newton, 77 Tex. 511, 14 S. W. 157. "With this explanation, the Court of Civil Appeals for the Third Supreme Judicial District certifies and submits to the Supreme Court for decision as part of the law of this case, as a new or novel question, the following proposition: 'Was the burden of proof on the plaintiff, after the introduction of the instrument sued on, to show nonperform- ance of its obligations by defendant ? In other words, i s the written ob- ligatinn crvry nntp, the He glaration ran, tbaf th° d°- fendant made a note, et manu sua propria scripsit. Ex ceptio n_was ~t aken. that smce the 'statut e h" f^1^n"1^ >i^^^p '^airl that tbp Hpfp^TTt^Tir - signed the n ote, but the cc>ur t held it well enough , beca use laid to be 134 FORM AND INCEPTION (Part 1 wrote witli Vii'; own ha.n H, and t here needs no subscription in that cas e, for it ii si i ffi^'''"^ Vii'f ncimp k i"n any part nf if. I. J. S. promisc to pay is as good as I promise to pay, subscribed J. S. DRUMMOND v. DRUMMOND. (Court of Session, Scotland, 17S5. Mor. Die. 1445.) Ja mes Drummond subscrib fidjaaJ he a crp ptnr nf n bill drawg jnjhese t ernigr"^Against Martinma rnast^pny to Anne Pnimmnnd, or order. the sum of 103 5 ^merks, fq rjvalije /' But ther e was no svtb&eription of the drawer. It was nhjerted b y the ntber rreditnr s nf Ja mes Drummond that a h;iJjTn1_5i]bgrr;hprl hy thp .dtviwi^t ^ lliMimh ^tcceplfd, t.t)rtW-^lQi_be_SUS- tai ned as a eround of d ebt^ B ut as the creditor's name was inserted in the body of the bill in qu estion, and thus the r e occur red s'l ^-l^" psspnHal rpgnisitps nf a pr omissory note, Thb Court repelled the objection. *» STOESSIGER v. SOUTH EASTERN RY. CO. (Court of Queen's Bench, 1854. 3 El. & Bl. 549.) Cajfi-agarnsL the deiead^nLas-XQlumon carrier for~thg_Ioss_of_£9. 10s. On the trial, before Crompton, J., at the Westminster sittings in last Michaelmas term the following facts appeared : The pl aintiff was a- ^yi mmercial trav eller in the employment of Gideon Goold named in the declaration who resided at Birmingham. A person named Cruttpprlp j] rfpiHinp; ^ f Ch^i^hn. -m hnj n g indebted t '^ Qoold to the amount of ill. 10s. gaj;£ -to the plainti fi£...3tChatham, to be_b}M[iijaHTairaiTiitted_JXLllQold, an instrument of which theToTTowing is a copy : "ill : 10 : 0. Birmingham, Sept. 1852. "Thrqe ninnth s afte rdate pay to my Order the sum of e leven pounds lOg^^-ialue received. ' ~ " "~^ — ■ _. "MrT^iTrttenden, Jeweller, &c., Chatham." Across the face of this instrument was written : "Accepted payable at Bank. G. Cruttenden." *8 Contra : Tevis v. Young, 1 Mete. fKy.) 197, 71 Am. Dec. 474 (1858). But see the dissenting opinion of Simpson, J., in which he says : "The only parties to a bill of exchange between whom- a direct undertaking exists are the acceptor and the payee. The former, by his acceptance, agrees to pay to the latter the amount of the bill according to its tenor and eftect. Here such an undertaking existed ; the acceptor agreed to pay the sum named In the Instrument to the payee, and the latter, by his indorsement, transferred the benefit of this promise to the holder. What more was necessary to create a liability upon the parties? There is a direct promise to pay the money, «.nd a transfer of that promise." Ch. 1) FORM OF BILL AND OF NOTE 135 Goold was to co mplete this instrum ent, which was stamped with a two shiffing bill stamp, by sigTiing liis own name as_ drawe r. The pl aintiff hadjio authority todraw or accept bills for Go old. He a c- c ordingly enclo sed the_document. to gfitber with gnlrl anTl silver tf> the a mount of £9PVJs77 on account of a private debt of his own to Goold, in a parcelj^which he directed to Goold at Birmingham, a nd deli vered t o defendants , at their station at Strood, to be carried, -ailawhich they received for that purpose. TViPrp woe iffivpH^ I't^ p fnng pjcuous part of thp nffirp whfr° tb " j ' 1 "' ! ^'- iHrni iwad, ^ notice, requiring a n in- cre ased rate of char q-e. according to St. 11 Geo. IV & l~Wm. IV, c. 68, §§ 1 and 2, for the articles specified in section 1. No notice of the value or contents of the parcel was given, nor any. increased rate paid or agreed for. The cash was abstracted from the parcel, by some means which did not appear, befor.e it reacned Goold : t he remaind er of the contents came safely to hand. Ottthis evidence, the counsel for the dp fphdants conten d**^ '^hat the p arcel contained , within the meaning of the carriers' act (St. 11 Geo. IV & 1 Wm. IV, c. 68, § 1, g old or silver coin of the realm, an d a bill, nntp ^r «;pf-nritY fnf paympnt nf rnnV^Ji "'" writ ' n ^J ) tVl" Y^IlT^ "f tb " wholfiL-fixceedingflO., and th at no notice of the value or conten ts having been f | "iven, or incr eased ra te paiH nr contracted for, the defend - ant s^ were not liable for the loss. The plainl ifE's counsel conten ded that th e document, being incor^p lp^^Py-vaSJ^'^" value as a security or writing, and tba. t- tharpfnrp tbp pnrp p- 1 r i i i iuTTTi ^ as?r-aT+w4i- ■>, wi l hi ll I h e meanin g of the staj n^", "^ ^^^ yalup of mnre than /9. 10 s. The learned Judge directed a ve rdict for the plaintiff for £9. 10s., reserving leave to move to enter the verdict for the defendant if the skeleton bill was an article within the carriers' act, and was of such a value as to make together with £9. 10s. more than ilO. It was agreed that the jury were to be taken as finding, so far as it was a question for them, that the writing was of no value. In last Michaelmas term, W illes obtained a rule nisi accor dingly. *° Lord Campbell, C. J. I am of opinion that this r ule ought to be d i.scbarg^e d. The case of the defendants is clearly untenable unless this paper can be brought within section 1 of the carriers' act (11 Geo. IV & 1 Wm. IV, c. 68. TtjT^ngt hp slin-yyi^ to be a bill, order, note, or -""-nr'ty f"'' pnyr pp"<' "f money, or writinp-, of such value^ as to make up, with the. £9. 10s., more than £10. It is not a bill of exchan ge ; there is nritbrr rJrmTrr nnr payrr N or is it a promissory note to "'pav ^any one wh o mirht bnpprn tn brjhebearer; that Cruttenden s hould becomeJiable-gcnrrnlly to t'he ben rgrjiyagquite contrary to his'lnte n- tion. Nor is it a securit a-ioF-money ; for we must look at the time of the delivery to the carrier ; and at that time nothing could be claimed on it. I think it is a writing; it would be very difficult to define a writing so as not to include this paper. Then the question is as to *° The statement is abridged, and the arguments of counsel are omitted. 13fi FORM AND INCEPTION (Part 1 the value. If 4Jii£_writing_pj2Ssess_5ii3Ljialue- teria l that value must be ill. 10s. Noj writin^!]BsEe::;tlmt-^«alii£--at^te"tmie^ its_ dooiQtsee that^it was oi int a paftieSac ITvigTTaH tL£laicB--te-4ha1~ diuouiil, l i y u a tt iri R- his . name , to it ; but that had not bee n in f act done by th gjndiv idual, Goold. I can- not "agT^e--that-te''f3cecutorsof Goold could have madeTT valuable by putting' to it his name, or their own, or any name whatever. Nor could any one have bestowed value on it, who, not being contemplated by Cruttenden, had found it. Tt_i s th prp fp re. in- <''ntirn ncc ordance with ai l the authoritie s^-to hold_tot"This__writing was of no value at t he ti me of its deIiv^fy-ta.tH ^^carrTeE "^ ' ~~ WiGHTMAN J. The ' question is, whether that which beyond all I doubt was a writing was, at the time of its delivery to the carrier, of a /vali^ exceeding £10. The fallacy of the argument lies in attempting to mafte the. power of conferring the value at the end of the destined carriage the criterion of the value at the time of the delivery. I think the rule should be discharged. ErlE, J. I am of the same opinion. This being an imperfect in- strument, and not a complete bill, order, note, or security for money, but clearly a writing, we are not bound to say that, in point of law, it was of value. I use that expression, because it may be that, this being, except for the absence of the name of the drawer, an accepted bill of exchange, a jury may in a similar case find that the writing is of value ; and I do not wish to preclude myself from considering whether such a finding might not be sustained. Crompton, J. I am of the same opinion; and I have no remarks to add. Rule discharged. SIFFKIN V. WALKER & ROWLESTONE. (Nisi Prius, before Lord EfUenborough, O. J., 1809. 2 Camp. 308.) , Act ion on a promisso ry note in the following form : / "Two months after ditrT^rornise to pay J. Siffkin or order £300. fcr value received. Thos. Walker." The dexJnrntinn stnterl that the defend a^itsjTi^adp thpiV rrzllilLTi'^rn- issory note, whirh WRS signed by Walker for "hTrn ';p1 f and Row lestnne, whereby they promised to pay, etc. P^r^ in opening the case, un dertook to show that the defend ants WQreJointlxjndebted t o the plain titt on a charter party of affreight- ment/to the amount ot ±300. and t hat the not ejj p^l^'-prl ^pr^ r, vvas givea-bi LWalker in satisfaction of this de bt. "^ Lord ELLENBORrf^n^ I think your r emedy w as either jointly against both defendant^ on the charter party, nr separately -? P^inst Walket:--6B--tli£_prorriissory note. How can I sav t1^^<- ^ ""t° made Ch. 1) rORM OF BILL AND OF NOTE 137 a nd sigfned by one in his rvwn name is the note of him and another D ^son neither mentioned nor referred to? T^rU- rnntpnrlpfl tVi^t ^^"^ "O te was Set out in the declaration accord- in g to its import nnd ^°fyn1 "ffit'rt; th at Walker Had author ity to bind TTny ylpginnn for ll i in i l f li l , -i ii ll llut t liP prpfumptinn ni j ^^ ^ waS. ^^ t hat he had Hnne in r^lthnti^h T?nw1p=tnn<»'^ n?m.» ^Aran nnt i ntroduc ed. It was universally acknowledged that any number of partners might be bound by a note drawn in the partnership firm; and the legal conse- quence must be the same if a note be given for a partnership debt, whether the phrase "& Co." be employed or not. lyord EllEnborough. The import and le^-al effect of a writt en in- strnm^ nt mnrt h p trgthprpr l ffnm J h" j'^rv n " ^" ^yhir^h it ia pyprpcg prl^ and Lnyisttreat this nntpas a ■';e p''''''te seg nrjtj^^jfnr a joint debt. PlaintiffnohsUited.' " ' LEADBITTER v. FARROW. (Court of King's Bench, 1816. 5 Maule & S. 345.) Assumpsit upon a bill of exchange and the money counts. Plea, non assumpsit. At the trial before lyord Ellenborough, C. J., at the London sittings after last Hilary term, there was a verdict for the plaintiff, damages £50., subject to the opinion of the court upon the following case : The plaintiff and defendant, at the time of drawing the bill in ques- tion, resided at Hexham. The defendant, who was a tanner, was also agent of the Durham Bank, in which capacity he acted from July, 1813, to July, 1815, when the bank failed. On the 8th of June, 1815, the plaintiff sent £50. to the house of the defendant, in order to pro- cure a bill upon London for the amount, and the defendant filled up and signed the bill in question upon one of the printed forms of the Durham Bank, and sent it to the plaintiff. The following is a copy of the bill : "N. G. 205. £50. Hexham, June 8, 1815. "Forty days after date, pay to the order of Mr. Thomas Leadbitter fifty pounds, value received, which place to the account of the Durham Bank, as advised. "Messrs. Wetherell, Stokes, Mowbray, Hollingsworth, & Co., Bank- ers, London. [Signed] Christn Farrow." The persons who constitute the firm upon which the bill was 'drawri are the same who constitute the firm of the Durham Bank, that bank having a house in London, upon which they were in the habit of draw- ing bills, which they wished to make payable there. The bill in question was drawn in the same form as had been used 138 FOEM AND INCEPTION (Part 1 by the defendant since June, 1813, before which time he had been in the course of issuing bills drawn in the name of one of the partners of the Durham Bank. He did not draw bills on his own account in this form, nor upon the same parties. The plaintiff, when he sent the i50, and obtained the bill, knew that the defendant was agent of the Dur- ham Bank at Hexham, and that the Durham Bank drew upon a house in London, and he supposed that the bill was given by the defendant, as agent, and on account of the Durham Bank, to which the defendant paid over the £50. The bill, when due, was presented to the drawees, and payment refused, and due notice was given to the defendant. The question for the opinion of the court was, whether the plaintiff was entitled to recover. °° Lord Ellenborough, C. J. Is it not a universal rule that a man who puts his name to a bill of exchange thereby makes himself per- sonally liable, unless he states upon the face of the bill that he sub- scribes it for another, or by procuration of another, which are words of exclusion? Unless he says plainly, "I am the mere scribe," he be- comes liable. Now, in the present case, although the plaintiff knew the defendant to be agent to the Durham Bank, he might not know but that he meant to offer his own responsibility. Every person, it is to be presumed, who takes a bill of the drawer, expects that his re- sponsibility is to be pledged to its being accepted. Giving full effect to the circumstance that the plaintiff knew the defendant to be agent, still the defendant is liable, like any other drawer who puts his name to a bill without denoting that he does it in the character of procurator. The defendant has not so done, and, therefore, has made himself liable. 1 do not say whether an action would lie against the Durham Bank, because, considering it in either way, it would not, as it seems to me, affect the liability of the defendant. BaylEy, J. I am entirely of the same opinion. The drawer, by the act of drawing, pledges his name to the bill's being duly honoured ; and though the plaintiff in this case knew that the defendant was an agent, he might also know that he had given this pledge. Abbott, J. I am also of the same opinion. The party does not show that the bill was not taken according to the effect which it bears on the face of it. HoLROYD, J. I apprehend that no action would lie on the bill, ex- cept against those who are the parties to it. Judgment for the plaintiff."^ o" Arguments of counsel are omitted. 61 As to the liability of the agent where he signs the instrument per pro- curationem, or "X., by A., Agt.," or the name of the principal simply, but is unauthorized, see White v. Madison, 26 N. Y. 117 (1S62), an action for breach of warranty of authority, and West London Banls; v. Kitson, 13 Q. B. D 300 (0. A. 1884), an action of deceit. As to the liability of the principal in such case, see Reid v. Rigsby, [1894] 2 Q. B. 40, an action for money had and received, and In re Cunningham. 3tj Ch. Div. 532 (1SS7). Ch. 1) FORM OF BILL AND OP NOTE 139 MANUFACTURERS' & TRADERS' BANK v. LOVE. (Supreme Court, Appellate Division, Fourth Department 1897. 13 App. DIv. 561, 43 N. Y. Supp. 812.) Appeal by the plaintiff, the Manufacturers' & Traders' Bank, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Erie on the 39th day of February, 1896, upon the decision of the court rendered after a trial at the Erie Trial Term before the court without a jury, dismissing the complaint upon the merits. Th e action wa s VirnngVit tn rpf over of t^ P HpfpnHdtit npnn a prr.m- iss orv note which reads as follows: "$201.93. Buffalo, N. Y., May 3, 1895. "Two months after date, I promise to pay to the order of Rice-Blake i Lumber Company two hundred one and 93-100 dollars. Value re- ceived. At Bank of Buffalo, here. ' "[Signed] J. W. Johnston, Agent ." This n ote was pypmtffl Ky JnTingtr^p \Q the payees therein name d for lumb er purchased of them . Johnston was conducting a lumber busmess in Buffalo. The , payee indorsed and transferred this not e tot he plaint iff for value, before it was due. The de fendant resided in Efaura, and w as a stepdaughter of Johnsto n's. ^^ Ward, J. Whatever may be the rule as to other contracts not un-^ der seal, t he law is firmly established in this state as to commercial paper that persons deahng with negotiable instruments are presume d'^ t o_ take*" them on the credit of the parties whose names appeaY upon/ t hem, a nd a person not a party cannot be charged upon proof that th e^ ■ o stensible p arty s igned or indorsed as his agent . Briggs v. Partridge,^ 64 N. Y. 363, 31 Am. Rep. 617, and cases th^re cited ; Cortland Wagon. Co. V. Lynch, 83 Hun, 173, 31 N. Y. Supp. 325 ; Casco National Bank'' V. Clark, 139 N. Y. 307, 34 N. E. 908, 36 Am. St. Rep. 705. It is also^ held that tVip np p^ntiable instm rnpnt ^I'nHg nnl^r tVip friifPTTiihle maker, th ough the word "Agent" is attached to his signatur e: no principa f* be mg named in the body of tVip \^'i\r^^mpr\^ ^ or indicated by the sig-' nature. See the last two cases cited. The law merchant surrounds the negotiable paper in the hands of a ' bona fide holder with a credit not given to other contracts, and pro-' tects him .^gainst hidden equities of which he has no notice, and per- mits him to recover against the party whose name is signed to the in- strument, though there be attached to his name the word "Agent" ; andi he is not bound to search for a principal unknown to the instrument itself, nor can he do so. The rights of the holder are confined to the parties to the instrument, and he must rely upon them alone, except that he can establish that the name used as the signature to the instru-' 2 The statement of the case is abridged. 140 FOEM AND INCEPTION (Part 1 ment has been adopted by the assumed principal, or by the person not named in the instrument, as his own, in transacting the business. This may be done. A person may become a party to a bill or note by any mark or designation he chooses to adopt, provided it be used as a sub- stitute for his name, and he intends to be bound by it. De Witt v. Walton, 9 N. Y. 674; Daniel on Neg. Inst. § 304. The last-quoted authority says : "But such liability exists only where it is affirmatively and satisfactorily proved that the name or signature thus used is one which has been assumed and sanctioned as indicative of their contract, and has been with their knowledge and consent, adopted as a substitute for their own names and signatures in signing bills and notes." No anthnrityjs _gnvpn in t Vi P mrrittpn inc . trnmpnt filpH frnm the de- fendaKt--tO jise~the sif^naturp of "J. W Jnh nstnn , ,Ap^pn1-^[^_asand for th e defenSan t-: rwrrjg fh^rp gny proof that, in fact, the defendan FJiJtd aut horized the use of that name as representing her in the busme'ss ; and the case seems to stand upon the bare proposition that although neither the plaintiff nor the lumber company had knowledge of the instrument filed in the clerk's office, and in no manner relied upon it, and had no knowledge, in fact, that the signature to the note in any manner represented the defendant, still the plaintiff had a right to go outside of the instrument, and explore for some undiscovered principal that the simple addition of "Agent" to Johnston's name might indicate, and, having found this instrument on file, could stand upon that and recover. We cannot concur in this view. The appellant claims, also, that it was error to permit Johnston to testify that the defendant never had any interest in the business, and received no profits therefrom, and that a revocation of the agency was made in March, 1895, but not filed, over the objection of the plaintiff. The plaintiff had made Johnston its witness, and had gone into the re- lations existing between him and the defendant ; and the court per- mitted him to testify on cross-examination, to the matter objected to. Upon the facts we have narrated, if the reception of this evidence were error, it could not affect the result, as the defendant was not liable in any event so far as the case discloses, and it is therefore unnecessary to consider the matter further. We have reached the conclusion that the decision of the trial court was right, and that the judgment should be affirmed. TARVER V. GARUNGTON et al. (Supreme Court of South Carolina, 1887. 27 S. C. 107, 2 S. E. 846, 13 Am. St Rep. 628.) Simpson, C. J. The action below was commenced for the recov- ery of a certain sum of money alleged to be due the plaintiff from defendants. The complaint was, in substance, as follows, to wit: Ch. 1) FORM OF BIIiL AND OF NOTD 141 That the defendants, through their agent, S. D. Garlington, made their note in writing, whereby they promised to pay the plaintiff, or order, $460 on the 1st day of November, 1884, with interest at 7 per cent., a copy of which note was attached to the complaint, and, after the usual allegations of ownership and nonpayment, judgment was demanded for said amount. The copy of note attached was as follows : "$460. On the 1st day of November next I promise to pay Samuel J. Tarver, or order, four hundred and sixty dollars, for value received, with in- terest from date at the rate of seven per cent, per annum. Witness my hand and seal this March 23, 1884. [Signed] S. D. Garlington, Agent." The defendant George F. Young put in an answer denying that Gar- lington was his agent, and denied the alleged indebtedness. The time for Mary Garlington had not expired, and she had not answered, at the ensuing court. When the case was called, and the complaint and answer of George F. Young read, he interposed an oral demurrer that the complaint did not state facts sufficient to constitute a cause of ac- tion, which his honor. Judge Aldrich, sustained, dismissing the com- plaint,' with costs, as to the defendant George F. Young, with leave, however, to the plaintiff to amend his complaint. From this order this appeal is before us. The ground upon which the demurrer was interposed, and upon which, as we suppose, it was sustained, was that a party could not be bound as principal upon a note where it was signed by another simply as "Agent," as this note was signed; that under the law ap- plicable to such cases, involving the doctrine of agency, before one could be held liable as principal upon a note or other contract, his name should appear in some form upon the face of the paper, so that from the paper itself the principal could be ascertained ; and that, in the ab- sence of such fact, parol testimony was incompetent to discover or de- velop it. And the defendant contends here that inasmuch as the note sued on, as shown by the copy attached, was signed by "S. D. Garling- ton, Agent," without specifying for whom he was agent, either in the body of the note or attached to the signature, and inasmuch as parol testimony would not be allowed to explain away or remove this diffi- culty, therefore the facts stated in the complaint fail to show a cause of action. The, principle relied on by respondent is no doubt correct. In fact, at one time,in this state, this doctrine was carried much further than • that contended for here. See the case of Fash v. Ross, 2 Hill, Law, 294, where it was held that the agent signing his name for another, although the name of the other was mentioned thus, "A. B. for C. D.," was not sufficient. This case was, however, overruled, with the cases that had followed it, by the case of Robertson v. Pope, 1 Rich. L,aw, 503, 44 Am. Dec. 267 ; and now the doctrine as to unsealed contracts, negotiable notes, etc., is as stated by the respondent, to wit : That the name of the principal must appear on the paper, so that from the paper 142 FORM AND INCEPTION (Part 1 itself the principal can be known. This is the general rule, and it is said by some that to this rule there is no exception. In a note to Par- sons on Notes and Bills, p. 92, however, it is stated that there is at least one exception, apparent, if not real, to wit, where the principal carries on business in the name of the agent. In that case the name of the agent is the name of the principal pro hac vice. Bank of Rochester v. Monteath, 1 Denio (N. Y.) 402, 43 Am. Dec. 681. In the case of Hicks V. Hinde, 9 Barb. (N. Y.) 528, where one had drawn a draft in his own name, styling himself simply "Agent," without more, it being known at the time by all of the parties for whom he was acting as agent, it was held sufficient to charge his principal. It is true, how- ever, that in that case a distinction was drawn between a draft and an ordinary note or contract. The principle upon which it has been held that, where the name of the principal appears anywhere on the note, the agent himself is re- lieved from liability, and liability attaches to said principal, is that the ■principal is known at the time of the contract, and the contract is really made wfi'h him. It was upon this principle that Fash v. Ross, supra, was overruled by Robertson v. Pope, supra, thus differentiating ordinary unsealed contracts from the technical rule governing sealed contracts in this respect. And in the case of Robertson v. Pope, supra. Judge O'Neall said the proof was abundant that Byers (the party who signed the note, thus, "for Nath'l Pope, Sam'l Byers") "was the agent of Byers, and that Pope received half of the cattle bought for Neuffer and him." Neuffer was the other maker of the note sued on. And it seems that parol testimony was received in that case to show that Pope was a principal in the note. Now, in the case before us, the question how far parol testimony may be allowed to come in, to explain and to fix the application of the term "agent,'' as used here, has not been adjudicated by the court be- low ; at least, there does not appear any distinct and positive ruling on this question by his honor. He simply and in short form sustains the demurrer. This question, then, not being strictly before us, we pass it by. The case comes up on demurrer to a complaint, in which plaintiff alleges diat the defendants, through their agent, on a note signed by said agent in his own name, "Agent," promised to pay him $460. Under the rules of law and evidence, it may be that the plaintiff would not be allowed to go beyond the face of the note, and prove by parol that S. D. Garlington, in signing this note, promised for and as agent of the defendants, as alleged in the complaint; and, if the case had gone to the jury, it may be that, such parol evidence being excluded, the plaintiff would have failed in his action. But here the defendant admits the truth of the allegations, to wit, that S. D. Garlington had promised for him, and as his agent, to pay said money. He admits the agency, admits the promise, and that it was made by the note, a copy of which is attached. In other words, so far as the demurrer is concerned, he waives his right, if he has any, to exclude parol tes- Ch. 1) FORM OF BILL AND OF NOTE 143 timony on the question of the agency, and admits it. Upon these facts admitted, the question of law is raised for the judge ; whereas, if the case was before the jury, the first question would be, has the agency been established? Upon the face of the paper, unexplained by parol testimony, the jury would be compelled, under the cases Above, to answer in the negative. But before the judge, with the agency not even disputed, but actually admitted, it seems to us, it was error to hold that there was no cause of action. It appears that there is at least one exception to the general rule above stated. Note to Parsons, supra, p. 95. Non constat but the plaintiff may be able to bring his case under that exception. Besides, the plaintiff should have the right to test the question how far parol testimony may be admitted in a case of this kind. It is the judgment of this court that the judgment of the circuit court be reversed. STURDIVANT et al. v. HULL. (Supreme Judicial Court of Maine, 1871. 59 Me. 172, 8 Am. Rep. 409.) On exceptions to the ruling of Goddard, J., of the superior court for the county of Cumberland, at the November term, 1870. Barrows, J. Assumpsit by the payees against the maker of a promissory note of the following tenor: , "$225.00. Portland, Dec. 20, 18G9. "Four months after date I promise to pay to the order of Sturdivant & Co. two hundred and twenty-five dollars. Payable at either bank in Portland, with interest. Value received. ■ "John T. Hull, Treas. St. Paul's Parish." The signature to the note was not denied, but the defendant offered to prove, and if evidence dehors the note is admissible for that, pur- pose, we must consider it as proved, that at the time the note was made defendant was treasurer of St. Paul's parish, and made the note in suit, in behalf of said parish and for their sole benefit, in renewal of a former note given by his predecessor. Moody, for lumber used in building their parish church, and that defendant never received any personal consideration or any consideration for the note, other than the foregoing, and that these facts were known to the plaintiffs when the note was given, and that the understanding and intention of both parties, then, was that it was the note of the parish and not of the de- fendant. As the suit is between the original parties to the note, it follows that if the proffered evidence showed that there was no valid considera- tion for the defendant's promise, it should have been admitted. But such is not the case. It is not necessary that the consideration should 144 FORM AND INCEPTION (Part 1 have inured to the personal benefit of the promisor, and the surrender of the previous note or the extension of the term, of credit originally given to the parish for the lumber would, either of them, be a sufficient consideration for the defendant's note. The case presents but two questions : (1) Whether the defendant's liabihty must be determined solely by the written instrument which he has subscribed, excluding the evi- dence above offered to control its construction? (2) If so, does the true construction of it make it his note, or that of the parish? I. Now, when parties are competent witnesses, and stand ready to testify (if allowed) not only to their own intentions but to those of the other party to the contract, the wisdom of the long-established rule, which requires all parties to written contracts, at their peril, to state what they mean to abide by in the writing itself, and prohibits them from resorting to oral testimony to contradict or vary its terms, grows more apparent every day. One of the illustrations of this rule, given by Mr. Greenleaf in his treatise on Evidence (Volume 1, p. 320, Ed. 1842), citing Stackpole v. Arnold, 11 Mass. 27, 6 Am. Dec. 150), runs thus : "Where one signed a promissory note in his own name, parol evidence was held inadmis- sible to show that he signed it as the agent of another, on whose prop- erty he had caused insurance to be effected by the plaintiff, at the owner's request." When a* man has deliberately said, in writing, "I promise to pay," and a vahd consideration for the promise is shown, right and justice are not very Hkely to be the gainers by allowing him to retract and to undertake to prove that he did not actually mean, "I promise," but that he meant, and the other party understood that he meant, that some third party, whose promise the writing does not purport to be, undertook the payment. It is better that a careless or ignorant agent shall sometimes pay for his principal, than to subject the construction of valid written con- tracts to the manifold perversions, misapprehensions, and uncertain- ties of oral testimony. And upon this point the decisions (although, in cases of like type with this, they are somewhat conflicting, or, at least, distinguished with scarcely a shade of difference, upon the question of the construc- tion of the instrument itself) will be found concurring. Andrews v. Estes, 11 Me. 270, 26 Am. Dec. 521 ; Hancock v. Fairfield, 30 Me. 299 ; Slawson v. Loring, 5 Allen (Mass.) 342 ; Draper V; Mass. Steam Heat- ing Co., 5 Allen (Mass.) 338; Barlow v. Cong. Soc. in Lee, 8 Allen (Mass.) 460; Tucker Manuf. Co. v. Fairbanks, 98 Mass. 104, and cases there cited. Nor is this wholesome rule abrogated by any of our statute pro- visions touching the responsibility of principals upon contracts made and executed by their authorized agents. * * * Ch. 1) FOEM OF BILL AND OF NOTE 145 The defendant's liability niust be ascertained by an examination of the note itself. II. As has already been suggested, the cases involving the construc- tion of similar instruments are more difficult to reconcile than those in which the point just disposed of has been considered. Apparent- ly slight changes in the phraseology have affected the construction adopted by different courts, and by the same court in different cases. There is a necessity for a careful examination and comparison of the numerous decisions. This we have endeavored to make, and the re- sult is, we are satisfied that the weight of reason and authority dem- onstrates that this is the personal contract of the defendant and not that of the parish of which he was treasurer. There are no appropriate words in it to show that it was the contract of the parish, or that it was made by the defendant in its behalf. He does not say that he promises as treasurer, or use any language significative of an intention to bind his successors in office as in Bar- low v. Cong. Soc. in Lee, in which case Mann v. Chandler, a per curiam opinion reported 9 Mass. 335, is disavowed as an authority; and it is said that "all the decisions of this court upon unsealed instru- ments, since the case of Mann v. Chandler, have required something more than a mere description of the general relation between the agent and the principal, in order to make them the contracts of the latter." Vide 8 Allen (Mass.) 461, 462, 463. In Haverhill M.' F. Ins. Co. v. Newhall, 1 Allen (Mass.) 130, up- on a note signed, "Cheever Newhall, President of the Dorchester Av- enue Railroad Company," though it was agreed that the defendant, at the time of signing the note, was the president of said company, that it was given in consideration of a policy of insurance issued by the plaintiffs to that company, upon property owned by them, and that the defendant was duly authorized by the company to obtain the insurance and sign the note, it was held that the form of the note only was to be looked at upon the question of charging the de- fendant, that he had fixed a personal liability upon himself by the use of the words, "I promise to pay," and that this liability was not affected by the descriptive addition to his signature. In Fiske v. Eldridge, 12 Gray (Mass.) 474, the note was signed, "John S. Eldridge, Trustee of Sullivan Railroad," and the defend- ant was held personally liable, though he proved that he was trustee of the railroad company, and as such had entire charge of its prop- erty and business, and gave the note in suit to take up a promissory note of ,the corporation, and delivered with it bonds of the corpora- tion as collateral security for its payment. The defendant's counsel relies upon certain dicta intimating that the case of Mann v. Chandler may be sustained, because the defend- ant there, as here, was treasurer of the corporation, and that the sig- SM.& M.B.& N.(2d Ed.)— 10 146 FORM AND INCEPTION (Part 1 nature of that officer may be thought, of itself, to import a promise of the party whose treasurer he is. But we should be unwilling to say that the treasurer of a religious corporation has any authority by virtue of his office to bind such corporation by the issue of negotiable promissory notes, or that the official signature of such treasurer could be considered as indicating the assertion of such authority, any more than the signature of a per- son describing himself as president or trustee of a business corpo- ration asserts the requisite authority on the part of such president or trustee. In Mann v. Chandler, relied on by the defendant, the special au- thority conferred by the directors upon the treasiirer to give the note in suit was shown, and in the more recent cases above cited, from 12 Gray and 1 Allen, such authority was either admitted or proved without objection. But the tendency of the later decisions, manifest- ly, is to hold the man who says, "I promise to pay" (without stating in the writing itself that he promises for or in behalf of any other party), responsible personally. Why should it not be so? That is the plain and direct import of the language he uses. "I" is not the language of a corporation or an association. It is that of .an individ- ual signer. If such signer appends to his signature a description of himsef as agent, president, trustee, or treasurer of a corporation, it may import a declaration on his part that, having funds of such cor- poration in his possession, he "is willing to be responsible, and accord- ingly makes himself responsible, for a debt of theirs. And this descriptio persons may aid him in the keeping and adjust- ment of his accounts with his different principals. But without some words in the contract importing • that he prom- ises for or in behalf of his principal, he cannot avoid the personal liability he has thus assumed. In Seaver v. Coburn, 10 Cush. (Mass.) 324, the contract signed by defendant as "Treasurer of the Eagle L,odge," etc., was held bind- ing upon him personally. And the distinction which the defendant seeks to set up, between treasurers and other officers and agents of corporations, was ignored. The fact that it has been suggested as a possible ground upon which the case of Mann v. Chandler (so often doubted, and so recently de- nied to be an authority in the court which pronounced it) might be sustained can hardly be expected to avail the defendant here. This subject has been elaborately discussed in Tucker Manuf. Co. v. Fairbanks, 98 Mass. 101, and in Barlow v. Cong. Soc. in Lee, 8 Allen (Mass.) 460, and what we have already said may seem super- fluous. * * * Judgment for plaintiffs." ^^ Part of the opinion Is omitted. Ch. 1) FORM OF BILL AND OF NOTE 147 KEIDAN V. WINEGAR. (Supreme CJourt of Michigan, 1893. 95 Mich. 430, 54 N. W. 901, 20 L. R. A. 705.) McGrath, J. Plaintiff had judgment upon the following promis- sory note: "$336.96. Grand Rapids, Mich., Dec. 22, 1887. Ninety' days after date, I promise to' pay to the order of Geo. Keidan three' hundred thirty-six and 96-100 dollars at the Old National Bank of Grand Rapids, Mich., value received, with interest at the rate of eight per cent, per annum until paid. W. S. Winegar, Agt." Defendant, with his plea, filed an affidavit setting forth "that the note, a copy of which is attached to the declaration in saidiQause, ancL served upon said deponent, with a copy of said declaration, is not the' note of this deponent, defendant as aforesaid ; and he denies the same^ and the execution thereof, and says that he, said defendant, is not in- debted to said plaintiff upon said note, nor for any part thereof, nor is he indebted to said plaintiff in any sum whatever, nor in any man- ner whatever." Upon the trial defendant offered to show that in 1884, before plain- tiff had any dealings with defendant, plaintiff was informed that de-' fendant was carrying on business as the agent of Maggie G. Wine-- gar, and was not doing business for himself; that business relations' were then .established between plaintiff, and said Maggie G. Wine-' gar; that said business relations continued from the early part of] 1884 to and including the year 1887, and embraced many transac-[ tions between plaintiff and Maggie G. Winegar; that many instru-" ments were made between the parties, which were signed exactly as/ the note sued upon is signed, and that this form of execution had- .come to be recognized and adopted between the parties as binding^ Maggie G. Winegar; that during that time no business was trans-* acted by the defendant in his individual capacity, and all the busi- ness done was that of his principal, and known and understood to be such by plaintiff; that the said note was given and accepted as the obligation of Maggie G. Winegar ; that the note was given for due- bills and goods furnished by plaintiff to Maggie G. Winegar, and such duebills and goods were by plaintiff charged to said Maggie G. Wine- gar on the books of plaintiff; that the taking of these notes did not in the least change the character of the indebtedness; and that de- fendant never received any benefit or consideration for said note. The court refused to admit the testimony, and directed a verdict for the plaintiff. i The clear weight of authority is that the promise in the present case is prima facie the promise of William S. Winegar, and, as be- tween one of the original parties and a third party, the addition of the word "agent" is not sufficient to put such third party upon in- quiry. The question here, however, is whether, as between the imme- ' 148 FORM AND INCEPTION (Part 1 diate parties to the instrument, parol evidence is admissible to show the real character of the transaction. In his excellent work on Agency, Mr. Mechem lays down the general rules, which we think are sustained by reason and authority. Mechem, Agency, 'par. 443. * * * In Metcalf v. Williams, 104 U. S. 93, 98, 26 h- Ed. 665, Mr. Jus- tice Bradley says: "The ordinary rule, undoubtedly, is that if a per- son merely adds to the signature of his name the word 'agent,' 'trus- tee,' or 'treasurer,' etc., without disclosing his principal, he is person- ally bound. The appendix is regarded as a mere descriptio personse. It does not of itself make third persons chargeable with notice of any representative relation of the signer. But if he be in fact a mere agent, trustee, or officer of some principal, and is in the habit of ex- pressing in that way his representative character in his dealings with a particular party, who recognizes him in that character, it would be contrary to justice and truth to construe the documents thus made and used as his personal obligation, contrary to the intent of the parties." In Kean v. Davis, 21 N. J. Law, 683, 687, 47 Am. Dec. 182, Chief Justice Green says : "The question is not, what is the true construc- tion of the language of the contracting party; but, who is the con- tracting party? Whose language is it? And the evidence is not ad- duced to discharge the agent from a personal liability which he has assumed, but to prove that in fact he never incurred that liability ; not to aid in the construction of the instrument, but to prove whose in- strument it is. Now, it is true that the construction of a written con- tract is a question of law, to be settled by the court upon the terms of the instrument. But whether the contract was in point of fact ex- ecuted, when it was made, where it was made, upon what considera- tion it was made, and by whom it was made, are questions of fact, to be settled by a jury, and are provable in many instances by parol, though even the proof conflicts with the language of the instrument itself." In Hicks v. Hinde, 9 Barb. (N. Y.) 528, where an agent drew a bill on his principal for a debt due from the principal to the payee, add- ing the word "agent" to his signature, and the payee knew that the drawer was authorized by his principal to draw the bill as his agent, and it was the understanding of all parties that the drawer signed only as agent, and not with a view of binding himself, it was held that the drawer was not personaly liable on the bill. * * * As is so often said, it is the intent of the parties which is to be car- ried out by the courts. The rule that rejects words added to the sig- nature is an arbitrary one. Its reason is not so much that the words are not, or may not be, suggestive, but that they are but suggestive, and the instrument, as a whole, is not sufficiently complete to point to other parentage. The very suggestiveness of these added words has given rise to an irreconcilable confusion in the authorities as to the Ch. 1) FORM OF BILL AND OF NOTE 149 legal effect of such an instrument. Extrinsic evidence, therefore, is admissible in such case, between the immediate parties, to explain a suggestion contained on the face of the instrument, and to carry out the contract actually entered into as suggested, but not fully shown, by the note itself. The presumptinn thai- ppr snng Hpal inf f with neg o- tiable instruments tnl'MTiem on th e xredit of the parties whose n ames appear shoul d not be absolute in favor of the immediate payee, from wh om tn e_forisid°rritinn pni^e d. who mu st b e deemed to have know n all the facts and circumstances surroundmg ttie inception of the no te, an d yn'tb gnrh l-nniTilpH n rn nrr-pptpH a nntp rr.nfp]rMno ciirVi a gngg-pcti nn In the case of Tilden v. Barnard, 43 Mich. 376, 5 N. W. 420, 38 ' Am. Rep. 376, under a state of facts similar to those offered to be shown here, it was held that defendants there were not liable. We think that in the present rase defendant was entitled to m ake thg_shnMin"ng nfferpd >JJnder the general issue, defendant was enti- tled to give in evidence any matter of defense going to the exist- ence of any promise having legal force, as against him. 1 Shinn. PI. & Pr. § 740. The judgment is reversed, and a new trial ordered."* FIRST NAT. BANK OF BROOKLYN v. WALLIS. (Court of Appeals of New York, 1896. 150 N. Y. 455, 44 N. E. 1038.) Appeal from indtrn-ipnt of the General Term of the Supreme Court in the Second Judicial Department, entered September 10, 1894, ^Jiido- affirmed a furl p ^ment in favor of plaintiff entered upon a verdict di- rected by the court. Since the taking of the appeal William T. Wal- lis has died, and the action has been continued in the name of George T. Smith. Thi s action was upo n a_ promissory nntp in fhr fnll n winj fi -i rr i r "$1,100. Jersey City, N. J., Jan. 30, 1893. Three months after date, we promise to pay to the order of H. Stuetzer & Co. eleven hundred dollars at the First National Bank of Jersey City, value received. "William T. Wallis, President. "George T. Smith, Treasurer." On the day of its date the n ote was presented by the defendan t Herman Stuetzer, one of the members of the firm to whom it was pay- , able, t o the plaintiff for discoun t, and it was di scounted by the plain- - tvff anH'tbe ptft cgpds paid to S'tuetzer. When the note was discounted no knowledge had been communi- cated to the plaintiff respecting the purpose for which the note was >>* Part of the opinioi) Is omitted. Wallis Iron Works. 150 FORM AND INCEPTION (Part 1 given. The discount was made on the faith of Stuetzer, without in- quiry or knowledge whether it was the note of the Wallis Iron Works or the individual note of the defendants Wallis arid Smith, except what appeared upon the face of the note. The defense was that the note was the obligation of the Wallis 'Iron Works, not that of defendants. °'' Andrews, C. J. Th p rharartpr of t h p p1::i int-iff qt; a hona fide h old- er of the note is not a ffected by any mi sconception it may have be en under_ when it dis counted it, as toth e le.gaT import oi"tlie prom ise ; that isTo'say, whether~The note wai"lhe obligation of the Wallis Iron Works, or of the persons who signed it in their individual names, with the addition of the names of their respective offices. Thebank jidiscounted the note at the request of its customers, the payee'sTFetofe maturity, paying full value, without inquiring as to the nature of the principal obligation, and it i s_entitled -tQ- e i if o iL e' it auaiubl llt e-defgnd- ants_as_iiidiidiiualSjif on its faceitjaaS-th eir promi se , nnd no t the »p rnmis; p. of the corporation ot w lTicli they__wei:e_officers. It may be admitted that if the bank, when it discmmted the paper, was inform- ed or knew that the note was issued by the corporation, and was in- tended to create only a corporate liability, it could not be enforced 'against the defendants as individuals, who, by mistake, had execiit- "^d it in such form as to make it on its face their own note and not that of the corporation. But, according to the rules governing commercial paper, nothing short of notice, express or implied, brought home to the bank at the [time of the discount, that the note was issued as the note of the cor- poration, and was not intended to bind the defendants, could defeat its remedy against the parties actually liable thereon as promisors, 'it appears that the bank discounted the note on the credit primarily of its customers, the payees, making no inquiry as to whether it was a corporate or individual obligation, and having no knowledge on the subject. In law it was the individual note of the defendants (Casco ^National Bank v. Clark, 139 N. Y. 308, 34 N. E. 908, 36 Am. St. 'Rep. 705 ; Merchant's National Bank v. Clark, 139 N. Y. 315, 34 N. E. 910, 36 Am. St. Rep. 710), and the form of the promise is quite •consistent with an intention to create an individual liability. The fact ithat the bank sued the Wallis Iron Works on one of the notes of this kind is not a material circumstance. That note matured, and suit was brought thereon, subsequent to the discount of the note now in ques- tion. The view there entertained by the plaintiff of the legal nature of the obligation did not conclude the bank from enforcing the note now in question according to its real character. If the fact of the for- mer suit and the pleadings therein were admissible on the question j^i the knowledge of the bank, when it discounted the present note, that it was issued for and was intended as a corporate obligation, the 5 Arguments of counsel are omitted. Ch. 1) FORM OF BILL AND OF NOTH 151 existence of such knowledge has been negatived by the course of the trial. We think the judgment is right, and it should, therefore, be affirmed. All concur. Judgment affirmed. MEGOWAN et al. v. PETERSON. (Court of Appeals of New York, 1902. 173 N. Y. 1, 65 N. E. 738.) Appeal from j ^judgment.of the Appellate Division of the Supreme Cc5urt in the "Secondjudicial Department, entered June 7, 1901, af- fir ming a ju dgment in favor of defendant entered upon a dismissal of the conipTa mL by Lht; luuU al a Trial Te rm and an order denying a motion for a new trial. The nature of the action and the facts, so far as material, are stated in the opinion."* Haight, J. This action was brought to recover of the defend- ant personally the amount of a promissory note, of which the follow- ing is a copy: "$693.19. Brooklyn, Dec. 28, 1899. Three months] after date I promise to pay to the order of C. Stevens Co. six hundred ' and ninety-three ^"/loo dollars at Kings County Bank of Bklyn., value' received. Due March 28, 1900. Charles G. Peterson, Trustee." The plaintiffs were copartners doing business under the firm name of C' Stevens Company, and upon the trial, to establish their cause of ac- tion, introduced the note in question in evidence, the signature being - admitted, and then rested. The defendant, in order to establish his defense, then introduced in evidence testimony tending to show that on the 4th day of Decern-^ ber, 1899, the surviving member of the firm of Johnson & Peterson called a meeting of the creditors of the firm, and at such meeting the ' creditors assembled executed a paper by Which "we, the undersigned creditors of Johnson & Peterson, hereby agree to and with each other and for the purpose of liquidating the business of Johnson & Peter- . son and the completion of the contracts of said firm, do hereby ap- point Charles G. Peterson as sole agent and trustee for the benefit of all creditors to assume control and management of said business, here- by ratifying each and every act of said agent in the premises by him done or to be done; and we severally agree to forbear the prosecu- tion and collection of our respective claims against said firm." Then followed the signatures of the creditors, among which is that of the plaintiff's firm, "C. Stevens Co." This was followed by another pa- per of the same character, upon which appear the signatures of other creditors who were not present at the meeting. Thereupon, and at the same meeting, another paper was drawn and executed by John- son, the surviving member of the firm, by which, in consideration of 08 Tbe arguments of counsel are omitted. 152 FORM AND INCEPTION (Part 1 ■$1, the receipt of which he admitted, he bargained and sold, granted and conveyed, unto Charles G. Peterson, as trustee for the creditors of Johnson & Peterson, his successors and assigns, all the stock in trade, goods, merchandise, effects, and property of every description belonging to or owned by the said partnership of Johnson & Peter- son, wherever the same may be, together with all debts,. choses in ac- tion, and sums of money due and owing to said firm. He then pro- duced oral testimony tending to show that he entered upon the dis- charge of his duties as such trustee, and undertook the completion of certain buildings which Johnson & Peterson had contracted to con- struct, and for that purpose purchased lumber of these plaintiffs un- der the express agreement that they would accept in payment there- for his promissory note as such trustee and that the note in suit was given in payment for such lumber. This latter testimony was con- troverted by the plaintiffs, who testified that they did not know the purpose for which the lumber was purchased, and did not agree with him to accept his note as trustee for the benefit of the creditors in pay- ment therefor. At the conclusion of the evidence, the court, upon application of the defendant's counsel, dismissed the complaint upon the ground that no cause of action had been established against the defendant, the plain- tiffs asking for leave to go to the jury upon the controverted fact as to whether the plaintiffs gave credit to the defendant in his represen- tative capacity or as an individual. An exception was taken by the .plaintiffs to the direction of a verdict by the court. The negotiable instruments law (Laws 1897, c. 613, § 39j provides as follows : "Where the instrument contains, or a person adds to his signature words indicating that he signs for or on behalf of a princi- pal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describ- ing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability." In this case, as we have seen, the defendant signed the note, and then added to his signature the word "trustee." Pie did not, in the in- strument itself, disclose the fact that he was trustee for the cred- ' itors of Johnson & Peterson, so that, under the provisions of -this statute, he would become personally liable upon the note, unless he could show tha;t at the time of the delivery of the note to the plain- tiffs he disclosed the fact that the consideration for which the note was given was for the benefit of the creditors of Johnson & Peter- son, and that he gave the note as the trustee for such creditors. It is contended on behalf of the plaintiffs that his representative character must be disclosed upon the face of the note. This may be ,so in so far as innocent purchasers for value are concerned, but as to |dhe payees named in the note we think a different rule prevails. In '\he case of First National Bank v. Wallis, 150 N. Y. 455, 44 N. E. ^38, the action was upon a promissory note signed by Wallis, who Ch. 1) FORM OF BILL AND OF NOTE 153 added to his signature "President," and by Smith, who added to his signature "Treasurer." They were in fact president and treasurer of the Wallis Iron Works, a corporation, and the note was issued as an obligation for the corporation, and was discounted by the plaintiff bank. It was held that the plaintiff was entitled to recover upon the ground that the representative characters of the defendants were not disclos- ed to the bank at the time that it discounted the paper. Andrews, C. J., in delivering the opinion of the court, said, with reference there-, to : "It may be admitted that if the bank, when it discounted the pa- per, was informed or knew that the note was issued by the corpora- tion, and was intended to create only a corporate liability, it could not be enforced against the defendants as individuals, who, by mistake, had executed it in such form as to make it on its face their own note,, and not that of the corporation. But, according to the rules govern- ing commercial paper, nothing short of notice, express or implied, brought home to the bank at the time of the discount, that the note was issued as the note of the corporation, and was not intended to bind the defendants, could defeat its remedy against the parties actu- ' ally liable thereon as promisors." We do not understand that the statute to which we have alluded was designed to change the com- mon-law rule in this regard, which is to the effect that, as between the driginal parties and those having notice of the facts relied upon as constituting a defense, the consideration and the conditions under which the note was delivered may be shown. Benton v. Martin, 53 N. Y. 570, 574 ; Bookstaver v. Jayne, 60 N. Y. 146 ; Juilliard v. Chaf- fee, 93 N. Y. 539, 534; Reynolds v. Robinson, 110 N. Y. 654, 18 N. E. 137 ; Baird v. Baird, 145 N. Y. 659, 664, 40 N. E. 333, 28 L. R. A. 375 ; Blewitt v. Boorum, 143 N. Y. 357, 37 N. E. 119, 40 Am. St. Rep. 600, Schmittler v. Simon, 114 N. Y. 176, 31 N. E. 163, 11 Am. St. Rep. 631 ; Higgins v. Ridgway, 153 N. Y. 130, 47 N. E. 33. It is further contended on behalf of the plaintiffs that they are now entitled to judgment, for the reason that the answer does not allege all of the facts necessary to constitute a defense. The case, however, was not tried upon that theory, and the plaintiffs did not, upon the trial ask for any direction of a verdict. If the answer of the defend- ant is defective the question should have been raised in the trial court, where an opportunity to amend might have been given if it was found wanting in any material alleg-ation. The trial court appears to have been of the opinion that the plaintiffs, by signing the paper selecting the defendant to liquidate the business of Johnson & Peterson, con- stituted him their agent, and that, therefore, he could not be held per- sonally liable. We think this paper must be read in connection with that executed by Johnson, and, reading the two together, the intent of the parties is made reasonably clear. Johnson, the surviving member of the firm of Johnson & Peterson, called a meeting of the creditors and gave them the privilege of selecting the person who should take charge of the assets of the firm, carry on the business so far as it was 154 FORM AND INCEPTION (Part 1 necessary to close up existing contracts, and then distribute the prop- erty. The creditors selected the defendant, and then Johnson con- veyed all the property of the firm to him as trustee for the creditors, thereby vesting the title to the property in him as such trustee. We think, therefore, that, notwithstanding the fact that the word "agent" is used in the paper signed by the creditors, under the latter instru- ment the defendant became a trustee for the creditors, and that it was in such character that he took possession of the property and under- I'took the liquidation of the assigned estate. The evidence submitted on behalf of the defendant, tending to show that the lumber for which the note was given was purchased for the benefit of the assigned estate, and that the plaintiffs agreed to accept his- note in his representative capacity therefor, having been contro- verted by the testimony of the plaintiffs, a question of fact arose • which it became Accessary for the trial court to submit to the jury. It was, therefore, error to refuse the plaintiffs' request to go to the jury upon this question of fact, and to direct a verdict in favor' of 'the defendant. The judgment should be reversed, and a new trial granted, with costs to abide the event. CHATHAM NAT. BANK v. GARDNER. (Superior Court of Pennsylvania, 1906. .31 Pa. Super. Ct. 135.) Morrison, J.^' This is an action of assumpsit brought to re- cover the amount of two certain_p romissory notes, ajiJairrsTTlle^defend- ant s as ge nerat^artners. * * * The learned c ourt flatly ^jield that the defendantsjwereJiahle^s gen- eral partners and t hen fellTnto ~eiTcrn — * * * Upon this question the learned coiu±.said : * * * '^''e are of the opinion that these no tes were - the individual note s of A M. McCl ai n anH Oe orge -A . McClain. TJie association ^sname does not__app£aiL_iiu them, and in "rdf^r tn hind it the ri3me_ofthe_ association must a p pear in the body _of thpJ^ntP■S,..Qr-lila-ru«ae-Clf-J^]^p assnriation shnulJJaaj fp hpen -signed to the notes," Thi s ruling _of_ihp rpiirt-^is, we think, c learly erroneou s. First, the suit was upon two several promissory notes;-each one of which was less than $500. Second, the notes were signed by George A. McClain, secretary, and A. M. McClain, treasurer, and it is conceded that both of these partners had been appointed managers of the Gardner Shingle Company, Limited. We will here copy one of the notes and they are both precisely alike, except as to amount and time of payment: I "$215.75. Ridgway, Pa., Nov. 26, 1902. "Gardner Shingle Company, Ltd. "Three months after date we promise to pay to the order of the 1' Part of the opinion is omitted. Ch. 1) FORM OF BILL AND OF NOTH 155 ' Abbey Press two hundred and fifteen 75/100 dollars, at Elk County National Bank, without defalcation value received. "George A. McClain, Secretary. A. M. McClain, Treasurer." The twentieth section of the Act of May 16, 1901, P. L. 194 (Pa. St._ 1920,, § 16007), provides: , "Where the instrument contains or a person adds tohis signature words indicating that he signed for or on behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words' describing him as an agent or as filling a representative character, with- out disclosing his principal, does not exempt him from personal liabil- ity." In our opinion, the notes in suit plainly indicate upon, their face that they were the notes of the Gardner Shingle Company, Limited, and be- ing in writing, and signed by two of the partners, one as secretary and the other as treasurer, conclusively indicate that these persons did not make and execute the paper in their individual capacity. The note be-j ing that of the Gardner Shingle Company, which we have already seeni was in law a general partnership, and the signatures being George A. McClain, secretary, and A. M. McClain, treasurer, the question at once arises, of what were they secretary and treasurer? Upon the face of this note but one answer can be made : that they were secretary and treasurer of the Gardner Shingle Company. Now, having found that the three members of that company were liable as general partners, it follows, under well settled rules of law, that one or more of these partners could execute and deliver valid" promissory notes within the apparent scope of the business of the partnership. It is not necessary to cite cases sustaining the proposition that each member of a general partnership is the agent of the firm in the transaction of business in which the firm is engaged. It is a conceded fact that the notes in suit'' are negotiable, and that the plaintiff is a holder of the same, bona fide for value, and without notice. Nothing but clear evidence of knowl- edge or notice, fraud or mala fides, can impeach the prima facie title of' the holder of negotiable paper taken before maturity. Moorehead v. Gilmore, 77 Pa. 118, 18 Am. Rep. 435; Lancaster County National Bank v. Garber, 178 Pa. 91, 35 Atl. 848. * * * - As we have already said, we are unable to see how it can be seriously/ contended that the notes in question do not show on their face that they were the notes of the partnership, the Gardner Shingle Company, Limited. In Montour Iron Co. v. Coleman, 31 Pa. 80, one of the in- struments sued on was as follows : "$3,904.00. October 20, 1854. * "Sixty days after date, pay to the order of Messrs. Coleman and' Kelton, thirty-nine hundred and four dollars, value received^ and place to the account of Coleman & Kelton." "No. 1. To Thos. Chambers, Esq., Pres't, Montour Iron Co., Phil- adelphia. "Indorsed, Coleman & Kelton." 156 FORM AND INCEPTION (Part 1 Across the face of this was written : "Accepted, payable at the Girard Bank. "Thomas Chambers, Pres't." The defendants objected that the instruments showed the promise of Thomas Chambers only and not of the defendants; but the court gave judgment for the plaintiff below against the Montour Iron Com- pany, and this judgment was affirmed by the Supreme Court. In De Roy et al. v. Richards, 8 Pa. Super. Ct. 119, we held as stated in the syllabus : "The rule is that the name of the principal intended to be charged must appear on the paper. If it be intended to charge a maker or indorser in a representative capacity, this must be indicated with sufficient certainty, so that subsequent purchasers and indorsers may be informed of the fact.'' In Carpenter v. Farnsworth, 106 Mass. 561, 8 Am. Rep. 360, a check drawn on the Boston National Bank, a copy of which is as follows : "Boston National Bank. "$19.20. "Boston, September 9, 1879. "Pay to L. W. Chamberlain or J. E. Carpenter ^tna or order nineteen and twenty one-hundreths dol- Mills lars. I. D. Farnsworth, Treas." was held to be the check of the ^tna Mills, and therefore binding upon the corporation, and not the treasurer, Farnsworth, personally. On this subject see Falk et al. v. Moebs, 127 U. S. 597, 8 Sup. Ct. 1319, 32 L. Ed. 266. In Hitchcock v. Buchanan, 105 U. S- 416, 26 L. Ed. 1078, a bill of exchange was drawn: "Office of Belleville Nail Mill Company. "$5,477.13. Belleville, Ills., December 15, 1875." "Four months after date pay to the order of John Stevens, Jr., cashier, fifty-four hundred and seventy-seven and 13/100 dollars, value received, and charge same to account of Belleville Nail Mill Company. William C. Buchanan, Pres't. "James C. Waugh, Secry." "To J. H. Piper, Treas., Belleville, Ills." Mr. Justice Gray delivered the opinion of the court : "The bill of exchange declared on is manifestly the draft of the Belleville Nail Mill Company, and not of the individuals by whose hands it is subscribed. "Where the name of the principal appears on the face of the instru- ment an indorsement by an authorized agent with the descriptive words, 'Treasurer,' 'President,' 'Agent,' etc., will be a sufficient indorsement to bind the principal." 1 Am. & Eng. Ency. of Law ( 1st Ed.) 389. These and other authorities, in our opinion, establish, beyond ques- tion, a plain intention on the face of the paper to bind the Gardner Shingle Company, Limited, and not the individuals who signed as secretary and treasurer. * * * The judgment is reversed and a venire facias de novo awarded. Ch. 1) FORM OF BILL AND OF NOTH 157 JUMP V. SPARLING. (Supreme Judicial Court of Massachusetts, Suffolk, 1914. 218 Mass. 324, 105 N. E. 878.) Action by Edwin R. Jump, trustee in bankruptcy, of David F. Burns, against John H. Sparling. From an order of the appellate division of the municipal court of the City of Boston dismissing a report by the trial justice, plaintiff appeals. Affirmed. RuGG, C. J. This is an action upon a promissory note of the tenor following : $596.20. Boston, Nov. 19th, 1908. "On demand after date we promise to pay to the order of David F. Bums five hundred and ninetyrsix 20-100 dollars. Payable at State Street Trust Co., Boston, Mass. "Value received with interest. "J. H. Sparling, Treas. Stratton Engine Co. "David F. Bums, Pres. Stratton Engine Co." Thfe plaintiff is the trustee in bankruptcy of the payee. Oral evidence was received to the effect that both. Bums and the defendant signed the note in their respective capacities as officers of the Stratton Engine Company, that it was executed at a meeting and under the direction of the board of directors of that Company, that both Burns and the de- fendant believed they were executing the note of the company, that the note was given in payment of a claim against the company, and that the defendant received no consideration for his signature. The answer pleaded these facts by way of equitable defense and averred further that, if the phraseology of the note had the legal effect of binding him personally, there was accident and mistake in the use of such words. The^ equitable defense was properly pleaded under Revised Laws, c. 173, § 28, as amended by St. 1913, c. 307; but, as later is pointed out, the facts set forth constituted a legal defense. Under the law previous to the enactment of the negotiable instru- ments act, the defendant corporation would not have been held on this note. It would have been not- the note of the corporation, but simply the individual note of the two individuals who signed. Davis v. England, 141 Mass. 587, 6 N. E. 731 ; Tucker Manuf. Co. v. Fairbanks, 98 Mass. 101. A change in the law in this respect has been wrought by that act. R. L. c. 72), § 37, is as follows : "Where the instrument contains, or a person adds to his signature, words indicating that he signs for or on behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized ; but the mere addition of words describing him a^ an agent, or as filling a representa- tive character, without disclosing his principal, does not exempt him from personal liability." These words plainly imply that if the person signing a promissory note adds to his signature words describing himself an agent or as oc- 158 FORM AND INCEPTION (Part 1 cupying some representative position which at the same time discloses the name of the principal, he shall be exempted from personal liability, while if he omits the name of the principal, although adding words of agency, he will be held liable personally and the words of agency will be treated simply as descriptio personse. In this respect the common- law rule of this commonwealth whereby agents bind themselves by a form of signing a note such as the one at bar, even though acting with authority, Haverhill Ins. Co. v. Newhall, 1 Allen, 130, is abrogated. The agent now relieves himself from liabihty by a form of signature whereby he is described as agent of a disclosed principal. This con- clusion is not at variance with Tuttle v. First National Bank of Green- field, 187 Mass. 533, 73 N. E. 560, 105 Am. St. Rep. 420, and Dun- ham V. Blood, 207 Mass. 512, 93 N. E. 804. Where a trustee executes a note in his trust capacity he is liable personally. Of course, if one signs as agent when he is not, he is liable as principal. Although the law on this point in other jurisdictions before the pas- sage of the negotiable instruments act may have differed from that of this comm.onwealth, the result here reached appears to be in harmony with the rule now generally prevailing under that act. See American Trust Co. v. Canevin, 184 Fed. 657, 107 C. C. A. 543 ; Briel v. Ex- change Nat. Bank, 172 Ala. 475, 55 South. 808 ; Western Grocer Co. V. Lackman, 75 Kan. 34, 88 Pac. 527 ; Phelps v. Weber, 84 N. J. Law, 630, 87 Atl. 469; Megowan v. Peterson, 173 N. Y. 1, 65 N. E. 738; Citizens' Nat. Bank v. Ariss, 68 Wash. 448, 123 Pac. 593. The plaintiff as trustee in bankruptcy has no greater rights in this respect than the bankrupt himself had. U. S., June 25, 1910, c. 412, § 8, 36 Stat. 840 (U. S. Comp. St. § 9631) relied upon by him, confers upon the trustee the rights of an attaching creditor. Such rights in this respect are no greater than those of Bums suing as an individual plaintiff. Order dismissing report affirmed. (II) Payee GORDON V. LANSING STATE SAVINGS BANK. (Supreme Court of Michigan, 1903. 133 Micli. 143, 94 N. W. 741.) Assumpsit by Gordon against the bank to recover the balance of a deposit. From a judgment for plaintiff, defendant brings error. MooRE J. This case was tried by the circuit judge without a jury. At the request of the defendant, he made a finding"' of facts, which is as follows : "Monday morning, December 9, 1901, at about 9 o'clock, there was presented at the bank of defendant at the city of Lansing for payment Ch. 1) FORM OF BILL AND OF NOTE 159 the following check, made upon the printed form of check supplied by defendant to its patrons, and signed by plaintiff, viz. : rJ' " 'Lansing, Mich. 190 No. )/ " 'Lansing State Savings Bank of Lansing. f " 'Pay to the order of Nine Hundred and] Seventy Dollars— $970.00. Jno. R. Gordon.' "The check was indorsed by Charles P. Downey, and was presented^ by an employe of Mr. Downey, and cash was paid at the time of its presentation. The plaintiff had been a depositor at defendant's bank , at periods for three or four years, and at the opening of the bank on the morning of December 9, 1901, his balance or credit upon the books of the bank was $3.40, but during the day $2,997.50 was added to plaintiff's credit. The day defendant cashed the check plaintiff was at the bank, and was informed that the check for $970 had been cashed by payment to Mr. Downey, and he then notified defendant he would not accept that check as a voucher for the money paid. December 14, 1901, plaintiff prepared and presented to defendant his check, payable to himself, for $970, being the amount he claimed to then have on deposit in the bank. Payment on this check was refused by defendant upon the ground that plaintiff had no funds in the bank." The circuit judge rendered a judgment in favor of the plaintiff for $970 and interest. The case is brought here by writ of error. ^ Two questions are discussed by counsel: First, the effect of not dating the check; second, has the check a payee? We do not deem it necessary to discuss the first question. As to the second question, it will be noticed the drawer of the check did not name a payee therein, nor did he leave a blank space where the name of a payee might be inserted, nor did he name an impersonal payee. In the case of Mcintosh v. Lytle, 26 Minn. 336, 3 N. W. 983, the court used the following language: "A check must name or in- dicate a payee. Checks drawn payable to an impersonal payee, as to 'Bills Payable' or order, or to a number or order, are held to be pay- able, to bearer, on the ground that the use of the words 'or order' in- dicates an intention that the paper shall be negotiable ; and the mention of an impersonal payee, rendering an indorsement by the payee im- possible, indicates an intention that it shall be negotiable without in- dorsement — that is, that it shall be payable to bearer. "^ So, when a bill, or note or check is made payable to a blank or order, and actually delivered to take effect as commercial paper, the person to whom de- livered may insert his name in the blank space as payee, and a bona fide holder may then recover on it. These cases differ essentially from the one at bar. In the latter case the person to whom delivered is pre- sumed, in favor of a bona fide holder, to have had authority to insert a name as payee. In the former cases the instrument is, when it 08 Accord: Cleary v. De Beck Co., 54 Misc. Rep. 537, 104 N. Y. Supp. 8.31 (1907), a checU payable to "Cash." 160 FOEM AND INCEPTION (Part 1 passes from the hands of the maker, complete, in just the form the par- ties intend. But in this case there is neither a blank space for the name of the payee, indicating authority to insert the payee's name, nor is the instrument made payable to an impersonal payee, indicating . a fully completed instrument. It is claimed that the words 'on sight' are such impersonal payee. They were inserted, however, for another purpose — to fix the time of payment, and not to itidicate the payee. It is clearly the case of an inadvertent failure to complete the instrument intended by the, parties. The drawer undoubtedly meant to draw a check, but, having left out the payee's name, without inserting in heu thereof words indicating the bearer as a payee, it is as fatally defective as it would be if the drawee's name were omitted." See, also. Rush et al. V. Haggard, 68 Tex. 674, 5 S. W. 683 ; Prewitt v. Chapman, 6 Ala. 86 ; Brown v. Oilman et al., 13 Mass. 160 ; Rich et al. v. Starbuck, 51 Ind. 87 ; Norton, Bills & Notes (3d Ed.) p. 59, and notes ; 1 Daniel, Neg. Inst. (4th Ed.) § 102. The case differs from the one at bar in some respects, but the im- portant part of the decision is that a payee is necessary to make a com- plete instrument, and, even though the maker of the check may have intended to name a payee, if he has not in fact done so the check is incomplete. In the case at bar the failure to name a payee was not an oversight, if we may judge from what Mr. Gordon did, as will appear more in detail later. Our attention has been called to Crutchly v. Mann, 5 Taunt. 529. In this case the bill of exchange was made payable to the order of The court found that, under the facts shown, the con- clusion was irresistible that the name was filled in with the consent of the drawer. The same case was previously reported in 2 Maule & S. 90 (Cruchley v. Clarance), where, as the case then stood, it appeared the bill of exchange had been sent out, the defendant leaving a blank for the name of the payee. One of the judges was of the opinion that the defendant, by leaving the blank, undertook to be answerable for it, when filled up in the shape of a bill of exchange ; another judge was of the opinion that it was as though the defendant had made the bill payable to bearer; while the third judge was of the opinion that the issuing of the bill in blank without the name of the payee was an authority to a bona fide holder to insert the name. In the case of Harding v. State, 54 Ind. 359, a promissory note was drawn, leaving a blank space for the name of the payee; and it was held: "So the name of the payee may be left blank, and this will authorize any bona fide holder to insert his own name. 1 Pars. Notes & B. 33." In the case of Brummel v. Enders, 18 Grat. 873, promis- sory notes blank as to the names of the payees had been put in the hands of an agent to be sold for the benefit of the makers. The agent sold them, at a greater discount than the legal rate of interest, to pur- chasers who did not know they were sold for the benefit of the makers. Ch. 1) FORM OF BILL ^D OF NOTB 161 ' At the time of the sale the names of the purchasers were inserted, either by the purchasers or by the agent, in the blank left for the payee. When the notes were sued the makers pleaded usury. The court, following the cases already cited, held that any bona fide holder of a bill or note which is blank as to the name of the payee "may insert his own name and thus acquire all the rights of the payee. It will be observed that the case at bar differs from all of these cases. As before stated not only did Mr. Gordon fail to insert the name of a payee, or to leave a blank where the name of the payee might be inserted, but he did more. He drew a line through the blank space making it impossible for any one else to insert therein a name,, indicating very clearly that he not only declined to name a payee but intended to make it impossible for any one else to do so. Had Mr.- Gordon issued a check otherwise perfect, but with the blank space for' the amount of the check unfilled, and delivered it to a third person it would be presumed the third person was given authority to fill the' blank space. But had he, instead of leaving the space a blank filled it by dfawing a line through it, would any one say the third person might then insert a sum of money in that space? If not, upon what principle may the name of a payee be inserted when the space was filled in the same way, or upon what theory may it be presumed there was an im- personal payee when the maker has not made the check payable to cash or some other impersonal payee? In order to construe the check as a complete instrument, we must read into it an intention not^ only not expressed by its language, but contrary to the act of the maker. The check, as it appears to-day, is without any payee. The record is' silent in relation to whom it was delivered, or whether the person who presented it at the bank or the person whose indorsement it bears was- a bona fide holder. Judgment is affirmed. Hooker, C. J., concurred with Moore, J. Carpenter, J. I regret that I cannot concur in the opinion of my Brother MoorE. I agree with him that the check in question is not governed by the authorities which hold that, where a blank is left for the insertion of the name of a payee, the instrument is to be treated as payable to bearer. I cannot agree, however, that the case of Mcin- tosh v. Lytle, 36 Minn. 336, 3 N. W. 983, is controlling. That case' resembles this in many particulars. There is, however, a difference'' which, in my judgment, renders the reasoning of that case inapplica- ble. The fact that the plaintiff in the case at bar used the ordinary blank, and drew a line through the space intended for the name of the payee prevents our assuming, as did the court there — and its decision was based on this assumption — that it is "the case of an inadvertent failure to complete the instrument intended by the parties." The in- strument under consideration is obviously complete, in just the form the maker intended. SM.& M.B.& N. (2d Ed.)— 11 162 FORM AND INCEPTION (Part 1 In my judgment, the authorities which hold a check payable to the order of an impersonal payee to be valid and negotiable control this case. I quote from the case of Willets v. Bank, 3 Duer (N. Y.) at page 129 : "One of the checks was payable to the order of 1658, the other three to the order of bills payable; and, as the required order could not in either case possibly be given, the checks, unless transfer- able by delivery, were payable to no one, and were void upon their face. The law is well settled that a draft payable to the order of a fictitious person, inasmuch as a title cannot be given by an indorse- 'ment, is, in judgment of law, payable to bearer. Vere v. Lewis, 3 Term R. 183; Minet v. Gibson, Id. 481; Gibson v. Minet, 1 H. Black, 569, affirmed in the House of Lords. And it seems to us quite manifest that in principle these decisions embrace the present case. At any rate, the bank, by certifying the checks as good, is estopped from denying that they were valid as drafts upon the funds of the maker, and, consequently, were payable to bearer. The giving of such a certificate, if otherwise construed, would be a positive fraud.'' In Mechanics' Bank v. Straiton, 3 Abb. Dec. (N. Y.) 269, a check payable to bills payable or order was held payable to bearer, the court saying: "By naming the persons to whose order the instrument is payable, the maker manifests his intention to limit its negotiability by imposing the condition of indorsement upon its first transfer. But no such intention is indicated by the designation of a fictitious or im- personal payee, for indorsement under such circumstances is mani- festly impossible ; and words of negotiability, when used in connec- tion with such designations, are capable of no reasonable interpreta- tion except as expressive of an intention that the bill shall be nego- tiable without indorsement — i. e., in the same manner as if it had been made payable to bearer." We must decide that the check in the case at bar, like those in the cases cited, is either altogether void, or is transferable by delivery. I submit that we should follow those cases, and decide that it is trans- ferable by delivery. To quote the language of Lord Ellenborough, in Cruchley v. Clarance, 2 Maule & S. 90 : "As the defendant has chosen to send the bill [check] into the world in this form, the world ought not to be deceived by his acts." This view of the case compels me to notice the fact that the check under consideration is not dated. According to the weight of authority, this omission does not invali- date it. See Zane, Banks, §152; 2 Daniel, Neg. Inst., § 1577; Nor- ton, Bills & N. (3d Ed.) p. 405, note. I think the judgment of the court below should be reversed, and a judgment entered in this court for the defendant. Grant, J., concurred with Carpenter, J. Montgomery, J., did not sit.''^ 60 ".?i;,500.00. La Crosse, Wisconsin, Sept. 2, '97. Four montlis after date, for value received, I promise to pay to ttie order of twenty-five liundred dollars, at the office of People's Bank, Bloomington, Ch. 1) FORM OF BILL AKD OP NOTH 163 REGINA V. BARTLETT. (Nisi Prlus, before Erskine, J., 1841. 2 Mood. & R. 362.) The prisg Rcr— jyas indicteH for foryinp^^^anf ^ nttrrij i g- a bill of _ ex-T chaiige_-attd-the--a6€€pt ance of a hill - n? ' e xcha nge. In several of the counts the bill was set out verbatim, and in all it was called a bill of exchange. The document, when produced, agreed with that set out, and was in the following form : ~. •^ y "Nov. 10, 1840. I "Please to pay to your order tmfs^ of forty-seven pounds fo^ value received. ^^.^y jn^"^ "J. Bishop." "To Mr. G. Peckford, Yeovil." V" ^• The paper was indorsed "J- Bishop." It was objected for the prisoner that this could not be called a bill of exchange; it was nothing more than a request to a man to pay himself, and the acceptance of such a document laid the acceptor un- der no obligation to a third party. Illinois, with Interest at seven per cent, per annum until paid. And to se- cure the payment of said amount I hereby authorize, irrevocably, any at- torney of any court of record to appear for me in such court, in term time, or vacation, at any time hereafter, and confess a judgment without process in favor of the holder of this note, for such an amount as may be due and also for such an amount as may become due thereon, together with costs and fifty dollars attorney's fees, and to waive and release all errors which may intervene In any such proceedings, or in execution thereon, and consent to immediate execution upon such judgment, hereby ratifying and confirming all that my said attorney may do by virtue thereof. "John Willing." The nofe was upon a printed form which, after the words "pay to the order of," contained a single blank line terminating in the word "dollars" ; ] the words "twenty-five hundred" being written at the extreme left of that, line, so -as to leave no space whatever in front of them for the name of a payee. The plaintiff's attorney, before taking judgment in Illinois, had in- terlined between the words "pay to the order of" and the words "twenty- five hundred" the name of Edward E. Smith. Eeferring to the above Instru- ment, Dodge, J., said: "Plaintiff's principal contention is that this is a negotiable promissory note on either of two theories: First, that, by reason of the provision in the power of attorney embodied in the note that judgment may be confessed in favor of the holder, the silence of the promissory part of the note Itself as to a payee is supplied, and the note becomes, by its terms, a note payable to bearer ; secondly, that omission of the name of the payee is, in practical effect, the leaving of a blank which any person having possession of the note is thereby impliedly authorized to fill up; the further contention be- ing that, if this is a negotiable promissory note, the defendant has no mer- itorious defense based upon the agi;eement, at the time it was given, thatc it should be used only for a special purpose, since the very purpose of the law merchant is to give such currency and certainty to negotiable paper that equities existing only between the original parties cannot affect subsequent bona fide holders for value. Young v. War^ 21 111. 226. "The first ground on which plaintiff asserts negotiability we deem unten- able. The part of the entire writing which seeks to express the promise made clearly shows an intent that it be payable only to some person or 164 POEM AND INCEPTION (Part 1 Erskine, J., said he should reserve the point for the consideration of the judges, and left the case to the jury, who convicted the pris- oner ; and he was sentenced to transportation. His Lordship, however, afterwards thought the objection so clearly valid that he did not submit the case to the judges, but recommended a pardon for the offense. WITTE V. WILLIAMS. *t»() thp use nf B . it was held that B^had_baLan egnitablp ughi,_nQtJL\fS^^ intprftj^trand t^'^lTTTf r"nM rif^^"^^^^^^^^" =■" "rHnn nn thp4Mll against the accep tor. Evans v. Gramlington, Carth. 5, 1 Leigh's N. P. 402 ; Byles on Bills, ''* That Hill might have treated the phrase "administrator of estate of J. H. U." as descriptio personse Is held in Adams v. King, supra. See, also, Hamilton v. Aston, supra. "Compare Peltier v. Bablllion, 45 Mich. 384, 8 N. W. 99 (1881); Shaw V. Smith, 150 Mass. 166, 22 N. E. 887, 6 L. R. A. 348 (1889), where the payed was designated as "X.'s estate." 180 FORM AND INCEPTION (Part 1 84. So, in this case, Richa rd Grist describing himse lfjn_jthe bill as th e ageirroFTiis"aisigrie es _di d not give t hem the legJltitletotEe "bill. The counsel for the plaintiffs insist that the defendant cannot now object to this error, because there was no specific exception taken at the trial. The defendant had placed on the record his plea; it was for the plaintiffs to support the affirmative of the issue arising on that plea. The court misdirected the jury as to the law on the trial of the issue, and told them that the evidence offered was sufficient for the plaintiffs. This error appears on the record, and for that the judg- ment must be reversed and a new trial awarded. Ph;r Curiam. Judgment reversed. PRESIDENT, ETC., OF COMMERCIAL BANK v. FRENCH. (Supreme Judicial Court of Mlassachusetts, Suffolk and Nantucket, 1839. 21 Pick. 486, 32 Am. Dec. 280.) Assumpsit on a promissory note as follows : "Boston7"Sgptr- 88, 1836. — For-vslue received I, John Thompson, as principal, and I, John French, as surety, jointly and severally promise to ^av the casljifir.^^^ ^^'^ C ommercial Ba nk. Boston, or his order, nine thousand dollars, on demand with interest. John Thompson. "John French." The note was not indorsed. The defendairt-t n -s iBted -that-the-n pte was made paya b le t r>- fe «-ca5h- ier ^and no t to the bank,,a]ld. not being jndrrspd, an nrti-^n upnn it in *'^,?. nri"""' "^^ ^^"^ 1"|^"'<' rr,u](l nn \ hp -anntninnd The judge Overruled the objection, and a verdict was taken for the plaintiff by consent, sub- ject to the opinion of the whole court. ^ " Morton, j, * * * But the only objection much relied upon, or worthy of much consideration, relates to the form of the action. The note is in terms payable to "the cashier of the Commercial Bank," and the defendant contends that the action should have been brought in the name of the person who was then cashier, and will not lie in the name of the corporation. It is not denied that thp property nf th p nate_is _and eve r has been in the plaintiff s ; hut-tk e arg iime.T ;it is th at, , the promise beingi n the name of the cashier- althni i Hi rpyiHe tn hjr n in triTsl_anrl tnr the henHitrvf_tVip rnrpnratinn^ it can only he enforced in his nam e. It is a familiar ryUemf gleadingt hat contra c ts must be declared^ on arr-nrrHnnr tr. f}^f^y ipcral im port and _ effect_ rather than th eir literal form. , 1 Chit. PI. (1st Ed.) 299, 302. We should therefore firiTseek the true import of the contract under consideration. If it he in tll^h 78 The statement Is abridged, and the arguments of counsel and part of the opinion omitted. Ch. 1) ■ FORM OP BILL AND OP NOTE 181 a promise to t heJndiviHnal w1ir> vas wislniVr w h^n it was mac\ f., and n ot to the corporat ion, it is veryHear jIiat ttip plaintiff ' s cannot ma in- tain this actio n. For he alone to wnom a promise is made, or in wlTom its legal interest is vested, can enforce its performance or complain of its breach. Hammond on Parties, 4 ; 1 Chit. PI. (1st Ed.) 3 to 5, and cases there cited ; Allen v. Ayres et al., 3 Pick. 298. A contract may be made to or with a person, as well by description as by name. And where the parties can be ascertained, it will be val- id, although their names be mistaken or their description be incorrect. It cannot be doubted that a note to the Commercial Bank would be valid and might be declared on as a promise to the plaintiffs, although their legal name is "the President, Directors and Company of the Commercial Bank." So a contract with the stockholders, or with the president and directors, or with the directors of the Commercial Bank, would doubtless be, in its legal effects, a contract with the corporation. It is not easy to perceive why a contract with the cashier of a bank is not a contract with the bank itself.' The accounts of banks with each other are usually kept in form with the cashiers, but undoubtedly the banks themselves are the real parties to them. Master, etc., of Sussex Sidney College v. Davenport, 1 Wils. 184. A corporation , being an incorporeal being and having no existence but in law, can neith fr maU-p nnr g.r-cppt rnntrartg^ receive nor pay out money, but by t h e T^gtvry "f i*''' "ffi'''^rg. They are the hands of the corporation by which they execute their contracts and receive and make payments. O f thf n p ofRrfrs t h e m fi hifr i p the p rincipal. If_th€ not e had been m adf tn the rnrpnratirtn^ hy i>g appi-ppriatc namp the same officer ' would ha ve demanded and receiv ed p^Y"^rr''j or would have^ given notice ofTionpayment and protested it, and, had it been negotiated, would have made the indorsement, and in _ precisely the same form as he would upon this note. There are several decisions in our own reports, which support this view of the subject, in cases less strong than the present. In the Med- way Cotton Manufactory v. Adams et al., 10 Mass. 360, it was decid- ed that a note payable to Richardson, Metcalf & Co. might well be declared on as a promise to the Medway Cotton Manufactory. In Taunton & South Boston Turnpike v. Whiting, 10 Mass. 327, 6 Am. Dec. 124, it was holden that the promise, in a subscription paper, to pay the assessments which should be made on certain shares to John Gilmore, or order, would support an action in the name of the corpo- ration. And in Gilmore v. Pope, 5 Mass. 491, it was directly decided that an action would not lie upon the same subscription in the name of Gilmore, but must be brought by the corporation. Piggott v. Thompson, 3 Bos. & Pul. 147. Thepri nciple is that the pt og iitc luu^t be uiidnii ^ Luud a o t- u u Hng to the i ntention of the parties Tf in tmf h it h^ an u- nHm - tnlfinyr fr, fj^p corpo¥Scii6n^'^?!^:th%¥-a,- ^ight or a wrong no r tHC, vnhcllicr lh L-ftaxQ£_p f 182 FORM AND INCEPTION (Part 1 th e corporatio n oiigf some of its officers be used, it should be declare d on and_ treated as a promise to the corporatio n! AnH thpre is_im so safe criterion asj he considerat ion. I-f ^this proceed fr o m th e corpora- tion , it ralies a v ervstrong- presumptio n that the promise rs ~macte to them. If no express~promise beltimde7but it be left to legaFimphca- tioX it must be to them. Some later cases have the appearance of clashing a little with the two last above cited. But probably they may be reconciled by a refer- ence to the different nature of the promises declared on and the dif- ferent state of the facts. In Fisher v. Ellis, 3 Pick. 322, it was decid- ed that a note payable to the treasurer of a parish, though given for the funds of the parish, might well be sued in the name of the treas- urer. And in Fairfield v. Adams, 16 Pick. 381, it was holden that a note indorsed to S. S. Fairfield, cashier, would sustain an action in the name of Fairfield. See, also, Little v. O'Brien, 9 Mass. 423 ; Brigham V. Marean, 7 Pick. 40. Great favor and indulgence is always shown to negotiable securi- ties. The above cases seem to show that upon such paper, when made in the name of an agent or officer, though the beneficial interest be m the corfKjration, they may be sued by him. But they do not show that an action might not also be maintained in the name of the corpo- ration. The contrary is plainly intimated in Fisher v. Ellis. It has been the practice to sue towns on notes given by their treasurers. Many such actions have been brought and maintained. See Prece- dents of Declarations, 111. If a note given by the treasurer of. a ''i^niQigliQILl'i tbp rnptrart nf~t he corporation, w e can see no soun d rearsen-wfty a^nete-§is;£ii- to the treasurer shou l dnot "be an . av a_ ila5I e promise to the c orporation. There is an oBvloUS and broad distinction between the case at bar and those of "Fisher v. Ellis and Fairfield v. Adams. H ad the not e hf ^n m^flp t n the-cajJwM'y-hy.^riqrnp, th e ^dditinn .of-ilc a-sViipr "f ^ r* Conimercial Bank" might have been-censide red as descriptio p ersonaa. usedto~a"esi gnatB'^as~T5et wppri him anH thp Kanjc ^the rela tion he bore to it"m the transaction, an d the individual might hav g^ bpp" HpprnH tl\f prnmiF^'" nq '" thn^ip rac^f! ^^ Buj Lsuch was_pnt tl ip_f?;rt, and we , diseoyer-ao-^ alid objection t^ n thp plaintiffV rore oLesj''^ "In such a case as the court supposes the Instrument would be payable to the bank prima facie. First Bank v. Hall, 44 N. Y. 395, 4 Am. Rep. 698 (1871); Johnson v. Bank, 134 Iowa, 731, 112 N. W. 165 (1907); Griffin V. Ersklne, 131 Iowa, 444, 109 N. W. iS (1906), a note payable to "X., Pres." Compare First Bank v. McCullongh, 50 Or. 508, 93 Pac. 306, 17 L. R. A. (N. S.) 1105, 126 Am. St. Rep. 758 (1908). T8 Accord: McBroom v. Corporation of Lebanon, 31 Ind. 268 (1S69), a note payable to "treasurer of Lebanon Corporation." Compare Charitable Ass'n v. Baldwin, 1 Mete. (Mass.) 359, 365 (1840) ; Vermont R. R. Co. v. Clayes, 21 Vt. 30 (1848) ; Noxon v. Smith, 127 .Mass. 485 (1879) ; Sayers v. Bank, 89 Ind. 230 (1883). Ch. 1) FORM OP BILL AND OF NOTE 183 (III) Draweb REGINA V. HAWKES. (Court for Crown Cases Reserved, 1838. 2 Moody, C. C. 60.) " Thg ^risoner w as convicted before Mr. Justice Bosanquet, at the summer assizes, 1838, at Warwick, of uttering a forged acceptan ce upon a bill of exchatige, knowing it to be forged. The ind ictm ent rjiame d that the p risnnpr having in his possession, a bill of exchange_as33lpws : "Birmingham, 9th August, 1837. "i20. Two months after date, pay to my order the sum of twenty pounds for value received. Edward Hawkes, "General Provision Warehouse, Baker, etc., Unett Street, Well Street, Hockley." On whIch-Av as w r itten a forged acceptance - aa follo ws : " A;:cepted. Payable at Messrs., Gillett and Tawney, Bankers, Ban- bury. ' William Se llers," — did utter the same knowing the said acceptance "fo^be forged, with intent to defraud John Evans. And in another count with intent to defraud William Sellers. The prisoner brought the instrument described in the indictment with the acceptance upon it to the house of John Evans, and uttered it to his servant in payment of a debt ; the servant seeing that it was not addressed to any one asked who the acceptor was. The prisoner said it was his brother-in-law, named Sellers, a paper-maker near Banbury. The servant observed that it was not indorsed, and desired the prisoner to indorse it, which he did. The prisoner carried on busi- ness as a baker in Unett street, but had removed from thence when the bill became due. William Sellers was his brother-in-law and lived near Banbury. He had given no authority to the prisoner to accept the bill. The case of Gray v. Milner, 8 Taunt. 739, was cited. See, also, Edis V. Bury, 6 B. & C. 433 ; The King v. Ravenscroft, Russ. & Ry. 161 ; The King v. Hunter, Russ. & Ry. 511. The learned .j udge thought that the writing upon the instrument pur ported to b e an arrppt anrp hy . ^pl lers as drawee of the ^ ill. and, i f not^ jEat it jwaHan-aceeptanee-ixi cthe honor of th e_d rawer; anTT he learned judge spntenred th&4t risoner to imprisonment andJ iard labor for two years. The only q uestion for consideratio n was wh ether the instrume nt upon which the forged accep tance - waFwritte n was properly d escribed' as a bill of_e xchange. not bemg aHcTressed t cTahy pers on as draj tee. This case was considered by all the judges except Park, J., Eittle- 184 FORM AND INCEPTION (Part 1 DALE, J., and BoLLAND, B., in Michaelmas term, 1838, andjhej^^jwere rfj?£iriir:aLthat tlr* ^nr^Y^rfinn ^"^aLJlizll^ c'^cept Parke, ^TTPatteson, J., and Coleridge, J., who thought otherwise. ^^ FORWARD V. THOMPSON et. al. (Court of Queen's Bench, Upper Canada, 1854. 12 U. C. Q. B. 103.) As.s nmpsit on an in strnmpnt jn thp fn11nwi"ngr words: "i228. 7s. 6d. Port Hope, December 8, 1853. "Three months after date, pay to the order of William Thompson, at Port Hope, the sum of two hundred and twenty-eight pounds, seven shillings, and six pence, currency, for value received. "[Signed] John Thompson." This was deglafed-npoq, asa promissoryno te, made by Tohn T homp- son^-iofavor of the defendan t Wil jj ^ TTTomps on, whoja.a_alated tonaveindDrsefl to ttie defendant John Thompson, who indorsed to the plam tifil! "Pleas denying the making and indorsing, and other pleas not ma- terial to mention. At the trial at Cobourg, before McLean, J., it was ohJ£Cted— that th e instrument p rod"''''^ W^_J2£!t r* prn'ni'i^rn-^""^'' Several other objections were raised ; but it is only material to notice the one on which the judgment of the court proceeded.*" Draper, J., delivered the judgment of the court. The first question to be decided is whetheiUfce-illstru nieiil de clared I up on in point o?TaW"auiOUnIs to a prormssory n ote. The authorities cited (to which may be a^ed Russell v. Powell, 14 M. & W. 418, and Peto v. Reynolds, 18 Jur. 472) establish clearly, as we think, that it_couldnot have b een treated and declared upon as a bill of exchange for wan t ot a dr awee ; and, if not, then those cases which hav^ been decided on the ground that the instrument in question is made in terms so ambiguous as to make it doubtful whether it be a bill of exchange or promissory note, have no application. Th£n_as_a projuisa ory note J Lwants the very essence of a p r omissory note, th at which mainly distinguisTTeTlT from a bill of exchange, v iz., a pr omise in tennsjjylthejnaker, wiiich.jTiakes him prim arily liable to pav ]the money. Here are the proper wordsTlsedT'and'iio others, for drawing a bTlTof exchange, and if_tliere had been a drawee there would have beer 7 As to the sufficiency of the designation of the drawee, see Ball v. Al- len, 15 Mass. 433 (1819); Alabama Co. v. Brainard, 35 Ala. 476 (18G0) ; Cork V. Bacon, 45 Wis. 192, 30 Am. Eep. 712 (1878). 80 Arguments of counsel are omitted. Ch. 1) FORM OF BILL AND OF NOTB 185 billjiLexchangg. BjiLjo r want o f a drawee it is incomplete as a bill nf^yrhangA- -in^ fnr ^ynnf r,f p~p?Krrik'P if ■lJ\J\M; ^ r H tfi Uk mCOmplet e a s a note. It is quite true that no particular words are indispensable, but that any form of words from which the court can extract an ex- pressed intention to promise to pay are sufficient ; but in this case w e see nothing-b ut an -emi £§ion to complete, by adding a drawee's name, wRaT niall other respects is a good bill ot exchangx;, diid we c annot find-'ettEr r rnnrnn -iTT anthnriTy-fni-4i £ilrling that this is siittiripnt tn rnp - vpTf ^jt intn q promissory note. Rule absolute." "^ PETO V. REYNOLDS. (Court of Exchequer, 1854. 9 Bxch. 410.) Assumpsit. The first count charged the defendant as acceptor of a bill of exchange. The second charged him as a maker of a promis- sory note. ' Pleas, to the first count, that the defendant did not accept the bill ; to the second count, that the defendant did not make the note. Issues thereon. At the trial, before Talfourd, J., at the last Bristol assizes, it ap- peared that the de i£ndant was a merchant at Bristol an d owner _nf -? vessel called the "Mary, ' which, in April, 1853, had s_ail£d_from that port to the coast of Africa und er the command o f one Righton. The pl aintiff j v a s troacurcr - uf a fu re ^n missi r> n?'^'"g"'-i pi7- " ^ -^ tV i P regis- tered owner of a \r £ssel called Ji ie- "Dove." which had been sent by that society to the coast of Africa. Whilst R ig-btnn w as at Cameroons in Africa, he there saw the Dove, and a greed with one Saker, an agent of the missionary society , to purchase _th at ve ssel fui £300, for the purpose of loading the Mary. He paid £10 0, and, in respect of the residue, Saker drew the following bill in sets: ' "Cameroons, September 3, 1853. "Exchange for £300. "At sight of this my third of exchange, the first and second of the same tenSr and date being unpaid, p lease to pay toS;_J^JPeto, Esq., or order, the sum of two hundred po\inds sterlmg torvalue received, and place the same, as by letter of advice of 3d September, to the account of Alfred Righton." Arrn'!'; thp fare nf th^ hill T?i?rhtnn wrote the defendant's ae ceptaaee. as fbllowsT "Accepted. Sariiuel Reynolds, Esq., Shorn Lane, Bed- minster, Bristol." 81 Accord: Watrous v. Halbrook, 39 Tex. 573 (1873) ; Lehner v. Roth (Mo. App.) 227 S. W. 833, Id., 229 S. W. 232 (1921), semble. 186 FORM AND INCEPTION (Part 1 A witness for the plaintiff stated that, in January, 1853, he p resent ed th e ahnvp hill to the Helendant^ ,who denied the authority of Rig hton to accept bills in his name, byL- neverthele ss,j u-omised to pay this b ill. It was not, however, clear from the testimony of the witness, whether the defendant had made an absolute promise to pay, or a conditional promise to pay at a future period. The defendant, who was called, HeniedJjigtjTe haii-absol utely promised to_ pay_thebill. IFwas ob"iected, on th e part of the defendant] tha t there_j£0uld_be n o valid ac jyptcnr-P r."f a b iin A JiidLwasjiot_ajdresseJ to a ny one. The learned judge told the jury that, if thejTbelieved from Ilre~evidence that the defendant made an absolute and unconditional promise to pay the bill, that would amount to a parol acceptance of it. The jury found a vefdict f or the plaintiff on the first c ount,. for the aipouht of the bill and interest, and for tKe~defe»dafrron the seco nd; leave being re- served to the defendant to move to enter a nonsuit. A rule nisi hav ing been obtained accordingly,*^ Parke, B. i thmk tH3t there o ught to b e_a ,npw trial, becau se the evidenc e.^as-te-tb€-ai:ceDLaiiLK uf tbe-bilU is unsatisfacto ry. At the next trial, the parties will have an opportunity of putting on the rec- ord the question whether this instrument is a bill of exchange; and therefore it is not necessary to express any decided opinion on the point. I cannot, however, help observing that, wjtlj^ the eyic eptiog^f Regina v. Ilawke s. there is no case in which it ha .a-£y_e r been dec ided tihai_aninstriinTP2 Tt rnijld be_a_fcilLQi- ^xchange where there was not a rlrg j^pr'anrradrawee . With respect to that case, it does not seem to me entitled to the same weight of authority as a decision pronounced in the presence of the public, and on reasons assigned after hearing an argument in public. I must own that, but for that case, I should have had no doubt that the law merchant required that every bill of ex- change should have a drawer and a drawee. This instrument, tho ugh inthe fo rm of a bill, is not addressed tn anj L-efteffor'f--tbinl ^it im - p^sft itg^q __co nsider th e acceptance as an a ddress ; but I do n gLsee wiry thelnstrum ent may^ot be~tT catedjg SS^^fgn nsu ui j i male , bec ause, upo S^he 3flre-TTf^.' tlT^r^-^s^_j)tT)rni;?<' tp p^vthe amonntjv ntten in the name "f S^ r""''] IRpynnlds. Then, if^ the autlTorttfTo" subscribe his nar a.S been ^,^llbse2UMltlv rptifi ed^ that amniirits'Tn^apr?ffrrf»e. hy It^T 'Therefore, if, on the next trial/tEere^TS^tisfactory evidence to snow that the defendant absolutely promised to pay the amount men- tioned in the instrument, he will be liable as upon a promissory note. Martin, B. I am of the same opinion. The verdict is unsatisfac- tory, and therefore there ought to be a new trial. With respect to the matter of law, if it were necessary to express a decided opinion, I 8 2 Arguments of counsel are omitted, and tlie statement is abridged, lock, C. B., and Alderson, B., also delivered opinions. Pol- Ch. 1) FORM OF BILL AND OF NOTH 187 should concur with my Brothers Parke; and Alderson. It seems to me that it is absolutelv es sentia l to the validity of a bill of exchan ge, tlaai-4t--slt©aldJiavea3rawer and a drawee ; and, except for the case of Gray v. Milner7l snouia na" ^e JuubLed w hether the making a bill payable at a particular place was a sufficient address. However, as- suming that in this case the defendant made an absolute promise to pay, why may not this instrument be treated as a promissory note? A promissory note need riot be in any particular words. Here there is a request to pay a sum of money ; then a person accepts that in the name of Samuel Reynolds, which acceptance is a direct engagement to pay. The person so accepting is not Samuel Reynolds, but a person who professes to do it with Samuel Reynolds' authority. Then, if one man professes to make a contract on behalf of another, and that other adopts it, it is the same as if he had made it himself. Therefore, if there was evidence of an absolute undertaking by Samuel Reynolds to pay, this instrument is his promissory note. Rule absolute.'' 88 See Wheeler v. Webster, 1 E. D. Smith (N. T.) 1 (1850). "I am of the opinion that the omission of the name of the drawee at the foot of the bill will not vitiate it. The acceptance may be considered as sup- plying the defect, and as being an admission by the acceptor that he is the person Intended. At any rate, it does not lie with him to make such defense, after having admitted, by the acceptance, that he was the person intended, and after having promised to pay the draft at maturity. He is estopped, by his own act, from such a defense." Per Ingraham, J., In Wheeler v. Web- ster, supra. 188 FORM AND INCEPTION (Part 1 ALLEN V. SEA, EIRE & LIFE ASSUR. CO. (Court of Common Pleas, 1850. 9 C. B. 574.) Assumpsit. The declaration stated that the defendants theretofore, to wit, on the 28th of^ctober, 1849, mi de their pro missoryjaQte in writing, and deHvered the same to the plaintiff, and thereby promised to pay to the plaintiff, in the said note described as Mrs. Ann Allen, or order, the sum of £311. 9s. 6d., thirty days after the date thereof, and that the note was unpaid, etc. The defendants traversed the making of the note mentioned in the third count. At the trial, before Wilde, C. J., at the last assizes at Maidstone, the plaintiff put in an instrument in the following form, bearing an 8s. 6d. stamp : "Marine Department, Sea, Fire, Life Assurance Society. "31 Cornhill, October 20th, 1849. "689,617. £311. 9s. 6d. "To the Cashier: "Ninety days after date, credit Mrs. Ann Allen, or order, with the sum of three hundred and eleven pounds, nine shillings, and six- pence, claims per 'Susan King,' in cash, on account of this corporation. "A. Davis, } ^. ^ , ,^ -1 • t Directors. W. Ogilvie, 5 "Entered. F. F. A., Accountant." On the jTart pf <-hp dej^iiibiils, it-was suhmitt-prl tViat -f4w»-waa nnt a pro missory note a t-aftr-hrrtra mere order-fef-the pav ment of mo ney. There was a verdict ^r the plaintiff, but leave was reserved to the' defendants to move to set aside the verdict if the court should think the objection well founded. The defendants moved accordingly.^* Wilde, C. J. I think there should be no rule in this case. The first objection is that the instrument declared on in the third count is not a promissory note. What is necessary to constitute a promissory note? These parties issue this instrument, importing that the com- pany promise to pay. The note is addressed by the drawers to their own clerk. My Brother Shee treats the cashier as a drawer. But at the trial it was insisted for the plaintiff that the instrument was pre- cisely what we thinly it is. The company indicate that they mean to pay, by a direction to their officer to pay — "credit in cash," meaning, as we held in the former case, "pay;" and they point out to whom payment is to be made. It appears to me that the instrument contains all that is essential to constitute a promissory note. * * * Rule refused. '" 84 The statement is abridged, and the arguments and part of the opinion are omitted. «"> Accord: Roach v. Oster, 1 Manning & R. 120 (1827), an Instrument drawn by O., directed to O., and payable to R. Hegeman v. Moon, 131 N. Ob. 1) rOBM OF BILL AND OP NOTB 189 ALMY V. WINSLOW. (Supreme Judicial Court of Massachusetts, Bristol, 1879. 126 Mass. 342.) Contract on the following instrument, declared on as a promissory note: "New Bedford, April 26, 1870. "On demand, with interest for value received, pleise pay Charles Almy, or order, fifty-five and "/loo dollars. "George P. Winslow. "Witness : Asa C. Smith." Writ dated March 28, 1877, and returnable to the superior court. The defendant demurred, on the ground that the declaration set forth no legal cause of action. The court overruled the demurrer, and the defendant alleged exceptions. The defendant then filed an answer, admitting the execution of the paper declared on, and that the same was for a valid consideration, and alleging that the cause of action did not accrue within six years. At the trial, before Gardner, J., without a jury, the judge ruled that the instrument declared on was a witnessed promissory note, and was not barred by the statute of limitations, and ordered judgment for the plaintiff. The defendant alleged exceptions. '° SouLE, J. The only question in this case is whether the instru- ment sued on is or is not a witnessed promissory note. That it is wit- nessed is admitted. The controversy is as to the legal effect to be given to its terms. It does not purport to be a mere acknowledgment of the existence of a debt, and is admitted to have been given for a valuable consideration. It is in the form of a draft or bill of ex-) change, except that it is not addressed to or drawn upon any one, and therefore lacks one essential characteristic of a bill. It is not in the ordinary form of a promissory note, for it is not in express terms a promise, but a request to pay. It is familiar law, however, that no particular form of wo^ds is necessary to constitute a promissory note. There need not be a promise in express terms ; it being sufficient if an undertaking to pay is implied in the contents of the instrument. Daggett V. Daggett, 124 Mass. 149; Franklin v. March, 6 N. H. 364, 25 Am. Dec. 462; Carver v. Hayes, 47 Me. 257; Russell v. Whipple, 2 Cow. (N. Y.) 536; Brooks v. Elkins, 2 M. & W. 74. The instrument sued on was intended by the parties to take effect as a contract. The language imports this; and no other inference can be drawn from the fact that it was given for value. It cannot operate as a. draft, check, or bill of exchange, because there is no drawee. One who signed an acceptance on it would not be liable as T. 462, 30 N. B. 487 (1892), an Instrument In the form of a bill drawn by H. directing her executors, one year after her death, to pay M. 8« Part of the opinion Is omitted. 190 FORM AND INCEPTION (Part 1 acceptor of a bill. Peto v. Reynolds, 9 Exch. 410. T© be operative at all, as a contract, it must be as a promissory note. It was said in Edis V. Bury, 6 B. & C. 433, by Lord Tenterden, that, "where a par- ty issues an instrument of an ambiguous nature, the law ought to allow the holder, at his option, to treat it either as a promissory note or a bill of exchange." In that case the instrument was in the form of a promissory note, but had been accepted by a person whose name had been written on the corner of the paper at which the name of the drawee of a bill is usually placed. The maker, being sued, con- tended that he was discharged for want of notice of dishonor as drawer of a bill. The court decided otherwise. To the same effect is the decision in Lloyd v. Oliver, 18 Q. B. 471. It has been repeat- edly held that, where the drawer and drawee of an instrument in the form of a bill of exchange are the same person, it may be declared on as a promissory note. Miller v. Thomson, 3 Man. & Gr. 576 ; Al- len V. Sea Assur. Co., 9 C. B. 574; Fairchild v. Ogdensburgh, etc., Railroad, 15 N. Y. 337, 69 Am. Dec. 606. The reason is obvious. The drawer of a bill on another assumes only a conditional liability. His contract is that he will pay' if duly notified of dishonor of the draft; but when the drawer is the drawee too, such notice would be an empty form, and his undertaking is not conditional, but absolute. The doctrine of the cases cited above on this point is recognized and approved in Commonwealth v. Butterick, 100 Mass. 12. In view of the foregoing authorities, there seems to be no injus- tice in holding that an instrument in the form of that sued on is to be regarded, in passing upon the rights of the signer and the payee, as a promissory note. The signer, having made the instrument in the form of a bill of exchange, but without addressing it to any one as drawee, may properly be held to have intended to assume the ab- solute liability to pay, which he would have assumed if he had ad- dressed the instrument to himself. Any other view makes the instru- ment valueless. It does not contain anything which informs the payee what is to be done in order to fix the liability of the signer. If the undertaking of the signer is not absolute, it is nothing. * * * We are of the opinion that the instrument sued on was in legal effect a promissory note, and that, being duly attested, action on it was not barred by the statute of limitations. Exceptions overruled." 87 Accord: Dldato v. Coniglio, 50 Misc. Rep. 280, 100 N. T. Supp. 466 (1900) ; Funk v. Babbitt, 156 111. 408, 410, 41 N. E. 166 (1895). In the latter case the court said : "Said instruments were declared on as promissory notes. It Is urged that they are not notes, or even promises to pay, and, not being directed to any one, do not constitute drafts or orders, and In fact amount to no more than blank pieces of paper. They are, undoubtedly, very irreg- ular and informal Instruments; but they are not void as written evidences of indebtedness. A person may draw a bill upon himself, payable to a third person, in which case he is both drawer and drawee. Here the firm drew bills, but did not address them to any third person or pereons, and it l3 therefore to be regarded that they were in legal effect addressed to them- Oh. 1) FORM OF BILL AND OF NOTE 191 selves, as drawees, and the signatures of the firm to the several bills bound the firm both as drawers and acceptors. The Instruments are Inland bills of exchange, to which the firm sustains the triple relation of drawers, drawees and acceptors,- and, as the declaration contains ,the consolidated common counts, the bills were admissible in evidence under them. More- over, the drawers and drawees being the same, the bills are, in legal eff^pt, promissory notes, and may be treated as such, or as bills, at the holder's option. 1 Daniel on Neg. Inst. §§ 128, 129." 192 FORM AND INCEPTION (Part 1 CHAPTER II ' ACCEPTANCE SECTION 1.— GENERAL AND QUAUFIED ACCEPTANCES PETIT V. BENSON. (Court of King's Bench, 1697. Comberbach, 452.) A bill was drawn upon the defendant, who accepts it by indorse- ment in this manner: "I do accept this bill to be paid, half in money and half in bills." And the question was whether there could be a qualification of an acceptance; for it was alleged, that his writing up- on the bill was sufficient to charge him with the whole sum. But 'twas proved by divers merchants, that the custom among them was quite otherwise, and that there might be a qualification of an accept- ance, for he that may refuse the bill totally, may accept it in part; but he to whom the bill is due may refuse such acceptance, and pro- test it so as to charge the first drawer ; and tho' there be an accept- ance, yet after that he hath the same liberty of charging the first draw- er, as he before had. BOEHM V. GARCIAS. (Nisi Prius, before Lord Ellenborough, C. J., 1S07. 1 Campb. 425, note.) Action on a bill drawn on Lisbon, "payable in efifective and not in vals reals." The defendant was the drawer of the bill ; and the ques- tion was, whether it had been dishonored for nonacceptance ? The drawees offered to accept it, payable in vals denaros, another sort of currency, which was refused. The defendant now proposed to show that vals denaros was sufficient to answer what was meant by effective. But, Per Lord Eli,Enborough. The plaintiff had a right to refuse this acceptance. The drawee of a bill has no right to vary the acceptance from the terms of the bill, unless they be unambiguously and unequiv- ocally the same. Therefore, without considering whether a payment in denaros might not have satisfied the term "effective," an acceptance to pay in denaros was not a sufficient acceptance of a bill drawn paya- ble in effective. The drawees ought to have accepted generally, and an action being brought against them on the generar acceptance, the question would properly have arisen as to the meaning of the term. Ch. 2) ACCEPTANCE 193 HALSTEAD v. SKELTON. (Court of Exchequer Chamber, 1843. 5 Q. B. 86.) Assumpsit. The first count of the declaration stated that Williarn Harlan d, on, etc., made hi s bill of exchange in writing, and directed the same t o defendant, and thereby re quired defendant to pav to th e order of ^tli e saul W. _ H. the sum of _£ 66. lis. for value received, four months after the date thereof, whicliperiod had elapsed, etc., "and the d efendant then accepted the said bill , p ayablp a t Mpgsr';; r.nnliffp Rr Co. 's, bankers, London." Averment that W. H. i ndorsed to plaintiff , and" that d efendant "t lip^? prpmigpH th p p lnJa SBF tn p ay her the said bill according to the tenor and effect thereof, and of the said accept- ance and indorsement." The d^fendaat-de murr ed. assigning, as a groundy-that, although it appears by the first count that the bill therein mentioned was special- ly accepted by the defendant, and by him made payable at Messrs. Cunliffe & Co.'s, bankers, London, yet jt-ia-agt-a¥e<^red, non does it, a ppear _irQm— dag-sa id count, that t>ip gaip ] h\]] _ w as ever presented at M essrs. CunlifiFe & Co.'s f or pavment. accor ding to the terms of the said acceptanceTitlrothSr^round assigned was, that the defendant was not stated to have had notice of the indorsement. On motion in the bail court, in Trinity term, 1842, the demurrer was set aside as frivolous (Skelton v. Halstead, 2 Dowl. P. C. [N. S.] 69) ; and the plaintiff afterwards signed judgment by default. The de- fendant then brought error in the Exchequer Chamber, assigning, as error, "that the first count of the said declaration, and the matters therein contained, are not suificient in law for the said M. S. to have or maintain her aforesaid action," etc. Joinder in error.^ TiNDAi,, C. J. This was an action by the indorsee of a bill of ex- change against the acceptor. The declaration stated the bill to have been accepted payable at a particular banker's in L,ondon, and did not aver any presentment at the house of that banker; and the question argued before us was, whether the omission of such an averment made the declaration bad. The pl aintiff in error contended th at it djd^^ fpr that, ^ioGe-^riTC-'SfafttteJ, & 2 "Geo. IV, c. 78, " arTaccepim ^e payable at a banker's prp-HerallY w ithout restricti ve wor ds, ig a crpnpra1~"arrqT)aoce. a^a-QUght-te-be-seuBleaded'; wjainxal ^by dec laring, as in this case, o n m nrrpp ti"^" pnyoi^lp gt 'a banker s.^ie plainliff rriust^ e unders tood a s^referringj' to an acceptance paya ^ where. And, if the plaintiff in error is right m this proposition, it must certainly follow that the declaration is bad for not averring per- formance of what, according to his argument is a condition precedent to any right of action, namely, a presentment at the banker's.. But we are of opinion that the arguinent.£f_ihe plaintiff in error cannot be supported. 1 The arguments of counsel are omitted. Sm.& M.l!.i& N.(2d Ed.)— 13 VJi FORM AND INCEPTION, (Part 1 The statute enacts that, where a bill is accepted payable at a bank- er's, without further expression in the acceptance, such acceptance shall be deemed and taken to be to all intents and purposes a general acceptance of such bill ; but t he meaning of th is enactment is, not th at, in such a case, presen tment at the banker's shall be an invalid prese nt- s hall be gog d^-and ronser |uently that ij; __slial1 be unnecessary to pre- se nt or to. ajt er pre s e-ntrrippt at- thp hankpr^ A bill of exchange drawn generally on a party may be accepted in three different forms ; either generally, or payable at a particular banker's, or payable at a particu- lar banker's and not elsewhere. T f tlie drawee arrpptc: gpnerally, h e undertakgs-tQ jay the bill at maturit y when presented to jiim for pay^ ment. Tfjip^^arr^pj^t^^jajfahlp at a fJarTlTPr^Jip iinHprfaJfPg (ginrp the statute) to pa y the bi ll at maturi ty. ^Kfirrpr^spnf-pd-J<:tf-^ayTT|PnJ_prHipr to hirnself_or_aL-th€-baakej:jS. If_he_accepts_payable at a banker's a nd nerfelsewhere , he contr acts to pay the bil l at inatur it y~provide.d^ iFis p resenteJ ^aFt lK' baQ J^ePs. buf l T uL u th grw isi! * Her e thejjill was a ccepted arrnrrling tn_jj;ip gprnnri Q|__these three forms, i. e., paya ^ aTa bank er's, witho ut any restrictive wo rds: so tfiat presentn-ient at the banker's {ihougK'ii made it would have been a good presentment) was yet not, as against the acceptor, necessary. Acced|j^g, therefore, as we do, to the argument of the plaintifif in er- ror, that the bill must be taken to have been pleaded according to its legal effect, we do not go along with him in the conclusion at which he arrives. For the reasons which we have given, we do not think that, in this case, the legal effect of the bill, as pleaded, was to render necessary any presentment at the banker's; and the judgment of the court below will therefore be affirmed. Judgment affirmed. PECK V. COCHRAN. (Supreme Judicial Court of Massachusetts, 1S2S. 7 Pick. 34.) Assumpsit on an order, dated April 1, 1821, payable at sight, drawn by the deputy Postmaster General of the United States, at Washing- ton, upon the defendant, who was postmaster at Watertown, in this state, in favor of the plaintiffs. At the trial before Parker, C. J., it appeared that the plaintiffs sent the bill for collection to S. Burt, who delivered it to J. Sawyer, with directions to call on the defendant and demand payment. Sawyer tes- tified that in the early part of May he presented the bill for acceptance and payment ; that the defendant said he did not think the money was due to the government ; that the witness pressed him to pay the bill ; that the defendant refused to pay then, but said he would answer it at the commencement of the next quarter, which would be in about 60 days. The witness did not agree to wait, but told the defendant he Ch. 2) ACCEPTANCE, 195 would return the bill to Burt, who would send it to Washington. The defendant was irritated, and intimated that he did not care if it was sent to Washington. The witness afterwards, in September, called again on the defendant, who again refused to pay, saying that if the witness had called at the commencement of the quarter next after the time of the first presentment, he should have paid it, but that he had accepted other drafts presented since, and he would not pay it. The plaintiffs offered to show that the defendant, at the time of the first presentment, was indebted to the United States in a larger sum than the amount of the bill; but the evidence was deemed irrelevant. A nonsuit was entered by consent, which was to be taken off, if the above testimony was sufficient in law to authorize a verdict in favor of the plaintiffs. Per Curiam. It appears clearly that there was no contract between the parties. The offer to pay at a future day would have been an ac- ceptance, had the plaintiffs' agent acceded to it; but he did not, and said he should return the bill. The circumstance of the defendant's having funds 'at the time of the presentment is immaterial and the evi- dence of it was rightly rejected. Nonsuit made absolute. CAMPBELIv V. PETTENGILIv. (Supreme Judicial Court of Maine, 1830. 7 Greenl. 126, 20 Am. Dec. 349.) « Assumpsit for the price of certain logs sold, with a count on an or- der for the same sum, drawn by the defendants, as follows : "Orpno, June 13, 1827. Thomas Bartlett, Esquire, Collector and Treasurer.'of, the Penobscot Boom Corporation:" Please to pay Henry Campbell, or ^he bearer, ninety-seven dollars and seventy-seven cents, being for value received." This order was accepted in these terms: "July. 9, 1827. Accepted to pay when in funds of the Penobscot Boom Corporation. Thomas Bartlett, Treasurer of said Corporation." * * * At the trial it appeared that the treasurer had no cash funds of the corporation in his hands, but held its negotiable securities to the amount; that he had not paid the draft to the plaintiff. Verdict for defendant. Plaintiff excepted." Weston, j. * * * 'j'j^g plaintiff, the payee, and holder of the bill might have required an absolute acceptance, without which he might have treated the bill as dishonored ; but having received a spe- cial and conditional acceptance, he must abide by its terms. Parker v. Gordon, 7 East, 387 ; Gammon v. Schmoll, 5 Taunt. 344 ; Sebag v. 2 The statement is abridged, and the arguments of counsel and jjart of the opinion omitted. 196 FORM AND INCEPTION, (Part 1 Abitbol, 5 Maule & S. 462. It does not appear that there has been any failure, on the part of the acceptor, to pay according to the terms of the acceptance. He was to pay, when in funds of the Penobscot Boom Corporation. He had no cash funds at the time, but he had demands which were good and available, and subject to his control as treasurer. But these, until collected, were not funds, within the meaning of the acceptance. He has paid one-half the bill; and is holden to pay the residue when in funds. Under these circumstan- ces, independent of the objection arising from the want of notice, it cannot be pretended that there is any legal ground to charge the draw- ers, until there has been a violation of the terms of the acceptance. No' evidence to this effect has been adduced ; but the testimony was that, up to the time of trial, the acceptor had no funds of the Boom Corporation with which to pay the bill. Upon this ground, we are satisfied that the verdict is right. The exceptions are accordingly overruled; and there must be Judgment for the defendants. HEENAN V. NASH. (Supreme Court of Minnesota, 1863. 8 Minn. 40T [Gil. 363], 83 Am. Dec. 790.) FtANDRAU, J. A ction on bill of exc hangeag ainst accep tor. On the 18th day of September. 1856. the deTengan tTPatrick Nash, and one William B. McGrortv were partners under the nanje, firm, an3 style of "Nash & McGrorty." Un tnat^day Patrick Murnane drew the bill in question on the said firm, in favor of William Devine, and to his order, payable in one month from date. William Devine in- dorsed the bill to the plaintiff, who, on the 25th day of Jiily, 1859, pre- sented the same to Patrick Nash, who accepted it by writing on its face the following words: "Accepted this 25th July, 1859." The statute of this state, on the subject of acceptances, is as fol- lows : "No person within this territory shall be charged as an accept- or on a bill oi exchange, unless his acceptance shall be in writing, signed by himself or his lawful agent." Pub. St. p. 375, § 7. We will have to consider, in deciding this case, two questions : First, whether the acceptance by Nash was good as a partnership ac- ceptance, and binding on the firm; and, second, whether it was com- petent for him to accept the bill as an individual, and incur a liabil- ity against himself alone. If the acceptance was binding upon the firm, the action is well brought against one of the members. Pub. St. p. 536, § 38, provides, that "any one of the joint associates may also be sued for the obligations of all." If the liability was individ- ual, the acceptor was, of course, the proper defendant. In the case of Mason v. Rumsey, 1 Camp. 384, it was held that an Ch. 2) AOCEPTANGE, 197 acceptance by one member of a firm in his own name would bind the firm when the bill was drawn on the 'firm. The same was again held in Wells v. Masterman, 2 Esp. 731. This doctrine seems to have been adopted in Collyer on Partne.rship, § 410, and in Byles on Bills, 144, on the authority of these cases, and some others there collected. In the case of Dougal v. Cowles, 5 Day (Conn.) 511, the same is again laid down on the authority of the case of Mason v. Rumsey. There are other cases that hold an acceptance by a member of a firm, in a name other than the firm name, to raise a question of fact, to be left to the jury, whether the name used substantially describes the firm, or whether it so far varies that the acceptor must be taken to have made it on his own account. See Faith v. Richmond,- 11 Adol. & E. 339, 39 Eng. Com. Eaw Rep. 113; Drake v. Elwyn, 1 Caines (N. Y.) 184. Acceptances could formerly be made by parol, which was the law in Connecticut at the time of the decision cited from 5 Day, and that point is expressly made by the court in deciding the case. The sam^ may be said of the case of Mason v. Rumsey, which was decided be- fore the statute of 1 & 3 Geo. IV. c. 78, § 2, which provided that ac- ceptances, to be valid,' must be in writing. Even after this statute the English courts have held that the word "Accepted," written on the bill by one having authority, is sufficient to bind the drawees. The only principle upon which the courts have held that an acceptance by one partner in his own name will bind the firm is the implied author- ity which each member has to act for the whole, and when the bill is drawn upon the firm, and accepted by one, they hold that he intend- ed to accept it as drawn. I find one English case, decided in the Court of Exchequer in 1841, which holds a doctrine much more in accordance .with our views of the principles which should govern the question. In Kirk v. Blurton, 9 Mees. & W. 383, the defendants were partners under the name of "John Blurton." One of the firm drew a bill in the name of "John Blurton & Co." The firm was sued upon it, and the partner who did not draw the bill defended. Faith v. Richmond, Mason v. Rumsey, and other cases, were cited. Alderson, B., in delivering the opinion, says: "The court do not entertain any doubt as to the principles of law applicable to this case. One partner can bind his copartner only to the extent of the authority which is given to partners generally, to enable them to carry on the partnership business," which author- ity he says, in another part of the opinion, is "to bind the firm in the name of the partnership, and in that only." . Since the passage of our statute on the subject of acceptances, no inferences can be indulged in. To make an acceptance valid, it must be in writing, signed by the acceptor or his lawful agent. Mr. Nash, as a partner of the firm of Nash & McGrorty, had a right to accept the ^ill for the firm by virtue of his general powers as a partner, but this power of a partner is to bind the firm by the use of the firm name, 198 FORM AND INCEPTION (Part 1 and in no other way. This he did not do, and we are clear that the acceptance cannot be held to bind the firm.' We are next to consider whether the defendant can be held as ac- ceptor individually. It is a well-settled, rule^ of commercial law that no one can accept a bill but the person upon whom it is drawn, ex- cept for honor. Polhill v. Walter, 3 Barn. & Adol. 114; Davis v. Clark, 1 Car. & K. 177; May v. Kelly, 27 Ala. 497. If a bill is drawn upon A., and B. accepts it, the act is merely voluntary, with- out any consideration, and creates no liability whatever in the law. It is allowed, for the convenience of commerce, that a person other than the drawee may, after presentation, refusal, and protest, accept, for the honor -of the drawer, or any of the indorsers, or of all the parties as he may see fit; but this is a well-understood transaction, and is done supra protest, and under certain well-settled forms and ceremonies. There is no pretense that Mr. Nash was such an ac- ceptor of. the bill in question. Where a bill is drawn upon several individuals, an acceptance by any one of them is binding upon him, although the bill may be treat- ed, and should be, as dishonored, if not accepted by all the drawees, because the holder is entitled to the acceptance of them all ; but in such case a liability accrues against the party accepting, because he is a drawee, as much as if the bill had been drawn upon him alone. Where, however, the bill is drawn upon a firm, any member of the partnership, in his individual capacity, is quite as much a stranger to the same as a third person. He is only connected with the bill through his membership of the firm, which is drawee, and in virtue of such membership he has power to use the firm name in accepting it. If he accepts it in his individual name he does not bind the firm, and there is no consideration for his act. It is the case of a bill drawn on one party and accepted by another. The court, in deciding the case below, after stating that, "if one of several parties to whom a bill is addressed accepts the same, such ac- ceptance will bind him," adds, in another part of the opinion: "It can hardly be said that one of two or more partners, upon whom a bill is drawn, is so far a stranger to the bill that an acceptance will not bind him. If one of several persons, between whom no business relations exist, can bind himself, by accepting a bill drawn on all, it is not per- ceived why any one of several partners may not do the like." We have endeavored to show the error of this position above. In the case 8 "The action is not upon the bill of exchange, » • • but is for goods sold and delivered. But were it otherwise, as the bill was drawn upon the partnership for goods sold to the partnership, an acceptance by one partner in his own name would bind the firm. This is too well settled to require the citation of authorities in its support." Per Cole, J., in Tolman v Han- rahan, 44 Wis. 133, 135 (1878). A note signed by the partner in any other than the firm name would not be the note of the Arm. Palmer v. Stephens, 1 Denio (N. Y.) 471 (1S45): Tilford V. Ramsey, 37 Mo. 563, 567 (1886). Ch.2) ACCEPTA"NCE 199 of a bill drawn upon several individuals, "between whom no business relations exist," each is a drawee in his individual capacity, and com- petent as such to accept ; but, in the case of a bill drawn upon a firm, the association, and not the individual members thereof, is the draw- ee, and an acceptance by one member in his own name is not an ac- ceptance by the drawee. The complaint is demurrable, and the de- murrer should have been sustained. Order overruling demurrer reversed.* SECTION 2.— FORM OF ACCEPTANCE ERESKINE v. MURRAY. (Court of King's Bench, 1728. 2 Str. 817.) In case upon a bill of exchange against the acceptor, it was alleged generally, quod acceptavit. And on demurrer to the declaration ex- ception was taken, that by 3 Anne, c. 9, the acceptance must be in writing, and therefore this ought to be alleged to be so. Sed Per Curiam. Acceptavit is enough, and if writing is neces- sary, it will be implied." Besides, the writing required by the statute is only in order to make the drawer liable to damages and costs. The plaintiff must have judgment. WYNNE et al. v. RAIKES et al. (Court of King's Bencli, 1804. 5 East, 514.) The first count of the declaration stated, that on the 9th of Novem- ber, 1801, Aquila Brown drew a bill of exchange on the defendants for iSOO. payable to the order of Thomas Andrews and Butler at 60 days' sight; that Thomas Andrews and Butler indorsed the said bill to the plaintiffs ; and that the defendants upon sight thereof, duly ac- cepted the bill. There were also counts for money paid, and for money had and received. The defendants pleaded the general issue, i Contra: Owen v. Van Uster, 20 L. J. C. P. 61 (1850). "The only objection made to the fifth and sixth counts is that the build- ing committee as an official body is the drawee, and the order cannot be ac- cepted by individuals. But it does not appear that the committee differs from any association of individuals ; and an order drawn upon it is drawn upon a number of individuals associated together, but not incorporated nor copartners. In such case, although a bill may be treated as dishonored if not accepted by all the drawees, if accepted by a part it will be a good ac- ceptance as to them." Smith v. Milton, 133 Mass. 369-^71 (1882). e Accord: Barnsdall v. Waltemeyer, 142 Fed. 415, 419, 73 C. a A. 515 (1905). 200 FOEM AND INCEPTION (Part 1 and at the trial before Lord Ellenborough, C. J., at the sittings after last Hilary term at Guildhall, a verdict was found for the plaintiffs for £555. subject to the opinion of this court on the following case: On the 9th of November, 1801, Aquila Brown, who resides at Balti- more, in North America, drew the bill of exchange in question at that place upon the defendants, who reside in London, and for a valuable consideration paid the bill to Thomas Andrews and Butler, residing in Baltimore, who afterwards, for a valuable consideration, indorsed it to the plaintiffs, who reside in London. On the 9th of November, 1801, Aquila Brown, by letter of that date, advised the defendants of having valued on them by .divers bills amounting together to £5,548. 14s. 2d. sterling, of which the bill in question was one, the amount of which bills Aquila Brown in that letter requested the defendants to honor with acceptance, and place the amount to his debit, and which letter of advice was duly received by the defendants. The plaintiffs, on receiv- ing the bill in question in England, presented it on the 2d of January, 1802, to the defendants for their acceptance, but the defendants refused to accept it. On the 13th of January, 1802, the defendants wrote a letter to Aquila Brown, the drawer, which letter after mentioning some damage which the cargo of the Chesapeake, consigned to the defend- ants, had sustained, and difficulties in which it had been involved; as also an attachment laid upon' the property of Aquila Brown in the hands of the defendants (among other things), contains the following passages : "Under these circumstances, while your property in the Chesapeake appeared in so very- questionable a state that we could not tell what security to rest upon it, you could not expect that we could interfere for any of your bills refused by Mr. Mangin, or even accept all the bills of yours which came in upon us. Several of them of course have been noted for nonacceptance, and Messrs. Finlay Banna- tyne & Co. have officiously sent you a protest on that for £551. 15s for nonacceptance. We have however now the satisfaction to mention to you that Mr.- Mangin, having resolved to pay many of your bills on him, Messrs. Mellish & Co. have taken off the attachment in our hands, and since the receipt of Messrs. Muilman's letter, of the 5th instant, our prospect of security on the Chesapeake is so much improved that we shall accept or certainly pay all the bills which have hitherto ap- peared ; the one for £6,500., the 19th of October, has not yet been pre- sented to us, but we will hope that the state of your funds will like- wise permit us to take care of that." The bill in question was one of those which had appeared prior to the writing the above letter of the 13th January, 1802, and which letter was received by Aquila Brown in America on the 19th March, 1802. On the 6th of March, 1802, which was 60 days and 3 days of grace after the bill in question was presented for acceptance, the plaintiffs presented the bill to the de- fendants for payment; but the defendants refused to pay tlie same, and the plaintiffs caused it to be protested for nonpayment. Aquila Brown, the drawer of the bill, was at the time the same was drawn Ch. 2) ACCEPTANCE 201 indebted to the defendants in the sum of £5,000. and hath so continued to the present time. The question for the opinion of the court was, Whether the plaintiffs were entitled to recover? If the court should be of that opinion, the present verdict to stand; if otherwise, a nonsuit to be entered. ° Lord EilaintilTs are not in the pi-esent case, whicii so entirely rcsemhles it, cnlitled to recover. .'\nd as in adhering to it we violate no principles of commercial convenient^', hut coniirin a rule of law, which we lintl estahlisIuHJ on a subject which least of all others endures micertainty and change, we cannot do otherwise than hold the plaintitTs in this case entitled to recover. Postca to the plaintilVsJ COOIJDCK et al. v. PAYSON ot al. (Snpromo Oourt of (lie Unllcil SInlo.s, ISl". li WIkmiI. (ii;, -1 L. Kd. IS,").) Mausiiam,, C. ]., delivered the opinion of the court. This suit was instituteil by I'aysun iS: Co., ;is indorsers of a hill of exchange, drawn hy Cornth\v:iite \' Cary, |)a\'al)lc to the ordei- (d' John Randall, against Coolidge i^v: Co. ;is the ,-iccept(irs. At the trial the holders of the hill, on which the name of jnhn Ran- dall was indorsed, olTered, for llie purpose of pinviug' (he inddrsenieni, an affid;ivit made hy one of the defend.'uUs in the cause, in order to obtain a continuance, in which he referred to the bill in terms which, they supposed, implied ;i knowledge on his jLirt that tlie iilainlilfs were the rightful holdi'rs. The del'cnd.-mts objecled lo the bill's going to the jury without fnrllu'r piciof of Ihe iudoi-srment ; but (he court (\v- lermined that it should go with Ihe ;iirnl;ivit lo the jury, who miglil be at liberty to infer from (hence lliat the indorsement was made bv Randall. To this opinion the counsel for Ihe defend.anis in the Cir- cuit Court excepted, and Ibis com't is divided on the ciuestion wheth- er the exception ought lo be sustiiined. On the trial it ;ippeai-ed that ('oolidge ^^v Co. held the jiroceeds of part of the cargo of Ihe lliram, claimed by Corntbw;iite \' Cary, which bad been captiu'cd and libeled ;\s lawful pri/.e. The cai'go bad been ac(|uitled in the District .and ("ircnit Courts, but from the sentence of ac(|uitlal the captors had 'appealed to this court. 1 'ending- Ihe ap]>cd Corntbw.aile iS; (.'o. transmilled to Coolidge ii- Co. a boiul of indenuiily, ' No ncccplinico ol" any lilll oP ('.icliinine, wliotlw-r liilniid or I'dri'lmi, iiinili> lUMcr llu) aist (liiy n( I )iM'i']iil](^r, IH,">(;, hIiiiII lio hiiIIIcI(MiI, Id IiIikI iir cliiirni' any iierHciri, umIohh IIic kmiik) lio In wrIlliiK on Hiicli lilll, or, If IIum'i> lie iiiiirc l.hun one \u>ii ol' hihIi bill, on oiio ol' tint Hiild piirlH, iniil hIkiumI hy lliii iii' coptor or some pi'rsoii iliily iiiilliorl/.cil by liliii. Mei'cuMlllo laiw AiiiciiiliiKiML Act, 1!) &. LM) VIcl. c. 1)7, S It (IH.M'i). ■ Ch. 2) ACCEPTANCE / 203 executed at Baltimore with scrolls in the place of seals, and drew on them for $2,700. This bill was also payable to the order of Randall, and indorsed by him to Payson & Go. It was presented to Coolidge & Co. and protested for nonacceptance. After its protest Coolidge & Co. wrote to Cornthwaite & Cary a letter, in which, after acknowl- edging the receipt of a letter from them, with the bond of indemnity, they say: "This bond, conformably to our laws, is not executed as it ought to be ; but it may be otherwise 'in your state. It will there- fore be necessary to satisfy us that the scroll is usual and legal with you instead of a seal. We notice no seal to any of the signatures." "We shall write our friend Williams by this mail, and will state to him our ideas respecting the bond, which he will probably determine. If Mr. W. feels satisfied on this point, he will inform you, and in that case your draft for $2,000 will be honored." I On the same day Co6lidge & Co. addressed a letter to Mr. Wil- liams, in which, after referring to him the question respecting the le- gal obligation of the scroll, they say: "You know the object of the bond, and, of course, see the propriety of our having one not only legal, but signed by sureties of unquestionable responsibility, respect- ing which, we shall wholly rely on your judgment. You mention the last surety as being responsible. What think you of the others?" In his answer to this letter, Williams says : "I am assured that the bond transmitted in my last is sufficient for the purpose for which it was given, provided the parties possess the means; and of the last signer, I have no hesitation in expressing my firm belief of his being able to meet the whole amount himself. Of the principals I cannot speak with so much confidence, not being well acquainted with their resources. Under all circumstances, I should not feel inclined to withhold from them any portion of the funds for which the bond was given." On the day on which this letter was written, Cornthwaite & Cary called on Williams, to inquire whether he had satisfied Coolidge & Co. respecting the bond. Williams stated the substance of the letter he had written, and read to him a part of it. One of the firm of Pay- son & Co, also called on him to make the same inquiry, to whom he gave the same information, and also read from his letter book the let- ter he had written. Two days after this, the bill in the declaration mentioned was drawn by Cornthwaite & Cary, and paid to Payson & Co. in part of the pro- tested bill of $2,700, by whom it was presented to Coolidge & Co., who refused to accept it, on which it was protested, and this action brought by the holders. On this testimony, the counsel for the defendants insisted that the plaintiffs were not entitled to a verdict; but the court instructed the jury that if they were satisfied that Williams, on the application of the plaintiffs, made after seeing the letter from Coolidge & Co. to Cornthwaite & Cary, did declare that he was satisfied with the bond 204 FOEM AND INCEPTION (Fart 1 referred to in that letter, as well with respect to its execution, as to the sufficiency of the obligors to pay the same, and that the plain- tiffs, upon the faith and credit of the said declaration, and also of the letter to Cornthwaite & Gary, and without having seen or known the contents of the letter from Coolidge & Co. to Williams, did re- ceive and take the bill in the declaration mentioned, they were enti- tled to recover on the present action, and that it was no legal objec- tion to such recovery that the promise to accept the present bill was made to the drawers thereof, previous to the existence of such bill, or that the bill had been taken in part payment of a pre-existing debt, or that the said Williams, in making the declarations aforesaid, did exceed the private instructions given to him by Coolidge & Co., in their letter to him. To this charge the defendants excepted. A verdict was given for the plaintiffs, and judgment rendered thereon, which judgment is now before this court on a writ of error. The letter from Coolidge & Co. to Cornthwaite & Cary contains no reference to their letter to Williams which might suggest the neces- sity of seeing that letter, or of obtaining information respecting its contents. They refer Cornthwaite & Cary to Williams, not for the instructions they had given him, but for his judgment and decision on the bond of indemnity. Under such circumstances, neither the drawers nor the holders of the bill could be required to know, or could be affected by, the private instructions given to Williams. It was enough for them, after seeing the letter from Coolidge & Co. to Cornthwaite & Cary, to know that Williams was satisfied with the ex- ecution of the bond and the sufficiency of the obligors, and had in- formed Coolidge & Co. that he was so satisfied. This difficulty being removed, the question of law which arises from the charge given by the court to the jury is this : Does a promise to accept a bill amount to an acceptance to a person who has taken it on the credit of that promise, althoiigh the promise -yvas made before the existence of the bill, and although it is drawn in favour of a person who takes it for a pre-existing debt? In the case of Pillans & Rose v. Van Mierop & Hopkins, 3 Burr. 1663, the credit on which the bill was drawn was given before the promise to accept was made, and the promise was made previous to the existence of the bill. Yet in that case, after two arguments, and much consideration, the Court of King's Bench (all the judges being present and concurring in opinion) considered the promise to accept as an acceptance. Between this case, and that under the consideration of the court, no essential distinction is perceived. But it is contended that the au- thority of the case of Pillans & Rose v. Van Mierop & Hopkins is impaired by subsequent decisions. In the case of Pierson v. Dunlop et al., Cowp. 571, the bill was drawn and presented before the conditional promise was made on Ch. 2) ACCEPTANCE, 205 T»hich the suit was instituted. Although, in that case, the holder of the bill recovered as on an acceptance, it is supposed that the princi- ples laid down by L,or4 Mansfield, in delivering his opinion, contra- dict those laid down in Pillans & Rose v. Van Mierop & Hopkins. His Lordship observes: "It has been truly said, as a general rule, that the mere answer of a merchant to the drawer of a bill, saying, "He will duly honor it," is no acceptance, unless accompanied with circumstances which may induce a third person to take the bill by indorsement; but if tliere are any such circumstances, it may amount to an acceptance, though the answer be contained in a letter to the drawer." If the case of Pillans & Rose v. Van Mierop & Hopkins had been understood to lay down the broad principle that a naked promise to accept amounts to an acceptance, the case of Pierson v. Dunlop cer- tainly narrows that principle so far as to require additional circum- stances proving that the person on whom the bill was drawn was bound by his promise, either because he had funds of the drawer in his hands, or because his letter had given credit to the bill, and in- duced a third person to take it. It has been argued that those circumstances to which Lord Mans- • field alludes must be apparent on the face of the letter. But the court can perceive no reason for this opinion. It is neither warranted by the words of Lord Mansfield, nor by the circumstances of the case in which he used them. "The mere answer of a merchant to the draw- er of a bill, saying he will duly honor it, is no acceptance unless accom- panied with circumstances," etc. The answer must be "accompanied with circumstances" ; but it is not said that the answer must con- tain those circumstances. In the case of Pierson v. Dunlop, the an- swer did not contain, those circumstances. They were not found in the letter, but were entirely extrinsic. Nor can the court perceive any reason for distinguishing between circumstances which appear in the letter containing the promise, and those which are derived from oth- er sources. The great motive for construing a promise to accept as an acceptance is that it gives credit to the bill, and may induce a third person to take it. If the letter be not shown, its contents, whatever they may be, can give no credit to the bill; and, if it be shown, an absolute promise to accept will give all the credit to the bill which a full confidence that , it will be accepted can give it. A conditional promise becomes absolute when the condition is performed. In the case of Mason v. Hunt, Doug. 296, Lord Mansfield said : "There is no doubt but an agreement to accept may amount to an ac- ceptance ; and it may be couched in such words as to put a third per- son in a better condition than the drawee. If one man, to give credit to another, makes £^n absolute promise to accept his bill, the drawee, or any other person, may show such promise upon the exchange, to get credit, and a third person, who should advance his money upon 206 FORM AND INCEPTION (Part 1 it, would have nothing to do with the equitable circumstances which might subsist between the drawer and acceptor." What is it that "the drawer, or any other person, may show upon the exchange" ? It is the promise to accept — the naked promise. The motive to this promise need not, and cannot, be examined. The prom- ise itself, when shown, gives the credit; and the merchant who makes it is bound by it. The cases cited from Cowper and Douglass are, it is admitted, cases in which the bill is not taken for a pre-existing debt, but is purclms- ed on the credit of the promise to accept. But in the case of Pillans V. Van Mierop the credit was given before the promise was received or the bill drawn; and in all cases the person who receives such a bill in payment of a debt, will be prevented thereby from taking other means to obtain the money due to him. Any ingredient of fraud would, unquestionably, affect the whole transaction; but the mere circumstance that the bill was taken for a pre-existing debt has not been thought sufficient to do away the effect of a promise to accept. In the case of Johnson and Another v. Collins, 1 East, 98, Lord Kenyon shows much dissatisfaction with the previous decisions on this subject; but it is not believed that the judgment given in that case would, even in England, change the law as previously estab- lished. In the case of Johnson v. Collins, the promise to accept was in a letter to the drawer, and is not stated to have been shown to the indorser. Consequently the bill does not appear to have been taken on the credit of that promise. It was a mere naked promise, unac- companied with circumstances which might give credit to the bill. The counsel contended that this naked promise amounted to an ac- ceptance ; but the court determined otherwise. In giving his opin- ion, Le Blanc, J., lays down the rule in the words used by Lord Mans- field in the case of Pierson v. Dunlop ; and Lord Kenyon said that "this was carrying the doctrine of implied acceptances to the utmost verge of the law, and he doubted whether it did not even go beyond it." In Clarke and Others v. Cock, 4 East, 57, the judges again ex- press their dissatisfaction with the law as established, and their re- gret that any other act than a written acceptance on the bill had ever been deemed an acceptance. Yet they do not undertake to overrule the decisions which they disapprove. On the contrary, in that case, they unanimously declared a letter to the drawer promising to accept the bill, which was shown to the person who held it, and took it on the credit of that letter to be a virtual acceptance. It is true, in the case of Clarke v. Cock, the bill was made before the promise was given, and the judges, in their opinions, use some expressions which indicate a distinction between bills drawn before and after the date of the promise; but no case has been decided on this distinction, and in Pillans & Rose v. Van Mierop & Hopkins, the letter was written before the bill was drawn. Ch. 2) ACCEPTANCE 207 The court can perceive no substantial reason for this distinction. The prevailing inducement for considering a promise to accept as an acceptance is that credit is thereby given to the bill. Now, this credit is given as entirely by a letter written before the date of the bill as by one written afterwards. It is of much importance to merchants that this question should be at rest. Upon a review of the cases which are reported, this court is of opinion that a letter written within a reasonable time before or after the date of a bill of exchange, describing it in terms not to be mistaken, and promising to accept it, is, if shown to the person who afterwards takes the bill on the credit of the letter, a virtual accept- ance binding the person who inakes the promise. This is such a case. There is, therefore, no error in the judgment of the Circuit Court, and it is affirmed with costs. Judgment affirmed. SPEAR & PATTEN v. PRATT. (Supreme Court of New York, 1S42. 2 Hill, 582, 38 Am. Dec. 600.) Assumpsit, tried at the Onondaga circuit, in September, 1841, be- fore Moseley, C. J. The action was against the defendant, Fred- erick Pratt, as acceptor of a bill of exchange, payable to the order of the plaintiffs. The defendant's name was written across the face of the bill; and the question was whether this was such an accept- ance as is required by the statute. It was admitted that the defend- ant, at the time of the acceptance, was a resident of this state. His counsel insisted at the trial that the acceptance was insufficient to charge him, but the circuit judge, being of a different opinion, di- rected the jury to find for the plaintiffs, which they accordingly did ; and the defendant's counsel, 'having excepted, now moved for a new trial upon a bill of exceptions. CowEN, J. Any words written by the drawee on a bill, not put- ting a direct negative upon its request, as "Accepted," "Presented," "Seen," the day of the month, or a direction to a third person to pay it, is prima facie, a complete acceptance, by the law merchant. Bay- ley on Bills (Am. Ed. 1836) 163, and the cases there cited. Writing his name across the bill, as in this case, is a still clearer indication of intent, and a very common mode of acceptance. This is treated by the law merchant as a written acceptance — a signing by the drawee. "It may be," says Chitty, "merely by writing the name at the bottom or across the bill;" and he mentions this as among the more usual modes of acceptance. Chitty on Bills (Am. Ed. 1839) 330. It is supposed that the rule has been altered by 1 Rev. St. (2d Ed.) p. 757, § ,6. This requires the acceptance to be in writing, and signed by the acceptor or his agent. The acceptance in question was, as we have seen, declared by the law merchant to be both a writing and sign- 208 FORM AND INCEPTION (Part 1 ing. The statute contains no declaration that it should be considered less. An indorsement must be in writing and signed ; yet the name alone is constantly holden to satisfy the requisition. No particular form of expression is necessary in any contract. The customary im- port of a word, by reason of its appearing in a particular place, and standing in a certain relation, is considered a written expression of intent quite as full and effectual as if pains had been taken to throw it into the most labored periphrase. It is said the revisers, in their note, refer to the French law as the basis of the legislation which they recommended ; and that the French law requires more than the draw- ee's name— the word "Accepted," at least. That may be so; but it is enough for us to see that both the terms and the spirit of the act may be satisfied short of that word, and more in accordance with the settled forms of commercial instruments in analogous cases. The whole purpose was probably to obviate the inconveniences of the old law, which gave effect to a parol acceptance. ■New trial denied.* LUGRUE v. WOODRUFF. (Supreme Court of Georgia, 1860. 29 Ga. 648.) This was an action by James F. Lugrue against Minus W. Wood- ruff on a draft, of which the following is a copy, viz. : "Chattanooga, January 23, 1858. "164. Three days after date, pay to the order of myself one hun- dred and sixty-four dollars, value received, and charge the same to account of 202 sacks oats, marked W. [Signed] R. Hooper. "To M. W. Woodruff, Augusta, Ga." Indorsed: "Pay James F. Lugrue. [Signed] R. Hooper." « Section 6: "No person within this state shall be charged as an ac- ceptor on a bill of exchange, unless his acceptance shall be in writing, sign- ed by himself, or his lawful agent." Section 7 : "If such acceptance be written on a paper, other than the bill, It shall not bind the acceptor, except in favor of a person to whom such ac- ceptance shall have been shown, and who, on the faith thereof, shall have received the bill for a valuable consideration." Section 8: "An unconditional promise, in writing, to accept a bill before It is drawn, shall be deemed an actual acceptance, in favor of every per- son who, upon the faith thereof, shall have received the bill for a valuable consideration." 1 N. T. Rev. St. (2d Ed.) p. 757. IMany states have or had statutes to the same effect. See Stimpson, Am. Stat. Law, § 4720. Sections 6, 7, and 8, above, which related to nonnegotiable as well as ne- gotiable bills, were repealed by section 341, the general repealing section, of the New Xork negotiable instruments law (chapter 612, Laws 1897). In Nelson v. Nelson, 31 Wash. 116, 71 Pac. 749 (1903), section 132 of the negotiable instruments law was held applicable to a nonnegotiable bill. But see Westberg v. Lumber Co., 117 Wis. 589, 94 N. W. 572 (1903). Oh. 2) AOOEPTANOH 209 Noted and protested for nonacceptance January 27, 1858. Noted and protested for nonpayment January 29, 1858. Plaintiff, at the trial, offered the draft in evidence, to which defend- ant objected, on the ground that it was not accepted on its face. The court sustained the objection, and plaintiff excepted. Plaintiff then offered in evidence the following letter from defend- ant to Hooper, the drawer of the draft, as evidence of acceptance : "Augusta, January 26, 1858. "Mr. R. Hooper — Dear Sir : Your draft on the oats at three days was presented to-day for payment, and the oats not yet arrived, and money as tight as bricks. It is almost impossible to collect anything here. It is utterly impossible for me to pay the draft to-day; but as soon as the oats^get here I can realize on them immediately, and will then attend to the draft. It will be all right in a few days. If the draft should come back to you, have it sent down again, and I will certainly arrange it ; and send on all the oats you can. Our market is almost entirely bare of them and a good demand at 60 to 65 cents "Respectfully, M. W. Woodruff." Defendant objected to this letter, on the ground that it was not an acceptance as to third persons, whatever it might be as to Hooper. The court sustained the objection, and plaintiff excepted. Plaintiff then proposed to prove that the conditions expressed in the letter had been performed ; that the oats did arrive and were sold, and the draft sent back to defendant. The court rejected this evidence also, and plaintiff excepted. There being no further evidence, plaintiff was nonsuited, and there- fore tendered his bill of exceptions, assigning as error the above rulings and decisions. Lumpkin, J. The proof in this case did not go far enough. It should have been shown, either that the letter written by Woodruff, and which we hold to be a sufficient acceptance, was written to Hooper before the draft was indorsed to the plaintiff, which we are quite sure was not the fact, or that the paper, after acceptance was refused, was returned to Hooper, and redelivered by him to Lugrue, who took it upon the faith of t^ie letter, or, that he advanced money or paid some- thing of value upon it. If this proof can be supplied, the plaintiff will be entitled to recover. As the testimony stands, however, we hold, the judge was right in awarding a nonsuit. Judgment affirmed. SM.& M.B.& N.(2d Ed.)— 14 210 FORM AND INCEPTION (Part 1 JONES V. COUNCIL BLUFFS BRANCH BANK OF IOWA. (Supreme Court of Illinois, 1864. 34 111. 313, 85 Am. Dee. 306.) Beckwith, J. This is an action of assumpsit to recover the sum of money mentioned in a draft dated July 16, 1861, drawn by Green & Stone on the appellants, alleged to have been verbally accepted by them, but protested for nonacceptance. The defense -was that the promise of the appellants to accept did not constitute an acceptance, that such promise was obtained by fraud, and that its consideration had failed. On the trial, the plaintiffs offered in evidence the draft and a written agreement of Green & Stone, dated August 1, 1861, by which they transferred to the appellants all their interest in certain property and claims for commissions, in consideration of the appellants undertaking to pay the draft in question. The plaintiffs also offered evidence tend- ing to prove that the appellants promised Green & Stone that they would accept and pay the draft, and that the appellees, after they had taken it, were informed of this undertaking. A promise by the drawee to pay an existing bill is an acceptance, or, in law, amounts to an acceptance, whether the bill was taken upon the faith of the promise or not. A promise to any person interested in having a bill paid inures to the benefit of the holder. These principles were settled in the time of Lord Ellenborough, and a reference to any of the text-books will furnish the names of a great number of cases in which they have been dcted upon in England and in this country. They are too well settled to be discussed at the present day. The court below found there was no fraud in obtaining the promise, and we are entirely satisfied with its finding. The appellants' agreement to accept the bill, was for the benefit of its holders; and the agreement of Green and Jones that the net pro- ceeds of the property and the commissions transferred to the appel- lants should amount to a certain sum was solely for their benefit. The nonperformance of the latter agreement furnishes no excuse for not accepting and paying the bill. The agreements were not intended to be dependent on each other. The undertaking on the part of the appel- lants was that they would pay the bills when they became due. They were to convert the property transferred to them into money at the best price they could obtain for it, and ascertain the amount of the commissions ; and if these sums did not amount to sufficient to pay the bills which they undertook to pay. Green and Jones undertook to pay them the dift'erence. Such was the legal effect of their agreement. We do not deem it necessary to make a critical examination of the Special pleas filed by the appellants. All the matters set up in them were admissible in evidence under the general issue, and on the trial were given in evidence under it. The appellants have had all the bene- fit which tliey can derive from the facts ; and if the demurrer to some of Ch. 2) ACCEPTANCE 211 the pleas was improperly sustained, we should not reverse the judg- ment after the appellants have had the full benefit of their defense un- der the general issue. Atlantic Ins. Co. v. Wright, 22 111. 462. Perceiving no error in the record, the judgment of the court below will be affirmed." JARVIS V. WILSON. (Supreme Court of Errors of Connecticut, 1878. 46 Conn. 90, 33 Am. Rep. IS.) See ante, p. 24, for a report of the case. CHICAGO HEIGHTS LUMBER CO. v. MILLER. (Supreme Court of Illinois, 1905. 219 111. 79, 7G N. E. 52, 109 Am. St. Rep. 314.) In this cause the Appellate Court for the First District reversed the judgment of the circuit court of Cook county, which was against Miller, without remanding the cause, on the ground that neither the declaration nor the evidence shows a cause of action against the de- fendant. Miller appealed, and the following accurate statement of the facts in the case was made by the Appellate Court: "This is an appeal from a judgment of the circuit court of Cook county in favor of appellee (Chicago Heights Lumber Company) and against appellant, (David Miller,) impleaded with Isadore Miller. The declaration avers and the proof shows that on August 10, 1901, Wil- liam Frink drew an order on Miller Bros, for $682.81 in favor of ap- pellee, in terms as follows: "'Chicago Heights, 111., August 10, 1901. "'Mr. Wm. Frink — Miller Job. " 'In Account with Chicago Heights Lumber Company (Incorporated), Dealer In Lumber, Lath, Shingles, Lime, etc., Corner Sixteenth Street and East EJnd Avenue. August 10. To mdse $711 47 Less material returned 28 66 $682 SI " 'Chicago Heights, 111., August. 10, 1901. "'Miller Bros.: Please pay to the order of Chicago Heights Lumber Co. six hundred eighty-two 81/100 dollars. Yours truly, Wm. Frink.' "Frink delivered the order to appellee and appellee presented it to appellant, who, on behalf of Miller Bros., gave appellee the check of Miller Bros, for $400 thereon and promised orally to pay the balance of the order in a few weeks, retaining the order in his possession. e Accord: Scudder v. Bank. 91 U. S. 406, 23 L. Ed. 245 (1875); Davis v. Rittenhouse, 72 111. App. 58 (1897). 212 FOEM AND INCEPTION (Part 1 Miller Bros., defendants, pleaded the general issue, and subsequent- ly, by leave of court, filed two additional pleas of the statute of frauds, averring that the promises mentioned in the declaration were special promises to answer for the debt of Frink, and that no memorandum or note thereof in writing, signed by the defendants, or either of them, was made. To these pleas the court sustained a demurrer. "On the trial the defendants, at the close of plaintiff's case, moved to strike out the plaintiff's evidence, on the ground that the contract came within the statute of frauds. This motion was denied." The Appellate Court incorporated in its judgment the following finding of facts : "The court finds that the acceptance sued on in this case was an oral acceptance of an order, and that there was no fund in the hands of appellant, the acceptor, out of which to pay the order." The Chicago Heights Lumber Company obtained a certificate of importance from the Appellate Court, and brings the record to this court by appeal.^' ' ScoTT, J. (after stating the facts as above). Miller Bros, held no fund belonging to Frink and were not indebted to him. If Frink, un- der these circumstances, had orally requested Miller Bros, to pay his debt to Chicago Heights Lumber Company, and Miller Bros, had ver- bally promised the company to do so, the promise would have been within the statute of frauds. Does the fact that Frink's request to Miller Bros, to pay his debt was in writing, and that the written re- quest was left with appellee when he paid a part of the debt and ver- bally agreed to pay the remainder, make a material difference? We think not. In either event Miller Bros, could recover from Frink any amount paid in pursuance of his request. The only difference is that in one instance the evidence of Frink's request lies in parol, while in the other it is in writing. In either case the promise to pay Frink's debt is verbal, and the statute of frauds presents a complete defense. The only case to which our attention has been called, where, upon the oral acceptance of such an order, the writing itself was left with the acceptor, is that of Louisville, etc.. Railway Co. v. Caldwell, 98 Ind. 245. The views there expressed by the court of last resort of the state of Indiana are consonant with the conclusion reached above. If the written request of Frink be regarded as a bill of exchange, the result would not be different, as the verbal acceptance by the draw- ee of a bill of exchange, who holds no funds of the drawer, is no more than a parol promise to answer for the debt of another. Browne on Frauds, 174; 2 Rob. Pr. 152; Quin v. Hanford, 1 Hill (N. Y.) 84; Pike V. Irwin, 1 Sandf. (N. Y.) 14; Manley v. Geagan, 105 Mass. 445 ; Plummer v. Lyman, 49 Me. 229 ; Wakefield v. Greenhood, 29 Cal. 600 ; Walton v. Mandeville, 56 Iowa, 597, 9 N. W. 913, 41 Am. Rep. 123. The judgment of the Appellate Court will be affirmed.^* 10 The statement of facts is abridged. 11 Accord: Bamett v. Lumber Co., 43 W. Va. 4il, 27 S. E. 299 (1897). Ch. 2) ACCEPTANCE 213 RAMBO et al. v. FIRST STATE BANK OF ARGENTINE. (Supreme Court of Kansas, 1912. 88 Kan. 25T, 128 Pac. 182.) Action by J. P. Rambo and W. T. Aiken against the First State Bank of Argentine. Demurrer to the petition was sustained, and plaintiffs appeal. Affirmed. BuRCH, J. F. E. Mason deposited with the defendant a check for $250, and received credit therefor on account subject to check. After- wards h e drew p rhpr\r nn tha hinV in favor of the plaintiffs for $150 to pay for a diamond ring which he desired to purchase of them. One of the p laintiffs communicated with the bank hv telephon e, informed the cashier of the pending ring transaction, and asked if the check was good. The ca^hier_ replied that Masnn had on deposit sufficient fund s to meet the check, jbat the ch'e ck w^s gon d^ and that it would be all right to let Mason have the ring. R eJ ^nng on what th e- catillier said, the pla intiffs sold the rin ^ and took the check in payment of the price. The bank then discovered tha t thf ; rh^^'k fnr whi^h it had given Masnn cre(jit__was frauduj^ent, and, v yhen the plain tiffs prcacntcd thoir check. paymenFwas relused. The pl aintiffs sued the baj ik for the amount of the check, settmgup all the facts. A de murrer was sus t aine d to the petition, and the plaiutiffsaggpal. The pl aintiffs ba^° t^°ir n^ht tf^ ^'"•^^'^r f7" tb° pripripip n f pgnitablp. estogpel^s stated in Clark v. Coolidge, 8 Kan. 189: "As a general rule estoppels in pais can apply only in the following cases: (1) Where the party doing the act or making the admission knows at the time the truth of the matter about which he is acting or making admissions, or pretends that he knows the same, or has better means of knowing the same than the other party. (2) Where the other party does not know the truth of the same. (3) Where the act or admission is expressly designed to influence the conduct of the other party. (4) Where the other party relies upon and is influenced by such acts or admissions.'' All these elements, except perhaps the third, and its presence may be conceded, were embraced in the allegations of the petition. The argu- ment is that the bank's failure- to investigate the genuineness of the check deposited by Mason before the plaintiffs inquired about it made the loss possible, and consequently that the bank, although innocent of intentional wrongdoing, is the one who in justice and good conscience must suffer. TlTP_5faip qf fgrtq upon which liability is predicated i s the old; old o ne of refusal to pay an unaccepted bill which the draw ee orally recom- mended as good to the noide LJ ^fOro he acqui xed-it. 'I'he question in such cases isT WasTt the duty of the drawee tn pay the hi ll? If not, no liability attaches for refusal to pay because no duty- has been violated. The obligation of the drawee of a bill to the holder has been dealt with expressly by the' Legislature in the Negotiable Instruments Act. 214 FORM AND INCEPTION (Part 1 T lie drawee is not liable on thf bill nnlpqs and unti l bp arrppts it. jiectinn 13 4. A cceptance is the sif^nificatinn by the drawee of his_a s: cPtT±Jv ^f r^i-rlpr nf tViP Hrnnrar inrl -i r-rnptnnrp muct ha in wrritinp- sig n- ed by the_ draw€e^Section 139. Gen. Stat. 1909, §§ 5380, 5385. Sec- tion 134 relates to rights and duties, and not to form of remedy. It means that the drawee is not obligated to pay the holder unless and un- til he accepts, and the plaintiffs gain nothing by saying that they do not sue "on the bill." Neither do they gain anything by saying that they ground their ac- tion upon equitable considerations, since equity must follow the law in all cases in which the Legislature has intervened and prescribed rules of law which govern the rights of the parties. "The established rule, although not of universal application, is that equity follows the law, or, as stated in Magniac v. Thompson, 15 How. 281, 299 [14 L,. Ed. 696], 'that, wherever the rights or the Situation of parties are clearly defined and established by law, equity has no power to change or un- settle those rights or that situation, but in all such instances the maxim equitas sequitur legem is strictly applicable.' * * * Courts of equity can no more disregard statutory and constitutional requirements and provisions than can courts of law. They are bound by positive provisions of a statute equally with courts of law, and, where the trans- action or the contract is declared void because not in compliance with express statutory or constitutional provision, a court of equity cannot interpose to give validity to such transaction or contract, or any part thereof." Hedges v. Dixon County, ISO U. S. 182, 192, 14 Sup. Ct. 71, 37 h. Ed. 1044. Th e negotiable in struments, art entailer! no hardship upon the p lain- tiffs, for they might have asked for a certified check, or migh t easily have o btamed a lawtul acceptan i-p. ^n d to permit them tn rerr^ v er o n t he~"theo ry_ p r opn -i Pfi w n u l r i \r i nKr no-H itLn pon the business world the ev ils which the s tatutg w as dp='gnprl in repress. The iudg rnent of t he district court is affirmed. All the Justices concurring. Ch. 2) ACCEPTANCE • 215 COLCORD V. BANCO DE TAMAULIPAS. (Supreme Court of New Tork, Appellate Division, First Department, 1918. 181 App. Dlv. 295, 168 N. Y. Supp. 710.) Action by Alan H. Colcord against the Banco de Tamaulipas. From an order overruling demurrers to the complaint, defendant appeals. Reversed. DowuNG, J. The facts upon which the two causes of action herein are based are set forth in the complaint as follows : The First Stale Bank-& Trust Company ( assienor of the claim in question to plain tiff) i s a banking corporatio n organized under the laws of the state of Texas, and having its principal place of business at Laredo, Tex. It is herein- after referred to as the State Bank. D/fpriHant k a hankingr rnrpnra- tion org ^aniz ed under the laTiy; of the T?ppii1-i1ir nf Mpxir n, and having its principal place ot business at Tampico in the state of Tamaulipas, Republic of Mexico. On February 28, 1914, C. Barreda, as municipal _ pi-^ci'^or^t nf tH" -ity "f Niievn TiTif-l", a municipality m the Republic of Mexico, rnarjp a rprtm'n Hraft nr hill nf pyrhan^P jn writing. ThiS- (as well as all the other writings hereinafter referred to) was in the Spanish language, and translated into English read : "$S,0(X).00' (Mexican dollars). "G. Laredo, Tamaulipas, Feb. 28, 1914. "At three days' sight pa y bv this bill of excha nge, in this city, to th e order of the First St ate Bank of Laredo, Texas, the sum of five thou- sand Mexican dollars. Value which you will charge with or. without notice to account of C. Barreda, Municipal President. "To the Bank of Tamaulipas, Tampico, Tampas. "[Indorsement:] [Seal.] Municipal Government Constitutional of Laredo, Tamaulipas. "[Written:] G. Laredo Tampas, Feb. 28, 1914. C. Barreda. "[50 cent Mexican stamp affixed.]" Said d raft was presented to the State Bank, for purchase, which thereupon sent the following telegram to defendant : "Laredo, Texas, March 3, 1914. "Bank of Tamaulipas, Tampico; Tamps., Mex. : "Please tpjp;;Tiph iifi imrn"^iritp1y if ynii will pay a rlrait signed C. Barreda, Municipal President Nuevo Laredo, for five thousand Mex- ican dollars. First State Bank & Trust Co." To this defendant replied as follows : "Tampico, Mexico, March 5, 1915. "First State Bank & Trust Co., Laredo, Texas : " Draft C. Barreda, Municipal President Nuevo Laredo, for five thousand Mexican dollars is good. Banco de Tamaulipas." 216 FORM AND INCEPTION (Part 1 On the sa me day df^ f^nr^anf wrntp the State Bank as follows : "Tampico, Tarn., Mex., March 5, 1915. "First State Bank & Trust Co., Laredo, Texas— Dear Sirs : On this date and through the same method we have an svye^f^ ynnr tplegram. relative to Dr. C. Barreda's draft for five thousand Mexican dollars, v vhich we confirm a s per inclosed transcript. "Yours truly. Banco de Tamaulipas, "P. Assemat, Mgr. J. J. Dias, Cashier." The transcript inclosed was as follows : "Transcript of the telegrani which the Banco de Tamaulipas address- es to First State Bank & Trust Co., Laredo, Texas,'on March 5, 1914. 'I5;2it-J&-©arfeda, Mayor of New Laredo, for five thousand dollars is. good.' " The ■'^t^i^^rik, relying iipnn the faith of the rnrrespondpnce quoted, bought the draft in question, paying 5,000 Mexican dollars therefor, and atter indorsingTt^ so as to make it payable tq any bank, banker, or trust company, transmitted the draft, so indorsed, to defendant, and duly presented it and demanded paym ent. Thereafter defendant tele- graphed to the State Bank: "Tampico, March 19, 1914. "We return remittance 9336 because it is not correct. We are writ- ing. Banco de Tamaulipas." The letter which followed was in these terms : "Tampico, Tam., Mex., March 19, 1914. "First State Bank & Trust Co., Laredo, Texas— Dear Sirs: We confirm our telegram of even date as per inclosed copy. Accordingly w p fPtnrn yn^r rfftnittancp "Mn Q?, ?,f, for its lacking of two signatures . to wit : Faustino Garza's as finance commissioner and the signature of Dr. Adolfo Salinas Puga as health commissioner of Nuevo Laredo. It also lacks the official seal of the municipal corporation. Once the above requisites having been fulfilled, we will have no objection to hon- oring the remittance herewith returned. We have charged you with $5.54 for telegram expenses. We are yours respectfully, "Banco de Tamaulipas, "P. Assemat, Manager. J. J. Diaz, Cashier." Inclosed therewith was a copy of sajd telegram of March 19, 1914. The S tate Ban k prnpnrpH thn '-irrning ni tVip rlcai± hy tViP twr^ f^ffi^j-jU referred to in the latter, and also the affixing of the seal of the munici- pal corporation thereto, and in this condition it was returned to de- fendant and gg;g'"n '^"'y p'-pf^p^ ted for paymptit The d efendant re - tained, the draft m its possession from March 24, 1914, to December 8, 1914, igno ring' repeated demands to p ay th e same between March 29, 1914, and October 31/ iyl4, on which latter date i t_ rpfnspd payment- and still refuses to pay the same. It is alleged that when said draft was accepted, and when it was presented for payment, the drawer Ch. 2) ACCEPTANCE 217 thereof had deposited with the defendant funds sufiScient to pay the same, and which had been so deposited, for that purpose. The fir.st-ca n.se nf artinn is based a n the tViP ory that d efendant's tel sgram nf Marrli ^^fb ''"" stituted an acceptan rp nf tlip rlraff in ques- tion and that defendant was therefore Uable to pay the same. I do not believe that defendant's telegram of March 5th can be interpreted to be an acceptance of the draft in question, nor as a promise to accept the same. The State Bank telegraphed defendant an explicit question as to whether defendant would pay a certain described draft. Defend- ant did not reply to this question directly, nor does it appear that it was under any duty or obligation so to do. The State Bank did not say in its telegram that it was about to buy the draft upon the faith of defendant's reply. Defendant replied ■ only that the draft was good, which reasonably meant only that C. Barreda, as municipal president of Nuevo Laredo, then had on deposit with defendant at least the sum of five thousand Mexican dollars, but gave the State Bank no right to assume that defendant would hold the funds to meet the draft, or would itself accept or pay the draft. On the contrary, t he very form of the re pl y , nnt nmw r ri njj H irrr l l]- l l i r g ii r i li nn m t n n rbrtlir r rlpfpiirl a nt would pay the draft, was sufficient to put the State Bank on its guard, and cause it to either require an explicit answer from defend- ant as to whether it would accept and pay the draft, or to proceed fur- ther at its own risk. The defendant had no control over the State Bank's transactions with Barreda, and it was the business of the State Bank to protect itself in its dealings with him, and to make certain that the draft would be accepted by defendant before it parted with its money on the faith of the draft. An acceptance is a contract, and there are no words used by defend- ant in the telegrani which can be interpreted to mean that it agreed to accept the draft. In First National Bank of Atchison v. Commer- cial Bank, 74 Kan. 606, 87 Pac. 746, 8 h. R. A. (N. S.) 1148, 118 Am. St. Rep. 340, 11 Ann. Cas. 281, an acceptance was sought to be based upon the following telegrams passing between the parties : "Adrian, Mich., October 15, 1903. "First National Bank, Atchison, Kan.: "Is J. F. Donald's check on you $350 good? Commercial Savings Bai?k." "Atchison, Kan., October 15, 1903. "Commercial Savings Bank, Adrian, Mich. : "J. F. Donald's check is good for sum named. "First National Bank." In that case Donald was a depositor in the Kansas bank and drew a check upon it for $350 to a payee who indorsed and delivered it to a third party, who in turn indorsed and delivered it to the Michigan bank. Donald stopped payment on the check before it was presented for payment, and the Michigan bank sued the Kansas bank for the face 218 FORM, AND INCEPTION (Part 1 of the check and interest, claiming it had been accepted in writing, and that it had been purchased for value on the faith of such acceptance. The court held that the drawee of a check could not be held liable upon a claimed contract of acceptance, external to the bill, unless the language used clearly and unequivocally imported an absolute promise, and that the response that a check was "good for sum named" was not such a promise. In that case the reply was strictly responsive to the question, but the court said : "It indicates no clear intention to make Donald's check good whenever presented and whatever the condition of his account. It is entirely consistent with the simple purpose to state Donald's standing at the bank on the day of the telegram. It fairly means: 'Donald's account is now sufficient to meet a check for the sum named.' The writings are not equal to the unambiguous and une- quivocal 'Will you pay?' and 'We will pay.' " So, also, in Kahn v. Walton, 46 Ohio St. 195, 20 N. E. 203, it was held that, while an affirmative answer by the bank to a general in- quiry whether checks of a person named for a specified sum are good is information that such person has on deposit, subject to check, money to that amount, it does not constitute an acceptance or certification of, or otherwise create an obligation on the bank to pay, checks which- the inquirer may then hold. The telegraphed query in that case was, "Are M. A. Walton's checks for $2,000 good?" to which the bank answered, "Yes, sir." In the course of its opinion the court said : "It is manifest there was no acceptance or certification of the checks in question in this case. The telegraphic correspondence between the bank and Kahn's agent amounted to no more than an assurance that valid checks to the amount stated, drawn by Walton, or that might be drawn by him, were then good. No particular checks were mentioned in the inquiry, nor any intimation given that the inquirer had received, or was about to receive, such checks ; nor had the bank any means of identifying the cheaks to which the inquiry related. Its telegram, therefore, did not commit the bank to the payment of any particular check. At most, it was information that Walton had, at its date, money on deposit to the amount stated, subject to check. Espy v. Bank, 1& Wall. 604 [21 L. Ed. 947]." In Myers v. Union National Bank, 27 111. App. 254, the query tele- graphed to the defendant bank was, "Will drafts for $3,800 made by J. R. Snyder on you be paid, if presented Monday?" to which the reply was sent, "Drafts named are "good now." The funds of the drawer having been paid out to meet other checks, it was sought to hold the defendant for the drafts in question as upon a virtual ac- ceptance for certification. The defendant was held not to be liable, as it had not accepted the drafts. The court said : "An acceptance is a contract, and does not differ from other contracts in the essential re- -quirement of a meeting of minds. A bank is not bound to accept by telegram the checks or drafts of its depositors, although ia420ssession Ch. 2) ACCEPTANCE 219 of funds to pay. Its duty in such cases is to accept a draft, or pay a check, only on presentment. One relying on a telegram as an accept- ance should see to it that the language used will, at least, fairly bear the meaning. Rees et al. v. Warwick, 3 Eng. C. L. 467." These cases support the general rule as laid down in Daniel on Ne- gotiable Instruments (6th Ed.) vol. 1, p. 600: "There is no doubt that, in the absence of statutory interdiction, an acceptance may be upon a separate paper, as in a letter, for instance, as well as upon the bill itself. The drawee catjnot be held liable upon a contract of accept- ance external to the bill, unless the language used clearly and unequivo- cally imports an absolute promise to pay. Thus a written promise to accept an existing bill, or 'that it shall meet with due honor,' or that the drawee 'will accept or certainly pay it,' or any other equivalent lan- guage, has been held to amount to acceptance. But if the language be equivocal — if it be merely stated, 'Your bill shall have attention' — it is not sufficient." The Negotiable Instruments Law of New York (Consol. Laws, c. 38), in section 222, provides that : "Where an acceptance is written on a paper other than the bill itself, it does not bind the acceptor, ex- cept in favor of a person to whom it is shown and who, on the faith thereof, receives the bill for value." It follows as the result of the reasoning of the foregoing cases that the State _ Bfil<- >i^d nn ricrht- tn rply nn ripfpnd ant'g tplpj rram that the draft was good in purchasing it, but sho uld have insisted on a direct answer to a question whether d efen dant would accept or pay the dra itT" Hgrhavi ng^one so, and _d££g«iHant not having' sft id in its telegram tha t it wou ld either accept or pay the draft, the latter is not liable. TEe casTorGaiieLLsoa v. iidukTC. C.) 39 JFed. Ib3, / U R. A. 428, is not controlling here, for in that case the question was, "Will you pay James Tate's check on you twenty-two thousand dollars? Answer," and the reply was, "James Tate is good. Send on your paper." In its opin- ion the court laid stress on the last words, "Send on your paper," as clearly implying, that it was to be sent on for payment and not merely for acceptance. No such words were used in the case at bar. The demurrer to the first cause of action should have been sustained. The second cause of action, after restating all the facts alleged in the first cause ot action~"55K;ept the assignment of the claim and the retention of the draft and refusal to pay same by defendant, setsjorth th at defen d-^'^^ i.^lipn thp nn'^rinal draft was presented to it for ac- ,-pptanrp -^n^ ^'^'^ pajnnpnt, failed and neglected to accept or pay it: that the S tatp Bank caused the additional signatures and municipal se al^to be affixed_ Jo the draft as requested by defendant in its letter of March 19, 1914, and again on March 28, 1914, the State Bank pre- sented the draft to defendant "for formal acceptance and also for payment"; t hat defenda nt- ^^^^ prnmispiJ tp fnrmnlly nr rr pt n n d pny the draft T realleging the original telegram and the reply thereto), but 220 FORM AND INCEPTION (Part 1 instead refused and still refuses to keep its said promise; that defend- ant retained the draft in its possession from the time of its presenta- tion until December 8, 1914, and during the whole of said time failed to formally accept or pay the draft although repeated demands for pay- ment were made, until October 31, 1914, when it notified the State Bank of its refusal to formally accept or pay "said draft." It is then averred : "Sixth. That in and by the la w of Mexico it was then and there pro- vided that, when a draft of the character of the draft herein set forth is presented for acceptance, thp drnwf f mu s t nrropt it nr rrfusp plain - ly his acceptance on the same day in which the_ ^farpr prpgpnts if fnr t hat purp ose" And it is also the law of Mexico that, if the draweg a llows the dav to pass wi tbp"<- rPtnmi'ncj gurVi f^rflft^ Vip will hp liable f^its paviTiP Tit " The assignment of this cause of action to plaintiff is then alleged. This c ause of action proceeds upon tbe theory that the telegra m of March Stl-i was nnf an a prpp^'?"'-'^ but qn affr ep rnpnt to accept, to r the brpnrh_ £it w lii rh d rfrnrlnnt i"i rgu nl ly linbV Fnr the reasons hereto- fore assigned, I do not believe th(^ teles^ram in question w as a^ apree- ment to ac cept," any more than it was an acceptance. In so far as plaintitt pleads upon the alleged telegram as an agrtifitnent to accept, I believe the co mplaint i s d emurr able. Plaintiff does not set forth any acts done by his assignor, hability assumed by it, or moneys paid out by it, after the receipt of the defendant's letter of March 19th, nor does he seek to predicate any liability thereupon. Had the State Bank paid out its moneys only after the receipt of that letter, a very differ- ent question would have been presented. The statute law of Mexico sought to be pleaded not only raises a new theory of defendant's liability inconsistent with the remaining al- legations of the second cause of action (which are based solely on the ground that the original telegram of defendant was an agreement to accept), but that law is so inartificially pleaded that it is not made applicable to the state of facts set forth. It is said that "in and by the law of Mexico it was then and there provided" that the drawee must accept or refuse acceptance at a certain time, but whether this law was in effect when the transactions in question occurred does not appear. It is also alleged that "it is also," the law of Mexico that, if the drawee allows a day to pass without returning the draft, he will be liable. But this allegation is also vague as to time, and it does not clearly show that the law was to the effect quoted when the transactions between the parties were had. For all these reasons, the demurrer to the second cause oi action should also have been sustained. The order appealed from will be reversed, with $10 costs and dis- bursements, and the demurrers to the first and second causes of action sustained, with $10 costs, with leave to plaintiff to serve a further amended complaint as to said causes of action on payment of said costs. Ch. 2) ACCEPTANCE 221 Ordered reversed, with $10 costs, and motion denied, with $10 costs, and demurrers sustained, with leave to plaintiff to amend on payment of costs. Order filed. Clarkb, p. J., and I^aughlin and Smith, JJ., concur. Page, J. (dissenting). The sufficiencv of the allegations of the first cause of action depends upon whether the exchang f nf tf^^'g''"''"'' of March 3d and 5th c onstitute*^ an ac.ccipfance nf the draf t, so that the defendant became primarily liable thc/reon. In mv opinion it does . If the draft had besn presented to the defendant, and some one duly au - t horized had written "Good" upon the face tberenf and s igned the name of the defendant, t here could b e no doubt but that this would be equivalent to an acce ptance ot a n egotiable bill of exchange in favor of the hoiaer tor tlie amount specified therein. Meads v. Merchants' Bank of Albany, 25 N. Y. 143, 146, 82 Am. Dec. 331. The acceptance, to be binding in favor of a holder who has parted with value upon the faith thereof, does not have to be upon the instrument itself. The Ne- gotiable Instruments Law provides : "^pp 9.22^ Acceptance by Separate Instrument. W here an accept- ance is written o n a paper other than the hi11 itqplf, it' does nnr frin d nt I'nfavnr f^f a pprgnn trt wVinm i> k shown and who . o n the faith thereof, receives the bill for value ." ^ ^Pk?'''"^! gatigfjpg ihp rpqiiirPtnPTit«^ pf t'"'" FtVtvt" .' it is a Writing, and the method of its transmission, whether by mail or telegraph, is immaterial. Molson's Bank of Montreal v. Howard, 40 N. Y. Super. Ct. 15, 20. Th e telegram wa s und e^'strinrl tn hp in -irruptinrPj nnH , relyin g thereon, plaintiff's assignor discounted it. Fairly construed, I do not believe that the telegram of the defendant merely meant that C. Barreda, as municipal president of Nuevo Laredo, then had on deposit with defendant at least the sum of five thousand Mexican dollars. The inquiry of plaintiff's assignor was : "Please telegraph us immediately if you will pay a draft signed C. Barreda, Municipal President Nuevo Laredo, for five thousand Mexi- can dollars." This was not an inquiry as to the validity of the draft or as to the sufficiency of the account of the depositor. It was an explicit request for an acceptance of a specified draft for a definite amount. The . an-;wpr rpti^rnpH was siirh that had it hppn plarp.H nn the draft, it wetild Jiav.g-eeH9t-kuted an acce ptance . I n my opinion it f ibf"^"^ ^° so construed! ^A similar case to, the one at bar is Garrettson v. North Atchison Bank (C. C.) 39 Fed. 163, 7 L. R. A. 428, cited by Mr. Justice Bowling. The opinion in the Circuit Court of Appeals (North Atchison Bank v. Garrettson, 51 Fed. 168, 2 C. C. A. 145) did not lay stress on the words "Send on your paper." That court said : "The question put to the bank, and to which an answer was requested, was not whether Tate was good, but whether the bank would pay his check for a given sum." 322 FORM AND INCEPTION , (Part 1 It cannot be supposed that the bank intended to return an ambigu- ous answer, for the purpose of misleading the party asking the question, and therefore, if the answer had been Hmited to the words, "Tate is good," there would have been ground for holding that the bank thereby uitended an affirmative answer to the categorical question put to it; but all doubt is put at rest by the remaining words of the answer, "Send on your paper." 51 Fed. 170, 2 C. C. A. 148. Where, in the case at bar, the defendant replied that, "Draft C. Barreda, Municipal President Nuevo Laredo for five thousand Mexi- can dollars is good," the plaintiff's assignor was justified in believing that the defendant meant that if the plaintiff's assignor sent in the draft it would pay it, and where on the faith of that promise the plaintiff's assignor purchased the draft, the defendant became liable for the payment of the draft. The second cause of action sufficiently states a promise of acceptance, not alone from the facts above mentioned, but also from the later oc- currence. When the draft was presented to the defendant bank, it re- turned it, explaining that there were two signatures and the official seal of the municipality lacking. The letter further said : "Once the above requisites having been fulfilled, we will have no objection to honoring the remittance herewith returned." This letter is evidence that the defendant considered itself bound by the telegram of March Sth. The plaintiff's assignor secured the two signatures and the municipal seal and returned the same. It is urged that there is no consideration for this promise, as the plaintiff's assign- or had already paid the money for the draft. In my opinion the per- formance of the condition imposed was a sufficient consideration for the agreement to accept. The fact that a draft is discounted before acceptance does not render the acceptance without consideration. "It is the settled law of this state that the right of the holder of the draft against the acceptor is not af- fected by the mere fact that he discounted the draft before acceptance." Iselin V. Chemical Bank, 16 Misc. Rep. 437, 438, 40 N. Y. Supp. 388, 389. After the draft was returned in its completed form, the defend- ant retained it for several months. These facts would afford a con- sideration, because the plaintiff's assignor was deprived of the right to immediately proceed against the drawer; forbearance is necessarily granted. Mechanics Bank v. Livingston, 33 Barb. 458. In my opinion, the order overruling the demurrers to both causes of action should be affirmed. Oh. 2) ACCEPTANCE 223 SECTION 3.— CONSTRUCTIVE ACCEPTANCE HARVEY V. MARTIN. (Nisi Prius, tefore rx)rd Ellenborougln, O. J., 1807. 1 Oatupb. 425, rote.) Action on bill of exchangg . by payee against accepto r. Plaintiff tr ansmitted the bill hy post f^ ,],ff>=~p7[^r,^ f}^^ ^,-mY°f'^ is ""nn as he re- ceived it, desiringjiim to fif r'ept a nd hand it over to plaintiff's a^ent irij London, which was the usual mode of dealing between the parties. Pjaintiff hegringuio thing of 'his hill from his acrp nt wrntp t" r-Uf^ryr].' anl,^re monstrating _with ln'm fnr tVip i^p]^y The d efendant nmivrrrd, thnMlpJiaH rptai nprl the bill beCaUS f hf ^^<^ ""'''' r^^Pr,r^^ tr^nr-f apt if _ wh ich he n ow declined doing. Lord ElLENBOROUGhI T his is clearly an arrp ptanrp If a b ill is le ft for the express purpose of being acc epted and is ret ^iip*-! hv ^^j* d rawee, such retentio n is a s much an acceptanrp a^J ^ f he had written his name upon the face ot it. ' JEUNE V. WARD. (Court of King's Bench, 1818. 1 Barn. & Aid. 653.) Actio n against defendant as acceptor of a bill of exchange for £150. drawn by J. (j. upon the defendant, in favor of the plaintiff, Jeune. At the trial at the London sittings after Hilary term, before Lord Ellenborough, C. J., it appeared that the d efendant^ together with an- other person of the name of Stubbih, was the rnpyp^ntnr nf the- -^^ill of a iVlrs. Leake, u nder which the drawer G ^^f^'pj'-- was entitled to a l£ga< :y of ISO O. "n his rominp^-ff-pg-" In consequence of this, God- frey on the 28th May, 1817, d rew the bill on defendan t in favor of the plaintiff, as a payment of his bil l for goods sold and dehvered . The pJajritifiE^who lived in London, w ent o ver on the 29th May t o the de- fen dant's housg ^in the country with the bill, and there left it for the puxQQ Se of being accepted , but it did not very clearl)' appear what then passed between the plaintiff and the defendant. At a subsequent period, however, in June, the plain tiff called on M r. Egerton, t he agen t f or the defendant in London, and introduced himself to him by pro- ducing a letter from the defendant, and b egged his assistance toward s pnghling him tn nhtfl'"" pciymant nf tVia Viill -frnm thp Hra-nrpr He then stated that he had been before with the bill to the defendant, ^^i;] <-ha<- the defendant had rpfnp p ^ to ar pppt it Mr. Egerton told him that He - fendant h ad done verv right in refusing to accept t he bill ; that Godfrey was, on the 5th July to receive his legacy, and that he recommended 224 FORM AND INCEPTION (Part 1 plaintiff then to attend in order to secure the payment of the bill. Ac- cordingly, on the 5th July the plaintiff attended ; but, owing to some dispute as to the stamp for the receipt of the legacy, it was not paid on that day, Godfrey then refusing to receive it. It was afterwards paid to him. The p laintiff gave also in evidence ? Iptt^r <^^ <'hp rle- f endant . in answer to an application for the bill, w hich stated th at having been applied to by the mother of the drawer to give up the "bill to them, which, during all this period, had remained in his hands, ke ha d, to avoidj urtber trniihle , rfestroved it . This case having been proved, Lord Ellenborough, C. J., was of opinion that it amounted in law to an acceptance of the bill by the defendant, and directed the jury to find a verdict for the*plaintiff.^* y\ Lord Ellenborough, C. J. I do not recollect that any question was made at the trial as to the correctness of Gould's evidence. His state- ment was, that the bill in this case was originally left with the de- fendant for acceptance, and by the defendant's own letter it after- wards appeared that the bill had been destroyed by him. I certainly at that time proceeded on the ground that it was the ordinRrjLand_ rec- omized custom of merchants, that wherm bill h^^ been left for ac- ceptance, if afte r a reasonable time has expired ("a nd here a reason- able time had expired) the party omit ted to return the bill, he m ust be considered as hav innr rpi-cunpn it Inr arrppt^rirp" This casc goes still further; for h qre the defendant by his own act puts it whol ly out of his power ever to return it, and t hereby deprived the holde r (there being no power of recreating the bitll o f the advantage of be - in g able to prove the handwriting of the drawer. In such a case I have always considered it as a matter of course that such retention and dest ruction of a bi ll of exchange was tantamount to an absolut e refusa l to deliver it, and~was theretore, in p oint of law^anjrcegtance. But it is contended that no case can be cited, which goes so far as this proposition. The principle laid down by Lord Kenyon in Trimmer v. Oddy, seems to me to govern this case. That decision, I well re- member, made a considerable impression on my mind. In the ordi- nary course of business, when the bill is left with the acceptor, he is to consider whether he will accept it or return it. If he, without saying anything, retains it in his hands, the law then presumes that he has done that for which the bill was left, and which is for the benefit of the party leaving the bill, viz., that he has accepted it. Here, however, it is said that Ward absolutely refused to accept, and it is contended that that circumstance makes the difference. But the period when he did this does not distinctly appear. It might be after a rea- sonable time had elapsed. Suppose the bill delivered to him on the 29th May ; the meeting of Egerton and Jeune was not till the end of June, and the bill was not destroyed till the 9th of July. Then a rea- ls The arguments of counsel and the opinions of Abbott and Holroyd, JJ^ who concurred with Bayley, J., are omitted. Oh. 2) ACCEPTANCB 225 sonable time might have elapsed before the refusal took place, and a reasonable time did at all events elapse before the destruction. If so, the bill was in point of law then accepted by Ward, and the acceptance could not afterwards be retracted. If indeed the bill had not orig- inally been left for acceptance, the whole case would certainly fall to the ground. But I think it clearly appears from the evidence that it was so left, and the defendant not having in a reasonable time noti- fied his refusal to accept, and having ultimately destroyed the bill, must, as it seems to me, be held liable for it as the acceptor. I think, therefore, that this rule must be discharged. BayIvEy, J. I am not prepared to say that the defendant can, in the present case, be considered as the acceptor of this bill. The bill, as it appears from the evidence, was drawn on the 28th May, by God- frey, on the defendant, and was payable at sight. And on the 29th May the p laintiff , h aving- ^one down from London to the defendant j house in the country for that purpose, made an application to him either for payment or acceptance of the bi ll; b ut it is not clear fo r whicn oi these two the application was made. No payment is then niadej^tor is tliilie any reason to suppose that any acceptance was then given. F or some reason, h owever, which does not appear, the bjlL was then left in the possessfon of the defendant, where it remained till the atn July, tn e Lhiie when it was ulliim L d>i TT estroyed. Wh ere a bjll is, in the usual course of busi ne ss, left for acceptance, it i s the duty of the party who leav es it to call ag ain for it, and to i nquire wheth erj t has been accepted or not, it is not , as it seems to me, t he duty of the other person to send it t o him, unless, as in the case cited of Harvey v. Martin, t here is a usual course of deal - ing between the particular individuals concerned so to do Here the party yfhn Ipft the- hill Hnes nnt app ear ever to have called " Or ^s ent f nr it • a r '^ tViof m-itan'-iiiy -ifft^rtr tViA prpgp i^t case. I forbear to say, at present, what would be my judgment on the effect of a destruction of the instrument by the party with whom it was left for acceptance, within the reasonable time during which. the other party might expect kn acceptance of the bill. If a partv say s he has destroyed the bil l, and that he will not accept it, s uch destruction m ;g1^t prnKaMy cnhjpH- hiy tn nn nrtion "f trovpr for the bill ; but I cannot think that it would amount to a n acceptance of it . For what is an acceptance ? It is an engagement of the one party acceding to the proposition of the other ; and it would be very strange indeed if a refusal on his part could in law be deemed an acceding to the proposition. But I give no judgni ent on this point ; for the f ac tshere do not warrant the conrlnsinn that the b ill was destroved bv the deienaant Quring the period when the plainti ff could consider it as remaining lor acceptanc e! It appears that at the end of June the plaintitt called on iigerton, and introduced himself to him by producing a letter from the defendant. All the circumstances which then came out show plainly that this whole transaction was an isolated one betwe en the parties, and that there was no course of aeai- Sm.&;,M.1j.& W.C2d Kd.)— 15 ' '— 226 FORM AND INCEPTION (Part 1 ing between them; for the drawer, Godfrey, was entitled to a legacy, and on that ground alone it was that he drew on Ward, the executor. The plaintiff then tells Egerton that the defendant had refused to ac- cept the bill. He does not complain that the bill had been kept by him for an unreasonable time, but applies to Egerton for his assistance in obtaining the money. Egerton tells the plaintiff that Ward has done right in so refusing, and informs him that on the 5th July Godfrey will receive his legacy. On that day all the parties attend, but the money due on the bill does not appear to have been paid. Then after all this, on the 9th July, the defendant writes to the plaintiff that he has de- r.troyed the bill. Now, if that were a wrongful destruction by him, trover would lie against him, and he would in that form of action be subject to pay, not the whole bill as the acceptor of it, but only such damages as the party really sustained by this destruction. For if the drawer were a solvent person he would still be liable, and might pay the bill, either in the whole or in part. If, on the other hand, the de- struction was excusable from the circumstances of the case, as if it appeared that the plaintiff had treated the bill as of no importance, and had shown his intention of relying, not on the bill, but on the original consideration, then that would perhaps afford to the defendant an an- swer even to the action of trover. But at all events, either in the one case or the other, the destruction cannot, as it seems to me, amount to an acceptance of the bill by the defendant. I think, therefore, that this rule should, be made absolute. Rule absolute. DUNAVAN V. FLYNN. (Supreme Judicial Court of Massacliusetts, Worcester, 1875. IIS Mass. 537.) Contra ct to recover $9 on an account annexed for work and lab or. The answer ot the defendant contained a general denial and alleged payment. Trial in the Central district court of Worcester, the judge of which allowed a bill of exceptions in substance as follows: At the trial, the defendan t offor o d th& -.iQllQ wing ord er, si gned by the plaintiff, Hraa mon the dei endant, and payable to bearer, and dated Worcester, June 27 : "PleasejQ.jiajL4 he bearer 9 dolla rs due to me for work (t his woman is my board ingJbossV and nhlip-e, yours," etc. Below were written the words, "Acted June 30th, 1874," oy£jiJJie-d€- fendanf s signatu re. It appeared in evidence, and was not contra- di6Te37that the bearerofth£ nrder jvas Mrs Crn nan ; that the order was delivered to her" by tHe^laintiff ; that upon the receipt of the or- der Mrs. Cronan presented it to the defendant, and left- th e_a]:d£]:_in the _def endant'.S- possession : that the defendaoi- flniri thnf ITrpn i 4i4-iint pay it then, but that if she could give him three or four days he would pa5^; that she_£aveJltfuiMeBdaJlUliMTii££-ja)La^ andlhe order was left in the defendant's possession, and there remains, and Ch. 2) ACCEPTANCE 227 she never called upon the defendant for payment afterwards . The defendant testified substantially the same, and, upon cross-examina- tion, testified that nfler th*? dfpnrtu'''' "^ i^^' -?;- frnnan he wrote the words j "Acted June 30th. 1874. T. W. FIvn n"— upon the face, of he order ; that he wrote that to make him pay it to Mrs. Cronan ; that h e intended the words wn'ttpn nn the- fare of the order for an accept- ance in wri ting. On cross-examination, the defendant, in answer to the plaintiff's counsel, said that he did not think his liability to pay the order commenced until after he had written his name on the order. The j udge, against the objection of the defendant, instructed' t he j ury: "I f the defendant did no t verbally, or in writing, accept^ the o rder when presente d, b ut, the order bemg left with him.^e after- wa rds wrote the acceptance upon it, but did not af ter such acceptan ce in form either the drawer or Mrs. Crotian of the tact, hut r etaiaad the order in his custodv. th if y^^'ilf^ ""<• r^ppratp a.^ paympnt of the p IamTiff*s~claim ag^ainst him." The jury returned a jury returned a verdict for the plaintiff ; and the defendant alleged exceptions. — Gray, G. J. An acceptancg of a bill of exchange, or draft for the payment of money, may be oral , or may be implied from acts such as de tention for a longj ime, contrary to the usage of the parties^ and under such circumstances as to give credit to the bill. Storer v. Lo- gan, 9 Mass. 55, 60; Pierce v. Kittredge, 115 Mass. 374; Hough v. Loring, 24 Fick. 254, 257, 3 Kent, Com. (12th Ed.) 85. But in the case before us the j ury have found that there was no o ral ' ac ceptan ce, and were warranted in so doing; for although the tes- timony^oFthe defendant and of the holder of the bill, tending to prove such acceptance, is stated in the bill of exceptions not to have been contradicted, the jury were not obliged to believe if. Allowing the utmost weight to all the evidence, th ere was nothing tn show that t he detention of the bill by the defendant was contrary to the usua l c ourse of dealing between the partie s ( for it did not appear that thev h ad had anv other"dealin gs), or that the defendan t- was under pinj o b - ligatio n to return the bill to the holder , or detained it for any other reason except that she did not call for it. Under these circumstances, it was rightly held that the mere writing of the acceptance upon t he bi ll, not communicated to the drawer. or holder, and the detention of t he bill in the defendant's custody, .did not bind him, or operate as a pa yment of his debt tn the drawer, Exceptions overruled.^' IS Accord: Cox v. Troy, 5 Barn. & Aid. 474 (1822), when his acceptance was erased by drawee before delivery to the holder; Freuud v. Bank. 3 Hun (N. Y.) 689 (1875). But see Wilde v. Sheridan, 21 L. J. Q. B. 260 (1852). In the principal case, the statement of facts is abridged. 228 FOEM AND INCEPTION (Part 1 DICKINSON V. MARSH. ' (Kansas City Court of Appeals, Missouri, 1894. 57 Mo. App. 566.) Gihh, J. This a ction is foun ded on the followingJ)ill_of_excliange alleged to have been accepted by the detendant: "November 26th, 1892. "Mr. Ed. Marsh : Please pay to J. E- Dickinson eighty dollars and thirty cents. Fred Nichols." P laintiff offered certain eviden cetending to prove that_Nidi^5*.the drawer, owed the plaintiff, and~~t Har"gefenda*Tt; TVLarsh , prior to the date of thTorder. i nformga plaintiff thaL-ii-4i€: ,r plaintiff 1 would p ro- oiirp ^^ r^rHpr frnm fnJH NirVinlt; nn him (Marsh) for Said sum, h£- ( Mar sh) wou ld pay the same. This proffered evidence was, on ob- jetrtioin of the detendantTexcluded as immaterial. Plaintiff also of- fered testimony tending to prove that, on the day he received said or- der from NichQJg, ^^ <-nn]< the same to the defendant, who rece ived said^rder, remarking that. " H is all right. " a nd kept and retained sam e untirdate~o t L iial : Ll igt ~gelendant, at the time h e rereivfd the order, promised orally topa^ it. T o the in tr"''^"''^'"" "f thi s evidence jie-_ fe ndanTs" counsel 6bIect e_d_o n the ground that, sinc e this i s a suit o n an jlleged_ accepted order or bill of exchange, prool ol sucn acce pt- ance m-ust be in w riting: and could not be otherwise established. The co urt susfg mgcl'tEe' objection. Thereupon plai ntiff took a jionsuit with leave, and brought the case here by appeal. The action of the trial court is approved, and its judgment will be affirmed. The st atute provid es: " No person within this state shal l be charged as an acceptor of a bill of~exchange, unless his accepta nce shall be in" writing, signed by himself or his lawful ageji t." Rev. St. ' ISS^T^ 719. There is no pretense that the defendant ever so accep t- e d this bill of excha nge. H e cannot, therefore, be held there on. It is, however, claimed that there was a constr uctive acceptance un- d er the g royisjoa^ nf a s prtinn 724 o t the same stgtnte — It lead s: " Every per son up^ who m a bill of exchange may be d rawn, and to whom the same shall be delivered for acceptance, w ho shall des troy such bill, .oX-Tfifu^a- githin t w enty- four hours after such delivery, or within such period as the holder may allow, to return" the tj ill. accept- ed or nonaccepted, to the holder, shall be deemerl tn hayg^ f^i^pptprl the same." The facts sought to be proved, and as giving color to this position, are that plaintiff delivered the written order or bill of ex- change to the defendant on its date and that with the consent of plain- tiff, and under a promise by defendant to pay, he (defendant) contin- ued to hold the same till the trial of the cause. These facts, it is urged, amount to a refusal to return the bill after delivery, and such as will be deemed an acceptance under the foregoing section. We must hold this point against the plaintiff. Thernere_i£ce^>t.of t |if>-1^11 r|f fyrhonj T A ond li n l rUng <-V|p__C2rri»^ withoUt mOreT^lDeS-nOt, Ch. 2) ACCEPTANCE 229 in our opinion, constitute the refusal to return that will be deeme d a constructi ve arrcpi-anr^^ by force of the statute above referred to. Rousch V. Duff, 35 Mo. 512; Matteson v. Moulton, 11 Hun (N. Y.) 368, and 79 N. Y. 627. In the case last cited the New York court so construed a statute of which ours is an exact copy. The court there said: "The refusal mentioned in the statute, as it seems to us, re- fers to something of a tortious character implying an unauthorized conversion of the bill by the drawee." It cannot be called a tortious or wrongful holding of the bill when, as here, the plaintiff volunta- rily left it with the drawee and never demanded its return. Lockhart V. Moss, 53 Mo. App. 633, does not support plaintiff's contention. Indeed, that decision is in harmony with the cases before cited, since it was there admitted that return of the bill was demanded. We may further say, too, in answer to the claim made on account of the defendant's alleged promise to pay the order, using the lan- guage of the New York case, that "the attempt to charge the defend- ant with the payment of the bill upon the ground of a promise is simply an attempt to charge the defendant with a liability on the bill upon a parol acceptance. If an action can be maintained under such circumstances, the provisions of section 719 of the statute before re- ferred to would be rendered wholly nugatory." See, also, Rousch v. Duff, supra. Judgment affirmed. All concur. ** FIRST NAT. BANK OF OMAHA v. WHITMORE. (United States Circuit Court of Appeals, 1910. 177 Fed. 397, 101 O. 0. A. 401.) In the matter of the bankruptcy proceedings of William J. Crandall. From an order affirming the disallowance of a claim by the First Na- tional Bank of Omaha, on objection of Howard J. Whitmore, trus,tee, the bank appeals. Affirmed. Garland, District Judge. The app ellant filed a claim against the e state of William J. Crandall, a bankrupt, a mounting to $9,000._ The f oundat ion ofJhiR r^^^^ ■^"q f our draf ts drawn hy one MrWhnrter u pon Cranaa lTand de posited by the former for credit with the appe l- Icint, yhi(^ forwarded them by mail to the Citizens' Bank at Firth, Neb., nivMrja r.rapflall w as president^ for collection and return . The appel lant gave McWhorter credit for the amount of the dra ft. The Ci Hzehs' Bank recpiv pA thp dra7t7| but Crandall, its president, abou t th e time thp drafts wpre received, absconded. T he d rafts were not re- 14 Accord: Matteson v. Moulton, 11 Hun, 268 (1877), affirmed 79 N. T. 627 (1880); St. Louis & S. W. Ky. v. James, 78 Ark. 490, 95 S. W. 804 (1906); Westberg v. Chicago Lumber & Coal Co., 117 Wis. 589, 94 N. W. 572 (190S), semble. Contra: State Bank v. Weiss, 46 Misc. Eep. 93, 91 N. Y. Supp. 276 (1904) ; Wisner v. Bank, 220 Pa. 21, 68 Atl. 955, 17 L. B. A. (N. S.) 1266 (1908). In tie principal case, arguments of counsel are omitted. 230 FORM AND INCEPTION (Part 1 tu rned t o appellant, and what became of them doesjiot_app£aE from thej;ecordrTlii~appeilaj]Ijlajm ^ I'ln de r the law of. Nebraska -theae drafts must be deem ed to have been a ccepted by Grandall, and that his estate is hable for the amount of the same. ~ " ^ This claim of appeTIanFifljased^upon section 136 of what is known ;r«s-4he "Negotiable Instruments Law" of Nebraska. Comp. St. 1909, ^c. 41, art. 10. The section referred to reads as follows: "Where a drawee to whom a bill is delivered for acceptance destroys the same or refuses within twenty-four hours after such delivery or within such other period as the holder may allow to return the bill accepted or non- accepted to the holder, he will be deemed to have accepted the same." So far as the char actfr r>f tVip Hraftg arp concerned and their mod e and purpose of delivery to Crand all, the bur den of prog fjas-apoa-ap- pellant to show~that they wprpjipgnj-jphlp anri u-prp dpliverPr) tnJTrandall fo r'"a"ccep tance. We hndk unnecessary to determine whether, under the facts appearing in the record, there was a destruction of the drafts, or a refusal to return the same accepted or nonaccepted, by Crandall, within the meaning of section 136 hei^ein quoted, for the rea- son that we are of the opinion that appellant failed to sustain the burden of proof imposed upon it in showing that the drafts were ne- gotiable paper of the nature and kind that could be presented for ac- ceptance, or that they were actually delivered to Crandall for ac- ceptance. There were introduced in evidence, at the hearing before the referee, letters of transmittal which appellant claims were exactly similar to the letters used in transmitting the drafts in question to the Citizens' Bank. In these letters the following language is used : "We inclose the following for collection and returns in Omaha or Eastern exchange." On the deposit slip issued to McWhorter by appellant, when the former was credited with the amount of the drafts by the appellant, is the following statement: "For drafts and checks credited or taken as collections, this bank acts only as agent, and assumes no liability on them, nor on drafts in payment for them." The co nclusion is irresistible that the appella nt simply took the drafts for collecti on: that —the^ were sight drafts, and were delivered to Crandall_for_£ayment, and not fo r acceptanc e. Presentment for pay- ment and presentment tor acceptance are two different acts, well known to the law of negotiable instruments. Presentment for payment can- not be made until the instrument presented for payment is due. Pre- sentment for acceptance must be made before the instrument presented for acceptance is due. We do not think that the appellant has brought itself within said sec- tion 136, herein quoted, in the particulars specified, and therefore the decree appealed from must be affirmed. And it is so ordered. Hook, Circuit Judge, dissents. Ch. 2) ACCEPTANCB ^i^l BAILEY & CO. V. SOUTHWESTERN VENEER CO. et al. (Supreme Court of Arkansas, 1916. 126 Ark. 257, 190 S. W. 430.) Action by Bailey &.Co. against the Southwestern Veneer Company and another. From a j udgment for defendan ts and an order over- ruling a motion for a new trial, p laintiff appeals. Reversed, and re- manded for a new trial. I. W. Saxon was indebted to appellant in the sum of $84.96, and on the 22d day of March. 1915. s ^ave an order drawn on appellees for said sum in payment of said indebtedness. This o rder wa ^ iTn^npHiatpIv p resented to appellees for acceptance. They did not accept it in w rit- ing, b ut stated to t^" apppliant that thp order was all rig ht. Subse- quently thereto, and within a few days, t hey confirmed the oral acce pt- a nce of the order over telep hone. Later they re fused to pay' the order. On the 12th day of April thereatter ap pellant demanded a re- turn_of _the order. Appell ees stated that the order had been thrown in the, wastebasket and burned u p^ The return of the order was refused. The record fails to disclose why the order was thrown into the wastebasket and burned. No explanation appears in the record as to why appellees refused to pay it. The order was never paid by either I. W. Saxon or appellees. This cause was tried in the circuit court on appeal, and, after the evi- ^ dence was closed, the court gave the following peremptory instruction to the jury : "Gentlemen of the jury, under the law and testimony in this case, you are instructed to return a verdict for the defendant." Thereupon the jury returned in open court the following verdict: "We, the jury, find for the defendants. V. O. Richey, Foreman." Appellant filed its motion for a new trial, which was overruled. Judgment was rendered on the verdict, and this cause was brought here on appeal. Humphreys, J. (after stating the facts as above). Section 126 of Act 81 of the Acts of Arkansas 1913, known as the law of negotiable instruments, defines a bill of exchange : "An unconditional order in writing addressed by one person to another, signed by the person giv- ing it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer." So far as disclosed in this record, the order in question in form and substance conforms to this definition and is an inland bill nf pxch ancrp. By another section of the same act a written acceptance is necessary to bind the drawee. By still another section, i f the drawee destroys the hU\ ^hp will Up flppmpri tn }xavf arrpptpd th p^^atTTP Section l37, Act 81, Acts of Arkansas 1913. The evidence in this case is undisputed that appellees destroyed this bill and are silent as to why they did so. No excuse is rendered by them 232 FORM AND INCEPTION (Part 1 for not paying the order. Certainly i t is no t the privilege of a drawee to put th e holder to sleep by an oral acceptance, men afterwards to d e- strOVThej irder or bill of pxchajigp pnfl rpfusp ta pa y same without ren - dering anykind nr rhara rter nf p vplanat inn or py rn se. ' A n acciSenta l destruction of the bill could not amount to an accep t- aTTce^hiit a willful des triirtinn nf_the bill wo uld] Under all the cir- cumstances in this case, we are of the opinion that the Qu estion o f fact as to why the order was destroyed should have been submitted to the jury under proper instructions^ Throwing the order in the waste- 43asket and permittmg it to bum and refusing to pay it without ex- planation, after having orally accepted same, indicates a negligent and reckless manner of handling bills of exchange. If willful, then appel- lee herein became responsible. For this error this case must be reverse d, a nd remanded for a new trial: It is so ordered. Ch. 3) DELIVERY 233 CHAPTER III DELIVERY PERRY V. BIGELOW. (Supreme Judicial Court of Massachusetts, Worcester, 1880. 128 Mass. 129.) Contract on a promissory note for $5,000 signed by the defendant and indorsed by the payee. Trial in the superior court, before Dewey, J., who reported the case for the consideration of this court in sub- stance as follows: The defendant offered to show that, on January 11, 1877, the parties made an oral contract, by which the plaintiff was to let the defendant have $5,000 in money, less the interest for four months, and the defendant was to transfer to the plaintiff certain shares of the Scotia Lead Mining Company, and at the end of the four months the defendant was to have the right to have the stock back by paying the $6,000, and, if he did not do so, the plaintiff was to have the stock absolutely, and the defendant was not to pay the $5,000 ; that the par- ties were at the bankinghouse, of which the plaintiff was president, and he suggested that he would like to have it appear as a bank trans- action, and acdordingly went to the adjoining room, where was the cashier, and returned to the defendant with the note declared on; and that the same was then duly executed by the defendant and de- livered to the plaintiff, who paid him $5,000, less four months' dis- count. It was agreed that the note was made payable to the cashier for the accommodation of the plaintiff, and that neither the bank nor the cashier had any interest therein. The plaintiff contended that the above offer of proof was not com- petent. The judge so ruled; and directed a verdict for the plain- tiff.^ Ames, J. The defendant's written contract was a negotiable prom- issory note, requiring him to pay a certain sum of money at a definite time. The evidence which he sought to introduce was for the pur- pose of showing that this written contract was not the real contract between the parties; that the note was merely a memorandum; and that certain certificates of stock described in the note as collateral security should operate as payment of the note at its maturity, if it were not previously paid. This evidence could not be received with- out doing violence to the rule that oral evidence cannot be admitted 1 The statement of facts is abridged. 234 FORM AND INCEPTION (Part 1 to alter a written contract, or to annex to it a condition or defeasance not appearing in the contract itself. Adams v. Wilson, 12 Mete. 138, 45 Am. Dec. 240; St. Louis Ins. Co. v. Homer, 9 Mete. 39; Allen V. Furbish, 4 Gray, 504, 64 Am. Dec. 87. It is needless to multiply citations on so familiar a rule of evidence. Judgment on the verdict.^ McFARLAND v. SIKES. (Supreme Court of Errors of Connecticut, 1886. 54 Conn. 250, 7 Atl. 408, 1 Am. St. Rep. lU.) Park, C. J. This is a suit upon a note of $300. On the trial in the court below the defendant offered evidence to prove, and claimed to have proved, that previously to the execution and delivery of the note the plaintiff, who was a grand juror of the town of Ellington, where the defendant resided, and was acting as the attorney of one Mary Quinn, accused the defendant of having made an assault upon the person of the said Mary, and threatened him with a criminal prosecution unless he settled with her for the injury ; that the defend- ant thereupon admitted that he had done wrong in the matter, and offered $100 to settle it ; that the plaintiff demanded $300, which the defendant was unwilling to pay; that the defendant was without counsel, and asked to be allowed till the following Tuesday to consider the matter, and offered to give his note for $300, to "be held by the plaintiff till then, and, if he did not then appear, to be held by the - plaintiff as a settlement for the injury to the said Mary, but, if he should appear, to be returned to him to be canceled ; that thereupon the plaintiff wrote the note in suit, which the defendant executed and delivered to the plaintiff, to be held by him upon the conditions stated ; and that the defendant at the same time declared that he should ap- pear and demand a return of the note. The defendant also offered evidence that on the following Tuesday he appeared before the par- ties and demanded the return of the note, but that the plaintiff refused to surrender it. With reference to this evidence the defendant requested the court to charge the jury "that if the note was delivered to the plaintiff with the understanding between him and the defendant that it was to be delivered up to the latter on his demand on the Tuesday following, and the defendant demanded its return on that day, the plaintiff can- not recover, and the verdict must be for the defendant." The court did not so charge the jury, but substantially that if they should find 2 See Norman v. Norman, 11 Ind. 283 (1858), where the defendant pleaded as an equitable defense that the note was intended as a memorandum only. Ch. 3) DELIVERY 23.J all the facts claimed by the defendant to be proved they did not con- stitute a defense to the action. We think the. court erred in refusing to charge as requested, and in charging as it did. The error was in applying to the case the famil- iar and well-established rule that parol evidence is inadmissible to contradict or vary a written contract. A written contract must be in force as a binding obligation to make it subject to this rule. Such a contract cannot become a binding obHgation until it has been delivered. Its delivery may be absolute or conditional. If the latter, then it does not become a binding obligation until the condition upon which its delivery depends has been fulfilled. If the payee of a note has it in his possession that fact would be prima facie evidence that it had been delivered ; but it would be only prima facie evidence. The fact could be shown to be otherwise, and by parol evidence. Such parol evidence does not contradict the note or seek to vary its terms. It merely goes to the point of its nondelivery. The note in its terms is precisely what both the maker and the payee intended it to be. No one desires to vary its terms or to contradict them. In the case of Benton v. Martin, 53 N. Y. 570, the court say: "In- struments not under seal may be delivered to the one to whom upon their face they are made payable, or who by their terms is entitled to some interest or benefit under them, upon conditions the observance of which is essential to their validity. And the annexation of such conditions to the delivery is not an oral contradiction of the written obligation, though negotiable, as between the pa'rties, to it or others having notice. It needs a delivery to make the obligation operative at all, and the effect of the delivery and the extent of the operation of the instrument may be limited by the conditions with which the de- livery is made." In the case of Schindler v. Muhlheiser, 45 Conn. 153, the headnote is as follows : "The defendant had given the plaintiff his note for cer- tain real estate conveyed to him by an absolute deed by the plaintiff. Held, in a suit on the note, that parol evidence was admissible, on the part of the defendant, to show that the conveyance was not in- tended as a sale, but was made by the plaintiff for a certain purpose of his own and upon an understanding with the defendant that the land was afterwards to be conveyed back, and that the note was given at the time under an agreement that it was not to be paid." The de- fense in that case was really that the note had never been delivered as a note, binding upon the defendant. The delivery was merely formal, and was so understood by the parties. See, also, Adams v. Gray, 8 Conn. 11, 30 Am. Dec. 83; Collins v. Tillou, 36 Conn. 3G8, 68 Am. Dec. 398; Clarke v. Tappin, 33 Conn. 56; Post V. Gilbert, '44 Conn. 9; Hubbard v. Ensign, 46 Conn. 585. We think the court erred in refusing to charge the jury as requested by the defendant. 236 FORM AND INCEPTION (Part 1 The view we have taken of this question renders it unnecessary to consider the other questions made in the case. There is error in the judgment appealed from; and it is reversed, and a new trial ordered. NEW LONDON CREDIT SYNDICATE, Limited, v. NEALE. (Court of Appeal, [1898]. 2 Q. B. 487.) Appeal of plaintiffs from the judgment of Darling, J., at the trial before him without a jury. The action was upon a bill of exchange for £110. payable three months after date by indorsees against acceptor, the bill having been indorsed to the plaintiffs by the drawers to whose order it was made payable. The acceptance had been given to the drawers by the de- fendant, who was the chairman of and interested in a company, in settlement of an action brought by them against the company. The defense set up was that, at the time when the bill was accepted, it was orally agreed between the drawers and the defendant that, if the latter could not meet it at maturity, the drawers would renew it. It was admitted by the plaintiffs, who had given value for the bill, that they had notice of the circumstances under which the bill was ac- cepted, and that they consequently could not claim to stand in a better position than the drawers ; but they contended that what took place between the drawers and the acceptor did not amount to a contract to renew the bill, and that, if it did, evidence of such an oral agreement was not admissible to vary the effect of the written instrument. The learned judge held that the evidence showed that the negotiation of the bill by the drawers was in breach of good faith, and consequently the plaintiffs' title to the bill was defective, and they could not main- tain the action. He therefore gave judgment for the defendant.* A. L- Smith, L. J. This is an action upon a bill of exchange by indorsees against acceptor, but it really may be treated as if it were an action by the drawers ; for it is admitted that the indorsees stand in no better position than the drawers, as they had notice of the facts upon which the defendant relies. I do not disagree with the learned judge, upon the conflicting evidence with regard to the conversation that took place between the drawers of the bill and the defendant, that there was an agreement by the former that they would not part with the bill, and would renew it, if the defendant was not in a position to sArgumencs of counsel are omitted. Ch. 3) DELIVERY 237 pay it at maturity. The question is whether that evidence was ad- missible. The bill is a written instrument by which the defendant undertakes to pay £110. at the end of three months. It has been held, over and over again, that evidence of a contemporaneous oral agree- ment is not admissible to vary the effect of such an instrument. If the evidence be to the effect that the document is only delivered as an escrow, or that it is not to take effect as a contract until some condi- tion is fulfilled, it is admissible. But that is not this case. This docu- ment was signed and handed over as a bill of exchange, but there was an oral agreement that at maturity it should be renewed, if the defend- ant required it. In other words, although the written document states that the bill is to be met upon a day certain, the parol evidence is that it is not to be then met. Nothing is more clearly settled than that evi- dence of such an agreement is not admissible. In Abrey v. Crux, L. R. 5 C. P. 37, Willes, J., stated that to be the law as established by the cases of Hoare v. Graham (1811) 3 Camp. 57, and Young v. Aus- ten, L. R. 4 C. P. 553. It was argued by the defendant's counsel that the law as laid down in those cases is altered by the Bills of Exchange Act, 1882. I do not think that it was intended by that act to alter the general law of evidence which renders parol evidence inadmissible for the purpose of contradicting the terms of a written document. The defendant's counsel relied on the terms of section 21, subsec. 2, and section 29, subsecs. 1, 2, of the Bills of Exchange Act, 1882.* He urged that the plaintiffs had notice of a defect in the title of the drawers, because they knew that the bill was negotiated in breach of faith. But, assuming that section 29 has any application to such a case as this, the only way in which a breach of faith could be shown in. this case is by showing a breach ofthe contemporaneous oral agree- ment, and by the rules of evidence that is inadmissible. For these reasons I am of opinion that the appeal must be allowed and judg- ment entered for the plaintiffs. RiGBY, L- J. I am of the same opinion. It is a wholesome rule of law that, when parties have put an agreement into writing, parol evi- dence is not admissible to contradict or vary the terms of the written agreement. There are certain cases which may conveniently be called "escrow" cases where the question is whether the written agreement has ever become an effective agreement, or whether it was only to have effect as an agreement upon some condition being fulfilled which has not been fulfilled. This is not a case of that kind. Vaughan Wii,liams, L. J- I agree. For lawyers practicing under the old system of pleading there was a convenient test in these cases as to whether the oral evidence which it was sought to give was ad- missible. If the evidence were such as would support a plea of the general issue in an action of conti-act, like non est factum, that is to * The corresponding sections of the N. L L. are sections 16 and 52. 238 FOEM AND INCEPTION (Part 1 say, if it amounted to showing that, though the defendant signed the instrument, he signed it on the understanding that it should not be an effective instrument until some condition was fulfilled, then it was admissible. Appeal allowed." STOREY V. STOREY. (United States Circuit Court of Appeals, Seventh Circuit, 1914. 214 Fed. 973, 131 C. C. A. 269.) Action by William Storey against Carroll E. Storey. Judgment for plaintiff, and defendant brings error. Reversed and remanded, with directions. Baker, Circuit Judge. Defendant in error, plaintiff below, ah leged that he was the owner and holder of 22 promissory notes, past due and unpaid, executed by defendant. Defendant answered, in substance, that he is a son of plaintiff ; that in 1900 at his father's home in Ohio they entered into an agreement that his father should give him a medical education by making from time to time as requested gifts of money as advancements in anticipa- tion of his share of his father's estate and that upon receiving the ad- vancements he should give into the possession of his father papers in the form of promissory notes for the special and sole purpose of evidencing the amount of the advancements, and that his father should receive and hold and use the papers only as such evidence; that from time to time sums of money were given by his father and accepted by him as advancements and not otherwise; and that he gave and his father received the manual possession of the papers, sued on as prom- issory notes, for the purpose of evidencing the amount of said ad- vancements and not otherwise. Plaintiff's demurrer to this answer was sustained, and judgment for $3,520 followed. Judgment was rendered by applying to the admitted facts the rule that parol evidence is inadmissible in an action at law to contradict the terms of promissory notes as written contracts of debt. As the parol evidence rule is indisputable, the error was in the application. And probably nowhere is the basis of the error more clearly and sim- ply stated than in Pym v. Campbell, 6 El. & Bl. 370 : "The distinction in point of law is that evidence to vary the terms of an agreement in writing is not admissible, but evidence to show that there is not an agreement at all is admissible." Delivery is an act. Whether the act has been accomplished cannot be told by reading the paper. Therefore, when a declaration on a written 6 Compare Hall v. Bank, 173 Mass. V\. .53 N. E. ITA. 44 L. R. A. 319. 73 Am. St. T:ep. 2", (1899), wliere under facts similar to tliose in tlie principal case the defendant filed a bill for specitic performance of the parol agree- ment. Ch. 3) DELIVERY 239 contract is met by a, plea of no contract, the application of the rule against .varying the terms of a written contract by parol to the inquiry whetlier there is a contract, is a plain begging of the question, is a tour de force assumption of the very issue to be solved. Delivery is a composite act. . There must be both a manual transfer, actual or constructive, and an operation of minds intending to enter into the contract. In the ages-old strife for predominance between objective or external and subjective or internal measurements of con- duct, evolution has been away from symbolism toward the inner truth. And in the law of commercial paper, between the original par- ties, the animus contrahendi has become the predominant element. This is shown by a provision of the Uniform Negotiable Instruments Act, which has been adopted in nearly all of the states. Section 16 of that act, in force in Ohio since January 1, 1903 (Ohio Code, §' 8121), reads as follows : "Every contract on a negotiable in- strument is incomplete and revokable until delivery of the instrument for the purpose of giving effect to it. As between immediate parties, and as regards a remote party, other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of a party making, drawing, accepting, or indorsing, as the case may be. In such case,- the delivery may be shown to have been conditional, or for a special purpose, and not for the purpose of trans- ferring the property in the instrument. But when the instrument is in the hands of a holder in due course, a valid delivery of it by all parties prior to him, so as to make them liable to him, is conclusively pre- sumed." Plaintiff by his demurrer admits that in truth the pretended notes are "incomplete" because there was no "delivery for the purpose of giving effect" to them as contracts of debt, and because the manual transfer was "for a special purpose and not for the purpose of trans-' f erring the property in the instruments." Several of the papers were signed and manually transferred prior to January 1, 1903. But we apply the same rule to them all, for in our opinion section 16 of the Negotiable Instruments Act is merely a codification of the general law in that respect as established by pre- ponderant and sound authority." * * * Many of the foregoing authorities have to do with other purported written contracts than promissory notes; but, inasmuch as we believe that the rules peculiar to commercial paper are concerned, only with the travel of negotiable instruments, along the ways of commerce as "couriers without luggage," we conclude that all the cases are applica- ble between the original parties in support of the plea of no contract when alleged promissory notes are counted on, as fully as when other forms of contract are involved. Plaintiff argues that, because the answer discloses that the papers 8 The authorities cited are omitted. 240 FORM AND INCEPTION (Part 1 in the form of promissory notes were to have some effect, the notes must be given effect according to their terms. T^hat assumes that the purported notes are in fact notes, arid is merely another way of beg- ging the same question. The answer shows that the papers were passed with' the mutual intent and for the sole j)urpose of being held as evi- dence of the amounts of advancements. Receipts are not contracts. While plaintiff ultimately concedes that there may be cases where the truth respecting delivery of a purported written contract may properly be discovered by parol evidence, the contention is made that this is permissible only where the manual transfer was on condition that the writing should become effective on the happening of some event. And Burke v. Dulaney, 153 U. S. 228, 14 Sup. Ct. 816, 38 L. Ed. 698, is instanced as of that class. But in Michels v. Olmstead, 157 U. S. 198, IS Sup. Ct. 580, 39 L. Ed. 671, the paper of Olmstead alone was signed by him and manually transferred on condition "th^it in no event should the (alleged) contract bind Olmstead individually." A plea of no contract is a negative defense. It is not necessary for the defender to show affirmatively what was the purpose of the manual transfer, except possibly as corroborative evidence of the primary condition that the transfer was "not for the purpose of transferring the property in the instrument." That primary condition of want of intent to make a contract in presenti deprives the physical possession of the paper of its prima facie force as evidence of a legal delivery. If there is a secondary condition on the performance of which the writing is to become a contract, that fact is immaterial, except as it might obviate the effect of the primary condition, for the reason that the holder would then be relying on something more than the initial possession and its prima facie consequences. His rights, if any ever accrued, would date and flow from the subsequent transaction. The only way to escape the universality of the right between the original parties to establish by parol the facts respecting legal delivery, is, as was suggested in Burke V. Delaney, supra, to hold : "That the mere possession of a written in- strument, in form a promissory note, by the person named in it as payee, is conclusive of his right to hpld it as the absolute obligation of the maker." This matter of advancements, in which papers in the form of prom- issory notes were given and received merely to evidence the amounts, is not new. In every such case the primary condition was that the papers were never to come into existence as' contracts of debt. And there was no secondary condition through which they could ever have life. Peabody v. Peabody, 59 Ind. 556; Harris v. Harris, 69 Ind. 181 ; Bragg v. Stanford, 82 Ind. 234; Buscher v. Knapp, 107 Ind. 340, 8 N. E. 263; Brook v. Latimer, 44 Kan. 431, 24 Pac. 946, 11 L. R. A. 805, 21 Am. St. Rep. 292 ; Hicks v. Hicks, 29 Ohio Cir. Ct. R. 628, affirmed without opinion in 76 Ohio St. 575, 81 N. E. 1187; Garner v. Taylor (Tenn.) 58 S. W. 758. In Weaver v. Fries, 85 111. 356, and Ch. 3) DELIVERY 241 Schmidt V. Schmidt's Estate, 123 Wis. 295, 101 N. W. 678, a contrary result was reached by assuming the point at issue, namely, legal de- livery, and then saying that the written contracts could not be con- tradicted by parol. These advancement cases are merely instances of the general rule. While the rule, as a rule, is the same between father and son as between strangers, the application of it ought to be much easier for the triers of fact and for the court in instructing them. Transfers of money from father to minor son cannot create debts. Transfers from father to adult son may; but only by an express agreement to that effect. Presumptively such transfers are irrevocable gifts, either never to be accounted for or only as advancements. So when a father sues his son on an alleged promissory note, and the son denies the delivery of the paper as a binding obligation, proof or an admission by the son that on the date of the paper the father turned over to the son a sum of money equal to that named in the paper raises no inference of an in- tent to create the relationship of debtor and creditor. In this case the facts pleaded in the answer constitute a defense of no contract. Three aspects are apparent, but they all merge into the one defense. No contract, because no legal delivery. Nothing but a nudum pactum, because an irrevocable gift cannot, by a one-sided intent and act, be converted into the consideration for a contract of debt. And if plaintiff's original intent is to be gauged by his present attitude, even the physical possession of the paper was obtained by fraudulent representations. The judgment is reversed for further proceedings consentaneous to this opinion. Seaman, Circuit Judge. I concur in the conclusion for reversal, but would rest the decision upon these grounds : First, that the Ohio statute, referred to is controlling as to all the notes issued thereunder and authorizes the defense set up by the defendant; second, that the decisions in Burke v. Dulaney and Michels v. Olmstead, supra, are applicable to sanction the defense in respect of the notes in suit issued prior to January 1, .1903, and require like ruling in the case at bar. SM.& M.B.& N. (2d Ed.)— 16 242 FORM AND INCEPTION (Part 1 "' FEARING V. CLARK. (Supreme Judicial Court of Massachusetts, Hampden, 1860. 16 Gray, 74, 77 Am. Dec. 394.) Action of contract on a promissory note for $600, made by the de- fendant, dated July 4,"l"?57,~and'^yable iifone yeax after date to the order of one Joseph Lambrite, and by him indorsed. The defen dant irr his "ariswef~3eiTiartfie makmg and indorsement of the note declareH on, but a dmitted that he" sign ed such a not e, and avprre d that he p ut it int o the hands of third parties to be delivered toXambrite , nn.thp happening_ nf Qpntirif yeiicies which never diij happen , and that neither the defendant nor those parties, nor any one else, by his authority or consent, ever delivered the writing to Lambrite or to any other person as the defendant's promissory note. At the trial in the superior court, the plaintiff proved the signatures of the maker and indorser; and there was evidence that, on the 6th of July, 1857, the note was in Lambert's possession, and was indorsed and delivered by him to the plaintiff as collateral security for the pay- ment in six months of $2,000, of which $900 was still due from Lam- brite to the plaintiff at the time of the trial, and that the plaintiff took the note without any knowledge of the circumstances under which it had been given. Rockwell, J., allowed the defendant to introduce evidence of the facts alleged in his answer, against the objection of the plaintiff that they would constitute no defense to the-action unless proved to have been known to the plaintiff when he took the note, and instructed the jury "that if they should find that the writing copied in the declaration was never delivered by the defendant, or any person authorized by him so to deliver it, to the payee, or to any person for his use, but that he obtained possession of it without the assent or knowledge of or au- thority from the defendant, and, having obtained such possession with- out right or authority, put his name upon the back of it, and delivered it to the plaintiff, then and in that case it never became the negotiable note of the defendant, and the defendant was entitled to their verdict." The jury returned a verdict for the defendant, and the plaintiff al- leged exceptions. BiGELOW, C. J. The de fendant proved jnofacts at the trial whi ch constitiite^rft-yali d defense J:o the note dprlarpd nn as ao jjngttl TP_^ain- tif L who is a bona fi de holder for value without notice. The rule is well settled that, when a fl ote-i»- teajisfprrprL.by-a-par^ to wh om it is i ntrusted without authority of fraud ulently, it will be valid a s against the maker j nj hp hands nf. a~HoIder who takes it bona fid e witllout no - tice" Q± thesppriaLd rcumst ances under which the note came into the possession of the payee or'agSftt of the maker who puts it in circula- tion. In such case, tli^makgf orjuiiorser who places it in the hands Ch. 3) DELIVBEY 243 o f another, for the purpose of hping hspH | n a particular w ay or for a special object, t akes the t'"''''' "^ ^^"^ hpjng ii<;pr1 in a different way, and cannot refuse to pay it to any bona fide holder into whose hands it may come. Chit. Bills (10th Ed.) 198; Sweetser v. French, 2 Cush. 309, 48 Am. Dec. 666. It is undoubtedly true that, as between the ori ginal p arties to a note or those who take it' with notice, it i ^ p'^'^pntial thai- th ere should have been a delivery of the note by the maker to take ef- fect as a contra rt In this sense, delivery is included in the allegation of making. But the rule is qualified and limited as between the maker and a bona fide holder. In such case, a valid delivery can be made by any person to whom the maker has given the note in such form as to enable him to hold himself out as absolute owner of the note. The case of Putnam y. Sullivan, 4 Mass. 45, 3 Am. Dec. 206, is a strong one on this point. There the notes were delivered to a clerk to be used for special purposes only, and it was held that a delivery by the clerk, whether through deception practiced on him, or by a voluntary viola- tion of the. trust reposed in him, must be deemed in law, as against a bona fide holder, a delivery by those who were liable on the notes. T he rulejs different in regard to a deed, bond, or ot tirr in-tnimrnt pl aced in the hands of a third person as an escrow , to be delivered on the happening of a future event or contingency. In that case, no title or int(erest passes until a delivery is made in pursuance of the terms and conditions upon which it was placed in the hands of the party to whom it was intrusted. But the law aims to secure the free and iinrrrtrninrd c irculation of neffltiable pap er, and to protect the rights of- pers ons ta king it bon a fide without notice. It therefore makes the consequen- ces, which tollow Ifom the negotiation of promissory notes and bills of exchange through the fraud, deception, or mistake of those persons to whom they are intrusted by the makers to fall on those who enabled them to hold themselves out as owners of the paper jure dispondendi, and not on innocent holders who have taken it for value without no- tice. Exceptions sustained.^ T Contra: Chipman v. Tucker, 38 Wis. 43, 20 Am. Rep. 1 (1875). Ac- cord: Borough of Montvale v. Bank, 74 N. J. Law, 464, 67 Atl. 67 (1907), an action of replevin brought by the borough to recover two of its nego- tiable bonds, which after their authorization and formal completion were left In the custody of the mayor until the further order of the borough, and were by him negotiated to the plaintiff who took as a holder in due course. Gummere, C. J., said: "Applying to the borough the conclusive presump- tion -which this last-cited section (15) of the statute prescribed for the pro- tection of a holder in due course, it must be held to have made a valid de- livery of these bonds, so far as the defendant bank is concerned, and the latter is therefore entitled to retain possession of them as outstanding obli- gations of the municipality. Our determination that the negotiable instru- ments act applies to municipal bonds, as well as to bills of exchange, prom- issory notes, and checks, makes unnecessary a- consideration of the interesting question argued by counsel of the respective rights of the plaintiff and de- fendant under the law merchant as it existed prior to the enactment of that statute." 244 rOBM AND INCEPTION BURSON V. HUNTINGTON. (Part 1 (Supreme Court of Michigan, 1870. 21 Mich. 415, 4 Am. Rep. 497.) This cause was brought into the circuit court for the county of Kal- amazoo by appeal from the judgment of a justice of the peace, in an action in which Walter S. Huntington was plaintiff and John W. Bur- son defendant. The justice's transcript states that the plaintiff declar- ed verball_Y .r>n tVip rnmri'"''P coun ts in assum psit and upon a prom issory nntg, whjrh was filed at the time of declaring, and of whichthe follow- ing is a copy, viz. : / "Schoolcraft, Mich., April 12, 1866. "Ninety days from date, for value received, I promise to pay A. N. Goldwood, or order, one hundred and twelve dollars, and fifty cents, with interest. John W. Burson." Indorsed on the back : "A. N. Goldwood." The d£fendant_filed an affidavit_ denying the del iv ery of the not e. Jud gment for plaintiff an il the defend ant appealed. ^ Christiancy, J. * * * But this~no g~"W'g:B ~ i ndorsed bv Gold- wood, the payee, to the plaintiff, before maturity, for a val uable con- sideration, aridj3S_£laintiff_^laim^^ of a want or~3eliver y nr nf rnngiHoritinn^ nr any Other circumstances tending to invalidate it in the hands of Goldwood; and his evidence tended to show this, though there was evidence of some circumstances tending to show that he had notice of the circumstances under which the paper had been obtained. There was also evidenc£_Qn_the__B_ art of the defenda nt, strongly tend- ing to show : That the notejieyer was delivered_by_Jhe_def«i4ant, but that GoldwoodTTo'^fEose^order it was drawn, "was endeavoring to sell to the defendant a patent right or the right of certain territory under it, and that the parties had so far progressed towards the making of an arrangement to this end, that it wasu nderstood and -yej:ball.v- agreed tha t Gn l dwo od-^was-tD give'iTrrrh-an3iS3lQL£ertaitlU£aitoryj u^^ de- f endant'.s ^xf nifi"r to -him. a _ note for the amo unt, with some "other person signing it as surety. That the parties being in the defendant's house, and defendant's sister being present, Goldwood wrote this note, and defendant signed it; but as a surety wa s to be obtained, he laid t he note on the table and went out to fin d his uncle foFthaF purpose, tellingl;>o ldw_OQd^as he went out, not loToucE lt tilLJhfi,. came back; but that while defendant '^Rfi g""*^ Geldwooxj-Ejc ked up the paper and started out_dQQrs with it. That deferidantVsistei'-tfaea-teli-Bfn tbjetTEiln ote be on th e_table tilLdefen dant should corn eback, to which Goldw ood replied he w as_going to have the note, and_went_off with it, withou£^iving_a£i^_deed of territory or anyt'hmg^lse for it.~Thatlhe 8 The statement of facts is abridged, and the arguments of counsel and part of the opinion are omitted. Ch. 3) DELIVERY 245 note, at this time, was not stamped, and defendant never stamped or authorized it to be stamped; that some four days after, Goldwood wrote to defendant requesting him to come immediately to Kalamazoo "and sign stamp on the note," and saying if defendant was not there by Tuesday evening "I shall consider that you refuse your signature, and shall act accordingly." The evidence also tended to show that defendant called upon Goldwood .about that time, while the latter had the note, and demanded it, accusing him of stealing it, to which Gold- wood replied, "Never mind, we can fix that up," and said he was ready to do as he had agreed, and wanted defendant to get another signer, and he would give him a deed of territory ; but defendant said- he did not want the deed, but wanted the note. OnldwnnH refi Tserl to r e- t urn the note, or to gg ye a deed till he got another signe r. "^T hese facts, if foun5~by the jury", would show, j int only thnt tlr * n ote was never dehver ed to the paye e, andjhat_it tViprpfnrp nevt^ r bad a legal evist-pnrp as p note between the original parties, but that there was yet no completed or binding agreerrient of any kind, and was not to be until defendant should chpose to get a surety on the note, and the payee should give him a deed of territory. Until thus completed, the defeifdant had a right to retract. As a general rule, a negotiable promissory note, like any other writ- ten contract, has no legal inception or valid existence, as such, until it has- been delivered in accordance with the purjxjse and intent of the parties. See Edwards on B. and N. 175, ajid authorities cited, and 1 Pars, on B. and N., 48 and 49, and cases cited. And see Thomas V. Watkins, 16 Wis. 549; Mahon v. Sawyer, 18 Ind. 73; Carter v. McClintock, 29 Mo. 464. Delivery is an essential part of the making or execution of the note, and it takes effect only from delivery (for most purposes) ; and if this be subsequent to the date, it takes effect from the delivery and not from the date. 1 Pars, ubi supra. This is certainly true as between the original parties. But n£gotiahle.Ba2er_differs from ord inary written contracts in th is respect: That "^^ " wK>"g:^'"l liQld er, be t ween whom and the make r cffjndoiseiLthenote or indors ement wQ" 1'^""-t bV vaiiri^ may yt.Jl^''- fe r to an innoce nT^arty, who takes it in good faith, without notice ^ nr] fr.r v alue, a""goocl tJllK ati ggajnst the maker o r inf1n|-«!Pi-_^ And the question in the present case is, how far this principle will dispens e with delivery by the mak er. ~ ■ "When a note payaoie to bearer, which has once become operative by delivery, has been lost or stolen from the owner, and has subse- quently come to the hands of a bona fide holder for value, the latter may recover against the maker, and all indorsers on the paper when in the hands of the loser ; and the loser must sustain the loss. In such a case there was a complete legal instrument. The maker is clearly lia- ble to pay it to some one ; and the question is only to whom. 246 FORM AND INCEPTION (Part 1 But in the case before us, where t he, note had never -been deln;.ei£.d, and therefnrpliadjTfTjePial inception nr p.yistpnrp a'i a nntfi. the ques- ti ori"^s~wTTeOTeriie~is Jiahk-ta- pay at a iU , p\rt='n to a n - i -H-aofi e n t ho ld e r _ fgE. valu e. The wrongful act of a thief or a trespasser may deprive the holder of his property in a note which has once become a note, or property, by delivery, and m^y transfer the title to an innocent purchaser for val- ue. But a note in the hands of the maker before dehvery is not prop- erty, nor the subject of ownership, as such; it is, in law, but a blank piece of paper. - Can the theft or wrongful seizure of this paper create a valid contract on the part of the maker against his will, where none existed before? There is no principle of the law of contracts upon which this can be done, unless the facts of the case are such that, in justice and fairness, as between the maker and the innocent holder, the maker ought to be estopped to deny the making and delivery of the note. But it2 s_ureed that t his casejalls :mthi n_the ge neral principle, which has become a maxim _o£la^w^JJTat_ when one of two mn flcenL-Persons m ust suffer by the a cts of a third, h e who has ena bled such third per- son (rwTnragi nn thp In':';, miigt sustain \ t This is a principle ot rffihi- fest justice when confined within its proper limits. But the principle, as a rule, has many exceptions ; and the point of difficulty in its ap- plication consists in determining what acts or conduct of the party sought to be charged, can properly be said to have "enabled the third person to occasion the loss," within the meaning of the rule. If I leave my horse in the stable, or in the pasture, I cannot properly be said to have enabled the thief to steal him, within the meaning of this rule, because he found it possi-ble to steal him from that particular locality. And upon examination it will be found that thi s rule or maxim is main- ly confiii£d~tQ_ cases where the party who_is_jnadeJto[^uttefI2ie_16ss ha s reposed a confadence in rti e jhird pers onwhosg jcts havej Tccasinn- edjthfijQss, or in some other intermediate person whose acts or negli- g-ence have enabled such third person to occasion the loss, and that the party has been held responsible for the acts of those in whom he had trusted upon grounds analogous to those which govern the rela- tion of principal and agent; that the party thus reposing confidence in another with respect to transactions, by which the rights of others may be affected, has, as to the persons to be thus affected, constituted the third person his agent in some sense, and having held him out as such, or trusted him with papers or indicia of ownership which have enabled him to appear to others as principal, as owner, or as possessed of certain powers, the person reposing this confidence is, as to those who have been deceived into parting with property or incurring obli- gations on the faith of such appearances, to be held to the same extent as if the fact had accorded with such appearances. Ch. 3) DELIVERY 247 Hence, to confine ourselves to the question of delivery, the authori- ties in referwice to lost or stolen nrotes which have become operative by delivery have no bearing upon the question. If the maker or indors- er, before delivery to the payee, leave the note in the hands of a third person as an escrow, to be delivered upon certain conditions only, or voluntarily deliver it to the payee, or (if payable to bearer) to any oth- er person for a special purpose only, as to be taken to or discounted by a particular bank, or to be carried to any particular place or person, or to be used only in a certain way, or upon certain conditions not ap- parent upon the face of the paper, and the person to whom it is thus intrusted violate the confidence reposed in him, and put the note into circulation, this, though not a valid delivery as to the original parties, must, as between a bona fide holder for value, and the jnaker or in- dorser, be treated as a delivery, rendering the note or indorsement valid in the hands of such bona fide holder; or if the note be sent by mail, and get into the wrong hands, as the party intended to deliver to some one, and selects his own mode of delivery, he must be responsi- ble for the result. These principles are too well settled to call for the citation of authorities, and manifestly it will make no difference in this respect, if the note or indorsement were signed in blank, if the maker or indorser part with the possession, or authorize a clerk or agent to do so, and it is done. 1 Parsons on Bills and Notes, 109 to 114, and cases cited, especially Putnam v. Sullivan, 4 Mass. 45, 3 Am. Dec. 306, which was decided expressly upon the ground of the con- fidence reposed in the third person, as to the filling up, and in the clerks as to the delivery. And when the maker or indorser has himself been deceived by the fraudulent acts or representations of the payee or others, and there- by induced to deliver or part with the note or indorsement, and the same is thus fraudulently obtained from him, he must, doubtless, as between him and an innocent holder for value, bear the consequences of his own credulity and want of caution. He has placed a confidence in another, and by putting the papers into his hands has enabled him to appear as the owner, and to deceive others. Cases of this kind are numerous ; but they have no bearing upon the wrongful taking from the maker, when he never voluntarily parted with the instrument. Much confusion, however, has arisen from the general language used in the books, and sometimes by judges, in reference to cases where the maker has 'voluntarily parted with the possession, though induced to do so by fraud, when it is laid down as a general rule, that it is no defense for a maker, as against a bona fide holder, to show that the note was wrongfully or fraudulently obtained, without attempting to distinguish between cases where the maker has actually and voluntari- ly parted with the possession of the note, and those where he has not. We do not assert that the general rule we are discussing— that 248 FORM AND INCEPTION (Part 1 "where one of two innocent parties must suffer," etc. — ^must be con- fined exclusively to cases wherte a confidence has been placed in some other person (in reference to delivery) and abused. There may be cases where the culpable negligence or recklessness of the maker in allow- ing an undelivered note to get into circulation, might justly estop him from setting up nondelivery; as if he were knowingly to throw it into the street, or otherwise leave it accessible to the public, with no per- son present to guard against its abduction under circumstances when he might reasonably apprehend that it would be likely to be taken. Upon this principle the case of Ingham v. Primrose, 7 C. B. (N. S.) 82, was decided, where the acceptor tore the bill into halves (with the intention of canceling it) and threw it into the street, and the drawer picked them up in his presence, and afterwards pasted the two pieces together and put them into circulation. See, also, by analogy, Foster V. Mackinnon, Law Rep. 4 Com. B. 704. X — But the case before us is one of a very different character. No ac- tual deliverv bv the maker to anv one for_a nv purpose. The evidence tends to show that when he left the room in his own house, the note being on the table, and his sister remaining there, he did not confide it to t he custody of the payee, but told him not to tak e it; and nu finj t'Sgreement between them had yet been made, and no consideration given. Under such circumstances he can no more be said to have trusted it to the payee's custody or confidence than that he trusted his spoons or other household goods to his custody or con- fidence ; and there was no more apparent reason to suppose he would take and carry off the one than the other. Thp rnakpTjjJTPrpfnre, ranp"'' ^^ '^"H fps ponsible for any negligence . There was nothing to prove negligence, unless he was bound to sus- pect, and treat as a knave, a thief, or a criminal, the man who came to his house apparently on business, because he afterwards proved him- self to be such. This, we think, would be preposterous. We. therefore, s e e no gro und iipo" atlucb the HpfpnHant could_ be hfHJinblp n n n i n n lMlnri nht nT nr i. PYfn to a bnnn fi d e hnlHpr fnr vah ip He was guilty of no more negligence than the plaintiff who took the paper, and the plaintiff shows no rights or equities superior to those of the defendant. Such, we think, must be the result upon principle. We have care- fully examined the cases, English and American, and are satisfied there is no adjudged case in the English courts, so far as their reports have reached us, which would warrant a recovery in the present case. Some dicta may be found, the general language of which might sustain the liability of the maker, such as that of Baron Alderson in Marston v, Allen, 8 M. & W. 494, cited by Duer, J., in Gould v. Segee, 5 Duer (N. Y.) 260, and that used by Williams, J., in Ingham v. Primrose, 7 C. B. (N. S.) 82. But a reference to the cases will show that no such question was involved, and that these remarks were wholly outside of the case. Ch. 3) DELIVERY 249 ■ On the other hand, Hall v. Wilson, 16 Barb. (N. Y.) 548, 555, and 556, contains a dictum fully sustaining the views we have taken. There are, however, two recent American cases, where the note or indorsement was obtained without delivery, under circumstances quite as wrongful as those in the present case, in one of which the maker, and in the other the indorser, was held Uable to a bona fide holder for value: Shipley v. Carroll et al., 45 111. 285 (case of maker), and Gould V. Segee, 5 Duer (N. Y.) 266. But in neither of these cases can we discover that the court discussed or consi^lered the real principle in- volved; and we have been unable to discover anything in the cases cited by the court to warrant the decision. It is possible that the case in Illinois may depend somewhat upon their statute, and the note being made as a mere matter of amusement, and the making not being justi- fied by any legitimate pending business, the maker might perhaps just- ly be held responsible for a higher degree of diligence, and therefore more justly chargeable with negligence under the particular circum- stances, than the maker in the present case. There is another case (Worcester Co. Bank v. Dorchester '& Milton Bank, 10 Cush. [Mass.] 488, 57 Am. Dec. 130), where bank bills were stolen from the vault of the bank, which though signed and ready for use, had never been yet issued, and on which a bona fide holder for value was held entitled to recover. This, we are inclined to think, was correct. The court intimated a doubt whether the same rule should apply to bank bills as to ordinary promissory notes, and as to the lat- ter, failed to make any distinction between the question of delivery and questions affecting the rights of the parties upon notes which have be- come effectual by delivery. But we think bank bills which circulate universally as cash, passing from hand to hand perhaps a hundred times a day, without such inquiries as are usual in the cases of ordinary promissory notes of individuals, stand upon quite different grounds. And, considering the temptations to burglars and robbers, where large masses of bank bills are known to be kept, and the much greater facili- ty of passing them off to innocent parties, without detection or -identi- fication of the bills or the parties, and that the special business of banks is dealing in, and holding the custody of, money and bank bills, it is not unreasonable to hold them to a much higher degree of care, and to make them absolutely responsible for their safe-keeping. We do not therefore regard this case as having any material bearing upon the case before us. * * ' Judgment reversed. CLARKE v. JOHNSON. (Supreme Court of Illinois, 1870. 54 III. 296.) Walker, J. This was an arf\DVi-p,4-»if^mfi^it nn t prnmiRspryjTntp execute d_bv defendant to one Bus h, on the 28th of October, 1869, for $IOB7'3u?at one day, with 10 per cent, per annum interest. On the 250 FORM AND INCEPTION (Part 1 ba ck of tlie_note was indorsed an ass ignme nt, in the usua^^form, but wTtlTQuL Jate,~40^^a«rti#T- A plea, among others, .was. J.leji averting that the making of the note.jwas ahlaiflefLby. fxami and circumvention. A trial~was'had, resulting in a v|£dictjind judgment infavor of de- fend ant, and plainti ff has_brought_the record to this couTt, and assigns various .grrors. zj On theliial, appellee testified that he signed the note as it appeared at the trial ; that it had not been altered alter "irwas~Signed. He states that B.ush came to his house at the date of the note, and proposed to s ell him a plowing machine, and that, being in doubt as to tKe'truth of Bush's representatioiTSj, and Bush having proposed to go to the rail- road station and telegraph to the manufacturers for the purpose of sat- isfying appellee, he was abqutJto_uisert ^ condition, in the note that would insure the delivery of the plows or render it void, when Bush snatched the note from appellee^ndjr.aiLoff with it; that he_had_never se en Bush atte rward.S, and was_. at the time, to p u nwell to prosecute him; that he intended to insert a condition in the note before "giving it to Bush, and knew nothing of Clarke until the note was assigned to him. He states he never received the plows or machinery, and, on writing to the manufacturers, they denied knowing Bush and disclaim- ed his agency. The court t hereupon gave this instruction : "The plaintiff is entitled to recover on the note in queitTorTif the jury are satisfied that the de- fendant executed the note in question. I t is no defense t o an action on such note that_the note was_ ob tained in bad faith, or that^it^was sur- re]7rtIjousIv~c7htained JjAt-the-pave e, or even forciblj^TT it^was^assigned before dueT The defendant denies, by his pleas, the making and deliv- ery'ljT the note, as his note, for a note cannot be said to be executed until it is delivered. The makings is _nQt-Ci2ilvplete wit hout a delivery. If the jm7_shall belieyej_from the evidence, that defendant neveF ex- ecuted^ thjs^ note — that is, JhaMhere_was jio^jegaT ajTcTv^ of the note on his part, by a jehvery of it, as well as sig;nmg — it was nOFhis note, and the defen dant w]ll be_ entitled- to a verdicL" -nTt|Tfiitruction manifestly misled the jury in arriying_at their ver- dict. It ajserts ^ that the note was n'Ot tixecutt^c T until it \\as_deliyered, aiittthat, if app ellee did not deliver it, there was no le gal and valid execution o"t theliote, that would bind appellee for its payment, andTie was entilledTo^'vercfict. Thisjs ^no do u bt, true as between the par- ties, butno t as to an innocent purchasex before maturi ty. And when an assignment is found on a note, without date, the presumption is that it was indorsed at the date of its execution. In the case of Shipley v. Carroll, 45 111. 285, the plea averred that the note was written and signed by the maker, simply and solely as a matter of amusement, without any design of delivering it to the pay- ee, and that the payee feloniously stole the note from the maker, and that he never was the legal holder or owner of the note. In that case, the note had been assigned before maturity, and on demurrer it was Ch. 3) ' DELIVEET 251 held that the plea did not, as against the assignee before it fell due, present a defense to its collection. That case was certainly as strong as this, and, being similar in principle, it must control and is decisive of the case at bar. The judgment of the court below must De reversea and the cause re- manded. Judgment reversed. WALKER V. EBERT, (Supreme Court of Wisconsin, 1871. 29 WJs. 194, 9 Am. Rep. 548.) A ction on a promissory n ote, b y a holder, wh o_ckini'i tr> have pur- c hased it for full value, before maturi ty. Thea nswer alle ges <-h^t the d efendant is a Germa n by birth and education, and u nable to rea d and write the F.ngligH larigrnpicrp ; that, on the day of the date' of the supposed note, the payees thereof, ^by" their duly authorized agent, falsely and f raudulently represented to h im, with intent to swindle, cheat and defraud him, tW_tlif^y wnnld ^ppnint him cnlp acrpnt fnr his town of a certain patented machine, for ten years, arid would deliver to him one of said machmesTree of cost, except freight, and he should receive 50 per cent, of all profits on his sales; and he ac- cepte d such agency upon those terms, and that the payees, by'THelr satS'^ent, then presented to him to sign, in duplicate, an Ir^^riira^iii- partly written and partly printed, which he was un able to rea d, and which such agent falsely and fraudulently represeiite dto be s j mply a contract embracing th e terrn s orally agreed upon between them, and hepBelievmg it to be so, signed his name to it in duplicate; that such payees never delivered the machine pronjised, and never intended to do so, and defendant never sold any. On the trial, the defend ant nfFprpH t n prove by hi s own testitxi nny the.£ac tD no all eged— by him relative to his signature to the note in suit, and that he never delivered it to any one, w hich evidenrp wa s objected to by the plaintiff, and rn^^d ""<• W ^^^ '""IT'*'; and, there being no further evidence, the court directed a verdict for the plain- tiff. A motion for a new trial was overruled and judgment entered on such verdict, from which the d efendant appeals. Dixon, C. J. The defendant, Having properly alleged the same facts in his answer, offered evidence, and proposed to prove by him- self as a witness on the stand, that at the time he signed the sup- posed note in suit he was unable to read or write the English lan- guage; that, when he signed the same, it was represented to him as, and he believed it was, a certain contract of an entirely different char- acter, which contract he also offered to produce in evidence'; that the contract offered to be produced was a contract appointing him, de- fendant, agent to sell a certain patent right, and no other or different 252 FOEM AND INCEPTION (Part 1 Contract, and not the note in question; and that the supposed note was never deliveired by the defendant to any one. It was at the same time stated that the defendant did not claim to prove that the plain- tiff did not purchase the supposed note before maturity and for value. To this evidence the plaintiff objected, and the objection was sustained by the court, and the evidence excluded, to which the defendant ex- cepted ; and this presents the only question. We think i t^ was error to r ej p ft tbf tpstimnny The two cases cited by counsel for the defendant (Foster v. McKinnon, L. R. 4 C. P. 704, and Whitney v. Snyder, 3 Lans. [N. Y.] 477) are very clear and explicit upon the point, and demonstrate, as it seems to us, beyond any rational doubt, the invahdity of such paper even in the hands of a holder for value, before maturity, without notice. Thfi-p arty wh os,e signatut f tn ="Th papT i" i^Hfliv'^ W ^'"^"I'i 3? to the character of the paper . it'^pl'^; who is ignorant of such character, and has no inten- tion of signing it, and who is guilty of no negligence in affixing his signature, or in not ascertaining the character of the instrument, js, np pinrp VinnnH Ky 1> tinn if it wpr.» a tntal fnrgpry , tV] ? sicrnatu rp included. 'i'he reasoning of the above cases is entirely satisfactory and con- clusive upon this point. T he inqu ir y in s u r.h cunen f y nen h.'^ ck_nf all q uestions of ne p ;ntl abilitv, or of the transfer of the supposed paper to a purchaser for value, before maturity and without notice. _JJ . challenges the origin nr. / 'vistprir o nf th° pnpfr j ts^lf ; and the prnp Q- sition is to show that it is not in laaL or in fact what it purports t o b aTTraniElT, the pf oimssor y note of the supposed make r. For the pur- pose of setting on foot or pursuing this inquiry, it is immaterial that the supposed instrument is negotiable in form, or that it may, have passed to the hands of a bona fide holder for value. Negotiability in such cases presupposes the exis tpnrp nf thp inptrumpnt_ as having been made by the partv whose nam e is subF^ribH ; for, until it has been so made and has such actual legal existence, it is absurd to talk about a negotiation, or transfer, or bona fide holder of it, within the meaning of the law merchant. That _which, in contemplation of law, never_ existed as a negotia blp ingtriirnpnt^_raiTrint'hp held to be such; and to say that it is, and has the qualities of "negotiability, because it assumes the form of that kind of paper, and thus to shut out all inquiry into its existence, or whether it is really and truly what it purports to be, is petitio principii — begging the question altogether. It is, to use a homely phrase, putting the cart before the horse, and reversing the true order of reasoning, or rather preventing all correct reasoning and investigation, by assuming the truth of the conclusion, and so precluding any inquiry into the antecedent fact or premise, which is the first point to be inquired of and ascertained. For the purposes of this first inquiry, which must be always open when the objection is raised, it is immaterial what may be the nature of the supposed instrument, whether negotiable or not, or whether trans- Ch. 3) DELIVERY 253, fefred or negotiated, or to whom or in what manner, or for what consideration or value paid by the holder. It must always be comp e- tent for the party prnpn he charged upon any written ins tru- ment, to shnw that it \^ p ot his instrument or obligation. The^rin- ciple is the same as where instruments are made by persons having no capacity to make binding contracts, as by infants, married women,/ or insane persons; or where they are void for other cause, as for usury; or where they are executed as by an agent, but without, au- thority to bind the supposed principal. In these and all like cases, no additional validity is given to the instruments by putting them in the form of negotiable paper. See Veeder v. Town of Lima, 19 Wis. 297 to 299, and authorities there cited. See, also, Thomas v. Wat- kins, 16 Wis. 549. And identical in principle, also, are those cases under the registry laws, where the bona fide purchaser for value of land has been held not to be protected when the recorded deed, under which he pur- chased and claims, turns out to have been procured by fraud as to the signature, or purloined or stolen, or was a forgery, and the like. See Everts V. Agnes, 4 Wis. 343 [65 Am. Dec. 314], and the remarks of this court, pages 351-353, inclusive. In the case first above cited, the defendant was induced to put his name upon the back of a bill of exchange by the fraudulent represen- tation of the acceptor that he was signing a guaranty. In an action against him as indorser, at the suit of a bona fide holder for value. Lord Chief Justice Boville directed the jury that, "if the defendant's signature to the document was obtained upon a fraudulent represen- tation that it was a guaranty, and the defendant signed it without knowing that it was a bill, and under the belief that it was a guaranty, and if he was not guilty of any negligence in so signing the- paper, he was entitled to the verdict;" and this direction was held proper. In delivering the judgment of the court upon a rule nisi for a new trial, Byles, J., said: "The case presented by the defendant is that he never made the contract declared on; that he never saw the face of the bill; that the purport of the contract was fraudulently mis- described to him; that when he signed one thing, he was told and believed he was signing another and an entirely different thing; and that his mind never went with his act. It seems plain, on principle and on authority, that if a blind man, or a, man who cannot read, or for some reason (not implying negligence) forbears to read, has a written contract falsely read over to him, the reader misreading to such a degree that the written contract is of a nature altogether dif- ferent from the contract pretended to be read from the paper, which the blind or illiterate man afterwards signs, then, at least, if there be no negligence, the signature so obtained is of no force; and it is invalid, not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signer did not accompany the signature — in other words, that he never intended to sign, and there- 254 FORM AND INCEPTION , (Part 1 fore, in contemplation of law, never did sign, the. contract to which his name is appended.'' And again, after remarking the distinction between the case under consideration and those where a party has written his name upon a blank piece of paper, intending that it should afterwards be filled up, and it is improperly so filled, or for a larger sum, or where he has written his name upon the back or across the face of a blank bill stamp, as indorser or acceptor, and that has been fraudulently or im- properly filled, or, in short, where, under any circumstances, the party has voluntarily affixed his signature to commercial paper, knowing what he was doing, and intending the same to be put in circulation as a negotiable security, and after also showing that in all such cases the party so signing will be liable for the full amount of the note or bill, when it has once passed into the hands of an innocent indorsee or holder, for value before maturity, and that such is the limit of the protection afforded to such an indorsee or holder, the learned judge proceeded : "But, in the case now under consideration, the defendant, accord- mg to the evidence, if believed, and the finding of the jury, never in- tended to indorse a bill of exchange at all, but intended to sign a contract of an entirely different nature. It was not his design, and, if he were guilty of no negligence, it was not even his fault, that the instrument he signed turned Out to be a bill of exchange. It was as if he had written his name on a sheet of paper for the purpose of franking a letter, or in a lady's album, or an order for admission to Temple Church, or on the flyleaf of a book, and there had already been, without his knowledge, a bill of exchange or a promissory note payable to order inscribed on the other side of the paper. To make the case clearer, suppose the bill or note on the other side of the paper in each of these cases to be written at a time subsequent to the signa- ture, then the fraudulent misapplication of that genuine signature to a different purpose would have been a counterfeit alteration of a writing with intent to defraud, and would therefore have amounted to a forgery. In that case the signer would not have been bound by his signature, for two reasons — first, that he never in fact signed the writing declared on; and, secondly, that he never intended to sign any such contract. In the present case, the first reason does not apply, but the second does apply. The defendant never intended to sign that contract, or any such contract. He never intended to put his name to any instrument that then was or thereafter might become negotiable. He was deceived, not merely as to the legal effect, but as to the actual contents of the instrument." The other case first above cited, Whitney v. Snyder, was in all re- spects like the present, a suit upon a promissory note by the pur- chaser before maturity, for value, against the maker, and the facts offered to be proved in defense were the same as here; and it w^s held that the evidence should have been admitted. Ch. 3) DELIVERY 255 In Nance v. I^ary, 5 Ala. 370, it was held that where one writes his name on a blank piece of paper, of which another takes posses- sion without authority therefor, and writes a promissory note above the signature, which he negotiates to a third person, who is ignorant of the circumstances, the former is. not liable as the maker of the note to' the holder. In that case the note was written over the signature by one Langford, and by him negotiated to the plaintiff in the action, who sued the defendant as maker. Collier, C. J., said : "The making of the note by Langford was not a mere fraud upon the defendant. It was something more. It was quite as much a forgery as if he had found the blank, or purloined it from the defendant's possession. If a repovery were allowed upon such a state of facts, then every one who ever indulges in the idle habit of writing his name for mere pastime,' or leaves sufficient space between a title and his subscription, might be made a 'bankrupt by having promises to pay money written over his signature. Such a decision would be alarming to the community, has no warrant in law, and cannot receive our sanction." And in Putnam v. Sullivan, 4 Mass. 54, 3 Am. Dec. 306, Chief Jus- tice Parsons said: "The counsel for the defendants agree that, gen- erally, an indorsement obtained by fraud will hold the indorsers ac- cording to the terms of it; but they make a distinction between the cases, where the indorser, through fraudulent pretenses, has been in- duced to indorse the note he is called on to pay, and where he never intended to indorse a note of that description but a different note and for a different purpose. Perhaps there may be cases in which this distinction ought to prevail, as if a blind man had a note falsely and fraudulently read to him, and he indorsed it, supposing it to be the note read to him. But we are satisfied that an indorser cannot avail himself of this distinction, but in cases where he is not chargeable with any laches or neglect, or misplaced confidence in others." See, also, 1 Parsons on Notes and Bills, 110 to 114, and cases cited in notes. The ' judgment below must be reversed, and a venire de novo awarded. 256 FORM AND INCEPTION (Pait 1 MASSACHUSETTS NAT. BANK v. SNOW. (Supreme Judicial Court of Massachusetts, Suffolk, 1905. 187 Masa. 159, 72 N. B. 959.) Contract o n three promissory not es, each for $2,432.33, dated De- cember 9, 1899, payable-to and ind orsed by the defendant and dis - countedby— lic-^lailitiff, as described in the first paragraph of the opinion. Writ dated April 35, 1900. At the trial in the superior court before Harris, J., the jury returned a verdict for the defendant; and the plaintiff alleged exceptions, raising the questions stated by the court." Knowlton, C. J. This is an action of contract on three promissory notes, signed, "H. G. & H. W. Stevens," payable to the order of the defendant, indorsed by him in blank, and discounted by the plaintiff. They severally bear date December 9, 1899, and the rights of the parties are accordingly governed by St. 1898, p. 492, c. 533, some- times called the "Negotiable Instruments Act," which is now em- bodied in Rev. Laws, c. 73, §§ 18-212, inclusive. In referring to dif- ferent provisions of this statute, it may be convenient to cite the sec- tions of the Revised Laws, rather than those of the original act. The maker of the notes, H. W. Stevens, who did business under the name ot H. G. & H. W. Stevens, has deceas ed: and the d efend- a nt introduced evidence tending to show that, after the defendant , h ad indorsed the notes, the y •y^ere t^kpn frnm hie pn^spsiiinn hy t-hpjTTakpr^ without his knowledge or consent, and discounted at the plaint iff bank, arlfl thaf f^fy wprp ilit^rpd hy'tVip incprtjrin ^f th e WOrds "sCVCn per ce nt." aft fr th° w"'-^° "with intere st." The defense is founded on this evidence. The defendant's counsel stated that he made no con- tention that the bank had actual knowledge of any infirmity in the instruments, 'or defect in the title to them, or that it took them in bad faith. Nor was it contended by the defendant that in discounting the notes the bank acted otherwise than in the regular and usual course of business. But upon the defendant's testimony it might be found that the notes were given to him by the maker in payment of indebted- ness ; that, after he had indorsed them ip blank, and put them in his desk for collection or discount, he was called out of his office, leaving the maker, Stevens, there; and that Stevens then took them without right, and three days later carried them to the plaintiff bank, and caused them to be discounted for his own benefit. * * * The defendant's contention that, after the notes had been delivered to the defendant and indorsed by him, they were stolen by Stevens, brings us to the q^ip.a±inn whptlipr, under thp negotiable instrum ents ac t, a holfl er in Hup rnur'ip nf a npf^ payable to bearer, that has bee n 8 Part of the opinion is omitted. Ch. 3) DELIVERY 257 sto len, can acquire a good title from the thie f. Even before the enactment of the statute, while the decisions were not uniform, the weight of authority was in favor of an affirmative answer to the ques- tion. Wheeler v. Guild, 20 Pick. 545, 550, 553, 32 Am. Dec. 231; Worcester County Bank v. Dorchester & Milton Bank, 10 Cush. 488, 57 Am. Dec. 120 ; Wyer v. Dorchester & Milton Bank, 11 Cush. 51, 53, 59 Am. Dec. 137 ; Spooner v. Holmes, 102 Mass. 503, 3 Am. Rep. 491; London Joint Stock Bank v. Simmons, [1892] App. Ca^. 201, and cases cited; Smith v. Union Bank of London, 1 Q. B. D. 31; Goodman v. Simonds, 20 How. 343, 365, 15 L. Ed. 934 ; Murray v. Lardner, 2 Wall. 110, 17 L. Ed. 857 ; Hotchkiss v. National Shoe &, Leather Bank, 21 Wall. 354, 32 L. Ed. 645 ; Kinyon v. Wohlford, 17 Minn. 239 (Gil. 215), 10 Am. Rep. 165; Clarke v. Johnson, 54 111. 296 ; Seybel v. National Currency Bank, 54 N. Y. 288, 13 Am. Rep. 583 ; Evertson v. National Bank of Newport, 66 N. Y. 14, 23 Am. Rep. 9 ; Kuhns v. Gettysburg National Bank, 68 Pa. 445. The following specific language of the sjatute touching this question, as well as its provisions in other sections, was intended to establish the law in favor of holders in due course : "But wh ere the instrument is in the hands of a holder in due course, a vaiin deliverv thereof by all parties prior to him, sn as t;n m aWp tVipr^ liahlp fn Viim, i<^ rnn- clusively pres umed. " Rev. Laws, c. 73, § 33. This conclusive pre - s umption exists as well wVipn tVip ir^t? ii t^Vpp ^'"'PTP ^ thi>f n° 7" uny other case. Of course, this rule does not apply to an instrument which is incomplete. But in reference to a complete, negotiable promissory note, payable to bearer, it is a wholesome and salutary provision. See Greeser v. Sugarman, 37 Misc. Rep. 799, 76 N. Y. Supp. 922. Upon the defendant's statement and the counsel's theory of the case, the rule is applicable. The note not only was complete in form and in execution, but, upon his testimony, it had been delivered to him by the maker as a binding instrument, and had afterwards been indorsed by him. Therefore the first sentence of Rev. Laws, c. 73, § 33, "Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto," was inapplicable. The instrument had taken effect, and was subsequently negotiated by the bearer to the plaintiff as a holder in due course. That the bearer was also the maker was im- material after the instrument had been so indorsed as to become pay- able to bearer. Upon the plaintiff's theory of the facts, there was no theft, but an ordinary accommodation indorsement by the defendant for the benefit of the maker, and none of these questions arise. We are of opinion that the judge erred in giving the fourth and fifth instructions requested by the defendant, and in refusing other Sm.& M:.B.& N.(2b Ed.)— 17 258 FORM AND INCEPTION (Part 1 instructions requested by the plaintiff, founded upon a different view of the statute. T here was _alsp p'-'-nr i'ri-4be-ina tructions gi ven as to the alleg-ed ^ 1- teration nf the notes, Bv Rev. Laws, c. 73, § 141, it is provided tha t "w'hen an instru ment has been materiallv altered, and is in the ha nds nf rTnldei— rrrgue_ r.nurse. not a pa rty try the alt-prpHnn, he may pn- force paymen t thereof according to '"ts nrigrnal tp^^r " This lan- guage is directly applicable to the present case. See Scholfield v. Earl of Londesborough (1894) 2 Q. B. 660; (1895) 1 Q. B. 536; (1896) A. C. 514; Schwartz v. Wilmer, 90 Md. 136, 143, 44 Atl. 1059. We understand that the instructions were given independently of any question of pleading, and we therefore do not deem it necess ary to determine at this stage of the case w hether the plaintiff shou ld amend ItB decl aration by inserting counts upon the notes as they were B( ^f6fe t he alleged altera];ion7if it wishes to recover upon them as notes bearmg mterest at only 6 per cent. See Mutual Loan Association v. Lesser, 76 App. Div. 614, 78 N. Y. Supp. 629. Nor do we consider other questions which are not likely to arise upon a second trial. Exceptions sustained. Ch. 3) DELIVERY 259 PUTNAM V. SULLIVAN. (Sapreme Judicial Court of Massachusetts, Suffolk, 1808. 4 Mass. 45, 3 Am. Dec. 206.) Case by the indorsees against the indorsers of a promissory note, dated December X, igt^, payable to the defendants or their order. The action was tried at the last November term before Parker, J., when a verdict was given for the plaintiffs for the amount of the note and interest, subject to the opinion of the court whether upon the facts proved, and which were to be reported by the judge, the action could be maintained. If the court should be of that opinion, judg- ment to be entered according to the verdict, with additional damages for interest to the time of the judgment ; if the court should be of a different opinion, a new trial to be granted. Those facts were, in substance, that the. note was payable in fS days from the date with grace, and that the plaintiffs were innocent in- dorsees, having received the note indorsed in blank, and paid a valu- able consideration for the same. The handwriting of the promisor and indorsers were admitted, the latter being the handwriting of W. B. Sullivan, a partner of the house doing business under the firm of Jno. L. Sullivan & Co. The note being lodged in the Boston Bank for collection, notice was left at the lodgings of the promisor by the messenger of the bank, on the 28th of |P^ruary> ltO$, and on the 94 day of March following the said W. B. S., one of the indorsers, was notified that the note was unpaid. It was also in evidence that the promisor had absconded before the note fell due, and that this fact was known to all the parties at the time. One of the defendants being abroad in Europe, and the other, about the ^st of December, i^Otf, having occasion to make a journey from Boston to Philadelphia, intrusted with an apprentice or clerk of the house a number of papers on which one of the house had written the name of the firm in blank, some to be used as notes indorsed by the house, land others as notes in which the house were to be, the promis- ors. These papers were intrusted to a clerk of the defendants to be used when money was to be advanced on the sale of goods by the house on commission, or to renew the notes of the house when due at the banks. The clerk was directed to be careful of the blanks left with him, and not to use any for the advance of money on the sale of goods on commission without consulting a brother of the partners. He was further directed to deliver one of the blanks to the promisor upon the note sued in this action, to enable him to renew a note signed by him then in the bank, of which the house were indorsers, and for which he had requested a blank to be left. The promisor called on the clerk for the blank indorsement left for him, and one was delivered to him. Afterwards, pretending that by some mistake it had become use- less to him, and feigning to burn in the clerk's presen9e the name of 260 FORM AND INCEPTION (Part 1 the firm indorsed, he procured another blank, and by a similar preten- sion and contrivance he obtained a third and a fourth blank indorse- ment, the last of which was in fact used for the purpose for wfeich the house had directed a blank indorsement to be given him. The promisor had used one of the prior blank indorsements for making the note sued in this action, which had been negotiated, witk the indorse- ment remaining in blank, to the plaintiffs.^* Parsons, C. J. * * * On "the facts in this case we are to de- cide who shall suffer the loss of the money, the plaintiffs, who it is agreed are innocent indorsees, or the defendants. It is objected that this note ought to be considered as a forgery of the names of the indorsers, because a note was afterwards written on the face of the paper by the promisor, not only without the direc- tion or consent of the defendants, but against their express instruc- tion, and therefore that it was a false and fraudulent alteration of a writing, to the prejudice of the indorsers. This objection would have great weight if, when the indorsers put the name of the firm on the paper, they had not intended that some- thing should afterwards be written, to which the name should apply as an indorsement; for then the paper would have been delivered over unaccompanied by any trust or confidence. If the clerk had fraud- ulently, and for his own benefit, made use of all the indorsements for making promissory notes to charge the indorsers, we are of opinion that this use, though a gross fraud, would not be in law a forgery, but a breach of trust. And for the same reason, when one of these indorsements was delivered by the clerk, who had the custody of them, to the promisor, who by false pretenses had obtained it, the fraudulent use of it would not be a forgery, because it was delivered with the intention that a note should be written on the face of the paper by the promisor, for the purpose of negotiating it as indorsed in blank by the house. And we must consider a delivery by the clerk, who was intrusted with a power of using these indorsements (al- though his discretion was confined), as a delivery by one of the house^ whether he was deceived, as in the present case, or had voluntarily exceeded his direction ; for the limitation imposed on his discretion was not known to any but to himself and to his principals. It is further objected that, if the writing of this note under these circumstances is not a forgery, yet it is such a fraud as will discharge the indorsers against an innocent indorsee. The counsel for the de- fendants agree that generally an indorsement obtained by fraud shall hold the indorsers according to the terms of it ; but they make a dis- tinction between the cases where the indorser through fraudulent pre- tenses has been induced to indorse the note he is called on to pay and 10 Arguments of counsel and part of the opinion are omitted. Ch. 3) DELIVERT '261 where he never intended to indorse a note of that description, but a different note and for a different purpose. Perhaps there may be cases in which this distinction ought to pre- vail, as if a blind man had a note falsely and fraudulently read to him, and he indorsed it, supposing it to be the note read to him. But we are satisfied that an indorser cannot ayail himself of this distinction, but in cases where he is not chargeable with any laches or neglect, or misplaced confidence in others. Here one of two innocent parties must suffer. The indorsees confided in the signature of the defend- ants, and they could have no reason to suppose that it had been im- properly obtained. The note was openly offered to the plaintiffs by a broker, and when they objected on account of the absence of both the indorsers, they were answered, on the information of the prom- isor, whose character then stood fair, that blank indorsements had been left with the clerk, and that the indorsers' had before indorsed a number of notes for the same person, which had been negotiated by a broker. On the other hand, the loss has been occasioned by the mis- placed confidence of the indorsers in a clerk too young or too unex- perienced to guard against the arts of the promisor. It is to be re- gretted that the blank indorsements had not been deposited with the brother of the partners, who was directed to be consulted as to the use of them ; for then no innocent person would have been a sufferer. From a view of all the facts as they are presented to us, it is our opinion that the indorsers must be holden, and that judgment must be entered according to the verdict, with the additional interest agreed. In forming this opinion we have been necessarily led to consider the effect of a different opinion on the commercial part of the com- munity. How far it is common for merchants to intrust their clerks with blank signatures or indorsements is not known. But when mer- chants are in the habit of indorsing for each other at the banks, it is very common to put their names on blank paper, and deliver them to the party to be accommodated, for the express purpose of obtaining a renewal of certain notes, when they become due. And if the party having tjiese signatures should employ them as names to other ne- gotiable securities not contemplated, and the signatures should for that reason be void, much injury might result to innocent indorsees, or the bank discounts would be greatly embarrassed. 262 FORM AND INCEPTION (Part 1 CAULKINS V. WHISLER. (Supreme Court of Iowa, 1870. 29 Iowa, 495, 4 Am. Rep. 236.) Action upon a promissory note; defense, that the instrument js a fGfgefy-,— The cause was submitted to the court without a jury. The court found the f oUowins- facts : Defendant entered into a contract with one -Sfiitli- t02_sellfor_liim, as his agent, grain se eders. At Smith's request, defendan Tsjgned his name upoii~a blanF "piec^_Qf paper, w hich Smith w as to send to the manufacturers ot the seeders, that_ _they might know d efendant's sig nature upon" orde rs which he should make upon them for the machines. The signature was made for no other purpose. The i nstrument in suit was print ed over the signature of defendan t, so obtained without his knowledge and con- sent, and the stamp in. the same manner attached and canceled. The plaintiff p nrrhaqprl the- riotp bpf"rp matu rit y, for a valid consideratio n, and without knowledge of any matter connected with its execution. Upon these findings, the c ourt held that the note is a forgery and void, and that plaintiff is n ot entitled to recover t hereon. Plaintiff sppppV" Beck, J^ A holder of negotiable^ jjire.d hefnrp djs hnnnr^ is not protecte d.a£airtstidei gnses that m ake void t he instrument. He qan have no claim u pon forge d paper against the pers on whose na me is falsely atfaxed thereto a s the make r, and who is without faul t as to the forgery aficl the tkEing of the paper by the holder. 1 Parsons, Bills and Notes, 75, and authorities cited. Ts thp nnte gu ed upon a forged instrument? "The making or al- teration of any writing"~wM f fraudulent intcnt, -whereby another may be prejudiced, is forgery." State v. Wooderd, 20 Iowa, 543; Revi- sion, § 4253. Tp rilll£]l_i !2-r""'^<' 'tiit(^ the nffpnse n f fr>rq ;erv it i'^ not npnpggpii-y f^iflt thf, g'gn^tnrf^ pf_ the inst rument be fal se. The-instru- rnppj, may-4="^-^^t''^rM--sc>-4jia,t it is n^-#ija- instrument sigrva^-by.jjT' mak er, and, if^ is be fraudul ently and falsely done, it is forgery words be added to changelts~J 30 It words De added to change its"Eirect; with Hke intent it is a for- gery. In the case before us the instrument was falsely and fraudu- lently made over the genuine signature of defendant, which was not obtained for the purpose of binding defendant by any contract. It is evident that this differs, in no respect, from the cases mentioned, and that the note is a forgery and void. See 2 Parsons, Bills and Notes, 584. The case differs materially in its facts from the cases cited in sup- port of plaintiff's right to recover. In those cases blanks were filled up contrary to the direction of the maker, or without his authority. But in all of such cases the makers intended to execute an instrument that should be binding upon them. Blanks%rere filled up contrary to the authority given by the makers, or in some other way the instru- ments were made so that they did not correspond with the intention of the makers; but in all such cases there were makers and instru- Ch. 3) DELIVKET 263 ments, and through the frauds of those to whom the instruments were intrusted they were thus made to be of different effect than was de- signed by the makers. In these cases it is correctly held that, while the parties perpetrating the fraud in some cases may have been guilty of forgery, yet the makers were bound upon the instruments, as against holders in good faith and for value. The reason is obvious. The maker ought rather to suffer, on account of the fraudulent act of one to whom he intrusts his paper, or who is made his agent in respect of it,' than an innocent party. The law esteems him in fault, in thus putting it in the power of another to perpetrate the fraud, and requires him to bear the loss consequent upon his negligence. In the case under consideration no fault can be imputed to the de- fendant. He did not intrust his signature to the possession of the forger for the purpose of binding himself by a contract. He con- ferred no power upon the party who committed the crime to use it for any such purpose. He was not guilty of negligence in thus giving it, for it is not unusual, in order to identify signatures, and for other purposes, for men thus to make their autographs. The defendant cannot be regarded as being so far in fault in the transaction that he ought to be required to bear the loss resulting from the crime. In our opinion the decision of the circuit court is in accord with the law, and is therefore affirmed. BAXENDALE v. BENNETT. (Court of Appeal, 1878. 3 Q. B. D. 525.) Action commenced on the 10th July, 1876, on a bill of p-xrh^ngp.^ dated the 11th of March, 1873, for £50. drawn by W. Cartwright and accepted by the defendant, and of which the plaintiff was the holder, ,and for interest. At the trial before Lopes, J., without a jury, at the Hilary sittings in Middlesex, the following facts were proved : TheJsiiii ddted the 11th of March, 1873, on which the action was brought, pijr pnrtpH tn b? drnwn by n"f W Parf-vypoj it on the defend- ant, payable to order at three months' date. It was indorsed in blank by Cartwright, and also by one H, T. Cameron. The plaintiff received the bill from Cameron on the 3d of June, 1873, and was the b.£Iia-fide-helder of it, without notice of fraud, and for a valuable con- sideration. One J. F. Holmes had aske d th" f^pf^ tK^aj at fnr ViiV -ir-r-npt-in^a f r. an accoHiraodatian_hill, and the defftw4aiitj;ad writtenhisjiame_acr£tf3 a paper which ba d arf imprps^jcd bill r.tnmp (vS . ir, anH IT^ o-nrpn it to Holmes to fill in his name, and then to use it for the purpose of rais- ing money on it. Afterwards Holm es, not requiring accommodation, r eturned the 6 aper to t he defendagj: in the same state in which he had 204 FORM AND INCEPTION (Part 1 received it from him. The dt^p'idant 1^"" put '^ 'ntr* " f^rawpr, which was not locked, of his writing table at his chambers, to which his clerk, laundress, and other persons coming there had access. H«4iad ne ver author jze d Tartwrightor a ny person to fillup _the paper with a d raper's na me, and h e believed tEat it must have be en_sta1 eH - f rom his chambers. On these facts the learned j udge found that_ the_bill^was_stolen from the defendant's chambers, an3 the name ot'the drawer~afterwards added without the defendant's authority; butjjia t the dcfcn dapt_had so negligently dealt- with the .acceptance as to have facilitated th e theft. He ther^f^rp rule d, upon the authority of Young v. Grote, 4^ng. 253, and Ingham v. Primrose, 7 C. B. (N. S.) 83; 28 L. J. C. P. 294, t hat the defendant was Hable, and directed judgment to be entered for the plaintiff for £50. and costs.^* Bramwell, L,. J. I am of opinion that this judgment cannot be supported. The defendant is sued on a bill alleged to have been drawn by W. Cartwright on and accepted by him. In very truth he never a ccepted s uch_a. bill ; and, if he is to be held liable, it can on ly be on the-gtQund that he ise stopped tj a--deny_ihat he did so acce pF~such a bill. Esto ppels ar e_Qdieufi, and the doctrine should never BF'applied without a necessity for it. TtjpvT can be applied evrep t in cases where_fhe p^ r f. nn n . iT , nin!it -ml inm it is used ha? sn conducted hims el f , either in what he has said or done, or failed to say or do, t hat h e would, unless _ estopped, be saving something contrary to his former ^ c gnduct i n what he had said or done, or failed to say or do. Is that thePcase here? Let us examine the facts. The defendant drew a bill (or what would-be a bill had it had a drawer's name) without a draw- er's name, addressed to himself, and then wrote what was in terms an acceptance across it. In this condition, it, not being a bill, was stolen from him, filled up with a drawer's name, and transferred to the plaintiff, a bona fide holder for value. It may be that no crime was committed in the filling in of the drawer's name, for the thief may .have taken it to a person, telling him it was given by the defendant to the thief with authority to get it filled in with a drawer's name by any person he, the thief, pleased. This may have been believed, and the drawer's name bona fide put by such person. I do not say such person could have recovered on the bill. I am of opinion he could not; but what I wish to point out is that the bill might be made a complete instrument without the commission of any crime in the com- pletion. But a crime was committed in this case by the stealing of the document, and without that crime the bill could not have been com- plete, and no one could have been defrauded. Why is not the defend- ant at liberty to show this ? Why is he estopped ? What has he said or^y^done con trary to the truth, or which sho uld cause any nne tn be- lieve ^e-truTh to be ntber tWT njg ^ Is it not a rule that every one 11 The arguments of counsel and parts of tlie opinions are omitted Ch. 3) DELIVERY 2C5 hds a right to suppose that a crime will not be committed, and to act on that belief? Where is the limit if the defendant is estopped here? Suppose he had signed a blank check, with no payee, or date, or amount, and it was stolen; would he be liable or accountable, not merely to his banker the drawee but to a holder? If so, suppose there was no stamp law, and a man simply wrote his name, and the paper was stolen from him, and somebody put a form of a check or bill to the signature; would the signer be liable? I cannot think so. But what about the authorities? It must be admitted that the cases of Young V. Grote, 4 Bing. 253, and Ingham v. Primrose, 7 C. B. (N. S.) 82, 38 L. J. C. P. 294, go a long way to justify this judgment; but in all those cases, and in all the others where the alleged maker or acceptor has been held liable, he has Voluntarily parted with the instrument. It has not been got from him by the commission of a crime. This, undoubtedly, is a distinction, and a real distinction. The defendant here has not voluntarily put into any one's hands the means, or part of the means, for committing a crime. But it is said that he has done so through negligence. I confess I think he has been negligent ; that is to say, I think, if he had had this paper from a third person, as a bailee bound to keep it with ordinary care, he would not have done so. But then t his negligence is not th e pr qximate or effective cause of the fraud. A _ crime was necessary for its co mpletion . * . * * Brett, L. J. In this case I agree with the conclusion at which my Brother Bramwell has arrived, but not with his reasons. The de-^ fendant signed a blank acceptance and gave it to a person who want- ed mgney that he might get it discounted ; that person sent the blank acceptance back to the defendant, who put it into a drawer in his room ; the room was not a place of general resort, and the drawer into which the acceptance was put was left unlocked; somebody, not a servant of the defendant, stole it, and it was filled up by a different person from him to whom the acceptance was originally given and who had returned it. On these facts. Lopes, J., held that the defendant haa been guilty of negligence, and was therefore liable on the bill to the plaintiff. Bramwell, L. J., says that the defendant is not liable because, if he be guilty of negligence, the negligence is not the proximate or ef- fective cause of the fraud. It seems to me that the d efenda nLiiever authonz£d^ej3ilPtcH7e^tfed'tir-with--a^-dfawpr's namPj a»4-h&--can- not b g^SUed on -it. I dr,nni_ th\nk it rip fht ^n cay tVi^t f-ViP Hpfpprlant was negligent. The law as to the liability of a person who accepts a biH"1nDlank is that he gives an apparent authority to the person to whom he issues it to fill it up to the amount that the stamp will cov- er. He does not strictly authorize him, but enables him to fill it lip to a greater amount than was intended. Where a man has signed a blank acceptance, and has issued it, and has authorized the holder to fill it up, he is liable on the bill, whatever the amount may be, though he 266 FORM AND INCEPTION (Part 1 has given secret instructions to the holder as to the amount for which he shall fill it up. He has enabled his agent to deceive an innocent party, and he is liable. Sometimes it is said that the acceptor of such a bill is liable because bills of exchange are negotiable instruments, current in like manner as if they were gold or bank notes ; but wheth- er the acceptor of a blank bill is liable on it depends upon his having issued the acceptance intending it to be used. No case has been de- cided where the acceptor has been held liable if the instrument has not been delivered by the acceptor to another person. In this case it is true that the defendant, after writing his name across the stamped paper, sent it to another person to be used. When he sent it to that person, if he had filled it in to any amount that the stamp would cover, the defendant would be liable, because he sent it with the intention that it should be acted upon ; but iLi«as_S£jitback t o ^ the defendant, and he was t Vipti in tli» nnrnp rnndH'"':'" ^g ^f \]^~yi%r\ never issued the acceptance. The case is this : The defendant ac- cepts a bill and puts it into his drawer; '^• jb as if ^p ^'"^ npvpr is- _suedJt_mth the intentio n that it s ^""1d h" fiUpfl up; itJs.a3,if after hav ing acce pte3 the biU^e had left it in his room for a moment and a thief came in and stole it. He has never intended that the bill should be filled up by anybody, and no person was hife agent to fill it up. Then it has been said that the defendant is liable because he has been negligent; bii t w^^^— ^e dpfpnd ani-— negligent''' As observed by Blackburn, J., in Swan v. North British Australian Company, 2 H. & C. 175, 33 ly. J. (Ex.) 273, therejnust-fee-the-HeglecUaf-somfi^duty owi ng to sorn e_p£isQrL — Here how can the defendant be negligent who owes no duty to anybody? Against whom was the defendant neg- ligent, and to whom did he owe a duty ? He put the bill into a drawer in his own room. To say that was a want of due care is impossible. It .aas ^not n egligence for ^tjam-rea^eas-! — -F irst, he Hirl-a At-rnnrp--Mny duty— toT anylnn P-^^SSg; secondly - , he d i d -aet-ac t other -w ise t liM i^in a way which an o rdin ary careful ma a-^wTTCltd~act. * * * Baggallay, L. J., concurred that the judgment ought to be entered for the defendant. Judgment for defendant. CRUCHLEY V. CLARANCE. (Court of King's Bench, 1813. 2 Maule & S. 90.) This was an action against the defendant as drawer nf a bi1 1j-i£''v- clignge for £200. The dec^laration contained several counts, and in one, stated-th fi. bill to hav e '^""n m a df i'? i y? i h\^ ^ ir- ^ ^^^rjvfrr-rii the phintifE, andJnanotherJoJli&jCu;dsr_of . (thereby meaning to the order Ch. 3) DELIVERY 2G7 of such person as the defendant should cause to be named and inserted in the said bill as payee), and tV[pn fjvfrrp,] f^^^^ f he. rtpfpnHant c ?i"SRrl th e name of th e plaintiff to b einserted. etc. At the trial before Lord EUenborough, C. J., at the London sittings after last term, it appeared that the biUJiadheen^ drawn b y the. Hpfpnrlant \ r\ J a maica upon on e H enry Man, orXoncfon, t h f rlff^n diin t Ifflvinc a bhn l <- fnr ^ h? namp of ^e i pa j^fifi, and hadafter wards been nf-g-nri at^d ''n th'' ° country by one Vashon, who indo rsed it to the plaintiff -in payment nf an n] H_Hphh^ aiig!j]ie_BlainBEE3Ssi5e4-hi9-own T\Hvnf' as the payifp. A verdict was found forthe_glaintiff. Denman mov ed_ta-£nlar_ a nonsuit g r f?''-ar-«eML.lri al, on the g round th at the plaintiff had no ri^ht to inser t his na me in th e bill ; and he sSid it was distinguishable from Kussel v. Langstaffe, Doug. 513, be- cause there the bill was filled up by one of the original parties. Lord EllEnborough, C. J. A£_the_dfi£e n d ant ha -e chosen to -send the bill into thejtorld^ n this form, the world ought_ r"t tr. hp rtprshr. edjbv4ns^lgts^ Th&. defend ant-hy leavin g the blank u n flpi-tnnlf to . be answeraljL e for i t when filled up ia - the shape of a bill . ^t Bi nn a prnmi'isnr y note, second indorsee against second in - doi:ser, tried at the Ulster circuit, April 17, 1826, before Bctts, late Chief Judge. The note was made by Rowe, payable to H. at 60 day s, for $200, and purp orteg ^ujga^: dale Nu v ein ber b, 1825. T his note, having a blan k fo r the day of J Ji£-i»onth,.wa S-made on the 2'yth of Novem her. 1825, and indorsed_ by.-H<- anH tlie f^ffenHai^]; It was afterwards delismied b y the mg .kp'" ^•" <'^'' p^rlint'ff in i\?y^'^^^- -^f ^ riatd-^ who, by direction, of tEe former, filled in tfc /^erdict for the plaintiff, subject to the opinion of this court. Sutherland, J. This case is n ot distinguishable in principle from that of Mechanics' & Farm ery' pank v .'^^-bnyler (a) (decided at the (a) Mechanics' & Fabmees* Bank against Schhtleb and Others. Assumpsit ; Indorsees against first four indorsers, Joint payees of a promis- sory note; tried at the Albany circuit, February 9th, before Duer, Circuit Judge; when a verdict was taken for the plalntlfC, subject to the opinion of this court. Sutherland, J. The note was Indorsed by the defendants on the 23d of February, 1825 ; there being, at that time, no date to It ; and the defendants. 2C8 FORM AND INCEPTION (Part 1 last term). The only_difference is that her e the dat e_was inserted with th g_JfliQwl£dge of the__plaintiff. But I do not percerve that this can vary the case. When an indorser of j^_not e commit s it to_thejnak£r, w ith the jate in bla n k, the note ca rries on the fac e_of it an implied a uthority to the maker to fill up the blank . As between th'eTndorseFand third persons, the maker, under such circumstances, must be deemed to be the agent of the indorser, and as acting under his authority and with his approbation. Althoug h it is not essen tial to thelegalj yalidity o l-a -aote-tbat4 t should be d at£d,-yet we all know knowing that fact, (for they read the note before they Indorsed It) re-deliv- ered it in that state to the maker. The maker, on the 28th of February, in- serted the date of the 28th of January, 1825; and about the 1st of March, negotiated it to the plaintiffe, who were ignorant of the circumstances stated. The question is, whether, as between these parties, the note is rendered in- valid, in consequence of its having been ante-dated, so that it had nearly 30 days Tess to run, than it would have had if it had been dated as of the day when it was indorsed. An indorsement on a blank note, without sum, or date, or time of payment will bind the indorser, for any sum, payable at any time, which the person to whom the indorser entrusts It, chooses to insert. It is a letter of credit for an indefinite sum. Russell v. LangstafCe, Doug. 514 ; Violett v. Patton, 5 Oranch, 151, 3 L. Ed. 61 ; 2 M. & S. 90 ; Putnam v. Sullivan, 4 Mass. 54, 55, 3 Am. Dec. 206. If there is an implied discretionary authority in such case to fill all the blanks, it would seem to follow, that such an authority must equally exist to supply one, if one only be left. Accordingly, if the amount be left blank, any sum may be inserted ; if the time of payment, It may be fixed at the pleasure of the holder ; and In the hands of a bona fide indorsee, the indorser cannot question the transaction, though the blanks may have been filled in a manner entirely different from the understanding and expectation of the indorser, when he put his name upon the note. It is said that the note in this case was perfect without a date. It is true that the date is not essential to the validity of a bill or note ; for where they have no date, the time, if necessary, may be inquired into, and will be com- puted from the day they were issued. 2 Ld. Raym. 1076 ; 2 Show. 422 ; Chit, on Bills, 78 ; 3 B. & P. 173 ; Lansing v. Gaine, 2 John. 303, 3 Am. Dec. 422 ; 13 East, 5. Nor is it necessary to the validity of a note, that a time of pay- ment should be expressed in it. If none be fixed, it is payable on demand. Chit, on Bills, 79 ; 7 T. R. 427. But if a note is indorsed, perfect in every re- spect but the time of payment, and that is left blank, can there be any ques- tion of the authority of the maimer, if the note be re-delivered to him, to insert any time of payment he may think proper, before he puts it in circula- tion? Can the indorser, in such a case, protect himself from liability, on the ground of an alteration of the note? If not, upon what principle can the in- sertion of the date, where that is left blank, be considered an alteration? If it be conceded, as it must be, that the maker in this case had an implied au- thority to fill up the blank at all, the indorser, and not the innocent indorsee, must suffer the consequence of an abuse of that authority, if it has been abused. It Is not. In judgment of law, an alteration of the note. The defend- ant must have contemplated the addition of the date, before the note was to be passed; for it was payable at the Mechanics' & Farmers' Bank. It is be- lieved to be the invariahle custom of banks to discount no paper without a date. The cases of Woodworth v. Bank of America, 19 John. 391, 10 Am. Dec. 239, and Martin v. Miller, 4 T. R, 320, are very distinguishable from this. In tho latter case, the date of the bill was originally inserted, and had been actually altered by the holder, without the knowledge or assent of the acceptor. In the first case, the place of payment was inserted without the consent of the indorser. Judgment for the plaintiff. Ch. 8) DELIVEET 269 that itJsjri££ess.ai:yJoJtsJree and uninte rrupted negot iabili ty. A note without a date will not be discounted at our banks, nor pass in the money market, without previous inquiry. AlLlh£_parties^therefore, to a note intended for circulation, must--be--pr£sumei40-S^ftt-4bat the 2£^" t*^ mhnm giirVi a nntp ig infrii<;tpf1 fnr the p urpo se of raising money may fill up the blank with a date . The evidence does not show that the plaintiff paid less for the note than its face. Judgment for the plaintiff. AWDE V. DIXON. (Court of Exchequer, 1851. 6 Exch. 869.) Assumpsit by payee against maker of a promissory note. At the trial, before Cresswell, J., at the last York spring assizes, it appeared that the d efendant's brothe r, Richard Dixon, beinp ^ desirous of borrowin g ^mO-oiU-lip security of a promissory note, a pplied to the d e^endan <- ^-^ bp^-nmt. nn^. nf Viic cnrptJAg^ which he ag^reed to do . o^iJlie representation of his brother th at nnp 'Rnhin crin w "uM hp mmf i^ip ^ ^ surety, ana t nat the delendant should not he rpsp nn pihle unless Rohip - s onjoined in the not e. On the faith of this representation, the defen d- ant signed the following;- blank ins trnmentj- 1 p^ vi ng ti sp-irp fn r T?n h- inson ^as the first signature : " ■ December, 1848. On demand, we do hereby jointly and severally promise to pay to Mr. , or order, ilOO., as witness our ha,nds. William Dixon." ^cbinson_re- f used to sign the instrument, and Richard Dixon took it in its imperfect sta te to the plaintin: ; an d upon R. Dixon's representation that he "Had auth ority to deal with it the p laintiff aHvanrprl him mnnpy npnn it, and the bl anks were filled up by inserting "26" before "Dec pmher, " anrl the plaintiff's name as payee . The learned iudg"e directed a v erdict fo r the jjlaintiff^ reserving leave~for the defendant to move to enter a ver- dict for him. A rule nisi was obtained accordingly.^' Parke, B. It is unnecessary to say whether this instrument is a forgery or not ; but there is certainly ground for contending that the making of it complete contrary to the directions of the defendant ren- ders it a false instrument as against him. I do not gainsay the posi- tion that a person who puts his name to a blank paper impliedly author-, izes the filling of it up to the amount that the stamp will cover. But this is a different case. Here the instrume nt, to which the defendant's name is attached, i s delivered to his brother, with power to make it a complete instrument on one condi tion onl y ; that is, provided Robinson would be a jomt surety witn mm. TJiis. therefore, is ^n jpgfanrp- nf a limited authority, where, in case of a refus al by Robinson to join, thera 12 The statement of facts Is abridged, and the arguments of counsel are omitted. 270 FORM AND INCEPTION (Part 1 i s a cnnntermand. Rohmson refiisfid to join, and consequent ly the de- fendant's brother had no authontTLtqjMke_use_oLtlie-instrument. __A. part^rwHSTakeTsucE an incomplete jnstrum^tjaruaQJLrecovgrjiipoil it, uriTe"ss""th e perso n from whom he receives_U_hada£eal_authority tiJ._deal wiiii' it. There was no sucfrautliority in this case, and unless the cir- cumstances show that the defendant conducted himself in such a way as to lead the plaintiff to beheve that the defendant's brother had au- thority, he can take no better title than the defendant's brother could give. The maxim of law is, "Nemo plus juris in alium transferre po- test quam ipse habet." It is a fallacy toi ax- th^t the plni xitiffjs^a-bona R^.. h^-^H^^^j2;^^raW ; }iP >ipg tpl^pn a pipce nf blank paper, not.a^prom- issory note. He could only take it as a note under the authority of the d^endalT Ts-brofFer, an strument i<; y^'^I as ag-^inst th e defendant. Alderson and Pi,att, BB., concurred. Rule absolute. BOSTON STEEL & IRON CO. v. STEUER. (Supreme Judicial Court of Massacliusetts, Suffolk, 1903. 183 Mass. 140, 66 N. B. 646, 97 Am. St. Rep. 426.) Contract for $1,823.25 for work done and materials furnished for a building of the defendant numbered 811 on Beacon street in Boston. Writ dated April 11, 1899. At the trial in the superior court before Bishop, J., without a jury, the judge excluded certain evidence offered by the defendant and re- fused to make certain rulings requested by the defendant. He found for_th£-Blaint iff in the j jirn nf ^2,04-^,?,^, pnH the de fendant alleged e x- ceptions. LoRiNG, J. The only question in issue between the parties in this case is the right of the defendant to be credited with two sums, of $200 and $400, respectively, under the following circumstances: On December 31, 1898, th e defendant's husband owed the plaintif f $1.781.30. for ironwork furnished by it to him in the construction of a house, No. 819 Beacon street. On being pressed for payment, the dg- feprlant's husband, o n January 21, 1899, deliYfrerj to the-pl aintiff the de fendant's check for $200, p ayable to the plaintiff. It is .stated in the biTCo ljexceptions that on Febr uary 2, 1899, "he paid the plaintiff the f u rthpr^smTijTf_ ^00 m a cher. k jnade b)rsa rd"Ten!Tre- &7-&tetre n" — But it appears from the auditor's report, which was beiorethe court and is referred to in the bill of exceptions, that the plaintiff's manage r's name was Ne^fiomb, and that his rtorv \yas _that the chpr V for $400 " was prougHt to him at his offic e orTDevonshire street by Mr. Steuer in response to further demands for money, and that it was made ou t _in_hlaJ3k and filled up by himself, M r. Ste uer being unwilling that it Ch. 3) DELIVEKT 271 shoulrl hp rparif fnr tnnrft t|ifni ^gfi Q. while Mr. Newcomb insisted th at it should b e fnr tlip Inrrrpr nmnnnt-^ ^nH gn tmHp it ^ with Mr. Steuer's ^ ^"'"^nt ) and ^pp^H ' t t" h ' n d^H " The def endant's story was "that she i^avp tlif; rhpr\r tn Mr 'Mpwrnmh at Vipr Viniin Hp+pnrlcLoiilc-utifp These two COl- umns and base plate were delivered on December 22, 1898, and at the rate charged in the bill of items were worth $150.35. From December to March there were negotiations between the defendant's husband and the plaintiff for a contract by which all the ironwork for 811 Beacon street should be furnished by the plaintiff for a fixed sum, payments on account to be made as each floor was finished; and on or about March 1, 1899, the plaintiff's manager submitted to the defendant a written contract to this effect. On March 10th this was returned by the defendant's husband with the statement already referred to, that 811 Beacon street belonged to his wife, and that the contract should be made with her. No written contract was ever made between the plaintiff and the defendant, but the plaintiff went forward and deliver- ed the ironwork for two of the six stories of the house, part being de- livered before March 10th and part after that date. The last was de- livered on March 18th, when the plaintiff stopped because it had not been paid for what it had done. Thereupon this_actiQa_was_brougijt,to i-prnvpr th^J"^=^'^'"'r)aKlp valiif^ nfJJTP _rnafpria1s fnnnishpH anH y /nrU_c]nnp. At the trial the'^fendant contendedj^tji at the a mo unt of oaid pa y- me nts should be cre dited tc r t)pr in ti^ T J^tion, on the ground that the v wpfp paympntg requ l i ril l i j i t lii p pl nlii t if T t n b r niidi in Mil li n r nn ir donAt of her said buildin g numbered 811 Beacon street, atjiLihat-thf chp cEs ^ere trivti i i to he r sa irl hmhaiid, aa iiCT age T rt 74ou aake such p ay- ments ," and ^^ ottered evidence of her instr uctionsto her husba nd as to the use and application of said checks, not made in the presence of the plaintiff or anyone representing him, and claimed that the same should be admitted in evidence. The cou rt declined to admit the sam e, and the defendant duly excepted to the exclusion." The other exceptions taken at the trial have been waived, and the question raised by this ex- ception is the only matter now before us. The pl a.intj ff Via<^ fijp^ipH that it rUH nr.t apppp|- f,iif tViat tVipgp inctr^i/.- tions were give n in a private conversation between husband ^r\c{ wif.p BuT'oil i fair construction of the bill of exceptions we do not think t hat the .e .Y'^^"'''' ''ar| hp taken to have been excluded nn that g-rp nnH It is stated there that the "defendant offered evidence of her instruc- tions to her husband as to the use and application of said checks, not made in the presence of the plaintiff or anyone representing him." This must be taken to be a statement of the ground of the objection, and the rnlj pg miirt ha tnlj i m > i ' i In - ^ I'i dinn- tint rnmpptpnt pvidpnj o- 272 FORM AND INCEPTION, (Part 1 was offered and was excluded because jiot made in the presence of th e plamtnTor^oFiome one Fepresentmgl t. The judge before whom the casewas tried without a jury found "that ppi);?)er nf said p_avments was required by the plaintiff to be ma' de i n advance on account of her said building ' numbered 811 Beacon street, and that neither of them was made according to any agreement for payment to be made on account of said 811 Beacon street, and that no floor in said building was completed at the time either of said pay- ments was made, and that said payments were made by said Bernard Steuer on account of his building numbered 819 Beacon street, and were received by the plaintiff on account therefor." Tjus^ndiiig: makes the evidence exclude ^ irr"^'^^;^'"'"^^ sn fn^ fj. the check_ for $200 is concerned! l|^SEIi3d£Qce_had_beeii_adinitted»_the defendant's case on the $2^)0 check w ould have been this : A check payable_tojhe_plaiaS5a i!Ti3lTdt?d _by_ii]P d''^^tt£iL jo her hiisba nd. to_be deHv preH hy Viim ta jhe-pl aintiff in pa y ment of a debt l o-beeoiiM^due fr om the drawer of the check to thepayee, an djg_^''^"'^"'p'it]y ^i^HpH b y the husband to the pavee of the check, i n payme nt ^^ " d£l2!_j."'' fcom-hitB-tg-t be payee , and is accepted by the payee in good faith in payment of that debt. I n suc h a case the payee_ of the check is a bona fide purchaser o f the checkj or value , without notice, and tjip dc nwr r > - iiii 1 ■•"'» f)ppri arimittpri If the defendant's story were found to be true, namely, thaT-g hg-handed the check to the plain tiff's manager at her house, this c hpt^k wnnld stand nn the same fnntinp- as th e oth er. B ut the storv of the plaintiff 's m^nagpr ^»roo thif tha rViarir w ag brought to him by the defen daat^ husband, signea m-Maak-bv tfiedefendant, and tha t it was filled up by hinL -£ pr the cum of $1 00. vvi?h th6 husband's consent. We.ass ume, in favor of__ th£4)lai] ;i ti ff,-t hat this is to be interprete d tn mean tliaTThp oniv wank inthe rhp rk when iPwas brought to the plaintiff's manager by the defendant's husband, was in the a mount for which it was to be drawn . "Tt nad peen neid in Eng land, before the bills of exchange act in 1882, t liat_s udi-a piece of papgr is not a rhffck; thaLjanf who bny.£uLbuys an incomplete instr ument and his rights depend upon the real autho ri- ' SHrfe-M«:arN:i2D Ed.)— is 27^ FORM AND INCEPTION (Part 1 tyjffihjchj he sig ner had in f actgive n in the m atter. Awde v. Dixon, C ExdTTsegr^eer^teorlfatnrvrSearles, 2 Sm. & G. 147; Hogarth V. Latham, 3 Q.B. D. 643; Watkin v. Lamb, 85 L. T. (N. S.) 483; France v. Clark, 26 Ch. D. 257, 362. And see Ledwich v. McKim, 53 N. Y. 307. Such an incomplete instrument is prima facie authority to fill in the blank. Crutchly v. IVlann, 5 Taunt. 529 ; Swan v. North British Australasian Co., 2 H. & C. 175, 184. But this prima facie authority, as we have said, may be met by evidence of what authority was in fact given, as was done in Awde v. Dixon, 6 Exch. 869. If the blanks are filled up before the instrument is negotiated, it does not lie in the maker's mouth to set up that it was incomplete when delivered by him. In such a case, a plaintiff who buys for value without notice gets the rights of a bona fide purchaser for value of a negotiable instru- ment ; and the fact that there was no authority for filling up the blanks as they were filled up, or the fact that the paper was otherwise wrong- fully dealt with, is no defense. Schultz v. Astley, 2 Bing. N. C. 544 ; Foster v. Mackinnon, L. R. 4 ,C- P- '?04, .712. In this commonwealth it wa s held, on the other_ Ji3nd, that, annate wi tlx,a blank for th£_ i>aYe?s name was a promissory note, and no t an incornpl ete paper, which might be made into a promiss ory note. Ives v. Farmers' Bank, 2 Allen, 236. And in Frank v. Lihenfeld, 33 Grat. (Va.) 377, it was held that the purchaser in good faith of a note in printed form, indorsed by the defendant, where the date, payee's name, and amount had been left blank, had an absolute right to fill in the amount advanced thereon and to fill up the other blanks. It also has been held here, as it has been held in England, that such a blank, in the absence of other evidence, might be filled in by a bona fide pur- chaser (see Androscoggin Bank v. Kimball, 10 Cush. 373) ; and that a bona fide purchaser of such a paper, which is filled before it is nego- tiated, has the rights of a purchaser for value without notice (see Whitmore v. Nickerson, 125 Mass. 496, 28 Am. Rep. 257 ; Binney v. Globe National Bank, 150 Mass. 574, 23 N.^E. 380, 6 L. R. A. 379). See, also, in this connection, Herdman v. Wheeler, [1902] 1 K. B. 361. It is not necessary to consider how a blank check would be dealt with in Massachusetts at common law, where the amount in place of the name or date is lacking. T he negoti g^l^ ir'=^m'""'?"ts nrt (P^v Laws, c. 73, § 31) ado pted the Eng li sh law on this point, and it follow s that, if N ewcomb's st^ ry is to be belie ved, the blank check brou ght to him must be treated as~an incomplete mstrumpr)t anri rint a.g_n pTipr-lr The detendantfurther contends that it was inadmissible to show the real authority given to the husband in the absence of' the plaintiff, and cites in support of that contention Markey v. Mutual Benefit Ins. Co., 103 Mass. 78, 93, and Byrne v. Massasoit Packing Co., 137 Mass. 313. These are cases where the act done was within the ostensible scope_of the authority given an agent, and for that reason the real au- thority could not be invoked. The only act relied on as giving osten- sible authority to the husband in the case at bar was putting him in Ch. 3) DELIVEKT 275 possession of the blank check. There was no more ostensible authority here than there was in Awde v. Dixon, 6 Exch. 869, Hogarth v. Latham, 3 Q. B. D. 643, or Watkin v. Lamb, 85 L. T. (N. S.) 483. An incomplete check gives an authority to fill it up which is only a prima facie authority. It does not import an ostensible authority to fill it up, which is absolute. T he plaint Lfflfi-cight a . nnrl o r tVio bl nnlr rh p r\r fnr $4.00 , and to th e monev_recei3te r1 for - i t, r tpp i rmi ii prm- t- Vip q nthn ri ty a rt iia1 1y given by thed e{e.nr\ant su jw n ^tip - si^Tne - ci it , and tlip cviHgnre^rffgre H should hav e hppn^.grjmiftprl jn respect of th** TPHit rlaimpH fnr thp. $400 paid Und er tfieWankcheclj, i he entry must be : Exceptions sustained. 276" FORM AND INCEPTION (Part 1 CHAPTER IV CONSIDERATION* 2 BLACKSTONE, COMM. 445, 446, A consideration of some sort or other is so absolutely necessary to the formation of a contract, that a nudum pactum, or agreement to do or pay anything on one side, without compensation on the other, is totally void in law; and a man cannot be compelled to perform it. * * * [But] if a man enters into a voluntary bond, or gives a prom- issory note, he shall not be allowed to aver the want of consideration in order to evade payment; for every bond, from the solemnity of the instrument, and every note from the subscription of the drawer, carries with it an internal evidence of a good consideration.* STARR V. STARR. (Supreme Court of Ohio, 1858. 9 Ohio St 74.) Error to the court of common pleas of Athens county. Reserved in the district court. On the 8th day of October, 1857,, the plaintiflEJiledJn the court of common pleas of Athens county her petition against the defendant. 1 For cases as to what constitutes such a parting with value as to make a holder one in due course, see part II, chapter II, section 1. 2 "No-w we do not admit that, when one voluntarily makes a written promise to another to pay a sum of money, the promise can be avoided merely by prov- ing there was no legal and valuable consideration subsisting at the time, any more than, if he actually paid over the amount of such note, he can re- co^'e^ it back again, because he repents of his generosity. » * • We are satisfied that none of the decisions respecting the avoidance of notes or other written promises for want of consideration are impeached by our de- cision in this case. A careful examination will discover that In all those cases the ground taken in defense is, not that there was originally no con- sideration, contrary to the express admission of the promisor, but that the consideration bad failed, or that It rested in mistake or misapprehension; what the parties supiiosed to be a consideration turning out in fact to be none. It was on this priuciple that the case ot Boutell et al. v. Cowden, Adm'r, 9 Mass. 2.j4, was decided. In those cases the promisor is always permitted, against the party with whom he contracted, to show the mistake, or the fail- ure of what was supposed to be substantial. This does not contradict his own acknowled.LCD lent of value received, but sets up an equitable claim of discharge, upon the ground that both "parties were deceived in the contract. Fraud, il- legality, and imposition are also proper defenses against actions to enforce such promises, depending upon other principles." Bowers v. Hurd, 10 Mass. 42T, 429, 430 (1813), overruled in Hill v. Buckminster, 5 Pick. (Mass.) 303 (1S27), and Parish v. Stone, 14 Pick. (Mass.) 198, 25 Am. Dec. 378 (1833). Ch. 4) CONSIDERATION 277 stating that Philip M. ^tarr, in his lifetime, made and delivered to ^JntiinriF cerfain promissory no te in writing for the payment, to pramtitf or bearer, of $5,000 on demand; that said PhiHp M. Starr, after the dehvery of the note, d eparted this life, leaving it unBajd ; and that demand had been made of the defendant, as his executor , for the allowance or payment oLthe note, and that he refused to do either. Whereupon judgment is asked for the amount of the note and interest. To this petition the dgfendant-answered : (1) That his said tes - tator, Philip M. Starr, never made the note in the petition mentioned, andTiever assumed'SSd promised as tllgfemlfated. (2) That, if said_ testat or did make said note, the same was made without any consider- ation, or value whatever, moving from the plaintiff to said testator. Xt the May term, 1858, of said court, the cause was submitted to the court, and the co urt fou nd "that the said promissery^-nete-^was e ypf-ntpri anH rIpl iv prpH hy the said testator, as the said plaintiff hath in her said petition averred. And the court further find that the said note was given by the said testator a-shn rt time b efore his death to the said plaintiff, who was the daughter of said testator, y an advancemen t .aruLgifLby the said testator to the said plaintiff, an d^s some p rovision irirj^i^j n^^f r,f Viig gaiii _estate. and wjthout any other or different con- s ideration whatever. And the j:£!n'"ti_J2^i!2g 0^ r>pininn tViat^ by law, natural love and affer tinn, and a desire on the part of the testator to provide to"? and advance the said plaintiff, are not a good and sufficie nt conside ration to enable the plaintiff to recover on said note, do find that said nntp WPS with out consideration, as said defendant hath in his said answer averred." Thereupon ju dgment was rendered against th e plaintiff for costs, and she excepted to the ruling and judgment. To reverse this judgment, the plaintiff filed a petition in error in the dis- trict court, insisting that the court of common pleas erred: (1) In ruling "that, by law, natural love and affection, and a desire on the part of the testator to provide for and advance the said plaintiff, are not a good and sufficient consideration to enable the said plaintiff to recover on said note." (2) In finding that the note was without con- sideration. (3) In rendering judgment against the plaintiff, when it should have been for her. The questions thus presented were reserved in the district court for decision by the supreme court. Per Curiam. The jiKJ yment o f t hp rm i rt nf rnmmnn pleas mu st be_afi&rnied, upon the principles settled in the case of Hamor v. Moore's Adm'rs, 8 Ohio St. 239. TTiP -nntp jn the rase before the C QU-rt-ma^ a-gift. and i ts delivery was the deliv pr y nf a p rnmise only, and not of thething pro mised. The promise being unfulfilled at the death of the maker of the'note, the gift failed. A"d ?;_tl if prnmi gp wp <; wit hou t c oastderaljo n, and could no t have been en forced against the maker in his lifetime/it cannot he against his_ executor._^ J udgmentaffirmed. 278 FORM AND INCEPTION (Parti EASTON V. PRATCHETT. (Court of Exchequer, 1835. 1 Cromp., M. & R. 79S.) Assumpsit on a bill of exchang e drawn by the defendant in his own f a vnrj1JViri_ Pf't^rnU^ JHnf^^ pjamjiff^ Plea, that the _de fendanTTnclorsed~ said , bill 'to the plaintiff wit hout c onsideration, an3~that the defendant hasnot at any time-re- ceived any value oY consideration for or in respect of said indorse- ment. Replication that the defendant received from the plaintiff a good and sufficient consideration for and in respect of said indorse- ment concluding to the country. The jury found a ve rdict fo r the defendan t. A r ule nisi to enter judgment non obstante^eredicto^for the plaintiff was obtained.' Lord Abinger, C. B. * * * It is clear that on this issue both parties were at liberty to go into evidence as to the consideration for the indorsement of the bill. It appears, in point of fact, that they did so ; for evidence was given upon it on both sides, and the jury have f ound f or thedef endati L — Jt— 4y-H4wH=ft£rii^_pstabli ^('^ ^y th p^yprHirt that the hiTrwas'l ri^''=ed withou t, consideration : but it has been ar- ijage it does not neces- gx i^ that I his .4^a is bad, because in i ts. sarib£_ejjjci«4e.4hatspecigs tans not lie in such as anxLcOmfhon man is toTiave. So,' the forbeafin'g'lo sue, or "a-gaafaata -of another _person!s- d^ht. which are not pecuniary considerations capable of possession, and it is said that such considerations cannot properly be said to be had or received by the defendant. We are of opinion, however, that t his objectio n caiiaQt_be__sustained. Whatever be th e nature o f the consi deration, if it is actually obtained, "tKlI sgTtyTfiav both i njegal laneuag-e- be said to have _had andreceived it! If a cre3it7and it is given to Ijim, he has~fliat tor"which he stipulates, if a bill is given for forbearance, the party may be said to have the consideration, because he actually possesses the benefit of that for- bearance. This appears to us to be a sufficient answer to this objec- tion. But it is fuilli£r_ee«±£nii£dJ]iat4fee-p-lear-i9--bad,Jae£aa;se^ bx J^ay of gif t; that is, that an indorsement may be without consid- eration, yet if it be intended to be a gift, it will be binding. Suppos- ing it to be true that such gift is binding, in one sense indeed the in- dorsement may be said to be without consideration, as it is without pecuniary consideration; butU£- it can be the suhjf ct of an acti on. 'it r^ nnhff lie i ill -HTF--gq=ftW4»4--nrf--ai.acft-k<^;ntr ^nm" rnn°iide ration. as_of fayQr_.a r affection , or the_ desire to promote .the interests of anotjier. Without any violence to language, the terms used in this plea may so be construed, and that would be a sufficient answer to this objec- s The statement is abridged, and the arguments of counsel and part of the opinion are omitted. Ch. 4) CONSIDERATION 279 tion ; but I own that I go further. If a man give " loney as a gratu- ity, it cannot be recovered back, bec aus^^he act is complete, yet a man whu promi ses to give mone y cannot be sued o n such promise ; and ii sn, T dn~nnt spphn^y a prnrmsp m wntmg, notunder seal, can have any binding ettect The law makes no difference between such a "promise and a verbal one. There is the same distinction as to a bill of exchange. Ifaparty gives to another a ne gotiable instrumen t, on which other parti e s are liable, the man who niakes the gift cann ot recover the bill~ba ck, and the man to whom the bill is given may re- cover _against the other parties on the bill"^'^ but it is a v ery ditterent questio n whethe rjyhg gtv er biild5~ him set-f-by theindorse men t; so as to maKe him self liable thereupon to the person to wh omTie"g ives. it. There is no'^ecision that he does, and there is a strong authority the other way, and the prevailing opinion in the profession is that a parol promise of a gift, whether verbal or in writing, will not be binding. It appears, thertefore, that the supposition of a gift, which has been made for the purpose of this argument, would not support the action. We are of opinion, however, that the plea must be taken to negative the existence of any such consideration, even supposing that it would be sufficient. . Upon the whole, we think that the plea must now be considered as alleging that no consideration existed, and that after verdict it cannot be disturbed. Rule discharged. THOMPSON V. CLUBLEY. (Court of Exchequer, 1836. 1 Mees. & W. 212.) Assumpsit, bv the indorsee against the acceptor, o f a bill of ex- chaHge for £200. d ''^ wr ^y ""^ H . '^ ■ pavable t Q ji^c r.wn nrrlpr , an H hy lii"i indnrspH to the plaintiff. , Plea: T hrit thr b i ll n f P'fhrmg' e was wholly mad ^ b y W T? at the request and for and by way of accommodation of and for the plaintif f, and was accepted by the defendant, at the request of H. T?., ijor and by way nt like ar rnmmodatioTi of and for the plaintiff, and that at the time nf making and accepting the said bill of exchange it was ex presslv- agr ppd , by and between the said p artie s, t hat if the sa id bni_n£_£XChailSe gJinnlH liapppn i-n hp ^■\)f. i - - ^ .> -. a in 4^-nt^ f^^r fVip prrrmir "- d ation of the plaintiff, and that all the parties put their nampg to th e- b -ill without consideratio n. With regard to the evidence being inconsist- erit with the terms of the instrument, we are of opinion that .the agreem£ii^ -as~tTr--pavtneTrt--was--cottaterat7'and not part of the origina l c ontract. It was a collateral agreement, that the plaintiff would not enforce the contract upon the bill. Rule refused. Ch. 4) CONSIDERATION 281 COMMERCIAL BANK OP LAKE ERIE v. NORTON & FOX. (Supreme Court of New York, 1841. 1 Hill, 501.) — Assumpsit, tried at the Erie circuit, before Gridley, Chief Judge," August 29, 1840. The plaintiffs sought to recover n s jnHnrgppg r, i two bUls of exchang e drawn by Gillespie, Joice & Co., on E. Norton & Co., payable to Gillespie & Woodruff, at sixty days after date. The' firm of E. Norton & Co. was composed of said Norton and Simeon. Fox, two of the defendants, who alone defended the suit. The acceptance on each of the bills was in this form, "E. Norton & Co., per A. G. Cochrane," and was in Cochrane's handwriting. The bills were discounted on the d ay nf tViP Hatp^ hy t ViP plainti'ffa for the drawers , and were afterwards accepted for the drawers' ac- commodation; the dpfp.ndants N"''*''"'" ''"^ "^"^ lipinng no funds ( }f t hf Hrawpr No doubt, the want of bona fides in the holder will let in a defense, that the bill was accepted without consideration. But is there any want of good faith in advancing money and taking a bill from the borrower, with knowledge generally that it was accepted for his ac- commodation? There certainly is not, unless it be known that it was made for some purpose different from that for which it is used. Grant v. EHicott, 7 Wend. 227. But the question does not arise here. In this case the money was advanced to, and the bills taken from, the men to whom they were » Part of the case relating to a question of agency Is omitted. 282 FORM AND INCEPTION (Part 1 lent, without notice that the defendants were destitute of effects be- longing to the drawers, much less that they would continue destitute. The bills, however, were not yet accepted w,hen the plaintiffs took and discounted them. This raises the objection that the latter dis- counted the bills on the credit of the drawers and indorsers alone, and relieves the defendants to a, certain extent from the doctrine of estoppel. They did not induce the plaintiffs to loan money by previ- ously putting their names on the paper ; and the question is whether there be any other principle on which they are liable. I think there . clearly is. The acceptance of a bill of exchange to secure the debt of a third person is more than a mere special guaranty. The latter must "show a consideration on its face. The acceptance of a bill imports a .consideration; and though there was none in this case, as between ''the drawers and the defendants, yet it was not enough to stop with showing that. The defendants should, at least, have shown beside that the bills were suffered to lie and to mature before they were pre- sented for acceptance. They were drawn at 60 days after date and discounted on the day of their date, and, by acceptance presently, a delay to collect of the drawers would necessarily ensue. Till the con- trary is shown it must be intended that the acceptance was with a view to such forbearance, and in fact worked that consequence. This leaves the case open to the presumption that the acceptances ••were in consideration of the forbearance. It is not enough to defeat ^ note or bill that it appear on its face to have been made or accept- ed as security for a precedent debt' of a third person. Popplewell v. ■ Wilson, 1 Str. 264. It will still be intended that something collateral . to the debt, and something adequate, formed the consideration ; and the maker or acceptor must negative every possible intendment. This f) consideration; 2S5 , 6 from time to time of the note held by the plaintiffs against the in-t. testate at the time of his death, all of which were signed in the same manner as that now produced, and all endorsed by Keating Rawson, the same endorser who was on the note held by the plaintiffs against the intestate at the time of his death ; that the* defendants having in*^ due course of administration exhausted the personal estate of the in- testate, applied to a,nd obtained from the surrogate of the county of • Rensselaer an order to sell all the real estate of the intestate; that^ such real estate was sold, and that the plaintiffs received $3,734.95, endorsed on. the note, from the surrogate of Rensselaer, as their por- tion or dividend of the fund produced by such sale; which evidence , was objected to and rejected by the judge, and the plaintiffs had a> verdict for $939.96, the 'balance of the note, after deducting the en- dorsements thereon. The defendants' having excepted to the decision , of the judge, now moved for a new trial. H. P. Hunt, for defendants. The note of the defendants was given for the debt of their intestate; and offering to prove that they had! no assets, they were not liable, although the promise was in writing, for there was no consideration for the promise. Although the note * is payable at sixty days, the court will not thence infer that forbear- ance was the consideration, but rather, as the notes were uniformly given by the defendants in their representative character, that it was an arrangement for the benefit of the plaintiffs, by means of which they receive a discount every two months. J. P. Cushman, for plaintiffs. Forbearance to sue is a good and suf- ficient consideration for a note given by administrators to pay the debt of their intestate. H^xe forbearance was extended for the period of a year after the date of the intestate, and the note now. in suit it- self shews a delay in the collection of the debt sixty days. The con- sideration need not be averred in the declaration; it is enough that it, as well as the fact that the promise was in writing, be shewn on the trial. Savage, C. J. Toller, in his Treatise on the Laws of Executors and Administrators, p. 464, says an executor may make himself personally liable by his promise to pay a debt of the testator, or answer damages out of his own estate ; but such promise must be in writing, and sup- ported by a sufficient consideration ; there must be either assets in his hands or forbearance by the creditor to constitute a consideration. An admission of assets may be implied by the nature of the promise — as if it be accompanied with a declaration that the money is ready, &c. But in case there are no assets, a promise by an executor to pay his testator's debt is nudum pactum. Paying interest on a bond is no ad- mission of sufficient assets to pay the principal, nor is mere submission to arbitration ; though a submission of the question of assets in his hands and an award against him would be conclusive against him in that litigation, but not with any other creditor. This is a brief sum- mary of the English cases. 286 FORM AND INCEPTION (Part 1 The leading case on this subject is Rann v. Hughes, 7 Brown's P. C. 556. 7 T. R. 350, note. The declaration stated an indebtedness by the defendant's intestate, his death, leaving suiScient assets, the granting administration to the defendant, the liability of the defend- ant, and in consideration thereof, his promise to pay. The defend- ant pleaded the general issue, plene administravit, and plene adminis- travit praeter. On the trial, the first issue was found for the plain- tiff and the others for the defendant. After verdict, it must be taken for granted that the promise was proved to be in writing. That case was therefore the same in principle as this. In the King's Bench, judg- ment was given for the plaintiff, but that judgment was reversed in the Exchequer Chamber, and the latter judgment affirmed in the House of Lords. A question was there submitted to the judges, whether a sufficient consideration appeared in the declaration. Ch. Baron Skin- ner delivered the opinion of the judges at length, in which, among oth- er things, he stated that every man by the law of nature is bound to ful- fil his engagements ; but the law of England affords no remedy to com- pel performance of an agreement without sufficient consideration. The fact that the promise is in writing does not supersede the necessity of proving a consideration. If a person indebted in one right, in con- sideration of forbearance for a particular time, promise to pay in an- other right, that forbearance will constitute a sufficient considera- tion; but if one promise to pay upon request what he was liable to pay upon request in another right, no advantage or convenience is gained by the promissor to constitute a consideration for such prom- ise. In the case of Trevivian v. Hewell, Cro. Eliz. 91, the point de- cided is, that if an executor having sufficient assets promises to pay, the fact of his having sufficient assets is sufficient consideration for the promise. The cases of Atkins v. Hill and Hawks v. Saunders, Cowp. 284, 289, both support the doctrine that a promise by an ex- ecutor to pay a legacy, founded upon the fact of his having assets, is a valid promise. Such, I apprehend, is the doctrine of all the cases. In an action against him in the character of executor, to recover a de- mand out of the testator's estate, a promise by the executor is a mere nudum pactum if there be no assets. 1 Saund. 210, n. 3 Comyn on Contr. 431, concludes an examination of the cases on this point, by saying that though the executor promise upon sufficient consideration, yet by the statute of frauds, the promise, to be valid, must be in writ- ing; but a bare promise to pay by an executor does not make him liable to pay out of his own estate, but he is chargeable only as ex- ecutor and to the extent of assets in his hands, as he would have been if no such promise had been made; and it makes no difference that such promise is in writing. The cases which have been referred to shew, 1. That every promise require a sufficient consideration to sup- port it ; 2. That the promise of an executor to pay absolutely and to bind him personally, not only requires a consideration, but the prom- ise, to be binding, since the statute of frauds, must be in writing; Ch. 4) CONSIDERATION 287 3. That sufficient assets in the hands of an executor constitute a suf- ficient consideration for such promise; and 4. That forbearance to sue is also a sufficient consideration. Assuming these principles to constitute the law of this case, had the plaintiffs any right to recover? The defendants had given a promissory note, which, since the statute of Anne, imports a consideration so far as to relieve the plaintiff from stating any consideration in his declaration, or proving any in the first instance; but it is well settled, as between the parties to a note, that the consideration may be inquired into, and if the defendant, shews a want of consideration, the plaintiff cannot recover. In the case of Ten Eyck v. Vanderpoel, 8 Johns. (N. Y.) 120, the defendant, as administrator, promised to pay, the amount of the note for value received, by J. B. and his heirs ; it was held on demurrer that there was no -consideration for the promise. And in Schoonmaker v. Roosa, 17 Johns. (N. Y.) 304, it is expressly adjudged, that between the original parties the consideration of a promissory note may be inquired into; and if there is a want of consideration, the note can- not be enforced at law. In this case the defendants offered to prove that they had no assets except what had been applied, and therefore there was no consideration for their promise beyond the amount which had been paid. In the case last cited it was also decided by this court that a promise by an executor to pay is not binding, unless he has as- sets, and that a note given by executors by way of submission to arbi- tration, was not binding, unless there were assets in the executor's hands. When a submission has been made by bond, the executor is liable, not only because a seal imports a consideration, for a promis- sory note imports a consideration also, but also because when a per- son has executed an instrument under seal, he shall not be permitted to disprove the consideration. Both the bond and note import as- sets, and of course a sufficient consideration ; the consideration of the bond cannot be explained ; that of the note may, as between the orig- inal parties and 'all parties having notice of the consideration. The defendants in this case having shewn, or what is the same thing on this motion, offered to shew, that they had fully administered, and had no assets in their hands, there was no consideration for their prom- ise; "for such promises," says Lord Hardwicke, "must be understood with reference to assets, otherwise men might be drawn in." I Ves. Sr. 126. From the offer in this case it is apparent that tjie plaintiffs do not stand in a situation to exclude the question of consideration ; they are endorsees of the note, but the note being endorsed for the accommodation of Topping originally, and the debt being his, the transaction was between the plaintiffs and Topping; they paid no value for the note to Rawson, the endorser. The question of forbearance does not properly arise on this record. No such consideration was shown, and the court cannot infer it from the fact that the note is payable sixty days after date. It was contended, upon the argument, that this was like the case of 288 FORM AND INCEPTION (Part 1 a guardian who gave a note for his ward, and was holden personally responsible, on the ground that the debt of the ward was discharged by the guardian's note. The case of Thatcher v. Dinsmore, 5 Mass. 301, 4 Am. Dec. 61, was cited to support the proposition. In that case the defendant as guardian to A. L,., an insane person, promised to pay the plaintiff a certain sum of money. The notes were given for just debts of the ward, and the defendant was his guardian. After the notes were payable, and before suit was brought, A. L. was re- stored to his reason, and the defendant discharged from his guardian- ship. There was a verdict for the plaintiff, subject to the opinion of the court. That opinion was pronounced by Chief Justice Parsons. It had been objected on the argument that there was no considera- tion for the promise; in answer to which, the learned judge says that the notes were given for a debt which the defendant was bound to pay, if he had assets, which it was not denied he had ; that a note for value received was a promise for a legal consideration, though as be- tween the original parties the promissor might shew that none was re- ceived. And he says it has long been settled as law in that state, that a negotiable note given for a simple contract debt extinguishes such debt. He therefore argued that the defendant was liable, as by his note the plaintiff's debt against the ward was discharged. That case is no authority here, because the reasons are not applicable. A prom- issory note given in this state for a simple contract debt does not ab- solutely discharge such debt ; the creditor may still prosecute upon the original consideration, and may recover upon producing and cancel- ing the note. In that case also it appears that the defendant had as- sets. In the case now under consideration the plaintiff lost nothing by taking the defendant's notes for the note of their intestate; they might at any time have prosecuted the defendants as administrators for the money lent to their intestate, and recovered judgment, and thus have obtained any preference which the law would then have given them. On the whole case, therefore, I am of opinion that the facts offered in evidence were a bar to a recovery against the defendants in their individual capacity, and that a new trial should be granted. THOMPSON V. GRAY. (Supreme Judicial Court of Maine, 1874. 63 Me. 228.) Assumpsit_iipon _aJiQte ^ven- by the-defendaat-to-tbe-^laintiff-fDr $190, dated August 17, 1873. A brief statement was pleaded with the general issue, admitting the signature to the note, but s aving tha t it was without any valid legal consideration : tliatj at the time of its^ ex ecution, Mrs. Gray was in a fe ebl e and imp aired__cgqdit'"" "f >^"Hy Ch. 4) CONSIDEKATION 289^ a nd mind, and was mentally i f i rnrnpptpnt- tn . tring-jf t Siit;i'npgg_w;th in- telligence, understanding rationally what she was doing; and that the plaintiff procured her signature by artifice, deception and fraud. The note was given to take up -one of her husband, rnaturing in tb^ bank, for necessaries supplied to their family by the plaintiff. There is no occasion to rehearse the testimony as to the issues of fact presented, since no legal questions arose upon that branch of the case.' Wai,TON, J. The prnmissnyy no te of a married wo man given for th e antecedent debt of her hnshanH is not vo id for wa nt of consider- ation if it is made p a vable a t a futur e^jajC- S uch a np tc npppsjKM44y, operate s^as a suspension of"tEe right ofthe creditor to pnfnrrp p ayrtipnf of his debt till the note matures ; and it is a rule of law, too well settled to require the citation of authorities in support of it, that such a sus - p^nsion of the right of the credit or to enforce paymen t of hi R dpht is a suffictentrfinsidf raiion f"5f"th p prnmisf nf a third person tn pay if- It is not necessary that there should be -an express agreement for delay. The taking of a new security payable at a future day, by operation of law, and without any special agreement to that effect, imposes upon the creditor the duty of waiting for his pay till the new security ma- tures. Andrews v. Marrett, 58 Me. 539, and authorities there cited; Eisner v. Keller, 3 Daly (N. Y.) 485. ' The objection, therefore, that the note in suit was given without consideration is not sustained. Nor are we satisfied that, at the time of the giving of the note in suit," the defendant did not have an intelligent understanding of what she was doing. Nor are we satisfied that there was any such fraud or imposition practiced upon her as ought to avoid the note. She prob- ably felt that if there was no legal obligation resting upon her to pay the debt, still, inasmuch as it was incurred for necessaries supplied her and her children as well as her husband, and she alone had the means to pay it, that there was a moral obligation resting upon her which she was not at liberty to throw off; and the fact that she was- willing to give her personal obligation to pay for such necessaries is not to our minds evidence of insanity or imposition. Judgment for the plaintiff.* ' T Arguments of counsel are omitted. 8 Accord: York v. Pearson, 63 Me. 587 (1874); Pulton v. Loughlin, 118 Ind. 286, 20 N. E. 796 (1888) ; Murphey v. Illinois Bank, 57 Neb. 519, 77 N. W. 1102 (1899) ; Balfour v. Insurance Co., 3 C. B. (N. S.) 300 (1857). In Murphey v. Illinois Bank, supra, the court said: "The effect of this evidence is that Murphey executed the note in suit as an accommodation for Warren & Co. We do not think he executed the note without consideration. The promise of Warren & Co. to repay him what he should pay the bank was a sufficient consideration to support his promise to the bank, and the fact that Warren & Oo. failed to keep their promise to indemnify did not release Murphey from his promise to the bank." If there is a consideration moving from the holder sufficient to support the SM.& M.B.& N. (2d Ed.)— 19. 290 FORM AND INCEPTIglJ i^P^rt 1 MARTENS-TURNER CO. v. MACKINTOSH. 5(^upreme Court, Appellate Division, First Department, 1897. -17 App. Div. 419, 45 N. T. Supp. 275.) Ingraham, J. The action was brought to recover upon two causes of action. The first was a cause of action for goods sold and d e- liversd; and the second f or goods sold an d delivered u pon a cre dit, alleging that the credit was obtainedJj^LialsexepresentatiQns. ~T.he answer of thVdefendant admitted the sale and delivery of the goods set forth in the first cause of action, alleging the commencement of the action on the 24th day of December, 1894, and that, at the time the said action was commenced, nothing was due from the de- fendant to the plaintiff, except the amount due on a note of $323.11, and further alleging that the defendant had given to the plaintiff prom- issory notes for the goods sold and delivered in the cause of action set up in the complaint ; that the plaintiff had accepted the said notes, such notes being given in payment, and not otherwise, of the entire amount *5rhich was due and owing from the defendant to the plaintiff ; and that said notes were not due at the time of the commencement of the action, except the note for $323.11 and denied the allegations of the second cause of action as to the fraud alleged. Upon motion judgment was entered in favor of the plaintiff for the amount of the promissory note admitted to be due, and upon the trial the court, on motion of the plaintiff, directed a judgment for the bal- ance of the amount claimed to be due, on the ground that the giving by the defendant and the acceptance by the plaintiff of a promissory note for the amount of the sale of such goods was not an extension of the time of payment, but that, notwithstanding the giving and acceptance maker's or indorser's obligation, viewed as a simple promise in writing — e. g., an actual promise to forbear to sue upon the debt, whether that of the promis- or or a third party, for which the note was given, or a forbearance at the re- (juest of the maker or indorser (Mansfield v. Corbin, 2 Cush. 151 [1848!] ; Rus- seU V. Bassett, 79 Conn. 709, 66 Atl. 531 [1907]. See Strong v. Sheffield, post, p. 293), or an extinguishment of the promisor's or third party's prior indebted- ness (Union Bank v. Jefferson, 101 Wis. 452, 77 N. W. 889 [1899] ; Petrie v. Miller, 57 App. Div. 17, 67 N. Y. Supp. 1012 [1901], affirmed 173 N. Y. 596, 65 N. B. 1121 [1903] ; Bigelovs^ Co. v. Automatic Co., 56 Misc. Rep. 389, 107 N. Y. Supp. 894 [1907] or the making of advances to the promisor or a third party upon the instrument as collateral security (Black v. Bank, 96 Md. 399, 54 Atl. 88 [1903] ; Metropolitan Co. v. Springer [Sup:] 90 N. Y. Supp. 376 [1904] ; Mer- sick V. Alderman, 77 Conn. 634, 60 Atl. 109 [1905]), or the surrender of col- lateral security at the request of the promisor (Allentown Bauk v. Clay Co., 217 Pa. 128, 66 AtL 252 [1907]), or the giving of a note to the promisor (Milius V. Kauffmann, 104 App. Div. 442, 93 N. Y. Supp. 669 [1905])— it Uas always been held that the maker or indorser is liable on the instrument. A bill or note, given in payment of a debt barred by the statute of limita- tions, or by a discharge In bankruptcy, or voidable on the ground of infancy or insanity, is enforced on the same theory as a parol promise. Mull v. Van Trees, 50 Gal. 547 (1875) ; Wisllzenus v. O'Fallon, 91 Mo. 184, 3 S. W. 837 (1886) ; Bank v. Sneed, 97 Tenn. 120, 36 S. W. 716, 34 L. R. A. 274, 56 Am. St. Rep. 788 (1896). And see Eastwood v. Kenyon, 11 Ad. & E. 438 (1840). Compare Wldger V. Baxter, 190 Mass. 130, 76 N. E. 509, 3 L. R. A. (N. S.) 436 (1906). Ch. 4) CONSIDERATION .291 of the notes in payment of the indebtedness, which notes were not due' at the time of tlie commencement of the action, the plaintiff could at any time maintain an action to recover the price of the goods sold and , delivered. The counsel for the respondent refers to but one authority as jus- tifying the decision of the court below, viz., Graham v. Negus, 55 Hunf 440, 8 N. Y. Supp. 679. That case is opposed to a long Hne of au- thorities in this state (including decisions of the Court of Appeals upon^ the exact point), in England and many of the other states. The rule is stated in 18 Am. & Eng. Enc. Law, p. 177, as follows : "The taking of a note for a debt, whether such note is negotiable or not, operates to suspend the right of the creditor to sue on the original cause of action until after the maturity of the note;" and the cases to which reference is made in the note amply sustain this proposition. It was expressly applied by the Court of Appeals in this state in the cases of Happy v. JVIosher, 48 N. Y. 313, and Hubbard v. Gurney, 64 N. Y. 457. Whether, upon this allegation in the answer, the acceptance of the note was an extinguishment under the original obligation to pay for the goods sold and delivered, it is not necessary to determine. At least the acceptance of the notes was a suspension of the right to sue for the amount due upon the original cause of action for goods sold and de- livered. The cons ir''"'^*''"" frir tlnV --n rpensinn of the right to enforce the ob - ligation is apparent. By the execution of the promissory note the deBt Pi plater ^in tile hands of the creditor an obligation which imposes upon him a much more onerous obligation than that upon the mere agreement to pay money. By it the creditor has the right to transfer by mere indorsement and delivery the obligation of the debtor, which^;, in the hands of the indorsee for value before maturity, imposes uppn the maker of the note an obligation to pay, regardless of any equities^ which exist between himself and his original creditor. That this right of transfer to such a third party gives to the creditor an important ad- vantage, and imposes upon the debtor an increased liability, is ap- parent, and is certainly an ample consideration for an agreement, im- plied by the delivery of the note, that at least the right to enforce the original obligation should be suspended until a failure to pay the note when due. That this must be so is apparent from the fact that such a right to transfer the note by indorsement exists. Upon such transfer the right to sue upon the original cause of action would be suspended, not only until the note was due, but until the note so delivered had again become the property of the original debtor. To hold that, not- withstanding the giving and acceptance by the original creditor of a note for the amount of the indebtedness, such original creditor could at once commence an action to collect the original indebtedness, would expose such a debtor to a twofold liability in case of the transfer of the note, and would be to allow a violation of a clearly implied agreement for which there was ample consideration. We think it quite clear that. 292 1 FORM AND INCEPTION, (Part 1 both upon principle and authority, the giving and acceptance by the creditor of a note for an existing indebtedness at least suspends the right of the creditor to sue on such indebtedness until after the ma- turity of the note, and that the direction of the verdict was erroneous. It follows that the judgment appealed from must be reversed, and a new trial ordered, with costs to the appellant to abide the event. SISON V. KIDMAN. (Court of Common Pleas, 1842. 3 Man. & G. 810.) D ebt by the payee against-a ne of two -^aaJteca-of-a—j^Mai— and .sev- eral note for il5.. payable on demand. The defendant pleaded that the note in the declaration mentioned was and is a promissory note made by the defendant and one Watt; but that neither before nor at the time of making the said note was the defendant liable to the plaintiff for the said sum of £15.; and that the said note was made and signed by the defendant at the request of the said Watt, and for the security to the plaintiff of the said sum of £15., then due and owing from the said Watt to the plaintiff, of which the plaintiff then had notice; and that the defendant never had any value or consideration for the said note. Replication, that the defendant had value and consideration for the said note, to wit, of the amount of the said note. General demurrer and joinder.' ■ TiNDAL, C. J. When the defendant signed this note he entered into a new and original contract; he took the debt upon himself. It abundantly appears upon the plea that the note was made for a good consideration. I think that Evans v. Jones, 5 M. & W. 295, disposes of all argument upon the subject. Erskine, J. I also think that there is no doubt in this case. A good consideration for the note appears on the defendant's plea ; then the case is that of a man who agrees to pay a certain sum on a good con- sideration. Maule, J. The case is wholly free from doubt. Judgment for the plaintiff.^* 9 Arguments of counsel are omitted. 10 But see Courtney v. Doyle, 10 Allen (Mass.) 122 (1865), Ellis v. Clark, 110 Mass. 389, 14 Am. Rep. 609 (1872), Hood v. Robbins, 98 Ala. 484, 13 South. 574 (1893), and Remington v. Detroit Co., 101 Wis. 307, 77 N. W. 178 (1898), In which cases the accommodation party signed ^fter the delivery of the instrument. Ch. 4) CONSIDEEATION 293 STRONG V. SHEFFIELD. (Court of Appeals of New York, 1895. 144 N. Y. 392, 39 N. B. 330.) Appeal from judgment of the General Term of the Supreme Court in the Second Judicial Department, entered upon an order made De- cember 12, 1892, which reversed a judgment in favor of defendant, entered upon a verdict, and also affirmed an order denying a motion for a new trial. This was an action upon a promissory note. The facts, so far as material, are stated in the, opinion.** Andrews, C. J. The contract between a maker or indorser of a promissory note and the payee forms no exception to the general rule that a promise, not supported by a consideration, is nudum pac- tum. The law governing commercial paper, which precludes an in- quiry into the consideration as against bona fide holders for value be- fore maturity has no application where the suit is between the orig- inal parties to the instrument. It is undisputed that the demand notei upon which the action was brought was made by the husband of the\ defendant and indorsed by her at his request, and delivered to the) plaintiff, the payee, as security for an antecedent debt owing by the/ husband to the plaintiff. The debt of the husband was past due atf the time, and the only consideration for the wife's indorsement, whicH is or can be claimed, is that as part of the transaction there was anl agreement by the plaintiff when the note was given to forbear the] collection of the debt, or a request for forbearance, which was folV lowed by forbearance for a period of about two years subsequent tq the giving of the note. There is no doubt that an agreement by the creditor to forbear the collection of a debt presently due is a good con- sideration for an absolute or conditional promise of a third person to pay the debt, or for any obligation he may assume in respect thereto. Nor is it essential, that the creditor should bind himself at the time to forbear collection or to give time. If he is requested by his debtor to extend the time, and a third person undertakes, in consideration of forbearance being given, to become liable as surety or otherwise, and the creditor does in fact forbear in reliance upon the undertaking, a.1- though he enters into no enforceable agreement to do so, his acqui- escence in the request, and an actual forbearance in consequence there- of for a reasonable time, furnishes a good consideration for the col- lateral undertaking. In other words, a request followed by perform- ance is sufficient, and mutual promises at the time are not essential, unless it was the understanding that the promisor was not to be bound, except on condition that the other party entered into an immediate and reciprocal obligation to do the thing requested. Morton v. Burn, 7 Adol. & E. 19; Wilby v. Elgee, L. R. 10 C; P. 497; King v. Upton, 11 Arguments of counsel are omitted. 294 FORM AND INCEPTION (Part y 4 Greenl. (Me.) 387, 16 Am. Dec. 266; Leake, Cent. p. 54; Reynold V. Padelford, 2 Am. Lead. Cas. p. 96 et seq. and cases cited. The general rule is clearly, and in the main accurately, stated in the note to Forth v. Stanton, 1 Saund. 210, note b. The learned reporter says : "And in all cases of forbearance to sue such forbearance must be either absolute or for a definite time or for a reasonable time ; for- bearance for a little, or for some time, is not sufficient." The only qualification to be made is that, in the absence of a specified time, a reasonable time is held to be intended. Oldershaw v. King, 2 Hurl. & N. 517 ; Calkins v. Chandler, 36 Mich. 320, 24 Am. Rep. 593. The note in question did not in law extend the payment of the debt. It was payable on demand, and although, being payable with interest, it was in form consistent with an intention that payment should not be immediately demanded, yet there was nothing on its face to pre- vent an immediate suit on the note against the maker or to recover the original debt. Merritt v. Todd, 23 N. Y. 28, 80 Am. Dec. 243; Shutts V. Fingar, 100 N. Y. 539, 3 N. E. 588, 53 Am. Rep. 231. In the present case the agreement made is not left to inference, nor was it a case of request to forbear, followed by forbearance, in pur- suance of the request, without any promise on the part of the cred- itor at the time. The plaintiff testified that there was an express agreement on his part to the effect that he would not pay the note away, nor put it in any bank for collection, but (using the words of the plaintiff) : "I will hold it until such time as I want my money. I will m^ke a demand on you for it." And again: "No, I will keep it until such time as I want it." Upon this alleged agreement the de- fendant indorsed the note. It would have been no violation of the plaintiff's promise if, immediately on receiving the note, he had com- menced suit upon it. Such a suit would have been an assertion that he wanted the money and would have fulfilled the condition of for- bearance. The debtor and the defendant, when they became parties to the note, may have had the hope or expectation that forbearance would follow, and there was forbearance in fact. But there was no agreement to forbear for a fixed time, or for a reasonable time, but an agreement to forbear for such time as the plaintiff should elect. The consideration is to be tested by the agreem,ent, and not by what was done under it. It was a case of mutual promises, and so intended. We think the evidence failed to disclose any consideration for the de- fendant's indorsement, and that the trial court erred in refusing so to rule. The order of the General Term reversing the judgment should be affirmed, and judgment absolute directed for the defendant on the stipulation, with costs in all courts.'-* 12 But a negotiable instrument payable on demand, signed by the debtor and delivered by him to his creditor on account of the debt, is enforceable by the payee against the debtor. Stevens v. Park, 73 111. 3S7 (1874). (Ch. 4) CONSIDEKATION ^^^ GROCERS' BANK OF CITY OF NEW YORK v. PENFIELD et al. (Court of Appeals of New York, 1877. 69 N. T. 502, 25 Am. Rep. 231.) Appeal from judgment of the General Term of the Supreme Court in the First Judicial Department, reversing a judgment in favor of defendants, entered upon the report of a referee (reported below, 7 Hun, 279). This action was upon two promissory notes, on which defendants Penfield and Stone were makers, which were made payable to de- fendant Truax, and by him indorsed and transferred to plaintiff. , The referee found, in substance, that the notes were executed by the makers without any consideration, were accommodation notes, and were received by plaintiff solely as collateral security for a precedent debt, without any agreement to extend the time of payment of the debt, and thereupon held that plaintiff was not a bona fide holder, and directed judgment dismissing the complaint as to said makers.^* t Rapallo, J. We think that the order in this case must be affirmed on the ground stated by Brady, J., in his opinion delivered at General Term. Whatever confusion may have existed upon the point, w? think that we may, now safely say, in the language of Professor Par- sons (1 Parsons on Notes and Bills, 296), that it is universally con- ceded that the holder of an aCCO r P'TI"''^''*''"" nnta urithnnt rpcfriffl nn as to the mode~ 329 Notes, § 479: "Judge Story says that the interpretation ought to be just such as carries into effect the true intention of the parties, which may be made out by parol proof of the facts and circumstances which took place at the time of the transaction. If the party intended at the time to be bound only as guarantor of the maker, he shall not be an original promisor ; and, if he intended to be liable only as a second xn- dorser, he shall never be held to the payee as first indorser." It is said in Parson on Bills & Notes, §• 520 : "In a suit between the original parties it is considered that the blank name of the indorser means nothing of itself, but its purpose must be shown, aliunde." And in FuUerton v. Hill, 48 Kan. at page 560, 29 Pac. at page 584, 18 L,. R. A. at page 36, it is held, in regard to the liability upon a blank indorsement, that parol evidence is received to rebut the pre- sumption (arisiAg from the indorsement being in blank) and to show what liability it was intended (by the parties) he should assume, and what relation he should sustain to the paper. The opinion in that case is a well-considered one, and in the notes to it many cases are cited that support the text. In order to show that the great weight of authority favors this view, we add the following cases: * * * Moffett V. Maness, 102 N. C. 457, 9 S. E. 399, is relied on by plain- tiffs, but the principle there announced has no application ; and Justice Shepherd, who wrote the opinion in that case, said, in the later cases of Southerland v. Fremont, 107 N. C. 570, 12 S. E. 238: "It is well settled * * * that the agreement upon which the blank indorser of another's obligation signed, and the liability which he intended to assume; may (at least between the original parties, or those parties and a holder with notice) be shown by parol evidence, and he will be held only according to such agreement and intention." fSri ttio cQtTiA t|^^n ry that pa rol evidence is admissible as between the first parties _to the blank indorsement, it is also applicable as against subs equent holders with liOlin,. Q Cyc. 266: David s on v . PowelL- supra. * * * 330 ' NEGOTIATION (Part 2 NICKELL V. BRADSHAW et al. (Supreme Court of Oregon, 1919. 94 Or. 580, 183 Paa 12, 11 A. L. R. 623.) Belle Nickell b rought this action against R. H. Bradshaw, as-jh e m^W^^nfr^g?ing3ffip May Tprrill, as paypp inrlnr.ser, of a pro misao rv nol£. T errill's indorsem ent was in blank. Bradshaw made no appear- anbe, and there was~a~judgmenr^gainst him for the amount of the note ; but as between Belle Nickel! and Efifie May Terrill there was an involuntary ju dgment ofjion suit against Belle J jidaell. — J The plainti ff appealed. Affirmed.''' " HarrTsTT ^"^""^ * O"^ °f ^^ further and separate deffnsps in- ter posed by Effie May Te rrill is based upon the alkgatinn that thp nntf; wa s delivered to and accepte "a by the appellant upo n_ a'n agreement ."to loo k entirely to" Bradshaw tor payrn £nt withQUtlariyrlaim upoa-the re- sp dndent "for liabihty for any _2ortjon nf said note." Th rough cross- gjaHHHa S.on of witnesses for the appellant , the respondgnt succeeded in jtitcad iirin f) - p arnl pvidenre in rnppnrt of thp dpfpn'^P last mentioned. The direct examination justified the cross-examination which was con- ducted by the respondent and permitted by the court (Speer v. Smith, 83 Or. 571, 575, 163 Pac. 979), and consequently the only remaining question arising out of the cross-examination is wl^fither-fliisjfistiniony was competent for any p urpose. The appeHastjQsists that the testi- mniw AiiraTTnrrnnp £tentj2£ £ause it varied the terms ofa~wrttt en con tract. The respondent relies upon an ingenious argument. The're gpoiidcn t endeavors to apply a principle discussed in Colvin v. Goff, 82 Or. 314, 161 Pac. 568, L. R. A. 1917C, 300. The argHtneTit-Df-ri»-i£spQadent is, in substance, that t he note o n i ts face contained two contracts ^jjHf be tween the m ake£_aiid_ the paye e and t he other betw ee n the indorser and indorsee ; th at, w hilf ; the r<>- ^Jtv ■■* i nnn ii a1't i ^ ii ',U 'i- n l i t i n jm| ]i"i' f or thg' WTpose of effecting a delivery of the contract beUveen the make r anj jayee. n e vertheless the seemirip^contract betweenthe indorsee and in3ors ee was _nevg r delivered except in the sense of a physical d e- 1i-v?rjr"; an d that thprpfnrp thp i-^spn-nrl^nt ! 340 '' NEGOTIATION (Part 2 I The counsel for the plaintiffs say that the present case would come under the head of what is in some places denominated a "short en - ^_Y ii" It would seem that iri_T,nndnn it was a rngtnm (Giles et al. V. Perkins et al., 9 East, 13, and counsel arguendo in Ex parte Thomp- son, 1 Alont. & Mac. 102, 110) fo r bankers to receive bills for co Uec- ■'ffon and to enter them immediptpiy in t hpirr nstomers' account s.^Eut never to carry out the proceeds in the column to their credit until a c- ' tually "collected; and this was called a "short entry," or "entering shorr" A nd such bills always continued the property of the c iist( 7mp.£ , unless the cont rary was to be inferred from some course of deal ing. V/hereas country bankers in England generally credited to their cus- tomers at once all bills considered good, and generally allowed drafts upon the proceeds. And even in the latter cases Lord EHenborough held such bills did not pass to the assignees in bankruptcy, if there . was a balance in favor of the customer over and above the bills. "Xjiles et al. v. Perkins et al., 9 East, 12 ; Ex parte Harford, 2 Rose, 163. But Lord Eldon held that where they were with the knowledge ^of the customer entered as cash, and the customer was entitled to draw against them, he could not claim the specific bills. Ex parte Sar- 'geant, 1 Rose, 153; Ex parte Thompson, 1 Mont. & Mac. 102 (A. D. 1828). Bu t even where the r n'it^m wnq to ?ntgr "ih ort. and it was not done, this would not change the property, unless some act of^ ^the customer concurred. Ex parte Sargeant, 1 Rose, 153 ; Ex parte Pease, 1 Rose, 232; and the Vice Chancellor's opinion in Ex parte Thompson, 1 Mont. & Mac. 103, 113. But besides the ground that this was equivalent to a short entry, and that the cases decided upon that point apply to it, it is contende d t-hai^in iliji^ n^gp tlio pffp^f r.f flnp rpgfriVt;r.n jn fhf ind orsement w as -to give ^to all s ubspqi]PTl<' hnldprg pvprpgg nntiVp nf fVip trilfil') and we thmk th is view of the plaintiff's r.nn nsp l is correct . The indorsee is rather an agent of the indorser with power of sub- stitution, and the bill is still in the possession of the indorser 'by his agent. Ex parte Sargeant, 1 Rose, 153. The very mode of indorse- ment in this case shows that it is not a case of ordinary indorsement, and that no consideration has been paid for it. Eadie & Laird v. E. India Co., 1 W. Bla. 395, also in 3 Burr. 1316. The bill must be taken by the holder subject to the trust; and, says Judge Story (on Agency, § 211), if he voluntarily consents to or aids in any other appropria- tion he is responsible; and says Judge Byles (on Bills, *157), he holds the bill or money as trustee for the restraining party, and is liable to the party making the restriction. The words are notice that the re- stricted indorsee has no property in the bill, that he is a mere trustee, and that he can appoint no subagent except for the purpose of hold- ing the bill or money on the same trust, and if the holder pays it to the intermediate agent he becomes responsible for its misapplication. In the case of Sigourney v. Lloyd et al., 8 B. & C. 632, also in 3 Ch. 1) TRANSFER 341 M. & R. 58, and in Dan. & U. 133, 2 Chitty, Jr., on Bills, 1412, 1439, it was contended that an indorsement, "Pay to B. for my use," was a mere direction to B. as to the application of the money; but Lord Tenterden said that if it meant no more the words were useless, as he would be so liable without those words. In that case the payee indorsed generally to A. A., the plaintiff, indorsed, "Pay B. or order for my use." The defendants discounted it and applied it to the credit of B. B. failed, and it was held that the indorsement was sufficient notice to prevent its transfer for the bene- fit of any other person; that all subsequent indorsees were trustees for the plaintiff; and that whoever advanced any money on it did it at his peril. And on appeal this judgment was confirmed by the Exchequer Chamber, the court holding' that the money to whomso- ever paid was in trust for the indorser. Lloyd et al. v. Sigourney, 5 Bing. 525, also in 3 M. & P. 229, and 3 You. & Jer. 220, and Dan. & LI. 213. This custom of restricted indorsing is not of late origin, but is spoken of as usual in Snee et al. v. Prescott et al., 1 Atk. 245, 249 (A. D. 1743) ; the object being, as there stated, to prevent the in- dorsement being filled up in such a manner as to pass the interest in the bill. If the defendants in the present suit had paid the cash to Jay Cooke before hearing of the failure, it would have presented a different question. But they had no right to apply the money of the plaintiffs to the payment of a debt due to them (the defendants) from Jay Cooke. This is not such a payment as can protect them against a suit by the plaintiffs, the real owners. Truettel v. Barandon, 2 Chitty, Jr., on Bills, 1002, also in 8 Taunt. 100, and 1 Moore, 543 ; Thomp- son V. Giles, 2 Chitty, Jr., on Bills, 1190, also in 2 B. & C. 422, and 3 D. & R. 733 ; Lloyd's note to Paley, quoted in full in Story on Agency, § 228, note; 1 Bell's Comm. *270, which work is praised by Mr. Warren as being a "mine of commercial law." Judgment for plaintiffs. HOOK V. PRATT et al. (Court of Appeals of New York, 1879. 78 N. T. 371, 34 Am. Rep. 539.) Appeal from judgment of the General Term of the Supreme Court, in the Fourth Judicial Department, affirming a judgment in favor of plaintiff, entered upon a decision of the court on trial without a jury (reported below, 14 Hun, 396). This action was brought by plaintiff, as trustee of Charles H. Hook, against defendants, as executors of the will of James P. Haskin^ de-. ceased, upon a draft signed and indorsed by said testator, of which the following is^a copy: 342 NEGOTIATION (Part 2 "$5,000. Syracuse, N. Y., September 13, 1872. "Orrin Welch, Treasurer Morris Run Coal Co. : Pay to the or- der of myself, one year after date, five thousand dollars, for value re- ceived. [Signed] J. P. Haskin Indorsed: "Pay to the order of Mrs. Mary Hook, 35 King, for the benefit of her son Charlie. [Signed] J. P. Haskin." Defendants waived demand upon the drawee and notice of protest. Upon the trial defendants' counsel moved for a nonsuit, in substance, upon the ground that the indorsement was restrictive and did not import a consideration, but imported a gift. The motion was de- nied and said counsel excepted. It was then admitted by plaintiff's counsel that Charles H. Hook, the cestui que trust, and the "Charlie" referred to in the indorsement, was a boy some seven or eight years old at the date of the draft ; that he was claimed by plaintiff to be the illegitimate son of defendants' testator, which claim was admitted by said Haskin ; that plaintiff was at the date of said draft a married woman, living in the city of Roch- ester with her husband, who is made a party defendant, and was married not long before the draft was drawn. The boy lived with het and was taken care of by her. A motion was again made for a non- suit, which was denied, and defendants' counsel excepted.'-' RapalIvO, J. The point mainly relied upon by the appellant is that the draft and indorsement upon which this action is brought do not on their face import a consideration. The draft was drawn by the defendants' testator upon the treasurer of an incorporated company, payable to the drawer's own order, and purported to be for value received. It was indorsed by the drawer by a special indorsement, "Pay to the order of Mrs. Mary Hook, for the benefit of her son Charlie." The appellant claims that this is one of those restrictive indorsements which do not purport to be made for a consideration, and do not entitle the indorsee to maintain an action on the bill, with- out proving a consideration. As a general rule an indorsement of a negotiable bill which purports to pass the title to the bill to the indorsee imports a consideration, and the burden of proving want of consideration rests upon the party al- leging it. The restrictive indorsements which are held to negative the presumption of a consideration are such as indicate that they are not intended to pass the title, but merely to enable the indorsee to collect for the benefit of the indorser, such as indorsements "for col- lection," or others showing that the indorser is entitled to the pro- ceeds. These create merely an agency, and negative the presumption of the transfer of the bill to the indorsee for a valuable consideration. But where the indorsement purports to pass the title to the bill ' 1' Arguments of counsel and citations of authorities at end of opinion are omitted. Ch. 1) TRANSFER 343 therein from the indorser, and divest him of all beneficial interest, a consideration for such transfer is presumed. All the cases cited by the counsel for the appellant rest upon these principles. The citation from 3 Kent, Com. 92, states the principle to be that when the in- dorsement is a mere authority to receive the money for the use or according to the directions of the indorser, it is evidence that the in- dorsee did not give a valuable consideration for it and is not the abso- lute owner. This accords with the statement of the principle by Wil- mot, J., iri Edie v. E. India Co., 2 Burr. 1227. So an indorsement, "Pay to S. W. or order for our use" (Sigourney v. Lloyd, 8 B. & C. 622, 3 Y. & J. 220), was held to create a mere agency, and the addition even of the words "value received" to such an indorsement has been held not to vary its effect (Wilson v. Holmes, 5 Mass. 543, 4 Am. Dec. 75). In Edie v. East India Co., 2 Burr. 1221, the examples of restric- tive indorsements put by way of illustration are, "Pay to my steward and no other person," or "Pay to my servant for my use." These show that there was no intention to pass the title to the bill ; and the same effect has been given to an indorsement, "Pay to P. only." It was held that these words indicated that the indorsee was agent only, and paid no consideration for the bill, as a purchaser would not have accepted such an indorsement. Power v. Finnie, 4 Call (Va.) 411. But an indorsement to one person for the use or benefit of an- other affords no such indication. The indorser parts with his whole title to the bill, and the presumption is that he does so for a consid- eration. The only effect of such an indorsement, by way of restric- tion, is to give notice of the rights of the beneficiary named in the indorsement, and protect him against a misappropriation. When a bill is indorsed, "Pay to A. or order for the use of B.," A. cannot pass the bill off for his own debt, but he can by indorsing it transfer the title, and will hold the proceeds for the benefit of B., and be ac- countable to him for them. Evans v. Cramlington, Carth. 5, affirmed in the Exchequer Chamber, 2 Vent. 309. In Treuttel v. Barandon, 8 Taunt. 100, cited by the appellant, drafts payable to the drawer's own order were indorsed by him to De Roure & Co. or order "for the account of Treuttel & Wurz." It appeared that De Roure & Co. were the agents of Treuttel & Wurz, and the latter were held entitled to maintain trover for the drafts against a party to whom De Roure & Co. had pledged them for their own debt. There is nothing in this case to sustain the proposition that a draft thus drawn and in- dorsed does not import a consideration, or that the indorsee couW not maintain an action upon it against the drawer and indorser without proving a consideration. The effect of the special indorsement was simply to give notice of the interest of Treuttel & Wurz, and prevent De Roure & Co. from appropriating the drafts to their own use. Blaine v. Bourne, 11 R. I. 119, .23 Am. Dec. 429, is to the same point. In the present case the indorsement did not purport to restrain the indorsee from negotiating the d^-aft, for it was "Pay to the order 344 NEGOTIATION (Part 2 of Mrs. Mary Hook," for the benefit of her son Charlie. She was constituted trustee of her son and held the legal title. 3 Kent, Com. 89. The indorsement gave notice of the trust, so that if she had passed it off for her own debt, or in any other manner indicating that, the transfer was in violation of the trust, her transferee would take it subject to the trust, but there was nothing reserved to the drawer and indorser. He retained no interest in it. The presumption is that the draft was drawn and indorsed by him for a consideration re- ceived either from the indorsee or the beneficiary. If the youth of the beneficiary should be deemed to afford a presumption that no consideration was paid by him, the presumption would be that it emanated from his mother. The facts admitted on the trial do not establish that the considera- tion was illegal. They show that the boy lived with his mother and was taken care of by her. There is nothing illegal in an undertaking by a putative father to support his illegitimate child, or to pay a sum of money in consideration of such support being furnished by another, though it be the mother of the child. If such was the consideration of this obligation, and it was furnished by Mrs. Hook, she was at lib- erty to take it, payable to herself in her own right, or for the benefit of her child. * * * Judgment affirmed. WILLIAMS, DEACON & CO. v. SHADBOLT. (Queen's Bench Division, 18S5. 1 Cab. & El. 529.) «,/This was an action on bills of exchange by indorsees against the ^acceptors. ly The Dana Land & Lumber Company carried on business in Mo- bile, Alabama, United States, and consigned timber from time to time to the defendants, timber merchants and agents in London. The course of business was for the Dana Company to draw on the defendants from time to time, not against particular shipments, but for amounts regulated by the quantity of timber in course of ship- ""ment. These drafts the Dana Company used to discount with the Bank of Mobile, at Mobile ; and the Bank of Mobile forwarded them Ko the plaintiffs in London indorsed restrictively in the manner the 1bill hereinafter set out was indorsed. The plaintiffs on receiving the draft would take it to the defendants for acceptance, and the plaintiffs thereupon credited the Mobile Bank with the amount of the draft, and allowed them to draw on them at once against the amount so credited. The acceptances would then, in the ordinary course, be paid by the defendants to the plaintiffs at maturity. The defendants were not aware that the plaintiffs used to allow the Bank of Mobile to draw against the amount of the acceptances before ma- , turitv. Ch. 1) TRANSFER 345 In pursuance of the above course of business the Dana Company drew bills upon the defendants iii a form of which the following is a sample : "Sixty days after sight of this first of exchange (second and third unpaid), pay to the order of ourselves £1,600. sterling value received, and charge the saine to account of as advised. "Dana Land and Lumber Company. "To Messrs. Geo. Shadbolt & Son, London." This draft with others was discounted by the Dana Company with the Bank of Mobile, and indorsed to the bank. The bank- indorsed the drafts to the plaintiffs as follows: "Pay to the order of Messrs. Williams, Deacon & Co., for collection per account of the Bank of Mobile, Mobile, Alabama. "A. F. Manley, Cashier." The plaintiffs presented the drafts to the defendants for acceptance, and the defendants accepted the same. The plaintiffs thereupon al- lowed the Bank of Mobile to draw on them for the amount of the said bills. Before the bills matured, the Dana Company paid to the Bank of Mobile the amount of the bills, and wrote to the defendants releasing them from their liability as acceptors. The defendants never received any assignments of timber on ac- count of these bills. Soibsequently both the Dana Company and the Bank of Mobile failed. Cave, J. The questio n is w hat is t he ^ffpci- nf g Hill heinp- rpstnV - tivelv indorsed ? Section 35 of the Bil ls of Ex rhangp Art^ 1882, de- lines a restricti ve indorsement as one which prohibits the further n e- gotiation of the bill, or which expres ses that it is a mere authority t o de al with ttie bill as thefeby diiected, and not a transfer of the own - ership thereof^ We Have tlieretore in this case an indorsement which is not a transfer of the ownership of the bill, but merely operates as an, authority to the indorsee to receive the money on behalf of the indorser. This kind of indorsement was well known long before the act of 1883. In Lloyd v. Sigourney, 5 Bingham, 525, the bankers of the person to whom the bill was restrictively indorsed discounted the bill for their customer, and allowed him to apply the proceeds for his own use; and it was held that the bankers were liable for that amount to the indorser. Best, C. J., there says : "Whoever reads the indorsement on this bill of exchange must perceive that its operation is limited, and that the object of the indorser was to prevent the money received in respect of the bill from being applied to the use of any other person than himself. To whomsoever the money might be paid, it would be paid in trust for the indorser ; and into whose hands soever the bill traveled, it carried that trust on the face of it. And we see no inconvenience to commercial interests from such a limita- 340 NEGOTIATION (Part 2 tion of the effect of the indorsement so expressed. The only result will be to make parties open their eyes, and read before they dis- count." Those observations are eminently applicable in this case. The i ndors eeJLu"^ anf-ln ori'ty tn rpllect the amount of the bill; but t he mvnpr';hi p pf t1ip h i ll nnd nf the rlaht remain e d in th e Bank of M o- hile^ anii_ thp pnym pn t t n th nt hank, was a perfectly good paym ent. That it is a good payment is perfectly clear, u nless the course of bu si- ness between the plaintiffs and the Bank of Mobile ma kes a differenc e ; for the appomtmeht of in agent to receive a debt does not prevent the payment of the debt to the real creditor. C an, then, the arrange - in PTijKhptjyppn tVi p plaintiffs and the Bank of Mobile, that the la tter shall draw on the former for the amount of the acceptances, a ffect ther ights of the parties to the bill, and alter the quality of the indo rse- menF? Can it be that, if the Bank of Mobile does not draw against arTacceptance, the defendants caij pay the amount of the acceptance to the Bank of Mobile; but if the Bank of Mobile does draw, then the defendants can only legally pay the plaintiffs, and this, though the defendants know nothing about the arrangement between the plaintiffs and the Bank of Mobile? Again, if the property in the bill passes to the plaintiffs, when does it pass? Clearly not at the time of the indorsement. Does it pass, then, at the time the advance is made by the plaintiffs? This would be subsequent to the indorse- ment and delivery of the bill; and so the f)roperty in the bill would pass without indorsement or delivery. In my opinion the plaintiffs never got any property in the bill. They got merely an expectation that the money would be paid by the defendants, but were never own- ers of the bill. The plaintiffs' right of action is against the Bank of Mobile, and not against the defendants. As against the defendants, they cannot assert rights in respect of the bill which their indorsers, the Bank of Mobile, cannot assert; and it is clear that the Bank of Mobile have no cause of action against the defendants. I do not think this decision can produce any mischief or inconven- ience. As Chief Justice Best says : "Parties must open their eyes and read before they discount." If the plaintiffs desire to secure themselves in the course of busi- ness they have adopted, they should insist upon a general indorse- ment, and not take a restrictive one. A restrictive indorsement has been long used for the very purpose of preventing the property in the bill from passing, and its effect as so doing has now been sanctioned by the Legislature ; and it would be very dangerous to hold that, by reason of a secret arrangement between indorser and indorsee, a title can be conferred, and the property pass, and so the rights of the acceptor be affected, without his knowledge. Judgment for the defendants.^" 18 Accord: Smith v. Bayer, 46 Or. 143, 79 Pac. 497, 114 Am. St. Rep.' 858 (1905). Ch. 1) TRANSFBE 347 ) GULBRANSON-DICKINSON CO. v. HOPKINS. (Supreme Court of Wisconsin, 1919. 170 Wis. 326, 175 N. W. 93.) Action by the Gulbranson-Dickinson Company against Wilbur E. Hopkins. Judgment for plaintiff, and defendant appeals. Reversedj_ with directions. • ^ Action on notes. The defendant was engaged in the general mer- chandise business at West De Pere, Wis. The Brenard Manufactur- ing Company was a copartnership in Iowa City, Iowa, engaged in a general advertising and business promotion enterprize. On March 25, 1916, the defendant and the Brenard Manufacturing Company entered into a contract by the terms of which the manufacturing com- pany was to deliver to the defendant certain advertising matter and render certain services in promoting the defendant's business, in con- sideration of which the defendant executed and delivered to the manu- facturing company six notes amounting in the aggregate to $340. The merchandise contracted for was to be used as premiums or prizes, tcr be distributed by the defendant in the manner directed, and it was- agreed that if defendant's sales were not increased in an amount speci- fied that certain payments were to be made by the manufacturing com-< . pany to the defendant. One note, amounting to $60, was paid. On April 12, 1916, and before any of the notes given by the defend- ant were due, the manufacturing company, being indebted to the plain- tiff, gave the plaintiff its note, and contemporaneously therewith trans-' f erred as collateral- security the notes in question by the following in-' dorsement : "Pay to the order of Iowa City State Bank, Iowa City, Iowa, for credit account of Gulbranson-Dickinson Co. "Brenard Manufacturing Co." The defendant failed to pay the notes at maturity. They were in- dorsed by the Iowa City State Bank to the First National Bank of Chicago, by whom they were returned to the Iowa City State Bank. Thereafter the plaintiff -brought this action. There was a jury trial. The jury by special verdict found : ( 1) That the plaintiff did not be- come the owner of the notes in question in due course of business for a valuable consideration ; (2) that there was a failure of consideration to the defendant of the notes remaining unpaid and sued upon. Upon motion of the plaintiff the answer to the first question in the special verdict was changed from "no" to "yes" and upon the verdict so amended, judgment was rendered for the plaintiff for $327.50, princi- pal and interest, and costs. From this judgment the defendant ap- peals. RosE.'^BERRY, J. (after stating the facts as above). The plaintiff claims that it is entitled to recover because it is a holder in due course. That the indorsement is restrictive as defined by section 1676 — 6, Wis. ^SiS^ NEGOTIATION (Part 2 "Stats. 1917, is conceded. The notes are dated at West De Pere, Wis., and are payable by their terms at Iowa City, Iowa, where the notes in the contract appear to have been sent for acceptance by the payee named in the note. No claim is made that the laws of Iowa, where I the note was payable, and where it was transferred, are not the same ^s those of Wisconsin. Therefore we treat the case as if the notes were executed, delivered, and payable within the state of Wisconsin and indorsed there. Section 1676 — 7, Wis. Stats. 1917, states the rights conferred upon the trustee under a restrictive indorsement. He may: (1) Receive payment of the instrument; (2) bring any action thereon that the in- jdorser could bring ; (3) transfer the rights as such indorsee where the form of the indorsement authorizes him to do so ; but all subsequent in- . dorsees acquire only the title of the first indorsee under the restrictive indorsement. Indorsements restrictive as to persons are of two kinds: First, those for the benefit of the indorser ; and, second, those for the bene- fit of a third person. An indorsement for the benefit of the indorser constitutes the trustee the agent of the indorser, the beneficial interest remaining in the indorser, while an indorsement for tlie benefit of a third person transfers the title in the instrument to the indorsee. Hook V. Pratt, 78 N. Y. 371, 34 Am. Rep. 539; 8 C. J. 366. The in- ^ dorse ment of the instru me nt in question by the manuiac44jrinpr cnm^ ^ny to the Iowa City State Bank for the benefit of the p laintiff trans- ferr ed the whole title in the instrument to the bank f"'- fh" hptipfit nf the plaintiff. r-TVip q'npstion theri ar jsps , C an ttin pliinti-ff^ fj-f^- whose benefit the in - , dorsement was made, m aintain an action upon the note ? This question niusli5e""ans wered in the amrma tivel JSection 2605, Wis. Stats., pro- vides that every action must be prosecuted in the name of the real party in interest. While section 2607, Wis. Stats., provides that a trustee of an express trust may sue without joining with him the person for whose benefit the action is prosecuted, it is permissive, and does not re- quire that the person for whose benefit the trust was created be joined with the trustee. Piotrowski v. Czerwinski, 138 Wis. 396, 120 N. W. 268;8C. J. 824. The question then arises, I s the plaint ifl. entitled t-r? re^'o yer upon_t he n ntps as a Vinldpr i n due rnnr jip ? The defendant conte nds that und er the provision of section 1676 — 17, Wis, Stats. , which provides that an. in- strument negotiable in it s origin continues in he nep^^ tia ble until itJ ias be eil feSTnctively in dorsed, o r dischars;-ed f t y pavment or otherwis e, t h_g pla intiff cannot be such a holder in due course, because of the fact t hat the mstruments m question were restnc nvply Inffrrpesrl- T he plaintiff_ conten(is that thp instruments in question passed to t he i ndorsee as negotiable instrun ieilj;^ s i^ as ^n rnnnti t ntr *ho inrlm-mn tVip Holder in due course, the restrictive indorsement becoming operative Ch. 1) TRANSFER 349 onl y as against subseq uen t transferees^ It is established beyond ques- tion that an indorsee under a restrictive indorse ment takes a title q ualified either as to person orj jse. The delivery of the instrument gives effect to the indorsement, and it passes to the indorsee subject to all restrictions imposed upon it. The indorsee in this case parted with nothing of value. While as betwee n the manufacturing compa ny and the plaintiff the money w hen paid was to be applied to the us e of the plaintiff, the plaintiff was not in any sense of the term an ind orsee. The instruments in question were not delivered to it until after due. It had no legal title there to. It s right to maintain an action upon the nate s so indorsed arises out of no inrider it "^ tt^e. T^tfiit^if nt as npg^ntiahl e papg TT -bttl laLhci, aixses out ot the practice acts which requir e the sui t t o be brought in the name ot the real party in interest, it does not ap- pear that the notes were delivered to plaintiff under such circumstances as to pass the legal title thereto. While no doubt the Iowa City State Bank by the terms of the indorsement could have transferred or ne- gotiated the instrument in question, the rights of the transferee would have been subject to the terms of the indorsement, and such second indorsee would hot have the rights of a holder in due course. Any transfer by the Iowa City State Bank would have been subject to the rights of the plaintiff, and notice to all subsequent transferees of the plaintiff's right to the proceeds of the instrument in question. Our attention is called to Hook v. Pratt, 78 N. Y 371, 34 Am. Rep. 539. This case, however, does not pass upon this point The question there involved was whether or not it was incumbent upon an indorsee under a restrictive indorsement to prove consideration, or whether con- sideration was imported by the indorsement. In N. C. Bank v. West- cott, 118 N. Y. 468, 475, 23 N. E. 900, 16 Am. St. Rep. 771, Hook v. Pratt, supra, and White v. National Bank, 103 U. S. 658, 26 L. Ed. 250, are cited on the proposition that a restrictive indorsement rendered the check in question nonnegotiable. The instruments in the hands of the plaintiff were therefore nonnegotiable, and subject to any defense which might have been made against them in the hands of the manu- facturing company. We do not overlook the fact that an indorsee accepting negotiable, paper as collateral security may be a holder for value. Shaffer v. Peavey, 161 Wis. 149, 152 N. W. 829. The trouble is that the notes were not accepted by the plaintiff, and were not held by the Iowa City State Bank as collateral, but as trustee for the benefit of the plaintiff, and the Iowa City State Bank as in- dorsee is therefore plainly brought within the provisions of the statute relating to restrictive indorsements. While the indorsement rendered the instruments nonnegotiable, they were valid and transferable, and the plaintiff is entitled to recover thereon in the event that the defend- ant failed to establish a valid defense thereto. The plaintiff further claims that the delivery of the note to plaintiff 350 NEGOTIATION (Part 2 united the legal and equitable title, and so constitutes the plaintiff the owner, with exactly the same right as if the original indorsement had been in the usual and unrestricted form. It appears from the evidence tliat the note was not delivered to the plaintiff until after due. It could not, therefore, become such owner and holder before the maturity of the note, and we are not called upon to consider or discuss what the effect would have been had there been a union of the legal and equitable titles before the notes became due. ^ The jury found that there was a failure of consideration to the de- fendant as to the notes sued upon. The court set aside the finding of the jury upon motion, and held that there was no failure of consider- ation. The object and purpose of the advertising campaign was to increase the sales of defendant during the 12-month period specified in the contract. While the manufacturing company agreed that, if P/9 per cent, of the defendant's gross sales did not amount to $340, it would pay to the defendant any deficiency, in cash, and the defendant testified upon the trial that he had no claim under that clause of the contract, that does not dispose of the question whether or not there was a substantial failure of consideration. It appears with reasonable cer- tainty that the amount of the defendant's sales were increased, but that increased amount of sales was due to advance in prices resulting from war conditions, and not to any increased betterment of business. It clearly appears that a considerable part of the goods contracted for were never shipped, or, if shipped, were never received by the defend- ant, that the campaign was not put on in the manner and at the times specified in the contract, and there is evidence from which the jury was warranted in believing that the business of the defendant was injured rather than promoted by reason of the manufacturing company's fail- ure to carry out its contract according to its terms. Without attempting to recite the entire evidence, we are clearly of the opinion that there was sufficient evidence to sustain the jury's answer to question 2 that there was a failure of consideration as to the notes remaining unpaid and sued upon. The trial court was therefore in error in setting aside the answer to question 2', and that part of the ■verdict should have been allowed to stand. The plaintiff not being a holder in due course for value, and the defendant having established a valid" defense to the notes, jud'gment should have gone accordingly. Judgment reversed, with direction's to dismiss the plaintiff's com- plaint ^° 1 » In National Bank of Commerce v. Bossemeyer, 101 Neb. 96, 100, 162 N. W. 503, 504, li. R. A. 1917E, 374 (1917), referring to an indorsement: "Pay to any bank or banker. All previous indorsements ^aranteed" — the court said: "Is the Indorsement restrictive? Whatever may have been held before the enactment of the Negotiable Instruments Act, it is clear that this question must be determined by the provisions of that statute. Section 5354, Rev. St. 1913 (Laves 1905, c. 83, § 36) is as follows: 'An indorsement is restrictive which either: First — prohibits the further negotiation of the instrument; or second — constitutes the indorsee the agent of the Indorser ; or third — vests the title Ch. 1) TRANSFER 351 in the indorsee In trust for or to the use of some other person. But the mere absence of words Implying power to negotiate does not make an indorsement restrictive.' "There is nothing on the face of this indorsement which prohibits the further negotiation of the instrument or constitutes the indorsee the agent of the indorser, or vests title in the indorsee in trust for the use of some ether person, and hence, by the most elementary principles of statutory con- struction, the plain meaning of the language must be observed, and it must be held that the indorsement was not restrictive. "In Bank of Indian Territory v. First Nat. Bank, 109 Mo. App. 665, 83 S. W. 537 (1904), a case which was decided before the Negotiable Instruments Act went into effect in that state, it was held, without any discussion of the reasons, that an Indorsement such as this was a restrictive indorsement. In three cases decided in that state after the act was in force (National Bank of Roll a V. First Nat. Bank, 141 Mo. App. 719, 125 S. W. 513 [1910] ; National Bank of Commerce v. Mechanics' American Nat. Bank, 148 Mo. App. 1, 127 S. W. 429 [19101 ; Citizens' Trust Co. v. Ward, 195 Mo. App. 223, 190 S. "W. 364 [1916]) the same ruling was made; but in none. of these cases was the lan- guage of the statute considered, and the holding is placed upon the authority of the first case, which, as we have seen, was decided before the act took ef- fect. These cases are not authority upon the proposition as to whether such an indorsement is restrictive under the provisions of the act. ' "Furthermore, any bank receiving a draft with such an indorsement has the right to again Indorse it in blank or payable to any particular bank or person. This, of course, it would have no power to do if the indorsement was restrictive. If, however, the words 'for credit,' 'for account,' 'for collection and return' had been added, the character of the indorsement would have been changed entirely, and it would have been restrictive, showing upon its face that the indorsee bank took it only as a collecting agent, and not as a holder for value. White v. Miners' Nat. Bank, 102 U. S. 658, 26 L. Bd. 250 (1880) ; Commercial Nat. Bank of Pennsylvania v. Armstrong, 148 U. S. 50, 13 Sup. Ct 583, 37 L. Ed. 363 (1893) ; Ditch & Bros. v. Western Nat. Bank, 79 Md. 192, 29 Atl. 72, 138, 23 L. ». A. 164, 47 Am. St. Rep. 375 (1894) ; Murchison Nat. Bank v. Dunn Oil Mills Co., 150 N. O. 718, 64 S. E. 885 (1909) ; Fayette Nat. Bank v. Summers, 105 Va. 689, 54 S. E. 862, 7 L. B. A. (N. S.) 694 (1906) ; United States Nat. Bank v. Geer, 55 Neb. 462, 75 N. W. 1088, 70 Am. St. Rep. 390 (1898). "In First Nat. Bank of Belmont v. First Nat. Bank of Bamesville, 58 Ohio St. 207, 50 N. E. 723, 41 L. R. A. 584, 65 Am. St. Rep. 748 (1898), it is pointed out that the practice of indorsing checks 'for collection' 'for account' had be- come almost universal, but when it was decided by the Supreme Courts of New York and Missouri that the drawee bank could not recover back money paid upon a forged draft in the one case from a collecting bank, or in the other from the bank owning the draft, 'it startled the banks located in large cities, and awakened them to the dangers attending the payment of such drafts or bills, and the result was that in the year 1896, the clearing house in the city of New York adopted a rule to the effect that its members should not send through the exchanges any paper having any qualified or restrictive indorsements, such as "for collection," or "for account of," unless all indorse- ments were guaranteed by the bank sending such paper. This action was soon followed by the clearing houses in other cities, and in some of them all in- dorsements are required to be either in blank, or "pay to or order." By this action of the clearing houses, indorsements "for collection" or "for account of" have fallen into disuse, and the banking business of the country is now done, almost universally, upon unrestricted indorsements.' "We conclude then that the indorsement by the Superior bank was general, and not restrictive." 352 NEGOTIATION (Part 2 III. -Qe^iiElEIL-Iw^Og^BMeNT WARD V. BOWMAN et al. (Kansas City Court of Appeals, Missouri, 1»21. 228 S. W. 833.) Suit by Charles A. Ward against Lynn E. Bowman and another. Verdict and judgment for plaintiff, and defendants appeal. Reversed and remanded."" Bland, J. This is a suit against the indorsers of a promissory note. The note is in the sum of $1,000, dated Kansas City, Mo., June 15, 1914, due three years after date, payable to U. G. Osbom, and signed by Ida M. Goode and Thomas A. Goode as makers. There was a verdict and judgment in favor of plaintiff in the sum of $1,179.82. The note bears the following indorsement: "Without recourse on me. U. G, Osborn. Lynn E. Bowman. Edith L. Bowman." There is a line drawn between the name of Osborn and those of de- fendants. Plaintiff introduced the note and rested. Thereupon de- fendants introduced testimony tending to show that they had owed plaintiff $1,000 as a balance on the sale of certain live stock and farm implements ; that defendants made an agreement with plaintiff that for the money owed to him by them he would take a note secured by a second mortgage aild that defendants would guarantee the payment of ' said amount ; that before the arrangement had been completed plaintiff suggested that they make some other arrangement; that defendants then agreed with him that they would give him a $1,000 mortgage se- cured by real estate in Lawrence, Kan. ; that they knew nothing about the value of the land, but were willing for plaintiff to investigate it, and if the investigation proved favorable they would turn the note over to him and indorse it without recourse. The note is the one sued on, and, while it is payable to U. G. Osborn, it in fact belonged tcr the Bowmans. Defendants' evidence further showed that plaintiff agreed to accept this note, provided Osborn would indorse it and that the defendants would indorse it without recourse. Defendant Edith L. Bowman did not testify, but defendant Lynn E. Bowman testified that his wife signed the note first, he taking it out to his house for her signature; that he and Osborn afterwards On the same day signed the note together, Osborn writing above his name the words "Without recourse on me." Bowman testified that they signed from the bottom upward rather than from the top downward, his wife signing at the bottom; that when his wife signed the words "Without recourse on me" were not on the note, *o Part of the opinion is omitted. Ch. 1^ TRANSFER 3§3 Plaintiff testified in rebuttal that the note sited on- was offered to hipbill as originally drawn, and the days of grace, the defendants paid the contents to the Bank of England, who presented it to them Ch. 1) TRANSFER 355 for payment. The plaintiff, at the time of drawing the bill, paid the full value for the same to Sir Wm. Forbes, J. Hunter & Co., the draw- ers, but did not ask, or obtain, their consent, or that of the defendants, the acceptors, to make any alteration in the tenor of the bill by indorse- ment either as to the condition of the payment, or the extension of time. The plaintiff's name had never appeared in the Gazette as ensign in any regiment of the line. The question for the opinion of the court was whether the plaintiff was entitled to recover. If he was, the verdict was to stand ; if he was not entitled to recover, a verdict was to be entered for the defendants. This case was argued by Lens, Serjt., for the plaintiff, who con- tended that it was competent for the plaintiff by this special indorse- ment to make only a conditional transfer of the absolute interest in the bill, which he had purchased for a full consideration, and had vested in him by the delivery of the drawer. The defendants, by subsequently accepting the bill, had become parties to that conditional transfer, and as the condition had never been performed, the transfer was defeated, and they became liable, after the expiration of the two months, to pay the plaintiff, to whom the property then reverted, the contents of the bill, of which none of the indorsers could enforce payment against the defendants at the 45 days' end, because they had all received the bill subject to the condition, and were bound thereby. He cited Ancher V. Bank of England, Doug. 638. Shepherd, Serjt., for the defendant, contended that it was imma- terial whether the acceptance was before or after the conditional in- dorsement. The acceptance admitted the handwriting of the drawer, but it did not mix itself with the conduct of the indorsers. It admitted nothing which was on the back of the bill. The whole practice of the courts was accordingly ; for in an action against the acceptor it be- came unnecessary to prove the handwriting of the drawer, but it was necessary to prove the handwriting of the indorser. The Court gave judgment for the plaintiff. SECTION 4.— TRANSFER BY DELIVERY MAURAN v. LAMB. (Supreme Court of New York, 1827. 7 Cow. 174.) Assumpsit by the plaintiff as bearer, against the defendant, as draw- er, of a check on the Bank of America, dated New York, October 21, 1824, for $1,912.02, payble to No. 25 or bearer. 356 NEGOTIATION (Part 2 The cause was tried at the New York circuit, March 25, 1826, be- fore Duer, Judge. It was admitted at the trial that the plaintiff had no interest in the check, but sued for the benefit of Mrs. Remsen, to whom the check belonged, with her consent. The defendant objected that the action was not sustainable by the plaintiff in his name; but the objection was overruled. Verdict for the plaintiff.'^ WooDwORTH, J. It is contended that the plaintiff, being a mere agent, and having no interest, cannot maintain this action. It appears that the plaintiff came fairly by the possession ; and his name was used for the benefit of Mrs. Remsen, claiming to be the person in interest. The rule is that the bearer of a note or bill payable to bearer need not prove a consideration, unless he possesses it under suspicious circum- stances. 1 Chit, on BillSj 51. If a question of mala fide possessio arises, that is a fact to be raised by the defendant, and submitted to the jury. Conroy v. Warren, 3 John. Cas. 259, 2 Am. Dec. 156. In that case, Mr. Justice Kent referred to Ivivingston v. Clinton, decided July term, 1799, where the law was laid down that, if a note be indorsed in blank, the court never inquires into the right of the plaintiff, whether he sues in his own right or as trustee ; that any person in the possession of a note may sue; and he says a decision to the like effect (Cooper v. Kerr) was, in March, 1800, affirmed in the Court of Errors. In Payne V. Eden, 3 Caines, 213, the note was indorsed to the plaintiff. He had no interest, but was merely a trustee for others. No objection was tak- en to his want of interest. The question was as to the consideration of the note, and, that being illegal, the plaintiff failed. Thompson, Jus- tice, who delivered the opinion of the court, considered the cause in the same point of view as if the original parties were before the court. In consequence of proving that the plaintiff has no interest, the remedy is not defeated; but the defendant is permitted to avail himself of a defense against the original party. It is no answer to say that the defendant cannot plead a set-off against the cestui que trust. . It may, in some cases, be a hardship, as such a defense applies to the parties on the record only. The act authorizing a set-off may not be sufficient to meet this case ; but the remedy is with the Legislature, not the courts of justice. * * * ■ New trial denied. .21 The statement of facts Is abridged, and the arguments of counsel and part of the opinion are omitted. Ch. 1) TRANSFER 357 GAGE V. KENDAI.I;. (Supreme Court of New York, 1836. 15 Wend. 640.) Error from the Cortland common pleas. Kendall declared in the court below on a promissory note made by Gage, payable to William Castle or bearer! The defendant pleaded the general issue, and gave notice with his plea that he would prove, on the trial, that the plaintiff, at the commencement of the suit, had no title to or interest in the note declared on, but had transferred the same to one Shankland, who was the owner and holder thereof, and that the suit was commenced with- out the knowledge, consent or authority of the plaintiff. On the trial, the defendant offered to prove the facts set forth in his notice. The evidence was objected to, and rejected by the court. The defendant excepted. The plaintiff obtained a verdict, upon which judgment was entered. The defendant sued out a writ of error. PBr Curiam. The question is whether the fact that the holder and owner of a negotiable note has prosecuted such note in the name of a stranger, without his knowledge or consent, is a bar to a recovery in the name of such nominal plainljff. Perhaps this question cannot be better answered than it has been by this court in Lovell v. Evertson, 11 Johns. 58. The note being in- dorsed in blank (in this case payable to bearer), the owner had a right to fill it up with what name he pleased, and the person whose name was so inserted would be deemed, on record, as the legal owner ; and if not so in fact, he could sue as trustee for the persons having the real interest. But the defendant could have no concern with that question. He was responsible to the person whose name was so inserted in the blank indorsement. It is true, as contended for by the plaintiff in er- ror, that suits should be brought by the persons having the legal in- terest in contracts ; but, in the case of negotiable paper, a suit may be brought in the name of a person having no interest in the contract. He may sue as trustee for those who are interested. But why should the defendant give himself the trouble to investigate the plaintiff's title ? He owes the money to some one. In this case he offered to show that he owed it to Mr. Shankland, who had brought the suit. It is not a case, therefore, of mala fide possession. A recov- ery in this case in the name of the present plaintiff might be pleaded, with proper averments, in bar of a new suit in favor of any other per- son. The defendant is not deprived, in such a suit, of any defense which he may have as against the real owner. There is, in principle, no objection to a suit on a promissory note in the name of a nominal plaintiff ; nor is there any authority against it. The cases referred to do not sustain the defense. In the case of Olcott v. Rathbone, 5 Wend. 494, it was said the owner of a promissory note, indorsed in blank, can make whom he pleases the holder. The difficulty in that case was that it did not appear that the owner had assigned the note to the plain- 358 ,NE.GOTiATioN (Part 2 tiff, or had directed that suit. There is no such difficulty here. The defendant's offer was to show that the true owner had himself brought the suit. The case of Waggoner v. Colvin, 11 Wend. 27, when prop- erly considered, is not an authority for the plaintiff in error. That case came up on demurrer. The defendant pleaded that, before the commencement of the suit, the plaintiff had indorsed the note to Stil- well and others and delivered the note to them, who were the true and lawful owners and possessors of the note. The court said that the plea was good, because it showed the legal title out of the plaintiff, but add- ed that, if the suit was brought in the name of the plaintiff for the ben- efit of the owners, that fact should be replied, and it would be a good answer to the plea — distinctly asserting that a suit may be brought in the name of a person having no interest in the note, if for the benefit and by the direction of the owner. The court below decided correctly, and their judgment must be af- firmed. Judgment affirmed. , •HAYS V. HATHPRN et al. (Court of Appeals of New York, 1878. 74 N. T. 486.) Appeal trom judgment of the General Term of the Supreme Court, Jn the Third Judicial Department, affirming a judgment in favor of 'plaintiff, entered upon a decision of the court on trial without a jury (reported below, 10 Hun, 511)! - This action was upon a promissory note, alleged in the complaint to have been made by the firm of Hathorn & Southgate, payable to the order of defendant, Frank H. Hathorn, and by him indorsed and . transferred to plaintiff. The facts appear sufficiently in the opinion. '^ Hand, J. In their answer the defendants denied that the note on which the action was brought was ever transferred to the plaintiff or that he was the legal owner or holder thereof. They further denied that the plaintiff was the real party in interest, and alleged that the Saratoga County Bank was the real party in interest and the owner and holder and should be the plaintiff, and that the note was duly transferred to it instead of to the plaintiff. Upon the trial, the plaintiff having produced the note which was payable to the order of F. H. Hathorn and indorsed in blank by him, rested. The defendants then offered to prove that the note "was not 'the property of the plaintiff; that the same was never transferred to him ; that he was not the real party in interest ; that the note was the property of the savings bank, who is the real party in interest." The 2- The arguments of counsel are omitted Ch. 1) TRANSFER 359 evidence was objected to by the plaintiff as immaterial and was ex- cluded. This ruling I think was erroneous and renders necessary a reversal of the judgment. Under the answer and this offer, the defendants unquestionably pro- posed to show substantially that the plaintiff had no title, legal or equitable, to the note, and no right as owner to its possession. This might have been done by proving that he was the mere finder or the unlawful possessor, or that the right to its possession and ownership was in the bank, to whom they were liable thereon, or in some other way. This they had a right to show. It may be that, had their offer been admitted, they would have pro- duced in fact no evidence to sustain it or prevent a recovery, but in considering the validity of their exception to the exclusion, we must assume that the evidence would have fully covered the propositions contained in the offer. And, as remarked in the dissenting opinion in the court below, "unless the defendants are to be precluded altogether from giving any evidence of a matter confessedly issuable, I do not see how this offer could be rejected." The cases relied upon as justifying the exclusion of the evidence do not go that length. In Cummings v. Morris, 25 N. Y. 625, it was held that the maker of a note could not defeat the plaintiff, not a payee, by proof that the consideration of the transfer to him was contingent up- on his collecting the note. Such plaintiff was declared to be the real party in interest on the express ground that the transfer was complete and irrevocably vested in him the title to the note." In City Bank v. Perkins, 29 N. Y. 554, 86 Am. Dec. 332, there was no question of ex- clusion of evidence, but all the circumstances being proved, it was held that where the cashier of a bank holding commercial paper, pledged it "duly indorsed" to the plaintiff as security for a loan by the plaintiff to his bank, and it had been actually transmitted under his direction to the plaintiff so indorsed, it was no defense to one admitting his liabili- ty upon such paper to show lack of authority in the cashier alone to contract a loan for the bank; or the fraudulent diversion by him of the funds received from the plaintiff on such loan. Some remarks in the opinion in that case, not necessary to the decision, are perhaps too broad to be entirely approved, but it is fully conceded in it that proof that the plaintiff had no right whatever to the possession but was a mere finder or had obtained it by some "positive breach of law" would be a defense. Brown v. Penfield, 36 N. Y. 473, holds merely that proof, by the party Uable on a bill, of gross inadequacy of the consideration for the transfer of such bill to the plaintiff does not impeach the validity of such transfer as to the party so liable. In Allen v. Brown, 44 N. Y. 288, it was d'ecided that, as against the plaintiff holding legal title to the claim by written assignment valid up- on its face, the debtor cannot raise the question as to the considera- 360 NEGOTIATION (Part 2 tion for such assignment or the equities between the assignor and as- signee. In Eaton v. Alger, 47 N. Y. 345, the note being payable to bearer and produced by the plaintiff upon the trial, it was proved that the pay- ee had delivered it to the plaintiff upon his undertaking to collect it at his own expense and pay to such payee upon its collection a certain sum of money^ This was held to show sufficiently that the plaintiff and not the payee was the real party in interest under the Code. Sheridan v. The Mayor, 68 N. Y. 30, reiterates the doctrine that, as against the debtor, the plaintiff holding a written assignment of the claim to himself vaHd on its face, obtained the legal title and was the real party in interest notwithstanding the fact that the assignment was without consideration and merely colorable as between him and the original claimant. Such assignment is expressly declared to protect the debtor paying the assignee against a subsequent suit by the assignor. In Gage v. Kendall, 15 Wend. 640, the fact that the prosecution of the note was by its owner and holder in the name of the plaintiff, a stranger to it, without his consent or knowledge, was sought to be set up as a defense, but it was ruled out on the ground that the nominal plaintiff need have no title to or interest in the paper sued upon. We apprehend the Code has changed this, and that such facts would now be fatal to an action. Such a plaintiff could not in any view be the real party in interest. Indeed he would not even have manual possession of the paper. From this glance at the cases, it appears that it is ordinarily no de- fense to the party sued upon commercial paper, to show that the trans- fer under which the plaintiff holds it is without consideration or sub- ject to equities between him and his assignor, or colorable and merely for the purpose of collection, or to secure a debt contracted by an agent without sufficient authority. It is sufficient to make the plaintiff the real party in interest if he have the legal title either by written trans- fer or delivery, whatever may be the equities between him and his as- signor. But, to be entitled to sue, he must now have the right of pos- session and ordinarily be the legal owner. Such ownership may be as equitable trustee, it may have been acquired without adequate con- sideration, but must be sufficient to protect the defendant upon a re- covery against him from a subsequent action by the assignor. As we understand the scope of the offer in the present case, it went to entirely disprove any ownership or interest whatever, or even right to possession as owner in the plaintiff. It should therefore have been admitted. It may be true that the plaintiff, if this note had been dehv- ered to him with the intent to transfer title, might have lawfully over- written the blank indorsement with a transfer to himself ; it is also true that the production of the paper by him was prima facie evidence that it had been dehvered to him by the payee and that he had title to it, but the defendants' offer was precisely to rebut this very presumption, Ch. 1) TRANSFER 361 and for aught that we can know the evidence under it would have done so. The judgment must be reversed aiid a new trial ordered, costs td abide the event. PREVOT V. ABBOTT. (Court of Common Pleas, 1814. 5 Taunt. 786.) The plaintiff declared on a bill of exchange drawn by the defendant , requiring BT Skinner, 90 days after date, to pay to the defendant or^ his order £27, 5s. 6d., and avprTfH tViat thp dt^ fendant delivered the b ill^ to the plaintiff , and a verred an acceptance, presentment for payment, . and_di£hQnor. After verdict for the plain tiff. Vauehan. ISent.. obtain-i: ed a rule nisi in arrest of judgment, upon the ground that no indorse - ment by the defenda nt was averred , and th at the bill could not pa ss without inaorsement bv mere delivery : and on this day, no cause being shown, he made the Rijlcabcolute. GROVER V C-ROVER. (Supreme Judicial Court of Massachusetts, Middlesex, 1837. 24 Pick. 261, 35 Am. Dec. 319.) -) Assumpsit upon a promissory note made by the defendant, and pay- able to the order of Hiram S. Grover, the plaintiff's intestate. < At the trial, before Putnam, J., it appeared, that in March, 1832, Grover V. Blanchard called to see the intestate. Upon an inquiry be- ing made, whether the intestate had put on record a deed of mortgage' given to secure the payment of the note in question, the intestate pro- duced the deed, which had not then been recorded, and the note, and said to Blanchard, "I will make a present of these to you, if you will accept them." Blanchard then took them and put them in his pocket, saying that he would accept them as a token of love, or affection, or respect. Before they parted, Blanchard handed them back to the in- testate, saying to, him, "You may keep the papers until I call for them, or collect them for me." No assignment was made on the note or mortgage. Afterwards the intestate put the mortgage deed on record. The plaintiff, after the death of the intestate, in October, 1832, took, the deed from the register's office, and, having received of the defend- ant payment of the amount secured thereby discharged the mortgage. Upon the death of the intestate, the note was found in his chest, with his papers ; and Blanchard took it, refused to deliver it to the plaintiff, and caused this action to be brought. The defendant contended: (1) That no valid gift of a chose in ac- tion could be made inter vivos without writing; (2) that the name of 362 NEGOTIATION (Part 3 the donor, or of the administrator or executor of the donor, could not _be used without his consent, in an action brought for the use of the -.donee; and (3) that the donor could not, by law, act as the agent of the donee to keep the papers or collect the money. The jury found that the intestate did intend to give the property contained in the note and mortgage, absolutely, to Blanchard. The whole court were to determine, upon these facts, whether or not the property passed and vested in Blanchard, and whether or not he might maintain this action without the consent of the nominal plain- tiff, for his own use, under the facts and circumstances above stated."' Wilde, J., delivered the opinion of the court. The jury have found that the deceased intended to give the prop- erty in the note, and in the mortgage made to secure it, absolutely, to Blanchard ; and the question is whether by the rules of law this inten- -tion can be carried into effect. It is objected that no vaHd gift of a chose in action can be made in- ter vivos, without writing, and this objection would be well maintain- ed, if a legal transfer of a chose in action were essential to give effect to a gift. But as a good and effectual equitable assignment of a chose in action may be made by parol, and as courts of law take notice of and give effect to such assignments, there seems to be no good founda- tion for this objection. It is true that the cases, which are numerous, in which such equitable assignments have been supported, are founded on assignments for a valuable consideration ; but there is little, if any, distinction in this respect, between contracts and gifts inter vivos. ^The latter indeed, when made perfect by delivery of the things giv- en, are executed contracts. 2 Kent's Comm. (3d Ed.) 438. By de- livery and acceptance the title passes, the gift becomes perfect, and is irrevocable. There is, therefore, no good reason why property thus acquired should not be protected as fully and effectually as property acquired by purchase. And so we think that a gift of a chose in ac- tion, provided no claims of creditors interfere to affect its validity, ought to stand on the same footing as a sale. The cases favorable to the defense do not depend on the question whether an assignment must be in writing, but on the question wheth- er a legal transfer is not necessary to give validity to a donation of a chose in action. The donation of a note of hand payable to bearer, or of bank notes, lottery tickets and the like, where the legal title passes by delivery, is good, for by the form of the contract no writ- ten assignment is necessary ; but as to all other choses in action, ne- gotiable securities excepted, it has been held in several cases, that they are not subjects of donation mortis causa, on the ground un- doubtedly, for I can imagine no other, that a legal assignment is nec- essary to give effect to such donations, and the same reason would 'apply to donations inter vivos. 2»Aj^ments of counsel are omitted. Ch. 1) TEANSFBE 363 The leading case on this point is that of Miller v. Miller, 3 P. Wms. 356, in which it was held that the gift of a note, being a mere chose in action, could not take effect as a donation mortis causa, because no property therein could pass by delivery, and an action thereon must be sued in the name of the executor. But in Snellgrave v. Bailey, 3 Atk. 214, Lord Hardwicke decided that the gift and delivery over of a bond was good as a donation mortis causa, on the ground that an equitable assignment of the bond was sufficient. It seems to be very difficult to reconcile these two cases. The distinction suggested by Lord Hardwicke in the case of Ward v. Turner, 2 Ves'. Sr. 431, in which he adheres to the decision in Snellgrave v. Bailey, is tech- nical, and, to my mind, unsatisfactory; and certainly has no applica- tion to our laws, which place bonds and other securities on .the same footing. We cannot, therefore, adopt both decisions without manifest inconsistency; and we think, for the reasons already stated, that the decision in Snellgrave v. Bailey is supported by the better reasons, and is more conformable to general principles, and the modern de- cisions in respect to equitable assignments. We are, therefore, of opin- ion that the gift of the note of hand in question is valid ; and in com- ing to this conclusion, we concur with the decision in the case of Wright -V. Wright, 1 Cow. (N. Y.) 598, wherein it was held that the gift and delivery over of a promissory note, mortis causa, is valid in law, although the legal title did not pass by the assignment. It is not necessary to decide whether the gift of the mortgage se- curity is valid, although it is reported to have been said by the Vice Chancellor, in the case of Duffield v. Elwes, 1 Sim. & Stu. 243, that a mortgagor was not compellable to pay the mortgage debt without having back the mortgage estate, and for that and other reasons he ' decided, that a mortgage was not a subject of a gift mortis causa. This decision, however, was afterwards overruled in the House of Lords (Duffield v. Elwes, 1 Bligh's New R. 497), on the ground that the gift of the debt operated as an equitable assignment of the mort- gage. But as we think it clear that the right to maintain this action does not depend on that question, we give no opinion in regard to it. Another objection is that, if the gift was valid and complete by the delivery of the note, it was annulled by the redelivery to the donor. We think this .objection also is unfounded. In the case of Bunn v. Markham, 7 Taunt. 230, Gibbs, C. J., lays it down as a well-settled principle that if, after a donation mortis causa, the donor resumes possession, he thereby revokes and annuls the donation. This is the law no doubt. Whether there may not be an exception to this rule, when the donor takes back the thing given at the request of the donee for a particular purpose, and agrees to act as his agent under circum- stances negativing every presumption that he intended to revoke his gift, is a question which it is not necessary now to consider; for the principle has no relation to a donation inter vivos. When such a do- nation is completed by delivery, the property vests immediately and 364 NEGOTIATION (Part 2 irrevocably in the donee; and the donor has no more right over it than any other person. But a donation mortis causa does not pass a title immediately, but is only to take effect on the death of the donor, who in the meantime has the power of revocation, and may at any time resume possession and annul the gift. The last objection to the maintenance of this action by Blanchard, in the name of the administrator, has been sufficiently answered in considering the first objection. It is contended that the consent of the administrator is necessary. But if an equitable assignment is sufficient to complete the gift, it follows that the administrator is trustee, and cannot set up his legal right in order to defeat the trust. This is fully established by the cases of Duffield v. Elwes, 1 Bligh's New R. 497, Hunt V. Beach, 5 Madd. Ch. R. 351, and Duffield v. Hicks, 1 Dow. 1. Judgment for plaintiff for the use of Blanchard.^* ^eqR/^G'ER V. GARY et al. (SupremgJjidlcial Court of Massachusetts, Hampshire, Franklin, and Hamp- ^^c-^Cl^r^^^-^ /^^ITi^^^ den, 1840. 1 Mete. 369.) ■_ ^Assumpsit on a promissory note for $60, made by the defendants, ' ^ary. Ward & Bond, on the 21st of December, 1836, payable to Bax- ter Ayres, or order, on demand, and by him indorsed to the plaintiff. The defendants pleaded the general issue, and filed the following spec- ification of defense, viz.: That said note, if made and indorsed as is supposed by the plaintiff, was not indorsed until the same was over- due and dishonored, and that said Ayres, at the time of making said note, was, and hitherto always has been, and now is, indebted to the defendants in a larger sum than th^ amount of said note, as by their ^account filed by way of set-off. At the trial, in the court of common pleas, before Williams, C. J., the parties agreed that it should be taken by the court and jury as -true "that the note declared on was made as in the declaration alleged; that it passed, for a valuable consideration, into the hands of the plain- tiff, soon after it was made, the precise time, if material, to be left to the jury; that it was not indorsed to the plaintiff until the autumn of 1838 ; and that, at the time of making the note, and ever since, the said Ayres was indebted to the defendants in a sum over $500, which claim has been filed in offset." The only question submitted to the 24 Accord: Hopkins v. Manchester, 16 R. I. 663, 19 Atl. 243, 7 Ij. R. A. 387 (1889), trover against donee of unindorsed instrument; Esau v. Greene & Co 94 Wis. 8. 68 N. W. 405 (1896), trover against purchaser of unindorsed In- strument. Ch. 1) TRANSFEE 365 ~ plaint of the respondent and the demurrer of the appellant. It is an action in equity. The facts set forth in the complaint are to be taken as true. The demurrer admits them. The complaint sh'ows that James- Walters, as the agent of Joseph Fultz, deposited in the First National Bank of Helena $3,100, and took a certificate of deposit in his owi^ name from said bank therefor; that the certificate of deposit is now, in the possession of Fultz, but that Walters has refused, and still re-_ fuses, to make a written indorsement of the same to him; and that, said bank refuses to pay the same, for the reason that the said cer- tificate is not indorsed to him, Fultz. The object of the action is to compel the said Walters to indorse this certificate of deposit to Fultz, and, should he fail to do so, that the court appoint a commissioner to make the same; and, foirther, that the said bank, when the indorse- ment shall be made, shall be compelled to pay the said certificate. Thel demurrer was to the point that the complaint did not state equity suf- ficient to charge the bank. The court overruled the demurrer. The first point we will consider. Does t^ie complaint state facts sufficient to warrant the court in giving the relief demanded against the bank? A certificate of depQsit made in the form of the one presented in this action is in effect a promissory note. It is made payable to the order of Walters, three months from date. Morse on Banks, 53, says of instruments of this character: "They have been held to be in fact equivalent to promissory notes. Usually they embody an express' promise in terms to pay; but, even if they do not, they are yet the bank's acknowledgement of its indebtedness, and so are of the same effect as if they expressly promised payment. Substantially they re- semble promissory notes, and the courts have always inclined to re-, gard them as such, especially when they are made payable otherwise than immediately and upon demand. If they are payable at a future day certain, they are simply promissory notes, neither more nor less." Upon the same subject. Parsons on Notes and Bills (volume 1, p.' 26) says: "There has recently been considerable discussion as to the nature of the instrument in common use among bankers, called a 'cer- tificate of deposit.' It is usually in this form: 'I hereby certify that 28 Compare Keel v. Construction Co., 143 N. C. 429, 55 S. E. 826 (190G). 372 NEGOTIATION (Part 2 Mr. A. has deposited in Bank $1,000, payable twelve months from date, to his order, upon the return of this certificate. [Signed] B., Cashier.' We think this instrument possesses all the requisites of a negotiable promissory note; and that seems to be the prevailing opinion." See, also, to the same effect, Miller v. Austen, 13 How. 218, 14 L,. Ed. 119. Being a promissory note, this certificate is ne- gotiable. The bank, then, had no interest in the relief asked against Walters, the indorsement of the same. And it may be needless to re- mark that this is the only equity presented in the bill for which the plaintiff asks relief. I think, also, that the plaintiff had a speedy and adequate remedy at law against the bank without the indorsement prayed for. The complaint shows that Fultz was the holder of the said certificate, and the real owner of the same. Walters had delivered it to him, and claimed no interest therein. A note may be transferred by assignment as well as by indorsement. And it is not necessary that such assignment should be evidenced by writing. Upon the subject of the assignment of promissory notes, see 2 Pars, on N. & B. 44- 54. In this discussion, he lays down the rule: "A note of hand, or a bill of exchange, being, as we have said, itself only a personal chat- tel, although called and regarded for most purposes as .a chose in ac- tion, may be assigned by delivery only, without any writing upon it, or on another paper." The delivery of the certificate to Fultz under the circumstances that appear in the complaint was an assignment of the same. Fultz al- leges that he is the holder and owner thereof, and that Walters claims no interest therein. The fact that the certificate was made payable to'^tha order of Walters makes no difference. Promissory notes, made payable to.xirder, may be assigned, as we have seen, by delivery. The words "payable to order" made it negotiable, and made it subject to the incidents which attach to negotiable paper. The words "payable to order," in a promissory note, do not amount to a contract that the payor is only to pay the same when it is indorsed properly by the payee. He is liable to an assignee, as well as to an indorsee. Under our stat- ute, Fultz, being, as he avers, the owner and holder of this certificate, could bring an actiqn thereon in his own name against the bank. Our statutes provide : "Inland and foreign bills of exchange and promis- sory notes are hereby declared to be negotiable obligations in this ter- ritory, and collectible by and in the name of the holders and owners thereof." Cod. St. 385. Again, the holder and owner of a promissory note is the real party in interest, and hence, under our statutes, the proper person to bring an action on such an obligation.^' Did the common-law rule prevail, then Fultz would have a right 2 9 Accord: First Nat. Bank v. Moore, 137 Fed. 505, 70 C. O. A. 89 (1905) ; Andrews v. McDaniel, 68 N. C. 385 (1873); Tounker v. Martin, 18 Iowa, 143 (1864); Brown v. Richardson, 20 N. Y. 472 (1859). Ch. 1) TRANSFER 373 to sue the bank, in the name of Walters, for his benefit, and there would be no need of a resort to a court of equity to enforce his rights. For these reasons, we 'think the court erred in its ruling, as far as the bank was concerned. That there was no equity presented in which it had an interest we think evident. In regard to Walters, had this case been properly presented by the demurrer, or briefs filed in this case, I, for myself, would be inclined to hold that the complaint presented no equity against him. The demurrer does not show wherein there was a misjoinder of parties. The point that the complaint does not show equity sufficient to charge either party cannot be raised on a specification that there is a misjoinder of parties defendant. This point can be raised by our Code only under the specification that the complaint does not state facts sufficient to constitute a cause of ac- tion. The other ground specified in the demurrer goes to the point" only that the complaint does not state sufficient facts to justify the court in giving the plaintiff the relief he asks against the bank, and does not present the question as to whether or not there was equity enough in the complaint to charge Walters. And there is nothing in the briefs of appellants that present this issue. This court does riot feel called upon to rule upon any point, in a case like this, not pre- sented by the exceptions or arguments of counsel. Considering the premises, the order of this court is that the judg- ment of the court below be modified, so as to give the relief asked against Walters alone, and that, as to the First National Bank of Helena, the demurrer be sustained and the cause dismissed. Judgment modified. FARRIS V. WELLS. (Supreme Court of Georgia, 1882. 68 Ga. 604.) Crawi^ord, J. R. C. Farris brought suit against C. W. Wells on two bank checks — each one calling for the sum of $250 — drawn by himself (Wellg), against the Gate City National Bank of Atlanta, pay- able to his own order, but not indorsed. The declaration alleged that the said checks were delivered to the plaintiff by the defendant, and upon presentation at the bank for payment were refused on the ground that the said defendant had notified the bank not to pay the same. It was further averred that the said defendant had also re- fused to pay the same, although thereunto frequently requested so to do. The case was dismissed on demurrer, and the plaintiff excepted. We know of no exception to the rule that, where an instrument is made payable to order, the indorsement of the payee is necessary to transfer the legal title to another.. Without such indorsement the transferee takes it as a mere chose in action, and to recover upon it must aver and prove the consideration. Nothing of the sort being 374 NEGOTIATION (Part 2 averred, the demurrer was well taken and properly sustained. Daniel on Neg. Inst. § 661; Story on Promissory Nqtes, § 121; Story on Bills of Exch. § 300. Judgment affirmed. WALTERS V. NEARY. (Coiu-t of Appeal, 1904. 21 Times L. R. 14G.) This was an appeal by the defendant from the judgment of Mr. Justice Phillimore, reported in 20 Times L. R. 5>')5. The plaintiff claimed a declaration that the defendant might be ordered duly to in- dorse a certain bill of exchange, dated February 2, 1903, drawn by the defendant and payable to his order and accepted by one Chapman, and he also claimed to recover £50., the amount of the bill in question. The defendant denied that the plaintiff was entitled to his indorse- ment on the bill, or that he was entitled to recover the amount for which it was drawn. In February, 1903, a Mr. Chapman was de- sirous of raising a sum of money. He got into communication with the plaintiff's solicitor, and it was arranged that if Chapman could procure a bill of exchange for £50., accepted by himself, with the name of a responsible drawer attached, the plaintiff would lend the money. On February 1th Chapman brought to the plaintiff's solicitor a bill for £50. drawn by the defendant and payable to his (the defendant's) order and accepted by Chapman, and upon this being handed to the solicitor the sum in question was advanced. It was not noticed at the time that the bill was not indorsed by the defendant. When this omis- sion was discovered, application was made to him to indorse it, but he declined to do so. The defendant, in his evidence, stated that Chap- man brought the bill to him at his office, and he signed his name as drawer and handed it back to Chapman for the purpose of enabling him to raise money upon it, and that he received no value for it. Mr. Justice Phillimore held that the effect of the transaction was that the defendant was the "holder" of the bill within the definition in section 2 of the Bills of Exchange Act, 1S8'2, immediately after it had been accepted by Chapman, and that he transferred the bill by means of Chapman, as his messenger or agent, to the plaintiff, and that tire plaintiff, as the transferee, was entitled, under section 31, subsec. 4, of the act, to have the indorsement of the defendant, and to recover against him on the bill. He accordingly gave judgment for the plain- tiff for the amount of the bill. The defendant appealed. By section 2 of the Bills of Exchange Act, 1882 : " 'Holder' means the payee or indorsee of a bill or note who is in possession of it, or the bearer there- of." By section 31, subsec. 4: "\\'here the holder of a bill payable to his order transfers it for value without indorsing it, the transfer gives the transferee such title as the transferror had in the bill, and Ch. 1) TRANSFER 375 the transferee in addition acquires the right to have the indorsement of the transferror." , The couft dismissed the appeal. The Master OF the Rolls'" said that the appeal failed. The facts were a little unusual. Cha pman was i n want of a sum of money. He accordingly w ent to the-netend fip'- ^"-'th thp vipyy pt raismgj EHe money. The course adopted was that a bill w as made, of which" the de fendant was the dra wer and Chapman tne drawee , and it was drawn pgj yable to the d efendant's order. C hapman accepted the bill. It was clear that as between the defendant and Chapman the bill was drawn to assist Chapman in raising the money. The transaction involved permission to Chapman to use the defendant's name on the bill for the purpose of raising money. Therefore w hen Chapman took th e bill to the plaintiff and used it for the purpose of raising monev he carried an authority ffnm the detenflant tn request th e plaintiff tn arl- vanr^'^nri Tipy t n Chapman iipnn i t. Chapman , as the learned judge had frinnrl .fr-rj^tj^f bill f" t^" plrijntj ff in the capacity of agent for the defendant, and in that capacity h e hanHpfl the hill to the plainTrff, who g ave him valnp fnr it The d ejendant's indnrsement was nmittp H b v mistake. B ut he trailsferred the bill for value to the plainti ff. The plaintiff claimed to have the bill pa id, and he was met with th ^ diff iculty that.tbe bill wts p ayabl e tn thf defendant's order, and that t he defendant had not in dor^^'^ '*• ^he q^ipgiirm wq" w^^et'ier th^ pl aintiff was entitled in these r i rmrpgtai'T'i ' s tff rffqu i r" th^* d''fenf 1 a nt t o indorse the bill . It was clear that he was so entitled . The case came exactly within the authority of Watkins v. Maule, 3 Jac. & W. 237. The plainj jff accordingly ha d a right to h ave the defendant's indorsement on the bill, and as soon as he obtained the ind orse meni ne would hecome^ he holder fpr val ue , and he could then s ue the accommodation drawe r, though he knew when he took the bill that the drawer was merely an accommodation drawer. That was clear from, section 28, subsec. 2, of the R jlls of Kxchange Act. 1882. which provided that "a n accommo- dation pa rt y is lia b ]p pn the T^TTWn t VinlHer -fnr -iraliif.; j]Xl^ ^ jg itnma - tT rip l wVie ther , wVien RnrVi holder tn ^ k t^" ^'^^ ^" lrr.r,. | , | , r^f, ^ }^ pnrty tn he an ^r cnmmodation part y r>r nnt" It was said, however, that, though the plaintiff became the holder of the bill, he did not become the holder for value. The answer was that value was giver i ^-y tho pl aintiff at the d e fenHant's regiiegt fn ri-npmnn, Tnri » h i f i ^ \^a pl aintiff became the ho lde r for value. _ The judgment was therefore right.' ^ 80 Sir Richard H. Collins. The opinions of Sterling and Matthews, h. J J., are omitted. 31 See Seeley v. Reed, 28 Fed. 164 (1886). 376 NEGOTIATION (Part 2 SUBLETTE et al. v. BREWINGTON et al. (Kansas City Court of Appeals, Missouri, 1909. 139 Mo. App. 410, 122 S. W. 1150.) Broaddus, p. J. This is a s uit to restrain rlefendants from dispos- ing n f a rert a- in prnmiMnnry nnt£ , and askin g inr itg panrpllaHnn On January 8, 1906, th e plaintiffs applied to E. L^ilhert to procure fo r t hem a loan of $1,000 , for the period of one year. For the purpose of obtaining the loan, they:-exg cuted an d deliver ed thpir promissory no te for said sum of $1,000, due in one year, pa yable to the order of said Hi lbert. Hilbert, w ith one of the plaintiffs, applied to several persons to- get them to advancg th s_aioiiey on the notST^ gt failegTo get stic h aavance. The plaintiffs then went home. Afterwards" communica- tion by telephone was had between the plaintiffs and Hilbert as to whether the latter had succeeded in securing the loan. The matter was left in this condition until in April, whenplaintiffs, according to their statements, saw Hilbert for t he purposeof takiffs^ up the no te Vi'hpn jif infnrm fd t hem t h nt h ° h ii-T^dpntroxifK^"*^ lliereafter, on the 2d of October, 1906, several months bef ore the maturitv of the no te. Pl ilbert borrowed fr nm defendants $S14, ^^nd ex ecutedhis note to the m for that amount and turned over to them the note m suit, without in- d^j^^m^nt) as roHateral s p.rnrity , The defendants_Ji2ok__thenote in t h in the b eliefthat Hillpert was its o wner. The j ud gmenLX)"f ls^or~fh?^5eiend ants, and plaintiffs appealed. Th§,.H©teun_c[uestion was a negotiable instrument as defined iii sec- tion 1, p. a43rAcI£n555-(Ann. StrTgTO7 § 403-1), ent!tIea"TSregotiable Instruments," and_is_such_i mder the law merchan t, and, being payable to drder, it did not p3ss by the mere act of deliv ery. Section 30, pp. 247', 248, Acts 1905, is as follows : "An instrument is negotiated when it is transferred from one person to another in such manner as to con- stitute the transferee holder thereof. If payable to bearer it is nego- tiated by delivery ; if payable to order it is negotiated by the indorse- ment of the holder completed by delivery." Section 31 : "The indorse- ment must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, without additional words, is a sufficient indorsement." If the case is to be determined by the law governing the transfer of negotiable instruments payable to order, the defendants are holders with notice of whatever equities plaintiff may have had. The defendants' defense is based u pon fhe gronnd that, as Hilbert was the agen t_of_plaintiffa,,jhe laaL-mgrchant-doesja ot control, but the qiigstionjs one ni -ag-ency. . With this view we coincide. That_Hi lbert w a s the ag ent_of_plaintiffs_ta-iiegotiate a loanJb y means nf the, notq . is undeniable! His duty was to obtain a loan upon the credit of plain- tiffs' note, which as a matter of course would necessarily become the property of whoever could be induced to advance the money on the se- Ch. 1) TRANSFER 377 curity offered. His authority was complete. I n effect he was empow - er ed to dispose of the paper as freely as if it had been his own ! The face . ol the papen in fact, was a notice to strangers that it was his property ; and it was not issued in due course of business . There is no question better settled than that the acts of the agent (within the scope or apparent scope of his authority) are binding upon the principal. We cannot escape the conclusion that the case falls within the rule governing the relation of agent and principal, and that the law merchant does not apply. Furthermore, we are of the opinion that the plaintiffs have no equity as against defendants, and that the transfer to defendants was for a sufficient valuable consideration. It does not lie in the mouth of a party to plead want of consideration where his agent in the exercise of his authority as such deals with a stranger to his prejudice. We believe the judgment of the court was for the right party, and it is therefore affirmed. All concur." 8 2 Accord: Marling v. Fitzgerald, 138 Wis. 93, 120 N. W. 388, 23 L. R. A. (N. S.) 177 (1909). See Fidelity Trust Co. v. Fowler (Tex. Civ. App.) 217 S. W. 953 (1920). 378 NEGOTIATION (Part 2 CHAPTER II HOLDER IN DUE COURSE SECTION 1.— VALUE BAY V. CODDINGTON et al. (Court of Chancery of New York, 1821. 5 Johns. Ch. 54, 9 Am. Dec. 268.) The plaintiff being owner of a vessel, employed Randolph & Savage, defendants, who were copartners, to sell her on a credit, and take good notes in payment, and transmit the same to him, with an account of their charges, which he would pay. Randolph & Savage sold the vessel for $3,875, and on the 3d of June, 1819, i;eceived the notes of the purchasers, payable in two, three, and four months; some of them being made payable to, and indorsed by, P. Aymar & Co., and the others by J. R. Stewart. On the 12th of June, 1819, Randolph & Savage delivered the notes so indorsed to the defendants, J. & I. Cod- dington, who were, at that time, as they stated in their answer, under heavy responsibilities for Randolph & Savage, as indorsers of notes for their accommodation, payable at different times, but all subsequient to the 12th of June, 1819, and which they were afterwards obliged to take up, as they fell due, amounting to above $17,000. The answers admitted that Randolph & Savage had stopped payment, when the notes so held by them were to be delivered to J. & I. Coddington. The defendants, J. & I. Coddington, denied all knowledge of the manner in which the notes had come to the hands of Randolph & Savage, and alleged that they believed that they were the bona fide and exclusive property of Randolph & Savage, that they received these notes with others, as a guaranty and indemnity, as far as they would avail, for their responsibilities, and three days after disjxDsed of some of the notes for cash, and did not know, until several days afterwards, that the notes belonged to the plaintiffs, as stated in the bill. They ad- mitted that, when they so received the notes, Randolph & Savage were not, in a strict, legal sense, indebted to them, but that they were under large gratuitous responsibilities for them. The Chancei,lor.^ It is admitted that Randolph & Savage held the notes belonging to the plaintiff, and which they transferred to the defendants J. & I. Coddington on the 12th of June, 1819, as agents or 1 James Kent. The arguments of counsel and part of the opinion are omitted. Ch. 2) HOLDER IN DDE COURSE 379 trustees for the plaintiff, and that they had no authority to pass them away. It was a gross and' fraudulent abuse of trust on the part of Randolph & Savage. The only question now is whether J. & I. Cod- dington are entitled, under the circumstances disclosed, to hold the notes, and retain the amount of them as against the plaintiff. Negotiable paper can be assigned or transferred by an agent or factor, or by any other person, fraudulently, so as to bind the true owner as against the holder, provided it be taken in the usual course of trade, and for a fair and valuable consideration, without notice of the fraud. But the defendants J. & I. Coddington, have not entitled Ihemselves to the protection of holders of that description. The notes were not negotiated to them in the usual course of business or trade, nor in payment of any antecedent and existing debt, nor for cash, or property advanced, debt created or responsibility incurred, on the strength and credit of the notes. They were received from Randolph & Savage, and after they had stopped payment and had become insol- vent within the knowledge of J. & I. Coddington and were seized upon by the Coddingtons as tabula in nauf ragio, to secure themselves against contingent engagements previously made for Randolph & Savage and on which they had not then become chargeable. There is no case that entitles such a holder to the paper, in opposition to the title of the true ownerj They were not holders for a valuable consideration within the meaning or within the policy of the law. In Miller v. Race, 1 Burr. 463, a bank note was stolen and came to the hands of the plaintiff, and he was held entitled to it. But the Court of King's Bench considered bank notes as cash, which passed as money in the way of business ; and the holder, in that case, came by the note, for a full and valuable consideration, by giving money in exchange for it, in the usual course of his business, and without notice of the rob- bery, and on those considerations he was entitled to the amount of the note. So, in Grant v. Vaughan, 3 Burr. 1516, 1 Black. Rep. 785, a bill of exchange payable to bearer was lost, and the finder paid it to a grocer, for teas, and took the change. There the court laid stress on the, facts that the holder came by the bill bona fide, and in the course of trade, and for a full and fair consideration, and that, though he and the real owner were equally innocent, yet he was to be preferred, for the sake of commerce and confidence in negotiable paper. Again, in Peacock v. Rhodes, 1 Doug. 633, a bill of exchange, with a blank in- dorsement, was stolen and negotiated to a person who took it in the way of his trade, for cloth sold and cash for the balance, and he was held entitled to hold it. Lord Mansfield placed reliance on the cir- cumstance that it was received in the course of trade. It was "by rea- son of the course of trade, which creates a property in the assignee or bearer," that Holt, C. J. (1 Salk. 126, Anon.), held that the owner of a bank bill, which was lost and transferred by the finder to C, for a valuable consideration, could not maintain an action against C. 380 NEGOTIATION (Part 2 It will not be necessary to go further in support of the principle which uniformly pervades the cases upon this point, and I shall con- clude with the case of Collins v. Martin, 1 Bos. & Pull. 648, in which it was decided that if bills of exchange, indorsed in blank, be deposited with a banker, to be received when due, and the banker raises money on them, by pledging them to C, and then becomes bankrupt, C. could not be sued by the real owner, as he took them innocently, without knowledge of the previous circumstances. But it is to be observed that C. there advanced money to the banker, on the credit of the bills, and, as Chief Justice Eyre observed in that case, "If it can be proved that the holder gave no value for the bill, then, indeed, he is in privity with the first holder, and affected by all that will affect him." In short, I have not been able to discover a case in which the holder of negotiable paper, fraudulently transferred to him, was deemed to have as good a title, in law or equity, as the true owner, unless he re- ceived it, not only without notice, but in the course of business, and for a fair and valuable consideration given or allowed on his part, on the strength of that identical paper. It is the credit given to the paper, and the consideration bona fide paid on receiving it, that entitles the holder, on grounds of commercial policy, to such extraordinary pro- tection, even in cases of the most palpable fraud. It is an exception to the general rule of law, and ought not to be carried beyond the ne- cessity that created it. 1 shall accordingly declare that the defendants J. & I. Coddington are not entitled to the notes or the proceeds thereof, as against the plaintiff, who was the lawful owner of them when they were transfer- red to those 'defendants, inasmuch as they did not receive the notes in the course of business, nor in payment, in whole or in part, of any then existing debt, nor for cash or property advanced, or debt created, or responsibility incurred on the credit of the notes. And I shall direct that it be referred to a master to compute the amount of the said notes, with interest thereon from the times they were respectively payable, to the time of making the report, and that all the defendants in the amend- ed bill, or some or one of them, pay to the plaintiff the sum that ^hall be reported as the amount of the said notes, with interest, as afore- said, within 30 days after the master shall have made and filed his re- port, and notice thereof, and of this decree, or that the plaintiff may have execution therefor, against all or either of the said defendants, according to the course and practice of the court. * * * 2 2 Affirmed 20 Johns. 637, 11 Am. Dec. 342 (1822). Ch. 2) HOLDER IN DUB COURSE) 381 BANK OF SANDUSKY v. SCOVILLE et al (Supreme Court of New York, 1840. 24 Wend. 115.) This was an action of assumpsit, tried at the Erie circuit in January, 1839, before Hon. Nathan Dayton, one of the circuit judges. The action was on a note for $500, dated May 11, 1837, made by the defendant Scoville, payabls 60 days after date, at the Bank of Bufifalo, to the order of the defendant Barton, and indorsed by him and the de- fendant Mooney. The defense was usury. It was. an accommodation note, which had been discounted at an usurious rate of interest by Henry D. Ward, a broker in Buffalo, and by him negotiated to the plaintiffs. Ward, in his deposition, testified that he passed the note to and it was discounted by the plaintiffs in June, 1837, to extinguish a debt due by the witness to the plaintiffs; and again he said the note was discounted by the plaintiffs for his benefit, ahd the avails went so far to discharge his liability to them. The plaintiffs had no knowl- edge of the usury. The judge ruled that the plaintiffs were bona fide holders, and entitled to recover. Exception. Verdict for plaintiffs. Defendants move for a new trial. Bronson, J. The note was transferred before the usury act of 1837 took effect; the plaintiffs received it in good faith, without any notice of the usury; and the only question is whether they paid a valuable consideration. 1 Rev. St. 772, § 5. I think they did. It is not the case of a note received in security for a precedent debt, without parting with anything at the time. The note was discounted by the plaintiffs for the benefit of Ward, to ex- tinguish his debt, and the avails went to discharge his liability to the bank. I cannot understand this language as meaning less than that the proceeds of the note were actually applied to the use of Ward. It is the same thing, substantially, as though Ward had first received the money and then paid it over to the plaintiffs, or, indeed, to any other creditor. If Ward's liability was discharged, his debt extinguished, it is impossible to deny that the plaintiffs, in effect, parted with their money, and that Ward received it. In Bank of Salina v. Babcock and Others, 21 Wend. 499, the old notes were charged over and canceled by the bank ; and although not actually given up, we held that the bank was a bona fide holder for value of the new note which had been dis- counted to take up the old ones. The principle of that case is, I think, decisive in favor of the plaintiffs. We were referred by the counsel for the defendants to the case of Ypsilanti Bank v. Martin and Others, decided on the argument at July term, 1839. I have looked into the papers in that case, and it does not appear that the bank had parted with the proceeds of the note, by ei- ther paying over the money to Stevens & Co., or applying it in satis- 382 NEGOTIATION (Part 2 faction of their debt. We thought the plaintiffs had not made out that they had in any way paid value for the note, and on that ground the report of the referee was set aside. New trial denied. TRADERS' BANK OF ROCHESTER v. BRADNER et al. (Supreme Court of New York, General Term, 1864. 43 Barb. 379.) The action is against Lester Bradner and Lewis W. Carroll, makers, as copartners under the firm name of Bradner & Carroll, and the other defendants as acceptors, as copartners under the firm name of Lowrey, Strang & Co., of a draft of $17,000, dated February 6, 1862, payable 90 days after date, to the order of D. Lowrey, indorsed by him, ac- cepted by the drawees and delivered by Lowrey to the plaintiff as col- lateral security for nine drafts held by plaintiff, to which he was a par- ty, in consideration of plaintiff's agreement to extend the time of pay- ment of the nine drafts until the maturity of the draft in suit. The draft in suit had been delivered to the plaintiff in breach of faith by Lowrey and without any authority on his part from the defendants. The court directed a verdict for the plaintiff, to which the defendants excepted, and the exception was directed to be argued irt the first in- stance at the general term.' James C. Smith, J. * * * At the time when the bank received the draft in suit, which was between the 19th and 29th days of March, it held nine other drafts, previously discounted by it, seven of which-, amounting to $17,000, were drawn by Lowrey, on Lowrey, Strang & Co., and accepted by them, and the other two, amounting to $4,000, were drawn by Bradner & Carroll, on Lowrey, Strang & Co., to the or- der of Lowrey, and accepted by the drawees. Of these nine drafts, one was to mature on the 29th of March, one on the 9th of May, and the others on different days between those dates. The draft in suit was transferred to the plaintiff as collateral security for the payment of the nine drafts above mentioned, and the plaintiff, in consideration of such transfer, expressly agreed that it would not sue Lowrey, or Lowrey, Strang & Co., upon either of said drafts, until the maturity of draft thus transferred. The judge, at the circuit, held that this agreement for forbearance was a valuable consideration within the meaning of the rule protecting the holder of negotiable paper ; and I am of opinion the decision is correct. It is insisted by the defendants that, as the plaintiff received the draft as collateral security to a pre-existing debt, it is not a holder for value according to the law as settled by the adjudications of the courts 3 The statement of facts is abridged- The arguments of counsel and part of the opinion are omitted. Cll. 2) HOLDER IN DUB COXIESB 383 of this state. As I understand the numerous reported cases bearing upon this question, they establish the following propositions : ( 1) The holder of commercial paper, who has received it for an antecedent debt, either as a security for payment, or as a nominal payment, without parting with any security, property or thing of legal value, or giving any new consideration, is not a holder for a valuable consideration. Coddington v. Bay, 20 Johns. 637, 11 Am. Dec. 342; Stalker v. Mc- Donald, 6 Hill, 93, 40 Am. Dec. 389 ; Farrington v. Frankfort Bank, 24 Barb. 554. (3) If, however, he has paid value for the paper, or on the credit thereof has rehnquished some available security or valuable right, or has expressly assumed some new legal obligation, he is a hold • er for value, although the paper is available to him as security for a pre-existing debt. Bank of Salina v. Babcock, 21 Wend. 499 ; Bank of St. Albans v. Giliiland, 23 Wend. 311, 35 Am. Dec. 566; Bank of San- dusky V. Scoville, 24 Wend. 115 ; Mohawk Bank v. Corey, 1 Hill, 513 ; Youngs V. I^e, 18 Barb. 187, affirmed 12 N. Y. 551 ; White v. Spring- field Bank, 3 Sandf. 222 ; Meads v. Merchants' Bank, 25 N. Y. 143, 82 Am. Dec. 331. Tested by these rules, the agreement of the plaintiff to give time up- on the drafts held by it was clearly a valuable consideration. Not only was it a valid consideration to support the transfer, but it created a new equity between the original parties, and, as it suspended the legal rem- . edy of the plaintiff, the latter could not be restored to as good condi- tipn as it was in before the transfer. It operated like a new loan of the sums due upon the drafts, until the maturity of the new security. The transaction was substantially the same as if the old drafts, to the amount of $17,000, had been paid and canceled, and the sum paid had been loaned upon the new draft. Although the plaintiff did not give up the old drafts, it parted virith its right of action upon them until the maturity of the new one, and assumed the risk of loss by the insolven- cy of Lowrey and his firm, in the meantime. And if the agreement to give time included the drafts drawn by Bradner & Carroll, they were thereby released from their obligation upon such drafts,- as, on the face of the paper, they were sureties for the acceptors, and it does not ap- pear that they consented to the extension. The defendants' counsel cites Wardell v. Howell, 9 Wend. 170, and Francia v. Joseph, 3 Edw. Ch. 182, as authorities for the position that the agreement to give time does not constitute a valuable considera- tion. But I think they are not decisive of the question. In Wardell V. Howell the plaintiffs had sued one Hughes on a note of $178. Hughes offered the plaintiffs that, if they wouki stop the suit, he would pay the costs and turn out a note in his possession, indorsed by the de- fendants, for $150, as collateral security for the note they held against him. The plaintiffs acceded to his proposition ; he paid the costs and delivered the note in question to them; and they gave him a receipt acknowledging that they had received the note, which, when paid, was 384 NEGOTIATION (Part 2 to apply on their note against him. There was no express agreement to extend the time of payment ; and none could be presumed, as the agreement was merely that the note should take effect as security. Gahn v. Niemcewicz, 11 Wend. 320 ; Williams v. Townsend, 1 Bosw. 411. It would have been otherwise, perhaps, if the parties had intend- ed the note to operate as a conditional payment, at the time of the transfer. Myers v. Welles, 5 Hill, 463 ; Fellows v. Prentiss, 3 Denio, 512, 45 Am. Dec. 484, 2 Am. L. Cas. 420. But, by the terms of the receipt, it was not. to be applied until paid. This view of the case was undoubtedly taken by the court. Justice Sutherland, delivering the opinion, said that the prior indebtedness of Hughes, and the discon- tinuing the suit against him, did not constitute a valuable considera- tion against the indorser, under the circumstances of the case. But he did not suggest that there was an agreement to extend the time express or implied ; nor is there an allusion in the case to the effect of such an agreement by way of constituting a valuable consideration in the sense of the commercial rule. The case of Francia v. Joseph wa? decided by Vice Chancellor McCoun, so far as this point is concerned, mainly upon a misapprehension, as I conceive, of the ruling in War- dell V. Howell. The decision is entitled to great respect, but as it stands alone, and is not binding upon this court at General Term, we may properly consider the question as an open one. The plaintiff is to be regarded as a holder for value to the full amount of the draft in suit. As has already been observed, it assumed by its agreement the risk of loss by reason of all the parties to the drafts becoming insolvent during the period for which the credit was extended. If such insolvency had occurred, the bank would be re- garded as having paid the full amount of the draft. The result is the same if the transaction is treated as a payment of $17,000 upon the original drafts, and a loan of that amount upon the draft in suit. I am of opinion the motion for a new trial should be denied. Ordered accordingly.* * "The law Is well settled that the acceptance of such a note, on time, though not received as an absolute payment of the original debt, suspends the right of action on the original debt until the note becomes due, or is dishon- ored. Putnam v. Lewis, 8 Johns. 389 ; 5 Term K. 513 ; Edwards on Bills and Promissory Notes, 197, 199, 200; 1 Blng. 100. The debt from Agnew to the plaintiff being due, and the plaintiff, at the time of surrendering the old note, having the right to enforce its payment presently, and which right he relin- quished by receiving the note in suit, and his power to collect the original debt from Agnew being suspended until the note in suit should mature, he certainly parted with value, which constitutes a sufficient consideration to make the plaintiff a bona fide holder of the note In suit. Burns v. Rowland, 40 Barb. 369. It is true the plaintiff had Agnew's indorsement upon the note in suit ; but this was only a contingent liability at the end of six months, and the plaintiff was bound to protest the note to charge him." Mason, J., in Pratt v. Coman, 37 N. Y. 440, 443. Ch. 2) HOLDER IN DUB COUESH 385 MOORE V. RYDER. (Court of Appeals of New York, 1875. 65 N. T. 438.) Appeal from judgment of the General Term of the Supreme Court in the Third Judicial Department, affirming a judgment in favor of plaintiff, entered upon a decision of the court upon trial without a jury. This action was brought upon a draft drawn by J. W. L,anden, as agent of the Cooper's Falls Iron Company, upon defendant, James M. Ryder, and accepted by him for the purpose stated in the opinion of Earl, C, wherein may be found a sufficient statement of the facts." Earl, C. John W. Landen was agent of the Cooper's Falls Iron Company, and as such agent, on the 1st day of October, 1868, he drew the draft in suit on the defendant, Ryder, who accepted the same. The draft was made, accepted and delivered to Landen mainly for the spe- cial purpose of paying certain drafts of the iron company which had been previously accepted by Ryder for its accommodation, and which were then held by the Jefferson County Bank. Landen, however, did not take up the iron company's drafts, but transferred and delivered the draft in suit to the plaintiff, who took the same without any knowl- edge of the purpose for which it was made and accepted. At the time of the transfer to the plaintiff the iron company was indebted to him and Burnham, under the firm name of Moore & Burnham, $723.35; to plaintiff and Kingsbury, under the firm name of Moore & Kings- bury, $272.53 ; and to plaintiff individually, $110.56— all the debts be- ing past due. The plaintiff received the draft in payment of these debts, and assumed to pay to his partners, Burnham and Kingsbury, their respective shares of the debts. Upon these facts the judge at Special Term found, as a conclusion of law, that plaintiff was a bona fide holder of the draft for value, and entitled to recover against the acceptor, and an exception to this finding presents the only question for our consideration. This draft, having been fraudulently diverted from the object for which it was made and accepted, can be enforced against the accom- modation acceptor only by a bona fide holder for value. This has been so thoroughly settled by repeated adjudications in this state as to need no further discussion. The only difficulty in this and similar cases is to determine what is a parting with value within the meaning of the rule. A mere precedent debt does not make a party taking such a draft a holder for value, whether the draft be taken in payment of the debt or as collateral security therefor. Coddington v. Bay, 20 Johns. 637, 11 Am. Dec. 342 ; Wardell v. Howell, 9 Wend. 170 ; Payne v. Cutler, 13 Wend. 605 ; Stalker v. McDonald, 6 Hill, 93, 40 Am. Dec. 389 : Farrington v. Frankfort Bank, 24 Barb. 555; Huff v. Wagner, 63 5 The arguments of counsel, and the opinion of Gray, C, who placed the re- versal on another ground, are omitted- Sm.& M.B.& N.(2d Ed.)— 25 386 NEGOTIATION (Part 2 Barb. 215; Lawrence v. Clark, 36 N. Y. 128; Pratt v. Coman, 37 N. Y. 440 ; Weaver v. Barden, 49 N. Y. 286. The law enables a bona fide holder of negotiable paper, which has been fraudulently obtained, diverted or used, to recover thereon only to protect him against loss, upon the principle that, when one of two innocent parties must suffer by the fraud or wrong of a third person, the one who put it in the power of such third person to commit the fraud or wrong must bear the loss. In case the holder of such paper has not parted with any value, or incurred any binding obligation, or changed his position to his detriment on the faith thereof, he cannot recover thereon against the party defrauded or wronged. In this case, plaintiff gave up no security and parted with no value when he received the draft. But it is claimed that he extended the time of payment upon the debt until the- maturity of the draft, and that his extension makes him a holder for value. I cannot assent to this. There was no agreement to extend the time of payment, and the receipt by plaintiff of this paper fraudulently diverted would fur- nish no consideration for such an agreement. If the rule were other- wise, then, in all cases where negotiable paper fraudulently diverted is received in payment of a precedent debt past due, there would be such an extension of time as would make the taker a holder for value. The paper taken must have some time to run or the taker cannot be a bona fide holder, and the claim is that, when such paper is taken in payment of a precedent debt past due, there is such a necessary extension of the time of payment of the debt as to make the taker a holder for value. If this claim be well founded, the rule that one who takes negotiable paper which has been fraudulently diverted in payment of a precedent debt cannot enforce the same against the party wronged by the fraud is of no practical value; and yet the rule has been enforced in many cases. Rosa v. Brotherson, 10 Wend. 86 ; Payne v. Cutler, Lawrence v. Clark, and other cases above cited. It is further claimed that the assumption by plaintiff to pay his part- ners, Burnham and Kingsbury, their shares of the demands against the iron company which were paid by the draft transferred to him, makes him a holder within the rule. He did. not in fact pay his partners, and so far as the case shows they did not call upon him for payment. While they could adopt and enforce such a promise made upon a val- uable consideration for their benefit, within the rule laid down in the case of Lawrence v. Fox, 20 N. Y. 268, they did not do it, and until they did adopt it, or in some way claim the benefit of it and accept the new debtor in place of the old one as their principal debtor, the origi- nal parties to the promise could rescind or mod,ify it ; and the obliga- tion of the promisor to the party for whom the promise was made re- mained imperfect. If they should adopt the promise, they would have to adopt the instrumentalities by which it was obtained ; and the plain- tiff could defend against them upon the ground that he was induced to make the promise by fraud. Ch. 2) HOLDEE IN DUE COURSE 387 I am also of the opinion that the mere promise of the transferee of such paper does not make him a holder for value, for the reason that the promise is not binding, and. cannot, therefore, in a legal sense, subject him to loss. Weaver v. Barden, 49 N. Y. 286, 291, and cases cited. The promise is no more binding than it would have been if it had been made to pay a certain sum of money at sorJie future time to the fraudu- lent negotiator of the paper. That such a promise made the transferee a holder for value within the meaning of the rule no one would claim. In any event plaintiff could only be a bona fide holder for value to the extent of the shares of his partners in the debts which he had as- sumed to pay. Stalker v. McDonald, 6 Hill, 93, 40 Am. Dec. 389; Huff V. Wagner, 63 Barb. 215. The judgment should therefore be reversed, and new trial granted ; costs to abide event. Judgment reversed. CURRIE et al. v. MISA. (Court of Exchequer Chamber, 1875. 10 L. R. Exch. Cas. 153.) Action by the plaintiffs as bearers of a check drawn by defendant on his bankers, Barnett, Hoare & Co., payable to Lizardi & Co., or bearer,/ payment of which had been refused by the drawee in compliance with the defendant's instructions. The defendant for the sum of £1,999. 3s^ to be paid the 14th February, 1873, had purchased of Lizardi & Co.' drafts on their correspondent in Cadiz. On the 13th Lizardi & Co. delivered to the plaintiffs the following instrument : "London, 14th February, 1873. "M. Misa, Esq., 41, Crutched Friars: Please to pay to Messrs.' Glynn, Mills & Co., or bearer, the sum of nineteen hundred and ninety' pounds three shillings, for bills negotiated to you last post. ' "£1,999. 3s. F. De Lizardi & Co." < This instrument was stamped as a bill of exchange payable on de-/i mand, although it was postdated. At this time Lizardi & Co. were indebted to the plaintiffs, their bankers, in the sum of about i83,500e and were insolvent. On the 14th the defendant was notified that this instrument was in the hands of the plaintiffs, and delivered to them' the check upon which this action is brought, receiving from the plain- tiffs the instrument above set forth. The plaintiffs credited the check ' on account of Lizardi & Co.'s indebtedness to the plaintiffs. Before* the check was paid by the drawee, the defendant, learning of Lizardi & Co.'s failure, stopped its payment. Subsequently the drafts pur-' chased of Lizardi & Co. were dishonored Jby the drawee in Cadiz. It was contertded on behalf of the defendant at the trial that there was a total failure of consideration as between the defendant and Lizardi for the check sued on, and that the plaintiffs were not holders thereof for value; but the learned judge ruled upon the above facts 388 NEGOTIATION (Part 2 (neither party desiring that any question should be left to the Jury) that the plaintiffs were entitled to recover, and directed the jury to find a verdict for the plaintiffs for £2,090., the amount of the check and interest thereon, and a verdict for that amount was thereupon entered, with leave to move to enter a nonsuit. The Court of Exchequer refused a rule, and the defendant ap- pealed.* The judgment of the court (Keating, Lush, Quain, and Arch- ibald, JJ. ; Lord Coleridge, C. J., dissenting) was delivered by Lush, J. This is an action on a check, dated the 14th of Febru- ary, 1873, drawn by the defendant on Messrs. Barnett, Hoare & Co., for payment of £1,999. 3s. to Lizardi & Co. or bearer. The material plea is the fifth, which alleges that there never was any consideration for the defendant's making or paying the check, and that the plain- tiffs have always held the same without having given any consideration. We think it must be assumed on the facts stated in the case that, if the action had been brought by Lizardi, the defendant would have had a good answer to it, on the ground either of fraud or failure of consideration, it matters not which. The only question therefore is whether, under the circumstances stated, the plaintiffs are to be con- sidered the holders of the check for value. The material facts bearing on this question may be briefly stated. The defendant had purchased of Lizardi. & Co. bills on Cadiz, which were delivered to him on the 11th of February, and which, according to the usual course of business, were to be paid for on the next post day, the 14th. Lizardi was at this time largely indebted to the plain- tiffs, who were his bankers, on both his drawing account and a loan account, and he had for several days previously to and again on the 13th of February been pressed for payment or further security. On the 13th he paid in various checks on account of the balance, and at the same time handed to the plaintiffs the document set out in para- graph 13 of the case, which is designated a "bill." On the morning of the 14th notice of this "bill," described as ly- ing due at the plaintiffs', was left at the defendant's office, and shortly afterwards the check in question was paid in by the defendant to the plaintiffs' bank, and the "bill" given up to him in exchange for it. The amount of the check was, together with the other checks paid in by Lizardi, entered to the credit of Lizardi's account, anp a large balance still remained owing to the plaintiffs. Soon after paying in the check the defendant heard that Lizardi had stopped payment, and he at once instructed his bankers not to honor the check. In conse- quence of this the check was returned from the clearing house in the after part of the day, and on the following morning (the 15th) it was entered in the plaintiffs' books to the debit of Lizardi's account. « The dissenting opinion of Lord Coleridge, C. J., is omitted. Tlie state- ment of facts is written by the editors. The judgment was affirmed on another ground In 1 App. Cas. 554 (1876). Ch. 2) HOLDER IN DCB COUESH 389^ The court below, in giving judgment for the plaintiffs, proceeded, partly at least, upom the special circumstance that the check was given to take up the so-called "bill," and considered that this of itself formed a sufficient consideration to entitle the plaintiffs to recover. The argu- ment before us, however, was addressed almost entirely to the broader question, namely, whether ap pyist ing- deht formed of itself a sufficient rnnsirlpral-inn fnr a n^gptiaMp gprnritj.- pgyahle nn demand. ' so as to constitute the creditor to whom it was paid a holder for value. As this is a question of great and general importance, and as our opinion upon it is in favor of the plaintiffs, we do not think it necessary to say more, with reference to the special circumstance adverted to, than that we are not prepared to dissent from the view taken upon this question by the court below. It will, of course, be understood that our judgment is based up on- w hat was admitted in the argument, namely , that the check w as re- cei ved by t he plain tiffs bona fide^ and without notice of any mhrmitv of title on tne part of Lizardi. We, therefore, for the purpose -of the argument, regard the so-called "bill" as merely an authority to the defendant to pay the amount to Lizardi's bankers, instead of paying it to him, and treat the transaction as if the check had been paid to Lizardi, and he had paid it to the plaintiffs, not in order that he might draw upon it, but that it should be^ applied pro tanto in discharge of his overdrawn account. It was not disputed on the argument, nor could it be, that if in- stead of a check the security had been a bill or note payable at a subse- (^uent date, however short, the plaintiffs' title would have been unim- peachable. This has been established by many authorities, both in this country and in the American courts. It has been supposed to rest on the ground that the taking of a negotiable security payable at a future day implied an agreement by the creditor to suspend his reme- dies during that period, and that this constituted the true consideration which, it is alleged, the law requires in order to entitle the creditor to the absolute benefit of the security. The counsel for the defendant accordingly contended that where the security is a check payable on demand, inasmuch as this consideration is wanting, the holder gains no independent title of his own, and has no better right to the security than the debtor himself had. We should be sorry if we were obliged to uphold a distinction so refined and technical, and one which we believe to be utterly at vari- ance with the general understanding of mercantile men. And upon consideration we are of opinion that it has no foundation either in principle or upon authority. Passing by for the present the consideration of what is the true ground on which the delivery or indorsement of a bill or note payable at a future date is held to give a valid title to a creditor in respect of a pre-existing debt, and assuming that it is the implied agreement to suspend, it does not follow that the legal element of consideration is 390 NEGOTIATION (Part 2 entirely absent where the security is payable immediately. The giving time is only one of many kinds of what the law calls consideration. A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, sufl?ered, or undertaken by the other. Com. Dig. Action on the Case, Assump- sit, B, 1-15. The holder of a check may either cash it immediately, or he may hold it over for a reasonable time. If he cashes it immediately, he is safe. The maker of the check cannot afterwards repudiate, and claim back the proceeds any more than he could claim back gold or bank notes if the payment had been made in that way instead of by check. This was decided in Watson v. Russell, 3 B. & S. 34, 31 L. J. (Q. B.) 304, with which we entirely agree. In very many — per- haps in the great majority of — cases checks are not presented till the following day, especially where they are crossed, and this usage is so far recognized by law that the drawer cannot complain of its not having been presented before, even though the banker stop payment in the interval. The loss in such a case falls on the drawer of the check, and not on the holder. It cannot, we think, be said that a creditor who takes a check on account of a debt due to him, and pays it into his banker that it might be presented in the usual course, instead of getting it cashed immedi- ately, does not alter his position, and may not be greatly prejudiced if his title could then be questioned, or that the debtor does not, or may not, gain a benefit by the holding over. If this subject vvere worth pursuing it would not, we think, be difficult to show that there is no sound distinction between the two kinds of securities of which we have been treating. In the course of the argument it was put to the learned counsel for the defendant whether a debtor who gave his own check in payment of a pre-existing debt could defend an ac- tion upon it on the ground that the creditor was not a holder for value, and Mr. Watkin Williams admitted that his argument must go to that extent, arfd yet it has always been the practice to sue in such a case on the check as well as on the original debt, and no such defense has, as far as we are aware, ever been attempted to be set up, certainly not successfully. But it is useless to dilate on this point, for, in truth, t he title of a ^rHjt21-tn i^ ^'^^ givpn.nn-accQiniL gf a pre-exig<-ino- rlp;bt, anrL ^y"aT<1p at a future day, does notre st upon the implied ag^rppment tn gngpan H hi s rem ed.ies. 'i'he tru£_!:eason_is that given by the Court of Common Pleas in Belshaw v. Bush, 11 C. B. 191, 22 L. J. C. P. 24, as the foun- dation of the judgment in that case, namely, that a negotiable se- c urity given for such a purpose is a conditional payment of the de bt, the condition bemg that the debt revives if the security is not realized. This is precisely the effect which both parties intended the security to Ch. 2) HOLDER IN DUE COURSE ■ 391 have, and t he doctrine is as applicable to one species of negotiabl e se curity as to another — to a check payable on dem and, as to a nin niiig b ill or a promissory note payable tn nHpr nr bparpr/AyViptVipr it be the note of a country bank which circulates as money, or the note of the debtor, or of any other person. The security is offered to the creditor, and taken by him as money's worth, and justice requires that it should be as truly his property as the money which it represents would have been his had the payment been made in gold or a Bank of England note. And, on the other hand, until it has proved unproductive, the creditor ought not to be allowed to treat it as a nullity, and to sue the debtor as if he had given no security. The books are not without au- thorities in favor of this view, although the point has not, as far as we ate aware, been directly decided. Story lays it down in his work on Promissory Notes (section 186) that a pre-existing debt is equally available as a consideration as is a present advance or value given for the note, without suggesting any distinction between a note payable after date and one payable on demand; and the cases of Poirier v. Morris, 2 E. & B. 89, 32 h- J. Q. B. 313, Watson v. Russell, 3 B. & S. 34, 31 L,. J. Q. B. 304, before cited. Whistler v. Forster, 14 C. B. (N. S.) 248, 32 L.' J. C. P. 161, and others, contain clear expres- sions of opinion the same way. On the part of the defendant the case of Crofts v. Beal, 11 C. B. 172, 20 L,. J. C. P. 186, was strongly relied on, where it was held that a promissory note given by a surety for payment on demand without any new consideration was nudum pactum. It is sufficient to say of that case that the note was payable to the plaintiff, and not to order or bearer, and was not, therefore, a negotiable security. De la Chaumette V. Bank of England, 9 B. & C. 208, appears at first sight to be more in point ; but there, although it appeared as between the plaintiff and O., by whom the bank note in question was remitted, that the state of account was in favor of the plaintiff, it is not really so, for the note had not been remitted in payment, but merely for collection as agent, and the court held that under these circumstances the plaintiff had no better title than O. For these reasons we are of opinion that a creditor to whom a ne- gotiable security is given on account of a pre-existing debt holds it by an indefeasible title, whether it be one payable at a future time or on demand, and that, therefore, the judgment of the court below ought to be affirmed. My Brother Quain, whp concurs in the judgment, desires to add that he does not adopt all the reasoning as to consideration. 392 NEGOTIATION (Part 2 BROOKLYN CITY & N. R. CO. v. NATIONAL BANK OF THE REPUBLIC. (Supreme Court of United States, 1880. 102 U. S. 14, 26 L. Ed. 61.) Error to the Circuit Court of the United States for the Southern District of New York. This was an action by the National Bank of the Republic of New York against the Brooklyn City & Newtown Railroad Company, as maker of a promissory note for $5,000, which had been made by the company payable to one of its officers and by him indorsed and deliv- ered to Hutchinson & Ingersoll, a firm of note brokers, for sale for the benefit of the company. Hutchinson & Ingersoll without authority pledged the note, together with other paper, to the plaintiff as col- lateral security for the repayment of a cash advance of $36,000 made by the plaintiff to them on June 19, 1873. On July 11, 1873, the plaintiff loaned Hutchinson & Ingersoll $10,000. On July 22, 1873, Hutchinson & Ingersoll agreed (antedating the agreement to June 19th) that all collateral which had theretofore been deposited with the plaintiff, including the $5,000 note, should be held by the plaintiff as collateral to the loan of July 11th, and any other loans which the plain- tiff might make. Subsequently the $36,000 loan was paid,' but $5,- 136.68 remained due on the $10,000 loan, and the plaintiff claims to be a holder for value by virtue of his position as pledgee of tl;ie $5,000 note as security for this balance of $5,136.68. The plaintiff had no knowledge of the breach of trust by Hutchinson & Ingersoll in pledg- ing the note.' Mr. Justice Harlan. * * ♦ Xhe next proposition involves the right of the railroad company to show as against the bank, that the note was executed and dehvered to Hutchinson & Ingersoll for the purpose only of raising money upon it for the company, and that, consequently, they had no authority to pledge it as collateral security for their own indebtedness to the bank. It will have been observed, from the statement of facts, that the note in suit was among those pledged to the bank as security for the call loan of $36,000, made June 19, 1873; that Howes, Hyatt & Co., whose notes had been pledged as security for the call loan of $10,000, made June 19,* 1873, having become insolvent, Hutchinson & Ingersoll, July 22, 1873, at the request of the bank, executed the writing, dated June 19, 1873, whereby they pledged all securities, bonds, stocks, things in action, or other property theretofore deposited with the bank, whether specif- ically or not, as security for the payment of any and every indebted- ness, liability, or engagement held by the bank, for which they were, I The statement of facts Is written by the editors. The arguments of counsel, part of the opinion of Harlan, J., and the concurring opinion of Cllt ford, J., are omitted. Miller and Field, JJ., dissented. 8 Obviously this should be July 11. Ch. 2) HOLDER IN DUE COURSE 393 or should become in any way liable. Although, therefore, the call loan of $36,000 was extinguished, without resorting to the note in suit, that note, under the agreement made July 22, 1873, stood pledged as collateral security, also, for the $10,000 call loan of July 11, 1873. The bank, we have seen, received the note, before its maturity, in- dorsed in blank, without any express agreement to give time, but without notice that it was other than ordinary business paper, or that there was any defence thereto, and in ignorance of the purposes for which it had been executed and delivered to Hutchinson & Ingersoll. Did the bank, under these circumstances, become a holder for value, and as such entitled, according to the recognized principles of com- mercial law, to be protected against the equities or defenses which the railroad company may have against the other parties to the note? This question was carefully considered, though, perhaps, it was not absolutely necessary to be determined, in Swift v. Tyson, 16 Pet. 1, 10 L. Ed. 865. After stating that the law respecting negotiable in- struments was not the law of a single country only, but of the com- mercial world, the court, speaking by Mr. Justice Story, said: "And we have no hesitation in saying that a pre-existing debt does consti- tute a valuable consideration in the sense of the general rule already stated as applicable to negotiable instruments. Assuming it to be true (which, however, may well admit of some doubt from the generality of the language) that the holder of a negotiable instrument is unaffected with the equities between antecedent parties, of which he has no no- tice, only where he receives it in the usual course of trade and busi- ness for a valuable consideration, before it becomes due, we are pre- pared to say that receiving it in payment of or as security for a pre- existing debt is according to the known usual course of trade and busi- ness. And why, upon principle," continued the court, "should not a pre-existing debt be deemed such a valuable consideration? It is for the benefit and convenience of the commercial world to give as wide an extent as practicable to the credit and circulation of negotiable paper, that it may pass 'not only as security for new purchases and advances, made upon the transfer thereof, but also in payment of and as security for pre-existing debts. The creditor is thereby enabled to realize or to secure' his debt, and thus may safely give a prolonged credit, or forbear from taking any legal steps to enforce his rights. The debtor, also, has the advantage of making his negotiable securi- ties of equivalent value to cash. But establish the opposite conclusion, that negotiable paper cannot be applied in payment of or as security for pre-existing debts, without letting in all the equities between the original and antecedent parties, and the value and circulation of such securities must be essentially diminished, and the debtor driven to the embarrassment of making a sale thereof, often at a ruinous dis- count, to some third person, and then by circuity to apply the proceeds to the payment of his debts. What, indeed, upon such a doctrine, would become of that large class of cases where new notes are 394 NEGOTIATION (Part 2 given by the same or by other parties, by way of renewal or security to banks, in lieu of old securities discounted by them which have ar- rived at maturity? Probably more than one-half of all bank transac- tions in our country, as well as those of other countries, are of this nature. The doctrine would strike a fatal blow at all discounts of negotiable securities for pre-existing debts." After a review of the English cases, the court proceeded: "They directly establish that a bona fide holder, taking a negotiable note in payment of or as security for a pre-existing debt, is a holder for a valuable consideration, entitled to protection against all the equities between the antecedent parties." The opinion in that case has been the subject of criticism in some courts, because it seemed to go beyond the precise point necessary to be decided, when declaring that the bona .fide holder of a negotiable note, taken as collateral security for an antecedent debt, was protected against equities existing between the original or antecedent parties. The brief dissent of Mr. Justice Catron was solely upon that ground, which renders it quite certain that the whole court was aware of the* extent to which the opinion carried the doctrines of the commercial law upon the subject of negotiable instruments transferred or deliv- ered as security for antecedent indebtedness. In the judgment of this court, as then constituted (Mr. Justice Catron alone excepted), the holder of a negotiable instrument, received before maturity, and without notice of any defense thereto, is unaffected by the equities or defenses of antecedent parties, equally whether the note is taken as collateral security for or in payment of previous indebtedness. And we understand the case of McCarty v. Roots, 21 How. 432, 16 L- Ed. 162, to affirm Swift v. Tyson, upon the point now under consideration. It was there said : "Nor does the fact that the bills were assigned to the plaintiff as collateral security for a pre-existing debt impair the plaintiff's right to recover." 21 Plow. 438 (16 L. Ed. 162). "The delivery of the bills to the plaintiff as collateral security for a pre- existing debt, under the decision of Swift v. Tyson, was legal." 21 How. 439 (16 L. Ed. 162). It may be remarked in this connection that the courts holding a different rule have uniformly referred to an opinion of Chancellor Kent in Bay v. Coddington, 5 Johns. Ch. (N. Y.) 54, 9 Am. Dec. 268, reaffirmed in Coddington v. Bay, 20 Johns. (N. Y.) 637, 11 Am. Dec. 342. There is, however, some reason to believe that the views of that eminent jurist were subsequently modified. In the later editions of his Commentaries (volume 3, p. 81, note b), prepared by himself, reference is made to Stalker v. McDonald, 6 Hill (N. Y.) 93, 40 Am. Dec. 389, in which the principles asserted in Bay v. Coddington were re-examined and maintained in an elaborate opinion by Chancellor Walworth, who took occasion to say that the opinion in Swift v. Ty- son was not correct in declaring that a pre-existing debt was, of itself, and without other circumstances, a sufficient consideration to entitle Ch. 2) HOLDER IN DTJE COURSE 395 the bona fide holder, without notice, to recover on the note, when it might not, as between the original parties, be valid. But Chancellor Kent adds: "Mr. Justice Story, on Promissory Notes (page 215, note 1), repeats and sustains the decision in Swift v. Tyson, and I am inclined to concur in that decision as the plainer and better doctrine." Of course it did not escape his attention that the court in Swift v. Tyson declared the equities of prior parties to be shut out as well when ,the note was merely pledged as collateral security for a pre- existing debt as when transferred in payment or extinguishment of such debt. According to the very general concurrence of judicial authority in this country as well as elsewhere, it may be regarded as settled in com- mercial jurisprudence — ^there being no statutory regulations to the con- trary — that where negotiable paper is received in payment of an ante- cedent debt, or where it is transferred by indorsement, as collateral security for a debt created, or a purchase made, at the time of transfer, or the transfer is to secure a debt, not due, under an agreement ex- press or to be clearly implied from the circumstances, that the col- lection of the principal debt is to be postponed or delayed until the collateral matured, or where time is agreed to be given and is actually given upon a debt overdue, in consideration of the transfer of nego- tiable paper as collateral security therefor, or where the transferred note takes the place of other paper previously pledged as collateral se- curity for a debt, either at the time such debt was contracted or before it became due — in each of these cases the holder who takes the trans- ferred paper, before its maturity, and without notice, actual or other- wise, of any defense thereto, is held to have received it in due course of business, and, in the sense of the commercial law, becomes a holder for value, entitled to enforce payment, without regard to any equity or defense which exists between prior parties to such paper. Upon these propositions there seems at this day to be no substantial conflict of authority. But there is such conflict where the note is transferred as collateral security merely, without other circumstances, for a debt previously created. One of the grounds upon which some courts of high authority refuse, in such cases, to apply the rule an- nounced in Swift V. Tyson, is that transactions of that kind are not in the usual and ordinary course of commercial dealings. But this objection is not sustained by the recognized usages of the commercial world, nor, as we think, by sound reason. The transfer of negotiable paper as security for antecedent debts constitutes a material and an increasing portion of the commerce of the country. Such transactions have become very common in financial circles. They have grown out of the necessities of business, and, in these days of great commercial activity, they contribute largely to the benefit and convenience both of debtors and creditors. Mr. Parsons, in his treatise on the I^w of Promissory Notes and Bills of Exchange, discusses the general ques- tion of the transfer of negotiable paper under three aspects — one. 396 NEGOTIATION (Part 2 where the paper is received as collateral security for antecedent debts. We concur with the author "that, when the principles of the law mer- chant have established more firmly and unreservedly their control and their protection over the instruments of the merchant, all of these transfers (not affected by peculiar circumstances) will be held to be regular, and to rest upon a valid consideration." 1 Parsons, Notes and Bills (2d Ed.) 218. Another ground upon which some courts have declined to sanction the rule announced in Swift v. Tyson is that upon the transfer of negotiable paper merely as collateral security for an antecedent debt nothing is surrendered by the indorsee — that to permit the equities be- tween prior parties to prevail deprives him of no right or advantage enjoyed at the time of transfer, imposes upon him no additional bur- dens, and subjects him to no additional inconveniences. This may be true in some, but it is not true in most, cases, nor, in our opinion, is it ever true when the note, upon its delivery to the transferee, is in such form as to make him a party to the instrument, and impose upon him the duties which, according to the commercial law, must be discharged by the holder of negotiable paper in order to fix liability upon the indorser. The bank did not take the note in suit as a mere agent to receive the amount due when it suited the convenience of the debtor to make pay- ment. It received the note under an obligation, imposed by the com- mercial law, to present it for payment, and give notice of nonpayment, in the mode prescribed by the settled rules of that law. We are of opinion that the undertaking of the bank to fix the liability of prior; parties, by due presentation for payment and due notice in case of nonpayment — an undertaking necessarily implied by becoming a party to the instrument — was a sufficient co;isideration to protect it against equities existing between the other parties, of which it had no notice. It assumed the duties and responsibilities of a holder for value, and should have the rights and privileges pertaining to that position. The correctness of this rule is apparent in cases like the one now before us. The note in suit was negotiable in form, and was delivered by the maker for the purpose of being negotiated. Had it been regularly dis- counted by the bank, at any time before maturity, and the proceeds either placed to the credit of Hutchinson & Ingersoll, or applied di- rectly to the discharge, pro tanto, of any one of the call loans previously made to them, it would not be doubted that the bank would be pro- tected against the equities of prior parties. Instead of procuring its formal discount, Hutchinson & Ingersoll used it to secure the ultimate payment of their own debt to the bank. At the time the written agree- ment of July 22, 1873, was executed, by which this note, with others, was pledged as security for any debt then or thereafter held against them, the bank had the right to call in the $10,000 loan ; that is, to require immediate payment. The securities upon which that loan rested had become, in part, worthless, and it is evident that but for the Ch. 2) HOLDER IN DUE COURSE 397 deposit of additional collateral securities the bank would have called in the loan, or resorted to its rightful legal remedies for the enforce- ment of payment. It was, under the circumstances, the duty of the debtors to make such payment, or to secure the debt. It was important to them, and was in the usual course of commercial transactions, to furnish such security. If the bank was deceived as to the real owner- ship of the paper, or as to the purposes of its execution and delivery to Hutchinson & Ingersoll, it was because the railroad company in- trusted it to those parties in a form which indicated that the latter were its rightful holders and owners, with absolute power to dispose of it for any purpose they saw proper. Our conclusion, therefore, is that the transfer, before maturity, of negotiable paper, as security fpr an antecedent debt merely, without other circumstances, if the paper be so indorsed that the holder be- comes a party to the instrument, although the transfer is without ex- press agreement by the creditor for indulgence, is not an improper use of such paper, and is as much in the usual course of commercial business as its transfer in payment of such debt. In either case, the bona fide holder is unaffected by equities or defenses between prior par- ties, of which he had no notice. This conclusion is abundantly sus- tained by authority. A different determination by this court would, we apprehend, greatly surprise both the legal profession and the com- mercial world. See Bigelow's Bills and Notes, 503 et seq. ; 1 Daniel, Neg. Inst. (2d Ed.) c. 35, §§ 830-833; Story, Promissory Notes (7th Ed. by Thorndyke) §§ 186, 195; 1 Parsons, Notes and Bills (3d Ed.) 318, c. 6, § 4 ; and Redfield & Bigelow's Leading Cases upon Bills of Exchange and Promissory Notes, where the authorities are cited by the authors. * * * Mr. Justice Bradley. I concur in the judgment rendered in this case, and in most of the reasons given in the opinion. But, in refer- ence to the consideration of the transfer of the note as collateral se- curity, I do not regard the obligation assumed by the indorsee (the bank), to present the note for payment and give notice of nonpayment, as the only, or the principal, consideration of such transfer. The true consideration was the debt due from the indorsers to the indorsee, and the obligation to pay or secure said debt. Had any other collateral security been given, as a mortgage, or a pledge of property, it would have been equally sustained by the consideration referred to, namely, the debt and the obligation to pay it or to secure its payment. If the indorsers had assigned a mortgage for that purpose, the title of the bank to hold the mortgage would have been indubitable. In that case prior equities of the mortgagor might have prevailed against the title of the bank ; because a mortgage is not a commercial security, and its transfer for any consideration whatever does not cut off prior equities. But the bona fide transfer of commercial paper before maturity does cut ofif such equities ; and every collateral is held by the creditor by such title and in such manner as appertain to its nature and qualities. Se- 398 NEGOTIATION (Part 2 I curity for the payment of a debt actually owing is a good considera- tion, and sufficient to support a transfer of property. Wheii such transfer is made for such purpose, it has due effect as a complete trans- fer, according to the nature and incidents of the property transferred. When it is a promissory note or bill of exchange, it has the effect of giving absolute title and of cutting off prior equities, provided the ordi- nary conditions exist to give it that effect. If not transferred before maturity or in due course of business, then, of course, it cannot have such effect. But I ' think it is well shown in the principal opinion that a transfer for the purpose of securing a debt is a transfer in due course. And that really ends the argument on the subject. Judgment affirmed. KELSO & CO. V. ELLIS et al. (Court of Appeals of New York, 1918. 224 N. Y. 52S, 121 N. E. 364.) Action by Kelso & Company against Charles H. Ellis, Sr., and an- other, copartners doing business under the firm name of Charles H. Ellis & Son. Judgment on directed verdict for plaintiff affirmed by Appellate Division (171 App. Div. 912, 155 N. Y. Supp. 1117), and de- fendants appeal. Reversed, and new trial granted. Pound, J. Thomas Howard, under the name of Thomas Howard Company, dealt in advertising specialties in Brooklyn, N. Y. He had a plan for a piano contest whereby a merchant would offer a piano to be voted for by his customers and given to the contestant receiving the highest number of votes ; the right to vote being dependent upon the purchases made at the store where the contest was being conducted, during a given period. The idea was so to stimulate trade beyond its usual activity as to enhance the sales of the merchant and thus put money in his purse. Careful and voluminous instructions for arousing public interest in the contest were an essential part of the plan. Other prizes were offered to contestants, but the interest centered around the piano. Howard did not deal in pianos himself, but when he obtained a customer for his scheme he placed an order with a manufacturer for a piano to be shipped to such customer. The plaintiff herein was a piano manufacturer. The defendants were merchants in Port Chester, N. Y. On October 24, 1913, they entered into a contract with Howard for the delivery at his earliest convenience of one T. Howard Com- pany $750 player piano, mahogany finished, warranted and guaranteed for 10 years ; five $500 certificates good on a T. Howard Company $750 piano, mahogany finished, warranted and guaranteed for 10 years; 20 dozens assorted pieces of flat silverware, permanently warranted. To be distributed by defendants the following: 200 nomination letters, 500 follow-up letters, 1,500 circulars, 1,000 postal cards, 40 posters, 50 bulletins, 150-$1, 100-$2, and 300-$5 trading books, 1 voting register, Ch, 2) HOLDER IN DUE COUESB 399 1 Howard Company's instruction book, 2 sets of "Display Card" signs, instructions for newspaper advertising, to be done without expense to vendor, 54,000 certificates in four colors for piano votes in denomina- tions of 5 to 25,000 votes ; all the foregoing to be used in a piano ad- vertising contest to open November 3, 1913, and close May 3, 1914. In consideration therefor they gave their six negotiable promissory notes payable to Howard and due two, three, four, five, six, and seven months after date, aggregating $650. The defendants agreed to "keep the piano well displayed in my store," and it is a fair inference that it was the intention of the parties that the piano should be delivered for that purpose before the opening of the contest on November 3, 1913. On December 4, 1913, Howard sent an order to plaintiff to deliver a player piano at once to the defendants. He had previously delivered to them some of the siKrerWare and all of the printed matter which they made use of in a voting contest. But the contest without a piano was like the play of Hamlet with the part of Hamlet left out. Plaintiff had sold pianos to Howard for over two years and had shipped many pianos to merchants for him, and had received from him notes of mer- chants \tp whom it had shipped pianos on his order. He had previously told it that he had an advertising plan ; that he was supplying merchants with pianos all over the country and he had thus obtained from it a line of credit. It stenciled the name "T. Howard Company" on such pianos. But plaintiff did not ship the piano to defendants. Howard owed it upwards of $2,000 for pianos actually shipped and further credit was refused. On December 22, 1913, prior to the maturity of the first note in suit, Howard transferred the Ellis notes to it, and it gave him credit therefor on his general account as cash, knowing at the time that no piano had been delivered by it to defendants. It does not appear that plaintiff then had actual knowledge of the terms of the contract between Howard and defendants. This action is brought to recover on the notes. The answer sets up many defenses and a counterclaim, none of which are substantial ex- cept the defense that the plaintiff was not a holder in due course ; that it did not take the notes in good faith and did not take them for value. This defense calls for careful examination. In the hands of Howard, the notes were subject to the defense that the contract was entire, that there had been no full performance by Howard, and that there was no obligation to pay until performance was complete. Defendants were constantly demanding performance by Howard on his contract to furnish the piano, and it cannot be said as matter of law that there was waiver on their part of this condition of the contract. They therefore did not begome liable to pay for or return even the articles received in part performance. "A party may retain, without compensation, the benefits of a partial performance, where, from the nature of the contract, he must receive such benefits in advance of a full performance, and by its terms or just construction 400 NEGOTIATION (Part 2 is under no obligation to pay until the performance is complete." Avery v. Willson, 81 N. Y. 341, 344 (37 Am. Rep. 503). The agree- ment to deliver the piano and the other articles and the agreement to pay the notes, being concurrent in time, were dependent, and Howard could not maintain an action against defendants without tendering full performance on his part. Where a promissory note is given for the purchase money on an executory contract for the sale of lands or chat- tels the law is the same as obtains in a case where the only promise to pay is found in the contract of sale itself, provided the action is be- tween the original parties. Ewing v. Wightman, 167 N. Y. 107, 60 N. E. 322. Was plaintiff chargeable with knowledge of such facts that its ac- tion in taking the instruments might be found by a jury to amount to bad faith? Neg. Inst. Law (Cons. Laws, c. 38) § 95. If it did not act in good faith, the notes were subject to the equities between the original parties. Canajoharie National Bank v. Diefendorf, 123 N. Y. 191, 25 N. E. 402, 10 L. R. A. 676. The relation between Howard's order for the piano to be shipped by the plaintiff to defendants, and the notes of defendants payable to his order, would, we think, under the circumstances, sustain a finding that "by the simple test of honesty and good faith" (Magee v. Badger, 34 N. Y. 247, 249 [90 Am. Dec. 691]) it became the duty of plaintiff to inquire as to the real situation be- tween Howard and the defendants. "It would be no defense to these acceptances that they were given upon an executory contract for the sale of merchandise, even if the plaintiff knew that an agreement existed between the makers and the acceptors that the drafts were not to be in force until the merchandise was delivered, unless the accept- ances were discounted with knowledge of the breach." Tradesmen's National Bank v. Curtis, 167 N. Y. 195, 198, 60 N. E. 429, 430 (52 L. R. A. 430). Could the inference fairly be drawn that plaintiff's man- ager should have had knowledge on December 22d that there had been a breach on the part of Howard of his promise to deliver a piano prior to that time to the defendants? The notes were dated October 24th; the letter of December 3d directs plaintiff to deliver a piano to defend- ants at once. The plaintiff itself prevented the performance of the contract between Howard and the defendants by refusing to give Howard any further credit and by taking the defendants' notes and placing them to the credit of Howard's antecedent indebtedness. The situation, as it now appears, fairly suggests a determination on the part of plaintiff to enforce the obligations of the defendants without ship- ping the piano coupled with indifference, at least, as to whether Howard had agreed to deliver the piano at an earlier date. More than a sus- picion may have existed on its part that to enforce the notes would be to compel defendants to pay for something to which they were entitled and which they had not received because Howard had broken his contract with them. Ch. 2) HOLDER IN DUE COURSE 401 l|nquestionably, upon the evidence, plaintiff was a holder for value. Prior to the passage of the Negotiable Instruments Law, and from thS time of the decision of Coddington v. Bay, 20 J^hns. 637, 11 Am. Dec. 342, it was the law of this state that, in order to constitute one a holder for value as indorsee of negotiable paper, it was necessary that he should part with some present consideration and that mere credit given on an antecedent debt was not such a consideration ; but the Negotiable Instruments Law (section 51) provides that "an antecedent or pre- existing debt constitutes value" and thus brings the law of tliis state into harmony with that of the United States Supreme Court. Swift v. Tyson, 16 Pet. 1, 10 L. Ed. 865, held that the transfer of negotiable paper by indorsement to a creditor before maturity, merely as security for an antecedent debt or in payment thereof, is a transfer for value. The conflicting doctrines of the two leading cases were for many years the subject of earnest discussion in the courts, and the- lack of a uniform rule on the subject caused no little confusion. The New York rule was so well established that the inertia of Coddington v. Bay carried it along for some distance before the external force of the Negotiable Instruments Law acted upon it. Sutherland v. Mead, 80 App. Div. 103, 107, 80 N. Y. Supp. 504; Roseman v. Mahony, 86 App. Div. 377, 378, 83 N. Y. Supp. 749 ; Crawford's Annotated Neg. Inst. Law, p. 63. Even in this court a dictum in Bank of America v. Waydell, 187 N. Y. 115, 120, 79 N. E. 857, reveals the habit of bencb and bar to look to cases rather than statutes for principles of commer- cial law until attention is sharply directed to the extent that the move- ment for uniformity of layirs through legislation has been successful in New York and many other states. But it is perfectly clear that for the sake of uniformity New York has abrogated the rule which had been in force since the year 1822. Melton v. Pensacola Bank & Trust Co., 190 Fed. 126, 132, 111 C. C. A. 166. Coddington v. Bay and section 51 of the Negotiable Instruments Law are irreconcilable in the mind of any candid student of the decisions in this and other jurisdictions. While it is ordinarily said that the payment of value for negotiable paper is a circumstance to be taken into account with other facts in de- termining the question of the bona fides of the transaction, and that when full value is paid that circumstance is entitled to great weight (Canajoharie National Bank v. Diefendorf, supra), the fact is not con- clusive, particularly when it appears that, as in this case, the value given was merely credit on the old debt. The question as to whether the plaintiff was a bona fide purchaser was one of fact for the jury, and the court erred in striking out the evidence of the dealings between Howard and the plaintiff and the de- fendants and directing a verdict for the plaintiff. The learned trial justice thus disposed of the case upon the ground that "the defenses here pleaded are pleaded as complete defenses, and that, therefore, the testimony does not constitute a defense." SM.& M.B.& N.(2d Ed.)— 26 402 NEGOTIATION (Part 2 But, as we have seen, no recovery on any doctrine of quantum meruit could be had. The Negotiable Instruments Law (section 54) provides that "partial failure of consideration is a defense pro tanto." By way of illustration, if the notes had been given for several different articles, bought for dii?erent prices but at the same time, under circum- stances implying a separate contract for each article sold, the failure to deliver one of the articles might limit the buyer to a partial defense to an action on the notes ; but, as in the case at bar one consideration was paid for all the articles sold, it is not possible to determine the amount paid for each, and the contract is entire. The judgment should be reversed, and a new trial granted, with costs to abide the event. HiscocK, C. J., and Collin, Cuddeback, Cardozo, and Andrews, JJ., concur. Crane, J., dissents on the ground that the evidence would not sus- tain a finding that plaintiff was' not a bona fide holder for value. GRISWOLD V. MORRISOi^ ef al. /District Court of Appeal, Second District, Division 2, California, 1921. 200 ' Pac. C:' ) FiNi.AYSON, P. J.* This is an action on a promissory nntp fnr $1,000, dated May 29, 1919, and ex ecuted by d efenda ntg tr. cr^c XWr ^ a s payme nt fnr rprtnin ^^"g° hnTi 403- rescission of the contract, and that therefore he stands in no better position than his indorser, Akers. ^ To understand the criticism aimed at this instruction, it is necessary^ to make a further statement of the facts. It seems that prior to and_ at the date of the sale of the hogs Akers was indebted to two banks ^ in sums that aggregated $762. To each of these banks Akers had ex- ecuted his promissory note for the amount of his indebtedness. Ap^ pellant, in some manner not disclosed by the record, but probably as , an accommodation indorser, was liable for the payment of thesen notes. The record does not show when Akers' notes to the banks ma-_^ tured. We have no means of knowing whether either of them had*;! matured prior to the transfer by Akers to appellant of the note that is in suit here. On the very day that respondents executed to Akers, i as payee, their note for $1,000 in payment for the hogs, Akers indorsed^ and delivered it to appellant. At the same time appellant gave Akers $50, who at the time was further indebted to appellant in the sum of^ $36.20, the balance due appellant on a note previously executed to him by Akers. Some months after the transfer to appellant of the note in ' suit here — the note for $1,000 that respondents had given to Akers in^ payment for the hogs — appellant paid to the banks the amounts dtie^ upon the two notes upon which he was liable as a guarantor or surety-J for Akers. At the time when Akers indorsed and transferred to ap- - pellant the note in litigation here, they agreed that after appella!nt should succeed in collecting from respondents the principal and in- ' terest of the note, and after he had reimbursed himself for any sums i that he might have to pay to the two banks on account of Akers' notes/ to those institutions, and after he had satisfied, from his collection on- respondents' note, the other amounts owing him by Akers, namely, the sums of $50 and $36.20, respectively, the balance of his collection on the $1,000 note should be paid to Akers. From these facts it is apparent that the note in suit here was trans- ferred by Akers to appellant as collateral security: (1) To secure an indebtedriess of $86.20 then due to appellant from Akers, made up of the $50 that he then was loaning Akers (under the facts stated the $50 was received by Akers as a loan) and the $36.20 that was due to appellant as the balance of a note previously given him by Akers ; and (2) to secure or indemnify appellant against any loss that he might sustain by reason of his liability on the two notes that Akers had executed to the banks — obligations for which, as between themselves, Akers was liable as the primary debtor and appellant as a guarantor or surety only. The day after Akers indorsed the note to appellant the latter was informed by respondents that they had rescinded the con- tract of sale on account of the alleged false representation, or fraudu- lent concealment, respecting the condition of the hogs. If appellant was without notice of the alleged fraud at the time when respondents' note was indorsed to him by Akers, then, without doubt, 404 NEGOTIATION (Part 2 instruction No. 12 is not only erroneous, but prejudicial; for in that event appellant, regardless of any notice that he subsequently may have ^received respecting Akers' fraud in the sale of the hogs, would be entitled to recover from respondents the sum of $86.20 at least ; i. «., the said sum of $50 that he loaned to Akers at the time when the note was indorsed to him, and Akers' pre-existing indebtedness of $36.20, the balance due on the note previously executed by Akers to appellant. A more difficult problem is presented by the question whether, as to the $762 for which appellant was liable to the banks as an accommoda- tion indorser for Akers, the former took the note in litigation as a holder for value and in due course of business. While there has been much conflict in the decisions, it is the estab- lished law in the federal courts and in most states, including our own, t hat an indorsee of a note merely as collateral security for a pre-ex ist- ing debt owing to him by his indorser is a holder for value and in the 'usual cours e ot busmess, an d the note, m the hands of such indorsee, iriTthe date of the indorsement it is taken without notice of any in- firmity in the instrument, is not subject to existing equities between the original parties. This is the majority rule, and is usually referred to as the federal rule ; while the contrary rule, which until the adoption of the Uniform Negotiable Instruments Law, prevailed in New York and about a dozen other states, is frequently referred to as the New York rule. 8 Corp. Jur. 488. The federal rule is, as we have said, the one that obtains in this state. Sackett v. Johnson, 54 Cal. 107; j^^egotiable Instruments Law (Civ. Code, §§ 3105-3110); note to Ger- man Am. Bk. V. Wright, Ann. Cas. 1917D, 387. The difficult question with which we are. confronted is this: Under the so-called federal rule, is the indorsee of a note, indorsed, not to secure a pre-existing indebtedness due to him from his indorser, but to indemnify him against future loss on account of an existing liability to a third person, a transferee for value and in due course? Though he was liable to each bank for the amount that it had loaned Akers, still, until appellant paid the amounts due the banks, Akers, who was primarily liable therefor, did not become appellant's debtor. As to the amounts that appellant was obliged to pay to the banks to sat- isfy these obligations for which Akers was primarily liable, the note in suit here was not indorsed to appellant by Akers to secure an existing indebtedness then owing to him by Akers. Rather, as to those amounts, the note was indorsed to appellant as indemnity to indemnify or secure him harmless against future possible loss, namely, loss in the event that he should thereafter become obliged to pay the amounts that Akers had borrowed from the banks. Under these circumstances, is appel- lant protected by the so-called federal rule? We have found no case directly in point. Of the cases to which our attention has been called, those most nearly in point are two Alabama cases. Bank of Mobile v. Hall, 6 Ala. 639, 41 Am. Dec. 72 ; and Andrews v. McCoy, 8 Ala. Ch. 2) - HOLDER IN DUE COURSB 405 920, 42 Am. Dec. 669. Those cases would be in point but for the fact^ that the New York, and not the federal, rule obtains in Alabama. In these two Alabama cases the Supreme Court of that state held that a negotiable instrument received as indemnity against a possible future- loss, even though that loss afterwards actually occur, is not taken in-^ the usual course of trade, and therefore the note remains subject to"* existing equities between the original parties. But, as we have said, Alabama is one of those states where the so-called New York rule ob- tains, or, at any rate, did obtain at the date of those decisions. So ' that these Alabama cases may not be persuasive precedents in states where, as with us, the federal rule prevails. So far as the question before us is concerned, -^^^ "^'f unahlp tn spp an y distinction between an antecedent debt in the form of an absol ute obligation due to the transferee from his transferer a nd an existi ng, K11T prpiWrr^if^jy •'^•^^^i\^ liability upon which the transferee may suffer a future loss or damage, even though that loss may be contingent upon the failure of the transferer to pay the debt for which his transferee, , for his accommodation, became liable as a guarantor or surety. It seems to us to be s ufficient if the transferer of the collateral note is i n s uch contract relat ion with his transferep as r ertders it advantageous t o the latter to have additional securitv for the performance by his transferer of the antecedent obligation. This conclusion finds support in the reasoning pursued in the following cases: First Nat. Bank v. Busch, 102 Minn. 365, 113 N. W. 898; Brown v. James, 80 Neb. 475, 114 N. W. 591 ; State Sank v. Holland, 60 Tex. Civ. App. 515, 128 S. W. 435 ; Forstall v. Fussell, 50 La. Ann. 249, 23 South. 273 ; Lee v. Whitney, 149 Mass. 447, 21 N. E. 948. We can see no force in the argument advanced by the Alabama court to the effect that, because the transferee of the note given as collateral security may never have to pay anything on account of the pre-existing liability assumed by him for the benefit of his transferer, he therefore should not be regarded as a holder in due course. In every case where collateral is put up to secure the performance of an obligation, as, for instance, the payment of a debt immediately owing to the transferee by his transferer, it is possible that the security may never have to be enforced. It is always possible that the debtor may pay his debt with- out making resort to the security necessary. And yet no court, in a jurisdiction where the federal rule obtains, would for a ipoment hold that the indorsee of a note transferred to secure an antecedent debt due to him from his indorser was not a transferee for value and in due course merely because the indorser might voluntarily pay the debt that he owes his indorsee without compelling the latter to have recourse to the note given as security. The Alabama cases, it will be noticed, proceed upon the theory, not that value was given for the note, but that the transaction is not a dealing in the usual course of trade. Such a holding is not warranted 406 NEGOTIATION (Part 3 by the Negotiable Instruments Law of this state. That law defines a holder in due course as one "who has taken the instrument under the following conditions: (1) That it is complete and regular upon its face; (2) that he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact ; (3) that he took it in good faith and for value ; (4) that at the time it was negotiated to him he had no notice of any infirmity in the instru- ment or defect in the title of the person negotiating it." Civ. Code, § 3133; Stats. 1917, p. 1540. If appellant had no notice of the infirmity in the note at the time when it was indorsed to him, then he took it under all the conditions prescribed in this Code section as those necessary to constitute one a "holder in due course," unless it can be said that he did not take it for "value." Under the reasoning pursued by the courts in First Na- tional Bank v. Busch, supra. Brown v. James, supra. State Bank v. Holland, supra, Forstall v. Fussell, supra, and Lee v. Whitney, supra, appellant did take the note for value even though, with respect to his liability on Akers' notes to the banks, his danger of loss thereon was not absolute but contingent. Moreover, appellant is a "holder for value" under the Code definition obtaining in this state since the enactment of the Negotiable Instru- ments Law. Section 3108 of our Civil Code now reads: "Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien." A person to whom a promissory note has been indorsed as collateral to indemnify him against possible future loss arising out of an existing liability incurred for and on behalf of his indorser has a lien on the note to the extent of any loss that he may sustain by reason of such liability. Plaintiflf, therefore, became a holder of the note for value to the extent of the amounts for which he was liable to the banks as a guarantor or surety for Akers. We are not unmindful that it also is provided by the Negotiable In- struments Law (Civ. Code, § 3135, as amended in 1917) that "where the transferee receives notice of any infirmity in the instrument * * * before he has paid the full amount agreed to be paid there- for, he will b^ deemed a holder in due course only to the extent of the amount theretofore paid by him." In our opinion this provision is applicable only where the obligation incurred by the holder of the note is such that, on discovering the in- firmity in the instrument, he is relieved from all further legal obliga- tion to make any further payment, as, for example, where the note has been transferred to him in consideration of his promise to make future payments to his transferer. In that case, if it should turn out that, by reason of fraud on the part of the transferer, the maker of the note had a defense thereto, the transferee would be under no legal obligation to Ch, 2) HOLDER IN DUB COUESfl 407 ffay the balance of the amount that he had agreed to pay to his trans- ferer as a consideration for the transfer. In the instant case, however, appellant's liability to the banks con- tinued regardless of any discovery he may have made respecting the fraud alleged to have been perpetrated by his transfer on these re- spondents as the makers of the note. Appellant's antecedent liability to the banks was the consideration for the transfer of the note to him as collateral security. The extent of tliat liability never varied after the note was indorsed to him. His liability to the banks was fixed and unconditional, even though his loss or damage by reason of that liability were contingent upon the failure of Akers to pay to the banks the amounts due from him as the primary obligor. Appellant's liability to the banks being fixed, definite, and unconditional, it follows that, unless he had notice of the alleged fraud at the time when the note was transferred to him, he is in the position of an indorsee who does not receive notice of the infirmity until after the completion of his pur- chase of the note for value. And the rights of such a purchaser are not affected by such after-acquired notice. The meaning of sectioh 3135 of the Civil Code is substantially this: If the transferee receives notice of the infirmity before he has paid all the consideration for the note, he is a bona fide holder for value only to the extent that he had paid the consideration that he agreed to give. But in the instant case the consideration for the indorsement of the note to appellant, in addition to the $50 and the $36.20, consisted of ap- pellant's pre-existing and unconditional liability to pay certain fixed and definite debts for which, as between themselves, his indorser was primarily liable, namely, the amounts due or to become due to the banks. Appellant's liability to the banks, as a guarantor or surety for Akers, was, of itself, a sufficient consideration for the indorsement of the note to appellant. As having some bearing upon this phase of the question, see Miller v. Marks, 46 Utah, 257, 148 Pac. 412. For the foregoing reasons we conclude that the instruction No. 12 was misleading and not applicable to the facts of this case. * * * Reversed. 40S NEGOTIATION (Part 2 GROCERS' BANK v. PENFIELD. (Court of Appeals of New York, 1877. 69 N. Y. 502, 25 Am. Rep. 231.) See ante, p. 295, for a report of the case. ALLAIRE V. HARTSHORNE. (Court of Errors and Appeals of New Jersey, 1847. 21 N. J. Law, 665, 47 Am. Dec. 175.) Green, C. J.^° * * * The third and, last error relied upon for reversal is that the judge charged the' jury "that, if they believed any consideration passed of any value from the said Richard S. Hartshorne to the said Pettis for the note, they should find in favor of the plain- tiff for the whole principal and interest of said note," and that the jury found accordingly. The action is by the indorsee against the maker of a promissory note. The note was given by Allaire to Pettis, for a specific purpose, viz., the renewal of an acceptance by Allaire of a draft of Pettis for $1,500, given in payment of iron sold and delivered by Pettis to Allaire. The note was not so appropriated by Pettis, but was indorsed to Harts- horne as collateral security for a check of Thomas Hegeman for $750 (as is conceded by both parties), and also (as is insisted by the plain- tiff) to secure a debt of $400, previously due from Pettis to Hartshorne. Hartshorne is a bona fide holder of the note for value, and is en- titled to all the immunity and protection which that character can give. But he holds the note, it is not denied, as collateral security for a less amount than purports to be due upon its face. The question presented is simply this: In an action by a bona fide holder of a promissory note, who received it as collateral security for a less sum than the amount due upon the note, the note being without consideration and invalid as between the original parties, can the holder recover more than the amount which he had advanced, or for which the note is held as security? I speak not now of the rights of a bona fide purchaser of a note. It is admitted that the plaintiff obtained the note in ques- tion, not as a purchaser, but that it was transferred to him as security merely, for a specific sum, less than the amount of the note. For the purpose of this inquiry, it may be assumed that the plaintiff has shown a clear right to recover upon the note in question the sum of $1,150, with interest. He claims no more as due to himself. He admits that for the amount recovered beyond that sum he stands as trustee for the party really entitled to the money. As between the ^"The facts sufficiently appear in the opinion, all of which except that part relating to the third assignment of error, together with the statement of the case, is omitted. Ch. 2) HOLDER IN DtIB COURSH 409 original parties, Allaire and Pettis, the note is worthless. It was given to Pettis for a specific purpose, and by him misappropriated. He gave no value for it. If the suit were in his name, no recovery could be had. Hartshorne, as a bona fide holder for value without notice, may recover the amount due him upon the note. But shall he have judg- ment for the surplus beyond his claim? If he do, then by the judg- ment of this court Allaire is compelled to pay money which it is con- ceded he is not bound in law to pay, and which is due to no one. Not due to Pettis; in his hands the note is valueless. Not due to Harts- horne ; he does not pretend to have a claim to it. • The judgment then is ^rendered against the defendant for an amount which he is not bound to pay, in favor of the plaintiff who disavows all claim to the surplus, after satisfying his demand, to be held in trust, either for a party who in his own name never could recover, or in trust for the defendant himself. And not only does Hartshorne thus recover money which he does not claim ; not only is Allaire compelled to pay money which he does not owe ; but he pays it under circum- stances which preclude all possibility of effectual redress. Suppose the money recovered upon this judgment — how is Allaire to be indemnified ? Can he file a bill in equity, or institute proceedings at law to recover back from Hartshorne money which he has recovered of Allaire himself upon verdict and judgment? He might indeed look to Pettis for the misappropriation of the note ; but Pettis is bankrupt. But admitting that either a court of law or of equity may interfere to protect the rights of Allaire; to what protection is he entitled? What sum shall be retained? Was the note taken and held by the plaintiff to secure $1,150, as was insisted by him — or only $750, as ad- mitted by the defendant? This is a point upon which there is con- flicting evidence, and upon which the parties were entitled to the ver- dict of a jury. The justice and right of the case manifestly require that judgment should be rendered only for the amount actually advanced by, or se- cured to, Allaire, upon the transfer of the note to him. Is such a judg- ment open to any valid objection? Is it in violation of legal principle, or in conflict with authority? It is said in the first place that the note is a unit, that a recovery upon it is an entire thing, and that different recoveries cannot be had upon the same note, by different claimants against the same party. The principle is sound, but it assumes as true the very question in dispute. If there be a further valid claim by Pettis upon this note, it is not denied that judgment should be rendered for the whole amount due. But that is the very fact in dispute, and which Allaire insists that he should have been permitted on the trial to disprove. The true distinction is clearly stated by Lord Kenyon, in Wiffen v. Roberts, and has been repeatedly recognized in the later cases. If the note is valid as between the original parties, if the amount of the note 410 NEGOTIATION (Part 2 is actually due from the defendant to any party (no matter to whom), the indocsee, though he has not given the full value, may yet recover the whole, and retain the overplus above the sum claimed by him, as trustee for the party beneficially entitled. And this upon the plainest principles of justice. The defendant owes the whole debt. It is im- material to him in whose name the recovery is had. The legal owner- ship of the note is in the plaintiff ; he is entitled to recover all that is due upon it; no injustice is done to any party. But where the note, as between the original parties, is without consideration, either as being accommodation paper, or as having been misappropriated, there a bona fide indorsee for value will recover upon it only the amount he has actually paid, provided there be no other party in interest. Wiffen v. Roberts, 1 Esp. 361; Jones v. Hibbert, 2 Stark. 204; Williams v. Smith, 2 Hill, 301. It is said that in Wiffen v. Roberts, and in Jones v. Hibbert, the note was an accommodation note, transferred to the indorsee with knowl- edge of its character. But that circumstance surely does not impair the force of the authorities upon the point in question. In each case, as in the present, the paper was invalid as between the original parties, for want of consideration. It was held available in the hands of the indorsee for the amount actually advanced by him, and for no more. The case of Williams v. Smith was (like the present) a case of the misappropriation of the note by the party in whose hands it was placed for a special purpose. The case differed from this,^in that the action was brought both against the makers and indorsers. Here the payee is not a party to the suit; and it is objected that his rights, as against Allaire, should not be concluded in a suit to which he is not a party. The answer to this objection is obvious. He stands in the position of every indorser, liable to have his rights affected in an action brought by the indorsee. The indorsee is the legal owner of the note, and the rights of all previous indorsers are liable to be affected and concluded by his acts. If the indorser retains an interest in the note, the indorsee is his trustee and representative, with full power to con- clude the rights of the indorser, but liable for any abuse of Tiis trust. It is said again that the indorsee may recover the full amount where- ever there is some person to receive the overplus ; that in Williams v. Smith the indorser being a defendant in the suit, there was not one to receive the overplus, other than the defendant ; and that therefore that case is no authority in the present. The true statement of the prin- ciple is that the plaintiff can recover, beyond the amount actually due to himself, only where there is some person, other than the defendant, entitled to receive the overplus. 1 Saund. PI. & Ev. 280; Pierson v. Dunlop, Cowp. 571. That we apprehend to be precisely the position of the present case. If the plaintiff recovers beyond the amount due him, there is no person entitled to the surplus but the defendant himself. Ch. 2) HOLDER IN DUB COURSE 411 The rule that the bona fide holder of accommodation paper shall re- cover, in an action against the maker, only the amount actually ad- vanced, is well settled. Edwards v. Jones, 7 Car. & P. 633, 2 Mees. & W. 413 ; Robins v. Maidstone, 4 Ad. & EL N. S. 811 ; Chitty on Bills (8th Ed.) 81; Sedgwick on Damages, 341. The principle is ap- plicable to the present case. The instruction to the jury was erroneous. The defendant was en- titled to show that as between himself and Pettis the note was without consideration, that the plaintiff paid only part value for it, and upon such proof the verdict should be for the amount actually due the plain- tiff, and no more. The judgment must be reversed, and the record remitted to be pro- ceeded in according to law. In this opinion the court unanimously concurred, except that the chancellor declined expressing any opinion upon the second error as- signed. Judgment reversed. GAUL V. WILLIS. (Supreme Court of Pennsylvania, 1856. 26 Pa. 259.) This was an action on a promissory note,_by_££i4amin_B,-Wi-llis- n^ninst_Frpdpri^k ',Tau1, th" 'r^?i^'^'^ ^WrH^^ni C. Rudman, on behalf of the defendant, filed an affidavit of defense^ as follows: "This de- Done ^tibeing; anxious to borrow monev. requested Frederick f^^nl tlip drawer, to lend hifn g nntp nf *^9. fino, now sued Upon in this case, wfeiek he r ^Ti i pnt ° d \n d r^, n "d ^ H i v't^""t ^" y ''r.ncirlnrntinn . l yVi-i ^ oy oy and solely for the accommodation of the deponent; that the sa id note, so loaned by the said Frederick Gaul, was_placed- by t he - dcpow e nt in th e hands fvTl ns broker. wJi tl as deponent's agent, and for deponent's use, on or about the day of the date thereof, negotiated it f or th e sum of $1,82 and no moi eJ jHng nt t h e n i uriouc rate nt 1 l/a "p grjgnt. per ifTntrHTrin t Vip fnre nf the note, w hich sum his said broker paid over to deponent, deducting his commissions, and the same was used by this deponent, and this deponent believes and expects to be able to prove on the trial of this cause that the plaintiff obtained the said note at the said usurious rate at or about the date thereof." And also a sup- plemental affidavit as follows: "That the promissory note sued upon was discounted for the said William C. Rudman by Messrs. Drexel & Co., and by them passed to the plaintiff at the time and rate specified in the original affidavit of defense in this case, as this affirmant is in- formed and truly believes and expects to be able to prove on the trial of this cause." The court rendered a judgment for the plaintiff, and the prothono- tary Hquidated the amount due at $2,022,601/2. It was assigned for 412 NEGOTIATION (Part 2 error that the court erred in entering judgment for the plaintiff below.** Lewis, C. J. Frederick Gaul, the defendant below, loaned his note to William C. Rudman, for the purpose of enabling the latter to raise money by the sale of it. The note was drawn in the usual form of negotiable instruments, and expressed on its face to have been given for "value received," although there was in fact no debt due from Gaul to Rudman. Rudman ind orsed the not e, and sold it to Drexel & Co. Th ey, in t urn, dis posed of it to Ben jamin B. Willis, at a dis count e qual to 1 ^g-pet^^ ce nt. per m onth. Neither Dr exel & Co. nor Wi llis had anv knowledge -of- the pur pose for whic h Llie iiuLe wa s-^fiyeiL-. They had'a right to put fa ith, in f lip rppr p r f nfntinn , nn t he_ face of the pape r, that-ft-w as given for a va luable consideration. As against the parties who made that representation thenoEeTnust be held to be as they represented it. This is a principle of equity applicable to all business transactions; but it is so indispensable, in the transfer of negotiable securities, that a party to such an' instrument cannot be received, even after a release, to give evidence to invalidate it in the hands of a bona fide holder, on the ground of usury, or for any other cause touching the original consideration. Walton v. Shelly, 1 T. R. 300 ; Griffith v. Reford, 1 Rawle, 196. This brings us to the question : T "; Benjamin B. WJl l[g__g_b"''i^ fide holder ? If he participated in any contrivance to ejyadZISie—statute agai nst usury ^Jie woTilTi~Tintlfagl5rjmr6has£:L i n good faith . But we have already seen that he had no noticewh atever of the pu jyngp for wh ich the note wa s-made. — Se neither loaned nor intended to loan money to Rudman or to Gaul. He had no transaction of any kind with them, or with either of tl]em. His dealings were with Drexel & Co. There was no intention on the part of the latter to borrow, and no engagement to return the money received, or any part of it, or to pay any sum whatever for the use of it. Now was there any intention on the part of Willis to lend rtioney to them ? It wasajileat^arehase of th^_S£aiH4yr-a»d— nothing elsfir Had he a rTgHtto purchase it at a greater discount than 6 per cent. ? That he had was fully settled so long ago as 1785. Wycoff v. Longhead, 2 Dall. 93, 1 L- Ed. 303; Musgrove v. Gibbs, 1 Dall. 216, 1 L. Ed. 107. Although the period of credit given on the instrument is usually spoken of in fixing upon the discount, it is not the only element that enters into the calculation. The value of the security is determined by the present responsibility of the parties bound for it, the proba- bilities of their continued ability to pay, and their character for punc- tuality in meeting their engagements. As the parties to the sale of the security were competent to manage their own affairs, their agreement fixing the value of the note, when fairly made, is as binding as any 11 Arguments of counsel are omitted. Ch. 2) HOLDER IN DUB COURSE) 4:13 other contract. It is true that if the note was absolutely void there might be an insuperable obstacle to a recovery on it, however fairly acquired. But in this particular the English statutes against usury differ from our own. The former declared that all securities made in violation of them were "utterly void." 13 Eliz. c. 8 ; 3 Hen. VII, c. 5 ; 13 Geo. Ill, c. 63. The latter contains no such provision. The result was that the English courts were bound to declare that all such se- curities were absolutely void even in the hands of innocent purchasers. But in this state the law has always been that even between the original parties such securities are valid for the real debt and legal interest. The excess cannot be recovered by one who participated in the con- trivance to evade the statute, because he has no right to recover at law what the law prohibits him from contracting for or receiving. But as an innocent purchaser of such a security violates no law, he of course is entitled to recover the amount which, on the face of the instrument appears to be due. The district court was therefore correct in giving judgment for the plaintiff. Judgment affiimed." 12 HILTON V. WARING et al. (Supreme Court of Wisconsin, 1858. 7 Wis. 402.) The complaint states, on information and belief: That on 3d day of August, 1855, at Berlin, in the county of Marquette, the defend- ants made their promissory note in writing, whereby they promised to pay Enos Beall or order $1,288.92, for value received, by the 1st day of March, 1857, and then and there delivered the same to said Beall. That on the 15th day of April, 1856, at Berlin, Beall made his promis- sory note payable to the plaintiff or order, on the 1st day of June, 1856, for $537.22 at 12 per cent, interest That the said Enos Beall, on the said 15th day of April, 1856, at Berlin, aforesaid, in writing, assigned and delivered the said promissory note of said defendants, George D. Waring and Elliot Reed to the plaintiff, as collateral security for the payment of the said sum of $537.22, and interest at the rate of 12 per cent, per annum, according to the conditions of the said promissory note, made and delivered by the said Enos Beall to the plaintiff, on the said 15th day of April, 1856. That the said defendant George D. Waring had notice, and the plaintiff believes that Elliot Reed also had notice, of the assignment to the plaintiff as collateral security of said promissory note, made and delivered by them to the said Enos Beall, before the maturity thereof. 12 Contra: Sabine v. Paine, 223 N. Y. 401, 119 N. E. '849, 5 A. L. R. 1444 (1918) post, p. 496 ; Clark v. Sisson, 22 N. Y. 312 (1860). See Wirt v. Stubblefleld, 17 App. D. C. 288 (190O) post, p. 491; contra, Alexander v. Hazelrigg, 123 Ky. 677, 97 S. W. 353, 29 Ky. Law Rep. 1212 (1906). 414 NEGOTIATION (Part 2 The plaintiff, upon his knowledge, says ; That he is now the lawful owner and holder of the said promissory note, made and delivered by the said Enos Beall to the plaintiff, on the 15th day of April, 1856, at Berlin, aforesaid, whereby on the 1st day of June, 1856, he promised to pay to the plaintiff, or his order, the sum of $537.32 and interest, at the rate of 13 per cent, per annum for value received, and that the said Enos Beall is justly indebted to him thereupon in the sum of $537.- 32, principal, together with interest thereon from the 15th day of April, 1856. That, though the said promissory note, made and deliv- ered by the said defendants to the said Enos Beall, and by the said Enos Beall assigned 'and delivered to the plaintiff, became due before the commencement of this action, yet they, the said defendants, have not paid the same to the plaintiff, or any part thereof. And the plaintiff further says that he is now the lawful holder of the said promissory note of the defendants, made and delivered by them to the said Enos Beall on the 3d day of August, 1855, and by the said Enos Beall, as aforesaid, on the 15th day of April, 1856, assigned to the plaintiff as collateral security, and that the defendants are in- debted to him, by virtue of said assignment and delivery by said Enos Beall of said note of defendants, thereupon in the sum of $1,288.92, principal, together with interest thereon from the 1st day of March, 1857. Whereupon the plaintiff demands judgment, etc. The defendant demurred to the complaint, on the ground, first, that it did not set forth facts sufficient to sustain a cause of action; and, second, for that it appears on the face of the complaint, that there is a defect of parties thereto, viz. : That Enos Beall is a necessary party defendant to the action. The demurrer was sustained, and the plain- tiff appealed. Cole, J. The objections taken to the complaint by the demurrer, are : (1) That it appears upon "the face thereof that the same does not state facts sufficient to constitute a good cause, of action; and (2) for that it appears upon the face thereof that there is a defect of parties defendant in this : It appears upon the face of the complaint that Enos Beall is a necessary party defendant. We do not deem it necessary to say more, in answer to the first ob- jection taken to the complaint, than to remark that in our opinion the complaint does state facts sufficient to constitute a cause of action. Perhaps the complaint unnecessarily sets forth the interest which Hil- ton, as pledgee, has in the note of the defendants. Being the bona fide holder of that note, he might undoubtedly have brought his action upon it, and recovered judgment for the amount due thereupon, re- gardless of any interest the pledgor, Beall, might have in the proceeds after the payment of the note which he had given to Hilton. But the fact that the complaint does disclose the true nature of the transac- tion, and that Hilton took this note as collateral security for the one which Beall had given him, by no means renders the complaint bad. Ch. 2) HOLDER IN DUE COURSE 415 Neither can we conceive that it was necessary to make Beall a party to this action. It appears he had given a. note to the appellant for $537.28, and to secure the payment of it had turned out the note upon which the suit was brought, as collateral security. What earthly ne- cessity could there be of making him a party to this action? None whatever. He had a residuary interest in the note, to be sure; for, if Hilton realized more than his debt from the security, he would be compelled to account to Beall for the overplus. But it was not neces- sary that he should be a party to the action to collect the amount of the respondent's note. All the interest he had in that matter was that they should pay their note with the least unnecessary delay. The order of the circuit court sustaining the demurrer must be re- versed, and the cause remanded to the circuit court for further pro- ceedings according to law.^* IS In Black v. Bank, 96 Md. 399, 416, 417, 54 Atl. 88 (1902), the court said: "Section 45 provides that, where value has at any time been given for the in- strument, the holder is deemed a holder for value in respect to all parties who became such prior to that time. But, apart from these considerations, the plea states a case which does not disentitle the plaintiff to recover, since it alleges that the notes were delivered by the association to the Old Town Bank, 'as collateral security for advances to be made by it to the association'; and in Maitland v. Citizens' Bank, 40 Md. 562, 17 Am. Rep. 620, It is said that 'every person is within the rule, and entitled to the protection of a bona fide holder for value, who has received the note in payment of a precedent debt, or has taken it as collateral security for a precedent debt, or for future as well as past advances.' The Old Town Bank, therefore, as well as the plaintiff, is pre- sumed to be a holder for value; and in Cover v. Myers, 75 Md. 419, 23 Atl. 850, 32 Am. St. Rep. 394, the court said: 'Where a negotiable instrument Is originally infected with fraud, invalidity, or illegality, the title of the original holder being destroyed, the title of every subsequent holder which reposes on that foundation, and no other, falls with it. But if any subsequent holder takes the instrument in good faith, and for value, before maturity, he is enti- tled to recover on it; and so any person taking title under him may recover, notwithstanding such latter holder may have knowledge of the infirmities of the instrument; and all that is required of the holder in such case is that it be proved that he, or some preceding holder or indorsee, under whom he claims, acquired title to the paper before maturity, bona fide, and for value.' And this view of the law has since been formulated in section 77 of article 13." 416 NEGOTIATION (Part 2 ATLAS BANK v. DOYLE. (Supreme Court of Rhode Island, 1868. 9 R. I. 76, 08 Am. Dec. 368, 11 Am. Rep. 219.) Assumpsit on the check of the defendant on D. W. Vaughan & Co. for $2,000, payable to bearer, and dated June 17, 1867. At the trial I of the case before Mr. Justice Potter, with a jury, at the March term of this court, 1868, the plaintiffs produced the check in suit and there rested their case. The defendant then called Thomas H. Brownell, who testified that he was cashier of the Atlas Bank during the year 1867, and as such cashier, received the check in suit from Edward J. Gushing as collateral security towards Cushing's indebtedness to the bank, and that he paid out no money on the check. On being asked, in cross-examination, if the check of Edward J. Gushing, dated June 18, 1867, for $2,000 on the Atlas Bank was not paid on account of the check in suit, he replied that it was not. The defendant's counsel then moved that the case be sent to an auditor to ascertain the state of the account between Gushing and the bank, claiming that the check in suit having been loaned by the de- fendant to Gushing without consideration, and by said Gushing pledged to the plaintiffs as collateral security for his indebtedness to them, the plaintiffs could not maintain this action without proof of such indebt- edness. This motion the judge overruled, and instructed the jury that the plaintiffs might maintain their action and recover upon the money counts in their declaration, without reference to the question whether Gushing was or was not indebted to the plaintiffs. Under these in- structions, the jury having returned a verdict for the plaintiffs for $3,- 106, the amount of the check and interest, the defendant now moved for a new trial upon the ground of error in law in said instruction. Potter, J. Of the general right of the pledgee to collect notes and securities pledged to him there can be no doubt. If he could collect only the amount for which the paper was pledged, this would render two suits necessary to collect the whole amount of the note pledged. The pledgee can collect the whole, and account to the pledgor for the surplus over his debt. But with paper known to be accommodation paper the case is dif- ferent. If, in this case, the pledgee could collect the whole of the mak- er, he could be obliged to pay the surplus over his own claim to the pledgor, who would be in his turn liable to repay sucji surplus to the maker. We think, therefore, that in case of accommodation paper pledged the pledgee can recover of the maker only the amount of the debt due him from the pledgor. Jones v. Hibbert, 2 Starkie, 304, 3 Eng. Gom. Law, 356; Ghicopee Bank v. Ghapin, 8 Mete. (Mass.) 40; Chitty on Bills, 81 ; Wiffin v. Roberts, 1 Esp. ^61. Ch. 2) HOLDER IN DUB COURSE! .417 On the trial of the case, the defendant claimed that the burden of proof (it being a pledge) was on the plaintiffs to show the amount of the defendant's indebtedness ; and the plaintiffs, at the hearing before us, claimed that the defendant was obliged to prove that the debt for which the note was pledged as collateral had been paid wholly or in part. The holder of commercial paper is presumed to be a holder for val- ue; that is, until the contrary be shown. In the present case, it was proved that the defendant's check (payable to bearer) was pledged by Gushing, to whom it was given, to the plaintiffs for his (Cushing's) indebtedness. This shows a valuable consideration, and makes the plaintiffs holders for value, even if the indebtedness be fluctuating. Byles on Bills, side page 123 ; Heywood v. Watson, 4 Bing. 496 ; Chit- ty on Bills, side page 85 ; Woodruff v. Hayne, 1 C. & P. 600 ; 1 Starlde, 483. It is generally sufficient for the holder of such paper to present it; and it is held to be pi^ima facie evidence that he is a holder for value and to the amount expressed. The burden of proof is indeed on the plaintiff to prove a valuable consideration, but by presenting the paper he makes a prima facie case ; that is, a case sufficient to justify a ver- idict for him if the defendant does not rebut it. But if the defendant does produce evidence to rebut this presumption, the burden is still on the plaintiff, taking all the testimony together, to show a valuable con- sideration by a preponderance of evidence on his side. Burnham v. Allen, 1 Gray (Mass.) 500; Delano v. Bartlett, 6 Gush. (Mass.) 366 (which criticises and explains 1 Gush. [Mass.] 170); Powers v. Rus- sel, 13 Pick. (Mass.) 69, 76. But if the defendant, not disputing the original consideration, takes some new ground of defense, for example, payment, failure of consid- eration, and the like, then the burden is on him to prove this matter of avoidance. Delano v. Bartlett, supra; 3 Phillips on Evidence, side page 161. In the present case, therefore, it would be sufficient for the plaintiffs in the first instance to produce their check to the jtury, which would en- title them to a verdict for the face of it, unless the defendant produced evidence to show that the amount of the indebtedness was either orig- inally less or had been reduced by payment. If he does so, then, tak- ing all the evidence together, the burden of proof would return on the plaintiffs to show themselves entitled to recover the face of the check. Ghitty on Bills, side page 638, note "c." A new trial will be granted, on the defendant's fihng an affidavit that he has evidence to show that the amount of Gushing's indebted- ness to the plaintiffs was less than the amount of the check.^* 1* Accord: Mersick v. Alderman, 77 Conn. 634, 60 Atl. 109 (1905), semble. Sm.& m:.B.& N.(2d Ed.)— 27 418 NEGOTIATION (Part 2 LAY V. WISSMAN. (Supreme Court of Iowa, 1873. 36 Iowa, 305.) Actionu pon a promissory note for $150 executed by d £. fpnrlant to J. L. C ory and W. G. ^ StQpe, snsLhy thpm inHnrspd without recours e. 'I'Jie defendant-answered under oath, denying that he signed the note sued on; denying that plaintiff is a bona fide holder thereof; alleging that the sarrfe~was obtained by~fraud, without any conside ration, and that plaintiff paid therefor only the sum of $80. Trial by the court. Judgment for plaintiff. Defendant appeals. The material facts are stated in the opinion.** Day, J. * * * It appears from the evidence that the payee of the jiote procured it fraudulen tly Rprl wi'thnnt rnnsulpratinn, and that the pl^i'T^tiff r^'*^ -%'^" tViprpfnr, wjfhniil^any knnwle.dg-e of-tbfe-circum- st ances attending its execution. A f|iiestinn is prps e ntcri as t o the amount -plaintiff is entitled to recover: whether t he amount^ olithe p niP nr f V i P piitr| pn ifj thprpf oxj^ Jth interest . It is an elementary principle that the equities existing between the maker and the payee cannot be set up against the indorsee in the ordi- nary course of business, for a valuable consideration, in good faith, and before maturity. There is some confusion and uncertainty in the authorities as to whether one who purchases a note for less than its face can be con- sidered a bona fide holder. Bailey v. Smith, 14 Ohio St. 396, 84 Am. Dec. 385, and cases cited. In this state, however, the rule is settled that one who j)urchases_a._iijOte-at-artfocount may be ct- bona fido holder and , entitle d, tr> rprnver tlipff^ nn. Sully v. Goldsmith, 33 Iowa, 397. And this view has the support of both principle and authority. Bailey V. Smith, supra; Gould v. Legee, 5 Duer (N. Y.) 270'. The- a.mny pt nf the consideration paiHj22gy; ^P': nrr\p ina p nrtnnt in rioto x minipp- wh e f her the holder is a bonalideindorsee. Where b Ttcrteior^SOO, on aTresponsible person, and nearly due, was sold for $5, it was held that the indorsee was not a holder in good faith for value, and that he could not recover thereon, the note being with- out consideration. De Witt v. Perkins, 22 Wis. 473. The amount of consideration paid becomes an important element, in connection with the responsibility of the maker, the rate of interest, the time of matur- ing, and the circumstance of the transfer in determining the bona fides of the holder. And if he is not a purchaser in good faith, he takes the note subject to the equities growing out of the note, existing be- tween the maker and the payee. When^Jiowei^r, the_£onsideration pa id, and the other circ umsta nces of the purchase, show that the in - dorsee^is a bona fide hnlder , Tn thp "iisncil mii r^e- nf bif:in p ^s. there is " Part of the opinion is omitted. Ch. 2) HOLDER IN DUE COUESH 419 no logical principle Upq n \^r1ii^;h his rprnvpry frnm the makpr rar\ be reduced 'helnw tlie-amount of the Bete. The defense that a note has been obtained fraudulently or without consideration does not avail against a bona fide holder. If, however, the recovery of such holder may be limited to the amount paid, it is apparent that the defense does avail; for without such defense he would recover the amount evidenced by the note. There is a class of cases in which the holder has been allowed to re- cover only the amount advanced upon the note. But it is believed that they will nearly, if not quite, all be found to be cases in which the holder is not a purchaser in the ordinary course of business. Thus in Allaire v. Hartshorne, 21 N. J. Law, 665, 47 Am. Dec. 175, cited in 1 Pars, on Notes and Bills, p. 191, note 1, the note was deposited with the holder as collateral security for a pre-existing debt. The plaintiff was the owner of the note only to the extent of the debt secured. If- he had recovered more, he would have held the surplus in trust for the payee. But the payee was not entitled to recover; the note, as between him and the maker, being invalid. Hence it was held, and very properly, that the holder could recover pnly the amount of his debt. The same principle is involved in Williams v. Smith, 2 Hill (N. Y.) 301; Youngs v. Lee, 18 Barb. (N. Y.).187; Cardwell v. Hicks, 37 Barb. (N. Y.) 458; Chicopee Bank v. Chapin, 8 Mete. (Mass.) 40. In Hubbard v. Chapin, 2 Allen ( Mass.) 328, a note was given upon an illegal consideration to one Stone, for the benefit of Mallory. Stone indorsed the note to the plaintiff, who paid but a small sum thereon, and agreed to pay the balance to Mallory. It was claimed that, before paying the balance to Malldry, he had knowledge of the illegality of the consideration. It was held that, if he did acquire such knowledge, he could recover of the maker only the sum paid before he obtained information of the failure of consideration. This case falls under the same principle as those before cited. It is essential to the utility of commercial paper, as a medium of ex- change, that the parties dealing with it, so long as they act in good faith, should be allowed to regulate its value by the responsibility of the parties bound thereby, and all the circumstances attending the transfer; and it would very much lessen the usefulness of such paper, if the purchaser for less than its face, in the ordinary course of busi- ness, holds it, pro tanto, subject to the defenses which the maker may have against the payee. We hold, therefore, that t}^" rniirf d'"^ ""*• "^^ '" rpnHpn'no- jnHg-p^pnt- for the amount of the not^ . This holding is in accord with the general currenrbf decision in this state, upon the subject of commercial paper. See Dickerman v. Day, 31 Iowa, 444, 7 Am. Rep. 156 ; Loomis & Le- roy V. Metcalf & Fuller, 30 Iowa, 382 ; Sully v. Goldsmith, 32 Iowa, 397 ; National Bank of Michigan v. Green, 33 Iowa, 140. Affirmed. 420 NEGOTIATION (Part 2/ ^ CLAYTON V. BANK OF EAST CHATTANOOGA. (Supreme Court of Alabama, 1920. 204 Ala. 64, 85 South. 271.) Assum2s it by the Ban k of East Chattanooga gpi'ngt n, W naytnn. Judgt nent for plaintiff, and defendant appeals. Reversed a nd remand- ed." S0MERV11.LE, J. * * * To de lendant's pleas of fraud and want nfj-nritiidfrptirm plaintiff jTJpadprl nn1^_a_s]2P.ri"aT~repliraTinn tViattTwaS a bona fid e jurchaser for value in due course . The re being no genera l d enial of't hejl£as,-tbc y were confe ss ed by th e-replication, and prool of them Sy"defendant could not be required. Ger.-Am. National Bank V. Lewis, 9 Ala. App. 352, 63 South. 741. It_ was_ theref ore J noim- beul upon plaiiitif f'To establislfits replica"tron, viz. t hat it purc hased tlie-»ete-fGtjjalue. The trial judge itistni£t£ d thp ii i r y-4 hat if plo ttrttff, under the cir- cumstances shown in evidence, "boug ht, the note by givi ng Jludso-n. or his company [the first holder "and" transferor] c redit for it , then * * * thi s note wil l_haje-to-be4aid." This part of the oral charge was duly excepted to by defendant, and is assigned for error. The o nly evidence as to plaintiff's payment of value for the note is found in the te.strmony nf-Ji- s c . t shier. lJ £iQla_t£ i±TTie~bought the note f or $980 from Hudson, by giving to him "j . certificate of deposit for themote." It does not aggear whethe r '<" •'^ac (xrtifirate ot presen£jl e- posit, or a time certificate, or whetherit-wagjie^ tiahle, nr whethe r the fund represented, or any part""ofTf7has ever been paid out by the plam- tiff bank. The t rial court jute rpreted thi gj^stirnnriv_a s meanin g_(as it may well have meant) <-Vi^t pl tiintiff 1-.nw V-g:rPT»-4t4l dSnn a rreHit nn ac - count for $980, and this interpretation was apparently acquiesced in by" both partiesT^Th e instruc tion was erroneous and prejudicial, and must work a reversal of the judgment. ^Tiemll v. Merchants' Bank, 195 Ala. 175, 70 South. 723 ; Ala. Grocery Co. v. First National Bank, 158 Ala. 143, 48 South. 340, 132 Am. St. Rep. 18; Armstrong v. Walker, 200 Ala. 364, 76 South. 280. In the last-cited case it was said : "According to the evidence, the German Bank gave * * * certif- icate of deposit for the notes of the defendant. It does not appear from the evidence that this certificate of deposit was ever paid. If no part of the deposit atte^ tedjrjr the .ce<=rifteatt'^--Kr)R f!ver bffin ])3P^ tJm o-the h f^jTJ ^ did nnt pari L ^ f viTil v alne its due date a represen ta- tive of the maker presented to the d efen dant m payment of the note a rbp rlTTn tho nrdpr of the defendant drawn by the St. f^cnrgrn I'ny hSir Crmipany gicrtig.4T4^r fri j,^ _^j^/j]v^ he being treasurer of that organ iza- tion as well a s of the Union _£ ommerciai Paper >.^o mpany, on tne Inter- natfSnal 'iVust Company and ce rtified by the trust company. The chec k w:^g arppptp^ 'n payment and the note was delivered by the defendant to the representative of the maker. The St. Georges Bay Fur Company had a checking account with the International Trust Company. The check was- paid - tn -c nurse a nd the defenda nt- remitted th a^a roreedA to its correspondent, who had forwarded to it the note for collection. THere was no. turther evidence other than such inferences as may be drawn from these agreed facts. The defendant had no interest in the npte or che ck other than as collecting agent, i t had no kno-w^ edge whether the St. Georges Bay Fur Company, the drawer of the check, had ' any luklioils w ilh Lh e—Uft ion Comm ercial Paper Company, the maker of the note ; n or did it ha ve any knowledge as to the authority nr jiuaiat-j:if anthnrity nf^^alkgr as treasurer t o Sign th e_c heck, and n o notice of any in firmity in~the~cn eCk_ unless rieces.s aril y~inf erab le from the circumstances stated. Ch. 2) HOLDER IN DUB COUESB 459 The plaintiff is jib^ gggi'gtipc nf t he St. Georges Bav Fur Company an d brings this action tn recp yfr "f ^^"'-d.pfpnHant tVip prncppHs of the check collected by it. Its gr ound of action is that the transaction on it s jace showed that it was a payment of the private debt of Walker, fo r his benetit, out of the fnnHs nf the S tTOeorges Bay Fur Company w ithout authnritv . The plaintiff i? n o*' ^"titlpH tn recoyer under these circumstances . The defendant bank, although named as payee of the check, was o r m ight be, nevertheless, a holder in due course " Liberty Trust Co. v. Tilton, 217 Mass. 462, 105 N. E. 605, L,. R. A. 1915B, 144, and case3T there collected. By R. L,. c. 73, §' 76, every holder is deemed prima facie to be a holder in due course. 'The defendant became a holder ' in due course by receiving a check complete and regular on its face, f before being overdue, in good faith and for value, with no notice of any infirmity in the check or defect in the title of the person nego-j tiating it. R. L. c 73, §■ 69. Shawmut Nat. Bank v. Manson, 168 Mass. 425, 47 N. E. 196; Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N. E. 646, 97 Am. St. Rep. 426. There is nothing in the agreed facts to indicate that the check was not given by its maker, the St. Georges Bay Fur Company, to the Union Commercial Paper Company in. payment of a debt owed by it to the latter company, haying been previously made*at its request to the order of the defend- ant in order that the check might be used in payment of the note of the Union Commercial Paper Company held by the defendant for collec- tion. Moreover, the check was certified by the trust company, on which it was drawn, before it was offered to the defendant. For aught that the latter knew, that certification may have been procured by the Union Commercial Paper Company, whose representative pre- sented it to the defendant. The check, complete in every respect as to form, was tendered to the defendant by a representative of the maker, the Union Commercial Paper Company, who was the one primarily liable on the note, and not by Walker, whose liability was only secondary. The re was jiflthing in t he transaction to-i ndica t c tliat tl^e el^ e ^lf wa«; intpndpfl aga~^vrnpnt of th e debt oi_Wn1]fpr. but nn tb g contrary everything in^cate d that it was intended as a pavmpn<-.-fyM4>e rlpht nf tVip maker of the note. In principle the case atTar is indistinguishable from Nat. Investment & Security Co. v. Corey, 222 Mass. 453, 111 N. E. 357. See, also, Allen v. Fourth Nat. Bank, 224 Mass. 239, 244, 112 N. E. 650, and Allen V. Puritan Trust Co., 211 Mass. 409, 423, 97 N. E. 916, L. R. A. 1915C, 518. The cases relied on by the plaintiff do not support its contention. In Newburyport v. Fidelity Mut. Ins. Co., 197 Mass. 596, 84 N. E. HI, the check of a municipality drawn by its treasurer to the order of his creditor was by him handed to that creditor. Plainly that transaction bore on its face evidence of its infirmity. Here the primary debtor was not the treasurer, Walker, but the Union Commercial Paper Company, A60 NEGOTIATION (Part 2 whose representative presented the check to the defendant and received the note from it. The facts that Walker was secondarily liable and was treasurer of both companies, and was not the person apparently active in the transaction, plainly distinguish this case in its essential facts from that case. The numerous cases from other jurisdictions relied on by the plaintiff, so far as applicable, are similar to Newburyport v. Fidel- ity Ins. Co., 197 Mass. 596, 84 N. E. HI, are not at variance with the conclusion here reached, and need not -be reviewed in detail. There is nothing in Johnson Co. v. Longley Ivuncheon Co., 207 Mass. 52, 92 N. E. 1035, which requires a finding for the plaintiff. The decision of Farrington v. So. Boston R. R., 150 Mass. 406, 23 N. E. 109, 5 L,. R. A. 849, 15 Am. St. Rep. 222, turned on the peculiar nature of certifi- cates of stock in a corporation and did not involve the law of negotiable instruments. In accordance with the terms of the report, let the entry be: Judg- ment for defendant. FOX et al. v. CITIZENS' BANK & TRUST CO. et al. (Court of Chancery Appeals of Tennessee, 1896. 37 S. W. 1102.) Bill_by_Ered-vFox and others against 'the Citizens' Bank & Trust Company and others ja_gnj oin defendant bank an d trust company fro m further prosecuting suits on n^t'"' pypf-ntpH by ppmplainants to J. (lAndersQiu-4f4is tee. who indorsed them to the bank and trust company. The cause was heard by the chancello r April 11, 1895. He held_ th at the complainants were not entitled to'tti e re lief sough t, inasmuch asthe bank and trust rnmpaTvv arqnireH the nntes in^^nH faTER7Tor~a fall iable co nsi deration ; h pfnrp tVipir matj uit Y , '"" d llff ^"nrse"of tradeT' and^^withouTanxJi ntire nf thp pq uities_e.xi£iingL-against them, or be- tween "the" original parties thereto. So holding, he dismissed the original bill, dissolved the injunction that had been granted, gave the bank and trust company a decree for the amount of the notes, interest, and an agreed attorney's fee, and taxed complainants with the costs. From this decree complainants prayed and obtained an appeal to the Supreme Court, and have assigned errors. F our errors are assigned, as follows: (1) ErjxuLJn_ Jiolding tha t the__bank_and__truaD ^m p any was an inn -e ecnt purdiaac r of the notes, in due course of trade, and without notice of the equities of complain- ants; (2) Vipr-y^iifiP tlip nntpg, ^pifig" ^^v^" O n their face to J. C. An- de rson, tru steej__and showing that theywere given for landr gave no- ti ce to the banktE aFA nderson was holder of the land and notes f or jomebodv els e: (3) e rror in not holding, nnder the evidence^ tha t the bankjifas nnt^iolder of the notes in due course of trade, but that it received them as collaterai~5ecurity tor a pre-existing debt, exc ept as 10 a ;j>l,000, which- was-advanc o d at the liini,, bur wnich was alter- Ch. 2) HOLDBE IN DUE COUESB d:61 wards paid ; (4) error in not holding that the bank, at the time it to ok tl ^se notes as collaierais. had np tice-t bat the con s ider^inn for th em JUadLiaikd. It is co nceded that the consideration of these note s ent irely fail- ed." ~— — — '^=^ WlI,SON, J. It is next i nsisted that th^p;r■p^ npnn thf r^vn^:ff, '^ ^'■'"'^ fi'?'=?iiP>iiY "^ m^ftpr f /-.r +hp jury tn cTy wliptVipr ]-|^ j i^d Satisfied them on t hat SM.& M.B.& N.(2d Ed.)— 30 4C6 NEGOTIATION (Part 2 2pint,_ and I think tha t even had the onus been upon the defend ant tk^]-» ^y^^ pYi^f nc.e up on which the jury were entitled to find a"vef- dict for him. The verdict, therefore, cannot be disturbed. ~~ KERR V. ANDERSON. ^(Supreme Court of North Dakota, 1907. 16 N. D. 36, 111 N. W. 614.) Morgan, C. J. Action upon a promissory note by the plaintiff, as indorsee, against the defendant, as maker thereof. The cornjjlaint al- I cgc s the execution - a iTd delivery and nnn payment of the note p t ma- tuji ty, and t hat the same was d"'}^ inHnrgpfl tn thp pl aintiff be fore maturity for a valiiaKl^jwi Side'"?tin n-4t i d iii » n - ninp nf l . m ,ginps<^] T^p ahswj^er is a general denial. A jury was impaneled. P laintiff estab^. li shed the du e indnrseme nt of the note by the paye e, and offered the note in evidence, which was received without objection, and thereupon rested._ Jj^f^pdant ''fiS^p''! w'tbmi t offering anv evidenc e."*"" Plaintiff moved the court to" direct a verdict in his favor, and the motion was denied. The defend ant the.n moved fo r Ft di'''"7t' ^d v? -rd'"^ t in hi s fny"r, which was granfecE Plamtiff excepted to the rulings on each of these motions] I'iamtift thereafter moved for a judgment notwithstanding the verdict, and for a new trial. Both motions were denied. Plain- tiff appeals from the order denying these motions. The record does not disclose the grounds upon which the trial court granted defendant's motion for a directed verdict. In their printed argument, the d efendant's . attorneys attempt to sustain the trialpnnrf'f; prtinn npnn thp orrnnTid thd^ plai'nt-lff nfff rerl no evirlenc e to~sHow^h at he was an innocent purchaser of the note before maturity . ' It was not necessary to offer such evidence. The p re sumptio ji_ is that the inrlnrsfmpnt was m ^ de in the regular course of busin ess. The statute expressly so declares, and ^every holder of negotiable instru- ments is deemed prima f acie to be a holder in due course, unl ess the title of the person negotiating - jhe instn unent is shpwn tn he defe^ ive •^or fraud or other reasons. When this is shown, the burden is then upon tne holder to show that he took the instrument in due course. Section 6361, Rev. Code 1905." This court has often held that the imlA-r ni a npg otinhip instrument is riQ t primarilv bound to establ ish tliat-l+c ii ail iiiuuLCUr'puiLfeaser. Shepard v. Hanson, 9 N. D. 249, 8 8 "The instruction in question ought to have been refused. Its rejection was proper for the reason, if there were no other, that It required the jury, if they believed either fraud or illegality in the Inception of the bonds to have been established, to find for the township, unless the plaintiff proved that he purchased for value or gave some consideration for them. Such is not the law ; for, if any previous holder of the bonds In suit was a bona fide holder for value, the plaintiff, without showing that he had himself paid value, Ch. 2) ' HOLDER IN DUE COURSE 467 83 N. W. 30 ; Id., 10 N. D. 194, 86 N. W. 704. Plai ntiff pro'gifced farjp that tip arcjiiirpd titlf^ tViPTpfn in <3jie-tiQrmie-rrf hn'iinpsi^- Daniel on Neg. Ins. § 812, and cases cited. The fact that plaintiff alleged in his complaint that the note was purchased by him before'maturity did not make it incumbent on him to establish that fact by evidence. The statutory presumption was in force with or without such allegation. It was therefore error to di- rect a verdict in defendant's favor. Plaintiff requests this court to order judgment in his favor notwithstanding the verdict. This is not a proper case for such a judgment. Defendant may be able to show upon another trial that the allegations of the complaint are not true. * * * Order reversed. SECTION 3.— EQUITIES WHITEHEAD v. WALKER. (Court of Exchequer, 1842. 10 Mees. & W. 696.) Assumpsit by the assignees of the indorsee against the indorser of a bill of exchange. The declaration stated, that on the 8th of August, 1834, and before the bankruptcy of Benbow, certain persons made their bill of exchange in writing, directed to Grayhurst & Co., and payable to the defendant; that the defendant indorsed the bill to W. Swainson, who indorsed it to Willis & Swainson, who indorsed it to Benbow before his bankruptcy. Averment, that Grayhurst & Co. refused to accept the bill, and that the same was protested, etc. See the former case of Whitehead v. Walker, 9 Mees. & W. 506. Plea, that after the indorsement of the bill to Willis & Swainson, and before and at the time when it was indorsed by them to Ben- bow, Willis & Swainson were, and still are, indebted to the defendant in certain large sums of money, amounting in the whole to £1,000,, in respect of certain bills of exchange, etc., goods sold and delivered, etc. Averment, that the said sums so due from Willis & Swainson could avail himself of the position of such previous holder." Montclair y. Ramsdell, 107 U. S. 147, 159, 2 Sup. Ct. 391, 27 L,. Ed. 431 (1882). 468 NEGOTIATION (Part 2 to the defendant exceeded the amount of the said bill of exchange, of all which premises Benbow, at the time of the said indorsement there- of to him by Willis & Swainson, had notice, and that the said bill was indorsed by them to Benbow, after it had so been refused acceptance and had been protested as in the declaration mentioned, and after it had become due. Verification. Replication, de injuria. Special demurrer, and joinder therein.*' Parke, B. It is unnecessary to determine whether the replication 'is good or not, for we think the plea is bad in substance, on the au- thority of Burrough v. Moss.^" That case decides that the indorsee of an overdue promissory note takes it, as against the maker, with all the equities arising out of the note transaction itself, but not subject to a set-off in respect of a debt due from the endorser to the maker of the note, arising out of collateral matters. For example, if the note be released or discharged, the plaintiff under such circumstances can- not make a title to it. But a set-off is not an equity ; it is a mere col- lateral matter ; it is a right to set off a cross-demand against the plain- tiff's cause of action, which was introduced to prevent a multiplicity of actions. The case of Burrough v. Moss is good law, and has been recognized in this court. Nor do I think that case is affected by the decision of Coleridge, J., in Goodall v. Ray, 4 Dowl. P. C. 76. It seems to me that either there must be some inaccuracy in the report, or there must have been in that case that sort of formal notice to the plaintiff which is equivalent to an agreement to set off the cross-de- mand as against him. On that ground the case may perhaps be sup- ported; otherwise I cannot assent to the position that a mere notice of a set-off between the payee and the maker can operate to restrict the negotiability of a promissory note. ' Besides, the decision of the point was unnecessary in that case, inasmuch as the plaintiff's demand was for a sum less than the amount of the note. I cannot, therefore, consider that case as an authority that mere notice of the set-off makes any difference. Our judgment must be for the plaintiffs. Alderson, B. I am of the same opinion. If the doctrine advanced on the defendant's part were correct, no one would be able to tell whether certain instruments were negotiable or not; for their nego- tiability would depend on the will of a third person. No one could tell whether the maker would set off his claim against the prior party or not. If he will not, the note is negotiable; otherwise, it is not. Burrough v. Moss, lays down the true rule, that the indorsee of an overdue bill is subject to those equities, and those only, which affect the bill itself. GuRNEY, and Rolfe, BB., concurred. Judgment for the plaintiffs. 3 3 The arguments of counsel are omitted. 4 10 Bam. & G. 558. Ch. 2) HOLDER IN DUE COURSE 469 RANGER V. GARY. (Supreme Judicial CJourt of Massachusetts, 1840. 1 Mete. 369.) See ante, p. 364, for a report of the case. BAXTER V. LITTLE. (Supreme Judicial Court of Massachusetts, Suffolk and Nantucket, 1843. ' 6 , Mete. 7, 39 Am. Dec. 707.) This action_ was by the indorsee against the maker of a. p frir"''"=^Y note for $330, dated March 1. IS ag. pajahig tn Jn^pph Warrk^ Jr , in 'four months, and by him indorsed. Thf _n r ti nn ; ynn r n mnifTiff rj Or tn- b er 4. 1 S39. At the trial before the Chief Justice^ the si gnatures of the m aker an d_indorser were admitted by the defenda nt, and he relied upon a' set-off of not es against the 'P'rankliti Tiank . u pon the fyrnnnH fViat \\\e nnt<»in cnir T^ypg IipIH ] ytf that bank, after it was due, and that he had a r igRFlo make the same defense against t b " p]?'"*-^^ •"' ^^ ^^"^ ort-l nn' w ere brou^ [ht ^y ^^^ >'^"if -^ In order to present the question of law, it was mutually^rnncerl ed ^ that the note was discou nlfidJj y the Franklin Dank in the due cour se, of business; that it was held by the bank when it became due ; that aft ^i ' w grds, and after the bank had stopped payment , in pursuance of a vote of the directors to pay the debts of the bank' in such securities as they had, the note in question, on the 2 0th nf nerpmbpr, is.^y^ was" d elivered to the plain tiff, or to the person under whom the plaintiff claims title, jn "excha hr f f nr hiH n nf '\n\'\ hnn k, at par, which bill^ were then at a discount in the market; that befnrp. tb is artinn was brought — upon notice of the plaintiff's attorneys that they had such a note, and demanded payment thereof, but without notice to the de- fendant that the note had been transferred by the bank — t he-defenda nt' t endered to said attorneys, in g^ti'sfartmn nf tbp n ote, bills of t he Fr anklin Ban k, which th eydeclined to a ccept ; that the defendant has e ver since had said bil ls, and has filed them in offset in this action,, and now relie s_up6n that tend er and set-off. It waS' agreed that judgment should be entered by the plaintiff if in the opinion of the court he was entitled to recover; otherwise, that the plaintiff should become nonsuit. *^ ( Shaw, C. J. When a negotiable note is indorsed and transferred after it is due, and the defendant relies upon matter of set-off which he may have against the promisee, he can avail himself only of such matter of defense as existed between himself and the promisee, at ^' The arguments of cbunsel are omitted. Baxter v. Harris is reported with the principal case, but everything relating to that action is omitted. 470 NEGOTIATION (Part 2 the time of the actual indorsement and transfer of the note to the holder. A note does not cease to be negotiable, because it is overdue. The promisee, by his indorsement, may still give a good title to the indorsee. Notes or other matters of set-off, acquired by the defend- ant against the promisee, after such transfer, cannot be given in evi- dence in defense to such note, although the maker had no notice of such transfer at the time of acquiring his demand against the prom- isee. Having made his promise negotiable, he is liable to any bona fide holder and actual indorsee ; and therefore, even after the note has become due, in making payments to the original promisee, or in further dealings by which he gives him a credit, he has no right to presume, -without proof, that the promisee is still the holder of the note. Besi(Jes, in case of payment of a negotiable note, or of a credit which the maker intends shall operate by way of payment, he has a right to have his note given up, if paid in full, or to see the payment indorsed, if partial. Should he insist on this right, in the case pro- posed, he would at once perceive that the person to whom he is mak- ing payment or giving credit is no longer the holder of the note. And this appears to us to be the true distinction between the indorsement of a note overdue and the assignment of a chose in action. In the latter case, notice of the assignment must be given by the assignee to the debtor, to prevent him from making payment to the assignor. Without such notice, he has no reason to presume that the original creditor is not still his creditor; and payment to him is according to his contract and in the due and ordinary course of business. The as- signee takes an equitable interest only, which must be enforced in the name of the assignor; and, until notice, he has no equity against the debtor, which can be recognized and protected by a court of law or equity. The indorsee of a note overdue takes a legal title; but he takes it with notice on its face that it is discredited, and therefore subject to all payments and offsets in the nature of payment. The ground is that by this fact he is put upon inquiry, and therefore he shall be bound by all existing facts, of which inquiry and true informa- tion would apprise him ; but these could only apprise him of demands then acquired by the maker against the payee. * * * 42 / The defendant Little, the maker of the note now in suit, not having shown that he held the bills of the Franklin Bank at the time that his note was transferred to the plaintiff, he cannot set them off in this '^uit. In a case in New York, it was held that bills of a bank, held by the defendant when his note became due, could not be set off in aa action brought on the note by receivers appointed previously. Hax- ton V. Bishop, 3 Wend. (N. Y.) 13. The English rule, in allowing set-off in an action upon a note, is somewhat more limited than our own, confining such defense to equi- ps The Chief Justice here discussed the case of Sargent v. Southgate, 5 Pick. 312, 16 Am. Dec. 409. Ch. 2) HOLDER IN DUB COUESB 471 ties arising out of the same note, or transactions connected with it. Burrough v. Moss, 10 Barn. & Cres. 558. Here it has been held that an independent demand may be get off, where in other respects the party is entitled to go into that defense. Sargent v. Southgate, 5 Pick. 312, 16 Am. Dec. 409 ; Ranger v. Gary, 1 Mete. 375. Since the decision in Sargent v. Southgate, the principle decided by it has been confirmed, and the whole subject of set-off placed, by Rev. St. c. 96, upon' grounds more distinct and satisfactory than it was under the former statutes. * * * Judgment for the plaintiff;** PROUTY V. ROBERTS. (Supreme Judicial Court of Massactiusetts, Hampshire, Franklin, and Hamp- den, 1850. 6 Ousli. 19, 52 Am. Dee. 761.) This was an action of assumpsit on a promissory note signed by the defendant, payable to Daniel Whitney or order, on demand, and indorsed by Whitney. The note was dated on the 12th of August, 1849, and was put in suit on the 22d of October following. The defendant pleaded the general issue, and offered evidence to prove that the note declared on was still the property of Daniel Whit- ney, the payee, and was never legally transferred by him, but was got out of his possession, by false and fraudulent pretenses, by Hart & Forbes, who represented that they had $700 deposited in the savings bank in Greenfield, which they would draw out and loan to him, if he would give them the note, by means of which pretenses they got possession of the same; that these representations were false; that Hart & Forbes had not and never had any money deposited in the 'savings bank ; that the plaintiff, at the time he got possession of the note, knew that the same was thus fraudulently obtained from Whit- ney; and that he obtained it for a small consideration, much less than half the sum for which it was given. The presiding judge (Mellen, J.) ruled that the above facts, if proved, would not constitute a defense in behalf of the defendant. A verdict was thereupon rendered for the plaintiff, and the defendant excepted. Per Curiam. The ■ directions we think were right. The plaintiff proved a legal title to the note, and the facts proposed to be proved by the defendant' could afford him no ground of defense. It was no ^3 Accord : Driggs v. Rockwell, 11 Wend. (N. T.) 504 (1833). Contra : Gem- mell V. Hueben, 71 Mo. App. 291 (1897). Compare Marling v. FitzGerald. 138 Wis 93 101, 120 N. W. 388, 23 L. R. A. (N. S.) 177 (1909) ; and see Freitten- berg V. Rubel, 123 Iowa, 154, 98 N. W. 624 (1904). 472 NEGOTHATiON (Part 2 fraud upon the defendant; he was called upon to pay only what he had undertaken to pay ; and payment to the plaintiff would be a good discharge. Knights v. Putnam, 3 Pick. 184. Judgment on the verdict. CARRIER V. SEARS. upreme Judicial Court of Massachusetts, Berkshire, 1862. 4 Allen, S36, 81 Am. Dec. TOT.) Hoar, J.^* This action is by the indorsee of a promissory note against the maker ; and the defendant offered to prove that the plain- tifi procured the indorsement by undue influence from the payee, when he was of unsound mind and incapable of making a valid indorsement This evidence was rejected, and we think it ought not to have been admitted. An indorsement is a contract ; and the contract of an insane person, or one obtained by fraud or duress, is voidable and not void. 2 Bl. Com. 291; 2 Kent, Com. (6th Ed.) 451; Seaver v. Phelps, 11 Pick. 304, 22 Am. Dec. 372 ; Allis v. Billings, 6 Mete. 415, 39 Am. , Dec. 744 ; Arnold v. Richmond Iron Works, 1 Gray, 434 ; Gibson v. ^ Sopea, 6 Gray, 279, 66 Am. Dec. 414. The right to avoid it is a per- sonal right, which can only be exercised by the insane person, or his guardian, or representatives. The contract is binding upon the party who is of sound mind, and his rights under it are not affected until it is avoided by the party entitled to disaffirm it. The property passes as to third persons. The only case cited by the defendant upon this point is Peaslee v. Robbins, 3 Mete. 164. That was an action upon a note by an indorsee against the promisor, and evidence was offered tending to prove that the payee, when he indorsed the note, had not sufficient mental ca- pacity to make a valid transfer of it. To establish this, evidence was admitted as to his incapacity at the time the note was made to him, as well as after ; and the admissibility of this evidence was the question raised upon the bill of exceptions. This court held that it was ad- missible, as tending to show his state of mind at the time he indorsed it. Whether his want of mental capacity was a defense of which the defendant could avail himself does not appear to have been questioned by either party, or by the court. Judge Wilde, in delivering the opin- ion, says : "The plaintiff is bound to show a legal transfer of the note, by proof of the handwriting of the indorser; and it follows, as a necessary consequence, that the defendant must be allowed to. impeach the plaintiff's title to the note by showing that the indorsement was void. Evidence, therefore, of the indorser's mental incapacity to make a valid contract, at the time he indorsed the note, was material evidence; and not the less material because the same incapacity ex- isted when the note was signed." *■* Part of the opinion Is omitted. Ch. 2) HOLDER IN DUB COURSE 473 These remarks of the learned judge, unexplained, would certainly countenance the position taken by the defendant in the case at bar; and the report, as it stands, does not afford the necessary explanation. The point decided, was only that evidence of insanity at one time was , competent as tending to prove insanity at a time shortly after. But the fact in the case was, as I well remember, that the defendant Ijad been notified by the guardian of the insane payee not to pay the* note to the plaintiff; and the defense was conducted by the guardian for the benefit of his ward. We have examined the record, and find in the original specification of defense the statement "that said Fletcher, as guardian to said Parker (the payee of the note), claims said note as the property or estate of said Parker." There was no controversy upon this point; and, the guardian having claimed and exercised the right to disaffirm and avoid the indorsement, the only question was upon the metal incapacity of the payee at the time the indorsement was made. The language of the court was therefore perfectly war- ranted in its application to the circumstances of the case, as it was presented and understood by the parties, but would require limitation if taken as the enunciation of a general principle. * * " CLARK V. PEASE et al. (Supreme Judicial Court of New Hampshire, 1860. 41 N. H. 414.) This is an action of assumpsit, counting upon the promissory n ote o f the three defend ants, dated fuly 26. 1858, for $112.50, payable to oneTheodane__Es__Qark, or order, on the 1st day of the following November, and by the payee i ndorsed and delivered, on the Hay nf ifs date, to the plaintiff. There was also a count for money had and re- ceived, to the amount of $300. Plea, the general issue. The d efendants offered to prove, that, nn tVic Hay hpfnrp the- gnring ofthejiotej all of the makers e xcept Charl es Pease were arrested at Ellsworth, ill Grafton county, by (Jalvm Clark, a deputy sheriff, by th e procurement and with the aid of the payee, and held by them "m custody until the next day, when they were carried by them to Ply- mouth, and there held in custody until, to effect their liberation, th is note was gi ven, the said Charles Pease signing as the surety nf the others ; tViat tVin nrrnnt ^»t-t; maHp witVinilt an y warrant Or Other law - f ul authority , but it was represented by the sheriff that they were ar- rested for the criminal offense of malicious mischief, and that he had the right to arrest them without a warrant; that this note, with two others, amounting in all to $250, was given to said Theodore P. Clark to obtain the release from duress of the three principals in the note, and upon the promise by the payee that they should then be set at liberty, and he would prosecute them no further ; and upon the exe- cution of the note they were set at liberty accordingly. 474 NEGOTIATION (Part 2 The plain tiff exc egted_l o this evidence, as nn f1pfpn<;p ag -ningt- thp indorsee, without proof that he was not the bona fide holder OLLj the iiofeTBut the c ourt ru lg^lhat, if t'r' r'"*'p '"^g nhf^inprl hy Hurf^s'ii. '*" wa s void in Jli e hands of an innocent indorse e, and thereupon the plaintiff, admitting for the purposes of this trial that the defendants' witnesses would testify to the facts stated, a verdict for the defendants was taken by consent, subject to the opinion of the court; and the questions thus raised were reserved, and assigned to the determination of the whole court.^' Sargent, J. That the case presented is clearly one of duress there can be no question. The_ ahuse of any p r^fp^s, either civil or criminal, tocom pel a party, by imprisonment, tn.dn ^^y art ngainf't hluy'"'' except to pay the debt for which he is arrested, i s entirely illega l, andjiie art may he avoid ed on the grnnnH nf. dure ss. Richardson v. Duncan, 3 N. H. 508 ; Severance v. Kimball, 8 N. H. 386 ; Shaw v. Spooner, 9 N. H. 197, 32 Am. Dec. 348 ; Burnham v. Spooner, 10 N. H. 523; Breck v. Blanchard, 22 N. H. 303. Here the arrest was without any warrant or lawful authority. Such dures s is a perfec t d efense, "ppn all thp a uthorities, to an actio n between the orig inal garties. The note in this case was not only void as between the original parties, on the ground of duress, but was given to compromise a charge of crime, and was wholly illegal upon that ground. Plunier v. Smith, 5 N. H. 553, 23 Am. Dec. 478. But the princ jpal questio n raised here by the ruling of the court is \v hether such a note is ab - s olutely void in the hands of any holde r ; an^_Jf_j]j2L_lli£n_.ariQther questi on arises upon the exception which was taken by the plaintiff, wtiTcIi is this : After an in dorsee has made out a, prima f acie case by proving the indorsemenL etc.. and the defendant has shown that the note was obtaTned""fro m him bv duress, upon whom rests the hnrden of~proof ? Mi Lst tJTedefendant prove that the pl aintiff was_ not the bo na fide holj ^r, and that he did not pay a valid consideration for it, as the plaintiff claimed? or,- the duress being pr o v e d, docs that t lirow th e burden of proof upon the plaintiff, to prove how he came-byjli e note, and the consideration he paid, etc., as the defendant claims? We will "examine these questions in the order in which we have stated them. L__I s thi.s note absolute l y y"i^ '^^ *^^ VnnHr r.f nny ii.^](-lp^ ^.j-|.^.YpYar in nocent, who has paid a valid co nsiderat ion for it hpfnre it was (j i t e ? •'' We find that the law holds certain persons to be incompetent parties to make contracts, on account of want of capacity. It has, therefore, wisely taken care of the interests of those who either have not judg- ment to contract, as in the case of infants, or who, having judgment to contract, cannot in law have any funds or property to enable them to perform the contract, as in the case of a feme covert; and there- *'' The arguments of counsel are omitted. Ch. 2) HOLDER IN DUB COUUSlS 475 fore it has in general' rendered the contracts of infants voidable, and those of married women absolutely void. Ch. on Bills, 18. By our law an infant has not capacity to bind himself absolutely by a prom- issory note, as maker or indorser. Story, Prom. ' Notes, § 78. So a married woman is incapable, in any case, 9f becoming a party to a note or bill so as to charge herself with any obligation whatever or- dinarily arising therefrom. So contracts made with an alien enemy are absolutely void, upon the ground of disability to contract. This principle has its origin and confirmation in the law of nations. Per- sons insane, or imbecile in mind, have not the mental capacity to con- tract. This disability flows from the most obvious principles of nat- ural justice, because persons in that condition — lunatics, idiots, and persons non compos mentis — ^being bereft of their reason, are, by the rules not only of municipal law but of universal justice, held to be utterly incapable of making contracts, and generally their contracts are absolutely void. Story, Prom. Notes, §§ 85, 94, 100, 101; Ed- wards, Bills & Notes, c. 3. There are some other parties that are held to be incompetent to contract, but these are the principal; and there are also some exceptions to some or all of the general rules above stated, which are not now important to be noticed. These doctrines are all familiar as elementary principles. Contracts, therefore, purporting to be entered into by either of the above parties, are either void, or voidable, as the case may be, alike as against the other party to the original contract, and also, where the contract is assignable, they are void as to such incompetent parties, or are voidable by them, in the hands of any assignee or indorsee. These rules of law are founded upon the most common principles of natural ■justice and of public policy. There are numerous other, contracts, which, though made between competent parties on both sides, are nevertheless void as between such original parties. A contract made on Sunday, where the transaction of such business is prohibited, is an illegal contract, and void as be- tween the parties. So a contract based upon an illegal consideration — as usury, gaming, spirituous liquors sold without license contrary to law, the compounding of a felony, etc. — is void as between the parties. So a contract without consideration, nudum pactum, and one where the consideration has failed, as between the immediate parties, is void or voidable. So a contract entered into by compulsion under duress, or obtained by fraud, or circumvention of one in a state of in- toxication, is void as between the parties. Other cases might be stated (see Ch. on Bills, 83-87), but these are sufficient for our present pur- pose. Where the contract itself is illegal, or is founded upon an illegal consideration, the parties are usually both violators of the law, and stand in pari delicto. In such case any contract for the payment of money or the performance of any service cannot be enforced as between the parties; nor, if money has been paid or property trans- ferred by one party to the other under such contract, where both par- 476 • NEGOTIATION (Part 3 ties are alike in fault, can it be recovered back, because in such cases "potior est conditio possidentis." But in cases of duress, fraud, or circumvention, the fault was all upon one side, an d , the innocent party. upon who m the duress or the fraud vyas practiced, may not only avo id the contract enf ffp'^ '""*•''' "nrlp r these circumstances, but if he |3 av mo^iey, or deliver__pixip erty, he may recover it back agai n. Now bills and notes stand upon the same foundation as all other contracts do, in all the above respects, so long as they remain in the hands of the original payee. B ut bills and note s h ave another a ttribute, whic h other contrac ts "H'nFtr'l Y fjn p^-it p^ ' ^ ' pFg ; ^'^M '"°i np|Tnfi-3hiiit-y Where a bill or note has been negotiated, and passed into the hands of a bona fi de hnlder before it is due, and f or a valuable consideration , in such case the holder a cquires rights which did not be long to the la yse- He stands in a different relation to the ptomisorT These additional rights and privileges have been conferred upon such holder by law, for good and sufficient reasons, too well known and understood to need to be stated, but which are incident to and dependent upon the attribute of negotia- bility, which these instruments possess. And it may be laid down as the general rule, as the general principle applyingf to this class nf ras es, that such a note, thus negot iated and in the hands of such a holder, is notUj able to any detense which th e maker had as again st the origin al pa^^ee. Tn thin [ J° nprnl n ile there are s yne e-x-ceptinm; , among which are: 1. When a statute n ot only pro hibit s_the.mnlfinr rf n "^ntrnrt. but prnv [des that the same shall he v oTiTtn all intents and purpose s or where the law provides that any contract made or securities given upon any illegal consideration shall be absolutely void, then th e nnt e which embodies such contract, or is based upon such consideration, Js, held void, everywhere a nd in the hands of every hoj der. In England, andlh most ot the United States, there are or havebeen laws against usury, which not only, by a general prohibition of usury, made that an illegal consideration for a note, but also provided that all bills or notes founded upon such a consideration should be absolutely void. Such, however, is not the law in this state on that subject, and it is believed that we have no statutes with similar provisions. Hence here usury may be a good defense to a note as against the original party, but not as against an innocent indorsee, for value, etc. 2. ^AflTPTTjliP nptP ig a.trYro-pry^ \f jc| yf^ ij evcrvwhc re. 3. When the maker bel ongs to a class of persons who are ordinarily, and as a generaTruIef on grounds of public policy, held incompetent to contr act at a 11, such as infants, married women, alien enemies, and insane persons, including spendthrifts and others under guardianship, who have been by some statute declared incompetent to contract. ■i. N otes signed b ^;_agents,jaath out aiit hority. In none of these cases (except thefirstTwETch, as we have seen, does Ch. 2) HOLDER IN DUE COURSE 477, not apply in this state) is a note valid in the hands of any one ; and the party who discounts such paper is bound to inquire, at his peril, whether the note offered to him is signed by a party capable and com- petent in law to bind himself, or by an agent duly authorized to bind his principal. Beside this, he is bound to inquire whether the party from whom he receives it is competent to make such transfer in his own right, or is authorized to do it for his principal, for whom he as- sumes to act. If there is a failure in either of these pomts of capacity or authority, it will not avail the party that he is a bona fide holder, for value, with- out notice. He must look to his indorser if he has one, and if he has not he must suffer loss. 5. Another case might be mentioned, which has been made an ex- ception to the general rule above stated by express provisions of the statute — as where a note is attached by the trustee process. There, by operation of the statute, the maker of a note may have a perfect de- fense against an indorsee, for value, without notice, and before due. So notes discharged by operation of insolvent laws might afterward be transferred, by possibility, so as to form another exception, where the indorsee, holding the note bona fide, etc., might be met with a per- fect defense on the part of the maker. But these last cases throw no light upon the question we are considering. These are the principal, perhaps all the exceptions to the general rule above stated, that no defense is available against an innocent indorsee, for value paid before due. B ut where the contra c*" was illpfya], Tvinp^ prohibited by law, or the consideration was illegal, as usury, wages, compoimdinf a felony, restraint of trade or of marriage, etc., or where there was a want or failure of consideration, and even where the note has been paid — aJ L these defenses, rnif* "i^"y rnnrp, r'anripi |ip marjp ag ainst the note in the hands of such a hold er. And the g uestinn here raised'ls'wViptlTpr , in rase n f diirp-ss or fra»"3, wherp thpre is mala fidps, hyt_itisallon.Q3ia.sLde, and the other party tO' the note has been induc- ed to sign it by force or by fraud, and is in every respect an innocent party, s uch defense shall avail him as against such a holder, for valu e, etc., who seeks to collect it. A nd W tViinl- rnnVi '\ dpfpnrip rinnnt gygil thp m^kpr ag -ainst such a n i pxlorsee nf the note . The authorities favor this view. Kent, in his Commentaries (volume 2, § 39), speaks of contracts generally, and on page 453 says : "If a contract be entered into by means of violence offered to the will, or under the influence of undue constraint, the party may avoid it by plea of duress ; and it is requisite to the validity of every agreement that it be the result of a free and bona fide exercise of the will. Nor wijl a contract be valid if obtained by misrepresenta- tion or concealment," etc. He here speaks evidently of the contract as between the original parties to it, or of contracts in general as distinguished from negotiable 478 NEGOTIATION (Part 3 notes and bills ; because he devotes another chapter especially to a con- sideration of bills and notes, in which he says, in speaking of the right of the holder (volume 3, pp. 79, 80), that a bona fide holder can re- cover upon such note, though it came to him from a person who had stolen or robbed it from the true owner, provided he took it innocently in the course of trade, for a valuable consideration, and undet circum- stances of due caution; and he need not account for his possession of it unless suspicion be raised. This doctrine is founded on the com- mercial policy of sustaining the credit and circulation of negotiable paper. . Suspicion must be cast upon the title of the holder by showing that the instrument had got into circulation by force or fraud, before the onus is cast upon the holder of showing the consideration he gave for it. Chitty says (Ch. on Bills, 72): "In general there will be a sufficient defense between the original parties when the bill or note was obtained by duress, or by fraud, or by circumvention," etc. But he nowhere intimates that any of these defenses would be good against an innocent indorsee; but, on the contrary, he expressly says (page 79): "The circumstance of a bill or note having been obtained without adequate consideration, or even by duress or fraud, or misapplied by an agent to his own use, affords no defense where the instrument comes into the possession of a bona fide holder, for value, without notice, and before it is due." So in Edwards on Bills and Promissory Notes (page 325) it is said that "between the immediate parties it may be shown, by way of de- fense, that a bill or note was obtained by duress, or by fraud, or by cir- cumvention," etc. ; but he nowhere intimates that any of those circum- stances would constitute an exception to the rule which he states (page 56), that the bona fide holder of negotiable paper, who has paid value for it before its maturity, or who has relinquished some available se- curity or valuable rights on the credit thereof, is entitled to protection, and may recover thereon notwithstanding some of the previous holders procured the same by fraud. So in Story on Promissory Notes (section 188) it is said, amder the head of want ot c'onsideration, that notes obtained under duress are void ; but it is also said (section 191) that the want or failure of cons id- eraii &n, or mere fr aud hpt-yyppn the ar|fprp dent parties, will be no de - f ease or bar to the title nf a hnna fi de holder oHhe not e, for value, etc. Now we are not a'h lp tp f"°p wViat rlktinntinn thr re rnulrj he, infart. be- tw een a note the signature to which was obtained by fraiiH anH on e where the signature was obtained b y d.uresj . B oth are equally void as be tWHeiTti'ie oiitj i'i'^l jviJiiuHj.: and there can be no better reason in th e one case for hold in?T thp nht(^ void in The hands of a bona fide ho lder t han m the o thgr. — "It is requisite to the validity of , every agreement that it be the result of a free and bona fide exercise of the will." 2 Kent, Com. 453, ante. Upon this ground, fraud in obtaining the sig- Ch. 2) HOLDER IN DUB COURSH 479 nature would be fatal to precisely the same extent as would duress ; there would be no "free and bona fide exercise of the will" in the one case more than in the other. In Doe V. Burnham, 31 N. H. 431, the rule is laid down very broadly, and without those qualifications and exceptions which we have here- tofore seen must necessarily always accompany it. Eastman, J., de- livering the opinion in that case, says that, where a note is indorsed in the usual and ordinary course of commercial business, all the authori- ties "sustain the broad rule that a bona fide holder for a valuable con- sideration, who becomes such before the dishonor of the note, takes it free from all defenses between prior parties." And see cases there cited. He also quotes Shaw, C. J., in Wheeler v. Guild, 20 Pick. 545, 32 Am. Dec. 231, as stating the rule in Massachusetts substantially in the same way, and then adds : "We are not aware, that in this state there is any exception to the universality of the rule." Now this rule, in the general and broad terms in which it is here laid down, is at once seen to be incorrect, because in case of notes forged, or signed by an agent having no authority, or by an infant, a married woman, an alien enemy in time of war, or an insane person, exceptions to this rule have been seen to exist necessarily. But if the intention was merely to state a general rule, subject to such limitations and ex- ceptions as general rules are usually subject to, it is undoubtedly cor- rect ; and in that view it is broad enough to cover our present case, be- cause in this case the signature to the note is genuine, and no forgery.. No question of agency or authority arises, nor does the signer belong to either of the classes whom the law holds incompetent to contract. Suppose an individual, then, wer.e about to purchase a note payable to bearer, before it was due, and pay a fair equivalent for it, with a view of collecting it of the maker, and where he is to have no indorser to rely upon ; what would be his duty in order to proceed safely ? First, he must a ssure himself of the genuineness of the sig'nature . or, it if purported to be signed by an agent, he must assure himself that t he agent was dulv authorized to bind his principal m that particular ; sec- ondly , he must make such inquiries, which, ordinarily, he may easily do, as to ascert gin *^^* tVip si p ^npr is not an infant, a married woma n, an alien e nem y, an insane person, etc. — that he does not belong to a dass ot personFwho are always presumed by the law to be incompetent to contract ; and, thirdly., he might need, for his own safety, to i nqui re w hether the sip^ner of the note had been trusteed , or whether any othe r speci al statute could affect his claim t o it. When he has satisfied him- selt upon these points, if he learns of no other defects and the signer is of sufficient ability to respond, he may purchase; and there is gen- erally very little trouble in ascertaining these facts. They are usually matters of public notoriety, about which there can be little room for mistake. But suppose that, after being satisfied upon all these points, and hav- ing purchased the note, it should prove that it was an illegal contract, 480 NEGOTIATION (Part 2 or was for an illegal consideration ; who shall suffer, the maker, or the indorsee? This is settled on the best of authority. The original par- ties stood upon equal ground, both being in fault, and could neither of them enforce the contract; yet neither shall be allowed to take ad- vantage of his own wrong as against an innocent indorsee. And suppose it should tur n out that his note was obtained o f the maker by fraud""5r"by duress, a case in which the maker wasliTT ID fault : w Eat rule shall b £_axtplied here ? The long-establi shed one., that whe r e one of two innocent persons must suffer the loss should fall upon him who has suffered a negotiable security, with his name attach ed t~o it,' ~ro get into ci rculatiaiL-. and there by misl ead the indors ee. Such rules, and such an application of them, are necessary to give security to negotiable paper. The defendant's counsel claim that the same rule that would hold the maker of a note, who signed it under duress, to pay it to the innocent holder, for value, would hold infants, and others who are incompetent to contract, to pay their notes when thus held ; but this is neither a legal nor a logical sequence. The infant belongs to a class, all of whom are held by law to be incompetent to bind therriselves by their contracts. In the other case, the man belongs to a class amply competent to con- tract, is under no general disability as the infant is, is never to be pre- sumed to have signed any note under duress, because that is a condi- tion never to be presumed in case of a free man, who may have signed a thousand notes and never have signed but this one utider duress. Is suspicion to be cast upon all notes that are known to be properly signed, and against men under no disability, simply because it is possible that such a note may be obtained by duress or fraud ? Take also the case of a slave. There the general rule is that he is in- competent to contract; and if a man were about to purchase a note, and, upon inquiry as to who the signer was, should learn that he was a slave, that would be sufficient notice to him that the note was void, be- cause all contracts made by all slaves usually are so, because while in that condition they must necessarily be constantly under duress of body, mind and will. But w hen it i s ascertained tha t the sip fner is a free man, then the presumption is that he is n ever under duress, an d there arp^nnTvTare eyreptinn s^ tn this p ;enpra.l ru le:"and tn say that in such exCeptTohat 'Cases the maker shall be allowed to stand upon such a defense against an innocent holder for value, taking it in the ordinary course of mercantile business before the maturity of the note, would be to overthrow all confidence in negotiable paper, and entirely reverse the policy of the whole system of mercantile law. The exception to the ruhng of the court upon this point must be sustained ; but we shall find that the numerous authorities which bear upon the next question to be considered have also a direct bearing upon this point. II. Next let us inquire, up on who rruis-the-hurdpn qf pro' ^f- after duress , or fra jld,._QrJllegal itV of r nTisidprf;tinn_is_£rnvprl ? Must t he defendant not only prove that he had a perfect deTense to the note Ch. 2) HOLDER IN DDE COUUSH 481 originally, b ut also show th at the indorsee had notice of the defect, or that he paid^no consideration tor it, or that he is not in some way the bona fide holder of the note ? Or .must the plaintiff, -after such defen se t o the or ig-ina.1 mntrart is prnvprl, as gnme 1-Vip .hnrHen nf prnvinfy {Ea t h e is a bona fide holder , for a valuable consideration, without notice of any defect, and that it came seasonably into his hands? In Collins v. Martin, 1 B. & P. 651, Eyre, C. J., says : "No want of consideration, or other ground to impeach the apparent value received, was ever admitted in a case between an acceptor or drawer and a third person holding the bill for value ; and the rule is so strict that it will be presumed that he does hold for value till the contrary appears. The onus probandi lies on the defendant." This case is cited approvingly in Doe v. Burnham, 31 N. H. 432, though the question we are now con- sidering was not there raised. But the case of Collins v. Martin goes further than this, and holds that where the defendant has first proved that the note or acceptance had been obtained by. felony, by fraud, or by duress, that so far tended to throw suspicion upon the indorsecient as to call on the plaintiff, the indorsee, to prove that he paid value for it. This is unquestionably the correct rule, as also stated by Parker, J., in Heath v. Sansom, 2 B. & Ad. 391, although the majority of the court' in that case came to a somewhat different conclusion, and held that "in all cases where^ from defect of consideration, the original payees cannot recover upon the note or bill, the indorsee, to maintain an action against the maker or acceptor, must prove consideration given by himself, or a prior indorsee." The same doctrine is held in Brown V. Philpot, 2 M. & Rob. 285. But these decisions were soon overruled, so far as a mere want or failure of consideration was concerned. In Bailey v. Bidwell, 13 M. & W. 73, it was held by the Court of Exchequer that if, to an action on a bill or note, the defendant pleads that it was illegal in its inception, and that the plaintiff took it without value, the illegality being proved, the onus is cast upon the plaintiff of proving that he gave value. The reason of the rule is there stated by Parke, B., who says : "It certainly has been, since the later cases, the universal understanding that if the note were proved to have been obtained by fraud, or affected by illegality, that afforded a presumption that the person who had been guilty of the illegality would dispose of it, and place it in the hands of another person to sue upon it, and that such proof casts upon the plaintiff the burden of showing that he was a bona fide indorsee for value." Alderson, B., adds: "It appears to me that, though the defendant is bound to aver in his plea both the il- legality and want of consideration, yet if he proves the illegality, and the plaintiff does not prove the giving of the consideration, the plea is maintained." And in Smith v. Braine, in the Queen's Bench, 3 E. Iv. & E. 379, Campbell, C. J., says: "But since the new rules, judges have, with entire approbation, directed juries that where the bill was illegal in its Sm.& M.B.& N. (2d Ed.)— 31 483 NEGOTIATION (Part 2 inception, or where the immediate indorser to tfie plaintiif obtained possession of it by fraud, the want of consideration as between him and the plaintiff may be presumed." In Duncan v. Scott, 1 Camp. 100, which was an action by the in- dorsee against the drawer of a bill, the defendant had given the bill without consideration, and while under duress. Lord EHenborough held that, upon these facts being proved by the defendant, the plaintiff must prove that he gave value for it before he could recover, even though it was indorsed to him before it became due. Rees V. Headfort, 2 Camp. 574, was an action by an indorsee against the acceptor of a bill. The drawer had received no consideration, but had been tricked out of the bill by a gross fraud. Upon proof of these facts by the defendant, Lord EHenborough held that it was incumbent on the plaintiff to show some consideration paid for the bill ; and, not doing so, he was nonsuited. Bayley, in his work on Bills (page 373), says: "In many cases the plaintiff is compellable to prove that either he, or some preceding par- ty, took the note bona fide, or for value — as in case of a bill or note originally given without consideration, and while the person giving it was under duress, or in case of a bill or note obtained by fraud, or in case of a delivery by a person not entitled to make it, as in the instance of bills or notes that have been stQlen or lost." In Mills V. Barber, 1 M. & W. 425, Lord Abinger, C. B., says: "Where there is no fraud, nor any suspicion of fraud, but the simple fact is that the defendant received no consideration for his acceptance, the plaintiff is not called upon to prove that he gave value for the bill ; but if the bill be connected with some fraud, and a suspicion of fraud be raised from its being shown that something has been done with it of an illegal nature, or that it has been clandestinely taken away, or has been lost or stolen, the holder will be required to show that he gave value for it." And (page 432) "if, in an action by an indorsee against the acceptor of a bill, the ground of defense be that the bill was ob- tained illegally from the defendant, and indorsed to the plaintiff with- out consideration, the defendant will be bound in his plea to aver both the illegality and the want of consideration ; and if, at the trial, he proves the illegality, such proof will, according to the rule above stat- ed, throw upon the plaintiff the onus of showing that he gave consid- eration for the bill." The same doctrine is held in Bingham v. Stan- ley, 2 A. & E. (N. S.) 117; Berry v. Alderman, 24 E. L. & E. 318. In De La Chalumette v. Bank of England, 9 B. & C. 208, where the defendant had proved that the bill was stolen, it was held that it was incumbent on the plaintiff to show that the foreign merchant, who as- signed it to him, gave full value for it. In Harvey v. Towers, 4 E. L. & E. 551, 6 Exch. 656, Pollock, C. B., says : "This is an action on a bill of exchange, with a plea of fraud, which, according to the ordinary course of pleading, contains an alle- gation not merely of the fraud in obtaining the bill, but that the plain- Ch. 2) HOLDER IN DUB COURSE) 483 tiff gave no consideration for it. In point of law, that last allegation was necessary to make the plea a perfect answer to the action; for though a bill of exchange may have been originally concocted in fraud, or obtained by fraud, though it may have been stolen, or a party may have been swindled out of it, this is no defense to an action by the holder unless he has obtained it without giving value, and he may sue on it notwithstanding such defect in the title of some one else." He also holds that proof of fraud alone, by the defendant, is a sufficient sustaining of this plea to throw upon the plaintiff the burden of prov- ing consideration; and where there is evidence of fraud for a jury, the judge should call on the plaintiff for such proof, with instructions to the jury that, if they find the fact of fraud proved, the plaintiff must satisfy them that he gave consideration for the bill. In accordance with the doctrine of these cases last cited is Green- leaf on Evidence (section 172), where it is said: "I n an action by the indorsee against th e original party to the bill, if it is shown on th e p art en the detendant that the hill w as maHp nndfr HnxesSy- pr that h e was defra uded of j t, or if a strong suspicion of fraud be raised, tlie plamtitt will then be required to show under what circumstances a nd to r what value he became the hold er. It is, however, only in such cases that this proof will be demanded of the holder. It will not be required where the defendant shows nothing more than a mere absence or wanf of consideration on his part." See also Bramah v. Roberts, 1 Bing. N. C. 469 ; Low v. Chifney, 1 Bing. N. C. 267. So in 2 Phill. Ev. (4 C. & H.) 8, it is said that in some cases the plaintiff, in an action upon a bill of exchange or promissory note, must prove that he or some preceding party took the bill or note bona fide, and for value, as where bills or notes have been obtained by fraud, or under duress, or have been stolen or lost. When the plaintiff has es- tablished a prima facie case, it then remains for the defendant, if he can, to impeach his title ; and until he has first cast some suspicion on the title by showing that the note was lost, or obtained by force or fraud, he cannot cast the burden of proof upon the plaintiff. See, also, Heyden v. Thompson, 1 A. & E. 210 ; 1 Saund. on PI. & Ev. 304, 305 ; Ch. on Bills, 79 ; Bayley on Bills, 500. And in Smith's Mercantile Law, 320, it is said that the defenses of duress, fraud, etc., will not prevail against a bona fide holder. The same doctrines very generally prevail in this country, wherever the subject has received judicial consideration. Munroe v. Cooper, 5 Pick. (Mass.) 412 ; Woodhull v. Holmes, 10 Johns. (N. Y.) 231 ; Val- lett V. -Parker, 6 Wend. (N. Y.) 615; Small v. Smith, 1 Denio (N. Y.) 583 ; Worcester County Bank v. D. & M. Bank, 10 Cush. (Mass.) 488, 57 Am. Dec. 120; Wyer v. D. & M. Bank, 11 Cush. (Mass.) 52, 59 Am. Dec. 137 ; Rockwell v. Charles, 2 Hill (N. Y.) 499 ; Bissell v. Morgan, 11 Cush. (Mass.) 198 ; Crosby v. Grant, 36 N. H. 273. So in Smith on Cont. (3d Am. Ed.) 277 (*187), in a note by Rawle, it is said that in New York it has been held that, as soon 'as the defend- 484 NEGOTIATION (Part 2 ant shows there has been usury between the prior parties, he casts on the plaintiff the burden of proving that he is a holder for value, as is the case in every instance where fraud, duress, or illegality is shown between the prior parties. These authorities would seem conclusive that the plaintiff's exception — that the evidence offered would have been no defense unless it were proved that he was not the bona fide holder — must be overruled. Whe n t he defendant had proved th e duress, he had made a gnnH defense ^s ao-aing<- the nrig-inal p^rty; p|nd bCCaUSC of the le g"p1 prpgnmpf-if^n ^■^^gt in such cases the payee, being guilty of suc h jllep-ality, wnuld Hispnsa nfjjTPjTritp pnH p1arp it in the hands of some other pe rson to sue upon it (Bailey v. Bidwell, supra), he had thereby cast a suspicion on th g p lainti| [!s- title, which throw the bu r rlen upon him of showing afSrm a- tnyl y tViat.Jn o wn n n hnnn firl a hn ]. rl a r fnr va1iip Nor Can we See that the fact that this evidence was offered under the general issue alters the position of the parties or the state of the case. These authorities also bear directly upon the first point taken by the defendant that duress is a defense against any holder, however in- nocent he may be, and however valuable a consideration he may have paid for the note ; and if other authorities on this point were needed they are not wanting. In Powers v. Ball,' 27 Vt. 662, Redfield, C. J., says: "IllegaHty, duress, fraud, and want or failure of consideration are no defenses as against a bona fide holder for value." See, also, St. Albans Bank v. Dillon, 30 Vt. 123, 73 Am. Dec. 295 ; Ellicott v. Martin, 6 Md. 509, 61 Am. Dec. 327; Minell v. Reed, 26 Ala. 730; Norris v. Langley, 19 N. H. 423 ; Knight v. Pugh, 4 Watts & S. (Pa.) 445, 39 Am. Dec. 99. The verdict must be set aside, and a new trial granted.*' In re EUROPEAN BANK. Ex parte ORIENTAL COMMERCIAL BANK. (Court of Appeal in Cbancery, 1870. L. R. 5 Ch. App. 358.) This was an appeal from an order of Vice Chancellor Malins dis- missing a summons taken out by the Oriental Commercial Bank with reference to certain bills drawn on and accepted by the European Bank, which was now in course of winding up, but able to pay its debts in full. The Eastern Commercial Bank were the holders of the bills, but the Oriental Commercial Bank claimed the proceeds on the ground that the bills were bought with their moneys by one Demetrio Pappa, that the Eastern Commercial Bank had notice of this through Deme- The court here quotes Negotiable Instruments Law, §§ 57 and 52. Ch. 2) HOLDER IN DUB COURSE 497 of those who made the usurious contract. No vitality can be given to it by sale or exchange, because that which the statute has declared void cannot be made valid by passing through the channels of trade." The rule has general recognition in judicial opinion. Eastman v. Shaw, 65 N. Y. 522 ; Vallett v. Parker, 6 Wend. 615 ; Harper v. Young, 112 Pa. 419, 3 Atl. 670; Kaadall v. Robertson, 12 Cush. (Mass.) 156'; Town of Eagle v. Kohn, 84 111. 292; Sondheim v. Gilbert, 117 Ind. 71, 18 N. E. 687, 5 L. R. A. 432, lO Am. St. Rep. 23 ; Bohon's Assignee V. Brown, 101 Ky. 354, 41 S. W. 273, 38 L,. R. A. 503, 72 Am. St. Rep. 420; Birmingham Trust & Savings Co. v. Curry, 160 Ala. 370, 49 South. 319, 135 Am. St. Rep. 102; Snoddy v. Bank, 88 Tenn. 573, 13 S. W. 127, 7 L. R. A. 705, 17 Am. St. Rep. 918; German Bank v. De Shon, 41 Ark. 331, and cases cited. The fact that the holder when he took the paper did not know that it had had no inception— that no prior party could sue upon it, and that he was loaning money upon it- does not affect the rule. He is bound to know the character of the pap-er he is dealing in. Eastman v. Shaw, 65 N. Y. 522, 530; Miller V. Zeimer, 111 k Y. 441, 18 N: E. 716. The statutes of this state fix the rate of interest upon the loan or for- bearance of money at $6 upon $100 for one year, and at that rate, for a greater or less sum, or for a longer or shorter time, forbid the tak- ing of a greater rate, and provide : "All bonds, bills, notes, * * * whereupon or whereby there shall be reserved or taken, * * * ^ny greater sum, or greater value, for the loan or forbearance of any mon- ey, goods or other things in action, than is above prescribed, shall be void. Whenever it shall satisfactorily appear by the admissions of the defendant, or by proof, that any bond, bill, note, assurance, pledge, conveyance, contract, security or any evidence of debt, has been taken or received in violation of the foregoing provisions, the court shall declare the same to be void, and enjoin any prosecution thereon, and order the same to be surrendered and canceled." General Business Law (Cons. Laws, c. 20) §§ 370, 371, 373. The statute is peremptory and unequivocal in enacting that a usurious obligation is absolutely void. The Legislature did not by enacting section 96 of the Negotiable In- struments Law intend to abrogate the rule we have stated. The statute declaring the usurious instrument void is not repealed expressly or through implication. The court is, under its command, to declare it void, enjoin prosecution of it, and order it to be surrendered and can- celed, whenever satisfactory proof of its usurious character appears. It is a pretense, and ineffectual as a source of obligation or of right. It is insubstantial and within the intendment of the Negotiable Instru- ments Law is not a negotiable instrument, and cannot be acted upon or affected by it. Section 96 is a declaration of the general principle stat- ed by us, and has not relevancy to the rule which is an exception to it. Our conclusion is in harmony with judicial decisions of other states. Perry Savings Bank v. Fitzgerald, 167 Iowa, 446, 149 N. W. 497; Sm.& M.B.& N.(2d Ed.)— 32 498 NEGOTIATION (Part 2 Eskridge v. Thomas, 79 W. Va. 322, 91 S. E. 7, L. R. A. 1918C, 769 Lawson V. First National Bank of Fulton (Ky.) 102 S. W. 324 Alexander & Co. v. Hazelrigg, 123 Ky. 677, 97 S. W. 353 ; Citizens^ Bank v. Crittenden Record-Press, ISO Ky. 634, 150 S. W. 814; Twen- tieth Street Bank vl Jacobs, 74 W. Va. 525, 82 S. E. 320, Ann. Cas. 1917D, 695. The judgment should be affirmed, with costs. MARLING ^. JONES et al. (Supreme C!ourt of Wisconsin, 1909. 138 Wis. 82, 119 N. W. 931.) Appeal from a judgment dismissing plaintiff's complaint. The ac- tion was against Jones as maker of a note, which he had made for the accommodation of Herman. After maturity Herman negotiated the note to the plaintiff, who paid value for it."* Timlin, j, * * * ■yv'as the action properly dismissed as to Jones ? No consideration moving to the accommodation maker is necessary to uphold an accommodation note. The very name of the paper suggests this. The consideration in such case which supports the promise of the accommodation maker is that parted with by the person taking the accommodation note and received by the person accommodated. Nor is it any defense by the maker of an accommodation note that the taker other than the person accommodated, whether indorsee or transferee for value, knew before and when he took the note that the accommo- dation maker received no consideration. This would be merely show- ing that such taker, indorsee, or transferee knew that it was an accom- modation note. If this were sufficient to defeat the note, there could be no such thing as accommodation paper, except in cases of ignorance, of this fact on the part. of the taker, indorsee, or transferee, and this would be contrary to common experience, and avoid many of the daily transactions in banking and other branches of business. Section 1675 — 55, vol. 3, Sanborn's St. Supp. 1906. But the accommodation note in question was transferred by the party accommodated, namely, the payee therein, after it became due. Does this circumstance permit the accommodation maker to avoid the note on the ground that he received no consideration? If the effect of a transfer, after due, is merely to leave the transferee subject to notice or knowledge of the true circumstances attending the execution of the note in question, and for this reason subject him to defenses, then, as actual knowledge that the note was accommodation paper would be no defense by the accommodation maker as against the transferee for value from the party accommodated, it would seem that it could make no difference in the liability of the accommodation maker upon this 6 4 The statement of facts is abridged from tlie opinion. Part of tlie case relating to a mortgage given to secure the note is omitted. Ch. 2) HOLDER IN DUE COtJRSB 409 ground whether the note was transferred before or after due. Aside from this imputed notice or knowledge, or actual notice or knowledge, it is not true that the taker for value from the party accommodated stands in the shoes of the latter. The difference between them is that one has parted with value for the note and the other has not. In neither case has the maker received a consideration moving to him. So that between the party accommodated and the accommodation maker there is no consideration parted with or rfeceived by either, while between the transferee for value and the accommodation maker there is a consideration moving from the former at the instance of the latter sufficient to support the contract. There is considerable conflict among the decisions on this point, and those text-writers who profess to have made a thorough examination of the cases seem to incline to the belief that the weight of authority upholds the view that the transferee of accommodation paper after due may enforce the same against the ac- commodation maker. Joyce, Defenses to Com. Paper, § 382 (A. D. 1907); 1 Dan. Neg. Inst. (5th Ed.) § 726 (A. D. 1903); 2 Randolph, Com. Paper (2d Ed.) § 677 (A. D. 1899); Story, Prom. Notes (7th Ed.) § 194 (A. D. 1878); 2 Parsons, Notes and Bills, p. 29 (A. D. 1865) ; Mersick v. Alderman, 77 Conn. 634, 60 Atl. 109 ; Black v. Tar- bell, 89 Wis. 390, 61 N. W. 1106; 1 Am. & Eng. Ency. Law (2d Ed.) 364. The. uniform Negotiable Instrument Law (Sanborn's St. Supp. 1906, §§ 1675 to 1684 — 7) enacted by the Legislature of this state, and in like manner adopted by 34 states of the Union, and by Congress for the District of Columbia, in the effort to bring about more uniformity of decision regarding these instruments of commerce, appears to distin- guish between a holder for value and a holder in due course. Brannan, Neg. Inst. Law (A. D. 1908); Bunker, Neg. Inst. Law (A. D. 1905). Section 1675 — 55, Sanborn's St. Supp. 1906, defines who is an accom- modation party, and provides that such party is liable on an instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an af a rprtain promisso ry note, against the de fendants as maker s. tQ_re cover the balance allege d, td~Beliue atter the s ale and application nf thecollater al. The note is dat gd "New^¥5f irCi ty7May 1471892^" and is payable n n Hpmand after- dat e to the nrrtpr nt the malfprs at the offi ce of Wilson, ColstOO & CO^ Baltimore, and is indorsed by the defendant^ The writ is dated May 13, 1898. the last dav hpf^^p the artinn wnnlH hav e been bar rM by the, statute of limitations. The plaintiff is a banking association organized, under the laws of the United States and having its usual place of busi\ ness at Annapolis in the state of Maryland. The defendants formerl^) were copartners doing business in New York City under the name of C. -H. Venner & Co. Personal service was made in this state on the defendant Venner, but no service was made on either of the other two* defendants. The firm of C. H. Venner & Co. was dissolved July 31, 1893, and the assets became the sole property of the defendant Venner.j The s_ econd actinn is tnr i- fnr the g^lleg- ed conversion of .tJaftr^OO. par v alue, bonds o f the American Wate rw^^rlfg nf Dmaha, Neb-^ pledg^ ed as collateral to secure the payment of the above not e. The note pro - vided, amongst other things, t hat the hnlder mig^ht sell th" ^"Hat^l or any part thereof on nonperformance of his promise by the make r "in such manner as the holder hereof may deem proper without notice at any stock exchange or at public or private sale at the option of the holder hereof, and with the right on the part of the holder hereof to become purchaser thereof at such sale." It also r nntained a prnvisio n, that "in case of depreciation in the market value of the security hereby pledged * * * a payment is to be made on account or additiona l approved sernrity p ven upon demand, so that the market value of the security shall always be at least ten (10) per cent, more than the amount unpaid on this note. In case of f ailure to do so this note sh all he dppmfd tn be d ue and payf|blp forthwrFK * « * and the holder' hereof may immediately reimburse himself by a sale of the' security in the manner provided for above." The note is signed "C. H. Venner, & Co." and fte words "Due on demand" immediately precede the sig- nature. There was evidence te nding to show, or from which it could have , been found, th at the note ana bonds were presented to the defenda nt" Venner in person at his office in New York City and a demand f or payment was made. There als o was evidence t h a t n df"""'" 1 m rr i n i 1 upon him for the payment of $5.000 on account, a nd for add itional ml. 508 LIABILITY OF PARTIES (Part 3 lateral under circumstances which justified the latter according to the terms of the note. N either o f thp dpTnanrts t hus made was compl ied witli. There was no evidence of a presentment or demand at the office ^Wilson, Colston & Co. in Baltimore, or that there were funds there ^o meet the note if it had been presented. The collate ral was sold through the firm of A. H. Muller & Son in New Yerir CitT ind wa s b id in for the hank at a pr ice, except as to one bond, very much less, as there was testimony tending to show, than other bonds of the sam e i ssue were sold for b ef ore nnd n ftrr t h r i n lr in qiir ,''; fio n 'jphis ron- stitiitps the conversion complained of. It is conceded, or, at least, is stated in the bill of exceptions as a fact, that A. H. Muller and Son were proper atictioneers, and that the place where the bonds were sold was a proper place to sell them. The jnHgp fn^ iruj^ for the plaintiff in th e first action in the sum of $34,865.26, ar id for the defendant in^ t he B eraTrrrl- irrin n." The cases are here on exceptions by the defendant Venner to the refusal of the judge to give certain rulings requested by him and to the finding that was made. We see no err or_in t\] p rulings nr rpfns aU tn rtjie, or in the finding that was made. The defendant Venner contends in the first place that no action can be maintained on the note because no demand was made for its pay- ment at the office of Wilson, Colston & Co., in Baltimore. It is set- tled- in this state both at common law and recently by statute and by the weight of authority in this country, contrary to the law in England, that, w here a note nr bill'of Pxchangei s payable at a particular time ^M j^ n rpj P" Hpm-inr1 nr prp^pntrnpnt at tVip pl ace named is neces.sarv i n order to en title th? holder tn rnairitain,arL-actiQa_ui x>n the note o r bill against the make r or accepto r. Ruggles v. Patten, 8 Mass. 480 ; Carley v. Vance, 17. Mass. 389 f Payson v. Whitcomb, 15 Pick. 213; Wright V. Vermont Life Ins. Co., 164 Mass. 303, 41 N. E. 303. Rev. Laws, c. 73, § 87. For a collection of cases see 1 Dan. Neg. Inst. (3d Ed.) 643; 1 Pars. Notes and Bills (1st Ed.) p. 305 et seq. ; 4 Am. & Eng. Ency. of Law (3d Ed.) 373. We see no valid distinction between a note payable on time at a particular place and a note payable on de- mand at a particular place. No demand is necessary, before suit, where a note is payable generally on demand. And as we have seen no de- mand is necessary when a note is payable on time at a particular place. It seems to us that the fact that both circumstances are found in the same note cannot operate to change the rule and render a demand nec- essary when it would not otherwise be required. McKenney v. Whip- ple, 21 Me. 98; Gammon v. Everett, 25 Me. 66, 43 Am. Dec. 355; Haxton v. Bisltop, 3 Wend. (N. Y.) 13 ; Montgomery v. Elliott, 6 Ala. 701 ; Dougherty v. Western Bank, 13 Ga. 287 ; Bowie v. Duvall, 1 Gill & J. (Md.) 175. • That part of the opinion relating to the second action is omitted. Ch. i) MAKER AND ACCBPTOB 509 We think, therefore, that the refusal of the judge to rule as re- quested, that in order to maintain the action the plaintiff was bound to prove a demand at the office of Wilson, Colston & Co. and that a refusal of a demand to pay the note at any other place did not consti- tute a default in the payment of the note, was correct, and that the judge was right in ruling, as he did, that a sufficient demand was made though not/made at the office of Wilson, Colston & Co. in Baltimore. The note is dated and apparently was made in New York. But it was given in renewal' of a note previously held .by Wilson, Colston & Co. and was to be paid in Baltimore, and, it fairly may be inferred, was delivered to the plaintiff bank at its usual place of business in An- napolis. It must be regarded, therefore, either as a New York or Maryland contract. If it is to be regarded as a Maryland contract then- the decisions by the highest court in that state which were put in by the plaintiff bank would seem to show, so far -as they bear upon the question, that a demand at the office of Wilson, Colston & Co. was not necessary in order to enable the plaintiff to maintain its action. Bowie V. Duvall, 1 Gill & J. (Md.) 175. No evidence was introduced as to the law of New York and in the absence of ^ch evidence it is to be assumed that the law of that state is the same as the law of this. Hazen v. Mathews, 184 Mass. 388, 68 N. E. 838, * * * Exceptions overruled. PRICE V. NEAIv. (Court of King's Bench, 1762. 3 Burr. 1354.)' This was a special case reserved at the sittings at Guildhall afte^ Trinity term, 1762, before Lord Mansfield. It was an action upon the case brought by Price against Neal ; where- ' in Price^ deflarpg that tlip HpfpnHant KHwarH Neal was inrlehted to him" i n i80. iormoney had and rpppiyprl fp hia th^ pl^inti fiF'c hcp ; and dam- ^ ages were laid to £100. The general issue was pleaded; and issue ^ joined thereon. It was proved at the trial, that a bill was drawn as follows : "Lei- - cester, 23d November, 1760. Sir : Six weeks after date pay Mr. Rog- ers Ruding or order forty pounds, value received for Mr. Thomas -^ Poughfor; as advised by, sir, your humble servant Benjamin Sutton. < To Mr. John Price in Bush lane. Cannon street, London." Indorsed y^ "R. Ruding; Antony Topham; Hammond and Laroche. Received" the contents. James Watson and Son. Witness, Edward Neal." That th is bill was indorsed to the defendant for a valuable consi d-> eration ; and noti ce of tb^ ^^i^l l^ft at thp plaintiff's hnuse. on the day it""Became due. Whereupon the plaintiff sent his servant to call on th e defenHan , t , tn pay h irr <^'-'" F-H "H"^ "^ -^^^ ^"^ take up the said bill,'- mhirh ^Yfjg fjnpp armrHinoJy ^ 5.10 LIABILITY OF PARTIB3. (Part 3 That anot her bill was drawn as follows : "Leicester, 1st February, 1761. Sir: Six weel^s' after date pay M r Png-prc Tiur\incr or order forty pounds, value received for iVIr. Thomas Ploughfor; as advised by, sir, your humble servant Benjamin Suti on. T o Mr. John, Pric e in Bush lane. Cannon street,' London." That this bill was indorsed: "R. Ruding; Thomas Watson and Son. Witness for Smith: Right & Co." That the p jaintiff accepted thisJ all, by writing on it, "Accepted John Price," and that the plaintiff wrote on the back of it : "Messieurs ■ Freame and Barclay : Pray pay forty pounds for John Price." That t his bill b ein g sn nrrpptff d W" Jn f ir.rcPfi tr. the HpfpnH ant for a valuable consideration, and left at hi*? hf ^ pker 's fr^r paympn<-y--Myl,yra<; paid by order o f the plaintiff, and taken up . l^thjhesR hilirWre fnrp^ed h y P "p T,pp^ ^rbn hn*; bflftn sin rP hagg pH f or forge ry. The defendant Neal acted innocently and bona fide , without the least privity or suspicion of the said forgeries or of either of them, and paid the whole value of those bills. The ju ry frvnnr^ 3 vpfdirt f o f thf pl a i n t iff: and assessed damages £80. and costs 40s. su bject to the opinio n of the cf=>urt np"" ^•^'s q"p°- tion: "VJhpthpr thf plaintiff, under the circumstances of the case, can r e- rnvpr fiaf-k, frnm tVip rlpfpnHant, tVip mnnpy Vip pairl nn thp gaifl hillg, or eit her of ther n." ■ y^T. Stowe, for the plaintiff, argued that he ought to recover ba ck th e money, in this p ptinn ; a<; it was paid hy him V.y mistf ike onlv- on supposition "that these were true genuine bills ;" and as he could nev- er recover it against the drawer, because in fact no drawer exists ; nor against the forger, because he is hanged. He owned that in a case at Guildhall, of Jenys v. Fawler et al. (an action by an indorsee of a bill of exchange brought against the ac- ceptor), Lord Raymond would not admit the defendants to prove it a forged bill, by calling persons acquainted with the hand of the drawer, to swear "that they believed it not to be so ;" and he even strongly in- clined, "that actual proof of forgery would not excuse the defendants against, their own acceptance, which had given the bill a credit to the indorsee." But he urged, that in the case now before the court, the forgery of the bill does not rest in belief and opinion only ; but has been actually proved, and the forger executed for it. Thus it .stands even upon the accepted bill. But the plaintiff's case is much stronger upon the other bill which was not accepted. It is not stated, "that that bill was accepted before it was negotiated;" on the contrary, the consideration for it was paid by the defendant, before the plaintiff had seen it. So that the defendant took it upon the credit of the indorsers, not upon the credit of the plaintiff; and therefore the reason, upon which Lord Raymond grounds his inclination to be Oh. 1) MAKER AND ACCJ3PT0R 511 of Opinion "that actual proof of forgery would be no excuse," will not hold here. Mr, Yates, for the defendantj^argued that the plaintiff was not en- titled to recover back tinslnoney~T?Dm-4liedefendant. He denied it to be a payment by mistakej'^tmLjn sisted that it w as rather owing to the neglig-encft nf thp p laintiff; who^ should have in- quired and satisfied/fiimself "whether the bill was really drawn upon him by Sutton, or not." Here is no fraud in the defendant; who is stated "to have acted innoc^tly and bona fide, without the least privity or suspicion of the forgery ; and to have paid the whole value for the bills." Lord MansfiUld stopt him from going on ; saying that this was one of those cases that could never be made plainer by argument. It is an action upon the case, for money had and received to the plaintiff's use. In which action, the plaintiff can not recover the m oney. -unless it he af^ait r it (-nnsnVnrg in fVio d^^^' ^r^n nt, tn rPtnin it : and great liberality is always allowed, in this sort of action. But it_ can never be thou ght unrnnsripntinns in ttip fl p.fenHant, tn rp-- ta in this money, when he has once received it upon a bill nf f?r7rhnnr° indorsed to h im for a fairand val nabli ;- rnn^irlpratinn, •mh^rh hp had bo na nde paid, without thp Ipagt privity or s nspirinn ^f any forg ery. H ere was no fraud : no wrp ng. It was incumbent "pnn the plain -' t|ff. to be satisfied, "^at ths 'bill drawn upon him was the drawer's. hand." before he accepted or paid it ; but it was n ot incumbent npn n the defe ndant, to inquire into it. Here was notice given by the def end- ahr to the plaintiff of a bill drawn upon him; and he sends his serv- ant to pay it and take it up. The other bill, he actually accepts ; af te^ which acceptance, the def endant -ranocently and bona fide discounts it.^ The plaintiff lies by, for a considerable time after he has paid these- bills; and then found out "that they were forged;" and the foi;geca comes to be hanged. He made no objection to them, at the time of* paying them. Whatever neglect there was, was on his side. The de- fendant had actual encouragement from the plaintiff l^imself, for nego-6 tiating the second bill, from the plaintiff's liaving without any scruple/ or hesitation paid the first: and he paid the whole value, bona fide. It is a misfortune which has happened without the defendant's fault or^ neglect. If there was no neglect in the plaintiff, yet there is no reason to throw off the loss from one innocent man upon another innocent man ; but, in this case, if there was any fault or negligence in any one, it certainly was in the plaintiff, and not in the defendant. Per Cur'. Rule — that the postea be delivered to the defendant.'' T "Both the referee and the Judge who wrote the prevailing opinion below thought that the case was controlled by section 112 of the negotiable instru- ments law (Consol. Laws, c. 38), which provides that the acceptor of a nego- tiable instrument admits 'the existence of a drawer, the genuineness of his signature, and his capacity and authority to draw the instrument' This en- actment is merely declaratory of the common law. The leading English ca^ tn which it is enunciated is Price v. Neal, 3 Burrow, 1354, decided by Lord 612 LIABILITY OF PARTIES (Part 3 MINET et al. v. GIBSON et al. (Court of King's Bench, 1789. 3 Term R. 481.) This was an a ction on a hill of exchang e: and the first count in the declaration st ated that Livesey fr Co. on the 18th February, 1788, made a hillrif eyrhang- er directed to the defendan ts, requiring them three rn^nthsjvFjyr dnte to pny £72. 5s. t o John White , or orde r. T, jveseyT . r(-)_we11 knowinp - that no si mh p^^sQp as J Whitp pyjgtpd ■ on which bill aiTindorsement was m ade, purporting to be the indorsement of J. Whit*^ nnm^d in th" hill, rpfjiiirni gThp ^"ntTtp t " he p i id to T.ivespy R- Co. or order ; that Ifiyjs ey and Co ^by one Absalom Goodrich, by proc- wratioh otl^ivesey & Co.) indorsed to theplaintiffs ; and that the de- fen dants accepted it, knowing th at_rio pncVi pprgpn a P J- Whitg existed, and "that the name of J. White so indorsed was not the handwriting of any person by that name. The second co unt, after st ating t hp dr'^'^ing "f thpJm'll, as above, proceeded thusl Li vesey & Co. knowing th=^<' J- White wap ""t a per^sotT jrlealing w itbT-cn:- l^""w" to, Tjiypcpy Rr Cn and usingthe name ofjTWhite in the bill as a nominal person on ly, and intending no"t to deliver the same to him, or to procure the same to be actually indorsed by him; upon which bill a certain indorsement was made, requiring the payment to be made to L-ivesey & Co. ; and that Livesey & Co. indorsed to the plaintiffs, without having delivered the bill to J. White, and without any actual indorsement or assignment of the bill by White. The third count stated that the bi H was made payable to themsel ves. Livesey & Co., bvthe nain£ _and description of T- Wh ite. The fourth treate djt as a common bill payabl e to J. White or ord er, anHjJT^t J. Whi ip indnrspdJ M7T_thp_jVhlr<''ffp: Mansfield In 1762. The leading New York case to the same effect Is National Park Bank v. Ninth National Bank, 46 N. T. 77, 7 Am. Rep. 310. But the doctrine of these decisions, now found in the rule formulated by section 112 of the negotiable instruments law, applies only in favor of one who is a holder for value of the instrument which turns out to have been forged. Thus Lord Mansfield in Price v. Neal, supra, dwelt upon the fact that the bill of- exchange there in question had been indorsed to the defendant 'for a fair and valuable consideration which he had bona fide paid,' and in the leading New York case (National Park Bank v. Ninth National Bank, supra) it appeared that the draft had been discounted by the Livingston National Bank and indorsed to the defendant, which was a bona fide holder. The rule therefore that he who accepts a negotiable instrument to which the drawer's name is forged is bound by the act, and can neither repudiate the acceptance nor recover the money paid, has no application in beh-alf of one who has acquired the paper in the absence of any consideration whatever therefor, either present or past. Such was the case here according to the finding of the referee. So far as appears, the check of the Green estate, which proved to be forged, was not given in payment of any existing or an- tecedent indebtedness either on the part of that estate or even of the forger. For these reasons we agree with the leariled judge who wrote for the minority in the Appellate Division, saying: 'Section 112 of the negotiable instruments law, upon which the referee based his decision, has nothing to do with the qne^tion.' " Title Guarantee and Trust Co. v. Haven, 196 N. Y. 487, 89 N. H 1082, 1083 (1909). oil. 1) MAKER AND ACCEPTOR 513 The fi fth as payable tn hearer ; and that plaintiffs were the bearers. • The <^Wfh p^ yahlp fn J Wh\ff>-nr nrrlpr , w it h an av e rmpnt tha t, when the bill was made, t here was no such person as T. Whit e, the supposed payee, but t hat the name was merely fictitiou s ; b y reason wh ereof the s um mentioned in the bill became and was payable to the bearer thereof, according to the effect and meaning of the bill-^averring also that the plaintiffs were the bearers and proprietors thereof. The s eventh count stated that there was a partnershi p, or house, of certain persons iigino^fr^'^'' ^° w^^ '" ^^'^ n^tT-i«. ^^n d firm nf Livesey & Co. as in th e name and firm of T. White L that the last mentioned persons niade a certain other bill (the hand of one of them on their joint ac- count, and in their copartnership name and firm of Livesey & Co. being thereto subscribed), and directed it to the defendants, requiring them three months after date to pay to the said last mentioned copartners, by the name of J. White or order, £731. 5s. ; and that the said last men- tioned copartners afterwards by a certain indorsement in writing ap- pointed the contents to be paid to the plaintiffs, and delivered the bill so indorsed to thens. There were also other counts for money had and received by the defendants to the use of the plaintiffs; for money paid, laid out, and expended by the plaintiffs to the use of the defendants ; and for money lent and advanced by the plaintiffs to the defendants. The defendants pleaded the general isiue. A special verdict was found (this question first came before the court on a motion for a new trial ; but, as it was of so much importance, bills to the value of near a million a year having passed through these houses only, the court recommended it to the parties to consent to have a special verdict, in order that the record might be carried to the house of Lords, and the counsel for both parties, without going lo another trial, agreed upon stating this verdict), stating (in substance) that, L ivesey & Co. made a certa in instr ument in writing , directed to the defendants, requiring them, tiiree months after date, to piy tn John White o r order £731. 5s. ; that Livesey & Co! at the time of making It well knew that -Jio aufh pcr-ion as T. White, in the bill mentioned, ex- isted ; that a certain ind orsement in writi ng was afterwards made by Livesey & C.n pnrpnrtmg f to be W in^TP^gpmen t of J. White , and re- quirmg the contents of the bill to be paid to Livesey & Co., or their or- der ; that Liv esey & Co. afterwards indorse d (by A. Goodrich by pro- curation of T UrPQpy /^ Pr. ^ tn thp. plaintifiFc far ^ full and valuable cp n- sideration, when th e plaintiffs became and gtill arp tV|p holders o f the bill : that the detendant£ afterwards accepted. -^ "^11 1^T^r^1.^;npr that nr> curTi person as J. wmte, mThe bill named, existed, and that the name of J. VVhite so mdorsed thereon was not the handwritmg of any person of that name ; that the de fendants a t the time of the making, and ac- cepting, the bill had not, nor had the y at any time since, an y money, gnrirlg^ qy pffp^^t_s^ wliatsoever 01 or belongmg tn l.ivesey kr {-p . nr nf Sm.& M.B.& N. (2d Ed.)— 33 514 LIABILITY OP PARTIES (Part 3 the plaintifTs in their hands; and that the defendants have not paid tiie bill (although often requested). But whether upon the whole matter the defendants are liable, etc., the jurors are ignorant, and pray tlie advice of the court, etc. This verdict was set down in this day's paper for argument ; but The Court, being of opinion that this case was decided by that of, Vere v. Lewis, 3 Term R. 182, gave judgment for the plaintiffs, with- out hearing any argument, adding that they understood that the reason why it was agreed to be turned into the shape of a special verdict was that it might be carried up to the dernier resort. Judgment for the plaintiffs.' CANAL BANK v. BANK OF ALBANY. (Supreme Court of New York, ISll. 1 Hill, 287.) ^ Assumpsit, to recover money paid on a draft, tried at the Albany -Circuit, in 1840, before Cushman, C. J. The draft was drawn on the plaintiffs by the Montgomery County Bank, payable to the order of E. Bentley, Jr. It purported to have been indorsed successively by Bentley, then by one Budd, afterward by the Bank of New York, and lastly by the defendants, to whom the plaintiffs paid it. The payment of it was made on the 28th of March, 1839. The ground on which the plaintiffs sought to recover back the money was that the indorsement purporting to be that of Bentley was a forgery, which fact was proved by Bentley and others on the trial. On the 7th of June, 1839, the plaintiffs' attorney called on the de- fendants, and asked to have the money refunded, notifying them at the same time of the forgery. When the plaintiffs offered Bentley as a witness, the defendants objected, insisting that he was incompetent, as being interested. The ' objection was overruled, and Bentley permitted to testify; whereupon the defendants excepted. " The defendants offered to prove, and the plaintiffs admitted, that 'they (defendants) received the draft from the Bank of New York to collect, as agents for the latter, and that as such they received the t money and paid it over to their principals, before notice of the for- gery. The defendants, however, never disclosed their agency to the plaintiffs till called on by the plaintiffs' attorney, as above mentioned, and notified of the forgery. The defendants further offered to show a uniform custom of the 8 Affirnied in the House_of_Lojds, 1 H. Bl. 5C9.^ Ch. 1) MAKER AND ACCBPTOE 515 banks of this state to receive and collect drafts in the manner this was done, without disclosing their agency. The plaintiffs objected, on the ground of irrelevancy, and the judge overruled the offer, to which the defendants again excepted. A verdict having been rendered for the plaintiffs, the defendants now moved for a new trial on a bill of exceptions, presenting the above and some other points. CowEN, J. It is not perceived what advantage, direct or remote, Bentley can derive from the plaintiffs' recovery, nor what he can lose by their failure. It is said, the plaintiffs will hold the money to be recovered in trust for the witness. This is not so. Their recovery or failure will neither add to nor take from their liability to him. Their recovery will not, as the defendants' counsel supposes, estop them to deny that Bentley's name was forged. The record and pro- ceedings here would not, as such, be any evidence whatever between him and the plaintiffs. The whole is but a more solemn admission of the forgery; and his being sworn as a witness adds nothing to its strength in his favor. Should he sue the Montgomery County Bank, and should they plead payment, they would have the same right to contest the forgery as if this suit had never been; nor could any of the proceedings here be used as evidence against the witness, even though the plaintiffs should fail to establish the forgery against these defendants. On the merits, there was nothing in the nature of the transaction to conclude the plaintiffs against showing the forgery. They had done no act giving currency to the bill on the strength of Bentley's name. Even had they accepted it on the day when it was drawn, the defendants could have holden them concluded only in respect to the genuineness of the drawer's name, he being their immediate corre- spondent. Chit, on Bills (7th Am. Ed. of 1839) 336. And the act of payment could amount to no more. Id. Neither accept ance n or_ payment, at any time, nor under a n y rirnimstanrps ' Ch. 1) MAKBE AND ACCEPTOR 525 SEABOARD NAT. BANK v. BANK OF AMERICA. (Supreme Court of New York, 1906. 51 Misc.. Rep. 103, 100 N. Y. Supp. 740.)_ Action by the Seaboard Bank, the drawee of a draft, against the^ Bank of America to whom as indorsee the plaintiff had paid it. '. E. V. Babcock & Co., engaged in the lumber business in the city of ' Pittsburg, Pa., kept an account in the Federal National Bank there lo- cated. One H. R. Pennock, to the knowledge of the bank, was the au- ditor- and chief bookkeeper of that firm, and had access to its check- books and its books generally, and, on occasions, he called at the bank with reference to certain financial matters^ of the firm. On September 17, 1904, Pennock went to the bank, and, claiming to represent E. V. Babcock & Co., presented a chepk purporting' to be a check of that firm drawn on the Federal National Bank to the order* of "N. Y. Draft for $2,000, and requested a New York draft in that sum, payable to the order of Carroll Bros. This firm, composed of David N. Carroll' and W. T. Carroll,, was likewise engaged in the lumber business in,^ Pittsburg, but the bank was not aware of its existence, or who were its^ individual members. The bank complied with Pennock's request, drew _ on the Seaboard National Bank, the plaintiff, a draft in the sum of $3,000 in favor of "Carroll Bros.," and handed it to Pennock. There- upon he left, and, without the knowledge of the Federal National ' Bank or of E. V. Babcock & Co. or of Carroll Bros., indorsed "Car- roll Bros." on the draft and collected the proceeds through the de- fendant bank which acted in good faith. The $2,000 check which Pen- nock delivered to the Federal Bank was forged, presumably by him. Babcock & Co. were at no time indebted to Carroll Bros.^^ LevEntriTT, J. The defendant resists the claim principally on the ground that the draft was in effect payable to bearer. What was the nature of the draft? If in law it was equivalent to a draft payable to bearer, then through Pennock's indorsement of "Carroll Bros." the payee, the Mellon National Bank, and, through it, the defendant, ac- quired a good title to the draft. An instrument is payable to bearer not only when it is so expressed on its face, but also "when it is pay-^ able to the, order of a fictitious or nonexisting person, and such fact was known to the person making it so payable." Neg. Inst. Law (Laws 1897, p. 724, c. 612) § 28, subd. 3. To bring the draft within the provisions of the statute the defendant maintains that in so far as ■ the Federal National Bank was concerned Carroll Bros., unknown to it as a firm or as individuals, was "nonexisting" ; and, in so far as Pen- nock was concerned, Carroll Bros, was "fictitious," because it was a mere name arbitrarily selected by him to promote the fraudulent scheme which he had concocted, a firm that was a nonentity in the 11 The statement of the case is taken from the opinion, part of which is omitted. _^4' LIABILITY OF PAETIBS (Part S transaction, a stranger to it, and neitlier interested in, nor entitled to any of the proceeds of tlie draft. Tiius the defendant deduces as a conclusion that Carroll Bros, was either "fictitious or nonexisting" to the only parties who participated in, or were aware of, the issuance of the draft. But the mere adoption of a random name for a payee would •not, under the statute, make the instrument payable to bearer, and such result would follow only provided the "person making it so payable" knew the payee named to be "fictitious or nonexisting." The defend- ant argues that, in the contemplation of the statute, Pennock, and not the Federal National Bank, made the draft payable to Carroll Bros. ; that in its preparation the bank acted simply as a scribe, obedient to Pennock's dictation and direction ; that his mind guided the bank's hand to record intention. Let us consider these propositions. It is uniformly recognized law that negoti able paper , the pa j^ee of which does not r epresent a real person^ cannot he deemed payable to b€ai-er ~unless the paper was put intn rirmlatinn — t»t_the maker W4^h t he'knowledge that the name of the payee dnf?s nnt repre s ent a real pe r- son. Th e fictitiousness of the payee and the knowledge of the maker niust_cancur! Then the maker's intention as disclosed by his adoption of a fictitious payee fixes the character of the paper. Shipman v. Bank of the State of N. Y., 126 N. Y. 318, 27 N. E. 371, 12 L. R. A. 791, 22 Am. St. Rep. 821 ; Turnbull v. Bowyer, 40 N. Y. 456, 100 Am. Dec. 523 ; Irving Nat. Bank v. Alley, 79 N. Y. 536 ; VagHano v. Bank of England, L. R. 22 Q. B. D. 103 ; Armstrong v. Pomeroy, 46 Ohio St. 512, 22 N. E. 866, 6 L. R. A. 625, 15 Am. St. Rep. 655; Gibson v. Minet, 1 H. Black. 569. But can it be said that Carroll Bros, was non- existent merely because the Federal National Bank was ignorant of the existence of that concern? Ignorance of existence is not the equiv- alent of knowledge of nonexistence. Carroll Bros, was a real concern, though the bank did not know it. Conceding that conclusion, the de- fendant argues, in effect, that ignorance of the existence of Carroll Bros, precludes the possibility of any intention on the part of the bank that that firm should enjoy the proceeds of the draft; that if any in- tention so utterly colorless and purposeless could be conceived it is of no consequence ; that Pennock was, in effect, the maker as he was the author of the draft; that it was his intention that the name Carroll Bros, should represent a fictitious payee, and that that intention is con- trolling and should prevail. That argument ignores the statute, which constitutes the intention of the maker the test, and not that of anv per- son to whose dictation the maker submits. It also ignores the essential fact that the draft is the obligation of the bank, and that to allow the argument would enable any person to change the legal effect of the act of the obligor. There are many precedents for the conclusion that t he drawer of a negotiable _ijist4; ^m e nt i ajja ble to th e drawee I Lxaa yment be made t o a person not named as pa yee. Where the drawer of a check, draft, or bill of exchange delivers it to an imposter, supposing him to be the per- Ch. 1) MAKER AND ACCEPXOK 5^5 son whose name he has assumed, the drawer must, as against the draw- ee or a bona fide holder for value, bear the loss where the imposter ob- tams payment of or negotiates the draft. The underlying reason is that-it- wab Llie diawt-i's iuLtulluii that the person to whom the i netr u- ment was delivered should be the paye e, even though through fraud and iiiipublLiOii Lliat mtention was created. Though, the victim of de- ception practiced by the person who adopted the name of the payee, the maker must honor the paper. Land Title & Trust Co. v. North- western National Bank, 196 Pa. 330, 46 Atl. 420, 50 L. R. A. 75, 79 Am. St. Rep. 717; United States v. National Exchange Bank (C. C.) 45 Fed. 163 ; Levy v. Bank of America, 34 La. Ann. 320, 13 Am. Rep. 124 ; Electrical Const. Co. v. Globe Sav. Bank, 64 111. App. 225. Un- der such circumstances the intention of the maker of the instrument controls, and casts upon him the consequences of the imposition. It is because the draw ee has acted in accord ant ^p wit h thr dr n wrr'i indfr nt ed~iritent ion tHat the latter must make reimbursement- It is scarcely conceivable that if, under such conditions, the maker's intention is vi- tal to involve him in liability, that under other conditions, where lia- bility would not follow, such intention is immaterial, and must give place to the intention of a third person, here the impostor. Let us assume that Pennock, as a stranger, had called at the Fed- eral National Bank, had represented himself to be a member of the firm of Carroll Bros., and as such had requested the draft in suit, and the bank, believing the representation of Pennock to be true, had drawn the draft in the form in which it appears and delivered it to Pennock, then Pennock's indorsement of Carroll Bros, would have made the Federal National Bank answerable because its intention had been effectuated. Bu t the facts_a.re otherwise. Pennock was know n to the bank; he claimed t o re presf r"- V^'g pmp1nyP]-»^^ ^_^^ Vi^hrnr]^ Rt Co., a nd in their behalf applied f nr a draft in favnr nf Carroll Bro s, as payee. He made no p retense whatever to be a member of thf jt firm or in anywigpTn l-i^PTifitlprl as payep tn the proceeds of the draf t. The imposition which hepracticed did not relate +o fiis own identity. Noth-_ in g transpired which could have given rise to an intention on t he p art of the bank that Pennock should become the paye e. The delivery to him of the draft did not import any intention on the part of the bank that he should reap the proceeds. If, under the assumed condi- tions, the bank is to be mulcted as a result of its intention, is it also to be mulcted under the actual conditions where a contrary intention ex- isted? If so, the intention of the maker, which the courts have uni- formly accepted as the controlling element, could be eliminated, as his liability would attach whatever his intention. I n my op inion, tVip in- triitinnnf jhf F r d r rnl N nt in ii iil Tl i nlr, tn thr nr r hninn n f nny dr-iipi ot Ji^ennockTis the controlline consideration . Th e bank intended to js .- sue. as in form it did, a draft to order, and not to bearer, and handed it to Pennock, not as owner, out for deliverv to E. V. Babcock & Co . or to Carroll Bros. H is.indorsement of Carroll Bros, was a forgerv. 526 LIABILITY OF PARTIES (Part a He had no title to the draft ; he. could convey none. T he Mellon N a- t ional Bank cashed the draft in reliance on his impliVrl ^yafranty nfTf;- tl e; having taken that risk, it cannot comp lain if it must bear the con-, s equence s~oF its mispiacea reliance and restore to the defendant th e remi tted proceeds ot a dratt to which it did not give the defendant good title. * * * " ~ ^ ' — ~ Plamtiff's motion for a verdict granted.'* TRUST CO. OF AMERICA v. HAMILTON BANK OF NEW YORK CITY. (Supreme Court, Appellate Division, Fii-st Department, 1908. 127 App. Div. 515, 112 N. Y. Supp. 84.) Submission of controversy under Code Civ. Proc. § 1379, by the Trust Company of America and the Hamilton Bank of New York City. Judgment for defendant. McLaughlin, J. This is a controversy submitted to the court up- on an agreed statement of facts under section 1279 of the Code of Civil Procedure. The controversy relates to four checks for $500 each, drawn upon the plaintiff, a trust company doing a banking busi- ness, and signed, "Estate of Kate M. Wallace, Arthur B. Wallace, Adm'r." At the time the checks were presented to the plaintiff for payment, the estate of Kate M. Wallace was one of its depositors, hav- ing to its credit an amount in excess of all the checks, which could be drawn out on checks signed by Arthur B. Wallace, administrator, when countersigned by the United States Fidelity & Guaranty Com- pany. The Wallace estate had then been practically settled, and the amount on deposit was ready for distribution among the next of kin of the decedent. The four checks in question were drawn without the knowledge or authority of the administrator, his signature being forged, and in each there was inserted as payee the name of some one of the next of kin whose distributable share of the amount on deposit with the plaintiff was greater than the amount of the check or checks thus apparently payable to such person. The first check was dated September 25, 1905, and was presented on that day to the United States Fidelity & Guaranty Company by a person unnamed, without the knowledge of plaintiff or defendant. The United States Fidelity & Guaranty Com- pany, relying upon the apparent genuineness of the check, counter- signed the same, and it was then, by some person unknown, presented to the plaintiff for acceptance and by it accepted, in writing. The name of the payee was then forged upon the back of the check as first indorser, and it was subsequently deposited with the defendant, by one M. F. Kerby, one of its depositors, who was given credit for the same. 12 Affirmed 193 N. Y. 20, 85 X. E. S2ti, 22 L. R. A. (N. S.) 490 (lOOS). . Ch. 1) MAKER AND ACCEPTOR 527 It then bore the following additional indorsements: "Harvey J. Con- key. M. F. Kerby. A. Edward Fisher." Thereafter, the defendant, through the New York Clearing House, presented the check to the plaintiff for payment, guaranteeing the indorsements, and it, relying upon the genuineness of the check, with the guarantee of the defend- ant thereon, not knowing that the indorsement of the payee was forg- ed, paid the same in good faith. Substantially the same facts are true in regard to the second check, which was dated in November, 1905. The other two checks, dated in December, 1905, and January, 1906, were not presented to plaintiff for acceptance before payment and were deposited with defendant by Harvey J. Conkey, one of its de- positors, to the credit of his account; otherwise, the same course was pursued with regard to them. They were indorsed "Harvey J. Con- key" below the forged indorsement of the payee. Upon discovering the forgeries, the plaintiff at once notified the de- fendant, tendered back the checks, and demanded repayment. In the meantime both Kerby and Conkey had withdrawn the proceeds of the checks, and the defendant, relying on plaintiff's acceptance and pay- ment of them, had paid out the same in good faith. The defendant has refused to repay plaintiff the amount of the checks, or any of them, and the question presented is whether plaintiff is entitled thereto. The general rule is that payments made under a mistake of fact may be recovered, although negligently made; but it is also settled that, if the drawee of a bill of exchange to which the drawer's name has been forged accepts or pays the same, he can neither repudiate the acceptance nor recover the money paid, since he is bound to know the drawer's signature. Price v. Neal, 3 Burrows, 1354; Bank of United States V. Bank of Gebrgia, 10 Wheat. 333, 6 L. Ed. 334; National Park Bank v. Ninth National Bank, 46 N. Y. 77, 7 Am. Rep. 310 ; Goddard v. Merchants' Bank, 4 N. Y. 147. It is also settled that, where the indorsement of the payee of a bill of exchange has been forged, subsequent holders obtain no title to it, and payments made to one who holds under such forged' indorsements may be recovered. Corn Exchange Bank v. Nassau Bank, 91 N. Y. 74, 43 Am. Rep. 655 ; Holt V. Ross, 54 N. Y. 472, 13 Am. Rep. 615'; Canal Bank v. Bank of Albany, 1 Hill, 287. Therefore, if all the indorsements on the checks in question had been genuine, the plaintiff could not recover; but if the maker's sig- natures had been genuine, and only the indorsements or any of them forged, it could recover. Having paid the checks, the plaintiff cannot now be heard to say that the maker's signatures are not genuine, or recover on the ground that the same were forged, and by reason of that fact it is suggested that the rights of the parties are precisely the same as though the drawer's signatures were genuine, and since the defendant never obtained good title to them, on account of the forged indorsements of the payees, the plaintiff is entitled to recover. There are authorities to support this contention. First Nat. Bank v. North- 528 LIABILITY OF PARTIES (Part 3l western Bank, 152 111. 296, 38 N. E. 739, 26 L. R. A. 289, 43 Am. St. Rep. 247 ; McCall v. Croning, 3 La. Ann. 409, 48 Am. Dec. 454. But it does not necessarily follow, because the checks were not indorsed by the persons whose names appeared on them as payees, that the defendant, which received them in good faith and paid value therefor, can be compelled to repay their amounts to the plaintiff. A leading authority on the subject is Bank of England v. Vagliano Bros., L. R. 1891 App. Cas. 107, which reversed Vagliano v. Bank of England, 23 Q. B. D. 243, and 22 Q. B. D. 103. This authority has been frequently cited and is directly in point. There, Vagliano Bros, were foreign bankers doing a large business in various parts of the world. One of their clerks, Glyka, forged a large number of bills of exchange purporting to be drawn on the firm by one of its foreign correspondents, payable to another well-known firm. He also forged letters of advice to accompany them and caused them to be presented, the same as genuine bills, to Vaghano Bros, in the regular course .of business. Vagliano Bros., deceived by the" cleverness of. the forgeries, accepted from time to time bills aggregating over $350,000, which they directed the Bank of England, their general banker, to pay when presented. After bills had been accepted, Glyka would obtain pos- session of them, indorse thereon the name of the payee, and collect the money from the bank, which charged the amounts so paid to the account of Vagliano Bros. The latter, on discovering the forgeries, sued the bank to recover the amounts so paid out on the forged bills. The House of Lords held, reversing the decisions of the lower courts, that this amount could not be recovered. The decision is placed upon the ground that "since Glyka, although he inserted in the forged bills as payee the name of a well-known firm, knew that such firm had no interest in the bills and never intended that it should, the payee was fictitious," and under the statute providing that "where the payee is a fictitious or non-existing person the bill may be treated as payable to bearer" (Bills of Exchange Act 1882, § 7, subsec. 3), the bills of ex- change were, in legal effect, payable to bearer, and the bank obtained good title, regardless of the indorsements. Some doubt was expressed in the Bank of England Case as to wheth- er the statute warranted such construction, since the effect was to make the fictitiousness of the payee depend upon the maker's inten- tion ; but under our own statute no such question can be raised. The negotiable instruments law provides (Laws 1897, p. 724, c. 612, § 28): "The instrument is payable to bearer: * * * (3) When it is pay- able to the order of a fictitious or nonexisting person, and such fact was known to the person making it so payable." The correctness of the decision in First National Bank v. North- western Bank, supra, may well be questioned, since the decision of the lower court, which was reversed by the House of Lords, in the Bank of England Case, was cited at length and relied upon. Whether this be so or not, the decisions in our own state are entirely in harmony Ch. 1) MAKER AND ACCEPTOR 529 with the views expressed by the House of Lords. Thus, in Coggill V. American Exchange Bank, 1 N. Y. 113, 49 Am. Dec. 310, a partner drew a bill of exchange in the name of the partnership, payable to one Truman Billings and forged thereon the indorsement of the lat- ter. The bill subsequently came into the hands of the defendant bank, and the plaintiff, upon whom it was drawn, accepted and paid it. It was held that the plaintiff, on discovering the forgery, could not re- cover the amount paid from the defendant, since the bill was in effect payable to bearer, and defendant had good title. Mr. Justice Bronson, who delivered the opinion of the court, distinguished the case of Canal Bank v. Bank of Albany, supra, and said : "As the payee had no in- terest, and it was not intended that he should evpr become a party to the transaction, he may be regarded, in relation to this matter, as a nonentity; and it is fully settled that when a man draws and puts in- to circulation a bill which is payable to a fictitious person, the holder may declare and recover upon it as a bill payable to bearer. * * * In legal effect, though not in form, the bill is payable to bearer. * * * The plaintiff probably accepted and paid the bill under the mistaken assumption that the indorsement was genuine; but he was not mistaken" about the main fact which he was concerned to know, which was that the holder was the owner of the bill." And in Phillips v. Mercantile National Bank, 140 N. Y. 556, 35 N. E. 982, 23 L. R. A. 584, 37 Am. St. Rep. 596, the cashier of the Na- tional Bank of Sumter, S. C, drew checks in the name of the bank, inserting as payees the names of customers of the bank, whose indorse- ments he forged. The checks thus drawn were sent to various firms in New York and subsequently came into the hands of the defendant, which received them in good faith and charged them to the account of the Sumter Bank. The receiver of the Sumter Bank thereafter brought an action to recover the amount of these checks, and it was held that the same could not be maintained, since in legal effect the payees ' were fictitious and the checks payable to bearer, and f on that reason the defendant obtained good title. The court, Mr. Justice Gray delivering the opinion, said: "The names he used were, for his pur- poses, fictitious, because he never intended that the paper should reach the persons whose names were upon them. . The transaction was one solely for the fraudulent purpose of appropriating his bank's moneys, by a trick which his position enabled him to perform. Concededly, if the names of the payees were of fictitious persons, the Sumter Bank would have had no claim upon the defendant. How, then, can the transaction be said to assume a different aspect because the names adopted were of known persons ? That the intention was to treat them as being of fictitious persons is manifest. * * * The fictitiousness of the maker's direction to pay does not depend upon the identification of the name of the payee with some existent person, but upon the in- tention underlying the act of the maker in inserting the name." Sm.&M.B.&N.(2d Ed.)— 34 530 LIABILITY OF PARTIES (Part 3 Under the negotiable instruments law and the cases cited, I am of the opinion the checks in question, as between plaintiff and defendant, were payable to bearer. It does not appear who forged the maker's signatures, but the subsequent history of the checks does not leave it open to doubt that the person who did so knew that the parties whose names were used as payees would never have any interest in the in- struments. Just as in the Bank of England and the Phillips Cases, in order to accomplish the fraud more easily, the names inserted as payees were those of persons to whom checks might naturally be made. Whether indorsing the names of the payees upon the checks was tech- nically forgery or not it is unnecessary to consider. It has been con- venient to thus describe them. Despite these forged indorsements, then, the defendant acquired good title, since in legal effect the checks were payable to bearer. Plaintiff, having paid them to a holder in due course, cannot recover upon the ground that the payees' signatures were forged. Nor is this view at all in conflict with Shipman v. Bank of State of , New York, 126 N. Y. 318, 27 N. E. 371, 12 L. R. A. 791, 22 Am. St. Rep. 821. There, the plaintiffs' firm signed a large number of checks relying on the false statements of an employe ; the names of the payees being in some instances fictitious and in others the names of existing persons. The employe upon whose false statements the checks were made then indorsed upon them the names of the respective payees, and the checks were thereafter paid in good faith by the bank upon which they were drawn. The court held that the plaintiffs could recover from the bank the amount paid, distinguishing the Bank of England Case, and the distinction is obvious. In the former case, the member of tlie firm who signed the checks in the firm name believed that in every instance the payee was a real person to whom alone the check was payable, while, in the latter case, the person who wrote the mak- er's signature was a forger who knew that, so far as the bills of ex- change were concerned, the payee was fictitious. The court expressly recognized the rule that the maker's intention was controlling, saying: "The maker's intention is the controlling consideration which deter- mines the character of such paper." It is true that in many of the authorities cited the person guilty of the fraud was connected in some way with one of the parties, which may have affected the equities of the case, as was suggested in Ship- man V. Bank of State of New York, supra, concerning the decision in the Bank of England Case, while here, so far as appears, the guilty party was a stranger to both plaintiff and defendant, and they are equally innocent. But that cannot change the law as to the fictitious- ness of the payees, and, if it did, I am of the opinion that any equities in the present case are with the defendant. The risk of paying out money upon a forged signature of a depositor is one which a banker must assume, and, if the plaintiff had detected the forgeries when the Ch. 1) MAKER AND ACCBPTOE 631 checks were presented for payment, it would not have suffered any loss, and it is possible that the defendant would not. I am of the opinion that the plaintiff has no legal claim against "the defendant, and for that reason the latter is entitled to judgment upon the merits, with costs. UNITED STATES v. CHASE NAT. BANK. (Supreme Court of the United States, 1920. 252 U. S. 485, 40 Sup. Ct. 361, 64 L. Ed. 675, 10 A. L. K. 1401.) Ac^oiLhyLthe United States against the Chase National Bank. A ju dgmen t for defendant on a directed verdict (241 Fed. 535) was af- firmed by the Circuit Court of Appeals for the Second Circuit (250 Fed. 105, 162 C. C. A. 277), and plaintiff brmgs error. Affirmed.^* Mr. Justice McReynolds deliveredthe opinion of the court. .Pla intiff in error sued th e_defendant bank, at jaw, to recover money pamout under_mi5Jake_fliIfact. le'Eank denied liability and among other things claimed that the same person wrote the name E. B. Sumner upon the draft both as drawer and indorser. The facts were stipulated. It appears : Lieutenant Sumner , quarterma ster and disbursing offi- cer at Ft. Ethan Allen, near' Burlington, Vt., had authority to draw on the_LJnitei.Sia4es^ Treasurer. Sergeant Howar d~was' his'finance cle rk and gn y-nnmn f|f fh e Howard National Bank of Burlington. Utilizing the official blank form, Howar d manufactured in toto the draft in ques- _tion; — Exhibit A. Haying {Qrged"L ieutenan t_ Sumoer's name both as d rawer and indorser, he cashed the instrument over the counter at the Howard National Bank without adding his own name. That^bank, immediately indorse3~ahd forwarded it for collection and credit to the defendSntrafr^^Few- York-C-ity7 the latter promptly presented it_to„the dr awee (th g__Treastnrer),_receiyed..^yment and credited the proceeds as directed! TwoyFeeks thereafter the Treasurer discovered the forger y and at once d emanded repayment whicK_was^re fused.' -Before di scovery of the forgery jthe. Howard J:Jational Bank withdrew trom the Chase National Bank sums aggregating more than its TofaT balance immediately~alfef~such proceeds were credited; but addlttonal-silbse- quent credit items had maintained its balance continuously above jEe arnounroFTRr^gft. " ~ "' ' " """ "BotE sides asked for an instructed verdict without more. The trial court directed one for the defendant (241 Fed. 535) and judgment thereon was affirmed by the Circuit Court of Appeals (250 Fed. 105, 162 C. C. A. 277). If important, the record discloses substantial evi- dence to support the finding necessarily involved that no actual negli- gence or bad faith, attributable to defendant, contributed to success of 18 Part of the opinion is omitted. 532 LIABILITY OF PARTIES (Part 3 the forgery. Williams v. Vreeland, 250 U. S. 295, 298, 39 Sup. Ct. 438, 63 L. Ed. 989, 3 A. L. R. 1038. The complaint placed the demand for recovery solely_upon the forged'TndOTsemeht— neither negligence nor bad faith is set up'. If the draft had been a valid instrument with a good title fherefo in some other than the collecting bank, nothing else appearing, the drawee might recover as for money paid under mistake. Hortsman v. Hen- shaw, 11 How. 177, 183, 13 L. Ed. 653. But here the whole instru- ment was forged, never valid, and nobody had better right to it than the collecting bank. ' ' Price V. Neal (1762) 3 Burrows, 1354, 1357, held that it is incumbe nt on the drawee to know the drawer's hand and that if the former_2ay a draft upon the latter's forged name to an innocent holder not charge- able with fault there can be no recovery. * * ♦ ' Does the mere fact that the' name of Lieutenant Sumner was forged as indorser as well as drawer prevent application here of the established rule? \y'e think not. In order to recover plaintiff must show that the defendant cannot retain the money with good conscience. Both are in- nocent of intentional fault. The, drawee failed to detect the forged signature of the drawer. The forged indorsement puts him in no worse position than he would occupy if that were genuine. He cannot be called upon to pay again and the collecting bank has not received the proceeds of an instrument to which another held a better title. The equities of the .drawee who has paid are not superior to those of the in- nocent collecting bank who had full right to act upon the assumption that the former knew the drawer's signature or at least took the risk of a mistake concerning it. Bank of England v. Vagliano Bros., [1891] L. R. App. Cases, 107; Dedham Bank v. Everett Bank, 177 Mass. 392, 395, 59 N. E. 62, 83 Am. St. Rep. 286 ; Deposit Bank v. Fayette Bank, 90 Ky. 10, 13 S. W. 339, 7 L. R. A. 849; National Park Bank v. Fourth National Bank, 46 N. Y. 77, 80, 7 Am. Rep. 310; Howard v. Bank, 28 Ea. Ann. 727, 26 Am. Rep. 105 ; First National Bank v. State Bank, 107 Iowa, 327, 77 N. W. 1045, 44 E. R. A. 131 ; Bank v. Trust Co., 168 N. C. 606, 85 S. E. 5, E. R. A. 1915D, 1138; 4 Harvard Eaw Re- view, 297, article by Prof. Ames. And see Cooke v. United States, 91 U. S. 389, 396, 23 L. Ed. 237. The judgment of the court below is affirmed. Mr. justice Clarke dissents. Ch. 1) MAKER AND ACCEPTOR 533 WHITE et al. v. CONTINENTAL NAT. BANK. (Court of Appeals of New York, 1876. 6i N. Y. 316, 21 Am. Rep. 612.) '<'f„ . Appeal from judgmeilt of the General Term of the Court of Con>' mon Pleas in and for the city and county of New York; affirming a judgment in favor of defendant entered upon a verdict, and affirming an order denying a motion for a neW trial. This a ction was jrough t to recover back money paid by plaintifisJLo defendant, upon an' altered sight draf t jr awn upon plaintiffs by th eir c orresponden t, -in Buffalo . ~The dr afFwas'dr awnlor the sum of $27. After its delivery to the' payee, and before presentati5n~aiid acceptance, it was altered so_ as to chan^g-thg-a mount to $2,75 0. It was sent by one Hm-ton, of~BaItP more, to A ustin Baldwin & C o., New YorkTaniT'receivea'By them Au- gust 16, 1869. T hat firm deposited it on the same da y with defendant, and for its avails sent to Horton a sterling bill of exchange on London" at 60 days. Defendanl-cra dited said f irm the amount of the d raft. The draft was presented, August 17th, to and accepted by plaintiffs, payable at the Leather Manufacturers' Bank, by wKom it'was paid to^ defendant. In the regular_course_oi_business_bet\yx£n-^)ia4atiffs^ the drawer of the draft, monthly statements of .accQunts_were_render- _^egi_ji'he^ugiBFirccount'was"'rendered the forepart of September. It^ was not examined by the drawer until October 5th, wh en the altera- tion_wasj3X51...(l,LscOVCTei± — Platnti'^'''were~acrvised on the '6th, ali3~im- medja tfiLyiJaotified defendan't.""~"' ~~~ " " ~~ 7 ■» The court cl3.arged among other things: "If the jury believe from the evide nce. tHat ij_ Austin Baldwin &__gQ^hag]^eeri7"erffie''r~clir££tly byMJT p""plai n ti ff <; or by theni. through the defendants, inform ed with- ina reasonahle time after the a cce ptance of the draft by the plalrifflfS, that the .sa me was f orged lor an amount exceeding the sum of $27, t ney.-A urtm IiaJilwin_& Ca. or the defendants, cojuld have taken steps t-rt^traf !■ "I'l ri I'l'"! i' iTftiiitth p crime in- its "consummation, and have prevented the acceptance of thMF"MItTTf^xchange~oirtEe~City Bank of London, ' and that_th.ey.-fail£d_to.,ta_ke either of such^ steps by reason of the^c- ceptanc'e ancL-payment of the draft in - question, by the plaintiffs, and the failure^.! the plaintiffs to advise them of such forgery until on or about October 6, 1869, then the plaintiffs are estopped from denying the_j[eiiuiii£iiess_xDi_tha-xiia>ttJ.n^U55tTO thatrthe-derfe'n'dants are entitled to a verdict." To which the plaintiffs' counsel excepted. Plaintiffs'-cQunsol requested the court to charge that plaintiffs, were not_boujn(i. to know that this draft had been altered in the way it was altered, and that all they were bound to know when they accepted it was that the signature to the draft was genuine ; also, that if the plain- tiffs were not legally chargeable with knowledge of the fact that the draft had been altered, no duty devolved upon them to give any earli- 534 LIABILITY OF PARTIES (Part S er notice than was given, either to Austin Baldwin & Co. or anybody else, of the fact of the alteration. The court dechned so to charge, and the plaintiffs' counsel excepted. Allen, J. The right of a party, paying money to another under a bona fide forgetfulness or ignorance of facts, to recover it back from one who is not entitled to receive it, is well established. The equita- ble action for money had and received will lie against one who has re- ceived money which in conscience does not belong to him. Kelly v. Solari, 9 M. & W. 54; Bank of Orleans v. Smith, 3 Hill, 560. The doctrine has been appHed, repeatedly, in cases analogous to the present. Bank of Commerce v. Union Bank, 3 N. Y. 230 ; Continental National Bank v. National Bank of the Commonwealth, 50 N. Y. 575 ; National Bank of Commerce v. National Mechanics' Banking Associa- tion, 55 N. Y. 211, 14 Am. Rep. 232 ; Marine National Bank v. Na- tional City Bank, 59 N. Y. 67, 17 Am. Rep. 305. That the plaintiffs in this action paid to the defendant, professing to be the holder of the bill, the face of it, in ignorance of the facts dis- entitling the defendant to receive the same, is not disputed. Their right to recover the money thus paid must be unquestioned, unless their right is barred by some circumstance which takes the case out of the general rule, or by some act of their own, they have lost the right. Certain general principles, applicable to commercial paper and regu- lating the rights and obligations of the several parties thereto, are very familiar and of every-day application. First. The plaintiffs, as drawees of the bill, were only held to a knowledge of the signature of their correspondents, the drawers ; by accepting and paying the bill they only vouched for the genuineness of such signatures, and were not held to a knowledge of the want of genuineness of any other part of the instrument, or of any other names appearing thereon, or of the title of the holder. Kelly v. Solari, su- pra ; Broom's Legal Maxims, 257 ; National Park Bank v. Ninth Na- tional Bank, 46 N. Y. 77, 7 Am. Rep. 310; Merchants' Bank v. State Bank, 10 Wall. 604, 19 L. Ed. 1008; Espy v. Bank of Cincinnati, 13 Wall. 604, 21 L. Ed. 947 ; Goddard v. Merchants' Bank, 4 N. Y. 147. Second. The defendant, as holder of the bill and claiming to be en- titled to receive the amount thereof from the drawees, was held to ^ knowledge of its own title and the genuineness of the indorsements, and of every part of the bill other than the signature of the drawers, within the general principle which makes every party to a promissory note or bill of exchange a guarantor of the genuineness of every pre- ceding indorsement, and of the genuineness of the instrument. Erwin V. Downs, 15 N. Y. 575 ; Turnbull v. Bowyer, 40 N. Y. 456, 100 Am. Dec. 523 ; Story on Promissory Notes, §§ 135, 379, 380, 381. The presentation of the bill, and the demand and receipt of the money thereon, was equivalent to an indorsement. The drawees had a right to act upon the presumptive ownership of the defendant as the appar- ent holder. Ch. 1) MAKER AND ACCEPTOR 535 The facts which disentitled the defendant to receive the money, and in ignorance of which it wasj paid, were those presumed to be within the knowledge of the defendant and not of the plaintiffs. The defend- ant, in receiving the money and in disposing of it, did not act upon the faith of any admission by the plaintiffs, express or implied, of any fact which they now controvert in prosecuting this action. There was, therefore, no want of good faith, no negligence, or even want of ordi- nary care on the part of the plaintiffs in the payment of the money. The defendant, in the entire transaction, acted upon other evidence of its right to the money than the statement or actions of the plaintiffs, and in dealing with the bill and with the money, its avails, acted upon the apparent title and genuineness of the instrument, and the responsi- bility of those from and through whom it received the bill. The plain- tiffs, therefore, owed no duty to the defendant in respect to the for- gery, which invalidated the bill and its title to the moneys represented by it. It follows that there could be no negligence on the part of the plain- tiffs which could defeat their right to reclaim the money paid when- ever the forgery and the consequent mistake in the payment were dis- covered. Owing no duty and making no misrepresentation, there was no estoppel to bar the action. The case is distinguishable from Con- tinental National Bank v. National Bank of the Commonwealth, supra, in this: That in the case cited the officer of the bank pronounced a forged certification of a check to be genuine, upon which the payee of the check relied, as he had a right to do, and thus relying neglected to take the means then in his power to retrieve his position and save him- self from loss. The court held that the circumstances created an equi- table estoppel, and that the bank could not thereafter gainsay the gen- uineness of the certification which it had adopted and upon which the other parties had acted. It will be seen that this estoppel Was based upon the admission of a fact peculiarly wifhin the knowledge of the bank upon which the check was drawn, and which it was bound to know, and upon a positive assertion upon which the other party had a right to and did rely. In this case, as we have seen, the plaintiffs made no assertion of any fact within their knowledge, and the defendant did not act or forbear to act upon the faith of anything which the plain- tiffs said or did or omitted to say or do. Again, in the case cited, had the teller of the certifying bank dis- claimed the forged certification and pronounced it a forgery when pre- sented, the holder of the check would have had ample time to arrest the swindler at the Bank of the State of New York before, as the evi- dence showed, he had received the money on the gold checks, and be- fore he went to the subtreasury with his gold certificates. In the case at bar, it is the merest conjecture, with scarcely a possi- bihty to support it, that the defendant, or those from whom it received the bill, could at any time after the transmission of the foreign bill of exchange to Baltimore, have taken any effectual measures either for 536 LIABILITY OF PARTIES (Part 3 arresting the swindler or reclaiming the bill bought and paid for up- on the credit of the bill. Estoppels cannot be based upon mere con- jectures even if a proper foundation is laid for them in other respects. There is nothing really in the case to distinguish it from National Bank of Commerce v. National Banking Association, supra, in which the plaintiff recovered. Should this action be retried other questions may arise not present- ed by this record, growing out of the relations between the defendant and other parties, and the character in which the defendant acted, whether as agent or principal. Upon the present record the equities are with the plaintiffs. If they fail to recover, they lose the money ab- solutely and without legal fault on their part. If the defendant is com- pelled to reimburse the plaintiffs, it has its remedy over against the prior indorsers ; and if they in turn have no remedy against the prior indorsers, it is because they have chosen to deal with irresponsible per- sons, or those of whose character and responsibility they were igno- rant. It would be unjust to father the consequences of their method of dealing upon innocent third persons. But waiving the question as to the responsibility of the defendant for the genuineness of the instru- ment, and taking the most favorable view for the defendant, which is to regard it as the case of a mutual mistake, in respect to which neither was in fault, and in that view and upon that theory, the case is within the principles decided in Bank of Commerce v. Union Bank, 3 N. Y. 230, and Kingston Bank v. Eltinge, 40 N. Y. 391, 100 Am. Dec. 516, and the plaintiffs are entitled to a new trial. Upon the case as made and upon the exceptions taken at the trial, I am of the opinion that the judgment should be reversed, and a new Judgment reversed.^* »* The dissenting opinion of Miller, J., Is omitted. Compare Ward v. Al- len, 2 Mete. (Mass.) 53, 35 Am. Dec. 387 (1840). Ch. 1) MAKER AND ACCEPTOR 537 NATIONAL CITY BANK OF CHICAGO v. NATIONAL BANK OF THE REPUBLIC OF CHICAGO. (Supreme Court of Illinois, li921. 300 111. 103, 132 N. E. 832.) Action by the National City Bank of Chicago against the National Bank of the Republic of Chicago. Judgment for plaintiff was affirmed by the appellate court (219 111. App. 343) and defendant brings error. Reversed. Thompson, J. On January 4, 1915, the Jackes-Evans Manu- facturing. Cnmpaffly^of St. Louis purchased a draft for $629.80 from tEeBroadway Savings Trust_Comgany of St. Louis drawn on the Na- tianal'TIilyJBankoTXElisgo and payable to the or'der of the AmerTcan SSesT^Tin Plate Company of Pittsburgh. On the same day the St. Louis company inclosed the draft in a letter addressed to the Pitts- burgh company and deposited the letter in a mail box. Andrew H. Mawuag-«fledJiuajnaiJ box and s tole the draft. He yibstitnterl his name f or the name o f the Am£rican-She£t.&..Xij-£lat£_CQmpany. The alteration of the draft was done with such skill that it could not be de- j tected by inspection. January 9 Manning appeared at Bamett Bros, jewelry store, in Chicago, and selected and ajTeed_to_gurchase_££rtaixi diarnoEuis-f&p-$600. In payment of the purchase price Man nin g ; tender - ed to Z,_Baxn£tOi£_altere4drail;_^^ Manning, in the pres- ence of Barnett, indorsed the draft ijLblank, and Barnett, with the con-' sent of Manning, took the draft to the draweeTth e National City Bank of Chicago, and_£^rgonally present ed it t o that bank for acceptance. The barilc_accepted_jhe_draft_by_writmg_a^^ face of the draft these words and figures : "Accepted, payable through Chicago clearing house 55055, Jan. 9, '15— The National City Bank of Chicago, per G. D. Grim, Paying Tell- . er." The drawee also entered in its records the following notation: "The National City Bank of Chicago. "Certification Debit. $629.80. ' "As shown by teller's stamp we certify & charge to the account of Broadway Sav. Trust Co. St. Louis, Makers number or date 5584 Order of Andrew H. Manning. "No. 55055 Asst payer Jan. 9, 1915. "Customer will please call at bank & exchange this slip for check described above. N. C. B. 1/9/15." The draft, with the acceptance written thereon, was returned to Bar- nett, who returned to his place of business. Barnett delivered the dia- tno nds. o f the fair retail market value of $600, aiid_$223X4n-SeHey, and retained tlierefor, with the consent of Manning, the draft so in- dorsed and accepted. Thereafter Barnettindorsed_jhe_jdi^^ order of the Nationa l Bank of the. Republic ancTjanuary 11, 1915, d'e- posited the draft to the credit of his account with said bank. January 538 LIABILITY OF PARTIES (Part 3 12, 1915, the National. City Bank, the drawee, through the Chicago clearing house, paidjhe National- Bank of .the_ Republic the sum of $629.80 in payment of the draft. February 4,' 1915, fhrNational City Bank returned to its customer, the Broadway Savings Trust Company, this draft along with other canceled paper for January. The draft was received in St. Louis thefollowing day, and the St. L ouis bank af once notified its Chicago correspondent, the drawee, tSSOEe. draft had been altered by changing the name of the payee, and asked that its ac- count be credited with the amount of the draft. The d rawee in tu rn notified the National Bank of the Republic of the alteration^ and asked f ojr reimbursement, which was refused. The drawee voluntarily credit- ed the accoii'nt'of the St. Louis bank with the amount of the~3raTf, and brought suit in the circuit courT: of Cook county against the National Bank of the Republic to recover the amount paid on this draft. Judg- ment was rendered in favor of the drawee, and that judgment was af- firmed, on appeal, by the Appellate Court for the First District. That court granted a certificate of importance, and this appeal followed. In its last analysis the qji£s±ion_presented for decision is the liability of _the acceptor af. a., negOJtiable instrument under section 62 of.__the Negotiable Instruments Law (Kurd's St. 1919, p. 2029), which pro- vides : "The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance, and admits : "1. The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument ; and "2. The existence of the payee and his then capacity to endorse." The question presented, so far as we have been able to determine, is one that has not been passed upon by any court of last resort in this country. Judging from the able briefs filed, counsel have given this case much thought, and they say that they have been unable to find a case exactly in point. Counsel for appellee insists, however, that this case is controlled by our decision in First Nat. Bank v. Northwestern Nat. Bank, 152 111. 296, 38 N. E. 739, 26 L. R. A. 289, 43 Am. St. Rep. 247, Metropolitan Nat. Bank v. Merchants' Nat. Bank, 182 111. 367, 55 N. E. 360, 74 Am. St. Rep. 180, and State Bank v. Mid-City Trust & Savings Bank, 295 111. 599, 129 N. E. 498, 12 A. L. R. .989. We shall notice these decisions later. Illinois adopted the Negotiable Instruments Law in 1907. This law was the result of an effort to codify the law of negotiable instruments, and to establish uniformity in this important branch of the law by securing the adoption of the code by all the states of the Union. In 1896 the commissioners appointed by the several states finally agreed upon a draft of a bill to be recommended to the several Legislatures. This law, in a few cases with some modifications but generally in the form recommended, has been adopted in 46 of the 48 states of the Union. Prior to the adoption of the act by the various states there was lack of uniformity in the statutes of the states and in the decisions of Ch. 1) MAKES AND ACCBPTOE 539 the courts with reference to the law merchant. This led to great confu- sion in the conduct of business among the merchants of the several states and prompted the effort to establish uniformity. The aim was , to codify the law rather tlian to reform it. In order to establish uni- formity it was necessary to change the law in some states, but where these changes were made the Negotiable Instruments Law generally lays down the -rule which conforms to the weight of authority. The confused state of the law before the adoption of" the Negotiable In- struments Law would naturally bring some of its provisions in conflict with the statutes and decisions of the several states. In construinp" the act the language ought to be interpreted in such a way as to give effect to the benehcen t desi^ of tHe Legiilature in passing an act for the promotion of harmony m thelawTegarSng negotiable paper. The court must take the act as it is written, and should give to the words used their natural and common meaning. The law was enacted for the purpose of furnishing in itself a certain guide for the determination of all questions covered thereby relating to commercial paper, arid^so f ar as it speaks without ambiguity as to .any such, questLQn,.jr££&cen£e ^ case law,.,aa_it-£xiSutfii.priQX.-to Jiie,,enactrneat„is.-niore~lilieLy-to. be misleading-thanJaeneficial. If the provisions of the act harmonize with the general principles of commercial law in force before its enactment, those principles should be followed, but if the lang[uag£ji£-tb£-actxon- flicts witli_statUtes_or„deeisions in foree-before -its~enactm£at the courts sSouIH^'ot give di^jxt^ a ^sti^in^d. construction jn_pjd&LMjnakek monize with eaxli£i^SJtaiiltsa„Qrjdeci.sions. If this is done the very pur- pose of the act is defeated. In order to keep the law as nearly as may be uniform, the courts of all the states should keep in mind the spirit and object of the law, and should give to the language of the act a natural and common construction, so that all might be more likely to come to the same conclusion. Section_624jiereinbefore quoted, so far as it applies to the facts in this case, d eclares th at__thg„j£cefitaE, by -ac£e.pting-. the .instrument_en- gages that he will pay the instrument which he jhas accepted according to"tHe"'Ienor'oniTs acceptance, and admits the existence of the payee and_his then capacity t0.indi3kr.se. The instrument which appellee ac- cepted was payable_"to__the. order oF Andrew H.^'Manning." By^ts acceptance it admitted that Andrew H. Manning vvas in existence, and that Andrew HrManning^at the time of acceptance was .not. suffering any legal, disability which would.affe.cthis»ability..to , .pass, title to, IheiO" st rument accepted by means of indorsement. According to the plain language of this section a22ellee_h^Jts_^nejal_ac£epta^ to pay a drait for $629,^0, payable to the^order of_Andrew H. Man- Slag. 'Alter the draft was accepted by appellee the drawer was~3is- ■charged from liability thereon. When appellant to.okJiie,dia;ft_it was cgtn.plete--and x figular u pon its _f ace7 It had been duly accepted by Jhe ■drawee. It„ffi as taken in gppd.faith andTlQ? value, and appellant_then had no notice of any infirmity in the instrument or defect in the title 540 LIABILITY OF PARTIES (Part 3 of the person negotiating it, and appellant wa^therefore a holder in due course. It relied upon the general acceptance of appellee, and under the Negotiable Instruments Law was protected by it. This construc- tion of section 62 is in accordance with that sound principle which de- clares that where one of two innocent parties must sufifer a loss the klaw will leave the loss where it finds it. The first two cases on which appellee relies were decided some years before the adoption of the Negotiable Instruments Law, and in so far as the principles announced in those decisions are in conflict with the positive provisions of the statute the statute must prevail. In both these cases it was held that the drawee by accepting a draft simply warranted the genuineness of the signature of the drawer, and that it had funds sufficient to meet the draft, and engaged that those funds should not be withdrawn from the drawee by the drawer, and that the drawee would pay the amount actually due on the check to the person legally entitled to it. It was specifically held that the acceptance of a draft did not warrant the genuineness of the body of a draft either as to the payee or the amount. These decisions are in harmony with the first obligation placed upon the acceptor by section 62, but are in direct conflict with the second obligation fixed by said section. Appellee contends that the drawee by accepting this draft admitted, the existence of the payee named in the draft by the drawer^^thafis, the American Sheet and Tin Plate Company — and that it admitted'~the capacity of the American Sheet & Tin Plate Company to indorse the draft. We cannot agree with this contention. The drawee knew noth- ing of the American Sheet & Tin Plate Company, and could have ad- mitted nothing regarding its existence or its capacity to indorse. If section 62 means anything, it means just what it says ; that is, by ac- cepting this draft appellee admitted the existence of the payee then named in the draft and the capacity of the named payee to indorse the draft. In' State Bank v. Mid-City Trust & Savings Bank, supra, the State Bank accepted a check payable through the Chicago clearing house when properly indorsed. A depositor of the Mid-City Bank whose name was the same as that of the payee named in the check forged the indorsement of the payee and deposited the proceeds of the check with the Mid-City Bank. In tliis case the acceptor, the State Bank, recovered from the Mid-City Bank the amount paid on this check. The declaration on which recovery was had was drawn on the theory that the acceptor was liable to pay the amount of the check to the real payee. It was held that the check had never been delivered to the real payee, and had never come into his possession, and that he had acquired no right and incurred no liability by reason of the acceptance of this check. The judgment was reversed, and the cause remanded for a new trial. Section 62 of the Negotiable Instruments Law is not men- tioned in the opinion, nor does it appear that it was considered by the court in reaching its conclusion. When the facts in that case and the Ch. 1) MAKER AND ACCEPTOR 541 point presented for decision are considered, the decision does not con- flict with anything we have said in this opinion. The judgments of the Appellate and circuit courts are reversed. FIRST NAT. BANK OF CENTRAL CITY v. UTTERBACK et al. (Court of Appeals of Kentucky, 1917. 177 Ky. 76, 197 S. W. 534, L. B\. A. 1918B, 838.) Action on a note by the First National Bank of Central City against Alice M. Utterback, executrix, and others. Demurrer to amended an- swer overruled, petition dismissed, and plaintiff appeals. Reversed. Clarke, J. The only question raised on this appeal is whether or not the failure of a payee in a negotiable promissory note to comply with sections 199b and 571, Kentucky Statutes, without which it could not do business in the state, before the execution of the note, renders it uncoUectable in the hands of an owner in due course. Granting, for the purposes of this opinion only, but expressing no opinion upon the question because it is not here, that such failure would have been a complete defense against an original payee, who is amenable to either section 571 or 199b, which is the most that could be inferred from the case of Oliver Co. v. Eouisville Realty Co., 156 Ky. 637, 161 S. W. 570, 51 L. R. A. (N. S.) 293, Ann. Cas. 1915C, 565, relied upon by ap- pellees, the question remains, which is not involved in the Oliver Case, whether or not it is a defense against an owner in due course ; and that question is clearly controlled by the Negotiable Instruments Act (section 3720b, Kentucky Statutes), which became a law in this state July 13, 1904. The scope of this law has been defined by this court in two recent opinions as follows : "The Negotiable Instruments Act was adopted by the several states for the purpose of establishing uniformity in the law regulating nego- tiable instruments. The act was intended to embody in a code a par- ticular branch of the law. Where the act speaks, it controls, and its meaning should be ascertained by interpreting the language used, and not by assuming that the former law on the -subject should remain un- altered." First State Bank of Nortonville v. Williams, 164 Ky. 143, 175 S. W. 10. "The act, however, covers the entire subject joi negotiable instru- ments, and must be treated as a complete body of law upon that sub- ject, and controlling in all cases to which it is applicable." Elsey v. People's Bank of Bardwell, 168 Ky. 701, 182 S. W. 873. Subsection 60 of the act provides : "The maker of a negotiable in- strument by making it engages that he will pay it according to its tenor, and admits the existence of the payee, and his then capacity to indorse." And in subsection 57 we find: "A holder in due course holds the instrument free from any defect of title of prior parties and free from- 542 LIABILITY OF PARTIES ' (Part 3 defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all par- ties liable thereon." Clearly, under these provisions the defendant could not deny either the existence of the original payee or its capacity to indorse, as against a holder in due course, and the trial court erred in overruling the de- murrer to the amended answer and in dismissing the petition. To permit the maker of such an instrument to assert that the note is void and unenforceable because the original payee had not complied with a statute, without which it could not legally do business iji this state, would be to authorize him to deny the legal capacity of the payee to negotiate the instrument, whereas, the act says in plain language that the maker of the instrument, by making it, admits the capacity of the payee to indorse it. The act does not say, however, that the maker admits the payee's capacity to make the contract for which the note was executed, and hence he may have the right to urge such defense against the original payee, with which question we are not now concern- ed, but it does, in plain langviage, take from him the right to deny the capacity of the payee to indorse and negotiate the note free from de- fenses available against the payee, even though, as between the original parties, the note was void and unenforceable for any reason. The plain intention of the statute is to render negotiable paper, after negotiation, free from all defenses available to prior parties arnong themselves, and at the same time, it would seem, preserve to the maker all defenses against the original payee. Upon the precise question raised here, it was decided in Colorado and North Dakota that a note to a foreign corporation that had not complied with the local law, without which it could not do business in the state, is valid against the maker in the hands of a holder in due course. Mc^'Iann v. Walker, 31 Colo. 261, 72 Pac. 1055; National Bank of Commerce v. Pick, 13 N. D. 74, 99 N. W. 63. So far, in considering the case, we have assumed that the payee in the note, Davis Coal Company, was required to comply with one or the other of the two sections of the statutes referred to before it was authorized to do business in this state, but that fact is not made to ap- pear, and for that reason alone the demurrer to the amended answer should have been sustained. For the reasons indicated, the judgment is reversed for proceedings consistent herewith. Ch. 1) MAKEE AND ACCEPTOR 543 MT. MORRIS BANK v. TWENTY-THIRD WARD BANK. (Court of Appeals of New York, 1902. 172 N. X. 244, 64 N. E. 810.) Action by the^Mt. Morris Bank against the Twenty-Third Ward Bank. From a judgment of the appellate division (70 N. Y. Supp. 78) affirming a judgment for plaintiff, defetidanL.appeals.,..,Affirmed. CuIvL'En, J. The actionjs brought to recover 1r10nfiy4iaid.0n~a.pr.0m- issoryj!al£j2axabl,e.,at the plaitrtiff 's £an'£7~When the note became due, at the request of the defendant it was cerd^^bylhe JBlaintiff. This was done t hrough a mistake as to t he condition pf the_ makei:^a&CQunt wit h - thc jjank. Withm a very short time, on the same daY .ib£-filaiutiff djscovered the,. error, and notified. .the defendant thereof, requesting it to erase the certification. Of this it is sufficient to say that the appeirant Concedes that the right of _no party was^affected by the. certificatioiS, and that under the decision of this court in Bank v. Wetherald, 36 N. Y. 335, the plaintiff was no t estopped _£]CQai-sh€Hw4ngLthat.Jt certified the check_lh£Qugh-mistake. The appellant makes no attack on the judg- ment based on such certification. Neither the plaintiff nor the defend- ant were directly members of the cTearing house in the city of New York; but each cleared through another bank which was a member. The complaint alleges that both the parties to the action were, under their respective agreements for clearing, bound by the rules of the clearing house, and this allegation is expressly admitted by the answer. Notwithstanding the notice it had rpcpivpH jjnmjhp^p^^f^ff^ tVip rle- f endanLdHjOsilgd'the note m~its"'clearing"^nk,_and thereafter the same was paid through the clearing house. On'the same day the plaintiff tendered a return' of the note both to the defendant and its cle aring bajQkr-*nd_demand£d_r£.pa.yment-Gf its -«no«nt. . _This.,wasj£fused, and thereupon the present action was brought. While the appellant concedes that it acquired .no, right against .the plaintiff by the. certification of the note, it insists that the case is to be considered the same as if the note had not besn. certified, nor notice g-iven by fhe plaintiff that the maker's account was not good. It then conigads-thaLJhe. payment was .voluntary, not made under a mistake •of fact, and that hence the plaintiff Js precluded'Iromrecovering. Con- ceding the position of the defendant that the cause of action is not af- fected by its certification of the note, the .plainti ff's rig ht to recover de- pends on the rules of the clearing house, which are toimdln the record. That association appears by its constitution to have adopted a very simple manner of settling the drafts, checks, and other claims of its various members against the others. Each member, every morning, delivers to the clearing house the checks, drafts, and notes it holds against the other banks, and receives credit therefor, while it is charged with all checks, drafts, or notes payable by it and deposited by other banks. If its deposits exceed the drafts and checks deposited against S44 LIABILITY OF PARTIES (Part 3 it, it receives from, the clearing house during the day the amount of the excess in money, while, if the reverse proves the case, it is obliged to pay the balance against it to the clearing house. In this daily set- tlement of the clearing house no account is taken of the fact that the checks may be bad. All checks, drafts, or notes on any bank are charged agaifist it, though the" accounts of the drawers of those checks or the makers of the notes may not be good for their amounts, and even though the checks be forgeries. By section.- 14 .fif the constitution it is provided that the association shall be no way responsible for such items, but that they are to be adjusted directly between the bank who deposited them in the clearing house and the bank on which they were drawn. Section 15 provides that "all checks, drafts, notes or other items in the exchanges returned as 'not good' or missent shall be re- turned the same day directly to the bank from whom they were re- ceived, and the said bank shall immediately refund to the bank return- ing the same the amount which it had received through^ the jdearing house for the said checks, drafts, notes, or other items so returned to it in specie or legal tender notes." It will be seen that the system of clearances adopted by the associa- tion is very simple, and that it enafcles exchanges of the greatest magni- tude to be effected in a remarkably brief period of time. This could be accomplished only by making the several banks return the bad checks or notes directly to the banks which deposited them, and keep- ing the accounts of the clearing house free from all such items. The system has a weak feature ; that is, the contingency that a bank de- positing a bad check on another bank, possibly for a very large sum, may refuse or might fail and be unable to pay the amount of such check for which it had received credit in the clearing house. In such a case the bank, on which the check was drawn would have been com- pelled to pay the amount of the check in money to the clearing house, and thus have lost it either in whole or part. This danger, however, could not have been regarded as imminent, for the rules remained in the condition I have stated until 1884. In that year — whether because a case of the kind suggested actually arose or not does not appear in the record — a further rule was adopted as an addition to section 15: "In case of the refusal or inability of any bank to promptly refund to the bank presenting such checks, drafts, or other items returned as not good, the bank holding them may report to the manager -the arnpunt of the same. And it shall be the manager's duty, with the approval of the clearing house committee, to take from the settling sheet of both banks the amount of such checks, drafts, or other item so reported, and to readjust the clearing house statement, and declare the correct balance in conformity with the change so made : provided that such report shall be given to the manager before one o'clock of the same day." The appellant contends that it was the, duty of the .plaintiil,.fln _find- ing the note in its exchanges of the day, to haye applied to thej Ch. 1) MAKER AND ACCEPTOR 545 of the clearing house for a resettlement of the accounts, and that its„ fai lure to do so o p erated to^make the payment of the note voluntary. We think not. Tne provision of the constitution last quoted did not re peal the~previous p rovisioFof "section" 15, 'wTiereby the depositing bank is bound to repay in money any check or note returned the same day "a s^tjt good. • Nor-was-it i-ntgndg^to act 'as'.asubstitute for that p^vision. It appears^ by the testimony of the manager of the clearing house that the number of checks and drafts cleared daily is from eighty to a hundred thousand. It is extremely improbable, and bordering on the impossible^ that out of that vast nurtiber several should not prove bad. If these bad checks were to be always settled by a restatement of the clearing house accounts, the simplicity and expedition of the clearing house system of exchanges would be very much impaired, if not destroyed. It would seem, from its very language, which requires the approval of the committee, that the_ajnendrn£nt_ij£J.884;_j!vas in-_ tended_tQL_aj^j]^L-imLy-Jn_jexceptiQnalxases,- where otherwise a bank would be unable to obtain relief ; and that it.did, not in any respect ab~ rogate the obligation of the depositing" bank to repay a member any iterns of the exchanges which might be returned as not good. The plaintiff, therefore, was at entire liberty to let the charge for the note stand against it in the account of the clearing house, and seek reclama- tion directly from the defendant, under the express contract of the lat- ter imposed upon it by the rules of the clearing house. The judgment appealed from should be affirmed, with costs. LIBERTY TRUST CO. v. HAGGERTY et al. (Oourt of Chancery of New Jersey, 1921. 113 Atl. 596.) Suit by the Liberty Trust Company against William J. Haggerty and others to impress a trust on certain funds. Decree advised dismissing the bill. Fielder, V. C. The proofs show that the defendantJIaggerty was conducting a sham importing business in the city of Newark, hisjr^_. purpose being to obtain money Jrom ojthers, ostensibly for investment in his business, or on personal loans on his pfomise^'repayment with inKresraf"a~Kigh rate. Complainant is a trust company doing, a bank- ing business, with whom Haggerfy kept a: checkffig^Bank account. He induced a booCCe^ier in complainant's employ to so mani£ulate^ the books" oT the bank that _chACks. drawn on the,, banlT by Haggerty .were hcrabred an3' paid out of an apparent balance to. Haggerty's credit, when iirfact"heTiad msufficient funds to meet his checks. The first false bookkeeping entry in Haggerty's account appears under date of July 24, 1918, and not again until August 14, 1918, from which latter date to on or about December 9, 1918, the false entries occur nearly every Sm.& M.B.& N.(2d Ed.)— 35 54G LIABILITY OF PARTIES (Pai't 3 day and by means of the conspiracy between Haggerty and the- book- keeper the former succeeded in obtaining on his overdrafts a total of nearly $53,000 of the bank's funds. The falsification of Haggerty's account was accidentally discovered by one of the bank officials on De- cember 9, 1918, and Haggerty was arrested the following day. A peti- tion in bankruptcy was filed against Haggerty December 20, 1918, and he was duly adjudged a bankrupt, and a trustee in bankruptcy was appointed. The total amount realized on his assets was about $9,500 and upward of $150,000 in claims have been filed v/ith his trustee. The defendant Mayhew entered Haggerty's employ about May 1, 1918. Shortly prior to that date he had been attracted by thejn- ducements held out by Haggerty, and had made loans to him at usuri- ous interest rates. Subsequent to the date of his employment, Mayhew continued to make loans to Haggerty on the latter's promissory notes, receiving from time to time payments of interest at rates which ran from 20 per cent, to 40 per cent, per annum and partial payments on principal. These payments of principal and interest were made by Haggerty's checks to the order of Mayhew, drawn on and honored by complainant during the time complainant's bookkeeper was engaged in falsifying Haggerty's account, and the amount paid by complainant on these checks, against which Haggerty actually had ho" funds to his cre^T^ ^amounts to $19,250. Complainant seeks to have the money so received by Mayhew irn- pressed with a trust in its favor, upon the theory that the cliecks given Mayhew by Haggerty and drawn onliomplainant were not received by Mayhew as a bona fide holder for vakie, and that they were not effec- tual to pass title to Mayhew of money stolen by Haggerty from com- plainant. In the event that Mayhew should not be required to account for such money directly to complainant, the complainant and the frustee in bankruptcy contend that at the time of~sach-payffi?nts Haggerty was insolvent^ and that Mayhew had reasonable cause to believe that he was insolventj and that he (Mayhew) was being preferred, and because all the payments to Mayhew were made within four months before the filing of the petition in bankruptcy, they must be repaid to the trustee. " Complainant then insists that a trust on such funds should be declared' in its favor for the reason that the bankrupt's estate should not be per- mitted to profit by the crime of the bankrupt. There seems to be no doubt that Haggerty was insolvent at the time he made the payments on account of his indebtedness to Mayhew, but my conclusion from the evidence is that Mayhew was not aware of that fact and had no reasonable cause to believe that he was behig pre- ferred as a creditor, and therefore the payments made to Mayhew are not voidable under the federal Bankruptcy Act (U. S. Comp. St. §§ 9585-9656). I am also satisfied that Mayhew had no reason to believe that Haggerty's bank account was being falsified, and that Haggerty's checks on complainant to Mayhew's order were paid with money Hag- Ch. 1) MAKER AND ACCBPTOK 547 gerty was stealing from complainant. Haggerty's checks came to May- hew as payments on account of principal and interest due on Hag- gerty's promissory notes which evidenced Mayhew's loans to Haggerty. Qn receiving- these checks, _Mayhew became a bona fide holder for jialiig._^omp. Stat. p. 3738,"§ 25. As a'hoider of these checks, Maj- hewjiad no legaJLrig:ht to exact payment jmJ;b£niJuxaiLXCHielaili.ant, because they did not constitute a contract between complainant ^ijid l^^Hew2an2_eoiiiplainant Jiad the right to del£rmiiie~whether.Jtfij^y them ox. not. Comp. Stat. p. 3756, § 189; Creveling v. Bloomsbury fTational Bank, 46 N. J. Law, 255, SO Am. Rep. 417; National Bank of New Jersey v. Berrall, 70 N. J. Law, 757, 58 Atl. 189, 66 L. R. A. 599, 103 Am. St. Rep. 821, 1 Ann. Cas. 630. In m_aking- its election whether to pay or not, complainant was bound to know the state of its account with Haggerty. The fact that his ac- colinf appeared to be good when actually it was not is immaterial. Complainan t placed.lts bookkeeper in a position jKdiSXe.i£Jiad_th£_Qp- p ortunity to falsify the account, and it must be held.,acco.uatabl&.for his ac tsas ggainst an innocent third party who presented checks re- ceived in the ordinary course of business. Having exercised its option to pay or not to pay by honoring the checks, complainant cannot re- cover the money back from the payee. This is under the general rule i-ha:t-paymerit of a check by a bank upon which it is drawn, unHer the mistaken belief that the maker of the check had sufficient funds to his credit to pay the check, is a finality, and the bank cannot recover from the payee of theeheek the amount- so. .paid. One of three reasons and sometimes all three reasons have been assigned~Tor the riileT First, because there is no privity between the payee and the bank; second, becaiSsetKe barik' always has the means of knowing the state of thede- positor's account by an examination of its books, and therefore the pay- ment is not a mistake within the meaning of the general rule which pemiits the recovery of money paid under a mistake of fact ; and, third , because to permit the bank to repudiate the payment would destroy the certainty that must pertain to commercial tran sact ions of this sort arid give way to the uncertainty, delay, and annoyance which would result if the bank could at some future time call on the payee for the return of money paid him on a check. National Bank of New Jersey v. Berrall, supra; Citizens' Bank of Norfolk v. Schwarzschild, 109 Va. 539, 64 S. E. 954, 23 L. R. A. (N. S.) 1092 ; Spokane & Eastern Trust Co. v. UuS, 63 Wash. 225, 115 Pac. 80, 33 L. R. A. (N. S.) 1023, Ann. Cas. 1912D, 491. So it has been held that the certification of a check by a bank upon the mistaken belief that the drawer had sufficient funds to his credit, when in fact the apparent credit was the result of the de- posit of a forged check to the credit of the drawer's account, will not excuse the bank from paying the certified check (Fidelity Trust Co. v. Baiter, 60 N. J. Eq. 170, 47 Atl. 6), and it has also been held that where a bank official having authority to certify checks certified one 548 LIABILITY OF PARTIES (Part 3 for an amount which he kn^ to be in excess of the drawer's account, the effect of the certification is payment, precisely as if the bank had paid the money on it instead of making a certificate of its being good, and the bank is estopped from denying that it has sufficient funds with which to pay the check. State v. Scarlett, 91 N. J. Law, 200, 102 Atl. 160, 2 A. L. R. 86. And it is the rule that a person receiving stolen money innocently in due course of business, in payment of a pre-existing debt, is a holder for value as against the former owner. Fidelity Trust Co. v. Baker, 60 N. J. Eq. 170, 173, 47 Atl. 6; Village of Mineral City v. Gilbow, 81 Ohio St. 263, 90 N. E. 800, 25 L. R. A. (N. S.) 631 ; Benjamin v. Welda State Bank, 98 Kan. 361, 158 Pac. 65, L. R. A. 1917A, 704, 707. All the checks given by Haggerty to Mayhew, save one, were de- posited by Mayhew in his bank under a general indorsement, and were paid by complainant to Mayhew's bank. It might be argued that when Mayhew deposited the checks in his bank, the amount thereof was credited to him ; that the money so credited was the money of his bank ; that the transaction was, in effect, a sale of negotiable paper by May- hew to his bank ; that the money complainant afterward paid was paid to Mayhew's bank, and not to Mayhew, and that the right to recover money paid by mistake exists only as against the party to whom the payment was made. But this question of privity between the parties to this action was not raised, and has not been considered. I shall advise a decree that complainant's bill be dismissed. SPRINGS et al. v. HANOVER NAT. BANK OF CITY OF NEW YORK. (Court of Appeals of New York, 1913. 209 N. T. 224, 103 N. E. 156, 52 L. K, A. [N. S.] 241.) Action by Richard A. Springs and others against the Hanover Na- tional Bank of the' City of New York. A judgment on a directed ver- dict for defendant was unanimously affirmed by the Appellate Division, First Department (152 App. Div. 949, 137 N. Y. Supp. 1144), and plain- tiffs appeal. Affirmed. The plaintiffs are, and for some time have been, engaged as cotton commission merchants in the business of buying and selling cotton in New York, dealing mainly on the Cotton Exchange. The defendant at all times involved in this action has been a national bank, having its banking offices in said city, and the First National Bank of Decatur, Ala., was a similar banking association having its banking office at said latter city, and Knight, Yancey & Co. was a firm of cotton dealers carrying on business as such at said last-named city and other places until they went into bankruptcy in April, 1910. Said latter copartner- ship had done business with said First National Bank of Decatur for Ch. 1) MAKER AND ACCEPTOR 549 several years, procuring the discount of drafts with and without bills of lading attached for large sums of money, and also had done busi- ness with plaintiffs, mainly dealing in futures. Said copartnership at the time of the occurrences involved in this action was in good standing and credit, and in my opinion there was no evidence introduced or offered which tended to impeach such standing with either of the banks which have been mentioned. On March 29, 1910, telegrams and a letter passed between said co- partnership and plaintiffs, whereby in substance the latter authorized the former to draw upon them for $39,000 as against a shipment of 600 bales of cotton. In accordance with such arrangement, on said date said firm presented to the Decatur bank their draft for $39,000 drawn on plaintiffs payable at sight with what purported to be bills of lading and certificates of insurance for 60O bales of cotton attached, and this draft was by said Decatur bank duly discounted and the proceeds there- of placed to the credit of said firm, who on the same day checked the same out. On the same day the Decatur bank transferred said draft by un- restricted indorsement to the defendant and mailed it in a letter which stated that it was "for collection and credit." The draft thus inclosed reached the defendant shortly thereafter and was presented with the bills of lading attached in the usual manner to plaintiffs, who, after satisfactory examination, took it up and gave the defendant a check for its amount. The moneys thus received by defendant from plain- tiffs were placed to the credit of the Decatur bank, and, as claimed by defendant, were withdrawn by the latter in the ordinary course of business April 4, 1910. It subsequently transpired that the purported bills of lading were forgeries and did not represent any shipment of cotton. These forger- ies, however, are not claimed to have been of such a character as to be obvious, and neither the Decatur bank nor the defendant had any no- tice or knowledge that they were such until notice was received by the defendant from the plaintiffs on May 13, 1910, accompanied by a de- mand for repayment of the amount of said draft on the ground that the bills of lading were forgeries. Except for the word "cotton," lithographed in the body of the blank form of draft, there is nothing in the latter' which is even claimed to make any reference to the bills of lading which were attached to it. There is evidence from which it may be inferred that plaintiffs in tak- ing up the draft from defendant were more or less influenced by the supposed security of said bills of lading. There was also introduced and offered by plaintiffs some evidence claimed to permit the inference that the Decatur bank had other security from Knight, Yancey & Co., and that, relying on such security, it was too trustful in its dealings with said firm in such transactions as the one here involved, and did not sufficiently scrutinize the purported bills of lading. There is, however. 550 LIABILITY OF PARTIES (Part 3l not even a suggestion which questions the good faith of the defendant if it be regarded, as plaintiffs elect to regard it, as the purchaser and owner of the draft in question instead of a collecting agent for the De- catur bank. HiscocK, J. (after stating the facts as above). This case directly presents to this court for the first time the question whether the drawee of a draft who has paid the same to a bona fide holder for value relying in part upon purported bills of lading attached by the drawer to the draft, but not m.entioned therein, can, on discovery that the bills of lading are forgeries, recover back the moneys so paid from the payee or indorsee who has neither guaranteed the genuineness of said instru- ments nor been aware of their fraudulent character. In this case the plaintiffs who as such drawees paid the defendant as indorsee from another bank a draft for $39,000 drawn by a, firm of cotton dealers in the south with forged bills of lading attached, urge four theories as justifying a recovery back. They say tliat defendant represented that the bills of lading were genuine and truthful both as to signatures and contents ; that the draft contained such reference to the bills of lading as to make it conditional on the genuineness of the bills of lading; that plaintiffs relied on an examination of signatures by the bank and its transferror which had not in fact been made, and therefore the payment was made under a mistake of fact ; that the de- fendant or its transferror departed from the usual course of business in discounting the draft, and thereby caused a mistake of fact; and that even if both parties were equally innocent the defendant must' suffer. These theories are not sustained. For instance, while it may be assumed that a draft like the present one may make such reference to bills of lading attached thereto as to make it conditioned on their genu- ineness and to permit a drawee who has paid the draft to recover back his moneys if the bills of lading prove to be forged, there is no evidence to bring this draft within that principle. Plaintiffs' entire argument at this point is built upon the fact that there was lithographed or printed in the blank form or draft used on this occasion the word "cotton." This was evidently for some such general purpose as that of advertis- ing or characterizing the business in which the drawers were engaged, and it cannot be seriously argued that it had any such reference to the purported bills of lading which were attached to this particular draft as to imply that the latter was conditional or drawn against such purported shipments of cotton. One of the other theories outlined is based on certain evidence introduced or offered from which plaintiffs contend that it may be inferred that the bank in Decatur, Ala., from which de- fendant received the draft, was not as careful in watching the drawers of the draft or in scrutinizing the bills of lading as it should have been and hence helped to bring about plaintiffs' misfortune. We think there was no evidence which showed legal fault upon the part of the Decatur bank in originally discounting the draft, and cer- Ch. 1) MAKER AND ACCEPTOR 551 tainly there is no evidence which affects the defendant in that respect. The contention of the plaintiffs is that defendant became the owner and holder of the draft and was not a mere collecting agent for the Deca- tur bank. Accepting this theory, there is no question that defendant became the owner and holder of the draft in the regular course of business for value and without notice of any fact or circumstance which made it chargeable with knowledge or of responsibility for the forgery of the bills of lading. Therefore in the end plaintiffs confront the general question as first stated. While, as I have said, this questidn has not been directly de- cided by this court, it has been a subject of discussion and decision in many other courts. In these cases the argument had been made on which plaintiffs in this case must finally rely, that a party accepting or discounting drafts ac- companied by purported bills of lading upon the faith and security of which he more or less relies and which prove to be forgeries has acted under a material mistake of fact which entitles him to be relieved from his acceptance of payment. To this argument, however, the answer in substance has been made by the courts with almost unvarying uniform- ity, that the mere attachment of bills of lading to a draft does not make the former a part of the latter; that one who accepts or pays such a draft must be assumed in the absence of special circumstances to do so on the faith of the draft itself, and that reliance upon the bills of lading is not a fact which enters into the substance of the real transaction in accepting or paying the draft, but is an extrinsic fact ; that, if the rule were established that relief should be afforded against the acceptance or payment of a draft because of mistaken belief in the genuineness of attached bills of lading, such rule logically would apply to other cases, as that the drawee had entertained a mistaken notion as to the financial standing and responsibility of the drawers or as to the value of security for the draft and thus lead to an instability and confusion in transac- tions involving negotiable paper which would be intolerable; that as between the innocent holder for value of a draft and the drawee who has accepted or paid the same in reliance upon forged bills of lading there is no reason why the drawee should be permitted to shift the burden of loss to the holder. While; as stated, none of these decisions are by this court, and there- fore controlling, nevertheless they have such weight and have- so widely established a rule of negotiable paper that we shpuld feel reluctant to disagree witli them even if we doubted the wisdom of the principles upon which they are based. We do not, however, have any such dif- ference with other courts in respect of the principles which are in- volved, and have no hesitation in adopting the rule which has beeri es- tablished by them. It is impossible within reasonable length to review even the leading cases on this subject, and reference will be made to the opinions in only two or three of them. 552 LIABILITY OF PARTIES (Part 3 Hoffman & Co. v. Bank of Milwaukee, 79 U. S. (12 Wall.) 181, at' page 189 (20 L,. Ed. 366), was an action brought by plaintiffs as drawees to recover the amount of three drafts paid by them to the defendant on the ground that such moneys were paid under a mistake of fact. The fundamental and decisive fact on which they based their claim to re- covery was that said drafts were accompanied by bills of lading on the faith of which they made payment supposing them to be genuine, when as a matter of fact they were forged. The defendant had discounted the drafts for value and was ignorant of the fraudulent character of the bills of lading. There Was evidence, as in this case, of prior deal- ings between the drawers and drawees and of communications between them with reference to the drawing of the drafts in question. The Supreme Court affirmed the action of the lower courts in directing judgment for the defendant, and in so doing wrote as follows : "Money paid under a mistake of facts, it is said, may be recovered back as having been paid without consideration ; but the decisive answer to that suggestion, as applied to the case before the court, is that money paid, as in this case, by the acceptor of a bill of exchange, to the payee of the same, or to a subsequent indorsee, in discharge of his legal obligation as such, is not a payment by mistake nor without considera- tion, unless it be shown that the instrument was fraudulent in its in- ception, or that the consideration was illegal, or that the facts and circumstances which impeach the transaction, as between the acceptor and the drawer, were known to the payee or subsequent indorsee at the time he became the holder of the instrument. * * * Attempt is made in argument to show that the plaintiffs accepted the bills of ex- change upon the faith and security of the bills of lading attached to the same at the time the bills of exchange were discounted by the de- fendants. Suppose it was so, which is not satisfactorily proved, still it is not perceived, that the concession, if made, would benefit the plaintiffs, as the bills of exchange are in the usual form and contain no reference whatever to the bills of lading, and it is not pretended that the defendants had any knowledge or intimation that the bills of lading were not genuine, nor is it pretended that they made any representation upon the subject to induce the plaintiffs to contract any such liability. They received the bills of exchange in the usual course of their business as a bank of discount and paid the full amount of the net proceeds of the same to the drawers, and it is not even suggested that any act of the defendants, except the indorsement of the bills of exchange in the usual course of their business, operated to the prejudice of the plaintiffs or prevented them from making an earlier discovery of the true character of the transaction. On the contrary, it distinctly) appears that the drawers of the bills of exchange were the regular cor- respondents of the plaintiffs, and that they became the acceptors of the bills of exchange at the request of the drawers of the same and upon tlieir representations that the flour mentioned in the bills of lading had Ch. 1) MAKER AND ACCEPTOR • 553 been shipped to their firm for sale under the arrangement before de- scribed. Beyond doubt the bills of lading gave some credit to the bills of exchange beyond what was created by the pecuniary stahding of the parties to the same, but it is clear that they are not a part of those in- struments, nor are they referred to either in the body of the bills or in the acceptance, and they cannot be regarded in any more favorable light for the plaintiffs than as collateral security accompanying the bills of exchange. * * * Failure of consideration, as between the drawer and acceptor of a. bill of exchange, is no defense to an action brought by the payee against the acceptor, if the acceptance was un- conditional in its terms, and it appears that the plaintiff paid value for the bill, even though the acceptor was defrauded by the drawer, unless it be shown that the payee had knowledge of the fraudulent acjs of the drawer before he paid such value and became the holder of the in- strument. * * * Forgery of the bills of lading would be a good defense to an action on the bills if the defendants in this case had been the drawers, but they were payees and holders for value in the regular course of business, and the case last referred to, which was decided in the Exchequer Chamber, shows that such an acceptance binds the acceptor conclusively as between them and every bona fide holder for ■value." Goetz V. Bank of Kansas City, 119 U. S. 551, at page 555, 7 Sup. Ct. 318, 320 (30 L. Ed. 515), was an action brought to recover on a bill of exchange with forged bills of lading which had been discounted by the bank and accepted without knowledge of the fraud in either party. The contention of the defendant was that he had accepted the draft in question in the belief that the bills of lading were genuine, whereas they were forged; that genuineness was asserted by the indorsement of the bank on certain invoices accompanying them; that the drawer bore such a reputation for dishonesty in the community that the banks were guilty of culpable negligence amovinting to bad faith in discounting the drafts on the faith of the bills of lading without inquiring as to their genuineness. The court, in overruling these claims and holding the acceptor liable, wrote as follows : "A bank in discounting commercial paper does not guarantee the genuineness of a document attached to it as collateral security. Bills of lading attached to drafts drawn, as in the present case, are merely security for the payment of the drafts. * * * The bank, after discounting the drafts, stood 'towards the acceptors in the position of an original lender, and could not be affected in its claim by the want of a consideration from the drawer for the acceptance, or by the failure of such consideration." It also interpreted the opinion in the Hoffman Case as deciding as follows : "Supposing the plaintiffs accepted the bills of exchange upon the faith and security of the bills of lading attached, that fact would not benefit them, as the bills of exchange were in the usual form, and 554 - LIABILITY OF PARTIES (Part 3 contained no reference whatever to the bills of lading, and it was not pretended that the defendants had any knowledge or intimation that the bills of lading were not genuine, or that they had made any repre- sentation upon the subject to induce the plaintiffs to contract any such liability; that undoubtedly the bills of lading gave some credit to the bilis of exchange beyond what was created by the pecuniary standing of the parties to them, but that they were not a part of those instru- ments, and could not be regarded in any more favorable light than as collateral security accompanying the bills of exchange; and that proof that the bills of lading were forgeries could not operate to discharge the liability of the plaintiffs, as acceptors, to pay the amounts to the payees or their indorsees, as the payees were innocent holders, having paid.value for the same in the usual course of business." . In First National Bank of Detroit v. Burkham, 32 Mich. 328, the court discussed a situation where the drawees sought to recover from, the payees the amount of a draft which they had paid, and the genuine- ness of which was not disputed, upon the ground that the security for the bill was fictitious when they supposed it to be genuine, and that therefore they had made payment under a mistake of fact. Judge Cooley, writing in behalf of the court, said : "Adrnitting this to be so, how does the fact concern the payees ? Do they assume to guarantee the fairness of the dealings of the drawers, with the drawees, or the adequacy of any securities upon which the dealings are based? Not, certainly, in ordinary cases. The law mer- chant gives the payees the right to assume that any draft they receive and forward, if it is accepted and paid, is a draft which, from the state of the dealings between the drawers and the drawees, it is right and proper that the latter should pay as the principal party ; and the pre- sumption of law that such is the case is their complete protection if they received the bill in the ordinary course of business and for value. What is peculiar in the present case is that the security which was sent forward with the bill proved to be fictitious. It is said that the drawees relied upon this security, and would not have paid the bill but for a belief that it was valid. It is in this that the mistake consists on which they rely for a recovery. If a mistake regarding their security will authorize the drawees to recall the payment made to the payee, no rea- son is perceived why a mistake regarding the responsibility of the draw- er, or regarding his honesty or integrity, or anything else upon which they relied for protection in their dealings, should not justify the like action. If they suppose the drawer to be responsible when he is not, is not this as genuine a mistake of fact on their part as if they suppose a security to be good when it is fictitious? * * * But we think it would be an exceedingly unsafe doctrine in commercial law, that one who had discounted a bill in good faith, and received in its payment the strongest possible assurance that it was drawn with proper author- ity, should afterwards hold the moneys subject to such a showing as Ch. 1) MAKER AND ACCEPTOR 555 the drawee might be able to make as to the influences operating upon his mind to induce him to make payment. * * * The best view that can be taken of this case for the plaintiffs below is that there was a mutual mistake of fact under which the bank discounted and the drawees paid the bill. Conceding this, why should the drawees be al- lowed to transfer the loss to the bank ?" The principles affirmed by these decisions are supported directly or indirectly by the following cases: Robinson v. Reynolds, 2 Q. B. (Adolphus & Ellis N. S.) 196; Thiedemann v. Goldschmidt, 1 De Gex, F. & J. 4; Leather v. Simpson, L. R. (H Eq.) 398 j Young v. Lehman, 63 Ala. 519; Craig v. Sibbett, IS Pa. 238; Alton v. First Nat. Bank of Webster, 157 Mass. 341, 32 N. E. 228, 18 L. R. A. 144, 34 Am. St. Rep. 285; Southwick v. First Nat. Bank of Memphis, 84 N. Y. 420; Guaranty Trust Co. v. Grotrian, 114 Fed. 433, 52 C. C. A. 235, 57 L. R. A. 689; Hannay v. Guaranty Trust Co. (C. C.) 187 Fed. 686; 2 Daniel's Negotiable Instruments, § 1734D. It would likewise be impossible within reasonable limits to review the many cases cited by the learned counsel for the plaintiffs as au- thority for his contention that they are entitled to recover. Most of them are clearly distinguishable from and not at all contradictory of the cases which have been cited in support of the conclusions reached by us.* It is true that two or three decisions were made by an inferior court of Texas and by the courts of North Carolina, Mississippi, and Ala- bama, which are at variance with those cases and which do tend to support the plaintiffs' position. These decisions, however, were revers- ed or so qualified by the courts of the same states respectively that they are not entitled to serious consideration. We therefore hold that the judgment appealed from should be af- firmed, with costs, upon the grounds stated, and find it unnecessary to discuss the arguments which have been addressed to us on other points. 556 LiABiUTi OF PARTIES (Part 3 CHAPTER II DRAWER AND INDORSER SECTION 1.— IN GENERAi; BISHOP V. HAYWARD. (Court of King's Bench, 1791. 4 Term R. 470.) The p laintiff declared on a j romip s u'";' "'''^" nmr+ g | >y n Ti » -Caii;nt;^ p ayable to t he. plaintiJiLO-r order, and afterwards i ndorsed by him to th e deJsDJiaiit, who afterwards reindorsed it to the plaintiff again. After verdict for the plaintiff on the" general issue, a motion w as mac\f. by Bower, in ^rrest nf j iidprnent^ iijinrithe ground that nothing- ap peared to be due to the plaintiff o n his own sEoW injj ; f(5 f~{Eedefendant_ wQ.uld b e ferrtitled to reco ver bade ag "a[ n the identical sum from the pla inti ff for'''wEich he had now obtained a verdict against the defendant, and therefore, as this would introduce a circuity of action, which the law does not permit, the declaration was bad upon the face of it.^ Lord Kenyon, C. J. It is an invariable rule that every plaintiff must, on his own stating of the case, show sufficient to entitle him to recover judgment against the defendant. And it is a rule equally clear that every instrument ought to be declared on according to its legal import. I do not say but that there may be circumstances, which, if disclosed on the record, might entitle the plaintiff to recover against the defendant on this note; but we are now called upon to form a judgment on the title which he has disclosed. And on the face of the declaration he has stated the note as a legal existing note, and the in- dorsements as legal existing indorsements ; we are therefore bound to consider them to be so. Then the case stands thus : That he, the plain- tiff, being the original indorser of the note, calls on the defendant who appears on the record to be a subsequent indorsee. And nothing can be clearer in law than that an indorsee may resort to either of the pre- ceding indorsers for payment; whereas the present action is an at- tempt to reverse this. I admit that a case might happen in which the plaintiff might have stated that he was substantially entitled to re- cover on this note, e. g. that his own name was originally used for form only, and that it was understood by all the parties to the instrument that the note though nominally made payable to the plaintiff, was sub- 1 The argument of plaintiff's counsel and the opinion of Buller, J., are omitted Ch. 2) DRAWEE AND INDORSER 557 stantially to be paid to the defendant; but if such were the case, the note should have been declared on According to its legal import, as was held in Minet v. Gibson, 3 Term R. 481, 1 H. Bl. 569. A name may be oniitted in the declaration, if the legal operation of the instrument re- quires it. But in this case the plaintiff has stated fa '-t" 'iihYf^rf^'v" '^^ histjile— Per Curiam. Judgment arrested. SHAW V. KNOX. (Supreme Judicial Court of Massachusetts, Suffolk, 1867. 98 Mass. 214.) Contrpft nn a draft by Nathaniel Heath on John W. West for pay - ment of $450 three months after datp tn <-hp n rHpr nf \he. defgii HaiTl;, i ndorsed by the lat ter and b earing also, below the defendant's indo rse- m ent, the indorsement of E. Longfellow 8r Son. 1 rial m the superior court, before Morton, J., without a jury, when it appeared that the draft was drawn on the day of its date._ and indors- ed bv the defenda nt, and then at his request by E. Longfellow 8r Son. "s p that it could be discounted" (neit her of the indorser s receiving any consideration therefor), and then was n egotiated, a nd di scnunte^ hy a baiTk. and p resented for acceptan ce-: that it was ac cepted by West , but on maturity was pr otested j ornonpavment ; and that E. Long - f ellow & Son some months Iptf p""^ '^ *"" ^^^ '"""''' ''"'^ *""^' iLjir- a nd afterwards sold it to the plaintiff . The de fendant asked the judp-e to riile "that E. L ongfellow & Son a nd^the defen d nn t were join t arrnrpimodntinn indnrrnr r.r ^nrl , when thp fnrmpx p'^'"^ *^^ Hraft itg np gotiabilitv was destroyed, and they co uld n ot pass it to the plaintiff so that he could maintain an action tViprpnn " But he declined so to rula. and ruled that the plaintiff could maintain- his action, and found for the plaintiff; and the defendant alleged ex- ceptions. BiGELOW, C. J. TWp w^s TI" }"'"<• liability nn thp part nf tVip rip- fendant with the subsequent indorsers. The indorsers on the draft were an hable to the holders ot the'-draft for ,value on their several contracts of indorsement. Ther e was no agreement betw een the pa r- fi es. when the draft was made and indorsed, that thp y sTinni H hnlri any other relation toward s each other than that which would result from t heir be in g sUcJcessive indorsers on the draf t for the ar.mmmndatinn ot the_ drawer. If the last indorser paid the draft to the holder for value, he would succeed to the right of such holder, and could look to his prior indorser for payment of the amount paid by him. Guild v. Eager, 17 Mass. 615. Such payment was in fact made by the second indorsers, from whom the plaintiff derives his title to the draft. The relations of the parties to the draft can in no sense be regarded as creating a contract of joint guaranty and suretyship. The rights and 558 LIABILITY OF PARTIES (Part 3 duties of the several parties to an accommodation note or bill of ex- change are the same in all respects as upon notes given for value. The legal eff ect of the contrac t into which they respectively enter ^ ^Ee"- coming parties to negotia'ble paper is ttiat wtiich appears on the -£a.c e o^The bill or nofe! It follows that, if an accommodation mdorser is obliged ro taKeUp^he draft in the hands of a holder for value, he can look to his prior indorser for payment. Church v. Barlow, 9 Pick. 547 ; Clapp v. Rice, 13 Gray, 403, 74 Am. Dec. 639 ; Howe v. Merrill, 5 Cush. 80. Exceptions overruled. EASTERLY v. BARBER. (Court of Appeals of New York, 1876. 66 N. T. 433.) "" There were two appeals in this case — the one by plaintiff from an order of the General Term of the Supreme Court in the Fourth Ju- dicial Department denying motion for a new trial and directing judg- ment on a verdict; the other by defendant from the judgment entered upon such order.. T he action wasbroughtJby__plamti ff as third ind nr.';f ^r nf a prn mis- ■sory note t p_ recover the amou nt thereof of the sqrnpd^ indorser. "rlieriote in question was made by the Stevenson Manufacturing Company, payable to the order of one Knight, who indorsed it. De- fendant was second indorser, plaintiff third, and one MacDougall the fourth. Defendant alleged '"n ^'^ ^"'■"T'"- th pt the nnte was given _ and discoun ted for the benefit of the make r, in which company all the four indofseFs were stockholders ; that t hey indorsed for the accommoda - tinnof thecoiTipanv und er an agreement that as between themselv es t hey s hould" b e cosureties, and share and contribute equally to the rainount all or either should be obliged to pay thereon. TTpnn^a^fnrmpr t ri al plaintiff rprnvprpH t jndfrmpnt fnr nnp-fniir tli the a,mount of the note. It appeared on such trial that the two othe r in dorsers w ere insoTvent? The Ge neral Term re vfrf"'''' tVip jiirla-mpnt and ordeml a nevTtrial on t he ground that plaintiff was entitled t a judgmentfor one-hal f the amoumt . 3 Th. & C. 481. ..^ Upon t he second, par o l eviden cejas- receiv e d t n provp thf a^^''g"i|- tions oTTITe answer, which was received under objection and exception. THe evidence tended to show that the note in suit was a renewal of a former note ; that the agreement was made in reference to the orig- inal note, which was renewed from time to time. The testimony was conflicting as to whether any thing was said in reference to the lia- bility as co-sureties at the time of the indorsements of the note in suit. Plaintiff was allowed to prove, under objection and exception, the insolvency of the other two indorsers, Knight and MacDougall. Evi- Ch. 2) DRAWER AND INDORSEE 559 dence.was given on the part of defendant tending to show that the banl^ which discounted the note brought suit thereon against plaintiff alone at defendant's request upon his giving security to indemnify the bank. As .H Thf. T^n^ e with the purpose of p-iving the maker cfredit withjhe ^paye e, prooi_ was given tending to show th a i , d e fau lt hgyinfy been made in the pavment o f the parlier note, notic e - flf prote st th ereof was given to the defendant. It is ur ged that the evi dence-as to the protest oi -th e - earlier note was not of a p r oper character. It 582 LIABILITY OF PARTIES (Part 3 is unnecessary to consider this question, for since the enactment of the negotiablejnstrumentsjaw (Laws 1897, p. 719, c. 613) the law obtain- ing m the case of such indorsement as that made by the defendant has been radically changed. Prior to that time t he indorser was p re- sumed_to be a second indor spri-and not liable to the pavee, thoup-fi it was competent for the payee to prove aliunde that the intention of the indorser was to give the maker credit with the payee. Bacon v. Burn- ham, 37 N. Y. 614 ; Coulter v. Richmond, 59 N. Y. 478. Section m of_the_negotiable instruments- law pr^scdhes a._di££xe nt rul e. It is" enacted thar''wh ere a person, not otherwise a party to an instrument, places thereon his'signature in blan k before delivery, he is liabl e~as in- doi'ser in~accorda nce 'wit h the "follovying rules: _ "(l)If the instrument is payable to the order of a third person, he is liable to^Sie^iayee and to all subsequent partiesT" Tilly iiuLe W"asTna3e in^December, 1898, and therefore the proof offered by the plaintiff was not necessary to maintain its cause of action, and the error, if error there was, was im- material. The judgment appealed from should be affirmed, with costs. DEAHY V. CHOQUET et al. (Supreme Court of Rhode Island, 1907. 28 R. I. 338, 67 Atl. 421, 14 L. R. A. [N. S.] 847.) Assumpsit on promissory note. Heard on exceptions of plaintiff, and overruled. Douglas, C. J." A few days before June 5, 1901, the defendant Choquet, being desirous of borrowing some money, called, with de- fendant Carroll, upon the plaintiff, and asked him for a loan upon a proposed note. The plaintiff offered to lend the money if the note should be indorsed by rehable persons. On June 5th Choquet, ac- companied by Carroll, called again and offered to the plaintiff' a prom- issory note in the words and figures following : "$1,800.00 Pawt., R. I., May 29, 1901. "Three months after date I promise to pay to the order of Joseph H. Beland eighteen hundred ""/loo dollars at the Ind. Trust Co., Pawt. Branch. Value received. Ambrose Choquet." Upon the back of the note were signatures : "J. H. Beland. "Hugh J. Carroll. "Hugh J. McGinn." The plaintiff examined the note and approved it, whereupon Car- roll wrote at the bottom, after the printed word "Due," the words and figures: "Sept. 5, '01. Money advanced June 5, '01"— and the plain- 8 Part of the opinion Is omitted. Oh. 2) DRAWEE AND INDOESEE 583 tiff took the note and gave to Choquet his check for $1,737, deduct- ing from the face of the note $63 for three months' interest. No presentation of the note was made at the bank, either three months from its date or three months from June 5th. No notice of dishonor was ever given to the parties whose names are upon the back of the note. This action was begun by a writ of attachment dated January 7, 1904, which was served January 25th by attachment of real estate of defendant Carroll and personal property of defendant Choquet and by summons of defendants Beland and McGinn. All the defendants answered, and certain special pleas having been overruled on demurrer, trial upon the general issue was begun Decembef 5, 1906, and ended December 7th by a verdict, by direction of the court, against the de- fendant Choquet and in favor of the other defendants. The verdict in favor of the defendants Beland, Carroll, and McGinn was directed on the ground that they were indorsers and released from liability by failure of the holder to make due presentment for payment af the note and to give them notice of the dishonor, as well as on the ground that the agreement referred to was an extension of time given to the maker within the meaning of section 128, subd. 6, Neg. Instru. Act. We think the direction should be sustained. Article 1, § 3, of the negotiable instruments act (chapter 674, Pub. Laws), provides that : "The person 'primarily' liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. AH other parties are 'secondarily' liable." Article 6, § 71, of the same act, provides that: "A person placing his sigfnature upon an instrument otherwise than as maker, drawer, or ac- ceptor is deemed to be an indorser unless he clearly indicates by ap- propriate words his intention to be bound in some other capacity." The defendants named come within the plain language of these sec- tions, and there is no evidence that they made any agreement to vary their liability. They all affixed their names to the note, before delivery, for the ac- commodation of Choquet, to whom the plaintiff directly paid the money for it, knowing that they were such accommodation indorsers. As such they were entitled to notice of the dishonor of the note by sec- tions 97 and 111, art. 8, c. 674, which they never received. It is urged, however, by the plaintiff that all these defendants be- came liable to him as joint makers because he would not have taken the note if their names had not been upon it, and in regard to defend- ant Carroll, that there was an express waiver h^ him of presentment and notice. The claim that the indorsers are liable as makers because the plain- tiff required good indorsers before he would discount the note is the height of absurdity. If it were valid every indorser whose name was 584 LIABILITY OF PARTIES (Part 3 of any value would be held as a maker. The principle which the plaintiff mistakes as applicable to this case is well stated in the case which he cites — Equitable Marine Insurance Co. v. Adams, 173 Mass. 436, 53 N. E. 883. In that case the company assented to the assign- ment of a policy of insurance on condition that the assignee should in- dorse the premium note, which of course had been made and delivered at the time the poHcy was issued. The court held that Pub. St. Mass. c. 77, § 15 — "Every person becoming a party to a promissory note payable on time, by a signature in blank on the back' thereof, shall be entitled to notice of nonpayment the same as an indorser." — does not refer to a collateral contract made subsequent to the issuing of a note and upon an independent consideration, even if it happens to be in- dorsed upon the note instead of being written upon a separate piece of paper. The case of Downey v. O'Keefe, 26 R. I. 571, 59 Atl. 929, holds the familiar doctrine, which prevailed in Rhode Island until the operation of the negotiable instruments act, that one not the payee of a note, who indorses it or agrees to indorse it before its issue, is liable as a joint maker. Moies v. Bird, 11 Mass. 436, 6 Am. Dec. 179, and Leonard v. Wildes, 36 Me. 265, are to the same efifect. This doctrine has no validity since the passage of section 71 of the negotiable in- struments act. In the case at bar the note was issued when the plaintiff paid the maker a consideration for it, and there is no evidence of any consid- eration being paid to the indorsers or of any agreement with them oth- er than that expressed by their signatures upon the note. By indorsing the note they assumed the obligation of successive indorsers to become effectual when it came into the hands of a holder for value. This ob- ligation was released by failure to make presentment and to give no- tice of dishonor, and the plaintiff has no claim upon them unless they have waived their rights as indorsers. There is no claim that Beland and McGinn ever did so, and the verdict in their favor must stand. * ♦ * Plaintiff's exceptions are overruled, and the case is remanded for judgment on the verdict. Ch. 2) DRAWER AND INDORSBB HADDOCK, BLANCHARD & CO., Inc., v. HADDOCK. (Court of Appeals of New York, 1908. 192 N. Y. 499, 85 N. B. 682, 19 L. R. A. [N. S.] 136.) Action by Haddock, Blanchard .& Co., Incorporated, against John C. Haddock. From a judgment of the Appellate Division (103 N. Y, Supp. 584), affirming a judgment for plaintiff, defendant appeals. Aifirmed. Chase, J. The plaintiff is a foreign corporation authorized to dot business in this state and engaged as a wholesale dealer in coal at Bing- hamton. The Plymouth Coal Company, a corporation, was engaged in' the operation of coal mines in Pennsylvania prior to March, 1902, at which time it went into the hands of a receiver. The defendant was the president and manager of said coal company and the owner of sub- stantially all of its stock. The defendant was, until May, 1902, the president of the plaintiff, and during all the times herein mentioned had charge of plaintiff's New York office. At the time when the note and bills hereinafter mentioned were given the plaintiff was engaged in selling on commission at wholesale the coal mined by the Plymouth Company or its receiyer, under a contract made with said coal com- pany. One B., the vice president of the plaintiff prior to May, 1902, and its president thereafter, passed upon the financial responsibility of persons seeking credit with the plaintiff, and he arranged with a trust company at Binghamton to discount commercial paper of the plaintiff's customers. The Lenape Coal Company, the Living Stone Coal Com- pany, and the Montauk Coal Company were severally organized as' corporafibns and engaged in the business of retailing coal in or near the city of New York, and the defendant was the owner of substantially all of the stock of each. Soon after the organization of such corpora-' tions to retail coal, they sought credit with the plaintiff, and their financial responsibility was investigated by B. The responsibility of each was found to be unsatisfactory, and B. so reported to the defend-, ant, and the defendant replied that said companies were his companies and he would guarantee their credit by indorsing their paper. On February 13, 1902, said L,enape Coal . Company, for value re- ceived, executed and delivered to the plaintiff, as payee, its certain promissory note for $880.96, dated on that day, payable four months after date at a bank in the city of New York. On and between January 27, 1902, and May 13, 1902, the plaintiff, for value received, made 30 several drafts each on either said I^enape Coal Company, said Living Stone Coal Company, or said Montauk Coal Company, payable to the order of itself as payee, which drafts aggregated $26,833.15, each of which drafts was, for value received, accepted by the coal company on which it was drawn, payable at a place and on a day in each respective- ly specified. The drafts or bills were all similar in form, and the fol- 586 LIABILITY OF PARTIES (Part 3 lowing is a copy of one of said bills: "1327.*^/io». Coal Office of Haddock, Blanchard & Co., Incorporated, New York, Apl. 28, 1902. Four months after date pay to the order of ourselves thirteen hundred twenty-seven and *^/ioo dollars, value received, and charge the same to account of Haddock, Blanchard & Co., Incorporated. C. N. Blanchard, Asst. Treas. To Montauk Co., Brooklyn, N. Y." Indorsed across the face: "Accepted. Payable at the Binghamton Trust Co., Binghamton, N. Y. The Montauk Coal Co., Chas. B. Smith, Treas." Indorsed on the back: "Haddock, Blanchard & Co., Incorporated. C. N. Blanchard, Assistant Treasurer. John C. Haddock." Said note after it had been signed by said Lenape Coal Company, and each of said bills after they had been accepted by the corporation on which they were severally drawn, were indorsed by the defendant be- fore delivery, and thereafter each of them, so indorsed, was before maturity delivered to the plaintiff as payee, and the plaintiff thereafter and prior to their maturity severally indorsed and procured them to be discounted at a trust company at Binghamton. Said note and each of said bills were given and delivered to the plaintiflf for the purchase price of coal sold and delivered by the plaintiff to the acceptors, respectively, of said bills and the maker of said note, or in renewal in whole or in part of prior notes or bills given or accepted for the purchase price of coal so sold and delivered. Said note and each o£ said bills were so in- dorsed by the defendant for the accommodation of the maker of said note and the acceptor of said bills, respectively, and for the purpose of giving such maker and acceptors credit with the plaintiff, an d in pu r- su3ri£^^2f_jt n riijrf:fm''nt hf i tw « ^ e. n t h e defendant and the plaintiff Ji y whic h theplaintif F ac rreefl tn sell coal on credit to the acceptors of said Vii'llg 3nd to thf "irikCT of said note upon the defendant's guaranteein g iVio^rp^;! pf caiH rr,mparijps rpspprtfvply, and fhp plain tiff was induce d to "talcesaid accepted bills and said note, and each of them for such coal by reason of the indorsement of the said defendant and pursuant to said agreement that the defendant would be liable thereon to the plain- tiff in case the respective corporations primarily liable thereon should make default in payment thereof. The proceeds of said bills and note were remitted lo the defendant at the New York office of the plaintiff to provide funds to pay for coal and other current expenses. At the time when said note and bills respectively became due they were presented for payment at the place where they were respectively made payable, and payment duly demanded, which was refused, and there- upon each was duly protested for nonpayment, and notice thereof given to the plaintiff and to said defendant. Thereafter the plaintiff was com- pelled to take up said note and drafts and pay the amount due thereon, respectively, and became the owner and holder thereof and of each of them. This action is brought to compel the defendant to pay to the plaintiff the amount of said note and bills pursuant to his said agreement with the plaintiff when they were severally indorsed by him, and the facts Ch. 2) DRAWEE AND INDOBSEB 587 Upon which the plaintiif's claim is based are stated in the complaint. The defendant denies that he indorsed the note and bills for the ac- commodation of and as surety for the retail coal companies, respective- ly; but the Evidence is sufHcient to sustain the findings of the court from which the statements of fact in this opinion have been taken. As the facts are found, if the intention of the parties is to prevail, the de- fendant should be required to pay to the plaintiff the amount of such note and bills as established by the judgment. The defendant contends that the position of his name upon the note and bills conclusively es- tablishes that he indorsed the several instruments without liability to the plaintiff, and that parol evidence should not have been received to affect or overcome the alleged conclusive presumption arising from his indorsements as made. In the early decisions by the courts in this state there was some con- fusion relating to the liability of a person who indorsed a note or bill prior to its delivery. Labron v. Woram, 1 Hill, 91 ; Herrick v. Carman, 12 Johns. 159; Hall v. Newcomb, 3 Hill, 233, s. c. 7 Hill, 416, 42 Am. Dec. 82 ; Hahn' v. Hull, 2 Abb. Prac. 352. This court, in Moore v. Cross, 19 N. Y. 227, 75 Am. Dec. 326, referring to a case of a person who for the accommodation of a maker indorsed a note payable to a third person, say : "Some confusion has been thrown around this sub- ject from what has been finally settled to have been an error, treating such an indorsement as a guaranty and charging the indorser as a maker or guarantor. This doctrine was advanced in Herrick v. Car- man, 12 Johns. 160, and was adjudged in Nelson v. Du Bois, 13 Johns. 175, and Campbell v. Butler, 14 Johns. 349. It was attacked in Dean v. Hall, 17 Wend. 214, and in Seabury v. Hungerford, 2 Hill, 80, and was finally overthrown in Hall v. Newcomb, 3 Hill, 233, and the same case in error, 7 Hill, 416, 42 Am. Dec. 82. The Chancellor, in his opinion in the latter case, says: 'If the object of the second indorser was to enable the drawer to obtain money from the payee of the note upon the credit of the accommodation indorser, he may indorse it without recourse, and by such indorsement may either make it payable to the second indorser or to the bearer ; and such original payee may then, as legal holder and owner of the note, recover thereon against such second indorser, upon a declaration stating such special indorsement by him and subsequent indorsement of the note to him by the second in- dorser.' " The court further say : "If a note be made and indorsed for the accommodation of A., who indorses it to another person, and afterward in the course of trade again becomes the holder, he could maintain no action against the maker and indorser for his accommoda- tion, notwithstanding their apparent liability to him on the face of the paper. The fact of the accommodation making and indorsing might be proved to defeat the action, and it would establish that the agreement of the parties, contrary to the legal inference from the face of the paper, did not impose a liability on the maker and indorser to pay the party suing." 688 LIABILITY OP PARTIES (Part 3 There has always been conflict among the courts of the several states both in asserting the principles upon which irregular indorsers upon commercial paper are to be held and in the conclusion arrived at in particular cases litigated. The number of cases is so great, and the possibility of even a partial reconciliation of them so remote, that we will confine our citation of authorities wholly to those in this state. It was well settled in this state for many years prior to the enactment of the negotiable instruments law that a person who puts his name on the back of a bill or note before its delivery is presumably a second in- dorser and not liable to the payee, but the presumption could be rebutted by parol evidence to show that the intention of the indorser was to be- come surety for some prior party to the instrument." * * * The negotiable instruments law was first enacted in this state in 1897. Laws 1897, p. 734, c. 612. Section 113 of the said law provides : "A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity." The defendant was within this definition an indorser of each of said instruments. Section 114 of the said law provides: "Where a person, not otherwise a party to an instrument, places there- on his signature in blank before delivery, he is liable as indorser in ac- cordance with the following rules : ( 1) If the instrument is payable to the order of a third person, he is liable to the payee and to all sub- sequent parties. (2) If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties sub- sequent to the maker or drawer. (3) If he signs for the accommoda- tion of the payee, he is liable to all parties subsequent to the payee." By this section of said law the presumption as established by the courts in this state was changed, and an irregular indorser is now presumed to be liable in accordance with the express language of the statute. Questions relating to the sufficiency of the pleadings are settled by the statute. A complaint upon a note or bill, without alleging a collateral agreement between the parties whose names are on the instrument, seeking to recover against a person except as provided by the statute, would clearly be demurrable. The note of the Lenape Coal Company was -payable to the plaintiff, a third person, and the defendant, according to the provisions of said section 114, is liable to the plaintiff, the payee therein. No serious contention has been made to the contrary. The serious question for consideration arises from the fact that the bills were payable to the maker and drawer thereof, respectively, and the defendant, as an in- dorser thereon before delivery, is not under the statute prima facie lia- ble thereon to the plaintiff. Should parol evidence have been allowed to show the intent of the parties? We have not discovered any excep- tion to the rule as established by the courts of this state allowing parol 8 The authorities cited are omitted. Ch. 2) DRAWER AND IND0RSB3R 589 evidence as between the parties whose names appear on tlie bill or note to determine their liability as between themselves. It is frequently- stated that where a note is payable to a person other than the maker, and is indorsed by a third person before delivery, the intention of the indorser is ambiguous and uncertain on the face of the paper, and such uncertainty justifies the receipt of parol evidence to deter- mine the true intention of the parties. We do not see that any greater certainty exists upon the face of a bill as to the true intention of the parties, where it is drawn to bearer or to the order of the maker, and it is indorsed by a third person after acceptance by the acceptor and be- fore delivery to the payee and maker. There is a certain rule of pre- sumption determined by common law or by statute, but the alleged reason for the rule in either case is not very apparent. The long-estab- lished rule to allow parol evidence that the intention of the parties may prevail seems to have met with somewhat general approval, with- out discussing specifically the principles upon which such evidence is admitted. It is said by Daniel in his work on Negotiable Instruments (5th Ed., § 710) : "Whatever diversities of interpretation may be found in the authorities on the subject, they very generally concur, though not with entire unanimity, that as between the immediate parties the interpreta- tion ought to be in every case such as will carry their intention into effect, and that their intention may be made out by parol proof of the facts and circumstances which took place at the time of the transac- tion." Story on Promissory Notes, § 479. In Good v. Martin, 95 U. S. 90, 24 L. Ed. 341, the court say: "Considerable diversity of deci- sion,' it must be admitted, is found in the reported cases, where the record presents the case of a blank indorsement by a third party, made before the instrument is indorsed by the payee and before it is deliver- ed to take effect ; the question being whether the party is to be deemed an original promisor, guarantor, or indorser. Irreconcilable conflict exists in that regard; but there is one principle upon the subject al- most universally admitted by them all, and that is that the interpreta- tion of the contract oiight in every case to be such as will carry into effect the intention of the parties, and in most cases it is admitted that proof of facts and circumstances which took place at the time of the transaction are admissible to aid in the interpretation of the language employed. Denton v. Peters, L. R. 5 Q. B. 475. Facts and circum- stances attendant at the time the contract was made are competent evi- dence for the purpose of placing the court in the same situation and giving the court the same advantages for construing the contract which were possessed by the actors. Cavazos v. Trevino, 6 Wall. 773, 18 L- Ed. 813." It must constantly be borne in mind that the acceptance of a bill makes the acceptor the principal debtor. A bill, when accepted, be- comes similar to a promissory note; the acceptor being the promisor, and the drawer standing in the relation of an indorser. Daniel on 590 LIABILITY OF PARTIES (PaXt 3 Negotiable Instruments ( 5th Ed.) § 532. There is nothing in the nego- tiable instruments law to indicate an intention on the part of the Leg- islature to change the rule as established in this state relating to the re- ceipt of parol evidence to determine ' the primary liability as between the persons whose names appear upon the instrument or as between those secondarily liable thereon. By section 55 of the negotiable in- struments law it is provided : "An accommodation party is one who has signed the instrument as maker, drawer, acceptor or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of tak- ing the instrument knew him to be only an accommodation party." Parol evidence is necessary to determine whether a party to an instru- ment, including an indorser thereon, is an accommodation party, and also to determine which other party to the instrument he had accom- modated. The plaintiff was the holder of the note for value, and the evidence showed that the defendant was an accommodation indorser for the benefit of the acceptor. The last subdivision of section 114, as we have quoted, makes parol evidence necessary to establish whether the indorser signed the instrument for the accommodation of the payee. It is true that this section does not expressly state that, if the indorser signed for the accommodation of the acceptor, he is liable to all par- ties subsequent to the acceptor; but the fact that such a provision is not included in sectfon 114 does not prevent the admission of parol evidence to determine generally the questions relating to an accommo- dation party as provided by section 55. The negotiable instruments law by section 7 provides: "In any case not provided for in this act the rules of the law merchant shall govern." By section 118 of the nego- tiable instruments law it is provided: "As respects one another, in- dorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise.'' As we have seen, upon thfe acceptance of the bill the acceptor becomes the principal debtor and the one primar- ily liable to pay the amount of the bill, and all other parties to the in- strument, including the maker and indorser, are secondarily liable. We are of the opinion that the maker of the bill is in legal effect and within the intention of this section an indorser, and that as between the plain- tiff and the defendant parol evidence is authorized to determine the liability as between them. The articles of the negotiable instruments law relating to the pres- entation of bills and notes for payment and notice of dishonor (articles 7 and 8) further show an intention by the Legislature to leave the order of liability among those whose names are on the instrument subject to determination by any competent evidence. Section 130 provides: "Presentment for payment is not necessary in order to charge the per- son primarily liable on the instrument. * * * But except as herein otherwise provided, presentment for payment is necessary in order to Ch. 2) DRAWER AND INDORSBB 591 charge the drawer and indorsers." Section 139 provides: "Present- ment for payment is not required in order to charge the drawer where he has no right to expect or require that the drawee or acceptor will pay the instrument." Section 140 provides: "Presentment for pay- ment is not required in order to- charge an indprser where the instru- njent was made or accepted for his accommodation, and he has no rea- son to expect that the instrument will be paid if presented." Section 160 provides : "Except as herein otherwise provided, when a negotia- ble instrument has been dishonored by nonacceptance or nonpayment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is dis- charged." Section 186 provides : "Notice of dishonor is not required to be given to an indorser in either of the following cases: * * * (3) Where the instrument was made or accepted for his accommoda- tion." There is no reason that we can conceive why the Legislature should intend to change the rule in regard to the admission of parol evidence as it had existed in this state for many years. All of the quotations that we have made from the negotiable instruments law show that it has enlarged rather than restricted the rules allowing parol evidence to show the true liability and relation of the parties whose names ap- pear upon the bill or note in all actions between themselves. It is cer- tainly very material to the drawer of a bill whether an indorser signs ■ it at his request or at the request and for the benefit of the acceptor. We do not think it was the intention of the Legislature by the enact- ment of section 1 14 of the negotiable instruments law to establish a rule as to the liability of an irregular indorser conclusive on the parties to the instrument as between themselves in an action where the facts showing a different intention are fully alleged. All of the decisions of our courts since the enactment of the negotiable instruments law tend to sustain the views herein expressed. Corn v. Levy, 97 App. Div. 48, 89 N. Y. Supp. 658; Kohn v. Consolidated Butter & Egg Co., 30 Misc. Rep. 725, 63 N. Y. Supp. 265. In the case last mentioned McAdam, J., said: "Prior to the statute of 1897, supra, the allega- tion referred to was a necessary one in such cases, and, if denied, the onus of proving the allegation was on the plaintiff, for the payee was presumably the first indorser. Daniel's Neg. Inst. (4th Ed.) § 704; Wood's Byles' Bills, 151, note, and cases before cited. Since the stat- ute the legal presumption is changed where the complaint alleges that the irregular indorsers indorsed the paper 'before delivery' to the payee ; and when this fact is established the onus is cast upon such indorsers to allege and prove that, notwithstanding such delivery, the payee was to become first indorser according to the customary form of the con- tract, and that they did not indorse for the purpose of lending their credit to the maker or with the intention of becoming liable to the payee. That this is the proper interpretation of the act is obvious. The true intention of indorsers as between themselves can always be shown 592 LIABILITY OF PARTIES (Part 3 by oral evidence. Daniel's Neg. Inst., supra ; 4 Am. & Eng. Ency. of Law (2d Ed.) 492 et seq.; Guild v. Butler, 127 Mass. 386; Cady v. Shepard, 12 Wis. 639; Benjamin's Chambers' Bills (2d Am. Ed.) 250; Witherow v. Slayback, 158 N. Y. 649, 58 N. E. 681, 70 Am. St. Rep. 507. To go further, and decide that the statute intended to create an incontestable liability against irregular indorsers, would be to impute to the legislative wisdom a design repugnant to every notion of judicial procedure, especially in a provision enacted in the interest of law re- form." The judgment should be affirmed, with costs.^' ORTHWEIN V. NOLKER. (Supreme Court of Missouri, 1921. 234 S. W. 787.) Claim by Chas. C. Orthwein against W. H. Nolker, administrator of the estate of L,ouis T. Nolker, deceased. From a judgnient of the cir- cuit court disallowing the claim on appeal from the probate court, claimant appeals. Reversed and remanded. David E. Blair, J. This case originated in the probate court of the city of St. IvOuis as a demand against the estate of Louis T. Nolker, deceased. The claim was allowed in that court, and on appeal to the circuit court judgment was rendered in favor of the defendant dis- allowing said claim, and plaintiff has appealed. The claim is based on the following note : "$5,000.00. ' St. Louis, December 19, 1907. "One year after date I promise to pay to the order of Caroline Orth- wein five thousand no/100 dollars, for value received, negotiable and payable without defalcation or discount, with interest at the rate of six per cent, per annum from date. Payable at the office of William J. Orthwein, Gay Building. Peroxident Mfg. Co., • "Per Max R. Orthwein, Prest. "No. Due ." Indorsed : "LouisT^Nolker. "Max"Rr Orthwein and Chas. C. Orthwein, Executors of the Estate of Caroline Orthwein, Deceased." The principal of said note with accrued interest brings the amount of the demand within our jurisdiction. No part of the principal or any interest thereon has been paid. Appellant acquired title to said note by indorsement from the executors of the estate of Caroline Orthwein, deceased. 10 Accord: Bradley v. Louisville Food Products Co. (Md.) 114 Atl. 913 (1921). Contra: Steele v. McKinlay, 5 App. Cas. 754 (1880); Jenkins v. Coomber, [18980 2 Q. B. 168. Compare Glenie v. Smith, [1908] 1 K. B. 263. Ch.2) DRAWER AND INDORSER 593 Plaintiff offered and the trial courtexcludgd_oral evidenrp tending to show that Nolker was in fact maker^oTtheiiote ; that it was executed tp-re aew-a uuLe SJj^'ned by him as mak er. This testimony was excluded on lEe ^^flund-tbat the witnes S;_Max R. Orthwein wasjnconi petent to te stify because h ewas actin g as the ag enLxii-GareSie^^Q^^^daa, the payee, and becauseTCouis T. Nolker, the maker was dead. Because of the view we take of the competency of this sort of testimony general- ly, discussion here of the competency as a witness of the agent of one party to a contract when the other is dead is tmnecessary. That ques- tion will be considered later in the opinion in connection with the evi- dence offered tending to show waiver of notice of dishonor. The testimony of this witness as to the circumstances leading up to Nolker's signature on the note was properly excluded, not for the rea- son assigned, but because it is not permissible to show by parol evidence that Nolker signed the note in any capacity other than as indorser. Plai ntiff tried the rnsp nn tlip theory and endeavored to show that Nol- kerjsiasJar-fdLl iiukei uf ihe-notE Section luu^j, R. 3. 1909, cu««. ■-w-.w-- TTThat the demand was' not lawful, inasmuch as it was made on the streetr - The general rule of law is that the holder must use diligence to find the maker and demand payment of him ; and the inquiry will be whether, under the circumstances of the case, due diligence has been used. 3 Kent, Comm. 129. It is familiar law that when a promissory note payable generally, and not at a specified place, is seasonably demanded at the maker's known and settled place of business for the transaction of his moneyed concerns, it is sufficient to hold the indorser. And the same may be said of a like demand made at his place of residence. Neither does 8s The arguments of counsel and part of the opinion are omitted. / 656 LIABILITY OF PARTIES (Part 3 it make any difference whether the maker be personally present or temporarily absent at the time of the demand. In either case, the law has for many years been constant in declaring that the evidence af- forded by such a demand constitutes full proof of due diligence on the part of the holder. But in the case at bar the plaintiff went still further than thejtech- nical exactions of the law required. He was a resident of Monmouth. On the day the note became due he went to Winthrop village, where both the maker and the defendant resided, "for the purpose of col- lecting this note, or of taking the necessary steps to hold the indorser." On going to the store which had been occupied by the maker as his place of business, he found J^tjiad been closed and in the possession of an officer more than 30 days ; that the maker had failed in his iusi- ness, and that all his pVoperty was under attachment. Thereupon the plaintiff went to the maker's place of resi4ence, where he'was'jn- formed that the maker was not at the house, but had gone out on the street. Had he gone through the ceremony of demanding payment, of the note at the EouseT' while the rftaker was out on the street, the law would" pronounce the plaintiff's diligence ample. But, not finding the maker at home, the plaintiff trebled his diligence, sought and found him on the street in that country village, and then and there requested payment of the. maker personally, which was refused. It does not appear (as it would be likely to, if true) that any ob- jection to the place of demand was made by the maker. If he had had' funds witli which to pay, not with him, but at his house, he would at once have said so. If he had objected to the place, and requested the plaintiff to accompany him to his house, and receive the money due on the note, and the plaintiff had declined so reasonable a request, the legal aspect of this branch of the case might thereby have been materially changed. But no such facts exist. He simply refused payment, and, in all human probability, for the real, though to him, perhaps, unpleasant, reason that all his property was in the custody of the law, and he had in fact nothing wherewith he could pay. It would seem that such a demand would be more satisfactory to all concerned than a mere formal ceremony of a demand gone through at his place of residence during the maker's absence. And we have no hesitation in declaring the demand sufficient under the circum- stances, so far as the place is concerned, to charge the defendant. We are aware that Byles on Bills, 196, declares that a demand made on the street is not sufficient. Stich is the doctrine expressed, too, in the author's notes in Leading Cases on Bills, 327, 328. And there are several cases containing the dictum in general terms that a demand must be made either at the maker's place of business or place of resi- dence. But our attention has been called to no case, neither have we, after considerable research, been able to find any, wherein the court having the question before it decided adversely to a demand made on the street, under circumstances similar to those in this case. Ch. 2) DEAWHH AND INDOESHB 657 On the other hand, Judge Story, in discussing the law applicable to notes like this, uses the following language: "The general rule is that the presentment for payment may be made to the maker person- ally, or at his dwelling house or other place of abode, or at his counting house or place of business. It seems a presentment may always be made personally to the maker, wherever he may be found, although he may not be either at his domicile or at his place of business." And he cites quite a large number of cases, in a note, as authority. Story, Prom. Notes, § 235. In Edw. Bills (2d Ed.) 150, is found the follow- ing : "Being made payable at large, it is due at any and every place ; but, for the purpose of charging the indorser, it must be presented to the maker personally, or at his residence or place of busi;ness. If it be made payable at a particular place in the city, it is necessary to pre- sent the note there for payment, for the purpose of charging the in- dorser. But, even in this case, if a personal demand is made upon the maker, and no objection is made by him as to the place, it is sufficient." So in 3 Kent's Comm. 138: "Demand of payment must be made by the holder or his agent upon the acceptor at the place appointed for payment, or at his house or residence, or regular known place of his moneyed business, or upon him personally if ho particular place is ap- pointed." And again, on page 96: "If demand be made upon the maker elsewhere than the place appointed, and no objection be made at the time, it will be deemed a waiver of ^ any future demand." And Prof. Parsons says : "In general, a personal demand would be sufficient, if made at any place where the maker may reasonably be expected to be in condition to pay; and if made in any other place — such, for instance, as in the street — it would usually be good, unless objection were made to payment because the place was an improper one, or some similar reason were given for the refusal." 1 Pars. Notes & B. 421. And he uses somewhat similar language on page 372. The doctrine, as stated above by Judge Story, is approved in Taylor V. Snyder, 3 Denio (N. Y.) 145, 45 Am. Dec. 457, pubHshed as a lead- ing case in Leading Cases on Bills, 313, 316. Finally, our own court held that where a note signed by two, made payable at their dwelling houses, was demanded of them, together, at the barnyard of one of them, and no objection was made as to the place of the demand, the demand was sufficient. Baldwin v. Farns- worth, 10 Me. 414, 25 Am. Dec. 252. 2. But the- def,e^dant, further objecting to the sufficiency of the de- man4,,,says: -"As the payer has a right to require its dehvery up to him before he pays, and may insist that the holder produce it, the note should have been exhibited." It is true that the rule requiring' the person making the derriand to exhibit the evidence of debt is well settled, and well grounded in rea- son ; and, although applicable to all written contracts on which a de- mand is necessary, it is, as has been well said, especially applicable to negotiable securities, which may be legally transferred to another at Sm.&M.B.&N.(2d Ed.)— 42 658 LIABILITY OF PARTIES (Part 3 the very time the original payee makes the demand. But the reasons applicable to cases in which the maker offers to pay cannot apply to cases in which he not only does not offer, but absolutely refuses, to pay, and does not evdn express any desire to see the note. The idle ceremony of producing- the note when the maker unquali- fiedlyTe fuses to pay is well illustrated by Shaw, C. J., in Gilbert v. Den- nisr"3" Mete. "'(Mass.) 497, 38 Am. Dec. 329, where he says-: "Even under the law of tender, which is extremely strict, it is held that, where a party to whom a tender is to be made declares that he will not accept- it, ailir actual production and offer of the money is not necessary." The -case finds expressly that the maker had the note in his possession when" he made the demand. We think the objection cannot prevail. Arnold v. Dresser, 8 Allen, 435 ; Freeman v. Boynton, 7 Mass. 485 ; Etheridge v. Ladd, 44 Bark (N. Y.) 69. * * * Defendant de- faulted. GILPIN V. SAVAGE. (Court of Appeals of New York, 1911. 201 N. T. 167, 94 N. E. 656, 34 L. B. A. [N. S.] 417, Ann. Cas. 1912A, 861.) Action by Richard S. Gilpin against William M. Savage. From a judgment of the Appellate Division (132 App. Div. 948, 118 N. Y. Supp. 1108), affirming a judgment of the Trial Term, plaintiff appeals. Reversed. See, also, 138 App. Div. 416, 124 N. Y. Supp. 875. CuLLEN, C. J. The action is brought against the indorser of a prom- issory note, made payable at a particular place designated by street aiiHTnufilbei', wEich v^ras the residence of the maker. The only ^g^uestion in the case is whether the presentment .to „1;he maker was sufficient to charge the indorser. At the maturity of the note it was in the hands of the ColumbJa,JiIa.tiaiial Bank, which was located about two miles from the' maker's residence, in Buffalo. After some delays the cashier of the "bank succeeded in calling^ up the maker at his place of residence. He stated to him that the bank held the note, and 1;he further cojij^^rsa- tion between, the, parties we will assume to be sufficient to establish a demand for its payment and refusal or statement of inability on the part" of the maker to comply wTth' the demand. The cashier had the note in his possession when the demand was made, and the maker made no request to see it or for its production, but stated he would call at the bank, which he did a short time subsequently. What then trans- pired between the parties does not appear. By section 116 of the negotiable instruments law an indorser engages that on due presentment a note or bill will be paid, and that if it be dishonored, and if the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder; by section 130 present- ment for payment is necessary in order to charge the indorser ; by sec- Ch. 2) ? DRAWER AND INDORSBR 659 tion 132 presentment, to be sufficient, must be made at a proper place as defined in the act ; and by section 133 presentment is made at a prop- er place where a place of payment is specified in the instrument and it is there presented. These statutory provisions seem to be a mere re- enactment of the common law as it has hitherto obtained in this state, with the possible exception that they may have altered the rule that, where no possible damage could occur to the indorser by the failure to make proper presentment, he was not discharged by such failure, which exception, however, was of the most limited character; mere in- solvency of a party primarily liable on the instrument not being sufifi- cient to create it. Smithv. Miller, 52 N. Y. 545. It seems to us entirely clear that no„pr-oper4«:e5e»tm«itj)f the note was made.^„J'resefitjgjsat .of a .n.Qte ^nd -demand of payment ipust, be ma3e' tyactuai exhibition of the instrurpent itselfj or at least the de,- manT slioiiild.b£ accQoip^ijied .fey, someeJeaK J?J.4i«^J4ia5,itet-tte .instru- ment Ig^a^Jjand, ready to be delivered, and such must really be the case. iJaniel on Negotiable Instruments, § 654. While it may not be neces- sary to actually produce the note, if the maker refuses to pay it, it must be there at the place for presentment; otherwise, the present- ment is insufficient. Story on Promissory Notes, §' 243 ; Freeman v.. Boynton, 7 Mass. 483 ; Woodbridge v. Brigham, 13 Mass. 556. The reasoning of Chief Judge Ruger in the case of Parker v. Stroud, 98 N. Y, 379, 384, 50 Am. Rep. 685, clearly points out the reason for the rule. The action was against the indorser of a demand note, who p'.eaded the statute of limitations, relying upon a demand for payment made on the maker by mail. It was held the demand was insufficient to set the statute running. It was said : "A demand of payment at the place named is an essential part of the contract so far as the indorser is concerned, and no right of action accrues to the holder until 'after demand has been made in strict compliance with the terms of the con- tract and due notice given of the default.' * * * It is essential to the validily of a demand that it shall be made by a person authorized to receive payment and deliver the instrument upon which it is found- ed, and the person upon whom it is made must then be afforded an opportunity, by immediate payment or performance, to protect himself from the consequences of a breach of contract." So necessary is it that the demand be made at the place specified in the instrument, in order that the indorser may be charged, that the addition to a promissory note payable generally of words specifying a particular place of payment is held to be a material alteration of a contract, which of itself discharges the indorser. Woodworth v. President, etc.. Bank of America, 19 Johns. 391, 10 Am. Dec. 239. The counsel for the respondent seeks to sustain the judgment below on two propositions: First, that a demand over the telephone on the maker, at the place specified in the note,' is the same as a demand at that place by ordinary speech; second, that the possession of the note by 660 LIABILITY OF PAETIE!3 (Part S the cashier was sufficient to make the demand a proper one. The truth of the first proposition as a general rule may be conceded ; but the argu- ment ignores the fact that a_ valid presentment, as hitherto pointed out, consists of something more than mere demand. It requires personal attendance at the place of demand with the note, in readiness to exhibit it if required, and to receive payment and surrender it if the dettor is 'willing to pay. The counsel cites several cases in which it is said that the possession of the instrument by the person making the demand is sufficient, although it is not actually exhibited. These statements were entirely accurate when made, before the general use of the telephone. When demand is made by ordinary human vocal power, unaided by me- chanical device, it is plain that the person making the demand is neces- sarily present at the place at which the demand is made, and if the in- strument is in his possession the presence of the instrument is equally clear. The statement, if now inaccurate, is so by the use of the tele- phone. If the theory on which the decisions of the courts below have proceeded is to prevail, it is difficult to see why a valid presentment of a note payable in Buffalo might not be made over the telephone from New York ; or, if that is to be deemed too great a distance, where shalT the line between a sufficient and insufficient demand and presentment be drawn? Will a demand for payment of an instrument payable in BuHafo be good if made at Batavia, and bad if made at Rochester? The judgment appealed from should be reversed, and new trial or- dered ; costs to abide the event. COLUMBIA-KNICKERBOCKER TRUST CO. v. MILLER. (Court of Appeals of New York, 1915. 213 N. T. 191, 109 N. B. 179, Ann. Cas. 191TA, 348.) Action by the Columbia-Knickerbocker Trust Company against An- drew Miller. From a judgment of tlie Appellate Division (156 App. Div. 810, 142 N. Y. Supp. 440) affirming judgment for plaintiff, de- fendant appeals. Affirmed. Miller, J. This is an action upon a check drawn on the 17th day of January, 1910, upon the National City Bank of New York by La- throp, Haskins & Co., to the order of the defendant, and by him in- dorsed and deposited about noon the next day in his regular account with the plaintiff trust company, which on that day indorsed and trans- ferred the check to the National Bank of Commerce, a member of the New York Clearing House Association. At about 10 o'clock on the morning of the 19th the check, in a bundle with other items, was de- livered at the Clearing House to the messenger of the City Bank, and was by him delivered unopened at about 10:30 at the latter's banking house. At about noon on that day, and before the City Bank had had Ch. 2) DRAWER AND INDOESER 661 an opportunity to check up the items received through the Clearing House, verify signatures, and the Hke, it received a letter from the drawers of the check stating: "We regret to state that we are forced to suspend. Assignee will be named later." Thereupon it affixed to the check a memorandum reading : Returned to 23 by the National City Bank of New York, assigned." "23" is the Clearing House num- ber of the National Bank of Commerce, to which the check, with the memorandum attached, was delivered before 3 o'clock, and the refund made by the National Bank of Commerce to offset the credit given to it at the Clearing House for the check reached the City Bank before 3 o'clock. Thereupon the plaintiff was required to pay the check, and notice was given to charge the indorser. The constitution of the Clearing House Association, article 10, sec- tion 6, provides in part as follows : "All checks, drafts, notes or other items in the exchanges, returned as 'not good' or missent, shall be re- turned the same day directly to the member from whom they were re- ceived, and the said member shall immediately refund to the member returning the same the amount which it had received through the Clear- ing House for the said checks, drafts, notes or other items so returned, to it, in lawful money or in Clearing House certificates." Rule 1 provides: "Return of checks, drafts, etc., for informality, not good, missent, guarantee, of indorsement, or for any other cause, should be made before 3 o'clock of the same day." The constitution also provides that between the hours of 12:30 and 1 p, m. the debtor members shall pay to the manager at the Clearing House the balances against them and at 1 :30 o'clock p. m. the manager shall pay the creditor members "the balances due them respectively. The system adopted by the Clearing House Association to facilitate ex- changes and adjust accounts between its members, as shown by the record in this case, is well explained in the opinion of Judge Cullen in Mt. Morris Bank v. Twenty-Third Ward Bank, 172 N. Y. 244, 64 N. E. 810. There was no evidence to show whether the account of the drawers of the check at the City Bank was at the time of their sus- pension good for the amount of the check. The appellant contends that the check was paid, and that, if it was not paid, it was not duly present- ed for payment. Doubtless, the adjustment of balances by the Clearing House con- stitutes a sort of tentative or provisional payment, but that adjustment occurs without an opportunity to the members to examine the items, verify signatures, compare the amounts with the drawers' accounts, and the like, and regardless of whether the checks are good. The con- stitution of the association contemplates that the members will directly adjust between themselves claims arising from the return of checks. It thus appears that the question of payment is not, and cannot be, ulti- mately decided until the bank upon which the check is drawn has had an opportunity at its banking house to examine the checks. The time 662 LIABILITY OF PARTIES (Part 3 taken to do that may be estimated from the fact that the face total of the checks sent by the Bank of Commerce to the Clearing House on the morning of January 19, 1910, was $69,645,514.55, and tliat the face total of checks sent by the City Bank on that morning was $61,141,008.- 29. In truth, the City Bank refused to pay the check. Its refusal was acceded to by the National Bank of Commerce, which refunded the amount of the credit it had received for the check at the Clearing House. As between the immediate parties to the transaction then there was plainly no payment, but, although claiming not to be bound by the constitution and rules of the Clearing House Association, the appel- lant contends that payment resulted perforce of them. That argument is based on the construction given to section 6 of article 10, above quoted, to the effect tliat only checks "not good or missent" may be returned, and it is claimed that that provision of the constitution could not be modified by a rule which contemplates the return of checks for any cause. It is urged from those premises that the adjustment of ac- counts at the Clearing House constituted payment unless the check was, in fact, "not good," and that the burden was upon the plaintiff to show that fact, if it were the fact. We do not consider it necessary to construe the constitution and rules of the Clearing House Association, which is a mere agency adopt- ed by its members to facilitate exchanges and the adjustment of ac- counts as between themselves. We agree with the contention of the defendant that he was not bound by rules of the association to which he did not belong. Neither could he claim the benefit of them. See Merchants' National Bank v. National Bank of the Commonwealth, 139 Mass. 513, 2 N. E. 89. Concededly, the adjustment of the accounts at the Clearing House is, at most, tentative and provisional, and sub- ject to an examination by each member of the checks drawn upon it. Whether the City Bank had the right, under the rules of the associa- tion, as between it and the National Bank of Commerce, its comember, to return the check, is of no consequence. So far as the payee was concerned, it could refuse payment for any reason or no reason. It did, in fact, refuse payment, and its refusal was acceded to. It was of no concern to the defendant, an outsider, whether the rules of the association were violated or not. He was concerned only with the ac- tual fact, and could neither be prejudiced by, nor gain an advantage from, the constitution and rules of the association. It may be assumed that the banking house of the City Bank was the proper place of presentment. Section 133 of the Negotiable Instru- ments Law. The check was, in fact, presented at that place through the Clearing House. Although the point does not appear to have been expressly ruled upon in this state, it has been assumed in many cases that presentment through the Clearing House is sufficient. Turner v. Bank of Fox Lake, 4 Abb. Dec. 434; Johnson v. Bank of North Ameri- ca, 28 N. Y. Super. Ct. 554, 594; Burkhalter v. Second National Bank Ch. 2) DRAWER AND INDORSEE 663 of Erie, 42 N. Y. 538; Citizens' Central National Bank v. New Am- sterdam National Bank, 128 App. Div. 554, 112 N. Y. Supp. 973, af- firmed 198 N. Y. 520, 92 N. E. IQSO. It is important to observe the distinction between presentment through the Clearing House and pre- sentment at the Clearing House. The law undoubtedly contemplates that presentment shall be made by a person authorized to receive pay- ment (see section 132 of the Negotiable Instruments Law), but in this case presentment was made by the holder, the National Bank of Com- merce, through the agency of the Clearin^g House. The checfe actually reached the banking house of the City Bank in time. Under the arrange- ment existing between the members of the Clearing House Association payment was to be made, not in currency, but by an exchange of cred- its at the Clearing House. The tentative or provisional payment throu^ the usual exchange of credits was to stand if upon examining the check after it reached its banking house the bank upon which it was drawn concluded to pay it. If it reached that conclusion, nothing more remained to be done, and the tentative or provisional payment became final. That arrangement obviated the necessity of having some one stand at the counter of the City Bank to receive payment, and in practical effect answered the, same purpose. We ^gree with the learned counsel for the appellant that it is not competent for the Clearing House Association to change the rules of the law merchant, but we have been unable to discover wherein an attempt has been made to do that. It is quite possible to give effect to the constitution and rules of the association in so far as concerns transactions between members themselves without in any way affecting the rights of out- siders. To hold otherwise would make it difficult, if not practically impossible, to effect exchanges in a great financial center. It is unnecessary to consider whether the evidence relating to the second presentment at the counter of the City' Bank presented a ques- tion of fact. The judgment should be affirmed, with costs. In re POOLE. (Supreme Judicial Court of Massachusetts, Plymouth, 1917. 227 Mass. 29, 116 N. a 227.) Action against Alva P. Poole. There was a finding for plaintiff, and defendant brings exceptions and files a petition to establish the ex- ceptions. Petition for establishment of exceptions allowed, and excep- tions sustained.' ° ' RuGG, C.J. * * * The action is by the holder against the in- dorser to recover the face of a promissory note given on time. One » « Part of the opinion is omitted, 664 LIABILITY OF PARTIES (Part 3 of the requests of the defendant thus denied was that "there was no presentment tor payment on the proper day either at the residence or placeof business of the maker of the note." In order to recover of the indorser it was necessary for the plaintiffs to prove that demand of payment was made upon the maker on the day of maturity of the note. It is not contended that the case is within the exceptions mentioned in R. L., c. 71, § 132. Neither the place of payment nor address of maker were stated in the note. Therefore, by R. L,. c. 73, § 90, subd. 3, it would have been enough if the instrument had been "presented at the usual place of business or residence" of the maker. The substance of the evidence on this point was that, on the day of the maturity of the note, the plaintiffs went after dinner to the front door and then to an- other door Of the residence of the maker, knocked and received no_^an- swer, and tried both doors, but could not open them; they did not go to the back door of the house, nor to the maker's place of business, which was nearby on the other side of the street, nor to any other build- ing ; that they did not see the maker ; that, after trying the two doors, they came round the comer of the house and they sdw a man standing in a stable door; that the distance between the house and stable was about four hundred, feet, an open field lying between. The manT and the plaintiffs walked toward each other and they met "in the midst of an open field." Demand was made on this man. ' This was noiietnand upon -tire-maker* of the note. There is nothing to show that the stable belonged to the maker or was TiS'ed' in connection with her reside_nce or her place of business. For aught that appears, it might have be- longed to another person and been used in connection with another estate. The same is true of the open field where the conversation took place. The demand was not made either at the residence or £lace of business of the maker. The circumstance that confessedly the place of business of the maker, which was across the street, was not visited for the purpose of making demand, is significant. The maker lived about three and a half miles from the holders, in a place called West- dale in the town of East Bridgewater. This evidence does not show due diligence in making a demand. Porter v. Judson, 1 Gray, 175 ; Demond v. Bumham, 133 Mass. 339. It fails also to show demand up- on the maker in person or upon his authorized agent, or upon any per- son found at a place where presentment ought to have been made. See Granite Bank v. Ayers, 16 Pick. 392, 28 Am. Dec. 253, Bank of United States V. Corcoran, 2 Pet. 121, 7 L. Ed. 368, and Adams v. Wright, 14 Wis. 408. The case is not aided on this point by the further evidence that, be- fore the date of the note, which was six months before the attempted demand, "this man had been a great many times" to the store of the plaintiffs "to buy provisions for the Davidsons" (one of whom was the maker of the note) but the plaintiffs did not know his name and made no effort to procure his attendance as a witness at the trial. An agency Ch. 2) DBA WEE AND INDOESBK 665 to buy provisions more than six months earlier had no tendency to show agency for receiving demand of payment on a promissory note at the time in question at a place not shown to be either the residence or place of business of the maker. Evidence was admitted against the exception of the defendant to the effect that the plaintiffs asked the man who came from the stable about the Davidsons and he answered that Mr. and Mrs. Davidson had gone to Boston and would be back, he thought, about 6 o'clock, and that he "was in charge." This evidence doubtless was admitted to show that the maker of the note was "absent or inaccessible" within R. L. c. 73, § 89, subd. 4. But it was not competent for this purpose. The man's bald assertion made out of court and in the maker's absence that he was acting as agent for the maker, ought not to have been received. Haney v. Donnellyj 12 Gray, 361. That being out of the case, there was nothing to show that he had any relation to the maker. While his own testimony, if called as a witness, might have been competent to show where the maker was, the repetition in court of what he said was the merest hearsay. It cannot be said that these errors of law did the defendant no harm. For aught that appears, the judge may have found that there was a sufficient demand, since he denied a request for the second ruling, which was a correct statement of the law. It is not necessary to determine whether the evidence of a promise to pay made by the defendant after the due day of the note (Glidden v. Chamberlain, 167 Mass. 486, 494, 46 N. E. 103, 57 Am. St. Rep. 479) showed that the promise was made under such circumstances of knowl- edge of the material facts as to justify a finding of waiver of demand (Parks v. Smith, 155 Mass. 26, 33, 28 N. E. 1044). No finding was made upon this point and the evidence may not be the same at another trial. The other questions argued need not be considered. Petition for establishment of exceptions allowed. Exceptions sustained. ^ SECTION 4.— PROTEST COMMERCIAL BANK OF KENTUCKY v. WILLIAM H. BARKSDALE & CO. (Supreme Court of Missouri, 1865. 36 Mo. 563.) This was a §jiit instituted March 13, 1861, on a bill^^ exchange, dated at St. Louis, Mo., September 4, 1860, made by William H. Barks- dale & Co., in favor of John F. Darby (acceptance waived), on the Park Bank, New York City, for $10,000 at four months, indorsed by Darby. The petition averred due protest and notice ; also that William 666 LIABILITY OF PARTIES (Part 3 H. Barksdale & Co. had no funds at the Park Bank, and that Darby knew this at and before the maturity of said bill. Defendants, William H. Barksdale & Co., denied that the bill was duly prSscnted at maturity, to the Park Bank for payment, or that such payiTient was refused, or that the billwa§^_dul^juatested for noripay" ment, or that defendantsria3~anyaue or legal notice of any such facts. "The case was tried before the court, sitting as a jury, on the 24th January, 1863, and judgment was given for the defendants. By the bill of exceptions, It * * * appeared that the bill was protested on the 5th January, 1861; that payment was demanded by Tiirney, a notary; that the protest was by .Varnum, notary public, and that after the Gommencement oif this suit Turney made out a notarial act of protest, dating.it back to January 5, 1861 ; * * * th at Turney and Varnum jvere_£artners. The court^}-,^;ise.d.,tlie, fo]lowiag,ifl§tiiic- tiori which was requested by. the, plaintiff : "(9) It is not necessary to the validity -of a certificate of protest that it be 3rawn"up on the day of demand and refusal of payment, nor is it necessary that such cer- tificate, or a copy thereof, should be sent with the notice. It_ may be dravvn up when called for, or at any time before trial, provided the bill was properly. presented for payment by a notary public at the. re- quest of the holder, and payment demanded and refused, and a proper notice of the protest is given and in due time." The cgurt_g;ave_the folJowijJg, instructions at the request of the de- fendants: "(3) Tomake a, valid presentment by a notary, it is nec- essary that such notary make a personal presentment and demand ; Aod a protest of ,aj)ill by a notary who did not make such, presentQient and demand is insufficient to hold the indorser." °' Holmes, J., delivered the opinion of the court. The decision .of the case turns mainly upon the validity of ibft pro- test. The bill is to be considered as a foreign bill. St. Bills, §§ 22, 23. In cases of foreign bills of exchange, the rule is too well settled to admit of question that there must be a protest of the bill by a notary public, in all places where such officer is at hand. Sto. Bills, § 276. The notarial protest is evidence of presentment, demand, and refusal to pay the bill, at the time and in the manner therein stated. This rule of the law merchant is recognized by statute in this state (Rev. St. 1855, p. 298, § 20); and so essential is the production of a protest in all cases of foreign bills that this evidence of presentment, demand and refusal cannot be dispensed with, nor supplied by other evidence of the same facts, as may be done in cases of inland bills. Sto. Bills, § 276. It is equally well established that the presentment and demand must be made in person by the same notary who protests the bill. It cannot be done by a clerk, nor by any other person as his 87 The statement of the case Is abridged, and part of the opinion omitted. Ch. 2) DRAWEE AND INDOESBR 6G7 agent, though he be also a notary. The protest is to be evidence of t he facts jt atedjii it, of which the notary is supposed to have personal k^all^fee, and- credit, is given, to his official statements by the com- mercial world on the faith of his public and official character. "EETcourT,' the Instrument speaks as a witness. Such statements made merely upon the information of another person would amount to hear- say only, if the notary were himself upon the stand as a witness. The notarial protest must state facts known to the person who makes it, and he cannot delegate his official character or his functions to another. Edw. on B. 466; Leftley v. Mills, 4 T. R. 174; Carmichael v. Bank of Penn., 4 How. (Miss.) 567, 35 Am. Dec. 408; Sacrider v. Brown, .3 McLean, 481, Fed. Cas. No. .12,305 ; Onondaga Co. Bank v. Bates, 3 Hill (N. Y.) 53; Chenowith v. Chamberlin, 6 B. Mon. (Ky.) 60, 43 Am. Dec. 145. The presentment and protest are governed by the law of the place where the bill is payable, and on this principle, it has been held that where the statute law of the state (as in Louisiana) authorizes notaries to appoint deputies, a protest made by such deputy, duly ap- pointed, would be recognized as sufficient. • Carter v. Bank, 7 Humph. (Tenn.) 548, 46 Am. Dec. 89. But no case seems to have gone far- ther than this: Such deputy may be considered as having a semi- official character, and sufficient authority by force of the statute ; but without some change in the general rule of law, one notary can neither delegate his functions nor impart his own official character to another. Herej^wQjpota,ries were in partnership in general business, and one of them undertook to present the bill and make the demand, and the other to dfa^'up the protest and give the notice. They were both notaries, but as such they were distinct public officers, and there can be no part- nership in such matters. No law or custom was proved to have existed in the state or city of New York which changes the general rule of the law merchant on this subject.**' Itmust follow that the protest made by Varnum can have no validity ; nor will that made by Turney ariy'more avail. It seems to be clearly established by the general cur- r^flf'Sf authority that the protest must be made on the same day with 88 "In the absence of any established rule of law In this state, by decision of the court or by any statute, requiring a demand to be made by the notary In person, it is not perceived why a usage such as was approved was not ad- missible as proof upon the subject. • • • "The practice in England is to present and demand by a clerk of the notary, and we are not referred to an English authority holding such presentment Illegal where the usage so to present was established. "Chitty on Bills, in his last edition (10th Eng. Ed. 355, note 4). sustains this usage, and says it Is not questioned in any English case, and 'is amply justified by the law of principal and agent.' I take this from 1 Par. on Bills, 360, as this edition of Chitty is not accessible to me. This is said after cor- respondence upon and examination and discussion of the subject, and is free from the doubt in other editions, based chiefly upon a doctrine of Mr. Justice Buller, In Leftley v. Mills, 4 T. R. 175, an action on an inland bill. "In Brookes' Notary of England (3d Ed.) 71, published In 1867, It Is stated: 'Before the protest is made it is the custom in England to cause the bill to be presented either by a notary or by his clerk (in general his clerk presents it), and acceptance tolDe demanded.' As to the admission of usage, see Nelson 668 LIABILITY OF PARTIES (Part 3 the presentment and demand, though a noting of the protest on the bill itself may be regarded as an incipient protest, or preliminary step towards a, protest, which may be completed afterwards, at any time, by drawing up the protest in form. Here there was no noting of the bill for protest, nor any memorandum marked on the bill, by Turney ; nor is there any proof of any distinct note, entry, or memorandum of pro- test, made by him on that day, in any other way than upon the bill itself. It would appear that he did not make the demand for the pur- pose of protesting the bill himself, but as the agent of his partner, the other notary. He neither protested the bill, nor noted it for protest, at the time; and his drawing up of the protest, long afterwards, must be regarded as having no basis of contemporaneous fact or present authority, and as being entirely void. Byles, Bills, 301-203 ; Sto. Bills, § 283 ; Leftley v. Mills, 4 T. R. 174. ♦ * * Judgment affirmed. SECTION 5.— NOTICE OF DISHONOR SMITH V. MULLETT. (Nisi Prius, 1809. 2 Camp. 208.) Action against the indorser of a bill of exchange drawn bj^ one Mills, payable to his own order, and indorsed by him^to the defendant, by the defendant to one Hefford, by Hefford to one Aylett, by Aylett to the plaintiff, and by the plaintiff to one Lowe. ~-«~.~,. The bill became due on Saturday, May 19th, when it was in Lowe's hands. He and all the parties to it reside in the metropolis. On Mon- day, the 20th, Lowe gave notice to the plaintiff that the bill had fceen dishonored,. On Tuesday aiterAopn, a few minutes past .5, the plain- tiff's clerk put a letter into the two-penny post office, giving notice to Aylett. This letter having been put in so late, according to the course o~f the two-penny post, was not delivered out till Wednesday morning. On Wednesday Aylett gave notice to Hefford, and Hefford to the defendant. The question was, whether the defendant had received due notice of the dishorlo'f of the bill.^* V. Fotterall, 7 Leigh (Va.) 179 ; Miltenberger v. Spaulding, 33 Mo. 421 ; Com- mercial Bank of Kentucky v. Barksdale, 36 Mo. 573. "It is said that this usage was not known to the plaintiff, and hence could not be obligatory upon it. "A knowledge by plaintiff of this usage was not necessary to its v.ilidity." Commercial Bank of Kentucky v. Varniira, 49 N. Y. 269, 276-277 (1872). See Aiusinck v. Rogers, ISO N. Y. 2.:,2, 82 N. B. 134, 12 L. E. A. (N. S.) 875, 121 .Vm. St. Rep. 858 (1907). 3" The arguments of counsel are orditted. Ch. 2) DRAWEE AND INfiORSER 669 Lord Eli,b;nborough. It is of great importance that there should be an established rule upon this subject, and I think there can be none more convenient than that" where the parties reside in London, each party should have a day to give" notice. I have before said, the holder ai tt hilt Of excfiahge Is not, omissis omnibus aliis negotiis, to devote himself to giving notice of its dishonor. It is enough if this be done with reasonable expedition. If you limit a man to the fractional part of a day^it w'lir'come to a question how swiftly the notice can be con- veyed. A man and horse must be employed, and you will have a race against time. Hut-here a day has .been Ipst. The plaintiff had notice himselfon_t[i£jitIanday, and does not giye .noiicelo his indorser till the'"'Wec!nesda;^ If a party has an entire day, he must send off his let- tSFTomreying;_the. notice, within post time of that day. The plaintiff onTjrWfote^ the letter to Aylett on the Tuesday. It might as well have continued^in-feis--WTiti'ng desk on the Tu,esday night, as lie at the post office. He has clearly been guilty of laches, by which the defendant is g iscEarged. -plamtiff .nonsuited.*' BURBRIDGE v. MANNERS. (Nisi Prius, 1812. S Camp. 193.) See post, p. 730, for a report of the case. BRAY et al. v. HADWEN. (Court of King's Bench, 1816. 5 Maule & S. 68.) At the trial of this cause before Graham, B., at the last Devon as- sizes, the action being by the plaintiffs as indorsees against the defend- ant as indorser of a bill of exchange, the question was, i£^sufficient no- tice"of the dishonor of the bill had been given to the, defendant. The bill was^payable at a banker's in London, and became due on the 14th of July, 1814, and was presented on that day about 12 o'clock, and dishT3T16red. The bill was returned with notice of its dishonor by the posf^"tTie 15th to Glyn & Co., bankers at Launceston, with whom the plaintiffs had deposited the. bill as their bankers. The letter reached Launceston on Sunday morning, the 17th. And qn Monday, the 18th, Glyn & Co. sent notice by the post to the plaintiffs at Tavistock, where they resided, and the plaintiffs afterwards forwarded notice to another indorser, who gave notice to the defendant. The post from London to Launceston arrives at Launceston at 8 o'clock in the morning, and letters are delivered in about half an hour, and the post from Launces- *o Accord: Siegel f. Dubinsky, 56 Misc. Rep. 681. 107 N. Y. Supp. 678 (1907). 670 LIABILITY OF PARTIES (Part 3 ton to Tavistock leaves Launceston at 13 at noon, allowing an interval of about four hours. The letter which the bankers at Launceston put into the post on the Monday, to the plainliffs at Tavistock, was not put in until after 12 o'clock, after the departure of the post, in conse- quence o? which it did not go from Launceston till the next post, nor reach Tavistock before the morning of the 20th; whereas, if it had been sent to the post before 12 o'clock on the Monday it would have reached Tavistock on the morning of the 19th. And the question was whether the Launceston bankers„.should not have apprised the plain- tiffs Fy the earliest possible pp.st, that is, by sending the letter to the post on Monday before 12 o'clock, or whether they had the whole of Monday to do it. There was also another question, whether the plain- tiffs should not have given notice immediately to the defendant, in- stead of giving it to another indorser, and through the medlum'bf that indorser to the defendant. The learned judge ruled in favor of the plaintiffs upon both points, and there was a verdict for the plaintiffs. Lens, SerjL, moved for a new trial/* Lord EivLENBOROUGH, C. J. It has been laid down, I believe, since the case of Darbyshire v. Parker, 6 East, 3, as a rule of practice, that each party, into whose hands a dishonored bill i^ay pass, should _be allowed one entire day for the purpose of giving notice. See Scott v. Lifford, 9 East, 347, and Langdale v. Trimmer, 15 East, 291. A dif- ferent rule would subject every party to the inconvenience of giving an account of all his other engagements, in order to prove that he could not reasonably be expected to send notice by the same day's post which brought it. This rule is, I believe, in conformity with what Marius states upon the subject of notice, and it has been uniformly acted up- on at Guildhall, by this Court, for some time. It has, moreover, this advantage : That it excludes all discussion as to the particular occu- pations of the party on the day. As to the objection .that notice was not given by the holders immediately to the defendant, it was given by one who was an indorser, and not by a stranger, which is enotigh to satisfy the- artlegation that the defendant had notice. Rule refused. ••1 The arguments of counsel are omitted. Ch. 2) DRAWER AND INDORSEE 671 HARRIS V. BAKER. (Supreme Judicial Court of Massachusetts, Suffolk, 1917. 226 Mass. 113, 115 I N. B. 292.) Action by Samuel C. Harris against Emma E. Baker. There was a finding for defendant, and plaintiff excepts. Exceptions overruled. RuGG, C. J. The single question presented by this record is whether seasonable notice of nonpayment was given to the defendant to hold her-asan* ihdbrser upon a promissory note. The facts are that the note was "aeposited ly the plaintiff, wlao was holder for value, with the LTbtfrcyThist Company for collection, and was duly protested for non- payment onTriday, October 1, 1915. Notice wiB^senl tothe plaintiff, together with another notice addressed to the defendant. These no- tices were received by the plaintiff on Saturday, October 2. The ^otice addressed to the defendant at her residence in Somerville was mailed at Bo stonrpostage prepaid, on Monday, October 4, and was postmarked at~S:30 p. m. There was no other evidence as to the time on Monday when it was deposited in the mail. It was receiyeiby the.defendant on October 5. There were twelve mails daily between Boston and Somer- ville, but only four deliveries daily in Somerville. There was no evi- dence as to the time when these mails were scheduled to leave Boston. The court fcMnd for the defendant, ruling that the notice did not constitute^ compliance with the statute, and denying requests of the plaintiff to the effect that the defendant was liable, The governing provisions of the Negotiable Instruments Act are R. L. c. 73, §§ -124 and 121. No controversy is made except as to the seasonableness of the notice sent by the plaintiff to the defendant. As that notice to the defendant was sent by mail and on the right day, the precise question is whether it was deposited in the post office "in time to go by mail" on that day within the meaning of those words in the act. The plaintiff might prove that he deposited- the letter in the post office in time to go by mail either by showing the time of deposit in the ptrsf office and the regular and ordinary time of departure of mails or by~showing that in fact it did go by mail. The evidence did not re- qtlTre a fihding of either of these facts in favor of the plaintiff as mat- ter of law. The only evidence offered as to the time when the letter was deposited in the" post" office was the hour of the postmark. There was~no"evidence that a letter postmarked in Boston at 8:30 p. m. on Monday, October 4, was forwarded to Somerville on that day or that after that hour a regular mail left for Somerville on that day. It well may be that it did not leave Boston until the following morning. At all events, there was no evidence requiring a finding that it djd in truth "go by mail" on that day. The words "go by mail" mean, we think, an actual'"departure'in the course of mail from the post office in which the notice was deposited in case there is a mail departing from that post 672 LIABILITY OF PARTIES' (Part 3 office toward the destination of the notice at "a convenient hour" on that day. Manifestly, with twelve mails daily from Boston to Somer- ville, being adjoining cities,~some of them must have departed at a convenient hour during the busThess day of October 4. The finding was not required that any regular mail departed from Boston for Somerville after 8:30 p. m. It is not as matter of law necessarily a compliance with the statute when under these circumstances the notice was mailed so late in that day as to render it extremely doubtful wheth- er it left Boston until the following morning. That it remained in Bos- ton over that night was an hypothesis on the evidence quite as probable as that it left Boston on October 4. It could not be ruled as matter of law that the plaintiff sustained the burden required by the statute and resting on him to show that the letter containing the notice to the de- fendant was "deposited in the post office in time to go by mail" on the required day. This conclusion is in accord with First Nat. Bank v. Miller, 139 Wis. 126, 120 N. W. 820, 131 Am. St. Rep. 1040, and with the reasoning of Farmers' Nat. Bank v. Howard, 71 W. Va. 57, 76 S. E. 122. Apart from the Negotiable Instrument Act the same result would be neces- sary. Haskell v. Boardman, 8 Allen, 38. See Mackintosh v. Gibbs, 81 N. J. Law, 577, 582, 80 Atl. 554, Ann. Cas. 1912D, 163. Exceptions overruled. HEWITT V. THOMSON. (Court of Exchequer, 1S36. 1 Moody & R. 543.) Assumpsit against the drawer of a bill of exchange. The bill was dated, "3 Wilton Street, 30 November, 1835," and pur- ported to be drawn by "Chas. Thomson," and to have been accepted by one John Johnson, payable to the drawer's order, by him indorsed to I. R. Nicolls, who indorsed it to the plaintiff. Plea, that the defendant had not notice of the dishonor, and issue thereon. It appeared in evidence that when the bill was returned unpaid to the plaintiff as indorser, on the 7th March, 1836, his attorneys wrote a letter containing notice of the dishonor, and put the same into the twopenny post ; but, misreading the drawer's surname for "Thorn- ton," instead of "Thomson," they directed their letter "to C. Thorn- ton, Esq., No. 3 Wilton Street." The defendant had ceased to reside at that place before the bill became due, and the letter was returned to the attorneys of the plaintiff on the 10th of March, from the Dead Let- ter Office, with an intimation that no such person as Mr. Thornton was known at No. 3 Wilton street, whereupon the attorneys on the same day, having made inquiries who the defendant was, and having ascertained his present residence, addressed a notice to him in his right name at that residence. The postman who had the delivery of letters Ch. 2) DRAWEE AND INDORSEB 673 in Wilton street on the 7th was called and said that, being informed there was no such person as Mr. Thornton living at No. 3, he returned the letter to the head office, without making any further inquiry. It was contended for the defendant that no notice of dishonor had been given to him until the 10th of March, which was clearly too late. Parke, B., told the jury, that it was clear the defendant had not re- ceived notice within the time limited by the ordinary rule, and that it was fit they should watch very closely any evidence adduced for the purpose of taking any particular case out of that rule. The notice ought to have been given on the 7th. In fact it did not reach the de- fendant until the 10th; and the question for the jury was whether sending the letter on the 7th to the residence occupied by the defend- ant when the bill was drawn by him, and with the error that had been proved to exist in the defendant's name upon the address of the letter, was a sufficient notice? They would look at the bill, and examine the defendant's signature thereto, and then say whether the mistake in the address was attributable to the want of proper care on the part of the plaintiff or his attorneys, or whether it might more reasonably be said to result from the defendant's own manner of writing his name in the bill. If they were of the latter opinion, their verdict would be for the plaintiff. Verdict for the plaintiff." HARRISON v. RUSCOE. (Court of Exchequer, 1846. 15 Mees. & W. 231.) Assumpsit on a bill of exchange for iSlO. 10s., dated 21st Decem- ber, 1823, drawn by the defendant on, and accepted by, Daniel Ruscoe, payable to the order of the defendant in London four months after date, indorsed by the defendant to W. H. Vaughan, and by him to the plaintiff. Plea, that the defendant had not due notice of the non- payment of the bill. Issue thereon. At the trial, before the recorder of Chester, it appeared that, the bill having become due on the 34th of April, 1845, and being dishon- ored, the plaintiff's attorney, a Mr. Roberts of Chester, wrote and sent to the defendant, on the 26th, the following notice of dishonor : "Sir: I am requested by Mr. W. H. Vaughan, of this city, to ap- ply to you for the payment of the amount due on you and your brother Daniel Ruscoe's dishonored bill to him ; and as Mr. Vaughan is very pressing for the amount, I trust you will immediately oblige me with the same, together with my charge as under. "I am, sir, your obedient servant, S. J. Roberts." 42 Accord: The ElmvlUe, [1904] Prob. Div. 319, 329 (delay caused by Ig- norance of sea captain's address) ; Citizens' Bank v. Pugh, 19 La. Ann. 43 (1867) delay caused by war, semble. But notice must be given when cause of delay ceases to exist Studdy v. Beesty, 60 L. T. (N. S.) 647 (1889.) See Peck V. Easton, 74 Conn. 456, 51 Atl. 134 (1902). SM.& M.B.& N.(2d Ed.)— 43 C74 LIABILITY OF PARTIES (Part 3 Mr. Roberts, being called as a witness for the plaintiff, stated that he had no authority from Vaughan to give any notice of dishonor, and that Vaughan's name was inserted in the letter by a clerk of his, in mistake, instead of the plaintiff's. The bill having fallen due in the hands of a banker in London, a notice of dishonor given on the 26th of April would be good either for the plaintiff or for Vaughan. It was contended for the defendant, first, that under these circum- stances the notice of dishonor, being given in the name of Vaughan, from whom Mr. Roberts had no authority to give it, was of no avail ; and, secondly, that it was bad in form, as it improperly described the bill as being the bill of the defendant and his brother. The learned recorder thought the notice was good, and directed a verdict for the plaintiff for the amount of the bill and interest, giving the defendant leave to move to enter a nonsuit. The plaintiff obtained a rule nisi ac- cordingly.*' Parke, B. * * * The only question is whether this notice was sufficient ; for we have already intimated our opinion that the notice was in sufficient time, whether it be considered as given by the plain- tiff or Vaughan, and that it sufficiently referred to the bill in question, and notified its due presentment and nonpayment. Since the case of Chapman v. Keane, 3 Ad. & E. 193, it must be considered as perfectly settled that a notice of dishonor need not be given by the holder, but that he may avail himself of notice, given in due time by any party to the bill. The decision in that case is referred to and adopted by Chancellor Kent, Commentaries, vol. 3, p. 108, and Mr. Justice Story on Bills of Exchange, § 304. The former states the rule to be that the notice may be given by any one who is a party to the bill ; the latter states it more fully, and says that the notice will be sufficient, although not given by the holder or his agent, if it comes from some person who holds the bill when it is dishonored, or is a party to 'c'he bill, or who would, on the same being returned to him, and after payment, be entitled to require reimbursement thereof. The notice, by the terms of the rule as laid down by the Court of Queen's Bench, must be given in due time by the party to the bill, that is, in due time, if he himself were suing; and, consequently, the case of notice by a party who had himself been already discharged by the laches of the holder, is excluded. So the terms of the rule as laid down by Mr. Justice Story seem to exclude the case of a party to the bill, who could not himself sue upon it on paying the amount of the bill; at least they must be so understood, otherwise the mischief would hap- pen which was pointed out by Mr. Jervis, that there might be a bill with 20 indorsements, which the holder might retain 20 days after its dishonor, and then recover against the drawer on a notice then given to him by the first indorsee, which that indorsee hiinself could not do. Such a notice would not be in good time if given by the first indorsee, ^5 Tbe arguments of counsel and part of the opinion are omitted. Ch. 2) DRAWEE AND INDORSBR 675 and would therefore be bad, and not support an action by the last The rule equally excludes the case of notice by an acceptor, who nev- er could sue himself upon the bill after taking it up ; and the instances in which a notice by an acceptor has been held good at nisi prius (Thor- old V. Smith, 1 Chit. R. 227 ; Rosher v. Kieran, 4 Campb. 87) are ex- plained by Mr. Justice Bayley (Bayley, Bills [Ed. 1830], c. 7, § 2, p. 254, et seq.) on the supposition that in these the acceptor had a special authority to do so,** But in the present case Vaughan, in whose name the notice was given, was not discharged by the laches of the holder at the time it was given, and a notice by him on the 26th would have been in sufficient time to support an action by him, and, consequently, an action by the plaintiff. There is therefore no objection to the no- tice on that ground; nor would there have been any, if the attorney had omitted to state on whose behalf he applied. It was so held in Woodthorpe v. Lawes, 2 M. & W. 109, and had been previously laid down in Chancellor Kent's Commentaries (volume 3, p. 108), who says that any agent in possession of the bill may give the notice, and it need not state at whose request it was given, nor who was the owner of the bill. It remains, therefore, to consider what is the effect of giving an un- true description of the party on whose behalf it was given. This point has never been decided ; for in Chapman v. Keane, the only case which bears upon it, the plaintiff's clerk, who gave the notice, must have been authorized, by the nature of his employment, to give it on behalf of the plaintiff, as he was, by the express authority of the holder, to give it for him ; and the notice stated no untruth. Here there is an untrue statement, but made unintentionally, and by a mere mistake. There is, no doubt, a difference between the two cases, where a no- tice is given by an authorized person, without stating on whose behalf it is given, and where untrue information is afforded. In one case, the party is put on inquiry, if he thinks fit to make it; in the other, he is misinformed. What, then, ought to be the result of that mis- information? It is to be recollected that, whether the party is misled or not as to the person giving the notice, the great object of a notice is answered by the information of the dishonor of the bill, and the person to whom notice is given is thereby enabled to withdraw his ef- fects from, or take his remedy against, the prior parties. And we think it reasonable to hold that the misrepresentation of the name of the person on whose behalf notice is given ought not wholly to avoid the notice, but only -to place the party giving it in the same situation, as to the party to whom it was given, as if the representation had been true; and, therefore, the defendant ought to have every defense against the plaintiff that he would have had if the notice had been really given by the party named. And this is in analogy with the law as to con- ** See Trader's Nat. Bank v. Jones, 104 App. Div. 436, 93 N. T. Supp. 768 (1905), where the maker as agent for the holder, notified his accommodation indorser. 676 LIABILITY OP PARTIES (Part 3 tracts with factors acting for concealed principals, and similar cases, where the contract is not avoided by the misstatement, but the other party has all the equities against the real as he would have had against the apparent contractor. If, therefore, in the present instance, the notice by Vaughan would have been bad (as it would have been had he been discharged by laches, or had no right of action on the bill against the defendant if he had taken it up), the defendant would have had a defense ; if good, as upon the evidence it appears that it would have been, the defendant has not been injured, and has no right to complain of the misrepresentation. We think, therefore, the ruHng of the learned recorder was right, and the rule ought to be discharged. ROWE V. TIPPER. (Court of Common Pleas, 1853. 13 O. B. 249.) Assumpsit by indorsee against indorser of a bill of exchange. The declaration stated that one_Green, theretofore, to wit, on the 12th of July, 1851, made his bill of exchange in writing, and directed the same to Messrs. Knight & Co., and thereby required them to pay to his order the sum of £52. 9s., four months after the date thereof, for value received, which period had elapsed before the commencement of the suit ; that Green indorsed the bill to the defendant ; that the de- fendant indorsed it'to,,piie Abley; and that Abley indorsed it to the plaintiff," before it became due ; and that Knight & Co. did not pay the sard- bill, although the same was duly presented to them for payment, on the day when it became due — of all which the defendant then had due notice, and then, in consideration of the premises, promised the plaintiff to pay him the amount of the said bill, on request. By his sixth plea, the defendant traversed the notice of dishonor. The cause was tried before Cresswell, J., at the second "iftting in London, in Michaelmas term last. It appeared that the bill was duly presented when it became due, viz. on Saturday, the 15th of November, 1851, at the place where it was made payable, and was dishonored ; that the plaintiff, on the 17th of November, gave notice of dishonor to Ab- ley, and on the 18th (through the agency of one Delane) gave notice to the defendant. On the part of the defendant, it was insisted that the notice to him was too late, and that there was no evidence that the notice given by Defahe was given with the authority of the plaintiff ; all that was proved beTiig^that the bill had been placed in Delane's hands to obtain payment. Forjhe plainliff, it was insisted that, inasmuch as the notice reached the defendant in the same time as it would have done if Abley had given it,7t"was" a sufficient notice, and that Delane was duly authorized to give Ch. 2) DRAWEE AND INDORSBR G77 the notice; and the case of Turner v. Leech, 4 B. & Aid. 451, was re- ferred' to. The learned judge directed the jury to find for the defendant on the sixth issue, reserving'leave lb the plaintiff to enter the verdict for him, for the amount of principal and interest, if the court should be of opinion that the notice was sufficient. The plaintiff obtained a rule nisi accordingly."*^ ^ -'■• ■ "Jervis, C. J. It seems to me that the rule laid down in Chitty and Hulme is the correct rule, and that, if the holder of a bill of exchange wishes to avail himself of a notice oT'dishonor given by him to a ire- mote indorsef, he must give it within the time within which he is by law required to give it to his immediate indorser ; and he cannot avail him- self of his laches, to gain another day. If he could, the consequence which has been pointed out would follow, viz. that, if there were 20 indorsers, he would have 30 days within which to give notice to the first of them. The rule is correctly laid down by Burrough, J., in Do- bree v. Eastwood, 3 C. & P. 250, that the holder has his day to give notice toany party he rnay seek to charge, and thaf each' of the prior indorsers in turn has his day. Each has one day to give notice to all the^pafties against whom he inten3s'T6 enforce his remedy. That is the result of all the decisions. No doubt it is settled that the holder need not himself have given all the notices ; he may avail himself of a notice duly given by any other party to the bill. That was decided in Chapman v. Keane, 3 Ad. & E. 193, 4 N. & M. 607. And in Harrison V. Ruscoe, 15 M. & W. 231, Parke, B., commenting upon that case, says : "Thenotice, by the terms of the rule, as laid down by the Court of Queen's Bench, must be given in due time by the party to the bill, that is, in due time if he himself were suing." That, in fact, is rec- ognizing the rule as stated in Chitty and Hulme. The^ii2ticgi.jipGn whiclj-JJie"#*i-Htiff relies in this case is his own notice; and he must sh OT/ that, ■that was given in due time. He gave notice in due time ,to- ASf^This imniediate indorser; but he did riot give .due notice to. the defendant. I am, therefore, of opinion that he has by his_ laches re- leased jilg.,d(ie£eiidant;' and consequently the rufe which 'has been ob- tained to enter the verdict for the plaintiff on the sixth issue, must be discharged. LINN V. HORTON. (Supreme Court of Wisconsin, 1863. 17 Wis. 151.) Yates and Gray, for value, gave their note, indorsed for them by Horton -before delivery, and payable to the plaintiffs or order at the Rock County Bank, at JanesviUe, in this state. Before the note be- came due, the plaintiffs, who were merchants in the city of New York, indorsed it for collection to Kissam & Taylor, bankers in the same city, .ifi The arguments of counsel and the opinion of Maule, J., are omitted. 678 LIABILITY OF PARTIES (Part 3 who indorsed it and sent it for collection to the Central Bank of Wis- consin, at Janesville. Default having been made in its payment when due, to wit, November 22, 1861, it was duly protested, and on the same day the note and notice of protest for Horton, and like notices for Kissam & Taylor and the plaintiffs respectively, were inclosed in an envelope and deposited in the post office at Janesville, post paid, di- rected to Kissam & Taylor, who received the same November 27th. On the same day Kissam & Taylor delivered to the plaintiffs the notices addressed to them and to Horton respectively; and the plaintiffs, on the same day, inclosed the notice for Horton in an envelope directed to him at Janesville, and deposited the same post paid, in the post office at New York; but the notice was never, in fact, received by Horton. This action was brought against Horton together with the makers ; but the circuit court found that "the notary, who protested the note, did not use due diligence to ascertain the residence of Horton," and there- upon held that proper steps had not been taken to charge him, and ren- dered judgment in his favor; from which the plaintiffs appealed.** Dixon, C. J. It is an established principle of mercantile law that, if the holder of a bill or note chooses to rely upon the responsibility of his immediate indorser, there is no necessity for his giving notice to any previous party ; and if such notice be properly given, in due time, by the other parties, it will inure to the benefit of the holder, and he may recover thereon against any of them. Thus, if the holder notifies the sixth indorser, and he the fifth, and so on to the first, the latter will be liable to all the parties. 1 Parsons on Bills and Notes, 503, 504; and Edwards on Bills and Notes, 473, 474, and the cases cited. And it is no objection to such notice that it is not in fact received so soon by the first or any prior indorser, as if it had been transmitted directly by the holder or notary, provided it has been seasonably sent by each indorser as he receives it. Colt v. Noble, 5 Mass. 167 ; Mead V. Engs, 5 Cow. (N. Y.) 303; Howard v. Ives, 1 Hill (N. Y.) 263. And the same degree of diligence must be exercised on the part of the indorser in forwarding notice as is required of the holder. Ordinary diligence must be used in both cases. He is not bound to forward no- tice on the very day upon which he receives it, but may wait until the next. Howard v. Ives, and the authorities cited. For the purpose of receiving and transmitting notices, those who hold at the time of protest, and those who indorse as mere agents to collect, are regarded as real parties to the bill or note ; the former as holders in fact, and the latter as actual indorsers for value. Mead v. Engs ; Howard v. Ives. It follows, from these principles, that the proper steps were taken to charge the defendant Horton as indorser. Notice for him was for- warded by mail, post paid, on the day of the protest, to the agents and last indorsers in New York, and delivered by them, on the day it was •16 The arguments of counsel and part of the opinion are omitted. Ch. 2) DRAWER AND INDORSER 679 received, to the plaintiffs, their immediate indorsers, who, on the same day, deposited it, inclosed in an envelope, post paid, in the post office at New York, directed to the defendant at Janesville, Wis., his proper post office. Under these circumstances the only question which can possibly arise is whether the defendant ought to be discharged by reason of the notfce not having been in fact received by him. He testifies that it was not. Professor Parsons observes that in all the cases of constructive notices, where notice given by a subsequent to a prior indorser has been held to inure to the benefit of the immediate indorser, it has appeared that the notice was actually received ; and he raises a question whether this would be so if the notice was sent to the wrong place. 1 Pars, on Notes and Bills, 504, note, and 627. But here the notice was sent to the right place. Besides, the plaintiffs, who seek to avail themselves of the notice, are the indorsers who sent it to the defendant as the in- dorser next immediately preceding them. We have already seen that the rule of diligence as to them is the same as in the case of the holder. * * * Judgment reversed. BI,UE RIBBON GARAGE, Inc., v. BALDWIN et al. (Supreme Court of Errors of Connecticut, 1917. 91 Conn. 674, 101 Atl. 83.) Action by the Blue Ribbon Garage, Incorporated, against R. L- Baldwin and others. From judgment for plaintiff, the named defend- ant and others appeal. No error. On February 15, 1915, the plaintiff became the owner of the note in suit in part payment for the sale to the defendant Baldwin of an au- tomobile. The note was drawn by the defendant the State of Maine Lumber Company, to the order of the defendant Atwater, and was made payable at the Connecticut Trust & Safe Deposit Company, of Hartford. It bore the indorsements of the five individuals who were made defendants, including Atwater and Baldwin,' against whom judg- ment was rendered. The plaintiff still owns the note, which remains unpaid. The date of maturity was March 2, 1915. February 26, 1915, the plaintiff deposited it for collection with the First Bridgeport National Bank of Bridgeport. That bank forwarded it in due course of business to their agents, the State Bank of Albany, for collection. The State Bank of Albany in like manner forwarded it for collectiop to its agents, the Hartford National Bank of Hartford. On or before the morning of March 2, 1915, the last-named bank de- livered it to the Connecticut Trust & Safe Deposit Company, the place of payment. Payment not having been made at the close of business upon that day, it was handed by the discount clerk of the trust com- pany to its teller, who demanded payment, and, no payment having been made, wrote across the face of the note : Protested for nonpayment 680 LIABILITY OF PAETIE8 (Part 3 Mar. 2, 1915, Harvey W. Corbin, Notary Public." He then made a certificate of protest and ten notices of protest, one addressed to each of the banks, and each party whose name appeared upon the note, pinned the certificate to the original note and placed the note and cer- tificate thus attached, together with the ten copies of the notice of pro- test, in an envelope and mailed it with its inclosures, including two-cent stamps for each notice save one, to the Hartford National Bank. On the following day, the last-named bank mailed the note, certificate of protest, and notices, save only the notice to itself, to the State Bank of Albany. On March 5th, the First Bridgeport National Bank re- ceived from that bank in the first mail the same inclosures less the no- tice to the State Bank of Albany. The Bridgeport bank immediately thereafter remailed them, less the notice to it, to the plaintiff, who re- ceived them during the forenoon of the same day. Upon that day Bald- win was notified by the plaintiff's treasurer by telephone of the dis- honor. On the following day, Atwater, who resided in New Haven, was visited by the plaintiff's agent and orally notified. No attempt was made by the plaintiff to notify the other indorsers. Prentice, C. J. (after stating the facts as above). The course of conduct of the notary who made presentment of the note in suit and of the several banks through whose hands it passed in the collection process conformed strictly, in so far as notice of dishonor was con- cerned, to the requirements of the- law merchant formerly controlling and to those of the negotiable instrument law now in force. By the overwhelming weight of authority under the law merchant, a holder for collection of negotiable paper, which had been dishonored, perform- ed his full duty in respect to notice of its dishonor by giving such no- tice in due form and time to the party from whom he received it. Where the paper before presentment had passed through several hands, whether they were those of mere holders for collection or of parties having a beneficial interest in it, the approved rule was that notice given by each holder in turn to the prior one from whom it was received was notice sufficiently given to fix the liability of all indorsers included in the chain of notice. United States Bank v. Goddard, 5 Mason, 366, 375, Fed. Cas. No. 917; Eagle Bank v. Hathaway, 5 Mete. (Mass.) 212, 215; Phipps v. Millbury Bank, 8 Mete. (Mass.) 79, 84; Farmers' Bank V. Vail, 21 N. Y. 485, 487; Seaton v. Scovill, 18 Kan. 433, 438, 21 Am. Rep. 212, note 26 Am. Rep. 779; Wood v. Callaghan, 61 Mich. 402, 411, 28 N. W. 162, 1 Am. St. Rep. 597; Daniel on Negotiable Instru- ments, 331. Each holder for collection was regarded as a real holder and his relation to the party from whom the paper was received such that the latter was entitled to be treated as his immediate principal. Bartlett v. Isbell, 31 Conn. 296, 299, 83 Am. Dec. 146; Phipps v. Mill- bury Bank, 8 Mete. (Mass.) 79, 84; Freeman's Bank v. Perkins, 18 Me. 292, 294; Howard v. Ives, 1 Hill (N. Y.) 263, 264; Exchange Bank v. Sutton Bank, 78 Md. 577, 587, 28 Atl. 563, 23 L. R. A. 173. The Negotiable Instruments Act has not changed the law in any of Ch. 2) DRAWER AND INDORSBB 681 these respects. The defendant's broad contention that notice of dis- honor to be effective in fixing the liability of indorsers should be given by the holder at presentment directly to the beneficial owner disre- garding all intervening holders for collection only is without founda- tion in the act, and we have so distinctly held. Gleason v. Thayer, 87 Conn. 248, 250, 87 Atl. 790, Ann. Gas. 1915B, 1069. Such a require- ment, necessitating, as it would, inquiries as to who was the real owner and what his address, and involving embarrassment and complications in accounting as between those through whose hands the paper passed in the process of collection, would be fruitful of such annoyances, difficulties, and hazards of miscarriage and loss as to make it an unsat- isfactory substitute for the simple, orderly and effective method pur- sued in this case and by us heretofore approved. The case of East Haddam Bank v. Scovil, 12 Conn. 303, furnishes a good example of easily possible consequences. The law under consideration in Glea- son V. Thayer was, to be sure, the Negotiable Instruments Act as it was enacted in New York ; but its provisions of present pertinence were identical with those of our own. The defendant's counsel undertake to escape from the operation of the decision in that case by an attempt to distinguish between the two cases upon the ground that the note in Gleason v. Thayer presumably Was indorsed by the Whaling Bank to the collection bank in New York, whereas it does not appear by the record that the note in this case, when presented for payment, bore any bank indorsements. It would doubt- less be quite in accordance with the fact to assume that it did, but that is not a matter of controlling importance. The note, as indorsed upon its delivery to the Bridgeport Bank, was transferable by delivery, and the finding is that it was sent along through the chain of banks for col- lection. Each bank received and transmitted it to its agents for that purpose, and each receiving bank became its holder for collection with all the rights, powers, and obligations attached to such holders, fiast Haddam Bank v. Scovil, 12 Conn. 302, 311. Counsel for the defendant attach' great importance to one of the para- graphs in the finding, and build much of their argument upon it. The paragraph is to the effect that the Connecticut Trust & Safe Deposit Company has never been the plaintiff's agent for any purpose whatso- ever. That finding is one of law and not of fact. The legal character of the relation in which the trust company stood to the owners of the note is to be determined as a legal conclusion upon the facts. The find- ing, to be sure, does not state in so many words that the Hartford Na- tional Bank delivered the note to the trust company for collection for its account, but there is no other reasonable inference from the facts found than that it did so. The conduct of the parties throughout so indicates quite unmistakably. As a holder for collection is, as a matter of law, the agent of the owner, the finding of the court upon this matter must be disregarded as not justified as a matter of law by the facts. Gleason v. Thayer, 87Conn.248, 250, 87Atl.790, Ann. Cas. 1915B, 1069. 682 LIABILITY OF PARTIES (Part 3 The action of the plaintiff in giving notice to the defendants Baldwin and Atwater, following its receipt in due course from the Bridgeport Bank, of the notice of dishonor, complied in all respects with the re- quirements of the law, and no complaint of irregularity in that respect is made by the defendants. Certain evidence tending to prove a banking custom in the matter of giving notices of dishonor was received against objection that it was not permissible' to show conformity to a custom at variance with the provisions of statute. The court has found no such custom, nor did it decide the case upon the strength of one. Its decision was based upon the provisions of statute and compliance therewith. Two or three objections to the admission of testimony, offered to show that the Hartford National Bank mailed the note, certificate of protest, and notices to the State Bank of Albany on March 3, relate to details which in view of other testimony, were unimportant. The court was amply justified in finding that it did so upon proof that these papers were received by the Bridgeport Bank by first mail on the 5th contained in a letter from the State Bank of Albany addressed to it. There is no error. The other Judges concurred. REQUA V. COLLINS. (Court of Appeals of New York, 1872. 51 N. Y. 144.) Appeal from judgment of the General Term of the Supreme Court in the Eighth Judicial District, affirming a judgment in favor of plain- tiff, entered upon the decision of the court upon trial at circuit without a jury. This action was upon a promissory note dated June 2, 1884, payable one^year after date, rnade by one Miller for the accommodation of one ' Brown, and indorsed by the latter and by the defendant, payable at the Flour City Bank, Rochester. The answer denied notice of pro- test ; and the only question litigated at the trial was whether notice had bden properly served so as to charge defendant. The material facts were as follows : Brown delivered the note to W. R. Townsend to sell for him, and he sold it to the plaintiff, who resided at Kendall, Orleans county, about 25 miles from Rochester. The plaintiff held it until it was about due, and then he sent it by one Jewett to the Flour City Bank, at Rochester, fbr the purpose of having it protested if not paid. It was not paid and was protested, and notice of protest was mailed to the defendant, addressed to her at Rochester. She had, about six months before, moved from Rochester to the city of New York, and then resided there, having, before her removal, re- sided ten years in the city of Rochester. Before the note was sent to the bank, said Townsend, acting for the plaintiff, made inquiry as to the place of residence of the defendant of various persons, among whom was one Plumley, a relation of the defendant, residing in the ^h. 2) DRAWBB AND INDORSEE 683 same town with the plaintiff. These inquiries were made at different times within six months before the note fell due, and he was informed that she resided at Rochester. Jewett, who took the note to the barik for the plaintiff for the purpose of having it protested, had been in- formed by various persons that defendant lived in Rochester. He was so informed by said Townsend in the winter or spring" before the note fell due. He was also so informed by said Plumley in the fall of 1364. When Jewett left the note at the bank he told the teller that all the parties resided in Rochester, and the teller so informed the cashier, who was the notary who protested the note. -No inquiry was made at Rochester on the day the note fell due as to the residence of defendant. The court held that due diligence had been used to charge the de- fendant, and that she was liable upon the note,*' Earl, C. The defendant, at the date of the indorsement, had for ten years resided in Rochester, and she continued to reside there for six months thereafter, when she moved to the city of New York, where, during the last six months the note had to run, she resided. Neither the plaintiff nor his agents knew ei this change of residence. They jbelieved, in good faith, from information which they had re- ceived', that she continued to reside in Rochester. There is evidence tending to show that their inquiries as to her residence were made in the fall, winter a"nd*spring before the note fell due. They were made of persons likely to know defendant's residence. The information re- ceived was, therefore, such as the plaintiff could rely on, and, in pur- suance of this information, the notary was directed to serve notice of protest upon the defendant at Rochester. She claims that she did not receive the notice, and hence that she was not charged as indorser. In order to change an indorser, it is not necessary that he should actually receive notice of protest. It is sufficient that such notice has been properly served. If the service be by mail, and the indorser has not indicated where notice may be served upon him by writing the place under his signature on the back of the note, the notice must be ad- dressed to him at his place of residence. But in case the holder does not actually know the indorser's place of residence, the notice may be addressed to the place-where, after diligent inquiry, he is informed and believes he resides. What is due diligence in such a case, the facts being undisputed or ascertained, is a question of law. In Bank of Utica v. Phillips, 3 Wend. 408, the defendant was the second indorser upon a promissory note, payable in 90 days from date. At the time of the indorsement, he resided at Geddes, in the county of Onondaga, but in a few days thereafter removed to Fulton, Oswego county, where he continued to reside. At the time the note was dis- We are of opinion that the judgment must be reversed. The ap- pellant is sued solely as indorser of this note. The evidence is wholly insufficient to show the service of the notice of protest upon it. Nego- tiable Instruments Law (Laws 1897, p. 704, c. 612) §§ 160, 167, 168, provide that notice of dishonor, to charge an indorser, may be given by delivering it personally or through the mail either to the party him- self, or "to his agent in that behalf." This doubtless was not intended to change the rule as it theretofore existed. Eaton & Gilbert on Com. Sm.& M.B.& N.v2d EId.)— 44 690 LIABILITY OF PARTIES ' (Part 3 Paper, 489. Where personal service is relied upon, the evidence must show either actual personal service, or an ordinarily intelligent, dili- gent effort to make personal service, upon the indorser, either at his place of business during business hours, or at his residence if he have no place of business ; but, if he be absent, it is not necessary to call a second time, and the notice may in that event be left with any one found in charge, or, if there be no one in charge, or no one there, then the giving of notice is deemed to be waived. Stewart v. Eden, 2 Caines, 121, 2 Am. Dec. 222; Bank of Commonwealth v. Mudgett, 4^ Barb. 663; Id., 44 N. Y. 514; New York & Alabama Contracting Co. V. Selma Savings Bank, 51 Ala. 305, 306, 23 Am. Rep. 552 ; Allen v. Edmondson, 2 Exch. Rep. 719 ; Williams v. Bank of U. S., 2 Pet. 9G, 7 L. Ed. 360 ; Huffcut's Negotiable Instruments, p. 47. The evidence in this case shows that personal service was -not made upon any officer of the corporation, and there is no evidence that the notice was left with any agent of the corporation, or even where it might be reason- ably inferred that an officer or agent of the corporation would receive it. It does not even appear upon what floor or in what part of the hotel the cashier's window was, at which the notice was left. There can be no inference from such evidence that the notice was received by the corporation ; and the president and ma,nager of the hotel, who was in charge, testifies that it was not brought to his attention. Judgment reversed. PINKHAM V. MACY. (Supreme Judicial Court of Massachusetts, Suffolk and Nantucket, 1845. 9 Mete 174.) Assumpsit on the following note, held by the plaintiff, as executrix of the last will of Seth Pinkham, to whom it was indorsed by the payee : "Nantucket, April 1, 1837. 'At the termination of the ship Obed Mitchell's present voyage, for value received, I promise to pay to the order of Josiah Macy eight hundred and fourteen dollars and forty one cents, with interest till paid. "James Mitchell." At the trial in the court of common pleas, at Nantucket, before Ward, J., the signatures of the maker and indorser were admitted ; and the plaintiff, to prove demand on the maker, and notice to the de- fendant as indorser, called J. M. Bunker, a notary public, who testi- fied that the defendant had always resided in Nantucket ; that Mitchell, the maker, resided there at the date of the note, but that he removed his business and family to the city of New York before the arrival of the ship Obed Mitchell; that said ship arrived at the bar of Nan- tucket, on Sunday 27, 1841; that the witness, on the next day, took said note, as notary public, and.went to the place of business formerl-y Ch. 2) DKAWBS AND INDOBSEH, 691 occupied by the maker, in Nantucket, and found it closed; that he then went to the house formerly occupied by the maker, in Nantucket, and found another family residing there, but then presented the note and demanded payment thereof, which was refused; and that he there- upon made and gave to the defendant this notice : "Nantucket, June 28, 1841. "Please to take notice that a promissory note for $814.41, with in- terest, dated October 1, 1837, payable at the termination of ship Obed Mitchell's voyage, now completed, signed by James Mitchell, and in- dorsed by you, remains this day unpaid, and that the holders look to you for payment thereof. Done at the request of Seth Pinkham. "James M. Bunker, Notary Pubhc. [Seal.] "To Josiah Macy." The judge ruled that said notice was not sufficient to charge the in- dorser ; and the jury found a verdict for the defendant. The plain- tiff alleged exceptions to said ruling. Shaw., C. J. The question is whether due notice was given to charge the indorser. This subject was so fully discussed in the recent case of Gilbert v. Dennis, 3 Mete. 495, 38 Am. Dec. 329, that it seems only necessary to inquire whether this case falls within the principles laid down in that case. The rule there laid down was that the notice must be such as to inform the indorser, either in terms or by reasonable implication, that the note was dishonored; that is, that it had been presented for payment, and payment refused, or other act done, which by law is deemed equivalent. It is not necessary to state what has been done ; whether an actual demand was made, or that the note lies over at a bank where,- by contract or by usage, it was payable, or that the maker has absconded. All this is matter of proof afterwards, to show the fact of dishonor. But the notice must be such as to assert or imply that the note has been presented and payment refused, or other- wise dishonored. It was also stated that a notice simply that the note is unpaid is sufficient, where, from the terms of the note, nonpayment and lapse of time constitute such dishonor. So, when a note is payable at a bank, it is the duty of the maker to pay it at the bank, on the last day of grace. Then a notice dated after bank hours, on that day or the next day, simply informing the indorser, who is presumed to know the terms and purport of the note, that it is, at that time, unpaid, is notice of dishonor. But in case of a note not payable at a place certain, where presentment or inquiry is necessary, in order to make a demand, such a notice, either on or after the day of payment, is not, in terms, or by intendment or implication, notice that it has been demanded, or that it is dishonored. In the present case, all that was stated in the notice might be strictly true, though no presentment and demand had been made, and though the maker had not left the island, and no inquiry for him had been made. It is, therefore, exactly within the case of Gilbert v. Dennis. It was suggested, in the argument, that there is a difference, because. 692 LIABILITY OF PARTIES (Part 3 in the present case, the notice was given by a notary public. But this can make no difference in principle ; and we think it would not be ex- pedient for the community that a rule of law so universally important should depend on new or slight distinctions. A notary public, in such case, is the mere agent of the holder. His service is hot required, as in case of a foreign bill of exchange, to make a protest. City Bank v. Cutter, 3 Pick. 414. A case may happen, where a reference to a protest by a notary pub- lic, which term implies a demand and refusal, may be important, be- cause it intimates, by implication, that the note has been dishonored: As where the notice of nonpayment is accompanied with notice that the holder looks to the indorser for payment, with costs, or fees, or charges of protest. This may be sufficient to show, by reasonable in- tendment, that it has been protested for nonpayment, which is notice of dishonor. But the present notice carries no such implication, but is a simple notice of nonpayment, without intimation of dishonor. There seems to be another good ground of defense, namely, -that the demand and notice were too soon. If the arrival of the ship at Nan- tucket was not the termination of the voyage, then they were too soon. If it was such termination, then it became a day certain, and the note was entitled to grace. Exceptions .overruled."' MARSHALL v. SONNEMAN. (Supreme Court of Pennsylvania, 1906. 216 Pa. 65, 64 Atl. 87-1.) Assumpsit on a promissory note. Judgment for plaintiff. Defend- ant appealed. Mestrezat, J.°^ This is an action by an indorsee against an in- dorser to recover the balance due on a promissory note. One of the defenses interposed at the trial was an alleged failure to give the de- fendant notice of the dishonor of the note. The plaintiff proved the execution of the note by the maker, and introduced testimony to show that the defendant had indorsed it. A notary public was then called and he testified that he had protested the note at maturity for nonpay- ment, and that on the same day he had delivered notices of protest per- sonally to both the plaintiff and the defendant, who were the indorsers. He said he gave but one notice to the defendant. The certificate of protest was offered in evidence by which it appears that the note was protested on the day it became due, and that the notary had notified the indorsers "by notices of protest personally delivered to" the plain- so Contra: Reed v. Spear, 107 App. Div. 144, 148, 94 N. T. Supp. 1007 (1905). See Second Bank v. Smith, 118 Wis. 18, 27, 94 N. W. 664 (1903). 01 The statement of the case and the arguments of counsel are omitted. Ch. 2) DRAWEE AND INDOESER 693 tiff and defendant. A copy of the notice was not produced at the trial by the plaintiff. The defendant denied that he had received notice of the dishonor of the note. He testified that the notary delivered to him an envelope addressed to L,. A. Marshall, the plaintiff, which contained the follow- ing notice: "Notice of Protest. "York, Pa., March 1, 1904. "L. A. Marshall: Please take notice that the note of M. Fink for four thousand dollars in favor of A. Sonaman dated York, Pa. Nov. 2, 1903, payable March 1, at L,. A. Marshall & Co., Bankers, York, Penna. and by you endorsed, (being due this day, payment having been demanded and refused,) is protested for nonpayment, and that the holders look to you for the payment thereof. "Respectfully yours, Henry K. Kraber, Notary Public." The defendant further testified that the notary gave him no other notice, paper, or envelope. He then offered in evidence the notice which, on objection by the plaintiff, the trial judge excluded, stating the reason for his ruling as follows: "I think there is sufficient no- tice there to hold him under the law. If this vvas addressed through the post *ffice; it would not be evidence because he would not have received it ; but jt wa^s delivered to him at his place of business and he could not help but have notice. We do not think it shows want of no- tice, but, on thefither hand, it shows sufficient notice, although it was improperly addressed." This is the subject of the second assignment of error. The correctness of the ruling of the learned court depends upon the sufficiency of this notice. If it was sufficient notice to the defendant of the dishonor of the note, he was not injured by the exclusion of the offer. He admits he received the notice from the notary on the day the note was protested. If, however, the notice was insufficient to charge the defendant with liability on the note, it was error to exclude the offer. In that view it became a question for the jury to determine under the evidence whether legal notice of dishonor had been given, and, as bearing on that question, it is apparent that this notice was com- petent evidence. The notary testified that he delivered only one notice to the defendant, but he denied that the notice excluded was the one he gave the defendant. The defendant testified that he received but one notice from the plaintiff, and that the paper in question was that notice. It is true that the certificate of protest showed that a notice had been delivered to the defendant, but that was only prima facie evi- dence of the fact, and the party could contradict it by other evidence. It was therefore a question of fact for the jury what, if any, notice of protest was given the defendant; and, if they had found that the only notice given him was the paper produced by him on the trial, it would 694 LIABILITY OF PARTIES (Part 3 have been the duty of the court to determine the legal effect of the pa- per, and, if that had been against its sufficiency as a notice, the verdict should have been for the defendant. The controlling question in the case, therefore, was the sufficiency of the notice. If the holder of negotiable paper desires to charge antecedent parties with its payment, it is incumbent on him to give them notice of its dis- honor. He may notify either or all of the prior indorsers, but he can compel payment only from those who have received notice of the maker's default. The notice may be either written or verbal, or it may be partly written and partly verbal. "All that is necessary," says the learned author of Byles on Bills, *276, "is to apprise the party liable of the dishonor of the bill in question, and to intimate that he is expected to pay it. And an announcement of the dishonor will (at least if it come from the holder) amount to a sufficient intimation to the indorser that he is liable." It is sufficient if under all the circum- stances the language of the notice imports that the indorser is looked to for payment, and it would seem not unfair to imply such intention from the very fact of sending notice of dishonor. 7 Cyc. 1109. The weight of authority is that a notice of dishonor is sufficient to charge an indorser, if it comes from the holder or his agent and notifies the indorser that the note \vas presented and payment was refused. No- tice of nonpayment, however, is not sufficient ; nor is mere knowledge of protest all that is required to charge the indorser. Says the author above quoted (page 276): "Notice does not mean mere knowledge, but an actual notification. For a man who can be clearly shown to have known beforehand that the bill would be dishonored is, neverthe- less, entitled to notice." In Tindal v. Brown, 1 Term Rep. 167, Ashhurst, J., says: "Notice means something more than knowledge, because it is competent to the holder to give credit to the maker. It is not enough to say that the maker does not intend to pay, but that the holder does not intend to give credit to such maker. The party ought to know whether the holder intends to give credit to the maker or to resort to him." And in the same case Buller, J., observes : "The notice ought to purport that the holder looks to the party for payment, and a notice from another party cannot be sufficient. It must come from the holder." This case and many other English authorities are cited on the subject in the opin- ion of this court in Juniata Bank v. Hale, 16 Serg. & R. 157, 160, 16 Am. Dec. 558, where it is said: "That knowledge of nonpayment is not notice is very clear for the notice must come from the holder him- self, or some one who is a party; for the notice must assert that the holder intends to stand on his legal right, and to resort to the indorser for payment, and therefore, where the drawer had notice before the bill was due that the acceptor had failed, and gave another person money to pay the bill and the holder neglected to give notice of its dis- honor, it was held that the drawer was discharged." Ch. 2) DRAWEE AND INDORSEE '695 We are of opinion that the written notice which the defendant al- leges was delivered to him was not suflficient io charge him with the dishonor of the note. It was in propei- form, signed by a notary, and was delivered in due time. But on its face it clearly discloses the fact that it was not intended for the defendant. It was directed to L. A. Marshall, the plaintiff, and the envelope containing it bore the same address. Marshall, hke the defendant, was also an indorser of the note, and, if the holder intended to impose liability on him, it was nec- essary that he should have notice of dishonor. It is therefore apparent that this notice was intended for Marshall, and was, of course, for the purpose of apprising him of the dishonor of the note, and was prepared by the notary with that intention. The notary does not testify that at the time he delivered the envelope containing the notice he told the de- fendant what it contained or said anything to him concerning its con- tents. He did not apprise the defendant that the note had been dis- honored or that the notice was intended for him. He gave the de- fendant no verbal notice whatever, and hence all the iriformation the latter had of the dishonor of the note and the intention of the holder to guard his rights and to avoid responsibility by fixing liability on antecedent parties was what was contained in the envelope addressed to Marshall. This, as we have observed, was a notice to Marshall that the note "by you indorsed" was protested for nonpayment, "and that the holders look to you for the payment thereof." Why should the defendant accept this as a notice of dishonor to him and take care of the note? There is no .intimation in the paper that the holder intended to look to him for payment. On the contrary, the notice is that the holder will look to Marshall, his immediate prior indorser, for payment. This he had a legal right to do, and was not compelled to notify the defendant or any other indorser or to demand payment of him. If Marshall desired to hold the defendant responsible as a prior indorser it was incumbent upon him to give the latter notice of dishonor. The defendant was justified in treating the paper deliv- ered to him by the notary as a notice to Marshall, as the address on the envelope and notice disclosed, and that the purpose was to notify Mar- shall of dishonor for the purpose of charging him with payment of the note. If either the envelope or the notice had been addressed to the defendant, or if neither had been addressed to him, the plaintiff's con- tention that the notice was for the defendant would have some ground for its support. If, when .he delivered the paper, the notary had noti- fied the defendant verbally that the note had been dishonored or that the written notice was for him, there would be sufficient to charge the defendant with notice of dishonor. But none of these facts can be found in the case. Assuming that the defendant opened the envelope and read its contents, he simply obtained the knowledge that the note was dishonored and that the holder would look to Marshall, the last indorser, for payment. This, as we have seen, is not sufficient under 696 LIABILITY OF PARTIES (Part 3 the cases to fix the defendant, as an indorser, for the payment of the note. For the reasons above stated, the second assignment of error is sus- tained, and the judgment is reversed, with a venire facias de novo. SECTION 6.— WHEN PRESENTMENT AND NOTICE OF DISHONOR UNNECESSARY BARTON V. BAKER. (Supreme Court of Pennsylvania, 1815. 1 Serg. & R. 334, 7 Am. Dec. 620.) Assumpsit by the plaintiff as indorsee of a promissory note, against the defendant as indorser. It appeared in evidence at the trial that the note was drawn on the 2d June, 1808, by James Brown & Co., in favor of John Baker, the defendant, by whom it was indorsed, and that it was payable in four years after date; that the house of James Brown & Co., which was composed of James Brown and Armat Brown, was insolvent at the time the note was drawn, and continued to be so until it became due; that it was given for a debt previously contracted, and was received on the credit of Baker only; that several months before it was pay- able Armat Brown executed an assignment of all his estate, real and personal, to the defendant, to indemnify him for certain advances of money, and for indorsements on account of the firm of James Brown & Co. When the note became due, which was on the 2d and 5th June, 1812, James Brown was in Europe; but a demand for payment was made on Armat, who was then in this city, vhich not being complied with, it was protested. On the loth of the same month, notice of non- payment was given to the defendant, who observed that it was out of time, but did not deny that he was responsible, and said that his abil- ity to pay would depend upon the arrival of a vessel. Under these circumstances the defendant contended that the holder of the note had been guilty of such laches as to discharge the indorser from his liability to pay it. His honor, Judge Yeates, before whom the cause was tried, on 2d February, 1814, charged the jury that, if the defendant knew of the insolvency of James Brown & Co. at the time he indorsed their note, he could not urge the want of due notice to discharge himself from the payment of it. The jury actordingly found for the plaintiff, and the case now came before the court on a motion by the defendant for a new trial."* TiLGHMAN, C. J. The objection to the verdict in this case is that due notice of nonpayment by the maker of the note on which the ac- 6-2 The arguments of counsel and tlie concurring opinion of Yeates, J., are omitted. Ch. 2) DRAWER AND INDORSER G97 tion is founded was not given to the defendant, who was the indorser. It is confessed that due notice was not given; but the plaintiff con- tends that, under the circumstances of the case, notice was not neces- sary. The circumstance principally relied on at the trial, and on which the plaintiff had the charge of the court in his favor, is that at the time when the note was made and indorsed, and also at the time when it fell due, it was known to the defendant that James Brown & Co. were insolvent. If the. case rested solely on this objection, I should be for granting a new trial, because the cases cited by the plaintiff, of De Berdt v. Atkinson, 2 H. Black. 336, and Cornay v. Da Costa, 1 Esp. Rep. 302, have been overruled in Nicholson v. Gouthit, 2 H. Black. 609, and Esdaile v. Sowerby, 11 East, 114. The case of Jack- son V. Richards, 2 Caine's T. Rep. 343, agrees with the law as settled by the last English cases. But I do not rest my opinion solely upon the authority of these cases. The reason of the thing demonstrates that the insolvency of the maker of a note, though known to the in- dorser, ought not to discharge the holder from giving notice. There are various degrees of insolvency, and it rarely happens that a man is totally insolvent.V So that there is a chance of getting something by an application to the debtor. Besides, if a man has nothing of his own, he may have friends, who, to relieve him from pressure, will do some- thing for him. The indorser, therefore, has a chance of securing him- self at least in part. The only reason that can be assigned for insol- vency taking away the necessity of notice is that notice could be of no use to the indorser. But it is almost impossible to prove that it might not have been of use. Therefore it is necessary.'* There is another circumstance in this case, however, operating pow- erfully in favor of the plaintiff. The house of James Brown & Co. consisted of James Brown and Armat Brown. When the note fell due, James Brown was in Europe, and Armat Brown in this city. A few months before it was due the defendant received from Armat Brown an assignment of his whole estate, for the purpose, among other things, of indemnifying him against his indorsements on account of James Brown & Co. Now, by the taking of this assignment, it is not unreasonable to presume that the defendant took upon himself the payment of the indorsed notes, especially as when he did receive no- tice (10 days after the note fell due), although he knew and remarked that it was out of time, he did not deny his responsibility, but said that his ability to pay would depend on the arrival of a vessel. I agree, therefore, with Bond v. Farnham, 5 Mass. 170, 4 Am. Dec. 47, where it was held that in such a case the indorser dispenses with notice. In- asmuch, then, as it appears upon the whole of this case that notice of nonpayment was not necessary, no injustice has been done by the ver- dict, and therefore a new trial ought not to be granted."* New trial refused. »8 But see West Bank v. Haines, 135 Iowa, 313, 112 N. W. 552 (1907). 6* Compare Kramer v. Sandford, 4 Watts & S. 328, 39 Am. Dec. 92 (1842). 698 LIABILITY OF PARTIES CREAMER V. PERRY and Trustee. (Snpreme Judicial Court of Massachusetts, Middlesex, 1835. 17 Pick. 332, 28 Am. Dec. 297.) Assumpsit on a promissory note dated January 27, 1834, for the sum of $697.68, made by Isaac Tliayer, of Sherburne, payable to the defendant or his order in six months from the date, and indorsed by the defendant. It was agreed by the parties that in February, 1834, Thayer stopped payment, and assigned all his property for the benefit of his creditors to one Choate and John M. Perry, who was summoned as trustee in the present action; that in the assignment the defendant, who was the father-in-law of Thayer, was a preferred creditor, and was fully secured for all his demands and liabilities; that shortly after the as- signment all the creditors of Thayer, excepting the plaintiff, agreed to give Thayer an extension of the time of payment of their respective claims for four, eight and twelve months, provided all the creditors should assent to it; and that Thayer, although the plaintiff did not agree to such extension, took possession of the property so assigned, proceeded to dispose of it as before the assignment, and continued to transact business in his own name, until after the note became due. A witness produced by the plaintiff tes'tified that the plaintiff deliv- ered the note in question to him on the day after it became due, with directions to collect the money of Thayer; that on the same day he called upon Thayer, who proposed to renew the note for the sum of $350, and to pay the residue in cash ; that this proposal was declined ; that a few days after the note became due the witness was told by Thayer that he had conveyed away all the property in his shop ; that the witness then called on the defendant, who lived in Sherburne, and informed- him that he called, by the request of the plaintiff, to settle the note, it not having been paid by Thayer ; that the defendant said that he knew that the note was unpaid ; that Thayer had endeavored to induce the plaintiff to renew the note for the sum of $350, and to receive the residue in cash; that he, the defendant, had indorsed a note for that amount for the purpose, but the plaintiff had refused it, and that Thayer's ability to pay it would depend upon his getting accom- modation at the Tremont Bank ; that before leaving the defendant the witness inquired of him what would be done about the note, and the defendant said that "the note will be paid" ; that the defendant, in the course of the above conversation, also said that he had received no letter informing him of a demand of payment and of nonpayment of the note by Thayer; that the witness inquired of the defendant if he had the benefit of the property assigned by Thayer to Choate and Per- ry for his indemnity, and the defendant replied, either "I had the ben- ^^'"^^ H DRAWER AND INDORSER 699 efit," or "I.|jam to have the benefit of it"; that he asked the defendant if he knew what Thayer had done with his goods that he had in the ■ store the last' week, and the defendant answered that he did not ; that the witness did not understand from the defendant that he, the defend- ant, was a preferred creditor, or that he was to have any benefit under the new assignment by Thayer to his brothers, or that the defendant knew of any second assignment. The plaintiff was nonsuited. If, in the opinion of the court, it would be competent for the jury to find a verdict for the plaintiff on the foregoing evidence, the non- suit was to be taken off, and a new trial granted; otherwise, judg- ment was to be rendered for the defendant. Shaw, C. J., delivered the opinion of the court. It was conceded, that no seasonable demand had been made on the promisor, and no no- tice given to the indorser. The plaintiff relied upon a waiver, as an excuse for want of demand and notice, placing it on two grounds: (1) That the promisor had placed funds in the hands of the defendant to meet the payment; and (2) that, with noticd that therd had been no demand and notice, the defendant had promised to pay the note. This is rather matter of evidence than of law ; that is, whether there is proper evidence to go to a jury, and whether it would be sufficient to warrant them in finding a waiver of demand and notice. On the first ground we think that the most which could be made of the evidence is that after this note was made, but several months before it became due, the promisor made an assignment to trustees, up- on trust among other things to secure the defendant for all debts due to him from the promisor, and to indemnify him against all his liabil- ities. Without stopping to consider whether, after this property was surrendered by the trustees, the defendant could have availed himself of it, we think the effect of this assignment was to secure and indem- nify the defendant against his legal liabilities; and as his liability as indorser on this note was conditional, and depended upon the contin- gency of his having seasonable notice of its dishonor, his claim upon the property depended upon the like contingency.*" The second assignment does not affect the question. It does not ap- pear to have been made till several days after the note became due. And on the other ground, it is a rule of law that if an indorser, know- ing that there has been no demand and notice and conversant with all the circumstances, will promise to p^y the note, this is to be deemed a waiver."® B B But compare Bond v. Farnham, 5 Mass. 170, 4 Am. Dec. 47 (1S09) ; Develing v. Ferris, 18 Ohio, 170 (1849). BO Accord: Ross v. Hurd, 71 N. Y. 14, 27 Am. Rep. 1 (1877) ; Glidden v. Chamberlain, 167 Mass. 486, 46 N. E. 103, 57 Am. St. Rep. 479 (1897). Com- pare Aebl V. Bank, 124 Wis. 73, 102 N. W. 329, 68 L. R. A. 964, 109 Am. St. Rep. 925 (1905) ; First Bank v. Gridley, 112 App. Div. 398, 98 N. Y. Supp. 445 (1906). 700 LIABILITY OF PARTIES (Part 3 But these rules In regard to notice and waiver are to be held with some strictness, in order to insure uniformity of practice and regular- ity in their application. Though questions of due diligence and of waiver were originally questions of fact, yet, having been reduced to a good degree of certainty by mercantile usage and a long course of judicial decisions, they assume the character of questions of law, and it is highly important that they should be so deemed and applied, in order that rules affecting so extensive and important a department in the transactions of a mercantile community may be certain, practical and uniform, as well as reasonable, equitable and intelligible. In the present case we are of opinion that the evidence falls short of proving a promise by the defendant either to pay the note or see it paid. The agent of the plaintiff applied to the defendant, some days after the note had become due, obviously for the purpose of obtaining from him a renewed promise. The strongest expression used by the defendant in the course of a long conversation was, "The note will be paid." This is quite as consistent with hypothesis that it was a mere assertion of his expectation that it would be paid by the promisor as of a promise on his own part to pay it ; and from the general tenor of the conversation we think it cannot be inferred that it was his in- tention, knowing of his discharge, to waive his defense, and promise to pay the note, or see it paid, at all events. This view of the evidence, considering that the burden of proof is upon the plaintiff, is decisive, and therefore the nonsuit must stand. Judgment for the defendant. CITIZENS' STATE IBANK OF MT. VERNON v. HENDRIX et al. (Supreme Court of Iowa, 1919. 187 Iowa, 1192, 175 N. W. 17.) Action at law upon two promissory notes. Judgment was prayed against the three defendants, only one of whom, Hendrix, was the maker. A cross-petition was filed by the maker, Hendrix, against his codefendants praying that Barber, the payee of the note, be charged with primary liability therefor. There ^Yas a judgment for the plain- tiff in conformity with the prayer of its petition and of the prayer of the cross-petition of Hendrix. The defendants Barber and Bennett appeal. Affirmed. Evans, J. Barber was the payee of the notes and negotiated the same to the plaintiff before due. At the time of such negotiation, Ben- nett became a guarantor of payment thereof. The only semblance of defense set up by Barber and Bennett was that the plaintiff failed to protest the notes when due and failed to give notice of nonpayment thereof. Mere failure to protest or to give notice of nonpayment did not re- lease the guarantor. He is not an indorser. Barber was an indorser. Ch. 2) DRAWEE AND INDOBSBR 701 but his' liability for the payment of the note was fixed by certain in- ■ struments pleaded in the cross-petition of Hendrix. ' From these instruments, it was made to appear that the notes in question were executed by Hendrix to Barber as a part of an agree- ment whereby Hendrix purchased shares of corporate stock in a corpo- ration principally owned by Barber, and whereby Barber agreed that Hendrix should be employed as the advertising solicitor of the corpo^ ration at a stated salary. It was further provided therein that option was reserved to each party to terminate the contract at any time, in which event Barber should take back the corporate shares from Hen- drix and should restore to Hendrix the purchase price, including the notes in suit. Within two months the contract, including the employ- ment of Hendrix, was terminated. Thereafter a further contract was signed by Hendrix and Barber, wherein these facts were recited, and whereby Barber bound himself to redeem and restore to Hendrix the notes in suit. By virtue of these instruments, therefore. Barber became primarily liable as between him and Hendrix for the payment of these notes. The question, therefore, whether he was liable as a mere indorser, is beside the mark. It is urged for the defendant Bennett that he was not a party to the contract between Barber and Hendrix and had no notice thereof and that he was not bound thereby. Let this be granted. Neither was he in any manner hurt thereby. The point thus raised on behalf of Ben- nett, if sustained, is not of the slightest benefit to him. The judgment below held him liable only as guarantor. Nor did it give Hendrix re- course over to Bennett. It did give Hendrix recourse over to Barber. Other grounds of reversal pertain to rulings on evidence. If the rul- ing of the trial court had been otherwise in each case, it could not have aided the defendants. The material facts which we have already set forth are all undisputed. None of the offered evidence rejected by the court tended in any degree to contradict or qualify the con- trolling facts above set forth. Indeed, not only are such facts undis- puted, they were admitted. The record discloses in fact no erroneous ruling at the trial. The judgment was clearly right on the larger merits, and it is affirmed. 702 LIABILITY OF PARTIES (Part 3 MISER V. TROVINGER'S EX'RS. (Supreme Court of Ohio, 1857. 7 Ohio St 281.) The declaration is on a bill of exchange for $3,150, drawn at Thorn- ville, Ohio, December 28, 1849, by Trovinger (defendants' testator), Culbertson, Fisher, and Good, on Babcock & Co., New York City, pay- able to the order of Culbertson, five months after date, acceptance waived, and indorsed by Culbertson to Smith, and by him to plaintiff. The averments are of demand and nonpayment at maturity, and that the drawers had not, either jointly or severally, at any time before or at the time the bill became due and was presented for payment, any effects in the hands of the drawee, and that there was no considera- tion for drawing the bill, or for accepting or paying it, or any part of it, by the drawee, and that neither have the defendants, as executors, nor their testator, sustained any damage by reason of not having no- tice of the nonpayment. of the bill by the drawee. Plea — That the bill declared on was an accommodation bill, made for the exclusive accommodation of Culbertson ; that all the drawers, other than Culbertson, were his sureties and accommodation drawers; that, at the time of their so drawing, he agreed with them to look after the bill and take it up at maturity ; that Smith discounted the bill with notice of these facts; that Culbertson at the maturity of the bill in- formed them that it had been taken up ; that Culbertson was solvent un- til long after the maturity of the bill ; that they supposed it had been paid, until on or about December 1, 1851, when Culbertson became, and has ever since remained, insolvent ; and that Smith was the holder of the bill until long after its maturity, when it was indorsed to plain- tiff. To this plea there is a general demurrer."^ J. R. Swan, J. The contract of a drawer is that he will pay the bill, provided it be duly presented and payment duly demanded of the drawee, and, in the event of nonpayment, he be duly notified thereof. These are, in general, conditions precedent to the liability of the drawer. This general rule is not denied; but the plaintiff claims that the drawers in the case at bar were placed beyond the operation of this rule, and were not entitled to notice of nonpayment of the bill. It is conceded on both sides that there were no funds in the hands of the drawee. The fact of drawing without funds, in the absence of other proof to explain it, is a fraud ; for the bill is negotiated under the faith that the drawer has or will place effects in the hands of the drawee to meet the bill ; and if he had no effects in the hands of the drawee, and knew that none would be placed there, and that the drawee would not meet the bill, the whole transaction is deemed fraudulent on the part of the drawer. Another, but subordinate, reason is given 6 7 The arguments of counsel are omitted. Ch. 2) DRAWER AND ^ INDOKSBR 703 fqjr this exception, that the drawer cannot, in such case, be in any way injured for want of notice of nonpayment. But it is the fraud in draw- ing and delivering such a bill, upon which the exception substantially rests ; for bankruptcy or notorious insolvency of the drawee, Qr proof that in fact no injury resulted from want of notice, will not excuse the holder from giving the drawer notice. Notice, therefore, under this exception, is to be dispensed with in those cases where the drawer had no reason to expect, when he drew the bill, that it would be paid. Thus, in the case of Rucker v. Hiller, 16 East, 43, it was laid down that the drawer is entitled to notice, if he have reasonable ground to expect tlie bill will be paid, although he have no assets in the acceptor's hands. So, in the case of Lafitte v. Slatter, 6 Bing. 623, 19 Eng. C. L. Rep. 180, in which the defendant drew a bill on one Tebbs, under the ex- pectation that a third person, not a party to the bill, who owed him, would provide funds for its payment, but neglected to do so, it was held that the defendant was entitled to notice of nonpayment. In- deed, the rule is too well settled both by English and American cases to admit of question, that if the drawer has reasonable grounds to ex- pect that the drawee will receive, through the transactions of the draw- er, or from some one else, funds to meet the bill, although the drawer had no assets in the hands of the drawee, the drawer is, notwithstand- ing, entitled to notice of nonpayment. 2 Smith's Lead. Cas. (Wallace & Hare's Notes) 55. The bill in the case at bar was an accommodation bill, made for the exclusive accommodation of Culbertson, and all the drawers other than Culbertson were his accommodation drawers ; and they expected Cul- bertson to provide funds to meet the bill. Now, unless there be something in the fact that the drawers were joint drawers with Culbertson, we can perceive no difference in prin- ciple between their situation than any other drawers who in good faith draw a bill, under the expectation and belief that the same will be met by some third person, as in the case of Lafitte v. Slatter, above cited. There is no fraud ; and whether Culbertson had made himself a party to the bill or not, if it was in fact drawn for his accommodation, they had a right to look to him as the person who would see that funds were placed in the hands of the drawee to meet the bill at maturity ; and if not met, they were entitled to notice so as to have had an opportunity immediately to take up the bill and proceed against Culbertson. It is true that if Culbertson had been the sole drawer of this bill, witliout assets in hand or any expected, no notice to him would have been necessary.^' And such seems to have been his position and rela- 6 8 Similarly, if for any other reason the drawer has no right to expect or require the bill to be paid by the drawee, presentment and notice to the draw- er is not necessary. Scanlon v. Wallach, 53 Misc. Rep. 104, 102 N. T. Supp. ]0!)0 (1!)07). See, also. West Bank v. Haines, 135 Iowa, 313, 112 N. W. 5.52 (IfKfT). Presentment and notice are not necessary to charge an indorser, if he has no reason to expect payment by the maker or drawee at maturity. Baumeister v. Kuntz, 53 Fla. 340, 42 South. 8S6 (1907). 704 LIABILITY OF PARTIES (Part 3 tion to the holder of this bill, so that no notice was necessary to him, and he may be treated as having notice of the dishonor of this bill. Such being the situation of Culbertson, it is claimed that inasmuch as Culbertson and his accommodation drawers form but one party to the bill, being joint drawers, no relation or rights between them, not grow- ing out of the face of the paper, can be set up as ground for requir- ing notice of nonpayment, and, all being but one party, notice to one is notice to all, and, if notice is not necessary to one, it is not to the others. But it is not true that the right to notice uniformly depends upon the fact whether the party is entitled to a remedy over on the bill itself against another party to the bill. The drawer of a bill never has any remedy over on the bill itself, unless it has been actually accepted; and if presented for payment at maturity, he is entitled to notice of its dishonor. An accommodation indorser is, in general, entitled to notice, although the bill was drawn without funds, and the party. for whose accommodation he indorsed is a subsequent indorser, and consequently not liable to the accommodation indorser on the face of the bill. Brown et al. V. Maffey, 15 East, 216. Notice to Culbertson, the drawers not being partners, would not be notice to the other joint drawers. 3 Kent, Com. (8th Ed.) 135, notes b and 3 ; 4 Smedes & Marsh. 749 ; Story on Bills, § 299. Notice to one partner is notice to all, because each is the agent of all; and no- tice to an agent is notice to the principal. Mere joint drawers are not agents of each other in respect to notice. But the fraud of Culbertson, in drawing without the expectation of meeting the bill, would not, we think, be tantamount to notice to his co-drawers ; they drawing for his accommodation, under the belief that he would meet the bill. In the c^se of Harris v. Clark, 10 Ohio, 5, it was held that a demand upon one of two or more makers of a joint and several note was suf- ficient to charge an indorser. The presentation of a note for payment to two or more makers of a joint and several note, on the third day of grace, especially where the makers reside at a distance from each other, is attended with embarrassments which do not arise on the giv- ing of notice of nonpayment ; and in holding that notice to one of two or more joint drawers or indorsers, not partners, cannot be deemed notice to all, we do not touch the question decided in Harris v. Clark. Demurrer overruled. CL2) DRAWER AND INDORSBB 705 NOLAN V. H. E. WILCOX MOTOR CO. (Supreme Court of Tennessee, 1917. 137 Tenn. 667, 195 S. W. 581.) Bill by L. C. Nolan against the H. E. Wilcox Motor Company, in which was filed a cross-bill. From a judgment for plaintiff, and against defendant on its cross-bill, defendant appeals. Affirmed. NEiiy, C. J. The bill was brought to recover on an account for serv- ices in the sum of $1,32L The defendant filed an answer and cross-bill interposing as offsets an item of $500, alleged to have been paid for the complainant, and a note of $3,953.47. There is no practical controver- sy as to the validity of the account, and it is clear from the evidence that the offset of $500 should not be allowed. The only difficulty in the case arises over the note. It is in the following words and figures : "$3953.47. Memphis, Tenn., Nov. 11, 1913. "One year after date I promise to pay to the order of H. E. Wilcox Motor Car Co. thirty-nine hundred and fifty-three 47/100 dollars, at office of H. E. Wilcox Motor Car Co., Minneapolis, Minn., 6% inter- est. Value received. [Signed] Nolan Bros. Motor Truck Co., "By L. C. Nolan, Pres. "E. H. Nolan, V. P." This note was indorsed 'before delivery by L. C. Nolan and also by his brother, E. H. Nolan. After delivery, for the purpose of conveying title, it was indorsed by the H. E. Wilcox Motor Car Company to the H. E. Wilcox Motor Company. The chancellor held that, under sections 63 and 64 of the Negotiable Instruments Law, L. C Nolan was liable only as indorser, and, inas- much as there was no evidence of demand of the maker, and notice of dishonor given the indorser, L. C. Nolan was not liable on the paper. It is insisted by the defendant, under the authority of Bank v. Busby, 120 Tenn. 652, 113 S. W. 390, that parol evidence was properly introduced to show an agreement on the part of the complainant to become liable on the note as joint maker, and that the evidence shows such an agreement ; but we do not think the evidence sustains the con- tention. It is insisted, for the complainant, that the indorsement was for the accommodation of the maker. The defendant insists that, if the paper was an accommodation paper at all, the party accommodated was the complainant. This contention is based on the following facts: L. C. Nolan and E. H. Nolan were the principal stockholders of Nolan Bros. Motor Truck Company, and they had never paid in their subscriptions to the capital stock. Indebtedness had been incurred in excess of the capital stock, and the corporation was practically insolvent. The note was indorsed by the complainant before delivery in order to give it SM.& M.B.& N.(2d Ed.)— 45 706 LIABILITY OF PAKTiES (Part 3 currency; that is, to induce the defendant to accept it for the debt which the corporation owed to the defendant. Does the fact that the complainant was a stockholder in the corpora- tion which made the note justify a conclusion that the indorsement was for the benefit of himself, in the sense of section 115, subsection 3, of the Negotiable Instruments Law? That section reads: "Notice of dishonor is not required to be given to an indorser in either of the following cases: * * * (3) Where the instrument was made or accepted for his accommodation." We think an affirmative answer to the inquiry just stated would be in conflict with the principles which distinguish accommodation paper. "The mercantile credit of parties," says Daniel, "is frequently loaned to others by the signature of their names as drawer, acceptor, maker, or indorser of a bill or note, used to raise money upon, or otherwise for their benefit. Such instruments are termed accommodation paper. An accommodation bill or note, then, is one to which the accommoda- tion party has put his name, without consideration, for the purpose of accommodating some other party who is to use !t, and is expected to pay it." Daniel on Neg. Inst. (6th Ed.) § 189. It is said, in 8 Corpus Juris, p. 255, § 402: "An essential element of accommodation paper is that it must be loaned or signed by one party for the purpose of procuring credit for the other, generally or for a specific purpose" — citing many authorities. To the same effect are numerous definitions appearing under section 398, note 52. The Negotiable Instruments Law (section 29) defines the term "accommodation party" thus : "An accommodation party is one who has signed the instrument as maker, drawer, acceptor or in- dorser, without receiving value therefor, and for the purpose of lend- ing his name to some other person." Section 63 of the Negotiable Instruments Law provides that a person placing his signature on an instrument otherwise than as maker, draw- er, or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity. Under this section it is held that persons putting their names on the back of a note before delivery for the accommodation of the maker are accommodation indorsers. Deahy v. Choquet, 28 R. I. 338, 67 Atl. 421, 14 L. R. A. (N. S.) 847. The party accommodated need not be a party to the note, and such accommodation may originate in the re- quest or suggestion of a third person ; but, of course, the accommoda- tion must be with the knowledge and assent of the party accommodat- ed, in order to hold the latter bound to the accommodation party, when he has paid the obligation. 8 C. J. 254, 255. Having made payment to the holder, the accommodation party may sue the accommodated party for reimbursement, since the relation between them is in effect that of principal and surety; the accommodation party being the surety. 8 C. Ch. 2) DEAWBR AND INDORSEB 707 J. p. 269, § 422; page 270, § 424; page 272, § 425; Daniel, Neg. Inst. (6th Ed.) § 1342. Now, if it be true, as matter of law, that one who indorses an ac- commodation paper for a corporation becomes an accommodation par- ty, not only to the corporation itself, but to the individual stockholders as well, then a debt is raised against them in favor of the accommoda- tion party without their consent, and it may be even without their knowledge. It would follow that, instead of incorporation protecting stockholders from individual liability for the debts of the corporation, they could be made personally liable at the will of the managing officers of the corporation, and any one who might choose to become its ac- commodation indorser, or an accommodation party for it in any form. So it cannot be true that the mere fact of indorsing for the accommo- dation of a corporation raises a personal liability against the stock- holders; nor is this conclusion invalidated by the fact that the accom- modation party is himself one of the stockholders. A corporation is a legal person, distinct from its stockholders and from each of them. If the stockholder be not personally bound upon the debt of the corpora- tion covered by the paper to which he lends his name, it is not possible to say that it is for his accommodation, unless it be laid down as a true principle that whatever accommodates the corporation as a legal entity necessarily accommodates in law each of its stockholders, in the sense of the law merchant. This would be equivalent to saying that, when- ever a stockholder goes upon an accommodation paper for the corpo- ration, he accommodates himself and is in effect only a joint maker, which position is untenable. The party accommodated is defined as "he to whom the credit of the accommodation party is loaned." 8 C. J. p. 254, § 401. The inquiry always is "as to whom did the accommo- dation party loan his credit as a matter of fact." Id. Can it be said that the accommodation party lends his credit to him- self? It is true that, when a corporation is accommodated, there is an incidental benefit conferred upon all of its stockholders; but "the fact that one derives some incidental benefits from the paper will not make it an accommodation paper as to him." Id. Thus a note given by a bank director to the bank for the overdue interest on another note held by the bank, so as to enable it to pass the inspection of the bank exajniner, is a note for the accommodation of the maker of the other note, and not for the accommodation of the bank, and the bank can en- force it, although no consideration therefor moved to the director. Skagit State Bank v. Moody, 86 Wash. 286, 150 Pac. 425, L. R. A. 1916A, 1215 ; 8 C. J. 255, note. The case of McDonald v. Luckenbach, 170 Fed. 434, 95 C. C. A. 60, is in its facts strikingly like the case before us. In that case it appeared the defendants, who were respectively the president and secretary, and also directors and large stockholders in the corporation. 708 LIABILITY OF PARTIES (Part 3 indorsed a note made by the corporation to raise money. When tlie note matured the company had no money to pay it, as defendants knew. It was held that the defendants were liable only as indorsers, and could not be legally proceeded against without presentment and notice of dishonor. It was insisted in that case that the defendants were really liable as makers, and therefore notice of dishonor was unnecessary, and also that under the circumstances of the particular case no notice of dishonor was necessary, because the defendants were the officers of the company upon whom demand would have to be made, and were fully advised of the fact that the company was without funds to pay the note. In the opinion it was said: "In transactions of this kind, the corporate entity is as distinct from its officers and directors as it is from third persons with whom it transacts business, and stockholders or directors who lend their individual credit to the corporation of which they are members, by indorsement of negotiable paper, or otherwise, are entitled to the same rights and immunities which attach to the status of indorser or surety, where third parties have assumed those liabilities." , In addition, the court said: "The contract of the defendant, as in- dorser of the company's note, was that his liability to pay the same was secondary, and would only become fixed after its maturity, by due presentment to the maker, and, in case of refusal or default by the maker, by due notice of such default to him as indorser. In the ab- sence of waiver on his part, no assumption that, by reason of his of- ficial position in the corporation, he might have known, or did know, that the company was unable to pay the note at maturity, can deprive the defendant of the protection of his contract, or relieve plaintiff's decedent from the requirement to give due notice of default, in order to fix his liability as indorser. The court below has not placed its de- cision upon any distinct ground of waiver, but defendant in error con- tends here that the evidence discloses such a waiver on the part of the defendant. The evidence relied upon for this contention is largely what we have already referred to as the ground upon which the court below concluded that the transaction was really a loan made to the de- fendant and his colleagues for their own purposes. We find, however, that, as there was no express waiver of notice or protest in the instru- ment itself, so none can be predicated on the language or conducj of the defendant aliunde. The liability of the defendant, therefore, is determined by sections 63 and 64 of the Pennsylvania Negotiable In- struments Act, above quoted, to be that of an indorser, and not of a maker, of the note in question." We are again referred to Bank v. Busby as authority for the propo- sition that a stockholder in a corporation, circumstanced as was the com- plainant in the present case, on indorsing the company's note before de- livery, if such indorsement was for accommodation, must be held to Ch. 2) DRAWER AND INDORSHB ' 709 have indorsed for his own accommodation, and that he could not there- fore be entitled to notice of the dishonor of the paper. The decision in the case of Bank v. Busby was based primarily upon the fact that the evidence showed that all the stockholders who indorsed the note had, at the time, agreed among themselves to be joint makers. Of course, stockholders could make a note, all as principals, for the ac- commodation of their corporation. If they were such principals, no question concerning notice of dishonor could arise; nor do we see that it could be said in any legal sense that they were making the note for the accommodation of themselves. If it was meant that, because the same parties had been bound on a previous note, or notes, they ac- commodated each other by executing a renewal as principals, while this may have been an accommodation in the sense of a benefit to each other, yet it was not a lending of credit as before explained, and could have no bearing upon the operation of section 115 of the Negotiable In- struments Law. We are unable, therefore, to follow Bank v. Busby on the point just indicated. As to the point that there was no need of presentment, or notice of dishonor, because the Nolan Bros. Motor Truck Company was in- solvent, and known to be so by complainant, and because he was one of the principal stockholders and president, we need only say that this point is fully shown by the authorities to be without merit. Alton v. Robinson, 2 Humph. (21 Tenn.) 340, 344, 345 ; Hudson Furniture Co. V. Harding, 70 Fed. 468, 17 C. C. A. 203, 34 U. S. App. 148, 30 L. R. A. 513, 519, 520. That insolvency will not excuse demand and notice, see, also, Groton v. Dallheim, 6 Greenl. (6 Me.) 476 ; Sanford v. Dilla- way, 10 Mass. 52, 6 Am. Dec. 99 ; Famum v. Fowle, 12 Mass. 89, 7 Am. Dec. 35; Barton v. Baker, 1 Serg. & R. (Pa.) 334, 7 Am. Dec. 620. And this is true, though the indorser indorsed the note of the insolvent for the purpose of giving it credit. Buck v. Cotton, 2 Conn. 126, 7 Am. Dec. 251. Moreover, no such exception is made in the Negotiable Instruments Law, which purports to cover the subject. It is true, as insisted by defendant and cross-complainant, that where the note is on its face payable at the business place of the holder, it is sufScient that it be there on the day, in the hands of the holder, or his agent, ready for payment, and that no funds are present, and no one calls to make payment; no formal or clamorous demand in such case being necessary. But this does not dispense with the necessity of giv- ing notice to the indorser of the failure of the maker to pay. State Bank v. Napier, 6 Humph. (25 Tenn.) 270, 44 Am. Dec. 308 ; Apperson & Co. V. Union Bank, 4 Cold. (44 Tenn.) 445 ; F. Lane & Co. v. Bank of West Tenn., 9 Heisk. (56 Tenn.) 419, 433-436. Moreover, in the case before us, the holder was the H. E. Wilcox Motor Company, while the place of payment was the office of the H. E. Wilcox Motor Car Company, a diifferent corporate entity. So it does not appear why 710 LIABILITY OF PARTIES (Part 3 tlie usual formal presentment should not have been made. However, as no notice was given to the indorser, the result would be the same — the release of the indorser. On the grounds stated, we are of the opinion that the chancellor com- mitted no error in disallowing the two offsets and decreeing in favor of the complainant upon his account. His judgment is therefore af- firmed. Buchanan, J., dissents. HOLTZ V. BOPPE. (Court of Appeals of New York, 1868. 37 N. X. 634.) See ante, p. 651, for a report of the case. V' RINDGE V. KIMBALU (Supreme Judicial Court of Massachusetts, Suffolk, 1878. 124 Mass. 209.) Contract upon a promissory note for $500, payable to the order of the defendant, and indorsed by him to the plaintiff. At the trial in the superior court, before Pitman, J., without a jury, it appeared that no demand had been made on the note or notice of nonpayment given to the defendant ; but it was admitted that the de- fendant wrote on the back of the note the words, "Waive demand and notice." The evidence was conflicting upon the question whether these words were written before or after the note was due. The defendant testified that he wrote these words upon the note intelligently and intentionally, with a full knowledge of all the material facts. The judge ruled that such a waiver of demand and notice was as effectual after as before the maturity of the note, and ordered judg- ment for the plaintiff. The defendant alleged exceptions. Per Curiam. This point has been repeatedly determined by recent decisions of this court, and should not have been brought up again. Matthews v. Allen, 16 Gray, 594, 77 Am. Dec. 430; Harrison v. Bailey, 99 Mass. 620, 97 Am. Dec. 63 ; Third National Bank v. Ashworth, 105 Mass. 503. Exceptions overruled." 5 Accord: Toole v. Crafts, 193 Mass. 110, 78 N. E. 775, 118 Am. St. Kep 455 (1906) ; Id., 196 Mass. 397, 82 N. E. 22 (1907). Ch.2) DRAWER AND INDORSEE 711 REED V. SPEAR. (Supreme Court, Appellate Division, Fourth Department, New York, 1905. 107 App. Div. 144, 94 N. Y. Supp. lOOT.) HiscocK, J." This case was brought on for trial before the county judge and a jury. At the close of the evidence each side moved for a direction of a verdict, and therefore any questions of fact or divergent inferences from the evidence are to be regarded as having been settled in favor of the plaintiff. The action-Va^ brought against the defendant as indorser of a prom- issory note made by one Harry A. Lamkin, dated at Sinclairville, Chau- tauqua county, N. Y., August 9, 1900, whereby said maker, for value received, promised "to pay Emma Reed, or bearer, four hundred dol- lars and ajfnual interest in the following manner to wit: $100 of the principal. August 9, ia02; $100 August 9, 1903; $100 August 9, 1904, and $100 'August 9th, 1905, the interest to be paid annually on the 9th day of August of each year; the undersigned to have the right to pay any part or the whole of said principal sum before the same shall become due." Recovery was sought with interest on the three installments of prin- cipal becoming due respectively August 9, 1902, August 9, 1903, and August 9, 1904. Upon the trial, plaintiff abandoned his claim as to the first installment, but recovered iipon the last two. It is insisted by the defendant that such recovery was erroneous, that no proper or neces- sary evidence was given of the presentment or notice of dishonor of said note as to said installments, and that the evidence given by plain- tiff tending to excuse him from presentment and notice of dishonor was incompetent and improperly received under his complaint. We conclude that plaintiff has failed to establish the necessary notice of dishonor of said note as to said first installment, and cannot recover therefor, but that he established a right to recover as to the second in- stallment embraced in the judgment. Plaintiff having abandoned his claim to the installment becoming due August 9, 1903, we need not discuss that. Lamkin, the maker of the note, died a few days before the install- ment of August 9, 1903, became due. A few days after the same be- came due, one Chessman was appointed administrator of his estate. Emma J. Reed, the payee and owner of the note, died March 7, 1904; and subsequently plaintiff was appointed her administrator. No place of payment being specified in the note, and the person primarily liable thereon being dead; and no personal representative having been ap- pointed, the holder of the note was excused from presenting the same for payment of the installment becoming due in August, 19,03, under the provisions of section 136 of the negotiable instruments law (Laws 1897, p. 737, c. 612), which reads as follows: "Where the person 80 Parts of the opinion are omitted. 712 LIABILITY OF PARTIES (Part 3 primarily liable on the instrument is dead, and no place of payment is specified, presentment for payment must be made to his personal rep- resentative, if such there be, and if with the exercise of reasonable dili- gence he can be found." But as we construe the statute, the holder of the note, although ex- cused under the circumstances from presentment for payment, was not excused from giving notice of dishonor to the indorser. Section 160 (page 739) of the statute referred to provides: "Except as herein otherwise provided, when a negotiable instrument has been dishonored by nonacceptance or nonpayment, notice of dishonor must be given *' * * to each endorser and any * * * endorser to whom such notice is not given is discharged." Section 143 (page 738) provides that: "The instrument is dishon- ored by nonpayment when : (1) * * * (2) Presentment is excused and the instrument is overdue and unpaid." These sections seem to make it clear that, although presentment for nonpayment may be excused under such circumstances as existed in this case, the indorser is still entitled to notice of dishonor of the in- strument by its being overdue and unpaid. No proof was offered of notice to the defendant indorser of the dis- honor of the note as to this installment, except as the plaintiff seeks to have it supplied by inferences drawn from certain conversations with the defendant, but which we feel are insufficient for that pur- pose. * * * We pass to the consideration of the installment becoming due in Au- gust, 1904. At this time an administrator had been appointed of the maker of the note and also of the holder. The latter lived at Sinclair- • ville, in Chautauqua county. The former resided at Fredonia, in said county, some distance from the former place, and connected therewith by railroad. At the time this installment became due he was, how- ever, a member of a banking firm which had its place of business in Sinclairville, and was also interested in other business industries lo- cated in the same place, and was accustomed to spend more or less time in looking after said interests. Upon the day when the installment be- came due, plaintiff went two or three times to the banking office for the purpose of presenting the note to the maker's said administrator, but was unable to find him. He also sought him at the railroad station near the seat of his other business interests, and at a time when he might be expected to take or alight from a train, but did not find him. Having failed to find him at about 9 o'clock in the evening, he drew a notice, of which the following is a copy: "Sinclairville, August 9, '04. "To W. N. Spear : Take notice that the last $100 installment of a note given to Emma J. Reed August 9th, 1900, by Harry Eamkin and endorsed by you fell due this day and remains unpaid at this hour of 9 p. m. and that I shall look to you for payment. "C. M. Reed, Admin. E. J. Reed Est." Ch. 2) DRAWER AND INDORSER TL^ Upon the following day he sought to serve this notice upon the de- fendant at his store in Fredonia, but after one or more efforts, having failed to find him, delivered it, sealed and addressed, to defendant^ wife in the 'store, who acted as his clerk and assistant. There is evi- dence that the notice was actually received by the defendant upon the date of service, August 10, 1904. Upon this evidence the county judge was entitled, as a matter of fact, if not of law, to find, a sufficient compliance by plaintiff with the provisions of the negotiable instruments law applicable to such a case. Under section 136, already quoted, the obligation existed to make pre- sentment of the note to the personal representative of the maker if "with the exercise of reasonable diligence he could [can] be found." And, conversely, under section 142 (page '738), presentment for pay- ment was dispensed with where the same could not be made "after the exercise of reasonable diligence." Section 167 (page 740) provided that the notice of dishonor "may be in writing or merely oral and may be given in any terms which sufficiently identify the instrument, and indicate that it has been dishonored by nonacceptance or nonpay- ment." Sections 167 and 168 respectively provide that such notice may be given by delivering it personally or through the mails, and that it may be given either to a party himself or to his agent in that behalf. The evidence fairly warranted a finding that reasonable diligence was exercised by plaintiff in his effort to present for payment the note to Mr. Chessman as administrator of the maker of the note. No ques- tion is raised but that the notice of dishonor was served in due time, and we think no question can be successfully made but that said notice was sufficient in form and properly served upon defendant's wife and agent, especially in view of the fact that it actually came into defend- ant's possession within the time allowed by law. * * * Judgment reversed, in so far as it allows a recovery for the install- ment due August 9, 1903 ; otherwise, affirmed.'^ 01 See Merchants' Bank v. Brown. 80 App. Div. 599, 83 N. Y. Supp 1037 (1903), as to notice in case the Indorser is dead. 714 LIABILITY OP PARTIES k^Part 3 TORBERT V. MONTAGUE. (Supreme Court of Colorado, 1906. 38 Colo. 325, 87 Pac. 1145.) MaxwBll, J."^ a trial to the court below, without a jury, resulted in a judgment against appellant as indorser upon three promissory notes. It is conceded that there was no presentment of the notes for payment, as required by section 70, p. 225, and no notice of dishonor, as required by section 89, c. 64, p. 228, of the Acts of 1897, "Nego- tiable Instruments" (3 Mills' Ann. St. Rev. Supp. §§ 245m, 247d). But it is claimed that there was a waiver of presentment and notice of dishonor under sections 83 and 109 of the above statute. * * * Over defendant's objection plaintiff's husband, who was acting as her agent in the matter, was -allowed to testify, in substance, that at the time the notes were indorsed and delivered to witness by Mr. Fow- ler, of the firm of Torbert & Fowler, of which firm appellant was a member, Mr. Fowler said, quoting from the abstract of the record : "That they [meaning Torbert & FowlerJ would be responsible for the interest and the principal when it becomes due ; that I would have nothing to do whatever with the collection of the note, or the principal of it; that they would look after the collection of the note when it became due and pay me the interest when it became due" ; and that the same statement was substantially repeated several times thereafter prior to the maturity of the notes. A motion to strike out all of this testimony interposed by defendant's counsel was overruled, and an ex- ception' saved. There is evidence in the record to the effect that Torbert & Fowler were conducting a chattel loan and business chance business in the city of Denver ; that the notes upon which this suit was brought were "■indorsed by Mr. Fowler in the name of Torbert & Fowler at the time they were delivered to appellee's agent; that the firm of Torbert & Fowler managed and conducted the entire business for appellee, col- lecting and paying over to her the installments of interest as they fell due and a portion of the principal of one of the notes, which seems to have been realized from the foreclosure of a chattel mortgage given to secure the note upon which a partial payment was made. In short, the evidence tends to prove that Torbert & Fowler were acting as the agents of appellee in the matter. Appellant did not introduce any evidence. The judgment of the court, set forth, in full in the abstract, con- clusively shows that it was based, in part at least, upon the testimony of the witness as to a parol agreement made contemporaneously with the indorsement of the noteS to appellee. It is settled in this state that the legal effect of a blank indorsement, which was the indorse- ment upon the notes sued upon in this action, cannot be varied by parol. Martin v. Cole, 3 Colo. 113 ; Dunn v. Ghost, 5 Colo. 134 ; Doom v. 2 Part Of the opinion is omitted. Ch. 2) DRAWER AND INDOESEB 715 Sherwin, 20, Colo. 234, 38 Pac. 56. This being the rule, all testimony as to a parol agreement between the indorser and the indorsee con- temporaneous with the indorsement of the note sued upon was incom- petent, and should have been rejected. It is insisted by appellee that there is sufficient evidence in the rec- ord, exclusive of the incompetent testimony above referred to, to sup- port the finding of the court to the effect that there was a waiver of presentment for payment and notice of dishonor. As seen above, by sections 83 and 109 of the negotiable instrument statute presentment for payment and notice of dishonor may be waived, and the waiver may be express or implied. Appellant concedes this to be the law, but insists that the testimony relied upon, which is quoted frorn the abstract, supra, does not prove a waiver. The findings of the court were as follows : "I am compelled to find, from the evidence in the case, that the evidence discloses the fact that the conduct and promises and manner of transacting the busi- ness by the firm, on the part of Mr. Fowler, at that time misled and caused the plaintiff to rely upon those promises and upon that course of conduct, to the extent that she left the matter entirely to the firm of Torbert -& Fowler to attend to the collection and take charge of the matter, and that the evidence discloses they got their pay for it and got their commission on this matter, and undertook the responsibility of doing it, and that was the cause, under the evidence at least, for the failure on the part of the plaintiff to present these notes and give any further notice of dishonor." * * * The question to be determined is whether, upon a fair construction of the language used by Fowler, his conduct in relation to the matters in contijoversy, and his acts as agent of appellee, were calculated to mis- lead appellee, to put her off her guard, and to induce her to forbear taking the necessary steps to charge appellant as indorser. In Union Bank v. Magruder, 7 Pet. (U. S.) 287, 8 L. Ed. 687, the United States Supreme Court, according to the headnote, held: "Whether certain declarations by the indorser of a note amounted io a waiver of de- mand on the maker and notice to the defendant, or to a new promise in consideration of forbearance, are questions of fact for the jury, under instructions from the court, not mere questions of law." Decla- rations intermixed with acts and conduct, as in this case, seem to us to raise a question of fact to be determined by the court or jury. So the rule is stated by Daniel, § 1103, and Randolph, § 1383, quoted above. The court below found this fact against the appellant, and we do not feel at liberty to disturb it. In view of all the circumstances surrounding this case, as disclosed by the transcript of the evidence,, which has been read with great care, the judgment will be affirmed."' 63 See In re Swift (D. 0.) 106 Fed. 65 (1901). 716 LIABILITY OF PARTIES (Part 3 CHAPTER III TRANSFERROR BICKNAIvIv & SKINNER v. WATERMAN. (Supreme Court of Bliode Island, 1857. 5 R. I. 43.) Assumpsit on a contract for the sale of 65 bales of cotton, made by the defendant with the plaintiffs.^ Ames, C. J. This is a mixed contract of sale and exchange, by which the defendant, on the 24th day of November, 1856, engaged with the plaintiffs, through a broker, to sell to them a specified lot of Augusta cotton, being 65 bales marked "Hoppin," at 13% cents per pound, for the note of one John E. Weeden for about $1,350, having then some four months to run; the balance to be secured by the note of the plaintiffs at six months.. It is in proof, that about one-half of the sales of cotton in the market of Providence are made in this way of barter for the notes of third persons, in which it is understood, as sworn by the broker, and as has been frequently proved before us, that the notes are "put oflf" — that is, exchanged — for the cotton ; the very purpose of the transaction on the part of the purchaser being to get rid of the risk of the solvency of the paper, even though he pay an enhanced price for the cotton. The testimony of the broker who conducted this bargain shows that, so far as the note of Weeden would go towards the price of the cotton at the agreed rate, such was the nature of this <:ontract; time being expressly given to and taken by the defendant to make inquiries concerning the solvency of Weeden, before he bound himself to it. The contract, as of a present sale and exchange, was concluded by the assent of both parties, and was so entered in the bro- ker's book on the evening of the 24th of November; and the subjects of the contract being perfectly identified by it, and nothing remaining to be done but muttially to deliver the stipulated cotton and notes, the effect of the transaction, in the absence of fraud, was at common law — and we have no statute which touches the matter — to vest the title to the cotton in, and place it at the risk of, the plaintiffs, and to vest the title to Weeden's note in, and place it at the risk of, the defend- ant. Such was the view which forced itself upon my own -mind when the case was first tried before me with a jury, and such is the con- clusion to which we have all arrived, upon the maturest considera- tion of the arguments and authorities which have been pressed upon our attention. A well-known common-law principle, applicable alike to sales and exchanges of personal things, is that fraud or warranty is necessary 1 The statement of the case, the arguments of counsel, and part of the opinion are omitted. Ch. 3) TRANSFBEEOR 717 to render the vendor or exchanger liable, in any form, for a defect in the quality of the thing sold or exchanged. Applying this principle to the sale or exchange of the note of. a third person, transferred by indorsement without recourse or by delivery merely, the vendee or person taking it in exchange takes the risk of the past or future in- solvency of the maker, or other party to it, unless indeed, in case of past insolvency, the vendor or exchanger is guilty of the fraud of pass- ing it off with knowledge of that fact." The case of a sale or exchange of a forged note is equally within the above principle ; since the parting with it for value is a represen- tation, and so a warranty, that it is the note of the persons whose note it purport^ to be — ^that is, is the thing as which it is sold or ex- changed. Although decisions may undoubtedly be found departing from these ancient common-law principles, yet this is the _ settled doc- trine of Westminster Hall, and is supported by the main current of American authorities. Byles on Bills, 123-125, 307, and cases cited, especially Camidge V. AUenby, 6 B. & C. 373 ; Gompertz v. Bartlett, 24 Eng. L. & Eq. 156 ; Gumey v. Womersley, 28 Eng. L. & Eq. 257 ; Hall V. Conder, 38 Eng. L. & Eq. 259, and cases cited; 2 Am. Lead. Cases (Hare & Wallace's Notes) 180-189. As remarked by Sergeant Byles in his valuable treatise, after quoting several conflicting Ameri- can cases bearing upon this subject: "The confusion has arisen from neglecting to distinguish between questions of law and questions of fact." Byles on Bills, 122, note "i." In other words, what was the agreement of the parties with regard to the transfer of a note or bill — that is, whether it was by way of sale or exchange, or, in case of a precedent debt, whether by way of complete payment or as mere security for payment of it — is a question of fact, and varies with proof, direct and presumptive, in cases in other respects similar. It is obvious what contrariety of decision must necessarily arise if courts, mistaking their province, undertake to decide such questions as if they were questions of law; and, however they decide them, of what little value their decisions must be as precedents. In case at bar, the matter of fact has been withdrawn from the jury, and, under the statute, has been submitted to us by the parties, along with the matter of law. We find, in fact, that the defendant agreed to take the note in question, so far as it would go, in exchange for his cotton; and this, without any fraud practiced upon him by the plaintiffs, either by expression' or suppression, and without express war- ranty, on their part, of the solvency of the maker of the note. In such case, the law certainly implies no warranty by the plaintiffs of the solvency of the maker of the note; and we see no reason why they should not be entitled to the benefit of a contract fairly made by them. because the risk assumed under it by the defendant has chanced to lurn against him. 2 See Brown v. Montgomery, 20 N. T. 287, 75 Am. Dec. 404 (1S59). 718 LIABILITY OP PARTIES (Part 3 The case of Roget v. Merritt, 2 Caines (N. Y.) 117, is relied upon as sustaining the defense that by the insolvency of Weeden the consid- eration agreed to be given to the defendant had wholly failed before the execution of the contract by delivery, and upon that ground that he had a right to retract from the contract. The note existed at the time of the contract, like the sea-damaged goods sold during a voy- age, or the annuity whilst the person upon whose life it was depend- ent was in extremis, and, though perhaps of little value, will, like them, support a contract of sale which is based upon it (Sutherland v. Pratt, 11 M. & W. 296; Hastie v. Couturier, 20 Eng. L. & Eq. 535); and it would be a singular perversion of a contract, the legal effect of which is that the risk of the value of a note is to be assumed by one con- tractor, to say, that he was freed from the contract upon the ground of failure of consideration, because the note did not turn out to be as valuable as he anticipated. * * * Judgment for plaintiff.' LITTAUER V. GOLDMAN. (Court of Appeals of New York, 1878. 72 N. T. 506, 28 Am. Rep. 171.) Appeal from judgment of the General Term of the Supreme Court in the First Judicial Department, entered upon an order affirming an an order of Special Term, which overruled a demurrer to the com- plaint herein. Reported below, 9 Hun, 231. The complaint alleged, in substance, that defendant sold and trans- ferred by delivery to plaintiff, for valuable consideration, a promissory note, which was void for usury in its inception; that plaintiff sued the makers, who interposed the defense of usury ; that plaintiff notified defendant of the bringing of the action and of the defense set up, and requested him to take charge of the prosecution of said action, and that he would be held liable in case the defense was sustained ; that plaintiff was beaten in said action and a judgment for costs rendered against him. It was not alleged that defendant had knowledge of the defect, or that any express representation or guaranty was made. The defendant demurred that the complaint did not state facts suffi- cient to constitute a cause of action.* Miller, J. The right of the plaintiff to maintain this action rests upon the ground that the note in question, which was sold and trans- ferred by the defendant to the plaintiff, was invalid and void, by rea- son of its original usurious consideration. It is alleged that, being in violation of the statute against usury, it was no note, and by implica- tion of law the defendant did warrant and undertake that the same 8 Compare Dille v. White, 132 Iowa, 327, 100 N. W. 909 (190G) ; Gordon v. Irvine, 105 Ga. 144, 31 S. E. 151 (1898). * Tlie arguments of counsel are omitted. ' Ch. 3) TRANSFERROR 719 was not usurious or illegal, but a valid and legal note. The complaint does not allege that the defendant had any knowledge of the usury or was a party to the same, but states that the seller by the act of transfer for a valuable consideration, impliedly warranted that the paper was genuine and all that it purports to be upon its face, and incurred an obligation by the sale to make the paper good, although he did not indorse or guarantee the same. The question whether an ac- tion will lie for the loss sustained by the plaintiff by reason of the note being usurious, and the recovery of the amount thereof thereby defeated, has never arisen under the precise circumstances presented in this case, and demands an examination of the principle applicable to the contract entered into upon the sale of paper of this description, and of the authorities bearing upon the subject. The rule is well settled that generally one who transfers paper by delivery only incurs none of the liabilities which attach to an indorser, for the reason that the irresistible inference is that if he transfers it, and it is received without his indorsement, that such liabilities did not enter into the bargain or the intention of the parties. This rule, however, is not without exception, and the transferror of notes or bills by delivery warrants the genuineness of the signatures, and that the title is what it purports to be. If the paper is forged, the transferee is liable upon the original consideration, which has never been extin- guished by the sale. 2 Parsons on Contracts, 37, 38. So, also, it is laid down by the same author that the vendor without indorsement war- rants that the paper is of the kind and description that it purports to be, and there is an implied warranty that the parties to the paper are under no incapacity to contract, as from infancy or marriage or other disability, and the assignment of a bill or note for a valuable consideration raises an implied warranty that the assignor has done nothing, and will do nothing, to prevent the assignee from collecting it. The reason given as to forged paper is that it is nothing, and the one whc5 has transferred it has transferred nothing, and is therefore liable. Id. 39, 40. The question whether paper tainted with usury, which' is transferred by the holder without knowledge of this defect, can be regarded as within the principle of the exceptions stated, is not free from difficulty, and at first view there appears to be some ground for claiming that a note made in violation of a statute which declares usury to be a mis- demeanor, and that all paper of this kind shall be void, should stand on the same footing as forged or other paper, which is excepted from the general rule. Although the reported cases do not decide the ex- act point, an examination of some of the leading authorities tends to throw some light on the subject. In Marvin, Pres't of the Delaware Bank, v. Jarvis, 30 N. Y. 226, a note was transferred to the plaintiff which had been taken at a usuri- ous premium by the defendant and the avails received by him. Upon being sued, the defense of usury was interposed, which was successful. 720 LIABILITY OF PARTIES (Part ^ and the bank sued the defendant to recover the amount and costs of prosecuting the note. It was held that one who transfers a chose in action impliedly warrants that there is no legal defense to its collec- tion arising out of his own connection with its origin, and that the party accepting the transfer is at liberty to act upon the implied asser- tion of the validity of the paper, and to bring an action for its collec- tion, and when defeated to recover the costs incurred by him from his assignor. The opinion lays down the rule that the authorities hold the doctrine in general terms that the vendee of a chose in action, in the absence of express stipulations, impliedly warrants its legal sound- ness and validity, and that exceptions do not exist when the invalidity of the debt or security sold arises out of the vendor's dealing in re- lation to it. It is also said that the act of transferring the note was the strongest possible assertion that no legal defense existed. The defendant in the case cited had knowledge of the usury, which was not the fact here; and hence it differs from the case at bar, and is not decisive of the question ; but the opinion is very strong in uphold- ing the general doctrine referred to where there is a radical defect in the note. In Webb v. Odell, 49 N. Y. 583, a recovery for the purchase price, was upheld where notes were sold for less than their face, upon a rep- resentation that they were business paper, when, in fact, they were accommodation notes, and thus usurious and void in the hands of the vendee. The decision is placed upon the ground that the thing sold differed in substance from what the purchaser was led by the vendee to believe he was buying, and the difference was so substantial and essential in its character as to amount to a failure of considera- tion. The representation that the notes were business paper was an important fact, and hence the decision does not exactly cover a case where the party transferring had no knowledge of the true character of the paper. In Ross V. Terry, 63 N. Y. 613, the defendant sold a bond and mortgage to the plaintiff, which was usurious and void. The defend- ant was personally concerned in the making of them, and in the un- lawful acts which vitiated them, and it was held that there was an implied warranty of the validity of the securities. It will be observed that here, also, the defendant had knowledge of the usury, and hence the case is not directly in point. In Fake v. Smith, 7 Abb. Prac. (N. S.) 106, the defendants, who sold a usurious note to the plaintiff, were held liable upon an implied warranty by defendants, on the sale of the note, that there was no legal defense to an action upon it; but it appeared that the defend- ants were privy to the consideration of the note, and the facts and circumstances under which it was given and transferred. The foregoing constitute the principal cases in this state which have a direct bearing upon the question arising where the notes trans- ferred were tainted with usury. In the cases of Whitney v. National Ch. 3) TEANSFEEEOE 721 Bank of Potsdam, 45 N. Y. 305, and Bell v. Dagg, 60 N. Y. 530, the notes were forgedj and the implied warranty related to the genuine- ness of the signature, which, as we have seen, is expressly provided for in the elementary works. In the case of Gemport v. Bartlett, 75 Eng. C. L,. 849, an unstamped bill of exchange, indorsed in blank, purporting to be a foreign bill, was sold without recourse by the holder. It was shown to have been drawn in the country where the parties resided, and was for that rea- son unavailable for want of a stamp, and it was held that the article did not answer the description of that which was sold, viz., a foreign bill, and hence the purchaser could recover back the price from the vendor. This case sustains the doctrine that the money might be recovered as paid under a mistake of fact, which seems to have been a mutual mistake, and the whole case appears to have been disposed of upon the ground that the article did not answer the description. There is some analogy between the case last cited and the one at bar, for here the note on its face purported to be valid, and was only shown not to be by proof of extrinsic facts, which affected the original con- sideration. The difference, however, is that in the case last cited the purchaser contracted for a foreign bill which required no stamp, and did not receive what he was entitled to, while here there was a secret defect unknown to both parties, and not provided for; and as was said by the L,ord Chief Justice in Gemport v. Bartlett: "If it really had been a foreign bill, any secret defect would have been at the risk of the purchaser." From the authorities to which we have adverted, it appears that in every case where usury was involved there was knowledge of its existence on the part of the person who held and transferred the note. It is true that in Delaware Bank v. Jarvis, supra, it is remarked by the judge that he does not consider it a material circumstance that the defendant had knowledge that the note had not been negotiated prior to the time when it was received, and, as we have seen, lays down the broad rule that, in any case where there is not an express agreement, the vendor of a chose in action warrants, not only the title, but the soundness and validity, of the note. The opinion of the learned judge is entitled to great respect; but, as the facts show it was not necessary to go to this extent to sustain the decision made, it is not entirely controlling. It is of grave importance whether a scienter is material for the pur- pose of upholding an implied warranty in a case of this kind. In Hoe V. Sanborn, 21 N. Y. 552, 78 Am. Dec. 163, Selden, J., lays down the rule "that whenever an article sold has some latent defect, which is known to the seller and not to the purchaser, the former is liable for this defect if he fails to discover his knowledge on the subject at the time of the sale." He proceeds to state that, where knowledge is proved by direct evidence, the responsibility rests upon the ground of fraud ; but where the probability of knowledge is so strong that courts Sm.& M.B.& N.(2d BD.)^i6 722 LIABILITY OF PARTIES (Part 3 will presume its existence without proof, the vendor is held respon- sible upon an implied warranty. And the difference between the two cases is that in the one the scienter is actually proved ; in the other it is presumed. A scienter is, therefore, essential to establish an im- plied warranty ; and, as we have seen, the cases to which we have re- ferred all show knowledge on the part of the vendor. The cases which are cited to sustain the doctrine that the scienter is immaterial where there is a warranty either express or implied do not go to that extent. In Evertson v. Miles, 6 Johns. 138, the action was, assumpsit for a breach of warranty on the sale of a horse, and the judge upon the trial rejected evidence to show that the representations proved were false, and decided that the plaintiff must show an express warranty, other- wise they could not recover upon the declaration. This ruling was sus- tained by the higher court, and it was said that there is no case which permits a plaintiff to establish deceit and fraud, when he declares only in assumpsit on a warranty express or implied. The question presented related to the form of the complaint, and has no application to the case now considered, where the point is, What constitutes an implied warranty upon the sale of a chose in action? In Ross V. Mather, 47 Barb. 582, the action was for a false war- ranty in the sale of a horse, and it was held it was unnecessary for the plaintiff to make proof of the scienter ; but proof of the warranty was sufficient, and whether the defendant knew the warranty was false at the time of making it was of no importance. The warranty in the case cited was express, and of course, when proved, made out a case. Here the question is, where there is no express warranty and the evidence does not show knowledge or deceit, whether any implied warranty is made out, and the cases cited furnish no light on that subject. In Williamson v. Allison, 2 East, 446, the warranty was proved and the same rule was laid down. The reason of the rule was stated by Lord EHenborough to be that the plaintiff was equally entitled to recover on the •same proof, by striking out the whole averment of a scienter. This is apparent, and hence the rule last stated has no appli- cation to a case where the warranty is necessarily dependent upon proof of knowledge. Without proof of such knowledge no warranty is made out, for there is only the naked fact that the plaintiff purchased the notes, and as we have seen there is no reported case which holds that where such purchase is made without actual knowledge by the defendant that an implied warranty is established. It is true that some of the cases to which we have referred hold that express representations are not necessary to establish a case and fix a liability^ but in all of those where the notes were affected by usury the evidence showed that such fact was known to the defendant. The case of a forged instrument, as we have seen, rests upon a different principle, viz. : That the note is no note, and hence none of the cases ^'l. 3) , TRANSFERROR 723 cited aid the plaintiff. The doctrine that an action can be maintained to recover back the purchase price paid under a contract of sale of personal property, without proof of warranty or fraud, where, upon delivery of the property, it proves utterly valueless, and where an offer to return has been made and refused, which is held in Stone v. Frost, 61 N. Y. 614, is scarcely applicable to negotiable paper which must be governed by entirely a different rule. In the latter case, where the transfer is made without indorsement, it is not unreasonable to suppose that certain liabilities did not enter into the consideration of the transfer, and had it been so intended some agreement would have been made in regard to the same. The authorities cited in Parsons on Contracts, supra, in the note, to uphold the rule stated that there is an impHed warranty that the parties are under no incapacity to contract, do not sustain the doctrine laid down in the text. In Lobdell v. Baker, 1 Mete. (Mass.) 193,' 35 Am. Dec. 358, and 3 Mete. (Mass.) 469, the note was indorsed by a minor, and the action was for deceit in procuring the minor to indorse it, and then putting it in circulation. Knowledge was a neces- sary ingredient of the plaintiff's action, and hence the case cited is not in point. In Thrall v. Newell, 19 Vt. 202, 47 Am. Dec. 682, where the note was invalid, as one of the signers of the same was insane, and had successfully defended on that ground, the case turned some- what upon the construction to be given to a written assignment to the plaintiff, which it was held must be construed as an express warranty on the part of the defendant that it was a valid note, and that the signers were of sufficient capacity to contract, and although, in the opinion, the judge was incHned to think that there was a warranty im- plied by law from the^sale of the note, that question was not in the case ; nor do the text-books sustain the doctrine as stated in Parsons in reference to incapacity. In Story on Promissory Notes, § 118, it is said that the holder war- rants by implication, unless otherwise agreed, that he is the lawful holder and has title; that the instrument is genuine, and not forged or fictitious; that he has no knowledge of facts which prove the in- strument, if originally valid, to be worthless, either by a failure of the maker, or by its being p^id, or otherwise to have become void or defunct. . In Chitty on Bills, p. 245, it is laid down that where a person ob- tains money on a note, and it turns out to be forged, he is liable to refund the money to the party from whom he received it, on the ground that there is, in general, an implied warranty that the instru- ment is genuine. Again, at page 247, it is said: "If a man assign a bill for any sufficient consideration, knowing it to be of no value, and the assignee be not aware of the fact, the former would in all cases be compellable to repay the money he had received." It is knowl- edge of the defect which renders the party hable for a note which is of no value, and this rule applies to a note which is tainted with usury. 724 LIABILITY OF I'AETIES (Part 3 In Ferns v. Harrison, 3 D. & E. 757, the same rule was laid down. In the case last cited the holder of a bill of exchange desired to get it discounted, but refused to indorse it, and delivered it to another party, who passed it off for that purpose to a third party, informing him to whom it belonged, and such last-named party disposed of it by indorsing it, being prevailed upon to do so by the person who de- livered it to him. Although the original owner afterward promised to pay the bill, it was held that such promise cannot support an action brought against him by the indorser. Lord Kenyon says: "It is extremely clear that if the holder of a bill sends it to market without indorsing his name, neither morality nor the laws of this country will compel him to refund the money for which he sold it, if he did not know at the time that it was not a good bill. If he knew the bill to be bad, it would be like sending out a counterfeit into circulation to impose upon the world instead of current coin. In this case, if the defendant had known the bill to be bad, there is no doubt that he would have been obliged to refund the money." See, also, Byles on Bills, 158, 159 ; Story on Bills, § 111 ; Edwards on Bills, 191. In Lambert v. Heath, 15 M. & W. 485, the defendant, a share broker, bought for the plaintiff scrip certificates, which were sold in the share market, at a premium, as "Kentish Coast Railway Scrip," and were signed by the secretary of the railway company. The genuineness of the scrip was denied afterwards by the directors, who alleged that it was issued without authority. In an action brought to recover back the price on the ground that it was not genuin?, it was held that it was a proper question for the jury whether what the de- fendant intended to buy was that which was sold in the market as such scrip. Alderson, B., said: "It appears that it was signed by the secretary of the company; and if this was the only Kentish railn way scrip in the market, as appears to have been the case, and one person chooses to sell and another to buy that, then the latter has got all he contracted to buy." The scrip was of no value, because it was not genuine, as the note here is worthless, by reason of the usury. The same principle is applicable in both cases, and the plaintiff cannot recover unless it is made to appear that the plaintiff intended to pur- chase and the defendant to sell the note without the alleged defect. In Hall V. Conder, 26 L. J. (C. P.) 138, an action was brought to recover money agreed to be paid upon the sale of an interest in a patent right. One of the pleas interposed to the declaration was that the invention was not new in England, and was worthless, and the plaintiff was not the first inventor. To that there was a demurrer, and it was held that there was in the agreement no warranty, express or implied, that the patent was indefeasible, and no fraud being alleged, and the defendant having the same means of knowledge as to the novelty and value of the patent as the plaintiff, the plea was bad. The rule is laid down by Caswell, J., that on the sale of a known ascertain- ed article there is no implied warranty of its quality. *^"- 3) TRANSFERROR 725 The examination we have made of the question shows that the law in regard to the transfer of negotiable bills of exchange and promis- sory notes, as laid down for a century or more, only excepts two cases as coming within the doctrine of an implied warranty, viz., a warranty of title, and that the instrument is genuine and not forged. There is no precedent and not a single reported case in the books in favor of the doctrine that where a promissory note is infected with usury, and that fact is unknown to the party who ^transferred it, that is an implied .warranty of the validity of the note. To uphold such a doctrine would be an innovation upon a settled principle of law and the establishing of a new and different rule from that which has governed the sale and transfer of this species of property for a long period of time. It is at least exceedingly doubtful whether it would be expedient to inaugurate a new and iquestionable rule of conduct for the government of transactions of this description, even if the law permitted it to be done. The hardship which may fall upon the plaintiff by the purchase of the paper in question may operate quite as harshly on the defendant, as the assumption is that he had no knowl- edge of the inherent vice which affected the note. It is difficult to apply the rules of law in all cases with exact justice. In fact, if the rule be as the authorities hold, and as should be if it is not well un- derstood, that the purchaser of paper of this description takes it at his own hazard and risk without any warranty, unless he chooses to require such an indemnity and makes it a part of the contract no seri- ous inconvenience or injury can follow. The doctrine of caveat emp- tor applies, and the fault is with the person who fails td exact a war- ranty, if it turns out that he has been mistaken or has unfortunately made an unprofitable or a bad bargain. Neither party has any just ground of complaint in such a case. The result is that the judgment was wrong and must be reversed, with- leave to the plaintiff to amend his complaint upon the usual terms in such cases. All concur, except Earl, J., dissenting. Judgment accordingly." Contra: Giffert v. West, 33 Wis. 617 (1873). "There is an exceptional case, Littauer v. Goldman, 72 N. T. 506, 28 Am. Rep. 171 (1878), which holds that the common-law ohligation, as to the implied warranty of identity in the thing sold, in the case of commercial paper, ex- tends only to the genuineness of the instrument The case was one involv- ing the nullity of a usurious note, and, If correctly decided, would be author- ity for the proposition that there was a peculiar species of warranty in the sale of commercial paper, differing from all others; In other words, that there was a law merchant of warranty where there was no commercial con- tract. The opinion in this case illustrates the same contradictory position presented here by the argument of the defendant in error, to which we have just called attention ; that is, that It admits the common-law rule and then denies Its essential result by eliminating conditions of nonexistence which are necessarily embraced by It. It follows that this New York decision leads logically to the view expressed in the Maine and Maryland cases Just re- ferred to, for either the principle of warranty of identity must be accepted or rejected. It cannot be accepted, and Its legitimate and inevitable results be denied. The rule there announced was In conflict with previous decisions 726 LIABILITY OF PARTIES (Part 3 PACKARD et al. v. WINDHOLZ. (Supreme Ciourt, Appellate Division, Fourth Department, New York, 1903. 88 App. Div. 365, 84 N. Y. Supp. 666.) Spring, J. Adolph Truman made his promissory note for $50, dated July 31, 1902, to the order of C. D. Eaton, and due in three months from its date. The maker forged the indorsement of Eaton, who was his father-in-law, to the note, and then procure^ the defend- ant to indorse the same. The note, with these two indorsements ap- pearing upon it, was presented to the plaintiffs, who were note bro- kers, to be by them negotiated for the benefit of Truman. The plain- tiffs obtained one Packelnisky to indorse it, and, after indorsing it themselves, sold it to the New York State Banking Company for $55, and turned over the avails to the maker. The defendant and those subsequent to him believed the indorsement of Eaton was genuine, and the plaintiffs learned he was responsible. The banking company soon after suspended business, and before the maturity of the note it was taken up by the plaintiffs. The maker also presented to the plaintiffs a note of $120, bearing the apparent indorsement of Eaton and the genuine signature of the defendant on its back, and this was put in circulation for the benefit of Truman, and purchased by the pjaintiffs before maturity, the same as the note above described. The latter note, when indorsed by the defendant, was $20, and was fraudulently raised to $120 before it was presented to the plaintiffs. The notes were duly protested for nonpayment, and due notice thereof given to the defendant. The plaintiffs have been allowed to recover on the first note, and $20 on the second note. The defendant, by his contract of indorsement, guaranteed the gen- uineness of the signature of Eaton, the prior indorser on each note, and that the note was a "valid and subsisting" obligation. Neg. Inst. Law (chapter 612, p. 731, Laws 1897) § 116; Lennon v. Grauer, 159 N. Y. 433, 51 N. E. 11 ; Erwin v. Downs, 15 N. Y. 575. The de- fendant expected that the note was to be negotiated for the benefit of the maker. He indorsed at his request, and the note was put in circulation not only within the legal contemplation of the contract of indorsement entered into by the defendant, but as he in fact intended. To be sure, the plaintiffs knew the note was to be used for the benefit of the maker, and that the defendant indorsed for his accommoda- tion. These circumstances do not relieve the indorser from the effect of his contract. Neg. Inst. Law (Laws 1897, p. 727^ c. 612) § 50, and section 55, as amended by Laws 1898, c. 336. One cannot enter into in New York, and the decision is strongly criticised by the Court ot Errors and Appeals of New Jersey in Wood v. Sheldon, 42 N. J. Law, 421, 423, 36 Am. Rep. 523." Meyer v. lUchards, 1U3 U. S. 3S5, 411, 16 Sup. Ct. 114S, 41 L. Ed. 199 (1896). Ch. 3) Transferror 727 this contract, knowing that he is indorsing solely for the benefit of another, and then shield himself from the enforcement of the agree- ment because the purchaser is apprised that the indorsement is without actual consideration. Such a construction of the contract of indorse- ment would impair .materially the transfer of commercial paper, and nullify the effect of the contract. The plaintiffs negotiated the notes without any knowledge or sus- picion of any infirmity in them. They then purchas'ed them before maturity from a bona fide holder, still without any information as to any vice in them. They are holders in good faith. Neg. Inst. Law (Laws 1897, pp. 732, 733, c. 612) §§ 91, 95-98. The judgment should be affirmed, with costs.' MILLER V. STEWART et al. (Court of Civil Appeals of Texas, Ft. Worth, 1919. 214 S. W. 565.) Action on note by J. C. Stewart and another against T. S. Stanfield and wife as makers and H. L. Miller as indorser. Judgment against indorser, and he appeals. Affirmed. Conner, C. J. J. C. and F. L. Stewart instituted this suit against T. S. Stanfield and his wife, Jettie Stanfield, as makers, and H. L. Miller as indorser of a promissory note for $750 owned by the plain- tiffs. In behalf of T. S. Stanfield, it was alleged that he was an en- listed soldier in the service of the United States in foreign lands, and as to him the suit was abated. Mrs. Stanfield pleaded that her name on the note was a forgery, and this fact being established, she was dis- charged, and there is no complaint here made of the disposition of the case as to the Stanfields. H. L. Miller, however, pleaded that he had transferred and indorsed the note to the plaintiffs "without recourse in any way," and it was so shown by the indorsement and so found by the jury in answer to a special issue. Nevertheless the plaintiffs were awarded a judgment as p'rayed for, and the indorser, Miller, has duly appealed. It was shown at the trial that T. S. Stanfield was financially irre- sponsible at all times involved, and that the note was worthless without the wife's genuine signature, and the question presented here is wheth- er appellant is to be held as warranting the genuineness of Mrs. Stan- field's signature to the note, notwithstanding the terms of his indorse- ment. We have concluded that we cannot disturb the trial court's judgment, which in effect so affirms. The general rule in cases of the ordinary indorsement of a promis- sory note "without recourse" is thus stated in 1 Daniel on Negotiable e Affirmed ISO N. T. 549, 73 N. E. 1129 (1905). Accord: Willard v. Crooke, 21 App. D. C. 238" (1903); Leonard v. Draper, 18T Mass. 536, 73 N. E. 644 (1905). 728 LIABILITY OF PARTIES (Part 3 Instruments, § 670 : "When the indorsement is 'without recourse' the indorser specially declines to assume any responsibility as a party to the bill or note ; but by the very act of transferring it he engages that it is what it purports to be — ^the valid obligation of those whose names are upon it. He is like a drawer without recourse, but who is never- theless liable if he draws upon a fictitious party or one without funds. And therefore the holder may recover against the indorser 'without re- course' ( 1) if any of the prior signatures were not genuine ; or (2) if the note was invalid between the original parties, because of the want or illegality of the consideration; or if (3) any prior party was in- competent; or (4) the indorser was without title." See, also, 7 Cyc. 833, and 35 Cyc. 396. It is not to be doubted that an indorser may by contract relieve him- self from liability because of a want of the genuineness of the signa- tures to a note transferred by him, but there is no finding by the court or jury that on the occasion of appellant's transfer of the note under consideration that he expressly declined to guarantee the genuineness of the signatures to the note. Appellant insists that this is necessarily to be implied from the broad terms of the indorsement. It is true that the terms "without recourse in any way" seem sufficiently broad to in- clude a refusal to be bound for the payment of the note even though the signatures might not be genuine. But we do not think that this is necessarily so. Appellant himself testified that at the time he made the indorsement he did not have in mind the question of whether the signatures to the note or either one of them had been forged; that he just assumed that they were genuine. It was said, in speaking of a gen- eral indorsement by the court in the case of Bell v. Dagg, 60 N. Y. 528, and cited in 6 Ann. Digest, p. 718, that, "if nothing has been said in respect to the genuineness of the note, a general refusal to guarantee might well have been understood as confined to the responsibility of the maker." We think the implication suggested by the New York decision should certainly be indulged in this case, for not only did appellant tes- tify, as Stated, that at the time of the indorsement he assumed the signatures to the note to be genuine, but one of the appellees testified specifically that appellant, in discussing the matter pf transfer, express- ly stated that Mrs. Stanfield "signed the note." While this statement was denied by appellant, we must assume that the court credited it. If so, for yet another reason, it can be said that appellant, notwithstanding the general terms of his indorsement, will not be allowed to escape lia- bility. There was evidence sufficient to support a finding that appellees in good faith purchased the note, giving full value therefor, without any notice that the name of Mrs. Stanfield had been forged. It was alleged in appellees' petition that the statement that Mrs. Stanfield had signed the note was an inducement to their acceptance of it, and to now hold that, notwithstanding the statement, appellant may invoke the Ch. 3) TEANSFBBEOE 729 terms of his indorsement to escape liability, would be to give effect to fraud, and it is a familiar principle that fraud will vitiate any con- tract. See Young v. Barcroft (Tex. Civ. App.) 168 S. W. 392 ; Wells V. Driskell (Tex. Civ. App.) 149 S. W. 205; Benton v. Kuykendall (Tex. Civ. App.) 160 S. W. 438; 1 Daniel on Negotiable Instruments, §722. We conclude that all assignments of error should be overruled and the judgment affirmed. PART IV DISCHARGE SECTION 1.— PAYMENT AND RENUNCIATION DE SILVA V. FULLER. (Nisi Prius, 1T76. 1 Chitty, Jr. 392.) Trover for a bill, draft, or check, drawn by one Cox on the de- fendants, who were bankers, payable to "No. 437, or bearer, on de- mand." It was drawn the 17th June, but dated the 18th. On the 17th the plaintiff received it, that day he lost it, and the same day (the 17th) it was presented to the defendants, who paid it. It was proved to be contrary to the usual course of business to pay drafts before the day on which they were dated, and on that ground the plaintiff had a verdict. BURBRIDGE V. MANNERS. (Nisi Prius, 1812. 3 Camp. 193.) This was an action on a promissory note for £101. 15s. 5d. doited 11th October, ISltJr drawn by J^ Finney, payable three months after date at Eraser & Co.'s to the defendant, indorsed by him to one Tinson and by Tinson^ to the plaintiff. The note was regularly presented for payment' in the forenoon of the day it became due, when payment was refused ; and in the af ter- noon~of the same day the plaintiff caused notice of its dishonor to be sent to the defendant. Park, for the defendant, objected that this was not sufficient notice of the dishonor-. Finney, the maker of the note, had the whole of the day it became due to pay it, and till the last minute of that day it could not be considered as dishonored. The notice therefore stated what was untrue, and was evidently premature. Lord Ellenborough. I think the n^ite was dishonored as soon as the maker had refused payment on the day when it became due, and the notice sent to the defendant .must have answered all the purposes for which notice in such cases is required. The holder of a bill or note gives notice of its dishonor in reasonable time the day after it is (730) Sec. 1) PAYMENT AND RENUNCIATION 731 due; but he may give such notice as soon as it has been dishonored the dajlJjjecomes due, and the other party cannot complain of the exfflorginary diligenee- used to give him information. ~By the defendant's evidence it appeared that this bill, being in the hands of Maude & Co., was paid in by them when indorsed only by the defendantjo their bankefSTMasterxnan & Co.7 who were to present it for payment. Ma]ide.& Co., had received it from Finney, the maker, as a cojy^eral. security for an acceptance of his, then in their hands overdue. On the lOfh of January, four days before the note was due, some person unknown came to Masterman & Co.'s, where it lay, paid it, an^ixarried-itaway without its being canceled, or any memorandum being made upon it. However, it had been indorsed by Tinson, and had come into the hands of the plaintiffj before it was due. Tark contended that after the bill had been once paid, it could not be i-eissued, and he relied upon Beck v. Robley, 1 H. Bl. 89, note. Tord Ellenborough. Payment means payment in due course, and not by anticipation. Had tHg"biir been due before it came into the thF^plaintiff's hands, he" must have taken it with all its infirmities. IirthaTcase it would have been his business to inquire minutely into its origin and history. But. receiving it before it was due, there was nothing to awaken his suspicion. I agree that a^tnn. paid at maturity cafffror be reissued, and that no action can afterwards be maintained upOTBlf by a subseiquent indorsee. A payment. before it becomes due, however, I think does not extinguish it any more than if it were merely discounted. 'A contrary doctrine would add a new clog to the circula- tit«r of bills of exchange and promissory notes; for it would be im- possible to know whether there had not been an anticipated payment of them. It is the duty of bankers to make some memorandum on bills and notes which have been paid ; but if they do not, the holders oTIucb securities cannot be affected by any payment made before tlrcy are diie. While a bill of exchange is running, it remains in a negtitiable state. I cannot limit its negotiability the last four days before it becomes due more than the first four days after it is drawn. Verdict for the- plaintiff. THOROGOOD v. CLARKE. (Nisi Prius, 1817. 2 Starkie, 251.) This was an action by the indorsee against the acceptor of a bill of exchange, dated 29th of July, 1815, drawn by Powys on the defend- ant, for the sum of £40., payable two months after date, to the order. of the drawer, and by him indorsed to the plaintiff. Upon the evidence for the defendant, it appeared, that when the bill became due, it was in the hands of Cripps & Co., the bankers of Po- wys ; and that on the 26th of October, some time after the bill had been due, Powys gave the defendant, after a settlement of the ac- 732 DISCHARGE (Part 4 counts between them, a receipt in full of all demands ; and that after this, the bill was in Powys' hands, for several months after having been refused payment. Peake, for the plaintiff, insisted that this was not a sufficient answer, since it was not shown that the bill had been indorsed to the plaintiff, after it became due ; but, Lord Ellenborough held, that since Powys, who the 26th of Oc- tober, gave a receipt in full of all demands, could not have sued upon the bill, which was due on the 2d of October, the plaintiff could derive no title from him. Verdict for the defendant.* JOHNSON et al. v. WINDLE et al. (Court of Common Pleas, 1836. 3 Blng. N. C. 225.) This was an action of trover to recover the value of the promissory note, set out as follows : "Milford Wharf, London, 30th March, 1835. "Sixty days after date, we promise to pay C. Johnson & Sons, or order, £30. value received in coals, ex ship Two Brothers, at Messrs. Gosling & Sharpe. W. & C. Windle." The declaration was in the usual form, and alleged that the plaintiffs were lawfully possessed of the note as of their own property. The defendants pleaded, first, not guilty ; secondly, that the plain- tiffs were not lawfully possessed as of their own property of the said promissory note in manner and form as the declaration alleged. Upon these pleas issues were joined. By order of a judge, and consent of the parties, the following facts were stated in a special case for the opinion of the court : The defendants were the makers of the promissory note above set forth, and the plaintiffs were the payees therein mentioned. 1 In an action by one who had lost a promissory note payable to bearer (in the form of a coupon), against the maker, which had paid It after maturity to the finder, the court said: "There is another circumstance in this case which tends to fis more clearly upon the defendant the duty of Inquiry, and that is that the coupon was long overdue. The maker of a coupon cannot be exempt from the liabilities which attach to all negotiable instruments when overdue. It is an elementary principle of commercial law that nesotiable paper overdue carries with It, on its very face, notice of defective title sufficient, to put the transferee on inquiry. Gold v. Eddy, 1 JIass. 1; Vermilye v. Adams Express Co., 21 Wall. 138, 22 L. Ed. 609. Al- though the application of the simple rule to payment would be practically of rare occurrence, since notice of the loss or stealing would be given In almost every case, there Is no reason why a distinction should be made In this respect between transfer and payment, and no such distinction is consistent with the language of Chief Justice Shaw In Wheeler v. Guild [20 Pick. 54.5, 32 Am. Dec. 231], before cited. After maturity, a coupon, like any other negotiable security, loses the protection of the law merchant, and becomes a mere chose In action. There Is no presumption of law that the party pre- senting such a chose in action to the partv liable to pay is the true holder.' Hinckley v. U. P. R. R., 129 Mass. 52, 60, 37 Am. Rep. 297 (1880). Sec. 1) PAYMENT AND RENUNCIATION 733 . The note in question was made and drawn by the defendants on the day of its date, and deUvered by them to the plaintiffs in the usual course of business, in part payment for part of a cargo of coals ex ship the Two Brothers. The note was afterwards stolen from the plaintiffs ; and at the time it was so stolen there was no indorsement upon it. On the day when it became due, Messrs. Wilkins were holders of the said note for value, and the same was presented by a clerk of Messrs. Glynn & Co., bankers in London, on account of the said Messrs. Wil- kins to Messrs. Gosling & Sharpe, for payment, who, as the defend- ants' bankers, paid the no,te and debited the defendants' account with the sum paid. The note was afterwards handed over to the defend- ants, in whose possession it still remained. Upon the delivery of the note to the defendants by Messrs. Gosling & Sharpe, and whilst it remained in the defendants' possession, and before the commencement of this suit, the plaintiffs demanded the note of the defendants, but they refused to give it up. Afterwards the pres- ent action was commenced. The prorilissory'note was never indorsed by the plaintiffs, or by their authority, nor was any person ever authorized by them to receive the amount thereof. At the time when the note was handed over to the defendants, the following indorsements appeared upon the back of it. "By C. Johnson & Sons to Mr. John Atkin. "John Atkin. "George Wright." All the indorsements on the notes were forgeries in the handwriting of one George Wryghte, who, at the time the note was made and de- livered to the plaintiffs, and for some time afterwards, was a clerk in their employ. The note was stolen from the plaintiffs by the said G. Wryghte, whilst he was in their service. The defendants had no notice that the indorsement of "C. Johnson & Sons" was a forgery at the time their bankers, Messrs. Gosling & Sharpe, paid the note, nor till six weeks afterwards, when notice was given to the defendants of that fact upon the plaintiffs' first discover- ing that the note had been stolen. If the court upon the circumstances above stated, should be of opin- ion that the plaintiffs were entitled to the property, and to the posses- sion of the note when the same was demanded as aforesaid, and that there was sufficient evidence of a conversion by the defendants, the pleas were to be withdrawn, and judgment was to be entered for the plaintiffs by confession, damages i30. and interest, together with their costs and charges of this suit. But If the court should be of opinion that the plaintiffs were not so enti- tled, or that there was not sufficient evidence of a conversion, then judgment of nolle prosequi was to be entered.* 2 The arguments of counsel are omitted. 734 DISCHARGE (Part 4 TiNDAL, C. J. It would be of most dangerous consequence if we were to give legality to a forged indorsement of a bill of exchange, and that would be the effect of a judgment in favour of these defend- ants. The general rule is, that no title can be obtained through a forgery. Here the indorsement upon the, bill has been forged, and the only ground which- has been urged to take the case out of the general rule, is, that there has been such gross negligence in the plaintiffs as to di- vest them of any remedy against the defendants. But for aught that appears on this case they may have acted with sufficient caution to ex- clude any such grqund of defense. If such negligence were to be the defense relied on, it should have been stated in the case. GASEtKB, J. In the case relied on for the defendants, it was ex- pressly found that there had been gross negligence on the part of the plaintiff. Vaughan, J. The plaintiffs have fulfilled all the requisites to en- able them to maintain an action of trover; and no fact is stated from which negligence can be inferred. It differs therefore entirely from the case in which negligence was expressly found. ' • BoSANQUET, J. I am of the same opinion. This instrument on the face of it, was marked as the property of the plaintiffs. By an indorse- ment which is a nullity, it has found itS way into the hands of the de- fendants. It has been demanded of them, and refused; and that af- fords sufficient ground for an action of trover. Judgment for plaintiffs. MORLEY v. CULVERWELL. (Court of Exchequer, 1840. 7 Mees. & W. 174.) Assumpsit by indorsee against drawer of a bill of exchange for ilOO., dated 7th of March, 1840, drawn by the defendant on and ac- cepted by Thomas G. C. Riley, payable to the order of the defendant three months after date, indorsed by the defendant to John Short, and by Short to the plaintiff. The defendant pleaded nine pleas, of which, however, the seventh and ninth only are material to this report. The seventh plea stated that after the drawing and accepting of the bill of exchange in the declaration mentioned, and before the delivery of the same to the said T. G. C. Riley, before the same became due and payable, and before the commencement of this suit, and while the defendant, as such drawer as aforesaid, was the holder thereof, and entitled to sue upon the same, to wit, on the 20th of April, 1840, it was agreed between the defendant and Riley, that he, Riley, should exe- cute a certain indenture, and thereby assign by way of mortgage cer- tain leasehold premises to the defendant, to secure the payment of a large sum of money, to wit, £853., part of which, to wit, the sum of £703., was theretofore lent and advanced by the defendant to Riley, and Sec. 1) PAYMENT AND RENUNCIATION 735 for part of which Riley, before the said 20th of April, 1840, gave to the defendant certain bills of exchange, drawn by the defendant on Riley, and accepted by him [stating four bills of exchange, one of which was the bill mentioned in the declaration] ; and that the defend- ant should deliver up to Riley the said four bills of exchange, that is to say, the three bills of exchange in this plea mentioned, and the said bill of exchange in the declaration mentioned, as discharged and fully satisfied by the said T. G. C. Riley. Averment, thati-lin pursuance of the said agreement, the said mortgage was executed' b^ Riley, and ac- cepted and received by the defendant in discharge and satisfaction of the said four bills of exchange, and thereupon the said bills respectively were given up and delivered to Riley, as paid and fully satisfied by him, Riley, the acceptor thereof, and not for the purpose of being transferred, indorsed, or otherwise negotiated; that the said bill in the declaration mentioned was indorsed and delivered by Riley to Short, without any consideration or value for the same, and without any authority or sanction from the defendant, as drawer thereof, and that Short indorsed and delivered it to the plaintiff without any con- sideration or value for the same, and the plaintiff now holds the same without having given any consideration or value for the same. Veri- fication. The ninth plea stated that the said bill of exchange was and is an instrument or bill liable to the charges and duty imposed by the statute in such case made and provided, and that the said bill afterwards, and after the drawing and accepting thereof, and before the same becarhe due, to wit, on, etc., was fully paid and satisfied by the said T. G. C. Riley, and was then, to wit, on, etc., and after the said bill had been so fully paid and satisfied by Riley, according to the statutes in such case made and provided, without any new stamp, or the payment of any rate of duty chargeable thereon, reissued by the said T. G. C. Ri- ley. Verification. To each of these pleas the plaintiff replied de in- juria, on which issue was joined. At the trial before Lord Abinger, C. B., at the last assizes for the county of Surrey, the delivery up of the bills by the defendant to Riley, the acceptor, on his executing a mortgage, was proved as stated in the seventh plea. It appeared also that Riley, before the bill in question became due, indorsed it to Short for a valuable consideration, who al- so, before it became due, indorsed it for a valuable consideration to the plaintiff. It was not proved that the plaintiff had any knowledge of the circumstances under which the bill had been negotiated by Riley. The learned Chief Baron thought that the seventh and ninth pleas were proved in substance, and directed a verdict on those issues for the defendant, leave being reserved to the plaintiff to move to enter a verdict for him, with il02. damages. The plaintiff obtained a rule nisi accordingly." s The arguments of counsel are omitted. 736 DISCHARGE (Part 4 Lord Abinger, C. B. I am of opiniorf that this rule ought to be made absolute. On the trial, it struck me that the pleas were substan- tially proved ; but upon consideration I am satisfied that I was wrong. I think, under the circumstances, the seventh plea could not be sup- ported, unless the allegation, that the plaintiff took the bill without any consideration or value, was proved. It seems to me that was an es- sential part of the plea, in order to make out the defense. As to the last plea, I think, it is bad in point of law ; but the question now is, whether it was jjroved or not. It is bad, on the ground that it does not allege a payment in satisfaction of the bill, after it became due. But even supposing that payment by the acceptor in satisfaction of the bill, before it became due, were a good answer in point of law to an action by an indorsee, the plea was not proved ; because upon this is- sue the plaintiff had a right to expect proof of actual payment in money, not of a mere accord and satisfaction. If the bill were satisfied other- wise than by payment in money, the plaintiff had a right to expect that the particular kind of satisfaction should be set forth in the plea. Proof of payment, therefore, was essential to support this plea ; and that not having been given, the defendant cannot maintain his verdict upon it. With respect to the more general question which arises in this case, I am now satisfied, after some doubt, that the plaintiff is entitled to recover. The defendant, the drawer of the bill, agrees with the accept- or, while it is running, to deliver it up to him, in consideration of his having the security of a mortgage of property of the acceptor; and gives up the bill accordingly, without striking out his name as drawer. Before the bill becomes due, a party who is ignorant of this transac- tion discounts it for the acceptor, and, before ft becomes due, transfers it for value to the plaintiff, who is also ignorant of the transaction. The question then is, whether the discharge of a bill by the acceptor, by an arrangement with the drawer before it is due, can affect the bill in the hands of an innocent holder for valuable consideration. I think it cannot. The contract of the drawer and of each indorser is, that the bill shall be paid by the acceptor at its maturity— not before it is due ; that it shall be paid, as Mr. Peacock has observed, according to its tenor and effect — that is, when it becomes due. If, upon its being discharged before it becomes due, the drawer inadvertently leaves his name upon the bill, he is but in the ordinary case of a party who has a bill in negotiation with his name upon it, against his intention. It is in the hands of an innocent holder, who has no notice that it has been discharged. Suppose mutual accommodation acceptances to be given, and to be exchanged before they have been negotiated, the names re- maining on them ; the parties may circulate them so as to give a title to a bona fide holder, before they become due. And wherein does this case differ from that ? Therefore, a bill is not properly paid and satis- fied according to its tenor, unless it be paid when due; and conse- Sec. 1) PAYMENT AND RENUNCIATION 737 quently, if it be satisfied before it is due, by an arrangement between the drawer and acceptor, that does not prevent the. acceptor from ne- gotiating it, or an innocent indorsee for value from recovering upon it. The rule must therefore be absolute. Parke, B. I entirely concur with the Lord Chief Baron, and think that in this, case neither of the pleas was proved. [His Lordship stat- ed the seventh plea.] Undoubtedly, if all the facts alleged in this plea had been proved, they would have amounted to a good defense; be- cause the plaintiff would then have been in the same situation as Short, and Short as Riley, and as to Riley the bill was satisfied. But in or- der to establish the plea, it was necessary to prove the two allegations which put the plaintiff in the same situation with Riley, viz. that Riley indorsed to Short, and Short to the plaintiff, without value or consid- eration ; whereas it was proved that there was a valuable consideration for both indorsements. The question therefore is, whether the fact of the acceptor having satisfied the bill before it became due, is any de- fense against a bona fide indorsee. I am of opinion that nothing will discharge the acceptor or, the drawer, except payment according to the law merchant — that is, payment of the bill at maturity. If a party pays it before, he purchases it, and is in the same situation as if he had discounted it. The rule is laid down correctly by Lord Ellenborough, in Burbridge v. Manners, that a payment before a bill becomes due "does riot extinguish it, any more than if it were merely discounted" ; and that "payment means payment in due course, and not by anticipa- tion." The party who takes a bill before it becomes due has no means of knowing whether payment has been anticipated or not. The seventh plea, therefore, was not proved. As to the cases that have been cited, they are all cases of bills paid at maturity, because they were payable on demand. With respect to the ninth plea, the question now is, whether it was proved in fact. It is bad in point of law ; because the payment men- tioned in the stamp act must be taken to mean payment by the party liable, at the maturity of the bill, and according to the tenor of it; oth- erwise there have been many cases wrongly decided. But I agree that, even assuming the plea to be good, it was not proved in fact. It would be essential, in order to support it, to prove payment of the bill in mon- ey, and not merely a satisfaction of it by an agreement such as was proved in this case, which was no payment in the proper sense of the word. On a demurrer to this plea, for stating only that the bill had been "paid and satisfied," without stating the mode of payment, the plea would, I think have been held sufficient on the ground that those words would be construed to mean payment in money. It follows that, in or- der to support that averment in evidence, the proof should have been of a payment in money. Neither of these pleas, therefore, being proved the rule must be absolute to enter a verdict on those issues for the plaintiff. GuRNEY and RotFE, BB., concurred. Rule absolute. SM.& M.B.& N.(2d Ed.)-47 738 DISCHARGE (Part i ATTENBOROUGH v. MACKENZIE. (Court of Exchequer, 1850. 25 L. J. Ex. 244.) Action on a bill of exchange for i400., drawn by the defendant, ac- cepted by one Tingay, indorsed by the defendant to Tingay, by him in- dorsed to Robert Attenborough (the plaintiff being Richard), and by him to the plaintiff. Pleas — First, denying the indorsement to Tingay ; secondly, deny- ing the indorsement by Tingay to the plaintiff ; thirdly, that while the bill was in the hands of the drawer and payee, and before it was due, the acceptor, Tingay, paid the defendant the amount (less the inter- est), and deposited the bill with Robert Attenborough, who fraudulent- ly transferred it to the plaintiff. Issues were joined on these pleas; and at the trial, before Alder- son, B., it appeared that the defendant, having money due from Tin- gay, got him to accept the bill, and gave it to one Score to get it dis- counted. Score offered it to one Barton for that purpose, who took it to Tingay, and got from him £375., which was offered to the defend- ant, and by him accepted, he at the same time observing that he took it because the bill was in Tingay's hands, and that he, the defendant, was thereby discharged. But it did not appear that this had been com- municated to Tingay. Before the bill was due, Tingay transferred it to Robert Attenborough on discount, and afterwards said "that all that he knew Robert Attenborough knew." After the bill was due, it came to the plaintiff. Burbridge v. Manners, 3 Campb. 193, was cited. The learned judge, upon this state of facts, directed a verdict for the plaintiff, reserving to the defendant leave to move to enter a verdict on either of the pleas. A rule having "been obtained accordingly, but no one appearing to show cause. Bovill and Honyman, for the defendant, were called upon to sup- port it. The acceptor, Tingay, had no authority to transfer the bill, ei- ther actual or legal. [Martin, B. He di.d not require any authority other than that which was involved in the transfer of the bill to him for discount.] That transfer by the defendant was on the understanding that it should not be transferred by Tingay, and that he took it to retire it as acceptor, and in discharge of the drawer. [Pollock, C. B. The transfer of a bill cannot be clogged with any such secret condition, whether it be to the acceptor or any one else.] It was mentioned to the agent who came from Tingay. [Alderson, B. But not communicated to him.] [Martin, B. On the expiration of a reasonable time after the agent brought the money, the transfer to Tingay, as indorsee, was complete ; and if the defendant did not mean to make such a transfer, he should have returned the money.] Sec. 1) PAYMENT AND EENUNCIATION 739 The evidence is that Robert Attenborough knew what Tingay knew, and therefore knew that the bill was not to be transferred. [Pollock, C. B. Why not? Assuming that he knew all that Tin- gay knew, nothing that Tingay knew precluded his transfer of the bill.] If a party take a bill, knowing that the transferror had no authority to transfer, it is not a valid indorsement. Marston v. Allen, 8 Mee. & W. 494, 11 Law J. Rep. (N. S.) Exch. 122. [Martin, B. No "authority" was necessary. The interest in the bill was transferred to Tingay, who was a bona fide holder for valuej Then, assuming the indorsements are prima facie proved, the special plea was sustained. Payment by the acceptor discharges the drawer. Morley v. Culverwell, 7 Mee. & W. 174, 10 Law J. Rep. (N. S.) Exch. 35. [Pollock, C. B. Payment in due course, and payment as payment. In this case the money was paid before the bill was due, and by way of discount, not paytnent.] The acceptor cannot reissue the bill after paying the amount, less the discount, in order to charge parties upon it, to whom he himself will be liable. [Pollock, C. B. Not after paying it in due course. But this was not payment, it was discount ; and as regards discount, the acceptor is in the same position as any other person. It cannot be contended that an acceptor or bona fide holder of a bill, by discounting it before it is due, cannot reissue it.] Not if he is ultimately liable upon it. [Pollock, C. B. He is always ultimately liable, except in the case of accommodation acceptances.] It is clear the defendant understood that the bill was discharged. [Martin, B. That only shows -that he mistook the law.] [Pollock, C. B. When a bill has been created according to the cus- tom of merchants as a real commercial transaction, it is part of the general circulating medium of the country, and the acceptor, after its issue, stands with regard to a retransfer of it to him in the same posi- tion as any other person. He may indeed pay it to discharge it, but discounting it is not paying it ; and if he discounts it, he may reissue it. Nothing will discharge the drawer but payment according to the law merchant. , That is the doctrine of Morley v. Culverwell. Here the bill was not satisfied. Martin, B. The defendant was bound by the transfer to Tingay, when he took the money of Tingay. He could not retain Tingay's money on any other terms than those which Tingay understood — the general terms of discount. He could not attach to the transfer secret terms or conditions of which Tingay never heard. If, indeed, there had been a bargain with Tiiigay not to transfer the bill, that would have been a bar to the action ; but nothing of the kind appeared. As 740 DISCHARGE (Part 4 to the case of Morley v. Culverwell, it confirms this view. There the bill was satisfied, here it was not. It was merely discounted. ANDERSON, B., concurred. If an acceptor discounts a bill he may reissue it. Rule discharged. GREVE V. SCHWEITZER. (Supreme Court of Wisconsin, 1875. 36 Wis. 554.) This is an appeal from an order denying the motion of defendant for judgment on the counterclaim set up in his answer, which was not replied to. The only question presented on the appeal is, Does the counterclaim state facts sufficient to constitute a cause of action enti- tling the defendant to judgment upon it? The material allegations in the counterclaim are that the defendant, nearly 20 years ago, at the request of one Arnold H. Greve, and in consideration of a loan to him of $1,100, executed his promissory note for $1,000, which was made payable to one Keller, or bearer, and de- livered the same to said Greve ; that Greve died single and intestate in 1857, greatly involved in debt, leaving his father and several broth- ers surviving him; that shortly after his death the note was found in the possession of the plaintiff, who represented himself as the owner thereof, and that it had been given to him by his deceased brother; that the defendant, believing these representations to be true, was in- duced to take up and exchange that note for another of $1,000 paya- ble to the plaintiff or order, which latter note was secured by a chattel mortgage; that he has paid the plaintiff on the latter note various sums amounting to $635 ; that after these payments were made, he learned that the plaintiff was not the owner of the Keller note, and never received it as a gift from his brother, but obtained possession of it by undue and improper means ; that the creditors and legal rep- resentatives of Arnold H. Greve were entitled to the note and its pro- ceeds ; and that as a consequence, the note and chattel mortgage given by the plaintiff in exchange therefor were without consideration and void. He claims, upon these facts, the right to recover of the plain- tiff the moneys which he has paid him on account thereof, and that the complaint be dismissed. Cole, J. The matters alleged by defendant, as above sjated, are in- sufficient to show a good counterclaim. The consideration for the note in suit Was the note surrendered, which still remains in the possession of the defendant. It is very obvious, therefore, that there is no fail- ure of consideration, and that the defendant cannot be relieved from the payment of the substituted note and mortgage upon any such ground. Besides, as is well remarked by the counsel for the plaintiff, the allegations in the answer, while they may show that a fraud was perpetrated by the plaintiff upon the creditors and legal representa- Sec. 1) PAYMENT AND RENUNCIATION 741 tives of Arnold H. Greve in obtaining the possession of the Keller note, still fail to show any fraud upon the defendant, and afford no reason why he should be permitted to recover back the money which he has already paid on his indebtedness. The Keller note was paya- ble to bearer, and any arrangement which the defendant made for its extinguishment, or any payments which he has made in good iaith upon the substituted paper, are protected in law, and valid. The plain- tiff had- the possession, and was presumably the lawful holder, of the Keller note; and the defendant had the right to deal with him upon that assumption; And he did discharge and extinguish that note by giving another note. Upon the latter note he has made payments in good faith, which he seeks to recover back. In equity and good con- science he owed this money to some one, and the question is. Can he possibly be compelled to pay it again? We think not. He is protect- ed in law, and even if the plaintiff was not the true owner of the Kel- ler note, that will not deprive him of his rights in the transaction. For he has paid his note to the presumptive owner, the person producing it, and the party prima facie entitled to receive payment thereof. The rule of law applicable to this question is clearly stated in Byles on Bills, in the following language: "If a bill or note payable to bearer, either originally made so or be- come so by an indorsement in blank, be lost or stolen, we have seen that a bona fide holder may compel payment. Not only is the payment to a bona fide holder protected, but payment to the thief or finder him- self will discharge the maker or acceptor, provided such payment were not made with knowledge or suspicion of the infirmity of the holder's title, or under circumstances which might reasonably awaken the sus- picions of a prudent man." Chapter 15, p. 173. In Story on Bills the doctrine is laid down in substantially the same language; and there can be no doubt of the rule upon the subject. Sections 415 and 416. Now, within this rule, it is apparent that even if the plaintiff was a wrongful holder of the Keller note, yet the possession of it was pre- sumptive evidence that he was the lawful owner; and any arrange- ment which the defendant entered into in good faith for its discharge, and any payments which he has made, are valid. It is quite immater- ial whether these payments were made upon the original or substitut- ed paper. In either case the payments will extinguish pro tanto his indebtedness, and he runs no risk of being compelled to pay it again, unless guilty of negligence, which is denied. Suppose the proceeds of the original note belong to the creditors or legal representatives of Arnold H. Greve ; that does not concern him so long as he is under no obligation to respond to any one for moneys already paid in dis- charge of his debt. In any view we see no ground for holding that the defendant, upon the facts alleged, is entitled to recover back the money paid the plaintiff. This disposes of all questions arising upon the merits of the counterclaim. 742 DISCHARGE (Part 4 It IS insisted that the motion of defendant for judgment on his coun- terclaim was not disposed of when the court rendered judgment on tlie verdict; and that this is such an error or irregularity as should reverse the order appealed from. Assuming that the objection is borne out by the record, still, upon the views expressed upon the merits of the coun- terclaim, the error could not have affected any substantial right of the defendant. The order, thefefore, should not be reversed by reason of the error or irregularity complained of. Section 40, c. 125, Rev. St. ; Allard v. Lamirande, 29 Wis. 502-510; Bonnell v. Gray, 36 Wis. 574, decided herewith. The order of the circuit court is affirmed.' NASH et al. v. DE FREVILLE. (Court of Appeal, [1000] 2 Q. B. 72.) A. L. Smith, L. J., read the following judgment: In this case the plaintiffs, who are tailors and money lenders, sue Major Freville upon five promissory notes amounting in all to £5,300., payable on demand, of which notes the defendant was the maker and a solicitor named Peed was the payee. These notes at one time had been in the plain- tiffs' possessio'n, though they had been fraudulently induced by Peed to hand them back to him, and the notes then got back into the de- fendant's hands, as hereafter will appear. There is also a count in trover. This case is complicated, as ordinarily is the case when fraud inter- venes in the matter of negotiable instruments ; but, having heard ex- cellent arguments on each side, for the reasons I will now state, I think the question in the case is : Did the defendant, when he received the notes back into his possession from Peed, take them under such cir- cumstances as to give him a better title to the notes than Peed had when he gave them back to the defendant? If the defendant had not a better title than Peed had, then the plaintiffs, in my judgment, can succeed in this action ; aliter, if the defendant had. Peed was a solicitor who for years had carried on business at Cam- bridge, and down to September 29, 1897, when he absconded and aft- erwards became bankrupt, was a man of unimpeachable credit and above suspicion. Between the years 1885 and September, 1897, inclu- sive. Peed was the trusted solicitor of the defendant, and from time to time made advances of money to and disbursements for the defend- ant, and in January, 1895, the defendant owed him for so doing about £800. Peed then suggested that the defendant should give him a prom- issory note payable on demand by way of security for the debt. This the defendant did, and it was a note for £800., dated January 14, 4 Compare Prouty v. Rotierts, 6 Cush. (Mass.) 19, 52 Am. Dec. 761 (1S50), ante, p. 41'S. Sec. 1) PAYMENT AND RENUNCIATION 743 1895, payable on demand in favor of Peed, and it was expressly agreed between the defendant and Peed that Peed should not negotiate or part with this note. For further advances and disbursements the defend- ant made two other notes payable on demand in favor of Peed, and handed them to him. The one was dated January 31, 1896, for ioOO., and the other was dated April 4, 1896, also for i500., and there was the like agreement about not negotiating or parting with these two notes. The reason for this agreement as to Peed not negotiating or parting with these notes was that the defendant did not then wish to be called upon 'to pay the amounts represented by them, it being an- ticipated, as turned out to be the case, that in the month of June, 1897, when the defendant's son would come of age, the defendant, by means of barring an estate tail, would be placed in funds. In the next year, namely, upon February 9, 1897, the defendant gave to Peed two notes, the one of il,500. and the other for £2,000. ; i. e. for i3,500. in all — payable on demand and in favor of Peed. These two notes were given to and taken by Peed to pay off the first three notes for il,800. and to cover further advances. These two notes were also by agreement between the defendant and Peed not to be parted with or negotiated by him. The defendant did not take back from Peed the first three notes thus paid by the defendant, but left them in Feed's possession, and this, as will be seen, was what enabled Peed to commit the fraud which he subsequently practiced upon the plain- tiffs as regards these three notes. In the month of March, 1897, Peed, without the knowledge of the defendant, broke faith with him and negotiated all five notes with the plaintiffs, they paying to him the sum, of £4,800. and taking a bonus of £500. for so doing. These notes were indorsed by Peed, and he also deposited with the plaintiffs an insurance upon the life of the defend- ant's son. In June, 1897, the defendant's son came of age, the estate tail was barred, the defendant became possessed of funds, and a set- tlement of accounts was then come to between the defendant and Peed, and the only material fact as to this "settlement is that the defendant then gave to Peed £4,000. wherewith to pay the two notes for £3,500. and interest. The defendant did not get back from Peed those two notes when he paid them, but left them in Feed's hands, as he had done when he paid the first three notes. By his doing so Peed was enabled to perpetrate the fraud he subsequently practiced upon the plaintiffs as regards these two notes. It is not denied that the plaintiffs, when they discounted the five notes for Peed, became holders of them in due course and for value, and without notice of anything which would have impeached the plain- tiffs' title to sue the defendant or Peed upon these notes. That the plaintiffs could have sued the defendant upon these five notes I have no doubt, and the defendant would have been undefended. It is true that up to this point the plaintiffs have no cause of complaint and wer^ in no way prejudiced by the defendant not having taken back the notes. 74i DISCHARGE (Part 4 from Peed as and when they were paid; and, on the contrary, the plaintiffs, by reason of the notes not having been returned by Peed to the defendant when they were paid, have been enabled to discount the notes for Peed at the rates they did, and were also enabled to enrich themselves by the sum of £500., being the bonus they took when they discounted them for Peed. But the prejudice to the plaintiffs comes in later on. The plaintiffs pressed Peed for payment of the notes, but could not get payment, and upon September 28, 1897, this took place. Peed, desiring to have the notes back, gave to the plaintiffs his check for £5,581. in exchange for the notes which they held for £5,300., and also what the plaintiffs call a contango — whatever that may mean — amounting to £86.; they preferring, I suppose, Peed's check coupled with the contango of £86. to the signature of the defendant upon the notes, with no contango. This, however, the plaintiffs were clearly en- titled to do. The Lord Chief Justice finds, and I have no doubt cor- rectly, "that the plaintiffs then voluntarily or intentionally parted with the notes, intendmg that Peed should take them, and intending that they should take and rely upon Peed's check which he had given in ex- change for them" ; and he also finds, and I think correctly, that "when Peed drew his check he knew that it would not be met, and he, did not intend that it would be met, and in point of fact he was contemplating the perpetration of a fraud upon the plaintiffs." That Peed defrauded the plaintiffs is clear- What is the effect of this? Before I discuss this, I should state that Peed, when he thus got back the notes by means of his worthless check in exchange, at once placed them in an envelope and sent them to the defendant, who received them upon September 29, 1897, and knowing, as was the fact, that he had paid them long smce to Peed, and not knowing that. Peed had ever parted with them, put them mto the fire and treated the mat- ter as at an end. Upon October 1, 1897, Peed's check was returned to the plaintiffs marked "referred to drawer." The plaintiffs made no communication to the defendant upon the matter until some four months after the check was thus returned, and the question arises, in these circumstances, who has the better title to the notes, obtained as they were by fraud from the plaintiffs, who were the bona fide hold- ers for value of the notes? Now, the notes having been obtained by Peed from the plaintiffs by fraud, although the property in the notes passed to Peed, the plaintiffs as against Peed were entitled to disaf- firm the transaction on discovering the fraud, and if, before the trans- action with Peed was disaffirmed by the plaintiffs, the defendant had become holder in due course of the notes, it would then be too late in my judgment to disaffirm, so far as the defendant was concerned, and the plaintiffs could not then successfully sue the defendant either upon the notes or in trover; and the real question, therefore, as I have above stated, comes to this : Did the defendant, when he took the notes on September 29, 1897, from Peed, obtain a better title to them than Peed had ? Which means : Did he take them bona fide, and for value, Sec. 1) PAYMENT AND RENUNCIATION 745 and without notice of Feed's fraud, and before they were due? For, if so, the defendant would in my judgment have taken a better title to the notes than Peed had, and a title whicli would prevail over that of the plaintiffs. That the defendant received back the notes bona fide and without notice of Feed's fraud is clear. The defendant, when he received the notes from Feed, knew nothing of Feed having ever parted with them, nor had he ever heard of the plaintiffs in the matter. That the defend- ant received back the notes before the fraud of Feed was discovered is clear, for he received them the day after the fraud was committed. But did he give value for the notes when he received them back, and did he take them from Feed before they were overdue? As to the question of value, what value did the defendant give for the notes when he took them back from Feed ? He had given value for the first three notes when, upon February 9, 1897, he gave the second two notes to Feed in order to pay off the first three notes, and he gave value for the second two notes when he paid the £4,000. in July, 1897, to Feed to pay them off; but this was months before the fraud was perpetrated by Feed upon the plaintiffs, and before the defendant got the notes back on September 29, 1897. When he got the notes back the defendant gave nothing for them. Ho^y can it be said, then, that he took back the notes for value? For he did not. If the case cited of London & County Banking Co. v. London & River Flate Bank, 21 Q. B. D. 535, were to be held to apply to this case, we should have to hold that the defendant gave re^l value for the notes and then a supposed value over again for the same notes, which cannot be. But supposing the defendant did give value for the notes when he took them back, which in my opmion he did not, did he take the notes aft- er they were due? I cannot see how it can be held that defendant, when he received back the notes in September, 1897, though payable on demand, did not take them when overdue ; for he must have known they were overdue if he thought about it at all, inasmuch as he had himself paid them off, the first three notes in February, 1897, and the last two notes in July, 1897. How can the defendant now say that they were not overdue in September, 1897, when he received them back? It seems to me that as the defendant did not give value for the notes when he took them back, and as, even if he did, the notes were then overdue, the defendant did not take a better title to them than Feed had, and that the plain- tiffs, having disaffirmed, as they were entitled to do, the transaction with Peed, can maintain trover for the notes and bring an action upon the notes against the defendant, who has no better title to set up than that of Feed. I must point out that the difficulty which the defendant unfortunately is in arises through his own default in not getting the notes back from Peed when he paid them, thereby giving Feed the op- / portunity of cheating the plaintiffs as he did. It is a well-known prin- ciple of law that whenever one of two innocent persons must suffer by 746 , DISCHARGE (Part 4 the acts of a third person, he who has enabled such third person to occasion the loss must sustain it. See the well-known cases of Lick- barrow V. Mason in 1 Smith's Leading Cases, and Babcock v. Lawson, [1879] 4 Q. B. D. 394, which contains matters very apposite to the present case. In my opinion counsel for the plaintiffs are right in their construc- tion of section 61 of the Bills of Exchange Act, which was so much relied upon by the defendant's counsel, and that section does not ap- ply to the present case, and the words "in his own right" do not mean in contradistinction to a representative right as argued for the defend- ant. For these reasons I think that the appeal must be allowed, and that judgment must be entered for the plaintiffs." SCHWARTZMAN v. POST et al. (Supreme Court, Appellate Division, First Department, New York, 1903. 94 App. Div. 474, S4 N. Y. Supp. 922, S7 N. Y. Supp. ST2.) Appeal by the plaintiff, Abraham Schwartzman, from an order of the Appellate Term of the Supreme Court, entered in the office of the clerk of the county of New York on the 16th day of November, 1903, which order reversed a judgment of the City Court of the city of New York in favor of the plaintiff, entered in the office of the clerk of said court on the 15th day of February, 1903, upon the verdict of a jury, and also (as stated in the notice of appeal) from a judgment of rever- sal entered in the office of the clerk of the city of New York on the 13th day of January, 1904, upon said order of the Appellate Term. Per Curiam. Determination of Appellate Term affirmed, with costs, on the opinion of the court below, and judgment absolute order- ed for defendant, with costs. Van Brunt, P. J., and Patterson, Ingraham, and McLaughlin, JJ., concur. Lauchein, J. (dissenting). According to the testimony of the plain- tiff, the note was not paid, nor was it surrendered up to the defendant Post upon the understanding that it was to be deemed paid, but on the distinct agreement that the defendants were to remain liable for the balance for which plaintiff has recovered in this action. The defend- ants did not, therefore, in my opinion, by this surrender become hold- ers of the note in their "own right," within the intent and meaning of subdivision 5 of section 200 of the negotiable instruments law. Laws 1897, p. 744, c. 612, and the transaction did not constitute a dis^pharge of the note. The defendant Post merely became the bailee thereof for the payee. 6 Collins and Romer, L. JJ., delivered concurring opinions, which, with the statement of the case and the arguments of counsel, are omitted. Sec. 1) PAYMENT AND RENUNCIATION 747 The following is a part of the opinion delivered by Frb;h;dman, P. J., in the court below : This action was brought to recover an alleged balance of $1,750, claimed to be due upon a demand note for $5,000, dated May 1, 1899, payable to the order of the maker, the defendant Post, and indorsed by him and his father, the defendant Postawalsky. Postawalsky was not served with the summons and did not appear. After a trial by a jury, a verdict for the amount claimed was rendered in favor of the plaintiff. The plaintiff's complaint originally averred that he is "now the lawful owner and holder" of the note in suit, but it was subse- quently amended by striking out the allegation that plaintiff was the "holder." The .answer denied the delivery of the note to the plaintiff, and that he was the owner thereof, and set up, among other defenses, that the note had been delivered up and surrendered to Post, the mak- er, about April 9, 1900, and that defendant had ever since been the holder thereof. At the beginning of the trial, the note, in pursuance of a notice giv- en by plaintiff's attorney, was produced by the defendant Post, and by plaintiff's attorney offered and received in evidence. The testimony of the transaction out of which the cause of action arose, as given by the parties, is very conflicting, and a reading of the record convinces one that neither party has given a complete statement of the facts. The plaintiff's version, however, was accepted and believed by the jury, and must, therefore, for the purposes of this appeal, be taken as true, and, briefly stated, is as follows : In 1898 plaintiff" and the defendant Postawalsky were copartners in- the cloak business. This partnership was dissolved by mutual consent in 1899, and plaintiff received the note in question for his interest in- said business. Subsequently, upon demanding payment of the note of the defendant, Post told the plaintiff that he (Post) could not pay the full amount of the note, but would pay $2,000 if the plaintiff would give up the note. This offer was afterwards increased by Post to the sum of $2,500. Plaintiff then authorized his brother (Schwartz) to- continue the negotiations with Post. For some reason, not appearing,, the plaintiff had placed the note with one Kohn, who testifies that he also called upon Post in regard to obtaining payment of the note, and that Post refused to pay in full. Plaintiff's brother (Schwartz) tes- tifies to similar conversations with Post. In all of the conversations Post is alleged to have said, in substance, that, unless the amount of- fered was accepted by the plaintiff, and the note given up, that he. Post, w^ould "protect" himself; that "I have been through the mill' once before, and know how to take care of myself." These witnesses also testify that Post promised to pay the balance of his indebtedness,, but insisted upon the surrender of the note to him. Matters between the parties culminated in a meeting of Post, Kohn, one Kohler, at- torney for Post, one Essberg, attorney for plaintiff or his brother, Schwartz, and Schwartz, at Essberg's office, at which time Post paid. 748 DISCHAEGB (Pait 4 $2,750 and Essberg $500 to Schwartz, who then gave the note to Ess- berg. The $3,250 was then paid plaintiff, and the note eventually given to Post, although when Post came into possession of the note does not appear, nor is it shown for what reason Essberg contributed the sum of $500 towards the amount paid the plaintiff. At the close of the plaintiff's case, and again at the close of the whole case, the defendant's attorney moved to dismiss the complaint upon the ground that "the plaintiff has failed to establish a cause of action, and upon the ground that by his own admission of the delivery and surrender of the note by him to the defendant [the plaintiff] ex- tinguished any liability on the note. * * * My contention is that the delivery of that note by the plaintiff to the defendant constituted a discharge and cancellation of that note." I am of the opinion that the defendant Post is right in this conten- tion. The cause of action is based wholly upon the note. Subdivision 5 of section 200 of the Negotiable Instruments Law (Laws 1897, p. 744, c. 612) provides that a negotiable instrument is discharged "when the principal debtor becomes the holder of the instrument at or after maturity in his own right." The instrument in question was a nego- tiable note. The term "holder" is defined in section 2, p. 720, as fol- lows : " 'Holder' means the payee or indorsee of a bill or note who is in the possession of it, or the bearer thereof." And section 3 con- tains the following definition : "Person Primarily Liable on Instru- ment. — The person 'primarily' liable on an instrument is the person who, by the terms of the instrument, is absolutely required to pay the same." The words of subdivision 5 of section 200, "in his own right," mere- ly exclude such a case as that of a maker acquiring the instrument in purely a representative capacity. The case at bar comes exactly with- in these provisions. Post was the maker of the note, and primarily liable thereon. It was surrendered to him, and he became the "holder" thereof without fraud or mistake, in "his own right." Prior to the adoption of the negotiable instruments law it has been held that, if a note be surrendered by the payee to the maker, the whole claim is dis- charged. Jaffray v. Davis, 124 N. Y. 16.^170, 26 N. E. 351, 11 L. R. A. 710 ; Ellsworth v. Fogg, 35 Vt. 355 ; Kent v. Reynolds, 8 Hun, 559 ; Beach v. Endress, 51 Barb. 570, affirmed in Larkin v. Harden- brook, 90 N. Y. 333, 43 Am. Rep. 176. Whether the plaintiff can maintain an action upon the original in- debtedness, or upon the defendant Post's promise to pay the balance due, the consideration therefor being the plaintiff's surrender of the note, need not now be determined. * * * « » A fortiori the Instrument is discharged when It Is surrendered, eitber In exchange for a part payment which is accepted in full satisfaction (Slade V. Mutrie, 156 Mass. 19, 30 N. E. 168 [1892]), or as a gift (Sherman v. Sher- man, 3 Ind. 337 [1852]; Larkin v. Hardenbrook, 90 N. Y. 333, 43 Am. Rep. 176 [1882], semble). Sec. 1) PAYMENT AND RENUNCIATION 749 UNION TRUST CO. v. McGINTY. (Supreme Judicial Court of Massachusetts, Suffolk, 1912. 212 Mass. 205, 98 N. B. 679, Ann. Cas; 19130, 525.) Contract on a promissory jiote for $250, dated October 13, 1902, signed by the defendant as maker, payable two months after date to one James J. McCluskey, indorsed by McCluskey and discounted by the plaintiff at his request. Writ in the municipal court of the city of Boston dated October 6, 1908. On appeal to the superior court the case was tried before Bell, J. There was evidence that the note was made by the defendant solely for McCluskey's accommodation ; that at the maturity of the note, on De- cember 13, 1902, the plaintiff received from McCluskey a payment of $10 as interest to February 13, 1903 ; and that in consideration of this payment without the defendant's knowledge or consent the plaintiff ex- ' tended the time of payment of the note until the last named date. It was agreed that the defendant had introduced evidence which would war- rant the jury in finding that the plaintiff when the note was discounted knew through its president that the defendant had executed the note solely for McCluskey's accommodation and that McCluskey had not given the defendant any consideration therefor. The judge ordered the jury to return a verdict for the plaintiff; and the defendant alleged exceptions. RuGG, C. J. The single question presented in this case is whether the accommodation maker of a promissory note is discharged, if. the holder, knowing that the note was made for the accommodation of the payee and indorser, by agreement with the indorser upon a valuable consideration, without the maker's consent, extends the time of pay- ment. Before the enactment of the Negotiable Instruments Act (St. 1898, c. 533 ; R. L. c. 7Z, §'§ 18-212) one who made a promissory note for the accommodation of another was as between the parties a surety. The holder, who had knowledge of the true relation of the parties, was bound to act toward such accommodation maker as toward a surety in order to preserve his rights against him. Under such circumstances an extension of time to the person ultimately liable, without the consent of the surety, that is the accommodation maker, released the latter. Guild V. Butler, 127 Mass. 386, and cases cited at 389; Jennings v. Moore, 189 Mass. 197, 75 N. E. 214. The precise point is whether this rule of law has been changed by the Negotiable Instruments Act. It is matter of common knowledge that the Negotiable Instruments Act was drafted for the purpose of codifying the law upon the sub- ject of negotiable instruments and making it uniform throughout the country through adoption by the Legislatures of the several states and by the Congress of the United States. The design was to obliterate state lines as to the law governing instrumentalities so vital to the con- 750 DiscHAEQB (Part 4 duct of interstate commerce as promissory notes and bills of exchange, to remove the confusion or uncertainty which might arise from conflict of statutes or judicial decisions amongst the several states, and to make plain, certain and general the controlling rules of law. Diversity was to be moulded unto uniformity. This act in substance has been adopted by many states. While it does not cover the whole field of negotiable instrument law, it is decisive as to all matters comprehended within its terms. It ought to be interpreted in such a way as to give effect to the beneficent design of the Legislature in passing an act for the pro- motion of harmony upon an important branch of the law. Simplicity and clearness are ends especially to be sought. The language of the act is to be construed with reference to the object to be attained. Its words are to be given their natural and common meaning, and the pre- vailing principles of statutory interpretation are to be employed. Care should be taken to adhere as closely as possible to the obvious meaning of the act, without resort to that which had theretofore been the law of this commonwealth, unless necessary to dissolve obscurity or doubt, especially in instances where there was a difiference in the law in the different states. Approaching the act from this point of view, it is apparent that no relation of principal and surety is established or contemplated by any of its sections. It determines the liability of the various parties to the negotiable instrument on the basis of that which is written on the paper. The obligation of all makers, whether for accommodation or otherwise, is to pay to the holder for value according to the terms of the bill or note. Their obligation is primary and absolute. Sections 17 , 208. The act makes no provision for the proof of another and differ- ent relation than that expressly undertaken and defined by the tenor of the instrument signed. The fact that one is an accommodation mak- er gives rise to a duty no less or greater or different to the holder for value than that imposed upon a maker who received value. This is expressly provided by the act, even though such holder knew at the time of making that the maker was an accommodation maker. Section 46. The act further provides in definite terms that the instrument and hence one primarily liable is discharged in one of five different ways (section 136) ; that is, by payment by the principal debtor, or by the party accominodated, by cancellation, by any other act which would discharge a simple contract, and by the principal debtor becoming the owner at or after maturity. There is no mention here of a discharge of an accommodation party by extension of time. But among the ways in which a party secondarily liable may be discharged is (section 137) an agreement by the holder to extend the time of payment or to post- pone his right to enforce the instrument "unless made with the assent of the party secondarily liable or unless the right of recourse against such party is expressly reserved." Whatever force might attach to the enumeration of ways in which the instrument and consequently parties primarily liable might be dis- Sec. 1) PAYMENT AND EENUNCIATION 751 charged, if this provision stood alone, the inference arising from the omission of extension of time from such enumeration and its inclusion among the ways in which persons secondarily liable may be discharged, is almost irresistible that the Legislature did not intend that persons primarily liable should be discharged in that manner. These two sec- tions standing side by side, both dealing with the subject of discharge of liabilities of parties, the one mentioning, the other not mentioning, extension of time by the holder as a means of working discharge of liability, cannot be treated as accidental or without significance. It is strong proof of a legislative purpose to change the pre-existing law of the commonwealth. These considerations outweigh the argument ad- duced from the fact that the "instrument" rather than "parties primar- ily liable" is the language used in section 136 and from the phrase of clause 4, to the effect that the instrument may be discharged "by any other act which will discharge a simple contract." The act establishes a liability on the part of an accommodation maker, which is not affect- ed by an extension of time given by the holder to any other party to the note, even though as between such party and the accommodation maker a different relation may subsist in fact from that appearing on the. face of the paper. The result is to render somewhat more rigid the rights of the parties as set forth in the written instrument, and so far as the holder is concerned to establish liability to him upon a firm basis, not easily shaken by parol evidence. There is nothing inconsistent with this conclusion in Enterprise Brewing Co. v. Canning, 210 Mass. 285, 96 N. E. 673. "The contention of the defendants there discussed concerned a relation of principal and surety between the payee and guarantor in an action between the two. This appears to be the view taken without exception by the courts of other jurisdictions which have considered the point. In the inter- pretation of a statute widely adopted by the states to the end of se- curing uniformity in a department of commercial law, we should be inclined to give great weight to harmonious decisions of courts of other states, even if we were less clear than we are in this instance as to the soundness of our own conclusion. Vanderford v. Farmers' Bank, 105 Md. 164, 66 Atl. 47, 10 L. R. A. (N. S.) 129 ; Cellers v. Meachem, 49 Or. 186, 89 Pac. 426, 10 L. R. A. (N. S.) 133, 13 Ann. Cas. 997; Wolstenholme v. Smith, 34 Utah, 300, 97 Pac. 329 ; Bradley Engineer- ing & Manuf. Co. v. Heyburn, 56 Wash. 628, 106 Pac. 170, 134 Am. St Rep. 1127; National Citizens' Bank v. Toplitz, 81 App. Div. 593, 81 N. Y. Supp. 422, affirmed on another ground 178 N. Y. 464, 71 N. E. 1 ; Richards v. Market Exchange Bank, 81 Ohio St. 348, 90 N. E. 1000, 26 L. R. A. (N. S.) 99; Fritts v. Kirchdorfer, 136 Ky. 643, 650, 124 S. W. 882. Exceptions overruled. 752 DISCHARGE (Part 4 FOSTER V. DAWBER. (Court of Exchequer, 1851. 6 Exch. 839.) Assumpsit. The first count of the declaration was on a promissory note, dated the 7th of December, 1845, made by the defendant, for payment of £500. and interest, on demand, to Clark, the plaintiff's testator. The second count was on a similar note for £500., dated the 20th of January, 1846. Pleas, to the first and second counts. First, payment. Secondly, that after the making of the promissory notes, and before any demand of the sums of money therein mentioned, or of either of them, or of any interest thereon, and before any breach of the promises in those counts mentioned or either of them, the said J. Clark, in his lifetime, to wit, etc., exonerated, absolved, and discharged the defendant from, and then waived, performance of the promises therein mentioned, and payment of the said notes respectively, and of the sums of money and interest therein mentioned. Verification. Thirdly, that after the making of the promissory notes, and in the lifetime of J. Clark, to wit, on, etc., it was agreed between J. Clark and the defendant that the defendant should purchase a piece of paper marked with a certain receipt stamp, to wit, a 10s. stamp, to wit, of the value of 10s., with the moneys of the defendant, and that he should then fill up and write on the same to the tenor and effect following, that is to say: "Hull, 16th February, 1846. Received of Robert Dawber the sum of £1080., being the interest and principal on two notes, dated December, 1845, and January, 1846, and in full of all demands" — and that the defendant should suffer and permit J. Clark to sign the same; and that such agreement and purchase of the said piece of paper so stamped, and such writing on and filling up by the defendant, and suffering and permitting J. Clark to sign the same, should be, and should be accepted and taken by J. Clark, in full satisfaction and discharge of the several causes of action in the introductory part of this plea mentioned. The plea then averred performance of the agreement in terms, and that J. Clark accepted the same in satisfaction and discharge of the several causes of action. Verification. Replication de injuria. Verdict for the defendant. The plaintiff obtained a rule nisi to enter a verdict for the plaintiff or judgment non obstante veredicto.^ Parke, B., said: The court has already disposed of all the points in this case except two. The first of these depends upon the question whether the evidence supported the second plea. [His Lordship, after reading that plea and stating the substance of the evidence, proceeded :] There is no doubt that the effect of that transaction of the 16th oi February, 1846, is to show that the testator meant to discharge the 7 The statement Is abridged, and the arguments of counsel and part of the opinion on other points are omitted. Sec. 1) PAYMENT AND RENUNCIATION 753 defendant, from all liability upon the notes. But it was contended that, as the plea stated the transaction to have taken place before breach, the plea was not proved. The plea is inartificially drawn, and appears to have been copied from the precedents of a plea in discharge of an executory contract. Now, it is competent for both parties to an execu- tory- contract, by mutual agreement, without any satisfaction, to dis- charge the obligation of that contract. But an executed contract can- not be discharged except by release under seal, or by performance of the obligation, as by payment, where the obligation is to be per- formed by payment. But a promissory note or a bill of exchange appears to stand on a different footing to simple contracts ; and we think the words "before breach," when taken with reference to those instruments, are either idle or absurd. If they are to be taken as hav- ing any meaning in this plea, they must ,be read in conjunction with the context, and they merely amount to an allegation that Clark dis- charged the defendant from all liability before any demand of the sum of money mentioned in the notes. And if that be so, the plea was proved, for Clark exonerated the defendant before he called on him to pay the amount of the notes. We are, therefore, of opinion that the plea was proved. The next question is, whether the plea is good after verdict. Mr. Willes disputed the existence of any rule of law by which an obliga- tion on a bill of exchange, by the law merchant, can be discharged by parol, and he questioned the decisions, and contended that the authori- ties merely went to show that such an obligation might be discharged as to remote but not as between immediate parties. The rule of law has been so often laid down and acted upon, although there is no case precisely on the point as between immediate parties, that the obliga- tion on a bill of exchange may be discharged by express waiver, that it is too late now to question the propriety of that rule. In the passage referred to in the work of my Brother Byles, the words "it is said" are used ; but we think the rule there laid down is good law. We do not see any sound distinction between the liability created between im- mediate and distant parties. Whether they are mediate or immediate parties, the liability turns on the law merchant, for no person is liable on a bill of exchange except through the law merchant ; and probably, the law merchant being introduced into this country, and differing very much from the simplicity of the common law, at the same time was introduced that rule quoted from Pailliet as prevailing in foreign countries, viz., that there may be a release and discharge from a debt by express words, although unaccompanied by satisfaction or by any solemn instrument. Such appears to be the law of France, and prob- ably it was for the reason above stated that it has been adopted here with respect to bills of exchange. But Mr. Willes further contended, that though the rule might be true with respect to bills of exchange, it did not apply to promissory notes, inasmuch as they are not put upon the same footing as bills of exchange by the statute law. Sm.& M.B.& N.(2d Ed.)-48 754 DiscHAEGB (Part 4 The negotiability of promissory notes was created by the statute 3 & 4 Anne, c. 9, which recites that "notes in writing, signed by the party who makes the same, whereby such party promises to pay unto any other person or his order any sum of money therein mentioned, are not assignable or endorsable over, within the custom of merchants, to any other person" (that is one of tlie properties promissory notes are recited not to have) ; "and that such person to whom the sum of money mentioned in such note is payable, cannot maintain an action by the custom of merchants against the person who first made and signed the same ; and that any person to whom such note shall be assigned, en- dorsed, or made payable, could not, within the said custom of mer- chants, maintain any action upon such note against the person who first drew and signed the same." _ That appears to apply to cases of the original liability on a note, as well as to those cases where the liability has been created by the assignment of that instrument. Now, bills of exchange and promissory notes diflfer from other contracts at common law in two important particulars : first, they are assignable, whereas choses in action at common law are not; and secondly, the instrument itself gives a right of action, for it is presumed to be given for value, and no value need be alleged as a consideration for it. In both these important particulars promissory notes are put on the same footing as bills of exchange by the statute of Anne, and therefore we tl:ink the same law applies to both instruments. This court was of this opinion in a case of Mayhew v. Cooze (November 23, 1849, not reported), in which there was a plea similar to the present, although the expression of that opinion was not necessary for the decision of that case. The plea is, therefore, good after verdict. * ♦ * Rule absolute accordingly. LEASK et al. v. DEW. (Supreme Court, Appellate Division, First Department, New York, 1905. 102 App. Div. 529, 92 N. Y. Supp. S91.) This action was brought to recover upon a promissory note given by the defendant to the plaintiffs' testator. The note was dated No- vember 23, 1901, whereby the defendant promised to pay to the order of Oliver W. Buckingham, the testator, one year after date, the sum of $5,000, with interest at 6 per cent. Oliver W. Buckingham died testate on the 31st day of October, 1903, and upon the probate of his will the plaintiffs duly qualified as his executors. The answer averred, for separate and affirmative defenses, that the testator had canceled the said note by an instrument in writing. Upon the trial of this action the plaintiffs proved the making of the note, the nonpayment of which was admitted, except as stated in the answer, and rested. The de- fendant then offered proof that after testator's death the note in ques- tion was found among his papers, inclosed in an envelope together with Sec. 1) PAYMENT AND RENUNCIATION '^55 the following paper, all in the handwriting of the testator, except the, signature of the witness : "New York, Nov. 25, 1901. "To My Executors — Gentlemen: The enclosed note I wish to bt cancelled in case of my death, and if the law does not allow it I wish you to notify my heirs that it is my wish and orders. "Truly yours, Oliver W. Buckingham. "Witness : Frank W. Woglom." Judgment for plaintiffs. Defendant appeals.' . Hatch, j. * * * This brings us to the main question in the case — the construction of the written declaration of the testator, which was found in the envelope which contained the note after his death. It is probably true that this declaration was sufficient to discharge de- fendant's obligation upon the promissory note, within the authority of Wekett v. Raby, 2 Brown's House of Lords Rep. 386. The decla- ration therein was made a few days before thfe death of the testator, in these words : "I have Raby's bond, which I keep. I don't deliver it up, for I may live to want it more than he; but when I die he shall have it, he shall not be asked or troubled for it." Suit haying been brought upon the -bond, it was ordered to be de- livered up and canceled, and such decision was affirmed by the House of Lords upon appeal. The declaration in the present case is, in one view, stronger than the declaration in that case, for therein there was the express intention of the testator to keep the bond as a subsisting obligation against Raby, and it was not to be enforced save in the event of his death, when it was to fake effect. In the writing under consideration in this case there is no such expression in terms. A similar doctrine was announced in Brinckerhoff v. Lawrence, 2 Sandf. Ch. 412. Therein the Raby Case is cited with approval. The declara- tion therein was, like the present, limited in its operative force to events which might happen subsequently to the death of the declar- ant. These cases applied the common-law rule, and, while they are authoritative declarations of the effect of this instrument at common law, they are not controlling in its construction at the present time, for the reason that the force and effect of an instrument of renunciation is now governed by the provisions of section 203 of the negotiable instruments law (Laws 1897, p. 744, c. 612). It reads: "The holder may expressly renounce his rights against any party to the instrument before, at or after its maturity. An absolute and unconditional re- nunciation of his rights against the principal debtor made at or after the maturity of the instrument, discharges the instrument. But a re- nunciation does not affect the rights of a holder in due course without notice. A renunciation must be in writing unless the instrument is delivered up to the person primarily liable thereon." » The statement Is abridged, and part of the opinion omitted. 756 DISCHARGE ^ (Part 4 This statute was taken from an act passed by the British Parliament in 1882, known as the "Bills of Exchange Act." It has been quite generally adopted in various states of the American Union. Its pro- visions are as follows: "(1) When the holder of a bill at or after its maturity absolutely and unconditionally renounces his rights against the. acceptor, the bill is discharged.^- The renunciation must be in writ- ing, unless the bill is delivered up to the acceptor. (2) The liabilities of any party to a bill may in like manner be renounced by the holder before, at, or after its maturity, but nothing in this section shall af- fect the rights of a holder in due course without notice of the renuncia- , tion." It is readily seen that these two statutes, in character and import, are ahke. The only difference is change in the form of phraseology, but it affects neither the sense nor the construction. A single case has arisen in England under the provisions of this statute. In re George, L. R- 44 Ch. Div. 627, decided in 1890. Therein it appeared that the testator desired to have destroyed a note for i2,000. given by Mrs. Francis. Search was made for the same, that it might be de- stroyed, but it could not be found. At the instance of the decedent, the nurse in attendance upon him wrote at his dictation: "30th Au- gust, 1889. It is by Mr. George's dying wish that the check [sic] for £2,000. money lent to Mrs. Francis be destroyed as soon as found." The nurse added to this declaration the words : "Mr. George is per- fectly conscious and in his sound mind. [Signed] Nurse T." This transaction took place two or thr.ee hours before death. The testator therein left a will, in which he bequeathed to Mrs. Francis, his niece, the sum of i6,000. The executors of the will declined to pay the be- quest in full, and thereupon the legatee brought an action to determine the question as to whether the promissory note had been duly canceled. The court, under the provisions of the statute above quoted, deter- mined that the renunciation was insufficient to discharge the note. Upon the case there presented, I should be disposed to hold that it amounted, within the terms of the act, to an unconditional renuncia- tion of the rights of the testator against the maker of the note. The expression Ihat it was the testator's wish that it be destroyed would seem to constitute an announced declaration to destroy the instrument, and, as such, it was a clear expression of a renunciation of his right to enforce it. In the declaration of renunciation, it is stronger than the instrument relied upon in the present case. There is some obscurity in the provisions of our statute. In its first sentence it provides for the renunciation of the rights of the holder against any party to the instrument which may be made before, at, or after its maturity. In the second sentence it provides for an absolute and unconditional renunciation of the rights of the holder against the principal debtor at or after the maturity of the instrument, and dis- charges the instrument. The first relates to the party ; the second, to the instrument. It is somewhat difficult to see how there could be an Sec. 1) PA'XMENT AND RENUNCIATION 757 absolute discharge of a party to an instrument without discharging the instrument as an obHgation, so far as he is concerned. We do not clearly perceive why this distinction should have been made. It is im- material, however, to the rights of the parties to the present action. The instrument of renunciation contains no express declaration of the testator to renounce his rights in the note against the party, or of his rig^t to enforce it as a subsisting .obligation. The expression is : "I wish [the note] to be canceled in case of my death.'' There is nothing in these words which can be construed as expressing a renunciation of any rights either against the party or upon the instrument. Had it been delivered to the defendant during the lifetime of the testator, it would not have precluded the latter at any time upon maturity from enforcing the note. There is nothing indicating an intent upon his part not to enforce it during his lifetime. There was no delivery of it to anybody, and while, doubtless, it was «ufficiently authenticated to accomplish a renunciation, it had no operative effect whatever, as it did not fall within the statute or comply with its terms. In principle, the question raised by this case has been decided by this court. Dimon v. Keery, 54 App. Div. 318, 66 N. Y. Supp. 817. Therein the plaintiff's intestate loaned to the defendant a sum of money, taking her promissory note in writing, wherein she agreed to pay the same, with interest, on demand. At the time the note was de- livered, the testator indorsed thereon the words: "At my death the above note becomes null and void. Stephen C. Dimon." Dimon con- tinued to retain possession of the note, and the defendant paid interest thereon, but no principal. Dimon died about three years after the exe- cution and delivery of the note. In an action to enforce the same by his administrator, the defendant was held liable thereon, as the indorse- ment was a mere declaration by the payee of the note as to his inten- tion concerning it, but that it was insufficient as constituting either a gift of money, or an agreement to discharge it as an obligation. The court therein did not discuss the statute which is here the subject of consideration. It is manifest, however, that the declaration indorsed upon the note was not a renunciation of the liability of the maker dur- ing the lifetime of the deceased, or of any renunciation of the obliga- tion of the instrument; and, as it did not constitute a gift or an agree- ment, it neither fell within the, terms of the statute, nor exempted the defendant, for either reason, from liability thereon. In the instrument relied upon in this case, so far as the direction for cancellation in the event of death, and a command to his heirs to obey his wish and follow his orders, the language is no stronger than the in- dorsement upon the back of the note in the Dimon Case. Nor is it as strong, because the language there used was a declaration that the note at death "becomes null and void." Here there is simply the expression of a wish to have it canceled, and a direction to the heirs to obey the wish. Consequently the Dimon Case becomes a direct and controlling 758 DISCHARGE (Part 4 authority in the disposition of this controversy. As there was no valid renunciation of right of the testator to enforce the note against the party, or of renunciation from Hability upon the instrument, and as nothing contained in the declaration otherwise operates to relieve the defendant from hability, it follows that the note remains a valid and subsisting obligation. The judgment enforcing it should therefore be affirmed, with costs." BOYLSTON V. GREENE. (Supreme Judicial Court of Massachusetts, Suffolk, 1812. 8 Mass. 465.> Assumpsit, in which the plaintiff declares as indorsee against the de- fendant as indorser of a promissory note made by one John R. Greene, dated April 21, 1807, payabfe to the defendant, by him indorsed to one Thomas Lathrop, and by him to the plaintiff, being payable in 60 days from date with grace at the Norwich Bank. On the trial of the action upon the general issue before Parker, J., it appeared that the said Lathrop had procured the note, soon after its date, to be discounted at the Norwich bank, and had received therefrom the sum therein expressed ; that at the expiration of the 60 days and grace, neither the said John R. Greene nor the defendant having paid the sam_e, the said Lathrop paid the said note at the said bank, and, having taken it up, afterwards indorsed it to the plaintiff. The judge directed the jury that, after Lathrop had thus paid and taken up the note, it ceased to be negotiable, and therefore that the plaintiff could not recover. And the jury having returned a verdict for the defendant, the plaintiff moved for a new trial, for the misdirection of the judge.^" Per Curiam. The question in this case is whether the note declared on continued to be capable of negotiation after it had been paid by Lathrop, the last indorser. In such 'case there would be no incon- venience in considering the note still negotiable, having been paid by the last indorser, for he has a full and complete right upon the note against the maker and all prior indorsers, and their situation would not be made worse in any respect by their obligation being transferred to another. But we find the rule laid down generally that, by payment of a bill or promissory note, the contract of the parties to it ceases, so far as to prevent their being subject to new engagements, and an indorsement cannot be made after it, so as to affect any of the parties, except the person making it. 8 Compare Faneuil Hall Bank v. Meloon, 183 Mass. 66, 66 N. E. 410, 97 Am. St Rep. 416 (1903), and Baldwin v. Daly, 41 Wash. 410, 83 Pac. 724 (1906). See Edwards v. Walters, [1896] 2 Ch. 157 (C. A.). 10 The arguments of counsel are omitted. Sec. 1) PAYMENT AND EBNDNCIATION 759 The whole effect, however, of this rule, is to make a difference in the form of action, as it respects the nominal parties. The maker and prior indorser are still liable on their respective engagements ; and the plaintiff,' having a bona fide transfer of the note from Lathrop, may maintain an action in Lathrop's name against either of them; and the court will see that no interference of the nominal plaintiff shall prevent a recovery. Judgment on the verdict.*^ PRICE v. SHARP. (Supreme Court of North Carolina, 1842. 24 N. C. 417.) RuFFiN, C. J.^^ This is an action of assumpsit on two bills of ex- change by the plaintiff" as an indorser of Peebles, Hall & Co. against the acceptor. The bills were drawn on the 10th of July, 1841, by Peebles, Hall & Co., of Petersburg, in Vitginia, in favor of F. E. Rives, on the defendant Sharp, of Danville, in Virginia, who accepted them, but failed to pay them when they fell due. The one was for $783.85 at 90 days, and the other for $787.71 at 4 months, from date. Upon the failure of Sharp, the payee. Rives, returned the bills to the drawers, Peebles, Hall & Co., for payment ; and they accordingly paid him and took up the bills. On the 10th of December, 1841, Peebles, Hall & Co. indorsed the bills to the present plaintiff, who resides in Caswell, in this state, and immediately commenced this action by orig- inal attachment, levied on the estate of the defendant, situate in Cas- well. The indorsement from Peebles, Hall & Co. to the plaintiff was without consideration, and was made for the purpose of enabling Price to take out an attachment in his name for the benefit of Peebles, Hall & Co., and the present action was accordingly brought for their use. Upon the return of the attachment the defendant gave bail, and ap- peared and pleaded, first, non assumpsit, and, secondly, by way of spe- cial plea in bar, the facts stated respecting the indorsement and the purpose of it. Upon the trial the facts were agreed upon as here stat- ed, and upon them his honor was of opinion for the plaintiff, and so instructed the jury, who found a verdict accordingly, and from the judgment the defendant appealed. For the defendant it has been insisted that the plaintiff cannot main- tain this action, commenced by original attachment, because it is not brought for his own benefit, but, in evasion and fraud of the act of 1777, for that of Peebles, Hall & Co., who could not have brought it in their own names, according to the case of Broghill v. Wellborn, 15 N. C. 511. Whether this objection be valid or not, if taken in apt time, it is not now necessary to say ; for, if good, it comes too late. Un- 11 Overruled In Guild v. Eager, 17 Mass. 615 (1822). 12 The statement of facts Is omitted. 760 DISCHARGE ' (Part 4 doubtedly the holder of a bill may indorse it to another in trust for himself, or to collect as his agent, and the indorsee may have an ac- tion against the acceptor of the bill. The objection is not, therefore, that this plaintiff could not maintain assumpsit on these bills, but that he cannot commence that action by attachment, but should have done it by capias. The imputed defect Hes in the writ, and the answer is obvious that, by accepting the declaration and pleading to it, the party waives all defects in the process. This point should have been raised by a plea in abatement or in some other method before pleading in bar. But in the opinion of the court there is another objection to the plain- tiff's recovery, which has more force. It is that the bills could not be put into circulation by the indorsement of Peebles, Hall & Co., after those persons had paid them to Rives. If Rives' name had been put on the bills, the case of Beck v. Robley, 1 H. Black. 89, is a direct au- thority against this action. In that case a bill was drawn by Brown on Robley, payable to Hodgson or order. Hodgson put his name on the bill ; and, not being paid when due, Hodgson, without striking out his blank indorsement, returned the bill to Brown, and he took it up, and afterwards passed it to Beck, who brought the action. It was held that when the bill came back unpaid, and was taken up from the payee by the drawer, it ceased to be a bill, for it could not then be negoti- ated by him without making Hodgson Hable thereon, for which there was no color. Between that case and the present there is but one point of difference; and that but increases the diffictilties in the plaintiff's way. Hodgson's name was remaining on the bill when he returned it to Brown ; whereas it does not appear that Rives ever put his name on these bills, and it cannot be assumed that he did. But waiving that for the present, the case cited is conclusive for the defendant, even if Rives' indorsement were on the bills. The counsel for the plaintiff, however, opposes to that case the more recent one of Callow v. Lawrence, 3 Maule & Selwyn, 95, and the language there used by Lord Ellenborough : "That a bill of exchange is negotiable ad infinitum, until it has been paid by, or discharged in behalf of, the acceptor; and that, if the drawer has paid the bill, it seems he may sue the acceptor on the bill, and if, instead of suing the acceptor, he put it into circulation upon his own indorsement only, it does not prejudice any of the other parties, who may have indorsed the bill, that the holder should be at liberty to sue the acceptor." But it seems to us that neither the case itself, nor the doctrine here quoted, when correctly understogd, shakes the principle of Beck v. Robley, but rather sustains it. No one can deny that a bill is negotiable indefinitely until payment. But the question is, by whom may it be negotiated? Why, by the payee, or by any person entitled under his indorsement; and the acceptor will be as much bound to pay it to such indorsee, however remote, as he was to the payee himself, before he indorsed it. But it does not follow that the drawer of the bill, who takes it up, after dishonor, from the payee, is to be considered the indorsee of the Sec. 1) PAYMENT AND RENUNCIATION 761 payee. Far from it; for, instead of claiming from the payee or un- der -him, he was, in truth, liable on it to the payee, in default of the acceptor, and in discharge of the liability took it up. Then he could not look to the payee to make the bill good to him; and, by conse- quence, he could not by his subsequent indorsement give to his indorser the right to such recourse against the payee. But as that would be the necessary effect of such indorsement, if allowed at all, it resulted that in such a case the law would not allow the drawer again to put his bills into circulation. That the payee suffered his name to remain on the bill, when he returned it, will not be an authority to the drawer to negotiate it ; for it was not left there to give credit to the bill with the drawer, or, in other words, as an indorsement, but merely as a re- ceipt for the amount paid by the drawer, animo solvendi. After such payment it would be unjust to the payee to allow the drawer to pass the bill on the responsibility of the former ; and, therefore, he is not permitted to pass it at all. With this reasoning, the passage quoted from Lord Ellenborough consists. In Callow V. Lawrence the bill was not, as here and in Beck v. Rob- ley, payable to the third person, but was payable to the drawer's or- der. After acceptance the drawer indorsed it, and it went through several hands, and was finally returned to the drawer by the holder, who struck out all indorsements after that of the drawer, and received payment from him, and then the drawer passed the bill to Callow; and it was held that the latter might maintain his action against the acceptor. A bill payable to the drawer's order, when accepted, be- comes substantially a promissory note from the acceptor to the drawer, being an express promise to pay the drawer or. his assigns. When it comes back to the drawer, he is remitted to his original rights upon an instrument payable to himself, and niay sue on it, without noticing indorsements that 'had been made of it. Dock v. Caswell, 2 N. C. 18; Strong v. Spear, 2 N. C. 214 ; Callow v. Lawrence, 3 M. & S. 95. It would seem to follow necessarily that the drawer might again indorse it ; for in so doing he passes the instrument regularly according to its face, and leaves no one liable to his indorsee but himself and the ac- ceptor, each of whom ought thus to be liable. Gomez Serra v. Berke- ley, 1 Wils. 46 ; Guild v. Eager, 17 Mass. 615. Upon this distinction between bills payable to a third person, on the one hand, and a promissory note or bill payable to the drawer's order, on the other, are obviously founded the observations of Lord Ellen- borough in the case cited. He admits the authority of Beck v. Robley, and carefully confines his rule to the case then before him, that is to say, of a bill payable to the drawer's order, by saying "that if, instead of suing the acceptor, he (the drawer) put the bill into circulation up- on his own indorsement only, the holder might sue the acceptor," which can apply to no case but that of a bill payable to the drawer's order or a promissory note. Then he immediately proceeds to declare further that "the case would be different, if the circulation of the bill would 762 DiscHABGB (Part 4 have the effect of prejudicing any of the indorsers," as in Beck v. Robley was the case. The other judges place the matter in a still clear- er light. Le Blanc, J., said: "There was in Beck v. Robley no color to charge Hodgson, and, striking out Hodgson's indorsement, the bill could not possibly be negotiable." And Bayley, J., who is high au- thority upon a point of this kind, states the distinction very shortly and happily by saying that "in Beck v. Robley payment by Brown struck out the indorsement of Hodgson, whereas the payment by Pywell (the drawer in Callow v. Lawrence) did not, in legal effect, strike out Py- well's own indorsement, so as to render the bill no longer negotiable." Thus those two cases stand well together. The principle of Beck v. Robley is that which governs this case, and is that a person cannot negotiate paper, when by so doing he would render responsible on it another person, from whom he had taken it up, under a prior respon- sibility ; while the principle of Callow v. Lawrence is that a person who takes up paper once due to himself may again put it into circu- lation, provided that, in so doing, he exposes no person to a prejudice but himself or those who are legally and justly liable on the paper be- fore him. In considering the case hitherto, it has been treated as if Rives had put his name on the bills, in which case, even, we have seen that the law is against the plaintiff. But that fact is otherwise here, or, at least, does not appear, which is the same thing. In Beck v. Robley the plain- tiff no doubt did sue as the indorsee of Hodgson, the payee, so that he had apparently a regular title to the bill. But this plaintiff declares, not as the indorsee of Rives, but upon the indorsement of Peebles, Hall & Co., which is qertainly bad. No person can acquire a title to a bill, payable to the order of Rives, but by the order of Rives. When he gave it back to Peebles, Hall & Co., without his indorsement, it was dead to all intents and purposes as a negotiable instrument. In the words of Mr. Justice Le Blanc, "Striking out the payee's indorsement, the bill could not possibly be negotiated." The indorsement to the plaintiff was a nullity, and he cannot maintain any action on the bills. New trial awarded. BLENN V. LYFORD. (Supreme Judicial Court of Maine, 1879. 70 Me. 149.) Assumpsit by indorsee against the maker of a promissory note. After the note was read in evidence, the defendant offered the receipt following, signed by M. E. Rice, the payee, which was excluded : "Re- ceived of H. H. Lyford two notes of hand, dated in December last, for three hundred dollars each, one payable in six months from date, the other seven months from date. These notes are for my benefit, except for his note due me April 15, 1873, for $225. The balance of the two above-named $300 notes I am to pay." Sec. 1) PAYMENT AND RENUNCIATION 763 Joseph H. Richardson, called by the defendant, testified in substance that he bought the note in suit of M. E. Rice in the fore part of April, 1873 ; that it had about four months to run ; that it then had on the back the words, "Holden without demand or notice, M. E. Rice," now erased ; that he kept it two or three months after it became due. On being asked whether M. E. Rice then paid it and took it up, the answer, on objection of the plaintiff, was excluded. Various other questions to similar purports, and other testimony tending to show equitable defenses, was excluded on objection. By consent of parties, the case was withdrawn from the jury and reported to the law court. If the foregoing rulings were wrong, and if the evidence excluded was admissible and would constitute a valid defense against this plaintiff, the case is to stand for trial ; if inad- missible, or insufScient to constitute such defense, a default is to be entered fof the amount of the note, with interest since due. The remaining material facts sufficiently appear in the opinion.^' Appleton, C. J. This is an action of assumpsit on the following note: "St. Albans, Me., Dec. 2, 1871. "Seven months from date, value received, I promise to pay M. E. Rice, or order, three hundred dollars, at any bank in Bangor. "H. H. Lyford." The note was indorsed in blank: "M. E. Rice." The following words were also on the back of the note, erased with ink, but legible : "Holden without demand or notice. M. E. Rice." Granting the presumption that the plaintiff is a bona fide holder for value of the note before maturity, that presumption may be over- come by proof. It appears from the testimony that the note was indorsed to one Richardson, for value, in the April following its date, that it was not paid at maturity, and that about three months after its dishonor he delivered it to Rice, the payee. The plaintiff then received the note in suit, when overdue. The note, remaining unpaid after maturity, was dishonored, and it was the duty of the indorsee to make inquiries concerning it. If he takes it, though he gave a full consideration for it, he does so on the credit of the indorser. He holds the note subject to all equities with which it may be incumbered. As the plaintiff is the indorsee of a dishonored note, it was com- petent for the defendant to show that it was an accommodation note, and that it had been paid by the party for whose accommodation it was given. That the note was for the accommodation of the payee is abun- dantly shown by his receipt of the date of February 22, 1872, as well as by the testimony offered and excluded. The note' being for the accommodation of Rice, it was his duty to 18 The arguments of counsel are omitted. 764 DISCHARGE. (Part 4" pay it. The note being found after dishonor in the hands of the one bound to pay it, the presumption i^ that he paid it. 2 Par. N. & B, 220. It was competent to show that in fact he paid it, but the answer to an inquiry whether the note was paid by Rice was excluded. This was erroneous. Assuming the note to have been paid by Rice, it was the same as if paid by the maker. It was paid by the party whose duty it was to pay it. The purpose for which it was given has been accomplished. The negotiability of a note ceases after its payment by the party who should rightfully pay it. "Now it cannot be denied," says Denman, C. J., in Lazarus v. Cowie, 43 E. C. L. 819, "that if a bill be paid when due by the person ultimately liable on it, it has done its work, and is no longer a negotiable instrument. * * * But the drawer of an accommodation bill is in the same situation as the acceptor of a bill for value. He is the person ultimately liable, and his payment dis- charges the bill altogether." Rice, when he took up the note in suit, had no right of action against the maker, and could not transfer to the plaintiff any better right after maturity than he had. Edw. B. & N. 564; Fish v. French, 15 Grav (Mass.) 520; Tucker v. Smith, 4 Me. 415. In the cases cited by the plaintiff there are most important differ- ences from the one under consideration. In Bank v. Crow, 60 N. Y. 85, the plaintiffs were the indorsees of the note for value and before maturity, and were consequently to be protected. In Thompson v. Shepherd, 12 Mete. (Mass.) 311, 46 Am. Dec. 676, it was held that the indorsee of a note, who receives it for value from the second indorser, after it has been dishonored by the maker, can recover thereon against the maker, although he knew when he received it that as between the maker and first indorser it was an accommodation note. But this is upon the principle affirmed by the court in Woodman v. Churchill, 52 Me. 5'8, that where the first indorsee of a promissory note acquires a right of action against the maker, by being a bona fide purchaser, without notice and before maturity, he can transfer a good title as well after as before the note becomes due. Exceptions sustained. MADISON SQUARE BANK v. PIERCE. (Court of Appeals of New York, 1893. 137 N. T. 444, 33 N. E. 557, 20 L. R. A. 335, 33 Am. St. Rep. 751.) This was an action upon a promissory note. The facts, so far as material, are stated in the opinion. Finch, J. We have a novel and interesting question before us on this appeal, although its apparent importance will lessen as we pass from first impressions to some slower reflection. It arises upon facts which are very brief and simple, and may at once be stated. The de- Sec. 1) PAYMENT AND EENUNCIATION 765 fendant, I'ierce, made his promissory note payable to his own order, and indorsed it to the Bates Company, Limited, which indorsed it to the plaintiff bank; the latter discounting it, and paying the proceeds over to the immediate indorser. Thereafter the Bates Company be- came insolvent, and passed into the hands of a receiver, who paid to the bank upon the liability of the indorser 7314 per cent, of the amount secured by the note. Later the bank sued Pierce, the maker, and re- covered judgment for the full amount of the note, in spite of the proof showing the payment made by the receiver, and in disregard of the claim asserted by the defendant that he should only be held liable for the balance remaining unpaid. That judgment has been affirmed by the general term, Judges Daniels and Barrett each writing very strong and valuable opinions in support of their doctrine, and relying upon the authority of Jones v. Broadhurst, 9 Man., G. & S. 177, 67 E. C. L. 175, which fully warrants their conclusion. The question does not seem ever before to have arisen in this country, and we are left at liberty to examine the English rule, and to follow it or not, as we ap- prove or disapprove its logic and its consequences. We are not to regard the note as being accommodation paper, but must assume its transfer for value. The form of the transaction is equivalent to what it would have been if the Bates Company had been named as payee, and loses none of its force by the intervention of the maker as first indorser. That indorsement, in the form adopted, was needed for the regular transfer of title, but does not change or affect the nature and character of the maker's liability. He remains the ultimate debtor, the person who ought to pay the debt, in preference to and in exoneration of all the other parties, to the paper, who in some form or other are entitled to have final recourse to him ; and it is ta the case of such a maker, of the note or such an acceptor of the bill of exchange that the English rule alone applies, and it is ex- plicitly declared inapplicable where the indorser or drawer is the real debtor, although in form only secondarily liable. Pierce, therefore, was the ultimate debtor, and the party who ought to pay the note, both in discharge of the obligation to the holder and in exoneration of the indorser. When the bank sued on the note, it was the legal holder and the legal party in interest. Upon production of the paper and the usual proof, judgment against the maker for the full amount was inevitable, unless some defense should be inter- posed. The only possible one for Pierce was part payment, and he was compelled to assert, and his counsel are compelled to argue, that the money paid by the indorser to the holder inured to the benefit of the maker as a payment on his debt. But that doctrine cannot pre- vail, for very obvious reasons. The indbrser's payment did not in the least lessen or satisfy the maker's debt. He owed it all exactly as before. What had happened possibly changed somewhat the real creditor, but left the whole debt due and unpaid. To whom he should pay might become a new question, but how much he should pay in 766 DISCHARGE (Part 4 discharge of the note was not made doubtful in any degree. What the receiver advanced to the holder is familiarly described as a pay- ment; but it was such relatively to the indorser's liability alone, while relatively to the obligation of the maker it was an equitable purchase, instead of a payment. That view of it was taken in a very early case, the decision of which depended necessarily upon it. In Callow V. Lawrence, 3 Maule & S. 95, it appeared that one Pywell drew a bill upon Lawrence to his own order, which Lawrence accepted. The drawer indorsed the bill to Taylor, who discounted it, and thereafter indorsed it to Barnett. It was protested for nonpay- ment. The drawer paid Barnett the full amount, and took the bill, and, striking off the indorsements of Taylor and Barnett, transferred the bill to Callow, who sued the acceptor upon it. The latter claimed that the bill was paid and extinguished, which the court denied, say- ing that the drawer "became the purchaser of the bill" when he paid and took it up out of Barnett's hands; that it was not paid by the drawer animo solvendi, in order to extinguish it, but only to redeem himself from the situation in which he stood. That must always be true of payment by indorser to holder, where the maker is the ultimate debtor. To the extent of the money paid the indorser becomes equi- tably entitled to be substituted to the rights and remedies of the holder, and becomes pro tanto the beneficial owner of the debt; so that the maker's obligation to pay the note in full, at first due to the holder solely in his own right, becomes, after the part payment by the indorser, still wholly due to the holder, but partly in his own right and partly as trustee for the indorser. A court of law cannot split the note into parts, and must act upon the legal interest and owner- ship. In the present case there was no privity between maker and in- dorser as respects the action of the latter. He paid, not as the agent of the maker, not at his request, not for his benefit, and under no duty to relieve him, but independently, upon his own obligation, to lessen his own responsibility, and not at all to discharge the ultimate debt which it was the maker's duty to pay. It seems very clear, therefore, that the maker cannot utilize for his own benefit a payment which, as to him, is not a payment upon the debt. It becomes, as I have said, merely a question to whom he shall pay, and who may sue for and collect the whole unpaid sum. In that question the maker has no concern beyond the inquiry whether he may become liable to different persons for the same debt, and encounter the danger of paying it twice. I can discover no such peril. The judgment in favor of the holder is a bar to any other suit on the same note, and payment to the holder discharges the note utterly. Ordinarily, the indorser cannot recover except upon the note, and as holder, and in accordance with the law merchant. If he ever has any other right of action against the maker, it is either in equity or by force of some facts beyond the Sec. 1) PAYMENT AND EKNUNCIATION 767 bare relation established by the paper. And where the note is merged in the holder's judgment, or paid in full to him by the maker, the in- dorser's only right is through the judgment or against the proceeds, if he has made a partial payment to the holder. That does the indorser no wrong. If he is not content that the holder shall collect to some extent as his trustee, he may prevent it by payment in full to the holder, and so entitle himself to the possession of the note on which to sue, or, if judgment has been obtained, to be subrogated to all ul the rights of the plaintiff therein. I think this result is clearly indicated by our own decisions. In Mechanics' Bank v. rfazard, 13 Johns. 353, the maker of the note had been arrested in an action upon it, and his bail sought to relieve them- selves by force of a payment made by the indorser to the holder ; but such effect was denied to it; the court saying that it was not a pay- ment by or on behalf of the maker, or of which he or his bail could avail themselves. And in Guernsey v. Burns, 25 Wend. 411, where the suit was by the holder, representing the legal title and interest, it was said to be no defense to the maker, and no concern of his, that some property in the note was in another. It thus becomes apparent that there is no very great importance in the question which method of securing payment from the maker is adopted, since the same result follows from each, and that it narrows down to the inquiry ^whether, as matter of correct doctrine and of convenience in practice, the holder may recover the whole debt against maker or acceptor for himself and as trustee for the indorser to the extent of his acquired interest; or whether he shall take judgment only for the balance, leaving the indorser to sue in some way and on some theory, which apparently could not be upon the note, because already merged in the judgment, but might be for money paid for the use of the maker, since he gets the benefit of it in the reduction of the judgment, as was held in Pownal v. Ferrand, 6 Barn. & C. 439, where the holder deducted the indorser's payment from the levy against the maker. The former seems to me to be the logical and convenient method, and so I think we should follow the English doctrine." I have not underrated the assault made upon it by the appellant. He asserts that Jones v. Broadhurst is contrary to the earlier cases, and has been criticised and shaken by the later ones. I have ex- amined them all, with some wonder at the amount of learning and in- genuity expended upon the subject. Pierson v. Dunlop, Cowp. 571 ; Walwyn v. St. Quintin, 1 Bos. & P. 652 ; Bacon v. Searles, 1 H. Bl. 88 ; Hemming v. Brook, 1 Car. & M. 57 ; Randall v. Moon, 12 C. B. 261 ; Cook v. Lister, 13 C. B. (N. S.) 543 ; Solomon v. Davis, 1 Cababe & E. 83 ; Thornton v. Maynard, L. R. 10 C. P. 695. The prior cases were very fully and carefully reviewed by Baron Cresswell in the opinion rendered in Jones v. Broadhurst, and of the subsequent cases I deem it only necessary to say that, along with some criticism and 768 DISCHARGE (Part 4 occasional doubt, the doctrine has remained substantially unshaken, and the case last cited was declared by Lord Coleridge to be the ac- cepted law. It must not be forgotten, however, and I may prudently repeat, that the doctrine has no application to accommodation paper, and rests wholly upon the actual and ultimate indebtedness of maker or acceptor as the party who ought to pay. In such a case as that, which cor- rectly describes the one now before us, and where no disturbing facts affect the relations of the parties as fixed by the paper itself, I think the holder may sue and recover the full amount, receiving so much of the proceeds as represents a part payment by the indorser as trus- tee for him. It follows that the judgment should be affirmed, with costs. All concur, except Maynard, J., dissenting. Judgment affirmed. QUIMBY V. VARNUM. (Supreme Judicial Court of Massachusetts, Suffolk, 1906. 190 Mass. 211, 76 N. E. 671.) Contract on two promissory notes made by John M. Varnum, the defendant, payable to the order of John H. Hurley, attorney, one for $250, dated October 10, 1898, payable 12 months after date, and the other for $200, dated April 10, 1899, and payable on May 1, 1899. Writ dated June 27, 1904. The answer, among other defenses, alleged payment. At the trial in the superior court before Hardy, J., without a jury, the following facts appeared: Both of the notes sued on were signed on the back in blank by Ben- jamin Varnum Howe after they had been signed by the defendant and then were delivered by the defendant to Hurley, the payee. At the maturity of each note Hurley notified Howe that the notes were not paid and that he should look to him for payment. Howe thereupon paid the amount due on the notes to Hurley, whereupon Hurley struck his own indorsement off the- notes, by drawing a line through his name, and handed the notes to Howe. Howe retained the notes in his possession until April or May, 1904, when he negotiated them to the plaintiff, to whom he owed money at that time. The notes were to be applied on Howe's account with the plaintiff. No money ever was received on the notes by Howe from the defendant. The defendant requested the judge to rule that the plaintiff could not recover, because Howe, having indorsed the notes before delivery, Sec. 1) PAYMF3NT AND EENUNCIATION 769 was an original promisor and conrlaker with the defendant, and not an indorser, and that the plaintiff, having received the notes after ma- turity and after they had been paid by Howe, the comaker, could not maintain an action thereon ; that the co-maker, Howe, having paid the notes to Hurley, the payee, at their maturity, the notes became extin- guished, and would not support the present action based solely on the notes ; that each note was a promise to pay John H. Hurley, attorney, and that neither of the notes offered in evidence bore the indorsement of John H. Hurley, attorney, and therefore the action on the notes could not be maintained; and that on all the evidence the plaintiff was not entitled to recover. The judge refused to rule as requested, but ruled that each note was a promise to pay to the order of John H. Hurley, attorney, and that neither of the notes offered in evidence bore the indorsement of John H. Hurley, attorney, and further ruled, at the request of the plaintiff, that Howe, by placing his signature on the notes in suit in blank be- fore delivery, became secondarily liable to the payee, that payment of the notes sued on by the indorser, Benjamin Varnum Howe, did not discharge or extinguish the notes, that upon paying the face of the notes to the payee Howe was entitled to the possession of the notes and vested with the right to recover the amount from the maker, that after paying the amount of the notes sued on and receiving possession of them he was entitled to negotiate them, that the plaintiff upon re- ceiving the notes from Howe succeeded to all the rights against the maker which Howe had, that vfrhere an instrument is negotiated back to a prior party that party may reissue and further negotiate the same, and that the holder of a negotiable instrument may sue thereon in his own name. The judge found for the plaintiff in the sum of $590.53, and the defendant alleged exceptions. Hammond, J. The note of October 10, 1898, was given before St. 1898, p. 492, c. 533 (now embodied in Rev Laws, c. 73), took effect; and, of course, the rights of the parties, so far as respects that note, are to be determined by the law of this commonwealth as it was be- fore the statute. By that law Howe, although entitled to notice of the dishonor of the note the same as an indorser, was, nevertheless, a co-maker and joint promisor, and the payment, of the note by him ex- tinguished it ; and he could not thereafter put it in circulation as against his co-'promisor, although in a proper action he could recover of him the amount paid, if, as between the two, it was the duty of the latter to pay the note. Pray v. Maine, 7 Cush. 853, and cases cited. Brooks V. Stackpole, 168 Mass. 537, 47 N. E. 419 ; National Bank of Republic V. Delano, 185 Mass. 424, 70 N. E. 444. The same doctrine is applicable to the note of April 10, 1899, which SM.& M.B.& N.(2d Ed.)^9 770 DISCHARGE (Part 4 was made after the statute above named took eflfect, unless there is something in that statute to the contrary. The plaintiff contends that there is something there to the contrary. He contends that, under Rev. Laws, c. 73, §§ 30, 81, the rights and liabihties of Howe were those of an indorser, and therefore he was only secondarily liable, and that by section 138 the payment of the note by Howe did not extinguish it, but he was remitted to his former rights on the note, and under that section and section 67 might reissue it. But we cannot adopt this interpretation of the statute. It is mani- fest that the precise case in hand, so far as respects the original sig- nature of Howe, is described in section 81 of the statute in the follow- ing words : "Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser: * * * (1) H the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties." This section accurately defines the liability of Howe upon this note. And in a sense this Hability may be said to be secondary. Section 138 provides that, "where an instrument is paid by a party secondarily liable thereon it is not discharged ; but the party so paying it is remitted to his former rights as regards all prior parties, and he may strike out his own and all subsequent indorsements, and again negoti- ate the instrument," with some exceptions not here material. It is plain that this section cannot apply to a case like the one before us. First, > what kind of note would this have been if Howe had done what the statute suggests ? Let him strike out his own and all subse- quent indorsements. Subsequent indorsements must be held to mean subsequent in point of Habihty. He must therefore strike out, not only his own indorsement, but also that of the payee. Having done what the statute says, he has a note signed by Varnum payable to the order of Hurley, but without Hurley's indorsement, and, further, without any right to Hurley's indorsement. Is such. a note negotiable? In the case at bar the note sued on did not bear the indorsement of the payee, Hurley having struck out his own indorsement before he handed the note to Howe. Again, the statute says that the party secondarily liable is remitted to his former rights as regards all former parties. But the only prior party Howe could look to is the maker, for he stands next to the maker in the order of Hability, but, as against him, Howe never had any claim on the note as such, and it never was intended that he should have. If this note never had been delivered to Hurley, but had been handed to Howe in the first instance by Varnum, could Howe have negotiated it without the indorsement of the payee? And, when he has paid it and is remitted to his former rights, does he get any other right than he had before? The section is clearly inapplicable to such a state of things. It is intended to apply where the person secondarily liable can trace his title on the face of the note and its indorsements through the Sec. 2) CANCELLATION 771 prior parties to the party whom he seeks to hold. This Howe could not do, nor can the plaintiff. Having paid the note, Howe had an ac- tion against Varnum to recover, but the action was not upon the note. It follows that the plaintiff cannot recover on either note. Exceptions sustained. SECTION 2.— CANCELLATION RAPER et al. v. BIRKBECK et al. (Court of King's Bench, 1812. 15 East, 17.) This was an action brought on a bill of exchange for i534. 18s. drawn by one Crossley on Samuel Shawe & Co., and accepted by them, at Messrs. Ladbrooke's and Co., London, payable six months after date. The declaration, after stating several indorsements over to the defend- ants, alleged an indorsement by them to the plaintiffs by name, and then averred in the usual way the presentment of the bill for payment at Ladbrooke's, and their refusal to pay it. At the trial, before Lord Ellenborough, C. J., in London, after last Trinity term, it appeared that the defendants, who were bankers in Yorkshire, paid the bill in question, with other-s, to the plaintiffs, who were likewise bankers there ; and it was then in a perfect state, with the several indorsements and acceptance on it. When the bill became due, on the 31st of Janu- ary, 1811, being then in the hands of Down & Co., their clerk carried it to the general clearing house of the bankers in London, and re- ceived it back from Ladbrooke's clerk as a dishonored bill, with the words "no account" written thereon. But as there was also written at the back of it, "in case of need apply to Boldero & Co." the bill was sent to Boldero's house in the course of the clearing hours, where H. Boldero, one of the partners, upon receiving the bill from his clerk, intending to allow it in account with Down & Co. drew his pen through the acceptance, and canceled it by mistake, thinking it had been an ac- ceptance payable at their house; but the bill had not then been al- lowed in the clearing house, nor taken down in the clearing book, and in less than ten minutes from the time of canceling it, the clerk in- formed him of his mistake, and wrote under the acceptance, "Canceled by mistake," to which H. Boldero subscribed his initials. But never- theless the bill was taken up by Boldero's house for the honor of the plaintiffs, with whom they had an account, and was neVer out of their hands afterwards. On the following day, one of the prior indorsers called at Boldero's for the bill in order to pay it ; but on finding that the acceptance had been canceled, said that as it appeared canceled, he would not take it up. Upon these facts the jury found a. verdict for ''^72 DISCHARGE (Part 4 the plaintiffs ; and in the following term the Attorney General obtained a rule nisi for a new trial, on the ground that the cancellation, in fact, though accidental, threw a, difficulty upon the defendants of recovering over against the prior indorsers, as it would be necessary to go through the same media of proof to establish their claim over against such prior indorsers — a difficulty which ought not to be thrown upon them, es- pecially by the act of the then holders of the bill, and which difficulty might be increased by the death of any of the witnesses in the mean- time ; and therefore, he contended, that this action did not lie. Garrow aiid Holroyd now showed cause against the rule, and said that the only pretense there could be for disturbing the verdict was that the effect of this accidental cancellation might be to prevent the defendants from recovering over against the prior indorsers. But their legal remedy upon the bill remains the same as before, however the circumstance may throw more of difficulty in their way, and require some additional proof by way of explanation. This is no more than might happen from any other accident to which a bill of exchange is liable, as if it should be obliterated by a quantity of ink falling upon it, or torn by a child ; and yet it cannot be contended that in such case the party would be precluded from his remedy on the bill. It is ob- servable that this cancellation was not only done by mistake, but was done also by a person who had no authority to cancel; for the ac- ceptance was at lyadbrooke's, and not Boldero's acceptance. But wher- ever an instrument is not made an end of, then if anything be done to it by a person who has no authority to do the act, the act so done will not vitiate it. In Fernandez v. Glynn it was held, where a bank- er's clerk had canceled a check by mistake, but had afterwards writ- ten under it, "Canceled by mistake," that the banker might, notwith- standing, return the check unpaid, for he had not thereby made it his own. The Attorney General, contra. The ob'jection is not of the plain- tiff's own raising, but, as appears by the evidence, has been made by one of the prior indorsers refusing to take the bill up on that very account. The question, then, is whether the defendants, before they are compellable to pay the amount of the bill to the plaintiffs, have not a right to require that they shall be placed in such a situation as to have the usual means furnished them of resorting over against the prior indorsers. If they have such right, it is an answer to this action ; for it is clear that the cancellation will impose upon them many dif- ficulties of proof out of the ordinary course. The bill upon the face of it appears to have been paid ; and it will be necessary, in order to support any action on it, to go into evidence explanatory of that cir- cumstance. That evidence may be removed out of the reach of the defendants, either by death, or a variety of other accidents. It is said that this is the common chance attending upon all cases ; the answer to which in the present case is that the parties themselves, who held the bill at the time, had no right by their own act to impose these diffi- Sec. 2) CANCELLATION 773 culties upon others, though if the law had cast them upon the defend- ant's, it might have been different. Lord EllEnborough, C. J. I should have felt considerable pressure in the argument used on behalf of the defendants, if the fact had borne them out. Undoubtedly the indorsees, generally speaking, are bound to return the bill to the indorsers in the same plight as they received it, and unchanged by any act of theirs ; but I cannot consider the act of Boldero as the act of the indorsees, for he had no authority, either express or implied, from them to do the act, and the whole originated in his mistake. The case then comes to the instances put in argument at the trial, of a blot having fallen upon, or a child having torn or de- stroyed, the instrument. In such cases the law is not so strict as to require the precise formal proof which is ordinarily required; for that would be at once to preclude the party of his remedy. I remem- ber Pothier (vol. 2, 114, partie 1, c. 3, § 3) in his treatise on Bills of Exchange, speaking of an ac(j:eptor who has put his signature to a bill, but has not parted with it, says, that before he does part with it, "II pent changer de volonte et rayer son acceptation." A fortiori, then, a third person who cancels an acceptance by mistake, having no au- thority so to do, shall not be held thereby to make void the bill, but shall be at liberty to correct that mistake, in furtherance of the rights of the parties to the bill. Per Curiam. Rule discharged.^* INGHAM V. PRIMROSE. (Court of Common Pleas, 1859. 7 C. B. [N. S.] 82.) This was an action upon a bill of exchange drawn by one Charles Murgatroyd upon and accepted by the defendant, and indorsed by Murgatroyd to one King, and by King to the plaintiff. * * * The caus^ was tried before Cockburn, C. J., at the sittings in Lon- don after Hilary term,. 1858. The facts which appeared in evidence were as follows : The defendant accepted the bill declared on, and gave it to Charles Murgatroyd for the purpose of procuring it to be discounted for his use. Murgatroyd tried, but in vain, to get the bill discounted, and returned it to the defendant, who in Murgatroyd's presence tore the paper in half and threw it away in the street. Mur- gatroyd picked up the bill, observing that it was better not to throw 14 Accord: Lyndonvllle Bank v. Fletcher, 68 Vt. 81, 34 Atl. 38, 54 Am. St. Rep. 874 (1895) ; Humboldt Bank v. Rossing, 95 Iowa, 1, 63 N. W. 351 (1895) ; Dominion Bank v. Anderson, 15 Sess. Cas. 408 (1SS8). See, also, Bank of Scotland v. Bank, [1891] A. C. 592. But a destruction or cancellation not in- duced by fraud or mistake discharges all parties, or the party whose signa- ture Is canceled, both from liability on the Instrument (MeCormick v. Shea, 50 Misc. Bep. 592, 99 N. Y. Supp. 467 [1906]) and from liability on the con- eideraUon given for it (Blade v. Noland, 12 Wend. [N. r.] 173, 27 Am. Dec. 126 [1834]). 774 DiscHARGB (Part 4 it down in the street; whereupon the defendant said nothing. Mur- gatroyd afterwards pasted together the two pieces of paper, and passed the bill away to one King, who afterwards indorsed it to the plaintiff. The jury found that the defendant when he tore the bill in half and threw it away intended to cancel it ; that King bona fide gave £15. for the bill; but that the transaction between King and the plaintiff was not bona fide. The learned judge thereupon directed a verdict to be entered for the defendant, but gave the plaintiff leave to move to enter the ver- dict for him, the court to be at liberty to draw inferences of fact. Cross, in Easter term, 1858, accordingly obtained a rule nisi.^* Williams, J., now delivered the judgment of the court. This case was argued before the late Lord Chief Justice, my Broth- ers WiLLES and Byles, and myself. We are of opinion that the plaintiff is entitled to judgment. It is, we think, settled law that, if the defendant had drawn a check, and, before he had issued it, he had lost it, or it had been stolen from him, and it had afterwards found its way into the hands of a holder for value without notice, who had sued the defendant upon it, he would have had no answer to the ac- tion. So, if he had indorsed in blank a bill payable to his order, and it been lost or stolen before he delivered it to any one as indorsee. See the judgment in Marston v. Allen, 8 M., & W. 504. The reason is that such negotiable instruments have, by the law merchant, become part of the mercantile currency of the country ; and, in order that this may not be impeded, it is requisite that innocent holders for value should have a right to enforce payment of them against those who by making them have caused them to be a part of such currency. In the present case, the defendant made the jjill in question, and rendered it a negotiable instrument, and then tried in vain to get it discounted. It was then returned to him, and was intended by him to be wholly withdrawn from circulation. But it was, notwithstanding, again put into circulation through the fraud of another man, and reached the hands-of the plaintiff, who held it for value, without any notice of the fraud. If these were all the facts of the case, it appears to be impossible to distinguish it in any material point from the cases already mentioned, of liability when the original circulation has been effected by fraud, without the consent of him who made the instrument. The question, then, is whether such liability is precluded by the fact that, before the instrument was put into circulation for the second time, the defendant had torn it, with the intention of destroying or annulling it. If an act done with such an intention by the maker of a negotiable instrument does not manifest the intention on the face of the instru- 15 The statement Is abridged, and the arguments of counsel omitted. Sec. 2) CANCELLATION 775 ment, it can hardly te maintained that the act would be of any ef- ficacy ; because the instrument would nevertheless be apparently a part of the mercantile currency, as, for instance, if, in the present case, the defendant had merely crumpled up the bill in his hand and thrown it away, and it had been restored to its original appearance, without leaving any trace of the act which was intended to annul it. But if, on the other hand, the act be such that the paper bears on the face of it the signs of something having been done to it which is character- istic of an intention to destroy or annul it, as in the case of Scholey v. Ramsbottom, 2 Campb. 485, where the drawer of a check tore it into four pieces and threw it from him, and the four pieces were after- wards neatly pasted together upon another slip of paper, but the rents were quite visible, and the face of the check soiled and dirty, no holder of an instrument in such a condition could enforce it, because, in truth, no man of ordinary intelligence and caution could fairly re- gard it as part of the apparent commercial currency. The case before us, therefore, appears to turn on the question whether the act of tearing the bill into two pieces, being manifest on the face of it, is such an act as prima facie ought to have indicated to the plaintiff that it had been withheld or withdrawn from circulation. As we understand the facts, the tearing had been done in such a way that the appearance of the bill when it reached the plaintiff's hands was at least as consistent with its having been divided into two, for the purpose of safer transmission by the post, as with its having been torn for the purpose of annulling it. It was, properly, a question for the jury whether the bill exhibited appearances which would have led a man of ordinary intelligence to the conclusion that it had been torn for the latter purpose. But the point has been so reserved at the trial that the court is to perform the function of the jury in this re- spect; and we cannot find enough on the facts of the case, or on an inspection of the bill itself, to justify us in coming to such a conclu- sion. But it is argued, on the part of the defendant, that the putting to- gether of the two halves under the circumstances amounted to for- gery, just as fnuch as if some signature which he had written for a dif- ferent purpose had been taken from its proper place, and fraudulently attached as his signature to the bill. This would be a very narrow ground of decision, inasmuch as it ' would concede that the bill would be enforceable if the tearing had stopped short of utterly dividing the paper, or if the bill had come to the plaintiff's hands in the halves, by two successive posts, with an in- timation that it was so sent to him for the purpose of safer transmis- sion. However, it seems to us that, even assuming that the act of thus reconstructing the bill constituted a forgery (which may admjt of grave doubt), yet, on the principle of the decision of Young v. Grote, 4 Bingh. 2^53, 12 J. B. Moore, 484, this would be no answer to the 776 DiscHABGB (Part 4 claim ot the plaintiff, because the defendant, by abstaining from a.-i\ effectual cancellation or destruction of the bill, has led to the plaintiff's becoming the holder of it for value, and without having any just cause for supposing that it had been canceled or annulled. The rule must therefore be absolute for entering a verdict for the plaintiff for the amount of the bill arjd interest. SECTION 3.— ALTERATION MASTER et al. v. MILLER. (Court of King's Bench, 1791. 4 Term R. 320.) The first count in this declaration was in the usual form by the in- dorsees of a bill of exchange against the acceptor ; it stated that Peel & Co. on the 30th of March, 1788, drew a bill for £974. 10s. on the de- 'fendant, payable three months after date to Wilkinson & Cooke, who indorsed to the plaintiffs. The second count stated the bill to have been drawn on the 26th of March. There were also four other counts, for money paid, laid out and expended; money lent and advanced; money had and received; and on an account stated. The defendant pleaded the general issue ; on the trial of which a special verdict was found. It stated that Peel & Co. on the 26th March, 1788, drew their bill on the defendant, payable 3 months after date to Wilkinson & Cooke, for £974. 10s., "which said bill of exchange, made by the said Peel & Co.-, as the same hath been altered, accepted, and written upon, as here- after mentioned, is now produced, and read in evidence to the said jurors, and is now expressed in the words and figures following, to wit: June 23d. £974. 10s. Manchester, March 26, '1788. Three months after date pay to the order of Messrs. Wilkinson & Cooke, £974. 10s. received, as advised. Peel, Yates & Co. To Mr. Chas. Mil- ler. C. M. 23d June, 1788." That Peel & Co. delivered the said bill to Wilkinson & Cooke, which the defendant afterwards, and before the alteration of the bill hereinafter mentioned, accepted. That Wil- kinson & Cooke afterwards indorsed the said bill to the plaintiffs, for a valuable consideration before that time given and paid by them to Wilkinson & Cooke for the same. That the said bill of exchange at the time of making thereof, and at the time of the acceptance, and when it came to the hands of Wilkinson & Cooke as aforesaid, bore date on the 26th day of March, 1788, the day of making the same Sec 3) ALTERATION 777 And that after it so came to, and whilst it remained in the hands of, Wilkinson & Cooke, the said date of the said bill, without the author- ity, or privity, of the defendant, was altered by some person or per- sons to the jurors aforesaid unknown from the 26th day of March, 1788, to the 20th day of March, 1788. That the words "June 23d," at the top of the bill, were there inserted to mark that it would become due and payable on the 23d of June next after the date; and that the alteration herein before mentioned, and thfe blot upon the date of the bill of exchange, now produced and read in evidence, were on the bill of exchange, when it was carried to and came into the hands and pos- session of the plaintiffs. That the bill of exchange was on the 23d of June and also on the 28th of June, 1788, presented to the defendant for payment, on each of which days respectively he refused to pay. The verdict also stated that the bill so produced to the jury and read in evidence was the same bill, upon, which the plaintiffs declared etc.^« Grose, J. The only question in this case is, whether there appears on the face of this special verdict a right of action in the plaintiffs on any of the counts. The first count is on a bill of exchange dated the 20th of March; but, there being no proof of any bill of that date, there is clearly an end of that count. The second is on a bill dated the 26th of March; but the defendant objects to the plaintiffs' recovering on this count also, because, the bill having been altered while it was in the hands of Wilkinson & Cooke, it is not the same bill as that which was accepted; and that is the true and only question in the cause. My idea is that the plaintiffs' fight of action, as stated in this count, cannot be maintained at common law, but is supported only on the custom of merchants, which permits these particular choses in action to be transferred from one person to another. The plaintiffs, as in- dorsees, in order to recover on this bill, must prove the acceptance by the defendant, the indorsement from Wilkinson & Cooke to them, and that this was the bill which was presented when it became due. Now has all this been proved? The bill was drawn on the 26th of March, payable at 3 months date. The defendant's engagerrient by his acceptance was, that it should be paid when it became due, according to that date; but afterwards the date was altered. The date I con- sider as a very material part of the bill, and by the alteration the time of payment is accelerated several days. According to that alteration, the payment was demanded on the 23d of June, which shows tliat the plaintiffs considered it as a bill drawn the 20th of March; then the bill which was produced in evidence to the jury was not the same bill which was drawn by Peel & Co. and accepted by the defendant; and here the cases, which were cited at the bar, apply. Piggott's is the leading case; from that I collect that when a deed is erased, whereby it becomes void, the obligor may plead non est le The arguments of counsel and the opinions of Lord Kenyon, C. J., and Ashhurst and BuUer, JJ., are omitted. 778 DISCHARGE!, (Part 4 factum, and give the matter in evidence, because at the time of plea pleaded it was not his deed ; and secondly, that when a deed is altered in a material point by himself, or even by a stranger, the deed thereby becomes void. Now the effect of that determination is, that a ma- terial alteration in a deed causes it no longer to be the same deed. Such is the law respecting deeds ; but it is said that that law does not extend to the case of a bill of exchange. Whether it do or not must depend on the principle on which this law is founded. The policy of the law has been already stated, namely, that a man shall not take the chance of committing a fraud, and when that fraud is detected, re- cover on the instrument as it was originally made. In such a case the law intervenes, and says that the deed thus altered no longer continues the same deed, and that no person can maintain an action upon it. In reading that and the other cases cited, I observe that it is nowhere said that the deed is void, merely because it is the case of a deed, but be- cause it is not the same deed. A deed is nothing more than an instru- ment or agreement under seal ; and the principle of those cases is that any alteration in a material part of any instrument or agreement avoids it, because it thereby ceases to be the same instrument. And this principle is founded on great good sense, because it tends to pre- vent the party, in whose favor it is made, from attempting to make any alteration m it. This principle too appears to me as applicable to one kind of instruments as to another. But it has been contended that there is a difference between an al- teration of bills of exchange and deeds; but I think that the reason of the rule affects the former more strongly, and the alteration of them should be more penal, than in the latter case. Supposing a bill of exchange were drawn for £100. and after acceptance the 'sum was altered to il,000. It is not pretended that the acceptor shall be liable to pay the £1,000. ; and I say that he cannot be compelled to pay the £100. according to his acceptance of the bill, because it is not the same bill. So if the name of the payee had been altered, it would not have continued the same bill. And the alteration in every respect prevents the instrument's continuing the same, as well when applied to a bill as to a deed. It was said that Piggott's Case only shows to what time the issue relates ; but it goes further, and shows that if the instrument be altered at any time before plea pleaded, it becomes void. It is true the court will inquire to' what time the issue relates in both cases. Then to what time does the issue relate here? The plaintiffs in this case undertook to prove everything that would support the assumpsit in law, otherwise the assumpsit did not arise. It was incumbent on them to prove that, before the action was brought, this identical bill, which was produced in evidence to the jury, was accepted by the de- fendant, presented, and refused; but if the bill, which was accepted by the defendant, were altered before it was presented for payment, then that identical bill which was accepted by the defendant, was not presented for payment; the defendant's refusal was a refusal to pay Sec. 3) ALTERATION 779 another instrument; and therefore the plaintiffs failed in proving a necessary averment in their declaration. If the bill had been presented and refused payment, and it had been altered after the action was brought, then it might have been like the case mentioned at the bar. It was contended at the bar that the inquiry before a jury in an action like the present should be, whether or not the defendant prom- ised to pay the bill at the time of his acceptance ; but granting that he did so promise, that alone will not make him liable, unless that same bill were afterwards presented to him. I will not repeat the observa- tions which have been already made by my Lord on the case in Mol- loy; but the note of that case is a very short one; and the principle of it is not set forth in any other book, nor indeed do the facts of it sufficiently appear. I doubt also whether it was a determination of this court. It only appears that there was a point made at nisi prius, but not that it was afterwards argued here. But it has been said that a decision in favor of the plaintiffs will be the most convenient one for the commercial world ; but that is much to be doubted, for if, after an alteration of this kind, it be competent to the court to inquire into the original date of the instrument, it will also be competent to inquire into the original sum and the original payee, after they have been altered, which would create much confusion, and open a door to fraud. Great and mischievous neglects have already crept into these transactions ; and I conceive that keeping a strict hand over the hold- ers of bills of exchange to prevent any attempts to alter them may be attended with many good effects, and cannot be productive of any bad consequences, because the party, who has paid a value for the bill, may have recourse to the person who immediately received it from him. On these grounds, therefore, I am of opinion that the plaintiffs cannot recover on the second count. Neither do I think that they can recover on the general counts, because it is not stated as a fact in the verdict that the defendant received the money, the value of the bill. Per Curiam, Judgment for the defendant.^^ DRUM V. DRUM. (Supreme Judicial Court of Massachusetts, Barnstable, 1882. 133 Mass. 566.) Contract upon a promissory note for $100, dated October 19, 1869, payable on demand to the plaintiff, or order, signed by the defendant, and witnessed. Writ dated September 28, 1878. Trial in the su- perior court, before Brigham, C. J., who allowed a bill of exceptions, in substance as follows : The plaintiff offered the note in evidence; and the signatures of the defendant and of the attesting witness were proved. It appeared ir Affirmed In Exchequer Caiamber, 2 H. Bl. 140 (1793). 780 DISCHARGE (Part 4 that the note, after its delivery to the plaintiff, who could neither read nor write, had been changed in the following respects : The figures "$100" had been made to read "$136," or "$156 ;" the word "dollars" had been made to read "fifty," or "thirty," the word "six" being inter- polated thereafter; and the word "on" changed to "dollars," and another word "on" interpolated before the word "demand." The plaintiff testified that he knew nothing about the erasures and changes above described, and neither made them himself, nor directly or indirectly authorized the same to be made; and the agent of the plaintiff, in whose possession the note was left for a time, testified the same as the plaintiff, as to her knowledge of, and relation to, said erasures and changes. The defendant objected that the plaintiff was not entitled to re- cover upon the note, unless he first explained and accounted for said changes and erasures ; and that there was a variance between the plaintiff's allegations and the proofs. The plaintiff asked the judge to instruct the jury as follows: "If the jury believe that said $100 note was altered without the knowledge or consent of the plaintiff, and without his agency, directly or in- directly, it is not, in law, an .alteration, but a mutilation or spoliation; and the note would be good for, and according to, its original tenor." The judge declined to give this instruction ; but instructed the jury as follows : "The note of $100, appearing to be materially altered, is void, unless the plaintiff proves that it was altered by consent of the defendant, or proves the circumstances of its alteration as well as that he did not make or procure it. The alteration would not be suffi- ciently explained by proof that the plaintiff did not make, direct or procure it." The jury returned a verdict for the defendant; and the plaintiff alleged exceptions. CoLBURN, J. The note declared on in this case was for $100, signed by the defendant, and payable to the plaintiff, or order. Upon the production of the note, it appeared to have been changed from a note for $100 to a note for $136, or $156, in the manner stated in the exceptions. It was proved at the trial that this note was originally a valid note for $100, and it was not pretended that it had ever been changed with the knowledge or consent of the defendant. The note was not indorsed, and, so far as appears, had always been owned by the plaintiff, and in his possession or in that of his agent. These changes, under the circumstances, rendered the note prima facie void, and the burden was upon the plaintiff to explain them. If the changes had been made by the plaintiff, or by his authority or consent, directly or indirectly, the note was absolutely void. Adams v. Frye, 3 Mete. 103; Fay v. Smith, 1 Allen, 477, 79 Am. Dec. 752; 1 Greenl. Ev. § 564. But if the changes had been made by a stranger, without the knowledge or consent of the plaintiff, directly or in- Sec. 3) ALTEKATfON 781 directly, the note remained a valid note, according to its original tenor. Adams v. Frye, ubi supra ; 1 Greenl. Ev. § 566. If the plaintiff proved that the note had never rightfully, or to his knowledge, been in the possession of any one but himself and his agent, and that the alterations were not made by him or his agent, or with the knowledge or consent, directly or indirectly, of either of them, he was entitled to recover on the note as originally written, , , though he might not be able to prove the circumstances of its alter- ation; and there was evidence tending to show that these were the facts in this case. We are of opinion that the judge erred in instructing the jury, as he apparently did, in effect, that proof of the state of facts above sup- posed would not entitle the plaintiff to recover. Of course, we ex- press no opinion as to the credibility of the evidence at the trial, or the probability that such changes as were made in the note would have been made by a stranger. These are considerations for the jury. If, as we infer from the exceptions, the tenor of the note as orig- inally written was apparent upon inspection of the note, it was suffi- cient to declare upon it in the usual way; and, upon showing that the changes in the note were mere spoliations, there would be no variance between the allegation and proof. Exceptions sustained. JEFFREY et al. v. ROSENFELD. (Supreme Judicial Court of Massachusetts, Middlesex, 1901. 179 Mass. 506, 61 N. E. 49.) Morton, J. This is a bill in equity to restrain the foreclosure of a mortgage, on the ground that, after the delivery of the mortgage and note, there was a material alteratipn of the note without the plaintiffs' assent. The nature of the alteration, or by whom it was made, is not set out, nor is it alleged that the alteration Was fraudulent. There was a demurrer for want of equity, and on the grounds that the bill did not state a case that entitled the plaintiffs to reUef, and that they had an auequate remedy at, law. The demurrer was sustained, and the bill dismissed, and the plaintiffs appealed. The defendant contends that the nature of the alleged alteration should have been specifically set forth. St. 1898, c 533, § 135 (the negotiable instruments act), provides what alterations shall be deemed material, and it would seem, for that and other reasons, that, as m,at- ter of correct pleading, the bill should have described the alteration relied on, in order that the court might see whether, as matter of law, the alteration was a material alteration. But for the purposes of this case, we assume in favor of the plaintiffs, without deciding, that this defect, if relied on as a ground of demurrer, should have been partic- ularly pointed out, and that it is not open to the defendant, when the 782 DiscHARGB, (Part 4 cause of demurrer assigned is the general one of a want of equity, or that the bill does not state a case which entitles the plaintiffs to relief. The question which has been chiefly argued relates to the effect of tlie alteration of the note upon the mortgage. The bill alleges that the mortgage was given to secure the payment of the note, but, for aught that appears, the transaction was the ordinary one of a loan of money secured by a note and mortgage. At any rate, there is nothing to show that the note and mortgage were not both given upon the same consideration, and to secure the same debt, and there is no allegation that the debt has been paid or satisfied in any way. If the mortgage was given to secure the personal obligation created by the note, and nothing more, the allegations of the bill should have been more specific. There is no doubt that the effect of a material alteration of a note has been held to be different in some respects in England from what it has been held to be in this country. Thus it has been held there that a material alteration, even by a stranger, without the knowledge or as- sent of any of the parties to the note, will avoid it. Davidson v. Coop- er, 11 Mees. & W. 778; Id., 13 Mees. & W. 343. And very likely i. would be held under the bills of exchange 'act that the effect of such an alteration, by whomsoever made, would be to avoid the note as to all parties except those consenting to it and subsequent indorsers. Chalmers' Bills of Exchange (5th Ed.) 213, 214. But the law has been laid down differently in this commonwealth (Drum v. Drum, 133 Mass. 566) ; and, according to the weight of authority in this country, a material alteration of a note by a stranger, or a spoHation of it, as it is termed, will not avoid the note (Drum v. Drum, ubi supra ; 2 Dan. Neg. Inst. [3d Ed.] § 1373a; 2 Pars. Notes & Bills [1st Ed.] 574; Norton, Bills & Notes [2d Ed.] 234, 235; 1 Ames, Cases on Bills & Notes, 449). Whether, therefore, section 124 of the negotiable instruments act (St. 1898, c. 533), which is copied from section 64 of the bills of ex- change act (St. 45 & 46 Vict. c. 61), should receive the same construc- tion which that has received, or which it undoubtedly will receive, de- serves serious consideration. The statute enacted in this state is the same, in substance and effect, as that adopted by the conference of com- missioners on uniformity of laws which met at Detroit in 1895, and has already been enacted in 15 states (14 Harvard Law Rev. 241, Dec. 1900, by Prof. Aijnes) ; and although itis largely copied from the Eng- lish act, and is in many of its provisions an almost, if not quite, verba- tim copy of that act, it would seem not unreasonable to suppose that it ,was the intention of the framers of the American act that section 124 should be construed according to the law of this country, rather than that of England. But it is not necessary to pass upon that ques- tion now. In England, as in this country, except when an alteration is fraudulent, it does not cancel or extinguish the debt for which the note was given. Sutton v. Toomer, 7 Barn. & C. 416 ; Atkinson v. Hawdon, 2 Adol. & E. 638; Byles on Bills (4th Am. Ed.) 257; 2 Am. Sec. 3) ALTERATION, 783 & Eng. Encyc. of Law (2d Ed.) 200, 202; 2 Dan. Neg. Inst. (3d Ed.) §§ 1410a, 1411 ; 2 Pars. Notes & Bills (1st Ed.) 571, 572, And the cases are numerous in which it has been held that a party could recover upon the original consideration, notwithstanding there had been a material alteration of the written contract. Eee v. Butler, 167 Mass. 426, 46 N. E. 52, 57 Am. St. Rep. 466; Nickerson v. Swett, 135 Mass. 514; Adams v. Frye, 3 Mete. 103; Smith v. Dunham, 8 Pick. 246 ; Milbery v. Storer, 75 Me. 69, 46 Am. Rep. 361 ; Croswell V. Labree, 81 Me. 44, 16 Atl. 331, 10 Am. St. Rep. 238; Keene v. Weeks, 19 R. I. 309, 33 Atl. 446.' Following out this principle, it has been held in many cases that the material alteration of a mortgage note, if not fraudulent, will not avoid the mortgage. Elliott v. Blair, 47 111. 342 ; Vogle v. Ripper, 34 111. 100, 85 Am. Dec. 298 ; Clough v. Seay, 49 Iowa, 111 ; Gillette v. Smith, 18 Hun, 10; Cheek v. Nail, 112 N. C. 370', 17 S. E. 80; Heath v. Blake, 28 S. C. 406, 416, 5 S. E. 8-12 ; 2 Am. & Eng. Encyc. of Law (2d Ed.) 202; 2 Jones, Mortgages (3d Ed.) § 1215. It is true that in this state it is held, contrary to what is the law in most of the states and in England, that a negotiable note is prima facie payment of the debt for which it is given. But the rule is not an un- qualiiied one. Curtis v. Hubbard, 9 Mete. 322. Thus when a note is avoided by the maker for illegality or fraud, the promisor may recover the original consideration in an action ior money lent or money had and received (Bank v. Tyndale, 176 Mass. 547, 57 N. E. 1022, 51 L. R. A. 447 ; Walker v. Mayo, 143 Mass. 42, 8 N. E. 873) ; and the pre- sumption of payment is rebutted when the effect will be to deprive a party of security which he has taken for the payment of the debt for which the note was given (Curtis v. Hubbard, ubi supra; Davis v. Parsons, 157 Mass. 584, 32 N. E. 1117). This being the state of the law at the time of the passage of the ne- gotiable instruments act, we should hesitate to say that the effect of section 124 is not only to avoid the note in case of a material altera- tion, but to cancel the debt for which -it was given, and to deprive a party of the benefit of any security that he may have taken. But it is not necessary to go so far. This is a suit on the equity side of the court. As already observed, there is no allegation of fraud in the bill, or of fault on the part of the mortgagee. For aught that ap- pears, the alteration in the note may have been made by a stranger, or may have been innocently made by the holder, for the purpose of recti- fying what he supposed to be a mistake, occurring under such circum- stances that he would be entitled in equity to ai'reformation of the note and mortgage. There is no allegation that the note or the debt which the mortgage was given to secure has been paid, and there is no tender of payment. The mortgage is a separate instrument from the note. At law and in equity the holder can enforce his remedy^ upon the mortgage inde- pendently of or concurrently with that on the note, and in some cases, 784 mscHARGB (Part 4 at least, where he had lost his remedy upon the note. Thayer v. Mann, 19 Pick. 535; 2 Jones, Mortgages (3d Ed.) § 1215 et seq. Under the circumstances, there being no allegation of payment and no offer of payment in the bill, we think that the bill does not state a case which entitles the plaintiff to relief, and that the demurrer was rightly sus- tained, and the bill rightly dismissed. Decree affirmed. NATIONAL EXCH. BANK OF ALBANY v. LESTER. (Court of Appeals of New York, 1909. 194 N. Y. 461, 87 N. B. 779, 21 L. E, A. (N. S.) 402.) Appeal from the judgment of the Appellate Division of the Supreme Court in the Third Judicial Department, entered May 16, 1907, af- firming a judgment in favor of plaintiff entered upon a verdict and an order denying a motion for a new trial. The defendant was sued as the accommodation indorser upon a note for $375 made by one Frank L- Fancher and acquired by the plaintiff bank before maturity in the regular course of its business. The de- fense was that the note as originally made and indorsed was for $75 only ; that the maker' thereafter, without the knowledge or consent of the indorser, altered the note by inserting in the body thereof the words "three hundred" immediately in front of the words "seventy- five" and the figure "3" immediately in front of the figures "75," there- by making the instrument apparently a note for $375 instead of $75 ; and that the maker thereafter caused the note as thus altered to be discounted by the plaintiff bank. The answer prayed judgment that the complaint be dismissed except as to the amount of the note before alteration, together with interest and protest fees, to wit, $78.66. The defendant also served an offer to allow the plaintiff to take judgment for that amount. Upon the trial the court charged the jury that, if the note indorsed by the defendant was in fact a note for $375 on its face, the plaintiff was entitled to recover that amount and interest. The trial judge fur- ther charged the jury that if they found that there were spaces upon the note "so carelessly and negligently left by this indorser, Mr. Lester, that a person having custody of the note might run in a figure 3 and the words 'three hundred' so as not to occasion in the mind of the in- dorser [evidently meaning indorsee] any inquiry into its validity," they might find that the indorser conducted himself carelessly and neg- ligently in the premises, and thus invited the hability which the face of the note called for when presented to the bank. The defendant duly excepted to that part of the charge to the ef- fect, that, if the defendant was negligent in leaving blank space--, the jury must find a verdict for the plaintiff for the full amount of the note as it stood. The court then reiterated the proposition, saying that, Sec. 3) ALTEEATION 785 "if the jury find that the defendant was careless and negligent in leav- ing vacant spaces for the words and figures, such carelessness and neg- ligence on his part would still make him liable for the note;" and to this the defendant also excepted. The jury found for the plaintiff in the sum of $375, with interest. The judgment entered upon the verdict has been unanimously affirmed by the Appellate Division. WiLi,ARD Bartlett, J. As this case went to the jury, they might well have found that the note in suit was a note for only $75 when originally prepared by the maker and indorsed at his instance by the defendant, and that it had subsequently been altered to a note for $375 when discounted by the plaintiff bank. They were instructed in sub- stance, however, that the indorser was liable for the amount of the note as raised by the alteration, if he had been careless and negligent in placing his name upon the instrument while there were spaces there- on which permitted the insertion of the words and figure whereby it was transmuted from a note for $75 into a note for $375. Conceding that the contract which he actually signed bound him only to pay the smaller amount, the jury were permitted to find that in consequence of his negligence in the respect indicated it had become a contract which bovmd him to pay the larger amount to a subsequent innocent holder of the paper. In support of the correctness of this ruling, the learned counsel for the .respondent asserts the doctrine that "a party to a note who puts his name to it in any capacity of hability, when it contains blanks un- canceled facilitating an alteration raising the amount, is liable for the face of the note as raised to an innocent holder for value" ; and he de- clares that this doctrine has been approved and apparently adopted in Alabama, California, Colorado, Illinois, Kansas, Kentucky, lyOuisiana, Michigan, Missouri, Nebraska, and Pennsylvania. In considering his proposition, it is important to bear in mind a radical distinction which exists between two classes of notes to which the adjudicated cases re- late: (1) Those notes in which obvious blanks are left at the time when they are made or indorsed, of such a character as manifestly to indicate that the instruments are incomplete until such blanks shall be filled up; and (2) those notes which are apparently complete, and which can be regarded as containing blanks only because the written matter does not so fully occupy the entire paper as to preclude the insertion of additional words or figures or both. It is a note of the latter class that we have to deal with here. One who signs or indorses a note of the first class has been held liable to bona fide holders there- of, in some of the cases cited by the respondent, according to the terms of the note after the blanks have been filled, on the doctrine of im- plied authority, while in other cases, relating to notes of the second class, the liability of the maker or indorser for the amount of the note as increased by filling up the unoccupied spaces therein is placed upon the doctrine of negligence or estoppel by negligence. SM.& M.B.& N.(2d Ed.)— 50 786 DISCHARGE (Part 4 The cases cited by respondent in which parties to commercial paper executed by them while obvious blanks remained unfilled thereon have been held liable upon the instrument as completed by filling out such blanks, on the ground of implied authority, require no further con- sideration here, as there is no suggestion that there was any blank of this character upon the note in suit. These cases are Winter & Loeb V. Pool, 104 Ala. 580, 16 South. 543 ; Statton v. Stone, 15 Colo. App. 237, 61 Pac. 481 ; Cason v. Grant Co. Deposit Bank, 97 Ky. 487, 31 S. W. 40, 53 Am. St. Rep. 418 ; Weidman v. Symes, 120 Mich. 657, 79 N. W. 894, 77 Am. St. Rep. 603. There were obvious blanks also in the notes under consideration in Visher-v. Webster, 8 Cal. 109, and Lowden v. S. C. Nat. Bank, 38 Kan. 533, 16 Pac 748, and the deci- sion in each of these cases appears to have proceeded upon the doctrine of implied authority rather than negligence. It must frankly be conceded, however, that the respondent finds sup- port for the doctrine which it asserts in the case at bar in the decisions of Pennsylvania, lUinois, and Missouri, so far as the maker of com- mercial paper is concerned, and in those of Kentucky and Louisiana, in respect to the liability of a party who has indorsed or become surety upon a note in which there were spaces (not obvious blanks) that per- mitted fraudulent insertions enlarging the amount. Garrard v. Had- dan, 67 Pa. 82, 5 Am. Rep. 412 ; Tocum v. Smith, 63 111. 321, 14 Am. Rep. 120; Scotland Co. Nat. Bank v. O'Connel, 23 Mo. App. 165; Hackett v. First Nat. Bank of Louisville, 114 Ky. 193, 70 S. W. 664; Isnard v. Torres & Marquez, 10 La. Ann. 103. In Garrard v. Haddan, supra, a space was left between the words "one hundred" and the word "dollars" in which "fifty" had been in- serted after the maker had signed and delivered it ; and the court held the maker answerable to a bona fide holder for the full face of the note as altered on the ground of the negligence of the maker in leav- ing the space in the note which was thus filled up after execution. "We think this rule is necessary," said Chief Justice Thompson, "to facilitate the circulation of commercial paper, and at the same time in- crease the care of drawers and acceptors of such paper and also of bankers, brokers, and others in taking it." It is a little difficult to see how the rule tends to make bona fide purchasers more careful, as this last observation suggests. The case of Yocum v. Smith, supra, held the maker liable upon a note which had been raised after execution from $100 to $120 ; the words "and twenty" having been inserted in a space left between the word "hundred" and the word "dollars." The court said that the maker had acted with unpardonable negligence in signing the note and leaving a blank which could so easily be filled ; that he had thus placed it in the power of another to do an injury ; and that he must, there- fore, suffer the resulting loss. This decision undoubtedly sustains the position of the respondent, although there was another element of negligence in that case which is not present here. It appeared that Sec. 3) ALTEEATIOK 787 the maker there -was informed by letter by the purchaser, very soon after the date of the note, that he had bought it and of its date and amount; yet he made no objection as to the amount until nearly a year later. In Scotland Co. Nat. Bank v. O'Connel, supra, the defendants ex- ecuted and delivered a note for $100 to one Smith, the body of which was in his handwriting, in a condition which enabled him to add the words "thirty-five" after "one hundred" in the written part and put the figures "$135" at the head of the note in the space where the amount is usually indicated by figures. The St. Louis Court of Appeals held that the defendants were liable for $135 because they had delivered the note to Smith, who was their co-maker, "in such a condition as to enable him to fill blank spaces without in any manner changing the appearance of the note as a genuine instrument." The cases thus far discussed were all of them actions against the makers of the raised paper. The same rule, however, was applied against an indorser in Isnard v. Torres & Marquez, supra, by the Supreme Court of Louisiana under the following circumstances: Marquez indorsed a note for $150 for the accommodation of Torres. The amount was raised to $1,150, and purchased by the plaintiff in good faith as a note for that sum. The report states that there was testimony of experienced persons to the effect that, if at the time of the indorsement the word "onze" ( for eleven, the note being in French) and the additional figure before 150 were not there, "the note would have exhibited blanks which at least with regard to the written part were unusual and calculated to attract attention, and would have ren- dered the note unsalable in the market." In this opinion, upon in- spection of the note, the court expressed its full concurrence. The in- dorser was held liable for the amount of the note as raised on the ground that he had not exercised proper caution. To the same effect is Hackett v. First Nat. Bank of Louisville, supra, where it was held that a surety who had signed a note in which were written the words "five hundred" with spaces before and .after them, which the maker had filled up by writing "twenty" before and "fifty" after them, thereby making a note for $2,550, was liable thereon to a purchaser in good faith. In this case the attention of the Kentucky Court of Appeals was called to the fact that the great weight of authority was the other way, but, in view of the fact that the rule had been so established in Kentucky for a quarter of a century, the court determined to adhere to it, in observance of the principle of stare decisis. This court is not thus constrained. The question involved in the present appeal has not been authoritatively decided in this state, and we are at liberty to adopt that view of the law which seems to us most consonant with sound reason and best supported by well-considered adjudications in other jurisdictions. The outcome of these adjudications is accurately set forth, as it 788 . DISCHARGE (Part 4 seems to me, by Mr. Randolph in his treatise on the Law of Com- mercial Paper, as follows : "Where negotiable paper has been executed with the amount blank, it is no defense against a bona fide holder for value for the maker to show that his authority has been exceeded in filling such blank and a greater amount written than was intended. This was also once held to be the rule where no blank had been ac- tually left, but the maker had negligently left a space either before or after the written amount which made it easier for a holder fraudu- lently to enlarge the sum first written. It has now, however, become in America an established rule that, if the ■ instrument was complete without blanks at the time of its delivery, the fraudulent increase of the amount by taking advantage of a space left without such inten- tion * * * -vvill constitute a material alteration, and operate to dis- charge the maker." 1 Randolph on Commercial Paper, § 187. The rule thus stated is sustained by the decisions of the courts of last resort in Massachusetts, Michigan, New Hampshire, Iowa, Mary- land, Mississippi, Arkansas, and South Dakota. In my judgment it rests on a sounder basis than the opposite doctrine, and accords better with such adjudications of this court as bear more or less directly on the question involved. The leading case sustaining this view is Greenfield Savings Bank v. Stowell, 123 Mass. 196, 25 Am. Rep. 67, in which the opinion was written by Chief Justice Gray, afterward an Associate Justice of the Supreme Court of the United States. The discussion is careful and exhaustive, reviewing all the important cases in England and America bearing upon the subject which had been decided up to that time (1877), including that of the Supreme Court of Pennsylvania in Gar- rard V. Haddan, supra, which was the principal authority the other way. I shall not undertake to review the same authorities here or paraphrase the opinion of Chief Justice Gray which deals with them in such a manner as fully to justify his rejection of the doctrine that - the makers of a promissory note apparently complete when they sign it are liable for an amount to which it may subsequently be raised, without their knowledge or consent, on the ground that they were negligent in permitting spaces to remain thereon in which the figures and words which affected the increase could be inserted. In support of his conclusion, however, he quotes some passages from the opinion of Christancy, J., in Holmes v. Trumper, 22 Mich. 427, 7 Am. Rep. 661, which will bear repetition as suggestive of some of the reasons why the forgery of a promissory note should not be held to create a contract, which the party sought to be charged never consciously made himself or authorized anybody else to make in his behalf. Speaking of the alleged negligence in leaving spaces on the note, Mr. Justice Christancy said: "The negligence, if such it can be called, is of the same kind as might be claimed if any man in signing a contract were to place his name far enough below the instrument to permit another line to be written above his name in apparent harmony with the rest Sec. 3) a'ltekation 789 of the instrument. * * * Whenever a party in good faith signs a complete promissory note, however awlcwardly drawn, he should, we think, be equally protected from its alteration by forgery in what- ever mode it may be accomplished; and, unless perhaps when it has been committed by some one in whom he has authorized others to place confidence as acting for him, he has quite as good a right to rest upon the presump^tion that it will not be criminally altered as any per- son has to take the paper on the presumption that it has not been ; and the parties taking such paper must be considered as taking it upon their own risk, so far as the question of forgery is concerned, and as trusting to the character and credit of those from whom they receive it and of the intermediate holders." While a general reference to the cases cited and reviewed by Chief Justice Gray in Greenfield Savings Bank v. Stowell, supra, will suffice, there are some later decisions to which attention may be called. In Knoxville Nat. Bank v. Clark, 51 Iowa, 264, 1 N. W. 491, 33 Am. Rep. 129, will be found a strong and well-reasoned opinion against holding a party to a note which has been fraudulently raised, after it left his hands, liable for negligence, because when he executed the instrument there were spaces left thereon (not being obvious blanks designed to be filled) which would permit of forgery. The trial court had rendered judgment agaipst the maker for the amount of the note as raised from $10 to $110 on a finding of negligence in leaving a space before the word "ten" and the figures "10." "On this ground," said the Su- preme Court of Iowa, "the court proceeded and the decision is based on the reasoning of the civil lawyers. But could it be anticipated that such negligence would cause another to commit a crime, and can it be said a person is negligent who does not anticipate and provide against the thousand ways through or by which crime is committed? Is it not requiring of the ordinary business man more diligence than can be maintained on principle, or is practicable, if he is required to protect and guard his business transactions so that he cannot be held liable for the criminal acts^of another? If so, why should not the negligence of the owner of goods which are stolen excuse the bona fide purchaser?" And, referring to the argument that such a measure of liability is required to promote the free interchange of commercial paper (a view which seems to have been influential in the Pennsyl- vania case of Garrard v. Haddan), the court well said : "At the pres- ent day negotiable paper is not ordinarily freely received from un- known persons. Forgeries, however, are not confined to such. But the necessities of trade and commerce do not require the law to be so construed as to compel a person to perform a contract he; never made and which it is proposed to fasten on him because some one has com- mitted a forgery or other crime." In Burrows v. Klunk, 70 Md. 451, 17 Atl. 378, 3 L. R, A. 576, 14 Am. St. Rep. 371, the Maryland Court of Appeals emphasizes the distinction between, a note in blank as to the amount, when signed 790 DISCHARGE (Part 4 and delivered to another for use, and a note complete on its face when signed and delivered, in which has been written the sum payable, the date, time of payment, and name of the payee. "In such case," it is held, "there can be no inference that the defendant authorized any one to increase the amount simply because blank spaces were left in which there was room enough to insert a larger sum." No one questions the proposition that, where a party to commercial paper intrusts it to another with a blank thereon designed to be filled up with the amount, such party is liable to a bona fide holder of the instrument for the amount filled in, though it be larger than was stip- ulated with the person to whom immediate delivery was made. Van Duzer v. Howe, 21 N. Y. 531. So, also, a note executed with a blank therein for a statement of the place of payment is not avoided in the hands of a bona fide holder for value by the insertion in the blank of a place different from that agreed upon by the original parties. Red- lich v. Doll, 54 N. Y. 234, 13 Am. Rep. 573. But, where there is no blank for that purpose when the note is indorsed, the insertion of an obligation to pay interest is a material alteration which invalidates the instrument as against the indorser. McGrath v. Clark, 56 N. Y. 34, 15 Am. Rep. 372. In the case last cited the note, when indorsed, ended with the word "at," followed by a space in which the maker, after indorsement, inserted a place of payment, adding the words "with interest" ; but no suggestion appears to have been made that, because the space left was large enough to allow the insertion of these words, the indorser was negligent and could be charged with the amount of the note, including the interest, on that ground. On the contrary, as the law then stood, he was relieved of all liability whatever as the effect of the unauthorized alteration. Now, however, under the negotiable instruments law (Laws 1897, p. 745, c. 613, § 205) he would be liable on the paper according to its original tenor. To sustain the judgment in the case at bar in view of the instruc- tions under which the issues were submitted to the jury, we must hold that the indorser of a promissory note, the ai.iount of which has been fraudulently raised after indorsement by means of a forgery, is liable upon the instrument in the hands of a bona fide holder for the increased amount, because of negligence in indorsing the same when there were spaces thereon which rendered the forgery easy, though the note was complete in form. To do this would be to create a con- tract through the agency of negligence; for the action is not in tort for damages, but upon the contract as expressed in the note. But, apart from any question as to the form in which the indorser is sought to be charged, I am of opinion that no liability on the part of the in- dorser for the amount of such a note as raised can be predicated simply upon the fact that such spaces existed thereon. This conclu- sion I base upon the authorities to that effect which I have already discussed, and upon what seems to me to be considerations of sound reason independent of judicial authority. Sec. 3) ALTERATION 791 An averment of negligence necessarily imports the existence of a duty. Wha;t duty to subsequent holders of a promissory note is imposed by the law upon a person who is requested to indorse the paper for the accommodation of the maker and who complies with such request? It is a complete instrument in all respects — as to date, name of payee, time and place of payment, and amount. There are, it is true, spaces on the face of the instrument in which it is pos- sible to insert words and figures which will enjarge the amount and still leave the note apparently a genuine instrument; in other words, there is room for forgery. On what theory is the indorser negligent because he places his name on the paper without first seeing to it that these spaces are so occupied by cross-lines or otherwise as to render forgery less feasible? It can only be on the theory that he is boi^id to assume that those to whom he delivers the paper or into whose hands it may come will be likely to commit a crime if it is compara- tively easy to do so. I deny that there is any such presumption in the law. It would be a stigma and reflection upon the character of the mercantile community and constitute an intolerable reproach of which they might well complain as without justification in practical experience or the conduct of business. That there are miscreants who will forge commercial paper by raising the amount originally stated in the instrument is too true, and is evidenced by the cases in the law reports to which we have had oc- casion to refer; but that such misconduct is the rule, or is so general as to justify the presumption that it is to be expected and that busi- ness men must govern themselves accordingly, has never yet been as- serted in this state, and I am not willing to sanction any such propo- sition either directly or by implication. On the contrary, the presump- tion is that men will do right rather than wrong. See Bradish v. Bliss, 35 Vt. 336. As was said by Judge Cullen in Critten v. Chemical Nat. Bank, 171 N. Y. 219, 224, 63 N. E. 969, 57 L. R. A. 529, it is not the law that the drawer of a check is bound so to prepare it that no- body else can successfully tamper with it. Neither is it the law that the indorser of a promissory note complete on its face may be made liable for the consequences of a forgery thereof simply because there were spaces thereon which rendered the forgery easier than would otherwise have been the case. I think the judgment of the Appellate Division should be reversed and a new trial granted, with costs to abide the event.^» 1 8 A fortiori where there are no blank spaces in the instrument, a holder in due course under section 124, Neg. Inst. Law. may enforce the instrument ac- cording to its original tenor. Massachusetts Bank v. Snow, 187 Mass. 159, 72 N E 959 (190^; Colonial Bank v. Duer, 108 App. Dlv. 215, 95 N. Y. Stop 810 (1905); Hetch v. Shenners, 126 Wis. 27, 105 N. W. 309 (1905), semble ; Schwartz v. Wilmer, 90 Md. 136, 44 Atl. 1059 (1899), semble. See Bothell V. Schweitzer, 84 Neb. 271, 120 N. W. 1129. 22 L. R. A. (N. S.) 263 (1909). 792 DiscHAEGB (Part 4 LONDON JOINT STOCK BANK, Limited, v. MacMILLAN & ARTHUR. (House of Lords, [1918] A. C. 777.) Viscount Haldane.^* My Lords, the respondents, who are in part- nership as general merchants, at the time of the transaction in question were customers of the appellant bank. They employed as their clerk one Klaentschi, who was their book-keeper and cashier, and who, amongst other duties which he discharged, used at times to fill in cheques for them for signature. In the .forenoon of February 9, 1915, Mr. Arthur Doluchanjanz, one of the respondent partners, was going out of his office to luncheon. He appears to have been in a hurry, and to have had his hat already on, when Klaentschi called him back and said that he wanted him to sign a cheque for petty cash for the firm. Klaentschi brought him a loose cheque torn out of the cheque-book and without the counterfoil. Mr. Doluchanjanz appears from his own account to have taken a pen which Klaentschi handed to him, and to have signed the cheque without further consideration. He only remarked that he did not like signing with Klaentschi's pen, and that he wished he would bring cheques to his private office in future. He, however, signed the firm name to this one, with the observation that the cheque was for £2. and that usually Klaentschi asked for £3. for petty cash. The latter replied that the amount was enough. My Lords, the cheque was not completely filled in when the partner signed it. It was already dated and made payable to "ourselves or bearer." But, as Sankey J., who tried the case, found, no words at all had been inserted in the space provided for the indication in words of the amount, and in the space provided for figures there was a "2," with room in which other figures could be inserted on each side of this figure. After Mr. Arthur Doluchanjanz had left the office Klaentschi proceeded to fill in the cheque thus left incomplete. His employer had without doubt authorized him to fill it in so as to be a complete cheque for £2. and then to take it to the bank and cash it. But he inserted "one hundred and twenty" pounds in the space provid- ed for the words, and he further inserted a "1" to the left and a "0" to the right of the "2" in the space where the latter figure was written, making a corresponding amount in figures of £120. He subsequently took the cheque to the bank, obtained cash for it over the counter, and almost immediately afterwards absconded. There were other cheques as to which questions were raised by the respondents, but these questions have all been disposed of. The only thing that remains in controversy is whether the respondents were entitled to succeed in an action which they brought to have it declared that the bank were not entitled to debit the respondents' account with i» The arguments of counsel, the statement of the case, and the other opinions are omitted. Sec. 3) ALTERATION 793 more than £2. in respect of the cheque I have described, or alternatively that the respondents were entitled to ill8. as damages. Sankey J., decided in favour of the respondents, and the Court of Appeal has affirmed this decision. > My Lords, the question before us is whether the courts below, in dealing with the facts found as I have stated them, came to a true conclusion as to what ought to result from them in law. In order to consider the proper conclusion it is necessary to ascertain what relevant principles have been established. The decided cases in point have been fully brought before your Lordships in the able arguments to which we have listened from the bar. After considering the authori- ties, I do not, speaking for myself, entertain any doubt that certain important principles have at length been placed beyond controversy. Ever since this House in 1848 decided Foley v. Hill (1848) 2 H. L. C. 28, it has been quite clear that the relation between a banker and the customer whose balance he keeps is under ordinary circumstances one simply of debtor and creditor. But in other judgments, and notably by a later decision of this House, Scholfield v. Earl of Londesborough, [1^96] A. C. 514, it was made equally clear that along with this relation and consistently with it there may subsist a second one. This further relation, and the duties which arise out of it, differentiate the additional relation between the customer who draws a cheque on his banker from a relation which exists between the parties to an ordinary negotiable instrument, between, for example, the acceptor of a bill of exchange and the person who buys it in the market in reliance on his signature. The acceptor of a bill of exchange may well be under the general obliga- tion which affects persons who invite others to act upon their undertak- ings given for valuable consideration not to express these undertakings in such a form as may naturally mislead those who act upon them. But the customer of a bank is under a yet more specific duty. The banker contracts to act as his mandatory and is bound to honour his cheques without any delay to the extent of the balance standing to his credit. The customer contracts reciprocally that in drawing his cheques on the banker he will draw them in such a form as^ will enable the banker to fulfil his obligation, and therefore in a form that is clear and free from ambiguity. The correlative obligation is thus comple- mentary to the obligation of the mandatory to apply the balance in pay- ing without delay the cheques as and when presented to him. It may be that, if the cheque is completely and distinctly drawn, the mere fact that so much space has been left between the words and the figures on the one hand and the marginal limits provided by the blank form on the other as to have enabled a skillful forger to commit a crime by altering the amounts is not, if that be all, a breach of the obligation of the customer. People are not called on to anticipate the commission of forgery when they are exercising ordinary care in writing their cheques. To have left such spaces, if there is nothing more, may not bring the case within the category of those in which the customer is 794 DISCHARGE (Part 4, deemed to have failed in his duty to his banker. At all events the Judi- cial Committee of the Privy Council said so in Colonial Bank of Aus- tralasia V. Marshall, [1906] A. C. 559, and I do not think that in order to dispose of the present appeal it is necessary to discuss the question how far what was said in that case binds us sitting here, or what au- thority should be attributed to the judgment. What I wish to make plain is that in the case of a cheque drawn by a customer on his banker there is a special duty to exercise care in the framing of what is a mandate, a special duty which does not exist in the same fashion in the instance of the acceptor of a bill of exchange, where the instrumerit is drawn for circulation among the members of the public generally, and is not a direction to a designated person to pay out of a balance for which he has to account, a person who has a right to insist that the direction he receives to be acted on without any delay shall be so drawn as not to require exceptional consideration and so impose delay. The obligation of the customer to avoid negligence in this regard was, I think, well expressed by Kennedy, J., in Lewes Sanitary Steam Laundry Co. v. Barclay, Bevan & Co., 11 Com. Cas. 255, 266, when that very accomplished judge defined it as including a "duty to be careful not to facilitate any fraud which, when it has been perpetrated, is seen to have, in fact, flowed in natural and unin- terrupted sequence from the negligent act." The limitation of the lia- bility to that which flows directly from the act established as negligent was obviously introduced by Kennedy J. because of what has been repeatedly laid down in the decided cases as essential, that the negli- gence should be of such a kind that the loss has resulted immediately from it, and not from some intervening cause which, although it was able to produce its effect because of what the customer had previously done or omitted to do, was not itself brought into existence as the im- mediate and natural outcome of his action. Thus a man may be im- prudent in leaving his cheque-book and pass-book in the hands of his clerk, who is thereby enabled to forge a cheque. But he is not liable, for this reason, that the direct and real cause of the loss is the interven- tion of an act of wickedness on the part of the clerk, which the law does not call on him to anticipate in the absence of obvious ground for suspicion. In Kepitigalla Rubber Estates v. National Bank of India, [1909] 2 K. B. 1010, Bray, J., states the principle with conspicuous lucidity. My Lords, a cheque is a bill of exchange within the definition in the Bills of Exchange Act, 1882. • The statement in a cheque of the sum payable as expressed in words is therefore, in accordance with section 9 of that act, instructive, inasmuch as in the case of a discrepancy the statement in words is to prevail over that in figures. Although a bill of exchange is a complete order for payment within the definition in section 3, even if the sum payable is stated in figures only, yet it may be that a banker would be justified in refusing to pay a cheque in which a statement in words had been omitted from the space provided for it. Sec. 3) ALTEEATION 795 For, as I have observed above, the banker as a mandatory has a right to insist on having his mandate in a form which does not leave room for misgiving as to what he is called on to tio, and there is nothing in the Act which in any way abrogates this right if by usage between himself and his customer he is entitled to expect the amount to ap- pear in writing as well as in figures. The point does not, however, arise for decision in the present case. The statute also declares the law on another point which is not without bearing on the question before us. Sect. 20, sub-s. 1, enacts that "where a simple signature on a blank stamped paper is delivered by the signer in order that it may be con- verted into a bill, it operates as a prima facie authority to fill it up as a complete bill for any amount the stamp will cover, using the signa- ture for that of the drawer or the acceptor or an indorser; and in like manner, when a bill is wanting in any material particular, the person in possession of it has a prima facie authority to fill up the omission in any way he thinks fit." By subsection 2 of the same section, "In order that any instrument when completed may be enforceable against any person who became a party thereto prior to its completion, it must be filled up within a reasonable time and strictly in accordance with the authority given." My Lords, these words probably do no more than express the law merchant as it stood prior to the statute. And they leave open for determination by the law outside the statute the question how the authority given is to be proved. I think that a banker has more than one answer to his customer if he is challenged for paying a cheque which on the face of it appears to have been duly filled in be- fore signature, although in fact it has really been filled in subsequently and otherwise than in accordance with instructions given by the cus- tomer to his clerk when he signed it and handed it to the latter to com- plete and cash with a restriction on the clerk's authority of which the banker knew nothing. If the customer objects to be debited with the amount of such a cheque, on the ground that the clerk has inserted an amount which was not authorized, the banker may reply either of two things. He may say that the customer was under a legal obligation to see that any cheque which he signed, in order that it might subsequently be filled in and presented, was in order when presented, and that the existence of this obligation precludes him from setting up that the clerk had not authority in fact. The presentation at the counter of a cheque for a definite amount, which he authorized to be presented in order to be cashed, although he actually intended that it should be cashed for a different amount, is a representation that the bearer presenting it has authority to receive payment. The special duty of the customer towards his banker to which I have already referred is, in itself, a suffi- cient ground for attributing an intention to make such a representation, and I think that its inference may also be justified on the more general principle of estoppel by conduct enunciated by Parke, B., in the well- known case of Freeman v. Cooke ( 1848) 2 Ex. 654, 663, explained in this connection by Blackburn, J., in the Exchequer Chamber in Swan 796 DISCHARGE (Part 4 V. North British Australasian Co., 2 H. & C. 175. In Freeman v. Cooke, Parke, B., points out the difference between estoppel by record or by deed, as to which the rules of pleading, which do not favour it, are strict, and estoppel in pais, which is, generally speaking, a mere ap- plication not of any technical rule, but of common sense. He quotes Pickard v. Sears (1837) 6 Ad. & E. 469, 474, for the proposition that when a man by his words or conduct willfully causes another to believe in the existence of a certain state of things, and induces him to act on that belief so as to alter his own previous position, the former is precluded from averring against the latter a different state of things as existing at the same time. He explains that by "willfully" is meant, not necessarily that the party represents that to be true which he knew to be untrue, but that at least he meant his representation to be acted on, and therefore that, whatever a man's real intention may be, if he so conducts himself that a reasonable person would take the represen- tation to be true, and believe that it was meant that he should act upon it, and did act upon it, as true, the party making the representation would be precluded from contesting its truth. He goes on to add that conduct, by negligence or omission, where there is a duty cast upon a person, by usage of trade or otherwise, to make known the facts accu- rately, may have the same effect. My Lords, the principle laid down by Parke, B., is one the recognition of which is essential to the conduct of business between the members of every well-ordered community. It is generally recognized in ordi- nary social life as imposing obligation of honour as much as of law. And it may be observed that it is hardly a rule of what is called sub- stantive law in the sense of declaring an immediate right or claim. It is rather a rule of evidence, capable not the less on that account of affecting gravely substantive rights. The principle of estoppel thus explained is one which it appears plain that a banker, in proper circum- stances, might invoke as a defence against his customer's claim. I think, further, that the banker may alternatively say that even if the customer could otherwise prima facie be entitled to recover from him the amount paid on such a cheque as I have referred to, on the footing that the latter had no voucher which justified the payment, he, the banker, must be entitled in such a case to recover against the cus- tomer for the loss sustained by a negligent act, and that, to prevent circuity of action, he must be allowed to set up a defence based on his immunity from the loss so occasioned ; see the judgment of Cockburn C. J. in the case of Swan v. North British Australasian Co., 2 H. & C. 175, 190. My Lords, the case of a customer drawing a cheque on a banker to whom he owes the duty referred to is different from that of, for example, an acceptor of a bill of exchange who has not such a special duty. And I should hesitate before saying that the proposition laid down by Lord Halsbury in Scholfield v. Earl of Londesborough, [1896] A. C. 514, 532, in commenting on the unreported decision in Sec. 3) ALTERATION 79t Adelphi Bank v. Edwards ought to be extended without qualification to a cheque drawn on a banker. Lord Halsbury cites with approval what Lindley h. J. laid down in the latter case to the effect that it was wrong to contend that it is negligence to sign a negotiable instrument so that somebody else can tamper with it ; and also a wider proposition of Bovill, C. J., in Soci^te Generale v. Metropolitan Bank, 27 L. T. 849, 856, that people are not supposed to commit forgery, and that the protection against forgery is, not the vigilance of parties excluding the possibility of committing forgery, but the law of the land. For the reasons which I have already given I think that, at all events, in the case of cheques drawn by a customer on his banker, this proposition cannot be applied without qualification by other principles which are plainly applicable. And even in regard to other kinds of negotiable instruments that must be remembered which was pointed out by Fletcher Moulton, L. J., in Smith v. Prosser, [1907] 2 K. B. 735, 752, that "if a person signs a piece of paper and gives it to an agent with the intention that it shall in his hands form the basis of a negotiable instrument, he is not permitted to plead that he limited the power of his agent in a way not obvious on the face of the instrument." The decision of this House in Brocklesby v. Temperance Building Society, [1895] A. C. 173, is a further illustration of the way in which the proposition of Lord Halsbury has to be taken as laying down only a general rule which is subject to qualification in special instances. There a father entrusted his son with the title deeds for the purpose of raising a limited sum. The son, by fraudulent concealment of the written authority given to him and by means of forgery, succeeded in borrowing a larger sum on equitable mortgage by deposit of the deeds and appropriated it. It was held by Lord Herschell, Lord Watson, and Lord Macnaghten, following the well-known decision of Lord Cran- worth in Perry-Herrick v. Attwood (1857) 2 De G. & J. 21, that the father could not redeem the security without paying the lender all he had lent. The principle laid down by this House was that if a person permits title deeds to be dealt with for the purpose of creating a charge of definite amount, and the limit is exceeded, he cannot, as against an innocent third party who has advanced his money without notice of the limit, complain that the authority which he gave has been exceeded. My Lords, no doubt this principle becomes applicable owing to the importance which the Court of Chancery always attached to the posses- sion of title deeds, but it furnishes none the less a further illustration of the caution which is required before relying on the general proposi- tion to which I have referred. My Lords, I have come to the conclusion that if the principles which I have now stated are applied in the present case we cannot avoid the conclusion that the decision in the courts below was erroneous. The respondents signed a cheque which was blank altogether as regards the words which according to usage were to be inserted to describe the amount, and as to the figure space was in such a condition that the 798 DISCHARGE (Part 4 figure "2" was inserted in a place where other fig'ures could easily be added on each side. They left it to their clerk to fill up the cheque thus imperfect. It was drawn payable to bearer, and he was authorized to present it for payment. On the face of the cheque there was nothing of any kind to awaken any doubt in the minds of the officials of the bank that the cheque, which it was their duty to honour, if in order, without delay, was in order. The bank paid the amount which it ap- peared to be drawn for over the counter in cash to the fraudulent clerk. Both upon the principles and upon the authorities I have referred to, it seems to me that the bank acted rightly in law in so doing. It was said in the judgments in the Courts below that the insertion of the figure "2" in the cheque before signature was a limitation on the face of it of the authority of the clerk, and that therefore the real cause of the loss was not the failure to tell the bank of the restriction on his power, but his own fraud, for which the respondents were not liable. I cannot agree. So far as the bank was concerned, no limitation of the amount appeared on the face of the cheque when presented. Before signature there was that which, if left alone, would have been such a limitation. But then the respondents left the clerk- in a position to make additions to the cheque, which was not only in an imperfect condition, but had the limiting figure in such a place that the clerk could, by merely adding figures on each side, make it disappear as completely as if it had never been inserted. He did make additions which, when the cheque was pre- sented at the bank, had rendered the original limiting figure for all practical purposes non-existent. It was immediately due to the action of the respondents, and not to any other cause, that he was able to do this, and I am of opinion that in putting as much as they did within his power they took the risk of failure in the discharge of their duty to the bank of which they were customers. It follows that they can- not now recover the amount of a loss which was due to their own neg- ligence. My Lords, much was said in the course of the discussion, both at the Bar and in the Courts below, about the case of Young v. Grote, 4 Bing. 253. There the plaintiff, having occasion to leave home, signed a blank cheque and handed it to his wife with authority to fill it up for such sum as she might think requisite for the purposes of his business. She told a clerk to fill it up with the sum of i50. 2s. 3d. He filled in that sum, and showed the cheque, so made out and payable to bearer, to the lady, who told him to get it cashed. The amount was inserted in words as well as figures, but the word "fifty" commenced in the middle of a line and had a small "f" and the figure "50" was inserted so far from the letter "£" as to permit another figure to be inserted in the interval. The clerk then fraudulently altered the words and figures by such in- sertions as made the cheque appear as one for £350. 2s. 3d., and obtained payment from the defendants, the plaintiff's bankers. The latter claim- ed to debit the plaintiff with the larger amount, and the dispute which arose was referred to arbitration. The arbitrator found that the Sec. 3) ALTERATION 799 plaintiff had been negligent in 'causing his cheque to be handed to the clerk in such a state that he could, by the mere insertion of words, make it appear to be a cheque forthe larger sum. He appears to have stated the facts in his award, and to have referred the question whether they imported a duty the breach of which amounted to negligence in law for the opinion of the Court of Common Pleas. That court decid- ed that the bankers were not liable for the loss sustained by the plain- tiff. The case is a very well-known one, and has been frequently dis- cussed. I think that the outcome has been a substantial balance of au- thority in support of the result reached by the Court of Common Pleas. To me it appears that the conclusion come to by that court was the right one. I think that the facts established were in some respects not so favourable to the bankers as those in the case now before us.' The cheque as signed was complete, which is not the case here. But the small "f" in the word "fifty" was a feature of importance when taken in conjunction with the way in which the figure "50" was placed at a distance from the "i." There was also the finding of the arbitrator, which seems to have impligd that he thought the plaintiff had been careless in his conduct. In these points the circumstances of the case differ from those in Colonial Bank of Australasia v. Marshall, [1906] A. C. 559, to which I have referred earlier, and I see no reason for saying that the result reached by the Court of Common Pleas is incon- sistent with the weight of subsequent authority. But having gone so far, I wish to add that I doubt whether the case is to-day a particularly instructive one. The judges who decided it did so on grounds- which varied. Best, C. J., proceeded on that of neg- ligence, and so did Grose, J. But in the remaining judgments it is suggested as a sufficient ground that the plaintiff signed an authority to the bankers so general that it covered what was done by his wife and the fraudulent clerk in combination. My Lords, I think that since Young v. Grote, 4 Bing. 253, was de- cided the principles on which questions of this kind ought to be dis- posed of have been rendered much clearer than they were made in the judgments of the Court of Common Pleas. While I have no quarrel with the particular decision in the case, I am therefore not disposed to rely on these judgments as containing any exposition of the law which is of much value to-day. * * * INDEX [TSB nOUBEB REFEB TO PAGES] AOCEPTANCB, Consideration for, 24, 279, 281. Delivery of, 226. Form, 199-232. Parol, 24, 199 (1st case), 210, 211, 213. Written, 207. Extrinsic, 109 (2(1 case), 208, 215. Virtual, 202. Constructive, 223-232. By retention of bill, 223, 226, 228, 230. By conversion of bill, Refusal to return, 229 (1st case). Destruction, 223 (2d case), 231. Kinds, 192-199. General, 192-199. Qualified, 192-199. As to amount, 192. As to time, 194. As to place, 193. By conditions, 195. Acceptance by less than all drawees, 196, 198. Acceptance by one partner in bis own name, 196, 198, 198, note. Obligation resulting from, see Maker and Acceptor. Of checks, see Checks, certification. ACCEPTOR, See Maker and Acceptor. ACCOMMODATION PARTIES, Who may be. Acceptor, 24, 211, 279, 281. Maker, 289, note, 292, 295. Indorser, 296. Irregular indorser, see Irregular Indorser. Liability of. To accommodated party, 279. To holder for value with notice, 281. To purchaser for value after maturity, 498, BOO, note. To purchaser for less than face, 411. To pledgee for less than face, 416. How liability discharged. By discharge of instrument, see Discharge. By payment of accommodation party, 762, 768. Extension of time to accommodated payee does not discharge maker, 749. Notice of accommodation character, effect on rights of holder for value, 281. Constructive notice of accommodation character of Indorsement fron* dis- count by maker, 442, 445. Proof of accommodation character, effect on burden of going forward with evidence, 463. ADMISSIONS, Of maker and acceptor, see Maker and Acceptor, SM.& M.B.& N.(2d Ed.) (827) 828 INDEX [The figures refer to pages] AGENT, Instrument signed by, who is bound, 13(>-158. Instrument payable to, who is proper plaintiff, 168-182. Presentment by, 665, 667, note. Corthpletion of check for an unauthorized amount, 792. ATjTERATION, See Discharge. ALTERNATIVE, Payees, 168, 173. Obligation to pay money or to deliver property, 121 f2d case). AMBIGUOUS INSTRUMENTS, Unsigned bill which has been accepted, 134 (both cases), 134, note. Unaddressed bill. Before acceptance, 184, 189. After acceptance, 185, 187, note. Where drawee of bill is agent of drawer, 188. Where drawer, drawee, and payee are same person, 165. AMBIGUOUS SIGNATURES, 136-158. AMOUNT, Payable on negotiable Instrument must be certain, 79-86. When blank, see Incomplete Instruments. Recoverable by holder in due course, see Holder in Due Course, value, notice. ANOMALOUS INDORSEiRl, See Irregular Indorser. ANTECEDENT DEBT, See Holder in Due Course, value. See Consideration. ANTEDATED INSTRUMENT, See Date. ASSIGNABILITY. Distinction between assignability and negotiability, see Negotiability. ASSIGNMENT, Whether an indorsement, 107, 311, 315, note, 332. Of instruments payable to order by delivery without Indorsement, see Transfer, by delivery of instruments payable to order. ATTORNEY'S FEES, 82. AVAL, See Irregular Indorser. BANK, Hour of presentment, when instrument payable at, 644. Manner of presentment, when instrument payable at, 646. BANK NOTES, Though payable on demand do not mature until presentment, 427, note. BEARER, Instrument payable to. What are, 14-35, 159, 159, note, 730 (1st case). Negotiability of, 14-G5. Transfer of, see Transfer, by delivery. BILL OF EXCHANGE. See Form of Negotiable Instrument. BILL OF LADING, Admissions of acceptor of genuineness of biU of lading attached to draft, 548. BLANKS, See Incomplete Instruments. INDEX 829 [The figures refer to pages] BLANK INDORSEMENT, See Transfer, by indorsement, kinds. BONA FIDE HOLDER, See Holder In Due Course. BURDEN OF PROOF, See Holder in Due Course, presumptions. CANCELLATION, See Discharge. CAPACITY, Admissions as to capacity of drawer, 509, 511, not?. Admissions as to capacity of payee, 541. "Warranties of ind'orser as to capacity of prior parties, 723. Warranties of indorser without recourse as to capacity of prior parties, 719. Warranties of transferor by delivery as to capacity of prior parties, 718. CASHIER, Instruments payable to are payable prima f&cie to bank, 180, 182, note 77. CERTIFICATE OF PROTEST, 665. CERTIFICATES OF DEPOSIT, Though payable on demand do not mature until presentment, 427, note. Negotiability of, 32. As value, see Holder in Due Course. Transferred after maturity, 488. CERTIFICATION, See Checks. CHECKS, Certification of. Obligation of bank, 543, 547, 604, 606. Effect on liability of drawer and indorsers when certified at re- quest of. Drawer, 606. Holder, 604. Obligation of drawer and Indorser, Necessity of timely presentment to charge. Drawer, where drawee bank fails, 620, 622, 624, note, 630, 631. Indorser, 625, 634. To draw ch^k so as to prevent insertion of figures raising amount. 792. Mode of presentment, see Presentment for Payment. Payment under mistake, see Mistake, payment under. CHOSE IN ACTION, See Negotiability ; Assignability. CLEARING HOUSE, Hour of presentment when instrument payable through, 637. No payment until opportunity for examination of checks, 543, 660. COLLECTION, Indorsement for, 338, 344. CONDITION, , Instruments conditional on face, see Form of Negotiable Instrument, char- acter of order or promise. CONDITIONAL INDORSEMENT, 354. CONSIDERATION, Necessity of, for obligation of, Maker, 276 (both cases). Indorser, 278. Acceptor, 24, 279, 281. 830 INDEX [The figures reter to pages] CONSIDBBATION— Continued, What is, In general, 2S9, note 8. Implied promise to forbear suit upon receipt of debtor's obligation on negotiable instrument on account of debt, where the instru- ment is payable. In the future, 284, 288. On demand, 292, 293. Presumption of, 296, 298. Nonnegotiable note, no presumption of, 29 (1st case). Note from adult son to father for money, no presumption oT, 238. Failure of, 72, 478. See Accommodation Parties. CONTINGENCY, Instruments payable on, see Form of Negotiable Instrument, character of order or promise. CONVEESION, Of bill by drawee, a constructive acceptance, 223 (2d case), 229 (1st case). Of foreign money by agent, rights of bona fide transferee, 4. COUPONS, Detached from negotiable bonds, 732, note. CUEHENCY, Instruments payable in, 130. CURRENT FUNDS, Instruments payable in, 130. DATE, Undated instrument, When it matures, 426, note. Authority to fill In, see Incomplete Instruments. Antedated instrument, 425, note. Postdated instniment, 425. DAYS OF GBACE, 22, 611. DEATH, Instrument payable at or after, 88 (1st case). Notice of dishonor in case of death of, Holder, 711. Drawer or indorser, 713, note. ^ Presentment for payment in case of death of. Holder, 711. Maker or acceptor, 711. Of holder, who may transfer after, 300. DEFENSES, Real or legal. Alteration, see Discharge. Coverture, 475, 476. Cancellation, .see Discharge. Delivery, no voluntary, see Delivery. Discharge in bankruptcy, 477. Discharge, see Discharge. Forgery, 476. Illegality, 411, 413, note, 475, 491, 496. Infancy, 474, 476, 484, note. Insanity, 475, 476. Trustee process, 477. Personal or equitable. Accommodation character of defendant's obligation, 279, 281, 498. Accommodation instrument negotiated by accommodation party after maturity, 498, 500, note. INDEX 831 [Tbe flgurea refer to pages] I>EIFBNSES--Contlnued, Consideration, Absence of, see Consideration. I Failure of, 72, 478. Delivery, no voluntary, see Delivery. Drunkenness, 475. Duress, 473. Equitable rights of transferor or third person against holder be- cause of. Fraud practiced by holder, 471, 484. Breach of trust by holder, 460. Insanity of holder, 472. Theft by holder, 358. Fraud, 476. Illegality,. 411, 413, note, 475, 491, 496. Payment, see Discharge. Renunciation, see Discharge. Set-offs, when available, 364, 467, 469. DBDAY, In making presentment, see Presentment for Payment In giving notice of dishonor, see Notice of Dishonor. In drawing certificates of protest, 667. DELIYBRY, Necessity of, for Inception of obligation of, Drawer and maker, 238, 244, 249. Indorser, 256, 330. Acceptor, 226. In escrow, 234, 242, 243. Induced by fraud, 251. Subject to collateral agreement, 236. Of incomplete instruments, see Incomplete Instruments. As a mode of transfer, see Transfer. Without indorsement of instrument payable to order, see Transfer. Transferor by, liability of, see Transferor by Delivery. DEMAND, Instruments payable on, What are, No time for payment stated, 96. As soon as convenient, 89. At such times as payee requires, 91. Overdue instruments, 616. When overdue, 424, 426. Are payable without demand, 501, 501, note. Presentment for acceptance of, necessity, 604, 606, 611. Presentment for payment of, see Presentment for Payment. Days of grace on, 611. Checks, see Checks. Necessity and mode of demanding payment of negotiable instrument, see Presentment for Payment. DILIGENCE, In making presentment for acceptance, see Presentment for Acceptance. In making presentment for payment, see Presentment for Payment In giving notice of dishonor, see Notice of Dishonor. DISCHARGE, Surrender of instrument to maker or acceptor, By whom. Holder, 730. Thief of bearer instrument, 740. Possessor under forged indorsement, 732. Holder who obtained instrument through fraud, 742. 832 INDEX [The figures refer to pages] DISCHARGE— Continued, When, Before date of demand Instrument, 730 (1st case). Before maturity, 731 (1st case). After maturity, 731 (2d ease), 732, note. Payment in exchange for. Part payment with promise to pay balance, 746. Part payment in satisfaction, 748, note. Discount by maker or acceptor, 738. Gift, as a, 748, note. Payment by maker or acceptor without surrender of instrument, not a Discharge, 742. But personal defense against holder receiving payment, 731. Payment by drawer. Of bill payable to drawer's order, not a discharge, 760. Of bill payable to a third person's order, 759. When drawer party accommodated, 762, 768. Payment by indorser. Not a discharge, 758, 760. Part payment by, 764. When indorser party accommodated, 762, 768. Renunciation, 752, 754. Cancellation, Intentional, 773, note. By mistake, 771. What is sufficient, 773. Alteration, Effect of, when made by, Party, Intentionally, 776, 779, 782. By mistake, 776, 779. Stranger, 776, 782. Purchaser without notice of, amount of recovery, 784. Extension of time to accommodated payee does not discharge maker. 749. DISHONOR, Proceedings upon. Notice of dishonor, see Notice of Dishonor. Protest, 665, 667, note. Purchaser after dishonor by nonpayment not holder in due course, 422-431. Purchaser without notice of dishonor by nonacceptance, a holder in due course, 597. DRAFT, A negotiable instrument, see Form of Negotiable Instrument. DRAWEE, See Form of Negotiable Instrument, parties. DRAWER, See Form of Negotiable Instrument, parties. DRAWER AJSTD INTJORSEiR, Obligation of, to pay upon dishonor by maker or acceptor conditional upon Presentment for acceptance, see Presentment for Acceptance. Presentment for payment, see Presentment for Payment. Protest, see Protest. Notice of dishonor, see Notice of Dislionor. Form and kinds of indorsement, see Transfer. Order of liability of indorsers among themselves, Depends upon order in time in which they indorse, 556, 557. Unless they vary order of liability by agreement, 558, 562, 585. Irregular indorser, see Irregular Indorser. Warranties of indorser as vendor, 718, 726. INDEX 833 [The figures refer to pages] DRAWER AJSTD INDORSBR— Continued, Warranties of Indorser without recourse, 719. Genuineness of previous indorsements, 727. Parol evidence inadniissible to show indorser signed In another capacity, 592. DRUNKENNESS, As a defense, 475. DUBBILLS, 38, 47. See Form of Negotiable Instrument, promise in note.. DUE COURSE, What is, see Holder in Due Course. DURESS, A personal or equitable defense, 473. EQUITABLE DEFENSES, See Defenses. EQUITIES, Of maker or acceptor as defenses, see Defenses. Of transferor or third person against holder, when avallnMe as defenses, Collateral agreements between holder and indorser, 330. Fraud practiced by holder, 471, 484. Breach of trust by holder, 460. Insanity of holder. 472 Theft by holder, 358. ESCROW, Delivery in, see Delivery. ESSENTIAL REQUISITES, Of negotiable instruments, see Form of Negotiable Instrument. ESTATE, " Named as payee, 179, note 75. EVIDENCE, See Holder In Due Course, presumptions, EXCHANGE, Instrument payable in, 124, note. Instrument payable with, 80. FAILURE OF CONSIDEniATION, A personal or equitable defense, 478. FICTITIOUS PAYEE, To whom instrument drawn payable to. Is payable, 512, 519, 523, 526. FISCAL OFFICER, To whom instrument drawn payable to, Is payable, 180, 182, note 77. PORBEARiANCE, As a consideration, see Consideration. As value, see Holder in Due Course, value. FOREIGN BILLS, Necessity of protest, 665. FOREIGN MONET, Instruments payable In, negotiability of, 123. Negotiability of, 4. FORGERY, As a defense, 476. Admissions of acceptor as to genuineness of drawer's idgnature, 509, 511, note. Admissions of drawee by paying as to genuineness of drawer's signature which is also payee's, 531. Admissions of acceptor as to genuineness of body of instrument, 533. SM.& M.B.& N.(2d Ed,)— 53 834 INDEX [The figures refer to pages] PORGEBT— Continued, Admissions of drawee by paying as to genuineness of body of Instrument, alteration of designated payee, 537. Admissions of acceptor of genuineness of bill of lading attached to draft, 548. Warranty of Indorser as to genuineness of signatures of prior parties, 649. "Warranty of indorser without recourse as to genuineness of signatures of prior parties, 719. Warranty of transferor by delivery as to genuineness of signatures of prior parties, 718. FORM OF NEGOTIABLE IXSTRCMENT, Writing, Instrument must be in, 36. What with. Pencil, 36. Stamp, 37. note. Printing, 37, note. On what, 36. - Conflict between written and printed matter, 29 (23 case). Promise in note, Must be on face of instrum-ent, 38-49. Duebills, 38. I. O. U., 38, 47. Order in bUl, Must be on face of instrument, 49-54. Request and order, distinction between, 50 (1st case). Authority and order, distinction between, 50 (both cases). Words of politeness coupled with order, 49. Character of promise or order, Must not be conditional on its face, 55-79. Promise or order to pay. Out of proceeds of property to be sold, 56. Out of delit due from drawee to drawer, 59. Out of obligation running from third person to drawee on account of drawer, 53. Out of debt due maker from third person, 62. "As per contract," 77. "Bound by all conditions and agreements," 70, note. "Subject to terms of contract," 72, 73. "On account of contract," 66. "If receipt at foot hereof is signed," 71, note. "In consideration of," 60, 63. "On return of this certificate properly indorsed," 32. Must be certain, As to amount. Instruments payable with, Attorney's fee, 82. Exchange, 80. Interest, larger rate after maturity, 86. Penalty, in case of default, 86. Option to maker to pay in uncertain installments, 108. As to time, instruments payable, After death, 88 (1st case). After ship's crew paid off, 88 (2d case). After money received from government, or as soon as con- venient, 89. When 21 years old, 89, note. At such times as payee requires, 91. On or before a day named, 109. Within a named period, 109. No time specified, 96. At specified future day with option to payee or holder, To confess judgment for maker before maturity, 97. INDEX 835 [The figures refer to pages] rORM OF NEGOTIABLE INSTRUMENT— Continued, To declare whole sum due, Upon breach of conditions of mortgage, 99. Upon failure to pay interest, 99. Upon failure to pay installment, 108. Upon failure to give additional security, 112, 115. To extend time of payment indefinitely, 93, 94. In installments, 108. In uncertain installments at option of maker, 108. Must be to pay in money, instruments payable. In chattels. Gold, 123. Tobacco, 121 (1st case). In checks or exchange, 124, note. In money or securities, 121 (2d case). In current funds, 130. In currency, 131. In money of country other than country where payable, 124. In money of country where payable, 127, note, 128. Promise to do something in addition, 112, 115. Must be payable to order or bearer, 14-35. Instruments payable to, Payee or bearer, Bills, 14, 18, 21, note. Notes, 15, 17. . Payee or order. Bills, 14. Notes, 15, 17. "Holder," 23. "Assigns," 28, note, 34. "Bearer A.," 21, note. "A. or bearer," 21, note. Instruments payable to payee without more, 22, 24, 25, note, 26, 29 (1st case). Effect of phrase, "this instrument shall be negotiable," 23, note. Instruments payable to order of payee "only," 29 (2d case). Instruments payable when "properly indorsed," 32. Parties, Maker and drawer, Must appear on face of instrument by signature, 136, 139. Subscription not necessary, 133. Acceptance of unsigned bill equivalent to signing note, 134 (both cases), 134, note. Signature, what is sufficient, In trade name, 140. By agent. In principal's name, 138, note, 140. In agent's name. Without more, 136, 137. With words describing signer as agent, 139, 143-158. Payee, Must be designation of, on face of instrument, No payee named, 158, 162, note. Designation by. Naming impersonal things, "Bills Payable," 159. "Cash," 159, note. "No. 437," 730 (1st case). Designation of, must be certain. Instruments payable to, Two or more in alternative, 168, 169, notet Corporation or its treasurer, 173. 836 INDEX [The figures reler to pases] FORM OF NEGOTIABLE INSTRUMENT— CJontinued, Officer for time being of unincorporated association, 170. Officer or his successor in office, 176. Administrators, 177, 179, note 74. "X's estate," 179, note 75. Officer, agent, or trustee by name, with words indicating fiduciary relation, 174, 178, note 73, 179, 180, 182, note 77. Fiscal officers of a bank or corporation, 180, 182, note 77. Who may be designated. Drawee, 163, 164. Maker and another, 166. Drawer, 165. Payee, drawer, and drawee, same person, 165. Drawee, Must be designated on face of instrument, No drawee designated, 183, 184, 185, 189. Designation must be certain, 183, 1S4, note. Who n»ay be designated. Drawer or his agent, 188. Payee, 163, 164. FRAUD, A personal or equitable defense, 476. FRAUDS, STATUTE OF, Whether parol acceptance within, 24, 211. ■ FUND, Instrument payable out of particular, see Form of Negotiable Instrument, character of order or promise, must not be conditional on face. GAMING, As a defense to instrument given for, 413, note 475, 491, GAiRINISHMENT, Of maker or acceptor as a defense, 477. GENUINENESS, See Forgery. GIFT, Surrender by holder to maker or acceptor as a, 748, note. By maker to payee, 276 (both cases), 276, note. By indorser to indorsee, 278. GOLD, Instrument payable in, 123. GOOD FAITH, See Holder in Due Course, notice, GRACE, DAYS OF, See Days of Graca GUARANTOR, Irregular indorser, whether a, 579. Notice of dishonor not required, 700. GUARANTY, Whether an indorsement, 308. HOLDER IN DUB COURSE, Value, must part with, 378-421. Amount of, 418. What is, Extinguishment of pre-existing debt, 381, 398, 402. Making of advances, 421, note. Promise to make advances, 421, note. Assumption of liability to third party, 421, note. INDEX 8S7 [The figures refer to pages] HOLDER IN DUB COURSE— Continued, Assumption of contingent liability to third party, 402, 420. Certificates of deposit, 420. Express promise to forbear suit, 382. Implied promise to forbear suit upon receipt of Instrument, ' On account of pre-existing debt, 384, note, 385, 387. As collateral security for pre-existing debt, 295, 378, 392. Holder for, amount of recovery. Purchaser for less than face of instrument issued for, Value, 418. Accommodation, 411. Pledgee for debt less than face of instrument, Which had been issued for value, 413. Which had been issued for accommodation, 416. Which had been misappropriated, 408. Transferee of holder for, succeeds to rights of transferor, 413, 415, note. Maturity, must purchase before, 422-431. When instruments mature which are. Payable at stated future time, 422. With stipulation accelerating maturity upon default, 427. On demand, 424, 426, 501. After demand, 504. At sight, 502, note. After sight, 502 (1st case). Undated, 426, note. Antedated, 425, note. Postdated, 425. Days of grace, 22, 611. Extension of time written on Instrument, 426, note. Certificates of deposit transferred after, 488. Notice, must purchase without, 422-462. Actual, Negligent omission to ascertain facts, 431, 434. Intentional omission to ascertain facts, 437. Gross negligence, 437-438. Constructive, Purchase after dishonor, 422-431. Of discharge, from possession of instrument by maker, 442. Of accommodation character of indorsement from discount by maker, 442, 445. Of abuse of authority, By corporate officers, 447-460. By trustees, 460. "Trustee," after name of payee or indorsee, 460. Presumption that holder is one in due course, 463-467. Prima facie case, how established, 466. Burden of proof, how affected by evidence of. Fraud, 464. Absence of consideration, 463, Payment of value, 398, 464. Transfer from holder in due course, 319, 466, note. Defenses, what are available against. Personal or equitable defenses, see Defenses. Real or legal defenses, see Defenses. HOUR, Of presentment, see Presentment for Payment ILLEGALITY, As a defense, 411, 413, note, 475, 491, 496. INCAPACITY, To contract, as a defense to party under disability, see Defenses. Of drawer, no defense to acceptor, 509, 511, note. 838 INDEX [TOie figures refer to pages] INCAPACITY— Continuecl, Of payee, no defense to maker, 541. Of prior parties, no defense to indorser, 726. Warranty of Indorser without recourse as to capacity of prior parties, 719. Warranty of transferor by delivery as to capacity of prior parties, 719. See Capacity. INCOMPLETE INSTRUMENTS. Necessity for delivery to inception of potential obligation of party sign- ing, 262, 263. Delivery of, in escrow, 259. Delivery of, induced by fraud, 262. Holder may complete in accordance with actual authority, 269, 273. Prima facie authority of holder to complete, 266. Effect of knowledge of fact of completion on rights of innocent purchaser after unauthorized completion, 267, 269, 270. INDORSEMENT, As a mode of transfer, see Transfer, by indorsement. Liability resulting from, see Drawer and Indorser, ■ INDORSEME2NT WITHOUT RECOURSE, Liability resulting from, 719, 727. INDORSER, See Drawer and Indorser. INFANCY, A real or legal defense, 474, 476, 484, note. Of maker, acceptor, drawer, or indorser, as a defense to subsequent par- ties, see Capacity ; Incapacity ; Drawer and Indorser, warranties ; Maker and Acceptor, admissions. INSANITY, A real or legal defense, 475, 476. Of maker, acceptor, drawer, or indorser, as a defense to subsequent par- ties, see Capacity ; Incapacity ; Drawer and Indorser, warranties ; Maker and Acceptor, admissions. INSOLVENCY, Does not excuse presentment and notice of dishonor, 696, 698, 709. No warranty of transferor by delivery as to, 716. INSTALLMENTS, Instruments payable in, 108. INTEGRATION, Rule of (parol evidence rule), 233, 2.3S. Indorsement in blank, 326. 330. Position of name, indorser bound to party whose name appeared ahead of his, 585. Inadmissible to show indorser signed in another capacity, 592. I. O. U., 38, 47. See Form of Negotiable Instrument, promise in note. IRREGULAR INDORSER, Liability of one who indorses irregularly. After delivery to, but before indorsement by payee as surety for him. 506. After delivery to payee as surety- for maker, 567. Before delivery to payee as surety for maker, As guarantor, 570. As indorser, 573, 575, 581, 582. As maker, 569. Before delivery to payee as surety for acceptor, 585^ Before delivery to payee as surety for him, 566. ISSUE, See Delivery. INDEX 839 [The figures refer to pages] JOINT INDOEiSER, When indorsers are, Joint payees. 305. Accommodation indorsers by agreement between theitiselves, 557, 558. Contribution between joint accommodation indorsers, 558. JOINT PAYEES, Both must indorse, 166, 305. KNOWLEDGE, Of defense, see Holder in Due Course, notice. Of dishonor does not render notice of dishonor unnecessary, 692, 694. LIEN, See Pledgee. LIMITATIONS, STATUTE OP, When begins to run, see Maker and Acceptor, obligation to pay, when In- struments mature. LDNATIC, See Insanity. MAIL, A means of conveying notice of dishonor, 668, 669, 672, 677, 689. Miscarriage of, notice of dishonor sufficient, though not received, 677. Delay in, an excuse for delay in making presentment for payment, 615, note. MAKER AND ACCEPTOR, Obligation to pay on day of maturity. When instruments mature which are payable. At stated future time, 422. With stipulations accelerating maturity upon default, 427. On demand, 424, 426, 507. After demand, 504. At sight, 502, note. After sight, 502 (1st case). Days of grace, 22, 611. Necessity of presentment to mature instruments payable. At stated future time at particular place, 193, 502, 505. On demand, 501. On demand at particular place, 506, 507. After demand, 504. At sight, 502, note. After sight, 502 (1st case). Whether action against, begun on day of maturity after presentment, is premature, 642, 643, note. Protest and notice of dishonor on day of maturity after presentment, 730. Admissions of. Existence, capacity, and genuineness of signature of drawer, 509, 511, note. Genuineness of drawer's signature which Is also payee's, 531. State of drawer's account, 543, 545. ■ Existence of payee, fictitious payees, 512, 519, 523, 526. Capacity of payee to indorse when a corporation, 541. Genuineness of indorsement, 514, 516, note. Genuineness of body of instrument, 533. Alteration of designated payee, 537. Genuineness of bill of lading attached to draft, 548. MARRIED WOMEN, Coverture a real or legal defense, 475, 476. Coverture of maker, acceptor, drawer, or indorser, as a defense to subse- quent parties, see Capacity; Incapacity; Drawer and Indorser, war- ranties ; Maker and Acceptor, admissions. 840 INDEX [The figures refer to pages] MATBRIAIiS, For writing negotiable instruments, 36, 37, note. MATURITY, Of negotiable instruments, see Maker and Acceptor, obligation to pay, when instruments mature. MISTAKE, Alteration by mistake, see Discharge, alteration. .Cancellation by mistake, see Discharge, cancellation. In date, 425, note. Payment under. As to genuineness of drawer's signature, 509, 511, note, 516, note. As to genuineness of drawer's signature which is also payee's, 531. As to genuineness of payee's and indorser's signature, 514, 519, 526. As to genuineness of body of the instrument, 533. Alteration of designated payee, 537. As to genuineness of bill of lading attached to draft, 548. As to state of drawer's account, 545. Effect of negligence, 535. Acceptance under, 512, note. Certification of note under mistake as to sufficiency of drawer's funds. 543. MONEJY, Negotiable instrument must be payable in, see Form of Negotiable Instru- ment. Negotiability of foreign, 4. NAME, Designation of parties by, see Form of Negotiable Instrument, parties. Indorsement in what, 302. NEGLIGENCE, Not equivalent to notice of defenses, 431, 434. In facilitating alteration by leaving blanks, 784, 792. In paying under mistake, see Mistake, paynjent under. NEGOTIABILITY, Of foreign money, 4. Of certificate of deposit, 32. What instruments have quality of, see Form of Negotiable Instrument. What is quality of. 1-13. NEGOTIABILITY, WORDS OF, See Form of Negotiable Instrument, must be payable to order or bearer. NEGOTIABLE INSTRUJIENTS, What are, see Form of Negotiable Instrument. NEGOTIABLE INSTRUMENTS LAW, Text of, 801. NEGOTIATION, See Transfer. NONEXISTENT PAYEES, See Fictitious Payees. NON^NEGOTIABLE BILLS AND NOT'ES, Acceptance of nonnegotiable bill, 24. Days of grace, 22. No presumption of consideration, 29 (1st case). NOTARY, Presentment by, when necessary, 665, 667, note. Protest, 665. NOTICE, See Holder in Due Course, notice. INDEX 84:1 [The figures refer to NOTICE OF DISHONOR, Necessity of, 694. When indorser a large stockholder, 705. Mode of giving. By whom, i Holder or his agent, 672, 673, 676, 692. Agent of holder in name of indorser, 673, Indorser chargeable on bill, 673. Maker, 675, note. Acceptor, 675. Form, • Parol, 694. Written, 694. Indication of dishonor, where instrument payable^ At bank, 691. Elsewhere, 690, 692, 694. Time, On day of maturity, 730 (2d case). When parties giving and receiving notice reside In same place, 668. When parties giving and receiving notice reside in different places, 669, 671. Holder notifying remote and not immediate indorser, 676. Successive notices, 677, 679. Means of conveying. Mail, 668, 669, 671, 672, 677, 689. In person or by messenger, 688, 688, note, 692, 712. Place, Residence or place of business known. Place of business or residence, 686. Place of sojourn, 686. Elsewhere, 688, note. Residence or place of business unknown, Address given in instrument, 672. Address ascertained after diligent inquiry, 682. Effect of. When given by holder or Indorser to remote indorser as to inter- mediate Indorsers, and parties subsequent to party giving no- tice, 673, 678. Delay, when excused. Illegible signature, 672. Ignorance of address, 673, note. War, 673, note. •Death of drawer "or indorser, 713, note. Unnecessary, when, Death of. Maker or acceptor, 711. Drawer or indorser, 713, note. Drawer no reason to expect or require payment, 702, 703, note. Funds placed in hands of indorser to pay- instrument, 698. Insolvency of maker or acceptor, 696, 698, 709. Indorser no reason to expect payment, 703, note, Knowledge of dishonor, 692, 694. Miscarriage of mail, 677. Waiver, 592, 696, 698, 710, 714. Guai'antor, 700. NOTING, Of protest, 668. OFFICER, Instrument payable to, see Form of Negotiable Instrument, parties, payee. OPTION, To declare instrument due upon default, 427. To pay in money or commodities, effect on negotiability of instrument, 121. 842 INDBX [Tbe figures refer to pages] ORAL ACCEPTANCE, See Acceptance, form. ORAL NOTICE, Of dishonor, 694. ORDER, In a bill of exchange, see Form of Negotiable Instrument, order In bUl. A word of negotiability, see Form of Negotiable Instrument, must be pay- able to order or bearer. OVERDUE INSTRUMENTS, Instruments issued or negotiated when overdue, when payable, 616. Purchaser of, position of, see Holder in Due Course. PAROL ACCEPTANCE, See Acceptance, form. PAROL EVIDENCE RULE, See Integration, rule of. PAROL NOTICE,- Of dishonor, 694. PARTIES, See Form of Negotiable Instrument, parties. PARTNERSHIP, Acceptance by, 196, 198, note. Indorsement by, 303. Signature of, to negotiable instrument, 19S, note. PAYEE, See Fornj of Negotiable Instrument, parties. PAYMENT, As a discharge, see Discharge. Under mistake, see Mistake, payment under. PENALTY, Provision for attorney's fee, or additional interest after maturity, 85. PENCIL, Sig-nature by, 36. PERSONAL REPRESENTATIVE, Presentment and notice to or by, 711. Transfer by, 300. PLACE, Of presentment, see Presentment for Payment. At which to give notice of Dishonor, see Notice of Dishonor. PLEDGEE, May be a holder for value, see Holder in Due Course, value. Amount of irecovery by, see Holder in Due Course, value. POSTDATED INSTRUMENT, See Date. PRE-EXISTING DEBT, As a consideration, see Consideration. As value, see Holder in Due Course, value. PRESENTMENT FOR ACCEPTANCE, Necessity of, bills payable. At stated future time, 597, 598. On demand, 604, 006, Oil. After demand, 504. At sight, 502, note, 603, 611. After sight, 502 (1st case), 600. Within what time, GOO. Mode of, see Presentment for Payment. INDEX 843 [The figures refer to pages] PRESENTMENT FOB ACCEPTANCE— Continued, Effect of nonacceptance, Immediate dishonor, 596, 597. Immediate recourse against drawer and indorser, 596 (1st case). Effect of qualified acceptance, see Acceptance. Of checks, see Checks, certification. PRESENTMENT FOR PAYMENT, Necessity of, 617, 702. When indorser a large stockholder, 705, Mode of. By whom. Notary, when necessary, 665, 667, note. Personal representative of holder when holder dead, 711. To whom. Personal representative, when maker dead, 711. When maker or acceptor absent from place of presentment, 651, 654, 711. Day, instrument payable, At siglit, 611. On demand. Notes, 637. Bills, To charge drawer, 622, 631, 624, note. To charge indorser, 625, 634. Checks, To charge drawer when bank fails, 620, 622, 624, note, 627, 630, 631. To charge indorser, 625, 634. Instrument indorsed after maturity, 616. Hour, instrument payable at. Place of business, 643. Residence, 643. Bank, 644. Clearing house, 637 (1st case). Manner, 646. Telephoning, 658. Through clearing house, 660. Place, When no place specified in instrument. Residence or place of business known to holder, At residence of maker or acceptor, whether within or without the state, 649, 653, 663. Where maker or acceptor has removed to another state. 651 (1st case). On street, personally, 654. Residence or ijlace of business unknown to holder. At last known place of business or residence, 651, When payable at city or village, 647, 649, note. When payable at particular place, 649, note. Delay in making, when excused. War, 613. Sickness, 615, note. Delay in mails, 615, note. Unnecessary, when, After due diligence cannot be made, 651. Waived, 592, 698, 710, 714. To charge drawer when he has no reason to expect or require pay- ment, 709, note. To charge indorser when he has no reason to expect payment, 709, note. Maker or acceptor dead, and no personal representative, 711. 844 INDEX tThe figures refer to pages) PRiBSUMPTION, Of consideration, 296, 298. None, nonnegotiable note, 29 (1st case). None, note from father to adult son for money, 238. That holder is holder in due course, see Holder in Due Course. PRINCIPAL AND AGEINT, See Agent. PRINTING, Signatures printed, 37, note. PROCURATION, Signature by, see Agent. PROMISE, In a promissory note, see Form of Negotiable Instrument, promise in note. PROMISSORY NOTES, See Form of Negotiable Instrument. PROTEST, When necessary, 665. Mode of, 665, 667, note. Noting of, 668. PURCHASER FOR VALUE, See Holder in Due Course. QUALIFIED ACCEPTANCE, See Acceptance, kinds. QUALIFIED INDORSEMENT, See Indorsement Without 'Recourse. REAL PARTY IN INTEREST, Holder for collection of Instrument Is, 358. Transferee of unindorsed instrument payable to order is, 372, note. REASONABLE TIME, Of day to make presentment, see Presentment for Payment, hour. Within which to present instrument payable. On demand, see Presentment for Payment, day, hour. After sight, 600. Within which to give notice of dishonor, see Notice of Dishonor. Demand instruments overdue after, 424, 426. RENUNCIATION, Discharge by, 752, 754. RELEASE, See Renunciation. RESIDENCE, Change of, as an excuse for not making presentment, 651 (1st case). Hour of presentment, when made at, 643. When a proper place for presentment, see Presentment for Payment, place. When a proper place to give notice of dishonor, see Notice of Dishonor, place. RESTRICTIVE INDORSEMENT, See Transfer, by indorsement, kinds of. RETRANSFBR, Indorsement not necessary upon a, 333. To maker or acceptor, see Discharge, surrender. Before date of demand instrument, 730 (1st case). Before maturity, not a discharge, 730 (2d case). After maturity, discharge, 731 (ist case). To indorser or drawer, Not a discharge unless he is accommodation party, 758, 762. But he may further negotiate instrument, 759. Unless instrument payable to third person's order, 759. INDEX 845 [The figures refer to pages] SETMDFF, Wlien available, 364, 467, 469, SIGHT, Instruments payable at, Necessity of presentment for acceptance, 502, note, 603, 611. Time within which must be presented for payment, 502, note. See Presentment for Payment, day. SIGNATURE, Ambiguous, see Ambiguous Signatures. With what, instrument may be made. 36, 37, note. SPECIAL INDORSEMENT, See Transfer, by indorsement, kinds. STATUTES, 3 and 4 Anne, c. 9, § 1, 17. Statute of frauds, see Frauds, Statute of. ■ Negotiable instruments law, 801. SUCCESSIVE NOTICES, Of dishonor, 677, 679. SURRENDEiR, As a discharge of instrument, see Discharge, surrender. TENDER, When instrument payable at particular place, readiness and willingness to pay at that place is equivalent to tender, 506. TIME, Of presentment for acceptance, see Presentment for Acceptance. Of presentment for payment, see Presentment for Payment, time, Of giving notice of dishonor, see Notice of Dishonor, time. Of drawing certificate of protest, 667. TRANSFER, By whom. Holder, 300, 302. Legal representative of holder, 300. Joint payees, 305. Partners, 303. . By indorsement. Form of indorsement, Should be an order. Effect of "I hereby assign," 107, 311, 315, 332. ■ Effect of "Payment Guaranteed," 307. Effect of "I transfer my right title and interest," 311. JIust be of whole sum payable, 323. Must be in writing on instrument. On "allonge" or separate slip of paper, 321. On face of Instrument, 315, 319. In what name, 302. Necessity of delivery to complete, 256, 324. Need not contain words of negotiability, 336. Kinds of indorsement, Blank, Necessity of completion, 325 (1st case). When must be completed, 325 (2d case). Effect of, before completion, 4 (1st case), 325. When followed by special indorsement, 332. Special, Special indorsee must indorse to transfer, 332. But not to retransfer, 333. When special indorsement follows blank indorsement, 332. Special indorsement of instrument payable to bearer, 335. 846 INDEX [The figures refer to pages] TRANSFER— Continued, Restrictive, Absence of words of negotiability does not make Indorsement restrictive, 336. Constitutes indorsee trustee. For the indorser, 338, 344, 347, 350, note. For third person, 341. Renunciation by indorser, 344. For collection, 338, 350, note. Followed by blank or special indorsement, 338. Rights of indorsee against indorser, 326, 330, 341. Qualified, 352. Conditional, 354. Indorsement without recourse, see Indorsement without Recourse. By delivery (without indorsement), Of instruments payable to bearer, What is delivery, 1, 3, 256, 355. 357, 358. Transferee for collection merely is, Bearer, 355. Real party in interest, 358. Where bearer secures possession. By trespass, 358. By consent induced by fraud, 471. From insane person, 472. Of instruments payable to order. Does not transfer obligation, 361 (1st case). But transfers title to paper, 364, note. And an irrevocable power of attorney to sue. In name of transferor, 361 (2d case), 372. In his own name under the codes, 372, note. Transferee must prove consideration, 373. Transferee takes subject to. What equities, 368, 873, 374, 376. What set-ofCs, 364. Transferee entitled to indorsement, 371, 374. Effect of securing indorsement after notice or after maturity, 364, 36?;. TRANSFEREE, Without indorsement of instrument payable to order, position of, see Transfer, by delivery. TRANSFEROR BY DELIVERY, Warranties of, as to, Solvency of parties, 716. Defenses, Capacity of parties, 719. Forgery, 719. Usury, 718, 725, note. TRUST, Created by restrictive indorsement, see Transfer by Indorsement, kinds, see Equities. TRUSTEE, Effect of "trustee" added to name of payee, or indorsee, 460, 461. TRUSTEE PROCESS, See Garnishment. USURY, Attorney's fee, agreement to pay, 85. As a defense, 411, 413, note, 475, 496. VALUE, See Holder in Due Course, value. INDEX S47 tTlie figures refer to pages] WAIVERv Of presentment, 698, 710, 714. Of notice of dishonor, 696, 698, 710, 714. WANT OF CONSIDERATION, See Consideration. WAR, As an excuse for delay in making presentment, 613. As an excuse for delay in giving notice of dishonor, 673, not^ WARRANTIES, Of indorser, 718, 726. Of indorser without recourse, 719, 727. Of transferor by delivery, see Transferor by Delivery, WITHOUT RECOURSE, See Indorsement without Recourse. WRITING, What is sufficient, 36, 37, note. vssT puBUSBura oo., PBiNTsaa, st. paxti^ khol