nil (Hxivmii Slam Btl^nnl Slihtara KF 957.BM igi""""™"" '■"'™1' ^'l»Sai?.,te™!!>.?nts .aw annotated 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/cu31924018854012 The Negotiable Instruments Law Annotated WITH References to the English Bills of Exchange Act and with the Cases under the Negotiable Instruments Law and the Bills of Exchange Act and Comments thereon BY JOSEPH DODDRIDGE BRANNAN Bussey Professor ot Law in Harvard University Together with Comments and Criticisms on the Negotiable Instruments Law (Reprinted from the Harvard Law Review, the Yale Law Journal and the American Law Reeister) JAMES BARR AMES (Dean of the Harvard Law School), JUDGE LYMAN D. BREWSTER (Formerly President of the State Boards of Commissioners for Promoting Uniformity of Legis- lation), and CHARLES L. McKEEHAN, Esq. (Formerly Lecturer on the Law of Bills and Notes in the University of Pennsylvania) SECOND EDITION REVISED— RE-ARRANGED— ENLARGED CINCINNATI THE W. H. ANDERSON COMPANY 1911 Copyright, 190S, Bt thb Trustees or the Habtabd Law Review. Copyright, 1908, Br THE Habtabd Law Review AssociAnoir. Copyright, 1911, Bt J. D. Bbannan. PREFACE TO FIRST EDITION The Negotiable Instruments Law is based upon and largely copied from the English Bills of Exchange Act, a codification of the law of England as to bills of exchange, promissory notes and checks, which was drawn by Judge Chalmers and enacted by Par- liament in 1882/ At a meeting of the National Conference of State Boards of Commissioners for Promoting Uniformity of Legislation in the United States, held in August, 1895, a committee was appointed, who caused a draft of a bill codifying the law of negotiable instru- ments to be prepared and submitted to the Conference at its annual meeting in August, 1896. This draft, entitled "The Negotiable Instruments Law," was discussed by the Conference and was agreed upon for recommendation to the Legislatures of the States.* The law has been adopted in the District of Columbia and in thirty- four States and Territories,^ in a few cases with some modifica- tions, but generally in the identical form recommended. 1 Chalmers, Bills of Exchange, Introduction to Third Edition. See also infra, page 99 ( page 220 in this edition ) . 2 See a more extended history of the Law, infra, page 100 (page 221 in this edition ) . 3 Alabama. — Laws of 1907, page 660. In effect January 1, 1908. Arizona. — R. S. 1901, Title XLIX. In effect September 1, 1901. Colorado. — Laws of 1897, ch. 64. Approved April 20, 1897. Connecticut. — Laws of 1897, ch. 74. Approved April 5, 1897. District of Columbia. — Laws of 1899 (U. S. Stats.) ch. 47. In effect April 3, 1899. Florida. — Laws of 1897, eh. 4524. Approved June 1, 1897. Hawaii. — Laws of 1907, Act 89. In effect April 20, 1907. Idaho. — Laws of 1903, page 380. In effect March 10, 1903. Illinois. — Laws of 1907, page 403. Approved June 5, 1907.* Iowa. — Laws of 1902, ch. 130. Approved April 12, 1902. Kansas. — Laws of 1905, ch. 310. In effect June 8, 1905. ' Kentucky. — Acts 1904, ch. 102. Approved March 24, 1904. I Louisiana. — Laws of 1904, Act 64. Approved June 29, 1904. •The amendments suggested by Professor Ames, in the following articles, to flections 9, 29, C4, 37, 40, 49, 64. 66, 68, 70, 119, 120, 137, and 186 of the Law, as recommended by the Commissioners, were adopted in whole or in paxt ia the Illinois Act. iii IV PREFACE. The Negotiable Instruments Law, taken as the standard and herein gfiven, is in the form recommended by the National Con- ference of State Boards of Commissioners. The sectional num- bering of the Law, as adopted in several of the States, differs from that adopted in the Law as recommended by the Commissioners, but, as the headings of the titles and articles are the same, except in two or three States, which omit the headings altogether, there will be little difficulty in finding in the Law, as herein printed, the section corresponding to any given section of the Law as adopted in any particular State. Speedy reference may, however, be facilitated in any State, in which' the sectional numbering has been changed, by writing opposite the sections as herein given the numbers of the sections of the Law as enacted in such State. In December, 1900, after the Law had been adopted in several States, Professor James Barr Ames, Dean of the Harvard Law School, published in the Harvard Law Review an article commending some features of the Law and criticising others. An answer to these criticisms, written by Judge Lyman D. Brewster, President of the National Conference of State Boards of Commissioners, was soon after published in the Yale Law Journal. This was followed by other articles by Professor Ames in defense of his position. Finally Maryland. — Laws of 1898, ch. 119. Approved March 29, 1898. Massachnsetts. — ^Laws of 1898, ch. 533. In effect January 1, 1899. Massachnsetts. — ^Laws of 1899, ch. 130. In effect March 6, 1899. Micbigan. — Public Acts 1905, page 389. Approved June 16, 1905. Missouri. — ^Laws of 1905, page 243. Approved April 10, 1905. Montana. — Laws of 1903, ch. 121. In effect March 7, 1903. Nebraska. — ^Lawa of 1905, ch. 83. In effect August 1, 1905. Neir Jersey. — Laws of 1902, ch. 184. Approved April 4, 1902. Ifew Mexico. — ^Laws of 1907, ch. 83. Approved March 21, 1907. Wew York. — Laws of 1897, ch. 612. Became a law May 19, 1897. New York. — Laws of 1898, ch. 336. Became a law April 20, 1898. Nortk Carolina. — ^Laws of 1899, ch. 733. In effect March 8, 1899. North Dakota. — Laws of 1899, ch. 113. Approved March 7, 1899, Ohio. — ^Lawa of 1902, page 162. In effect January 1, 1903. Oregon. — ^Laws of 1899, page 18. Approved February 16, 1899. Pennsylvania. — ^Laws of 1901, page 194. In effect September 2, 1901. Rhode Island.— Laws of 1899, ch. 674. In effect July 1, 1899. Tennessee. — ^Laws of 1899, ch. 94. In effect May 16, 1899. Utah.— Laws of 1899, ch. 83. In effect July 1, 1899. Virginia.— Laws of 1897-8, ch. 866. Approved March 3, 1898. Washington. — ^Laws of 1899, ch. 149. In effect March 22, 1899. West Virginia.— Acts of 1907, ch. 81. In effect January 1, 1908, ■Wisconsin.— Laws of 1899, ch. 356. In effect May 15, 1899. Wyoming. — Laws of 1905, ch. 43. In effect February 15, 1905. PREFACE. V Mr. Charles L. McKeehan, Lecturer on Bills and Notes in the Law Department of the University of Pennsylvania, published in the American Law Register (now the U. of P. Law Review) a "Review of the Ames-Brewster Controversy." In 1902 a com- pilation consisting of the Negotiable Instruments Law and of the articles by Professor Ames and Judge Brewster was published by the Harvard Law Review Publishing Association for use as an aid to teacher and pupil in the course on Bills and Notes in the Harvard Law School. This compilation has not only been found useful in that course, but has proved of service to the legal pro- fession and to law students generally. Mr. McKeehan's "Review of the Ames-Brewster Controversy," which appeared too late to be included in the former compilation, is so interesting and instruc- tive that it seems highly .desirable that it should be made more conveniently accessible by including it within the same covers as the articles reviewed. It seemed also that it would be advisable to set opposite each other in parallel columns the corresponding provisions of the Bills of Exchange Act and of the Negotiable Instruments Law. But this has been found impracticable because of the difference in the structure of the two statutes, a difference which must be borne in mind in comparing the two statutes and in searching them for equivalent provisions. Part I of the Bills of Exchange Act is devoted to definitions of terms used in the Act. Part II deals with bills of exchange and enacts rules as to Form and Interpretation, Capacity and Authority of Parties, Consideration, Negotiation, General Duties of the Holder, Liabilities of Parties, Discharges, etc. Part III, after pro- viding that in general the provisions applicable to bills of exchange payable on demand shall apply to a check, enacts certain rules specially applicable to checks. Part IV makes certain special pro- visions as to promissory notes, and then provides that, subject to certain exceptions, the provisions of the Act relating to bills of exchange shall, with the necessary modifications, apply to prom- issory notes. Part V contains certain supplementary provisions, some of which are not applicable to this country. Title I of the -Negotiable Instruments Law, while dealing with the same subjects as Part II of the Bills of Exchange Act, groups bills of exchange and promissory notes imder the designation of "instruments," and states the n.iles applicable to both kinds of negotiable instruments. Title II provides rules relating only to bills of exchange. Title III gives a definition of promissory notes and adds a few provisions peculiar to checks. Title IV defines a VI PREFACE. number of words used in the Law and makes also a few general provisions. It will thus be seen that many of the provisions whicn are common to both statutes are enacted in the Negotiable Instruments Law as to both bills and notes, under the general description of instru- ments, while, in the Bills of Exchange Act, they are specially enacted as of bills of exchange and made applicable to promissory notes only by the general provision of Part IV of that Act. But while it has not seemed feasible to illustrate the differences between the two statutes by the parallel column method, the plan has been adopted of giving in the notes to the Negotiable Instruments Law those sections of the Bills of Exchange Act which differ more or less from the corresponding provisions of the Negotiable Instru- ments Law, and of noting the fact wherever any particular pro- vision of the Negotiable Instruments Law is not found in the Bills of Exchange Act. The absence of a note to any provision of the Negotiable Instruments Law indicates that the Bills of Exchange Act contains substantially the same provision, although the lan- guage may sometimes differ. An Appendix sets forth such provisions of the Bills of Exchange Act as have not been adopted by the Negotiable Instruments Law and have not already been mentioned or quoted in the notes to the Negotiable Instruments Law. Tables of the corresponding sections of the two statutes are also given in an Appendix. The fact that a provision is to be found in the one statute, but not in the other, does not necessarily mean that the principle set forth in such provision is not the law in the other country, for both statutes contain provisions to cover such omissions, the Bills of Exchange Act providing in section 97 (2) that "The rules of common law, including the law merchant, save so far as they are inconsistent with the express provisions of this Act, shall continue to apply to bills of exchange, promissory notes, and checks," and the Nego- tiable Instruments Law providing in section 196 that "In any cases not provided for in this act the rules of the law merchant shall govern." It is not within the scope of this work to annotate those sections of the Law under which no cases have been decided. This has been done in other books. But all the cases decided under the Bills of Exchange Act and under the Negotiable Instruments Law and reported to April i, 1908, have been examined and, with a few exceptions, deemed unimportant, have been given in Appendices with cross-references and comments. PREFACE. Vll In addition to the articles in this compilation the student will find the Negotiable Instruments Law discussed in articles by Hon. Amasa M. Eaton, now President of the National Conference of State Boards of Commissioners, 2 Michigan Law Rev. 260; by John Lawrence Farrell, Esq., 3 Brief of Phi Delta Phi 131, 5 lb. I ; by Judge Julian W. Mack, I Illinois Law Rev. 592 ; by Pro- fessor Louis M. Greely, 2 Illinois Law Rev. 145. See also a series of articles in 16 Banking Law Journal, beginning at page 315. On behalf of The Harvard Law Review and of himself the Editor gratefully acknowledges the courtesy of the Yale Law Journal, the American Lam Register, and of Judge Brewster and Mr. McKeehan in granting permission for the republication of their articles. And the Editor also acknowledges his indebtedness to the Hon. Amasa M. Eaton for copies of his lists of cases decided under the Negotiable Instruments Law and for other valuable information. Although great care has been taken in the compari- son of the English and American statutes and in other respects, it is too much to hope that the result is without fault. The Editor will, therefore, consider it a favor to have his attention called to any errors which may be discovered in any part of this work. J. D. Brannan. Cambridge, Mass., July, 1908. PREFACE TO SECOND EDITION. In this edition the book has been rearranged. The articles on the Negotiable Instruments Law by Professor Ames, Judge Brew- ster and Mr. McKeehan have been preserved in full for the benefit of the student and the practicing lawyer, but a brief summary of the comments and criticisms in the articles has been placed after each of the sections therein discussed^ The English and American cases which in the first edition were given in Appendices III and IV have been brought under the sections to which they relate, and all the cases decided under the Bills of Exchange Act and the Negotiable Instruments Law since the preparation of the first edition have been added. Some of these recent cases are cited generally, but of the most of them brief abstracts are given with frequent comments by the editor. A new feature consists in a statement after each section of the changes, if any, made in the Law by the various States which have adopted it. A table showing the corresponding sections of the Law as found in the statutes of the different States has been added. Cumulative references to the regular reports, the National Reporter System, the American State Reports and the Lawyers Reports Annotated are made as to all the cases cited or abstracted. Appendix I containing those provisions of the Bills of Exchange Act which were not adopted by the Negotiable Instruments Law is retamed, and abstracts of the cases decided under such provisions have been added. Appendix II containing comparative tables of tne sections of the Bills of Exchange Act and the Negotiable Instru- ments Law IS also retained. it is hoped that the changes made in this edition will make the book more useful to the Bench and the Bar without impairing its value to the student. J. D. Brannan. November, 1910. CONTENTS. PAGE. Table of Cases xi List of States and Tereitobies Which Have Adopted the Negotiable Instruments Law xxi Table of Corresponding Sections of the Negotiable Instru- ments Law in the Various States and Territories. . xxii The Negotiable Instruments Law Annotated with Ref- erences to the English Bills op Exchange Act and WITH THE Cases Under Both Acts .1-161 TITLE I. negotuble instruments in general, article. page. I. Form and Interpretation 1 II. Consideration 30 III. Negotiation 39 IV. Rights op the Holder 52 V. Liabilities op Parties 72 VI. Presentment for Payment 87 VII. Notice of Dishonor 101 VIII. Discharge of Negotiable Instruments 116 TITLE II. BILLS OF EXCHANGE. I. Form and Interpretation 130 II. Acceptance 132 III. Presentment for Acceptance 138 IV. Protest 141 V. Acceptance for Honor 144 VI. Payment for Honor 147 Vll. Bills in a Set 148 X CONTENTS* TITLE III. ARTICLE. PAGE. I. Promissoet Notes and Checks 150 TITLE IV. I. General Provisions, Definitions, etc 156 The Negotiable Instruments Law. James Barr Ames 162 A Defense op the Negotiable Instruments Law. Lyman D. Brewster 179 The Negotiable Instruments Law — ^A Word More. James Barr Ames 194 The Negotiable Instruments Law — A Rejoinder to Dean Ames. Lyman D. Brewster 202 Letter op Arthur Cohen, Q. C 213 Supplementary Note. James Barr Ames 216 Reply to Supplementary Note. Lyman D. Brewster 217 The Negotiable Instruments Law — ^A Review op the Ames- Brewster Controversy. Charles L. McKeehan 220 The Negotiable Instruments Law — ^Necessary Amend- ments. James Barr Ames 291 Appendix I. Additional Sections op the Bills op Ex- change Act 298 Appendix II. Comparative Tables of Sections of the Bills op Exchange Act and the Negotiable Instruments Law 313 Index to the Negotiable Instruments Law 319 Index to the Articles on the Negotiable Instruments Law 329 TABLE OF CASES. [Tbe refercDces are to the pages.] Abmeyer v. First Nat. Bank, 69. Abramowitz v. Abramowitz, 85. Adle V. Metoyer, 176. Adler v. Levinson, 114. Aebi V. Bank of Evansville, 95, 144, 153. Akrokerri Mines v. Economic Bank, 309. Albany Co. Bank v. People's Ice Co., 57, 59, 66. Albany Trust Co. v. Frothingham, 111. Albert v. Hoffman, 17, 33. Alcock V. Smith, 62, 299, 305. Aldine Co. v. Warner, 178. Aldrich v. Peckham, 63. Alexander ■;;. Hazelrigg, 60, 150. V. Swackhamer, 247. AUentown Nat. Bank v. Clay Co., 32. Allison V. Hollembeak, 3. American Bank v. Sprague, 165, 224. American Exchange Nat. Bank v. American Hotel Victoria Co., 102, 105, 106. American Nat. Bank v. Fountain, 70. American Seeding Co. v. Slocum, 68. Amsinck v. Rogers, 130, 132, 142, 143, 151. Ancher v. Bank of England, 235. Andrews v. Robertson, 68, 218. Arnd v. Aylesworth, 62, 70. V. Heckert, 10, 69. V. Sjoblom, 61, 67. Arons v. Ziegfeld, 53. Ashpitel V. Bryan, 233. Aukland v. Arnold, 61, 67. Bacigalupo v. Parrilli, 97, 102. Baldwin v. Daly, 123. B. & 0. Ry. Co. V. First Nat. Bank, 1, 131, 133, 151, 156. Bamford v. Boynton, 86. Bank v. Hay, 134. Bank of America v. Waydell, 34. Bank of England v. Vagliano, 14, 15, 30, 190, 305. Bank of Houston v. Day, 10, 17, 24, 158. Bank of Laddonia v. Bright-Coy Commission Co., 133. Bank of Monticello v. Dooly, 31. Bank of Montpelier v. Lumber Co., 75, 113. Bank of Morehcad v. Hernig, 59, 60, 69. Bank of Ozark v. Hanks, 69. Bank of Sampson v. Hatcher, 7, 62. Bardsley v. Washington Mill Co., 89. Barker v. Barth, 51. Barnsdall v. Waltemeyer, 133. Bartlett v. Tucker, 168, 228, 242, 292. Baskiu v. Wilson, 269. Batterman v. Butcher, 35. Baumeister v. Kuntz, 5, 22, 78, 86, 88, 95, 97, 102, 150. Bavins v. London & S. W. Bank, 131, 152. Beaumont, Re, 305. Beck V. Mailer, 69. Becker v. Hart, €6. V. Horowitz, 159. Beem v. Farrell, 29. Benedict v. Kress, 2, 31, 54, 66, 69. Berenson v. London & Lancashire Fire Ins. Co., 3. Bessenger v. Wenzel, 96. Bevan v. The Nat. Bank, 309. Bigelow Co u. Automatic Gas Co., 33. Birmingham Trust Co. v. Whitney, 125, 129. Biasell u. Fox, 27, 302, 309. Black V. Bank of Westminster, 31, 32, 35, 38, 65, 67. Blankenhagen v. Blundell, 163. Blethen v. Lovering, 172, 187, 266. Blum V. Whipple, 29. Boles V. Harding, 14. Boline v. Wilson, 52. Borough of Montvale v. People's Bank, 2, 22, 53, 63. Boston Steel & Iron Co. v. Steuer, 19, 32, 54. Boswell V. Citizens' Savings Bank, 156. Bothell V. Schweitzer, 127. Bothwell V. Corum, 62. Boyd V. Corbitt, 256. Boyse In re, 6. Bradley Engineering Co. v. Heyburn, 38, 117. Brewster v. Shrader, 1, 33, 113. Bringman v. Van Glahn, 31, British Linen Co. Bank v. Carruthers, 131. xu TABLE OF CASES. [The references are to the pages.] British Linen Co. v. Bainey, 131. Broadway Trust Co. v. Manheim, 60, 66. Brooks V. Sullivan, 34, 35. Brown, Be, 177, 287. V. Feldwert, 70. V. James, 35. V. Montgomery, 294, V. Penfield, 72. Bruck V. Lambeck, 39, 84. Bruen v. Marquand 176, 278. Bryan v. Harr, 67, 69, 125. Bryant, Powis & Bryant v. Quebec Bank, 27. Bryson v. Lucas, 242, 292. Bull V. Bank, 213. Burchfield v. Moore, 265. Burke v. Smith, 84. Buttrick Lumber Co v. Collins, 130. Buzzell V. Tobin, 22, 54. Byars v. Doores, 168, 204, 242, 292. Callendar Savings Bank v. Loos, 70. E. J. & B. F. Camp Lumber Co. v. State Savings Bank, 40. Campbell v. Day, 51. V. Fourth Nat. Bank, 34, 69. Canadian Bank v. Coumbe, 176. Capital & Counties Bank v. Gordon, 33, 302, 309. Caplan v. Moness, 39. Caras v. Thalmann, 149. Carrier v. Sears, 72. Case V. Beyer, 58. V. Bradburn, 173, 270. Casey v. Pilkington, 29. Cassel V. Eegierer, 114. Cedar Rapids Nat. Bank v. Myhre Bros., 69. Cellers v. Meachem, 117. Central Bank v. Davis, 173, 270. V. Lang, 229. Central Nat. Bank v. Nat. Met. Bank, 29 Chaliis V. McCrum, 172. Chamberlain v. Young, 12. Chapman v. Smethurst, 26. Chemical Nat. Bank v. Kellogg, 49. Chestertown Bank v. Walker, 6. Chicago Co. v. Merch. Bank, 165, 225 Choate v. Stevens, 165, 225. Choteau Trust & Banking Co. v. Smith, 66. Church V. Stevens, 10, 93. Citizens' Bank v. Bank of Waddy's EiGCGivcr 34. V. First Nat. Bank, 90, 153, 159. Citizens' Nat. Bank of Towanda v. Piolett, 227. Citizens' State Bank v. Cowles, 57. City Deposit Bank v. Green, 71. City Nat. Bank v. Jordan, 69. Clark V. Nat. Bank, 177, 287. Clarke, ea; parte, 265. V. Foster, 242. V. Johnson, 22. V. London & County Bank, 308. Cleary v. De Beck Co., 15, 52. Cleveland Co. v. Chittenden, 42, Cluseau v. Wagner, 81. Clutton V. Attenborough, 14, 15, 233. Cohen v. Wright, 214, 243. Colborn v Arbecam, 22, 30, 48, 69. Cole V. O'Brien, 292. Collis V. Emett, 228, 265. Collott V. Haigh, 176, 278. Colonial Bank of Australasia v. Marshall, 128. Colonial Nat. Bank v. Duerr, 126. Columbian Banking Co. u. Bowen, 1, 90, 92, 130, 151. Commercial Bank, Re, 302. Commercial Nat. Bank v. State Bank, 32. V. Zimmerman, 89, 90. Comstock V. Buckley, 38, 68, 118. Congress Brewing Co. v. Habenicht, 89, 92, 93, 97, 111. Consolidation Bank v. Kirkland, 57, 69. Cook V. Am. Tubing Co., 69. Cooper V. Meyer, 265. Copp V. McDougall, 172, 266. Corn V. Levy, 78. Costelo V. Crowell, 165, 224. Cowie V. Sterling, 163. Cox v. Cline, 70. Craig V. Palo Alto Stock Farm, 53, 158. Crawford Co. Bank v. Stegeman, 32. Cullinan v. Union Surety & Guar- anty Co., 155. Cunningham & Co., re, 27. Cundy v. Marriott, 173. Curtice v. London City & M. Bank, 305. Dale V. Donaldson, 242. Dando v. Boden, 302. Daniel v. Buttner, 27. V. Glidden, 27. Daskam i>. UUman, 173, 271. Dawson v. Isle, 22. Day V. Longhurst, 52. Deahy v. Choquet, 77, 102, 121, 158. Deering v. Thorn, 165, 225. Dehoust V. Lewis, 153, 154. Delius V. Cawthorn, 292. Demelman v. Brazier, 61, 100, 115. TABLE OF CASES. [The refereDces are to the pages.] xiU Devenny v. League Island %.. & B. Assoc. 227. Deyo V. Thompson, 31. Diamond Distilleries Co. v. Gott, 19, 125. Dickey v. Adler, 4. Dickinson v. Marsh, 135. Dickson v. Swansea, 171. Didato V. Coniglio, 11, 24. Dille V White, 10, 81. Dominion Bank v Anderson, 124. V. Scotland, 124. Dorsey v. Wellman, 63, 160. Downey v. O'Keefe, 77. Drayton v Dale, 265. Drinkall v. Movius State Bank, 60, 69. Dugane i>. Hvezda Pokroku No. 4, 131, 133 Dunbar v. Boston E. R. Co., 247. Dunbar Co. v. Martin, 26. Duncan v. Niles, 242, 292. Dunn V Meserve, 51. V. O'Keefe, 115. V. Whalen, 155. E. I. Dupont, &c.. Powder Co. v. Rooney, 111. Ebling Brewing Co. v. Reinheimer, 102, 111. Edelman v. Rams, 150. Edge 1?. Bumford, 171. Edmunds v. Mereh. Co., 216, 247. Edwards v. Chancellor, 33. V. Walters, 124. Elgin City Banking Co. v. Hall, 42, 45, 57 Blias V. Whitney, 55, 125. Ellery v. People's Bank, 156. Elliott V. Smitherman, 216, 247. V. Worcester Trust Co., 65 101, 154. Elmville, The, 113. Embiricos v. Anglo-Austrian Bank, 30, 305. Emporia Bank v. Shotwell, 216, 247. Engle V. Hyman, 69. English V Schlesinger, 39. English Bank of the River Platte, re, 302. Evans v. Freeman, 45. Ewald V. Faulhaber Co., 102. Ewan V. Brooks Waterfield Co., 79. Ewin V. Lancaster, 176. Faircloth-Byrd Mercantile Co. «. Adkinson, 133. Faneuil Hall Nat. Bank v. Meloon, 123. Farmers' Bank v. Bank of Ruther- ford, 39, 54, 83, 168 Farmers' Nat. Bank v. Venner, 88. Farnsworth v. Drake, 228. Farquhar Co. v. Higham, 77. Far Eockaway Bank v. Norton, 78. Fayette Nat. Bank v. Summers, 57. Federal Nat. Bank v. Cross Creek Co., 37. Feigenspan v. McDonnell, 62, 69, 107, 109. Fenwick, re, 112. Fielding v. Corry, 105. Fillebrown v. Hayward, 64. First Bank v. American Bank, 216, 247. First Nat. Bank v. Barnum, 127. V. Diehl, 121. V. Gridley, 19, 47, 84, 104, 119, 124, 125, 126. V. Lightner, 6. V. McCullough, 41, 48. First Nat. Bank of Durand v. Shaw, 61. First Nat. Bank of Omaha v. Whitmore, 136. First Nat. Bank of Pomeroy v. Buttery, 122, 150. First Nat. Bank of Shawano v. Miller, 5, 109. Fishburn v. Londershausen, 53. Fisher v. Roberts, 308. Florence Oil Co. v. First Nat. Bank, 88. Fonseca v. Hartman, 102, 111, 113. Forbes v. Espy, 216, 228, 247. Ford V. Brown, ■65. Forrest v. Safety Banking & Trust Co., 16. Foster v. Shattuek, 228. Frankland v. Johnson, 242. French, v. Barney, 170, 236. Freund v. Importers' Bank, 171, 259. Fritts V. Kirchdorfcr, 88, 102, 117. Fuller Buggy Co. v. Waldron, 110. Fullerton Lumber Co. v. Snouker, 67, 117. Fulton V. Gesterding, 131. V. Varney, 4, 7. Furber v. Dane, 153. Gaden v. Newfoundland Savings Bank, 152. Galbraith v. Shepard, 88, 96, 102, 103, 111. Gale V. Mayhew, 46. Gansevoort Bank v. Gilday, 34. 37. 66. Gazzam v. Armstrong, 285. George, re, 123. Gerli v. Nat. Mill Supply Co., 3T. XIV TABLE OF CASES. [The references are to the pages.] German-American Bank v. Cunning- ham, 4S, 54, eO, 66, 69. V. Milliman, 88, 89, 91, 92, 94, 97, las. -!). Mills, 90. Germania Nat. Bank v. Mariner, 24 26, 75, 77. Gibbs V. Guaraglia, 77, 78. Gibaon v. Hunter, 228. Giffert v. West, 173, 271. Gillespie, re, 160, 302. Gilley v. Harrell, 4, 124. Gilpin V. Savage, 91, 93, 95, 97. Ginn v. Dolan, 31. Glasscock v. Balls, 101, 118. Glenie v. Bruce Smith, 20, 79. Gloucester Bank v. Worcester, 176, 278. Goetting o. Day, 54, 59, 65. Goodwin, re, 176. Gordon v. Irvine, 294. V. Kerr, 89, 300, 310. V. Levine, 59, 90, 153, 159. V. London, &c.. Bank, 308. Goshen Nat. Bank v. Bingham, 259, 260. Graham v. Smith, 34. Gravis v. Am. Exch. Bank, 247. Gray v. Baron, 158. V. Boyle, 54, 62. Great Western Ky. v. London & County Bank, 308. Green v. Ostrander, 36. Greeser v. Sugarman, 22, 53, 66. Gregg V. George, 177, 287. GriflBn v. Erskine, 48. V. Kemp, 177, 287. V. Weatherby, 227. Groh's Sons v. Schneider, 54, 60, 62, •67. Guerrant v. Guerrant, 19. Guild V. Butler, 176. Haddock, Blanchard & Co. v. Had- dock, 1, 39, 78, 79, 80, 86. Hall V. Capital Bank, 176. V. Crandall, 168, 242, 243, 292. V. Merrick, 165, 224. Halsey v. Henry Jewett Co., 72. Hampton v. Miller, '89. Hannan's . Lake .View Central v. Armstrong, 308. Hannum v. Bichardson, 173, 271. Hardon v. Dixon, 11. Harris v. Aldous, 71. V. Fowler, 34. Harvey v. Martin, 283. Haskell v. Lambert, 165, 224. Hathaway v. County of Delaware, 54. Havana Central Ejiilroad Co. v. Knickerbocker Trust Co., 64. Hawkins v. Ward, 71. V. Windhorst, 31. V. Young, 69. Heard v. Dubuque Bank, 165, 225. Heavy v. Commercial Nat. Bank, 29. Hecht V. Shenners, 126. Heim v. Neubert, 30. Herdman v. Wheeler, 19, 20, 58. Hermann's Ex'r. v. Gregory, 19, 33. Herrick v. Whiting, 269. Hibbs V. Brown, 3. Hiekok v. Bunting, 31, 151. Hill V. Read, 176, 278. Hitchcock V. Edwards, 17, 56. Hodge V. Smith, 22, 57, 59, 61, 69, 70. V. Walhice, 56. Hoge V. First Bank, 216. Hoiffman v. American Exch. Bank, 29. V. Planters' Nat. Bank, 129. Hood V. Stuart, 50, 171, 291. Hopkins v. Mehaffy, 242, 292. V. Merrill, 75, 84, 88, 103. Hopper-Morgan Co., Re, 34, 37, 62. Hornby v. McLaren, 61. Hornstein v, Cifuno, 19. Horowitz V. Wollowitz, 60, 85. Houghton V. McAulifle, 72. Houie V. Bailey, 236. Houry v. Eppinger, 170, 236. HoussouUier v. Hartsinck, 227. Hove V. Stanhope State Bank, 156. Hover v. Magley, 1, 34, 35, 37. Howard v. Simpkins, 165, 225. Hoyland v. Nat. Bank of Middles- borough, 75. Hughes V. Nelson, 171, 259. Hunt V. Gray, 297. Hunter v. Allen, 55. V. Bacon, 55. V. Blodget, 228. Hutchins v. Langley, 63. Hyman v. Doyle, 88. Hynes v. Plastino, 60. Imperial Bank v. Bank of Hamilton, 128. . Iowa Nat. Bank v. Carter, 8, 34, 63, 69. Ireland v. Scharpenberg, 69. Ironclad Mfg. Co. v. Sackin, 93. Irving, N. B., v. Alley, 229. Irwin V. Deming, 40, 158. Izzo V. Ludington, 133. Jackson v. Hudson, 79. Jamieson v. Heim, 29, 30. Jefferson Bank v. Chapman-White Lyons Co., 63, 64, 66. TABLE OF CASES. Z.V [The references are to the pages.] Jeffrey v. Eosenfeld, 126, 129, 216, 218, 281. Jenkins v. Coomber, 78, 79. V. MacKenzie, 295. . Jennings v. Carlucci, 67. V. Law, 35. Jerman v. Edwards, 42, 43, 44, 49. Jeune v. Ward, 283. Jobes V. Wilson, 58, 71. Johnson v. Buffalo Bank, 48, 62. V. Mitchell, 47, 236. V. Smith, 242. Johnson County Savings Bank v. Mills, 71. V. Rapp, 62. V. Seoggin Drug Co., 51. V. Walker, 54, 60, 62, 66, 69. Johnston v. Hoover, 18, 125. Jones V. Miners' & Merchants' Bank, 71. V. Witter, 51. Jordan v. Reed, 95, 111, 115. Joveshof, V. Rockey, 31, 36, 71. Jurgens v. Wichmauu, 108, 109, 110. Karsch v. Pettier Co., 30, 53, 69. Kaufman v. State Sav. Bank, 47. Keegan v. Rock, 54, 60, 69, 70. Keel V.' Construction Co., 51. Keene v. Behan, 60. Keener v. Harrod, 242. Keith V. Burke, ■97. Kennedy v. Thomas, 97, 100. Kerby v. Ruegamer, 27. Kerr v. Anderson, 69. Ketcham v. Govin, 53, 63, 66. Key V. Usher, 22. Killan v. Schoeps, 226. Kimball v. Mellon, 165, 225. Kimpton v. Studebaker Bros. Co., 2, 9. Kinney v. Kruse, 72. Kipp V. Smith, 63, 64. Kirkwood v. Carroll, 151. V. Smith, 151. Klar V. Kostiuk, 60, 66, 85. Kleinwort u. Comptoir Nat. d'Es- oompte de Paris, 308. Knight V. Lanfear, 173, 271. Kohn V. Consolidated Co., 77, 78, 79. Korkemas v. Macksoud, 119. Kuflick V. Glasser, 102. Lacave v. Credit Lyonnais, 308. Lacy V. Lofton, 176. Lambert, Ex parte, 147, 148, 176, 177, 205, 286. Land Title & Trust Co. v. N. W.. Bank, 216, 217, 247, 248. Lander v. Castro, 292. Landes v. Marcus and Davids, 26. Lanning v. Trust Co. of America, 64. Lassas v. MaCarty, 65, 66. Lawless/!;. State, 51, 129. Lawrence v. Wiloocks, 302. Lawson v. First Nat. Bank, 60. Leach v. Hewitt, 173. Leask v. Dew, 123. Leeds & County Bank v. Walker, 128, 310. Leonard v. Draper, 77, 83. Lewis V. Clay, 58. Lewisohn v. Kent, 195, 232. Lindsay v. Dutton, 56. Littauer v. Goldman, 81, 173, 293. Lloyd's Bank v. Cooke, 19, 20, 58. Lobdell V. Baker, 271. Lombard v. Byrne, 31. London, &c.. Bank, v. Clancarty, 301. London & County Banking Co. v. Lon- don & River Plate Bank, 58. London & River Plate Bank ■;;. Carr, 142. I«nier v. State Sav. Bank, 29, 156. Louisville Co. v. International Trust Co., 40, 158. Louis de Jonge & Co. v. Woodport Hotel Co., 70. Lowell V. Bickford, 34, 37. Lucker v. Iba, 69. Ludwig V. Iglehart, 176, 278. Lynch v. First Nat. Bank, 260. Lynchburg Milling Co. v. Nat. Ex- change Bank, 31. Lyuds V. Van Valkenburgh, 36. McAfee v. Mercer Nat. Bank, 61. MeCord, Re, 37, 86. McCormick v. Shea, 120, 124. McCornick v. Swem, 6. McDonald v. Luckeubach, 76, 95, 114, 115. McDonough v. Cook & Crawford, 79. McDowell V. Cook, 285. McGehee v. Cooke, 56. McGregor v. Rhodes, 265. Mackintosh v. Gibbs, 5, 42, 49, 75, 85. McLean v. Bryer, 59, 75, 76, 77, 159. V. Clydesdale Banking Co., 152. McLeod V. Hunter, 10, 11, 32. McMann v. Walker, 55, 72. McMoran v. Lange, 78. McNamara v. Jose, 54, 65, 66. McNight V. Parsons, 57, 60, 63, 65, 69. McPherson v. Wright, 143. Madden v. Graston, 19, 22. Maloney v. Cfark;" 216. Manufacturers' Commercial Qo. v. Blitz, 51. XVI TABLE OF CASES. [The references are to the pages.] Manufacturing Co. v. Summers, .32, 54, 59, 70, 161, 152, 159. Marling v. FitzGerald, 33, 51, 68. V. Jones, 36, 118. Marseilles Co., Re, 304. Marshall v. Sonneman, 105, 106. Mass. Kat. Bank v. Snow, 16, 22, 54, 64, 126, 158. Mathews v. Williams & Co., 308. Matlock V. Scheureman, 33, 59, 63, 153. Matteson v. Mjoulton, 135, 166, 284. Matthews v. Bloxsome, 171, 262. Matthias v. Kirsch, 171, 259. Mayers v. McRimmon, 41, 51, 69, 158. Mechanics' & Farmers' Savings Bank V. Katterjohn, 75, 160. Meggett V. Baum, 171, 176, 259. Megowan v. Peterson, 27. Mehlinger v. Harriman, 55. Mercantile Bank v. Busby, 78, 79, 115. Merchants' Bank v. Brown, 107, 125. V. Metropolitan Bank, 216, 247. Merchants' Exch. Bank v. N. B. Savings Institution, 72. Meridian Bank v. First Bank, 216, 247. Merritt v. Jackson, 89, 96, 159. V. Todd, 175, 277. Mersick v. Alderman, 35, 37, 38, 55, 66, 67. Metropolitan Printing Co. v. Spring- er, 37. Metzger v. Franklin Bank, 216, 247. Meuer v. Phenix Nat. Bank, 51, 65. 74, 154, 155. Meyer v. Deoroix, 130, 131, 137. V. Indiana Bank, 216, 247. V. Richards, 173, 271, 203. Middlesborough Nat. Bank v. Cole, 37, 80. Milius V. Kauffmann, 34, 54, 57. Miller v. Reynolds, 168, 292. Milton Nat. Bank v. Beaver, 9. Mindlin v. Applebaum, 33. Miners' Bank v. Rogers, 121. Minet v. Gibson, 13, 228, 229. Mitchell V. Baldwin, 31, 53, 60, 71. V. Fuller, 170, 236. V. Reed's Ex'r., 125. Moak V. Stevens, 22, 31. Mohlman Co. v. McKane, 32, 106, 109, 111., , . Montrose Savings Bank v. Claussen, 57. Moore v. Cross, 79. V. Hall, 256. Morgan «. Thompson, 86. Morris County Brick Co. v. Austin, 37, 38. Morrison v. Ornbaun, S. Moskowitz V. Deutsch, 126, 152. Mott V. Havana Bank, 166, 225. Murchison Nat. Bank v. Dunn Co., 32. Mutual Loan Assoc, v. Lesser, 125. Myers v. Friend, 236. Nash V. De Freville, 56, 119. Nathan v. Ogdens, 131, 152. National Bank v. Berrall, 156. V. Foley, 34, 64, 57, 70. V. Haskins, 236. V. Nolting, 217, 251. V. Silke, 33, 298, 306. V. Snyder Co., 38, 63. National Bank of Commerce v. Me- chanics' Am. Nat. Bank, 74. V. Pick, 40, 55, 66, 72. National Bank of Rolla v. First Nat. Bank of Salem, 74, 84, 154. Nat. Bank of Boyersford v. Davis, 225. National Citizens' Bank v. Toplitz, 37, 117. Nat. Co., Be, 292. National City Bank v. Third Nation- al Bank, 29. National Exchange Bank v. Lester, 127. V. Lubrano, 75. National Park Bank v. Koehler, 122. V. Saitta, 31, 36, 134, 141. National Savings Bank v. Cable, 3, 7. ■Nelson v. Groiidahl, 88, 91, 92. V. Nelson Bennett Co., 131, 133. New Haven Mfg. Co. v. New Haven Pulp Co., 49, 52, 158. N. Y. Life Ins. Co. i;. Martindale, 24, 125. New York Produce Exch. Bank v. Twelfth Ward Bank, 84. Neyens v. Worthington, 72. North & South Wales Bank v. Macbeth, 15. Northern State Bank v. Bellamy, 122, 159. Northfield Nat. Bank v. Arndt 33. Nottingham v. Ackiss, 125. Noyes v. Loring, 168, 242, 243, 292. Oakdale Mfg. Co v. Clarke., 49, 160. Oakley v. Boulton, 7. P'Bannon, J. W. Co., v. Curran, 96, 111. O'Connor v. Kleiman, 70. V. Slatter, 61. Ofenstein v. Bryan, 125. Oppenheim v. Simon Reigel Cigar Co., 28, 38. Oriental Bank v. Gallo, 29, TABLE OF CASES. xvii [Tbe refereoces are to the pages,} Ormsby «. Kendall, 242. Orr V. Amboy Co., 63. Owen, K. M., &. Co. v. Storms & Co., S3, 158. Packard o. Figliuolo, 69. V. Windholz, 37, 62, 66, 67, 69, 83, 126. Padgett V. Lewis, 36. Parks V. Ingram, 176, 278. Parsons v. TJtica Cement Co., 71, 72. Patterson v. Lippincott, 292. Paulson V. Boyd, 22, 58. Pavenstedt v. K. Y. Life Ins. Co., 116. Payne v. Zell, 1, 34, 35. Pease & Dwyer v. State Nat. Bank, 65, 154, 156. Peck 13. Easton, 77, 103. Peltier v. Babillon, 195, 232. Pelton V. Spider Lake Co., 32, 63, 69. Pentz V. Winterbottonj, 236. People's Nat. Bank v. Schepflin, 32. Perry v. Van Norden Trust Co., 118. Perry Co. v. Taylor Bros., 75, 77. Petrie v. Miller, 34, 35. Pettyjohn v. Nat. Exchange Bank, 29. Phillips V. Im Thum, 265. Phoenix Oo. v. Fuller, 79. Pickering v. Cording, 79. Pitt V. Little, 123, 125. Plets V. Johnson, 228, 229. Plover Sav. Bank v. Moodie, 90, 153. Poess V. Twelfth Ward Bank, 22, 63, 65, 154, 156. Polhemus v. Prudential Corporation, 123. Polizzotto V. People's Bank, 20. Price V. Neal, 74. Prouty V. Roberts, 72. Provident S. & E. Co. v. First Nat. Bank, 136. Pugh T. Sample, 75. Purcell V. AUemong, 177, 287. Quiggle V. Herman, 53, 61, 62, 66. Quimby v. Varnum, 52, 75, 76, 123. Baesser v. Nat. Exch. Bank, 156. Railroad Company v. National Bank, 34. Rand v. Dovey, 236. Redfern v. Rosenthal, 35, 56, 299. Reed V. Spear, 94, 95, 97, 103, 106. Regester's Sons Co. v. Reed, 69. Reid V. Rigby & Co., 27. Reyburn v. Queen City Savings Bank & Trust Co., 38. Rice V. Barrington, 63, 66. Richards v. Market Exchange Bank Co., 37, 117, 127, 159. Richie v. Bass, 242. Rinker v. Lauer, 4. Bobbins v. May, 165, 224. Robertson v. Coleman, 216, 247. Robinson c. Mann, 79. Rockfield v. First Nat. Bank, 1, 7«, 77. Rodgers v. Baker, 18. Roessle v. Lancaster, 76. Rogers v. Morton, 35, 40, 54. V. Ware, 228. Roseman v. Mahqney, 1, 34. Rosenthal v. Freedman, 66. V. Parsont, 33. Rouse V. Wooten, 76, 88, 103, 158. Rowe V. Bowman, 36, 53, 129. Royal Bank of Scotland, The, 228. Royal Bank v. Ooldschmidt, 31, 116. i;. Tottenham, 17, 33. Russell Electric Co. v. Bassett, 32. St. Louis & S. W. Ry. Co. v. James, 135. St. Paul's Episcopal Church v. Fields, 10. St. Regis Paper Co. v. Tonawanda Co., 155. Salen v. Bank, 29. Samuel v. Cheney, 247. Sanderson v. Collman, 265. Sargent v. Appleton, 176, 278. Savannah Bank iXaskins, 170. Scanlon v. Wallach, 102, 114. Scarbrough v. City Nat. Bank, 106. Scherer v. Everest, 32. Schlesin - v. Gilhooly, 60, 67. V. Kelly, 39, 60. V. Kurzrok, 40, 52, 74, 151, 154, 155. V. Lehmaier, 60, 67. V. Schultz, 8, 11, 90, 92. Scholfield V. Londesborough, 128. Schultheis v. Sellers, 70. Schultz V. Astley, 232. Sohwartzman v. Post, 118. Scotland County Nat. Bank v. Eohn, 25, 40. Scott V. Parker, 232. Seaboard Nat. Bank v. Bank of Amer* ica, 14. Seattle Shoe Co. v. Packard, 24, 133. Second Nat. Bank v. Smith, 105. Second Nat. Bank v. Werner, 32. Security Loan & Trust Co. v. Fields, 102, 111. Seeberger v. MeCormick, 292. Shaver v. Ehle, 269. Shaw V. Smith, 195, 232. SheflFer v. Fleischer, 22. Sheffield v. Ladue, 242, 292. Sheltan «. Hurd. 176, XVIU TABLE OF CASES. [The references are to the pages.] Shepard v. Abbott, 6. Sherman v. Ecker, 103. Sherman v. Goodwin, ISO. Shipley v. Carroll, 22. Shipman v. Bank, 211. Shutts V. Fingar, 175, 277. Siegel V. Dubinsky, 108. Siegmeister v. Lispenard Co., 54, 62, 66. Simon v. Mintz, 150. Simpson v. Hefter, 39. Sloan V. MoCarty, 7, 165, 194, 225, 226. Smith V. Bayer, 44. V. Bradley, 81. V. Clarke, 15, 16, 46, 47, 163, 170, 235, 236, 237, 239, 240, 292, 293. V. Mech. Bank, 217, 228, 251. V. Proaser, 20. V. Shipper's Oil Co., 92. V. State Bank, 39, 125. Snyder v. Corn Exchange Nat. Bank, 14, 128. Solomon v. Cohen, 108. SoltykofF, Re., 28, 299. South Bend Co. v. Paddock, 165, 225, 226. South Wales, &c., Co. ■». Underwood, 56. Stanley v. Davis, 19, 125. V. Penny, 52. State Bank v. Kahn, 86, 121. V. Smith, 176. V. Solomon, 109. V. Weiss, 135, 151. State V. 'Coming Savings Bank, 29, 80. V. Hinton, 42. V. Mitton, 7. Steele v. "M'Kinlay, 78, 79. Stevens v. Monongahela Bank, 176. V. Strang, 228. Stewart v. Smith, 177, 287. Stix V. Matthews, 178. Stouffer V. Curtis, 22. Strickland v. Henry, 39, 60. Studdy V. Beesty, 113. Sublette v. Brewington, 40. Susquehanna Bank v. Loomis, 173, 270. Sutherland v. Mead, 1, 34. Swan, Eo! parte, 176, 177, 205, 286. Swenson v. Stoltz, 25, 40, 41, 51. Swift, Re, 77, 88, 94, 96, 114. Symonds v. Riley, fit. Tamlyn v. Peterson, 69. Tanners' Nat. Bank v. Laos, 4. Tatam v. Haslar, 71. Tatlock V. Harris, 228. Taylor v. Shelton, 292. Terwilliger v. Murphy, 242. Thicknesse v. Bromilow, 265. Thilmany v. Iowa Co., 292. Third Bank v. Spring, 166, 182, 225. Third Nat. Bank v. Armstrong, 225, 226. V. Hastings,, 176. Thorp V. Mindeman, 3, 5, 8, 45. Thorpe v. White, 54, 76, 78, 126. Timbel v. Garfield Nat. Bank, 127. Times Square Automobile Co. v. Ruth- erford Nat. Bank, 155. Title Guarantee & Trust Co. v. Haven, 74. Tolman v. American Bank, 29, 216, 217, 246, 247, 249, 252. Toole V. Crafts, 75, 77, 96. Torbert v. Montague, 97, 111. Torpey v. Tebo, 4, 8. Towles V. Tanner, 125. Trader's Nat. Bank v. Jones, 104, 107. Troy & Cohoes Shirt Co., Re, 37, 38. 54, 63, 66, 69. Trust Co. of America v. Conklin, 127. V. Hamilton Bank, 14. Trust Oo. V. Floyd, 292. Trustees of American Bank v. Me- Comb, 1, 34, 55, 58, 125. Turnbull v. Bowyer, 172, 173, 266. Tuttle V. First Nat. Bank of Green- field, 26. Twelfth Ward Bank v. Brooks, 116, 123. UUery v. Brohm, 24. Unaka Nat. Bank v. Butler, 16, 65, 66, 151, 154, 156. Union Bank of Brooklyn v. Deshel, 109. Union Stockyards Nat. Bank v. Bolan, 3, 8, 151. U. S. V. Nat. Bank, 216, 247. .V. Spalding, 297. Usefof V. Herzenstein, 11, 125. Vagliano v. Bank of England, 203, 214, 229, 232, 233,. 234. Valley Savings Bank v. Mercer, 62. Van Brunt v. Vaughan, 178. Van Buskirk v. State Bank, 130, 133, 138, 151, 156. Vanderford v. Farmers' Bank, 117, 122. Vander Ploeg v. Van Zuuk, 1, 19, 54, 66, 69, 158. Vann v. Marbury, 51. Van Norden Trust Co. v. L. Rosen- berg, 35. Vera v. Lewis, 228. TABLE OF CASES. XIX [The references are to the pages,] Viets V. Silver, 22. Vinden v. Hughes, 15. Vogel V. Starr, 111. Voss V. Chamberlain, 35, 72. Wackerbath, Ex parte, 176, 285. Waddell v. Hanover Nat. Bank, 3. Wadhams v. Portland Ky. Co., 131, 133. Walker v. D nham, 77. Walker v. Macdonald, 170, 236. V. Washington Title Ins. Co., 121. Wallebout Bank v. Peyton, 33. Walters v. Neary, 52, 158. Walters v. Rock, 59, 63. Wamesit Bank v. Buttrick, 178. Ward V. City Trust Co., 34, 64. Warren v. Smith, 29, 69. Warren-Seharf Co. i?. Com. Bank, 172, 266. Watervliet Bank v. White, 170, 236. Watson V. Chesire, 81, 172, 269, 293. Weare v. Gove, 242, 292. Wedge Mines C". v. Denver Nat. Bank, 42 62. Weil V. Corn Exchange Bank, 112. Weiss V. Eieser, 36. Westberg v. Chicago Lumber Co., 1, 4, 135. West Branch Bank i;. Haines, 94. West London Commercial Bank v. Kitson, 27. Western Grocer Co. v. Lackman, 26. Westervelt v. Freeh, 176. Wettlaufer v. Baxter, 4, 16. Wheeler v. Young, 154. White V. Dodge, 54. V. Madison, 168, 242, 292. V. Savage, 37. Whitlock V. Auburn Lumber Co., 7. Wilkina v. Usher, 34, 5b, 69. Willard v. Crook, 28, 37, 80, 83. Williams v. Germaine, 146, 163. Williams, Deacon & Co. v. Shadbolt, 45. Williamsburg Trust Co. v. Tum Su- den, 83. Wilson V. Isbell, 176. 'e. Hendee, 75, 77, 78, 80, 86. ■u. Peck, 105, 106, 108, 110. V. Tolson, 256. Wirt V. Stubbl^.field, 60, 218. Wisconsin Yearly Meeting v. Babler, 9. Wisdom & Levy v. Bille, 102. Wisner v. First Nat, Bank, 115, 133, 135, 136, 151. Witteman v. Glass, 127. Wolstenholme v. Smith, 117. Wood V. Babbitt, 60. V. Sheldon, 173, 271, 293. V. Skelley, 125. Worden Grocer Co. v. Blanding, 7. Wray v. Miller, 4, 8. Wright v. Gansevoort Bank, 118. Yakima Bank v. McAllister, 60, 62. Yates V. Evans, 151. Young V. American Bank, 150. V. Gaus, 72. V. Glover, 171, 262. V. Grote, 127, 128. Zander v N. Y. Security & Trust Co., 4. Ziegfried v. Stein, 121. Zimbleman & Otis v. Finnegan, 31. ZoUner v. Moffitt, 106. LIST OF STATES AND TERRITORIES WHICH HAVE ADOPTED THE NEGOTIABLE INSTRUMENTS LAW. Alabama.— Laws of 1607, page 660. In effect January Ij 1908. Arizona.— B. S. 1901, Title XLIX. In effect September 1, 1901. Colorado. — Laws of 1897, ch. 64. Approved April 20, 1897. Conmecticnt. — Laws of 1897, oh. 74. Approved April 5, 1897. Diitrict of Columbia.— Laws of 1899 (U. S. Stats.), ch'. 47. In effect April 3, 1899. Florida. — ^Laws of 1897, ch. 4524. Approved June 1, 1897. Hawaii. — ^Laws of 1907, Act 89. In effect April 20, 1907. Idaho. — Laws of 1903, page 380. In effect March 10, 1903. niinois. — ^Laws of 1907, page 403. Approved June 5, 1907.* Iowa. — Laws of 1902, ch. 130. Approved April 12, 1902. Kansas. — Laws of 1905, ch. 310. In effect June 8, 1905. Kentncky. — ^Acts 1904, ch. 102. Approved March 24, 1904. Iionislana. — ^Laws of 1904, Act 64. Approved June 29, 1904. Maryland. — Laws of 1898, ch. 119. Approved March 29, 1898. Massachusetts. — Laws of 1898, ch. 533. In effect January 1, 1899. Massachusetts. — Laws of 1899, ch. 130. In effect March 6, 1899. Michigan. — Public Acts 1905, page 389. Approved June 16, 1905. Missouri. — Laws of 1905, page 243. Approved April 10, 1905. In effect June 16, 1905 (see Nat. Bank of Commerce v. Mechanics' Am. Nat. Bank, 127 S. W. 429). Montana.— Laws of 1903 ch. 121. In effect March 7, 1903. Nebrasha. — Laws. of 1905, ch. 83. In effect August 1, 1905. Neirada. — Laws of 1907, ch. 62. In effect May 1, 1907. New Jersey. — Laws of 1902, ch. 184. Approved April 4, 1902. New Hampshire.— Laws of 1909, ch. 128. In effect January 1, 1910. New Mexico. — Laws of 1907, ch. 83. Approved March 21, 1907. New York. — Laws of 1897, ch. 612. Became a law May 19, 1897. New York. — Laws of 1898, ch. 336. Became a law April 20, 1898. North Carolina.— Laws of 1899, ch. 733. In effect March 8, 1899. North Dakota. — Laws of 1899, oh. 113. Approved March 7, 1899. Ohio.— Laws of 1902, page 162. In effect January 1, 1903. Oklahoma.. — Laws of 1909, ch. 24. Approved March 20, 1909. Oregon. — Laws of 1899, page 18. Approved February 16, 1899. Pennsylvania. — Laws of 1901, page 194. In effect September 2, 1901. Rhode Island.— Laws of 1899, ch. 674. In effect July 1, 1899. Tennessee. — Laws of 1899, ch. 94. In effect May 16, 1899. Utah. — Laws of 1899, ch. 83. In effect July 1, 1899. Virginia. — Laws .of 1897-8, eh. 866. Approved March 3, 1898. Washington. — Laws of 1899, ch. 149. In effect March 22, 1899. West Virginia. — Acts of 1907, ch. 81. In effect January 1, 1908. 'Wisconsin. — Laws of 1899, ch. 356. In effect May 15, 139D. Wyoming. — ^Laws of 1905, eh. 43. In effect February 15, 1905. * The amendments suggested by Professor Ames, in the following articles, to sections 9, 29, 34, 37, 40, 49, 64, 66, 68, 70, 119, 120, 137, and 186 of tnc Law, as recommended by the Commissioners, were adopted in whole or in part in the Illinois Act. xxi TABLE OF CORRESPONDING SECTIONS THE LAW IN THE VARIOUS STATES AND TERRITORIES OF X 1 2 3 4 5 6 7 8 9 10 11 12 13 N. 1. L. AU. Ariz. C3ol. Conn. D. C. Fla. Ida. 111. Kan. Ky. Md. Mass. Mich. 1 4958 3304 4464 4171 1305 2935 3458 1 4540 1897 20 18 3 2 4959 3305 4465 4172 1306 2936 3459 2 4541 1898 21 ^ 19 4 3 4960 3306 4466 4173 1307 2937 3460 3 4542 1899 22 20 5 4 4961 3307 4467 4174 1308 13938 {29S9 3461 4 4543 1900 23 21 6 6 4962 3308 4468 4175 1309 2939 3462 5 4544 1901 24 22 7 6 4963 3309 4469 4176 1310 2940 3463 6 4545 1902 25 23 8 7 4964 3310 4470 4177 1312 2941 3464 7 4546 1903 26 24 9 8 4965 3311 4471 4178 1312 2942 3465 8 4547 1904 27 26 10 9 4966 3312 4472 4179 1313 2943 3466 9 4548 1905 28 26 11 10 4967 3313 4473 4180 1314 2944 3467 10 4649 1906 29 27 12 11 4968 3314 4474 4181 1315 2945 3468 11 4550 1907 30 28 13 12 4969 3315 4475 4182 1316 2946 3469 12 4651 1908 31 29 14 13 4970 3316 4476 4183 1317 2947 3470 13 4552 1909 32 30 15 14 4971 3317 4477 4184 1318 2948 3471 14 4553 1910 33 31 16 15 4972 3318 4478 4185 1319 2949 3472 15 4554 1911 34 32 17 16 4973 3319 4479 4186 1320 2950 3473 16 4555 1912 36 33 18 17 4974 3320 4480 4187 1321 2961 3474 17 4556 1913 36 34 19 18 4975 3321 4481 4188 1322 2952 3475 18 4557 1914 37 36 20 19 4976 3322 4482 4189 1323 2953 3476 19 4558 1915 38 36 21 20 4977 3323 4483 4190 1324 2954 3477 20 4569 1916 39 . 37 22 21 4978 3324 4484 4191 1325 2955 3478 21 4660 1917 40 38 23 22 4979 3325 4485 4192 1326 2956 3479 22 4561 1918 41 39 24 23 4980 3326 4486 4193 1327 2957 3480 23 4562 1919 42 40 25 24 4981 3327 4487 4194 1328 2958 3481 24 4563 1884 43 41 26 25 4982 3328 4488 4195 1329 2959 3482 25 4564 1885 44 42 27 26 4982 3329 4489 4196 1330 2960 3483 26 4665 1886 45 43 28 27 4982 3330 4490 4197 1331 2961 3484 27 4666 1887 46 44 29 28 4983 3331 4491 4198 1332 2962 3485 28 4667 1888 47 45 30 29 4984 3332 4492 4199 1333 2963 3486 29 4668 1889 48 46 31 30 4985 3333 4493 4200 1334 2964 3487 30 4669 1939 49 47 32 TABLE OF CORRESPONDING SECTIONS OF THE LAW IN THE VARIOUS STATES AND TERRITORIES X 14 15 16 17 18 19 .0 21 22 23 » 25 26 N.I.L. Hon. Neb. N. H. N.Y. N.O. N. D. Okl. Ohio Ore. R.I. Tenn. Utah Wis. 1 5849 1 1 20 2151 6303 1 3171 4403 7 , 1553 1675-1 2 5850 2 2 21 2152 6304 2 3171a 4404 8 2 1564 1675-2 3 5851 3 3 22 2153 6305 3 3171b 4405 9 3 1555 1675 3 4 5852 4 4 23 2156 6306 4 3171c 4406 10 4 1556 1675-4 5 5853 5 5 24 2154 6307 5 3171d 4407 11 5 1557 1675-5 6 5854 6 6 25 2155 6308 6 317 le 4408 12 6 1558 1675-6 7 5855 7 7 26 2157 6309 7 3171f 4409 13 7 1559 1675-7 8 5856 8 8 27 2158 6310 8 317lg 4410 14 8 1560 1675-8 9 5857 9 9 28 2159 6311 9 3171h 4411 15 9 1561 1675-9 10 5858 10 10 29 2160 6312 10 31711 4412 16 10 1562 1675-10 11 5859 11 11 30 2161 6313 11 3171J 4413 17 11 1563 1675-11 12 5860 12 12 31 2162 6314 12 3171k 4414 18 12 1564 1675-12 13 5861 13 13 32 2163 6315 13 31711 4415 19 13 1565 1675-13 14 5862 14 14 33 2164 6316 14 3171m 4416 . 20 14 1566 1675-14 15 5863 15 15 34 2165 6317 15 3171n 4417 21 15 1567 1675-15 16 5864 16 16 35 2166 6318 16 31710 4418 22 16 1568 1675-16 17 5865 17 17 36 2341 «319 17 3171p 4419 23 17 1569 1675-17 18 5866 18 18 37 2167 6320 18 3171q 4420 24 18 1570 1675-18 19 5867 19 19 38 2168 6321 19 3171r 4421 25 19 1571 1675-19 20 5868 20 20 39 2169 6322 20 31713 4422 26 20 1572 1675-20 21 ■5869 21 21 40 2170 6323 21 3171t 4423 27 21 1573 1675-21 22 5870 22 22 41 2180 6324 22 3171U 4424 28 22 1574 1675-22 23 5871 23 23 42 2171 6325 23 3171V 4425 29 23 1575 1675-23 24 5872 24 24 50 2172 6326 24 3171W 4426 30 24 1576 1675-50 25 5873 25 25 51 2173 6327 26 3171X 4427 31 25 1577 1675-51 26 5874 26 26 52 2174 6328 26 3171y 4428 32 26 1578 1675-52 27 5875 27 27 53 2175 6329 27 3171Z 4429 33 27 1579 1675-53 28 5876 28 28 54 2176 6330 28 3172 4430 34 28 1580 1675-54 29 5877 29 29 55 2177 6331 29 1 3172a 4431 35 29 1581 1675-55 30 5878 30 30 60 2178 6332 30|3172b 4432 36 30 1582 1676 XXIV THE NEGOTIABLE INSTKTJMENTS LAW. X 1 2 3 4 5 6 7 8 9 10 11 12 13 N. I. L. Ala. Ariz. Col. Conn. D. C. Fla. Ida. 111. Kan. Ky. Md.' Mass. Micb. 31 4986 3334 4494 4201 1335 2965 3488 31 4570 1940 50 48 33 32 4987 3335 4495 4202 1336 2966 3489 32 4571 1941 51 49 34 33 4988 3336 4496 4203 1337 2967 3490 33 4572 1942 52 SO 35 34 4989 3337 4497 4204 1338 2968 3491 34 4573 1943 53 51 36 35 4990 3338 4498 4205 1339 2969 3492 35 4574 1944 54 52 37 36 4991 3339 4499 4206 1340 2970 3493 36 4575 1945 55 53 38 37 4992 3340 4500 4207 1341 2971 3494 37 4576 1946 56 54 39 38 4993 3341 4501 4208 1342 2972 3495 38 4577 1947 57 55 40 39 4994 3342 4502 4209 1343 2973 3496 39 4578 1948 58 56 41 40 4995 3343 4503 4210 1344 2974 3497 40 4579 1949 59 57 4a 41 4996 3344 4504 4211 1345 2975 3498 41 4580 1950 60 58 43 42 4997 3345 4505 4212 1346 2976 3499 42 4581 1951 61 57 44 43 4998 334« 4506 4213 1347 2977 3500 43 4582 1952 62 60 45 44 4999 3347 4507 4214 1348 2978 3501 44 4583 1953 63 61 46 45 5000 3348 4508 4215 1349 2979 3502 45 4584 1954 64 62 47 46 5001 3349 4509 4216 1350 2979 3503 46 4585 1955 65 63 48 47 5002 3350 4510 4217 1351 2980 3504 47 4586 1956 66 64 49 48 5003 3351 4511 4218 1352 2981 3505 48 4587 1957 67 65 50 49 6004 3352 4512 4219 1353 2982 3506 49 4588 1958 68 66 51 50 5005 3353 4513 4220 1354 2983 3507 50 4589 1958 69 67 52 51 5006 3354 4514 4221 1355 2984 3508 61 4590 1920 70 68 53 52 5007 3355 4515 4222 1356 29815 3509 52 4591 1921 71 69 54 53 5008 3356 4516 4223 1357 2986 3510 53 4592 1922 72 70 55 54 5009 3357 4517 4224 1358 2987 3511 54 4593 1923 73 71 56 55 5010 3358 4518 4225 1359 2988 3512 55 4594 1924 74 72 57 56 5011 3359 4519 4226 1360 2989 3513 56 4595 1925 75 73 58 57 5012 3360 4520 4227 1361 2990 3514 57 4596 1926 76 74 59 58 5013 3361 4521 4228 1362 2991 3515 58 4597 1927 77 75 60 59 5014 3362 4522 4229 1363 2992 3516 59 4598 1928 78 76 61 60 5015 3363 4523 4230 1364 2993 3517 60 4599 1929 79 77 62 61 |5016 13364 |4524 .4231 1365 2994 3518 61 4600 1930 80 78 63 62 63 64 65 1 5017 1 3365 1 5018 1 3366 1 5019] 3367 1 5020] 3368 1 1 1 4525 1*23211366 12995 14526 14233 11367 12996 145271423411368] 2997 1 4528 1 42351 1369 1 2998 1 1 1 1 13519 |3520 |3521 13522 1 62 63 64 65 460111931 4602 j 1932 4603] 1933 14604] 1934 1 1 81 82 1 83 1 ^^ 79 80 81 82 j 64 { 65 1 66 1 67 66 67 68 1 1 1 1 1 1 1 1 5021 1 3369 1 4529 | 4236 | 1370 | 2999 | 3623 15022133701453014237 11371 1300013524 5023 1 3371 1 4531] 4238 1 1372 1 3001 1 3525 66 146051 1935 671460011936 68 1 4607 1937 ] 86 1 86 1 87 83 84 85 1 68 ] 69 70 THE NEGOTIABLE INSTRUMENTS LAW. XXV X 14 15 16 17 16 19 20 81 22 23 24 25 26 N.I.L. Mon. Neb. N. H. N.Y. N.O. N. D. Okl. Ohio Ore. B.I. Tenn. Dtah Wis. 31 5879 31 31 61 2179 6333 31 3172c 4433 37 31 1583 1676-1 32 5880 32 32 62 2181 6334 32 3172(1 4434 38 32 1584 1676-2 33 5881 33 33 63 2182 6335 33 3172e 4436 39 33 1585 1676-3 34 5882 34 34 64 2183 6336 34 3172f 4436 40 34 1586 1676-4 35 5883 35 35 65 2184 6337 35 3172g 4437 41 36 1687 1676-5 36 5884 36 36 66 2185 0338 36 3172h 4438 42 36 1688 1676-6 37 5885 37 37 67 2186 6339 37 31721 4439 43 37 1589 1676-7 38 5886 38 38 m 2187 6340 38 3172J 4440 44 38 1590 1676-8 39 5887 39 39 69 2188 6341 39 3172k 4441 45 39 1591 1676-9 40 5888 40 40 70 2189 6342 40 31721 4442 46 40 1592 1676-10 41 5889 41 41 71 2190 6343 41 3172m 4443 47 41 1593 1676-11 42 5890 42 42 72 2191 6344 42 3172U 4444 48 42 1594 1676-12 43 5891 43 43 73 2192 6345 43 31720 4445 49 43 1595 1676-13 44 5892 44 44 74 2193 6346 44 3172p 4446 50 44 1596 1676-14 45 5893 45 45 75 2194 6347 45 3172q 4447 51 45 1597 1676-15 46 5894 46 46 76 2196 6348 46 3172r 4448 52 46 1598 1676-16 47 5895 47 47 77 2196 6349 47 3172s 4449 53 47 1599 1676-17 48 5896 48 48 78 2197 6350 48 3l72t 4450 54 48 1600 1676-18 49 5897 49 49 79 2198 6351 49 3172U 4461 66 49 1601 1676-19 50 5898 60 50 80 2199 6352 50 3172V 4452 56 50 1602 167«-20 51 5899 51 51 90 2200 6353 51 3172W 4453 57 51 1603 1676-21 62 5900 52 52 91 2201 6364 52 3.172X 4464 58 52 1604 1676-22 63 5901 53 53 92 2202 6356 53 3172y 4455 59 53 1605 1676-23 54 5902 64 54 93 2203 6356 54 3172Z 4456 60 64 1606 1676-24 65 5903 65 55 94 2204 6357 56 3173 4457 61 55 1607 1676-25 56 5904 56 56 96 2205 6358 66 3173a 4468 62 56 1608 1676-26 67 5905 57 67 96 2206 6359 57 3173b 4469 63 57 1609 1676-27 68 5906 58 58 97 2207 6360 58 31730 4460 64 58 1610 1676-28 69 5907 59 59 98 2208 6361 59 3173d 4461 65 59 1611 1676-29 60 5908 60 60 110 2209 6362 60 3173e 4462 66 60 1612 1677 61 5909 61 61 111 2210 6363 61 3173f 4463 67 61 1613 1677-1 62 5910 62 62 112 2211 6364 63 3173g 4464 68 62 1614 1677-2 .63 5911 63 63 113 2212 6365 63 3173h 4465 69 63 1615 1677-3 64 5912 64 64 114 2213 6366 64 31731 4466 70 64 1616 1677-4 65 5913 65 65 115 2214 6367 65 3173J 4467 71 65 1617 1677-5 66 5914 66 66 116 2215 6368 66 3173k 4468 .72 66 1618 1677-6 67 5915 «7 67 117 2216 6369 67 31731 4469 73 67 .1619 1677-7 68 5916 68 68 118 2217 6370 68 3173m 4470 74 68 1620 1677-8 XXVI THE NEGOTIABLE INSTRUMENTS LAW. X 1 2 3 4 5 6 7 8 9 10 11 12 13 N. 1. L. Ala. Ariz. Ool. Conn. D. C. Fla. Ida. 111. Kan. Ky. Md. Mass. Mich. 69 5024 3372 4532 4239 1373 3002 3526 69 4608 1938 88 86 71 70 5025 3373 4533 4240 1374 3003 3527 70 4609 1990 89 87 72 71 5026 3374 4534 4241 137S 3004 3528 71 4610 1991 90 88 73 72 5027 3375 4535 4242 1376 3005 4529 72 4611 1992 91 89 74 73 5028 3376 4536 4243 1377 3006 3530 73 4612 1993 92 90 75 74 5029 3377 4537 4244 1378 3007 3531 74 4613 1994 93 91 76 75 5030 3378 4538 4245 1379 3008 3632 75 4614 1995 94 92 77 76 5031 3379 4539 4246 1380 3009 3533 76 4615 1996 95 93 78 77 5032 3380 4540 4247 1381 3010 3534 77 4616 1997 96 94 79 78 5033 3381 4541 4248 1382 3011 3535 78 4617 1998 97 95 80 79 5034 3382 4542 4249 1383 3012 3536 79 4818 1999 98 96 81 80 5035 3383 4543 4250 1384 3012 3537 80 4619 2000 99 97 82 81 5036 3384 4544 4251 1385 3013 3538 81 4620 2O01 100 98 83 82 5037 3385 4545 4252 1386 3014 3539 82 4621 2002 101 99 84 83 e038 3386 4546 4253 1387 3015 3540 83 4622 2003 102 100 85 84 5038 3387 4547 4254 1388 3016 3541 84 4623 2004 103 101 86 85 5039 3388 4548 4255 1389 3017 3542 85 4624 2005 104 102 87 86 5040 3389 4549 4256 1390 3017 3543 86 4625 2006 105 103 88 87 5041 3390 4550 4257 1391 3018 3544 4626 2007 106 104 89 88 5042 3391 4551 4258 1392 3019 3545 87 4627 2008 107 105 90 89 ■5043 3392 4552 4259 1393 3020 3546 88 4628 1960 108 106 91 90 5044 3393 4553 4260 1394 3021 3547 89 4629 1961 109 107 92 91 5045 3394 4554 4261 1395 3022 3548 90 4630 1962 110 108 93 92 5046 3395 4555 4262 1396 3023 3549 91 4631 1963 111 109 94 93 5046 3396 4656 4263 1397 3024 3550 92 4632 1964 112 110 95 94 5047 3397 4557 4264 1398 3025 3551 93 4633 1965 113 111 96 95 5048 3398 4558 4265 1399 3026 3552 94 4834 1966 114 112 97 96 5048 3399 4559 4266 1400 3027 3553 95 4635 1967 115 113 98 97 5049 3400 4560 4267 1401 3027 3554 96 4636 1968 116 114 99 98 5050 3401 4561 4268 1402 3028 3555 97 4637 1969 117 115 lOO 99 5051 3402 4562 4269 1403 3029 3566 98 4638 1970 118 116 101 100 5052 3403 4563 4270 1404 3029 3557 99 4639 1971 119 117 102 101 5053 3404 4564 4271 1405 3030 3556 100 4640 1972 120 118 103 102 5054 3406 4565 4272 1406 3031 3559 101 4641 1973 121 119 104 103 5055 3406 4566 4273 1407 3031 3560 102 4642 1974 122 120 105 104 5056 3407 4567 4274 1408 3032 3561 103 4643 1975 123 121 106 105 5057 3408 4568 427611409 3033 3562 104 4644 1 1976 124 122 107 THE NEGOTIABLE INSTRUMENTS LAW. xxvu xl 14 15 16 17 18 19 20 21 22 23 24 25 26 N.I.L. Man. Neb. N. H. N.Y.. N.C. N.D. Okl. Ohio Ore. E.I. Tenn. Utah wis. 69 5917 69 69 119 2218 6371 69 3173n 4471 75 69 1621 1677-9 70 5918 70 70 130 2219 6372 70 31730 4472 76 70 1622 1678 71 5919 71 71 131 2220 6373 71 3173p 4473 77 71 1623 1678-1 72 5920 72 72 132 2221 6374 72 3173q 4474 78 72 1624 1678-2 73 5921 73 73 133 2222 6375 73 3173r 4475 79 73 1625 1678-3 74 5922 74 74 134 2223 6376 74 3173s 4476 80 74 1626 1678-4 75 5923 75 75 135 2224 6377 75 3173t 4477 81 75 1627 1678-5 76 5924 76 76 136 2225 6378 76 3173U. 4478 82 76 1628 1678-6 77 5925 77 77 137 2226 6379 77 3173V 4479 83 77 1629 1678-7 78 5926 78 78 138 2227 6380 78 3173W 4480 84 78 1630 1678-8 79 5927 79 79 139 2228 6381 79 3173X 4481 85 79 1631 1678-9 80 5928 80 80 140 2229 6382 80 3173y 4482 86 80 1632 1678-10 81 5929 81 81 141 2230 6383 81 3173Z 4483 87 81 1633 1678-11 82 5930 82 82 142 2231 6384 82 3174 4484 88 82 1634 1678-12 83 5931 83 83 143 2232 6385 83 3174a 4485 89 83 1635 1678-13 84 5932 84 84 144 2233 6386 84 3174b 4486 90 84 1636 1678-14 85 5933 85 85 145 2234 6387 85 31740 4487 91 85 1637 1678-15 86 5934 86 86 146 2236 6388 86 3174d 4488 92 86 1638 1678-16 87 5935 87 147 2237 6389 87 3174e 4489 93 87 1639 1678-17 88 5936 87 88 148 2238 6390 88 3174f 4490 94 88 1640 1678-18 89 5937 88 89 160 2239 6391 80 3174g 4491 95 89 1641 1678-19 90 5938 89 90 161 2240 6392 90 3174h 4492 96 90 1642 1678-20 91 5939 90 91 162 2241 6393 91 31741 4493 97 91 1643 1678-21 92 5940 91 92 163 2242 6394 92 3174J 4494 98 92 1644 1678-22 93 5941 92 93 164 2243 6395 93 3174k 4495 99 93 1645 1678-23 94 5942 93 94 165 2244 6396 94 31741 4496 100 94 1646 1678-24 95 5943 94 95 166 2245 6397 95 3174m 4497 101 95 1647 1678-25 96 5944 95 96 167 2246 6398 96 3174n 4498 102 96 1648 1678-26 97 5945 96 97 168 2247 6399 97 31740 4499 103 97 1649 1678-27 98 5946 97 98 169 2248 6400 98 3174p 4500 104 98 1650 1678-28 99 5947 98 99 170 2249 6401 99 3174q 4501 105 99 1651 1678-29 100 5948 99 100 171 2250 6402 100 3174r 4502 106 100 1652 1678-30 101 5949 100 101 172 2251 6403 101 3174s 4503 107 101 1653 1678-31 102 5950 101 102 173 2252 6404 102 3174t 4504 108 102 1654 1678-32 103 5951 102 103 17412253 6405 103 3174U 4505 109 103 1655 1678-33 104 5&52 103 104 17512254 6406 104 3174V 4506] 110 104 1656 1678-34 105 5953 104 105 17612255 6407 105 3174W 4507 1 111 105 1657 1678-35 xxvm THE NEGOTIABLE INSTRUMENTS LAW. X 1 S 3 4 5 6 7 8 9 10 H 12 13 N. I. L. Ala. Ariz. Col. Conn. D. 0. Fla. Ida. 111. Kan. Ky. Md. Mass. Mich. 106 5056 3409 4569 4276 1410 3033 3563 105 4645 1977 125 123 108 107 5058 3410 4570 4277 1411 3034 3564 106 4646 1978 126 124 109 108 5059 3411 4571 4278 1412 3035 3565 107 4647 1979 127 125 110 109 5060 3412 4572 4279 1413 3036 3566 108 4648 1980 128 126 111 110 5060 3413 4573 4280 1414 3036 3567 109 4649 1981 129 127 112 111 5060 3414 4574 4281 1415 3036 3568 110 4650 1982 130 128 113 112 5061 3415 4575 4282 1416 3037 3669 111 4651 1983 131 129 114 113 5062 3416 4576 4283 1417 3038 3570 112 4652 1984 132 130 115 114 5063 3417 4577 4284 1418 3039 3571 113 4653 1985 133 131 116 115 5064 3418 4578 4285 1419 3039 3572 114 4654 1986 134 132 117 116 5065 3419 4579 4286 1420 3039 3573 115 4655 1987 135 133 118 117 5066 3420 4580 4287 1421 3040 3574 116 4656 1988 136 134 119 118 5067 3421 4581 4288 1422 3041 3675 117 4657 1989 137 135 120 119 5068 3422 4582 4289 1423 3042 3576 118 4658 1890 138 136 121 120 5069 3423 4683 4290 1424 3042 3577 119 4659 1891 139 137 122 121 5070 3424 4584 4291 1425 3043 3578 120 4660 1892 140 138 123 122 5071 3425 4585 4292 1426 3044 3579 121 4661 1893 141 139 124 123 5072 3426 4586 4293 1427 3045 3580 122 4662 1894 142 140 125 124 5073 3427 4587 4294 1428 3046 3581 123 4663 1895 143 141 126 125 5074 3428 4588 4295 1429 3046 3582 124 4664 1896 144 142 127 126 5075 3429 4589 4296 1430 3047 3583 125 4665 1826 145 143 128 127 5076 3430 4590 4297 1431 3047 3584 126 4666 1827 146 144 129 128 5077 3431 4591 4298 1432 3047 3585 127 4667 1828 147 145 130 129 5078 3432 4592 4299 1433 3048 3586 128 4668 1829 148 146 131 130 5079 3433 4593 4300 1434 3049 3587 129 4669 1830 149 147 132 131 5080 3434 4594 4301 1435 3050 3588 130 4670 1831 150 148 133 132 5081 3435 4595 4302 1436 3051 3589 131 4671 1832 151 149 134 133 5082 3436 4596 4303 1437 3051 3590 132 4672 1833 152 150 . 135 134 5083 3437 4597 4304 1438 3051 3591 133 4673 1834 153 151 136 135 5084 3438 4598 4305 1439 3052 3592 134 4674 1835 154 152 137 136 5085 3439 4599 4306 1440 3053 3693 135 4675 1836 155 153 138 137 508613440 4600 4307 1441 3054 3594 4676 1837 156 154 139 138 5087 1 3441 4601 4308 144213055 3595 136 4677 1838 157 155 140 139 5088 [3442 14602 4309 1443 [305613596 138 4678 1839 168 156 141 140 5089 1 3443 1 4603 1 1 4310 1444 1 3056 1 3597 1 1 139 4679 1840 159 157 142 1 1 1 1 141 150901 34441 46041 4311 1 1 1445] 3056 1 3598 140 4680 1841 160 .1 158] 143 142 1 5091 134451 4605 1 4312 1446 13057)3599 14114681 1842 161 159J 144 143 15092 1 3446] 4606 1 4313 1447 1 3058 1 3600 ' 142 1 4682 11843 162 160 1 146 THE NEGOTIABLE INSTBUMENT8 LAW. XXIX X 14 15 16 i7 18 19 20 21 22 23 1 24 1 25 26 N.I.L. Mod. Neb. N. H. N.r. N.C. N. D '|Okl Ohio Ore. R.I. Tean. 1 Ut'h wis. 106 5954 105 106 177 2256 6408 106 3174X 4508 112 106 1658 1678-36 107 5955 106 107 178 2257 6409 107 3174y 4509 113 107 1659 1678-37 108 5956 107 108 179 2258 6410 108 3174z 4510 114 108 1660 1678-38 109 5957 108 109 180 2259 6411 109 3175 4511 115 109 1661 1678-39 110 5958 109 110 - 181 2260 6412 110 3175a 4512 116 110 1662 1678-40 111 5959 110 111 182 2261 6413 111 3175b 4513 117 111 1663 1678-41 112 6960 111 112 183 2262 6414 112 3175c 4514 118 112 1664 1678-42 113 5961 112 113 184 2263 6415 113 3175d 4515 119 113 1665 1678-43 114 5962 113 114 185 2264 6416 114 3175e 4516 120 114 1665X 1678-44 115 5963 114 115 186 2265 6417 115 3175f 4517 121 115 1665x1 1678-45 116 5964 115 116 187 2266 6418 116 3175g 4518 122 116 1665x2 1678-46 117 5965 116 117 188 2267 ■6419 117 3175h 4519 123 117 1665x3 1678-47 118 5966 117 118 189 2268 6420 118 3175i 4520 124 118 1665x4 1678-48 119 5967 118 119 200 2269 6421 119 3175J 4521 125 119 1665x5 1679 120 5968 119 120 201 2270 6422 120 3175k 4522 126 120 1665x6 1679-1 121 5969 120 121 202 2271 6423 121 31751 4523 127 121 1665x7 1679-2 122 5970 121 122 203 2272 6424 122 3175m 4524 128 122 l«65x8 1679-3 123 5971 122 123 204 2273 6425 123 3175n 4525 129 123 1665x9 1679-4 124 5972 123 124 205 2274 6426 124 31750 4526 130 124 1665x10 1679-5 125 5973 124 125 206 2275 6427 125 3175p 4527 131 125 1665x11 l«79-6 126 5974 125 126 210 2276 6428 126 3175q 4528 132 126 1664x12 1680 127 5975 126 127 211 2277 6429 127 3175r 4529 133 127 1665x13 1680a 128 5976 127 128 212 2278 6430 128 31753 4530 134 128 1665x14 1680b 129 5977 128 129 213 2279 6431 129 3175t 4531 135 129 1665x15 1680c 130 5978 129 130 214 2280 6432 130 3175U 4532 136 130 1665x16 1680d 131 5979 130 131 215 2281 6433 131 3175V 4533 137 131 1665x17 1680e 132 5980 131 132 220 2282 6434 132 3175W ■ 4534 138 132 1665x18 1680f 133 5981 132 133 221 2283 6435 133 3175k 4535 139 133 1665x19 1680g 134 5982 133 134 222 2284 6436 134 3175V 4536 140 134 1665x20 I680h 135 5983 134 135 223 2285 6437 135 3175?. 4537 141 135 1665x21 16801 136 5984 135 136 224 2286 6438 136 3176 4538 142 136 1665x22 1680J 137 5985 136 137 225 2287 6439 137 3176a 4539 143 137 1665x23 1680k 138 5986 137 138 226 2288 6440 138 317611 4540 144 138 1665x24 16801 139 5987 138 139 227 2289 6441 139 317CC 4541 145 139 1665x25 1680m 140 5988 139 140 228 2290 6442 140 3176d 4542 146 140 1665x26 1680n 141 5989 140 141 229 2291 6443 141 3176e 4543 147 141 1665x27 1680O 142 59fl0 141 142 230 2292 6444 142 3176f 4544 148 142 1665x28 1680p 143 5991 142 143 240 2293 6445 143 3176g 4545 149 143 1665x29 168-1 XXX THE NEGOTIABLE INSTRUMENTS LAW. X 1 2 3 4 5 6 7 8 9 10 11 ii 13 N.I.L. Ala. Ariz. Col. Conn. D. 0. Pla. Ida. 111. Kan. Ky. Md. Mass. Mich. 144 5093 3447 4607 4314 1448 3059 3601 143 4683 1844 163 161 146 14S 5094 3448 4608 4315 1449 3060 3602 144 4684 1845 164 162 147 146 5094 3449 4609 4316 1450 3061 3603 145 4686 1846 165 163 148 147 5095 3450 4610 4317 1451 3062 3604 146 4686 1847 166 164 149 148 5095 3451 4611 4318 1452 3062 3605 147 4687 1848 167 165 150 149 5097 3452 4612 4319 1453 3063 3606 148 4688 1849 168 166 151 150 d09« 3453 4613 4320 1454 3063 3607 149 4689 1850 169 167 152 161 5099 3454 4614 4321 1455 3064 3608 150 4690 1851 170 168 153 162 5100 3455 4615 4322 1456 3066 3609 151 4691 1875 171 169 164 153 5101 3456 4616 4323 1457 3066 3610 152 4692 1876 172 170 155 164 5102 3457 4617 4324 1458 3066 3611 153 4693 1877 173 171 156 155 5103 3458 4618 4325 1459 3067 3612 164 4694 1878 174 172 157 156 5104 3459 4619 4326 1460 3067 3613 155 4695 1879 175 173 158 157 5105 3460 4620 4327 1461 3068 3614 156 4696 1880 176 174 159 158 5106 3461 4621 4328 1462 3069 3615 157 4697 1881 177 176 160 159 5107 3462 4622 4329 1463 3070 3616 158 4698 1882 178 176 161 160 5108 3463 4623 4330 1464 3071 3517 159 4699 1883 179 177 162 161 5109 3464 4624 4331 1465 3073 3618 160 4700 1852 180 178 163 162 5110 3465 4625 4332 1466 3074 3619 161 4701 1853 181 179 164 163 5111 3466 4626 4333 1467 3076 3620 162 4702 1854 182 180 165 164 5112 3467 4627 4334 1468 3076 3621 163 4703 1855 183 181 166 165 5113 3468 4628 4335 1469 3076 3622 164 4704 1856 184 182 167 166 5114 3469 4629 4336 1470 3077 3623 165 4705 1857 185 183 168 167 5115 3470' 4630 4337 1471 3078 3624 166 4706 1858 186 184 169 168 5116 3471 4631 4338 1472 3079 3625 167 4707 1859 187 185 170 169 5117 3472 4632 4339 1473 3080 3626 168 4708 1860 188 186 171 170 5118 3473 4633 4340 1474 3081 3627 169 4709 1861 189 187 172 171 5119 3474 4634 4341 1475 3082 3628 ■170 4710 1868 190 1S8 173 172 5120 3475 4635 4342 1476 3082 3629 171 4711 1869 191 189 174 173 5120 3476 4636 4343 1477 3083 3630 172 4712 1870 192 190 175 174 5121 3477 4637 4344 1478 3084 3631 173 4713 1871 193 191 176 175 5122 3478 4638 4345 1479 3085 3632 174 4714 1872 194 192 177 176 5123 3479 4639 4346 1480 3086 3633 175 4715 1873 195 193 178 177 5124 3480 4640 4347 1481 3086 3634 176 4716 1874 196 194 179 178 5125 3481 4641143481' 1482 3087 3635 177 4717 1862 197 195 180 179 5126 3482 4642 1 4349 1 1483 1 3088 3636 178 4718 1863 198 196 181 180 5127 3483 4643 1 4350 1 1484 1 3089 3637 179 47.19 1864 199 197 182 THE NEGOTIABLE INSTRUMENTS LAW. XXSL z 14 IS 16 17 18 19 20 21 22 23 24 25 26 N.l.L. Mon. Neb. N. H. N.Y. N.O. N. D. Okl. Ohio ore. B.I. Tenn. Utah WlB. 144 5992 143 144 241 2294 6446 144 3176h 4546 150 144 1665x30 1681-1 145 5993 144 145 242 2295 6447 146 31761 4547 151 145 1666x31 1681-2 146 5994 145 146 243 2296 6448 146 3176J 4548 152 146 1665x32 1681-3 147 5995 146 147 244 2297 6449 147 3176k 4549 153 147 1665x33 1681-4 148 5996 147 148 245 2298 6450 148 31761 4550 154 148 1665x34 1681-5 149 5997 148 149 246 2299 6451 149 3176m 4551 155 149 1665x35 1681-6 150 5988 149 150 247 2300 6452 150 3176n 4552 156 150 1665x36 1681-7 151 5999 150 151 248 2301 6453 151 3176o 4553 157 151 1665x37 1681-8 152 6000 151 152 260 2302 6454 152 3176p 4554 158 152 1665x38 1681-9 153 6001 152 153 261 2303 6455 153 3176q 4555 159 153 1665x39 1681-10 154 6002 153 154 262 2304 6456 154 3176r 4556 160 154 1665x40 1681-11 155 6003 154 155 263 2305 6457 155 3176s 4557 161 155 1665x41 1681-12 156 6004 155 156 264 2306 6458 156 3176t 4558 162 156 1665x42 1681-13 157 6005 156 157 265 2307 6459 157 3176U 4559 163 157 1665x43 1681-14 158 6006 157 158 266 2308 6460 158 3176V 4560 164 158 1665x44 1681-15 159 6007 158 159 267 2309 6461 159 3176w 4561 165 159 1665x45 1681-16 160 6008 159 160 268 2310 6462 160 3176X 4562 166 160 1665x46 1681-17 161 6009 160 161 280 2311 6463 161 3176y 4563 167 161 1665x47 1681-18 162 6010 161 162 281 2312 6464 162 3176Z 4564 168 162 1665x48 1681-19 163 6011 162 163 282 2313 6465 163 3177 4565 169 163 1665x49 1681-20 164 6012 163 164 283 2314 6466 164 3177a 4566 170 164 1665x50 1681-21 165 6013 164 165 284 2315 6467 165 3177b 4567 171 165 1665x51 1681-22 166 6014 165 166 285 2316 6468 166 31770 4568 172 166 1665x52 1681-23 167 6015 166 167 286 2317 6469 167 3177d 4569 173 167 1665x53 1681-24 168 6016 167 168 287 2318 6470 168 3177e 4570 174 168 1665x54 1681-25 169 6017 168 1«9 288 2319 6471 169 3177f 4571 175 169 1665x55 1681-26 170 6018 169 170 289 2320 6472 170 3177g 4572 176 170 1665x56 1681-27 171 6019 170 171 300 2321 6473 171 3177h 4573 177 171 1665x57 1681-28 172 6020 171 172 301 2322 6474 172 3177i 4574 178 172 1665x58 1681-29 173 6021 172 173 302 2323 6475 173 3177J 4575 179 173 1665x59 1681-30 174 6022 173 174 303 2324 6476 174 3177k 4576 180 174 1665x60 1681-31 175 6023 174 175 304 2325 6477 175 31771 4577 181 175 1665x61 1681-32 176 6024 175 176 305 2326 6478 176 3177m 4578 182 176 1665x62 1681-33 177 6025 176 177 30612327 6479 177 3177n 4579 183 177 1665x63 1681-34 178 6026 177 17fe 3 10 1 2328 6480 1781 31770 4580 184 178 1665x64 1681-35 179 6027 178 179 311|2329 6481 179|3177p 4581 815 179 1665x65 1681-36 180 6028 179 180 312 2330 6482 180 3177q 4582 186 180 1665x66 1681-37 XXXll THE NEGOTIABLE INSTRUMENTS LAW. X 1 2 3 4 5 6 7 si's 10 11 12 13 N. 1. h. Ala. Ariz. Col. Conn. D. 0. Ma. Ida. lU. Kan. Ky. Md. Mass. Mich. 181 5128 3484 4644 4Z5,1 1485 3090 3638 180 4720 1865 200 198 183 182 5129 3485 4645 4352 1486 3091 3639 181 4721 1866 201 199 184 183 5130 3486 4646 4353 1487 3092 3640 182 4722 1867 202 200 185 184 5031 3487 4647 4^4 1488 3093 3641 183 4723 2009 203 201 186 185 5032 3487 4648 4355 1489 3094 3642 184 4724- 2010 204 202 187 186 5033 3487 4649 4356 1490 3096 3643 185 4725 2011 205 203 188 187 5034 3487 4650 4357 1491 3096 3644 186 4726 2012 206 204 189 188 5035 3487 4651 4358 1492 3097 3645 187 4727 2013 207 205 190 189 5036 3487 4652 4359 1493 3098 3646 ■188 4728 2014 208 206 191 190 6037 4653 2934 3647 189 4533 ...: 13 1 191 5038 3487 4654 4170 1304 2934 3648 190 4534 1820 14 207 2 192 5039 3488 4655 4170 1304 2934 3649 191 4535 1821 16 208 2 193 5040 3489 4656 4170 1304 2934 3650 192 4536 1822 16 209 2 194 5041 3490 4657 4170 1304 2934 3651 193 4537 1823 17 210 2 195 5042 4658 4170 1304 3652 194 4538 1824 18 211 2 196 5043 3491 4659 4170 1304 2934 3653 195 4539 19 212 2 197 196 19 198 (X) In the following States, the numbering of the sections (in some cases the sub-sections) is the same as that of the commissioners' draft in the first column: Iowa.— Code Supl. (1907), Tit. XV., sec. 3060a. lionisiana. — Laws of 1904, Act. 64. Missouri. — Laws of 1905, page 243; Annot. Sts. (1906), ch. 5, see. 463. Nevada.— Laws of 1907, ch. 62. New Jersey. — Laws of 1902, ch. 184. New Mexico.— Laws of 1907, ch. 83. Pennsylvania, — Laws of 1901, page 194. Virginia.— Laws of 1897-8, ch. 866; Code (1904), eh. 133a, see. 2841a. Washington. — Laws of 1899, ch. 149. West Virginia.- Acts of 1907, ch. 81. Wyoming. — Laws of 1905, ch. 43. Hawaii.— Laws of 1907, ch. 89. (1) Code 1907, ch. 115. (2) E. S. 1901, Tit. XLIX. (3) E. S. 1908, ch. XCV. (4) G. S. 1902, Tit. 33, ch. 234. (5) Code 1902, ch. XLVI. (6) G. S. 1906, Tit. 5, ch. 2. (7) Rev. Codes, 1908, Tit. 13. THE NEGOTIABLE INSTRUMENTS LAW. XXXIU X 14 15 16 17 18 10 20 21 22 23 24 25 26 N.I.L. Mon. Neb. N. H. N.Y. N.C. N. D. Okl. Obio Ore. E.I. Tenn. Utab Wis. 181 6029 180 181 313 2331 6483 181 3177r 4583 187 181 1665x67 1681-38 182 6030 181 182 314 2332 6484 182 3177s 4584 188 182 1665x68 1681-39 183 6031 182 183 315 2333 6485 183 3177t 4585 189 183 1665x69 1681-40 184 6032 183 184 320 2334 6486 184 3177u 4586 190 184 1665x70 1684 185 6033 184 185 321 2335 6487 185 3177v 4587 191 185 1665x71 1684-1 186 6034 185 186 322 2336 6488 186 3177w 4588 192 186 1665x72 1684-2 187 6035 185 187 323 2337 6489 187 3177x 4589 193 187 1665x73 1684-3 188 6036 187 188 324 2338 6490 188 3177y 4590 194 188 1665x74 1684-4 189 6037 188 189 325 2339 6491 189 3177z 4591 195 189 1665x75 1684-5 190 5482 1 6492 I 4592 1665x76 191 5843 189 190 2 2340 6493 3178 4592 1 1665x77 1675 192 5844 190 191 3 2342 6494 3178a 4592 2 .1 1665x78 1675 193 5845 191 192 4 2343 6495 3178b 4592 3 1665x79 1675 194 5846 192 193 5 6496 3178c 4592 4 ■^s 1665x80 1675 195 5847 193 194 6 2345 6497 3178d 4593 5 CD . 1665x81 1675 196 5848 194 195 7 2344 6498 I 3178e 4594 6 i^ 1665x82 1675 197 197 196 190 ^ 1684-7 198 198 196 So (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) (20) (21) (22) (23) (24) (25) (26) Laws of l907, page 403. G. S. 1905, ch. 70. Sts. (1909), Art. 9. Pub. Gen. Laws 1904, Art. 13. E. L. 1902, fcli. 73. Pub. Acts, 1905, page 389. Civ. Code, 1907, Tit. XV. Comp. Sts. 1907, ch. 41. Laws of 1909, ch. 123. Consol. Laws, ch. XXXVIII. E. S. 1908, ch. 54. Rev. Codes, 1905, ch. 90. Laws of 1909, ch. XXIV. Anno. Sts. 1787-1908, Tit. 1, Div. 2, eh. 2. Anno. Codes and Sts. 1902, Tit. XXXVIII. Gen. Laws 1909, Tit. XIX. Code Supl. 1897-1903. Comp. Sts. 1907, Tit. 53. Sts. Supl. 1899-1906, ch. 78. ARRANGEMENT The arrangement of the Negotiable Instruments Law herein, with the annotation thereof, is as follows: First. The text of each section of the Negotiable Instruments Law, as recommended by the Commissioners on Uniform Legislation. (See Preface to first edition.) Second. The changes, if any, made in the section in the various States adopting the Law. Third. A brief summary of the criticisms and comments, if any, upon the section by Professor Ames, Judge Brewster and Mr. McKeehan. (See articles in full, infra, pp. 162-297.) Fourth. The American cases decided under the section with com- ments. (The cases cited generally without abstracts are either cases in which the court made no reference to the Negotiable Instru- ments Law (although the Law was in force at the time), or cases abstracted under other sections to which reference is made, or cases which involve no question of sufficient novelty or im- portance or in which the application of the Law is too plain to justify an abstract. Such cases are placed at the head of the cases under the respective sections, and are cited for the sake of completeness. A few of the cases in which the Law was not cited have, however, been abstracted because of their special interest or novelty, the fact that the JLaw was not mentioned being noted in the abstract. Cases which have been decided since the Law went into effect, but to which it was not applic- able because the instruments were issued before the Law was adopted, are not cited. The abbreviation "S. C. sec," at the end of the citation of some of the cases, means that an abstract of the same case upon another point will be found under the sec- tion indicated by the numeral following the abbreviation.) Fifth. The English cases decided under the corresponding section of the Bills of Exchange Act. (It would require too much space to include in the abstracts of these cases the text of the sections of the Bills of Exchange Act therein involved. Ref- erence should therefore be made to the corresponding sections of the Negotiable Instruments Law, as shown in Appendix II, Table II.) Sixth. Annotations in foot notes, showing the differences in sub- stance and sometimes in form between the Bills of Exchange Act and the Negotiable Instruments Law. Abbreviations. B. E. A. : Bills of Exchange Act of England. N. I. L. : Negotiable Instruments Law. xxxiv I The Negotiable Instruments Law. (1) A GENERAL ACT RELATING TO NEGOTIABLE INSTRUMENTS (BEING AN ACT TO ESTABLISH A LAW UNIFORM WITH THE LAWS OF OTHER STATES ON THAT SUBJECT).^ TITLE I. NEGOTIABLE INSTRUMENTS IN GENERAL. Article I. FORM AND INTERPRETATION, Section 1. Be it enacted, etc., An instrument ^ to be negotiable must conform to the following require- ments:— 1 This Act does not affect the right of parties to non-negotiable instru- ments. Westberg v. Chicago Lumber Co., 117 Wis. 589, 94 N. W. 572. 2 For cases rightly favoring a liberal construction of the law in the interest of uniformity, see Brewster v. Shrader, 26 Misc. E. 480, 57 N. Y. Supp. 906; Payne v. Zell, 98 Va. 249, 36 S. E. 379; B. & 0. Ey. Co. v. First Nat. Bank, 102 Va. 753, 47 S. B. 837 ; Trustees of American Bank v. McComb, 105 Va. 473, 54 S. E. 14; Vander Ploeg v. Van Zuuk, 135 Iowa, 350, 112 N. W. 807, 13 L. E. A. (N. S.) 490; Eockfleld v. First Nat. Bank, 77 Ohio St. 311, 83 N. E. 392, 14 L. R. A. (N. S.) 842; Columbian Banking Co. v. Bowen, 134 Wis. 218, lli N. W. 451. Contra, and construing the law strictly in favor of the pre-existing law of the State, are Sutherland v. Mead, 80 App. Div. 103, 80 N. Y. Supp. 504 ; Hoseman v. Mahoney, 86 App. Div. 377, 83 N. Y. Supp. 749; Hover v. Magley, 48 Misc. Rep. 430, 96 N. Y. Supp. 925 ; Haddock, Blanchard & Co." T. Haddock, 192 N. Y. 499, 85 N. E. 682. 3 The Illinois aet interpolates "payable in money" after "instrument" because in that State instruments payable in goods have always been negotiable. A THE NEGOTIABLE INSTBUMENTS LAW. 1. It must be in writing and signed by the maker or drawer; 2. Must contain an imconditional promise or order to pay a sum certain in money; (a) 3. Must be payable on demand, or at a fixed or determinable future time; (&) 4. Must be payable to order or to bearer; *(c) and, 5. Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. (^) The Michigan Act uses, "Certain sum" instead of "sum certain. ' ' The Arizona, Idaho, Iowa and North Carolina Acts read, in subsection 4: "Must be payable to the order of a specified person, or to bearer," but "specified person" is surplusage. See Section 8. The Wisconsin Act adds: "But no order drawn upon or accepted by the treasurer of any county, town, city, village or school district, whether drawn by any ofiScer thereof or any other person, and no obligation nor instrument made by any such corporation or any ofiScer thereof, unless expressly author- ized by law to be made negotiable, shall be, or shall be deemed to be, negotiable according to the custom of merchants, in what- ever form they may be drawn or made. Warehouse receipts, bills of lading and railroad receipts upon the face of which the words 'not negotiable' shall not be plainly written, printed or stamped, shall be negotiable as provided in section 1676 of the Wisconsin Statutes of 1878, and , in sections 4194 and 4425 of these . statutes, as the same have been construed by the Supreme Court." Benedict v. Kress, 97 App. Div. 65, 89 N. Y. Supp. 607; Borough of Montvale v. People's Bank, 74 N. J. Law, 464, 67 Atl. 67, S. C. sec. 56 ; Kimpton v. Studebaker Bros. Co., 14 Idaho, 552, 94 Pac. 1039, 125 Am. St. Rep. 185, S- C. see. 5-1. (a) A promissory note in due form is negotiable, although it is secured by a mortgage which provides that on default in interest or failure to comply with any of the conditions of the mortgage, the whole shall, at the option of the mortgagee, become « "A negotiable bill may be payable either to order or to bearer." B, S. A. 8. 8 (2). THE NEGOTIABLE INSTRUMENTS LAW. 6 due and payable. The court a^so cited sections 2-3 and 4-4. The latter, a new section composed of the words "at a fixed period after date or sight, though payable before then on a contingency," and of the last paragraph of section 4-3 N. I. L. Thorp V. Mindeman, 123 Wis. 149, 101 N. W. 417, 68 L. R. A. 146, 107 Am. St. Rep. 1003. A draft in the ordinary form contained the following words after the sum: "400 e A. R. L. No. 3362 via A. R. L. B. L. direct." These words, under the custom and usage cff business, notified the payee that a certain number of cases had been shipped by a certain line, and that the bill of lading went direct to the payee. Held, that the draft was an unconditional order and negotiable. Waddell v. Hanover Nat. Bank, 48 Misc. R. 578, 97 N. Y. S. 305. An order to pay A, or order, "$300.00, or what may be due on my deposit book," is conditional. National Sav. Bank v. Cable, 73 Gonn. 568, 48 Atl. 428. Bonds otherwise negotiable in form issued by a joint-stock association are none the less negotiable because of a provision therein making them payable solely out of assets assigned to a trustee under a trust deed or out of other assets of the association, and exonerating the shareholders of the association from the individual liability to which they would otherwise be subject ; and negotiability of the bonds renders the coupons negotiable. Nor does the fact that the deed of trust securing the bonds reserves to a certain portion of the bondholders the right to waiye default in payment of coupons and postpone the time of their payment, affect the negotiability of the coupons; the reservation relating to procedure under the trust deed, and not preventing enforcement of a bondholder's general remedies at law for the collection of the obligation. Hibbs v. Brown, 190 N. Y. 167, 82 N. E. 1108. See 19 Harv. Law Rev. 616, for criticism of this case in the Appellate Division. A stipulation on the back of a note that it was secured by a mortgage, and that the payee agreed to look to mortgage security for its payment, became a part of the note, and rendered it non-negotiable. Allison v. HoUembeak, 138 Iowa, 479, 114 N. W. 1059. An instrument drawn by a special agent of a foreign insur- ance company directing the drawee (the company) "on ac- ceptance" to pay to the order of the payee a sum of money in satisfaction of all claims under a certain policy is not payable unconditionally, and is not negotiable, and neither the drawee nor the drawer c'an be held thereon. Berenson v. London & Lancashire Fire Ins. Co., 201 Mass. 172 87 N. B. 687. (6) Hibbs V. Brown, 190 N. Y. 167, 82 N. E. 1108, S. C. sec. 1-2; Union Stockyards Nat. Bank v. Bolan, 14 Idaho, 87 93* Pac. 508, S. C. sec. 184. 4: THE NEGOTIABLE INSTRUMENTS LAW. An mstrument in the following form : "$250. Aug. 14, 1907. Mr. W. T. will please pay to R. J. T., or order, two hundred and fifty dollars and charge to, my account. Due Oct. 1st, J. B.'.' is payable Oct. 1st, and is a bill of exchange. Torpey v. Tebo, 184 Mass. 307, 68 N. E. 223. A note expressed to be "payed when we get it from the brewery after date," is not negotiable. "Wray v. Miller (Misc. Rep.), 120 N. Y. Supp. 787. (c) Wettlaufer v. Baxter (Ky.), 125 S. W. 741, S. C. sec. 9-5. A certificate of deposit payable to "A or his assigns" is not negotiable under the N. I. L. nor under the law merchant. Zander v. N. T. Security & Trust Co., 39 Misc. R. 98, 78 N. Y. Supp. 900, affirmed 81 App. Div. 635, 81 N. Y. Supp. 1151. But a certificate of deposit payable to the order of the payee is negotiable. Dickey v. Adler (Mo. App.), 127 S. W. 593. A promissory note not payable to order or to bearer is not negotiable. A former statute, otherwise providing, is impliedly repealed by the N. I. L. Gilley v. Harrell, 118 Tenn. 115, 101 S. W. 424, S. C. see. 123. See also, as to first point, Fulton V. Varney, 117 App. Div. 572, 575, 102 N. Y. Supp, 608; West- berg V. Chicago Lumber Co., 117 Wis. 589, 94 N. W. 572, S. C. sec. 137. Defendant made a note on a printed form containing the words "or order," and in the lower left-hand comer the words "not transferable" in a small, contracted hand. When plaintiff acquired the note he did not notice these words. The court found that the defendant was not negligent in not writing the words "not transferable" more plainly. Held, that the written portions of a note prevail over the printed, and that the note was not negotiable. Tanners' Nat. Bank v. Lacs (App. Div.), 120 N. Y. Supp. 669. The N. I. L. was not cited in this case. (d) Rinker v. Lauer (Idaho), 88 Pae. 1057. Sec. 2. The sum payable is a sum certain within the meaning of this act, although it is to be paid— 1. With interest; (a) or 2. By stated installments; or 3. By stated installments, with a pro^nsion that upon default in payment of any installment or of interest^ the whole shall become due; (&) or 1 The words "or of interest" are omitted in the English Act. B. E. A. 6.9 (1) (c). THE NEGOTIABLE rNTSTRTJMBNTS LAW. 4. With exchange, whether at a fixed rate or at the current rate ; ^ or 5. With costs of collection or an attorney's fee, in case payment shall not be made at ma- turity.* (c) Tile Idaho, Iowa and North Carolina Acts omit, "Or of in- terest" in Subsection 3. The Nebraska Act adds: "Provided that nothing herein contained shall be construed to authorize any court to include in any judgment on an instrument made in this State any sum for attorney's fees or other costs not allowable in other cases." The North Carolina Act adds (Section 197, Pells Revisal, Section 2346) : "Nothing in this chapter shall authorize the enforcement of an authorization to confess judgment or a waiver of homestead and personal property exemptions or a provision to pay counsel fees for collection incorporated in any of the instruments mentioned in this 'chapter; but the mention of such provisions in such instruments shall not afEect the other terms of such instruments or the negotiability thereof." (a) Baumeister v. Kuntz, 53 Fla. 340, 42 So. 886, S. C. sees. 64-1, 109. (6) Thorp V. Mindeman, 123 Wis. 149, 101 N. W. 417, 68 L. R. A. 146, 107 Am. St. Rep. 1003, S. C. sec. 1-2; Mackintosh v. Gibbs (N. J.) 74 Atl. 708, S. C. sec. 66. (c) Semlle, the attorney's fee is due if the unpaid note is placed in the hands of an attorney for collection, although no suit is brought. A stipulation in a mortgage securing the note for fees in case of suit on the mortgage is cumulative and not re- strictive of the provision of the note. Morrison v. Ombaun, 30 Mont. Ill, 75 Pac. 953. A provision in a promissory note for attorney's fees "if collected by attorney, or if suit is brought on this note," is a promise to pay attorney's fees for collection only after dis- honor, and does not impair the negotiability of the note. First Natl. Bank of Shawano v. Miller, 139 Wis. 126, 120 N. W. 820, S. C. sec. 104. A provision in a note for an attorney's fee, but leaving blank the amount thereof, amounts to a promise to pay a rea- sonable sum as an attorney's fee, and does not render the note non-negotiable. Where plaintiff employed an attorney, it is 2 "According to an indicated rate of exchange, or according to a rate of exchange to he ascertained as directed by the bill." B. E. A. o. 9 (1) (d). 3 Not in B. E. A. 6 THE NEGOTIABLE INSTRUMENTS LAW. sufficient to show what is a reasonable fee, and it is not neces- sary to prove an express agreement as to fees, or that plaintiff paid the attorney before suit. MeCormick v. Swem (Utah) 102 Pae. 626. Under the law of Maryland a clause in a note agreeing to pay five per cent, commission for collecting it, if not paid when due, was construed to mean such commissions to the extent of five per centum in case the holder reasonably had to incur lia- bility for and pay such commissions, but not otherwise. Ches- tertown Bank v. Walker, 163 Fed. 510, 90 C. C. A. 140. The N. I. L. was not cited in this case. Sec. 3. An unqualified order or promise to pay is unconditional within the meaning of this act, though coupled with— 1. An indication of a particular fund out of which reimbursement is to be made', or a particular account to be debited with the amount; (a) or 2. A statement of the transaction which gives rise to the instrument. (6) But an order or promise to pay out of a particular fund is not unconditional. (a) An order drawn by the X Company directing payment of a certain sum, "on account of contract between you (the drawee) and the X Company" held negotiable, the words "on account of" not having the same effect as "out of the proceeds of." First Nat. Bank v. Lightner, 74 Kans. 736, 88 Pac. 59, 8 L. R. A. (N. S.) 231, 118 Am. St. Rep. 353. An order to pay on or before a fixed day and "charge the same to the $1,800 payment," is not conditional. Shepard v. Abbott, 179 Mass. 300, 60 N. E. 782. A bill of exchange is not made non-negotiable because it con- tains the words "charge to my account and credit according to a registered letter I have addressed to you." These words do not mean according to the conditions mentioned in the letter, but merely charge my account and credit according to the letter. In re Boyse, 33 Ch. Div. 612. (6) Ames: If taken literally, this subsection is mischievous because it might make negotiable a note with the words '* given as collateral security for A's debt to the payee," contrary to several decisions. And quaere whether it would not apply to a note with a statement that it is given for a chattel, which is to be the property of the payee until the note is paid, as to the negotiability of which there is a conflict. THE NEGOTIABLE INSTRUMENTS LAW. 7 Brewster: Admits that the provision was intended to apply- to a "chattel note." McKeehan: Sees no danger that courts will construe the sub- section as covering a note given as collateral. He also doubts its application to the so-called "chattel notes," and regards it as only a codification of the rule, that an indication of the nature of the transaction does not make the instrument condi- tional. Fulton V. Varney, 117 App. Div. 572, 102 N. T. Supp. 608, S. C. sec. 1-4; National Sav. Bank v. Cable, 73 Conn. 568, 48 Atl. 428, S. C. see. 1-2; Bank of Sampson v. Hatcher, 151 N. C. 359, 66 S. E. 308. A promissory note given for a chattel, and stipulating that the title to the chattel shall remain in the vendor-payee until the note is paid, is not conditional, and the maker is liable thereon although the chattel was destroyed before the maturity of the note. The N. I. L. was not mentioned. Whitlock v. Auburn Lum- ber Co. 145 N. C. 120, 58 S. E. 909, 12 L. R. A. (N. S.) 1214. See infra, pp. 165-166, 182-183, 224-227. . A note payable to the order of X which contains a provision that it is given subject to the approval of X for property received of X, and that the title to said property shall remain in X until the note is paid, is not negotiable. Worden Grocer Co. v. Bland- ing (Mich.), 126 N. W. 212. The court did not cite the N. I. L., and followed the case of Sloan v. MeCarty, 134 Mass. 245, upon this disputed question. An instrument contained an order for specified goods, and at the end of it was a promissory note in negotiable form, the sig- natures to which were the only signatures to the instrument. The note was capable of being detached, and was detached and transferred by defendant. Held, that the instrument as originally written was not a promissory note, that the detachment of the note part was a material alteration, and that defendant was guilty of forgery. State v. Mitton, 37 Mont. 366, 96 Pac. 926. Sec. 4. An instrument is payable at a determin- able future time, within the meaning of this act, which is expressed to be payable, (a) 1. At a fixed period after date or sight; or 2. On or before a fixed or determinable future time specified therein; ^ (6) or 1 Not in B. E. A. 8 THE NEGOTIABLE INSTRUMENTS LAW, 3. On or at a fixed period after the occurrence of a specified event, which is certain to happen, though the time of happening be uncertain. An instriunent payable upon a contingency is not negotiable, and the happening of the event does not cure the defect.^ The Wisconsin Act substitutes, for the last paragraph, the following: ''4. At a fixed period after the date or sight, though payable before then on a contingency. An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect, except as herein provided." (a) Thorp v. Mindeman, 123 Wis. 149, 101 N. W. 417, 68 L. R. A. 146, 107 Am. St. Rep. 1003, S. C. sec. 1; Schlesinger v. Schultz, 110 App. Div. 356, 96 N. T. Supp. 383, S. C. sees. 7-1, 71, 73 ; Uiyon Stock Yards Nat. Bank v. Bolan, 14 Idaho, 87, 93 Pac. 508, 125 Am. St. Rep. 146, S. C. sec. 184. (&) Torpey v. Tebo, 184 Mass. 307, 68 N. E. 223, S. C. sec. 1-3; Wray v. Miller (Misc. Rep.), 120 N. Y. Supp. 787, S. C. sec. 1-3. Notes, payable at a certain time, but secured by a mortgage executed as part of the same transaction, and reciting that the whole debt shall be due in case of sale or removal of the prop- erty by the mortgagor without the consent of the mortgagee, or in case the mortgagee deems himself insecure, are uncertain as to time and amount of payment and are therefore not nego- tiable. Iowa Nat. Bank v. Carter (Iowa), 123 N. W. 237, S. C. sees. 25, 56. Sec. 5. An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. But the negotiable char- acter of an instrument otherwise negotiable is not affected by a provision which— 1. Authorizes the sale of collateral securities in case the instrument be not paid at ma- turity; ^ (a) or 2 "An instrument expressed to be payable on a contingency is not a bill, and the happening of the event does not cure the defect." B. E. A. s. 11 (2). 3 A note is not invalid by reason only that it contains also a pledge of collateral security with authority to sell or dispose thereof." B. E. A. s. 83 (3). The B. E. A. appears to make no similar provision as to bills. THE NEGOTIABLE INSTRUMENTS LAW. 9 2. Authorizes a confession of judgment if the instrument be not paid at maturity; * (6) or 3. Waives the benefit of any law intended for the advantage or protection of the obligor ; * or 4. Gives the holder an election to require some- thing to be done in lieu of payment of money.* But nothing in this section shall validate any provision or stipulation otherwise illegal. The North Carolina Act qualifies subsection 2 (see supra, under section 2). The Illinois Act adds the words "under this Act," at the end of the first sentence, and omits the words "if the instrument be not paid at maturity," in subsection 2. The Kentucky Act omits subsection 3. The Wisconsin Act adds to the last paragraph: "Or authorize the waiver of exemptions from execution." (a) A note, reciting that the title to property for which it is given shall remain in the payee, and that he shall have the right to declare the money due and take possession of the property whenever he may deem himself insecure, "even before the maturity of the note," is not negotiable. Kimpton v. Stude- baker Bros. Co., 14 Idaho, 552, 94 Pac. 1039, 125 Am. St. Rep. 185. (6) A note which contains a provision authorizing a confession of judgment at any time thereafter, whether due or not, is not negotiable. Wisconsin Yearly Meeting v. Babler, 115 Wis. 289, 91 N. W. 678. Nor is a note containing an authority to confess judgment "as of any term." Milton Nat. Bank v. Beaver, 25 Pa. Superior Ct. 494. Sec. 6. The validity and negotiable character* of an instrument are not affected by the fact that — 1. It is not dated; {a) or 2 Not in B. E. A. 3 Not in B. E. A., except that section 16 (2) provides ttat the drawer of a bill and any indorser may insert therein an express stipulation "waiving as regards himself some or all of the holder's duties." *The English Act omits the words "and negotiable character." B. E. A. 8. 3 (4). 10 THE NEGOTIABLE INSTRUMENTS LAW. 2. Does not specify the value given, or that any value has been given therefor; (&) or 3. Does not specify the place 'where it is drawn or the place where it is payable; or 4. Bears a seal;^(c) or 5. Designates a particular kind of current money in which payment is to be xaade.^(d) But nothing in this section shall alter or repeal any statute requiring in certain cases the nature of the consideration to be stated in the instrument.* The Illinois Act begins subsection 5 with the words, "Is payable in currency or current funds: or," and omits the last paragraph of said subsection. (a.) Church v. Stevens, 56 Misc. R. 572, 107 N. Y. Supp. 310; Bank of Houston v. Day (Mo. App.), 122 S. W. 756, S. C. sec. 13. (h) McLeod v. Hunter, 29 Misc. R. 558, 61 N. Y. Supp. 73, S. G. sec. 24. (c) St. Paul's Episcopal Church v. Fields, 81 Conn. 670, 72 AtL 145 ; Amd V. Heckert, 108 Md. 300, 70 Atl. 416. (d) A cheek payable "in current funds" is not payable in money and is not negotiable. Dille v. White, 132 Iowa, 327, 109 N. W. 909, 10 L. R. A. (N. S.) 510, following former Iowa cases, but not citing the N. I. L. S. C. sec. 65. Sec. 7. An instrument is payable on demand— 1. Where it is expressed to be payable on demand, or at sight, or on presentation; (a) or 2. In whiJch no time for payment is expressed. (&) 2 "In the case of a corporation, where, by this Act, any instrument or writing is required to be signed, it is sufficient if the instrument or writing " be sealed with the corporate seal. But nothing in this section shall be con- strued as requiring the bill or note of a corporation to be under seal." B. E. A. s. 91 (2). 3 Not in B. E. A. THE NEGOTIABLE INSTRUMENTS LAW. 11 Where an instrument is issued/ accepted, or in- dorsed when overdue, it is, as regards the person so issuing,^ accepting, of indorsing it, payable on de- mand. (ft) A note payable on demand after date is a demand note, and presentment need not be made the day after date, but only within a reasonable time, to hold an indorser. Hardon v. Dixon, 77 App. Div. 241, 78 N. T. S. 106, holding that the Statute of Limitations did not begin to run on such a note until the day after its date, said to have no application. Schlesinger v. Schultz, 110 App. Div. 356, 96 N. Y. S. 383, S. C. sees. 71, 73. Defendant indorsed a note which was signed by the maker, but was blank as to date, time of payment and payee. The note was delivered to the plaintiff for value by the maker, who told the plaintiff to fill in the dates at any time she wanted money, because he did not know when he would be able to pay. The maker dis- appeared nearly three years later, and three months thereafter plaintiff dated the note the day of its delivery to her, and made it payable the day it was filled in, and presented it the same day. Held, that the defendant was liable, that the note was not a demand note requiring presentment within a reasonable time after its issue to charge the indorser. But no interest was recover- able, because when a note does not call for interest and there is no blank in which to add the words "with interest," the holder is not authorized to add such words. Usefof v. Herzenstein, 65 Misc. Eep. 45, 119 N. T. Supp. 290. (&) Didato V. Coniglio, 50 Misc. R. 280, 100 N. Y. Supp. 466, S. C. sec. 17-5 ; McLeod v. Hunter, 29 Misc. E. 558, 61 N. Y. Supp. 73, S. C. sec. 24. Sec. 8. The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order. ^ It may be drawn payable to the order of — 1. A payee who is not maker, drawer, or drawee;^ (a) or 1 The words '"issued" and "issuing" are omitted in the English Act. B. E. A. ». 10 (2). 1 "A bill is payable to order which is expressed to be so payable, or which is expressed to be payable to a particular person, and does not contain words prohibiting transfer or indicating an intention that it should not be trans- ferable." B. E. A. s. 8 (4). See also infra, p. 130, n. 1, and p. 150 n. 34. 2 Not in B. E. A. 12 THE NEGOTIABLE INSTRUMENTS LAW. 2. The drawer or maker ; or 3. The drawee; or 4. Two or more payees jointly; ' or 5. One or some of several payees ; ^ or 6. The holder of an office for the time being. Where the instrument is payable to order the payee must be named or otherwise indicated therein with reasonable certainty.* The Illinois Act interpolates after subsection 6 the following: "7. An instrument payable to the estate of a deceased person shall be deemed payable to the order of the ad.ministrator or execu- tor of his estate." (a) "Pay to order" means "pay to my order," dnd a bill so reading and indorsed by the drawer is a valid bill of exchange. Chamberlain v. Young [1893], 2 Q. B. 206. Sec. 9. 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 non-existing person, and such fact was known to the person making it so pay- able; ^(a) 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, (c) 3 "A bill may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees." B. E. A. s. 7 (2). * "When the bill is not payable to bearer, the payee must be named or otherwise indicated therein with reasonable certainty." B. E. A. s. 7 ( 1 ) . 1 Not in B. E. A. Chalmers ( 6th ed. 25 ) says "a bill payable 'to J. C. or bearer' is of course payable to bearer." 2 "Where the payee is a fictitious or non-existing person the bill may be treated as payable to bearer." B. B. A. s. 7 (3). s Not in B. E. A. THE NEGOTIABLE INSTKUMENT8 LAW, 13 ' The Illinois Act substitutes for subsection 3 the following: "3. "When it is payable to the order of a person known by the drawer or maker to be fictitious or non-existent, or of a living person not intended to have any interest in it, ' ' and for subsection 5, the following: "5. When, although originally payable to order, it is indorsed in blank by the payee or a subsequent in- dorsee. ' ' (a) Ames: Section 9-3 ignores the tenor of the instrument. By this section and section 16, if a note payable to a fictitious payee is stolen from the maker and indorsed by the thief in the name of the payee, the maker would be liable to a holder in due course. The section should be made to read, " If a bill be drawn, or a note made, payable to the order of a person known by the drawer or maker to be fictitious or non-existent, or of a living person not intended to have any interest in the instrument, and if such bill or note be indorsed by the drawer or maker in the name of the nominal payee, the instrument will have the same effect as a bill or note payable to the order of, and endorsed by the drawer or maker respectively." As a matter of actual experience the maker of an instrument, with a known fictitious payee, does not intend it to be payable to bearer, but always indorses it in the fictitious name before is- suing it. Beewstee: The case of the stolen note put by Dean Ames would be rare. The section seems to cover common cases, such as notes payable to unincorporated associations, estates of deceased persons and the like. But upon the reply of Professor Ames, that if the section applies to the ease of a note payable to a joint stock company incorporated, or to a partnership which is an incorporated association, or to the estate of a deceased person, the provision is still more mischievous, Judge Brewster seems to claim that he used the case merely as an illustration of a common case, without saying that the section applied to such a case. McKeehan: There are strong arguments in favor of Professor Ames' view. But the section codifies the law since Minet v. Gib- son, in 1791. TechnieaUy it is wrong to permit the transfer with- out indorsement of an instrument which appears on its face to require an indorsement for a valid transfer, but there is no great danger in the ease of an unindorsed stolen note payable to a fictitious payee, because no one would discount it. If indorsed by the thief to a holder in due course, still the maker's conduct made the fraud possible, and he should bear the loss. An interpreta- tion which would make payable to bearer notes payable to tmin-' • eorporated associations or to the estates of deceased persons would be opposed to reason and authority, and would work much harm. The section does not suggest such a change in the law. A requested a bank to draw a draft to the order of C Bros, an existing firm who were ignorant of the transaction. A indorsed 14 THE NEGOTIABLE INSTKUMENTS LAW. the draft in the name of C Bros., and the indorsee collected it from the drawee. Held, that the knowledge of the drawer of the fictitious or non-existing character of the payee controls, not the knowledge of the person at whose request the draft is drawn. That the draft was not payable to bearer and that the drawee could recover the money from the indorsee. Seaboard Nat. Bank V. Bank of America, 193 N. Y. 26, 85 N. E. 829 ; Jordan Marsh Co. V. Nat. Shawmut Bank, 201 Mass. 397, 87 N. E. 740 accord. See also cases cited under section 23. A clerk had a power of attorney to draw checks on his employer's bank account. The clerk fraudulently drew checks to X, an existing person, but who had no interest in the cheeks and was not intended by the clerk to receive them. The clerk indorsed the name of X and negotiated the checks for his own purposes, and the drawee bank paid them in good faith. Held, that the payee was a fictitious person within the section, that the cheeks were payable to bearer and that the payment by the bank was rightful. Snyder v. Corn Exch. Nat. Bank, 221 Pa. 599, 70 Atl. 876, S. C. sec. 124 The name of the drawer was forged to checks made payable to real persons. It did not appear who the forger was, but he knew that the payees would never have any interest in the checks. The drawee biank paid the cheeks to defendant, a holder in due course, on the forged indorsement of the payee. Held, that the payees were fictitious, that the cheeks were payable to bearer, and that the drawer could not recover the money from defendant. Trust Company of America v. Hamilton Bank, 127 App. Div. 515, 112 N. T. Supp. 84. An instrument knowingly made payable to the order of a fictitious or non-existing person is negotiable without indorsement, but to recover upon the instrument as payable to bearer, it must be shown that the maker had knowledge of the fiction, and if the plaintiff declares only upon the instrument as payable to order, it is not necessary to decide whether there is evidence of such knowledge, as the issue is not open. Boles v. Harding, 201 Mass. 103, 87 N. E. 481. This ease is meagerly reported, but it seems to hold that the plaintiff, having declared that the instrument was indorsed by the payee, must prove it or fail, which is a harsh rule, as he may not be aware of the fictitious character of the payee before the trial. In reading the following English cases it must be remembered that the Bills of Exchange Act treats an instrument, payable to a fictitious or non-existing person, as payable to bearer, without regard to the knowledge of the person making it so payable. See supra, p. 12, n. 2. A bill payable to a real person not intended by the drawer to have any interest in it is payable to a fictitious person, and is to be treated as payable to bearer, and the acceptor's ignorance of the fiction is immateri-". Bank of England v. Vagliano [1891], A. C. 107. The drawer's ignorance that the payee is non-existing is also immaterial. Clutton v. Attenborough [1897], A. C. 90. But if THE NEGOTIABLE INSTKUMENTS LAW. 15 the payee is a real person intended by the drawer to be the payee, hfi is not a fictitious person, and the drawer .is not liable to one claiming under a forged indorsement of the payee's name, although the payee really had no interest in the instrument. Bank of Eng- land V. Vagliano and Glutton v. Attenborough, distinguished. Vin- den V. Hughes [1905], 1 K. B. 795; North &, South Wales Bank V. Macbeth [1908], App. Gas. 137. (6) In an action against the drawer of a cheek payable to cash, the production of the check is prima facie evidence of ownership. Cleary v. DeBeck Co., 54 Misc. E. 537, 104 N. Y. Supp. 831. (c) Ames: The language of subsection 5 is not well chosen. 1. Taken literally a note payable to the order of B and bearing the anomalous blank indorsement of C, would be payable to bearer, which is, of course, an absurdity. 2. It means that an instrument expressly payable to bearer so continues, although afterward specially indorsed; but that if an instrument payable to order has become payable to bearer by being indorsed in blank, it ceases to be payable to bearer, if afterwards indorsed specially, an illogical and undesirable distinction. 3. If an instrument, indorsed in blank, and subsequently indorsed specially is transferred by the special indorsee by delivery merely, the transferee can sue prior parties only in the name of his assignor. But as owner, though not according to this subsection, holder, he ought to have the right to strike out the special indorsement and sue as bearer. But it should be provided that, though payable to bearer, a subsequent special indorsement carries notice that the property in the instrument was once vested in the special indorsee, so that, in the absence of an indorsement or assignment by him, all subse- quent holders will hold for his benefit. Beewstee: Professor Ames' first objection is untenable; his construction is impossible. As to his third objection, section 40 gives the transferee the right to sue in his own name. And section 48 gives the right to strike out any indorsements not necssary to title. McKeehan: Professor Ames' second objection is not tenable. The distinction noted is logical and in accordance with the mercantile view. As to his third objection, the transferee, by delivery from the special indorsee of an instrument payable to order and indorsed in blank, should not have the right to strike out indorsements necessary to his title. Under Smith v. Glarke, 2 Peake, 225, the holder had the right to strike out all indorsements after the first blank indorsement. But section 9-5 was adopted expressly to do away with this doctrine. Section 48 gives the right to strike out only indorsements not necessary to the holder's title, and in the case put the indorsement to the special indorsee is necessary to his title, and therefore can not be stricken out. As to Judge Brewster's statement, that section 40 gives the transferee by de- 16 THE NEGOTIABLE INSTRUMENTS LAW. livery from the special indorsee the right to sue in his own name, if this is so, then Smith v. Clarke is still in force, and section 9-5 which was inserted to overthrow that case, is a nullity. See mfra, under section 40, for further discussion. A promissory note indorsed in blank by the payee is pay- able to bearer. Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959, S. C. sees. 16, 56, 124, 191; Unaka Nat. Bank v. Butler, 113 Tenn. 574, 83 S. "W. 655 (a check), S. C. sec. 56. The indorsement in blank of a non-negotiable promissory note does not make it negotiable, and the indorser is liable only as an assignor. Wettlaufer v. Baxter (Ky.), 125 S. "W. 741. Sec. 10. The instrument need not follow the lan- guage of this act, but any terms are sufficient which clearly indicate an intention to conform to the require- ments hereof.^ Idaho, Iowa and Wyoming Acts insert the word "negotiable" be- tween the words "The" and "instrument." The Wisconsin Act (Nos. 1675-10) adds "Memoranda upon the face or back of the instrument, whether signed or not, material to the contract, if made at the time of delivery, are part of the instrument and parol evidence is admissible to show the circum- stances under which they were made." A certificate of deposit reciting that "X has deposited in the Y bank three thousand dollars to the credit of himself, payable in current funds on return of this certificate properly indorsed on July 1, 1909" is a negotiable instrument under the N. I. L. For- rest V. Safety Banking & Trust Co. (E. D. Pa.), 174 Fed. 345. Sec. 11. Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie to be the true date of the making, draw- ing, acceptance, or indorsement as the case may be. Sec. 12. The instrument is not invalid for the rea- son only that it is antedated or postdated, provided this is not done for an illegal or fraudulent purpose.* (a) 1 Not in B. E. A. 2 "A bill is not invalid by reason only .that it is antedated or postdated, or that it bears date on a Sunday." B. E. A. s. 13 (2). THE NEGOTIABLE IN8TEUMENT8 LAW. 17 The person to whom an instrument so dated is deliv- ered acquires the title thereto as of the date of delivery.^ The Missouri Act by an evident clerical error reads "valid" instead of "invalid." Bank of Houston v. Day (Mo. App.), 122 S. W. 756, S. C. sec. 13. (a) An indorsee of a postdated check is not put upon inquiry merely because of its negotiation prior to its date. Albert v. Hoffman, 64 Misc. Rep. 87 ; 117 N. Y. Supp. 1043, S. C. sec. 25. A post-dated check is not invalid, and may be properly stamped as a bill payable on demand. Royal Bank v. Tottenham, [1894] 2 Q. B. 715 ; Hitchcock v. Edwards, 60 L. T. Rep. 636. A post-dated check is not irregular within sec. 29 (1) so as to charge the holder with equities. Hitchcock v. Edwards, 60 L. T. Rep. 636. Sec. 13. Where an instrument expressed to be payable at a fixed period after date is issued undated, or where the acceptance of an instrument payable at a fixed period after sight is undated, any holder may insert therein the true date of issue or acceptance, and the instrument shall be payable accordingly, (a) The insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted is to be regarded as the true date.* (a) An undated note, payable four months after date, was de- livered to the payee by an accommodation indorser on December 1st. The payee, without authority, filled in the date December 30th. Held, that in the absence of other authority the payee could only fill in the blank with the date of issue and that the indorser was discharged. Bank of Houston v. Day, (Mo. App.), 122 S. "W. 756. 3 Not in B. El. A. * "Provided that ( 1 ) where the holder in good faith and by mistake inserts a wrong date and (2) in every case where a wrong date is inserted, if the bill subsequently comes into the hands of a holder in due course, the bill shall not be avoided thereby, but shall operstte and be payable as if the date so inserted had been the true date." B. E. A. s. 12, second paragraph. 18 THE NEGOTIABLE INSTKUMENTS LAW. Sec. 14. Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. (a) And a signature on a blank* paper delivered by the person making the signature in order that the paper may be converted into a nego- tiable instrument ojierates as a prima facie authority to fill it up as such for any amount.*, In order, how- ever, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time.(&) But if any such instru- ment, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time.(c) The Illinois Act interpolates the words "issued or" before "negotiated" in the last sentence. The Wisconsin Act inserts "prior to negotiation" before the words "by filling." The "Wisconsin Act also omits the words "prima facie" in the seventh line of the section. The Kentucky Act uses "negotiable" in the last paragraph in- stead of "negotiated," an evident clerical error. Rodgers v. Baker (App. Div.), 122 N. Y. Supp. 91. (a) The word "material" in this section is not synonymous with "necessary" so as to restrict the right of filling a blank to something essential to a complete negotiable instrument. There- fore the name of a place may be written after delivery in a blank space after the word "at" and the instrument will not be thereby avoided in the hands of a holder in due course. Johnston v. Hoover, 139 Iowa, 143 ; 117 N. "W. 277. B Tha English Act interpolates the word "stamped." B. E. A. s. 20 ( 1 ) . 8 B. E. A. B. 20 ( 1 ) provides that the blank signature shall operate as prima facie authority to fill up "for any amount the stamp will cover, using the signature for that of the drawer, acceptor, or an indoraer." THE NEGOTIABLE INSTEITMENTS LAW. 19 "Where the maker of a note signed and delivered it, leaving a blank after the amount between the words "at" and "value re- ceived,-" the payee or any subsequent holder was authorized to fill the blank with a place of payment either within or without the State, and such act was not an alteration avoiding the note. Diamond Distilleries Co. v. Gott (Ky.), 126 S. W. 131. Where a note is drawn payable with interest at the rate of per cent., it draws interest at the legal rate, although the blank is not filled. Hornstein v. Cifuno (Neb.), 125 N. W. 136. The N. I. L. was not cited in this case. (b) The burden is on the plaintiff, a party prior to the com- pletion of an instrument signed in blank, to prove that the blanks were filled up within a reasonable time. From October to the fol- lowing June 9 is, if unexplained, more than a reasonable time. Madden v. Gaston, 121 N. Y. Supp. 951, semble, S. C. sec. 16. Defendant signed a note in blank on the statement that it was to be used to borrow money for a co-defendant who was jointly liable with the plaintiff to a bank. The note was filled up in the presence of the plaintiffs, who were made payees, and delivered to them, and they then paid the co-defendant's share of the debt to the bank. Held, that the note was filled up in accordance with the authority given, that the payees were holders for value and could recover on the note. Hermann's Ex'r. v. Gregory (Ky.), 115 S. W. 809, S. C. sec. 25. (c) First Nat. Bank v. Gridley, 112 App. Div. 398, 98 N. Y. Supp. 445, S. C. sees. 66, 109, 119-4; Stanley v. Davis, 32 Ky. Law E. 1135; 107 S. W. 773. The purchaser of a negotiable instrument with an unfilled blank is put upon inquiry as to the authority of the person intrusted with the incomplete instrument. Sec. 14 N. I. L. changes the law. Guerrant v. Guerrant, 7 Va. L. Reg. 639 (payee) ; Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N. B. 646 ; 97 Am. St. Rep. 426 (amount), S. C. sec. 52; Huntington Nat. Bank v. BresUn (Neb.), 128 N. W. 659. Defendant signed a note in blank and gave it to A with the authority to fill it up not in excess of $200. A filled it uj) for $2,000 payable to plaintiff, and delivered it to him in payment of a debt. Held, that defendant was not liable to plaintiff on the note, although plaintiff was ignorant of A's abuse of his authority. Plaintiff was a holder, but not a holder in due course to whom the instrument had been "negotiated." Herdman v. "Wheeler, [1902] 1KB 361, infra, followed, "Vander Ploeg v. "Van Zuuk, 135 Iowa, 350, 112 N. "W. 807 ; 13 L. R. A. (N. S.) 490. But see Boston Steel & Iron Co. V. Steuer, 183 Mass. 140, 66 N. B. 646, 97 Am. St. Rep. 426, holding that the payee of a completed check received in pay- ment of a debt due from the remitter of the check is a holder in due course, under sec. 52, without regard to the question whether it has been "negotiated" within sec. 14. See statement of this case infra, sec. 52. See also Lloyd's Bank v. Cooke, [1907] 1 K. 20 THE NEGOTIABLE INSTEUMENTS LAW. B. 794, infra, in which Herdman v. Wheeler is criticised by Fletcher Moulton, L. J. ' A note signed in blank was filed up in excess of the authorized amount, the name of C inserted as payee, and the completed note delivered to C, who took in good faith and for value. Held, that this was not a negotiation to a holder in due course within the meaning of the proviso to sec. 20 (2) (sec. 14, N. I. L.), and C could not recover. Herdman v. "Wheeler, [1902] I K. B. 361. (See criticism in 15 Harvard Law Rev. 579.) But where defendant signed a note as maker in blank with au- thority to another to fill it up with a certain sum payable to plain- tiff, and it was filled up for a larger sum and delivered to plaintiff, who had no notice of the fraud, held, that independently of section 20 (2), (see. 14, N. I. L.), defendant was estopped to deny the validity of the note as against the plaintiff. Herdman v. Wheeler distinguished, Lloyd's Bank v. Cooke [1907], 1 K. B. 794. The payee in such a case is a holder in due course, per Fletcher Moulton, L. J. n. 805, 809. Where, however, the defendant signed blank forms of promissory notes and left them with his attorney, but with no authority to complete and issue them until so instructed by telegram or letter, and the attorney without further instructions filled up the forms, making plaintiff payee, and plaintiff bought the notes hona fide for value, but although he knew that they had been signed in blank, and were held by the attorney under a power of attorney, made no inquiries as to its terms. Held, that as defendant had intrusted the blank forms to his attorney as custodian merely, and had not given him authority to issue them as negotiable instruments he was not estopped to deny the validity of the notes. Also per Fletcher Moulton, L. J., that plaintiff was bound to inquire into the attorney's authority. Lloyd's Bank v. Cooke distinguished. Smith v. Prosser, [1907] 2 K. B. 735. See also Glenie v. Bruce Smith [1908] 1 K. B. 263 infra, sec. 64-2. Sec. 15. Where an incomplete instrument lias not been delivered it will not, if completed and nego- tiated, without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery.'' Polizzotto V. People's Bank (La.), 51 So. 843. Sec. 16. Every contract on a negotiable instrument is incomplete and revocable until delivery of the »Not in B. E. A. THE NEGOTIABLE IN8TKUMENTS LAW. 21 instrument for the purpose of giving effect there- to.* (a) As between immediate parties, and as regards a remote party other than a holder in due course, the deliver}^, in order to be effectual, must be made either by or under the authority of the party making, draw- ing, accepting, or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. (6) And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentionaP delivery by him is presumed until the contrary is proved. The North Carolina Act omits the word "accepting" in the second sentence. The Kansas Act omits the third sentence. Ames: The doctrine of section 16, that one who has signed a negotiable instrument complete on its face is liable thereon to a holder in due course, although it was never delivered by him, but lost by him, or stolen from him, or even from some one else after his death, is somewhat startling at first. But it should commend itself on teflection. It has been adopted, after much consideration, in Germany. The Biirgerliches Gesetzbuch, section 794, referred to by Pro- fessor Ames, applies to other instruments payable to bearer, but not to bills and notes, since such instruments payable to bearer are not authorized by the German code. Section 16 (N. I. L.) goes beyond the German law, for it applies even to the case of an undelivered bill or note made payable to 8 B. E. A. s. 2 1 ( 1 ) interpolates here the additional provision, "Provided that where an acceptance is written on a bill and the drawee gives notice to or according to the directions of the person entitled to the bill that he has accepted it, the acceptance then becomes complete and irrevocable." 9 The English Act reads "unconditional" instead of "intentional." B. E. A. e. 21 (3). 22 THE NEGOTIABI^ INSTKUMENTS LAW. order, stolen by the payee, indorsed by him and negotiated to a holder in due course, thus codifying such extreme eases as Clarke V. Johnson, 64 111. 296 and Shipley v. Carroll, 45 111. 285. Ed. (a) A bill of exchange was indorsed and handed to the payee's bankers to be discounted. Some days later the bankers credited the payee's account with the bill. Held, that the property in the bill did not pass to the bankers until it was discounted by them. Dawson v. Isle, [1906] 1 Ch. 633. (b) Colborn v. Arbecam, 54 Misc. R. 623, 104 N. Y. S. 986; Moak V. Stevens, 45 Misc. R. 147, 91, N. Y. Supp. 903; Viets v. Sil- ver, 15 N. Dak. 51, 106 ,N. W. 35; Borough of Montvale v. Peoples' Bank, 74 N. J. Law, 464, 67 Atl. 67, S. C. sec. 56 ; Baumeister v. Kuntz, 53 Pla. 340, 42 So. 886, S. C. sec. 64-1, 109; BuzzeU v. Tobin, 201 Mass. 1, 86 N. E. 923. A holder in due course can recover upon a negotiable note in- dorsed in blank by the payee and stolen from him. Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959 (action against payee as indorser), S. C. sees. 9-5, 56, 124, 191; Greeser v. Sugarman, 37 Misc. R. 799, 76 N. Y. Supp. 922 (action against maker-payee) ; Poess V. Twelfth Ward Bank, 43 Misc. R. 45, 86 N. Y. Supp. 857 (check), semhle, S. C. sees. 51, 187. Evidence of a contemporaneous oral agreement is admissible as against parties not holders in due course to show that the instru- ment was not to take effect until some condition was performed. Hodge v. Smith, 130 Wis. 326, 110 N. W. 192, S. C. sees. 52-3, 54, 55 ; see also Key v. Usher, 30 Ky. L. Rep. 667, 99 S. W. 324, in which, however, the N. I. L. was not cited. Evidence of a contemporaneous verbal agreement that the payee would renew the note twice for a similar period, and at the end of that time would accept a re-transfer of stock, for which the note was given, at the maker's election, was admissible to show that the note was never delivered with intent that it should constitute a completed instrument in presenti. Bed quaere, whether this was not a case of condition subsequent which could not be shown by parol to defeat the note? See dissenting opinions. Paulson v. Boyd, 137 Wis. 241, 118 N. W. 841, S. C. sec. 52-3. Under the last clause of section 16 and section 14, the burden is on the defendant to show the agreement under which a negotiable instrument signed in Wank was delivered and that the terms have been violated. Madden v. Gaston (Misc. Rep.) 121 N. Y. Supp. 951, S. C. see. 14. A bill of exchange payable to the order of the drawer does not come into existence until it is delivered as well as indorsed by the payee. StoufPer v. Curtis, 198 Mass. 560, 85 N. E. 180. In Sheffer v. Fleischer, 158 Mich. 270, 122 N. W. 543, holding, that no delivery is a defense even as against a holder in due course, the date of the notes does not appear but they must have been executed before the N. I. L. was adopted in that State (June 1905) otherwise the decision is erroneous. THE NEGOTIABLE INSTRUMENTS LA"W". 23 Sec. 17. Where the language of the instrument is ambiguous or there are omissions therein, the fol- lowing rules of construction apply:— 1. "Where the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum denoted by the words is the sum payable; but if the words are am- biguous or uncertain, reference may be had to the figures to fix the amount ; ^^ 2. Where the instrument provides for the payment of interest, without specifying the date from which interest is to run, the interest runs from the date of the instrument, and if the instru- ment is undated, from the issue thereof; (a) 3. Where the instrument is not dated, it wiU be considered to be dated as of the time it was issued ;^^ 4. Where there is a conflict between the written and printed provisions of the instnmient, the written provisions prevail;" 5. Where the instrument is so ambiguous that there is doubt whether it is a bill or note, the holder may treat it as either at his election; "(6) 6. "Where a signature is so placed upon the instru- ment that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser;^^(c) 7. Where an instrument containing the words, "I promise to paj^," is signed by two or more 10 The last clause of 1 is not in the corresponding section of the English Act. B. E. A. s. 9 (2). 11 Not in B. E. A. 12 "Where a. person signs a hill otherwise than as drawer or acceptor, he thereby incurs the liabilities of an indoiser to a, holder in due course." B. E. A. s. 56. 24 THE NEGOTIABLE INSTRUMENTS LAW. persons, they are deemed to be jointly and severally liable thereon.*^ ( 117 N. W. 269. Sec. 26. Where value lias at any time been given for t?ie instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time. Black V. Bank of Westminster, 96 Md. 399, 54 Atl. 88, S. C. sees. 29, 56; Petrie v. Miller, 57 App. Div. 17, 67 N; Y. Supp. 1042, afSrmed 173 N. Y. 596, S. C. see. 25 ; Hover v. Magley, 48 Misc. R. 430, 96 N. Y. Supp. 925. An allegation in an answer that the note was executed and in- dorsed without any consideration is insufficient, the allegation of the complaint that the payee indorsed and delivered the note for value befoi-e maturity having been admitted. Rogers v. Morton, 46 Misc. R. 494, 95 N. Y. Supp. 49, S. C. sees. 30, 52. The holder of a note for $2,000, surrendered it for a payment of $500, and a new note for $1,500 executed by the maker and in- dorsed by defendant. Held, that the holder of the new note was a holder for value. Van Norden Trust Co. v. L. Rosenberg, 62 Misc. R. 285, 114 N. Y. Supp. 1025. Sec. 27. Where the holder has a lien on the instru- ment, arising either from contract or hj implication of law, he is deemed a holder for value to the extent of his lien. Brooks V. Sullivan, 129 IST. C. 190, 39 S. B. 822, S. C. see. 25 ; Payne v. Zell, 98 Va. 294, 36 S. E. 379, S. C. sec. 25; Mersick v. Alderman, 77 Conn. 634, 60 Atl. 109, S. C. sec. 52; Rogers v. Mor- ton, 46 Misc. R. 494, 95 N. Y. Supp. 49, S. C. sees. 26, 30, 52; Bacterman v. Butcher, 95 App. Div. 213, 88 N. Y. Supp. 685 1 Petrie v. Miller, 57 App. Div. 17, 67 N. Y. Supp. 1042, affirmed 173 N. Y. 596, S. C. see. 25; Brown v. James (Neb.), 114 N. W. 591. See Redfern v. Rosenthal, 86 L. T. Rep. 855. infra, sec. 52-2. 36 THE NEGOTIABLE INSTKUMENTS LAW. Sec. 28. Absence or failure of consideration is mat- ter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascer- tained and liquidated amount or otherwise.^^ Lynds v. Van Valkenburgh, 77 Kans. 24, 93 Pac. 615; Padgett V. Lewis, 54 Fla. 177, 45 So. 29; Green v. Ostrander (Mich.), 125 N. W. 735 ; Joveshof v. Roekey, 58 Misc. Rep. 559, 109 N. Y. Supp. 818, S. C. see. 59. One of two joint makers of a note can not testify that he signed it because two names were necessary and on condition that he was not to pay the note but that the other maker was to have the money and pay the note. Rowe v. Bowman, 183 Mass. 488, 67 N. E. 636, S. C. sec. 125. A check was made by A to the order of B to be used to pay C for withdrawing a charge of rape against B, alleged to be a false charge, and to prevent his rearrest on said charge. The check was indorsed by B to C and by C to plaintiff, without consideration, and upon payment being stopped, plaintiff sued A. Held, that A could not defend on the ground of duress which was not exercised on him, but that he could defend on the ground of want of consid- eration. "Weiss V. Rieser, 62 Misc. Rep. 292, 114 N. Y. Supp. 983. In a suit between remote parties to a bill of exchange, as the payee or indorsee and the acceptor, to sustain the defense of no consideration, there must have been no consideration received by the defendant and plaintiff must have given no consideration. National Park Bank v. Saitta, 127 App. Div. 624, 111 N. Y. Supp. 927, S. C. sec. 133. ■ The N. I. L. was not cited on this point. Sec. 29. An a,ccommodation 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 ]>er- son. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party. The Illinois Act omits the words "without receiving value therefor" in line three and adds at the end of the section 'Not in B. B. A. THE NEGOTIABLE INSTRUMENTS LAW. 37 "and in ease a transfer after maturity was intended by the ac- commodating party notwithstanding such holder acquired title after maturity." Ames: The clause "without receiving value therefor" is inac- curate and misleading. If A gives B $10 to induce B to sign a note for $1,000 for A's accommodation, no one would doubt that B would be an accommodation party, yet if he is, the above clause is erroneous. Bbewstee: The definition in section 29 is the same as in the cases, text books and law lexicons. McKeehan: As stated by Mr. Arthur Cohen, "Without receiving value therefor" means without receiving value for the bill and not without receiving any consideration for lending his name. So B is an accommodation party if he received no value for the instrument, though he did receive $10 for signing his name to it. [See Morris County Brick Co. v. Austin, infra, in which this construction is adopted. — Ed.] Packard v. Windholz, 88 App. Div. 365, 84 N. Y. Supp. 666, S. C. sees. 66, 124; Metropolitan Printing Co. v. Springer, 90 N. Y. Supp. 376 ; Mersiek v. Alderman, 77 Conn. 634, 60 Atl. 109, S. C. sec. 52; White v. Savage, 48 Oregon 604, 87 Pac. 1040; In re Troy & Cohoes Shirt Co., 136 Fed. Rep. 420, S. C. sec. 56 ; Hover v. Magley, 48 Misc. R. 430, 96 N. Y. Supp. 925 ; Willard v. Crook, 21 App. D. C. 237, S. C. sec. 66; Nat. Citizens' Bank v. Toplitz, 81 App. Div. 593, 81 N. Y. Supp. 422, S. C. sec. 119 ; Gansevoort Bank v. Gilday, 53 Misc. R. 107, 104 N. Y. Supp. 271; In re Hopper-Morgan Co., 156 Fed. 525; Federal Nat. Bank v. Cross Creek Co., 220 Pa. 39, 68 Atl. 1018; Middleborough Nat. Bank V. Cole, 191 Mass. 168, 77 N. B. 781; Lowell v. Bickford, 201 Mass. 543, 88 N. E. 1; Richards v. Market Exch. Bank Co. (Ohio), 90 N. E. 1000, S. C. sees. 119, 124. In re MeCord, 174 Fed. Rep. 72, S. C. see. 68. Defendant made a note to its own order and indorsed it for the accommodation of X, who also indorsed the note, which was nego- tiated to the plaintiff for value. Held, that evidence was not admissible to show an oral agreement between all the parties that the note was to be paid by X. Gerli v. National Mill Supply Co. (N. J.), 73 Atl. 252. Plaintiff was payee of a note taken for bricks sold to the maker through defendant, who demanded his commission on the sale. Plaintiff refused to pay until the maker paid for the bricks unless defendant would endorse the note, which defendant did and was paid his commission. The note was discounted by a bank and dishonored and notice given to defendant. Plaintiff took up the note and sued defendant on it. A verdict was directed for the plaintiff. Held error, that whether defendant's indorsement was for plaintiff's accommodation was a question for the jury. Also, 38 THE NEGOTIABLE INSTBUMENTS LAW. that neither the promise to pay a debt nor its subsequent payment was "value" within the meaning of section 29. Also that the words "value therefor" in section 29 mean value for the nego- tiable instrument, not value for the use of the name, and that one may be an accommodating party although he is paid some- thing for the use of his name. Morris County Brick Co. v. Austin (N. J.) 75 Atl. 550. Where it was agreed between the maker and the payee of a note that each should receive one-half the proceeds of the discount a,nd pay one-half of the note, the maker was not an accommodation maker. Reyburn v. Queen City Savings Bank & Trust Co., 171 Fed. 609, 96 C. C. A. 373. The N. I. L. was not cited in this case. An accommodation note may be negotiated after maturity even though it be the first negotiation and to one having knowledge of the accommodation so as to make the accommodation maker liable. Marling v. Jones, 138 Wis. 82, 119 N. W. 931 ; Mersick v. Alder- man, 77 Conn. 634, 60 Atl. 109, semble, S. C. sec. 52. Bed quaere, whether it is not the business view, that there is an understanding that the accommodated party shall take care of the paper at maturity, which would be inconsistent with a right in the accommodated party to negotiate it after maturity? It is submitted that there is nothing in the N. I. L. to negative this view and the ease is contrary to the majority of the American cases. But if an accommodation note has once been negotiated and paid at maturity it is extinguished and can not be re-issued so as to bind the accommodating party. A repeated use of the instrument is not within the authority given. Comstock v. Buckley, (Wis.), 124 N. W. 414, S. C. sec. 58. Knowledge of an indorsee for value that the note was given -for the accommodation of the payee is not a defense to an action by the indorsee against the accommodating maker. Nor is an agree- ment between the payee and maker that the note should be de- posited in a bank as collateral security for advances to be made to the payee (and which were made) and that the bank should hold and not negotiate the note, although the indorsee of the bank had knowledge of the agreement. The bank being a holder in due course could transfer its rights to the plaintiff. Black v. Bank of Westminster, 96 Md. 399, 54 Atl. 88, S. C. sec. 56. A manufacturing corporation has no power to bind itself as an accommodation party. Therefore in such a case the plaintiff must show both that he paid value and also that he did not know of the accommodation character of the instrument. Natl. Bank v. Snyder Co., 117 App. Div. 370, 102 N. Y. Supp. 478 ; Bradley Engineer- ing Co. V. Heyburn (Wash.), 106 Pac. 170, S. C. sec. 119; Cf. Tn re Troy & Cohoes Shirt Co., infra, sec. 56. The possession and negotiation by the maker of a note with the indorsement of the payee imports that the indorsement was for accommodation, and neither sec. 29 nor sec. 22 give power to a corporation to make accommodation indorsements. Oppenheim v. Simon Reigel Cigar Co., 90 N. Y. Supp. 355. THE NEGOTIABLE INSTRUMENTS LAW. 39 This section has not changed the law of New York that an ac- commodation note transferred by the accommodated payee at a greater discount than the legal rate is unenforceable by the trans- feree. Strickland v. Henry, 66 App. Div. 23, 73 N. Y. Supp. 12 ; Brack V. Lambeck, 63 Misc. Rep. 117, 118 N. Y. Supp. 494 (trans- fer by accommodated maker), S. C. sec. 66; Simpson v. Hefter, 42 Misc. R. 482, 87 N. Y. Supp. 243. Cf. Schlesinger v. Kelly, infra, sec. 55. The payee of a raised check asked plaintiff, a depositor in a drawee bank, to introduce him to the bank.- Plaintiff asked the teller if the check was good, to which he answered, "Perfectly, I believe." At the request of the teller the plaintiff indorsed the check and the bank paid it. Upon finding that the check was raised, the bank deducted the full amount of the check from plain- tiff's account. Plaintiff sued the bank. Held, that plaintiff was an accommodation indorser, and, as such, liable to the bank, but only for the difference between the original amount and the raised amount. Smith v. State Bank, 54 Misc. R. 550, 104 N. Y. Supp. 750. Sed quaere whether plaintiff was liable at all? The drawee bank was not a holder for value under sec. 29. See Farmers' Bank v. Bank of Rutherford, infra, sec. 66. Nor did plaintiff re- ceive the money or mislead the banker. He only identified the payee. An accommodation maker of a note is liable to one to whom it was indorsed in payment of an antecedent debt, the use of the note not having been restricted by the maker. English v. Schles- inger, 55 Misc. R. 584, 105 N. Y. Supp. 989. Parol evidence is necessary to show whether a party is an ac- commodation party and also to determine which party he accom- modated. Haddock, Blanchard «fc Co. v. Haddock, 192 N. Y. 499, 85 N. B. 682, S. C. sec. 64-2, 64-3, 68. Witteman v. Glass, 117 N. Y. Supp. 940, seems to hold contrary to section 29, although the court does not cite the section, that knowl- edge that the instrument was for accommodation would defeat it even where plaintiff gave value for it. The plaintiff had materially altered the note and this was sufficient reason for denying re- covery even according to the original tenor. (See section 124.) Aeticle III. NEGOTIATION. Sec. 30. An instrument is negotiated when it is transferred from one person to another in such man- ner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery; if payable to order it is negotiated by the indorsement of the holder completed by delivery, (a) 40 THE NEGOTIABLE INSTRUMENTS LAW. (a) Schlesinger v. Kurzrok, 47 Misc. R. 634, 94 N. Y. Supp. 442, S. C. see. 187 ; Swenson v. Stoltz, 36 Wash. 318, 78 Pac. 999, S. C. sees. 18, 49 ; Nat. Bank of Commeree v. Pick, 13 N. D. 74, 99 N. W. 63, S. C. see. 52; R. J. & B. F. Camp Lumber Co. v. State Savings Bank (Fla.), 51 So. 543. An allegation that the payee "indorsed and transferred" is a sufficient allegation of delivery. Semble, that it is enough to allege that he indorsed the note. Louisville Co. v. International Trust Co., 18 Col. App. 345, 71 Pac. 898. A denial that a note was ever duly negotiated or discounted for value is not demurrable. It is a statement of fact, not a conclu- sion of law. Rogers v. Morton, 46 Misc. R. 494, 95 N. Y. Supp. 49, S. C. sees. 26, 52. The plaintiff made a note to the order of X, who was to negotiate it for plaintiff's benefit. About three months later after several unsuccessful attempts to negotiate the note, plaintiff asked X for the note and was falsely told that it had been destroyed. About six nionths thereafter but before its maturity X delivered the note, without indorsing it, to defendant as collateral for a loan to himself. Plaintiff sued to restrain defendant from disposing of the note and for its cancellation. Held, that the relief should not be granted, that although defendant was not a holder in due course under the Negotiable Instruments Law, yet plaintiff was liable to him on the ground that X was his agent to borrow money for him. Sublette v. Brewington (Mo. App.), 122 S. W. 1150; Sed quaere whether X had authority to transfer the note other- wise than by indorsement? Moreover, the authority clearly seems to have been terminated when plaintiff was informed that the note had been destroyed. See 23 Harvard Law Rev. 479. The holder of a note payable to order before its transfer is the payee and not one who claimed to have possession of it as agent of the payee. Scotland Comity Natl. Bank v. Hohn (Mo. App.), 125 S. W. 539, S. C. sec. 19. The cashier of a bank sold certain notes, indorsed in blank by the payee, to defendant who deposited them in his private box in the bank. The cashier had a key to the box and was authorized by defendant to collect the notes. The cashier abstracted the notes from the box and sold them to plaintiff, a tona fide purchaser. Plaintiff deposited them in his private box, authorizing the cashier to collect them. "When the notes were due the cashier got new notes from the maker, payable to the order of defendant, forged defendant's indorsement and deposited the notes in plaintiff's box where they were found after the suicide of the cashier. Held, that there was sufficient delivery of the original notes to plaintiff to complete a valid transfer, whether they were deposited in his box by him or by the cashier, and that plaintiff was entitled to impress a trust on the new notes taken in place thereof. Irwin V. Deming, 142 Iowa, 299; 120 N. W. 645. The N. I. L. is not cited in this case. THE NEGOTIABLE IMSTEUMEKTS LAW. 41 Sec. 31. The indorsement 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.^^ The Illinois Act adds "and the addition of words of assign- ment or guaranty shall not negative the additional effect of the signature as an indorsement, unless otherwise expressly stated." Swenson v. Stoltz, 36 "Wash. 318, 78 Pae. 999, S. C. sees. 18, 49 ; First Nat. Bank v. MeCullough, 50 Oregon 508, 93 Pae. 366, 17 L. E. A. (N. S.) 1105, 126 Am. St. Rep., 758, S. C. see. 42. Stamping the name of the payee on the back with a rubber Stamp with his authority and with intent to indorse the instru- ment, is a valid indorsement, but the indorsement does not prove itself. The N. I. L. was not referred to on this point. Mayers v. McRimmon, 140 N. C. 640, 53 S. E. 447, 111 Am. St. Rep. 879, S. C. sec. 49. Sec. 32. The indorsement must be an indorsement of the entire instrument. An indorsement, which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instrument has been paid in part, it may be indorsed as to the residue.^* Sec. 33. An indorsement may be either special or in blank; and it may also be either restrictive or quali- fied, or conditional.^^ An allegation in a complaint to which was annexed the note sued on, that it was indorsed to the plaintiff, is sustained by 23 "It must be written on the bill itself and be signed by the indorser. The simple signature of the indorser on the bill without additional words is suf- ficient. An indorsement written on an allonge, or on » 'copy' of a bill issued or negotiated in a country where 'copies' are recognized, is deemed to be written on the bill itself." B. E. A. s. 32 (1). 2* The provision in the last sentence is not in B. Ei. A. See section 32 (2). 25 The English Act omits the words "qualified or conditional." B. E. A. e. 32 (6). 42 THE NEGOTIABLE IN8TBJMENTS LAW. Bhowing that the note was indorsed in blank. It is immaterial whether plaintiff's ownership was derived through a special or a blank indorsement. Cleveland Co. v. Chittenden, 81 Conn. 667, 71 Atl. 935. Sec, 34. A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable; and the indorsement of such indorsee is necessary to the further negotiation of the instru- ment.^*' An indorsement in blank specifies no in- dorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery. Ames: This section fails to define an indorsement, so as to settle the conflict on the question, as to whether such words as "I assign this note to B" or "I guarantee the payment of this note to B," is an indorsement creating liability as an indorser and giving a holder in due course a title free from equities. Brewster : The liability of a party on a peculiar indorsement, which is outside of negotiability must be settled by a court. Ames : The very point in controversy is one of negotiability. McKeehan: Much would be gained by deciding what expres- sions constitute an indorsement. But Professor Ames does not show how it can be done by any sufSciently brief, accurate and comprehensive provision. Jerman v. Edwards, 29 App. D. C. 535, S. C. sec. 48 ; Mackin- tosh V. Gibbs (N. J.) 74 Atl. 708, S. C. sec. 66; Wedge Mines Co. V. Denver Nat. Bank, 19 Colo. App. 182, 73 Pac. 873. An indorsement in blank is not nullified by a guaranty follow- ing it and guaranteeing the payment of a greater rate of interest, and costs of collection, and waving demand and notice of non- payment. Elgin City Banking Co. v. Hall, 119 Tenn. 548, 108 S. W. 1068, S. C. sees. 38, 52-3. The N. I. L. was not cited on this point. The payee of a check indorsed it, "Pay to the order of," leav- ing a sufficient blank between said words and his signature to write the name of the holder. Held, that the legal effect of an indorsement is a question of law for the court and not for expert testimony, and that the indorsement made the check payable to bearer and negotiable by delivery. State v. Hinton (Oregon"), 109 Pac. 24. 26 The last clause is omitted in the English Act. B. E. A. s. 34 (2), but see 8. 34 (3), which reads: "The provisions of this Act relating to a payee apply with the necessary modifications to an indorser under a special indorse- ment." THE NEGOTIABLE INSTRUMENTS LAW. 43 Sec. 35. The holder may convert a blank indorse- ment into a special indorsement by writing over the signature of the indorser in blank any contract con- sistent with the. character of the indorsement.^'' Jerman v. Edwards, 29 App. D. C. 535, S. C. see. 48. Sec. 36. An indorsement is restrictive, which either— 1. Prohibits the further negotiation of the instru- ment; or 2. Constitutes the indorsee the agent of the in- dorser; or 3. Vests the title 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 re- strictive.^^ Ames: Subsections 2 and 3 should be consolidated as follows: "An indorsement is restrictive which vests the title in the indorsee in trust for the indorser or some third person," because, since Tijider section 37 the "agent of the indorser" has the right to suo in his own name, he is in truth a trustee. Brewstee: All agents are not technically trustees. The dis- tinction is made to relieve the plaintiff from proving an actual trust. McKeehan : The section preserves an existing distinction, e. g., an indorsement for collection has always been regarded as creating a mere agency which may be revoked at any time. Section 37 probably intended only a procedural change. 27 "By writing above the indorser's signature a direction to pay the bill to, or tO' the order of, himself or some other person." B. E. A. s. 34 (4). 28 "An indorsement is restrictive which prohibits the further negotiation of the bill, or which expresses that it is a mere authority to deal with the bill as thereby directed, and not a transfer of the ownership thereof, as, for example, if a bill be indorsed, 'Pay D only' or 'Pay D for the account of X,' or 'Pay D or order for collection.' " B. E. A. s. 35 ( 1 ) . 29 "Where a bill, either originally or by indorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to bim or his order at his option." B. B. A, s. 8 (5). 44 THE NEGOTIABLE INSTRUMENTS LAW. Sec. 37. A restrictive indorsement confers upon the indorsee the right,— 1. To receive pajinent of the instrument; 2. To hring any action thereon that the indorser could bring ; (a) 3. To transfer his rights as such indorsee, where the form of the indorsement authorizes him to do so. But all subsequent indorsees acquire only the title of the first indorsee under the restrictive in- dorsement. The Illinois act adds to subsection 2: "or except in the case of a restrictive indorsement specified in section 36 — subsection 2 — any action against the indorser or any prior party that a special indorsee would be entitled to bring," and substitutes for the words "his rights as such indorsee" in subsection 3 the words "the instrument," and adds to the end of subsection 3 the words: "specified in section 36 — subsection 1 — and as against the prin- cipal or cestui que trust only the title of the first indorsee under the restrictive indorsement specified in section 36 — subsections 2 and 3 respectively." Ames: Under clause 2 an indorser, even though for" value, can not be sued by an indorsee in trust for a third person. This is unjust. Beewstee: Equity would take care of the case supposed. McKeehan: It is plain that the indorser in such a case should have a right of action against the indorser. How equity would take care of the case is not apparent. It has been suggested that the language of section 37-2 is used in a permissive and not in a restrictive sense. By this construction the indorsee in trust could sue his indorser. Jerman v. Edwards, 29 App. D. C. 535, S. C. sec. 48. (a) An indorsee for collection can sue in his own name, but he takes the instrument subject to all equities existing between his indorser and the maker. Payment by the maker to the in- dorser after the indorsement is a good defense, and parol evi- dence to show that the indorsee was actual owner of part of the note is inadmissible as tending to contradict the indorsement. Smith V. Bayer, 46 Or. 143, 79 Pac. 497, 114 Am. St. Rep. 858. An indorsee "for collection" can not hold the acceptor where the drawer paid the amount of the bill before maturity to the THE NEGOTIABLE INSTETJMENTS LAW", 45 indorser and released the acceptor, although said indorsee has paid the amount to the indorser. Under sec. 35 Bills of Exchange Act such indorsee gets no property in the bill. Williams, Deacoii & Co. V. Shadbolt, 1 Cababe & Ellis, 529. Sed quaere as to this case ? It is true, that section 35* defines a restrictive indorsement as one "which prohibits the further nego- tiation of the bill, or which expresses that it is a mere authority to deal with the bill as thereby directed, and not a transfer of the ownership thereof." But does this mean anything more than that the beneficial ownership does not pass? Section 35 (2) gives the restricted indorsee the right to sue, for which legal title is necessary. The drawee's payment was to the cestui after the trust had ceased, for payment by the indorsee to the indorser should have that effect, and the acceptor ought not to be allowed to set up a release by the drawer since the bill was not given up or exhibited, and the acceptor therefore knew that it might be in the hands of a third person. Sec. 38. A qualified indorsement constitutes the indorser a mere assignor of the title to the instru- ment. It may be made bv adding to the indorser 's signature the words ''without recourse," or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument. *'* (a.) The Michigan Act reads: "Such an instrument" instead of "such an indorsement" an evident error. (a) Thorp v. Mindeman, 123 Wis. 149, 101 N. W. 417, 68 L. R. A. 146, 107 Am. St. Rep. 1003, S. C. sec. 1. The payee wrote on the back of the instrument the words "I hereby transfer and assign all my right, title, and interest ii; and to the within note." Held, that this is a qualified indorsement and equivalent to an indorsement without recourse. Evans v. Freeman, 142 N. C. 61, 54 S. E. 847. The court seemed to treat the instrurnent as negotiable in form, but as set out in the state- ment of facts it was not so. The fact that an indorsement is "without recourse" is not enough to put a purchaser upon notice of equities. Elgin City Banking Co. v. Hall, 119 Tenn. 548, 108 S. W. 1068, S. C. sees. 34, 52-3. 1 * Supra, p. 43, n. 28. 30 "The drawer of a bill, and anv indorser, may insert therein an express stipulation (1) negotiatins or limiting his own liability to the holder; (2) waiving as regards himself some or all the holder's duties." B. B. A. b, 16 46 THE NEGfOTIABLE INSTRUMENTS LAW. A writing on the back of a negotiable note signed by the payee "I hereby assign my interest in this note to G," is not a legal indorsement enabling G to bring an action therein -in his own name, but merely an assignment within Comp. Laws, section 10054, whereby only an assignee of non-negotiable choses in action can sue in his own name. Nor does section 38, N. I. L. aid the assignee for, if the writing in question is a qualified indorsement, it con- stitutes the indorser a mere assignor, and the assignee is here also debarred by Comp. Laws, section 10054, from suing in his own name. Gale v. Mayhew (Mich.) 125 N. W. 781. Sec. 39. Where an indorsement is conditional, a party required to pay the instrument may disregard the condition, and make payment to the indorsee or his transferee, whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated, will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally.*^ Sec. 40. Where an instrument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement.'^ The Illinois Act substitutes for "payable to bearer," in line 1, the words "originally payable to or indorsed specially to bearer." Ames: This section is not in the English Act and it is repug- nant to section 9-5. By section 9-1-5 an instrument is payable to bearer, when expressed to be so payable and when the only or last indorsement is an indorsement in blank. If an instrument, payable to order, is indorsed in blank and is specially indorsed by a subsequent holder, it is not under this section payable to bearer. Yet by section 40 this instrument may be negotiated by mere delivery, thus restoring the rule of Smith v. Clarke, Peake 225, which as Chalmers says (Bills of Exchange, 5th Ed. 24), section 9-5 was intended to abrogate. Brewster : Section 40 implies that the negotiation by delivery is by the owner and under section 49 his title would pass with the rights to have an indorsement. 81 The words "or hia transferee" and the provision in the last sentence axe omitted in B. B. A. s. 33. s2Nbt in B. E. A. THE NEGOTIABLE INSTRUMENTS LAW. 47 Ames: Judge Brewster's explanation of section 40 seems an after-thought. To interpolate the words "by the special in- dorsee" after the word "negotiated," thus restricting the further negotiation by delivery to a delivery by him, is to take an unwar- rantable liberty with the statute. McKbehan; Smith v. Clarke and all the cases following it are cases of instruments originally payable to order. None of them refer to instruments originally payable to bearer. [The case of Johnson v. Mitchell, 50 Tex. 212, which follows Smith v. Clarke, and in which the instrument was payable to "A, or bearer," seems to have been overlooked. — Ed.] For this reason and also because of the historical and logical distinction between instru- ments originally payable to bearer and those made so by indorse- ment in blank, section 9-5 may abrogate the rule of Smith v. Clarke and restrain the negotiation by delivery of an instrument, payable to order and indorsed in blank, and subsequently indorsed specially, leaving section 40 to apply only to instruments expressly made payable to bearer. In this way, and in this way only, can the two sections be harmonized. Sec. 41. Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse, unless the one indorsing has authority to indorse for the others. The "Wisconsin Act inserts "joint" before "indorsees" in line two. First Natl. Bank v. Gridley, 112 App. Div. 398, 98 N. Y. Supp. 445, S. C. sees. 66, 109, 119-4. An assignment by one joint payee of his interest to another payee carries with it authority to indorse the instrument for him. The N. I. L. was not cited, Kaufman v. State Sav. Bank, 151 Mich. 65, 114 N. W. 863, 18 L. R. A. (N. S.) 630, 123 Am. St. Eep. 259. Sec. 42. Where an instrument is drawn or indorsed to a person as "Cashier" or other fiscal officer of a bank or corporation, it is deemed prima facie to be payable to the bank or corporation of which he is such officer, and may be negotiated by either the in- dorsement of the bank or corporation, or the indorse- ment of the officer.^'' (a) 33 Not in B. E. A. 48 THE NEGOrriABLE INSTRUMENTS LAW. (a) Where the president of a bank by authority of the directors discharges the duties ordinarily performed by a cashier, a draft drawn payable to the president by name with the addition of "Pt" is payable to the bank. GrifSn v. Erskine, 131 Iowa, 444, 109 N. W. 13. S was cashier of the C bank. A certificate of deposit issued by the C bank to the order of "S Cashier" was indorsed "S Cashier," and came to the plaintiff, a holder, in due course. Held, that the indorsement was that of the bank, and that it was not competent for the bank to show that S acted in his own interest and in violation of his duty to the bank. Johnson v. Buffalo Bank, 134 Iowa, 731, 112 N. W. 165. Where a note was indorsed to A, parol evidence is not admis- sible to show that a bank was intended as indorsee, even though A is, in fact, cashier of such bank. If A delivers the note to the bank without indorsement, the bank may sue upon it, but subject to equities. First Nat. Bank v. McCuUough, 50 Oregon, 508, 93 Pac. 366, 17 L. R. A. (N. S.) 1105, 126 Am. St. Rep. 758. Sec. 43. Where the name of a payee or indorsee is wrongly designated or misspelled, he may indorse the instrument as therein described, adding, if he think fit, his proper signature. Sec 44. Where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability. Sec. 45. Except where an indorsement bears date after the maturity of the instrument, every negotia- tion is deemed prima facie to have been effected be- fore the instrument was overdue, (a) (a) Colbom v. Arbecam, 54 Misc. R. 623, 104 N. Y. Supp. 986; German-American Bank v. Cunningham, 97 App. Div. 244, 89 N. Y. Supp. 836. Sec. 46. Except where the contrary appears, every indorsement is presumed prima facie to have been made at the place where the instrument is dated.** (a) (o) A married woman, accommodation indorser of a note dated and payable in New York, is estopped as against a holder in due 3* Not in B. E. A. THE NEGOTIABLE INSTRUMENTS LAW. 49 course to show that the indorsement was made in New Jersey, where it would be void. Chemical Nat. Bank v. Kellogg, 183 N. Y. 92, 75 N. E. 1103, 2 L. E. A. (N. S.) 299, 111 Am. St. Eep. 717. Sec. 47. An instrmnent negotiable in its origin continues to be negotiable until it has been restric- tively indorsed or discharged by payment or other- wise, (a) (a) An overdue promissory note is still negotiable within a stat- ute exempting from attachment debts secured by bills of exchange or negotiable promissory notes, and hence the amount due thereon is exempt from foreign attachment. Sec. 47 N. I. L. is consistent with this view. Oakdale Mfg. Co. v. Clarke, 29 R. I. 192, 69 Atl. 681. Sec. 48. The holder may at any time strike out any indorsement which is not necessary to his title, (a) The indorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument.^® Mackintosh v. Gibbs (N. J.), 74 Atl. 708, S. C. see. 66. (a) An indorsee indorsed the note to a bank for collection, and upon its dishonor received it back. Held, such indorsee in pos- session of the note was a "holder" under sec. 191, and that he could sue upon it without striking out his indorsement. Mere possession was sufficient evidence of ownership to support the suit (sec. 51). New Haven Mfg. Co. v. New Haven Pulp Co., 76 Conn. 126, 55 Atl. 604. One in possession of negotiable paper, indorsed in blank by the payee, is prima facie the owner thereof, and the mere erasure of subsequent indorsements does not destroy this presumption. King V. Bellamy (Kan.), 108 Pae. 117. The N. I. L. was not cited in this case. Plaintiff sued the maker and the payee on a note indorsed by the payee in blank, under which indorsement appeared the words "to aec't of B. F. B." Held, that even if these words constituted a subsequent restrictive indorsement, it was not necessary to plain- tiff's title, and he could strike it out at the trial and recover as bearer. Jerman v. Edwards, 29 App. D. C. 535. 36 Not in B. E. A. 50 THE NEGOTIABLE INSTRUMENTS LAW. Sec. 49. Where the holder of an instrmnent pay- able to his order transfers it for value without indors- ing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferor, (a) But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the in- dorsement is actually made.^® The Illinois and Missouri Acts, after the word "right" in the first sentence read as follows: "to enforce the instrument against one who signed for the accommodation of his transferor, and the right to have the indorsement of the transferor, if omitted by accident or mistake. But for the purpose," etc. The Colorado Act inserts after "transferor," at the end of the first sentence, "if omitted by mistake, accident or fraud." The "Wisconsin Act adds at the end of the section: "When the indorsement was omitted by mistake, or there was an agreement to indorse made at the time of the transfer, the indorsement, when made, relates back to the time of transfer." (a) Ames; If the transferee gets only the title of the transferor, the transferee, even for value of an accommodated payee, could not hold the maker, which would be unjust and contrary to the American cases. This defect could be cured by inserting words giving this right. Beewsteh : Makes no answer to this criticism of Professor Ames. McKeehan: "When the accommodating maker gives a note to the order of the payee, he promises to pay only to one holding under an indorsement and should not be held otherwise. It has been held in Scotland that under the Bills of Exchange Act, section 31 (4) which is the same as section 49 N. I. L., the transferee for value, but without indorsement, of a bill accepted for the accommodation of the drawer-payee gets the title of the transferor and may hold the acceptor without first getting an indorsement. Hood v. Stewart, 17 Session Cases (4th Series) 749. As observed by Professor Ames {infra, p. 291, n. 4), if the Amer- ican courts should follow this Scotch case his objection to section 49 would disappear. Section 49 seems to change the law to the extent that a transfer for value, even without indorsement, of an seThe English Act omits the provision in the laat Bentenoe. B. E. A. S. 31 (4). THE NEGOTIABLE INSTRUMENTS LAW. 51 instrument, payable to order, passes the legal title, although sub- ject to equities. But accommodation, as against a transferee for value, is not, properly speaking, an equity, but only a defense against the accommodated party and transferees without value. The Scotch precedent ought therefore to be followed. Keel V. Construction Co., 143 N. C. 429, 55 S. E. 826 ; Lawless V. State, 114 Wis. 189, 89 N. W. 891, S. C. sec. 125; O'Connor v. Slatter, 48 Wash. 493, 93 Pac. 1078; Manufacturers' Commercial Co. V. Blitz, 131 App. Div. 17 ; 115 N. Y. Supp. 402. This section vests the title in the transferee without indorse- ment, and is not affected by sees. '30, 31. Swenson v. Stoltz, 36 Wash. 318, 78 Pac. 999, S. C. sec. 18 ; Meuer v. Phenix Nat. Bank, 94 App. Div. 331, 88 N. Y. Supp. 83, S. C. sec. 187. But the transferee without indorsement of a note payable to order can not be a holder in due course, notwithstanding sec. 59, for under sec. 191 he is neither "holder," because not a payee or indorsee, nor "bearer," because the instrument is not payable to bearer. Mayers v. McEimmon, 140 N. C. 640, 53 S. E. 447, 111 Am. St. Rep. 879, S. C. see. 31. Plaintiff sued the maker on a note, on the back of which ap- peared an indorsement of the name of the payee, but gave no proof of the genuineness of the indorsement. Held, that plaintiff eould recover as the equitable owner of the note, subject to any defenses against the payee. Johnson County Savings Bank v. Scoggin Drug Co. (N. C), 67 S. E. 253. The N. I. L. was not cited in this case. Where a note secured by mortgage is given to take effect im- mediately for money to be subsequently advanced, the maker is estopped to assert a failure to advance the money as against a purchaser from the payee in good faith for value and without negligence, although the note was not indorsed by the payee; the rules of sections 49 and 58, N. I. L., giving way to the supreme rule of estoppel in pais. Marling v. FitzGerald, 138 Wis. 93, 120 N. W. 388, S. C. sees. 25, 58. It is submitted that the decision is erroneous for two reasons : First, a transfer of a negotiable note payable to order without indorsement, has no more effect in cutting off equities than the assignment of a chose in action; and in general the assignee of a chose in action is subject to equities against the assignor arising before notice to the debtor of the assignment. Barker v. Barth, 192 111. 460, 61 N. E. 388. So if a negotiable note is assigned without indorsement, payment to the payee by the maker who has no notice of assignment is effectual against the assignee. Camp- bell V. Day, 16 Vt. 558 ; Vann v. Marbury, 100 Ala. 438, 14 So. 273, 23 L. R. A. 325, 46 Am. St. Rep. 70; Dunn v. Meserve, 58 N. H. 429 ; Jones v. Witter, 13 Mass. 304. Failure of considera- tion before notice of the assignment should have the same effect. Second, by section 28, N. I. L., which was not cited by the court, failure of consideration is a matter of defense against any person 52 THE NEGOTIABLE INSTRUMENTS LAW. not a holder in due course, and the assignee without indorsement can not be a "holder" because he is neither payee, indorsee, or bearer. See section 191. Defendant, to accommodate C, drew a bill to his own order on C, who accepted the bill and transferred it to plaintiff for a loan. Defendant neglected to indorse the bill, which was not noticed by plaintiff when he made the advance. Held, that defendant was the "holder" of the bill within sec. 2 (N. I. L. sec. 191), that he transferred it by means of C to the plaintiff, and that plaintiff was entitled to have the indorsement of defendant and to recover against him on the bill. Walters v. Neary, 21 T. L. R. 146; cf. Day V. Longhurst, Weekly notes (1893), 3, S. C. sec. 191. Sec. 50. "UHiere an instrument is negotiated back to a prior party, such party may, subject to tbe pro- visions of this act, reissue and further negotiate the same. But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable. Quimby v. Vamum, 190 Mass. 211, 76 N. E. 671, S. C. sec. 121. Article IV. RIGHTS OF THE HOLDER. Sec. 51. The holder of a negotiable instrument may sue thereon in his own name ; and payment to him in due course discharges the instrument.^^ New Haven Mfg. Co. v. New Haven Pulp Co., 76 Conn. 126, 55 Atl. 604, S. C. sec. 48 ; Schlesinger v. Kurzrok, 47 Misc. R. 634, 94 N. Y. Supp. 442, S. C. sec. 187 ; Stanley v. Penny, 75 Kan. 179, 88 Pac. 875 ; Boline v. Wilson, 75 Kan. 829, 89 Pac. 678 ; Cleary V. DeBeck Co., 54 Misc. R. 537, 104 N. Y. Supp. 831, S. C. sec. 9-4. Payment by the bank of a certified check indorsed in blank by the drawer-payee discharges the check, and repayment to the bank by the one who received payment, when threatened with suit, will not entitle him to sue the bank on its certification, al- though he was a holder in due course and the check was returned 3T "Where his title is defective (a) if he negotiates the bill to a holder In due course, that holder obtains a good and complete title to the bill, and (b) if he obtains payment of the bill, the person who pays him in due course gets a valid discharge' for the bill." B. E. A. s. 38 (3). THE NEGOTIABLE INSTRUMENTS LAW. 53 to him. The money repaid passes to the credit of the depositor and the bank is liable to him for it. Poess v. Twelfth Ward Bank, 43 Misc. R. 45, 86 N. Y. Supp. 857, S. C. sees. 16, 187. Where a promissory note was attached and sold under an execu tion against the holder, the purchaser may sue thereon in his own name, whether the indorsement by the sheriff was regular or irregular and whether it was indorsed or not. Fishbum v. Lon- dershausen, 50 Oregon, 363, 92 Pac. 1060, 14 L. R. A. (N. S.) 1234. The payee or indorsee of a note in possession thereof, although not the beneficial owner, may strike out his own and subsequent indorsements and may sue in his own name by consent of the owner. R. M. Owen & Co. v. Storms & Co. (N. J.), 72 Atl. 441. Although the Code requires an action to be brought in the name of the real party in interest, yet under section 51 N. I. L. a holder, even though he be a holder only for collection, may sue in his own name. Craig v. Palo Alto Stock Farm (Idaho), 102 Pac. 393. Sec. 52. A liolder in due course is a holder wlio has taken the instrument under the following condi- tions:— (a) 1 That 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; (c) 3. That he took it in good faith and for value ; (d) 4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it, 38 The Wisconsin Act adds: "5. That he took it in the usual course of business." (a) Quiggle v. Herman, 131 Wis. 379 ; 111 N. W. 479 ; Borough of Montvale v. Peoples' Bank, 74 N. J. Law, 464; 67 Atl. 67, S. C. sec. 56 ; Arons v. Ziegfeld, 52 Misc. R. 571, 102 N. Y. Supp. 898 ; Karsch V. Pettier Co., 82 App. Div. 230, 81 N. Y. Supp. 782 ; Greeser v. Sugarman, 37 Misc. R. 799, 76 N. Y. Supp. 922, S. C. see. 16; Mitchell v. Baldwin, 88 App. Div. 265, 84 N. Y. Supp. 1043, S. C. sec. 59 ; Ketcham v. Covin, 35 Misc. R. 375, 71 N. Y. Supp. 991, S. C. see. 56; Rowe v. Bowman, 183 Mass. 488, 67 38 The English Act omits the words "infirmity in the instrument." B. E. A. s. 29 (1) (b). 54 THE NEGOTIABLE INSTRUMENTS LAW. N. E. 636, S. C. sees. 28, 125 ; Mass. Nat. Bank v. Snow, 187 159, 72 N. E. 959, S. C sees. 9-5,. 16, 56, 191; German-Ameriean Bank v. Cunningham, 97 App. Div. 244, 89 N. Y. Supp. 836 j Milius V. Kauffmann, 104 App. Div. 442, 93 N. Y. Supp. 669, S. C. sec. 25; Goetting v. Day, 87 N. Y. Supp. 510, S. C. sec. 56; Benedict v. Kress, 97 App. Div. 65, 89 N. Y. Supp. 607 ; Keegan V. Roek, 128 Iowa 39, 102 N. W. 805; Farmers' Bank v. Bank of Rutherford, 115 Tenn. 64, 88 S. W. 939, 112 Am. St. R. 817, S. C. sec. 66 ; Mfg. Co. v. Summers, 143 N. C. 102, 55 S. E. 522, S. C. sees. 53, 59 ; McNamara v. Jose, 28 Wash. 461, 68 Pac. 903, S. C. sec. 56; Vander Ploeg v. Van Zuuk, 135 Iowa, 350, 112 N. W. 807, 13 L. R. A. (N. S.) 490, S. C. see. 14; White v. Dodge, 187 Mass. 449, 73 N. E. 549 ; National Bank v. Foley, 54 Misc. R. 126, 103 N. Y. Supp. 553, S. C. sees. 25, 59 ; Siegmeister v. Lis- penard Co., 107 N. Y. Supp. 158 ; In re Troy & Cohoes Shirt Co., 136 Fed. Rep. 420, S. C. sec. 56 ; Gray v. Boyle, 55 Wash. 578 ; 104 Pac. 828; Buzzell v. Tobin, 201 Mass. 1; 86 N. B. 923. Sections 52, 55, 56, and 59 vary the ordinary rule of procedure requiring him who alleges a fact to prove it, but they are not unconstitutional as an invasion of the judicial power by the Legislature. Johnson County Sav. Bank v. Walker, 79 Conn. 348, 65 Atl. 132. An allegation in an answer that plaintiff is not a, holder in due course is a conclusion of law and insufficient to show which of the conditions named in sec. 52 has not been complied with. Rogers v. Morton, 46 Jlisc. R. 494, 95 N. Y. Supp. 49, S. C. sees. 26, 30. The evidence tended to show that plaintiff took for value a clieck drawn by defendant, but knowing that it had been deliv- ered to the payee upon a condition which had not been fulfilled and that payment had been stopped. Held, error to direct a ver- dict for the plaintiff, as the question whether plaintiff was a holder in due course within sees. 52, 55, 56 N. I. L. is for the jury. Groh's Sons v. Schneider, 34 Misc. R. 195, 68 N. Y. Supp. 862. A woman delivered to her husband a check made payable to a certain creditor, with instructions to pay her debt with it. The husband handed the check to the creditor as a payment upon a debt of his own to the same creditor who accepted it as such in good faith. Held, the creditor was a holder in due course of the check. Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N. B. 646, 97 Am. St. Rep. 426, S. C. sec. 14. The payee of a negotiable instrument may be a holder in due course. lb. Thorpe v. White, 188 Mass. 333, 74 N. B. 592, accord, S. C. sees. 64-1, 124. Cf. Hathaway v. County of Delaware, 185 N. Y. 368, 78 N. B. 153, 13 L. R. A. (N. S.) 273, 113 Am. St. Rep. 909, which is contra in principle, although the N. I. L. was not cited. A note payable to the maker's order was indorsed in blank to a bank. The note was afterwards altered by inserting "payable with interest. ' ' The bank made a deed of trust of all its property THE NEGOTIABLE INSTRUMENTS LAW. 55 including the note to secure its creditors. Held, that in Virginia a pre-existing debt is a valuable consideration for a deed of trust to secure it, and that the trustee was a holder in due course and could recover on the note according to its original tenor, under sec. 124. Trustees of American Bank v. McComb, 105 Va. 473, 54 S. E. 14, S. C. sees. 25, 52-1. The payee of a note agreed with the accommodation maker that it should not be negotiated to one R, of which fact R was aware. The payee offered to sell the note to R, who lent the money to S, who bought the note. Before maturity S sold the note to plain- tiff, who was ignorant that it was an accommodation note and of the agreement, and who paid for it by his own note to S, who still held it. Held, plaintiff could recover of the maker the full amount of the latter 's note. Mehlinger v. Harriman, 185 Mass. 245, 70 N. E. 51. A statute declared that any contract made by or on behalf of a foreign corporation failing to comply with the laws of the State, as to registration, etc., should be "wholly void on behalf of such corporation or its assigns." Held, the word "assigns" as used in the statute did not include a holder in due course of a negotiable instrument made to the order of such corporation. Nat. Bank of Commerce v. Pick, 13 N. Dak. 74, 99 N. "W. 63. See also McMann V. Walker, infra, sec. 60. The payee of an accommodation note indorsed it before ma- turity to A for goods to be furnished at once and in the future. A furnished goods both before and after the maturity of the note. A sold to plaintiff the note and the debt due from the payee. Held, that the accommodation maker could not set up the defense of want of consideration. Semhlei that accommodation paper may be negotiated even after maturity so as to make the purchaser for value a holder in due course. Mersiek v. Alder- man, 77 Conn. 634, 60 Atl. 109. S. C. supra, sec. 29 with comment. (&) Blias V. Whitney, 50 Misc. R. 326, 98 N. Y. Supp. 667, S. C. sec. 124. The fact that the words "payable with interest" are written on a blank space after the words "value received" in the same handwriting as the other written parts of the note, does not pre- vent the note being complete and regular on its face. Trustees of American Bank v. McComb, 105 Va. 473, 54 S. E. 14, sees. 25, 52. A partner in a firm which had dissolved, but without giving notice thereof, signed notes in blank payable to X and sent them to X or to a bank where they were filled up as to date, amount, and maturity by the cashier as occasion required, and the pro- ceeds placed to the credit of X. Held, that the bank was not a holder in due course, and could not recover against the retired partner without proof that he had authorized or ratified the issue of the notes. Hunter v. Allen, 127 App. Div. 572; 111 N. Y. Supp. 820, sub nom. Hunter v. Bacon. 56 THE NEGOTIABLE INSTRUMENTS LAW. A post-dated check is valid and negotiable, and is complete and regular on its face, notwithstanding it is stamped as a check, and not as a bill of exchange payable on time. Hitchcock v. Edwards, 60 L. T. Rep. 636. The defendant accepted a bill otherwise complete, but the place for the drawer's signature was left blank and under it was writ- ten, "Drawn to the order of X." The bill was sent to X to be used for a certain purpose. X instead of using the bill for such purpose transferred it to plaintiff, who paid value bonafide. X indorsed the bill, but neglected to sign it as drawer until after it was overdue and dishonored. Held, that the bill was not com- plete and regular when plaintiff took it and that he could not recover. South "Wales, etc., Co. v. Underwood (Q. B. Div. 1899), 15 T. L. Rep. 157. (c) Lindsay v. Button, 217 Pa. 148, 66 Atl. 250; McGehee y. Cooke, 55 Misc. R. 40, 105 N. Y. Supp. 60. A note providing that any delinquency in the payment of in- terest "shall cause the whole note to immediately become due and collectible" is made overdue by the failure to pay the interest when due, and a subsequent taker can not be a holder in due course. Hodge v. Wallace, 129 Wis. 84, 108 N. W. 212, 116 Am. St. Rep. 938. A note payable one day after date is not overdue at any time on the day after its date. Wilkins v. Usher, 123 Ky. 696, 97 S. W. 37, S. C. see. 25. A bill drawn for the acceptor's accommodation but which had never been negotiated was in the hands of the drawer after ma- turity, and having come into the possession of the drawer's solicitors, the latter claimed a lien on it for services previously rendered the drawer in an action to recover the bill from a con- verter, and sued the acceptor on the bill. Held, that plaintiffs taking the bill overdue could acquire no rights against the ac- ceptor. Redfern v. Rosenthal, 86 L. T. Rep. 855; see also sec. 27(3). "In his own right"* is not used merely in contradistinction to a right in a representative capacity, but indicates a right not subject to that of another person, and good against all the world. A gave a demand note payable to B or order on the under- standing that it should not be negotiated. B, however, indorsed the note for value to C. Afterwards A. paid B the amount of the note. B then obtained the note from C by fraud and gave it to A. Held, that A was not a holder for value, the previous payment not being a consideration given when he received back the note, and he is still liable to C on the note. Nash v. DePre- ville [1900] 2 Q. B. 72. * See section 119-5, N. I. L. THE NEGOTIABLE INSTRUMENTS LAW. 57 (d) Milius V. Kauffmann, 104 App. Div. 442, 93 N. Y. Supp. 669, S. C. sec. 25; Fayette Nat. Bank v. Summers, 105 Va. 689, 54 S. B. 862, 7 L. R. A. (N. S.) 694. A credit on an old account which does not discharge the debt or any part of it, or extend the time of payment, is not a valu- able consideration for the transfer of a note. National Bank v. Foley, 54 Misc. R. 126, 103 N. Y. .Supp. 553, S. C. sees. 25, 59. The mere crediting to a depositor's account of a check on another bank, where the account continues to be sufficient to pay the check if it be dishonored, does not make the bank a holder for value. Citizens' State Bank v. Cowles, 180 N. Y. 346, 73 N. E. 33, 105 Am. St. Bep. 765. For the English rule in this class of cases see supra, sec. 25, p. 33. The crediting of the purchase price of a note by the buyer (a bank) to the seller is not giving value, except to the extent of the money actually drawn and charged against the credit before notice. Hodge v. Smith, 130 Wis., 326, 110 N. W. 192, S. C. sees. 16, 55; Albany Co. Bank v. People's Ice Co., 92 App. Div. 47, 86 N. Y. Supp. 773, A bank giving credit for the amount of a note is not a holder in due course of business when such credit is not absorbed by an antecedent indebtedness or exhausted by subsequent withdrawals. McNight V. Parsons, 136 Iowa, 390, 113 N. W. 858, 125 Am. St. Rep. 265, S. C. sec. 56. See also cases under section 25. But if the bank assumes a legal obligation to a third person (promising to honor a check of the depositor) on the faith of the deposit or credit, it becomes a holder for value. Montrose Sav. Bank v. Claussen, 137 Iowa, 73, 114 N. W. 547. A bank discounting a note and obtaining credit in favor of the seller in another solvent bank for the amount, is a holder for value. But the mere statement that such credit was given, when it does not appear how it was given or that it was ever used, is not enough to enable the court to determine whether the credit was real and substantial. Elgin City Banking Co. v. Hall, 119 Tenn. 548, 108 S. "W. 1068, S. C. sees. 34, 38. A bank credited the amount of a note to the payee, who died insolvent the next day. Held, that the fact that at the time of his death the amount to his credit was less than the proceeds of the note did not prove the bank to be a holder for value to the extent of the difference, without evidence that the difference was caused by payment of an overdraft or other past due obligation of the payee, or payment of checks drawn by the payee. Con- solidation Bank v. Kirkland, 99 App. 'Div. 121, 91 N. Y. Supp. 353. Sed quaere? See dissenting opinion of Houghton, J. Proof that the holder paid full value before maturity makes out a prima facie case of good faith. Hodge v. Smith 130 Wis 326, 110 N. W. 192, semUc, S. C. sees. 16, 55. But see Natl. Bank V. Foley, infra, see. 59, contra. That plaintiff took a note, indorsed without recourse, without knowing the makers and without making inquiry as to their finau- 58 THE NEGOTIABLE INSTEUMENTS LAW. cial condition, except of the payee, and paid only a little over half the face are facts to be considered by the jury in the ques- tion of plaintiff's bona fides. Jobes v. Wilson (Mo. App.), 124 S. W. 548, S. C. sec. 59. Where a corporation took over the assets of a private bank and a,greed to assume the liabilities in consideration of the transfer of the assets of the bank, among which was defendant's note, the corporation took the note subject to a contemporaneous parol agreement by which the note never became ah absolute obligation in presenti. Paulson v. Boyd, 137 Wis. 241, 118 N. W. 841, S. C. sec. 16. Sed quaere? See dissenting opinions and comment under sec. 16, supra. A finding that plaintiff paid value but did not purchase a note before maturity in good faith does not negative his title, but only the bona fides of his purchase. Case v. Beyer (Wis.), 125 N. W. 947. The N. I. L. was not cited in this case. The manager of a bank stole negotiable securities from the bank and pledged them with A. He afterwards got them back, with other negotiable securities from A by fraud and replaced them in the bank. The bank knew nothing of the transaction. Held, that the bank was a holder in due course and entitled to keep the securities. London & County Banking Co. v. London & River Plate Bank, 21 Q. B. D. 535. Quaere whether the payee of a note obtained by fraud can be a "holder in due course"? Lewis v. Clay, 14 T. L. Rep. 149; Herd- man V. Wheeler, [1902] 1 K. B. 361. That he can be, see Lloyd's Bank v. Cooke [1907] 1 K. B. 794, 805-808, semile. See supra, sec. 14. Sec. 53. Where an instrument payable on demand is negotiated an unreasonable length of time after its issue, the holder is not deemed a holder in due eourse.^^ (a) (a) Trustees of American Bank v. McComb, 105 Va. 473, 54 S. E. 14, S. C. sees. 25, 52. Sixteen months is not an unreasonable time where payments of monthly interest were made to the payee and also to plaintiff 89 "Where a note payable on demand is negotiated, it is not deemed to be overdue, for the purpose of affecting the holder with defects of title of which he had no notice, by reason that it appears that a reasonable time for pre- senting it for payment has elapsed since its issue.'' B. E. A. s. 86 (3). "A bill payable on demand is deemed to be overdue within the meaning and for the purposes of this section (relating to transfer) where it appears on the face of it to have been in circulation for an unreasonable length of time. What is an unreasonable length of time for this purpose is a question of fact." B. E. A. s. 36 ( 3 ) . The same rule would applj to a check. B. E. A. s. 73. THE NEGOTIABLE INSTRUMENTS LAW. 59 after he took the instrument. McLean v. Bryer, 24 R. I. 599, 54 Atl. 373, S. C. see. 64-1. Five days between the issue and negotiation of a cashier's check is not an unreasonable time, such a check, whether certified or not, being a bill of exchange payable on demand. Mfg. Co. v. Summers, 143 N. C. 102, 55 S. B. 522, S. C. sec. 59. A check dated and issued on one day and negotiated at noon the next day is not overdue so as to convey notice to the indorsee of its illegality or of its previous dishonor. Matlock v. Scheuer- man, 51 Oregon, 49, 93 Pac. 823, 17 L. R. A. (N. S.) 747, S. C. sees. 25, 56, 186. This section repeals the former statute whereby a demand note was overdue immediately for purposes of transfer so as to let in equities. Therefore a check invalid in the hands of the payee because delivered on Sunday is good in the hands of a bona fide purchaser for value without notice and within a reasonable time. / Gordon. V. Levine, 197 Mass. 267, 83 N. E. 861, 15 L. R. A. (N. S.) 243, 125 Am. St. Rep. 361, S. C. see. 186. Sec. 54. Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the full amonnt agreed to be paid therefor, he will be deemed a holder in due course only to the extent of the amount theretofore paid by him.*" (a) (a) Hodge v. Smith, 130 Wis. 326, 110 N. W. 192, S. C. sees. 16, 52-3, 55; Goetting v. Day, 87 N. Y. Supp. 510, S. G. sec. 56; Walters v. Rock (N. D.), 115 N. W. 511; Bank of Morehead v. Hernig, 220 Pa. 224, 69 Atl. 679. Where a bank discounted a note and pkced the proceeds to the credit of the depositor, quaere whether the mere fact that the note was not paid when due is such notice of defect of title of the depositor as to make the subsequent payment of the balance of the proceeds a wrongful pavment Albanv County Bank v. People's Ice Co., 92 App. Div. 47, 86 N. Y. Supp. 773. Sec. 55. The title of a person who negotiates an instrument is defective within the meaning of this act when he obtained the instrument, or any signature thereto,*' by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, 40 Not in B. E. A. *i The English Act uses the words "the acceptance thereof" instead of "any signature thereto." B. E. A. s. 29 (2). 60 THE NEGOTIABLE INSTRUMENTS LAW. or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud. The Kansas Act reads "alleged consideration" a clerical error. The Wisconsin Act (sec. 1676-25) adds the following: "And the title of such person is absolutely void when such instrument or signature was so procured from a person who did not know the nature of the instrument and could not have obtained such knowl- edge by the use of ordinary care." Keegan v. Eock, 128 Iowa 39, 102 N. W. 805 ; Yakima Bank v. McAllister, 37 Wash. 566, 79 Pac. 1119; Groh's Sons v. Schneider, 34 Misc. R. 195, 68 N. Y. Supp. 862, S. C. supra, sec. 52 ; Johnson Co. Sav. Bank v. Walker, 79 Conn. 348, 65 Atl. 132, S. C. sec. 52; McNight V. Parsons, 136 Iowa 390, 113 N. W. 858, 125 Am. St. Eep. 265, S. C. sees. 52-3, 56; Hynes v. Plastino, 45 Wash. 190, 87 Pac. 1127 ; Wood v. Babbitt, 149 Fed. Rep. 818 ; Mitchell v. Bald- win, 88 App. Div. 265, 84 N. W. Supp. 1043, S. C. sec. 59; German-American Bank v. Cunningham, 97 App. Div. 244, 89 N. Y. Supp. 836; Bank of Morehead v. Hemig, 220 Pa. 224, 69 Atl. 679. The title of the payee of a note is defective where the only con- sideration is accrued interest on a loan previously made at an unlawful rate of interest. Keene v. Behan, 40 Wash. 505, 82 Pac. 884. Defendant bank paid its cashier's check to an indorsee of the payee after notice that the indorsement had been made in an unlawful gambling transaction. Held, that the bank was liable over again to the payee although the statute against gambling did not in express terms declare gambling contracts void. Drink- all V. Movius State Bank, 11 N. Dak. 10, 88 N. W. 724. Illegality ceases to be a real defense under the N. I. L. unless made so by a subsequent statute. The statutes previously in force declaring void instruments given for gaming are impliedly re- pealed by the N. I. L. Wirt v. Stubblefield, 17 App. D. C. 283 ; Schlesinger v. Kelly, 114 App. Div. 546, 99 N. Y. Supp. 1083 (usury), per opinion of Laughlin, J., distinguishing Strickland V. Henry, supra, sec. 29 ; Broadway Trust Co. v. Manheim, 47 Misc. R. 415, 419, 95 N. Y. Supp. 93 (usury), semble; Schlesinger v. Lehmaier, 191 N. Y. 69, 73, 83 N. E. 657, 658, 16 L. R. A. (N. S.) 626, 123 Am. St. Rep. 591, semble; Klar v. Kostiuk, 119 N. Y. Supp. 683 (usury) , S. C. see. 66 ; Horowitz v. WoUowitz, 59 Misc. Rep. 520, 110 N. Y. Supp. 972 (usury), S. C. see. 66; Wood v. Babbitt, 149 Fed. Rep. 818, 822 (usury), semble. See also the opinion of Willard Bartlett, J., in Schlesinger v. Gilhooly, 189 N. Y. 1, 81 N. E. 619 (usury), accord. But the opinion of Cullen, C. J., in the last-mentioned case is contra, and so also is the case of Alexander v. Hazelrigg, 123 Ky. 677, 97 S. W. 353 (gaming). See also Lawson v. First Nat. Bank (Ky.), 31 Ky. Law Rep. 318, THE NEGOTIABLE INSTKUMENTS LAW. 61 102 S. "W. 324, holding that a statute making void a peddler's note unless indorsed with the words "Peddler's note" is not re- pealed by implication by the N. I. L. McAfee v. Mercer Nat. Bank (Ky.), 31 Ky. Law Rep. 863, 104 S. W. 287, accord. Cf. Arnd v. Sjoblom, infra, see. 57. In Quiggle v. Herman, 131 Wis. 379, 111 N. W. 479, a note given for a stallion and not containing words stating the consideration, as required by statute, was held void as between the parties; but as plaintiff had notice of the consideration, the question of the effect of the N. *[. L. was not considered. If one of the signatures of several makers is obtained by fraud so as to make the title of the payee defective as to him, it will be defective as to the other makers also, since the equality of burden is thus disturbed and increased as to them. Hodge v. Smith, 130 Wis. 326, 110 N. W. 192, S. C. sees. 16, 52-3. But a holder in due course can recover against those who signed. First Nat. Bank of Durand v. Shaw, 157 Mich. 192, 121 N. W. 811. The fraud consisted in the fact that the signatures of some of the makers were forged. The N. I. L. was not cited. In Wisconsin the following words are added to the section : ' ' and the title of such person is absolutely void when such instrument or signature was so procured from a person who did not know the nature of the instrument and could not have obtained such knowl- edge by the use of ordinary care." Held, that in a case covered by this clause the note was void not only as to the maker so de- frauded, but also as to all the makers. Aukland v. Arnold, 131 Wis. 64, 111 N. W. 212. Cf. Arnd v. Sjoblom, infra, see. 57. Where the defendant indorsed a note and intrusted it to X to negotiate and give a part of the proceeds to defendant, and X retained the proceeds, it is a question for the jury whether X acted with fraudulent intent from the beginning, so as to consti- tute a fraudulent negotiation, or merely embezzled the money subsequently. Demelman v. JBrazier, 198 Mass. 458, 84 N. E. 856, S. C. sec. 118. X owed plaintiff. In order to provide funds to pay the debt, defendant at X's request drew a check payable to X or order, which X was to pay into his bank to meet his check for the same amount to plaintiff. X indorsed the defendant's check, paid it into his bank and gave his own check to plaintiff. Defendant changed his mind and stopped his check, whereupon X stopped his check and indorsed and delivered defendant's cheek to plaintiff v/ho had notice of its dishonor. Held, that as the cheek was an accommodation bill and plaintiff, even assuming that he gave con- sideration for it, not being a holder in due course, since he took the check with notice that it had been dishonored, took it subject to any defect of title at the time of dishonor, and as X had nego- tiated it to plaintiff in breach of faith, there was a defect of title attaching to it and the plaintiff could not recover. Hornby v. McLaren (C. A., March 31, 1908), 24 T. L. Rep. 494. An overdue bill indorsed in blank was sold in Norway on a judicial proceeding against one of several joint owners of the 62 THE NEGOTIABLE INSTBTJMENTS LAW. bill. By the laws of Norway the purchaser acquired a good title as against the equity of the other joint owners. Held, that al- though the bill was drawn and payable in England, sec. 36 (2)* of the Bills of Exchange Act was not applicable and the purchaser was entitled to the bill. Alcoek v. Smith, [1892] 1 Ch. 238. In this case Lindley, J. (p. 263), said that " 'defect of title' is a phrase introduced into the Bills of Exchange Act in lieu of the old expression 'subject to equities,' which is an expression not adopted, because the Act applies to Scotland as well as to England, and 'subject to equities' is an expression not known to Scotch law." Sec. 56. To constitute notice of an infirmity in the instrument or defect in the title of the person nego- tiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.*^ Quiggle V. Herman, 131 Wis. 379, 111 N. W. 479; Yakima Bank v. McAllister, 37 Wash. 566, 79 Pac. 1119; Groh's Sons v. Schneider, 34 Misc. R. 195, 68 N. Y. Supp. 862, S. C. see. 52; Johnson County Sav. Bank v. Walker, 79 Conn. 348, 65 Atl. 132, S. C. sec. 52; Johnson County Sav. Bank v. Rapp, 47 Wash. 30, 91 Pac. 382; Packard v. Windholz, 88 App. Div. 365, 84 N. Y. Supp. 666, S. C. sees. 66, 124 ; Johnson v. Buffalo Bank, 134 Iowa 731, 112 N. W. 165; S. C. sec. 42; Siegmeister v. Lispenard Co., 107 N. Y. Supp. 158; In re Hopper-Morgan Co., 156 Fed. 525; Bank of Sampson v. Hatcher, 151 N. C. 359, 66 S. E. 308 ; Gray V. Boyle, 55 Wash. 578, 104 Pac. 828; Feigenspan v. McDonnell, 201 Mass. 341, 87 N. E. 624; Wedge Mines Co. v. Denver Nat. Bank, 19 Colo. App. 182, 73 Pac. 873. This section simply reiterates a rule of the common law. Amd V. Aylesworth (Iowa), 123 N. W. 1000, S. C. see. 59. It is not material that an indorsee's denial that the instrument was obtained by fraud was insufflcient where he had sufficiently denied knowledge or notice of the fraud. Bothwell v. Corum (Ky.), 123 S. W. 291. Merely suspicious circumstances sufficient to put a prudent man on inquiry, or even gross negligence on the part of plaintiff, at the time of acquiring a note, are not sufficient of themselves to prevent recovery unless the jury find from the evidence that plaintiff acted in bad faith. Valley Savings Bank v. Mercer, 97 Md. 458, 55 Atl. * See Infra, p. 299. <2 Not in B. E. A. "A thing ia deemed to be done in good faith within the meaning of this Act when it is in fact done honestly, whether it is done negligently or not." B. E. A. s. 90. THE NEGOTIABLE INSTEUMENT8 LAW. 63 435 ; Hutehins v. Langley, 27 App. D. C. 234 ; Keteham v. Govin, 35 Misc. R. 375, 71 N. Y. Supp. 991 ; Matlock v. Scheuerman, 51 Oregon 49, 93 Pac. 823, 17 L. R. A. (N. S.) 747, S. C. sees. 25, 53, 186; Aldrieh v. Peckham, 74 N. J. Law 711, 68 Atl. 345; Kipp v. Smith, 137 Wis. 234, 118 N. W. 848 ; Rice v. Barrington, 75 N. J. Law 806, 70 Atl. 169 ; Jefferson Bank v. Chapman- White Lyons Co. (Tenn.), 123 S. W. 641, S. C. sec. 57; Dorsey v. Wellman (Neb.), 122 N. W. 989. But if the purchaser does in fact suspect and fails to make investigation lest it disclose a defense, he is not a pur- chaser in good faith. Walters v. Rock (N. D.), 115 N. W. 511; Iowa Nat. Bank v. Carter (Iowa), 123 N. W. 237, S. C. sees. 4, 25. Municipal bonds payable ,to bearer are negotiable instruments. The fact that the mayor of a municipality had signed, as mayor, negotiable' municipal bonds, which he wrongfully appropriated and pledged to secure a loan to himself, is not sufficient to charge the pledgee, who had no knowledge of the pledgor's lack of authority, with notice of the pledgor's defect of title. Borough of Montvale V. People's Bank, 74 N. J. Law, 464, 67 Atl. 67. The question whether the facts have any fair tendency to show bad faith is one of fact and not of law, especially where the evi- dence of fraud is sufficient to put the burden of showing good faith on the indorsee. McNight v. Parsons, 136 Iowa 390, 113 N. W. 858, 125 Am. St. Rep. 265, S. C. sec. 52-3. The president and treasurer of defendant corporation, without consideration, made notes in the corporate name to the order of the corporation, indorsed them in that name and also individually, and delivered them to the vice-president for the accommodation of a firm of which all three persons were members. An agent of the firm offered them to plaintiff in another city for discount, rep- resenting that the notes were for value given by the firm to the corporation, and plaintiff discounted the notes. Held that neither the form of the notes and indorsement, nor the knowledge of plain- tiff that the president and treasurer of the corporation were mem- bers of the firm, charged plaintiff with notice of the true character of the notes. In re Troy & Cohoes Shirt Co., 136 Fed. Rep. 420. Cf. Nat. Bank v. Snyder Co., supra, sec. 29. Plaintiffs, in renewal of a note made to them by a partnership, took a note of a third person to the order of a corporation, the treasurer of which was known to the plaintiffs to be a member of the partnership. Held, that the plaintiffs were put upon in- quiry as to the authority of the treasurer to indorse the name of the corporation. Pelton v. Spider Lake Co., 132 Wis. 219, 112 N. W. 29, 122 Am. St. Rep. 963. As it is out of the usual course of business for a corporation to issue its obligations to its officers, one who takes such an obli- gation knowing that the payee is an officer or director, is put upon inquiry as to whether the obligation has been lawfully issued. MacLean, J., dissenting. Orr v. South Amboy Co., 47 Misc. R. 604, 94 N. Y. Supp. 524. Where a corporation has general authority to issue negotiable notes, a note issued by it for ultra vires purposes, e. g., for pur- 64 THE NEGOTIABLE INSTEUMENTS LAW. chase of stock in another corporation is not enforceable by the payee, but is good in the hands of a holder in due course. Jeffer- son Bank v. Chapman- White-Lyons Co. (Tenn.), 123 S. W. 641, S. C. sec. 57. One who takes in paj^nent of a private debt the promissory note of a corporation, executed by the debtor as an officer of the cor- poration, does not take in the usual course of business and is charged with notice of any fraud or illegality in the execution of the note. Kipp v. Smith, 137 Wis. 234, 118 N. W. 484, semble. The president of a corporation, having no authority to do so, indorsed in payment of his individual debt to defendant a cheek made payable to the corporation. Held, that the form of the check was notice to defendant of a misuse of the corporation's property in apparent violation of the president's duty and that defendant was liable to the corporation for the proceeds of the check. Ward V. City Trust Co. 192 N. Y. 61, 84 N. E. 585, S. C. sec. 25. A trust company took in part payment from a debtor a check on itself for more than $35,000, payable to its order, and signed by the treasurer of a company of which its debtor was president. Defendant knew that the capital stock of said company was $100,000, and that it had little or no surplus. Held, that the trust company was charged with notice of the lack of authority of the treasurer and president to make such use of the company's funds, and was liable for its amount. Lanning v. Trust Co. of America (App. Div.), 122 N. Y. Supp. 485. The N. I. L. was not cited in this case. The treasurer of plaintiff railroad company, authorized to sign checks, deposited to his own account in defendant bank checks drawn by him as treasurer of the railroad company to his own order, and later drew out the money. Held, that the drawee bank was the agent of the plaintiff to determine whether the cheeks were authorized and properly drawn, and having so decided and paid the checks, the plaintiff could not recover from the defendant, who acted in good faith. The case was distinguished from cases wherein the fraudulent officer was using trust funds to pay his individual debt to the defendant. Havana Central Railroad Co. V. Knickerbocker Trust Co., 198 N. Y. 422, 27 Banking Law Jour- nal 501. The N. I. L. was not cited. The treasurer of a corporation drew checks as treasurer and paid his individual debt therewith. Held, that this was not of itself enough to show bad faith on the part of the creditor, the court having found that the creditor took the checks in good faith. Fillebrown v. Hayward, 190 Mass. 472, 77 N. E. 45. The fact that the maker presents to a bank for discount a note indorsed in blank by the payee does not constitute notice of wrong- ful possession by the maker. Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. B. 959, S. C. sees. 9-5, 16, 124, 191. In an action against the drawer, held, that the bona fide pur- chaser for value from the payee of a check is none the less a holder in due course because of the erasure of an indorsement of a sub- sequent party of which a plausible explanation was given at the THE NEGOTIABLE INSTRUMENTS LAW. 65 :tiine of plaintiff's purchase. Goetting v. Day, 87 N. Y. Supp. 510. A certificate of deposit payable to "A, trustee," or to "A, trustee of B," gives actual notice that it represents a trust fund, and an indorsee is bound to inquire as to the right of the trustee to dis- pose of it. Ford v. Brown, 114 Tenn. 467, 88 S. W. 1036. The loser of a check indorsed in blank by the payee can not recover from the drawee bank which paid it to a bona fide pur- chaser in due course, although previous to such payment the payee and the drawer gave notice of the loss to the bank and directed the bank not to pay it. Unaka Nat. Bank v. Butler, 113 Tenn. 574, 83 S. W. 655, S. C. sec. 9-5. See also Poess v. Twelfth Ward Bank and Meuer v. Phenix Nat. Bank, infra, sec. 187. Cf. Elliot V. Worcester Trust Co., infra, sec. 87 ; Pease & Dwyer v. State Nat, Bank, infra, sec. 189. Taking a check indorsed in blank by the payee from a finder, who was unknown, but was supposed to be the payee, without inquiry as to his identity or further indorsement, does not prove knowledge of the defective title of the finder or bad faith. Unaka Nat. Bank v. Butler, supra. Notice of an agreement between the maker and the payee of a note that the payee should do certain things does not affect a pur- chaser who has no notice or knowledge that the payee has broken his contract. Black v. Bank of Westminster, 96 Md. 399, 54 Atl. 88, S. C. sec. 29 ; McNight v. Parsons, 136 Iowa 390, 113 N. W. 858, 125 Am. St. Rep. 265, S. C. sec. 52-3. Plaintiff paid only one-half its face for a note made payable at a place in Alaska, which was inaccessible for half the year. There was no evidence of lack of good faith. Held, no error to direct a judgment for plaintiff, although the maker had a good defense against the payee. McNamara v. Jose, 28 Wash. 461, 68 Pac. 903. See also Lassas v. McCarty, 47 Oregon 474, 84 Pac. 76, S. G. sec. 57. Sec. 57. A holder in due course holds the instru- ment free from any defect of title of prior parties, and free from*^ defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof** against all parties liable thereon. The Illinois Act after the word "themselves" interpolates a clause excepting the defenses of fraud and circumvention and gaming, which are, by statutes referred to in said clause, made real defences. *3TIie English Act reads "from mere personal defenses." B. J5. A. s. 38 (2). ** The words "for the full amount thereof" are omitted in the English Act. JJ,E. A. s. 38 (2). , 66 THE NEGOTIABLE INSTRUMENTS LAW. The Wisconsin Act adds to the section : ' ' Except as provided in sections 1944 and 1945 of these statutes, relating to insurance pre- miums, and also in cases where the title of the person negotiating such instrument is void under the provision of section 1676-25 (sec. 55 N. I. L.) of this act." Albany Co. Bank v. People's Ice Co., 92 App. Div. 47, 86 N. Y. Supp. 773, S. C. sec. 54; Unaka Nat. Bank v. Butler, 113 Tenn. 574, 83 S. W. 655, S. C. sees. 9-5, 56; Packard v. Windholz, 88 App. Div. 365, 84 N. Y. Supp. 666, S. C. sees. 66, 124; Quiggle v. Herman, 131 Wis. 379, 111 N. W. 479, S. C. sec. 55 ; Rosenthal v. Freedman, 53 Misc. R. 595, 103 N. Y. Supp. 714 ; Greeser v. Sugar- man, 37 Misc. R. 799, 76 N. Y. Supp. 922 ; Benedict v. Kress, 97 App. Div. 65, 89 N. Y. Supp. 607; Broadway Trust Co. v. Man- hdm, 47 Misc. R. 415, 95 N. Y. Supp. 93 ; Mersick v. Alderman, 77 Conn. 634, 60 Atl. 109, S. C. sec. 52; Vander Ploeg v. Van Zuuk, 135 Iowa 350, 112 N. W. 807, 13 L. R. A. (N. S.) 490, S. C. sec. 14; Gansevoort Bank v. Gilday, 53 Misc. R. 107, 104 N. Y. Supp. 271, S. C. sec. 25; In re Troy & Cohoes Shirt Co., 136 Fed. Rep. 420, S. C. see. 56 ; Nat. Bank of Commerce v. Pick, 13 N. Dak. 74, 99 N. W. 63, S. C. sec. 52; Siegmeister v. Lispenard Co., 107 N. Y. Supp. 158; Ketcham v. Govin, 35 Misc. R. 375, 71 N. Y. Supp. 991, S. C. see. 56 ; German- American Bank V. Cunningham, 97 App. Div. 244, 89 N. Y. Supp. 836 ; Klar v. Kcstiuk, 119 N. Y. Supp. 683, S. C. sees. 55, 56 ; Rice v. Barring- ton, 75 N. J. Law 806, 70 Atl. 169 ; Johnson County Savings Bank V. Walker (Conn.), 72 Atl. 579. The purchase of a negotiable promissory note at a heavy dis- count (two-thirds of the face value) is not of itself enough to pre- vent the buyer from being a holder in due course and recovering the full amount. Lassas v. McCarty, 47 Oregon 474, 84 Pac. 76. See also McNamara v. Jose, 28 Wash. 461, 68 Pac. 903, S. C. sec. 56. Evidence that plaintiff bought a note made by responsible per- sons, when it had less than six weeks to run, for little more than one-half the face value, is enough to carry the question of plain- tiff's bona fides to the jury. Becker v. Hart, 120 N. Y. Supp. 270. The fact that a bank, which is a holder in due course of a check, obtained by the payee by fraud, sues the drawer alone and not the payee-indorser is not evidence that the bank is no longer the holder, but is suing for the benefit of the indorser. Choteau Trust & Banking Co. v. Smith, (Ky.), 118 S. W. 279. This section changes the law of Tennessee and under it a holder in due course may recover the full amount of the instrument, not merely the amount paid for it. Jefferson Bank v. Chapman- Wliite- Lyons Co. (Tenn.), 123 S. W. 641, S. C. see. 56. Under N. Y. LavFs 1837, c. 430, sec. 1, all usurious securities are void. The National Banking Act provides that a national bank knowingly charging a usurious rate on a loan or discount shall forfeit all interest, but does not make the instrument void. N. Y. THE NEGOTIABLE INSTRUMENTS LAW. 67 Laws 1900, chap. 310, places State and private banks on a parity with national banks as to usury. A State bank bona fide in due course and for value discounted a note which was void for usury as between the original parties. Held, that the bank can recover on the note. Schlesinger v. Gil- hooly, 189 N. Y. 1, 81 N. E. 619. But if the bank had knowledge that the note was usurious as between the original parties it can not recover, Laws 1900, chap. 310, having no application in such a case. Schlesinger v. Lehmaier, 191 N. Y. 69, 83 N. E. 657, 16 L. R. A. (N. S.}, 626. The Wisconsin Act adds the words "except as proivded in sec- tions 1944 and 1945, of these statutes relating to insurance premi- ums and also in cases where the title of the person negotiating such instrument is void under the provisions of section 1676-25 (N. I. L. sec. 55) of this Act." (See Aukland v. Arnold, supra, sec. 55.) Held, that the above-quoted exception does not include a note given for lightning rods which did not contain a statement that it was so given as required by Laws 1903, chap. 438, and that a holder in due course could recover on such a note. Amd v. Sjoblom, 131 Wis., 642, 111 N. W. 666, 10 L. R. A. (N. S.), 842. Sec. 58. In the hands of any holder other than a holder in due course, a negotiable instrument is sub- ject to the same defenses as if it were non-negotia- ble.*^ But a holder*" who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter. The Illinois and Wisconsin Acts insert "duress" after "fraud" and substitute "such holder" for "the latter." Groh's Sons v. Schneider, 34 Misc. R. 195, 68 N. Y. Supp. 862, S. C. see. 52 ; Black v. Bank of Westminster, 96 Md. 399, 54 Atl. 88, S. C. sees. 29, 56 ; Mersick v. Alderman, 77 Conn. 634, 60 Atl. 109, S. C. sec. 52 ; Jennings v. Carlucei, 87 N. Y. Supp. 475 ; Bryan V. Harr, 21 App. D. C. 190 ; Symonds v. Riley, 188 Mass. 470, 74 N. E.. 926 ; Packard v. Windholz, 88 App. Div. 365, 84 N. Y. Supp. 666, S. C. sees. 66, 124; FuUerton Lumber Co. v. Snouffer, 139 Iowa 176, 117 N. W. 50, S. C. sec. 119. *5Not in E. E. A. *6The English Act inserts here, "(whether for value or not)." B. E. A. 6. 29 (3). 68 THE NEGOTIABLE INSTRUMENTS LA"W. A note given for a grain drill with a warranty was transferred to plaintiff after maturity. Held, that a breach of the warranty need not be set up as a counter-claim under the statute respecting assignments, but is properly pleaded as a defense under this sec- tion. American Seeding Co. v. Slocum, 58 Misc. R. 458, 108 N. Y. Supp. 1042. A payee whose title is defective can not better it by selling the instrument to a holder in due course and buying it back again. Andrews v. Robertson, 111 Wis. 334, 87 N. W. 190, 87 Am. St. Rep. 870. A note, made or indorsed by defendants for the accommodation of a third person, was delivered to an agent to be negotiated and the proceeds paid to such third person. The agent sold the note to a bona fide purchaser but appropriated the proceeds to his own use. At maturity the note was protested for non-payment, and the agent paid it and afterwards sold it to the plaintiff, who had notice of the dishonor and agreed with the agent to extend the time. Held, that the agent having fraudulently sold the note could not acquire a good title by payment to or purchase from the bona fide purchaser and could not give a good title to plaintiff. Comstock v. Buckley, (Wis.) 124 N. W. 414, S. C. sec. 29. Only defences existing at the time of its transfer affect a prom- issory note, although it was not indorsed to the payee. Therefore, where a note was given for advances to be made subsequently, failure of the payee to make the advances will not prevent recov- ery by the assignee. Marling v. FitzGerald, 138 Wis. 93, 120 N. W. 388, S. C. sees. 25, 49. See note criticizing this case, supra, sec. 49. Sec. 59. Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instru- ment was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course.*''(a) But the last-mentioned rule Joes not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title.** (S) 47 "But if in an action on a bill it is admitted or proved that the accept- ance, issue, or subsequent negotiation of the bill is affected, with fraud, duress, or force and fear, or illegality, the burden of proof is shifted, unless and until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill." B. E. A. s. 30 (2). *8 The provision in the last sentence is omitted in the English Act. B. E. A. 8. 30 (2). THE NEGOTIABLE INSTRUMENTS LAW. 69 ■ Colborn v. Arbecam, 54 Misc. R. 623, 104 N. Y. Supp. 986; Engle V. Hyman, 54 Misc. R. 251, 1U4 N. Y. Supp. 390 ; Tamlyn v. Peterson, 15 N. Dak. 488, 107 N. W. 1081 ; Karsch v. Pettier Co., 82 App. Div. 230, 81 N. Y. Supp. 782 ; Keegan v. Rock, 128 Iowa, 39, 102 N. W. 805; Bryan v. Harr, 21 App. D. C. 190; German- American Bank v. Cunningham, 97 App. Div. 244, 89 N. Y. Supp. 836 ; Consolidation Bank v. Kirkland, 99 App. Div. 121, 91 N. Y. Supp. 353, S. C. sec. 52-3 ; Wilkins v. Usher, 123 Ky. 696, 97 S. W. 37, S. C. sees. 25, 52-2 ; Mayers v. McRimmon, 140 N. C. 640, 53 S. ,B. 447, 111 Am. St. Rep. 879, S. C. 49 ; Johnson County Sav. Bank v. Walker, 79 Conn. 348, 65 Atl. 132, S. C. sec. 52 ; Hodge v. Smith, 139 Wis. 326, 110 N. W. 192, S. C. sees. 16, 52-3, 55; Kerr v. Ander- son, 16 N. Dak. 36, 111 N. W. 614; Vander Ploeg v. Van Zuuk, 135 Iowa 350, 112 N. W. 807, 13 L. R. A. (N. S.) 490, S. C. sec. 14; Pelton V. Spider Lake Co. 132 Wis. 219, 112 N. W. 29, 122 Am. St. Rep. 963, S. C. see. 56 ; McNight v. Parsons, 136 Iowa 390, 113 N. W. 858, 125 Am. St. Rep. 265, S. C. sees. 52-3, 56; Packard v. Windholz, 88 App. Div. 365, 84 N. Y. Supp. 666, S. C. sees. 66, 124 ; Benedict V. Kress, 97 App. Div. 65, 89 N. Y. Supp. 607 ; Drinkall v. Movius State Bank, 11 N. D. 10, 88 N. W. 724, S. C. sec. 55 ; In re Troy & Cohoes Shirt Co., 136 Fed. Rep. 420, S. C. sec. 56 ; Lucker v. Iba, 54 App. Div. 566, 66 N. Y. Supp. 1019 ; Cook v. Am. Tubing Co. 28 R. I. 41, 65 Atl. 641, 9 L. R. A. (N. S.), 193; Abmeyer v. First Nat. Bank, 76 Kan. 877, 92 Pac. 1109. Cedar Rapids Nat. Bank v. Myhre Bros. (Wash.), 107 Pac. 518; Bank of Ozark v. Hanks (Mo. App.), 125 S. W. 221; Hawkins v. Young, 127 Iowa 281, 114 N. W. 1041 ; City Nat. Bank v. Jordan, 139 Iowa 499, 117 N. W. 758; Packard v. Figliuolo, 114 N. Y. Supp. 753; Ireland v. Scharpenberg (Wash.), 103 Pac. 801; Iowa Nat. Bank v. Carter (Iowa), 123 N. W. 237, S. C. sees. 4, 25, 56; Feigenspan v. McDonnell, 201 Mass 341, 87 N. B. 624; Warren v. Smith (Utah), 100 Pac. 1069; Walters v. Rock (N. D.), 115 N. W. 511 ; Bank of Morehead v. Hernig, 220 Pa. 224, 69 Atl. 679 ; Amd V. Heckert, 108 Md. 300, 70 Atl. 416; Regester's Sons Co. v. Reed, 185 Mass., 226, 70 N. E. 53. (a) This section is declaratory of the common law. The Nego- tiable Instrument Act is in the main a codification of the common law rules. Where it lays down a new rule it controls ; but where its language is consistent with the rule previously recognized, it should be construed as simply declaratory of the law as it was before the adoption of the Act. Campbell v. Fourth Nat. Bank (Ky.), 126 S. W. 114, S. C. sec. 25. In an action by an indorsee against the maker, where defendant admits that the note was made for a valuable consideration, but denies, on information and belief, the indorsements, it was suffi- cient for the plaintifE to introduce the note in evidence with the indorsements thereon. Beck v. Mailer, 131 App. Div. 243, 115 N. Y. Supp. 596. 70 THE NEGOTIABLE INSTRUMENTS LAW. The burden put upon the plaintiff involves something more than the mere presumption arising from an indorsement regular in fonn. O'Connor v. Kleiman (Iowa), 121 N. W. 1088. When defendant has proved fraud, the further inquiry is not whether defendant has shown that plaintiff took with notice of the fraud, but whether plaintiff had shown that he took in good faith and without notice. Cox v. Cline, 139 Iowa 128, 117 N. "W. 48. When fraud has been shown, the burden is on the plaintiff af- firmatively to establish good faith. Whether he has done so is for the jury, and a verdict should not be directed for plaintiff, unless the testimony is not only consistent with good faith, but is such that there is no room for difference of opinion among fair- minded men. Amd v. Aylesworth (Iowa), 123 N. W. 1000, S. C. sec. 56. In an action on a note the maker gave evidence of duress. Semble that it was also incumbent on defendant to show that plain- tiff indorsee was not an innocent purchaser of the note. Callendar Savings Bank v. Loos (Iowa), 120 N. W. 317. The court did not refer to and evidently overlooked section 59 N. I. L. See Keegan v. Eock, 128 Iowa 39, 102 N. W. 805, and other foregoing Iowa cases. Defendant having given evidence of fraud, and plaintiff having responded by showing that he acquired the note bona fide for value in the usual course of business and before its maturity, it was error to charge that the prima facie case of plaintiff was restored, because such instruction assumed the truth of plaintiff's evidence and withdrew the question from the jury. American Nat. Bank v. Fountain, 148 N. C. 590, 62 S. B. 738. Where the evidence establishes that the title of the party nego- tiating the instrument was defective, the holder claiming to be a purchaser in good faith for value and without notice must make this claim good by the greater weight of evidence. Mfg. Co. v. Summers, 143 N. C. 102, 55 S. E. 522, S. C sec. 53 ; Louis de Jonge & Co. V. Woodport Hotel Co. (N. J.), 72 Atl. 439; Schultheis v. Sellers (Pa.), 72 Atl. 887. Proof that plaintiff gave value before maturity is not enough to show good faith. Natl. Bank v. Foley, 54 Misc. R. 126, 103 N. Y. Supp. 553, S. C. sees. 25, 52-3. But see Hodge v. Smith, supra, sec. 62-3, contra. Where the maker did not deny the allegations of the complaint that the payee before maturity indorsed, assigned, and delivered the note to plaintiff for value, an allegation coupled with a defence of failure of consideration, denying that plaintiff was an innocent purchaser for value, raises no issue because the fact intended to be disputed was already admitted by the failure to traverse the alle- gations of the complaint. Brown v. Feldwert, 46 Oregon 363, 80 Pac. 414. While the burden of proof to show that he or some one under whom he claims is a holder in due course is shifted to the holder when the fraudulent character or negotiation of the paper is THE NEGOTIABLE INSTRUMENTS LAW. 71 shown, the presumption that the indorsee is a bona fide holder for value is not repelled merely by proof that the instrument as be- tween the immediate parties was without consideration. Mitchell V. Baldwin, 88 App. Div. 265, 84 N. Y. Supp. 1043, sembU, Joveshof V. Rockey,,58 Misc. Rep. 559, 109 N. Y. Supp. 818. As to the rule where the action is between immediate parties, see eases cited supra, sec. 24. Where a note for the full purchase price of a horse was given to the payee's agent after the greater part of the price had been paid, on the agent's statement that he had no authority to indorse such payment but that he would have the payee do so, the note was ob- tained without consideration, whether the representations were false or not, and the indorsee of the note has the burden of showing that he is a bona fide holder in due course. Under section 59 the burden of evidence is shifted to the plaintiff to show that he ac- quired the note in due course, whether the proof shows that the note was obtained by fraud or was given without consideration. Jobes V. Wilson (Mo. App.), 124 S. W. 548, S. C. sec. 52-3. Bed quaere, as to the last point where the proof shows only that the note was without consideration. But see to the same effect Johnson County Savings Bank v. Mills (Mo. App.), 127 S. W. 425. If notes sued on by an indorsee are tainted with fraud in their inception even though this affected the consideration, the burden of proof was upon the plaintiff to show that he gave value. City Deposit Bank v. Green, 138 Iowa 156, 115 N. W. 893. When fraud has been proved, the burden of proof is on the holder to prove both that value has been given and that it has been given in good faith without notice of the fraud. Tatam v. Haslar, 23 Q. B. D. 345 ; Oakley v. Boulton, 5 T. L. R. 60 ; Harris v. Aldous, 18 New Zealand L. R. 449. This section does not affect the practice of the Chancery Division, which requires the amount of the bill to be paid into court or security to be given upon an application for an injunction to re- strain the negotiation of a bill alleged to have been obtained by fraud. Hawkins v. Ward, W. N. (1890) 203. Plaintiff paid to defendant a note to which plaintiff's signature as maker was forged, mistaking it for a genuine note of like amount which he had made. Plaintiff sued defendant to recover back the money and was non-suited. Held, error, that the rule is the same as in the case of a payment by the drawee of a bill to which the name of the drawer is forged and that plaintiff could not recover if defendant was a holder in due course. But the burden upon this point was on the defendant under sections 55-59, N. I. L., and the question should therefore have been sub- mitted to the ,iury. Jones v. Miners' & Merchants' Bank (Mo. App.), 128 S. W. 829. (b) In Parsons v. Utiea Cement Co., 80 Conn. 58, 66 Atl. 1024, the court appears to have overlooked the last paragraph of section 59 and held that where the plaintiff acquired the instrument from 72 THE NEGOTIABLE INSTRUMENTS LAW. a prior holder, who had obtained it fraudulently and without con- sideration from the rightful owner, the burden was on the plaintiff to prove that he was a holder in due course although defendant the maker, had no defence of its own to the instrument. The last clause of section 59 was intended to codify the contrary case of Kinney v. Kruse, 28 Wis. 183. See Crawford Negotiable Instru- ments Law, 3d Ed. 79 n. (c). After the second trial of Parsons v. Utica Cement Co., 73 Atl. 785, the court discovered that the instrument had been made and delivered prior to the taking effect of the Negotiable Instruments Law, and deciding the ease according to the pre-existing law, the court declined to follow Kinney v. Kruse, saying that it is opposed to the strong current of authority. Sed quaere unless the rightful owner has notified the maker not to pay. See Prouty V. Roberts, 6 Cush. 19 ; Carrier v. Sears, 4 Allen, 336 ; Merchants Bxch. Bank. v. N. B. Savings Institution, 33 N. J. L. 170 ; Brown V. Penfield, 36 N. Y. 473 ; Houghton v. McAuliffe, 26 How. Pr. 270. The ease of Voss v. Chamberlain, 139 Iowa, 569, 117 N. W. 269 is contra to the case of Parsons v. Utica Cement Co. and regards the last clause of section 59 as intended to settle the conflict of authority on this question. Article V. LIABILITIES OF PARTIES. Sec. 60. The maker of a negotiable instrument 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.*" Where the statute does not declare the instrument void, a holder in due course can recover against the maker on a promissory note made to the order of a foreign corporation, although it had not complied with the statutory conditions to the right to do business in the State. McMann v. Walker, 31 Colo. 261, 72 Pac. 1055; Neyens v. Worthington, 150 Mich. 580, 114 N. W. 404, 18 L. R. A. (N. S.), 142; Halsey v. Henrv Jewett Co., 190 N. Y. 231, 83 N. E. 25. semble. Young v. Gaus, 134 Mo. App. 166, 113 S. W. 735. See also Nat. Bank of Commerce v. Pick, supra, sec. 52. 49 "The maker of a promissory note by making it ( 1 ) Engages that he will pay it according to its tenor; (2) Is precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse." P, S: A. B. 88. , - , THE NEGOTIABLE INSTRUMENTS LAW. 73 Sec. 61. The drawer by drawing the instrument admits the existence of the payee and his then capac- ity to indorse ; ^^ and engages that on due present- ment the instrument will be accepted ox^^ paid, or both,^^ according to its tenor, and that if it be dis- honored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder. The Colorado and Illinois Acts omit the word "subsequent" before "indorser." The District of Columbia, North Dakota and New York Acts read "accepted and paid." Sec. 62. 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 author- ity to draw the instrument, and 2. The existence of the payee and his then capacity to indorse.^* The Missouri Act omits "then" before "capacity" in sub- section 2. s" "la precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse." B. E. A. a. 65 (1) (b). 61 The English Act reads "and" instead of "or." B. E. A. s. 55 (1) (a). 62 The words "or both" are omitted in B. E. A. s. 65 (1) (a). 63 "The acceptor of a bill, by accepting it, ( 1 ) Engages that he will pay it according to the tenor of his acceptance; (2) Is precluded from denying to a holder in due course; (a) The existence of the drawer, the genuineness of hia signature, and his capacity and authority to draw the bill; (b) In the case of a bill payable to drawer's order, the then capacity of the drawer to indorse, but not the genuineness or validity of his indorsement; (c) In the case of a bill payable to the order of a third person, the existence of the payee and hia -then capacity to indorse, but not the genuineness or validity of his indorse- ment." B. E. A. s. 54. 74 THE NEGOTIABLE INSTRUMENTS LAW. Ames: Since an acceptor, by section 62, engages to pay the bill "according to the tenor of his acceptance," he must pay to the innocent payee or subsequent holder the amount called for by the bill at the time he accepted, even though larger than the original amount ordered by the drawer. A bank certifying a raised check is in the same case, since section 187 assimilates a certification to an acceptance. If the acceptor or certifying bank must honor his acceptance or certification in such a case, a fortiori a drawee who pays a raised bill or check, without acceptance or certification, should not recover the money paid from an innocent holder. These results are at variance with numerous American decisions, but they are changes for the better, and, so far as adopted, bring the law of this country into harmony with the law of nearly, if not indeed all, of the Eurppean States.* Schlesinger v. Kurzrok, 47 Misc. R. 634, 94 N. Y. Supp., 442, S. C. sec. 187 ; Meuer v. Phoenix Natl. Bank, 94 App. Div. 331, 88 N. Y. Supp. 83, S. C. sees. 49. 187. Defendant bank, without negligence, cashed a forged check on plaintiff bank, indorsed it, "Indorsement guaranteed. Pay any national or state bank or order," and sent it for collection and it was paid by plaintiff, who, upon discovery of the forgery, sued to recover the money. Held, that plaintiff could not recover; that section 62 was intended to adopt the doctrine of Price v. Neal, 3 Burrow 1354, and applied as well to a payment as to an acceptance by the drawee of a forged bill or cheek. Also, that the indorsement of the defendant bank was not a guaranty to the drawee but only to indorsees, Semble, that such an indorsement is only for collec- tion and does not transfer title to an indorsee. National Bank of RoUa V. First Nat. Bank of Salem (Mo. App.), 125 S W. 513; National Bank of Commerce v. Mechanics' Am. Nat. Bank (Mo. App.), 127 S. W. 429 accord. Some unknown person forged a check on plaintiff bank and paid the same to the city to discharge a street assessment on defendants' land, which defendants subsequently sold. The plaintiff bank hav- ing paid the check and charged the account of its depositor, upon discovery of the forgery, credited the sum back to the depositor and sued defendants for the amount. Held, that see. 62, N. I. L. has no application in behalf of one who has acquired the paper without consideration. That the plain- tiff was entitled to be subrogated to the lien of the city as against the proceeds of the sale of the land in the hands of defendants, if it should appear upon a new trial that the payment of the assess- ments were purely gratuitous and not in discharge of a real or supposed obligation on the part of the depositor or the unknown forger. Title Guarantee & Trust Co. v. Haven, 196 N. Y. 487, 89 N. B. 1082. * 4 Harvard Law lUview, 306, 307. THE NEGOTIABLE INSTKUMENT8 LAW. 75 Sec. 63. A person placing his signature upon an instrument otherwise than as maker, drawer or ac- ceptor, is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity.^* In dealing with irregular indorsements the courts sometimes refer only to section 63, sometimes only to section 64, sometimes to both eections. Therefore the cases herein cited under both sections should be consulted. Rockfield v. First Nat. Bank, 77 Ohio St, 311, 83 N. E. 392, 14 L. R.. A. (N. S.), 842, S. C. sec. 64-1; Quimby v. Varnum, 190 Mass. 211, 76 N. E. 671, S. C. sec. 121 ; McLean v. Bryer, 24 R. I. 599, 54 Atl. 373, S. C. sec. 53, 64-1 ; Toole v. Crafts, 193 Mass. 110, 78 N. E. 775, 118 Am. St. Rep. 455, S. C. sees. 64-1, 82-3; Hopkins v. Merrill, 79 Conn. 626, 66 Atl. 174, S. C. sees. 66, 89 ; Hoyland v. Nat. Bank of Middlesborough (Ky.), 126 S. W. 356, S. C. sec. 89 ; Pugh V. Sample, 123 La. 791, 49 So. 526 ; Bank of Montpelier V. Lumber Co. (Idaho), 102 Pac. 685; Mackintosh v. Gibbs (N. J.) 74 Atl. 708, S. C. sec. 66 ; Perry Co. v. Taylor Bros., 148 N. C. 362, 62 S. E. 423, S. C. see. 64. Where defendant's signature appeared with another in the place for the maker's name, he is not deemed an indorser although the body of the instrument names the other signer as a promisor with- out mention of defendant 's name. Germania Nat. Bank v. Mariner, 129 Wis. 544, 109 N. W. 574, S. C. sees. 17-6, 64. This section abrogates the former rule in New Jersey that the signature of a third person upon the back of a negotiable instru- ment prior to its delivery to the payee creates per se no implied or commercial contract. Wilson v. Hendee, 74 N. J. Law 640, 66 Atl. 413, S. C. sees. 64, 64-1, 68. See also cases under sec. 64-1. A partner who individually indorses a firm note adds to his liability as maker a several and distinct lirbility as indorser, and may be sued as such. Nat. Exch. Bank v. Lubrano, 29 R. I. 64, 68 Atl. 944. The payee of a note, who indorsed it to enable the maker to nego- tiate it for his own benefit, is liable merely as an accommodation indorser and is discharged if no notice of dishonor is given. Mechanics' & Farmers' Savings Bank v. Katterjolin (Ky.), 125 S. W. 1071, S. C. sees. 109, 196. Upon a sale of property the seller required the buyer to procure an indorser to a note to be given for part of the price. The buyer executed a note to the seller with the blank indorsement of the de- 64 "Where a, person signs a bill otherwise than as a drawer or a^Meptor, he thereby incurs the liabilities of an indorser to a, holder in due course." B. E. A. B.66. 76 THE NEGOTIABLE INSTRUMENTS LAW. fendant. Held, that defendant was liable as an indorser and ijot as a maker. Roessle v. Lancaster, 130 App. Div. 1, 114 N. Y. Supp. 387. The defendants, who were respectively president and secretary and also directors and large stock holders in a corporation, en- dorsed a note made by the corporation to raise money. When the note matured the company had no money to pay it, as defendants knew. Held, that defendants were liable only as indorsers and could not be held without presentment and notice of dishonor. McDonald v. Luckenbach, 170 Fed. 434, 95 C. C. A. 604. Sec. 64. Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser, in accordance 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 subsequent parties.®®(a) 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 subsequent to the maker or drawer. "*(&) 3. If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee."^(c) The Illinois Act substitutes for sub-sections 1 and 2 the changes advised by Professor Ames {infra, p. 171), as follows: "1. If the instrument is a note or bill payable to the order of a third person, or an accepted bill, payable to the order of the drawer, he is liable to the payee and to all subsequent parties. 2. If the instrument is a note or unaccepted bill payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer." Thorpe v. White, 188 Mass. 333, 74 N. E. 592, S. C. sees. 52, 64-1, 124 ; McLean v. Bryer, 24 R. I. 599, 54 Atl. 373, S. C. sees. 53, 64-1 ; Quimby v. Vamum, 190 Mass. 211, 76 N. E. 671, S. C. sec. 121 ; Rouse v. Wooten, 140 N. C. 557, 53 S. E. 430, 111 Am. St. Rep. 875, S. C. sec. 89; Roessle v. Lancaster, 130 App. Div. 1, 114 N. Y. Supp. 387, S. C. see. 63. 05 Not in B. E. A. 66 See note 54 above. THE NEGOTIABLE INSTBUMENTS LAW. 77 A note recited "The A. B. Co. promise to pay to the order of C," and was signed A. B. Co., E. R. S. Treasurer, J. W. M." Held, section 64 was not applicable, because J. W. M. did not place "his signature in blank" on the note and he was therefore not liable as indorser. That there was a plain ambiguity on the face of the note, and that evidence was admissible even against a holder in due course to show that J. W. M. was secretary of the A. B. Co. and intended to sign as such but omitted his title by mistake. Germania Nat. Bank v. Mariner, 129 Wis. 544, 109 N. W. 574, S. C. sees. 17-6, 63. This section deals only with the liability of an irregular indorser to the payee and subsequent parties and does not define the rights and liabilities of several irregular indorsers as between themselves. This is done by section 68. Wilson v. Hendee, 74 N. J. Law 640, 66 Atl. 413, S. C. sees. 63, 64-1, 68. One who endorses under this section is entitled to the same defences as to legality or consideration as the maker for whose ac- commodation he signed. Leonard v. Draper, 187 Mass, 536, 73 N. E. 644. semble S. C. sec. 66. The Negotiable Instruments Law governs a renewal note made after the passage of the actj although the original note was given before the act, especially where there were new indorsers on the renewal note making in law a new contract with different parties. Walker v. Dunham, 135 Mo. App. 396, 115 S. W. 1086. (a) This section has no application to a case where the signature was placed on the instrument after its delivery to the payee. Kohn V. Consolidated Co., 30 Misc. R. 725, 63 N. Y. Supp. 265. Secus, if the indorsement, though made after the note comes into the pos- session of the payee, was made in pursuance to an agreement be- tween the parties that the note should be so indorsed to be accept- able. Downey v. O'Keefe, 26 R. I. 571, 59 Atl. 929, semUe. By force of this section and section 63 the law has been changed in States which have adopted the N. I. L. and in which a person signing in blank before delivery for the accommodation of the maker was formerly held to be a joint maker or guarantor. Now he is an indorser, and is chargeable only after presentment and noticef of dishonor. Deahy v. Choquet, 28 R. I. 338, 67 Atl. 421, 14 L R A. (N. S.), 847, S. C. see. 120-6;* Farquhar C. v. Higham, 16 N. Dak. 106, 112 N. W. 557 ; McLean v. Bryer, 24 R. I. 599, 54 Atl. 373, S. C. sec. 53 ;Toole v. Crafts, 193 Mass. 110, 78 N. E. 775, 118 Am. St. Rep. 455, S. C. sec. 82-3 ; Peck v. Easton, 74 Conn. 456, 51 Atl. 134, S. C. sec. 89 ; Gibbs v. Guaraglia, 75 N. J. Law 168, 67 Atl. 81 ; In re Swift, 106 Fed. Rep. 65, S. C. see. 82-3 ; Rockfield v. First Nat. Bank, 77 Ohio St. 311, 83 N. E. 392, 14 L. R. A. (N. S.), 842- ' Perry Co. v. Taylor Bros., 148 N. C. 362, 62 S. E. 423. See also Wilson y. Hendee, 74 N. J. Law 640, 66 Atl. 413, S. C. sees 63 64 68 ; Kohn v. Consolidated Co., 30 Misc. R. 725 ; 63 N. Y. Supp. 265' * The court cited only see. 63, but the facts and the reasoning of the cottrt bring the case also under sec. 64-1. 78 THE NEGOTIABLE INSTRUMENTS LAW. S. C. infra, Far Rockaway Bank v. Norton, 186 N. Y. 484, 79 N. E. 709, S. C. infra; Baumeister v. Kuntz, 53 Fla. 340, 42 So. 886, S. C. sec. 109 ; Thorpe v. White, 188 Mass. 333, 74 N. E. 592, S. C. sees. 52, 124. And in an action by the payee against the indorser under this section, an allegation and evidence of the intention of the indorser to be liable to the payee is unnecessary and immaterial. Far Rock- away Bank v. Norton, 186 N. Y. 484, 79 N. E. 709 ; Corn v. Levy, 97 App. Div. 48, 89 N. Y. Supp. 658; McMoran v. Lange, 25 App. Div. 11, 48 N. Y. Supp. 1000, semble; Kohn v. Consolidated Co., 30 Misc. R. 725, 63 N. Y. Supp. 2S5, semhle. See also Gibbs v. Guaraglia, 75 N. J. Lave 168, 67 Atl. 81, and Wilson v. Hendee, 74 N. J. Law 640, 66 Atl. 413, S. C. sees. 63, 64, 68. And parol evidence of a contrary intention is not admissible. The statute fixes the status of the indorser. Baumeister v. Kuntz, 53 Fla. 340, 42 So. 886. See contra, Mercantile Bank v. Busby (Tenn.), 113 S. W. 390, S. C. sec. 115 and Kohn v. Consolidated Co., supra, semble (6) Ames: This section is an otherwise excellent piece of codifi- cation, but defective because under subsection 2 a party signing as indorser for the accommodation of an acceptor would not be liable to a drawer-payee, but only to siibsequent parties. This omission can be remedied by an amendment, a draft of which is given. Brevtster: Misapprehends the criticism and so fails to answer it. McKeehan : Agrees with Professor Ames that the section is de- fective and that his suggested amendment would improve it. One, who endorsed a bill in blank before delivery for the pur- pose of backing the acceptor, is liable to the drawer-payee, who had indorsed and transferred the instrument and was compelled to take it up. Haddock, Blanchard & Co. v. Haddock, 192 N. Y. 499, 85 N. B. 682, S. C. sees. 29, 64-3, 68. In this ease the court j?eached the desirable result advocated by Professor Ames without an .amendment of the section, by holding that sections 63 and 64-2 merely established a presumption and that parol evidence was ad- missible to show an intention that the indorser should be liable to the drawer. It is submitted that this decision nullifies the plain language of section 64-2, which defines the parties to whom an anomalous indorser of a bill, payable to the drawer's order, is liable, and does not merely enact a rule of evidence. See cases cited under the preceding sub-section. An aval or backer to an acceptor was not recognized at the common law. Steele v. M 'Kin- lay, 5 App. Cas. 754. In Jenkins v. Coomber [1898] 2 Q. B. 168, it was held that, where A drew a bill on B, payable to his own order, which B accepted, and C, in accordance with a previous agreement to guarantee its THE NEGOTIABLE INSTKTJMENTS LA"W. 79 payment, wrote Ms name on the back, and the bill was delivered to A, C was not liable to A as indorser, as the bill had not been in- dorsed by A before C put his name on the back. That Steele v. M'Kinlay, 5 App. Gas. 754, was not changed by section 56 B. E. A. corresponding to section 63 N, I. L. It has, however, since been held in Glenie v. Bruce Smith [1908] 1 K. B. 263, where the defendant indorsed a bill in blank after another had accepted it in blank and the bill was then delivered to plaintiff, who filled it up as drawer, payable to himself, and then indorsed it, that defendant was liable to plaintiff. The court relied on section 20 B. B. A. (section 14 N. I. L.), and thus attempted to distinguish Jenkins v. Coomber. This case in effect adopts the Continental rule that there can be an aval or backer for any party to a bill or note including the acceptor of a bill, thus overruling Jackson v. Hudson, 2 Campbell 447, and disregarding Steele v. M'Kinlay, supra. It has also been held in Robinson v. Mann, 31 Canada Supreme Court Reports 484 that under section 56 of the Canadian Bills of Exchange Act of 1890, which is substantially the same as section 56 of the English Act, one who indorses a note may be liable as an indorser to the payee although it had not been first indorsed by the payee. That the statute adopts the aval form of liability of the French Commercial Law, and that the payee is a holder in due course. See also McDonough v. Cook & Crawford, Ontario Court of Appeals, April 5, 1909, 45 Canadian Law J. accord. The result in these eases can be more easily reached in England and in Canada where there is so such section in the Bills of Exchange Acts as section 64-2 of the Negotiable Instruments Law. The construction put by the New York Court of Appeals on sec- tion 64-2 seems fatal to uniformity. By the common law of New York the anomalous indorser of a bill might perhaps have been made liable, as indorser, to the drawer-payee by the use of the same fiction that was adopted in the case of the anomalous indorser of a note in Moore v. Cross, 19 N. Y. 227, 75 Am. Dec. 326, but this could not have been done. in a Stats where it was held, that a stranger, who wrote his name on the back of a bill before delivery, could not be an indorser but must be a drawer. Phoenix Co. v. Fuller, 3 Allen, 441. The maker of a note, payable to his own order, simply promises to pay, and the drawer of a bill, payable to his own order, simply orders payment to be made to the person he may designate. But neither the maker of such a note nor the drawer of such a bill is in the legal sense of the term an indorser when he writes his name on the back of the instrument. Ewan v. Brooks-Waterfield Co., 55 Ohio St. 596 ; 45 N. B. 1094, 35 L. R. A. 786. 60 Am. St. Rep. 719 ; Pickering v. Cording, 92 Ind. 306, 47 Am. Rep. 145. Mercantile Bank v. Busbv (Tenn.), 113 S. "W. 390, S. C. infra, sec. 115, is in accord with Haddock, Blanchard & Co. v. Haddock and Kohn v. Consolidated Co., supra, in holding that sections 63 and 64 merely create a presumption and that the real contract may be shown by oral evidence that one who indorsed before delivery 80 THE NEGOTIABLE INSTRUMENTS LAW. may he shown to be a joint maker and so not entitled to notice of dishonor. For the reasons already stated it is submitted that this decision is also erroneous and to be regretted. The New York Court of Appeals also relied upon section 68, but it is submitted that it is a fallacy to say that a drawer is an indorser in his relation to parties signing on the back of the bill subsequent to the drawing, and that section 68 does not affect the question involved in section 64-2. See Wilson v. Hendee, 74 N. J. Law 640, supra. (c) Parol evidence is necessary to establish whether the indorser signed for the accommodation of the payee. Haddock, Blanchard & Co. V. Haddock, 192 N. Y. 499, 85 N. B. 682, S. C. sees. 29, 64-2. Sec. 65. Every person negotiating an instrument by delivery or by a qualified indorsement, warrants,— 1. That the instrument is genuine and in all res- pects what it purports to be; 2. That he has a good title to it; 3. That all prior parties had capacity to contract; 4. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee, (a) The provisions of subdivision three of this section do not apply to persons negotiating public or corporation securities, other than bills and notes." Willard v. Crook, 21 App. D. C. 237, S. C. sec. 66 ; State v. Coming Savings Bank, 139 Iowa, 338, 115 N. W. 937 ; Middle- borough Nat. Bank v. Cole, 191 Mass. 168, 77 N. E. 781. 67 " ( 1 ) Where the holder of a bill payable to bearer negotiates it by deliv- ery without indorsing it, he is called a 'transferor by delivery.' (2) A trans- feror by delivery is not liable on th,e instrument. { 3 ) A transferor by delivery who negotiates a bill, thereby warrants to his immediate transferee, being a holder for value, that the bill is what it purports to be, that he has a right to transfer it, and that at the time of transfer he is not aware of any fact which renders it valueless." B. E. A. s. 58, There appears to be no special provision in the English Act as to the liability of an indorser with qualification. See Chalmers, 6th ed. 40. THE NEGOTIABLE IN8TEUMENT8 LAW. 81 The payee of a note secured by chattel mortgage transferred the note and mortgage, indorsing the note as follows : "By agreement with recourse after all security has been exhausted waiving pro- test." Held, that the indorser was liable only for the balance due after the security has been exhausted, and as no cause of action accrues against him until the security is exhausted he can not be joined as a defendant in the action to foreclose the mortgage. Smith V. Bradley, 16 N. Dak. 306, 112 N. W. 1062. An action for cancellation of a note because cashier's checks re- ceived therefor were worthless is not an action for breach of war- ranty in negotiation of the checks, and is therefore not governed by this section. Dille v. White, 132 Iowa, 327, 109 N. W. 909, 10 L. R. A. (N. S.) 510, S. C. supra, sec. 6-5. The transferor by delivery of a forged note is not released from liability as warrantor by the act of the transferee in receiving interest from the alleged maker and extending the note, without the consent of the transferor, all the parties being still in ignor- ance of the forgery. Cluseau v. Wagner (La.), 52 So. 547. (a) Ames: 1. The wai*ranty of an indorser without recourse should run only to his immediate transferee. The liability being extrinsic to the bill should be the same as that of a transferor by delivery. There is no authority for the distinction made in this section (sub-section 4), and Watson v. Cheshire, 18 Iowa 202, 87 Am. Dee. 382 is directly opposed to it, and holds that a subsequent transfer or indorsement is not of itself an assignment of the war- ranty of the indorser without recourse. 2. By this section (sub-section 4) the transferor of an instru- ment, void for usury, is not liable as warrantor, unless he was aware of the usury, thus codifying the discredited case of Littauer v. Goldman, 72 N. Y. 506, 28 Am. St. Rep. 171, although he is made liable as warrantor, irrespective of his knowledge, if the instru- ment is void for coverture or voidable for infancy. Again, if knowledge is necessary in the ease of an indorser without recourse, why not also in the case of an indorser without qualification ? Yet sub-section 4 of section 65 is not incorporated in section 66 as are sub-sections 1, 2 and 3 of section 65. 3. In sub-section 4 the last words "it valueless" should be changed to "its collectibility." The warranty should attach if the instrument is worth, for instance, fifty cents on the dollar. Brewstee : In 2 Ames Cases on Bills and Notes, 840, 882 an in- dorser without recourse is made liable to his indorsee and subse- quent holders. Makes no answer to Professor Ames' second and third criticisms on sub-section 4. Ames : The passage referred to by Judge Brewster was a youth- ful indiscretion, but, even there, no distinction was made between the indorser without recourse and the transferor by delivery, the writer erroneously conceiving that in both cases the warranty ran to subsequent holders. 82 THE NEGOTIABLE INSTRUMENTS LAW. McKeehan: 1. Discusses the difference between the English theory of estoppel against the indorser without qualification, pre- cluding him from denying not only to his indorsee but to any holder in due course, his title, the genuineness of the instrument, etc., and the prevalent American theory that an indorsement in- cludes a warranty of the same things to the indorsee and to sub- sequent holders and shows that while the Negotiable Instruments Law in sections 61 and 62 follows the English Act in expressing the liabilities of the maker, drawer and acceptor, it departs from the English Act as to the theory of the indorser 's undertakings and in sections 65 and 66 N. I. L. adopts the theory of warranty, and applies it both to qualified indorsements and to indorsements without qualification. 2. The difference in the effect of indorsements without recourse and transfers by delivery may be justified on the theory that, if the subsequent transfer is by indorsement, such indorsement may be regarded as an assignment of the warranty of the indorser without recourse. Agrees with Professor Ames that the transferor should be held- liable as warrantor if the instrument is void for usury. Sec. 66. Every indorser who indorses without qualification, warrants to all subsequent holders in due course: 1. The matters and things mentioned in subdivi- sions one, two, and three of the next preceding section; and 2. That the instrument is at the time of his indorse- ment valid and subsisting.^® And, in addition, he engages that on due present- ment, it shall be accepted or ^* paid, or both,^* as the case may be, according to its tenor, and that if it be dishonored, and the necessary pro- ceedings on dishonor be duly taken, he will 08 "The indorser of a bill by indorsing it . . (b) Is precluded from denying to a holder in due course the genuineness and regularity in all respects of the drawer's signature and all previous indorsements ; ( c ) Is precluded from denying to his immediate or a subsequent indorser that the bill was at the time of his indorsement a valid and subsisting bill, and that he had then a good title thereto." B. B. A. a. 55 (2). 69 The English Act reads "and" instead of "or" and omits the words "or both." B. E. A. s. 55 (2) (a). THE NEGOTIABLE INSTRUMENTS LAW. 83 pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. The Illinois Act interpolates after "indorser" in line one the words "not an accommodating party" and after "three" in sub- section 1 the words "and four" and substitutes "every indorser" for "he" in the first line of the last sentence. Ames: This section betrays the same misconception as to war- ranty as does section 65. Under it an accommodation indorser, though not a vendor, is liable as warrantor, which is unjust and contrary to the authorities. Suggests amendments of section 65 in accordance with his criticisms which would dispense with all of section 66 between the words "qualification" in the second line and "engages" in the first line of the last paragraph. Brewster: Claims that the section follows the English Act but makes no answer to the criticism of Professor Ames. McKeehan: Agrees with Professor Ames that the accommoda- tion indorser should not be saddled with the warranties of a vendor. An indorser of a note executed by a corporation by its treasurer can not defend on the ground that the treasurer was not authorized to execute the note. Leonard v. Draper, 187 Mass. 536, 73 N. E. 644, S. C. sec. 64. Whether a corporation has power to indorse or not, its indorse- ment passes title (sec. 22), and a subsequent indorser is liable to a purchaser even though the latter knew thati the subsequent indorse- ment was for the accommodation of the corporation (sec. 29). Willard v. Crook, 21 App. D. C. 237. A made a note to the order of B, forged B's indorsement, then procured C's indorsement for A's accommodation, and negotiated the note. Held, C by his indorsement, guaranteed the genuineness of B 's signature, and was liable to a holder in due course. Packard V. Windholz, 88 App. Div. 365, 84 N. Y. Supp. 666, afBrmed with- out opinion, 180 N. Y. 549, S. C. sec. 124. An indorser of a check does not warrant the genuineness of the drawer's signature to the drawee who pays it. The drawee is not a holder in due course under sec. 52, nor a holder under the defini- tion in sec. 191. • The drawee when he accepts a check becomes the guarantor thereof. Farmers' Bank v. Bank of Rutherford, 115 Tenn. 64, 88 S. W. 939, 112 Am. St. Eep. 817. But the drawee may recover back the money when the drawee was without fault and the indorser was guilty of negligence in not discovering the forgery. Williamsburgh Trust Co. v. Turn Suden, 120 App. Div. 518, 105 N. Y. Supp. 335. The opinion in this case contains cer- tain dicta to the effect that the indorsement of the payee when presenting the check to the drawee for payment is a warranty or guaranty to the drawee. For a well-founded criticism of these 84 THE NEGOTIABLE INSTETJMENTS LAW. dicta see 56 Am. Law Reg. (N. S.) (now University of Pennsyl- vania Law Review), 122. See also 17 Harvard Law Rev. pp. 581- 583. See also National Bank of RoUa v. First Nat. Bank of Salem (Mo. App.), 125 S. W. 513, S. C. sec. 62. An unqualified indorser of a secured installment note can not vary his contract of indorsement by parol evidence that the in- dorsee at the time of the indorsement agreed to keep him fully ad- vised as to the conduct of the maker respecting the payment of installments and any action of his touching the value of the secu- rity, and failed to do so. Hopkins v. Merrill, 79 Conn. 636, 66 Atl. 174, S. C. see. 89. An accommodation indorser, who was one of several payees of a note, is not liable to a transferee when the maker without authority altered the note before negotiation by striking out the name of another payee. The warranty of an indorser does not arise in such a ease, his liability being fixed by the condition of the instrument when it leaves his hands. Nor can recovery be had according to the original tenor under sec. 124, because the indorsement of all the original payees was necessary to give a good title to the trans- feree and because the note which defendant indorsed never had an inception. First Nat. Bank v. Gridley, 112 App. Div. 398, 98 N. Y. Supp. 445, S. C. sees. 109, 119-4. The first reason is good, but the second seems not in accord with the cases under sec. 124, infra. A note made by a corporation was indorsed by defendants before its delivery to the payee. The consideration was known to all parties to be an illegal purchase by the corporation of its own capital stock. Held, that the payee was not a holder in due course because he knew of the illegality and want of consideration, and could not hold the indorsers upon their warranty. Burke v. Smith, (Md.), 75 Atl. 114. The warranty of an indorser without qualification, running only to a holder in due course, is not available to a plaintiff who dis- counts for the maker a usurious note indorsed by defendant for the accommodation of the maker and the indorser may set up the defense of usury. Bruck v. Lambeek, 63 Misc. Rep. 117, 118 N. Y. Supp. 494, S. C. sec. 29. A check on plaintiff bank which had been raised as to the amount, and the date and name of the payee changed, was indorsed in the substituted name and was deposited in defendant bank which indorsed it "Received payment through New York Clearing House. Indorsements guaranteed." Held, that this indorsement was equivalent to a guaranty of the genuineness of the whole in- strument including the indorsement, excepting only the signature of the drawer, and that the defendant was bound to refund the money to the plaintiff. New York Produce Exch. Bank v. Twelfth •Ward Bank, 134 App. Div. 953, 119 N. Y. Supp. 988. The N. I. L. was not cited in this ease. Plaintiff sued defendant as an indorser. The complaint alleged, that plaintiff made the note to his own order and that defendant indorsed the note and delivered it to plaintiff for value. That upon THE NEGOTIABLE INSTRUMENTS LAW. 85 presentment at maturity payment was refused and due notice given to defendant as indorser. Held, that the complaint was in- sufficient. If plaintiff made the note for the accommodation of defendant his remedy is an action for money paid. Abramowitz v. Abramovitz, 113 N. Y. Supp. 798. Under his warranty that the instrument is valid and subsisting, an indorser without qualification, can not defend against a holder in due course on the ground that the instrument was void because of usury in its inception. Even apart from this section, an in- dorser 's contract is a new and independent contract. Horowitz v WoUowitz, 59 Misc. Rep. 520, 110 N. Y. Supp. 972; Klar v. Kos- tiuk, Misc. Rep. 119 N. Y. Supp. 683. A note secured by mortgage on land in California was executed, delivered and payable in California, where it was non-negotiable, but it was indorsed by defendant, the payee, in New Jersey, where, at the time of the indorsement it would have been negotiable un- der the Negotiable Instruments Law, which had been there adopted, after the inaking of the note but before the indorsement. By the law of California there can be only one action for the recov- ery of any debt or the enforcement of any right secured by a mort- gage upon real estate. Held, that it was unnecessary to determine whether the note would have been negotiable in New Jersey prior to the adoption of the Negotiable Instruments Law; that notwithstanding the mortgage had been foreclosed and the land sold, the contract of the indorser was governed by sections 68 and 66 N. I. L. and that the defendant could be held for the unpaid balance. Mackintosh v. Gibbs (N. J.), 74 Atl. 708. Quaere whether the N. I. L. had any application to this case since under section 195, the provisions of the Act do not "apply to instru- ments made and delivered prior to its passage, and whether the case should therefor not have been dealt with as one involving the liability of an indorser of a non-negotiable note? Sec. 67. Where a person places his indorsement on .an instrument negotiable by delivery he incurs all the liabilities of an indorser."" Sec. 68. As resj)ects one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between 00 "Where a person signs a bill otherwise than as drawer or acceptor, he thereby incurs the liabilities of an indorser to a holder in due course." B. E. A. 8. 86. 86 THE NEGOTIABLE INSTRUMENTS LAW. or among themselves they have agreed otherwise/^ Joint payees or joint indorsees who indorse are deemed to indorse jointly and severally."^ Ames: As joint makers, joint drawers and joint acceptors are liable only jointly, why should joint payees or joint indorsers be liable jointly and severally? Brewster: The provision is a convenience in suing and is in accord with the reformed procedure in most of the States. McKeehan: Professor Ames' query "Why this distinction" re- mains unanswered. But would it not be better to widen the scope of the provision and include joint drawers, joint makers, and joint acceptors ? State Bank v. Kahn, 49 Misc. R. 500, 98 N. Y. Supp. 858, S. C. sec. 120-4; Baumeister v. Kuntz, 53 Fla. 340, 42 So. 886, S. C. sees. 64-1, 109; Bamford v. Boynton (Mass.), 86 N. B. 900; George v. Bacon, 138 App. Div. 208, 123 N. Y. Supp. 103. A promise upon good consideration by the second of two accom- modation indorsers to indemnify the first, is not a promise to answer for the debt, default, or miscarriage of another within the meaning of the Statute of Frauds, but an original obligation. The evidence admissible under this section may be either written or parol. Wilson v. Hendee, 74 N. J. Law 640, 66 Atl, 413, S. C. sees. 63, 64, 64-1. The maker of a note who has been obliged to pay it may show by parol evidence that he signed for the accommodation of the payee and subsequent indorsers, and may recover the amount from them. His action is on an implied promise of indemnity and not upon the note. Morgan v. Thompson, 72 N. ,J. Law, 244, 62 Atl. 410. The mere fact that the indorsers are accommodation indorsers and known to each other to be so, is not sufiBcient, without proof of an express agreement, to change the rule that prior indorsers are liable in solido to subsequent indorsers who have paid a note. In re McCord, 174 Fed. 72. The drawer of an accepted bill is an indorser within the intention of this section, and as between him and an anomalous indorser parol evidence is admissible to show an intention to make the anom- alous indorser liable to the drawer-payee. Haddock, Blanchard & Co. V. Haddock, 192 N. Y. 499, 85 N. E. 682, S. C. sees. 29, 64-2. See comment on this case, supra, sec. 64-2. ci "Where there are two or more indorsements on a bill, each indorsement is deemed to have been made in the order in which it appears on the bill, until the contrary is proved." B. E. A. s. 32 (5). 82 Not in B. E. A. THE NEGOTIABLE INSTRUMENTS LAW. 87 Sec. 69. Where a broker or other agent negotiates an instrument without indorsement, he incurs all the liabilities prescribed by section sixty-five of this act, unless he discloses the name of his principal, and the fact that he is acting only as agent.®* The Illinois Act adds the fallowing. "See. 69a: Whenever any bill of exchange drawn or indorsed within this State and payable without this State is duly protested for non-acceptance or non-payment, the drawer or indorser thereof, due notice being given of such non-acceptance or non-payment, shall pay such bill at the current rate of exchange and with legal interest from the time such bill ought to have been paid until paid, together with the costs and charges of protest, and on bills payable in the United States in case suit has to be brought thereon and on bills payable without the United States with or without suit, five per cent, damages in addition. Article VI. presentment for payment. Sec. 70. Presentment for pajrment is not neces- sary in order to charge the person primarily liable on the instrument;** (a) but if the instrument is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity, such ability and willingness are equivalent to a tender of payment upon his part.®* But except as herein otherwise pro- vided, presentment, for payment is necessary in order to charge the drawer and indorsers.(6) 63 Kot in B. E. A. 04 " ( 1 ) When a bill is accepted generally presentment for payment is not necessary in order to render the acceptor liable. ( 2 ) When by the terms of a qualified acceptance presentment for payment is required, the acceptor, in the absence of an express stipulation to that effect, is not discharged by the omission to present the bill for payment on the day it matures." B. E. A. s. 52 (1) (2). "Where a promissory note is in the body of it made payable at a particular place, it must be presented for payment at that place in order to render the maker liable. In any other case presentment for payment is not necessary in order to render the maker liable." B. E. A. s. 87 ( 1 ) . 88 THE NEGOTIABLE INSTKUMENTS LAW. The Illinois Act interpolates "except in the case of bank notes" after "instrument" in line three. The Kansas, New York and Ohio Acts interpolate "and has funds there available for that purpose" after "maturity" in line five. The Wisconsin Act omits all of the first sentence after the words "on the instrument." Ames : This section changes the law in a number of States as to certificates of deposit and bank notes, and should be amended to except them. Brewster : The objection does not seem to be practical. McKeehan: Agrees with Professor Ames because under this section the statute of limitations would begin to run against a cer- tificate of deposit from its date, which is contrary to business cus- tom, and the language of such instruments. In re Swift, 106 Fed. Rep. 65, S. C. see. 82-3 ; Rouse v. Wooten, 140 N. C. 557, 53 S. E. 430, 111 Am. St. Rep. 875, S. C. sec. 89 ; Nelson v. Grondahl, 13 N. Dak. 363, 100 N. W. 1093, S. C. see. 73; German-American Bank v. Milliman, 31 Misc. R. 87, 65 N. Y. Supp. 242, S. C. sec. 75; Baumeister v. Kuntz,.53 Fla. 340, 42 So. 886, S. C. sees. 64-1, 109; Fritts v. Kirehdorfer (Ky.), 124 S. W. 882. (a) Presentment for payment is unnecessary to charge the per- son primarily liable whether the instrument is payable on time oi* on demand, although it is made payable at a particular place. Farmers' Nat. Bank v. Venner, 192 Mass. 531, 78 N. E. 540 ; Hyman v. Doyle, 53 Misc. R. 597, 103 N. Y. Supp. 778. It is for the maker of a note payable at a specified place to aver and prove that he was ready and offered at the time and place to pay it. No demand by the holder need be averred or proved. Flor- ,enee Oil Co. v. First Nat. Bank, 38 Colo. 119, 88 Pac. 182. (i) Presentment and notice of dishonor are necessary to charge the indorser of a note containing an option, which has been exer- cised, to declare the whole sum due for non-payment of interest. Galbraith v. Shepard, 43 Wash. 698, 86 Pac. 1113, S. C. see. 82-3' Cf. Hopkins v. Merrill, infra, sec. 89. Where a note names no place of payment, it is generally payable at the maker's residence or place of business, Where a note, pay- able on or before a given date with the option to the holder to de- clare the whole due on default as to monthly installments of inter- est, did not fix a place of payment and the maker had a place of business in the city where the note was payable and was able and willing to make interest payments as they matured, the holder could not declare the note due for failure to pay installments of interest, without presentment, demand and refusal at the maker's place of business, although the note may not be, under section 70 THE NEGOTIABLE INSTRUMENTS LAW. 89 N. I. L., "By its terms payable at a special place." Bardsley v. "Washington Mill Co. (Wash.), 103 Pac. 822. By virtue of section 52 (2)* failure to present to the maker on the day of maturity a note made payable at a particular place does not discharge the maker. Presentment at the particular place on a subsequent day is sufficient,. Gordon v. Kerr, 25 Sess. Cas. 570. Sec. 71. Where the instrument is not payable on demand, presentment must be made on the day it falls due. Where it is payable on demand, presentment must be made within a reasonable time after its issue, except that in the case of a bill of exchange, presentment for pajTnent mil be sufficient if made within a reasonable time after the last negotiation thereof.®*^ The New Hampshire Act adds a provision in effect making sixty days a reasonable time in case of demand notes. The Nebraska Act omits all of the section after the words "reasonable time after its issue." German-American Bank v. Milliman, 31 Misc. R. 87, 65 N. Y. Supp. 242, S. C. sec. 75; Congress Brewing Co. v. Habenicht, 83 App. Div. 141, 82 N. Y. Stipp. 481, S. C. sec. 82-3 ; Hampton v. Miller, 78 Conn. 267, 61 Atl. 952. Section 71 has abrogated the former distinction between interest- bearing demand bills and notes and those payable without interest, with reference to the time of presentment to charge an indorser. Under this section and section 193 the burden is on the holder to prove presentment within a reasonable time, and the defendant indorser need not plead failure to make due presentment. Where the facts are ascertained and not in dispute reasonable time is a question of law. Circumstances held to make three and a half years an unreasonable time. Commercial Nat. Bank v. Zimmerman, 185 N. Y., 210, 77 N. E. 1020. The case of Merritt v. Jackson, 181 Mass. 69, 62 N. E. 987, S. C. sec. 193 is in accord as to the burden of proof. * See supra, p. 87, n. 64. 06 "Where the bill is payable on demand, then subject to the provisions of this Act, presentment must be made within a reasonable time after its Issue, in order to render the drawer liable, and within a reasonable time after its indorsement, in order to render the indorser liable." B. E. A. s. 45 (2). ■'Where a jiote payable on demand has been indorsed, it must be presented for payment within a reasonable iime of the indorsement. If it be not so pre- sented, the indorser is discharged." B. E. A. s. 86 (1). 90 THE NEGOTIABLE INSTRUMENTS LAW, The case of German-American Bank v. Mills, 99 App. Div. 312, 91 N. Y. Supp. 142, which held that this section is in effect a stat- ute of limitations, and that the burden was upon the indorser of jl demand note to plead and prove that presentment was unreason- ably delayed, must be considered as overruled by Commercial Nat. Bank v. Zimmerman, supra. It is not universally true that even where the facts shown in evi^ denee are without dispute, the question whether presentment was in reasonable time is for the court. Citizens' Bank v. First Nat. Bank, 135 Iowa, 605, 113 N. W. 481, 13 L. R. A. (N. S.), 303, semble, S. C. sec. 186. A demand note payable to the order of the maker, and drawing interest, was indorsed by a third person for the maker's accom- modation and was negotiated ten days after its date. Held, that presentment for payment within ten months was suflBcient to hold the indorser. Schlesinger v. Schultz, 110 App. Div. 356, 96 N. Y. Supp. 383. See S. C. sees. 7-1, 73. Within reasonable limits cheeks may remain outstanding with- out discharging an indorser, so long as one negotiation promptly follows another and the checks are in fact in circulation. {Bed quaere as to this proposition? See Gordon v. Levine, infra, see. 186. But see also Columbian Banking Co. v. Bowen, infra, this section.) The usage of trade or business includes the usage of banks relating to the presentment of checks for payment. It is sufficient diligence to charge an indorser if a check on a bank in another place is forwarded through various banks for collection in accordance with the regular usage of the business, although presentment might have been more promptly made if a more direct course had been taken. Plover Sav. Bank v. Moodie, 135 Iowa 685, 110 N. W. 29, S. C, petition for rehearing overruled, 113 N. W. 476. See also Citizens' Bank v. First Nat. Bank, infra, sec. 186. See Gordon v. Levine, infra, sec. 186, as to time of present- ment where the drawer, payee, and drawee bank are all in the same place. This section changes the law as to bills of exchange payable on demand, and under this section only the time intervening between the last negotiation and the presentment need be considered. Hence, where a draft was sold by a Wisconsin bank to defendant (payee) on June 10th, and he indorsed and sent it on June 16th to A at Spokane while he was on his way to San Francisco, and A upon arrival there on July 14th sold the draft to plaintiff bank, which sent it at once to a Chicago bank, which presented it July 18th to the drawee bank there, which refused payment, and due protest was then made, it was held that the delay between the date and the negotiation of the draft to plaintiff bank was immaterial, and that the draft was presented in time to hold the defendant on his indorsement. Columbian Banking Co. v. Bowen, 134 Wis. 218, 114 N. W. 451, S. C. sec. 72-2. The principle established in this ease would seem to continue the liability of the drawer and indorsers of a bill payable on demand THE NEGOTIABLE INSTRUMENTS LAW. 91 for an indefinite time, limited only by the Statute of Limitations, provided only that the bill is presented for payment within a reasonable time after its last negotiation, no matter how long this may be after the drawing or indorsement. Moreover, by the combined effects of sections 185 and 186 if a check had not been presented within a reasonable time after its issue and the drawee bank had failed in the meantime, the drawer would be discharged to the extent of the loss caused by such delay. Whereas, if said presentment was within a reasonable time after the last negotiation of the check, the indorser would be held with- out any recourse against the drawer except as to such dividend as the insolvent bank might be able to pay, a most unjust result. These unfortunate consequences might have been avoided by adopting the corresponding provision of the B. B. A. (sec. 45 (2) supra, p. 89 n. 65), under which the drawer is discharged unless presentment is made within a reasonable time after the issue of the bill, and the indorser unless it is presented within a reasonable time after his indorsement. Sec. 72. Presentment for payment, to be sufficient, must be made,— 1. By the holder, or by some person authorized to receive payment on his behalf; 2. At a reasonable hour on a business day; (a) 3. At a proper place as herein defined; 4. To the person primarily liable on the instrument, or if he is absent or inaccessible, to any person found at the place where the presentment is made.^" Nelson v. Grondahl, 13 N. Dak. 363, 100 N. W. 1093, S. C. sec. 73 ; German- American Bank v. Milliman, 31 Misc. R. 87, 65 N. Y. Supp. 242, S. C. see. 75 ; Gilpin v. Savage, 60 Misc. Rep. 605, 112 N. Y. Supp. 802, S. C. sees. 73, 74. (a) This provision has reference to the general custom at the place of the particular transaction. So when presentment was made to a Chicago bank between 3 and 6 o'clock and the business day of banks continued after the closing of clearing-house transac- tions so as to enable banks holding paper for collection to present such as had been refused recognition in the clearings such pre- «« "Either to the person designated by the bill as payee or to some person authorized to pay or refuse payment on his behalf, if with the exercise of reasonable diligence such person can there be found." B. E. A. s. 45 (3). 92 THE TSTEGOTIABLE INSTEUMENTS LAW. sentment was within reasonable hours on a business day. Colum- bian Banking Co. v. Bowen, 134 Wis. 218, 114 N. W. 451, S. C. sec. 71. In ease of presentment in a foreign jurisdiction what constitutes reasonable hours of a business day there is a matter of proof. 76. A notarial certificate of protest showing due presentment raises a presumption that presentment was made at a proper time. 76. Sec. 73. Presentment for payment is made at the proper place,— 1. Where a place of payment is specified in the instrimient and it is there presented; 2. Where no place of payment is specified, but the address of the person to make payment is given in the instrument and it is there pre- sented ; 3. Where no place of payment is specified and no address is given and the instrument is pre- sented at the usual place of business or resi- dence of the person to make payment ;*'^ 4. In any other case if presented to the person to make payment wherever he can be found, or if presented at his last known place of business or residence. German-American Bank v. Milliman, 31 Misc. R. 87, 65 N. T. Supp. 242, S. C. sec. 75; Congress Brewing Co. v. Habenicht, 83 App. Div. 141, 82 N. Y. Supp. 481, S. C. sec. 82-3 ; Smith v. Ship- pers ' Oil Co., 120 La. 640, 45 So. 533. A note payable at a bank is properly presented for payment at the bank although the bank is in the hands of a receiver and closed. Presentment need not be made to the receiver personally, he hav- ing no authority to pay. Schlesinger v. Schultz, 110 App. Div. 356, 96 N. Y. Supp. 383, S. C. sees. 7-1, 71. "Where a note is payable at a certain store, presentment for pay- ment at such store to a person connected therewith is sufficient and no personal demand on the maker is necessary. Nelson v. Gron- dahl, 13 N. D. 363, 100 N. W. 1093. 67 "Where no place of payment is specified and no address given, and tha bill' is presented at the drawee's or acceptor's place of business, if known, and if not, at his ordinary residence if known." B. E. A. s. 45 (4) (e). THE NEGOTIABLE INSTRUMENTS LAW, 93 ' "Where a note is payable at a designated branch of a trust com- pany, presentation at the principal ofSce of the company on the date of maturity and at the branch after banking hours on the day following is not sufficient as against an indorser. Ironclad Mfg. Co. V. Sackin, 129 App. Div. 555, 114 N. Y. Supp. 43. A note was made payable at the home of the maker and at ma- turity he was called up by telephone and asked what he was going to do about it, and answered that he could not pay, and was told that the note would be protested. Held, that the right of the maker under section 74 to the exhibition of the note was waived, and that the demand over the telephone was a sufficient present- ment to charge the indorser. Gilpin v. Savage, 60 Misc. Rep. 605, 112 N. Y. Supp. 802. Sec. 74. The instrument must be exhibited to the person from whom payment is demanded, and when it is paid must be delivered up to the party pay- ing it. Congress Brewing Co. v. Habenieht, 83 App. Div. 141, 82 N. Y. Supp. 481, S. C. sec. 82-3. In an action on a demand note against the maker it is not neces- sary to allege a demand for payment or that the note was exhibited to the maker. The note was due at the time of delivery, and de- mand is presumed to have been then made, and this is true even though the note bears interest. Church v. Stevens, 56 Misc. R. 572, 107 N. Y. Supp. 310. The right of the maker to the exhibition of the note may be waived. Gilpin v. Savage, 60 Misc. Rep. 605, 112 N. Y. Supp. 802, S. C. see. 73. Sec. 75. Where the instrument is payable at a bank, presentment for payment must be made during banking hours, unless the person to make payment has no funds there to meet it at any time during the day, in which case presentment at any hour before the bank is closed on that day is sufficient.^* The Nebraska Act omits everything after the words "banking hours" in line three. es Not in B. E. A. 94 THE NEGOTIABLE INSTRUMENTS LAW. The person to make payment has until the close of banking hours of the bank where the instrument is made payable in which to pay it, and if before the close of such hours he deposits money enough to pay it, a demand earlier in the day is premature. German- American Bank v. Milliman, 31 Misc. R. 87, 65 N. Y. Supp. 242. Sec. 76. Where the person primarily liable on the instrument is dead, and no place of payment is specified, presentment for payment must be made to his personal representative, if such there be, and if, with the exercise of reasonable diligence, he can be found. Calling two or three times at the banking office of the administra- tor of a deceased maker, and again seeking him at a railroad station near the seat of his other business interests at a time when he might be expected to be there, warrants a finding of reasonable diligence to present a note for payment. Reed v. Spear, 107 App. Div. 144, 94 N. Y. Supp. 1007, S. C. sees. 89, 96. Sec. 77. Where the persons primarily liable on the instrument are liable as partners, and no place of payment is specified, presentment for payment may be made to any one of them, even though there has been a dissolution of the firm.*® Sec. 78. Where there are several persons, not part- ners, primarily liable on the instrument, and no place of payment is specified, presentment must be made to them aU, Sec. 79. Presentment 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. West Branch Bank v. Haines, 135 Iowa, 313, 112 N. W. 552; In re Swift, 106 Fed. Rep. 65, S. C. sees. 64-1, 82-3. e«Not in B. K A., except inferentially froms. 45 (6), which is the same as N. I. L. s. 78. THE NEGOTIABLE INSTRUMENTS LAW. 95 Sec. 80. Presentment for payment is not required in order to charge an indorser where the instrument was made or accepted for his accommodation and he has no reason to expect that the instrument will be paid if presented. The Illinois Act omits everything after the words "for his ac- commodation." McDonald v. Luckenbach, 170 Fed. 434, 95 C. C. A. 604. S. C. sec. 63. Sec. 81 Delay in making presentment for payment is excused when the delay is caused by circumstances beyond the control of the holder, and not imputable to his default, misconduct, or negligence. When the cause of delay ceases to operate, presentment must be made with reasonable diligence. Aebi V. Bank of Evansville, 124 Wis. 73, 102 N. W. 329, 68 L. B. A. 964, 109 Am. St. Rep. 925, S. C. sec. 186. Sec 82. Presentment for payment is dispepsed with:— 1. "Where after the exercise of reasonable diligence presentment as required by this act can not be made ; ""^ 2. Where the drawee is a fictitious person; 3. By waiver of presentment, express or implied, (a) Baumeister v. Kuntz, 53 Fla. 340, 42 So. 886, S. C. sees. 64-1, 109 ; Reed v. Spear, 107 App. Div. 144, 94 N. Y. Supp. 1007, S. C. sees. 76, 89, 96; Gilpin v. Savage, 60 Misc. Rep. 605, 112 N. Y. Supp. 802, S. C. sees. 73, 74; Jordan v. Reed (N. J.), 71 Atl. 280, S. C. sec. 115. TO The English Act adds: "The fact that the holder has reason to believe that the bill will, on presentment, be dishonored does not dispense with the necessity for presentmeot." B. E. A. &■ 46 (2) (a). 96 THE NEGOTIABLE INSTRUMENTS LAW. (a) Tha faets excusing presentment or failure to give notice of dishonor or a waiver thereof must be specially pleaded. Proof thereof is not otherwise admissible. Galbraith v. Shepard, 43 Wash. 698, 86 Pac. 1113, S., C. sec. 70. To bind the indorser, his waiver must be with knowledge of the facts which release him, but ignorance as to their legal effect wiU not relieve him in the absence of fraud. Toole v. Crafts, 193 Mass. 110, 78 N. E. 775, 118 Am. St. Rep. 455, S. C. see. 64-1. This case was again heard by the Supreme Judicial Court upon exceptions taken at a second trial, when it was further held that, while a written waiver of demand made without limitation after the time for demand has expired can not, as a general rule, be limited by oral evidence, yet such evidence is competent to show fraud, mis- take, or circumstances to aid the court to ascertain the construc- tion of the agreement. So where on a demand note an indorse- ment was made more than sixty days after its date (see Merritt v. Jackson, infra, sec. 193), waiving "demand, notice, and protest," evidence was admissible to show whether this waiver referred to a protest within said sixty days or to a further protest, and that it was for the jury to say upon the evidence which of these two pro- tests was the subject matter of the agreement, and that their find- ing for the indorser was conclusive. Toole v. Crafts, 196 Mass. 397, 82 N. E. 22. Defendant, the president of a corporation, indorsed its note. Before maturity, the maker was adjudged a bankrupt partly upon the written admission of defendant of its inability to pay its debts with a willingness that it be adjudged a bankrupt. Held, that defendant had waived presentment and notice of dishonor. J. W. O'Bannon Co. v. Curran, 129 App. Div. 90, 113 N. Y. Supp. 359. Where the indorsers of a note, payable at a bank, had assured the holder that it could not be paid at maturity and knew that the maker, a corporation, had not the' money to pay it, they were not discharged by failure to present the note for payment. Bes- senger v. Wenzel (Mich.), 125 N. W. 75Q. A firm made a note which was indorsed by one of the partners prior to its delivery. Shortly before maturity of the note the indorser, during a consultation with the holder regarding a general assignment of the firm and the partners, which was there- after made as a result of the conference, told the holder that neither the firm nor he could pay the note at maturity, and the holder therefore made no presentment for payment and gave no notice of nou-pament. Held, that both by the law merchant and under the statute there was an implied waiver of presentment, and that under sec. 115-2 notice of dishonor was not required. In re Swift, 106 Fed. Rep. 65, S. C. sec. 64-1. Evidence of assurances by the indorser to the indorsee when indorsing and delivering a note that the former would be respon- sible for principal and interest when due, and would look after the collection of the note and pay interest when it became due, is competent to show a waiver by declarations of the indorser cal- THE NEGOTIABLE IN8TEUMENTS LAW. 97 culated to mislead the indorsee and induce him to omit present- ment and notice of dishonor. Torbert v. Montague, 38 Colo. 325, 87 Pac. 1145. Defendant was an accommodation indorser of a demand note •payable to plaintiff and given as security for debts which the maker might contract with plaintiff. Defendant reserved the right to withdraw his indorsement after four months upon pay- ment of such debts to the amount of the note. Within four months plaintiff informed defendant of the amount due him from the maker, and defendant said that he would see the maker and if he did not pay "would go and shut him up." Held, these facts did not excuse presentment and notice of dishonor. Congress Brew- ing Co. V. Habenicht, 83 App. Div. 141, 82 N. Y. Supp. 481. The drawer, being ignorant that the bill had not been pre- sented for payment, accepted notice of non-payment. Held, that he had not waived presentment. Keith v. Burke, 1 Cababe & Ellis, 551. Sec. 83. The instrument is dishonored by non-pay- ment when,— 1. It is duly presented for payment and pajrtnent is refused or can not be obtained; or 2. Presentment is excused and the instrument is overdue and unpaid. Baumeister v. Kuntz, 53 Pla.'340, 42 So. 886, S. C. sees. 64-1, 109 ; Eeed v. Spear, 107 App. Div. 144, 94 N. Y. Supp. 1007, S. C. sees. 76, 89, 96; German- American Bank v. Milliman, 31 Misc. R. 87, 65 N. Y. Supp. 242, S. C. sec. 75. Sec. 84. Subject to the provisions of this act, when the instrument is dishonored by non-payment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder. German-American Bank v. Milliman, 31 Misc. R. 87, 65 N. Y. Supp. 242, S. C. sec. 75 ; Baumeister v. Kuntz, 53 Fla. 340, 42 So. 886, S. C. sees. 64-1, 109 ; Bacigalupo v. Parrilli, 112 N. Y. Supp. 1040, S. C. sec. 89 ; Gilpin v. Savage, 60 Misc. Rep. 605, 112 N. Y. Supp. 802, S. C. sees. 73, 74 ; Kennedy v. Thomas, [1894] 2 Q. B. 759, S. C. sec. 85. Sec. 85. Every negotiable instrument is payable at the time fixed therein without grace. When the day of 98 THE NEGOTIABLE INSTRUMENTS LATT. maturity falls upon Sunday, or a holiday, the instru. ment is payable on the next succeeding business day. Instruments falling due on Saturdaj^ are to be pre- sented for payment on the next succeeding business day, except that instruments payable on demand may, at the option of the holder, be presented for payment before twelve o'clock noon on Saturday when that entire day is not a holiday." In Massachusetts this section was amended (Laws 1899, c. 130), as follows: "On all drafts and bills of exchange made payable within this Commonwealth at sight, three days of grace shall be allowed, unless there is an express stipulation therefor to the con- trary." The New Hampshire Act makes the same provision. The North Carolina Act (Revisal of 1908, sections 2234, 2235), provides that every negotiable instrument is payable at the time fixed therein without grace except that "all bills of exchange pay- able within the State, at sight, in which there is an express stipula- tion to that effect, and not otherwise, shall be entitled to days of grace as the same are allowed by the customs of merchants in foreign bills of exchange, payable at the expiration of a certain period after date on sight; provided, that no days of grace shall be allowed on any bill of exchange, promissory note or draft pay- able on demand." The Arizona, Kentucky and Wisconsin Acts omit altogether the third sentence beginning "Instruments falling due." In the Colorado Act the following words are substituted: "In- struments falling due on any day, in any place where any part of such day is a holiday, are to be presented for payment on the next succeeding business day, except that instruments payable on demand may, at the option of the holder, be presented for 71 "Where a bill is not payable on demand, the day on which it falls due is determined as follows: (1) Three days, called days of grace, are, in every case where the bill itself does not otherwise provide, added to the time of payment as fixed by the bill, and the bill is due and payable on the last day of grace: Provided that (a) When the last day of grace falls on Sunday, Christmas Dp,y, Good Friday, or a day appointed by royal proclamation as a public fast or thanksgiving day, the bill is, except in the case hereinafter pro- vided for, due and payable on the preceding business day. (b) When the last day of grace is a bank holiday (other than Christmas Day or Good Friday) tinder the Bank Holidays Act, 187il, and Acts amending or extending it, or when the last day office in time to go by mail the day following 80 See note 79 to section 102, supra, p. 107. THE NEGOTIABLE INSTRUMENTS LAW, 109 the day of dishonor, or if there be no mail at a convenient hour on that day, by the next mail thereafter.*^ ^ 2. If given otherwise than through the post-office, then within the time that notice would have been recived in due course of mail, if it had been deposited in the post-office within the time specified in the last subdivision.*^ Mohlman Co. v. MeKane, 60 App. Div. 546, 69 N. Y. Supp. 1046, S. C. see. 108; Jurgens v. Wichmann, 124 App. Div. 531, 108 N. Y. Supp. 881, S. C. sec, 107. Departure time for the mail the day after dishonor was between 9 and 10 o'clock A. M. This was a convenient time and deposit on the evening of that day after the closing of the mail for that day was too late. Even if this were not so, a failure to prepay sufficient postage and to remedy the mistake after knowledge thereof for five days released the indorser beyond any possible question. First Nat. Bank of Shawano v. Miller, 139 "Wis. 126, 120 N. W. 820, S. C. sec. 2-5. Sec. 105. Where notice of dishonor is duly ad- dressed and deposited in the post-office, the sender is deemed to have given due notice, notwithstanding any miscarriage in the mails. State Bank v. Solomon, 84 N. Y. Supp. 976; Feigenspan v. McDonnell, 201 Mass. 341, 87 N. B. 624. Although non-receipt of a duly mailed notice of dishonor does not discharge an indorser, evidence of such non-receipt is com- petent on the question whether the notice was actually mailed. Union Bank of Brooklyn v. Deshel (App. Div.), 123 N. Y. Supp. 585. Sec. 106, Notice is deemed to have been deposited in the post-office when deposited in any branch post- office or in any letter box under the control of the post-office department,*''' i Feigenspan v. McDonnell, 201 Mass. 341, 87 N. E. 624. _ : 1 , 81 See note 79 to section 102, supra, p. 107. 82 Not in B. E. A. 83 Not in B. E. A. 110 THE NEGOTIABLE INSTKUMENTS LAW. Deposit of a note of protest in a mail chute under the control of the postofSce is sufficient. "Wilson v. Peek (Misc. Rep.), 121 N. Y. Supp. G44, S. C. see. 95, 103-3. Sec. 107. YvTiere a party receives^' notice of dis- honor, lie has, after the receipt of such notice, the same time for giving notice to antecedent parties that the holder has after the dishonor. When the answer alleges that the indorser had no notice of dis- honor, the burden is on the holder to show that due notice was given. It is not shown by testimony of a notary that, not know- ing the address of the indorser, he inclosed the notice of dishonor to a subsequent indorser with postage for forwarding the notice to the prior indorser. Fuller Buggy Co. v. "Waldron, 112 App. Div. 814, 99 N. Y. Supp, 920. The N. I. L. was not cited in this case. Plaintiff indorsed and deposited a check for collection in bank on the 28th. On the 29th he was notified of the dishonor of the check, and on the 30th he notified the defendant indorser by telegraph. Held, that the notice was in due time. Jurgens v. Wichmann, 124 App. Div. 531, 108 N. Y. Supp. 881. Sec. 108. T^^lere a party has added an address to his signature, notice of dishonor must be sent to that address; but if he has not given such address, then the notice must be sent as follows:*^— 1. Either to the post-office nearest to his place of residence, or to the post-office where he is accustomed to receive his letters;*® or 2. If he live in one place, and have his place of business in another, notice may be sent to either place;®® or ! 3. If he is sojourning in another place, notice i may be sent to the place where he is so sojourn- ing.*® But where the notice is actually received by the party within the time specified in this act, it will be sufficient, though not sent in accord- ance with the requirements of this section." 84 The English Act interpolates "due." B. B. A. s. 49 (;14). « Not in B. E. A. THE NEGOTIABLE INSTETJMENT8 LAW. Ill Albany Trust Co. v. Frothingham, 50 Misc. E. 598, 99 N. Y. Supp. 343. Notice of protest addressed merely "C. H., N. Y.," is not suffi- cient where there is no evidence that the indorser lived or ever had lived, or was sojourning in New York, or that any inquiry was made to ascertain the fact. Fonseca v. Hartman, 84 N. Y. Supp. 131. The indorser lived at the place where the note was dated, but moved from said place at some time not stated. Held, that notice of dishonor mailed to said place was sufficient, the court assuming that there had been no change of residence up to that time. Mohl- man v. McKane, 60 App. Div. 546, 69 N. Y. Supp. 1046. Notice to an indorser, who has added no address to his signa- ture, mailed to the postoffice of his place of residence is good, but not if addressed to a house where the indorser does not reside or do business or receive his letters, even though he owned the house and his sons did business there. Ebling Brewing Co. v. Rein- heimer, 32 N. Y. Misc. R. 594, 66 N. Y. Supp. 458. "Where a notary inquired of several persons as to the postoffice address of an indorser, all of whom seemed to have some informa- tion and stated their belief that a certain town was the nearest town to the farm where the indorser lived, and a much larger ■ place than the town where the indorser aetualy received his mail, a ' notice of dishonor sent to such nearest town was sufficient, al- though the indorser did not receive it within a reasonable time. Vogel V. Starr, 132 Mo. App. 430, 112 S. W. 27. The N. I. L. was not cited in this ease. Plaintiff, the payee of a dishonored note, knew that the defend- ant indorser lived in New York City, but claimed that he did not know his address. Defendant testified that plaintiff had fre- quently corresponded with defendant at his New York address. The notice of dishonor was mailed to defendant in the care of the maker, but not delivered to defendant. Held, that this was not sufficient notice, and that defendant was discharged. E. I. Du- pont, etc.. Powder Co. v. Rooney, 63 Misc. Rep. 344, 117 N. Y. Supp. 220. Sec. 109. Notice of dishonor may be waived, either before the time of giving notice has arrived, or after the omission to give due notice, and the waiver may be express or implied. Torbert v. Montague, 38 Colo. 325, 87 Pac. 1145, S. C. sec. 82-3,; Galbraith v. Shepard, 43 Wash. 698, 86 Pac. 1113, S. C. sees. 70, 82-3 ; Congress Brewing Co, v.. Habenicht, 83 App. Div. 141, 82 ; N. Y. Supp. 481, S. C. sec. 82-8; J. W. O'Bannon Co. v. Curran, 129 App. Div. 90, 113 N. Y. Supp. 359, S. C sec. 82-3 ; Security Loan & Trust Co. v. Fields (Va.), 67 S. E. 342, S. C. sec. 89; Jordan v. Reed (N. J.), 71 Atl. 280, S. C. sec. 115. 112 THE NEGOTIABLE INSTRUMENTS LAW. If presentment for payment be waived (see sees. 82 and 83) notice of dishonor is dispensed with. Baumeister v. Kuntz, 53 Pla. 340, 42 So. 886, S. C. sec. 64-1. Defendant was one of several payees and indorsers of a note. Some days before its maturity defendant indorsed a renewal note having also several payees. The maker struck out the name of one of the payees in the renewal note and substituted his own name as payee, and several days after maturity of the original note took it up t)y the renewal note. Held, that defendant had not waived notice of dishonor of the original note and was not liable on it. First Nat. Bank v. Gridley, 112 App. Div. 398, 98 N. Y. Supp. 445, S. C. sees. 66, 119-4. A mere oral promise to renew a note, made after its maturity by an accommodation indorser, is not a waiver of the failure to give notice of dishonor; such promise is not an acknowledgment of liability. Mechanics' and Farmers' Savings Bank v. Katter- John (Ky.), 125 S. "W. 1071, S. C. sees. 63, 196. Plaintiff, an indorser of a check deposited by him with defend- ant bank, was not given due notice of its dishonor. "With knowl- edge thereof, plaintiff gave his own check for the dishonored check and sued defendant for its failure to give him due notice of such dishonor. Held, that plaintiff had waived the bank's laches and could not recover. Weil v. Corn Exchange Bank, 63 Misc. Rep. 300, 116 N. Y. Supp. 665. Quaere, whether section 109 has any application to the case. See dissenting opinion of Lehman, J. A bill was drawn by the. A Company to its own order on the B Company and accepted and indorsed to the C Company. All three companies knew that the bill would be dishonored. No no- tice of dishonor was given to the drawer, because the secretary of the C Company, who was also secretary of the other two com- panies, knew it never was intended to make the drawer liable. Held, that it was not the duty of the secretary of the C Company to communicate his knowledge of the dishonor to the drawer, that his knowledge was therefore not notice to the drawer, and that the latter was discharged. In re Fenwick, [1902] 1 Ch. 507. Sec. 110. Where the waiver is embodied in the instrument itself, it is binding upon all parties; but where it is written above the signature of an indorser, it binds him only.*® Sec. 111. A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable in- strument, is deemed to be a waiver not only of a 86 Not in B. E. A. THE NEGOTIABLE INSTRUMENTS LAW. 113 formal protest, but also of presentment and notice of dishonor.*'' Bank of Montpelier v. Montpelier Lumber Co. (Idaho), 102 Pac. 685. Sec. 112. Notice of dishonor is dispensed with when, after the exercise of reasonable diligence, it can not be given to or does not reach the parties sought to be charged. Fonseca v. Hartman, 84 N. Y. Supp. 131, S. C. see. 108. Eeasonable diligence depends upon the circumstances of the case, and is a question for the jury. Brewster v. Shrader, 26 Misc. R. 480, 57 N. Y. Supp. 606, S. C. sec. 25. Failure, after the exercise of reasonable diligence, to find the draTver of a dishonored bill at the address given by him, does not dispense with notice if an address at which he is to be found comes to the holder's knowledge before action brought. Studdy v. Beesty, 60 T. L. Rep. 647. Sec. 113. Delay in giving notice of dishonor is excused when the delay is caused by circumstances beyond the control of the holder,^^ and not imputable to his default, misconduct, or negligence. When the cause of delay ceases to operate, notice must be given with reasonable diligence. Delay in giving notice of dishonor caused by the necessity of making inquiries as to the address of the party to be notified is excusable, the holder being ignorant of the address. The Elmville, [1904] P. 319. ' Sec. 114. Notice of dishonor is not required to be given to the drawer in either of the following cases:— 1. Where the drawer and drawee are the same person ; 87 Not in B. 88 B. E. A. s. 60 ( 1 ) Uses "party giving notice" instead of "holder." 114 THE NEGOTIABLE INSTRUMENTS LAW. 2. When the drawee is a fictitious person or a per- son not having capacity to contract; ^ 3. When the drawer is the person to whom the instrument is presented for payment; 4. Where the drawer has no right to expect or re- quire that the drawee or acceptor will honor the instrument;** 5. Where the drawer has countermanded payment. Scanlon v. Wallach, 53 Misc. R. 104, 102 N. Y. Supp. 1090, S. C. sec. 89. Defendant gave a check which was duly presented to the drawee bank and dishonored, for what reason did not appear. Notice of dishonor was not given to defendant for fourteen days thereafter. Held, that the failure to give notice is dispensed with only under defined circumstances, and that the burden is on the holder of the check, or one claiming under him, to excuse the failure to give notice. Cassel v. Regierer, 114 N. Y. Supp. 601. A complaint on a check, alleging that when it was presented for pajrment to the defendant, who was the drawer, he refused to pay, is not demurrable for failure to allege notice of dishonor to the defendant. Adler v. Levinson (Misc. Rep.) 120 N. Y. Supp. 67. The case does not show whether the complaint stated that pre- sentment for payment was made to the drawee nor why it was pre- sented to the drawer. Sec. 115. Notice of dishonor is not required to be given to an indorser in either of the following cases:— 1. Where the drawee is a fictitious person or a per- son not having capacity to contract, and the indorser was aware of the fact at the time he indorsed the instrument; 2. Where the indorser is the person to whom the instrument is presented for payment; 3. Where the instrument was made or accepted for his accommodation. In re Swift, 106 Fed. Rep. 65, S. C. sees. 64-1, 82-3 ; McDonald V. Luckenbach, 170 Fed. Rep. 434, S. C. sec. 63, 95 C. C. A. 604. 89 "Where the drawee or acceptor is, aa between himself and the drawer, under no obligation to accept or pay the bill." B. E. A. a^ 50 (2) -(c) (4). THE NEGOTIABLE IN8TETJMENTS LAW. 115 Neither the receipt by defendant, with others of property of the maker of a note on an agreement to take care of the note at maturity, nor an admission that defendant, with others, was responsible for the note, will support an action against defendant alone on the ground that such receipt of property or such admis- sion is a waiver of presentment and notice of dishonor or an excuse therefrom. Jordan v. Reed (N. J.), 71 Atl. 280. A stockholder of a corporation, who endorsed, before delivery, a note made by another stockholder, to raise money for the corpora- tion is not entitled to notice of dishonor, because the instrument was really for his benefit. Mercantile Bank v. Busby (Tenn.), 113 S. W. 390, S. C. supra, sec. 64. Sed quaere? See McDonald v. Luckenbach, 170 Fed. 434, supra, see. 63. Sec. 116. Where due notice of dishonor by non- acceptance has been given, notice of a subsequent dis- honor by non-payment is not necessary, unless in the meantime the instrument has been accepted. Sec. 117. An omission to give notice of dishonor by non-acceptance does not prejudice the rights of a holder in due course subsequent to the omission. The Wisconsin Act adds this inconsistent provision "but this shall not be construed to revive any liability discharged by such omission." (See Dunn v. O'Keefe, 5 M. & S. 282.) Sec. 118. "Where any negotiable instrument has been dishonored it may be protested for non-accept- ance or non-payment, as the case may be ; but protest is not required except in the case of foreign bills of exchange. Wisner v. First Nat. Bank, 220 Pa. 21, 68 Atl. 955, 17 L. R. A. (N. S.), 1266, S. C. sees. 132, 137. The mere fact of a protest is not conclusive upon the dishonor of the instrument and due notice to the indorser; other evidence is competent on these questions and they must be left to the jury. "Where no formal protest is necessary, and defendant admitted having received notice of dishonor, and did not ask to have the questions of presentment and payment submitted to the jury, he was not aggrieved by the court allowing the notary to amend his certificate of protest by annexing his seal or by the admission of his certificate in evidence. Demelman v. Brazier, 198 Mass. 458, 84 N. E. 856, S. C. sec. 55. 116! THE NEGOTIABLE INSTETJMENTS LAW. Articjle VIII. DISCHARGE OP NEGOTIABLE INSTRUMENTS. Sec 119. A negotiable instrument is discharged:— 1. By payment in due course by or on behalf of the principal debtor; (a) 2. By payment in due course, by the party accom- modated, where the instrument is made or ac- cepted for accommodation ;(&) 3. By the intentional cancellation thereof by the holder ; ^'' 4. By any other act which will discharge a simple contract for the payment of money ;®*(c) 5. When the principal debtor becomes the holder of the instrument at or after maturity in his own right. ( not presented for acceptance or certification, but for payment. But the case illus- trates the evil possibilities of the section in the case of a cheek presented for certification (which by section 187 is equivalent to an acceptance), and inadvertently retained more than twenty- four hours. The danger has, however, been averted for the future in Pennsylavnia by an amendment to the section (Laws of 1909, Act 169, April 27, 1909) which provides that "the mere detention of such bill by the drawee, unless its return has been demanded, will not amount to an acceptance: And provided further, that the provisions of this section shall not apply to checks." In order to hold a drawee as acceptor under this section, the burden is upon the plaintiff to show that the instrument was negotiable paper of the nature and kind that could be presented for acceptance or that it was actually ■ delivered to the drawee for acceptance and not for payment. First Nat. Bank of Omaha V. Whitmore, 177 Fed. Rep. 397. Sec. 138. A bill may be accepted before it lias been signed by tbe drawer, or while otherwise incomplete, or when it is overdue, or after it has been dishonored by a previous refusal to accept, or by non-payment. But when a bill payable after sight is dishonored by non-acceptance and the drawee subsequently accepts it, the holder, in the absence of any different agree- ment, is entitled to have the bill accepted as of the date of the first presentment. THE NEGOTIABLE INSTRUMENTS LAW. 137 Sec. 139. An aeeeptance is either general or quali- fied. A general acceptance assents without qualifica- tion to the order of the drawer. A qualified acceptance in express terms varies the effect of the bill as drawn. Meyer v. Decroix, [1891] A. C. 520, S. C. sec. 125. Sec. 140. An acceptance to pay at a particular place is a general acceptance, unless it expressly states that the biU is to be paid there only and not else- where. Sec. 141. An acceptance is qualified, which is:- 1. Conditional, that is to say, which makes pay- ment by the acceptor dependent on the ful- filment of a condition therein stated; 2. Partial, that is to say, an acceptance to pay part only of the amount for which the bill is drawn; 3. Local, that is to say, an acceptance to pay only at a particular'^ place; 4. Qualified as to time; 5. The acceptance of some one or more of the drawees, but not of all. Sec. 142. The holder may refuse to take a qualified acceptance, and if he does not obtain an unqualified acceptance, he may treat the bill as dishonored by non- acceptance. Where a qualified acceptance is taken, the drawer and indorsers are discharged from liability on the bill, unless they have expressly or impliedly authorized the holder to take a qualified acceptance, or subsequently assent thereto.'^ When the drawer or an "The English Act interpolates "specified." B. B. A. s. 19 (2) (c). 12 The English Act adds: "The provisions of this subsection do not apply- to a partial acceptance whereof due notice has been given. Where a foreign bill has been accepted as to part, it must be protested as to the balance." B. E. A, s. 44 (2). 138 THE NEGOTIABLE INSTRUMENTS LAW. indorser receives notice of a qualified acceptance, he must, within a reasonable time, express his dissent to the holder, or he will be deemed to have assented thereto. Article III. PRESENTMENT FOR ACCEPTANCE. Sec. 143. Presentment for acceptance must be made:— 1. Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the instrument;*^ or 2. Where the bill expressly stipulates that it shall be presented for acceptance; or 3. Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee. In no other case is presentment for acceptance nec- essary in order to render any party to the bill liable. Van Buskirk v. State Bank, 35 Colo. 142, 83 Pac. 778, 117 Am. St. Eep. 182, S. C. sec. 189. Sec. 144. Except as herein otherwise provided, the holder of a bill which is required by the next preceding section to b-e presented for acceptance must either present it for acceptance or negotiate it within a rea- sonable time. If he fail to do so, the drawer and all indorsers" are discharged.*^ 13 The English Act omits the words "or in any other case where." B. E. A. s. 39 (1). '' i*The English Act interpolates "prior to that holder." B. E. A. s. 40 (2). 10 B. E. A. s. 40 ( 1 ) , corresponding to the above section 144, relates only to bills payable after sight. THE NEGOTIABLE INSTETJMENTS LAW. 139 Sec. 145. Presentment for acceptance must be made by or on behalf of tbe bolder at a reasonable hour, on a business day and before the bill is overdue, to the drawee or some person authorized to accept or refuse acceptance on his behalf; and: 1. Where a bill is addressed to two or more drawees who are not partners, presentment must be made to them all, unless one has authority to accept or refuse acceptance^" for all, in which case presentment may be made to him only ; 2. ~V\naere the drawee is dead, presentment may be made to his personal representative; 3. Where the drawee has been adjudged a bank- rupt or an insolvent or has made an assign- ment for the benefit of creditors, presentment may be made to him or to his trustee or as- signee.^'' Sec. 146. A bill may be presented for acceptance on any day on which negotiable instruments may be presented for payment under the provisions of sec- tions seventy-two and eighty-five of this act. When Saturday is not otherwise a holiday, presentment for acceptance may be made before twelve o'clock, noon, on that day.^* The Kentucky and Wisconsin Acts omit the last sentence. The Colorado Act substitutes for the last sentence the follow- ing: "When any day is in part a holiday presentment for ac- ceptance may be made during reasonable hours of the part of such day which is not a holiday." '6 The words "or refuse acceptance" are omitted in B. E. A. s. 41 (1) (b). " "Where tbe drawee is bankrupt, presentment may be -made to him or to his trustee." B. E. A. s. 41(1) (d). 18 Not in B. E. A. The Bank Holidays Act, 1871, s. 2, provides that when the day on which a bill should be presented for acceptance is a bank holiday, the bill shall be presented the next day. Chalmers' Bills of Exchange, 6th ed., 348; see also B. E. A. s. 92 infill, p. 168, n. 45. 140 THE NEGOTIABLE IN8TETJMENT8 LAW. Sec. 147. Where the holder of a bill drawn payable elsewhere than at the place of business or the resi- dence of the drawee has not time with the exercise of reasonable diligence to present the bill for ac- ceptance before presenting it for payment on the day that it falls due, the delay caused by presenting the biU for acceptance before presenting it for payment is excused, and does not discharge the drawers and indorsers. The North Carolina Act uses "executed" instead of "excused" in the next to the last line, an evident clerical error. Sec. 148. Presentment for acceptance is excused, and a bill may be treated as dishonored by non- acceptance, in either of the following cases:— 1. Where the draAvee is dead, or has absconded, or is a fictitious person or a person not having capacity to contract by bill.^** 2. Where, after the exercise of reasonable dili- gence, presentment can not be made. 3. Where, although presentment has been irregular, acceptance has been refused on some other ground.^" Sec. 149. A bill is dishonored by non-acceptance:— 1. When it is duly presented for acceptance, and such an acceptance as is prescribed by this act is refused or can not be obtained; or 2. When presentment for acceptance is excused, and the bill is not accepted. 19 "Where the drawee is dead or bankrupt, or is a fictitious person or a person not having capacity to contract by bill." B. E. A. a. 41 (2) (a). 20 The English Act adds: "The fact that the holder has reason to believe that the bill, on presentmsnt, will be dishonored does not excuse presentment." B. E. A. s. 41 (3). THE NEGOTIABLE INSTRUMENTS LAW. 141' National Park Bank v. Saitta, 127 App. Div. 624, 111 N. Y. Supp. 927, S. C. sees. 24, 133. Sec. 150, Where a bill is duly presented for ac- ceptance and is not accepted within the prescribed*^ time, the person presenting it must treat the bill as dishonored by non-acceptance or he loses the right of recourse against the drawer and indorsers. National Park Bank v. Saitta, 127 App. Div. 624, 111 N. Y. Supp. 927, S. C. sees. 24, 133. Sec. 151 When a bill is dishonored by non-accept- ance, an immediate right of recourse against the drawers and indorsers accrues to the holder and no presentment for payment is necessary. National Park Bank v. Saitta, 127 App. Div. 624, 111 N. Y. Supp. 927, S. C. sees. 24, 133. abticle rv. PROTEST. Sec. 152. Where a foreign bill appearing on its face to be such is dishonored by non-acceptance, it must be duly protested for non-acceptance, and where such a bill which has not previously been dishonored by non-acceptance is dishonored by non-payment, it must be duly protested for non-pajrment. If it is not so protested, the drawer and indorsers are dis- charged. Where a bill does not appear on its face to be a foreign bill, protest thereof in case of dis- honor is unnecessary. The liabilities of the drawer of a bill of exchange are fixed by the law of the place where he draws it. So a bill drawn in New 21 The English Act uses the word "customary" instead of "prescribed." B. E. A. B. 42. 142 THE NEGOTIABLE INSTRUMENTS LAW. York and payable in Austria is a foreign bill (sec. 129), and must be protested in order to hold the drawer, although by the law of Austria no protest is required. Amsinck v. Rogers, 189 N. Y. 252, 82 N. E. 134, 12 L. R. A. (N. S.) 875, 121 Am. St. Rep. 858, S. C. in Appellate Division, infra, see. 185. Sec. 153. The protest must be annexed to the bill, or must contain a copy thereof, and must be under the hand and seal of the notarj^ making it, and must specify,— 1. The time and place of presentment; 2. The fact that presentment was made and the manner thereof; 3. The cause or reason for protesting the bill; 4. The demand made and the answer given, if any, or the fact that the drawee or acceptor could not be found.^^ London & River Plate Bank v. Carr, 54 Misc. R. 94, 105 N. Y. Supp. 679. Sec. 154. Protest may be made by,— 1. A notary public; or 2. By any respectable resident of the place where the bill is dishonored, in the presence of two or more credible witnesses.^* 22 "A protest must contain a copy of the bill, and must be signed by the notary making it and must specify (a) The person at whose request the bill IS protested; (b) The place and date of protest, the cause or reason for pro- testing the bill, the demand made and the answer given, if any, or the fact that the drawer or acceptor could not be found." B. B. A. s. 51 ( 7 ) . ' 23 "Where a dishonoured bill or note is authorised or required to be pro- tested, and the services of a notary cannot be obtained at the place where the bill is dishonoured, any householder or substantial resident of the place may, in the presence of two witnesses, give a certificate, signed by them, attesting the dishonour of the bill, and the certificate shall in all respects operate as if it were a formal protest of the bill" B. E. A. s. 94. A form of protest which may be used in such case is given la the first schedule to the Act. THE NEGOTIABLE INSTRUMENTS LA"W. 143 Sec. 155. When a bill is protested, sueli protest must be made on the day of its dishonor, unless delay is excused as herein i)rovided. When a bill has been duly noted, the protest may be subsequently extended as of the date of the noting.^* Amsinck v. Rogers, 103 App. Div. 428, 93 N. Y. Supp. 87, S. C. sec. 185. A bill was protested on 25th September, but noting on the bill was 24th September. The extended protest dated 25th September contained 25th September as date of noting. The protest was held invalid. M'Pherson v. Wright, 12 Sess. Cas. 942. Sec. 156. A bill must be protested at the place where it is dishonored, except that when a bill drawn payable at the place of business, or residence of some person other than the drawee, has been dishonored by non-acceptance, it must be protested for non-pay- ment at the place where it is expressed to be payable, and no further presentment for payment to, or de- mand on, the drawee is necessary. Sec. 157. A bill which has been protested for non- acceptance may be subsequently protested for non- payment. Sec. 158. Where the acceptor has been adjudged a bankrupt or an insolvent, or has made an assignment for the benefit of creditors, before the bill matures. 2* "Subject to the provisions of this Act, when a bill is noted or protested, it must be noted on the day of its dishonor. When a bill has been duly noted, the protest may be subsequently extended as of the date of the noting." B. E. A. s. 51 (4). "For the purposes of this Act, where a bill or note is required to be protested within a specified time or before some further proceeding is taken, it is sufficient that the bill has been noted for protest before the expiration of the specified time or the taking of the proceeding; and the formal protest may be extended at any time thereafter as of the date of the noting."' B. E. A. s. 93. ' 144 THE NEGOTIABLE INSTRUMENTS LAW. the holder may cause the bill to be protested for better security against the drawer and indorsers.^' Sec. 159. Protest is dispensed with by any circum- stances which would dispense with notice of dishonor. Delay in noting or protesting is excused when delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct or negligence. When the cause of delay ceases to operate, the bill must be noted or protested with rea- sonable diligence. Sec. 160. When a bill is lost or destroyed or is wrongly detained from the person entitled to hold it, protest may be made on a copy or written particulars thereof. Aebi V. Bank of Bvansville, 124 Wis. 73, 102 N. W. 329, 68 h. R. A. 964, 109 Am. St. Rep.. 925, S. C. see. 186. Article V. ACCEPTANCE FOE HONOR. Sec. 161. Where a bill of exchange has been pro- tested for dishonor by non-acceptance or protested for better security, and is not overdue, any person not being a party already liable thereon may, with the consent of the holder, intervene and accept the bill supra protest for the honor of any party liable there- on, or for the honor of the person for whose account 25 "Where the acceptor of a bill becomes bankrupt or insolvent, or suspends payment before it matures, the holder may cause the bill to be protested for better security against the drawer and indorsers.'' B. E. A. a. 51 (5). The English Act has the additional provision: "When a bill is presented through the post office and returned by post dishonored, it may be protested at the place to which it is returned and' on the day of its return, if received during busixiess hours, and if not received during business hours, then not later than the next business day." B. E. A. s. 51 (6) (a). THE NEG0XIABL2 INSTRUMENTS LAW. 145 the bill is drawn. The acceptance for honor may be for part only of the sum for which the bill is drawn; and where there has been an acceptance for honor for one party, there may be a further acceptance by a different person for the honor of another party.^* Sec. 162. An acceptance for honor supra protest must be in writing,''^ and indicate that it is an ac- ceptance for honor, and must be signed by the acceptor for honor. Sec. 163. Where an acceptance for honor does not expressly state for whose honor it is made, it is deemed to be an acceptance for the honor of the drawer. Sec. 164. The acceptor for honor is liable to the holder and to all parties to the bill subsequent to the party for whose honor he has accepted. Sec. 165. The acceptor for honor, by such acceptance engages that he will, on due presentment, pay the bill according to the terms ^® of his acceptance, provided it shall not have been paid by the drawee, and pro- vided also, that it shall have been duly presented for payment and protested for non-payment and notice of dishonor^' given to him. Sec. 166. Where a bill payable after sight is ac- cepted for honor, its maturity is calculated from the date of the noting for non-acceptance and not from the date of the acceptance for honor. 26 The provision in the last clause for a further acceptance by a different person for the honor of another party is not in the English Act; see s. 65 and S. 65 (2). 27 The English Act reads, "must be jiritten on the bill." B. E. A. s. 65 (3). 28 The English Act uses "tenor" instead of "terms." B. E. A. s. 66 (1). 2» The English Act reads "notice of these facts." B. E. A. s. 66 (1). 146 THE NEGOTIABLE IN8TEUMENTS LAW. « Ames: Section 166 enacts that the maturity of an acceptance for honor of a bill payable after sight shall be calculated trom the date of the noting for non-acceptance, and not, as was erron- eously decided in Williams v. Germaine.* from the date of the acceptance for honor. Sec. 167. Where a dislionored bill has been ac- cepted for honor supra protest or contains a reference in case of need, it must be protested for non-payment before it is presented for puyment to the acceptor for honor or referee in case of need. Sec. 168. Presentment for payment to the ac- ceptor for honor must be made as follows:— 1. If it is to be presented in the place where the protest for non-payment was made, it must be presented not later than the day following its maturity. 2. If it is to be presented in some other place than the place where it was protested, then it must be forwarded within the time specified in sec- tion one hundred and four.'" Sec. 169. The provisions of section eighty-one ap- ply where there is delay in making presentment to the acceptor for honor or referee in case of need. Sec. 170. When the bill is dishonored by the ac- ceptor for honor it must be protested for non-payment by him. * 7 B. & C. 468. so Where the address of the acceptor for honor is in the same place where the bill is protested for non-payment, the bill must be presented to him not later than the day following its maturity; and where the address of the acceptor for honor is in some place other than the place where it was protested for non-payment, the bill must be forwarded not later than the day following its maturity for presentment to him." B. £. A. s. 67 (2). the negotiable insteument8 law. 147 Article YI, PAYMENT rOE HONOR. Sec. 171. Where a bill has been protested for non- payment, any person may intervene and pay it supra protest for the honor of any person liable thereon or for the honor of the person for whose account it was drawn. Sec. 172. The payment for honor supra protest in order to operate as such and not as a mere voluntary payment must be attested by a notarial act of honor which laaj be appended to the protest or form an extension to it. Sec. 173. The notarial act of honor must be founded on a declaration made by the payer for honor or by his agent in that behalf declaring his intention to pay the bill for honor and for whose honor he pays. Sec. 174. Where two or more persons offer to pay a bill for the honor of different parties, the person whose payment will discharge most parties to the bill is to be given the preference. Sec. 175. Where a bill has been paid for honor, all parties subsequent to the party for whose honor it is paid are discharged, but the payer for honor is sub- rogated for, and succeeds to, both the rights and duties of the holder as regards the party for whose honor he pays and all parties liable to the latter. Ames: This section codifies, as does the English Act, evidently by an oversight, the overruled case of ex parte Lambert. It should be amended by substituting for "liable" the fourth word from the end, the word "prior." 148 THE NEGOTIABLE INSTRTJMENTS LAW. Brewster : Ex parte Lambert was the law in several States, and seems just. McKeehan : It is doubtful whether the change in the English rule was inadvertant. The rule enacted by this section is prob- ably the more just one. Sec. 176. Where the holder of a bill refuses to receive payment supra protest, he loses his right of recourse against any party who would have been discharged by such payment. Sec. 177. The payer for honor, on paying to the holder the amount of the bill and the notarial expenses incidental to its dishonor, is entitled to receive both the bill itself and the protest.'^ Aeticle YII. bhxs in a set. Sec 178. Where a bill is drawn in a set, each part of the set being numbered and containing a reference to the other parts, the whole of the parts constitutes one bill. Sec. 179. Where two or more parts of a set are negotiated to different holders in due course, the holder whose title first accrues is as between such holders the true owner of the bill. But nothing in this section affects the rights of a person who in due course accepts or pays the part first presented to him. Sec. 180. Where the holder of a set indorses two or more parts to different persons he is liable on every such part, and every indorser subsequent to him is liable on the part he has himself indorsed, as if such parts were separate bills. 31 The English Act adds, "If the holder do not on demand deliver them up^ he shall be liable to the payer for honor for damages." B. E. A. s. G8 (6). THE NEGOTIABLE INSTKTJMENT8 LAW. 149 Sec. 181. The acceptance may be written on any part and it must be written on one part only. If the drawee accepts more than one part, and such accepted parts are negotiated to different holders in due course,*^ he is liable on every such part as if it were a separate bill. Sec. 182. When the acceptor of a bill drawn in a set pays it without requiring the part bearing his ac- ceptance to be delivered up to him, and that pait at maturity is outstanding in the hands of a holder in due course, he is liable to the holder thereon. Sec. 183. Except as herein otherwise provided where any one part of a bill drawn in a set is dis- charged by payment or otherwise the whole biU is discharged. Two parts of a bill of exchange drawn in a set in New York on a drawee in Paris were mailed in separate covers to the payees in Spain. Only the second part of the bill was received. This was indorsed by the payees, negotiated and presented to the drawee and payment refused, because the first part, which was apparently regularly indorsed by the payees and several other persons, had been previously presented and paid in good faith. One notice of dishonor was given to the drawer and the indorsee of the payees sued the drawer. The French Code of Commerce provided that "The party who pays a bill of exchange at its maturity and without opposition is presumably discharged." Held, that as the validity of the payment was governed by the law of the place of performance and as by the French Code the payment of the first part of the bill was valid, although the endorsements were forged, and the drawer was therefore discharged, a complaint which set forth the above facts was demurrable. Caras v. Thalmann, 123 N. Y. Supp. 97. The "Wisconsin Act here inserts two sections, entitled "Damages on Bills, ' ' as follows : "Sec. 1682. Whenever any bill of exchange drawn or indorsed within this State and payable without the limits of the United States shall be duly protested for non-acceptance or non-payment, the party liable for the contents of such bill shall, on due notice and demand thereof, pay the same as the current rate of exchange 32 Tlie English Act reads, "get into the hands of different holders in due course." B. E. A. ». 71 (4). 150 THE NEGOTIABLE INSTRTJMENTS LAW. at the time of the demand and damages at the rate of five per cent upon the contents thereof, together with interest on the said con- tents to be computed from the date of the protest ; and said amount of contents, damages and interest shall be in full of all damages, charges and expenses. "Sec. 1683. If any bill of exchange drawn upon any person or corporation out of this State, but within some State or Terri- tory of the United States, for the payment of money shall be duly presented for acceptance or payment and protested for non-ac- "eeptance or non-payment, the drawer or endorser thereof, due notice being given of such non-acceptance or non-payment, shall pay said bill with legal interest, according to its tenor and five per cent, damages, together with costs and charges of protest." TITLE III. PROMISSOEY NOTES AND CHECKS. Aeticle I. Sec. 184. A negotiable^* promissory note within the meaning of this act is an unconditional promise in writing made by one person 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.** Where a note is drawa to the maker's own order, it is not complete until indorsed by him. Alexander v. Hazelrigg, 123 Ky., 677, 97 S. W. 353, S. C. sec. 55; Young v. American Bank (No. 1), 44 N. Y. Misc. R. 805, 89 N. Y. Supp. 913; Young v. American Bank (No. 2), 44 N. Y. Misc. R. 308, 89 N. Y. Supp. 915; Sherman v. Goodwin (Arizona), 89 Pac. 517 ; Baumeister v. Kuntz, 53 Fla. 340, 42 So. 886, S. 0. sees. 64-1, 109; First Nat. Bank of Pomeroy v. Buttery (N. D.), 116 N. W. 341, 16 L. R. A. (N. S.) 878, S. C. sec. 120-5. A complaint on a note payable to the maker's order which fails to allege indorsement by the maker is defective. Simon v. Mintz, 51 Misc. Rep. 670, 101 N. Y. Supp. 86 ; Edelman v. Rams, 58 Misc. Rep. 561, 109 N. Y. Supp. 816. An instrument reading "Having been cause of a money loss to my friend X, I have given her three thousand dollars. I hold this amount in trust for her and one year after date or there- after, on demand, I promise to pay to the order of X, her heirs 33 "Negotiable" is omitted in the English Act. B. E. A. s. 83 (1). 34 The English Act reads, "a sum certain in money to, or to the order of a specified person or to bearer." B. B. A. s. 83 (1) and see also section 8 (4), supra, p. 130, n. 1. THE NEGOTIABLE INSTETJMENTS LAW. 151 or assigns, three thousand dollars with interest" is a valid prom- issory note. As it does not appear upon the face that there was no consideration or an invalid consideration, it will be presumed that there was a valid consideration. In the absence of evidence to the contrary the court must assume that the money loss re- ferred to was legally chargeable to the maker. Hickok v. Bunt- ing, 92 App. Div. 167, 86 N. Y. Supp. 1059. A stipulation in a promissory note that "no extension of time of payment, with or without our knowledge, by the receipt of interest or otherwise, shall release us or either of us from the obli- gation of payment" is an express contract that the time of pay- ment may be extended to any one or all of the sureties, guarantors, indorsers, or makers of the note without notice to all or any one of them and renders the note non-negotiable. Union Stodg^ards Nat. Bank v. Bolan, 14 Idaho 87, 93 Pac. 508, 125 Am. St. Rep. 146. An instrument in the form of a joint and several promissory note contained the clause, "No time given to, or security taken from, or composition or arrangement entered into, with either party hereto shall prejudice the rights of the holder to proceed against any other party." Held, a valid promissory note within sec. 83 (1),* Kirkwood v. Carroll, [1903] 1 K. B. 531, overruling Kirkwod v. Smith, [1896] 1 Q. B. 582, and approving Yates v. Evans, 61 L. J. Q. B. 446. Sec. 185. A check is a bill of exchange drawn on a bank payable on demand. Except as herein other- wise provided, the provisions of this act appUeable to a bill of exchange payable on demand apply to a check. B. & 0. Ry. Co. V. First Nat. Bank, 102 Va. 753, 47 S. B. 837, S. C. sec. 189 ; Schlesinger v. Kurzrok, 47 Misc. Rep. 634, 94 N. Y. Supp. 442, S. C. sec. 187; State Bank v. Weiss, 46 N. Y. Misc. 93, 91 N. Y. Supp. 276, S. C. see. 137; Van Buskirk v. State Bank, 35 Col. 142, 83 Pac. 778, 117 Am. St. Rep. 182, S. C. sec. 189; Mfg. Co. V. Summers, 143 N. C. 102, 55 S. E. 522, S. C. sees. 53, 59 ; Unaka Nat. Bank v. Butler, 113 Tenn. 574, 83 S. W. 655, S. C. sees. 9-5, 56; Columbian Banking Co. v. Bowen, 134 Wis. 218, 114 N. W. 451, S. C. sees. 71, 72-2 ; Wisner v. First Nat. Bank, 220 Pa. 21, 68 Atl. 955, 17 L. R. A. (N. S.) 1266, S. C. sees. 132, 137. An instrument not drawn on a bank is not a check, although it may be so styled on its face. Amsinck v. Rogers, 103 App. Div. 428, 93 N. Y. Supp. 87, afSrmed 189 N. Y. 252, 82 N. E. 134, 12 L. R. A. (N. S.) 875, 12 Am. St. Rep. 858, S. C. sec. 152. •Sec. 184, N. L L. .152 THE NEGOTIABLE INSTRUMENTS LAW. An order on a bank to pay "provided the receipt form at foot hereof is duly signed, stamped, and dated," is not an uncondi- tional order to pay and is therefore not a check. Bavins v. Lon- don & S. W. Bank, [1900] 1 Q. B. 270. But a cheek which bore at the foot the words "The receipt at the back hereof must be signed, which signature will be taken as an indorsement of the check," and on the back of which was a receipt form, is negotiable, since the order to pay is unconditional, the words at the foot not being addressed to the bankers and not affecting the order to them. Nathan v. Ogdens, 21 T. L. R., 775 {semble). The provision that a check is a bill of exchange is declaratory. M'Lean v. Clydesdale Banking Co., 9 App. Cas. 95. A deposit in the A bank by the drawer of a certified check on the B bank is not the same as a deposit of cash, although the amount is credited to the depositor, ' and if the B bank fails the depositor can not hold the A bank, no negligence in failing to present the cheek for payment being shown. Gaden v. Newfound- land Savings Bank [1899] A. C. 281, Privy Council. The practice of certifying checks does not appear to prevail in England. Chalmers, Bills of Exchange, 6th ed. 249. Sec. 186. A cHeck must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay.* The Illinois Act interpolates "and notice of dishonor given to the drawer as provided for in. the case of bills of exchange" after the word "issue" in line two. The criticisms and comments on this section by Professor Ames, Judge Brewster and Mr. McKeehan will be found under section 89, supra. Mfg. Co. V. Summers, 143 N. C. 102, 55 S. E. 522, S. C. sees. 53, 59 ; Moskowitz v. Deutsch, 46 Misc. 603, 92 N. Y. Supp. 721, S. C. sec. 124. * "Subject to the provisions of this Act, — (1) Where a check is not pre- sented for payment within a reasonable time of its issue, and the drawer, or the person on whose account it is drawn, had the right at the time of such pre- sentment, as between him and the banker, to have the check paid, and suffers actual damage through the delay, he is discharged to the extent of such damage, that is to say, to the extent to which such drawer or person is » creditor of such banker to a larger amount than he would have been had such check been paid . . . (3) The holder of such check as to which such drawer or person is discharged shall be a creditor, in lieu of such drawer or person, of such banker to the extent of such discharge, and entitled to recover the amount from him." B. E. A. s. 74. THE NEGOTIABLE INSTRUMENTS LAW. 153 Where the payee of a check indorsed and deposited it in his own bank, which credited him with the amount as cash to be drawn against, the bank became prima facie the owner of the check and not a mere agent to collect, and in order to charge the payee as indorser the bank must present the check to the drawee bank within a reasonable time. Aebi v. Bank of Bvansville, 124 Wis. 73, 102 N. W. 329, 68 L. R. A. 964, 109 Am. St. Eep. 925. The indorser of a check does not waive delay in presentment and renew his obligation by procuring and indorsing a duplicate of a lost check from liability upon which he has been discharged by such delay. lb. Although under see. 185 a check is a bill of exchange payable on demand, it is intended for immediate use and not to circulate as a promissory note. Therefore the transfer of a check to suc- cessive holders, where it is drawn and delivered in the place where the drawee bank is located, does not extend the time for present- ment. If the cheek is delivered on one day and is not presented before the close of banking hours the next business day, the drawer is discharged to the extent of any loss suffered from the failure to present. Gordon v. Levine, 194 Mass. 418, 80 N. B. 505, 120 Am. St. Eep. 565 ; Matlock v. Scheuerman, 51 Oregon 49, 93 Pac. 823, 17 L. R. A. (N. S.) 747, S. C. sees. 25, 53, 56; Dehoust v. Lewis, 128 App. Div. 131, 112 N. Y. Supp. 559. A check which, if presented during banking hours the next day after its receipt, would have been paid, was not presented until the second day and in the meantime the drawer failed. Held, that by the delay the holder made the check his own, and had no greater rights than ordinary creditors. Furber v. Dane, 203 Mass. 108, 89 N. E. 227; Gordon v. Levine, supra, was cited but the N. I. L. was not. Where a check is negotiated at a town distant from the drawee bank, it is not negligence to forward it for collection through the mails, even though it might have been more expeditiously sent by messenger. Nor is it necessarily negligence to send it to the drawee instead of to a third person for presentation, where pay- ment was refused because of lack of funds of the drawer and its dishonor could not have been ascertained sooner if it had been forwarded to a collecting agent. Citizens' Bank v. First Natl. Bank, 135 Iowa 605, 113 N. W. 481, 13 L. R. A. (N. S.) 303, S. C. sec. 71. See also Plover Savings Bank v. Moodie, supra, see 71, as to forwarding checks where the drawee bank is in another place. The payee of a cheek delivered on Sunday in payment of a debt can not hold the drawer on non-payment by the bank, although the check was presented within a reasonable time. And even though the check was invalid because delivered on Sunday, the payee can not recover on the original claim against the drawer if he failed to present the check for payment with due diligence before the drawee bank failed. Gordon v. Levine, 197 Mass. 263, 83 N. E. 861, 15 L. R. A. (N. S.) 243, 125 Am. St. Rep. 361, S. C. sec. 53. 154 THE NEGOTIABLE INSTRUMENTS LAW. In an action on a check unpaid because of the payee's failure to present within a reasonable time and until after the closing of the drawee bank, the burden is on the plaintiff to show that the drawer has suffered no loss by said delay. Dehoust v. Lewis, 128 App. Div. 131, 112 N. Y. Supp. 559, semUe. "Reasonable time" under this section is a question of fact for the jury. Wheeler v. Young, 13 T. L. E. 468. Sec. 187. Where a check is certified by the bank on which it is drawn, the certification is equivalent to an acceptance.^' For comment on this section by Professor Ames see supra, sec- tion 62. Where the drawer of a check before delivery to the payee pro- cures its certification and the bank fails before presentation for payment, the bank is not liable on the check to the drawer, but only to the holder, and therefore the drawer on receiving the cheek from the payee can not set it off against a debt to the bank. Schles- inger v. Kurzrok, 47 Misc. R. 634, 94 N. Y. Supp. 442. Notice to a bank by a depositor that his certified check, indorsed in blank, had been lost and to stop payment would not justify the bank in refusing payment to a holder in due course. Poess v. Twelfth Ward Bank, 43 Misc. R. 45, 86 N. Y. Supp. 857, semble, S. C. sees. 16, 51. See also Unaka Bank v. Butler, supra, sec. 56, cf. Elliott V. Worcester Trust Co., supra, sec. 87, and Pease & Dwyer v. State Nat. Bank, infra, sec. 189. The payee of a check given to him for value transferred it, also for value, to plaintiff, but without indorsing it. The payee died the next day, and the drawer, although having no equities against the cheek, stopped payment. Plaintiff subsequently sent the check to the drawee bank, and the teller certified it without asking any questions. Held, that under sec. 49 N. I. L. the title of the payee vested in plaintiff, and that the bank was liable to him upon its certification. Meuer v. Phenix Nat. Bank, 94 App. Div. 331, 88 N. Y. Supp. 83, S. C. sec. 49. Sec. 188. Where the holder of a check procures it to be accepted or certified, the drawer and all in- dorsers are discharged from liability thereon.'® National Bank of Rolla v. First Nat. Bank of Salem (Mo. App.) 325, S. W. 513, S. C. sec. 62; Gallo v. Brooklyn Sav. Bank, 199 N. Y. 222. Schlesinger v. Kurzrok, 47 Misc. R. 634, 94 N. Y. Supp. 442, S. C. sec. 187, Meuer v. Phenix Nat. Bank, 94 App. Div 331 88 N. Y. Supp. 83, S. C. sees. 49, 187. 35 Not in B. E. A. 38 Not in B. E. A, THE NEGOTIABLE INSTRUMENTS LAW, 155 The mere acceptance by the payee of a check certified by the procurement of the drawer is not a discharge of the drawer, even though the bank at the time the cheek was certified transferred the amount to the credit of the payee, such transfer being without the knowledge or acquiescence of the payee. CuUinan v. Union Surety & Guaranty Co., 79 App. Div. 409, 80 N. Y. Supp. 58. But where the holder procures certification of a check, this is payment to the amount of the check, and where the check con- tained a statement on the back that it was to be in full payment, such procuring of certification is an acceptance of the check in full payment. St. Eegis Paper Co. v. Tonawanda Co., 107 App. Div. 90, 94 N. Y. Supp. 946. So also where the holder procured certification of a check sent in a letter stating that it was in full payment, although the holder after the certification wrote to the drawer and declined to accept the check in full payment. Dunn v. Whalen, 120 App. Div. 729, 105 N. Y. Supp. 588. The N. I. L. was not cited in this case. When the holder procures certification of a check, the drawer is discharged and the bank becomes a debtor to the holder and can not avoid payment by showing that the holder obtained the check from the drawer by false pretenses. The certification has the same effect as if the holder had drawn the money, re-deposited it and taken a certificate of deposit for it. But semble that if the drawer procures the certification, since he is not thereby dis- charged, either he or the bank can set up the fraud on the drawer. Times Square Automobile Co. v. Rutherford Nat. Bank (N. J.), 73 Atl. 479. 8ed quaere as to this dictum, so far as concerns the liability of the bank if more than a reasonable time has elapsed since the delivery of the check to the payee whereby the drawer is discharged. Sec. 189. A cheek of itself does not operate as an assignment of any part of tlie funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check.*'^ Schlesinger v. Kurzrok, 47 Misc. R. 634, 94 N. Y. Supp. 442, S. C. sec. 187 ; Meuer v. Phenix Nat. Bank, 94 App. Div. 331, 88 3''The English Act makes no such provision as to checks specially, but section 53(1) provides that "A bill, of itself, does not operate as an assign- ment of funds in the hands of the drawee available for the payment thereof, and the drawee of a bill who does not accept as required by this Act is not liable on the instrument." And section 73 provides that "Except as otherwise pro- vided in this part, the provisions of this Act applicable to a bill of exchange payable on demand apply to a cheque." 156 THE NEGOTIABLE INSTETJMENTS LAW. N. Y. Supp. 83, S. C. sees. 49, 187 ; Eaesser v. Nat. Exeh. Bank, 112 Wis. 591, 88 N. W. 618, 88 Am. St. Rep. 979 ; Lonier v. State Savings Bank, 149 Mich. 483, 112 N. W. 1119-; Boswell v. Citizens' Savings Bank, 123 Ky. 485, 96 S. W. 797. Before its payment or certification by the bank the drawer of a check may countermand the order, and payment thereafter to the payee by the bank is wrongful. Pease & Dwyer v. State Nat. Bank, 114 Tenn. 693, 88 S. W. 172, cf. Unaka Bank v. Butler, supra, see. 56; Poess v. Twelfth Ward. Bank, supra, sec. 187. A bank is under no legal obligation to the holder of an unaccepted and uncertified check. Payment is therefore voluntary and can not be recovered back from a hona fide holder on the ground that the drawer had previously countermanded payment of the check. National Bank v. Berrall, 70 N. J. L. 757, 58 Atl. 189, 103 Am. St. Rep. 821. A drawee bank paid and charged to the account of the drawer checks indorsed by an agent of the payee who had no authority to indorse or collect the cheeks, and who appropriated the money. Held, that the bank was not liable to the payee in assumpsit for money had and received. B. & 0. Ry. Co. v. First Nat. Bank, 102 Va. 753, 47 S. E. 837. It would seem that the plaintiff miscon- ceived his remedy and that he should have sued the bank for the conversion of cheeks belonging to him. EUery v. People's Bank, 114 N. Y. Supp. 108. A bank being asked to cash a check on another bank, telephoned to the drawee bank and was informed that the check was "good" or "all right," and thereupon cashed the check, but before pre- sentment for payment the drawer notified the drawee bank not to pay the check. Held, the drawee bank was not liable on the cheek, because it was not accepted or certified in writing. Van Buskirk V. State Bank, 35 Colo. 142, 83 Pac. 778, 117 Am. St. Rep. 182. Notwithstanding section 189, an action in equity will lie by the payee of a cheek to whom an assignment of the fund was also given, and such assignment will be upheld against subsequent claimants. Hove v. Stanhope State Bank, 138 Iowa 39, 115 N. W. 476. TITLE IV. GENERAL PROVISIONS. ARTICLE I. Sec, 190. This act shall be known as the Negotiable Instruments Law.^** The Nebraska Act omits this section. 38 "This Act may be cited as the Bills of Exchange A*-', 1882." B. E. A. s. \. THE NEGOTIABLE INSTEUMENT8 LAW. 157 Sec. 191. In this act, unless the context otherwise requires,— "Acceptance" means an acceptance completed by delivery or notification.^' "Action" includes counter-claim and set-off. "Bank" includes any person or association of per- sons carrying on the business of banking, whether incorporated or not.*" "Bearer" means the person in possession of a bill or note which is payable to bearer, (a) "Bill" means bill of exchange, and "note" means negotiable promissory note.*^ "Delivery" means transfer of possession, actual or constructive, from one person to another. (&) "Holder" means the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof, (c) "Indorsement" means an indorsement completed by delivery, (d) "Instrument" means negotiable instrument.*^ "Issue" means the first delivery of the instrument, complete in form, to a person who takes it as a holder, (e) "Person" includes a body of persons, whether in- corporated or not. 89 The English Act contains the same provision, but also provides that "where an acceptance is written on a bill and the drawee gives notice to or according to the directions of the person entitled to the bill that he has ac- cepted it, the acceptance then becomes complete and irrevocable." B. E. A. ss. 2, 21 (1). See supra, p. 21, u. 8, and p. 133, u. 5. *o " 'Banker' includes a body of persons, whether incorporated or not, who carry on the business of banl^ing." B. B. A. o. 2. *i " 'Bill' means bill of exchange and 'note' means promissory note." B. E. A. s. 2. The same section of the English Act also gives the following additional definition: " 'Bankrupt' includes any person whose estate is vested in a trustee or assignee under the law for the time being in force relating to bankruptcy." « Not in B. E. A. 158 THE NEGOTIABLE INSTRUMENTS LAW. "Value" means valuable consideration. "Written" includes printed, and "writing" in- cludes print. (a) "Bearer," see Mayers v. McRimmon, 140 N. C. 640, 53 S. E. 447, 111 Am. St. Rep. 879, supra, sees. 31, 49. The maker of a note who has obtained possession of it by theft after it has been indorsed in blank by the p.ayee is the bearer within the meaning of the statute. Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959, S. C. sees. 9-5, 16, 56, 124. (fc)" Delivery," see Irwin v. Deming, 142 Iowa 299, 120 N. W. 645, S. C. sec. 30; Gray v. Baron (Arizona), 108 Pac. 229. (c) "Holder," see Mayers v. McRimmon, 140 N. C. 640, 53 S. E. 447, 111 Am. St. Rep. 879, supra, sees. 31, 49; Farmers' Bank V. Bank of Rutherford, 115 Tenn. 64, 88 S. W. 939, 112 Am. St. Rep. 817, supra, sec. 66 ; New Haven Mfg. Co. v. New Haven Pulp Co., 76 Conn. 126, 55 Atl. 604, supra, sec. 48; Vander Ploeg v. VanZuuk, 135 Iowa 350, 112 N. W. 807, 13 L. R. A. (N. S.) 490, supra, sec. 14. R. M. Owen & Co. v. Storms & Co. (N. J.), 72 Atl. 441, supra, see. 51; Craig v. Palo Alto Stock Farm (Idaho), 102 Pac. 393, supra, sec. 51. {d) Indorsement," see Louisville Co. v. International Trust Co., 18 Colo. App. 345, 71 Pac. 898, S. C. supra, sec. 30. The possessor of an unindorsed bill payable to order, who is not the payee, is neither a "holder" nor a "bearer." Day v. Long- hurst, W. N. (1893) 3; cf. Walters v. Neary, 21 T. L. R. 146, S. C. sec. 49. (e) "Issue," see Bank of Houston v. Day (Mo. App.), 122 S. W. 756, supra, sec. 13. Sec. 192. The person "primarily" liable on an in- strument is the person who by the terms of the instrument is absolutely required to pay the same. AU other parties are "secondarily" liable.*^ The Kansas Act omits the last sentence. Rouse V. Wooten, 140 N. C. 557, 53 S. E. 430, 111 Am. St. Rep. 875, S. C. sec. 89 ; Deahy v. Choquet, 28 R. I. 338, 67 Atl. 421, 14 « Not in B. E. A. THE NEGOTIABLE INSTRUMENTS LAW. 159 L. R. A. (N. S.) 847, S. C. sec. 64-1. Northern State Bank v. Bellamy (N. D.) 125, N. W. 888, S. C. sec. 120-5; Richards v. Market Exchange Bank Co. (Ohio), 90 N. E. 1000, S. C. sees. 119, 124. An accommodation maker is a person primarily liable even though he add the word "surety" to his signature or the fact that he signed for accommodation is otherwise known to the holder. See cases under sec. 119, supra. Sec. 193. In determining what is a "reasonable time" or an "unreasonable time," regard is to be had to the nature of the instrument, the usage of trade or business (if any) with respect to such instruments, and the facts of the particular case.^* Mfg. Co. V. Summers, 143 N. C. 102, 55 S. E. 522, S. C. sees. 53, 59 ; McLean v. Bryer, 24 R. I. 599, 54 Atl. 373, S. C. sees. 53, 64-1 ; Gordon v. Levine, 194 Mass. 418, 80 N. B. 505, 120 Am. St. Rep. 565, S. C. sec. 186; Citizens' Bank v. First Natl. Bank, 135 Iowa 605, 113 N. W. 481, 13 L. R. A. (N. S.) 303, S. C. sees. 71, 186. See also cases under sec. 71. In the absence of any evidence to bring the case within this sec- tion, a demand on a promissory note payable on demand must be made within sixty days to charge an indorser, that having been the law in this State prior to the Negotiable Instrument Law. Merritt v. Jackson, 181 Mass. 69, 62 N. E. 987, S. C. sec. 71. A demand note was given by a friendly arrangement between the parties, with the understanding that the payee should ask payment when he needed it. It was presented for payment, dis- honored, and notice given to an accommodation indorser about seven months after its date. Held, error to dismiss the complaint as against the indorser, on the ground that the demand was not made within a reasonable time. Becker v. Horowitz, 114 N. Y. Supp. 161. Sec. 194. Where the day, or the last day, for doing any act herein required or permitted to be done falls on Sunday or on a holiday, the act may be done on the next succeeding secular or business day.*" " The provision here stated generally is made in the English Act as to bills in sections 40 (3) and 45 (2), as to checks in sections 73 and 74 (2), and as to promissory notes in sections 86 { 2 ) and 89 { 1 ) . *5 Not in B. E. A. See B. E. A. s. 14, supra, p. 98, n. 71, and B. E. A. s. 92, which reads "Wljere by this Act the time limited for doing any act or thing is less than three days, in reckoning time, non-business da.ys are excluded. 'Nou- 160 THE NEGOTIABLE INSTRUMENTS LAW. The statutory eonstrtietion laws of the respective States should be consulted in connected with this and similar sections, e. g., see Consolidated Laws of New York, 1909, sees. 20, 24, 25. Sec. 195. The provisions of this act do not apply to negotiable instruments made and delivered prior to the passage hereof.*® The Arizona Aet omits this section. The N. I. L. does not apply to actions on instruments made and delivered before the statute became effective. Dorsey v. Wellman (Neb.), 122 N. W. 989. Sec. 196. In any cace not provided for in this act the rules of the law merchant shall govern. ~ 47 The Kentucky Act omits this section. Oakdale Mfg. Co. v. Clarke, 29 E. I. 192, 69 Atl. 681, S. C. sec. 47. Where the negotiable instruments law is silent, resort must be had to the law merchant or the common law regulating negotiable paper. Mechanics' & Farmers' Savings Bank v. Katterjohn (Ky.), 125 S. W. 1071, S. C. sees. 63, 109. Under this clause a foreign drawer has still a right to re-ex- thange against an English acceptor, notwithstanding the provi- sions of sec. 57 B. E. A.* In re Gillespie, 16 Q. B. D. 702, affirmed 18 Q. B. D. 286. business days' for the purposes of this Aet mean — (a) Sunday, Good Friday, Ohristmas Day; (b) A bank holiday under the Bank Holidays Act, 1871, or acta amending it; (c) A day appointed by Royal proclamation as a public fast or thanksgiving day. Any other day is a business day." For the Bank Holi- days Acts see 'Chalmers, Bills of Exchange, 6th ed., 347-351. *8 Not in B. E. A., but the general rule of law is that a statute is not to be .construed as retrospective unless so made in express terms. Chalmers, Bills of Exchange, 6th ed., 2. *7 "The rules of common law, including the law merchant, save so far as they are inconsistent with the express provisions of this Act, shall continue to apply to bills of exchange, promissory notes and cheques.'' B. B. A. s. 97 (2). • Infra, p. 301. THE NEGOTIABLE i^iTSTEaMENTS LA'V*'. 161 Sec 197. Of the laws enumerated in the schedules ihereto annexed, that portion specified in the last column is repealed. The form of this section differs in the various States. Sec. 198. This chapter shall take effect on New York adds the following section, by amendment (Laws, 1904, eh. 287) : "No bank shall be liable to a depositor for the payment by it of a forged or raised check, unless within one year after the return to the depositor of the voucher of such payment, such depositor shall notify the bank that the check so paid was forged or raised." A number of the States add sections defining public holidays and making provisions as to notes given for a patent right. .162 THE NEGOTIABLE INSTRUMENTS LAW. I COMMENTS AND CRITICISMS UPON THE NEGOTIABLE INSTRUMENTS LAW.^ THE NEGOTIABLE INSTRUMENTS LAW.2 BY JAMES BARR AMES, However much lawyers may differ as to the expediency of the attempt to secure by codification uniformity in American commercial law, all will agree that the commissioners for pro- moting uniformity of legislation in the United States could not have selected a better subject for the beginning of the experi- ment than that of negotiable paper. Even the opponents of codi- fication must admit that the Negotiable Instruments Law, framed and recommended by the commissioners in 1896, and already enacted in fifteen states,^ contains a nuinber of desirable changes in the law of Bills and Notes, and will, when generally adopted, settle definitively several questions which have given rise to much litigation and conflict of decisions. On the other hand, the friends of codification who chance to read the following pages may become convinced that there are serious defects of commis- sion and omission in the new code. Codification is with us a new art, and it is not surprising, although it is unfortunate, that the commissioners did not realize, as continental codifiers realize, the extreme importance of the widest possible publication of the proposed code, and the necessity of abundant criticism, especially of public criticism, from practising lawyers and judges, professors and writers, merchants and bankers. It is far from an agreeable task to offer criticisms at this late hour.* Nor would the follow- ing criticisms be offered now but for the writer's conviction that 1 The following articles are reprinted from 14 Harvard Law Review 241 ; 10 Yale Law Journal 84; 14 Harvard Law Review 442 ; 15 Harvard Law Review 26; 16 Har- vard Law Review 255, and 41 American Law Register, Ni S. 437, 499, 561. 2 Reprinted from 14 Harvard Law Review 241. ' Colorado, Connecticut, Florida, Maryland, Massachusetts, New York, North Caro- lina, North Dakota, Oregon, Rhode Island, Tennessee, Utah, Virginia, Washington, Wisconsin, and also the District of Columbia. ■* The writer, although interested in the subject of Bills and Notes both as an author and as a teacher, saw the Negotiable Instruments Law for the first time after its enact- ment by four state legislatures. THE NEGOTIABLE INSTRUMENTS LAW. 163 the Negotiable Instruments Law ought not to be enacted by any state which has not yet acted in the matter, unless changed in important respects, and that those states in which it has been adopted should remedy its defects by supplemental legislation.* The plan of making the law of Bills and Notes uniform through- out the United States has found favor in so many states that the enterprise ought to be carried through on the basis of the com- missioners' proposed code. But in the interest of future codi- fication, as well as for the sake of the law itself, this new legislation should be in such form as to stand the fire of adverse, if also fair-minded, critics. Before considering the defects in the new code attention should be called to its merits. These are of two kinds: first, salutary changes in the law ; and, secondly, the settlement of controverted questions. Under the new law a negotiable instrument may be made pay- able to one or more of several payees,^ or to the holder of an office for the time being.^ These provisions give efifect to the tenor of the instrument ,and nullify certain unfortunate decisions to the contrary in which the judges failed to grasp the mercantile con- ception of such instruments.* Another judicial error is corrected by the provision that an instrument, though indorsed in blank, ceases to be negotiable by delivery whenever the last indorse- ment thereon is a special indorsement.^ Section i66 enacts that the maturity of an acceptance for honor of a bill payable after sight shall be calculated from the date of the noting for non- acceptance, and not, as was erroneously decided in Williams v. Germaine,'^ from the date of the acceptance for honor. Since an acceptor, by section 62, engages to pay the bill " according to the tenor of his acceptance," he must pay to the innocent payee or subsequent holder the amount called for by the bill at the time he accepted, even though larger than the original amount ordered ^ For several of the criticisms here suggested the writer gratefully acknowledges his indebtedness to his colleagues, Professor Williston and Professor Brannan, who successively have had charge of the subject of Bills and Notes in the Harvard Law School during the last ten years, and he takes satisfaction in adding that these experts in the law of Negotiable Paper concur with the views expressed in this paper, '^ N. I. L. sec. 8-5. The references follow the numbering of the commissioners' draft. ' N. I. L. sec. 8-6. * Blanckenhagen v. Blundell, 2 B & Al. 417 ; Cowie v. Stirling, 6 E. & B. 333. ^ N. I. L. sec. 9-5, nullifying the doctrine first advanced by Lord Kenyon in Smith V. Clarke, Peake, 225 ; i Esp. 180, s. c. The language of sec. 9-5 is not happily chosen for the reasons pointed out, infra, p. 46. ^ 7 B. & C. 468. 164 THE NEGOTIABLE INSTKTJMENTS LAW. by the drawer. A bank certifying a raised check is in the same case, since section 187 assimilates a certification to an acceptance. If the acceptor or certifying bank must honor his acceptance or certification in such a case, a fortiori a drawee who pays a raised bill or check, without acceptance or certification, should not re- cover the money paid from an innocent holder. These results are at variance with numerous American decisions, but they are changes for the better, and, so far as adopted, bring the law of this country into harmony with the law of nearly, if not indeed all, of the European states.^ Other judicious changes for the better, but not involving the correction of judicial mistakes, are the following: The abolition of days of grace ; ^ the assimilation of sight and demand paper ; * the provisions that the negotiability of the instrument shall not be affected by its be;aring a seal ; * that a payor may disregard a condition in an indorsement ; ^ and that the holder in due course may enforce payment of an altered instrument according to its original tenor.* Especially to be commended are those sections of the new code which settle, and in the right way, certain questions which have been a prolific source of litigation and antagonistic decisions. Nothing but good can come from enacting that the negotiability of an instrument is not destroyed by a clause providing for the payment of exchange,^ or the costs of collection, or an attorney's fee in case of default,* or by a clause giving a power to confess judgment.® The same is true of the provisions that an ante- cedent debt constitutes value ; ^'* that the holder in due course, although he paid less, may enforce payment of the face value from all parties to the instrument; ^^ and that a check is not an assignment of the drawer's claim upon the bank.^* The rules regulating the liability of the anomalous indorser ^' are admirable, but for one slight omission which may be easily remedied, as will be shown on a subsequent page.^* The doctrine of section 16, that one who has signed a negotiable instrument complete on its face is liable thereon to a holder in due course, although it was never delivered by him, but lost by him, or stolen from him, or even from some one else after his death, is somewhat startling 1 4 Harvard Law Review 306, 307. ' N. I. L. sec. 85. » if. I. L. sec. 7-1. * N. I. L. sec. 6-4. * N. I. L. sec. 39. • N. I. L. sec. 124. ' N. I. L. sec. 2-4. ' N. I. L. sec. 2-5. • N. I. L. sec. S-'. *" N. I. L. sec. 25. ^ N. I. L. sec. 57. " N. I. L. sec. 189. " N. I. L. sec. 64. " Infra, p. 50. THE NEGOTIABLE INSTRUMENTS LAW. 165 at first. But it should commend itself on reflection. It has been adopted, after much consideration, in Germany. The new code, it is believed, would have gained greatly in sim- plicity, arrangement, and expression, if its framers had grasped firmly the principle that the formal right of a claimant upon a bill or note depends solely upon whether he is the holder by the tenor of the instrument, and had also given due emphasis to the dis- tinction between real and personal or equitable defences. It is, however, too late to recast the code. The critic must content himself with pointing out formal or substantial defects in par- ticular sections. If it be said that it is not worth while to make merely formal changes in sections that have been already enacted in sixteen jurisdictions, it may be answered that clearness, conciseness, and the right way of putting things are intrinsically desirable, and that improvements of this kind do not involve any sacrifice, as to the substantive law, of the principle of uniformity. It is from this point of view that the following suggestions are made as to matters of form. Section 3-2 provides that an order or promise is not rendered conditional by the addition of " A statement of the transaction which gives rise to the instrument." What do these words mean ? Do they cover the case of a note coupled with the words, " Given as collateral security for A's debt to the payee " ? Such an inter- pretation, although a literal one, would be deplorable, and would nullify several decisions.^ Mr. Crawford, the draftsman of the code, suggests that this sub-section applies to the case of notes containing a statement that it is given for a chattel which is to be the property of the owner of the note until the note is paid.^ Such a note is deemed negotiable in several states,^ and justly, being in effect nothing more than a note secured by a chattel mort- gage. But it is highly improbable that the courts of Massachu- setts, Kansas, and Minnesota, which have taken the opposite view,* will treat this sub-section as changing the law of those 1 Robbins v. May, 11 A. & E. 213; Haskell v. Lambert, 16 Gray, 592; Costelo v. Crowell, 127 Mass. 293; 134 Mass. 280, 285; American Bank v. Sprague, 14 R. I, 410 ; Hall V. Merrick, 40 Up. Can. Q. B. 566. 2 Crawford, An. N. I. L. 12. ' Chicago Co. v. Merch. Bank, 136 U. S. 268; Howard v. Simpkins, 69 Ga. 773; Choate v. Stevens, 116 Mich. 28; Heard v. Dubuque Bank, 8 Neb. 10; Mott v. Havana Bank, 22 Hun, 354; Kimball v. Mellon, So Wis. 133. * Sloan u. McCarty, 134 Mass. 245; South Bend Co. v. Paddock, 37 Kan. 510; Deering v. Thorn, 29 Minn. 120. 166 THE NEGOTIABLE INSTRUMENTS LAW. States. One New York judge has already ruled that the Negotiable Instruments Law has no application to such a note.^ Many cases have decided that the statement of a consideration in a note is not notice to a transferee of its failure.^ But the doctrine of these cases, which are doubtless the only ones which this sub-section can fairly be made to cover, is a rule as to bona Udes, and has nothing to do with conditions. The sub-section in question should be stricken from the act. If interpreted literally, it is mischievous. If not taken literally, it is obscure, inartistic, and useless. Section 36-2 and 3. An indorsement is restrictive which, either ( i ) " constitutes the indorsee the agent of the indorser, or (2) vests the title in the indorsee in trust for or to the use of some other person." Since the so-called " agent of the indorser " has, under section 37, the right to sue in his own name on the instrument, but for the benefit of the indorser, he is in truth a trustee, and not a mere agent. The sub-sections 2 and 3 should therefore be consolidated as follows : " An indorsement is restric- tive which vests the title in the indorsee in trust for the indorser or some third person." Section 137 is to the effect that a drawee who destroys a bill delivered to him for acceptance, or refuses to return it within the usual time, shall be deemed to have accepted it. A refusal to accept is an acceptance ! Such a perversion of language would be strange enough anywhere, biit in a deliberately framed code is well-nigh inexplicable. As a consequence of this fantastic pro- vision the holder may bring concurrent actions : against the drawee because of his fictitious acceptance, and against the drawer because of the drawee's non-acceptance. Nor is anything gained by this fiction, of which there is no trace in the English act. All the demands of justice are met by holding the misconducting drawee liable for a conversion of the bill.* The section should be cancelled as worse than useless. The following sections of the code seem to the writer to be defective, not merely in point of form, but in substance. Section 9-3 declares an instrument to be payable to bearer, although it is " payable to the order of a fictitious or non-existing person." Such a rule ignores the tenor of the instrument ; nor is 1 Third Bank v. Spring, 2S N. Y. Misc. Rep. 9. ^ I Ames, Cases on Bills and Notes, 775, n. i. ' Under the New York statute, 2 Rev. Stat. (6th ed.) 1161, from which section 137 is copied, the holder, to recover, must prove a converiion o£ the bill. Matteson i\ Moulton, 79 N. Y. 627. i THE NEGOTIABLE INSTEUMENT8 LAW. 167 there any judicial precedent or mercantile custom in support of the notion that a bill payable to a fictitious payee, but not indorsed in the name of such payee, is payable to bearer. In all the re- ported cases, instruments payable to a fictitious payee have been indorsed in the name of such payee before negotiation. By the combined effect of this section and section i6, if a note payable to a fictitious payee were stolen from the maker, and indorsed by the thifef in the name of the payee, the maker would be liable upon the note to any holder in due course. For, the note being already payable to bearer, the forged indorsement in the payee's name would be of no legal significance. Such a result would be a cruel injustice to the maker. The section should be materially changed. The real and commendable object of the section would be attained, without resorting to a fiction, by a provision as fol- lows : " If a bill be drawn, or a note made, payable to the order of a person known by the drawer or maker to be fictitious or non- existent, or of a living person not intended to have any interest in the instrument, and if such bill or note be indorsed by the drawer or maker in the name of the nominal payee, the instru- ment will have the same effect as a bill or note payable to the order of, and indorsed by, the drawer or maker respectively." Section 9— (5) provides that an instrument is payable to bearer " ( I ) where it is expressed to be so payable " and " ( 5 ) where the only or last indorsement is an indorsement in blank." The lan- guage of this sub-section (5), which is borrowed from section 8-(3) of the English act, is not well chosen. If it is to be taken as it stands, a note payable by A to the order of B and bearing the anomalous blank indorsement of C would be payable to bearer. This, of course, would be an absurdity, but it is certainly true that the only indorsement is an indorsement in blank. This ob- jection apart, the sub-section means that, if an instrument is expressly payable to bearer, it continues to be so payable, although it afterwards be indorsed specially; but that, if an instrument payable to the order of a particular person has become payable to bearer by being indorsed in blank, it ceases to be payable to bearer, if afterwards indorsed specially. This distinction between instruments originally payable to bearer and instruments made so payable by indorsement in blank is illogical and undesirable, and probably was not contemplated by the framers of the English and American acts. There is still a third objeetjon to this sub- section. If an instrument indorsed in blank aiid subsequently 168 THE NEGOTIABLE INSTRUMENTS LAW. indorsed specially, so that it is no longer payable to bearer, is transferred by the special indorsee by delivery merely, the trans- feree cannot sue parties prior to the special indorser in his own name, but only in the name of his assignor. This puts the assignee to unnecessary inconvenience. As owner of the instrument, although not, according to this sub-section, holder, he ought to have the right to strike out the special indorsement, thus making the instrument once more payable to bearer, and as bearer to sue upon it in his own name. The following substitute is suggested for section 9-(i) and 9-(5) : "The instrument is payable to bearer " ( I ) when it is expressed to be so payable ; "(5) when, although originally payable to order, it is indorsed in blank by the payee or a subsequent indorsee.- " An instrument payable to bearer will, however, whenever it is indorsed specially, carry notice that the property in it was at one time vested in the special indorsee, so that, in the absence of an indorsement or assignment by him, all subsequent holders will hold for the benefit of such indorsee." Section 20 provides that a person who purports to sign an in- strument in behalf of a named principal is not liable on the instru- ment, if he was duly authorized by the principal. By necessary implication he is liable on the instrument, if not duly authorized.^ This is a departure from the English act and from the almost uniform current of judicial decisions.^ This new rule involves a flat contradiction of the instrument, and the fiction works not justice but injustice. For example : A, mistakenly believing that he is duly authorized, signs a note, " A, agent for B," and delivers it to C, the payee. At maturity B repudiates the note. He is, however, at that time a bankrupt. A is rightfully chargeable to C on his implied warranty of authority, but only to the amount that C might have recovered from B, if he had authorized the note. But, under section 20, A is liable to C for the face of the note. By Section 22 the indorsement or assignment of the instru- ment by an infant " passes the property therein." Does this section, like the corresponding section of the English act, mean merely that the indorsee has the right to enforce pa)rment from all 1 Mr. Crawford so interprets the section. Crawford, An. N. I. L. 26. 2 Hall V. Crandall, 29 Cal. 567; Noyes v. Loring, 55 Me. 408; Bartlett w. Tucker, 104 Mass. 336; White v. Madison, 26 N. Y. 117 ; Miller v. Reynolds, 92 Hun, 400. The case of Byars v. Doores, 20 Mo. 284, is contra. THE NEGOTIABLE INSTRUMENTS LAW. 169 parties prior to the infant, or does it mean that the indorsee be- comes absolute owner of the instrument, so that he and his trans- ferees, whether with or without notice of the infancy, may retain the instrument even against the infant? If it was intended to reproduce the effect of the English act on this point, it is unfor- tunate that the unambiguous language of that act was not re- tained. If, on the other hand, it was intended to make the infant's transfer of negotiable paper irrevocable, the section introduces a radical change in the law as to the rights of infants, and one that goes unnecessarily far in protecting an indorsee who knows that he is dealing with an infant. Section 29 defines an accommodation party as one who has signed the instrument " without receiving value therefor and for the purpose of lending his name to some other person." By this definition one who has received a commission, which is certainly value, for lending the credit of his name would not be an accom- modation party. But no business man or good lawyer would sanction such a distinction. The words, " without receiving value therefor and," should be cancelled as inaccurate and misleading. Section 34 distinguishes between special and blank indorse- ments, but it is nowhere stated that an indorsement, like the drawing of a bill, is an order. If the payee writes, " I assign this note to B," or " I guarantee to B the payment of this note," is he liable as indorser on his assignment or guaranty ? Is his trans- feree an indorsee, and therefore within the rule that gives a holder in due course the title free from equitable defences? There are numerous but discordant decisions on these points, and it is un- fortunate that the new code does not secure uniformity here, as it does in the matter of notes payable with exchange or attorneys' fees. Section 37 confers upon the indorsee under a restrictive in- dorsement the right to bring any action that the indorser can bring. Inferentially such an indorsee cannot sue his indorser. This is just, if the instrument was transferred to the indorsee for the benefit of the indorser. But unjust, if the indorsement was for value to the indorsee in trust for a third person. Section 40, which has no counterpart in the English act, pro- vides that an instrument indorsed in blank, although subsequently indorsed specially, " may nevertheless be further negotiated by delivery," the special indorser being liable of course " to only such holders as make title through his indorsement." If, for example. 170 THE NEGOTIABLE INSTRUMENTS LAW. the special indorsee lost possession of the instrument by accident or theft, and the finder or thief transferred it by delivery to one who had no notice of the loss or theft, the latter is entitled to charge all parties antecedent to the special indorser. Lord Kenyon ruled to this effect in Smith v. Clarke,^ and his view was followed by the courts,^ and was repeated in the text-books, in a form much resembling the language of the section under discussion.* But Lord Kenyon failed to see that the special indorsement was notice that the instrument had become the property of the special in- dorsee, and that the right of any subsequent taker must be derived through him. To correct Lord Kenyon's error, and, as Mr. Chal- mers tells us,* " to bring the law into accordance with mercantile understanding," section 8-3 was inserted in the English act, which defined an instrument payable to bearer as one " which is expressed to be so payable, or on which the only or last indorse- ment is an indorsement in blank." This section of the English act is reproduced in section 9-5 of the American act, so as to change the law in this country also. Then, in apparent forgetful- ness of the effect of section 9-5, the framers of the American act insert section 40, which changes the law back to its former state. One of these repugnant sections, and preferably section 40, should be cancelled.' Section 49 gives to the transferee of an instrument payable to the order of the transferor, but not indorsed by the latter, " such title as the transferor had therein," and also " the right to have the indorsement of the transferor." If an indorsement was intended, but omitted through inadvertence, it is obviously just that the transferor should be required to indorse subsequently. If, on the other hand, the omission is not due to inadvertence, it is as obviously unjust, as Mr. Bigelow has pointed out,® to com- pel the transferor to assume the liability of an indorser. In sec- tion 44 it is provided that any person under obligation to indorse 1 Peake, 225 ; t Esp. 180, s. c. ' Walker v. MacDonald, ^ Ex. 527; Savannah Bank v. Haskins, loi Mass. 370; Houry v. Eppinger, 34 Mich. 29; Watervliet Bank v. White, i Den. 608; French v. ISarney, i Ired. 219; Mitchell ■v. Fuller, 15 Pa. 268. 3 Byles, Bills (13th ed. 1879), 'S^; Chitty, Bills (nth ed. 1878), 173; Chalmers, Dig. of Bills of Exch. (1878) 96. * Chalmers, Bills of Exch. (5th ed.) 24. See, also, Byles, Bills (i6th ed. 1899). ^ The neutralizing effect of section 40 upon section 9-5 is recognized by the learned writer in 17 Banking Law Journal, 77 5, who adds: "More wrong than right, it seems to us, will follow the operation of the law as it now stands." • Bigelow, Bills and Notes (2d ed.), 295, n i . 4 THE NEGOTIABLE INSTRUMENTS LAW. 171 in a representative capacity may indorse in such terms as to negative personal liability. But there is no similar provision for a qualified indorsement in section 49. Such a provision should be added to this section.^ There is a further objection to this section. If the transferee by delivery merely of an instrument payable to the order of the transferor always acquires only the rights of the latter, such a transferee of a note made for the accommodation of the payee could not enforce it against the maker, even though he might have given to the payee the money which it was the object of the maker to procure for the payee on the credit of his own name. Such a result would be a reproach to the law, even if due to the action of the courts. But this section, so far from codifying, actually nullifies the judicial precedents in this country.^ This defect in this section would be cured by inserting after the word " addi- tion " the words " the right to enforce the instrument against one who signed for the accommodation of his transferor and." Section 64, defining the liability of the anomalous indorser, is an excellent piece of codification but for one slip. One not other- wise a party to a bill payable to the order of the drawer may sign it for the accommodation of the acceptor, as in Matthews v. Blox- some.* He should clearly be liable to the drawer-payee. But by the sub-section 2 he is liable only to parties subsequent to the drawer. This case may be provided for by making the first two sections read as follows : — (i) "If the instrument is a note or bill payable to the order of a third person, or an accepted bill payable to the order of the drawer, he is liable to the payee and to all subsequent parties." (2) " If the instrument is a note or unaccepted bill payable to the order of the maker or drawer, or payable to bearer, he is liable to all parties subsequent to the maker or drawer." Section 65 introduces the distinction that the implied warranty of genuineness, title, and the like of the transferor by delivery 1 The Colorado legislature, to remedy this injustice, before enacting this section, added to the sentence requiring an indorsement the words " if omitted by accident or mistake." 2 Hughes w. Nelson, 29 N. J. Eq. 547; Matthias v. Kirsch, 87 Me. 523 ; Meggett v. Baum, 57 Miss. 22 ; Freund v. Importers' Bank, 76 N. Y. 352. See, further, the Scotch case of Hood v. Stuart (Court of Sess., March 20, 1870) and the analogous case of an accommodation bond, Dickson v. Swansea, L. R. 4 Q. B. 44, which greatly lessens the authority of Edge v. Bumford, 31 L. J. Ch. 805. 8 .33 L. J. Q. B. Young v. Glover, 3 Jur. N. s. 637, is a similar case. ,172 THE NEGOTIABLE INSTRUMENTS LAW. inures to the benefit of his immediate transferee, whereas the sim- ilar warranty of the indorser without recourse runs in favor of all subsequent holders. This idea that the indorser without recourse is liable to any one but his transferee is an original invention of the Negotiable Instruments Law. But this is its only merit. To say that such an indorser is liable in any manner on the bill is to contradict the plain language of his indorsement. His liability is extrinsic to the bill. As the vendor of the bill, he, like the vendor of other personal property, is liable to his vendee, but to no subsequent purchaser, for the genuineness and title of the thing sold. His liability is therefore identical with that of the transferor by delivery. This view is brought out in almost all of the sixteen reported cases seen by the writer, in which an indorser without recourse was made a defendant. There seems to be no trace of authority for an action against such an indorser by any one but his immediate transferee. In one case* a subsequent holder attempted to charge the indorser without recourse, but the court decided against him, Mr. Justice Dillon delivering a con- vincing opinion, in which the indorsement without recourse was treated as creating the same liability as a transfer by delivery. Section 65 should be amended by adding in the first sentence after " warrants " the words, " as a vendor, and, therefore, only to the vendee," and by cancelling the sentence beginning with the words, " But, when the negotiation." Section 66 betrays the same misconception in regard to war- ranty as the preceding section. One who indorses without quali- fication is liable as indorser to all subsequent holders. If he transfers the bill for value, he incurs the additional but extrinsic liability of a vendor. But this liability runs only to his indorsee as a vendee. These liabilities are quite distinct. As indorser, he cannot be charged until the maturity of the bill and after due dili- gence exercised by the holder. As warrantor, since the warranty is broken at the moment of transfer, if at all, he may be sued at once, before maturity, and without regard to presentment or notice.^ An accommodation indorser is obviously not a vendor. 1 Watson V. Chesire, i8 Iowa, 202. In Challis v. McCrum, 22 Kan. 156, Mr. Justice Brewer said : " Of course no action will lie on the indorsement, for by his written con- tract Challis expressly declines to assume the liability of an indorser. If sustainable at all, it must be against him as a vendor, and not as an indorser, and upon the doctrine of implied warranty." 2 TurnbuU v. Bowyer, 40 N. Y. 456; Warren-Scharf Co. v. Com. Bank, 97 Fed. R. 181 ; Copp V, McDougall, 9 Mass. i ; Blethen • note payable to the legal representa- tive of A. Mr. Chalmers, who drew the English Act, says that a note payable to a deceased person is payable, since the Act, as it was before it, to his personal repre- sentative. Chalmers, Bills of Exch. (5th ed.) 23, 24. ' N. T. L. sec. 191. s " Continues to be assignable by mere delivery." Chitty, Bills ( i ith ed.), 173. " Is transferable by mere delivery." Story, Prom. Notes (7th ed.), § 139. " Is afterwards negotiable by mere delivery." 4 Am. & Eng. Encycl. (2d ed.) 252. " Remains trans- ferable by delivery." 2 Rand. Neg. Pap. § 705. " The negotiability is not restrained." Chalmers, Dig. (1878) 96. THE NEGOTIABLE INSTRUMENTS LAW. 197 must believe that, either they would have followed the English Act, and omitted section 40, or else have abandoned the language of the discarded rule along with the rule itself. Furthermore, to interpolate the additional words is to take an unwarrantable lib- erty with the statute. Section 22. Indorsement by an infant. The learned Chair- man informs us that this section is the same in effect as the corre- sponding section of the English Act. Other members of his committee assured the writer that the purpose of this section was to give the infant's indorsee an indefeasible title to the instru- ment. This is not the effect of the English Act. If the framers of this section are not agreed as to its scope, its reference. back to the committee for revision would seem to be in order. In Section 29 an accommodation party is defined as one who signs " without receiving value therefor, and for the purpose of lending his name to some other person." This definition was criticised by the writer as excluding the case where the signer receives a commission for lending his name, and the omission of the words " without receiving value for and " was recommended. Judge Brewster shows that the language in this section is the cur- rent definition of the books. But this does not meet the criticism. It may indicate only that he and his colleagues erred in good company. To take a concrete case. A offers B $10 if he, B, will sign a note of $1000 for A's accommodation. B accepts the $10 and signs the note. Can any one seriously doubt that B is an accommodation party? If he is, the definition in this section is erroneous. Section 34. The definition of indorsement. A note, a bill, and an acceptance are carefully defined in the Negotiable In- struments Law. To the writer's criticism upon the absence of a definition of an indorsement which would remove the conflict of decisions in cases where the payee writes : " I assign this note to B," or " I guarantee the payment of this note to B," Judge Brewster replies that " the liability of a party on a peculiar in- dorsement which is outside of negotiability must be settled by a court." But the very point in controversy is one of negotiability, as it was in the case of notes containing a promise to pay attor- ney's fees. It is unfortunate that an excellent opportunity to unify the law was neglected.^ 1 In ten states a payee who transfers a note by writing on the back, " I assign this note to X," assumes the liability of an ordinary indorser. In six states such an 198 THE NEGOTIABLE INSTRUMENTS LAW. Section 37, Restrictive indorsement. A, the holder of a note payable to his order, sells it to B and is about to indorse it to him, but, at B's request, indorses it to X in trust for B, instead of to B directly. At the maturity of the note the maker is insolvent, but A is solvent. By this section, X, the indorsee, may sue any one that his indorser can sue. In other words, he may sue the in- solvent maker, but he cannot sue the solvent indorser, A. Judge Brewster sees no injustice to B in the inability of X, his trustee, to sue A, upon the latter's indorsement. Let us hope that the learned judge may never find himself in B's situation. Section 64. Anomalous indorser. Judge Brewster seems to have misapprehended the writer's criticism upon this section. If A makes a note payable to X or order, gets B to indorse it and delivers it to X in exchange for goods, B is liable, under this sec- tion, to X and all subsequent parties. If, however, A accepts a bill drawn by X, payable to the order of X, gets B to indorse it, and delivers it, as before, to X for goods purchased, B, onder this section, is not liable to X, but only to subsequent holders. And yet the business relations of A, B, and X are obviously identical in the two cases. In each X sells to A on credit, trusting to the responsibility of both A, the buyer, and B, the surety. The amendment suggested by the writer ^ secures to X the just pro- tection which this section in its present form denies him. Section 65-4 makes the novel distinction that, while a trans- feror by delivery is liable on his warranty of genuineness only to his immediate transferee, an indorser without recourse, because his name is on the instrument, is liable to all subsequent holders. This distinction was criticised on the ground that the warranty in both cases was extrinsic to the instrument, being merely the war- ranty of a vendor, and therefore running to the vendee only. The learned Chairman makes merry with the critic by quoting a state- ment from the Summary of Ames's Cases on Bills and Notes ^ as the first printed expression of the idea that an indorser without assignor is not an indorser. In thirteen states the assignee, like an indorsee, acquires title free from equities good against the assignor. In two states the assignee takes subject to such equities. In three states a payee who transfers a note by writing on the back, " I guarantee the payment of this note to X," is liable as an indorser. In ten states he is not so liable. In thirteen states the transferee, like an indorsee, acquires a title free from equities good against the transferor. In three states and in the Supreme Court of the United States, the transferee takes subject to such equities. 1 14 Harvard Law Review 250. Supra, p. 50. 3 840, 882. THE NEGOTIABLE INSTRUMENTS LAW. 199 recourse is responsible as a warrantor to the indorsee and sub- sequent holders. The writer frankly confesses that a youthful indiscretion, committed so long ago that it had passed from his memory, made him fair game for the alert sportsman. But, after all, he is not so black as he is painted. In his callow days he never entertained the heresy that the indorser without recourse was liable on the instrument, or that there was any difference between his obligation and that of a transferor by delivery. The liability of each is described in the Summary in the same forms and as extrinsic to the instrument. Nor did he consider that the obligation of either was negotiable. He regarded the warranty as an assignable chose in action, with this peculiarity, that it passed, with the bill or note as an incident, without any express assignment.* The writer is indebted to Judge Brewster for re- calling to his mind this forgotten conception, for it suggests an additional objection to this subsection. The distinction intro- duced between the transferor by delivery and the indorser without recourse must rest upon the fact that the name of the latter is upon the paper, and upon the assumption that such an indorse- ment is like a regular indorsement, except that the liability is limited to a warranty of genuineness and the like, and, therefore, runs in favor of all subsequent holders.* In other words, the indorsement is negotiable, and not merely assignable. A concrete case illustrates the difference. The holder of a bill containing several prior indorsements is induced by fraud to transfer it by an indorsement without recourse. The fraudulent indorsee trans- fers it to a holder in due course. The signature of one of the prior indorsers turns out to be a forgery. If the warranty of the defrauded indorser is merely an extrinsic, assignable chose in action, the holder in due course, having only the rights of the fraudulent indorsee, cannot charge him; if, on the other hand, as this section of the Act must mean, his obligation is a qualified negotiable indorsement, he is chargeable by the holder in due course. This result will hardly commend itself to any one. Section 70. Presentment for payment. To the unqualified statement in this section that " presentment for payment is not 1 He agrees now with Dillon, J., that an express assignment is necessary. Watson V. Chesire, 18 Iowa, 202. * Similarly, in section 66, the two liabilities of the regular indorser — the warranty of genuineness and the engagement to pay upon due notice of dishonor — are grouped together, and made to run in favor of all subsequent holders, as if both arose upon the instrument itself. 200 THE NEGOTIABLE INSTKTJMENTS LAW. necessary to charge the person primarily liable" the writer ob- jected that an exception should be made in the case of bank note" and certificates of deposit. This objection seems to the learned Chairman unpractical. An objection which gives effect to the express intention of the parties and has the support, as to cer- tificates of deposit, of the decisions in at least nine states, would seem to be sufficiently practical. Section 119-4. It is said in defence of this subsection that it relates only to acts between the parties, and that the holder's acceptance of a horse in satisfaction of a note, if before maturity, docs not discharge the maker as against a holder in due course. This is very sound, law, but, with all deference, this subsection declares just the opposite. The language is that by such an accord and satisfaction " a negotiable instrument is discharged." If it is discharged the maker can never be charged upon it. In all the other subsections of this section the discharge is complete and final. Section 120. Judge Brewster says that " discharge of a prior party " in subsection 3 means a discharge " by the holder." To add the words " by the holder " seems to the writer as unjustifi- able as the unsuccessful attempt that was made in Vagliano's case ^ to add to the section of the English Act relating to fictitious payees thewords " to the knowledge of the acceptor." Further- more, if the words were added, to what possible case would this paragraph apply which is not covered by the other paragraphs of this section? Finally, if the words are added, this subsection would still be indefensible, for it certainly discharges the accom- modated indorser of a note, if the holder, with knowledge of the accommodation, should release the accommodating maker. This would be a shocking result and contrary to all the reported de- cisions on this .point. This same illustration demonstrates the inaccuracy of paragraphs 5 and 6 of this section. Section 186 provides that the holder's failure to present a check discharges the drawer only to the extent of loss caused by the delay. To the writer's criticism that, under section 89, the failure to give the usual prompt notice of dishonor of a check dis- charges the drawer irrespective of any loss to him, and that this is unjust, the learned Chairman replies, that no harm is done, for the holder may sue upon his original claim. But in all other cases • i8qi, App. Cas. 144. THE NEGOTIABLE INSTRUMENTS LAW. 201 a creditor who, by his laches, discharges his debtor from liability on a bill given in conditional payment of a debt, forfeits also all right to the debt. Furthermore, suppose a check to be given in absolute payment of the drawer's debt, or in consideration of the payee's release of a claim against a third person. Surely, in either of these cases, the holder, who loses his right on the check, has lost everything. The writer's criticisms upon the new code may be summed up as follows : — Section 3-2 is either useless or provocative of litigation. Sec- tion 36-2 might well be merged with section 36-3. Section 137 crystallizes an unscientific conception without any compensating advantage. • Section 29 is an erroneous definition. Section 34 is an inade- quate definition. Sections 9-5 and 40 are repugnant. Section 68 introduces an unprecedented and arbitrary distinction. Section 70 would settle a conflict of decisions against the majority opinion, which is that of the chief commercial states. Section 175 copies the blunder of the English Act which codified an over- ruled decision. Sections 9-3, 20, Z7^ 49> 64, 65-4, 66, 119-4, 120-3, 120-5, 120-6, and 186, taken with section 89, establish rules opposed alike to justice and to well-established law. Their enactment must inevitably be followed, sooner or later, by additional legis- lation to remedy the evils they would introduce. The writer desires to repeat his opinion that the general adop- tion of the new code, properly amended, would be greatly to the advantage of the mercantile community. But unless the state- ments in the preceding two paragraphs can be disproved, the passage of the Act in its present form in a single additional state should be an impossibility. James Barr Ames. 202 THE NEGOTIABLE INSTRUMENTS LAW. THE NEGOTIABLE INSTRUMENTS LAW.^ A REJOINDER TO DEAN AMES. BY LYMAN DENISON BREWSTER. " The best test of a good shield," says the proverb, " is a sharp lance." No keener weapon than that wielded by the accomplished Dean of the Harvard Law School could be turned against the Negotiable Instruments Law. The fact that in his two elaborate attacks on that code he has failed to disclose a single serious flaw is the most conclusive proof of it's invulner- ability. A word of recapitulation and introduction may be allowed before making a direct reply to his " One Word More " in the February number of the Harvard Law Review. Of the twenty-three subsections of the law to which the critic objects, eleven are taken from the English Bills of Exchange Act,^ one follows the German code,* one is taken from a New York statute,* three are mere matters of form,° and the objections to the remaining seven chiefly come, it would seem, from mis- interpretations of the meaning of the law on the part of the critic. The eleven subsections taken, most of them word for word, from the English Bills of Exchange Act, and all so identical therewith that the critic's objections apply to the acts equally, need no justification at this late date. They have been the satis- factory law of England and her colonies for twenty years. On them criticism is barred by the natural statute of limitations and the universal approval of the commercial world. One might as well criticise the Bill of Rights or the Lord Chancellor's wig. No text-book that I know of holds any doctrine contrary to the law of these eleven sections. Nor in fact has the Dean suggested any text-book which is in favor of any one of his twenty-three strictures. As to the practical working for twenty years of these eleven subsections, I beg to refer to the testimony of one of the committee who helped to draft the English Act. 1 Reprinted from i J Harvard Law Review 26. 2 3-2 from 3-3 of English Act ; 9-3 from 7-3, with an addition not in question ; 9-5 from 8-3 ; 22 from 22-2 ; 29 from 28 ; 37-2 from 35-2 ; 49 from 31-4 ; 70 from 52 ; 17S from 65-5 ; 186 from 74, and 66 from 52-2. ' Sec. 20, art. 95, German Exchange Law. * Sec. 137. « 36-2, 36-3, 37. THE NEGOTIABLE INSTRUMENTS LAW. 203 In December last I wrote Mr. Arthur Cohen, Q. C, who was one of the committee who framed the Enghsh Act, stating the sections of the English Act which Dean Ames had criticised in his first article, and asked him if those sections had caused any difficulty in English practice. Unfortunately the copy of the American Act which I sent to him did not reach him, and he could only answer partially the points suggested. I wrote again, sending the two articles of the Dean, the answer, and the Ameri- can Act, expecting to be able to publish his reply in this article. As it has failed to reach me at this writing,^ I can only give the substance of the letter received from him dated January 30, 1901. It was evidently not intended for publication as a whole, but I am permitted to make the following quotations : — " No difficulties have arisen in England with reference to the suggested points, nor any litigation except as to the meaning of ' fictitious person.' The question came before the House of Lords in Vagliano v. Bank of England, 1891, Appeal Cases, 107. " I think you are to be congratulated if your Act has not been and cannot be objected to for more formidable reasons." In a letter received several years ago Mr. Cohen had written as follows : — " In my opinion the language of your bill is singularly felicitous. It is more clear, concise, less stiff and artificial than our Bills of Exchange Act, and in this respect — one by no means unimportant — your draft is an improvement on our Act." Perhaps it ought to be added here that Judge Chalmers, the draftsman of the English Act, to whom a draft of the Negotiable Instruments Act was sent in 1896, after congratulating Mr. Crawford on the success of his work, recommended Mr. Cohen as one of the three best authorities in England on the law of bills and notes, the other two, I believe, being eminent London bankers, who had participated in the drafting of the English Act. One word as to those eight sections which the Dean does not think it necessary to re-argue. As my answer to the criticisms on those eight sections, founded chiefly on their utility and con- venience, does not seem convincing to the critic, I pause, depre- catingly, to suggest that the same eight sections are also well sustained by authority, as well as by reasons of convenience. 1 For letter received after sending to press, see Appendix, tn/ra, p. 92. 204 THE NEGOTIABLE INSTRUMENTS LAW. Let us see. Section 20, it is claimed, makes by implication an unauthorized agent liable personally on the note. In addition to the answer already given in the Yale Law Journal for January, 1901, i.e. " that the agent alone is in law, as in fact, the real maker of the note " in such cases, and might well be made di' rectly liable, as he always is ultimately, it is proper to refer to the fact that the rule which the Dean claims is laid down in the Negotiable Instruments Law is adopted in the German Code, to which the Dean refers us as a model,^ and is declared in Byars V. Doores,^ as having " the weight of authority " decidedly in its favor at that time. Tiedeman (sec. 84) cites eleven cases so holding, to which we may add 147 111. 520; 104 Ind. 32. There are more cases one way and more states the other. The Dean's criticism on sections 37-2-3 was that the word " trustee " was more descriptive of the position of the indorsee in restrictive indorsement than the word " agent," and so but one word should be used. It is proper to say that the text- writers take exactly the opposite view,^ and so did Dean Ames when he published his Leading Cases. In his Index and Sum- mary, p. 837, is the following section : — " The term ' restrictive indorsement ' is commonty but loosely applied to two distinct kinds of orders,''' namely, to an order, whereby the holder indorses a bill to one person in trust for an- other, e.g. ' Pay A for account of B ' ; ' Pay A for the use of B ' ; and to an order whereby the holder simply deputes to an agent the business of collecting a bill, e.g. ' Pay to A for my use.' " It was with reference to this " common," i.g. ordinary use of the word that the section in question was framed. Mr. Tififany, in the new Norton Hornbook on Bills and Notes, as usual hits the exact distinction tersely and clearly (p. 124) : — "The first and commonest variety, and the one which is generally spoken of by the text-writers as the restrictive indorsement, is that where the holder deputes to some other person the business of collecting the bill ; the other where the holder indorses the instrument to one person for the use or benefit of, or as the trustee of another." Regarding section 49, which treats of the right to have the transferrer indorse, which follows the English Act and does not 1 American Law Register, March, igoo, vol. 39, p. 145. ' 20 Mo. 284. " See especially Chalmers, 5th ed. ; McLaren on Canadian Bills of Exchange Act, 414; Tiffany's Norton, 124. * The italics are ours. THE NEGOTIABLE INSTRUMENTS LAW. 205 follow the Colorado Act, as the critic would have it do, it may be pertinent to say that the annotator of the Colorado Act, Mr. J. Warner Mills (p. 23), says, speaking of the two forms of expression, " but either form of expression establishes the equi- table rule of law." ^ Section 66 is substantially in the line of section 55 of the Eng- lish Act, as already suggested. Section 68, making joint indorsers liable severally, which the critic called " a blunder," and now calls " unprecedented " and " arbitrary," is in accord with the theory of the law already estab- lished in most of the states which adopt the reformed procedure, say three quarters of the states of the Union.* " The liability of each indorser is several. So now by statute generally." * Section 137, making destruction of a bill acceptance, at first was objected to as " a perversion of language," " fantastic and inexplicable." * It is now described as " crystallizing an unsci- entific conception." Whether it is fantastic, or crystalline, or scientific, is not, perhaps, so very material. But instead of its being " a conception " of the draftsman or of the conference, the section was taken from the statutes of eight states, including the state of New York, from all of which the report was that " it had worked well." The bankers regarded it as a simple, practical, definite working rule, and none of the twelve commentators on the Negotiable Instruments Act have suggested the least objec- tion to it. Section 175. Payment for Honor. The Dean argued in the December number of the lieview that because Mr. Chalmers adopted in the English Bills of Exchange Act the doctrine of an overruled case,® the fact of its having been overruled must have been overlooked. By reference to note 3, page 237, of the fifth edition of Chalmers, he will see that the overruling case ® is duly cited as well as the continental codes. There was no " slip of memory " there. Daniel favors the overruled case.'^ 1 See, also, HufEcutt, 26, to the saJne effect. 2 Connecticut Rules of Practice, p. i, sec. 2 ; 2 Bliss, 53; Pomeroy, 2d ed., 326, " Norton, 159. * See our answer to these adjectives and others, 10 Yale Law Journal, 88, Januarr 190 1. ' Ex parte Lambert, decided by Lore Erskine. ' Ex parte Swan. ' Daniel, sec. 1255; Norton, 301. 206 THE NEGOTIABLE INSTRUMENTS LAW. DIRECT ANSWER TO ONE WORD MORE IN THE FEBRUARY NUMBER.* Section 3-2. This section asserts the familiar doctrine that an order or promise is not rendered conditional by " a statement of the transaction which gives rise to the instrument." * The Dean's first article declared this clause " unmeaning, deplorable, nullify- ing several decisions," and either " mischievous " or " obscure, inartistic, and useless." He cited, to show the inefficiency of the Negotiable Instruments Act on this point, the case of Third Bank V. Spring,' an Erie County Supreme Court case, in which he said " the judge ruled that the Negotiable Instruments Law had no application to such a note." In the answer it was stated that that case was reversed in the Appellate Division.* The Dean now replies that the reversal did not affect the point he made that the Negotiable Instruments Act was not applicable. On reexamina- tion it turns out that the note in question in that case was made in 1896 and negotiated in May, 1897. Whereas the New York Negotiable Instruments Law did not go into effect until October, 1897, and therefore, as the judge said, had no application to it. The law had not then become operative in the state of New York. So much for the wee Supreme Court case of Erie County, which was supposed to demonstrate the inefficiency of the Negotiable Instruments Law as expressed in section 3-2. As this is the only case decided on the Negotiable Instruments Law cited by the Dean, and that did not come under the law at all, the natural inference is that the Dean labors under some difficulty in treating the subject under the " case law system." He is likely to con- tinue to so labor, for the Negotiable Instruments Law, not only in England, but in this country, diminishes litigation and the necessity for it to an astonishing degree. Next page, in note 3, the Dean speaks of " Judge Brewster's startling suggestion that a note payable to the order of unincor- porated associations or the estates of deceased persons is payable to bearer by force of this section 9-3." But in point of fact, by referring to the answer published in the Yale Law Journal, on the criticism on section 9-3, it will be seen that, instead of being put down as a statement of the writer in the Law Journal, it is put down as follows : — • Harvard Law Rev. 442. ' English Act, 3-3 ; 4th Am. & Eng. Enc. of Law, 89, citing 43 cases. » 28 N. Y. Misc. 9. * SO App. Div. 66. THE NEGOTIABLE IN8TEUMENTS LA"W. 207 " His [the Dean'sJ criticism seems to imply that the act should cover rare and imaginary exceptions rather than serve the commendable pur- pose which he concedes that the section has, of providing for common cases, such as notes payable to unincorporated associations, estates of deceased persons, and the like." If the concession is denied, that is a question of fact. If it is admitted, is it quite right to exploit one's own admission as the opinion of his opponent? As to the section criticised, it is not only more conservative than the English act, but it is so laid down in the text-books.-' As to the doctrine of the illustration itself, to wit, that the estate of one deceased is regarded as a fictitious payee, the only point about that was that it was convenient in such cases to use a fictitious name. " How far afield a figure sometimes leads." Is section 40 inconsistent with subsection 9-5? Sub-section 9-5 reads as follows : — " The instrument is payable to bearer when the only or last indorse- ment is an indorsement in blank." Section 34 is : — "A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable ; and the indorsement of such in- dorsee is necessary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer and may be negotiated by delivery." Section 40 is : — " Where an instrument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery ; but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement." How, giving the language of section 34 its legitimate effect, there is any repugnancy between subsection 9-5 and section 40, I have never been able to perceive. Without rediscussing whether the critic was justified in changing the language of section 40, in the first article, or whether the substantive " negotiation " in sec- tion 34 applies to the verb " negotiated " in section 40, I much prefer to refer the reader to the' full and clear exposition of the 1 Daniel, 119; Randolph, 169; Tiedeman, sec. 243.. 208 THE NEGOTIABLE INSTRUMENTS LAW. whole matter in the new Norton Hornbook, pages no to ii8. Mr. Tiffany's paraphrase of section 40 on page 116 assumes that the words " indorsed in blank " are equivalent to the words " pay- able to bearer," and is as follows : — "An instrument which is originally payable to bearer, or which has been indorsed in blank, though afterwards specially indorsed, is still pay- able to bearer ; except as to the special indorser, who on such an instru- ment, after such an indorsement, is only liable on his indorsement to such parties as make title through it." But what is the result of this interpretation? In the new Norton Hornbook, not only do 9-5 and 40 stand as good law, but after going over all the cases on pages 1 16-17-18, and after stat- ing that the application of the rules " is somewhat confusing to the student," Mr. Tiffany sums up as follows : — "The rule is well settled that if a note or bill be once indorsed in blank and afterwards indorsed in full, it will still, as against the drawer, payee, and prior indorsers, be payable to bearer, though, as against the special indorser himself, title must be made through his indorsee." In other words, Mr. Tiffany finds no inconsistency at all. Sub- section 9-5 and section 40 stand in perfect harmony. In fact, one is the complement of the other. As to section 22, the Dean's claim is that some members of the committee informed him that they interpreted the section dif- ferently from the interpretation given in the Yale Law Journal. I can only say that I never heard of any other interpretation, nor was any such intimated when the committee reported to the con- ference that they found none of the Dean's criticisms tenable.^ Section 29. Accommodation Paper. One hardly knows what language to use in characterizing the serene self-confidence with which the Dean reiterates his conviction that everybody is wrong in defining accommodation paper as paper without consideration. Having shown in the answer that not only all the cases, all the text-writers, and all the encyclopedias, the law dictionaries, and the ordinary English lexicons, are against him, and all give the same definition as the Negotiable Instruments Act, his only reply is that " the conference erred in good company." It is the Dean against the world. Therefore so much the worse for the worlds This eccentric heresy of the Professor makes his illustrations > For the fair interpretation of section 22 see the new edition of Norton's Horn- book, 220, and note 15 therewith. THE NEGOTIABLE INSTRUMENTS LAW. 209 referring to accommodation parties utterly meaningless. The contestants are not using the same yardstick. The original criticism on section 34 was " that it nowhere stated that an indorsement is an order, and nowhere defined the difference between a guaranty and an indorsement." Our answer was that it was for the court rather than for a code on negotia- bility to settle questions outside of negotiable instruments. The new criticism is that " it is unfortunate that an excellent oppor- tunity to unify the law was neglected." Yet in his first note the Professor prides himself on the fact that the adoption of his pro- posed amendments would shorten the act by something more than a dozen lines. One ventures to say that if this " excellent oppor- tunity to unify the law " by laying down the law of assignments and guaranty were embraced, and the omissions which the Dean recommends at the end of his first article were also added, the Negotiable Instruments Law would have contained fifty instead of thirty-six pages. Section 37 is an exact copy of the English Act. The fact that no trouble has arisen under it in England sufficiently indicates that the immunity the Dean claims for the solvent indorser " A " does not exist. Equity would take care of that. Section 64. Anomalous Indorsers. One must answer the alge- braic illustration of the supposed misapprehension of the pres- ent writer on the Dean's first criticism by giving a Roland for an Oliver. For the lamentable fact is that the Dean seems to have misapprehended the answer already given and the reasons stated why his first proposed substitute would defeat the purpose of the act. In the careful examination of this section by Mr. Tiffany,^ the editor says, after referring to the previous " chaos of conflicting authorities," and speaking of the rule laid down in the Negotiable Instruments Law, as " an important step toward uniformity on this subject," " that it has the further advantage that it abolishes so-called ' presumptions,' lays down definite rules of liability; and that it probably gives expression as nearly as possible to the actual intentions of the parties in such cases." As the Dean's definition of accommodation paper includes paper for value received, his new illustration has no meaning, if the illustration makes " B " an accommodation indorser. 65-4. The Dean claims the doctrine quoted in the answer 1 Norton's Hornbook, pages 138-143. 210 THE NEGOTIABLE INSTKUMENT8 LAW. from his Leading Cases, that an indorsee without recourse is liable to subsequent holders on his warranty of genuineness, was " a youthful indiscretion " committed in his " callow days," and adds that neither now nor then did he ever entertain the heresy that there was any difference between the obligation of a qualified indorser and that of a transferrer by delivery. In addition to for- mer quotations from Daniel and Norton on this subject we beg, to refer him to the following quotation from the very able article on Bills and Notes in the 4th American and English Encyclopedia of Law, 2d edition, page 281 : — " Indorsement considered as a transfer of title, (i) Generally. The liabilities of an indorser as a vendor or transferrer of the instrument are identical with those of a transferrer by delivery, with this exception, that while a transferrer by delivery is liable only to his immediate transferee, an indorser, being a party to the instrument, is liable to all subsequent bona-fide holders." ^ As both this article and the code were published simultaneously, neither could have borrowed from the other. The critic has no need to blush for a " youthful indiscretion " adopted by four of the best American authorities.* Sections 70 and 1 19-4 add nothing to what have already been discussed. Reiteration does not advance the argument. Section 120-3 declares that a person secondarily liable on the instrument is discharged by the discharge of a prior party. The critic's arbitrary reply to the answer in regard to this section al- most eclipses his remarks on section 29. It had been said in answer to the Dean's strictures on section 120-3 that the con- text clearly showed that his rendering was a misinterpretation of 1 To the same effect is Tiedeman, section 244, note 5 ; Norton, 167. 2 It may be pardonable to repeat here a note on this section from our answer in the Yale Law Journal, January number, page 93, although that note is perhaps more per- tinent to some other sections in which the Norton Hornbook is freely quoted: — " On this point I have cited chiefly the new Norton Hornbook, on Bills and Notes, just edited by Mr. Francis B. Tiffany, not only because it is one of the ablest and most interesting discussions on this special point, but because the editor seems to have taken most of the new matter in the book equally from the Negotiable Instruments Law and Professor Ames's Leading Cases on Bills and Notes. The preface says : ' The present editor wishes to express his great obligation to Professor Ames, whose Index and Summary at the end of the cases, unquestionably the most important con- tribution to the subject that has been made in America, he has constantly consulted.' It is, hence, doubly reassuring to note that with so orthodox an authority for ' constant ' reference, as the Leading Cases on Bills and Notes, Mr. Tiffany quotes a score of definitions, bodily, from the Negotiable Instruments Law, and so far as I have observed does not seem to disagree with its statement of law on any point." THE NEGOTIABLE I]SrSTRTJMENTS LAW. 211 the meaning of that section, that none of the learned , authors who have discussed the Negotiable Instruments Act since it was enacted interpreted it as he did, that the commissioners from thirty-two states whose special duty it was, in reporting the Nego- tiable Instruments Law for adoption, to mention every change, never suggested any change from the existing law in that section, that it was the language generally given in the text-books,^ and that the ordinary rule of construction of codes reaffirming the common law was never to assume any change unless imperatively demanded by the language used. The only reply to all these points made in the answer is that the Dean entertains a dififerent opinion. Why he should do so he does not inform us, except by reference to the Vagliano case. To be sure the Vagliano case refused to add the words " to the knowledge of the acceptor " to the section of the English Act relating to fictitious payees; but why? Because, as the court says in the case of Shipman et al. v. Bank of the State of New York,^ it is apparent the code " intended to make the change and did make the change," but with such extreme reluctance and dis- sent as to strengthen rather than weaken the doctrine we had cited in Sutherland and Endlich, that in codes restating the common law, " no change is presumed except by the clearest and most imperative implication." In point of fact the Dean practically seeks to read into this subsection (120-3) the words " by opera- tion of law." The Dean further claims this paragraph, when interpreted as everybody else interprets it, as meaning " a discharge by the holder," could apply to " no possible case." Then what " pos- sible " harm could it do, except in releasing that extraordinary accommodation indorser, always in reserve, who haply indorsed it " for value received " ? Section 186. But the most truly academical criticism in the whole list is the objection to section 186. The section reads thus : — " A check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay." Copied from the English Act, repeated in the text-books since the first edition of Byles on Bills, with no reported case to the 1 Norton, 260 and 308. ^ 126 N. Y. 318, 335. 212 THE NEGOTIABLE INSTRUMENTS LAW. contrary, this section, at least, would seem to be solid. But, no! In section 89, treating of notice of dishonor generally, the Dean detects a hidden danger, and insists that under the combined oper- ation of the two sections, the drawer of a check would escape lia- bility if no notice of dishonor were given. To be sure, section 89 also is in the English Act and in all the text-books, but what of that? Section 186, the critic says, taken with section 89, estab- lishes a rule " opposed alike to justice and to well established law." How or why the joint effect of the same two statements of law should be one thing at the common law or the law merchant and totally and mischievously different when put in a code, does not appear. If what the Dean means is that section 186 is orthodox enough, but that section 89 is not sufficiently guarded by its own expression and by sections 70, 114, 185, and other kindred sec- tions (as I believe it is), that raises another very different ques- tion not heretofore discussed. Although both the English and American acts define checks to be bills of exchange for the sake of convenience, in point of fact this is not strictly true.^ And the courts, doubtless, in construing the Negotiable Instruments Act, would recognize the distinction between the two, and con- strue section 89 accordingly, with reference to the ordinary law on demand paper and checks, and practically hold the drawer primarily liable, as he is, in fact, the principal debtor. But how- ever that may be, instead of section 186 aiding the supposed un- just effect of section 89, in discharging the drawer of a check if notice of non-payment is not given, its effect is exactly contrary to that. For, since the only penalty for delay in presentment (186) is the loss occasioned by delay, and not a discharge, the natural inference therefrom would be that the same exceptional exemption as to checks would continue in case of non-payment, namely, that the only penalty would be the loss occasioned by the delay, and not any absolute discharge, as claimed by the Dean. It is suffi- cient here to add, in regard to both sections 186 and 89, that they have been fairly tried and worked well together. Considering the enormous business in checks every day, the fact that in twenty years' experience in England and four years in four states in the Union, no impecunious drawer of checks ' See 5th Am. & Eng. Enc. o£ Law, page 1030 and note 2 ; Norton, page 408, sec. THE NEGOTIABLE INSTRUMENTS LAW. 213 has ever been crafty enough to claim a discharge of his obligation in this ingenious way would seem of itself to refute the strained construction of the Dean. But if a right of action was lost on the check by the effect of the combined sections, the drawer would be liable on the original debt.* APPENDIX. Letter of Mr. Arthur Cohen, Q. C, on the Negotiable Instruments Law.^ 5 Paper Buildings, Temple, London, March ii, 1901. Dear Sir, — The following are some observations which occur to me in reference to some of Professor Ames's very ingenious and able criticisms of the Negotiable Instruments Act in the " Harvard Law Review." First, Section 3 provides that an order or a promise is not ren- dered conditional by the addition of a statement of the transaction which gives rise to the instrument. These words were inserted in the English Act in order to provide for cases where the bill or note contains an order or a promise to pay a certain sum " being a por- tion of a value or order (sic) deposited in security for the payment hereof," or " on account of money advanced for a certain person," and similar cases in which the transaction on account of which the bill or note is given is referred to. Stich cases presented themselves in 7 T. R. 733, L. R. 3 Q. B. 753, and other reported decisions. The words in the English Act correctly state what the English law is, and I see nothing obscure, inartistic, or useless in them, nor do I think that any intelligent judge could be misled by them. As regards section 36-2-3, I do not think that the words used could possibly mislead or present the slightest difficulty to any in- telligent person, and as it is by no means easy to determine in what cases an agent is or is not a trustee in the proper sense of the word, I am of opinion that the section ought not to be altered. Section 9-3 declares " an instrument to be payable to bearer when it is payable to the order of a fictitious or non-existing person, *and such fact was known to the person making it so payable."* The section is substantially the same as the corresponding one in the ^ 2 Randolph, 1554; 2 Daniel, sec. 1120; Van Schaack on Checks, 164, who says "the holder is agent of the drawer," and on page 25 "the drawer is the principal debtor"; Tiffany's Norton, 418, which cites on this point, among many other caseS[ Bull V. Bank, 123 U. S,ro5. ' This letter was received after the above article went to press. 214 THE NEGOTIABLE INSTRUMENTS LAW. English Act with the exception of the words between asterisks. In Vagliano v. Bank of England, 23 Q. B. D. 260, Lord Justice Bowen says : — " The exception that bills drawn to the order of a fictitious or non- existing person might be treated as payable to bearer was based upon the law of estoppel, and applied only against the parties who at the time they became liable on the bill were cognizant of the fictitious character or non-existence of the supposed payee." The English Act has modified and simplified the law, but the Negotiable Instruments Act has not gone so far as the English Act. I do not think that the section in question will work any injustice, or that there is any sufficient ground for altering it. Section 9-5. This section is substantially the same as 3 of the English Act. We altered the English law as it stood before the passage of the act. This was deliberately done on the strong recom- mendation of the bankers and merchants who were members of the committee, and I have reason to believe that the alteration of the law has been generally approved of in the United Kingdom, and there does not seem to have been any opposition to it manifested in the United States. Section 20. This section certainly alters the law as it exists in England, but I think it very likely that the alteration is an improve- ment. The wisdom of the rule laid down in Cohen v. Wright has often been doubted. Professor Ames takes one case, that of the supposed principal being a bankrupt. Even in that case it would be doubtful what could be recovered until the dividend was declared and the bankruptcy concluded; and in the case of the principal not being bankrupt, but being a man in bad credit, the question would have to be left to a jury what amount could properly be recovered from the principal. It may well be held that in actions on negotiable instruments, against a person who professedly acts on behalf of another person. A, it would be inconvenient to allow the former to allege an attempt to prove that probably the whole amount could not be recovered from A. I think the 20th section should be re- tained, and may be considered as a practical improvement of the law, unless there be reason to suppose that merchants and bankers think it unjust. I agree with Mr. Brewster that much indulgence should not be shown in business to a person who professes to have authority when he is really acting without authority. As regards section 22, it expresses what Mr. Justice Mellor stated as reported in the 8th of Best & Smith, page 833. I think the sec- tion objected to is equivalent to the corresponding section of the English Act. The infant cannot be sued, but he can transfer the instrument so as to enable a holder to sue other persons. Professor Ames seems to think it unjust that persons should be able to retain the negotiable instrument against the infant. I do not see the in- justice of this if the infant himself cannot be sued on the instru- THE NEGOTIABLE INSTRUMENTS LAW. 215 ment. Again, I do not think any intelligent judge could be misled by the wording of this, section. Section 29. This is the same as the 28th section of the English Act, which has given rise to no doubt or difficulty. " Without re- ceiving any value therefor" means without receiving any value for the bill, and not without receiving any consideration for lending his name. Section 68. This section does alter the law, at any rate as it exists in this country. To me it seems very doubtful whether it is not an improvement by reason of its sweeping away certain tech- nicalities. There has always been a tendency in the law merchant to consider contracts which are in form joint contracts as being intended to be joint and several. Section 137. I am of opinion with Professor Ames that this sec- tion is imperfect. It would seem to imply that if the bill be destroyed or not returned accepted within a reasonable time, notice of dishonor need not be given to the drawer. This is not in my opinion the law, and ought not to be law. I do not think the act is imperfect because it does not contain rules relating to the conflict of laws, any more than it could be con- sidered imperfect because it does not contain rules defining illegality or fraud. The sections in the English Act relating to the conflict of laws were introduced in order to embody the result of certain recent English decisions. I do not know whether the American decisions relating to these questions are sufficiently uniform to render it desirable to embody these results in a code relating to negotiable instruments. On the whole, I consider the Negotiable Instruments Act a very important and ably framed code. Its style and language seem to me in some respects better than those of the English Act, as being simpler, less technical, and more easily intelligible. I have no doubt it is not perfect. What code is perfect? Whether the very few blemishes which may have been discovered are such as ought to induce states which have not yet adopted the act to require it to be amended, in a few respects, is a question of expediency and public or state policy on which I do not venture to express an opinion. I am very sorry I have not had time to write more or to put my observations into a better shape. We are, you may be interested to know, engaged in codifying the law of insurance, and I think the bill will be found to be a useful measure. Believe me, yours very sincerely, Arthur Cohen. 216 THE NEGOTIABLE INSTRUMENTS LAW. SUPPLEMENTARY NOTE. BY JAMES BARR AMES. Two recent decisions suggest the need of amending two sections of the Negotiable Instruments Law, not considered in the preced- ing articles reprinted from the " Harvard Law Review." In Tolman v. American Bank,^ one Louis Potter, representing him- self to be Ernest Haskell, induced Tolman to give him his check upon the American Bank, payable to Haskell. Potter indorsed this check in Haskell's name, and the indorsee collected it from the drawee bank. The bank, it was decided by the Supreme Court of Rhode Island, could not debit Tolman, the drawer, with this payment, "but must bear the loss due to Potter's fraudulent impersonation. The Court based this decision upon common law principles and also upon Section 23 of the new Code. The decision is a surprising one in either aspect. Not one of the common law cases cited in its support is in point. On the other hand, all the reported cases on the point of fraudulent impersonation are against the decision.'' As a statutory question, but for this decision, the liability of the drawer would seem clear under the last clause of the section. He expected that the physical person before him, to whom he delivered the check, would indorse it, as he did. Is he not, therefore, by his conduct, " precluded from setting up forgery or want of authority " ? But the opinion was delivered by the learned Chief Justice Stiness, one of the most influential of the Commissioners who framed the Nego- tiable Instruments Law. It is difficult to believe that the courts which decided the cases opposed to Tolman v. American Bank will agree with the view of the Rhode Island Court, that those cases are nullified by Section 23 of the new Code.' But this section, in the light of the only judicial interpretation it has received, unless amended, must be a source of mischievous uncertainty. In Jeffrey v. Rosen f eld,* a note secured by a mortgage was altered, but by whom did not appear. It is a long-established doctrine in 1 48 Atl. R. 480. * U. S. V. Nat. Bank, 45 Fed. R. 163; Meridian Bank v. First Bank, 7 Ind. App. 322 ; Meyer v. Indiana Bank (Ind. App. 1901 ), 61 N. E. Rep. 596 ; Maloney v. Clark, 6 Kan. 8z ; Emporia Bank v. Shotwell, 35 Kan. 360 ; Robertson v. Coleman, 141 Mass. 231 ; First Bank v. American Bank, 49 N. Y. App. Div. 349 ; Merch. Bank v. Metro- politan Bank, 7 Daly, 137 ; Elliot v. Smitherman, 2 Dev. & B. 338 ; Forbes v. Espy, 21 Oh. St. 474; Land Co. v. N. W. Bank, ig6 Pa. 230. See also Hoge v. First Bank, 18 Ind. App. 501 ; Metzger v. Franklin Bank, 119 Ind. 359. ' If those decisions are nullified by the new Code, the similar decisions in regard to the sale of chattels (Edmunds v. Merch. Co., 135 Mass. 283) remain intact. This certainly would be a singular antinomy. * 61 N. E. R. 49. THE NEGOTIABLE INSTRUMENTS LAW, 217 England that a material alteration of a note, though made by a stranger, avoids it. This doctrine is perpetuated in Section 64 (l) of the English Bills of Exchange Act. In this country the English rule was not followed. The holder's rights were not impaired by an alteration by a stranger. But Section 124 of the Negotiable In- struments Law relating to " alteration " is almost a verbatim copy of the English act. We are then in this dilemma, — either the English and American sections, although expressed in the same terms, must be interpreted differently, or else the American law is changed, and, as it seems to the writer, for the worse. To avoid the second horn of the dilemma involves a great straining, not to say perversion, of simple English words. The Supreme Court of Massachusetts found it possible to sustain the holder's right to fore- close his mortgage without interpreting this section of the new Code, but remarked that the question of its interpretation was one that deserved serious consideration. There seems to be no good reason why, for the sake of uniformity, a state which has not yet adopted the Negotiable Instruments Law should deliberately intro- duce the difficulties sure to arise from this section and Section 23. James Barr Ames. REPLY TO SUPPLEMENTARY NOTE. BY LYMAN DENISON BREWSTER. ToLMAN V. American Bank. The exact point in Tolman v. Bank was simply this : Was it " precluding " negligence for Tolman to trust the stranger Potter with no further inquiry than that stated in the opinion ? On this precise point as to a " stranger payee " there are but two exact precedents.^ The first is Nat'l Bank v. Nolting.' This case holds the bank liable, saying " to hold that giving a check to a stranger . . . was sufficient . . . evidence to excuse the bank . . . would be to relieve the bank from a just responsibility." The second case is Smith v. Mech. Bank.^ This case by a divided court held the bank not liable.* The theory of the Dean as to the drawer's expectation that the " physical person before him " would indorse the note had already been shown to be a fallacy. The real intent is that the payee named shall be the actual payee." The robust com- 1 S Am. & Eng. Enc. of Law, 2d ed., 1066. s 94 Va. 263 ; 26 S. E. 326. ' 6 La. Ann. 610. * See criticism on this case, 2 Morse on Banking, 2d ed., sec. 474. ' Note in 50 L. R. A., to Land Co. v. Bank, 83 ; article on " Loss by Check de livered to Impostor," Case & Comment, vol. 7, No. 7, Dec. 1900, page 75. 218 THE NEGOTIABLE INSTRUMENTS LAW. mon sense of Judge Stiness's opinion on this " intention " point ought to make further discussion tjiereon needless. And this, too, what- ever question there may be as to the correctness of his conclusion in regard to the common law precedents on the general question of fraudulent impersonation. As the Louisiana and Virginia cases above cited put their decisions on the facts attending the giving the checks to a stranger, the question of negligence in such cases would seem to be considered by the courts largely a question of fact. Such being evidently the rule, one would say it was hardly \yithin the province of a short code to provide in detail as to what particu- lar acts of negligence should preclude the drawer from setting up " forgery " or " want of authority " as to a signature, or any negli- gence by which the fraud was facilitated by his own action. As both the Judge and the Dean agree that the Code does not change the true common law, whatever that may be, the Code on this matter would seem to be about right after all, and to specialize as much as the nature of the case permits. Jeffrey v. Rosenfeld. Section 124 changes both the English and the American law in both clauses, since the second clause affects the first fundamentally. Mr. Tiffany, in his new edition of Norton,*^ says of section 124 that under the second clause " alteration has ceased to be a defense." Perhaps he should have said "practically ceased to be a defense." Why then is the oXA rule of the common law in England, as to the note itself — not the debt — regarding alterations by a stranger as now modified by clause 2 not the best rule between the parties themselves? It makes the law of the two countries uniform on this important point, and like the Statute of Frauds preserves the benefit of written evidence. The Dean gives no reason to the contrary. Such was Mr. Crawford's view as given to the Conference in 1896 and approved by it. That is, he held with the Dean contrary to the dictum intimated by Judge Morton, that the American rule was so far changed by the Code. As the Dean says, to hold otherwise would indeed "be a perversion of simple ■ English words." As this appears to be the first case so far in which any judge has suggested any ambiguity in the Code, and this in an obiter dictum, and Dean Ames says there is no ambiguity, the Code seems to have fared well on that score. It seems to me, therefore, the critic has shown no sufficient reasons why either section 23 or section 124 should be changed. I beg to add in regard to the exceedingly few decisions on the Negotiable Instruments Act two cases well worthy of the attention of anjy student of the subject, Wirt v, Stubblefield 2 and Andrews V. Robertson.' As I read them, both hold to the construction hitherto » Page 248. * 17 Appeal Cases, Dist. of Col. 283. « Wis. 87 N. W. 191. 7 THE NEGOTIABLE INSTRUMENTS LAW. 219 insisted on in the articles previous to this. That method of inter- pretation of itself practically disposes of all the serious questions raised by the critic. Nevertheless, lest the " shadow of a great name " should cause any legislature to delay the adoption of the Negotiable Instruments Law, I venture to add that since the four previous articles have appeared and after a very careful study of them the judiciary committee of the Pennsylvania legislature thought it inadvisable to change a word of the act, and the legislature passed the law without any change whatever after a very thorough discussion of all the points raised by Dean Ames, including the case of Jeffrey v. Rosenfeld. The same conclusion was arrived at by the American Bankers' Association. Judge Chalmers, author of the English act, after going over the whole discussion, while highly extolling the infinite ingenuity of the critic, regarded none of his serious contentions tenable. As to its practical reception wherever adopted, Mr. Tracy, chairman of the Committee on Uniform Laws of the American Bankers' Association, says : " The Negotiable Instruments Law has worked satisfactorily to all classes of business men." Lyman Denison Brewster. 220 THE NEGOTIABLE INSTRUMENTS LAW. THE NEGOTIABLE INSTRUMENTS LAW.^ A Review of the Ames-Brewster Controversy. BY CHARLES L. McKEEHAN. The Negotiable Instruments Law has now been adopted by twenty states * as well as for the District of Columbia, and there is little doubt that in a very few years, at the longest, it will be the law throughout this country. Aside from the importance of the sub- ject with which it deals, the act claims a peculiar interest as being the first important step taken in this country towards codifying any branch of the law. In 1878 Judge Chalmers published his digest of the law relating to bills of exchange, in the preparation of which he read through all the English cases (some twenty-five hundred in number) beginning with the first reported case in 1603. Where there was a dearth of English authority, he states that he had re- course to the American decisions and to the usages among bankers and merchants. Two years after the publication of the digest, the Institute of Bankers and the Associated Chambers of Commerce instructed him to prepare a bill on the subject. This he did, his aim being, to use his own words, " to reproduce, as exactly as possible, the existing law, whether it seemed good, bad, or indifferent in its effects." The bill was introduced into Parliament in 1881, and after a few amendments had been made by the Select Committee of merchants, bankers, and lawyers, to which it was referred by the House of Commons, and by the Select Committee headed by Lord Bramwell, to which it was referred by the House of Lords, it passed both houses without opposition. It is worth noticing that amendments were inserted only when the Committee was unani- mous in their favor, no amendments being pressed on which there was a difference of opinion. Practically, the English bill was an enactment into law of Judge Chalmers' digest. For the most part the propositions of the act were taken word for word from the propositions of the digest, and excepting a few amendments which 1 Reprinted by permission from 41 American Law Register, N. S. 437, 499, 561, with a few changes and additions subsequently made by Mr. McKeehan. " Arizona, Connecticut, Colorado, Florida, Iowa, Maryland, Massachusetts, New Jersey, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Virginia, Washington, and Wisconsin. THE NEGOTIABLE INSTRUMENTS LAW. 221 were inserted to choose between conflicting decisions, or to correct some admittedly serious errors in the law, the whole purpose of the English Bills of Exchange Act was to reproduce, as exactly as possible, the existing law. This act has now been in force in Great Britain for twenty years, and has been adopted by all of her self-governing colonies. English merchants, bankers, and lawyers appear to unite in the opinion that it has been successful even beyond expectation. At the Annual Conference of the Commissioners on Uniform State Laws, held in Detroit in 1895, a resolution was passed re- questing the Committee on Commercial Law to procure, as soon as practicable, a draft of a bill relating to commercial paper based upon the English Bills of Exchange Act and upon such sources of information as the Committee might deem proper to consult. The matter was referred to a sub-committee consisting of Judge Lyman D. Brewster, of Connecticut; Henry C. Willcox, of New York, and Frank Bergen, of New Jersey, who secured Mr. John J. Crawford, of the New York bar, a well-known expert on the law of bills and notes, to draft the proposed bill. The English act had followed the continental codes as to form, i. e. it dealt primarily with bills of exchange, and then applied those provisions, so far as they were applicable, to promissory notes, adding provisions which were peculiar to the latter class of instru- ments. Deeming this form to be unsuited to American conditions — the use of bills of exchange being proportionately less extensive here than in Europe — Mr. Crawford adopted a form of his own, which grouped together the provisions applicable to all kinds of negotiable instruments, and then collected, under separate articles, the provisions specially afifecting the different classes. Mr. Crawford's draft was laid before the sub-committee, each section being annotated with reference to the decisions of the Courts, the comments of text-book writers, and the statute laws of the several states. Tliis draft (slightly amended by the sub- committee) and the draftsman's notes were printed along with the English bill for comparison, and copies were sent to each member of the Conference, to many prominent lawyers and law professors, and to several English judges and lawyers, with an invitation for suggestions and criticisms. The draft was then submitted to the Conference at Saratoga in 1896. The twenty-seven Commission- ers who were in attendance — representing fourteen different states — went over it section by section, and made some amend- 222 THE NEGOTIABLE INSTRUMENTS LAW. merits to it, " most of which," says Mr. Crawford, " were such changes in the existing law as I had not felt at liberty to incorpo- rate into the original draft." ^ The draft as thus amended was adopted by the Conference, and in such form has been submitted to the various state Legislatures. The most important contribution that has been made to the act is the Ames-Brewster controversy. In the Fourteenth Harvard Law Review, Professor James Barr Ames, Dean of the Harvard Law Faculty, for some years lecturer on Bills and Notes in the Harvard Law School, and the author of the leading case book on the subject, published an article criticising some twenty-three sec- tions of the new act, and expressing the opinion that notwithstand- ing the act's many merits, " its adoption by fifteen states must be regarded as a misfortune, and its enactment in additional states, without considerable amendment, should be an impossibility." Professor Ames' criticisms were answered by Judge Lyman D. Brewster, President of the National Conference on Uniform State Laws, and a member of the sub-committee which drafted the act. The discussion consists of two articles in the Harvard Law Review, by Professor Ames,^ and two articles by Judge Brewster, one published in the Yale Law Journal and one in the Harvard Law Review.* In a pamphlet recently published by the Harvard Law Review Publishing Association, containing the text of the act, to- gether with these articles, there are added a supplementary note by Professor Ames criticising two additional sections of the act — a reply thereto by Judge Brewster, and a letter containing comments on some points of the discussion by Mr. Arthur Cohen, Q. C, a member of the committee which framed the English act, who was recommended by Judge Chalmers as one of the three best authori- ties in England on the law of bills and notes. As Judge Brewster remarks, " No keener weapon than that wielded by the accomplished Dean of the Harvard Law School could be turned against the Negotiable Instruments Law." Pro- fessor Ames knows more about the law of bills and notes from the student's standpoint than any one else in this country. What- ever one's conclusions may be as to the soundness of his criticisms, there is little doubt that few, if any, of the vulnerable points in the act have escaped his notice, and that the sections he criticises are 1 Crawford's An. N. I. L. Preface. ' 14 Harvard Law Review 241 ; 14 Harvard Law Review 442. * 10 Vale Law Journal 84; 15 Harvard Law Review 26. THE NEGOTIABLE INSTRUMENTS LAW. 223 those most likely to come up for construction. A familiarity with his criticisms and with Judge Brewster's replies cannot but aid both the bench and bar in giving some sections of the act their proper meaning. This consideration, together with the difficulty of under- standing the discussion in its present form, where the criticism of each section, the answer, replication, and rejoinder are spread out through four separate articles, has prompted me to write a review of the controversy. Two general observations may be made, which should be borne in mind throughout the entire discussion. In the first place, no one can judge the new act fairly who does not realize that the Commis- sioners were attempting to codify the law.* Their aim was not to reform the law of negotiable paper. It was to state accurately and concisely the existing law. Of course, here and there it was neces- sary to choose between two or more conflicting views. Very fre- quently a section changes the law in a small minority of states which had departed from the almost uniform current of authority. Occasionally, though very rarely and only when there seemed to be no room for a difference of opinion, the law was deliberately changed. But the main, and almost the sole purpose of the framers of the Negotiable Instruments Law was to reproduce, as exactly as possible, that which the great weight of authority had declared to be the law. Second, in construing some sections of the act, the language used must be given not a hyper-literal meaning, but a reasonable legal meaning, derived, to some extent, from a knowledge of the cases on which the sections are based. It would be a great achieve- ment for a code to state the law, in every instance, in language capable of meaning only one thing, even to a man entirely without legal training and unacquainted with what the law was before the code. But it will be a long time before such a code is framed. Of course, in the great majority of instances the Negotiable Instru- ments Law does this. But it is not a serious reflection on the act 1 The discussion between Professor Ames and Judge Brewster makes no attempt to take up the broad question as to the propriety and utility of codification. For a most learned and able argument against codification, the reader may be referred to a book by R. F. Clarke, Esq., of the New York bar, entitled " The Science of Law, and Law Making." The arguments in favor of at least a, partial codification of such a branch of the law as that relating to commercial paper are concisely stated by Judge Brewster in a paper read before the American Bar Association in 1898 on " Uniform State Laws," which is reprinted in the report of the Ninth Conference of the Com- missioners for Promoting Uniformity of Legislation in the United States. 224 THE NEGOTIABLE INSTRUMENTS LAW. that in some instances a familiarity with the cases on which the language of the act is based, is — if not necessary — at least very helpful in deciding what the language means. Indeed, Judge Brewster said to the American Bar Association, in discussing the new act in 1898, " Care has been taken to preserve, as far as pos- sible, the use of words which have had repeated construction by the courts, and have become recognized terms in the law merchant." With these observations we may proceed to consider the dis- cussion of particiilar sections. Section 3, par. 2 : — " An unqualified order or promise to pay is unconditional within the meaning of this act though coupled with a state- ment of the transaction which gives rise to the instrument." " What," asks Professor Ames, " do these words mean ? Do they cover the case of a note coupled with the words ' given as collateral security for A.'s debt to the payee ' ? Such an inter- pretation, although a literal one, would be deplorable and would nullify several decisions." ^ It would, indeed, be deplorable, for such notes are clearly conditional and courts have uniformly re- fused to regard them as negotiable. Judge Brewster's answer is that this clause does not apply to the case put since " a note ' given as collateral security ' contains notice, upon its face, that the note is not an unconditional promise to pay, but conditional upon the non-payment of the principal debt." And he refers to Section i, par. 2, which requires a negotiable in- strument to contain " an unconditional promise or order to pay a sum certain in money." There is no danger that any court will ever make the innovation that would result from the " deplorable interpretation," indicated by Professor Ames. Nor could such ? conclusion easily be reached from the language of the act. With- out turning back to the first section, the very clause under discus- sion speaks only of " an unqualified order or promise." If " the statement of the transaction " contains a qualification of the order or promise, if it shows that the instrument is not payable at all events, but only on a contingency, the instrument can scarcely be said to contain " an unqualified order or promise." A fair and 1 Robbins v. May, li A. & E. 213; Haskell v. Lambert, 16 Gray 592; Costelo v, Crowell, 127 Mass. 293; 134 Mass. 280, 285; American Bank v. Sprague, 14 R. I. 410, Hall V. Merrick, 40 Up. Can. Q. B. 566. THE NEGOTIABLE INSTRUMENTS LAW. 225 reasonable reading of the section would scarcely require even the most literal interpreter to hold that this clause covers a note given as collateral. To do so, he would have to construe it as meaning, " a note is unconditional provided you start it with an unqualified promise, no matter how many qualifications and conditions are later embodied in the statement of the transaction which gave rise to the instrument." Such an interpretation would be far-fetched, not literal. But Professor Ames makes another criticism of this clause of Section 3, which is less easily disposed of. The real purpose of this clause, as we learn from Mr. Crawford,* who drafted the act, and from Judge Brewster, is to cover the case of a note which con- tains a statement that it is given for a chattel, which is to be the property of the owner of the note until the note is paid. Such notes are usually regarded as negotiable.^ Several states, however, have taken the opposite view, holding that such notes are non-nego- tiable,* and it was to bring the latter states into accord with the more general view and unify the law on this point, that this clause was inserted. But will it accomplish this object ? That is Profes- sor Ames' further criticism. The only case touching the point is of little or no assistance,* but it may seriously be doubted whether this clause will overrule the decisions at which it was aimed. It does not cover a note " given as collateral security " because such a note " contains notice, upon its face, that the note is not an uncon- ditional promise to pay." Suppose a judge decides that a chattel note (one containing a statement that it is given for a chattel which 1 Crawford. An. N. I. L. 12. 2 Chicago Co. v. Merch. Bank, 136 U. S. 268 ; Howard v. Simpkins, 69 Ga. 773 ; Choate v. Stevens, 116 Mich. 28 ; Heard ». Dubuque Bank, 8 Neb. 10 ; Mott v. Havana Bank, 22 Hun 354; National Bank of Royersford ». Davis. 6 Montg. Co. (Pa.) 99; Kimball v. Mellon, So Wis. 133. ' Sloan V. McCarty, 134 Mass. 245 ; South Bend Co. v. Paddock, 37 Kan. 510 ; Third Nat. Bank v. Armstrong, 25 Minn. 530; Deering v. Thorn, 29 Minn. 120. * Third Bank v. Spring, 28 N. Y. Misc. Rep. 9. White, J., held that a note, con- taining a statement that it is given for a piano, the title of which shall remain in the payee until the note is paid, is not a negotiable instrument. After so holding, he simply remarks that Section 3, par. 2, of the Negotiable Instruments Law " has no ap- plication here.'' This decision was reversed in 50 N. Y. App. Div. 66, the court mak- ing no allusion to the statute, but merely holding with the current of authority that such a note is negotiable. Judge Brewster points out that the note in this case was made in 1896 and negotiated in May, 1897, but that the New York Negotiable Instru- ments Law did not become operative until October, 1897, and, therefore, as Judge White said, had no application to the case. Whether Judge White meant that the ■ act did not apply because it was not yet operative, or because the note under discussion was not covered by the section referred to, does not appear. 226 THE NEGOTIABLE INSTRUMENTS LAW, is to remain the property of the payee until the note is paid) is not an unconditional promise to pay. Would he feel that this clause covers such an instrument ? And at least some of the courts which hold chattel notes non-negotiable do so on precisely this ground. Sloan V. McCarty.^ By the instrurrient sued upon in that case, the defendant promised to pay Sloan, one month from date, $85, for a roan horse known as .A. M., " said horse to be and remain the entire and absolute property of the said Sloan until paid for in full by me." The court said this note contained a conditional promise and so was non-negotiable. " If the money were not paid by the defendant at the time specified, the plaintiff could, if he chose, rescind the conditional sale and the defendant would then have no right to the horse, and would no longer be liable to pay the note. ... If the horse should die within the month without fault on the part of the defendant, the plaintiiif would be disabled from transferring the title and could not maintain an action on the contract." ^ Now, if Section 3, par. 2, does not cover a note " given as collateral security " for the very reason that such a note shows on its face that the promise contained in it is conditional, why will it cover a " chattel note " in jurisdictions which say that a chattel note shows on its face that the promise contained in it is conditional ? That is Professor Ames' second criticism, to which no answer seems to be furnished in Judge Brewster's replies. Professor Ames' conclusion is that Section 3, par. 2, is " either useless or provocative of litigation." If, by " useless " is meant that it will fail to overrule the cases which hold chattel notes non-negotiable on the ground that they are conditional promises, this subsection may prove to be useless. Aside from this, however, it may not have been unwise to insert it in the act. The clause is copied almost word for word from Sec- tion 3, par. 3, of the English act,^ which was inserted to codify the 1 134 Mass. 245 (1883). 2 The Minnesota courts give the same reason for their decision as those of Mass, Third Nat. Bank v. Armstrong, 25 Minn. 530. But the Kansas courts (also instanced by Professor Ames) hold chattel notes to be non-negotiable, not so much on the ground that they are conditional, as that they con- tain stipulations other than the promise to pay money. Killan v. Schoeps, 26 Kan. 310 Pg. 312 ; South Bend Co. v. Paddock, 37 Kan. 510. Should Kansas adopt the act, her courts might, therefore, hold that the section under discussion changed the above cases. ' English Bills of Exchange Act (August 18, 1882), 45 and 46 Vict. C. 61. Sec. 3-3; ' An unqualified order to pay coupled with a statement of the transaction which gives rise to the bill, is unconditional." And by Sec. 89 the above clause applies to promis- tory notes. THE NEGOTIABLE INSTRUMENTS LAW, 227 decisions of cases ^ in which the instruments sued on contained . language which, while absolutely unnecessary to a negotiable in- strument, nevertheless did not qualify the promise in any way, nor contain any independent promise, but amounted to nothing more than a brief description of how the instrument came to be drawn — a statement of the consideration for which it was given — a memorandum that collateral security for the note had been given : — an indication of the nature of the transaction. The courts held that such language did not affect the negotiable character of the instrument. Referring to this subsection, Mr. Arthur Cohen says : " The words in the English act correctly state what the English law is." The courts of this country do not differ on this point from those of England. They have held almost unanimously that lan- guage such as that used in the English cases referred to does not destroy the negotiable character of a bill or note.^ Section 3, par. 2, of the new act will doubtless be regarded here as it has been for twenty years in England, as a codification of this rule of law, and as such may serve a useful purpose. Whether the clause will be provocative of litigation remains to be seen. It has not given rise to a single case in England, where it has been in force for twenty years, nor has any case arisen under it as yet in this country. It will quite likely come up for construc- tion in the very few jurisdictions which have hitherto held chattel notes non-negotiable, but it is extremely unlikely that any lawyer will ever attempt to have it applied to notes " given as collateral security." Therefore, about the worst that can be said against it is that it may not accomplish quite all that its framers intended. Section 9, par. 3 : — " The instrument is payable to bearer when it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable." Professor Ames levels two criticisms at this subsection. In the first place, he says that such a rule " ignores the tenor of the instru- ment," meaning, for one* thing, that to say an instrument payable to " John White or order " is payable " to bearer " is to ignore what the instrument itself says — even though no such person' 1 Houssoullier z». Hartsinck, 7 Term Rep. 733 (1798) ; GriiEn v. Weatherby, L. R. 3Q.B.7S2(i868). » 4 Am. and Eng. Encyc. of Law, 2d Ed. 89 and cases there cited, i Ames' Cases on " Bills and Notes." Note on p. 56. Devenny v. League Island Loan and Bldg. Assn., 9 W. N. C. (Pa.) 127 ; Citizens' Nat. Bank of Tovparida v. Piolett, 126 Pa. 194. 228 THE NEGOTIABLE INSTRUMENTS LAW, as John White exists. The correct way to interpret such an in- strument, says the critic, is to give it the effect of an instrument payable to the order of and indorsed by the drawer or maker respectively. Thus a bill drawn by Andrew Smith payable " to the order of John White " (a fictitious payee) and indorsed in the name of John White ought to be treated as a bill drawn by Andrew Smith payable to his own order, and by him indorsed — this result being reached by regarding the bill as payable to Andrew Smith by the name of John White.^ Professor Ames objects to treating any such instrument as payable " to bearer." Undoubtedly there are strong arguments in favor of such a view, and the whole question of fictitious payees might have been simpler and more logical had they originally prevailed. As a matter of fact, how- ever, the act on this point merely codifies that which has been the settled law of England and America for more than a century. The argtiments in support of Professor Ames' view were fully pre- sented both to the Court of King's Bench and to the House of Lords in the leading case of Minet v. Gibson,^ decided in 1791. Both courts repudiated them and held that the holder in due course of a bill payable to the order of a fictitious payee could, as against the drawee who accepted knowing that no such person existed, declare on the bill as payable to bearer and recover.* Lord Chief Baron Eyre delivered a powerful dissenting opinion. " His reasoning," Professor Ames has said, " has never been refuted." * It is equally true that it has never been followed. Minet v. Gibson has been practically unanimously followed both by English and American courts."* It was followed, moreover, in the Eiiglish Bills of Exchange Act,® and it would have been strange indeed if 1 Professor Ames has long insisted that this is the correct way of interpreting such instruments. See Ames' Cases on " Bills and Notes," Vol. 2, Summary, p. 864, pub- lished in I 88 I. » I H. Blackstone, 569. * Minet v. Gibson is universally regarded as the leading case on this point, though there had been several earlier decisions to the same effect. Tatlock v. Harris, 3 T. R. 174 ; Vere v. Lewis, 3 T. R. 182 ; Collis v. Emett, Term Rep. C. P. 313. * Ames' Cases on " Bills and Notes," Vol. i, p. 421. » Gibson v. Hunter, 2 H. Bl. 187, 288 ; 6 Bro. P. C. 235, s. c. ; The Royal Bank of Scotland, 19 Ves. 310; Farnsworth v. Drake, 11 Ind. loi; Smith v. Mechanics' Bank, 6 La. An. 610, 624 (semble) ; Bartlett v. Tucker, 104 Mass. 336, 344 (semble) ; Rogers V. Ware, 2 Neb. 29 (semble) ; Fosters. Shattuck, 2 N. H. 446 ; Plets v. Johnson, 3 Hill 112; Stevens v. Strang, 2 Sandf. 138 ; Forbes v. Espy, 21 Oh. St. 474, 483 (semble). Hunter v. Blodget, 2 Yeates, 480. > It may aid comparison to print the corresponding sections of the two acts THE NEGOTIABLE INSTRUMENTS LAW. 229 the framers of the American act, who were codifying the law, who were framing a code, moreover, which would have to run the gauntlet of nearly fifty legislatures, had attempted anything so inexpedient as the overthrow of such a well established and uni- versally accepted rule.* The second criticism of subsection 9, par. 3, is that such an instrument is, under the act, payable to bearer without being in- dorsed, and that this, also, ignores the tenor of the instrument. " Nor is there any judicial precedent or mercantile custom," says Professor Ames, " in support of the notion that a bill payable to a fictitious payee, but not indorsed in the name of such payee, is payable to bearer. In all the reported cases, instruments payable to a fictitious payee have been indorsed in the name of such payee before negotiation." That is substantially true.^ If such an instrument requires no indorsement, a departure has been made from what has been supposed to be the law — and Professor Ames and Judge Brewster agree that the new act dispenses with the necessity of an indorsement. Indeed, any other reading of it seems impossible, though whether an indorsement is necessary under the English act has never been decided, and seems fairly open.* together. English Bills of Exchange Act, Section 7, par. 3 : " When the payee is a fictitious or non-existing person, the bill may be treated as payable to bearer." The Negotiable Instruments Law, Section 9, par. 3 : " The instrument is payable to bearer when it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable." 1 The rule was originally based on the doctrine of estoppel. Prior to the English act (1882) a recovery was never allowed except against a defendant who became a party to the bill knowing that the payee was fictitious. See Minet v. Gibson, i H. Bl. 569, and Review of Cases by Bowen, L. J., pp. 257-260, in Vagliano Bros. v. Bank of Eng., L. R. 23 Q. B. D. 243 (1889). The English act, however, rendered the defend- ant's knowledge immaterial, providing merely that a bill may be treated as payable to bearer when the payee is fictitious. The American act does not go so far, however, for it contains the proviso " and such fact was known to the person making it so payable." But if the maker or drawer knows the fact, then the bill is for all purposes payable to bearer, and thus a drawee, who accepted in ignorance of the fact, would be liable. 2 In New York, however, it has been held for many years that a bill or note pay- able to the order of a fictitious payee is payable to bearer without being indorsed bj the maker or payee. Plets v. Johnson, 3 Hill, 112 ; Central Bank of Brooklyn v. Lang, I Bosworth, 203 ; Irving, N. B. v. Alley, 79 N. Y. 536. ' It might be argued that the words " may be treated as payable to bearer " used in the English act mean that the bill may be so treated only when regular in all other respects, 2. e., among other things, when properly indorsed. Judge Chalmers, the draftsman of the English act, says of this subsection : " When a bill is payable to the order of a fictitious person, it is obvious that a genuine indorsement can never be obtained, and in accordance with the language of the old cases and text-books, the act 230 THE NEGOTIABLE INSTRUMENTS LAW. Judge Brewster defends the change. He says : " Surely it is more logical to hold that a note which purports to be payable to a person when there is no such person, and the maker knows it, must have been intended to be payable to bearer, than to hold that some- body must assume the name of such fictitious person and make a , false indorsement in order to give title to the note." There is much common sense in that. But the trouble is that title to a note pay- able to order is derived through the indorsement on the back of it. What " must have been intended " by a maker who names a ficti- tious payee it is extremely hard to say. Moreover, both commer- cial practice and legal theory tend more and more to disregard .everything except that which actually appears on the instrument. When A. makes his note payable to " John White or order " all our notions about negotiable paper require that John White be written on the back of this note, even though no such person as John White exists. It seems necessary for form's sake. To dispense with the necessity for it gives a decided jolt to our ideas. Aside from this, however, it is difficult to see how any harm can result from the change. In the first place (and though this does not touch the theory of the criticism, it does touch its practical worth) notes pay- able to fictitious payees and unindorsed, will be about as plentiful as counterfeit dollars labelled " counterfeit." Either the maker or the person to whom he delivers the instrument will indorse it in the name of the fictitious payee. Why? Because otherwise no one would discount it. It would be patently irregular on its face. An indorsement is necessary to give such' a note any commercial value. Professor Ames supposes one case which, in his opinion, works an injustice on the maker. He says, " By the combined effect of this section and section i6^ if a note payable to a ficti- puts it on the footing of a bill payable to bearer. But inasmuch as a bill payable to one person but in the hands of another is patently irregular, it is clear that the bill should be indorsed, and perhaps a bona fide holder would be justified in indorsing it in the payee's name. It might have been better it the act had provided that a bill pay- able to the order of a fictitious person might be treated as payable to the order of anyone who should indorse it, or, in other words, as indorsable by the bearer." Chal- mers' Bills of Exchange, 5th Edition, page 22. From this, it would appear that the failure of the English act to require an indorsement was a mere oversight — though the use of the words "may be treated " furnishes a method of correcting the omission. Judge Brewster's readiness to defend the change in the American act seems to indicate that the change was intentional. Except for this, one would suppose that it had been an oversight. 1 Section 16 provides, inter alia, " Where the instrument is in the hands of a holder jn due course, a valid delivery thereof by all parties prior to him, so as to make them liable to him, is conclusively presumed." THE ISTEGOTIABLE INSTRUMENTS LAW. 231 tious payee were stolen from the maker and indorsed by the thief in the name of the payee, the maker would be liable upon the note to any holder in due course. For, the note being already payable to bearer, the forged indorsement in the payee's name would be of ■no legal significance. Such a result would be a cruel injustice to the maker." Clearly the maker would be liable in such a case, but is this a " cruel injustice " ? If the note were stolen when made expressly payable to bearer or when made payable to a fictitious payee, and then indorsed, there would be no injustice in holding the maker. How much more sympathy is he entitled to when (though not indorsing the note) he deliberately chooses to name a payee, well knowing that there is no such person in existence. If it is merely a question of the actual justice meted out, it takes a nice distinc- tion and a very tender heart to produce much sympathy for the maker in the case supposed. Both parties are innocent of fraud, but it is the maker's conduct that made the fraud possible and he should bear the loss. Even in the rare case where no indorsement whatever appears on the back of the note, no actual injustice is done in holding the maker liable. The real worth of the criticism lies in its technical point, namely, that this subsection permits the transfer, without indorsement, of an instrument which, for all that appears on the face of it, requires an indorsement to make a valid transfer. It remains to notice one or two other points before passing this subsection. In his first paper, Judge Brewster seemed to suggest that notes payable to the order of unincorporated associations or to the estates of deceased persons are payable to bearer by force of Section 9, par. 3. Professor Ames performs a real service in disposing of such a notion in vigorous fashion, though the discussion on this point was evidently due to a misunderstanding, as in his second paper, Judge Brewster disclaims holding any such view as that attributed to him. The point, however, is worthy of notice, since both Mr. Crawford and Mr. Selover, in their published Annota- tions of the act, seem to have gone astray on this point and to seriously regard notes payable to the estate of a deceased person as payable to bearer.^ Such an interpretation is opposed alike to reason and authority, and should it prevail, much harm might ' " Thus a note made payable to the order of the estate of a deceased person is a promissory note with a fictitious payee, and, where it has been negotiated by the maker, 232 THE NEGOTIABLE INSTKUMENTS LAW. result. Moreover, such was not the law prior to the act, and there is absolutely nothing in this subsection which either suggests or warrants such a change. The meaning of the words " fictitious or non-existing person," used in the corresponding section of the English act, came before the House of Lords in the case of Vagliano Bros. v. The Bank of England.^ The plaintiffs in that case were in the habit of accept- ing bills drawn on them by " V " (their foreign correspondent) in favor of Petridi & Co., a foreign firm. One Glyka, the plaintiffs' clerk, fraudulently drew a bill in V.'s name on the plaintiffs, pay- able to Petridi & Company. After the plaintiffs had accepted it, Glyka forged Petridi & Company's name and had the bill cashed by the Bank of England. Of course, Glyka never intended that the bill should be delivered to Petridi & Company or that they should receive any money on it, the whole transaction being a fraud on his part. The question came up whether this was a bill payable to bearer within this subsection of the English act. The House of Lords, reversing the lower court, held that Petridi & Company was a fictitious person within the act and that the bill was therefore payable to bearer, but the opinions delivered in both courts disclose a wide difference of opinion as to the true meaning of the words " fictitious or non-existing person." * The possibility of litigation is deemed, as against him, to be a note payable to bearer. Lewisohn v. Kent, 87 Hun 257." Crawford's Neg. Inst. Law, p. 18. " When the name of the payee does not purport to be the name of any person, as in the case of instruments payable to an estate, . . . the paper is payable to bearer. Scott V. Parker, 5 N. Y. Supp. 753 ; Lewisohn v. Kent, 33 N. Y. Supp. 826." Selover's Neg. Inst. Law, p. 73. True, there is a dictum to this effect in Lewisohn v. Kent, but, as Professor Ames justly says : " It is a perversion of language to call the payee in such a note a fictitious or non-existing person." In Shaw ij. Smith, 150 Mass. 166, and Peltier v. Babillon, 45 Mich. 384, such a note was properly interpreted as a note payable " to the legal repre- sentatives of A." As to bills payable to an unincorporated company. Judge Chalmers says : " The signature of a fictitious person must be- distinguished from the signature of a real person using a fictitious name, — for instance, John Smith may trade as ' The Birmingham Hardware Company' and sign accordingly. Schultz w. Astley (1836), 2 Bing. N. C. 544." Chalmers' Bills of Exchange, 5th Edition, p. 23. 1 L. R. 23 Q. B. D. 243 {1889) and L. R. 16 Appeal Cases 107 (1891). 2 The majority in the Lower Court, speaking through Bowen, L. J., held that Petridi & Company were not fictitious payees, inasmuch as they were not known to be such by the party sought to be charged, i. e., the acceptor. " By the words 'The bill may be treated as payable to bearer ' must surely be understood ' treated as against those who are to be made liable for the bill.' The word 'fictitious' must in each case be interpreted with due regard to the person against whom the bill is sought to be enforced. ... If the obligations of the acceptor are in question, and the acceptor is THE NEGOTIABLE INSTRUMENTS LAW. 233 of the same sort under our act might have been avoided by sub- stituting " when the drawer or maker knowingly makes the instru- ment payable to the order of a fictitious or non-existing payee, or a living person not intended to have any interest in it," ^ though probably the words of the act will prove to be sufficiently precise. the person against whom the bill is to be so treated, ' fictitious ' must mean fictitious as regards the acceptor and to his Icnowledge." Such an interpretation could scarcely be made under our act, which, instead of saying " may be treated as payable to bearer," gays "is payable to bearer," and clearly points out the only person whose knowledge is material, i. e., the person making it so payable. Lord Bramwell, in a trenchant dissent in the House of Lords, held that Petridi & Company was not a " fictitious or non-existing person " within the meaning of the act, since it was a real, existing firm, " as identifiable as N. W. Rothschild & Company, — Glyn, Mills, Currie & Company, — as the Bank of England itself." On the other hand, Esher, M. R. (dissenting in the Lower Court), thought that " fictitious " must embrace an existing person ; for " if ' fictitious ' in this subsection does not apply to the name of an existing person, who is not really intended to be the payee, I can see no distinc- tion between 'fictitious' and 'non-existing' in the subsection." Lord Bramwell characterized this argument as " very feeble. ... A prudent draughtsman does not accurately examine whether a word will be superfluous. He makes sure by using it." Judge Chalmers says that the words " or non-existing " seem superfluous, and that they probably were intended to cover the case of Ashpitel v. Bryan (1863), 32 L.J. Q. B. 91, in which, by arrangement between the indorsee and acceptor, a bill was drawn and indorsed in the name of a deceased person. Chalmers' Bills of Exchange, sth Edi. tion, pp. 21 and 22. Halsbury, L. C, held that if the person named in the bill is not the real/oy^, then, although a real person, he is " fictitious " within the statute. But Lord Selbourne thought the statute did not extend to the case of a real person falsely represented as payee, because " the Legislature has here described ' a person ' as ' fictitious or non- existing ' instead of saying ' when the payee is fictitious or non-existing.' " The majority of the House of Lords held (though for very different reasons) that Petridi & Company were fictitious payees within the meaning of this subsection, and that therefore the bill was payable to bearer. See also Clutton & Co. v. Attenborough, L. R. 2 Q. B., pp. 306 and 707. The plaintiffs' clerk, by fraudulently representing that work had been done for them by one George Brett, induced them to draw checks payable to the order of George Brett in payment of the pretended work. In point of fact, no such person as George Brett existed. The clerk then forged Brett's indorsement and cashed the checks. Held, that Brett was none the less a fictitious or non-existing person within the act, because at the time of drawing the checks the plaintiffs supposed him to be a real person. Therefore these checks were to be treated as payable to bearer. The decision in this case would be different under the American act, which insists that the fictitious charac- ter of the payee must be known to the person making the instrument so payable. 1 The words in italics are practically Professor Ames' suggestion, except that he uses " person " instead of " payee." It is submitted that the latter word would be bet- ter. " In truth, if strictly construed, the words ' fictitious person ' are a contradiction. One may pretend there is a person when there is not. One may assume a character which does not belong to one. But to satisfy the word ' fictitious,' as applicable to a person, is assuming in one part of the proposition what is denied in the other." Per Halsbury, L. C, in Vagliano Bros. v. The Bank o£ England. In addition to this 334 THE NEGOTIABLE INSTKUMENT8 LAW, Finally, it may be noted tha;t the words used, in the English act " may be treated as payable to bearer " are less fortunate than the, wording of our act, which says, " is payable to bearer when," etc. Under our act, it is payable to bearer for all purposes just as com- pletely as if it had indeed been expressly so drawn. In England, however, the question may arise, "Who may so treat it?" In Vagliano Bros. v. The Bank of England, Lord Bramwell insisted that this subsection was inserted solely for the benefit of the holder, but the majority thought that the bill might be treated as payable to bearer by any person whose rights or liabilities de- pended upon whether it was a bill payable to order or to bearer. Section 9, par. 1-5 : " The instrument is payable to bearer ( i ) when it is ex- pressed to be so payable; or (5) when the only or last indorsement is an indorsement in blank." Section 40, which is involved in the discussion of Section 9, par. 1-5, reads : " When an instrument, payable to bearer, is indorsed spe- cially, it may nevertheless be further negotiated by delivery ; but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement." One or two preliminary observations may aid to a proper understanding of the criticisms made of these sections. Blank indorsements were unknown to the early law of Bills and Notes, which required that the name of the indorsee should be contained in the indorsement. A practice later arose by which the payee often wrote only his own name on the back of a bill, leaving a blank above his signature for the name of the indorsee. Hence the term " blank indorsement." The bill being transferred in this condition, the transferee or any subsequent holder has an implied authority " to write above the signature an order of payment to himself, or to bearer, or to anyone to whom he may wish in turn to transfer the bill; and the blank indorsement, when so filled up, takes effect by relation from the time of the original de- livery by the indorser." ^ The transferee or any subsequent rather fine-spun reason, the use of the words " fictitious person " presented a real diffi- culty to Lord Selboume. See extract from his opinion, cited in the preceding note on Vagliano Bros. v. Bank of England. 1 Ames' Cases on " Bills and Notes," vol. 2, p. 837. 8 THE NEGOTIABLE INSTBUMENT8 LAW. 235 holder is the indorser's agent for this purpose. For a long time it was necessary to exercise this authority and fill out all the blank indorsements on a bill at or before trial. Gradually this last requirement was dispensed with, and thus a bill payable to the order of A. — with A.'s name written on the back (no indorsee being named) could be recovered on by the holder.^ Such in- struments are said to be payable to bearer, and indeed they are so while the indorsement remains blank, but although the necessity of filling up a blank indorsement has been dispensed with, the right to do so has never been abridged, and the holder of a bill or note has to-day, as he always had, the right to fill up any or all blank indorsements on the instrument and thus make it payable only to order. It is to be observed — and this is important — that these rules in no way violate the original tenor of the instrument. The maker has promised to pay " A. or order," and A., by signing his name with a blank above it and handing it to B., authorizes B. or any subsequent holder to designate the person entitled to receive payment. Until they do so designate him, the holder is the man entitled. Now, suppose B. indorses specially to C. or order, and theri C. transfers the paper to D. by mere delivery. Should D. be allowed to sue the maker as on a note payable to bearer ? No, for ^ince the maker has promised only to pay to A.'s order — and since A. has given B. or any holder authority to designate the one to whom the sum shall be paid — and since B. has designated that it shall be paid " to C. or order " — plainly no one who cannot trace title through C. comes within the terms of the maker's promise. That is the logical view, and it is the view that the merchants and bankers adopted, i. e., a blank indorsement of a note payable to order is controlled by the subsequent special indorsement. But the courts held otherwise. In the case of Smith v. Clarke,^ decided in 1794, a bill originally payable to order, was indorsed in blank by the payee and was subsequently indorsed specially. Lord Kenyon held that the bill was payable to bearer as long as the first ^ This added a new term to the indorser's order, «. e., that until the blank was filled up the instrument should be payable to bearer. 2 Peake, 225. Although in a case which arose some years earlier, Ancher v. Bank of England, 2 Douglas, p. 637 (1781), Lord Mansfield evidently agreed with the under- standing of merchants that a blank indorsement was controlled by a subsequent special indorsement. However, the exact point decided in Smith v. Clarke was not involved in that case. 236 THE NEGOTIABLE INSTRUMENTS LAW. indorsement remained blank, and that the holder might therefore strike out the special indorsement and recover as on a bill payable to bearer. Smith v. Clarke has been generally followed both in England and America.^ This decision was opposed to the view held by the business community, and so, in 1882, the framers of the English act, in order " to bring the law into accordance with the mercantile understanding, by making a special indorsement control a previous indorsement in blank," ^ provided in Section 8, par. 3 : " A bill is payable to bearer which is expressed to be so payable, or on which the only or last indorsement is an in- dorsement in blank." The provisions of Section 9, par. 1-5, of the American act are the same as those of the English act and were inserted for the same reason. It is further to be observed that Smith v. Clarke and all of the cases which follow it are cases of instruments originally payable to order. None of these cases contains a syllable about instruments originally made payable to bearer.^ There is an important distinc- tion between the two kinds of instruments. For reasons which I have referred to above, the custom of merchants, which has now been adopted by both the English and American acts, says that in the case of an instrument originally payable to order, a blank in- dorsement is controlled by a subsequent special indorsement, because in such a case the maker's promise embraces only those who make title through the special indorsement. But a note originally payable to bearer is another matter. It is a violation of the plain tenor of such a note to treat it as other than payable to bearer. That is the maker's absolute promise — to pay the bearer. His promise cannot be qualified or changed in any way by a sub- sequent holder. The only effect of a special indorsement on such a note is that the indorser can be held only by those who make title through his indorsement. 1 Walker v. MacDonald, 2 Wels Hurl & Gordon, 526 (1848) ; Houie v. Bailey, 16 La. 213 ( 1840) ; National Bank 11. Haskins, loi Mass. 370 ( 1869) ; Houry v. Eppinger, 34 Mich. 31 (1876); Watervliet Bankz/. White, i Denio 608 (1845); Pentz ji. Winterbottom, 5 Denio 51 (1847); French v. Barney, i Iredell 219 {1840) ; Mitchell v. Fuller, 15 Pa. 268 (1850) ; Rand v. Dovey, 83 Pa. 280 (1877). Contra : Myers v. Friend, i Randolph 12 (1821). 2 Chalmers' Bills of Exchange, 5th Edition, p. 24. ' But see Johnson v. Mitchell, 50 Tex. 212. — Ed. * Story, Bills of Exchange, Section 207 ; Wood's Byles on Bills and Notes, 151. THE NEGOTIABLE INSTRUMENTS LAW. 237 This distinction between instruments originally payable to bearer and instruments originally payable to order and then indorsed in blank is preserved both in the English and American acts. lUnder both acts, a note originally payable to bearer and specially indorsed continues payable to bearer, while an instrument origi- nally payable to order is payable to bearer only when the last in- dorsement is in blank. Professor Ames says that this distinction is " illogical and undesirable," though he gives us no reasons. Judge Brewster's reply is equally brief : " The reason why such a rule is ' illogical and undesirable ' is not clear." It is submitted that, for the reasons noted above, this distinction is decidedly " logical," and inasmuch as it appears to obtain generally through- out the business community, its continued observance by the Code would seem to be " desirable." Professor Ames further criticises this subsection, as follows: " If an instrument indorsed in blank and subsequently indorsed specially, so that it is no longer payable to bearer, is transferred by the special indorsee by delivery merely, the transferee cannot sue parties prior to the special indorser in his own name, but only in the name of his assignor. This puts the assignee to unnecessary inconvenience. As owner of the instrument, although not, accord- ing to this subsection, holder, he ought to have the right to strike out the special indorsement, thus making the instrument once more payable to bearer, and as bearer to sue upon it in his own name." /. e., A. makes a note to B. or order. B. indorses in blank. C. indorses it " to D. or order" and D. delivers it (with- out indorsement) to E. Professor Ames thinks that E. should have the right to strike out C.'s indorsement and sue A. or B. as on a note payable to bearer. Why should he have this right? It has long been the law (and still is under Section 48) ^ that the holder may strike out any indorsements which are not necessary to his title. The law has never permitted him to strike out indorsements which are neces- sary to his title.^ Now, so long as Lord Kenyon's doctrine* prevailed, the holder had the right to strike out all indorsements subsequent to the first blank indorsement because the instrument ^ Sec. 48 : " The holder may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers, subsequent to him are thereby relieved from liability on the instrument." ^ Story, Promissory Notes, Section 208. « Smith V. Clarke, supra. 238 THE NEGOTIABLE INSTRUMENTS LAW. was by that first blank indorsement payable to bearer and a subse- quent special indorsement did not change its tenor and was there-^ fore riot" necessary to his title. But this subsection was inserted for the express purpose of doing away with Lord Kenyon's doc- trine. Everybody agrees that a blank indorsement of an in- strument originally payable to order ought to be affected by a subsequent special indorsement. What does this change mean, then? Why it means (taking the case Professor Ames supposes for us) that by virtue of the special indorsement by C. the note has again become payable only to order, and therefore C.'s in- dorsement cannot be stricken out by a subsequent holder because it is necessary to his title. Suppose D. had in his turn indorsed specially to E. The latter (though now a holder within the mean- ing of the ^ct) could not strike out the indorsements of C. and D. Why ? Because the instrument being now again payable to order only, the indorsements of C. and D. are necessary to his title, and so Section 48 gives him no right to strike them out. Professor Ames says, " As owner of the instrument, he ought to have the right." But ownership of a bill or note gives the holder no right to alter it — to change the tenor of any of the promises which it evidences. Judge Brewster answers this criticism, however, in another way. He first agrees with Professor Ames that E. (in the case supposed) ought to be allowed to strike out C.'s special indorse- ment, and then he tries to give him this right.* He first points to Section 48, which gives the right to strike out indorsements not necessary to title. But Professor Ames reminds him that Section 48 confers this right only on holders and that E. is not a holder, for " holder " is defined in Section 191 to mean " The payee or indorsee of a bill or note who is in possession of it, or the bearer thereof," and " bearer " is defined by the same section to mean " The person in possession of a bill or note which is payable to bearer." Both ignore the fact that in the case supposed C.'s in- dorsement is necessary to E.'s titfe. ' Mr. Farrell answers Professor Ames as follows : " In answer to this, it is neces- sary only to say that in most jurisdictions he may bring suit in his own name, being the real party in interest." (The Negotiable Instruments Law, by Jno. Lawrence Farrell. Brief of Phi Delta Phi, Vol. Ill, No. 2, First Quarter, igoi.) But the statutes which permit an assignee to sue in his own name have effected merely a procedural change. He is still an assignee merely and can be met by any defence arising out of the instrument which could be pleaded against the assignor. The question is not, in whose name shall £. bring suit (a minor point), but it is, what right can E. assert. THE NEGOTIABLE INSTRUMENTS LAW. 239 In order to give E. the right to sue the maker, Judge Brewster next refers to Section 40, which provides inter alia that " when an instrument payable to bearer is endorsed specially, it may never- theless be further negotiated by delivery." " This section," says Judge Brewster, " which authorizes a transfer by delivery seems to give the transferee the right to sue in his own name, otherwise the note would not be negotiated within the meaning of the act." But if Section 40 applies to a note originally payable to order — then indorsed in blank and made payable to bearer — and then indorsed specially — if such an instrument may still be negotiated by delivery, then the rule of Smith V. Clarke is still in full force, and Section 9, par. 5, which was inserted to overthrow Smith v. Clarke, is a nullity. That carries us to the next criticism. Professor Ames insists that Section 40 completely nullifies Sec- tion 9, par. 5, and that for this reason only may E. sue the maker in the case supposed. His position is that Section 9, par. 5, was inserted to change the old rule that an instrument " payable to bearer (or indorsed in blank) " ^ although afterwards specially indorsed, was still negotiable by delivery — that " then, in ap- parent forgetfulness of the effect of Section 9, par. 5," Section 40 was inserted providing that an instrument payable to bearer and indorsed specially is still negotiable by delivery, the special in- dorsee being liable only to such as make title through his indorse- ment, and that this section (40) thus changes the law back to its former state. Judge Brewster's answer is : " Section 40 is claimed to be repugnant to Section 9, par. 5, but this is not so. Section 9, par. 5, declares a note to be payable to bearer when its last indorsement is in blank ; 40 relates to a note when the last indorsement is special, and provides that it may then be transferred by delivery!^ in order to cover cases of good faith where title is frequently passed in that way, by persons ignorant of mercantile usage." It is submitted that that is no answer, and for this reason. If a bill m^y be transferred by delivery, it is payable to bearer. Sec- , tion 40, on Judge Brewster's reading, permits a bill whose last ^ These are Professor Ames' words ; but if by " Payable to bearer " he means originally payable to bearer, it is submitted that neither Smith v. Clarke nor any of the cases which follow it say anything about such instruments. They are all cases o£ instruments originally payable to order. ^ The italics are the reviewer's. 240 THE NEGOTIABLE INSTRUMENTS LAW. indorsement is special to be payable to bearer, yet Section 9, par. 1-5, was inserted to permit only bills originally payable to bearer or whose last indorsement is in blank to be payable to bearer.* I submit that in one way and one way only can these two sec- tions be harmonized. If Section 40 be interpreted as applying only to instruments originally payable to bearer, there can be no difficulty as to either section.^ True, it reads merely " When an instrument payable to bearer is indorsed specially," etc., and there is no denying that if it meant only an instrument originally pay- able to bearer it should have said so. At the same time, the words used are commonly understood to describe an instrument originally payable to bearer, and there is the additional reason that unless these words are so interpreted here, the section is diametrically opposed to Section 9, par. 5, a conclusion plainly to be avoided if possible. Again, Section 9, par. 5, can be construed in only one way, while Section 40 may be construed either as being opposed to or as being in harmony with it. Moreover, such an interpretation would be good law. At the opening of the discussion of these sections, some reasons were submitted why the distinction be- tween instruments originally payable to bearer and those origi- nally payable to order and indorsed in blank, was both logical and desirable. However this may be, such a distinction is certainly 1 Judge Brewster cites the following passage from the new Norton Horn Book by Mr. Tiffany, p. 1 16, to prove that Section 40 and Section 9, par. 5, are in harmony : " An instrument which is originally payable to bearer, or which has been indorsed in blank, though afterwards specially indorsed, is still payable to bearer ; except as to the special indorser, who, on such an indorsement, after such an indorsement, is only liable on his indorsement to such parties as make title through it." It is submitted that the above tends to prove just the reverse, because if by Section 40 an instrument originally payable to order, then indorsed in blank, and then specially indorsed, is still payable to bearer. Section 9, par. 5 (which intended to make only in- struments whose last indorsement is in blank payable to bearer) is nullified. Mr. Crawford, the draughtsman of the act, actually regards Section 40 as embodying the decision of Smith v. Clarke (Crawford's Annotated Negotiable Instruments Law, p. 41). Yet admittedly Section 9, par. 5, was intended to overthrow that decision. 2 (Supplementary Note. In commenting upon the above suggestion. Professor Ames has pointed out that Section 9-1 includes, not only instruments originally payable to bearer, but also instruments originally payable to order and indorsed by the payee expressly " Pay to bearer." :6 Harvard Law Review, 257. This seems clearly right, and it would seem to show that the writer's suggestion should be modified to this ex- tent, that Section 40 should be construed as applying only to instruments expressly payable to bearer, thus including instruments originally so drawn, and also instruments originally drawn to order and then expressly endorsed by the holder " Pay to bearer." With this modification, the writer is still of opinion that the suggested construction of Section 40 would satisfactorily harmonize that section with Section 9-5.) THE NEGOTIABLE INSTRUMENTS LAW. 241 made in Section 9, par. 5, and it has been made without complaint for twenty years in the Eng^lish act. The suggested interpretation of Section 40 preserves this and the two sections would be har- monious. By Section 9, par. i, an instrument originally payable to bearer continues to be payable to bearer even though specially indorsed. But if it is specially indorsed, then by Section 40 " the person indorsing specially is liable as indorser only to such hold- ers as make title through his indorsement," and this has always been the law.^ By Section 9, par. 5, on the other hand, a bill originally payable to order is payable to bearer only when the only or last indorsement is in blank. Every one of these propositions is good law and accords with the understanding of merchants. The remaining criticism of this subsection is unimportant. " If it is to be taken as it stands," says Professor Ames, " a note payable by A. to the order of B., and bearing the anomalous blank indorsement of C, would be payable to bearer. This, of course, would be an absurdity, but it is certainly true that the only in- dorsement is an indorsement in blank." Profesor Ames does not suggest that any merchant, any lawyer, any court would ever give the section such a construction. Nor does it require any stretch of the English language to arrive at its proper meaning. An anomalous indorser is not strictly an in- dorser at all. He is called one for convenience' sake, and a liabil- ity closely resembling that of an indorser is fastened upon him. But a section which uses the word " indorsement " with reference to the transfer of an instrument, could scarcely be regarded as having any reference whatever to an anomalous indorser. The words used in Section 9, par. 5, of the American act have been found entirely satisfactory in the English act throughout twenty years' experience, and there can be no reasonable doubt as to their meaning with reference to an anomalous blank indorsement. Section 20: " 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 addi- tion of words describing him as an agent, or as filling a representative character, without disclosing the principal, does not exempt him from personal liability." 1 Story, Bills of Exchange, Section 207 ; Wood's Byles on Bills and Notes, p. 151. 242 THE NEGOTIABLE INSTRUMENTS LAWi. Professor Ames criticises this section as follows : " Section 20 provides that a person who purports to sigti an instrument in behalf of a named principal is not liable on the instrument, if he was duly authorized by the principal. By neces- sary implication he is liable on the instrument if not duly author- ized.* This is a departure from the English act and from the almost uniform current of judicial decisions. This new rule involves a flat contradiction of the instrument, and the fiction works not justice, but injustice." The section is copied from Article 95 of the German Exchange Law, and undoubtedly is a departure from the English act, under which the pretended agent is liable, not on the instrument, but for the damage resulting from the breach of his implied warranty of authority to sign for the principal. Mr. Crawford's original draft embodied the English rule,^ but the Commissioners changed it and adopted the German rule deliberately and after mature con- sideration. It is scarcely true that in doing so they departed from " the almost uniform current of judicial decisions." There is a strong conflict of authority on the point, some states holding the pretended agent liable on the instrument itself, while a somewhat larger number hold him liable only for the damage resulting from the breach of his implied warranty of authority.^ The latter decisions seem correct on theory. As was said in Hall v. Cran- dall, if the instrument contains language which does not in legal effect charge the pretended agent, " or, in other words, contains language which, in legal effect, binds the principal only, the agent cannot be sued on the instrument itself, for the obvious reason that the contract is not his." He has falsely represented that he had authority to bind another, but he has not intended or attempted to bind himself, and courts which hold him liable on the contract 1 "Mr. Crawford so interprets the section. Crawford's An. N. I. L. 26." 2 Crawford, An. N. I. L. 26. ' In the following states the pretended agent appears to be held liable on the contract itself : Ormsby v. Kendall, 2 Ark. 338 (but see Dale v. Donaldson, 48 Ark. igo) ; Richie v. Bass, 15 La. Ann. 668 ; Terwilliger v. Murphy, 104 Ind. 32 ; Keener v. Harrod, 2 Md 63; Byars v. Doores, 20 Mo. 284; Weare v. Gove, 44 N. H. 196; Clarke v. Foster, 8 Vt. 98. In the following states, the pretended agent is held liable not on the contract itself, but for the damage resulting from the breach of his implied warranty of authority: Hall V. Crandall, 29 Cal. 567 ; Johnson v. Smith, 21 Conn. 627 ; Duncan v. Niles, 32 111. 532 (but see Frankland z/. Johnson, 147 III. 520) ; Bartlett v. Tucker, 104 Mass. 336; Noyes v. Loring, 55 Me. 408 ; Sheffield v. Ladue, 16 Minn. 388 ; White v. Madison, 26 N. Y. 117 ; Bryson o. Lucas, 84 N. C. 680; Hopkins v. Mehaffy, 11 S. & R. (Pa.) 126. THE NEGOTIABLE INSTRUMENTS LAW. 243 itself "' treat all matter which the contract contains in relation to the principal as surplusage, which is, in effect, to make a new contract for the parties concerned instead of construing the one which they made for themselves." ^ Judge Brewster's answer is : " One signing a note as agent for another should know and be able to show his authority. If he signs without authority, he alone in fact, and so in law, is the maker of the note, and he should be held liable accordingly." This view, though perhaps difficult to justify on the principles of contract, is supported by weighty authority,^ and important prac- tical advantages. The rule will tend to increase negotiability, by assuring the holder that if the pretended principal cannot be reached because of a lack of authority in the agent, a recovery may be had on the instrument itself against the agent. Then there is the additional advantage — which on reflection will appear to be of great importance — that the liability of the agent can be easily proved and the amount to be recovered ascertained by a mere inspection of the instrument, whereas if the only recovery were for damages resulting from a breach of warranty, a compli- cated set of disputed facts would often go to the jury, from which it would be difficult even to approximate the damage. The case which Professor Ames supposes, as proving the injustice of Sec- tion 20 may serve as an illustration of this. He says, " For ex- ample, A., mistakenly believing that he is duly authorized, signs a note, 'A., agent for B.,' and delivers it to C, the payee. At 1 Hall V. Crandall, supra. Referring to the cases which hold the pretended agent liable on the instrument, Walton, J., said in Noyes u. Loring, 55 Me 408: "The in- consistency of such a doctrine, to use no stronger term, will be apparent by supposing that instead of a promise to pay money the pretended agent had signed a promise that his principal should marry the plaintiff within a given time, or do some other act which it was perfectly competent for the principal to perform, but which the agent could not. What would be thought of a declaration charging the pretended agent as a principal in such a case ? " ^ To the decisions referred to above, and the very high authority of the German Code, there may be added the opinion of Mr. Arthur Cohen, Q. C. (one of the framers of the English act, and admittedly one of the leading experts in England on this sub- ject), who regards Section 20 as an improvement on the English act. He says : "This section certainly alters the law as it exists in England, but I think it very likely that the alteration is an improvement. The wisdom of the rule laid down in Cohen v. Wright has often been doubted. .' . I I think the 20th Section should be retained, and may be considered as a practical improvement of the law, unless there be reason to suppose that merchants and bankers think it unjust. I agree with Mr. Brewster that much indulgence should not be shown in business to a person who professes to have authority when he is really acting without authority." Letter from Mr. Cohea to Judge Brewster, written March 31, igoi. 244 THE NEGOTIABLE INSTRUMENTS LAW. maturity B. repudiates the note. He is, however, at that time a bankrupt. A. is rightfully chargeable to C. on his implied war- ranty of authority, but only to the amount that C. might have recovered from B., if he had authorized the note. But under Sec- tion 20 A. is liable to C. for the face of the note." But, as Mr. Cohen points out, " It would be doubtful what could be recovered until the dividend was declared and the bankruptcy concluded; and in the case of the principal not being bankrupt, but being a man in bad credit, the question would have to be left to a jury what amount could probably be recovered from the principal. It may well be held that in actions on negotiable instruments against a person who professedly acts on behalf of another per- son, A., it would be inconvenient to allow the former to attempt to prove that probably the whole amount could not be recovered from A." So the case stands about as follows : The rule discarded by the Commissioners works out the rights of the parties strictly on the rules of contract, and the balance of authority is in its favor. Under it, however, a plaintifif may encounter considerable difficulty and uncertainty in proving his case. The rule they have embodied in the act — while perhaps less dear on theory — is supported by the authority of several states, by the German Code, by some of the best expert opinion of England, and (besides tending to in- crease negotiability) enables a plaintiff to know and prove, with ease and certainty, the amount to be recovered. Of course, under such circumstances, individual opinion will differ somewhat as to which rule should have been chosen. Section 22 : " The indorsement or assignment of the instrument by a corporation or by an infant passes the property therein ^ notwithstanding that from want of capacity the corporation or infant may incur no liability thereon." Professor Ames says, " Does this section, like the correspond- ing section of the English act,^ mean merely that the indorsee has the right to enforce payment from all parties prior to the infant, 1 The italics are inserted by the reviewer. ^ English Bills of Exchange Act, Sec. 22, par. 2 : " Where a bill is drawn or in- dorsed by an infant, minor, or corporation having no capacity or power to incur liability on a bill, the drawing or indorsement entitles the holder to receive payment of the bill, and to enforce it against any other party thereto." THE NEGOTIABLE INSTRUMENTS LAW. 245 or does it mean that the indorsee becomes absolute owner of the instrument, so that he and his transferees, whether with or with- out notice of the infancy, may retain the instrument even against the infant ? If it was intended to reproduce the effect of the Eng- lish act on this point, it is unfortunate that the unambiguous language of that act was not retained. If, on the other hand, it was intended to make the infant's transfer of negotiable paper irrevocable, the section introduces a radical change in the law as to the rights of infants, and one that goes unnecessarily far in protecting an indorsee who knows that he is dealing with an infant." There are two criticisms here. The first is that the language is ambiguous and may mean that the infant's indorsee takes an indefeasible title. As a proof of this. Professor Ames states that some members of Judge Brewster's committee assured him that this was the purpose of the section. Judge Brewster replies that the American and English acts mean the same thing and that he never heard of any other interpretation. It is to be regretted that Professor Ames does not indicate the reasoning by which this section could be interpreted as giving an indefeasible title. It is the practically universal rule with us that an infant's acts are voidable merely and not void.-"^ Of course, then, when he indorses a note he " passes the property therein." That is simply stating what has been the law for years. Without discussing whether he is or ought to be permitted later to annul his act, it is clear that his indorsement, which certainly is not void, " passes the property " in the note. As to his right to revest the title in himself, the act is silent. Now, a statute which decides one point and leaves another point untouched, is not ambiguous. Nor does Professor Ames tell us why the English act is any different from ours. The language there used is that the infant's indorse- ment " entitles the holder to receive payment of the bill, and to enforce it against any other party thereto." But to enforce pay- ment the holder must have title to and possession of the bill. Therefore the English act provides that the indorsement " passes the property." Moreover, that is all it does provide. It does not provide that the holder may enforce it only until the infant avoids ' In England by the Infant's Relief Act, 37 and 38 Vict., Ch. 62 (1874), the common law rule is abrogated to the extent of making the contract of an infant absolutely void. But throughout the United States the common law rule that it is voidable merely prevails universally. 246 THE NiSGOTIABLE INSTRTJMENTS LAW. his act and reclaims the instrument. On that point, it is as silent as our act. Yet the critic would have us believe that under the English act the infant clearly may reclaim the instrument, but that our act is ambiguous on this point. Both acts provide exactly the same thing, and since it appears never to have been specifically decided whether an infant may reclaim a negotiable instrument that he has indorsed, both acts are precise codifications of existing law. In the absence of authority on that point, the framers of the American and English acts did well to leave the question un- touched. Whether they did so unintentionally or not is of small moment. Professor Ames is of opinion that the infant should be allowed to reclaim the instrument as against a holder with notice, but not as against a holder in due course.^ Probably all would agree that the title of the holder in due course should be indefeasi- ble. The importance of preserving the untrammelled negotia- bility of bills and notes leads some to conclude that even a holder with notice should be protected as against the infant. The point is that this question is within the province of a judge and not within the province of those engaged in codifying the law. Section 23 : " When a signature is forged or made without the au- thority of the person whose signature it purports to be, it is wholly inoperative and no right to retain the iristrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority." In a supplementary note, published subsequently to the articles in the Harvard Law Review, Professor Ames says that the need of amending Section 23 is shown by the case of Tolman v. Ameri- can National Bank,^ decided by the Supreme Court of Rhode Island in March, 1901. An interesting line of cases is involved in the discussion of this section. Suppose A., falsely representing himself to be B., a citi- zen of X. town, goes to C. for a loan. C. makes inquiry concerning B., and finding him to be a prosperous and responsible merchant 1 See also Ames' Cases on Bills and Notes, Vol. 2, title " Infancy," p. 840, and title "Transfer" (18) on p. 881. s 48 Atl. R. 480. THE NEGOTIABLE INSTRUMENTS LAW. 247 of X. town, hands A. a check payable to the order of B., whom he supposes that A. is. A. indorses the check in B.'s name and A. or his indorsee has it cashed. The question then comes up between the bank and C. (the drawer) as to who shall bear the loss. This set of facts, with strikingly few variations, has been presented in numerous cases, all of them, prior to the case of Tolman v. Amer- ican National Bank, holding that C. must bear the loss.^ This result may be reached in several ways, none of which is without difficulty. 1. You may hold that A., albeit he is representing himself by a name falsely assumed for the purpose of deceiving C, is the real payee, the person to whom C. intended that the check should be paid. Under this view, any question as to C.'s negligence becomes immaterial. He must bear the loss, not because he has negligently trusted a stranger, but because the physical person who stood be- fore him and with whom he dealt is the person whom he intended the bank should pay. The difficulty with this view is that al- though C. intended that the money should be paid to the person standing before him, it is equally true that he intended that it should be paid to B. of X. town. 2. You may hold that the drawer is liable because he has negligently trusted a stranger, but this view is unsatisfactory because none of the cases in point go on this ground, and because 1 U. S. V. Nat. Bank. 45 Fed. R. 163 ; Meyer v. Indiana Bank, 61 N. E. Rep. 596; Emporia Bank v. Shotwell, 35 Kan. 360 ; Robertson v. Coleman, 141 Mass. 231 ; First Bank v. American Bank, 49 N. Y. App. Div. 349 ; Merch. Bank v. Metropolitan Bank, 7 Daly, 137; Land Title and Trust Co. v. N. W. Bank, 196 Pa. 230; Metzger v. Franklin Bank, iig Ind. 359. And see Meridian Bank v. First Bank, 7 Ind. App. 322 ; Elliott v. Smitherman, 2 Dev. & B. (N. C.) 338 ; Forbes v. Espy, 21 Oh. 474, in which, though the name adopted by the swindler appears to have been really fictitious, the loss is thrown on the drawer for the same reason as that which governed the former cases. The same rule prevails as to the sale of chattels : Edmunds v. Merch. Co., 135 Mass. 283 ; Samuel v. Cheney, 135 Mass. 278 ; Dunbar v. Boston R. R. Co., 1 10 Mass. 26 ; Alexander v. Swackhamer, 105 Ind. 81. A case interesting (though not quite in point) in connection with the rule here dis- cussed is Gravis v. The American Exchange Bank, 17 N. Y. 205, which holds that if a check be made payable to one person and another person of precisely the same name or initials, so far as these are written out in the check, comes wrongfully or accident- ally into possession of the same, indorses it, and obtains the money on it from the bank, still the bank is liable to make good the amount to the drawer. Possibly this carries the bank's liability to an excessive point. It would seem that the drawer, having represented that any man named John Smith is the payee, should be estopped to deny that the particular John Smith who indorsed the check and had it cashed is the payee. 248 THE NEGOTIABLE INSTRUMENTS LAW. the loss is thrown on C, even when he has admittedly exercised all reasonable diligence. 3. You may hold that the payee is fictitious, and that the check is therefore payable to bearer ; but such an instrument is payable to bearer only when the drawer knows that the payee is fictitious. Moreover, if B., of X. town, is in existence and known to the drawer, such a view is clearly untenable. 4. You may hold that C. is estopped to deny that A., to whom he gave the check, is the real payee. But estoppel cannot operate unless the fact represented be known to and acted on by the bank, and where the swindler indorses the check to a bona fide holder who cashes it (and this is what happened in most of the cases) the bank knows nothing of the delivery to A. and does not rely on the drawer's representation that he is the payee/ As a matter of fact, the coyrts base their decision on the first ground, namely, that the bank has merely carried out the drawer's intent. Here and there an expression may be singled out which seems to countenance one or more of the other views, but a fair reading of the opinions shows that one idea domiriates nearly all of them, namely, that the money has been paid to the person for whom it was really intended. The reasoning is briefly this : A man's name is the verbal designation by which he is known, but the man's visible presence affords a surer means of identifi- cation. C. was deceived as to the man he was dealing with, but he dealt with and intended to deal with the visible man who stood before him, identified by sight and hearing. Thinking that this man's name was B., he drew the check to B.'s order intending thereby to designate the person standing before him ; so the bank has simply paid the money to the person for whom it was intended. Such was undoubtedly the law prior to the act. By Section 23, when a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative ' However, in an interesting note to Land Title and Trust Co. v. Bank, 50 L. R. A. 83, the above objection to the estoppel theory is claimed to be invalid, the argument being : When the bank pays a check upon a forged indorsement it acts on the belief that the person who indorsed it was the person whom the drawer intended to designate as payee. This belief is largely — and when the person who presents the check is not identified — is solely induced by the fact that the check is, or was at the time of in- dorsement, in the impostor's possession. The drawer — by delivering the check to the impostor in the belief that he is the person named as payee — creates the appear- ance on which the bank acts. THE NEGOTIABLE INSTEUMENTS LAW. 249 except as against the person who " is precluded from setting up the forgery or want of authority." In the Hght of the cases above referred to, the meaning of this section, as applied to the point under discussion, seems reasonably clear. The drawer (C.) " is precluded from setting up the forgery or want of authority " and so the signature is not inoperative as to him and the law remains unchanged. In 1899, Rhode Island adopted the .Negotiable Instruments Law and in 1901 the case of Tolman v. American National Bank arose in that state. In that case, one Louis Potter, representing himself to be Ernest A. Haskell, went to the plaintiff (Tolman) for a loan of money, giving the occupation and residence of Haskell as his own. The plaintiff made inquiry, and finding that Haskell was em- ployed and was living as represented, gave Potter his check on the defendant bank payable to the order of Haskell. Potter indorsed Haskell's name and delivered the check to one A. R. Hines, who had it cashed at the bank. In an action by Tolman to compel the bank to credit him with the amount of the check, the court held that the bank must bear the loss. As Professor Ames remarks, " the decision is a surprising one, both from the standpoint' of common law principles, and of Sec- tion 23 of the act. All the reported cases on the point of fraud- ulent impersonation are against the decision. As a statutory question, but for this decision, the liability of the drawer would seem clear under the last clause of the section." It is worth while to analyze the opinion of the court. It divides itself into three parts, and the reasoning of the learned Chief Justice Stiness may be summarized as follows : 1. When a bank receives money, it is to be paid out only as the depositor shall order. Therefore, if it pays on a forged indorse- ment, it bears the loss, unless the depositor is estopped by neg- ligence from alleging the forgery. Therefore, since Tolman intended that the money should be paid to the order of Haskell, and since Haskell has not indorsed the check, and since the plain- tiff has not misled the defendant, the hank must hear the loss. 2. The above reasoning represents what the law was " when, a few years ago, it seems to have been switched off on a fallacy in some places." To show that this formerly was the law, the learned judge cites three English and four American cases, not one 250 THE NEGOTIABLE INSTRUMENTS LAW. of which presents the point involved in Tolman v. The Bank. Coming, then, to the line of cases involving substantially the same facts as Tolman v. The Bank, in all of which the drawer was held liable, the learned judge says that these are based on a manifest fallacy and ignore the distinction between fictitious and real payees. 3. Section 23 brings the law back to where it was before it was " switched off on a fallacy." An application of this section to the case at bar shows this. The signature here is clearly one " made without the authority of the person whose signature it purports to be." Therefore, it is wholly inoperative except as against a person who " is precluded from setting up the want of authority." But Tolman is not precluded, for he has been guilty of no conduct which misled the bank and so is not estopped from showing that the bank did not pay as directed. Judgment for Plaintiff. Three observations may be made on this opinion : 1. In stating what the law was before it was " switched off on a fallacy " the learned judge is really stating what in his opinion the law should have been. There is no case in point to sustain him. Prior to the cases against his view, there are no cases in point at all. 2. A,s to " the manifest fallacy " in which the uniform current of authority has its source, the learned judge says that it is caused by ignoring the distinction between real and fictitious payees — that in the latter case, there can be no one in the mind of the drawer other than the person with whom he is dealing — but that " in the case of a real person, one party having him in mind satisfies himself about the responsibility of such party and supposes that he is dealing not with the person who is in fact before him, but with the one whom he has in mind." But the numerous cases which oppose the learned judge go on the ground that the real person whom the drawer has in mind is the man standing before him. True, this ignores the fact that the drawer supposed him to be B., of X. town, but the other view ignores an equally important fact, i. e. that he intended to deal with and lend the money to the person standing before him. One view is about as satisfactory as the other in interpreting the drawer's real intention. Moreover, the view which holds the drawer liable, in case B., of X. town, does not exist, even though the drawer made all reasonable inquiry and was deceived into believing that he did exist, but protects 9 THE NEGOTIABLE INSTEUMENT8 LAW. 251 him in case B., of X. town, is in existence, makes a distinction which does nothing to increase the actual justice meted out. 3. When a code is, as here, entirely in accord with a settled rule of law, what justification is there for holding that it meant to upset that rule and establish one which never was the law ? Judge Brewster replies, " The exact point in Tolman v. Bank was simply this : was it ' precluding ' negligence for Tolman to trust the stranger Potter, with no further inquiry than that stated in the opinion ? On this precise point as to a ' stranger payee ' there are but two exact precedents.^ The first is National Bank V. Nolting.^ This case holds the bank liable, saying, ' To hold that giving a check to a stranger . . . was sufficient . . . evi- dence to excuse the bank . . . would be to relieve the bank from a just responsibility.' The second case is Smith v. Mech. Bank.* This case, by a divided court, held the bank not liable." Of this defence, it may be observed first, while the lack of negli- gence may have been the ground on which the decision in Tolman V. Bank was based, it was not, according to all the cases in point, the question really involved. The well-settled rule applicable to these facts renders the question of negligence wholly immaterial because it declares that Potter was the real payee. Admit that he is not the payee, then the drawer is liable only in case he is es- topped. But the latter view has never been the law. Thus it is that in the numerous cases which are exact precedents on this point, though the degree of care exercised by the drawer differs, the decisions are the same, for the very reason that they proceed on a ground which renders negligence immaterial. Second, the two cases cited by Judge Brewster are not prece- dents at all. National Bank v. Nolting was a case of the alteration of a check, and the point decided was that the check, having been properly drawn, the mere fact that it was delivered to a stranger did not estop the drawer from showing that it had been raised from ten dollars to five hundred dollars. Smith v. Mech. Bank comes somewhere nearer being in point, though it differs from Tolman v. The Bank in at least one vital particular. In the former case, the swindler did not represent himself to be P. & W., the firm in whose favor the check was drawn. It v/as made pay- able to P. & W., who were known to the drawer, for the very 1 5 Amer. and Eng. Ency. of Law, Second Edition, 1066. ' 94 Va. 263. ' 6 La. Ann. 610. 252 THE NEGOTIABLE INSTRUMENTS LAW. purpose of compelling the stranger concerning whom the drawer realized that he knew nothing, to go to P. & W. and get their indorsement. Of course, then, when the stranger forged their signature, the drawer could not be held liable on the ground that the stranger was the man to whom he intended to make the check payable. Judge Brewster further remarks, " The theory of the Dean as to the drawer's expectation that the ' physical person before him ' would indorse the note had already been shown to be a fallacy." Where and by whom ? Not in any of the cases in which the ques- tion was raised and not in the two articles which Judge Brewster cites as bearing out his assertion.^ It is perfectly evident, then — and indeed this is Professor Ames' position — that the trouble is not with Section 23, but with the case of Tolnlan v. The Bank. Undoubtedly it is unfortunate that the only judicial interpretation that this section has received should serve only to throw doubt on what was previously well settled.* But the blame does not belong to the Negotiable In- struments Law. Section 23 — copied from the English act — was, at the time of its adoption, an accurate statement of existing law, and in view of the unanimity that exists among the cases on which it is based, the doubts raised by Tolman v. The Bank will probably soon be dispelled and this section will be interpreted as having merely affirmed a well-settled rule. Section 29: " An accommodation party is one who has signed the in- strument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his 1 The admirable little article on " Loss by Check Delivered to Impostor," Case and Comment, Vol. I, No. 7, December, 1900, p. 75, cites no authorities, and although ably stating the difficulty of the " intention " theory, i. e., that " The imposture makes it impossible that both parts of his intent can be carried out," admits that most courts have adopted this view. Moreover, though agreeing with the result of the decisions, it advances no more satisfactory ground on which to base it, the estoppel theory being as open to objection as the intention theory. As for Judge Brewster's negligence theory, the article disposes of that in convincing fashion. To the same effect is the note in 50 L. R. A. 83. Moreover, both of these articles agree that the drawer should bear the loss. * It is not denied that much might be said in favor of the result reached in Tolman V. The Bank, did the question arise de novo. The point is that when once so difficult and doubtful s point is clearly settled, mischief and not good results from reopening the matter and involving it in doubt. As matters stand to-day, no lawyer could advise a client, with any certainty, on this point. THE NEGOTIABLE INSTRUMENTS LAW, 253 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 taking the instrument knew him to be only an accommodation party." ^ The criticism is, " By this definition, one who has received a commission, which is certainly value, for lending the credit of his name, would not be an accommodation party. But no business man or good lawyer would sanction such a distinction. ... To take a concrete case. A. offers B. ten dollars if he, B., will sign a note of $i,ooo for A.'s accommodation. B. accepts the ten dollars and signs the note. Can anyone seriously doubt that B. is an accommodation party? If he is, the definition in this section is erroneous." Judge Brewster's answer is that the definition of an accommo- dation party given in Section 29 is the same as the definition given by " all the cases, all the text writers, and all the encyclopedias,^ the law dictionaries, and the ordinary English lexicons. . . . The only reason given for the overthrow of all these authorities is an illustration intended apparently to demonstrate the diffi- culty of showing what is value and what is not, but which in reality indicates value on its face." Professor Ames replies that Judge Brewster's answer only shows " that he and his colleagues erred in good company." The last sentence quoted above from Judge Brewster leaves something to be desired from the standpoint of clearness, but apparently the judge thinks that under Section 29 B. (in the case supposed) is not an accommodation party.* A moment's reflec- tion shows the error of this. B. ought to be regarded as an accommodation party. Though doubtless partially induced by the ten dollars to sign his name, his real purpose in signing (however that purpose may have been induced) was to lend credit to A. B. received nothing for the note. He did not become a holder for value of it. On the contrary, what he did receive came from 1 This is a copy of Section 29 of the English Act. ' Judge Brewster refers to Amer. and Eng. Ency. of Law, Vol. I, pp. 335-36 ; i Daniel, 189; Tiedeman, Sec. 158; Byles on Bills, star p. 131; 2 Randolph, 472; Norton's Horn-Book (1900), 176; Bigelow, Second Edition, cites the definition given by the Negotiable Instruments Law as the true definition ; Standard and Webster Lexicons. ' Mr. John L. Farrell also thinks that B. is not an accommodation party. See article in Brief of Phi Delta Phi, Vol. itl, No. 20, Quarter (igoi). But Mr. Fairell, like Judge Brewster, ignores the meaning of the word " therefor." 254 THE NEGOTIABLE INSTRUMENTS LAW. his transferor (assuming that B. ever became the holder of the note at all) and the note was negotiated solely for A.'s benefit, who received the consideration paid for it. Moreover, B. is an accommodation party under Section 29. Mr. Cohen hits the nail squarely in stating the meaning of this section. " ' Without re- ceiving any value therefor ' means without receiving any value for the bill, and not without receiving any consideration for lend- ing his name." Thus B. is an accommodation party because he has received no value for the instrument, though he did receive ten dollars for signing his name to it. Probably no harm would have resulted had the Commission adopted Professor Ames' suggestion and omitted the words " without receiving value therefor and," but since their insertion requires merely that proper care be exercised in interpreting the word " therefor," no difficulty need be anticipated on this point. It may be added that the same words used in the English act have proved entirely satisfactory. Section 34 : " A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable; and the in- dorsement of such indorsee is necessary to the further nego- tiation of the instrument. An indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery." " This," says Professor Ames, " is an inadequate definition " because " it is nowhere stated that an indorsement, like the draw- ing of a bill, is an order. If the payee writes " I assign this note to B.," or " I guarantee to B. the payment of this note," is he liable as indorser on his assignment or guarantee? Is his trans- feree an indorsee, and therefore within the rule that gives a holder in due course title free from equitable defences? There are nu- merous but conflicting decisions on these points,* and it is unfor- * " In ten states a payee who transfers a note by writing on the back, ' I assign this note to X.,' assumes the liability of an ordinary indorser. In six states such an assignor is not an indorser. In thirteen states the assignee, like an indorser, acquires title free from equities good against the assignor. In two states the assignee takes subject to such equities. " In three states a payie who transfers a note by writing on the back, ' I guarantee the payment of this note to X.,' is liable as an indorser. In ten states he is not so liable. In thirteen states the transferee, like an indorsee, acquires a. title free from equities good against the transferor. In three states and in the Supreme Court of the United States, the transferee takes subject to such equities." THE NEGOTIABLE INSTRUMENTS LA"W. 255 tunate that the new code does not secure uniformity here as it does in the matter of notes payable with exchange or attorneys' fees." Judge Brewster answers that " The Hability of a party on a pecuhar indorsement, which is outside of negotiability, must be settled by a court." But, a^ Professor Ames replies, " The very point in controversy is one of negotiability." Some states hold that language such as that referred to above amounts to an indorsement — others hold that it does not — Professor Ames' point is that the code should have settled this disputed question as to negotiability and that it could have done so by stating in Section 34 that an indorsement, like the drawing of a bill, is an order. Undoubtedly much would be gained by deciding once for all as to what expressions constitute an indorsement. But the ques- tion cannot be settled by enacting that an indorsement is an order. No one ever denied that an indorsement is, among other things, a direction to the maker or acceptor to pay the amount of the instru- ment to the indorsee, but some states hold that the words " I as- sign this note to B." amount to such a direction, while others hold that they do not. This is where the courts differ. Therefore, Pro- fessor Ames has merely shown that here is a disputed question left unanswered, without showing how it could have been an- swered, by any provision sufficiently brief and accurate and com- prehensive to be inserted in a code. Section 36: "An indorsement is restrictive, which either (2) consti- tutes the indorsee the agent of the indorser; or (3) vests the title in the indorsee in trust for or to the use of some other person." Professor Ames says, " Since the so-called ' agent of the in- dorser ' has, under Section 37, the right to sue in his own name on the instrument, but for the benefit of the indorser, he is in truth a trustee, and not a mere agent. The Subsection 2 and 3 should therefore be consolidated as follows : ' An indorsement is restric- tive which vests the title in the indorsee in trust for the indorser or some third person.' " Judge Brewster rq)lies that although all agents are trustees in the sense that they are ultimately accountable to the principal, all agents are not technically trustees, and that the distinction be- tween an agent and a trustee is embodied in Section 36 to relieve, the plaintiff from proving an actual trust. 256 THE NEGOTIABLE INSTEUMENTS LAW. Of course the criticism of this subsection deals simply with its form. Professor Ames does not mean that any difficulty can possibly arise under the language as it stands. He means merely that the substitute he ofifers is somewhat shorter than the act and more technically correct. When A. indorses a note " Pay to B. for the use of C," B. has always been termed a trustee, as of course he is. When A. indorses a note " Pay to B. for my use " or indorses " for collection " to B., B. has always been termed an agent. Professor Ames' point is that " agent " is no longer a correct word to use in describing B. in the latter case, because he can now, under Section 37, sue in his own name on the instrument, though for the benefit of the indorser. Thus Section 37 vests the legal title in the indorsee, and therefore, says the critic, he is in truth a trustee. Possibly — though nevertheless it is not clear that the sug- gested change could have been made without the risk of some misunderstanding. An indorsement for collection has always been regarded as creating a mere agency. Title remains in the in- dorser, who may terminate the agency at any time before collection and reclaim the instrument. In mos't states, prior to the act, the agent, not having title, could not sue in his own name. In some, however, he could ^ — the indorsement being deemed to have conferred this authority — but the latter states, though deeming the agent to have received the legal title to an extent sufficient to enable him to sue in his own name, still speak of him and regard him as an agent whose authority may be revoked at any time. It is extremely unlikely that Section 37 intended to accomplish anything more than a procedural change. The indorsee for col- lection was to be allowed to sue in his own name ; it was not in- tended to make any further change in his rights and duties — ■ not intended to alter in any way the legal conception of the rela- tionship that exists between him and his indorser. Was it not, therefore, the wise and safe course to retain the words whose meaning, long use, and repeated construction have rendered un- mistakable? Why introduce a word which has never been used to describe an indorsee for collection even by courts which con- ferred on him the right to sue in his own name? * 1 Wilson V. Tolson, 79 Ga. 137 ; Boyd v. Corbitt, 37 Mich. 52 ; Moore v. Hall, 48 Mich. 143. * It may be added that by Section 35 of the English Bills of Exchange Act, a re- •trictive indorsement, although it confers on the indorsee the right to sue in his own THE NEGOTIABLE INSTRUMENTS LAW. 257 Section 37 : . . . This section confers upon the indorsee under a restrictive in- dorsement the right to bring any action that the indorser can bring.^ " Inferentially," says Professor Ames, " such an indor- see cannot sue his indorser. This is just, if the instrument was transferred to the indorsee for the benefit of the indorser. But unjust, if the indorsement was for value to the indorsee in trust for a third person." For instance, " A., the holder of a note pay- able to his order, sells it to B. and is about to indorse it to him, but, at B.'s request, indorses it to X. in trust for B., instead of to B. directly; At maturity of the note, the maker is insolvent, but A. is solvent. By this section, X., the indorser, may sue anyone that his indorser can sue. In other words, he may sue the in- solvent maker, but he cannot sue the solvent indorser, A." The ground upon which Judge Brewster finally rests his defence of this section is " the fact that no trouble has arisen under it in England sufficiently indicates that the immunity the Dean claims for the solvent indorser ' A.' does not exist. Equity would take care of that." It is too plain for discussion that X., in the case supposed, should have a right of action on the note against the solvent in- dorser A. How " equity would take care of that " does not appear. Unless X. has his action under a proper construction of this section it is difficult to see how equity could mend matters. Mr. Farrell makes a useful contribution on this point. He says, " The language of Section 37 is used in a permissive and not in a restrictive sense. Section 36 defines a. restrictive indorsement, which limits and circumscribes the utility of the instrument so indorsed as compared with paper which does not bear this quali- fied indorsement. The following section (37) states the effect of such an indorsement, and the rights of the indorsee, notwith- standing the restrictive feature, and says that it ' confers the right to bring any action that the indorser can bring.' That does not iiTiply that he could bring no action other than that which his transferor might have brought, and the phraseology of the open- name, is, nevertheless, regarded as a mere authority to deal with the bill and not as a transfer of the ownership thereof. ^ Section 37 : "A restrictive indorsement confers upon the indorsee the right, (i) To receive payment of the instrument ; (2) To bring any action thereon that the in- dorser could bring." 258 THE NEGOTIABLE INSTRUMENTS LAW, ing clause shows that the framers undoubtedly had this in mind when drafting the section." ^ This argument — while not wholly convincing — makes out the best case that can be presented in defence of the act on this point. Undoubtedly this section could be improved upon, but since it would be gross injustice to refuse X. the right to sue A. and since the real purpose of subsection 37, par. 2, was simply to permit an indorsee under a restrictive indorsement to sue in his own name, the reasoning suggested by Mr. Farrell is sufficient to enable the courts to reach a just result. Section 40: . . . Professor Ames criticises Section 40 as being repugnant to Section 9-5. A discussion of this criticism and of Judge Brew- ster's reply thereto will be found supra, pages 123 to 130 inclusive. Section 49 : " Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferee had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorse- ment is actually made." Professor Ames criticises the first sentence of this section. He agrees that if an indorsement was intended, but omitted through inadvertence, it is obviously just that the transferor should be required to indorse subsequently. But he says that if the omis- sion to indorse was intentional, it is as obviously unjust to com- pel the transferor to assume the liability of an indorser. The obvious answer is that the transferor may indorse " with- out recourse " whenever such an indorsement will carry out the intention of the parties. But Professor Ames thinks that this section does not permit of a qualified indorsement in any case. " In Section 44," he says, " it is provided that any person under obligation to indorse in a representative capacity may indorse in such terms as to negative personal liability. But there is no simi- 1 Article on the Negotiable Instruments Law by John L. Farrell, Brief of Phi Delta Phi, Vol. III. No. 8, First Quarter (1901). THE NEGOTIABLE INSTRUMENTS LAW. 259 lar provision for a qualified indorsement in Section 49. Such a provision should be added to this section." The critic's reasoning does not convince. It certainly does not follow that Section 49 requires an unqualified indorsement in every case, simply because Section 44 provides that one under obligation to indorse in a repre- sentative capacity may use terms which negative personal liability. Section 49 does not specify any one kind of indorsement. In every case the transferee must go into a court of equity to compel an indorsement. Obviously he will be given the kind of an indorse- ment to which he is entitled. If the parties agreed that the transferor was not to assume personal liability, an indorsement " without recourse " gives the transferee all that he is entitled to by common sense, by equity or by Section 49.^ Professor Ames makes a further objection to this section. " If the transferee by delivery merely of an instrument payable to the order of the transferor always acquires only the rights of the latter, such a transferee of a note made for the accommodation of the payee could not enforce it against the maker, even though he might have given to the payee the money which it was the object of the maker to procure for the payee on the credit of his own name. Such a result would be a reproach to the law, even if due to the action of the courts. But this section, so far from codifying, actually nullifies the judicial precedents in this country." ^ ' The Coloiado Legislature added to the sentence requiring an indorsement the words " if omitted by accident or mistake," but for the reason given above the addition was unnecessary, and Judge Brewster refers to Mr. J. Warner Mills, page 23, the anno- tator of the Colorado act, who says, in speaking of the two forms of expression, " But either form of expression establishes the equitable rule of law." 2 Of the four American casses cited by Professor Ames, only one can be regarded as supporting his position, viz., Hughes v. Nelson, 39 N. J. Eq. 547. (For a convincing argument which expressly disapproves of that case and cites numerous authorities the other way, see Goshen National Bank v. Bingham, 23 N. E. Rep. 181.) In Matthias v. Kirsch, 87 Me. 523, the accommodation note in suit, which was unin- dorsed by the payee, had been given in renewal of a prior note which had been prop- ■erly indorsed. It was held that the rights of the parties were established by the first note. The plaintiff could have enforced the first note and, having taken the second merely as a renewal of the first, should be allowed to recover. The court expressly based its decision on this ground, stating that but for the transaction previous to the giving of the note in suit, the defendant would have prevailed on the well-settled rule that the delivery of a note before maturity without the indorsement of the payee is a mere assignment and carries with it only the rights of the assignor. Meggett w. Baum, 57 Miss. 22, went entirely on a Mississippi statute, on reasoning which is not applicable in other states. Freund v. National Bank, 76 N. Y. 352, is a poor case with which to sustain any proposition. The court mistook the point and then reasoned incorrectly on what it 260 THE NEGOTIABLE INSTRUMENTS LAW. Judge Brewster makes no reply to this criticism. Let us see. A. makes his note for $i,ooo payable " to the order of B." for B.'t> accommodation. B. transfers it by delivery, with- out indorsement, to C. for value. Under Section 49, C. may go supposed to be the point. The plaintiff drew his checlc on the defendant bank payable to O. for the latter's accommodation. O. transferred it unindorsed to B. for value. Then B. took it to the defendant bank and had it certified. Later the bank paid the check and the plaintiff (drawer), who, prior to the payment but after the certification, had notified the bank to stop payment of the check, sought to compel the bank to credit him with the amount of it. Judgment for defendant. The opinion first estab- lished at some length that B. was an assignee who succeeded merely to the payee's rights. Then it reasoned that since B. could have enforced the check against the drawer, the bank was justified in paying him or in certifying at his instance. Two later New York cases (Goshen National Bank v. Bingham, 23 N. E. Rep. 181, and Lynch v. First National Bank, 13 N. E. Rep. 775) based the decision in the Freund case solely on the ground that the bank certified the check while it was in the hands of B., the transferee by delivery of the payee — that under these circumstances the bank took, as it had a right to take, the risk of the title which the holder claimed to have acquired from the payee, and entered into a contract with the holder by which it ac- cepted the check and promised to pay the amount of it to the holder, notwithstanding the lack of indorsement. The precise point involved in the Freund case was this : Is a bank justified in pay- ing a check to one who is merely the transferee by delivery of the payee .' If that question be answered in the affirmative, the bank wins regardless of whether the check was an accommodation one or not. If that question be answered in the negative, the drawer wins. Why? Once admit that payment to the payee's transferee by mere de- livery is within the scope of the drawer's order, then the bank is justified in paying the transferee whenever it would be justified in paying the payee. But it is justified in paying the payee regardless of whether the latter gave value for the check or not. Therefore the question of accommodation was wholly immaterial in the Freund case. Still more immaterial, if possible, was the question which arose out of the fact that the payee was an accommodated party, viz., the question whether the transferee by mere delivery had a right of action against the drawer. The question was as to the implied contract that exists between the drawer and the bank. If that contract per- mits the bank to cash checks only for the payee or his indorsee, then any payment made to the payee's transferee by mere delivery violates the drawer's order. Other- wise, if the contract allows a payment to the payee, or to his transferee by delivery or to his indorsee. (Of course, a bank may certify a check and debit the drawer with the amount of it when and only when it would be justified in cashing the check.) The Freund case decided that the defendant bank would have been justified in paying the check to the payee's transferee by delivery. It follows that it was justified in certify- ing It at his instance. It is submitted that the decision is wrong for the reason that if the check should be given to the payee in payment of a debt, the drawer, if sued by the payee on the origi- nal consideration, might find it difficult, if not impossible, to prove that the debt had been paid. He must prove that B. (who had the check cashed) was the payee's as. signee. But there is no written evidence of that. A check should be regarded as authorizing the bank to pay only to the payee or his indorsee. Moreover, this view accords with banking practice, which does not sustain the proposition laid down (though apparently unconsciously) by the Freund case. THE NEGOTIABLE INSTRUMENTS LAW. 261 into equity, compel B. to indorse, and may then recover against the maker. But until C. gets B.'s indorsement, he is merely B.'s assignee and so cannot recover against the maker. This, says Professor Ames, is a " reproach to the law." It would not be, if A., induced by B.'s fraud, had executed the note for a valuable consideration. In such a case all would sanc- tion the application of the well-settled rule that the transfer by delivery without indorsement of a note payable to order operates as a mere assignment which vests in the assignee (C.) whatever rights his assignor (B.) had. But as against B., the maker has the defence of fraud, so C. cannot recover. Why should there be a difference between the defence of " fraud " and the defence of " accommodation " ? Professor Ames' reason is that A. gave the note to B. to enable the latter to raise money on it. He lent his credit for that purpose. And since B. has in fact raised money on the note by using A.'s credit, A. should not be allowed to escape liability to C. That is an argument ad hominem. It does not contain any legal reason for holding A. liable. Of course, he meant to lend B. his credit. But he lent it to him by executing a promissory note in which he promised to pay " to the order of B." Those words have a very definite legal meaning, viz., to pay to B. or to one who holds under his indorsement. That is A.'s promise. What reason is there for saying that he intended to assume a broader liability ? By what legal principle can he be held liable on any promise other than the one he has made? Why should the law be " reproached " for in- sisting that those who seek to avail themselves of the unusual and extraordinary protection extended to commercial paper must com- ply with the rules which govern commercial paper — rules univer- sally understood and which are merely a statement of those everyday business customs which really created and govern this branch of the law ? It is a fundamental and an almost universal rule of law that no one can transfer a better title than he possesses. An exception exists in favor of those who become the holders in due course of commercial paper. The proper method of becoming a holder in due course is very simple, and little authority and still less reason can be presented for protecting those who through design, carelessness or ignorance seek to dispense with that method.-' 1 Section 49 is copied from Section 31, par. 4, of the English act. See Chalmers' Bills of Exch., Fifth ed., pp. 103 to 105. 262 THE NEGOTIABLE INSTEUMENTS LAW. Section 64: " When a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser, in accordance with the following rules : " I. If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent 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 subsequent to the maker or drawer. " 3. If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee." Prior to the act, no part of the law of Bills and Notes was more difficult and confused than the rules regulating the liability of the anomalous indorser. This kindly individual was held liable in various states as first indorser, second indorser, joint maker, and guarantor. Even then his liability was in most cases merely " pre- sumed," and the question, in what cases and by what evidence could the presumption be rebutted, gave rise to various answers. All agree that Section 64, which deals with this question, is a long step forward. It unifies the law and lays down rules admirably framed to carry out the intention of the parties. Professor Ames fully appreciates the excellence of this section, but thinks that it might be improved in one particular. He says, " Section 64 is an excellent piece of codification but for one slip. One not otherwise a party to a bill payable to the order of the drawer may sign it for the accommodation of the acceptor, as in Matthews v. Bloxsome.^ He should clearly be liable to the drawer-payee. But by Subsection 2 he is liable only to parties subsequent to the drawer." To illustrate: X. is willing to sell goods to A. on credit pro- vided B. becomes surety for A. So A. makes his note payable to X., gets B. to indorse it, and delivers it to X. in exchange for the goods. By Subsection i, B., the surety, is liable to X. This is the correct result and the one intended by the parties. Suppose, how- ever, that they attempt to accomplish it in a different way. Sup- pose X. draws on A. payable to his own order, A. accepts, gets B. to indorse, and hands the bill back to X. X. sells it to Y. It is dishonored at maturity and X. is compelled to take it up. X. now has no right over against B. All intended that B. should be- 1 33 L. J. Q. B. 309. For a similar case see Young v. Glover, 5 Jurist, N. s. 637. THE NEGOTIABLE INSTRUMENTS LAW. 263 come liable to X., yet, the bill being payable to the order of the drawer, Subsection 2 makes B., the anomalous indorser, liable not to the drawer-payee, but only to parties subsequent to the drawer-payee. Professor Ames' point is that Section 64 should be amended so as to render B. liable to X. in the latter case.^ Judge Brewster misapprehends Professor Ames' meaning on this point. He regards the critic as saying that the anomalous indorser should be liable to the maker or drawer whom he has accommodated with his signature, in cases where the maker or drawer is the payee. But Professor Ames does not say that. The case he speaks of and the hypothetical case he puts forward is a case in which the acceptor is accommodated by the anomalous in- dorser. Where the drawer-payee is the accommodated party. Pro- fessor Ames agrees with Subsection 3, which renders the anoma- lous indorser in such case liable only to parties subsequent to the drawer-payee. To this misapprehension of the critic's meaning must be attributed Judge Brewster's statement that " The Dean's proposed substitute would defeat the purpose of the act." It would not. The proposed substitute would leave the act precisely as it is, except that an anomalous indorser who signed for the accommodation of the acceptor, a bill payable to the drawer's order, would be liable to the drawer-payee.^ In another place Judge Brewster says that by Section 64 the anomalous indorser is to be liable to all subsequent parties. This is the answer to Professor Ames, if any there be. Of course, the only liability that the regular indorser assumes is to subsequent parties. That is the contract created by the law merchant. But ' Professor Ames proposes to meet the difficulty by making the first two sections of Section 64 read as follows : T. "If the instrument is a note or bill payable to the order of a third person, or an accepted bill payable to the order of the drawer, he is liable to the payee and to all subsequent parties." 2. " If the instrument is a note or unaccepted bill payable to the order of the maker or drawer, or payable to bearer, he is liable to all parties subsequent to the maker or drawer." 2 In his second paper, Judge Brewster remarks, "As the Dean's definition of ac- commodation paper includes paper for value received, his new illustration has no meaning if the illustration makes 'B.' an accommodation indorser." A remarkable sentence. All anomalous indorsers are accommodation parties in the sense that they sign for the purpose of lending their credit. But very few accommodation indorsers are anomalous indorsers. And these are anomalous indorsers not because they re- ceived no value, but because they signed before delivery instruments to which they were not otherwise parties. Therefore, whether or not " B." in the case supposed re- oeived value is absolutely immaterial. 264 THE NEGOTIABLE INSTRUMENTS LAW. one, not otherwise a party to an instrument, who puts his signature thereon before deHvery, is not a regular indorser. His position is anomalous. So far, therefore, as any technical rule goes, he could be held to the liability of a first indorser, second indorser, joint maker, or guarantor. Section 64 attempts, and with much success, to fasten on him the liability which he intended to assume. In one case, however, namely, where he signs, for the accommodation of the acceptor, a bill payable to the order of the drawer, the sec- tion makes his liability less than he intended. Professor Ames' substitute would remedy this defect without making any other change. It would seem, therefore, that admirable as Section 64 now is, Professor Ames' substitute would have been even better. Sections 65 and 66: " Sec. 65. Every person negotiating an instrument by delivery or by a qualified indorsement, warrants, " I. That the instrument is genuine and in all respects what it purports to be : " 2. That he has a good title to it ; " 3. That all prior parties had capacity to contract ; " 4. That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. " But when the negotiation is by delivery only, the war- ranty extends in favor of no holder other than the immediate transferee. " The provisions of Subdivision 3 of this section do not apply to persons negotiating public or corporation securities, other than bills and notes. " Sec. 66. Every indorser who indorses without qualifi- cation, warrants to all subsequent holders in due course: " I. The matters and things mentioned in Subdivisions I, 2, and 3 of the next preceding section; and " 2. That the instrument is, at the time of his indorse- ment, valid and subsisting. " And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indor- ser who may be compelled to pay it." THE NEGOTIABLK INSTRUMENTS LAW. 265 Sections 65 and 66, which deal with the so-called " warranties " of one who negotiates a bill or note, can best be considered together. Early English cases established that one sued as acceptor, drawer or indorser upon a bill or note was " precluded " from denying to a holder in due course certain things. The acceptor was precluded from denying the existence of the drawer, the genuineness of his signature, his capacity and authority to draw the bill,^ and the existence of the payee and his then capacity to indorse.'' The drawer was precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse.' Similarly the indorser was precluded from denying the genuineness and regularity in all respects of the drawer's signature and all previous indorsements,* nor could he deny that the instrument was, at the time of his indorsement, a valid and subsisting bill, to which he then had a good title.® These cases preclude him on the ground that by drawing, accept- ing or indorsing, he admits certain facts which he is afterwards estopped to deny. Nothing is said in these cases about " war- ranties." None of them place the indorser's liability on the ground that he has made a collateral agreement warranting, for instance, the genuineness of the drawer's signature. Of course, under the view adopted in these cases, the estoppel works for the. benefit not merely of the immediate indorsee, but for all subse- quent holders in due course. The provisions of the English Bills of Exchange Act accord with this view. By Section 54, par. 2, the acceptor " is precluded from denying to a holder in due course," etc. Section 55 " pre- cludes " the drawer. Section 55, par. 2, " precludes " the indorser. On the other hand, by Section 58, one who negotiates by mere delivery a bill payable to bearer, while of course not liable on the instrument, is in the position of the vendor of a chattel and " warrants " to his immediate transferee, being the holder for value, that the bill is what it purports to be, that he has a right to 1 Cooper V. Meyer, 10 B. & C. 468, 1830; Sanderson v. CoUman, 4 M. & Gr. 209, 1842. "^ Drayton v. Dale, 2 B. & C. 293, 1823. sColIis V. Emett, i H. Bl. 313, 1790; Phillips v. Im Thum, 18 C. B. N. s. 694, 1865. * Ex parte Clarke, 3 Brown, C. R. 238, 1791 ; Thicknesse v. Bromilow, 2 Gr. & J. 425, 1832 ; McGregor v. Rhodes, 6 E. & B. 266, 1856. s Burchfield v. Moore, 23 L. J. Q. B. 261, -854. 26i TiElS" NEGOTIABLE INSTRUMENTS I/AW. transfer it, and that he knows no fact which renders it valueless. And these warranties, like the warranties of the vendor of a chat- tel, extend only to the immediate transferee, and can be extended to a subsequent holder only by an express assignment by that transferee. Turning now to the American act, we find that it follows the English act in regard to the incidents of the contracts of the drawer and acceptor. By Section 6i, the drawer by drawing the instrument "admits the existence of the payee and his then capacity to indorse." By Section 62, an acceptor " admits " the existence of the drawer, the genuineness of his signature, his capacity and authority to draw the instrument, and the existence of the payee and his then capacity to indorse. But coming to the indorser, we find that by Sections 65 and 66 he " warrants " to all subsequent holders in due course the matters and things enumerated in these sections. Tlie use of the word " Warranty " in this connection did not start with the Negotiable Instruments Law. For some years past the American courts have said that an indorsement is a warranty of the genuineness of the instrument's existence and capacity of prior parties, etc. The word has been loosely used and often interchangeably with such expressions as " precludes the indorser from denying " — " estops the indorser to deny " — or, " is an admission," ^ though in some respects the courts have regarded it as a strict legal warranty and have held, for instance, that since the warranty is broken, if at all, at the time of transfer, the warrantor may be sued immediately, before maturity, and without presentment or notice.^ Nor can it be doubted that Sections 65 and 66 of the American act iise the word " warrants " in its proper legal sense. " The 1 " Obviously this is not a necessary result of the indorser's conditional undertaking to pay; and, in the absence of plain public policy calling for it, the existence of such a warranty, taking the word in its ordinary sense, should depend upon the custom. The judicial dicta (and generally the language of the courts in the matter is nothing more) have, however, become so common as to create the belief that warranty is an incident of indorsement. And the statute at last has confirmed the belief and turned a number of loose and unnecessary dicta into law, while at the same time it follows the custom in regar4 to the incidents of the contracts of the drawer and of the acceptor, treating their acts as admissions merely." Bigelow on the Law of Bills, Notes and Checks, zd Edition, p. 99. 2 TurnbuU v. Bowyer, 40 N. Y. 456, 1859; Warren-Scharf Co. v. Com. Bank, 97 Fed. R. 181, 1S99; Copp V. McDougall, 9 Mass. i, 1812; Blethen v, Lovering, 58 Me* 437. "870. THE NEGOTIABLE INSTRUMENTS LAW. 267 fact that the American statute departs, at this point, from the Enghsh statute, on which it is based, which indeed it generally follows ipsissimis verbis, and that it makes a distinction, in terms between the incidents of indorsement and those of drawing and accepting, leads to the inference that the word ('warrants') is used in its primary sense. Something certainly is meant beyond indorsement according to the legal import of that act, for the indorser ' warrants ' and in addition he ' engages,' " etc.^ Now for the criticism. It will be observed by Section 66 that the indorser without qualification " warrants to all subsequent holders in due course." Professor Ames, while evidently concur- ring in the use of the word " warranty," says that to extend it to all subsequent holders in due course is a misconception of the nature of a warranty. His position is : — An indorsement is ( i ) a transfer of title, (2) a contract to pay the instrument in case of dishonor. The warranty has no connection with the indorser's liability on his contract of indorsement. Like the warranty of the vendor of a chattel, it is a mere incident of the transfer of title. Moreover, the warranty is a collateral agreement, quite extrinsic to the instrument. Plainly, then, the indorser's liability for a breach of warranty extends only to his immediate indorsee as a vendee. Theory aside for a moment, it is certain that had the act limited the so-called " warranties " to the immediate indorsee, it would have changed the law. These rules were based originally upon the doctrine of estoppel ; yet, whatever be their true explanation, it seems never to have been denied that one who indorses a bill with- out qualification cannot, as against any subsequent holder in due course, plead, for instance, that the drawer was without capacity to contract. Exen those who speak of the incidents of the indor- ser's contract as " warranties " hold this view. So that in extend- ing this protection to all subsequent holders in due course, the act has merely codiiied that which has long been the law. As to the theory of the criticism — there can be little doubt that the " warranties " of the indorser (for such they are under the act) are incidents of the transfer of the instrument and not of the con- tract of indorsement. But of course, like other choses in action, they are assignable, and there is no serious difficulty in saying that they require no express assignment, but are assigned by the indorse- 1 Bigelow on the Law of Bills, Notes and Checks, 2d Edition, p. 99. 268 THE NEGOTIABLE INSTRUMENTS LAW. ment of the instrument. Of course, it will be asked, why should an indorsement be considered as the assignment of a collateral contract, which is an incident, not of the contract of indorsement, but of the transfer of the instrument ? The answer must be that such an interpretation of the indorsement best carries out the in- tention of the parties and preserves or tends to preserve the un- trammelled negotiability of the instrument by affording this pro- tection to the holder in due course. It is further to be observed that in one sense these warranties do arise from the contract of indorsement. As Mr. Norton points out,^ upon the strict analogy of the sale of other personal property, it would follow that the implied " warranty " of the indorser would be confined to a war- ranty of title. But the indorser also warrants that the instrument is genuine and that the drawer had capacity to contract. The real reason for this is that he may not set up facts which are wholly inconsistent with his promise of indemnity. So we see that thus far the results reached by Section 66 are just, and are based on sound business sense. The only difficulty is that we are now obliged to explain as a " warranty " that which arose as an estoppel. Yet the difficulty is not insuperable if we re- gard them as choses in action, extrinsic to the instrument, but peculiar only in this, that they require no express assignment, but are assigned by the indorsement of the instrument. This prepares us for the next criticism. Turning back to Sec- tion 65, we find that a warranty of the transferrer by delivery inures only to the benefit of his immediate transferee, whereas the similar warranty of the indorser " without recourse " runs in favor of all subsequent holders. The critic says that the idea that the indorser " without recourse " is liable to any but his immediate transferee is an original invention of the Negotiable Instruments Law.^ " To say that such an indorser is liable in any manner on the bill is to contradict the plain langfuage of his indorsement. His liability is extrinsic to the bill. As the vendor of the bill, he, like the vendor of other personal property, is liable to his vendee, 1 Norton on Bills and Notes, 3d Edition, 163. ' Judge Brewster answers this by showing that the view adopted by the act was asserted by Professor Ames some twenty years ago. " An indorsement without re- course, like a transfer by delivery merely, being, in substance, a sale, the indorser is responsible to the indorsee and subsequent holders for the validity of the title and the genuineness of the instrument which he purports to sell." 11 .4mes' Cases on Bills and Notes, p. 840. The Dean smilingly replies that that was a youthful indiscretion committed in his callow days. THE NEGOTIABLE INSTRUMENTS LAW. 269 but to no subsequent purchaser, for the genuineness and title of the thing sold." ^ Of course, under the English view, the indorser without re- course would not be liable to subsequent holders, because, not being able to sue him on his indorsement, they could make no use of the estoppels. And it would seem that such a result is the one intended by the parties and accords with the popular interpretation of a qualified indorsement. Nevertheless, if the reasoning sug- gested above in the discussion of Section 66 be sound (and it seems to be the only reasoning by which a warranty can be ex- tended to subsequent holders) the framers of the act would have been strangely inconsistent had they limited the warranty of the indorser without recourse to his immediate indorsee. A. indorses " without recourse " to B. It is everywhere the law that B. could still sue A. for a breach of warranty, which is a collateral agree- ment incident to the sale of the instrument. Suppose B. indorses to C. If the warranty is assigned by the indorsement, C. could sue A. in case the warranty were broken. Moreover, the same result would follow if B. indorsed " without recourse " to C, for the qualification cannot possibly do more than curtail B.'s liability and cannot be construed as curtailing C.'s rights against parties prior toB. Next we notice that by Section 65. the warranty of the trans- ferrer by delivery extends only to his immediate transferee. This is a codification of what has always been the law, but, as Professor Ames remarks, if the indorser " without recourse " is liable to sub- sequent holders for a breach of warranty, why not also the trans- feree by delivery ? Undoubtedly the liability of the two has always been supposed to be identical. The only answer is that the trans- feree not having indorsed the instrument to a subsequent holder, there has been no assignment of the warranty. Professor Ames makes a further criticism on this same point. 1 Professor Ames cites one case squarely in point which sustains his view. Wat- son V. Chesire, 18 Iowa, 202, 1865. There seems to be no case in point the other way, although in three New York cases a point was decided which indicates that indorser& without recourse would there be held liable to subsequent indorsees. Herricfc v. Whiting, 15 Johnson, 240, 1818; Shaver v. Ehle, 16 Johnson, 201, 1819; Baskin v. Wilson, 6 Wendel, 474. Two of these cases held that when a maker is sued by a transferee remote from the payee who indorsed without recourse, the payee is incom- petent to testify on behalf of the plaintiff for the reason that he is an interested party and by proving the plaintiff's case would be relieving himself from liability on his im- plied warranty to the plaintiff. 270 THE NEGOTIABLE INSTRUMENTS LAW. Turning to the warranties of one who indorses without quahfi- cation, he points out that " an accommodation indorser is ob- viously not a vendor. Tlie party accommodated fills that position. The accommodation indorser is, therefore, not liable as a warran- tor, but is chargeable only as indorser upon the bill after maturity and due notice of dishonor." ^ Yet, by Section 66, the accommo- dation indorser is liable as a warrantor. Here, again, the difficulty is to justify the provision of the act on the theory of warranty. As an estoppel, the matter would be simple enough. The very indorsement of the accommodation indorser should preclude him from setting up that the bill is not genuine or that prior parties had no capacity to contract, facts which are wholly inconsistent with his contract of indemnity. But on what legal principle he can be saddled with the warranties of a- vendor is far from clear. As to extending the warranties of the indorser to subsequent holders, therefore, the gist of the matter seems to be this : The result reached in Sections 65 and 66 are in the main just. The only possible objections would seem to be that the accommoda- tion indorser 2 should not be subject to suit till after maturity, and that the warranty of the indorser " without recourse " should extend only to his immediate indorsee. Certainly with these two exceptions, the results reached are those which have long been the law. But the rules are stated in terms which are difficult to justify on any legal theory. Professor Ames makes a further and a different criticism of these two sections. " The transferrer by delivery or by a qualified indorsement not only warrants, in Section 65, paragraphs i, 2, and 3, the genuineness of the instrument, his title to it, and the capacity of prior parties, but also, by Section 65, par. 4, " that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless." Why, asks Professor Ames, should his knowledge be irrelevant in the case of forgery or capacity of prior parties and yet be essential when the instru- ment is invalid because of usury or other statutory real defence, or if the transfer is after maturity, by reason of payment, failure of consideration, or other personal defence? \ , There is much force in the criticism. Subsection 65, par. 4, is 1 Central Bank v. Davis, 19 Pick. 373 ; Sus. Bank v. Loomis, 85 N. Y. 207 ; Case V. Bradburn, i Daly, 256. * If the accommodation indorser is a warrantor, he may be sued before maturity This changes the law. See cases cited in preceding note. THE NEGOTIABLE IN8TEUMENTS LAW. 271 evidently a codification of the New York case of Littauer v. Gold- man,^ which held that a defendant who transferred by dehvery to the plaintiff a note tainted with usury in its inception, of which defect, however, the defendant was ignorant, could not be held liable on an implied warranty. The court, after reviewing a number of cases, concludes that thete are only two implied warran- ties in the transfer of negotiable paper, namely, a warranty of title, and a warranty that the instrument is genuine and not forged. That case is " admittedly supported by no precedent," ^ and there are decisions flatly against it.^ As Chief Justice Shaw said, in Lobdell v. Baker,* " Whoever takes a negotiable security is understood to ascertain for himself the ability of the contracting parties; but he has the right to believe, without inquiring, that he has the legal obligation of the contracting parties appearing on the bill or note." That was a case of infancy, but the remark is equally applicable to a note tainted with usury in its inception. For in the latter case the indorsee does not get that legal obligation for which he contracted. It would seem, therefore, that the trans- ferrer should be held liable for a breach of warranty since the thing sold is not what it purported to be. Furthermore, as the critic points out, if " scienter " is necessary in the case of the indorser without recourse, why is it not equally necessary in the case of one who indorses without qualification ? Yet Section 65, par. 4, is not incorporated by reference in Section 66.* Section 68 : " As respects one another, indorsers 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. Joint payees or joint indorsees who in- dorse are deemed to indorse jointly and severally." 1 72 N. Y. 506. 2 Wood V. Sheldon, 42 N. J. 421. It is also disapproved of in Meyer v. Richards, 163 U. S. 385 (pages 411 and 412). 8 Giffert v. West, 33 Wis. 617 ; Daskam v. UUman, 74 Wis. 474 ; Hannum v. Richardson, 48 Vt. 508; Knight v. Lanfear, 7 Rob. (La.) 172. * 3 Met. 469. ^ Professor Ames proposes as a substitute for Section 65-4 " that the instrument is subject to no real defence, nor, if the transfer is after maturity, or after dishonor noted on the bill, to any personal defence." In the opening of his first article, Pro- fessor Ames justly remarks that the new code would have gained in simjjlicity and arrangement had due emphasis been given to the distinction between real and personal or equitable defences. 272 THE NEGOTIABLE INSTRUMENTS LAW. Professor Ames thinks that the last sentence — which intro- duces a change into the law — is a blunder which should be can- celled. He says, " Joint makers, joint drawers and joint accep- tors are liable only jointly. Why this arbitrary distinction ? " Judge Brewster replies that the change was made for con- venience' sake, and that it " is in accord with the theory of the law already established in most of the states which adopted the reform procedure, say three-fourths of the states of the union." ^ Mr. Arthur Cohen also thinks that this change is an improvement, " by reason of its sweeping away certain technicalities. There has always been a tendency in the law merchant to consider contracts which are in form joint contracts as being intended to be joint and several." Still, Professor Ames' query " Why this distinc- tion ? " remains unanswered. If joint indorsees are to be liable jointly and severally (and it would seem that they ought to be), why not joint drawers also ? Instead of cancelling the latter part of this section, however, would it not have been better to widen its scope and include joint drawers, joint makers, and joint acceptors ? Section 70: Section 70 provides that " Presentment for payment is not necessary in order to charge the person primarily liable on the instrument." ^ This, says Professor Ames, changes the law and for the worse as to certificates of deposit. The weight of authority, represented by the leading commercial states,* is that they must be pre- sented to charge the bank. Five states hold that presentment is not necessary.* Furthermore, under this section, " presentment would not be necessary in the case of bank notes circulating as money." The critic suggests that the words " except in the case 1 Referring to 2 Bliss 53, Pomeroy, 2d Edition, 326, Conn. Rules of Practice, page I, Sec. 2. For the American statutes see Randolph's Commercial Paper, Sec. 1669. 2 The remainder of the section reads, " but if the instrument is, by its terms, pay- able at a special place, and he is able and willing to pay it there at maturity,' such ability and willingness are equivalent to a tender of payment upon his part. But ex- cept as herein otherwise provided, presentment for payment is necessary in order to charge the drawer and indorsers." » Indiana, Massachusetts, New Jersey, New York, Pennsylvania, South Dakota, Vermont. * California, Iowa, Michigan, Minnesota, Wisconsin. THE NEGOTIABLE INSTRUMENTS LAW. 273 of bank notes and certificates of deposit " should be inserted after the word " necessary " in the first line. Of course, this section was intended to apply to the maker of a note and acceptor of a bill. Evidently, from Judge Brewster's reply, the point as to certificates of deposit did not occur to the Commissioners. His defence is, " In view of the fact that no per- son would be likely to bring a suit on such instruments when he could get the money at the bank, and the further fact that no harm could come to the promiser excepting as to costs, which are in most, if not all the states, subject to the discretion of the court, the objection does not seem to be practical." 1. The numerous reported cases of suits brought on certifi- cates of deposit dispose of the first part of that defence. 2. " No harm could come to the promisor excepting as to costs." All right. But how about the promisee ? If no present- ment is necessary, the holder's right of action accrues on the date of the certificate, and the statute of limitations runs from that date.^ It follows that after six years the holder cannot get his money. This result is unjust. Nor is it a true answer to say that such a holder, like the holder of a demand note, has slept on his rights by allowing six years to slip by. He has not. Business custom determines such a question, and the fact is, as everyone knows, that by the custom of merchants the holder of a certificate of deposit is a depositor, who, like any other depositor, may leave his money in the bank for an indefinite period. The idea that he must withdraw it within six years would be a novel one to a banker. So Section 70, in so far as it applies to certificates of deposit, not only ignores the language of such instruments, which always is that the money shall be paid " on the return of this certificate," but, by barring the holder's right of action after six years from the date of the certificate, runs counter to the understanding of the business community, which regards such an individual as a depositor. It is not likely that much harm will result from this section, as the use of certificates of deposit is very limited and appears to be decreasing. Nevertheless, the framers of the act shpped up on this point. 1 In states where right of action accrues on date of certificate, statute runs from that date. When action accrues only after demand, statute runs from date of demand. For collection of authorities see Am. and Eng. Encyc. of Law, 2d Edition, 804. 274 THE NEGOTIABLE INSTRUMENTS LAW. Section 119: " A Negotiable Instrument is discharged : " I. By payment in due course by or on behalf of the prin- cipal debtor; " 2. By payment in due course by the party accom- modated, where the instrument is made or accepted for accommodation ; " 3. By the intentional cancellation thereof by the holder ; " 4. By any other act which will discharge a simple con- tract for the payment of money; " 5. When the principal debtor becomes the holder of the instrument, at or after maturity in his own right." Professor Ames criticises the fourth paragraph of this section. He says, " If a creditor accepts a horse in satisfaction of his claim, not yet matured, the simple contract claim is discharged. But if the holder accepts a horse from the maker before maturity, in satisfaction of the note, the note is not discharged. The accord and satisfaction gives the maker merely a personal defence, which is cut off the moment the note is transferred to a holder in due course." Judge Brewster's answer is, " The section evidently relates to acts between the parties. If the maker allows his note to remain outstanding, and so to be transferred, of course he should be held liable." " This," as Professor Ames says, " is very sound law, but, with all deference, this sUb-section declares just the opposite. The language is that by such an accord and satisfaction ' a nego- tiable instrument is discharged.' If it is discharged, the maker can never be charged upon it. In all the other sub-sections of this section the discharge is complete and final." The critic seems to have the best of it. Payment of a note before maturity is no defence against a holder in due course. That has always been the law. But a simple contract claim is dis- charged by payment before the claim is due, and now comes Sec- tion 119 and says that such a payment discharges a negotiable instrument. The Judge's only answer is that this section " evi- dently relates to acts between the parties." i. What is meant by " acts between the parties " ? 2. Why does this section evidently relate only to such acts ? Mr. Farrell makes a curious answer to this criticism. He says that Professor Ames is " construing the language of one of the THE NEGOTIABLE INSTRUMENTS LAW. 275 component parts of a section without reference to its connection with the others. The section declares that an instrument is dis- charged : by payment by the principal debtor ; by payment by the accommodated party ; by the holder's intentional cancellation, and (4) 'by any other act which will discharge a simple contract for the payment of money,' i. e., any other act which will discharge a negotiable instrument, which is but a simple contract for the payment of money, as distinguished from a specialty, in the extin- guishment of which the same formality is required that is neces- sary to its creation. Do the other sub-sections, specifying the methods of extinguishment, refer to negotiable instruments, or to some other form of contract? " ^ Let us see. In the first place, Mr. Farrell misstates Sub- section I. It does not read " By payment by the principal debtor." It reads, " By payment in due course ... by the principal debtor." That makes a difference. Now, Subsection 4 reads "By any other act which will discharge a simple contract for the pay- ment of money." I.e., any act other than the acts specified in Sub- sections I, 2, and 3. But payment before maturity is not within the acts specified in Subsections i, 2, and 3, and it is an act which discharges a simple contract for the payment of money. There- fore by Subsection 4, payment before maturity will discharge a negotiable instrument. But Mr. Farrell says that Subsection 4 ( " By any other act which will discharge a simple contract for the payment of money") means "any other act which will discharge a negoti- able instrument, which is but a simple contract for the payment of money, as distinguished from a specialty, in the extinguishment of which the same formality is required that is necessary to its creation." Now, with all deference! The purpose of Section iig was to answer this question, " What acts will discharge a nego- tiable instrument? " To say that the answer given is " A negoti- able instrument is discharged by acts i, 2, 3, and any other act which will discharge a negotiable instrument " is to say that Mr. Crawford and the Commissioners had lost their wits. It reminds one of the celebrated excuse for drinking : " If I the reasons well divine. There are just five for drinking wine : Good wine, a friend, or being dry, Or lest you should be by and by, Or any other reason why." 1 The Negotiable Instruments Law, by John L. Farrell, Brief of Phi Delta Phi, Vol. Ill, No. 2, First Quarter, 1902. 276 THE NEGOTIABLE INSTRUMENTS LAW. Perhaps a negotiable instrument is " a simple contract for the pa)Tnent of money, as distinguished from a specialty." But it is certainly true that it is negotiable, and in this respect dififers from all other simple contracts for the payment of money. From this negotiabUity arise certain rules not applicable to non-negotiable contracts for the payment of money. At least one of these rules relates to the discharge of a bill or note, and Professor Ames' illustration shows that Subsection 1 19, par. 4, goes too far in that it practically places the discharge of a negotiable instrument and the discharge of a non-negotiable simple contract for the payment of money on the same footing. Why Subsection 119, par. 4, was inserted does not appear. As Professor Ames says, " It would be superfluous even if it were accurate." It has no counterpart in the English act, nor appar- ently in any other existing code. Mr. Crawford's Annotation, which usually gives the cases upon which each section is based, is silent as to 119, par. 4. But that this subsection will be per- mitted to upset such a rule as that which declares that payment befdre maturity is no defence against a holder in due course, is unbelievable, though it must be confessed that in limiting its meaning, the courts will probably have to proceed on the ground that any other interpretation would be revolutionary, unjust, and absurd. Section 120, par. 3 : " A person secondarily liable on the instrument is dis- charged : "(3) By the discharge of a prior party." * " This subsection," says Professor Ames, " is the most mis- chievously revolutionary provision in the new code. It means that if the maker is discharged by the statute of limitations, all 1 The entire section reads : " A person secondarily liable on the instrument is discharged : 1. By any act which discharges the instrument. 2. By the intentional cancellation of his signature by the holder. 3. By the discharge of a prior party. 4. By a valid tender of payment made by a prior party. 5. By a release of the principal debtor, unless the holder's right of recourse against the party secondarily liable is expressly reserved. 6. By any agreement binding upon the holder to extend the time of payment or to postpone the holder's 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." THE NEGOTIABLE INSTRUMENTS LAW. 277 the indorsers are ipso facto discharged. It means that if a joint note is executed by ' A., principal,' and ' B., surety,' and B. dies, whereby the whole burden survives to A., all the indorsers are discharged. It means that if by some inadvertence due notice should not be given to the first indorser so that he would be dis- charged, all subsequent indorsers, although duly notified, would also be discharged. It would mean, but for the saving grace of Section i6 of the National Bankrupt Law, that an indorser would be discharged if any prior party received his discharge in bankruptcy." ^ Judge Brewster's reply is that Subsection . 3 means only the discharge of a prior party by the holder, and to show this he argues : 1. The other paragraphs of Section 120 refer to acts of the parties, not to acts of law. 2. In none of the ten books on commercial papter published since the new act was legislatively adopted, is there a suggestion that Subsection 120, par. 3, changed the law. 3. That two or three text-books state the law in words practi- cally the same as those used in Subsection 120, par. 3. 4. It is a rule of statutory construction that in statutes or re- visions condensing or in general restating the common law, no change is presumed except by the clearest and most imperative implication. Judge Brewster thinks that the critic is unjust in trying to read 1 This section, which has no counterpart in the English act, seems to have been developed out of the New York case of Shutts v. Fingar, 100 N. Y. 539, 1885. In Merritt «. Todd, 23 N. Y. 28, 1861, the New York court laid down the rule that in order to charge the indorser of a demand note in New York, it is not necessary, as it is in other jurisdictions, to present the note for payment within a reasonable time. Merritt v. Todd was followed by later New York cases, though it has now become obsolete through the adoption by New York of the Negotiable Instruments Law, which provides that an instrument payable on demand must be presented within a reasonable time after issue. " In Shutts v. Fingar the holder failed to present a simi- lar note to the maker until after the latter was discharged by the statute of limitations, but claimed the right, under the authority of Merritt v. Todd, to charge the indorser by a presentment at any time. The court, however, declined to follow that case to its logical conclusion. While adhering to the doctrine that the presentment of a demand note need not be made within a reasonable time, they decided tliat such a note must be presented before the maker was discharged by the statute of limitations. This, it will be seen, is a totally different proposition from that of Subsection 3. Since Merritt ». Todd has become obsolete through the adoption of the Negotiable Instruments Law, Shutts o. Fingar is now nothing more than a legal curiosity.'' And see, also, Crawford's An. N. I. L. 84, notes A and C. 27S TUB :iEGOTIABLE INSTRUMENTS LAW. into Subsection 3 the words " by operation of law." Professor Ames retorts that Judge Brewster is trying to read into this subsection the words " By the holder." Furthermore, says the critic, if the words " by the holder " are to be read in, this sub- section will apply to only one case which is not already covered by the other paragraphs of this section, and in that one case it works injustice. A. makes a note for the accommodation of B. If the holder, with knowledge of the accommodation, releases A., this subsection would discharge B., the accommodated indorser. Yet the decisions are the other way,^ and rightfully, for the action of the holder in releasing A. has not prejudiced B., since the latter could not, on paying the holder, have any right over against the accommodation maker. The rather lame answer given amounts to this: If all that is true, what possible harm can Subsection 120, par. 3, do, except to discharge the indorser in the case you suppose ? The subsection says simply " By the discharge of a prior party." That would seem to mean any discharge; a discharge by operation of law, or a discharge by the holder. If the Com- missioners meant only the latter (and of course that is all they did mean), why did they not say so? It is to be earnestly hoped that the courts will adopt Judge Brewster's interpretation. It is to be as earnestly regretted that the Commissioners did not ex- press themselves unmistakably on so important a point. Professor Ames also criticises paragraphs 5 and 6 of Section 120, which read : " 5. By a release of the principal debtor, unless the holder's right of recourse against the party secondarily liable is expressly reserved. " 6. By any agreement binding upon the holder to ex- tend the time of payment or to postpone the holder's 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." They are inaccurate, he says, in point of law. " If the party primarily liable is an accommodation acceptor or maker, a release of him by the holder, or a binding agreement to give him time, 1 CoUott V. Haigh, 3 Campbell, 281 ; Hill v. Read, D. & Ry. N. P. z6 ; Sargent v. Appleton, 6 Mass. 85 ; Parks v. Ingram, 22 N. H. 283 ; and see also Ludwig v. Igle- hart, 43 Md. 39 ; Gloucester Bank v. Worcester, 10 Pick. 528 ; Bruen a. Marquand, 17 Johnson, 58. THE NEGOTIABLE INSTKUMENTS LAW. 279 does not discharge the accommodated drawer or indorser. The discharge of the drawer or indorser in such cases would be highly inequitable. The action of the holder cannot possibly prejudice them, for, under no circumstances, would they, on paying the holder, have any right, either by subrogation or indemnity, against the accommodation acceptor or maker." Professor Ames assumes that both these subsections have to do with releasing or giving time to " the person primarily liable." Possibly there is room for doubt as to that. Subsection 5 speaks of " the principal debtor." Now the person " primarily liable " on the instrument is the person who, by the terms of the instrument, is absolutely required to pay the same; whereas, by the words " principal debtor " we usually or at least very frequently mean the person ultimately liable for the amount of the instrument. If A. makes his note for B.'s accommodation, A. is " primarily liable," for, by the terms of the instrument, he is absolutely re- quired to pay the same, but B., the accommodated payee, is " the principal debtor " who must ultimately foot the bill. On the other hand, paragraph 6 evidently refers to an extension of time given to the person " primarily liable." Now, if Subsection 5 refers only to a release of " the principal debtor," Professor Ames' illus- tration of the accommodation note is not in point, because the accommodated indorser would not be discharged by a release of the accommodation maker, the latter not being " the principal debtor." But by Subsection 6 an extension of time given to the accommodation maker would discharge the accommodated indorser.^ Assuming, however, that Professor Ames is correct in suppos- ing that both Subsections 5 and 6 apply to the person primarily liable on the instrument, even though he may not be the principal debtor, his illustration shows that these subsections are not wholly satisfactory. Judge Brewster's reply admits that the cases dealing with the point raised by Professor Ames' illustration are sound, but says that they are not disturbed by the Negotiable Instruments Law, for " The law is intended to set out the legal liability on the in- strument as such, in the due course of commercial transactions. It could never be held to mean that a party who had paid money 1 But the cases on this point make no distinction between releasing an accommoda- tion maker or acceptor and giving him an extension of time. See cases cited in preceding note. Nor does there appear to be any reason for making such a distinction. 280 THE NEGOTIABLE INSTKTJMENTS LA"W. for another's accommodation could not at law, if not on the instru- ment, recover it back. That is a matter between the parties, entirely outside of the effect of the instrument in the hands of a holder." The answer is scarcely responsive, as Professor Ames is talking about taking away from the holder his right against the accom- modated indorser, and not about a person's right to recover money paid for another's accommodation; but evidently Judge Brewster's idea is that the act is dealing solely with the discharge of the instrument, and does not discharge any other actions at law that the parties may have. That is true, but it furnishes no reason for denying an action on the instrument whenever an action on the instrument should lie. Moreover, if the holder, in Professor Ames' illustration, took the note in absolute payment of a debt, what rights would he have against the accommodated indorser after the latter is discharged from liability on the note ? Finally, Professor Ames objects to Subsections 5 and 6 as the superfluouT introduction of doctrines of suretyship into a nego- tiable irjfruments code, and if these are to be introduced, he think-; that other doctrines of suretyship of equal importance should be inserted, as, for instance, the doctrine that the accom- modation maker or acceptor, although the party primarily liable on the instrument, will be discharged if the holder, with knowl- edge of the accommodation, releases or undertakes to give time to the accommodated drawer or indorser. Section 124: " Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided 1. except as against a party who has himself made, authorized or assented to the alteration, and subsequent indorsers. " But when an instrument has been materially altered, and is in the hands of a holder in due course not a party to the alteration, he may enforce payment thereof according to its original tenor." ^ 1 Section 64 of the English Bills of Exchange Act reads, " Where a bill or acceptance is materially altered without the assent of all parties liable on the bill, the bill is avoided, except as against a party who has himself made, authorized, or assented to the alteration, and subsequent indorsers. "Provided, that where a bill has been materially altered, but the alteration is not apparent, and the bill is in the hands of a holder in due course, such holder may avail himself of the bill as if it had not been altered, and may enforce payment of it according to its original tenour." THE NEGOTIABLE INSTRUMENTS LAW, 281 The criticism of this section is contained in a note published subsequent to the articles in the Harvard Law Review and is based upon the case of Jeffrey v. Rosenfeld/ decided by the Supreme Court of Massachusetts in September, 1901. At the common law, the material alteration of a negotiable in- strument without the assent of all parties liable thereon avoided the instrument except as against a party who made, authorized or assented to the alteration, and subsequent indorsers. The rule applied to an alteration made by a stranger as well as to an altera- tion made by a party to the instrument. Section 64 of the English act perpetuates the common law rule with the exception of a pro- viso inserted for the benefit of a holder in due course, under which he may enforce, according to its original tenor, a bill which has been materially altered, if the alteration is not apparent. The proviso, however, does not concern us in this discussion. The American courts early changed the common law rule to the extent of holding that an alteration made by a stranger was a mere spoliation or trespass, and that the holder could still en- force the instrument in its original form. Now Section 124 of the American act is practically the same as Section 64 of the English act. Therefore, says Professor Ames, we are in this dilemma : " Either the English and American sections, although expressed in the same terms, must be interpreted differently, or else the American law is changed, and, as it seems to the writer, for the worse. To avoid the second horn of the dilemma involves great straining, not to say perversion, of simple English words." How one can see any ambiguity in Section 124 is a mystery. It reads, " When a negotiable instrument is materially altered ... it is avoided," etc. An alteration made by a stranger is not excepted, and certainly it is none the less an alteration because made by a stranger. To say that such an alteration is not covered by Section 124 would be, as Professor Ames says, " a great strain- ing, not to say perversion, of simple English words." Judge Brewster agrees with the critic on this point. The only person who has ever suggested a doubt as to the meaning of this section is Mr. Justice Morton, who wrote the opinion in Jeffrey v. Rosen- feld, supra. In that case, a note secured by a mortgage was al- tered, though by whom did not appear. On a bill in equity to restrain the foreclosure of the mortgage, the court sustained the holder's right to foreclose without interpreting Section 124 of the 1 61 N. E. R. 49. 282 THE NEGOTIABLE INSTRUMENTS LAW. code, though Justice Morton, in an obiter dictum of some length, remarked that the question of its interpretation was one that deserved serious consideration. After referring to the authorities in this country which decided that a material alteration made by a stranger will not avoid the instrument, he adds, " 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." As a generality, that remark is profoundly true and applies to all the sections of the new act. They should be construed according to American law rather than English law. As applicable to the particular point under discussion, however, the remark is of small value. If the language of Section 124 is clear and unmistakable, it should be given its plain meaning. To construe it according to American law does not mean to knock it down simply because it changes American law somewhat. The learned Judge points out no ambiguity in the language of this section. His sole reason for doubting its very plain meaning is that it changes the law. As a matter of fact we learn from Judge Brewster that it was intended to change the law; that Mr. Crawford reported to the Confer- ence in 1896 in favor of adopting the common law rule as to alterations by a stranger, in order that the law of the two coun- tries might be uniform on this important point, and in order that the benefit of written evidence might be preserved. This view was approved by the Conference, and Section 124 was inserted to restore the English rule. Professor Ames thinks that the change is for the worse, though he vouchsafes no reasons. Under such circumstances, the pro- fession cannot be blamed for accepting without question the judg- ment of the learned and experienced experts who drafted the new act. But at all events, there is no ambiguity in this section. Its meaning is unmistakable. Section 137: " Where a drawee to whom a bill is delivered for accept- ance 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." Says Professor Ames, "A refusal to accept is an acceptance! Such a perversion of language would be strange enough any- THE NEGOTIABLE INSTRTIMENTS LAW. 283 where, but in a deliberately framed code is wellnigh inexplicable. As a consequence of this fantastic provision the holder may bring concurrent actions: against the drawee because of his fictitious acceptance, and against the drawer because of the drawee's non- acceptance. Nor is anything gained by this fiction, of which there is no trace in the English act. All the demands of justice are met by holding the misconducting drawee liable for a conversion of the bill." How the holder could bring concurrent actions is not clear. He may sue the drawee, for under this section the latter is deemed to have accepted. But how could he proceed " against the drawer because of the drawee's non-acceptance " ? The drawee " is deemed to have accepted." In legal effect, therefore, he has accepted, and so the holder must wait until the bill is dishonored for non-payment, before a right of action accrues against the drawer. Mr. Cohen also disapproves of Section 137, though on another ground, namely, that this section " would seem to imply that if a bill be destroyed or not returned accepted within a reasonable time, notice of dishonor need not be given to the drawer. This is not in my opinion the law, and ought not to be the law." There is force in this objection. By destroying the instrument or refusing to return it to the holder, the drawee surely indicates that he does not propose to honor it. It would seem that the drawer should be instantly apprised of this in order that he may proceed at once to recover the funds that he has placed in the drawee's hands. And if the destruction of a bill amounted to a dishonor of it, the drawer would have that right, but by regarding it as an acceptance all actions are postponed until after the day of maturity. The idea that the wrongful retention or destruction of a bill by the drawee to whom it had been presented for acceptance, is of itself an acceptance, seems to have been introduced in 1808 by- Lord Ellenborough in the case of Harvey v. Martin.^ He reit- erated that view in a dissenting opinion in Jeune v. Ward,^ but .the majority decided otherwise, and held that such a destruction or refusal to return, while rendering the drawee liable for conver- sion, was not an acceptance. Jeune v. Ward settled the English law on this point, and it has never been changed. On principle, that decision seems to be correct, and the view there expressed is 1 r Campbell; 425 n. 2 2 B. & A. 653, 1818. 284 THE NEGOTIABLE INSTKTJMENTS LAW. approved by such commentators as Bayley, Chitty, Story, Par- sons, Daniel and Tiedeman,^ all of whom regard the idea that the retention or destruction of a bill amounts to an acceptance, as illogical and quite unnecessary. Mr. Farrell, in defending Section 137, recalls the rule that the holder of an instrument may join the drawer and drawee in the same action, and points out that if he were restricted to an action for conversion against the drawee, that action sounding in tort could not be joined with the action ex contractu against the drawer. Whether the advantage which results from the simple fact of joining the two actions will compensate for dispensing with the necessity of notifying the drawer of the refusal to return the instrument or the destruction thereof, and for adopting a rule so questionable on principle, may be seriously doubted. One never views without concern the insertion of a pure legal fiction in a statute. But the rule adopted is far from being without support. By the New York statute, from which this section of the code is copied, " every person upon whom a bill of exchange is drawn, and to whom the same is delivered for acceptance, who shall destroy such bill, or refuse, 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, shall be deemed to have accepted the same."" And several states have substan- tially copied the New York statute.^ Judge Brewster says that from all these states came the report that this provision " ' had worked well.' The bankers regarded it as a simple, practical, definite, working rule." Probably, there- fore, we are justified in hoping that it will " work well " in the Negotiable Instruments Law. Section 175: " Where a bill has been paid for honor, all parties subse- quent to the party for whose honor it is paid are discharged, but the payer for honor is subrogated for, and succeeds to, 1 Bayley on Bills, Chapter vi, Sec. i ; Chitty on Bills, star page 296 ; Story on Bills, Sec. 248 ; i Parsons, 285 ; i Daniel's Negotiable Instruments, Sec. 500 ; Tiedeman on Commercial Paper, Sec. 224. " 2 Rev. St. of N. Y. {6th Ed.j 1161. Though it was decided that under this statute the holder, in order to recover, must prove a conversion of the bill. Matteson V. Moulton, 79 N. Y. 627. " Alabama, Arkansas, Idaho, Kansas, Nevada, Washington, California. THE NEGOTIABLE INSTRUMENTS LAW. 285 both the rights and duties of the holder as regards the party for whose honor he pays and all parties liable to the latter." ^ When a bill has been protested for non-payment, a third person ■ — who may or may not be a party to the bill — may intervene and pay the bill for the honor of any party or parties thereto. The payer for honor is then, by Section 175, subrogated to the rights of the holder as regards the party for whose honor he pays, and all persons liable to the latter. Suppose A. draws on B. and the latter accepts for A.'s accommodation. The bill is dishonored and X. pays it for the honor of the drawer. Since B., the accommodation acceptor, would not be liable to the accommodated drawer in case the latter took up the bill, X., the payer for honor, cannot, under this section, sue B. He may sue only A. and all parties liable to the latter. This rule was laid down in 1808 by Lord Erskine in Ex parte Lambert.^ For many years that case was everywhere regarded as an authority. No text writer doubted its soundness, and the only two American cases in which the point has been raised,* decided in 1835 and 1846, followed Lord Erskine without hesita- tion. But in Ex parte Swan,* decided in 1868, Malins, V. C, condemned the doctrine of Lord Erskine and laid down the oppo- site rule, viz., that the payer for honor should be subrogated to the rights of the holder against the party for whose honor he pays, and all parties prior to (not liable to) the latter. In 1882, how- ever, the English code enacted Lord Erskine's rule. Professor Ames says that this was evidently a mere oversight. " Mr. Chal- mers, in his excellent treatise, is careful to indicate every instance in which the English act modifies the previous law, but he gives no intimation that Section 68-5 introduced any change. One must infer that he was unconscious of any change. This inference is confirmed by the first edition of his Digest,^ published four years before the passage of the English act, in which he defines the right of the payer for honor in substantially the same language as that of the act. Mr. Chalmers' statement of the result of the 1 This section is identical with Section 68-5 of the English Act. ' 13 Ves. 179. Disapproving of the contrary view expressed in Ex parte Wacker- bath, 5 Ves. 574, 1800. » Gazzam v. Armstrong, 3 Dana [Ky.], 554, 1835; McDowell v. Cook, 6 Smed. & M. [Miss.] 420, 1846 ; and see Sharswood's Edition of Byles on Bills, 406 n. 4 L. R. 6 Eq. 344-365- ' Page '92- 286 THE NEGOTIABLE INSTRTTMENTS LAW. decisions is in general so accurate that one wonders at this slip, which is all the more surprising, because in his table of cases overruled, he includes Ex parte Lambert as overruled by Ex parte Swan." Of course it is possible, though scarcely likely, that when Judge Chalmers published his Digest in 1878, he overlooked the fact that Ex parte Lambert had been overruled by Ex parte Swan. It is scarcely believable, however, that the experts who revised Judge Chalmers' original draft of the Bills of Exchange Act, who certainly had both cases before them, should have been uncon- scious of the fact that they were codifying the overruled decision. The probable, natural, and reasonable explanation is that they pre- ferred the doctrine of Lord Erskine to the doctrine of Chancellor Malins. However this may be. Lord Erskine's doctrine has cer- tainly been the law for twenty years last past in England, and it is the doctrine laid down in the only two American cases on this point. Therefore, when one criticises the American Commis- sioners for not digging up the rule of Ex parte Swan, it would seem to be incumbent on him to show very clearly that Ex parte Lambert is wrong and Ex parte Swan right. It is true that the latter rule prevails in the codes of Germany and France,^ and that it formerly prevailed in the California code.^ Beyond this, Professor Ames presents nothing in support of it. As a matter of fact, it is far from clear that the rule of the American and English acts is not the better of the two. It certainly lessens litigation, for if the payer for honor may sue the accommodation acceptor the latter will then proceed against the accommodated drawer. Aside from this, there seems to be justice and common sense in the view that when X. steps in and pays for A.'s honor a bill on which the latter is liable as drawer, X. should be regarded (except as to his undoubted right to reimbursement from the man whose debt he has paid), as having stepped into A.'s shoes, and' therefore should have only those rights which A. would have had in case he had paid his own debt. Section 186: " A check must be presented for payment within a reason- able time after it is issued, or the drawer will be discharged 1 French Code de Commerce, Art. 159. German Wechselordnung, Sec. 63. Trans- lated in 3 Randolph's Commercial Paper, 2d Edition. * Sec. 3205, 3 Randolph's Commercial Paper, 2d Edition. THE NEGOTIABLE INSTRUMENTS LAW. 287 from liability thereon to the extent of the loss caused by the delay." i No similar provision is made for the effect of not giving due notice of dishonor when the check has been presented but not paid. Now Section 185 provides that " Except as herein other- wise provided, the provisions of this act applicable to a bill of exchange payable on demand apply to a check." Therefore the effect of a failure to give due notice of dishonor to the drawer of a check must be governed by Section 89, under which delay in giving notice of dishonor to the drawer of a bill absolutely dis- charges him, although the delay has not caused him any loss. In other words, delay in presenting a check for payment discharges the drawer from liability thereon only to the extent of the loss caused by the delay, but delay in giving the drawer notice of dishonor absolutely discharges him. Yet the Courts and the text writers give the same effect to delay in presenting a check and delay in sending notice of its dishonor.^ In both cases the drawer is discharged only to the extent of the loss caused by the delay. That is Professor Ames' objection to this section. Judge Brewster shifts his ground somewhat in replying to this criticism. In his first paper he seems to admit that delay in noti- fying the drawer of a check will absolutely discharge the latter, and says, " Suppose it is so, technically, with reference to the check itself. What is the harm? The debt is not discharged, except for laches. The holder can sue on his debt just the same as he could have done before the check was given. . . . The sec- tion seems to be harmless in any view." Professor Ames disposes of that answer as follows : " In all other cases a creditor who, by his laches, discharges his debtor from liability on a bill given in conditional payment of a debt, for- feits also all right to the debt. Furthermore, suppose a check to be given in absolute payment of the drawer's debt, or in consideration of the payee's release of a claim against a third person. Surely in either of these cases, the holder who loses his right on the check, has lost everything." Then in his second paper. Judge Brewster claims that, " Since * This provision is copied from Section 74 of the English act. " Clark V. Nat. Bank, 2 MacArthur, 249; Griffin v. Kemp, 46 Ind. 172; Gregg v. George, 16 Kan. 546; Stewart v. Smith, 17 Ohio St. 82; Purcell v. AUemong, 22 Grat 739 ; /« r^ Brown, 2 Story, 502 ; Story, Prom. Notes, 493 ; Dan. Neg. Inst. (4th Edition) 1587 ; 2 Benj. Chal. (2d Edition) 270. -.--288 THE NEGOTIABLE INSTRUMENTS LAW, the only penalty for delay in presentment (i86) is the loss occa- sioned by delay, and not a discharge, the natural inference there- from would be that the same exceptional exemption as to checks would continue in case of non-payment, namely, that the only pen- alty would be the loss occasioned by the delay, and not any abso- lute discharge, as claimed by the Dean." All admit that this ought to be the law, and again it is pertinent to inquire, " If the Commis- sioners meant that, why did they not say so ? " A few short words would have settled the matter. Why, then, rely on " the natural inference " ? Does the history of the making and inter- preting of statutes vindicate the wisdom of relying on the courts to " infer " the right thing, or does it rather teach that the lan- guage of a statute cannot be too clear ? And in this case it may not be such " a natural inference " after all, when the learned Chairman of the Conference which framed the act sees it only after second thought. Judge Brewster regards Professor Ames' objections to this section as " the most truly academical criticism in the whole list." Evidently his reason for this view is that although the rules laid down in Sections 89 and 186 are copied from the English act, and have. been repeated in all the cases and text-books since the first edition of Byles on Bills, no one has doubted during all this period that the same result flows from delay in sending notice of the dishonor of a check as from delay in making presentment. As to the cases and the text-books, that argument is worth little. Language used by a court must be construed with strict regard to the particular facts to which the language relates, and is authori- tative only when so construed. Language used by a text writer is not authoritative at all, and is of little assistance even, unless construed with reference to the particular line of cases under dis- cussion. Language used in a statute is read in a different light. An inaccuracy of statement which causes little confusion and no real harm in the opinion of a judge or in a text-book, may prove positively mischievous in a statute. But the fact that these same provisions have proved satisfactory in the English act for twenty years — while not disproving the objection that they are inac- curate — does indicate that little or no harm will result from that inaccuracy.-' 1 Mr. Farrell argues that Section 89 cannot refer to a check, because it provides that when an instrument has been " dishonored by non-acceptance or non-payment " notice of dishonor must be given. And he reasons that since a check need not be THE NEGOTIABLE INSTEUMENT8 LAW. 289 This concludes the discussion. If it is permitted to offer a cautious generahzation on this controversy, it is submitted that ahhough Professor Ames has pointed out two or three actual errors in the new law and has shown that in still other instances the language might have been improved upon, nevertheless, these errors and imperfections are not sufficiently numerous or impor- tant to make one seriously doubt the advisability of adopting the Negotiable Instruments Law in every state in the Union. It is easy to lose one's perspective and sense of proportion in such a matter. The flaws in the act, few though they be, when grouped together and considered alone, seem formidable. Yet, when a survey is made of the entire statute, when one regards the many salutary provisions which settle disputed questions or introduce needed changes, when one studies the admirable simplicity and accuracy of most of its provisions and considers the comparative unimportance of most of the flaws which have been discovered, then the shortcomings of the Negotiable Instruments Law shrink to their real size and (though still apparent) do not seem likely to seriously impair its usefulness. It is unfortunate that the Com- missioners did not have the benefit of Professor Ames' criticisms when they were revising the original draft of the act.-^ That some of them would have been adopted (to the benefit of the act) can scarcely be doubted. But the act having been started on its course and legislatively adopted in a number of states bferofe these errors were discovered, it was decided, and no doubt wisely de- cided, that it was unnecessary and impolitic to start the work of amendment at that stage of its career. The readiness of several state legislatures to adopt the act in spite of the criticisms that have been made upon it and the very small amount of litigation that has arisen under it in jurisdictions where it has been in force' for several years, have thus far vindicated the soundness of the Commissioners' decision. Undoubtedly, however. Professor Ames has rendered sub- stantial service to the Negotiable Instruments Law. He has pointed out the difficulties and possible dangers that lurk in some ■ sections of it, and a careful study of his criticisms by those courts which will be called on from time to time to construe these sec-' presented for acceptance, Section 89 does not apply. The error is obvious. Section 89 reads, " dishonored by non-acceptance or non-payment." Therefore when a check is dishonored by non-payment, Section 89 does apply. 1 Professor Ames saw the act for the first time after its adoption by four state legislatures. 290 THE NEGOTIABLE INSTRUMENTS LAW. tions, will serve to avoid some confusion and several unfortunate decisions. After all, many, if not most of the flaws in the act can be overcome by a careful construction. Finally, the whole controversy should serve as a useful lesson to those who will in future direct the preparation of statutes codifying other branches of the law in this country. The Nego- tiable Instruments Law was originally drafted with the greatest care by a learned expert. It was then revised by a sub-committee of the Commissioners on Uniform State Laws, and was then revised by the Commissioners themselves at their annual confer- ence. In addition to this, the statute, prior to its adoption by the Conference, had been brought to the attention of a number of ex- perts generally throughout the country, and had received at least some consideration at their hands. Moreover, all who shared in the preparation of the act enjoyed the very great advantage of having before their eyes the English Bills of Exchange Act, which offered suggestions on every important point ; afforded a constant opportunity for useful comparisons; whose provisions moreover could be examined in the light of twenty years' experience. In spite of all this, some errors (precisely how serious no one can say as yet) crept into the Negotiable Instruments Law which might have been avoided had the act, prior to its final revision, been sub- jected for several years to the most searching criticism obtained by giving to it the widest publicity and by soliciting the active co- operation of the considerable number of men whose thorough knowledge of the law of negotiable paper, whether from the standpoint of the banker, the practitioner, or the student, had fitted them to render valuable assistance in the preparation of a code on that subject. The two or three additional years consumed by pur- suing this method would have yielded an ample return, and those who would object to the labor, expense, and time required by this method little appreciate the gravity and difficulty of the task of embodying the law in a series of authoritative, abstract proposi- tions. Many will regard the shortcomings of the Negotiable In- struments Law as not very serious, but all may well remember that these shortcomings (such as they are) can probably be as- cribed to the lack of adequate criticism. Charles L. McKeehan. THE NEGOTIABLE INSTRUMENTS LAW. 291 THE NEGOTIABLE INSTRUMENTS LAW — NECESSARY AMENDMENTS.^ BY JAMES BARR AMES. The Negotiable Instruments Law has been enacted in twenty states and the District of Columbia. There is reason to be- lieve that it would have been adopted in some other states but for the criticisms of several of its provisions in earlier numbers of this Review.^ In the American Law Register for August, September, and October there is a series of articles by Mr. Charles L. McKeehan upon " The Negotiable Instruments Law — A Re- view of the Ames-Brewster Controversy." * Whether readers agree or disagree with the reviewer's conclusions, all must recog- nize his ability, impartiality, and knowledge of his subject. This year most of the biennial legislatures meet, and attempts will be made to secure the enactment of the new code in additional states. It is quite possible that attempts will also be made to amend the Law in some states which have adopted it. It is not the object of this paper to reiterate in detail former criticisms upon the new code. But, inasmuch as the reviewer of the Ames-Brewster controversy sustains the greater part of these criticisms,* it seems worth while to point out that the most serious defects in the new code are in those sections in which the codifiers departed from the model of the English Act, and to call attention to two sections in which the defects, though common to both Acts, not only change well-established American law, but also threaten serious injustice. 1 Reprinted from i6 Harv. L. Rev. 255. » 14 Harv. L. Rev. 241, 442 ; 15 Harv. L. Rev. 26. These criticisms and the replies thereto by Judge Brewster in 10 Yale L. J. 84; 15 Harv. L. Rev. 26, together with a letter from Mr. Arthur Cohen, Q. C, to Judge Brewster, and the text of the Negotiable Instruments Law have been published in a pamphlet by the Harvard Law Review Publishing Association. ' 41 Am. L. Reg. 3, 499, 561. * It is right to say that Mr. McKeehan has convinced the writer that his first ob- jection to § 49 is fully met by the suggestion that the indorsement required of the transferor might in certain cases be a qualified indorsement. If the American courts would follow the Scotch precedent of Hood v. Stuart (Court of Sess. March 2C, 1870) in which case the assignee of the accommodated payee was allowed without the aid of the latter's indorsement to charge the acconffiiodating acceptor, his second objection to that section would disappear also. He must dissent, however, from Mr. McKeehan's view that the case of accommodation and the case of fraud are to be treated in the same manner. The reason for the distinction is clearly pointed out In the Scotch case. 292 THE KKGOTIABLE INSTKUMENTS LAW. The sections that would be wisely amended by making them uniform with the English Act are eight, namely, 20, 40, 65-4, 1 19-4, 120-3, 120-5, 120-6, and 137. The other two are sections 124 and 186. Section 20 makes an agent, who signs his principal's name without authority, liable on the instrument. The decisions and text writers are almost unanimous against this doctrine,^ which arbitrarily imposes upon the parties a contract which was not in the contemplation of anybody. It may work, too, very unjustly. It is right that the agent should be held to warrant his authority to act as agent, and made to answer to the other party for dam- ages suffered by reason of his not getting the principal's obliga- tion. But to make the ostensible agent liable for the face of the instrument, when the contemplated principal was insolverit, would give the holder unjust enrichment and impose an undeserved penalty upon such agent.^ To amend this section, strike out in the fourth line the words " if he was duly authorized." Section 40. Section 8-3 of the English Act, of which Sec- tions 9-1 and 9-5 are a reproduction, was intended to supersede the doctrine of Smith v. Clarke,^ by which an instrument indorsM in blank continued negotiable although subsequently indorsed specially.* But Section 40 revives Smith v. Clarke by enacting that "where an instrument, payable to bearer, is indorsed spe- cially, it may nevertheless be further negotiated by delivery." Mr. McKeehan endeavors to save this section by reading into it before the word " payable " the word " originally." ^ But this , is inadmissible. Instruments payable to bearer are defined with t . 1 Hall V. Crandall, 29 Cal. 567 ; I^ander v. Castro, 43 Cal. 497 ; Taylor v. Shelton, 30 Conn. 122 ; Duncan v. Niles, 32 111. 532 ; Seeberger v. McCormick, 178 111. 404, 417 ; Thilmany v, Iowa Co., 108 Iowa 357, 363; Noyes v. Loring, 55 Me. 408; Bartlett v. Tucker, 104 Mass. 336; Sheffield v. Ladue, 16 Minn. 388 ; Cole v. O'Brien, 32 Neb. 68; Patterson v. Lippincott, 47 N. J. Law 457, 459 ; White v. Madison, 26 N. Y. 1 17 ; Miller w. Reynolds, 92 Hun 400 ; Delius v. Cawthorn, 2 Dev. go; Bryson v. Lucas, 84 N. C. 680,683; Trust Co. ». Floyd, 47 Oh. St. 525; Hopkins ». Mehaffy, 11 S. & R. 126 (semble); Story, Ag. (gth ed.) § 764 a; Mechem, Ag. § 550; Huffcut, Ag. § 230; Rein- hard, Ag. § 307. In two or three states an agent who without authority signs " A. B. agent for C. D." is held liable on the instrument, everything after his own signature being ignored. Byars v. Doores, 20 Mo. 284 ; Weare v. Gove, 44 N. H. 196. But no case has been found in which A. B. signing simply the name of " C. D." was charged on the instrument. « Re Nat. Co., 24 Ch. Div. 367, 372, 375. • Peake, 225. * Chalmers, Bills of Exch. Act (5th ed.) 24; Mr. Cohen's letter, 15 Harv. L. Rev. 37. J«/ra, p. 93. ' 41 Am. L. Reg. 461. Sufira,p. 119- THE NEGOTIABLE INSTRUMENTS LAW. 293 great care in Section 9 as including several species of instruments. Wherever the generic term is used without qualification in another section, it cannot be limited to one of the species.^ Furthermore, Mr. Crawford, the draughtsman of the new code, in his note to Section 40 cites Smith v. Clarke as if still law. So do the other commentators upon the Act.^ Mr. McKeehan's suggestion is also opposed to the interpretation given to this- section by Judge Brewster, the Chairman of the Committee on Uniform Laws. Section 40 should be expunged. Section 65-4 introduces the novel distinction that a transferor by delivery is a warrantor of title and genuineness only to his immediate transferee while the similar warranty of the indorser without recourse runs to all subsequent holders. There is no authority for this arbitrary distinction.* The only decision on the point is against this distinction.* Another new and unfortunate distinction is introduced by sub- section 4, by which the transferor of an instrument void for usury is not liable as a warrantor, unless he was aware of the usury, whereas the transferor of an instrument void for coverture or voidable for infancy is liable as a warrantor, although he was ignorant of the coverture or infancy. This distinction is due to the anomalous decision in Littauer v. Goldman,^ and the anomaly, already condemned in other jurisdictions,* should not be per- 1 Section 9-1 reads : " The instrument is payable to bearer when it is expressed to be so payable." Mr. McKeehan understands this section to mean only instruments originally payable to bearer. Such was formerly the opinion of the writer. 14 Harv. L. Rev. 246. Supra, p. 46. But clearly it must apply to an instrument originally pay- able to order and indorsed by the payee expressly " Pay to bearer." Whether, there- fore, an instrument is payable to bearer under each of the paragraphs of Section 9 would seem to depend upon the form of the instrument, not at the time of its creation, but at the moment of inspection. An instrument originally payable to order may become payable to bearer by an indorsement to bearer or by an indorsement in blank, and conversely an instrument originally payable to bearer may cease to be so payable by a special, indorsement. ^ 2 Norton, Bills & Notes (Tiffany's ed.) 116; Huffcut, Neg. Inst. 24; 17 Bank. L. J. 12 and 775 ; Selover, N. I. L. 189 n. 78, citing cases like Smith v. Clarke. ' The New York cases cited by Mr. McKeehan in 41 Am. L. Reg. 567, u, 12, in which an indorser without recourse was held to be incompetent to testify in an ac. section, would have no remedy on the instrument against the drawer either on the bill or for the consideration for which the bill was given until after its dishonor by non-payment. As Mr. Cohen says : " This is not in my opinion the law, and ought not to be the law." This section should be expunged.* Each of the amendments thus far recommended would remove a difference between the English and American codes. It remains to consider two' sections whose amendments would introduce a difference between the two codes. Section 124. By the English decisions a material alteration of an instrument, even by a stranger, nullified it. The American courts, deeming the English precedents repugnant to justice, de- clined to follow them, and decided that the holder should not forfeit his rights because of this wrongful act of a stranger. The Bills of Exchange Act codified the English decisions. The Ne- gotiable Instruments Law, instead of codifying the American decisions, abandoned them, and restored the medieval doctrine of forfeiture. Other things being equal, uniformity between the American and English law is to be encouraged. But where it is a choice between uniformity and justice, American legislators ought not to hesitate to sacrifice uniformity. Upon the point of justice in this case the words of Mr.. Justice Story may be cited: " The old cases proceeded upon a very narrow ground. It seems to have been held, that a material alteration of a deed by a stranger, without the privity of either obligor or obligee, avoided the deed ; and by parity of reasoning the destruction or tearing off the seal either by a stranger or by accident. A doctrine so 1 15 Harv. L. Rev. 38. Supra, p. 94. * 41 Am. L. Reg. 583. Supra, pp. 161-163. • This section is objectionable for another reason. A drawee, who destroys the instrument, is properly liable to the holder for its collectible value, as in any case of conversion of a bill. But the fictitious acceptor, under this section, must pay the payee the face value of the bill, although the drawer is hopelessly insolvent. THE NEGOTIABLE INSTRUMENTS LAW. 297 repugnant to common sense and justice, which inflicts on an inno- cent party all the losses occasioned by mistake, by accident, by the • wrongful acts of third persons, or by the providence of Heaven, ought to have the unequivocal support of unbroken authority, before a Court of law is bound to surrender its judg- ment to what deserves no better name than a technical quibble." ' The section should be amended by adding after the word " altered " in the first line the words " by the holder." It is believed that it would be advisable also to insert before the word " materially " in the first line the words " fraudulently and." Section i86 together with Section 89 provides that the drawer ■ of a check is absolutely discharged by the holder's failure to give him due notice of its dishonor although the laches has not caused any loss to him. This section changes well settled law, and for the worse. Fortunately cases presenting the facts here supposed are not likely to be frequent. But this will be small consolation to the particular plaintiff when the case does arise. To sum up, Sections 20, 65-4, 119-4, 120-3, 120-5, 120-6, and 137 are obnoxious to these three objections. They introduce un- necessary distinctions between the English and American codes. They nullify generally established and well-approved doctrines of the American and English courts. They are sure to provoke needless litigation and to cause much injustice. Section 40 is open to the first and third objections, and further- more nullifies the wholesome innovation of Section 9-5. Section 186 is opposed to the American and English precedents and is doubtless due to an inadvertence of the American and English codifiers. Section 124 is a return to archaic formalism, and the language of Judge Story, already quoted, fittingly describes its injustice. The writer retains his conviction that it is wiser to have no code at all than to adopt the Negotiable Instruments Law in its present form. If, on the other hand, this law should be amended as sug- gested in this paper, the sooner it is enacted throughout the Union, the better. James Barr Ames. 1 U. S. V. Spalding, 2 Mas. 478, 482. See the similar remarks by Beasley, C. J, in Hunt v. Gray, 35 N. J. Law 227, 233. 298 APPENDIX I. APPENDIX I. [In addition to the differences already noted the Bills of Exchange Act contains the following provisions not adopted by the Negotiable Instru- ments Law.] Form and Interpretaton. Sec. 8. (1) Where a bill contains words prohibiting a transfer, or indicating an intention that it should not be transferable, it is valid as between the parties therto, but is not negotiable. A cheek payable to M's order was crossed by the drawer "ac- couiit of M, National Bank, Dublin." Held, that the check con- tained no words prohibiting a transfer or indicating an intention that it shall not be transferred, and M's indorsee could recover from the drawer. Semile, a check payable to order or to bearer can not be made non-negotiable except by crossing it in the man- ner provided by sec. 76. National Bank v. Silke [1891] 1 Q. B. 435. See S. C, infra, sec. 76. Sec. 14. (3) Where a bill is payable at a fixed period after sight, the time begins to run from the date of the acceptance, if the bill be accepted, and from the date of noting or protest, if the bill be noted or protested for non-acceptance or for non-delivery. Sec. 14. (4) The term "month" in a bill means cal- endar month. Capacity and Authority of Parties. Sec. 22. (1) Capacity to incur liability as a party to a bill is co-extensive with capacity to contract. Pro- vided that nothing in this section shall enable a corpo- ration to make itself liable as drawer, acceptor, or indprser of a bill unless it is competent to it so to do under the law for the time being in force relating to corporations. APPENDIX I. 299 Under the Infants' Relief Act 1874 and Bills of Exchange Act sec. 22, an infant can not be held on a bill of exchange, even though it was given for necessaries and is in the hands of a holder in due course. In re Soltykoff [1891] 1 Q. B. 413. Transfer. Sec. 36. (2) Where an overdue bill is negotiated, it can only be negotiated subject to any defect of title affecting it at its maturity, and henceforward no person who takes it can acquire or give a better title than that which the person from whom he took it had, A bill drawn for the acceptor's accommodation but which had never been negotiated was in the hands of the drawer after maturity, and having come into the possession of the drawer's solicitors, the latter claimed a lien on it for services previously rendered the drawer in an action to recover the bill from a con- verter, and sued the acceptor on the bill. Held, that plaintiifs taking the bill overdue could acquire no rights against the accep- tor. Redfern v. Rosenthal, 86 L. T. Rep. 855. An overdue bill indorsed in blank was sold in Norway on a ju- dicial proceeding against one of several joint owners of the bill. By the laws of Norway the purchaser acquired a good title as against the equity of the other joint owners. Held, that although the bill was drawn and payable in England, sec. 36 (2) of the Bills of Exchange Act was not applicable and the purchaser was entitled to the bill. Alcock v. Smith, [1892] 1 Ch. 238; see also S. C. infra, sec. 72. In the above case Lindley J. (p. 263), said that " 'defect of title' is a phrase introduced into the Bills of Exchange Act in lieu of the old expression 'subject to equities,' which is an expression not adopted, because the Act applies to Scotland as well as to England, and 'subject to equities' is an expression not known to Scotch Law." Sec. 36. (5) Where a bill which is not overdue has been dishonoured, any person who takes it with notice of the dishonour, takes it subject to any defect of title attaching thereto at the time of its dishonour, but noth- ing in this subsection shall affect the rights of a holder in due course. SOO APPENDIX I. Presentment for Acceptance. Sec. 41. (1) (e) Where authorized by agreement or usage a presentment (for acceptance) through the post- office is sufficient. Presentment for Payment. Sec. 45. (5) Where a bill is presented at the proper place, and after the exercise of reasonable diligence no person authorized to pay or refuse payment can be found there, no further presentment to the drawee or acceptor is required. Sec. 45. (8) Where authorized by agreement or usage, a presentment (for payment) through the post- office is sufficient. Notice of Dishonour. Sec. 49. (6) The return of a dishonoured bill to the drawer or an indorser is, in point of form, deemed a sufficient notice of dishonour. Protest. Sec. 51. (6) (a) When a bill is presented through the post-office, and returned by post dishonoured, it may be protested at the place to which it is returned and on the day of its return, if received during business hours, and if not received during business hours, then not later than the next business day. Sec. 52. (2) When by the terms of a qualified ac- ceptance presentment for payment is required, the acceptor, in the absence of an express stipulation to that effect, is not discharged by the omission to present the bill for payment on the day that it matures. See Gordon v. Kerr, 25 Sess. Gas. 570 infra, see. 87 (1). APPENDIX I. 301 Sec. 52. (3) In order to render the acceptor of a bill liable, is not necessary to protest it, or that notice of dishonour should be given to him. Liability of Parties. Sec. 57.- Where a bill is dishonoured, the measure of damages, which shall be deemed to be liquidated dam- ages, shall be as follows: (1) The holder may recover from any party liable on the biU, and the drawer who has been compelled to pay the bill may recover from the acceptor, and an indorser who has been compelled to pay the bill may recover from the acceptor or from the drawer, or from a prior indorser (a) the amount of the bUl; (&) interest thereon from the time of present- ment for payment if the bill is payable on demand, . and from the maturity of the bill in any other case; (c) the expenses of noting, or when protest is necessary, and the protest has been extended, the ex- penses of protest. (2) In the case of a bill which has been dishonoured abroad, in lieu of the above damages, the holder may recover from the drawer, or an indorser, and the drawer or an indorser who has been compelled to pay the bill may recover from any party liable to him, the amount of the re-exchange with interest thereon until the time of payment, (8) Where by this Act inter- est may be recovered as damages, such interest may, if justice require it, be withheld wholly or in part, and where a bill is expressed to be payable with interest at a given rate, interest as damages may or may not be given at the same rate as interest proper. The damages given by this section are liquidated so as t6 ' permit the entry of judgment under Order XIV, rule 1, which gives power to a judge at chambers to order such entry when the writ is specially indorsed under Order III, rule 6, as for a liqui- dated demand. London, &c. Bank v. Clancarty, [1892] 1 Q. B. 689. The writ was indorsed "interest until payment or judg- 302 APPENDIX I, ment." So also as to a claim for noting and interest from date of the writ until payment. Lawrence v. "Wileocks, [1892] 1 Q. B. 696. Section 57 is not exhaustive; it only determines what shall be deemed liquidated damages, and does not prevent recovery of special unliquidated damages recoverable before the statute. In re Gillespie, 16 Q. B. D. 702, afSrmed 18 Q. B. D. 286. See S. C. supra, p. 160. Where a bill protested for better security was accepted for the honor of the drawer it was held that the acceptor could not re- cover the expenses of protest for better security, nor a commission for accepting, as, under see. 57, such expenses only as are "neces- sary" are recoverable and a protest for better security, while permitted, is not necessary. In re English Bank of the Eiver Plate, [1893] 2 Ch. 438. The words "bank charges" are a sufficient description of the expenses of noting. Dando v. Boden, [1893] 1 Q. B. 318. When a bill has been dishonored abroad, the damages are recoverable only under sec. 57 (2), and the holder has no option to sue under sec. 57 (1). Be Commercial Bank, 36 Ch. Div. 522. Discharges. Sec. 60. "WTieii a bill payable to order on demand is drawn on a banker, and the banker on whom it is drawn pays the bill in good faith and in the ordinary course of business, it is not incumbent on the banker to show that the indorsement of the payee or any subsequent in- dorsement was made by or under the authority of the person whose indorsement it purports to be, and the banker is deemed to have paid the bill in due course, although such indorsement has been forged or made without authority. A banker's draft payable to order on demand, addressed by one branch of a bank to another branch of the same bank and not crossed, is not a cheek within the meaning of sees. 60, 82, B. E. A. But it is within sec. 19 of the Stamp Act 1853, which protects bankers hona fide paying such drafts to holders claiming under forged indorsements. Capital and Counties Bank v. Gordon, [1903] A. C. 240. See S. C, infra, sec. 82. Crediting a customer with the amount of a check which he has, without authority, indorsed in the name of the payee per proc. the customer is not a payment of the cheek within sec. 60 B. E. A., but it is within sec. 19 Stamp Act 1853. Bissell v. Pox, 53 L. T. Rep. 193. See S. C, infra, sec. 82. APPENDIX I. 303 Lost Instruments. Sec. 69. Where a bill has been lost before it is over- due, the person who was the holder of it may apply to the drawer to give him another bill of the same tenour, giving security to the drawer if required to indemnify him against all persons whatever in case the bill alleged to have been lost shall be found again. If the drawer on request as aforesaid refuses to give such duplicate bill he may be compelled to do so. Sec. 70. In any action or proceeding upon a bill, the court or a judge may order that the loss of the in- strument shall not be set up provided an indemnity be given to the satisfaction of the court or judge against the claims of any other person upon the instrument in question. Conflict of Laws. Sec. 72. Wliere a bill drawn in one country is nego- tiated, accepted, or payable in another, the rights, duties, and liabilities of the parties thereto are deter- mined as follows : (1) The validity of the bill as re- gards requisites in form is determined by the law of the place of issue, and the validity as regards requisites in form of the supervening contracts such as acceptance, or indorsement, or acceptance supra protest, is deter- mined by the law of the place where such contract was made. Provided that— (a) Where a bill is issued out of the United Eangdom it is not invalid by reason only that it is not stamped in accordance with the law of the place of issue. 304 APPENDIX I. (&) Where a bill, issued out of the United Kingdom, conforms, as regards requisites in form to the law of the United Kingdom, it may, for the pur- pose of enforcing payment thereof, be treated as valid as between all persons who negotiate, hold, or become parties to it in the United King- dom. (2) Subject to the provisions of this Act, the inter- pretation of the drawing, indorsement, acceptance, or acceptance supra protest of a bill, is determined by the law of the place where such contract is made. Provided that where an inland biU is indorsed ia a foreign country the indorseinent shall as regards the payor be interpreted according to the law of the United Kingdom. (3) The duties of the holder with respect to present- rhent for acceptance or payment and the necessity for or sufficiency of a protest or notice of dishonour, or other- wise, are determined by the law of the place where the act is done or the bill is dishonoured. (4) Wliere the bill is drawn out of but payable m the United Kingdom, and the sum payable is not expressed in the currency of the United Kingdom, the amount shall, in the absence of some express stipulation, be calculated according to the rate of exchange for sight drafts at the place of payment on the day the bUl is payable. (5) Wbere a bill is drawn in one country and is pay- able in another the due date thereof is determined, ac- cording to the law of the place where it is payable. A bill was drawn in France (before the Act) by a Frenchman in French, but in English form on an English company, which accepted it. The drawer indorsed the bill in blank and sent it to an Englishman in England. Held, that the acceptor can not dispute the negotiability of the bill because the indorsement was invalid by French law. Be Marseilles Co., 30 Ch. Div. 598. APPENDIX I. 305 Interpretation here means "legal effect." Alcock v. Smith, [1892] 1 Ch. 238, 256, semile. See S. C. supra, sec. 36 (2). See also Embiricos v. Anglo-Austrian Bank, [1905] 1 K. B. 667. Cheques. Sec. 75. The duty and authority of a banker to pay a cheque drawn on him by his customer are determined by: (1) Countermand of payment; (2) Notice of the customer's death. A check to order of A delivered as a gift causa mortis was presented before death, but the banker refused payment because doubtful of the signature of the drawer, who died before it could be confirmed. Held, that the check was revoked by the death. In re Beaumont, [1902] 1 Ch. 889. A banker is authorized to pay a bill accepted by a customer payable at the bank, but is not bound to do so in the absence of a special arrangement. Bank of England, v. Vagliano, [1891] A. C. 107, 157. semble. See also Chalmers, Bills of Exchange, 6th ed. 255. On October 31st plaintiff drew a check on defendant bankers. On the same day he telegraphed to countermand payment. The telegram was delivered the same day after office hours and put in the letter box in the door of the bank. By an oversight on the part of defendant's servants the telegram was not brought to the notice of their manager until November 2d. On November 1, the cheek was presented and paid. Held, that payment was not in fact countermanded within section 75 B. E. A. although it might be that it was due to negligence of the bank officials that the notice was not received in time to stop payment. If de- fendant was liable at all it would be in damages for negligence. Curtice v. London City & Midland Bank, [1908] 1 K. B. 293. Crossed Cheques. Sec. 76. (1) Where a cneque bears across its face an addition of (a) The words "and company" or any abbreviation thereof between two parallel transverse Hues,' either with or without the words "not nego- tiable"; or, 306 APPEXDIX I. (&) Two parallel lines simply, either with or without the words "not negotiable"; that addition con- stitutes a crossing and the. cheque is crossed gen- erally. (2) Where a cheque bears across its face an addi- tion of the name of the banker, either with or without the words ''not negotiable," that addition constitutes a crossing, and the cheque is crossed specially and to that banker. A check drawn payable to the order of M was crossed "ac- count of M, National Bank, Dublin." This did not make the check non-transferable. National Bank v. Silke, [1891] 1 Q. B. 435; S. C. supra., see. 8 (1). Sec. 77. (1) A cheque may be crossed generally or specially by the drawer. (2) Where a cheque is un- crossed, the holder may cross it generally or spe- cially. (3) Where a cheque is crossed generally, the holder may cross it specially. (4) Where a cheque is crossed generally or specially, the holder may add the words ''not negotiable. " (5) Where a cheque is crossed specially, the banker to whom it is crossed may again cross it specially to another banker for collection, (6) Where an uncrossed cheque, or a cheque crossed generally is sent to a banker for collection, he may cross it specially to himself. Sec. 78. A crossing authorised by this Act is a mate- rial part of the cheque ; it shall not be lawful for any person to obliterate or, except as authorised by this Act, to add to or alter the crossing. Sec. 79. (1) Where a cheque is crossed specially to more than one banker, except when crossed to an agent for collection being a banker, the banker on whom it is drawn shall refuse payment thereof. (2) When the banker on whom a cheque is drawn which is so crossed APPENDIX I. 307 nevertheless pays tlie same, or pays a cheque crossed generally otherwise than to a banker, or if crossed spe- cially otherwise than to a banker to whom it is crossed, or his agent for collection being a banker, he is liable to the true owner of the cheque for any loss he may sus- tain owing to the cheque having been so paid. Provided that where a cheque is presented for payment which does not at the time of presentment appear to be crossed, or to have had a crossing which has been oblit- erated, or to have been added to or altered otherwise than as authorised by this Act, the banker paying the cheque in good faith and without negligence shall not be responsible or incur any liability, nor shall the pay- ment be questioned by reason of the cheque having been crossed, or of the crossing having been obliterated, or having been added to or altered otherwise than as authorized by this Act, and of payment having been made otherwise than to a banker, or to the banker to whom the cheque is or was crossed or to his agent for collection being a banker as the case may be. Sec. 80. Where the banker on whom a crossed cheque is drawn, in good faith and without negligence pays it, if crossed generally to a banker, and if crossed specially, to the banker to whom it is crossed, or his agent for col- lection being a banker, the banker paying the cheque, and, if the cheque has come into the hands of the payee, the drawer shall respectively be entitled to the same rights, and be placed in the same position as if payment of the cheque had been made to the true owner thereof. Sec. 81. Where a person takes a crossed cheque which bears on it the words ''not negotiable," he shall not have, and shall not be capable of giving a better title to the cheque than that which the person from whom he took it had. 308 APPENDIX I. A cheek crossed "not negotiable" was payable to a firm or order. One partner in fraud of his co-partner indorsed the cheek to defendant, who cashed it. Held, that the other part- ner, who by the partnership agreement was entitled to it, could recover the amount from defendant. Fisher v. Roberts, 6 T. L. R. 354. Sec. 82. Where a banker in good faith and without negligence receives payment for a customer of a cheque crossed generally or specially to himself, and the cus- tomer has no title, or a defective title thereto, the banker shall not incur any liability to the true owner of the cheque, by reason only of having received such payment. It is negligence for a bank to place to the credit of the secre- tary of a company the amount of a cheek drawn payable to the company or order, and crossed generally and indorsed by the secretary with the name of the company and his own name, without making any inquiries as to the authority of the secre- tary to deal with the check. Hannan's Lake View Central v. Armstrong, 5 Commercial Cas. 188. A stranger having wrongfully obtained possession of a crossed cheek specially indorsed, obliterated the special indorsement, sub- stituted one to himself, and presented the check to the defendant bank, to collect for him. The defendant collected the check and paid the money to the stranger. Held, that defendant was liable to the special indorsee for conversion of . the cheek. Kleinwort V. Comptoir National d'Eseompte de Paris, [1894] 2 Q. B. 157; Laeave v. Credit Lyonnais, [1897] 1 Q. B. 148, accord. Where the only transaction between an individual and a bank is the collection of a crossed cheek, such individual is not a cus- tomer of the bank. Mathews v. "Williams & Co., 10 Reports, 210; 63 L. J. Q. B. D. 494. One for whom a bank has been in the habit of cashing checks is not a customer, and the bank is not protected by sec. 82 in obtain- ing for him payment of a check crossed "& Co.," and marked "not negotiable," and which he had obtained by fraud. Great Western R'y v. London & County Bank, [1901] A. C. 414. A customer of a banker stole a crossed check, forged the indorse- ment of the payee, and paid it into his own account. The banker is protected in receiving payment of the cheek and thereafter placing it to his customer's account, even though the account was overdrawn at the time of the deposit. Clarke v. London & County Bank, [18971 1 0. B. 552, as explained in Gordon v. London, &c.. Bank, [1902] 1 K. B. at p. 270. But if the banker at once credits the customer's account with the amount of the check, and allows him to draw against it, the banker in receiving payment of this check is not collecting it APPENDIX I. 309 for a customer, but for himself as holder, and is not protected by the section, and the true owner can recover from the banker. Capital & Counties Bank v. Gordon, [1903] A. C. 240, See S. C, supra, sec. 60. But merely crediting the customer in the books of the bank with the amount of the crossed check before collecting it without notifying the customer or allowing him to draw against it, does not make the banker a purchaser or deprive him of the protec- tion of section 82. Akrokerri Mines v. Economic Bank, [1904] 2 K. B. 465. Quaere, would not the result have been different if the entries had been made in the customer's pass-book? lb. p. 470. A banker does not lose the protection of this section merely because, before a crossed check paid in by a customer is cleared, he makes a credit entry in the bank's books or in the pass book not communicated to the customer. Bevan v. The Natipnal Bank (K. B. Div. Nov. 14, 1906) 23 T. L. Eep. 65. By an Act August 4, 1906, section 82 was amended so as to get rid of the decision in Capital and Counties Bank v. Gordon, supra, by providing that a banker receives payment of a crossed check for a customer within the meaning of section 82 notwith- standing he credits his customers' account with the amount of the check before receiving payment thereof. If the check is indorsed in the name of the payee per proc, the customer, the banker is put upon inquiry as to the right of the customer to indorse the check, and failure to make inquiry is negligence. Bissell v. Pox, 51 L. T. Eep. 663, afSrmed 53 L. T. Rep. 193. See S. C, and also Capital and Counties Bank V. Gordon, supra, sec. 60. Promissory Notes. Sec. 84. A promissory note is inchoate and incom- plete until delivery thereof to the payee or bearer. Sec. 85. (1) A promissory note may be made by two or more makers, and they may be liable thereon jointly, or jointly and severally, according to its tenour. Sec. 87. (1) Where a promissory note is in the body of it made payable at a particular place, it must be pre- sented for payment at that place in order to render the maker liable. In any other case presentment for pay- ment is not necessary in order to render the maker liable. 310 APPENDIX I. By virtue of section 52 (2) failure to present to the maker on the day of maturity a note made payable at a particular place does not discharge the maker. Presentment at the particular place on a subsequent day is sufficient. Gordon v. Kerr, 25 Sess. Cas. 570. Sec. 87. (3) Where a note is in the body of it made payable at a particular place, presentment at that place is necessary in order to render an indorser liable ; but when a place of payment is indicated by way of memo- randum only, presentment at that place is sufficient to render the indorser liable, but presentment to the maker elsewhere, if sufficient in other respects, shall also suffice. Sec. 89. (1) Subject to the provisions in this part, and except as by this section provided, the provisions of this Act relating to bills of exchange apply, with the necessary modifications to promissory notes. (2) In applying those provisions the maker of a note shall be deemed to correspond with the acceptor of a bill, and the first indorser of a note shall be deemed to corre- spond with the drawer of an accepted bill payable to drawer's order. (3) The following provisions as to bills do not apply to notes; namely, provisions relating to,— (a) Presentment for acceptance; (&) Acceptance; (c) Acceptance supra protest; (d) Bills in a set. (4) Where a foreign note is dishonoured, protest thereof is unnecessary. The "necessary modifications" referred to in section 89 (1) would exclude Bank of England notes from the operation of the proviso of section 64 (1) (same as second sentence of section 124 N. I. L.) Leeds & County Bank v. Walker, 11 Q. B. D. 84. Dividend Warrcmts. Sec. 95. The provisions of this Act as to crossed cheques shall apply to a warrant for the payment of dividend. APPENDIX I, 311 Repeals. - Sec. 96. Tlie enactments mentioned in the second scliedule to this Act are hereby repealed as from the commencement of this Act to the extent in that schedule mentioned. Provided that such repeal shall not affect anything done or suffered, or any right, title, or interest acquired or accrued before the commencement of this Act, or any legal proceeding or remedy in respect of any suoh thing, right, title, or interest. Savings. Sec. 97. (1) The rules in bankruptcy relating to bills of exchange, promissory notes, and cheques, shall con- tinue to apply thereto, nothwithstanding anything in this Act contained. Sec. 97. (3) Nothing in this Act or in any repeal effected thereby shall affect— (a) The provisions o^ the Stamp Act, 1870 or acts amending it, or any law or enactment for the time being in force relating to the revenue; (&) The provisions of the Companies Act, 1862, or Acts amending it, or any Act relating to joint stock banks or companies; (c) The provisions of any Act relating to or confirming the privi- leges of the Bank of England or the Bank of Ireland respectively; {d) The validity of any usage relating to dividend warrants or the in- dorsement thereof. Construction with other Acts. Sec. 99. Where any Act or document refers to any enactment repealed by this Act, the Act or document shall be construed, and shall operate, as if it referred to the corresponding provisions of this Act. 312 APPENDIX I. Scotland. Sec. 98. NotMng in this Act, or in any repeal effected thereby shall extend or restrict, or in any way alter or affect the law and practice in Scotland in regard to svinunary diligence. Sec. 100. In any judicial proceeding in Scotland, any fact relating to a biU of exchange, bank cheque, or promissory note, which is relevant to any question of liability thereon, may be proved by parole evidence: Provided that this enactment shall not in any way affect the existing law and practice whereby the party who is, according to the tenour of any bill of exchange, bank cheque, or promissory note, debtor to the holder in the amount thereof, may be required, as a condition of obtaining a sist of diligence, or suspension of a charge, or threatened charge, to make such consigna- tion, or to find such caution as the court or judge before whom the cause is depending may require. This section shall not apply to any case where the bill of exchange, bank cheque, or promissory note, has undergone the sesennial prescription. APPENDIX n. 313 APPENDIX II. COMPARATIVE TABLES OF SECTIONS OF BILLS OF EXCHANGE ACT AND NEGOTIABLE INSTRUMENTS LAW. [In these tables a blank opposite a section of the one act indicates that there is no exactly cor- responding section of the other act. The word " See '* before a section of the one act indicates, in general, that the section is not the exact equivalent of the opposite section of the other act, but differs, in some cases substantially, in others only slightly. Or the section may sometimes merely suggest a similarity or an analogy.] TABLE I. H. I. 1. B. E. A. H. I. I. B. E. A. I. See8(i),3(2),83(i). 17-2. 9(3)- 1-1-2-3. See3(i). 17-3-4-S- 1-4. See3(i),8(2),83(i). 17-6. See 56. i-S- 6(1). 17-7. 85 (2), promis- 2-1-2-3-4. 9(1)- sory note. 2-S. 18. 23. 23 (0, and 3-1-2. 3(3)- see 23 (2). 4-1. II (I). 19. See 91. 4-2. 20. See26(i),(2). 4-3- II (2). 21. 25- 5- 3(2)- 22. 22 (2). s-i- 83 (3), promissory 23- 24. note. 24, first clause. 5-2-3-4- See 16 (2). 24, second clause. 30 (I)- 6-1-2-3. 3(4). 25. See27{.)(a)(b). 6-4. See 91 (2). 26. 27 (2). 6-5. 27. 27 (3)- 7-1-2. 10 (I) (2). 28. 8. See 8 (4), 8 (5). 29. 28 (I). (2). 8-1. 3°- 31 (I). (2), (3). 8-2-3. 5(1)- 3'- See 32 (I). 8-4. 7(2)- 32, except last para- 8-5. See 7 (2)- graph. 32 (2). 8-6. 7(2). 32, last paragraph. 9-1-5. 8(3)- 33- See 32 (6). 9-2-4. 34, first paragraph, 9-3- See 7 (3)- first clause. 34(2). 10. 34, first paragraph. n. 13(1). second clause. See 34 (3). 12, first paragraph. See 13 (2). 34, last paragraph. 34 (I), 31 (2). 12, last paragraph. 35- See 34 (4). '3- See 12. 36. See 35(1). 14. See 20 (i), (2). 37- 35 (2), (3). 15. 38. See 16 (I). 16. 21 (I), (2), (3). 39, first paragraph. 33- 17-1, first clause. 9(2). 39, last paragraph. 17-1, second clause. 40. 314 APPENDIX n. TABLE I (continued). ir. I. £. B. E. A K. I. 1. B.E. A 41. 32 (3)- 76. 45 (7)- 42- 77- See 45 (6). 43- 32 (4). 78. 45 (6)- 44- 3' (S)- 79- See 46 (2) (c). 45- 36 (4). 80. 46 (2) (d). 46. 8l. 46(1) 47- 36(1). 82-1. See 46 (2) (a). 48. 82-2. 46(2) (b). 49, first paragraph. 31 (4). 82-3. 46 (2) (e). 49, last paragraph. 83- 47 (I). SO. 37- 84. ' 47 (2). 51, first clause. 38 (I)- 85. See 14 (I). 51, last clause. See 38 (3). 86. 14 (2h 52-1-2-3. 29 (I) (a) (b). 87. 52-4. See 29 (I) (b) 88. 59(1), last par* S3- See36(3),bill,86(3), graph. note, 73, check. 89. 48. S4- 90. See49{0- SS- 29 (2). 91. 49 (2). 56. See go. 92. See 49 (3). S7- See 38 (2). 93- See 49 (4). $8, first paragraph. 94- 49 {i3)- 58, last paragraph. See 29 (3). 95- 49 (7)- 59, first paragraph. See 30 (2). 96. See49(S). 49(iS)- 59, last paragraph. 97- 49 (8). 60. See 88 (I), (2). 98, except last para- 61, first paragraph. See 55 (i). graph. 49 (9)- 61, last paragraph. 16 (I). 98, last paragraph. 62. S4- 99- See 49 (11). 62-1-2. See54(2)(a){b)(c). too. 49(11). 63. See 56. lOI. See 49 (10). 64. 102. See 49 (12). 65-1-2-3-4. See 58 (I), <2), (3). 103.. See 49 (12) (a). 66. See 55 (2). I04-I. 49 (>2) (b). 67. See 56. 104-2. 68, first paragraph.. See 32 (5). 105. 49 (IS)- 68, last paragraph. 106. 69. 107. 49(14). 70, first paragraph, See 52 (I), (2), bill. 108. first clause. 87 (I), note. 109. SO (2) (b). 70, first paragraph. 110. second clause III. 70, last paragraph. 45, bai, 87 (2), 112. 50 (2) (a). note. "3- 50(0- 71, first paragraph. 45 (I)- I 14-1-2-3-5. 5° (2) (c)- 71, second para- See45(2),bill.86(i), 1 14-4. See 50 (2) (c) (4); graph. note. Chalmers, 6th 72-1-2-3. 45 (3)- ed. 171. 72-4. See 45 (3)- 115. 50 (2) (d). 73-1- 45 (4) (a). 116. 48(2). 73-2- 45 (4) (b). 117. 48 (I). 73-3- See 45 (4) (c). 118. See 51 (I), (2), bm. 73-4- 45 (4) (d). 89 (4), note. 74- 52 (4). II9-I. 59(1)- 75- 1 19-2. 59 (3). APPENDIX n. 315 TABLE I (conHnued). ir. I. L B. E. A. H. I. L. B. Z. A. "9-3- See63(i),(2). 154- See 94. 119-4. iSS- See 51 (4),93- 1 1 9-5. 61. 156. 51 (6), and 51 120-1-3-4-5-6. (6) (b). 120-2. See 63 (2). •57- 51 (3). 121, 121-1. See 59 (2) (a) (b). 158. See 51 (5). 121-2. 59 (3)- 159. 51 (9)- 122. 62 (I), (2). 160. 51 (8). 123- 63 (3)- 161, irst paragraph. 65 ( i ). 124, first paragraph. 64(1). 161. second para- 124, second para- graph, first graph. See 64 (i), proviso. clause. 65 (2). 125-1-3. 64(2). 161, second para- 125-2-4-5. See 64 (2). graph, second 126. See 3 (I), (2), 8 (4). clause. 127. See S3 (i), (2). 162. See 65 (3). 128. See 6 (2). 163. 65 (4). 129. See 4(i),(2). 164. 66(2). 130. 5(2)- 165. 66(1). 13'- •S- 166. 6S (S)- 132, first paragrapli. 17 (I), see 21(1). 167. 67 (I). 132, second para- 168. See 67 (2). graph. See 17 (2) (a). 169. See 67 (3). 132, third paragraph 17 (2) (b). 170. 67 (4)- 133- 171. 68(1). 134- 172. 68(3). •35- 173- 68(4). 136- See 42. 174. 68(2). 137- 17s- 68(5). 138- 18 (I), (2), (3). 176. 68 (7). 139- 19(0,(2)- 177- See 68 (6). 140. 19 (2) (c), last 178. 7t (I)- paragraph. 179 7' (3)- 141. 19 (2). 1 80. 71 (2). 142, first paragraph 44(1)- •181. See 7 1 (4). 142, second para- 182. 71 (5)- graph. See44(2). 183. 71 (6). 142, third paragraph 44(3)- 184, first paragraph. See 83 (r). 143-1- See 39(1). .184, last paragraph. See 83 (2). 143-2-3- 39 (2), (3)- 185. 73- 144- See40(i). 186. See74(i). '45- 41 (I) (a). 187. I4S-I. 41 (I) (b). 188. 145-2. 41 (!) (c). 189. See 53(1). 73- MS-3- See 41 (I) (d). 190. See I. 146. See 92. 191. except" Accept- 147. 39(4) ance," ' ' Bank," 1 48-1. See4i(2)(a). " Bill "and" In- 148-2. 41 (2) (b). strumen ." 2. 148-3. 41 (2) (c). 191. "Acceptance." 2-21 (i), last 1 49-1-2. 43 (0 (a) (b). paragraph. 150. See 42. 191. "Bank.' See 2. 151. 43 (2)- 191, " Bill." See 2. 152. SI (2). 191. " Instrument." 153- See SI (7)- 192. 316 APPENDIX n. TABLE I (continued). K. I. L. »93- 194. B. E. A. t. 2. 3- 3(2). 3(3)- 3(4). 4(0,(2) S(i)- 5(2). 6(1). 6(2). 7(1). 7(2). 7(3). 8(1). 8(2). 8(3). 8(4). 8(5). 9(1). 9(2). 9(3). 10(1). 10(2). 11; II (I). II (2). 12. 13(1). 13 (2). 14(1). 14(2). 14 (3). 14 (4). •s. 16(1). 16(2). 17 (I)- 17 (2) (a). '7 (2) (b). 18. B. E. A. N. I. L. B. E. A. 40 (3). 4S (2) 73. 195. 74 (2), 86 (2), 196. See 97 (2). 89 (I). 197. See 14 (I) (a) (b), 92. 198. TABLE II. K. I. L. B. E. A. K.I.L. See 190. 19 (I), (2). 139. See 191. 19 (2) (a) (b) (d) (e). 141-1-2-4-S. See 126. 19 (2) (c), first para- s. graph. 141-3- 3- 19 (2) (c), last para- 6. graph. 140. See 129. 20. See 14. 8-2-3. 21 (i), first para- 130. graph. 16. i-s. 21 (i), second para- 128. graph. See 8-6, second 21 (2), (3). 16. paragraph. 22 (I). See 8-4-5-6. 22 (2). See 22. See 9-3. 23. 23 (i). 23 (2). 18. See 1-4. 24, first paragraph. 23. 9-i-S. 24, last paragraph. See 8. 25. 21. See 8. 26 (I). See 20. See 2. 26 (2). 17-1. 27 (I). 25- 17-2. 27 (2). 26. 7-1-2. 27 (3). 27. 7-2, last para- 28 (I), (2). 29. graph. 29 (i). 52-1. 4- 29 (I) (a). 52-2. 4-1. 29 (I) (b). See 52-3-4. 4-3- 29 (2). 55- See 13. 29 (3). See 58. II. 30 (I). 24, second clause See 12. 30 (2). See 59. See 85. 31 (I). (2), (3) 30. 86. 3' (4). 49. 31 (5). 44. 32(1). See 31. 131. 32 (2). 32. 61. 32 (3). 41. See 5-3. 32 (4). 43. 132. 32 (s). See 68. See 132. 32 (6). See 33. 132. 33- See 39. 138. 34(1), (2), (3). See 34. APPENDIX n. 317 TABLE II (continued). B. E. A. S. I. L. B. E. A. N. I. 1. 34 (4)- See 35. 48 (2). 116. 35(0. See 36. 49 (i)- See 90. 35 (2). (3)- See 37. 49 (2). 91. 36(')- 47- 49 (3)- ' 92. 36 (2)- 49 (4). 93- 36 (3)- See 53. 49 (5)- See 96. 36 (4). 45- 49 (6). 36 (5)- 49 (7). 95- 37- 50. 49 (8). 97. 38 (I). S'- 49 (9). See 98. 3« (2)- See 57. 49(10). Seeioi. 38 (3) (a). 49 (I I)- 100. 38 (3) (b). See 51. 49 (12). See 102, 103, 104, 39(1), (2), (3). See 143. 49 ('3)- 94- 39 (4)- 147. 49 ('4)- 107. 40 (I), (2). See 144. 49 (IS). 96, 105. 40 (3). See 193. 5° («)• "3- 41 (I) (a). 145. 50 (2) (a). 112. 41 (I) (b). 145-1. 50 (2) (b). 109. 41 (I) (c). 145-2- 50 (2) (c). 114. 41 (■) (d). See 145-3. 50 (2) (d). 115. 41 (I) (e). 51 (I)- See It 8. 41 (2) (a). See 148-1. SI (2). 152. 41 (2) (b). 148-2. 51 (3). 157. 41 (2) (c). 148-3. 51 (4). See 155. 41 (3). SI (5). See 158. 42. See 150. 51 (6) (a). 43 (') (a). 149-1. 51 (6) (b). 156. 43 (0 (b). 149-2. 51 (7). See 153. 43 (2). 151- 51 (8). 160. 44 ('),(2), (3), except SI (9). 159. second paragraph 52(1). See 70. of (2). 142: 52 (2). 44 (2), second para- 52 (3). graph. 52 (4). 74- 45- See 70. 53 (!)• See 127. 45 (0- 71- 53 (2). 45 (2). See 71. 54 (I). 62. 45 (2), last para- 54 (2). See 62-1-2. graph. See 193. 55 (I) (a). See 61. 45 (3)- See 72. 55 (I) (b). See 61. 45(4). See 73. 55 (2) (a). See 66-2, last para- 45 (5)- graph. 45 (6). 78. 55 (2) (b) (c). See 66. 45 (7)- 76. 56. See 17-6, 63, 67 45 (8). 57. 46 (I). 81. 58. See 65. 46 (2) (a) (b). See 82-1-2. 59(1)- 119-1,88. 46 (2) (c). See 79. 59 (2) (a) (b). See 121, I2I-I. 46 (2) (d). 80. 59 (3). See 1 2 1-2. 46 (2) (e). 82-3, 60. 47 (I). 83- 61. 119-5. 47 (2). 84. 62 (I), (2). 122. 48. 89. 63 (^)- See 1 19-3. 48(1) 117. 63 (2). See 120. 318 APPENDIX n. TABLE II (continued). B. X. A. H. I. L. B. E. A. H. I. L. 63 (3). 123. 76. 64(1). first para- 124. first para- 77. graph. graph. 78. 64 (I), proviso. See 124, second para- graph. 79. 80. 64 (2). See 125. 81. 6s(i),(2). 161. 82. 6S (3)- See 162. 83 (1). See 184. 65 (4). 163. 83 (2). See 184. 65 (S)- 166. 83 (3)- See S-i 66(1). See 165. 83 (4). 66 {2\ 164. 84. 67 (I). 167. 85 (I). 67 (2). See 16S. 8s (2.) 17^ 67 (3)- See 169. 86(1). See 71. 67 (4). 170. 86 (2). See 193. 68 (I). 171. 86 (3). See 53. 68 (2). 174. 87 (I). 68(3). 172. 87 (2). 70. 68(4). 173. 87 <3). 68 (5). 175- 88. See 60. 68 f6). See 177. 89. 68(7). 176. 90. See 56. 69. 91 (I). See 19. 70. 91 (2). See 6-4. 71(1). 178. 92. See 85,1c 71 (2). 180. 93- SeeisS. ' 71 (3)- 179. 94. See 154. 71 (4). i8i.. 95- 7i (5). 1S2. 96. 71 (6). 183. 97 (I). 72. 97 (2). See 196. 73- 185. 97 (3). 74(1). See 186. 98. 74 (2). See 193. 99- 74 (3)- 100. 7S- THE NEGOTIABLE INSTRUMENTS LAW. 319 INDEX TO THE NEGOTIABLE INSTRUMENTS LAW. [The references are to the sections.] ACCEPTANCE, meaning of, 191, 132. how made on bill, 132, 133. by separate instrument, 134. of non-existing bill, 135. time allowed for, 136. by destruction or detention of bill, 137. of incomplete, overdue, or dishonored bill, 138. of bills in a set, 181. general or qualified, 139, 140. to pay at particular place, 140. forms of qualified, 141. qualified, rights of parties, 142. ACCEPTANCE FOR HONOR, when, by whom, and for what sum maybe made, 161. how made, 162. for whom made, 161, 163. liability of acceptor for honor, 164, 165. maturity of bill payable after sight accepted for honor, 166. protest of bill accepted for honor, 167. presentment for payment, 168. delay in presentment excused when, 169. protest of dishonored, 170. ACCEPTOR, engagement and admissions of, 62. charged without presentment, 70. ACCOMMODATION INSTRUMENT, discharged by payment by accom- modated party, 119. liability of accommodation party, 29. accommodated party paying may not reissue, I2I. ACTION, meaning of, 191. AGENT, signature by, 19. when personally liable, 20. signature "by procuration," 21. negotiating instrument liable when, 69. (See Notice of Dishonor.) ALTERATION, effect of material, 124. rights of holder in due course, 124. ■what alterations material, 125. AMBIGUOUS INSTRUMENT, construction of, 17. ANTECEDENT DEBT, constitutes value, 25. ANTEDATED INSTRUMENT, not invalid, 12. when title acquired, 12. 320 THE NEGOTIABLE INSTRUMENTS. LAW. [The references are to the sections.] ASSIGNMENT, bill is not of itself, 127. check is not of itself, 189. ATTORNEY'S FEE, provision for, 2. BANK, meaning of, 191. making payable at, equivalent to order to pay, 87. presentment of instrument payable at, 75. not liable on check unless accepted or certified, 189. BEARER, meaning of, 191. negotiable instrument payable to, i, 9. instrument payable to, indorsed specially, 40. BILL, meaning of, 191. BILL OF EXCHANGE, defined, L26. , , , , same as bill, 191. ambiguous instrument treated as bill or note, 17. not of itself an assignment, 127. may be addressed to two or more drawees, 128. inland and foreign, 129. when, may be treated as promissory note, 130. BILLS IN A SET, constitute one bill, 178. different parts negotiated, rights of holder, 1 79. (See Acceptance, Discharge, Indorser, Payment.) BLANKS, who may fill, 13, 14. effect when delivered instrument improperly filled, 14. when undelivered instrument improperly filled, 15. BONDS, public or corporation, liability of person negotiating, 65. BROKER, negotiating instrument, liability of, 69. BURDEN OF PROOF, when title of transferor defective, 59. CANCELLATION, of instrument as discharge, 119. of signature, 120. 7jnintentional, by mistake or without authority, 123. burden of proof, 1 23. CAPACITY, maker admits capacity of payee to indorse, 60. so does drawer, 61. acceptor admits capacity of drawer to draw and of payee to indorse, 62. (See Warranty.) CASHIER, as payee or indorsee, 42. CERTIFICATION. (See Check.) CHECK, defined, 185. when, must be presented for payment, effect of delay, 186. certification of, 187, 188. not of itself an assignment, 189. (See Bank.) COLLATERAL SECURITIES, provision for sale of, 5. CONDITIONAL INDORSEMENT, payor may disregard condition, but subsequent transferee takes subject to it, 39. CONFESSION OF JUDGMENT, provision for, j. THE NEGOTIABLE INSTETJMENTS LAW. 32J. [The references are to ihe sections.] CONSIDERATION, presumption of, 24. when absence or failure of a defence, 28. (See Value.) CONTINGENCY, instrument payable on, not negotiable, 4. CORPORATION, included in " person," 191. indorsement by, 22. CURRENT MONEY, designation of kind does not affect negotiability, 6. DATE, omission of, does not affect negotiability, 6. in instTument, prima /acie true date, 11. instrument may be antedated or post-dated, 12. when date may be inserted, 13. insertion of wrong date, 13. construction, when instrument not dated, 17, alteration of, 125. DAYS OF GRACE, not allowed, 85. DEFENCES, when instrument subject to, 58. DELAY, in presentment for payment, excused when, 81. in giving notice of dishonor, excused when, 1 13. in presenting check, effect of, 186. DELIVERY, meaning of, 191. of incomplete instrument, 15. contract incomplete without, 16. when presumed, 16. necessary to negotiation, 30. DEMAND, when instrument payable on, I, 7. negotiation of demand instrument unreasonable time after issue, 53. when presentment of demand instrument must be made, 71. DETERMINABLE FUTURE TIME, I. what is, 4. DISCHARGE OF INSTRUMENT, how made, 119. payment by party secondarily liable not a, 121. of one of set of bills, 183. DISCHARGE OF PARTY secondarily liable, 120. (See Drawer, Inoorser.) DISHONOR, by non-payment, 83. effect of, 84. by non-acceptance, 149. effect of, 150, 151. (See Notice of Dishonor.) DRAWEE, must be named or indicated, i may be payee, 8. not liable unless he accepts, 127. bill may be addressed to two or more, but not in alternative or succession, 128. and drawer same person or drawee fictitious or incapable of contracting, 130. time allowed to accept, 136. retaining or destroying bill liable as acceptor, 137. DRAWER, may be payee, 8. admissions and engagement of, 61. 16 322 THE NEGOTIABLE INSTRUMENTS LAW. [The references are to the seccioiia.] DRAWER {continued). and drawee same person or drawee fictitious or incapable of contracting, 130. may negative or limit liability, 61. existence, capacity, and authority admitted by acceptor, 62. when presentment for payment necessary to charge, 70. when charged without, 79. when liability accrues, 84, 151. when notice of dishonor required to charge, 89. when not required, 112, 114. when discharged by failure to negotiate or present bill for acceptance, 144. liability upon dishonor by non-acceptance, 151. when protest necessary to charge, 152. when failure to present check discharges, 186. when certification of check discharges, 188. DURESS, instrument or signature obtained by, 55. EQUITIES. (See Defences, Notice of Equities.) EXCHANGE, provision for, 2. EXHIBITION OF INSTRUMENT, when payment demanded, 74, FEAR, instrument or signature obtained by, 55. FICTITIOUS PERSON, as payee, 9. as drawee, 130. presentment dispensed with where drawee is, 82. FIGURES IN INSTRUMENT, office of; discrepancy between figures and words, 17. FISCAL OFFICER, as payee or indorsee, 42. FORCE, instrument or signature obtained by, 55. FOREIGN BILL, what is, 129. FORGERY OF SIGNATURE, effect of, 23. estoppel to set up, 23. FRAUD, instrument or signature obtained by, 55. GENUINENESS, warranty of, upon negotiation, 65, 66. of signature of drawer, acceptor admits, 62. GRACE, no days of. 85. HOLDER, meaning of, 191. may sue in own name, 51. payment to, 51. right of, upon dishonor by non-payment, 84. upon dishonor by non-acceptance, 151. duty of, upon dishonor by non-acceptance, 150. refusing to receive payment supra protest, effect of, 176* HOLDER FOR VALUE, who is, 26, 27. HOLDER IN DUE COURSE, who is, 52. of instrument payable on demand, 53. where full payment not made before notice, 54. where title of transferor defective, 55. , what constitutes notice, 56. THE NEGOTIABLE INSTRUMENTS LAW. 323 [The references are to the secticms.] HOLDER IN DUE COURSE {continued). has title free from defences, and may recover full amount, 57. rights of one claiming under, 58. when burden of proof on holder, 59. rights of an altered instrument, 124. HOLDER OF OFFICE FOR TIME BEING, as payee, 8. HOLIDAY, when day for act falls on, 194. instrument due on, 85. HONOR. (See Acceptance for Honor, Payment for Honor.) INCOMPLETE INSTRUMENT, filling blanks in, 13, 14. not delivered, 15. acceptance of, 138. INDORSEMENT, meaning of, 191. in blank makes instrument payable to bearer, 9. by infant or by corporation, 22. necessary to negotiate instrument payable to order, 30. transfer without, effect of,. 49. after transfer, effect of, 49. must be on instrument or allonge, 31. signature alone sufficient, 31. must be of entire instrument unless paid in part, 32. kinds of, 33. special and blank, 34. how blank converted into special, 35. restrictive, 36. rights of restricted indorsee, 37. qualified, 38. conditional, 39. negotiation by delivery of bearer instrument indorsed specially, 40. of instrument payable to two or more not partners, 41. by cashier or fiscal officer, 42. where name of payee or indorsee wrongly designated or misspelled, 43, in representative capacity, 44. presumption as to date of, 45. presumption as to place of, 46. striking out and effect of, 48. (See Warranty.) INDORSER, when person deemed such, 17, 63. irregular«or anomalous, 64. liability of qualified, 65. of unqualified, 66. liability where instrument negotiable by delivery, 67. order of liability, evidence as to, 68. when joint and several, 68. when presentment for payment necessary to charge, 70. when not necessary, 80. when liability accrues, 84, 151. when notice of dishonor required to charge, 8g. 324 THE NEGOTIABLE INSTEUMBNTS LAW. [The references are to the sections.] INDORSER {continued). when not required, 112, 11 J. how discharged, 120. payment by, does not discharge instrument, 121. when discharged by failure to negotiate or present bill for acceptance, 144. when protest necessary to charge, 1 52. liability for indorsing parts of bills in set, 180. INFANT, indorsement by, 22. INLAND BILL, what is, 129. INSTALMENTS, INSTRUMENT PAYABLE ON, 2. INSTRUMENT, meaning of, 191. INTEREST, date from which it runs, 17. does not make sum uncertain, 2. default in payment of instalment, 2. ISSUE, meaning of , 191. JOINT AND SEVERAL PARTIES, two or more signing "I promise to pay,"i7. (See Indorser.) JOINT DEBTORS, presentment to, 78. LAW MERCHANT, governs cases not provided for, ig6. LIABILITY, of transferor by delivery only, 65. (See Agent, Broker, Maker, Drawer, Acceptor, Indorser.) LIEN HOLDER, is holder for value, 27. MAIL, notice of dishonor by, 96, 103, 104, 105, 106. MAKER, may be payee, 8. note to order of, not complete until indorsed, 184. engagement and admissions of, 60. presentment for payment not necessary to charge, 70. MATURITY, instrument payable "on or before," 4. time of, 85. NAME, signing in assumed or trade, i'8. NEGOTIABILITY, provisions in instrument which impair, 3, 4, 5. provisions in instrument which do not impair, 2, 3, 4, 5, 6. NEGOTIABLE INSTRUMENT, " instrument " means, 191. formal requisites of, 1-9. continues negotiable until restrictively indorsed or discharged, 47. NEGOTIABLE INSTRUMENTS LAW, titleig o. takes effect when, 195, ,198. NEGOTIATION, how made, 30. to and by prior party, jo. after payment by party secondarily liable, 121. discharge by failure to present for acceptance or negotiate, 144. of parts of bill in set, 179. (See Delivery, Indorsement.) THE NEGOTIABLE INSTRUMENTS LAW. 325. [The references are to the sections.] NON-EXISTING PERSON, as payee, 9. NOTARY PUBLIC, may make protest, 154. NOTE, meaning of, 191. NOTICE OF DISHONOR, to whom must be given, 89. by whom may be given, 90. given by agent, 91, 94. enures to whose benefit, 92, 93. need not be signed ; written may be supplemented by oral, 95. when misdescription does not vitiate, 95. may be written or oral; terms of; may be delivered personally or by mail, 96. may be given to party or agent, 97 when party deed, 98. to partners, 99. to joint parties not partners, 100. where party bankrupt or an insolvent, loi. when may be given, 102. where parties reside in same place, 103. where parties reside in different places, 104, miscarriage in mail does not invalidate, 105. when deemed deposited in post-office, lo6. time for giving to prior parties after receiving, 107. here must be sent ; receipt of, within time, although missent, 108. waiver of, 109, no. waiver of protest includes what, iii. when dispensed with, 112, 114, 115. delay excused when, 113. when need not be given to drawer, 114. when need not be given to indorser, 115. of non-payment after notice of jion-acceptance, 116. subsequent holder in due course not prejudiced by omission of notice of non-acceptance, 117. NOTICE OF EQUITIES, what constitutes, 56. before full payment of agreed amount, 54. NOTING FOR PROTEST, 155. OMISSIONS, not affecting validity and negotiability, 6. construction in case of, 17. (See Blanks.) OPTION, to pay "on or before," 4. .- to require something in lieu of money, 5. ORDER, instruments payable to, i, 8. OVERDUE INSTRUMENT, when payable on demand, 7. PARTNERS, presentment to, 77, 145. notice of dishonor to, 99. PAYEE, who may be, 8. fictitious or non-existing person, 9. not name of any person, 9. 326 THE NEGOTIABLE INSTRUMENTS LAW. [The references are to the sections-! PAYEE {continued). maker admits existence and capacity of payee to indorse, 6a so do drawer, 6i. and acceptor, 62. PAYMENT, in due course, 88. discharge by, 119, 120. of bill in set, 182, 183. PAYMENT FOR HONOR, who may make and for whose honor, 171. how made, 172, 173. preference among persons offering, 174. rights of payer for honor, 175, 177. discharge of parties by, 175. efEect of holder refusing to receive, 176. PERSON, meaning of, 191. fictitious or non-existing, 9, 130. PERSON PRIMARILY LIABLE, meaning of, 192. chargeable without presentment for payment, 70. PERSON SECONDARILY LIABLE, meaning of, 192. right of recourse against, 84, 150, 151. PLACE, failure to specify does not affect negotiability, 6. of indorsement, presumption, 46. for presentment for payment, 72, 73. for presentment for acceptance, 143, 147. alteration as to, is material, 125. instrument payable at special, 70. POST-DATED INSTRUMENT, not invalid because post-dated, 12. when title passes, 12. POST-OFFICE, what constitutes deposit in, 106. PRE-EXISTING DEBT, constitutes value, 25. PRESENTATION, instrument payable on, is payable on demand, 7. PRESENTMENT FOR ACCEPTANCE, when necessary, 143. effect of failure to make or negotiate, 144. how made, 145. on what days may be made, 146. when delay excused, 147. when failure excused, 148. PRESENTMENT FOR PAYMENT, when necessary, 70. of instrument payable on demand, 71. how must be made, 72. proper place for, 73. instrument must be exhibited and delivered up, 74. of instrument payable at bank, 75. where principal debtor dead, 76. to partners, 77. to joint parties not prirtners, 78. when drawer charged without, 79. when indorser charged without, 80. delay excused when, 81. dispensed with when, 82. THE NEGOTIABLE INSTRUMENTS LAW,, 327 [The refe'ences are to the sections.] PRESENTMENT FOR PAYMENT {continued). of instrument due on Saturday, Sunday, or holiday, 85. time for, how determined, 86. to acceptor for honor, 168. when check must be presented; effect of delay, 186. PRINCIPAL, not liable unless signature on instrument, 18. may sign by agent, 19. PRINTED PROVISIONS, give way to written, if conflict, 17. PROCURATION, signature by, 21. PROMISSORY NOTE, definition, 184. "note"' means, 191. when holder may treat as bill or note, 17, 130. to maker's order, not complete without indorsement, 184. PROTEST, waiver of, includes what, iii. when may be made, 118. when must be made, 118, 152. how made, 153. by whom made, 154. when to be made, 155. where, 156. for non-acceptance and non-payment, 157. for better security, 158. when dispensed with, 159. of lost, destroyed, or wrongly detained bill, l6o. of bill accepted for honor, 167, 170. REASONABLE TIME, how determined, 193. where instrument payable on demand, 53. bill payable on demand, 71. REFEREE IN CASE OF NEED, definition, 131. protest of bill having, 167. RE-ISSUE OF INSTRUMENT, 50, 121. RE-NEGOTIATION. (See Reissue.) RENUNCIATION, how made; effect of, 122. REPEAL OF LAWS, 197. SATURDAY, instrument due on, 8;. SEAL, does not impair negotiability, 6. SECURITIES, negotiation of public or corporation, 6j, SIGHT, instrument payable at, payable on demand, 7. SIGNATURE, necessary to liability, 18. in trade or assumed name, iS. by agent, i>, with qualifying o. descriptive words, 20. by "procuration," 21. forged, 23. acceptor admits genuineness of drawer's, 62. SUM CERTAIN, what is, 2. SUNDAY, when day for act falls on, 194. instrument due on, 85. 328 THE NEGOTIABLE INSTRUMENTS LAW. [The references are to the sections-] TENDER OF PAYMENT, when having funus at special place is, 70. as discharge of party, 120. TERMS OF INSTRUMENT, what sufficient, 10. TIME, of maturity, 85. of negotiation, 45. when act takes effect, 195, 198. TITLE, of Act, 190! of person negotiating, when defective, 55. of holder in due course, 57. through holder in due course, 58. burden of proof, 59. notice of defect in, 54, 56. TRANSFER, without indorsement, effect of, 49, 65. (See Indorsee.) UNCONDITIONAL, order or promise, what is, 3. USAGE, in determining reasonable or unreasonable time, 193. VALUE, meaning of, 191. what constitutes ; antecedent or pre-existing debt, 25. who holder for, 26, 27. accommodation party receives no, 29. need not be specified in instrument, 6. (See Consideration.) WAIVER, of benefit of law does not impair negotiability, 5. of presentment for payment, 82. of notice of dishonor, 109, no. of protest. III. WARRANTYj upon negotiation by delivery or qualified indorsement, 65. by qualified indorsement, 66. upon sale of public or corporation securities, 65. "WITHOUT RECOURSE," effect of indorsement, 38. "WRITTEN," includes printed and " writing" includes print, 191. WRITTEN PROVISIONS, prevail over printed, if conflict, 17. INDEX TO ARTICLES. 329 INDEX TO THE ARTICLES ON THE NEGOTIABLE INSTRUMENTS LAW. The page3 where sections of the N. I. L. are mentioned, criticised, defende(^ or discussed are as follows: [The references are to the pages.] Section Ames Brewster McKeehan 1-2 182 224 2-4 164 2-5 164 3 213 3-2 165, 194, IPS, 201 180, 182, 202, 206 224, 225, 226, 227 5-2 164 6-4 164 7-1 164 8-5 163 8-6 163 9-1 167, 168, 292, 293 234, 236, 240, 241 9-3 166, 195, 201 180, 184, 202, 213 206, 227, 229, 231 9-S 163, 167, 168, 170, 180, 184, 185, 186, 234, 236, 239, 240, 196, 201, 292, 297 202, 207, 218 . 214 241, 258 16 164, 167 230 20 168, 194, 201, 292, 297 185, 204, 214 241, 242, 243, 244 22 168, 197 185, 202, 208, 214 244 23 216, 217 217, 218 246, 248, 249, 250, 252 25 164 29 169, 197, 201 180, 181, 202, 210, 215 208, 252, 253, 254 34 169, 197, 201 185, 207, 209 254, 255 36 257 36-2 166, 194, 201 183, 202, 213 255 36-3 166, 194, 201 183, 202, 213 255 37 166, 169, 198, 201 202, 204, 209 255, 256, 257 37-2 185, 202, 204 258 39 164 40 169, 170, 196, 197, 201, 292, 293, 297 185, 186, 207, 208 234, 239, 240, 241, 258 44 170 258, 259 48 • 196 185 237, 238 49 170, 171, 194, 201, 291 186, 202, 204 258, 259, 260, 261 57 164 61 266 no INDEX TO ARTICLES. [The references are to the pages.] Section Ames Brewster McKeehan 62 163 266 64 164, 171, 198, 201 187, 209 262, 263, 264 65 171, 172, 173, 294 187 264, 265, 266, 268, 269, 270 65-1 173 264, 270 65-2 173 264, 270 65-3 173 264, 270 65-4 173, 198, 201, 292, 293, 297 209 264, 270, 271 66 172, 173, 194, 199, 201, 294 188, 202, 205 264, 265, 266, 267, 268, 269, 270, 271 66-1 173 264 66-2 173 264 68 174, 194, 201 189, 205, 215 271 70 174, 199, 201 180, 189. 202, 210, 272, 273 212 71 175 85 164 89 177, 200, 201, 297 191, 212 287, 288, 289 114 212 119-4 174, 200,; 201, 292, 294, 297 189, 210 274, 275, 276 120-3 174, 175, 200, 201, 292, 294, 297 189, 190, 210, 211 276, 277, 278 120-5 175, 176, 200, 201, 292, 295, 297 190 278, 279, 280 120-6 175, 176,' 200, 201, 292, 295, 297 190 278, 279, 280 124 164, 217, ' 292, 296, 297 218 280, 281, 282 137 166, 194, 201, 292. 296, 297 183, 202, 205, 215 282, 283, 284 166 163 175 176, 177, 194, 201 191, 202, 205 284, 285 184 195 185 212 287 186 177, 200, 201, 292, 297 191, 202, 211, 212 286, 288 187 164 189 164 191 196 181 238 196 190