^ kfi THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW 3<; The Law of Bills, Notes and Checks Being The full text of the Negotiable Instruments Law as adopted by forty-four states, the District of Columbia and Hawaii WITH COPIOUS ANNOTJTIONS, FORMS iff ILLUSTRATIONS By JAMES L. WHITLEY of the New York Bar, former Assistant Corporation Counsel of City 0/ Rochester, Member of Committee on Banks, New York State Legislature and author of Police Officers Law ROCHESTER, N. Y. NATIONAL LAW BOOK COMPANY I9I7 i9n Copyright 19 17 by James L. Whitlett John P. Smith Printing Company- Rochester, N. Y. 1917 PREFACE The object designed for the following volume is to guard those dealing with commercial paper and point out the dangerous spots as determined by the leading decisions of the courts of all the states. Although appa- rently plain, the provisions of the Negotiable Instruments Law have been the subject for many thousand legal actions and but few sections have escaped the necessity of legal interpretation. It was the aim to condense these decisions in language that would be plain to the bank clerk, bank director and the layman dealing with commercial paper, and also to collect the leading decisions for the legal practitioner for ready reference. The want of a book of this nature has been generally expressed by bankers and the legal profession, and although the author makes no pre- tension to having fulfilled the requirements, it is hoped that the book may be found of service. In order that important matters might be more forcibly impressed on the reader's mind, illustrations of negotiable and non-negotiable paper have been supplied, as have also forms used in connection with commer- cial paper and banking. It has been the aim of the courts in the forty-four states in which the Negotiable Instruments Law has been adopted to construe the law to make it uniform wherever questions of the interpretation of the statute have been presented. Were this not the case the object of the framers and advocates of the law would be lost and the intent of the State Legis- latures towards uniformity be reduced to wreckage. While the Law is, with few exceptions, uniform, the numbering of the sections vary. For convenience the numbering of the New York statute has been followed, with a table of the corresponding sections of the other states. From an almost overwhelming mass of law and precedent selection has been made of what seemed to be the most important and useful. Trusting that the volume may often aid and seldom mislead, it is sub- mitted to the legal profession, bankers and others dealing with com- mercial paper. X. , J- L. W. Rochester, N. Y., May 24, 1917. 740192 The Negotiable Instmments Law adopted in the following States and Territories. Alabama.— Laws of 1907, No. 722, p. 660. Arizona. — Laws of 1905, Ch. 23. Arkansas. — Law of 1913, Act 81. Colorado.— Laws of 1897, Ch. 64. Connecticut. — Laws of 1897, Ch. 74. Delaware.— Laws of 1911, Ch. 191. District of Columbia.— Laws of 1899, Chap. 47; 30 U. S. Stat, at L., 9, 785. Florida.— Laws of 1897, Chap. 4524. Hawaii.— Laws of 1907, Act 89. Idaho.— Laws of 1903, p. 380. Illinois.— Laws of 1907, p. 403. Indiana. — Laws of 1913, Chap. 63. Iowa.— Laws of 1902, Chap. 130; Laws of 1906, Chap. 149. Kansas. — Laws of 1905, Chap. 310. Kentucky.— Laws of 1904, Chap. 102. Louisiana. — Laws of 1904, Act. 64. Maryland.— Laws of 1898, Chap. 119. Massachusetts. — Laws of 1898, Chap. 533; Laws of 1899, Chap. 130 Michigan.— Laws of 1905, Chap. 265, p. 389. Minnesota. — Laws of 1913, Chap. 272. Missouri. — Laws of 1905, p. 243. Montana. — Laws of 1903, Chap. 121. Mississippi. — Laws of 1916, Ch. 244. Nebraska. — Laws of 1905, Chap. 83. Nevada. — Laws of 1907, Chap. 62. New Hampshire. — Laws of 1909, Chap. 123. New Jersey.— Laws of 1902, Chap. 184, New Mexico. — Laws of 1907, Chap. 83. New York.— Laws of 1897, Chap. 612; Laws of 1898, Chap. 336. North Carolina.— Laws of 1899, Chap. 733; Laws of 1905, Chap. 327; Laws of 1907, Chap. 897. North Dakota.— Laws of 1899, Chap. 113. Ohio.— Laws of 1902, p. 162. Oklahoma.— Laws of 1909, Chap. 24. Oregon.— Laws of 1899, p. 18. Pennsylvania. — Laws of 1901, p. 194. Rhode Island.— Laws of 1899, Chap. 674. South Carolina.— Laws of 1914, Act. No. 396, p. 668. South Dakota.— Laws of 1913, Chap. 279. Tennessee. — Laws of 1899, Chap. 94. Utah.— Laws of 1899, Chap. 83. Vermont. — Laws of 1912, p. 114. Vii-ginia. — Laws of 1898, Chap. 866. Washington.— Laws of 1899, Chap. 149. West Virginia.— Laws of 1907, Chap. 81. Wisconsin. — Laws of 1899, Chap. 356. Wyoming. — Laws of 1905, Chap. 43. I Table of Corresponding Sections of the 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, III. Kan. K». Md. Mass, 18 Mich. 1 4958 3304 4464 4171 1305 2935 3458 1 4540 1897 20 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 (2938 J 2939 3461 4 4543 1900 23 21 6 5 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 4965 3310 4470 4177 1312 2941 3464 7 4546 1903 26 24 9 8 4965 3311 4471 4178 1312 2942 3465 8 4547 1904 27 25 10 9 4966 3312 4472 4179 1313 2943 3466 9 4548 1905 28 26 11 10 4967 3313 4473 4180 1314 2944 3467 10 4549 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 4551 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 35 33 18 17 4974 3320 4480 4187 1321 2951 3474 17 4556 1913 36 34 19 18 4975 3321 4481 4188 1322 2952 3475 18 4557 1914 37 35 20 19 4976 3322 4482 4189 1323 2953 3476 19 4558 1915 38 36 21 20 4977 3323 4483 4190 1324 2954 3477 20 4559 1916 39 37 22 21 4978 3324 4484 4191 1325 2955 3478 21 4560 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 4565 1886 45 43 28 27 4982 3330 4490 4197 1331 2961 3484 27 4566 1887 46 44 29 28 4983 3331 4491 4198 1332 2962 3485 28 4567 1888 47 45 30 29 4984 3332 4492 4199 1333 2963 3486 29 4568 1889 48 46 31 30 4985 3333 4493 4200 1334 2964 3487 30 4569 1939 49 47 32 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 50 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 Law in the Various States and Territories II 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Mon. Neb. N.H. N.Y. N. C. N.D. OKI, Ohio Ora, R.I. S. D. Tenn, Utah Wis. 5849 1 1 20 2151 6303 1 3171 4403 7 1 1 1553 1675-1 5850 2 2 21 2152 6304 2 3171a 4404 8 2 2 1554 1675-2 5851 3 3 22 2153 6305 3 3171b 4405 9 3 3 1555 1675-3 5852 4 4 23 2156 6306 4 3171c 4406 10 4 4 1556 1675-4 5853 5 5 24 2154 6307 5 3171d 4407 11 5 5 1557 1675-5 5854 6 6 25 2155 6308 6 3171e 4408 12 6 6 1558 1675-6 5855 7 7 26 2157 6309 7 3171f 4409 13 7 7 1559 1675-7 5856 8 8 27 2158 6310 8 3171g 4410 14 8 8 1560 1675-8 5857 9 9 28 2159 6311 9 3171h 4411 15 9 9 1561 1675-9 5858 10 10 29 2160 6312 10 3171i 4412 16 10 10 1562 1675-10 5859 11 11 30 2161 6313 11 3171J 4413 17 11 11 1563 1675-11 5860 12 12 31 2162 6314 12 3171k 4414 18 12 12 1564 1675-12 5861 13 13 32 2163 6315 13 31711 4415 19 13 13 1565 1675-13 5862 14 14 33 2164 6316 14 3171m 4416 20 14 14 1566 1675-14 5863 15 15 34 2165 6317 15 3171n 4417 21 15 15 1567 1675-15 5864 16 16 35 2166 6318 16 3171o 4418 22 16 16 1568 1675-16 5865 17 17 36 2341 6319 17 3171p 4419 23 17 17 1569 1675-17 5866 18 18 37 2167 6320 18 3171q 4420 24 18 18 1570 1675-18 5867 19 19 38 2168 6321 19 3171r 4421 25 19 19 1571 1675-19 5868 20 20 39 2169 6322 20 3171s 4422 26 20 20 1572 1675-20 5869 21 21 40 2170 6323 21 3171t 4423 27 21 21 1573 1675-21 5870 22 22 41 2180 6324 22 3171u 4424 28 22 22 1574 1675-22 5871 23 23 42 2171 6325 23 3171v 4425 29 23 23 1575 1675-23 5872 24 24 50 2172 6326 24 3171w 4426 30 24 24 1576 1675-50 5873 25 25 51 2173 6327 25 3171x 4427 31 25 25 1577 1675-51 5874 26 26 52 2174 6328 26 3171y 4428 32 26 26 1578 1675-52 5875 27 27 53 2175 6329 27 3171z 4429 33 27 27 1579 1675-53 5876 28 28 54 2176 6330 28 3172 4430 34 28 28 1580 1675-54 5877 29 29 55 2177 6331 29 3172a 4431 35 29 29 1581 1675-55 5878 30 30 60 2178 6332 30 3172b 4432 36 30 35 1582 1676 5879 31 31 61 2179 6333 31 3172c 4433 37 31 31 1583 1676-1 5880 32 32 62 2181 6334 32 3172d 4434 38 32 32 1584 1676-2 5881 33 33 63 2182 6335 33 3172e 4435 39 33 33 1585 1676-3 5882 34 34 64 2183 6336 34 3172f 4436 40 34 34 1586 1676^ 5883 35 35 65 2184 6337 35 3172g 4437 41 35 35 1587 1676-5 Ill X 1 2 3 4 5 6 7 8 9 10 11 12 13 N.I.I. Ala. Ariz. Col. Conn. D. C. Fla. Ida. III. Kan. Kj. Md. Mass Mich. 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 42 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 59 44 43 4998 3346 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 5004 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 51 4590 1920 70 68 53 52 5007 3355 4515 4222 1356 2985 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 4427 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 3364 4524 4231 1365 2994 3518 61 4600 1930 80 78 63 62 5017 3365 4525 4232 1366 2995 3519 62 4601 1931 81 79 64 63 5018 3366 4526 4233 1367 2996 3520 63 4602 1932 82 80 65 64 5019 3367 4527 4234 1368 2947 3521 64 4603 1933 83 81 66 65 5020 3368 4528 4235 1369 2948 3522 65 4604 1934 84 82 67 66 5021 3369 4529 4236 1370 2999 3523 66 4605 1935 85 83 68 67 5022 3370 4530 4237 1371 3000 3524 67 4606 1936 86 84 69 68 5023 3371 4531 4238 1372 3001 3525 68 4607 1937 87 85 70 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 1375 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 3532 75 4614 1995 94 92 77 IV 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Mon. Neb. N.H. N. Y, N. C. N. D. OKI, Ohio Ore. R. 1. S. D. Tenn. Utah Wis. 5884 36 36 66 2185 6338 36 3172h 4438 42 36 36 1588 1676-6 5885 37 37 67 2186 6339 37 31721 4439 43 37 37 1589 1676-7 5886 38 38 68 2187 6340 38 3172] 4440 44 38 38 1590 1676-8 5887 39 39 69 2188 6341 39 3172k 4441 45 39 39 1591 1676-9 5888 40 40 70 2189 6342 40 31721 4442 46 40 40 1592 1676-10 5889 41 41 71 2190 6343 41 3172m 4443 47 41 41 1593 1676-11 5890 42 42 72 2191 6344 42 2173n 4444 48 42 42 1594 1676-12 5891 43 43 73 2192 6345 43 3172o 4445 49 43 43 1595 1676-13 5892 44 44 74 2193 6346 44 3172p 4446 50 44 44 1596 1676-14 5893 45 45 75 2194 6347 45 3172q 4447 51 45 45 1597 1676-15 5894 46 46 76 2195 6348 46 3172r 4448 52 46 46 1598 1676-16 5895 47 47 77 2196 6349 47 3172s 4449 53 47 47 1599 1676-17 5896 48 48 78 2197 6350 48 3172t 4450 54 48 48 1600 1676-18 5897 49 49 79 2198 6351 49 3172u 4451 55 49 49 1601 1676-19 5898 50 50 80 2199 6352 50 3172v 4452 56 50 50 1602 1676-20 5899 51 51 90 2200 6353 51 3172w 4453 57 51 51 1603 1676-21 5900 52 52 91 2201 6354 52 3172x 4454 58 52 52 1604 1676-22 5901 53 53 92 2202 6355 53 3172y 4455 59 53 53 1605 1676-23 5902 54 54 93 2203 6356 54 3172z 4456 60 54 54 1606 1676-24 5903 55 55 94 2204 6357 55 3173 4457 61 55 55 1607 1676-25 5904 56 56 95 2205 6358 56 3173a 4458 62 56 56 1608 1676-26 5905 57 57 96 2206 6359 57 3173b 4459 63 57 57 1609 1676-27 5906 58 58 97 2207 6360 57 3173c 4460 64 58 58 1610 1676-28 5907 59 59 98 2208 6361 59 3173d 4461 65 59 59 1611 1676-29 5908 60 60 110 2209 6362 60 3173e 4462 66 60 60 1612 1677 5909 61 61 111 2210 6363 61 3173f 4463 67 61 61 1613 1677-1 5910 62 62 112 2211 6364 63 3173g 4464 68 62 62 1614 1677-2 5911 63 63 113 2212 6365 63 3173h 4465 69 63 63 1615 1677-3 5912 64 64 114 2213 6366 64 31731 4466 70 64 64 1616 1677-4 5913 65 65 115 2214 6367 65 3173J 4467 71 65 65 1617 1677-5 5914 66 66 116 2215 6368 66 3173k 4468 72 66 66 1618 1677-6 5915 67 67 117 2216 6369 67 31731 4469 73 67 67 1619 1677-7 5916 68 68 118 2217 6370 68 3173m 4470 74 68 68 1620 1677-8 5917 69 69 119 2218 6371 69 3173n 4471 75 69 69 1621 1677-9 5918 70 70 130 2219 6372 70 3173o 4472 76 70 70 1622 1678 5919 71 71 131 2220 6373 71 3173p 4473 77 71 71 1623 1678-1 5920 72 72 132 2221 6374 72 3173q 4474 78 72 72 1624 1678-2 5921 73 73 133 2222 6375 73 3173r 4475 79 73 73 1625 1678-3 5922 74 74 134 2223 6376 74 3173s 4476 80 74 74 1626 1678-4 5923 75 75 135 2224 6377 75 3173t 4477 81 75 75 1627 1678-5 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. III, Kan, Kr, Md. Mass. Mich. 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 4549 1383 3012 3536 79 4618 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 2001 100 98 83 82 5037 3385 4545 4252 1386 3014 3539 82 4621 2002 101 99 84 83 5038 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 2392 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 5047 3396 4556 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 4634 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 117 115 100 99 5051 3402 4562 4269 1403 3029 3556 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 3558 100 4640 1972 120 118 103 102 5054 3405 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 4275 1409 3033 3562 104 4644 1976 124 122 107 106 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 3569 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 VI 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Mon, Neb. N.H. N.Y, N. C. N. 0. OKI. Ohio On. I.I. S. 0. Ttnn. Utah wis. 5924 76 76 136 2225 6378 76 3173u 4478 82 76 76 1628 1678-6 5925 77 77 137 2226 6379 77 3173v 4479 83 77 77 1629 1678-7 5926 78 78 138 2227 6380 78 3173w 4480 84 78 78 1630 1678-8 5927 79 79 139 2228 6381 79 3173x 4481 85 79 79 1631 1678-9 5928 80 80 140 2229 6382 80 3173y 4482 86 80 80 1632 1678-10 5929 81 81 141 2230 6383 81 3173z 4483 87 81 81 1633 1678-11 5930 82 82 142 2231 6384 82 3174 4484 88 82 82 1634 1678-12 5931 83 83 143 2232 6385 83 3174a 4485 89 83 83 1635 1678-13 5932 84 84 144 2233 6386 84 3174b 4486 90 84 84 1636 1678-14 5933 85 85 145 2234 6387 85 3174c 4487 91 85 85 1637 1678-15 5934 86 86 146 2236 6388 86 3174d 4488 92 86 86 1638 1678-16 5935 87 147 2237 6389 87 3174e 4489 93 87 1639 1678-17 5936 87 88 148 2238 6390 88 3174f 4490 94 87 88 1640 1678-18 5937 88 89 160 2239 6391 80 3174g 4491 85 88 89 1641 1678-19 5938 89 90 161 2240 6392 90 3174h 4492 96 89 90 1642 1678-20 5939 90 91 162 2241 6393 91 3174i 4493 97 90 91 1643 1678-21 5940 91 92 163 2242 6394 92 3174J 4494 98 91 92 1644 1678-22 5941 92 93 164 2243 6395 93 3174k 4495 99 92 93 1645 1678-23 5942 93 94 165 2244 6396 94 31741 4496 100 93 94 1646 1678-24 5943 94 95 166 2245 6397 95 3174m 4497 101 94 95 1647 1678-25 5944 95 96 167 2246 6398 96 3174n 4498 102 95 96 1648 1678-26 5945 96 97 168 2247 6399 97 31740 4499 103 96 97 1649 1678-27 5946 97 98 169 2248 6400 98 3174p 4500 104 97 98 1650 1678-28 5947 98 99 170 2249 6401 99 3174q 4501 105 98 99 1651 1678-29 5948 99 100 171 2250 6402 100 3174r 4502 106 99 100 1652 1678-30 5949 100 101 172 2251 6403 101 3174s 4503 107 100 101 1653 1678-31 5950 101 102 173 2252 6404 102 3174t 4504 108 101 102 1654 1678-32 5951 102 103 174 2253 6405 103 3174u 4505 109 102 103 1655 1678-33 5952 103 104 175 2254 6406 104 3174V 4506 110 103 104 1656 1678-34 5953 104 105 176 2255 6407 105 3174w 4507 HI 104 105 1657 1678-35 5954 105 106 177 2256 6408 106 3174x 4508 112 105 106 1658 1678-36 5955 106 107 178 2257 6409 107 3174y 4509 113 106 107 1659 1678-37 5956 107 108 179 2258 6410 108 3174z 4510 114 107 108 1660 1678-38 5957 108 109 180 2259 6411 109 3175 4511 115 108 109 1661 1678-39 5958 109 110 181 2260 6412 110 3175a 4512 116 109 110 1662 1678^0 5959 110 111 182 2261 6413 HI 3175b 4513 117 110 111 1663 1678^1 5960 111 112 183 2262 6414 112 3175c 4514 118 111 112 1664 1678-42 5961 112 113 184 2263 6415 113 3175d 4515 119 112 113 1665 1678-43 5962 113 114 185 2264 6416 114 3175e 4516 120 113 114 1665x 1678-^ 5963 114 115 186 2265 6417 115 3175f 4517 121 114 115 1665x1 1678-45 VII X 1 2 3 4 5 6 7 8 9 10 11 12 13 N.I.I. M. H\l. Col. Conn. D. C. Fla. Ida. III. Kan. Ky. Md. Mass. 133 Mich. 116 5065 3419 4579 4286 1420 3039 3573 115 4655 1987 135 118 117 5066 3420 4580 4287 1421 3040 3574 116 4656 1988 136 134 119 118 5067 3421 4581 4288 1422 3041 3575 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 3593 135 4675 1836 155 153 138 137 5086 3440 4600 4307 1441 3054 3594 4676 1837 156 154 139 138 5087 3441 4601 4308 1442 3055 3595 136 4677 1838 157 155 140 139 5088 3442 4602 4309 1443 3056 3596 138 4678 1839 158 156 141 140 5089 3443 4603 4310 1444 3056 3597 139 4679 1840 159 157 142 141 5090 3444 4604 4311 1445 3056 3598 140 4680 1841 160 158 143 142 5091 3445 4605 4312 1446 3057 3599 141 4681 1842 161 159 144 143 5092 3446 4606 4313 1447 3058 3600 142 4682 1843 162 160 145 144 5093 3447 4607 4314 1448 3059 3601 143 4683 1844 163 161 146 145 5094 3448 4608 4315 1449 3060 3602 144 4684 1845 164 162 147 146 5094 3449 4609 4316 1450 3061 3603 145 4685 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 5098 3453 4613 4320 1454 3063 3607 149 4689 1850 169 167 152 151 5099 3454 4614 4321 1455 3064 3608 150 4690 1851 170 168 153 152 5100 3455 4615 4322 1456 3065 3609 151 4691 1875 171 169 154 153 5101 3456 4616 4323 1457 3066 3610 152 4692 1876 172 170 155 154 5102 3457 4617 4324 1458 3066 3611 153 4693 1877 173 171 156 155 5103 3458 4618 4325 1459 3067 3612 154 4694 1873 174 172 157 VIII 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Mon. Neb. N. H. N.Y. N. C. N. D. m. Ohio Ore. R.I. S.D. Tenn. Utah wis. 5964 115 116 187 2266 6418 116 3175g 4518 122 115 116 1665x2 1678^6 5965 116 117 188 2267 6419 117 3175h 4519 123 116 117 1665x3 1678-47 5966 117 118 189 2268 6420 118 3175i 4520 124 117 118 1665x4 1678-48 5967 118 119 200 2269 6421 119 3175J 4521 125 118 119 1665x5 1679 5968 119 120 201 2270 6422 120 3175k 4522 126 119 120 1665x6 1679-1 5969 120 121 202 2271 6423 121 31751 4523 127 120 121 1665x7 1679-2 5970 121 122 203 2272 6424 122 3175m 4524 128 121 122 1665x8 1679-3 5971 122 123 204 2273 6425 123 3175n 4525 129 122 123 1665x9 1679-4 5972 123 124 205 2274 6426 124 3175o 4526 130 123 124 1665x10 1679-5 5973 124 125 206 2275 6427 125 3175p 4527 131 124 125 1665x11 1679-6 5974 125 126 210 2276 6428 126 3175q 4528 132 125 126 1664x12 1680 5975 126 127 211 2277 6429 127 3175r 4529 133 126 127 1665x13 1680a 5976 127 128 212 2278 6430 128 3175s 4530 134 127 128 1665x14 1680b 5977 128 129 213 2279 6431 129 3175t 4531 135 128 139 1665x15 1680c 5978 129 130 214 2280 6432 130 3175u 4532 136 129 130 1665x16 1680d 5979 130 131 215 2281 6433 131 3175v 4533 137 130 131 1665x17 1680e 5980 131 132 220 2282 6434 132 3175w 4534 138 131 132 1665x18 1680f 5981 132 133 221 2283 6435 133 3175x 4535 139 132 183 1665x19 1680g 5982 133 134 222 2284 6436 134 3175y 4536 140 133 134 1665x20 1680h 5983 134 135 223 2285 6437 135 3175z 4537 141 134 135 1665x21 16801 5984 135 136 224 2286 6438 136 3176 4538 142 135 136 1665x22 1680J 5985 136 137 225 2287 6439 137 3176a 4539 143 137 1665x23 1680k 5986 137 138 226 2288 6440 138 3176b 4540 144 136 138 1665x24 16801 5987 138 139 227 2289 6441 139 3176c 4541 145 137 139 1665x25 1680m 5988 139 140 228 2290 6442 140 3176d 4542 146 138 140 1665x26 1680n 5989 140 141 229 2291 6443 141 3176e 4543 147 139 141 1665x27 I68O0 5990 141 142 230 2292 6444 142 3176f 4544 148 140 142 1665x28 1680p 5991 142 143 240 2293 6445 143 3176g 4545 149 141 143 1665x29 1681 5992 143 144 241 2294 6446 144 3176h 4546 150 142 144 1665x30 1681-1 5993 144 145 242 2295 6447 145 31761 4547 151 143 145 1665x31 1681-2 5994 145 146 243 2296 6448 146 3176J 4548 152 144 146 1665x32 1681-3 5995 146 147 244 2297 6449 147 3176k 4549 153 145 147 1665x33 1681-4 5996 147 148 245 2298 6450 148 31761 4550 154 146 148 1665x35 1681-5 5997 148 149 246 2299 6451 149 3176m 4551 155 147 149 1665x35 1681-6 5998 149 150 247 2300 6452 150 3176n 4552 156 148 150 1665x36 1681-7 5999 150 151 248 2301 6453 151 3176o 4553 157 149 151 1665x37 1681-8 6000 151 152 260 2302 6454 152 3176p 4554 158 150 152 1665x38 1681-9 6001 152 153 261 2303 6455 153 3176q 4555 159 151 153 1665x39 1681-10 6002 153 154 262 2304 6456 154 3176r 4556 160 152 154 1665x40 1681-11 6003 154 155 263 2305 6457 155 3176s 4557 161 153 155 1665x41 1681-12 IX X 1 2 3 4 5 6 7 8 9 10 11 12 13 N.I.L. Ala. h\i. Col. Conn. D. C. Fla. Ida. III, Kan. Ky. Md. 175 Mass. 173 Mich. 156 5104 3459 4619 4326 1460 3067 3613 155 4695 1879 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 177 175 160 159 5107 3462 4622 4329 1463 3070 3616 158 4698 1882 178 176 161 160 5108 3463 4623 4330 1464 3071 3617 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 3075 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 190 188 173 172 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 196 194 170 178 5125 3481 4641 4348 1482 3087 3635 177 4717 1862 197 195 180 179 5126 3482 4642 4349 1483 3088 3636 178 4718 1863 198 196 181 180 5127 3483 4643 4350 1484 3089 3637 179 4719 1864 199 197 182 181 5128 3484 4644 4351 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 4354 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 3095 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 5037 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 15 208 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 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Mo. Neb. N.H. N.Y. N. C. N. D. Okl. Ohio Ore. R.I. S.D. Tenn. Utah wis. 6004 155 156 264 2306 6458 156 3176t 4558 162 154 156 1665x42 1681- -13 6005 156 157 265 2307 6459 157 3176u 4559 163 155 157 1665x43 1681- -14 6006 157 158 266 2308 6460 158 3176V 4560 164 156 158 1665x44 1681- -15 6007 158 159 267 2309 6461 159 3176w 4561 165 157 159 1665x45 1681- -16 6008 159 160 268 2310 6462 160 3176X 4562 166 158 160 1665x46 1681- -17 6009 160 161 280 2311 6463 161 3176y 4563 167 159 161 1665x47 1681- -18 6010 161 162 281 2312 6464 162 3176z 4564 168 160 162 1665x48 1681- -19 6011 162 163 282 2313 6465 163 3177 4565 169 161 163 1665x49 1681- -20 6012 163 164 283 2314 6466 164 3177a 4566 170 162 164 1665x50 1681- -21 6013 164 165 284 2315 6467 165 31.77b 4567 171 163 165 1665x51 1681- -22 6014 165 166 285 2316 6468 166 3177c 4568 172 164 166 1665x52 1681- -23 6015 166 167 286 2317 6469 167 3177d 4569 173 165 167 1665x53 1681- -24 6016 167 168 287 2318 6470 168 3177e 4570 174 166 168 1665x54 1681- -25 6017 168 169 288 2319 6471 169 3177f 4571 175 167 169 1665x55 1681- -26 6018 169 170 289 2320 6472 170 3177g 4572 176 168 170 1665x56 1681- -27 6019 170 171 300 2321 6473 171 3177h 4573 177 169 171 1665x57 1681- -28 6020 171 172 301 2322 6474 172 3177i 4574 178 170 172 1665x58 1681- -29 6021 172 173 302 2323 6475 173 3177J 4575 179 171 173 1665x59 1681- -30 6022 173 174 303 2324 6476 174 3177k 4576 180 172 174 1665x60 1681- -31 6023 174 175 304 2325 6477 175 31771 4577 181 173 175 1665x61 1681- -32 6024 175 176 305 2326 6478 176 3177m 4578 182 174 176 1665x62 1681- -33 6025 176 177 306 2327 6479 177 3177n 4579 183 175 177 1665x63 1681- -34 6026 177 178 310 2328 6480 178 3177o 4580 184 176 178 1665x64 1681- -35 6027 178 179 311 2329 6481 179 3177p 4581 185 177 179 1665x65 1681- -36 6028 179 180 312 2330 6482 180 3177q 4582 186 178 180 1665x66 1681- -37 6029 180 181 313 2331 6483 181 3177r 4583 187 179 181 1665x67 1681- -38 6030 181 182 314 2332 6484 182 3177s 4584 188 180 182 1665x68 1681- -39 6031 182 183 315 2333 6485 183 3177t 4585 189 181 183 1665x69 1681- -40 6032 183 184 320 2334 6486 184 3177u 4586 190 182 184 1665x70 1684 6033 184 185 321 2335 6487 185 3177v 4587 191 183 185 1665x71 1684- -1 6034 185 186 322 2336 6488 186 3177w 4588 192 184 186 1665x72 1684- -2 6035 185 187 323 2337 6489 187 3177x 4589 193 185 187 1665x73 1684- -3 6036 187 188 324 2338 6490 188 3177y 4590 194 186 188 1665x74 1684-4 6037 188 189 325 2339 6491 189 3177z 4591 195 187 189 1165x75 1684- -5 5482 5483 1 6492 I 4592 188 1665x76 189 190 2 2340 6493 3178 4592 1 189 u 1665x77 1675 5844 190 191 3 2342 6494 3178a 4592 2 190 1665x78 1675 5845 191 192 4 2343 6495 3178b 4592 3 191 1665x79 1675 5846 192 193 5 6495 3178c 4592 4 192 ' 1665x80 1675 5847 193 194 6 2345 6497 3178d 4593 5 193 si 1665x81 1675 5848 194 197 198 195 196 196 7 2344 6498 I 190 3178e 4594 6 194 S5 00 tS 1665x82 1675 1684 -7 Note. — In Alaska, Arkansas, Delaware, Hawaii, Iowa, Kentucky. Louisiana. Mississippi, Nevada, New Jersey. New Mexico, Pennsylvania, Rhode Island, Vermont. Virginia, West Virginia and Wyom- ing, the numbers are the same as in the commissioners' draft column X. Negotiable Instruments Law Article "i. Short title; definitions (§§ i, 2). 2. General provisions (§§ 3-7). 3. Form and interpretation (§§ 20-42). 4. Consideration (§§ 50 — 55). 5. Negotiation (§§ 60-80). 6. Rights of holder (§§ 90-98). 7. Liabilities of parties (§§ 110-119). 8. Presentment for payment (§§ 130-148). 9. Notice of dishonor (§§ 160-189). 10. Discharge (§§ 200-206). 11. Bills of exchange; form and interpretation (§§ 210- 215)- 12. Acceptance (§§ 220-230). 13. Presentment for acceptance (§§ 240-248). 14. Protest (§§ 260-268). 15. Acceptance for honor (§§ 280-289). 16. Payment for honor (§§ 300-306). 17. Bills in sets (§§ 310-315). 18. Promissory notes and checks (§§ 320-326). 19. Notes given for patent rights and for a speculative consideration (§§ 330-332). 20. Laws repealed; when to take effect (§§ 340-341). 2 NEGOTIABLE INSTRUMENTS LAW ARTICLE I Short Title: Definitions Section i. Short title. 2. Definitions. § I. Short title. This chapter shall be known as the "Negotiable Instruments Law." Variant. — Same wording as proposed by the Commissioners of Uni- formity of Laws and used in most of the states. Several states have inserted the word "uniform" before "negotiable." The courts of the different states in construing the law seek to follow the original intent of uniformity. Brown v. Brown, 91 Misc. 220; State Bank of Halsted, 162 Iowa, 443; Tosh V. Crafts, 193 Mass. 110; Windsor Cement Co. v. Thompson, 86 Conn. 511; First National Bank v. Miller, 139 Wis. 126; American Trust Co. V. Conevin, 184 Fed. Rep. 657; Smith v. Nelson Land Co. 212 Fed. Rep. 56; Schmidt v. Bank of Commerce, 234 U. S. 64. While the law has been adopted by practically all the states the courts of one state will not take judicial notice of its adoption in another state wnthout proof of that fact. Glcason v. Thayer, 87 Conn. 248; Demelman v. Brazier, 193 Mass. 589. § 2. Definitions. In this chapter, 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 persons 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. "Bill" means bill of exchange, and "note" means negoti- able promissory note. "Delivery" means transfer of possession, actual or con- structive, 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. SHORT title: definitions 6 "Indorsement" means an indorsement completed by delivery. "Instrument" means negotiable instrument. "Issue" means the first delivery of the instrument, com- plete in form, to a person who takes it as a holder. "Person" includes a body of persons, whether incorpo- rated or not. "Value" means valuable consideration. "Written" includes printed, and "writing" includes print. The rule is well settled that words having precise and well-settled meaning in the jurisprudence of a country have the same sense in its statutes unless a different meaning is plainly intended. Perkins v. Smith, 116 N. Y. 441, 23 N. E. 21; Bell v. Terry, 163 N. Y. Supp. 733. Person. — Defined in New York General Construction Law, Sec. 37. Bearer. — If the maker of a promissory note wrongfully obtains possession of it after it was indorsed in blank by the payee, he is the bearer within the meaning of the statute. Massachusetts National Bank v. Snow, 187 Mass. 159. Holder.— Craig v. Polo Alto Co., 16 Idaho 705. The term "holder in due course" should be construed to apply only to one who takes the instrument by negotiation from another who is holder. It should not include the person to whom it is made payable. Vander v. VanZuuk, 112 N. Y. (la.) 807; Putnam v. Crimes, 36 Am. Dec. 250. Delivery. — There is no doubt that a delivery of a note or other obliga- tion to one person in favor of and for the benefit of another, constitutes a valid and binding delivery as against the party who delivers it, whether the party in whose favor it is delivered is the owner of it or not; and for the purpose of protecting his interests, the law holds the party receiving the delivery as his trustee and makes his acceptance of it the acceptance of the beneficiary. Worth V. Case, 42 N. Y. 362; Wolfin v. Security Bank, 170 App. Div. (N. Y.) 521. The question of delivery is one of fact and each case must stand on its own facts. To constitute delivery it must appear that the maker intentionally surrendered control over it, placing it under the power of the payee or some third person for his use. Depositing it in the mail directed to some person makes delivery complete. 4 NEGOTIABLE INSTRUMENTS LAW Digan v. Mandal, 167 Ind. 586; Schovl v. Sheidley, 138 Mo. 672; Daggert v. Simonds, 173 Mass. 340; Garrigue v. Keller, 74 N. E. (Ind.) 523; Barrett v. Dodge, 16 R. I. 740; see Sections 34, 35. Indorsement. — Indorsement is the signature of the payee of a note, bill or check, or that of a third person, written on the back in evidence of his transfer of it, or of his assuring his payment of it or both. Century Dictionary. Written. — Writing may be made in ink or pencil. Negotiable instru- ments like any other contract may be written on parchment, cloth, leather or any other substitute for paper, capable of being transferred from hand to hand. They may be written in any language, and in any form of words. It is enough if the words employed import an absolute engage- ment to pay a certain sum of money. The signature or indorsement of negotiable paper may be made by a mark. Brown V. Butchers' Bank, 6 Hill 443; Acme Coal Co. v. Northrop, 146 Pac. 593. GENEEAL PROVISIONS ARTICLE 2 General Provisions Section 3. Person primarily liable on instrument. 4. Reasonable time, what constitutes. 5. Time, how computed; when last day falls on holiday. 6. Application of chapter. 7. Law merchant; when governs. § 3. Person primarily liable on instrument. The person ''primarily" liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. All other parties are "secondarily" liable. Variant. — The Kansas statute omits the last sentence. This section and section 55 was not intended to prevent the courts from determining in equity all questions between an insolvent holder of a note and the one primarily liable for the indebtedness of the instrument as a matter of fact, whether maker or indorser. Building Engineering Co. v. Northern Bank, 206 N. Y. 400; Winne v. Winne, 166 N. Y. 263-271. A surety is usually bound with his principal by the same instrument, executed at the same time and on the same consideration. He is an original promisor and debtor from the beginning and is held ordinarily to know every default of his principal, and is not entitled to notice of dishonor. Mfg. Co. V. Kimmel, 87 Ind. 566; Ballard v. Burton, 16 L. R. A. 667; Dan. Neg. Inst. Sec. 1753. The distinction between primary and secondary liability is well stated and illustrated in Coleman v. Fuller, 105 N. C. 328, where it is said that a surety is bound with his principal as an original promisor, but the contract of a guarantor is his own separate contract and a warranty that what is promised by the principal shall be done and not merely an engagement jointly with the principal to do the thing. The surety's promise is to pay a debt, which becomes his own when the principal fails to pay. See also Hall v. Weaver, 34 Fed. Rep. 104; Hammel v. Beardsley, 31 Minn. 315; Mcintosh v. Reed, 89 Fed. Rep. 466; Kilton v. Tool Co. 22R. I. 611. Liability of accommodation maker. — See notes Sec. 201. 6 NEGOTIABLE INSTRUMENTS LAW § 4. Reasonable time, what constitutes. 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. The burden is on the holder of a note, when seeking to charge an indorser to prove due and timely presentment and the giving of notice to the indorser of its dishonor; since the obligation of the indorser is con- ditional upon all the steps having been taken by the holder which the statute has prescribed as to presentment and as to notice of non-payment. Commercial National Bank v. Zimmerman, 185 N. Y. 211. Ordinarily between drawer and drawee, where a check is payable in the same town in which it was given, it should be presented the day of its receipt or the next day. Deshoutt V. Lewis, 128 App. Div. (N. Y.) 131; S. B. & N. Y. R. R. Co. V. Collins, 57 N. Y. 641; Sulsberger & Sons Co. v. Cramer, 170 App. Div. 114. Where demand note was indorsed to plaintiff three months and six days after it was made, the delay in negotiation was not for an "unreason- able length of time" within the meaning of this section, providing that, in determining what is a reasonable time, regard is to be had of the nature of the instrument and the usage of trade in the particiilar case. Weber v. Hirsch, 163 N. Y. Supp. 1086. See also German Am. Bank v. Atwater, 165 N. Y. 36; Commercial National Bank v. Zimmer- man, 185 N. Y. 211; Tomlinson Carriage Co. v. Kinsella, 31 Conn. 273; Northwestern Coal Co. v. Bowman, 69 Iowa 153. Notes to Sec. 131. § 5. Time, how computed; when last day falls on holi- day. 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. Variant. — The North Carolina statute omits this section. As banks close on hoHdays this legislation was necessary in regard to commercial paper. Walton v. Stafford, 162 N. Y. 562. Legal Holidays in New York.— The first day of January, known as New Year's day; the 12th day of February, known as Lincoln's birthday; the 22nd day of February, known as Washington's birthday; the 30th GENERAL PROVISIONS 7 day of May, known as Memorial day; the 4th day of July, known as Independence day; the first Monday in September, known as Labor day; the 12th day of October, known as Columbus day; and the 25th day of December, known as Christmas day; each general election day and such day appointed by the president of the United States and governor as a day of general thanksgiving. The term half-holiday includes the period from noon to midnight of each Saturday, which is not a holiday. Sec. 24 General Construction Law. Saturday half-holiday.— The holder of a bill or note due and present- able on Saturday may, if he so elects, rest upon the demand and present- ment made before noon of that day, and if he does, notice of demand and protest given on that day or the succeeding Monday or next secular day, is good, but if he elects to make demand on Monday and payment is not made, then he must in order to hold the indorser or other parties entitled to notice, protest and give notice of dishonor on that day. Sylvester v. Crohan, 138 N. Y. 499. § 6. Application of chapter. The provisions of this chapter do not apply to negotiable instruments made and dehvered prior to October first, eighteen hundred and ninety- seven. Variant. — The statutes of Arizona and Florida omit this section. The Minnesota statute adds: "Nor shall they be construed as modifying, repealing or superseding any of the terms and provisions of Section 2747, Revised Laws 1905." The South Dakota statute reads: "Nothing in this act contained shall be construed as in any manner repealing Chapters 128, 140 and 141 of the Laws of 1905 and Chapter 74 of the Laws of 1907." Indorsed after Law, effect of paper made before see, Gate City National Bank v. Schmidt, 168 Mo. App. 153; Mackintosh v. Gibbs, 81 N. J. L. 37. § 7. Law merchant; when governs. In any case not provided for in this chapter the rules of the law merchant shall govern. Chancellor Kent defines the rules of the law merchant to be "a system of law, wliich does not rest essentially on the positive institutions and local customs of any particular country, but consists of certain principles of equity and usages of trade, which general convenience and a common sense of justice have established to regulate the dealings of merchants and mariners in all the commercial countries of the civilized world." 8 NEGOTIABLE INSTRUMENTS LAW All matters bearing upon the execution, the interpretation, and the validity of contracts, including the capacity of the parties to contract thereto, are determined by the law of the place where the contract is made. All matters connected with its performance, including presentation, notice, demand, etc., are regulated by the law of the place where the contract, by its terms, is to be performed. All matters respecting the remedy to be piirsued including the bringing of suits and the service of process, depend upon the law of the place where the action is brought. Scudder v. Bank, 91 U. S. 406. FORM AND INTERPRETATION ARTICLE 3 Form and Interpretation Section 20. Form of negotiable instrtiment. 21. Certainty as to sum; what constitutes. 22. When promise is unconditional. 23. Determinable future time; what constitutes. 24. Additional provisions not affecting negotiability. 25. Omissions; seal; particular money. 26. When payable on demand. 27. When payable to order. 28. When payable to bearer. 29. Terms, when sufficient. 30. Date, presumption as to. 3 1 . Ante-dated and post-dated. 32. When date may be inserted. 33. Blanks; when may be filled. 34. Incomplete instrument not delivered. 35. Delivery; when effectual; when presumed. 36. Construction where instrument is ambiguous. 37. Liability of person signing in trade or assumed name. 38. Signature by agent; authority; how shown. 39. Liability of person signing as agent. 40. Signature by procuration ; effect of. 41. Effect of indorsement by infant or corporation. 42. Forged signature; effect of. § 20. Form of negotiable instrument. An instrument to be negotiable must conform to the following requirements: 1 . It must be in writing and signed by the maker or drawer ; 2. Must contain an unconditional promise or order to pay a sum certain in money ; 3. Must be payable on demand, or at a fixed or determin- able future time ; 4. Must be payable to order or to bearer; and 10 NEGOTIABLE INSTRUMENTS LAW 5. Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. Variant. — The statutes of Arizona, Idaho, Kentucky, North CaroHna and Wyoming add the words: "of a specified person" after the word "order" in subdivision 4. The Wisconsin statute the following is added to subdivision 5: "But no order drawn upon or accepted by the treasurer of any county, town, city, village or school district, whether drawn by any officer thereof or any other person, and no obligation nor instrument made by any such corporation, or any officer thereof, unless expressly authorized by law to be made negotiable, shall be, or shall be deemed to be, negotiable according to the custom of merchants, in whatever 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 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." The character of an instrument cannot be affected by what the parties may choose to call it in their pleadings or otherwise, whether the paper is a bill, note, check or what not is to be determined by the court from the writing thereof. Buisenthall v. WilHams, 85 Am. Dec. 629. Negotiable is a term applied to a contract, the right of action of which is capable of being transferred by indorsement (of which delivery is an essential part) in case the undertaking is to A, or his order. A, or his agent, or the like, or, by delivery alone, in case the undertaking is to A, or bearer, the assignee in either case having a right to sue in his own name with all the rights of the assignor. Bills of exchange, promissory notes, government, state, county, township, district, mtmicipal and corporate bonds, and bank notes, to order or bearer, are universally negotiable; and bills of lading, and notes not to order or bearer, are quasi negotiable; that is, an indorsement will give a right of action in the name of the assignee. Whether a written instrument is negotiable must be determined from the writing itself and cannot depend on extrinsic facts. Equitable Trust Co. v. Harger, 258 111. 615; 102 N. E. 209. Subd. I. The word writing includes print. Sec. 2, ante. The material on which the writing or printing is made is immaterial and may be written on paper, wood, stone or metal. Danl. Neg. Inst. Sec. 77. FORM AND INTEEPEETATION 11 The writing may be with ink or pencil. Brown v. Butchers' Bank, 6 Hill 443. Reed v. Roark, 14 Tex. 329; 65 Am. Dec. 127. The signature need not necessarily be the full name. Signature by initials or b}^ mark are sufficient, provided it be used as a substitute and he intends to be bound by it. Dewit V. Wilson, 9 N. Y. 574; Brown v. Butchers' Bank, 6 Hill 433; Merchants' Bank v. Spicer, 6 Wend'. 443. The place of signature on the instrument is immaterial provided it is signed with the intent to become maker or drawer. Palmer v. Stephens, 1 Denio 471; Zerin v. Sterne, 71 Am. Dec. 204, 474; Olcott v. Little, 32 Am. Dec. (N. H.) 357. A rubber stamp indorsement is valid when made by one having authority. Mayers v. McRimmon (N. C), 53 S. E. 447; Robl v. Pennsylvania Co. (Pa.),40 Atl. 969. Signature to a check by a bank depositor by mark in lead pencil is valid. Drefahl v. Security Savings Bank, 107 N. W. (la.) 179. A deposit in the name of one person "or" another is a deposit in the name of both, the same as if the word "and" had been used. Clary v. Fitzgerald, 155 App. Div. 659. By Section 144 of the Banking Law of New York (Consol. Laws, Chap. 2; Laws of 1909, Chap. 10), it is among other things provided as follows: "When a deposit shall be made by any person in the names of such depositor and another person and in form to be paid to either or the survivor of them, such deposit thereupon and any additions thereto made by either of such persons upon the making thereof shall become the property of such persons as joint tenants and the same together with all interest thereon shall be held for the exclusive use of the persons so named and may be paid to either during the lifetime of both or to the survivor after the death of one of them, and such payment and the receipt or acqmttance of the one to whom such payment is made shall be a valid and sufficient release and discharge to said bank for all payments made on account of such deposit prior to the receipt by said bank of notice in writing not to pay such deposit in accordance with the terms thereof." Equivalent statutory provisions were in 1909 adopted in California (Stats, and Amdts. of 1909, Chap. 76, Section 16) and Michigan (PubHc Acts of 1909, No. 248, Section 3). The law recognizes a joint tenancy in personal property, irrespective of whether the tenants be husband and wife, and where there is a joint tenancy the right of survivorship exists. 12 NEGOTIABLE INSTRUMENTS LAW West V. McCullough, 123 App. Div. 846, 108 N. Y. Supp. 493, affirmed 194 N. Y. 518, 87 N. E. 1130, citing Farrelly v. Emigrant In- dustrial Savings Bank, 92 App. Div. 529, 87 N. Y. Supp. 54, and Kelly v. Home Savings Bank, 103 App. Div. 141, 92 N. Y. Supp. 578; In re Rey- nolds Estate, 163 N. Y. Supp. 803. FORM FOR OPENING ''EITHER OR SURVIVOR" ACCOUNT We, John Rogers and Helen Rogers, do hereby open an account with the Bank, and do hereby authorize,, empower and direct the Bank to open an account with us in the name of ''John Rogers and Helen Rogers" payable to either or the survivor, or under such other designation as said bank may employ; and we, the said John Rogers and Helen Rogers, do hereby agree with each other to become and be co-partners in the ownership of said moneys and all accrued and accruing interest thereon and of all moneys hereafter to be deposited to the said account. And it is agreed that each and either of said parties and the survivor of them may at any and all times draw and receive from said bank the whole or any part of said moneys and accumu- lated interest; and each of said parties is authorized and empowered to sign the name of the other to any receipt, check, draft or other voucher for the moneys so drawn. Subd. 2. A simple I. O. U. is not usually a promissory note unless those words are added showing it to be absolutely payable. Gay V. Rooke, 151 Mass. 115. An instniment worded "Due A $100, payable on demand" and signed is a promissory note. Kimball v. Huntington, 10 Wend. 675. A savings bank pass book is not negotiable paper, and its possession constitutes in itself no evidence of a right to draw money thereon. White V. Gushing, 88 Me. 339; Grawford v. West Side Bank, 100 N. Y. 51; Smith v. Brooklyn Savings Bank, 101 N. Y. 60; Iron Gity Bank V. McGord, 139 Pa. St. 52. A paper reading "As per verbal agreement we hereby agree to pay you $1,000 ninety days from date, this amount to be paid out on our profits on job," not being an unconditional promise or order to pay a simi certain in money, and not being payable to bearer or order is not a negotiable instrument. Fulton V. Varney, 117 App. Div. 572. FOBM Al^D INTERPKETATION 13 A certificate of deposit issued by a bank whereby it agrees to pay to the person named therein "or her assigns" a certain sum of money is not a negotiable instnmient within the meaning of this section. Zander v. N. Y. Security & Trust Co., 178 N. Y. 208. A certificate of deposit payable to the order of the depositor, in current bank notes, was held negotiable. Pardee v. Fish, 60 N. Y. 265. A note is not rendered non-negotiable by the fact that it provides for a discount, providing it is paid before maturity. Farmers' Trust Co. v. Planck, (Neb.) 152 N. W. 390. In Loring v. Anderson, 95 Minn. 101, 103 N. W. 722, it is held that a note providing for a discoimt of 6 per cent., if the debt is paid on or before naturity, does not make the instrument non-negotiable, as the amount of the deduction is readily ascertainable from the face of the paper. As to what constitutes money.— In most of the states it is held that bills payable in merchandise or anything but money are not good bills of exchange, but the cases are not agreed in all respects as to what shall be deemed as money. In Klauber v. Biggerstaff, 47 Wis. 551, the court defining money said, "Money is a generic and comprehensive term. It is not a synonym of coin. It includes coin, but is not confined to it. It includes whatever is lawfully and actually current in buying and selling, of the value and the equivalent of coin. By universal consent, under the sanction of all courts, everywhere, or almost everywhere, bank notes lawfully issued, actually current at par in lieu of coin, are money. The common term paper money is in a legal sense quite as accurate as the term coined money." The general rule is that the term "currency" and "current funds" when used as the expression of the medium of payment should be con- strued to mean current money, when thus construed an instrument payable in currency or current fimds is in this respect negotiable. Bank of Dexter, 94 Me. 348; Howe v. Hartness, 11 Ohio St. 449; Black V. Ward, 27 Mich. 191. Where a bill was drawn in Montreal on a business firm in Whitehall, payable in New York City in gold dollars, it was held to be a negotiable instniment upon the ground that at the time (1870) there were two kinds of lawful money in use under Acts of Congress, and as gold and silver were recognized as money current in business and as legal tender by the statute, it was decided that a person might be permitted to select that description of money recognized by law without destroying the negoti- ability of the instnmient. Crystler v. Renois, 43 N. Y. 209; Van Alstyne v. Sorley, 32 Texas 518. 14 NEGOTIABLE INSTRUMENTS LAW In Michigan a note payable in "Canada currency" was held to be negotiable. Black V. Ward, 27 Mich. 193; 15 Am. Rep. 162. In Texas a note payable in "Mexican silver dollars" was held to be negotiable. Hogus V. Williamson, 85 Texas 553, reported with notes in 20 L. R. A. 481. In order to be negotiable a promissory note must be payable either in specie or funds which the court can judicially notice as equivalent here for money. Held therefore that a note payable in "Canada money" was not negotiable. Thompson v. Sloan, 23 Wend. 71 ; also see Jones v. Fales, 4 Mass. 245, The words "as per contract" written on the back of a note at the time of its execution, under which the payee indorses at the time of the negotiation, do not affect the negotiability of the note. Snelling State Bank v. Clasen, (Minn.) 157 N. W. 643; First National Bank v. Lightner, 74 Kan. 736; 118 Am. St. Rep. 353. "New York or Chicago exchange" are negotiable. Security Trust Co. v. Des Moines Co., 198 Fed. 331. The Coiu-ts however, are not unanimous and the safer rule to adopt for the bank where such note is offered for discount, is to proceed on the theory that it might be held non-negotiable. See Chandler v. Calvert, 87 Mo. App. 362; Hogue v. Edwards, 9 111. App. 153. The following are illustrations of provisions which have been held not to render the instrument objectionable on the ground of uncertainty as to amount. A discount of 6% will be given if the full amount of this instnmient is paid at maturity of the first installment. Harrison v. Hunter, Tex. 168 S. W. Rep. 1036. A discount of 6% will be allowed if paid in full within fifteen days from date. Installments after maturity draw 6 per cent, interest. First National Bank v. Watson, Okla., 155 Pac. Rep. 1152. With interest at eight per cent, payable annually from November 1, 1905, until paid. Interest from date if not paid when due. (Note dated May, 1905; payable November 1, 1905.) Security Trust & Savings Bank v. Gleichman, Okla., 150 Pac. Rep. 908. Non-payment of any installment for more than thirty days after maturity renders remaining installments due at holder's option. Harrison v. Hunter, Texas, 168 S. W. Rep. 1036. If default is made in the payment of any note or the machine is levied upon or undersigned attempts to sell or remove the same, said FORM AND INTERPEETATION 15 company may declare all the notes due. (Series of notes for threshing machine.) Schmidt v. Pegg., 137 N. W. 524. If suit is begun judgment may be taken for an additional $15.00 and ten per cent, of the amotmt due for attorney's fees. Seton V. Exchange Bank, Okla., 150 Pac. Rep. 1079. \J^^Luy i^/^^ny^^^u,^ a^M^ >Tnent. The tendency of the courts is to construe comm.ercial instruments havmg on them a memorandum or reference to dealings between the parties as negotiable, if they in other respects have all the characteristics of negotiability. Schmittler v. Simon, supra, 101 N. Y. at page 561, 5 N. E. 452, 54 Am. Rep. 737; Hibbs v. Brown, 190 N. Y. 167, 82 N. E. 1108. There are many cases in the books where it has been held that additional writings upon a note or bill have destroyed negotiability, but it will be found upon examination that the ruling invariably rested upon a determination that the language there present showed that the maker or drawer clearly in- tended to charge a specified fund, and not to go beyond that. The closest cases we have found, are National Bank of Newbury v. Wentworth, supra, and Taylor v. Curry, 109 Mass. 36, 12 Am. Rep. 661. In the Bank Case the words "as per terms of contract" followed the words "value received" at the end of the note. In the Taylor Case the note was given by an assured in payment of a premium, and bore upon it the words "on poHcy No. 33,386." In both cases it was held that the words claimed to have the effect of destroying negotiability were mere references to the transactions out of which the notes grew, and that the instruments were negotiable. In the Taylor Case the court said (109 Mass. at page 37 12 Am. Rep. 661): 22 NEGOTIABLE INSTRUMENTS LAW "The words quoted in these notes do not express any contingency as to the payment of the notes, or refer to any fund out of which they are to be paid, but appear to refer to the consideration for which they were given. Such a reference may be for mere convenience, or for any other reason; but it cannot be interpreted as a modification of the promise. Even if the poHcy contains a provision for a set-off in case of loss, this does not make the payment of the note contingent upon the happening of no loss; for the language referred to does not express any such con- tingency." In National Bank v. Wentworth, the court said (218 Mass. at page 32, 105 N. E. at page 627): "But, while the defendant [maker] doubtless intended to guard against the payment of money for which in the future he did not receive an equivalent, and the payee has gone into bankruptcy, the language used does not affect the payment of the amounts shown by the notes." In both of these Massachusetts cases the court points out that the ruling would have been different, had the questioned language been such as "subject to" the contract, or the policy, as the case might be, citing cases where reference in such form was held to create restriction of payment. See also, First National Bank v. Lightner, 74 Kan. 736; Nichols v. Ruggles, 76 Me. 27; Whitney v. National Bank, 137 Mass. 351; Hibbs v. Brown, 112 App. Div. (N. Y.) 219; Fulton v. Varney, 117 App. Div. (N. Y.) 572; Bull v. Simms, 23 N. Y. 570; Oatman v. Taylor, 29 N. Y. 649; Schmitter v. Simon, 114 N. Y. 176; Hibbs v. Brown, 190 N. Y. 167; Chicago R. R. Co. v. Merchants Bank, 136 U. S. 268; Equitable Trust Co. v. Taylor, 146 App. Div. (N. Y.) 424; Gilbert v. Adams, 146 App. Div. (N. Y.) 864; Schmitter v. Simon, 101 N. Y. 554; Brill v. Tuttle, 81 N. Y. 454; Parker v. City of Syracuse, 31 N. Y. 376. Payment out of a particular fund. — This expression is the same as found in many of the cases "drawn on the general credit of the drawer." Waddell v. Hanover Bank, 48 Misc. 578; Fulton v. Varney, 117 App. Div. (N. Y.) 572; Hibbs v. Brown, 190 N. Y. 167. The mere mention of a fund in a draft does not necessarily deprive it of the character of negotiable paper; it is only where there is a direction expressed or implied, to pay it from the fund, and not otherwise, that it will have that effect. Schmitter v. Simon, 101 N. Y. 554; Munger v. Shannon, 61 N. Y. 255; Redmond v. Adams, 51 Me. 429; Coursen v. Ledder, 31 Pa. St. 506. An order upon a savings bank for a certain sum of money, made chargeable to the drawer's account, but with the printed words "the FORM AND INTERPRETATION 23 bank book of the depositor must accompany this order" upon the face of the order, below the signature of the drawer is not a negotiable instru- ment. White V. Gushing, 51 Am. St. Rep. 402, 88 Me. 339. Where reference is made to a special fund merely as a direction to the drawee how to reimburse himself, and the payment is not made to depend upon the adequacy of the fund it will not vitiate the bill. Edward on Bills and Notes, 158; Munger v. Shannon, 61 N. Y. 255; Brill V. Tuttle, 81 N. Y. 457. Subd. 2. — The insertion of a memorandum explaining the nature of the business for which the bill or note was given will not make it non- negotiable, as such memorandiim does not make the payment conditional. Tiedman Commercial Paper, 26; 4 Am. & Eng. Ency. of Law 89; Rigely v. Bank, 109 111. 479, 54 L. R. A. 827. The following instruments have been passed upon by the Courts and held to be negotiable : "On account of contract." First National Bank v. Lightner, 74 Kans. 736, 88 Pac. Rep. 59. "Value received as per contract." National Bank of Newberry v. Wentworth, Mass., 105 N. E. Rep. 626. "For payment under contract of even date." Slaughter v. Bank of Bisbee, Ariz., 154 Pac. Rep. 1040. "Pay to the order of Wm. H. Deweese, atty., $1,150.76 (eleven hundred and fifty and 76-100) in full for A. J. Kenney mortgage. To Denton National Bank, Denton, Maryland. Oscar Clark." Denton National Bank v. Kenney, Md. 81 Atl. Rep. 227. "Having been cause of a money loss to my friend, I have given her three thousand dollars. I hold this amount in trust for her and one year after date or thereafter on demand, I promise to pay to the order of Jane Doe, her heirs or assigns, three thousand dollars with interest." Hickok V. Bunting, 86 Supp. 1059, 92 App. Div. 167. "Two years after date we promise to pay to the order of Howard Hazlett, trustee, thirty-five thousand and twenty-one dollars with interest from date until paid, at the rate of 6 per cent, per annum, in part payment for land in Logan and Boone Counties, and upon which a lien has been reserved to secure this note, payable at the National Exchange Bank, Wheeling, W. Va." Dollar Savings & Trust Co. v. Crawford, W. Va., 70 S. E. Rep. 1089. See also, Nichols v. Ruggles, 76 Me. 25; Bank v. Mitchell, 96 N. C. 53; Shepard v. Abbott, 137 Mass. 224; Bank v. Lightner, 88 Pac. (Kan.) 59. 24 NEGOTIABLE INSTRUMENTS LAW An order drawn by the president of a railroad company upon its treasurer, directing the latter to pay A or order, a specified sum, stated as being the amount due A for work done by him as a contractor in building a section of the corporation's line, is in effect a promissory note. Fairchild v. Ogdensburg C. & R. R. R., 15 N. Y. 337. In Mott V. Havanna National Bank, 22 Hun. 354, the court held, "The addition of the statement of the consideration, to wit: the engine, with the statement that it was to remain the property of the owner until the note was paid, did not render it non-negotiable. See also, Hereth v. Meyer, 33 Ind. 511; National Bank v. Wentworth, 218 Mass. 30; Equitable Trust Co. v. Taylor, 146 App. Div. (N. Y.) 424; Merchants Bank v. Santa Co., 162 App. Div. (N. Y.) 248; Pope v. Lumber Co., 162 N. C. 206; Chicago R. R. Equipment Co. v. Merchants National Bank, 136 U. S. 268; Third National Bank v. Bowman, 50 App. Div. (N. Y.) 66; Hedges v. Shuler, 22 N. Y. 114. The presence of the words "as per contract" on the back of the note did not affect its negotiabiHty, using the word "negotiability" in its large sense as including the passing of title free of equities in favor of the maker and against the payee, as well as the transfer of title by indorsement; that is, the right of a bona fide purchaser for value before maturity and in due course of business was not affected. It is essential to the negotiability of an instrument that the promise be to pay a definite simi in money, absolutely and not contingently, and generally and not out of a particular fund. In First National Bank v. Lightner, 74 Kan. 736, 88 Pac. 59, 8 L. R. A. (N. S.) 231, 118 Amer. St. Rep. 353, 11 Ann. Cas. 596, the words "on account of contract," written on the face of the note, were held not to affect negotiability. Snelling Bank v. Clasen, 157 N. W. 643. § 23. Determinable future time; what constitutes. An instrument is payable at a determinable future time, within the meaning of this chapter, which is expressed to be payable: 1 . At a fixed period after date or sight ; or 2. On or before a tixed or determinable future time specified therein; or 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 instnmient payable upon a contingency is not negoti- able, and the happening of the event does not cure the defect. FORM AND INTERPRETATION 25 Variant. — After Subdivision 3 and before the last sentence the Wis- consin statute has inserted "4 at a fixed period after date or sight, though payable before then on a contingency." Subd. I. — An action on promissory notes which are due according to their terms, and which were given as the consideration for advertising to be performed under a contract, will not be postponed until its com- pletion, where there is no such provision in the contract. Dismond v. Friedman, 162 N. Y. 487. The time of maturity is determined by the intent of the parties. Torpey v. Tebe, 184 Mass. 307. A note stating no time of payment but written on its face "due Jan. 1," was construed as payable January 1 . Torpey v. Tebo, 184 Mass. 307. The following notes have been held to be valid and negotiable. "The makers and indorsers of this note * * * authorize said bank (payee) to appropriate on this note, whether due or not, at any time at its option, without notice, or legal proceedings, any money which they or any one or more of them may have jointly or severally in said bank on deposit or otherwise." Louisville Banking Co. v. Gray, 123 Ala. 251, 26 So. 205. "The said Henry Hem and Maria Hern (makers) to have the privilege of paying the sum of $25.00 or $50.00 at any time during the 5 years on accoimt of said principal sum." Fisher v. O'Hanlon, Neb., 141 N. W. 157. "Two years after date we promise to pay to the order of A. H. Pickerall and Frank Hume twenty-four thousand, seven hundred and fifty 80-100 dollars for value received with interest and eight per cent, per annum interest payable semi-annually, * * * ^jth privilege of paying all or any portion before maturity." Bowie V. Hume, 13 App. D. C. 286. "If, in the judgment of the holder of this note, said collateral depre- ciates in value, the undersigned agrees to deliver when demanded additional security to the satisfaction of said holder ; otherwise this note shall matiire at once." Kennedy v. Broderick, 216 Fed. Rep. 137. "The undersigned having deposited with the said bank as collateral security for the payment hereof and of any and all claims and demands of indebtedness of which the undersigned may now or hereafter be liable, to said bank, whether directly or contingently and whether as principal, surety, guarantor or indorser, the securities named at the foot of this 26 NEGOTIABLE INSTRUMENTS LAW note, it is further agreed by the undersigned that, in case of depreciation in the market value of the securities herewith or hereafter pledged to secure this note, the undersigned will deposit and pledge with said bank such additional security as it may from time to time require and in default of such deposit and pledge for three days after notice to make the same shall be given to or left at the place of business of the undersigned, this note, at the option of the bank, shall become due and payable." Finley v. Smith, 165 Ky. 445, 177 S. W. Rep. 262. "Six months after death I promise to pay Clyde D. Burke from my estate and through my administrator one thousand dollars, 6 per cent, interest from maturity." Deeter v. Burk, Ind., 107 N. E. Rep. 304. (1914) The three following notes were held to be non-negotiable on the grotmd that they were not payable at a fixed or determinable future time. "Said C. E. Reynolds (payee) or his agents have full power to declare this note due and take possession of the said automobile for which it is given when they deem themselves insecure even before the maturity of the note." Reynolds v. Vint, Oregon, 144 Pac. Rep. 526. "The makers and indorsers of this note hereby severally waive pre- sentment for payment, notice of payment, protest and notice of protest and all exemption that may be allowed by law, and valuation and ap- praisement laws waived, and each signer and indorser makes the other an agent to extend the time of this note." Rossville State Bank v. Heslet, Kans., 113 Pac. Rep. 1052. A promissory note which provided that the payees "are hereby fully authorized and empowered to declare this note due any time they may feel insecure even before the maturity of the note," is non-negotiable because of uncertainty as to time of payment. Western Machine Co. v. Burnett, 161 Pac. 184; Reynolds v. Vint, 144 Pac. (Or.) 526. A note containing a provision that the title of the property for which it was given should remain in the payee, and that he should have the right to declare the amount due and take possession of the property whenever he may deem himself insecure "even before maturity of the note" is not negotiable. Kimball v. Studebaker, 94 Pac. (Id.) 1039. Subd. 2. — A note payable at a fixed date with the proviso "When contract is completed and satisfactory" is not payable on the date men- tioned imless all the other conditions have been fulfilled. FORM AND INTERPRETATION 27 11 L. R. A. 748 with notes; Stultz v. Silva, 119 Mass. 139; First National Bank v. Skeen, 101 Mo. 683; Home Bank v. Dmmgoole, 109 N. Y. 67. Municipal bonds issued under a statute providing they should be payable any time before due, are negotiable. While the holder could not exact payment before the day fixed in the bonds: yet by their terms, they were payable at a time which must certainly arrive. Fisher v. O'Hanlon, 93 Neb. 529; See also, HoUiday State Bank v. Hoffman, 85 Kan. 71; Hibernia Bank v. Dresser, 132 La. 532; Bright v. Oldfield, 81 Wash. 442; Thorpe v. Mindeman, 123 Wis. 149. Where one, whose notes were discounted by a bank, signed an agree- ment containing a list of his assets and liabilities and providing that, if such statement proved false in any respect or in case of his insolvency the notes should immediately become due, the bank might declare the notes due, and set off the maker's deposit against them, even though it did not discover the maker's insolvency until after his death. Paoli V. East River National Bank, 155 N. Y. Supp. 245. To constitute a valid promissory note, it must be for the payment of money at some fixed time, or upon some event which must inevitably happen, and that its character as a promissory note cannot depend upon future events, but solely upon its character when created. Chicago Ry. Equipment Co. v. Merchants Bank, 136 U. S. 268; See Sec. 320. The negotiable quality of a promissory note, on or before a fixed day, is not destroyed by a provision that the maker and indorsers severally waive presentment and notice of protest, and consent that the time of payment may be extended without notice. Pomeroy v. Buttery, 116 N. W. 341; 16 L. R. A. (N. S.) 878. The reservation in a note of the right to pay it before maturity in certain specified installments does not render it non-negotiable. The object of the law in requiring certainty as to the time of payment is to give to negotiable paper as far as possible the quality of a circulating medium like money, and practically to make it represent money, is fully met in a note in such form. Riker v. Sprague, 14 R. I. 402, 51 Am. Rep. 413. A note containing the provision that it may be renewed at maturity is not negotiable for the reason that it is not an absolute unconditional contract to pa.y the amount at maturity. Citizens Bank v. Piolett, 126 Pa. St. 194. Subd. 3. — An instnmient by which the signer agrees to pay a sum certain at a specified time after his death is a valid promissory note ; death being a contingency which is sure to happen. 28 NEGOTIABLE INSTRUMENTS LAW Cartwright v. Gray, 127 N. Y. 92; See also, Bristol v. Warner, 19 Conn. 7; Shaw v. Camp, 160 111. 425; Hegeman v. Moon, 131 N. Y. 462; Root V. Strang, 77 Hun. 14; Gilbert v. Adams, 146 App. Div. (N. Y.) 864; Beatty v. Western College, 117 111. 280. The words "upon the return of this receipt," do not make it payable upon a contingency, or constitute a condition precedent to any payment. Frank v. Wessels, 64 N. Y. 158. Where certain coupons cut from railroad bonds were subject to the condition that the time of pa>TTient could be changed from time to time at the option of a majority of holders of the series of bonds simultaneously issued therewith, it would deprive them of one of the essential characteris- tics of negotiable paper. McClellan v. Norfork R. R., 110 N. Y. 476. A note payable to A "when he is twenty-one years of age" is not a negotiable promissory note, it not being certain that he will ever reach that age. Rice V. Rice, 43 App. Div. (N. Y.) 458; Kelly v. Hemmingway, 13 111. 604. A note which states that it is payable to the order of the payee, at a certain fixed time, and states that it is one of a series of notes given for cars sold by the payee to the maker, and is to become due upon the failure to pa}^ any one of the series, and that it is agreed that the title of the cars shall remain in the payee until all the notes are paid, is a valid nego- tiable promissory note. Chicago Ry. Equipment Co. v. Merchants' National Bank of Chicago, 130 U. S. 268; See also, Bemeson v. London Insurance Co., 201 Mass. 172. An order, "Forty days after date pay to the order of A $1,500, and charge same to accoimt of contract. On account of contract when com- pleted and satisfactory" is not a bill of exchange absolutely payable at the end of forty days, whether the contract was completed or not. Home Bank v. Drumgoole, 109 N. Y. 63. Subd. 4. — A series of notes payable at different times, but all to become payable on the default in the payment of one, are negotiable. White V. Thatcher, 188 S. W. Rep. 61. § 24. Additional provisions not afifecting negotiability. 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 character of an instrument otherwise negotiable is not affected by a provision which : FOEM AXD INTERPRETATION" 29 1. Authorizes the sale of collateral securities in case the instrument be not paid at maturity ; or 2. Authorizes a confession of judgment if the instriunent be not paid at maturity; or 3. Waives the benefit of any law intended for the advan- tage or protection of the obligor; or 4. Gives the holder an election to require something to be done in lieu of payment of money. But nothing in this section shall validate any provision or stipulation otherwise illegal. Variant. — The Illinois and Wisconsin statute add to end of the saving clause the words: "or authorize the waiver of exemptions from the execu- tion." The Illinois statute also omits the words: "if the instrument be not paid at maturity" in Subdivision 2. The Kentucky statute omits Sub- division 3. An instrument providing for the payment of a certain sum of money and the payment of something else, the value of which is not ascertained, but depends upon extrinsic evidence, is not a bill or note. Dorsey v. Wolff, 142 111. 589; Hohday v. State Bank, 116 Pac. (Kan.) 239. Subd. I. — Where the maker of an instrument in the form of a promis- sory note, states therein that bonds have been deposited as collateral security with a certain person, and gives authority to sell the same upon non-payment of the note at maturity, and apply the proceeds to the payment of the note; held to be negotiable. Arnold v. Rock River R. R., 5 Duer 207; Collins v. Bradbury, 64 Me. 37. The law seems to be settled that although it may appear on the face of the note that its payment is secured by collateral in personal property, yet if otherwise in proper form, it is negotiable. Heard v. Dubque Co. Bank, 8 Neb. 10; See also, Kennedy v. Bro- derick, 216 Fed. Rep. 137; Biegler v. Merchants' Trust Co., 62 111. App. 560; HolHday State Bank v. Hoffman, 85 Kan. 71; Towe v. Rice, 122 Mass. 67; Costello v. Crowell, 127 Mass. 293; ColHns v. Bradbury, 64 Me. 37; Perry v. Biglow, 128 Mass. 129. Subd. 2. — A note authorizing a confession of judgment whether due or not is not negotiable, for the reason that the time of payment is uncertain, depending upon the whim of the holder. 30 NEGOTIABLE INSTRUMENTS LAW Wisconsin Baptists, etc. v. Bobler, 115 Wis. 289; First National Bank v. Russell, 124 Tenn. 618; Dan. Neg. Inst. Sec. 61 and cases collected. Statutory construction of this Subdivision renders an instrument authorizing judgment before maturity non-negotiable. Bank of Elgin v. Russell, 139 S. W. (Tenn.) 618. Subd. 3. — See Zimmerman v. Anderson, 67 Pa. St. 421; Zimmerman V. Rote, 75 Pa. St. 188; HolHday State Bank v. Hoffman, 85 Kan. 71. The clause waiving all defenses on the ground of extension of time has been held not to destroy the negotiability of the note. First National Bank v. Buttery, 17 N. D. 326, 116 N. W. 341, 16 L. R. A. (N. S.) 878, 17 Ann. Cas. 52; National Bank of Commerce v. Kenney, 98 Tex. 293, 83 S. W. 368; Jacobs v. Gibson, 77 Mo. App. 244; City National Bank v. Goodloe-McClelland Com.mission Co., 93 Mo. App. 123; Farmer, Thompson & Helsell v. Bank of Graettinger, 130 Iowa 469, 107 N. W. 170; Stitzel v. Miller, 250 111. 72, 95 N. E. 53, 34 L. R. A. (N. S.) 1004, Ann. Cas. 191 2B, 412; Navajo County Bank v. Dolson, 163 Cal. 485, 126 Pac. 153, 41 L. R. A. (N. S.) 787; Missouri-Lincoln Trust Co. v. Long, 31 Okl. 1, 120 Pac. 291; De Grot v. Focht, 37 Okl. 267, 131 Pac. 172; Longmont National Bank v. Loukonen, 53 Colo. 489, 127 Pac. 947, Ann. Cas. 1914B, 208. Subd. 4. — Provision for the payment in "cash or goods on demand" being optional with the holder to accept cash or goods is negotiable. Hostatter v. Wilson, 36 Barb. 307. An instrument providing for payment of money or stock negotiable for the same reason. Hodges v. Shuler, 22 N. Y. 116. § 25. Omissions; seal; particular money. The validity and negotiable character of an instrument are not affected by the fact that: 1 . It is not dated ; or 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; or 5. Designates a particular kind of current money in which payment is to be made. But nothing in this section shall alter or repeal any statute requiring in certain cases the nature of the considera- tion to be stated in the instrument. FORM AND INTERPRETATION 31 Variant. — The Illinois statute, Subdivision 5, reads as follows: "Is payable in currency or current funds, or funds, or designates a particular kind of current money in which payment is to be made." The Illinois statute also omits the saving clause. Subd. I. — The date of a check or note is only presumptive of the time it was issued. A check or note has no inception until delivery, and for all legal purposes it is to be considered as made on the date it is de- livered. Cowing V. Altman, 71 N. Y. 411; Church v. Stevens, 56 Misc. 572; Bigge V. Piper, 86 Tenn. 589; See Section 35. It is the general rule that where the words indicative of the time of payment are omitted as "one after date" so that on the face of the instru- ment no time of payment is specified, the omission may be supplied by the holder and such alteration will not vitiate the paper. See notes Sec. 33. Nichols V. Frothingham, 45 Me. 220. Subd. 2. — The omission of the words "for value received" in a note is not material. Underbill v. Phillips, 10 Hun. 591; Dan. Neg. Int. Sec. 108. The production of a note and proof of defendant's signature make a prima facie case for plaintiff, but the burden of proof still remains upon the plaintiff to prove consideration, and if there is any evidence upon this on behalf of the defendant, plaintiff must show, upon a preponderance of the whole evidence that there was a valuable consideration. Durland v. Durland, 153 N. Y. 67; See also, Dan. Neg. Inst. Sec. 164; Bruyn v. Russell, 52 Hun. 17; Brown v. Russell, 60 Hun. 280; Simpson v. Davis, 119 Mass. 269; Periy v. Periy, 144 Mass. 104; See Consideration Art. 3. "Due Kimball & Kenston $325, payable on demand, is a promissory note within the statute. Neither the acknowledgement of value received or negotiable words are essential. Carnwright v. Gray, 127 N. Y. 97; Carver v. Hayes, 47 Me. 257. Subd. 3. — Where the maker of a promissory note removes from the state and continues to reside abroad imtil its maturity, the indorser may be charged without a demand of such maker or presentment at his last place of residence in the state. Foster v. Julian, 24 N. Y. 28 ; Adams v. Leland, 30 N. Y. 309 ; Anderson v. Drake, 14 Johns 114. 32 NEGOTIABLE INSTRUMENTS LAW On the principle that neither the date nor place is essential, see Dan. Neg. Inst. Chapter 3, Sec. 11. A negotiable instrument is presumed to be made where it is dated. N. Y. Manufacturers, etc. Co. v. BHtz, 131 App. Div. (N. Y.) 17. If no place of payment is named in a note, it is presumed to be payable at the place of residence of the maker. Cox V. Bank, 100 U. S. 704; Bank v. Lee, 117 Mich. 122; 75 N. W. 444; McCruden v. Jones, 173 Pa. 507; Brown v. Jones, 113 Ind. 46. See notes on Acceptance and Notice of Dishonor, post. Subd. 4. — This changes the law as laid down in some of the states. Instruments under seal imposing obligations upon private individuals had been held to be non-negotiable. Merritt v. Cole, 9 Him. 98. But it makes no change in the law existing before its adoption in the states of Colorado, Florida, Georgia, Illinois, Kansas, Massachusetts, Nebraska, North Carolina, Ohio and Tennessee. Prior to the adoption of the statute the courts have been practically imanimous in declaring obligations of corporations having attached thereto a seal, negotiable, on the theory that the seal was not placed there to restrain their negotiability, but rather to stamp them as genuine. Dinsmore v. Duncan, 57 N. Y. 577; See also, St. Paul's Church v. Fields, 81 Conn. 670; Jackson v. Myers, 43 Md. 452; Bank of Houston v. Day, 145 Mo. App. 410; Weeks v. Esler, 143 N. Y. 374; Chase National Bank v. Faurot, 149 N. Y. 532; Osborne v. Hubbard, 20 Oregon, 318; Mason v. Frick, 105 Pa. St. 162. The mere attaching of a seal after the signature upon a promissory note does not raise the presumption that the note is a sealed instnmient iinless there be a recognition of the seal in the body of the instrument by some such phrase as "witness my hand and seal" or "signed and sealed." Matter of Pirie, 198 N. Y. 209. Subd. 5.— See notes to Sec. 20, Subd. 2; Dille v. White, 132 Iowa 327, 10 L. R. A. 510; Chrysler v. Griswold, 43 N. Y. 209. Saving Clause. — Undoubtedly refers to notes given for patent rights or for speculative consideration incorporated in this act. See Sections 330, 331. § 26. When payable on demand. An instrument is payable on demand: 1. Where it is expressed to be payable on demand, or at sight, or on presentation; or 2. In which no time for payment is expressed. FORM AND INTERPRETATION 33 Where an instrument is issued, accepted or indorsed when overdue, it is, as regards the person so issuing, accepting or indorsing it, payable on demand. Subd. I. — A note payable on demand not affected by conditions contained in a letter. Beaudrias v. Curtiss, 44 N. Y. St. Rep. 478, 63 Hun. 628. When a specific sum of money is made payable upon demand, or at a specified time, at a particular place, as against the original debtor, no demand at the time or place, prior to the commencement of the smt is necessary. The commencement of the suit itself is a sufficient demand. The only benefit the defendant could get from the specification of payment at a particular place is that if he was ready there to pay, and kept ready, he could set up that fact in his answer and then pay the money into court and allege such payment in his answer, and thus shield himself from liability for interest and costs. Rowland v. Edmunds, 24 N. Y. 308; Locklin v. Moore, 57 N. Y. 360-362; First National Bank v. Story, 200 N. Y. 349; Dominion Trust Co. V. Hildner, 243 Pa. 253, 90 Atl. 69; Farmers' National Bank v. Venner, 192 Mass. 531, 78 N. E. 540, 7 Ann. Cas. 690; Florence Oil, etc., Co. v. First National Bank, 38 Colo. 119, 88 Pac. 182; Citizens' Savings Bank v. Vaughan, 115 Mich. 156, 73 N. W. 143; Dominion Trust Co. v. Hildner, 243 Pa. 253, 90 Atl. 69; Dewees v. Middle States, etc., Co., 248 Pa. 202, 93 Atl. 958; 1 Daniel, Neg. Inst. Sec. 643; 3 R. C. L. 1174-1175; 7 Cyc. 965. r&^o<>^7>- -2:^.^^^^^y7^y -^^^/aa y? /^ ,^^^^vt>^^i;^^;?^-<^i^^ %K B^ <^ >^ q ^ Vv^,g/t^ The words "on demand" in a note do not make a demand a condition precedent to a right of action, but import that the debt is due and demand- able, or at least that the commencement of a suit therefor is a sufficient demand. Dominion Trust Co. v. Hilder, 243 Pa. St. 235; Merchants' National Bank v. Lovitt, 114 Mo. 519. 34 NEGOTIABLE INSTRUMENTS LAW As between the maker and the payee, a note payable on demand is due as soon as it is executed. Brophy v. Wilson, 124 Pac. 510. A promissory note dated July 21, 1874, was by its terms "payable on demand after date with interest after maturity." The note was in- dorsed and transferred by the payee on the day of its date. It was pre- sented to the bank for payment on the February 4, 1878, which was refused and thereupon protested and the indorser notified. In an action upon the note held, that it was the interest of the parties that the note should be presented for payment, if not immediately, at least within a very short time, and that the delay was such as to dishonor the note, and the indorser was discharged. Crim V. Starkweather, 88 N. Y. 339. A note payable on demand and a note payable on demand after date, are for the purpose of the running of the Statute of Limitations deemed due and payable respectively on the day of the date of the note and the day followang -without demand. Harden v. Dixon, 77 App. Div. (N. Y.) 241; McMullen v. Rafferty, 89 N. Y. 456; Neg. Int. Law, Sec. 146. Such note providing for no payment of interest draws no interest tmtil a demand is duly miade. Ledyard v. Brill, 199 N. Y. 62; Lawrence v. Church, 128 N. Y. 324, 332; Am. & Eng. Ency. of Law (2nd ed.) 1020; Adams v. Adams, 55 N. J. Eq. 42; Van Vliet v. Kanter, 139 App. Div. (N. Y.) 605; See Sec. 131. A negotiable instrument expressed to be payable "on demand after date" is payable on demand, and it is so payable although it is made to bear interest from date. Fenn. v. Gay, 146 Mass. 118; O'Neil v. Wagner, 81 Cal. 631; Turner V. Iron Mining Co., 74 Wis. 355, 43 N. W. 149; Peninsular Bank v. Hosie, 112 Mich. 351. Such demand obligations are, as between the maker and payee, due and payable immediately. Winsted Bank v. New Hartford, 78 Conn. 319. Subd. 2. — A note given by an insurance company, payable in such portions and at such times as the board of directors may require is in effect payable upon demand. Howard v. Edmunds, 24 N. Y. 307. A note payable at the maker's convenience is payable on demand. Smithers v. Junker, 41 Fed. Rep. 101. The legal intendment that a note is payable on demand cannot be changed by parol proof. FORM AND INTERPRETATION 35 Sheldon v. Heaton, 88 Hun. 535 ; See also, Roberts v. Snow, 28 Neb. 425; Messmore v. Morrison, 172 Pa. St. 300; James v. Brown, 11 Ohio St. 601 ; Porter v. Porter, 51 Maine 376; Libby v. Mekelborg, 28 Minn. 38; Self V. King, 28 Texas 552. § 27. When payable to order. The instrument is pay- able 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 ; or 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 o. 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. Variant. — The Illinois statute adds a new section as follows: '7 — An instrument payable to the estate of a deceased person shall be deemed payable to the order of the administrator or executor of the estate." Subd. I. — Where a note is drawn to the maker's own order, it is not complete until it is indorsed by him. See Sec. 320. It is not necessary that the payee be designated by name. If his identity can be ascertained with certainty, it is sufficient. United States v. White, 2 Hill 59 ; Blackman v. Lehman, 63 Ala. 547. A note by its terms payable to a specified person omitting the words "or order" is in legal effect payable to him or his order and indorsement is effectual to transfer it. Leavitt v. Putnam, 3 N. Y. 498; Chetty on Bills 136. Subd. 2. — A note payable to the order of the maker does not come into force as a valid note until indorsed by the drawer. Sauffer v. Curtis, 198 Mass. 560. Subd. 4. — In a note payable to two persons in the alternative, the interest is deemed joint. Passut V. Heuvner, 81 Misc. 249; Willoughby v. Willoughby, 5 N. H. 244; Osgood v. Pearsons, 70 Mass. 455; Carr v. Bauer, 61 111. App. 504; Westgate v. Healy, 4 R. I. 523; Colly(!r v. Cook, 28 Ind. App. 272, 275. 36 NEGOTIABLE INSTKUMENTS LAW See also Notes Sec. 71. A note payable to A and B must be sued upon and transferred by them jointly unless in case of partnership. Ryhner v. Feickert, 92 111. 305; Tisdale v. Maxwell, 58 Ala. 40. Subd. 5- — A note payable to the trustees of a church, or their col- lector, is not negotiable. Vorin V. Schoonover, 91 Kans. 530; Noxon v. Smith, 127 Mass. 485. ^^UA(T'^.^.^, ^£^A ^^^a^J^cm^^6<^(^ ■'^:-^>^i^ In the foregoing illustration the note was made payable to the Mutual Life Insurance Co. or Hugh Blackman. It is manifest that it does not fall within the terms of this section for the reason that it was not made payable to two or more payees or to their order. It is made payable to either one of two payees and under Sec. 27 its indorsement by either one of the payees named therein would pass title. Under the last named section a note payable to one or some of several payees is payable to the order of any of the payees, and is negotiable. Union Bank v. Spies, 151 la. 178; Bank v. Lightner, 74 Kans. 736. Were the note payable to the payees jointly, the indorsement of both would be necessary. Where a promissory note payable "to the order of A or B" is indorsed by A only, to one who takes it in good faith, for value and without any notice of infirmity in the instnmient or defect in title, the indorsee is a holder in due course. Voris V. Schoonover, 91 Kans. 530; Union Bank v. Spies, 130 N. W. (la.) 928. Subd. 6. — A written instrtiment by which D promises to pay to W, D and M, "Trustees of the Apalachicola Land Company or their suc- cessors in office, or order" is a promissory note. Davis V. Garr, 6 N. Y. 124. FORM AND INTEEPRETATION 37 § 28. When payable to bearer. The instrument is pay- able 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 payable; or 4. When the name of the payee does not purport to be the name of any person; or 5. When the only or last indorsement is an indorsement in blank. Variant. — In the Illinois statute, subdivision 3 reads: — "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." Subdivision 5 of the Illinois statute reads: "When, although originally payable to order it is indorsed in blank by the payee or subsequent indorsee." Subd. I. — A note "payable to the order of A or bearer" is payable to bearer and may be transferred without indorsement. Phoenix Nat. Bank v. Saucier, Miss., 59 So. Rep. 91. Subd. 2. — A note payable to the maker thereof, as against an accom- modation indorser having knowledge of this fact, is to be considered as I)ayable to bearer; and is valid, although negotiated without the indorse- ment of the payee. Irving Nat. Bank v. Alley, 79 N. Y. 536. Subd. 3. — This rule applies only to paper put in circulation by the maker with the knowledge that the name of the payee does not represent a real person. The maker's intention is the controlling consideration which determines the character of such paper. It cannot be treated as payable to bearer unless the maker knows the payee to be fictitious and actually intends to make the paper payable to a fictitious person. Under the English statute the fact governs. Under the statutes of the various states, the fact coupled with knowledge governs. Shipman v. Bank of New York, 126 N. Y. 318; see also, Irving Nat. Bank v. Alley, 79 N. Y. 536; PhilHps v. M. N. Bank, 146 N. Y. 557; Sea- 38 NEGOTIABLE INSTRUMENTS LAW board Nat. Bank v. Bank of America, 193 N. Y. 34; Boles v. Harding, 201 Mass. 103; Armstrong v. Pomeroy Nat. Bank, 46 Ohio St. 512; Snyder v. Com Exchange Bank, 221 Pa. 599; see Section 27. Where the name of the drawer of a check is forged and the indorse- ment of the payee also forged, it is apparent that the forger never intended the payee to have an interest in the check, and he is therefore, a fictitious or non-existent person within the meaning of this subdivision, and the check became payable to bearer even though the payee named was an actual person. Trust Co. of America v. Hamilton Bank, 127 App. Div. (N. Y.) 515. Where a check is payable to the order of a fictitious or non-existing person, and this fact was known to the person who signed the check, the check is deemed to be payable to bearer. Although such a check appar- ently requires an indorsement in order to transfer it, it is in reality transfer- able without indorsement just as though it were actually made payable to bearer. Consequently, if a check of this kind is indorsed with the payee's name, the indorsement is immaterial and cannot be regarded as a forgery, and, if the drawee bank pays the check, it is not responsible to its depositor for the amount as it would be in the ordinary case of paying a check bearing a forged indorsement. Phillips v. Mercantile Nat. Bank, 140 N. Y. 556, 35 N. E. Rep. 982, 23 L. R. A. 584. A check may be regarded as payable to a fictitious person, and there- fore payable to bearer, though it names as payee an actually existing person. This happens when the person drawing the check to the order of an existing person does so for his own purposes and intends that the payee shall have no interest whatever in the check. The check is in effect payable to a nonentity. Phillips v. Mercantile Nat. Bank, 140 N. Y. 556, 23 L. R. A. 584; Snyder v. Com Exchange Bank, 221 Pa. 599; see also Shipman v. Bank, 126 N. Y. 318; Jordon Co. v. Nat. Shawmut Bank, 201 Mass. 397; Arm- strong v. Pomeroy Nat. Bank, 46 Oliio St. 512; Guaranty State Bank v. Lively (Tex.) 149 S. W. 211. Subd. 4. — This rule is intended to cover cases where checks are payable to "cash," "payroll" or to "sundries." Willets V. Phoenix Bank, 2 Duer 121; Mechanics Bank v. Stratton, 2 Keyes 365. Subd. 5. — An indorsement in blank on a non-negotiable note does not make it negotiable. Wettlaufler v. Baxter, 137 Ky. 362; Johnson v. Lassiter, 155 N. C. 47. FOEM AND INTERPRETATION 39 § 29. Terms, when sufficient. The instrument need not follow the language of this chapter, but any terms are suf- ficient which clearly indicate an intention to conform to the requirements hereof. Variant. — The statutes of Alabama, Idaho, Iowa, North Carolina and Wyoming have inserted the word "negotiable" between the first two words. This change appears to be superfluous. Sec. 2 having defined instruments as used in this act to mean "negotiable instrument." The Wisconsin statute adds to the end of the section: "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 instrirment, and parol evidence is admissible to show the circumstances under which they were made." A negotiable instrument is not affected by reason that it is written in a foreign language. Delebian v. Gala, 64 Md. 262, or whether written with pencil or ink. Brown v. Butchers' Bank, 6 Hill 443. A written statement that a certain amount of money is due a payee therein named, followed by the signature of the maker of the statement, implies that the money is due from the maker and is an indebtedness from him to the person to whom the money is thus acknowledged to be due. The acknowledgement of the indebtedness and that it is due implies a promise to pay it on demand. It is a promissory note within the statute. Hageman v. Moon, 131 N. Y. 462; Gilbert v. Adams, 146 App. Div. 864. A negotiable bill or note is courier without luggage. It is a requisite that it be framed in the fewest possible words, and those importing the most certain and precise contract, and though this requisite be a minor one, it is entitled to weight in determining a question of intention. Overton v. Tyler, 3 Pa. St. 346; 45 Am. Dec. 645; Woodbury v. Roberts, 59 la. 348. § 30. Date, presumption as to. 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, drawing, acceptance or indorsement as the case may be. A check has no inception until delivery and the date is prima facie evidence of the time it was made. A party accepting a check considerable time after its date is put upon inquiry, and in the absence of explanation, takes it subject to any defense existing as between the payee and drawer. 40 NEGOTIABLE INSTRUMENTS LAW Cowing V. Altman, 71 N. Y. 435. If there is no such date the law will deem the nearest date of that month the date intended. A note dated September 31st will be construed as to have been intended for September 30th. Wagner v. Kenner, 2 Rob. (La.) 120. See notes, vSec. 25, vSubd. 1. § 31. Ante-dated and post-dated. The instrument is not invalid for the reason only that it is ante-dated or post- dated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery. Variant. — The Missouri statute reads "valid" instead of "invalid," evidently an error. A check is not invalid for the reason only that it is antedated or post- dated, providing this is not done for an illegal or fraudulent purpose, and an indorsee is not put upon inquiry merely because of the negotiation of the check prior to the day of its date. Albert v. Hoffman, 64 Misc. 87. A postdated check may be negotiated before the day of its date. Brewster v. McCardle, 8 Wend. 475; Passmore v. North, 13 East 517; Albert v. Hoffman, 64 Misc. 88. Where a bank under such circumstances pays the check it is liable to a depositor if there are not left sufficient funds to pay a subsequent check dated prior to the postdated check. Smith V. Maddox, etc. Banking Co., 135 Ga. 151. The intent of the section is to cover instruments so dated by mutual understanding between the parties. Bank of Houston v. Day, 145 Mo. App. 410. But if such false date is inserted to evade the law it is void as to all persons having notice. Serle v. Norton, 9 M. & W. 309. § 32. When date may be inserted. Where an instru- ment 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. The insertion of a wrong date does not avoid the instrument in the hands of FORM AND INTERPRETATION 41 a subsequent holder in due course; but as to him, the date so inserted is to be regarded as the true date. A note made June 10th and dated June , the day of the month left blank, was indorsed for accommodation and thereafter transferred by the maker for value. The holder without the knowledge of the other parties thereto filled the blank date with the figure "1". Held, there was an implied authorization to fill the blank date, and the indorsers, who delivered the note in blank, were bound by the date filled in. Page V. Morrell, 3 Abbt. Ct. App. Dec. 433; Mitchell v. Culver, 7 Cowen, 336; Bank of Houston v. Day, 145 Mo. App. 410; See Notes, Sec. 33. Where a note is, before delivery, made complete in accordance with its general character, and is free from words and imscored blanks reason- ably indicating incompleteness, the unauthorized addition of words or figures by filling of unoccupied blanks or parts of blanks, or otherwise, is such an alteration, if material, as will make the paper void in the hands of the forger or any one claiming under him. Kindler v. First Nat. Bank, 109 N. E. (Ind.) 68. § 33. Blanks; when may be filled. Where the instru- ment 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. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrtiment operates as a prima facie authority to fill it up as such for any amount. In order, however, 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 instrtmient, after comple- tion, 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 author- ity given and within a reasonable time. Variant. — The Illinois statute adds the words "issued or" before negotiable in the last sentence. The South Dakota statute reads as follows: — One who makes himself a party to an instrument, intended to be 42 NEGOTIABLE INSTRUMENTS LAW negotiated but which is left wholly or partly in blank for the purpose of falling in afterwards, is liable upon the instrument to an indorsee thereof in due course, in whatever manner and at whatever time it may be filled so long as it remains negotiable in form. The Wisconsin statute adds "prior to negotiation" before the words "by filling" and omits the words "prima facie" in the second sentence. When considering this section it is important to bear in mind the dis- tinction which exists between (1) those notes in which obvious blanks are left at the time when they are made or indorsed, of such a character as manifestly to indicate that the instruments are incomplete until such blanks shall be filled up, and (2) those notes which are apparently com- plete, and which can be regarded as containing blanks only because the written matter does not so fiilly occupy the entire paper as to preclude the insertion of additional words or figures, or both. One who signs or indorses a note of the first class is liable to bona fide holders thereof, on the doctrine of implied authority, while in other cases relating to notes of the second class, the liability of the maker or indorser for the amount of the note has increased by filling up unoccupied spaces therein is placed upon the doctrine of negligence. Cannon v. Grigsley, 116 111. 151; National Exchange Bank v. Lester 194 N. Y. 464; Winter v. Poole, 104 Ala. 580; Stanton v. Stone, 61 Pac. 481 ; Carson v. Grant Bank, 96 Ky. 487; Weidman v. Symes, 120 Mich. 657; Lowden v. Nat. Bank, 38 Kansas 533. As to the liability of a party who has endorsed or become surety upon a note in which there were spaces (not obvious blanks) that permitted fraudulent insertions in enlarging the amount, see Garrard v. Haddan, 67 Pa. St. 82; Yocum v. Smith, 63 111. 321; Scotland v. O'Connel, 23 Mo. App. 165; Hackett v. Bank of Louisville, 114 Ky. 193; Burrows v. Klunk, 70 Md. 451. See Section 205 and notes. An uncompleted, negotiable instrument sent by a maker residing in Massachusetts to an agent in Canada to be filled out and delivered to the payee there is subject to Canadian laws governing the completion of negoti- able instnmients. Perry v. Pye, 215 Mass. 403. In Abbott V. Rose, 62 Me. 194, 16 Am. Rep. 427, the defendant vol- imtarily signed a blank out of which a promissory note was made when he supposed the blank was to be filled out for another purpose. In that case the court said: "The note, then, owed its existence to some instrumentality on his part. The perfected note was the result of his putting his name to the blank; a result which might have been contemplated as the natural and FOEM AND INTERPRETATION 43 even probable effect of such an act. The signature contributed to that end very materially, and that end was reached by the confidence, misplaced though it was, which he had in the payee. If, then, this act resulted from negligence, or a want of due care on the part of the defendant, however innocent he might be, he would be responsible to any person equally innocent with himself who is injured by that act. This results not only when the person committing the fraud is the appointed agent of the de- fendant, but where no such relation exists." Amount. — One who intrusts another with his acceptance in blank is responsible to a bona fide holder, although the blank is filled by a sum exceeding that agreed upon. Van Duzer v. Howe, 21 N. Y. 531; Trust Co. ot America v. Conklin, 65 Misc. 1. A promissory note with the time and place of pa^nnent in blank and given by the indorser to the maker, who in addition to filling the blanks inserted the words "with interest." Held, that the delivery of the note gave the holder implied authority to fill the blanks by inserting any time and place he chose, but it did not authorize the addition of the words "with interest," and that such addition was a material alteration which invalidated the note in the absence of proof of some authority therefor, aside from the delivery. McGrath v. Clark, 56 N. Y. 38; Meyer v. Huenke, 55 N. Y. 412; Dmnbrow v. Geib, 72 Misc. 400; Columbia Distilling Co. v. Rech, 151 App. Div. 128; Exchange Bank v. Little, 164 S. W. 731. The courts distinguish between notes in which obvious blanks are left and notes which are apparently complete, but in which there is space to insert additional writing. National Exchange Bank v. Lester, 194 N. Y. 465; Greenfield Savings Bank v. Stowell, 123 Mass. 196; Garrard v. Hadden, 67 Pa. St. 82; Harrington v. Breslin, 88 Neb. 47; Weyerhauser v. Dunn, 100 N. Y. 50. Where the amount is stated in figures on the space on the margin and a blank space is left for the amount in the body of the instrument, it is not complete until such amount is written. Chestnut v. Chestnut, 104 Va. 539; Hepler v. Mt. Carmel Bank, 97 Pa. St. 420. But the holder is not authorized to write in a larger amount than called for by the figures. Norwich Bank v. Hyde, 13 Conn. 284; Prim v. Hamil, 32 S. Rep. (Ala.) 652 ; Toomer v. Rutland, 29 A. Rep. (Ala.) 722 ; Nat. Bank v. Carson, 60 Mich. 432. Where a check with the amount in blank was given by a woman to her husband instructing him to deliver it to a creditor in payment of her 44 NEGOTIABLE INSTRUMENTS LAW account, and it was delivered by the husband to be used in the payment of his own debt, and allowed the creditor to insert such amount. Held, that the instrument was incomplete, and in an action by the creditor against the woman for payment of her indebtedness she could introduce evidence to show that by the authority given by her to her husband, he had no right to apply it other than for her debt. Boston Steel & Iron Co. v. Steuer, 183 Mass. 140; Kramer v. Schnitzer, 109 N. E. Rep. 695. The payee of a check which was originally delivered with the amount left blank, is not under the burden of showing authority to fill in the blank. Madden v. Gaston, 137 App. Div. (N. Y.) 294; Davison v. Lanier, 4 Wall 447; Business Men's League v. Sragow, 153 N. Y. Supp. 231. The rule that the bona fide holder of an incomplete instrument, nego- tiable but for some lack capable of being supplied, has implied authority to supply the omission, and to hold the maker thereon, only applies where the latter has by his own act, or the act of another, authorized, confided in or invested with apparent authority by him, put the instniment in circula- tion as negotiable paper, and does not apply where the paper has been stolen. Linick v. Nutting, 140 App. Div. (N. Y.) 265; Solley v. Terrill, 95 Me. 553, 55 L. R. A. 730; Citizens Bank v. Moreland, 71 S. W. (Ky.) 102; Nichols V. Frothingham, 45 Me. 220; Market Nat. Bank v. Sargent, 85 Me. 349; Smith v. Willing, 123 Wis. 377. Sometimes an alteration in a note, seemingly material, and such as may prima facie render it void, is innocent and does not vitiate the instru- ment. So it is, when it is done to correct a mistake in penning the note, or to make it express the real bargain of the parties, or to give the proper legal form to their contract. In such a case the payee has the right to enforce it. Booth V. Powers, 56 N. Y. 22-31; Levy v. Arons, 81 Misc. 166. But where in a check "or order" is changed to "bearer," see Builders Lime & Cement Co. v. Welmer, 151 N. W. (la.) 100. If one signs a negotiable note in blank amount, the payee has authority prima facie, to complete it, in a reasonable time, by filling in the amount authorized, and if he fills it in any other sum he cannot hold the maker (or anyone else who became a party to it before it was completed) unless, after its completion, it is negotiated to a holder in due course, in which case, the maker (or those becoming parties to it before its completion) can be held regardless of whether the amount was authorized. Exchange Bank v. Robinson, 185 Mo. App. 585. FOEM AND INTERPRETATION 45 Place.— In Redlich v. Doll, 54 N. Y. 235 held, that a note perfect in form except the filling of the blank intended for place of pa3mient carried upon its face an implied authority for any bona fide holder to insert the place of pa3mient. Even if the blank be filled contrary to agreement or intention of the original parties, the maker is held to any bona fide holder for value, upon the principle that, where one or two innocent parties must suffer by the fraud or wrong of a third person, the one who put in the power of such third person to commit the fraud or wrong must bear the loss. Diamond Distilleries Co. v. Gott, (Ky.) 126 S. W. 131; Van Duzer V. Howe, 21 N. Y. 531; Winter v. Poole, 104 Ala 580. "Business men, who place their signatures to blanks, suitable for negotiable bills of exchange or promissory notes, and entrust them to their correspondents to raise their money at their discretion ought to under- stand the operation and effect of this rule, and not to expect that courts of justice will fail in such cases to give it due application." Bank of Pittsburgh v. Neal, 63 U. S. 96; Redlich v. Doll, 54 N. Y. 234. Parties. — This section does not authorize a person to alter a note payable to several payees jointly to make it payable to himself. Nat. Bank v. Gridley, 112 App. Div. (N. Y.) 398. But he may insert his own name in a blank space left for the name of the payee. Boyde v. McCann, 10 Md. 118. Signature. — While it has been held that the delivery of a promissory note with blanks unfilled implies authority to complete it, yet it can hardly be claimed that one drawing a promissory note which is unsigned, and falls into the hands of another, thereby authorizies the holder to attach the maker's signature or add anything which is incomplete in its execution. Davis Sewing Machine Co. v. Best, 105 N. Y. 67. In Abbott V. Rose, 62 Me. 194, 16 Am. Rep. 427, the defendant vol- untarily signed a blank out of which a promissory note was made when he supposed the blank was to be filled out for another purpose. In that case the court said : "The note, then, owed its existence to some instrumentality on his part. The perfected note was the result of his putting his name to the blank; a result which might have been contemplated as the natural and even probable effect of such an act. The signature contributed to that end very materially, and that end was reached by the confidence, mis- placed though it was, which he had in the payee. If, then, this act resulted from negligence, or a want of due care on the part of the defendant, however innocent he might be, he would be responsible to any person equally 46 NEGOTIABLE INSTKUMENTS LAW innocent with himself who is injured by that act. This results not only when the person committing the fraud is the appointed agent of the defend- ant, but where no such relation exists." In the same case the covirt cited wdth approval the case of Trigg v. Taylor, 27 Mo. 245, 72 Am. Dec. 263, in which that court declared: "If, however, a bill, note, or check is so negligently drawn, with blank spaces left for the addition of other words or figures, that alterations can be made so as not to excite suspicion, the loss ought to fall on the person in fault, according to the familiar rule that, when one of two persons must suffer by act of a third, the one who affords the means to the wrongdoer must sustain the loss." The authority implied by a signature to a blank note, and the credit given, are so extensive that the party so signing wall be bound to a holder for value in due course, although such note was only authorized to be used for a purpose different from that to which it has been perverted. Rusmissel v. White Oak Stove Co., 92 S. E. 672. Date. — One who signs or indorses a note in blank, authorizes the person to whom it is delivered to fill the blanks in respect essential to the completeness of the note as such; but in the absence of express authority or consent, no authority can be implied from delivery to insert a special agreement not so essential. Weyerhauser v. Dunn, 100 N. Y. 151 ; see notes to Section 32. The absence of a date upon a negotiable instrument at its inception, or the fact that it is post or antedated, may not be material upon the ques- tion of its validity ; but when a date has once been inserted and its time of payment has been fixed, such date is material and cannot be altered with- out the consent of the maker. Dan. Neg. Inst. 1376-7, 1577-8; Bank of Houston v. Day, 145 Mo. App. 410; Eastman v. Shaw, 65 N. Y. 522; Miller v. Gilleland, 9 Penn. St. 119; Crawford v. West Side Bank, 100 N. Y. 51 ; see Section 206. Where an undated note in which blanks were left for the name of the payee and time of payment, after indorsement and with the assent of the indorser, was delivered to plaintiff for value, with authority to fill in the blanks at any time she needed the money, she, under this section, had the right to complete the note by filling in the blanks ; and the indorser is liable for the amount of the note. Usefof V. Herzenstein, 65 Misc. 45; Nat. Exchange Bank v. Lester, 194 N. Y. 471; Johns v. Ha\Hnson, 20 Ind. 317. Reasonable time. — The burden is on the payee to show they were filled in within a reasonable time. A delay of eight months, unexplained, is not within reasonable time. FORM AND INTEEPRETATION 47 Madden v. Gaston, 137 App. Div. 296; Union Trust Co. v. McAneny, 145 App. Div. 412. Incomplete instruments generally. — If a bill, note or check is so negligently drawn with blank space left for the addition of other words, that they can be filled in without suspicion, the loss ought to fall on the person in fault, according to the familiar nile, that when one or two persons must suffer by the act of a third, the one who affords the means must sustain the loss. Trigg V. Taylor, 27 Mo. 245, 72 Am. Dec. 263; Kellogg v. Curtis, 65 Me. 59; Yocum v. Smith, 63 111. 321; Knoxville Nat'l Bank v. Clark, 51 Iowa 264; Mannussier v. Wright, 158 111. App. 219; Hackett v. First Nat'l Bank, 114 Ky. 193; Burrows v. Klxmk, 70 Md. 451; Holmes v. Tnmiper, 22 Mich. 427; Stone v. Sargent, 220 Mass. 445; Harrington Nat'l. Bank v. Breslin, 88 Neb. 47; Redlich v. Doll, 54 N. Y. 238; Town of Solon v. Williamsburg Bank, 114 N. Y. 122; Critten v. Chemical Nat'l Bank, 171 N. Y. 219; Angle v. N. W. Mut. Life Ins. Co., 92 U. S. 330; Abbott v. Rose, 62 Me. 194, 16 Am. Rep. 427; Johnson v. Hoover, 117 N. W. (la.) 277. § 34. Incomplete instrument not delivered. Where an incomplete instnmient has not been delivered it will not, if completed and negotiated, without authority, be a valid con- tract in the hands of any holder, as against any person whose signature was placed thereon before delivery. Variant. — The Wisconsin statute substitutes the word "negotiation" for "delivery" and the end of the sentence. A negotiable instrument must be a complete and perfect instrument when it is issued, or there must be authority reposed in some one after- ward to supply anything needed to make it perfect. Lednich v. McKim, 53 N. Y. 313; Davis Sewing Machine Co. v. Best, 105 N. Y. 67; Nor\^4ch Bank v. Hyde, 13 Conn. 279; Dan. Neg. Int., Sections 841, 842. While the possession of a negotiable instnmient is prima facie evidence of delivery, yet if it is shown that it was never actually delivered, no recovery can be had upon it in the hands of an innocent holder for value. Linick v. Nutting, 140 App. Div. (N. Y.) 265; Burson v. Htmtington, 21 Mich. 415; Where a verbal agreement is made that a promissory note delivered by the maker to the payee shall not be effective tmtil others have signed, it will have no validity between the parties unless the conditions are com- plied with. Hodge v. Smith, 130 Wis. 326; see notes. Sections SZ, 35, 94. 48 NEGOTIABLE INSTRUMENTS LAW § 35. Delivery ; when effectual ; when presumed. Every contract on a negotiable instrument is incomplete and revo- cable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting or indors- ing, 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 instriunent. But where the instrimient 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. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved. Variant. — The Kansas statute strikes out the third sentence. The North Carolina statute omits ''accepting" in the second sentence. The South Dakota statute substitutes for the third sentence commencing with the word "But" as follows: "An indorsee of a negotiable instrument in due course, acquires an absolute title thereto, so that it is valid in his hands, notwithstanding any provision of law making it generally void or voidable, and notwithstanding any defect in the title of the person from whom he acquired it." Delivery being the final act in the execution of a negotiable instrument is as essential as the signature of the maker. Purvance v. Jones, 21 N. E. (Ind.) 1099. There is no doubt that, by virtue of the rtile embodied in this section, the rule of law governing ordinary contracts or instruments, that a con- tract becomes effectual only by actual delivery, is modified, at least to the extent that, where a negotiable 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. Notes properly signed, sealed and placed in an envelope properly addressed to the payee, and delivered to the United States mail at a certain place with postage prepaid, are deemed delivered at such time and place. Garrigue v. Kellar, 108 Ind. 324. FORM AND INTERPRETATION 49 Necessary to Deliver. — A check or note has no inception until delivery, and for all legal purposes it is to be considered as made on the date of its delivery. Cowing V. Altman, 71 N. Y. 441; Burr v. Beelder, 264 III. 230. As between the original parties, delivery involves not only a change of possession, but also an intent that the note shall become effective. Bombolaski v. Bank, 103 N. E. (Ind.) 422. When delivered to the payee the promise became effective, and it is then, and not before, become a chose in action, valid and effective. Wilcox V. Corwin, 117 N. Y. 503; Eastman v. Shaw, 65 N. Y. 528; Burton v. Huntington, 21 Mich. 416; Griffith v. Kellogg, 39 Wis. 290; Grannis v. Stevens, 216 N. Y. 583. Actual or constructive delivery of an indorsed promissory note pay- able to order is essential to vest title; but delivery must be presumed prima facie, from possession of a properly indorsed note, which presump- tion will prevail, in the absence of rebutting evidence. Chandler v. Hedrick, 187 Mo. App. 665; Newcomb v. Fox, 1 App. Div. (N. Y.) 389; Madden v. Gaston, 137 App. Div. (N. Y.) 294. Where the maker of a promissory note allows the same to get into circulation, he is liable to a bona fide holder upon the ground that he is estopped by his own negligence to deny a valid delivery. The maxim declaring that where one of two innocent persons must suffer by the reason of the wrong of a third party, he whose acts made the wrong possible should bear the loss, will apply. See Section 91; Palmer v. Poor, 121 Ind. 135; Dodd v. Dunn, 71 Wis. 578. The delivery of a check by the maker to his agent is not delivery to the payee. Mutual Life Ins. Co. v. Barry, 211 Mass. 306. A delivery of a note to an agent of the payee, is a sufficient delivery. Quality Co. v. Corkill, 182 111. App. 175. Stolen or lost before delivery. — The courts are not unanimous on the question of liability of the maker of negotiable paper lost or stolen before delivery. See, Kinyon v. Wohlford, 10 Am. St. Rep. (Minn.) 165; Magee v. Badger, 34 N. Y. 247; Shippley v. Carroll, 45 III. 285; Cook v. United States, 91 U. S. 389; Rockwell Bank v. Citizens Co., 45 Atl. (Conn.) 361; Cline v. Guthrie, 42 Ind. 227; Caulkins v. Whistler, 29 la. 495; Burson v. Hunting- ton, 4 Am. Rep. (Mich.) 497; Palmer v. Poor, 22 N. E. (Ind.) 984, 6 L. R. A. 469; Salley v. Terrill, 50 Atl. (Me.) 896; Davis Machine Co. v. Best, 105 N. Y. 59; Branch v. Commissioners, 80 Va. 427; Dodd v. Dunn, 37 50 NEGOTIABLE INSTRUMENTS LAW N. W. (Wis.) 430; Walters v. Tielkmeyer, 72 Mo. App. 371; Wheeler v. Guild, 37 Mass. 545; Poess v. 12th Ward Bank, 86 N. Y. Supp. 857; Pollard V. Vinton, 105 U. S. 7. In Burson v. Hunting, 21 Mich. 415, where a note was taken by a payee from a table in the room of the maker, without his authority or consent, and transferred to an innocent holder for value, on the question of the maker's liability the court said: "The wrongful act of a thief or a trespasser may deprive the holder of his property in a note which has once become a note, or property, by delivery, and may transfer the title to an innocent purchaser for value. But a note in the hands of the maker before delivery is not property, nor the subject of ownership, as such; it is, in law, but a blank piece of paper. Can the theft or wrongful seizure of this paper create a valid contract on the part of the maker against his will, where none existed before? There are undoubtedly cases where the negligence of the maker in allowing an undelivered note to get into circulation might justly estop him from setting up non-delivery, as if he were knowingly to throw it into the street, or otherwise leave it accessible to the public." See also Linick v. Nutting Co., 140 App. Div. (N. Y.) 265; Note Section 96. But in Schaeffer v. Marsh, 90 Misc. 307, in a review of the foregoing cases held, that if the instrument is complete, except as to delivery, the non-delivery is not a defense as against a bona fide holder in due course for value. A want of delivery cannot be urged as a defense against a bona fide holder of a negotiable note where it appears that the note got into cir- culation through the fault or negligence of the defendant. Clark V.Johnson, 54 111. 296; Bombolaski v. Nat. Bank, 55 Ind. App. 182; Palmer v. Poor, 121 Ind. 135. A holder in due course of commercial paper may recover thereon, although the instrument was originally stolen from the maker, for the reason that where one or two innocent persons must suffer by the wrong of another, he whose act made the loss possible must suffer. Angus V. Downs, 85 Wash. 75. A note ordinarily has no legal existence until delivered pursuant to the intentions of the parties. Stockton V. Turner, 153 N. W. 641. Conditional Delivery. — A promissory note may be delivered upon a condition, the observance of which is essential to its validity as between the parties to the paper, and where the answer contains an explicit denial of FORM AND INTERPRETATION 51 delivery of the note as alleged in the complaint, and avers a delivery to a different person upon a condition which has not been fulfilled, it raises a question of fact for the jury. Niblock V. Sprague, 200 N. Y. 390; Bookstaver v. Jayne, 60 N. Y. 146. Where the maker of a promissory note in a suit against him by the payee pleads that the delivery was conditional and the non-fulfillment of the condition, such conditional delivery may be proved by parol proof, and the parol proof is not deemed an attempt to vary or contradict the written contract between the parties. Higgins V. Ridgway, 153 N. Y. 130; see also Sayre v. Leonard, 57 Colo. 116; McFarland v. Sikes, 54 Conn. 250; Benton v. Martin, 52 N. Y. 570; Chapin v. Dobson, 78 N. Y. 74; Reynolds v. Robinson, 110 N. Y. 654; Burke v. Dulaney, 153 U. S. 228; Hodge v. Smith, 130 Wis. 326; Cavanagh V. Beer Co., 113 N. W. (la.) 856; Hilsdale v. Thomas, 40 Wis. 661; Juilliard v. Chafee, 92 N. Y. 529; Revere Bank v. Morse, 163 Mass. 383; Vosburg v Diefendorf, 119 N. Y. 357; Citizens Bank v. Millet, 103 Ky. 1. This section does not require that the contract of conditional delivery shall be in writing. Norman v. McCarthy, 56 Colo. 290. A note founded upon a good consideration, which remains in the hands of the payee until the death of the maker, is valid, although it was received and held by the payee on condition that it should be returned whenever the maker might request. Warth V. Case, 42 N. Y. 362. Where the maker of a note delivers it to the payee with the under- standing that it shall be inoperative until the happening of a certain event or the performance of a certain condition, which event or condition has not occurred or been performed, an action cannot be maintained thereon. McKnight v. Parsons, 113 N. W. (la.) 858; Central Bank v. O'Connor, 94 N. W. (Mich.) 11; Larson v. Seguin, 149 N. W. 174. It is necessary, in order to render a delivery conditional, that express words to that effect be used at the time. The conclusion may be drawn from all the circumstances which properly form a part of the entire trans- action, whether in point of time they precede or accompany the delivery. Wilson V. Powers, 131 Mass. 539. A note delivered on condition that it shall be ineffective unless signed by another as co-maker cannot be enforced by the payee unless so signed. State Bank v. Kelly, 152 N. W. 125. Evidence to vary the terms of an agreement in writing is not admis- sible, but evidence to show that there is not an agreement at all is ad- missible. A promissory note, like any other written instrument, has no legal inception or valid existence until it has been delivered in accordance 52 NEGOTIABLE INSTRUMENTS LAW with the ptirpose and intention of the parties, and in support of a plea denjdng its execution it is competent to show, as between the parties to it or others having notice, that the manual delivery of the instnmient to the payee was accompanied b}^ a condition which was never fulfilled. Hunter v. Bank, 172 Ind. 62; Bank v. O'Connor, 132 Mich. 578; Burke v. Dulaney, 153 U. S. 228; Bank v. Borman, 124 111. 200. It is competent for the defendant to show that the note never had a valid inception and that the delivery was conditional. Smith V. Dotterwich, 200 N. Y. 299; 33 L. R. A. 892; Rubel v. Honig, 164 N. Y. Supp. 219. As between the original parties to a promissory note and others having notice, a conditional deliver}^ may be shown, and parol evidence that the delivery was conditional and of the terms of the condition is not open to the objection of var^nng or contradicting the written instnmient. Higgins V. Ridgway, 153 N. Y. 130; Bookstaver v. Jayne, 60 N. Y. 146; Persons v. Hawkins, 41 App. Div. (N. Y.) 171 ; Simmons v. Thompson, 29 App. Div. (N. Y.) 559. Testimon}' as to oral conversations contemporaneous with the making and delivery of a note representing a loan, that the money would not be demanded back until a certain event happened, was admissible only if tending to prove that the deliver}^ of the note itself was made upon con- dition that it should not be complete until the event; i. e., it was intro- duced, not to vary or to show that there was no agreement until the event happened. Weinhandler v. Loewenthal, 159 Supp. 695. The manual transfer of an instrument, in form a complete contract, does not bar parol evidence that it is not to become binding until the happening of some condition precedent resting in parol, or that the trans- fer is for a special purpose. Reynolds v. Robinson, 110 N. Y. 654; Higgins v. Ridgway, 153 N. Y. 130; Burke v. Dulaney, 153 U. S. 228; Niblock v. Sprague, 200 N. Y. 390. It is a question of fact whether any written agreement, though in possession of the obligee, has been delivered by the obligor as a binding agreement, or whether any delivery that has been made is conditional only. Elastic Tip Co. v. Graham, 185 Mass. 597 ; Benton v. Martin, 52 N. Y. 570; Eastman v. Shaw, 65 N. Y. 522; Bookstaver v. Jayne, 60 N. Y. 146; Grierson v. Mason, 60 N. Y. 394; Megowan v. Peterson, 173 N. Y. 1; Juilliard v. Chaffee, 92 N. Y. 529. Act and intention are the essential constituents of a delivery which makes the instrument operative according to its terms. The final question is, did the obligor do such act in reference to it as evidences an intention to give it, in the possession or control of the obligee, effect and operation FORM AND INTERPRETATION 53 according to its terms. Whenever there has been a delivery of the instru- ment for the purpose of giving it such effect, it becomes a present and completed contract, and parol evidence cannot be given to contradict, vary or modify its terms. Jamestown Business College Assn. v. Allen 172 N. Y. 291; Wooley v. Cobb, 165 Mass. 503; Currier v. Hale, 8 Allen 47; Tower v. Richardson, 6 Allen 351; Brown v. Wiley, 20 How. (U. S.) 442; Thomas v. Scutt, 127 N. Y. 133. Bills and notes may be delivered to take effect, not at all events, but conditionally upon the happening of a future contingency, and this may be accom.plished, either by a formal delivery in escrow into the hands of a third person for the promise, or by delivery to the promisee himself in the natiire of an escrow; the intervention of a third person not being abso- lutely necessary. Gamble v. Riley, 39 Okla. 368; Horton v. Birdsong, 129 Pac. 701; Lyons v. StHls, 37 S. W. (Tenn.) 280; 4 Am. and Eng. Ency. Law, 204- McNight V. Parsons, 113 N. W. (la.) 858. Delivery by mistake. Where a note was given by mistake as to the party receiving it, and was accepted by such party fraudulently, with knowledge of the maker's mistake, the note is void from its inception. Bergmann v. Salmon, 79 Hun. 456, affirmed in 150 N. Y. 575. Testimony as to oral conversations, contemporaneous with the making and delivery of a note representing a loan, that the money would not be demanded back until a certain event happened, was admissible only if tending to prove that the delivery of the note itself was made upon con- dition that it should not be complete until the event; i. e., if it was intro- duced, not to vary or explain defendant's agreement, but to show that there was no agreement imtil the event happened. Weinhandler v. Loewenthal, 159 N. Y. Supp. 695; Smith v. Dotter- weich, 200 N. Y. 299, 33 L. R. A. 892. In an action by the payee upon a promissory note, the maker was properly permitted to show a contemporaneous oral agreement pursuant to which the note was delivered conditionally and for a special purpose only, and was not to be paid unless the amount thereof was collected by the maker in a certain suit to foreclose a mechanic's lien. Such evidence did not vary or contradict the written contract. Harder v. Reinhardt, 162 Wis. 558; Hodge v. Smith, 110 N. W. 192; Paulson V. Boyd, 118 N. W. 841. The words "immediate parties" refer to those who are "immediate" in the sense of knowing or being held to know of the conditions or limita- 54 NEGOTIABLE INSTRUMENTS LAW tions placed upon the delivery of the instrument. A payee who is a holder in due course is not an immediate party in the sense of this section. National Security Co. v. Corey, 222 Mass. 455, Holder in due course. See Sec. 91; Linick v. Nutting Co., 140 App. Div. N. Y. 268. Delivered checks revoked upon drawer's death. A check is revoked by the drawer's death. Simmons v. Society, 31 Ohio St. 457; Tate v. Hilbert, 2 Vesey, Jr., (Eng.) Ill; Second National Bank v. Williams, 13 Mich. 282. A bank is protected in paying a check in ignorance of the drawer's death. Drum V.Benton, 13 App. Cases (D. C.) 245; Weiand's Admr. v. State Nat. Bank, 112 Ky. 310, 65 S. W. Rep. 617 ; Brennan v. Merchants' & Mfrs. Nat. Bank, 62 Mich. 343, 28 N. W. Rep. 881. The death of the drawer of a check before its payment or certification revokes the bank's authority to pay it, but the bank is protected in paying the check in ignorance of the drawer's death. In re Stacey's Estate, 152 N. Y. Supp. 717; Brennan v. Merchants' & Manufacturers' Nat. Bank, 62 Mich. 343, 28 N. W. Rep. 881. A bank which pays a check with knowledge of the drawer's death is liable for the amount to his estate. Pullen V. Placer County Bank, 138 Cal. 169, 71 Pac. Rep. 83. Where a check delivered to the payee without consideration is col- lected by the payee after the drawer's death, the money so received remains the property of the estate of the drawer. In re Stacy's Estate, 152 N. Y. Supp. 717. Where the payee of a check collects it after the death of the drawer, he must refund the amount to the drawer's estate. In re Adamson's Will, 154, N. Y. Supp. 667. Massachusetts Rule. — There is a statute in Massachusetts relating to savings banks and institutions for savings (Chapter 590, Acts of 1908), Section 65 of which provides: "Such corporation may pay an order, drawn by a person who has funds on deposit to meet the same, notwithstanding the death of the drawer, if presentation is made within thirty days after the date of such order; and at any time if the corporation has not received written notice of the death of the drawer." The above, however, would not apply to a national bank so as to authorize payment of a customer's check after his death where the officials had knowledge thereof. FORM AND INTERPRETATION" 55 There seems to be some diversity of authority in the various states as to whether the payee of a negotiable instrument can ever be a "holder in due course" within the meaning of the statute. See Boston Steel & Iron Co. V. Steuer, 183 Mass. 140, 66 N. E. 646, 97 Am. St. Rep. 426; Liberty Trust Co. V. Tilton, 217 Mass. 462, 105 N. E. 605, L. R. A. 1915B, 144, which hold that a payee is not necessarily a remote party, and may be a holder in due course. See, also, Vander Ploeg v. Van Zuuk, 135 Iowa 350, 112 N. W. 807, 13 L. R. A. (N.S). 490, 124 Am. St. Rep. 275; Long V. Shafer, 185 Mo. App. 641, 171 S. W. 690, which hold that a payee is an immediate party, and cannot be a holder in due course, and does not take free from any defenses which the maker could interpose if the instrument were non-negotiable. § 36. Construction where instrument is ambiguous. Where the language of the instrument is ambiguous, or there are omissions therein, the following rtiles 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 ambiguous or uncertain, references 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 instrument is undated, from the issue thereof; 3. Where the instrtunent is not dated, it will 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 instrument, 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. Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser; 7. Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon. 56 NEGOTIABLE INSTRUMENTS LAW Variant. — The North Carolina statute omits subdivision 2. The Wisconsin statute adds a new subdivision as follows: — "8. When several waitings are executed at or about the same time, as parts of the same transaction, intended to accomplish the same object, they may be con- strued as one and the same instrument as to all parties having notice thereof." Subd. I . — The figures in the margin of an instrument are no material part of it and are used as convenience. Norwich Bank v. Hude, 13 Conn. 281; Schreyer v. Hawkes, 22 Ohio St. 308; Prim v. Hammel, 134 Ala. 652; Kimball v. Costa, 76 Vt. 289; Witty V. Michigan Mut. Life Ins. Co., 123 Ind. 411. The theory of inserting the figures in addition to the written amount in the body of the instrument is that the amount might strike the eye immediately. Gerard v. Lewis, L. R. 10 Q. B. Div. 30. Marginal figures in a note may be referred to for the purpose of sup- plying the amoimt for which the note was given, when such amount has been wholly omitted in the body of the note. Kimball v. Costa, 76 Vt. 289. LomsviLLE.KY.. ^^/y,i^/,, J91^ OR ORDER s^ 'o .Dollars {INDORSED) PAY TO W. S. GOODWIN JOHN BROWN, WARDEN W. S. GOODWIN From the face of the check it is not plain whether the amount intended is S20.00 or $70.00. Providing the indorsements were correct the paying teller would be justified in papng the lesser amoiint. As to the indorsement, FORM AND INTERPRETATION 57 "John Brown, Warden," it is incorrect, as such indorsement is not the indorsement of St. Paul's Church, and would be a personal indorsement of John Brown — the word "Warden" being merely descriptive. If, however, John Brown was authorized to indorse the paper of St. Paul's Church, and was in the custom of indorsing as above, such authority should be in the hands of the paying bank before the amount be paid. The indorsement of W. S. Goodwin being in blank would make the check payable to bearer in case the previous indorsement had been correct. UfiJTii Smt isTiisi Qqmp^w - ^ <^y^j, . M,^^^ ..^^^^ ^ -^Ci^Zy *^j.^ Dollars {INDORSED) PAY TO UNION TRUST CO., ANNA B. DUNN UNION TRUST CO. The amoimt of the check as evidenced by the writing and figures is misleading. The check should be paid for the amount in writing, for which amount the maker is liable — the figures being a mere memorandum. Regarding the indorsement, "Anna B. Dimn," if she is known to be the same person as Mrs. A. S. Dunn mentioned as payee, the indorsement shoiild be accepted. If, however, the paying bank has no such knowledge, the check should be returned to the Union Trust Company for the irregular- ity. However, the paying bank may rely upon the right of recovirse against the Union Trust Company, the last indorser. It is a custom, how- ever, to enable previous indorsers to protect themselves to draw attention to such irregularities. Subd. 2. — ^Where a note provided for the payment of interest and no rate being mentioned it will draw interest at the legal rate of the place where dated. Franklin Bank v. Roberts, 168 N. C. 473; Homstein v. Cifunio, 86 Neb. 103. 58 NEGOTIABLE INSTRUMENTS LAW Interest Laws of All the States. States and Territories. Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia. Florida Georgia Hawaiian Islands . . . . Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Philippine Islands — Porto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming. DAYS OF GRACE RATES OF INTEREST. STATUTES OF LIMITATIONS. Sight Legal. SPECIAL OR Judgments Notes. Open Accis Drafts CONTRACT Years. Years. Years. No No 8 8 per ^ t. 20 6* 3 No No 8 12 per ct. 10 6 6 No No 6 10 per ct. 5 4 3 No No 6 10 per ct. 10 5 3 No No 7 No limit 5 4 4 No No 8 No Hmit 20 6 6 No No 6 1112 per ct. (a) (b) 6 No No 6 6 per ct. 10 ('t 3 No No 6 10 per ct. 12 3 3 No No 8 10 per ct. 20 5 3 No No 7 8 per ct. 7 6t 6 No No 8 12 per ct. 20 6 6 No No 7 12 per ct. 6 5 4 No No 5 7 per ct. 20 10 5 No No 6 8 per ct. 20 10 6 No No 6 8 per ct. 20t 10 5 No No 6 10 per ct. 5 5 3 No No 6 6 per ct. 15 15 2 No No 5 8 per ct. 10 5 3 No Yes 6 No limit. 20 6-20 6 No No 6 6 per ct. 12 3 3 No Yes 6 No limit. 20 6 6 No No 5 7 per ct. 6 6 6 No No 6 10 per ct. 10 6 6 No No 6 8 per ct. 7 6 3 No No 6 8 per ct. 10 10 5 No No 8 No limit. 10 8 5 No No 7 10 per ct. 5 5 2 No No 7 No limit. 6 6 4 No Yes 6 6 per ct. 20 6 6 No No 6 6 per ct. 20 6 6 No No 6 12 per ct. 7 6 4 No No 6 1(6 per ct. 20 6 6 No No 6 6 per ct. 10 3* 3 No No 6 10 per ct. 10 6 6 No No 6 8 per ct. 5 15 6 No No 6 10 per ct. 1-5 5 3 No No 6 10 per ct. 10 6 6 No No 6 6 per ct. 5 6t 6 No No 6 No imit. No No 6 12 per ct. 5 3 3 No Yes 6 No limit . 20 6 6 No No 7 8 per ct. 10 6 6 No No 7 12 per ct. 20 6 6 No No 6 6 per ct. 10 6 3 Yes Yes 6 10 per ct. 10 4 2 No No 8 12 per ct. 8 6 4 No No 6 6 per ct. 8 6 6 No No 6 6 per ct. 20 5* 5 No No 6 12 per ct. 6 6 3 No No 6 6 per ct. 10 10 5 No No 6 10 per ct. 6-20 6 6 No No 8 12 per ct. 21 10 8 II Any rate of interest on call loans of $5,000 or upward, on collateral security, (a) No limit, (b) Negotiable notes, 6 years. * Under seal, 10 years. fUnder seal, 20 years. | In Courts of Record, 20 years; Justice's Court, 10 years. i Over 6 per cent, cannot be collected by law. FORM AND INTERPEETATION 59 Interest, conflict of laws. A contract valid where made is valid everywhere. Thus a resident of one state may authorize an agent in another state where there is no limit upon the rate of interest to execute a note in his name in that state and the note so made is a valid obligation, although, if executed in his own state would be void for usury. Thompson v. Erie R. R. Co., 147 App. Div. 8; 207 N. Y. 171; see also Western Co. v. Kilderhous, 87 N. Y. 430; Whitehead v. Heidenheimer, 57 App. Div. 590. Where a resident of Illinois sent to a resident of New York a ten per cent, note in payment of a debt due the latter, it was held that the usurious character of the note was to be determined by the laws of the State of Illinois, though it was payable in New York, Sheldon v. Hoxtun, 91 N. Y. 124; Agricultural Bank v. Sheffield, 4 Hun. 421. But a note made in New York State and payable there, specifying no rate of interest, no intention existing that it will be discounted elsewhere, is controlled by the laws of that state, and if first discounted in another state at a rate of interest lawful there, but illegal in New York, it may be invalid for usury. Dickinson v. Edwards, 77 N. Y. 573; Clayes v. Hooker, 4 Hun. 231. Where a note is sent to one state for negotiation and had its inception in that state, the fact that it was signed in another state does not require that the laws of the latter state shall govern the rate of interest thereon. Smith V. Dixon, 150 App. Div. (N. Y.) 571 ; Wayne Co. Bank v. Low, 81 N. Y. 566. A note which is dated and payable in Florida is regarded as a Florida contract so far as the defense of usiiry is concerned, though it is made and executed in New York. Cutler V. Wright, 22 N. Y. 472. Subd. 3. — As to authority to fill in date, see notes to Sec. 33. It is well settled that a note payable on demand and a note payable on demand after date are, for the purpose of the running of the Statute of Limitations, deemed due and payable respectively on the day of the date of the note and the day following without demand. Hardon v. Dixon, 77 App. Div. (N. Y.) 241; Van Vliet v. Kanter, 139 App. Div. 604. See notes under Subdivision 1, Sec. 25 and Sec. 33. Subd. 4. — This is a general proposition applicable to all written contracts. 60 NEGOTIABLE INSTKUMENTS LAW In a case of conflict the court will consider the whole instrument, and not one or more parts detached from the others. Barkley v. Ellis, 45 N. Y. 107. Where two clauses apparently repugnant may be reconciled by any reasonable construction, as by regarding one as qualification of the other, that construction must be given because it cannot be assumed that the parties intended to insert inconsistent provisions. Miller V. Hannibal & St. Jo. R. R., 90 N. Y. 433. Subd. 5. — See Heise v. Bumpass, 40 Ark. 547; Dan. Neg. Int. Sec. 131. Subd. 6. — A note reading "Four months after date the Northwestern Straw Works promise to pay," etc., was signed "The Northwestern Straw Works" "E. R. Stillman, Treas." "John W. Mariner." While the note was ambiguous as to Mariner, parol evidence was admissible to show that he signed in a representative capacity, even as against a bona fide purchaser of the note before its maturity. Germania Bank v. Mariner, 129 Wis. 544; see Sec. 114; Germania Nat. Bank v. Mariner, 129 Wis. 544. Subd. 7. — See Uelery v. Brohm, 20 Colo. App. 544; Kingsley v. Sampson, 100 111. 54. § 37. Liability of person signing in trade or assumed name. No person is liable on the instrument whose sig- nature does not appear thereon, except as herein otherwise expressly provided. But one who signs in a trade or assumed name will be liable to the same extent as if he had signed in his own name. Variant. — The Wyoming statute omits the word "expressly." In an action on a promissory note which was made payable to the National Publishing Company, a company which had no legal existence but was an assumed name used by the payee, he was estopped from alleging it was made payable to a fictitious payee. Jones V. Home Furnishing Co., 9 App. Div. (N. Y.) 103. A person may become a party to a bill or note by any mark or designa- tion which he choses to adopt as a substitute for his name, and where the FORM AND INTERPRETATION 61 word "agent" is added to his name he, and not the undisclosed principal, is liable thereon. Stackpole v. Arnold, 11 Mass. 27; Manufacturers & Traders Bank v. Love, 13 App. Div. (N. Y.) 561; Dan. Neg. Int. Sec. 304. A person who sells commercial paper as his own is understood to warrant his title thereto to be good — and that the instrument is good. A co-partnership may exist and the parties to it be bound even though there is no finn name, if such name has been agreed upon — a name that fairly represents the company m.ay be adopted, and by custom and use becomes its valid name. M. N. Bank v. Gallaudet, 120 N. Y. 298. § 38. Signature by agent; authority; how shown. The signature of any party may be made by a duly authorized agent. No particular form of appointment is necessary for this purpose; and the authority of the agent may be estab- lished as in other cases of agency. Variant. — In the Kentucky statute the words "an agent duly author- ized in writing" are substituted for the words "duly authorized agent" in the first sentence. On the effect of the change, see Finley v. Smith, 165 Ky. 445. "It is an acknowledged principle of the law of agency that a general power of authority given to an agent to do an act in behalf of the principal does not extend to a case where it appears that the agent himself is the person interested on the other side." Bank of N. Y. v. A. D. & T. Co., 143 N. Y. 559. "There is no reason which is founded on principle that can be given for not applying the same rule of agency to a cashier as to other persons occupying fiduciary relations. No person can act as an agent in a trans- action in which he has an interest, or to which he is a party, on the side opposite to his principal. This must be so where the person dealing with the agent has knowledge of the facts. A person cannot deal with a cashier of a bank as an individual, in securing a draft and claim; after the draft is delivered it has become the transaction of the bank. To make the acts of the cashier valid, the transaction in which the draft is delivered must be a bank transaction, made by the cashier, within his express or implied authority in the conduct of the business of the bank. So long as a person deals with the cashier in a n-jatter wherein, as between himself and the cashier, he is dealing with, or has a right to believe he is dealing with, the bank, the transaction is obligatory upon the bank. The cashier is pre- 62 NEGOTIABLE IISTSTRUMENTS LAW sumed to have all the authority he exercises in dealing \vith executive func- tions legally \\'ithin the powers of the bank itself, or which are usually or customarily done, or held out to be done, by such an ofRcer. But the test of the transaction is whether it is with the bank and its business, or with the cashier personally and in his business." Claflin V. Bank, 25 N. Y. 293; Moores v. Bank, 111 U. S. 164. A married woman stands at law on the same footing as if unmarried, and therefore may authorize her husband as agent to make for her nego- tiable paper. Noll V. Kinney, 106 N. Y. 74. Authority of corporation officers to make notes. ^Z-^on y? / Ci^tX,,^^yy:^yJ^^/ \(^^2.^<2,^ ^(^^ y^^^^2.<2y: {INDORSED) ED. HOGABOOM. The general authority of a president of a business corporation to make and discount notes gives him no power to make a note of the corporation payable to his own order, and one who discounts such a note cannot recover thereon against the corporation without showing special authority for its execution. An act done or a contract made with himself by an agent on behalf of his principal is presumed to be, and is notice of the fact that it is without the scope of his general powers. The form of the foregoing note carries notice to the purchaser of a possible want of power and sufficient to put him on guard. There is another reason why this note is not binding on the hotel corporation. It is that it was an accommodation note, that the bank had notice of that fact when it discounted the paper, and that it was beyond the powers of the corporation to make a note of that character. Park Hotel Co. v. Foiirth Nat. Bank, 86 Fed. 742; Bank v. Armstrong, 152 U. S. 346; Claflin v. Bank, 25 N. Y. 293; Bank v. Wagner, 20 S. W. (Ky.) 535; Smith v. Association, 78 Cal. 289; 20 Pac.677; Nat. Park Bank V. G.A.M.Co., 116 N. Y. 281; Aetna Bank v. Charter Oak Co., 50 Conn. 167; Nat. Bank v. Globe Works, 101 Mass. 57; Davis v. R. R. Co., 131 Mass. 258; Lucas v. Transfer Co., 70 Iowa 541; Bank v. Kennedy, 167 U. S. 362. As to religious or other corporations, not engaged in business, a busi- ness act which charges them with liability must have been shown to have been authorized before the liability will attach. People's Bank v. St. Anthony's Church, 109 N. Y. 512. When an agent abandons the object of his agency and acts for himself by committing a fraud for his own exclusive benefit, he ceases to act within the scope of his employment and to that extent ceases to act as agent. Shipman v. Bank of New York, 126 N. Y. 318, 331, 27 N. E. 371, 12 L.R.A.791, 22 Am. St. Rep. 821; Welsh v. German-American Bank, 73 66 NEGOTIABLE INSTRUMENTS LAW N. Y. 424, 29 Am. Rep. 175; Allen v. South Boston R. Co., 150 Mass. 200, 206, 22 N. E. 917, 5 L. R. A. 716, 15 Am. St. Rep. 185. While it is well settled that a principal is responsible for the frauds of his agent while acting wnthin the scope of his authority, it is equally well settled that the principal is not responsible for the fraudulent acts of his agent committed outside the scope of his authority and for his own personal advantage. Taylor v. Commercial Bank, 174 N. Y. 181, 66 N. E. 726, 62 L. R. A. 783, 95 Am. St. Rep. 564; Henry v. Allen, 151 N. Y. 1, 11, 45 N. E. 355, 36 L. R. A. 685; Cushman v. Amend, 103 N. Y. Supp. 45. The authorities very generally hold that an agent with general author- ity to manage the business of his principal has not, by reason thereof, implied power to indorse or execute negotiable paper. 1 Am. & Eng. Ency. of Law, 1030; Jackson Co. v. Commercial Bank, 199 111. 151, 65 N. E. 136; Pluto Powder Co. v. Cuba Bank, 153 Wis. 324; Deering Co. v. Kelso, 74 Minn. 41, 76 N. W. 792. The authority of an agent to a particular act in connection with a transaction may be inferred from proof that his principal authorized or ratified similar acts in connection with past transactions. Cartage Co. v. Cox, 74 Ohio St. 284; Antrim v. Anderson, 140 Mich. 702; Union Stock Yards v. Mallory, 157 111. 554. As to proof of authority of agent see: In re Estate of Chismore, 166 la. 217; Scotland National Bank v. Hohn (Mo.) 125 S. W. 539; Eldredge v. Husted, 22 Misc. 534; Grant County Bank v. N. W. Land Co., 28 N. D. 479. The extent to which a principal shall authorize his agent is completely within his determination, and a party dealing with the agent must ascer- tain the scope and reach of the powers delegated to him, and must abide by the consequences if he transcends them. A power of attorney, like any other contract, is to be construed according to the natural meaning of the words in view of the purpose of the agency and the needs to its fulfillment. The authority within it under such construction is not to be broadened or extended. Porges V. U. S. M. & Trust Co. 203 N. Y. 181. The purpose of a written power of attorney is not to define the author- ity of the agent, as between himself and his principal, but to evidence the authority of the agent to third parties with whom the agent deals. Keyes v. Metropolitan Trust Co., 220 N. Y. 237; Watson v. Cleveland, 21 Conn. 538 ; Wimberly v. Windham, 104 Ala .409 ; Fitzbaugh v. Spunangle, 118 la. 341; Hallady v. Underwood, 90 111. App. 130. FORM AND INTEEPBETATION 67 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, of , have made, constituted and ap- pointed, and by these presents do make, constitute and appoint of true and lawful attorney for and in name, place and stead: I. To draw checks against account in the Bank. 2. To endorse notes, checks, drafts or bills of exchange which may require endorsement for deposit or for collection in said bank. J. To borrow money from the said bank and to execute, seal and deliver any notes, bonds or other instruments in writing necessary therefor, and to assign as collateral security stocks, bonds, warehouse receipts or other personal property. 4. To endorse any paper may offer said bank for discount. 5. To draw and accept all drafts or bills of exchange. 6. To waive demand, protest and notice of protest on all notes, checks drafts or bills of exchange. 7. To do all lawful acts requisite for effecting these premises, hereby ratifying and confirming all that the said attorney shall do therein by virtue of these presents. It is understood and agreed that this power shall stand irrevoked and in full force until notice thereof shall be given, in writing, by or legal representatives to said Bank. In witness whereof, have hereunto set hand and seal this day of , in the year of our Lord one thousand nine hundred and {Seal) Signed, sealed and delivered in the presence of 68 NEGOTIABLE INSTRUMENTS LAW REVOCATION OF POWER OF ATTORNEY To the Bank, Dear Sirs: Please take notice that the undersigned hereby revokes a certain power of attorney heretofore made and executed on the day of ip , wherein and whereby one of was made, constituted and appointed due and proper attorney to perform certain acts therein more particularly described, holding you harmless from all acts which may have been heretofore done by you pur- suant to the said power of attorney and previous to the receipt of this notice of revocation. Dated the day of ig § 39. Liability of person signing as agent. Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative char- acter, without disclosing his principal, does not exempt him from personal liability. Variant. — The Virginia Statute adds the words: "without disclosing his principal" after the word "capacity." A promissory note signed "Annie M. PhilHps, Admrx." constitutes an individual obHgation of the said Annie M. Phillips, the word "Admrx." being simply descriptive. Jenkins v. Philhps, 41 App. Div. (N. Y.) 389. The same nile applies to notes signed "guardian," "trustee," "secre- tary," etc. Bank v. Looney, 99 Tenn. 278; Schmittler v. Simon, 114 N. Y. 186; Daniel v. Glidden, 38 Wash. 556. An agent, who on behalf of his principal, purchases property and delivers to the vendor in pajnnent thereof a promissory note signed with his own name to which he added the word "Agt." is not personally liable, where it appears that the vendor accepted the note, with knowledge FOKM AND INTEKPKETATION 69 that the agent was not acting in his individual capacity but as agent for another. Crandall v. Rollins, 83 App. Div. (N. Y.) 618; Sumwalt v. Rigley, 20 Md. 107. When one knowingly and without dissent permits another to act as his agent, the capacity will be conclusively presiimed. Joyce V. Rohan, 111 N. W. (la.) 319. If an agent signs a note with his own name alone and there is nothing on its face to show that he is acting as agent, he is, and his principal is not, personally liable. Burkhalter v. Perry, 127 Ga. 438; N. Y. Life Ins. Co. v. Martindale, 88 Pac. (Kan.) 559; 121 Am. St. Rep. 362. Where the bank discounting note as above had knowledge of the inten- tion of the signers, see First National Bank v. Wallis, 150 N. Y. 458; Second Nat. Bank v. Midland, 155 Ind. 581. A trustee of an insolvent firm, for the benefit of the creditors thereof, appointed by such firm and its creditors, is not personally liable under this section, upon a note signed by him as "Trustee." Mogowan v. Peterson, 173 N. Y. 1. See also, Kerby v. Ruegamer, 107 App. Div. (N. Y.) 491; Jump v. Sparling, 218 Mass. 344; Meyers v. Chesley, 177 S. W. Rep. 326. An owner contracted for the erection of certain buildings. During the work the premises were conveyed to trustees for creditors, for the pur- pose of completing the buildings. A sub-contractor, with knowledge of the facts, agreed with the trustees to do certain work on the buildings, and received a note therefor, signed by the trustees in their individual names, followed by the words "as trustees, etc." There was evidence that, when the note was given, the sub-contractor was informed that the trustees would not incur personal liability. Held, that the trustees were not bound individually, though the note did not on its face disclose that its considera- tion was for the benefit of the creditors of the owner, and that it was given by the trustees as trustees for the creditors. Kerby v. Ruegamer et al., 95 N. Y. Supp. 408; Nat. Bank v. Wallace, 150 N. Y. 455; Megowan v. Peterson, 173 N. Y. 1; Kirby v. Ruegamer, 107 App. Div. 491. For exception to the rule see Sec. 72. Where the name of a religious corporation indorsed upon its promis- sory note is followed by the names of its president and treasurer, the words "finance committee" and the names of the persons constituting such committee, the indorsement comes within the protection of this section, and negatives any personal liability on the part of the individual signers. Cheslee Ex. Bank v. First U. P. Church, 89 Misc. 70 NEGOTIABLE INSTRUMENTS LAW Qj,U^ ^;^£^Z/-^€^^.c^^v^y^y V jA ^^ ^^^ ^£ -^yJ^y^j^^/ (S^^.^Aa^ly y^/^^X 3^\AS> ^ S!oU^>.^JL. CL-^ %SL^n.) (IXDORSEMENT) FIRST UNITED PRESBYTERIAN CHURCH JOHN ELLIOTT, PRES. EDWARD A. SHEA, TREAS. JOHN ELLIOTT, \ EDWARD A. SHEA, Finance Committee. JOHN McKEE, J In an action against John Elliott, Edward A. Shea and John McKee as indorsers, held that the note was complete and unambiguous in form, and nowhere does it import more than a corporate obligation and no per- sonal liability attached. Chelsea Ex. Bank v. First U. P. Church, 89 Misc. 619; see also Falk V. Moebs, 127 U. S. 597; Carpenter v. Farnsworth, 106 Mass. 561 ; Libscher V. Kraus, 74 Wis. 387; Farmers & Mechanics Bank v. Colby, 64 Cal. 352; Atkins V. Brown, 59 Maine 90; Castle v. Belfast, 72 Maine 167; Lathan v. Houston Mills, 3 S. W. (Tex.) 462; Hitchcock v. Buchanan, 105 U. S. 416; Collins V. Buckeye Ins. Co., 17 Ohio St. 215. Where a person signs a promissory note adding the word "agent" after his name, and there is nothing on the face of the instrument to show that he does not intend to be bound thereby, he is personally liable, the word "agent" being merely descriptive of the person so signing. Casco Bank v. Clark, 139 N. Y. 307; Burkhalter v. Perry, 127 Ga. 438; Tradesmen Bank v. Looney, 99 Tenn. 278. FORM AND INTERPRETATION 71 Liability of a person signing as trustee. ja.3 \S ^.,^^AY.<^y.'^M. Air/ J^.f, ^9<^^ y^X^^i^X^ - ^J . Q/:^ ^^^^n^ ^p^ :d^c^^^^_^ ^yj^^^^. TJAxiXi/ ^^^ao W/^- X^^./'^C?.>..^ \lA./\^^^^i^ £t. Stevens Company upon the trial introduced the note in question in evidence, the signature being admitted and then rested. The defendant showed that prior to the making of the note Peterson called a meeting of his creditors and at such meeting the creditors, among which were Stevens Company, assembled executed a paper, appointed Peterson as sole agent and trustee for the benefit of all creditors. Under these facts the court held that Peterson was acting as trustee for the creditors and no personal liability attached. The signature in which the name of the principal followed by the word "by" or "per" agent, is regarded as the proper method of disclosing the agency, and imposes no personal liability on the person so signing as agent. A note in the following form is the contract of Harry A. Sampson and not John Lockwood. In order to reheve an agent from liability upon an instrument, executed by him within the scope of his authority and agency, he must not only name his principal but must express by some form of words that the liability is that of the principal though done through the agent. A mere description of the general relation of office with the person signing the 72 NEGOTIABLE INSTRUMENTS LAW paper bears to another person, mthout indicating that the particular signature is made in the execution of the agency, is not sufficient to charge the principal or exempt the agent from personal liability. Petz V. Stanton, 10 Wend. 271 ; Guthrie v. Imbrie, 6 Pac. 661 ; 53 Am. Rep. 331; Kansas Nat. Bank v. Day, 62 Kan. 692; Shoe & Leather Bank V. Dix, 123 Mass. 148; Means v. Stormwood, 32 Ind. 87. Mjf'//>r^/rf./y ^ ^^-^^/y r^^f^..^P^ (£ y^j2^ '^y^.^a^y^ '7>^...CAY>^ ^yr^.^f^.<::/.^7y^y.';>-Z^^ m '/ao ^ w^ This note only binds the ostensible maker, though the word "agent" is attached to his signature, no principal being named in the body of the instrument, or indicated by the signattire. A party is not bound to search for a principal unknown to the instrument itself. The rights of the holder are confined to the parties to the instrument, and he must rely upon them alone, except he can establish that the name used as the signature to the instrument has been adopted by the assimied principal or by the person not named in the instnmient as his own in transacting the business. Manufacturers & Traders Bank v. Love, 13 App. Div. (N. Y.) 564; Casco Bank v. Clark, 139 N. Y. 307. X>rCOn ^ 0^^^24=^ .(^.n^ '.^^ '^&^i4J '^^^•-"^••^rr^tf. <1 But in the foregoing case the descriptive words following the signature of the makers suggest the possibility that the Hobart Horse and Cattle Show Association might have intended thereby to make the promise, and FORM AND INTERPRETATION 73 as the action was between the original parties to the note, it was competent for the defendants to show that there was a corporation by that name; that the makers were president and secretary; that the corporation had the benefit of the consideration; that the makers were authorized to make the note as the act of the corporation, and intended to do so, and that plaintiff's testator at the time he received the note knew these facts and took the note with the understanding that the corporation was its maker. Such evidence would not contradict the note, but would give further and permissible meaning to the addendxim to the signatures of the makers, and tend to show that such addendum was made as the corporate execution of the note, and was understood by both parties to it. Bush V. Gilmore, 45 App. Div. 89; Bank of Genesee v. Patchin, 19 N. Y. 312; Groves v. Acker, 85 Hun. 492; Schmittler v. Simon, 114 N. Y. 176, 186. 'Wizwrd Licctiic & Mfg. Compi //f/^^^ ^ -r^/ZzyzJy Y -4/X:z^fUg^^2^. /^vlj Where a negotiable promissory note, given for the debt of a corpora- tion, the language of the promise does not disclose the corporate obliga- tion, and the signatures to it are in the names of the individuals, who were in fact officers of the corporation, a bona fide holder, without notice of the circumstances of its making, is entitled to hold it as the personal under- taking of its signers, although they have affixed to their names the title of their respective offices, this will be regarded as descriptive of the persons and not of the character of liability. This is the rule even though the corporation name is printed on the margin of the note. C. N. Bank v. Clark, 139 N. Y. 312; Belmont Dairy Co. v. Thrasher, 124 Md. 320; Daniel v. GHdden, 38 Wash. 556; Hayes v. Matthews, 63 Ind. 412; Burlingame v. Brewster, 79 111. 512. But in First Nat. Bank v. WalHs, 150 N. Y.455,as between the original parties, it was held that if the bank, when it discovmted the paper, was informed or knew that the note was issued by the corporation, and was intended to create a corporate liability, it could not be enforced against the defendants as individuals, who, by mistake had executed it in 74 NEGOTIABLE INSTRUMENTS LAW such fonn as to make it on its face their own note, and not that of the corporation. But nothing short of notice, express or impHed, brought home to the bank at the time of the discount, that the note was issued as the note of the corporation, and was not intended to bind the defendants, could defeat its remedy against the parties actually liable thereon as promisors. See also Higgins v. Ridgway, 153 N. Y. 130; Baird v. Baird, 145 N. Y. 659, 664; Schmitter v. Simon, 114 N. Y. 176. Notes of a corporation signed with its corporate name "by Henry 0. Narstead, President, J.E.Schultz," the latter name being that of its secre- tary, by their terms impose a personal liability on him. Exchange Bank v. Schultz, 149 N. W. 99. § 40. Signature by procuration; effect of. A signature by "procuration" operates as notice that the agent has but a limited authority to sign, and the principal is bound only in case the agent in so signing acted within the actual limits of his authority. Variant.— The Illinois statute omits the word "only" after "bound." The term "procuration" is seldom used in this country, but is fre- quently used in England; this section being taken from the English Bill of Exchange Act. Byles on Bills, 33; Dan. Neg. Inst., Sec. 280. § 41. Effect of indorsement by infant or corporation. The indorsement or assignment of the instrument by a cor- poration or by an infant passes the property therein, not- withstanding that from want of capacity the corporation or infant may incur no liability thereon. Variant.— The North Carolina statute adds the words "or married woman" after the word "infant" in both instances. The defense of infancy is a personal one, and the defense ultra vires on the part of the corporation being intended for the benefit of the stock- holders cannot be taken advantage of by third parties. As to the transfer of negotiable paper by infants, see: Roach V. Woodhall, 91 Tenn. 206; Dan. Neg. Inst., Sec. 682. As to transfer by corporations, see: rOEM AND INTEEPEETATION 75 Willard v. Crook, 21 App. Div. (N. Y.) 237; Hess v. Sloane, 66 App. Div. (N. Y.) 522; North Hudson v. Hudson Bank, 11 L. R. A. 845; People's Bank v. St. Anthony's Chiirch, 109 N. Y. 512; Notes to Sec. 55. A treasurer of a manufacturing company has no power to make promis- sory notes in its name unless such power is expressly given to such officer by the by-laws of the corporation or by resolution of its board of directors, and one who deals with the officers or agents of a corporation is bound to know their powers and the extent of their authority. Jacobus V. Jamestown Mantel Co., 211 N. Y. 161; People's Bank v. St. Anthony's Church, 109 N. Y. 525; Westchester Mtg. Co. v. Mclntyre, 157 N. Y. Supp. 726. C^Z ^^(§ fZ^^> ^ / Squires, Taylor & Co., the m.akers and payees of said note, indorsed it in blank and thereupon it was indorsed, "German American Warehousing Co., Robert Squires, President." This note was then discounted and the avails credited to Squires, Taylor & Co. The fact that the maker of a promissory note procures it to be discounted for his own benefit is imex- plained notice to the discounter that the indorsement is not in the usual course of business but it is for the accommodation of the maker. National Park Bank v. German American Warehousing Co., 116 N. Y. 393; Hendrie v. Berkowitz, 37 Cal. 113; Bloom v. Helm, 53 Miss. 21; National Bank v. Globe, 101 Mass. 57; Davis v. Old Colony R. R. Co., 131 Mass. 258; Culver v. Reno Co., 91 Penn. 367. A manufacturing corporation has no power to make or indorse notes for the accommodation of others. (National Park Bank of N. Y. v. Rural Home Co., 90 Him. 365; 157 N. Y. 684.) One who deals wath the officers or agents of a corporation is bound to know their powers and the extent of their authority. (Alexander v. Cauldwell, 83 N. Y. 480.) Not- withstanding the general rule stated, a corporation is bound if it makes or indorses commercial paper for the accommodation of another in respect to a bona fide holder who discounts it before maturity on the faith of its being business paper. (Mechanics' Banking Association v. N. Y. & S. 76 NEGOTIABLE INSTKUMENTS LAW White Lead Co., 35 N. Y. 515.) The decision in the White Lead Co. case (supra) and other similar decisions are based upon the assumption that the officers making or indorsing a promissory note had authority from the corporation to make and indorse such notes in the ordinary course of its business. Such decisions do not apply to a case where the officers purport- ing to act for a corporation do not have authority to sign commercial paper in the ordinary cotirse of its business. A treasurer of a manufactur- ing corporation has no power to make promissory notes in its name unless such power is expressly given to such officers by the by-laws of the corpora- tion or by resolution of its Board of Directors. (Thompson on Corpora- tions (2d ed.), Sec. 1564; Daniels on Negotiable Instruments (5th ed.), vol. 1, Sec. 394; Edwards on Bills, Sec. 65; Beach on Private Corporations (2d ed.), vol. 2, Sec. 804; National Bank of Newport v. Snyder Mfg. Co., 107 App. Div. 95; Niagara Falls Suspension Bridge Co. v. Bachman, 66 N. Y. 261; National Bank of the Repubhc v. Navassa Phosphate Co., 56 Him. 136; People's Bank v. St. Anthony's R. C. Church, 109 N. Y. 512.) § 42. Forged signature; effect of. Where a signature is forged or made without authority of the person whose sig- nature it purports to be, it is wholly inoperative, and no right to retain the instrument, 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. Variant. — The Illinois statute omits the words "of the person whose signatiu-e it purports to be." See Section 326. Where a contract is evidenced by several writings, all of which are material to show the actual agreement of the parties, the fraudulent altera- tion of any of them by one of the parties invalidates all, as against the other. Meyer v. Hunckee, 55 N. Y. 412. The same rule wovdd apply on alteration of any material part of a negotiable instrument. First National Bank v. Allen, 100 Ala. 476; De Feriet v. Bank of America, 23 la. Ann. 310; Darma v. National Bank of the Republic, 132 Mass. 156; Morgan v. U. S. Mortgage Co. 208 N. Y. 218; Meyers v. S. W. National Bank, 193 Pa. St. 1; Weinstein v. National Bank, 69 Texas 38; Leather Manufacturers' Bank v. Morgan, 117 U. S. 96. The agent of the plaintiff was authorized to draw checks against plaintiff's account in the defendant bank. The agent drew a number of checks, payable to various persons with whom the plaintiff had business FORM AND INTERPRETATION 77 dealings. The agent forged the indorsement of the payees on these checks and procured the money thereon directly from the bank, or by negotiating them to others. It was held that the bank was not liable for the amount thus wrongfully secured by the agent, for the reason that the bank was misled through the fault of the plaintiff. Litchfield Shuttle Co. v. Cumberland Valley National Bank, 183 S. W. Rep. 1006. The agent of the plaintiff had power of attorney to receive and indorse checks for the purpose of deposit in a specified bank. He received such checks, indorsed them with the name of the payee, adding his own indorse- ment, and transferred them to a broker having knowledge of such agency. The checks were thereafter deposited in the broker's bank, not the bank where the agent was authorized to make deposits. In an action for con- version held, that the broker having knowledge of the agency would have been liable. The bank, however, was not liable, having no knowledge to impeach the checks which were regular on their face. Salen v. Bank of State of N. Y., 110 App. Div. (N. Y.) 636. The rule as laid down in Salen v. Bank of State of N. Y. is not applic- able when the agent has authority to indorse checks for the purpose of deposit in a designated bank, and which checks he deposits to his own accotmt in said bank. The authority to indorse and deposit to the princi- pal's account does not authorize a deposit to his own account, and a bank is bound to make inquiry as to the extent of his authority. Schmidt v. Garfield National Bank, 64 Hun. 298; Wilson v. Metro- politan R. R., 120 N. Y. 145. Genesee Valley TRUST Company {INDORSED) C. A. SCHMIDT CO. GEORGE LINGARD Christian A. Schmidt Company employed one Lingard, authorizing him to indorse checks and drafts for deposit, and fiunished him a stamp 78 NEGOTIABLE INSTRUMENTS LAW reading "For deposit in the Chemical National Bank to the credit of ," which it was his custom to use in indorsing paper for deposit and to place his signature under this indorsement. Lingard in- dorsed a large amount of paper, "Christian A. Schmidt Co. — George Lingard," not using the stamp, and deposited the paper to his own credit in his own bank, from which he afterwards drew out the proceeds and converted them to his own use. In an action brought by Schmidt Co. against his bank to recover the amount of such checks, held — that he could recover. The check was drawn payable to the order of Schmidt Co. and when deposited by Lingard in the defendants' bank they were indorsed with the names of Schmidt Co. and Lingard in Lingard's handwriting. The officers of the bank, therefore, knew that Schmidt Co.'s name had not been indorsed upon the check by Schmidt Co., but had been indorsed by Lingard. In receiving the checks and paying the proceeds thereof to Lingard the officers of the bank acted at their peril ; they knew that Lingard had indorsed the checks -^nth plaintiff's name, and, imless they were satisfied to take the risk of paying the proceeds to Lingard, they were bound to make inquiry as to the extent of his authority. Schmidt Co. v. Garfield National Bank, 64 Hun. p. 298, affirmed 138 N. Y., 63L Where an officer or agent of a corporation makes a corporate obligation payable to himself, it bears upon its face sufficient notice of his incapacity to issue it, when he attempts to deal with it for his own benefit. Hanover Bank v. Am. Dock & T. Co., 148 N. Y. 612; Bank of N. Y. etc. V. Am. Dock & T. Co., 143 N. Y. 559. A drawer who pays money on forged checks, payable to bearer, relying on the unqualified indorsement of the holder presenting them, and who has been in the habit of cashing checks of the drawer whose name was forged, may recover of the indorser, when the mistake of the drawer has not been to the prejudice of the indorser. Williamsburg Trust Co., v. Tune, 120 App. Div. (N. Y.) 518. A bank which pays a check drawn on it, bearing payee's indorsement forged by an employee of the drawer, is liable to the drawer for the amoimt thus paid. Metallurgical Co. v. Mechanics Bank, 157 Supp. 321. The fact that one signature to a note is a forgery will not necessarily affect the liability of the other makers concerning the genuineness of whose signature there is no question; if the other makers signed with knowledge of the forgery, they cannot avail themselves of the fraud, but the rule would be different in case of innocent makers. FORM AND INTERPRETATION 79 Beem v. Farrell, 135 Iowa 670; Geering v. Metropolitan Bank, 170 App. Div. (N. Y.) 751. A by fraudulently representing himself to be B, obtained a check from C payable to the order of B. At the time C knew of the existence of B and delivered the check to A, supposing him to be B. A indorsed B's name on the check and gave it to D, who collected from the bank. In an action to recover from the bank the court said: "It is a fundamental rule that when a bank received money to be checked out by a depositor, it is to be checked out only as the depositor shall order. If therefore, it pays out money othervnse than according to such order, it is liable to the depositor for the amotmt so paid." Hence, if it pays money out on a forged signature, the depositor being free from blame or negligence, it must bear the loss. First National Bank v. American Exch. National Bank, 170 N. Y. 88; Tolman v. American Bank, 22 R. I. 463; U. S. Portland Cement Co. v. U. S. National Bank (Or) 157 Pac. Rep. 202; Armstrong v. National Bank, 46 Ohio St. 512, 22 N. E. 866; German Savings Bank v. Citizens' Bank, 101 Iowa 530; Robertson v. Coleman, 141 Mass. 231. This same rule applies to "travelers' checks." Sullivan v. Knauth, 161 App. Div. (N. Y.) 148; Somberg v. Am. Express Co., 136 Mich. 639. If the bill run to a fictitious payee it is as if drawn to bearer, and indorsement is not necessary. But if it be payable to some person known at the time to exist and present to the mind of the drawer when he made it as the party to whose order it was to be paid, the genuine indorsement of such payee is necessary. Rogers v. Ware, 2 Neb. 29; Rowe v. Putnam, 131 Mass. 281. Where a transaction is contrary to good faith and the fraud affects individual interests only, ratification is allowed, but where the fraud is of such a character as to involve a crime the adjustment of which is forbidden by public policy, the ratification of the act from which it springs up is not permitted. Christian, etc. v. Walton, 181 Pa. St. 201. But in Massachusetts one ratifying a signature on a promissory note purporting to be his and which he knows to be forged is bound by it. Central National Bank v. Copp, 184 Mass. 328; Traders' National Bank v. Rogers, 167 Mass. 315. Authority to an agent to indorse checks in a specifically restricted manner, in order that they may be deposited to the account of the principal, does not confer upon the agent authority to indorse for any other purpose. Schmidt v. Garfield National Bank, 64 Hun. 298, affirmed 138 N. Y. 631. Standard S. S. Co. v. Com Exchange Bank, 84 Misc. 447. 80 NEGOTIABLE INSTRUMENTS LAW Liability of savings banks. — A savings bank which pays a deposit on a series of forged drafts, presented by one in possession of the pass book, is not liable unless it is negligent in failing to detect the forgery. It is negligent only where the discrepancy between the genuine and forged signatures is so plain that an ordinary competent clerk, exercising reason- able care, should detect the forgery. Noah V. Bank for Savings of N. Y. 157 Supp. 324; 171 App. Div. 191; Campbell v. Schenectady Savings Bank, 114 App. Div. (N. Y.) 337; Kelley v. Buffalo Savings Bank, 180 N. Y. 171, 69 L. R. A. 317; Appleby V. Erie Co. Savings Bank, 62 N. Y. 12; Robestein v. Franklin Savings Bank, 152 N. Y. Supp. 277; Krummel v. Germania Savings Bank, 127 N. Y. 488. A savings bank, which pays a deposit to a person wrongfully in pos- session of the pass book, is responsible for the amount to the real owner of the deposit, where the difference between the genuine signature of the depositor and the forged signature, on which the pajnnent was made, was "such as to be apparent to a man experienced in comparing hand- writing." The bank is not protected in a case of this kind by a by-law to the effect that a payment made to a person presenting a deposit book shall be deemed to be made to the depositor. Schneider v. Union Dime Savings Bank, 156 N. Y. Supp. 753. Signature on corporate check. — A bank is liable in paying the check of a corporation, the signature on which does not conform to the signature on file at the bank. Shoe Lasting Machine Co. v. Western National Bank, 79 N. Y. App. Div. 588, 75 N. Y. Supp. 627. Where a person having possession of checks forged the name of the payee and then indorsed them himself and delivered them to plaintiff, who deposited them to his own account in a bank, the plaintiff obtained no title to the instruments and is not entitled to recover the deposit from the bank which, on discovering the forgery, cancelled the credit and rein- bursed the bank upon which the checks had been drawn. GerUng v. Metropolitan Bank, 170 App. Div. (N. Y.) 751. Any person taking checks made payable to a corporation, which can act only by agents, does so at his peril, and must abide by the consequences if the agent who indorses the same is without authority, imless the corpora- tion is negligent or is otherwise precluded by its conduct from setting up such lack of authority in the agent as in Phillips v. Mercantile National Bank of N. Y., 140 N. Y. 556, 35 N. E. 982, 23 L. R. A. 584, 37 Am. St. Rep. 596. The business man who authorizes his clerk to take his checks FOEM AND INTERPRETATION 81 to his bank for deposit does not vest in her so dangerous a power as to preclude him from setting up her lack of authority if she indorses his name thereon in blank and innocent persons cash the checks for her without inquiry. The stringent rules of agency and the arbitrary niles of the law of negotiable paper alike protect the principal from such tmauthorized acts. If greater authority has been conferred, expressly or by implication, or if the principal has been negligent or has ratified the conduct of his agent, the law will not shield him. Standard Steam Specialty Co. v. Conn. Exchange Bank 220 N. Y. 178, 116 N. E. 386. See also, Stein v. Empire Trust Co., 148 App. Div. (N. Y.) 851; Oriental Bank v. Gallo, 112 App. Div. 360; 188 N. Y. 610; Seaboard National Bank v. Bank of America, 193 N. Y. 26; Critten v. Chemical National Bank, 171 N. Y. 219; First National Bank v. Whitman, 94 U. S. 343; Ranch v. Bankers' National Bank, 143 111. 625; Tibby Bros. v. F. & M. Bank, 220 Pa. 1; 2 Morse on Banking, Sec. 477; Coggill v. American Exchange Bank, 1 N. Y. 113; Dan. Neg. Int. Sec. 1356; Angelo S. A. Bank v. National City Bank, 146 N. Y. Supp. 457. Payments made upon forged indorsements are at the peril of the bank imless it can claim protection upon some principle of estoppel or by reason of some negligence chargeable to the depositor. CraTviord v. West Side Bank, 100 N. Y. 53; Com Ex. Bank v. Nassau Bank, 91 N. Y. 80; Phoenix Bank v. Risley, HI U. S. 125; Citizens' Bank v. Importers' Bank, 119 N. Y. 195; Shipman v. Bank S. N. Y., 126 N. Y. 327. Where one knowingly pays a note to which his name is forged, does not thereby render himself liable for other forgeries of his name by the same person, where those dealing with the forger have no knowledge that any forged paper has been paid and have not been injured or misled or deceived by such payment. Murphy v. Skinner, 160 Wis. 554. Estoppel. — Parties are often estopped from asserting defenses which might otherwise have been available in view of previous acts. Buckley v. Collins (Ark.), 177 S. W. 920; Curtin v. Mining Co., 141 Cal. 308; Beatty v. College, 177 111. 280; Van Slyke v. Rooks, 181 Mich. 88; Bank v. Merkle, 97 Miss. 824; Monongahela Bank v. Weston, 172 N. Y. 259. Thus, an indorser may be estopped to set up against a bona fide holder that the signature of the maker, drawer or prior indorser is a forgery. Richards v. Street, 31 App. D. C. 427. 82 NEGOTIABLE INSTRUMENTS LAW And an indorser whose signature is alleged to be forged thereafter signs a waiver of notice indorsed on the note is thereafter estopped from denying the signatiire. Bowie V. Hume, 13 App. D. C. 286; Beem v. Farrell, 135 Iowa, 670; Tumbull V. Bowyer, 40 N. Y. 456. A bank is relieved from responsibihty for raised checks which it has paid after the account was balanced, by the negHgence of the depositor in the examination of the returned vouchers and comparison with the stubs of his check book, which would have disclosed the alterations and prevented subsequent frauds. Critten v. Chemical National Bank, 171 N. Y. 220. Silence of the person whose signature is alleged to be forged will work an estoppel on the theory, "He who is silent when conscience requires him to speak shall be debarred from speaking when conscience requires him to keeo silent." Tobias v. Morris, 126 Ala. 535; Rothchild v. Title G. & T. Co., 204 N. Y. 458. Where a depositor learns through the examination of his returned checks or otherwise that a paid check returned as a voucher has been forged as to the signature, or has been altered in any particular, it becomes his duty to give notice to the bank without delay, and failure to do so and the bank is misled to its injury, the bank will not be held Hable for the loss. Leather Mfrs. National Bank v. Morgan, 117 U. S. 96. The burden of proof is on the bank to prove that it has been injured by the neglect of the depositor. Murphy v. MetropoHtan National Bank, 191 Mass. 159. But in McNeely v. Bank of North America, 221 Pa. 588, irrespective of the showing of damage to the bank, a failure of prompt notification after discovery of the forgery relieves the bank from liability. In Connors v. Old Forge Bank (Pa.), 91 Atl. 210, it was held a delay of forty-three days after knowledge of forgery before notifying the bank was sufficient to deprive him of the right of recovery. Primarily a bank may pay and charge to its depositors only such sums as are duly authorized by the latter, and of course a forged check is not authority for such payment. It is, however, permitted to a bank to escape liability for repayment of amotints paid out on forged checks by establishing that the depositor has been guilty of negHgence which con- tributed to such payments and that it has been free from any negligence. Morgan v. U. S. Mortgage & Trust Co., 208 N. Y. 218, 222, 101 N. E. 871, 872, L. R. A. 1915D, 741 Ann. Cas. 1914D, 462. "If the depositor has by his negligence * * * caused loss to his bank, * * * he should be responsible for the damage caused by hie FOEM AND INTEKPEETATION 83 default, but beyond this his liability should not extend.'' Critten v. Chemical Bank, 171 N. Y. 219, 228, 63 N. E. 969, 972 (57 L. R. A. 529). The depositor's liability "is limited to the damages sustained by the bank in consequence of such neglect." 171 N. Y. 229, 63 N. E. 973, 57 L. R. A. 529. See also, Bank of Danvers v. Bank of Salem, 151 Mass. 280; Bank of St. Albans v. Farmers & Mechanics Bank, 10 Vt. 141; Bank v. Wood, 85 Me. 204; Carroll v. Safe Co., HI Md. 252; Carmine v. Bowen, 104 Md. 198; Harris v. American Building Assn., 122 Ala. 545 ; Chester v. Wabash R. R., 182 111. 382; Belding Mfg. Co. v. Drury, 111 Mich. 41; Ackerman v. True, 175 N. Y. 353; Collier v. Miller, 137 N. Y. 332; Paul v. Kunz, 188 Pa. St. 504; Flint v. Babbett, 59 Vt. 190; Prieme v. Wis. Land Co., 103 Wis. 537; Greey v. Dockendorf, 231 U. S. 513; Coal Co. v. Trust Co., 197 Fed. 347; Dickerson v. Colgrove, 100 U. S. 580; Leather Manufacturers' Bank v. Morgan, 117 U. S. 96. Subsequent wrongful dealing with negotiable paper by an agent who had authority to indorse his principal's name to it does not constitute the previous signature a forgery under this section. Salem v. Bank of N. Y., 110 App. Div. N. Y. 636. 84 NEGOTIABLE INSTRUMENTS LAW ARTICLE 4 Consideration Section 50. Presumption of consideration. 51. What contributes consideration. 52. What constitutes holder for value. 53. When lien on instrument constitutes holder for value. 54. Effect of want of consideration. 55. Liability of accommodation party. § 50. Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. Negotiable notes and bills of exchange are presiimed to have been made for a valid and adequate consideration, and whether they purport to have been given for value received or not, it is unnecessary for the plaintiff in the first instance to allege or prove a consideration. In this respect they differ from other contracts. Foster v. Valentine, 48 Hun. 475. An instrument "Due Klimball $325 on demand," is a promissory note within the statute. Neither the acknowledgment of value received or negotiable words are essential. Kimball v. Huntington, 10 Wend. 675; Carver v. Hayes, 67 Maine 257; Franklin v. Marsh, 6 N. H. 364. But in Deyo v. Thompson, 53 App. Div. (N. Y.) 9, a note ''On demand I promise to pay Helen Deyo three hundred dollars," does not import a consideration, and the burden is upon a party sueing on such a note to prove the existence of a consideration by extrinsic evidence. The recital for "value received" in the body of a note constitutes an admission that it was issued for a consideration. Owen V. Blackburn, 161 App. Div. (N. Y.) 829; Durland v. Durland, 153 N. Y. 67; Cartwright v. Gray, 127 N. Y. 92; First National Bank v. Stallo, 160 App. Div. (N. Y.) 702. CONSIDERATION" 85 But the omission of the words does not in any way affect the paper or overcome the presumption that it was given for value. McLeod V. Hunter, 29 Misc. (N. Y.) 559; Faymous Shoe Co. v. Crosswhite, 124 Mo. 34. Where a complaint in an action upon a promissory note alleges the making of the note by the defendant, it is unnecessary to allege delivery or consideration, for both are presumed from the issuance of the instrument. Abrahamson v. Steele, 176 App. Div. 865; First National Bank v. Stallo, 160 App. Div. 702. An acceptance of a bill cannot as against a bonafide holder for value, defend on the ground that the acceptance was without consideration. National Park Bank v. Saitta, 127 App. Div. (N. N.) 624, affirmed 196 N. Y. 548. The maintenance of the presumption that a promissory note was given or indorsed for a sufficient consideration justifies the maxim "that when one by his carelessness and undue confidence has enabled another to obtain the money of an innocent third person, he must answer for the loss he has caused." Lassas v. McCarty, 47 Or. 483; Bedell v. Herring, 77 Cal. 572. A written promise by a stranger in the form of a note given to a husband in order that he might deliver the same to his wife, to whom it was made payable, in order to secure peace between a newly married couple, is with- out consideration, and the wife cannot recover the amount from the maker thereof, and neither the possession of the note nor the use of the words "value received" create any question of fact for the jtu"y in an action brought upon it. Kramer v. Kramer, 181 N. Y. 477; Strickland v. Henry, 175 N. Y. 373. The negotiation of a promissory note in violation of the agreement under which it was given is a breach of faith and fraud upon the maker, and, when sued thereon, he is entitled to show the facts, before he can be called upon to prove that the plaintiff, an assignee of the note, was not a holder for value. Ginsberg v. Thurman, 71 Misc. 463; German Am. Bank v. Cunning- ham, 97 App. Div. (N. Y.) 244 and cases cited. One cannot make his own note the subject of a gift. Such a note is but the promise of the donor to pay money in the future. The gift is not completed until the money is paid. There is no delivery of the gift but the mere promise to deliver it in the future. Sullivan v. Sullivan, 92 S. W. (Ky.) 966; Shugart v. Shugart, 76 S. W. (Tenn.) 821; Beatty v. Western College, 177 111. 280; School v. Sheidley, 138 Mo. 672; Richardson v. Richardson, 148 111. 563. 86 NEGOTIABLE INSTRUMENTS LAW Consideration generally, Hickok v. Bunting, 92 App. Div. (N. Y.) 167; First National Bank v. Stallo, 160 App. Div. (N. Y.) 704; Zimbleman V. Finnegan, 118 N. W. 312; Hawkins v. Windhorst (Kas.) 108 Pac. 805; Waxberg v. Stappler, 83 Misc. 78; National Discount Co. v. Jenkins, 143 Supp. 996. Burden of Proof. — The plaintiffs in an action upon a promissory note, to which the defense of want of consideration has been imposed, are entitled to rest after reading the note in evidence, as that raises a presumption that the note is a valid obligation based upon a good and legal consideration, and imposes upon the defendant the biu-den of showing a want of considera- tion. If the defendant offers any evidence showing or tending to show a want of consideration, it is incumbent upon the plaintiff to show the exist- ence of a sufficient consideration by a preponderence of evidence. Bringman v. Von Glahn, 71 App. Div. (N. Y.) 537; Lombard v. Bryne, 196 Mass. 236; Perley v. Perley, 144 Mass. 104; Simpson v. Davis, 119 Mass. 269; Durland v. Durland, 153 N. Y. 67; Camwright v. Gray, 127 N. Y. 92; Hartford National Bank v. Gardner, 157 N. Y. Supp. 850; Harding v. U. S. Zinc Co., 157 N. Y. Supp. 852; Hague v. Northern Hotel Co., 77 Misc. 142; Dan. Neg. Inst., Sec. 164. If no evidence is introduced by the defendant showing a want of con- sideration, the plaintiff is entitled to recover; but this presumption being rebutted, the burden is upon the plaintiff to show by a preponderence of evidence that there was a consideration. Bourne v. Ward, 62 Me. 155; 16 Am. Rep. 410; Bank v. Seymour, 64 Mich. 59; Foote v. Valentine, 48 Hun. 475. In a contest between the payee of a bill of exchange and the drawer thereof, or a creditor of the drawer, over the proceeds of the draft, the payee by the terms of the Negotiable Instrument Law is presumed prima facie to be a holder for value, and the biirden is on the party denying it to prove the contrary. Lynchburg Co. v. National Exchange Bank, 109 Va. 639; See also, Lombard v. Bryne, 194 Mass. 288; Carter v. Butler, 264 Mo. 330; Bank of Monticello v. Dooley, 113 Wis. 590. In an action by the payee against the maker of a note containing on its face the words "value received," a motion by the defendant without putting in any evidence to dismiss the complaint on the ground of failure of plaintiff to prove a consideration, should be denied since the burden of proving the want of consideration rests on the defendant. Gerli v. Doorley, 151 N. Y. Supp. 574. CONSIDERATION 87 § 51. What constitutes consideration. Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed such whether the instrument is payable on demand or at a future time. That an antecedent debt may constitute a good consideration, see: Boston Steel Co. v. Steuer, 183 Mass. 140; Evans v. Speer, 65 Ark. 204; Voss v. Chamberlain, 139 la. 569; Mack v. Prang, 104 Wis. 1. An old debt and the extension of time for the payment thereof con- stitute "value." In re Progressive Wall Paper Co., 224 Fed. 143. This and the preceding section being applicable only to negotiable instruments as defined by Sec. 20, viz. — instruments for the payment of money are not applicable to a certificate of stock. Cowles v. Kiehl, 65 N. Y. Supp. 349; American Press Assn. v. Braut- ingham, 75 App. Div. (N. Y.) 435. The delivery of the old note was a sufficient consideration for the giving of the new one, and the defense of the failure of consideration of the first note cannot be brought against the second. Smith V. Smith, 35 Pac. (Id.) 697; Fidelity Bank v. Miller, 162 Pac. 245. But in Seager v. Drayton, 218 Mass. 571 is held, that if at the matur- ity of a note, which was made without consideration, the maker gives a new note, the new note is also without consideration, and no action can be maintained against the maker. In order that a pre-existing debt may be a sufficient consideration for the accommodation indorsement of a note, the holder must show that he parted with something, that he has given up the original debt or the right to sue on it. Rogonski v. Brill, 131 N. Y. Supp. 589. The enactment of the section has not changed the riile that to consti- tute a holder for value of accommodation paper received for an antecedent debt, it must be taken in payment and discharge thereof. Sutherland v. Mead, 80 App. Div. (N. Y.) 103. If the consideration of the note, without any fault of the defendant, failed this was a matter of defense which should have been pleaded, for it cannot be inferred that the privilege was not worth all the defendant promised to pay for it or that the plaintiff was unable to confer it. 88 NEGOTIABLE INSTRUMENTS LAW Equitable Trust Co. v. Newman, 69 Misc. 498; Frank v. Wessils, 64 N. Y. 155. When the consideration for a promissory note was the promise of the payee to do certain work, the fact that the payee fails to keep his promise makes him liable for damages, but does not constitute a failure of considera- tion, which may be urged as a defense in a suit on the note. Schiavone v. Lingarelli, 191 111. App. 167. Mr. Justice Werner of the Supreme Court, later Associate Justice of the Court of Appeals of New York, in discussion of this question in Brew- ster V. Schrader, 26 Misc. 482, said; "The language of this section when given its usual and ordinary signification, ought to leave no doubt upon the subject. There is, however, a universal disposition among lawyers to look for some hidden or subtle meaning in the most simple language. If the language in this section were not obviously clear and unequivocal, and there were need of ascertaining the legislative intent, the history of the subject, the judicial decisions of England and states of this country, leave no possible doubt as to the purpose of the section." The courts of England and our federal courts have held that a bona fide holder of a negotiable instnmient who takes the same in payment of or as security for an antecedent debt, is a holder for a valuable considera- tion, entitled to protection against all equities between antecedent parties. In Railroad Co. v. National Bank, 102 U. S. 26, Mr. Justice Harden in an exhaustive opinion squarely adopted the rule that the taking of a note in payment of, or as security for, a pre-existing debt constitutes the holder thereof a holder for value in the usual course of business. Supporting the above, see Mayer v. Heidelbach, 123 N. Y. 332. See also, Sutherland v. Meade, 80 App. Div. (N. Y.) 103; Roseman V. Mahoney, 86 App. Div. (N. Y.) 377; Bank of America, 103 App. Div. (N. Y.) ZZ\ Milius v. Kauffman, 104 App. Div. (N. Y.) 216; Grocers Bank V. Penfield, 60 N. Y. 502; M'Bee v. Shoemaker, 160 N. Y. Supp. 254. A promissory note given for the purpose of making a gift or donation to the payee, if based upon no other consideration, cannot be enforced by the payee against the maker or his estate. The note is only an executory obHgation, a promise to give, but not an extended gift until the note is actually paid. Abelman v. Haehnel, 57 Ind. App. 15. A valuable consideration is necessary to support any contract, and the rule makes no exceptions as to the character of the consideration respecting negotiable instruments when the consideration is open to inqmry. There- fore, a consideration foimded on mere love and affection, or gratitude, is not sufficient to sustain a suit on a bill or note, as, for instance, when a bill CONSIDERATION 89 or note is accepted or made by a parent in favor of a child could not be enforced between the original parties. Dan'l Neg. Inst., Sec. 179; 6 Am. & Eng. Ency. of Law, 679; Maynard V. Maynard, 105 Me. 570; Sullivan v. Sullivan, 92 S. W. (Ky.) 966. § 52. What constitutes holder for value. Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time. Variant. — The Illinois statute substitutes for the second sentence, "An antecedent or pre-existing claim, whether for money or not, constitutes value where an instrument is taken either in satisfaction thereof or as security therefor, and is deemed such, whether the instrtiment is payable on demand or at a future time." The Wisconsin statute adds the words: ''discharged, extinguished or extended" after the words "pre-existing debt." The courts of New York at first refused to recognize in the application of this section the legislative intent to change the rule that had been fol- lowed in 1822, and followed in Coddington v. Bay, 20 Johns 637. See Sutherland v. Mead, 80 App. Div. 103, 107; Roseman v. Mahoney, 86 Id. 28, affirmed in 187 N. Y. 115. But the later cases, without expressly over- niling these decisions, have held that the Negotiable Instruments Law has changed the rule, and held that a pre-existing debt without extension or forbearance is a sufficient consideration to constitute a holder for value. King V. BowHng Green Trust Co., 145 App. Div. 398; Maurice v. Fowler, 78 Misc. 357; Hall Co. v. Todd, 139 Supp. 111. One to whom a promissory note was indorsed and delivered before maturity in payment of a pre-existing debt is a holder for value, and in an action against the maker the equities between him and the payee are not available as a defense. Broderick v. Bascomb Rope Co., 81 Misc. 199. Upon exchange of promissory notes, each note is a valid consideration for the other and is fully available in the hands of its holder. Rice V. Grange, 131 N. Y. 149; Nickerson v. Ruger, 84 N. Y. 675; State Bank, etc. v. Smith, 155 N. Y. 185; Milius v. Kaufmann, 104 App. Div. (N. Y.) 444. The presumption that the indorsee of a negotiable note is a bona fide holder for value is not repelled merely by proof that the paper, as between the immediate parties, was without consideration. Joveshof V. Rockey, 109 N. Y. Supp. 818, 58 Misc. 559. 90 NEGOTIABLE INSTRUMENTS LAW Where a depositor in a bank, having sufficient funds standing to his credit, tenders to the bank a check in payment for negotiable paper it has for sale, and the bank accepts the check, charges it against the deposit and delivers the papers purchased, the purchaser is a holder for value, and the antecedent debt of the bank being pro tanto actually and in fact extinguished. Mayer v. Heidelbach, 123 N. Y. 332. A valuable consideration sufficient to support a contract may con- sist of some right, interest or benefit accruing to one party, or some for- bearance, detriment, loss or responsibility given, suffered or undertaken by the other. Union Bank v. Sullivan, 214 N. Y. 332. Although a bank does not become a holder for value by merely placing the proceeds of the discotmt of a note to the credit of the payee, yet when it holds a note of the payee due on that day and pays the same by the application of the discotmt, it becomes a holder for value. Van Norden Trust Co. v. Rosenberg, 123 App. Div. (N. Y.) 727. Where a bank discounts paper for a depositor who is not in its debt, and gives him credit upon the books for the proceeds of said paper, it is not a bona fide holder for value, so as to be protected against infirmities in the paper, unless in addition to the mere fact of crediting the depositor with the proceeds of the paper, some other and valuable consideration passes. Such a transaction simply creates the relation of debtor and creditor between the bank and the depositor, and so long as that relation continues the bank is held subject to the equities of the prior parties, even though the paper had been taken before maturity and without notice. Bank v. Valentine, 18 Hun. 417; Bank v. Newell, 71 Wis. 309; Bank V. Huver, 114 Pa. 216; Dresser v. Missouri Co., 93 U. S. 227; DreilHng v. Bank, 43 Kan. 197; McNight v. Parsons, 136 la. 390; Security Bank v. Pretuschke, 101 Minn. 478; Grocery Co. v. Bank, 48 S. (Ala.) 340. In order to constitute one the holder of a negotiable instrument for value it is not necessary that he part with present consideration. King V. Bowling Green Trust Co., 145 App. Div. (N. Y.) 399. The uniform interpretation of the section has been to continue and confirm the rule of the common law that a payee might claim the protection accorded any other bona fide holder for value. Boston Iron & Steel Co. v. Steuer, 183 Mass. 140; Merseck v. Alder- man, 77 Conn. 634; South Boston Iron Co. v. Brown, 63 Me. 139; Camp- bell V. Fourth National Bank, 137 Ky. 555; American Exch. Bank v. Arm- strong, 133 U. S. 443. Possession of a negotiable note properly indorsed is prima facie evidence that the holder is a bona fide purchaser. CONSIDERATION 91 Manhattan Sav. Inst. v. N. Y. National Bank, 107 N. Y. 58; Clark V. Skeen, 61 Kan. 526. And if the defendant admits the execution of the note in suit, but denies that the holder is the owner thereof by purchase before maturity, and alleges want of consideration, the burden of proving such allegations is on the defendant. Yates V. Spofford, 7 Idaho 737, 97 Am. St. Rep. 267. § 53. When lien on instrument constitutes holder for value. Where the holder has a lien on the instniment, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien. The pledgee has the right to enforce the collection of a collateral even though the principal debt is not yet due. Seely v. Wiestrom, 49 Neb. 730; Elk Coal Co. v. Third National Bank, 157 Ky. 619; Field v. Sibley, 74 App. Div. (N. Y.) 81. Recovery can be had only to the extent of the debt for which the paper is held as collateral security. Brown v. Calloway, 41 Ark. 418; Fisher v. Am.es, 98 Mass. 303; Union Bank v. Roberts, 45 Wis. 373. Unless an accommodation note is shown to have been appropriated by the payee to some purpose other than for which it was given, the maker cannot set up the want of consideration in an action by one who has acquired the note in good faith, in the ordinary course of business for value, although after maturity. Mersick v. Alderman, 77 Conn. 634; Dunn v. Weston, 71 Me. 270; Miller v. Lamed, 103 111. 562; Maitland v. Citizens' Bank, 40 Md. 540. If a negotiable promissory note, which is without consideration as between the original parties thereto, is delivered without consideration to another person, who pledges it before its maturity, as collateral security for a debt of his own of less amoimt than the face of the note, the pledgee, if they take it AAdthout notice, are to be deemed holders for value, and may maintain an action thereon for the amount due to them upon the debt which it was pledged to seciu"e. Fisher v. Fisher, 98 Mass. 303; Miller v. Pollock, 99 Pa. St. 202. Where there is no other person entitled to receive the surplus, the pledgee can recover only the amount of the debt secured. Stoddard v. Kimball, 60 Mass. 469. In an action on a promissory note held as collateral security, the holder is entitled to judgment for the whole amount due on it with liability to account for the surplus to the owner of the note. 92 NEGOTIABLE INSTRUMENTS LAW Camden Bank v. Fries, 214 Pa. St. 395. Payment in amoimt beyond that for which it was pledged nor for a debt for which it was not pledged cannot be had against an accommodation maker. C. N. Bank v. Bell, 125 N. Y. 42. § 54. Effect of want of consideration. Absence or fail- ure of consideration is matter of defense as against any per- son not a holder in due course ; and partial failure of considera- tion is a defense pro tanto whether the failure is an ascertained and liquidated amount or otherwise. As between the original parties to a promissory note and others having notice, a conditional delivery, as well as want of consideration, may be shown; and parol evidence that the delivery was conditional and of the terms of the condition is not open to the objection of varying or contradicting the written contract. Higgins V. Ridgway, 153 N. Y. 130; Benton v. Martin, 52 N. Y. 570; Bookstaver v. Jayne, 60 N. Y. 146; Breneman v. Fumiss, 90 Pa. St. 186. A consideration moving from one of several joint makers of a promis- sory note is good as to all. First National Bank v. Hopper, 89 Neb. 377. Where there was a good consideration for a draft when it was accepted, but subsequently such consideration entirely failed, held that the failure of consideration was a good defense to any action upon the paper brought by the transferee. Leslie v. Bassett, 129 N. Y. 523; Ferguson v. Netter, 41 App. Div. (N. Y.) 274; reversed 204 N. Y. 505. Upon an exchange of promissory notes, each note is a valid con- sideration for the other and constitutes a good consideration as an exchange of property. Cobb V. Titus, 10 N. Y. 198; Rice v. Grange, 131 N. Y. 149; Newman V. Frost, 52 N. Y. 422; Williams v. Banks, 11 Md. 198. Although a note itself is prima facie evidence of a consideration, the question is always open as between the immediate parties; and it is com- petent for the defendant to show, by parol, that there was no sufficient consideration, or that the consideration has failed, or that the paper was given for accommodation merely. Cowee V. Cornell, 75 N. Y. 91; Batterman v. Butcher, 95 App. Div. (N. Y.) 213; Anthony v. Valentine, 130 Mass. 119; Franz v. Schiro, 136 La. 842; Ingersoll v. Marten, 58 Md. 67; Finer v. Brittain, 165 N. C. 401; Gresham Bank v. Walch, 157 Pac. Rep. (Ore.) 534. CONSIDERATION 93 The law presumes that a note regular on its face is a valid obligation based upon a good and legal consideration, and the burden of showing that there was a want of consideration rests upon the defendant. Durland v. Durland, 153 N. Y. 67; Bringman v. VonGlahn, 71 App. Div. (N. Y.) 537; Janvey v. Loketz, 122 App. Div. (N. Y.) 410; Lynds v. Van Valkenberg, 77 Kas. 24; Finer v. Brittain, 165 N. C. 401. An acceptor of a bill cannot, as against a bona fide holder for value, defend on the ground that the acceptance was without consideration, or for accommodation. National Park Bank v. Saitta, 127 App. Div. (N. Y.) 624. The maker of a note who induces another to purchase it from the payee, assuring him that it was valid and will be paid, cannot set up the illegality of the consideration against the assignee, who had no notice thereof. Holzbog V. Bokrow, 156 Ky. 161. Partial failure of consideration is a defense to an action on a note, only to the extent of the injury sustained by such failure. Black V. Ridgway, 131 Mass. 80; Carter v. Butler, 264 Mo. 307; Finance Co. v. Schroder, 74 W. Va. 68; Cline v. Miller, 8 Md. 274; Davis v. Wait, 12 Oregon 425. Although a bank does not become a holder for value by merely placing the proceeds of the discount of a note to the credit of the payee, yet when it holds a note of the payee due on that day and pays the same by application of the discount, it becomes a holder for value. Wallabout Bank v. Peyton, 123 App. Div. (N. Y.) 727. An assignee of a draft after maturity and for a nominal consideration, is not a holder in due course within the meaning of this section. Ferguson v. Netter, 141 App. Div. (N. Y.) 274. § 55. Liability of accommodation party. An accommo- dation party is one who has signed the instrument as maker, drav^er, acceptor or indorser, w^ithout receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instru- ment knew him to be only an accommodation party. Variant. — The Illinois statute omits the words "without receiving value therefor" in first sentence and at the end of the section adds, "and in case a transfer after maturity was intended by the accommodating party, notwithstanding such holder acquired title after maturity." 94 NEGOTIABLE INSTRUMENTS LAW The clause "without receiving value therefor" is misleading and the courts have interpreted to mean without receiving value for the bill itself and not without receiving consideration for lending his name. Thus A, who receives $25 for signing his name and received no value for the instru- ment, is an accommodation party. Morris County Brick Co. v. Austin (N. J.) 75 Atl. 550. Liability of accommodation maker. — When a promissory note, made by the maker for the accommodation of the payee with the intent that the payee should raise the money thereon, is discounted by a bank for the benefit of the payee, with knowledge of its accommodation character, the action of the bank in extending, after the maturity of the note, the time of payment thereof, without the knowledge or consent of the accom- modation maker, does not discharge the accommodation maker. National Citizens Bank v. Toplitz, 81 App. Div. (N. Y.) 593; English V. Schlesinger, 55 Misc. 584. Unless an accommodation note is shown to have been appropriated by the payee to some piupose other than for which it was given, the maker cannot set up the want of consideration in an action by one who has acquired the note in good faith, in the ordinary course of business and for value, although after matiuity. Mersick v. Alderman, 77 Conn. 635 ; Benjamin v. Rogers, 126 N. Y. 60. The very purpose of the accommodation would be defeated if knowl- edge of the fact that the responsible party was acting as an accommodator were a good defense in an action by a party who parted with value relying upon the credit of the accommodating party. English V. Schlesinger, 105 N. Y. Supp. 990; Black v. Bank of West- minister, 96 Md. 418; Dunn v. Weston, 71 Me. 270; Miller v. Lamed, 103 111. 562-570; Maitland v. Citizens' Bank, 40 Md. 540; Marling v. Jones, 138 Wis. 83. Where at the solicitation of the cashier of a bank and for the purpose of making good an overdraft by a customer of the bank, a third person without receiving any consideration delivers to the cashier, who knows of such lack of consideration, his check drawn upon a second bank, payable to his own order and indorsed by him to be deposited to the credit of the overdrawn account, the first bank is not a party accommodated and can recover from the drawer of the check. Neal V. Wilson, 213 Mass. 336; Jennings v. Wall, 217 Mass. 284. No consideration moving to the accommodation maker is necessary to uphold an accommodation note, the consideration supporting his promise being that parted with by the person taking the note and received by the person accommodated. Marling v. Jones, 138 Wis. 82. CONSIDEEATIO]!?' 95 A transferee of negotiable paper who takes it knowing that it was executed by an accommodation maker, and transferred in violation of the conditions or limitations imposed by such maker, cannot maintain an action thereon against him. Benjamin v. Rogers, 126 N. Y. 60; U. S. N. Bank v. Ewing, 131 N. Y. 506. A wife is not an accommodation maker of a promissory note where the note is given in payment of a transaction in which she has a property or pecuniary interest, such for instance as the payment for labor and materials in the construction of a house by the husband on land owned by the wife. Brayer v. Edell, 163 N. Y. Supp. 989. Liability of accommodation indorser. — An accommodation indorser of a raised check was liable to a bank paying the same for the difference between the amoimt of the check as originally drawn, and the amount to which it was raised. Cooley V. Cvirran, 104 N. Y. Supp. 751; Smith v. State Bank, 54 Misc. 550. If the note be raised by the maker, without the knowledge of the accommodation indorser, subsequent to such indorsement, the accommo- dation indorser is only liable for the amount of the note as indorsed by him. Packard v. Windholz, 88 App. Div. (N. Y.) 365; Smith v. State Bank, 54 Misc. 550. A person who indorses a note for the accommodation of the maker, without knowledge that the note is to be used for the benefit of the maker, is not relieved from liability to a person to whom the maker negotiates it for value, simply because the latter knew the accommodation nature of the indorsement. Packard v. Windholz, 88 App. Div. (N. Y.) 365. This section was not intended to prevent the courts from determining in equity all questions between an insolvent holder of a note and one primarily liable for the indebtedness on the instrument as a matter of fact, whether maker or indorser. Building, etc., Co. v. Northern Bank, 206 N. Y. 400; U. S. N. Bank V. Ewing, 131 N. Y. 506. One who indorses a promissory note without consideration for the accommodation of the maker, becomes simply a surety. Easton Mfg. Co. v. Caminez, 146 App. Div. (N. Y.) 436; Maurice v. Fowler, 78 Misc. 357. 96 NEGOTIABLE INSTRUMENTS LAW The payee's extension of time on a note does not release the accom- modation indorsers on a collateral note. Commercial National Bank v. Sanders (La.) 71 S. Rep. 891. The fact that the indorsee for value of a promissory note knew that it was an accommodation note between the original parties, is not a defense to an action by him on the note. Black V. Bank of Westminister, 96 Md. 399; Cotrell v. Watkins, 89 Va. 816; National Bank of Newport v. Snyder, 117 App. Div. (N. Y.) 37. Partner as accommodation party. — Where the signature of the firm is designated as that of a surety, or when there is anything in the appear- ance of the note to charge the holder vnth knowledge that the signature is used by the way of accommodation, the holder cannot recover without showing the assent of all the partners; for it is not within the usual scope of partnership business to assume a liability for the debt of another. Clement Bank v. Connolly, 88 Vt. 57; 1 Dan. Neg. Inst. Sec. 365; National Bank, etc. v. Law, 127 Mass. 72; Bank of Commerce v. Selden, 3 Minn. 155 ; Sherwood v. Snow, 46 Iowa 481 ; 26 Am. Rep. 155 ; Vosburg v. Diefendorf, 119 N. Y. 357; Smith v. Weston, 159 N. Y. 194; Tanner v. Hall, 1 Pa. St. 417; Atlas v. Savery, 127 Mass. 75. The law as to the liability on partnership, the subject is well stated in Stall V. Catskill Bank, 18 Wend. 466, where the court stated, "It is no part of the ordinary business of a mercantile firm to make or indorse notes as sureties for third persons, or to pay the private debts of the individual partners, and of course there is no implied authority for one member to indorse or affix the name of the firm to negotiable paper, in which the partnership has no interest, for such purposes. If, therefore, it appears upon the face of the paper, that the partnership name is signed as a mere surety for some other person, the party who takes the note from such person has actual notice of the fact that it is not signed in the ordinary course of business. He must, therefore, at his peril, make the necessary inquiries, and ascertain that there was some special authority for one partner to sign the partnership name as such surety, either expressed or implied. So if the drawer of a note carries it to the bank to get it dis- counted on his own account, or transfers it to a third person with the firm name indorsed thereon, the transaction oh its face shows that it is a mere accommodation indorsement, or the note would be in the hands of the drawer; and the bank or the person who receives it from the drawer, being thus chargeable with notice that the firm is a mere surety of the drawer and the members of the firm who have been made sureties without their consent, are not liable to such holders of the note." CONSIDERATION 97 Partnership accommodation paper. ^^/^^ y^M ^ ^y k ^^^u^f, 'M kujj. . vf y/^^ y^^ y/J > »f7:^2^a^'U ^^jK ^yue/. <^^-o^ CJ ^^.y 7n^ — ya ^"^t-Or C/y^^.y tn^^^.^,^./ /wCo->^^ >' J. K. VAN CAMPEN WESTON BROS. In the above case Weston Bros, indorsed for accommodation of the makers without consideration or without authority. The plaintiff in taking the note knew he was deahng with one of the makers of the note when he took it from the payee, and he also knew Mr. Van Campen, either as maker or first indorser, coiild not be expected to have possession of the note if it had passed through the firm of Weston Bros, in the ordinary course of business. He was therefore put upon inquiry, which, if made in the proper quarters, would have disclosed the fact that the second indorsement was made without authority. Corporation accommodation paper. — A banking corporation may become the indorser of and procure paper owned by it to be discoimted for the use and benefit of the banking corporation, but it is not authorized to make an accommodation indorsement. Bank of Genesee v. Patchin Bank, 13 N. Y. 309. When an individual signs a note as an accommodation maker or indorser for the benefit of another, he is liable to a subsequent holder for value, although the holder knew him to be an accommodation party. But the rule does not hold in the case of a manufacturing corporation which has no power to bind itself as an accommodation party. 98 NEGOTIABLE INSTRUMENTS LAW ; 'fr r — f\y / / / ' JsA^^'z2:^ ^6c y^/^yCr^ <^ /J- , lai Y No. ^/// r>S^^ xr:^:^^^ {INDORSED) PAY TO H. COHEN THOS. A. KILLIP PAY TO WATSON B. KENDALL H. COHEN COMMERCIAL BANK The indorsement 'Thomas A. Killip" is correct, the title Dr. is not necessary, although the check should not be cashed on account of the missing indorsement of Watson B. Kendall. An indorsement of ''all the right, title and interest of the payee of a note" does not in any way affect its negotiability, and the indorsee is deemed prima facie to be a holder in due course, if he has possession of the note under such indorsement. Evans v. Freeman, 142 N. C. 66; Patent Title Co. v. Stratton, 89 Fed. 174; First National Bank v. McCullough, 17 L. R. A. 1105; Borden v. Clark, 26 Mich. 61; Thorp v. Mindeman, 123 Wis. 140; Schmidt v. Pegg, 172 Mich. 163; Hailey v. Falconer, 32 Ala. 536. "For value received I hereby guarantee payment of the within note and waive demand and notice of protest" written on the back of a note by the payee, constitutes a mere guaranty and not an indorsement in due course. Ireland v. Floys, 142 Pac. 401. The words "I hereby assign this note over to E. H. Farnsworth this, the Nov. 1st, 1910," signed by the payee on the back of a negotiable promissory note, complete and regular on its face, accompanied by delivery is an indorsement of the note. 106 NEGOTIABLE INSTRUMENTS LAW Famsworth v. Biirdick, 94 Kans. 749. The assignee of a promissory note takes it subject to any defenses or counterclaim good as against the assignor, at least to the amount of the note. Smith V. Hedges, 89 Misc. 183; Zabriskie v. C. V. R. R. Co. 131 N. Y. 72. /^?o^ ^i3^-^t^J^y^W- A.^c< / -/^^^ C^^'-yTjy :Z!^A^H<^>a-tz., OF l_AURE(- ORDER OF ,'tZ<^t3.t^. ^^^ -f^^^ -^>d^^^^^. 'y^'^^ _— ^ ^DOLLARS (/iVD0i?5££>) PAY TO AMERICAN PIPE CO. E. HOWE, TREAS. AMERICAN PIPE COMPANY The question in the above indorsement is as to whether Edward G. Stull and E. Howe are Secretary and Treasurer respectively of the American Pipe Company. If the paying bank has knowledge that they are both authorized officers of the same company, it may safely pay the check, although on its face the indorsements are irregular. In the absence of such knowledge the check should be returned for proper indorsement. The omission of the margin figures is immaterial. The usual mode of transfer of a promissory note is by simply writing the indorser's name on the back, or by writing also over it the direction to pay the indorsee named, or order, or to him or bearer. An indorsement may, however, be made in more enlarged terms, and the indorser be held liable as such. In Sands v. Wood, 1 Iowa 263, the indorsement was, "I assign the within note to Mrs. Sarah Coffin." In Sears v. Lautz, 47 Iowa 658, the indorsement was, "I hereby assign all my right and title to Loms Meckley." In each case the party so assigning was held as indorser. The court in the latter case saying, "He used no words that in and for themselves indicated that he had bound or made himself liable in case the maker, after demand, failed to pay the note. But it was held the law as a legal conclusion, attached to the words used the liability that follows the indorsement of a promissory note." See also, Shelby v. Judd, 24 Kan. 166; Brotherton v. Street, 124 Ind. 599; Gale v. Mayhew, 125 N. W. Rep. 781. Where a note was indorsed "For value received I transfer to A all my right, title and interest in the within note, to be enjoyed in the same 108 NEGOTIABLE INSTRUMENTS LAW manner as may have been by me," it was held, that such indorsement exempted the indorser from personal liability on the note. Hailey v. Falconer, 32 Ala. 536; Aniba v. Yeomans, 39 Mich. 171; Fassin v. Hubbard, 55 N. Y. 465. Indorsement by guaranty nn"-^ ^ CP^^ r^jj^^y . yt^^ >C?.c^ ^-y^r^^ -^^~y^,'C/C/' ^ ^^ J>/f-£^ /-^ ( ^ . ^ (zCr-^ {INDORSED) WILLIAM B. SMITH For value received i hereby guarantee the payment of the within note to any holder thereof, together with any costs and expenses INCURRED IN THE COLLECTION OF THE AMOUNT THEREOF FROM THE MAKER, INDORSEE, MYSELF OR EITHER OR ALL OF US. JOHN DOE A surety is not entitled to a notice of dishonor. Manufacturing Co. v. Kimmel, 87 Ind. 566; Ballard v. Burton, 16 L. R. A. 667; Dan. Neg. Int. Sec. 1753; Coleman v. Fuller, 105 N. C. 328; Hall V. Weaver, 34 Fed. Rep. 104; Kitton v. Tool Co., 22 R. I. 611. The words "For value received I hereby guarantee payment of the within note and waive demand and notice of protest on same when due," written on the back of the note by the payee, do not constitute an indorse- ment and transfer in due course, but constitute a mere guarantee of pay- ment. And the maker of such note is entitled to make the same defenses against same in the hands of the holder under such guaranty that he would be entitled to make if it were in the hands of the original payee. Ireland v. Floyd, 42 Oakl. 609; Swenson v. Stoltz, 36 Was. 318; Hall V. Toby, .110 Pa. St. 318; Thorp v. Mindeman, 123 Wis. 150. § 62. Indorsement must be of entire instrument. The indorsement must be an indorsement of the entire instrument. An indorsement, which purports to transfer to the indorsee a NEGOTIATION 109 part only of the amount payable, or which purports to trans- fer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instnunent has been paid in part, it may be indorsed as to the residue. Where an executor accepts a promissory note in payment for property belonging to testator and thereafter assigns one-fifth of such promissory note to each of the five beneficiaries of the estate and he, himself, retains possession of the note, each of the five beneficiaries is not entitled to maintain a separate action against the maker to recover the one-fifth part thereof assigned to him, as the obligation is single and cannot be divided into parts. King V. King, 73 App. Div. (N. Y.) 547. 'A complaint which alleges that defendant made a promissory note on a certain date, and that the payees thereafter and before maturity of said note indorsed a one-half interest therein and delivered the same to plaintiff, who is now the owner and holder thereof, fails to state a cause of action. Barkley v. Muller, 164 App. Div. (N. Y.) 351. A negotiable promissory note, dated July 8, and signed by fifteen persons, had indorsements on it of partial payments dated July 11, by the signers. The note was finally delivered on July 13. Held, the indorsements did not destroy the negotiability of the note, inasmuch as the amount due, although not expressly stated, could be ascertained with mathematical certainty. Smith V. Shippey, 182 Pa. St. 24. Notes cannot be apportioned by assignment. Were the law other- wise, the holder of a promissory note might greatly oppress the payee by making numerous assignments of parts of the note, and thus multiply suits, if the same were not paid at matiuity. Lindsay v. Price, Z?> Texas 282. § 63. Kinds of indorsement. An indorsement may be either special or in blank ; and it may also be either restrictive or qualified, or conditional. An indorsement in blank means that the instrument is to be paid to the person who may hold it. These may be successive indorsements in blank. The indorsee in blank, or any subsequent bona fide holder, may write over an indorsement in blank any contract consistent with the character of the indorsement. Sec. 65. 110 NEGOTIABLE INSTRUMENTS LAW There is no difference between a note indorsed in blank and one payable to bearer and is deemed to be treated as so much cash, unless the payee chooses by a specific indorsement to some person to restrain its currency. c^/-r.yyiy y7J > cJx€^.^/uA^. y<5,;2^?2Jy This note payable to order is the sole property of Brewster until indorsed by him. If it is lost or stolen and paid by the maker without Brewster's indorsement, the maker will continue to be liable for the amotmt. When Brewster indorses his name on the back {INDORSEMENT IN BLANK) HENRY C. BREWSTER the note would then be indorsed in blank and is then payable to bearer and should it be negotiated further, Brewster would be liable to such subsequent holder if the note was duly protested for non-payment and Brewster received notice thereof. The note being payable to "order" Brewster could negotiate the note away. If Brewster should indorse PAY TO PETER VAY OR ORDER HENRY C. BREWSTER would mean an indorsement in full and could not again be further nego- tiated without the signature of Vay. Should Vay indorse {QUALIFIED INDORSEMENT) WITHOUT RECOURSE PETER VAY such indorsement does not impair the negotiable character of the bill. {CONDITIONAL INDORSEMENT) Pay James L. Hotchkiss or order on the completion of the Le Roy branch B. R. & P. R. R. JOHN F. DINKEY The maker of the note can pay if he choose, whether the condition has been fulfilled or not. NEGOTIATION 111 {RESTRICTIVE INDORSEMENT) Pay Fred ZoUer or order for collection for my account C. C. DAVY The last two indorsements destroy the further negotiation of the note as a negotiable instrument. § 64. Special indorsement; indorsement in blank. A special indorsement specifies the person to whom, or to whose order the instriiment is to be payable ; and the indorsement of such indorsee is necessary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee, and an instrimient so indorsed is payable to bearer, and may be negotiated by delivery. Variant. — The Massachusetts statute substitutes the words "does not specify any indorsee" for "specifies no indorsee." The Wyoming statute adds the word "made" between "be" and "payable," second line. The legal effect of a blank indorsement on a promissory note cannot be varied by parol evidence. Torbert v. Montague, 38 Colo. 325; See, Zimmer v. Cheu, 34 App. Div. (N. Y.) 505. Where notes are indorsed in blank to an agent, for a particular pur- pose, which has been disregarded by him, the principal will be bound to a bona fide holder by reason of the general authority implied in the blank, and cannot against such holder, avail himself of the fact that the agent exceeded his authority. Wedge Co. v. Denver Bank, 19 Cola. App. 188. The indorsement of a note in blank by the payee and its production by the plaintiff in an action thereon are prima facie evidence of the latter's ownership of it and the existence of subsequent indorsements, does not effect the presumption, especially where they were cancelled. Zimmer v. Cheu, 34 App. Div. (N. Y.) 505; 4 Am. & Eng. Ency. of Law (2nd ed.) 318 and cases cited. A check upon its face is made payable to F. M. Rounds and is indorsed by Rounds in these words, "Pay to the order of with his signature written immediately below." This amounts to an indorsement in blank, rendering the instnmient payable to bearer and negotiable by delivery. State V. Hinton, 109 Pac. 26. 112 NEGOTIABLE INSTKUMENTS LAW Where A, the holder of a check, indorsed it in blank, and delivered it to B for deposit to A's account, the drawee bank was protected in paying the check in good faith to B. Peerot v. Mt. Morris Bank, 120 N. Y. App. Div. 241, 104 N. Y. Supp. 1045. Where one indorses a note in blank, he warrants to all subsequent holders in due course that he will pay the note to the holder on receiving due notice that the maker, upon demand at the proper time, neglected to pay it, and if the maker has become the holder also, he cannot by present- ment and notice of refusal recover on the indorsement. Abramonitz v. Abramonitz, 113 N. Y. Supp. 798. § 65. Blank indorsement; how changed to special in- dorsement. The holder may convert a blank indorsement into a special indorsement by writing over the signature of the indorser in blank any contract consistent with the character of the indorsement . The holder of a note indorsed in blank by the payee has no right to change the contract of the indorser by writing over the name of the indorser a contract of guaranty without the knowledge or consent of the indorser. Belden v. Hann, 61 Iowa 44. In an action on a note indorsed in blank and negotiated by delivery, it was no defense that it was not indorsed by the party from whom plain- tiff purchased it. Dominion Trust Co. v. Hildner, 243 Pa. 253, 90 Atl. 69. § 66. When indorsement restrictive. An indorsement is restrictive, which either: 1 . Prohibits the further negotiation of the instrument ; or 2. Constitutes 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. But the mere absence of words implying power to negotiate does not make an indorsement restrictive. Examples of restrictive indorsement. 'Tay to A only," 'Tay to A for my use," "The within must be credited to A," "Credit my account," "For collection and return." Subd. I. — A note indorsed "Pay the within to A. Thatcher" with the omission of the words "or order" does not restrict further negotiation. Leavitt v. Putnam, 3 N. Y. 496. NEGOTIATION 113 In Edie v. East India Co., 2 Burr 1221, the examples of restrictive indorsements put by the way of example are, "Pay to my steward and no other person for my use." This shows there was no intention to pass title; and the same effect has been given to an indorsement, "Pay to P only." It was held that these words indicated that the indorsee was agent only. Power V. Finnic, 4 Call. (Va.) 411; "Pay S or order for account Merchants' National Bank;" White v. Miners' National Bank, 102 U. S. 658. Subd. 2. — The general trend of decisions hold that an indorsement for collection or deposit constitutes a retention of title in the absence of any agreement to the contrary, and the owner may control such paper unless paid. Freemans' Bank v. National Tube Co., 151 Mass. 413; 21 Am. St. Rep. 461. An indorsement in blank accompanied by a letter stating that the inclosed draft was for "collection and credit" must be read together, and the effect is to make the indorsement restrictive and the same in character as if the contents of the letter had been incorporated in the indorsement. Bank of America v. Waydell, 187 N. Y. 120. Plaintiffs were owners of certain sight drafts drawn on the defendants by P, who was plaintiff's confidential clerk and had authority to receive payment for them in the course of their business, indorsed them "For deposit in Broadway National Bank." A messenger boy in plaintiff's employ, who had been directed by them to obey the orders of P, by his directions took the drafts to defendant's office and received payment in money, which he paid over to P, who misappropriated it. In an action for alleged conversion held, that the indorsement did not confer apparent authority upon the boy to receive payment, but as P had such authority, the delivery of the money to him was a valid payment to plaintiff. Johnson v. Donnell, 90 N. Y. 1. An indorsement for collection is not a transfer of the title to the indorsee, but merely constitutes him the agent of the indorser to present the paper, demand and receive payment and remit the proceeds. National Butchers, etc.. Bank v. Hubbell, 117 N. Y. 384. When a bank to which a draft, appearing on its face to be negotiable, is forwarded by another bank, purchases it for value, without notice of the agreement restricting negotiation, the drawer may not stop payment of the draft against the rights of the bank so holding the paper. Bank v. Oil Mills, 150 N. C. 719. 114 NEGOTIABLE INSTRUMENTS LAW Indorsement for collection and deposit, see, N. W. National Bank v. Bank of Commerce, 107 Mo. 402; Cecil Bank v. Farmers' Bank, 22 Md. 148; Blaine v. Bourne, 11 R. I. 119; Armstrong v. National Bank, 90 Ky. 431; Ditch v. Western National Bank, 79 Md. 192; Smith v. Bayer, 46 Or. 143; Commercial National Bank v. Armstrong, 148 U. S. 50; Beal v. Somerville, 50 Fed. 647; Haskell v. Avery, 181 Mass. 106. Subd. 3. — Restrictive indorsements are held to negative the pre- sumption of a consideration, on such as indicate that they are not intended to pass title, but merely to enable the indorsee to collect for the benefit of the indorser. An indorsement "Pay to the order of Mrs. Mary Hock for the benefit of her son Charlie," imparted consideration, and in effect was simply to give notice of the interest of the beneficiary named, and protect him against misappropriation. Hock V. Pratt, 78 N. Y. 375. § 67. Effect of restrictive indorsement; rights of indor- see. A restrictive indorsement confers upon the indorsee the right: 1. To receive payment of the instnmient; 2. To bring any action thereon that the indorser could bring; 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 indorsement. Variant. — The Illinois statute adds to subdivision "or except in the case of a restrictive indorsement specified in Section 36 — Sub-section 2 — any action against the indorser or any prior party that a special indorsee would be entitled to bring," and eliminates the words "his rights as such indorsee" in Subdivision 3 and substitutes therefor "the instnmient" and adds at the end of Subdivision 3 the clause "specified in Section 36 — Sub-section 1 — and as against the principal or cestui que trust only the title of the first indorsee imder the restrictive indorsement specified in Section 36 — Sub-sections 2 and 3 respectively." Where a promissory note was indorsed by the payee to another "for collection" for the account of the payee, the indorsee had such a legal title as would authorize him to bring a suit in his own name. Wilson v. Tolson, 79 Ga. 137, but in such case he will hold the note subject to the same defenses that could have been made to it in the hands of the original payee. NEGOTIATION 115 Roberts v. Parrish, 17 Or. 583; Craig v. Palo Stock Farm, 16 Idaho 701. SEE ALSO, Hook v. Pratt, 78 N. Y. 376; Freeman's Bank v. National Tuve Works, 151 Mass. 417; Regina Flour Mills v. Holmes, 156 Mass. 11; Spofford V. Norton, 126 Mass. 533; Cummings v. Kohn, 12 Mo. App. 585; Ward V. Tyler, 52 Pa. St. 393; Schmidt v. Pego, 172 Mich. 161; Metzger v. Sigall, ^3 Wash. 80. § 68. Qualified indorsement. A qualified indorsement constitutes the indorser a mere assignor of the title to the in- strument. It may be made by adding to the indorser's sig- nature the words "without recourse" or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument. The words "without recourse" accompanying an indorsement clearly indicate that the person making the transfer does not intend to assume the position of an imconditional indorser, or to incvir any liability if the note is not paid at maturity upon due demand, or even if all the parties to the paper should prove to be wholly insolvent. Such indorsement effects a transfer of the title of the paper without imposing the liability of indorser. While he is thus not liable on the paper, yet certain liabilities are deemed to flow from the contract of sale on the principle that where personal property of any kind is sold, there is on the part of the vendoe an implied warranty that he has title to it and that it is what it purports to be. 3 R. C. L. 1166; Drennan v. Dunn, 124 111. 175. (J^J^y ;7^;^^/^^ -^W^.. u {INDORSED) WITHOUT RECOURSE EUGENE STEPHENSON By the foregoing indorsement Eugene Stephenson guarantees that the signature of the maker is genuine; that the note is valid between the 116 NEGOTIABLE INSTRUMENTS LAW original parties; that the makers were competent to contract; that the amount expressed therein is due and that there was no illegality in its inception. To avoid such guarantees it should be indorsed. Without recourse and without expressly or impliedly war- ranting ANY OF THE MATTERS CONTAINED IN OR WHICH GO TO THE MAKING UP OF THIS INSTRUMENT. An indorsement without recourse is usually accompanied by the words, "without recourse," "at the indorsee's risk," "sans recourse," "to be enjoyed in the same manner as may have been by me," "without warranty," etc., etc., and means that the indorsee exempts himself from liability to indemnify the holder upon the dishonor of the bill or note. To relieve one who indorses paper from liability on his indorsement, he must insert in the instrument itself words clearly expressing such an intention. Fassin v. Hubbard, 55 N. Y. 465; Hailey v. Falconer, 32 Ala. 536; Schmidt v. Pegg, 172 Mich. 160; Craft v. Fleming, 46 Pa. St. 140. The indorsement of a negotiable instnmient "without recourse" is not sufficient to put the purchaser upon notice, and it does not impair the negotiable character of the instrument. Banking Co. v. Hall, 119 Tenn. 548. While an indorsement "without recourse" relieves the indorser of liability as a party to a bill or note, it does not relieve him if the instnmient is not genuine or if he had no title to it, or if any prior party was incom- petent. Bell v. Dagg, 60 N. Y. 528. The purpose of an indorsement without recourse is to transfer the title of an instnmient without creating any personal liability on the part of the indorser. Goolrich v. Wallace, 157 S. W. (Ky.) 920. The indorsee of a note without recourse impliedly warrants that the signatures of prior parties whose names appear thereon are genuine. State V. Bank, 139 la. 338; Ware v. McCormick, 96 Ky. 139; 28 S. W. 157. He also impliedly warrants that he has title to the paper which gives him the right to sell it, but he does not warrant the solvency of maker. Hecht v. Batcheller, 147 Mass. 335; Challis v. McCrum, 22 Kan. 157. An indorsement "without recourse" in the absence of fraud releases the indorser from liability. Cross V. Hollister, 47 Kan. 652. NEGOTIATION 11 7 An indorser "without recourse" of a note partially void for usury, is liable upon the implied warranty that the note is valid for the amount expressed upon its face. Challis V. McCrum, 22 Kan. 157; Meyer v. Richards, 163 U. S. 385. Hannum v. Richardson, 48 Vt. 508, where an indorser sold a nego- tiable promissory note without recourse. The note was void because given for intoxicating liquors in violation of law. It was claimed that the defendant knew of the invalidity of the note when he transferred it. The court held that knowledge on the part of the seller was not necessary to fix his liability, saying: "By indorsing the note 'without recourse' the defendant refused to assume the responsibility and the liability which the law attaches to an unqualified indorsement, so that in respect to such liability it was perhaps to be regarded as standing without an indorsement. If it be so regarded, then in what position do these parties stand in respect to the transaction? The principle is well settled that where personal property of any kind is sold there is on the part of the seller an implied warranty that he has title to the property and that it is what it purports to be and is that for which it was sold, as understood by the parties at the time; and in such case, knowledge on the part of the seller is not necessary to his liability. The note in question was not a note. It was not what it piirported to be, or what it was sold and purchased for. It was of no more effect than if it had been a blank piece of paper for which the plaintiff had paid his $50. In this view of the case, we think the defendant is liable upon the warranty that the thing sold was a valid note of hand." See also, Drennan v. Bunn, 124 111. 175. The words "without recourse" need not precede the signature of the indorser. Where the payee of a note indorses his name at the right and opposite the words "without recourse" the words cannot be taken advan- tage of by subsequent indorsers. m/C^iw/p^mm^^Ji^J^^ 26-51 ■^>^ ^f^^^ ^^y r^^^g^^ x^,Ai^i^(jf.^^dM^ ,.y^u^,c^ae',a^XlC^U7^/'y^li^A^/^ <^ j/^^^^%/^. U^ 118 NEGOTIABLE INSTKUMENTS LAW {INDORSED) PAY TO THE ORDER OF SECURITY TRUST CO. FRANK E. MAY PAY TO THE ORDER OF FIRST NATIONAL BANK, N. Y. SECURITY TRUST CO. WITHOUT RECOURSE FIRST NATIONAL BANK, N. Y. The only peculiarity about the above check is the indorsement of the Security Trust Company, without recourse. In view of the fact that the First National Bank, a responsible institution, has seen fit to indorse it, the check should be paid, as the words "without recourse" added to the indorsement of the Security Trust Company would not relieve the First National Bank or Frank E. May of responsibility. A qualified indorsement may be made by adding to the indorser's signature the words "without recourse" and a transfer by indorsement of the "right and title" of the payee or an indorser to a negotiable instru- ment is equivalent to an indorsement "without recourse." 1 Dan. Neg. Inst. Sec. 700 and 700a; Borden v. Clark, 26 Mich. 410; Evans v. Freeman, 142 N. C. 66; Thorp v. Mindeman, 123 Wis. 151. Parol evidence. — Where a note is endorsed by two persons and the words "without recourse" are added to such indorsement and occupy such position with reference thereto that ambiguity arises as to which of said indorsements they are intended to apply, parol evidence is admissi- ble to show to which indorsement such words are applicable. Goolrick V. Wallace, 154 Ky. 596; Doll v. Gotzchmann, 26 Am. & Eng. Ann. cases 880; Rice v. Stearns, 3 Mass. 225; Pres. Fitchburg Bank v. Greenwood, 84 Mass. 434; Corbett v. Fetzer, 47 Neb. 273; Merchants Bank v. Vranson, 165 N. C. 344. § 69. Conditional indorsement. Where an indorsement is conditional, a party required to pay the instrument may dis- regard the condition, and make payment to the indorsee or his transferee, v^hether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is nego- tiated, will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally. An example of conditional indorsement may be found in the case of Robertson v. Kensington, 4 Taunt 30, where the indorsement on the draft was "Pay the within sum to Messrs. C. and R., or order upon my name appearing in the Gazette as ensign in any regiment in the line, within two months from date." The court held the indorsement was conditional and a payment to the subsequent indorsers was at the peril NEGOTIATION" 119 of the persons paying, in case the conditions were not fulfilled. In other words the conditional indorsement did not absolutely transfer the title. This section therefore changes the law in this respect. See also, Dan, Neg. Inst. 697. § 70. Indorsement of instrument payable to bearer. 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. Variant. — The Illinois statute substitutes for "payable to bearer" the words "originally payable to or indorsed specially to bearer." Where a bill of exchange or draft accepted was indorsed by the payee in blank and was by the next holder indorsed specially. Held, that the first indorsement being in blank, the bill was afterwards transferable by mere delivery, and that a holder by delivery may strike out the special indorsement and in a suit against the acceptors may declare and recover, as the indorsee of the payee. Mitchell V. Fuller, 15 Pa. St. 268. A check payable to a certain person or bearer need not be indorsed, nor the holder thereof be identified, and a bank paying such check without identification of the holder is not negligent. Farmers' Bank v. Bank of Rutherford, 115 Tenn. 64; Phoenix National Bank v. Saucier, 59 So. Rep. 91. Genesee Valley Trust Company ^^^--^^ Jv^'^jt . - 120 NEGOTIABLE INSTRUMENTS LAW (INDORSED) GEORGE VAN ALSTYNE PAY TO THE ORDER OF JOHN DOE RICHARD ROE LINCOLN STATE BANK This check when deHvered was payable to bearer and did not require indorsement and wotdd be good in the hands of any person personally presenting it, and could be cashed without indorsement. Richard Roe by his indorsement converted it into an order check, and a cautious banker would require the indorsement of John Doe, which is missing. A bill or note payable to order and indorsed in blank, so long as the indorsement continues blank is in effect payable to bearer. Dan. Neg. Inst. Sec. 668-696; Greneaux v. Wheeler, 6 Texas 522; Ross V. Smith, 19 Texas 172; Rule v. Bailey, 16 La. 213; Little v. O'Brien, 9 Mass. 423; Johnson v. Mitchell, 32 Am. Rep. 602; Dugan v. United States, 3 Wheat. 172; See notes Sec. 66. § 71. Indorsement where payable to two or more per- sons. 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. Variant. — The Wisconsin statute inserts the word "joint" before "indorsees." ^"ir^TTTT ^ ■i:.u Liiiijllili;., '<;'''^*'v^i. ;'•'•::.,. I . WASHINGTON B R ANC H- < ■^' . ■'- 'j \'t.! !':,ni;i to- ^-^^^^«^. CX^JLA-t,^A^>- (INDORSED) CHARLES F. ALLEN AARON C. ALLEN By CHARLES F. ALLEN Commercial paper, payable to two or more persons who are not co-partners, must be indorsed by all the payees in order to give good NEGOTIATION 121 title to the indorsee. Checks representing installments of the purchase price of lands owned by Charles F. Allen and Aaron C. Allen, two brothers, as tenants in common, made payable to both of such brothers, were mailed to Charles F. Allen, who indorsed both his own and his brother's names upon the checks and deposited them in a bank to his own individual credit. The brothers were not co-partners and Aaron C. Allen had not given to Charles F. Allen express authority to indorse his name on the checks. It appeared, however, that Aaron C. Allen had committed the entire details of the sale of the land and of the receipt of the purchase to Charles F. Allen; that he knew that installments of the piu-chase price had been paid from time to time; that he did not attack his brother's dealings with the checks until after the latter 's death and until over four years after the last check was paid. Held, that a jury might properly find that the unauthorized act of Charles F. Allen in indorsing his brother's name upon the checks had been ratified by the latter. Allen V. Corn Exchange Bank, 87 App. Div. N. Y. 335. In Willis V. Green, 5 Hill 233, the court said, "It is a settled rule that co-payees, not partners, must each indorse in order to negotiate the paper." In Foster v. Hill, 36 N. H. 526, it was held, where a promissory note is made payable to two joint payees, their joint indorsement is necessary to negotiate it. In Bennett v. McGaughy, 4 Miss. 192, it is well settled that where a note is payable to two it must be indorsed by both. In Wood v. Wood, 16 N. J. L. 428, it was held, that one joint payee of a promissory note cannot indorse it, either in his own name alone or in his own name and that of his co-payee. In Smith v. Whiting, 9 Mass. 334, it was held, that one of two executors cannot assign a nego- tiable promissory note, made to them as executors, for a debt due to their testator. In Ryhiner v. Feickert, 92 111. 305, where a note was payable to the order of Charles and William Feickert, who were not partners, the court ruled that the note was not prima facie payable to a firm, and that the possession of one joint owner was not evidence of a partnership. In First National Bank v. Gridley, 112 App. Div. (N. Y.) 401 (a case since the adoption of the statute) it was held, that the indorsement of all the payees was necessary to give good title to the transferee. As to the right of survivorship of husband and wife in a certificate of deposit, in the name of both, see, Martz v. State National Bank, 147 App. Div. (N. Y.) 250. See Dan. Neg. Inst. Sec. 701a; Allen v. Corn Exchange Bank, 87 App.. Div. (N. Y.) 335; 181 N. Y. 278. Where a note is payable to either of two payees it may be transferred by the indorsement of one of them. 122 NEGOTIABLE INSTRUMENTS LAW Voris V. Shoonover, 138 Pac. Rep. 607; Union Bank v. Spies, 151 Iowa 178. See notes, Sec. 27, Subd. 4. Regardless of the provisions of this section, a negotiable instnmient may be transferred without indorsement and the transferee becomes its owner, and can maintain an action thereon in his own name, it being, however, subject to all the equities and defenses which the debtor had at the time of the transfer against the claim in the hands of the previous holder. Martz V. State National Bank, 147 App. Div. (N. Y.) 250. § 72. Effect of instrument drawn or indorsed to a person as cashier. Where an instrument is drawn or indorsed to a person as "cashier" or other fiscal ofhcer of a bank or corpora- tion, 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 indorsement of the bank or corporation, or the indorsement of the officer. Under the common law the courts generally held that an indorsement to one as cashier was equivalent to an indorsement to the undisclosed bank, which is an exception to the general nile as to indorsement by agent as provided in Sec. 39. Bank of Genesee v. Patchin Bank, 19 N. Y. 312; Bank of New York v. Bank of Ohio, 29 N. Y. 619; First National Bank of Angelica v. Hall, 44 N. Y. 395. Where it appears that the president of a bank in his official capacity conducted the making and transfer of commercial paper, his acts in relation thereto are binding on the bank. Griffin v. Erskine, 131 Iowa 444. A check drawn to the order of "Treas. of Town of Farmingham" in legal effect, stands upon the same footing as if payable to the town, and the money which it represented belongs to the town which was the real payee of the check. Commercial Bank v. French, 21 Pick. 486; Quincy Mutual Insurance Co. V. Inter. Trust Co., 217 Mass. 373. First National Bank v. McCullough, 50 Oregon 508, a case arising under the statute. NEGOTIATION 123 § 73. Indorsement where name is wrongly designated or misspelled. Where the name of a payee or indorsee is wrongly designated or misspelled, he may indorsee the instru- ment as therein described, adding, if he think fit, his proper signature. An indorsement by a person of the same name as the payee but not the real payee intended by the drawer is forgery, and no title is derived from such indorsement. Weisberger v. Barbarton Bank (Ohio), 95 N. E. 379; Graves v. Am. Exch. Bank, 17 N. Y. 205; Cochran v. Atchinson, 27 Kan. 728; Rossi v. Bank of Commerce, 71 Mo. App. 570; Beattie v. National Bank of 111., 174 111. 571. Where the name of the corporation was "L. Rosenberg, Incorporated" and the indorsement was "Louis Rosenberg, Inc.", is not such a variance as to make the indorsement ineffectual, especially as the corporation received all the benefits of the transaction with full knowledge of the facts. Van Norden Trust Co. v. Rosenberg, 62 Misc. 285. § 74. Indorsement in representative capacity. Where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability. Such an indorsement is usually "A by B as agent," or "B as agent for A" or "per procviration A (principal) B" (agent). Where the name of a religious corporation indorsed upon a promissory note followed by the names of its president and treasurer, the words "finance committee" and the name of the persons constituting such com- mittee, the indorsements come within the protection of this section and negatives any personal liability on the part of the individual signers. Chelsea Exchange Bank v. First U. P. Church, 89 Misc. (N. Y.) 619. As to the liability of executors or administrators, see Schmittler v. Simon, 101 N. Y. 554; Schmittler v. Simon, 114 N. Y. 186. See notes Sec. 39. 124 NEGOTIABLE INSTEUMENTS LAW BiRMiNGnAM . Ala . Bm>fENGEL%M Trust &^avings Co.« bIPMINGHAM.ALA fiorroTBE OBDEKOF. ^^-^iCi ^:>^^^^ CyJ^J^^^ tt-jt.,*-^ (INDORSED) PAY TO MRS. EMMA BROOKS UNION IRON WORKS B. B. SHEPARD, MGR. EMMA BROOKS CHARLES F. CAREY The above indorsement by B. B. Shepard, Mgr., is proper if so authorized by the Union Iron Works, but without knowledge the paying bank should investigate the authority of Shepard to so indorse. The indorsement of "Emma Brooks" without prefixing the Mrs. is immaterial. § 75. Time of indorsement ; presumption. Except where an indorsement bears date after the maturity of the instru- ment, every negotiation is deemed prima facie to have been effected before the instrrunent was overdue. Upon the trial the plaintiff produced the note, proved the indorsement of the payee and the signature of the maker and introduced it in evidence. Thus, the plaintiff established prima facie that it became the owner of the note before it became overdue, in good faith and for value and without notice of any infirmity in the instrument. German American Bank v. Cunningham, 97 App. Div. (N. Y.) 246; Colbom V. Arbecam, 54 Misc. 623, 104 N. Y. Supp. 986. An indorsement of a promissory note, in the absence of evidence to the contrary, is presimied to have been made at or about the date of the note. Mason v. Noonan, 7 Wis. 609. The indorsement of a promissory note after maturity is, in effect, the drawing of a new bill payable on demand, and, to hold the indorser, demand and notice of non-payment are essential. NEGOTIATION 125 Smith V. Caro, 9 Oregon 278; see also, Cedar National Nank v. Bashara, 39 Okla. 482. § 76. Place of indorsement ; presumption. Except where the contrary appears every indorsement is presumed prima facie to have been made at the place where the instrument is dated. A married woman who, at her residence in the State of New Jersey, indorsed in blank and solely for his benefit, her husband's promissory note, dated and payable in the State of New York, where it is discounted in good faith, without notice that the indorser was a non-resident, or that the indorsement was made in another state, is estopped from denying that her indorsement is a New York contract and from claiming it a New Jersey contract, the laws of which state do not permit a married woman to become a simple accommodation indorser; but if she had written her place of residence after her name the plaintiff would have been put upon inquiry as to the validity of such a contract made in that state. Chemical National Bank v. Kellogg, 183 N. Y. 95; see also, Dan. Neg. Int. Sec. 728; Maxwell v. Vansant, 46 111. 58; Belford v. Bangs, 15 111. App. 76; Towne v. Rice, 122 Mass. 67; Glidden v. Chamberlain, 167 Mass. 486. A bill drawn in Illinois and delivered to drawee in New York, is governed by the law of the latter place, but if in good faith it is made payable in the former state, any rate of interest, not exceeding that there allowed, may be reserved. Freese v. Brownell, 35 N. J. L. 285. A negotiable instrument is presumed to have been made where it is dated, and hence an action upon a promissory note dated at the City of New York must be deemed to be brought on a contract made in that state. Manufacturers' Commercial Co. v. Blitz, 131 App. Div. (N. Y.) 17; Chemical National Bank v. Kellogg, 183 N. Y. 92. § 77. Continuation of negotiable character. An instru- ment negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise. A bill or note does not lose its negotiable character by being dis- honored, and the indorsement although made after dishonor, follows the 126 NEGOTIABLE INSTRUMENTS LAW nature of the original contract, and is negotiable unless it contains express words of restriction. Leavitt v. Putnam, 3 N. Y. 494; McSherry v. Brooks, 46 Md. 118. Where an indorser takes up a promissory note, after it has been dishonored, by paying the amount of it to the holder, the transaction is in effect a re-pvirchase of the note, and not a payment of it, and the indorser becomes vested again with all rights which he formerly had against prior parties on the paper. French v. Jarvis, 29 Conn. 347. A note once negotiable remains so until paid, the fact that it becomes overdue does not destroy its negotiability. Adair v. Lenox, 15 Oregon 489. A note indorsed after it became due is considered payable on demand, and the demand and notice must be made in a reasonable time. Rosson v. Carroll, 90 Tenn; 110; Graul v. Strutzel, 53 Iowa 712; Gray v. Bell, 44 Am. Dec. 277. As to discharge see Sections 200-206. § 78. Striking out indorsement. 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 liabil- ity on the instrument. Variant. — The Kentucky statute substitutes the word "owner" for "holder," probably an error in engrossing. This is declaratory of the law as it existed prior to the enactment of the statute. Vanarsdale v. Hax, 107 Fed. 878, 880 and cases cited; Mitchell v. Fuller, 15 Pa. St. 268; Rand v. Dovey, 83 Pa. St. 281; Merz v. Kaiser, 20 La. Ann. 379. The holder of a negotiable instrument indorsed in blank is prima facie the owner thereof, and the mere erasure of previous indorsements does not destroy the presumption. King V. Bellamy, 82 Kans. 301, 108 Pac. Rep. 117. See also, New Haven Manufacturing Co. v. New Haven Pulp and Board Co., 76 Conn. 127; Ensign v. Fogg, 177 Mich. 317; Quimby v. Vamum, 190 Mass. 211. § 79. Transfer without indorsement; effect of. Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the trans- NEGOTIATION 127 feree such title as the transferrer had therein, and the trans- feree acquires, in addition, the right to have the indorsement of the transferrer. But for the purpose of determining whether the transferee is a holder in due course, the negotia- tion takes effect as of the time when the indorsement is actually made. Variant.— The Colorado statute adds at the end of the first sentence "if omitted by mistake, accident or fraud." The IlHnois and Missouri statutes change after the word "right" in the first sentence by substituting the following, "to enforce the instrument against one who signed for accommodation of his transferrer, and the right to have the indorsement of the transferrer, if omitted by accident or mistake." The Wisconsin statute 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 indorsements when made, relates back to the time of transfer." This section does not affect the provisions of Sections 60 and 61. A purchaser of a draft or check who obtains title without an indorse- ment by the payee, holds it subject to all the equities and defenses existing between the original parties, even though he has paid full consideration, without notice of the existence of such equities and defenses. Gosen National Bank v. Bingham, 118 N. Y. 349; Meuer v. Phoenix National Bank, 94 App. Div. (N. Y.) 331; Manufacturers, etc. Co. v. Blitz, 131 App. Div. (N. Y.) 17; Bank of Bromfield v. McKinley, 53 Colo. 279; Mayers v. McRimmon, 140 N. C. 640; Landis v. White, 127 Term. 506; Meuer v. Phoenix Bank, 42 Misc. 341. Where a depositor has imposed the condition that his check shall not be paid without it bears his indorsement, the bank, if it pays it to a holder without such indorsement, runs the risk of the transaction, and takes the burden of showing that such holder has acqmred in some way the lawful title to receive the funds. Lynch v. First National Bank of Jersey City, 107 N. Y. 184. No indorsement is necessary to invest the holder with the presumption of ownership in due course, and this presumption is indulged until over- come by proof supported by evidence. Callahan v. Louisville Dry Goods Co., 140 Ky. 714. Both before and since the enactment of the statute, it has been held that to constitute a order in due cotu-se of a negotiable instrument, payable to order, it is always required that the same should be indorsed. Mayers v. McRimmon, 140 N. C. 643. 128 NEGOTIABLE INSTRUMENTS LAW A negotiable instrument bearing no indorsement is subject to attach- ment and sale imder execution. Fishbum v. Londershausen, 50 Or. 363. 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. Manufacturers' Commercial Co. v. Blitz, 131 App. Div. (N. Y.) 18. In an action upon a promissory note, where the plaintiff alleges a legal title thereto by indorsement, it may be doubted whether the mere physical possession of the note upon the trial is sufficient to support the allegation. Brown v. Janes, 71 Misc. 316. A certificate of deposit, though payable to the order of the depositor on the return of the certificate properly indorsed, may be transferred by the payee without indorsement, and where she owns the whole as survivor, her right in no way depends upon a transfer from the indorsement of the certificate by her husband's personal representative. Martz V. State National Bank, 147 App. Div. (N. Y.) 250; see also, Rivenburg v. First National Bank, 103 App. Div. (N. Y.) 67; Manu- facturers Commercial Co. v. Blitz, 131 App. Div. (N. Y.) 19; Martz v. State National Bank, 147 App. Div. (N. Y.) 252; Barker v. Barth, 192 111. 460; Lancaster National Bank v. Taylor, 100 Mass. 23; Kiefer v, Tolbert, 128 Minn. 519; Bank of Madison v. Stam., 186 Mo. App. 439; Carter v. Butler, 264 Mo. 324; O'Connor v. Slatter, 48 Wash. 498; Marling V. Fitzgerald, 138 Wis. 93. § 8o. When prior party may negotiate instrument. Where an instrument is negotiated back to a prior party, such party may, subject to the provisions of this capter, re-issue and further negotiate the same. But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable. See notes Section 202. EIGHTS OF HOLDER 129 ARTICLE 6 Rights of Holder Section 90. Right of holder to sue; payment. 91. What constitutes a holder in due course. 92. When person not deemed holder in due course. 93. Notice before full amoimt paid. 94. When title defective. 95. What constitutes notice of defect. 96. Rights of holder in due course. 97. When subject to original defenses. 98. Who deemed holder in due course. § 90. Right of holder to sue; payment. The holder of a negotiable instrument may sue thereon in his own name; and payment to him in due course discharges the instnmient. The term "holder" as applied to negotiable paper, has always had the well-recognized legal meaning of the payee or indorsee of it, entitled to receive the sum for which it calls. With us the term is now statutory and it means the payee or indorsee of a bill or note, who is in possession of it, or bearer thereof. Olson V. Rosenbloom, 247 Pa. St. 250. The owner and holder of the legal title to a promissory note may maintain an action to enforce collection thereof, even though a third party may be entitled to the proceeds. Stanley v. Penny, 75 Kan. 179; New Haven Mfg. Co. v. New Haven Pulp Co., 79 Conn. 127. Reading this section in connection with Sections 2, 79 and 98, it is evident that the holder of a note is deemed to be the holder in due course, that is, to have come lawfully into possession of it; and he may maintain an action in his own name. No indorsement is necessary to invest the presiimption of ownership, but possession alone presupposes ownership in due course. Callahan v. Louisville Dry Goods Co., 140 Ky. 714. 130 NEGOTIABLE INSTRUMENTS LAW A transferee of a promissory note who takes the same before maturity in settlement of a precedent debt, takes it subject to all infirmities. Union Nut and Bolt Co. v. Doherty, 20 Misc. 23. Pleadings. — A complaint which in substance alleges the making of a promissory note by defendants, by which they agreed to pay to the order of the plaintiff, a certain sum of money and that no part thereof has been paid, states a cause of action. The allegation that the note was "made" by defendants is equivalent to an allegation that it was both signed and delivered. It is not necessary to allege a consideration, as that is pre- sumed. First National Bank of Pittsburgh v. Stallo, 160 App. Div. (N. Y.) 702. Where the plaintiff, in an action upon a promissory note, is the payee thereof, the production of the note is sufficient, and the objection of the defendant to its admission becaxise no witness testified as to who was the holder of it cannot avail. Williams v. Holt, 170 Mass. 351. Section generally see, Owen v. Storms, 72 Atl. 441 ; Tullis v. McClairy, 128 la. 495; Lowell v. Bickford, 201 Mass. 543; Tyson v. Joyner, 139 N. C. 71; Smith v. Bayer, 46 Or. 143; Poess v. Twelfth Ward Bank, 43 Misc. 48; Schlesinger v. Kurzrok, 47 Misc. 636; Cleary v. Debeck Co., 54 Misc. 537; Marling v. Nommensen, 127 Wis. 363. § 91. What constitutes a holder in due course. A holder in due course is a holder who has taken the instrument under the following conditions: 1 . That it is complete and regular upon its face ; 2. That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact ; 3. That he took it in good faith and for value; 4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. The reason for the rtde embodied in this section was admirably ex- pressed by Justice Vann in Chemical National Bank v. Kellogg, 183 N. Y. 94. "The business of the coimtry is done so largely by means of EIGHTS OF HOLDER 131 commercial paper that the interests of commerce require that a promissory- note, fair on its face, should be as negotiable as a government bond. Every restriction upon the circulation of negotiable paper is an injury to the state, for it tends to damage trade and hinder the transaction of business. Commercial necessity requires that only slight evidence should be insisted upon to establish an estoppel in pais as to the validity of commercial paper. The only practical rule is to make the face of the paper itself, when free from suspicion, sufficient evidence, in the absence of notice, against all who aided to put it into circulation in that condition, unless the note is void by the positive command of a statute, such as the act of usury. No other rule would work well, for it would be intolerable if every bank had to learn the true history of each piece of paper presented for discount. It is better that there should be an occasional instance of hardship than to have doubt and distrust hamper a common method of making commercial exchange." Subd. I. — A party purchasing commercial paper which remains in some essential incomplete and imperfect does not acquire the character of a bona fide holder, unless authority is reposed in some one to supply anything needed to make it perfect. Davis Sewing Machine Co. v. Best, 105 N. Y. 67; Dan'l Neg. Int. Sections 841, 842; Hunter v. Allen, 127 App. Div. (N. Y.) 574. The addition of the words "payable with interest" to a negotiable note, in the same handwriting as the body of the note, written on the blank space after the words "value received," at the most appropriate place on the note on which it could be written without interlining them (in the absence of anything on the face of the note to show that it had been altered or to awaken suspicion) does not render the note incomplete within the meaning of this section. American Bank of Orange v. McComb, 105 Va. 473. Where an inspection of a check shows that the date has been changed, a purchaser thereof has notice of its infirmity and cannot recover thereon, as a holder in due course. EHas V. Whitney, 50 Misc. 326. That the payee of a check may be a holder in due course if he com- plies with the requirements of the Negotiable Instruments Law has been held, among other cases, in Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N. E. 646, 97 Am. St. Rep. 426; Thorpe v. White, 188 Mass. 333, 74 N. E. 592, and Brown v. Brown, 91 Misc. Rep. 220, 154 N. Y. Supp. 1098; Buzzel v. Tobin, 201 Mass. 1. 132 NEGOTIABLE INSTBUMENTS LAW Subd. 2. — An indorsee of a promissory note, taking it as collateral security for an antecedent debt without other consideration, but in good faith and before maturity, occupies the position of a holder for value. Continental National Bank v. Townsend, 87 N. Y. 8. The authorities hold that the mere crediting to a depositor's account, on the books of a bank, of the amount of a check drawn upon another bank, where the depositor's account continues to be sufficient to pay the check in case it is dishonored, does not constitute the bank a holder in due course. Citizens' State Bank v. Cowles, 180 N. Y. 349; Albany County Savings Bank v. Peoples' Co-Op. Ice Co., 92 App. Div. (N. Y.) 47 ; Thomp- son V. Sioux Falls Bank, 150 U. S. 231; Dykman v. Northbridge, 80 Hun. 258; Fox v. Bank of Kansas City, 30 Kans. 441; U. S. National Bank v. McNair, 114 N. C. 335; Fredonia National Bank v. Tommei, 131 Mich. 674; First National Bank v. McNairy, 122 Minn. 215; Morrison v. Farmers and Merchants Bank, 9 Okla. 697. A note dated Sept. 21st was made payable one day after date. One purchased the note on the day after its date. Held, that as the note was not overdue at any time on the day after its date the purchaser was a holder for value. Wilkins v. Usher, 123 Ky. 697. A purchase for value of negotiable paper after maturity is not a bona fide purchaser to the extent of being protected in his purchase against the rightful owner, from whom it had been stolen, unless he has succeeded to the rights of a bona fide purchaser before maturity. Northampton National Bank v. Kidder, 106 N. Y. 221. One who signs a note without reading it when he can read and has an opportimity to do so, his signature being obtained through misrepresenta- tion as to the character of the instrument, cannot set up his own omission against one who becomes a bona fide holder by discounting it for value before maturity. Mimnich v. Joffe, 164 App. Div. (N. Y.) 30; Marks v. First National Bank, 58 Am. Rep. (Ala.) 550. One who cashes a check for full value within a reasonable time after it was delivered to the payee, without knowledge of any invalidity, either in its inception or in its indorsement and transfer, is a bona fide holder of a negotiable instrument before maturity for value, and can recover from the drawers thereof. Poshkoff V. Bernstein, 159 N. Y. Supp. 206; see also, Jacobus v. Jamestown Mantel Co., 149 App. Div. (N. Y.) 356; Austin v. Bank of Scottsville, 150 Ky. 113; Johnson Co. Savings Bank v. Walker, 79 Conn. EIGHTS OF HOLDEE 133 348; Shawmut National Bank v. Manson, 168 Mass. 425; Kernohan v. Durham, 48 Ohio St. 1; Lindsay v. Dutton, 217 Pa. St. 148; Quiggle v. Herman, 131 Wis. 379; Northfield National Bank v. Arnot, 132 Wis. 383. Subd. 3. — As to what constitutes value see Sec. 51, 52. The action of a bank in discounting a promissory note and placing the avails thereof to the payee's credit, does not of itself constitute the bank a bona fide holder for value of the note. Consolidation Bank v. Kirkland, 99 App. Div. (N. Y.) 121 ; Merchants' National Bank v. Santa Maria Co., 162 App. Div. (N. Y.) 249. The bank does not become a holder for value until it has paid over the proceeds of the note to the payee. Albany Cotmty Bank v. Peoples' Ice Co., 92 App. Div. 48; Miller v. Norton, 114 Va. 610; Thompson v. Sioux Falls Bank, 150 U. S. 231; N. Y. County Bank v. Massey, 192 U. S. 138, 145; Dan. Neg. Int. Sec. 779b. It is quite generally held by the coiuts that the mere transaction of discoimting a note and crediting the amoimt on the books, without more, does not constitute the bank a holder in due course. The credit must be absorbed by antecedent indebtedness or subsequent withdrawals. How- ever, a bank which discoimts a promissory note, crediting the proceeds to the indorser's account, which becomes exhausted before the maturity of the note, is a purchaser for value, notwithstanding the indorser subse- quently has deposits equal to the amount of the note (Fredonia National Bank v. Tommei, 131 Mich. 674; First National Bank v. McNairy, 122 Minn. 215 [holding that in determining whether such credit has been exhausted, the rule is to be applied that as checks are paid the amount is to be charged against the oldest item of deposit or credit of the cus- tomer]; Dreilling v. Bank, 43 Kan. 197; Shawmut National Bank v. Manson, 168 Mass. 425; Second National Bank v. Weston, 170 N. Y. 250; Hatch V. New York City 4th National Bank, 147 N. Y. 184; Oppenheimer V. Radke & Co., 20 Cal. App. 518; McCasland v. Southern 111. National Bank, 127 111. App. 37; Choteau Trust Co. v. Smith, 133 Ky. 418; Symonds V. Riley, 188 Mass. 470). In Merchants' National Bank v. Santa Maria Sugar Co., 147 N. Y. Supp. 498, plaintiff bank discounted for a customer before maturity, the note sued on crediting the proceeds of the discount to the customer's account, which account at all times prior to the dishonor of the note con- tained a balance in the customer's favor in excess of the amount due on the note, but if the earliest credits were applied to the earliest debits the proceeds of the discotmt would have been paid out prior to any notice acquired by the bank of any infirmity in the note. It was held that, 134 NEGOTIABLE INSTRUMENTS LAW while the bank did not become a purchaser for value by merely crediting the proceeds of the discount to the customer's account, it did acquire such position when the proceeds were paid out, and that the same should be treated as paid out by an appHcation of the rule that the first items on the debit side were chargeable against the first items on the credit side of the account. In the absence of proof of fraud or misappropriation, the presumption is that the indorsee of a negotiable bill or note is a bona fide holder for value, and this presumption is not repelled merely by proof that the bill or note as between the immediate parties was without consideration. Mitchell V. Baldwin, 88 App. Div. (N. Y.) 268; Harger v. Worrall, 69 N. Y. 370; Cluett v. Couture, 140 App. Div. (N. Y.) 830. When a check is deposited at a bank it is generally for collection by the bank as agent of the depositor, and the bank does not owe the amount imtil its collection is accompHshed. National Bank v. Miller, 77 Ala. 173, 54 Am. Rep. 50; Fayette National Bank v. Summers, 105 Va. 693. What constitutes good faith upon the part of a holder of negotiable paper has been defined in the following language: "He is not boimd at his peril to be on the alert for circxmistances which might possibly excite the suspicion of wary vigilance; he does not owe to the party who puts the paper afloat the duty of active inquiry in order to avert the imputation of bad faith. The rights of the holder are to be determined by the simple test of honesty and good faith, and not by a speculative issue as to his diUgence or neghgence. The holder's rights cannot be defeated without proof of actual notice of the defect in title or bad faith on his part evidenced by circumstances. Though he may have been negligent in taking the paper, and omitted precautions which a prudent man would have taken, nevertheless, unless he acted mala fide, his title, according to settled doctrine, will prevail." Cheever v. Pittsburgh Ry. Co., 150 N. Y. 59, 44 N. E. 701, 34 L. R. A. 69, 55 Am. St. Rep. 646. The term "good faith" means not only honesty of intention, but the absence of suspicious circumstances, or, if such circumstances exist, then such inquiry as will satisfy a prudent man of the validity of the tran- saction. Pennington Bank v. Moorehead Bank, 125 N. W. (Minn.) 119; Williams v. Huntington, 13 Atl. (Md.) 336. Where the negotiable paper signed by a person considered to be solvent is sold at a very large discount, such circumstance alone is siifficient to require the purchaser to make inquiry as to the genuineness thereof; if he fails to make such inquiry he is not to be deemed a bona fide purchaser, RIGHTS OF HOLDER 135 and in any case the fact that the paper was purchased at a discount may, in connection with other circumstances, rebut the presimiption that the holder is one in due course. Vosburg V. Diefendorf, 119 N. Y. 357; Griffith v. Shipley, 74 Md. 591; Canajoharie National Bank v. Diefendorf, 123 N. Y. 191. One who purchases notes calling for the payment of $7,500 in good faith and before maturity, is a holder in due course, although he pays only $5,000 for the notes. Moore v. Burling, 160 Pac. (Wash.) 420; Ham v. Merritt, 149 S. W. (Ky.) 11; Citizens Bank v. Stewart, 22 Col. App. 91. The mere possession of the note by the plaintiff raises a presumption, without other evidence, that he is a holder in good faith, and it is not until it has been shown by appropriate evidence that the instnmient was procured and put in circulation by fraud that any burden is cast upon him to explain his possession, and give affirmative evidence that he acquired title in due course of business and without notice of the fraud. Cox V. Cline, 139 Iowa, 128, 117 N. W. 48. The purchaser of a note for considerably less than the face value from an entire stranger, without any knowledge or inquiry into the financial responsibility of its maker or indorsers, can hardly be said to show that the purchaser was a holder in due course; on the contrary, it tends to indicate that a disclosure of the whole truth would have been fatal to that claim. Harris v. Johnson, 89 Conn. 128; Stewart v. Lansing, 104 U. S. 505; King V. Doane, 139 U. S. 166. What constitutes good faith has been the subject of frequent dis- cussion, and while a difference of opinion may exist on some points, there is perfect uniformity in the decisions that the want of good faith in the transaction is fatal to the title of the holder, and that gross carelessness, although not sufficient of itself as a question of law to defeat title, con- stitutes evidence of bad faith. C. N. Bank v. Diefendorf, 123 N. Y. 202; Seybel v. N. C. Bank, 54 N. Y. 288; Duchess Co. M. Ins. Co. v. Hachfield, 73 N. Y. 228; Dan. Neg. Int. Sec. 819; Am. Exchange Bank v. N. Y. Belting Co., 148 N. Y. 705; Knox v. Eden Musee Co., 148 N. Y. 454; Jarvis v. Manhattan Beach Co., 148 N. Y. 652; Cheever v. Pittsburgh R. R., 150 N. Y. 66; 44 N. E. 701, 34 L. R. A. 69; Ward v. City Trust Co., 192 N. Y. 73 ; Cole v. Harrison, 167 App. Div. (N. Y.) 336; Oliver v. Goldberg, 168 App. Div. (N. Y.) 874; McBee Co. v. Shoemaker, 160 N. Y. Supp. 251. A gift of a negotiable instrimient to a third party is not such a nego- tiation of it in the usual course of business as to give to the donee the full protection which is extended to a bona fide holder for value. 136 NEGOTIABLE INSTEUMENTS LAW Greer v. Orchard, 175 Mo. App. 494; Dan. Neg. Int. Sec. 181. If one purchases an accommodation note for cash and sells it to a bona fide purchaser in exchange for the purchaser's own note, the pur- chaser may be foimd to be a holder of the note in due course within the meaning of this section. Methlinger v. Harriman, 185 Mass. 245. Notice or knowledge of an infirmity existing in a negotiable instru- ment which will invalidate in the hands of an indorsee must be actual, or of such facts that his action in taking it amounts to bad faith; and where the facts shown have any tendency to show bad faith the question is one of fact. McNight V. Parsons, 136 Iowa 391. Where a promissory note payable "to the order of A or B," is indorsed by "A" only, to one who takes it in good faith, for value and without any notice of infirmity in the instnunent or defect in title, the indorsee is a holder in due course. Voris v. Schoonover, 91 Kans. 530; Union Bank v. Spies, 151 Iowa 178, 130N. W. 928. It may be stated as a rule that suspicious circumstances alone, even though sufficient to put an ordinarily prudent person on inquiry, will not, in the absence of bad faith or a willful disregard of the facts showing an infirmity of the paper, destroy the title of the taker as that of a bona fide holder. Walters v. Rock, 115 N. W. Rep. 514; Sinkler v. Siljan, 136 Cal. 356; Mass. National Bank v. Snow, 187 Mass. 159; Robbins v. Swinburne Co., 91 Minn. 491; Second National Bank v. Morgan, 165 Pa. 199; Smith v. Livingston, 111 Mass. 342; Goetting v. Day, 87 N. Y. Supp. 510; Cole v. Harrison, 167 App. Div. 336. As to a payee as holder in due course. — The question as to whether a payee taking a bill or note without inquiry and for value from one other than the drawer or maker can inforce in free from equities is not free from doubt. The question seems has not been raised in New York, excepting a reference thereto in Schreyer v. Bailey, 89 Supp. 870, and Empire T. Co. V. Manhattan Co., 162 Supp. 630. In other jurisdictions, however, held that a payee is entitled to the same protection tmder the section as any other bona fide holder for value. Boston Steel and Iron Co. v. Steuer, 183 Mass. 140; Thorpe v. White, 188 Mass. ZZi, 334; Mersick v. Alderman, 77 Conn. 634; South Boston Iron Co. V. Brown, 63 Me. 139; Campbell v. 4th National Bank, 137 Ky. 555; Glascock v. Rand, 14 Mo. 550; American Exchange National Bank v. Armstrong, 133 U. S. 443, 453; Hodges v. Nash, 141 111. 391; Cagle v. Lane, 49 Ark. 465; Daniel on Negotiable Instnmients, Section 178; EIGHTS OF HOLDER 137 Payson on Bills and Notes, pp. 181, 199; Van Ploeg v. Van Zutik, 135 la. 350; 13 L. R. A. 490; Long v. Shafer, 185 Mo. App. 641, 171 S. W. 690. The assignment of notes before maturity to a bank, as collateral for a loan, without notice of any equities between the original parties, makes the bank a holder in due course. The defense of want of con- sideration is not available against the bank. McLean Co. Bank v. Brown, 187 S. W. Rep. 785. Cases on the subject generally, see, Campbell v. Fourth National Bank, 137 Ky. 555; Benedict v. Kress, 97 App. Div. (N. Y.) 67; National Park Bank v. Saitta, 127 App. Div. (N. Y.) 624; Hurst v. Lee, 143 App. Div. (N. Y.) 614; Laschinsky v. Margoles, 129 App. Div. (N. Y.) 529; Strickland v. Henry, 66 App. Div. (N. Y.) 24; Wallabout Bank v. Peyton, 123 App. Div. (N. Y.) 727; Wiser v. Osteyee, 24 Misc. 704; Bank of Monon- gahela v. Weston, 172 N. Y. 268; R. and C. Turnpike Co. v. Paviour, 164 N. Y. 281; Com. National Bank v. State Bank, 132 la. 706; Thorke v. White, 188 Mass. 333; Mehlinger v. Harriman, 185 Mass. 245; White v. Dodge, 187 Mass. 449; Banking Co. v. Hall, 119 Tenn. 550; Glascock v. Rand, 14 Mo. 550; Eagle v. Lane, 49 Ark. 465; Brown v. Brown, 91 Misc. 222; Mersick v. Alderman, 77 Conn. 634; Campbell v. 4th National Bank, 137 Ky. 555; Hodges v. Nash, 141 111. 391; Vander Ploeg v. Van Zuuk, 135 Iowa 350; 29 L. R. A. 351; 44 L. R. A. 395; Oliner v. Golden, 168 App. Div. (N. Y.) 874. Subd. 4. — As to what constitutes notice see, Sec. 95. In an action by the indorsee of a bill of exchange, if it appears on the part of defendant that the defendant or a prior party made it imder duress, or was defrauded of it, or had only part of its value, the plaintiff must be prepared to prove under what circumstances and for what value he became the holder. Chitty on Bills, 12 Am. ed. Sec. 648; C. N. Bank v. Diefendorf, 123 N. Y. 204. One who takes negotiable paper for value before due, without actual notice of any defect therein, has the right to assimie that the relations to the paper of every party, whose name appears on it are precisely what they appear to be. Cheever v. Pittsburgh, etc. R. R., 150 N. Y. 59. Mere surmise or suspicion is not sufficient to put a purchaser upon inquiry. The facts or circumstances to put him on inquiry must be such as to show dishonesty or bad faith on his part in refraining from making inquiry. Manhattan Sav. Inst. v. N. Y. National Exch. Bank, 170 N. Y. 58; Bank of Monongahela v. Weston, 172 N. Y. 259; Perth Amboy Loan 138 NEGOTIABLE INSTRUMENTS LAW Assn. V. Chapman, 178 N. Y. 558; Hibbs v. Brown, 112 App. Div. (N. Y.) 224; Dan. Neg. Inst. Sec. 1503; Blum v. Davis, 159 N. Y. Supp. 206. A person taking a check drawn by a guardian upon an account standing in his name as such is put upon inquiry to ascertain the authority of the guardian to use the money, and where it is misappHed the infant can compel an accoimting for the amount. Cohnfeld v. Tanenbaimi, 176 N. Y. 126; Empire State Surety Co. v. Nelson, 141 App. Div. 850. The maker of a negotiable promissory note, which on its face, purports to be for value received and negotiated before maturity, cannot escape liability upon what is at most a mere guess, that the purchaser had knowl- edge at the time of the purchase of some agreement between the maker and payee. Were the rule otherwise, there would be no safety in pur- chasing commercial paper. Heinbach v. Doubleday, Page & Co., 130 App. Div. (N. Y.) 37. Where a bill or note is indorsed by a person in an official capacity, as by Executor, Trustee, or Guardian, etc., the purchaser is put on inquiry. People V. Bank of N. A., 75 N. Y. 547; Strong v. Strouss, 40 Ohio St. 87; Langdon v. Bank, 52 Am. Rep. (Vt.) 113. When the word executor, administrator, trustee, guardian or the like when appended to the name of the payee of a bill, note or check, is sufficient to charge a purchaser with notice of the restrictions and limit- ations of his powers to dispose of the instniment. The term is a warning to every one who reads it that the payee named is not the owner and that he holds it for the use and benefit of another and that he has no right to sell or dispose of it without authority. State V. Jahrus, 41 S. Rep. 575; 117 La. 286; Henshaw v. State Bank, 239 111. 515; Hazletine v. Keenan, 54 W. Va. 600; 46 S. E. 609; Geyser Co. v. Stark, 106 Fed. 558; Bucher v. Buckingham, 18 Conn. 110. Where a bank discoimts negotiable paper void for usiiry, but in good faith and without knowledge of its previous taint, it is not deprived of the right to collect it from the maker. Schlessinger v. Gilhooly, 189 N. Y. 1. But where discounted with knowledge see, Schlessinger v. Leahmaier, 191 N. Y. 69. This section does not mean that when the title of the holder of a note indorsed in blank, which has been accepted by a bank as collateral se- curity, is shown to be defective, the bank must prove that it accepted the note before it was overdue, but means that the bank must prove that at the time the note was negotiated to it it had no notice of any infirmity in the instrument or defect in the title of the person negotiat- ing it. EIGHTS OF HOLDER 139 Justice V. Stoneciper, 267 111. 448; Savings Bank v. Claussen, 137 Iowa 72. A negotiable promissory note is not dishonored by reason of the failure to pay interest prior to maturity of the principal, in the absence of a stipulation to that effect; but the fact that interest is due and unpaid is a material circumstance bearing on the question of whether the pur- chaser acquired the note in good faith and without notice of prior equities of infirmities in the title. McPherrin v. Tittle, 36 Okla. 510; Dan. Neg. Int. Sec. 787. The purchaser of a past-due note takes it with notice of any defense to the note which the maker may have, but does not take it with notice of the secret equities of third persons. Kempner v. Huddleston, 90 Tex. 184, 37 S. W. 1066; Cordage Co. v. Seymour, 67 Minn. 311, 69 N. W. 1082; Moffett v. Parker, 71 Minn. 139, 73 N. W. 851, 70 Am. St. Rep. 319; Layman v. Vicknair, 47 La. Ann. 679, 17 South. 265; Bank v. Garlick, 137 La. 282, 68 South. 611; Dulin v. Hunter, 98 Ala. 539, 13 South. 301; Porter v. King (D. C.) 1 Fed. 760; Mohr v. Byrne, 135 Cal. 87, 67 Pac. 11; Gymnasium Co. v. Vank, 179 111. 599, 54 N. E. 297, 46 L. R. A. 753, 70 Am. St. Rep. 135; Justice v. Stonecipher, 267 111. 448, 108 N. E. 723; Jones on Mortgages, Sec. 843. Action by the transferee of a draft against the acceptor. It appeared that the defendant, a foreigner, unable to read English, had entered into a contract with a manufacttuing jewelry company by which he was to sell their jewelry on commission, but was not to be charged for any goods which he was unable to sell. Later, on the day the jewelry was received, he was induced by another agent of the vendor to sign four docimients under the representation that the goods were sent on com- mission and that the papers were to be held merely as collateral security. The papers were in fact drafts which the defendant, by his signature, accepted and which by transfer came into the hands of the present plain- tiff, a bank located in a town in a foreign State where the jewelry company had its place of business. It iurther appeared that the jewelry received by the defendant was worthless, that he had returned the same and repudiated all liability. On all the evidence. Held, that the jury was justified in finding that the acceptance of the defendant was procured by active fraud and deceit, and to find further that the plaintiff was not a bona fide holder in due course, even though, with the assistance of the jewelry company, it gave testimony to that effect. Johnson Co. Savings Bank v. Komhauser, 174 App. Div. (N. Y.) 136; but see Kellogg v. Hale, 190 111. 15; National Bank v. Hall, 151 140 NEGOTIABLE INSTRUMENTS LAW N. W. (la.) 120; cited in notes Section 94, fraud; Chapman v. Rose, 56 N. Y. 137, note Section 91, Subdivision 4. On the subject generally, see, Morton v. New Orleans, etc. Ry., 79 Ala. 590; Groh's Sons v. Schneider, 34 Misc. 196; Bank of North America v. Kirby, 108 Mass. 497; McLane v. Placeville S. V. Ry., 66 Cal. 606; Town of Ontario v. Hill, 99 N. Y. 324; Armstrong v. Am. Ex. Bank, 133 U. S. 434; Bergstrom v. Ritz-Carlson Co., 157 N. Y. Supp. 962; Brown v. Brown, 91 Misc. 220; Boston Steel and Iron Co. v. Steuer, 183 Mass. 140; Thorpe v. White, 188 Mass. 333; Carpenter v. Hoadley, 138 App. Div. (N. Y.) 190; Citizens Savings Bank v. Couse, 68 Misc. 153; Liberty Trust Co. v. Tilton, 217 Mass. 462; Nat. Investment and Surety Co. V. Corey, (Mass.) Ill N. E. 357; Johnson v. Kettell v. Longly, 207 Mass. 52, 56; Merchants Bank v. Branson, 165 S. C. 344; Central Trust Co. v. First National Bank, 101 U. S. 68; Hughes v. Flint, 61 Wash. 460; Goshen Bank v. Bingham, 118 N. Y. 349. //j^/^^.rfyy ^^^f-yi^y?/^ 4^3^t:vi^/C^g^^^^^:g:^g/-t^ (^j^i^/^^y •^^^^^yi^e<^ --^^-^^^ Wp^^ , ^J > <^^^ 2^^/%^.^r<^Ay._ M&. r^i^^<^hu^y. ^^- 'f/^- A promissory note was made payable to "Wonder Stock Powder Co." The only indorsement is ''James J. Doty, Prop." A banker who purchased it testified that Mr. Doty was the sole owner of the company, but there was no evidence as to whether the payee was a corporation or a trade name for Doty. Held, that the indorsement did not constitute the bank a holder in due course, and the note was subject to the same defenses as might be set up against the original payee. First National Bank v. Kelgord, 91 Mo. App. 178; Freeman v. Perry, 22 Conn. 617; ElHs v. Brown, 6 Barb. (N. Y.) 282. One taking a note with full knowledge that the consideration had failed, is not a holder in due course, and is subject to the defense of failure of consideration. Washington Trust Co. v. Keyes, 88 Wash. 287. As to instruments stolen before delivery, see notes Section 35. EIGHTS OF HOLDER I4l § 92. When person not deemed holder in due course. 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 course. A promissory note payable on demand, with interest, is a continuing security; an indorser remains liable until an actual demand; and the holder is not chargeable with neglect for omitting to make such demand within any particular time. Merritt v. Todd, 23 N. Y. 28; Pardee v. Fish, 60 N. Y. 271; Parker v. Stroud, 98 N. Y. 379. No cause of action against an indorser of a promissory note payable on demand, at a place specified, until demand is made in compliance with the terms of the contract and due notice of non-payment. Parker v. Stroud, 98 N. Y. 379. But as against the maker no demand is necessary before suit, the suit itself being sufficient demand. Herrick v. Woolverton, 41 N. Y. 581; Wheeler v. Warner, 47 N. Y. 520; see Sections 26, 131. A promissory note, payable on demand, is due forthwith, and an action thereon against the maker is barred by the statute of limitations. Wheeler v. Warner, 47 N. Y. 519. Until a demand is made at the place named, the statute of limitations does not begin to run in favor of the indorser. Parker v. Stroud, 98 N. Y. 379; Berkshire Bank v. Jones, 6 Mass. 524; Bank of U. S. v. Smith, 11 Wheat. 171; Shutts v. Fingar, 100 N. Y. 539. Demand by letter is insufficient to charge the indorser. The obliga- tion to make a demand, implies an opportunity afforded for performance, and there must be a person present to receive payment. Hartford Bank v. Green, 11 Iowa 476; Dan. Neg. Int. Sec. 518; Pierce v. Whitney, 29 Me. 188; Lockwood v. Crawford, 18 Conn. 361. Reasonable Time. — The note should be presented for payment if not immediately at least within a very short time and that the delay was such as to dishonor the note and release the indorser. Crim V. Starkweather, 88 N. Y. 339. A check drawn on Saturday and negotiated the following Monday was not overdue. Asbury v. Taube, 151 Ky. 142. Where the holder omits to make a demand until the liability of the maker has been discharged by the running of the Statute of Limitations, the indorser is thereby discharged. 142 NEGOTIABLE INSTKUMENTS LAW Shutts V. Fingar, 100 N. Y. 539; Dan. Neg. Int. Sec. 1306-7. As between the drawer and payee the rule is that, when the payee to whom the check is delivered receives it in the same place where the bank on which it is drawn is located, he may preserve recourse against the drawer by presenting it for payment at any time before the close of banking hours on the next day. 2 Dan. Neg. Inst. (5 ed) Sec. 1590; Matlock v.Scheuerman, 51 Or. 55; 93 Pac. Rep. 823. A demand note transferred by payee eighteen months after its date, upon which continuous payments of monthly interest have been made to payee, is not overdue at time of transfer. McLean v. Bryer, 24 R. I. 599; 83 N. E. 861. What constitutes reasonable time will vary under the facts and circtmistances of different cases, and this section expresses as definite rule as could well be established or considered desirable, and where a party obtained a cashier's check from a bank in North Carolina and nego- tiated the same to a party residing in Virginia in five days thereafter, such negotiation was within a reasonable time. Maniifacturing Co. v. Summers, 143 N. C. 103; Merritt v. Todd, 23 N. Y. 31; Hussey v. Sutton, 160 N. Y. Supp. 934. § 93. Notice before full amount paid. Where the trans- feree 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 amount 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. This is declaratory of the law, see Dan. Neg. Inst. Sec. 798a; Weaver v. Borden, 49 N. Y. 286; Albany County Bank v. Peoples' Ice Co., 92 App. Div. (N. Y.) 48; Bank of Morehead v. Hemig, 220 Pa. 224. If a purchaser of a note for value before maturity has notice of facts tending to show defenses to the same, he cannot purposely refrain from making inquiries as to the inception of the paper, and at the same time claim to be a bona fide purchaser. Walters v. Rock, (N. D.) 115 N. W. Rep. 512; see also, Bank of Morehead v. Hemig, 220 Pa. 224. The plaintiff discounted three notes paying therefore one-half of their face value, tmder an agreement that he was to retain the other half as security until the notes were paid. In an action against the maker EIGHTS OF HOLDER 143 of one of the notes it was held that he was entitled to recover one-half of its face value notwithstanding the fraud of the party who indorsed the notes to him. Rosenbaum v. Roth, 150 N. Y. Supp. 396. /Zy.r>^^^r/ SJ^/yy ^r^^ ^-/^J.^^^ (^z^^tj^y J?^^iye^t^^ ^A/^2<^?y <2^a^^c^yU/ /f) ^^^2^^ty < ^^c.^Q.oa5. The Union Square Bank, which discounted the foregoing note in due course of business for the payee thereof before maturity and placed the proceeds of the discount to the credit of the payee and retained the same until it obtained knowledge that there was an entire failure of consideration for the note as between the maker and the payee, could not, after bringing an action against the maker and payee to recover on the note, pay the proceeds of the discount to the payee and retain the right to insist that it is a holder for value and is protected from any defense existing between the maker and payee. A deposit by a bank of the proceeds of a note to the accoimt of a customer is not of itself a payment for the note. It is simply a promise by the bank to pay such proceeds to the customer by honoring his checks or drafts in the ordinary way pm-sued by banking institutions. The bank does not by such transaction transfer the title to any particular money to its customer. The bank becomes a debtor to the customer to the" amoimt of such credit. Albany Co. Bank v. Peoples' Ice Co., 92 App. Div. 52. It is said by the Supreme Court of the United States in New York County National Bank v. Massey (192 U. S. 138, 145), "It cannot be doubted that, except imder special circumstances, or where there is a statute to the contrary, a deposit of money upon general accoimt with a bank creates the relation of debtor and creditor. The money deposited becomes a part of the general fimd of the bank, to be dealt with by it as other moneys, to be lent to customers, and parted with at the will of the bank, and the right of the depositor is to have this debt repaid in whole or in part by honoring checks drawn against the deposits. It creates an ordinary debt, not a privilege or right of a fiduciary character. 144 NEGOTIABLE INSTRUMENTS LAW (Bank of the Republic v. Millard, 10 Wall. 152). Or, as defined by Mr. Justice "Wliite in the case of Davis v. Elmira Savings Bank (161 U. S. 275, 288): 'The deposit of money by a customer with his banker is one of loan with the superadded obligation that the money is to be paid when demanded by a check.' (Scammon v. Kimball, 92 U. S. 362.)" See also, Aetna Bank v. National Bank, 46 N. Y. 82; Am. and Eng. Ency. of Law, Vol. 4, 298; Thompson v. Sioux Falls Bank, 150 U. S. 231. § 94. When title defective. The title of a person who negotiates an instrument is defective within the meaning of this chapter when he obtained the instrument, or any sig- nature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud. Variant.— The Wisconsin statute adds at the end of the section the following, "and the title of such person is absolutely void when such instrument or signature was procured from a person who did not know the nature of the instrument and could not have obtained such knowledge by the use of ordinary care." "Defective title" does not include a failure of consideration. Hill V. Dillon, 176 Mo. App. 205, 161 S. W. 881. Where defendant signed a note without taking the precaution to ascertain its terms, he is not entitled to a cancellation on the ground of mistake because the terms were not as he thought they should be. Avery v. Powell, 174 Mo. App. 628; 161 S. W. 335; Oshea v. Lehr, 165 S. W. 837. The first clause was considered and interpreted in Hodge v. Smith, 130 Wis. 326, 110 N. W. 192. It was there held that the title of a person w^ho negotiates commercial paper is defective when he has obtained any signature thereto by fraud, and that if the party so defrauded be relieved from liability thereon, then such fraud makes such paper voidable by all the other persons who signed it, though they did not participate in and were ignorant of such fraudulent conduct at the time they signed it. This conclusion was reached upon the ground that when several persons assume such an obligation, it is material and important that all who join as makers should share equally in bearing the burden of its payment, and if through fraud of the person holding it, such equality of burden is disturbed and the burden increased as to some of the persons signing it, such fraud renders the title defective as to all of the persons who signed it. EIGHTS OF HOLDEK 145 Where the evidence given upon the trial of an action upon a check tends to show that the holder had knowledge that the check was originally- delivered upon a condition which had not been fulfilled, the question of good faith should be left to the jury. Groh's Sons Co. v. Schneider, 34 Misc. 196. Where a person was induced to sign a paper containing a blank form of a promissory note, under a false statement as to its character, the note was fraudulent, and only a bona fide holder can recover on the detached note. Bank v. Claypool, 91 Kans. 248; Clothier v. Adriance, 531; but see, Johnson Bank v. Komhauser, 174 App. Div. 136, note Sec. 91, Subd. 4. Whatever difference of opinion may exist as to the case of a note diverted or fraudulently put in circulation, it must be regarded as settled that the indorsee of a negotiable note made for the accommodation of the indorser, but without restriction as to its use, taking the note in good faith as collateral security for an antecedent debt and without other consideration, is entitled to the position of a holder for value. Grours' Bank v. Penfield, 69 N. Y. 505. A transferee of negotiable paper who takes it knowing that it was executed by an accommodation maker and transferred in violation of conditions imposed by such maker, cannot maintain an action thereon against him. Benjamin v. Rogers, 126 N. Y. 60; Kennedy v. Spieka, 72 Misc. 89. Bad faith in taking commercial paper does not necessarily involve furtive motives. Ward V. City Trust Co., 192 N. Y. 73. The plaintiff was induced by fraud to purchase stock for which he paid by check on defendant bank. The seller deposited the check to his account in the defendant bank and later drew part of the funds and had the bank certify the check for the remainder. Thereafter, without re- scinding the contract or offering to return the stock, the plaintiff notified the bank not to honor the seller's check. It was held that the bank was not bound to heed the notice, since in refusing to honor it, it would subject itself to an action for damages. Barnard v. First National Bank of Newpoint, 111 N. E. 451; Adam, etc. V. Stewart, 157 Ind. 678; Tonner v. Smith, 31 Neb. 107, 47 N.W. 632. Duress. — A threat by a husband to abandon his wife unless she signs certain notes, does not constitute duress, such as will relieve her of liability on the notes to a holder with notice, where it does not appear that the wife was under a reasonable apprehension that the husband would carry out his threat. 146 NEGOTIABLE INSTRUMENTS LAW Dorsey v. Bryans, Ga., 84 S. E. Rep. 467. Ordinarily, when no proceedings have been commenced, threats of arrest, prosecution, or imprisonment, do not constitute legal duress to avoid a contract; the threats must be made under such circumstances that they excite fear of imminent and immediate imprisormient. Sulzner v. Cappeau Co., 234 Pa. 162; Cornwall v. Anderson, 85 Wash. 378; Galusha v. Sherman, 105 Wis. 263; Kaus v. Gracey, 162 Iowa 671; McCarthy v. Taniska, 80 Atl. (Conn.) 84; Wilbiu- v. Blan- chard, 126 Pac. (Idaho) 1,069. Where the maker of the note is prevented from exercising his free x\dll by reason of payee's threats, the maker may repudiate the note for duress whether the threat be sufficient or insufficient to overcome mind of man of ordinary coiirage. In an action on a note, defended on the ground of duress, e\ddence as to the maker's mental or physical health, his condition in life, his experience, education and intelligence is admissible. Cornwall v. Anderson, 148 Pac. 1. In an action upon a check given by defendant to pay for repairs to his automobile, where plaintiffs by unlawfully withholding possession of the machine compelled the giving of a check for a larger amount than that which was really due, their good faith in enforcing a claim, in fact improper, will not affect defendant's right to set up duress as a defense. Caldwell v. Auto Co., 158 S. W. 1,030. Threats which induced the execution of a note by old and feeble persons amount to duress, even though they would not influence ordinary persons. Anthony v. Brown, 214 Mass. 439; 101 N. E. 1,056. Where upon the threatened insolvency of a firm, two of the creditors and their attorney went to the home of the aged parents of one of the members of the firm, and by indirect threats to prosecute their son, induced them to sign a note for his indebtedness, such note was void, as provided by duress. Spoerer v. Wehland, 100 At. Rep. 287; Harris v. Carmody, 131 Mass. 51; Mack v. Prang, 79 N. W. (Wis.) 770; 45 L. R. A. 407; Adams v. National Bank, 116 N. Y. 606; Bentley v. Robson, 76 N. W. (Mich.) 691; Ortt v. Schwartz, 62 Pa. Super Ct. 70. Fraud. — False representation made to the maker as to the considera- tion does not constitute such fraud as will invalidate the note. The fraud must relate to the execution and not to the consideration on which it is based. Kellogg V. Hale, 190 111. App. 15; but see, Johnson Bank v. Kom- hauser, 174 App. Div. (N. Y.) 135. (Note Sec. 91, Subd. 4.) EIGHTS OP HOLDEK 147 Where one unable to read signs a note without calHng upon those present for assistance, he cannot question it on the theory that his signa- ture was obtained through fraud. National Bank v. Hall, 151 N. W. (la.) 120. Where the maker of a note voidable because of his intoxication affirms it when sober, or fails to disaffirm it within a reasonable time, it is binding. Matz V. Martin, 149 N. W. (Minn.) 370. A note to which the maker's signatiire is procured by false representa- tion as to the character of the paper, he being ignorant of its true char- acter, and having no intention to sign such a paper and being guilty of no negligence in doing so, is regarded by some authorities as void, even in the hands of a bona fide holder. Greenfield Bank v. Stowell, 123 Mass. 196; Biddeford Bank v. Hill, 102 Me. 346; 66 Atl. 721; Keller v. Ruppold, 115 Wis. 636; 95 Am. St. Rep. 974; Yakima Bank v. McAllister, 37 Wash. 566; Johnson Co. Bank v. Komhauser, 174 App. Div. (N. Y.) 136. A note signed by one so intoxicated as to wholly destroy the rational faculties of the mind is void as between the parties. Green v. Gimston, 142 N. W. 261; 46 L. R. A. 212. Parol evidence is admissible to prove that a contract was procured by fraud (Barrie v. Miller, 104 Ga. 312; Dowager v. Gibson, 5 Am. St. Rep. (Iowa) 697); and parol evidence is admissible for the purpose of proving that a release was signed without knowledge of the contents, and without any intention on the part of the signer to execute an instru- ment of that character (Lors v. Accident Assn., 89 Wis. 19, 46 Am. St. Rep. 815). But as a general rule, imless fraud or mistake is shown, a contract in writing is conclusively presiimed to contain the entire agree- ment in which all previous negotiations respecting the subject matter have been merged. Smith V. Vose, 194 Mass. 193; Harris v. Murphy, 56 Am. St. Rep. 659. Burden of Proof. — Where the maker of negotiable paper shows that it has been obtained from him by fraud, a subsequent transferee must before he is entitled to recover thereon, show that he is a bona fide pur- chaser, or that he derived his title from such a purchaser. It is not sufficient to show simply that he purchased it before maturity and paid value, he must show that he had no knowledge or notice of the fraud. Vosburgh v. Diefendorf, 119 N. Y. 357; First National Bank of C. V. Green, 43 N. Y. 298; Farmers' and Citizens' National Bank v. Noxon, 45 N. Y. 762; Ocean National Bank of N. Y. City v. Carll, 55 N. Y. 440; Wilson v. Rocke, 58 N. Y. 643; Nickerson v. Ruger, 76 N. Y. 148 NEGOTIABLE INSTRUMENTS LAW 279; Canajoharie National Bank v. D'efendorf, 123 N. Y. 247; Grant v. Walsh, 145 N. Y. 502; German -Aineri can Bank v. Cunningham, 97 App. Div. 246; U. N. Bank v. Diefendorf, 123 N. Y. 203; Joy v. Diefendorf, 130 N. Y. 6; Johnson Co. Saving Bank v. Walker, 79 Conn. 348; Keegan v. Rock, 128 la. 39; Hodge v. Sm.ith, 130 Wis. 326; First Nat^'onal Bank v. Wise, 172 Iowa 25. Knowledge that a note was given in consideration of an executory agreement of the payee which has not been performed, will not deprive an indorsee of the character of a bona fide holder, unless he also has notice of the breach of the agreement. McNight V. Parsons, 136 la. 300. The bona fide holder for value, who receives the paper in the usual cottrse of business, is unaffected by the fact that it originated in an illegal consideration, without any distinction between cases of illegality founded in moral crime or turpitude, and those founded in positive statutory prohibition. The law extends th's protection to negotiable instruments because it would seriously embarrass mercantile transactions to expose the trader to the consequences of having a bill or note passed to him impeached for some covert defect. There is, however, one exception — that when a statute declares the instrutr.ent absolutely void, it gathers no vitality by its circulation in respect to the parties executing it. Dan. Neg. Inst. Sec. 197; Alexander v. Hazelrigg, 123 Ky. 684; Sond- heim v. Gilbert, 117 Ind. 71; 18 N. E. 687; Wirt v. Stubbefeld, 17 App. (D. C.) 283; but see, Johnson Co. Savings Bank v. Komhauser, 174 App. Div. (N. Y.); note Section 91, Subd. 4. On section generally, see, Am. Ex. National Bank of N. Y. v. N. Y. Belting Co., 148 N. Y. 698; Damelman v. Brazier, 198 Mass. 459; First National Bank of Durand v. Shaw, 157 Mich. 194; Real Estate Inv. Co. v. RusseU, 148 Pa. 496; People's State Bank v. Miller (Mich.) 152 N. W. 257; Hynes v. Plastins, 45 Wash. 190; Merchants National Bank v. Branson, 165 N. C. 348; Vosburg v. Diefendorf, 119 N. Y. 357. § 95* What constitutes notice of defect. To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith. The purpose of the statute was to place commercial paper on such footing that it would be fully and freely accepted without question in commercial transactions and thereby facilitate trade, and with that pur- EIGHTS OF HOLDER 149 pose in view to protect the holder for value before maturity from any defenses that might exist between the payor and payee, unless the holder before negotiation had knowledge of such defense or infirmity or was in possession of such facts as would make his negotiation of the paper am^ount to bad faith. In some of the states it seems to have been held that one who takes a transfer of negotiable paper under circimistances to put a reasonable person on inquiry as to defenses against it, is considered as having notice of the facts which such inquiry would develop; but the more general trend of the decisions from an early day has been to the effect that mere ground of suspicion as to possible defects in the title of the negotiator or of the existence of defenses to the instrument negotiated is not the equivalent of notice to the transferee, and, to be regarded as an innocent purchaser, he need not as a matter of law be diligent to investigate the circumstances of the origin of the paper, though if the negligence be of a marked or gross character it may be competent to establish the mala fides of the piu-chaser. That which will charge the paper in his hands with prior equities and defenses, is actual or direct notice of the facts. Or, in the absence of such notice or knowledge, the existence to his notice of such facts or circumstances that his action in taking the paper amounts to bad faith. Mere suspicious circumstances are not sufficient to put a party upon inquiry, vmless the circumstances are such as to so strongly intimate a defect in the title that a deduction of bad faith may fairly be made. Gross carelessness, although not of itself sufficient as a matter of law, to defeat the title in a purchaser for value, constitutes evidence of bad faith. Canajoharie National Bank v. Diefendorf, 123 N. Y. 191; Am. Ex. National Bank v. N. Y. Belting Co., 148 N. Y. 698; Interboro Brewing Co., V. Doyle, 165 App. Div. (N. Y.) 650; Hibbs v. Brown, 190 N. Y. 167; Baruch v. Buckley, 167 App. Div. (N. Y.) 116; Cole v. Harrison, 167 App. Div. (N. Y.) 336; Oliner v. Goldenberg, 168 App. Div. (N. Y.) 847; Hartford National Bank v. Gardner, 157 N. Y. Supp. 849; Ward v. City Trust Co., 192 N. Y. 61; Eisenberg v. Lefkowitz, 142 App. Div. (N. Y.) 569; Van Slyke v. Rooks, 181 Mich. 88. No other rule than cited above would work well, for it would be intolerable if every bank had to learn the true history of each piece of paper presented for discount before it could act with safety. Chemical National Bank v. Kellogg, 183 N. Y. 96; Mass. National Bank v. Snow, 187 Mass. 159; Second National Bank v. Morgan, 165 Pa. 199; Goetting v. Day, 87 N. Y. Supp. 510; Cole v. Harrison, 153 N. Y. Supp. 200; Cheever v. Pittsburgh Ry. Co., 150 N. Y. 59. 150 NEGOTIABLE INSTEUMENTS LAW The title of one who for full value receives a transfer of negotiable paper before maturity and without notice of any outstanding or antecedent equities, is not subject to be defeated by proof that he might have obtained such notice by the exercise of active vigilance. State Bank of Ohio v. Hoge, 35 N. Y. 65; Strickland v. N. Y. C. & H. R. R. R. Co., 88 App. Div. (N. Y.) 367; Amd v. Aylesworth, 145 Iowa 185; Setzer v. Deal, 135 N. C. 428; Bank v. N. Y. Belting Co., 148 N. Y. 705; Jarvis v. Manhattan Beach Co., 148 N. Y. 652; Davis v. Clark, 85 N. J. L. 696; Rice v. Barrington, 75 N. J. L. 806. He has a right to assimie that the relations to the paper of every party whose name appears on it are precisely what they appear to be. Cheever v. Pittsburgh, etc. R. R., 150 N. Y. 59; Valley Savings Bank v. Mercer, 97 Md. 459; Massachusetts National Bank v. Snow, 187 Mass. 163; Bank v. Butler, 113 Tenn. 575; Goodman v. Simmons, 61 U. S. 343. It is now a well settled rule that the rights of a holder of a negotiable instrument is to be determined by the simple test of honesty and good faith, and not by speculative issue as to his diligence and negligence. Charters v. Palmer, 113 App. Div. (N. Y.) 108; Second National Bank v. Weston, 172 N. Y. 250; Manhattan Savings Inst. v. N. Y. National Exch. Bank, 170 N. Y. 58; Weissinger v. Van Buren (Ky.) 123 S. W. 289; Second National Bank of Clarion v. Morgan, 165 Pa. St. 199. But it is a settled rule that when the maker of negotiable paper shows that it has been obtained from him by fraud and dm"ess, a subsequent transferee must, before entitled to recover on it, show that he is a bona fide holder. Vosburgh v. Diefendorf, 119 N. Y. 364. Where the taint of fraud once attaches to a written contract, nego- tiable or otherudse, the law is careful to require every person who seeks to profit by it to show that he comes into court ^vith clean hands. It would be a departure from principal to hold that the maker must prove that the holder had notice of the fraud. Whether he had notice or not is a matter peculiar within his own knowledge. Giberson v. JoUey, 120 Ind. 301; (22 N. E. 306). The purchaser of a note is a holder in due course, though he only pays for it one-third of its face value, the inadequacy of price standing alone not being sufficient to put him on notice, both the purchaser and seller living in another state and neither knowing the maker of the note. Ham V. Merritt, 150 Ky. 11; 4 Am. and Eng. Ency. 283. An indorsee of a negotiable instrument is not deprived of the position as holder in due course by the fact, and that alone, that said indorsement is in form "without recourse." EIGHTS OF HOLDEE 151 Bank of Sampson v. Hatcher, 154 N. C. 359; Siegel v. Bank, 131 111. 569; Ferriss v. Tarbel, 87 Tenn. 386; Stevenson v. O'Neil, 71 111. 314; Kelley v. Whitney, 45 Wis. 110; Thorpe v. Mindeman, 123 Wis. 149; Brotherton v. Street, 124 Ind. 599. Money held m fiduciary capacity. — A supervisor of the plaintiff town opened an account in the defendant bank entitled, "H. C. Merritt, Super- visor," in which were deposited town funds. The supervisor drew checks against the account payable to his own order and wrongfully appropriated the money to his own use. It was held that the bank was not called upon to investigate the purpose of the supervisor in withdrawing the money on checks payable to his own order, and that it was not liable to the town for the supervisor's defalcations. It was held that the fact that the supervisor drew 57 checks against the account to his own order did not put the bank upon notice that he intended to abuse his trust and apply the money to his individual use. Town of Eastchester v. Mt. Vernon Trust Co., 159 N. Y. Supp. 289. In the above case the subject was treated by Justice Thomas. The importance warrants the following extended extract from the opinion : "The relation between the defendant and Merritt was that of debtor and creditor. The opening of the accoimt in the name of "Merritt, Supervisor," distinguished it from personal account only in that it informed the bank that the moneys did not belong to Merritt as an individual, but that he had them in trust. (National Bank v. Insiirance Co., 104 U. S. 54, 26 L. Ed. 693.) In this instance the word "Supervisor" indicated the depositor's official relation, and therefore the nature of the trust; while, if the deposit of the moneys had been by "Merritt, Trustee," the trust itself would have been wholly undefined, and the depositary would have known only that it did or might exist. But, in either case, the bank was not obliged, for the purposes of pay- ment, to search for his authority as trustee. (Manhattan Savings Institu- tion V. N. Y. National Exchange Bank, 170 N. Y. 58, 67, 62 N. E. 1,079, 88 Am. St. Rep. 640; Boone v. Citizens' Savings Bank, 84 N. Y., 83, 86, 38 Am. Rep. 498.) The relation of the parties is clear. Merritt, super- visor, had deposited moneys which he officially held. Then the defendant owed him the money, and could and should pay it only to him. (Perleyv. County of Muskegon, 32 Mich. 132, 136, 20 Am. Rep. 637; Pittsburgh v. First National Bank, 230 Pa. 176, 181, 182, 79 Atl. 406.) If it did not pay upon proper demand, it was subject to action (Citizens' National Bank v. Importers' and Traders' Bank, 119 N. Y. 195, 23 N. E. 540), and could not plead in defense an interest in the town (Swartwout v. Mechanics' Bank of New York, 5 Denio 555). 152 NEGOTIABLE INSTEUMENTS LAW When a check in the form justified by the contract between the parties is presented by a depositor of trust money, the debtor owes no duty in behalf of the beneficiary to scrutinize the demand, or to be circum- spect, lest its customer is betrajnng his trust. (Goodwin v. American National Bank, 48 Conn. 550, 567.) Its solicitude should be to pay the debt to or upon the proper order of the person to whom it is owing, but not to suspect its customer's integrity or to guard against his doing wrong. (Lowndes v. City National Bank, 82 Conn. 8, 72 Atl. 150, 22 L. R. A. (N. S.) 408; Duckett v. Mechanics' Bank, 86 Md. 400, 405, 38 Atl. 983, 39 L. R. A. 84, 63 Am. St. Rep. 513.) The duty of a bank touching a trust fund and its duty to be apprehensive for the conduct of its depositor is discussed in Eyrich v. Capital State Bank, 67 Miss. 60, 71-73, 6 South. 615; Munnerlyn v. Augusta Savings Bank, 88 Ga. 333, 14 S. E. 554, 30 Am. St. Rep. 159; Brookhouse v. Union PubHshing Co., 73 N. H. 368, 373, 62 Atl. 219, 2 L. R. A. (N. S.) 993, 111 Am. St. Rep. 623, 6 Ann. Cas. 675; Morse on Banks and Banking, Sec. 317. But I gather that, in the absence of knowledge to the contrary, a bank is free to accept its depositor as honest in his purposed use of the money of which by check he demands payment. Freeholders of Essex v. Newark National Bank, 48 N. J. Eq. 53, 21 Atl. 185; National Bank v. Insurance Co., 104 U. S. 54, 63, 64, 26 L. Ed. 693. In view of such attitude of the depository to its depositor, although a trustee, and to the trust, it cannot be said that, when Merritt, supervisor, presented a check payable to his own order, the debtor should at its peril halt its creditor, interrogate him as to his purpose, or perchance suspend payment pending investigation. In Lowndes v. National Bank, 82 Conn. 8, 72 Atl. 150, 22 L. R. A., 408, the court, after attaching habifity to the bank for devastavit of an account of trust moneys, was painstaking to state:" "This is not to say that a bank undertakes to supervise and safeguard a trust account therein, or comes under the duty of looking after the appropriation of such funds when withdrawn. Such is not the law." And it decided that a check drawn on trust funds by "Lay ton, admin- istrator, to Layton individually, was not irregular upon its face." In Havana Central R. Co. v. Central Trust Co., 204 Fed. 546, 123 C. C. A. 72, L. R. A. 715, the decision was that, where the treasurer of the plaintiff drew a check signed, "Havana Central Railroad Company, C. W. Van Voorhis, Treasurer," to his order as an individual, as other checks had been drawn before, the bank was authorized to pay it without questioning it. There an agent drew a check in his own favor not on an account opened by him, but against the account of his principal, and even if the Court of Appeals in an action by the same plaintiff against the EIGHTS OF HOLDER 153 Knickerbocker Trust Company (198 N. Y. 422, 92 N. E. 12, L. R. A. 720) did suggest another view, it must be kept in mind that in the action at bar the depositor was drawing against his own accoimt, and no question of authority from the depositor is involved. In Allen v. Puritan Trust Co., 211 Mass. 409, 97 N. E. 916, L. R. A. 518, one Baker drew a large number of checks to his own order against an account kept by him under the name "Estate of Albert H. Baker^ Wm. L. Baker, Administrator," whereby he met overdrafts on his personal accoimt, and later the bank carried other checks to his credit in his personal account, whereupon he withdrew and misappropriated the money. It was found that as to the first class of checks the bank was liable, as it participated in the breach of trust, but that as to the second group it was not liable. The opinion states (page 422 of 211 Mass., page 919 of 97 N. E. [L. R. A. 518]): "The principle governing the defendant's liability is that a banker who knows that a fund on deposit with him is a trust fund, cannot appro- priate that fund for his private benefit, or, where charged with notice of the conversion, join in assisting others to appropriate it for their private benefit, without being liable to refund the money, if the appropriation is a breach of the trust." "From these authorities it is clear that a depositor, although holding money in a fiduciary capacity, may draw it out of the bank ad libitum. The bank is bound to honor his checks, and incurs no lianility in so doing, as long as it does not participate in any misapplication of funds or breach of trust. The mere payment of the money to, or upon the checks of, the depositor, does not constitute a participation in an actual or intended misappropriation by the fiduciary, although his conduct or coiu-se of dealing may bring to the notice of the bank circumstances which would enable it to know that he is violating his trust. Such circimistances do not impose upon the bank the duty, or give it the right, to institute an inquiry into the conduct of its customer, in order to protect those for whom it may hold the fund, but between whom and the bank there is no privity." 97 Tex. 576, 80 S. W. 606, 65 L. R. A. 820, 104 Am. St. Rep. 885. The addition of the word "Trustee" to the name of a person is notice of a trust and calls for inquiry and examination, and a person taking an assignment of a note made payable to the order of a third person as trustee is put upon inquiry as to all the terms and conditions under which the note was executed and is presumed to have full knowledge thereof. Geyser v. Stark, 106 Fed. 558; 53 L. R. A. 684; Marbury v. Ehlen, 72 Md. 206; McLeod v. Despain, 46 Or. 526; Henshaw v. Bank, 239 111. 515; 88 N. E. 214. 154 NEGOTIABLE INSTKUMENTS LAW J/tc/i^.Y/cs JBf^j>ric Boswell, as the agent of plaintiffs, had charge of certain premises known as "Glass Buildings"; he deposited the rents collected to the credit of a bank account kept in his name as "Agent Glass Buildings." In payment of a debt which Boswell owed defendant, as collateral for which the latter held certain securities, he received a check on the bank signed by Boswell, with the words "Agt. Glass Buildings" following his signature, and on receipt surrendered the securities. The check was paid by the bank and charged to said account. Boswell had no authority to so use the fund. In an action to recover the amount thereof, there was no evidence tending to raise any question as to defendant's good faith, except such receipt of the check. Held, that the form of the check was sufficient to indicate to defendant the existence of an agency, and to put him on inquiry as to the agent's authority to so use the money. Gerard v. McCormick, 130 N. Y. 261; see also. Carpenter v. Fams- worth, 106 Mass. 561 ; N. Bank v. Ins. Co., 104 U. S. 517; Shaw v. Spencer, 100 Mass. 389. A guardian who kept funds in defendant's bank in his name as guard- ian, also had an individual account in the same bank. He closed out the indi\4dual accoimt, and later drew checks signed in his individual name, which the bank paid out of the guardianship account. Held that the bank was liable for the amount thus paid. United States Fidelity Co. v. U. S. National Bank (Or.) 157 Pac. Rep. 155. The guardian might have negotiated the original check drawn in his favor for the amount due his ward, and deposited the proceeds to his private credit in the bank cashing it or in any other institution of the kind, and the depository, having no further knowledge, would be protected in paying the checks drawn against the deposit and signed in the personal name of the individual, even though he had also the office of guardian. This is upon the principle that the bank is bound to respond to the checks of the party wdth whom it contracts acting in the character in which he stipulates. EIGHTS OF HOLDER 155 Mimnerlyn v. Augusta Sav. Bank, 88 Ga. 333; 14 S. E. 554; Coleman v. First National Bank, 94 Texas 605; 63 S. W. 867; Safe Deposit and Trust Co. V. Diamond National Bank, 194 Pa. 334; Batchelder v. Central National Bank, 188 Mass. 25; 73 N. E. 1024; Hood v. Kensington National Bank, 230 Pa. 508; 79 Atl. 714; National Bank v. Insurance Co., 104 U. S. 54, 64. Where an executor deposits the funds of the estate in one bank, and draws checks as executor on such deposit and deposited the checks to his individual accoimt in another bank, and out of the individual account paid notes due by him to the second bank, the second bank is liable to the estate in the amount so appropriated. Being put on notice the bank was held a party to the misappropriation. Bischofi V. Yorkville Bank, 218 N. Y. 106; see also notes in L. R. A. 1915 C, 518; L. R. A. 1515 A, 715. Where a fiduciary draws a check to his individual order and deposits it elsewhere in his individual account, and subsequently uses the proceeds in breach of his trust, the bank receiving such deposit is not liable for the proceeds, in the absence of actual knowledge of the fiduciary's misconduct or of circumstances sufficient to put it on inqmry. Havana R. R. Co. v. Knickerbocker Trust Co., 198 N. Y. 423; Mills V. Nassau Bank, 52 Misc. 342; Batchelder v. Central Bank, 188 Mass. 25; Goodwin v. American National Bank, 48 Conn. 550; S. and D. Trust Co. V. Diamond, 194 Pa. St. 334; Rhinehart v. Banking Co., 99 Mo. App. 381; Martin v. Kansas National Bank, 66 Kan. 563. Where a check, given in payment of an individual debt, is signed by the debtor and another as executor of the estate, the form of the check is notice to the payee that it is payable from trust funds and the collection of the check renders him a joint tort frasor with the drawers in the con- version of the amount of the check from the trust fimd. Squire v. Ordemann, 194 N. Y. 394; and cases cited. J/^^^ ^^ J^^^^.^x-('&^t^.(L^.^y/ y^/^ ,i:>i:£{^ .^<)^^ 'tz^ _ .^^^^2^ "^^^da'U ^, 156 NEGOTIABLE INSTRUMENTS LAW Greatest caution should be exercised in discounting or accepting a note of an executor, administrator, guardian or trustee. Unless ex- pressly given authority none of them have power to bind the estate repre- sented by them. The title of the property coming into their hands vests in them only for the purpose of administration. Such a person who makes, indorses or accepts negotiable paper is personally liable thereon, although he adds to his signature the title of his office. The foregoing signature, regardless of the authority of Knapp to bind the estate, is in- correct; the words, "Executor of Estate of John Ray" are merely descrip- tive and are no more binding on the estate than if it were signed, Clarence Knapp, Republican, or any other descriptive word. While the note would in no way bind the estate of John Ray, Clarence Knapp would be personally liable to Thomas Atkin for the amoimt thereof. Had Knapp the authority to execute paper the signature to bind the estate would be "Estate of John Ray, By Clarence Knapp, Executor." Schmittler v. Simon, 101 N. Y. 554; Connor v. Clark, 12 Cal. 168; Foster v. Fuller, 6 Mass. 758. ^. ^,Ut/- C3n^^«'««i«i^V <8-*twi««iCHtf {INDORSED) N. W. WATKINS, TRUSTEE, J. REGISTER & SON. This note was given for the purchase of property sold by Watkins as trustee under a decree of the court. The note was indorsed by Register and Son. Subsequently, Watkins wrote above the name "J. Register and Son" the indorsement "N. W. Watkins, Trustee." Watkins thereafter sold the note through a broker to the Third National Bank, and the proceeds appropriated by Watkins. In a suit on the note the court said, ' 'It cannot be read understandingly without seeing upon its face that it is connected with a trust and part of a trust fund. It was the duty of the bank, before purchasing it, to have made inquiry into the rights of the trustee to dispose of it. But this it wholly failed to do, and as it turns EIGHTS OF HOLDEK 157 out, he was disposing of the note in fraud of his trust and the bank must suffer the consequences of the risk it assumed." Third National Bank v. Lange, 51 Md. 144; Shaw v. Spencer, 100 Mass. 382. The same rule would apply to an executor, administrator or guardian. Kepler v. Hall, 64 N. C. 60; Wilson v. Becker, 52 111. 346; Thompson v. Brown, 43 Ind. 206. Corporation paper. — It seems the general rule that one who receives from an officer of a corporation its notes or securities in payment of or as security for a personal debt of the officer, does so at his peril. Prima facie the act is unlawful and unless actually authorized, the purchaser will be deemed to have taken them with knowledge of the rights of the corporation. Wilson V. Metropolitan Ry. Co., 120 N. Y. 145; Smith v. Weston, 159 N. Y. 200; Cohnfeld v. Tannenbaum, 176 N. Y.; Black v. Bank of Westchester, 96 Md. 403; Dan. Neg. Int. Sec. 395; Kipp v. Smith, 137 Wis. 234; Park Hotel Co. v. Fourth National Bank, 86 Fed. 742; West St. L. Bank v. Shawnee Bank, 95 U. S. 557; Henderson v. Koenig, 192 Mo. 709; Reynolds v. Gerdelman, 170 S. W. 1153. A corporation having either an express or implied power to issue negotiable paper is presimied to act within the scope of such power, and hence there is a presumption in favor of the validity of negotiable paper issued pursuant to such power. Cox V. North Brew. Co., 245 Pa. St. 418; Bird v. Daggert, 97 Mass. 494; Jefferson Bank v. Chapman, 122 Term. 415. Where the president of a corporation procured a check payable to its order, and having indorsed it in the corporate name by himself as president, and deHvered it to the bank in payment of a personal loan, the form of the check was notice to the bank that such president was using the property of the corporation to pay a personal debt of himself in appa- rent violation of its rights. Ward V. City Trust Co., 192 N. Y. 61; R. and C. Turnpike Co. v. Paviour, 164 N. Y. 281; Gerard v. McCormick, 130 N. Y. 264; National Park Bank v. G. A. M. W. and Co., 116 N. Y. 1281 ; Hathaway v. County of Delaware, 185 N. Y. 368; Newman v. Newman, 160 App. Div. 331. As to where a corporation officer draws a corporation check in his own favor and deposits same in a different bank than on which it was drawn, see, Havana C. R. R. Co. v. Knickerbocker Trust Co., 198 N. Y, 422. 158 NEGOTIABLE INSTRUMENTS LAW BuPrALO. N.Y. (S^CTa / 191 'f wo. /A^ I^aisufacturers&TradersNationaiBank c. .Dollars <^// -^l^^ft^jL^J HARTMAN COMPANY FRANK A. UMSTED, Pres. FRANK A. UMSTED A person accepting or a bank paying the above check would do so at his or its peril. The face of the note shows it payable to Hartman Company, and the indorsement "Hartman Company, Frank A. Umsted, Pres." appears regular if by a resolution or by-laws Umsted was the person authorized to indorse the corporation paper. If after such indorse- ment the check was deposited to the credit of "Hartman Company," or if Umsted had authority (which authority was filed with the bank) to draw the cash represented by the check, the bank would not be liable. Without such authority, however, the bank would be acting at its peril in paying to Umsted the cash on such indorsement, or by crediting the amount to his personal account. The same would be true to any other person to whom Umsted might negotiate it. The form of the check was notice to the bank that Umsted was using the property of the corporation of which he was president to pay the personal debt of himself. Ward V. City Trust Co., 192 N. Y. 69; R. and C. Turnpike Co. v. Paviour, 164 N. Y., 281; Hathaway v. County of Delaware, 185 N. Y. 368-372. The effect of such notice was to put the bank upon inquiry. The presumption arising from the face of the check was that it belonged to the Hartman Company, and that its president had no right to appropriate to his own use or with which to pay his personal debt. The purpose of the law in exacting inquiry under such circumstances is to see whether the apparent situation is the actual situation, or in other words to learn whether facts exist to rebut the presumption. RIGHTS OF HOLDER 159 l.omsvmx»gy^ y^r^i^'^yf'^ j: ^ . — IM^ The LomsviixE T rust C a 21*52 G (/iVZ)0i?5£P) LAKE ONTARIO WATER CO. By J. C. CLARK, TREASURER, J. C. CLARK. In the above illustration Leo Pierce gave his check to the Lake Ontario Water Company, a corporation. The check was indorsed in proper form by the corporation, and further indorsed by J. C. Clark in his individual capacity, who deposited the amotmt to his personal account. At the time of the transaction Clark as treasiirer of the corporation had been authorized by a resolution of its board of directors "to take charge of all the business and property of the company, and to make and sign all checks, notes and other obligations of the corporation." There was no other resolution or by-law authorizing the use of its money or assets to pay other than corporate obligations. The bank in crediting this check to the personal account of Clark became liable to the Lake Ontario Water Company for the full amount. The form of the check was notice to the bank that Clark wa? using the property of the corporation of which he was treasurer for his personal use in apparent violation of his rights. Ward v. City Trust Co., 192 N. Y. 63; Rochester and C. T. Co. v. Pavior, 164 N. Y. 281 ; Gerard v. McCormick, 130 N. Y. 261 ; Hathaway v. County of Delaware; Matter of Haas Co., 131 Fed. Rep. 232; Matter of Mills, 126 Fed. Rep. 1011; Rankin v. C. National Bank, 188 U. S. 557; S. G. T. R. Co. V. Graver, 45 Penn. St. 386. The bank was required as a matter of law to make inquiry as to the right of Clark appropriating the check to his use, and inquiry from Clark himself would not justify the bank, whose first inquiry would be to have called for a resolution of the board of directors authorizing such use of the check. But such dangerous power cannot be conferred unless the intention is expressed in utmost clearness, and if such power is intended to be given it must be expressed in language so plain that no other inter- pretation can rationally be given it, for it is against the general law of 160 NEGOTIABLE INSTRUMENTS LAW reason that an agent should be intrusted with power to act for his principal and for himself at the same time. Bank of New York v. National Banking Assn., 143 N. Y. 559, 564; National Trust Co. v. Miller, 33 N. J. 155; Germania Tnnt Co. v. Boyn- ton, 71 Fed. Rep. 797. In view of the decisions of the courts and the enormous losses sustained, some banks, for their protection and to guard against mistakes of their clerks, require the adoption of a resolution by the board of directors of a corporation with whom they have accounts in the form as follows: FORM OF RESOLUTION OF CORPORATION IN OPENING BANK ACCOUNT To the Bank of We hereby CERTIFY that the following is a true and correct copy of a Resolution duly adopted at a meeting of the Board of Directors of the Company, held at on the day of 1917J ^ quorum then being present: "RESOLVED: that the funds of this Company be deposited in Bank of , and be subject to be withdrawn upon the check, draft, note or order of the Company, signed by any one of the following officers to wit: President Vice-President Treasurer Secretary and the said Bank is hereby authorized to pay such checks, drafts, notes or orders , and also to receive the same for the credit of or in payment from the payee or any other holder when so signed, without inquiry as to the circum- stances of their issue or the disposition of their proceeds, whether drawn to the individual order of, or tendered in payment of individual obligations of, the officers above named, or other officers of this Company, or otherwise." President Secretary Dated at 1917- {Impress with corporate seal) EIGHTS OF HOLDER 161 The foregoing resolution should be adopted by the board of directors at a meeting with a quorum present. The legal effect of investing the management of the affairs of a corporation in its board of directors is to invest the directors with such government and management as a board and not otherwise. The separate action individually of the directors is not the action of the constituted body of men clothed with corporate powers (17 Am. & Eng. Ency. of Law, 83), and the resolution to be effective and a protection of a bank relying on it should be adopted at a regular meeting with a quorum present. A knowledge of the law will convince any reasonable person the reasonableness of a bank demanding such protection. The bank dealing with a corporation has no control of the personnel of its officers and agents, and it would seem reasonable that the stock holders of a corporation should stand the responsibility of acts of its officers and agents selected by them — and not require the bank to inquire as to their authority in every transaction, requiring time and in some cases embarassment. Payment of personal debts of a partner or officer of a corporation with corporation paper. JW^^^^J^y^>^^/>-^^ ^^/ '^-. WOOWWOWTH BUII.OIMO- fl %^4 ^ f/4^^ -^/^^^. ^J^^;t^j^ C ^ & Mfg. Coi»pM(7 Qs^^y V C^ : r^y^ Jn^^M^ It is a general rule that where one who receives from an officer of a corporation its check or note in payment of or as security for a personal debt of the officer, does so at his peril. Prima facie the act is unlawful, and imless actually authorized, the purchaser will be deemed to have taken them'with knowledge of the rights of the corporation. Wilson V. Met. Ry. Co. 120 N. Y. 145. "It is well settled that one partner cannot give a partnership check, without the assent of the other partners, in payment of his individual 162 NEGOTIABLE INSTRUMENTS LAW debt. Rovers v. Betterton, 93 Tenn. 630, 27 S. W. 1017, and authorities cited. So it has been held by the Supreme Court of the United States that one partner cannot use the partnership funds to pay his pre-existing debts without the consent, express or impHed, of the other partners, and in such case a partnership creditor may recover from the party receiving the fund, although the party did not know that he had received partnership funds. Rogers v. Batchelor, 12 Pet. 221; Dob v. Halsey, 16 Johns. 34." The effect of notice referred to in cases cited is to put the bank upon inquiry to see if it was about to accept money from one whom it did not belong in payment of his own claim, and the presimiption arising from the face of the check was that it belonged to the corporation and that its officer had no right to use it to pay his personal debt. Ward V. City Trust Co., 192 N. Y. 61; Gerard v. McCormick, 130 N. Y. 261; First National Bank of Paterson v. National Broadway Bank, 156 N. Y. 459; Angle v. N. W. Insurance Co., 92 U. S. 312. If the president of a corporation who is authorized to make the corporation notes, makes one regular in form, attested by its secretary, payable to the order of a third person, who in fact had no interest therein, and the note is indorsed by the nominal payee to a firm of which the president is a member, or in blank and then indorsed by the firm, and the president thereafter wrongfully delivers the note, for value, before ma- turity, to a stranger having no actual knowledge or notice of defect in the title, the fact that the corporate note bears upon its face the signature, as president, of the party dealing with it, is not sufficient to put the transferee upon inquiry and does not deprive him as a matter of law of the character of a bona fide purchaser. Cheever v. Pittsburgh R. R. Co., 159 N. Y. 60. In Reynolds Elevator Co. v. Merchants National Bank, 55 App. Div. 1, a bank received checks drawn by the president of a corporation against the corporation accotmt in payment of the president's individual debt. The bank was held liable to the corporation for the amotmt of the checks, the court saying in the opinion: "It is well settled that a person who knowingly receives from an agent the money or property of a principal in payment of the agent's debt, does so at his peril; and if the agent acted without authority, the principal may, on proof of these facts, recover his money." Manhattan Co. v. National Bank, 133 Fed. 76. RIGHTS OF HOLDER 163 Plaintiff's president having without authority indorsed checks payable to it with its name, and thereunder with his own name, both in his handwriting, and deposited them to the credit of his individual account with defendant bank, and defendant having collected them and paid out the proceeds on the personal checks of such president, defendant became liable to plaintiff, at its election, either in conversion for the value of the checks, or for the proceeds thereof as for many had and received. Moch v. Security Bank, 163 N. Y. Supp. 277. In the foregoing case the court said: "The uncontro verted evidence is in accordance with the allegations of the complaint, that the checks were indorsed, so deposited to Moch's credit, collected, and the proceeds paid out without authority; and since there was no representation by the corporation concerning Moch's authority by which the bank was misled or the plaintiff is estopped from claiming ownership, no title passed, and the bank in receiving and exercising dominion over the checks by parting with them and collecting the proceeds, converted the checks and became liable to the plaintiff, at its election, either in conversion for the value of the checks or for the proceeds thereof as for money had and received, without regard to any question of good faith, or of notice or knowledge or duty of inquiry, notwithstanding the fact that it may have parted with the money in good faith and in the belief that Moch was authorized to indorse the checks and to receive the proceeds." Robinson v. Chemical National Bank, 86 N. Y. 404; Comstock v. Hier et al., 73 N. Y. 269, 29 Am. Rep. 142; Porges v. U. S. Mortgage and Trust Co., 203 N. Y. 181, 96 N. E. 424; Silver v. Krellman, 89 App. Div. 363, 85 N. Y. Supp. 945; Talbot v. Bank of Rochester, 1 Hill 295; Bur- stein v. People's Trust Co., 143 App. Div. 165, 127 N. Y. Supp. 1092; Schmidt v. Garfield National Bank, 64 Hun. 298, 19 N. Y. Supp. 252, affirmed in 138 N. Y. 631, 33 N. E. 1084; see also, Gerard et al. v. Mc- Cormick, 130 N. Y. 261, 29 N. E. 115, 14 L. R. A. 234; Cobb v. Dows, 10 N. Y. 335. Partnership paper. — The fact that a promissory note signed by an individual, who is a member of a partnership, is made payable to his own order, and is indorsed by him first in his own name and then in the name of the firm, does not give notice to a person who takes the note for value, that the indorsement in the name of the firm was for the accommodation of the maker or that the maker is to receive the proceeds of the note for his private use. Feigenspan v. McDonnell, 201 Mass. 342. 164 NEGOTIABLE INSTRUMENTS LAW y^//>r/:^yrfy ^ ^V/^%^*<^ <^%^^,^^^'z^c^-^: <^< ^*^ ?< ^^r^ ■ ^ "^ ©)/}Mj^ ^ '^d^pc^T.^^^n^y'^^/y /^^.<^^zj(y %K_ <^wC^/l> «T^>»y^..^^tP. >>VY.rfV:«gl:t^ {INDORSED) MOON & CLARK WILLIAM S. MOON Where a partner makes a promissory note in his own name, payable to the order of the firm, indorses the name of the firm on the note, and requests a bank to discoimt the note and place the proceeds of his discoimt to his personal credit on the books of the bank, the bank has notice of such irregiilarity as imposes on it the duty of inqmry as to whether the maker had authority from the firm to indorse the note with the firm name and procure its discoimt for his personal use. The fact that a firm note is given by one of the partners without the knowledge or consent of the other for goods sold to him personally is presimiptive evidence of want of authority to bind the other members of the firm, and if the person taking knows the fact at the time, he is chargeable with notice of such want of authority. Union N. & B. Co. v. Doherty, 20 Misc. 23. The same rule applies where an agent pays a personal debt with a check signed by him as agent. Coffin V. Tevis, 164 App. Div. (N. Y.) 323; Cox v. Northampton Brewing Co., 245 Pa. St. 418. A bank, which permits an administrator to deposit estate funds to the credit of his personal account, is not liable to the beneficial owners of the funds, where they are misappropriated by the administrator in the absence of knowledge on the part of the bank that such misappropriation was taking place. But if the bank, with the knowledge of the trust char- acter of the fimds, applies them to the personal debt, due from the admin- istrator to the bank, or knowingly assists or participates in the misap- plication of such funds, it will be liable for the amount so misapplied. Miami Co. Bank v. Peru Trust Co. (Ind.) 112 N. E. 40. EIGHTS OF HOLDER 165 Also where an executor (or trustee) uses trust funds for a similar purpose. Bischoff V. Yorkville Bank, 170 App. Div. (N. Y.) 681; Squire v. Ordemann, 194 N. Y. 394; 87 N. E. 435; Cohnfeld v. Tanenbaum, 176 N. Y. 126; 68 N. E. 141; Ward v. City Trust Co., 192 N. Y. 61; 84 N. E. 585; Union Stockyards Bank v. Gillespie, 137 U. S. 411; Shaw v. Spencer, 100 Mass. 382; x\llen v. Puritan Trust Co., 211 Mass. 409; Brookhouse v. Union Publishing Co., 73 N. H. 368; Havana C. R. R. Co. v. Knicker- bocker Trust Co., 198 N. Y. 422; Ford v. Brown, 114 Tenn. 467; Swift v. Smith, 102 U. S. 442. The executor of an estate, who kept an account in his name as executor in another bank, drew checks thereon, payable to the order of defendant bank, which he deposited to his personal accoimt in the defendant bank. He repaid loans made to him by the defendant with checks drawn against the accoimt in the defendant bank, and also drew checks against such accoimt to pay personal obHgations to others. It was held that the bank was chargeable with knowledge that the executor was making an imauthorized use of the funds of the estate, and that the bank was respon- sible to the estate for the amount misappropriated after the time the executor used the fimds to satisfy his individual debt to the bank. Bischoff V. Yorkville Bank, 218 N. Y. 106; 112 N. E. 759. Note of insane person. y^^^^T^r:^ (Mft^^/n^ /(^^M^ /^te>?>jVt^ yy/ / /7/M^fZZ/y J^yJ^A^^t^. /D^2/PZ^' ^ ^i^ ^'TC^^^^-^t^*^ y^^j/y-^^^^f^^^y^y^/^ -T^e^^t^t^ xili^^^^Hy -^^/oo ^ ^ S.<Tnent of the note. He is liable as maker without demand and notice and sustains no other legal relation to the paper. Ewan V. Brooks, 55 Ohio St. 596; 35 L. R. A. 786; 3 R. C. L. 1179. Counterclaim and set-off. — While the indorser of a promissory note is said to be secondarily liable, the holder of a note may sue both the maker and indorser, or either, and the indorser sued upon his contract of indorse- ment is absolutely liable thereon. Where the indorser is himself sued, he may plead as a set-off the indebtedness of the holder to him. Curtis V. Davidson, 215 N. Y. 395; Building & Engineering Co. v. Northern Bank of N. Y., 206 N. Y. 400; Armstrong v. Warner, 49 Oh. St. 376, 390; Van Wagoner v. Paterson Gas Co., 23 N. J. Law, 283; County National Bank v. Massey, 192 U. S. 138, 148; Scott v. Armstrong, 146 U. S. 499, 510; Hughitt v. Hayes, 136 N. Y. 163, 167; Carnige Trust Co. v. Kistler, 89 Misc. N. Y. 404. An indorser who is also maker merely warrants the genuineness of his own contract. Sabine v. Paine, 166 App. Div. 10. Indorsement by executor. — An executor, even if vested with full authority by the probate of the will and the issuance of letters testamentary, has no power to bind the estate by making a contract of indorsement. Schmittler v. Simon, 101 N. Y. 554; Packard v. Dunfee, 119 App. Div. (N. Y.) 601. r ;0 w ^^^/^;^W ?^ ^. ^jt^ Vfe^^ y/oirv^A rf ^ \'V^ {INDORSED) SAMUEL GREEN EXR. GEO. W. MAY Neither executors or administrators have power to bind the estate represented by them through an executory contract, having for its object LIABILITIES OF PAKTIES 205 the creation of a new liability, not founded upon the contract or obligation of the testator or intestate. They take the property as owners and have no principal behind them for whom they can contract. The title vests in them for the purpose of administration and they must account as owners to the persons ultimately entitled to distribution. In this case Samuel Green would be liable personally as an indorser, the addition of the word "Exr." after his name is merely descriptive. The estate which he may represent would in no way be liable under the form of the indorse- ment regardless of his lack of authority to indorse in behalf of the estate. Schmittler v. Simon, 101 N. Y. 554; Connor v. Clark, 12 Cal. 168; Foster v. Fuller, 6 Mass. 758; Wilcox v. Dwyer, 132 Mass. 285. Where in an action against the maker and indorsers of a promis- sory note it appears that the note was indorsed for the accommodation of the maker before its delivery and negotiation for value, the defense of usiiry is available to the indorsers. This section applies only to cases between a holder and an indorser as such, the warranty by the indorser nms only to a holder in due course. Brunck v. Lambeck, 63 Misc. 117. The defense of want of consideration is also available. Leonard v. Draper, 187 Mass. 536. An indorser of a note who, upon the default of the maker, satisfies the demands of the indorsee and takes up the note, becomes the lawful holder and may enforce the terms of the contract against all prior indorsers who have been notified of the dishonor, as well as against the maker. Ainslie v. Wilson, 7 Cow. (N. Y.) 247; Abraham v. Mitchell, 112 Pa. St. 230; Sheahan v. Davis, 27 Ore. 278, 40 Pac. 405. Every indorser on a note or bill is liable for its payment. Each party in the following diagram is responsible to each one below him : — In a Note. Accepted Draft. Certified Check. 1. Maker. 2. 1st Indorser. 3. 2nd Indorser. Etc. 1. Acceptor. 2. Drawer. 3. 1st Indorser. 4. 2nd Indorser. Etc. 1. The Bank. 2. 1st Indorser. 3. 2nd Indorser. Etc. Parol evidence. — An unqualified indorser of a secured installment note cannot vary his contract of indorsement by parol evidence that the indorsee at the time of the indorsement agreed to keep him advised respect- ing the time and amount of payments and failed to do so. 206 NEGOTIABLE INSTRUMENTS LAW Hopkins v. Merrill, 79 Conn. 637; Smith v. Caro, 9 Ore. 278; Goldman V. Davis, 23 Cal. 256. In an action by a holder in due course of a negotiable promissory note indorsed by the payee in blank, against such payee as indorser, it is no defense that it was orally agreed that said indorsement was to be without recourse to him. Aronson v. Nurenberg, 218 Mass. 376; Eaton v. McMahon, 42 Wis. 484; Charles v. Denis, 42 Wis. 56. Whether or not the rule forbidding parol evidence to vary the terms of a written instnmient is to be deemed to apply to actions upon notes between the parties thereto, has no application to actions between the makers or obhgees of notes for contribution. In such case the action is upon a different and collateral agreement, and proof or oral collateral agreement that as between themselves the parties shall stand in a different relation from that which would be inferred from the form of the instnmient which is signed, or even from that which is expressed in explicit terms upon the face of such instnmient, does not have the effect to contradict or vary its terms. The written instrument is designed to express the undertaking and obligation of the signers to the holder and is not designed to show their agreement or imderstanding among themselves. Mansfield v. Edwards, 136 Mass. 15; WilHams v. Glenn, 92 N. C. 253; 53 Am. R. 416; Bulkeley v. House, 62 Conn. 459; 21 L. R. A. 247. § 117. Liability of indorser where paper negotiable by delivery. Where a person places his indorsement on an in- strument negotiable by delivery he incurs all the liabilities of an indorser. This section seems to be declaratory of the law. Cover v. Meyers, 75 Md. 406; Dan. Neg. Inst. Law, Sec. 663a, 707a. § 118. Order in which indorsers are liable. 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 indorse are deemed to indorse jointly and severally. Variant. — The Illinois statute substitutes for the last sentence the following: "All parties jointly liable on a negotiable instrument are deemed to be jointly and severally liable." This section is substantially a re-enactment of the law as established by the following cases : LIABILITIES OF PAETIES 207 Moore v. Cross, 19 N. Y. 227; Coulter v. Richmond, 59 N. Y. 475; Culliford V. Walser, 158 N. Y. 65; Davis v. Bly, 164 N. Y. 527. In the absence of contrary proof, the parties to a promissory note are liable thereon according to the legal effect of the instrument; that is, the maker is liable to the payee and indorsers, the payee to the indorsers, and each indorser to the subsequent indorsees. Brewing Co. v. Canning, 210 Mass. 285. Liability of indorsers. — Where a second indorser of a promissory note has paid and taken it up, he becomes a holder for value and may maintain an action to recover the amount thereof of the first indorser, although both are accommodation indorsers. Kelly V. Burroughs, 102 N. Y. 93. In an action by the holder of a promissory note against an indorser a defense alleging that the plaintiff made false representations to induce defendant to make certain purchases for which the notes were given is insufficient in law in the absence of an allegation that the representations were false to the knowledge of the plaintiff when made. Hodges V. Jennings, 148 App. Div. (N. Y.) 880; Reinhart v. Schall, 69 Md. 252. Where one makes his own note for the accommodation of the payee and one or more subsequent indorsers, and is compelled to pay the note at its maturity to a bona fide holder for value, he may recover from the parties for whose accommodation he made the note the amount so paid with interest. Morgan v. Thompson, 72 N. J. L. 244; see also, Haddock v. Haddock, 118 App. Div. (N.Y.) 413. One who obtains possession of a bill or note after indorsing it, is restored to his original position, and cannot, nor can a purchaser from him with notice, hold intermediate indorsers liable who could look to him again, and when such indorsements are in blank, parol evidence is ad- missible to show the relations in which they stand. Moore v. First National Bank, 120 Am. St. Rep. 126; Adrian v. McCaskill, 103 N. C. 181; Garden City Bank v. Fitler, 155 Pa. 210; Bemey v. Steiner, 54 Am. St. Rep. (Ala.) 144. Order of Liability. — In the case of an accommodation note the payee who was the first indorser is considered as having lent his name to the maker on the credit of the latter alone; the second indorser as having lent his name upon the credit of the maker and the prior indorser, and so every subsequent indorser as having lent his name upon the credit of those who became parties to the note before him. Russ V. Sadler, 197 Pa. St. 51; Wolf v. Hostetter, 182 Pa. St. 292. 208 NEGOTIABLE INSTRUMENTS LAW Every indorser is liable directly to the holder of the instrument. If the holder elects to demand payment of the last indorser first, it becomes the latter's duty to meet his obligation and his right, on doing so, to look to prior indorser for re-payment of the amount due thereon. Bank of America v. Wilson, 186 Mass. 214. Liability of ofl&cers indorsing. — Where officers and stockholders of a corporation indorse, as officers and individuals, a note made by the corpora- tion they are not Hable as a matter of law in the order in which they indorse. The circumstances raise a question of fact as to whether it was not the intention of the parties to become jointly liable as sureties. Strasburger v. Myer Strasburger & Co., 152 N. Y. Supp. 757, 167 App. Div. 198; George v. Bacon, 138 App. Div. 208. Special agreement. — Such agreement need not be established by proof of a formal contract. It is sufficient if the surrounding circumstances indicate that the indorsements were made upon an imderstanding that all indorsers should participate in the liability. Thus where several parties indorsed a note to enable a stranded theatrical company to get home, and to give the instrviment credit with the bank, so that all are equally benefited, a prior indorser who has been compelled to pay may maintain an action against a subsequent indorser for contribution. George v. Bacon, 138 App. Div. (N. Y.) 208. It was sufficient if it appeared, taking all the circumstances into account, that was the nature of the liability which, as between them- selves, the parties intended to assume and did assume. Weeks v. Parsons, 176 Mass. 570, 575; Hagerthy v. Phillips, 83 Me. 336; Cook v. Brown, 62 Mich. 473; Trego v. Cunningham, 267 111. 378. The above rule has no practical application to accommodation in- dorsers, where neither of them has ever owned the paper and no transfer by indorsement has been made. Easterly v. Barber, 66 N. Y. 433, 437. The mere fact that the indorsers are accommodation indorsers is not sufficient to change the rule that prior indorsers are liable in solido to subsequent indorsers who have paid the note, but an express agreement is necessary to render them liable ratably as between themselves. In re McCord, 174 Fed. Rep. 72; McCarty v. Roots, 62 U. S. 432; Kelly V. Burroughs, 102 N. Y. 93; Egbert v. Hanson, 34 Misc. 596; Easter- ly V. Barber, 66 N. Y. 433, 437. Where several parties indorse a promissory note to enable a stranded theatrical company to get home and to give the instniment credit with a bank so that all are equally benefited, a prior indorser who has been com- LIABILITIES OF PARTIES 209 pelled to pay may maintain an action against a subsequent indorser for contribution. George v. Bacon, 138 App. Div. (N. Y.) 208; Weeks v. Parsons, 176 Mass. 570, 575; Haggarty v. Phillips, 83 Maine 336. Parol evidence. — The true intention of indorsers — as between them- selves — can be shown by oral evidence. 4 Am. & Eng. Ency. of Law (2d ed.) 492; Guild v. Butler, 127 Mass. 386; Cady v. Shepard, 12 Wis. 639; Witherow v. Slayback, 158 N. Y. 649; Haddock v. Haddock, 192 N. Y. 513; Noble v. Beeman, 65 Ore. 93; 1 Am. & Eng. Ency. Law, (2d ed.) 356. In an action by an indorser of a promissory note, who has paid the same, against a prior indorser, it is competent to prove by parol that all the indorsers were accommodation indorsers, and by agreement they were, as between themselves, co-sureties. Easterly v. Barber, 66 N. Y. 433. As between the original parties, the apparent rights of the indorser on the face of the note and the contract of indorsement may be qualified and changed by parol evidence, and the intention of the parties established by showing the facts and circumstances of the transaction. Witherow v. Slayback, 158 N. Y. 649; Good v. Martin, 95 U. S. 90; Patch V. Washburn, 82 Mass. 82; Breneman v. Fumiss, 90 Pa. St. 186. The burden of proof is on the plaintiff to show the alleged agreement. Goldman v. Goldberger, 208 Fed. 879. In an action brought on behalf of one indorser of a note against one of two other indorsers, the defendant may be allowed to show that the indorsements were for accommodation, and that by an oral agreement among the indorsers his liability in no event was to exceed one-third of the amount at any time due on the note ; and if such an agreement is proved, his liability is governed thereby, irrespective of the order in which the indorsers signed the note. Shea V. Vahey, 215 Mass. 80; Lewis v. Monahan, 173 Mass. 122. Evidence is admissible to show that, at the time of an indorsement of a note, the first and second indorsers agreed that in case of a loss they should bear it jointly. Ross V. Espy, 66 Pa. St. 481; 5 Am. Rep. 394. 210 NEGOTIABLE INSTRUMENTS LAW Me^,£^ri^^^r^ -(^/^ ^^Tnent of the check was not stopped and the com- plaint does not allege notice of dishonor, it is demurrable for insufficiency. Ewald V. Faulhaber, 55 Misc. 275. In a complaint in an action on a promissory note against the indorsers, an allegation of notice to the indorsers of presentment, demand and non- payment is necessary, and an allegation that the note was protested for non-payment is not equivalent thereto. Sherman V. Enker, 58 Misc. 456; Dan. Neg. Inst. (5th ed.) Sec. 921; Jaffray v. Krauss, 70 Hun. 449; Wisdom v. Bills, 120 La. 701. In an action on a promissory note, an allegation that due notice of protest was given to the defendants and each of them, is eqmvalent to an allegation that notice of presentment, demand, non-payment and protest was given to the defendants. Sherman v. Ecker, 59 Misc. 216. NOTICE OF DISHONOB 247 § i6i. By whom given. The notice may be given by or on behalf of the holder, or by or on behalf of any party to the instrument who might be compelled to pay it to the holder, and who, upon taking it up, would have a right to reimburse- ment from the party to whom the notice is given. It is not necessary that notice should come from the person who holds the bill when it was dishonored, and it snfficeth if it be given after the bill was dishonored by any person who is a party to the bill. West River Bank v. Taylor, 34 N. Y. 131; Chetty on Bills, 527. The law is well settled that a demand or notice to be effective to bind an indorser, or discharge the maker or drawer paying to the person making it, must be by one having real or ostensible right to receive payment. Hofrichter v. Enyhart, 99 N. W. (Neb.) 658; West River Bank v. Taylor, 34 N. Y. 128. Notice by a stranger is not sufficient. Lawrence v. Miller, 16 N. Y. 235; Brailsford v. Williams, 15 Md. 150; Chanoine v. Fowler, 3 Wend. 173. Where the facts relative to the junior indorser 's efforts to ascertain the address of the prior indorser are undisputed, the question whether he exercised reasonable diligence is a question of law. University Press v. Williams, 48 App. Div. 188. As to banks giving notice, see Howard v. Ives, 1 Hill, 263; Sheldon v. Benham, 4 Hill 129. The presenting notary may give notice. Smede v. Bank, 20 Johns, 372; Dykman v. Northbridge, 1 App. Div. (N. Y.) 26. The maker of a note cannot give a valid notice of protest to an accom- modation indorser, but may give such notice on behalf of a bank and as its agent. Traders' National Bank v. Jones, 104 App. Div. (N. Y.) 436; Cabot Bank v. Warner, 92 Mass. 522; see Sections 162, 163. First National Bank v. Gridley, 112 App. Div. (N. Y.) 406. § 162. Notice given by agent. Notice of dishonor may be given by an agent either in his own name or in the name of any party entitled to give notice, whether that party be his principal or not. See notes Sections 161, 163. The holder of a promissory note is presumed to know the person and residence of his immediate indorser, and is bound to communicate 248 NEGOTIABLE INSTRUMENTS LAW his information to any agent who may be employed to charge such in- dorser with notice of non-payment. Lawrence v. Miller, 16 N. Y. 235. The agent may give notice in his own name. Drexler v. McGlynn, 33 Pac. (Cal.) 773. A notice by a notary public by mistake signed with the name of the maker instead of his own name, without authority from the maker, is^insufficient. Cabot Bank v. Warner, 92 Mass. 522. See also, Traders' National Bank v. Jones, 104 App. Div. N. Y. 436; Lawrence v. Miller, 16 N. Y. 238; Smith v. Poillon, 87 N. Y. 590; Eagle Bank v. Hathaway, 46 Mass. 212; First National Bank v. Gridley, 112 App. Div. 406. § 163. Effect of notice given on behalf of holder. Where notice is given by or on behalf of the holder, it inures for the benefit of all subsequent holders and all prior parties who have a right of recourse against the party to whom it is given. The duty of the holder of a promissory note is discharged by notice to his immediate indorser, but if he is not satisfied with the responsibility of such indorser he should give notice to all the parties to whom he looks for indemnity. West River Bank v. Taylor, 34 N. Y. 128; Linn v. Horton, 17 Wis. 153; Spencer v. Ballon, 18 N. Y. 327; Traders' National Bank v. Jones, 104 App. Div. 433. § 164. Effect where notice is given by party entitled thereto. Where notice is given by or on behalf of a party entitled to give notice, it inures for the benefit of the holder and all parties subsequent to the party to whom notice is given. § 165. When agent may give notice. Where the instru- ment has been dishonored in the hands of an agent, he may either himself give notice to the parties liable thereon, or he may give notice to his principal. If he give notice to his principal, he must do so within the same time as if he were the holder, and the principal upon the receipt of such notice has himself the same time for giving notice as if the agent had been an independent holder. ISrOTICE OF DISHONOR 249 Unless the agent gives notice to his principal in due time the latter is cut off, even though he used due diligence in sending notice to ante- cedent parties. Russon V. Carroll, 90 Tenn. 90. Where the plaintiffs, indorsers of a promissory note, deposited the same with the defendant bank for collection, and the bank on the dishonor of the note, not knowing the address of the prior indorsers, gave due notice of dishonor to the plaintiffs and enclosed with the notice to them a notice of dishonor addressed in blank to the indorser and bearing a two cent postage stamp, which latter notice the plaintiffs did not forward to the indorser: as the bank did what the law required it was not Hable for negligence, and the failure of plaintiffs to collect from the prior indorser was due to their own negligence. Brill V. Jefferson Bank, 159 App. Div. 461. § 1 66. When notice sufficient. A written notice need not be signed and an insufficient written notice may be sup- plemented and validated by verbal communication. A mis- description of the instnunent does not vitiate the notice imless the party to whom the notice is given is in fact misled thereby. Variant. — The Kentucky statute omits the word "not" and substi- tutes the word "written" for "verbal" in the first sentence. The South Dakota statute omits the words "the notice" in the last sentence. For case imder Kentucky statute, see Grayson Co. Bank v. Elbert, 143 Ky. 750. It is not necessary that the notice of dishonor contain a written signature. The notary's signature may be printed, as it fully acquaints the indorser of the dishonor of the note, as would the manuscript signature of a person whose handwriting he did not know, and it certainly is not expected that the indorser should know the handwriting of the notary. Bank of Cooperstown v. Woods, 28 N. Y. 561. Inartificial language, accompanied by omission to give the date of the making of a note, the date of its maturity and the name of the payee, does not invalidate a notice of protest. Hermann Co. v. Bjurstrom, 74 Misc. 93. Notice of dishonor of a promissory note erroneously addressed on its face to the maker, but sent by mail to and received by the indorser, is sufficient in the absence of proof that the indorser was misled thereby. 250 NEGOTIABLE INSTRUMENTS LAW Wilson V. Peck, 66 Misc. 179; Marshall v. Sonneman, 215 Pa. St. 65. A notice of protest, erroneous in some particulars in the description of the note protested, may be aided by evidence that there was no other note to which the notice could be applied. Cayuga Coimty Bank v. Warden, 6 N. Y. 19; Bank v. Litchfield, 9 N. Y. 279; Second National Bank v. Smith, 94 N. W. Rep. 664. A notice of non-payment of a promissory note, not stating the maker's name, is not sufficient to charge the indorser. Home Insurance Co. v. Green, 19 N. Y. 518. The rule appears to be well settled that where a negotiable instrument has been permitted to go to protest, and the holder gives a notice of pro- test which contains a misstatement as to the time of dishonor, such mistake invalidates the notice, with the result that an indorser upon whom the defective notice is served will not be bound thereby. But where the indorser is not misled by a mistake in the notice as to the date of the dishonor, such mistake will not have the effect of rendering the notice invalid and discharge the indorser, as for example, where the mistake is apparent from the face of the notice, it being handed to the indorser before the date stated had arrived. 3 R. C. L. 1264; Derham v. Donohue, 155 Fed. 385. See also, Wilson v. Peck, 121 N. Y. Supp. 344; Marshall v. Sonneman, 216 Pa. St. 65; 64 Atl. 874; Howard v. Von Gieson, 46 App. Div. (N. Y.) 79; Hodges v. Shuler, 22 N. Y. 114, 119; Artisans' Bank v. Backus, 36 N. Y. 100, 107; Northup v. Cheney, 27 App. Div. (N. Y.) 421; Mills v. Bank of United States, 11 Wheat. 431; Gates v. Beecher, 60 N. Y. 518; Carter v. Bradley, 19 Maine 62. § 167. Form of notice. The notice may be in writing or merely oral and may be given in any terms which sufficiently identify the instrument, and indicate that it has been dis- honored by non-acceptance or non-payment. It may in all cases be given by delivering it personally or through the mails. Variant. — The Kentucky statute omits the words "or merely oral." For case under the Kentucky statute, see Grayson Bank v. Albert, 143 Ky. 753. While no precise form is necessary in a dishonor of a promissory note, yet the notice must reasonably apprise the party of the particvilar paper upon which he is sought to be charged. The note should be de- scribed in substance. I NOTICE OF DISHONOR 251 Home Insurance Co. v. Green, 19 N. Y. 518; Derham v. Donohue, 155 Fed. 385; Brown v. Jones, 125 Ind. 375. It is not necessary that the notice should contain a formal allegation that the payment of a note was demanded at the place where payable. It is sufficient that it stated the fact of non-payment and that the holder looks to the indorser for indemnity. Mills V. U. S. Bank, 11 Wheat. (U. S.) 431. A notice to an indorser is not insufficient although it does not state at whose request it was given, nor who is the holder. It is of no conse- quence to the indorser, who is the holder, as he is equally boimd by the notice, whosoever he may be, and it is time enough for him to ascertain the true title of the holder when he is called upon for pa3rment. Again, a misnomer of the indorser in the notice will not vitiate it if in fact he knew it was intended for him. But reasoning that the most striking feature of a note is the name of the maker it has been held that a notice of dishonor is insufficient if it fails to specify the maker's name, although it states the date, amoimt and time of maturity of the instrument. The notice is sufficient if signed by a notary, and the notary's name may be printed instead of being affiD5;ed by him in his own handwriting. Under this section no signature at all need be appended to the notice. 3 R. C. L. 1266; Derham v. Donohue, 153 Fed. 386; Home Insurance Co. V. Green, 19 N. Y. 518; Fulton v. Maccracken, 18 Md. 528. Notice to an indorser may contain more than is necessary, and more than is true, and yet be sufficient. It may contain less than the whole truth, that is less than what an exact copy of the note if sent to the indorser would give, and be good. This must necessarily be so, from the principal of law that no form of notice is prescribed, and that there is no general rule with regard to the notice other than the one already mentioned. Thus the omission of the date of the bill, the stating of a false date, or an inaccurate statement of the amoimt, is neither of them of course fatal to the notice as has been repeatedly held, if the notice be otherwise suffi- ciently full to give the needed information. Gill V. Palmer, 29 Conn. 54; Bank of Cooperstown v. Woods, 28 N. Y. 546; Cayuga Co. Bank v. Warden, 6 N. Y. 19; Derham v. Donahue, 155 Fed. 179. The essential facts to be stated in a notice of protest to bind the indorser are: (1) The note has not been paid at maturity. (2) It has been protested for non-payment. (3) The identification of the note. Artisans' Bank v. Backus, 36 N. Y. 100; Cayuga Co. Bank v. Warden, 1 N. Y. 413; Cook v. Litchfield, 9 N. Y. 280; Second National Bank v. Smith, 118 Wis. 19. 252 NEGOTIABLE INSTKUMENTS LAW A notice of dishonor need not state that the sender looks to the indorser, for payment as it may be inferred that the holder looks to the indorser and no other inference could reasonably be drawn from the notice. Nelson v. First National Bank, 69 Fed. 798; Ransom v. Mack, 2 Hill (N. Y.) 587. A notice of protest, dated the day a note is payable, and which states the names of the maker and indorser, and the amount, is sufficient to charge the indorser, imless circimistances exist which would render the information it was designed to give equivocal and uncertain. Bank of Cooperstown v. Woods, 28 N. Y. 561; Yotings v. Lee, 12 N. Y. 551. A notice of non-payment of a promissory note, not stating the maker's name, is not sufficient to charge the indorser. Home Insurance Co. v. Green, 19 N. Y. 518. An indorser 's liability to recollect whether he received written notice of protest does not overcome the positive proof that such notice was written and mailed. Herrman Lumber Co. v. Bjurstrom, 74 Misc. 93. As the object of the notice is always to give information, if the re- quired information actually reaches the party to be notified, it is sufficient however it may be communicated. Hence, whatever mode of service of notice may be adopted, if the notice actually comes to the indorser or drawer in due season, from the proper quarter and in proper form, it is valid and effectual. 3 R. C. L. 1257; Monarch Co. v. Farmers and Traders Bank, 105 Ky. 430; 49 S. W. 317. Notice may be given by telephone if it be clearly shown that the party to be notified was really commtmicated with, that is, fully identified, as the party at the receiving end of the line. Bank v. Fertilizer, 125 Tenn. 329; but see Mayer v. Boyle, 182 N. Y. Supp. 729. A notice of protest signed by a notary pubHc, and personally delivered by him to the indorser is not sufficient to charge the latter, where it ap- pears that the notice was addressed to another person than the indorser, and stated that the holder looked to such person for the payment of the note. Marshall v. Sonneman, 216 Pa. St. 65. Where personal service of a notice is relied upon, the evidence must show either actual personal service or an ordinarily intelligent, diligent effort to make personal service upon the indorser, either at his place of business during business hours, or at his residence if he has no place of NOTICE OF DISHONOK 253 business; but if he be absent, it is not necessary to call a second time, and notice may in that event be left with any one found in charge, or no one there, then the giving of notice is deemed to be waived. Am. Exchange National Bank v. American H. V. Co., 103 App. Div. (N. Y.) 373; Bank of Commonwealth v. Mudgett, 44 N. Y. 514; N. Y. & A. Contracting Co. v. Telma Savings Bank, 51 Ala. 305; Williams v. Bank of U. S., 2 Pet. 96; Reed v. Spear, 107 App. Div. (N. Y.) 149. § 1 68. To whom notice may be given. Notice of dis- honor may be given either to the party himself or to his agent in that behalf. A notice of protest of a draft may be served upon an agent of the payee and indorser of the draft, where the agent has authority to make and indorse drafts, and has authority to act and has acted as general agent of the payee. Pearsons v. Kruger, 45 App. Div. (N. Y.) 187; Scarborough v. City National Bank, 157 Ala. 577; 48 S. Rep. 62. Under this section a notice of protest of a bill of exchange indorsed by a bank may be addressed to its cashier. Coffman v. Bank of Kentucky, 41 Miss. 212; 90 Am. Dec. 371. In Union Bank v. Stone, 50 Maine 595, the notary testified that he was in the habit of delivering notices to S, and S testified that he was in the habit of delivering notices for the notary, and that he seasonably delivered to the parties to be notified all notices handed him for delivery, but had no definite recollections of doing so in the present instance. It was held, this testimony was sufficient. McLean v. Ryan, 36 App. Div. (N. Y.) 281; New Haven Co. Bank v. Mitchell, 15 Conn. 206. An incompleteness or inaccuracy in the address of a notice, either as to person or place addressed will be immaterial where it appears in evi- dence that the party charged actually received the notice. Am. and Eng. Ency. of Law, 416; Carter v. Bradley, 36 Am. Dec. (Me.) 735; Glickman v. Earley, 78 Wis. 223. Cases on the subject generally, see. Am. Exchange Bank v. Am. H. V. Co., 103 App. Div. 372; Reed v. Spear, 107 App. Div. 149; Mohlman V. McKane, 60 App. Div. 547; Fassin v. Hubbard, 55 N. Y. 471. § 169. Notice where party is dead. When any party is dead, and his death is known to the party giving notice, the notice must be given to a personal representative, if there be 254 NEGOTIABLE INSTRUMENTS LAW one, and if with reasonable diligence he can be found. If there be no personal representative, notice may be sent to the last residence or last place of business of the deceased. A notice of non-payment of a note given in an informal way to an executor of a deceased indorser after a delay of eleven days, and to his co-executor to whom the party giving such notice was referred only after ten additional days have elapsed, where more than six weeks elapse before a formal claim is presented to the executors, will not sustain an action to enforce the liability of such indorser upon the note. Deininger v. Miller, 7 App. Div. (N. Y.) 409. Notice of demand and non-payment served upon one of several execu- tors of a deceased indorser is sufficient to bind the estate. Carolina National Bank v. Wallace, 13 S. C. 347; 36 Am. Rep. 694. It has been held that if notice be sent to the last residence or last place of business of the deceased, it is sufficient to render his estate re- sponsible, as it may reasonably be supposed that it will thus reach those interested in it. Goodnow V. Warren, 122 Mass. 82; Merchants' Bank v. Birch, 17 Johns 25; Linderman v. Guldin, 34 Pa. St. 54. Where an indorser of a note has died and the holder seeks to render his estate liable, in case the Surrogate's Court has not acquired jurisdic- tion of the estate, and no executor or administrator has been appointed, it is still the duty of the holder to use all reasonable diHgence in order that those interested in the estate may be promptly informed of the demand. If notice be sent to the last place of residence or place of busi- ness of the deceased, it is sufficient to render his estate liable, as it may be reasonably supposed that it will reach those interested in it. Goodnow v. Warren, 122 Mass. 79; Merchants' Bank v. Birch, 17 Johns (N. Y.) 25. Cases on the subject generally, see Mohlman v. McKane, 60 App. Div. (N. Y.) 546; Merchants' Bank v. Brown, 86 App. Div. 599; Reed v. Spear, 107 App. Div. 144; Bank of Port Jefferson v. Darling, 91 Hun. 236; Smally v. Wright, 40 N. J. Law 471. § 170. Notice to partners. Where the parties to be notified are partners notice to any one partner is notice to the firm even though there has been a dissolution. The admission by one of two partners who have indorsed a draft in the name of the firm, that the draft has been duly protested will not, if made after the dissolution of the partnership, be allowed to have the effect of proving notice as against the other indorser. NOTICE OF DISHONOR 255 Bank of Vergennes v. Cameron, 7 Barb. 143. A demand of payment of one is demand of all, and where there is a dissolution of the partnership before a bill falls due cannot vary the rule, nor render it necessary that a separate demand should be made of each. Brown v. Turner, 15 Ala. 832; Slocomb v. Lizardi, 2 La. Am. 639 Gates V. Beecher, 60 N. Y. 518; Seldner v. Mt. Jackson Bank, 66 Md. 488 Darling v. March, 22 Maine 184; Kershaw v. Kelsey, 100 Mass. 561 Fiegenspan v. McDonnell, 201 Mass. 341; Bank of St. Loms v. Altheimer, 91 Mo. 191. The service of notice upon an agent employed in liquidating the affairs of a partnership firm is good service, as such notice relates to those affairs. Fassin v. Hubbard, 55 N. Y. 471. In Traders' National Bank v. Jones, 104 App. Div. (N. Y.),it was held, that a notice served upon the firm of which Jones was a member, had the plaintiff alleged that Jones was such member, would alone be sufficient to charge Jones with the liability as indorser. Gowan v. Jackson, 20 Johns 176. One who indorses a promissory note in the name of a firm, cannot deny the existence of the firm in order to protect himself from liability. Hubbard v. Matthews, 54 N. Y. 43. There is a distinction between the case of a note of joint makers who are not partners and a note of partners. That distinction rests upon the fact that partners are but one person, in legal contemplation; that each partner, acting in such capacity, is not only capable of performing what all can do, and such acts necessarily bind them all, and all the partners are affected by the knowledge of one. These things do not apply to the relations of joint makers who are not partners. Hence a demand of one partner is eqmvalent to a demand of all; a demand of one of joint makers, not partners, is not. Gates V. Beecher, 60 N. Y. 523; Major v. Hawks, 12 111. 298; see Sec. 171. It has been held that if one of the members of the partnership resides at a distance and another at the place of residence of the party giving notice, notice shoiild be given to the latter partner. Himie V. Watt, 5 Kan. 34. Cases on the subject generally, see Rhett v. Poe, 2 How. (U. S.) 457; Gowan v. Jackson, 20 Johns 176; Hubbard v. Matthews, 54 N. Y. 43; Citizens Bank v. Hays, 96 Ky. 365; St. Louis National Bank v. Altheimer, 91 Mo. 190. 256 NEGOTIABLE INSTRUMENTS LAW § 171. Notice to persons jointly liable. Notice to joint parties who are not partners must be given to each of them, unless one of them has authority to receive such notice for the others. Distinction between parties jointly liable and partners, see Notes, Sec. 170; Gates v. Beecher, 60 N. Y. 523. Where persons not partners indorse, each are entitled to notice, and upon failure to give such notice neither could be charged, because as to them each must have separate notice, and neither is liable without the other is so charged. Willis V. Green, 5 Hill 232; Shepard v. Hamley, 1 Conn. 367; Hub- bard V. Matthews, 54 N. Y. 50; Boyd v. Horton, 16 Wis. 495; but see, Jamagin v. Stratton, 95 Tenn. 619; Williams v. Paintsville Bank, 143 Ky. 781; 137 S. W. 535. § 172. Notice to bankrupt. Where a party has been adjudged a bankrupt or an insolvent, or has made an assign- ment for the benefit of creditors, notice may be given either to the party himself or to his trustee or assignee. In Callahan v. Bank of Kentucky, 82 Ky. 231, in discussion of this subject the court said: "The question has been heretofore undetermined in this state, and we are at liberty therefore to estabHsh that rule which is in most accord with what we conceive to be the weight of authority and reason. We are satisfied, therefore, to hold the law to be that, whenever a general assignment is made, as contemplated by our law, the assignee in such assignment so far stands in the shoes of his assignor that notice to such assignee of the non-payment of the indorsed paper will bind the indorser." American National Bank v. Junk, 94 Tenn. 624; Casco Bank v. Shaw, 79 Me. 376. Due notice of non-payment is not excused, because the maker of a note was insolvent or bankrupt when the note was made and indorsed, and also when it fell due, although the fact was known to the indorser. This demand and notice the indorser has a right, in all cases, to insist upon; for this reason, that, upon payment by him, he may have his remedy over against the maker. And although the insolvency of the maker renders his remedy less valuable, it does not necessarily render it worthless. There are various degrees of insolvency, and it rarely happens that a man is totally insolvent, so that there is a chance of getting something by an appUcation to the debtor. Besides, if a man has nothing of his own he NOTICE OF DISHONOR 257 may have friends who, to relieve him from pressure, will do something for him. The indorser therefore has a chance of securing himself at least in part. The only reason that can be assigned for insolvency taking away the necessity of notice is that notice could be of no use to the indorser. But it is almost impossible to prove that it might not have been of use. PhilHps V. Harding, 70 Fed. 468; Leonard v. Olson, 98 la. 162; Farnum V. Fowle, 12 Mass. 89; Cook v. American Tube Co., 28 R. I. 41 ; 3 R. C. L. 1234. Insolvency of a maker is no excuse for failure to notify the indorser of its dishonor. Manning v. Lyon, 70 Hunn. 345; Meise v. Newman, 98 Hun. 428. If the maker of a note becomes insolvent and is adjudged a bankrupt, the payee should present his claim in the bankrupt's estate and if he fails to do so, the indorsers are released, but only to the extent to which they suffer because of such failure, and a recovery may be had against them for the amount which would have remained unpaid had the claim been pre- sented in bankruptcy and a dividend been allowed and received thereon. Second National Bank v. Prewitt, 117 Tenn. 1 ; 9 L. R. A. 581. § 173. Time within which notice must be given. Notice may be given as soon as the instriunent is dishonored; and unless delay is excused as hereinafter provided, must be given within the times fixed by this chapter. The maker of a promissory note has until the close of the banking hours, of the bank where the note is payable, in which to pay it, and if before the close of banking hours he deposits money in the bank sufficient to cover the note, demands of payment (made by the holder) earlier on the same day are premature. He cannot thereafter be lawfully charged with fees of protest made before the close of banking hours, nor with in- terest after maturity where the account was kept good until action brought and he thereafter immediately paid the amoimt into court and pleaded tender, nor is he chargeable with costs of the action. German American Bank v. Milliman, 31 Misc. 87; Etheridge v. Ladd, 44 Barb. 69; Merchants' Bank v. Elderkin, 25 N. Y. 178; Osbom v. Rogers, 112 N. Y. 573; Planters' Bank v. Markham, 6 Miss. 397; Mills V. Bank of United States, 11 Wheat. 431. The holder of a bill or note is entitled to give notice of dishonor im- mediately upon demand and non-payment. If the instrument is due at any hour upon the day of maturity, the holder may present it for payment and give notice of dishonor forthwith. But where the maker is entitled to the whole day in which to make payment, the notice should not be given until the conclusion of business hours. If an indorser receives notice 258 NEGOTIABLE INSTRUMENTS LAW in due season that the note has been duly presented for payment and protested, the purpose of the law has been accomplished, although the holder of the note has not complied with one of the essential rules in regard to use of diligence in giving notice. While the authorities are not agreed upon the proposition, it is held by the weight of authority, that the same diligence must be used in giving notice of dishonor to the indorser of overdue note as is required by the law merchant is notifying one who indorses before maturity. 3 L. C. L. 1246; King v. Crowall, 61 Mo. 244; Oakley v. Carr, 66 Neb. 751; 92 N. W. 1000; Stanley v. McElrath, 86 Cal. 449; 10 L. R. A. 545; Rosson v. Carroll, 90 Tenn. 90; 12 L. R. A. 727. § 174. Where parties reside in same place. Where the person giving and the person to receive notice reside in the same place, notice must be given within the following times: 1 . If given at the place of business of the person to receive notice, it must be given before the close of business hours on the day following; 2. If given at his residence, it must be given before the usual hours of rest on the day following; 3. If sent by mail, it must be deposited in the post-office in time to reach him in usual course on the day following. Variant. — The Rhode Island statute amends subd. 2 to read: "2. If given at his residence it must be given before ten o'clock in the evening of the day following." Subd. I. — Service at the place of business must be made during business hours, but service at the residence will be sufficient if made during any hours when members of the household are attending to their ordinary affairs. Adams v. Wright, 14 Wis. 409. See also, Rosson v. Carroll, 90 Tenn. 90; Graul v. Strutzel, 53 la. 712; Bank v. Ezell, 10 Hun. 386; Patterson v. Todd, 18 Pa. St. 426; Cayuga Coimty Bank v. Hunt, 2 Hill 237; Dan. Neg. Insts., Section 1038. Subd. 2.— See Adams v. Wright, 14 Wis. 409. Subd. 3. — ^Where the notary certifies that a notice of protest was mailed to an indorser in care of plaintiff, and there is no evidence that the defendant was at plaintiff's address, and the notice does not contain the reputed address of the defendant, and any presumption of diligence in NOTICE OF DISHONOR 259 obtaining and mailing notice to the defendant is rebutted by the fact that three days after the protest she received notice mailed to her the day before its receipt. Siegel V. Dubinsky, 56 Misc. 683. A notice placed in a mail chute under the control of the postoffice department in the City of New York on the day of protest and postmarked the following day at noon will be prestimed to have been delivered before the close of business on the day last mentioned, as required by this section. Wilson V. Peck, 66 Misc. 179. Where the holder does not actually know the indorser's place of residence, the notice may be addressed to the place where, after diligent inquiry, he is informed and believes he resides. Requa v. Collins, 51 N. Y. 147; University Press v. Williams, 48 App. Div. 196. § 175. Where parties reside in different places. Where the person giving and the person to receive notice reside in different places, the notice must be given within the following times: 1. If sent by mail, it must be deposited in the post-ofifice in time to go by mail the day following 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 received in due course of mail, if it had been deposited in the post-ofhce within the time specified in the last subdivision. Whitewell v. Johnson, 17 Mass. 449; Chick v. Pillsbury, 24 Me. 458; Sewall V. Russell, 3 Wend. 276; Sussex Bank v. Baldwin, 2 Harrison (N. J.) 487; Burgess v. Vreeland, 24 N. J. L. 71; Lawson v. Farmers' Bank, 1 Ohio St. 206; Freeman's Bank v. Perkins, 18 Me. 292. These authorities, while not entirely harmonious, undoubtedly tend to sustain the rule that the notice must be sent on the next day by the first practical and convenient post. In Smith v. Poillon, 87 N. Y. 597, the court said: "From a careful examination of the above authorities it is clear that the law is not precisely settled. It appears that at first it was supposed to be necessary that a notice of dishonor should be given by the next post after dishonor, on the same day, if there was one. That rule was found inconveniently stringent, 260 liTEGOTIABLE INSTRUMENTS LAW and then it was held that when the parties lived in different places between which there was a mail, the notice could be posted the next day after the dishonor or notice of dishonor. Some of the authorities hold that the party required to give the notice may have the whole of the next day. Some of them hold that when there are several mails on the next day, it is sufficient to send the notice by any post of that day. Other authorities lay down the rule, in general terms, that the notice must be posted by the first practical and convenient mail of the next day; and that rule seems to be supported by most authorities in this state. What is practical and convenient mail depends upon circumstances. It may be controlled by the usages of business and the custom of the people at the place of mailing, and the condition, situation and business engagements of the person required to give the notice. The rule should have a reasonable application in every case." Notice of dishonor of a bank check given by telegraph on the second day following the deposit of the check for collection and immediately after the depositor received notice of such dishonor is good, for imder this section and Section 174, the bank had until the day following to give notice of dishonor, and by virtue of Section 178 the depositor had until the day following notice to him within which to notify antecedent parties. Jurgens v. Wichmann, 124 App. Div. (N. Y.) 531. Notice of dishonor is too late, where the notice with insufficient postage was deposited in the postoffice after ordinary business hours and the closing of mail on the business day succeeding dishonor, and was not again sent with sufficient postage imtil five days after its return by the postal authorities. First National Bank v. Miller, 139 Wis. 126. The general rule that notice of dishonor may be sent by mail to a drawer or indorser who resides in a different city or town from that in which the holder resides, is foimded on the universal usage of all persons engaged in commercial and other business transactions to resort to the public post as a safe and certain medium of commimication between places from and to which there is a regular transmission of the mail. If such were not the nile, and if it was necessary in order to charge a drawer or indorser either to give him personal notice of the dishonor of a bill or note, or to leave a notice at the place of his domicile, it is obvious that in may cases a very serious burden woiild be put on the holder of negotiable paper, and its free circulation beyond the limits of the domicile of the parties would become almost impracticable. Shaylor v. Mix, 4 Allen (Mass.) 351. The subject generally, see, Strubbe v. Kings Co. Trust Co., 60 App. Div. (N. Y.) 549. NOTICE OF DISHONOR 261 § 176. When sender deemed to have given due notice. Where notice of dishonor is duly addressed and deposited in the post-office, the sender is deemed to have given due notice, notwithstanding any miscarriage in the mails. This section should be construed in connection with section 179 specifying "where notice must be sent." It is a defense to an action against the indorser of a promissory note that notice of protest, mailed to him at a place he did not live and not at his last known address, was not received by him until many months after the note had been protested, and that plaintiff did not use reasonable diligence to ascertain defendant's address. Albany Trust Co., 70 Misc. 598. Proof of the non-receipt of the notice was competent on the question of whether there had ever been an actual mailing. Such proof would con- stitute a circttmstance in which the proof as to the mailing was to be weighed and considered. Union Bank v. Deshel, 139 App. Div. (N. Y.) 219. Where the evidence shows that a notice of dishonor of a promissory note, sent to an address other than the one written by the indorser upon the note, was never received by the indorser, the notice was not "duly addressed" within the meaning of this section, and the indorser is entitled to judgment in her favor. Centvu-y Bank v. Breitbart, 89 Misc. 308; Feigenspan v. McDonnell, 201 Mass. 341. Where a notice of dishonor is mailed as required by law, the fact that it is not received is immaterial. Board of Education v. Angel, 84 S. E. Rep. 747. A notice of protest signed by a notary public and personally delivered by him to the indorser is not sufficient to charge the latter, where it appears that the notice was addressed to another person than the indorser, and stated that the holder looked to such person for the payment of the note. Marshall v. Sonneman, 216 Pa. St. 65. A notice is not on time where it is deposited with insufficient postage in the postoffice after ordinary business ho\irs and after the close of mail on the first secular day following dishonor, and being returned by the postal authorities, is not again mailed with sufficient postage until five days thereafter. Bank of Shawano v. Miller, 139 Wis. 126; 120 N. W. 820. The burden of proof rests upon plaintiff to show a compliance with the statutory provisions in order to hold the indorser, as the liability of the indorser depends entirely upon compliance as to notice. 262 NEGOTIABLE INSTRUMENTS LAW Bank v. Zimmerman, 185 N. Y. 210; Robinson v. Aird, 43 Fla. 30^ Bank v. Pezolat, 95 Mo. App. 404, 69 S. W. 51; Bank v. Watch Case Co., 187 Mich. 226. For cases on the subject generally, see, Du Pont Powder Co. v. Rooney,. 63 Misc. 344; Cuming v. Roderick, 28 App. Div. (N. Y.) 253; Siegel v. Dubinsky, 56 Misc. 681; Bartlett v. Robinson, 39 N. Y. 187; Howard v. Van Gieson, 46 App. Div. 77; University Press v. Williams, 48 App. Div. 189; State Bank v. Solomon, 84 N. Y. Supp. 976; Requa v. Collins, 51 N. Y. 145; Vogel v. Starr, 132 Mo. App. 430; Bacon v. Hanna, 137 N. Y. 382; Pier v. Heinrichshoffen, 67 Mo. 163; Nolly v. Lyons, 117 111. 244; Carter v. Bradley, 19 Me. 62; Marshall v. Sonneman, 216 Pa. St. 65. § 177. Deposit in post-office; what constitutes. 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. Delivery to a mail carrier while making his rounds has been held a deposit within the meaning of the section. Pearce v. Langfit, 101 Pa. 507; Wynen v. Schappert, 6 Daly 558. A mail chute is a letter box imder the control of the postoffice depart- ment, and therefore eqmvalent to the postoffice itself. Wilson V. Peck, 66 Misc. 180; Casco National Bank v. Shaw, 79 Me. 376, Atl. 67. The deposit of a notice of dishonor of negotiable paper in a private letter box of a private office is not a deposit as required by this section. Townsend v. Auld, 10 Misc, 343. Where notice was deposited in a letter box in the bank from which the mail was accustomed to be collected by the mail carrier, it might be inferred in the absence of any evidence to the contrary that the notice had been sent. Central National Bank v. Stoddard, 83 Conn. 339; Hastings v. Brookly L. I. Co., 138 N. Y. 473, 478; Whitney v. Moore, 61 Vt. 230; 17 Atl. 1007. For cases on the subject generally, see. Bank v. Shaw, 79 Me. 376; Johnson v. Brown, 154 Mass. 106; Casco Bank v. Shaw, 79 Me. 376; Wood V. Callahan, 61 Mich. 402. § 178. Notice to antecedent party; time of. Where a party receives notice of dishonor, he has, after the receipt of such notice, the same time for giving notice to antecedent parties that the holder has after the dishonor. The holder may give notice of dishonor to the indorser to whom he desires to look for the payment of the money, and it is then incumbent NOTICE OF DISHONOR 263 upon him within the time specified after he receives the notice from the holder to give notice to those to whom he may wish to look for reimburse- ment. The operation of this section is not confined to those who are antecedent in liability as to the whole of the debt ; but it applies to all who are antecedent as to any part of it. The indorsers known their relation to each other better than the holder, and the purpose of the act is to provide a uniform rule which the holder may follow in all cases as the rule was applied in the case of successive indorsers at common law. Williams v. Bank, 143 Ky. 781, 137 S. W. 535; Eaves v. Keeton, 103 S. W. (Mo.) 632. Service of notice upon an antecedent party is not shown by the mere testimony of the notary that, not knowing the address of the indorser, he enclosed the notice of dishonor to a subsequent indorser with postage for forwarding the same to the prior indorser. Fuller Buggy Co. v. Waldron, 112 App. Div. 814. Where the last indorser of a promissory note received notice of dis- honor on Saturday, his notice to the next prior indorser is timely if served on the following Monday. Oakley v. Carr, 92 N. Y. (Neb.) 1000, 60 L. R. A. 431. Notice of dishonor of a bank check given by telegraph on the second day following the deposit of a check for collection and immediately after the depositor received notice of such dishonor is good, for under Sections 174 and 175 the bank had tmtil the day following to give notice of dishonor, and by virtue of this section the depositor had imtil the day following notice to him within which to notify antecedent parties. Jurgens v. Wichmann, 124 App. Div. 531. Cases on the section generally, see, Shelbume National Bank v. Townsley, 102 Mass. 177; Rosson v. Carroll, 90 Tenn. 90, 16 S. W. 66, 12 L. R. A. 727; Stephenson v. Dickson, 24 Pa. St. 148; Williams v. Bank, 143 Ky. 787; Shea v. Vahney, 215 Mass. 80. § 179. Where notice must be sent. Where 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-oflfice nearest to his place of resi- dence, 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 264 NEGOTIABLE INSTRUMENTS LAW 3. If he is sojourning in another place, notice may be sent to the place where he is so sojourning. But where the notice is actually received by the party within the time specified in this chapter, it will be sufficient, though not sent in accordance with the requirements of this section. If the holder goes further and attempts to add a particular address, he takes the risk that the address so given may be wrong, in which event the statute gives him no protection. McGrath v. Matilda Francolini, Emil Mayer, et al., 156 N. Y. Supp. 980; Du Pont de Nemour Powder Co. v. Rooney, 63 Misc. Rep. 744, 117 N. Y. Supp. 220; Ebling Brewing Co. v. Reinheimer, 32 Misc. Rep. 594, 66 N. Y. Supp. 458; Webber v. Gotthold, 8 Misc. Rep. 503, 28 N. Y. Supp. 763; and perhaps also Cuming v. Rod- erick, 28 App. Div. 253, 50 N. Y. Supp. 1053; Id., 42 App. Div. 620, 58 N. Y. Supp. 1093; Id., 167 N. Y. 571, 60 N. E. 1109. Subd. I. — The term residence as used in this section is not used in strict sense as necessarily implying a permanent, exclusive or actual abode in the place, but it may be satisfied by a temporary, partial or even con- structive residence. Wachusett National Bank v. Fairbrother, 148 Mass. 181. The holder cannot rely upon the fact that the indorser's address is given in the directory as his place of residence. McGrath v. FrancoHni, 92 Misc. 359. Where the indorser of a note, residing in New York City, does not add his address to his signature, a notice of dishonor mailed to him ad- dressed "New York City," is sufficient, though the notice is not received by the indorser. If the holder goes further and attempts to add a particular address, he takes the risk that the address so chosen may be wrong, in which event the statute gives him no protection. McGrath v. FrancoHni, 92 Misc. 364, 156 N. Y. Supp. 980; Webber V. Gotthold, 8 Misc. 503. See also, Mohlman v. McKane, 60 App. Div. 546. Notice mailed to an indorser of a note, directed to the city in which he has a place of business meets the requirements of this section. Hussey v. Sutton, 96 Misc. 552. The statute is mandatory. It provides that where the indorser has not added his address to his signature, the notice "must" be sent to the postoffice nearest to his place of residence or to the postoffice where he is accustomed to receive his letters. In such a case the burden is on the holder of the note to discover the "place of residence" and to send the NOTICE OF DISHONOR 265 notice to the nearest postoffice. This appears to be the measure of "diligence" required by law (Cuming v. Roderick, 28 App. Div. 253, 256, 50 N. Y. Supp. 1053), but if the holder goes further and attempts to add a particular address, he takes the risk that the address so chosen may be wrong, in which event the statute gives him no protection (Du Pont Co. v. Rooney, supra; Cuming v. Roderick, supra). An indorser who has not designated his address at the time of his indorsement cannot justly demand that this additional risk of selecting the correct address be voluntarily assumed by the holder. The statute declares the latter's duty, while affording the indorser ample means of protection. If he omits to avail himself of that protection, the omission cannot well be remedied by an at- tempt to enlarge the holder's duties beyond the plain meaning of the law. Where the notice has been mailed as required by the statute, the Hability of the indorser becomes fixed, although the notice may not be received by him. Du Pont Co. V. Rooney, 63 Misc. Rep. 344, 346, 117 N. Y. Supp. 220; Ebling Brewing Co. v. Reinheimer, 32 Misc. Rep. 594, 66 N.Y. Supp. 458; Webber v. Gotthold, 8 Misc. Rep. 503, 28 N. Y. Supp. 763; Bartlett v. Robinson, 39 N. Y. 187; Requa v. Collins, 51 N. Y. 145; Cummings v. Roderick, 167 N. Y. 571; University Press v. Williams, 48 App. Div. (N. Y.) 188; McGrath v. Francolini, 92 Misc. 364; Bacon v. Hanna, 137 N. Y. 382; Lankofsky v. Raymond, 217 Mass. 99. A notice addressed to the indorser at "New York" is insufficient where there is no evidence that he lived, ever had lived, or was sojourning in New York, and no inqtiiry was made to ascertain whether such was a fact. Fonesca v. Hartman, 84 N. Y. 131. Notice is sufficient if mailed to the indorser, at the place where the collecting agent believes he Hves, although he does not live there and the holder knows his residence but fails to communicate it to the agent. Bartlett v. Isbell, 31 Conn. 296. Subd. 2.— In Hussey v. Sutton, 160 N. Y. Supp. 936, the defendant resided in the village of Akron and had his place of business at Buffalo. The notary's certificate of protest stated that the notice of protest was directed to the defendant at Buffalo, which notice was not received. Quot- ing this section the court held, there was proper notice. See also, Montgomery v. Marsh, 7 N. Y. 482; Scott v. Brown, 240 Pa. St. 328. The defendant indorsed a note, payable at 309 Broadway, New York City, where his attorney's office was located. The notary, who protested the note, sent a notice of dishonor intended for the defendant to that address. The defendant testified that he never lived, transacted business 266 NEGOTIABLE INSTKUMENTS LAW or received his mail at the address mentioned. The notary was unable to state what steps he had taken to locate the defendant. It was held that the notice was insufficient. Mechanic v. Elgie Iron Works, 163 N. Y. Supp. 97. Subd. 3. — Although the residence or place of business is the usual and proper place for giving notice, it will be good if actually given an3rwhere. Dicken v. Hall, 87 Pa. St. 380; Eastern Bank v. Brown, 17 Me 356; Lowell Trust Co. v. Pratt, 183 Mass. 379; Citizens' National Bank v. Cade, 73 Mich. 449. Subd. 4. — Notice of dishonor by telegraph is good. Jurgens v. Schulter, 124 App. Div. (N. Y.) 531. Notice of dishonor of a promissory note erroneously addressed on its face to maker but sent by mail to and received by the indorser is sufficient in absence of proof that the endorser was misled thereby. Wilson v. Peck, 66 Misc. 179. § 180. Waiver of notice. 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. The waiver may be either verbal or in writing, and it is not necessary that it should be direct and positive. It may result from implication and usage, or from any imderstanding between the parties which is of a char- acter to satisfy the mind that a waiver is intended. Before the maturity of a note, the defendant indorser called upon the plaintiff, who was the holder, and asked to have it extended another year. To this the plaintiff agreed, on condition that the defendant should let his name remain upon it and "let it be as it was." To this the defendant said yes. This was held to be a waiver of the indorser's right to a demand of payment and notice of non-payment thereof. Cady V. Bradshaw, 116 N. Y. 188; Gawtry v. Doane, 48 Barb. 148; Linthiomi v. Caswell, 19 App. Div. (N. Y.) 541; First National Bank v. Weston, 25 App. Div. 414. An agreement at or before maturity of the note that an extension of time shall be given is a sufficient circumstance or fact to authorize an infer- ence of waiver. Daniel on Neg. Inst. (4th Ed.) Section 1106; Sheldon v. Horton, 43 N. Y. 93, 3 Am. Rep. 669; Amoskeag Bank v. Moore, 37 N.H. 539, 75 Am. Dec. 156; Ridgway v. Day, 13 Pa. 208; Robinson v. Holmes, 109 Pac. 754. Any act, coiu^se of conduct, or language of the indorser calculated to induce the holder not to make demand or protest or give notice, or to put him off his guard, or any agreement to that effect, will NOTICE OF DISHONOR 267 dispense with the necessity of taking such steps. Daniel on Neg. Inst. (4th ed.) Section 1103; Boyd v. Bank of Toledo, 32 Ohio St. 526, 30 Am. Rep. 624; Torbert v. Montague, 38 Colo. 325,87 Pac. 1145; Taunton Bank V. Richardson, 5 Pick. (Mass.) 436; Yaeger v. Farwell, 13 Wall. 6, 20 L. Ed. 476. The contingent liability of an indorser is changed into a fixed liabiHty by waiver of demand and notice. Amoskeag Bank v. Moore, supra. Stephenson v. Brown, 147 Pa. St. 303. The fact that an indorser of an instrument, waiving demand, notice and protest, could neither read nor write, beyond the making of his sig- nature, is immaterial unless it appears that the indorsee was aware of the fact. First National Bank v. Stolz, 183 S. W. (Mo.) 675. A waiver must be made by one having the capacity to incur obHga- tions, but, inasmuch as notice left with a clerk or party in charge of an indorser 's place of business is sufficient, it follows that a waiver by a person so in charge is effective." 7 Cyc. 1124. Ludington v. Thompson, 4 App. Div. 120. 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 acknowledgement of liability. Mechanics' Bank v. Katterjohn, 125 S. W. (Ky.) 1071. A waiver must be clearly established and will not be inferred from doubtful or equivocal acts or language. Ross v. Kurd, 71 N. Y. 14, 18; Nevins v. Moore, 221 Mo. 331; First National Bank v. Gridley, 112 App. Div. 405. Where a bank in which an indorsed check had been deposited by the indorser, failed to give him due notice of dishonor, the indorser by giving his check to take up the dishonored check and receiving it, waived the giving of notice of dishonor under this section, and cannot thereafter maintain an action against the bank for negligence in failing to notify the prior parties of the dishonor of the check. Weil V. Com Exchange Bank, 63 Misc. 300. The fact that the indorser was secured by a mortgage did not dispense with the necessity of presenting the note for payment and notice of nonpayment. Seacord v. Miller, 13 N. Y. 55; First National Bank of Binghamton v. Marlborough, 163 App. Div. (N. Y.) 72; Moore v. Alexander, 63 App. Div. (N. Y.) 100. Promise of payment by indorser, see, Losee v. Allen, 17 Misc. 275; Sheldon v. Horton, 43 N. Y. 93; Brown v. Mechanics' Bank, 16 App. Div. 207. 268 NEGOTIABLE INSTRUMENTS LAW As to waiver by partners, see, Miller v. Hackley, 4 App. Div. (N. Y.) 117. A waiver by the indorser of a promissory note of demand upon the maker is not a waiver of notice of the maker's default. Hall V. Crane, 213 Mass.; Bumham v. Webster, 17 Maine 50. If an indorser of a note, after the time for making a demand on the maker required to charge him as an indorser has expired without such demand having been made, signs upon the back of the note a waiver of "demand, notice and protest," knowing the facts which have released him from Hability but in ignorance of their legal effect, such ignorance in the absence of fraud does not save him from the consequence of his waiver. Toole V. Crafts, 193 Mass. 110. A waiver may be express or implied. It is express when there is an agreement between the parties to the effect that the holder need not make a demand or give notice of dishonor; it is implied when the acts of the indorser communicated to the holder are such as to give the holder the right to believe that the indorser consents that there shall be no presentment and no notice of dishonor. First National Bank v. Gridley, 112 App. Div. (N. Y.) 406; Cayuga Co. Bank v. Dill, 5 Hill 403; Sheldon v. Horton, 43 N. Y. 33; Leary v. Miller, 61 N. Y. 488; National Hudson Bank v. Reynolds, 57 Hun. 307; Weil V. Com Exchange Bank, 63 Misc. 300. Pleadings. — An allegation of a waiver, by an indorser of a promissory- note, of notice of dishonor, contained in the complaint in an action brought to enforce the indorser's liabiHty, is not sufficient unless it states the facts from which the imphcation of waiver relied upon may be deducted. Congress Brewing Co. v. Habenicht, 83 App. Div. 141. An allegation in the complaint that the indorsement was made with intent to give credit to the maker of the note, and that the note was delivered and accepted upon the faith of the indorsement, does not entitle the plaintiff to prove for the purpose of establishing such a waiver by the indorser, that the note was accepted upon the indorser's promise to treat it as his own paper and see that it was paid at maturity, if such a promise when made before the note was indorsed, was merged in the contract of indorsement. Bird V. Kay, 40 App. Div. (N. Y.) 533; 4 Am. & Eng. Ency. of Law, (2nd ed.) 458. § i8i. Whom affected by waiver. 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. NOTICE OF DISHONOR 269 One who, in blank, indorses a note, is bound by waiver of presentation, protest and notice of nonpayment contained in the body of the note. Phillips V. Dippo, 93 Iowa 85; Dan. Neg. Inst. Section 1092; Bryant V. Lord, 19 Minn. 405; Bank v. Ewing, 78 Ky. 266. A waiver of protest of a note by an indorser before maturity releases the holder from the necessity of making demand and of notifying the in- dorser of nonpayment. Annville Bank v. Kettering, 106 Pa. St. 531. A waiver written in the body of the instrument applies to the indorser as well as to the maker. Savings Bank v. Haynes, 143 Ky. 534. § 182. Waiver of protest. A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable instniment, is deemed to be a waiver not only of a formal pro- test, but also of presentment and notice of dishonor. See cases cited under Section 180. A waiver of notice of protest waives notice only and is not a waiver of presentment, but a waiver of protest operates to waive presentment and notice of dishonor. Atkinson v. Skidmore, 153 S. W. Rep. 457; Sprague v. Fletcher, 34 Am. Rep. 587; Lammert v. Guthrie, 111 Am. Rep. 561; Bank v. Hopson, 53 Conn. 453; Bank of Montpelier v. Lumber Co., 102 Pac. (la.) 685. The term protest in a strict technical sense is not applicable to promis- sory notes. The word has by general usage acquired a more extensive signification and includes all those acts which by law are necessary to charge an indorser. When among men of business a note is said to be protested, something more is imderstood than an official declaration of a notary. The expression would be used to indicate a series of acts necessary to convert a conditional into an absolute liability. Coddington v. Davis, 1 N. Y. 189. Strictly speaking, the term "protest" applies only to foreign bills, but the custom to treat inland bills and notes in the same manner has become so nearly universal, that in common usage the term means the taking of such steps as are required to charge the indorser. Annville Bank v. Kettering, 106 Pa. St. 531. Where an indorser, at or before the time the note becomes due, says to the holder that arrangements for its payment are being made, and in direct terms or by reasonable implication requests the holder to wait or give time, this amounts to an assurance that it will be paid and that the promisor or indorser will pay it, and is a waiver of demand and notice. 270 NEGOTIABLE INSTRUMENTS LAW It tends to put the holder oflf his guard, and induces him to forego making a demand at the proper time and place, and it would be contrary to good faith to set up such want of demand and notice — caused perhaps by such forebearance — as a ground of defense. Bessenger v. Wenzel, 161 Mich. 61; 27 L. R. A. 516; 3 R. C. L. 1240. See section 261 and notes. Pleading. — In an action upon a promissory note the complaint alleged the making of the note by defendant, the indorsement thereof by the defendants, its due presentation for payment, a demand and refusal, and then added ''Whereupon the said note was then and there duly protested for nonpayment, all of which the said Hammond (the maker) had notice." There was no averment that notice of protest was given to the indorser. Held, that the complaint was defective. The averment that the note was duly protested was not a sufficient allegation of notice to the indorser; and that the averment of notice to the maker tends to exclude the idea of an intention to aver notice also to the indorser. Cook V. Warren, 88 N. Y. 37. § 183. When notice dispensed with. Notice of dishonor is dispensed with when, after the exercise of reasonable dihgence, it can not be given to or does not reach the parties sought to be charged. Reasonable diligence. — The law does not exact every possible exertion which might have been made to affect notice of dishonor of the paper. Bank of Jefferson v. Darling, 91 Hun. 236; Hobbs v. Strain, 149 Mass. 212. As to what constitutes reasonable diligence depends upon the cir- cumstances of each case, and must be determined with reference to what wotdd have suggested itself as necessary under the circumstances to the man of ordinary prudence and intelligence. Brewster v. Schrader, 26 Misc. 486; Crouse v. First National Bank, 137 N. Y. 383; Rowland v. Adrian, 29 N. J. Law 42; Bank of Hartford V. Stedman, 3 Conn. 494. Whether sufficient dihgence has been shown, the facts being undis- puted, is a question of law. Smith V. Poillon, 87 N. Y. 590; Gawtry v. Doane, 51 N. Y. 92; Lamence v. Miller, 16 N. Y. 235; Haly v. Brown, 5 Pa. St. 178; Brewster V. Shrader, 26 Misc. 480; Harris v. Robinson, 4 How. (U. S.) 336; Siegel V. Dubinsky, 56 Misc. 681; Vogel v. Starr, 132 Mo. App. 430. Merely looking in a directory, and not pursuing the inquiry any further, to ascertain the residence or place of business of a person to be NOTICE OF DISHONOK 271 served with notice, is not diligent inquiry within the meaning of this section. Greenwich Bank v. DeGroot, 7 Hun. 210; Bacon v. Hanna, 137 N. Y. 379; Cuming v. Roderick, 28 App. Div. (N. Y.) 257; Gawtry v. Doane, 51 N. Y. 84; Requa v. Collins, 51 N. Y. 114, 147. By making no inquiry and merely mailing the notice to the indorser, in care of the maker, at the maker's street address, is not in compliance with this section and Section 179. Du Pont Powder Co. v. Rooney, 63 Misc. 344; McGrath v. FrancoHni, 92 Misc. 367. In an action against an indorser of a note, the notary's testimony that he mailed the notice of dishonor, the contents of which were not in the record, to the indorser at a certain address, and that he did not even know whether he looked for the indorser 's address in a city or telephone directory, the indorser testifying that he never lived, did business, or received his mail at the address, did not entitle plaintiff to avail of this section. Mechanic v. Elgie Iron Co., 163 N. Y. Supp. 97 . § 184. Delay in giving notice; how excused. 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. War an excuse. — Woods v. Wilder, 43 N. Y. 164; Griswold v. Wad- dington, 19 Johns, 438; Morgan v. Bank of Louisville, 4 Bush (Ky.) 82; Harden v. Boyer, 59 Barb. 425; Polk v. Spink, 98 Am. Dec. 426. Disease an excuse. — Tunno v, Lague, 2 Johns, Cas. 1; Dugan v. King, 33 Am. Dec. 107. Delay in mail an excuse. — The cessation of mails and of commercial intercoiirse generally is an excuse. House V. Adams, 48 Pa. St. 261; 86 Am. Dec. 588. § 185. When notice need not be given to drawer. 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; 2. Where the drawee is a fictitious person or a person not having capacity to contract; 272 NEGOTIABLE INSTRUMENTS LAW 3. Where the drawer is the person to whom the instru- ment is presented for payment; 4. Where the drawer has no right to expect or reqtiire that the drawee or acceptor will honor the instrument; 5. Where the drawer has countermanded payment. Subd. I. — An order drawn by the president of a railroad corporation upon its treasiirer, directing the latter to pay B or order a specified sum, stated as being the amount due B for work done by him as contractor on the railroad work, is in effect a promissory note and presentment and demand of payment are unnecessary. Fairchild v. O. C. & R. R. R. Co., 15 N. Y. 337. Subd. 3. — Where the drawer of a bill is a partner of the house or firm on which it is drawn, it is not necessary for the holder to prove that notice of its dishonor was given to the drawer. Gowan v. Jackson, 20 Johns. 176. Subd. 5. — In an action upon a bank check it is not necessary that the complaint should state that notice of dishonor of the check was given to the drawer in case the drawer stopped payment of the check, but it should contain an allegation that payment was stopped. Scanlon V. Wallach, 53 Misc. 104; Harker v. Anderson, 21 Wend. 372; Purchase v. Mattison, 13 N. Y. Supp. 587. § 186. When notice need not be given to indorser. 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 person 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 instru- ment is presented for payment; 3. Where the instnmient was made or accepted for his accommodation. Subd. I. — See notes subd. 3, Section 28. As to the liability of an indorser of a void instnmient, see Bank v. Loomis, 85 N. Y. 207. An indorsement of negotiable paper is a warranty, by him who makes it, to every subsequent holder in good faith, that the instrument itself and all the signatures antecedent to such indorsement are genuine; and where NOTICE OF DISHONOR 273 these signatures are forgeries, the indorser is at once liable upon his warranty to such subsequent holder without any presentment for payment or notice of nonpa^Tnent. Tumbull V. Bowyer, 40 N. Y. 457. Subd. 2. — Where a negotiable promissory note has been protested for nonpayment, and the liability of the indorsers thereof has been fixed by notice, such indorsers, selling such note without erasing their indorsement, will be held responsible for the payment of the same, though no notice be given to them of its nonpayment by the maker. St. John V. Roberts, 31 N. Y. 441. The piupose of giving notice is fully served when the indorser has actual knowledge of the dishonor and the law does not require the doing of a vain and useless act. Electric Co. v. Hodge, 181 Mo. App. 234; see also, in re McGill, 106 Fed. Rep. (Oh.) 57. Subd. 3. — If, as between the parties, the indorser is shown to be the principal debtor, the note having been made for his accommodation or, in other words, that he has no recourse against the maker, then it is not the strict contract of indorsement, and demand and notice are not necessary. Witherow v. Slayback, 158 N. Y. 649; Ray v. Smith, 17 Wall. 415; Story on Promissory Notes, Section 268, 357; Blenderman v. Price, 50 N. J. L. 296. If an indorser obtains a note to be discounted for his own benefit and accommodation, he is not entitled to notice, and so too, if he cannot be found after reasonable diligence. Beale v. Parrish, 20 N. Y. 407. A stockholder of a corporation, who indorsed before delivery, a note made by another corporation for the benefit of the corporation is not entitled to notice of dishonor, because the note was for his own benefit. Mercantile Bank v. Busby, 113 S. W. (Tenn.) 390; Luekenbach v. McDonald, 164 Fed. Rep. 298. § 187. Notice of non-payment where acceptance refused. Where due notice of dishonor by non-acceptance has been given, notice of a subsequent dishonor by non-payment is not necessary, unless in the meantime the instrument has been accepted. § 188. Efifect of omission to give notice of non-accept- ance. An omission to give notice of dishonor by non-accept- 274 NEGOTIABLE INSTRUMENTS LAW ance does not prejudice the rights of a holder in due course subsequent to the omission. Variant. — The Wisconsin statute adds the following, "but this shall not be construed to relieve any HabiHty discharged by such omission." § 189. When protest need not be made; when must be made. Where any negotiable instrument has been dis- honored it may be protested for non-acceptance or non- payment, as the case may be; but protest is not required, except in the case of foreign bills of exchange. See Sections 260, 268. Formal protest of a promissory note by a notary public is not essential to hold an indorser. It is mere proof. What is essential is presentment and demand at the time and place provided for in the instrument, followed by notice to the indorser of such presentment, demand and nonpayment. McBride v. Illinois National Bank, 138 App. Div. (N. Y.) 346. While it is customary to protest a promissory note for nonpa3rment, yet such protest is unnecessary. All that is required is that the note shall be presented for payment, and notice of nonpayment given. First National Bank v. Tustin, 246 Pa. 155. Where a bill of exchange was indorsed by the drawers to a firm of bankers in the city of New York, who sent it to their agent in Vienna for collection, and such agent failed to demand payment thereof, in accordance with the laws of this state, and upon the refusal of the drawees to pay, failed to protest the same and give notice of such protest to the drawers in the manner required by the laws of this state, the latter are discharged from any liability thereunder, notwithstanding the instnmient might have been under the laws of Austria, a mere "commercial order" for the payment of money of which no protest need be made. Amsinck v. Rogers, 189 N. Y. 252. It is not necessary, in order to charge an indorser of a promissory note which the maker failed to pay when it became due, to prove a formal pro- test by a notary; it is enough to prove that there has been proper demand upon the maker and a refusal by him to make payment, and that season- able notice of these facts has been given to the holder. Demelman v. Brazier, 198 Mass. 458; Wisner v. First National Bank, 220 Pa. St. 21. Protest is not necessary in order to charge the maker of a note. City National Bank v. Given, 87 S. E. 998. DISCHARGE 275 ARTICLE 10 Discharge Section 200. Instrument; how discharged. 201. When persons secondarily Hable on, discharged. 202. Right of party who discharges instrument. 203. Renunciation by holder. 204. Cancellation; unintentional; burden of proof. 205. Alteration of instrument; effect of. 206. What constitutes a material alteration. § 200. Instrument; how discharged. A negotiable in- strument is discharged: 1 . By payment in due course by or on behalf of the prin- cipal debtor; 2. By payment in due course by the party accommodated, 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. Variant. — The Illinois statute omits subdivision 4. In view of this section it would seem plain that it meant that the particular method prescribed for the accomplishment of that result should exclude a discharge by any other, or different method, upon the familiar maxim that the express mention of one thing implies the exclusion of another. 276 NEGOTIABLE INSTRUMENTS LAW Vanderford v. Farmers' Bank, 105 Md. 168; Union Trust Co. v. McGinty, 212 ]Mass. 205; Bradley v. Heybiim, 106 Pac. 170; State Bank V. Williams, 164 Ky. 143; Pease v. Syler, 78 Wash. 31. Subd. I. — A payment made to a holder of a promissory note by an indorser, not an agent for the maker but simply in discharge of his obliga- tion as indorser, where the note was executed by the maker for value, does not inure to the benefit of the latter, and in an action upon the note he is liable for the whole amount thereof, notwithstanding the payment; so far as the pa^inent relates to the maker's liability, it is simply an equitable purchase pro tanto by the indorser. Madison Square Bank v. Pierce, 137 N. Y. 444; Cantrell v. Davidson, 180 Mo. App. 410. When the maker of a note transferred to the payee money belonging to another and thereby obtained possession of the note and destroyed it, though the note was in form paid, the transaction was not in equity and justice a "pa\Tnent in due course" by or on behalf of the principal debtor within the meaning of this section. Pittsburgh-Westmoreland Coal Co. v. Kerr, 220 N. Y. 137. As to the distinction between payment and sale see, Lancey v. Clark, 64 N. Y. 209. Payment must be in money. De Meto v. Dagson, 53 N. Y. 635. The payor is entitled to demand the surrender of the instrument. Crandall v. Schroeppel, 1 Hun. 558. The taking of a note, either of a debtor or a third person, for a prece- dent debt is no payment imless it be expressly agreed to take the note as payment and run the risk of its being paid; or unless the creditor parts with the note, or is guilty of latches in not presenting it for payment. Elwood v. Diefendorf, 5 Barb. 398; Ruhl v. Martens, 40 App. Div. (N. Y.) 232. It is a general rule of law that when an instnmient upon which several are liable, some primarily and some secondarily, if it is satisfied by him who is primarily Hable, a complete discharge results. It no longer has legal existence. Comstock V. Buckley, 141 Wis. 231; Snyder v. Malone, 102 N. W. 354; Northern Bank v. Cooke, 76 Ky. 340; Rich v. Goldman, 90 N. Y. Supp. 364; Spies v. National City Bank, 174 N. Y. 222. DISCHARGE 277 When an indorser takes up a note after it has been dishonored is in effect a repurchase and not a payment of it, and the indorser retains all the former rights which he had against the prior parties. Kelly V. Stead, 136 Mo. 430, 37 S. W. 1110; Cochran v. Wheeler, 7 N. H. 202, 26 Am. Dec. 732. The maker of a promissory note can satisfy it only by payment to the owner at the time, or to such owner's authorized agent. If the recipient of the money is not actually authorized, the payment is ineffectual, tinless induced by imambigious direction from the owner or justified by actual possession of the note. This rule applies generally to all negotiable paper, independently of the existence of any mortgage or other security. Marling v. Nommensen, 127 Wis. 363; 115 Am. St. Rep. 1017; Harrison National Bank v. Austin, 65 Neb. 632. As to payment through clearing house, see. National Union Bank v. Earle, 93 Fed. Rep. 330; Title G. & T.Co. v. Haven, 126 App. Div. (N. Y.) 802; Exchange Bank v. Ginn, 114 Md. 181; Boylston v. Bank of Richard- son, 101 Mass. 287; Tradesmen's Bank v. Bank, 66 Pa. St. 435; People v. St. Nicholas Bank, 77 Hun. 159; Mt. Morris Bank v. Ward Bank, 172 N. Y. 244; National Bank Commerce v. Mechanics Bank, 148 Mo. App. 1; Columbia Knickerbocker T. Co. v. Miller, 215 N. Y. 191. The btirden of proof as to payment is on the maker. Guano v. Marks, 135 N. C. 59. Sub. 2. — The holder of a note with whom the indorser had deposited the full amoimt thereof as security for its collection may maintain an action against the maker. People's National Bank v. Rice, 149 App. Div. (N. Y.) 18; Madison Sq. Bank v. Pierce, 137 N. Y. 444. Subd. 3. — Where the holder of a promissory note voltmtarily cancels the same, and surrenders it to the maker, this, although no consideration was paid, in the absence of fraud or mistake, operates in law as a release and discharge of the maker's liability. Larkin v. Hardenbrook, 90 N. Y. 333; Albert v. Ziegler, 29 Pa. St. 50; Kent V. Reynolds, 8 Hun. 559; Wheeler v. Billings, 38 N. Y. 263; Barker v. Bradley, 42 N. Y. 316; Jaffray v. Davis, 124 N. Y. 164; Swartzman v. Post, 94 App. Div. (N. Y.) 474; Case v. Bridger, 133 La. 754; Van Auken V. Hombeck, 14 N. J. L. 178. When the payee of a note tears it up, with the intention of destroying and cancelling it, this is a discharge of the note. Montgomery v. Schwald, 177 Mo. App. 75. Where an instniment or the signatiure thereto has been cancelled unintentionally or by mistake, it is no discharge. Manufacturers' Bank v. Thompson, 129 Mass. 438. 278 NEGOTIABLE INSTRUMENTS LAW If one of several joint owners of a bill or note surrenders the instru- ment to the maker or acceptor for cancellation, and be done without the knowledge or consent of the other owners, the transaction amounts to a conversion of the instrument and an action lies in favor of the defrauded owners against their joint owner. Winner v. Penniman, 35 Md. 163; 6 Am. Rep. 385. Subd. 4. — Where a negotiable instnmient is materially altered without the assent of the parties liable thereon, it is avoided except as against a party who has himself made, authorized, or assented to such alteration. The same rule applying to any contract. Bodine v. Berg, 82 N. J. L. 662, 40 L. R. A. 65. Where plaintiffs surrendered to defendant the latter 's notes upon promise to deliver jewels to plaintiffs in payment, and thereafter defend- ant refused to do so, plaintiffs could rescind agreement to accept the jewels and sue on the notes, and were not obliged to sue for damages for defend- ant's refusal to carry out his agreement. Loeb V. Goldsmith, 163 N. Y. Supp. 1022. Where a note was provable in bankruptcy, a letter to the holder stating that the maker would pay every dollar remaining unpaid upon the note, with interest, as soon as he sold a mill, constituted a new promise sufficient to remove the bar of the discharge in bankruptcy. Herrington v. Davitt, 115 N. E. (N. Y.) 476. Subd. 5. — Where the holder of a promissory note surrenders it upon the pa>Tnent of part of the amount due thereon and promises to pay the balance of the indebtedness, the holder is precluded from subsequently maintaining an action against the maker upon the note to recover the balance thereof. Schwartzman v. Post, 94 App. Div. (N. Y.) 474; Jaflray v. Davis, 124 N. Y. 164; Ellsworth v. Fogg, 35 Vt. 355; Larkin v. Hardenbrook, 90 N. Y. 333. The words, "in his own right," merely excludes the case of a maker acquiring the instrument in purely a representative capacity as executor, administrator, guardian, etc. It has been held that w^hether a note is paid by the taking of a new note or merely renewed depends upon the intention. Flanigan v. Hambleton, 54 Md. 222; McElwee v. Lumber Co., 69 Fed. 302. Where the original note was exchanged for a renewal note which was forged, the holder may maintain an action on the original note although it cannot be produced. Bass V. Wellesey, 192 Mass. 192. DISCHAEGE 279 Where the maker of a promissory note induces the indorsee to pay it when due and thereafter in some way gets possession of it, not claiming that he paid it, or that it was deHvered to him by the indorsee, never became the holder "in his own right." It requires more than possession of a note obtained by accident or design to extinguish the liability of the maker. Korkemas v. Macksoud, 131 App. Div. 728. The fact that a maker after maturity has possession of a note is prima facie evidence of its payment. Weakley v. Mizell, 193 111. App. 484; McCoy v. Purcell, 110 N. E. (Ind.) 658. § 201. When persons secondarily liable on, discharged. 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 ex- pressly 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 the right of recourse against such party is expressly reserved. Variant. — In all the states except New York and Maryland the words ' 'unless made with the assent of the party secondarily liable or" are inserted after the word "instrument" in Sub. 6. The IlHnois Statute substitutes for Subdivision 3— "By a valid tender of payment made by a prior party," and adds to Sub. 5 the words: "or unless the principal debtor be an accommodating party." The Missouri Statute adds to the end of Sub. 3— "except when such discharge is had in bankruptcy proceedings." The Wisconsin Statute adds a new subdivision as follows: "4a. By giving up or applying to other purposes collateral security appHcable to the debt, or, there being in the holder's hands or within his control the means of complete or partial satisfaction, the same are applied to other purposes." 280 NEGOTIABLE INSTRUMENTS LAW The Wisconsin Statute adds the words: "prior or subsequent" after "assent" in Sub. 6, and also adds the words "or unless he is fiilly indemni- fied" in the last sentence. Subd. I. — While ordinarily the payment of a note by the maker terminates the liability of the indorser, yet the receipt of a preferred pay- ment made by a person insolvent at the time, contrary to the statute, is no pa>Tnent and the indorsers are not released. Perry v. Van Norden Trust Co., 118 App. Div. (N. Y.) 288. A mere taking of another instnmient as collateral, however, is not such an extension of time as will discharge an indorser. National Bank v. Peltz, 176 Pa. 513. Whether the acceptance of a new note is in extinguishment or pay- ment of the old note or is as collateral security depends upon the intentions of the parties, the presimiption being that it is only a further security for the indebtedness. McCarthy v. Kipp, 171 Pa. 644. Subd. 2. — See notes Section 200, subd. 3. The holder of an indorsed promissory note who authorized and agreed to the cancellation of the indorser's signature, is bound thereby although there is no consideration for the cancellation. McCormick v. Shea, 50 Misc. 592; Larkin v. Hardenbrook, 90 N. Y. 333; Swartzman v. Post, 94 App. Div. (N. Y.) 474. Subd. 3. — If the holder of a note does an act which destroys the remedy of an indorser against a maker, or, through inaction, produces the same result, the indorser is discharged. Shutts V. Fingar, 100 N. Y. 543; Spies v. National City Bank, 174 N. Y. 222. Where the maker gave a chattel mortgage as security for the pay- ment of a note and an action was thereafter commenced against the maker of the note to foreclose the mortgage, which action was settled, the in- dorsers were thereby discharged. Rosenberg v. Shoenwald, 126 N. Y. Supp. 615. Subd. 4. — The surety upon an undertaking an appeal, given by de- fendant upon an appeal from a judgment against him, who is compelled to pay the judgment, is subrogated to all the rights of the judgment creditor under the judgment appealed from, but not to the right of the judgment creditor to enforce the liability of an indorser upon the note on which the judgment appealed from was recovered, who was not sued and against whom no judgment was rendered. State Bank v. Kahn, 19 Misc. 500. DISCHARGE 281 Where the holder of a note, when payment is tendered by the principal debtor at the maturity of the obligation, accepts part of the amoimt due, and with the knowledge of the other makers are siireties, reloans the balance to the principal, the stireties are thereby released. Spurgeon v. Smith, 114 Ind. 453. See also, Sears v. Van Dusen, 25 Mich. 351; Donley v. Clamp, 22 Ala. 659; Joslyn v. Eastman, 46 Vt. 258. Subd. 5. — A reservation of such right of recourse cannot be implied from the acts or conduct of the parties, but must be expressly made; so that, where the payee of a promissory note received a part payment in full settlement and indorsed on the note an acknowledgement of full settlement of the liability of the maker, an indorser was discharged, although he indorsed on the note a consent to release the maker, since the right of recourse against the indorser was not "expressly reserved." Phoenix Bank v. Hanlon, 183 Mo. App. 243; Ziegfried v. Stein, 117 N. Y. Supp. 900. This subdivision has no application where such release is given by the holder at the oral request, and with the assent of the party secondarily liable, although the instrument of release is imder seal and contains no reservation of any right against the party secondarily liable. Arlington Bank v. Bennett, 214 Mass. 353. The unconditional release of one of several joint and several makers of a promissory note without the consent of the others operates as a release of all. Hubner v. Silver, 124 N. W. (Neb.) 148; McMaster v. Bank of Lawton, 101 Pas. 1103. A release of the maker of a promissory note without the consent of the indorser operates to release the indorser. But it is held otherwise if the instrtiment by which the maker is released expressly reserves the remedy of the holder of the note against the indorser. (Tohey v. Ellis, 114 Mass. 120.) And a covenant not to sue the maker, reserving all rights against the other parties, has been held not to release the indorser. Kenworthy v. Sawyer, 125 Mass. 28; Fanueil Hall Bank v. Meloon, 183 Mass. 66; Davis v. Gutheil, 87 Wash. 600. See also, Vanderford v. Farmers Bank, 105 Md. 164; Osgood v. Miller, 67 Maine 174; Post v. Losey, 111 Ind. 74, 12 N. E. 121. Subd. 6. — The principle is well settled that where the holder of a promissory note takes a new note from the debtor, payable at a future day, he suspends the right of action upon the original demand until the maturity of the last mentioned note, and the surety upon the same not assenting thereto, thereby becomes discharged of Hability. 282 NEGOTIABLE INSTRUMENTS LAW Hubbard v. Gurney, 64 N. Y. 457, 466; Union Trust Co. v. McCrum, 145 App. Div. 409; see also, Bank v. Graham, 246 Pa. St. 256; Brower V. Carpenter, 50 Misc. 525. A mere agreement by the holder of a note to extend the time of pay- ment and take other notes, on condition that the indorser of the original note should indorse the new one and not otherwise, which condition is not complied with, does not constitute an extension which will release the indorser. Jennings v. Kosmak, 19 Misc. 433; see also. National Park Bank v. Koehler, 121 N. Y. Supp. 640; McCarthy v. Kipp, 171 Pa. 644. It will be noted that this subdivision does not use the words "Principal debtor," or their equivalent, the wording being, "by any agreement bind- ing upon the holder to extend the time of payment." Does that mean by any agreement binding upon the holder made with a stranger to the instru- ment, or must the binding agreement be made with the principal debtor? The question does not seem to have been passed upon since the enact- ment of the statute in question or of similar statutes in other states. Brosemer v. Brosemer, 162 N. Y. Supp. 1067. In the case of National Park Bank v. Koehler, 204 N. Y. at page 178, 97 N. E. at page 468, Judge Gray wrote: "The existence of the general rule is not in dispute, if there has been an agreement by the creditor with the principal debtor, which extends the time of payment of the debt, without the consent of the surety, or indorser, the latter is discharged." As stated by Judge Gray, the rule that applies to a surety applies also to an indorser. Brandt on Suretyship (3rd ed.) Section 3. Any agreement of the creditor which operates to extend the time of pa>Tnent of the original debt and suspends the right to immediate action is held to discharge the non-assenting indorser or surety, as the law will presume injury to him thereby. The creditor may arrange with his debtor in any way which does not efifect either of these results, but to pre- vent a discharge of the indorser or surety the agreement must expressly reserve all the remedies of the creditor against him, in which case the latter will be in a position to pay immediately and then proceed. National Park Bank v. Koehler, 204 N. Y. 174; Greenberg v. Gins- berg, 82 Misc. 415; Moritz Estate, 239 Penn. St. 375. It would seem that the words of the statute, "agreement binding upon the holder," should be construed to mean an agreement binding upon the holder made with the principal debtor. Brosmer v. Brosmer, 162 N. Y. Supp. 1067. DISCHAEGE 283 By a valid agreement to give time is meant an agreement for the breach of which the maker or the acceptor has a remedy, either at law or in eqtiity. Veazie v. Carr, 3 Allen (Mass.) 14. It has been said that the statute in question should be regarded simply as a codification of the common law. Chemical National Bank v. Kellogg, 183 N. Y. 98, 75 N. E. 1103, 2 L. R. A. (N. S.) 299, 111 Am. St. Rep. 717, 5 Ann. Cas. 158. In the case of National Bank of Mechanicsburg v. Graham, 246 Pa. 256, 92 Atl. 198, the court, in writing of the provision said: "This was simply declaratory of the existing law." A holder of a promissory note does not discharge an indorser by merely refraining from suing the maker. He may take new security or other notes as collateral to the old notes, and if time is not given to the maker, the indorser will not be discharged. Riehl V. Austin, 155 App. Div. (N. Y.) 208. An agreement between the holder and one ultimately liable on the instrument operates to release parties who are entitled to recourse against the party ultimately liable and who do not consent thereto. Post V. Losey, 111 Ind. 74; Hagey v. Hill, 75 Pa. St. 108; Delaware Ins. Co. V. Haser, 199 Pa. St. 17; Farmers' Savings Bank v. Arispe, 139 la. 246; 117 N. W. 672; Place v. Mellvain, 38 N. Y. 96. Payment of a portion of a note before maturity is a sufficient considera- tion for an extension of time on the balance. Bowere v. Carpenter, 50 Misc. 525. Agreement between holder and maker of notes, by which maker paid a part of the amount due and executed new notes for the balance, surrender- ing the old notes, held to discharge the indorser, notwithstanding a pro- vision that it should not discharge the parties thereto from the previous indebtedness. Greenberg v. Ginsberg, 82 Misc. 415. See also, National Citizens' Bank v. Toplitz, 178 N. Y. 464; Pomeroy V. Tonner, 70 N. Y. 547; State Bank v. Williams, 164 Ky. 146. § 202. Right of party who discharges instrument. Where the instrument is paid by a party secondarily liable thereon, it is not discharged; but the party so paying it is remitted to his former rights as regards all prior parties, and he may strike out his own and all subsequent indorsements, and again nego- tiate the instniment, except: 284 NEGOTIABLE INSTRUMENTS LAW 1 . Where it is payable to the order of a third person, and has been paid by the drawer ; and 2. Where it was made or accepted for accommodation, and has been paid by the party accommodated. The words "remitted to his former rights" does not apply to a stranger who indorses a note for accommodation only and pays the same. Lill V. Gleason, 92 Kans. 758, 142 Pac. 287; Noble v. Beeman Co., 131 Pac. (Or.) 1006; 46 L. R. A. 162; Quinby v. Vamimi, 190 Mass. 211. Subd. I. — ^The possession of a promissory note by an indorser, after its protest for nonpayment, is prima facie evidence that he has performed his contract of indorsement and has paid the holder the amount due upon the note. Hill V. Buchanan, 71 N. J. L. 301. Where a second indorser of a promissory note has paid and taken it up, he became a holder for value and may maintain an action to recover the amount thereof of the first indorser, although both are accommodation indorsers. Kelly V. Burroughs, 102 N. Y. 93. Payment of a note in whole or in part by one secondarily liable thereon does not discharge the obHgation of the maker. Assets Co. V. Mercantile National Bank, 167 App. Div. 761; Twelfth Ward Bank v. Brooks, 63 App. Div. 221, Subd. 1. Where the consideration for which one signed a check obtained from him by false pretenses never passed to him, the one so obtaining the check is primarily Hable to an indorsee; and payment by him to the indorsee discharges the check as against all the parties. Josephenson v. Gens, 85 Misc. 372. Subd. 2. — Where the consideration for which one signed a check obtained from him by false pretenses never passed to him, the one so obtaining the check is primarily liable to an indorsee; and payment by him to the indorsee discharges the check against all parties. Josephsohn v. Gens, 85 Misc. 372. This section is without application to one who indorses the note payable to a third person before delivery to the payee, and subsequently pays the note, and the pa>Tnent by such indorser extinguishes the note, and it cannot be again transferred or made the basis of an action. Quimby v. Vamum, 76 N. E. (Mass.) 671. Where one of several accommodation makers of a joint and several promissory note paid the same, and subsequently transferred and delivered it for a valuable consideration to a third person held, that, although the DISCHAEGE 285 note as an obligation, was extinguished by the payment, yet it remained in the hands of the maker, who paid it, the evidence of his right of con- tribution from his co-sureties ; and that the delivery raised a legal presump- tion of an intent to pass and did pass the rights to the transferee. Dillenbeck v. Dygert, 97 N. Y. 303. The contract of an accommodation indorser of a note is wholly inde- pendent of that of the maker, and such indorser, upon making payment, succeeds to the title and rights of the holder as against the maker. Lill V. Gleason, 92 Kans. 757. § 203. Renunciation by holder. The holder may ex- pressly renounce his rights against any party to the instru- ment, before, at or after its maturity. An absolute and un- conditional renunciation of his rights against the principal debtor made at or after the maturity of the instrument, dis- charges the instrument. But a renunciation does not afifect the rights of a holder in due course without notice. A re- nunciation must be in writing, unless the instrument is de- livered up to the person primarily liable thereon. The term "renunciation" describes the act of surrendering a right or claim without recompense, but it can be applied with equal propriety to the relinquishment of a demand upon an agreement supported by a con- sideration. The term as used includes the release of a claim by virtue of an accord and satisfaction, as well as a gratuitous waiver of liability. Whitcomb v. National Ex. Bank, 123 Md. 612. Where after a testator's death there is found among his papers a note payable to him and addressed to his executors, stating "Gentlemen, the enclosed note I wish to be cancelled in case of my death, and if the law does not allow it, I wish you to notify my heirs that it is my wish and orders." Such instrument is not effective to prevent the executors from enforcing such note, as it does not comply with this section. Leask v. Dew, 102 App. Div. (N. Y.) 529, 184 N. Y. 599. In Dimon v. Keery, 54 App. Div., under almost similar state of facts the court said: "It is manifest that the declaration upon the note was not a renunciation of the liability of the maker during the lifetime of the deceased, or any renunciation of the obligation of the instnmient, and as it did not constitute a gift or an agreement, it neither fell within the terms of the statute nor exempted the defendant from liability thereon." For cases under the Bill of Exchange Act, which in character and im- port is like this section, see: 286 NEGOTIABLE INSTRUMENTS LAW Matter of George, L. R. 44 Ch. Div. 627. This section plainly provides that the renunciation of a debt must be hi writing where the debt is evidenced by a negotiable instrument, and if "renunciation" is used therein in the sense of a "release" there can be no question but what a written renunciation is necessary. Trudeaux v. American Mills, 83 Pac. 725. The holder and owner of a negotiable promissory note may covenant with the maker not to sue and reserve his rights against the indorsers. Faniul Hall Bank v. Meloon, 183 Mass. 67. Under this section a release of an indorser by a transaction amounting to an accord and satisfaction can only be proved by a renunciation in writ- ing, notwithstanding Section 201 designating the acts which will discharge an instrument. Whitcomb v. National Exchange Bank, 123 Md. 612; 91 Atl. 689. § 204. Cancellation; unintentional; burden of proof. A cancellation made unintentionally, or under a mistake, or without the authority of the holder, is inoperative; but where an instrument or any signatiu-e thereon appears to have been cancelled the burden of proof lies on the party who alleges that the cancellation was made unintentionally, or under a mistake or without authority. Some time after the making of a note, the maker and indorsers thereof, with one exception, but without the authority or knowledge of the board of directors of the bank, substituted for it their individual notes for equal sums amounting in the aggregate to the total of the note for which they were substituted. Held, that such substitution was unauthorized and therefore inoperative. Union Bank v. Sullivan, 214 N. Y. 332. Where the holder of a promissory note voluntarily cancels the same and surrenders it to the maker, this, although no consideration was paid, in the absence of fraud or mistake, operates in law as a release and dis- charges the maker's liability. Larkin v. Hardenbrook, 90 N. Y. 333; Kent v. Reynolds, 8 Hun. 559; Jaffrey v. Davis, 124 N. Y. 164, 170. In an action upon a note, the fact of erasing the indorser 's name was made by his representative in the plaintiff's presence, is a fact which the jury may consider in determining whether the cancellation was author- ized or consented to as claimed by the respective parties. McCormick v. Shea, 50 Misc. 592; Schwartzman v. Post, 94 App. Div. 474. DISCHAEGE 287 Burden of proof. — See Lorenz v. Jackson, 88 Hun. 202; Clinton v. Frear, 107 App. Div. 571; McCormick v. Shea, 50 Misc. 594; National Bank v. Gridley, 112 App. Div. 403; Gilley v. Harrell, 118 Tenn. 116. § 205. Alteration of instrument; effect of. Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized or assented to the alteration and subsequent indorsers. But when an instru- ment 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. Variant. — The Illinois statute adds the words "fraudulently or" before "materially" in the first line. The Wisconsin statute adds "orally or in writing" after "assented" in the first subdivision. See notes Section 33. "Subsequent indorsers" as used in the section mean those who indorse subsequent to the alteration. First National Bank v. Gridley, 112 App. Div. (N. Y.) 402. Any alteration of a written contract, which may in any event change the rights, duties or obligations of the party sought to be charged, is material regardless of whether the alteration is beneficial or prejudicial to him. Barton Bank v. Stephenson, 87 Vt. 433; Green v. Sneed, 101 Ala. 205, 13 South 277; Aldrich v. Smith, 26 Am. Rep. (Mich.) 536; Eckert V. Pickel, 13 N. W. (la.) 708. The indorser of a promissory note, the amount of which has been fraudulently raised after indorsement, is not liable upon the instrument, in the hands of a bona fide holder, for the increased amoimt, because of negligence in indorsing the same when there were spaces thereon which made the forgery easy, though the note was complete in form. No liability on the part of the indorser for the amount of such a note can be predicated simply upon the fact that such spaces existed thereon. National Exchange Bank v. Lester, 194 N. Y. 464. In Hackett v. Bank of Louisville, 114 Ky. 193, the contrary was held on the ground that proper precaution had not been exercised. Where there is nothing suspicious upon the face of an instrument beyond the fact that an erasure is manifest, the presumption is that any alteration appearing on the face thereof was made before the execution of the instrument. Ensign v. Fogg, 177 Mich. 318. 288 NEGOTIABLE INSTKUMENTS LAW The banker is presumed to know the signature of his depositor and if he pays a forged check he cannot charge the amount to his account. If a check plainly appears to have been altered the banker is put on enquiry as to the correctness of the alteration and he pays it at his own peril. Where, however, the alteration is such as to excite no suspicion because the check has been drawn by the maker in such a way as to invite an unsuspicious alteration, the law makes an exception to the rule that the banker pays at his own peril and permits him to assert negligence on the part of the maker in so drawing his check. Otis Elevator Co. v. National Bank, 124 Pac. Rep. 704; Timbel v. Garfield National Bank, 121 App. Div. 872; Oppenheimer v. W. S. Bank, 22 Misc. 722. In Greenfield Savings Bank v. Stoll, 123 Mass. 196; it is held that the above principle did not apply to a note, because the maker of a promissory note held no such relation to the endorsees as does a depositor to his banker. On the other hand the Pennsylvania and Illinois Courts apply the principle to negligently drawn notes as well as to checks. Gerard v. Haddan, 67 Pa. St. 82; Leas v. Walls, 102 id. 57; Harvey v. Smith, 55 111. 224. While the drawer of a check may be liable where he draws the instru- ment in such an incomplete state as to invite fraudulent alterations, it is not the law that he is bound to prepare the check that nobody else can successfully tamper with it. Critten v. Chemical National Bank, 71 N. Y. 219; Mitchell v. Security Bank, 147 N. Y. Supp. 470. The drawer is bound for the whole amount if his own negligence has facilitated or invited the fraud done by raising the check. Bank of Commerce v. Union Bank, 3 N. Y. 230; 2 Dan. Neg. Int. (2nd ed.) 608; I. C. Bank v. F. P. Bank, 159 Pa. St. 47; Elias v. Whitney, 50 Misc. 326. The bank is not responsible if the depositor has been negligent in examining his accounts and vouchers. Meyers v. S. National Bank, 44 Atl. Rep. 280; L. M. Bank v. Morgan, 117 U. S. 96; Crawford v. W. S. Bank, 100 N. Y. 50; Weinstein v. National Bank, 69 Texas 38; Dana v. National Bank, 132 Mass. 156; National Bank v. Allen, 100 Ala. 476; Critten v. Chemical National Bank, 171 N. Y. 219; Continental Bank v. Metropolitan Bank, 107 111. 455. As to the diligence required in the examination of the returned vouchers see. Leather Mfrs. Bank v. Richmond Co., 117 U. S. 96; Morgan V. U. S. Mortgage Co., 208 N. Y. 218; Scanlon Lumber Co. v. Germania Bank, 97 N. W. (Minn.) 380; Kenneth Co. v. National Bank, 77 S. W. (Mo.) 1002. DISCHARGE 289 In Garrard v. Haddan, 67 Pa. St. 82, a space was left between the words "one hundred" and the word "dollars" in which "fifty" had been inserted after the maker had signed and delivered it; and the Court held the maker answerable to a bone fide holder for the full face of the note as altered on the ground of the negligence of the maker in leaving the space in the note which was thus filled up after execution. "We think this rule is necessary," said Chief Justice Thompson, "to facilitate the circulation of commercial paper and at the same time increase the care of drawers and acceptors of such paper, and also of bankers, brokers and others in taking it." It is a little difficult to see how the rule tends to make bona fide purchasers more careful, as this last observation suggests. The case of Yoctmi v. Smith, 63 111. 321 ; held the maker liable upon a note which had been raised after execution from one hundred dollars to one hundred and twenty dollars, the words "and twenty" having been inserted in a space left between the word "hundred" and the word "dollars." The Court said that the maker had acted with unpardonable negligence in signing the note and leaving a blank which could so easily be filled; that he has thus placed it in the power of another to do an injury and that he must, therefore, suffer the resulting loss. It appeared that the maker there was informed by letter by the purchaser, very soon after the date of the note, that he had bought it and of its date and amount; yet he made no objection as to the amount until nearly a year later. In Scotland Co. National Bank v. O'Connel, 23 Mo. App. 165, the defendants executed and delivered a note for $100 to one Smith, the body of which was in his handwriting, in a condition which enabled him to add the words "thirty-five" after "one hundred" in the written part and put the figures "135" at the head of the note in the space where the amount is usuall}^ indicated by figures. The St. Louis Court of Appeals held that the defendants were liable for $135, because they had delivered the note to Smith, who was their co-maker, "in such a condition as to enable him to fill the blank space without in any manner changing the appearance of the note as a genuine instrument." The cases above cited were all of them actions against the makers of the raised paper. The same rule, however, was applied against an indorser in Isnard v. Torres & Marquez, 10 La. Ann. 103. To the same effect is Hackett v. First National Bank of Louisville, 114 Ky. 193, where it was held that a surety who had signed a note in which were written the words "five hundred" with spaces before and after them, which the maker had filled up by writing "twenty" before and "fifty" after them, thereby making a note for $2,550, was liable thereon to a pur- chaser in good faith. In this case the attention of the Kentucky Coiirt of Appeals was called to the fact that the great weight of authority was 290 NEGOTIABLE INSTRUMENTS LAW the other way, but in view of the fact that the rule had been so estabhshed in Kentucky for a quarter of a century the Court determined to adhere to it, in observance of the principle of stare decisis. Where negotiable paper has been executed with the amount blank, it is no defense against a bona fide holder for value for the maker to show that his authority has been exceeded in filling such blank, and a greater amount written than was intended. This was also once held to be the nile where no blank had been actually left, but the maker had negligently left a space either before or after the written amoimt which made it easier for a holder fraudulently to enlarge the sum first written. "It has now, however, become in America an established rule that if the instru- ment was complete without blanks at the time of its delivery, the fraudulent increase of the amoimt by taking advantage of a space left without such intention will constitute a material alteration and operate to discharge the maker." 1 Randolph on Commercial Paper, 187. Usefoff v. Herzenstein, 65 Misc. 45. The rule thus stated is sustained by the decisions of the courts of last resort in Massachusetts, Michigan, New Hampshire, New York, Iowa, Maryland, Mississippi, Arkansas and South Dakota. The leading case sustaining this view is Greenfield Savings Bank v. Stowell (123 Mass. 196), in which the opinion was written by Chief Justice Gray, afterward an Associate Justice of the Supreme Court of the United States. The discussion is careful and exhaustive, reviewing all the import- ant cases in England and America bearing upon the subject which had been decided up that time (1877). A bank may only pay out the ftmds of a depositor in conformity to his directions; it is not entitled to charge to him checks presented which have been altered in a material point without his consent, even if done so skillfully as to defy detection, and the bank is responsible for an omission to discover the original terms and conditions thereof. The change of the date of an instrimient, whereby the time is accelerated, is a material alteration, and when made without the consent of the maker, destroys its validity. Crawford v. W. S. Bank, 100 N. Y. 50; National Exchange Bank v. Lester, 194 N. Y. 461; Chicago Savings Bank v. Block, 126 111. App. 128; Morris V. Beaumont Bank, 37 Tex. Civ. 97; 83 S. W. Rep. 36. So also by adding the words: "with interest." Columbia Dis. Co. v. Rech, 151 App. Div. (N. Y.) 128; Broadway National Bank v. Hefferman, 220 Mass. 247. Where the cashier of a bank changed the name of the bank where the check was made payable, where the drawer made a mistake in drawing DISCHABGE 291 it on the wrong bank and should have been drawn as altered, it was held that such alteration made the check void. Whitset V. People's Bank, 119 S. W. (Mo.) 999. An alteration which is not material does not invalidate the instrument. Gleason v. Hamilton, 138 N. Y. 353; Condict v. Flower, 106 111. 105; Nickerson v. Sweet, 135 Mass. 514; Colonial Bank v. Duerr, 108 App. Div. (N. Y.) 217; Levy v. Arons, 81 Misc. 165; Booth v. Powers, 56 N. Y. 22, 31. The words "with the privilege of renewal for one year" written in the body of a note after delivery and negotiated to another without notice of the change, it was held that if such alteration had been made by the plaintiff after delivery and it was found to be material, the defendant would have been relieved from the performance of his promise. But if deemed immaterial he would have been held liable. Thorpe v. White, 188 Mass. 834. Where upon false representation of the payee of defendant's check that he had lost it, a new check is given and cashed, defendants under this section are liable to an innocent holder in due course of the first check, the date of which had been altered by the payee. Moskowitz V. Deutsch, 40 Misc. 603; Andrus v. Bradley, 102 Fed. Rep. 54; Mass. National Bank v. Snow, 187 Mass. 159; Thorpe v. White, 188 Mass. 333; 74 N. E. 592. Authority to fill blank space in a negotiable instrument does not justify changing or altering another place, and an indorser having notice of such alteration could not be a holder in due course, and even though he paid value he could not recover according to the original tenor. Bank v. Barnum, 160 Fed. Rep. 245. A material alteration of a written instrument by a party to it discharges a party who does not authorize or consent to the alteration, because it destroys the identity of the contract, and substitutes a different agree- ment for that which he entered. In the application of this rule, it is not only well settled that a material alteration of a promissory note by the payee or holder discharges the maker, even as against subsequent innocent indorsee for value, but it has been adjudged that a material alteration of a note before its delivery to the payee by one of two joint makers, without the consent of the other, makes it void as to him. Mersman v. Werges, 112 U. S. 141; Pensacola Bank v. Melton, 210 Fed. 57. An indorser of a note who admits the note, but alleges that it was altered after his indorsement and diverted, must establish this by affirma- tive defense, as well as notice to the holder of such diversion, and he should be permitted to do so. 292 NEGOTIABLE INSTRUMENTS LAW Mutual Loan Assn. v. Lesser, 76 App. Div. 614. By virtue of this statute, a party to a negotiable instrument must respond to "a holder in due course" upon the obligation which he in truth assumed, notwithstanding the fact that the instrument may have been changed so as to import a different obligation. Ensign v. Fogg, 177 Mich. 317, 143 N. W. 82; Voris v. Anderson (Okl.) 153 Pac. 291; Zehr v. Champlain (Okl.) 159 Pac. 1185; Thorpe v. White, 188 Mass. 333, 74 N. E. 592; Massachusetts National Bank v. Snow, 187 Mass. 159, 72 N. E. 959; National Exchange Bank v. Lester, 194 N. Y. 461, 87 N. E. 779, 21 L. R. A. (N. S.) 402, 16 Ann. Cas. 770; Moskowitz v. Deutsch, 46 Misc. Rep. 603, 92 N. Y. Supp. 721; Mutual Loan Ass'n v. Lesser, 76 App. Div. 614, 78 N. Y. Supp. 629; Diamond Dis- tilleries Co. V. Gott, 137 Ky. 585, 126 S. W. 131, 31 L. R. A. (N. S.) 643; Bothell V. Schweitzer, 84 Neb. 271, 120 N. W. 1129, 23 L. R. A. (N. S.) 263, 133 Am. St. Rep. 623. § 2o6. What constitutes a material alteration. Any alteration which changes: 1. The date; 2. The sum payable, either for principal or interest; 3. The time or place of payment; 4. The number or the relations of the parties; 5. The medium or currency in which payment is to be made; Or which adds a place of payment where no place of pay- ment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration. Subd. I. — See notes to Sections 33 and 205; Moskowitz v. Deutsch, 40 Misc. 603; National Ulster Co. Bank v. Madden, 114 N. Y. 280. Where a party to a negotiable instniment intrusts it to another for use as such with blanks not filled, it carries on its face an implied authority to complete it by filling them, but not to vary or altering the date or other material terms, by erasing what is written or printed as a part thereof, nor to pervert its scope or meaning by filling the blanks with stipulations repugnant to what was plainly expressed in the instrument. Angel V. N. W. Mutual Life Ins. Co., 69 Mo. 554. The change of date of an instrument, whereby the time of payment is accelerated, is a material alteration, and when made without the consent of the maker destroys its validity. DISCHARGE 293 Crawford v. W. S. Bank, 100 N. Y. 51; Eastman v. Shaw, 65 N. Y. 522; Miller v. Gilleland, 9 Penn. St. 119; Hervey v. Harvey, 15 Me. 357. Subd. 2. — See Birmingham Trust Co. v. Whitney, 95 App. Div. (N. Y.) 280; Colonial National Bank v. Duerr, 108 App. Div. 215. Where the payee of a note without interest adds the words "with interest" without the knowledge or consent of the maker, there is an altera- tion within the meaning of this section, and not only vitiates the note but extinguishes the original indebtedness. Columbia Dis. Co. v. Rech, 151 App. Div. (N. Y.) 128; Meyer v. Huneke, 55 N. Y. 419; Farmers' National Bank v. Auto Co., 79 Hun. 595; Dumbrow v. Gelb, 72 Misc. 400; McGrath v. Clark, 56 N. Y. 34; Broad- way National Bank v. Hefferman, 220 Mass. 247. The reason of the law imposing the forfeiture of the debt itself upon one who tampers with the instrument is upon the principle that "no man should be permitted to take the chance of gain by the commission of a fraud, without running the risk of loss in case of detection." Dan. Neg. Inst. (5th ed.). Section 1410a. Subd. 3.— See, Troy City Bank v. Lauman, 19 N. Y. 480; Walker v. Bank of New York, 13 Barb. 636; Melton v. Pensacola Bank, 190 Fed. 134. There is no question that the change in the place where a note is made payable is a material alteration which releases an indorser unless it is done with his assent. First National Bank v. Barnum, 160 Fed. 250; 2 Am. & Eng. Ency. of Law, 253; Simpson v. Bovard, 74 Pa. 351 ; Angel v. N. W. M. Life Ins. Co., 92 U. S. 330. The omission of the place of payment, there being nothing in the frame of the instnmient to indicate that the one which was subsequently inserted was intended, is not enough in itself to raise an inference of authority to do so, such a clause not being necessary to the completeness of the instrument. McCoy V. Lockwood, 71 Ind. 319; Toomer v. Rutland, 57 Ala. 379; McGrath v. Clark, 56 N. Y. 34. Subd. 4. — The holder of a promissory note, without the knowledge or consent of the indorser, procured a third person to sign it for the purpose of adding to their security. The subscription was the same in form as if he had been the original maker. This is not such an alteration as to vitiate the note and discharge the indorser. McGaughey v. Smith, 27 N. Y. 39; Hoffman v. Planters' Bank, 99 Va. 480. The indorsement of all the payees of a promissory note is necessary to give good title to the transferee, and hence an indorser of a note made payable to several payees is not liable to a transferee thereof when the 294 NEGOTIABLE INSTKUMENTS LAW maker, without authority from, or knowledge of the indorser, has altered the note before negotiation by striking out the name of one payee and substituting his own name as payee thereon. First National Bank v. Gridley, 112 App. Div. (N. Y.) 398. An alteration which changes the effect of the instrument in any respect is a "material alteration." A change in a note payable to order, made by striking out the words "order of" and inserting after the name of the payee the words "or bearer," is a material alteration, which invalidates the instrument if made after delivery, or, if made by the maker of the payee before delivery, discharges a surety. Builders v. Weimer, 151 N. W. Rep. 100; Needles v. Shaffer, 60 la. 65; Croswell v. Labree, 81 Me. 44; Booth v. Powers, 56 N.Y. 22; Weaver V. Bromley, 65 Mich. 212; Draper v. Wood, 112 Mass. 315; McGrath v. Clark, 56 N. Y. 34; 2 Dan. Neg. Int., Section 373a. A change of the pronoun "I" to "we" in a promissory note is a material alteration, since it changes the obligation from a joint and several to a joint obligation. Humphrey v. Guillon, 13 N. H. 385. Subd. 5.— See Angel v. Insiirance Co., 92 U. S. 330. Last subdivision. — A lead pencil entry on the back of a promissory note beneath the indorser's signature of the words "Glens Falls, N. Y." made by the manager of the bank for the purpose of aiding its clerk in keep- ing the bank records, does not constitute an alteration which will relieve the indorser from liability. Merchants' Bank v. Brown, 86 App. Div. 599; Struthers v. Kendall, 41 Penn. St. 214; Daniel Neg. Inst. (5th ed.) 1399. BILLS OF exchange; form and interpretation 295 ARTICLE II Bills of Exchange; Form and Interpretation Section 210. Bill of exchange defined. 211. Bill not an assignment of funds in hands of drawee. 212. Bill addressed to more than one drawee. 213. Inland and foreign bills of exchange. 214. When bill may be treated as promissory note. 215. Referee in case of need. § 210. Bill of exchange defined. A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or deter- minable future time a simi certain in money to order or to bearer. Bill of Exchange. .^^^^^^y^^e;^^ .a^^yi/ ^...^Z o^/y. •:/^.^>i^^//Z<^- 9r^^.^ The word draft is applied to instruments in the form of bills of exchange drawn for the purpose of collecting for the drawer's own use and account, money due him from some person. The payee of a draft is usually a bank delegated by the drawer to make the collection, and are usually made payable to a bank where the debtor resides. If the drawee was a bank the instnmient wotdd be, strictly speaking, a check. The essential parts of a draft are. Time, which shall be such time as the drawer shall fix and is usually "at sight." Amount, which should be definite. Value received is not necessary although customary to insert as in notes and bills of ex- change. Drawee, whose name and address should be given for the infor- mation of the payee. Signature, of the drawer. In the draft illustrated the Union Bank is the payee, Charles W. Martens the debtor and drawee, and Frank A. Wallis the creditor and drawer. § 211. Bill not an assignment of funds in hands of drawee. A bill of itself does not operate as an assignment BILLS OF exchange; form AND INTERPRETATION 299 of the funds in the hands of the drawee available for the pay- ment thereof, and the drawee is not liable on the bill unless and until he accepts the same. But where the drawee is a banker and has funds of the drawer on deposit, he is liable to an action for damages by the depositor for dishonor- ing a check, to meet which he has sufficient funds. See notes to Section 325. A check is analogous to a bill of exchange, and a bank cannot be made liable thereon except by its acceptance indorsed upon it in writing. Risley v. Phoenix Bank, 83 N. Y. 318; Lynch v. National Bank of N. J. 107 N. Y. 179; Cowperthwaite v. Sheffield, 3 N. Y. 251; Brill v. Tuttle, 81 N. Y. 454. An order drawn by a creditor on his debtor, directing the debtor to pay a certain amoimt to a third party, is not effectual as an equitable assignment unless it is drawn upon a particular fund. Such an order is not binding upon the debtor as a bill of exchange unless he signs a written acceptance thereof. Izzo V. Ludington, 79 App. Div. (N. Y.) 272; Shaver v. W. U. T. Co., 57 N. Y. 459; Attorney General v. Continental Life, 71 N. Y. 325; Wein- hauer v. Morrison, 49 Hun. 498. A check or draft drawn in the ordinary form does not operate as an equitable assignment of the funds of the drawer in the hands of the drawee or create any obligation against the drawer in favor of the payee imtil its acceptance by or delivery to him. McArdle v. German Ins. Co., 183 N. Y. 368. Where a draft drawn upon the general credit of the drawer with the drawee does not operate as an assignment of a particular fund, even though one to which the draft is to be charged is indicated, yet where it is the intention of the parties that the draft shall be paid out of a particular fund and not absolutely and at all events, it operates as an assignment of the fund. Muller V. Kling, 149 App. Div. (N. Y.) 177; Fourth Street Bank v. Yardley, 165 U. S. 634; Brille v. Tuttle, 81 N. Y. 454. Where the mere delivery to a third person of a check or draft drawn by a creditor upon his debtor does nor effect a legal transfer of the debt, where it appears that the intent was to make such a transfer, it is the duty of the court to carry out the intent. Throop Co. V. Smith, 110 N. Y. 83. The drawer of a bill of exchange is presumed to know the handwriting of the drawer. And the payment of the bill by the drawee is ordinarily an admission of the drawer's signature, which he is not afterwards, in a 300 NEGOTIABLE INSTRUMENTS LAW controversy between himself and the holder, at liberty to dispute. And therefore if the drawer's signature is on a subsequent day discovered to be a forgery, the drawee cannot compel the holder, to whom he has paid the bill, to restore the money, unless the holder be in some way implicated in the fraud. But the reason of the rule fails, and the rule itself does not apply where the forgery is not in counterfeiting the name of the drawer, but in altering the body of the bill. Bank of Commerce v. Union Bank, 3 N. Y. 230; White v. Bank, 64N. Y. 316. A check does not operate as an assignment of the funds in the bank. Rankin v. Colonial Bank, 31 Misc. 227, 230. The effect of the acceptance is to constitute the acceptor the principal debtor. By the act of acceptance he assumes to pay the order or bill, and becomes the principal debtor for the amount specified ; the acceptance being an admission of everything essential to the existence of such liability. Clayton v. Drug Co., 147 Pac. Rep. 460; Reilly v. Daly, 159 Pa. St. 605. Cases on the subject generally, see, Harris v. Clark, 3 N. Y. 93; Alger V. Scott, 54 N. Y.14; Munger v. Shannon, 61 N. Y. 251; Bailey v. R. R. Bank, 11 Fla. 266; Fulton v. Gesterding, 47 Fla. 150. There is a distinction between an order and a bill of exchange. An order payable out of a designated fund is a specific appropriation of that fund and invests in the payee a right to the particular thing thus appro- priated, which will be made effective, as against the thing, by treating the person on whom the order is drawn as a holder of what is so specifically appropriated for him in whom it has been vested by the order. A bill of exchange confers no such rights and has no such effect. It is payable generally, absolutely and at all events. It does not appropriate any particular thing to the payee. The idea of a transfer of assignment to the payee or an interest in a particular fund does not obtain in reference to a bill of exchange. If accepted by the drawee, he is bound by virtue of his acceptance, and not upon the ground of an assignment of so much money in his hands belonging to the drawer. A bill of exchange does not amoimt to an assignment, even after it has been accepted. 3 R. C. L. 1298; Bush v. Foote, 38 Am. Rep. 310; Kimball v. Donald, 64 Am. Dec. (Mo.) 209. § 212. Bill addressed to more than one drawee. A bill may be addressed to two or more drawees jointly, whether they are partners or not; but not to two or more drawees in the alternative or in succession. BILLS OF exchange; form and interpretation 301 Variant. — The Wisconsin statute omits the words "or in succession." This section seems to be inconsistent with Section 27, Subd. 5. § 213. Inland and foreign bills of exchange. An inland bill of exchange is a bill which is, or on its face purports to be, both drawn and payable within this state. Any other bill is a foreign bill. Unless the contrary appears on the face of the bill, the holder may treat it as an inland bill. A written instrument for the payment of money addressed by a firm doing business in the City of New York to a firm doing business in Vienna, Austria, signed by the firm giving it, requiring the firm to which it is addressed to pay on demand a specific sum in EngHsh money to the order of the drawers and charge the same to the account of a cargo of pig iron shipped to Vienna from a specified steamship, is a foreign bill of exchange within this section. Amsinck v. Rogers, 189 N. Y. 252. The laws of the place where bills are payable, determine what con- stitute payment. Kessler v. Armstrong Co., 158 Fed. 747; Sexton v. Armstrong Co., 207 U. S. 597. The damages recoverable by the payee of a negotiable foreign bill of exchange protested for nonpayment against the drawee may be deemed to be made up as follows: (1) The face of the bill; (2) interest thereon; (3) protest fees; (4) re-exchange, i. e., the additional expense of procuring a new bill for the same amount payable in the same place on the day of its dishonor; or a percentage in lieu of such re-exchange in jurisdictions where it is prescribed by statute. Bank of U. S. v. United States, 2 How. (U. S.) 745; Oliver Co. v. Walbridge, 19 N. Y. 134; 2 Dan. Neg. Inst. (4th ed.) Section 1444; Paven- stedt v. Life Ins. Co., 203 N. Y. 91. See also, Riddle v. Bank of Montreal, 145 App. Div. N. Y. 207; Casper v. Kuhne, 159 App. Div. (N. Y.) 390. A bill in form drawn in United States of Columbia by a corporation on itself in New York is a foreign bill and not a simple order or note. Pavenstedt v. N. Y. Life Ins. Co., 203 N. Y. 91. § 214. When bill may be treated as promissory note. Where in a bill the drawer and drawee are the same person, or where the drawee is a fictitious person, or a person not 302 NEGOTIABLE INSTRUMENTS LAW having capacity to contract, the holder may treat the instru- ment, at his option, either as a bill of exchange or a promissory note. Variant. — The Wisconsin statute omits the words "or a person." See Section 36, subd. 5. A draft drawn by an agent on his principal by authority of the prin- cipal is equivalent to a draft drawn by the principal upon himself, and need not be accepted by the drawee in order to bind it. Gray Co. Farmers' Bank, 60 S. M. 537; Falk v. Meade, 127 U. S. 702; Dow Law Bank v. Godfrey, 126 Mich. 521. Where a sight draft is drawn by an agent upon his principal in pa5nTient of purchases for the drawee, the effect is that of a bill drawn upon the drawer himself, which the holder may treat as a promissory note. Clements v. Stanton Co., 61 Wash. 419. Cases on the subject generally, see, 1 Dan. Neg. Inst. Section 398; Bank of Genesee v. Patchin, 19 N. Y. 312; Sally v. Terrill, 55 L. R. A. 730; Cimningham v. Wardell, 12 Me. 466; 4 Am. & Eng. Ency of Law, (2nd ed.) 109; McCann v. Randell, 147 Mass. 91 ; Bull v. Sims, 23 N. Y. 370; Paven- stedt V. Life Ins. Co., 203 N. Y. 95. § 215. Referee in case of need. The drawer of a bill and any indorser may insert thereon the name of a person to whom the holder may resort in case of need, that is to say, in case the bill is dishonored by non-acceptance or non-payment. Such person is called the referee in case of need. It is in the option of the holder to resort to the referee in case of need or not as he may see fit. ACCEPTANCE 303 ARTICLE 12 Acceptance Section 220. Acceptance; how made. 221. Holder entitled to acceptance on face of bill. 222. Acceptance by separate instrument. 223. Promise to accept; when equivalent to accept- ance. 224. Time allowed drawee to accept. 225. Liability of drawee retaining or destroying bill. 226. Acceptance of incomplete bill. 227. Kinds of acceptances. 228. What constitutes a general acceptance. 229. Qualified acceptance. 230. Rights of parties as to qualified acceptance. § 220. Acceptance ; how made. The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer. The acceptance must be in writing and signed by the drawee. It must not express that the drawee will perform his promise by any other means than the payment of money. 304 NEGOTIABLE INSTBUMENTS LAW jzf/^^^^^ y [ , .^^^cy^/Of.^. ^^//^ ^As /^.^i ^S^..^?h^ C^^:r^f/Xy^ J^^^t^J^tLxl-^l^^-t^ 9frOrq ^:^u:^:rCTnent, yet a check is a bill of exchange payable on demand, and a drawee is deemed to have accepted the same if he does not retiuTi it within twenty-four hours after its delivery for acceptance, as provided by Sections 321, 325. State Bank v. Weiss, 46 Misc. 93; First National Bank v. Bank, 154 S. W. 967. The word "refuses" as used in this section, does not mean a tortious refusal, nor does it imply that a previous demand for the return of the check to the holder shall be made. The word is to be construed so as to cover a failure or neglect to return the check. Wisner v. First National Bank, 220 Pa. St. 21; Westberg v. Chicago Lumber Co., 117 Wis. 589; 94 N. W. 572; Matteson v. Moulton, 11 Hun. 268; affirmed 79 N. Y. 627; State Bank v. Weiss, 91 N. Y. 276. The holder of a draft delivered to the drawee for acceptance, in order to raise a presumption of acceptance by the drawee's destruction thereof, or a refusal to return as provided by this section, must show that the drafts were negotiable, or of a nature and kind that could be presented for acceptance, or that they were actually delivered to the trustee for ac- ceptance. First National Bank v. Whitmore, 177 Fed. 397. § 226. Acceptance of incomplete bill. A bill may be accepted before it has been signed by the 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 agreement, is entitled to have the bill accepted as of the date of the first presentment. A bill or note does not lose its negotiable character by being dis- honored, and the indorsement although made after dishonor, follows the nature of the original contract and is negotiable unless it contains express words of restriction. L€a\4tt V. Putnam, 3 N. Y. 494. The right of a holder of a draft to recover of the acceptor thereof is not affected by the fact that such acceptance was an accommodation one, nor by the fact that he discounted the draft before acceptance. ACCEPTANCE 311 Iselin V. Chemical National Bank, 16 Misc. 437; Mechanics Bank v. Livingston, 33 Barb. 458; Bank of Louisville v. Ellery, 34 Barb. 630. § 227. Kinds of acceptances. An acceptance is either general or qualified. A general acceptance assents without qualification to the order of the drawer. A qualified accept- ance in express terms varies the effect of the bill as drawn. In Niagara District Bank v. Fairman, etc. Mfg. Co., 31 Barb. 403, the defendant, which was sued as the drawer of a bill of exchange, was a corporation, located in Rochester, N. Y. The bill, upon which the action was based, was drawn on A. Yerrington & Co., and addressed to that company at Cobourg, in Upper Canada. The bill was accepted by the drawee, payable at the Bank of Upper Canada, a place about ten miles distant from Cobourg. In holding that the drawer had been discharged the court said: "If the Bank of Upper Canada, where this bill was made payable by the ac- ceptors, was located in the same city, or town, or village where such acceptors resided, according to the case of Troy City Bank v. Lauman, 19 N. Y. 477, the acceptance payable at such a bank would have been entirely proper. Such acceptance is not a departure from the tenor of the bill. It merely fixes a place of payment for the mutual convenience of the acceptors and the holder, and can work no possible injury to the drawer or indorsers, as it will not affect the time for the presentment of the bill to or for the service of notice of non-payment on the parties entitled to such notice. But an acceptance of a bill at a different place from that of the residence of the drawee, by necessary implication from this case of the Troy City Bank v. Lauman, must be a material departure from the bill. This must be so upon principle. The acceptance becomes a part of the bill, and any material variance from the tenor and import of the bill, made in the terms or manner of the acceptance, taken or assented to by the holder, must be at his own risk and must discharge the drawer, if due presentment is not afterwards made at the proper place and due notice given of the non-payment of the bill. * * * The bill of exchange in this case was not properly presented for payment at the Bank of Upper Canada, Port Hope, so as duly to protest it for non-payment, as against the drawers, but it should have been presented personally to the acceptor, at Cobourg. It not having been so presented and notice of non-payment duly given, the drawers were not properly charged by the notice given, and are not liable on the bill." Sec. 228. See notes, Sec. 130. 312 NEGOTIABLE INSTBUMENTS LAW § 228. What constitutes a general acceptance. An ac- ceptance to pay at a particular place is a general acceptance unless it expressly states that the bill is to be paid there only and not elsewhere. § 229. Qualified acceptance. An acceptance is quaUfied, which is: 1. Conditional, that is to say, which makes payment by the acceptor dependent on the fulfillment 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. An instrument not under seal may be delivered upon conditions, the observance of which as between the parties is essential to its validity; that the operation of the instrument may be limited by the conditions upon which the delivery was made; that parol evidence of such conditions is not open to the objection of varjdng or contradicting a written contract, and that the rule applies to the enforcement of negotiable paper, not only as between the original parties, but as to others having notice. Higgins V. Ridgu'ay, 153 N. Y. 130; Tradesmen's National Bank v. Curtis, 38 App. Div. (N. Y.) 240; Bookstaver v. Jayne, 60 N. Y. 150. The drawer or indorser of a bill of exchange, specifying the place of payment only by its address to the drawee at a city named, is not dis- charged by its acceptance payable at a particular bank in that city, as no possible injury can result to the drawer or indorser. Troy City Bank v. Lauman, 19 N. Y. 481. A conditional acceptance is not enforceable until complete fulfillment of the conditions. Ford V. Angelrodt, 88 Am. Dec. (Mo.) 174. The following acceptance was held to be conditional: "Accepted, payable at Lloyd's Bank, Ltd., London, against indorsed bills of lading for 8,417 bushels of flax seed per Buffalo S. S. at New York and Certificate of Insurance, $8,500." Guaranty Trust Co. v. Grotian, 114 Fed. Rep. 433; see also Stevens v. Androsocgin, 62 Me. 498. ACCEPTANCE 313 If a written acceptance was delivered to the plaintiff upon an oral condition, assented to by him, that it was not to become operative, or have any existence at all as an acceptance, until the happening of a condi- tion, that condition, if proved, has been held to avail the defendant, and imder proper pleadings evidence of such conditional delivery is admissible. Schmittler v. Simon, 114 N. Y. 176; Bums Limiber Co. v. Doyle, 71 Conn. 742. In a telegram to a party, in relation to a draft, that the person sending the despatch "will pay B's draft, twenty-three hundred dollars, for stock," the words "for stock" subserve no purpose as between the payee and acceptor. At most, those words are but an indication of the nature of the consideration as between the drawer and acceptor. State Bank v. Bradstreet, 89 Neb. 188. § 230. Rights of parties as to qualified acceptance. 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 im- pliedly authorized the holder to take a qualified acceptance, or subsequently assent thereto. When the drawer or an 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. Where the holder of a bill of exchange transmits it to its agent for presentment to the drawee, such agent has no right to receive anything short of an explicit and unequivocal acceptance, without giving notice to the holder, as in case of non-acceptance; and he will be liable for any loss the holder may sustain in consequence of his right so to do. The rule which holds an agent to be bound by the terms of the contract, where he fails to bind his principal, is confined to cases where such failure arises from want of authority in fact to make the contract. Where, therefore, a draft drawn by the "Empire Mills" upon E. C. Hamilton was forwarded to a bank for presentment, and the drawee wrote across the draft "Ac- cepted, Empire Mills by E. C. Hamilton, Treas." it was held, that such acceptance bound neither the drawee nor the Empire Mills, and that the bank having omitted to protest the bill was liable to the holder, upon the insolvency of the drawer and indorsers, for the amount of the bill. Walker v. Bank of State of N. Y., 9 N. Y. 582. 314 NEGOTIABLE INSTRUMENTS LAW ARTICLE 13 Presentment for Acceptance Section 240. When presentment for acceptance must be made. 241. When failure to present releases drawer and endorser. 242. Presentment; how made. 243. On what days presentment may be made. 244. Presentment where time is insufficient. 245. When presentment is excused. 246. When dishonored by non-acceptance. 247. Duty of holder where bill not accepted. 248. Rights of holder where bill not accepted. § 240. When presentment for acceptance must be made. 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 pre- sented 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 necessary in order to render any party to the bill liable. When a bill is made payable at a day certain at a fixed time after its date, presentment for acceptance before that time is not necessary in order to charge the drawer or indorsers; it is to the owner's interest that the bill should be so accepted, as only by accepting it does the drawee become bound to pay it, and until such acceptance the owner has for his PRESENTMENT FOR ACCEPTANCE 315 debtor only the drawer, and the step is one which a prudent man of busi- ness, ordinarily careful of his own interests, would take for his protection. Allen V. Suydam, 17 Wend. 368; National Park Bank v. Saitta, 127 App. Div. (N. Y.) 628. A bill payable at a fixed time from its date may be presented for acceptance at any time. Bachellor v. Priest, 12 Pick. 399; Oxford Bank v. Davis, 4 Cush. 188. Presentment of a negotiable instrument for acceptance is distinct and different presentment for payment, since presentment for payment cannot be made until the instrument presented is due, while presentment for acceptance must be made before maturity. National Bank of Omaha v. Whitmore, 177 Fed. 398. All contracts, including negotiable instruments, are as to their valid- ity, nature, interpretation and effect governed by the law of the state or country where they are made and are to be executed. If, however, they are made in one state or country, but are to be executed in another state or country, then they are governed by the law of the state or country where they are to be performed. Presentment of negotiable paper must, therefore, be made in accordance with the interpretation as to its character extended to the instnmient by such foreign law. Westlake Inter. Law, Sections 110, 163, 169; Everett v. Vendryes, 19 N. Y. 436; Dickinson v. Edwards, 77 N. Y. 573; U. National Bank v. Chapman, 169 N. Y. 538; Spies v. National City Bank, 174 N. Y. 222; Stumpf V. Hallahan, 101 App. Div. (N. Y.) 383. § 241. When failure to present releases drawer and indorser. Except as herein otherwise provided, the holder of a bill which is required by the next preceding section to be presented for acceptance must either present if for acceptance or negotiate it within a reasonable time. If he fails to do so, the drawer and all indorsers are discharged. This section makes no change in the rule at common law. Gowen v. Jackson, 20 Johns 176; Robinson v. Ames, 20 Johns 146; Wallace v. Agry, 4 Mason 333; Phoenix Ins. Co. v. Allen, 11 Mich. 30; Allen V. Suydam, 20 Wend. 321. Where a bank receives from the owner a bill for collection, payable either at the place where such bank carries on its business, or at some distant place, it thereby becomes the agent of the owner for the col- lection, and in the discharge of its obligations as such, if the bill has not been accepted, it is boimd to present the same for acceptance without 316 NEGOTIABLE INSTRUMENTS LAW unreasonable delay, as well as to present the same for payment when it becomes payable; and if not accepted when presented for that purpose, or not paid when presented for payment, it must take such steps by pro- test and notice as are necessary to charge the drawer and indorser, or it will be liable to its principal, the owner, for the damages which the latter sustains by any neglect to perform such duties, unless there be some agreement to the contrary, express or implied. And if it be necessary or convenient for the bank to employ some other bank or individual to collect the bill, either at the place of its location, or at a distant place where the bill is payable, and it does employ another bank or individual to whom it transmits the bill for that purpose, the latter on receiving the bill and entering upon the discharge of the trust, becomes the agent for the former bank and not of the owner, and in the absence of any agreement to the contrary is answerable to it for any neglect in the discharge of its duties as agent whereby the former bank sustains any loss or damage. The principle is that when a trust is confided to an agent, and he whose interest is intrusted is damnified by the neglect of one whom the agent employs in the discharge of the trust, the agent employed shall answer to the person damnified. Montgomery Co. Bank v. Albany City Bank, 9 N. Y. 460. A draft payable on demand should be presented for payment, and if not paid, notice of non-payment should be given to the drawer within a reasonable time. Where, however, the drawer of a draft is the treasurer of the drawee, a corporation, and he, with full knowledge of the facts, some years after the draft was made, makes a partial payment thereon and promises to pay a balance due upon it, there is a waiver of any defect in presentation or notice of dishonor. Linthicum v. Caswell, 19 App. Div. (N. Y.) 341. Where the payee of a draft, on the day of its receipt by him, and in banking hours, presents and surrenders it to the drawee and receives therefor the drawee's check, which check had it been presented to the bank on that day, would have been paid, and on the next day the check is presented to the bank for payment and payment refused, and the drawers of the draft at once advised by letter of the non-payment of the check. Held, that the check could be operative as only by express agree- ment; but that although as between the said drawee and payee, the payee was not bound to present the check until the day after its receipt by him, yet that between the drawers and payee of the draft, it was the duty of the payee to present the check at once, and he was guilty of laches in not doing so, and was chargeable with the consequent loss. Smith v. Miller, 43 N. Y. 171. PRESENTMENT FOR ACCEPTANCE 317 A delay of the mail is a siifficient excuse for the omission to imme- diately present a bill for acceptance, and a presentation immediately upon its reception, is in time to charge the indorser. Walch V. Blatchley, 6 Wis. 422. § 242. Presentment; how made. Presentment for ac- ceptance must be made by or on behalf of the holder at a reasonable hour, on a business day, and before the bill is over- due, 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. Where the drawee is dead, presentment may be made to his personal representative; 3. Where the drawee has been adjudged a bankrupt or an insolvent, or has made an assignment for the benefit of credit- ors, presentment may be made to him or to his trustee or assignee. See Sections 170, 172, 245. Presentment is a term which requires but little explanation. Any- thing which amounts to a notification of the holding of the bill, with a request to accept, accompanied by the bill, will amount to a presentment. No formal presentment is necessary, or rather there is no form for a presentment. The bill explains itself, and the object is understood in the mercantile commimity, when it is shown and an answer required. So where bills are transmitted by letter to the drawee, this is good present- ment, and an answer by him that he has not accepted will be a refusal, which will make it necessary to protest and give notice. There is no rule requiring that a bill of exchange must be actually shown to the drawee, in order to effectuate a valid and binding acceptance. 3 R. C. L. 1317; Fisher v. Beckwith, 46 Am. Dec. 174. The reason for the exception of partners in Subdivision 1 rests upon the fact that partners are but one person to legal contemplation; that each partner, acting in such capacity, is not only capable of performing what all can do, and of receiving and paying out that which belongs to all, but by such acts necessarily binds them all; that, as incident to such joint relations, all of the partners are affected by the knowledge of one. 318 NEGOTIABLE INSTRUMENTS LAW These things do not pertain to the relations of joint makers or acceptors who are not partners. Hence, while a demand of one partner is equivalent to a demand of all, a demand of one of joint makers, not partners, is not. Story on Prom. Notes, Sec. 255; Gates v. Beecher, 60 N. Y. 523. As to the diligence in making presentment, see Holtz v. Boppe, 37 N. Y. 634; Reed v. Speer, 107 App. Div. (N. Y.) 144. Where the maker of a note calls on the holder on the day it becomes due and informs him that he is unable to pay, and requests him to so inform the indorsers, this is a sufficient demand and refusal to constitute a dishonor of the note. 3R. C. L. 1171. § 243. On what days presentment may be made. A bill may be presented for acceptance on any day on which negoti- able instruments may be presented for payment under the provisions of sections one hundred and thirty-two and one hundred and forty-five of this chapter. When Saturday is not otherwise a holiday, presentment for acceptance may be made before twelve o'clock noon on that day. Variant. — The statutes of Arizona, Kentucky and Wisconsin omit the last sentence. The Colorado statute substitutes for the last sentence as follows: "When any day is in part a holiday, presentment for acceptance may be made during reasonable hours of the part of such day which is not a holiday." The North Carolina statute omits the word * 'otherwise" in the last sentence. § 244. Presentment where time is insufficient. Where the holder of a bill drawn payable elsewhere than at the place of business or the residence of the drawee has not time with the exercise of reasonable diligence to present the bill for acceptance before presenting it for payment on the day that it falls due, the delay caused by presenting the bill for accept- ance before presenting it for payment is excused and does not discharge the drawers and indorsers. Reasonable time usually is a question of law tmder the circumstances of each case. Aymar v. Beers, 7 Cow. 705; Linthicum v. Caswell, 19 App. Div. (N. Y.) 541. PKESENTMENT FOR ACCEPTANCE 319 § 245. When presentment is excused. 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 drawee 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 diligence, pre- sentment can not be made; 3. Where, although presentment has been irregular, acceptance has been refused on some other ground. Subdivision 2 is analogous to cases where presentment for payment is excused. See Sec. 142. This section clears up all doubt existing before its adoption in cases where the drawee is dead. See Dan. Neg. Inst. Sec. 1178. Where on presentment of a bill of exchange for payment at the acceptor's usual place of business, within proper hours, the notary finds the doors closed, he is justified — nothing further appearing — in protesting the bill for non-payment without inquiry for the acceptor at his residence, and without making further effort to find him. Sulzbacher v. Bank, 86 Tenn. 201 ; Baumgarden v. Reeves, 35 Penn. 250; Wisconsin v. Chiapella, 23 How. U. S. 368. The payee of a check is relieved from the necessity of making presen- tation and demand if the drawee had no deposit in the bank. Culver V. Marks, 122 Ind. 544; Carroll v. Sweet, 128 N. Y. 19, 13 L. R. A. 43. § 246. When dishonored by non-acceptance. A bill is dishonored by non-accdptance : 1 . When it is duly presented for acceptance, and such an acceptance as is prescribed by this chapter is refused or can not be obtained; or 2. When presentment for acceptance is excused and the bill is not accepted. 320 NEGOTIABLE INSTRUMENTS LAW § 247. Duty of holder where bill not accepted. Where a bill is duly presented for acceptance 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. Where a bill is made payable at a day certain at a fixed time after its date, presentment for acceptance before that time is not necessary in order to charge the drawer or indorsers; it is the owner's interest that the bill shovild be accepted, as only by accepting it does the drawee become botmd to pay it, and until such acceptance the owner has for his debtor only the drawer, and the step is one which a prudent man of business, ordinarily careful of his own interests, would take for his protection. Allen V. Suygam, 17 Wend. 368; National Park Bank v. Saitta, 127 App. Div. (N. Y.) 628. § 248. Rights of holder where bill not accepted. When a bill is dishonored by non-acceptance, an immediate right of recourse against the drawers and indorsers accrues to the holder and no presentment for payment is necessary. PROTEST o^l ARTICLE 14 Protest Section 260. In what cases protest necessary. 261. Protest; how made. 262. Protest; by whom made. 263. Protest; when to be made. 264. Protest; where made. 265. Protest both for non-acceptance and non-pay- ment. 266. Protest before maturity where acceptor in- solvent. 267. When protest dispensed with. 268. Protest where bill is lost or destroyed or wrongly detained. § 260. In what cases protest necessary. 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 dtily protested for non-payment. If it is not so protested, the drawer and indorsers are discharged. Where a bill does not appear on its face to be a foreign bill, protest thereof in case of dishonor is unnecessary. As to the distinction between foreign and inland bills see Section 213. The failure to protest a foreign bill on the day it was dishonored, as required by Section 263, operates under this section to discharge the maker and indorsers from liability. 322 NEGOTIABLE INSTRUMENTS LAW Amsick v. Rogers, 103 App. Div. (N. Y.) 429; Freese v. Brownell, 35 N. J. L. 285. Where a bill does not appear on its face to be a foreign bill, protest thereof in case of dishonor is unnecessary. Williams v. Paintsville Bank, 137 S. W. 535. There are several reasons why protest as provided by this section is necessary: (a) for the sake of imiformity in international transactions; (b) because it affords satisfactory evidence of dishonor to the drawer, who from his residence abroad, might experience a difficulty in making inquiries on the subject and be compelled to rely on the representations of the holder; (c) because, as foreign courts give credit to the acts of a public fimctionary, the protest affords the most satisfactory evidence to charge an antecedent party. Byles 256. While as to certain details, such as the days of grace, the manner of making the protest, and the persons by whom the protest shall be made, the law or custom of the place where it is payable will govern ; the necessity of making a demand and protest, and circumstances under which the same may be required or dispensed with, are incidents of the original contract which are governed by the law of the place where the bill is drawn, rather than the place where it is payable. Amsick v. Rogers, 189 N. Y. 258; Price v. Page, 24 Mo. 65; Hunt v. Standart, 15 Ind. 33, 38; Raymond v. Holmes, 11 Texas, 54, 59; Powers v. Lynch, 3 Mass. 77, 80. The damages recoverable by the payee of a negotiable foreign bill of exchange protested for non-payment against the drawer, may be deemed to be made up as follows: (1) The face of the bill; (2) Interest thereon; (3) Protest fees; (4) Re-exchange, i.e., the additional expense of procuring a new bill for the same amoimt payable in the same place on the day of dishonor; or a percentage in lieu of re-exchange where it is prescribed by statute. Pavenstedt v. N. Y. Life Ins. Co., 203 N. Y. 95; 2 Sedgwick on Damages (8th ed.) 700; Byles on Bills, 418; Bank of United States v. United States, 2 How. (U. S.) 745; Lee & Co. v. Walbridge, 19 N. Y. 134. The provisions of this section, which require protest and due notice as a condition of the liability of both the drawer and indorsers of a foreign bill of exchange, apply to a check drawn and given in the State of New York on a bank in Austria, and the failure of the holder to protest the check discharges the drawer. PEOTEST 323 Casper v. Kuhns, 79 Misc. 411. Formal protest by a notary where the instrument is not a foreign bill is not necessary to hold the indorser. It is mere proof. What is essential is presentment and demand at the time and place provided for in the instrument, followed by notice to the indorser of such presentment, demand and non-payment. McBride v. Illinois National Bank, 138 App. Div. 346. § 261. Protest; how made. The protest must be annexed to the bill, or must contain a copy thereof, and must be under the hand and seal of the notary 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 cotild not be found. Protest is a solemn declaration, written by a notary public under a fair copy of a bill or note, stating that acceptance has been refused, the reasons, if any, therefor, and that the bill or note has been protested. Protest, strictly speaking, is absolutely necessary only in case of foreign bills, i.e., while it is necessary to give notice of dishonor of all negotiable paper, this need be done before a notary only in case of foreign bills. But by Section 189, ante, protest is authorized in the case of all negotiable instruments, and it is the usual way to give notice of dishonor. This method of notice has great advantages because the certificate of the notary is usually prima facie evidence. The form or contents of a protest is the time and place of presentment, the demand of payment, the fact and manner of presentment, the fact of dishonor, the name of the parties by whom and to whom presentment was made. A protest is the formal document; notice of protest is simply notice that the instrument has been dishonored and protested. Protest for better security is where the holder protests when the drawee of the bill of exchange has absconded before the day of maturity, or where the drawer or acceptor of a foreign bill has become insolvent. It is not necessary in order to bind the drawer or indorser, and seems to be principally used to enable drawer and indorser to provide for payment when due. Chitty on Bills, 383. The notice should positively identify the paper. Home Ins. Co. v. Green, 19 N. Y. 518. 324 NEGOTIABLE INSTKUMENTS LAW A notice of protest to an indorser, dated the day the note is payable, and which states the amount and the names of the maker and indorser, is suiBcient description of the note, in the absence of proof that any other note existed to which the notice might refer. A statement in such notice, that the note is protested for non-payment, is sufficient notice of a present- ment and demand of pa^inent at the time and place for payment. Youngs V. Lee, 12 N. Y. 551. Protest should designate or identify the instrument to which it refers, which is usually done by putting on it a copy thereof, but if the original instrument be annexed and referred to in the body of the protest, it is sufficient. Fulton V. Maccracken, 81 Am. Dec. (Md.) 620. A notary omitting to affix his seal may supply the defect by attaching his seal after objection has been made to its absence. RindskoflE v. Malone, 74 Am. Dec. (la.) 367. The certificate must be executed under the seal of the notary making it. Pierce v. Indseth, 106 U. S. 546. According to the weight of authority a notarial seal renders a certifi- cate of protest evidence in foreign countries, and in the absence of such a seal extraneous evidence must be given of the authority of the officer to take the protest. London R. P. Bank v. Carr, 54 Misc. 94; Bank of Rochester v. Gray, 2 Hill 227. A notary's protest is not conclusive, but only prima facie evidence of such facts as are proper to be stated in it; it may always be rebutted by other evidence showing how the demand was made, or that proper diligence was not used to make it, or that there was a permanent abandonment and removal to another place of business in the same city. 3 R. C. L. 1339; Clough v. Holden, 115 Mo. 336; Sulzbacher v. Bank, 6 S. W. Tenn. 129; Tate v. Sullivan, 96 Am. Dec. (Md.) 597; Rosen v. Carroll, 16 S. W. (Tenn.) 66; 12 L. R. A. 727; Johnson v. Brown, 154 Mass. 105. The notice of protest need not be signed manually by the notary if his name appears at the foot of the notification. It as fully acquaints the indorser of the dishonor as would the manuscript signature of a person whose handwriting he did not know; and it certainly is not expected that the indorser should know the handwriting of the notary. Bank of Cooperstown v. Woods, 28 N. Y. 567. PROTEST 325 A certificate of protest in the following form: ''I, John Doe, a notary public, do hereby certify that I have this day protested for non-payment, the annexed bill," even though properly dated and signed, is insufficient; a specification of the place and manner of presentment, and the person to whom presentment was made being necessary to bind the indorsers. Union Bank v. Williams Co., 117 Mich. 535; People's Bank v. Brooke, 31 Md. 7; Duckert v. Von Lileinthal, 11 Wis. 55. The protest of a promissory note, stating that the notary went with the original note and demanded payment thereof, at the promisor's office at a place named, and that the person in charge answered "no funds" is sufficient in form. Legg V. Vinal, 165 Mass. 555. A certificate of a notary, which states that he presented a note for payment at Montello and demanded payment, which was refused, but did not state to whom or at what place in the town it was presented, does not show such a presentation to the maker as will bind the indorser. Duckert v. Leinthal, 11 Wis. 56. CERTIFICATE OF PROTEST State of "j [ss. County of J Be it KNOWN, that on the day of , in the year of our Lord nineteen hundred and seventeen, I, , a Notary Public, duly commissioned and sworn, and residing at , in said County and State, at the request of Bank, of , went with the original instru- ment, which is hereto attached to and presented it to the person in charge, and demanded payment thereon, which was refused; because Whereupon, I, the said Notary, at the request of the aforesaid Bank did PROTEST, and by these presents do SOLEMNLY PROTEST, as well against the makers of said instrument, the indorsers thereof as all others whom it doth or may concern, for exchange, re-exchange and all costs, charges, damages and interest already incurred by reason of the non-payment or non-acceptance of said instrument. 326 NEGOTIABLE INSTRUMENTS LAW And I, the said Notary, do hereby certify that due notice of such protest as provided by law was put in the post office at , as follows: Notice for John Doe &° Co., Boston, Mass. Notice for Richard Roe, Chicago, III. Notice for Notice for Each of the above named places being the reputed place of residence of the person to whom such notice was directed. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written. Notary Public. NOTICE OF PROTEST State of 1 iss. County of ] 19. To You will please take notice that a for dollars, dated , payable after drawn by in favor of on {accepted by) endorsed by you and due has been pro- tested by me on this day for non- , after having made legal demand for the same. I hereby, at the request of the holder thereof, notify you that the said holder looks to you for payment, damages, interest and costs. Yours, etc., Notary Public. § 262. Protest; by whom made. 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. PROTEST 327 Variant. — The word "responsible" is substituted for "respectable" in Subdivision 2 in the Washington statute. A cashier of a bank who is a notary may legally protest his own note which has been discounted by the bank. Dykman v. Northbridge, 1 App. Div. (N. Y.) 26. And so too may a stockholder or an officer of a bank, who is a notary, protest paper belonging to the bank. Moreland v. Citizens Bank, 97 Ky. 211; Nelson v. Bank, 69 Fed. 798; Patton v. Bank of Lafayette, 53 S. E. (Ga.) 664; Herkimer Co. Bank v. Cox, 21 Wend. (N. Y.) 119. A notary cannot delegate his authority, he must make the presentment and demand himself, and if these duties are performed by his clerk the protest is invalid. Carmichael v. Bank of Penn., 35 Am. Dec. 408. § 263. Protest; when to be made. When a bill is pro- tested, such protest must be made on the day of its dishonor, unless delay is excused as herein provided. When a bill has been duly noted, the protest may be subsequently extended as of the date of the noting. It is not essential that the certificate be made out at the time of protest. If a note or memorandum is made by the notary at the time of the presentment and dishonor of the instrument showing what was done, a certificate thereafter drawn up from that memorandimi would be suffi- cient even though six months elapsed. Union National Bank v. Williams, 117 Mich. 535; Byles on Bills, 257; Mooreland v. Citizens Bank, 114 Ky. 577; 71 S. W. 520; 61 L. R. A. 900. Where an instrument falls due on Sunday, pa>Tnent thereof cannot be required, nor protest made, on the preceding Saturday, but present- ment and protest should be made on the following Monday vmless it is a legal holiday. Hirshfield v. Ft. Worth National Bank, 18 S. W. (Tex.) 743; 15 L. R. A. 639. The failure to protest a foreign bill on the day it was dishonored, as required by this section, operates vmder Section 260 to discharge the maker and indorsers. Amsick v. Rogers, 103 App. Div. (N. Y.) 429. § 264. Protest; where made. A bill must be protested at the place where it is dishonored, except that when a bill 328 NEGOTIABLE INSTRUMENTS LAW 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-payment at the place where it is expressed to be payable, and no further present- ment for payment to, or demand on, the drawee is necessary. Protest is generally to be made at the place where the dishonor occxirs. If a bill is drawn on a person in one place, and is payable in another, then it has been held that the holder has his election to cause the bill to be protested for non-payment either at the place of payment or at the place where the drawee resides. 3 R. C. L. 1322; 43 Am. Dec. 221; Byles on Bills, 257; Dan. Neg. Inst. Section 935. § 265. Protest both for non-acceptance and non-pay- ment. A bill which has been protested for non-acceptance may be subsequently protested for non-payment. § 266. Protest before maturity where acceptor insolvent. Where the acceptor has been adjudged a bankrupt or an in- solvent or has made an assignment for the benefit of creditors, before the bill matures, the holder may cause the bill to be protested for better security against the drawer and indorsers. See notes. Section 260. § 267. When protest dispensed with. Protest is dispensed with by any circumstances 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 reasonable diligence. Generally an excuse for non-protest will be such as arises from circum- stances not affecting the individual particularly, but having a general influence over the whole community so as to prevent and impede the transaction of business, as, for instance, the breaking out of a general war, or the prevalence of a malignant epidemic, or an overwhelming calamity. For a discussion on the subject, see Dan. Neg. Int., Section 730. PEOTESI 329 As in the case of presentment for pa)nTient and notice of dishonor, protest may be waived by the indorser, either orally or in writing, or by acts clearly calculated to mislead the holder and prevent him from treating the instrument as he otherwise would. 3 R. C. L. 1320; Burgettstown National Bank v. Nill, 213 Pa. St. 456; Manning v. Maroney, 87 Ala. 563; 6 So. 343; 3 L. R. A. 1079; Baker v. Scott, 29 Kan. 136; 44 Am. Rep. 628; Rose v. Kurd, 71 N. Y. 14; Bellinger V. Glenn, 80 Ala. 190; 60 Am. Rep. 98. § 268. Protest where bill is lost or destroyed or wrongly detained. Where 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. The defendant bank received checks from a depositor and credited them to his general account. The checks were forwarded for collection but were lost in the mail. After the failure of the drawer of the checks, the defendant bank charged them back against the depositor's account. It was held that the defendant was not entitled to charge the checks back in this manner, and that it must bear the loss itself. Heinrich v. Middletown Bank, 164 App. Div. 960; 112 N. E. Rep. 531; affirmed by Court of Appeals. In Albi v. Bank of Evansville, 124 Wis. 78, the court held, "Upon learning that its attempted presentment by mail had failed, and that the check was lost, at least for the purpose of immediate presentment, defen- dant had the opportunity and owed the duty to at once make substituted presentment and demand by means of a copy of sufficient description, and in case of non-payment to give notice to the indorser. Where a note is lost, a tender of a bond of indemnity is not necessary to a right of action on the note. Church V. Stevens, 56 Misc. 572. See also, Shipsey v. Bowery Bank, 59 N. Y. 487; Hinsdale v. Miles, 5 Cobb. 336. INDEMNITY BOND TO BANK IN PAYING LOST DRAFT KNOW ALL MEN BY THESE PRESENTS, That we, of principal, and of > as surety, are held and firmly bound unto Bank in the sum of $ , lawful money of the United States, to be paid to said Bank, or 330 NEGOTIABLE INSTBUMENTS LAW Us certain attorneys or assigns, to which payment well and truly to be made, we bind ourselves, our heirs, executors and administrators, firmly by these presents. Sealed with our seals and dated the day of , 19 THE CONDITION of this obligation is such that whereas the said Bank at the request of did, on or about the day of , igiy , issue its draft for $ on the Bank of , dated the day of iQi?, <^'>^d payable to the order of , which draft has been lost before presentment for payment, and Whereas, the said Bank has issued its duplicate draft in lieu of said lost draft upon the agreement of this bond of indemnity be given. Now therefore, if the said , principal, and surety, their execu- tors or administrators, or either of them, shall and do deliver the said draft unpaid when found to the said Bank or its successors or assigns to be can- celled, and until the same shall be so delivered and cancelled, to save, keep harmless and indemnify the bank or its assigns of and from any obligation incurred by the issuance of said draft, and from all actions, suits, payments, costs and damages for or by reason thereof, then this obligation to be void and of no effect, otherwise to remain in full force and virtue. (Seal) {Seal) State of I County of \ ss. City of J On this day of. 19 1 before me, the subscriber, personally appeared and , to me known to be the same persons who executed the foregoing instrument, and they each acknowledged to me that they executed the same. Notary Public. PROTEST 331 INDEMNITY BOND FOR PAYING A LOST NOTE KNOW ALL MEN BY THESE PRSENTS, Thai we, A, principal, of and B, surety, of fl^« held and firmly bound unto C, of in the penal sum of , lawful money of the United States, to be paid to the said C, his executors, administrators or assigns, for which payment well and truly to be made, we bind ourselves, our heirs, executors and adminis- trators, firmly by these presents. Sealed with our seals and dated the day of 19 THE CONDITION of this obligation is such that whereas A, principal, is the owner of a certain promissory note, dated the day of , for $ , and payable days after date, signed and made by and payable to the order of , due , and which said note has been lost and cannot now be produced by him and Whereas, said C, has this day paid to said A, the full amount due theron upon the agreement that this bond of indemnity would be given and that said A, principal, and B, surety, will indemnify and save C harmless, and will deliver up said note to C, when found. Now, THE CONDITION of this obligation is such that the above bounden A, principal, and B, surety, their heirs, executors, administrators or any of them shall well and truly indemnify and save harmless the said C, his executors and administrators from and against any claim on said note and any and all damages, costs, charges, actions or suits by reason thereof, and also deliver or cause said note to be delivered to said C, if found, then this obligation to be void, otherwise to remain in full force and virtue. {Seal) {Seal) {Acknowledgement as in the foregoing form) 332 NEGOTIABLE INSTRUMENTS LAW ARTICLE 15 Acceptance for Honor Section 280. When bill may be accepted for honor. 281. Acceptance for honor; how made. 282. When deemed to be an acceptance for honor of the drawer.' 283. Liability of acceptor for honor. 284. Agreement of acceptor for honor. 285. Maturity of bill payable after sight; accepted for honor. 286. Protest of bill accepted for honor or containing a reference in case of need. 287. Presentment for payment to acceptor for honor; how made. 288. When delay in making presentment is excused. 289. Dishonor of bill by acceptor for honor. Note. — An acceptance supra protest, or for honor, is when, upon the refusal of the original drawee to accept the bill, a stranger accepts for the honor of some one of the parties thereto. He declares before a notary public that he accepts the protested bill and that he will pay it at the appointed time; he then subscribes his name with the words, "accepted supra protest for the honor of A. B." The nature of the acceptor's under- taking in that respect is like an indorser, to the effect that if the drawee does not pay the bill when again presented to him, he will pay upon ma- turity. Any third person may accept supra protest; even the drawee, imless he is boimd to accept the bill in the first instance in good faith for the benefit of all parties. The holder of a bill accepted supra protest should again protest it for non-payment, and then present it to the ac- ceptor supra protest; if he refuses to pay, there must be another formal protest stating presentment to original drawee and his non-payment, the protest of the bill and its presentment to the acceptor supra protest, the ACCEPTANCE FOE HONOR 383 demand of payment from him and protest for his non-payment. A notice must be forthwith given to the drawer and the indorsers. The acceptor supra protest, it is said, does not admit the genuineness of the signature of any party, and, therefore, he may recover money paid if the bills turn out to be forgery. This is not presumed to be so if the bill has passed into the hands of a bona fide purchaser. The subsequent sections are taken from the EngHsh Bills of Exchange Act, Sections 65 to 68. § 280. When bill may be accepted for honor. Where a bill of exchange has been protested 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 thereon or for the honor of the person for whose account 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 accept- ance for honor for one party, there may be a further acceptance by a different person for the honor of another party. § 281. Acceptance for honor; how made. An acceptance for honor supra protest must be in writing and indicate that it is an acceptance for honor, and must be signed by the acceptor for honor. § 282. When deemed to be an acceptance for honor of the drawer. Where an acceptance for honor does not expressly state for whose honor it is made, it is deemed to be an accept- ance for the honor of the drawer. § 283. Liability of acceptor for honor. The acceptor for honor is liable to the holder and to all parties to the bill sub- sequent to the party for whose honor he has accepted. As to the rights of an acceptor for honor, he has recourse against the party for whose honor the acceptance was made, and all parties against whom the latter would have recourse, for all damages incurred by reason of his acceptance. If the drawee accepts supra protest, he stands in the position of an indorsee, paying full value for it, has the same remedies 334 NEGOTIABLE INSTRUMENTS LAW" to which an indorsee would be entitled against all prior parties, and can of course, sue the drawer or indorser. Swope V. Rose, 40 Pa. St. 186, 80 Am. Dec. 567. § 284. Agreement of acceptor for honor. The acceptor for honor by such acceptance engages that he will on due presentment pay the bill according to the terms of his accept- ance, provided it shall not have been paid by the drawee, and provided also, that it shall have been duly presented for payment and protested for non-payment and notice of dis- honor given to him. In order to render the acceptor supra protest liable, the holder is bound in the first instance to demand payment of the original drawee when the bill becomes due, and if he fails to pay, it must then be presented in due time to the acceptor supra protest. If the latter refuses to pay on such presentment, there must be another formal protest, stating the presentment for payment to the drawee, the protest for his non-payment, the presentment of the bill and acceptance to the acceptor supra protest, demand of payment of him and the protest for his non-payment; and notice thereof must be forthwith forwarded to the drawer and indorsers. If the acceptance is for the honor of a particular party, and the holder takes it, he cannot sue that party before maturity of the bill, and its dishonor by such acceptor ; and if the acceptance is generally for the honor of the bill, the holder cannot sue any of the parties before its maturity and dishonor. The acceptance inures to the benefit of all the parties subsequent to him and for whose honor it was made. § 285. Maturity of bill payable after sight; accepted for honor. Where a bill payable after sight is accepted 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. § 286. Protest of bill accepted for honor or containing a reference in case of need. Where a dishonored bill has been accepted for honor supra protest or contains a reference in case of need, it must be protested for non-payment before it is presented for payment to the acceptor for honor or referee in case of need. ACCEPTANCE FOR HONOR 335 § 287. Presentment for payment to acceptor for honor; how made. Presentment for pa3mient to the acceptor 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 section one hundred and seventy-five. § 288. When delay in making presentment is excused. The provisions of section one hundred and forty-one apply where there is delay in making presentment to the acceptor for honor or referee in case of need. § 289. Dishonor of bill by acceptor for honor. When the bill is dishonored by the acceptor for honor it must be pro- tested for non-payment by him. 336 NEGOTIABLE INSTRUMENTS LAW ARTICLE 1 6 Pa3mient for Honor Section 300. Who may make payment for honor. 301. Payment for honor; how made. 302. Declaration before payment for honor. 303. Preference of parties offering to pay for honor. 304. Effect on subsequent parties where bill is paid for honor. 305. Where holder refuses to receive payment supra protest. 306. Rights of payer for honor. § 300. Who may make payment for honor. Where a bill has been protested for non-payment, any person may inter- vene 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. 3 R. C. L. 1332; 92 Am. Dec. 570, 579. See Dan. Neg. Inst., Section 1254. Contrary to the general mle as to voluntary payments by a stranger without request of the debtor, a stranger may pay a negotiable bill of exchange for the honor of any one of the parties, and become thereby subrogated to the rights of the holder to the extent that he may recover against the person for whose honor he pays, and all parties prior thereto. He is also subrogated to the rights and remedies of the party for whose honor he pays, but this right of payment supra protest is not extended to promissory notes. § 301. Payment for honor; how made. The payment for honor supra protest in order to operate as such and not as a PAYMENT FOK HONOR 337 mere voluntary payment, must be attested by a notarial act of honor, which may be appended to the protest or form an extension to it. The method of accepting for honor is as follows: The acceptor for honor personally appears before a notary public with witnesses, and declares that he accepts such protested bill in honor of the drawer or indorser, as the case may be, and that he will satisfy it at the time ap- pointed. He then subscribes his name to the words following: "Ac- cepted supra protest in honor of A. B.," or, more usually, "Accepts S. P." An acceptance for honor supra protest must be in writing, and indicate that it is an acceptance for honor, and must be signed by the acceptor for honor. An agreement on the part of a stranger to the bill to pay it at maturity if the drawee does not is an acceptance for honor or an acceptance supra protest. There can be an acceptance for honor only when the bill has been protested; and it is at the election of the holder to take or refuse an acceptance for honor. The acceptance may be for part only of the sum for which the bill is drawn. It is well settled that a stranger or one not a party to the bill may accept for honor; and the drawee himself may accept for the honor of the drawer or of an indorser. And different persons may be acceptors supra protest for the honor of different parties to the bill. The party for whose honor the bill is accepted should be designated ; and the acceptor supra protest must at once give notice of his acceptance to the person for whose honor it is made. 3 R. C. L. 1331; 7 L. R. A. 209; Swope v. Ross, 40 Pa. St. 186; 80 Am. Dec. 567; 92 Am. Dec. 579 and Note. § 302. Declaration before payment for honor. 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. § 303. Preference of parties offering to pay for honor. 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. § 304. Effect on subsequent parties where bill is paid for^^honor. Where a bill has been paid for honor all parties subsequent to the party for whose honor it is paid are dis- 338 NEGOTIABLE INSTRUMENTS LAW charged, but the payer for honor is subrogated 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. § 305. Where holder refuses to receive payment supra protest. 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. § 306. Rights of payer for honor. 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. A stranger who pays supra protest for the honor of the bill generally is to be considered as an indorsee paying full value, and he is entitled to recover against all the parties to the bill. If payment has been made for the honor of a particiilar indorser, the payer may sue him and all prior parties, but not subsequent indorsers, the latter being discharged by such payment. But, if a person takes up a bill for the honor of the drawer, he has no right of action against the acceptor, if he accepted it for the accommodation of the drawer, the reason given being that if the drawer had taken it up himself, no action would lie upon it, and a third person taking it up for him must occupy the same position. 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 subrogated 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. 3 R. C. L. 1333; McDowell v. Cook, 45 Am. Dec. 289; Smith v. Sawyer, 92 Am. Dec. (Me.) 576. BILLS IN SETS 339 ARTICLE 17 Bills in Sets Section 310. Bill in sets constitutes one bill. 311. Rights of holders where different parts are negotiated. 312. Liability of holder who indorses two or more parts of a set to different persons. 313. Acceptance of bills drawn in sets. 314. Payment by acceptor of bills drawn in sets. 315. Effect of discharging one of a set. § 310. Bill in sets constitutes one bill. Where a bill is drawn in a set, each part of the set being numbered and con- taining a reference to the other parts, the whole of the parts constitutes one bill. Where the holder declares upon one of a set of exchange, it is not necessary to account for the non-production of the rest; any ground of defense which may arise in reference to another of the set, it devolves on the defendant to make. Hazzard v. Shelton, 15 Ala. 62. In Downes & Co. v. Church, 13 Pet. (U. S.), 205 (10 L. Ed. 127), it was decided, that where the holder of one of a set of exchange, which has been protested, and due notice thereof given to the indorser, brings an action thereon or against the drawer, and upon the trial produces the bill to which the protest is attached, it is not incumbent upon him to produce or account for the non-production of the other parts of the set. The law will not presume that the other bills of the set have been nego- tiated to other persons, merely because they are not produced. Nor can the drawer be prejudiced by their non-production; for if he pays the bill without notice of any superior adverse claim, under the negotiation of another of the set to a third person, he will be discharged from liability. See also, Caras v. Thalmann, 138 App. Div. 297. 340 NEGOTIABLE INSTRUMENTS LAW § 311. Rights of holders where different parts are negotiated. 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. § 312. Liability of holder who indorses two or more parts of a set to different persons. 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. § 313. Acceptance of bills drawn in sets. The accept- ance 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. § 314. Payment by acceptor of bills drawn in sets. When the acceptor of a bill drawn in a set pays it without requiring the part bearing his acceptance to be delivered up to him, and that part at maturity is outstanding in the hands of a holder in due course, he is Hable to the holder thereon. § 315. Effect of discharging one of a set. Except as herein otherwise provided, where any one part of a bill drawn in a set is discharged by payment or otherwise the whole bill is discharged. Variant. — The Wisconsin statute adds two new sections, entitled "Damages on Bills," as follows: "Sec. 1682. Whenever any bill of exchange drawn or indorsed wathin 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 at the time of the demand and damages at the rate of five per cent, upon the contents thereof, to- gether with interest on the said contents to be computed from the date BILLS IN SETS 341 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 territory of the United States, for the payment of money shall be duly presented for acceptance or payment and protested for non-acceptance 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, accord- ing to its tenor and five per cent, damages, together with costs and charges of protest." 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 Com- merce 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 per- formance, 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, 138 App. Div. (N. Y.) 297. Where the plaintifiE in the City of New York purchased a draft in a set of two, drawn on a bank in Vienna, and the first of the set, which has been mailed to the payee, was paid by the drawee in good faith on a forged indorsement, the obligation on the duplicate draft was discharged, and the purchaser cannot recover of the drawer. Casper v. Kiihne, 159 App. Div. (N. Y.) 389; Kessler v. Armstrong Co., 158 Fed. Rep. 745; Sexton v. Armstrong, 207 U. S. 597. 342 NEGOTIABLE INSTRUMENTS LAW ARTICLE 1 8 Promissory Notes and Checks Section 320. Promissory note defined. 321. Check defined. 322. Within what time a check must be presented. 323. Certification of check; effect of. 324. Effect where holder of check procures it to be certified. 325. When check operates as an assignment. 326. Recovery of forged check. § 320. Promissory note defined. A negotiable promis- sory note within the meaning of this chapter is an uncondi- tional 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 drawn to the maker's own order, it is not complete until indorsed by him. All bills, notes or other instruments which shall be issued by any bank or individual banker purporting to be receivable in payment of debts to it, shall be deemed and taken to be promissory notes for the payment on demand of the sum or value expressed in such instrument, and such simi shall be recoverable by the holder or bearer of such instrtmient, in like manner as if the same were a promissory note. Section HI, New York State Banking Law. A note may be made payable to "A or bearer," "A or order," or to "A" only. President v. Htirtin, 9 Johns 217; Kimball v. Himtington, 10 Wend. 675. But if payable to "A" only, it is not negotiable, not being payable to bearer or to order. Owens V. Blackburn, 161 App. Div. (N. Y.) 827. Neither the acknowledgement of value received or negotiable words are essential to bring it within the statute. PKOMISSOKY NOTES AND CHECKS 343 Carver v. Hayes, 47 Me. 257; Franklin v. Marsh, 6 N. H. 364; Hickok V. Bunting, 92 App. Div. (N. Y.) 167; Hegeman v. Moon, 131 N. Y. 462. A promissory note must contain the positive engagement of the maker to pay a fixed sum at a certain definite time and the agreement must not depend on any contingency, but be absolute and at all events. Camwright v. Gray, 127 N. Y. 99; Merchants National Bank v. Sugar Co., 162 App. Div. 248. An instrument by which the person signing it promises uncondition- ally to pay another certain sum of money at a certain specified time, is negotiable, although coupled with an acknowledgement of the receipt of a policy of insiu-ance. Equitable Trust Co. v. Newman, 69 Misc. 494; Equitable Trust Co. v. Taylor, 146 App. Div. 424. An instnmient which contains an order or promise to do any act in addition to the payment of money is not negotiable. Hibemia Bank v. Dresser, 132 La. 532. A complaint in an action on a promissory note payable to the order of the maker, which does not allege his indorsement of it, is demurrable. Edelman v. Rams, 58 Misc. 561 ; Odell v. Clyde, 23 Misc. 734; Simon v. Mintz, 51 Misc. 671. An allegation in a complaint in an action on a note that the instrument was delivered for a "valuable consideration" is a statement of fact and not a conclusion of law, and the complaint is not demurrable for failure to state facts constituting a cause of action. St. Lawrence Bank v. Watkins, 153 App. Div. (N. Y.) 551. A person who places his name on the back of a promissory note made by the maker, to the order of himself, before indorsement by the maker, cannot escape liability as an indorser under this section. Yonkers National Bank v. Mitchell, 156 App. Div. 318. In an action on a note payable absolutely, evidence is not admissible to prove an oral agreement that the maker of the note was not to pay it imless he received the amount of the note from another person. Torpey v. Tebo, 184 Mass. 307; Tacoma Mill v. Sherwood, 39 Pac. 977; Woods v. Finley, 153 N. C. 498; Nor is parol evidence admissible to show that it was agreed that the maker should pay in small amounts. Cauley v. Dunn, 167 N. C. 32. Where a note is ambiguous on its face, extraneous evidence, either written or oral, is admissible, to explain it. Dunbar Box Co. v. Martin, 53 Misc. 312. 344 NEGOTIABLE INSTRUMENTS LAW Promissory Note. ^/yy^f^/j^ ^ S^y/^^'L^ C^ -J.6^>:;z,,:y^yU^ "^^^^. ^/aa(eyi^cm^6d^.,^yyi^ y7J > t&^^y Sy^J^^^Z/ /Chd^Jy - &:/y>^y7^ Jl^y Q<^ r\ r.-^At^J^\y ^^t». C^^Jt^ A promissory note differs from a mere acknowledgement of debt without any promise to pay, as when the debtor gives his creditor an I O U. In its form it usually contains a promise to pay, at a time therein expressed, a siim of money to a person therein named, or to his order, for value received. It is dated and signed by the maker. A note by two or more makers may be either joint or joint and several. A note signed by more than one person, and beginning, "We promise," etc., is a joint note only. A joint and several note usually expresses that the rhakers jointly and severally promise. But a note signed by more than one person, and beginning, "I promise," etc., is several as well as joint. So, a note beginning, "I promise," and signed by one partner for his co-partners, is a joint note of all. A note in the form "I promise," etc., subscribed by two persons, is a joint and several note. Persons who sign their names to a note will be presimied to be joint makers in the absence of anything to the contrary on the face of the note. Although a promissory note, in its original shape, bears no resemblance to a bill of exchange, yet when indorsed it is exactly similar to one; for then it is an order by the indorser of the note upon the maker to pay the indorsee. The indorser is, as it were, the drawer; the maker, the acceptor; and the indorsee, the payee. Most of the rules applicable to bills of exchange equally affect promissory notes. There are two principal qualities essential to the validity of a note: 1. That it be payable at all events, and not dependent on any contin- gency. 2. It is required that it be for the payment of money only. The original parties to a promissory note are the maker or drawer and payee. The essential parts to a note are: Daie^ which is usually that of its delivery, but may be date ahead or back of delivery. Where no date is mentioned it will be presumed to be that of its delivery. Time, the time of payment may be expressed in days, months, years, demand or some other fixed determinable time; where no time is stated it is payable PROMISSORY NOTES AND CHECKS 345 on demand. Promise, which must be absolute and not conditional or contingent. Payee, the person, firm or corporation to whom the promise is made, which payee must be expressed with certainty and be capable of being identified. Amount, which must be stated with certainty and be in money, not securities or property. Place, which may be anywhere designated by the maker. If payable at a designated bank without the address indicated, it will be presimied to be payable at that bank in the city or town where the note was executed. Where no place of payment is stated it is payable at the place of business or residence of the maker. Value received, or similar words are not necessary, the law assuming it being issued for value. Interest, where not specified does not bear interest until after maturity. Signature, which is that of the maker or his or its authorized agent. A promissory note bearing date of a secular day, but in fact made and delivered on Sunday, is invalid as between the parties. Cook V. Forker, 193 Pa. 461; Crawson v. Gross, 107 Mass. 439; Froemert v. Decker, 51 Wis. 46; Header v. White, 66 Me. 90; 22 Am. Rep. 551; Textbook Co. v. Ohl, 150 Mich. 131; 13 L. R. A. 1157; Parker v. Pitts, 73 Ind. 597; 38 Am. Rep. 155; Braford v. Chandler, 81 Vt. 270; 17 L. R. A. 1239; Green v. Tulane, 52 N. J. L. 169; 28 Atl. 9. The following clauses may be added: (1) "With interest at the rate of per cent, per annum until paid." (2) "With interest at the rate of per cent, per annum, payable in advance." (3) "Should the interest not be paid as agreed, then the whole sum of principal and interest shall immediately become due and payable, and interest shall be compounded monthly thereafter at the rate of per cent, per annum." (4) "Said interest, if not paid as it becomes due, is to be added to the principal, and become part thereof, and to bear interest at the same rate." (5) "With per cent, attorney's fees in case the holder is obliged to place this note in the hands of an attorney at law for collection." (6) "Waiving grace." (7) "Waiving grace and protest." (8) "Waiving all benefit of stay and exemption laws." (9) "The maker and endorser of this note hereby expressly waive all right to claim exemption allowed by the constitution and laws of this or any other state." (10) "The maker, signer and endorser of this note severally waive demand, notice and protest, and agree to all extensions and partial pay- ments, before or after maturity, without prejudice to the holder." 346 NEGOTIABLE INSTRUMENTS LAW (11) "No extension of the time of payment with or without our knowledge, by receipt of interest or otherwise, shall release us or either of us, from the obligations of payment." (12) (In Louisiana) "The endorsers and sureties waiving the pleas of discussion and division." (13) (In states where the ability of married women to contract is limited) "I sign this note intending hereby to charge my separate estate with the payment of same." PROMISSORY NOTE WITH DEPOSIT OF COLLATERAL. {Long Form) % 191 after date, for Value Received PROMISE to pay to the order of THE BANK OF at its banking house in the City of DOLLARS, with interest at the rate of per cent, per annum (1) having deposited with and pledged to said Bank, as collateral security for the payment of this note and also for all other present or future lia- biUties and demands of any kind of the holder hereof, against the undersigned, now existing or hereafter contracted, whether created directly or acquired by assignment, whether absolute or contingent, whether due or to become due, upon the stipulations and powers herein contained, the following property, viz.: the market value of which is now $ The undersigned hereby give the Bank a lien for all of said liabiUties and demands, including this note, upon all property of the undersigned, left in the possession or custody of said Bank for safe keeping or other purpose, or coming to said Bank in any way (all remittances and property to be deemed in its possession or custody as soon as put in transit to said Bank by mail or carrier) , and upon any money or moneys and balance of deposit or deposits with said Bank, hereby authorizing and empowering said Bank at any time to apply said moneys and the deposit account or accounts of the undersigned on the books of the said Bank, in whole or in part, to the payment of any or all of said demands; and do hereby authorize and empower said Bank, upon or after the non-payment of this note, or of any of said other liabilities and demands when due, or in case of failure to comply with any demands hereunder, or to furnish further security or make payment on account as hereinafter agreed, to sell, assign, transfer and deliver the whole or any part of said collateral security or any substitutes therefor or additions thereto, or other property upon which said Bank is hereby given a lien, at any Broker's Board or at public or private sale at the option of said Bank, or any of its officers, or agents, without advertisement, or notice of intention to sell, or of the time or place of sale, and without demand of payment of this note or of any of said other liabilities and demands (such advertise- ment, notice and demand being hereby expressly waived), and after deducting all costs and expenses, including counsel fees, arising from or incidental to the sale, realization or collection of any of said collat- eral security, substitutions or additions or of any of said UabiHties and demands, including this note, to apply the residue of the proceeds to pay any or all of said liabilities and demands in whole or in part, due or not due. including this note, making a rebate of interest upon demands not matured by their terms, returning the surplus, if any, to the undersigned; and do hereby agree that at any such sale the said Bank may become the purchaser of any or all of said collateral security, substitutions, additions or other property upon which said Bank is hereby given a lien, and may hold the same thereafter in its own right absolutely, free from any claim and any right of redemption of the undersigned; and that in case of deficiency the undersigned will pay to the said Bank the amount thereof forthwith; and do hereby agree that if said Bank, or any of its officers or agents, shall at any time be of opinion that said property is of less value than above stated, or that the whole or any part of the property above or hereafter specifically pledged or on which the said Bank is hereby given a lien, has declined or may decline in value, so that the market value shall not be at least per cent, more than the amount unpaid of this note and all other liabilities of the undersigned to said Bank, or if the same shall, at any time, for any other reason become unsatisfactory to said Bank, then said Bank may in its discretion, call for payment on account or additional security satisfactory to the holder of said note, and the undersigned will immed- iately make such payment on account, or furnish such additional security, and that in case of failure so to do before twelve o'clock noon of the next day after the day of such call, th'.s note and all other liabilities of the undersigned to the said Bank, without notice or demand, shall at the option of said Bank, be and become forthwith due and payable, and said Bank may immediately reimburse itself by a sale of said securities as hereinbefore provided. Such call for payment or additional security may be made by giving any of the undersigned oral or written notice thereof, or by leaving written notice thereof at any office or place of business or usual abode of any of the undersigned. In case of any exchange of, or substitutions for, or addition to said property, or any part thereof, the provisions of this agreement shall extend to such new, exchanged, substituted or additional property; and do hereby agree that said Bank may transfer this note and that upon such transfer said Bank may deliver all security held therefor, or any part thereof, to the transferee who shall thereupon become vested with all the powers and rights herein given to said Bank in respect thereto, and the said Bank shall thereafter be forever relieved and fully discharged from any liability or responsibility in the matter. PROMISSORY NOTES AND CHECKS 347 It is further agreed that if the undersigned shall become insolvent, or make a general assignment for the benefit of creditors, or if a petition in bankruptcy shall be filed by or against the undersigned, or a receiver shall be appointed of his property or assets, then this note and all other liatsilities of the under- signed to said Bank shall thereupon become due and payable forthwith. The undersigned hereby ex- pressly empowers said Bank, at its option, to subscribe for, take and hold, as additional collateral for any and all of the indebtedness above named, all stock increases and stock and other special dividends which may be made upon collaterals held hereunder. It is further agreed that no delay on the part of the holder hereof, in exercising any rights here- under, shall operate as a waiver of said rights. PROMISSORY NOTE WITH DEPOSIT OF COLLATERAL (Short Form) I9- $ after date for Value Received, promise to pay to The Bank of , or order, at its office Dollars, in United States gold coin, or its equivalent, with interest from date hereof; having deposited with it as collateral security for payment of this or any other liability or liabilities of ours to it, due or to become due, or that may be here- after contracted, the following property, viz.: the market value of which is now , with this condition, viz., that the Bank of has the right to call for additional security should the said collateral decline in value, and on failure to respond to such call, or on the non-performance of this promise, or on the non-payment of the liabilities above mentioned, the said Bank, its President or Cashier, is hereby given full power and authority to sell and assign and deliver the whole or any part of the above-named securities, or any substitute therefor, or any addition thereto at any Brokers' Board, or at any public or private sale, at the option of the said Bank of or its President or Cashier, or their assigns, at any time or times hereafter, without advertisement or notice — such advertisement or notice being hereby expressly waived; and upon su h sale the said Bank of , the holder hereof may purchase the whole or any part of such securities — discharged from any right of redemption, and after deducting all legal or other costs and expenses for collection, sale and delivery, may apply the residue of the proceeds of such sale or sales to pay any, either, or fall of said liabilities as said Bank of shall deem proper, returning the overplus to the undersigned. And the under- signed agrees to be and remain liable to the holder hereof for any deficiency. 348 NEGOTIABLE INSTRUMENTS LAW GUARANTY OF COLLATERAL NOTE. IN CONSIDERATION of One Dollar {$i.oo) and other valuable con- sideration paid to the undersigned, the receipt of which is hereby acknowl- edged, and of the making, at the request of the undersigned, of the loan evidenced by the within note and contract, the undersigned hereby jointly and severally guar a nteeto the Bank of , its successors, endorsees or assigns, the punctual payment, at maturity, of the said note and contract and of the said loan, and hereby assent to all the terms and conditions of the said note and contract, especially agreeing that so long as the maker is bound by the said note and contract and the conditions therein contained, that he will remain bound, — waiving any defenses that the maker or makers could not maintain as maker. The undersigned hereby waives demand of payment, and also waives the protest, and notice of protest of the within note. NOTE WITH TRANSFER OF ACCOUNT $ (Place) Date On demand after date we promise to pay to the order of THE BANK of DOLLARS at the office of the BANK of , value received with interest. Per To secure the payment of this note and for value received we hereby sell, transfer and assign to the Bank, our right, title and interest in the account mentioned herein, viz: (a mechanics' lien for $2,000 against property of Richard Roe, situate at No. 7 Broad Street) and we hereby constitute ourselves as the Agents for the said Bank, for the purpose of collecting this account, and agree to turn over to the said Bank of , the proceeds of said account as soon as collected. In the foregoing note the interest of the maker in the mechanics' lien is assigned to the bank, while by its terms the maker may collect the amoimt thereof, but in doing so, he is acting as agent for the bank. Should he collect the amount and appropriate to his own use, an action for larceny would lie. PEOMISSOKY NOTES AND CHECKS 349 FORM FOR ASSIGNMENT OF BOOK ACCOUNTS AS COLL A TERAL SECURITY FOR VALUE RECEIVED, I hereby sell, assign and transfer to the First National Bank each and every of the accounts, claims, demands and causes of action named in the schedule hereto annexed, said schedule designat- ing the debtor's name, date of accounts and amount of same. I state and represent that said accounts are valid and subsisting and except as may be specified in said schedule, there are no set-ofs of counter claims thereto. I further agree that in case any of said debtors remit for or pay upon said accounts to me, that I will receive the said payment or remittance as agent for said bank. This assignment is made as collateral security for all my present indebted- ness to said bank and for all future claims or demands or indebtedness which it may have or hold against me. JOHN SMITH Dated iqi .. .. On before me personally appeared JOHN SMITH to me personally known to be the same person described in and who executed the foregoing instrument, and he acknowledged to me that he executed the same. Notary Public. Sale of Collateral secured by note. y^//>r^/rf/y^ •-lZ>yy^y:^yfj&^y x-g^^^^c^dve S//^Ay^ ^<^y 7^.c^^^t.<^z<^- ^/}^^ ^ /' (^2^^7i Wy^X^ /^.^t^^z^^ Accompanying this note was an agreement in writing providing that in case of non-payment of the note when due, Bauer could upon five days notice surrender a life insurance policy left with him by Toplitz. Upon maturity of the note Bauer did not exact strict performance, but without consideration extended the time of payment. Later without notice to 350 NEGOTIABLE INSTRUMENTS LAW the maker Bauer surrendered the pohcy to the insurance company and applied the proceeds to the payment of the note. This company refused to renew the policy and the maker shortly thereafter died. In an action for the difference between the note and the $5,000 policy, the court held, that Bauer waived the right to surrender the pohcy without notice when he said he would "hold it a few days." While he could have sold at maturity, but by extending time he would have to give timely notice. To quote from the decision: "In recent times the right of the parties to enter into a contract pro- \nding for a sale or disposition, without notice, has been recognized, and the disabiHty of the pledgee to become the purchaser, it is said, may be removed by express stipulation of the parties. The pledgee doubtless has the right to exact strict performance of the contract according to its terms, and, upon default in the payment of the debt at the time stipulated, he may, tmder a contract like this, dispose of the pledge. But if he waives the right to exact strict performance, and gives time and indulgence to the debtor, he cannot recall this waiver at his own option without notice to the pledgor, to the end that the latter may have an opportunity of protecting the pledge. The good faith which the law exacts from a person dealing with trust property will not permit the pledgee, after having once waived the forfeiture or the right to dispose of the pledge upon default of payment at the prescribed time, to suddenly stop short and insist upon the forfeiture for the non-payment of the debt when the other party is unprepared to redeem. Strict performance in such cases may be waived by any agreement, declaration or course of conduct on the part of the pledgee which leads the owner to believe that a forfeiture will not be insisted upon without an opportunity given him to redeem." TopHtz V. Bauer, 161 N. Y. 325; Insurance Co. v. Eggleston, 96 U. S. 577. CERTIFICATES OF DEPOSIT ®It^ Jfitlmnitl IBmtk af (£mntxttrte ^^ ^^/ ' ^ of Korh'atT. f^ iT -■ '^fat^y JMya/'Oyj4t'y^ne^>ci^-t ^- WOT dl-'BJBCT XO CHECK PROMISSORY NOTES AND CHECKS 351 When a person wishes to place funds in a bank upon which he does not expect to draw checks, he may secure a certificate of deposit from the bank. Certificates of deposit are the bank's receipts for funds deposited. They are negotiable and are often passed in settlement of debts. They are not subject to check. A certificate of deposit is payable on demand upon return of the certificate properly indorsed. If the money is to remain in the bank for ninety days or more it usually draws interest, but such arrangements must be made at the time of the deposit. Certificates for deposit made for a definite period of time are known as time certificates of deposit. A certificate of deposit contains the elements of a promissory note. It is a written acknowledgement by a bank of the receipt of a sum of money on deposit, which the bank promises to pay to the depositor or his order, or to some other person whereby the relation of debtor and creditor between the bank and the depositor is created. The words "promise to pay" are not essential because the law impHes such a promise when the fact of deposit is established. While money for which a certifi- cate of deposit is given by a bank is, in legal effect, in the nature of a loan, yet it is not a loan in the ordinary sense of the term, but a real deposit. No particular form is necessary to constitute a certificate of deposit. A letter of advice written by the cashier of one bank to another bank, stating that a person therein named has deposited with the former bank a sum of money therein stated, to the credit of the latter bank for the use of another, has been held to be a certificate of deposit. An ordinary deposit slip, however, signed by the cashier of the bank in which the deposit is made is not a certificate of deposit. 3 R. C. L. 198; Leaphart v. Bank of Columbia, 33 L. R. A. 700; Armstrong v. American Exch. Bank of Chicago, 133 U. S. 433; First National Bank v. Clark, 134 N. Y. 368; State v. Jackson, 120 S. W. (Mo.) 478; Elliott v. Capital City Bank, 103 N. W. (la.) 275; Reed v. Marine Bank, 136 N. Y. 454; Zander v. N. Y. Security and Trust Co., 178 N. Y. 208. § 321. Check defined. A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this chapter applicable to a bill of exchange payable on demand apply to a check. Bank checks are not inland bills of exchange, but have many of the properties of such commercial paper. Each is for a specific sum payable in money. In both cases there is a drawer, a drawee and a payee. With- out acceptance no action can be maintained by the holder upon either 352 NEGOTIABLE INSTRUMENTS LAW against the drawee. The chief difference is that a check is always drawn on a bank or banker. The drawer is not discharged by the laches of the holder in presentment for payment, unless he can show that he has sus- tained some injury by the default. It is not due until payment is de- manded and the statute of limitations runs only from that time. Merchants Bank v. State Bank, 10 Wall. 604; Bull v. Bank of Kasson, 123 U.S. 110. A check is a mere order on a bank to pay from the depositor's account according to the instructions therein contained, and may be revoked by the drawer at any time before payment or certification. Mitchell V. Security Bank, 85 Misc. 360. It is a commercial device intended to be used as a temporary expedient for actual money, and is generally designed for immediate payment and not for circulation. Kennedy v. Jones, 78 S. E. (Ga.) 1069. Check. CiTi2LEr4S Bank. N Rochester. NY ic^^^^zi , \9iyL\ No., Q31o» PK ^yS-^r-^ff^^ The original parties to a check are drawer or maker, George W. Cooper; drawee. Citizens Bank; payee, Charles E. Wilson. The drawer. — By signing his name the drawer says in effect, I have or will have on the date of the check on account with the Citizens Bank sufficient to pay the amount thereof upon demand. The drawee of a check is always a bank or banker. The drawee. — The bank promises in advance to pay it on presentation, properly indorsed it if has sufficient funds of the drawer. The bank is not required to make a partial payment. The payee assumes no financial obligations, but frequently does assume some obligations when he sells or transfers it, by indorsement. The death of the drawer of a check revokes the right of the drawee to pay the amoimt. The drawer may at any time before presentment by notifying and sufficiently describing the instnmient stop payment. PROMISSORY NOTES AND CHECKS 353 The essential parts of a check are, Date, which is usually that of its issuance, but may be dated back or ahead, but is not payable until on or after its date; Drawee, which must be a bank or banker; Payee, which may consist of one or more persons or corporations, or may be payable to bearer; Amount, which must be fixed with certainty, and in the United States expressed in dollars and cents — and not qualified by the use of words, "in current funds," "in currency" or similar phrases. In case of variance between the amount in writing and the figures the writing governs, the custom of inserting the figtires are merely for convenience. Signature of drawer or maker, which must conform to arrangements with the bank. The chief differences between checks and bills of exchange are: 1st. A check is not due until presented, and, consequently, it can be negotiated at any time before presentment, and yet not subject the holder to any of the equities existing between the previous parties. 2d. The drawer of a check is not discharged for want of immediate presentment with due dihgence, while the drawer of a bill of exchange is. The drawer of a check is only discharged by such neglect when he sustains actual damage by it, and then only pro tanto. 3d. The death of the drawer of a check rescinds the authority of the banker to pay it ; while the death of the drawer of a bill of exchange does not alter the relations of the parties. A bank check is substantially the same as an inland bill of exchange ; it passes by delivery when payable to bearer, and the nile as to presentment, dihgence of the holder, etc., which are applicable to one are generally applicable to the other. Checks are in use only between banks and bankers and their custom- ers, and are designed to facilitate banking operations. It is of their very essence to be payable on demand, because the contract between the banker and customer is that the money is payable on demand. A check on a banker is, in legal effect, an inland bill of exchange, drawn on a banker, payable to bearer, on demand, and subject, in general, to the niles which regulate the rights and liabilities of parties to bills of exchange. Cashier's Check. — A cashier's check, so-called, differs radically from an ordinary check. The latter * * * is an order upon a bank pur- porting to be drawn upon a deposit of funds, for the payment of a certain sum of money to a person named, or to order or bearer, on demand. As between himself and the bank, the drawer of the check has the power of countermanding his order of payment at any time before the bank has paid it, or committed itself to pay it. When the check, however, is certi- fied by the bank, the power of revocation by the drawer ceases, and the bank becomes the debtor. A cashier's check is of an entirely different 354 NEGOTIABLE INSTRUMENTS LAW nature. It is a bill of exchange, drawn by the bank upon itself, and is accepted by the act of issuance; and, of coiirse, the right of countermand, as applied to ordinary checks, does not exist as to it. Effect of memorandum on check. TnsflimSTDNNfflmi&LEzCHANGEBAHK^'^ The bank on which this check is drawn is in no manner concerned in the written memorandum, "In full satisfaction of all claims to date." It is however important to the payee, and unless he is satisfied to accept the amotmt in full satisfaction he should return it to the debtor. The payee would not relieve himself from liability by striking out the memor- andtmi without authority. In the case here illustrated Dr. Fuller sent the maker a bill for S670 for services. The maker disputed the amount and mailed a check for $400, as above. Fuller retained and collected the check, and again sent a bill for the full amount, crediting the sirni of $400, represented by the check. The maker thereupon wrote Fuller that he did not recognize Fuller's right to retain the check and repudiate the conditions, and requesting him to return the money or retain it on the condition named. In an action for the balance of the bill held, that there was in law an accord and satisfaction and no recovery thereon coiild be sustained; that upon receipt of the letter. Fuller had the alternative, the prompt return of the money or the extinguishment of the debt. This rule would not apply where the amount of the accoimt was liquidated. Fuller V. Kamp, 138 N. Y. 231 ; Tonslee v. Healey, 39 Vt. 522; Baird v. U. S., 96 U. S. 430; Jaffray v. Davis, 124 N. Y. 164; Bull v. Bull, 43 Conn. 455; Hilliard v. Noyes, 58 N. H. 312; Brick v. Plymouth, 63 Iowa, 462; Hinkle v. Minneapolis R. R. Co., 31 Minn. 434; Earns v. Prosser, 157 N. Y. 290. A bill of exchange drawn on a bank, if payable on demand, is a check, and such a bill is payable on demand unless a specific date of payment is mentioned. PROMISSORY NOTES AND CHECKS 355 Riddle v. Bank of Montreal, 145 App. Div. (N. Y.) 207. The distinction between a bill and a check is that the former is not payable on demand, while the latter is. It does not depend upon the question whether drawn on a bank or banker. Bowen v. Newell, 8 N. Y. 190; Harrison v. National Bank, 41 Minn. 488;43N. W. 336. Payment by check. — The giving of a check to a creditor is not in itself a satisfaction of the debt unless the check is paid. Burkhalter v. Second National Bank, 42 N. Y. 538; Cooney v. U. S. Wringer Co., 101 111. 468; Sutton v. Bald^nn, 146 Ind. 341; People's Bank v. Gilford, 108 Iowa 277; Union Biscuit Co. v. Grocery Co., 143 Mo. App. 300; Bradford v. Fox, 38 N. Y. 289. See also, Harris v. Clark, 3 N. Y. 93. § 322. Within what time a check must be presented. 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. Variant. — The Illinois statute adds "and notice of dishonor as pro- vided for in case of bills of exchange" after the word "issue." This section applies only to the rights of the drawer ; as to the indorser see notes Section 131. In order to hold the drawer it is necessary that the holder make presentment. Dolph V. Rice, 18 Wis. 397; Herker v. Anderson, 21 Wend. 372. While as between the holder and drawer of a check, presentment may be made at any time, and delay in presentment does not discharge the liability of the drawer, unless loss has resulted to him, a different rule obtains as between the holder and indorser. Carroll v. Sweet, 128 N. Y. 19; Bull v. Bank, 123 U. S. 105. The transfer of a check to successive holders does not extend the time for presentment. If not presented in a reasonable time the drawer is discharged to the extent of the loss sustained by reason of the failure to present. Gordon v. Levin, 194 Mass. 418; Gregg v. Beane, 37 Atl. (Vt.) 248; Dehoust V. Lewis, 128 App. Div. (N. Y.) 131; Veazie Bank v. Winn, 40 Me. 60; First National Bank v. Mackey, 157 111. App. 408. 356 NEGOTIABLE INSTRUMENTS LAW In order to charge a payee indorser, the bank must present the check to the drawer bank without delay. The paying bank will not be con- sidered as agent of the payee and must suffer from the acts of its own negligence. Albi V. Evansville Bank, 124 Wis. 73; 102 N. W. 329; 68 L. R. A. 964. Reasonable time. — See Section 4. Reasonable time is not fixed by the statute, but by consensus of authority, in the absence of special circumstances of excuse, is limited to the next business day, or, if the bank upon which the check is drawn is at another place, the check must be for^varded to the place of payment on the next business day, and pre- sented at latest upon the day following its receipt at the place of payment. Gifford V. Hardell, 60 N. W. (Wis.) 1064; Albi v. Bank, 124 Wis. 73; Industrial Saving Co. v. Weakley, 103 Ala. 458; Brown v. Johnson, 12 N. C. 293. Where a check is sent by mail and received by the payee the day after it is drawn, the reasonable time for presentation to the drawee is extended only until the expiry of the day following its receipt. Dehoust V. Lewis, 128 App. Div. 131; Carroll v. Smith, 128 N. Y. 19, 22. In Furber v. Dane, 203 Mass. 108 (89 N. E. 227), the court held, that a delay of two days by the holder in the presentment discharged the drawer, and the right of the holder was no greater than the general credit- ors. For the same rule see, Babcock v. City, 137 Pac. Rep. 899; National Bank v. Weil, 141 Pa. St. 457; Brown v. Schnitz, 202 111. 509; Cox v. Citizens Bank, 85 Pac. (Kans.) 762; Hamilton v. Salt Co., 54 N. W. (Mich.) 903; Bank v. Carroll, 116 N. W. (Neb.) 276. Ordinarily between drawer and drawee, where a check is payable in the same town in which it is given, it should be presented the day of its receipt or the next day. Dehoust V. Lewis, 128 App. Div. (N. Y.) 131; Smith v. Miller, 43 N. Y. 171; S. B. & N. Y. R. R. v. Collins, 57 N. Y. 641; Loux v. Fox, 171 Pa. St. 68. Allowance must be given for the presentment of a check mailed to another location. In general it is required that the person receiving such check, in the absence of special circimistances, forward it for presentment not later than the day of its receipt, and the agent to whom it is thus forwarded present it for payment not later than the day it is received by him. Brady on Law of Bank Checks, 100; Rosenthal v. Ehrlicher, 154 Pa. St. 396; N. M. Coal Co. v. Bowman, 28 N. W. (la.) 150; Lloyd v. Osborne, 65 N. W. (Wis.) 859; Buckhannon v. National Bank, 31 Atl. (Md.) 302; PROMISSORY NOTES AND CHECKS 357 Haggerty v. Baldwin, 131 Mich. 187; Carroll v. Sweet, 9 Misc. 382; Gifford V. Hardell, 88 Wis. 528; Plover Savings Bank v. Moody, 110 N. W. (la.) 29; Deboust v. Lewis, 128 App. Div. (N. Y.) 131; Williams v. Brown, 53 App. Div. (N. Y.) 486; Stilzberger & Sons Co. v. Cramer, 170 App. Div. 114. Failure to present a check within a reasonable time does not exon- erate the drawer unless there has been a loss. Baldwin's Bank v. Smith, 215 N. Y. 76; Watt v. Cans, 114 Ala. 264; Simpson v. Pacific Ins. Co., 44 Cal. 139; N. W. Coal Co. v. Bowman, 69 Iowa 150; Grange v. Reigh, 93 Wis. 552; Woodruff v. Plant, 41 Conn. 344; Stevens v. Park, 73 111. 387. Payment through clearing house. — Some courts hold that presenta- tion of a check through the clearing house does not add to the period within which presentment is required. (Holmes v. Roe, 28 N. W. (Mich.) 864; Rosenblatt v. Haberman, 8 Mo. App. 486.) The rule, however, followed by most of the states in this regard is announced by the courts of New York and Pennsylvania which hold that, where a check is de- livered after banking hours, the holder is not bound to present it for payment on the following day, but may deposit it in his bank on such day, and a presentment by such bank through the clearing house on the second day after delivery is sufficient. Brady on Checks, 104; Zaloon v. Garvin, 72 Misc. 36; Columbia- Knickerbocker Trust Co. V. Miller, 215 N. Y. 191; Hentz v. National City Bank, 159 App. Div. 743; Willis v. Finley, 173 Pa. St. 28. Presentment after death of drawer.— Where a bank has paid a check drawn by a depositor, but without knowledge of his death and in due course of business, the administrator of such depositor cannot recover from the bank the amount so paid, although the check was not presented to or paid by the bank until after the death of the depositor. Glennan v. Rochester T. and S. D. Co., 209 N. Y. 12; 2 Dan. Neg. Inst. 569; 52 L. R. A. 302; Matter of Stacey, 89 Misc. 88; Long v. Thayer, 150 U. S. 520. Where the payee of a check collects it after the death of the drawer, the estate may maintain an action against the payee to recover the amount. In re Adamson, 154 N. Y. Supp. 667; Bainbridge v. Hoes, 163 App. Div. (N. Y.) 870; Matter of Stacy, 152 N. Y. Supp. 717. Where a savings bank account was opened in the names of a husband and wife, and there was no evidence as to the ownership at the time of the deposit, or as to any agreement that it was to be jointly or otherwise owned, it was held that upon the death of the husband, the wife was entitled to the entire deposit. 358 NEGOTIABLE INSTBUMENTS LAW In re Missionary Society, 160 N. Y. Supp. and cases cited. The death of the maker of a check delivered to the payee three days before his death revokes the payee's authority to draw the money, and although the check ha\4ng been deposited in the payee's bank on which it was drawn two days after the maker's death, the fund constitutes a part of the maker's estate. Matter of Mead, 90 Misc. 263. § 323. Certification of check; effect of. Where a check is certified by the bank on which it is drawn the certification is equivalent to an acceptance. In certifying a check the bank virtually says that the check is good, we have the money of the drawer here ready to pay it. We will pay it now if you will receive it. The holder says no, I will not take the money; you may certify the check and retain the money for me tmtil the check is presented. National Bank of Jersey City v. Leach, 52 N. Y. 350; Carnegie Trust Co. V. First National Bank, 213 N. Y. 307; Times Square Auto Co. v. Rutherford Bank, 77 N. J. 649. A bank certifying a check does not warrant the genuineness of the title of the payee or holder, and in this case the payee and holder has no title to the check, and cannot enforce it. M. National Bank v. National C. Bank, 59 N. Y. 67; Cont. National Bank v. Tradesmen's Bank, 173 N. Y. 272. Where a check is certified, the drawer of the check cannot draw out the funds then in the bank necessary to meet the certified check, as the money is no longer his. Schlessinger v. Kurzrok, 47 Misc. 637; First National Bank v. Leach, 52 N. Y. 350. A bank which has certified the check of a depositor payable to his own order becomes as acceptor primarily liable thereon to any bona fide holder thereof. Poess V. Twelfth Ward Bank, 43 Misc. 45. A bank upon certification of a check becomes the primary debtor, and cannot thereafter refuse to pay it in order to make a set-ofif available to its depositor. Carnegie Trust Co. v. First National Bank, 213 N. Y. 301 ; reversing 156 App. Div. 712. The certification of checks is well known to be one of the greatest dangers to the integrity of their fimds with which banks have to contend. The power to certify checks, tmless guarded and restrained, is nothing less than the power of a corrupt letter, or other servant to give away the PEOMISSORY NOTES AND CHECKS 359 funds of the bank. Such abuses have been produced by the exercise of this power that prudent banks, as is well known, have generally discon- tinued the practice of certifying checks, and have substituted therefor the practice of taking up the check tendered for certification and issuing in its place their owti cashier's check, which is tantamount to their own promissory note. Bank of Springfield v. First National Bank, 30 Mo. App. 271. Certification of post-dated check. — "Where a post-dated check is certified by the cashier of the bank on which it is drawn to be 'good,' by indorsement thereon, before the day of its date, the instrument, upon its very face, commimicates facts and information to persons receiving the same that the cashier, in making such certification, was not acting within the known limits of his power, and that he was clearly exceeding them." Clarke National Bank v. Bank of Albion, 52 Barb. (N. Y.) 592. This case is cited \\dth approval in 1 Morse, Banks and Banking (4th ed.), Sec. 413, and the author says: "When a post-dated check is certified before maturity, it carries notice to all that the certification was beyond the officer's authority." Certification of a raised check. — A bank which certifies a raised check and afterwards pays it is entitled to recover the amount from the bank to which it was paid. The certification warrants the genuineness of the drawer's signature and that he has ftmds on deposit, which will be held for the pa}Tnent of the check, but does not warrant the genuineness of the body of the check. It is no defense for the collecting bank to say that the drawee bank was negligent in failing to detect the alteration, for the opportunity of discovering the alteration was equally open to the col- lecting bank. National Reserve Bank v. Com Exchange Bank, 157 N. Y. Supp. 316; 171 App. Div. 195; Udam v. Manufacturers' National Bank, 116 Supp. 595; Merchants Bank v. Baird, 160 Fed. 642; Continental Bank v. Metro- politan Bank, 107 111. App. 455; Blake v. Hamilton Sav. Bank, 79 Ohio St. 189; Jackson Paper Co. v. Commercial Bank, 199 111. 151 ; Continental National Bank v. Tradesmen's National Bank, 173 N. Y. 272; Epsy v. National Bank of Cincirmati, 85 U. S. 604. Stopping pajrment of certified check. — It is a general rule that pay- ment of a certified check cannot be stopped as against a holder in due course, and it makes no difference whether the check was certified at the instance of the drawer or of some person to whom it was negotiated. Meridian National Bank v. First National Bank, 7 Ind. App. 322, 33 N. E. Rep. 237; Pease & Dvryer v. State National Bank, 114 Tenn. 360 NEGOTIABLE INSTRUMENTS LAW 693, 88 S. W. Rep. 172; Poess v. Twelfth Ward Bank, 43 Misc. Rep. 45, 86 N. Y. Supp. 857. But if the certification is induced by mistake, and the ri.G;hts of no third party have intervened, and the holder has lost nothing, nor changed his position in reliance upon the certification, the certifying bank may be relieved from liability, and is justified in carrying out the drawer's instruc- tions not to pay the check. Carnegie Trust Co. v. First National Bank, 141 N. Y. Supp. 745; 213 N. Y. 301; Cleus v. Bank of New York, 114 N. Y. 70; National Com- mercial Bank v. Miller, 77 Ala. 168; 54 Am. Rep. 50; Pease v. Dwyer, 88 S. W. (Tenn.) 693; Blake v. Hamilton Sav. Bank, 79 Ohio St. 189; 88 N. W. 724; Drinkall v. Bank, 88 N. W. 724; Mt. Morris Bank v. Twenty-third Ward Bank, 172 N. W. 244; B. and K. Mfg. Co. v. Citizens Trust Co., 93 Misc. 94; Merchants Bank v. First National Bank, 116 Ark. 1. Certification by mistake. — If the bank certifies a check to be good by mistake, under the erroenous impression that the drawer had fimds on deposit, when in fact he had none, or has been induced by some fraudulent representation to certify it as good, the certification may be revoked and annulled, provided no change of circvimstances has occurred which could render it inequitable for such right to be exercised. If the check still remains in the hands of the holder who held it when it was certified, and the mistake is discovered and notified to him so speedily that he has time afforded him to notify and preserve the Hability of indorsers, the bank may retract its certificate. But if another person has become the holder of it, or circimistances have so changed that the rights of the holder woiild be prejudiced, and especially if it has been paid to a bona fide holder without notice, it is absolutely estopped from doing so. Ir\4ng National Bank v. Wetherald, 36 N. Y. 335; Second National Bank v. Western National Bank, 51 Md. 133; S. C, 34 Am. Rep. 300; Rankin v. Colonial Bank, 31 Misc. 227. Certification to be in writing. — By Section 220 it becomes necessary that a binding certification be in writing. Where the holder of a check wires the bank asking whether there are sufficient funds to meet it and he receives a reply in the affirmative, it was held that this constituted only an assurance that the check was good at the time of the sending of the telegram and not a certification. Kahn v. Walton, 46 Ohio St. 197; National Bank v. Commercial Bank, 87 Pac. 746; Myers v. Union Bank, 27 111. App. 254. But where a bank in response to a telegram as to whether it would pay a check, answered that it would, it was held, to be a certification which bound the bank. PKOMISSOKY NOTES AND CHECKS 361 Henrietta Bank v. State Bank, 16 S. W. (Tex.) 321; Atchinson Bank v. Garretson, 51 Fed. 168. A bank being asked to cash a check on another bank, telephoned to the drawee bank and was informed that the check was "good," and thereupon cashed the check, but before presentment for payment the drawer notified the drawee bank not to pay it. It was held that, for the reason it was not accepted or certified in writing, the drawee bank was not liable. Van Buskirk v. Bank, 83 Pac. (Colo.) 142. For cases on the subject generally, see Evansville Bank v. G. A. Bank, 155 U. S. 556; Boon Co. Bank v. Latimer, 67 Fed. Rep. 27; Wallace V. Stone, 107 Mich. 109; Libby v. Hopkins, 104 U. S. 303; Western Tie Co. V. Brown, 196 U. S. 502; Meuer v. Phoenix National Bank, 94 App. Div. (N. Y.) 331; American National Bank v. Miller, 229 U. S. 517; M. M. Bank v. T. T. W. Bank, 172 N. Y. 244; Goshen National Bank v. Bingham, 118 N.Y. 349. § 324. Effect where holder of check procures it to be certified. Where the holder of a check procures it to be accepted or certified the drawer and all indorsers are discharged from liability thereon. The certification of a bank check is not, in all respects, like the making of a certificate of deposit, or the acceptance of a bill of exchange, but that it is a thing sui generis and that the effect of it depends upon the person who, in his own behalf, or for his own benefit, induces the bank to certify the check. The weight of authority is that if the drawer in his own behalf, or for his benefit, gets his check certified, and then delivers it to the payee, the drawer is not discharged; but that if the payee or holder, in his own behalf or for his own benefit, gets it certified instead of getting it paid, then the drawer is discharged. Minot V. Russ, 156 Mass. 458; Cullen v. Union Surety Co., 79 App. Div. (N. Y.) 412. Certification at instance of drawer.— The certification of a check, if made at the instance of the drawer, does not become effective until the issuance and delivery of the check to the payee, for the implied obligation of the bank is to pay the money deposited to the depositor or to his order. G. N. Bank v. Bingham, 118 N. Y. 349, 7 L. R. A. 595, 765; Lynch v. First National Bank, etc., 107 N. Y. 179; Thomson v. Bank of British North America, 82 N. Y. 1 ; Shipman v. Bank of New York, 126 N. Y. 318; 12 L. R. A. 791; Bank of British North America v. Merchants' National 362 NEGOTIABLE INSTBUMENTS LAW Bank, 91 N. Y. 106; Citizens' National Bank v. Importers and Traders' Bank, 119 N. Y. 195; Kearney v. Met. Trust Co., 110 App. Div. 236, 97 N. Y. Supp. 274; Carnegie Trust Co. v. First National Bank, 156 App. Div. 712, 141 N. Y. Supp. 745; Freund v. Importers', etc.. Bank, 76 N. Y. 352; see Nassau Bank v. Broadway Bank, 54 Barb. 236; First National Bank v. Leach, 52 N. Y. 350; Worth v. Case, 42 N. Y. 362. When a bank at the request of the drawer of a check certifies it before delivery to the payee and it is then delivered, the certification does not discharge the drawer if the check is not paid on due presentment. The certification simply vouches for the genuineness of the check and that it will be paid on presentment, and merely adds to its easy negotiation by adding the promise of the bank. Born V. Bank, 123 Ind. 78, 24 N. E. 173, 7 L. R. A. 442, 18 Am. St. Rep. 312; Oyster and Fish Co. v. Bank, 51 Ohio St. 106, 36 N. E. 833; Minot V. Russ, 156 Mass. 458, 31 N. E. 489, 16 L. R. A. 510, 32 Am. St. Rep. 472; Blake v. Hamilton Dime Sav. Bk. Co., 79 Ohio St. 189, 87 N. E. 73, 20 L. R. A. (N. S.) 290, 128 Am. St. Rep. 691 and 696, 16 Am. Cas. 210. The certification of a check is charged against the drawer, the remedy of the holder being against the bank, unless the certification is obtained at the instance of the drawer, in which case, if he gets it certified and puts it in circulation, he is still liable in case the bank does not pay. Minot V. Russ, 156 Mass. 458. Where the drawer of a check has it certified before delivery, the certification operates merely as an assurance that the check is genuine, and the drawer is not discharged from liability. Davenport v. Palmer, 152 App. Div. 761; Minot v. Russ, 156 Mass. 458; Bom v. First National Bank, 123 Ind. 78; Oyster Co. v. Bank, 51 Ohio St. 106; Bickford v. Bank of Chicago, 42 111. 238; Randolph Bank v. Homblower, 160 Mass. 401. If the drawer gets the bank to certify his check and then delivers it to the holder, and the latter neglects to present it to the bank for payment in due course the drawer is discharged to the extent he suffers by the delay. Heartt v. Rhodes, 66 111. 351; Blair v. Wilson, 28 Graft. (69 Va.) 165, 171; Larsen v. Breene, 12 Colo. 480, 484, 21 Pac. 498. Certification at instance of payee. — The effect of a certification of a check at the instance of the payee, or other holder thereof, is to create a new contract between the drawee and the payee, or other holder, for the payment of the amoimt thereof, and the drawer is thereby released from liability thereon. PROMISSORY NOTES AND CHECKS 363 Meuer v. Phenix National Bank, 94 App. Div. 331, 88 N. Y. Supp. 83, affirmed 183 N. Y. 511; First National Bank of Jersey City v. Leach, 52 N. Y. 350; Freund v. Importers', etc.. Bank, 76 N. Y. 352; see also, Carne- gie Trust Co. V. First National Bank of City of N. Y., 156 App. Div. 712, 141 N. Y. Supp. 745. This rule is logically and necessarily confined to cases in which the check is certified at the instance of the payee, or other holder thereof in due course. Thomson v. Bank of British North America, supra; Hartford v. Greenwich Bank, 157 App. Div. 448; 142 N. Y. Supp. 387; see also, Morrison v. Chapman, 155 App. Div. 509, 140 N. Y. Supp. 700. If the holder receive an uncertified check, and instead of drawing the money has it certified, he discharges the drawer for he has accepted the bank as his sole debtor; the same as if he had drawn the money, then deposited it, and taken a certificate of deposit for it. Met. National Bank v. Jones, 137 111. 634, 27 N. E. 533, 12 L. R. A. 492, 31 Am. St. Rep. 403; Born v. Bank, 123 Ind. 78, 24 N. E. 173, 7 L. R. A. 442, 18 Am. St. Rep. 312; Oyster and Fish Co. v. Bank, 51 Ohio St. 106, 36 N. E. 833, 128 Am. St. Rep. 691 and 696; Meuer v. Phoenix National Bank, 94 App. Div. 331; First National Bank v. Leach, 52 N. Y. 350; Meuer v. Phoenix National Bank, 183 N. Y. 511. Where the holder procures certification of a check, the drawer is discharged and the bank becomes the 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. Times Automobile Co. v. Bank, 73 Atl. (N. J.) 479. Where a bank through the mistake of its teller certifies a check upon which the payment has previously been stopped, and the check has not left the hands of the payee who shows no change of circumstances and no harm or injury to himself, and where the drawer is not discharged by the certification for the reason that he has himself created the situation by stopping payment before the mistaken certification is made, the case is taken out of the rule of liabiUty of a bank upon its certification, and no recovery against the bank, upon suit by such payee, will lie. B. and K. Mfg. Co. v. Citizens Trust Co., 93 Misc. 94. For cases on subject generally, see Lyons v. Union National Bank, 150 App. Div. 493; Cooke v. State National Bank, 52 N. Y. 115; National Bank of Jersey City v. Leach, 52 N. Y. 350; Gallo v. Brooklyn Savings Bank, 199 N. Y. 222; Meuer v. Phenix Bank, 183 N. Y. 511. 364 NEGOTIABLE INSTRUMENTS LAW § 325. When check operates as an assignment. A check of itself does not operate as an assignment of any part of the 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. This is undoubtedly a statement of law, but it is also true that a bank which has received the money of a depositor is bound to honor his checks to the amount of his funds, and is liable in damages to the depositor for not honoring his check, where it has sufficient funds to meet such check; but the duty of the bank to honor the check where there are sufficient funds would, of course, cease upon a countermand of the check or notice of the death of the drawer. A check is not the assignment of the fund on deposit to the credit of the drawer pro tanto, and the holder is merely the agent of the drawer for the piirpose of collecting it, and upon the death of the drawer before presentation the authority of the holder is revoked, and the bank is no longer authorized to pay; but on principles of necessity incident to the banking business, if the bank pays in good faith and without notice of the death of the drawer, it is protected. Glennan v. Rochester Trust and Safe Deposit Co., 209 N. Y. 12, 102 N. E. 537, 52 L. R. A. (N. S.) 302; Pease v. State Bank, 88 S. M. (Tenn.) 172; Tibley Glass Co. v. F. and M. Bank, 220 Pa. St. 1; B. & O. R. Co. V. First National Bank, 102 Va. 757; Long v. Taylor, 150 U. S. 520; Matter of Stacey, 89 Misc. 88. The relation of debtor and creditor, not of agent and principal, exists between a bank and its depositor. The money deposited becomes a part of the bank's general fimds and it impHedly contracts to pay its depositor's checks, acceptances and notes payable at the bank to the amount of his credit. In discharging its implied obligation it pays its own money as a principal, not its depositor's money as an agent. It is a mere drawee answerable to the depositor if it fails to fulfill its implied contract obliga- tion to pay notes and checks drawn by the depositor. Baldwin's Bank v. Smith, 215 N. Y. 76; Commercial Bank v. Arm- strong, 148 U. S. 50; First National Bank v. Murfreesboro Bank, 127 Tenn. 205. The giving of a check is not the creation of an obhgation, but is merely the admission by the drawer of the existence of an obligation to pay a certain sum of money. It imposes no obhgation on the drawee to pay the same as between the drawee and payee. It is nothing more than a repre- sentation of the drawer that he has money on deposit with the drawee subject to his order, with an implied promise on the part of the drawee PKOMISSORY NOTES AND CHECKS 365 to pay the amount of the check in case it is not paid or accepted by the bank on which it is drawn. Peninsular Bank v. Penderson Co., 91 Wash. 623. This section is intended to cover the Hability of a bank to the holder of the check, and he can recover from the bank when he brings himself within the provisions of the statute. If a check is neither accepted nor certified, there is no liability on the part of the bank to the holder. Elyria Saving Bank v. Bin, HI N. E. (Oh.) 147; Covert v. Rhodes, 48 Ohio St. 66; National Bank v. Berrall, 70 N. J. L. 757; Hove v. Bank, 115 N. W. (la.) 476; 19th Ward Bank v. First National Bank, 184 Mass! 49; PoUak v. Niall, 137 Ga. 23; Moore v. Norman, 52 Minn. 83; Smith Co. v. Mitchell, 117 Ga. 772; Consolidated Bank v. First National Bank, 199 N. Y. 516; Baldwin's Bank v. Smith, 215 N. Y. 76. United States Supreme Court cases and those in Illinois and Missouri which follow so hold. The case of First National Bank of Washington v. Whitman, 94 U. S. 343, 24 L. Ed. 229, goes into the question in detail. There the payee brought suit against the bank upon which the check was drawn, upon the theory that the payment upon the forged indorsement to the forger operated as an acceptance by the banlv of the check sufficient to authorize an action by the real owner to recover thereon. U. S. Portland Cement Co. v. U. S. National Bank, 157 Pac. 202; Balsam v. Mutual Trust Co., 74 Misc. 465; Dimcan v. Berlin, 69 N. Y. 151. The payee of a check which has not been accepted by the bank upon which it is drawn, cannot maintain an action against the bank, even though the maker had on deposit sufficient fimds to pay it. Hentz V. National City Bank, 159 App. Div. (N. Y.) 743; Matter of Estate of Stacey, 89 Misc. 88. For cases on the subject generally, see A. S. American Bank v. National City Bank, 161 App. Div. (N. Y.) 268; Consolidated National Bank v. First National Bank, 129 App. Div. (N. Y.) 538; Eastman Kodak Co. V. National Park Bank, 231 Fed. 320. § 326. Recovery of forged check. 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. This section appears only in the statutes of New York and New Jersey, but the courts in most of the states have held that the depositor owes the bank the duty of making an examination of his pass book and vouchers for the purpose of discovering any unauthorized payments which may have been made. 366 NEGOTIABLE INSTRUMENTS LAW Leather Mfgrs. Bank v. Morgan, 117 U. S. 96; American Bank v. Bushey, 7 N. W. (Mich.) 725; Bank v. Allen, 14 S. Rep. (Ala.) 335; Scanlon v. Germania Bank, 97 N. W. (Minn.) 380; N. Y. Exchange Bank v. Houston, 169 Fed. 785; Nat. Dredging Co. v. President, 69 Atl. (Del.) 607; Kenneth v. National Bank, 77 S. W. (Mo.) 1002; National Bank v. Richmond Co., 56 S. E. (Va.) 96; Myers v. S. W. Bank, 193 Pa. St. 1. "Primarily, a bank may pay and charge to its depositors only such sums as are duly authorized by the latter, and of course a forged check is not authority for such payment. It is, however, permitted to a bank to escape liability for re-payment of amounts paid out on forged checks by establishing that the depositor has been guilty of negligence which contributed to such payments and that it has been free from any negli- gence." Morgan v. U. S. Mortgage and Trust Co., 208 N. Y. 218, 222, 101 N. E. 871, 872, L. R. A. 1915D, 741 Ann. Cas. 1914D, 462. If the depositor has by his negligence caused loss to his bank, he should be responsible for the damage caused by his default, but beyond this his liability shoiild not extend. Critten V. Chemical Bank, 171 N. Y. 219, 229. The relation between a bank and a depositor is that of debtor and creditor, and the law implies a contract on the part of the bank to disburse the money standing to the depositor's credit only upon his order, and in conformity with his directions; no payments can be charged against a depositor by a bank unless made to such persons as the depositor directed. Payments made therefore upon forged indorsements are at its peril. It can claim protestion upon some principle of estoppel, or because of some negligence chargeable to the depositor. Shipman v. Bank of State of New York, 126 N. Y. 318. A depositor who sends his pass book to be written up and receives it back with his paid checks as vouchers, is bound under certain circum- stances to examine the pass book and vouchers, and to report to the bank without unreasonable delay any errors which may be discovered. Morgan v. U. S. Trust Co., 208 N. Y. 218; Hardy v. Chesapeake Bank, 51 Md. 562. Rule as to savings banks. — The liability of a savings bank for pay- ments made upon forged drafts, differs from that of ordinary banks of deposit, which are absolutely liable for payments on forged checks no matter how skillful the forgery may be. A savings bank is not liable for payments made upon a forged draft unless negligence can be imputed to it; that is to say, unless the discrepancy between the signature is so marked and plain that an ordinary competent clerk should detect the forgery. PROMISSORY NOTES AND CHECKS 367 Noah V. Bank for Savings, 171 App. Div. (N. Y.) 191; Kelly v. Buffalo Savings Bank, 180 N. Y. 171; see Section 42. Pleadings. — The statute need not be pleaded, and under it either party may prove any fact which may establish a cause of action or defense if the pleadings are such as to permit it under the general rules. Shattuck V. Guardian Trust Co., 204 N. Y. 200. 368 NEGOTIABLE INSTRUMENTS LAW ARTICLE 19 Notes Given for Patent Rights and for a Speculative Consideration Section 330. Negotiable instruments given for patent rights. 331. Negotiable instruments given for a speculative consideration. 332. How negotiable bonds are made non-negotiable. § 330. Negotiable instruments given for patent rights. A promissory note or other negotiable instrument, the con- sideration of which consists wholly or partly of the right to make, use or sell any invention claimed or represented by the vendor at the time of sale to be patented, must contain the words "given for a patent right" prominently and legibly written or printed on the face of such note or instrument above the signature thereto ; and such note or instrument in the hands of any purchaser or holder is subject to the same defenses as in the hands of the original holder; but this section does not apply to a negotiable instrument given solely for the pur- chase price or the use of a patented article. Constitutionality.— This section does not contravene the provisions of the Constitution of the United States (Art. 1, Sec. 8), which secures to a patentee for a limited time "the full and exclusive right and liberty of making, using and vending to others to be used," his invention or discovery, or of the Acts of Congress passed in pursuance thereof (5 U. S. Statutes at Large, 117). The said act does not operate as a la\\'iul re- straint upon the right of sale conferred upon the patentee by acts of Congress. Herdic v. Roessler, 109 N. Y. 127; Hankey v. Downet, 116 Ind. 58; 1 L. R. A. 447; Bohn v. Brown, 101 Ky. 354; 41 S. W. 273; State v. Cook, 64 S. W. (Tenn.) 720; 62 L. R. A. 174; Allen v. Reiley, 203 U. S. 347, 358; Benton v. Sikyta, 84 Neb. 808; Quiggle v. Herman, 131 Wis. 379. NOTES GIVEN FOR PATENT RIGHTS, ETC. 369 Kniss V. Holbrook et al. (Ind. App.) 40 N. E. 1118; New v. Walker 108 Ind. 365, 9 N. E. 386, 58 Am. Rep. 40; Tescher v. Merea, 118 Ind. 586, 21 N. E. 316; Sandage v. Studabaker Bros., 142 Ind. 148, 41 N. E. 380, 34 L. R. A. 363, 51 Am. St. Rep. 165; Tredick v. Walters, 81 Kan. 828, 106 Pac. 1067; Pinney v. Bank, 68 Kan. 223, 75 Pac. 119, 1 Ann Cas. 331; Id., 70 Kan. 879, 78 Pac. 151; Nyhart v. Kubach, 76 Kan. 154, 90 Pac. 796; Bolte v. Sparks, 85 Kan. 13, 116 Pac. 224; Ensign & Co. v. Coffelt, 102 Ark. 568, 145 S. W. 231; Allen v. Riley, 203 U. S. 347, 27 Sup. Ct. 95, 51 L. Ed. 216, 8 Ann. Cas. 137; Woods v. Carl, 203 U. S. 358, 27 Sup. Ct. 99, 51 L. Ed. 219; Ozan Lumb. Co. v. Bank, 207 U. S. 251, 28 Sup. Ct. 89, 52 L. Ed. 195; Winchester Electric Light Co. v. Veal, 145 Ind. 506, 41 N. E. 334, 44 N. E. 353. This section does not apply to notes given for articles manufactured imder a patent, or for the purchase of territory for the sale of a patented article. State Bank v. Jones, 58 N. E. (Ind.) 852; Hankey v. Downey, 116 Ind. 118. The penal law in the State of New York makes it a misdemeanor for any person knowingly to take such note without having the words "given for a patent right." Sec. 1520 Penal Law. A statute making it a crime to take promissory notes in a prohibited transaction, does not make the notes void in the hands of innocent purchasers, although the person who violates the statute commits a crime. Anderson v. Etter, 102 Ind. 115; Glenn v. Farmers' Bank, 70 N. C. 191; Palmer v. Minar, 8 Hun. 342; Cook v. Weirman, 51 Iowa 561. A promissory note, executed in a transaction forbidden by statute, is at least illegal as between the parties and those who have knowledge that the law was violated. It is an elementary rule that what the law prohibits, under a penalty, is illegal, and it cannot, therefore, be the foundation of a right as between the immediate parties. Wilson V. Joseph, 107 Ind. 490; New v. Walker, 108 Ind. 369. § 331. Negotiable instruments given for a speculative consideration. If the consideration of a promissory note or other negotiable instrument consists in whole or in part of the purchase price of any farm product, at a price greater by at least four times than the fair market value of the same product at the time in the locaHty, or of the membership and rights in an association, company or combination to produce or sell any farm product at a fictitious rate, or of a contract or bond to purchase or sell any farm product at a price greater 370 NEGOTIABLE INSTRUMENTS LAW by four times than the market value of the same product at the time in the locaHty, the words, "given for a speculative consideration," or other words clearly showing the nature of the consideration must be prominently and legibly written or printed on the face of such note or instrument above the signature thereof; and such note or instrument, in the hands of any purchaser or holder, is subject to the same defenses as in the hands of the original owner or holder. See note Sec. 96. § 332. How negotiable bonds are made non-negotiable. The owner or holder of any corporate or municipal bond or obligation (except such as are designated to circulate as money, payable to bearer), heretofore or hereafter issued in and payable in this state, but not registered in pursuance of any state law, may make such bond or obligation, or the interest coupon accompanying the same, non-negotiable, by subscribing his name to a statement indorsed thereon, that such bond, obliga- tion or coupon is his property ; and thereon the principal sum therein mentioned is payable only to such owner or holder, or his legal representatives or assigns, unless such bond, obligation or coupon be transferred by indorsement in blank, or payable to bearer, or to order, with the addition of the assignor's place of residence. LAWS repealed; when to take effect 371 ARTICLE 20 Laws Repealed ; When to Take Effect Section 340. Laws repealed. 341. When to take effect. § 340. Laws repealed. Of the laws enumerated in the schedule hereto annexed, that portion specified in the last column is hereby repealed. Variant. — The date in the above section refers to the statute of the State of New York, and of course the date as to the other states is that on which the law went into effect. § 341. When to take effect. This chapter shall take effect immediately. Schedule of Laws Repealed. Revised Statutes. . . .Part 2, chapter 4, title 2, All Laws of Chapter Section 1788 33 All 1794 48 All 1801 44 All 1819 34 All 1823 216 All 1826 17 All 1828 20 15, H 30 (2d meet.) 1828 20 I, nil 51. 272, 393, 460 (2d meet.) 1835 141 All 1857 416 All 1865 309 All 1870 438 All 1871 84 All 1873 595 All 1877 65 All 372 NEGOTIABLE INSTRUMENTS LAW 1887 461 All 1888 229 All 1891 262 All 1894 607 All 1897 612 All 1897 613 2,3 1898 336 AH 1904 287 All Index 373 INDEX (References are to pages) ACCEPTANCE By separate instrument 306 Duty of holder where bill not accepted 320 Effect of 300 How made. 303 Holder entitled to on face of bill 306 Kinds of 311 Meaning of 2, 188 Notice of non-payment where refused 273 Of incomplete bill 310 Of note payable at bank 238 Omission to give notice of non-acceptance 273 Rights of parties as to qualified 313 Time allowed drawee to accept 309 To be made by drawee or agent 304 What constitutes general 312 What constitutes qualified 312 When bill dishonored for non-acceptance 319 When presentment for must be made 314 When promise equivalent to 307 ACCEPTOR Admits authority to draw bill 188 Admits capacity of corporation 188 Admits capacity of infants 188 Admits existence of drawer 188 Admits genuineness of drawer's signature 188 Has right to see bill 224 Liability of 188 Not presumed to know handwriting in body of the bill 188 Order of liability of 205 Payment by, of bills drawn in sets 340 ACCEPTANCE FOR HONOR Agreement of 334 Example of 337 How made 333 Liability of acceptor for honor 333 Presentment for payment 335 Protest of a bill accepted for honor 334 When bill may be 332 When deemed for drawer 333 When may be 333 ACCOMMODATION INSTRUMENTS Corporation paper 97 Executed by agent 99 No consideration necessary in accommodation note 94 374 Index {References are to pages) ACCOMMODATION PARTIES Burden of proof 99 Indorser 198, 245 Liability of 93, 100 Liability of maker 5, 94, 100 Married woman as 99 Parol evidence as to 100 Partners as 96 Where instrument paid by 284 ACCOUNT Assignment of 349 "Either or survivor" form of 12 Failure to examine 288 ACTION By holder 129 Includes counter-claim and set-off 2 Restrictive indorsement confers right to bring 1 14 ADMINISTRATOR See Agent and Executor. AGENT See, Corporation, authority of officers. Accommodation paper executed by 99 Bank as; for payee 134 Bank not 238 Draft ; drawn by 302 Exceeding authority; liability of principal 79 Fraud by 65, 76 Indorsement by 123 Indorsement by administrator or executor 68, 204 Liability as indorser 210 Liability of person signing as 68 May give notice of dishonor 247, 248 Notice of protest may be served on 253 Payment of personal debts with trust funds 151, 162 Power of attorney for 67 Signature by, authority; how shown 61, 154 Trustee as agent 71 ALTERATION Alleging 365 Bank when not responsible for 288 By striking out name of payee 203 Cancels the instnmient 278, 291 EfTect of; where instnmient complete 41, 287, 293 Filling blanks; not an. 291, 292 Holder in due course, rights of 292 Immaterial no effect 294 Of amount 289, 293 Of date 292 Index 375 {References are to pages) ALTERATION— Continued Of nimiber of parties 294 Of place 293 What constitutes material 291, 292, 294 When presumed before execution 287 When depositor estopped from alleging 365 Without consent of indorser 199 AMBIGUOUS INSTRUMENTS Parol evidence as to 60, 243 AMOUNT Alteration of 43, 289, 293 Certainty as to; what constitutes 18 When ambiguous 55, 57 When may be filled in 43 ANTECEDENT DEBT Constitutes consideration 87, 88 ANTEDATED Does not make instrument invalid 40 ASSIGNMENT Assignment of non-negotiable note 202 Bill does not operate as 298 Subject to defenses 106 Transfer by 192, 193, 194 When check does not operate as an 300 When check operates as an 364 Without indorsement 106 ASSUMED NAME See, Trade Name. ATTORNEY FEE Does not effect the negotiability 19 BANK See Savings Bank. Acceptance where note payable at 238 Agent of payee for collection 134 Corporation opening an account with 160 Liability as to altered instruments 290 Liability as to fraud of agents 76 Liability on forged checks 365 Not agent 238 Order of liability on certified check 205 Payee has no cause of action against 365 Presentment where instrument payable at 226, 237 Relation with depositor 364 When holder for value 133 What is 2 When not responsible for alterations 288 376 Index {References are to pages) BANKING HOUSES Presentment of payment 220, 233 What are 226, 227 BEARER Indorsement of instrument payable to 119 Payable to cash same as 38 To be negotiable payable to or order 9 When a fictitious person 37 , 38 When indorsed in blank; payable to 120 When payable to 37 Who is 2 BILL Means bill of exchange 2 BILLS IN SETS Acceptance of 340 Constitute one bill 339 Effect of discharging one of a set 340 Liability of holder 340 Payment by acceptor of 340 Rights of holder where different parts are negotiated 340 BILL OF EXCHANGE See Acceptance. Acceptance of; incomplete 310 Acceptance of; how made 303 Addressed to more than one drawee 300 Complaint against maker of 190 Damages recovered by payee 301 Damages recovered by payee on 322 Defined 245 Distinction between and an order 300 Holder entitled to acceptance on face 306 In effect a promissory note 184 Inland and foreign 301 Liability of drawee retaining 309 Negotiable before acceptance 305 Not assignment of funds in hands of drawee 298 Promise to accept 307 Time allowed drawee to accept 309 When a check 354 When amounts to an assignment 299 When may be treated as promissory note 301, 304 BLANKS Authority to fill 41, 44 Distinction between filling and altering 43 Inserting wrong date 41 Index 377 {References are to pages) BLANKS— Continued Liability of holder in due course 43, 44 Liability of party who has indorsed 42 Necessary to deliver 41 No right to supply signature 45 Space in completed instrument 41 True date to be inserted 46 When improperly filled 41 When may be filled 41, 290 BONDS Negotiable, how made, non-negotiable 370 BROKER See Agent. Liability of 210 BURDEN OF PROOF As to altered instruments 291 As to cancellation 286 As to consideration 86 As to holder in due course 173, 174 As to payment on maker 277 As to notice of defect 166 As to notice of dishonor 245 On holder to prove presentment 215, 219 Where fraud or duress is alleged 147, 174, 177 When title defective 172 CANCELLATION Burden of proof 287 Instrument discharged by 286 CAPACITY Acceptance of bill an admission of 188 Warranty by indorser 201 CASH Instnmient payable to "cash" is payable to bearer SS Payable in cash or merchandise negotiable 30 CASHIER Check '353 Effect of instnmient drawn to 122 Rule of agency applies to 61 CERTAINTY Of time 24,27,28 CERTIFICATE OF DEPOSIT Contains elements of promissory note 351 Form of 7, 350 When negotiable l'^ 378 Index (References are to pages) CERTIFICATION Effect of 358 By mistake 360, 363 Not a demand for payment 214 Of post-dated check 35^ Of raised check 359 Stopping payment certified check 359 To be in writing 360 Where drawer procvires 361 Where holder procures 361 Where payee procures 361 CHECK See Certification. Alteration of; see alteration. Bill of exchange is, when 354 Bond on lost 331 Certification; see certification. Defined 351 Does not operate as assignment of funds 300 Figures on; mere memorandum 57 Indorsement; when payable to bearer 1 15 Liability on delivery to wrong person 186 Lost; presentment of 219 Memorandum' on; effect of 354 Mutilated 186 Order of liability on certified 205 Payable on demand 351, 355 Payment by 355 Payment; what constitutes 239, 242 Recovery on forged 365 Revoked on drawer's death 54, 241 Stolen; liability of drawer 185 Stopping payment of 240, 241 Stopping payment of certified 359 Time to be presented 355, 356 When operates as assignment 364 CLEARING HOUSE Pa}Tnent through 277, 357 COLLATERAL NOTES Form of 346, 347 Guaranty of 348 COLLATERAL SECURITIES Sale of 350 Index 379 {References are to pages) COLLECTION Bank agent of payee for 134 Indorsement for 113,118 COMPLAINT Against drawer and indorser 187 Against maker 182 Against maker and indorser 183 Against maker bill of exchange 190 By accommodation maker 182 CONDITIONAL INDORSEMENT Example of • • HO Party required to pay may discharge the condition 118 CONFLICT OF LAWS VaHdity of instnmient governed by laws where made 315, 322 CONSIDERATION See Value. Absence or failure of 88 Antecedent debt constitutes 87, 88 Antecedent debt is 87 Burden of proof as to 86 Effect of want of 92 Instruments given for speculative 369 Not necessary on part of holder to discharge 277, 280 Presumption of 84 What constitutes 87 What is an admission of 17, 284 CONSTRUCTION Where instrument is ambiguous 55 CONTINGENCY Instrument payable on; not negotiable 24, 28 CORPORATION See Agent. Acceptor admits capacity to draw 188 Accommodation indorsement by 99 As accommodation party 97 As to capacity and powers of officers of 99 Authority of officers of 161, 180 Authority of officers 62, 64 Effect of indorsement by 74 Form of resolution with bank 160 Indorsement of note of 140 Liability as maker 180 380 Index {References are to pages) CORPORATION— Continued Liability of officer as indorser 208 Not, disclosed as maker 73 Pa\Tnent of personal debts by officer with corporate funds 157,158,161,171 When not disclosed 72, 73 COSTS OF COLLECTION Pro\'ision for i^ DATE Alteration of ■ 292 Ante-dated and post-dated not invalid 39 Change of ^31 Omission of 30 Omission of; presumption 55 Presimiption as to 39, 125 Presumptive evidence of time of issue 31 Presumed to be made when dated may be post-dated 40 When may be inserted 40, 46 Where wrong 40 DAY See Holiday, Satiu-day, Simday. DAYS OF GRACE Abolished 235 DEATH Of indorser where notice of dishonor to be sent 244 Note payable upon negotiable 27 Notice of dishonor where party is 253 Presentment when principal debtor is 227, 357 Presentment when drawee is 317, 319 Renunciation ; effect of 285 Revokes drawer's check 54, 241, 352 DEFECT What constitutes notice of 148 DEFENSES When subject to original 1 ' ^ DEFINITIONS Of tenns used in act 2 DELAY In giving notice of dishonor ^ •_ ^'A^ In making presentment 229, 335 Index 381 {References are to pages) DELIVERY A question of fact 3 By mistake 53 Conditional 50, 53 Of incomplete instrument 47 Liability of indorsee when negotiated by 206 Meaning of 2 Necessity of 49, 103 No inception until 39 Person paying, entitled to 223 Stolen or lost before 49 To impostor or wrong person 186 Warranty by 199 When effectual 48 DEMAND By letter 141, 214 By telephone 224 On joint makers 227 Must be presented on date due where not payable on 215 Necessary to charge drawer or indorser 213 On partners 255 Payable on 9, 213 Promissory note payable on 141 Suit sufficient demand ^^, 141 When pa^'^able upon 32, 237 DETERMINABLE FUTURE TIME Instrument must be payable on 9 What constitutes 24 DISCHARGE OF INSTRUMENT Accommodation party not discharged by extension granted in- dorser 279 By cancellation 275, 286 Consideration to holder not necessary 277 How discharged 275 Payment by indorser 276 Renunciation by holder 285 Rights of parties who 283 When holder person primarily liable 276 When persons secondarily liable are 279 DISCHARGE OF PARTY SECONDARILY LIABLE By agreement binding on holder 281 By cancellation 280 By discharge of instrument 280 By discharge of prior parties 280 By extension of time 281 382 Index {References are to pages) DISCHARGE OF PARTY SECONDARILY LIABLE— Continued By extension of time to plead ^-ill not 282 By release of one of several and joint makers 281 By release of principal debtor 281 By tender by prior party 280 Mere indulgence not sufficient to 282 DISHONOR By acceptor for honor 335 By non-pa^TTient 233, 318 Liability of person secondarily liable 233 When a bill is dishonored 319 DRAFT By agent 302 Defined 298 DRAWEE Bill may be addressed to two or more 300 Liability of, retaining bill of exchange 309 Time allowed to accept bill of exchange 309 To be named with reasonable certainty 10 When dead, presentment how made 317 DRAWER Acceptance of honor of 333 Acceptor admits existence of payee 184 Admission of 184 Complaint against; form of 186 Complaint by holder against 186 Complaint by payee again&t 186 Death of revokes check 54, 241 Discharged; upon certification 358 Liability of 184 Liability as to stolen checks 185 Liability of; where bill dishonored for non-acceptance 184 Notice of dishonor to be given to 244 Presentment necessary to charge 212 Presentment necessary to hold 355 Right of recourse to 233 To be indicated vnth reasonable certainty 10 When notice of protest need not be given to 27 1 DUE COURSE See Holder in Due Course. What constitutes pa^-ment in 242 DUE DILIGENCE What constitutes 230, 356 When question of law 232 Index 383 {References are to pages) DURESS See Fraud. Instrument obtained by; defective 144, 145 Parol evidence admissible to prove 147 ELECTION Holder right of 30 ESTOPPEL As to forgery 81, 365 As to previous acts 99 Of maker 176 EVIDENCE As to agreement for non-negotiation 103 As to fraud and duress 147 As to liability of parties 195, 196 % Contract of indorsement cannot be varied by parol 205 Effect of blank Ill Intention of indorsers may be shown by 209 Of indorser 244 Negligence in signing instrument 177 Possession of instrument 279 When ambiguity as to indorsement 118 Where instrument ambiguous 60, 243 EXECUTOR See Agent. Check payable to 152, 155, 156 Indorsement by 204 Liability as indorser 123 Paper of; notice to bank 154, 164, 165 Signattire of; notice to purchaser 138 EXCHANGE Provision for 19 EXHIBITION OF INSTRUMENT Must be 224 Payment without when; insufficient 225 When necessary 224 EXTENSION Effect of, on surety 179 FICTITIOUS PERSON Drawee in bill of exchange 301 Notice of protest to 272 Payee; when drawer estopped to allege 184 Presentment for acceptance excused when payee is 319 384 Index {References are to pages) FICTITIOUS PERSON— Continued Person fraudulently representing another 79 Presentment may be dispensed with 230 When payable to bearer 37,79 When payable to order of 38 FIGURES Mere memorandum 239 Where discrepancy with writing 56 FISCAL OFFICER Instrument payable to 122 Liability as indorser 208 FOREIGN BILL Defined 301 FOREIGN LANGUAGE May be written in 39 FORGED SIGNATURE As to a bona fide holder 189 Bank prestmied to know 288 Effect of 76 Estoppel 81 Of drawer and payee 38, 78, 189 Of maker, does not discharge indorser 202 Liability of savings bank on 80 Recovery on forged checks 365 FORM And interpretation 9 Need not follow statute 39 FORMS Assignment of account 349 Bond on lost check ^^ Bond on lost note 329 Certificate of deposit 350 Certificate of protest 325 Check 352 Complaint against acceptor, maker of Bill of Exchange 190 Complaint against maker and indorser 183 Complaint against maker of note 182 Complaint by accommodation maker 182 Complaint by holder against indorser 187 Complaint by payee against drawer 186 Either or survivor account 12 Guaranty of collateral note 348 Index 385 {References are to pages) FORM S— Continued Note 344 Note with deposit of collateral 346, 347 Note with transfer of account 348 Notice of protest 326 Power of attorney 67 Power of attorney, revocation of 68 Resolution of corporation with bank 160 Stopping payment on check 241 FRAUD See Duress. As to character of instrument 145 Burden of proof as to 174, 200 Evidence admissible to prove 147 Holder in due course 177 Instrument obtained by; defective 144 Ratification of 79 Rights of holder to paper obtained by 150 What transferee must show 171 GENUINENESS Acceptor admits signature of drawer 188 By implication 200 No warranty when by delivery only 201 Warranty of where negotiation 201 When warranty of, not implied 200 GOOD FAITH What constitutes on part of holder 134 GOODS AND MERCHANDISE Instnmient payable in 30 GUARANTOR Not entitled to notice of dishonor 244 When liability becomes fixed 244 When person becomes 192 GUARANTY Assignment not a 193 Form of 108, 235, 348 Indorsement by 108 Indorsement implies a 203 Meaning of 234 Where instrument dishonored 244, 245 GUARDIAN See Agent, Executor. 386 Index {References are to pages) HOLDER Effect of notice of dishonor given on behalf of 248 Certifying check discharges drawer 362 Duty of; where bill not accepted 320 Good faith on part of 134 Liability of indorsing bills in sets 340 May receive payment 1 29 May sue any party 170 May sue in own name 1 29 Meaning of 2, 129 Presentment to be made by 219 Renunciation by 285 Rights of 129, 170 Rights of; to stolen paper 169 HOLDER FOR VALUE Burden of proof 99 Indorsee prestmied to be 134 Indorsee taken for security is 132 Rights of 148 What constitutes 89 HOLDER IN DUE COURSE After riotice of infirmity 142 As to purchaser for less than face value 150 Burden of proof as to 173 Fraud not a defense against a 177 Payee as 136 Presumption of 127 Renunciation does not effect 285 Rights of 129, 166 Rights under altered instrument 292 Sectibn applied to 106 What constitutes 130 When a person not deemed 141 Who deemed 54, 172 With knowledge of failure of consideration 140 HOLIDAY See Saturday, Sunday. Legal holidays in New York 6 Time, how computed when laSt day 6 When instrument falls due on 235, 237 INCOMPLETE INSTRUMENTS See Blanks. Not delivered 45, 47, 49 Stolen 49 Who liable on 47 Index 387 {References are to pages) INDORSEMENT Accommodation by corporation 99 Blank; changed to special 1 12 Blank; example of 1 10 By agent; liability of 210 By execu;tor 122, 204 By fiscal officer 122 By guaranty 108 By mark or pencil sufficient 104 By party of same name 123 Conditional 118 Conditional ; example of 1 10 Effect of, by infant or corporation 74 Effect of restrictive indorsement 114 Failure to allege indorsement 343 For collection and deposit 1 14 In a representative capacity 123 In blank Ill In blank; meaning of 109 Indorsement of instrument payable to bearer 119 Kinds of 109, 110 Liability of partners 197 Meaning of 3, 202, 203 Must be of the entire instrument 108 Not necessary when payable to order how made 103 Of whole instrument 108 Payable to either of two 121 Payable to two or more 120 Presumption as to time of 124 Place of; presumption 125 Qualified 115 Qualified; example of 1 10 Restrictive ; effect of 1 14, 1 16 Restrictive ; example of Ill, 115 Requisites of 106 Striking out 126 To avoid guaranty by 116 Transfer without 1 26 Warranty by 199, 272 With rubber stamp 11, 191 When restrictive 112 Where name is wrongly designated or misspelled 123 Without recourse 115 INDORSEE Agent of indorser 112 Notice of dishonor to be given to 244 Rights of 114 388 Index (References are to pages) INDORSER Accommodation 198 Complaint against; form of 183 Delay in presentment discharges 356 Intention may be shown by parol 209 Liability of accommodation 95 Liability contingent upon protest 176, 196 Liability on demand note 141 Liability of corporation as 208 Liability of general 201, 273 Liability of irregular 1 1*1 Liability of where negotiated by deUvery 206 Not a surety after dishonor 234 Order of HabiHty of 205, 206 Order in which Hable 205, 206, 207 Payment by 276 Payment by second 276, 284 Presentment necessary to charge 212 Security to be tendered maker to hold 225 When name of only descriptive 56 When notice of dishonor need not be given to 272 When person deemed 191 When presentment not necessary to charge 229 INSTRUMENT See Negotiable Instruments. Ante-dated and post-dated 40 Definition of j Discharged; how 275 Drawee to be named on 10 In blank; payable to bearer 37 Incomplete • inc Indorsement of; must be entire 108 Means negotiable instnmient 3 Must be exhibited 223, 224, 225 Need not follow language of statute 39 Notice of infirmity in 142 Omissions not affecting 30 Payable to order or bearer 9 Payable in money ^ 9 Requisites of 9, 106 Stolen or lost before delivery 49 Subject to attachment 128 Subject to attachment and sale 128 Stmi to be certain 9 To be in writing 9 To be signed ? When ambiguous ^^ When prior party may negotiate 128 Where payable ^15 Index 389 {References are to pages) INFANT Acceptor admits capacity to draw 188 Effect of indorsement by 74 INTEREST Conflict of laws 59 Does not make the sum uncertain 18 Not to effect negotiability 19 Table of all states 58 When date omitted 55 When no rate mentioned 57 INSANE PERSON Acceptor cannot show drawer was 188 Instrument executed by 165, 200 ISSUE Meaning of 3 JOINT ACCOUNT Form on opening 12 JOINT DEBTORS Presentment to 228 JOINT PARTIES Joint payees indorsing 207 When jointly and severally liable 56 JUDGMENT NOTES When not negotiable 29 LAW MERCHANT Rules of when govern 7 LIABILITY Of acceptor 188 Of acceptor for honor 3?>Z Of accommodation party 93, 100 Of accommodation indorser 95 Of administrators or executors indorsers 123 Of agent or broker 210 On check delivered to wrong person 186 Of drawer 184 Of general indorser 201 Of holder indorsing bills in sets 340 Of indorser when negotiated by delivery 206, 209 Of joint makers 179 On lost note 178 Of maker 176 Of officers indorsing 123, 208 390 Index {References are to pages) LIABILITY— Continued Order of 99, 205, 207 Of partners indorsing individually 197 Presentment necessary to charge drawer and indorser 212 Of surety signing as maker 179 LIEN Person having deemed holder for value 91 Person having may sue 91 Person having may recover 91 Though principal debt not due 91 LOST INSTRUMENT Bond on lost check 331 Bond on lost note 329 Does not excuse notice of dishonor 245 Liability on 178 Protest of 329 MAIL As to notice of dishonor 258, 259 Delay in 230, 271 Miscarriage of 261 Notice of dishonor by 262 MAKER Admission of 176 Burden of proof on to show payment 277 Complaint against; form of 182 Demand to be made on joint 227 Estoppel of 176 Forged signature of 202 Liability of 176 Liability of accommodation 94 Liability of joint 179 Order of liability of 205 Parol evidence to show capacity 60 Pa>Tnent to own order; indorsement of 35 MATURITY Governed by law of place where payable 237 On holiday rule as to 237 Time of 235 MEMORANDUM Does not effect negotiability 21, 23 Effect of on check 354 Figures on check are 57 When not an alteration 294 Index 391 {References are to pages) MONEY As to what constitutes 13 Designation of particular kind 30 Election of holder; in lieu of 29 NAME Alteration by striking out 203 Holder may sue in own 129 When wrongly designated 123 NEGOTIABLE INSTRUMENTS See Instruments. Drawer to be named 9 Effect of inserting memorandum 23 Foreign language; written in 39 Form of 9 To be in writing 9 To be payable to order or bearer 9 To contain an unconditional promise 9 NEGOTIABILITY Bill of exchange is, before acceptance 305 Date ; effect of on 27 Meaning of term 10 Mention of fund; negotiability 22 Of instrument imtil restrictively indorsed 125 Provisions not effecting 28 NEGOTIABLE INSTRUMENTS LAW Adoption; date of after the preface Courts will not take judicial notice of 2 Short title 2 NEGOTL/VTION By prior party 128 Dishonor does not effect 234 Of bill, time of 217 Of instruments payable to bearer 102 Of post-dated instruments 40 Release of drawer and indorsers by delay in 315 Rules governing Art. V What constitutes 102 When prior party may negotiate 128 NOTE Acceptance of payable at bank 238 Ambiguous instrument may be considered a 55 Bill of exchange in effect a 184 Bond on 329 Defined 342 392 Index {References are to pages) NOTE— Continued Form of 344, 345 Given for patent rights and speculative consideration 363 Guaranty of 348 Lost, does not excuse notice of dishonor 245 Lost; HabiHty on 178 Made and dehvered on Sunday 345 May be considered a 55 Negotiability of 27 Not subject to gift 85 Payment by indorser 276 Payable upon death 27 To" constitute valid 27, 344 Usurious, see Usiury. When bill of exchange treated as 301, 304 NOTICE OF DISHONOR By bank, to whom given 245 By whom given 247 Delay in giving, how excused 271 Deposit in post-ofhce 262 Effect of given on behalf of holder 248 Effect of omission to non-payment 273 Form of notice 250 Given by agent 247 Lost note does not excuse 245 Notice to partners 254 Notice where party is dead 253 Pleadings of 246 Surety not entitled to 5 To antecedent party 262 To bankrupt 256 To persons jointly liable 256 Time in which notice must be given 257 To whom notice may be given 253 To whom notice must be given 244 Waiver of notice 266 When agent may give 248 When dispensed with 270 When need not be given to drawer 271 When indorser is dead 244 When notice sufficient 249 When sender deemed to have given due notice 261 When parties reside in different places 259 When parties reside in same place 258 Where acceptance is refused 273 Whom affected by waiver 268 Where must be sent 263 Where given by party entitled thereto 248 Index 393 {References are to pages) NOTICE OF INFIRMITY What constitutes 148 When person a holder in due course 142 NOTING 327 OMISSIONS Negotiable character, when not affecting 30 ORDER Indorsement not necessary 35 Instruments payable to 35 Instruments payable to order of drawer 35 Instnmients payable to order of maker 35 Instnmients payable to order two or more 35 Instruments payable to order one or more 35 Payee must be indicated 35 To be payable to or order 9 When payable to 35 OVERDRAFT Liability on 238 PARTICULAR FUND Promise unconditional when indicated 20 PAROL EVIDENCE See Evidence. PARTICULAR FUND Meaning of 22 PARTNERS Distinction between joint makers and 255 Distinction between parties jointly liable and partners 256 Liability of 96 Liability of indorsing individually 197 Notice of dishonor to 254 Partner as accommodation party 96 Payment of personal debt with partnership paper; effect of . . . . 161,163, 164 Presentment for acceptance to 317 Presentment to persons liable as 228 PATENT RIGHTS Constitutionality of provision relating to 368 Notes given for 368 394 Index {References are to pages) PAYEE Bank failure to accept, rights of 365 By acceptance ; admission of 188 Designation of 35 Entitled to surrender of instrument 276 For honor, rights of 338 Holder in due course 136 When more than one 36, 120, 121 Where name wrongly designated or misspelled 123 PAYMENT By acceptor of bills drawn in sets 340 By alteration 278 By check not satisfaction of debt 355 By person accommodated 275 By principal debtor 276 By stranger 275 By surrendering instrimient 277 By person insolvent, effect of 280 Checks order of 241 Deposit of proceeds of note to account, not 143 Discharges an instrument 129, 275 Distinguished from sale 276 Form of notice in stopping 241 In due course 242 Of check, what constitutes 239, 242 Of bill in set 340 Overdraft 239 Presentment for 212 Possession of instrmnent evidence of 279 Stopping 240, 359 Through clearing house 277 What constitutes in due course 242 PAYMENT FOR HONOR Declaration before 337 Effect on subsequent parties 337, 238 How made 336 Preference of parties 337 Rights of payee for honor 338 Where holder refuses to receive 338 Who may make 336 PENCIL Writing may be made with 4,11 PERSON Meaning of 3 Index 395 {References are to pages) PLACE Alteration of 293 Of indorsement; presumption of 125 Of payment not mentioned 223 Of presentment 221 Of protest 327 Omission to specify 30 What is for presentment 220, 221 When may be filled in 45 PLEADINGS See Forms. Allegation as to bill of exchange in writing 306 Allegation "for a valuable consideration" 343 Alleging making of instrument 130 Failure to allege indorsement 343 In notice of dishonor 246, 268 In notice of protest 270 Presentment and demand to be alleged 216, 219 POST-DATED INSTRUMENT Negotiable, not invalidated by reason of 40 POST OFFICE Deposit of notice of dishonor in 262, 263 What meant by 259 POWER OF ATTORNEY See Agent. Form of 67 Revocation of 68 PRE-EXISTING DEBT Constitutes value 87 PRESENTATION Necessary to hold drawer 355 Officer of corporation as indorser entitled to 215 When not necessary 213 When Saturday half holiday 7 PRESENTMENT FOR ACCEPTANCE Distinction between presentment for payment 315 How made 317 On what days may be made 318 When excused 319 When dishonored by non-acceptance 319 When it must be made 314 When time is insufficient 318 Where failure to present releases drawer and indorser 315 396 Index {References are to pages) PRESENTMENT FOR PAYMENT After death of drawer 357 Burden on holder to hold indorser 215 Delay in making; when excused 230 Distinction between presentment for acceptance 315 Not necessary to charge person primarily liable 212 Of lost instrument 219, 231 Place of 221 The rule as to Saturday 237 To acceptor for honor 335 To be alleged 216 To be made at reasonable hour 219 To joint debtors 228 To person liable as partners 228 What constitutes sufficient 219 When payable at bank 226 When dispensed with 231, 233 When falling due Sunday or hohday 234 When sufficient 224 When not necessary to charge drawer 229 When not necessary to charge indorser 229 Where not payable on demand 131 Where principal debtor is dead 227 Within what time check must be 355 PRIMARILY LIABLE Presentment for payment not necessary to charge 212 Question of fact 5 Who is 5 PRINCIPAL See Agent. Power of attorney of 67 PRINTED PROVISIONS Writing governs over 55 PROMISSORY NOTES See Notes. PROTEST Applies to foreign bills 269 Before maturity where acceptor insolvent 328 By whom made 326 Certificate of 325 Delay in giving notice of 271 Facts to be stated in notice of 251 For non-acceptance and non-payment 328 How made 323 Index 397 {References are to pages) PROTEST— Continued Indorser's liability contingent upon 196, 327 In what cases necessary 321 Meaning when used in pleading 219 Notice of 326 Notice may be served on agent 253 Object of notice of 252 Of bill accepted for honor 334 Of bill of exchange, damages recovered 301 To maker 274 Waiver of 269 What is 323 When dispensed with 328 When must be made 274 When need not be made 274 When notice need not be given to indorser 272 When notice need not be given to drawer 271 When notice dispensed with 270 When to be made 327 Where bill is lost or destroyed 329 Where made 327 REASONABLE DILIGENCE What is 270 REASONABLE HOUR Presentment to be made at a 219 REASONABLE TIME Burden on plaintiff to show 6, 46 In presentment for payment 217, 218 Nature of instrument in determining 216 Presentment for acceptance to be in 315 What constitutes 6, 141, 356 Where instrument payable on demand 140 When question of law or fact 6 REFEREE IN CASE OF NEED Drawer may insert name of 302 RENUNCIATION By holder 285 Effect of 285 Meaning of 285 To be in writing 285 REPRESENTATIVE CAPACITY Sec Agent. 398 Index {Refer ences are to pages) RESIDENCE Meaning of tenn 264 Time of sending notice of dishonor to 254, 258 SATURDAY Instruments falling due on 214, 235 Presentment for acceptance on 318 Presentment when half holiday 7, 237 Where indorser receives notice of dishonor 263 SAVINGS BANKS Forged instruments; effect of on 80 Liability on forged instruments 366 Order on; when non-negotiable 18 Pass book of; non-negotiable 12 When order on not negotiable 22 SEAL Efifect of; on corporation paper 32 Omission of 30 SECONDARILY LIABLE Liability of ; when instrument dishonored 233 When discharged 279 Where instrument paid by person 283 Who is 5 SIGHT Instruments payable at sight are payable on demand 32 SIGNATURE See Forged Instruments. Absence of; not authority to fill 45 Banker presumed to know 288, 299 By agent 61 By procuration; efifect of 74 Forged; efifect of 76 Full name not necessary 11 In case of doubt as to intention 55 Liability of paying on 80 Place of, immaterial 11 SPECULATIVE CONSIDERATION Constitutionality of provision relating to 368 Notes given for 368 Instruments given for 369 STATEMENT OF TRANSACTION Efifect of 20 Index 399 {References are to pages) STOLEN INSTRUMENTS Before delivery 49 Liability of drawer 185 Purchaser in good faith of 173 Rights of holder in due course 168, 169 SUM CERTAIN What is 18 SUNDAY See Holiday. Note made on 345 Time; how computed when last day 6 When instrument falls due on 234 SURETY Bound with principal 5 Indorser without consideration becomes 95 Liability of signing as maker 179 Not entitled to notice of dishonor 108 Subrogated to rights of judgment creditor 280 TELEPHONE Demand over 225 TENDER Funds to meet at place payable is 212 Persons secondarily liable discharged by 279 Security to be ; to hold indorser 2 25 TIME See Reasonable Time. Allowed drawer to accept bill of exchange 309 Determinable future; what constitutes 24 Depends upon intent 25 How computed 6, 237 Indeterminate 16 Indefinite 28, 29 In which check must be presented 355 In which notice of dishonor must be given 257 Of indorsement; presumption of 124 Of notice of dishonor to antecedent party 262 Of maturity 235, 237 Of notice of dishonor to antecedent parties 262 Presentment for acceptance 318 When time of omitted 31 TRADE NAME Liability of person signing in 60 400 Index {References are to pages) TRUST FUNDS See Corporation, Agent, Executor. Notice of 151 TRUSTEE Calls for inquiry 153 Liability of; see Agent, Executor. Negotiability of paper, payable to 36 UNCONDITIONAL PROMISE Necessary to be negotiable 9, 343 When promise is 20 UNIFORMITY Courts follow the intent of uniformity 2 USURY Rights of holder in due course 168 Transfer of note ; tainted with 200 Where bank discounts paper void for 138 VALUE See Consideration. Consideration presumed 84, 342 Omission to specify 30, 3 1 Payment of in determining bona fides 174 Pleading of 343 What constitutes 87, 133 WAIVER By failiu"e to examine account 288 May be implied 232 Of notice of dishonor 266 Of presentment 230, 232 Of protest 269 Whom effected by 268 WARRANTY By deliver}' or indorsement 199 By delivery only 199, 201 By qualified indorsement 1 16 Express 200 General indorser warrants 201 Of capacity of prior parties 201 Of check for deposit 202 Of genuineness 199, 201, 202 Of validity 200,201 One who sells paper implies 200, 202 Signature of drawer 202 To whom runs 201 When indorsed "for collection" 113,118 Index 401 {References are to pages) WITHOUT RECOURSE Does not effect negotiability 116 Form of indorsement of 110, 115, 118 Meaning of 115 Not evidence of defect of title 116 Purpose of 116 WRITING Acceptance to be in 303 Certification of check to be in 360 In foreign language 39 Includes print 10 May be with pencil or ink 4, 11 Negotiable instruments to be in 9 Prevails when in conflict with print 55 Renunciation to be in 285 Where ambiguous 55 UKin;^^^ £>0© UC SOUTHERN REGIONAL LIBRARY FACILITY AA 000 825 553 i