THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW. • / -ff.K^ 7^'/^^ THE LAW OP NEGOTIABLE INSTRUMENTS INCLUDING PROMISSORY NOTES, BILLS OF EXCHANGE, BANK CHECKS AND OTHER COMMERCIAL PAPER WITH THE NEGOTIABLE INSTRUMENTS LAW ANNOTATED AND FORMS OF PLEADING, TRIAL EVIDENCE AND COM- PARATIVE TABLES ARRANGED ALPHABETICALLY BY STATES BY JAMES MATLOCK OGDEN, LL.B., HARVARD OF THE INDIANAPOLIS BAR SECOND EDITION CHICAGO CALLAGHAN & COMPANY 1922 COPYRIGHT 192a BY CALLAGHAN & COMPANY T PREFACE TO FIRST EDITION The importance of the Law of Negotiable Instruments, or the Law of Bills, Notes and Checks, will be realized when it is con- sidered that over ninety per cent, of the work of paying for and effecting the exchange of interstate commerce is carried on today by means of commercial paper. It has been the endeavor of the author to furnish the prac- titioner and the student of the law such a practical presentation of the elementary principles of negotiable instruments as may serve, with the aid of its references to judicial decision, as a complete and convenient guide in this important subject of the law. The law herein set out is the law settled by the authorities rather than the writer's own views. The object has been to enable one readily to find the law of bills, notes and checks in any state or territory in the United States. The peculiarities of the law in those states which have adopted the Negotiable Instruments Law are set forth and all modifications are pointed out. The peculiarities of the law in those states which have not adopted the Negotiable Instruments Law are collected and arranged alphabetically by states. Thus the writer has endeavored to cover the entire field of the law of negotiable instruments, citing cases from every juris- diction. In the text discussing the elementary principles, the Nego- tiable Instruments Law is interwoven, distinguished by being printed in italics; the text of the law as printed is that of the New York Act. A table, however, is inserted to facilitate the finding of parallel sections of the acts or laws enacted by all other jurisdictions. All decisions construing the Negotiable In- struments Law since its adoption by the first state up to July 1st of the present year are cited ; also all decisions of the English law courts which affect corresponding provisions of the Bills of Exchange Act of 1882. That part of the text relating to the Negotiable Instruments Law will be found valuable in those jurisdictions which have not adopted that law, since most of its concise statements of rules are of application in all jurisdictions, whether the law has been adopted or not. With the hope that herein the principles of negotiable instru- ments, have been made clearer, the writer submits this work and asks indulgence for any oversights. James Matlock Ogden. Indianapolis, Indiana, August 25, 1909. 618537 PREFACE TO SECOND EDITION More than twelve years have passed since the last edition of this book was printed, although in the meantime there have been a number of reprints. The writer takes this opportunity to show his appreciation for the wonderful cordiality the other edition received and for the many requests for a revised edition. In 1909, at the time the other edition was published, the Negotiable Instruments Law had been adopted in thirty-eight states and territories while now it has been adopted in all juris- dictions of the United States except Georgia and Porto Rico, making a total of fifty-one of our jurisdictions. The writer showed his confidence in the ultimate adoption of the Negotiable Instruments Law in all jurisdictions of the United States by making the Law a part of the text and placing it in italics. This helpful plan has been continued in this edition. Since 1909 there have been some new phases of the law of negotiable instruments which have come to the front, such as trade acceptances, traveler's checks, liberty bonds and certain cases of illegality. These have all been added to the text and treated under the proper heading. Chapters have also been added on collateral security, on parties to suits, lost and destroyed nego- tiable instruments and sections have been added in various chap- ters throughout the book. Many citations have been add^d to the text and an endeavor has been made to bring the citations as to the Negotiable Instru- ments Law down to date, particularly in Part III. The text of this book is confined to negotiable instruments. Like the Negotiable Instruments Law no attempt has been made in it to deal with instruments which are non-negotiable as they are not governed by the Law. The writer trusts that the treatise may continue to be helpful to the student and the practitioner. James Matlock Ogden. Indianapolis, Indiana, April 1, 1922. TABLE OF CONTENTS PART I ELEMENTARY PRINCIPLES— BILLS, NOTES AND CHECKS. CHAPTER I. GENERAL CHARACTERISTICS AND GENERAL FORM OF BILLS, NOTES AND CHECKS. SECTION. PAGE. 1. Introtiuctory 1 2. Form of Promissory Note 1 3. General Characteristics of Promissory Note 2 3a. Other Clauses Added in Different Jurisdictions 5 4. Form of Bill of Exchange 11 5. General Characteristics of Bill of Exchange 11 6. Form of Check 11 7. General Characteristics of Check 11 7a. Origin and Development of Negotiable Instruments 11 CHAPTER II. LAW MERCHANT. 8. Meaning Term 13 9. Origin 14 10. Origin of Bill of Exchange under Law Merchant 15 11. Origin of Promissory Note under Law Merchant 15 12. Law Merchant Codified 15 CHAPTER III. NEGOTIABILITY. 13. Meaning of Term 17 14. Origin of Negotiability 18 15. Distinction Between Assignability and Negotiability 18 16. Purpose of Negotiability 20 17. Payment by Negotiable Instrument , 20 vii viii TABLE OF CONTENTS. CHAPTER IV. GENERAL DOCTRINE. SECTION. PAGE, 18. Negotiable Instruments Similar to Money— 22 19. Bona Fide Holder 22 20. Equities 23 21. Circulation when Parties not Immetiiate 25 CHAPTER V. PARTIES AND THEIR CAPACITY. 22. Parties and Their Capacity— In General 27 23. Parties Partially or Wholly Incapacitated— In General 28 24. Same— Persons Lacking Mental Capacity— Infants 28 25. Same— Persons Lacking Mental Capacity— Lunatics and Im- beciles "^O 26. Same— Persons Lacking Mental Capacity— Drunkards and Spendthrifts 21 27. Same— Persons Lacking Legal Capacity Other than Mental— i Married Women 32 28." Same— Persons Lacking Legal Capacity Other than Mental— The Bankrupt or Insolvent Payee 33 29. Same— Persons Lacking Legal Capacity Other than Mental- Alien Enemies 33 30. Parties Not Incapacitated — In General 33 31. Same— Persons Acting in Fiduciary Capacity— Executors and Administrators 34 32. Same— Persons Acting in Fiduciary Capacity— Trustees and Guardians 35 33. Same— Persons Acting in Representative Capacity— Agent 35 34. Same— Persons Acting in Representative Capacity— Partners.. 38 35. Same— Persons Acting in Representative Capacity— Private Corporations 40 36. Same— Persons Acting in Representative Capacity— Municipal or Public Corporations 41 37. Same — Persons Acting in Representative Capacity — Public Officers 42 CHAPTER VI. FORMAL AND ESSENTIAL REQUISITES. 38. Definition of Promissory Note 43 39. Definition of Bill of Exchange 43 40. Formal and Essential Requisites in General 44 41. Must be in Writing 45 42. As to Style and Material 46 43. The Date 46 44. The Signature 47 45. Must be Promise or Order to Pay 49 46. Must be Payable to Ortier or Bearer 50 47. Must be Certain as to Promise or Order to Pay_____- „-,. 51 TABLE OF CONTENTS. ix SECTION'. PAGE. 48. Must be Certain as to Amount 52 49. Must be Certain as to Time of Payment 54 50. As to Place of Payment , 55 51. Must be Payable in Money 56 52. Must be Necessary Parties 60 53. The Delivery 61 54. Value Received 64 55. As to Agreements Controlling the Operation 64 56. Days of Grace 66 56a. As to Payable at a Bank 66 57. As to Stamps 67 58. As to Blanks 67 59. As to Instruments Bearing a Seal 68 60. The Several Parts of a Foreign Bill Called a Set- — 69 CHAPTER VII. CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 61. Meaning of Term 72 62. Consideration in General 72 63. Necessity of Consideration 77 64. Presumption of Consideration 78 65. Sufficiency of Consideration 79 66. Inadequacy of Consideration 79 67. Illegal, Immoral, and Fraudulent Considerations 80 68. Want or Failure of Consideration 8l 69. Between Whom Questions of Consideration May Be Raised— 82 70. As to Accommodation Paper 83 CHAPTER VIII. SUBDIVISION A— ACCEPTANCE OF BILLS. 71. Meaning of Term 85 72. Object of Acceptance 86 73. Form of Acceptance 87 74. Nature and Effect of Acceptance 89 75. According to Tenor of Bill 90 76. Delivery 91 77. Acceptance of Incomplete Bill 91 78. Varieties of Acceptance — In General 91 79. Varieties of Acceptance— lAs to Terms— General Acceptance— 92 80. Varieties of Acceptance — As to Terms — Qualified Acceptance— 92 81. Varieties of Acceptance — As to Form — In General 92 82. Varieties of Acceptance — As to Form — Written 93 83. Varieties of Acceptance — As to Form — Parol 95 84. Varieties of Acceptance — As to Mode of Proof — Express 96 85. Varieties of Acceptance — As to Mode Proof — Implied 96 86. Acceptance of Bills Drawn in Sets 97 87. Revocation of Acceptance 97 88. What Bills Must be Presented for Acceptance 97 89. By and to Whom Presentment Should be Made™ 98 X TABLE OF CONTENTS. SECTION. PAGE. 90. Time of Presentment 99 91. Place of Presentment 100 92. Presentment Excused 100 93. Acceptance for Honor, or Supra Protest 101 SUBDIVISION B— TRADE ACCEPTANCES. 93a. Meaning of Term 104 93b. Trade Acceptances Distinguished from Ordinary Bill of Ex- change 104 93c. Trade Acceptances Distinguished from Promissory Note 105 93d. Nature of Transaction in which Tratie Acceptance Used 105 93e. Where Payable 105 93f. By Whom Presented for Discount 105 93g. Inducements by Federal Reserve System 106 93h. Effect on Other Negotiable Instruments 106 93i. Origin 106 93j. Extent of Use 107 93k. Decisions 107 CHAPTER IX. NEGOTIATION— BY INDORSEMENT. 94. Meaning of Term Negotiation 108 95. Who May Negotiate 109 96. Methods of Transfer 109 97. Meaning of Indorsement 110 98. Who Indorse 112 99. Nature of Indorsement 113 100. Requisite of Indorsement 114 101. Varieties of Indorsement 115 102. Indorsement in Full or Special Indorsement 116 103. Indorsement in Blank 117 104. Absolute and Conditional Indorsements 117 105. Restrictive Indorsement 119 106. Indorsement Without Recourse 121 107. Joint Indorsement 122 108. Successive Indorsements , 123 109. Irregular or Anomalous Indorsement 123 110. Presumptions as to Indorsement 125 110a. Effect of Transfer without Necessary Indorsement 126 110b. Indorsement Stricken Out 126 110c. Negotiable Character Continued 127 llOd. Negotiation by Prior Party 127 CHAPTER X. TRANSFER— BY DELIVERY AND BY OPERATION OF LAW. 111. In General 128 112. By Delivery 128 113. By Operation of Law , ,_ 130 TABLE OF CONTENTS. xi CHAPTER XI. TRANSFER— BY ASSIGNMENT. SECTION. PAGE. 114. Assignment in General 131 115. Assignment by a Separate Writing 132 116. Liability of Assignor of Bills and Notes 133 117. Rights of Parties 134 118. Transfer by Legal Process 135 118a. Some Differences as to Liability of Different Transferrers 136 118b. Several Indorsements in Blank, also Combination of in Blank and Special Indorsements 137 CHAPTER Xn. OF THE NATURE OF THE LIABILITIES OF THE PARTIES. 119. In General 139 120. Maker 139 121. Drawer 140 122. Acceptor 141 123. Indorser 142 124. Accommodation and Accommodated Parties 144 125. Agent 148 CHAPTER Xni. NATURE AND RIGHTS OF A BONA FIDE HOLDER OR A PUR- CHASER FOR VALUE WITHOUT NOTICE. 126. Bona Fide Holder for Value Without Notice— In General 149 127. Good Faith or Bona Fide 150 128. Holder for Value 150 129. Holder Without Notice 153 CHAPTER XIV. REAL OR ABSOLUTE DEFENSES. 130. Defenses in General 158 131. Real Defenses — In General 160 132. Incapacity to Contract — Infancy 160 133. Incapacity to Contract — Coverture 162 134. Incapacity to Contract — Where Corporation Prohibited 162 135. Incapacity to Contract — Insanity 163 136. Incapacity to Contract — ^Drunkenness 163 137. Illegality of Contract — Gaming, Usurious and Sunday Notes— 164 138. Forgery 169 139. Duress When Amounting to Forgery 170 140. Statute of Limitations J*- 171 141. Failure to Stamp 171 xii TABLE OF CONTENTS. CHAPTER XV. PERSONAL DEFENSES OR EQUITIES. SECTION. PAGE. 142. In General 173 1^3. Fraud 175 144 Alteration 176 145. Duress 17*5 146. Want or Defect of Consideration 179 147. Illegality of Consideration 180 148. Payment 182 CHAPTER XVI. PRESENTMENT, NOTICE OF DISHONOR AND PROTEST. 149. Meaning of Terms 183 150. In General 184 151. Presentment for Acceptance— When Essential 185 152. Presentment for Acceptance— Benefit 185 153. Presentment for Acceptance— Time 185 154. When Instrument Dishonored by Non-Acceptance 186 155. Presentment for Payment— In General 187 156. Presentment for Payment — When Essential 188 157. Presentment for Payment— When Dispensed With 189 158. Presentment for Payment— What Sufficient 189 159. Presentment for Payment — Date 190 160. Presentment for Payment— When Delay Excused 191 161. Presentment for Payment — Place 192 162. Presentment for Payment — To Whom 193 163. Presentment for Payment — Effect of Failure to Present 193 164. When Instrument Dishonored by Non-Payment 194 165. Notice of Dishonor — In General 194 166. Notice of Dishonor — Contents 194 167. Notice of Dishonor — By Whom Given and When to be Given__ 195 168. Notice of Dishonor — To Whom Given 196 169. Notice of Dishonor — Time 198 170. Notice of Dishonor — Place of Sending 199 171. Notice of Dishonor — Notice through Postoffice 200 172. Notice of Dishonor — When Notice Unnecessary 200 173. Notice of Dishonor — lExcuse for Failure 201 174. Notice of Dishonor — Effect of Notice as to Prior and Subse- quent Parties 203 175. Protest— Method of 204 176. Protest— Purpose 207 177. Protest— Notice 208 178. Protest— What Should be Protested and What Not Necessary. 210 179. Protest— Waiver 211 180. Protest — Miscellaneous Matters 211 CHAPTER XVn. DISCHARGE OF NEGOTIABLE INSTRUMENTS. 181. In General 214 182. By Payment 215 TABLE OF CONTENTS. xin SECTION. PAGE. 183. By Payment for Honor 219 184. By Cancellation and Surrender 220 185. By Covenant Not to Sue 221 186. By Accord and Satisfaction 221 187. By Substitution of Another Obligation 222 188. By Alteration 223 189. By the Principal Debtor Becoming the Holder in Due Course— 223 190. By Operation of Law 224 191. By Renunciation of Holder 225 192. When a Person Secondarily Liable, Discharged 225 CHAPTER XVIII. CONFLICT OF LAWS, OR WHAT LAW GOVERNS. 193. In General 227 194. As to Validity, Interpretation and Effect 228 194a. As to Capacity and Effect 229 195. As to Liability of Alaker, Drawer and Acceptor 230 196. As to Payment, Interest and Damages 230 197. As to Liability of Indorsers 231 198. As to Presentment, Protest and Notice 232 199. Rule in Federal Courts 232 199a. Damages upon Dishonor of Foreign Bill 233 199b. Date at Which Rate of Exchange Should be Applied 233 CHAPTER XIX. SUBDIVISION A— CHECKS. 200. Check Defined and Distinguished from Bill of Exchange 234 201. The Formalities of a Check 236 202. Presentment of a Check for Payment 236 203. Certification of Check 238 204. Forgery and Alteration of Check 241 205. Memorandum Check 242 206. Stale Check 243 206a. Cashier's Check 243 206b. Paid or Cancelled Check 244 206c. Crossed Check 244 206d. Fraudulent Check 244 206e. Stolen Checks or Stolen Negotiable Securities 245 206f. Check as Payment 246 206g. Stopping Payment 246 207. Checkholder's Right to Sue the Bank 248 208. The Depositor's Right to Draw on the Bank 249 209. Failure of Bank to Honor Check , 250 SUBDIVISION B— TRAVELERS' CHECKS. 209a. Meaning of Term and Object 251 209b. Provisions 251 209c. Rights and Liabilities ^^ 252 209d. Advantages 252 209e. Forgery of Travelers' Checks 252 xiv TABLE OF CONTENTS. CHAPTER XIX— A. LOST AND DESTROYED NEGOTIABLE INSTRUMENTS. SECTION. PAGE. 209f. In General 253 209g. Diligence of Owner 253 209h. No Title in Finder 253 209i. When Party Liable not Discharged 254 209j. Rule as to Indemnity 254 209k. Form of Bond of Indemnity for Paying Lost Note 254 2091. Copy Admissible in Evidence 255 209m. Burden of Proof 256 209n. Suit at Law or in Equity 256 209o. Demand, Protest and Notice as to Lost Instrument 257 CHAPTER XX. SOME OTHER KINDS OF COMMERCIAL PAPER. 210. In General 258 2n. Bill of Latiing 258 212. Certificate of Deposit 260 213. Certificate of Stock 261 214. Coupon Bonds 262 214a. Liberty Bonds 263 215. Draft 264 216. Due Bill 264 217. Letters of Credit 265 218. Paper Money 265 219. Warehouse Receipt 266 219a, Miscellaneous 266 CHAPTER XXL SURETYSHIP AND GUARANTY. 220. Terms Defined and Distinguished 267 220a. Who are Principals and Who Sureties 269 221. Consideration as to Guaranties 269 222. Guaranty as Affected by Statute of Frauds 270 222a. Conditional Guaranties 271 223. Negotiability of Guaranties 271 224. Notice to Guarantor of Default of Principal When Demand is Made 272 225. Liability of Concealed Sureties on Accommodation Paper 272 226. Remedies of Guarantors 273 226a. Limit of Surety's Recovery 273 226b. Trial of Suretyship 273 227. Discharge of Guarantors and Sureties 274 227a. Contribution Between Sureties , 276 TABLE OF CONTENTS. xv CHAPTER XXI— A. NEGOTIABLE INSTRUMENTS WITH COLLATERAL SECURITY. SECTION. PAGE. 227b. Meaning of Term Collateral Security 278 227c. Form of Promissory Note with Collateral Security 280 227ti. Holder of Collateral Security a Holder for Value — When Trans- fer is for Debt Created at Time of Transfer 281 227e. Holder of Collateral Security a Holder for Value — When Trans- fer is for a Pre-existing Debt 281 227f. Holder of Collateral Security a Holder for Value — When Trans- fer is as Collateral for a Debt Not Yet Due 281 227g. Presumption as to Ownership 282 227h. Whether or Not Note Secured by Collateral is Negotiable 282 227i. Whether or Not Collateral Note or Bill is Negotiable 283 227J. Effect of Agreement for Delay 284 227k. Provision for Deposit of Additional Collateral 285 2271. Proviso in Note Authorizing Sale of Collaterals 285 227m. What Amounts to Payment 285 227n. In Some Jurisdictions by Statute, the Surrender of Collateral Discharges Indorser 286 227o. Holder Receiving Collateral not Required to Proceed upon Same Before Suing Indorser 286 227p. Collateral Security Must Be Exhibited 286 227q. Right of Maker to Claim a Defense Because Holder has Col- lateral Security 286 227r. Amount of Recovery on Collateral Security 287 227s. Rights of Indorsee as to Stipulations in Collateral Note 287 227t. Whether Surrender of Collateral Discharges Surety 287 227u. Whether Surrender of Collateral Discharges Guarantor 287 TlTw. Effect upon Necessity of Presentment, Protest, and Notice as to Drawer or Indorser When They are in Possession of Security 288 227w. Accommodation Paper as Collateral Security 289 227x. Collateral Released or Lost 289 227y. Miscellaneous 289 227z. Form of Guaranty of Collateral Note 291 227aa. Form of Note with Transfer of Account 291 CHAPTER XXI— B. WHO MAY SUE— WHO MAY BE SUED. 227bb. In General 292 227cc. Party in Interest 292 227dd. Holder May Sue When Another is Entitled to Proceeds 293 227ee. Instruments Payable to Bearer or Indorsed in Blank 294 227ff. Acceptor _ 295 227gg. Drawee 295 227hh. Payee 295 227ii. Drawer 295 227jj. Agent 296 227kk. Public Officials . 297 xvi TABLE OF CONTENTS. SECTION. PAGE. 22711. Holder of Instrument for Collection ___ 297 227mm. Who May Sue— Miscellaneous 298 227nn. Parties to Actions — Defendants 300 PART II PLEADINGS, EVIDENCE AND TRIAL PROCEDURE AS TO BILLS, NOTES AND CHECKS. CHAPTER XXII. PLEADINGS— IN GENERAL. 228. Meaning of Term 303 229. Classes antl Order of Pleadings 303 230. The Complaint or Declaration 304 231. Pleadings After Complaint or Declaration 304 CHAPTER XXIII. FORMS OF COMMON LAW PLEADING. 232. Forms of Common Law Pleading — In General 306 DECLARATIONS— NOTE, BILL AND CHECK. 233. Payee Against Maker 306 234. Indorsee Against Maker 307 235. Indorsee Against Payee or Other Indorsers 307 236. Declaration on Bill of Exchange by Drawer Against Acceptor. 308 237. Payee Against Drawer for Non-Acceptance 308 238. Indorsee Against Indorser for Non-Acceptance 309 ANSWERS NOTE, BILL AND CHECK. 239. Plea 309 240. Plea and Affidavit of Merits 310 241. Affidavit Denying Execution of Instrument 310 242. Plea of Payment by Services 310 243. Averment of Set-off'. 311 244. Statute of Limitations 311 245. Averment of Arbitration and Award 311 CHAPTER XXIV. FORMS OF CODE PLEADING. 246. Forms of Codei pleading— In ^General 313 TABLE OF CONTENTS. xvii COMPLAINTS— PROMISSORY NOTE. SECTION. PAGE. 247. Complaint on Promissory Note by Payee Against Maker 313 248. Same For Interest Due 314 249. Same — Note Providing for Attorney's Fee 314 250. Same — "Whole Amount Due on Failure to Pay Part 314 251. Same — Payable After Sight, Demand or Notice 315 252. Same Excuse for Not Setting Out Copy of Note 315 253. Same — Lost Note 315 254. Complaint on Promissory Note by Executor of Payee Against Maker 316 255. Complaint on Promissory Note — Indorsee Against Maker 316 256. Same — Assignee by Delivery Against Maker and Assignor 316 257. Same — Indorsee Against Maker and Indorsers 317 258. Same — Indorsee Against Indorser — Payable in Another State — ■ Negotiable by Foreign Statute 317 COMPLAINTS— BILLS OF EXCHANGE. 259. Complaint on Bill of Exchange — Payee Against Drawer on Non-Acceptance 318 260. Same — Payee Against Acceptor on Non-Payment 318 261. Same — Drawer Against Acceptor on Non-Payment 319 262. Same — Indorsee Against Drawer on Non-Acceptance 319 263. Same — Indorsee Against Acceptor on Non-Payment 320 264. Same — Indorsee Against Acceptor — 'Payable at Particular Place 320 265. Same — Indorsee Against Drawer — Indorsers and Acceptor on Inland Bill of Exchange 320 266. Same — Indorsee Against Drawer When Payable at a Certain Place 321 267. Same — Indorsee Against Drawer — No Funds in Drawer's Hands — Failure to Notify Drawer 321 268. Same — Indorsee Against Drawer — Excuse for Non-Presentment --No Effects... 322 269. Same — Indorsee Against Drawer — Demand and Notice Waived. 322 270. Same — Indorsee Against Indorser — Non-Payment by Acceptor 323 COMPLAINTS— BANK CHECK. 271. Complaint on Bank Check — Payee Against Drawer 323 272. Same — Payee Against Drawee 324 273. Same — Drawer Against Drawee 324 274. Same — Indorsee Against Indorsor 324 ANSWERSHNOTE, BILL AND CHECK. 275. Answer to Complaint on Promissory Note, Bill of Exchange or Check — General Denial 325 276. Same — Denial of Execution of Instrument 325 277. Same — Want of Consideration 325 278. Same — Partial Want of Consideration 325 279. Same — Without Consideration as to Indorsee 325 280. Same — Illegal Consideration 326 281. Same — Failure of Consideration 326 282. Same — False Representations; 327 XVIU TABLE OF CONTENTS. SECTION. ^^51^- 283. Same— Payment ^_^' 284. Same— Alteration ■327 285. Same— That Acceptance was for Accommodation 328 CHAPTER XXV. EVIDENCE— IN GENERAL. 286. In General ^29 287. Presumptions in General 329 288. Burden of Proof in General 330 289. Competency of Parties to Negotiable Instruments as Witnesses 330 290. Declarations and Admissions 331 CHAPTER XXVI. EVIDENCE AS TO PARTICULAR CHARACTERISTICS. 291. As to Time 332 292. As to the Date 333 293. As to Amount Payable 334 294. As to Place of Payment 335 295. As to Mode of Payment 335 296. As to Interest 336 297. As to Consideration 336 298. As to Parties '^'^'^ 299. As to Ambiguous or Omitted Stipulations 338 300. As to Execution and Delivery 339 301. As to Acceptance of Bills •339 302. As to Transfer 340 303. As to Conditions 341 304. As to Mistake 342 305. As to Fraud and Duress 342 306. As to Usury 343 307. As to Payment and Discharge 343 308. As to Presentment and Demand 343 309. As to Protest and Notice 344 310. Bills and Notes as Evidences 344 311. As to Meaning of Certain Terms 345 CHAPTER XXVn. TRIAL PROCEDURE ON BILL, NOTE OR CHECK. 312. Essentials of Procedure 346 313. Common Law Procedure 347 314. Code Procedure 347 315. Steps in a Jury Trial 347 316. Impaneling the Jury 347 317. Opening Statements 348 318. Evidence of Plaintiff 348 319. Evidence of Defendant 351 320. The Argument 352 321. The Charge, VerMict and Judgment 352 PART III THE NEGOTIABLE INSTRUMENTS LAW ANNOTATED. Pages Introduction 353-357 List of States and Territories where Negotiable Instruments Law Enacted 358-359 Table Showing the Corresponding Sections of the Statutes as Adopted in the Different States and Territories 360-367 The Negotiable Instruments Law 368-706 ARTICLE. PAGE. I. Form and Interpretation of Negotiable Instruments— 369-426 n. Consideration 427-454 in. Negotiation 455-480 IV. Rights of Holder 481-537 V. Liabilities of Parties 538-562 VI. Presentment for Payment 563-585 VIL Notice of Dishonor 586-614 Vin. Discharge of Negotiable Instruments 615-639 IX. Bills of Exchange — Form and Interpretation 640-645 X. Acceptance of Bills of Exchange 646-656 XI. Presentment for Acceptance 657-661 XII. Protest 662-666 XIII. Acceptance for Honor 667-670 XIV. Payment for Honor 671-672 XV. Bills in a Set 673-675 XVI. Promissory Notes and Checks 676-691 XVII. General Provisions 692-704 XVIII. Notes Given for a Patent Right and for a Speculative Consideration 705-706 APPENDIX A. Tabulated Laws of the States and Territories. .707-713 APPENDIX B. Digest of Law in Georgia Where Negotiable Instruments Law Not Adopted 714-718 PART I NEGOTIABLE INSTRUMENTS CHAPTER I. GENERAL CHARACTERISTICS AND GENERAL FORM OF BILLS. NOTES AND CHECKS. § L Introductory. 2. Form of promissory note. 3. General characteristics of promissory note. 3a. Other clauses added in dif- ferent jurisdictions. 4. Form of bill of exchange. § 5. General characteristics of bill of exchange. 6. Form of check. 7. General characteristics of check. 7a. Origin and development of ne- gotiable inatrurnents. § 1. Introductory. The most common forms of commer- cial paper used today in commercial transactions are promis- sory notes, bills of exchange and bank checks. At present these constitute the medium of exchange for about ninety per cent of all commercial transactions. In this treatise these three instruments will be considered and it is essential in the begin- ning that a clear idea should be had in a general way of the characteristics and form of such instruments. § 2. Form of promissory note. The following is a simple form of a promissory note : $200.00 New York City, New York, December 1, 1921. Six months after date I Tpi'omise to pay to the order of William Redding Tivo Hundred Dollars at the First National Bank. Value received. No Due JOHN MORRIS. 2 NEGOTIABLE INSTRUMENTS. §3 The following is a form of a promissory note which is com- mon in some jurisdictions : $200.00 Indianapolis, Ind., December 1, 1921. Six months after date I promise to pay to the order of William Redding at The Eagle National Bank, of Indianapolis, Ind., Tzvo Hundred - Dollars With five per cent Attorney's f6«s, upon the principal of this note. Value received, without any relief w^hatever from Valua- tion or Appraisement laws of the State of Indiana. With in- terest at the rate of eight per cent per annum after maturity until paid. The drawers and endorsers severally waive present- ment for payment, protest, notice of protest, and notice of non- payment of this note. JOHN MORRIS. § 3. General characteristics of promissory note. Let us ex- amine the parts of the above instrument in a general way, com- mencing with the upper left corner of the instrument, (a) We note first the figures, "$200.00." This is to indicate the amount of the note and being in figures is more quickly grasped than if in writing. If there is a conflict between the figures and the writing below on the instrument, the writing will control, (b) The place, "Indianapolis, Ind.," shows the place where this contract to pay is entered into, and as the laws of the various states differ as to the requisites of such a contract and as to the enforcement of the same it is generally essential that the place of entering into the agreement should be set out so that it may be clear just what law governs as to the contract or instrument, (c) The date, "December 1, 1921," is likewise essential so as to determine when the note is due and from what time interest is to be charged and whether or not the collection of the instrument is barred by the statute of limita- tions, (d) The time, "Six months after date," indicates the period of time for which the instrument is to run or indicates when the promise on the instrument should be fulfilled, (e) The promise, "T promise to pay," is an absolute promise to do something, that is, to pay ; it does not read, if so and so happens or does not happen I promise to pay, but it is con- nected with no conditions of any nature.^ (f) The words "to iGrinnison v. Russell, 14 Neb. Am. St. Rep. 166, 11 L. R. A. 559; 521, 16 N. W. 819, 14 Am. Rep. Neg. Inst. Law, §§ 1 and 4; Bills 126; Iron City Nat. Bank v. Mc- Exch, Act, § 3. Cord, 139 Pa. St. 52, 21 At). 143, 23 § 3 GENERAL FORM OF BILLS AND NOTES. 3 the order of," signify a promise to pay it to the order of any who may be designated. We shall consider in a subsequent chapter whether such words are absolutely necessary and whether they should always be in the form indicated, (g) The name, "William Redding," is the person to whose order some- thing is to be paid and he is known as the payee, (h) Then follow these words, "at the Eagle National Bank of Indianapo- lis, Indiana," indicating where the note is to be paid ; however, it may be paid at any other place agreed upon by the inter- ested parties, (i) The amount "Two Hundred Dollars," indi- cates, as the figures did, the sum promised to be paid. The same being in writing cannot be so easily altered and since it takes longer to write the words than the figures the words are more likely to be accurate, (j) The phrase, "with five per cent Attorney's Fees," indicates that if William Redding, the payee, or any one to whose order he should make it payable, shall find it necessary to employ an attorney to collect the amount, five per cent additional will be paid by the party to the instrument who makes it necessary that an attorney should be employed, (k) The words "value received," indicate that a consideration was given for the note but most jurisdictions hold that these words are not necessary since a consideration is presumed. (1) The phrase, "without any relief whatever from Valuation or Appraisement Laws," shows that if the note is not paid when it should be and suit is brought and judgment recovered, then the one against whom judgment has been recovered waives any rights that he may have as to requiring that the property taken to satisfy the judgment, shall be valued or appraised by persons appointed for that pur- pose, and the property taken may be sold at any price. Thus the delay for a valuation and appraisement is avoided, (m) The words, "with interest at the rate of eight per cent per annum after maturity until paid," show what interest is to be paid by the maker in addition to the two hundred dollars if not paid when due. This interest will be calculated from June 1, 1922, the date of maturity, up to the time the note is paid. The per cent set out is eight per cent and we shall see in a later part of this work that different states have different laws governing the rate of interest which may be charged, (n) By the words "the drawers and endorsers severally waive presentment for payment, protest and notice of protest and non- payment of this note" is meant that the drawers (or persons who make the note) and the endorsers (or persons through whose hands the note passes and who write ther names on the back of it) waive any rights that they may be entitled to because the instru- 4 NEGOTIABLE INSTRUMENTS. § 3 ment when due was not properly presented for payment and the proper notice was not given to other parties who should have notice of the non-payment and other facts in connection therewith. Thus if such rights were not waived and William Redding should indorse the note, that is, write on the back of the note an order that it be paid to John Graham and John Graham in turn should indorse it, that is, order it to be paid to James Spencer, and on June 1, 1922, when the note became due John Morris, the maker, refused to pay James Spencer, the holder, then, in order for James Spencer to recover from John Graham on the note it would be necessary for him to present the note to John Morris for payment and then notify John Graham of the refusal of John Morris to pay and notify him that he, James Spencer, expected to look to him for the payment of the note. In other words it would be necessary to present the note to John Morris for payment unless the indorsers waived pre- sentment for payment and it would be necessary to notify the indorsers of the non-payment unless notice of non-payment of the note was waived. The contract of John Graham is that he will pay the note provided it is presented to the maker, John Morris, and in case John Morris does not pay it and he, John Graham, is notified of that fact, then he, John Graham, will pay it. In case the law should require the note to be protested in order to bind the drawers and indorsers, it would be necessary for a notary public to take the instrument to John Morris and John Morris would state to the notary public that he refused to pay it ; the notary would make out a paper stating that the instrument had been dishonored, and that he had protested it for non-pay- ment and to this statement he would attach his seal.* This is the protest, it is not the notice of the protest. The protest then is a solemn declaration in writing made by the notary public that the instrument has been dishonored by a refusal to pay it.^ At the trial this statement of the protest by the notary would be good proof that the instrument had been protested and the notice had been given to John Graham. After the instrument is protested as above set out, the notary would send notice to all those parties on the instrument whom the owner desired to hold responsible, which notice would state that the instrument had been presented for payment, that payment had been refused, and that the instrument had been protested for non-payment. SiTevis V. Randall, 6 Cal. 632, 65 3 Townsend v. Lorain Bank. 2 Am. Dec. 547; Shields v. Farmers Ohio St. 345; Swayze v. Britton, Bank, 5 W. Va. 254. 17 Kan. 625. § 3a GENERAL FORM OF BILLS AND NOTES. 5 The stipulation in this instrument waiving protest and notice of protest waives these rights, otherwise it would be necessary for James Spencer, the holder, to take these steps in order to re- cover from John Graham, an indorser, in case the instrument was one which the law required to be protested. The contract of the indorser under such circumstances is that he will pay the instru- ment provided the maker refuses to pay it and the owner of the instrument protests it and gives notice of that fact. (0) "John Morris" is the maker or drawer of this note. He is the one who promises to pay it in the first instance. The note may be signed by more than one as we shall consider more fully, in another part of this work. § 3a. Other clauses added in different jurisdictions. In some jurisdictions by statute or by court decision certain clauses may be added to promissory notes which do not render such notes invalid or non-negotiable in those jurisdictions. The holder of the instrument should consult the law of the particular jurisdic- tion to see whether or not such clauses affect the negotiability of the instrument in that jurisdiction. Among these clauses the fol- lowing are the most common : (1) "For value received, negotiable and payable without defalcation or discount." (2) "We also agree to waive protest, notice thereof and dili- gence in collecting." (2) "With interest thereon from until paid, at the rate of per cent, per annum payable monthly, both principal and interest payable in the like Gold Coin." (4) "If this note is not paid when due, and if placed in the hands of a attorney for collection, we agree to pay an attorney's fee of five per cent of the face of this note." (5) "Without defalcation, negotiable and payable at their office in , for value received, and they are hereby directed to place the proceeds to the credit of " (6) "This note and the consideration thereof, are for the benefit of my sole, separate and individual estate, which estate I expressly hereby charge with the payment thereof. (Married woman's negotiable note)." (7) "To be discounted at the rate of eight per cent, per annum; and if not paid at maturity, to bear interest thereafter at eight per cent, per annum, with all costs of collection and 10 per cent, attorney's fees." (8) "We the endorsers, guarantors, assignors and sureties, severally waive presentment for payment, protest and notice of protest for non-payment of this note and all defense on the 6 NEGOTIABLE INSTRUMENTS. § 3a ground of any extension of time of its payment that may be given by its holder or holders to the maker or makers thereof." (9) "Value received. The drawer and endorser of this note hereby waive the benefit of homestead exemption as to this debt." (10) "No extension of the time of payment, with or with- out our knowledge, by receipt of interest or otherwise, shall release us, or either of us, from the obligations of payment. I sign this note intending hereby to charge my separate estate with the payment of same." (11) "Also reasonable attorney's fee in any action brought on this note." (12) "The drawers and endorsers severally waive present- ment for payment, protest and notice of protest and non-payment of this note, and all defenses on the ground of any extension of the time of its payment that may be given by the holder or hold- ers to them or either of them. Witness our hands and seals." (13) "And if this note is placed in the hands of an attorney for collection or has to be sued on, we, the makers and all en- dorsers, agree to pay ten per cent attorney's fees, and all ex- penses incurred in its collection, in addition to the principal and interest, same to be taxed up in judgment." (14) "And if interest is not paid annually, to become as prin- cipal and bear the same rate of interest. Makers and endorsers hereby waive presentment and notice and protest." (15) "All the signers of this note agree to be holden for its payment, although the time of payment for the whole or any part of this sum should be extended from time to time ; such exten- sion not to exceed in the aggregate six years." (16) "If this note is not paid when due, or is collected by attorney or legal proceedings, we promise to pay an additional sum of ten per cent, of the amount of this note as attorney's fees. We waive protest and notice of non-payment and all ex- emption laws and rights thereunder." (17) "In case of the insolvency of the undersigned any in- debtedness due from the legal holder hereof to the undersigned may be appropriated and applied hereon at any time, as well before as after the maturity hereof." (18) "We, and each of us, hereby empower any attorney at any time hereafter to appear for us, either or any of us, in any court, in term time or vacation, and confess judgment against us, each or any of us, without process on the above note in favor of any legal holder for said sum, interest, costs and $ § 3a GENERAL FORM OF BILLS AND NOTES. 7 attorney's fees, and to release all errors and consent to imme- diate execution." (19) "Now, should it become necessary to collect this note through an attorney, either of us, whether maker, security, or endorser on this note, hereby agrees to pay all costs of such col- lection, including a reasonable attorney's fee. The drawers and endorsers severally waive presentment for payment, protest and notice of protest and non-payment of this note." (20) "We agree that after maturity this note may be ex- tended from time to time, by any one or more of us without the knowledge or consent of any of the others of us, and after such extension the liability of all parties shall remain as if no such extension had been made." (21) "We, the endorsers, guarantors and sureties, severally waive presentment for payment, protest and notice of protest for non-payment of this note, and all defense on the ground of extension of time of its payment that may be given by its holder or holders to the maker or makers thereof. If this note is not paid at maturity and is placed in the hands of an attorney for collection, or suit is brought hereon, ten per cent, of the entire amount shall be paid as attorney's fee and costs of collection." (22) "And if not so paid, the whole sum of principal and interest to become immediately due and collectible at the option of the holder of this note. And in case suit or action is instituted to collect this note, or any portion thereof promise and agree to pay, in addition to the costs and disbursements pro- vided by statute Dollars in like Gold Coin for attorney's fees in said suit or action." - (23) "Giving said Bank the right of collecting this note at any time, notwithstanding the payment of interest in advance, or of extending from time to time, by the reception of interest in advance or otherwise, the payment of the whole or any part thereof, as may be convenient or agreeable to the Bank." (24) "And further agree that in case of default in the pay- ment of this note, principal or interest, to pay all costs and ex- penses of collecting same, including reasonable attorney's fees, to be fixed and determined by the court. Each of the makers hereof and the endorsers hereon, waive demand, protest and notice of non-payment." (25) "Appraisement and all legal exemptions waived. In- terest to be paid annually, and if. not so paid to become as principal and draw interest at the rate of ten per cent, per annum until paid." 8 NEGOTIABLE INSTRUMENTS. § 3a (26) "The makers and endorsers of this note hereby express- ly waive all right to claim exemption allowed by the Constitution and Laws of this or any other State, and agree to pay cost of collecting this note, including a reasonable attorney's fee, for all services rendered in any way, in any suit against any maker or endorser, or in collecting or attempting to collect, or in secur- ing or attempting to secure, this debt, if this note is not paid at maturity. Notice and protest on the non-payment of this note is hereby waived by each maker and endorser." (27) "And if default be made in the payment of the prin- cipal at maturity, or of interest when due, this note shall be im- mediately due and payable and the interest unpaid shall become part of the principal and both shall bear interest at the rate of ten per cent, per annum from the date of such default, both before and after judgment, and if this note, or any part thereof, is collected by an attorney, with or without suit, ten per cent, additional for attorney's fees. The makers and endorsers hereof each expressly waive de- mand, protest, notice of non-payment and suit against the maker ; and also agree that date of payment may be extended, in whole or in part, without our consent. (28) "With interest from date at the rate of ten per cent, per annum until paid. Interest payable quarterly. Principal and interest payable in U. S. Gold Coin of the present standard of weight and fineness; and in case suit or action be instituted to collect this note, or any portion thereof, I promise to pay such additional lawful sum as the Court may adjudge reasonable as attorney's fees." (29) "In case of the failure to pay any part of the principal or interest when and where due, the legal holder hereof may de- clare the full amount of this note then remaining unpaid as im- mediately due, and proceed to collect the same at once. If this note is collected by an attorney, either with or without suit, or if legal proceedings be begun for the collection of any amount due hereunder agree to pay a reasonable attorney's fee and all other costs and expenses of collection. The makers and en- dorsers of this note each expressly waive demand, notice of non- payment and protest, and also agree that this note may be ex- tended in whole or in part without their consent." (30) "For value received, negotiable and payable without defalcation or discount, with interest from at the rate of _• per cent, per annum, payable until paid. We, the endorsers, guarantors and sureties, severally waive presentment for payment, protest and notice of protest for non- § 3a GENERAL FORM OF BILLS AND NOTES. 9 payment of this note, and all defense on the ground of extension of time of its payment that may be given by its holder or holders to the maker or makers thereof." (31) ("If not so paid to become a part of the principal, and bear the same rate of interest as above specified,) both principal and interest payable in Gold Coin in the present standard of weight and fineness, and in the event of suit for the collection hereof, counsel fees." (32) "And do hereby authorize , Attorney at Law, to appear for in an action on the above note, at any time after said note becomes due, in any Court of Record, in or of the State of , to waive the issuing and service of process against and confess a judgment in favor of the legal holder of the above against for the amount that may then be due thereon, with interest at the rate therein mentioned, and costs of suit; and to waive and release all errors in said pro- ceedings, petitions in error, and the right of appeal from the judgment rendered. Witness our hands and seals." (33> "And if not so paid the whole sum of both principal and interest to become immediately due and collectible. In case suit is instituted to collect this note, or any portion thereof, I, we, or either of us promise to pay, besides cost and disburse- ments allowed by law, such additional sum as the Court may ad- judge reasonable as attorney's fees in said suit." (34) "And we, and each of us, do hereby authorize any at- torney of any Court of Record in , to appear for us, either or any of us, in any such court, at the suit of the holder of this obligation upon the same, at any time after the maturity thereof, and waive the issuing and serving of the pro- cess, and confess judgment against us, either or any of us, and in favor of such holder, for the amount then appearing due there- on, and for costs of suit, and release all errors. We and each of us hereby agree that the holder of this note may, for any valuable consideration, extend the time of payment thereof, with- out notifying us, and that we will remain as sureties thereon thereafter. Witness our hands and seals the day and year above written." (35) "The parties to this instrument, whether maker, en- dorser, surety or guarantor, each for himself hereby severally agrees to pay this note and waives as to this debt, all right of exemption under the Constitution and Laws of or any other State, and they each severally agree to pay all costs of collecting or securing, or attempting to collect or secure this 10 NEGOTIABLE INSTRUMENTS. § 3a note, including a reasonable attorney's fee whether the same be collected or secured by suit or otherwise. And the maker, en- dorser, surety or guarantor of this note severally waives de- mand, presentment, protest, notice of protest, suit and all other requirements necessary to hold them." (36) "With interest payable semi-annually at the rate of eight per cent, per annum from due. Delinquent interest and principal after maturity shall draw interest at eight per cent, per annum until paid. In case of suit thereon we agree to pay an attorney's fee. Makers, payees, endorsers, sureties and guarantors waive de- mand for payment, protest and notice of protest of this note and consent that any Justice of the Peace may have jurisdiction hereon to any amount not over $300, and that time of payment may be extended from time to time without notice thereof. Pay- able at " (37) "Said interest, if not paid as it becomes due, to be added to the principal and become a part thereof, and there- after bear interest at the same rate as the principal, with ten per cent, on the entire amount unpaid if placed in the hands of an attorney for collection. We agree that after maturity the time of payment may be extended from time to time, by any one or more of us, without the consent of the other, and after such ex- tension the liability of all parties shall remain as if no such extension had been made." (38) "And we, the makers, sureties, endorsers and guaran- tors and each of us, do hereby authorize and empower any At- torney of any Court of Record, at any time after interest or principal in this obligation becomes due, to appear for us or either of us in any action or suit on this note in any such Court in , or elsewhere, and waive the issue and ser-vice of summons and confess judgment against us or any of us in favor of the payee or any holder of this note for the sum appearing to be due thereon, including interest and costs and ten per cent additional on the amount unpaid as attorney's fees, and thereupon to release all errors in said action and hereby agree that any extension of time shall not afYect our liability." (39) "For value received, negotiable and payable, without defalcation or discount, at the Bank of with interest from maturity at the rate of ten per cent, per an- num. The makers, signers and endorsers of this note severally waive demand notice and protest, and agree to all extensions and partial payments, before or after maturity, without prejudice to the holder, and if this note is placed in the hands of an at- torney for collection, an additional ten per cent, for attorney's fees." §§ 4-7a GENERAL FORM OF BILLS AND NOTES. 11 § 4. Form of bill of exchange. The following is the ordi- nar>' form of an inland bill of exchange : $120.00 Chicago, III, December 1, 1921. Thirty days after date Pay to the order of John Matlock One Hundred and Twenty Dollars. Value received, and charge the same to account of To Irving Dean, Jamestown, N. Y. HENRY HAMILTON. § 5. General characteristics of bill of exchange. Let us ex- amine this instrument, considering, however, only those formal and essential parts which are not found in the promissory note. There are three parties to this instrument ; John Matlock is the payee, Henry Hamilton is the drawer and Irving Dean the drawee. Irving Dean, the drawee, becomes Irving Dean, the acceptor, by writing "accepted" and his name, or words of sim- ilar import, across the face of the instrument. § 6. Form of a check. The following is the common form of a check Detroit, Mich., December 1, 1921. No. 15 The Eagle National Bank. Pay to the order of Albert Carter $200.00 Two Hundred Dollars. JOHN MARSH. § 7. General characteristics of check. A check is the most common instrument and in explaining the other two instruments all parts of this instrument have been explained. Albert Carter is the payee and John Marsh is the maker or drawer and the Eagle National Bank is the drawee. § 7a. Origin and development of negotiable instruments. It is interesting that we should look into the origin and develop- 12 NEGOTIABLE INSTRUMENTS. § 7a ment of these instruments whose form and general characteris- tics we have been considering. In general we may say that this development has been through three stages, The first stage we may call the barter stage, for at that early time money as the term is understood and used today was not known. At this stage the evidence of value was grain or skins or cattle. In agricultural communities grain served this purpose ; among fishing people the products of the sea; and in hunting races the skins of animals. This early stage was clearly a stage of barter. The second stage we may call the metal stage, when metal took the place of grain and skins and cattle, for these latter when used for purchasing purposes Vvcre open to many objections as can be readily understood. It was seen that it was necessary to adopt a token to represent value v/hich would be sufficiently port- able and durable to fulfill its purpose. Iron and the other com- moner metals in turn served their day, and finally of all metals gold and silver showed themselves to be the most suitable as evidences of value. The gold coin was not successfully intro- duced into England until the reign of Edward III. ; The third and last stage we may call the commercial paper or negotiable instruments stage. This is the present stage when credit as evidenced by negotiable instruments is able to pass from hand to hand as the representative of value or of money. These instruments are valuable or worthless dependent on the financial ability of the parties to these instruments. It would be impossible to transact business of any magnitude today if cash payments were required. We see the truth of this when we consider that more than 90% of all commercial trans- actions are estimated to be carried on today by the medium of commercial paper or negotiable instruments. Were it possible to estimate accurately the total sums for which checks, promis- sory notes and bills of exchange are annually drawn, the result would be so enormous as to be beyond intelligent comprehension. The only source of information which we have in this matter is concerning the checks and drafts and other negotiable instru- ments which pass through the Clearing Houses of the country, and from this one source alone it is estimated that the total amount of these instruments passing through said Clearing Houses of the entire country amount annually to about Four Hundred Billion Dollars ($400,000,000,000.00). Thus we see the great importance of these small pieces of paper known as negotiable instruments in the business and com- mercial life of this country. CHAPTER 11. LAW MERCHANT.! § 8. Meaning of term, § 11. Origin of promissory note 9. Origin. under law merchant. 10. Origin of bill of exchange un- 12. Law merchant codified, der law merchant. § 8. Meaning of term. The law merchant might be consid- ered as a code of rules growing out of the needs of trade which the courts administering treated as distinct from the ordinary common law of England. The law merchant in other words is a system of law which does not rest exclusively on the positive institutions and local customs of any particular country, but consists of certain prin- ciples 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 coun- tries of the civilized world.^ The law merchant is an example of how a custom or usage becomes gradually grafted into the law until it becomes as much a part of the system of law as any other principle in that system. It was first a mere particular usage which became general in its character and finally received the sanction of legal tribunals which recognized it as law.^ We must understand that the law merchant was no part of the law of England for generations after it had followed trade, in a private capacity, to the British Islands. Unlike admiralty and equity, it was for centuries a sort of tolerated outlaw, living only as the merchants could keep it alive. The law merchant is not a modification of the common law, it occupies a field over which the common law does not and never did extend. * On Law Merchant see : Van- troduction to 10th Ed. ; Chalmers heath v. Turner, Winch 24 ; Good- on Bills of Exchange, Preface ; win V. Roberts, L. R. 10 Ex. 346. Lowndes on Marine Insurance ; See also: The Elements of Mer- Scrutton on the Influence of the cantile Law by Thomas Edward Roman Law on the Law of Eng- Scrutton, Chapters I, II; Street land, Chapter XIII, XIV. on Foundations of Legal Liabil- 23 K;erit Com. 2. ity; Smith's Mercantile Law, In- 85 y. B. 13 Edw. IV, 9 PI. 5. 13 14 NEGOTIABLE INSTRUMENTS. § 9 § 9. Origin. The law merchant has gone through three stages in reaching the position it now holds in the legal tribunals. The first stage extended from the earliest times to the year 1606. During this time the law merchant was considered as a special kind of law for a particular class of people. During this period the business of the commercial world was transacted or conducted in the great fairs held at certain places at fixed times each year, to which merchant and trader came. At each fair there sat a Court to administer speedy justice, in accordance with the law merchant,"* to the merchants and traders there assembled. When any doubt or dispute arose it was settled according to the custom among merchants as declared by the merchants present. The second stage of the law merchant extends from the year 1606 when Lord Coke took ofiice as Chief Justice of England un- til the year 1756 in which Lord Mansfield became Chief Justice. The most noticeable effect upon the law merchant during this period was the manner of its administration. The special court of the fairs died out and the law merchant was administered by the King's Court of Common Law. This court did not admin- ister it as law but as a custom.^ As this court only admin- istered it as a custom the cases went to the jury without the facts and customs separated, in consequence of which very little was done in establishing any system of mercantile law in England during the period. The third stage began with the year 1756 when Lord Mansfield became Chief Justice of the King's Bench and extends to the present time. The thirty years which Lord Mansfield sat as Chief Justice was the period in which a system of mercantile law was fully established in the common law courts. This system of law has been added to constantly by the addition of new usages of the mercantile world which have been proven to the Courts. "Bills of Exchange at first extended only to merchant stran- gers trafficking with English merchants ; and afterwards to inland bills between merchants trafficking the one with the other in England ; and afterwards to all traders, and then to all persons whether traders or not ; and there was then no need to allege any custom of merchants."** Thus in its origin the law merchant distinguished the contracts of foreign merchants from the contracts of ordinary individuals, construing them not according to the tenets of the common law, but according to the usages of trade. This custom of regulating ^Blackstone, Book III. page 32. OBrownich v. Lloyd, 2 Lut- ^Vanheath v. Turner, 1 Winch. wyche's Rep. 1585. 24 (T622). §§ 10-12 LAW MERCHANT. 15 dealings between native and foreign merchants was extended to dealings between native merchants, but was confined to the per- sons of merchants, as apart from those pursuing other vocations. And it was not until 1666 that courts declared that "the law of merchants is the law of the land, and the custom is good enough generally for any man, without naming- him merchant." § 10. Origin of bill of exchange under law merchant. The bill of exchange is the earliest form of a negotiable instrument.'' Bills of exchange, which were first used by the bankers and merchants of Florence and Venice to facilitate the transfer of credits between distant points, came to England through France early in the fourteenth century, that is, came from the continent of Europe where they formed part of the modern Roman or Civil law. The English merchant used it as an instrument whereby he avoided either sending money out of the country or bringing money into the country. To pay a third party he would give an order on one of his foreign debtors. Originally a bill of exchange was purely a trade transaction which was a means whereby one country avoided sending money to another. § 11. Origin of promissory note under law merchant. Prom- issory notes are said to be of great antiquity and to have been in use among the Romans ; but the negotiability of these instru- ments was unknown among the Romans and is a development of modern times. The time of the introduction of promissory notes into England is not absolutely known but it appears to have been about thirty years before the reign of Queen Anne. They were in use a considerable time before they became the subject of litigation and legislation. The common-law judges were op- posed to the negotiability of promissory notes payable to order or bearer® and it became necessary for Parliament to legislate upon the matter, the result of which was the enactment of a statute conferring upon promissory notes the same qualities of assignability and negotiability as were possessed by the inland bills of exchange.® § 12. Law merchant codified. In the seventeenth century the law of Bills of Exchange was codified in France, but in Eng- land no general codification took place until 1882 (when the Eng- lish Bills of Exchange Act was enacted). In the United States the earliest general codification is found in the California Civil Code in 1872, but this has been followed within the last decade by a more widespread adoption of the Negotiable Instruments Law ^ Mogodara v. Holt, 1 Show. 318. » Statute of 3 and 4 Anne, Chap- SBuller v. Crips, 6 Mod. 30. ter, 9, §§ 1-3. 15 NEGOTIABLE INSTRUMENTS. § 12 on the general lines of the English Bills of Exchange Act in all but one of the states of the Union. That is, it has been adopted in forty-seven out of the forty-eight states of the Union, the state of Georgia being the only state which has not adopted the law. It has also been adopted in Alaska, District of Columbia, Hawaii and the Philippine Islands, but has not been adopted in Porto Rico and the Panama Canal Zone.*" i« See Introduction to Negotiable Instruments Law Annotated, in Appendix. CHAPTER III. NEGOTIABILITY. § 13. Meaning of term. § 16. Purpose of negotiability. 14. Origin of negotiability. 17. Payment by negotiable instru- 15. Distinction between assign- ment. ability and negotiability. § 13. Meaning of term. The term negotiability implies a transferable quality in the instrument to which it is applied. It is that quality of bills of exchange and promissory notes which renders them transferable from one person to another, and by possessing which they are emphatically termed negotiable paper.-' Negotiability in the law merchant is the property whereby a bill, note or check passes or may pass from hand to hand like money, so as to give the holder in due course the right to hold the instrument and collect the sum payable, for himself, free from defenses. The Negotiable Instrument Law provides : "An instnmtent is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to hearer it is negotiated by de- livery; if payable to order it is negotiated by the indorsement of the holder completed by delivery."^ Negotiation means the act by which a negotiable instrument is put into circulation by being passed by one of the original parties to another person. If A gives B a check on C bank, and B presents the check at the counter of C, no negotiation is nec- essary or had. He simply demands and receives payment ; but if B goes to D store and buys a bill of goods and tenders the in- dorsed check in payment, he negotiates the check. "^* "An instrument negotiable in its origin continues to be nego- tiable until it has been restrictively indorsed or discharged by payment or otherivise."^^ * Kinney's Law Dictionary; cases directly or indirectly bearing Odell V. Gray, 15 Mo. 2>2i7, 15 Am. upon or citing the Law are grouped. Dec. 147 ; Shaw v. Merchants I^a-?. ^^ Aurora State Bank v. Hayes Bank, 101 U. S. 557 ; Anniston Eames Elevator Company, 88 Neb. Loan & Trust Co. v. Steckney, 108 187, 190, 129 N. W. 279. Ala. 146, 19 So. 63, 31 L. R. A. 234. ** Neg. Inst. Law, § 47, where all * Neg. Inst. Law, § 30, where all cases directly or indirectly bearing upon or citing the Law are grouped. 17 18 NEGOTIABLE INSTRUMENTS. §§ 14-15 § 14. Origin of negotiability. Originally all instruments, including bills of exchange, promissory notes and bank checks were non-negotiable — in the sense that the maker could, when asked for payment, deduct from the amount due on the instru- ment any just claim that he had against the original owner. Such claim was termed a counter-claim, or set-off. In the revival of commerce in Italy, in the eleventh century, merchants and traders, feeling the need of a commercial instrument, similar to a bank bill that could be used in barter and trade and com- mercial transactions, and realizing that no such instrument could be passed from hand to hand or sold readily, no matter how good the financial standing of the maker was, if he, the maker, could always insist on adjusting accounts with the original owner — adopted a custom later known as the law merchant, under which notes, checks, drafts, and bills of exchange, drawn in certain prescribed forms, and in the hands of a bona fide purchaser, could be enforced to their full extent against the maker, regard- less of certain defenses or counter-claims that the maker might have against the original holder. Such instruments were nego- tiable and such was the origin of negotiability.^ In England, embarrassments arose in the application of the common law to these forms of contract and it was only after a long struggle that the courts engrafted upon the common law the law merchant, by which the parties to bills and notes were put upon a footing entirely different from that of parties to other contracts.^ The customs and usages of merchants as to negotiability of bills of exchange finally came to be recognized and enforced by the courts but were not put upon a firm basis until they received the sanction of parliament. Promissory notes were first recognized by the courts as negotiable and later they were refused that recognition.^ Their negotiability was at last estab- lished in 1705 by a statute passed by parliament.^ The principles of this statute have been followed in a general way by the various states of this country and embodied in statutes. § 15. Distinction between assignability and negotiability. Assignability is a more comprehensive term than negotiability. Assignability pertains to contracts in general while negotiability pertains to only a special class of contracts. Property, rights in property and other valuable rights evidenced by a contract are 3 For a complete discussion of ^ Clerk v. Martin, 1 Salk. 129, 2 this subject see Street on Founda- Ld. Raymond 757. tions of Legal Liability. ^ Statute of 3 and 4 Anne, Chap. 4 Buller V. Crips, 6 Mod. 29. 9. § 15 NEGOTIABILITY. 19 transferred by assignment.'' The rights evidenced or created by ordinary contractual obligations are usually a kind of property, having in themselves a value measured in law by the damages assessable upon their breach. This property may at this stage of the law pass from person to person just as any other property does. But there are well settled rules governing such transfer, which are the outgrowth and mingling of early doctrines of the courts of common law and of equity. The primitive view was that in contracts of this nature that only a party to the agreement could sue upon the contract. This was based upon the ground that the contract created a personal obligation between the credi- tor and debtor.* This doctrine has been greatly modified in the various states by statutes which declare that every action must be prosecuted by the real party in interest. Title to any property or rights in property cannot be completely passed, as to the debtor, by assignment without notice to him. The result of this rule is that if the debtor performs his contract to the original creditor without notice of the assignment he is discharged.* These are not the rules as to negotiability. The person who takes an instrument by indorsement takes it free from all equities.*" While a person who takes an instrument by assign- ment takes it subject to the equities incident to it.** This is the distinguishing feature between assignability and negotiability. Negotiability is applied to instruments which contain a promise to pay money. These instruments embodying a promise to pay money may be either negotiable or non-negotiable. In order to be negotiable under the law merchant they must contain some words indicative of negotiability.*^ The usual words employed to denote this quality are to "A or order," to "the order of A" or "to bearer." Thus then the material difference between a non-negotiable instrument and a negotiable instrument is that the party to a non-negotiable instrument who has agreed to pay money or prop- '' Hoag V. Mendenhall, 19 Minn. *" Everston v. Bank, 66 N. Y. 14 ; 335 ; Andrews v. Nat. Bank of Wilson Sewing Mach. Co. v. Spears, North Am., 7 Hun 20; Harlowe v. 50 Mich. 534, 15 N. W. 894. Hudgins, 84 Tex. 107, 19 S. W. 364, n Trustees of Union College v. 31 Am. St. Rep. 21. Wheeler, 61 N. Y. 88; Warner v. ^Beecher v. Buckingham, 18 Whittaker, 6 Mich. 133; Timms v> Conn. 110; McWilliam v. Webb, 32 Shannon, 19 Md. 296. la. 577 ; Halloran v. Whitcomb, 43 13 United States v. White, 2 Hill Vt. 306. (N. Y.) 59, 37 Am. Dec. 374; Da- ^Van Buskirk v. Insurance Co., vega v. Moore, 3 McCord (S. C.) 14 Conn. 141; Merchants' and Me- 482; Putnam v. Crymes, 1 McMuU chanics Bank v. Hewett, 3 la. 93; (S. C.) 9, 36 Am. Dec. 250. Richards v. Griggs, 16 Mo. 416. 20 NEGOTIABLE INSTRUMENTS. §§ 16-17 erty under it, may when the money or consideration is demanded by a purchaser, set off against it any claims that he has against the original owner, which he could have set off if it had not been assigned — while the bona fide purchaser, before maturity, of a negotiable instrument can enforce it for its full amount against the maker, regardless of any counterclaim or other equities that the maker has against the original owner. § 16. Purpose of negotiability. The primary purpose of ne- gotiability is to allow bills and notes the effect which money, in the form of government bills or notes supplies in the commer- cial world.^^ A man does not always have property or valuable property rights which he can turn into cash at any moment. These things, however, measure his credit, and he avails himself of this credit by executing his note to his debtor who in turn endorses this to a third person. Thus men in this way without cash in hand are enabled by means of credit to conduct and carry to completion business and commercial enterprises. The sole purpose of negotiability then is to allow men of undoubted credit to carry on a business enterprise upon their promissory notes knowing that other business men will treat these promises as cash. Furthermore the purpose of negotiability is to allow bills and notes to go from hand to hand in the commercial mar- kets and to take the part of money in commercial transactions. § 17. Payment by negotiable instrument. In the absence of an agreement, either express or implied, it is generally held that a negotiable instrument is not an absolute and unconditional pay- ment of the debt and a discharge of the original obligation. Thus it has been held that the debtor's own note given for a precedent or contemporary debt is conditional payment.^* But some juris- dictions hold that it is absolute payment.*'** If, however, a new note is given in renewal of a former note and for a less amount it will be considered as a satisfaction ot the prior note as all differences are presumed to have been adjusted when the new note was given. *^ 13 Friedlainder v. Railway Co., i-*" Hibben v. Hicks, 26 Ind. App. 130 U. S. 416. 646, — N. E. — . 14 Winsted Bank v. Webb, 39 N. i5 pjper v. Wade, 57 Ga. 223 ; Y. 325, 10 Am. Dec. 435; Night- Bolt v. Dawkins. 16 S. C. 198; ingale v. Chaffee, 11 R. I. 609, 23 Draper v. Hitt, 43 Vt. 439, 5 Am. Am. Rep. 531 ; Sheehy v. Mande- Rep. 292. ville, 6 Cranch 258. But see, Jenness v. Lane, 26 Me. Contra, Ward v. Bourne, 56 Me. 475. 61 ; Smith v. Bettger, 68 Ind. 254, 34 Am. Rep. 256. § 17 NEGOTIABILITY. 21 Nor is a new note executed by only a part of the original promisors generally to be considered as payment of the prior note in the absence of any agreement to that effect.^^ In case the bill or note of a third person is given in payment of a precedent debt the payment is generally held to be con- ditional.^'' But when the stranger's note is payable to bearer or has been indorsed in blank by a prior holder so that it may be transferred without indorsement it is then considered as absolute payment when given for a contemporaneous debt.-^^ But it is only as conditional payment when payable to order and can be transferred only by indorsement.^^ A note is not discharged by giving a new note which proves invalid.*** Thus the original note is not discharged even though it is surrendered and a new note is accepted in payment without knowledge that the nev/ note is a forgery.** It is not necessary that the old note be surrendered or can- celed before a new note can operate as payment.** i«Hill V. Sleeper, 58 Ind. 221; !» Monroe v. Hoff, 5 Denio 360; Bates V. Rosekrans, Zl N. Y. 409; Shriner v. Keller, 25 Pa. St. 61. Boston Nat. Bank v. Jose, 10 See Day v. Thompson, 64 Ala. Wash. 185, 38 Pac. 1026. 269. But see, Stanley v. McElrath, 86 20 Williams v. Gilchrist, 11 N. H. Cal. 449, 25 Pac. 16, 10 L. R. A. 535; Winsted Bank v. Webb, 46 545; Bansman v. Credit Guarantee Barb. 177; Edgell v. Stanford, 6 Co., 47 Minn. Ill, 50 N. W. 496. Vt. 551. *'' Gresham v. Morrow, 40 Ga. 21 Athens First Nat. Bank v. 487; Woods v. Woods. 127 Mass. Buchanan, 87 Tenn. 32, 9 S. W. 141 ; Gibson v. Tobey, 46 N. Y. 637, 202, 10 Am. St. Rep. 617, 12 L. R. 7 Am. Rep. 397. A. 199; West Phila. Nat. Bank v. But see, Dennis v. Williams, 40 Field, 143 Pa. St. 473, 22 Atl. 829, Ala. 633. 24 Am. St. Rep. 562. 18 Tobey v. Barber, 5 Johns. 68. 22 French v. French, 84 la. 655, 4 Am. Dec. 326; Day v. Kinney, 57 N. W. 145, 15 L. R. A. 30; Dixon 131 Mass. n-, Susquehanna Fert. ^ Dixon, 31 Vt. 450, 76 Am. Dec. Co. V. White, 66 Md. 444, 7 Atl. i29; East River Bank v. Butter- 802. worth, 45 Barb. 476. But see, Huse v. McDaniel, 33 la. 406, 4 Am. Rep. 244. CHAPTER IV. GENERAL DOCTRINE. § 18. Negotiable instruments similar § 20. Equities. to money. 21. Circulation when parties not 19. Bona fide holder. immediate. § 18. Negotiable instruments similar to money. As has al- ready been pointed out the peculiarities which attach to negotiable paper are the growth of time, and were acceded to for the benefit of trade. While all choses in action are now transferable, the ne- gotiable instrument is the only species which carries, by transfer, a clear title and a full measure ; and like an instrument under seal, imports a consideration. Negotiable instruments are thus given many of the peculiarities of money — i. e., gold and silver coin and bank bills.^ § 19. Bona fide holder. In order to take advantage of the special privileges attached to a negotiable instrument, the holder must have taken it before it was due,^ and with no notice of any irregularity in the instrument, or of any valid defenses that the maker had to it,^ and the owner must have parted with some- thing of value in acquiring it.^ The consideration need not have been money.® It may have been property,® the granting of credit,'^ or some disadvantage which the holder assumed in acquir- ing it. Such a holder is a bona Ude holder. He is often spoken of as a holder in due course, also, as a bona Ude purchaser for value without notice. ipriedlander v. Railway Co., 4 Webster v. Cobb, 17 111. 459; 130 U. S. 416; Russel v. Whipple, Tillow v. Britton, 9 N. J. L. 120; 2 Cow (N. Y.) 536; Durgin v. Bar- Kinkel v. Harper, 7 Colo. App. 45, tol, 64 Me. 473. 42 Pac. 173. 2 Lansing v. Gaine, 2 Johns. (N. ^ In re Great Western Tel. Co., Y.) 300, 3 Am. Dec. 422; Lancas- 5 Biss. (U. S.) Z63, 10 Fed. Cas. No. ter Bank v. Woodard, 18 Pa. St. 5,740; Mayer v. Heidelbach, 123 n! 357, 57 Am. Dec. 618; Gordon v. Y. 332, 25 N. E. 416, 9 L. R. A. 850,- Wansey, 21 Col. 77. Greenwood v. Lowe, 7 La. Ann. 3 Ward V. Doane, 77 Mich. 328, 197. 43 N. W. 980 ; Greneaux v. Wheel- 6 Pond v. Waterloo Agricultural er, 6 Tex. 515; Smith v. Florida Works, 50 la. 596. Cent. Ry. Co., 43 Fed. 731; Can- 7 Drulling v. Battle Creek First ajoharie Nat. Bank v. Diefendorf, Nat. Bank, 43 Kan. 197, 23 Pac. 94, 123 N. Y. 191, 25 N. E. 402, 10 L. 19 Am. St. Rep. 126. R. A 674 22 § 20 GENERAL DOCTRINE. 23 § 20. Equities. A makes a certain instrument payable to B, promising to pay him a certain amount of money. That instru- ment is vaHd regardless of whether or not it is negotiable by the law merchant. B can recover from A, providing, of course, there has been a consideration, and if B assigns that over to some one else, that other person can recover also from A, The instrument is valid, then, whether it is negotiable by the law merchant or not. The question as to whether or not it is negotiable by the law merchant becomes important when there are some equities which attach to the instrument, and then, if it is not negotiable by the law merchant, the person takes it subject to those equities ; it has certain luggage attached to it which the person who gets the in- strument must also take — he must take the luggage with the in- strument. Therefore, it is important to know whether or not an instrument is negotiable by the law merchant. Instruments which have this luggage attached to them are binding, but we are con- sidering now whether these instruments are negotiable by the law merchant for other reasons. In general it may be here stated that there are certain essen- tials which an instrument negotiable by the law merchant must have. The bill must contain an order, not merely a request.® A orders you to do so and so ; he does not merely request you to do it. A note must contain a promise.® A promises to do. The order or promise must be unconditional ; absolutely for the pay- ment of money alone.*® Thus an order for 50 bushels of wheat or corn is not sufficient because not payable in money. There must be a payment in money and nothing else attached to it. The amount of money must be certain;** the time of payment must be a time certain to arrive,*- and the instrument must be specific as to all its parties. In a promissory note it must be spe- cific as to all its parties, that is, it must be specific as to the maker and the payee. In a bill of exchange the drawer, drawee and payee must be specific. Now, the question, whether an instrument has all these requisites which are required by the law merchant in order to be negotiable, becomes important when the instrument is in the hand.. SGillilan v. Myers, 31 111. 525; " Neg. Inst. Law, § 2; Hatch Knowlton v Cooley, 102 Mass. 233. v. Dexter First Nat. Bank, 94 Me. 9 Smith V. Bridges, 1 111. 18; 348, 47 Atl. 908, 80 Am. St. Rep. Hatch V. Gillettee, 8 N. Y. App. 401. Div. 605, 40 N. Y. S. 221. iSHanel v. Marston, 7 Rob. (la.) 10 South Bend Iron Works v. 34; New Windsor First Nat. Bank Paddock, 37 Kan. 510, 15 Pac. 574; v. Brynum, 84 N. C. 24, Zl Am. Wainwright v. Straw, 15 Vt. 215, Rep. 604; Neg. Inst. Law, § 20 40 Am. Dec. 675. (1) ; Bills Exch. Act, §§ 3, 83. 24 NEGOTIABLE INSTRUMENTS. § 20 of a bona fide purchaser for value. A person who gets a note with equities attached to it, and gives vakie for it, gets that instru- ment free from all those equities if it is negotiable by the law merchant. For instance, suppose a note has been obtained from A by fraud ; he thinks he has been signing a receipt when in fact he was signing a negotiable promissory note, and he has been negli- gent in signing; it gets into the hands of X, and X transfers it to Y. Y can recover against A. That equity does not run against a bona Ude holder for value.^^ Suppose it has some of these essen- tials lacking in order to make it negotiable. In that case X, Y, or the person who holds the instrument for value, would take it sub- ject to the equity that the note was obtained from A by fraud. If it was not negotiable by the law merchant, A would have a right to take advantage of that equity. There are some things which even a bona fide holder for value without notice can not maintain suit against. Suppose some one forges A's name to a note ; now, the good reason of the law merchant and merchants generally would hold that that should not be held as valid against A, even in the hands of a bona fide purchaser for value without notice. A is not a party to it, and we shall find out later that that is a real defense; and any per- son holding that instrument and tr3'ing to recover against A, A would have the right to set up against him that it was a forgery, even though it was negotiable by the law merchant and even though the person holding it is a holder for value without notice.*^ Thus we see there is one fact and principle that we must bear in mind all the time, and that is, if a person makes an agreement or contract of any nature, and it is such a contract as would be bind- ing in the law of contracts, then that contract is binding as be- tween those parties. So, if a person makes a contract or a written instrument of any nature, whether or not that instrument is negotiable by the law merchant, he is bound if he would be bound by the law of contracts. If one attempts to make a promissory note or a bill of exchange but does not do it and makes some other paper, he is bound just the same. We must consider the difference. The law of contracts, we might say, controls always as between the immediate parties. The law of bills and notes becomes important when we consider the paper in the hands of an innocent holder for value. 13 Von Windisch v. Klaus, 46 17, 92 Am. Dec. 521; Roach v. Conn. 433 ; Strough v. Gear, 48 Ind. Woodall, 91 Tenn. 206, 18 S. W. 100. 407, 30 Am. St. Rep. 883. I'* Foltier v. Schroder, 19 La. Ann. § 21 GENERAL DOCTRINE. 25 § 21. Circulation when parties not immediate. As between the immediate parties, for example, the drawer and payee on a promissory note, circulation has not begun, but when it circu- lates in other hands, then it partakes of the nature of money and will circulate just as money does, providing it is negotiable by the law merchant. ^^ Suppose X promises to pay A $50 and to deliver him 50 bushels of wheat. Now, in the absence of any fraud or anything of that nature, that is absolutely binding as between them, and B can recover from A $50 and 50 bushels of wheat. Now, suppose that is assigned by B to C and C to D. Now, that is a case where there is a valid contract. Any party to the instrument can proceed upon it and can recover. Now, suppose this instrument has been procured by fraud ; that A believes he is making a receipt for 50 bushels of wheat to B and, as a matter of fact, he promises to pay him $50 and deliver him 50 bushels of wheat, but he is negligent and careless and as a result it turns out to be some other instrument. Well, of course, between A and B, B could not recover, but suppose B gets it and indorses it to C and C to D. Can D recover upon that instrument? No. That is an instrument that would be non- negotiable by the law merchant and D could not recover on it; there were certain equities that went with it, and A can set the equities up against anyone who gets that instrument. So, when it gets in the hands of anybody else, A has a right to set up that defense.^® Now, suppose it is negotiable by the law mer- chant, the promise is to pay $50 alone, but suppose the instru- ment has been procured by fraud from A and B instead of be- ing a receipt it is a promisson,^ note and A thinks he is sign- ing a receipt, and the circumstances are like the others. In that case B could not recover against A, although it has all the requi- sites of a negotiable instrument. As between the immediate par- ties the ordinary law of contracts would apply and the fraud could be set up.*'' But let us suppose that it is endorsed by B to C and by C to D. D has no notice of any equity and gives full value for it, and he endeavors to recover against A. A cannot set up fraud as a defense because it is an instrument negotiable by the law merchant and in the hands of a bona fide holder for value without notice. A cannot set up that defense. Now, if D knew that that had been procured by fraud he could not collect. '^^ Supra, § 18, note 1. 5 Kan. App. 437, 49 Pac. 324; Tur- i« Trustees of Union College v. ley v. Bartlett. 10 Heisk. (Tenn.) Wheeler, 6 N. Y. 88; Timms v. 221; Kulenkamp v. Grofif, 7 Mich. Shannon, 19 Md. 296. 675, 40 N. W. 57. *'' Lancaster Nat. Bank v. Mackey, 26 NEGOTIABLE INSTRUMENTS. §21 If a person gets a negotiable instrument and he has given value and has no notice of wrongdoing, good common sense would say that he could recover just like he had gotten a ten dollar bill. That is the general doctrine underlying the law of negotiable instruments.^'^ 18 Supra, § 18, note 1. CHAPTER V. PARTIES AND THEIR CAPACITY. § 22. Parties and their capacity — In general. 23. Parties partially or wholly incapacitated — In general. 24. Same — Persons lacking men- tal capacity — Infants. 25. Same — Persons lacking men- tal capacity — Lunatics. 26. Same — Persons lacking men- tal capacity — Drunkards and spendthrifts. 27. Same — Persons lacking legal capacity other than mental — Married women. 28. Same — Persons lacking legal capacity other than mental — The bankrupt or insolv- ent payee. 29. Same — Persons lacking legal capacity other than mental — Alien enemies. 30. Parties not incapacitated — In general. § 31. Same — Persons acting in fiduciary capacity — Execu- tors and administrators. 32. Same — Persons acting in fiduciary capacity — Trus- tees and guardians. 23. Same — Persons acting in representative capacity — Agent. 34. Same — Persons acting in representative capacity — Partners. 35. Same — Persons acting in rep- resentative capacity — Private corporations. 36. Same — Persons acting in rep- resentative capacity — Mu- nicipal or public corpora- tions. 37. Same — Persons acting in rep- resentative capacity — Public officers. § 22. Parties and their capacity — In general. In this chap- ter we shall consider parties to bills, notes and checks and the capacity of such parties. It may be stated that the general rules governing contracts will apply as to the capacity of persons to make and indorse bills, notes and checks,* and also as to the effect of the various forms of legal disability, as infancy, in- sanity, coverture and alien enmity, upon the rights of the par- ties. Paper executed by persons who are under any of the above disabilities, is either void or voidable. Others, as partnerships, corporations, and agents, who have capacity to make simple con- tracts also have capacity, to certain extent, to execute and trans- fer bills, notes and checks. We shall consider in turn the capac- ity of all these parties to execute negotiable instruments, or bills, notes and checks. 1 Bromwich v. Loyd, Lutw. 1582; Hodges V. Steward, 12 Mod. 36 ; Sarsfield v. Witherley, 2 Vent. 292. 27 28 NEGOTIABLE INSTRUMENTS. §§ 23-24 For convenience, parties and their capacity may be considered under two main divisions or heads, viz., 1st — those parties par- tially or wholly incapacitated, and 2nd — those parties not in- capacitated. § 23. Parties partially or wholly incapacitated — In general. Parties partially or wholly incapacitated may be classified either as parties lacking mental capacity, such as infants, lunatics, drunkards and spendthrifts; or as persons lacking legal capacity other than mental, such as married women, the bankrupt or in- solvent payee and alien enemies. § 24. Same — Persons lacking mental capacity — Infants. There is a difference of opinion in the decisions of the various states as to whether a negotiable instrument made, accepted or indorsed by an infant, that is, by one under twenty-one years of age, is absolutely void or is merely voidable.^ The better opinion is that such note is voidable and may be ratified by the minor after reaching his majority^ But before reaching his majority and ratifying the instrument the infant cannot bind himself absolutely as drawer, indorser, acceptor or maker of a bill of exchange or promissory note."* If an instrument is given by an infant for necessaries, the bet- ter opinion is that the instrument is voidable and if repudiated by the infant,^ he may be recovered against not on the note but for the value of the articles supplied, or service rendered, that is, in actions known technically as "quantum valebat" and "quantum meruit," respectively.* A note, bill or check made payable to an infant is enforceable by the infant against the maker or acceptor, as the privilege of 3 Tyler v. Gallop, 68 Mich. 185, Mich. 304; Little v. Duncan, 9 35 N. W. 902, 13' Am. St. Rep. 336; Rich. 55, 64 Am. Dec. 700; Stern Little V. Duncan, 9 Rich. (S. C.) v. Meikleham, 56 Hun (N. Y.) 475, 55, 64 Am. Dec. 700; Askey v. Wil- 10 N. Y. S. 216. liams, 74 Tex. 294, 11 S. W. 1101. 5 5 Morton v. Steward, 5 111. App. L. R. A. 176. See note 18 Am. St. 533; McCrillis v. How, 3 N. H. Rep. 606-611. 348; Swasey v. Vanderheyden, 10 Contra, Wentworth v. Went- Johns. (N. Y.) Zi. worth, 5 N. H. 410; McMim v. But see, Earle v. Reed, 10 Mete. Richards, 6 Yerg. (T^^nn.) 9. (Mass.) 387; Aaron v. Harley, 6 3 Heady v. Boden, 4 Ind. App. Rich. (S. C.) 26; Bradley v. Pratt, 475, 30 N. E. 1119; Whitney v. 23 Vt. 378. Dutch, 14 Mass. 4.^7, 7 Am. Dec. « Guthrie v. Morris, 22 Ark. 411; 229; Minock V. Shortridge, 21 Mich. Munson v. Washband, 31 Conn. 304. 303, 83 Am. Dec. 151; Askey v. ^Fetrow v. Wiseman, 40 Ind. Williams, 74 Tex. 294, 11 S. W. 148; Minock v. Shortridge. 21 1101, 5 L. R. A. 176. § 24 PARTIES AND THEIR CAPACITY. 29 avoiding the contract lies with the infant and is for his benefit.'' The one who pays should use due care in paying lest payment should be made to the guardian rather than to the infant. An infant's indorsement, that is, his writing his name on the back and making the instrument payable to some one else, is voidable, not absolutely void. He may choose to disaffirm it, and by returning the consideration received, compel the maker or acceptor to pay him, although the money has already been paid to the indorsee or the one to whom the infant indorses it ; or the infant may disaffirm the indorsement, notify all the par- ties, and if payment has not been made to the indorsee, destroy his title to the bill or note.^ In case of the indorsement of the note or bill by the infant payee, the maker or acceptor is liable, as the fact that they make the instrument payable to an infant estops or precludes them from denying his capacity to indorse the instrument. It would be absurd to allow one who has made an instrument payable to an infant, or his order, to refuse to pay the money to one to whom the infant had ordered it to be paid, in distinct violation of his promise.^ The Negotiable Instruments Law provides :*** '^The indorsement or assignment of the instrument by a cor- poration or by an infant passes the property therein, notwith- standing that from zmnt of capacity the corporation or infant may incur no liability thereon." The above section of the law does not take away the infant's right to disaffirm his indorsement and recover the instrument even against an innocent indorsee for value.*®* As the instrument of an infant is not absolutely void, but voidable only at his election, it follows that, after reaching full age, the then adult may ratify and affirm his bill or note exe- cuted while he was an infant. Unless a written ratification is required by statute, a verbal ratification is sufTcient. In some states by statute it is required that this ratification be in writ- ing. '"Garner v. Cook, 30 Ind. 331; Hardy v. Waters, 38 Me. 450; Dulty V. Brownfield, 1 Pa. St. 497 ; Nightingale v. Withington, IS Grey v. Cooper, 3 Dougl. 65 ; Bun- Mass. 272, 8 Am. Dec. 101. ker's Cases, 331. ^® Neg. Inst. Law, § 22, where all * Hardy v. Waters, 38 Me. 450; cases directly or indirectly bearing Nightingale v. Withington, 15 upon or citing the Law are grouped. Mass. 272, 8 Am. Dec. 101 ; Story i»* Murray v. Thompson, 136 Prom. Notes, §80. Tenn. 118, 188 S. W. 578, L. R. A. »Frazier v. Massey, 14 Ind. 382, 1917 B, 1172. 30 NEGOTIABLE INSTRUMENTS. § 25 § 25. Same — Persons lacking mental capacity — Lunatics and imbeciles. The bill or note of a lunatic, imbecile, idiot, or other persons non compos mentis, from age or personal infirmity, is, subject to the conditions set out below, not binding on such persons during the period of incompetency.-^^ There is a con- flict of authority in the various jurisdictions as to whether one ignorant of the incompetency of a person with whom he contracts will be protected. The better opinion would seem to be that he will be protected if he has acted in good faith and taken no undue advantage of the afflicted person.*^ That is, he will be protected if the note was obtained or the contract entered into in good faith, in ignorance of the want of capacity of the insane person to contract, and for a full and adequate consideration of money paid, or property delivered to him. As to whether a bill or note given for necessaries binds one under such incompetency, the more just rule would seem to be to place such an instrument upon the same footing as the bill or note of an infant given for necessaries, as discussed in the pre- vious section.-*' Contracts with a person who has been adjudged judicially to be insane and for whom a committee or guardian has been ap- pointed to care for his interests are not valid and cannot be en- forced if disaffirmed or avoided. If the insanity of a party to a contract is known, the contract is absolutely void.^^ " 15 Am. Dec. 361 note; Mussle- Boone, 102 Ga. 202, 29 S. E. 182, 66 man v. Cravens, 47 Ind. 1; Ellars Am. St. Rep. 167, 40 L. R. A. 250; V. Mossbarger, 9 111. App. 122 ; Hale Am. Dec. 372. V. Browne, 11 Ala. 87; Milligan v. Seaver v. Phelps, 11 Pick. 304, 22 Pollard, 112 Ala. 465, 20 So. 620; 13 Navasota First Nat. Bank v. Burke v. Allen, 29 N. H. 106, 61 McGinty, 29 Tex. Civ. App. 539, Am. Dec. 642 ; Carrier v. Sears, 4 69 S. W. 495 ; In re Renz, 79 Mich. Allen (Mass.) 336, 81 Am. Dec. 216, 44 N. W. 598; Hosier v. Beard, 707 ; American Trust Co. v. 54 Ohio St. Rep. 398, 43 N. E. 1040, Boone, 102 Ga. 202, 29 S. E. 182, 66 56 Am. St. Rep. 720, 35 L. R. A. Am. St. Rep. 167, 40 L. R. A. 250. 161. See note 11 Am. St. Rep. 320. Contra, Milligan v. Pollard, 112 12 Memphis Nat. Bank v. Sneed, Ala. 465, 20 So. 620; Davis v. Tar- 97 Tenn. 120, 36 S. W. 716, 56 Am. ver, 65 Ala. 98; McKee v. Purnell, St. Rep. 788, 34 L. R. A. 274 ; 18 Ky. L. Rep. 879, 38 S. W. 705. Snyder v. Lanback, 7 Wkly. Notes '^ American Trust, etc., Co. v. Cases (Pa.) 464 note; Mussleman Boone, 102 Ga. 202, 29 S. E. 182, V. Cravens, 47 Ind. 1; Hosier v. 66 Am. St. Rep. 167, 40 L. R. A. Beard, 54 Ohio St. Rep. 398, 43 250; Hughes v. Jones, 116 N. Y. N. E. 1040, 56 Am. St. Rep. 720, 35 67, 22 N. E. 446, 15 Am. St. Rep. L. R. A. 161. 386, 5 L. R. A. 637; Schramek v. Contra, American Trust Co. v. Shepeck, 120 Wis. 643, 98 N. W.' § 26 PARTIES AND THEIR CAPACITY. 31 Such persons of unsound mind may be payees of bills or notes and may compel payment to them or a return of the considera- tion. As payees they may indorse the paper and the indorsee may recover of the maker or acceptor, and the latter are estopped from denying the payee's capacity to indorse if the payee was incompetent when the bill or note was executed.^^ It has been held, that the insanity of the indorser may be pleaded by the maker of a note in an action brought against him by the indorsee.-^® But the better doctrine is as above stated that the contract of indorsement by an insane person is voidable and not void, and such contract is binding upon all prior parties to the instrument who are of sound mind.^'' No action will lie on an accommodation indorsement of a promissory note by a luna- tic, even in favor of an innocent holder.*^ There is a presumption that every person is of sound mind and capable in that respect of contracting a liability on a bill, note or check until the contrary appears.*'* If a person contracts such a liability with a third person whom he knows to be insane, it is not valid, for unsoundness of mind would be a good de- fense, if it could be shown that the defendant was not of capacity and the plaintiff knew it.*® But where a person as above in good faith contracts with another, without notice of any such insanity as affects his capacity to contract, the ordinary presumption of sanity prevails, and the contract is valid, unless undue advantage was taken of the lunatic.** § 26. Same — Persons lacking mental capacity — Drunkards and spendthrifts. If a person became so drunk as to be de- prived of understanding and reason and in such a condition signs a bill or note, either as maker, drawer, indorser or acceptor, the 213; Coleman v. Farar, 112 Mo. 54, 56 Am. St. Rep. 788, 34 L. R. A. 20 S. W. 441. 274; Bechtel's Appeal, 133 Pa. St. But see, Kimball v. Bumgardner, 367, 19 Atl. 412. 16 Ohio Cir. Ct. 587, 9 Ohio Civ. i» Jackson v. Van Dusen, 5 Dec. 409. Johns. 144; 1 Parsons on Notes and 15 Carrier v. Sears, 4 Allen Bills 150. (Mass.) 336, 81 Am. Dec. 707. 20 Hannahs v. Sheldon, 20 Mich. 16 Walker v. Winn (Ala. 1905), 278; Lincoln v. Buckmaster, 32 39 So. 12; Burke v. Allen, 29 N. H. Vt. 652; Hughes v. Jones, 116 N. 106, 61 Am. Dec. 642. Y. 67, 22 N. E. 446, 15 Am. St. 17 Carrier v. Sears, 4 Allen Rep. 386, 5 L. R. A. 637. (Mass.) 336, 81 Am. Dec. 707. 3i Mutual Life Ins. Co. v. Hunt, 18 Van Patton v. Beal, 46 la. 79 N. Y. 541 ; Hosier v. Beard, 54 62 ; Edwards v. Davenport, 20 Fed. Ohio St. Rep. 398, 43 N. E. 1040, 56 756 ; Smith v. Mirsack, 6 C. B. 486. Am. St. Rep. 720, 35 L. R. A. 161 ; But see, Memphis Nat. Bank v. Behrens v. McKenzie, 23 la. 343. Sneed, 97 Tenn. 120, 36 S. W. 716, 32 NEGOTIABLE INSTRUMENTS. § 27 instrument as to him is voidable.^^ He may ratify the instru- ment when he becomes sober and be bound by it.^"* Many courts hold that drunkenness, unless procured by the payee's connivance, must be habitual and amount practically to mental unsoundness in order that it may be set up as a defense on an instrument.^'' The spendthrift, as in cases of infancy, lunacy, or drunkenness, may be placed under the care of a guardian.^^ A person who has been deprived of his property for any of the above causes is considered incompetent to make a negotiable instrument. So likewise a spendthrift when placed under the care of a guardian is held to be incompetent to make a negotiable instrument. By the weight of authority when under the care of a guardian he cannot indorse a note made payable to himself, for if he is held to be incompetent to make a negotiable instrument in the first in- stance he could not consistently be held to incur any liability by indorsement.^® § 27. Same — Persons lacking legal capacity other than men- tal — Married women. Wherever the common law prevails, a married woman cannot bind herself as a party in any way to a bill or note and such instruments signed by her are absolutely void. There were a few exceptions to this, however, at common law, as where the husband was an alien enemy and the like. In those states where the common law has been unchanged by legisla- tive enactment the common law rules still prevail ; if a special or limited power to contract is given them, they are still deemed prima facie unable to contract, and the burden is on the persons relying on the validity of their contracts to bring them within the rule set down in the legislative enactment.*'^ Modern statutes in most of the states enlarge the capacity of a married woman as to the making of contracts. The general scope of this remedial legislation is either to give her power to con- tract the same as if single or contract as if single with reference to or for the benefit of her separate estate and in either case her 23Jenners v. Howard, 6 Blackfd 240; Conant v. Jackson, 16 Vt 335 ; Miller v. Finley, 26 Mich. 249 Gore V. Gibson, 13 Mees & W. 623 State Bank v. McCoy, 69 Pa. St 204. See note 107 Am. St. Rep. 545 23 Calkins v. Fry, 35 Conn. 170 Joest V. Williams, 42 Ind. 565 Mathews v. Baxter, L. R. 8 Exch St. 204, 8 Am. Rep. 246; Hale v. Brown, 11 Ala. 87; Smith v. Wil- liamson, 8 Utah 219. 2^ Manson v. Felton, 13 Pick. 206; Lynch v. Dodge, 130 Mass. 458. 26 Lynch v. Dodge, 130 Mass. 458. 27 Kenworthy v. Sawyer, 125 Mass. 28; Kenton Ins. Co. v. Mc- 132. Clelland, 43 Mich. 564; Comings v. But see, Berkley v. Canon, 4 Leedy, 114 Mo. 454, 21 S. W. 804; Rich. 136. Connor v. Martin, 1 Strange, 516. 2* State Bank v. McCoy, 69 Pa. See note 3 L. R. A. (N. S.) 145. §§ 28-30 PARTIES AND THEIR CAPACITY. 33 power to execute negotiable instruments would be the same as in case of other contracts. In some states she is forbidden to execute such instruments as surety and her engagements as surety are absolutely void and cannot be ratified by her after coverture is terminated, either by death or divorce.^^ § 28. Same — Persons lacking legal capacity other than men- tal — Bankrupt or insolvent payee. A bankrupt cannot indorse a bill or note, since all his bills and notes receivable are col- lectible only by the assignee or trustee in bankruptcy. Any in- dorsements which he attempts to make are absolutely void. The one exception to the above rule is that when the bankrupt shall have sold the paper before his bankruptcy, the title obtained by the purchaser will be superior to that of the assignee or trustee although the indorsement was made after the bankruptcy.-® § 29. Same — Persons lacking legal capacity other than men- tal — Alien enemies. In times of peace aliens may contract with each other as other persons may but in times of war alien enemies cannot contract with each other when it necessitates communi- cation across the line of hostilities; hence they cannot execute negotiable paper which is binding either during or after the close of hostilities. Alien enemies are those who are subjects of dif- ferent sovereignties which are at war with each other. In some cases, war simply suspends the contractual powers of aliens and does not terminate them. But in no case will communications or transfers of property or money across the line of hostilities be permitted.^" § 30. Parties not incapacitated — In general. Parties not in- capacitated may be classified as. 1st, those acting in a fiduciary capacity, such as executors, administrators, trustees, guardians, committees, and the like: 2nd, those acting in a representative 28 The law of the place deter- 28 N J. Eq. (2 Stew.) 547; First mines the capacity of married Nat. Bank v Gish, 72 Pa. St. 13; women to enter into contracts. Jerome v. McCarter, 94 U. S. 734. Bell V. Packard, 69 Mc. 105. 31 3» Woods v. Wilder, 43 N. Y. Am. Rep. 251; Bowles v. Field, 164, 3 Am. Rep. 684; Craft v. U. S., 83 Fed. 886; Robinson v. Queen, 12 Ct. CI. 178; Billgerry v. Branch, 87 Tenn. 445, 11 S. W. 38, 10 Am. 19 Gratt. (Va.) 393. 100 Am. Dec. St. Rep. 690, 3 L. R. A. 214. 679; Ledoux v. Buhlcr, 21 La. Ann. But in La., and generally under 130; Russell v. Russell, 1 Mac- the civil law, the wife's domicile Arthur (D. C.) 263. determines her capacity. Gamier As to transfer in this country V. Poydras, 13 La. 177. of a note bv an alien enemy, see 29Hersey v. Elliot, 67 Me. 526. Morris v. Poillon. 50 Ala. 403; 24 Am. Rep. 50; Hughes v. Nelson, Morrison v. Lovell, 4 W. Va. 346. 34 NEGOTIABLE INSTRUMENTS. § 31 capacity as agents, partners, private corporations, municipal or public corporations and public officers. § 31. Same — Persons acting in fiduciary capacity — Execu- tors and administrators. In general, the legal representatives of decedents, known as executors and administrators succeed to all the interests and rights of such decedents. The rights and remedies attaching to all their contracts and instruments, v^hether negotiable or not, pass to the executors and administrators. The assets of the decedent's estate also pass to these legal representa- tives. But these rules are subject to the exception that all those rights and obligations arising from the decedent's contracts which are so personal in their character that no one could take his place in the matter, do not pass to his executors or administrators. An executor or administrator cannot make or indorse a promis- sory note so as to bind the estate of the decedent. By his con- tact he can only bind himself and he can in no way bind the estate under his control except as to the debts contracted by the decedent himself. In case he should make a promissory note or accept a bill of exchange and it should be negotiated before due, the executor has created a personal liability. The fact that the executor in making the instrument describes himself as executor does not give him capacity to bind the estate.^^ In case a promissory note or bill of exchange which is made pay- able to the deceased or his order comes into the hands of the executor or administrator there is a conflict of authority as to whether either of them may indorse in such a manner as to pre- clude a personal liability .^^^ In case the note has been indorsed by the payee before his death it is necessary that the note be again indorsed in order to pass title. 31 Rittenhouse v. Ammerman, 64 Brown, 64 la. 425, 20 N. W. 745, 52 Mo. 197, 27 Am. Rep. 215; Funker- Am. Rep. 446; Bogert v. Hertell, 40 burg V. Gorham, 46 Ga. 296; Walk- Hill 492. er V. Patterson, 36 Me. 273 ; Greg- But see, Smith v. Whiting, 9 ory V. Leigh, 33 Tex. 813 ; Sneed v. Mass. 334 ; Sanders v. Blain, 6 J. Coleman, 7 Gratt. 300. J. Marsh 446, 22 Am. Dec. 86. As to liability of administrator Must indorse without recourse. or executor as acceptor of bill Foster v. Fuller, 6 Mass. 58; Liy, drawn against him as such, see ingston v. Gaussen, 21 La. Ann. 286, Tassey v. Church, 4 Watts & S. 141. 99 Am. Dec. 731. 39 Am. Dec. 65. As to power of a foreign execu- But see, Schmiltler v. Simon, 114 tor to transfer bill see, Dial v. Gary, N. Y. 176, 21 N. E. 162. 14 S. C. 573, 37 Am. Rep. 737', 32 Wool ey V. Lyon, 117 111. 244, Stearns v. Burnham, 5 Me. 261, 17 6 N. E. 867, 57 Am. Rep. 867 ; Wade Am. Dec. 228. V. Wade, 36 Tex. 529; Campbell v. §§ 32-33 PARTIES AND THEIR CAPACITY. 35 § 32. Same^ — Persons acting in fiduciary capacity — Trustees and guardians. Trustees and guardians have capacity to trans- fer instruments but they can incur only a personal liability. An estate is committed to them and they have capacity to hold it and keep it intact, not for themselves but for others. They have such powers as are necessary for them to exercise in carrying into force and efifect the estate which they control. If a trustee or guardian executes a bill or note and describes himself as such he does not bind the estate but incurs only a personal Hability.^* Trustees and guardians, like executors and administrators, can- not bind the estate under their control, or the persons for whom or for whose benefit they act, by their promissory note, or by the acceptance of a bill of exchange; to give any vaHdity to such a note or bill they must be deemed personally bound as makers or acceptors. It has been held that a guardian may indorse a note or bill of exchange payable to his order as guardian so as to pass title, the reasoning being upon the theory that the words "as guardian" are merely descriptive of the payee.^ But the better doctrine seems to be that if the indorsee takes such an instrument, the words "as guardian" should be sufficient to put him on his guard and if the transfer was in fraud of the trust the indorsee should be held personally liable.^ § 33. Same — Persons acting in representative capacity — Agent. All persons who are themselves competent to become parties to a negotiable contract, in their own individual right, can do so through the instrumentality of an agent.^* It is not necessary that the agent himself should be competent to make a contract, as he is the mere instrument of the contracting party, who, of course, must be capable.^'' The best mode for an agent to sign or indorse a bill or note for his principal, so that it may clearly appear that he is the mere scribe, as it were, who writes for another, is as follows: 33Towne v. Rice, 122 Mass. 67; ^5 shaw v. Spencer, 100 Mass. McGavock v. Whitfield, 45 Miss. 382, 97 Am. Dec. 107; Smith v. 452; Shiff v. Shiff, 20 La. Ann. 269; Dibrell, 31 Tex. 239, 98 Am. Dec. Conner v. Clarke, 12 Cal. 168. 526 ; Nickerson v. Gilliam, 29 Mo. But see, Gandy v. Babbitt, 56 Ga. 456, 11 Am. Dec. 583. 640. ^* Lea v. Bringier, 19 La. Ann ** Westmoreland v. Foster, 60 197; Ferguson v. Morris, 67 Ala. Ala. 448; Thornton v. Rankin, 19 389. Mo. 193 ; Zellner v. Cleveland, 60 37 Governor v. Daily, 14 Ala. Ga. 633; Jenkins v. Sherman, 11 469; Felker v. Emerson, 16 Vt. 653, Miss. 884, 28 So. 726; McKinney v. 42 Am. Dec. 532. Beeson, 14 La. 254. 36 NEGOTIABLE INSTRUMENTS. § 33 "X, by his attorney or agent, Y;" or, "X, by Y, agent;" or, "Y, for X;" or, "Y, agent for X." It is held competent also for the agent to sign simply the principal's name, and to show his authority to do so by other evidence.^^ If the agent sign a note with his own name, and discloses no principal, he is per- sonally bound. And though he write "agent" after his name, he is still bound personally unless the name of the principal can be found within the four corners of the instrument.^* The Negotiable Instruments Law provides: "Where the instrument contains or a person adds to his sig- nature words indicating that he signs for or on behalf of a prin- cipal, or in a representative capacity, he is not liable on the in- strument if he was duly authorized; but the mere addition of zvords describing him as an agent, or as Ming a representative character, without disclosing his principal, does not exempt him from personal liability."'*^ Thus one is not relieved from liability by adding the descriptive term "trustee," "administrator," "guardian," "agent" "secretary" or any such term.^"* Unless the promise purports to be by the corporation, it is that of the persons who subscribe to it. Unless the language creates or fairly implies the undertaking of the cor- poration, or if the purpose is equivocal, the obligation is that of its apparent makers.^**" "A sijinahire by ' procMration' 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.'*^ The terms "per procuration" and "per proc" are seldom, if ever, used in this country. They have a special technical mean- ing and are an express intimation of a special and limited author- 38 First Nat. Bank v. Gay. 63 Mo. Coy v. Stiner, 53 Mich. 42 ; Handy- 33, 21 Am. Rep. 430; Mechanics' side v. Cameron, 21 111. 588, 74 Am. Bank v. Bank of Columbia, 5 Dec. 119. Wheat. 326. ^" Negotiable Instruments Law, 3'J Bryson v. Lucas, 84 N. C. 286, § 20, where all cases directly or in- 37 Am. Rep. 634; Rodger Williams directly bearing upon or citing the Bank v. Groton Mfg. Co., 16 R. I. Law are grouped. 504, 17 Atl. 170 ; Penn. Mutual Life ^Oa Sumwalt v. Rigsley, 20 Md, Ins. Co. V. Conoughy, 54 Neb. 124, 107; Daniel v. Glidden, 38 Wash. 74 N. W. 422; Peterson v. Honan, 556. 44 Minn. 166, 46 N. W. 303. 20 Am. 4<»'' Casco National Bank v. Clark, St. Rep. 564. 139 N. Y. 307. Contra, Keidan v. Winegar, 95 ^^ Negotiable Instruments Law, Afich. 430 This decision affirmed §21, where all cases directly or in- by statute. directly bearing upon or citing the May be authorized by parol. Odd Law are grouped. Fellows V. Bank, 42 Mich. 461; § 33 PARTIES AND THEIR CAPACITY. 37 ity; and a person taking a bill so drawn, accepted, or indorsed, is bound to inquire into the»extent of the authority. Where an agent accepts or indorses "per proc." the taker of a bill or note so accepted or indorsed is bound to inquire as to the extent of the agent's authority. But when the agent has the authority to do the act in question, his abuse of such authority will not affect a bona fide holder for value.^^'^ The power to make or indorse negotiable paper must be ex- pressly granted or given by the principal. Thus the general authority bestowed upon an agent to transact the business of his principal and to receive payment of and to discharge debts, will not imply an authority to accept or indorse bills so as to charge the principal. A power expressly granted is subject to strict interpretation, and must be performed in strict conformity with the terms thereof.^ Thus it has been decided that a negotiable instrument differing in amount from that authorized, or made payable at a different time will not bind the principal.^' The implied authority of an afrent to bind his principal by a bill or note is upheld in some cases, as where the agent has formerly made a note or drawn a bill for his principal, and such principal has recognized his acts.** It i=; provided in the Negotiable In- strument Law that: "The signature of any party may be made by a duly authori::ed agent. No particular form of appointment is necessary for the purpose, and the authority of the agent may be established as in other cases of agency."'^'* The Kentucky Act requires the a'zent to be duly authorized in writing but it is held that the ni^fhority to execute a non-nego- tiable instrument is not required to be in writing.^* The above section permits proof of the ostensible authority of the agent to act for a corporation in issuing negotiable paper ; «a Bryant. Powis & Bryant v. Y. 398; Greenfield Bank v. Crafts Quebec Bank (1893) (England), 2 Allen. 269. A. C. 170, 179. 45 Neg. Inst. Law, § 19, where ^^Handyside v. Cameron, 21 III. cases are collected. Odd Fellows v. 588, 74 Am. Dec. 119; Humphreys Bank, 42 Mich. 461; Sager v. Tuix V. Wilson, 43 Miss. 328; Temple v. per, 42 Mich. 605; Kennedy v. Gra- Pomroy, 4 Grey 128; Ryhiner v. ham, adm., 9 Ind. App. 624, 35 N. Feickert, 92 111. 305, 34 Am. Rep. E. 925, 2,7 N. E. 25. 130. In case of partnership plaintiff But see, Nutting v. Sloan, 59 Ga. must show authorization in case it 392. is disputed. Gooding v. Underwood, 43 King V. Sparks, 77 Ga. 285; 89 Mich. 189. Blackwell v. Ketcham, 53 Ind. 184. 45a pinley v. Smith, 165 Ky. 445, 44 Stroh V. Hinchman, Z7 Mich. 177 S. W. 262, L. R. A. 1915 F, 777. 490; Hammond v. Varian, 54 N. 38 NEGOTIABLE INSTRUMENTS. § 34 but what shall constitute sufficient proof of such authority is left to the common law."*^"" A general authority to an agent is presumed to continue until its revocation is generally known. And if A is the agent of B to draw bills in his name, B will be liable as drawer to ignorant indorsees, who had no knowledge of the change in the relation- ship of the parties, or of the revocation of the agency.^® It should be noted that officers of the government and other public corporations are not held to the same rule of agency by which in exceeding their authority they bind themselves; everyone having dealings with a public officer is supposed to know the legal limitations of his agency, so that when a public officer in innocent mistake of the law makes an unauthorized contract in the name of the public corporation neither he nor the cor- poration is bound.*'' The officer of a public corporation acting in his official capacity must use care that his official character appears on the face of the instrument, and it is held that merely adding his official designation to his signature will relieve him of personal liabiHty. Below is a form of signature by an agent. Signature by an Agent. $100.00 Minneapolis, Minn., July 1, 1921. Thirty days after date I promise to pay to the order of Earl Matlock One hundred Dollars DONALD S. MORRIS, By NATHAN C. REDDING, Agent. § 34. Same — Persons acting in representative capacity — Partners. Partners only have implied power to make and ne- gotiate negotiable instruments in case the firm is a trading part- nership, or one whose business necessitates the use of negotiable paper. If it is in the nature and scope of the firm's business 45b Grant County State Bank v. *'' The Floyd Acceptances, 7 N. W. Land Co., 28 N. D. 479, ISO Wall. 666; Walker v. Christian, 21 N. W. 736. Gratt. 297; Hodgson v. Dexter, 1 4« Story on Agency, §§ 470-473. Cranch. 345. § 34 PARTIES AND THEIR CAPACITY. 39 to issue such paper, any one or more partners may bind the firm by executing or accepting a note or bill in a transaction within such scope even though the proceeds are for his own benefit if the holder of the paper was not a party to the fraud."*^ But if money is loaned to a firm on the sole credit of one of its mem- bers, and a note is given therefor signed by such member, the obligation is that of the individual member and not that of the firm, and the fact that the proceeds thereof are used for the benefit of the firm is not material. As a general rule a secret, silent, or dormant partner, whose name does not appear, is bound by notes made or bills drawn, ac- cepted, or indorsed by his co-partners in the name of the firm, both when they are negotiated for the benefit and when given un- der such circumstances as to bind the firm. After the dissolution of a partnership, no partner has any authority to bind any former partner by giving a promissory note in the name of the firm ; the act of dissolution is a revocation of all authority to act for and contract in the name of the part- nership.^® As between the firm and the world, the authority of the ex-partners to bind each other by bills or notes within the scope of the former partnership continues until a suffcient notice of the dissolution is duly given. Biit notice is not necessary when a secret, silent, or dormant partner retires, for he has not been held out as a member of the firm. If, however, such partner is known to certain individuals to have been a partner, he must notify them of his retirement to escape liability for future acts of the firm.^** The proper form of signing the firm name to any contract made by a partner is to write the firm name and nothing else. It is permissible but unnecessary to write the name of the part- ner after the firm signature, thus : "Smith & Brown, per William J. Brown." As to accommodation paper, which term will be explained later, the following rule has been laid down : No one member of a firm can bind it, without the consent of all its members, by signing the co-partnership name as drawer, maker, acceptor, or indorser 48 Bank V. Alden, 129 U. S. 2>7Z; 43 Am. Dec. 168; Hurst v. Hill. 8 Fulton V. Loughlin, 118 Ind. 286; Md. 399, 63 Am. Dec. 705; Wilson Carrier v. Cameron, 31 Mich. ZIZ ; v. Forder, 20 Ohio St. 95, 5 Am. Hayward v. Gray, 12 Gray 453 ; Rep. 627. Spaulding v. Kelly, 50 N. Y. S. 50 pit^jn y_ Beufer, 50 Kan. 108, 244; Towle v. Dunham, 76 Mich. 34 Am. St. Rep. 110; Baptist Book 367. See note 48 Am. St. Rep. 438. Concern v. Carswell, Tex. Civil Ap- 49 Humphries v. Chastain, 5 Ga. peals, 1898, 46 S. W. 858; Nuss- 166, 48 Am. Dec. 247; Commercial baumer v. Becker, 87 111. 281, 29 Bank v. Perry, 10 Rob. (La.) 61, Am. Rep. 53. 40 NEGOTIABLE INSTRUMENTS. § 35 of negotiable paper for his private accommodation or for the accommodation of a third party, and this for the obvious reason that such a transaction is not within the scope of the co-partner- ship business, unless expressly or impliedly made so and that it would ordinarily be without authority and in fraud of the firm.'** § 35. Same — Persons acting in representative capacity- Private corporations. The power of private corporations to be- come parties to bills of exchange or promissory notes is co- extensive with their power to contract debts.*^ Whenever a corporation is authorized to contract a debt it may draw a bill or give a note in payment of it. Every corporation, therefore, may become a party to bills or notes for some purposes. Thus, a mere religious corporation may need fuel for its rooms, and as an economical measure may buy a cargo of coal, and give its note for it ; and such a note would undoubtedly be valid. The cashier of a bank, the president of a corporation or any other administrative officer, as secretary or treasurer, may be expressly authorized to issue negotiable paper for the corporation, or he may have such power from implication by reason of having previously exercised the power.^^ The Negotiable Instruments Law provides as follows : "Where an instrument is dramn or indorsed to a person as 'cashier' or other fiscal officer of a bank or corporation, it is deemed prima facie to be payable to the bank or corporation of which he is such officer; and may be negotiated by either the indorsement of the bank or corporation, or the indorsement of the officer."^^ The directors of a corporation are in control of its afifairs and have the management of its business, subject to the restrictions and limitations imposed upon them by the articles of incorpora- tion, by-laws and statutes. If the issuing of commercial paper is within the power of the corporation itself, such paper may in all cases be executed by the directors acting as a board. So the sole manager of a corporation intrusted by the officers with its entire conduct may bind it by executing a note in its name, especially where the officers had previously acquiesced in his execution of similar notes.^* 51 Hendric v. Berkowitz, Z7 Cal. Co., 27 N. Y. 546, 84 Am. Dec. 298. 113, 99 Am. Dec. 251; Chenowith sSQdd Fellows v. Sturgis First V. Chamberlin, 6 B. Mon. (Ky.) Nat. Bank. 42 Mich. 461; Olcott v. 60, 43 Am. Dec. 145; Fort Madison Tioga R. Co., 27 N. Y. 546, 84 Am. Bank V. Alden, 129 U. S. 381. Dec. 298. 52 Mott V. Hicks, 1 Cow. (N. Y.) 53a Neg. Inst. Law, § 42, where all 513, 13 Am. Dec. 550; Auerbach v. cases directly or indirectly bearing Le Sueur Mill Co., 28 Minn. 291, 41 upon or citing the Law are grouped. Am. Rep. 285; Olcott v. Tioga R. 54 American Exch. Nat. Bank v. § 36 PARTIES AND THEIR CAPACITY. 41 The power to receive negotiable paper must necessarily be ac- companied by a power to transfer it to a third person, in the ordinary course of its business.^^ Many of the same rules which control indorsement and transfer of negotiable paper by agents are also applicable to officers and agents of a corporation. We have already seen under the section pertaining to agents as parties {^22) the proper form of making the signature of a corporation by an agent or officer. In making such paper it is generally held that the corporation may dispense with the use of its corporate seal. Below is a form of signature: Corporate Signature. $250.00 St. Paul, Minn., July 1, 1921. Sixty days after date The Acme Company promises to pay to the order of Joseph Thompson Two hundred fifty Dollars at First National Bank. Valued received. THE ACME COMPANY. By JAMES STARR, Treasurer. § 36. Same — Persons acting in representative capacity — Municipal or public corporations. As to municipal or public corporations, such as cities, towns and other like corporations created by the government as governmental agencies, it is held that there is no doubt that they may have the povvcr conferred on them to execute negotiable paper, but the better opinion is that such power does not exist unless expressed or clearly implied. And the extent of the power may be limited by statute, as well as the existence of the power.^® Oregon Pottery Co., 55 Fed. Rep. 56 Qaiborne Co. v. Brooks, 111 265 ; Credit Co. v. Howe Mach. Co., U. S. 400 ; Newgrass v. New Or- 54 Conn. 357, 1 Am. St. Rep. 133. leans, 42 La. Ann. 163, 21 Am. St. ssMcIntire v. Preston, 10 111. Rep. 368; Knopp v. Hoboken, 39 48. 48 Am. Dec. 321; Goodrich v. N. J. L. 394; Merrill v. Alonticello. Reynolds, 31 111. 490, 83 Am. Dec. 138 U. S. 673; State v. Smith, 47 240; Buckley v. Briggs, 30 Mo. 452. N. J. L. 473. 42 NEGOTIABLE INSTRUMENTS. § '^'^ §37. Same — Persons acting in representative capacity — Public officers. A negotiable instrument may be drawn pay- able to the order of "the holder of an office for the time being."^'^ This provision of the law was intended to declare the general rule that where an instrument was payable to a person holding a position of a representative character that he may be regarded as the payee of the instrument in behalf of all the persons whom he represents. When public officers in good faith contract with parties having full knowledge of the extent of their authority, or who have equal means of knowledge with themselves, they do not become individ- ually liable unless the intent to incur a personal responsibility is clearly expressed, although they may through ignorance of the law have exceeded their authority. This should be the rule in case of the making, drawing, accepting, and indorsing of nego- tiable instruments by public officers, but the cases upon this ques- tion are not all in accord with the application of this rule to such instruments.^^ 57Neg. Inst. Law, § 8, sub. 6, -"^s Walker v. Christian, 21 Gratt. where all cases directly or indi- 297; Hodgson v. Dexter, 1 Cranch rectly bearing upon or citing the 345. Law are grouped. ■K^ "^JLaJM" .An^roi^Jl CHAPTER VI. FORMAL AND ESSENTIAL REQUISITES. § 38. Definition of promissory note. § 49. Must be certain as to time of 39. Definition of bill of exchange. 40. Formal and essential requi- sites in general. 41. Must be in writing. 42. As to style and material. 43. The date. 44. The signature. 45. Must be promise or order to pay. 46. Must be payable to order or bearer. 47. Must be certain as to promise or order to pay. 48. Must be certain as to amount. payment. 50. As to place of payment. 51. Must be payment in money. 52. Must be necessary parties. 53. The delivery. 54. As to value received. 55. As to agreements controlling the operation. 56. As to days of grace. 56a. As to payable at a bank. 57. As to stamps. 58. As to blanks. 59. As to instruments bearing a seal. 60. The several parts of a for- eign bill called a set. §38. Definition of promissory note. A satisfactory defi- nition of a promissory note is found in the Negotiable Instru- ments Law, which states : "A negotiable promissory note within the meaning of this act is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a iixed or determinable future time, a sum certain in m,oney to order or to bearer. Where a note is drawn to the maker's own order, it is not complete until indorsed by him."^ The above section has changed the old existing law in a num- ber of jurisdictions. §39. Definition of bill of exchange. The following is a good definition of a bill of exchange found in the Negotiable Instru- ments Law : "A bill of exchange is an unconditional order in writing ad- dressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on de- 1 Neg. Inst. Law, § 184, where all cases directly or indirectly bearing upon or citing the Law are grouped. 43 44 NEGOTIABLE INSTRUMENTS. § 40 mand, or at a iixed or determinable future time, a sum certain in money to order or to bearer."^ Bills of exchange are either foreign or inland — foreign, when drawn in one state or country, and made payable in another state or country ;' inland, when drawn, and made payable in the same state or country.* For the purpose of the law of negotiable in- struments, the several states of the United States are foreign to each other.' Thus, a bill drawn in Pittsburg, Pennsylvania, and payable in Columbus, Ohio, is a foreign bill, while one drawn in Cincinnati, Ohio, and payable in Cleveland, in the same state, is an inland bill of exchange. The Negotiable Instruments Law provides: ''An inland bill of exchange is a bill which is, or on its face purports to be, both draimi 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 bill drawn in one state and addressed to the drawee in another state, had for a long time prior to the Negotiable Instruments Law been held to be a foreign bill.®* § 40. Formal and essential requisites in general. The Nego- tiable Instruments Law has the following provisions:'^ "An instrument to be negotiable must conform to the following requirements: (1) It must be in writing^ and signed^ by the maker or drazver. {2) Must contain an unconditional promise or order^^ to pay a sum certain'^^ in money^^ (3) Must be 2 Neg. Inst. Law, § 126, where all upon or citing the Law are grouped. cases directly or indirectly bearing ®^ Phoenix Bank v. Hussey, 12 upon or citing the Law are grouped. Pick. 483. 3 Armstrong v. Am. Exchange '' Neg. Inst. Law, § 1, where all Bank, 133 U. S. 433; Phoenix Bank cases directly or indirectly bearing V. Hussey, 12 Pick. 483 ; Holliday upon or citing the Law are grouped. V. McDougall, 20 Wend. 81 ; Com- « Brown v. Butchers' Bank, 6 Hill mercial Bank of Ky. v. Varnum, 49 443 ; Reed v. Roark, 14 Tex. 325. N. Y. 269 ; Mason v. Dousay, 35 111. » McCall v. Taylor, 34 L. J. R. 424; Ticonic Bank v. Stacpole, 41 C. P. 365; Cadillac State Bank v. Me. 302. Cadillac Stave and Heading Co., -^Lenning v. Ralston, 23 Pa. 9t. 129 Mich. 15. 137; Strawbridge v. Robinson, 5 ^^ White v. Cushing, 88 Me. 339 ; Gilman (111.) 472; Riggin V. Collier, Iron City Bank v. McCord, 139 6 Mo. 568 ; Yale v. Ward's Ex'r, 30 Pcnn. St. 52. . Tex. 17. 11 Smith v. Clopton, 4 Tex. 109 ; ' Bank of U. S. v. Daniel, 12 Parsons v. Jackson, 99 U. S. 440. Peters, 32 ; Commercial Bank v. ^2 Auerbach v. Prichett, 58 Ala. Varnum, 49 N. Y. 269. 451 ; Quincy v. Merritt, 11 Hump. 6 Neg. Inst. Law, § 129, where all (30 Tenn.) 439; First Nat. Bank cases directly or indirectly bearing v. Slette, 67 Minn, 425. § 41 FORMAL AND ESSENTIAL REQUISITES. 45 payable on demand}^ or at a fixed or determinable future time.^"^ (4) Must be payable to order or to bearer ;^^ (5) Where the instrument is addressed to a draivec, he must be named or other- wise indicated therein zvith reasonable certainty. "'^^ This section has some minor changes in it in a few of the states. There is also another provision in the Law providing that :*'' "The instrument need not follouf the language of this act, but any terms are sufficient which clearly indicate an intention to conform to the requirements hereof." § 41. Must be in writing. As pointed out above, the instru- ment must be in writing. When writing is spoken of, it is not meant merely that which has been written with a pen or pencil. It includes also that which is in print or has been printed. The word instrument implies that which has been reduced to writing. Therefore, the words negotiable instruments themselves indicate that which has been reduced to writing. In order to be nego- tiable there must be a writing of some kind, else there would be an absence of the thing to be negotiated or passed from hand to hand. The reason a promissory note or bill of exchange must be in writing is clear, that is, the instrument is currency, and ''could not run on crutches." So the whole of the bill or note must be expressed in writing. If it is complete on its face, the general rule is that no evidence of a verbal agreement made at the time, qualifying its terms, can be admitted. Contemporaneous written agreements are ad- missible for the purpose of controlling the effects of the instru- ment as between immediate parties and those having notice. Parol evidence is generally admissible as between the parties, to show their real relations to each other, and if there be a latent ambiguity to explain it. And, in general, parol evidence is admissible between the original parties to show fraud, accident, or mistake in the creation of the instrument, or the failure (entire or partial) of consideration.** iSAldous V. Cornwell, L. R. 3 Q. 23 Ind. 4, 85 Am. Dec. 445; Smur B. 573; Collins v. Trotter, 81 Mo. v. Forman, 1 Ohio 272; Maule v. 278; Hall v. Toby, 110 Pa. St. 318; Crawford, 14 Hun. 193. Messmore v. Morrison, 172 Pa. St. ^® Peto v. Reynolds, 9 Exch. 410; 300; Porter v. Porter, 51 Me. 376; Watrous v. Halbrook, 39 Tex. Jones V. Brown, 11 Ohio St. 601. 572. ^* Mattison v. Marks, 31 Mich. *'' Neg. Inst. Law, § 10, where all 421 ; Walker v. Woolen, 54 Ind. cases directly or indirectly bearing 164. upon or citing the Law are grouped. *5 Sherman Bank v. Apperson, 4 ^^ See Chapters XXV and XXVI Fed. 25 ; Musselman v. McElhenny, on Evidence. 46 NEGOTIABLE INSTRUMENTS. §§ 42-43 It has been decided many times that if any discrepancy or ambiguity exists between the figures and the words indicating the amount called for by the instrument, the words^** are to con- trol. The figures constitute no part of the note or bill, but are inserted merely for convenience of reference. § 42. As to style and material. The law does not require any particular form or style as to a promissory note or bill of exchange, yet it does not seem that it would be wise to depart from the approved forms in vogue among merchants. The law looks to the substance of the transaction rather than the form, and if the intention of the parties as to assuming the obligation of drawers and makers of negotiable instruments can be deter- mined, the law will give them force and effect regardless of the form. There is no arbitrary rule governing the material upon which the instrument should be written. It may be written upon parchment, cloth, leather or any other substitute for paper. It may be written either with a pencil or with ink.^® The perma- nence and security of ink as compared to a writing in pencil makes the ink preferable. § 43. The date. A date in a bill or note is not necessary.^* The Negotiable Instruments Law provides that "the validity mid negotiable character of an instrument are not affected by the fact that it is not dated."^^ It is of no consequence on what portion of the paper a date is written, but it is usually written in the upper right-hand corner of the instrument. If dated, it will be presumed to have been executed on the day it bears date.^^ That is, "-where the in- strument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie to be the true date of the mak- ing, drawing, acceptance, or indorsement, as the case may be."^* If there be no date, it will be considered as dated at the time it was issued,^^ and parol evidence is admissible to show from 1^ Saunderson v. Piper, 5 Bing. 23 Anderson v. Weston, 8 Scott, N. C. 425 ; Hears v. Graham, 8 583 ; Maybury v. Berkery, 102 Mich. Blackf. (Ind.) 144. 126; Hill v. Dunham, 7 Gray 543; 20 Geary v. Physic, 5 Barn. & Wagner v. Kenner, 2 Rob. (La.) Cress. (Eng.) 234; Reed v. Roark, 120. 14 Tex. 325, 65 Am. Dec. 127. 24Neg. Inst. Law, § 11, where all 21 Husbrook v. Wilder, 1 Pin cases directly or indirectly bearing (Wis.) 643; Mich. Ins. Co. v. Leav- upon or citing the Law are grouped, enworth, 30 Vt. 11. 25 Pasmore v. North, 13 East 517; 22Neg. Inst. Law, § 6, subd. 1, Brewster v. McCardel, 8 Wend, where all cases directly or indi- 478; Bayley v, Taber, 5 Mass. 286. rectly bearing upon or citing the Law are grouped. § 44 FORMAL AND ESSENTIAL REQUISITES. 47 what time an undated instrument was intended to operate, or (if a date appears) to show that there was a mistake in the date. So an instrument may be ante-dated or 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 rvhoni an instrument so dated is delivered acquires the title thereto as of the date of delivery."^^ The above section of the Law contemplates instruments ante- dated or post-dated by the parties in accordance with a mutual agreement to that effect.^*'* Where a blank has been left on the instrument for the date, it may in some cases be filled in by the holders. Thus, "where an instrument expressed to he payable at a fixed period after date is issued undated, or zvhere 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 instru- ment shall be payable accordingly. The insertion of a wrong date does not avoid the instrument in the hands of a subseque^it holder in due course; but as to him, the date so inserted is to be regarded as the true date."'^'^ The insertion of a wrong date in an undated instrument, by one having knowledge of the true date of issue, will avoid the instrument as to him, but an innocent third party may enforce the same notwithstanding the improper date.^'* § 44, The signature. It is immaterial in what part of the instrument the name appears, whether at the top, in the middle, or at the bottom. Anything from which it will appear that a person intended to make the instrument his own is sufficient.^* As long as the signature or emblem of the drawer or maker ap- pears anywhere upon the instrument, it is deemed prima facie evidence of his intention to be bound by its obligation.*^ It is immaterial whether the writing is in pencil or ink, al- though as a matter of permanence and security, ink is, of course, preferable.^** And the name may be printed or typewritten as 2« Neg. Inst. Law, § 12, where all 28 Lampkin v. State, 105 Ala. 1, cases directly or indirectly bearing 16 So. 575> Irvin v. Sterne, 25 upon or citing the Law are grouped. Ga. 223, 71 Am. Dec. 204 ; Dow 26a Bank of Houston v. Day, 145 Law Bank v. Godfrey, 126 Mich. Mo. App. 410, 122 S. W. 756. 521, 85 N. W. 1075, 86 Am. St. 27 Neg. Inst. Law, § 13, where all Rep. 559. cases directly or indirectly bearing 29 Neg. Inst. Law, § 17, and cases upon or citing the Law are grouped. there cited. 27a Bank of Houston v. Day, soReed v. Roark, 14 Tex. 329; supra. Geary v. Physic, 5 Barn & C. 234. 48 NEGOTIABLE INSTRUMENTS. § 44 well as written, though, in such cases, it cannot prove itself, and must be shown to have been adopted and used by the party as his signature.^^ The name may be written in script or Roman letters, and made with a pen or pencil, rubber stamp or type, or it may be printed, engraved, photographed or lithographed, in fact, in any form so long as the signer has adopted and issued the signature as his own.^** If another sign the name of the party in his presence and at his request, it is the same as if he did it himself ;^^ and if another sign the party's name by verbal or other authority, it is suffcient. The full name may be written; and at least the surname should appear, and generally does. But this is not indispensable — the initials are sufficient, and any mark which the party uses to indicate his intention to bind him- self will be as effectual as his signature, whether there be a cer- tificate of witnesses on the instrument or not.^^ And "the signa- ture of any party may be made by a duly authorised agent. No particular form of appointment is necessary for this purpose; and the authority of the agent may be established as in other cases of agency."^* The Kentucky Act requires such agent to be authorized in writing. The above section permits proof of the ostensible authority of the agent to act ; but what shall constitute sufficient proof of such authority is left to the common law^** ''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."^ The words "per procuration" have a special technical signifi- cance and are seldom if ever used in this country. They are an express intimation of a special and limited authority; and a person taking a bill so drawn, accepted or indorsed, is bound to inquire into the extent of the authority.*** 31 Pennington v. Baehr. 48 Cal. 443. See note 14 L. R. A. 693. and 565 ; Lexington v. Union Nat. Bank. 22 L. R. A. 372. 75 Miss. 1, 22 So. 291 ; Weston v. 34 Neg. Inst. Law, § 19, where all Myers, 33 111. 424. cases directly or indirectly bearing sia Weston v. Myers, 33 111. 424. upon or citing the Law are grouped. Note 7 A. L. R. 672. 34a Grant County State Bank v» 32 Crumrine v. Crumrine, 14 Ind. N. W. Land Co., 28 N. D. 479, 150 App. 641 ; 43 N. E. 322 ; Kennedy N. W. 736. V. Graham, 9 Ind. App. 624, 35 N. 35 Ngg. Inst. Law, § 21, where all E. 925. cases directly or indirectly bearing 33 Signing by mark. Merchants upon or citing the Law are grouped. Bapk V. Spicer, 6 Weiid. (N. Y.) 35a Bj.ym^^^ Purvis & Bryant v. § 45 FORMAL AND ESSENTIAL REQUISITES. 49 "Where a signature is forged or made without the authority of the person whose signature it purports to he, it is wholly in- operative, and no right to retain the instrument, or to give a dis- charge 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 pre- cluded from setting up the forgery or ivant of authority.'''^ The Negotiable Instrument Law also provides : "No person is liable on the instrument whose signature does not appear thereon, except as herein otherwise expressly pro- vided. But one zvho signs in a trade or assumed name will be liable to the same extent as if he had signed in his ozmi name."^^* One may become a party to a negotiable instrument by any designation he desires, provided it be used as a substitute for his name and he intends to be bound by it.^*"* § 45. Must be promise or order to pay. In order that the instrument contain a promise it is not necessary to use the word promise. But while it is not necessary to use that particular word, it has been held that the instrument must contain an ex- press promise.^" The instrument contains an express promise whenever it contains an expression equivalent to the word promise. It has been held that where a certain time for payment has been expressed in the instrument, or the words "on demand" are used, the instrument contains a promise. Example, "Due A. B. $76.50 on demand,"38 or "Pay to A. B. $76.50 on Dec. 24, 1922."3» The words "Value received,'"*** or "to be accountable,"** do not import, nor are they equivalent to a promise to pay. In a bill of exchange it is no more necessary that the word order should be used than it is that the word promise should be used in a promissory note.'*^ Any words which are equivalent to an order Quebec Bank (1893) (England), A. Lockwood, 40 Conn. 349, 16 Am. C. 170, 179. Rep. 40. 36 Neg. Inst. Law, § 23, where all 39 Cowan v. Hollack, 9 Colo. 572, cases directly or indirectly bearing 13 Pac. 700; Kendall v. Lewis, 10 upon or citing the Law are grouped. Ky. L. Rep. 362. 3«« Neg. Inst. Law, § 18, where all 40 st. Vrain Stone Co. v. Den- cases directly or indirectly bearing ver, N. & P. R. Co., 18 Colo. 211, upon or citing the Law are grouped. 32 Pac. 827. ss" Brown v. Butcher's and Dro- « Hyne v. Dewdney, 21 L. J. Q. ver's Bank, 6 Hill (N. Y.) 443. B. 278. But see Hegeman v. Moon, 37 Smith V. Bridges, 1 111. 18; 131 N. Y. 462. Hegeman v. Moon, 131 N. Y. 462, 42 Enison v. Collingridge, 67 E. 30 N. E. 487; Taylor v. Steele, 16 Q L. 570; Rufif v. Webb, 1 Esp. M. & W. 665. 129, 5 Rev. Rep. 722, ; Bresenthall 38 Smith V Allen, 5 Day (Conn.) v. Williams, 1 Dew (Ky.), 329, 85 337; Kimball v. Huntington, 10 Am Dec 629 Wend. (N. Y.) 675; Currier v." 50 NEGOTIABLE INSTRUMENTS. §46 or which show the drawer's will that the money should be paid are sufficient to make the instrument a bill of exchange. A bill of exchange is something more than the mere asking of a favor. It is in its very nature an instrument demanding a right. Hence a mere request or supplication made or authority given to pay a certain amount of money has been held not to be a bill.'*^ The following would be a good bill: "Mr. Smith will much oblige Mr. Jones by paying John Brown, or order, on account $50.00." The words by paying are held sufficient to import an order to pay.'*^ §46. Must be payable to order or bearer. By the Nego- tiable Instruments Law "bearer means thf person in possession of a bill or note which is payable to bearer."'*^ However, it is not essential that the words to order or to bearer be used so as to make the instrument negotiable, although they are the simplest words and the ones most frequently used.^* The words to A or holder and to A and his assigns are equiva- lent words which will render the instrument negotiable.*'' These words of negotiability may be dispensed with and the expression, "This is and shall be negotiable," may be inserted in the instru- ment, which expression makes the paper fully negotiable.** The instrument may also be made negotiable by using the words "to the order of A."*^ But if the instrument reads "to the bearer, A/' it is not negotiable, because the expression, "to the bearer," is only descriptive of A, and there are no words of negotiability.^® The Negotiable Instruments Law sets down certain rules as to when an instrument is held payable to order and also when held payable to bearer: "The instrument is payable to order zuhere it is drawn payable to the order of a specified person or to him or to his order. It 43 Woolley V. Sargent, 8 N. J. L. 47 Putnam v .Crymes. 1 McMuIl 262, 14 Am. Dec. 419; Little v. 9, 36 Am. Dec. 250; Wilson County Slackford, M. & M. 171, 31 Rev. v. Third Nat. Bank, 103 U. S. 770; Rep. 726, 22 E. C. L. 498; Russell Dutcliess Co. Ins. Co. v. Hach- V. Powell, 14 M. & M. 418, 14 L. field, 1 Hun 676. J. Exch. 269. 48 Raymond v. Middleton, 29 Pa. 44 Ruff V. Webb, 1 Esp. 129, 5 St. 529; Cudahy Packing Co. v. Rev. Rep. 723. Sioux Nat. Bank, 75 Fed. 473, 21 43 Neg. Inst. Law, § 191, where C. C. A. 428. all cases directly or indirectly bear- 49 Wittey v. Mich. Mut. etc. Co.. ing upon or citing the Law are 123 Ind. 411, 24 N. E. 141 ; Howard grouped. v. Palmer, 64 Me. 86; Stevens v. 46 Wilson County v. Third Nat. Gregg, 86 Ky. 461, 12 S. W. 775. Bank, 103 U. S. 770: United States 30 leaver v. Scott, 32 la. 22. V. White, 2 Hill (N. Y.) 59, Z7 Am. Dec. 374. § 47 FORMAL AND ESSENTIAL REQUISITES. , 51 may be draum payable to the order of: {!) A payee zvho 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 (d) 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 cer- tainty?^ The last clause of the above section of the Law changes the old rule of law. Thus, when a note was drawn payable to order, but with an unfilled blank for the name of the payee and nego- tiated in that condition, any bearer who came by it regularly can no longer fill the blank and recover thereon.^^^ The Illinois Act adds after subsection 6 the following: "7. An instrument pay- able to the estate of a deceased person shall be deemed payable to the order of the administrator or executor of his estate." As to when an instrument is held payable to bearer, the Nego- tiable Instruments Law provides : "The instrument is payable to bearer: (1) When it is ex- pressed 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."^^ The Illinois Act makes some changes in the above section. § 47. Must be certain as to promise or order to pay. If the instrument is a bill, it must contain a certain direction to pay^* — if it is a note, a certain promise to pay.^^ As stated heretofore, a bill is, in its nature, the demanding of a right, not the mere asking of a favor, and therefore a supplication made or authority given to pay an amount is not a bill. The language: "Please to send $10.00 by bearer, as I am so ill I cannot wait upon you," is held not to be a bill.*^^ A promissory note must contain a certain promise to pay. If over and above the mere acknowledgment of debt, there may 51 Neg. Inst. Law, § 8, where all v. Cook (District of Columbia), 96 cases directly or indirectly bearing S. E. 484. upon or citing the Law are grouped. ^'^ Gillian v. Myers, 31 111. 525 ; 5i» Tower v. Stanley, 220 Mass. Knowlton v. Cooley, 102 Mass. 233. 429, 107 N. E. 1010. 54 Smith v. Bridges, 1 111. 18; 52 Neg. Inst. Law, § 9, where all Forward v. Thompson, 12 U. C. I. cases directly or indirectly bearing B. 103 ; Taylor v. Steele, 16 M. & upon or citing the Law are grouped. W. 665. Union National Bank of Columbia ^^ King v. Ellor, 1 Teach. 323. I 52 NEGOTIABLE INSTRUMENTS. § 48 be collected from the words used a promise to pay it, the instru- ment may be regarded as a promissory note.'* The Negotiable Instruments Law provides : "An instrument is payable on demand: (1) Where it is ex- pressed to be payable on demand, or at sight, or on presenta- tion; or (2) in which no time for payment is expressed. Where an instrument is issued, accepted or indorsed when overdue, it is, as regards the person so issuing, accepting or indorsing it, pay- able on demand "^"^ § 48. Must be certain as to amount. It is also a requisite to the negotiability of an instrument that it shall call for the pay- ment of a definite and certain sum,'^ and not for unliquidated damages. The amount to be paid or the amount which the paper represents should be stated plainly on the face of the instru- ment, and like the denomination of money must be stated in the body of the instrument or it will be defective, unless it has been left blank and express or implied authority given to fill it up. The amount is customarily written in the margin also, but this is held to be no part of the instrument, and made simply for convenience of reference, and the statement in the body of the instrument controls, and should they vary any holder may change the marginal figures to conform to the amount as written in the body of the paper.''* Unless required by statute to be written in words, the amount may be stated in the body of the instrument in figures. Abbreviations and characters which have well defined meanings may be employed. There is some conflict of authority as to whether if there be added to the amount, "with exchange,"®" or "with current ex- 's Smith V. Bridges, 1 111. 18; Smith, 1 R. I. 398, 53 Am. Dec. Forward v. Thompson. 12 U. C. I. 652; Rockville Nat. Bank v. Second B. 103; Taylor v. Steele, 16 M. & Nat. Bank, 69 Ind. 479, 35 Am. W. 665. Rep. 236. ^~ Neg. Inst. Law, § 7, where all As to when marginal figures may cases directly or indirectly bearing be referred to see : Sweetzer v. upon or citing the Law are grouped. French, 13 Mete. (Mass.) 262; 58Gaar v. Louisville Banking Petty v. Fleischel, 31 Tex. 169, 98 Co., 11 Bush. (K)'.) 180, 21 Am. Am. Dec. 524 Rep. 209; Kendall v. Galvin, 15 Me. o Clark v. Skeen, 61 Kan. 526, 131, 32 Am. Dec. 141 ; Port Huron 60 Pac. 327, 78 Am. St. Rep. 337, First Nat. Bank V. Carson, 60 Mich. 49 L. R. A. 190; Hastings v. 432, 27 N. W. 589. As to effect of Thompson, 54 Minn. 184, 55 N. W. marginal letters or figures in bill or 968, 40 Am. St. Rep. 315, 21 L. note otherwise blank as to amount, R. A. 178. Contra, Culbertson v. see note 2 L. R. A. (N. S.) 879. Nelson, 93 la. 187, 61 N. W. 854, 59 Neg. Inst. Law, § 17, sub. 1, 57 Am. St. Rep. 266, 27 L. R. A. and cases there cited; Smith v. 222. § 48 FORMAL AND ESSENTIAL REQUISITES. 53 change on another place,"** the commercial character of the paper is or is not impaired. The weight of authority is that it is not, as that is capable of definite ascertainment and so the amount to be added is certain, and as set out below the Nego- tiable Instruments Law makes such paper negotiable. A stipulation as to interest does not make the amount uncer- tain.®2 It might be stated here, by way of parenthesis, that it is a general rule of commercial law that where a note is made payable with interest, without specifying the rate, or the time from which the interest is to be computed, the note carries inter- est from the date of its complete execution or its issue, at a legal rate fixed by law.*^ The provisions in notes, payable in part payment or install- ments, to the efifect that if any one of the installments is not paid as agreed, all installments or the whole sum shall become due and payable, does not destroy the negotiability of the note, and such notes are quite common.®"* The provision that the in- terest shall be paid at stated intervals, and if not paid the entire sum shall become due, is also common, and does not afifect the negotiability of the paper. There is likewise a conflict as to whether by adding the words, "with reasonable attorney's fees," the negotiability of an instrument is destroyed. The better opinion is that they do not.®^ Instruments with such words are not like contracts — to pay money and do some other things. They are simply for the payment of a certain sum of money at a certain time, and the additional stipulations as to attorney's fees can never go into efifect if the terms of the bill or note are complied with. They are, therefore, incidental and ancillary to the main engagement, intended to assure its performance or to compensate for trouble and expense entailed by its breach. 61 Smith V. Kendall, 9 Mich. 241, ingshead v. Stuart, 8 N. D. 35, 11 80 Am. Dec. 83. N. W. 89, 42 L. R. A. 659. «2 Neg. Inst. Law, § 2, where all «5 Bowie v. Hall, 69 Md. 433, 16 cases directly or indirectly bearing Atl. 64, 9 Am. St. Rep. 433, 1 L. upon or citing the Law are grouped. R. A. 546; Bank of Commerce v. Kirkwood v. Hastings First Nat. Fuqua, 11 Mont. 285, 28 Pac. 291, Bank, 40 Neb. 484, 58 N. W. 1016, 28 Am. St. Rep. 461, 14 L. R. A. 42 Am. St. Rep. 683, 24 L. R. A. 444. 588. As to validity of agreement See note 2 A. L. R. 139. to pay attorney's fees, see 55 Am. «3Salazar v. Taylor, 18 Colo. St. Rep. 438-441, 444; see also notes 538, 33 Pac. 369 ; Belford v. Beatty, 7 L. R. A. 445, 1 L. R. A. 547, 3 145 111. 414, 34 N. E. 254. L. R. A. 51. 64 Roberts v. Snow, 27 Neb. 425, Contra, National Bank of Com- 43 N. W. 241 ; Wilson v. Campbell, merce v. Feeney, 9 S. D. 550, 70 110 Mich. 580, 68 N. W. 278; Hoi- N. W. 874, 40 L. R, A. 7Z2. 54 NEGOTIABLE INSTRUMENTS. § 49 The Negotiable Instruments Law fully covers all such stipu- lations by providing- that "the sum payable is a sum certain mthin the meaning of this act, although it is to be paid: (i) With interest; or "(2) By stated installments; or "(3) By stated installments, with a provision that upon de- fault in payment of any installment or of interest, the zvhole shall become due ; or "(4) With exchange, whether at a fixed rate or at the current rate; or "(5) With costs of collection or an attorney's fee, in case payment shall not be made at maturity."^^ Some changes have been made in some jurisdictions in some of the parts of the above section. § 49. Must be certain as to time of payment. The instru- ment must be payable without conditions and at all events in order to be negotiable.'^'' If the order or promise be payable provided terms mentioned are complied with ; as, for instance, that a certain receipt be produced by a certain time,^^ it is not a negotiable bill or note ; and likewise if payable provided a certain ship shall arrive;®* or provided the maker shall live a certain time,^" or upon any contingency. "An instrument payable upon a contingency is not nei^otiable, and the happening of the event does not cure the defectr''^ If the time must certainly come, although the particular day is not mentioned, the instrument is regarded as negotiable, as the fact of payment is certain. If the instrument is payable at, or within a certain time after, a man's death, it is sufficient, because the event must occur.''^ ''An instrument is payable at a 66Neg. Inst. Law, § 2, where all (Mass.) 220; The Lykus, 36 Fed. cases directly or indirectly bearing 919. upon or citing the Law are grouped. ''* Kelley v. Hemmingway, 13 111. e^Harrell v. Marston, 7 Rob. 604; Rice v. Rice, 43 N. Y. App. (La.) 34; New Windsor First Nat. Div. 458, 60 N. Y. S. 97. Bank v. Bynum, 84 N. C. 24, 37 "^^ Neg. Inst. Law, § 4, last part, Am. Rep. 604; Mahoney v. Fitz- where all cases directly or indi- patrick, 133 Mass. 151, 43 Am. Rep. rectly bearing upon or citing the 502. Law are grouped. <5** Mason v. Metcalf, 4 Baxt. ''2 Garrigus v. Home Frontier (Tenn.) 440. etc. Missionary Society, 3 Ind. App. But see, Kirkwood v. First Nat. 91, 28 N. E. 1009, 50 Am. St. Rep. Bank, 40 Neb. 484, 58 N. W. 1016. 262; Hegeman v. Moon, 131 N. Y. 42 Am. St. Rep. 683, 24 L. R. A. 462, 30 N. E. 487; Carnwright v. 444. Gray, 127 N. Y. 92, 27 N. E. 835, 24 «5> Grant v. Wood, 12 Gray Am. St. Rep. 424, 12 L. R. A. 845. See note 2 A. L, R, 1471, § 50 FORMAL AND ESSENTIAL REQUISITES. 55 determinable future time zvithin the meaning of this act, which is expressed to be payable: "{!) At a fixed period after date or sight; or "{2) On or before a iixed or determinable future time speci- fied therein; or "(3) On or at a fixed period after the occurrence of a speci- fied event which is certain to Imp pen, though the time of hap- pening be uncertain.'"*^ ' In a few decisions a note or bill made payable "on or before" a stated date has been held non-negotiable, but the great majority of decisions declare such an instrument to be negotiable, since the legal rights of the holder are clear and certain, and the instrument being due at a time fixed and not before, the maker has a mere option to pay in advance of the legal liability if he sees fit.'"'* If a bill or note is made payable expressly or impliedly out of a particular fund it is not negotiable according to the law mer- chant, because there may be no such fundJ'^ "An unqualified order or promise to pay is unconditional, though coupled zmth an indication of a particidar fund out of zvhich reimbursement is to be made, or a particular account is to be debited zvith the' amount. But an order or promise to pay out of a particidar fund is not unconditional."'^ An order on a saving bank, "Pay C, or order, three hundred dollars, or what may be due on my deposit book No. 1, page 632," is payable out of a particular fund, and therefore not negotiable under the statute.''** § 50. As to place of payment. The purpose of a certain place of payment being set out in the instrument is to fix the place at which the holder must present the bill of exchange or note for payment. This is a very important feature of the in- strument when we come to consider the liability of sureties and indorsers. If no place is mentioned, presentment must be made '^SNeg. Inst. Law, § 4, where all 41 Am. Rep. 82; Thompson v. cases directly or indirectly bearing Wheatland Mercantile Co., 10 Wyo. upon or citing the Law are grouped. 86, 66 Pac. 595. As to reference '^4 Walker v. Woolen, 54 Ind. to account or fund as affecting ne- 164; Charlton v. Reed, 61 Iowa 166, gotiability, see note 8 L. R. A. (N. 16 N. W. 64, 47 Am. Rep. 808; S.) 2.31; see also notes 35 L. R. A. Ernst V. Steckman, 74 Pa. St. 13, 647 and 22 U. S. L. Ed. 161. 15 Am. Rep. 542. See also note 11 ''^Neg. Inst. Law, § 3, where all L. R. A. 748. cases directly or indirectly bearing "^^ Turner v. Peoria etc. Ry. Co., upon or citing the Law are grouped. 95 111. 134, 35 Am. Rep. 144 ; Miller ^Ca National Savings Bank v. Ca- V. Poage, 56 la. 96, 8 N. W. 799, ble, 73 Conn. 568. 56 NEGOTIABLE INSTRUMENTS. §51 at the place of business of the primary obligor.'''^ If he has no place of business, presentment must then be made at his resi- dence.''** Another purpose of having a certain place of payment set out in the instrument is to determine what law shall govern as to the condition and manner of payment. As a general rule it is not necessary to the negotiability of the instrument that a place of payment be designated.'^® But it is now required by statute in some of the states. The Negotiable Instruments Law provides that "the validity and negotiable character of an instrument are not affected by the fact that it does not specify the place where it is drawn or the place where it is payable. "^^ § 51. Must be payable in money. Another essential requi- site of a bill of exchange or promissory note is that the medium of payment must be money ; that is, the direction or promise in such instrument must be to pay in money.** If the instrument calls for the payment of goods, or is in the alternative, as for the payment of a sum of money or "to issue stock," it is not negotiable and becomes a mere simple contract.** It has been held, however, that if the instrument calls for the payment ot goods or money, giving the holder the option to choose, it is in effect payable in money and so negotiable. So if the instrument be expressed to be payable "in work,"*^ or in any other article than money, as, for instance, "an ounce of gold,"*^ it becomes a special contract, and by the law merchant loses its character as commercial paper. Thus it has been held that if the instrument be to pay money, and also "to deliver up horses and a wharf,"** or "to pay money and take up a certain outstanding note," it is not a negotiable note *^ 77 Biglow V. Kellar, 6 La. Ann. 85 Ind. 503 ; Chandler v. Calvert, 87 59, 54 Am. Dec. 555; Merrick v. Mo. App. 368. As to payment in Burlington etc. Plank Road Co., 11 money only, see note 3 L. R. A. 50. la. 74; Haber v. Brown, 101 Cal. 82 Pridgcn v. Cox, 9 Tex. 367; 445, 35 Pac. 1035. Corbitt v. Stonemetz, 15 Wis. 170; 7S Stivers v. Prentice. 3 B. Hon. Markley v. Rhodes, 59 la. 57, 12 (Ky.) 461; Shamburgh v. Cem- N. W. 775. magere, 10 Mart. (La.) 18; Pack- 83 Bothick v. Purdy, 3 Mo. 82; ard V. Lyon, 5 Duer. (N. Y.) 82. McClelland v. Coffin, 93 Ind. 456; 79 Kendall v. Galvin, 15 Me. 131, Ransom v. Jones, 2 111. 291. 32 Am. Dec. 141; Spears v. Bond, 84 Roberts v. Smith, 58 Vt. 492, 79 Mo. 467. 4 Atl. 709, 56 Am. Rep. 567. 80Neg. Inst. Law, § 6, sub. div. 85 Martin v. Chantry, 2 Strange 3, where all cases directly or indi- 1271. rectly bearing upon or citing the 86 Cook v. Saterlee, 6 Cow. 108. Law are grouped. But see Hodges v. Shulen 22 N. Y, 81 Killan v. Schoeps, 26 Kan. 310, 114. 40 Am. Rep. 313 ; Johnson v. Griest, § 51 FORMAL AND ESSENTIAL REQUISITES. 57 But it is held that "an unqualified order or promise to pay is unconditional though coupled with a statement of the transaction ivhich gives rise to the instrument."^' The most frequent instances of such notes are notes given in payment of the purchase price of goods and chattels.*''* So also an instrument in terms and form a negotiable promis- sory note does not lose that character because it recites that the maker has deposited collateral security for its payment, which he agrees may be sold in a specified manner.** Thus it seems well settled that, although it may appear on the face of the note that its payment is secured by collaterals in personal property, or mortgage of real property, yet if otherwise in proper form, it is negotiable. The Negotiable Instruments Law covers this and many similar provisions by the following section : "An instrument zvhich 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 nego- tiable is not affected by a provision which: ",{!) Authorizes the sale of collateral securities in case the instrument be not paid at maturity; or "(2) Authorizes a confession of judgment if the instrument be not paid at maturity; or "(3) Waives the benefit of any lazv intended for the. ad- vantage 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."^^ IlHnois, Kentucky, Wisconsin among other states make some changes in section 5 of the Law above set out. The object of the last sentence of this section is to prevent any inference of an intent to validate any agreement or stipulation set out in the section, where by any statute or settled policy of the state, the same would be illegal. It is uniformly held that a power of attorney to confess judg- s^Neg. Inst. Law, § 3, subd. 2. Am. St. Rep. 824; De Hass v. where all cases directly or indirectly Dibert, 70 Fed. 227, 17 C. C. A. bearing upon or citing the Law are 79, 30 L. R. A. 189; Carroll Bank grouped. v. Taylor, 67 la. 572, 25 N. W. 873 Chicago Railway Equipment 810. Co. V. Merchants' Nat. Bank, 136 89 Neg Inst. Law, § 5. where all U. S. 268. cases directly or indirectly bearing 88 Vallev Nat. Bank v. Crowell. upon or citing the Law are grouped. 148 Pa. St. 284, 23 Atl. 1068, 33 58 NEGOTIABLE INSTRUMENTS. § 51 merit must be strictly construed, and whether the power can be executed for the benefit of a holder of a note other than the payee must depend upon the language of the power itself.^* If the note is in itself perfect, without conditions, it may remain negotiable although the power of the attorney to confess judg- ment may not, by its terms, operate in favor of an indorsee or transferee of the note.'*^ A stipulation authorizing a confession of judgment if the in- strument is not paid at maturity is recognized as valid in many jurisdictions. In others it is not recognized as valid. It is stated by the court in one jurisdiction that it is the acknowledged public policy of that state not to recognize powers of confession in promissory notes, and that it seemed to be the public policy as declared by the statute in that state in respect to confessions of judgment requiring that in order to be a valid execution of such power, there must at the time of its execution be an affidavit made."^* "The validity and negotiable character of an instrument are not affected by the fact that it does not specify the value given, or that any value has been given^ therefor. But nothing in this section shall alter or repeal any statute requiring in certain cases the nature of the consideration to he stated in the instrument. "^^ Thus it is often required when notes are given for a patent or some right therein that the instrument should state the nature of the consideration. "A promissory note or other negotiable in- strument, the consideration of which consists wholly or partly of the right to make, use or sell any invention claimed or repre- sented 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 purchase price or the use of a patented article."''^ Some states as New 80 Cushman v. Welsh, 19 Ohio St. cases directly or indirectly bearing 536; Manufacturers and Mcchan- upon or citing the Law are grouped. ics Bank v. St. John, 5 Hill (N. As to a note not indicating the na- Y.) 497; Spence v. Emerine, 46 ture of its consideration as required Ohio St. 433, 21 N. E. 866, 15 Am. by statute see note 10 L. R. A. (N. St. Rep. 634; Marsden v. Soper, 11 S.) 842. Ohio St. 503. •»» Neg. Inst. Law, § 330 of N. _Y. 91 Osborn v. Howley. 19 Ohio law, where all cases directly or in- 130. directly bearing upon or citing the »i» Irose V. Balla. 181 Ind. 491. Law are grouped. ®* Neg. Inst. Law, % 6, where all § 51 FORMAL AND ESSENTIAL REQUISITES, 59 York and Ohio have made this provision as to patent notes a part of the Negotiable Instruments Law^ while many other states have such a law as a separate statute. The term money properly includes all legal tender.®'* Though the word "currency" includes bank-notes, which are not legal tender, yet it is held that certificates of deposit, notes, bills, bonds, checks and the like, payable in "currency," or in "current funds of this state," "current Ohio bank-notes," etc., constitute good commercial paper, and are really payable in money, as the term used is but a common expression used to indicate current legal tender.'**^ The property of being legal tender is not necessarily inherent in money ; it generally belongs no more to inferior coin than to paper money. Legal tender is that kind of money which the law compels a creditor to accept in payment of his debt, when tendered by the debtor in the right amount.^^ Foreign gold or silver coins are not legal tender.**" The gold and silver coins of the United States and the United States notes are lawful money and legal tender in the payment of all debts, public and private.®* "The validity and negotiable character of an instrument are not affected by the fact that it designates a particular kind of current tnoney in which payment is to be niade."^^ But if the instrument is made payable in the paper or cur- rency of a particular bank, specifically and absolutely, and with- out reference to the currency or value of the paper, it is held not to be for the payment of money and is not negotiable.-^ An instrument payable in "current funds" is negotiable.** It has been held that it is necessary that the instrument should express the specific denomination of money when it is payable in the money of a foreign country, in order that the courts may be able to ascertain its equivalent value ; otherwise it is not negotiable. a »4 Jones V. Overstreet, 4 T. B. »« United States Revised Stat- Mon. (Kv.) 547; Mann v. Mann, utes, § 3585. 1 Johns Ch. (N. Y.) 236. »» Neg. Inst. Law, § 6, subd. 5 85 Telford v. Patton, 144 ITI. 611, and cases there cited. 22> N. E. 1119; Butler v. Paine, 8 i Bonnell v. Covington, 7 How. Minn. 324; Phelps v. Town, 14 (Miss.) 322; Whiteman v. Chid- Mich. 374; ("Current Ohio Bank ress, 6 Humph. (Tenn.) 303; Fry Notes") ; Swetland v. Creigh, 15 v. Rousseau, 3 McLean (U. S.) Ohio 118; Bull v. Bank. 123 U. S. 106, 9 Fed. Cas. No. 5,141; Alitchell 105. There is much conflict on the v. Walker, 4 Ark. 145. above point, however. ^^ Millikan v. Security Trust '♦^ Black's Law Die; Martin v. Company, — Ind. —, 118 N. E. 568. Bolt, 17 Ind. App. 444, 46 N. E. 2 Thompson v. Sloan, 23 Wend. 151. (N. Y.) 71. But see Hogue v. Wil- ^ United States Revised Stat- liamson, 85 Te.x. 553. 22 S. W. 580, utes, §3584. 34 Am. St. Rep. 823, 20 L. R. A. 60 NEGOTIABLE INSTRUMENTS. § 52 Where an instrument is made payable generally in the money of a foreign country, without specifying the kind or denomina- tion of the coin or money, so that payment may be made in our own coin of equivalent value as determined by the par of ex- change, it is not negotiable, according to a leading case in New York upon this question.^ This is not the invariable rule, for in a Michigan case a note payable in "Canada currency" was held negotiable, and the New York case already referred to was dis- approved."* § 52. Must be necessary parties. The name of the maker of a note or the drawee of a bill should appear on the instrument. In the case of the note it is important, as it is the maker who is liable thereon ;** and in case of the bill the drawee's name must be written in order to bind the party accepting." The bill must be addressed to some person, except that : (a) If the drawee can be otherwise sufficiently identified from the bill it is sufficient ; and'^ (b) An unaddressed bill accepted or a bill accepted, where the drawer and acceptor are one and the same person, probably is to be treated as a promissory note, and is negotiable.® The bill or note must point out some person to whom the money is to be paid.® The following are the common rules concerning the nomination of payees: (a) The payee of an instrument, except one payable to bearer, must be a person in being, natural or legal, and ascertained, at the time of issue.*® 481; Black v. Ward, 27 Mich. 193, 35 Ala. 476; Culver v. Marks, 122 15 Am. Rep. 162. Ind. 554, 23 N. E. 1086, 17 Am. St. 3 Thompson v. Sloan, 33 Wend. Rep. 377, 7 L. R. A. 489; Rice v. (N. Y.) 71. Ragland, 10 Humph. (Tenn.) 545, 4 Black V. Ward, 27 Mich. 193. 15 53 Am. Dec. 737. Am. Rep. 162. sgUss v. Burnes, McCahon 5 Union Nat. Bank v. Forstall, (Kan.) 97; Funk v. Babbitt, 156 41 La. Ann. 113, 6 So. 32; Keck v. 111. 408, 41 N. E. 166. Sedalia Brewing Co., 22 Mo. App. ® Brown v. Oilman, 13 Mass. 158; 187; Ferris v. Bond, 4 B. & Aid. Secy. v. Stale Bank, 3 Sneed 679, 23 Rev. Rep. 443, 6 E. C. L. (Tenn.) 558, 67 Am. Dec. 579. 651. io\yayman v. Torreyson, 4 Nev. «Funk V. Babbitt, 156 111. 408, 124; U. S. v. Coffeyville First Nat. 41 N. E. 166 ; Watrous v. Holbrook, Bank, 82 Fed. 410 ; New v. Walker, 39 Tex. 572; McPherson v. John- 108 Ind. 365, 9 N. E. 386, 58 Am. ston, 3 Brit. Col. 465. Rep. 40; 7ddy v. Bond, 19 Me. 461, 7 Ala. Coal Min. Co. v. Brainard, 36 Am. Dec. 767. § 52 FORMAL AND ESSENTIAL REQUISITES. 61 (b) Where the payee and maker or drawer are the same per- son, the instrument is not issued until after its indorsement and delivery.** (c) The payee may be a fictitious or non-existing person, but the instrument is then construed as payable to bearer, and title thereto is made by estoppel.*^ "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. "'^^ "Where in a bill the drawer and drawee are the same person, or where the drazvee is a fictitious person, or a person not having capacity to contract, the holder may treat the instrument, at his option, either as a bill of exchange or a promissory note."''-* "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-accept- ance 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 tnay see ftt.^^ A bill or note may be executed by one person or by a number of persons. When executed by but one, it is called a several note. When executed by two or more, it is either joint, or joint and several, according to its wording. Thus, if in a note signed by two or more, the plural number is used in referring to them as "we promise to pay," it is held to be a joint note.** While if in the same note the singular number is used, as "I promise to pay," then the note is considered as joint and sev- eral, since this expression indicates an intention to make it a joint and several note." So the expression, "we or either of us," is held to make a note joint and several.** ^* Norfolk Nat. Bank v. Griffin, ing upon or citing the Law are 107 N. C. 173, 11 S. E. 1049. 22 Am. grouped. St. Rep. 868; Ewan v. Brooks-Wa- ^^ Neg. Inst. Law, § 131, where terfield Co., 55 Ohio St. 596, 45 N. all cases directly or indirectly bear- E. 1014, 60 Am. St. Rep. 719, 35 ing upon or citing the Law are L. R. A. 786. grouped. iSKohn V. Watkins, 26 Kan. 691, i« Harrow v. Dugan, 6 Dana 40 Am. Rep. 336; Shaw v. Brown, (Ky.) 341; Lafourche Transp. Co. 128 Mich. 573. 87 N. W. 757 ; Phil- v. Pugh, 52 La. Ann. 1517, 27 So. lips V. Mercantile Nat. Bank, 140 958; Peaks v. Dexter, 82 Me. 85, N. Y. 556, 35 N. E. 982, 37 Am. St. 19 Atl. 100. Rep. 596, 23 L. R. A. 584. *'' Dow Law Bank v. Godfrey, 126 . 13 Neg. Inst. Law, § 128, where Mich. 521, 85 N. W. 1075, 86 Am. all cases directly or indirectly bear- St. Rep. 559; Warren First Nat. ing upon or citing the Law are Bank v. Fowler, 36 Ohio St. 524, grouped. 38 Am. Rep. 610. i4Neg. Inst. Law, § 130, where 18 Pogue v. Clark, 25 111. 333; all cases directly or indirectly bear- Harvey v. Irvine, 11 la. 82; Harris 62 NEGOTIABLE INSTRUMENTS. § 53 The Negotiable Instruments Law provides ; "* * * Where an instrument containing the words 7 promise to pay is signed by two or more persons, they are deemed to be jointly and sever- ally liable thereon."^^'^ §53. The delivery. By the Negotiable Instruments Law "delivery means transfer of possession, actual or constructive, from, one person to another."^^ An undelivered bill or note is inoperative, because delivery is essential to the final completion of every written contract. Until delivery, the contract, is revocable. Delivery means transfer of possession with intent to transfer title, and is of two kinds: (1) The manual passing of the instrument itself ; and (2) some act manifesting intent to transfer right of possession while the possession of the instrument is actually with another. It has been held that by depositing a note in the mail with the intent that it shall be transmitted to the payee in the usual way the said party will be in control over it and the delivery is in legal contemplation completed.*®* "Where an incomplete instrument has not been delivered it will not if completed and negotiated, tvithout authority, be a valid con- tract in the hands of any holder, as against any person whose sig- nature was placed thereon before delivery."^** A negotiable instrument must be complete and perfect when it is issued, or there must be authority reposed in some one after- ward to supply anything needed to make it perfect.*®" This section of the law rather concerns delivery as between immediate parties. Thus we might say that delivery of a nego- tiable instrument is essential in order to create any liability as between the immediate parties to the instrument. This section then does not refer to the delivery to a bona fide purchaser for value without notice. This section and the one following in the Law and also following in this text should be considered to- gether. In order to avoid confusion as to matters relating to delivery considered in a later chapter these two sections will be briefly discussed. The other section provides as follows: V. Coleman etc. White Lead Co., 37 Am. St. Rep. 458, 459; sae also 58 111. App. 366. note 6 L. R. A. 470. 18a Neg. Inst. Law, § 17, subdiv. 7, ^^ Canterbury v. Sparta Bank, 91 where cases directly or indirectly Wis. 53, 64 N. W. 311, 30 L. R. A. bearing upon or citing the Law are 845. grouped. ^^ Neg. Inst. Law, § 15, where all i»Neg. Inst. Law, § 191, where cases directly or indirectly bearing all cases directly or indirectly bear- upon or citing the Law are grouped, ing upon or citing the Law are 20a Davis Sewing Machine Co. v. grouped. As to delivery, see note Best, 105 N. Y. 59. § 53 rORMAL AND ESSENTIAL REQUISITES. 63 "Every contract on a negotiable instrument is incomplete and revocable until delivery of tfie instrument for the purpose of giving effect thereto. As between immediate parties, and as re- gards a remote party other than a holder in dm course, the deliv- ery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. BM where fhe 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. 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."^^ Some jurisdictions have made some changes in this section of the Law. In North Carolina the words "accepting or" between the words "drawing" and "indorsing" in the second sentence are omitted. In Kansas the third sentence, which provides for a conclusive presumption of delivery in favor of a holder in due course, is omitted. In South Dakota the sentence beginning with the word "But" and ending with the word "presumed" is omitted and the following sentence substituted: "An indorsee of a negotiable instrument in due course, acquires an absolute title thereto, so that it is valid in his hands, notwithstanding any pro- vision of law making it generally void or voidable, and not- withstanding any defect in the title of the person from whom he acquired it." The section of the Law is declaratory largely of the preponder- ance of authority prior to its adoption in the various jurisdic- tions; that is, that one who had purchased for value, in good faith, in the usual course of business, and before maturity, a negotiable instrument complete upon its face, and rot avoided by forgery or statutory prohibition, had good title in the person from whom he had taken it, even though such person might have ac- quired it by fraud, by theft or by robbery. Some jurisdictions had held that a bona fide holder could not recover because taken away from the maker without his consent and had never been de- livered by him to any one for any purpose ; and others had held that the maker or drawer was not liable in any such case, whether completed or incompleted, unless it could be shown that the 21 Neg. Inst. Law, § 16, where all As to stolen paper see note 13 U. S cases directly or indirectly bearing L. Ed. 266. upon or citing the Law are grouped. 64 NEGOTIABLE INSTRUMENTS. §§ 54-55 possession of the undelivered instrument had been obtained through his culpable negligence. The above section of the Law provides that under certain cir- cumstances the delivery may be shown to have been conditional. This was the rule in most jurisdictions before the adoption of the Law and parol evidence of such a condition was not deemed an attempt to vary or contradict the written contract.*^ Neither the Negotiable Instruments Law nor the Statute of Frauds re- quires that a contract of conditional delivery shall be in writing,^' § 54. Value received. Value received is not necessary to be expressed in a negotiable instrument.^* Although these words are well nigh universal in negotiable bills and notes, they are in no wise necessary to them. Their omission is unimportant, be- cause the negotiable instrument itself imports a consideration.** "The validity and negotiable character of an instrument are not affected by the fact that it does not specify the value given, or that any value has been given therefor."^^ § 55. As to the agreement controlling the operation. There are two kinds of agreements which control the operation of bills and notes, which are designated as memoranda on the face or back of the instrument^* and collateral or independent agree- ments.^'' The advantage of having a memorandum on the bill or note is that it will furnish actual or constructive notice to all subsequent holders, whereby it will control the operation or character of the instrument,^^ whereas a collateral agreement can only control the operation or character of the instrument as to those parties who have received actual notice of its exist- ence. OInly such memorandum as does actually afifect the char- 22 Niblack V. Sprague, 200 N. Y. where all cases directly or irtdi- 390; Hodge v. Smith, 130 Wis. 326. rectly bearing upon or citing the Contra, — Ind. — . Law are grouped. 22a Norman v. McCarthy, 56 Colo. 2« Specht v. Beindorf. 56 Neb, 290. 553, 76 N. W. 1059, 42 L. R. A. 429; 23 Carnwright v. Gray, 127 N. Y. Nat. Bank of Commerce v. Feeney, 92, 27 N. E. 835, 24 Am. St. Rep. 12 S. D. 156, 80 N. W. 186, 76 Am. 424, 12 L. R. A. 845 ; Hubble v. St. Rep. 594, 46 L. R. A. 732. Fogartie, 3 Rich. (S. C.) 413, 45 27 Babbitt v. Moore, 51 N. J. L. Am. Dec. 775; Clarke v. Marlow, 229, 17 Ah. 99; Wood v. Ridgeville 20 Mont. 249, 50 Pac. 713. See College, 114 Ind. 320, 16 N. E. 619; note 12 L. R, A. 846. Murphy v. Farley, 124 Ala. 279, 27 24 Jones V. Berryhill, 25 la. 289; So. 442; Wooters v. Foster, 1 Tex. Kendall v. Galvin, IS Me. T31, 32 App. Civ. Cas. 700. Am. Dec. 141 ; Carnwright v. Gray. 28 \Yait v. Pomeroy, 20 Mich. 425, 127 N. Y. 92, 27 N. E. 835, 24 Am. 4 Am. Rep. 345 ; Farmers Bank v. St. Rep. 424, 12 L. R. A. 845. Ewing, 78 Ky. 264, 39 Am. Rep. 25Neg. Inst. Law, § 6, stiM. 2, 231. § 55 FORMAL AND ESSENTIAL REQUISITES. 65 acter and control the operation of the instrument will be con- sidered to be a part of the bill or note. Nor can the memorandum be treated as a part of the bill or note where it is so ambiguous and repugnant to the other con- tents that parol evidence is necessary to explain its import, or where the agreement is repugnant to the assignment or transfer of the instrument.^® Where the memorandum is added to the bill or note after its negotiation, with the consent of both parties, it will constitute a part of the instrument, controlling its opera- tion, but if it is added without the consent of all the parties, it will be an alteration which will invalidate the bill or note.'^ Collateral agreements entered into contemporaneously with the execution and negotiation of the instrument must be in writing in order to be valid and control the operation of such bill or note.^^ Subsequent agreements which change the terms of bills and notes already delivered must be based upon a sufficient consideration and be fully executed or performed in order to control the operation of the instrument as to all parties who have notice of the collateral agreement.^* The most common collateral agreement is that of renewing the bill or note. If the renewal is contemporaneous with the instrument it must be in writing; and if subsequent it must be supported by a sufficient consider- ation.^ A note which contains a statement to the effect that the maker has deposited collateral security for its payment does not thereby lose its character of negotiability nor does the fact that a note is received with collaterals afifect such negotiability.^ The Negotiable Instruments Law provides ; " * * * But the negotiable character of an instrument otherwise negotiable is not affected by a provision zvhich: 1. Authorises the sale of collateral securities in case the instrument be not paid at ma- turity/'^*^ This and other matters as to collateral security are more fully discussed in a subsequent chapter of this work. 29 Way V. Batchelder. 129 Mass. 33 Lime Rock Bank v. Mallett, 34 361 ; Leland v. Parriott, 35 la. 454. Me. 547, 56 Am. Dec. 673 ; Central SOTuckerman v. Hartwell, 3 Me. Bank v. Willard, 17 Pick. 150, 28 147, 14 Am. Dec. 225. Am. Dec. 284. 31 Noell V. Gains, 68 Mo. 649; ^4 Qjifo^d v. Minneapolis etc. Ry. Polo Mfg. Co. V. Parr. 8 Neb. 379, Co., 48 Minn. 560, 51 N. W. 658, 30 Am. Rep. 830. 31 Am. St. Rep. 694; Valley Bank 33 Dow V. Tuttle, 4 Mass. 414, 3 v. Crowell. 148 Pa. St. 284, 23 Atl. Am. Dec. 226; Allen v. Furbish, 4 1068, 33 Am. St. Rep. 824. Gray 504, 64 Am. Dec. 87. *** Neg. Inst. Law, § 5, subd. 1. 56 NEGOTIABLE INSTRUMENTS. §§ 56-56a § 56. Days of grace. As to days of grace the Negotiable In- struments Law provides:^ "Every negotiable instrument is payable at the time fixed therein without grace. When the day of maturity falls upon Sunday, or a holiday, the instrument is payable on the next suc- ceeding business day. Instruments falling due or becoming pay- able on Saturday are to be presented on the next succeeding business day, except that instruments payable on demand may, at the option of the holder, be presented for payment before tivelve o'clock noon on Saturday when that entire day is not a holiday." *** Many of the states have made changes in the above section of the Law and the different readings should be consulted in Part III of this work v/here all the changes are set out under this section. Where such lav/ is not in force grace is a short period of time, extended by the written law to instruments not payable on de- mand,^^ to enable the parties to provide payment. It arose before the age of steam, when communication was slow and often diffi- cult. It is said to have been a mere matter of indulgence at first, at the holder's election. The rule is peculiar to the law merchant ; and since the reason for it has mostly ceased, it has been abolished by statute in most jurisdictions. Days of grace are days added to the nominal time of payment of all bills or notes except those impliedly or expressly payable on demand, and are computed by excluding the day of date and including the day of payment.^' When granted at all they are usually for three days. But as stated above days of grace have been abolished by statute in most jurisdictions. § 56a. As to payable at a bank. It is provided in the Nego- tiable Instruments Law as follows: "Where the instrument is made payable at a bank it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon."^'^'' It will be noted that a few of the states have omitted this section among them being, Illinois, Kansas, Nebraska and South Dakota. In Missouri and New Jersey amendments have been made. There was a conflict of authority as :o the right or 35 Neg. Inst. Law, § 85. where all Thompson v. Ketchum, 8 Johns, cases directly or indirectly bearing (N. Y.) 190, 5 Am. Dec. 332. upon or citing the Law are grouped ^^ Thomas v. Shoemaker, 6 See also notes 5 U. S. L. Ed. 215 Watts (Pa.) 179; Tassell v. Lewis, and 6 U. S. L. Ed. 512. 1 Ld. Raym. 743. .35a Neg. Inst. Law, § 85. ^'^ Neg. Inst. Law, § 87, where all 3« Davenport First Nat. Bank v. cases directly or indirectly bearing Price, 52 la. 750, 3 N. W. 639 ; upon or citing the Law are grouped. §§ 57-58 FORMAL AND ESSENTIAL REQUISITES. 6/^ authority of a bank to do this before the adoption of the Nego- tiable Instruments Law. § 57. As to stamps. It seems that the first stamp duties were those levied by Holland in 1624 for the purpose of raising revenues for the prosecution of war against Spain. The first stamp duties levied in England were in 1694 and were employed to wage war against France. Some of the states of the Union have at different periods passed an Act imposing stamp duties on certain negotiable instruments. The first Act of a similar nature passed by the Federal Government was in 1862 during the war of the rebellion.** This Act imposed a tax upon deeds, bills, notes, checks and other evidences of indebtedness.^® This act was subsequently repealed from which time no stamp duties on these instruments were required until 1898 when the War Revenue Act was passed. This act imposed a stamp tax upon bills of exchange, promissory notes, money orders, certifi- cates of deposit, warehouse receipts, bills of lading and other evidences of indebtedness. In 1901 this act was repealed except as to bills of exchange and in 1902 it was repealed as to these. The present law is the Act of October 22nd, 1914, and contains no provision as in some of the previous acts making an unstamped instrument void.*** This matter is more fully considered in a later section of this work 39" § 58. As to blanks. Frequently bills of exchange and prom- issory notes are executed in blank and delivered to another to fill in and negotiate, either for his own benefit or that of the maker. The person to whom these instruments are delivered in blank with authority to fill the blanks is constituted the agent of the maker or principal.'*® There is no need of a second delivery by the maker after the blanks have been filled because the validity of the paper after its completion will relate back to the delivery by the maker or drawer. It may be, however, that the authority of the person to whom the instrument is delivered is limited to filling the blanks in a particular way, and in such case, if he exceeds his express authority, of course neither he nor any holder, with knowledge that the authority has been exceeded, can re- 38 U. S. Rev. Stat, at L.. 432. ' 39b See § 141. 39 Jones V. Jones, 38 Cal. 584; ^ORadlich v. Dall, 54 N. Y. 234; Merchants Nat. Bank v. Boston etc. Winter v. Poole, 104 Ala. 580, 16 Bank, 10 Wall. (U. S.) 604, 19 L. So. 543; Market etc. Nat. Bank v. Ed. 1008; Pugh v. McCormick, 14 Sargent, 85 Ale. 349, 27 Atl. 192, Wall (U. S.) 361, 20 L. Ed. 789. 35 Am. St. Rep. 376. See also note 39« Cole v. Ralph, 252 U. S. 286. 1 L. R. A. 648. 68 NEGOTIABLE INSTRUMENTS. § 59 cover.'** But any one purchasing the instrument as filled in, in reliance upon its terms, would be protected. Moreover, a bona fide purchaser is protected, and may enforce the instrument as filled in even if he had knowledge that the instrument had been delivered in its imperfect state, for he may rely upon the appar- ent authority of the person to whom it was delivered to fill in the blank as he sees fit, and as against such a holder the fact that the actual authority was exceeded is no defense.^ The Negotiable Instruments Law states : "Where the instrument is zvanting 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 instru' ment operates as a prima facie authority to fill it up as such for any amount. In order, hozvever, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be Ulled up strictly in accordance with the authority given and within a reasonable time. But if any such instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance zvith the authority given and within at reasonable time.'"^^ The authority under this section is only to complete the in- strument, for while there is an authority to fill up blanks in order to make the instrument complete as such, there is no authority to insert a special agreement not essential to the completeness of the instrument.*'* § 59. As to instruments bearing a seal. The mere attaching a seal to the instrument does not necessarily make it a sealed instrument. In addition to this there must be some reference in the instrument, itself, to the seal to bring it within the purview of sealed instruments.** 41 Clower V. Wynn, 59 Ga. 246; 43 Neg. Inst. Law, § 14, where all Wagner v. Deidrich, 50 Mb. 484; cases directly or indirectly bearing McCoy V. Gilmore, 7 Ohio 268. upon or citing the Law are grouped. 42 Farmers Bank v. Garten, 34 43a Weyerhouser v. Dunn, 100 N. Mo. 119; Merritt v. Boyden, 191 Y. 150. 111. 136, 60 N. E. 907, 85 A:m. St. 44 Woodman v. York etc. Ry. Co.. Rep. 246; Market etc. Bank v. Sar- 50 Me. 549; Royal Bank v. Grand gent, 85 Me. 349, 27 Atl. 192, 35 Junction Ry. etc. Co., 100 Mass. Am. St. Rep. 376. See notes 16 444, 97 Am. Dec. 115. As to effect U. S. L. Ed. 323 and 13 L. R. A. of seal see note 35 L. R. A. 605. (N. S.) 490. § 60 FORMAL AND ESSENTIAL REQUISITES. 69 "The validity and negotiable character of an instrument are not affected by the fact that it bears a seal.'"^ § 60. The several parts of a foreign bill called a set. The following is a common form of foreign bill of exchange in a set : 8 Troy, N. Y., U. S. A., August 31, 1922. First. Exchange for London. Thirty days after sight of the First of Exchange (Second and Third Unpaid) pay to the order of JOHN BALES Three Hundred Pounds Sterling, value received and charge the same to account of ORNAN BARKER. To Green & Co., London, Eng. 8 Troy, N. Y., U. S. A., August 31, 1922. Second. Exchange for London. Thirty days after sight of this Second of Exchange (First and Third Unpaid) pay to the order of JOHN BALES Three Hundred Pounds Sterling, value re- ceived and charge the same to account of ORNAN BARKER. To Green & Co.^ London, Eng. 8 Troy, N. Y., U. S. A., August 31, 1922. Third. Exchange for London. Thirty days after sight of this Third of Exchange (First and Second Unpaid) pay to the order of JOHN BALES Three Hundred Pounds Sterling, value re- ceived and charge the same to account of ORNAN BARKER. To Green & Co., London, Eng. ^Neg. Inst. Law, § 6, subd. 4, rectly bearing upon or citing the where all cases directly or indi- Law are grouped. 70 NEGOTIABLE INSTRUMENTS. § 60 In order to avoid delay and inconvenience which may result from the loss or miscarriage of a foreign bill, it is a common custom, particularly in bills drawn on Europe and other distant countries, for the drawer to issue several copies of the bill as above, which are called a set of exchange, and together con- stitute one bill. "Where a hill is drawn in a set, each part of the set being numbered and containing a reference to the other parts, the whole of the parts constitute one bill.'"^^ Either copy of the bill may be negotiated, and when any one of them is accepted and paid, all others are extinguished, even against bona Ude purchasers, so far as the drawer is concerned, although the payee is liable to each person, to whom he has trans- ferred a copy of the bill.'*'^ The drawee should accept only one of the copies, and pay the amount of the bill, when the part which he has accepted is presented for payment. If he accepts more than one copy, he will be liable to bona Ude purchasers on as many copies on which he has written his acceptance.** But any copy may be presented for acceptance, and the drawee may accept any copy. "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."^^ "Where the holder of a set indorses two or more parts to different persons he is liable on every such part, and every indorscr subsequent to him is liable on the part he has himself indorsed as if such parts were separate bills. "^^ "The acceptance may be written on any part, and it must be written on one part only. If the drawee accepts more than one part, and such accepted parts are negotiated to different holders in due course, he is liable on every such part as if it were a separate bill."^^ "When the acceptor of a bill drazvn in a set pays it iiithout requiring the part bearing his acceptance to be delivered up to 46 Kfeg. Inst. Law, § 178, where all ing upon or citing the Law are cases directly or indirectly bearing grouped, upon or citing the Law are grouped. ^® Neg. Inst. Law, § 180, where 4''^ Riggin V. Collier, 6 Mo. 568; all cases directly or indirectly bear- Yale V. Ward, 30 Tex. 17. ing upon or citing the Law are 48 Wright V. McFall, 8 La. Ann. grouped. 120; Holdsworth v. Hunter, 10 B. ^i Neg. I^st. Law, § 181, where & C. 449. all cases directly or indirectly bear- 49 Neg. Inst. Law, § 179, where ing upon or citing the Law are all cases directly or indirectly bear- grouped. § 60 FORMAL AND ESSENTIAL REQUISITES. 71 him and that part at maturity is outstanding in the hands of a holder in due course, he is liable to the holder thereon."^^ "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. "^^ _-^-^ MNeg. Inst. Law, § 182, where all cases directly or indirectly bear- ing upon or citing the Law are grouped. 53Neg. Inst. Law, § 183, where all cases directly or indirectly bear- ing upon or citing the Law are grouped. ,(!:-' ^^V V 1 y CHAPTER VII. CONSIDERATION OF NEGOTIABLE INSTRUMENTS. §61. Meaning of term. §68. Want or failure of considera- 62. Consideration in general. tion. 63. Necessity of consideration. 69. Between ^hom question of 64. Presumption of consideration. consideration may be 65. Sufficiency of consideration. raised. 66. Inadequacy of consideration. 70. As to accommodation paper. 67. Illegal, immoral, and fraudu- lent considerations. § 61. Meaning of term. In general, consideration means in- ducement to a contract, that is, the cause, motive, price or im- pelling influence which induces a contracting party to enter into a contract. It means the reason or material cause of a contract.* That is, by consideration is meant a benefit or gain of some kind to the party making the promise, or a loss, detriment or injury of some kind to the party to whom the promise is made.* § 62. Consideration in general. The Negotiable Instru- ments Law provides : "Value is any consideration sufficient to support a simple con- tract. An antecedent or pre-existing debt constitutes value; and is deemed such ivhether the instrument is payable on demand or at a future time."^ Valuable consideration may, "in general terms, be said to con- sist either in some right, interest, profit or benefit, accruing to the party who makes the contract, or some forbearance, detriment, loss, responsibility, or act, or labor, or service, on the other side. And, if either of these exists, it will furnish a sufficient valuable 1 Roberts v. City of New York, Dunan, 91 Md. 144, 46 Atl. 347, 50 5 Abb. Prac. 41, 49; Streshley v. L. R. A. 401. Powell, 51 Ky. (12 B. Mon.) 178, 3Neg. Inst. Law, § 25, where all 180. cases directly or indirectly bearing 2 Eastman v. Miller, 113 la. 404, upon or citing the Law are grouped. 85 N. W. 635 ; St. Marks Church As to antecedent debt as considera- V. Teed, 120 N. Y. 583, 24 N. E. tion, see note 1 Am. St. Rep. 136. 1014, 1015; Chicora Fert. Co. v. 72 § 62 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. IZ consideration to sustain the making or indorsing of a promissory note in favor of the payee or other holder."* So there may be sufficient consideration to support a note, although the payee does not actually give anything of value to the promisor, it will be sufficient if there is any damage or detri- ment to the payee, although no actual benefit accrued to the promisor.'*" In general a valuable consideration as applied to the law of commercial paper is any consideration sufficient to support a simple contract. Thus a cross acceptance,^ the forbearance of a debt of a third person,^ the compromise of a disputed liability'^ or a debt barred by the statute of limitations,^ are held to con- stitute a valuable consideration. Where a person has a valid and subsisting right or interest in property, a waiver or release thereof is a sufficient consideration for a promissory note made to such person.^ If a claim is clearly illegal and unfounded and no proceedings have been instituted thereon, a note given in settlement thereof is however without consideration.^** If there be any reasonable doubt about the validity of the claim, a compromise thereof is a sufficient consideration for a note, and in an action on such a note the invalidity of the claim compromised cannot be asserted.** Ignorance of the maker's rights in respect to an alleged liability will not affect the validity of a note given on account of such liability.*^ A note given by the treasurer of a corporation in consideration of the discharge of a disputed claim against such corporation is valid.*' . The Negotiable Instruments Law provides, as above set out, that an antecedent or pre-existing debt is a valuable considera- tion in support of a bill or note when the bill is received in absolute payment of the original debt, yet if received for nothing 4 Story on Promissory Note, ^ Sykes v. Laferry, 27 Ark. 407; § 186; Currie v. Misa, L. R. 10 Bradbury v. Blake, 25 Me. 397. Exch. 153, 162. lo Bullock v. Ogden, 13 Ala. 346; 4aAbleman v. Haehnel, 57 Ind. Tucker v. Ronk, 43 la. 80; Fuller App. 15, 103 N. E. 869. v. Green, 64 Wis. 159, 24 N. W. 907, 5 Backus V, Spalding, 116 Mass. 54 Am. Rep. 600. 418 ; Dockray v. Dunn, Z1 Me. 442. " Tyson v. Woodruff, 108 Ga. « Thompson v. Gray, (yZ Me. 376 ; 368, 33 S. E. 981 ; Keefe v. Vogle, Harris v. Harris, 180 111. 157, 54 36 la. 87; Easton v. Easton, 112 N. E. 180. Mass. 438. '"Wyatt V. Evins, 52 Ala. 285; la Bennett v. Ford, 47 Ind. 264; Jones V. Ritterhouse, 87 Ind. 348; Daily v. Jessup, 72 Mo. 144; Mory Feeter v. Weber, 78 N. Y. 334. v. Laird, 108 la. 670, 11 N. W. 835. ^Way V. Sperry, 6 Cush. 238; 13 National Bank v. Foster, 85 Giddings v. Giddings, 51 Vt. 227. Hun Zl^, 32 N. Y. S. 1031. 74 NEGOTIABLE INSTRUMENTS. §62 but a conditional payment, the holder's rights will be determined by a subsequent rule governing the bills taken as collateral security. In some jurisdictions as in Illinois the above section of the statute is changed to read as follows: "An antecedent or pre-existing claim, whether for money or not, constitutes value where an instrument is taken either in satisfaction therefor or as security therefor, and is deemed such, whether the instrument is payable on demand or at a future time." While in some other jurisdictions, as in Wisconsin, the statute provides that the "'antecedent or pre-existing debt" must be dis- charged, extinguished or extended" and adds : "But the indorse- ment or delivery of negotiable paper as collateral security for a pre-existing debt, without other consideration, and not in pur- suance of an agreement at the time of delivery, by the maker, does not constitute value." A promissory note given by the maker, in exchange for a promissory note given by the payee, is for a valuable consideration, and is in no sense an accommoda- tion paper, although made for the mutual accommodation of the parties.^^ A consideration founded on love and affection, as that naturally existing between husband and wife, father and son, etc., or upon gratitude, is known as a good consideration, as distinguished from a valuable consideration, and is not of itself sufficient to support the obligation of a bill or note as between the original parties thereto,^^ and the promise to pay an already existing debt, or the actual payment thereof, is not "value" within the meaning of the above section of the statute.-*'^* A note may be given for services to be rendered, and upon the rendition of the services the consideration becomes complete and will be sufficient to sustain the validity of the note even if the services are not equal in value to the amount of the note. Services rendered out of kindness, and without expectation of reward, although of value, are not a sufficient consideration to support a note.*® But the consideration is not affected by the fact that the services were rendered without an express promise to pay.*'^ 14 Farber v. National Forge Co., ^^a Morris County Brick Co. v. 140 Ind. 54, 39 N. E. 249 ; Wil- Austin, 79 N. J. Law, 273. liams V. Banks, 11 Md. 198; Backus i« Miller v. AIcKenzie, 95 N. Y. V. Spalding, 116 Mass. 418. 575, 47 Am. Rep. 85; Coe v. Smith, 15 Fink V. Cox, 18 Johns. (N. Y.) 1 Smith (Ind.) 88; Mitcherson v. 145, 9 Am. Dec. 191 ; In re Camp- Dozier, 7 J. J. Marsh (Ky.) 53y bell Estate, 7 Pa. St. 100, 47 Am. 22 Am. Dec. 116. Dec. 503 ; Kerns' Estate, 171 Pa. ^^ Root v. Strang, 77 Hun 14, 28 St. 55, 33 Atl. 129. N. Y. S. 273 ; Gramwell v. Mosley. 11 Gray 173. § 62 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 75 An. agreement to marry, which is afterward fulfilled, is a suf- ficient consideration for a note made by the intended husband ;** and notes given for establishing such public institutions as churches, schools and hospitals, are supported by a sufficient con- sideration.*'^* So when a number of persons subscribe an instru- ment, whereby they agree to pay certain sums of money, severally, to be expended in the erection of a college building, their mutual promises constitute a sufficient consideration for the promise of each.*^'' And it has been held that while notes which are given by one or more persons to any corporation or other legal person, or any trustees by way of voluntary subscription, to raise a fund to promote an object, may be open to the defense of want of consideration, yet the instruments are enforceable^ if it appears that the donee has, prior to any revocation, entered into engage- ments or made expenditures based on such promises, so that he must suffer loss or injury if the note is not paid.*®" Cross-notes, bills or checks are good consideration for each other; such are given for the mutual accommodation of the parties thereto, or of one of them, in which the maker and payee of one are respectively the payee and maker of the other, and a similar relationship exists as between acceptors of cross-bills of exchange or the makers of cross-checks.**'' An agreement or promise to make a gift in the future, not being based upon a valuable consideration, is not enforceable, even when put in the form of a promissory note ; *** thus gift notes are not supported by sufficient consideration ; the donor's own note or bill of exchange is not a good subject or gift either infer invos or causa mortis. Such a gift is but a promise to pay a sum certain at a future day and cannot be enforced either at law or in equity.*®* A mere moral obligation is not a sufficient considera- tion to support a promissory note between the parties to such obligation.^" Forbearance to prosecute a legal claim is a suffi- cient consideration to support a promissory note.^* IS Wright V. Wright, 54 N. Y. *s«' American National Bank v. 437; Prescott v. Ward, 10 Allen Patterson, 145 La. — , 82 So. 218, 7 (Mass.) 203; Blanshaw v. Russell, A. L. R. 1563. 52 N. Y. S. 963. See note in 7 A. L. R. 1563, at *8a Johnston v. The Wabash Col- p. 1569. lege, 2 Ind. 555. 19 Williams v. Forbes, 114 111. IS" Higcot V. The Trustees of In- 167, 28 N. E. 463 ; Johnston v. diana Asbury Universitv, 53 Ind. Griest, 85 Ind. 503 ; Ricketts v. 326. ' Scothcrn, 57 Neb. 51, 77 N. W. 365. Note in 52 L. R. A. (N. S.) 220. i»a Harmon v. James, 7 Ind. 263. *^"' Beatty's Estate v. Western -** Nightingale v. Barney, 4 G. College of Toledo, Iowa, 177 III. Greene Cla.) 106; Nash v. Russell, 280. 52 N. E. 432, 69 A. S. R. 242, 5 Barb. (N. Y.) 556. 42 L. R. A. 797. 21 Anstell v. Rice, 5 Ga. 472 ; Jen- 76 . NEGOTIABLE INSTRUMENTS. § 62 Receiving a bill or note as security for a debt^^ or forbearance to sue upon a present claim or debt,^^ or the dismissal of a pend- ing suit,*'* or the surrender of a prior valid note,*'^ or becoming a surety,** or giving an extension of time to an imputed debtor,*'^ or doing any act at the request of the drawer, indorser, or ac- ceptor, will be sufficient consideration for a bill or note. An extension of time upon an indebtedness is sufficient consideration for a promissory note given as collateral therefor.** A fluctuating balance may form a consideration for a bill or note.*** As where bills or notes are deposited as a security for the balance of an account current, the successive balances form a shifting consideration for the bill or note.^" But where the account has been settled or transferred prior to the execution of the note, the consideration of course fails, and the note is in- valid.^^ ; The Negotiable Instruments Law provides: "Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien.^^* One who has taken a negotiable instrument as collateral security has a lien upon it and is within the terms of the last named section of the statute.^" The holder of collateral security, that is, the pledgee is, in general, entitled to recover the full amount due on the instru- ment, with liability to account for the surpl.us to the pledgor,'^" nison v. Stafford, 1 Cush. (Mass.) Burton, 64 Vt. 387, 24 Atl. 769, 16 168, 48 Am. Dec. 55 ; Lavell v. Frost, L. R. A. 664 ; Whelan v. Swain, 16 Mont. 93, 40 Pac. 146. 132 Cal. 389, 64 Pac. 560. 23 Youngs V. Lee, 12 N. Y. 551 ; 28 Ballard v. Burton, 64 Vt. 387, Bank of Rochester v. Bentley, 27 24 Atl. 769, 16 L. R. A. 664 ; Brain- Minn. 87, 6 N. W. 422; Allaire v. ard v. Harris, 14 Ohio 107, 45 Am. Hartshorne, 21 N. J. L. 665. Dec. 525. 23 Worcester Nat. Bank v. Chee- 29 Perse v. Hirst, 10 B. & C. nev, 87 111. 602. (Eng.) 122; Richards v. Macv, 14 24Wyatt V. Evins, 52 Ala. 285; M. & W. (Eng.) 484. Brown v. Ladd, 144 Mass. 310; softwood v. Crowdie, 1 StarE 10 N. E. 839; Spielberger v. (Eng.) 483. Thompson, 131 Cal. 55. 63 Pac. 132. 31 Johnson v. Mitchell, 14 Colo. 25 Youngs V. Lee, 12 N. Y. 551; 227, 23 Pac. 452; First Nat. Bank Stevens v. Campbell, 13 Wis. 375 ; v. Henry, 156 Ind. 1, 58 N. E. 1057. Bank of Rochester v. Bentley, 27 3ia jsj^g 1^5^ l^j^^ § 27 and cases Minn. 87, 6 N. W. 422; Whelan v. cited. Swain, 132 Cal. 389, 64 Pac. 560. 3ib Bruster v. Shrader, 26 Misc. 26 Harrell v. Tenant, 30 Ark. 684 ; Rep. (N. Y.) 480; Wilkins v. Usher, Pauly V. Murray, 110 Cal. 13, 42 133 Ky. 696. Pac. 313; Gay v. Mott, 43 Ga. 252. SicCamden National Bank v. 27 Brainerd v. Harris, 14 Ohio Fries-Breslin Co., 214 Pa. St. 395. 107, 45 Am. Dec. 525; Ballard v. § 63 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 71 but if the pledgor could not recover upon the instrument, then the extent of the recovery will be limited to the amount of the debt due to the pledgee; and even though the principal obliga- tion is not due at the time of bringing suit on the collateral, the pledgee has a right to enforce the collection of the col- latteral.3" § 63. The necessity of consideration. By the common law a promise made without consideration was invalid, and in order to enforce any contract, it was necessary to aver and prove a con- sideration. The most ancient exception to this rule was made in reference to a promise under seal, the solemn act of the party in attaching a seal to the evidence of his contract being regarded as importing or excusing a consideration and estopping him from denying it. The necessities of trade soon produced another relaxation of the rule ; and by the usage and custom of merchants, bills of exchange and promissory notes came to be regarded as prima facie evidence of consideration : and peculiar qualities were ac- corded to them which were possessed by no other securities for debt. It is presumed that every negotiable instrument was given upon a valuable consideration, and words acknowledging receipt of consideration are not essential to the validity of the paper. If the instrument sued on is negotiable, it is unnecessary to aver or prove consideration, for it is imported and presumed from the fact that it is a negotiable instrument.*^ But if the paper does not possess the quality of negotiability, it does not, per se, import a consideration,** and it must be averred and proved unless it be stated on its face that it was given for "value re- ceived," or contains some other equivalent expression, in which case it would be prima facie evidence of consideration.*'* As between the immediate parties to a negotiable instrument, an actual, valid and valuable consideration cannot be dispensed with.**^ In such case the presumption as to the validity and value sid Elk Valley Coal Co. v. Third ^* Conrad Seipp Brewing Co. v. Nat. Bank, 157 Ky. 617. McKittrick, 86 Mich. 191, 48 N. W. 32 Germania Bank v. Michaud, 62 1086 ; Averett v. Brooker, 15 Gratt. Minn. 459, 65 N. W. 70, 54 Am. Sf 163, 76 Am. Dec. 203 ; Cowee v. Rep. 653, 30 L. R. A. 286; Adams Cornell, 75 N. Y. 91, 31 Am. Rep. V. HackeU, 27 N. H. 289, 59 Am Dec. 376; Perot V. Cooper, 17 Colo 80, 28 Pac. 391, 31 Am. St. Rep. 258 *3 Bristol V. Warner, 19 Conn. 7 Siddle V. Anderson, 45 Pa. St. 464; ran, 55 Pa. St. 59 Averett v. Booker, 15 Gratt. (Va.) 163, 76 Am. Dec. 203. 428; Rowland v. Harris, 55 Ga. 141. ssCatlin v. Home, 34 Ark. 169; Roberts v. Million, 17 Kv. L. Rep. 599, 32 S. W. 320: Hildeburn v. Cur- 78 NEGOTIABLE INSTRUMENTS. ' § 64 of the consideration only affects the proof ; the burden of proof being thereby shifted from the person to whom the instrument is payable to the person who is liable thereon.^^ In seeking to recover on a simple contract, it is a general rule that the plain- tiff must allege and prove that the contract was made on a valu- able consideration. But to this rule commercial paper is an exception. It would seem then that as between a promisor and a promisee of a promissory note, or the drawer and drawee of a bill of exchange, a lack of legal consideration would be a good defense in an action on such note or bill.^'' As between imme- diate parties, the ordinary rules of contracts as to consideration prevail, such as that the consideration must be valuable^* as dis- tinguished from merely good,^''* that it need not be entirely adequate,*** and that it must not be illegal.** § 64. Presumption of consideration. Bills of exchange and promissory notes like simple contracts under seal or executed pursuant to a statute, import a consideration.*^ The presump- tion of a consideration is of much importance in business trans- actions, and should not be lightly disregarded in favor of those who have carelessly, or by being unduly confiding, set afloat com- mercial paper.*^^ There are some decisions which hold that a non- negotiable instrument does not import a consideration unless it is so declared by statute.*^ Some other decisions hold that a non-negotiable instrument also imports a consideration.** 3« Stevens v. McLachlan, 120 denhack, 48 Ohio St. 177, 26 N. E. Mich. 285, 79 Am. Dec. 627 ; New- 979, 29 Am. St. Rep. 540. ton V. Newton, 11 Tex. 508, 14 S. *! Ketchum v. Scribner, 1 Root W. 157; Dalrymple v. Wyker, 60 (Conn.) 95; Parsons v. Randolph, Ohio St. 108, 53 N. E. 713; Perot 21 Mo. App. 353; Brisbane v. Les- V. Cooper, 17 Colo. 80, 28 Pac. 391, tarjette, 1 Bay (S. C.) 113. 31 Am. St. Rep. 258. *2 Brown v. Johnson Bros., 135 37 Fisher v. Salmon, 1 Cal. 413. Ala. 608, Z2> So. 683; Byrd v. Ber- 54 Am. Dec. 297; Kelley v. Guy, 116 trand, 7 Ark. 32; Fuller v. Hutch- Mich. 43, 74 N. W. 291; Williams ins, 10 Cal. 523. 70 Am. Dec. 746; V. Culver, 30 Oreg. 375, 48 Pac. 365. Carnwright v. Gray, 127 N. Y. 92, 38 Irwin V. Lombard Uni., 56 27 N. E. 835, 24 Am. St. Rep. 424. Ohio St. 9, 36 L. R. A. 239, 60 Am. 12 L. R. A. 845. See note 5 U. S. L. St. Rep. 239, 46 N. E. 63 ; Holt v. Ed. 87. Robinson, 21 Ala. 106 ; Currie v. 42a Lassas v. McCarty, 47 Ore. Misa, L. R. 10 Exch. 153. 474. 3» Pierce v. Walton, 20 Ind. App. "^3 Tibbets v. Thatcher, 14 Ind. 86. 66, 53 N. E. 309 ; Potter v. Grade, ** Carnwright v. Gray, 127 N. Y. 58 Ala. 313, 29 Am. Rep. 748. 92, 27 N. E. 835, 24 Am. St. Rep. 40Cowee v. Cornell. 75 N. Y. 91, 424, 12 L. R. A. 845; Caples v. 31 Am. Rep. 428 : Whcelock v. Bar- Branham, 20 Mo. 244. 64 Am. Dec. ney, 27 Ind. 462 ; Kitchen v. Lou- 183 ; Arnold v. Sprague, 34 Vt. 402. § 65 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 79 In those jurisdictions where it has been held that these instru- ments import a consideration it is unnecessary to use the words "Value received."'*® These words are surplusage and their omis- sion does not in any way affect the legal import of the paper, or weaken the presumption that it was given for value.^®* But in case of a non-negotiable instrument, they are important, for they amount to a prima facie admission that the instrument was issued for a sufficient consideration.'**" If these words are included in the bill or note, the maker's or other person's right to defend on the ground of want of, failure of, or illegality of consideration is not affected.'** "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 valuer'''^ § 65. Sufficiency of consideration. Any act of the maker from which the acceptor derives a benefit or from which the maker may sustain any detriment or inconvenience, is a sufficient consideration to support a promise.'** If there is no fraud in the transaction the fact that the consideration is not equal to the obligation incurred is no defense.*** In such case if the consid- eration is not wanting at the time the obligation is incurred and does not fail in any part thereof afterwards, it is sufficient. If that which was given as a consideration for a promissory note is worthless it has been held that the maker cannot avail himself of it as a defense.'*® But if the worthlessness of the thing given in consideration for the note consists in a defect of title it may be used as a defense.'^ § 66. Inadequacy of consideration. It is not necessary that the consideration should be adequate to the obligation incurred 45 Salazar v. Taylor, 18 Colo. 538, 49 Miller v. McKcnzie, 95 N. Y. 2)2, Pac. 369; Stacker v. Hewitt, 2 575; 47 Am. Rep. 85; Boggs v. 111. 207. Wann, 58 Fed. 681; Root v. 45aMcLeod V. Hunter, 29 Misc. Strange, 77 Hun 14, 28 N. Y. S. (N. Y.) 559. 273, 59 N. Y. St. 258; Kitchen v. ^^ Owen V. Blackburn, 161 App. Loudenback, 48 Ohio St. 177, 26 Div. (N. Y.) 827; DuBosque v. N. E. 979, 29 Am. St. Rep. 540. Munroe. 169 App. Div. (N. Y.) 821. 50 Bryant v. Pember, 45 Vt. 487; 46Bruyn v Russell, 60 Hun 290, Lester v. Webb, 5 Allen (Mass.> 14 N. Y. S. 591; Perley v. Perley, 45; Ried v. Prentiss, 1 N. H. 174, 144 Mass. 104, 10 N. E. 726. 8 Am. Dec. 50. 47 Neg. Inst. Law, § 24, and cases 51 Prjsbie v. Hoffnagle, 11 Johns, there cited. (N. Y.) 50; Crawford v. Beard, 4 48 Holt V. Robinson, 21 Ala. 106, J. J. Marsh. (Ky.) 187; Scudder 56 Am. Dec. 240; Holley v. Adams, v. Andrews, 2 McLean (U. S.) 464, 16 Vt. 206, 42 Am. Dec. 508. 21 Fed. Cas. No. 12,564. 80 NEGOTIABLE INSTRUMENTS. § 67 in order that the parties may be bound.^^ The only essential element in this respect is that the consideration must be a valuable one.^* Thus in an action upon a promissory note given as the price of real or personal property, it will not avail as a defense to the note that the property conveyed was inadequate for the amount of the note.'^^ The mere fact that a bargain is hard and unreasonable will not induce even a court of equity to interfere. The law presumes that a man is capable of managing his own affairs and the fact as to whether or not his bargains are wise or unwise is not a proper question for either a legal or equitable tribunal. While inadequacy of consideration is not of itself a sufficient ground for either legal or equitable relief yet it may be shown as evidence of fraud. Ordinarily the mere fact of in- adequacy of consideration has very little weight, when standing alone, but coupled with other elements tending to show fraud it becomes a very material factor of constructive fraud.'^^ It has been generally held that a note for a patent right which is of no value, either because it is useless or because the patent is void, is without consideration and therefore not enforceable.'** The fact that the vendor believed, at the time of the sale, that the patent was valid is not material.^'^ It should be noticed, in this connection, that an invention which is not useful cannot be patented, and therefore a patent for a useless invention is void. If an invention is useful, in the sense that it may be applied to some practical or beneficial purpose, it is patentable, and the de- gree of its utility or practical value does not affect the validity of the patent. If there is a valid patent, in this sense, the court will not inquire into the adequacy of the consideration.^^ § 67. Illegal, immoral and fraudulent consideration. Where the consideration is illegal in whole or in part it is a defense against the entire note while in the hands of an immediate party or one who is not a bona fide holder for value without notice. 52Anstell V. Rice. 5 Ga. 472; S. E. 799; Green v. Lowry, 38 Ga. Boggs V. Wann, 58 Fed. 681 ; Cowee 548; Abbe v. Newton, 19 Conn. 20. V. Cornell, 75 N. Y. 91, 31 Am. Rep. ^Gjilson v. Catling, 60 Ark. 114, 428. 29 S. W. 35; Mooklar v. Lewis, 40 53 Holt V. Robinson, 21 Ala. 106, Ind. 1 ; Rowe v. Blanchard, 18 Wis. 56 Am. Dec. 240; Holley v. Adams, 441, 86 Am. Dec. 783. 16 Vt. 206, 42 Am. Dec. 508. 57 Lester v. Palmer, 4 Allen 54 Johnson V. Titus, 2 Hill (N. (Mass.) 145. Y.) 606; Barnum v. Barnum, 8 58 Nash v. Lull, 102 Mass. 60, 3 Conn. 469, 21 Am. Dec. 689 ; Perley Am. Rep. 435 ; Hil^reth v. Turner, V. Balch, 23 Pick. (Mass.) 283, 34 17 m. 184; Harmon v. Bird, 22 Am. Dec. 56. Wend. (N. Y.) 113. 55 Jones V. Degge, 84 Va. 685, 5 § 68 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 81 Common law considerations are illegal which ( 1 ) violate the rules of religion or morality, or (2) are such as contravene public policy.'*'*' Many acts in themselves immoral are made by statute illegal considerations for the support of commercial paper. A note given for future illicit cohabitation is invalid,*® although if it be given in consideration of past cohabitation it is enforce- able.®^ A note by a husband to his wife, upon the promise of the wife to withdraw all opposition to proceedings for divorce insti- tuted by him, is founded upon an illegal consideration.®^ A distinction is to be made between a consideration simply illegal and one which by statute expressly makes the bill void. In the former case a bona Ude transferee may recover, though not in the latter.®* When the consideration for commercial paper is clearly fraudu- lent it is a good defense against an immediate party or a remote party unless he is an innocent holder for value.®"* If the instru- ment is yet in the hands of a party with notice a court of law will compel its surrender, or restrain its negotiation until the question of fraud is settled.** § 68, Want or failure of consideration. Want or failure of consideration is only a defense as against an immediate party or as against a remote party who is not a holder for value.®® It is not a defense against a remote holder for value. As between the original parties to a bill or note want of con- sideration then is a good defense, and this is so although the words *'for value received" are contained in the instrument.®'' This want of consideration may be total or partial ; in the former case it affects the entire validity pro fanto.^^ So also a failure 59 Scott V. Magloughlin, 133 111. ^^ Angier v. Brewster, 69 Ga. 362 ; 33, 24 N. E. 1030; Hamilton v. Hickson v. Early, 62 S. C. 42, 39 S. Scull, 25 Mo. 165, 69 .\m. Dec. 460; E. 782; Von Windisch v. Klaus, 46 Powell V. Inman, 52 N. C. 28. Conn. 433. «OMassey v. Wallace, 32 S. C. «5Zeigler v. Beasley, 44 Ga. 56; 149, 10 S. E. 937 ; Potter v. Gracie, Moeckly v. Gorton, 78 la. 202, 42 58 Ala. 303, 29 Am. Rep. 748. N. W. 648; Streissguth v. Kroll, 86 61 Brown v. Kinsey, 81 N. C. 245; Minn. 325, 90 N. VV. 577; King v. People V. Hayes, 140 N. Y. 484, 35 Baker, 1 Yerg. 450. N. E. 951. e«Whitt v. Blount, 124 Ga. 671, «2 Sayles v. Sayles. 21 N. H. 312, 53 S. E. 205 ; Homer v. Johnston, 53 Am. Dec. 208; Bend v. Bend, 65 5 Miss. (6 How.) 698; Fellers v. Cal. 354, 4 Pac. 229. Penrod, 57 Neb. 463, 77 N. W. 1085. «3 Wheeler v. Russell, 17 Mass. 67 Morton v. Stone, 67 N. H. 367, 258; Vanmeter v. Spurrier, 94 Ky. 29 Atl. 845. 22, 21 S. W. 337 ; Whitman v. 6S r^ss Lumber Co. v. Muscupi- Freese, 23 Me. 185. abe L. & W. Co., 120 Cal. 521, 52 82 NEGOTIABLE INSTRUMENTS. § 69 of consideration is, in most jurisdictions, deemed a valid defense in an action on a note or bill. But there is more difficulty as to a partial failure of consideration ; in such a case the rule seems to be that unless the facts are such that the amount to be de- ducted because of the partial failure can be definitely computed, or unless the amount is liquidated or in the nature of a certain debt, such partial failure of consideration will constitute no de- fense.®** There are many jurisdictions, however, where a par^ tial failure of consideration is permitted as a valid defense, al- though the amount be unliquidated,''** and in some jurisdictions such partial failure is declared a defense by statute.'^-^ "Absence or failure of consideration is matter of defense as against any person not a holder in due course; and partial failure of consideration is d defense pro tanto, whether the failure ts an ascertained and liquidated amount or otherwise.'"''^ So under the express terms of the above section of the statute failure of consideration is not a defense as against a bona fide holder for value but as against any person not a holder In due course the question of consideration is always open even though the instrument itself is prima facie evidence of the considera- tion.''^* § 69. BetrtA^een v^^hom question of consideration may be raised. As a general rule the want or failure of consideration can only be raised as between the immediate parties.'^^ This question may also be raised against any purchaser of the instru- ment who takes it with notice of such want or failure of the con- sideration,'"'* unless he acquires title from a bona Me purchaser for value. In the case of the indorsement of an instrument the question of consideration for the indorsement may be raised as Pac. 995, 65 Am. St. Rep. 186 ; ^2 Neg. Inst. Law, § 28, and cases Journal Printing Co. v. Maxwell, 1 there cited. Pennew. (Del.) 511, 43 Atl. 615; 72a -patum v. Commercial Bank, Wadsworth v. Smith, 10 Shep. 185 Ala. 249; Anthony v. Valen- (Me.) 500; Brown v. Roberts, 90 tine, 130 Mass. 119. Minn. 314, 96 N. W. 793. 73 Wynne v. Whisenant. 27 Ala. 6» Pulsifer V. Hotchkiss, 12 Conn. \6 ; Risley v. Gray, 98 Cal. 40, 32 234; Allen v. Bank of U. S., 20 Pac. 884; Storm Lake etc. Bank v. N. J. L. 620; Lloyd v. Jewell, 1 Me. Felt, 100 la. 680, 69 N. W. 1057; 352, 10 Am. Dec. 7Z. Fitch v. Redding, 4 Sandf. (N. Y.) 70Wentworth v. Dows, 117 Mass. 130. 14. ''4JJUSS Lumber etc. Co. v. Mus- 71 Schuchman v. Knoebel, 27 111. rupiabe Land etc. Co., 120 Cal. 521, 175; Webster v. Parker, Ind. 185; 52 Pac. 995, 65 Am. St. Rep. 186; Martin v. Iron Works, Fed. Cas. Skinner v. Raynor, 95 la. 536, 64 No. 9,157. N. W. 601 ; Hale v. Aldafifer, 5 Kan. App. 40, 5 Pac. 194. § 70 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 83 between the indorser and indorsee.''^ In a bill of exchange the want or failure of consideration may be shown in an action brought by the payee against the drawer, by the indorsee against the payee, or by the drawer against the acceptor, but not in an action between the payee and acceptor^* The Negotiable Instruments Law states: "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.'"^^^ § 70. As to accommodation paper. The following provision is found in the Negotiable Instruments Law: "An accommodation party is one zvho has signed the instru- ment as maker, drawer, acceptor or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value notunthstanding such holder at the time of taking the instrument knew him to be only an accommodation party/"''' The mercantile credit of parties is frequently loaned to others by the signature of their names as drawer, acceptor, maker, or indorser of a bill or note, to raise money upon, or to use otherwise for their benefit.''^ Such instruments are termed accommodation paper. An accommodation bill or note, then, is one to which the accommodation party has put his name, without consideration, for the purpose of accommodating some other party who is to use it, and is expected to pay it.'"'* Between the accommodating and accommodated parties, the consideration may be shown to be wanting, but when the instrument has passed into the hands of a third party for value, and in the usual course of business, it cannot be. But if the holder has notice of defenses, the accom- modation party may set up any defense which would avail the party accommodated, as to set ofif a debt due from the holder to the party accommodated. Until an accommodation bill has ■^5 Shanklin v. Cooper, 8 Blkfd. cases directly or indirectly bearing (Ind.) 41 ; Larrabee v. Fairbanks, upon or citing the Law are grouped. 24 Me. 363, 41 Am. Dec. 389 ; Mar- ^8 Dunn v. Weston, 71 Me. 270 tin V. Kercheval, 4 McLean (U. 36 Am. Rep. 310; Lenheim v. Wil- S.) 117, 16 Fed. Cas. No. 9,163. marding, 55 Pa. St. 73. As to na- ''6 Hoffman v. Bank of Milwau- ture of contract on accommodation kee, 12 Wall. 191 ; Hunt v. John- paper, see note 31 Am. St. Rep. ston, 96 Ala. 130, 11 So. 387; Mer- 745. rill V. Packer, 80 la. 543, 45 N. W. ''ttjeffeson Co. v. Burlington etc. 1076. Ry. Co., 66 la. 385, 16 N. W. 561 ; 76a jsjeg jnst. Law, § 26 and cases Oilman v. Henry, 53 Wis. 465, 10 there cited. N. W. 692 ; Vitkovitch v. Kleinecke, " Neg. Inst, Law, § 29, where all 33 Tex. Civ. App. 20, 75 S. W. 544. 84 NEGOTIABLE INSTRUMENTS. § 70 been negotiated the accommodation party may rescind his obliga- tion and demand the recall of the instrument or the cancellation of his signature. The consideration given by a holder for value of accommodation paper makes the paper enforceable against all parties to it, and in some jurisdictions this is true even where the paper has been negotiated after due.^'* It is a well established rule that a promissory note given by the maker, in exchange for a promissory note given by the payee, is for a valuable consideration, and is in no sense an accommoda- tion paper, although made for the mutual accommodation of the parties.*^ And this is so though the note given in exchange Is worthless.*^ And it has been held that an indorsement of X's note by Y to Z is a good consideration for a note from Z to Y, and it is no defense to Z's note that he failed to recover against X on the note indorsed to him by Y.*^ The words "without receiving value therefor" in the section of the statute above set out refer to the instrument itself, and not to the loan of the name by way of accommodation.^^* An accommodation indorser has the right to retract his in- dorsement at any time before the paper is negotiated for his mdorsement and his continuing to be so are alike voluntary until rights arise by the negotiation to third parties.^^'' 80 French v. Bank of Columbia, ■*^2 j^jce v. Grange, 131 N. Y. 149, 4 Cranch 141 ; Stephens v. Monon- 30 N. E. 46. gahela Nat. Bank. 88 Pa. St. 157, S3 Luke v. Fisher, 10 Cush. 32 Am. Rep. 438; Pray v. Rhodes, (Mass.) 271. As to power of cor- 42 Minn. 93, 43 N. W. 838; Clark poration to issue accommodation V. Thayer, IDS Mass. 216, 7 Am. paper, see nat in 9 L. R. A. (N. Rep. 511. S.) 193. s* Backas v. Spalding, 116 Mass. ^^^^ Morris County Brick Co. v. 418 ; Farber v. Nat. Forge Co., 140 Austin.. 79 N. J. Law, 273. Ind. 54, 39 N. E. 249; Williams v. «3b Bg^kley v. Tinsley, 88 Vt Banks, 11 Md. 198. 1001. CHAPTER VIII. SUBDIVISION A— ACCEPTANCE OF BILLS. § 71. Meaning of term. 72. Object of acceptance. 73. Form of acceptance. 74. Nature and effect of accep- tance. 75. According to tenor of bill. 76. Delivery. 77. Acceptance of incomplete bill. 78. Varieties of acceptance — In general. 79. Varieties of acceptance — As to terms — General accep- tance. 80. Varieties of acceptance — As to terms — Qualified accep- tance. 81. Varieties of acceptance — As to form — In general. 82. Varieties of acceptance — As to form — Written. 83. Varieties of acceptance — As to form — Parol. 84. Varieties ,oi acceptance — As to mode of proof — Express. 85. Varieties of acceptance — As to mode of proof — Implied. 86. Acceptance of bills drawn in sets. 87. Revocation of acceptance. 88. What bills must be presented for acceptance. 89. By and to whom presentment should be made. 90. Time of presentment. 91. Place of presentment. 92. Presentment excused. 93. Acceptances for honor, or supra protest. § 71. Meaning of term. The acceptance of a bill of exchange is the act by which the person on whom a bill of exchange is drawn (called the drawee) assents to the request of the drawer to pay it, or, in other words, engages, or makes himself liable, to pay it when due.^ As stated in the Negotiable Instruments Law : "The acceptance of a bill is the signiiication of the drazvee of his assent to the order of the draiver.'^^ The presumption is that every bill of exchange is drawn on account of some indebtedness from the drawee to the drawer, and that the acceptance is an appropriation of the funds of the latter in the hands of the former; and the rule of law is not unjust that prevents the acceptor from setting up a want of funds of 1 Swope V. Ross, 40 Pa. St. 186, 80 Am. Dec. 567; Kimbark v. Car etc. Co., 103 111. App. 632 ; Wolcott V. Van Santvoord, 17 Johns. (N. Y.) 248, 8 Am. Dec. 396. 2 Neg. Inst. Law, § 132, where all cases directly or indirectly bearing upon or citing the Law are grouped. 85 86 NEGOTIABLE INSTRUMENTS. § 71 the drawer in his hands, since it was his duty before he accepted the bill to find out whether he owed the drawer that amount. The payee or other holder of the bill had no means of knowing how the fact was as it was in the knowledge of the drawee and the payee or holder proceeding on the bill had a right to assume that the drawee would not accept the bill unless he had sufficient funds of the drawer to make good the acceptance.*' § 72. Object of acceptances. Acceptance applies only to bills of exchange, foreign and inland, for the law of presentment for acceptance and of acceptance can have no application to a , negotiable contract, where, from its nature, there is or can be no acceptor. The Negotiable Instruments Law provides that: "A hill of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is not liable on the bill unless and until he ac- cepts the same."^ Thus the drawee of a bill is not bound as a party to the bill until he has accepted it,* or agreed previously to pay it,*^ and cannot be sued by the holder of the instrument, though he has funds in his hands sufficient to cover the bill,® except where the bill constitutes an equitable assignment of" the funds drawn against.'' So due presentment for acceptance by the holder is a condition precedent to the exercise of rights against the other parties to the instrument arising when the bill is dishonored by non-acceptance. The object of acceptance then is to^bind the drawee and make hirrTan actuaT^iid boun^JPar ty to the inj tr.u- metrrwtucinie is nofTi iiLil he lias "accepted. For until t here ha s beefrigTrgccept anc e the -dr'awee isrTIg3e£^no_obngaHoir_wl^^ iipon the~Wr^itself: — HeThayHiave inliis possession funds be- longlhg to th^^itrawer, but that is a different obligation from that which appears upon the face of the instrument, and until he does accept either in writing or verbally, he is under no obliga- 2ajarvis v. Wilson, 46 Conn. 90, (U. S.) 66; Lindley v. Waterloo Boill V. Tuttle, 81 N. Y. 454. First Nat. Bank, 76 Iowa 629, 41 3Neg. Inst. Law, §127. where N. W. 381, 14 Am. St. Rep. 254; all cases directly or indirectly bear- Dull v. Bricker, 70 Pa. St. 255; ing upon or citing the Law are Neg. Inst. Law, §223 (135). grouped. ^ Rockville Nat. Bank v. Lafay- 4 Pickle V. Muse. 88 Tenn. 380. ette etc. Bank, 69 Ind. 479, 35 Am. 12 S. W. 919, 17 Am. St. Rep. 900. Rep. 236; Schuchardt v. Hall, 26 7 L. R. A. 93; Poole v. Carhart, 71 Md. 590, 11 Am. Rep. 514. la. Z7, 32 N. W. 16; Imp. Co. v. ^ Brill v. Tuttle, 81 N. Y. 454; Erwin, 66 Kan. 261, 71 P. 521. Torrance v. Bank of British North 6 Coolidge V. Payson, 2 Wheat. Am., L. R. 5 P. C. 246. § 73 ACCEPTANCE OF BILLS. 87 tion to the parties upon the bill of exchange. Thus, the purpose of acceptance is to create liability on the part of the drawee of the bill. By accepting he agrees to pay according to the terms of the bill, that is, his contract, after he writes his acceptance or verbally makes the acceptance, is on the bill itself. Until the bill has been accepted the drawer is the primary debtor and after acceptance the drawee or acceptor is the principal debtor and the drawer becomes secondarily liable.''^ The presemption arising from acceptance that the acceptor holds funds of the drawer may be rebutted.'^'' A complaint which fails to allege a written acceptance of a bill of exchange does not state a cause of action against the drawee ; '^'^ but a plea that the drawee "agreed to pay the order" is sufficient.'^'' § 73. Form of acceptance. By the Negotiable Instruments Law the acceptance must be written, signed by the drawee and must contain an express or implied promise to pay in money. The provisions are as follows : "The acceptance must be in writing and signed^ by^JhE^draiii^. It must not express that the drawee will perform his promise by any other means than the payment of money."^ "The holder of a bill presenting the same for acceptance may require that the acceptance be written on the bill, and if such request is refused, may treat the bill as dishonored."^ As the statute requires the acceptance to be in writing, the fact that it was so given must be pleaded.'"^^ "^^ Clayton Town Site Co. v. Clay- ^ Neg. Inst. Law, § 132, where ton Drug Co., 20 N. M. 185, 147 all cases directly or indirectly bear- Pac. 460. ing upon or citing the Law are T^" Dickerson v. Turner, 15 Ind. 4. grouped. 7° Wadhams v. Portland Ry. Co., ^ Neg. Inst. Law, § 133, where 27 Wash. 86, 79 Pac. 597. all cases directly or indirectly bear- Contra : Faircloth-Byrd Mercan- ing upon or citing the Law are tile Co. V. Adkinson. 167 Ala. 344, grouped. 52 So. 419. "^^ Wadhams v. Portland Ry. Co., '■d Boonsdall v. Waftemeyer, 142 37 Wash. 86, 79 Pac. 597. Fed. Rep. 415, 73 C. C A. 515. 88 NEGOTIABLE INSTRUMENTS. §73 Below is a form of acceptance written on an instrument > Chicago, III., December 1, 1922. } ,_g !2 Thirty days afterdate- « / ijPfl§. t^hc order of John Matlock oOm Hundred and Twenty — , Dollars g« Valued received, and charge the sam^ to account of 'iO^ ^Td^onald Morris, 14 Jamestozmi, N. Y. HENRY HAMILTON. The usual mode of making an acceptance is by writing the word "accepted" and subscribing the drawee's name as above, but the drawee's signature alone is sufficient. The acceptance may be made while the bill is still incomplete/® but is usually made a reasonable time after execution. The holder may require that the date of acceptance be written on the bill so it will appear from the face of the instrument when it is due.i^ An acceptance, if in writing, is constituted by words showing an intention to accept and not putting a direct negative upon the order contained in the bill ;-^^ but the mere admission of the correctness of the amount is not an assent to the order.-^* At common law but not under the Negotiable Instruments Law a verbal acceptance is allowed and such is constituted by any words which evidence such intention clearly and unequivocally, if they be addressed to the drawer or holder, and he waive his right to a written acceptance.^^ And at common law an acceptance may also be implied from conduct evidencing such intention. 10 Neg. Inst. Law, § 138, where all cases directly or indirectly bear- ing upon or citing the Law are grouped. 11 Neg. Inst. Law, §133, where all cases directly or indirectly bear- ing upon or citing the Law are grouped. *2 Cortelyou v. Maben, 32 Neb. 697, 36 N. W. 159, 3 Am. St. Rep. 284; Whilden v. Merchant etc. Nat. Bank, 64 Ala. 1, 38 Am. Rep. 1 ; Block V. Wilkerson, 42 Ark. 253 ; Bank v. Bank (Kan.), 87 Pac. 746. ^2a Plaza Farmers' Union v. Ry, an, 78 Wash. 124, 138 Pac. 65L 13 In re Goddard, 66 Vt. 415, 29 Atl. 634; Walker v. Lide, 1 Rich. (S. C.) 249, 44 Am. Dec. 252; Ecker v. Snowden, 2 Miles (Pa.) 275. For a full discussion see : Allen V. Leavens, 26 Oreg. 164, 37 § 74 ACCEPTANCE OF BILLS. 89 Acceptance by telegram has been held sufficient,*^ and such acceptance when the bill is properly identified seems entirely un- objectionable and accords with the best interests of the business world. Such acceptances have almost uniformly been held valid under the Negotiable Instruments Law ;*** thus A wires B a tele- gram reading : "Will you wire me that you will honor draft for $300?" and B telegraphed back: "I will." It was a sufficient acceptance under the statute.*^" Under the statutes of some states, which make an unconditional promise to accept a bill before it is drawn equivalent to actual acceptance in favor of a party, who upon the faith thereof receives it for valuable consideration, it has been adjudged that a telegram written and sent by the promisor operates as an acceptance.-^^ Under the English Bills of Exchange Act the acceptance must be written on the bill itself which precludes the giving of an acceptance by telegraph, either by a bank or by any other drawee.*'^* This section as to writing doc" not apply to a foreign bill pay- able in another state unless the law of that other state is proved since the common law rule will be presumed to apply that an acceptance may be oral. *'" § 74. Nature and effect of acceptance. The drawer of a bill undertakes that when it is presented to the drawee the latter will accept it ; and by acceptance is meant an undertaking on the drawee's part to pay the bill according to its tenor. Until the bill has been accepted, the drawer is the primary debtor. After acceptance, the drawer becomes secondarily liable, and his liabil- ity is the same as that of a first indorser upon a promissory note. The effect of the acceptance of a bill is to constitute the accep- tor the principal debtor.-^® The bill becomes by the acceptance Pac. 488. 46 Am. St. Rep. 613. 26 i^b oil Well Supply Co. v. Mac- L. R. A. 620. See also note 1 Am. Murphy, 119 Minn. 500. St. Rep. 137. 15 Henrietta Nat. Bank v. State 14 Flora etc. Bank v. Clark, 61 Nat. Bank, 80 Tex. 648, 16 S. W. Md. 400. 48 Am. Rep. 114; Garrett- 321, 26 Am. St. Rep. IIZ. See also son V. North Atchinson Bank. 39 note 2 L. R. A. 709. Fed. 163, 7 L. R. A. 428. See also i^^ Appendix C. paragraph 17. note 4 U. S. L. Ed. 185. i"'" Bank of Laddonia v. Bright- 14a In re Armstrong, 41 Fed. 381 ; Coy Commission Co., 139 Mo. App. Selma Savings Bank v. Webster 110, 120 S. W. 648. County Bank. 182 Ky. 604, 206 S. 1« Jarvis v. Wilson. 46 Conn. 9ft. W. 870; Iowa State Savings Bank ZZ Am. Rep. 18; Farmers etc. Bank V. City National Bank, 183 Iowa v. Rathbone. 26 Vt. 19, 58 Am. 1347, 168 N. W. 148. Dec. 200; Ragsdale v. Gresham, ■% ^ 90 NEGOTIABLE INSTRUMENTS. § 75 very similar to a promissory note — the acceptor being the prom- isor, and the drawer standing in the relation of an indorser.*'^ The acceptance is a response to the direction contained in the bill ; and the language of the bill and the acceptance are but parts of one entire contract in writing,^''* but this contract is regarded as a new contract.^"'' Upon paying the bill the acceptor can charge the amount of 'v the same to the fund of the drawer in his hands, or if he has none, he can recover from the drawer by action.^* If the drawee refuses to accept the instrument after he has promised to do so, the drawer may sue on the original amount due or on the breach \ of his promise to accept the bill.*'* Y\ / §/75. According to tenor of bill. The acceptance must be .^ according to the tenor of the bill to bind all the parties to it. The promise must be to pay all the money called for in the bill, at the time and place of payment.^" If the acceptance were not according to the tenor of the bill there w^ould be two or three causes of action divided among the parties. If an acceptor of a hundred-dollar bill of exchange accepts for $50, that leaves $50 which has not been accepted. There v^'ould be confusion when the obligation was paid ; the party paying would be entitled to possession of the bill and that would raise the presumption that the whole bill was paid. So for these among other reasons, the acceptance must be according to the tenor of the bill. When the modification of the tenor of the bill is such that it either casts no hardship upon the indorser or where the indorser or par- ties prior to the acceptor know of the modification and assent to it, there the reason for rejecting it as a form of acceptance ceases to exist, and so the rule is that a modified or qualified acceptance if immaterial, or if known and assented to is a good acceptance. The Negotiable Instruments Law provides as follows as to a qualified acceptance: "The holder may refuse to take a qualified acceptance, and if he does not obtain art nnqiialiiied acceptance, he may treat the 141 Ala. 308, Z7 So. W. As to i^b Superior City v. Ripley, 138 U. accommodation acceptor see: White S. 93. V. Hopkins, 3 Watts & S. (Pa.) 99, is Christian v. Keen, 80 Va. Z77 ; Z7 Am. Dec. 542. See Van Alstyne Martin v. Muncy, 40 La. Ann. 190. V. Sorley, 32 Tex. 518. See note »» Cooper v. Jones, 79 Ga. 379, 4 1 Am. St. Rep. 134. S. E. 916; Coursin v. Ledlie, 3 Pa. i^Raborg et al. v. Peyton, 2 St. 506 ; Quin v. Han'ev, 5 111. App. Wheat (15 U. S.) 385. 51. 17a Meyer v. Beardsley, 29 N. J. ^o See, however, § 79 on quali- L. 236. fied acceptance. §§ 76-78 ACCEPTANCE OF BILLS. 91 bill as dishonored by non-acceptance. Where a qualified accept- ance is taken the drazver and indorsers are discharged from liability on the bill, unless they have expressly or impliedly au- thorized 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:"'^^ If the holder receives such an acceptance he can claim payment only according to the condition or qualification.^^* An agent for collection as a bank has no authority to receive anything short of an explicit and unqualified acceptance .^■^'' § 76. Delivery. The Negotiable Instruments Law provides : "Acceptance means an acceptance completed b\ delivery or notification."^'^ The acceptance is incomplete until delivery or notification.^^* § 77. Acceptance of incomplete bill. While still incomplete a bill may be accepted. The Negotiable Instruments Law pro- vides : "A bill may be accepted before it has been signed by the drawer, or zvhile otherwise incomplete, or zvhen 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 presentment."^^ The right of the holder to recover from the acceptor is not af- fected by the fact that he discounted the instrument before ac- ceptance.*^* A bill does not necessarily lose its negotiable character by being dishonored.*^" § 78. Varieties of acceptance — In general. There are sev- eral varieties of acceptance. For convenience they may be clas- 21 Neg. Inst. Law, § 142, where A'^ashville, — Tenn. — , 154 S. W. all cases directly or indirectly bear- 965. ing upon or citing the Law are 23 jsjgg. Inst. Law, § 138, where grouped. all cases directly or indirectly bear- 2i«Cline V. Miller, 8 Md. 274. ing upon or citing the Law are 21b Walker v. New York State grouped. Bank, 9 N. Y. 582. 23a Bank of Louisville v. Ellery, 22 Neg. Inst. Law, § 191. where 34 Barb.630. all cases directly or indirectly bear- 23b Leavitt v. Putnam, 3 N. Y. 494. ing upon or citing the Law are As to acceptance when bill is in- grouped, complete see: Bank v. Neal, 22 22a First Nat. Bank of Murfrees- How C63 U. .S.) 107; Hopps v. toro V. First National Bank of Savage, 69 Md. 513. 92 NEGOTIABLE INSTRUMENTS. §§ 79-80 sified as to their terms, as to their form, and as to the mode of proof. As to their terms acceptances are either general or quah- fied; as to their form, they are either written or by parol; as to their mode of proof, they are either express or implied. § 79. Varieties of acceptances — As to terms — General ac- ceptance. "An acceptance is cither general or qualified. A gen- eral acceptance assents without qualification to the order of the drawer. A qualified acceptance in express terms varies the effect of the bill as drawn."'^'^ "An acceptance to pay at a particular place is a general accept- ance unless it expressly states that the bill is to be paid there only and not elsewhere."^^ The above sections of the Negotiable Instrument Law, as a general rule, have been the law in this country without statutory enactment. A bill addressed generally to a drawee in a city may be ac- cepted payable at a particular bank in that city ;^^* but where a bill is addressed to the drawee in one place, and is accepted payable in ^nother, it is a material variation .^•"^'' § 80. Varieties of acceptances — As to terms — Qualified ac- ceptance. The Negotiable Instruments Law provides : "An acceptance is qualified which is (1) conditional, that is to say, which makes payment by the acceptor dependent on the ful- fillment of a condition therein stated; (2) partial, that is to say, 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 drawees, but not of all."^^ The above is a clear statement of the law generally. Such acceptances do not become due until the happening of the contingency upon which the bill is accepted.^^* §8L Varieties of acceptance — As to form — In general. As to their form acceptances in the absence of statute are written or parol. 24 Neg. Inst. Law, § 139, where 25b Niagara District Bank v. all cases directly or indirectly bear- Fairman etc Mfg. Co., 31 Barb, ing upon or citing the Law are 403. grouped. 26 Neg. Inst. Law, § 141, where 25 Neg. Inst. Law, § 140, where all cases directly or indirectly bear- all cases directly or indirectly bear- ing upon or citing the Law are ing upon or citing the Law are grouped. grouped. 26a Marshall v. Burnby, 25 Fla. 25a Troy City Bank v. Lanwan, 619. 19 N. Y. 477; Meyers v. Standart, 11 Ohio St. 29, § 82 ACCEPTANCE OF BILLS. 93 A written acceptance: (1) may be written on the instrument; or (2) it may be written on a separate paper ; and if on a separate paper, (a) it may be an acceptance as to an existing bill; or it may be (b) an acceptance as to a non-existing bill. § 82. Varieties of acceptance — As to form — Written. Take a bill of exchange ; the drawee writes across the face of the bill "accepted" and signs his name on the bill itself.^^ That is the first form. Now, take the second form of written acceptances : A writes B that he has drawn on him for $500 and wants to know whether he will accept that, and B writes to A, or to the payee C, "y^s, I will accept that bill." That is an acceptance of an existing bill.^* Now, suppose A writes to B and says : 'T (in the future) am going to draw on you and want to know if you are going to accept it," and B writes A and says he will accept it. That is the acceptance of a non-existing bill.^** As to the existing bill the Negotiable Instruments Law provides : "Where an acceptance is written on a paper other than the bill itself, it does not bind the acceptor, except in favor of a person to whom- it was shown and who, on the faith thereof, receives the bill for valuer^'' For example, a certain instrument has been drawn and A holds the instrument ; it has been drawn upon B, and A writes to B a letter and says a certain instrument has been drawn upon him and describes it in definite terms or reasonably so, and then B writes back and states in his letter that he accepts that bill which has been drawn upon him and that he will pay it ; then A holds this instrument, he also holds the letter, he shows them to X and X says: "I wall take that instrument upon the promise of B that he will accept it. I see that he has written that he would and he has clearly described the bill of exchange, and I will re- ceive it." Such an acceptance is valid and conforms with the requirements. Thus the acceptance may be on a separate paper, but the promise must be clear and unequivocal. And since the acceptance 27 Spear V. Pratt, 2 Hill (N. Y.) Ct. 83; Coolidge v. Payson, 2 582, 38 Am. Dec. 600. Not abso- Wheat. 66. lutely necessary to use the word 29 Evansville Nat. Bank v. Kauf- accepted, Whilden v. Merchants etc. mann, 24 Hun (N. Y.) 612; Barns- Nat. Bank, 64 Ala. 1, 38 Am. Rep. dall v. Waltemeyer, 142 Fed. 415, 1. When insufficient, Cook v. Bald- 7Z C. C. A. 515. win, 120 Mass. 317, 21 Am. Rep. so ^gg jng^ l^^^ § 134^ where 517. all cases directly or indirectly bear- 28 Cook V. Miltenberger, 23 La. ing upon or citing the Law are Ann. Z77 ; Bank of Commerce v. grouped J. G. Shaw Band, 54 N. Y. Sup. 94 NEGOTIABLE INSTRUMENTS. §82 need not be on the instrument itself, a letter accompanying the bill may be used to qualify or limit an acceptance indorsed on the bill,^®' but not against a bona Me holder; and a written agree- ment modifying the terms of an accepted bill and securely pasted thereto, is a part thereof and cannot be lawfully severed there- from without the drawer's consent.^"'' A telegram agreeing to accept an instrument for a certain sum "for stock" is valid as an acceptance and is not a conditional con- tract,^®'= for at most the words "for stock" are but an indication of the nature of the consideration between the drawer and ac- ceptor.^**** As to the non-existing bill the Negotiable Instruments Law pro- vides : "An unconditional promise in zvriting to accept a bill be- fore it is drazvn is deemed an actiiul acceptance in favor of every person ivho, upon the faith thereof, receives the bill for valiie."^^ If the bill is not in existence, for the convenience of business, the acceptance may be on a separate paper. The requirements are: (1) That the contemplated drawee shall describe the bill to be drawn, and promise to accept it.^^ (2) That the bill shall be drawn in a reasonable time after such promise is written ;^^ and (3) That the holder shall take the bill upon the credit of the promise.^"* Thus A says to B : "I am going to draw upon you for $500 and I want to know if you will accept the instrument, if I draw upon you," and B writes back a letter and says: "I will accept that instrument for $500;" and describes the instrument so it soaLehnhard v. Sidway, 160 Mo. Burke v. Utah Nat. Bank, 47 Neb. App. 83. 247, 66 N. W. 295. 30b YVait V. Pomeroy, 20 Mich. ^3 Flora First Nat. Bank v. 425; Gerrish v. Glines, 56 N. H. 9. Clark, 61 Md. 400, 48 Am. Rep. 30oCoffman v. Campbell, 87 111. 114; Wilson v. Clements, 3 Mass. 98. 1; Union Bank v. Shea, 57 Minrt. 30" State Bank v. Bradstreet. 89 180, 58 N. W. 985. Neb. 188. What is reasonable. Nimochs v. 31 Neg. Inst. Law, §135, where Woody, 97 N. C. 1, 2 S. E. 249, 2 all cases directly or indirectly bear- Am. St. Rep. 268. ing upon or citing the Law are 34 Kennedy v. Geddes, 8 Port. grouped. (Ala.) 263, ZZ Am. Dec. 289; Ster- 32 Von Phul V. Sloan, 2 Rob. nan v. Harrison, 42 Pa. St. 49, 82 (La.) 148, 38 Am. Dec. 207; Few- Am. Dec. 491; Hall v. Emporia ler V. McPhee, 13 Colo. App. 185, Nat. Bank, 133 111.' 234, 24 N. E. 56 Pac. 118; Am. Waterworks Co. 546; Nelson v. Chicago First Nat. V. Venner. 18 N. Y. S. 379, 45 N. Bank, 48 111. 39, 95 Am. Dec. 510. Y. St. 441 ; Brinkman v. Hunter, See Storer v. Logan, 9 Mass. 55. 7Z Ma 172, 39 Am. Rep. 492; § 83 ACCEPTANCE OF BILLS. 95 can be understood. A shows this letter to Y and Y says : "Yes, I see you have drawn that instrument as you said you would and I will take the instrument, relying upon B's written promise." Such an acceptance is valid and conforms with the requirements. The last principles also apply to acceptances on a separate paper whether the bill is or is not in existence. That is, (1) credit must be given to the promise ;^^* (2) the bill must -be de- scribed and the terms must be definite, or reasonably so ;**" and (3) the bill must have been discounted upon the promise. But the promise is exempted if not made with the knowledge of some holder of the bill.^^ An acceptance on a separate piece of paper is a valid acceptance mainly because it assists in the nego- tiation of bills. Telegraphic authority to draw is an unconditional power in writing under the statute.^^* As the Negotiable Instruments Law requires all acceptances to be in writing, a bank cannot be held upon the oral promise of one of its officers to pay a check.^'" A written agreement modifying the terms of an accepted bill and securely attached thereto is a part thereof and cannot be lawfully detached therefrom without the drawer's consent.^*^ § 83. Varieties of acceptances — As to form — Parol, A parol acceptance is not recognized by thei Negotiable Instruments Law.^** In the absence of a statutory intervention, it is the common law rule that an unequivocal parol promise to accept a specific existing bill is binding.^' But such a promise to accept a future bill, even though the bill be taken by the holder upon the faith and credit of such promise, is not binding as an acceptance. Thus where A calls up B over the telephone and says : "B, I am going 34a Bank v. Hay, 143 N. C. 332; Ford, 35 Colo. 142, 83 Pac. 778, 117 First National Bank v. Muskogee, Am. St. Rep. 182. 40 Okla. 603. 35o Bothell v. Schweister, 84 Neb. 341' Bank of Flora v. Clark, 61 271. Md. 405. 36Neg. Inst. Law, §132, where 35 Pollock V. Helm, 54 Miss. 1, all cases directly or indirectly bear- 28 Am. Rep. 342; Nimochs v. ing upon or citing the Law are Woody, 97 N. C. 1. 2 S. E. 249, 2 grouped. Am. St. Rep. 268 ; Coolidge v. Pay- 37 Whilden v. Merchants, etc., son^ 2 Wheat. (U. S.) 66. Bank, 64 Ala. 1. 38 Am. Rep. 1 ; 35a Wells V. Western Union Tele- Joyce v. Wing Yet Lung, 87 Cal. graph Co., 144 Iowa 605, 123 N. W. 424, 25 Pac. 545 ; Ecker v. Snow- 371, 24 L. R. A. 1045. den, 2 Miles (Pa.) 275; In re God- 35" Ewing V. Citizens' Nat. Bank, dard, 66 Vt. 415, 29 Atl. 634. As 162 Ky. 551, 172 S. W. 955; Van to parol acceptances, see note 26 Buskirk v. State Bank of Rocky L. R. A. 620. 96 NEGOTIABLE INSTRUMENTS. §§84-85 to draw a certain bill of exchange upon you and I want to know if you will accept it," and B says, "Yes, I will accept it," and A draws the bill and takes it to Z and tells him what was said by B, and Z takes it, and Z doesn't wish to rely on the credit of A because A has no credit, but takes it because of B's credit; the law generally is that such a promise is not a good acceptance of a bill not in existence, if made by parol.^ § 84. Varieties of acceptances — As to mode of proof — Ex- press. An express acceptance is an acceptance w^-itten upon the face of the instrument.^** § 85. Varieties of acceptances — As to mode of proof — Im- plied. An implied acceptance is any act which clearly indi- cates an intention to comply with the request of the drawer, or any conduct of the drawee from which the holder is justified in drawing the conclusion that the drawee intended to accept the bill, and intended to be so understood.'*'* The Negotiable Instruments Law provides : "Where a drawee to whom a bill is delivered for acceptance destroys the same, or refuses within twenty-four hours after such delivery, or within such period as the holder may allow,*to return the hill accepted or non-accepted to the holder, he will be deemed to have accepted the sa^ne.'"^^ In some jurisdictions, as in Illinois and South Dakota, the above section is omitted ; in others as in Wisconsin it is pro- vided that mere retention of the bill is not acceptance; while in some jurisdictions as in Pennsylvania, a proviso as to demanding the return of the bill has been added."*^* The word "refuses" as used in the statute above, does not mean a tortious refusal, nor does it imply that a previous de- mand for the return of the instrument to the holder should be 38 Wakefield v. Greenhood, 29 State v. Weiss, 91 N. Y. S. 276; Cal. 597; Mercantile Bank v. Cox, Hough v. Loring, 24 Pick. (Mass.) 38 Me. 500; Nichols v. Commercial 254; Pickle v. Muse, 88 Tenn. 380, Bank, 55 Mo. App. 81. 12 S. W. 919, 17 Am. St. Rep. 900, Contra, Nelson v. .Chi. First 7 L. R. A. 93; Dickinson v. Marsh, Nat. Bank. 48 111. 36, 95 Am. Dec. 57 Mo. App. 566; Hall v. Emporia 510; Woodward V. Griffins-Marshall First Nat. Bank, 133 111. 234, 24 Grain Co., 43 Minn. 260, 45 N. W. N. E. 546. 433. 41 Neg. Inst. Law, § 137, where 39 Spear v. Pratt, 2 Hill (N. Y.) all cases directly or indirectly bear- 582, 38 Am. Dec. 600; Cortelyou v. ing upon or citing the Law are Maben, 32 Neb. 697, 36 N. W. 159, grouped. 3 Am. St. Rep. 284. 4ia g^g j^^g^ i^^^ l^^^ § 137^ 40Westbnrg v. Chicago L. & C. for changes made in different juris- Co., 117 Wis. 589; Overman v. Ho- dictions, boken City Bank, 31 N. J. L. 563; §§ 86-88 ACCEPTANCE OF BILLS. 97 made, but is to be construed to cover a failure or neglect to re- turn the check.**" § 86. Acceptance of bills drawn in sets. The law as to the acceptance of bills drawn in sets is stated in the Negotiable Instruments Law as follows : "The acceptance may he 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 sep- arate biiir'^ § 87. Revocation of acceptance. The acceptor or drawee who has not communicated his acceptance or the accepted bill to the holder, may revoke an acceptance before delivery and cancel the written acceptance.'*^ § 88. What bills must be presented for acceptance. The Negotiable Instruments Law provides : "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 iix the maturity of the instrument. 2. Where the bill expressly stipulates that it shall be presented for acceptance ; or 3 Where the bill is drazvn payable elsewhere than at the resi- dence 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."'*^ Bills payable on demand or at sight without grace, or payable at a certain number of days after date, or after any other certain event, or payable on a certain day, need not be presented for ac- ceptance at all, but only for payment.*^ But it is usual and best, 41^ State Bank v. Miss., 91 N. Y. 44 Neg. Inst. Law, § 143. where 276; Westburg v. Chicago Lumber all cases directly or indirectly bear- Co., 117 Wis. 589, 94 N. W. 572. ing upon or citing the Law are 42 Neg. Inst. Law, §181, where grouped. all cases directly or indirectly bear- 45 Commercial Bank v. Perry, 10 ing upon or citing the Law are Rob. (La.) 61, 43 Am. Dec. 168; grouped. Carmichael v. Pennsj^Ivania Bank, 43Robbins v. Lambeth, 2 Rob. 4 How. (Miss.) 567, 35 Am. Dec. (La.) 304; Irving Bank v. Weth- 408; House v. Adams, 48 Pa. St. erald, 36 N. Y. 335 ; German Nat. ?61, 86 Am. Dec. 588 ; Champion v. Bank v. Farmers Dep. Nat. Bank, Gordon, 70 P^. St. 474, 10 Am. Rep. 118 Pa. St. 294. 12 Atl. 303; Guth- 581. rie Nat. Bank v. Gill, 6 Okla, 560, 54 Pac. 434. 98 NEGOTIABLE INSTRUMENTS. , §89 when the bill is payable at a future day, to present it for ac- ceptance, in order to ascertain whether it will certainly be hon- ored, and to procure the assurance of Hability of the acceptor.*'^'' Bills payable at sight or at so many days after sight, or after demand, or after any other event not absolutely fixed must be presented to the drawee for acceptance and payment, or for ac- ceptance only, without unreasonable delay, or the drawers and indorsers will be discharged, for they have an interest in having the bills accepted immediately in order to shorten the time of payment, and thus put a limit to the period of their Hability and also to enable them to protect themselves by other means before it is too late, if the bill is not accepted and paid within the time originally contemplated by them.'*® § 89. By and to whom presentment should be made. Any^ person in possession of a bill of exchange may present it for acceptance, or may do so through his properly authorized agent.*'" The presentment must be made to the drawee personally or to some person who has authority to accept or refuse to accept for him.48 The Negotiable Instruments Law provides: "Where a hill is addressed to two or more drawees who are not partners, presentment must he made to them all, unless one has authority to accept or refuse acceptance for all, in which case presentment may he made to him only.'"^^ "Where the drazvee is dead, presentment way he made to his personal representative."^^ "Where the drazvee has heen adjudged a hankrupt or an insol- vent; or has made an assignment for the benefit of creditors, presentment may he made to him or to his trustee or assignee."'^'*- If one of the drawers accepts he will of course be bound by his acceptance. 45a National Park Bank v. Saitta, 48 Schuchardt v. Hall, 36 Md. 127 App. Div. (N. Y.) 624. 590, 11 Am. Rep. 514; Stainback v. 46 Neg. Inst. Law, §144, where State Bank, 11 Gratt. (Va.) 269; all cases direct^ or indirectly bear- Nelson v. Fotterall, 7 Leigh (Va.) ing upon or citing the Law are 179. grouped ; Nimocks v. Woody, 97 N. 49 jsj-^g^ j^st. Law, § 145, where C. 1, 2 S. E. 249, 2 Am. St. Rep. all cases directly or indirectly bear- 268; Nutting v. Burked, 48 Mich. ing upon or citing the Law are 241 ; Thornburg v. Emmons, 23 W. grouped. Va. 333. 50 See preceding note. 47 Stainback v. Bank, 11 Gratt. 51 See preceding note. 269; Walker v. State Bank, 9 N. Y. 582. § 90 ACCEPTANCE OF BILLS. 99 Where the drawee is dead presentment is not necessary and the above section of the law merely states some one to whom presentation can be made. §90. Time of presentment. The Negotiable Instruments Law provides : "Presentment for acceptance must be made by or on behalf of the holder at a reasonable hour on a business day, and before the bill is oz'erdue, to the drar^vee or some person authorized to accept or refuse acceptance on his behalf ."^^ The time within which the holder must present a bill for acceptance which requires such presentment, is usually stated to be a reasonable time, and this is a mixed question of law and fact depending upon the circumstances. The Negotiable Instruments Law provides: "Except as herein otherwise provided, the holder of a bill which is required by the next preceding section to be presented for ac- ceptance must either present it for acceptance or negotiate it with- in a reasonable time: If he fails to do so, the drawer and all in- dorsers are discharged ."^^^ This has always been the law in general. A delay of the mail is a sufficient excuse for the omission to immediately present a bill for acceptance, and a presentation im- mediately after its reception is in time to charge the indorser.'^*" Presentment should be made during usual and reasonable hours. What constitutes reasonable hours of business depends upon the custom of the particular place and also upon the trade or business. Any hour before the customary hour of retiring will be sufficient when presented at drawee's residence.^^ As to the days on which presentment may be made the Ne- gotiable Instruments Law provides as follows: "A bill may be presented for acceptance on any day on which negotiable instruments may be presented for payment under the provisions of sections seventy-two and eighty-Uve of this act. When Saturday is not otherwise a holiday, presentation for ac- ceptance may be made before tzvelve o'clock noon on that day."^^'^ s^Neg. Inst. Law, § 145, where 146, 11 Am. Dec. 259; Phoenix Ins. all cases directly or indirectly bear- Co. v. Allen, 11 Mich. 501. ing upon or citing the Law are Rule does not apply to non-nego- grouped. liable paper. Briggs v. Persons, 31 52a Neg. Inst Law, 144. Mich. 400. 52b Walsh V. Blatchly, 6 Mo. 422. ^sa ^gg ingt. Law, § 146, where 53 Bolton V. Harrod, 9 Mart, all cases directly or indirectly bear- (La.) 326, 13 Am. Dec. 306; Rob- ing upon or citing the Law are inson v. Ames, 20 Johns. (N. Y.) grouped. 100 NEGOTIABLE INSTRUMENTS. §§91-92 Several jurisdictions as Arizona, Kentucky and Wisconsin omit the last sentence of the above section. The Negotiable Instruments Law further provides : "The drawee is allowed twenty-four hours after presentment in which to decide whether or not he will accept the bill; but the acceptance if given dates as of the day of presentation"^"^ There may be an acceptance after there has been a refusal to accept or after protest or after dishonor.^^ So when we say it must be in a reasonable time, that means when the instrument is first presented for acceptance. It does not mean that after twenty- four hours the bill can never be accepted. When the bill is pre- sented, it is reasonable that the drawee should be allowed some time to deliberate whether he will accept or not ; and by the rule of the law merchant he was entitled to demand twenty-four hours for this purpose, and the holder was justified in leaving the bill with him for that time. The time allowed is twenty-four hours after delivery and not after demand for a return of the bill and the time for returning the bill to the holder does not begin to run from the demand for its return, but the date of its delivery .^^^ § 91. Place of presentment. The presentment for accept- ance, if the bill is addressed to the drawee at a particular place, should be made at that place.^® If the bill is not addressed to any particular place, presentment should be made either to the drawee personally, or at his dwelling or place of business'*'" at the time of presentment. § 92. Presentment excused. "Presentment for acceptance is excused and a bill may be treated as dishonored by non-accept- ance 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 exer- cise of reasonable diligence, presentment cannot be made. (3) Where, although presentment has been irregidar, acceptance has been refused on some other ground."^^ 54Neg. Inst. Law, §136, where (Tenn.) 425; Reynolds v. Chittle, all cases directly or indirectly bear- 2 Campb. 596. ing upon or citing the Law are '*' Boot v. Franklin, 3 John. (N. grouped. Y.) 207; Mason v. Franklin, 3 55 Wynne v. Raikes. 5 East. 514; Johns. (N. Y.) 202; Anderson v. Thompson on Bills, 214. Drake, 14 Johns. (N. Y.) 113. 55a 3 R. C. L. 1309; Wisner v. 58 ^gg. Inst. Law, §148, where Bank of Gallitzin,220 Pa. St. 21. all cases directly or indirectly bear- 5« Wolfe V. Jewett, 10 La. 383; ing upon or citing the Law are Ratcliff V. Planters Bank, 2 Sneed grouped. § 93 ACCEPTANCE OF BILLS. 101 Presentment for acceptance is excused and the bill should be protested as dishonored by non-acceptance: when the drawee is discovered to be a fictitious person, or is incapable of making a valid contract from legal disabilities, or where, after reasonable diligence to ascertain the drawee, the presentment cannot be effected, or under any other like circumstances. § 93.-k^cce ptanc es for honor, or supra protest. The Nego- tiable InstrumentsTSWprovWesI "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 acceptance for honor for one party, there may be a further acceptance by a different person for the honor of another party."^^ "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."^^ "Where an acceptance for honor does not expressly state for whose honor it is made, it is deemed to be an acceptance for the honor of the draiver."^^ "The acceptor for honor is liable to the holder and to all par- ties to the bill subsequent to the party for whose honor he has accepted."^^ This is a peculiar kind of acceptance. It most frequently hap- pens when the original drawee refuses to accept the bill, in which case a stranger may accept the bill for the honor of some one of the parties thereto, which acceptance will inure to the benefit of all the parties subsequent to him for whose honor it was accepted. It is essential that the acceptor for honor appear before a notary public and declare that he accepts the protested bill in honor of the drawer or indorser, as the case may be, and that he will pay it at the appointed time. "^Neg. Inst. Law, §161, where ^^Neg. Inst. Law, §163, where all cases directly or indirectly bear- all cases directly or indirectly bear- ing upon or citing the Law are ing upon or citing the Law are grouped. grouped. *ONeg. Inst. Law, §162, where *2 jsjeg jnst. Law, §164. where all cases directly or indirectly bear- all cases directly or indirectly bear- ing upon or citing the Law are ing upon or citing the Law are grouped. grouped. 102 NEGOTIABLE INSTRUMENTS. §93 An acceptance for honor, then, is properly made by the ac- ceptor appearing before a notary pubhc and declaring his inten- tion to accept for the honor of some one or more of the parties and subscribing to some such expression of his intention as "accepted for the honor of A."®^ This is done to save the credit of the parties to the instrument, or some party to it, as the drawer, drawee, or indorser, or some- body else. Some one desires to save the credit of some one on the bill, and he does so by writing "accepted" on the bill. The court holds that the consideration is presumed, and the presump- tion is that he does have funds or money. The acceptor for honor 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.^'* But the acceptor for honor of the drawer cannot maintain an action thereon against the drawer without proof of its present- ment to the drawee and non-acceptance or non-payment by him, and notice thereof to the drawer.®'" "The acceptor for honor by such acceptance engages that he will on due presentment pay the bill according to the terms of his acceptance, provided it shall not have been paid by the drawee, and provided that it shall hai'e been duly presented for payment and protested for non-payment and notice of dishonor given to him."^"^ The undertaking of the acceptor for honor is not an absolute engagement to pay at all events, but only a collateral and condi- tional engagement to pay, if the drawee does not.®'* The result of this rule is to require that the bill be presented to the drawee named therein at its maturity for payment and if payment is refused that it be protested and notice of dishonor given to him.®** And the rule has been stated that the acceptor of a bill for the honor of the drawer cannot maintain an action thereon against him, without proof of its presentment to the drawee and non- acceptance or non-payment by him, and notice thereof to the drawer.*'^ *3 Gazzam v. Armstrong, 3 Dana ^^ Schofield v. Bayard, 3 Wend. (Ky.) 554. See note 7 U. S. L. Ed. (N. Y.) 488; Mitchell v. Baring, 18 132. M. & M. 381. «3a Swope v. Rose, 40 Pa. St. 186, ee Walton v. Willianns, 4 Ala. 80 Am. Dec. 567. 347; BarJng v. Clark, 19 Pick. «3b Baring v. Clark, 19 Pick 220. (Mas.) 220. «4Neg. Inst. law. §165, where ^^ Wood v. Pugh, 7 Ohio, (Pt. all cases directly or indirectly bear- 2) 156. ing upon or citing the Law are grouped, § 93 ACCEPTANCE OF BILLS. 103 The following miscellaneous provisions relating to acceptances for honor are found in the Negotiable Instruments Law : "Where a hill payable after sight is accepted for honor, its m-aturity is calculated from the date of the noting for non-ac- ceptance and not from the date of the acceptance for honor."^^ "When a dishonored bill has been accepted for honor, supra protest, or contains a reference in case of need, it must be pro- tested for non-payment before it is presented for payment to the acceptor for honor or reference in case of need."^^ "Presentment for payinent to the acceptor for honor must be made as folloivs: (1)1 f if is to be presented in the place where the protest for non-payment zvas made, it must be presented not later than the day following its maturity; (2) If it is presented in some other place than the place where it was protested, then it must be forwarded within the time specified in section one hun- dred and four.'"^^ "The provisions of section eighty-one apply where there is de- lay in making presentment to the acceptor for honor or referee in case of need.'"^^ "When the bill is dishonored by the acceptor for honor it must be protested for non-payment by him-."'^^ 68 Neg. Inst. Law, § 166. '■1 Neg. Inst. Law, § 169. 69Neg. Inst. Law, §167. "Neg. Inst. Law, §170. 70 Neg. Inst. Law, § 168. SUBDIVISION B— TRADE ACCEPTANCES. § 93a. Meaning of term. § 93e. Where payable. _ _ 93b. Trade acceptances distin- 93f. By whom presented for dis- guished from ordinary bill count. of exchange. 93g. Inducements by Federal Re- 93c. Trade acceptances distin- serve System. guished from promissory 93h. Effect on other negotiable in- note. struments. 93d. Nature of transaction in 93i. Origin. which trade acceptances 93j. Extent of use. . used. , , 93k. Decisions. flK L ^ a ^r ,. . / .- I ^93ar Meaning of term. A trade acceptance is a bill of ex- change with a certain maturity drawn by a seller on a buyer for a fixed sum of money, representing the purchase price of goods payable to order, and bearing across its face the acceptance of the buyer. In terms of business, it may be defined as a negotiable cer- tificate of indebtedness, arising out of a current transaction in merchandise. § 93b. Trade acceptances distinguished from ordinary bill of exchange. The trade acceptance states upon its face that the obligation of the acceptor arises out of purchase of goods from the drawer, while the ordinary bill of exchange does not state upon its face the transaction out of which the giving of the instrument arose. The trade acceptance is confined to credit obligations arising from the sale of goods and must have a definite maturity, while the ordinary bill of exchange may cover various kinds of transactions and may be payable on demand, at sight, or at the end of a stated time. It has been held that there is nothing in the Federal Reserve Act, Sec. 13, or in the regulations made thereunder by the Fed- eral Reserve Board, changing the character of trade acceptances as bills of exchange, and they are within the rules, that a draft may be signed by the acceptor before the name of the drawer is filled in, that a drawer may be any one whom the acceptor may accept as such, and that a negotiable instrument may be drawn payable to the order of a payee who is not a maker, drawer or drawee.* 1 Stafiford V. Hill, — Calif. App. -, 200 Pac. 33. 104 §§ 93c-93f TRADE ACCEPTANCES. 105 § 93c. Trade acceptances distinguished from promissory note. In addition to the usual differences between a bill of exchange and a promissory note, a trade acceptance is limited to obligations arising from the sale of goods, while the promis- sory note may cover not only obligations arising from the sale of goods, but also may cover practically any kind of obligation. In other words, the promissory note deals with all kinds of busi- ness transactions, while the trade acceptance deals with current merchandise transactions alone. The trade acceptance, unlike the promissory note, is not to be given for borrowed money or past- due obligations. § 93d. Nature of transaction in which trade acceptance used. The business practice involved in a transaction in which the trade acceptance is used is that one buys a bill of goods from a wholesaler or jobber and, later, instead of putting the account on his books or taking the buyer's promissory note, executes a time draft or bill of exchange on the buyer, who writes across the face of the instrument, "Accepted," and affixes his name. Thus a definite bargain is consummated between the seller and buyer of goods, and an amount due with a definite term agreed upon ; the seller draws the trade acceptance and presents it to the buyer; if the buyer is willing to assume that title to goods has passed to him, that the trade acceptance is in proper form, and that the conditions of sale have been complied with, he accepts by writing across the face of the instrument the word, "Accepted," the date and place of payment, and his name, and then returns it to the seller or to the bank presenting it ; the seller either holds the instrument until maturity or arranges to have it negotiated, and, in negotiating it, any of the following may be brought into the transaction: that is, the acceptor, the bank, the note broker, and the Federal Reserve Bank; for the instrument after acceptance becomes a piece of negotiable two- name paper which the seller may retain until maturity if he so desires, or may take to his bank for discount. The acceptor either pays it at maturity or secures an extension of time by treating it as a past-due obligation and covering it by a promis- sory note. § 93e. Where payable. Ordinarily the trade acceptance is paid, preferably at the buyer's bank, and if not there, usually at some other place mutually agreed upon at the time of its issue. § 93f. By whom presented for discount. The trade accept- ance is ordinarily presented for discount by the seller of the merchandise. 106 NEGOTIABLE INSTRUMENTS. §§ 93g-93i § 93g. . Inducements by federal reserve system. For the trade acceptance to be eligible for purchase by Federal Reserve Banks, the trade acceptance must have a maturity at the time of purchase of not more than ninety days, exclusive of the days of grace, and it must be indorsed by a member bank or supported by a statement of the financial condition of one or more of the parties thereto. It must, of course, also bear the clause prescribed by the Federal Reserve Board, "The obligation of the acceptor hereof arises out of the purchase of goods from the drawer." Then the trade acceptance is entitled to extensive re- discount facilities with preferential rates and practical freedom from the ten per cent of capital and the surplus limits which measure the capacity of banks to loan to one person or concern upon single-name paper. § 93h. Effect on other negotiable instruments. The trade acceptance does not affect other negotiable instruments as the promissory note, since it is not given for borrowed money or past-due obligations. It may be legally treated as a check chargeable against a buyer's balance at his bank without further instructions or au- thority. The Negotiable Instruments Law provides that: "Where the instrument is made payable at a bank, it is equivalent to an order to the bank to pay the same for the account of the person debtor thereon."^ § 93i. Origin. The trade acceptance has been used in Eu- rope for two centuries and was employed in America before the Civil War. It has been brought to life again in this country by the Federal Reserve Board, and a joint committee of the Amer- ican Bankers Association, the United States Chamber of Com- merce, and the National Association of Credit Men who are con- sistently promoting the use of the trade acceptance in the settle- ment of the obligations arising out of commercial transactions. It is urged that a wide use of trade acceptance would release for pro- ductive business hundreds of millions of dollars now tied up in "accounts receivable," and will supplant the "open book ac- count" and the promissory note plan of commercial credit. It makes capital more fluid by releasing funds now tied up in open book accounts and by substituting readily negotiable paper for non-negotiable book accounts ; it enables the buyer to realize that credit is as tangible as cash and should be guarded and used accordingly, and further helps him by making him deal always in current transactions rather than in long-drawn-out book ac- §§ 93 j -93k TRADE ACCEPTANCES, 107 counts and prevents the accumulation of the over-due accounts; it relieves the seller from the burden of financing his customers and the consequent burdening of his own capital, and puts the burden of proving correctness of the details of merchandise transactions upon the buyer where it rightly belongs, and it en- ables the banker to borrow more easily because the trade accept- ance can be so easily rediscounted at the Federal Reserve Bank. It is urged that it will limit certain evils in our present com- mercial methods, such as those pertaining to discounts, bad debts, the secret assignment of book accounts, over-buying and over- selling, and the practice of cancelling orders and returning goods without sufficient reasons. § 93j. Extent of use. The trade acceptance has now been almost universally adopted in almost all lines of trade through- out the United States ; they are used by the producer of raw ma- terial, manufacturer, jobber and retailer. Banks of the United States have become well informed as to the value of trade ac- ceptances in place of single name promissory notes and are freely discounting them at favorable rates for their customers. During the past three years the number of trade acceptances and the volume represented by dealers has increased tremendously. It is estimated at the present time that more than 25,000 of our large concerns are using trade acceptances and are warm advocates of this system. § 93k. Decisions. Any legal questions which have arisen have been decided by the application of the provisions of the Ne- gotiable Instruments Law in force in all but one of the states. The same law which would apply to a promissory note or bill of exchange would apply to a trade acceptance. A ^ CHAPTER IX. TRANSFER— NEGOTIATION BY INDORSEMENT. 94. Meaning of term negotiation. 95. Who may negotiate. 96. Methods of transfer. 97. Meaning of indorsement. 98- Who indorse. 99. Nature of indorsement. 100. Requisites of indorsement. 101. Varieties of indorsement. 102. Indorsement in full or spe- cial indorsement. 103. Indorsement in blank. 104. Absolute and conditional in- dorsement. 105. Restrictive indorsement. 106. Indorsement without re- course. 107. Joint indorsement. 108. Successive indorsements. 109. Irregular or anomalous in- dorsement. 110. Presumptions as to indorse- ment. 110a. Effect of transfer without necessary indorsement. 110b. Indorsement striken out. 110c. Negotiable character con- tinued. llOd. Negotiations by prior party. § 94. Meaning of term negotiation. Negotiation is an act of the parties or of the law, by which the title to bills and notes is conveyed from one person to another.^ Negotiation means the act by which a bill of exchange or prom- issory note is put into circulation by being passed by one of the original parties to another person. If A gives B a check on C bank, and B presents the check at the counter of C, no negotia- tion is necessary or had. He simply demands and receives pay- ment; but if B goes to D store and buys a bill of goods and tenders the indorsed check in payment, he negotiates the check. ■^'' The Negotiable Instruments Law has the following provision as to what constitutes negotiation : "An instrument is negotiated zvhen if is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by deliv- ery ; if payable to order it is negotiated by the indorsement of the holder completed by delivery. "^^ As a bill or note is a chattel it may be sold as a chattel ; it is also a chose in action and may be assigned as a chose in action ; 1 Odell V. Clyde, 57 N. Y. S. 126, 38 App. Div. ZZZ; Whitworth v. Adams, 5 Rand. (Va.) 2Z?>, 415; Shaw V. Merchants Nat. Bank, 101 U. S. 557, 562, 25 L. Ed. 892. 1^ Aurora State Bank v. Hayes- Eames Elevator Co., 88 Neb. 187, 190 ; Seaman v. Muir, — Ore. — , 144 Pac. 121. ii^Neg. Inst. Law, §30. 108 §§95-96 TRANSFER BY INDORSEMENT. 109 and as it is also a negotiable instrument it may be transferred by indorsement according to the rules of the law merchant.^ § 95. Who may negotiate. In general, a bill or note must be negotiated by the de facto holder, that is, the person in pos- session of a bill or note and to whom it is payable, whether his possession, be lawful or not.^ And in such sense it is broader in significance than the term "holder," which customarily means lawful holder. If the bill or note is payable to bearer the person in possession is the de facto holder, but if the bill or note is payable to order, the de facto holder must have possession and be the person to whom it is payable.* But if the name is mis- spelled, or wrongly designated, the holder may negotiate by writ- ing the name as in the bill, and then his true name. So the person who obtains title by transfer of act of law is a de facto holder.** § 96. Methods of transfer. There are four methods of transfer, viz. : by assignment, by operation of law, by indorse- ment, and by delivery. The holder of a bill or note may transfer it by assignment the same as any other chose in action.^ Where the holder of a bill payable to order transfers it without indorsement it operates as an equitable assignment, and the transferee may compel indorse- ment.'^ And when indorsement is subsequently obtained, the transfer operates as a negotiation from the time when given,* un- less the indorsement was omitted at the time of transfer by fraud, accident or mistake, in which case it operates from the time of the transfer.® The full title to a bill or note passes, without either assign- ment, indorsement, or delivery, that is, by operation of law, (a) by the death of the holder,*" where the title vests in his personal a Willis V. Barrett, 2 Stark. 29; 7 Brown v. Wilson. 45 S. C. 519, Bryant v. Eastman, 7 Cush. 111. 23 S. E. 630, 55 Am. St. Rep. 779; 3 Collins V. Gilbert, 94 U. S. 753 ; Contro v. Rafiferty, 7 Montreal Wilson Sewing Mach. Co. v. Spears, Super. Ct. 146'; Schoepfer v. Tom- 50 Mich. 534, 15 N. W. 894; Ever- mack, 97 111. App. 562. ton V. Bank, 66 N. Y. 14. ^ Goshen Nat. Bank v. Bingham, 4 Jackson v. Love, 82 N. C. 405; 118 N. Y. 349, 23 N. E. 180; Osgood Lancaster Nat. Bank v. Taylor, 100 v. Artt, 17 Fed. 575 ; Hays v. Plum- Mass. 18, 97 Am. Dec. 70, 1 Am. mer, 126 Cal. 107, 58 Pac. 447, 77 Rep. 71; Durein v. Moeser, 36 Kan. Am. St. Rep. 153. 441, 13 Pac. 797. » Beard v. Dedolp, 29 Wis. 136. ^Earhart v. Grant, Z2 la. 481. lO Wooley v. Lyon. 117 111. 244, 6 6 Mitchell V. Walker, 17 Fed. Cas. N. E. 885, 57 Am. Rep. 867; Camp- No. 9,670; Deshler v. Guy, 5 Ala. bell v. Brown, 64 la. 425, 20 N. W. 186; Biscoe v. Sneed, 11 Ark. 104. 745, 52 Am. Rep. 446, 110 NEGOTIABLE INSTRUMENTS. §97 representative, or (2) by the bankruptcy of the holder/* where title vests in his assignee or trustee, or (3) in some jurisdictions, v^here the holder is an unmarried woman, on her subsequent mar- riage the title vests in her husband,*^ or (4) upon the death of a joint payee or indorsee, in which case the general rule is that the title vests at once in the surviving payee or indorsee.*^ The legal title to an instrument made payable to order can regularly be transferred only by indorsement.*'* The transferee of an instrument made payable to order without indorsement is the equitable owner, and takes it subject to all the equities vested in prior parties.*'* The indorsement must be written on the bill itself, or on a slip of paper attached thereto called an "Allonge" and considered a part of the bill.*^ The indorsement may be on the face of the bill. When the note or bill is made or becomes payable to bearer, it is transferable by delivery without indorse- ment.*® § 97. Meaning of indorsement. The literal meaning of in- dorsement is writing on the back, derived from the Latin in dorsa. In this connection, the word is used to indicate a legal transaction, effected by a writing of one's own name on the back, whereby one not only transfers one's full legal title to the paper trans- ferred, but likewise enters into an implied guaranty that the note or instrument will be duly paid. An acceptance applies to bills alone, while indorsement applies to both bills and notes. The in- dorsement cannot be by parol and the proper place for writing it is on the back of the instrument.*® But the name may be stamped on the back of the instrument, by one having authority to do so, and with intent to indorse and be a valid indorsement.*®* "The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, imthout " Roberts v. Hall, 2>7 Conn. 205, Bishop v. Chase, 156 Mo. 158, 56 9 Am. Rep. 308; Billings v. Collins, S. W. 1080. 79 Am. St. Rep. 515. 44 Me. 271. is Crosby v. Roub, 16 Wis. 645; 12 Coles V. Davis, 1 Campb. 485. Folger v. Chase 18 Pick. 63 ; French 13 Draper v. Jackson, 16 Mass. v. Turner, 15 Ind. 59. 480; Allen v. Tate, 58 Miss. 585; i" Wilton v. Williams. 44 Ala. Sanford v. Sanford, 45 N. Y. 723. 347; Haines v. Dubois, 30 N. J. L. Some jurisdictions have statutes 259. contra. ^''Freund v. Importers Nat. "Hopkins v. Manchester, 16 R. Bank, 76 N. Y. 352; Partridge v. I. 663. 19 Atl. 243, 7 L. R. A. 387 ; Davis, 20 Vt. 499 ; Gorman v. Chadron Bank v. Anderson, 6 Wyo. Ketcham, 3Z Wis. 427. 518, 48 Pac. 197. 20a Mayers v. McRimmon, 140 15 Pavey v. Stauffer, 45 La. Ann. N, C 640. 353, 12 So. 512, 19 L. R. A. 716; §97 TRANSFER BY INDORSEMENT. Ill additional words, is a sufficient indorsement."^^ An Indorsement alone without delivery conveys no title. Indorsement means an indorsement completed by delivery .^^ An indorsement is usually written on the back of the instrument, but the place is not essen- tial. If the payee write his name on any part of the instrument, with the intention of indorsing it, that is sufficient indorsement. The law looks to the intention of the parties rather than to the form as to indorsement.^* A person writes certain words upon the back of the instrument: was it the intention to indorse the instrument or do something else? And the law is very apt to consider any words as an indorsement rather than something else.'^ The Negotiable Instruments Law states : "Where a sig- nature is so placed upon the instrument that it is not clear in zi'hat capacity the person making the same intended to sign, he is deemed to be an indorser."^^^ And a further section of the law states : "A person placing his signature upon an instrument other- wise than as maker, drawer or acceptor is deemed to be an in- dorser, unless he clearly indicates by appropriate zvords his inten- tion to be bound in some other capacity."^'* There is one excep- tion, however, and that is in the case of a guarantor, or a guar- antee written on the back of an instrument.^^ And it should be noted that there is a difference between a surety and a guar- antor. A guarantor promises to account for the debt, default, or miscarriage of another person. The surety is bound in his own right with his principal and as an original promisor. He is the debtor from the beginning and is held to know of the default of the principal. On the other hand, the contract of the guarantor is his own separate contract. It is in the nature of a warrant by himself that the thing to be done by the principal shall be done. The contract is not his contract and he is not bound to take no- tice of non-performance. A surety obligation is a primary obliga- tion. The surety and the principal may be joined as defendants in one suit, or the surety may be sued alone. So, we see, then, there is that exception as to a guaranty ; when a guarantee is 21 Neg. Inst. Law, § 31. where Brown v. Butchers etc. Bank, 6 all cases directly or indirectly bear- Hill (N. Y.) 443, 41 Am. Dec. 755. ing upon or citing the Law are 23a ^^g. Inst Law, § 17, sub. 6. grouped. 24 Neg. Inst. Law, § 63, where all 231 Neg. Inst. Law. §2 (191), cases directly or indirectly bearing where all cases directly or indi- upon or citing the Law are grouped, rectly bearing upon or citing the 25 Eagerly v. Lawson. 176 Mass. Law are grouped. 551, 57 N. E. 1020, 51 L. R. A. 432; 22a Haines v. Dubois, 29 N. J. Ely v. Bibb, 4 J. J. Marsh. (Ky.) Law 259. 71. See Chap. XXI on Suretyship 23 Myers v. Wright, 33 111. 284; and Guaranty. 112 NEGOTIABLE INSTRUMENTS. §98 written on the back of an instrument it will not be construed as an indorsement, but most any other agreement or arrangement will be construed as an indorsement. § 98. Who indorse. The party to whose order the instru- ment is made payable should indorse the instrument.^ If the name of the payee or indorsee is wrongly designated he may indorse the paper as described. The Negotiable Instru- ments Law states: "Where the name of a payee or indorsee is iv^rongly designated or misspelled, he may indorse the instrnment as therein described, adding, if he think fit, his proper signature. '"^^^ This section also applies to a name assumed in business or otherwise. "Where an instrument is payable to the orcfer 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."^'' "Where an instrument is drawn or indorsed to a person as 'cashier' or other fiscal officer of a bank or corporation, it is deemed prima facie to be payable to the bank or corporation of which lie is such officer: and may be negotiated by either the in- dorsement of the bank or corporation, or the indorsement of the officer."^^ The above section as to the indorsement to a person as "cashier" states an old rule of the law, for banks had uniformly indorsed paper in this manner when sent for collection. And paper made payable to A as cashier of a bank and in- dorsed by him as cashier may be recovered upon by the indorsee who may show that said cashier was acting in his capacity as such in negotiating the paper.'^* The provisions of this section are not applicable where the cashier uses his individual name without the title of his ofifice i*^" and the mere possession by a bank of paper payable to its cashier in his individual name does not enable it to maintain an action thereon against the maker.^*'' 26 Cock V. Fellows, 1 Johns. (N. all cases directl}' or indiiectly bear- Y.) 143; Freeman v. Perry, 22 ing upon or citing the Law are Conn. 617; Woodbury v. Wood- grouped. bury, 47 N. H. 11; Ellis v. Brown, 28a Johnson v. Bufifalo Center 6 Barb. 282. State Bank, 134 Iowa, 731. 26a Neg. Inst. Law, §43. 28b pjrst National Bank of 27 Neg. Inst. Law, § 41, where Pomeroy v. McCullough, 50 Ore. all cases directly or indirectly bear- 508. ing upon or citing the Law are 28o Swanby v. Northern State grouped. Bank, 150 Wis. 572. *^ Neg. Inst. Law, § 42, where § 99 TRANSFER BY INDORSEMENT. 113 This section of the law refers to "other fiscal officer of a bank or corporation." Under this, paper would be deemed payable to the corporation where indorsed payable to the treasurer of a savings bank, the treasurer or secretary of a trust company or the treasurer of a town.^^** § 99. Nature of indorsement. As to its nature the indorse- ment is a contract^** and also a transfer. Every indorser is a new drawer and the terms are found on the face of the bill or note. There is an exception in case the indorsement is to A and not to his order, A could not negotiate it. There is an added obligation upon the instrument aside from what appears upon the face of the instrument. The person who indorses it says, "Yes, I made that contract, but you must present that for payment and you must notify me if it is not paid. If that is presented for acceptance and not accepted, or presented for payment and not paid, then I will pay it." That is the contract that the indorser on an instrument makes. He says, "I will pay the instrument according to the face of the bill,^" provided you give me notice of its non-acceptance or non-payment."^^ So an indorsement performs two things : It makes a contract and it transfers the instrument ; the indorser says to every person on the face of that instrument and to every person who precedes him as an indorser of the instrument, *Tf this instrument is not paid by the person who is primarily liable on the instrument, and if you give me due notice that the instrument has not been paid, then I will pay it." That is the contract. He doesn't say that he would pay it absolutely, but "if you give me notice that the person who is liable on the instrument will not pay or has failed in some respect, I will pay the instrument." Of course, if it is a bill of exchange, and it is not accepted by the acceptor, the indorser says by indorsing it, "If it is not accepted and you duly notify me, I will then pay the instrument." In that case, if the drawee did not accept it, the drawer would be pri- marily liable. In the case of a note, the indorser says, "In case that instrument is not paid, and you give me notice of the fact that the maker does not pay the note, then I will pay the note myself." 282>, and 72 Am. St. Rep. 676. 504; Childs v. Wyman, 44 Me. 441. 6« Blakeslee v. Hewett, 76 Wis. 68 Ranson v. Sherwood, 26 Conn. 341; Phelps V. Vischer, 50 N. Y. 437; Knight v. Dunsmore, 12 la. 69; Gilbert v. Finkbeiner, 68 Pa. .35; Chandler v. Westfall, 30 Tex. St. 243. \.A77; Webster v. Cobb, 17 111. 459. § 110 TRANSFER BY INDORSEMENT, 125 ferable by delivery, or payable to bearer, is to be deemed an indorser. A person signing on the back of a bill or note payable to order before the payee is prima facie presumed to be a second indorser, and not liable to the payee; but this may be rebutted by showing that his indorsement was made to give the maker credit with the payee, and he thus becomes Hable as first in- dorser, the payee being permitted to indorse to him without recourse. Parol evidence is always admissible in these cases to show what he intended to do under the circumstances.*^ The Negotiable Instruments Law provides as follows: "A person placing his signature upon an instrument otherwise than a maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity. '^^^ § 110. Presumptions as to indorsement. Some matters as to presumptions will be treated more fully in the Chapter on Evi- dence,''" but for several reasons it is best to consider presump- tions as to indorsements at this place. The Law provides: "Except where an indorsement bears date after the maturity of the instrument every negotiation is deemed prima facie to have been effected before the instrument was overdue."'^^ And where the plaintiff on the trial produced the instrument, proved the indorsement of the payee and the signature of the maker and introduced it in evidence he established prima facie that he became the owner of the note before it became due." This presumption is important since that, in order to constitute one a holder in due course, he must have taken the instrument before it was overdue.'^ Another important presumption is that as to the place where the indorsement was made. In the absence of evidence to the contrary, a note is presumed to have been made at the place where it bears date.'^* The place where an indorsement was made often becomes important where the law in different states varies. An indorse- ment in Massachusetts of an instrument executed and payable «9Good V. Martin, 95 U. S. 90; 'i Neg. Inst. Law, §45. Kohn V. Consolidated Butter & "^^ German American Bank v. Egg. Co., 30 Misc. 725, 63 N. Y. S. Cunningham, 97 App. Div. (N. Y.) 265. See note 18 L. R. A. 36. 246. «»a Neg. Inst. Law, § 63. ^3 Neg. Inst. Law, § 52. 70 Chapter XXV. " Finch v. Calkins, 183 Mich. 298. 126 NEGOTIABLE INSTRUMENTS. § 110a in New York is governed by the law of Massachusetts as to the contract of indorsement^' § 110a. Effect of transfer without necessary indorsement. One who is the holder of negotiable paper payable to his order and who transfers it for value without indorsing it, vests in the transferee such title as he had, and in addition to this, the trans- feree acquires the right to have the transferer's indorsement. Thus such an instrument payable to the order A may be effectu- ally transferred by mere delivery, and the assignee takes the legal title and may sue in his own name subject to defenses of prior parties.'^® The negotiation takes effect as of the time when the indorsement is actually made when it is necessary to determine whether the transferee is a holder in due course, thus the in- dorsement is required to constitute the transferee a holder in due course." And an intention by both parties to have the paper indorsed is not sufficient, as it is the act of indorsement, not the intention, which negotiates the instrument.''^ An indorsement after notice of a defense does not relate back to the transfer, so as to cut off intervening rights and remedies.'^® The holder, however, is protected against everything subsequent to delivery, as the indorsement relates back to the time of delivery as to any equity outside of the instrument itself.^® The Negotiable Instruments Law on these principles of law states : "Where the holder of an instrument payable to his order trans- fers it for value without indorsing it, the transfer vests in the transferee 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 negotiation takes effect as of the time ivhen the indorsement is actually made."^^ If the holder claims title under the above section he should from the special circumstances which bring him within this section of the Law, rather than as in the ordinary case, prove the indorse- ment of the payee as a part of his case. § 110b. Indorsement stricken out. The holder of a nego- tiable instrument may at any time strike out any indorsement which is not necessary to his title; he may strike out all inter- vening indorsements and aver that the first blank indorser in- ''^ Glidden v. Chamberlin, 167 ^^ Goshen National Bank v. Bing- Mass. 486. ham, 118 N. Y. 349. ''6 Smith V. Nelson, 212 Fed. Rep. ''^ Meuer v. Phcenix National 56; Martz v. State National Bank, Bank. 42 Misc. (N. Y.) 341. 147 App. Div. (N. Y.) 250. so Beard v. Dedolph, 29 Wis. 136. '■'■ Mayers v. McRimmon, 140 N. si Neg. Inst. Law, § 49. C. 640. §§ llOc-llOd TRANSFER P.Y INDORSEMENT. 127 dorsed immediately to him.^^ The striking out of such indorse- ment does not destroy the presumption that the one in posses- sion is the holder thereof.^^ Nor is the fact material that one or more of the intermediate indorsements is restrictive.^^ The striking out of the indorsements may take place at the trial and after the plaintiff has finished his case.*'* The following is the provision of the Negotiable Instruments Law : "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 re- lieved from liability on the instrument."^^ Where an instrument is transferred by a special indorsement, the holder has no right to strike out the name of the person mentioned in such indorsement and insert his own name in the place thereof; nor can he strike out such name and convert such special indorsement into a blank indorsement. § 110c. Negotiable character continued. As a general rule it may be stated that an instrument negotiable in its origin is always negotiable, in other words, once negotiable is always nego- tiable. But there are exceptions to this, namely, when an instru- ment has been restrictively indorsed or has been discharged by payment or otherwise. The Negotiable Instruments Law provides : "An instrument negotiable in its origin continues to be nego- tiable until it has been restrictively indorsed or discharged by payment or otherwise ."^"^ § nod. Negotiation by prior party, A prior party back to whom a negotiable instrument has been negotiated may, under certain circumstances, reissue and further negotiate the instru- ment, but he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable. The Negotiable Instruments Law has the following provision to such effect: "Where an instrument is negotiated back to a prior party, such party may, subject to the provision of this act, reissue and further negotiate the same. But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable."^^ 82 Preston v. Mann. 25 Conn. 127. ^'^ Neg. Inst. Law, §47, where all 83 King V. Bellamy, 82 Kans. 301. cases are grouped. As to the dis- ^'•Jerman v. Edwards, 29 App. charge of negotiable instruments, cases (D. C.) 535. see §§ 119-125 of the Law. 85 Ensign v. Fogg, 177 Mich. 317* 88 Neg. Inst. Law, § 50. 8' Neg. Inst. Law, §48. CHAPTER X. TRANSFER— BY DELIVERY AND BY OPERATION OF LAW. § 111. In general. § 113. By operation of law. 112. By delivery. §111. In general. Transfer without indorsement may be made by one of two methods, either by delivery^ or by opera- tion of law.^ §112. By delivery. The law provides: "An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery. "^^ The Negotiable Instruments Law has changed the law in those states where it was held that notes made payable to a person named therein or bearer must have been indorsed to pass the legal title.^" Another provision of the Law is as follows : "An indorsement in blank specifies no indorsee. And an instru- ment so indorsed is payable to bearer and may be negotiated by delivery."^ One holding an indorsement in blank may transfer it without writing upon the instrument, and in this way he escapes some liability which he would otherwise have. He is only liable to the party who receives it from him, and as his name does not appear on the instrument, he has not added any credit to it.^ 1 Dunham v. Peterson, 5 N. D. 276; Roberts v. Hall, 37 Conn. 20S, 414, 67 N. W. 293, 57 Am. St. Rep. 9 Am. Rep. 308 ; Earhart v. Grant, 556, 36 L. R. A. 232 ; United States 32 la. 481. V. Vermilye, 10 Blatchf. (U. S.) ^^Neg. Inst. Law, §30. 280, 28 Fed. Cas. No. 16,618, af- 2b pavis v. First National Bank firmed 21 Wall (U. S.) 138; Mar- of Blakeley, 192 Ala. 8, 68 So. skey V. Turner, 81 Mich. 62, 45 N. 261. W. 644 ; Kohn v. Watkins, 26 Kan. 3 Neg. Inst. Law, § 34^ where 691, 40 Am. Rep. 336; O'Conor v. all cases directly or indirectly bear- Clarke (Cal., 1896), 44 Pac. 482. ing upon or citing the Law are See also note 12 U. S. L. Ed. 399. grouped. 2 Wooley V. Lynn, 117 111. 244, 6 4 McDonald v. Bailey, 14 Me. 101 ; N. E. 885, 57 Am. Rep. 867; Crist Crenshaw v. Jackson, 6 Ga. 509, 50 V. Crist, 1 Ind. 570; Hendric v. Am. Dec. 361; Smith v. Garden, 1 Richards, 57 Neb. 794, 78 N. W. Swan. (Tenn.) 28. 378; Billings v. Collins, 44 Me. 128 8 112 TRANSFER BY INDORSEMENT, 129 When a person offers you an instrument by delivery when it is payable to bearer, you are not obliged to take that instrument without indorsement ; if it is not indorsed by the person offering it, you need not take it. "Where an instrument payable to hearer is indorsed specially, it may nevertheless be further negotiated by delivery, but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement."^ "The rule adopted in this section may be inconvenient in prac- tice at times as, for example, when paper drawn payable to bearer is sent through the mail. But to permit the holder to make the instrument payable to a specified person, or to his order, would be to allow him to vary the contract of the acceptor or maker. Thus, if A makes his note payable to B or bearer, he does not assume the obligation of seeing that the instrument is properly indorsed ; and upon no rational legal theory would it be in the power of the holder to impose upon him a duty which, by the express terms of his contract, he refused to take upon himself. "The section cannot apply where the paper is originally made payable to order and indorsed in blank ; for by section 9 a note or bill which, upon its face, is payable to order, becomes payable to bearer, only when the last indorsement is in blank ; and hence, when a blank indorsement is followed by a special in- dorsement the instrument is not within the terms of section 9. Thus, if a check drawn to the order of A is indorsed in blank by the payee, and delivered to B, and B indorses it to the order of C, it is not payable to bearer, for the reason that the last indorse- ment, which by section 9 is made the test, is a special indorse- ment. The reason for making a distinction in this respect be- tween instruments originally drawn payable to bearer and in- struments which have become so payable because indorsed in blank is obvious. In the one case, the maker or drawer has expressly provided that the instrument shall be payable to bearer, and it can- not be made payable to order without modifying these terms. But where, upon its face, it is payable to order, a transferee, taking under a blank indorsement does not. by indorsing it special- ly, change its tenor as originally drawn."''* Another provision of the Negotiable Instruments Law states: "The holder may convert a blank indorsement into a special indorsement by zvriting over the signature of the indorser in 5 Neg. Inst. Law, § 40i, where '^^ Crawford's Annotated Negoti- all cases directly or indirectly bear- able Instruments Law. § 40, pp. 83. ing upon or citing the Law are 84. grouped. 130 NEGOTIABLE INSTRUMENTS. §113 blank any contract consistent with the character of the indorse- ment.'"^ The person who in getting a negotiable note or bill of ex- change payable to order, neglects to have the indorsement put on it, gets it just as if he had received it by assignment and takes it subject to the equities.^ It is his duty to notify the parties on the instrument the same as in an assignment. If any equities accrue between the time he received the instrument and the time he secured the indorsement, the equities would run against it.** This is provided for in the Negotiable Instruments Law as follows: "Where the holder of an instrument payable to his order transfers it for value zvithoiit indorsing it, the transfer vests in the transferee such title as the transferrer had therein, and the transferee acquires in addition the right to have the indorse- ment of the transferrer. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time zvhen the indorsement is actually made."^ § 113. By operation of law. Suppose A becomes a bankrupt and has in his possession an instrument calling for $500, payable to him. That instrument vests in A's assignee in bankruptcy. There is a transfer by operation of law.*® So, if a person dies leaving a certain note payable to himself, his administrator or executor gets title to that paper by operation of law.** The person who gets the paper gets just as good title as the dead man had, if it passes or is transferred by operation of law.*^ e Neg. Inst. Law, § 35, where all N. Y. 349, 23 N. E. 180. But see cases directly or indirectly bear- Beard v. Dedolph, 29 Wis. 130. ing upon or citing th0 Law are » Neg. Inst. Law, § 49, where all grouped. cases directly or indirectly bearing '■ Hopkins v. Manchester, 16 R. I. upon or citing the Law are grouped. 663. 2Z S .E. 630, 55 Am. St. Rep. lo Roberts v. Hall, 2>7 Conn. 205, 779; Hersey v. Elliott, 67 Me. 526, 9 Am. Rep. 308. 24 Am. Rep. 50; Pavey v. Stauffer, " Wooley v. Lyon, 117 111. 244, 6 45 La. Ann. 353, 12 So. 512, 19 L. N. E. 885, 57 Am. Rep. 867; Crist R. A. 716. But see Brown v. Wil- v. Crist, 1 Ind. 570; Rand v. Hub- son, 45 S. C. 519. 23 S. E. 630, 55 hard. 4 Mete. (Mass.) 256. Am. St. Rep. 779. *^ Billings v. Collins, 44 Me. 271 ; s Osgood V. Artt, 17 Fed. 575: Earhart v. Cant, 32 la. 481; Nichols Goshen Nat. Bank v. Bingham, 118 v. Hill, 42 S. C. 28, 19 S. E. 1017. CHAPTER XL TRANSFER— BY ASSIGNMENT. §114. In general. § 118a. Some differences as to lia- 115. Assignment by a separate bility of different transfer- writing, rers. 116. Liability of assignor of bills HSb. Several indorsements in and notes. blank, also combination of 117. Rights of parties. in blank and special in- 118. Transfer by legal process. dorsements. § 114, Assignment in general. Bills of exchange and prom- issory notes are negotiated either by indorsement, transfer by delivery without indorsement, by operation of law or by assign- ment. Only negotiable instruments can be transferred by in- dorsement. An instrument payable to bearer may be negotiated by delivery without indorsement.^ A non-negotiable instrument is transferred by assignment.^ The difference between the trans- fer of a negotiable and a non-negotiable instrument is that the latter is transferred subject_to_ all defenses that migh t have been set up against the~oi^f^flaT payee,^ while the former is taken free from equitable defenses by a bona fide holder. Therefore the effect of the assignment of a non-negotiable instrument is that the party holding the right drops out of the contract and another takes his place. The assignee is substituted in place of the as- signor. The assignee and every subsequent person to whom the instrument comes by assignment may be considered as the person who made the instrument in the first instance, and as having said and done everything in making the instrument which the original assignor said or did. Hence if the original assignor said or did something which under the ordinary law of such contracts would prevent him from enforcing the contract, or asserting his right against the other party to t he orig inal contract^the assignee, although he Imows liOTin^_oOb^ ^^^gi^^^ t^ "^^^ ^^ deemed to have said and_don£Jthe_same things. And further, if any subsequent assignee from whom, as an assignor, the holder in turn derives the contract, has done anything to prevent its enforcement against the original party, the said holder cannot 1 Dunham v. Peterson, 5 N. D. 3 Trustees of Union College v. 414, 67 N. W. 293, 57 Am. St. Rep. Wheeler, 61 N. Y. 88 ; Warner v. 556, 36 L. R. A. 232. Whittaker, 6 Mich. 133 ; Tims v. a Franklin v. Twogood, 18 la. 515. Shannon, 19 Md. 296. 131 132 NEGOTIABLE INSTEUMENTS. §115 enforce it against the original party. Each assignee takes his chances as to the exact position in which any party making an assignment of it stands. And as it is called in law, the assignee takes the contract subject to equities ; that is, to defenses to the contract which would avail in favor of the original party up to the time the notice of the assignment is given to the person against whom the contract is sought to be enforced. A person taking an instrument negotiable by the law merchant and writing an assignment of that instrument on a separate piece of paper, takes it subject to the rules applying to assign- ments ; that is, he takes it subject to the equities the p'JTrtfes had on the instrument before the assignment had been made to him. One might think that a certain instrument is in the hands of A, and that he being indebted to A, say, in the sum of $500, that when A comes to him and wants to become indebted to him to the extent of that sum, he would be safe in making those advances to A. He is, until he gets notice to the contrary. If the original instrument has gotten into the hands of someone else by assign- ment, it is his duty to notify the obligor instantly of that fact so that the conditions existing between him and the party will re- main unchanged. In other words, when you get an instrument by assignment, it is your duty immediately to notify the person liable on the instrument that you hold that instrument and that you hold it by assignment.'* But it is not your duty so to do if the paper is negotiable by the law merchant. § 115. Assignment by a separate writing. The mode of as- signment of non-negotiable instruments differs in no respect from that of any other contract.** Although some sort of writ- ten assignment is customarily employed, it may be written either on the instrument itself or on a separate piece of paper.* The in- strument may be assigned on a separate paper so as to authorize an action thereon in the name of the assignee.'^ But the assignment of a mortgage which was given as security for the payment of a promissory note will not operate of itself in some jurisdictions as an assignment of the note.^ This is the result of statutes in ^ Van Buskirk v. Insurance Co., '^Morris v. Poillon, SO Ala. 403; 14 Conn. 141 ; Merchants & Mechan- Thornton v. Crowther, 24 Mo. 164; ics Bank v. Hewett, 3 la. 93 ; Rich- Clapp v. Cedar County, 5 la. 15, 68 ards V. Griggs, 16 Mo. 416. Am. Dec. 678. 5 Maxwell v. Goodman, 10 B. ® French v. Turner, 15 Ind. 59; Mon. (Ky.) 286; Stiles v. Farrar, Doll v. Hollenbeck, 19 Nebr. 639, 18 Vt. 444; Halsey v. Dhart, 1 N. J. 28 N. W. 286. But see Coombs v. L. 109. Warren, 34 Me. 89; Cortelyou v. 6 Mitchell V. Walker, 17 Fed. Cas. Jones (Cal., 1900), 61 Pac. 918. No. 9,670; Deshler v. Guy, 5 Ala. 186. §116 TRANSFER — BY ASSIGNMENT. 133 many states which declare that the legal title of the note cannot be assigned by a separate instrument. It is presumable that an oral assignment, accompanied by a delivery of the instrument, would pass a good title to the assignee.^ § 116. Liability of assignor of bills and notes. The assignor of bills and notes assumes certain liabilities by way of guaranty. But his liability is not so extensive as that of an indorser of nego- tiable paper.^® The liability of an assignor and indorser differs principally in respect to the guaranty of the solvency of the parties to the instrument and in the guaranty that the instrument will be honored at maturity.^* The assignor is not responsible for the solvency of the parties to a bill or note, neither can he be held responsible if the instrument is not paid when due, unless he had knowledge of the insolvency of the parties. The assignor warrants that the parties to the instrument were competent to contract and if any one of them is incompetent, on account of infancy, marriage, lunacy and the like, the assignor is responsible to his assignee.-^^ There is one exception to this rule, and that is in the case of government securities. It is not warranted that all prior parties on an instrument had capacity to contract as there is an exception in case of "persons negotiating public or cor- porate securities, other than bills and notes."^^'- The assignor of an instrument warrants that the signatures and the body of the instrument are genuine,^^ so that if either proves to be a forgery, the money he received for the transfer can be recovered back. The assignor also warrants that he does not know anything affecting the validity or value of the instrument. To attempt to sell an instrument which one knows to be worth- less is a fraud upon the purchaser, and naturally vitiates the con- tract of sale.^^ 9 Moore v. Miller, 6 Oreg. 254, 25 Rose, 5 N. J. L. 547, 18 Atl. 748, Am. Rep. 518; Sackett v. Mont- 14 Am. St. Rep. 704; Lobdell v. gomery, 57 Nebr. 424, 77 N. W. Baker, 3 Mete. (Mass.) 469. 1083, 73 Am. St. Rep. 522 ; Guy v. I2a Neg. Inst. Law, § 65, last Briscoe, 6 Bush. (Ky.), 687. clause. 1® Cochran v. Strong, 44 Ga. 636 ; ^^ Rhodes v. Jenkins, 18 Colo. 49, Boylan v. Dickerson, 3 N. J. L. 24. 31 Pac. 491, 36 Am. St. Rep. 263 ; 11 Hecht V. Batcheller, 147 Mass. Wood v. Sheldon, 42 N. J. L. 421, 335, 17 N. E. 651, 9 Am. St. Rep. 36 Am. Rep. 523; Zwazey v. Par- 708; Lyons v. Miller, 6 Gratt. ker, 50 Pa. St. 441, 88 Am. Dec. 549. (Va.) 427, 52 Am. Dec. 129; Milli- i"* Brown v. Montgomery, 20 N. gan V. Chapman, 75 Me. 306, 46 Y. 287, 75 Am. Dec. 404; Delaware Am. Rep. 486. Bank v. Jarvis, 20 N. Y. 226; May 12 Butler V. Slocomb, 33 La. Ann. v. Dyer, 57 Ark. 441, 21 S. W. 1064. 170, 39 Am. Rep. 265; Edmunds v. 134 NEGOTIABLE INSTRUMENTS. § 117 The assignor also guarantees to the purchaser that he has a good title to the instrument and that he has a right to convey it away. If he attempts to transfer property to which he has no title he is held to have committed an actual or constructive fraud upon the purchaser, according to the knowledge or igno- rance of the vendor in respect to his want of title.-^** The Negotiable Instruments Law provides: "A qualified indorsement constitutes the indorser a mere as- signor of^the title to the instrument. It may he made by adding to the indorse/s signature the words 'luithout recourse' or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument. "^^'^ §117. Rights of parties. In the transfer of a negotiable in- strument by indorsement the indorsee is the holder in due course and takes it free from all defenses, while in the transfer of a non-negotiable instrument by assignment the assignee takes the same subject to any equities between the original parties thereto, and any defenses which may be interposed by the maker. The assignment of a negotiable instrument confers upon the holder only such rights as he would acquire upon the assignment of a non-negotiable instrument.^^ The assignee of a non-negotiable instrument holds it subject to all equities or counterclaims be- tween the original parties existing at the time of the assign- ment.^'' The maker of a note may set up the same defenses against it in the hands of the assignee that he might set up if it were held by the payee. But all such defenses and equities must have existed in favor of the maker prior to the assign- ment. The equities and defenses which can be asserted against the assignee are only such as relate to the contract between the original parties, and therefore it has been held that the assignee of a non-negotiable note is not bound to inquire whether the note was made to defraud creditors.^^ The rights of the parties are often provided for by statute in the different states. These statutes usually provide that the as- signee of such an instrument may in his own name recover against the person who made the same and whatever defense or I'Furgerson v. Staples, 82 Me. Mon. (Ky.) 122; Cochran v. 159, 19 Atl. 158, 17 Am. St. Rep. Strong, 44 Ga. 6Z6. 470; Merchants Nat. Bank v. ^"^ Rockwell v. Daniels, 4 Wis. Spates, 41 W. Va. 27, 23 S. E. 681, 432; Young v. South Tredegar Iron 56 Am. St. Rep. 828. Co., 85 Tenn. 189, 4 Am. St. Rep. 15a Neg. Inst. Law, § 38. 752. i«May V. Dyer, 57 Ark. 441, 21 i* Dalrymple v. Hillenbrand, 62 S. W. 1064; Johnson v. Welby, 2 B. N. Y. 5, 20 Am. Rep. 438. §118 TRANSFER — BY ASSIGNMENT. 135 set-off the maker of such instrument had, before notice of as- signment against an assignor, or against the original payee, he shall also have against their assignees. The Negotiable Instruments Law provides: "Where the holder of an instrument payable to his order trans- fers it for value without indorsing it, the transfer vests in the transferee 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 negotiation takes effect as of the time zuhen the indorsement is actually made."^^'^ In Alabama the word "holder" and "said holder" are sub- stituted for transferrer. But the use of "holder" in this con- nection is confusing; for by section 191 "holder" is defined to mean the payee or indorsee who is in possession of the instru- ment, and where the transfer is without indorsement neither the transferrer nor the transferee answers to this description. In Colorado the words "if omitted by mistake, accident or fraud" are added at the end of the first sentence. In Illinois and Mis- souri, the words "to have the indorsement of the transferrer" are struck out, and the following substituted therefor: "to en- force the instrument against one who signed for the accommo- dation of the transferrer, and the right to have the indorsement of the transferrer if omitted by accident or mistake." If this is to be taken literally, the right of the transferee to enforce the instrument against a prior party is limited to cases where such prior party has signed for the accommodation of the transferrer. This is not very clear. In Wisconsin the following is added at the end of the section : "When the indorsement was omitted by mistake, or where there was an agreement to indorse made at the time of the transfer, the endorsement when made relates back to the time of transfer." As stated in the previous chapter*^"* a person who in getting a negotiable note or bill of exchange payable to order, neglects to have the indorsement put on it, gets it just as if he had re- ceived it by assignment and takes it subject to the equities. It is his duty to notify the parties on the instrument the same as in an assignment. If any equities accrue between the time he received the instrument and the time he secured the indorsement, the equities would run against it. § 118. Transfer by legal process. Property may be trans- ferred to a creditor in satisfaction of his claim by attachment, 18a Neg. Inst. Law, 5 49. is^ Sec. 112 of this work. 136 NEGOTIABLE INSTRUMENTS. § 118a garnishment and execution. These processes are created by statute, and whether commercial paper can be transferred by them for the satisfaction of the holder's debts depends upon the language of the particular statute under which the question arises.^® It is generally held that promissory notes and other commer- cial instruments cannot be garnisheed in the hands of an agent, in an attachment proceeding against the payee. Nor is commer- cial paper attachable for the debts of the payee, when it is in the hands of a receiver for the benefit of creditors, nor when it is placed in the hands of an agent to collect and apply the proceeds to the payment of a specific debt ; and even when it is merely placed in the hands of an agent for collection or for any other purpose, resulting in benefit to the payee. It is not even subject to attachment, if the agent delivers it up to the attach- ing officer. § 118a. Some differences as to liability of different trans- ferrers. Since we have now considered the liability as to the various transferrers of negotiable instruments, it might be well to summarize or set out in outline some of the differences, as fol- lows: Some differences as to liability of transferrers of negotiable instruments. 1. Indorser in full or special indorser. The liability of such transferrer is the complete liability of indorser; and proof of at least two signatures is necessary to recover against such transferrer unless the parties are immediate parties to the instrument. 2. Indorser in blank. The liability of such a transferrer is the complete liability of indorser; proof of one signature is all that is necessary before recovery. 3. Indorser or rather transferrer by delivery. The liability of such transferrer is binding only as to immediate parties. 4. Indorser without recourse. An indorser without recourse (a) does not guarantee the financial ability or solvency of any of the parties; (b) as distinguished from assignment no notice to the original obligor is required to be given by the holder to such transferrer, 10 Sheets v. Culver, 14 La. Ann. Williams, 1 Minn. 54, 55 Am. Dec. 449, 33 Am. Dec. 593; Hubbard v. 66. § 118b TRANSFER BY ASSIGNMENT. 137 5. Transferrer by assignment. A transferrer by assignment (a) is not responsible for the solvency of the parties, that is, he does not warrant solvency; (b) the holder through such transferrer takes the instrument subject to equities; and (c) the holder must notify the original obligor of the assignment. 6. Transferrer holding title by operation of law. A transferrer holding title by operation of law should use care or he will be bound personally when he indorses the instrument. 7. Anomalous indorser. The rules as to the anomalous indorser are laid down in certain cases by the Negotiable Instru- ments Law, that is, in those cases where the signature of such indorser is written in blank on the instrument before delivery. There is a liability by such indorser to the payee as follows: (a) There is liability of a first indorser, that is to the payee, if the instrument is payable to the order of a payee who is a third party; (b) there is liability of said indorser not to the payee but as a second indorser if it is payable to the order of the maker or drawer, or payable to bearer; (c) there is liability not to payee, that is, there is a liability as a second indorser if the signature is for the accommodation of the payee; (d) no other cases are covered by the Negotiable Instruments Law. § 118b. Several indorsements in blank, also combination of in blank and special indorsements. By way of summary and illustration suppose we have five indorsements in blank upon an instrument payable to bearer ; suppose the five blank indorsements are by A, B, C, D, and E, respectively, and the instrument is now in the hands of X. X may do any one of four things : (1) Fill up the first to himself. (2) Deduce his title through all. (3) Strike out any or all. (4) Turn the instrument over to. a stranger without indorse- ment by himself. Suppose again a case of a combination of in blank and special indorsements, that is, suppose X makes a promissory note pay- able to A or order, which is now in the hands of Y, the holder, and the indorsements are as follows: (1) A (in blank; just signs his name). (2) B (in blank; just signs his name). (3) Pay to order of D (signed) C. (4) D (in blank; just signs his name). (5) Pay to order of F (signed) E. (6) F (in blank; just signs his name). 138 NEGOTTABT.K INSTRUMENTS. §118b In the hands of Y, the holder, and as against X, the maker, and A, the payee, the instrument is payable to bearer, because indorsed in blank. Also against the indorser B it is payable to bearer. As against C the special indorser title must be made through D and the holder must prove both C and D's signatures. CHAPTER XII. OF THE NATURE OF THE LIABILITIE^OF THE PARTIES. § 119. In general. h^^3. Indorser. 120. Maker. '> 124. Accommodaton and accom- 121. Drawer. , \^ I S K modated parties. 122. Acceptor. / ^ I $h ■*■ 125. Agent. §JJAr"'Th general. The different parties to Negotiable In- struments have different HabiHties. Some parties are primarily liable, while others are secondarily liable. The Negotiable Instruments Law provides "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."'^ This is also the law generally. § 120. Maker. As to the liability of the maker of a nego- tiable instrument, the Negotiable Instruments Law provides: "The maker of a negotiable instrument by making it engages that he will pay it according to its tenor and admits the existence of the payee and his then capacity to indorse/'^ He not only promises the payee to pay it according to its tenor, but he promises any subsequent holder who is legally entitled to the instrument the same.^ He admits that the payee is the real owner^* and as against a bona fide holder he admits the legal existence of the payee and his capacity to contract.^'' When the instrument is payable to bearer, it is not necessary that the name of every one through whose hands it passes should appear on the instrument, because it is made payable to bearer.'* Anyone bearing the paper can recover against any party on the instrument, the maker, the payee or any of the indorsers. In order to recover against one who has made it payable specially 1 Neg. Inst. Law, § 192, where all ^ ggg bona fide holder. Chap, cases directly or indirectly bear- XIII. ing upon or citing the Law are ^a Wheeler v. Barr, 7 Ind. App. grouped. 381. 2 Neg. Inst. Law, § 60, where 3b gj-ickley v. Edwards, 131 Ind. all cases directly or indirectly 3. bearing upon or citing the Law '* Bitzer v. Wagar, 83 Mich. 223, are grouped. 47 N. W. 210; Goodpaster v. Voris, 8 la. 334, 74 Am. Dec. 313. 139 140 NEGOTIABLE INSTRUMENTS. § 121 to some one, It is necessary to prove the signature of the one who has made it payable and the signature of the one to whose order it is made payable, and also the signature of any other party you are trying to recover against. The payee, when he indorses the instrument, becomes liable to parties who take the instrument after his signature is upon it. § 121. Draviter. The general law as to the liability of the drawer is clearly set out in the Negotiable Instruments Law in the following language : "The drazver by drawing the instrument admits the existence of the payee and his then capacity to indorse ; and engages that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be didy taken, he will pay the amount thereof to the holder or to any subsequent indorser who may be compelled to pay it, but the drawer may insert in the instrument an express stipidation negativing or limiting his own liability to the holder."^ The Colorado and Illinois Acts omit the word "subsequent" before "indorser." The District of Columbia, North Dakota and New York Acts read "accepted and paid." The drawer by signing the instrument thereby states to the payee that if he will take it to the drawee that the latter will accept it and pay it, and if he does not and the payee gives notice to the drawer of the failure on the part of the drawee, then the drawer agrees to pay it himself. He agrees to pay it if the drawee does not, provided notice in a reasonable time is given him of that fact so that he can make himself safe. The Negotiable Instruments Law contains the following pro- vision as to the liability of the drawer or indorser in case of a qualified acceptance : "The holder may refuse to take a qualified acceptance, and if he dfes not obtain an unqualified acceptance, he may treat the bill as dishonored by non-acceptance. Where a qualified accept- ance is taken, the drawer and indorsers are discharged from lia- bility on the bill, unless they have expressly or impliedly au- thorised 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, zvithin a reasonable time, ex- press his dissent to the holder, or he will be deemed to hav^ assented thereto."^ ^ Neg. Inst Law, §61. ing upon or citing the Law are ^ Neg. Inst. Law, § 142, where grouped, all cases directly or indirectly bear- § 122 NATURE OF LIABILITIES. 141 § 122. Acceptor. The general law as to the liability of the acceptor is clearly set out in the Negotiable Instruments Law in the following section : "The acceptor by accepting the instrument engages that he zmll pay it according to the tenor of his acceptance, and admits (1) the existence of the drawer, the genuineness of his signature, and his capacity and authority to draz0 the instrument; and (2) the existence of the payee, and his then capacity to in- dorse:"^ When the acceptor accepts it, being the drawee, he thereby says to the payee, "I recognize that signature as that of the drawer ; I have funds in my possession belonging to him to the amount of this instrument, and I promise that I will accept this and I do accept it, and since it is payable ten days after sight, you bring that instrument around in ten days and I will pay it." Now, this instrument having been indorsed by the payee to A, what is the liability of the acceptor to A? Why, the acceptor says to A, "You present that instrument to me and I will pay it. I recognize that signature of the drawer, and I will vouch for that ; the payee is a party who is capable and has capacity to indorse the instrument ; you present the instrument to me and I will pay it." That is his contract with the indorser or holder, A. What is his contract with the drawer. It is, that he has funds in his hands belonging to the drawer, and he says to A, the drawer, "You draw upon me any time and I will ac- cept and pay the bill. If I don't, then I am liable to you in such damages as you may suffer by my refusal to accept and pay the instrument."* The liability as to the indorsers on th back of the instrument is substantially the same. If it appear that the acceptance is made by a person a/ the agent of another, such agent is not personally liable.** Other provisions as to the liability of the acceptor fou^d in the Negotiable Instruments Law are as follows : "When the acceptor of a hill drawn in a set pays it zvit requiring the part bearing his acceptance to be delivered up him, and that part at maturity is outstanding in the hands of a holder in due course, he is liable to the holder thereon."^ ^Neg. Inst. Law, §62, where all (N. S.) La. 301; Drew v. Phelps, cases directly or indirectly bearing 18 N. H. 572. upon or citing the Law are grouped. ** Tousey v. Taw, 19 Ind. 212 8 Pilkington v. Woods 10 Ind. » Neg. Ins. Law, § 182. where all 432 ; Thompson v. Flower, 1 Mart. cases directly or indirectly bearing upon or citing the Law are grouped. 142 NEGOTIABLE INSTRUMENTS. § 123 "Except as herein otherwise proznded, "where any one part of a hill drawn in a set is discharged by payment or othenmse, the zuhole hill is discharged."''-^ § 123. The indorser. The indorser engages (a) that the ne- gotiable instrument will be accepted or paid, as the case may be, according to its purport ;-^^ but this engagement is conditioned upon due presentment or demand, and notice ;^^ (b) that it is in every respect genuine;*^* (c) that it is the valid instrument it pur- ports to be ;^^ (d) that the ostensible parties are competent i^"* (e) and that he has good title to it and the right to indorse it.-^® And if it turns out that any of these engagements except that first named are not fulfilled, the indorser may be sued for re- covery of the original consideration which has failed, or be held liable as a party, without proof of demand and notice. The above rights inure to the bona fide holder of the bill, and he can sue upon it or further negotiate it, and though guilty of a fraud in parting with it, nevertheless he can give title to a bona fide holder for value v/ithout notice who takes it before maturity. Any irregularity, as a torn paper, or something similar, patent on the face of a bill, is equivalent to notice, and the holder who takes such an instrument will not be considered an innocent holder.*® In an action by the de facto holder, it may be shown that he holds adversely to the true owner, and that he is agent or trustee for another person, and then any defense or set-ofif available against such person is available against the holder. 10 Neg. Ins. Law, § 183. where all 159, 19 Atl. 158, 17 Am. St. Rep. cases directly or indirectly bearing 470; Thrall v. Newell, 19 Vt. 202, upon or citing the Law are grouped. 47 Am. Dec. 682. As to when in- 11 Van Fleet v. Sledge, 45 Fed. dorser can allege defenses, see note 743; Prentiss v. Savage, 13 Mass. 7 U. S. L. Ed. 744. 20; Woodward v. Lowry, 74 Ga. i* By^Jej. v. Slocomb, 33 La. Ann. 148. As to endorser's liability see 170, 39 Am. Rep. 265; Edmunds v. 11 Arf. St. Rep. 930. Rose, 51 N. J. L. 547. 18 Atl. 748, learner v. Brainerd, 7 Utah 14 Am. St. Rep. 704. 26 Pac. 299, 12 L. R. A. 434; 15 Purgerson v. Staples, 82 Me. ^'lie v. Colter, 170 Mass. 356, 49 159, 19 Atl. 158, 17 Am. St. Rep. N. E. 746, 64 Am. St. Rep. 305; 470; Merchants Nat. Bank v. Nash V. Harrington, 1 Aik. (Vt.) Spates, 41 W. Va. 27, 23 S. E. 681, 39, 16 Am. Dec. 672 ; McLanahan v. 56 Am. St. Rep. 828. As to war- Brandon, 1 Mart. (N. S.) La. 321, ranty implied by indorsement see 14 Am. Dec. 188. See note 16 U. S. note 7 Am. St. Rep. 365. L. Ed. 260. i« Skillman v. Titus, 32 N. J. L. 12a Baldwin v. Threlkeld, 8 Ind. 96; Chattanooga First Nat. Bank App. 312; Clark v. Trueblood, 16 v. Stockwell, 92 Tenn. 252, 21 S. Ind. App. 98. W. 523, 20 L. R. A. 605. i^Furgerson v. Staples. 82 Me. § 123 NATURE OF LIABILITIES. 143 "Every indorscr who indorses without qualification warrants to all subsequent holders in due course (1) the matter and things mentioned in subdivisions one, two and three of the next pre- ceding section; and (2) that the ifistrument is at the time of his indorsement valid and subsisting. And, in addition, he engages thai on due presentmient it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishon- ored, and the necessary proceedings on dishonor be didy taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it."^'^ The indorser is estopped to deny the legality or validity of the note*'^* and he undertakes that if tlie note is not paid at maturity and he has due notice of its dishonor, he will pay it.^^" "Where a person places his indorsement on an instrument negotiable by delivery he incurs all the liabilities of an in- dorser."^^ "As respects one another, indorsers are liable pritna facie in the order in which they indorse; but evidence is admissible to shozv that as betzveen or among themselves they have agreed othervAse. Joint payees or joint indorsers who indorse are deemed to indorse jointly and severally."^^ What liability does an indorser have to the preceding in- dorsers? He can recover against any who precede him, but none who succeed him. "The indorsement or assigntnent of the instrument by a cor- poration or by an infant passes the property therein, notzmth- standing that from tvant of capacity the corporation or infant may incur no liability thereon."^^ In other words, the parties who have received the instrument and passed it on to someone else are estopped to set up that the other parties did not have capacity. Of course, a minor has a right to set up the defense that he himself did not have the capacity. These parties, then, guarantee or warrant the capacity of the previous parties to make the instrument, but this does not estop the party who is really incapacitated from setting that up. There is some conflict as to the liability of an indorser with- out recourse, but the general rule is that a person who indorses ^"^ Neg. Inst. Law, § 66, where all cases directly or indirectly bearing cases directly or indirectly bearing upon or citing the Law are grouped, upon or citing the Law are grouped. 1» Neg Inst. Law, § 68, where all 1^' Hoffman v. Hollingsworth, 10 cases directly or indirectly bearing Ind. App. 353. upon or citing the Law are grouped. i^"* Alleman v. Wheeler, 101 Ind. 20 N^g Inst. Law, § 22. where all 141. cases directly or indirectly bearing 18 Neg. Ins. Law, § 67, where all upon or citing the Law are grouped. 144 NEGOTIABLE INSTRUMENTS. § 124 without recourse makes all warranties any other indorser does, except that he does not warrant the capacity financially of the other parties to pay. He does not agree to indemnify the other parties on the instrument. The indorser without recourse makes this representation and warranty to every person who gets the instrument, that the parties had capacity and the instrument is a valid instrument as to form, etc.,^* but he does not warrant the financial responsibility of the parties. By placing his name there, he makes that contract with everybody who takes the instrument. When an instrument is made payable to bearer and has passed from hand to hand by mere delivery, the indorsee or holder has no right to recover from any other party who has passed it on by delivery unless that party's name appears on the instrument. There can be no recovery against the party whose name is not on the instrument, unless the party who is endeavoring to re- cover from him has immediately received that instrument from him. Those are the liabilities of the indorser without recourse and the indorser by mere delivery. The Negotiable Instruments Law covers these principles in the following section : "Every person negotiating an instrument by delivery or by a qualified indorsement warrants^^ (1) that the instrument is genuine and in all respects what it purports to be; (2) that he has a good title to it; (3) that all prior parties had capacity to contract; (4) that he has no knoidedge of any fact zvhich wotdd impair the validity of the instrument or render it valueless. But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee. The provisions of subdivision three of this section do not apply to persons negotiating public or corporate securities, other than bills and notes." There is the following provision as to the liability of an agent or broker who negotiates an instrument without indorsement: "Where a broker or other agent negotiates an instrument with- out indorsement, he incurs all the liabilities prescribed by section sixty- five of this act, unless he discloses the name of his principal, and the fact that he is acting only as agent."^^ § 124. Accommodation and accommodated parties. The fol- lowing provision is found in the Negotiable Instruments Law: 21 Lobdell V. Baker, 3 Mete. 22 Neg. Inst. Law, § 65, where all (Mass.) 469; Watson v. Cheshire, cases directly or indirectly bearing 18 la. 202, 87 Am. Dec."' 382; Han- upon or citing the Law are grouped, mun V. Richardson, 48 Vt. 508, 21 23 Neg. Ins. Law, § 69, where all Am. Rep. 152; Ware v. McCormack, cases directly or indirectly bearing % Ky. 139, 28 S. W, 157. upon or citing the Law are grouped. § 124 NATURE OF LIABILITIES. 145 "An accommodation party is one mho has signed the instru- ment as maker, drawer, acceptor or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notzvithstanding such holder at the time of taking the instrument knezsj him to be only an accommodation party."^'* Here is a lending of the credit of one person to another for accommodation. A wishes to pay an obligation of $500 and he has no credit ; he says to B : "Put your name on this paper and I will have money by the time it comes due and pay it and I will see that you do not suffer any damage." So B signs. When that instrument becomes due, if A does not pay and B has to, then B can recover from him. But since B has received no con- sideration there can be no recovery as against him by A. As stated above, an accommodation contract may be described as a gift by A to B of A's credit, to be offered to another on payment of value. A contract of such a nature may take any of the forms of the law merchant ; a promissory note may be made or indorsed for accommodation ; a bill of exchange may be drawn, accepted or indorsed for accommodation, that is, most any party to the instrument may be an accommodation party. The accommodation party is the one who has signed for the purpose of lending his name to some other person as a means of credit — he is also called the accommodating party. The party to whom the credit is loaned is called the accommodated party. Certain liabilities arise as a result of the relations established. The accommodated party is liable to the accommodating or ac- commodation party. Thus the drawer may show that he accepted and paid the bill for the accommodation of the drawer and then the law will imply an undertaking on the part of the drawer, to indemnify the acceptor who, on such implied obligation, may have an action against the drawer. Such action is not brought upon the bill, for when the instrument is paid it is extinguished and no longer exists as a valid instrument and consequently the in- strument not being in existence, the acceptor cannot recover upon the instrument itself.^** As already stated, there is no liability of the accommodating party or accommodation party to the accommodated party or the person for whose accommodation he has given it, as the obliga- 24 Neg. Inst. Law, § 29, where all R. A. 698, and 31 Am. St. Rep. 745. cases directly or indirectly bearing And as to accommodation indorse- upon or citing the Law are grouped. ment by bank see note 23 L. R. A.. As to liability of accommodation 836. maker and indorser see notes 5 L. 24a Dj(.]^gj.son v. Turner, 15 Ind. 4. 146 NEGOTIABLE INSTRUMENTS. § 124 tion is without consideration and a nudum pactum. The accom- modating party is Hable to all other bona fide holders who take the instrument. Suppose A lends you his credit for a special purpose and you use that credit for some other purpose and the person who takes that credit knows that it has been loaned for a particular pur- pose, then the person who takes that credit cannot recover. He cannot recover because he knows that the credit has been diverted from the purpose for which it was given — he has notice. Where a bill is drawn or accepted, or a note made or indorsed for accommodation, with an agreement that it shall be used for a particular purpose, any diversion in its use operates as a dis- charge of the accommodation party as to all other parties who have knowledge of such diversion.^^ It is immiaterial that paper executed or indorsed for accom- modation is not used in precise conformity with agreement, when it does not appear that the accommodation party had any interest in the manner in which the paper was to be applied.^® No change in the mere mode or plan of raising the money, though not ap- plied to the purpose intended by the accommodation party, will constitute a misappropriation. In order to constitute a mis- appropriation, there must be a fraudulent diversion from the original object and design ; and it is now well settled that where a note is indorsed for the accommodation of the maker, to be discounted at a particular bank, it is no fraudulent misappro- priation of the note, if it is discounted at another bank^^* or used in the payment of a debt or otherwise for the credit of the maker.^'^ If the note has effected the substantial purpose for which it was designed by the parties an accommodation maker or indorser cannot object that the accommodation was not effected in the precise manner contemplated, where there is no fraud, and the interest of the indorser is not prejudiced.^* It is the general rule that an accommodation party lends his credit only for the period specified in the instrument, that is, until its maturity ; and if transferred thereafter such party should not be made liable except as an ordinary party to commercial 25 Stoddard v. Kimball, 6 Cush. 27 Powell v. Waters, 17 Johns. (Mass.) 469; Daggett v. Whiting, (N. Y.) 176; Bank of Chenango v. 35 Conn. 372; Small v. Smith, 1 Hyde, 4 Cow. (N. Y.) 567. Denio. (N. Y.) 583. ssj^ckson v. Bank, 42 N. J. L. ^epelters v. Muncie Nat. Bank, 178; Dum v. Weston, 71 Me. 270; 34 Ind. 256; Quinn v. Hard, 43 Vt. Briggs v. Boyd, 37 Vt. 538. As to 375. fraudulent diversion see note 31 /3. traudulent diver 2«a Reed v. Trentman, 53 Ind. 438. Am. St. Rep. 748. § 124 NATURE OF LIABILITIES. 147 paper.*® However, it should be borne in mind that the accom- modation indorser's liability may become fixed by presentment and notice and so survive maturity, and he would thus continue liable ; but of course if not issued until after maturity or until overdue, the accommodating indorser is not liatile. The presumption is that such an indorser is subject to the same liabilities as are imposed by the statute upon general in- dorsers. And their rights are largely the same. Thus one indorsing an instrument for the accommodation of the maker cannot be charged without a demand. While a corporation has, under certain circumstances, the gen- eral power to bind itself by promissory notes and contracts of indorsement, made in the general course of its business, it has no power to make or indorse notes for the accommodation of others.*'** The validity of such paper can also be assailed upon the theory that the officer of a corporation who executes it can- not so bind the corporation in a matter not connected with its business, or in which it has no beneficial interest. But in the hands of a bona fide purchaser for value, accommodation paper duly executed by the officers of a corporation can be enforced against the corporation.^® The rules applicable to the rights of bona fide holders of accommodation paper, signed by one of a partnership without the consent of his copartners, can also be applied in the case of similar paper executed by the officers of a corporation. An accommodation bill or note accepted, made or indorsed by one member of a firm cannot be enforced against the firm by one who took it with knowledge of the accommoda- tion character of the firm's signature, unless all the partners assented thereto.^**^ Successive accommodation parties are liable to each other in succession, according to the order in which their names appear upon the instrument.^^ The reason for this rule may be found in the presumption that each accommodation indorser placed his name upon the instrument trusting in the strength of the prior accommodation indorsers. Facts may be shown as in the case of 29 Chester v. Dorr, 41 N. Y. 279; macy Co. v. Trust Co., 97 Ga. 573, Bower v. Hastings. 36 Pa. St. 285 ; 25 S. E. 171. Battle V. Weems, 44 Ala. 105. soa Beach v. The State Bank, 2 29' Smead v. Railroad, 11 Ind, 104. Ind. 488. 30 Nat. Bank v. Young, 41 N. J. 31 Ajj^en v. Barklev. 2 Speers (S. L. 531, 7 Atl. 488; Am. Trust & C.) 747, 42 Am. Dec. 317; U. S.' Savings Bank v. Gkick, 68 Minn. Bank v. Beirne, 1 Gratt. 234, 42 129, 70 N. W. 1085 ; Jacobs Phar- Am. Dec. 551 ; Moody v. Findley, 43 Ala. 167. 148 NEGOTIABLE INSTRUMENTS. § 125 Other indorsers to show that the liabiUty is joint because of an agreement between them to be bound jointly and not severally. If no such agreement is shown such indorsers are not co-sureties and there can be no right of contribution among them.^^ § 125. Agent. The general rule as to the liability of an agent is found in a section of the Negotiable Instruments Law which reads as follows : "Whether 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 zms didy authorised ; but the mere addition of words describing him as an agent, or as Ulling a representative character without disclosing his principal, does not exempt him> from personal liability."^^ The above section of the statute as to the non-liability of the agent who has been duly authorized changes the rule in many jurisdictions. The section reaches the right result as individual liability should not be imposed upon an agent who, being duly au- thorized to sign, discloses the name of a principal on the instru- ment, and indicates that he himself is an agent or officer, without regard to the form in which this is done. It has been argued that an agent signing without authority of the principal is, by implication, liable on the instrument under this section. In support of this it is stated that the agent should know whether he has authority and it increases negotiability and causes no confusion as to the amount recoverable. The digest of the annotated cases in another part of this work should be consulted as to the course of judicial decisions on this section. 32 Kirschner v. Conklin, 40 Conn. 33 Neg. Inst. Law, § 39 (20), 77 ; Moore v. Gushing, 162 Mass. wher» all cases directly or indirect- 594, 39 N. E. 177. 44 Am. St. Rep. ly bearing upon or citing the Law 393 ; U. S. Bank v. Beirne, 1 Gratt are grouped. 234, 42 Am. Dec. SSL CHAPTER XIII. NATURE AND RIGHTS OF A BONA FIDE HOLDER OR A PUR- CHASER FOR VALUE WITHOUT NOTICE. § 126. Bona fide holder for value § 127. Good faith or bona fide. without notice— In gen- 128. Holder for value. era!. 129. Holder without notice. § 126. Bona fide holder for value without notice— In gen- eral. The following provisions are found in the Negotiable Instruments Law and contain a correct statement of the law generally : "A holder in due course is a holder who has taken the instru- ment under the following conditions: 1. That it is complete and regular upon its face. 2. That he became the holder of it before it zms 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 time it ztxis negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it."^ "A holder in due course holds the instrument free from any, defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon."^ "In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter."^ "Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who 1 Neg. Inst. Law, § 52, where all ^ Neg. Inst. Law, § 57, where all cases directly or indirectly bearing cases directly or indirectly bearing upon or citing the Law are grouped. upon or citing the Law are grouped. As to rights of bona fide holder, see ^ Neg. Inst. Law, § 58, where all notes 5 U. S. L. Ed. 87, also 10 U. S. cases directly or indirectly bearing L ed 473. upon or citing the Law are grouped. 149 150 NEGOTIABLE INSTRUMENTS. § 128 has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as a holder in due course. But the last men- tioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title."* § 127. Good faith or bona fide. The term "bona Me holder" or holder in good faith, means a holder according to the law merchant, without knowledge or notice of equities of any sort which could be set up against a prior holder of the instrument.** Absence of knowledge of the defense, when the instrument was taken, is the essential element in the matter of bona fide.^ That is, the holder, in order to be entitled to protection against offsets and equities and defenses based upon frauds, pleaded by prior parties, must have acquired the paper in good faith from his predecessor. If the holder's acquisition of the paper be in any respect fraudulent he cannot claim the position of a bona fide holder.'' The Negotiable Instruments Law provides : "The title of a person who negotiates an instrument is defect- ive within the meaning of this act zvhen he obtained the instru- ment, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or zvhen he negotiates it in breach of faith, or under such circum- stances as amount to a fraud."^ § 128. Holder for value. We have taken up the considera- tion of the expression "bona fide holder for value without no- tice"** and "bona fide purchaser for value without notice."^® This expression becomes important in case of equities or personal de- fenses. If there are certain equities or personal defenses against an instrument a bona fide holder for value without notice may nevertheless recover against any party to the instrument. Of course, any party to an instrument who had an equity or per- 4 Neg. Inst. Law, § 59, where all cases directly or indirectly bear- cases directly or indirectly bearing ing upon or citing the Law are upon or citing the Law are grouped. grouped. 5 Stephens v. Olson, 62 Minn. 295, ^ Matthews v. Poythress, 4 Ga. 64 N. W. 898; Whistler v. Forster, 287; Limerick Nat. Bank v. Adams, 14 C. B. N. S. 248, 108 E. C. L. 248. 40 Atl. 166, 70 Vt. 132. OHelner V. Krolick, 36 Mich. 371; lo Young v. Schofield, 132 MoT Raphael v. Bank of England, 17 650, 34 S. W. 497; Ten Eyck v. C. B. 161, 84 E. C. L. 161. Whitbeck, 135 N. Y. 40, 31 N. E. 7 Angier v. Brewster, 69 Ga. 362; 994, 31 Am. St. Rep. 809; Scott v. Hickson v. Earley, 62 S. C. 42, 39 McGraw, 3 Wash. St ^5. .29 Pac. S. E. 782. 260. 8 Neg. Inst. Law, § 55, where all § 128 RIGHTS OF BONA FIDE HOLDER. 151 sonal defense can be recovered against by a bona fide holder for value without notice, but the bona fide holder for value cannot recover against one who has an absolute defense, for such de- fense attaches to the thing itself and can be set up against any- body. But, if the defense is a personal defense, it cannot be set up successfully.^^ There is considerable in the expression "bona fide holder for value." What is a "holder for value" and a "bona fide holder without notice?" A person is a holder for value who has given in return value, just the same as in any con- tract, or according to the Negotiable Instruments Law: "Value means valuable consideration."-^^ "] A bank that has acquired possession of a negotiable instrument and given credit to the one who presented it in his deposit ac- count for the proceeds has given value so as to be a holder in due course.-^^* There are two different classes of cases, where there is some conflict of authority as to whether or not value has been given. One instance is where an instrument is given as collateral secur- ity. A not only makes his own note but gives the note of B as collateral security, and the better opinion is, that a note given as collateral security has been given for value, and a person who has an equity or a personal defense which he could set up against another could not set it up successfully in such a case, because the person who holds the security holds it for value.-^* Some juris- dictions hold that the collateral note must be given at the time of the loan ;** they say it must be in forbearance to sue, or extension of time, in order that some consideration may arise for the giving of the security.-^^ By the weight of authority, the better rule is to the effect that the holder of a collateral note is a holder for value and may recover from the parties liable upon the in- strument.*® 11 As to personal and real de- ^^ Smith v. Bibber, 83 Me. 34, fenses see, Chap. XIV. 19 Atl. 89, 17 Am. St. Rep. 464; i2Neg. Inst. Law, § 191, where all Porter v. Andrus, 10 N. D. 558, 88 cases directly or indirectly bearing N. W. 567. upon or citing the Law are grouped. ^^Maitland v. Citizens' Nat. 12a Old National Bank of Spokane Bank, 40 Md. 540, 17 Am. Rep. V. Gibson, - Wash. — 179 Pac. 117, 620; Best v. Krell, 23 Kan. 482, 33 6 A. L. R. 247. See note 6 A. L. Am. Rep. 185; Birket v. Edward, R. 252. 68 Kan. 295, 74 Pac. 1100. l^Silbley v. Robinson, 10 Shep. Contra, Porter v. Andrus, 10 N. (Me.) 70; Swift v. Tyson, 16 Pet. D. 558, 88 N. W. 567; Rosborough 1 ; Grocers' Bank v. Penfield. 69 N. v. Messich, 6 Ohio St. 448, 67 Am. Y. 502, 25 Am. Rep. 231. Dec. 346; Vollertein v. Howell, 37 i^Vann v. Marbury. 100 Ala. 438, Tenn. (5 Sneed) 441. 46 Am. St. Rep. 75, 14 So. 273, 23 L. R. A. 325. 152 NEGOTIABLE INSTRUMENTa § 128 It is now settled in those states which have adopted the act" .that a note transferred before maturity to a holder in due course, as collateral security for a pre-existing debt, is transferred for value, and the holder takes it free from defenses or set-offs exist- ing between the original parties. The Negotiable Instruments Law provides as follows: "Value is any consideration sufficient to support a simple con" tract. An antecedent or pre-existing debt constitutes value, and is deemed such whether the instrument is payable on demand or at a future time."^"^^ The second class of instruments is where a note is given for a pre-existing debt ; for example when an account, or something of that kind comes due, a note is given for the debt. What was the consideration? All the goods have been bought and used; it is a debt ; can we say there has been a consideration ? In some jurisdictions, the note itself is enough consideration ; other juris- dictions say that there must be some new consideration, forbear- ance or something of that nature. Still other jurisdictions hold that it must be in extinguishment of the debt. In other words, if A had an account of $50 and that account is due and unpaid, and A gives a promissory note for $50 and that is taken in extinguishment of the debt, and if afterward any proceeding is brought on that note, the holder of the note would be a holder for value; or, if an extension of time has been given, then the holder of the instrument would be a holder for value. Conceding that it is an established rule that an antecedent or pre-existing debt constitutes value, there can be no question but that where paper is transferred in payment of a pre-existing debt, the transferee becomes a holder for value, and takes the paper free from all defenses and equities existing between the original parties.*^ Those two classes of cases are the ones upon which there is a great diversity of opinion. In all other cases it is whether or not value was given, that is, the principles of contract are applied. "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."'^^ i'" Neg. Inst. Law, § 25, where all 243 ; Breckenridge v. Lewis, 84 cases directly or indirectly bearing Me. 349, 24 Atl. 864, 30 Am. St. upon or citing the Law are grouped. Rep. 353 ; Herman v. Gunter, 83 !''» Neg. Inst. Law, § 25, where all Tex. 66, 18 S. W. 428, 29 Am. St. cases directly or indirectly bearing Rep. 312. upon or citing the Law are grouped. i» Neg. Inst. Law, § 26, where all IS Yellowstone Nat. Bank v. cases directly or indirectly bearing Gagnon, 19 Mont. 402, 48 Pac. 762, upon or citing the Law are grouped. 61 Am. St. Rep. 520, 44 L. R. A. § 129 RIGHTS OF RONA FIDE HOLDER. 153 If one becomes a bona fide holder for value of a bill of ex- change before acceptance, it is not essential to his right to enforce it against a subsequent acceptor that any additional consideration should proceed from him to the drawer.** "Where the holder has a lien on the instrument, arising either from contract or by implication of laiv, he is deemed a holder for value to the extent of his lien."^^ A banker's lien would protect a bank having possession of the bills or notes of a customer to the extent of the balance due such bank from such customer;'^ and a transfer of such an instrument to any other holder as collateral security for the pay- ment of a debt due such holder from the person who transfers the note, makes the holder a pledgee and gives him a lien to the extent of the debt.*^ § 129. Holder vi^ithout notice. The third part of the prin- ciple is that the holder must be one "without notice," a bona fide holder, a holder for value "without notice." By that we mean that the person must not have any notice, either actual or constructive, of these defenses.*^ If he does have notice, he cannot recover against any one who has these defenses. If a person takes an instrument knowing of the equities, they can be set up against him. That a note is payable to the order of the maker is not suffi- cient to excite the suspicion of a purchaser so as to- prevent his becoming a bona fide holder.*** The Negotiable Instruments Law provides : "Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the fidl amount agreed to- be paid therefor, he unll be deemed a holder in due course only to the extent of the amount theretofore paid by him."^^ An amount paid for an instrument, if a trifling sum, may of itself establish notice. But it is difficult to lay down the exact 20 Heuertematte v. Morris, 101 N. ^^ Limerick Nat. Bank v. Adams, Y. 70. 70 Vt. 132, 40 Atl. 168; Stalker v. 2iNeg. Inst. Law, § 27, where all McDonald, (N. Y.) 6 Hill 93, 40 cases directly or indirectly bearing Am. Dec. 389. upon or citing the Law are grouped. 24a Ochsenreiter v. Block, — S. 22 Nat. Bank v. Ins. Co., 104 U. Dak. — , 173 N. W. 734. See note S. 54 ; Straus v. Tradesman Nat. 6 A. L. R. 458. Bank, 122 N. Y. 379; Qark v. 25 Neg. Inst. Law, § 54, where all Bank, 160 Mass. 26. cases directly or indirectly bearing 23 Anderson v. Bank, 98 Mich. upon or citing the Law are grouped. 543; Stoddard v. Kimball, 6 Cush. 469. 154 NEGOTIABLE INSTRUMENTS. § 129 line of demarcation and state what proportion the amount paid must bear to the face of the paper in order to charge the pur- chaser prima facie with notice or raise the presumption of bad faith on his part.^® But it may be said that the consideration should be so utterly trifling as to bear upon its face the impress of fraud to leave open no reasonable conjecture but that the purchaser must have known, from the very nature of the facts, that they could not have originated from any but a corrupt source. The known solvency of prior parties would of course strengthen the argument of implied notice and bad faith wher- ever they were alleged. If the amount paid for the paper were not so insignificant as, per se, to charge the transferee with no- tice, it might still be so inadequate as to be a pregnant fact, to be given due consideration in connection with others in determining whether he should be charged with notice or not.^'' If the amount v/hich the holder offers to take for a negotiable instrument is insignificant as compared to its face value, it might be under the circumstances implied notice that there was some- thing wrong about it; and taken without inquii*y, one should not be protected. For it is obvious that a bona fide owner would not throw away his property for a trifle, and that the purchaser acted in bad faith when he acquired it for comparatively nothing. "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 knozvledge of such facts that his action in taking the instrument amounted to had faith."^^ Actual knowledge of a defect or infirmity in an instrument on the part of the indorsee, although purchased by him, for value and otherwise in good faith, will destroy the protection which the law affords to a holder in due course. The fact that full value was given for an instrument will not benefit the holder where it appears that he had actual knowledge of the facts which impeach the title thereof or prevent a recovery thereon by him. Knowledge of the agent acting within the scope of his authority is notice to the principal. Now, there is one principle that is rather confusing in con- nection with a holder for value without notice, and yet it works 2« Williams v. Huntington, 68 27 Smith v. Jansen, 12 Nebr. 125, Me. 590. 13 Atl. 336, 6 Am. St. 10 N. W. 537, 41 Am. Rep. 761; Rep. 477; Joy v. Diefendorf, 130 Jordan v. Grover, 99 Cal. 194, 2,2 N. Y. 6, 28 N. E. 602, 40 N. Y. Pac. 889; Knowlton v. Schultz, 6 St. 491, 27 Am. Sit. 'Rep. 484; N. D. 417, 71 N. W. 550. Kitchen v. Loudenbach, 48 Ohio ^sjyTgg j^gj. l^w, § 56, where all St. 177, 26 N. E. 979, 29 Am. St. cases directly or indirectly bearing Rep. 540. upon or citing the Law are grouped. § 129 RIGHTS OF BONA FIDE HOLDER. 155 out justice, and that is this principle: That if A receives an instrument from B and B was a bona fide holder for value with- out notice, even though A has notice when he receives it, if he is a holder for value, he may recover upon the instrument. That is, if B secures the instrument, say for $50, and there are certain equities against that instrument, as for example, the note has been procured by fraud ; B does not have notice of that fraud when he gets that instrument, B having that instrument and being lawfully entitled to it can pass that on to anybody he desires, and if A has notice of the fraud which B did not have notice of, A can recover against those parties who did not have notice. What good would the instrument do B calling for $50 in his hands? His hands would be tied and he could not dispose of it until he disposed of it to somebody who did not have notice. The principle of the law merchant is that it can pass from hand to hand the same as money does. The law merchant says, "Yes, B can dispose of that instrument to anybody ; it does not matter if that person has notice of the fraud ; that person who had notice can recover upon the instrument. A bona Ude holder for value without notice can dispose of the paper to a bona fide holder for value who has notice."^^ It is provided in the Negotiable Instruments Law as follows: "* * * But a holder zvho derives his title through a holder in due course, and who is not himself a party to any fraud ot illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter.''-^^ The above section of the Law has some slight changes in several of the states. By this section a purchaser from a holder in due course is entitled to recover against the maker, even though he have notice of fraud.^'^'" "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."^^ The same is true as to paper which is overdue. An instrument has been received and it is one month overdue. A looks at the instrument and says, "Why, that was due the first of Februar}'' and this is the first of March ; why does the maker of that prom- issory note refuse to pay it? Why do those indorsers refuse to 29 Butterfield v. Town of Ontario, cases directly or indirectly bearing 82 Fed. 891 ; Armstrong v. Am. upon or citing the Law are grouped. Ex. Nat. Bank. 133 U. S. 433, 33 h. ^'^*' McMurray v. McMurray, 285 Ed. 747; Fowler v. Strickland, 107 Mo. 405, 167 S. W. 513. Mass. 552 ; Bodley v. Emporia Nat. so jsj^g i„gt j^^^^^ g 53_ where all Bank, 38 Kan. 59, 16 Pac. 88. cases directly or indirectly bearing 20a ]sjgg jj^5t L^^^ § 5g^ where all upon or citing the Law are grouped. 156 NEGOTIABLE INSTRUMENTS. § 129 pay it? Do not misunderstand, because the instrument is over- due, that does not make it void, for if an instrument is all right before it is due, it is all right afterguards. If A receives an instrument payable to himself at maturity, he has a right to transfer that instrument after it is due. If A has good title to it, he can transfer it to anybody at any time. But, if A re- ceives an instrument before it is due and receives it with notice of equities against it, such as fraud, etc., and he has notice of that before maturity, and then after the note becomes due and is not paid X comes along and A offers it to him, and he says, "That instrument is for $500, is it all right?" and A says, "Yes" — then X gives $500 for it, he is a bona fide holder for value but gets it after maturity. X gets no better title than A had. A had notice and X receiving it after maturity gets it also with no- tice, because A had notice and A cannot transfer any better title than he had.^^ After maturity negotiable paper still passes from hand to hand ad infinitum until paid. Moreover, the indorser, after maturity, wTites in the same form, and is bound only upon the same con- dition of demand upon the drawer and notice of non-payment, as any other indorser. The paper retains its commercial attri- butes, and circulates as such in the community ; but there is this vital distinction between the rights of a transferee who received the paper before and of one who received it after maturity. The transferee of negotiable paper to whom it is transferred after maturity, acquires nothing but the actual right and title of the transferrer.^^ The transferee takes overdue paper subject to all the equities with which it was encumbered m the hands of the party from whom he received it.^^ Thus if he took it from a thief, or finder, or from a bankrupt incapaci- tated by law to make the transfer, he can not recover on it, inas- much as the thief, finder, or bankrupt could not. Bills payable in installments are considered overdue in toto, 31 Greenwell v. Haylan, 78 Ky. merely makes it subject to the 332, 29 Am. Rep. 234; Aver v. equities that may exist against Hutchins, 4 Mass. 370, 3 Am. Dec. it and does not permit an attack 232 ; Comstock v. Draper, 1 Mich. on the purchaser's title. Sanderson 481, 53 Am. Dec. 78; Lancaster v. Crane, 14 N. J. L. 506. Bank v. Woodard, 18 Pa. St. 357, 3a Powler v. Brenbley, 14 Pet. 57 Am. Dec. 618. As to rights of 318. See note 46 L. R. A. 573. holder of instruments transferred ^3 Speck v. Car Co., 121 111. 57, after maturity see notes 18 U. S. L. 12 N. E. 213; Church v. Clapp, 47 Ed. 931 and 46 L. R. A. 753. Mich. 257, 10 N. W. 362 ; Morgan v. The purchase of paper overdue U. S., 113 U, §. 500. § 129 RIGHTS OF BONA FIDE HOLDER. 157 when any installment is past due, but not from the fact that interest is past due.** The position of a holder who takes a bill when overdue is this : He is a holder with notice. He may or may not be a holder for value and his rights will be regulated accordingly. He is a holder with notice for this reason ; he takes a bill which, on the face of it, ought to have been paid. He is therefore bound to make two inquiries. 1. Has what ought to have been done really been done, i. e., has the bill in fact been discharged? 2. If not, why not? Is there any equity attaching thereto? i. e., was the title of the person who held it at maturity defective? If his title to the instrument was complete, it is immaterial that for some collateral reason, e. g., set-off, he could not have enforced the bill against some one or more of the parties liable thereon. The rule that a party taking an overdue bill or note takes it subject to the equities to which the transferrer is subject does not extend so far as to admit set-off's which might be available against the transferrer.^ A set-off is not an equity, and the general rule stated is qualified and restricted to those equities arising out of the bill or note transaction itself, and the trans- feree is not subject to a set-off which would be good against the transferrer, arising out of collateral matters. 34 Vinton v. King, 4 Allen 562 ; 35 Robinson v. Lyman, 10 Conn. Field V. Tibbetts, 57 Me. 358, 99 30; Edney v. Willis, 23 Neb. 56, 36 Am. Dec. 779; Nat. Bank of Battle N. W. 300; Young v. Shriner, 80 Creek v. Dean, 86 la. 656, 53 N. W. Pa. St. 463. 338. CHAPTER XIV. REAL OR ABSOLUTE DEFENSES. § 130. Defenses — In general. § 136. Incapacity to contract — 131. Real defenses — In general. Drunkenness. 132. Incapacity to contract — In- 137. Illegality oi contract — fancy. Gaming, usurious and Sun- 133. Incapacity to contract — day notes. Coverture. 138. Forgery. 134. Incapacity to contract— 139. Duress when amounting to Where corporation prohib* forgery. ited. 140. Statute of limitations. 135. Incapacity to contract — 141. Failure to stamp. Insanity. § 130. Defenses — In general. The defenses which may be interposed to an action upon a negotiable instrument may be grouped or arranged into two classes : ( 1 ) real or absolute de- fenses, and (2) personal defenses. Real or absolute defenses are those which attach to the instru- ment itself, and are good against all persons, thus they are good against a bona fide holder for value. Real defenses, like real actions, are founded upon a right, good against the world. They are called real because they attach to the res, i. e., the instrument itself, regardless of the merits or demerits of the plaintiff. So a purchaser for value without notice is powerless against a real defense.-^ Personal defenses are those which grow out of the agreement or conduct of a particular person in regard to the instrument, which renders it inequitable for him, though holding the legal title, to enforce it against the defendant, but which are not available against bona fide purchasers for value, without notice. They are called personal defenses because they are available only against that person or a subsequent holder who stands in privity with him.^ The purpose of our consideration of these defenses on nego- tiable paper is to determine whether or not when an instrument gets into the hands of a bona fide holder for value without notice, there is any right which may be set up against him. We might * Ames Cases on Bills and Notes, ^ Ames Cases on Bills and Notes, 811. As to defenses in general, see 812. note 46 L. R. A. 760. 158 § 130 REAL OR ABSOLUTE DEFENSE, 159 say, as between the immediate parties, all defenses are real de- fenses, because as between the immediate parties any defense can be set up just as in an ordinary contract* As between you and A if the instrument has passed from you to A, you have the right to set up any defense you could on any ordinary con- tract. But it becomes important to know whether they run when it gets into the hands of some third party. Now, there is another matter which is confusing in these defenses. We see that a real defense is a defense which attaches to the thing itself. Now, we must not confuse the idea that that instrument in the hands of everybody cannot be recovered upon, for the real defense, in many instances, applies only to the person who has made the instrument. As a matter of fact, we may state it as a general rule, that a real defense is a defense which the person against whom you are endeavoring to recover may set up, and that person is usually the person primarily liable upon the instrument. The real defenses are so-called here because they attach to the thing irrespective of the parties to it. The right sought to be enforced has never existed or ceased to exist ; it is a real or abso- lute defense. It is a defense against everybody — against the party who receives it immediately from me, against A, B, C, or D, holders for value — against everybody. Now, those defenses which are absolute are : 1. Want of capacity to make a binding contract. ■ 2. Downright illegality of contract. \ / 3. Forgery — V a. Ordinary forgery. b. Fraud when it amounts to forgery. c. Alteration when material and made by a party and not a stranger. 4. The statute of limitations. 5. Fraud or duress when amounting to a forgery. The personal defenses or those free from which the purchaser for value without notice acquires title are : 1. Alteration. 2. Simple fraud. 3. Duress. 4. Want or failure of consideration. 5. Illegality, unless the contract is declared void by the statute. 6. Payment or renunciation, or release before maturity. SKulenkamp v. Groff, 71 Mich. Gratt. (Va.) 246; Wright v. Irwin. 675, 40 N. W. 57; Clark v. Pease, 2>Z Mich. 32; Mills v. Barber, 1 41 N. H. 414; Voltier v. Zane, 6 Mees. & W. 425. 160 NEGOTIABLE INSTRUMENTS. § 131 § 131. Real defenses — In general. As heretofore set out there are five divisions of real or absolute defenses. The first is "The incapacity of the defendant to make the contract." (1) As infancy,^ which may be a real defense at the option of the infant, and in some jurisdictions it is a real defense even in case of necessaries. (2) As coverture** — for example in some jurisdictions today married women are not bound by becoming surety. (3) So ultra vires^ is a real defense ; this, however, is an unusual case. It is a real defense to the cor- poration only. (4) Insanity'^ is a real defense when the party has been adjudged insane. It is a real defense to the insane person only. (5) And last is drunkenness.^ It is a real defense to the drunkard only. The second division is downright illegality of contract as "By statute."^ ( 1 ) Where the statute declares the contract void, as a gaming contract in some jurisdictions. This is a real defense to the maker of the instrument, or to one who has made the in- strument to pay a gambling debt. (2) Under the statute as when the statute connects a penalty, as notes made on Sunday. It would be a real defense as against anybody ; against a bona fide holder for value, since he would not be a bona fide holder for value, because he would have notice that it was made on Sunday by the date upon it. (3) Under the statute as "usury." Usury is a real defense in some jurisdictions as to the excess over the legal rate and in others as to all the interest and in still other jurisdictions as to both principal and interest. The third division is "Forgery."^** The fourth division is the "Statute of Limitations," which is a real defense at the option of the party who is entitled to set up that statute. The fifth and last is "Duress,"" which is a real defense where it amounts to a forgery. These will now be considered in their order. § 132. Incapacity to contract — Infancy. Suppose a note was made by a minor and you endeavor to recover against him and he sets up the defense that he is a minor, that he did not have the capacity to make that contract, and is therefore not liable. It is a defense which the minor can set up against all the world.** 4Pojf, §132. 11 Po.y/, § 139. ^Post,%UZ. i2Des Moines Ins. Co. v. Mc- «Po^^§134. Intire, 89 la. 50, 68 N. W. 565; 7 Post, § 135. Howard v. Simpkins, 70 Ga. 322 ; 8Poj/,§136. Fitts V. Hall. 9 N. H. 441; Conroe ^Post. §137. V. Birdsall, 1 Johns. Cas. (N. Y.) '^^Post, § 138. 127, 1 Am. Dec. 105. § 131 REAL OR ABSOLUTE DEFENSE. 161 It is a defense which no one can set up for him but he must set it up for himself.^^ Now, if that instrument passes through the hands of A, B, and C, the succeeding parties can recover from the preceding parties on the instrument, because of these imphed warranties which we have considered. If A makes a note pay- able to B, a minor, A would be estopped from setting up that B could not indorse." And so, the instrument is not void as to everybody, but the minor has a right to set up that the instru- ment is void as to himself, but the other parties do not have that right.^^ In other words, if the minor indorses an instrument it does not bind him on the indorsement, but at the same time he transfers certain rights; he is not incapacitated to contract and transfer those rights.*^ The Negotiable Instruments Law provides: "The indorsement or assignment of the instrument * * * hy an. infant passes the property therein, notzvithstanding that from zvant of capacity the * =i^ * iyifant may incur no liabil- ity thereon."^^" As to a note made by a minor for necessaries different juris- dictions have different rules. The law in some jurisdictions is that such a note made by a minor is voidable." Of course, if he does not set up the fact that he is a minor he can go ahead and pay it, and the person w^ho receives the money would be entitled to receive it. It is voidable then and not absolutely void. In some other jurisdictions the courts hold that a note made for necessaries by a minor is valid and he may be proceeded against the same as an adult.^^ If a bill of exchange is drawn by an infant, the acceptor cannot set up as a defense that the minor was without legal capacity to draw the bill ^^* The Law provides: "The acceptor by accepting the instru- ment * * * admits * * * the existence of the payee and his then capacity to indorse."^^*' 13 Nightingale v. Withington, 15 l' Ayers v. Burns. 87 Ind. 245, Mass. 272, 8 Am. Dec. 101; 44 Am. Rep. 759; Fenton v. White, Hertness v. Thompson, 5 Johns. 4 N. J. L. 115; Swasey v. Vander- (N. Y.) 160. heyden, 10 Johns. (N. Y.) 33; Price 14 Frazier v. Massey. 14 Ind. 382 ; v. Sanders, 60 Ind. 310. Nightingale v. Withington, 15 i^ Duboise v. Wheddon, 4 Mc- Mass. 271, 8 Am. Dec. 101. Cord (S. C.) 221; Earle v. Reed, 15 Hastings v. Dollarhide, 24 Cal. 51 Mass. (10 Mete.) 387; Bradley 195 ; Hardy v. Waters, 38 Me. 450. v. Pratt, 23 Vt. 378 ; Conn v. Co- i«Grey v. Cooper, 3 Doug. 54; burn, 7 N. H. 368, 26 Am. Dec. 746. Taylor v. Croker. 4 Esp. 187 ; Baker l^** Jones v. Darch, 4 Price 300. V. Kennett, 54 Mo. 82. 18" Neg. Inst. Law, § 62. 16» Neg. Inst. Law, § 22. 162 NEGOTIABLE INSTRUMENTS. §§ 133-134 § 133. Incapacity to contract — Coverture. A second real defense growing out of the incapacity to contract, particularly at common law, was coverture.^'* A married woman could not make that form of contract known as a negotiable instrument.^" There is a diversity of the law is to married women's ability to contract today, but a married woman generally has the same capacity, just as if she were a single woman.^^ In some juris*., ictions the contract of a married woman as to surety is void c:nd conse- quently on such a contract she would have a real defense.^^ § 134. Incapacity to contract— Where corporation prohib- ited. If a corporation has power to make a note for any pur- pose, it cannot, against a bona fide holder, set up as a defense that it had no power to make a note for a particular purpose.*^ Where a corporation is prohibited by its charter or by statute from issuing negotiable paper under any circumstances, such paper is absolutely void, even in the hands of a bona fide holder for value,*^ since what is absolutely void ab initio cannot acquire validity by being transferred to a third person any more than a forged instrument can acquire validity in that way. When a corporation has received the benefit of the proceeds of a bill or note it cannot set up the defense of ultra vires in an action on such bill or note. It is not usual, however, for a corporation to be prohibited by its charter or by statute from issuing negotiable paper under any circumstances, as above stated. 19 Dollner, Potter & Co. V. Snow, 413; Vlie't v. Eastburn, 62 N. J. 16 Fla. 86; Cummins v. Leedy, 114 L. 450, 43 Atl. 741 ; Voreis v. Muss- Mo. 454, 21 S. W. 804; Simpson v. baum, 131 Ind. 267, 31 N. E. 70, Soan, 5 Cal. 457. 16 L. R. A. 45. 20 Fernando v. Beshoar, 9 Colo. The common law rule is not 291, 12 Pac. 196; Lackey v. Boruff, changed except in the particular 152 Ind. 371, 53 N. E. 412 ; Radican cases provided by statute. Wilcox V. Radican, 22 R. I. 405. 48 Atl. 143. v. Arnold, 116 N. C. 708, 21 S. E: 21 Goar V. Moulton, 67 Cal. 536, 434 ; Rowe v. Kohle, 4 Cal. 285. 8 Pac. 63; Rodenmeyer v. Rod- 23 Jacobs v. Southern Banking man, 5 la. 426; Barrow v. Mitten- Co., 97 Ga. 573, 25 S. E. 171: berger. 21 La. Ann. 396 ; McVey v. Monument Nat. Bank v. Globe Contrell, 70 N. Y. 295, 26 Am. Rep. Works, 101 Mass. 57, Z6 Am. Rep. 605; Williamson v. Cline, 40 W. 322; Auerbach v. Le Sueur Mill Va. 194, 20 S. E. 917. Co., 28 Minn. 291, 9 N. W. 799, 41 Note: In order to determine the Am. Rep. 285; Blunt v. Walker, 11 status of married women reference Wis. 334, 78 Am. Dec. 709. must be made to the statutes of the 24 Scott v. Bankers' Union, 73 several states. Kan. 575, 85 Pac. 604; Chillicothc 2awiltbank v. Toblcr, 181 Pa. Bank v. Dodge, 8 Barb. (N. Y.) St. 103. 2,7 Atl. 188; Stores & Co. 233; Root v. Godard, 3 McLean 102, V. Wingate, 67 N. H. 190, 29 Atl. Fed. Cas. No. 12,037. §§ 135-136 REAL OR ABSOLUTE DEFENSE. 163 § 135. Incapacity to contact — Insanity. If the party sued is adjudged insane the obhgation is a non-enforceable one.^^ This defense is available not only as between immediate parties, but also as against a bona fide holder for value.^^ Some courts hold that negotiable paper executed by an insane person, who has not been adjudged insane is voidable, but not void.-^^ In some jurisdictions guardians may be appointed by statute for habitual drunkards, spendthrifts and for old persons incapable of transacting business ; instruments executed by any such persons who are under guardianship are also non-enforceable.^**" § 136. Incapacity to contract — Drunkenness. If a person become so drunk as to be deprived of understanding and reason, there is no doubt that while in such a condition, he has no capa- city to enter into a contract and if he should sign a negotiable instrument either as maker, drawer, indorser or acceptor, it would certainly be void as to all parties having notice of the condition in which he signed it.^'' If the drunkenness were so complete as to suspend all rational thought, the better opinion is that any instrument signed by the party would be utterly void even in the hands of a bona fide holder without notice, for, al- though it may have been the party's own fault that such an aberration of mind was produced, when produced it suspends for the time being his capacity to consent, which is the first essential of a contract.^** In some jurisdictions as in Wisconsin an amendment to Section 55 of the law makes such an instrument absolutely void. This amendment declares : "The title of such person is absolutely void 25 Van Patton v. Beals, 46 la. 62; 28 Caulkins v. Fry, 35 Conn. 170. Wirebach v. Easton Bank, 97 Pa. St. As against a bona fide holder, 543, 39 Am. Rep. 82. however, it has been determined in See Carrier v. Sears, 86 Mass. some jurisdictions that intoxication (4 Allen) 336, 81 Am. Dec. 707. is no defense. The reason underly- 28 Rice V. Peet, IS Johns. (N. Y.) ing this rule is that, when a man 503; Taylor v. Dudley, 5 Dana has voluntarily put himself in such (Ky.) 308; Moore v. Hershey, 90 a condition that a loss must fall on Pa. St. 196; Hossler v. Beard, 54 one of two innocent persons it Ohio St. 398, 43 N. E. 1040, 56 Am. should fall on him who occasioned St. Rep. 1040, 35 L. R. A. 161. it. If drunkenness were a defense 2Sa McClain v. Davis, 77 Ind. 419. it would clog and embarrass the 2ei> Copenrath v. Kienby, 83 Ind. circulation of commercial paper. 18. Miller v. Finley, 26 Mich. 248, 27 Burroughs v. Richman, 13 N. 12 Am. Rep. 306; McSpencer v. J. L. 233, 23 Am. Dec. 717; Stigler Neeley, 91 Pa. St. 17; Smith v. v. Anderson, — Miss. — , 12 So. Williamson, 8 Utah 219, 30 Pac. 831 ; Gore v. Gibson, 13 M. & W. 753. 623. 164 NEGOTIABLE INSTRUMENTS. § 137 when such Instrument or signature was so procured from a person who did not know the nature of the instrument and could not have obtained such knowledge by the use of ordinary care." Un- der this amendment an instrument signed by one when so intoxi- cated as wholly to destroy the vocational faculties of his mind, is absolutely void ; and negligence in getting drunk does not estop him and the signing of an instrument is not a usual or probable result of drunkenness.^^* § 137. Illegality of contract — Gaming, usurious, Sunday and other illegal instruments. A second division of real or ab- solute defenses is illegality of contract, where by force of statute certain contracts are declared to be absolutely void, e. g., gaming notes, usurious notes and Sunday notes. The Negotiable Instruments Law in some states provides: "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 locality, or of the membership and rights in an association, com- pany 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 by four times than the market value of the same product at the time in the locality, 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 instru- ment 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."^^^ The maker, indorser, acceptor, or any party to a gaming in- strument has a real defense in his favor in some of those juris- dictions having a statute to the effect that all notes, bills, checks or instruments made hereafter, when the whole or any part of the consideration thereof shall be for money or other valuable thing won on the result of any wager, or for repaying any money lent at the time of such wager for the purpose of being wagered, shall be void.^" 28a Green v. Gunster, 154 Wis. 69, St. Rep. 918, 7 L. R. A. 705 ; Ayer 142 N. W. 261. V. Younker, 10 Colo. App. 27, 50 ss^Neg. Inst. Law (New York), Pac. 218; Sondheim v. Gilbert, 11^ § 331, where all cases directly or in- Ind. 71, 18 N. E. 687, 10 Am. St. directly bearing upon or citing the Rep. 23, 5 L. R. A. 432; Chapin v. Law are grouped. Duke, 57 111. 295, 11 Am. Rep. 15. 2» Snoddy v. American Nat. Bk., See note 18 U. S. L. Ed. 423. 38 Tenn. 573, 13 S. W. 127, 17 Am. § 137 REAL OR ABSOLUTE DEFENSE. 165 There is much conflict of authority as to whether illegality ceases to be a real defense under the Negotiable Instruments Law unless made so by a subsequent statute and whether the statutes previously in force declaring void instruments given for gaming or upon usurious interest or other forbidden transactions are im- pliedly repealed by the Negotiable Instruments Law. These divergent views arise from the fact that some jurisdic- tions maintain that the requirements of commerce should be the controlling consideration in deciding the rule of law while others maintain that the controlling consideration should be the protec- tion of the weak and ignorant and the good morals of the matter. This question is not specifically covered by the Negotiable Instru- ments Law, except in the states of Illinois and Wisconsin ; in those states it is expressly referred to and covered in their enactment and the defense of gaming is made a real defense. The conflict in other jurisdictions is one between morals and commerce ; morals, which says that good morals should permit no recovery on gaming instruments even when in the hands of a bona fide holder, and commerce, which says for the advantage of trade and commerce the bona fide holder should be protected and he should be entitled to recovery on such an instrument. The weight of authority varies from time to time but is usually in favor of the commerce side of the question. On behalf of morals it is urged that gaming is against the best interests of society and con- trary to public policy, and statutes against it should be construed to preclude its practice; it is urged that no legislative enactment should be construed to have been repealed unless a subsequent act so states expressly, or unless the implication is so necessary as to be unescapable, and that statutes should be repealed by im- plication with great reluctance. And a number of jurisdictions decide this question on the side of morals.^"' In one jurisdiction the court states: "However, this act (Negotiable Instruments Law) applies only to paper that might have been obligatory be- tween the parties — that which it was legally possible for the par- ties to make. Wliere the parties were never bound because the law made the note void, as being contrary to public policy as ex- pressed in the statutes, the Negotiable Instruments Act does not have any application. That this act was not intended to inject life into a written instrument that was by law null and void, ab 29« Alexander v. Hazelrigg, 123 413, 222 S. W. SIS, 11 A. L. R. 207; Ky. 677, 97 S. W. 353; Martin v. Raleigh County Bank v. Toteet, Hess, 27 Pa. Dist. Ct. 19S ; Holzbog 74 W. Va. 511, 88 S. E. 187; V. Bakrow, 156 Ky. 161, 50 L. R. A. Twentieth Street Bank v. Jacobs, (N. S.) 1023; Levy v. Fidelity & C 74 W. Va. 528, 82 S. E. 320. Note Trust Co. or Doerhofer, 188 Ky. 8 A. L. R. 314. NEGOTIABLE INSTRUMENTS. § 137 initio, is apparent from the use of the word 'liable' in Section 57 of this act. The liability is defined to be the situation of one who is bound in law and justice to do something which may be enforced by action." "The maker of a note given in payment of a gambling transac- tion is not liable on such instrument, as by law such instrument is null and void and of no effect. It is questionable whether such a note ever becomes a negotiable instrument."*®" The other class of cases proceeds on the theory that the re- quirements of commerce should be the controlling consideration, holding an instrument given as the result of a wager is not void under a statute in force before the adoption of the Negotiable In- struments Law. It is urged that the great object sought to be accomplished by the uniform law was to free the negotiable in- strument as far as possible from all latent or local infirmities which otherwise would inhere in it to the prejudice and disap- pointment of innocent holders as against all the parties to the instrument professedly bound thereby. It is urged that this clearly could not be aft'ected so long as the instrument was ren- dered absolutely null and void by local statute as against the original maker or acceptor.*"" In furtherance of this theory it is said the business of the country is done so largely by means of commercial paper that the interests of commerce require that a negotiable instrument fair on its face should be as negotiable as a government bond ; that every restriction upon the circulation of negotiable paper is an injury to the state; for it tends to de- range trade and hinder the transaction of business and if such instruments are void in the hands of the holder for value, then not merely is that instrument affected but a doubt is cast upon all commercial paper originating in that community.*"'' It has been decided, however, that one may estop himself from setting up a defense of a gaming consideration under certain cir- cumstances even in a jurisdiction holding the instrument as or- dinarily void in the hands of a bona fide holder.*"^ Usury in some jurisdictions is a real defense by statute.^" ^Sb Martin v. Hess, 27 Pa. Dist. Montreal Bank v. Griffin, 154 111. Ct. 195. App. 616; Pritchett v. Ahrens, 26 29oWirt V. Stubbelfield, 17 App. Ind. App. 56. Cas. D. C. 283 ; Wood v. Babbitt, 30 Pearson v. Bailey. 23 Ala. 537 ; 149 Fed. 818, 822. Bridge v. Hubbard, 15 Mass. 96, ^^ti Chemical National Bank v. 8 Am. Dec. 86; Solomons v. Jones, Kellogg, 183 N. Y. 92, 75 N. E. 1103. 3 Brev. (S. C.) 54, 5 Am. Dec. 538; 2 L. R. A. (N. S.) 299, 111 Am. Hamilton v. Fowler, 99 Fed. 18. St. Rep. 717. In the absence of a statutory 29e Holzbog V. Bakrow, supra. provision the better doctrine is Kyser v. Miller, 144 111. App. 316; that usury is not a defense which § 137 REAL OR ABSOLUTE DEFENSE. 167 Usury is defined as an unlawful contract upon the loan of money, to receive the same again with exorbitant increase. In other words it is the reserving and taking, or contracting to reserve and take, either directly or by indirection, a greater sum for the use of money than the lawful interest.^^ In some jurisdictions a purchaser for value without notice cannot recover the sum called for by the instrument from persons who were parties to thg instrument at its inception, when the instrument was negotiated in its inception at a rate greater than the legal rate of interest. Interest in advance is not usury ,^2 nor does a sale of notes at a discount, in good faith, render the contract usurious.^^ In addi- tion to the legal rate of interest lenders of money may take a reasonable compensation for trouble and expense.^'* And as a general rule compound interest is not allowed,^^ but after simple interest is due, it may by contract be allowed in consideration of giving time for payment. By the weight of modern authority, it is held that when a promissory note is given with a stipulation that the interest is to be paid annually or semi-annually, the payee or holder is entitled to interest upon the interest if it is not paid according o the tenor of the instrument.^® In some states it is held that interest may be allowed on interest, if the promise to pay it is made after the interest matures, but not if the promise was made before the maturity of the interest.^'' In other states in- terest is allowed on such interest from the time it becomes payable, without any subsequent demand by the creditor, or agreement by the debtor, that it shall be paid, giving time for payment. is available against a bona fide 265; Hiller v. Ellis, 72 Miss. 701, holder although there is much con- 18 So. Rep. 95. flict on this point. Cheney v. 33 Bgajg y. Benjamin, 23 N. Y. Janssen, 20 Neb. 128. 29 N. W. 61; Borrows v. Cook, 17 la. 436; 289; Robinson v. Smith, 62 Minn. Geurren v. Cullen, 20 Gratt. 439. 62, 64 N. W. 90; Tilden v. Blair, 34Beadle v. Munson, 30 Conn. 21 Wall. (U. S.) 241. 175; McGill v. Ware, 5 111. 21 SiBrundage v. Burke, 11 Wash. Brummel v. Enders, 18 Gratt. 873. 679, 40 Pac. 343 ; Wilkie v. Roose- 35 e^. parte Bevan. 9 Ves. 223 velt, 3 Johns. (N. Y.) 206, 2 Am. Perkins v. Coleman, 51 Miss. 298 Dec. 149; Newton v. Wilson, 31 3« Preston v. Walker, 26 la. 205 Ark. 484. As to effect of usury in 96 Am. Dec. 140; Mathews v. Too- renewal note on original, see note good, 23 Neb. 536, 37 N. W. 265, 8 18 U. S. L. Ed. 305. A. S. R. 131 32 Bank of Newport v. Cook, 60 37 Wheaton v. Pike, 9 R. I. 132, 98 Ark. 288, 30 S. W. 35, 29 L. R. A. Am. Dec 377, 11 Am. Rep. 227; 761; Scott V. Safiford, 37 Ga. 384; Enkridge v. Thomas. 79 W. Va. English V. Smock, 34 Ind. 115. 322, 91 S. E. 7 L. R. A. 1918C p. But see Lemer v. Cox, 65 Ga. 769; Sabine v. Paine, 223 N. Y. 401, 119 N. E. 849, 5 A. L, R. 1444. 168 NEGOTIABLE INSTRUMENTS. § 137 There is the same conflict of opinion in the courts of the dififerent states as to the effect the adoption of the Negotiable Instruments Law has upon usury statutes as it has upon gambhng statutes discussed above. Some jurisdictions maintain that such instruments remain void as usurious as against a bona fide holder upon the adoption of the Negotiable Instruments Law when the state statute made a usurious contract void. In many courts usury and gaming are placed exactly upon the same footing, the courts frequently say that gambling and usury, the two most common objects of statu- tory inhibition, are against the best interests of society and con- trary to public policy, and statutes against them should be con- strued to preclude their practice; and no legislative enactment should be construed to have been repealed unless a subsequent act so states expressly or unless the implication is so necessary as to be unescapable, and statutes should be repealed by implica- tion with great reluctance. In some other jurisdictions it is urged that for the benefit of trade and commerce negotiable instruments under such circum- stances should not be void for usury as against a bona fide holder for value.^'^^ And where the statute as to usury does not expressly make the usurious contract void, but where it is construed by the court to have this effect, such an instrument is void.^'''' In some jurisdictions negotiable instruments made on Sunday are void by statute. In such case it may be set up as a real defense^^" The reason is that it is a violation of statutes for the observance of Sunday to execute contracts on that day, and one who has himself participated in a violation of law cannot be permitted to assert any right founded on an illegal transaction. If the negotiable instrument is delivered not on Sunday but on another day, it will not be invalid because it was agreed to and signed on Sunday. And it may be stated as a general rule that whenever a statute expressly declares a consideration void the holder may have a real defense set up against him. A bona fide holder is entitled to recover on negotiable paper given in payment of a subscription to corporate stock in viola- tion of law v.'here the statute does not expressly make the note void.^^" 37a See Appendix A, Table I for 37o Reeves v. Butcher, 3 N. J. L. the law as to the penalty for usury 224; Wadsworth v. Dunnam, 117 in the various jurisdictions. Ala. 661, 23 So. 699. 37b Perry Savings Bank v. Fitz- 37d Washer v. Smyer — Tex. — , gerald, 167 Iowa, 446. 149 N. W. 211 S. W. 985, 4 A. L. R. 1320, note 497, r A. L. R. 1330; Heard v. National § 138 REAL OR ABSOLUTE DEFENSE. 169 Where the instrument has been executed to a foreign corpora- tion within a state where it has not become authorized to do business in accordance with the statutory requirements, and where such corporation has transferred the instrument to the plaintiff, who sues as a holder in due course, the general rule is that the plaintiff can recover unless the particular statute makes the note and contract void.^'^* § 138. Forgery. By forgery is meant the counterfeit mak- ing or fraudulent alteration of any writing, and may consist in the signing of another's name, or the alteration of an instrument in the name, amount, description of the person and the like, with intent thereby to defraud. The intent to defraud distinguishes forgery from innocent alterations and spoliation.^* A forgery or fraudulent alteration will avoid the instrument and also extin- guish the debt which represents the consideration of the instru- ment. The Negotiable Instruments Law provides .^^ "Where a signature is forged or made without authority of the person whose signature it purports to he, 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 he acquired through or under such signature, unless the pa/rty against zvhont it is sought to enforce such right is pre- cluded from setting up the forgery or want of authority." It does not follow from the provisions of this section that proof of one forged signature on an instrument must of neces- sity, and in all cases, be given effect to avoid the note in favor of those whose signature thereto are found to be genuine, it is the forged or unauthorized signature that is declared to be in- operative.^^* The last clause of the section of the Law above refers to estoppel and not to ratification. A forger does not act on behalf Bank, 143 Ga. 48, 84 S. E. 129; 55 L. R. A. 408, 88 Am. St. Rep. Cornell v. Hichens, 11 Wis. 368. 770. 37eBank v. Utterbach, L. R. A. 39 Neg. Ins. Law, § 23, where all 1918 B, 838; McMann v. Walker, cases directly or indirectly bearing 31 Colo. 26, 72 P. 1055 ; Ensign v. upon or citing the Law are grouped. Christiansen, — N. H. — 109 A. As to payment of forged bill by g57 drawee or acceptor, see note 6 U. S. 3« Commonwealth v. Wilson, 89 L. Ed. 335. As to liability of per- Ky. 157, 12 S. W. 264, 25 Am. St. son whose signature is forged, see Rep. 528 ; Franklin Fire Ins. Co. v. note 36 L. R. A 539. Bradford, 201 Pa. 32, 50 Atl. 286, 39a Beam v. Ferrell, 135 Iowa 670, 113 N. W. 509. 170 NEGOTIABLE INSTRUMENTS. § 139 of, nor profess to represent the person whose handwriting he counterfeits ; and the subsequent adoption of the instrument can- not supply the authority which the forger did not profess to have.s"" Parties may be estopped, however, to dispute the genuineness of their signatures.**" An acceptor or an indorser may be precluded from setting up the forgery or want of authority as to the drawer or maker. It should be remembered that the drawee by accepting a bill, warrants the genuineness of the drawer's signature, and the in- dorsers likewise guarantee the genuineness of all parties to the bill at the time of the indorsement.^" Since an acceptor of a bill warrants the genuineness of the signature of the drawer he cannot therefore resist payment of the bill as against a bona fide holder if the drawer's name be forged.^-^ An indorser of a negotiable instrument admits that, at the time of his indorsement the instrument was valid and sub- sisting, and he is, therefore, bound by his indorsement to subse- quent parties.^^ And it has been held that a bank is entitled to recover against the second indorser of a note, although the in- dorsement of the name of the payee is a forgery, and although the note was offered for discount by the maker and not by the second indorser.^* The warranty of the acceptor only extends to the genuineness of the signature, and not to the matters contained in the bill itself. An indorser, by his indorsement, contracts with the subsequent bona fide holder of the instrument, that the instrument itself, and all the signatures prior to his indorsement, are genuine ; and the fact that the name of the maker was forged will not affect his liability.** § 139. Duress when amounting to forgery. When duress amounts to a forgery it is held in some jurisdictions to be a real defense. Thus when the signature of a person is obtained to 39b Henry Christian Building and '^ Cochran v. Atchinson, 27 Kan. Loan Association v. Walton, 181 728; Beattie v. Nat. Bank, 174 111. Pa. St. 201. 571, 66 Am. St. Rep. 318, 43 L. 390 Crout V. DeWolf, 1 R. I. 393 ; R. A. 654. Leather Manufacturers' Nat. Bank "^'^ State Bank v. Feaning, 16 V. Morgan, 117 U. S. 96. Pick. 533, 28 Am. Dec. 265. 40 Olivier v. Audry, 7 La. 496; 44 QHvier v. Audry, 7 La. 496. Rambo v. Metz, 5 Strob. (S. C.) As to effect of forgery of part of 108. signatures as defense against bona 41 Hoffman & Co. v. Bank of Mil- fide holder by makers whose sig- waukee, 12 Wall. 181, 20 L. Ed. natures were genuine, see note 13 366; Price v. Neal, 3 Bun. 1354; L. R. A. (N. S.) 426. Redington v. Woods, 45 Cal. 406, 13 Am. Rep. 19. § 140 REAL OR ABSOLUTE DEFENSE. 1/^1 an instrument under such circumstances as make the instru- ment a forgery, the person signing the same will not be liable thereon to any one.'*^ And so duress might be a real defense in every jurisdiction, as where A takes B's hand and forces him to sign his name. In such case the duress amounts to a forgery and is a real defense. § 140. Statute of limitations. The statute of limitations is a real defense. Holders of negotiable instruments do not neces- sarily have notice whether the period of limitation has run out or not. The instrument may not be dated, or, what is usual, an in- dorsement may not be dated; but the real date of the act, or rather of the delivery following it, may be shown, when there is nothing, such as subsequent payments of interest or installments, to prevent the running of the statute from that time.^ § 141. Failure to stamp."***^ Failure to put a revenue stamp on an instrument has been held in some jurisdictions under some of the stamp laws to be a real defense, while in others not to be a real defense.'*'' In construing the Federal Stamp Tax Law of 1898, the pro- vision declaring an unstamped instrument invalid was held to apply only to instruments from which the stamp had been omitted fraudulently;^''* and it has been held that the purchaser is not precluded from becoming a bona fide holder when there is no intent to defraud the Government.'*^ The present law, that is, the Act of October 22, 1914, contains no provision to the effect that an unstamped instrument shall be void.4» Some jurisdictions hold that a promissory note which is not stamped as required by the revenue laws is not complete and regu- lar on its face and the purchaser of such a note is not a holder in due course, and the instrument in his hands is open to any defense that the maker had against the original payee.^® Under such circumstances the omission of the stamp is relied upon not 45 Mitchell V. Tomlinson, 91 Ind. 409; Green v. Davies, 4 B. & C. 167; Webb v. Corbin, 78 Ind. 403; 233; Ebert v. Gitt, 95 Md. 186, 52 Cline V. Guthrie, 42 Ind. 227. Atl. 900. See also Hatch v. Barrett, 34 47a Rowe v. Bowlan, 183 Mass. Kan. 223; Loomis v. Rush, 56 N. 488. 67 N. E. 636. Y. 462. 48 Ebert v. Gitt 95 Md. 186, 52A. 46 A.S to their application, see 900. statutes of the various states. 49 Cole v. Ralph, 252 U. S. 286. 4«a See also § 57 of this book. ^o Lutton v. Baker, — Iowa — , 47 Robinson v. Fair, 31 la. 9; 174 N. W. 599. Anderson v. Starkweather, 24 la. 172 Negotiable instruments. § 140 as a ground of defense to the note, but as defeating the bona fides of the purchaser and thus letting in an independent defense.'* Other jurisdictions hold that the want of a revenue stamp on a promissory note is not such a circumstance of suspicion as to put an endorsee upon inquiry in taking the note, and the note is valid and can be enforced without a stamp.'^ The cancellation of the revenue stamp by one other than the maker whose initials were used is not a suspicious circumstance so as to be notice of any equity and prevent the holder from being a bona fide holder.** Many of the state courts held that the provisions of the Acts of 1864, 1865 and 1866, excluding unstamped instruments from evidence, did not apply to the said courts ; some denied the power of Congress to prescribe a rule of evidence for the state courts.*'* f*! Note 6 A. L. R. 1701 and cases. ^'*'Wa\hce v. Cavens, 34 Ind. »2 Burson v. Huntington, 21 Mich. 354. See 48 L. R. A. 305 and note 415, 4 Am. Rep. 497. pp. 305-320. 53 Martindale v. Stotler, 80 Kans. 87, 101 P. 629. CHAPTER XV. PERSONAL DEFENSES OR EQUITIES. S 142. In general. § 146. Want or defect of consid- 143. Fraud. eration. 144. Alteration. 147. Illegality of consideration. 145. Duress. 148. Payment. § 142. Personal defenses or equities — In general. The real defenses are such, that the party who has a right to set them up, can set them up against anybody. Every other person does not necessarily have a real defense because the party originally liable does. The real defense is one which the person alone who has it may set up. So, when we say that a real defense is an absolute defense so far as the person who is entitled to the defense is con- cerned, we do not necessarily mean that that extends to the other parties. A personal defense is of an equitable nature. It is a defense which depends upon circumstances, it is a defense which a person has a right to set up under certain circum- stances, and those circumstances are dependent upon whether or not he had notice and whether or not he was a purchaser for value. In the real defense, it is not a matter as to whether the person is a purchaser for value and had notice, and the like, the defense may be set up regardless of these facts ; but a personal defense cannot be set up that way since as to such a defense a person must show that he has not had notice and that he is a pur- chaser for value. As to equities or personal defenses it is important to know who are to be regarded as the immediate parties, or parties be- tween whom there is a privity, to a negotiable instrument, and who are remote. Among the former may be classed: (1) The drawer and acceptor of a bill;* or (2) the drawer and payee of a bill as a general rule;* (3) the maker and payee of a note ;^ and (4) the indorser and immediate indorsee* of a bill or note. That the bill or note has been lost or stolen^ or was executed 1 Thomas V. Thomas. 7 Wis. 476. 4 Klein v. Keyes, 17 Mo. 326; 'McCulloch V. Hoffman, 10 Hun Holliday v. Atkinson, 5 Barn. & C. (N. Y.) 133. 501. 3 Kennedy v. Goodman, 14 Neb. ^ Mills v. Berger, 1 Mees. & W. 585, 16 N. W. 834; Jeflfries v. 425, Austin, 1 Strange 674, 173 174 NEGOTIABLE INSTRUMENTS. § 142 under duress, or under fraudulent misrepresentations, or for fraudulent consideration,'' or for illegal consideration,* or has been fraudulently obtained from an intermediate holder," or been in any way the subject of fraud or felony, or has been misappro- priated and diverted, or for a loss for which the party was not liable, or that otherwise it was without valuable consideration, is a good defense as between the parties privy to it. And in some cases it is a good defense that it was given by mistake for too great a sum, or when no sum was due, the evidence showing fraud or a total or partial want of consideration. As between the immediate parties on a bill or note no question arises whether the defense is real or personal. Any defense is valid as between immediate parties if it would be valid on an ordinary contract. But when the parties are not immediate, then the question arises as to whether it is a real or a personal defense. Personal de- fenses being in the nature of equities, two principles of equity apply to them. ( 1 ) One is, he who comes into equity must come with clean hands ; he must not be a party to any fraud, to any illegality. If he has notice^" of any of these, he does not have clean hands. (2) The other is, of two innocent parties, he whose act or omission has caused the loss, must stand it. Equity says, as between two innocent parties, the one should suffer whose act or omission has caused the loss." If a person has no notice and he is the party who has made this loss possible there can be a recovery against him. The rule is the person who enables the fraud to be perpetrated must stand responsible-^^ where the instrument is gotten possession of in such a manner as to amount to a forgery, it should be a real defense and no recovery should be permitted against it. Here, however, we find a conflict of authority. The better opinion is that if you can show that it amounted to a forgery or was ob- tained by duress, there can be no recovery against you if you are the person liable on the instrument. e Clark v. Pease. 41 N. H. 414. lo Mass. Nat. Bank v. Snow, 187 7 Wilson V. Ellsworth, 25 Neb. Mass. 159; Cheever v. The Pitts- 246. 41 N. W. 177; Macomb v. burg etc. R. R. Co., 150 N. Y. 59, Wilkinson, 83 Mich. 486, 47 N. W. 55 Am. St. Rep. 646, 34 L. R. A. 336. 69. 8 Cummins v. Boyd, 83 Pa. St. ^ Ledwich v. McKim, 53 N. Y. 372; Bierce v. Stocking, 11 Gray 307. (Mass.) 174. 12 Putnam v. Sullivan, 4 Mass. ^ Rodgers v. Morton, 12 Wend. 45, 3 Am. Dec. 206 ; McCormick 484; Vither v. Zane, 6 Gratt. (Va) v. Holmes, 41 Kan. 265, 21 Pac. 246. 108. § 143 PERSONAL DEFENSES OR EQUITIES. 175 The Negotiable Instruments Law provides: "The title of a person who negotiates an instrument is defective within the meaning of this act when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud."^^ § 143. Fraud. Where the consideration for a bill is clearly fraudulent it is a good defense against an immediate party^* or a remote party unless he is an innocent holder for value/^ and while the instrument is yet in the hands of a party with notice a court of law will compel its surrender, or restrain its negotiation until the question of fraud is settled.-^® A bill is affected with fraud when the issue or any subsequent negotiation of it is obtained by fraud, coercion, or when it is negotiated in breach of faith, or in fraud of third parties. No holder of a bill subsequent to its being affected with fraud can enforce payment from any party thereto, or retain the bill against the rightful owner unless he received it from a bona fide holder for value without notice. The question of fraud is largely one of negligence. Did a person who has signed the instrument and let it get into the hands of other parties, or into circulation, act with negligence? If he did not, then fraud is a real defense, but if he did so act, it is a personal defense.^'' Where a person, in case of fraud, signs an instrument believing he is signing a dif- ferent instrument, if he was negligent he cannot set up the per- sonal defense. Then, in case of delivery through fraud, where an instrument has been delivered to an agent or an agent has fraud- ulently delivered it to someone else, fraud is not a personal de- fense, because the agent was entrusted with it.^^ As to a custodian the general law applies the same.^^ The maker l^Neg. Inst. Law. 55, where all by fraud in its origin, see note 11 cases directly or indirectly bear- Am. St. Rep. 309. ing upon or citing the Law are i® Hullhorst v. Schamer, 15 Neb. grouped. 57, 17 N. W. 259; Hodson v. Eu- "Carthers v. Levy, 111 Ga. 740, gene Glass Co., 156 111. 397, 40 N. 36 S. E. 958 ; Alabama Nat. Bank E. 971 ; Sackett v. Hillhouse, 5 Day V. Halsey, 109 Ala. 196, 19 So. 522; 551; Wilcox v. Ryols, 110 Ga. 287, Still V. Snow, 66 Vt. 277, 29 Atl. 34 S. E. 575. 250. 17 Gardner v. Wiley (Ore.), 79 1^ Russ Lumber Co. v. Muscupi- Pac. 341 ; Howry v. Eppinger, 34 able Land & W. Co., 120 Cal. 521, Mich. 29. 52 Pac. 993 ; Nichols v. Baker, 75 i^Hutchinson v. Brown. 19 Dist. Me. 334; Hawley v. Hirsch, 2 Col. 136; Jordan v. Jordan, 10 Lea Woodw. Dec. (Pa.; 158. Bona fide (Tenn.) 124, 43 Am. Rep. 294. holder takes instrument unaffected i® Walker v. Ebert, 29 Wis. 194; 176 NEGOTIABLE INSTRUMENTS. § 144 of the instrument would not be entitled to set up the fraud; and, where the instrument has been stolen or wrongfully taken, then the question becomes largely a question of negligence. If the party has been negligent, then he has no right to set up fraud as a personal defense. If he has not been negligent, then other circumstances not being considered, he could not be recovered against.*^* § 144. Alteration.^'"' The following is the provision in the Negotiable Instruments Law : "Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party zvho has himself made, authorised, or assented to the alteration and subsequent indorsers. But when an instrii- 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 pay- ment thereof according to its original tenor."^^ A material alteration is defined to be any change in the in- strument which affects or changes the liability of the parties in any way.^^ The alteration avoids the paper regardless of whether it is favorable or unfavorable to the party making the altera- tion.^^ The following have been held to be material alterations: any change in the date of the instrument, but not in the date of the indorsement f^ any alteration in the amount of principal or interest -^^ any change in the character of the payment, whether in the denomination or medium of payment ;^^ any alteration in the personality, number and relations of the parties ;^* any change in the liability of the parties ;^'^ or any change in the place of pay- ment.^* Baldwin v. Bricker, 86 Ind. 222; Griffith v. Cox, 1 Tenn. 210; Mers- Bedell v. Herring, 77 Cal. 572. man v. Werges. 112 U. S. 139, 28 i9»As to title of bona fide holder L. Ed. 641. to stolen paper, see note 103 Am. 24 Harsh v. Klepper, 28 Ohio St. St. Rep. 983, 987. 200; Draper v. Wood, 112 Mass. i^" See also section 188 infra. 315; Batchelder v. White, 80 Va. 20 Neg. Inst. Law, § 124, where 103 ; Nefif v. Horner, 63 Pa. 327, all cases directly or indirectly bear- 3 Am. Rep. 555. ing upon or citing the Law are 25 Poxworthy v. Colby, 64 Neb. grouped. 216, 89 N. W. 800, 62 L. R. A. 393 ; 21 Foxworthy v. Colby, 64 Neb. Schwalen v. Mclntyre, 17 Wis. 232 216, 89 N. W. 800, 62 L. R. A. 26 Lamb v. Paine, 46 la. 551; 393; Organ v. Allison, 68 Tenn. (9 Sneed v. Sabinal Min. & Mill. Co., Baxt.) 459. 71 Fed. 493, 18 C. C. A. 213. 22 Franklin Ins. Co. v. Courtney, 27 Blake v. Coleman, 22 Wis. 415. 60 Ind. 134; Mersman v. Werges, 28 Codes & St. Or. 1901, §4527; 112 U. S. 139, 28 L. Ed, 641. Rev. Codes, N. D., § 1053. 23 Wood V. Steele, 6 Wall, 8; § 144 PERSONAL DEFENSES OR EQUITIES. 177 The addition of the name of a witness to an instrument re- quired by law to be witnessed is a material alteration, but if the instrument need not be witnessed or if it already has on it the number of witnesses required by law, the alteration is imma- terial. An innocent alteration, when material, is held by some authorities to avoid the instrument while not cancelling the debt, others holding that so long as the alteration has caused no injury a court of equity may restore it to its original condition so that suit may be brought on it.^* The last proposition as set out in Section 124 of the Law above that a holder in due course may recover according to the original tenor of the instrument changes the law in some jurisdictions.^®' What constitutes a material alteration under the Negotiable In- struments Law is set out in Section 125 of that law as follows : "Any alteration which changes the date; the sum payable, either of principal or interest; the time or place of payment; the num- ber or the relations of the parties; the medium or currency or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration."^^^ When the change in the bill or note is made by a stranger it is called a spoliation instead of an alteration. Such a change of an instrument is held in most jurisdictions to have no effect upon it, if the original meaning can be ascertained. That is, if the alteration be made by a stranger to the instrument the rights of the parties are not affected.^'' Immaterial alterations are those which do not change the legal effect of the instrument, as adding words implied by law, making marginal figures to correspond to the written statement in the body of the instrument, the adding of immaterial memoranda, and the like.^* Thus the correcting of a mistake to conform to the intention of the parties is an immaterial alteration.^^ In those jurisdictions the effect of a material alteration is generally as follows : Bona fide holders are only protected 29 Booth V. Powers, 56 N. Y. 31; Langenberger v. Kroeger, 48 Calif. Kountz V. Kennedy, 63 Pa. St. 147. See note 18 U. S. L. Ed. 725. 187. 31 Smith v. Smith, 1 R. I. 398; Contra, Bigelow v. Stephens, 35 Bacheldor v. Priest, 12 Pick. 399; Vt. 525. Keene, Adm. v. Miller, 103 Ky. 628, 29a Tower v. Stanley, 220 Mass. 45 S. W. 1041. As to immaterial 429. alterations, see note 12 U. S. L. Ed. 29" Neg. Inst. Law, § 125, where 443. all cases directly or indirectly bear- ^2 Bank v. Bank, 13 N. Y. 309; ing upon or citing the Law are Shepard v. Whetstone, 51 la. 457, grouped. 1 N. W. 753, ZZ Am. Rep. 143. 30 Buckler v. Huff. 53 Ind. 474. 178 NEGOTIABLE INSTRUMENTS. § 145 against material alterations discharging the party liable, when some carelessness or negligence on the part of the person whose liability has been changed by the alteration, has contributed to the negotiation of the paper without suspicion of fraud, as where blank spaces have been left,^ or it is written partly in pencil so as to be easily erased ; so a memorandum which can be detached without affecting the paper will, when detached in fraud, not be allowed to avoid the paper in the hands of a bona fide holder.^^ In those jurisdictions the effect of a material alteration by the holder of a bill is to discharge all parties from liability on the bill, unless they consented to such alteration.*^ § 145. Duress. Duress, under most circumstances, is con- sidered a personal defense.^® It is provided in the Negotiable Instruments Law that duress is a defense. The Law states : "The title of a person who nego- tiates an instrument is defective w-ithin the meaning of this act ivhen he obtains the instrument, or any signature thereto by duress, or force and fear, or other unlaivful means. * * *"30a Threats which induced the execution of a note by old and feeble persons amount to duress, even though they would not influence ordinary persons,"*®" and where the maker of a note is prevented from exercising his free will by reason of payee's threats, the maker may repudiate the note for duress whether the threat be sufffcient or insufficient to overcome the mind of a man of or- dinary courage, and in such cases evidence as to the maker's mental or physical health, his condition in life, his experience, education and intelligence is admissible.^®" 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 33Stratlon v. Stone, 15 Colo. 443. As to fraudulent alterations, App. 237, 61 Pac. 481 ; Rainbolt v. see note 13 U. S. L. Ed. 266. Eddy, 34 la. 440, 11 Am. Rep. 152; 36 Hogan v. Moore, 48 Ga. 156; Cannon v. Grigsby, 116 111. 151, 5 Mumly v. Whitmore, 15 Neb. 647. N. E. 362, 56 Am. Rep. 769; Isnard 19 N. W. 694; Clarke v. Pease, 41 V. Tones, 10 La. Ann. 103 ; Zimmer- N. H. 414. man v. Rate, 75 Pa. St. 188 ; Har- 3«a Neg. Inst. Law, § 55, where all vey V. Smith, 55. 111. 224. cases directly or indirectly bear- 34 Noll V. Smith, 64 Ind. 511. ing upon or citing the Law are 35 Burrows v. Klunk, 70 Md. 451, grouped. 17 Atl. 378, 14 Am. St. Rep. 371, 3«b Anthony v. Brown, 214 Mass. 3 L. R. A. 576; Mills v. Wilson, 3 439, 101 N. E. 105^ Ore. 308; Bank v. Lockwood, 13 3«o (Cornwall v. Anderson, 85 W. Va. 392. As to authorized al- Wash. 378, 148 Pac. 1. terations, see note 12 U. S. L. Ed. § 146 PERSONAL DEFENSES OR EQUITIES. 179 prosecute their son, induced them to sign a note for his indebted- ness, such note was void as having been obtained by duress.^*^** The abuse of any process, either civil or criminal, to compel a party, by imprisonment, to do any act against his will except to pay the debt for which he is arrested, is entirely illegal, and the act may be avoided, on the ground of duress.^' Thus where an arrest was without any warrant or lawful authority and a note was signed under such pressure.^* Duress is a perfect defense to an action between the original parties and parties having notice of it.*^ § 146. Want or defect of consideration. The largest num- ber of defenses concern consideration. Anything which is a good consideration in a contract is a good one in a bill or note, or a negotiable instrument. If a person has bought something and agreed to give something in return, the court will not look into whether he has gotten value, the courts do not look into that, but the court will look into some other matters. If there has been no consideration whatever, the court will look into that as between the immediate parties — that is a personal defense.'*'* As between the parties, one who has notice of want or failure of consideration, that is a defense the maker can set up against him. For instance, A makes a promissory note and gives it to B as a gift ; there is no consideration ; A only thereby prom- ises to give B $50 in the future. As between the parties there can be no recovery ; but if A gives B a note of a third person, it is held there is sufficient consideration and B can recover from that person, but he cannot recover against A in the first case on account of the want of consideration. By failure of consideration, we mean something which ap- parently had a good consideration, but for some cause or other the consideration has failed.*-^ A thinks he owns a certain piece of property, but there is a judgment against him and execution has not been taken and A conveys that property to B for B's note. In the meantime, the property is taken on execution — 36<'-Spoerer v. Wehland, — — , '**' Farmers' Savings Bank v. 100 A. 287. Hausman, 114 la. 49, 86 N. W. 31; 37Thurman v. Burt, 53 111. 129; Chicago Title & Trust Co. v. Bary, Shauk V. Phelps, 6 111. App. 612; 165 Mo. 197, 65 S. W. 303; Ho^an Sheu V. Spooner, 9 N. H. 197, 32 v. Bigler, 5 Okla. 575, 49 Pac. 1011. Am. Dec. 348. ^^ Shirk v. Neible, 156 Ind. 66, ssOsborn v. Robbins, 36 N. Y. 59 N. E. 281, 83 Am. St. Rep. 150; 365. Ingersoll v. Martin, 58 Md. 67, 42 3» Graham v. Marks, 98 Ga. 67, Am. Rep. 322. 25 S. E. 931. 180 NEGOTIABLE INSTRUMENTS. § 147 there has been a failure of consideration and that note could not be recovered upon. Want of consideration is matter of defense as against any person not a holder in due course.*^ Partial failure of consideration is a defense pro tanto against an immediate party when the failure is an ascertained and liquidated amount in money .^^ But it is not a defense against a remote party holder for value."*^ A few decisions hold that a partial failure of consideration will not constitute a good de- fense in any case whether definite or indefinite."*' The Negotiable Instruments Law has the following provision: "Absence or failure of consideration is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise .'"^^ Total failure, as against an immediate party is a good de- fense,^*' but not as against a remote party who is a bona fide holder for value without notice."*' Thus where the consideration of the note was that the payee should act as executor for the maker, and the payee died first, the note could not be enforced against the maker. So where a bill is drawn by one party on another payable to his own order, and is accepted, if the con- sideration fails as between these two, an indorsee for value who knows that the consideration has failed cannot sue the acceptor. § 147. Illegality of consideration. Under the division "Ille- gality of Consideration" there are three classes of cases: (1) Those prohibited by statute, unless the statute renders the contract absolutely void. (2) Common law prohibitions. (3) Those against public policy. Where the consideration is illegal in whole or in part it is a defense against the entire note while in the hands of an imme- 43 Angler v. Brewster, 69 Ga. *** Edwards v. Porter, 42 Tenn. 362; Hickson v. Earley, 62 S. C. (2 Cold.) 42. 42, 39 S. E. 782; Clarion Second 45 Rgddick v. Mackler, 23 Fla. Nat. Bank v. Morgan, 165 Pa. St. 335. 2 So. 698; Hinton v. Scott, 199, 30 Atl. 957, 44 Am. St. Rep. Dud. (Ga.) 245; Stocks v. Scott, 652. 188 111. 266, 58 N. E. 990. 43 Russ Lumber Co. v. Muscupi- ^oa -^^g j^gj. l^^^ § 28. able L. & W. Co., 120 Cal. 521, 52 •*« r^ss Lumber etc. Co. v. Mus- Pac. 995, 65 Am. St. Rep. 186; cupiable L. & W. Co.. 120 Cal. 52; Cook V. Mi.x, 11 Conn. 432; Journal Ingersoll v. Martin, 58 Md. 67, 42 Printing Co. v. Maxwell, 1 Pennew. Am. Rep. 322. (Del.) 511, 43 Atl. 615; Wadsworth 47 Morrison v. Farmers' & Mer- V. Smith, 10 Shep. (Me.) 500; chants' Bank, 9 Okla. 697, 60 Pac. Truesdale v. Watts, 12 Pa. St. 73. 275 ; Trustees v. Hill, 12 la. 462. § 147 PERSONAL DEFENSES OR EQUITIES. 181 diate party or one who is not a bona fide holder for value with- out notice. In general, the consideration for a bill is illegal when it is wholly or in part immoral, contrary to public policy, or forbidden under penalties by statute.'** A distinction is to be made between a consideration simply illegal and one which by statute expressly makes an instrument void. In the former case a bona fide transferee may recover, though not in the latter."*^ Where an instrument is given for a consideration which the statute expressly makes void, the party wlio gave the paper may set it up as a defense against all the holders whether immediate or remote, but the holder can sue the indorser.^** It is no longer customary by law to make notes expressly void by statute, and where such statutes do exist a clause frequently saves the rights of innocent holders, but this is not always the case. The holder of commercial paper is prima facie presumed to be an innocent holder for value, but where there is evidence affecting the bill or note with fraud or illegality, the burden of proof is shifted to the holder to show that he is an innocent holder for value.^^ In case the holder can show that he paid full value the defend- ant must then show that the holder had notice of the fraud or illegality. So it is held that where the holder has in good faith given part value he ma;^ recover to a like amount. Commercial paper based upon considerations which contravene public policy are void.^^ Among such considerations is that for the purchase and sale of so-called "Bohemian Oats" at an ex- orbitant price.®^ Where one gives a note to another and for the reason that the other has committed a crime or will commit a crime — such 48 Bell v. Putnam, 123 Cal. 134, ningham v. Bank, 71 Ga. 400, 51 55 Pac. 773; Baker v. Parker, 23 Am. Rep. 266. Ark 390; Dickson v. Kittson, 75 ^i Farmers' & Citizens' Bank v. Minn. 168, 77 N. W. 820, 74 Am. Noron, 45 N. Y. 762; Davis v. St. Rep. 447 ; Irwin v. Margaret, 25 Bartlett, 12 Ohio St. 584, 80 Am. Ind. App. 383, 59 N. E. 38. Dec. 375; Nickerson v. Ruger, 76 49 Robinson v. Coleman, 141 N. Y. 279. Mass. 231, 4 N. E. 619, 55 Am. Rep. 53 Yeats v. Williams, 5 Ark. 684; 471 ; Ferris v. Tavel, 87 Tenn. 386, Ball v. Putnam, 123 Cal. 134, 55 11 S. W. 93, 3 L. R. A. 414; Wood- Pac. 773; Stoutenberg v. Lyband, son v. Barrett, 2 Hen & M. 80, 3 13 Ohio St. 228; Meachem v. Dow, Am. Dec. 612; Snoddy v. Bank, 88 32 Vt. 721. Tenn. 573, 13 S. W. 127, 7 L. R. 53 Schmueckle v. Waters, 125 Ind. A. 705. 265, 25 N. E. 281; Payne v. Rau- 50 Snoddy v. Bank, 88 Tenn. 573, binck. 82 la. 587, 48 N. W. 995 ; 13 S. W. 127, 7 L. R. A. 705; Merrill v. Parker, 80 la. 542, 45 Morton v. Fletcher, 2 A. K. Marsh N. W. 1076. (Ky.) 137, 12 Am. Dec. 366; Cun- 182 NEGOTIABLE INSTRUMENTS. § 148 note is a violation of the common law and there can be no recov- ery on it, that is, it is a personal defense which can be set up.^* § 148. Payment. Payment in due course is the discharge of the instrument and is a good defense,^^ but payment by one secondarily liable is not a discharge of the instrument.'® If a person makes an instrument and it becomes due and pay- ment is made, then it is discharged, but if he purchases the in- strument and it is not intended as in payment, it is not discharged. 54 Barker V. Parker, 23 Ark. 390; seMorgan v. Rentzel, 7 Cranch. Baker v. Farris, 61 Mo. 389. 273 ; West Boston's Sav. Bank v. 55Swope V. Ross, 40 Pa. St. 186; Thompson, 124 Mass. 506; Gallon Ballard v. Greenbush, 24 Me. 336; v, Lawrence, 3 Maule & S. 95, Gardner v- Maynard, 7 Allen 456. CHAPTER XVI. PRESENTMENT, NOTICE OF DISHONOR AND PROTEST. i 149. Meaning of terms. 150. In general. 151. Presentment for acceptance — When essential. 152. Presentment for acceptance — Benefit. 153. Presentment for acceptance — Time. 154. When instrument dishonored by non-acceptance. 155. Presentment for payment — In general. 156. Presentment for payment — When essential. 157. Presentment for payment — When dispensed with. 158. Presentment for payment — What sufficient. 159. Presentment for payment — Date. 160. Presentment for payment — When delay excused. 161. Presentment for payment — Place. 162. Presentment for payment — To whom. 163. Presentment for payment — Effect of failure to present. 164. When instrument dishonored by non-payment. § 165. Notice of dishonor — In gen- eral. 166. Notice of dishonor — Con- tents. 167. Notice of dishonor — By whom given and when to be given. 168. Notice of dishonor — To whom given. 169. Notice of disnonor — Time of. 170. Notice of dishonor — Place of sending. 171. Notice of dishonor — Notice through postoffice. 172. Notice bf dishonor — When notice unnecessary. 173. Notice of dishonor — Excuses for failure. 174. Notice of dishonor — Effect of notice as to prior and subsequent parties. 175. Protest— Method of. 176. Protest — Purpose. 177. Protest— Notice. 178. Protest— What should be protested. 179. Protest— Waiver. 180. Protest — Miscellaneous mat- ters. § 149. Meaning of terms. By Presentment is meant the production of a bill of exchange to the drawee for his acceptance, or to the drawee or acceptor for payment ; or the production of a promissory note to the party liable for payment of the same.-"- By Protest is meant a formal statement in writing made by a notary under his seal of office, at the request of the holder of a bill or note, in which it is declared that the same was on a certain day presented for payment (or acceptance, as the case may be), and that such payment (or acceptance) was refused, whereupon 1 Windham Bank v. Norton, 22 Mete. (Mass.) 216; Fiske v. Beck- Conn. 213, 56 Am. Dec. 397; Fall with, 19 Vt. 315, 46 Am. Dec. 174. River Union Bank v. Willard, 5 183 184 NEGOTIABLE INSTRUMENTS. § 149 the notary protests against all parties to such instrument, and declares that they will be held responsible for all loss or damage arising from its dishonor.^ By Notice of Dishonor is meant a notification to the parties on an instrument whom it is desired to hold liable on such instru- ment. If such notice were given by a notary it would be called a protest. When a negotiable bill or note is dishonored by non- acceptance on presentment for acceptance, or by non-payment at its maturity, it is the duty of the holder to give immediate notice of such dishonor to the drawer, if it be a bill, and to the indorser, whether it be a bill or note.^ § 150. In general. We shall now consider the matter of presentment and notice of dishonor. What was the contract of the drawer and the indorser? He says, "I will pay this instrument if you present the instrument to the parties to whom it should be presented and by whom it should be accepted, and if they do not pay it or accept it, I will pay it, but my contract is that it must be presented to them first." Now, if it is not shown that the instrument was presented for acceptance or payment then he will not be liable on it. These things may be waived by contract, but when not waived they must be established. Presentment for acceptance or presentment for payment must be made in order to hold certain parties on the instrument because that is the con- tract they enter into. As to presentment for payment the contract of the drawer is that he will pay the instrument providing the acceptor does not, and he is duly notified of that fact.* The indorser makes the same contract with his subsequent indorsers. He says, "You notify me of the fact that the drawee does not pay that instru- ment and I will pay it." Therefore, if we are going to hold the indorsers, we must perform our part of the contract.** The in- strument may be dishonored for failure to accept also.* ^Ocoll Bank v. Hughes, 42 Am. Dec. 707; In re Leeds Bank- Tenn. (Coldw.) 52; Williams v. ing Co., L. R. I. Eq. 1. Parks, 63 Neb. 747, 89 N. W. 395, * Los Angeles Nat. Bank v. Wal- 56 L. R. A. 759 ; Anville Nat. Bank lace, 101 Cal. 478, 36 Pac. 197 ; V. Keltering, 106 Pa. St. 531, 51 Baxter v. Graves, 2 A, K. Marsh Am. Rep. 536. (Ky.) 152, 12 Am. Dec. 374; Cru- 3Jagger v. Nat. German-Ameri- ger v. Armstrong, 3 Johns. Cas. can Bank, 53 Minn. 386; Juniata (N. Y.) 5, 2 Am. Dec. 126. As to Bank v. Hale, 16 S. & R. (Pa.) presentment, demand and notice in 157, 16 Am. Dec. 558; Brown v. general, see note 2 U. S. L. Ed. 102. Ferguson, 4 Leigh (Va.) 37, 24 5 Wilmington Bank v. Cooper, 1 99 la. 162, 68 N. W. 677, 61 Am. Han. (Del.) 10; Leonard v. Olson, St. Rep. 230, 35 L. R. A. 381 ; Pis- « Bolton v. Harrod, 9 Mart, cataqua Exch. Bank v. Carter, 20 N. (La.) 326, 13 Am. Dec. 300; Turner H. 246, 51 Am. Dec. 217. v. Greenwood, 9 Ark. 44; Hymar §§ 151-153 PRESENTMENT — NOTICE OF DISHONOR. 185 § 151. Presentment for acceptance — When essential. In a previous chapter we have discussed acceptance^ We shall now consider presentment for acceptance. In certain cases presentment for acceptance is not essential, and in others it is. In those jurisdictions where days of grace are recognized a bill payable at sight must be presented for acceptance. A bill payable after sight, say five days after sight, should be presented for acceptance and then after that for payment.* So many days after demand requires presentment for acceptance. The Negotiable Instruments Law provides : "Presentment for acceptance must be made: 1. Where the hill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the instrument ; or, 2. Where the bill expressly stipulates that it shall be presented for acceptance; or, / 3. Where the bill is drawn payable elsewhere than at the resi- dence 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."^ Where a bill is payable at a day certain or at a fixed time after its date it need not be presented for acceptance, but the holder may so present it, and if acceptance be refused, he may treat the bill as dishonored."* § 152. Presentment for acceptance — Benefit. What is the benefit of presentment for acceptance? A draws on B in favor of C. Well, you can see it is an advantage to A if C notifies him that B refuses to accept that instrument. A knows he must take care of himself in regard to B, and it helps C because it makes him know where he must look for his money, that is, to A. § 153. Presentment for acceptance— Time. The time for presentment is in a reasonable time.^** The hour of the day for V. Sheldon, 12 Wend. (N. Y.) 439, 640. As to presentment of demand 27 Am. Dec. 137. notes to hold indorsers, see 28 U. » See Chapter VIII, supra. S. L. Ed. 1044. 8 Oleson V. Wilson, 20 Mont. 544, » Neg. Inst. Law. §143, where 52 Pac. 272, 63 Am. St. Rep. 639; all cases directly or indirectly bear- Aymar v. Beers, 7 Cow. (N. Y.) ing upon or citing the Law are 705, 17 Am. Dec. 538; Brown v. grouped. Turner 11 Ala. 752; Mitchell v. »» National Park Bank v. Saitta, Degrand, 1 Mason (U. S.) 176, 17 127 App. Div. (N. Y.) 624, 111 N. Fed. Cas. No. 9,661 ; Kampmann Y. Supp. 927. V. Williams, 70 Tex. 568, 8 S. W. lo phoenix Ins. Co. v. Allen, 11 310. As to necessity to present for Mich. 501, 83 Am. Dec. 756; Thorn- acceptance, see note 1 U. S. L. Ed. burg v. Emmons, 23 W. Va. 325; 186 NEGOTIABLE INSTRUMENTS. § 154 presentment, if you are presenting it to a business man, is at his office during his office hours.** You apply your common sense as to the time of day for the presentment. The Negotiable Instruments Law has the following provisions covering this subject: "Except as herein otherzvise provided, the holder of a hill which is required by the next preceding section to be presented for acceptance must either present it for acceptance or negotiate it within a reasonable time. If he fail to do so, the drawer and all indorsers are discharged. "^^ This section also states the rule at common law. "A hill may be presented for acceptance on any day on which negotiable instruments may he presented for payment under the provisions of sections seventy-two and eighty-five of this act. When Saturday is not othcrzmse a holiday, presentment for acceptance may he made before twelve o'clock, noon, on that day."^^ In some jurisdictions the last sentence is omitted and in still others there are some changes. Another section of the Negotiable Instruments Law provides as follows: "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 hill for acceptance before presenting it for payment on the day that it falls due, the delay caused by presenting the bill for acceptance before presenting it for payment is excused and does not dis- charge the drawers and indorsers."^'* § 154. When instrument dishonored by non-acceptance. As to when an instrument is dishonored by non-acceptance the Nego- tiable Instruments Law provides : "A bill is dishonored by non-acceptance: (1) When it is duly presented for acceptance, and such an acceptance as is prescribed by this act is refused or cannot be obtained; (2) When present- ment for acceptance is excused and the bill is not accepted."^^ Bolton V. Harrod, 9 Mart. (La.) ^^'Neg. Inst. Law, §146, where 326, 13 Am. Dec. 306; Aymar v. all cases directly or indirectly bear- Beers, 7 Cow. (N. Y.) 705, 17 Am. ing upon or citing the Law are Dec. 538 ; Jordan v. Wheeler, 20 grouped. Tex. 698. 14 ^gg. Inst. Law, § 147, where ** Nelson v. Fotterall, 7 Leigh all cases directly or indirectly bear- (Va.) 179; Parker v. Gordon, 7 ing upon or citing the Law are East. 385, 6 Esp. 41 grouped. 12 Neg. Inst. Law. § 144, where *s Neg. Inst. Law, § 149, where all all cases directly or indirectly bear- cases directly or indirectly bear- ing upon or citing the Law are ing upon or citing the Law are grouped. grouped. § 155 PRESENTMENT — NOTICE OF DISHONOR. 187 "Where a bill is duly presented for acceptance and is not ac- cepted 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."'^^ "When a bill is dishonored by non-acceptance an immediate right of recourse against the drazvcrs and indorsers accrues to the holder, and no presentment for payment is ticcessary."^'^ § 155. Presentment for payment — In general. The engage- ment entered into by the acceptor of a bill and the maker of a note is, that it shall be paid at its maturity — that is, on the day that it falls due, and at the place specified for payment, if any place be designated — upon its presentment.-*^^ This engagement is absolute, but that of the drawer of a bill and the indorser of a bill or note is conditional and contingent upon the true present- ment at maturity, and notice in case it is not paid.-^'* It is not necessary that a presentment for payment should be personal. It is sufficient if made at the place specified in the instrument,^** or personally if the maker or acceptor waives his right of having it made at the place stipulated in the contract,*^ or, if no place is specified in the instrument, then if made at the place of business or residence of the maker or acceptor.^^ It is provided in the Negotiable Instruments Law as follows : "The drazver of a bill and any indorser may insert thereon the name of a person to zvhom 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. 18 Neg. Inst. Law, § 150, where grace, see note 6 U. S. L. Ed. 512. all cases directly or indirectly bear- 20-Wolfe v. Jewett, 10 La. 383; ing upon or citing the Law are Goodloe v. Godley, 13 Sm. & M. grouped. (Miss.) 233; Brownell v. Freese, 17 Neg. Inst. Law, § 151, wliere 35 N. J. L. 285, 51 Am. Dec. 150, all cases directly or indirectly bear- 10 Am. Rep. 239; McKenney v. ing; upon or citing the Law are Whipple, 21 Me. 98; Freeman v. rrrouped. Curran, 1 Minn. 161. ' 18 Cox V. Nat. Bank, 100 U. S. 21 King v. Crowell, 61 Me. 244, 712; Jeune v. Ward, 1 B & Aid. 14 Am. Rep. 560; Townsend v. 653 ; Snope v. Ross, 40 Pa. St. 186, Chas. H. Heer Dry Goods Co., 85 80 Am. Dec. 567. Mo. 503; King v. Holmes, 11 Pa. 1^ Johnson v. Zeckendorf (Ariz. St. 456. 1886), 12 Pac. 65; Jones v. Robin- 22 sharnburgh v. Cemmagere, 10 son, 11 Ark. 504, 54 Am. Dec. 212; Mart. (La.) 18; Simmons v. Bet., Grange v. Reigh. 93 Wis. 552. As 35 Mo. 461 ; Sussex Bank v. Bald- to demand as against maker of win, 17 N. J. L. 487; Oxnard v. note or acceptor of bill, see note Varnum, 111 Pa. St. 193, 2 Atl. 224, 6 U. S. L. Ed. 443. As to usage 56 Am. Rep. 255. As to banking* or custom as controlling and vary- customs as to demand and notice, ing demand, notice and days of sec note 21 L. R. A. 441. 188 NEGOTIABLE INSTRUMENTS. § 156 It is in the option of the holder to resort to the referee in case of need or not, as he may see fit."^^" The usual form is "In case of need, apply to Messrs. C. and D. at E." If the referee pays the bill the drawer will be liable to him for the amount. The provision is seldom inserted in bills. § 156. Presentment for payment — When essential. As to when presentment for payment is essential the law generally is as set out in the Negotiable Instruments Law which provides as follows : "Presentment for payment is not necessary in order to charge the person primarily liable on the instrument ; but if the instru- ment is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity, such ability and willing- ness are equivalent to a tender of payment upon his part. But except as herein otherivise provided, presentment for payment is necessary in order to charge the drawer and indorsers."^^ Some jurisdictions have made some changes in the above sec. tion of the law, for example, in Illinois the words "except in ca.se of bank notes" are interpolated after the words "primarily liable" on the instrument ; in Wisconsin all after the words "primarily liable" in the first sentence to the end of that sentence are omit- ted ; in Kansas, New York and Ohio the words "and has funds there available for that purpose" have been interpolated after the word "maturity" in the first sentence. The words added by these three states seem superfluous, however. It has been urged against the above section of the law that it changes the law in a number of the states as to certificates of deposit and bank notes and that it should be amended to except them from under the sections, since as it stands, the statute of limitations would begin to run from date, which is contrary to business custom and the language of such instruments. "Presentment for payment is not required in order to charge the drawer where he has no right to expect or require that the drawee or acceptor zvill pay the instrument. "^^ That the drawer of a bill has no funds in the hands of the drawer will not excuse failure to make presentment and notice of non-payment, particularly when provision has been made for ^* Neg. Inst. Law, § 131, where paper held as collateral or condi- all cases directly or indirectly bear- tional payment, see note 68 L. R. ing upon or citing the Law are A. 487. grouped. 24 Neg. Inst. Law, § 79. where 23 Neg. Inst. Law, §70, where all all cases directly or indirectly bear- cases directly or indirectly bear- ing tpon or citing the Law are ing upon or citing the Law arc grouped, grouped. As to presentment when §§ 157-158 PRESENTMENT — NOTICE OF DISHONOR. 189 payment of any bill drawn by the drawer on the drawee.^' But presentment is not required to charge the drawer of a check upon which payment has been stopped ;^^* and presentment of a check is excused where the making of a check was a fraud upon the part of the drawer, he having no funds in the bank, and no ground for a reasonable expectation that it would be paid.*^'' And "presentment for payment is not required in order to charge an indorser where the instrument was made or accepted for his accommodation, and he has no reason to expect that the instrument will be paid if presented."^^ The Illinois act omits everything after the words "for his ac- commodation." It is not necessary under this section that a loan for which notes were given should have been made for the sole accommoda- tion of an indorser but it is enough if it was only partly for his benefit,.*®* And where the instrument is made for the accom- modation of the indorser, and he promises the maker to "take care of it," presentment and notice of dishonor are not necessary.**" § 157. Presentment for payment — When dispensed with. Presentment for payment may be dispensed with as set out by the terms of the Negotiable Instruments Law which provides : "Presentment for payment is dispensed with: (1) Where after the exercise of reasonable diligence presentment as required by this act cannot be made; (2) where the drawee is a fictitious person; (3) by waiver of presentment express or implied."^"^ § 158. Presentment for payment — What sufficient. As to what constitutes a sufficient presentment the Negotiable Instru- ments Law provides : "Presentment for payment, to be sufficient, must be made'- (1) By the holder, or by some person authorised to receive pay- ment on his behalf ; (2) at a reasonable hour on a business day; (3) at a proper place as herein defined; and (4) to the person primarily liable on the instrument, or if he is absent or inacces- sible, to any person found at the place where the presentment is mad'e."^^ 25Simonoff v. Granite City Nat. ^e^ Berger v. Trimble (Md.), 101 Bank, 279 111. 246, 116 N. E. 6Z6. A. 137. 25«Sibree v. Thomas, 166 111. 26b Dillon v. Brion, 96 Kan. 189, App. 422. 150 P. 553. 25b Beaureguard v. Knowlton, 27 jsjeg. Inst. Law, § 82, where 156 Mass. 395. all cases directly or indirectly bear- 2eNeg. Inst. Law, § 80, where ing upon or citing the Law are all cases directly or indirectly bear- grouped. ing upon or citing the Law are 28 ^gg. Inst. Law, § 72, where grouped. all cases directly or indirectly bear- 190 NEGOTIABLE INSTRUMENTS. §^59 "The instrument must he exhibited to the person from whom payment is demanded, and when it is paid must be delivered to the party paying it."^'^ This section does not change the law but states an old estab- lished rule of law. The reason of the rule is plain and is neces- sary in order that the drawer or acceptor may be able to judge of the genuineness of the instrument ; of the right of the holder to receive payment ; and that he may immediately reclaim posses- sion upon paying the amount.^*** A mere informal talk asking payment of a note, not accom- panied with a presentment of it or intended as a formal present- ment and demand, is not sufficient to put the note in dishonor ;**'* and a demand over the telephone is not a sufficient presentment to charge the indorser unless the maker waives the right to ask for an exhibition of the note.^"° Since formal demand is required only in order to charge the parties secondarily liable, it follows that any reasonable request to pay a demand note with a clause for attorney's fees, is suf- ficient to put the maker in default if he fails to discharge the obligation ; the maker waives exhibition of the note by not asking for it and refusing payment on the ground that he did not have the money and needed the sum to support his family.^"" § 159. Presentment for payment— Date. In ascertaining the proper date for presentment the day of the date is excluded so where the paper is payable one year from date it will mature on the first anniversary of that date. The Negotiable Instruments Law provides : "Where the instrument is payable at a fixed period after date, after sight, or after the happening of a specified event, the time of payment is determined by excluding the day from zvhich the time is to begin to run, and by including the date of payment."^** Thus in an instrument payable so many days after sight, or after date, the day of sight or date is excluded and the day of payment included in the computation.^* ing upon or citing the Law are v. Kennedy, 145 App. Div. 669, grouped. As to necessity of act- 130 N. Y. Supp. 412. ual presentment to effect dishonor, 29o Gilpin v. Savage, 201 N. Y. see note 13 L. R. A. (N. S.) 303. 167, 94 N. E. 656. 2» Neg. Inst. Law, § 74, where all ^Od Hodge v. Blaylock, 82 Ore. cases directly or indirectly bear- 179, 161 Pac. 396. ing upon or citing the Law are 30 N^g jnst. Law, § 86, where grouped. all cases directly or indirectly bear- 29a Waring v. Betts, 90 Va. 46, ing upon or citing the Law are 51. grouped. s*"* State of New York Nat. Bank »! Mitchell v. Degrand, 1 Mason § 160 PRESENTMENT — NOTICE OF DISHONOR. 191 A note dated November 8, 1922, and payable twelve months after date should be presented November 8, 1923, and not No- vember 9, 1923. Another provision relating to the date of presentment is the following : "Where the instrument is not payable on demand, presentment must be made on the day it falls due. Where it is payable on demand, presentment must be made within a reasonable time after its issue, except that in the case of a bill of exchange, pre- sentment for payment will be sufficient if made within a reason- able time after the last negotiation thereof. "^^ Presentment for payment cannot be made on a Sunday or legal holiday, and if the note matures on a holiday or Sunday, since the maker'* cannot be compelled to pay sooner than he had promised, the note or bill will have to be presented on the next business day. Th Negotiable Instruments Law provides : "Every negotiable instrument is payable at the time fixed there- in without grace. When the day of maturity falls upon Sunday, or a holiday, the instrument is payable on the next succeeding business day. Instruments falling due on Saturday are to be presented for payment on the next succeeding business day, ex- cept that instruments payable on demand may, at the option of the holder, be presented for payment before twelve o'clock noon on Saturday when that entire day is not a holiday. "^"^ Several changes have been made in this section in many juris- dictions and these should be read as they are set out in the annotations in another part of this treatise. By usage the banks in some states give notice to the promisor a few days before maturity of the fact that the paper will be due on a named day, and it has been held that this preliminary notice will take the place of a formal presentment on the day of maturity. § 160. Presentment for payment — When delay excused. As to when delay in making presentment for payment is excused the (U. S.) 176, 17 Fed. Cas. No. 9,661 ; 33 Neg. Inst. Law, § 194 and § 85 Coleman v. Sayer, 1 Barn. K. B. where all cases directly or in- 303. directly bearing upon or citing the 31* Lewry v. Wilkinson, 135 La. Law are grouped. 105. 64 So. 1003. 34 Neg. Inst. Law, § 85, where all S2Neg. Inst, Law, §71, where all cases directly or indirectly bearing cases directly or indirectly bear- upon or citing the Law are grouped, ing upon or citing the Law are grouped. 192 NEGOTIABLE INSTRUMENTS. §161 following provision in the Negotiable Instruments Law sets out the law in general: "Delay in making presentment for payment is excused when the delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct or negli- gence. When the cause of delay ceases to operate, presentment must be made "with reasonable diligence."^ The above section follows the old established law. A loss resulting from the failure of the bank at which the instrument is payable, and in which the maker or acceptor has deposited funds at its maturity to pay it, does not fall upon the holder who has failed to present the instrument for payment.*^* It must be shown that the proper steps were taken as soon as the disability was removed.^*" In the excuses set out in the above section of the law where the facts are not disputed the question of due diligence is one of law for the court; but if there is a dispute as to the facts, the ques- tion is for the jury.^^' § 161. Presentment for payment — Place. The following provisions are found in the Negotiable Instruments Law, and represent the law generally, as to the place of presentment for payment : "Presentment for payment is made at the proper place: (1) Where a place of payment is specified in the instrument and it is there presented. (2) Where no place of payment is specified, but the address of the person to make payment is given in the instrument and it is there presented. (3) Where no place of payment is specified and no address is given and the instrument is presented at the usual place of business or residence of the person to make payment. (4) In any other case if presented to the person to make payment wherever he can be found, or if presented at his last known place of business or residence."^ "Where the instrument is payable at a bank, presentment for payment must be made during banking hours, unless the person to make payment has no funds there to meet it at any time during the day, in which case presentment at any hour before the bank is closed on that day is sufficient. "^"^ 85 Neg. Inst. Law, § 81, where all ^° Belden v. Lamb, 17 Conn. cases directly or indirectly bear- 451. ing upon or citing the Law are ^^ Neg. Inst. Law, § 73, where grouped. all cases directly or indirectly bear- 35a Note 2 A. L. R. 1381. ing upon or citing the Law are 35" Wilson V. Senier, 14 Wis. grouped. See also note 12 L. R. A. 380. 727. ^'^ Neg. Inst. Law, § 75, where all §§ 162-163 PRESENTMENT — NOTICE OF DISHONOR. 193 § 162. Presentment for payment to whom. When a bill is payable generally or at a particular place no presentment is necessary to charge the acceptor, as it is his duty to be on hand to pay or seek out his creditor to pay him.** The following provisions are in the Negotiable Instruments Law: "Where the person primarily liable on the instrument is dead, and no place of payment is specified, presentment for payment must be made to his personal representative if such there be, and if with the exercise of reasonable diligence, he can be found."'^ "Where there are several persons not partners, primarily liable on the instrument, and no place of payment is specified, present- ment must be made to them all."'*^ "Where the persons primarily liable on the instrument arc liable as partners, and no place of payment is specified, present- ment for payment may be made to any one of them, even though there has been a dissolution of the firm."'^^ There is no doubt that a clerk found at the counting-room of the acceptor or promisor is a competent party for presentment for payment to be made to, without showing any special author- ity given him.^ But where the protest stated the mere fact of presentment "at the office of the maker," it will be con- sidered insufficient, as not showing that the paper was presented to the party authorized to pay or refuse payment. A demand upon the servant of the owner who used to pay money for him was held sufficient in England.'*^ § 163. Presentment for payment — Effect of failure to pre- sent. The maker and acceptor are bound, although the bill or note be not presented on the day it falls due,"*^ and the only cases directly or indirectly bear- ing upon or citing the Law are ing upon or citing the Law are grouped. grouped. As to parol agreement ■*! Neg. Inst. Law, § 77, where all as to place of demand, when valid, cases directly or indirectly bear- see note 7 U. S. L. Ed. 65. ing upon or citing the Law arc ^ Cooperstown Bank v. Woods. grouped. 28 N. Y. 545; Goodloe v. Godley. 42 Stewart v. Eden, 2 Caines CN. 13 Sm. & M. (Miss.) 233. 51 Am. Y.) 121; Draper v. Clemens. 4 Mo. Dec. 150; De Wolf v. Murray, 2 52; Stainback v. Clemens, 11 Gratt Sandf. (N. Y.) 166. 260. 3® Neg. Inst. Law, § 76, where all 43 Bank of England v. Newman, cases directly or indirectly bear- 12 Mod. 241. ing upon or citing the Law are 44 C(.g|j,(,p ^ Jeflfries, 118 Ala. grouped. 573, 24 So. 37 ; Greeley v. White- 40 Neg. Inst. Law, §78, where head. 35 Fla. 523, 17 So. 643. 48 all cases directly or indirectly bear- Am. St. Rep. 258 ; Wcstcott v. Pat- 194 NEGOTIABLE INSTRUMENTS. §§ 164-166 consequence of a failure to make such presentment is that the maker or acceptor, if he was ready at the time and place to make the payment, may plead the matter in bar of damages and costs ;'*^* but the drawer and indorsers are discharged if such pre- sentment be not made, unless some sufficient cause excuses the holder for failure to perform that duty.^ The fact that the indorser holds security to indemnify him against loss upon his indorsement does not make presentment for payment and notice of dishonor unnecessary.'*'^* § 164. When instrument dishonored by non-payment. "The instrument is dishonored by non-payment when: (1) It is duly presented for payment and payment is refused or ca/nnot be ob- tained; or (2) presentment is excused, and the bill is overdue and tinpaid.'"^^ § 165. Notice of dishonor — In general. Notice of dishonor is bringing either verbally or by writing, to the knowledge of the drawer or the indorser of an instrument, the fact that a specified negotiable instrument, upon proper proceedings taken, has not been accepted, or has not been paid, and that the party notified is expected to pay it.^'' "The notice may be in writing or merely oral, and may be given in any terms zuhich sufficiently identify the instrument, and indicate that it has been dishonored, by non-acceptance or non-payment. It may in all cases be given by delivering it per- sonally or through the mails.'"^^ § 166. Contents of notice. In order that the notice may be complete, it should contain, (1) a sufficient description of the bill or note;"*" (2) a statement that it had been presented for ton, 10 Colo. App. 544, 51 Pac. 47 Martin v. Brown, 75 Ala. 442 ; 1021. Ticonic Bank v. Stackpole, 41 Me. 44a Moore V. Alton, 196 Ala. 158, 321, 66 Am. Dec. 246. As to notice 70 So. 681. of demand, lion-payment, and pro- 45 Jones V. Robinson, 11 Ark. 504, test in general, see note 5 U. S. L. 54 Am. Dec. 212; Wylie v. Cotter, Ed. 215. 170 Mass. 356, 49 N. E. 746, 64 Am. 48 Neg. Inst. Law, §96, where St. Rep; 305 ; Piscataqua Exch. all cases directly or indirectly bear- Bank V. Carter, 20 N. H. 246, 57 ing upon or citing the Law arc Am. Dec. 217; Los Angeles Nat. grouped. Bank v. Wallace, 101 Cal. 478, 36 49 Brown v. Jones, 125 Ind. 375, Pac. 197. 25 N. E. 452, 21 Am. Rep. 227; 45a Whitney v. Collins, 15 R. L 44. Dodson v. Taylor, 56 N. J. L. 11, 4«Neg. Inst. Law, §83, where 28 Atl. 316; Alexandria Bank v. all cases directly or indirectly bear- Swann, 9 Pet. (U. S.) ZZ, 9 L. Ed, ing upon or citing the Law arc 40. grouped. § 167 PRESENTMENT — NOTICE OF DISHONOR. 195 acceptance or payment, and had been dishonored;'^® (3) a state- ment that the paper had been protested,®^ and (4) an announce- ment of the intention of the holder to look to the party addressed for payment.^^ A statement of non-payment is not sufficient without a state- ment that presentment and demand had been made, but if the word "dishonored" is used it is held to be sufficient without further statement of presentment and demand. Notice is sufficient if the necessary facts can reasonably be in- ferred from the terms of the notice. "A un-itten notice need not he signed, and an insufficient written notice may he supplemented and validated hy verbal communication. A misdescription of the instrument does not vitiate the notice unless the party to whom the notice is given is in fact misled therehy."^^ No misdescription of the amount,®* or of the date, or of the names of the parties,^ or of the time the paper falls due,''^ or other defect vitiates the notice of dishonor, unless it misleads the party to whom sent. § 167. By whom given and when to be given. The proper party to give the notice is the holder"" or his authorized agent,^^ or an indorser who is at the time of giving it liable on the bill and who has a right of recourse against the party to whom notice is given.**® That is, the notice must be given by a party to the '^OTowsend v. Lorain Bank, 2 Renner v. Downer, 23 Wend. (N. Ohio St. 345; Sinclair v. Lynch, 1 Y.) 620. Speers (S. C.) 244; Newberry v. 55 Brown v. Jones, 125 Ind. 375, Trowbridge, 4 Mich. 39L 25 N. E. 452, 21 Am. St. Rep. 227; 51 Kellogg V. Pacific Box Factory, Mainer v. Spurlock, 9 Rob. (La.) 57 Cal. 327; Selden v. Washington, 161; King v. Hurley, 85 Me. 525, 17 Md. 379, 79 Am. Dec. 659; Et- 27 Atl. 463; Carter v. Bradley, 19 ting V. Schuylkill Bank, 2 Pa. St. Me. 62, Z6 Am. Dec. 735. 355, 44 Am. Dec. 205; Tevis v. ^e Sahmarsh v. Tuthill, 13 Ala. Wood, 5 Cal. 393. 390; Smith v. Whiting, 12 Mass. 52 U. S. Bank v. Norwood, 1 6,7 Am. Dec. 25; Gates v. Beecher, Harr. & J. (Md.) 423; Burgess v. 60 N. Y. 518, 19 Am. Rep. 207. Vreeland, 24 N. J. L. 71, 59 Am. 57 Tindal v. Brown, 1 T. R. 167, Dec. 408. 1 Rev. Rep. 171 ; e.r parte Barclay, 53 Neg. Inst. Law, § 95, where 7 Ves. Jr. 597. all cases directly or indirectly bear- 5S Lindesborg Bank v. Ober, 31 ing upon or citing the Law are Kan. 599, 3 Pac. 324; Tevis v. Ran- grouped. dall, 6 Cal. 632, 65 Am. Dec. 547 J 54 King v. Hurley, 85 Me. 525; Waldron v. Turpin, 15 La. 552, 35 Alexandria Bank v. Swann, 9 Pet. Am. Dec. 210. (U. S.) 2Z, 9 L. Ed. 40; McKnight 59Glasgow v. Pratte, 8 Mo. 336, V. Lewis, 5 Barb. (N. Y.) 681. See 40 Am. Dec. 142; Stanton v. Bios- 196 NEGOTIARI.E INSTRUMENTS. § 168 paper or his a^ent, and a total stranger cannot give proper notice of dishonor.®* The notary may give the notice as agent for the holder, and so may any bank holding the paper for col- lection.** "The notice may he given by or on behalf of the holder, or by or on behalf of any party to the instrument who might be com- pelled to pay it to the holder, and who upon taking it up, would have a right to reimbursement from the party to whom notice is given."^^ "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."^^ "Where the instrument 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 gives notice to his principal, he miust do so within the same time as if he zvere 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."^^ If the holder die before the time for presentment for pay- ment, it must be made by his personal representative.*'''' If there be no personal representative at the time, presentment and demand within a reasonable time after his appointment w^ill be sufficient to charge subsequent parties, although presentment and demand were not made at maturity. § 168. Notice of dishonor — To whom given. As to vv^hbm notice of dishonor should be given the Negotiable Instruments Law provides : "When a negotiable instrument has been dishonored by non- acceptance or non-payment notice of dishonor must be given to som, 14 Mass. 116, 7 Am. Dec. 198; ing upon or citing the Law are Linn v. Horton, 17 Wis 15L grouped. s^'Beal V. Alexander, 6 Tex. 531; ^3 N^g i^gt l^w, §91, where all Brailsford v. Wiliams, 15 Md. 150, cases directly or indirectly bear- 74 Am. Dec. 559; Brower v. Woot- ing upon or citing the Law are en, 4 N. C. 507, 7 Am. Dec 692. grouped. 61 Lindsborg Bank v. Ober, 31 *■* Neg. Inst. Law, § 94, where Kan. 599, 3 Pac. 324; Couch v. all cases directly or indirectly bear- Sherrill, 17 Kan. 622; Warren v. ing upon or citing the Law are Oilman, 17 Me. 360; Blackeslee v. grouped. Hewett, 76 Wis. 341, 44 N. W. 65 white v. Stoddard. 11 Gray 1105. (Mass.) 258, 71 Am. Dec. 711; 62 Neg. Inst. Law, §90, where all Rand v. Hubbard, 4 Mete. (Mass.) cases directly or indirectly bear- 252, §168 PRESENTMENT — NOTICE OF DISHONOR. 197 the drazwr and to each indorser, and any drawer or indorser to ivhoni such notice is not given is discharged,"^^ and "Notice of dishonor may he given either to the party himself or to his agent in that behalf ."^"^ The proper party or parties to be given notice are the drawer,®"^ indorser or indorsers,®^ or their authorized agent or other person entitled to receive notice for them.''® That is, the notice must be given to all persons secondarily liable whom the holder wishes to charge. And notice should be given to indorsers who have indorsed for the purpose of collection,''*^ and indorsers of over- due paper.''^ Where there are two or more joint drawers or indorsers who are not partners, notice of dishonor must be given to them all in order to bind either.''^ Some jurisdictions hold that absence of protest and notice of dishonor is not a defense to an action by one joint indorser of negotiable paper to compel contribution by his coindorsers to the amount paid by him upon the paper.''^* While other juris- dictions decide that if he would hold his coindorsers, he must give notice to them.'^'' When the note is executed by several joint promisors who are not partners, but liable only as joint and several promisors, it ** Neg Inst. Law, § 89, where all cases directly or indirectly bear- ing upon or citing the Law are grouped. As to sufficiency of no- tice to indorser, see note 12 L. R. A. 7Z\. ^^ Neg. Inst. Law, § 97, where all cases directly or indirectly bear- ing upon or citing the Law are grouped. «8 Patillo V. Alexander, 96 Ga. 60, 22 S. E. 646, 29 L. R. A. 616 ; Bax- ter V. Graves, 2 A. K. Marsh. (Ky.) 152, 12 Am. Dec. 374. ^9 McLanaham v. Brandon, 1 Mart. (N. S.) La. 321, 14 Am. Dec. 188 ; Fotheringham v. Price, 1 Bay. (S. C.) 291, 1 Am. Dec. 618; Pea- body Ins. Co. V. Wilson, 29 W. Va. 528, 2 S. E. 888. 70 Crowley v. Berry, 4 Gill. (Md.) 194; Coffman v. Commonwealth Bank, 41 Miss. 212, 90 Am. Dec. 37L As to whom given after appoint- ment of receiver or assignee, see note 61 L. R. A. 900. ''* Elizabeth State Bank v. A3'ers, 7 N. J. L. 130, 11 Am. Dec. 535; U. S. Bank v. Davis, 2 Hill (N. Y.) 451. 72 Beer v. Clifton, 98 Cal. 323, 33 Pac. 204, 55 Am. St. Rep. 172, 20 L. R. A. 580; Grand v. Strutzel, 53 la. 712, 6 N. W. 119, 36 Am. Rep 250. 73 People's Bank v. Keech, 26 Md. 521, 90 Am. Dec. 118; Willis v. Green, 5 Hill (N. Y.) 232, 40 Am. Dec. 351. See note 36 L. R. A. 703. Contra : Williams v. Paintsville National Bank, 143 Kv 781, 137 S. W. 535; Eaves v. Kecton, 196 Mo. App. 424, 193 S. W. 629. 73a Williams v. Paintsville Na- tional Bank, 143 Ky. 781. 137 S. W. 535. ^Sb Owens V. Greenlee, — Colo. — , 188 P. 721. 9 A. L. R. 1184. See note 9 A. L. R. 1188. 198 NEGOTIABLE INSTRUMENTS, § 169 has been held, that presentment should be made to each, in order to fix the liability of an indorser. And as provided by the Negotiable Instruments Law : "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."'^'^ "Where the parties to he notified are partners notice to any one partner is notice to the Urm, even though there has been a dissolution.""^^ "Where a party has been adjudged a bankrupt or an insolvent, or has made an assignment for the benefit of creditors, notice may be given either to the party himself or to his trustee or as- signee.""^^ Notice left with a clerk or person in charge, at the party's place of business, in his absence, or at his place of business,'^ without proof as to the person with whom it was left, is sufficient, and proof that such person was not the party's agent has been held irrelevant, notice being left at the right place. Hence, leaving it with his private secretary at his public office is suffi- cient. If service be sought on the party at his dwelling, it is sufficient to leave notice with his wife, or with any other person on his premises.'^^ "When any party is dead, and his death is known to the party giving notice, the notice must be given to a personal represen- tative, if there be 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 de- ceased/'"^^ § 169. Notice of dishonor — Time. As to the time In which notice must be given the Negotiable Instruments Law provides : "Notice may be given as soon as the instrument is dishonored ; and unless delay is excused as hereinafter provided, must be given within the times fixed by this act."^^ '^'* Neg. Inst. Law, § 100, where 194 ; Coffman v. Commonwealth all cases directly or indirectly bear- Bank, 41 Miss, 212, 90 Am. Dec. ing upon or citing the Law are 371. grouped. 78 Mercantile Bank v. McCarthy, 75 Neg. Inst. Law, §99, where all 7 Mo. App. 318; Colms v. Bank of cases directly or indirectly bearing Tenn., 4 Baxt. 422 ; Bank of Ky. upon or citing the Law are v. Duncan, 4 Bush. (Ky.) 294; U. grouped. S. v. Hatch, 1 McLean (U. S.) 92. 76 Neg. Inst. Law, § 101, where 79 Neg. Inst. Law, § 98, where all fill cases directly or indirectly bear- cases directly or indirectly bear- ing upon or citing the Law are ing upon or citing the Law are grouped. grouped. 77 Crowley V. Barry, 4 Gill (Md.) so Neg. Inst. Law, §102., where § 170 PRESENTMENT — NOTICE OF DISHONOR. 199 The law as to parties residing in the same place is as follows : "Where the person giving and the person to receive notice reside in the same place, notice must he given zvithin- the folloiv- ing 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 folloiving; (3) if sent by mail, it must be deposited in the postoffice in time to reach him in usual course on the day follozmng."^^ And where the parties reside in different places the law is: "Where the person giving and the person to receive notice reside in different places, the notice must be given zvithin the follozving times: (1) If sent by mail, it must be deposited in the postoffice in time to go by mail the day follozmng the day of dis- honor, or if there be no mail at a convenient hour on that day, by the next mail thereafter; (2) if given otherzvise than through the postoffice, then within the time that notice would have been received in due course of mail, if it had been deposited in the postoffice zvithin the time specified in the last subdivision."^^ As to time of giving notice to a subsequent party the law is : "Where a party receives notice of dishonor, he has, after the receipt of such notice, the same time for giving notice to ante- cedent parties that the holder has after the dishonor/'^^ § 170. Notice of dishonor — Place of sending. The Nego- tiable Instruments Law sets out the law as to the place of send- ing the notice of dishonor. It states : "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 follozvs: (1) Either to the postoffice nearest to his place of residence, or to the postoffice where he is accustomed to receive his letters; or (2) if he live in one place, and have his place of business in an- other, notice may be sent to either place; or (3) if he is sojourn- ing in another place, notice may be sent to the place where he is sojourning. But zvhere the notice is actually received by^ the party within the time specified in this act, it will be sufficient, all cases direcctly or indirectly bear- ^^ Neg. Inst. Law, § 104, where ing upon or citing the Law are all cases directly or indirectly bear- grouped. As to time within which ing upon or citing the Law are notice of dishonor must be given, grouped. see note 12 L. R. A. 729. ^'-^Neg. Inst. Law, § 107, where ** Neg. Inst. Law, § 103, where all cases directly or indirectly bear- all cases directly or indirectly bear- ing upon or citing the Law are ing upon or citing the Law are grouped, grouped. 200 NEGOTIABLE INSTRUMENTS. §§ 171-172 though not sent in accordance with the requirements of this sec- tion."^'* This is also the law generally. § 171. Notice of dishonor — Through postoffice. As to send- ing notice through the postoffice the Negotiable Instruments Law states : "Where notice of dishonor is duly addressed and deposited in the postoffice, the sender is deemed to have given notice, notwith- standing any miscarriage in the mail."^^ "Notice is deemed to have been deposited in the postoffice when deposited in any branch postoffice or any letter box under the control of the postoffice department. "^^ That is, if a notice he given by the holder to an indorser by mail, addressed to the indorser at the postoffice nearest his resi- dence and deposited in the postoffice at the proper time, the indorser will be charged whether he received the notice or not. The letter containing the notice must be posted early enough to be sent by mail on the day succeeding the dishonor of the instrument. § 172. Notice of dishonor — When unnecessary. Notice of dishonor is dispensed with: (1) When the drawer or indorser sought to be charged is, as between the parties to the bill, the principal debtor, and has no reason to expect that it will be honored on presentment.^' (2) As regards the drawer, when drawer and drawee are the same person, or identical in interest.^ (3) When the drawer or indorser sought to be charged is the person to whom the bill is presented for payment. (4) When the drawee is fictitious and the drawer or indorser sought to be charged was aware of the fact at the time he drew or indorsed the bill.^^ (5) When the drawer or indorser sought to be charged has received an assignment of all the property of the 84Neg. Inst. Law. §103, where 328, 85 Am. Dec. 309; Culver v. all cases directly or indirectly bear- Marks, 122 Ind. 554, 23 N. E. 1086, ing upon or citing the Law are 17 Am. St. Rep. 2i77, 7 L. R. A. 489; grouped. Merchants Bank v. Easley, 44 Mo. 85 Neg. Inst. Law, § 105, where all 286, 100 Am. Dec. 287. As to when cases directly or indirectly bearing drawer or indorser is not entitled upon or citing the Law are grouped. to notice, see note 2 U. S. L. Ed. As to service of notice by mail, see 102. note 12 L. R. A. 731. ^8 Planters Bank v. Evans, 36 *^ Neg. Inst. Law, § 106, where Tex. 592 ; New York etc. Co. v. all cases directly or indirectly bear- Selma Sav. Bank, 51 Ala. 305; ing upon or citing the Law are Gowan v. Jackson, 20 Johns. 176. grouped. *" Groth v. Gyger, 31 Pa. St. 271 ; *'' Kupfer V. Galena Bank, 34 111. Magruder v. Union Bank, 3 Pet. 87. § 173 PRESENTMENT — NOTICE OF DISHONOR. 201 acceptor as security against his liability.^® (6) When, after the exercise of reasonable diHgence, no notice of dishonor can be given to or does not reach the party sought to be discharged.^* The Negotiable Instruments Law has the following provisions as to when notice of dishonor is unnecessary and they represent the law generally: "Notice of dishonor is not required to be given to an indorser in either of the follotmng cases: 1. Where the drawee is a fictitious person or a person not hazing capacity to contract, and the indorser was aware of the fact at the time he indorsed the instrument; 2. Where the indorser is the person to whom the instrument is presented for payment ; 3. Where the instrument was made or accepted for his ac- commodation."^^ ''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; (3) zvhere the drawer is the person to whom the instrument is presented for payment; (4) zvhere the drawer has no right to expect or require that the drazvee or acceptor zvill honor the instrument; (5) where the drawer has countermanded payment. "^^ "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."^* "Notice of dishonor is dispensed zvith when, after the exercise of reasonable diligence, it cannot be given to or does not reach the parties sought to be chargcd."^^ § 173. Notice of dishonor — Excuse for failure to give notice. Certain excuses for failure to give notice of dishonor are per- mitted, thus : 80 Prentiss v. Danielson, 5 Conn. ing upon or citing the Law are 175, 13 Am. Dec. 52; Mead v. grouped. Small, 2 Me. 207, 11 Am. Dec. 62; »3 Neg. Inst. Law, § 114. where all Perry v. Green, 19 N. J. L. 61, 38 cases directly or indirectly bearing Am. Dec. 536. upon or citing the Law are grouped. »i Walker v. Stetson, 14 Ohio St. 94 Neg. Inst. Law, § 109, where 89, 84 Am. Dec. 362 ; Galpin v. all cases directly or indirectly bear- Hard, 3 McCord (S. C.) 394, 15 ing upon or citing the Law) are Am. Dec. 640; Miranda v. New Or- grouped. leans City Bank, 6 La. 740, 26 Am. »5 Neg. Inst. Law, § 112, where Dec. 493; Tunstall v. Walker, 2 Sm. all cases directly or indirectly bear- & M. (Miss.) 638. ing upon or citing the Law are 92 Neg. Inst. Law, § 115, where grouped, all cases directly or indirectly bear- 202 NEGOTIABLE INSTRUMENTS. § 173 "Delay in giving notice of dishonor is exeuscd when the delay h caused by circumstances beyond the control of the holder and not inipntable to his default, misconduct or negligence. When the cause of delay ceases to operate, notice must be given with reasonable diligence."^ When political disturbances interrupt and obstruct the ordi- nary negotiations of trade, they constitute a sufficient excuse for want of presentment or notice, upon the same principle that con- trols in cases of military operations or interdictions of com- merce.®'^ So the prevalence of a malignant, contagious, or infectious disease, such as the cholera, yellow fever, the plague, or small- pox, which has become so extensive as to suspend all commercial business and intercourse or to render it very hazardous to enter into the infected district, is recognized by the text writers as a sufficient excuse for not doing any act which would require an entry into such districts."® Where presentment or notice of dishonor has been waived by express agreement or is implied in the acts of the parties, it is unnecessary -^^ when sudden illness or death of, or accident to, the holder or his agent prevents the presentment of the bill or note in due season, or the communication of notice, the delay is excused, provided presentment is made and notice given as promptly afterward as the circumstances reasonably permit.* This doctrine rests upon the same principle as that which ex- cuses want of punctuality when overwhelming calamities or acci- dents of a general nature prevent. The sudden illness or death of his agent is on the same footing as when these happen to the holder himself. If the excuse be illness, it must be of such a 96Neg. Inst. Law, § 113, where cliffe, 4 Strobh. (S. C.) 296, 53 Am. all cases directly or indirectly bear- Dec. 678; Hale v. Damford, 46 Wis., ing upon or citing the Law are 554, 1 N. W. 284. As to indorser's grouped. promise to pay or acknowledgment 9'' Peters v. Hobbs, 25 Ark. 67, of liability after maturity as 91 Am. Dec. 526; House v. Adams, waiver of lack of notice, see note 48 Pa. St. 261. 86 Am. Dec. 426; 6 U. S. L. Ed. 596. Immaterial Ray V. Smith, 17 Wall. (U. S.) 411, whether indorser receives notice if 21 L. Ed. 666. due diligence used in sending it, sSTunno v. Lague, 2 Johns. Cas. see note 11 U. S. L. Ed. 1000. (N. Y.) 1, 1 Am. Dec. 141; Han- i White v. Stoddard, 11 Gray over V. Anderson, 16 Lea (Tenn.) (Mass.) 258, 71 Am. Dec. 711; 340. Newbold v. Borsef, 155 Pa. St. 99 Markland v. McDaniel, 51 Kan. 227, 26 Atl. 305 ; Duegan v. King, 350, 32 Pac. 1114, 20 L. R. A. 96 ; Rice (S. C.) 239, Z?, Am. Dec. 107; Hibbard v. Russell, 16 N. H. 410, Wilson v. Sevier, 14 Wis. 380. 41 Am. Dec. 72Z; Schmidt v. Rad- § 174 PRESENTMENT — NOTICE OF DISHONOR. 203 character as to prevent due presentment and notice by the exer- cise of due dilgience.^ Where the person against whom the bill is sought to be en- forced has been fully secured against loss by the person princi- pally liable on the instrument, and has promised to see to the acceptance or payment of the paper, its presentment is unnec- essary.^ § 174. Notice of dishonor — Effect of notice as to prior and subsequent parties. "Where notice is given by or on behalf of the holder, it enures for the benefit of all subsequent holders and all prior parties tvho have a right of recourse against the party to whom it is given.'"* "Where notice is given by or on behalf of a party entitled to give notice, it enures for the benefit of the holder and all parties subsequent to the party to whom notice is given."'^ That is, notice of dishonor given by or on behalf of the holder enures to the benefit of all subsequent holders, and all prior indorsers liable on the bill who have a right of recourse agamst the party to whom notice is given. And notice of dishonor given by or on behalf of an indorser entitled to give notice, enures to the benefit of the holder and all indorsers liable on the bill who have a right of recourse against the party given notice. A party who receives due notice of the dishonor of a bill, as an indorser, after the receipt of such notice, has the same time in which to give notice to antecedent parties whom he desires to hold liable, as the original holder has after the dishonor of the bill. "Where due notice of dishonor by non-acceptance has been given, notice of a subsequent dishonor by non-payment is not nec- essary unless in the meantime the instrument has been accepted"^ "An omission to give notice of dishonor by non-acceptance does not prejudice the rights of a holder in due course subsequent to the omission.'"^ 2 Wilson V. Sevier, 14 Wis. 380; cases directly or indirectly bearing Purcell V. Allerr.ong, 22 Gratt. upon or citing the Law are grouped. (Va.) 739. 6Neg. Inst. Law, § 116, where all 3 Prentice v. Danielson, 5 Conn. cases directly or indirectly bearing 175, 13 Am. Dec. 52 ; Perry v. upon or citing the Law are grouped. Green, 19 N. J. L. 61, 38 Am. Dec. '^ Neg. Inst. Law, § 117, where all 536; Brandt v. Mickle, 28 Md. 436. cases directly or indirectly bearing Contra, Watkins v. Crouch, 5 upon or citing the Law are grouped. Leigh (Va.) 522. As to effect of omission to give no- ^ Neg. Inst. Law, § 92, where all tice on paper held as collateral or cases directly or indirectly bearing conditional payment, see note G& L. upon or citing the Law are grouped. R. A. 482. 5 Neg. Inst. Law, § 93, where all 204 NEGOTIABLE INSTRUMENTS. § 175 § 175. Protest — Method of. Protest in its popular signifi- cation includes all the steps taken to fix the liability of a drawer or indorsers,** but its accurate technical meaning is that it is the testimony of some proper person, usually a notary, that the regular legal steps to fix that liabihty have been taken by the holder.*^ Its method is for the notary himself to properly pre- sent the instrument, and demand its acceptance or payment. If these are refused, to make a minute thereof on the instrument, or in his official record ; the minute consisting of his initials, the year, month, and day of dishonor, and his charges. This is done on the day of the dishonor. And on the same day, or after- wards, the notary extends the protest thus noted by embodying in a certificate the facts of the protest, and his acts in making presentment, demand, and in giving notice of dishonor. To this he generally appends his official seal.-^® Where a notary cannot be obtained protest may be made by any respectable person.-^-"^ As to protest the Negotiable Instruments Law provides as follows : "The protest must he annexed to the hill or must contain a copy thereof and must he under the hand and seal of the notary making it, and must specify: (1) The time and place of present- ment; (2) the fact that presentment zvas 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 drazvee or acceptor could not he found."^^ The signature of the notary may be printed ;^^* and neither the seal nor the signature of the notary need be proved.-^^" A certificate of the protest of a foreign bill of exchange is no proof of the drawer's refusal to accept or pay the bill, unless properly authenticated by the seal of the officer before whom the protest was made.-^^** 8 White V. Keith, 97 Ala. 668, 12 Donegan v. Wood, 49 Ala. 242, 20 So. 611 ; Ayrault v. Pacific Bank, 47 Am. Rep. 275. As to v/rongful pro- N. Y. 570, 7 Am. Rep. 489 ; Sprague test, see note 30 Am. St. Rep. 158. V. Fletcher, 8 Oreg. 367, 34 Am. ^2 Ngg i^gt. Law, §153. where all Rep. 587. cases directly or indirectly bearing ^ Swayze v. Britton, 17 Kan. 625. upon or citing the Law are grouped. As to liability of notaries making ^^^ Fulton v. MacCracken, 18 Md. protest, see note 82 Am. St. Rep. 528. 380. 12b Barrv v. Crowly. 4 Gill (Md.) lOLeftley v. Mills, 4 T. R. 170; 194. Gale V. Walsh, 5 T. R. 170; Rod- i2o London & River Plate Bank gers V. Stephens, 2 T. R. 713. v. Carr, 54 Alisc. Rep. 94, 105 N. Y. 11 Read v. Commonwealth, 1 T. Supp. 679. B. Men. (Ky.) 91, 15 Am. Dec. 86; § 175 PRESENTMENT — NOTICE OF DISHONOR. 205 "Protest may he made by: (1) A notary public; or (2) by any respectable resident of the place where the bill is dishonored, in the f>resence of two or more credible witnesses."^^ In some states the word responsible is substituted for respect- able in the law. In the absence of any custom or usage, the presentment and demand must be made by the notary in person.^^* "When a bill is protested, such protest must he 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."''-'* The protest should be commenced on the day on which ac- ceptance or payment is refused ; but it may be drawn up and completed later. The drawer of a check who has countermanded payment is not entitled to notice of its protest.*^* "A bill must be protested at the place where it is dishonored except that when a hill drawn payable at the place of business or residence of some person other than the draivee, has been dis- honored, by non-acceptance, it must he protested for non-pay- ment at the place where it is expressed to be payable, and no further presentment for payment to, or demand on, the drawee is necessary."''^ "A bill which has been protested for non-acceptance may be subsequently protested for non-payment."^^ Below is given a form of protest: FORM OF PROTEST. United States of America, State of County of City of ss. By this Public Instrument of Protest, be it known; That on this day of , in the *3 Neg. Inst. Law, § 154, where ^^^ First National Bank v. Korn, all cases directly or indirectly bear- — Mo. App. — , 179 S. W. 721. ing upon or citing the Law are i^ Neg. Inst. Law, § 156, where grouped. all cases directly or indirectly bear- 13a Ocean National Bank v. Will- ing upon or citing the Law are iams. 102 Mass. 141. grouped. 14 Neg. Inst. Law, § 155, where ^^ Neg. Inst. Law, § 157, where all cases directly or indirectly bear- all cases directly or indirectly bear- ing upon or citing the Law are ing upon or citing the Law are grouped. grouped. 206 NEGOTIABLE INSTRUMENTS. § 175 year of our Lord 19 , I, a Notary Public in and for the County and State aforesaid by lawful authority duly commissioned and sworn, residing in , in the County and State aforesaid, at the request of , holder of the original , did present the original - , which is hereunto annexed, to , and did demand The said did refuse to the same (here insert reason, if any, why payment or acceptance was refused). Whereupon I did protest, and by these presents do publicly and solemnly protest as well against the drawer and indorsers of the said as against all others whom it doth or may concern for exchange, re-exchange and all costs, charges, damages and interest heretofore incurred or to be hereafter incurred for want of the of the same; and I do hereby certify that on the day of , one thousand nine hundred , I did give due and written notice, signed by me, of the present- ment and protest of the foregoing — to the respective indorsers of the said instrument, and informing that held liable for the payment of said ; and on the same day, in the evening, I deposited the same in the postoffke at , contained in a securely sealed postpaid wrapper, duly directed and subscribed to said as follows, to-wat: to The above-named places and addresses being the reputed place of residence and address of the persons to whom such notice was so addressed and the postoffice nearest thereto. Thus done and protested in the City of , in the County and State aforesaid, in the presence of and , witnesses. §176 PRESENTMENT — NOTICE OF DISHONOR. 207 In testimony whereof, I have hereunto set my hand and affixed my official seal this day of , 19 (seal) Notary Public. My Commission Expires on the day of , 19 fees Protest . Record Notices Postage Total -$- Registered Vol Page. § 176. Protest — Purpose. The dishonor must be brought to the attention of the person secondarily liable on the instru- ment. That is, to the indorsers or drawer. For "subject to the provisions of this act, zvhen the instrument is dishonored by non-payment an immediate right of recourse to all parties secondarily liable thereon accrues to the holder/'^"^ By the above section of the law an indorser whose liability has become fixed by demand and notice is, as to the holder, a prin- cipal debtor.*'^' The notice may be made by a notary public.^^ The instru- ment is presented for payment and payment is refused, then the instrument may be taken by a notary public to the party and the party may state that he refuses to pay it ; the notary makes a statement to that effect and attaches his seal, that it has been dishonored, and that he has protested it for non-payment. The notary keeps this or he may send his sworn statement, one copy to one person and one to the other.^^ This is the protest, it is not the notice of protest. The protest is a solemn declara- tion made by the notary public that the paper has been dis- honored.*® Now, when suit is brought on the paper, it is abso- *'' Neg. Inst. Law, § 84, where all cases directly or indirectly bearing upon or citing the Law are grouped. *''* Pittsburg- Westmoreland Coal Co. V. Kerr, 220 N. Y. 137, 115 N. E. 465. 18 Donegan v. Woods, 49 Ala. 242, 20 Am. Rep. 275 ; Scrider v. Brown, 3 McLean (U. S.) 481, 21 Fed. Cas. No. 12,205.. i9LeftIey v. Mills, 4" T. R. 170; Gale V. Walsh, 5 T. R. 170; Rod- gers V. Stephens, 2 T. R. 713. As to what facts certificate of notary is evidence, see note 2 U. S. L. Ed. 102. 20 Swayze v. Britton. 17 Kan. 625. As to protest as sufficient evidence, see note 36 Am. St. Rep. 685, 208 NEGOTIABLE INSTRUMENTS. § 177 lutely necessary that proof be shown. So when you come to prove your case as the holder of an instrument you must prove that there has been a protest of the instrument, that it has been presented for payment or acceptance to the person liable and that it has been refused. That is part of your case. And when you come to the trial, this statement of the protest by the notary is a part of your case. It is the same as a deposition. It can go into evidence anywhere and will prove the case just the same as a deposition. For this certificate is generally accepted as evidence of the facts set forth in its terms, and its production obviates the neces- sity of proof of these facts by witnesses in open court. The main purpose of the protest, therefore, is to furnish to the holder legal testimony of presentment, demand, and notice of dishonor, to be used in actions against the drawer and indorsers. And the notary's certificate of protest is only evidence of those facts which are stated therein and which it is the duty of the notary to note in making presenment and demand for payment. Collateral facts noted by the certificate must be proved by other evidence. A protest certificate is only prima facie evidence and all facts stated therein may be disproved by competent evidence show- ing the statements to be untrue. § 177. Protest — Notice of. After the notary protests the in strument he sends notice to all the parties on the instrument.** He can do this in several ways. He might send it to the per- son who sent the paper in for collection. Then the notary public would send his notice of protest for the other parties on the in- strument, to the last person on the instrument, and he would say, "Notices enclosed herewith to be sent to the other parties." If the holder has sent notice to all the parties, he is entitled to come in and recover because he has performed his contract. He has sent notice to all the parties on the instrument that he intends to recover against them. Now, if the indorsee is D and he has sent notice to all the other indorsers, he can proceed against all or any one of them. C gets the notice and he sends out notices to those who preceded him and that holds them, but they will be held already by the notices sent them by the other man. It is just performing the contract which was entered into in the way a merchant would do it. It is performing the contract aiTevis v. Randall, 6 Cal. 632, 65 Am. Dec. 547; Ban v. Marsh, 9 Yerg. (Tenn.) 253. § 177 PRESENTMENT — NOTICE OF DISHONOR. 209 which was entered into originally so that you may come within the terms of the contract.^^ It is the duty of a bank undertaking the collection of a bill or note to protest the same upon dishonor and give the proper notice. Some jurisdictions hold that the notice must be given to all prior indorsers while others hold that notice need be given only to the collecting bank's immediate indorser or principal. Under the latter view when the principal has received notice the col- lecting bank is relieved from liability. Thus it is no part of the duty of the collecting bank to forward to an indorsee notice of dishonor received by it from its correspondent, provided its prin- cipal received notice of the dishonor, that is, a bank which col- lects through a correspondent bank must see to it that, at least, its principal is notified.^** Below is given a form of notice: FORM OF NOTICE OF PROTEST. State dp ss 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 protested 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 pay- ment, damages, interest and costs as indorser thereof. Very respectfully, Notary Public. My Commission Expires on the day of , 19__ 22 Lysaght v. Bryant, 9 C. B. 46 ; People's National Bank, 263 Pa. Smith V. Poillon, 87 N. Y. 590, 41 266. 106 A. 311, 4 A. L. R. 531, 3 Am. Rep. 402 ; Wilson v. Swaberg, R. C. L. 250 and 622. Note 4 A. L. 1 Stark. 34. R. 534. *2a Farmers' National Bank v. 210 iSTEGOTIABLE INSTRUMENTS. § 178 § 178. Protest — What should be protested and what not necessary. As to what should be protested and what is un- necessary to protest the Negotiable Instruments Law has the fol- lowing provisions : "Where any negotiable instrument has been dishonored 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."^'^ In many states statutes make the certificate of the notary prima facie evidence of the facts of presentment, demand, non- payment and notice of dishonor. Therefore, while protest is not required in cases of promissory notes and inland bills, it is usual to protest these instruments also, when dishonored, since the notary's certificate of protest is the most convenient and certain mode of proving the facts.*^* And under some statutes it has been held prima facie evidence that notice was given in com- pliance with the Negotiable Instruments Law.^^" "Where a foreign bill appearing on its face to be such is dis- honored by non-acceptance, it must be didy protested for non^ acceptance, and where such a bill zvhich has not previously been dishonored by non-acceptance is dishonored by non-payment, it must be didy protested for non-payment. If it is not so protested, the drazver 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."^* A foreign bill must be presented by a notary public, because, from the needs of the case, some act of a universally recognized authority is called for.*' By force of custom, the official act of the notary public is of recognized authority throughout the world. Protest by notaries public of a foreign note is unnecessary, unless it is indorsed; but, if indorsed, its protest by a notary public, according to the weight of authority, is required be- cause the indorsement of a note is essentially a bill drawn on the maker .20 23 Neg. Inst. Law, § 118, where all As to protest for non-acceptance, cases directly or indirectly bearing see notes 1 U. S. L. Ed. 640 and 2 upon or citing the Law are grouped. U. S. L Ed. 79. As to protest of promissory note or ^5 Commercial Bank v. Barks- inland bill under general law mer- dale, 36 Mo. 563; Sussex Bank v. chant, see note 5 U. S. L. Ed. 228. Baldwin, 17 N. J. L 476; Cape 23a Eaves v. Keeton, — Mo. App. Fear Bank v. Stinemetz, 1 Hill (S. — . 193 S. W. 629. C.) 44. As to liability of notary 23" Scott V. Brown, 240 Pa. St. for neglect to protest, and of bank .".28, 87 A. 431. employing him, see note 16 U. S. 2-* Neg. Inst. Law, § 152, where all L. Ed. 466. cases directly or indirectly bearing 26 Austin v. Rodman, 8 N. C 194, upon or citing the Law are grouped. 9 Am. Dec. 630; Carter v. Union §§ 179-180 PRESENTMENT — NOTICE OF DISHONOR. 211 The convenience of proving the essential facts of dishonor by notarial certificate has caused the enactment in some of the States of statutes requiring or permitting the protesting of inland bills and notes. § 179. Protest — Waiver. Protest is vi^aived by express or impHed waiver of a presentment for payment, and protest is dispensed with by the same circumstances which would dispense with notice of dishonor in the case of an inland bill, and cir- cumstances excusing delay in giving notice of dishonor will excuse delay in protesting. The Negotiable Instruments Law provides : "Protest is dispensed ivith 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 defaidt, miscon- duct, or negligence. When the cause of delay ceases to operate, the bill must be noted or protested zvith reasonable diligence. "^"^ "Where the waiver is embodied in the instrument itself, it is binding upon all parties; but where it is written above the signa- ture of an indorser, it binds him only."^^ "A zmiver of protest whether in the case of a foreign bill of exchange or other negotiable instrument, is deemed to be a waiver not only of a formal protest, but also of presentment and notice of dishonor."^^ § 180. Protest — Miscellaneous matters. A foreign bill dis- honored for non-acceptance must be protested, but when this is done it need not be subsequently protested for non-payment. Any holder may present the bill or note for payment and re- ceive payment, but in case payment is refused and protest be- comes necessary, the notary public who makes the protest is obliged, by law to make a second demand, so that he can of his own personal knowledge certify to the fact of dishonor.^" Bank, 7 Humph. (Tenn.) 548, 46 As to effect of waiver, see note 29 Am. Dec. 671 ; Carmichael v. Penn- L. R. A. 313. sylvania Bank, 4 How. (Miss.) 567, 29 Neg. Inst. Law, § 111, where all 35 Am. Dec. 408. cases directly or indirectly bearing 27 Neg. Inst. Law. § 159. where all upon or citing the Law are grouped, cases directly or indirectly bearing ^^ Ellis v. Commercial Bank, 7 upon or citing the Law are grouped. How. (Miss.) 294, 40 Am. Dec. 63; 28 Neg. Inst. Law, § 110. where all Chenowith v. Chamberlin, 6 B. cases directly or indirectly bearing Mon. (Ky.) 60, 43 Am. Dec. 145: upon or citing the Law are grouped. Donegan v. Wood, 49 Ala. 242, 20 Am, Rep. 275. 212 NEGOTIABLE INSTRUMENTS. § 180 A bill must be protested at the place where it is dishonored, but if the domicile and place of payment are different it may be protested at either place.^^ When the laws are in conflict, the validity of the protest will be determined by the law of the place where it is made.^^ The notary's minutes made on the bill or note, such as his initials, the date and the like, are made for his convenience, since he by the law merchant is required to make the protest the same day that the presentment and demand were made, and this short form is equivalent to the protest itself, and the more formal protest may be made out later from the minutes. When the acceptor of a bill becomes bankrupt or makes an assignment before its maturity, it may be protested for better security.^^ "Where the acceptor has been adjudged a bankrupt or an insolvent, or has made an assignment for the benefit of creditors, before the bill matures, the holder may cause the bill to be pro- tested for better security against the drawer and indorsers."^* "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 f'^ The notary public must present the paper, if you desire to protest it, either for non-payment or non-acceptance.^* The custom in some cities is to make two presentments, twice in the same day. If it is not accepted when it is presented in the forenoon it is taken back again in the afternoon and is pro- tested. As the Negotiable Instruments Law makes no provision as to the damages which may be recovered on foreign bills of ex- change, this matter is to be determined by the law merchant under section 196 of the Law or by statute in the dififerent juris- dictions. The damages recoverable by the payee of a negotiable 31 Grigsby v. Ford, 3 How. cases directly or indirectly bearing (Miss.) 184; Neeley v. Morris, 2 upon or citing the Law are grouped. Head. (Tenn.) 595, 75 Am. Dec. 35 Ngg. Inst. Law, § 160, where all 753. cases directly or indirectly bearing 32 Wooley V. Lyon, 117 111. 244, 6 upon or citing the Law are grouped. N. E. 885, 57 Am. Rep. 867; Tick- Hinsdale v. Miles, 5 Conn. 331; ner v. Roberts, 11 La. 14, 30 Am. Kavanaugh v. Bank, 59 Mo. App. Dec. 706; Carter v. Union Bank, 540. 7 Humph. (Tenn.) 548, 46 Am. 38 Ellis v. Commercial Bank, 7 Dec. 89. How. (Miss.) 294, 40 Am. Dec. 6Z; 33 Neg. Inst. Law, § 158, where all Chenowith v. Chamberlain, 6 B. cases directly or indirectly bearing Mon. (Ky.) 60, 43 Am. Dec. 145; upon or citing the Law are grouped. Donegan v. Wood, 49 AU. 242, 20 34 Neg. Inst. Law, § 159, where all Am. Rep. 275, 8 180 PRESENTMENT — NOTICE OF DISHONOR. 213 foreign bill of exchange protested for non-payment against the drawee may be deemed to be made up as follows : (a) The face of the bill; (b) interest thereon; (c) protest fees; (d) 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 dishonor; or a percentage in lieu of such re-exchange in juris- dictions where it is prescribed by statute .*'' S7 Pavenstedt v. N. Y. Life Insur ance Co., 203 N. Y. 91. io H. 7^ a.-^^ CHAPTER XVII. DISCHARGE OF NEGOTIABLE INSTRUMENTS. § 181. In general. § 188. By alteration. 182. By payment. jgg gy ^h^ principal debtor be- 18J. By payment for honor. ^ .• „ ^.u i i i • u- io, r. 11 • 1 commg the holder m hia 184. By cancellation and surren- ^^^ ^.j^j^^ 185. By covenant not to sue. ^^^ ^^ operation of law. 186. By accord and satisfaction. 191. By renunciation of holder. 187. By substitution of another 192. When a person secondarily obligation. liable, discharged. § 181. In general. Some writers treat this subject under the head of defense while others treat it as the performance of an obHgation contracted. It will be treated here largely in the nature of a discharge of a contract. The Negotiable Instruments Law provides, as follows : "A negotiable instrument is discharged, 1. By payment in due course by or on behalf of the principal debtor. 2. By payment in du.e 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 contract for the payment of money. (Thus the release of one joint maker will operate to discharge the others.)'* 5. When the principal debtor becomes the holder of the in- strument at or after maturity in his ozvn right."^ The words "in his own right" exclude the cases where the maker or acceptor acquire the instrument in a purely repre- sentative capacity as agent, as executor or in some such capacity.** The above five provisions of the Law merely designate the acts which discharge the instrument and do not purport to describe a Case v. Bridger, 133 La. 754, 63 discharging other parties only pro So. 319. tanto, see note 2 U. S. L. Ed. 79. 1 Neg. Inst. Law, § 119, where all l» Schwartzman v. Post, 94 App. cases directly or indirectly bearing Div. (N. Y.) 474, 87 N. Y. Supp. upon or citing the Law are grouped. 872 ; Peoples State Bank v. Dryden, As to part payment by one party 91 Kans. 216, 137 P. 928. 214 § 182 DISCHARGE OF INSTRUMENTS. 215 the character of proof by which they must be estabhshed. A renunciation must therefore be in writing under section 122 of the Law, unless the instrument is deHvered up to the party primarily liable thereon.^" § 182. By payment. Negotiable instruments may be dis- charged by payment.^ This is the most usual way of perfecting a discharge of the bill or note. The very nature of the word payment indicates that it is a discharge of a contract to pay money by giving to the party entitled to receive it the amount agreed to be paid by one of the parties to the contract. Pay- ment is not a contract but is rather a manner of discharging a contract in which one party has a right to demand a sum of money and in which the other party has a right to receive the money. Then by payment is meant the discharge of a contract tO' pay money by giving to the party entitled to receive it, the amount agreed to be paid by one of the parties who entered into the agreement.^ Payment as stated above is not a contract. It is the discharging of a contract in which the party of the first part has a right to demand payment, and the party of the second part has a right to make payment. A sale is altogether different. It is a contract which does not extinguish a bill or note, but continues it in circulation as a valid security against all parties. And it is necessary to constitute a transaction a sale that both parties should expressly or impliedly agree, the one to sell and the other to purchase the paper. Whether the transaction is a purchase or payment is a question for the jury where the facts are in dispute, to be resolved according to the intention of the parties, by looking to the substance of the matter rather than its form. Payment is usually made by the principal debtor and is a complete discharge of the instrument, that is, "a negotiable instrument is discharged by payment in due course by or on behalf of the principal debtor'"^ because it is the performance of a contract according to its terms by the person primarily liable. Payment may be made by any other person than the principal debtor. But in order that he may in l** Whitcomb v. National Ex- to necessity of surrender, see note change Bank, 123 Md. 612, 91 A. 1 Am. St. Rep. 184; and as to pre- 689. sumption of payment from lapse of 2Ballard v. Gremburch, 24 Me. time, see 18 Am. St. Rep. 882. 336; Dooley v. Va. Fire & Marine 3 Kendall v. Brownson, 47 N. H. Ins. Co., Fed. Cas. No. 3,999, 3 186; Green v. Hughitt School Tp., Hughes (U. S.) 221 ; Christman v. 5 S. D. 452. 59 N. W. 224. Harmon, 29 Gratt. 494. As to ef- ^ Neg. Inst. Law, § 119, where all feet of payment by indorser, see cases directly or indirectly bearing note 14 Am, St. Rep. 794 ; and as upon or citing the Law are grouped. 216 NEGOTIABLE INSTRUMENTS. § 182 turn recover from the maker it is necessary for him to ascertain whether there has been presentment, protest and notice, because in default of these steps in this particular case the maker would not be liable to him. It is also advisable for him to inform him- self as to the identity of the holder and determine as to whether or not he has the legal title to the instrument, "and payment to him in due course discharges the instrument."^ Payment always discharges the instrument when made to the proper party but it does not discharge all the parties. The principal debtor must pay the amount of the instrument before he is discharged.* But it must be understood that not any one who desires may pay the instrument and then recover of the maker. He must be a person who has in some way made himself liable for the payment of the instrument. There is however one exception to this, and that is where an instrument has been protested and some one comes in and makes "payment supra protest" or "for honor." The mere fact that the payee stamps the word "paid" upon the instrument does not constitute payment.^* "A negotiable instrument is discharged: By payment in due course by the party accommodated where the instrument is made or accepted for accommodation.'"^ Thus where a note is made for the accommodation of one of the makers and he pays it then it is discharged as to other makers. '^^ Any party to a bill or note may pay it, and an indorser who has been discharged by failure of notice may still sue a prior indorser or other parties who were not discharged, because, al- though not compelled to pay it, he acquires the right of the holder from whom he took the instrument, or is remitted to his own rights as indorsee.® A mere stranger to the paper cannot make payment without the consent of the holder unless he represents a party liable thereon, or makes payment supra protest.** And when one who is 5 Neg. Inst. Law, § 51. where all '^^ Comstock v. Buckley, 141 Wis. cases directly or indirectly bearing 228, 124 N. W. 414. upon or citing the Law are grouped. ^Ellsworth v. Brewer, 11 Pick. *• King V. Hannah, 6 111. App. 495; 316; Comomnwealth Bank v. Floyd, Leeke v. Hancock, 76 Cal. 127, 17 4 Mete. (Ky.) 159; Meyer v. Spen- Pac. 937 ; Mead v. Small, 2 Me. 207, cer, 9 Mo. App. 590 ; Ticonic Nat. 11 Am. Dec. 62. Bank v. Bagley, 68 Me. 249. 6a Hanna v. McCrory, 19 N. Mex. But see Turner v. Leech, 4 B. & 183, 141 P. 996. Aid 457, 6 E. C. L. 556; Roscow v. ''Neg. Inst. Law, § 119, subd. 2, Hardy, 2 Campb. 458, 12 East. 434. where all cases directly or indi- ® Burton v. Slaughter, 26 Gratt. rectly bearing upon or citing the 919. Law are grouped. § 182 DISCPIARGE OF INSTRUMENTS. 217 not a party to negotiable paper pays his money for it and takes up the paper, the presumption is that he has bought it and not paid it off.^* Where some payment is made to the holder of a negotiable note by an indorser in discharge of his obligation as an indorser, it does not enure to the benefit of the maker of the instrument and in an action upon it the maker is liable for the whole amount thereof, notwithstanding the payment. The indorser to the extent of the money paid becomes equitably entitled to be substituted to the rights and remedies of the holder, and becomes, pro tanto, the beneficial owner of the debt; so that the maker's obligation to pay the note in full, at first due the holder solely in his own right, becomes, after the part payment by the indorser, still wholly due to the holder, but partly in his own right and partly as trustee for the indorser. A court of law cannot split the note into parts, and must act upon the legal interest and own- lership.^" Where payment is made by a party who is not the primary obligor or an accommodation party, his payment only cancels his own liability, and those who are obligated after him. All prior parties, primarily or secondarily liable on the bill, are liable to such a payer, and the payer may cancel indorsements subsequent to his own and reissue the paper, and it will be valid as against the prior parties. The Negotiable Instruments Law covers this by the following provision : "Where the instrument is paid by a party secondarily liable thereon, it is not discharged ; but the party so paying it is re- mitted to his former rights as regards all prior parties, and he may strike out his own and all subsequent indorsements, and\ again negotiate the instrument, except: * 1. Where it is payable to the order of a third person, and has been paid by the drawer; and 2. Where it luas made or accepted for accommodation, and has been paid by the party accommodated."'^^ Payment of a bill or note should be made to the legal owner or holder thereof, or some one authorized by him to receive it.** If it be payable to bearer or indorsed in blank, any person having »aCantrelI v. Davidson, 180 Mo. " Stuart v. Asher, 15 Colo. App. App. 410, 168 S. W. 271. 403, 62 Pac. 1051 ; Walter v. Logan. O"" Madison Square Bank v. 63 Kan. 193, 65 Pac. 225 ; Chicago Pierce, 137 N. Y. 444. etc. Ry. Co. v. Burns, 61 Neb. 793, lONeg. Inst. Law, § 121, where all 86 N. W. 724; Patten v. Fullerton. cases directly or indirectly bearing* 27 Me. 58. upon or citing the Law are grouped. 218 NEGOTIABLE INSTRUMENTS. § 182 it in possession may be presumed to be entitled to receive pay- ment, unless the payer have notice to the contrary; and a pay- ment to such person will be valid, although he may be a thief, finder or fraudulent holder. "Payment is made in due course zvhen it is made at or after the maturity of the instrument to the holder thereof in good faith and zmthout notice that his title is defcctive."^^ The maker of a note or the acceptor of a bill must satisfy himself, when it is presented for payment, that the holder traces his title through genuine indorsements ; for if there is a forged indorsement it is a nullity and no right passes by it.*^ The party making payment should insist on the presentment of the paper by the party demanding payment, in order to make sure that it is at the time in his possession, and not outstanding in another. And if at the time he makes payment it is out- standing, and Held by a bona Me holder for value, he will be I liable to pay it again, and a receipt taken will be no protection. \ The party making payment of the bill or note should also not fail I to insist upon its being surrendered up, as a voucher that the I party receiving the money was entitled to do so and also that he \has paid it to him. \ The party bound to make payment has no right to do so in any other medium than that expressed on the face of the instru- ment — that is, he must make payment in money.*'* When payment of a bill or note is made by giving another note or bill, — other than notes treated as legal tender, — as a general rule, such payment will not be considered absolute until the paper given in payment has been itself paid, except where the parties expressly or impliedly agree that the claim shall be discharged by such payment.*^ A distinction is made by some authorities when the payer gives his own note in payment and when he gives the note or bill of another. In the first instance it is usually treated as a conditional payment.*® When a stranger's note is given in pay- 12 Neg. Inst. Law, § 88, where all v. Patterson, 13 La. 256, 81 Am. cases directly or indirectly bearing Dec. 432 ; Klauber v. Biggerstaff, upon or citing the Law are grouped. 47 Wis. 551, 3 N. W. 357, 32 Am. i^Harter v. Mechanics Nat. Rep. 772>; Williamson v. Smith, 1 Bank, 63 N. J. L. 578, 44 Atl. 715, Coldw. (Tenn.) 1, 78 Am. Dec. 478. 76 Am. St. Rep. 224; Tolman v. 15 Stanley v. McElrath, 86 Cal. Am. Nat. Bank, 22 R. L 462, 48 449, 25 Pac. 16, 10 L. R. A. 545; Atl. 480, 84 Am. St. Rep. 850, 52 Granite Nat. Bank v. Firch, 145 L. R. A. 877; Lane v. Nufifer, 5 N-. Mass. 567, 14 N. E. 650, 1 Am. St. Y. S. 421, 25 N. Y. St. 823. Rep. 484 ; Cadiz Bank v. Slemmons. 14 Galena Ins. Co. v. Kupfer, 28 34 Ohio St. 142, 32 Am. Rep. 364. 111. Zd2, 81 Am. Dec. 284; Graydon le^insted Bank v. Webb, 39 N. § 183 DISCHARGE OF INSTRUMENTS. 219 ment for a precedent debt it is also generally treated as a con- ditional payment.^'' but if given in satisfaction of a contem- poraneous debt it is held to be an absolute payment if so trans- ferred as to end the transferrer's liability thereon, that is, with- out indorsement.-^^ A new bill or note given in renewal of an old one retained by the payee is also held to constitute but a suspension of the old one until the new one is paid. The conditional payment operates to suspend the right of action on the original paper until the paper taken in payment falls due, then the holder can sue, at his election, on either of the obli- gations.-^^ A part payment of a bill or note which has fallen due only extinguishes it pro tanto, and an agreement that it shall be in full discharge of the debt does not make such part payment any more effectual as to the residue, there being no sufificient con- sideration for the discharge of the whole.^® But any agreement by way of compromise or composition, into which any new ele- ment entered, would be sustained, and if the claim were disputed, agreement to receive part payment in full would discharge it.^* § 183. By payment for honor. "Where a hill has been pro- tested for non-payment, any person may intervene and pay it supra protest for the honor of any person liable thereon or for the honor of the person for whose account it zvas drauni."'^'^ "The payment for honor supra protest, in order to operate as such and not as a mere voluntary payment, must be attested by a notarial act of honor zvhich may be appended to the protest or form an extension to it."^^ Y. 325, 100 Am. Dec. 435 ; Nightin- Mordecai v. Stewart, 36 Ga. 126 ; gale V. Chafee, 11 R. I. 609, 23 Am. In re Weeks, 8 Ben. (U. S.) 269, Rep. 531 ; Scott v. Gilkey, 153 111. 29 Fed. Cas. No. 17,349. 168, 39 N. E. 265. 21 Coburn v. Ware, 25 Me. 330 ; 17 Gibson v. Tobey, 46 N. Y. 6Z1, Robbins v. Cheek, 32 Ind. 328, 2 7 Am. Rep. 397; Tilford v. Miller, Am. Rep. 348; Price v. Cannon, 3 84 Ind. 185. Mo. 453. IS Tobey v. Barber, 5 Johns. 68, 22 j^Teg. Inst. Law, § 171, where ' 4 Am. Dec. 326 ; Day v. Kinney, all cases directly or indirectly bear- 131 Mass. Zl ; Susquehanna Fert. ing uponj or citing the Law are Co. V. White, 66 Md. 444, 7 Atl. grouped. As to payment for honor 802. in general, see note 7 U. S. L. Ed. 19 Henry v. Conley, 48 Ark. 271, 132. Zl S. V/. 181 ; Geib v. Reynolds. 35 23 Neg. Inst. Law, § 172. where Minn. 331, 28 N. W. 923; East all cases directly or indirectly bear- River Bank v Butterworth, 45 Barb. ing upon or citing the Law are (N. Y.) 476. grouped. 20 Hart V. Freeman, 42 Ala. 567; 220 NEGOTIABLE INSTRUMENTS. § 184 "The notarial act of honor must be founded on a declaration made by the payer for honor or by his agent in that behalf de- claring his intention to pay the bill for honor and for whose honor he pays."^* "Where two or more persons offer to pay a bill for the honor of different parties, the person zvhose payment zvill discharge most parties to the bill is to be given the preference/'^^ "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."^ "Where the holder of a bill refuses to receive payment supra protest, he loses his right of recourse against any party who woidd haz'e been discharged by such pay^nent."^'^ "The payer for honor, on payment to the holder of the amount of the bill and the notarial expenses, incidental to its dishonor, is entitled to receive both the bill itself and the protest."^^ § 184. By cancellation and surrender. The second method by which an instrument may be discharged is by cancellation and surrender. Where the person who is entitled to receive pay- ment delivers up the instrument which he holds against another with the intent and for the purpose of discharging the debt, this surrender operates as a release and discharge of the liability thereon in the absence of fraud or mistake. It is set out in the Negotiable Instruments Law that: "A negotiable instrument is discharged by the intentional cancellation thereof by the holder."^'^ Thus where the payee of a note tears it up, with the intention of destroying and cancelling it, this is a discharge of the note.*®* No consideration is necessary to support such a transaction after it has been executed.^** Where the return or surrender of 24 Neg. Inst. Law, § 173, where 28 ^gg. Inst. Law, § 177, where all all cases directly or indirectly bear- cases directly or indirectly bearing iiig upon or citing the Law are upon or citing the Law are grouped, grouped. 2» j^eg. Inst. Law, § 119, where all 35 ivjeg lx\st. Law, § 174, where cases directly or indirectly bearing all cases directly or indirectly bear- upon or citing the Law are grouped, ing upon or citing the Law are 39a ]v[ontgomery v. Schwal3, 177 grouped. Mo. App. 75, 166 S. W. 831. 2« Neg. Inst. Law, § 175, where aTi 30 Hale v. Rice, 124 Mass. 292; cases directly or indirectly bearing Booth v. Smith, 3 Woods (U. S.) upon or citing the Law are grouped. 19, 2 Fed. Cas. No. 1,649; Ellsworth '"^ Neg. Inst. Law, § 176^ where all v. Fogg, 35 Vt. 355. cases directly or indirectly bearing See in re Campbell, 7 Pa. St. 100, upon or citing the Law ar? grouped, 47 Am. Dec. 503. §§ 185-186 DISCHARGE OF INSTRUMENTS. 221 a note is induced by fraud,^* the maker is not released from liability thereon ; and where a note has been surrendered by mistake'^ upon the supposition that it was fully paid, the maker will remain liable for the balance still unpaid. The holder may waive his right to payment by cancellation. Cancellation of an instrument may be made by destroying it or by any other means by which the intention to cancel the instrument may be evi- denced.^^ "A cancellation mode unintentionally, or under a mistake, or w-ithout the authority of the holder, is inoperative; but where ait instrument or any signature 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. "^^ Cancellation may be made before maturity, but in order to be effective in such case against a bona fide holder it must carry notice to him of such cancellation upon its face.** § 185. By covenant not to sue. The maker or acceptor may be discharged from the payment of the instrument by a general covenant not to sue, and, of course, if the maker is discharged, the indorsers will also be discharged.^® Such a covenant is a discharge of the instrument as to these parties, but such a covenant will not discharge another who is jointly liable with the covenantee. If the covenant is given by one of two creditors it will not operate as a release or a discharge of the instrument.*'^ A covenant not to sue for a limited time will not discharge the instrument as between the parties, but it does release the sureties.*^ § 186. By accord and satisfaction. In considering the ques- tion of accord and satisfaction a distinction should be made be- SiPindley v. Cowles, 93 la. 389, ssDod y. Edwards, 2 Car. & P. 61 N. W. 998; Liesemer v. Burg, 602; Morley v. Culverwell, 7 Mees. 106 Mich. 124. 63 N. W. 999; Rey- & W. 174. nolds V. French, 8 Vt. 85, 30 Am. 36 Gordon v. Third Nat. Bank, Dec. 456. 144 U. S. 97, 36 L. Ed. 360 ; Hall v. 32 Mfg. Nat. Bank v. Thompson, Capitol Bank of Macon, 71 Ga. 715; 129 Mass. 438, 37 Am. Rep. 376; Scott v. Saffold, Z7 Ga. 384; Mc- Blodgett V. Bickford, 30 Vt. 731, 7Z Lemore v. Powell, 12 Wheat. (U. Am. Dec. 334. S.) 554. 33 Booth V. Smith, 3 Woods (U. 37 Williams v. Scott, 83 Ind. 405. S.) 19, 2 Fed. Cas. No. 1,649; Blade 38 Hine v. Bailey, 16 la. 213, 35 V. Noland, 12 Wend. (N. Y.) 173. Am. Dec. 214; Hamilton v. Prowty, 34Neg. Inst. Law, § 123, where 50 Wis. 592, 7N. W. 659, 36 Am. all cases directly or indirectly bear- Rep. 866 ; Okie v. Spencer, 2 Whart. ing upon or citing the Law are 253, 30 Am. Dec. 251. grouped. 222 NEGOTIABLE INSTRUMENTS. § 187 tween an extinguishment and a satisfaction of a bill or note. This has been very clearly stated by Justice Story in the follow- ing words : "Taking a security of a higher description, such as a bond or judgment, will extinguish the claim of the holder upon the note against the party given the security ; but it will not amount to a satisfaction thereof, so as to discharge the other parties upon the note."^'** Any person to whom the maker is liable on an instrument who makes an agreement with the maker not to sue has caused the instrument to be extinguished as to himself, but there is no satisfaction as to the other parties to the note."*** Whatever the payee of the instrument receives from the maker in full satisfaction of his claim is a satisfaction as to all other parties who might have been held liable."*^ Where the debt or demand is liquidated, that is, where it is a sum certain, the payment of a less sum by the debtor and a receipt therefor by the creditor is not an accord and satisfaction of the debt, although the creditor agrees to accept it as such.'*^ Such would not be the case, however, if the sum was in dispute or was an unliquidated sum. § 187. By substitution of another obligation. A bill of ex- change or promissory note may be discharged by the substitution of a new obligation for the pre-existing one.'*^ Some writers treat this subject under the head of novation. In these cases the ex- tinguishment of the old debt is sufficient consideration for the new obligation. It is essential that the new obligation be such as may legally take place in order that it may extinguish or discharge the prior obligation. There may be a sufficient con- sideration and competent parties to the substitution obligation, but if the new obligation is one whch cannot legally take place the prior instrument is not discharged.^ It is permissible at any time before the contract of substitution is complete, for the parties to withdraw from the arrangement, but after such com- pletion, none of them, without the consent of all the others, may withdraw from or rescind or in any way modify the new contract existing between them. The entire doctrine of substi- 39 Story on Promissory Notes, Hun 459, 10 N. Y. S. S8; Hart v. § 409; Tradesmen's Nat. Bank v. Freeman, 42 Ala. 567; Mordecai v. Looney, 99 Tenn. 278, 42 S. W. 149, Stewart, 36 Ga. 126. 38 L. R. A. 837. 43 McDonnell v. Ala. Gold Life 40 Dean v. Newhall, 8 T. R. Ins. Co., 85 Ala. 401, 5 So. 120. (Eng.) 168; Fowell v. Forrest, 2 Note 10 L. R. A. 369; Note 5 L. Saund. (Eng.) 47n. R. A. 414. 41 S.tory on Promissory Notes, 44 Henry v. Nubert (Tenn.), 35 §402. S. W. 44; Pope v. Vajen, 121 Ind. 43 People V. Hamilton County, 56 317, 22 N. E. 308, 6 L. R. A. 688. §§ 188-189 DISCHARGE OF INSTRUMENTS. 223 tution and the legal effect thereof depend upon the agreement between the parties and is governed by the general laws of con- tracts. § 188. By alteration. The general rule as to whether or not the alteration of a bill or note will operate as a discharge of the in- strument depends upon the effect produced upon the instrument by such alteration. If the alteration is immaterial it is held not to be a discharge, while, if it is a material alteration it is held to be a discharge of the instrument as to all the parties liable except as to the party who has himself made, authorized or as- sented to the alteration. "Where a negotiable instrument is materially altered imthout the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorised 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 pay- ment thereof according to its original tenor.""*^ "Any alteration zvJiich 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 zuhere no place of payment is specified, or any other change or addition which alters the effect of the in- strument in any respect, is a material alteration."'^ If the alteration is made before the delivery of the instrument it will not operate as a discharge of it. If a person after full knowledge of an alteration unconditionally promises to pay the instrument, it is considered a sufficient ratification and will not be construed as a discharge of the instrument to this particular party.'*'' Where the alteration is made by a stranger to the in- strument the rights of the parties are not affected and there is not sufficient ground for a discharge."** § 189. By the principal debtor becoming the holder in due course. The instrument is discharged if, when it matures, the acceptor or maker is or becomes the holder, since the right to 45Neg. Inst. Law, § 124, where ^7 Canon v. Grigsby, 116 HI. 151, all cases directly or indirectly bear- 5 N. E. 362; Bell v. Makin, 69 la. ing upon or citing the Law are 408, 29 N. W. 331 ; Camden Bank v. grouped. • Hall, 14 N. J. L. 583. 4« Neg. Inst. Law, § 125, where ^^ Paterson v. Higgins, 5 111. App. all cases directly or indirectly bear- 268; Piersol v. Grimes, 30 Ind. 129; ing upon or citing the Law are White Sewing Machine Co. v. Da- grouped, kin, 86 Mich. 581, 49 N. W. 583. 224 NEGOTIABLE INSTRUMENTS. § 190 recovery upon the instrument and the liabiHty to pay the instru- ment are coincident in one and the same person. In order that payment or coincidence of right and liabiHty should operate as a discharge, it is essential that the instrument should have ma- tured. "A negotiable instrument is discharged zvhen the prin- cipal debtor becomes holder of the instrument at or after ma- turity in his own right/''*''* An acceptor or maker may acquire it before maturity, as purchaser, and may then further nego- tiate it. The possession of a bill of exchange by the acceptor after it has been in circulation is prima facie evidence that it has been paid by him.*'-** And the possession of a promissory note by the maker is prima facie evidence that it has been paid by him.'*'*'' But where he admits the execution of the note, the bur- den of showing payment is on him."*^" § 190. By operation of law. An instrument may be dis- charged by operation of law. If a judgment is obtained on a bill or note, the bill or note is thereby extinguished and merged in the judgment.^** The judgment alone, without actual satis- faction, is no extinguishment as between the plaintiff and other parties not jointly liable with the original defendant, whether those parties be prior or subsequent to the defendant.^^ The issuing of execution against the person or property of one party to a negotiable instrument does not extinguish the plaintiff's remedy against the other parties.^* The intermarriage of the maker of a note with the payee or holder formerly discharged the maker from all liability thereon,^^ but this rule has now been changed by statute in most jurisdictions. A discharge in bank- ruptcy, unless, otherwise provided by statute, releases a bankrupt from all his provable debts, and therefore will discharge the bank- rupt, on all bills accepted, or notes made by him, but will not discharge the other parties.®* ^^Neg. Inst. Law, § 119, where 51 Qaxton v. Swift, 2 Show, all cases directly or indirectly bear- (Eng.) 441 . ing upon or citing the Law are ^^ Porter v. Ingraham, 10 Mass. grouped. 88; Hayling v. Mulhall, 2 W. Bl. 49a Raring v. Clark, 19 Pick. 220. (Eng.) 1235. 49i> Perez v. Bank of Key West, ^3 Curtis v. Brooks, 37 Barb. (N. 36 Fla. 467. Y.) 476 49" Swan V. Carawan, 168 N. C. ^4 Dean v. Justice's Munic. Ct., 472, 84 S. E. 699. 173 Mass. 453, 53 N. E. 893, 2 Am. 50 Claxton V. Swift, 2 Show. B. R. 163. (Eng.) 441; Nor r is v. Aylett, 2 Campb. (Eng.) 329. §§ 119-192 DISCHARGE OF INSTRUMENTS. 225 § 191. By renunciation by holder. The Negotiable Instru- ments Law provides that : "The holder may expressly renounce his rights against any party to the instrument, before, at or after its maturity. An absolute and unconditional renunciation of his rights against the principal debtor, made at or after the maturity of the instrument, discharges the instrument. But a renunciation does not affect the rights of a holder in due course without notice. A renunciation must be in writing, unless the instrument is delivered up to the person primarily liable thereon."^^ § 192. When a person secondarily liable discharged. "A person secondarily liable on the instrument is discharged: "By any act which discharges the instrument ; "By the intentional cancellation of his signature by the holder; "By the discharge of a prior party; "By a valid tender of payment made by a prior party; "By a release of the principal debtor, unless the holder's right of recourse against the party secondarily liable is expressly re- served; "By any agreement binding upon the holder to extend the time of payment, or to postpone the holder's right to enforce the in- strument, unless made with the assent of the party secondarily liable, or unless the right of recourse against such party is ex- pressly re served. ''^^ Certain changes have been made in the above section of the law in some of the states. In IlHnois subdivision three is omitted ; at the end of subdivision five the following is added: "or unless the principal debtor be an accommodating party;" and subdi- vision six reads: "By an agreement in favor of the principal debtor binding upon the holder to extend the time of payment, or to postpone the holder's right to enforce the instrument, unless made with the assent prior or subsequent of the party secondarily liable or unless the right of recourse against such party is ex- pressly reserved, or unless the principal debtor be an accommo- dating party." In Maryland and New York the words "unless made with the assent of the party secondarily liable, or" are omitted in subsection 6. In Missouri the words "except when such discharge is had in bankruptcy proceedings," are added at the end of subdivision three. In Wisconsin the words "or unless he is fully indemnified," are added at the end of the section ; and 55Neg. Inst. Law, § 122. where 56 Neg. Inst. Law. § 120, where all cases directly or indirectly bear- all cases directly or indirectly bear- ing upon or citing the Law are ing upon or citing the Law are grouped. grouped. 226 NEGOTIABLE INSTRUMENTS. § 192 a new subdivision numbered 4a, is interpolated, as follows "By giving up or applying to other purposes collateral security ap- plicable to the debt, or, there being in the holder's hands or with- in his control, the means of complete or partial satisfaction, the same are applied to other purposes." CHAPTER XVIII. CONFLICT OF LAWS, OR WHAT LAW GOVERNS. § 193. In general. 197. As to liability of indorser. 194. As to validity, interpretation § 198. As to presentment, protest and effect. and notice. 194a. As to capacity. 199. Rule in federal courts. 195. As to liability of maker, 199a. Damages upon dishonor of drawer and acceptor. foreign bills. 196. As to payment, interest and 199b. Date at which rate of ex- damages, change should be applied. § 193. In general. Suppose a note is made in Pennsylvania, payable in Ohio, indorsed in Kentucky, and suit is brought upon it in Illinois ; and suppose each of these states has a different law, which law will govern? As a general rule if the instrument is made in one state to be performed in another its negotiability will be governed by the laws of the state in which it is to be performed.''^ The formalities essential to the validity of a contract and the interpretation there- of and the matter as to the capacity of the parties are by the weight of authority to be governed by the laws of the country where it is made. Suppose a note is made in one jurisdiction and suit brought in another jurisdiction, what rule governs as lO the bringing of the suit? The law of the latter state. A man cannot come from another state and sue on a note under that state's method of procedure, but must proceed according to the law in the place where he sues. All matters respecting the remedy to be pursued including the bringing of suits, service of process, and admissibility of evidence, depend upon the law of the place where the action is brought.^ In some states in order for a note to be negotiable by the law merchant it must be payable at a bank. Now suppose some one gets such a note in another state where such is not the law and 1 National Bank of America v. R. A. 801, and as to situs for pur- Indiana Banking Co., 114 111. 483, poses of administration, see note 24 2 N. E. 401 ; Shae etc. National L. R. A. 689. Bank v. Wood, 142 Mass. 563, 8 N. 2 Garrigue v. Kellar, 164 Ind. E. 753. See note 61 L. R. A. 193. 676. As to where taxable, see note 2 L. 227 228 NEGOTIABLE INSTRUMENTS. § ISH he endeavors to recover upon that note. In order to show the law of that state he must introduce the special statute, because the court would presume that the common law prevailed. In or- der to show that the formalities were different in that state from what they are in another state, that special statute would have to be produced and introduced in evidence in another state to prove that, and if it is not introduced in evidence, then the common law would prevail.^ In order to have the statute to govern, the statute must be produced in another state to make it supersede the common law there, for if a note is executed in one state and suit is brought on it in another state, in the absence of the statute of the first state being pleaded, the common law prevails. If a bill on its face is an inland bill, the fact that it was actually drawn and delivered in a foreign state will not divest it of its inland character. The principle is that it is competent for the parties to provide, by agreement, that it shall be governed by the laws of any particular state or country.^* § 194. As to validity, interpretation and effect. The valid- ity of a bill or note as regards requisites in form is determined by the law of the place of its issue."* As a negotiable instru- ment is not binding upon the parties until it is delivered, the place of contract is, therefore, the place where the instrument is delivered and not where it is written, dated and signed.'^ But in the absence of evidence to the contrary it will be presumed that the instrument was executed and delivered at the place where it bears date.* Where the instrument specifies a place of payment in a different state from that in which it was executed and de- livered it is governed by the laws of the state in which it is made payable as to its execution.''^ The question of the negotiability of a bill or note is to be deter- mined by the law of the state where it is made payable. A note payable generally and negotiable in the state where executed will be governed by the law of that state in case suit is brought there on the note after it has been indorsed in another state aWhidden V. Seelye, 40 Me. 247; ^Austed v. Sutter, 30 111. 164; Hunt V. Adams, 44 N. Y. 27; Fran- Ford v. Buckeye Ins. Co., 6 Bush, cis V. Ocean Ins. Co., 6 Cow. (N. 133. See also note 3 U. S. L. Ed. Y.) 404; Mason v. Dousay, 35 111. 205. 424, 85 Am. Dec. 368. 5 Freese v. Brownell, 35 N. J. L. 3a As to state statutes declaring 286; Bell v. Packard, 69 Me. 105. contracts executed by foreign corpo- ^ Lernig v. Ralston, 23 Pa. St. rations void under certain condi- 139. tions see cases cited under § 60, '' Strieker v, Tinkham, 35 Ga. 176. Neg. Inst. Law. § 194a CONFLICT OF LAWS. 229 where it is not negotiable. But it has been held that when a note is executed in one state and made payable in another that it will be governed for the purposes of negotiability by the law of the state where payable. Some jurisdictions state the rule to be that every contract as to its validity, nature, interpretation and effect — the right, in contradistinction to the remedy — is governed by the law of the place where made, unless to be performed iu another place when it is governed by the law of the place of performance.''* § 194a. As to capacity. As a general rule the capacity of the parties is, with some few exceptions, determined by the law of the place with reference to which the contract is made. There is a conflict among the authorities, however, when the instrument is made in one state and is to be performed in another state. Some jurisdictions hold that when parties make contracts which upon their face are to be discharged in a state other than that in which they are executed, they are presumed, in the absence of anything to the contrary, to have intended the law of the state of performance, the les loci solutionis, to control, and thus, if intention can do so, to have voluntarily constituted the law of that state the law of the contract, or, the governing law ;'"'' and matters connected with the performance of the contract are regu- lated by the law prevailing at the place of performance.'^'^ The question as to capacity, where there is a conflict of laws, has often arisen as to the disability of coverture. In jurisdic- tions holding that the law prevailing at the place of performance controls it is stated that the disability of coverture arising from the law of the married woman's domicile does not follow her into other states, and where she goes into another state, and makes a contract valid by and to be performed in accordance with the laws of such state, she will be bound thereby, and such contract will be enforced wherever suit is brought, even in the state of her domicile, subject only to exception on ground of public policy in states where married women are totally incapacitated to con- tract.''" In other jurisdictions it is held that questions pertaining to the capacity of the party are determined by the lex loci con- tractus, that is, the law of the state where it was executed and not by that of the state wherein it is payable.''*' 7a Poole V. Perkins, — Va. — '""Poole v. Perkins, supra. 101 S. E. 240. 7« Garrigan v. Kellar, 164 Ind. ''b Poole V. Perkins, supra. 676, 74 N. E. 523, 67 L. R. A. 870, 70 Scudder v. Union Nat. Bank, 108 Am. St. Rep. 324. 91 U. S. 1106, 23 L. Ed. 245. 230 NEGOTIABLE INSTRUMENTS. § 195 In jurisdictions which maintain the view that the formal validity of the contract or the capacity of the parties is deter- mined not by the place of performance but by the place of con- tract it is stated that where a contract is made in one state and, by its terms provides for its performance in another, and the laws of the two states differ, no fixed rule can be announced by which it can be determined in every case which law shall apply. Where the parties have manifested an intention in good faith to make their contract subject to the laws of one or the other of such states such intention will be given effect in construing the con- tract and determining the reciprocal rights and duties of the parties thereunder; but if the question to be decided relates to the capacity of the parties such question is to be determined in accordance with the lex loci contractus without regard to the intention of the parties.''* § 195. As to liability of maker, drawer and acceptor. The obligation of the maker of a note is governed by the law of the place where the note is made or to be performed.* If a nego- tiable note is made in one state and payable there, and it is after- wards indorsed in another state, and by the law of the former, equitable defenses are let in, in favor of the maker, and by the latter excluded, what rule is to govern as to the holder? The answer is, the law of the place where the note was made ; for there the maker undertook to pay; and the subsequent negotia- tion did not change his obligation or right.® The contract of the drawer of a bill of exchange is governed by the law of the place where the bill is drawn,^** in regard to the rights of the payee and any subsequent holder, and not by the law of the place where accepted. This is so since the contract of the drawer is to pay the bill in the place where it is drawn, in case of the failure of the drawee to accept it,, and not to pay it at the place where the drawee resides. The liability of an acceptor of a bill of ex- change is governed by the law of the place of his acceptance,** as to the drawer, payee, and each subsequent holder, provided payment is to be made in the state where the acceptance was made. § 196. As to payment, interest and damages. The obliga- tion of the maker to pay and that of the acceptor to accept is "^^2 Wharton, Conflict of Laws ^ Raymond v. Holmes, 11 Tex. 60. (3rd Ed.), sees. 427e-427n. Scud- i® Bank of U. S. v. U. S.. 2 How. der V. Union Nat. Bank, supra. 711, 11 L. Ed. 439; Raymond v. ^Lawrence v. Bassett, 5 Allen Holmes, 11 Tex. 55. 140; Wilson v. Lazier, 11 Gratt. 482. "Bissell v. Lewis, 4 Mich. 459. §§ 196-197 CONFLICT OF LAWS. 231 governed by the law of the place of performance. Therefore the rate of interest will likewise be governed by the same law. And if the different parties to the instrument reside in different juris- dictions the law of the place where each is required to perform his obligation will govern.^^ In respect to interest, the maker of a note or the acceptor of a bill has a right to elect whether the legality of the rate shall be determined by the law of the place of payment, or of the place of execution. If a rate of interest is expressly provided for, which is usurious according to the law of the place of execution, and lawful according to the law of the place of payment, or vice versa, it will be lawful interest, and may be recovered anywhere, even in the place where the rate is declared to be usurious. ^^ But if the provision of the law, which applies in the determination of the legality and rate of interest and damages, is not established by proper testimony, the law of the place where suit is brought will govern.*'' The rate of interest payable as damages is determined by the law of the place of performance ; thus, in case of the acceptor or maker where the instrument is payable ; and in case of the drawer and indorser, where the contract of indemnity is to be performed, that is, at the place of drawing and indorsing. § 197. As to liability of indorser. The liability of the in- dorser is said to be governed by the law of the place where the indorsement is made.*^ It is the new liability created by the indorsement in favor of the indorsee and subsequent indorsers that causes this law to govern. This law governs only as to the new liability created between the indorsee or subsequent indorsers and the prior indorsers. The rights of the transferee or indorsee against the original parties to the instrument are determined by the law of the place where the contract was made or is to be performed. Each successive holder of a commercial instrument has the same rights against the acceptor or maker, it matters not where the transfer was made.*^ These rights are determined by the lex loci contractus vel solutionis. The law of the forum de- termines always in whose name the suit may be brought, and to that extent governs the determination of the title of the in- dorsee.-*'^ laschofield v. Day, 20 Johns. 15 Lee v. Selleck. ZZ N. Y. 615; 102 ; Summers v. Mills, 21 Tex. 77. Canton v. Barnes, SO Ala. 403. See 13 Richards v. Globe Bank, 12 note 61 L. R. A. 212, 222. Wis. 692 ; Potter v. Tallman, 35 i® Robertson v. Burdekin, 1 Ross. Bash. 182. Lead. Cas. 812. 14 Wood V. Cerl, 4 Met. 203 ; Ay- i^ Walsh v. Dart, 12 Wis. 635. mar v. Sheldon, 12 Wend. 221. 232 NEGOTIABLE INSTRUMENTS. §§ 198-199 § 198. As to presentment, protest and notice. The required formalities in respect to presentment are determined by the law of the place of acceptance or payment or, as sometimes called, the law of the place of performance.^^ Thus where a draft is drawn in the state of A, by one residing there, upon a person residing in the state of B, any legal question in reference to pres- entation and demand for payment is to be determined by the laws of the state of B.^^^ This needs no explanation, as no other law could govern as to presentment except the law of the place of performance. The law of the place of payment governs as to the requirements in respect to protest.^'* If a bill is protested for non-acceptance the law of the state where the bill was presented for acceptance will govern, while if it is presented for non-pay- ment the law of the place of payment will govern. The necessity of making a demand and protest, and the 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.-^*** The authorities are divided as to what law governs the requirements in respect to notice, but the weight of American decision is to the efifect that the notice must conform to the law of the place where the contract of the maker or indorser is to be performed.^" § 199. Rule in federal courts. In the courts of the United States, the decisions are in general in conformity with those of the state courts of last resort in respect to the liability of parties to bills and notes, but not uniformly .^^ In a late case a federal court held that where a question is governed by a Negotiable Instruments Law adopted by the state the federal court is bound to give force and efifect to the statute if applicable.**^ Where any controversy arises as to the liability of a party to a bill of exchange, promissory note, or other negotiable paper, in one of the federal courts of the United States, which is not determined by the positive words of a state statute, or by its meaning as con- strued by the state courts, the federal courts will apply to its so- 18 Todd V. Neal's Admrs., 49 Ala. 21 Moses v. Laurence Co. Nat 266. Bank, 149 U. S. 298, . 13 S. Ct. 90a 18a Sylvester v. Crohan, 138 N. Y. 37 L. Ed. 743 ; Burgess v. Selig- 494. man, 107 U. S. 20-33, 2 S. Ct. 10, 19 Raymond v. Holmes, 11 Tex. 27 L. Ed. 359. 54. 21a Smith V. Nelson Land and is^Amsick v. Rogers, 189 N. Y. Cattle Company, 212 Fed. Rep. 56, 258. 122 C. C. A. 512. 20 Lee V. Selleck, 33 N. Y. 32 ; Williams V. Putnam, 14 N. H. 543. §§ 199a-199b conflict of laws. 233 lution the general principles of the law merchant, regardless of any local decision.** § 199a. Damages upon dishonor of foreign bills. In some jurisdictions the statutes provide the amount of damages which may be recovered upon foreign bills upon their dishonor. These statutes often provide that said rules do not apply to promissory notes discounted by a bank and protested for non-payment. These statutes ordinarily provide that damages payable on pro- test for non-payment or non-acceptance of a bill of exchange drawn or negotiated within the state, shall be, if drawn upon any person at any place out of the state but within the United States, S% on the principal of the bill and that beyond such damages no interest or charges accruing prior to protest shall be allowed but interest from the date of protest may be recovered; and when such bills are payable within the United States the rate of ex- change shall not be taken into account. These statutes usually further provide that no damages beyond cost of protest shall be chargeable against the drawer or indorser if upon notice of pro- test and demand of the principal sum the same is paid, and that no holder of a bill of exchange shall recover damages thereon if he has not given a valuable consideration for the same or have some interest thereunder ; and that on any bill drawn or nego- tiated in the state and payable at any place without the state, or in regard to which it shall appear that it was not to be presented for acceptance or payment at that place, if means were provided for its discharge within the state, that no damages or charges for protest shall be allowed. § 199b. Date at which rate of exchange should be applied. •Whenever money is due in a foreign country it becomes neces- sary to determine its equivalent in domestic currency. The ques- tion arises as to whether or not it should be at the date of the breach or the date of the judgment. The date of the breach has been adopted in England.*^ And the late American decisions point in the same direction.** 23 Swift V. Tyson. 16 Pet. 1 ; see 23 Scott v. Bevan, 2 B. & Ad. 78. Hughes (W. T.) Prac. 1214, for 34simonoff v. Granite City Na- full statement and bibliography; tional Bank, 279 111. 248, 116 N. E. Brooklyn City, etc. Railroad Co. v. 636; Pavenstedt v. New York Life Nat. Bank, 102 U. S. 14, 26 L. Ed. Ins. Co., 203 N. Y. 91, 96 N. E. 104. 61. CHAPTER XIX. SUBDIVISION A— CHECKS. \ 200. Check defined and distin- guished from bill of ex- change. 201. The formalities of a check. 202. Presentment of a check for payment. 203. Certification of check. 204. Forgery and alteration of check. 205. Memorandum check. 206. Stale check. 206a. Cashier's check. 206b. Paid or cancelled check. § 206c. Crossed check. 206d. Fraudulent check. 206e. Stolen checks or stolen ne- gotiable securities. 206f. Check as payment. 206g. Stopping payment. 207. Chcckholder's right to sue the bank. 208. The depositor's right to draw on the bank. 209. Failure of bank to honor check. § 200. Check defined and distinguished from bill of ex- change. The Negotiable Instruments Law defines a check as follows: "A check is a bill of exchange drawn on a bank, pay- able on demand." To this definition is added the following pro- vision : "Except as herein otherzvise provided, the provisions of this act applicable to a bill of exchange payable on demand apply to a check "^ In other words a check is a commercial instrument which is in the form and nature of an inland bill of exchange, payable on demand.^ A check unlike a bill of exchange, is always drawn upon a bank or banker and is always payable on demand without days of grace.^ It is not necessary that a check be presented for ac- ceptance as in case of a bill of exchange.^ However, if the holder requests it and the banker desires he may accept it. 13 L. R. A. (N. S.) 211. As to nature of checks, see note 7 L. R. A. 595 and as to what are checks, see note 7 L. R. A. 489. ^ McDonald v. Stokey, 1 Mont. 388; In re Brown, 2 Story (U. S.) 502, 4 Fed. Cas. No. 1.985 ; Hawley V. Jette, 10 Oreg. 31, 45 Am. Rep. 129. ^ In re Brown, 2 Story (U. S.) 502, 4 Fed. Cas. No. 1,985; Bowen V. Newell, 5 Sandf. (N. Y.) 326. "^ Neg. Inst. Law, § 185, where all cases directly or indirectly bear- ing upon or citing the Law are grouped. 2 Exchange Bank v. Sutton Bank, 78 Md. 577, 28 Atl. 563, 23 L. R. A. 176; Minot v. Russ, 156 Mass. 458, 31 N. E. 489, 32 Am. St. Rep. 472, 16 L R. A. 510. As to remedy of payee of a check against one who has taken it on indorsement of unauthorized agent, see note 234 §200 SUBDIVISION A— CHECKS. 235 The whole theory and use of a check points to its immediate payability. A depositor places money with his bank or banker, where it is subject at any time to his order ; and by his check or order he desires to appropriate so much of it to another person, and the bank or banker, in consideration of its temporary use of the money, agrees to pay it in whole, or in parcels, to the depositor's order when demanded. Biit he does not agree to con- tract to pay at a future day by acceptance and the depositor can not require it.^' A check is similar to a bill of exchange in that it is a nego- tiable instrument,® if negotiable in form, and is subject to the same rules regarding its transfer. A check may be transferred by indorsement and the indorser incurs the same liability as the indorser of a promissory note or bill of exchange. Like a bill, a check must contain an order ; the order must be for the payment unconditionally and at all events ; and it must be for a certain sum of money.® If an instrument is drawn in all respects as a check except that it orders payment at a day subsequent to its date, it is then a bill of exchange and not a check, being subject to all the rules governing bills of exchange.'^ Unless a specific date of payment is mentioned, a check is pay- able upon demand under Section 7 of the Law.''" The drawer of a bill of exchange is discharged by default of the payee or holder in making due presentment to the drawee and in giving notice in case of dishonor, while in case of a check the drawer is not discharged by the failure of the payee or holder to take the above steps unless the delay was unreasonable.^ A check is due when demand is made for payment and the statute of limitations begins to run after that time. A check may be accepted as payment.^' ^^Mt. Sterling National Bank v. ''» Riddle v. Bank of Montreal, Green, 99 Ky. 262, 35 S. W. 911. 145 App. Div. (N. Y.) 207. 5 Gate City Bldg. etc. Assn. v. « Bull v. Bank, 123 U. S. 105, Nat. Bank of Commerce, 126 Mo. 31 L. Ed. 97; Stewart v. Smith, 17 82, 28 S. W. 633, 47 Am. St. Rep. Ohid St. 82; Serle v. Norton, 2 633, 27 L. R. A. 401. IMoody & R. 401. As to release ® Grisson v. Commercial Nat. of indorser of check by delay in Bank, 87 Tenn. 350, 10 S. W. 774, presenting it, see notes 22 L. R. A. 10 Am. St. Rep. 669, 3 L. R. A. 785 and 17 Am. St. Rep. 810. As 273. to recovery by holder from drawer '' Whitehouse v. Whitehouse, 90 or indorser, see 17 Am. St. Rep. Me. 468, 38 Atl. 374, 60 Am. St. 807. Rep. 278; Harrison v. Nicollet Nat. Sa ^g ^q pavment bv check, see Bank, 41 Minn. 488, 43 N. W. 336, note in 7 L. R. A. 442, and as to 16 Am. St. Rep. 718, 5 L. R. A. effect of acceptance of check as 746. payment, see note 9 L. R. A. 263. 236 NEGOTIABLE INSTRUMENTS. §§201-202 , A cashier's check, whether certified or not, is classed with bills of exchange payable on demand.^'' § 201. The formalities of a check. A check as to its form and formalities differs but little from that of a bill of exchange. All the various requisites of negotiable paper must be complied with in case of a check ; there must be certainty as to amount, time and the person to whom payment shall be made and the payment must be in money.** In order that the check may be negotiable it must contain words of negotiability, but the absence of such words does not affect the character of the check other than that it is non-negotiable. The signature may be in pencil as well as in ink, it may be stamped or even printed if adopted as one's signature; and it may be by mark. Usually a check does not contain the address of the drawee, while in a bill of exchange it is almost invariably written in the lower left hand corner. The address of the bank is usually written or printed in large letters across the top, just below the date and place of execution. A blank space may be left for the payee's name, which would indicate authority to any bona fide holder to insert his name as payee.®' A check may bear its actual date, or be ante-dated or post- dated. The Negotiable Instruments Law provides : "The instru- ment 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."^** Under the above section an indorsee of a post-dated check is not put upon inquiry merely because of the negotiability of the check prior to the day of its date.'"' The sum should be distinctly and carefully expressed in figures and in words to avoid any dispute. While either words or figures are sufficient, if they differ, the words control. A change of the figures, so as to conform them to the words made by the holder, without the knowledge or consent of the drawer, is not a material alteration or forgery."" § 202. Presentment of a check for payment. The main pur- pose of presentment for payment being made in due time is to fix 8»» Singer Mfg. Co. v. Summers, 9» Mcintosh v. Lytic. 23 Minn. 143 N. C. 103. 2^6. » Ridgely Nat. Bank v. Patton, 9" Neg. Inst. Law, § 12. 109 III. 479; Industrial etc. Bank 9o Albert v. Hoffman, 64 Misc. 87, of Chi. v. Bowers. 165 111. 70, 46 117 N. Y. Supp. 1043. N. E. 10, 56 Am. St. Rep. 228 ; Od Smith v. Smith, 1 R. I. 398. State V. Warner, 60 Kan. 90, 55 Pac. 342. § 202 SUBDIVISION A — CHECKS. 2Z7 the liability of the drawer in case the bank fails before payment is made. The Negotiable Instruments Law provides that : "A check fnust be presented for payment within a reasonable time after its issue or the drawer zvill be discharged from liabil- ity thereon to the extent of the loss caused by the delay."^^ This is simply the enactment of a general principle of law which existed prior to the passage of the act. Simply the want of due presentment of a check will not discharge the drawer, unless he has suffered some loss or injury thereby.^* The only injury which would be sustained by the drawer in case present- ment was not made within a reasonable time would be caused by the failure of the bank subsequent to the delivery and prior to the presentment of the check. Justice Story states the rule in the following language : 'Tf a bank or banker still remains in good credit and is able to pay the check, the drawer will still re- main liable to pay the same, notwithstanding many months may have elapsed since the date of the check, and before the pre- sentment for payment and notice of the dishonor. So if the drawer at the date of the check or at the time of the present- ment of it for payment had no funds in the bank or banker's hands, or if, after drawing the check and before its presentment for payment and dishonor, he had withdrawn his funds, the drawer would remain liable to pay the check, notwithstanding the lapse of time."" As to what is a reasonable time the Negotiable Instruments Law provides: "In determining what is a 'reasonable time' or an 'un- reasonable time/ regard is to be had to the nature of the instru- ment, the usage of trade or business (if any) with respect to such instruments, and the facts of the particular case."^^" Thus far we have only discussed the effect of delay in pre- sentment as to the drawer. Now we will consider its effect upon an indorser. We have already seen that delay in presentment does not discharge the liability of the drawer unless he has sus- tained a loss thereby, but we find that a different rule applies as to an indorser. As between the holder and an indorser the rule i»Neg. Inst. Law, §186, where 25 L. R. A. 200; Bull v. Bank, 123 all cases directly or indirectly bear- U. S. 105 ; Little v. Bank, 2 Hih ing upon or citing the Law are (N. Y.) 425; Henshaw v. Root, 60 grouped. As to necessity of de- Ind. 220; Stewart v. Smith, 17 mand, see note 7 L. R. A. 490 and Ohio St. 82 ; Alexander v. Burch- as to the time of presenting a check, field, 7 Mon. & G. 1061. As to pre- see note 13 L. R. A. 43. As to sentment and notice, see note 41 when check must be presented for U. S. L. Ed. 855. payment, 17 Am. St. Rep. 807. 12 gtory on Promissory Notes, "Anderson v. Gill, 79 Md. 312. §498. Z9 Atl. 527, 47 Am. St. Rep. 402, ia» Neg. Inst. Law, § 193, 238 NEGOTIABLE INSTRUMENTS. § 203 is that the check must be presented within the time prescribed by the law merchant, which is usually the following day, and if such presentment is not made within a reasonable time the in- dorser will be discharged from any liability.^^ The question that now arises is what constitutes a reasonable time. The law merchant has established the rule that where the parties all re- side in the same place the holder must present it not later than the next day.*^ This is not, however, an absolute and iron-clad rule. What is a reasonable rule will depend upon circumstances and will in many cases depend upon the time, the mode, and the place**^ of receiving the check and upon the relation of the par- ties between whom the question arises.^^' If a bank pays a check after the death of a depositor, but before the bank has received knowledge of that fact, it is a valid pay- ment and the bank is not Hable for the amount to the personal rep- resentative of the depositor, for 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.^^" But if a bank pays a check with knowledge of the drawer's death it is liable for the amount to his estate. Where the payee of a check collects it after the death of the drawer, he must refund the amount to the drawer's estate.^'" § 203. Certification of check. Certification of a check is an agreement whereby the bank agrees to pay the check at any future time when presented for payment. The certification of checks is an expedient and outgrowth of modern commerce quite recent in its origin, but now of daily and extensive occurrence. It enables persons not well acquainted to deal promptly with each other, and it avoids the delay and risks of receiving, count- ing and passing from hand to hand large sums of money.*'" No particular form of words is necessary, but the usual method of 13 Miller v. Moseley, 26 La. Ann. Buckhannon Bank, 80 Md. 475, 31 667; Wymore First Nat. Bank v. Atl. 302, 21 L. R. A. 332; Parker Miller, 43 Neb. 791, 62 N. W. 195; v. Reddick, 65 Miss. 242, 3 So. 575, Smith V. Jones, 20 Wend. (N. Y.) 7 Am. St. Rep. 646; Wymore First 192, 32 Am. Dec. 527. As to duty Nat. Bank v. Miller, 43 Neb. 791, of holder to present, see note 17 62 N. W. 195. Am. St. Rep. 807. isa Merchants' Bank v. State 14 Morris v. Eufaula Nat. Bank, Bank, 10 Wall. 648 (U. S.). 122 Ala. 580, 25 So. 499, 82 Am. i5b Qigrman v. Rochester Trust St. Rep. 95; Hamilton v. Winona etc. Co., 209 N. Y. 12, 102 N. E. Salt etc. Co., 95 Mich. 436, 54 N. 537, 53 L. R. A. (N. S.) 302. W. 903; Grange v. Reigh, 93 Wis. i-"'" /n re Adamson, 154 N. Y. 552, 67 N. W. 1130. Supp. 667. 1* Grafton First Nat. Bank y, § 203 SUBDIVISION A — CHECKS. 239 certification is by stamping or writing- upon the check the word "certified" and adding the date of the certification. After a check is once certified at the request of the holder, the drawer is released from all liability and all subsequent indorsers are discharged from their obligations. The Negotiable Instruments Law provides : "Where the holder of a check procures it to he accepted or cer- tified the drawer and all indorsers are discharged from liability thereon."^^ But the drawer is not discharged when the check is certified at the procurement of said drawer, even if he has the check certi- fied at the request of the one to whom it is payable. So if the drawer has the check certified and then delivers it, the certifica- tion does not discharge the drawer. The bank, after the certification, will not be allowed to dispute the genuineness of the drawer's signature or to question the suf- ficiency of the funds in its hands to pay, as against a bona fide holder.*'' Neither will the bank be allowed to deny the validity of the check on the ground that no payee is named therein, be- cause in such case it will be held payable to bearer. A bank can not refuse to pay a check which it has certified in order that the drawer may enforce a right of set-off against the payee.*''* The above section of the law applies where a bank, which has taken its customer's check on another bank and given him credit there- for, has the check certified by the drawer.*'" The efifect of certification is that the bank by certifying the check becomes the principal and only debtor, and the holder by taking a certificate of the check from the bank, instead of re- quiring payment, discharges the drawer, that is, "Where a check is certified by the bank on which it is drazvn the certification is equivalent to an acceptancef^^ The check then circulates as the representative of so much cash in bank, payable on demand to the holder. i« Neg. Inst. Law. § 188, where ation of check, 19 U. S. L. Ed. all cases directly or indirectly bear- 1008. ing upon or citing the Law are But see Marine Nat. Bank v. grouped. As to effect of certifica- Nat. City Bank, 59 N. Y. 67. tion, see note 12 L. R. A. 492, and i^a Ca^negie Trust Co. v. First as to effect on liability of drawer, National Bank, 213 N. Y. 301, 107 see note 16 L. R. A. 510. N. E. 693, L. R. A. 1916C, 186. *^ Farmers & Mechanics Bank v. *'''' Lyons v. Union Exchange Na- Rutchers & Drovers Bank, 16 N. Y. tional Bank, 150 App. Div. (N. Y.) 125; Espy v. Bank, 18 Wall. 621. 493, 135 N. Y. Supp. 121. 21 L. Ed. 947 ; Louisiana Nat. Bank 18 Ngg ipsj l^^^ § jg;^ ^^ j ^ases V. Citizens Bank, 28 La. Ann. 189. cited. As to parol certification see As to liability of bank on certific- note 7 L. R. A. 428. 240 NEGOTIABLE INSTRUMENTS. §203 And 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 as opportunity of discovering the alteration was equally open to the collecting bank.^*** We shall next notice who may certify a check. The board of directors as the governing body of the corporation or bank may delegate to other officers who have not implied power, the power to certify checks. The officers having implied power are the president, cashier and teller.*" The assistant cashier has not this power and if he certifies a check, signing his name with his official title, "Asst. Cashier," without authority, it is generally held that it is not binding on the bank even in the hands of a bona -fide holder. A check cannot be certified before it is payable. Thus if a check is post-dated, the bank would not be bound by a certifica- tion made before the date on which the check is payable.*® Such check carries notice to all that the certification was beyond the officer's authority. If the commercial character of the check has been destroyed in any manner the officer of the bank is not au- thorized to certify it. If the officer certifies a check of a person who has no funds there, the bank is not bound by it except as to a bona fide holder without notice.** Of course a certification must be in writing, thus a bank is not liable on equitable grounds to the holder for the amount of an unaccepted check which it has refused to pay though the holder acquired the check on the oral representation of the bank that the drawer had funds on deposit to meet the check, and that the check was good, and that the holder might safely take it in pay- ment for goods sold the drawer.*** And so a telephone message is not a good certification but a telegram sent by a bank that it would pay a certain check has been held to be a certification.**'' li^' National Reserve Bank v. ^OQari^g Nat. Bank v. Bank of Coon Exchange Bank, 171 App. Div. Albion, 52 Barb. 592. 195, 157 N. Y. Supp. 316; Jackson ai Atlantic Bajik v. Merchants Paper Co. v. Commercial Bank, 199 Bank, 10 Gray 532; Cooke v. State 111. 151. Nat. Bank, 52 N. Y. 96, 11 Am. Rep. 1^ Merchants Bank v State 667. Bank, 10 Wall. 604, 19 L. Ed. 1008 ; **" Rambo v. First Nat. State Cooke V. State Nat. Bank, 52 N. Bank of Argentine, 88 Kans. 257, Y. 96, 11 Am. Rep. 667. 128 Pac. 182. But see Atlantic Bank v. Mer- **'' Henrietta Bank v. State Bank, chants Bank, 10 Gray 532. — Tex. — , 16 S. W. 321 ; Atchison Bank v. Garretson, 51 Fed. 168. 204 SUBDIVISION A — CHECKS. 241 Below is a form of certification: ^ Detroit, Mich., December 1, 1922. THE %^LE NATIONAL BANK. Pay to the % % order of Albert^rte?^ , $200.00 l^xvo^Mundrcd Dollars % V JOHN MARSH 204. Forgery and alteration of check. The rules g-overn- ing forgeries and alterations to commercial paper in general are applicable to checks.^*'' The bank is under a peculiar obli- gation, however, to know the signatures of its depositors on the checks drawn against it. But the bank is not presumed to have any peculiar knowledge of the gen- uineness of the contents of the checks. It is very com- mon now that a check is filled out by a clerk and then signed by the maker. Therefore a bank is not charged with as great a degree of knowledge as to the genuineness of the contents of the checks as of the signature of the drawer. If the bank pays a check which has been altered in any material respect it may re- cover the money so improperly paid, since the holder of the check guarantees the genuineness of its contents. The general rule therefore is that the bank is strictly held to know the signa- ture of its depositors and money paid on forged checks cannot be recovered.** In some jurisdictions there are statutes pro- viding that no bank shall be liable to a depositor for the pay- ment by it of a forged or raised check, unless within one year after the return to the depositor of the voucher of such pay- ment, such depositor shall notify the bank that the check so paid was forged or raised.*** A mutilated check puts one on in- quiry; thus a bank is guilty of negligence and is responsible to 210 As to liability of person whose 327, 27 L. R. A. 635. As to draw- name is forged, see note 36 L. R. ee's duty to know signature, see A. 539. As to rights of holder of note 27 L. R. A. 635. As to bank's forged check, see notes 17 Am. St. liability to depositors for payment Rep. 890 and 94 Am. St. Rep. 645. of forged check, see notes 2 L. R. 22 First Nat. Bank of Danvers v. A. 96, 7 L. R. A. 596, 849 and 12 First Nat Bank of Salem, 151 L. R. A. 793. As to duty of deposi- Mass. 280, 24 N. E. 44; First Nat. tor as to forged check, see notes 27 Bank v. Northwestern Nat. Bank, L. R. A.. 426, 36 L. R. A. 539. 152 111. 296, 38 N. E. 739, 26 L. R. 22« Leather Mfgrs. Bank v. Mor- A. 289; Germania Sav. Bank v. gan, 117 U. S. 96. Boutell, 60 Minn. 189, 62 N. W. 242 NEGOTIABLE INSTRUMENTS, § 205 the drawer in paying without inquiry a check which has been torn in pieces and pasted together again.^^" A savings bank is not liable for payments made upon a forged draft unless negli- gence can be imputed to it; that is, unless the discrepancy be- tween the signature is so marked and plain that an ordinary competent clerk should detect the forgery. Thus the liability differs from that of ordinary banks of deposit, which, as we have seen, are absolutely liable for payments on forged checks no matter how skillful the forgery may be.^^" But the bank is not held to so strict a knowledge of the contents of the check because they are not charged with knowledge of the handwrit- ing in the body of the check, since it may or may not be the handwriting of the drawer. The bank is still liable to a payee or indorsee on whose • indorsement alone the check is payable, although the money has been paid on a forged indorsement. But the bank is not supposed to know the signature of indorsers, and if any of them be forged the bank can recover back the money paid out on the check. Where a drawee bank paid and charged to the account of the drawer checks indorsed by an agent of the payee who had no authority to indorse or collect the checks and who appropriated the money, said drawee bank is liable in conversion, if upon de- mand for their surrender the bank should refuse to deliver the checks. The bank is not liable to the payee in assumpsit for money had and received under such circumstances. And should the bank deliver the checks, a plaintiff could present them to the bank for payment, and should payment be refused, the plaintiff could notify the drawer and recover from him. § 205. Memorandum check. A memorandum check has been described to be a contract by which the drawer engages to pay the bona fide holder absolutely, and not upon a condition to pay upon presentment at maturity, and if due notice of the presentment and non-payment should be given.*^ The word "memorandum" written or printed upon the check describes the nature of contract with precision. In form and appearance a memorandum check does not differ from an ordinary check ex- cept that the words "memorandum," "mem" or "memo" are written upon the face of the check. Such a check is given by the 22b Scholey v. Ramsbottom, 2 23 Turnbull v. Osborne, 12 Abbott Camp. (Eng.) 485. Prac. (N. S.) 200; Franklin Bank 22c Noah V. Bank of Savings, 171 v. Freeman, 33 Mass. (16 Pick.) App. Div. (N. Y.) 191; Kelly v. 535. BuflFalo Savings Bank, 180 N. Y. 171. §§ 206-206a subdivision a — checks. 243 drawer to the payee more in the nature of a memorandum of in- debtedness than as payment.^'* In the case of a regular check demand for payment and a refusal on the part of the bank are necessary steps before the holder can maintain an action against the drawer, while in the case of a memorandum check the drawer may be sued the same as upon a promissory note.^^ If such a check is presented for payment, and the drawer has sufficient funds to meet it, the bank must honor it like any ordinary check. If the agreement between the drawer and payee is that it shall not be presented for payment, any remedy of the drawer for the breach of such agreement is solely against the payee.^® If a memorandum check has been indorsed to a bona fide holder for value the check then presents all the features of other negotiable instruments. § 206. Stale check. A stale check is one where there has been unreasonable delay by the holder in presenting for pay- ment. It is always unsafe to delay the presentment for the double reason that the drawer or indorser may be discharged by loss occasioned by the failure of the bank and because a stale check is looked upon with suspicion since custom has established the fact that checks are not supposed to remain long in circula- tion. Some jurisdictions hold that if the bank pays a stale check which for any reason may be invalid, the bank will be held to have done so at its peril, as the fact that the check was stale was sufficient to put the bank upon inquiry.*^ It has also been held that a purchaser is put upon notice as to the genuineness of a check by the fact that it is stale. There is no absolute rule which may be laid down in determining when a check is stale.^'^* § 206a. Cashier's check. A cashier's check is one drawn by a bank upon itself. It is a bill of exchange drawn on the bank upon itself, and is accepted by the act of issuance. The right of countermand, as applied to ordinary checks, does not exist as to it. A cashier's check, whether certified or otherwise, is classed with bills of exchange payable on demand.^^ 24 United States v. Isham, 17 294; Estes v. Shoe Co., 59 Minn. Wall. 496. 21 L. Ed. 728. 504, 61 N. W. 674 ; First Nat. Bank asVan Schaack, Bank Checks, v. Needham, 29 la. 249; Bull v. 184. Bank, 123 U. S. 105. As to when a 2« Morse, Banks, 313. check is considered stale, see note 27 Lancaster Bank v. Woodward, 13 L. R. A. 44. 18 Pa. St. 357. 28 Singer Mfg. Co. v. Summers, 27a Ames V. Merriam, 98 Mass. 143 N. C. 102, 55 S. E. 522. 244 NEGOTIABLE INSTRUMENTS. §§ 206b-206d § 206b, Paid or cancelled check. A check if payable to order when paid or cancelled is presumed to be a receipt for the debt or obligation. A bank has the right to keep a cancelled check until the de- positor's account is balanced. But after debiting it against the drawer in account with the bank, it is the duty of the bank to return the check to its depositor, who has the better right to its permanent possession as it is to him a voucher of payment of his debt to the payee named in it ; and the bank, until it returns the check, has been said to hold it only as agent of the drawer.*®* § 206c. Crossed check. A crossed check is one which in addition to the ordinary check contains also the name of a cer- tain banker through whom it must be presented for payment. The name of the banker is usually stamped across the face of the check. This does not destroy the negotiability of the check. Such checks are used in Canada and in England but not often in the United States. The statute in England provides that the object of the crossed check is to provide that drawers or holders of drafts, payable to bearer or order on demand, may be enabled efifectually to direct the payment of the same only to or through some banker, and that the crossing shall have the force of a direction to the bank- ers upon whom the check is drawn, that it is to be paid to or through some banker, and that the same shall be payable only to or through some banker.*^"* § 206d. Fraudulent check. It is usually provided by stat- ute in the different jurisdictions that one issuing a check or other negotiable instrument without having a deposit in bank to meet said instrument and thereby obtaning credit or something of value thereon is guilty of a crime. Under many of these statutes if the check is issued and pay- able at a future date, it is not fraudulent.*®" A bank is not liable to a minor or infant depositor for the payment of checks ob- tained by fraud by the payee thereof.*®*" If the drawer delivers his check to an impostor or wrong per- son and the bank pays the check the drawer must suffer the loss and not the bank.*®® Thus when a depositor signed a check in blank and it was stolen and a scoundrel filled in the blank with his own name and the amount, the bank has a right to pay the 28a Morse on Banking, 291. 28d Smalley v. Central — Ind. 28b Simmons v. Taylor, 2 C. B. App. — , 125 N. E. 789. (N. S.) 528, 27 L. J. C. P. 45. 248. 28e Meyer v. Indiana National 28'= Brown v. The State, 166 Ind. Bank, 27 Ind. App. 354. 85. § 206e SUBDIVISION a — checks. 245 money to such scoundrel and the depositor is the loser. But where the scoundrel filled the name as "A. B.'' and not his own name and the bank paid it without identification of the scoundrel, the bank is liable.^""' Where the drawer of a check delivers it to an impostor, be- lieving him to be the payee named in the check, the indorsement thereof by the impostor is not a forgery, and the drawer is liable to any subsequent bona fide holder.^*' And where a check is en- closed in a letter which is directed by mistake of the drawer of the check, and the letter is delivered to another person of the same name as the payee, who indorses and negotiates the check, which is finally received by the drawer bank and paid and charged to drawer's account, the latter cannot recover from the bank.^sh § 206e. Stolen checks or stolen negotiable securities. The thief acquires no title to the negotiable security which he steals and neither does any one who has notice that the instrument was stolen. The owner may trace the instrument or its proceeds so long as it or its substitute can be identified in the hands of the thief or holder with notice.^^' If however the instrument is indorsed in blank, or payable or indorsed to bearer, a bona fide holder for value and without notice may retain the instrument as against the true owner, upon whom the loss falls, and enforce payment by any party liable thereon.^**^ Under Section 57 of the Law a bona fide holder of a check pay" able to bearer can acquire a good title thereto from one who has stolen it.^'^'' But this section is to be construed in connection with Section 15 of the Law and if the check is incomplete when stolen, it is not valid in the hands of any holder.^'^' When a blank check left by the drawer with his bookkeeper is stolen by an employee, filled out and collected, the payment of the drawer bank is valid as against the drawer, since the drawer is under a duty to see that his checks do not get into the hands of those for whom they are not intended.^^"* Where a check, complete in every respect, except as to de- 28* Citizens National Bank v. 28j Jefferson Bank v. Chapman- Reynolds — Ind. App. — , 126 N. E. White-Lvons Co., 122 Tenn. 415, 234. 123 S. W. 641. 28b Burrows v. Western Union 2Sk Massachusetts National Bank Telegraph Co., 86 Minn. 499, 90 N. v. Snow, 187 Mass. 160; Jefferson W. 1,111 ; Meyer v. Indiana National Bank v. Chapman, 122 Tenn. 415. Bank, 27 Ind. App. 354, 61 N. E. 28i Linick v. Nutting, 140 App. 596. Div. (N. Y.) 265. 28h Weisberger v. Bank, 84 Ohio 28m Trust Company of America St. 21. V. Conklin, 65 Misc. Rep. (N. Y.) 28i Newton v. Porter, 69 N. Y. 1,119 N. Y. Supp. 367. 133. 246 NEGOTIABLE INSTRUMENTS. § 206f livery, is stolen from the drawer by the payee and negotiated by the latter to a holder in due course, the holder is entitled to re- cover thereon. ^'^" When an instrument is stolen and negotiated, the burden is upon the holder to show that he himself is a holder in due course, or that he claims under such a holder ; and there is no presump- tion that the thief negotiated the instrument before it became due. § 206£. Check as payment. In some jurisdictions the giv- ing of a check to a creditor is not in itself a satisfaction of the debt unless the check is paid;^^" in some other jurisdictions a check when delivered is presumed to be in payment of the obli- gation or debt, but this presumption may be rebutted by the facts. A question which frequently arises is whether a check given for a less amount than the debt or obligation and marked in full payment or with words to that effect, or accompanied by a letter stating that it is sent in full payment, is, as a matter of fact a full payment, that is, may such check pay a less amount for a larger amount. The general rule is that if the debt or obligation is unliqui- dated the acceptance of the smaller amount is good as an accord and satisfaction, thus where there is a controversy, and the debtor claims to owe less than the amount paid, while the credi- tor claims more, the acceptance of a check in compromise is bind- ing on both parties. Where there is no dispute as to the amount owing by the debtor, and he only seeks to set off an alleged indebtedness in another transaction, the acceptance of a portion of the amount admitted to be due is not a satisfaction of the balance of the accovmt.^^" A memorandum on a check that it was for a balance due is not conclusive, but is subject to be explained by parol.*^' § 206g. Stopping payment. The order to stop payment must be communicated to the bank before the check to which it refers has been paid ; and in the absence of a rule of the bank that stop orders must be in writing, a verbal notice is suf- ficient."*"" If a bank pays a check after payment has been 28" Schaefer v. Marsh, 90 Misc. App. 300; Cox v. Hayes, 18 Ind. Rep. 307, 153 N. Y. Supp. 16; North- App. 220. hampton National Bank v. Kidder, 2Sp Carton & Jeffrey v. Wm. 106 N. Y. 221 ; Hinckley v. Mer- Thackberry Co., 139 Iowa 586, 117 chants' National Bank, 131 Mass. N. W. 953. 147. 38q Bade v. Hibberd, 50 Ore. 501, 280 Burkhalter v. Second National 93 Pac. 364. Bank, 42 N. Y. 538; Union Biscuit 2Sr Brandt v. Public Bank, 139 Company v. Grocery Co., 143 Mo. N. Y. App. Div. 173, 123 N. Y. Supp. 207. § 206f SUBDIVISION A — CHECKS. 247 stopped, it cannot charge the amount against the depositor's ac- count.^**' The certification of a check by the drawee bank terminates the drawer's right to stop payment.^^* And so notice to a bank by a depositor that his certified check, indorsed in blank, had been lost and to stop payment, will not justify the bank in re- fusing payment to a holder in due course.^^" The Negotiable Instruments Law provides: "Notice of dis- honor is not required to he given to the drawer * * where the drawer has countermanded payment.'"^^'' And under the above section it has been held that an allega- tion that payment of a check had been countermanded is suf- ficiently set out vi^here the check was set forth with the indorse- ment across the face, "Pyt. Stopped."*^* The drawer of a check, who has countermanded payment, is not entitled to notice of its protest.^^" Below is given a form of request frequently required by banks for stopping payment on negotiable instruments. CITY TRUST BANK, INDIANAPOLIS: Please endeavor to stop payment of my check or draft Number dated for DOLLARS ($ ) and payable to the order of My reasons for wishing payment stopped are: / hereby agree to hold yoiu harmless for said amount, and all expenses and costs incurred by you on account of your refusing payment of said check or draft, and agree further not to hold you liable on account of payment contrary to this re- quest if same occurs through inadvertence or accident only. Dated this day of 19 Depositor. IMPORTANT. — Do not issue duplicate check or draft until your pass-book or statement has been received and exam- ined. When issuing duplicates, please notify us, 28» People Savings Bank & Trust 43 Misc. Rep. 45, 86 N. Y. Supp. Co. V. Lacey, 146 Ala. 688, — So. 857. Rep. 346; German National Bank ^Svjyjgg^ j^st. Law, § 114, subd. 5. V. Farmers' Deposit National Bank, ^Sw National Copper Bank v. 118 Pa. St. 294, 12 Atl. Rep. 303. Davis Co. Bank, 47 Utah, 236 152 28t National Commercial Bank v. Pac. 1180. Miller, 77 Ala. 168. 38" pjrst National Bank v. Korn, 28" Poess y. Twelfth Ward Bank, — Mo. App. — , 179 S. W. 721. 248 NEGOTIABLE INSTRUMENTS. § 207 § 207. Checkholder's right to sue the bank. Let us first consider when the holder of a certified check may sue the bank and then consider when the holder of an uncertified check may sue the bank. The great weight of authority is that where the bank has certified a check any holder of the check may sue the bank to compel payment.^** The certification creates a new and binding obligation on the part of the bank. Delay in presenting a certified check does not discharge the bank from this obliga- tion. It has been said that the obligation of the bank after cer- tifying a check is simply and unconditionally to pay upon de- mand, and in all such cases the demand may be made whenever it suits the convenience of the party entitled to the stipulated payment. When the business of a bank is properly conducted, it is not possible that it can sustain any loss or prejudice from this interpretation of the contract which it makes in certifying a check; and it is only where delay may be prejudicial that the want of due diligence may be legally imputed and operates as a bar to a claim which the holder could otherwise maintain against the bank.^" The effect of a certification as to the right of action which may be maintained by the holder simply shifts from the drawer and indorsers to the bank. His right to sue is transferred from a right against the drawer to a right against the bank. A certification does not become effective when made at the instance of the drawer until the delivery of the check to the payee.^**" The rule as to the right of a holder of an uncertified check to sue the bank is denied by the great weight of authority. To en- able the holder of such a check to successfully maintain an action against the bank it would be necessary for the check to operate as an assignment of the drawer's funds. This, it is plain, an un- certified check does not do, since it is but an order to pay and not an absolute assignment of anything. The Negotiable Instruments Law provides: "A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the hank, and the hank is not liable to the holder, unless and until it accepts or certifies the check."^^ It would seem on principle that there 29Willits V. Bank, 2 Duer (N. 30 Andrews v. German Nat. Bank, Y.) 121; Merchants Nat. Bank v. 9 Heisk (Tenn.) 211, 24 Am. Rep. State Nat. Bank, 10 Wall 604; Nat. 300; Robson v. Bennett, 2 Taunt. Commercial Bank v. Miller, 77 Ala. 388, 11 Rev. Rep. 614. 168; Meads v. Merchants Bank, 25 **** Anglo South American Bank N. Y. 143, 82 Am. Dec. 331. As to v. National City Bank, 161 App. liability of bank on certification Div. (N. Y.) 268, 146 N. Y. Supp. of check, see note 19 U. S. L. Ed. 457. 1008. § 208 SUBDIVISION A — CHECKS. 249 is no assignment to the holder nor privity of contract betw^een the bank and the holder of an uncertified or unaccepted check, either at law or in equity. The holder's remedy is against the drawer, and to the drawer only is the bank liable if its refusal to pay was a breach of its contract. A check is clearly not an as- signment of money in the hands of a banker. The banker is bound by his contract with his customer to honor the check, when he has sufficient assets in his hands. If he does not fulfill his contract, he is liable to an action by the drawer.^ The payment of a clearing house balance is not a payment of any particular check, and does not become so until the time within which the check may be returned has expired.^^* § 208. The depositor's right to draw on the bank. The implied contract between the banker and the depositor is that the banker will honor his checks to the amount of his deposits. Therefore it is a plain proposition that only the depositor or his duly authorized agent can draw against the deposits. In case the deposit is made by a partnership the check must be signed by the partnership name and may be issued by any one of the active partners. Where the check is not signed by the partnership name, but instead all the partners sign their individual names the bank may honor the check. Where several persons not a partnership make a joint deposit it is necessary that all their names appear on the check unless they make the deposit a joint and several credit, in which case any one of them may draw on the deposit. As to corporations it is incumbent upon the bank to ascer- tain from the charter or by-laws of the corporations what officers are authoried to draw on the deposits of the corporation. But if a check is drawn by an unauthorized officer and the corporation accepts the proceeds of the check, it is estopped to set up the officer's want of authority. Where a number of trustees de- posit trust funds the general rule is that all their names must be signed to the check in drawing on the bank, but a court of equity may sanction the drawing of a check by a less number than all. 31 Neg. Inst. Law, § 189, where ^^ Hopkinson v. Foster, L. R. 19 all cases directly or indirectly bear- Eq. 74. As to liability of bank ing upon or citing the Law are upon check drawn upon it, see grouped. As to a check as an note 19 U. S. L. Ed. 897. equitable assignment, see notes in 32a Hentz v. Nationaal City Bank. 7 L. R. A. 596. 9 L. R. A. 109: and 159 App. Div. (N. Y.) 743, 144 >J. as to checkholder's right to sue bank Y, Supp. 979- for refusal to pay, see note 41 U. S. L. Ed. 207. 250 NEGOTIABLE INSTRUMENTS. § 209 An agent who has put to his private account funds of an un- disclosed principal may recover damap:es from the bank for re- fusal to honor his check upon them, although he had improperly obtained them. § 209. Failure of bank to honor check.— Where the bank possesses funds of a depositor it is bound to honor his checks to the amount of his deposits. If a check is properly drawn and presented for payment and the bank fails to honor it when there are sufficient funds, the depositor may maintain an action against the bank not only for a breach of contract, but also for a tort; in the latter case he would be entitled to recover damages for injury to his credit or any other injury that he might have suffered.^ The drawer must have sufficient funds in the bank to meet the check in full to entitle him to maintain an action against the bank for a failure to honor his check, because the bank cannot be required to make a part payment.^ After the deposit is made the bank is allowed a reasonable time in which to enter the credit upon its books. But if a reasonable time has elapsed between the deposit and the presentment of the check the bank will be liable although the credit was not entered because it is the duty of the bank to properly keep its books and to properly conduct its business. A bank is not supposed to make a partial payment on a check if it has not sufficient funds to pay the entire amount. In prac- tice the holder of the check sometimes deposits sufficient of his own funds to the drawer's account in order to have sufficient on deposit in the drawer's name so that the latter's check will be honored by the bank. Overdraft payments are considered as loans made to deposi- tors and if the loan is not made good the bank may then sue for the repayment of the loan upon the implied promise on the part of the person to whom the loan was made to repay the same. 33 Mt. Sterling Nat. Bank v. 15 L. R. A. 134. As to right to Greene, 99 Ky. 262, 35 S. W. 911, stop payment of check, see note 32 L. R. A. 568 ; Svendsen v. State 30 L. R. A. 845. Bank, 64 Minn, 40, 65 N. W. 1086, 34 pgnner v. Smith, 3 Neb. 107, 31 L. R. A. 552. As to liability 47 N. W. 632, 11 L. R. A. 528. of bank for refusal to pay, see note SUBDIVISION B— TRAVELERS' CHECKS. § 209a. Meaning of term and ob- § 209c. Rights and liabilities, ject. 209d. Advantages. 209b. Provisions. 209e. Forgery of travelers' checks. § 209a. Meaning of term and object. A travelers' check is a negotiable instrument upon which the holder's signature must appear twice in order to be a complete in- strument. It is issued by a bank to a holder who must place his signature upon the instrument at the time it is issued, and the instrument must be countersigned by the holder before it is paid. Checks of this character have come into very general use, especially by travelers. They are an ingenious, safe and con- venient method by which the traveler may supply himself with funds in almost all parts of the civilized world without the hazard of carrying the money on his person. The bank or com- pany issuing the instrument has the right to refuse to pay it when it does not bear the countersign agreed upon. The owner of the check also has the right to insist it shall not be paid when it is not countersigned as agreed.-^ It is a safe and yet con- venient way in which to carry funds in addition to the well- known and reliable letter of credit. § 209b. Provisions. In order to insure himself against loss, the traveler or holder is required at the time of purchase to sign his name to the checks in a space reserved for "Holder's signature." Travelers' checks can not be cashed unless they are countersigned, and then only if "holder's signature" and "coun- tersignature" correspond, and the countersignature must be af- fixed to the instrument in the presence of the correspondent of the bank or company issuing the same. The amount paid in European or foreign countries is specified on each check, so that the holder knows exactly how much for- eign money he is to receive, and it is provided that the fixed amounts will be paid without deduction, excepting for the gov- ernment stamp tax, if any. In countries not specially designated, it is provided that the equivalent of the dollar-amount will be paid at regular market rates. It is usually provided that if the instrument is lost, the amount will be refunded upon the execution of a satisfactory bond of 1 Samberg v. American Express 879, L. R. A. 1917F, p. 558 note. Company, 136 Mich. 639, 99 N. W. 251 252 NEGOTIABLE INSTRUMENTS. §§ 209c-209e indemnity, and that unused checks will be redeemed at their face value. If the instrument is issued by an agent of the issuer of the instrument, such agent receives from the holder a certain amount of money for the issuer, not as a deposit or for safe-keeping, but upon a contract vi^herein the issuer undertakes that he will, within one year from the date of the checks when countersigned, pay the amount stated in the check to the order of the payee therein named.^ It will be seen that identification is easily es- tablished by means of two of the travelers' signatures, one being placed on the check at the time of purchase and the other at the time of payment in the presence of the bank officer, that is, the paying agent. § 209c. Rights and liabilities. The company or issuer of the check has the right to refuse to pay when the check does not bear the countersign agreed upon. The owner of the check also has the right to insist it shall not be paid when it is not countersigned as agreed. The instrument is not effective as a draft or check, or order for the payment of money, until the purchaser, who, in the presence of the agent of the issuer, has signed his signature, has also countersigned it.^ § 209d. Advantages. These travelers' checks are payable all over the world, being cashed by banks, bankers, and tourists' agents ; they are also readily taken in settlement of travelers' bills by steamship companies and the principal hotels and stores. § 209e. Forgery of travelers' checks. One issuing travelers' checks under the agreement to pay them when countersigned by the signature placed on their face is liable to the purchaser for checks paid on a forged signature.^ a Sullivan v. Knauth. 220 N. Y. 4 Sullivan v. Knauth. 220 N. Y. 216. 115 N. E. 460 L. R. A. 1917F. 216, 115 N. E. 460, L. R. A. 1917F, p. 554. p. 554 ; Samberg v. American Ex- 3 Sullivan v. Knauth, 161 App. press Company, 136 Mich. 639, 99 Div. 148, 146 N. Y. Supp. 583. N. W. 879. CHAPTER XlX-a LOST AND DESTROYED NEGOTIABLE INSTRUMENTS. § 209f. In general. § 209k. Form of bond of indemnity 209g. Diligence of owner, for paying lost note. 209h. No title in finder. 2091. Copy admissible in evidence. 209i. When party liable not dis- 209m. Burden of proof. charged. 209n. Suit at law or in equity. 209j. Rule as to indemnity. 209o. Demand, protest and notice as to lost instrument.' § 209f. In general. There are certain duties and rights of the loser, finder and holder of lost and destroyed negotiable in- struments which should be given separate consideration. The duties and rights as to ordinary chattels differ from those as to coins, bank bills and negotiable paper. Negotiable paper takes the place and performs to a large extent the office of money and it would be embarrassing if every taker of such instruments was bound to inquire into the title of the holder and if he were obliged to take it with all the imperfections and subject to all the defenses which attach to it in the hands of the holder. So a bona fide holder for value without notice may obtain good title to certain negotiable instruments, such as those negotiable by delivery against the parties thereto, as well as against the true owner ; this rule applies to negotiable instruments negotiable by delivery such as those payable to bearer or indorsed in blank. § 209g. Diligence of owner. As soon as the owner discov- ers that he has lost a negotiable instrument he should instantly give notice of the loss to all the parties on such paper and inform them not to pay the amount to any one but to the loser or his order. Thus, if an unaccepted bill of exchange be lost the drawee should be advised not to accept the same. § 209h. No title in finder. No title to a lost bill or note vests in the finder and the owner when he has identified it may maintain trover against the finder. If the finder has received payment of the bill or note an action for money had and received for his use may be maintained against him. The owner may like- wise maintain an action of replevin against the finder.* And it has been held that the finder has no lien on the bill or note for his expenses on account of finding the instrument. 1 Halbert v. Rosenbalm, 49 Neb. 498, 68 N. W. 622. 253 254 NEGOTIABLE INSTRUMENTS. §§ 209i-209k § 209i. When party liable not discharged. A party liable will not be discharged if he pay the amount to the holder of the lost instrument before maturity as such a payment is not made in the usual course of business.^ Neither will the party liable be discharged if he had notice of the loss unless the holder is a bona fide holder for value and entitled to enforce payment. § 209j. Rule as to indemnity. Ordinarily where a writing is merely evidence of a contract, the loss or destruction does not destroy the cause of action but in case of negotiable instruments where the parties liable are entitled to have the writings deliv- ered up to them for their security or to enable them to enforce their rights under them when they are called on to perform their obligations, in case such instruments are lost or destroyed, an action can not be maintained unless their rights can be fully secured by a bond of indemnity or other sufficient security. As the parties liable upon a negotiable instrument are entitled to the instrument at time of payment and as this is not possible with a lost instrument, the owner should tender a sufficient indemnity in some form against any future claim by the finder or holder upon a lost instrument. This indemnity should be offered to every party of whom payment is demanded. There are some exceptions, however, as to the requirement of a bond of indemnity as where a note is payable to order and is unindorsed or where it has been specially indorsed, or where the lost instrument has been traced to the defendant's custody, or where it is shown that the defendant is protected' by the Statute of Limitations against future liability.^ § 209k. Form of bond of indemnity for paying lost note. The following is a form of indemnity bond for paying a lost note: INDEMNITY BOND FOR PAYING LOST NOTE. Know All Men By These Presents, That we, AB, prin- cipal, of and CD, surety, of , are held and firmly bound unto EF, of , in the penal sum of , lawful money of the United States, to be paid to the said EF, his executors, administrators or assigns, for which payment well and truly to be made, we 2 Hinckley v. Union Pacific Rail- ^ Moore v. Fall, 42 Maine 450. road Co., 129 Mass. 52. § 2091 LOST AND DESTROYED. 255 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 where- as AB, 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 EF has this day paid to said AB the full amount due thereon upon the agreement that this bond of in- demnity would be given and that said AB, principal, and CD, surety, will indemnify and save EF harmless, and will deliver up said note to EF when found. Now, THE CONDITION of this obligation is such that the above bounden AB, principal, and CD, surety, their heirs, executors, administrators, or any of them shall well and truly indemnify and save harmless the said EF, his executors and ad- ministrators from and against any claim on said note and any and all damages, costs, charges, actions or suits by reason there- of, and also deliver or cause said note to be delivered to said EF, if found, then this obligation to be void, otherwise to remain in full force and virtue. (SEAL) (SEAL) State of 1 County of > ss. City of J On this day of , 19 , before me, the subscriber, personally appeared and , to be known to be the same persons who executed the foregoing instrument, and they each acknowledged to me that they executed the same. Notary Public. My commission expires § 2091. Copy admissible in evidence. An affidavit by the plaintiff addressed to the court is admissible to prove the loss of a bill or note and to lay the foundation for secondary evidence of its contents.* ^Katzenberg v. Lehman, 80 Ala. 513. 256 NEGOTIABLE INSTRUMENTS. §§ 209m-209n The original existence, genuineness, identity and loss or de- struction of the instrument must be proved if disputed in a suit against the maker, otherwise a copy will not be received in ev- dence.** The contents and terms of a note cannot be shown by parol nor the character in which it had been signed by the makers, whether as principal or sureties, when there has been no showing that the note was lost or destroyed or not within the reach of the court's process.® The loss must usually be proved by circumstantial evidence and the courts are less exacting as to proof where the maker is safe against any future claim of a bona fide transferee. Where the circumstances are suspicious or the maker is not protected and safe the courts are more exacting; and where the note is not negotiable the proof need not be so strong as in case of negotiable paper.'' And it should be remembered that it must be affirmatively shown that the lost instrument was negotiable since that fact will not be presumed.* Should the negotiable instrument be lost after suit is brought upon the same, the court still has jurisdiction and there may be recovery, as in case of lost notes.* § 209m. Burden of proof. When the loss of a negotiable instrument by the original owner is proven the burden of proof is said to shift and the holder must show that he acquired the instrument as a bona fide purchaser or from some one who held title as a bona fide holder.*** Neglect to offer indemnity to the maker or acceptor on de- mand before payment does not deprive the payee of his right of action but it will deprive him from recovering costs.** § 209n. Suit at law or in equity. There is a conflict as to whether or not a proceeding upon a lost or destroyed negotiable instrument should be at law or in equity. In those jurisdictions which have separate proceedings at law and in equity the pro- ceeding is usual in equity. And in such jurisdictions there are usually certain exceptions so that the proceeding may be at law in certain cases as where the lost negotiable instrument is proved 5 Field V. Anderson, 55 Ark. 546, » Beoteler v. Dexter, 20 D. C. 18 S. W. 1038. Rep. 26. « Merrill v. Timbrell, 123 Iowa !« Warren v. Smith, 35 Utah 455, 879. 100 Pac. 1069, 136 A. S. R. 1071. '' Nagel V. Mignot. 8 Mart. 488. ^^ Commercial Bank v. Benedict, s Hough V. Barton, 20 Vt. 455. 18 B. Mon. 307. § 209o LOST AND DESTROYED, 257 to have been destroyed, or if a negotiable instrument transferable by delivery be traced to the defendant's possession after it is lost or where the debt would be barred by the Statute of Limi- tations if a third party were to demand payment of the instru- ment.*" § 209o. Demand, protest and notice as to lost instrument. The Negotiable Instruments Law in Section 160 of the Law pro- vides : "When a bill is lost or destroyed or is wrongly detained from the person entitled to hold it, protest may he made on a copy or ■mrittcn particulars thereof." The loss of a negotiable instrument is no excuse for want of a demand, protest or notice because it does not change the contract of the parties and the drawer and indorsers on such failure will be discharged.*^ 12 Torey v. Foss, 40 Maine 74. ^^ Kavanaugh v. Bank. 59 Mo. App. '540. CHAPTER XX. SOME OTHER KINDS OF COMMERCIAL PAPER. §210. In general. §215. Draft. 211. Bill of lading. 216. Due bill. 212. Certificate of deposit. 217. Letters of credit 213. Certificate of stock. 218. Paper money. 214. Coupon bonds. 219. Warehouse receipt. 214a. Liberty Bonds. 219a. Miscellaneous. § 210. In generaL Among the most common species of commercial paper other than bills of exchange, promissory notes and bank checks are bills of lading, certificates of deposit, cer- tificates of stock, coupon bonds, drafts, due bills, letters of credit, paper money and warehouse receipts.-^ §211. Bill of lading. A bill of lading is an instrument is- sued by a common carrier to any person desiring to have goods transferred from one place to another. It contains a receipt acknowledging the receipt of the goods and also an agreement to carry them to a certain destination to a party designated in the instrument as the consignee.-** In commercial transactions it is regarded as the symbolical representative of the goods which it describes ; and its assignment carries with it such rights as the party in possession of the goods could transmit by actual cor- poral transfer of the goods themselves.-*'' It should contain a description of the quantity and condition of the goods received, the marks on the same, the names of the consignor and consignee., the place of shipment, the place of discharge, and the price of the freight.^ The bill of lading is generally issued in sets of three and some- times in sets of four, yet there need not be more than one copy as the number is immaterial.^ When issued in sets of three, one is 1 As to what instruments are ne- tie to the property, see note 22 L. gotiable, see notes 7 L. R. A. 537 R. A. 423. and 8 L. R. A. 393. i"" Yergen v. Northern Pacific la Knox V. The Nevella, Crabbe Railway Co., 19 N. D. 70, 121 N. W. 534; 1 Smith Lead. Cas. 879; Haille 205. V. Smith, 1 Bos. & Pul. 564; How- ^ Gage v. Morse, 12 Allen 410; ard V. Shepard. 19 L. J. C. B. 248; Germania Fire Ins. Co. v. Mem- Sanders V. Vanzellcr, 12 L. J. Exch. phis etc. R. R., 72 N. Y. 90; Belger 497. As to effect of attaching draft v. Diasmore, 51 N. Y. 166. to bill of lading upon passing of ti- SDo^s v. Perrin, 16 N. Y. 325. 258 §211 OTHER KINDS OF COMMERCIAL PAPER. 259 retained by the common carrier, a second by the consignor, and a third is to be sent to the consignee. A bill of lading in the strict commercial sense of the term is not negotiable in like man- ner as bills of exchange and promissory notes.* Yet they are assignable and pass from hand to hand as other non-negotiable instruments. It is more correct to speak of a bill of lading as a quasi negotiable instrument since it is rather like, than of them.** It differs from the promissory note, bill of exchange and check, in that it calls for a delivery of goods instead of the payment of money. It is held that goods shipped by a bill of lading drawn to the order of the shipper may be transferred by delivery of the bill. The character of bills of lading is now regulated in many jurisdictions by statute, and in some, bills of lading are declared to be negotiable like other commercial paper. But the United States Supreme Court has declared that it does not follow under such statutes that all the consequences incident to the assignment of bills and notes ensue or are intended to ensue from such nego- tiations ; and that the rule that a bona Ude purchaser of a lost or stolen bill or note is not bound to look beyond the instrument has no application to the case of a lost or stolen bill of lading.*" If the owner should lose or have stolen from him a bill of lading assigned in blank, the finder or thief could confer no title upon an innocent third person.** If the consignee has received the bill of lading of the goods, deliverable to him or his assigns, or assigned to him or his assigns, and assigned it to a bona Me third party, then the vefi- dor's right to stop the goods in transitu and hold them as security for the purchase money is defeated, and the assignee of the bill acquires as perfect a title to the goods, although they have not reached the buyer's hands, as if they had actually passed through his hands and been delivered bodily to him.^ But a sale of goods not yet received by the vendee, without a transfer of the bill of lading, would not divest the right of stoppage in transitu. 4 Gurney v. Behrend, 3 E. & B. 4b ghaw v. Railroad Co., 101 U. S. 622, 22 L. J. Q. B. 265; Blanchard 557. V. Page, 8 Gray 297 ; Davenport *> Raleigh & Gaston v. Lowe, 101 Nat. Bank v. Homeyer, 45 Mo. 145 ; Ga. 320, 28 S. E. 867. National Bank v. Merchants Nat. ^Lickbarrow v. Mason, 1 Smith Bank, 91 U. S. 98, 23 L. Ed. 208; Lead. Gas. 895; Dows v. Greene, Barnard v. Campbell, 55 N. Y. 462. 24 N. Y. 641 ; Becker v. Hallgarten, 4a National Bank of Bristol v. 86 N. Y 167; Newhall v. Cent. P. Baltimore & O. R. Co., 99 Md. 661, R. R. Co., 51 Cal. 345; Gurney v. 59 Atl. 134, 105 Am. St. Rep. 321. Behrend, 2 El. & B. 622; Emery v. Irving Nat. Bank, 25 Ohio St. 360. 260 NEGOTiAnr.E instruments. §212 And after goods have reached the consignee, the right of stop- page in transitu, as its very terms import, is at an end.*^" Sometimes for the protection of the vendor the bill of lading for the goods shipped is sent to the vendee, attached to a bill of exchange for the purchase money; the purpose of this is to make the passing of title to the goods contingent upon the hon- oring of the bill of exchange." A party discounting a bill of exchange on the faith of the indorsement of a bill of lading for goods has such security for the draft as he would acquire if the goods themselves w^ere delivered to him instead of the bill of lading.®" § 212. Certificate of deposit. A certificate of deposit is an instrument in the form of a receipt given by a banker for a cer- tain sum of money. When the time of payment is specified and the words of negotiability are used it is in effect, then, a promis- sory note. Otherwise it only circulates as a negotiable instru- ment by assignment. In general negotiability of such an instrument depends upon its wording and is controlled by the same rules that govern promissory notes.'' It has been held that Section 66 of the Negotiable Instruments Law applies to one who indorses in blank a certificate of deposit; and if the paper is dishonored owing to the insolvency of the bank he can be held as indorser'^* So also it has been held that Section 71 of the Negotiable In- struments Law as to presentment applies to a certificate of de- posit payable upon demand, and presentment of such a certificate within a reasonable time after its issue must be made in order to charge an indorser thereon.'^" However, an indorsee may not be held to the same degree of diligence in presenting it for pay- ment as the law requires in other cases.'^" 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, 5a Louisville & Nashville R. Co. v. Lindsay v. McClelland, 18 Wis. 481 ; Barkhouse, 100 Ala. 543, 13 So. 534. London (S. C.) v. Hagerstown S. ® Shepard v. Harrison, L. R. 4 Bank, 12 Casey 498; Easton v. Q. B. 197, 5 H. L. 116; Indiana etc. Hyde, 13 Minn. 90. Bank v. Colgate, 4 Daly 41; Marine ''* Jensen v. Wilslef, 36 Nev. 37 Bank V. Wright, 48 N Y. 1. 132 Pac. 16. *3 Mather v. Gordon Bros., 77 '''' Anderson v. First Nat. Bank of Conn. 341, 59 Atl. 424. Charlton, 144 Iowa 251, 122 N. W ' Huse V. Hamblin, 29 la. 501 ; 918. Rindskoff v. Barrett, 11 la. 172; ^o Ljndsel v. McCIellan, 18 Wis Ford V. Mitchell, 15 Wis. 304; 481. § 213 OTHER KINDS OF COMMERCIAL PAPER. 261 but such arrangements must be made at the time of the deposit. Certificates of deposit for a definite period of time arc known as time certificates of deposit. An ordinary deposit slip signed by the cashier of the bank in which the deposit is made is not a certificate of deposit. The certificate of deposit is used instead of drawing a check on the fund deposited, whenever the depositor desires a continu- ing security, drawing interest, and payable on demand or at some time in the future. A certificate of deposit is prima facie a conditional payment only if transferred in payment of a debt. §213. Certificate of stock. A certificate of stock is a sim- ple certification that a certain person is the owner of so many shares of the stock of the company mentioned. It is signed and sealed by the president and secretary of the company. It is not regarded as coming within the classification of negotiable instruments, but subject to certain rules, it inures to the benefit of the bearer. It is one of that class of instruments, while not negotiable in the sense of the law merchant, it is so framed and so dealt with, as frequently to convey as good a title to the trans- feree as if it were negotiable. A share in the capital stock of a corporation is not a debt, nor money, nor a security for money, but it is a species of incorporeal personal property. The capital stock of the corporation is so much money, or property assessed at money valuation, which is divided into a number of shares, which shares are the holders 'interest in the corporate estate.'^'' A certificate of stock is a muniment of title of the same nature as the note or bond of a private person, ordinarily called a "chose in action" or of a State or United States bond, or certificate of debt.^" It is not the stock itself but only evidence of the stock, and not money, therefore it is not as fully negotiable as a promissory note or check. The certificate is passed from hand to hand by assignment of the certificate and by the rules of most corpora- tions there must be an assignment on the books of the company in order that the person holding the certificate may be entitled to all the rights of an owner of a certificate of stock in the first instance. The general rule is that the purchaser of the certificates of stock gets no better title than his vendor had ; and if stock which is payable to bearer or assigned in blank is stolen or found, and '^*' Allen V. Pegram, 16 Iowa 173. ^e Hutchins v. State Bank, 12 Mete. (Mass.) 421. 262 NEGOTIABLE INSTRUMENTS. § 214 unlawfully transferred to an innocent purchaser for value, the real owner may nevertheless recover it.** §214. Coupon bonds. A coupon bond is a primary obliga- tion, in the nature of a promissory note, promising to pay a sum of money on a day certain in the future, to which are attached certain other obHgations called coupons, or interest certificates, and of which there are usually as many as there are payments to be made. The term "coupon" is derived from the French "cotiper" — to cut, and is so called because it is cut off when it is presented for payment. They may be severed and negotiated before the maturity of the interest they represent, and thus pass as separate and independent securities, like other commercial instruments. In their form coupon bonds usually resemble prom- issory notes more than they do bank notes, checks or bills of exchange. They are fully negotiable if they contain words of negotiability. Each coupon is in itself a separate instrument con- taining a distinct and independent promise to pay the sum named. The holder of a coupon bond does not necessarily have to own the bond to recover on the coupon and he can sue on the coupon without producing the bonds to which they were attached.^ They are issued by the federal and state governments, by mu- nicipal and other public corporations ; and by all sorts of private corporations, such as railroads, canal companies and the like. A large portion of the wealth of this country is represented in these bonds. The signature to these instruments is generally written by the president of the corporation, or the chief executive of the municipality issuing them ; and there is generally a counter signature by the secretary, or treasurer, or chief clerk of the corporation or municipality. The signature to the coupons, where the bonds are properly signed and sealed, need not be written, but may be printed in facsimile, or otherwise. Coupon bonds are generally made payable to the party to ^Bereich v. Marye, 9 Nev. 312; Commonwealth, 18 Gratt. 776; Burton's Appeal, 93 Pa. St. 214; Com'rs of Knox Co. v. Aspinwall, Howard v. Howard, 7 Wall. 415, 21 How. 589; Town v. Culver, 19 19 L. Ed. 122. Wall. 84 ; Beaver Co. v. Armstrong, 9 Clark V. Iowa City, 20 Wall. 44 Pa. St. 63; Maddox v. Graham, 584, 22 L. Ed. 427; Thompson v. 2 Mete. (Ky.) 56; Brainard v. N. Lee County, 3 Wall. 327; City v. Y. & H. R. R. Co., 25 N. Y. 496; Lamson, 9 Wall. 477, 19 L. Ed. Evertsen v. Nat. Bank, 11 N. Y. 725; Clarke v. Janesville, 10 Wis. S. C. (4 Hun) 694; Langston v. 136; Rose v. City of Bridgeport, 17 S. C. R. R. Co., 2 S. C. 249; Nat. Conn. 243 ; R. R. v. Cleway, 13 Ind. Ex. Bank. v. Hartford R. R. Co., 161 ; Commonwealth v. Industrial 8 R. I. 375. As to negotiability of Assn., 98 Mass. 12; Spooner v. coupon bonds, see note 1 L. R. A. Holmes, 102 Mass. 503; Arents v. 299. § 214a OTHER KINDS OF COMMERCIAL PAPER. 263 whom they are issued, or bearer, and in such cases are trans- ferable by delivery. Sometimes they are payable to order, and then pass by indorsement; sometimes they are payable to the holder, which term is regarded as equivalent to bearer; some- times they are payable to a certain party "or his assign," in which case the party's assignment is necessary to pass title, but if he makes an assignment in blank, the title then passes by delivery. The rights of the purchaser or holder of a coupon bond are determined by the same principles which control those of the purchaser or holder of a bill or note. The Negotiable Instruments Law in some states has the fol- lowing provision : "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 accom- panying the same, non^negotiable, by subscribing his name to a statement indorsed thereon, that such bond, obligation or coupon is his property; and thereon the principal sum therein mentioned is payable only to such owner or holder, or his legal representa- tives or assigns, unless such bond, obligation or coupon be trans- ferred by indorsement in blank, or payable to bearer, or to order, with the addition of the assignor's place of residence." § 214a. Liberty bonds. Liberty bonds are negotiable paper and the purchaser of such bonds, although they have been stolen, acquires a good title thereto, as against the true owner, providing he purchased in good faith, and for a valuable consideration. This rule is limited in its application to bonds which are not mature at the time they are stolen and placed in circulation. But the purchaser of Liberty Bonds is liable to the real owner if he purchases the same in what amounts to bad faith. Such bonds, being negotiable instruments, payable to bearer, are subject to the provisions of the Negotiable Instruments Law. One of the provisions of that statute, Section 56, declares that one who takes a negotiable instrument with "knowledge of such facts that his action in taking the instrument amounted to bad faith" is not a holder in due course and does not acquire a valid title, and the purchaser in such circumstances is liable to the real owner of the bonds for their value.-^* lOArnd v. Aylesworth, 145 Iowa 185; Ward v. City Trust Co., 117 App. Div. 130 (N. Y.). 264 NEGOTIABLE INSTRUMENTS. §§215-216 Where circumstances showed that a bank had kept "in an insecure place government liberty bonds payable to bearer, which could not be readily identified," the bank was held liable for the theft of the bonds.^* It has been held that the class of securities generally designated as municipal bonds are subject to the provisions of the Nego- tiable Instruments Law.*^ § 215. Draft by bank. It is customary in the transaction of banking business for one bank to issue drafts upon a bank located in another state. It has been decided that such drafts are checks and the parties thereto are subject to the same liabilities and pos- sess the same rights as though such drafts were drawn upon a particular bank or banker by an individual.*^ By the weight of authority a draft upon a bank not payable immediately is a bill of exchange rather than a check.*"* § 216. Due bill. A due bill is an instrument whereby one person acknowledges his indebtedness to some other party in form as follows: "Due B two hundred dollars, payable to his order, (signed A)." Thus it is in substance a promissory note. If the bill contains words importing a promise to pay and ren- dering the instrument negotiable it is generally treated as a prom- issory note.*^ A particular kind of due-bill is the clearing-house due-bill or clearing-house certificate. It is a device of clearing-house asso- ciations to save inconveniences and labor incident to the settling of balances between the members of the association. A clearing- house is a place or institution where the settlement of mutual claims, especially of banks, is effected by the payment of differ- ences called balances. Clerks from each bank attend the clear- ing-house with checks and drafts on the other banks belonging to the clearing-house. These exchanges are distributed by mes- sengers among the clerks of the banks that must pay them. The exchanges which a bank takes to the clearing-house are called 11 Merchants' National Bank of Pa. St. 474. As to nature of bank Vandervoort v. Affholter, — Ark. draft, see note 23 L. R. A. 173. — , 215 S. W. 648. 15 Sackett v. Spencer, 29 Barb. i2Neg. Inst. Law, § 332 (New 180; Russell v. Whipple, 2 Conn. York) ; Laws of N. Y. 1871, ch. 81; 536; Carver v. Hayes, 47 Me. 257; Laws of N. Y. 1873, ch. 595. Hussey v. Winslow, 59 Me. 170; 13 Borough of Monvale v. People's Franklin v. March, 6 N. H. 364 ; Bank, 74 N. J. L. 464, 67 Atl. 67. Cummings v. Freeman, 2 Humph. 14 Bowen V. Newell. 8 N. Y. 190. 144; Huych v. Meador, 24 Ark. Contra: Champion y. Gordon, 70 192; Marrigan v. Page, 4 Humph, ?47, §§217-218 OTHER KINDS OF COMMERCIAL PAPER. 265 creditor exchanges ; the exchanges which it receives from the Other banks represented there are called debtor exchanges. The balances are paid by the debtor banks to the clearing-house for the creditor banks. The certificates or due-bills are issued, in- stead of the actual payment of money, by one member of the association to another. They are not merely certificates of deposit creating a contract of bailment but are as negotiable as checks payable to bearer, or as promissory notes payable to order or bearer. Some jurisdictions have by statutory enactment extended the law of bills of exchange and promissory notes to all instruments in writing whereby any person acknowledges any sum of money to be due to any other person. § 217. Letters of credit. Letters of credit, sometimes called bills of credit, are open instruments of request from some person, usually a merchant or banker, to any other person to advance money or give credit to some third party and promising that he will repay the same to the party advancing it or will accept bills drawn upon himself for a like amount. If addressed to some par- ticular person, that person alone can advance money upon them and then recover of the writer,^® but if they are addressed to any person in general then anybody can advance money upon them and recover of the writer. Bills of credit are usually issued by banks or merchants. These letters are often used by travelers and agents to obviate the risk and burden of carrying about money. In such cases a deposit is made by the bearer of the letter with the banker as an indemnity. § 218. Paper money. Paper money in its most common form is that of United States treasury notes. United States silver and gold certificates and bank notes. United States treasury notes differ very little from promissory notes payable on demand except as to the texture of the paper on which they are printed. The purpose of the quality of the paper used is to prevent counter- feiting. Treasury notes differ from other paper money in that they have been made a legal tender by the federal government. Gold and silver certificates circulate as money. They specify on their face that there has been placed or deposited in the treasury of the United States a sum of gold or silver as indicated by the certificate which is payable to the bearer on demand. These certificates are not a legal tender. Bank notes or bank bills are 1* Robins v. Bingham, 4 Johns. to what a letter of credit' is, see note 476 ; Walsh v. Bailie, 10 Johns. 180 ; 7 L. R. A. 209. Taylor v. Wilmore, 10 Ohio 490. As 266 NEGOTIABLE INSTRUMENTS. §§ 219-219a the promissory notes of an incorporated bank and are intended to circulate as money. They are not legal tender, but may be tendered in payment of debts the same as other money, if not objected to. They are payable to bearer on demand and are negotiable. It has been held that a bona fide holder can compel payment to him al- though they are proven to have been stolen from the rightful owner. The mere possession of the note is prima facie evidence of bona fide ownership and this presumption is so strong that it can not be overturned by showing the holder was negligent in taking the notes without inquiry. All that it is necessary. to show in this connection is that they were obtained in the usual course of business. The payment of bank notes is secured by the deposit of gov- ernment bonds, and the banks issuing said notes being so closely supervised by the government, the said notes circulate without regard to the banks which gave them life. The financial stand- ing of the national bank note differs in nothing from the treasury note, except that the treasury note is a legal tender and the bank note is not. § 219. Warehouse receipt. A warehouse receipt is a receipt showing the acceptance of grain or other goods which are to be delivered to the bearer. As to grain, upon its receipt by the ware- houseman or elevator company an instrument is issued which sets out that a certain quantity of grain and kind has been received and a promise is made to deliver it to the order of the depositor. Such warehouse receipts are taken by the depositor or the ex- changes of the cities as the representative of the grain itself and when the latter is sold the receipts are transferred by assignment and delivery, or by delivery alone. In such manner the title to the grain will be transferred just as if the grain itself had been delivered. These receipts represent goods and not money and so are not negotiable as promissory notes and bills of exchange.-^'' §219a. Miscellaneous. Post ofifice money orders are not negotiable instruments. The restrictions and limitations which the postal laws and regulations place on money orders are in- consistent with the character of negotiable instruments.-^^ 17 Second Nat. Bank v. Wall- Bank v. Boyce, 78 Ky. 42; Gris- ridge, 19 Ohio St. 419; Burton v. wold v. Haven, 25 N. Y. 595. Curyea, 40 111. 320; Canadian Bank See also, Allen v. Maury, 66 Ala. V. McCrea, 40 111. 281; Spanglcr v. 10; Fourth Nat. Bank v. St. Louis Butterfiest, 6 Colo. 356; Solomon Compress Co., 11 Mo. App. 333. V. Bushnell, 11 Oreg. 272, 50 Am. ^^ Bolognesi v. United States, 189 Rep. 475; Durr v. Hervey, 44 Ark Fed. 335, 111 C. C. A. 67, 36 L. R. 301, 51 Am. Rep. 594; Louisville A. (N. S.) 143 and notes. CHAPTER XXI. SURETYSHIP AND GUARANTY. § 220. Terms defined and distin- § 225. Liability of concealed sure- guished. ties on accommodation pa- 220a. Who are principals and who per. sureties. 226. Remedies of guarantors, 221. Consideration as to a guar- 226a. Limit of surety's recovery. 222. Gua'lS.ty as affected by 226b. Trial of suretyship. statute of frauds. 227. Discharge of guarantors and 222a. Conditional guaranties. sureties. 223. Negotiability of guaranties. 227a. Contribution between sure- 224. Notice to guarantor of de- ties. fault of principal when de- mand is made. §220. Terms defined and distinguished. Guaranty is an undertaking by one person that another shall perform his contract or fulfill his obligation, and in case he does not do so the guar- antor promises to answer in damages. A guarantor of a bill or note is one who engages that the note shall be paid. A contract of suretyship is a contract by which the surety becomes bound as the principal or original debtor is bound. It is a primary obli- gation, and the creditor is not required to proceed first against the principal before he can recover from the surety. The surety is bound with his principal as an original promisor, that is, he is a debtor from the beginning and must see that the debt is paid and is held ordinarily to know every default of his principal, and cannot protect himself by the mere indulgence of the creditor, nor by want of notice of the default of the principal, however such indulgence or want of notice may, in fact, injure him.* Being bound with the principal his obligation to pay is equally absolute. One who signs a promissory note on the face thereof, and who in that way becomes a surety for the principal maker is, under the Negotiable Instruments Law, primarily liable for the payment of such note.** On the other hand, the con- tract of a guarantor is his own separate contract; it is in the nature of a warranty by him that the thing guaranteed to be 1 Millan v. Bull's Head Bank, 32 la Rouse v. Wooten, 140 N. C. Ind. n. See note 13 L. R. A. (N. 557, 53 S. E. 430, 111 Am. St. Rep. S.) 204. As to signing by surety 875. for surety, see note 21 L. R. A. 247. 267 268 NEGOTIABLE INSTRUMENTS. §220 done by the principal shall be done, and is not merely an en- gagement jointly with the principal to do the thing.^ A guaran- tor, not being a joint contractor with his principal, is not bound to do what the principal has contracted to do, like a surety, but only to answer for the consequences of the default of the prin- cipal. The guarantor has to answer for the consequences of his prin- cipal's default. A surety is an insurer of the debt. A guarantor is an insurer of the solvency of the debtor. A surety may be sued as promisor, but a guarantor cannot. The surety and the princi- pal being equally bound may be joined as defendants in one suit or the surety may be sued alone, without any effort having been made to recover the debt from the principal ; but a guarantor, be- ing bound by a separate contract, must be sued separately. The Negotiable Instruments Law provides: "A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity."^^ The intention must be by appropriate language used for that purpose; and such intention may not be inferred from conduct, or from language that is not clear. But where one wrote upon the back of a note the words : "I hereby guarantee payment of the within note," the word "guarantee" indicated his intention not to be bound as mdorser.^'' By way of summary some of the differences between a surety and guarantor may be stated as follows : Some Differences Between Surety and Guarantor. 1. A surety is a co-maker with the principal; a guarantor is not. 2. A surety agrees to do the thing itself ; a guarantor agrees that the principal will do it, and if he does not, he will pay the damages. 3. The entire contract of the surety does not have to be in writing; the entire contract of the guarantor, except in some jurisdictions as to the statement of the consideration, must be in writing. 4. The surety is primarily liable ; the guarantor is secondarily liable as he agrees to act if the principal does not. 2 La Rose et al. v. Logansport 2a Ngg i^st. Law, § 63. Bank, 102 Ind. 332 ; Reigert v. 2b Noble v. Beeman-Spaulding White, 52 Pa. St. 438; Harris v. Co., 65 Ore. 93, 131 Pac. 1006, 46 Newell, 42 Wis. 687. L. R. A. (N. S.) 162. §§ 220a-221 suretyship and guaranty. 269 5. The surety and principal may be sued jointly, but the guar- antor and principal must be sued separately. 6. An extension of time ordinarily releases the surety, whether he is damaged or not, but a guarantor is released only in case he is damaged by the extension. 7 . A surety is not released by failure to receive notice, as there is no legal duty resting upon a holder of paper to notify the surety of default; the guarantor is discharged if he has been damaged by failure to receive notice of the default of the prin- cipal. 8. The surety's contract is negotiable; the guarantor's con- tract is not negotiable in most jurisdictions but is assignable. 9. In some jurisdictions by statute a creditor upon receiving notice from the surety to sue upon an instrument must do so to preserve his rights ; the guarantor does not have this right against a creditor. § 220a. Who are principals and who sureties. The ac- ceptor of a bill of exchange and the maker of a note are prin- cipals as to the other parties thereto. And to the holder of such bill or note the drawer of such bill and the indorsers of such bill or note are sureties of the acceptor or maker.^'^ The fact that the liability of the drawer or indorser is fixed by due demand and notice, does not change their relation as sureties of the debt ; it only fixes their liability as sureties for its payment, provided nothing is done by the creditor to relieve them from liability.^** If a final judgment has been entered against the drawer or indorser, the relation of suretyship ceases, and his liability is merged in that of a principal judgment debtor unless the statutes should otherwise provide.^^ § 221. Consideration as to guaranties. The general doctrine upon this subject is that a consideration is necessary to support a guaranty.^ In some instances the consideration of the note or bill is of itself sufficient, while in other cases an independent con- sideration is required. A guaranty of the payment of a negotiable promissory note, written by a third person upon the note before its delivery, requires no other consideration to support it, and need express none other than the consideration which the note ^oGunnis v. Welgley, 114 Pa. St. 3e Bray v. Manson, 8 M. & W. 194. 668. SdPriest v, Watson, 7 Mo. App. 3 Davis v. Wells, 104 U. S. 159, 578, 26 L. Ed. 686; Rause v. Glissman, 29 111. App. 321. 270 NEGOTIABLE INSTRUMENTS. § 222 upon its face implies to have passed between the original parties.* In such a case the credit is given to both, and not to one alone, although only one may derive any substantial benefit from the transaction. But a guaranty written upon a promissory note, after the note has been delivered and taken effect as a contract, requires a distinct consideration to support it, and if such a guaranty does not express any consideration, it is void, where the Statute of Frauds of the state requires the consideration to be expressed in writing as a contract of guaranty not entered into at the same time as the original obligation or its acceptance by the guarantee must be supported by a consideration distinct from that of the original obligation.^* There seems to be an excep- tion to this requirement, as in the case where the guaranty was agreed upon at the time of making the principal contract, and it was merely committed to writing afterwards. If the considera- tion is a continuous thing, running along at the time both of the principal contract and of the guaranty, it is considered a con- temporaneous guaranty and does not require a distinct considera- tion. § 222. Guaranty as affected by statute of frauds. Guaranty is an undertaking to answer for the debt or default of another within the meaning of the Statute of Frauds, and must accord- ingly be in writing and signed by the party to be bound or by his lawful agent. That statute provides that no action shall be brought to charge any person, upon any special promise to answer for the debt, default or miscarriage of another, unless the prom- ise, contract or agreement, upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or b> some person thereunto by him lawfully authorized; and the consideration of any such promise, contract or agreement need not be set forth in such writing, but may be proved. Since a guaranty is a promise or an undertaking by one person to answer for the debt, default or miscarriage of another person the question arises as to whether or not a writing setting out the consideration and signed by the person to be charged thereby is necessary. The courts in this country are agreed that the signa- ture of the party to be charged must be obtained, but the de- cisions are at a variance as to whether the consideration for the guaranty should also be set out in full.'* If the statute only 4 Moses V. Lawrence Co. Bank, See also note 44 L. R. A. (K. S.) 149 U. S. 298, Zl L. Ed. 743. 481. 4" Clements v. Jackson County Oil ^ Nichols v. Allen, 23 Minn. 543 ; and Gas Company, — Okla. — , 161 Rigbey v. Norwood, 34 Ala. 129; Pac. 216, L. R. A. 1917C, p. 437. Reed v. Evans, 17 Ohio 128; Gil- §§ 222a-223 suretyship and guaranty. 271 requires the promise to be in writing^ it seems that the considera- tion need not be in writing.^ This is estabHshed upon the prin- ciple that the promise is not the entire agreement and therefore does not inckide the consideration. In order that the agreement may be controlled by the statute it must contain a promise to answer for the debt of another both in form and in fact/ It has been held that if the transaction be nothing more than an indirect way of guaranteeing the payment of one's transfers to his creditor, such as giving the note of another which is payable to himself with a guaranty that this third person's note will be paid, the guaranty is substantially that the guarantor's original debt will be paid by the collection of this third person's note; and for this reason the guaranty need not be in writing. § 222a. Conditional guaranties. A conditional guaranty is one which depends upon some condition, for example a guaranty of the collectibility of an instrument, in which case there is no right of recourse against the guarantor until the holder has first made proper effort to collect from the principal debtor. The Negotiable Instruments Law provides as follows: "Subject to the provision of this act, zvhen the instrument is dishonored for non-payment, an immediate right of recourse to all parties secondarily liable thereon, accrues to the holder/"^* This section does not change the law as to conditional guar- anties for the express terms of such contract exclude the idea of an intention to incur the liability prescribed by said section.''* § 223. Negotiability of guaranties. Whether a guaranty on a negotiable bill or note is itself negotiable is a question concern- ing which there is much confusion. It is held by some cases that the guaranty does not fall within the rule of negotiability, and can inure only to the benefit of the person to whom it was given. On the other hand, it is held in some jurisdictions that the guar- anty passes with the instrument, and inures to the benefit of the holder. Some of those cases, holding that it passes with the in- strument as being negotiable, treat it in the nature of an indorse- ment, while still others hold that it is not negotiable on the ground that it is a contract of the common law and not of the law merchant, and consequently is incapable of negotiability by any intention of the guaranty. Authorities, however, are not wanting lighan v. Boardman, 29 Me. 79. '^* The question as to when a ^ Violett V. Patten, 5 Cranch 142, guaranty is a continuing one is dis- 3 L. Ed. 61. cussed in the note 39 L. R. A. (N. ^Birkmyr v. Darnell. 3 Ld. Ray- S.) 724. mond 1085, 6 Mod. 248, 1 Salk. 27. 'b ^eg. Inst. Law, § 84. 272 NEGOTIABLE INSTRUMENTS. §§ 224-225 evidence as against all parties except a bona fide holder without which decline to take this view where the guaranty is by a third person, and not by the holder of the instrument, and, while not readily allowing negotiability to a guaranty, allowing it to the guaranty if the language of the guaranty does not restrain it. The better doctrine seems to be to hold the guaranty as non- negotiable, since it is a common law contract and is not properly considered an indorsement. It may be transferred with the in- dorsement by assignment and the assignee can then maintain an action upon the guaranty in his own name under statutes of most of the states.''" § 224. Notice to guarantor of default of principal when de- mand is made. The guarantor's contract is more rigid than that of an indorser and he is bound to pay the amount upon a presentment made and notice given to him of dishonor, within a reasonable time.* And in the event of a failure to make present- ment and give notice within such reasonable time, he is not abso- lutely discharged from all liability, but only to the extent that he may have sustained loss or injury by the delay. The same per- son may be a guarantor and also an indorser of a note ; and in such case the failure to give him due notice of demand and non- payment will discharge him as indorser, but he will still be bound as a guarantor, as the rule as to notice does not apply to guar- antors.** In case the principal is insolvent at and before ma- turity of the bill or note, the guarantor is liable, because it is presumed that the guarantor has suffered nothing in that case from the failure to give notice of the default.® § 225. Liability of concealed sureties on accommodation paper. If a person signs an instrument as an accommo- dation for another party and writes the word surety after his signature, he must be treated as such by all subsequent holders whether he be the drawer or acceptor of a bill of exchange, the maker of a promissory note or the indorser of either.*" But in case the instrument does not disclose his real character as a surety the question then arises, can such relation be shown and the liabil- ity fixed in accordance therewith. The English equitable rule is that the character of a concealed surety who appears on the in- strument as a regular acceptor or indorser may be shown by parol 70 Cowles V. Peck, 55 Conn. 251 ; *" Brown v. Curtiss, 2 N. Y. 225. Summers v. Barrett, 65 Iowa 292. '-* Wolfe v. Brown, 5 Ohio St. 304. SQay V. Edgerton, 19 Ohio St. lo Hunt v. Adams, 5 Mass. 358; 553; Montgomery v. Kellog, 43 Robison v. Lyle, 10 Barb. 512; Miss. 486. Sayles v. Sims, 73 N. Y. 552. §§ 226-226b suretyship and guarantV. 273 notice.-^* However, the great weight of judicial opinion denies the admissibility of parol evidence to prove the party's real char- acter where it would materially change the party's liability to the paper and follows the English common law rule, which permits all subsequent holders to a bill or note to treat all the prior par- ties according to their ostensible character.^* But if the con- cealed surety is a co-maker or drawer and proo. of his character would not reverse the evident intention of the parties as to his relation to the paper, the general trend of judicial opinion in this country is to admit such proof.-^' § 226. Remedies of guarantors. The remedies which are available to guarantors are of two classes. The first and most common is that by which the guarantor pays the debt and re- covers of the principal and all other parties whom the holder may have held liable.^* But he can only recover a sum equal to the amount he was compelled to pay with interest on the same.^" The second method which he may pursue is to file a bill in equity making as parties thereto the creditor and the principal parties, to enjoin proceedings against himself until the resources of the principal have first been exhausted.*** The credi- tor may demand the guarantor to indemnify him against loss.^'^ This is a very unusual proceeding and the interests of the guar- antor can always be fully protected by the former proceeding. § 226a. Limit of surety's recovery. The limit of the surety's recovery who pays a bill or note, or other obligation of his prin- cipal is the amount with legal interest necessary to indemnify him.-*''* So if he compromises the debt he can only recover back the amount accepted by the creditor in compromise of it. A surety who makes payment is subrogated to all the rights of the holder and to the enjoyment of all the securities which his principal w^as entitled to for the payment of the debt.*'^'' § 226b. Trial of suretyship. The statutes in some states provide that when any action is brought against two or more de- 11 Erwin v. Lancaster, 6 Best & 524 ; Edgerly v. Emerson, 23 N. H. S. Q. B. 572; Hollier v. Eyre, 9 555. CI. & P., 1, 45; Strong v. Foster, 15 Pgtre v. Duncombe, 20 L. J. Q. 17 C. B. 201. B. 242. 12 Farmers etc. Bank v. Rath- i« Humphrey v. Hitt, 6 Gratt. 524. hone, 26 Vt. 19; Stephens v. Mo- i'' Humphrey v. Hitt, 6 Gratt. 524. nongahela, 88 Pa. St. 157. i^a Smith v. Mason. 44 Neh. 611, 13 Hubbard v. Gurney, 64 N. Y. 6Z N. W. 41. 460 ; Sayles v. Sims, 43 N. Y. 552 ; i''" Sheahan v. Davis, 27 Oreg. Stillwell V. Aaron, 69 Mo. 539. 279. 40 Pac. 405, 50 Am. St. Rep. 14 Humphrey v. Hitt, 6 Gratt. 722. 274 NEGOTIABLE INSTRUMENTS, §227 fendants upon a contract, any one or more of the defendants being surety for the others, the surety may, upon written com- plaint to the court, cause the question of suretyship to be tried and determined upon the issue made by the parties at the trial of the cause, or at any time before or after the trial, or at a subsequent term; but such proceedings shall not affect the pro- ceedings of the plaintiff. And if the finding upon such issue be in favor of a surety, the court shall make an order directing execution to be levied, first upon the property of the principal exhausting his property, before levy shall be made upon the prop- erty of the surety. § 227. Discharge of guarantors and sureties. Guarantors and sureties may be discharged in any one of the following three ways: (1) By a discharge of the principal, as anything which discharges the principal will discharge the guarantor or surety ;*** (2) by the signature having been obtained by fraud ;-^^ and (3) lastly by the surrender to the principal or other party to the paper of the collateral securities.^® Any alteration of the written in- strument which will discharge the principal will also discharge the surety. The surety may be released by an alteration which does not release the principal debtor. In the case where a cred- itor receives from the principal debtor payment of interest in ad- vance on a past due note an agreement to give time is necessarily implied and the creditor thereby debars himself in the meantime of suing on the note, and the surety is therefore discharged, un- less the creditor can show mistake, or possibly an agreement that the right of suit should not be suspended.^^ Another classifica- tion of matters which will discharge a surety is as follows :*^* (1) Misrepresentation or concealment to induce his becoming surety. The contract is voidable from the beginning as between the surety and all parties privy to such misrepresentation or con- cealment ;^" if a principal signed under duress, the holder guilty of the duress could not enforce the obligation against a surety.*^" (2) Diversion of the instrument from the agreed purpose. As where accommodation paper is signed that it shall be used for a particular purpose and diversion in its use operates a discharge IS Broadway Sav. Bank v. Wheat. 554 ; Galbraith v. Fullerton, Schmucker, 7 Mo. App. 171; Glous- 53 111. 126; Muirhead v. Kirkpat- ter Bank v. Worcester, 10 Pick. rick, 9 Harris 237. 528. ^** Daniel on Negotiable Instru- i« Melick V. First Nat. Bank, 52 ments. la. 94. sibLe^ls ^ Brown, 89 Ga. 115, 20 Dillon V. Russell, 5 Neb. 484; 14 S. E. 881. Kirkpatrick v. Hawke, 80 111. 122. 2io Griffith v. Sitgravcs, 90 Pa. St. 21 McLemore v. Powell, 12 161. § 227 SURETYSHIP AND GUARANTY. 275 of the accommodation party as to all other parties who have knowledge of such diversion.^^'' (3) Alteration. Any material variation in the instrument without the consent of the surety will discharge him.^^* (4) Payment. Thus payment by the parties primarily liable discharges parties secondarily liable as payment by the maker or acceptor discharges the drawer and in- dorsers ; and a tender of payment which the holder refuses to accept will discharge a surety .^^' (5) Release. A release of the acceptor or maker discharges the drawer and indorsers.*^' (6) Satisfaction. The holder's claim may be extinguished as to an indorser or drawer, and the debt not be satisfied, but if there is a satisfaction by one, it operates as to all.^^'' (7) Covenant not to sue a prior party. This discharges the surety because it disables him from suing should he pay the debt. (8) Parting with security for the debt. Thus if any collateral security which the creditor held be released, or a judgment lien given up or a levy withdrawn, the surety is discharged.^^' (9) Agreement to indulge prior party by extension of time or forbearance of suit. The weight of authority seems to be against this last proposi- tion.*^' It is held by the weight of authority that the plea of fraud or misrepresentation will not avail to discharge a guarantor or surety as against a bona fide holder. The surety or guarantor is discharged if the holder surrenders the collateral securities to the principal or any other party to the paper ;*^ if the holder enters into a binding contract for the extension of time they are discharged.*^ Under the principle of subrogation, the guarantor or surety has a vested interest in the collateral security, which can not be jeopardized or destroyed without his discharge from his liability. The agreement for an extension of the time of payment in order to be a discharge must not only be based upon a valuable executed consideration of some sort, but the agree- ment must be absolute and for an extension of payment for a definite period of time.*^ 21" Haworth v. Crosby, 120 Iowa 21" Story on Note, § 403. 612. 94 N. W. 1098. 2li state Bank of Lock Haven v. 2ie Stutts V. Strayer, 60 Ohio. St. Smith, 155 N. Y. 185, 49 N. E. 680. 384, 54 N. E. 368, 71 Am. St. Rep. 2ij Wolstenhohne v. Smith, 34 723. Utah 300, 97 Pac. 329. 21' Hudson Bros. Commission Co. ** Muirhead v. Kirkpatrick, supra. V. Glencoe Sand and Gravel Co., ^speHo^vs v. Prentiss, 3 Denio 140 Mo. 103, 41 S. W. 450, 62 Am. 512. See also Fanning v. Murphy, St. Rep. 722. 126 Wis. 538. 105 N. W. 1056, 4 2i9 Montgomery v. Sayre, 100 Cal. L. R. A. (N. S.) 666. 182, 34 Pac. 646, 38 Am. St. Rep. 24 Norris v. Cumming, 2 Rand. 271. 323 ; Smith v. Sheldon, 35 Mich. 42. 276 NEGOTIABLE INSTRUMENTS. § 227a It has been held, however, that payment of interest in advance on a past due note operates to extend the time of payment and releases the sureties.^* § 227a. Contribution between sureties. The right to con- tribution arises out of an implied promise amongst co-sureties to share equally the burdens of co-suretyship,^^ and, therefore, does not exist where there is an express understanding to the contrary.^* If one co-surety be required to pay the whole debt, the others are bound to contribute in equal proportions, and the co-surety may recover of the others their aliquot shares.*'^ The liability of co-sureties to each other for contribution is not joint but sev- eral. ^^ The right of contribution arises between co-sureties though the same debt be secured by different instruments, executed by different sureties ; and though one portion of the debt be secured by one instrument, and one portion by another ; and even though the surety demanding contribution did not at the time of the contract know that he had any co-sureties.^ Where the debt is paid by several sureties in equal propor- tions, the equities between them as co-sureties cease, and each becomes an independent creditor of the principal for the amount he may have paid ; so that if one of them subsequently re- ceived indemnity from the principal for his own debt, the others are not entitled to participate therein, such indemnity not pro- ceeding from securities held by the surety or creditor previous to the payment of the debt, although the general rule is that a co-surety is entitled to participate in any indemnity which any of his co-sureties may obtain from the principal, directly or in- directly.^'' The co-surety, in order to maintain his suit for contribution, must have made payment under a legal and fixed obligation, but not necessarily under compulsion of suit or legal process.^* One of two co-sureties on a note paid the note at maturity to a holder in due course and sued his co-surety for contribution 24aMatchett v. Winona, 113 N. 29 Craythorn v. Swinburne, 14 E. 1. Ves. 169; McBride v. Potter Lovell 25 Hedges v. Mehring, — Ind. Co., 169 Mass. 7, 47 N. E. 242, 61 App. — . 115 N. E. 433. Am. St. Rep. 265. 2« Chappell V. McKeough, 21 Colo. 30 joUe y. Boeckeler, 12 Mo. App. 277, 40 Pac. 769. 55. 27 Caldwell v. Hurley. 41 Wash. 31 Nixon v. Beard. Ill Ind. 140; 296, 83 Pac. 318. Afarch v. Barnet, 114 Cal. 375, 46 28VOSS V. Lewis, 126 Ind. 155, 25 Pac. 152. N. E. 892. §227a SURETYSHIP AND GUARANTY. 277 who pleaded failure of consideration between the principal maker and the payee, but this was held to be no defense to his claim for contribution.^ To give credit to a note, A and B agreed to become accom- modation co-makers on a note payable to C ; A signed as a co-maker and there being no more room on the face of the note, B wrote his name on the back and no notice of dishonor of the note was given to B. C sued and recovered of A, and A sued B for contribution and recovered, oral evidence being admitted to show that they were co-sureties.^* A surety indorser who pays the note can not recover contribu- tion from other indorsing sureties without showing presentment and notice of dishonor.*'* While the drawer and indorsers of a bill are sureties of the acceptor as to the holder of said bill, they are not as between themselves co-sureties, liable for contribution to each other in the event that any one should pay the amount for the acceptor ; for each prior party is a principal as between himself and each sub- sequent party. 32 Cummins v. Line, 43 Okla. 575, 34 Bennett v. Kistler, 163 K. Y. 143 Pac. 672. Supp. 555. 33 Hunter v. Harris, 63 Ore. 505, 127 Pac. 786. CHAPTER XXI— A. NEGOTIABLE INSTRUMENTS WITH COLLATERAL SECURITY. 8 227b. Meaning of term collateral security. 227c. Form oi promissory note with collateral security. 227d. Holder of collateral security a holder for value — when transfer is for debt cre- ated at time of transfer. 227e. Holder of collateral security a holder for value — when transfer is for a pre-exist- ing debt. 227f. Holder of collateral security a holder for value — when transfer is as collateral for a debt not yet due. 227g. Presumption as to owner- ship. 227h. Whether or not note secured by collateral is negotiable. 227i. Whether or not collateral note or bill is negotiable. 227j. Effect of agreement for de- lay. 227k. Provision for deposit of ad- ditional collateral. 2271. Proviso in note authorizing sale of collaterals. 227m. What amounts to payment. 227n. In some jurisdictions by statute, the surrender of collateral discharges in- dorser. § 227o. Holder receiving collateral not required to proceed upon same before suing in- dorser. 227p. Collateral security must be exhibited. 227q. Right of maker to claim a defense because holder has collateral security. 227r. Amount of recovery on col- lateral security. 227s. Rights of indorsee as to stip- ulations in collateral note. 227t. Whether surrender of col- lateral discharges surety. 227u. Whether surrender of col- lateral discharges guaran- tor. 227v. Effect upon necessity of presentment, protest, and notice as to drawer or in- dorser when they are in possession of security. 227w. Accommodation paper as collateral security. 227x. Collateral released or lost. 227y. Miscellaneous. 227z. Form of guaranty oi col- lateral note. 227aa. Form of note with trans- fer of account. § 227b. Meaning of term collateral security. Collateral se- curity in its broad sense means any security in addition to the original obligation or security.^ Accepted bills of exchange^ and promissory notes^ may be held as collateral security; they may 3 Wright v. Ross, 36 Calif. 414; Polhemus v. Prudential Realty Cor- poration, 74 N. J. L. 570, 67 Atl. 303. * Schnitzler v. Wichita Fourth National Bank, 1 Kan. App. 674, 42 Pac. 496. ^ Cornwell v. Baldwin's Bank, 12 N. Y. App. Div. 227, 43 N. Y. Supp. 77L 278 § 227b WITH COLLATERAL SECURITY. 279 be given to secure the payment of another bill or note being an additional obligation, that is, a separate obligation attached to another obligation to guarantee its payment * As applied to the law of negotiable instruments collateral security in its perfect state is said to be a separate obligation, as the negotiable bill of exchange or promissory note of a third person, or other repre- sentative of value, indorsed, where necessary, and dehvered by a debtor to his creditor, to secure the payment of his own obli- gation, represented by an independent instrument.'* Collateral security is a concurrent security to the holder of the original obligation whether antecedent or newly created and is designed only to increase the means of the holder to realize the principal debt which it is given to secure.^ It has been stated that the use of the term "collateral security" is intended to express, that it is not received in payment of the principal debt, and that it is not an additional right to which the creditor is absolutely en- titled.'^ Thus, collateral security is a separate obligation, as the nego- tiable bill of exchange or promissory note of a third person, delivered by a debtor to his creditor to secure the payment of his own obligation represented by an independent instrument as a bill of exchange or promissory note;^ it is security for the ful- fillment of a pecuniary obligation or payment of money in addi- tion to the principal security; the collateral security stands with the principal promise as a cumulative means for securing the payment of the obligation -^ it is subsidiary to the principal debt — running parallel with it — collateral to it — and when collected, is to go to the credit of the principal debt ; or if the principal debt be paid ofif, the debtor is usually entitled to a restoration of the collateral security.^® Interpreted in the terms of negotiable instruments, a nego- tiable bill or note given as collateral security to another nego- tiable bill or note, known as the principal obligation, is concur- rent security for said principal bill or note and is designed to increase the means of the holder of said principal bill or note to realize on said bill or note which it is given to secure ; it is sub- 4 Butler V. Rockwell, 14 Colo. 125, 57 Fed. 107, 110, 9 U. S. App. 203, 6 136, 23 P. 462 ; Schnitzler v. Wichita C. C. A. 683. Fourth National Bank, 1 Kan. App, * International Trust Company v. 674, 42 P. 496, 500. Union Cattle Co., 3 Wyo. 803, 804; 5 International Trust Company v. 31 Pac. 408, 19 L. R. A. 640. Union Cattle Company, 3 Wyo. 803. » Moffatt v. Corning, 14 Colo. 104, « Osborne v. Stringham, 4 S. D. 123, 24 Pac. 7. 593, 598, 57 N. W. 776. lo Munn v. McDonald, 10 Watts ''McCormick v. Falls City Bank, (Pa.) 270, 273; McCormick v. Falls City Bank, 57 Fed. 107. 280 NEGOTIABLE INSTRUMENTS. § 227c sidiary to said principal bill or note, that is, collateral to it and when collected is to go to the payment of said principal bill or note. § 227c. Form of promissory note with collateral security. The following is a form of promissory note with collateral security : $ No Due INDIANAPOLIS, IND days after date promise to pay to the order of the CITY TRUST BANK of Indianapolis, Indiana. Dollars, Negotiable and Payable at the office of the CITY TRUST BANK of Indianapolis, With five per cent. Attorney's fees upon the principal of this note. Value received, without any relief whatever from Valua- tion or Appraisement laws of the State of Indiana. With interest at the rate of eight per cent, per annutn after maturity until paid. The drawers and endorsers severally waive presentment for payment, protest, notice of protest and notice of non-payment of this note. Address have transferred and delivered to the CITY TRUST BANK of Indianapolis, Ind., as Collateral Security for the pay- ment of this and of any other liabilities of the undersigned to said payee, or assigns, due or to become due, or that may hereafter be contracted, the folloiving property, the value of which is Dollars, vis: And the Undersigned hereby gives the said Payee and Assigns authority to sell and to transfer and assign the said property, or any part thereof, or any substitutes therefor, and all additions thereto, on the maturity of the above note, or any time there- after, or before in the event of the said security depreciating in value, at any public or private sale without advertising the .■ante, or demanding payment or giving notice, with the right lo said payee and assigns themselves to be the purchasers, when sale is made at any broker's board or public sale. And, after ■ Jeducting all costs and expenses to apply the residue to the •Kiyment of any, either or all liabilities as aforesaid, as said ■ayee or assignee shall elect, returning the overplus to the under- §§ 227d-227e with collateral security. 281 signed, and in case the proceeds of the sale of said property shall not cover the principal, interest and expenses, the undersigned en- gages to pay the deficiency forthwith after such sale, with legal interest. § 227d. Holder of collateral security a holder for value — When transfer is for debt created at time of transfer. The holder of a negotiable instrument as collateral security for a debt contracted at the time of the transfer is a bona fide holder for value, provided the bill or note transferred as collateral secur- ity is itself not overdue at the time, thus the indorsee of a col- lateral instrument executed by a third party is a holder for value, if said instrument is indorsed as collateral security for a debt contracted at the time of such indorsement ; this is true whether the bill or note of said third party is payable to order or is pay- able to bearer. But in no case, however, should the collateral instrument be overdue at the time of its transfer.** A creditor who receives the bill or note of a third party from his debtor as collateral security for his debt is entitled to the full protection of a bona fide holder for value, free from all equi- ties which might have been pleaded between the original parties.*^ § 227e. Holder of collateral security a holder for value — When transfer is for a pre-existing debt. Prior to the adoption of the Negotiable Instruments Law in the various jurisdictions there was much conflict of authority as to whether one who takes a note merely as collateral security for a pre-existing debt is a holder for value. Since the adoption of the Law such holder is generally regarded as a holder for value.*^ Under the Wisconsin negotiable instruments law, however, "the indorsement or delivery of negotiable paper as collateral security for a pre-existing debt, without other consideration, and not in pursuance of an agreement at the time of delivery by the maker, does not constitute value."^'* § 227f. Holder of collateral security a holder for value- When transfer is as collateral for a debt not yet due. If the debt is not due and the collateral bill or note is indorsed as ** Texas Banking Co. v. Turnley, 13 Melton v. Pensaloca Bank & 61 Tex. 369; Best v. Crall, 23 Kan. Trust Co., 190 Fed. 126, 111 C. C. 482; Miller v. Boykin, 70 Ala. 476. A. 166; Voss v. Chamberlain, 139 12 Bank of Commerce v. Wright, Iowa 569, 117 N. W. 269, 19 L. R. 63 Ark. 604, 40 S. W. 81. Contra, A. (N. S.) 106, 130 A. St. Rep. 331. Thompson v. Maddux, 117 Ala. 468, ^^Neg. Inst. Law (Wis.), §§ 23 So. 157, 1675-71, 282 NEGOTIABLE INSTRUMENTS. §§ 227g-227h security and there is an agreement for delay until the collateral matures, such agreement constitutes a consideration and makes the holder a holder for value. But if the debt is due and there is no agreement for delay, the holder will not be protected against equities.^'* § 227g. Presumption as to ownership. If the collateral nego- tiable instrument is transferable by delivery, that is, by being payable to bearer or having a blank indorsement, the holder is prima facie proprietor and owner. But if it is payable to order and unindorsed, the holder has only the equitable title and cannot claim the rights of an indorsee.-^® § 227h. Whether or not note secured by collateral is nego- tiable. A promissory note M^hich contains a statement to the effect that the maker has deposited collateral security for its payment does not make it non-negotiable ; although it may appear on the face of the note that its payment is secured by collateral consisting of personal property or a mortgage on real property, yet if otherwise in proper form, it is negotiable.-^'^ And a note is negotiable which contains a recital that on non-payment, the holder may sell the collateral and apply the proceeds to "pay- ment and necessary charges." So a stipulation in a note whereby the legal title to the property for which it was given, as security for payment, is in the holder of the collateral, has been held not to make the note non-negotiable ;** and also the negotiability of a note made payable to a bank is not affected by a stipula- tion therein authorizing the bank to appropriate to the payment of the note any money that the maker may have in the bank,^® and it has been held that a stipulation in a note payable on de- mand, giving the bank power to sell the collateral before the maturity of the note, in the event the securities depreciate in value, does not change the promise to pay "on demand" so as to make the note non-negotiable. 20 15 Bone V. Tharp, 63 Iowa 224. ter, 98 Ala. 602 14 So. Rep. 545, 39 1* Bank of Chadron v. Anderson, Am. St. Rep. 88; Heard v. Dubuque 6 Wyo. 520, 48 Pac. 197. Co. Bank, 8 Neb. 10, 30 Am. Rep. 1'' Valley National Bank v. Crow- 811; Third National Bank v. Bow- ell, 148 Pa. St. 284. 23 Atl. Rep. man-Spring Co., 50 App. Div. 66. 64 1068; Farmer v. First National N. Y. Supp. 410. Bank of Malvern, 89 Ark. 132, 115 i'' Louisville Banking Co. v. Grav, S. W. 1141, 131 A. S. R. 79; Dor- 123 Ala. 251, 26 So. 205, 82 A. S. R. sey V. Wolff, 142 111. 589, 32 N. E. 120; Louisville Banking Co. v. 495, 34 A. S. R. 99, 18 L. R. A. 428 ; Howard, 123 Ala. 380, 26 So. 207. Albertson v. Laughlin, 173 Pa. St. 82 A. S. R. 126. 525, 34 Atl. 216, 51 A. S. R. 177, 20 prinden v. Muskegon Savings Ann. Cas. 1912D 9 note. Bank (Mich.), 140 N. W. Rep. 549. 18 First National Bank v. Slaugh- § 227i WITH COLLATERAL SECURITY. 283 A Statement that the collateral security has been deposited for the performance of the promise contained in the note has been held not to affect its negotiability ^^ but, a stipulation in a note that the title to property for which the note is given shall re- main in the payee, and he shall have the right to declare the money due and take possession of the property whenever he may deem himself insecure, "even before the maturity of the note" renders the note non-negotiable -^^ so, also a stipulation that the payee may sell certain warehouse receipts given as collateral, and if they depreciate in value, may sell them before the in- strument would otherwise become due makes the note non-nego- tiable because such alternative introduces elements of uncer- tainty.^^ And a promissory note is not certain as to terms and there- fore non-negotiable which contains an agreement to pay a sum certain as the purchase price o^ property sold, with an option on the part of the payee to take possession of the property in case of default in payment;** and if a mortgage note incorporates by reference provisions of the mortgage requiring something to be done in addition to the payment of money it is non-nego- tiable.25 § 227i. Whether or not collateral note or bill is negotiable. Securities given as collateral to negotiable paper are held in most jurisdictions to partake of the' negotiability of the instrument secured to the exclusion of defenses by the maker as against bona fide purchasers of the note and security ;-^ in some jurisdictions, however, a different rule maintains,^'' and notes which are them- selves given as collateral security are held non-negotiable.*^ The effect on the negotiabih'ty of a note of a reference therein to another instrument, collateral thereto, securing it, often de- pends on whether the note and security are to be construed to- gether.2» 21 Wise V. Charlton, 4 A. & E. 450; Craft v. Buiister, 9 Wis. 503: 486; Fancourt v. Thorne, 9 Q. B. Hamilton v. Fowler, 99 Fed. 18. 40 312. C. C. A. 47 ; Thompson v. Maddux. 22Kimpton V. Studebaker Broth- 117 Ala. 468, 23 So. 157. ers Co., 14 Idaho 552, 94 Pac. 1039, 27 Baily v. Smith, 14 Ohio St. 125 Am. St. Rep. 185. 396. 84 Am. Dec. 385 ; Watkins v. 23 Continental National Bank v. Gocssler, 65 Minn. 118, 67 N. W. Wells, 72> Wis. 332, 41 N. W. 409 ; 796 ; Butler v. Slocomb, Z2, La. Ann. Cushman v. Haynes, Z7 Mass. (20 170. 39 Am. Rep. 265. Pick.) 132. 28 Arnj^rican National Bank v. 24 Wright V. Traver, 73 Mich. 493, Sprague, 14 R. I. 410; Costelo v. 41 N. W. 517. 3 L. R. A. 50. Crowcll, 127 Mass. 293, 34 Am. Rep. 25 Bright V. Offield, 81 Wash. 443. 367. 2«Gabbert v. Schwartz, 69 Ind. 2932 l. R. A. (N. S.) 858, note. 284 NEGOTIABLE INSTRUMENTS. § 227j A memorandum on a note that the same was issued as collat- eral to A's draft accepted by B has been held to make the note non-negotiable because not payable at all events since payment of the draft would discharge the maker and indorsers of the note and render the note null and void ;^*' so also is a promissory note which states that it is to be held as collateral security for the payment of certain debts of a third person ;^^ and a statement that the note is "given as collateral security with agreement" has been held to make the note non-negotiable.^^ § 227j. Effect of agreement for delay. There is no exten- sion of a bill or note, so as to postpone suit or as to discharge indorsers or sureties, whether another bill or note, either of the maker or a third person, is taken merely as collateral secur- ity, and there is no agreement postponing the remedy, although indulgence may in fact be granted ;^^ it is otherwise, however, if there is an agreement for delay.^* If a bill, note or check taken as collateral security is payable at a future day to the original obligation, there arises an implica- tion of agreement for delay until its maturity. The holder may show, however, that it was agreed that there should be no delay, or that the remedy against the drawer or indorser was reserved \^'^ but when the debt is not yet due and the collateral instrument is indorsed as security with an agreement that there shall be a delay until the collateral shall mature, such agreement by the creditor constitutes a consideration and makes the indorsee a Holmes v. Porter, 39 Me. 157. J455 ®i Boyle v. Skinner, 19 Mo. 82. ssLaSalle Nat. Bank v. Tolu 62 Beach v. Peabody, 188 111. 75, Rock & Rye Co., 14 111. App. 141 ; 58 N. E. 679. Kraniger v. Peoples Bldg. Soc, 60 6* Nave v. First Natl. Bank, 87 Minn. 94, 61 N. W. 904. Ind. 204. 5» Prescott V Hixson, 22 Ind. *■* Southern L. Ins. & Trust Co. App. 139, 53 N. E. 391. v. Gray, 3 Fla. 262. §§ 300-301 EVIDENCE — PARTICULAR CHARACTERISTICS. 339 there is doubt zvhcther it is a bill or note, the holder may treat it as either at his election; (6) where a signature is so placed up- on the instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an in- dorser; (7) where an instrument containing the words 'I promise to pay' is signed by tzi'O or more persons they are deemed to be jointly and severally liable thereon/'^ This is the law generally. And the Negotiable Instruments Law provides as follows as to instruments executed before its passage and as to matters not provided for in the act : "The provisions of this act do not apply to negotiable instru- ments made and delivered prior to the passage hereof ."^^ "In any case not provided for in this act the rules of the laiv merchant shall govern."^"^ § 300. As to execution and delivery. The general rule of evidence is that the instrument is presumed to have been exe- cuted and delivered at the maker's residence^^ and at the time in- dicated by the date thereof.®" The possession of the instrument by the holder is presumptive evidence of delivery -^^ and the hold- er must prove the execution of the instrument 7^ execution may also be proved by circumstantial evidence.'^^ The fact that one person signed a note for another at his direction in his presence may be shown by parol evidence.''^ Parol evidence may be used to show that a note in the hands of the payee was not intended to be delivered/'* but it cannot be used to show that it was de- livered to him as an escrow.'^' § 301. As to acceptance of bills. The presumptions as to the acceptance of bills of exchange is that the acceptor knows the signature of the drawer,''® and that he (the acceptor) has sufficient *5 New. Ins. Law, § 17, where 27o, 25 So. 745 ; Hopkins v. Miller, all cases directly or indirectly bear- 17 N. J. Law 185. ing upon or citing the Law are '^^ Pastcne v. Pardini, 135 Cal. grouped. 431, 67 Pac. 681. «»Neg. Ins. Law, § 195, where ''i McRae v. Handeshell, 88 111. all cases directly or indirectly bear- App. 428. ing upon or citing the Law are '^^ Victor v. Swisky, 87 111. App. grouped. 583. C^Neg. Ins. Law. § 196, where 73 Morton v. Alurray, 176 111. 54, all cases directly or indirectly bear- 51 N. E. 767. ing upon or citing the Law are ''"* Scaife v. Byrd, 39 Ark. 568. grocped. 75 Garner v. Fite, 93 Ala. 405. 9 «8 McAuliff V. Reuter, 61 111. App. So. 367. 32 ; Strawberry Point Bank v. Lee, ^c U. S. v. Bank of Georgia, 10 117 Mich. 122, 75 N. W. 444. Wheat. 32,2,, 6 L. Ed. 334; White ^9 Ely Law Co. v. Hood. 121 Ala. v. Continental Natl. Bank, 64 N. Y. 316, 21 Am. Rep. 612. 340 NEGOTIABLE INSTRUMENTS. §302 funds of the drawer in his hands with which to meet the de- mand ;'''' however, evidence may be introduced to show the con- trary. If the acceptance is not plain and clear but is ambiguous the same may be explained by parol evidence.''** If there has been an oral acceptance of a bill the same may be shown by parol evidence.'^'* Where a person who has accepted a bill for accom- modation sues the drawer he must prove both the acceptance and the payment by him.^" But the fact that the acceptance was for the accommodation of the drawer cannot be shown by parol evi- dence as against the payee.** § 302. As to transfer. The presumption is that a transferee or holder has procured the instrument in good faith for value and without notice of equities.**^ The party alleging the want of good faith, value or notice has the burden of proof showing the same.** But where the instrument in its inception was obtained by fraud or upon an illegal consideration the burden of proof is upon the holder to show that he is a bona Ude purchaser.*'* The indorsee wdio sues upon a note and produces the instru- ment need not give other evidence of ownership to make out a prima facie case.*' A testator has been held to be the owner of an instrument where the payee's day book showed a transfer to the deceased.*® A transfer of a note may be proven by the payee's admission without proof of his signature.*'' All acts w^hich show a wilful failure of inquiry and gross neg- ligence in purchasing are admissible as tending to show bad faith on the part of the purchaser.** Evidence is admissible to show that an indorsee suing upon a note had notice that the payee usually loaned money at a usuri- '"' Turner v. Browder, 5 Bush. 83 Goodman v. Simonds, 20 How. 216; Trego v. Lowrey, 8 Neb. 238. 343. 15 L. Ed. 934; Credit Co. v. 78 Gallagher v. Black, 44 Me. 99: Home Mach. Co., 54 Conn. 357, 8 Laften & Rand Powder Co. v. Sin- Atl. 472. sheimer, 48 Md. 411. 30 Am. Rep. 84 Kniss v. Holbrook (Ind. App.). 472. 40 N. E. 1118; Galbraith v. Mc- 79 Pierce v. Kittridge, 115 Mass. Laughlin, 91 Iowa 399, 59 N. W. 374. 338. 80 Nichols v. Morgan, 9 La. Ann. 85 Dawson Town & Gas Co. v. 534. Woodhull, 67 Ind. 451. 14 C. C. A. 81 Noevak v. Excelsior Stone Co., 464. 78 111. 307. 86 Macomb v. Wilkinson, 83 82Leening v. Wise, 64 Cal. 410; Mich. 486, 47 N. W. 336. Forbes v. National Forge & Iron 87 McKown v. Mathes, 19 La. Co., 50 111. App. 503; Challiss v. (O. S.) 542. Woodburn, 2 Kans, App. 652, 43 88 Rowland v. Fowler, 47 Conn. Pac. 792. 347. § 303 EVIDENCE — PARTICULAR CHARACTERISTICS. 341 ous rate.^ The fact that the purchaser had knowledge of the fraudulent manner in which similar notes were procured by the payee may be shown by evidence as tending to show bad faith on the part of the purchaser.''* If the note was merely indorsed for collection®* or as collateral security®^ or for any particular pur- pose the same may be shown by parol evidence.**' § 303. As to conditions. If the conditions are written on the note, either at the bottom or on the margin, before delivery they are presumed to be a part of the original obligation .^'^ But if these conditions are in the form of a memorandum and con- tradictory in themselves they are deemed no part of the note.** If the conditions on the note are executed in one state and the note is payable in another state the presumption is that they were expressed with reference to the law of the state where the in- strument is payable.*® Where an instrument for the payment of money was delivered pursuant to an oral agreement that it should become binding only upon a future condition or contingency, parol evidence is admissible against the payee or holder with no- tice to show such agreement.** Where a bill of exchange was drawn for the purpose of canceling the drawer's funds on condi- tion that it should take effect only in case of an attachment such fact may be shown by parol evidence.*'' Parol evidence is admissi- ble to show that at the time of making a note, it was orally agreed that it should be payable from the proceeds of a mill and that if there were no proceeds it was to be returned and destroyed.*^ An agreement entered into at the time the note was executed, to the effect that the note should be returned upon a certain day if de- manded, may be shown by parol evidence.** But the general rule is that parol evidence is inadmissible to show that an instru- ment, absolute in its terms, was to be paid only on a condition or contingency.* Thus parol, evidence is not admissible to prove an 89Blackwell v. Wright, 27 Neb. 94 Way v. Batchelder, 129 Mass. 269, 43 N. W, 116, 20 Am. St. Rep. 301. 662. 95 Farmers Trust Co. v. Schen- »o Bowman v. Metzger, 27 Or. nit, 83 111. App. 267. 23, 39 Pac. 3, 44 Pac. 1090. »« Smith v. Mussetter, 58 Minn. »i Church V. Barlow, 9 Pick. 547. 159, 59 N. W. 995. See note 17 L. R. A. (N. S.) 838. 97 Stevens v. Parker, 7 Allen 361. 92 Stack V. Beach, 74 Ind. 571, 98 Roberts v. Greig, 15 Colo. App. 39 Am. Rep. 113. 378. 62 Pac. 574. 92a As to parol evidence to explain 99 McFarland v. Sikes, 54 Conn, indorsement. See note 4 A. L. R. 250, 7 Atl. 408. 764. 1 Brown v. Wiley, 20 How. 442, »3Edelen v. Worth, 69 Mo. App. 15 L. Ed. 965; Kempshall v. Ved- 124. der, 79 111. App. 368. As to ad- 342 NEGOTIABLE INSTRUMENTS. §§304-305 oral agreement entered into contemporaneous with a note, pro- viding that the note which is absolute and payable at a time cer- tain, was not to be paid if certain land was not paid for;^ neither can it be shown that a parol agreement providing that a note was not to be operative or collected until certain other securities for the same debt had been exhausted.^ But if the conditions of the note or other obligation for money have been reduced to writ- ing contemporaneously with the instrument, such writing will be admissible as evidence as being part of the same contract.* In an action by the indorsee of a note, which is negotiable in form, against the maker, an oral agreement between the maker and payee that the note was not to be negotiated cannot be shown.** § 304. As to mistake. The burden of proving that there is a mistake in an instrument is on the party alleging the mistake,® but this, in general, can only be proved as between the original parties, or those having notice. Parol evidence may be introduced to show a mistake between the parties upon an instrument in settlement, or to show the amount of actual indebtedness upon a note held by written agree- ment as collateral security for the balance due on settlement.'^ § 305. As to fraud and duress. Parol evidence may be in- troduced in a proper case to show that the execution or indorse- ment of a note was obtained through fraud or misrepresenta- tions f but in order to relieve the maker it must be clearly estab- lished. The defense of fraud or duress can be established by a mere preponderance of evidence.^ Any evidence which will tend in any manner to establish a defense of fraud or duress is ad- missible.** Fraud in obtaining a negotiable instrument may be established by the circumstantial evidence tending to prove the same.-^* Where relief is sought in equity for alleged fraud or duress in procuring a negotiable instrument the same may be shown by parol evidence.*^ But parol evidence is not admissible missibility of parol evidence of con- App. 166, 178 111. 182, 52 N. E. 957; dition to vary or contradict, see note Stout v. Judd, 10 Kans. App. 579, 3 L. R. A. 363. 63 Pac. 662. 2 Gliddens v. Harrison, 59 Ala. ^ Sherwood v. First Natl. Bank, 481. 17 III. App. 591; Rossiter v. Lae- 3 Fisher v. Briscoe, 10 Mont. 124, ber, 18 Mont. 372, 45 Pac. 560. 25 Pac. 30. 10 Maples v. Browne, 48 Pa. St. 4Gerrish v. Glines, 50 N. H. 9; 458; Behl v. Schuett, 104 Wis. 76, Munro v. King, 30 Col. 238. 80 N. W. 73. s McSherry v. Brooks, 46 Md. n Maxson v. Llewelyn, 122 Cal. 103. 195, 54 Pac. 732. ® Sheby v. Brooks, 114 -Mich. 11. 12 pjt^maurice v. Mosier, 116 ''Thomas v. Thomas. 7 Wis. 476. Ind. 563. 16 N. E. 175, 19 N. E. 8 Blake v. State Bank, 78 111. 180, 9 Am. St. Rep. 854. §§ 306-308 EVIDENCE — PARTICULAR CHARACTERISTICS. 343 to show a fraudulent promise to surrender a note or bill." Pay- ment may be proven by a preponderance of evidence and any evidence is admissible which tends to corroborate or rebut a pre- sumption of payment. Parol evidence may be introduced to ex- plain or contradict a receipt of payment. Parol evidence can be used to show that indorsements on a note were for one and the same sum. § 306. Usury. It is not necessary to establish usury by di" rect evidence, but facts and circumstances which will tend to establish usury may be proved. The burden of proving usury is upon the party setting it up as a defense and a mere prepon- derance of the evidence will establish usury. Parol evidence may be admitted to show an agreement for usurious interest, and to prove that it was paid. § 307. As to payment and discharge. The possession of a note by the payee is prima facie evidence of non-payment*"* while the possession of the instrument by the maker creates a rebut- table presumption of payment.-^^ The presumption is that a note or other instrument has been paid when due.^* If there is no evidence to the contrary the presumption is in some jurisdictions that the taking of a negotiable instrument for a debt is a payment of the debt.*'' The presumption as to a check is that it is in payment of money due rather than for a loan.*® Although the language of a check imports full payment, it is only prima facie, and not conclusive evidence of that fact.*® The person having possession of a negotiable instrument is prima facie entitled to receive payment,^® and anyone alleging payment to a person who is not in possession of the instrument must also show that this person was authorized to receive pay- ment.** § 308. As to presentment and demand. Parol evidence is admissible to prove demand,^^ to show an agreement for demand at a particular place*^ and to show a waiver of demand.*^ ^^3 Henderson v. Thomson, 52 Ga. '^^ Yates v. Shepardson, 39 Wis. 149. 173. 14 Pastene v. Pardini, 135 Cal. *® Greer v. Laws, 56 Ark. 37, 18 432, 67 Pac. 681 ; Ritter v. Schenk, S. W. 1038. 101 111. 387. 20Pau]man v. Claycomb, 75 Ind. 15 Lipscomb v. Le Lemos, 68 Ala. 64 ; Whelan v. Reilly, 61 Mo. 565. 592; Callahan v. Bank of Ky., 82 ^i Hall v. Smith, 3 Kans. App. Ky. 231. 685, 44 Pac. 908; Loy v. Hovey i« Richardson v. Cambridge, 2 (Neb.), 89 N. W. 998. Allen 118, 79 Am. Dec. 767. -^ Hunt v. ^felbee. 7 N. Y. 266. 17 Bunker v. Barron, 79 Me. 62, ^^ Meyer v. Hibsher, 47 N. Y. 265. 8 Atl. 253, 1 Am. St. Rep. 282. ^* Porter v. Kimball, 53 Barb. 467. 344 NEGOTIABLE INSTRUMENTS. §§ 309-310 A note payable at a bank, which remains there, is presumed to have been presented there for payment when due,^'* and the casKTer of the bank is presumed to have done his duty to be at the bank to receive payment during business hours of the last day of payment.^® It has been held sufficient evidence of demand and refusal that no funds were provided to meet a note payable at a bank when properly presented when due, at the bank within banking hours.*^ It is presumed when a bill of exchange is drawn that it is drawn against funds sufficient to meet it; but it has been held that where there are no funds to meet it, then it is presumed that the drawer knew this and that he did not expect it to be paid, and that therefore it is not necessary to present and give notice, as he could not be injured by such a failure. The burden of explaining delay, or cause of failure to present when due, is on the holder. § 309. As to protest and notice. The question of notice of dishonor may be supplemented or explained by evidence of the notary in addition to his certificate of protest.^^ Notice of pro- test, however, may be proved by any other competent evidence.*® In case of a foreign bill of exchange it has been held that no evi- dence can be given of the protest for non-acceptance without producing the protest itself or showing that both the original and the books are lost.^" The certificate of protest may be contra- dicted and a waiver of notice may be shown by parol.^* § 310. Bills and notes as evidences. If the signature to the instrument is not properly denied a bill or note is admissible in evidence without proof of the signature.^* A note ofifered in evi- dence as being one secured by a mortgage or deed of trust may be identified by parol evidence.^^ When the action is upon an old note which has been renewed, the renewed note must be pro- duced in court, if not previously delivered.^'* A suit cannot be maintained upon negotiable instruments which have been exe- cuted in lieu of outstanding negotiable notes of the same maker 25 Dykman v. Northridge, 1 App. 31 Applegarth v. Abbott, 64 Cal. Div. 26, 36 N. Y. Supp. 962. 459, 2 Pac. 43. 26 Folger v. Chase, 18 Pick. 3^ Richardson v. Comstock, 21 (Mass.) 63. Ark. 69; Talbott v. Kennedy, 76 27 Gillett V. Averill, 5 Denio Ind. 282. (N. Y.) 85. 33Kiser v. Carrollton D. G. Co., 28 Bliss V. Paine, 11 Mich. 92; 96 Ga. 76, 22 S. E. 303; Cutter v. Wetherall v. Clagett, 28 Md. 465. Steele, 93 Mich. 204, 53 N. W. 521. 29 Eddy V. Peterson, 22 111. 535. 34 Miller v. Woods, 21 Ohio St. 30 Ky. Com. Bank v. Barksdale, 485, 5 Am. Rep. 71. 36 Mo. 563. §311 EVIDENCE — PARTICULAR CHARACTERISTICS. 345 unless these outstanding obligations are produced and surren- dered.^ At the hearing of a suit upon any negotiable instru- ment the instrument must be produced or there must be an excuse for its non-production.*® § 311. As to meaning of certain terms. As to the meaning of certain terms the Negotiable Instruments Law makes the fol- lowing provisions: "Action" includes counterclaim and set-off. "Bank" includes any person or association of persons carrying on the business of banking, whether incorporated or not. "Bill" means bill of exchange, and "note" means negotiable promissory note. "Holder" means the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. "Instrument" means negotiable instrument. "Issue" means the first delivery of the instrument, complete in form, to a person who takes it as a holder. "Person" includes a body of persons, whether incorporated or not. "Written" includes printed, and "writing" includes print.^"^ 35 Garner v. Cohen, 99 Ga. 78, 24 3' Neg. Ins. Law, § 191, where S. E. 851. all cases directly or indirectly bear- 36 O'Neil V. O'Neil, 123 111. 361, ing upon or citing the Law are 14 N. E. 844. grouped. CHAPTER XXVII. TRIAL PROCEDURE ON BILL, NOTE OR CHECK. § 312. Essentials of procedure. § 318. Evidence of plaintiff 313. Common law procedure. 319. Evidence of defendant. 314. Code procedure. 320. The argument. 315. Steps in a jury trial. 321. The charge, verdict and 316. Impaneling the jury. judgment. 317. Opening statements. § 312, Essentials of procedure. In a proceeding on a note, bill or check, the following steps are essential whether the pro- cedure is the common law or the code : (a) An application to the courts for recovery on the note, bill or check. (b) The process. (c) Appearance of the adverse party, (d) Readings, (ej A trial. (f) A decision. (g) Its enforcement.* § 313. Common law procedure. When the procedure is un- der common law, the following steps appear: (a) Suit is commenced by the filing of a praecipe and the issuing of an original writ. (b) The defendant appears either in person or by attorney. (c) The pleadings are as follows : (1) The plaintiff's declaration on the bill, note or check, (2) The defendant's plea, or when he wishes to raise a question of law, his demurrer. (3) The plaintifif's replication to the plea. (4) The defendant's rejoinder. (5) The plaintiff's surrejoinder. (6) The defendant's rebutter. (7) The plaintiff's surrebutter. (d) The trial is usually by jury. (e) The decision of the jury is called a verdict, upon which the court renders a judgment. (f) The judgment is enforced by means of an execution.* 1 Perry on Common Law^ Plead- ^ Perry on Common Law Plead- ing, Chapt. vii ; Smith's Elemen- ing, Chapt. vii ; Smith's Elemen- tary Law. tary Law. 346 \ §§ 314-316 TRIAL PROCEDURE. 347 § 314. Code procedure.^ When the procedure is under a code, the following steps usually occur : (a) Suit is commenced by filing a complaint or petition on the bill, note or check. (b) The writ by which the defendant is notified that a suit has been filed against him on the bill, note or check is usually called a summons. (c) The defendant may appear either in person or by at- torney. (d) The only pleadings usually allowed are: (1) The complaint or petition on the bill, note or check. (2) The answer or demurrer of the defendant to the com- plaint or petition. (3) The reply of the plaintiff to the answer or demurrer to the answer. (4) The demurrer by defendant to the reply. (e) The trial may be with or without jury. (f) The court's decision may take the form of a judgment or a decree, according to whether the action is of a legal or equi- table nature. (g) If the action is legal in its nature the judgment is en- forced by execution ; if equitable, by contempt of court proceed- ings. § 315. Steps in a jury trial. For convenience a jury trial may be divided into seven different steps as follows : (a) Impaneling the jury. (b) Opening statements on behalf of plaintiff and defendant. (c) Evidence produced on behalf of plaintiff and defendant. (d) Argument on behalf of plaintiff and defendant. (e) Charge by the court to the jury. (f) Verdict of jury. (g) Judgment rendered by the court.'* §316, Impaneling the jury. The first step in the trial is the impaneling of the jury. Almost universally in the states the jury consists of 12 men."* These men should be disinterested in the matter in litigation and should be entirely impartial.'* Each party has the right to object to a certain person's sitting as a juror in his case, and, if proper reasons for the objection are given, the person so objected to cannot sit on the jury; this 3 Bliss on Code Pleading, Chapt. 2 Wis. 22 ; Cooley's Const. Lim. X, et seq; Smith's Elementary Law. (5th Ed.) 391. 3a Smith's Elementary Law. ^ Ensign v. Harney, IS Neb. 330, 4 Work V. State, 2 Ohio St. 296, 48 Am. Rep. 344; Melson v. Dick^ 59 Am. Dec. 671 ; Nerval v. Rice, son, 63 Ga. 683, 36 Am. Rep. 128. 348 NEGOTIABLE INSTRUMENTS. §§317-318 is called a challenge for cause.® It is customary for each party to be allowed to challenge from two to five persons perempto- rily as jurors without assigning cause.'^ After each party has made his challenges or had an opportunity to do so, those men remaining are sworn in as the jury to try the case. § 317. Opening statements. Ordinarily as the second step, each party gives an outline of what he proposes to prove in what is known as an opening statement of the case to the jury.® The plaintiff makes his statement first and then the defendant makes his.» §318. Evidence of plaintiff. Following this is the produc- tion of the testimony. In a proceeding on a promissory note, a bill of exchange or bank check some of the testimony exists in the form of documents, that is, in the form of written instru- ments and in such case the instruments themselves are intro- duced. Upon the bill, note or check being introduced in evi- dence the following six presumptions arise : (a) A presumption of consideration or that a consideration was given for it by the plaintiff.^® (b) A presumption that there was the necessary delivery.** (c) A presumption that all the terms of the instrument are stated therein.*^ (d) A presumption of title on a good consideration from th^ fact of possession.*^ (e) A presumption that the debt is unpaid; and*"* Barrett v. Long, 3 House of Rep. 653, 30 L. R. A. 286; Niblack Lords Cases 395, 415; Gilliam v. v. Champeny, 10 S. D. 165, 72 N. Brown, 43 Miss. 641 ; Loeffler v. W. 402. Keokuk etc. Co., 7 Mo. App. 785. ^^ McFarland v. Sikes, 54 Conn. 7 Hayes v. Missouri, 120 U. S. 68, 250, 7 Atl. 408, 1 Am. St. Rep. Ill ; 30 L. Ed. 578; O'Neil v. Lake Su- Schallehn v. Hubbard, 64 Kan. 601, perior Iron Co., 61 Mich. 560, 35 N. 68 Pac. 61 ; Woodford v. Dorwin, W. 162 ; Gulf etc. Rv. Co. v. Keith, 3 Vt. 82, 21 Am. Dec. 573. 74 Tex. 287, 11 S. W. 1117. 12 Hill v. Shields, 81 N. C. 250, SKley V. Healy, 127 N. Y. 555. 28 31 Am. Rep. 499; Rice v. Ragland, N. E. 593; Vawter v. Hultz, 112 10 Humph. (Tenn.) 545, 53 Am. Mo. 633, 20 S. W. 689; Elwell v. Dec. IZI ; Dwiggins v. Mercliants' Chamberlin, 31 N. Y. 611. Nat. Bank (Tex. Civ. App.), 27 S. » Elder v. Oliver, 30 Mo. App. W. 171. 575; Cortelyou v. Hiatt, Zd Neb. ^3 Borgess Invest. Co. v. Vetts, 584, 54 N. W. 964 ; Bates v. Forcht, 142 Vio. 560, 44 S. W. 754, 64 Am. 89 Mo. 121, 1 S. W. 120. St. Rep. 567; Middleton v. Griffith, 10 Perot V. Cooper, 17 Colo. 80, .57 N. J. L. 442, 31 Atl. 405, 51 Am. 28 Pac. 391. 31 Am. St. Rep. 258; St. Rep. 617; Smith v. Lawson, 18 Germania Bank v. Michand, 62 W. Va. 212, 41 Am. Rep. 688. Minn. 459, 65 N. W. 70, 54 Am. St. ^^ Sampson v. Fox, 109 Ala. 662. § 318 tSlAL PROCEDURE. 349 (f) If the indorsement is undated, a presumption arises that it was made before maturity.*^ These are well established principles. But proof of certain facts becomes necessary. It is necessary in the first instance to prove the signatures of all parties necessary to prove plaintiff's title.-^* This is usually done by witnesses, who after being sworn to testify to the truth, the whole truth, and nothing but the truth, are questioned with regard to what they know as to the signatures on the note, bill or check. The party producing the witness, or his attorney, first examines the witness, bringing out the testimony desired. This is called the "direct examination." The opposite party may then cross-examine the witness, asking him questions pertaining to the matter brought out on the direct examination. There is then usually a redirect examination, and usually a recross-examination is allowed. If the bill, note or check sued upon is governed by the law of some state other than the one in which the action is pending that law must be alleged and proved. It is a general principle that the courts of a state or country cannot take judicial notice of the laws of a foreign state or country ; and when such laws are sought to be appHed, they must be alleged and proved.-^'^ •When relied upon, they must be proved as facts,^^ otherwise it will be presumed that they are the same as the laws of the state in which suit is brought ; or what is the same in effect, when the laws of the foreign country are not put in proof as facts, the court will apply to the transaction in suit the laws of the state in which suit is brought.-*^ Thus the law as to the rate of dam- ages will be presumed to be the same where the bill is drawn in one country, and is sued on in another ;^® so it will be presumed where the law of the place where suit is brought authorizes an indorsee to sue before exhausting recourse against the maker,** 19 So. 896, 55 Am. St. Rep. 950; 377, 76 Am. St. Rep. 779. Note 67 Morehead Banking Co. v. Walker, L. R. A. 33 et seq. 121 N. C. 115, 28 S. E. 253. is Owen v. Boyle, 15 Me. 147, 32 1^ Snyder v. Riley, 6 Pa. St. 164, Am. Dec. 143 ; Nashua Savings 47 Am. Dec. 452; McDowell v. Bank v. Anglo-American Co., 189 Goldsmith, 6 Md. 319, 61 Am. Dec. U. S. 221, 47 L. Ed. 782. See notes, 305; Smith v. Lawson, 18 W. Va. 11 Am. Dec. 779 and 113 Am. St. 212, 41 Am. Rep. 688. Rep. 868. 16 Chafifee v. Taylor, 3 Allen 598; i» McBride v. The Farmers Bank, First Nat. Bank of Houghton v. 26 N. Y. 450; Crake v. Crake, 18 Robert, 41 Mich. 709. Ind. 156. 1^ Birmingham Water Works Co. 2® Kuenzi v. Elvers, 14 La. Ann. V. Hume, 121 Ala. 168, 77 Am. St. 391. Rep. 43; Murtey v. Allen, 71 Vt. 21 Beauer v. Briggs, 4 La. 467; Bernard v. Barry, 1 Gr. 388. 350 ■ NEGOTIABLE INSTRUMENTS. § 318 that the law of the place of the contract is the same ; and so, where by the law of the place where suit is brought a party sign- ing in a certain way is regarded as an indorser the foreign law will be presumed to be the same.** But where the question is one relating to the law merchant, which is of general applica- tion, as for instance, the number of days of grace, it will be presumed that they were fixed by the law merchant — the law merchant being regarded as part of the common law.** In case the instrument is one which must be protested in order for the plaintiff to recover then the fact of protest must be proved. In a proceeding by the holder against the drawer or indorser of a bill, or the indorser of a note, the obligation of the defend- ant being to pay in the event the party primarily liable does not, it is necessary to prove the default of such party unless the proof be in some manner waived or dispensed with.** One who re- ceives a bill or note is understood thereby to enter into an agree- ment with every other party, who would be entitled to bring an action on paying it, that he will present it in proper time to the drawee for acceptance,*'* when acceptance is necessary, and to the acceptor for payment, when the bill has matured;**' and to give notice in a reasonable time, and without delay, to every such person, of a failure in the attempt to procure a proper accept- ance or payment.*^ Thus in an action by the payee of a bill, or the indorsee of a bill or note, against the drawer or indorser, it is necessary to prove a presentment to the drawee for payment. Presentment for payment as well as notice of dishonor may be proved by entries in the books of a deceased notary,*^, clerk*® messenger of a bank, or other person, whose duty or ordinary course of business it was to make such entries. In an action against the drawer or indorser of a foreign bill (and even of an inland bill, if a protest is alleged) the plaintiff must prove dishonor, a protest for non-acceptance or non-pay- 22 Dubois V. Mason, 127 Mass. Z7. 68 N. W. 677, 61 Am. St. Rep. 230, 23 Reed V. Wilson, 12 Va. 29; Lu- 35 L. R. A. 381 ; Hamer v. Brain- cas V. Ladew, 28 Mo. 342. erd, 7 Utah 245, 26 Pac. 299, 12 24 Lockett V. Howze, 18 Ala. 613 ; L. R. A. 434. Rushworth v. Moore, Z6 N. H. 188 ; 27 Aldine Mfg. Co. v. Warner, 96 Crane v. Trudeau, 19 La. Ann. 307 ; Ga. 370, 23 S. E. 404 ; Stix v. Math- Mudd V. Harper, 1 Md. 110, 54 Am. ews, 63 Mo. 371 J Beale v. Par- Dec. 644. rish, 20 N. Y. 407, 75 Am. Dec. 114. 25Neg. Inst. Law. §§ 240, 241; 28 Homes v. Smith, 16 Me. 181; Schuchardt v. Hall, 36 Md. 590, 11 Bell v. Perkins (Peck), Tenn. 261, Am. Rep. 514; Sharpe v. Drew, 9 14 Am. Dec. 745; Wilmington Bank Ind. 281. V. Cooper, 1 Harr. (Del.) 10. 20 Leonard v. Olson, 99 la. 162, 29 Gawtry v. Doane, 51 N. Y. 84. § 319 TRIAL PROCEDURE. 351 ment. This is done by introducing the statement made out by the notary.^" The official seal of the notary attached to the certificate of protest is everywhere received as a sufficient prima facie proof of its authenticity. The courts take judicial notice of the seal, and it proves itself by its appearance upon the certificate. But it may be controverted as false, fictitious, or improperly an- nexed.^* §319. Evidence of defendant. After the plaintiff has pro- duced the testimony necessary to establish his case, the defend- ant then introduces his testimony. This testimony in defense on a bill, note or check, is governed by the rules as applied to ordinary contracts between the purchaser for value and prior parties. If the defense is a real defense the question is solely whether the defense does exist, and any evidence tending to prove such fact is admissible. If the real defense does exist, the plain- tiff cannot recover against one who has that defense.^^ Where it is a question of a personal defense, there are two classes of cases : 1. Where the defense shows lack of consideration, or release, or payment of a bill or note. 2, Where the defense shows fraud, duress, or illegality in the inception of the instrument. In the first class it is not so much the question of wrong doing as merely a question of lack or failure of consideration, and where there is a lack or failure of consideration, the first thing to be proved by the defendant is that the plaintiff had notice of the fact that there was a want of consideration or failure of con- sideration. He does not prove that there was a failure of con- sideration, but notice and after that he proves the facts of want or failure of consideration. In the other cases, that is, those of fraud or illegality, the defendant does not prove notice but proves the fraud or illegality, itself. And when the fraud or illegality is proved the presumption of notice arises without any proof of notice and the burden of proof is on the plaintiff to prove he did not have notice.^* When a plea of tender is made so Clough V. Holden, 115 Mo. 336, 32 As to real and personal de- 21 S. W. 1071, 37 Am. St. Rep. 393 ; fenses see supra, Chapts. 13 and 14. Rosson V. Carroll, 90 Tenn. 90, 16 33 Alabama Nat. Bank v. Halsey, S. W. 66, 12 L. R. A. 727 ; Kellam 109 Ala. 196, 19 So. 522 ; Wood- V. McKoon, 31 Hun (N. Y.) 519. ward v. Rodgers, 31 la. 342; Capi- 31 Pierce v. Indseth, 106 U. S. 546, to! etc. Co. v. Montpelier etc. Co., 27 L. Ed. 254; Nichols v. Webb, 8 (Vt. 1905), 59 Atl. 827. Wheat. 326; Bradley v. Northern Bank, 60 Ala, 258. 352 NEGOTIABLE INSTRUMENTS. §§ 320-321 it must be pleaded with a profert of the money.** To constitute a legal tender, money must have been offered and the offer must have been absolute and unconditional. The Negotiable Instruments Law provides: "Every holder is deemed primn facie to he a holder in due course ; but when it is shoum that the title of any person tvho has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course. But the last-men- tioned ride does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title/'^'' § 320. The argument. As the next step each party may in person or by his attorney, address the jury and the court in support of his side of the controversy. Usually the plaintiff makes the first address and in it he points out the evidence he has produced which shows or tends to show why he should re- cover on the bill, note or check. The defendant follows the plaintiff with his address or argument showing why from the evidence there should not be recovery by the plaintiff. After this the plaintiff has the right to close the discussion.** § 321. The charge, verdict and judgment. At the close of the argument, the judge instructs the jury on the law of the case,^* after which the jury retire and decide whether the plain- tiff or defendant is entitled to a verdict. Upon the verdict re- turned by the jury the court renders a judgment. 34 Caldwell v. Cassidy, 8 Cow. 34 Barb. (N. Y.) 198. But see Kent 271 ; Adams v. Hackensack Co., 15 v. Mason, 79 111. 540. Vroom 638. 36 Pottle v. Thomas, 12 Conn. 34a Neg. Inst. Law, § 59. 565 ; Wolf v. Troxell, 94 Mich. 573, 35 Pate V. Aurora First Nat. 54 N. W. 838 ; Galloway v. Hicks, Bank, 63 Ind. 254 ; Kenny v. Lynch, 26 Nebr. 531, 42 N. W. 709. 61 N. Y. 654; Slauson v. Englehart, PART III. NEGOTIABLE INSTRUMENTS LAW ANNOTATED INTRODUCTION. The Negotiable Instruments Law is the name given to the statute which contains within narrow compass all the funda- mental principles and essential definitions of the law of nego- tiable instruments or commercial paper. It provides one stand- ard for such instruments as to their formal requisites of negotia- bility; and it provides a uniform rule as to methods of their transfer, as to the rights of the holder and as to the liabilities of the parties. It is the result of a concerted effort to have the legislatures of the States to harmonize and make uniform the rules and principles governing the use of such instruments in the different states throughout the United States because it was realized that commercial paper does* over 90% of the work of paying for and effecting the exchange of interstate commerce. Such uniformity could not be secured without codification ; so this law is a codification of existing laws, that is, a codification of laws which were scattered through some ten thousand reported cases, and hundreds of statutory enactments. In other words, it is a codification of the common law of negotiable instruments clearly and concisely condensed into less than two hundred sec- tions and contained in less than thirty-five pages. In this law the disputed points and variant laws, whose discussion occupies so large a share of two and three volumed treatises on the sub- ject, are decided and harmonized. The law is in the main de- claratory in its effect but makes a few changes; it necessarily changes the law in some jurisdictions on points concerning which a conflict of laws has existed; but it may safely be said that there is not an important provision in the act which is not sup- ported by some well considered decision of an American court 353 354 NEGOTIABLE INSTRUMENTS. of high authority or by some American statute which has been tested and proved by experience. The easiest and best manner to have had such an uniform law throughout the United States would have been to have had the Congress of the United States to have enacted it as a Federal statute, but the Supreme Court of the United States in 1868, held that contracts (and, in consequence, negotiable instruments), be- tween the states, did not constitute interstate commerce. From this decision the lawyers have concurred in the view that a Fed- eral law regulating negotiable instruments, or commercial paper would be unconstitutional. Thus it became necessary in order to bring about uniformity that the different states should unite on the same law and enact it separately. Most of the continental countries have codified the law of negotiable instruments. The French code was enacted about a century ago, and no substantial alteration has been made in it by subsequent legislation. The German General Exchange Law was adopted in 1849, and slightly modified in 1869. Other con- tinental codes modeled upon one or the other of the above codes (but usually in later years modeled on the German code) have been adopted. In the common law countries the first attempt at a codifica- tion was a digest of the laws of bills of exchange by Judge Cham- bers, of England, published in 1878, after a review by him of over 2,500 cases then reported in the English courts dealing with the subject of bills of exchange. In 1880, the Institute of Bank- ers and the Associated Chambers of Commerce instructed Judge Chambers to prepare a bill on the subject. He did so, putting into a few words the results of the decisions of the courts for three hundred years. This bill was introduced in Parliament and adopted practically as presented. It has been in force since that time and is known as the ''English Bill of Exchange Act of 1882" and has thus operated successfully for forty years. It has been adopted by practically all of the various colonies and dependencies of the British Empire. In the United States there was, prior to the drafting of the Negotiable Instruments Law, a codification of the law in some states but there was nothing looking toward a codification for all the states of the Union. The earliest codification for an in- dividual state, in a strict sense, is found in the California Code of 1872. The history of the act looking to a uniformity of laws in all the states dates back to several years ago. Then, at the request of the American Bar Association and through its co-operation, acts INTRODUCTION. 355 were passed in many states providing for the appointment by the governor of "Commissions for the Promotion of Uniformity of Legislation in the United States." It was provided that these should meet in joint conference, frame and adopt statutes which they would recommend to their respective Legislatures for all of the states and thus endeavor to eliminate as much as possible the confusing conflict in the commonest principles and provisions of private law. At a conference of commissioners from nineteen states, held in 1895, a resolution was adopted requesting the committee on commercial laws to procure a draft of a bill- relat- ing to commercial paper, based on the English Bill of Exchange Act, and on such other sources of information as the committee might deem proper to consult and to prepare a codification of the law relating to bills and notes. The matter, as stated by Mr. John J. Crawford, was referred to a sub-committee consisting of Lyman D. Brewster, of Connecticut ; Henry C. Willcox, of New York, and Frank Bergen, of New Jersey ; and Mr. Craw- ford was employed by the sub-committee to draw the proposed law. In drafting this law when the decisions of the state courts were conflicting the rules of the Supreme Court of the United States were adopted and the decisions of that high tribunal were followed. When completed the draft was submitted to the sub- committee who printed it and sent copies to each member of the conference, and also -to many prominent lawyers and law pro- fessors and to several English judges and lawyers, with an invi- tation for suggestions and criticisms. The draft was submitted to the conference which met at Saratoga in August, 1896; and the commissioners who were in attendance, being twenty-seven in all, and representing fourteen different states, in a session of three days by the entire conference went over it section by sec- tion, and made amendments therein. The draft as thus amended was adopted by the conference and recommended for general enactment by the state Legislatures. It also met with the ap- proval of the American Bar Association, and in such form was unanimously recommended by said association to the Legislatures of the several states and territories of the Union for adoption. The law Is the result of two purposes ; the first and chief pur- pose was to produce uniformity in the laws of the different states upon this important subject, so that the citizens of each state might know the rules which would be applied to their notes, checks and other negotiable paper in every other state in which the law was enacted, since it was an absolute impossibility for the commercial purchaser in any state to know all the details affecting the negotiability of paper governed by the laws of all 356 NEGOTIABLE INSTRUMENTS. the Other states. The second purpose was to preserve the law as nearly as possible as it then existed. And it may be said prob- ably without question that in the enactment of this statute no essential feature of the law of negotiable instruments as there- tofore determined has been eliminated. While the bill is sim- ple and intelligible in its expression, great care was taken to pre- serve the use of words which had had repeated legal construc- tions and had become recognized terms in the law merchant. New York was the first state to enact the law. The law is now in force in all the states and territories of the Union except Georgia. The bill has been introduced annually in the Legisla- ture of Georgia for years but has failed to pass. Before the enactment of the law in any states the situation induced by conflicting decisions and statutes embarrassed busi- ness and interrupted the free circulation of commercial paper. What was- a promissory note in one State was a simple contract in another ; what was an indorsement in one jurisdiction was only an assignment in another ; in some States a note was not negotiable unless the words "Value received" were written in the body of the note, while in others such words were unneces- sary; some jurisdictions permitted exchange to be added while others held that such addition made the note non-negotiable ; days of grace were permitted in one State and not in another; what was a contract of an indorser in one State was a contract of a maker in another, or of a guarantor or maker in still another, as oral proof of the circumstances attending the making of the contract might determine ; and there were other similar conflicts. So long as trade and commerce were mainly confined to trans- actions between the citizens of a single State within its own borders, the State regulations operated fairly well and it did not matter materially that the laws of one State differed from those of another upon these subjects. But now the country has outgrown such conditions and in innumerable cases more business is done by the people or corporations of a State with the people of other States than with their own, and commercial paper is almost universally the medium of exchange in these transactions. As our commercial activity is ever expanding and as interstate commerce has assumed such vast proportions, the necessity be- comes imperative that the commercial currency of payment shall be uniform, and not variable, in its essential characteristics. The enactment of the law has tended to facilitate trade between the States, and make the transactions of business less complicated and more certain and sure, as whatever legislation tends to sustain credit helps commerce. The law of negotiable instruments INTRODUCTION. 357 affects all classes of merchants throughout the country since, as has been pointed out, negotiable instruments are the medmm for the payment and settlement of 90% of all trade transactions. The law has had the test of twenty-five years' experience and the testimony is all one way as to its efficiency. It should be realized that a statute, which has been adopted after due delibera- tion by so many legislative bodies and adopted by the Congress of the United States, must exercise a beneficial mfluence on all and be productive of good results. THE NEGOTIABLE INSTRUMENTS LAW. Below is given a list of the States and Territories where the Negotiable Instruments Law has been enacted : Alabama— Laws 1907, Chap. 722, in effect Jan. 1, 1908. Alaska — Laws 1913, Chap. 64, approved April 28, 1913. Arizona— Rev. Stat. 1901, p. 852, in effect Sept. 1, 1901. Arkansas— Acts 1913, No. 81, approved Feb. 21, 1913. California— Laws 1917, Chap. 751, p. 1531, in effect July 31, 1917. Colorado— Laws 1897, Chap. 64, approved April 20, 1897. Connecticut — Laws 1897, Chap. 74, approved April 5, 1897. Delaware — Laws of 1911, Chap. 191, approved April 4, 1911. District of Columbia— Laws U. S. 1899, in effect April 3, 1899. Florida— Laws 1897, Chap. 4524, approved June 1, 1897. Hawaii— Laws 1907, Act 89, in effect April 20, 1907. Idaho— Laws 1903, p. 380, in effect March 10, 1903. Illinois — Laws 1907, p. 403, approved June 5, 1907. Indiana— Acts 1913, Chap. 63, in effect April 30, 1913. Iowa — Laws 1902, Chap. 130, approved April 12, 1902. Kansas— Laws 1905, Chap. 310, in effect June 8, 1905. Kentucky — Laws 1904, Chap. 102, approved March 24, 1904. Louisiana — Laws 1904, Chap. 64, approved June 29, 1904. Maine — Laws 1917, Chap. 257, approved April 7, 1917. Maryland— Laws 1898, Chap. 119, approved March 29, 1898. Massachusetts — Laws 1898, Chap. 533, in effect Jan. 1, 1899. Michigan — Laws 1905, Chap. 265, approved June 16, 1905. Minnesota — Laws 1913, Chap. 272, in effect July 1, 1913. Mississippi — Laws 1916, Chap. 244, p. 355, in effect July 7, 1916. Missouri — Laws 1905, p. 243, approved April 10, 1905, in effect June 16, 1905. Montana— Laws 1903, Chap. 121, in effect March 7, 1903. Nebraska— Laws 1905, Chap. 83, in effect August 1, 1905. Nevada— Laws 1907, Chap. 62, in effect May 1, 1907. New Hampshire — Laws 1909, in effect January 1, 1910. New Jersey — Laws 1902, Chap. 184, p. 283, approved April 4, 1902. New Mexico — Laws 1907, Chap. 83, approved March 21, 1907. New York— Laws 1897, Chap. 612, became a law May 19, 1897. 358 NEGOTIABLE INSTRUiMENTS LAW. 359 North Carolina— Laws 1899, Chap. 7?>Z, in effect March 8, 1899. North Dakota — Laws 1899, Chap. 113, approved March 7, 1899. Oliio— Laws 1902, p. 162, in effect January 1, 1903. Oklahoma— Laws 1909, in effect June 10, 1909. Oregon — Laws 1899, p. 18, approved February 16, 1899. Pennsylvania — Laws 1901, No. 162, in effect September 2, 1901. Philippine Islands — Acts of Philippine Commission 1911, No. 2031, enacted Feb. 3, 1911, in effect 90 days after publication. Rhode Island— Laws 1899, Chap. 674, in effect July 1, 1899. South Carolina— Acts 1914, Act 396, p. 668 (in effect March, 1914?). South Dakota — Compiled Laws 1913, Chap. 279, approved March 4, 1913. Tennessee— Laws 1899, Chap. 94, in effect May 16, 1899. Texas — General Laws 1919, p. 190, in effect June 17, 1919. Utah— Laws 1899, Chap. 83, in effect July 1, 1899. Vermont— Laws of 1912, Act 99, in effect June 1, 1913. Virginia— Laws 1898, Chap. 866, approved March 3, 1898. Washington— Laws 1899, Chap. 149, in effect March 22, 1899. West Virginia — Laws 1907, Chap. 81, in effect January 1, 1908. Wisconsin— Laws 1899, Chap. 356, in effect May 15, 1899. Wyoming — Laws 1905, Chap. 43, in effect February 15, 1905. 360 NEGOTIABLE INSTRUMENTS. 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C2^"^OI>;00^0 o roCNOONr^ COoOu^'— 'CM'— *'^Or^^S^^ ^04u^i^O002^CM<^'^"^^l^^°°922} ?, ^:7^SSc^dN)or^r^cM^;:^co^ 00 (\i (v^ Tt Lo vo r^ t^ 00 362 NEGOTIABLE INSTRUMENTS. ^§SJ^^!!$:ir2nir'P^v:?'r*cN "■^ ONCNJCNro-^mvOt^OO ^■^Tj-votN»ooo<^'^TfioorN.ooa\OOr-J ^rvi'^Tj-txiN»a\ooooio^CN),-HOot^tN.00Os ovotN.vo"Ovo'Ofoi^oa\oo C 1 ' ' ' ' 1 I I ' ' ■ ' HtH lO l-n U^ LO LO LO VO vO O VO vo O O O ^ ^ UD vS 00 LO T-l t^ t^ Q\ Ci r-l 1-1 C^ ^O t^ tX t-j LO VO vo VO MD VO I I 1 I I Q\ On VQ "M i— I 00 c?N O '-I cq ^ vO tx t^ lO ^D O \0 ^ VO < o s o R "2 S Du ^C«;lCMiOiOvOOO-^vOt cQ cQ oq (V) f<) cv) eg ^1 r^ CM c^ o^i ^^1 r-/ CM cvi (N t>^ cmcmcmcmcscmcmcmcm i^ i^ i^ 1"^ i^ t^ i^ t;^ rsj^JcgcMCMCMCMCji O^OCT'. On^CMCO ^CMrO<^^LOVOMD CMCMCVJCMCMCMCMCM ro -^ ^ f> 00 8otx<^"^<^cN^i'^y;? < s o *5 a ro CM 1 46-66 CQ ro m vO t^ T-if\iPO'^Lo^ot^t^oocoaN »-(__Il— IT— (,— 1»— IT— tl— 4»— lT-^»— I ^H 00 -"I- Q 364 NEGOTIABLE INSTRUMENTS. 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Q MO t^ CO ro LO ^ .^.^^i~^oot^^^'^<5\Loo O\^cOro^>O\Ot^0000a\' J^,_,--l,-H^^T-t»-l.-ll-H'-Hr-H»-' loiorjcooSoor^t^ ONfMcOcOTl-LOVOr^ ^R »- 5 ca fo LO ^^00'— lC^CO"^LOOt^tN.OOON o r^ ON CO CO lO 00 t^ ^ _^ _^ - t^ On '^ ■* "^ '^'^ r^ON0000QtN.cooo ^invot^ONO>0--;r^ r^ CO '^r^Lco'^'Ofor-iCMONLo^Lo^ ^lovoSo\OOJ|LOLovop;>ocg; 0000000000O^O^q^a^O^O^O^g^-^ LOLOinLOLOLOlOlOLOLOLOLOLOVO < o?3gi OCNONOOCOLOt-iCvl O tN. CO C^ vg ^ J.46- SR:^8^^avio^^r^^3ji^^g 366 NEGOTIABLE INSTRUMENTS. I I I I I I I J I I I I I I I I I rt- O 'Tj O . '— < fV) '^ "^ r; "^ "^ "^ ^ c« <^ CO <^ <^ ►P M LO -^ (M < o^ -H cq ^ •^ ro T^ ^ 'T- fO CO fO '^ O CO 00 >-o ^ vO 1^ O '— < f^l tj- -t lo Lo in CO CO CO CO CO I I I I I r-l y—( C\ Q\ ^ lO VO t^ O »— I rt •<+ r^ lO >0 CO CO CO CO CO (M-- I I I I I I I I I I I I covO^'^^^^J^'-'CO'^LOri- lOioLovOvo^OOvOvOl^t^ LO to LO LO LO LO LO LO \J~i LO LO lO fvi On LO ^— 1 CO CO CO '^ LO lO l-^ t\ t^ IX tx LTJ ir-i L^) lO LO CO CO 6 vO lfVl rt o o o On O ON CN LO LO rt n5 rt 8'"' O O O O VO Ol CM Tl- O T-( CM ''O in rt rt rt ONOOOOiOT-tCM^HOOtxcoONlx vOOO'— iCMco-^LooixtxOOOOON rt n5»— I,— It— (T— (»— I,— It— (1— (r— It— ( t— I T— It— irtoJrtaJrtojfSrtrSrtoJ 8 VO CN CM 5 o o o (M oa o o 6 6^^^ vO Ix On On 03 rt (X) T-H r— I i— I rt »— H 88o (N CN4 O 8 O Q O O (N CM C^l (N I I I I VO CM CO (M (N CO 't LO O O Q Q Q O O O O O CM r^l CM Cm CN ^ CM 00 NO tx tX o CTn rtrtrtcjcSrtrtrtolrt O O CM 888 o o _ ^ _ CM CM CM (NJ 88888 CM CM CM CM rg • coONOONONOOOOiO^CM^OOrxfOON OCMCMLOLOVOOO'— iCMcOTfLONOtxtxOOOO •-^ > !_i lll»— 2 Mont. 456, 81 Pac. 4; First Nat. Bank v. Berritt, 52 Mont. 359, 157 Pac. 951. Nctv /^r^rv.— Mackintosh v. Gibbs, 81 N. J. L. 577, 80 Atl. 554, Aim. Cas. 1912D 163. Neiv Mexico. — Williams v. Dockwiler (1914), 145 Pac. 475. New ForA'.— First Nat. Bank v. Fleitman, 153 N. Y. Supp. 869, 168 A. D. 75. North Carolina. — Exchange Bk. v. Apalachian L. & L. Co. (1901), 128 N. Car. 193; Newbern Banking & Trust Co. v. Duffy (1910). 153 N. Car. 62, 68 S. E. 915; Franklin Nat. Bk. v. Roberts Bros. (1915), 84 S. E. 706. O/iio.— Miller V. Kyle (1911). 85 Ohio St. 186, 97 N. E. 372. Oklahoma. — Continental Gin Co. v. Sullivan. 48 Okla. 332, ISO Pac. 209; Citizens' Savings Bank v. Landis, Z7 Okla. 530, 132 Pac. 1101; Ran- dolph V. Hudson, 12 Okla. 516, 74 Pac. 946; First Nat. Bk. of Stigler v. Howard (1916). 158 Pac. 927; Security State Bank v. Fussell, 2,6 Okla. 527, 129 Pac. 746; Scton v. Exchange Bk. (1915). 150 Pac. 1079; Potts V. Crudup (1915), 150 Pac. 170; Tr. & Sav. Bk. of Charles City v. Gleichman (1915), 50 Okla. 441. 150 Pac. 908; First Nat. Bk. v. Muskogee Pipe Line Co. (1914). 139 Pac. 1136; Citv Nat. Bk. v. Kelly (1915). 151 Pac. 1172; Voris v. Anderson (1915), 153 Pac. 291; Union Bank v. Mav- field (1917), 169 Pac. 626; Letcher v. Wrightsman (Okla.), 158 Pac. 1152. § 3 FORM AND INTERPRETATION. 381 Oregon— Hodges v. Blaylock, 82 Ore. 179, 161 Pac. 396. Pennsylvania.— WdskkchcT v. Connelly (1917), 100 Atl. 965. South Carolina.— Smith v. Phifer, 104 S. C. 396, 89 S. E. 323. Tennessee.— Uohtron Nat. Bk. v. Wood (1911), 125 Tenn. 6, 140 S. W. 31; First Nat. Bk. of. Elgin, 111., v. Russell (1911), 139 S. W. 734; Franklin v. The Duncan, 133 Tenn. 472, 182 S. W. 230, Ann. Cas. 1917C 1080; Merrimon v. Parkey (1917), 191 S. VV. 327. Texas.— Sugg v. Smith (1918), 205 S. W. 363; Drinkard v. Jenkins (1919), 207 S. W. 353. Utah.— McCormkk v. Swem (1909), 36 Utah 6, 102 Pac. 626, 20 Ann. Cas. 1368; Utah Banking Co. v. Newman (1914), 138 Pac. 1146; Utah Nat. Bank v. Nelson, 38 Utah 169, 111 Pac. 907. Virginia.— Ogleshy Co. v. Bk. of N. Y. (1913), 114 Va. 663, 19 Va. L. Reg. 122, 77 S. E. 468; Colley v. Summers Parrott Hardware Co. (1916), 89 S. E. 906; Triplett v. Second Nat. Bk. of Culpepper (1917), 92 Va. 897; Sands v. Roller, 118 Va. 191, 86 S. E. 857. Washington. — Parker v. Saxton (1911), 66 Wash. 260; Barker v. Sar- tori (1911), 66 Wash. 260, 119 Pac. 611; First Nat. Bk. of Snohomish v. Sullivan (1911), 66 Wash. 375; Puget Sound State Bank v. Wash. Paving Co. (1917), 162 Pac. 870; Davis v. Hibbs (1913), 73 Wash. 315, 131 Pac. 1135; Harris v. Johnson (1913), 134 Pac. 1048; Scandinavian-American Bk. V. Long (1913), 134 Pac. 913; Pease v. Syler (1914), 138 Pac. 310; Bright V. Offield, 81 Wash. 442, 143 Pac. 159; Balkema v. Giolimund (1916), 159 Pac. 127. West Virginia.— First Nat. Bk. of Pineville v. Sanders (1916), 88 S. E. 187; Raleigh Co. Bk. v. Poteet (1914), 82 S. E. 332; First Nat. Bk. V, Sanders (1916), 88 S. E. 187. Wisconsin.— Thorpe v. Mindeman (1904), 123 Wis. 149, 101 N. W. 417, 107 Am. St. 1003, 68 L. R. A. 146; First Nat. Bk. of Shawano v. Miller (1909), 139 Wis. 126, 120 N. W. 820; Clark v. Talmadge, 176 N. W. 906. United 5'/flf^.y.— Chestertown Bank v. Walker, 163 Fed. 510, 90 C. C. A. 140; Mechanics' American Nat. Bank v. Coleman, 204 Fed. Rep. 24, 122 C. C. A. 338; Smith v. Nelson Land & Cattle Co. (1914), 212 Fed. 56; Kennedy v. Broderick (1914), 216 Fed. 137 (C. C. A., 7th Ct.) ; West- water V. Murray, 245 Fed. 427, 157 C. C. A. 589. § 3. When promise is unconditional. An unqualified order or promise to pay is unconditional within the meaning of this act, though coupled with : 1. An indication of a particular fund out of which reim- bursement is to be made, or a particular account to be debited with the amount; or 2. A statement of the transaction which gives rise to the in- strument. 382 NEGOTIABLE INSTRUMENTS. § 3 But an order or promise to pay out of a particular fund is not unconditional. *' ** 1. Digest of some of the decisions in which this section is construed, arranged alphabetically by states : See text, §§ 49, 51. Cross sections : 1-2. Provision retaining title of chattel in payee of note does not render it non-negotiable. Ex parte Bledsoe, 180 Ala. 586, 61 So. 813. Retention of title to property does not destroy negotiability of note. Citizens' Nat. Bank v. Bucheit (Ala.), 71 So. 82. Conditional indorsement. Peoples Bank of Mobile v. Moore, — Ala. — , 78 So. 789. Word "reimburse" renders promise conditional and note non-negotiable. Sacred Heart Church Building Committee v. Manson, — Ala. — , 82 So. 498. Effect of words "as per contract" in the corner of note upon nego- tiability. Strand Amusement Co. v. Fox, — Ala. — , 87 So. 332. Notation under signature of maker did not impair negotiability. Slaughter v. Bank of Bisbee, 17 Ariz. 484, 154 Pac. 1040. Conditional promise to pay. Rector v. Strauss, — Ark. — , 203 S. W. 1024. Letter as note prior to Negotiable Instruments Law. Equitable Trust Co. V. Harger, 258 111. 615, 102 N. E. 209. Instrument containing provisions as to correspondence course render note non-negotiable. Midwest Collection Bureau v. Greenwald, 214 111. App. 468. A note providing for deduction from insurance policy in case of death before maturity is not conditional. Union Bank v. Spies, 151 Iowa 178, 130 N. W. 929. Order directing payment "on account of contract" is negotiable. First Nat. Bank v. Lightner, 74 Kans. 736, 88 Pac. 59, 8 L. R. A. (N. S.) 231, 118 Am. St. Rep. 353. Unconditional promise to pay qualified by words "as per contract dated March 24, 1913." Continental Bank, etc., v. Times Pub. Co., 142 La. 209, 76 So. 612. Provision in note that it is subject to approval of payee makes it non- negotiable. Sloan V. McCarty. 134 Mass. 245. The words "value received as per contract" do not destroy negotia- bility of note. Nat. Bank of Newbury v. Wentworth, 218 Mass. 30, 105 N. E. 626. Direction to charge to a certain payment a definite order to pay is not conditional. Shepard v. Abbott, 179 Mass. 300, 60 N. E. 782. Note given subject to approval of payee bv its provision is not nego- tiable. Worden Grocer Co. v. Blanding, 161 Mich. 254, 126 N. W. 212. Where contract was transferred with note on back of which the words "per contract" appeared the purchaser is not charged with provisions of some other contract giving defense. Snelling State Bank v. Clasen, 132 Minn. 404, 157 N. W. 643. Effect of retention of title and default provisions in note. Polk Coun- ty State Bank of Cropkston v. Walters, — Minn. — , 176 N. W. 496. Question of negotiability not considered where tried on another theory. Lebrecht v. Nellist, 184 Mo. App. 335, 171 S. W. 11. § 3 FORM AND INTERPRETATION. 383 Note given to "secure" difference between two sums does not destroy negotiability. Morehead v. Cummins, — Mo. App. — , 230 S. W. 656. Notation "To be used in part renewal of note" on back of check as afifecting negotiation. R. S. Howard Co. v. International Bank of St. Louis, 198 Mo. App. 284. Detachment of promissory note from order for specified goods held not to render the instrument, which attached was non-negotiable, negotiable. State V. Mitton, Zl Mont. 366, 96 Pac. 926. Provisions in an instrument for delivery of property for installment payments and attorney fees in case of suit do not render it non-negotiable. First Nat. Bank v. Barrett, 52 Mont. 359, 157 Pac. 951. Note otherwise negotiable is not changed by provisions as to title remaining in vendor. Whitlock v. Auburn Lumber Co., 145 N. C. 120, 58 S. E. 909, 12 L. R. A. (N. S.) 1214. Township bonds negotiable in form are not affected by tax provisions in relation to paj^ments in statute authorizing their issue, the amount finally to be realized being definite. Cleveland Co. v. Bank of Gastonia, 157 N. C. 191, 72 S. E. 996. Note given for purchase of animal which is warranted does not destroy negotiability. Critcher v. Ballard. — N. C. — 104 S. E. 134. Condition contained in note that it does not affect the ownership of goods sold renders non-negotiable. Fleming v. Sherwood, 24 N. D. 144, 139 N. W. 101, 43 L. R. A. (N. S.) 945. Direction to pay from certain insurance draft, the same being balance of account, is not payable from particular fund so as to render promise to pay conditional. Hanna v. McCrory, 19 N. M. 183, 141 Pac. 996. Conditional sale provision in negotiable note. Welch v. Owenby, — Okla. — , 175 Pac. 746. Provision for holding notes due at any time payee feels security not sufficient is conditional. Reynolds v. Vint, IZ Ore. 528, 144 Pac. 526. Note is non-negotiable where it contains provision that payee may upon certain conditions declare it due. Western Farquahar IMachine Co. v. Bur- nett, 82 Ore. 174, 161 Pac. 384. Promise to pay if order is accepted is not negotiable. Neylus v. Port, 46 Pa. Supr. Ct. 428. Letter promising to pay "A" if "A" advances monev is non-negotiable. Equitable Trust Co. of N. Y. v. Howe, 72 Misc. 46, 129 N. Y. Supp. 112. A letter promising to pay a definite sum in certain items is negotiable. Equitable Trust Co. v. Taylor, 146 App. Div. 424, 131 N. Y. Supp. 475. "I shall pay to order of" held to be negotiable although containing added statements as to transaction. Merchants' Nat. Bk. v. Santa Maria Sugar Co., 162 App. Div. 248, 147 N. Y. Supp. 498. Words referring to transaction on which note is based do not render note non-negotiable. Waterbury- Wallace Co. v. Ivey, 99 Misc. 260, 163 N. Y. Supp. 719. Draft attached to bills of lading is not conditional because of word "cotton" on face of draft. Springs v. Hanover Nat. Bk., 209 N. Y. 224, 103 N. E. 156, 52 L. R. A. (N. S.) 241. A note providing for payment and the application of certain moneys thereto is negotiable. First Nat. Bk. of Snohomish v. Sullivan, 66 Wash. 375, 119 Pac. 820, Ann. Cas. 1913C, 930. A promise is unconditional where the note is accompanied with an ?dditional instrument designating fund from which payment is to be made. VanTassel v. McGrail, 93 Wash. 380, 160 Pac. 1053. 384 NEGOTIABLE INSTRITMENTS. § 3 Erasure from nolo containing unconditional promise to pay the words "This note to fulfill a certain agreement." Mason v. Shaffer, — W. Va. — 96 S. E. 1023. The order to pay is absolute where object for which drawn is stated. Brown v. Cow Creek Sheep Co., 21 Wyo. 1, 126 Pac. 886. Bill of exchange accepted against indorsed bills of lading held condi- tional. Guaranty Trust Co. v. Grotian, 114 Fed. Rep. 433, 52 C. C. A. 235. Words, "charge to account of X, 100 bales cotton," in a draft, with bills of lading attached, held to render conditional the promise to pay. Hannay v. Guarantee Trust Co., 187 Fed. Rep. 686. Direction to pay and credit according to letter is not conditional so as to affect negotiability. In re Boyse, 33 Ch. Div. 612. ^* The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : Alabama.— Ex parte Bledsoe, 180 Ala. 586, 61 So. 813; Citizens' Nat. Bank of Bucheit, 71 So. 82; People's Bank of Mobile v. Moore (1918), 78 So. 789; Strand Amusement Co. v. Fox, 87 So. 332; Sacred Heart Building Com. v. Manson (1919), 82 So. 498. Arkansas.— Rector v. Strauss (1918), 203 S. W. 1024. ^n.?o?;a.— Slaughter v. Bank of Bisbee (1916), 17 Ariz. 484, 154 Pac. 1040. Colorado. — Johnson v. Engstone (1916), 155 Pac. 1095. Connecticut.— Nat. Sav. Bk. v. Cable (1901), 73 Conn. 568, 48 Atl. 428. 7;/iwo/.y.— Equitable Trust Co. v. Harger, 258 111. 615, 102 N. E. 209; Midwest Collection Bureau v. Greenwald, 214 111. App. 468. Iozva.~The Union Bk. of Bridgwater v. Spies (1911), 151 Iowa 178, 130 N. W. 929. Kansas. — First Nat. Bk. of Hutchinson v. Lightener (1906), 74 Kans. 736, 88 Pac. 59, 8 L. R. A. (N. S.) 231, 118 Am. St. Rep. 353. Louisiana. — Bonart v. Rabito, 141 La. 970, 76 So. 166; Continental Bank v. Times Pub. Co., 142 La. 209, 76 So. 612. Maryland.— Tirst Denton Nat. Bk. v. Kenney (1911), 116 Md. 24; Denton Nat. Bk. v. Kenney (1911), 116 Md. 124, 81 Atl. 227. Massachusetts.-Shepard v. Abbott (1901), 179 Mass. 300, 60 N. E. 782; Nat. Bk. of Newberry v. Wentworth (1915), 218 Mass. 30, 105 N. E. 626. Michigan. — Worder Grocer Co. v. Blanding, 161 Mich. 254, 126 N. W. 212; White v. Wadhams (1919), 170 N. W. 60. Minnesota.— SmlVmg State Bank v. Clasen, 132 Minn. 404, 157 N. W. 643; Polk County State Bank of Brookston v. Walters, — Minn. — , 176 N. W. 496. Missouri.— Lehrecht v. Nellist, 184 Mo. App. 335, 171 S. W. 11; R. S. Howard Co. v. International Bank of St. Louis (1918), 198 Mo App. 284, 200 S. W. 91 ;Morehead v. Cummins, 230 S. W. 656. Montana.— States v. Mitton (1908), 37 Mont. 366, 96 Pac. 926; First Nat. Bk. of Miles City v. Barrett (1916), 52 Mont. 359, 157 Pac. 95J § 4 FORM AND INTERrRETATION. 385 New Mexico.— Rznnd^ v. McCrory, 19 N. M. 183, 141 Pac. 996. New For/;.— Hibbs v. Brown (1907). 190 N. Y. 167, affirming 112 A. D. 214, 82 N. E. 1108, 98 N. Y. Supp. 353; Fulton v. Varncy (1907). 117 A. D. 572, 102 N. Y. Supp. 608; Eq. Tr. Co. of N. Y. v. Newman (1910). 69 Misc. 494, 127 N. Y. Supp. 243 ; Eq. Tr. Co. v. Howe, 72 Misc. 46, 129 N. Y. Supp. 112; Eq. Tr. Co. v. Taylor (1911), 146 App. Div. 424, 131 N. Y. Supp. 475. 72 Misc. 52; Eq. Tr. Co. of N. Y. v. Were (1911), 74 Miss. 469. 132 N. Y. Supp. 351 ; Merchants Nat. Bk. of St. Paul v. Sante Maria Sugar Co. (1914). 162 App. Div. 248. 147 N. Y. Supp. 498; Water- bury Wallace Co. v. Ivey (1917), 99 Misc. 260. 163 N. Y. Supp. 719; Springs V. Hanover Nat. Bank, 269 N. Y. 224. 103 N. E. 156. 52 L. R. A. (N. S.) 241. North Caro/n/a.— Whitlock v. Auburn Lumber Co. (1907). 145 N. Car. 120. 58 S. E. 909. 12 L. R. A. (N. S.) 1214; Bk. of Sampson v. Hatcher (1909), 151 N. Car. 359. 66 S. E. 308; Commrs. of Cleveland Co. V. Bk. of Gastonia (1911), 157 N. Car. 191, 72 S. E. 996; Critcher v. Ballard, 104 S. E. 134. North Dakota.— Fleming v. Sherwood, 24 N. D. 144, 139 N. W. 101, 43 L. R. A. (N. S.) 945. Oklahoma.— ^e\ch. v. Owenby (1919), 175 Pac. 746. Oregon. — Western Farquhar Machine Co. v. Burnett, 82 Ore. 174, 161 Pac. 384. Pennsylvania. — Neylus v. Port, 46 Pa. Superior Ct. 428. South Dakota. — Coleman v. Valentine, — S. D. — . 164 N. W. 67. Texas:— M.Qi. Nat. Bk. v. Vanderpool (1917), 192 S. W. 589. Tennessee.— First Nat. Bk. of Elgin. 111., v. Russell (1911). 139 S. W. 734. Washing'ton. — First National Bank of Snohomish v. Sullivan, 66 Wash. 375. 119 Pac. 820, Ann. Cas. 1913C, 930; Peninsula Nat. Bk. v. Pederson (1916), 158 Pac. 246; VanTassel v. McGrail. 93 Wash. 380. 160 Pac. 1053. West Virginia.— Mason v. Shaffer, — W. Va. — , 96 S. E. 1023. Wyoming. — Brown v. Cow Creek Co. (1912), 21 Wyo. 1, 126 Pac. 886. United States. — Guaranty Trust Co. v. Grotian, 114 Fed. Rep. 433, 52 C. C. A. 235; Hannay v. Guaranty Trust Co., 187 Fed. Rep. 686. § 4. Determinable future time ; what constitutes. An instrument is payable at a determinable future time, within the meaning of this act, which is expressed to be payable : 1. At a fixed period after date or sight; or 2. On or before a fixed 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. 386 NEGOTIABLE INSTRUMENTS. § 4 An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect. See text, § 49. Cross sections: 1, 184, 1-3, 7-1, 71, 7Z. The Wisconsin act (No. 1675-4) substitutes, for the last paragraph, the following: "4. At a fixed period after date or sight, though payable before then on a contingency. An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect, except as herein provided." Corresponding provision of English Bill of Exchange Act: 11 (1), (2). 1. Digest of some of the decisions in which this section is construed, arranged alphabetically by states : If payment of note is liable to happen it is not a contingency. Arnett v. Clack, — Ariz. — , 198 Pac. 127. Promise to pay on happening of a contingency certain to happen does not affect negotiability. McClenathan v. Davis, 243 111. 87, 90 N. E. 265, 27 L. R. A. (N. S.) 1017. Extension for indefinite period does not prevent demand after note due. Lanum v. Harrington, 267 111. 57, 107 N. E. 826. Uncertainty as to time of payment renders note non-negotiable even though in mortgage. Iowa Nat. Bank v. Carter, 144 Iowa 715, 123 N. W. 237. Note containing conditional extension for definite period is nego- tiable. State Bank of Halsted v. Bilstad, 162 Iowa 433, 136 N. W. 204, 49 L. R. A. (N. S.) 132. Provision for declaring debt due for breach of stipulations of mort- gage does not render note non-negotiable. Des Moines Sav. Bank v. Arthur, 163 Iowa_205, 143 N. W. 556, Ann. Cas. 1916C, 498. Waiver of notice of extension of time as time certain. Nat. Bank of Webb City, _Mo., v. Dickinson, 102 Kan. 564. Anticipating payment privilege in note held not to affect negotiability under^ statute. Lowel Trust Co. v. Pratt, 183 Mass. 379, 67 N. E. 363. Privilege of anticipating payment renders note non-negotiable. Ne- gotiable instruments law overlooked. Pierce v. Talbot, 213 Mass. 330, 100 N. E. 553. Default of payment provision in note does not render it uncertain as to time. Schmidt v. Pegg, 172 Mich. 159, 137 N. W. 524. Check payable on a contingent date which is certain to happen is good. Keeler v. Hiles' Estate, — Neb. — , 172 N. W. 363. Postdated check accepted in good faith. Kuflik v. Vaccaro, 170 N. Y, Marginal notations as to payment did not control body of note. Union State Bank v. Benson, 38 N. Dak. 396, 165 N. W. 509. Privilege of declaring due when pavee feels insecure renders note non-negotjable._ Reynolds v. Vint, 73 Ore. 528, 114 Pac. 526. Provisions in mortgage for accelerating time of payment of note. Westlake v. Cooper, — Okla. — , 171 Pac. 859. § 4 FORM AND INTERPRETATION. 387 Provision that note is "due if ranch is sold or mortgaged" does not affect negotiability. Nickell v. Bradshaw, — Ore. — , 183 Pac. 12. Provisions for advancing date on account of non-payment of taxes does not render time uncertain. Bright v. Officld, 81 Wash. 442, 143 Pac. 159. When due date changed by contingency note is non-negotiable. Pugct Sound State Bank v. Washington Paving Co., 94 Wash. 504, 162 Pac. 870. Note's negotiability not controlled by contingencies in mortgage. Smith V. Nelson Land & Cattle Co., 212 Fed. 56, 128 C. C. A. 512. **The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : Arisona.—Arnen v. Clack, 198 Pac. 127. California.— Blake v. Craig (1918), 173 Pac. 1005. Colorado.— DrakQ v. Pueblo Nat Bk. (1908), 96 Pac. 996. Idaho. — Union Stockyards Nat. Bank v. Bolan, 14 Idaho 87, 93 Pac. 508, 125 Am. St. Rep. 146. ///iHou.— McClenathan v. Davis, 243 111. 87, 90 N. E. 265, 27 L. R A (N. S.) 1017; Lanum v. Harrington, 267 111. 57, 107,N. E. 826. Iowa. — Des Moines Saving Bank v. Arthur, 163 Iowa 205. 143 N. W. 556, Ann Cas. 1916 C. 498; Iowa Nat. Bk. v. Carter (1909), 144 Iowa 715, 123 N. W. 237; State Bank of Halsted v. Bilstad, 162 Iowa 433, 136 N. W. 204, 49 L. R. A. (N. S.) 132. Kansas.— The Rossville State Bk. v. Heslet (1911), 84 Kans 315, 113 Pac. 1052; The Holliday St. Bk. v. Hoffman (1911), 85 Kans. 71, 116 Pac. 239, 35 L. R. A. (N. S.), 390 Ann. Cas. 1912 Dl ; Brown v. Cruce (1913), 133 Pac. 865; Nat. Bank of Webb City, Mo., v. Dickinson, 102 Kan. 564. LoMmano.— Hibernia Bk. & Tr. Co. v. Dresser (1912-1913), 61 So. 561 ; Bonart v. Rabito, 141 La. 970, 76 So. 166. Afary/oMC?.— Agricultural Chem Co. v. Stringer (1917), 100 Atl. 774. Massachusetts.— LoweW Trust Co. v. Pratt, 183 Mass. 379, 67 N. E. 363; Torpey v. Tebo (1903), 184 Mass. 307, 68 N. E. 223; McQueen v. Spalding (1919). 120 N. E. 850; Pierce v. Talbot, 213 Mass. 330, 100 N. E. 553. Michigan.—Schmidt v. Pegg (1912), 172 Mich. 159. 137 N. W. 524; White V. Wadhams (1919), 170 N. W. 60. Nebraska— Keder v. Hiles' Estate, 172 N. W. 363. New Mexico. — First Nat. Bk. of Albuquerque v. Stover (1916), 155 Pac. 905. New Forfe.— Schlesinger v. Schultz (1905), 110 A. D. 356. 96 N. Y. Supp. 383; Usefof v. Herzenstein (1909), 65 Misc. 45. 119 N. 388 NEGOTIABLE INSTRUMENTS. § 5 Y. Supp. 290; Wray v. Miller (1910), 120 N. Y. Supp. 787; Eq. Tr. Co. of N. Y. v. Were (1911), 132 N. Y. Supp. 351; Devine v. Trice (1915). 152 N. Y. Supp. 321; Osl)orne v. M., K. & T. Ry. Co. (1915), 155 N. Y. Supp. 236; Kerr v. Smith (1913), 156 A. D. 807, 142 N. Y. Supp. 57; Powell v. Began (1917), 167 N. Y. Supp. 770; Kulflik V. Vaccaro (1918), 170 N. Y. Supp. 13. North Dakota— Union State Bank v. Benson, 38 N. Dak. 396, 165 N. W. 509. Oldahojm.—DeGroat v. Focht (1913), 131 Pac. 172; Westlake v. Cooper (1918), 171 Pac. 859. Oregon.— ReynoMs v. Vint, 73 Ore. 528. 144 Pac. 526: Western Far- quhar Mch. Co. v. Burnett (1916), 82 Ore. 174, 161 Pac. 384; Nickell v. Bradshaw (1919), 183 Pac. 12. Pennsylvania. — Empire Nat. Bk. of Clarksburg W. Va. v. High Grade Oil Refining Co. (1918), 103 A 602. r^««^.y,y^^.— First Nat. Bk. of Elgin. 111. v. Russell (1911), 139 S. W. 734; White v. Hatcher (1916), 188 S. W. 61. Washington — Puget Sound State Bank v. Washington Paving Com- pany, 94 Wash. 504, 162 Pac. 820; Bright v. Offield, 81 Wish. 442, 143 Pac. 159. West Virginia.— Huhhard v. Morton (1917), 92 S. E. 252. Wisco7tsin.— Thorpe v. Mindeman (1904), 123 Wis. 149, 101 N. W. 417, 107 Am. St. 1003, 68 L. R. A. 146. United States.— Kohey v. Hoffman (1916), 229 Fed. 486; Smith v. Nelson Land & Cattle Co., 212 Fed. 56, 128 C. C. A. 512. § 5. Additional provisions not affecting 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, 1. Authorizes the sale of collateral securities in case the in- strument be not paid at maturity ; or 2. Authorizes a confession of judgment if the instrument be not paid at maturity ; or 3. Waives the benefit of any law intended for the advantage or protection of the obligor ; 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.*' ** See text, § 51. § 5 FORM AND INTERPRETATION. 389 In Illinois the words "under this Act," arc added at the end of the first sentence and the words "if the instrument be not paid at maturity" are omitted in subsection 2. And the following words are added to the last paragraph : "Or authorize the waiver of exemptions from exe- cution." The North Carolina act (No. 197) contains the following as re- lating to subdivision 2 above: "That nothing in this act shall authorize tiie enforcement of an authorization to confess judgment or a waiver of homestead or personal property exemptions or a provision to pay counsel fees for collection incorporated in any instrument mentioned in this act; but the mention of such provision in such instrument shall not affect the other terms of such instruments or the negotiability thereof." Kansas adds to subsection 1 the following": "Or in case the security should depreciate in value or in case the holder for reasonable cause deems himself insecure." A subsection 5 is added as follows : "Provi- sions or agreements in concurrent writings or mortgages given to secure payment of such instruments." Kentucky omits subdivision 3 above. The Wisconsin act (No. 1675-5) adds: "or authorize the waiver of exemptions from execution." * Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states : Words "without defalcation" are surplusage. First Nat. Bank of Pocky Ford v. Lewis, 57 Colo. 125, 139 Pac. 1102. Note giving right to take possession of property when insecure held not negotiable. Kimpton v. Studebaker Bros. Co., 14 Idaho 552, 94 Pac. 1039, 125 Am. St. Rep. 185. Promise to do an act in addition to payment of money and failure therein default only hastens date of»payment and does not afifect nego- tiability. Finley v. Smith, 165 Ky. 445, 177 S. W. 262, L. R. A. 1915F, m. Promise to give added security in case collateral declines and in de- fault due date advanced renders note non-negotiable. Hibernia Bank V. Dresser, 132 La. 532, 61 So. 561. Option to receive money or stock does not affect negotiability. Pratt v. Higginson (Mass.), 119 N. E. 661. Agreement to pay money and keep certain securities unincumbered renders note non-negotiable. Strickland v. National Salt Co., 79 N. J. Eq. 182, 81 Atl. 828. Confession of judgment provision affects negotiability. Yankolivitz V. Wernick, 20 Pa. Dist. Rep. 223, 59 U. of P. Law Rev. 573. Provision for confession of judgment at any term is not negotiable. Milton Nat. Bank v. Beaver, 25 Pa. Super Ct. 494. Time of payment not so uncertain as to affect negotiability where promise of added security or default. Empire Nat. Bank v. Highgrade Oil. etc., Co. (Pa.), 103 Atl. 602. "At any time after note becomes due" does not affect negotiability. Green v. Dick & Shope, 72 Pa. Super Ct. 266. Note authorizing confession of judgment at anvtime is not nego- tiable. First Nat. Bank v. Russell, 124 Tcnn. 618, 139 S .W. 739, Ann. Cas. 1913A 203. 390 NEGOTIABLE INSTRUMENTS. ' § 5 Promise to pay money and wheat renders note non-negotiable. Thomson v. Koch, 62 Wash. 438, 113 Pac. 1110. Provision to pay taxes is one which renders note non-negotiable as addition to payment of money. Bright v. Offield, 81 Wash. 442, 143 Pac. 159. Words "at any time hereafter" are not definite enough to render note negotiable. Clark v. Tallmadge, — Wis. — , 176 N. W. 906. Provision for giving added collateral in case of depreciation does not destroy negotiability. Railway Equipment Co. v. Merchants Nat. Bank, 136 U. S. 268, 10 Sup. Ct. 999, 34 L. ed. 349. Question as to effect of added promises not considered. National Salt Co. v. Ingraham, 143 Fed. 805, 74 C. C. A. 479. ^* The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Alabama. — Ex parte Bledsoe (1913), 61 So. 813. California. — Navajo Co. Bk. v. Dolson (1912), 126 Pac. 153. Colorado. — First Nat. Bank of Rocky Ford v. Lewis, 57 Colo. 125, 139 Pac. 1102. 7. ^ Note payable to order of A or B is negotiable. Bank v. Spies, 151 Iowa 178, 130 N. W. 928. Negotiable instrument indorsed bv either of two joint payees is sufficient. Voris v. Schoonover, 91 Kan. 530, 138 Pac. 607, 50 L. R. A. (N. S.) 1097. Note payable to order of maker is negotiable when indorsed by maker. Doplh V. Stubblefield, — Md. — , 108 Atl. 448. Payment to survivor of joint payees discharges negotiable instru- m.ent. Park v. Parker, 216 Mass. 405, 103 N. E. 936. Note payable to order of blank cannot be filled in by any bearer. Tower V. Stanley, 220 Mass. 429, 107 N. E. 1010. Who may bring suit on note payable to two persons in alternative. Passut V. Heubner, 81 Misc. Rep. 249, 142 N. Y. Supp. 546. Indorsement to order of blank, bearer may not fill blank. State v, Hinton, 56 Ore. 428, 109 Pac. 24. Note indorsed to order of C or D does not affect negotiability. Page V. Ford, 65 Ore. 450, 131 Pac. 1013, 45 L. R. A. (N. S.) 247, Ann. Gas. 1915B 1048. Note payable to A or wife is construed to pass to survivor if one died before maturity. Smith v. Haire, 133 Tenn. 343, 181 S. W. 161. § 9 FORM AND INTERPRETATION. 395 ** The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : Ca/i/omia.— Stafford v. Hill, — Cal. App. — , 200 Pac. 33. Colorado. —Sca\3i v. M. & M. Bank (1918), 171 Pac. 752. ///i;zow.— Peterson v. Emery (1910), 154 111. App. 294. Jowa.— The Union Bk. of Bridgewater v. Spies (1911), 151 Iowa, 178, 130 N. W. 928. Kansas.— Voris v. Schoonover (1914), 91 Kans. 530, 138 Pac. 607, 50 L. R. A. (N. S.) 1097. Maryland.— Dolph v. Stubblefield, — Md. — , 108 Atl. 448. Massachusetts.— Mass. Nat. Bk. v. Snow (1905), 187 Mass. 159, 72 N. E. 959 ; Park v. Parker, 216 Mass. 405, 103 N. E. 936 ; Tower v. Stan- ley. 220 Mass. 429, 107 N. E. 1010. New York.— Uilhorn v. Penn. Cement Co. (1911), 145 A. D. 442; Passut V. Heubner, 81 Misc. Rep. 249, 142 N. Y. Supp. 546. North Dakota.— Aarnoth v. Hunter (1916), 157 N. W. 299. Or<'^OH.— State v. Hinton, 56 Ore. 428, 109 Pac. 24; Page v. Ford (1913), 65 Ore. 450, 131 Pac. 1013, 45 L. R. A. (N. S.) 247, Ann. Cas. 1915A, 1048. Tennessee.—Sm\th v. Haire, 133 Tenn. 343, 181 S. W. 161 ; Moore v. Carey (1917), 197 S. W. 1093. Virginia. — Guewant v. Guewant (1902), 7 Va. L. R. 639. United States.— MWion v. Pensacola Bk. & Tr. Co. (1911), 190 Fed. 126, 111 C. C. A. 166. England— Chamherlain v. Young (1893), 2 Q. B. 206. § 9. 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-ex- isting 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.*- 1" See text, § 46. Cross sections: 30, 34, 16, 56, 124, 191. 396 NEGOTIABLE INSTRUMENTS. § 9 In Illinois the following is substituted for subsection 3: "3. When it is payable to the order of a person known by the drawer or maker to be fictitious or non-existent, or of a living person not intended to have any interest in it," and for subsection 5 the following: "5. When, although originally payable to order, it is indorsed in blank by the payee or a subsequent indorsee." ^ Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states: Indorsement in blank shown makes prima facie case. Kaladner v. First Nat. Bk., — Ala. — 84 So. 562. Note payable to order indorsed in blank is thereafter negotiable by delivery. Davis v. First Nat. Bank of Blakley, 192 Ala. 8, 68 So. 261. Note payable to assumed name of payee can be enforced in true name of payee. Lockland v. Storch, 123 Ark. 253, 185 S. W. 262. Drafts made payable to fictitious persons by agent authorized to issue same are payable to bearer. American Hominy Co. v. National Bank of Decatur, — 111. — , 128 N. E. 391. Drafts are payable to bearer although made payable to payees who exist but whose names are forged and draft transferred. Bartlett v. First Nat. Bank, 247 111. 490, 93 N. E. ZZ7. Note payble to fictitious person or bearer is payable to bearer. Lane V. Krekle, 22 Iowa 404. Draft payable to fictitious payee by drawer without his knowledge is not payable to bearer. American Exp. Co. v. People's Sav. Bank, — la. — , 181 N. W. 701. Maker of note to fictitious person estopped to assert the fiction against ignorant holder. Kohn v. Watkins, 26 Kan. 691. Non-negotiable note does not become negotiable by indorsement in blank. Wettlaufer v. Baxter, 137 Ky. 362, 125 S. W. 741, 26 L. R. A. (N. S.) 804. Indorsement in blank by payee of promissory note renders payable to bearer. Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959._ _ Failure to pay to person authorized by check, although a fictitious name appears thereon, renders drawee bank liable to drawer. Jordan Marsh Co. v. Nat. Shawmut Bank, 201 Mass. 397, 87 N. E. 740, 22 L. R. A. (N. S.) 250. Recovery on instrument made to fictitious payee depends upon show- ing that maker knew the same to be true. Boles v. Harding, 201 Mass. 103. 87 N. E. 481. Indorsement of note in blank makes it payable to bearer. Leavitt v. Wintman, — Mass. — , 125 N. E. 390. Indorsement of fictitious payee's name is a forgery. People v. Wardner, 104 Mich. Z2,7, 62 N. W. 405. Knowledge of agent that checks are drawn to fictitious persons by request of drawer's agent makes check payable to bearer. Equitable Life Assurance Societv v. Nat. Bank of Commerce (Mo. App.), 181 S. W. 1176. Instrument payable to estate of deceased person is payable to bearer. In re Ziegenheim (Mo. App.), 187 S. W. 893. Firm name under which several persons are doing business is not a fictitious name in note. Write Away Pen Co. v. Buckner, 188 Mo. App. 259, 175 S. W. 81. § 9 FORM AND INTERPRETATION. 397 Where drawer of check has no knowledge of fictitious payee check is not payable to bearer. Egner v. Corn Exchange Bank, 42 Misc. Rep. 552, 86 N. Y. Supp. 107. Production of check payable to cash is prima facie evidence of ownership. Cleary v. DeBeck Co., 54 Misc. Rep. 537, 104 N. Y. Supp. 831. Where checks are forged and payable to payees, known by the forger to have no interest therein, they are payable to bearer. Trust Company of America v. Hamilton Bank, 127 App. Div. 515, 112 N. Y. Supp. 84. Instrument unknowingly made payable to a fictitious bearer gives holder no rights. United Cigar Stores Co. v. American Raw Silk Co., 171 N. Y. S. 480. Instrument must knowingly be made by maker to fictitious person to render it payable to bearer. Shipman v. Bank, 126 N. Y. 318, 27 N. E. 371. Regulations of Treasury Department that funds are payable only upon checks payable to order control, and fictitious payees do not render them payable to bearer. Phillips v. Mercantile Nat. Bank, 140 N. Y. 556, 35 N. E. 982, 23 L. R. A. 584, Z7 Am. St. Rep. 596. A requested draft payable to B and then indorsed B's name. C endorsee collected from B. Held B could collect from C as not payable tc bearer. Seaboard Nat. Bank v. Bank of America, 193 N. Y. 26, 85 N. E. 829. Indorser in blank of non-negotiable note becomes liable only as assignor. Johnson v. Lassiter, 155 N. C. 50, 71 S. E. 23. Instruments are payable to bearer only when knowingly made to fictitious persons by maker. Armstrong v. Bank, 46 Ohio St. 512, 22 N. E. 866, 6 L. R. A. 625, 15 Am. St. Rep. 655. Drawer of check bound by knowledge of his agent that check was procured to be drawn to fictitious persons by fraud. Jones v. People's Bank Co., 95 Ohio St. 253, 116 N. E. 34. Indorsement in blank makes note payable to bearer. Stevens v. Pierce, — Okla. — , 193 Pac. 417. Presumption of knowledge of maker that payee of note was fictitious after judgment and verdict. Weishaas v. Pendeton, 7Z Ore. 190, 144 Pac. 401. Note payable to W. E. D. & Co. indorsed by W. E. D. in the former name under which he did business was not to fictitious person so as to ren- der it payable to bearer. Hill v. McCrow, 88 Ore. 299. Checks drawn by A, who was authorized to draw same by employer, to person who did not know and was not intended to know thereof, were to fictitious payee and payable to bearer. Snyder v. Corn Exchange Nat. Bank, 221 Pa. 599, 70 Atl. 876. Principal precluded from setting up forgery where manager forged checks and also payees' names. Litchfield Shuttle Co. v. Cumberland Valley Nat. Bank, 134 Tenn. 379, 183 S. W. 1006. Drawer does not vouch for authority of agent to indorse name of payee where agent fraudulently procures checks to be issued. Good- tellow V. First Nat. Bank, 71 Wash. 554, 129 Pac. 90, 44 L. R. A. (N. S.) 580. Government bound by act of officer in making checks to fictitious persons. Smith v. Nelson Land & Cattle Co., 212 Fed. Rep. 56, 128 C. C. A. 512. Distinction between government and person as drawer. National Bank of Commerce v. United States, 224 Fed. 679, 140 C C. A. 219. 398 NEGOTIABLE INSTRUMENTS. § 9 Drawee of government checks has notice that only checks paj^able to order should be paid, whether payable to bearer by construction or so written. United States v. Chase Nat. Bank, 241 Fed. 535, 537. Draft made payable to fictitious payee by drawer who knew is payable to bearer. American Hominy Co. v. Millikin Nat. Bank, 273 Fed. 5^0. Check payable to M. or order is not to a fictitious person although issued for a forged note. Vinden v. Hughes (1905), 1 K. B. 795. Acceptor's ignorance of the fact that the bill was made payable to A. who was to have no interest therein does not prevent bill being payable to bearer. Bank of England v. Vagliano L. R. (1891), A. C. 107. Drawer's ignorance as to payee's existence is immaterial. Clutton v. Attenborough L. R. (1897). A. C. 90. Post-dated check may be stamped bill payable on demand. Royal Bank v. Tottenham (1894), 2 Q. B. 715. Plaintiffs entitled to recover for moneys had and received where check issued by them on forged note was intercepted and cashed, it be- ing made to H. or order. North & South Wales Bank, Ld., v. Macbeth (1908), 1 K. B. 13, L. R. (1908) A. C. 137. *'The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : ^/afcawa.— Bledsoe v. City Nat. Bank, 180 Ala. 586, 60 So. 942; Davis v. First Nat. Bank of Blakeley, 192 Ala. 8, 68 So. 261 ; Kaladner v. First Nat. Bank, 89 So. 562. Arisona.—PeopWs Nat. Bk. v. Taylor (1915), 17 Ariz. 215, 149 Pac. 763. Arkansas.— Lockland v. Storch. 123 Ark. 253, 185 S. W. 262; Wil- liamson Bk. & Tr. Co. v. Miles (1914), 169 S. W. 368. Ca/i/ornwi.— Hatton v. Holmes, 97 Cal. 208, 31 Pac. 1131. District of Columbia.— Union Nat. Bank of Columbia v. Cook (1918), 96 S. E. 484. Illinois.— '^od V. Security Bk. of Chicago (1911), 163 111. App. 82; Bartlett v. First Nat. Bank. 247 111. 490, 93 N. E. 337; American Hom- iny Co. v. National Bank, 128 N. E. 391. lozm. — American Express Co. v. People's Sav. Bank, 181 N. W. 701. Kansas.— Grand Lodge v. State Bank, 92 Kan. 876. 142 Pac. 974, L. R. A. 1915B, 815; Grand Lodge v. Emporium Bank (1917), 101 Kan. 369, 166 Pac. 490; Kohn v. Watkins, 26 Kan. 691. Kentucky.— Ohio Vallev Bk. & Tr. Co. v. Gt. Southern Fire Ins. Co. (1917), 197 S. W. 399; Wettlaufer v. Baxter, 137 Ky. 362, 125 S. W. 741, 26 L. R. A. (N. S.) 804. Louisiana.— Rose v. Shaw (1919), 80 So. 727. Massachusetts.— Shavj v. Smith, 150 Mass. 166, 22 N. E. 887, 6 L. R. A. 348; Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959; Murphy v. Met. Nat. Bk. (1906), 191 Mass. 159; Boles v. Harding (1909), 201 Mass. 103, 87 N. E. 481; Jordan Marsh Co. v. Nat. Shawmut Bank, 201 Mass. 397, 87 N. E. 740, 22 L. R. A. (N. S.) 250; Leavett v. Wintman, — Mass. — , 125 N. E. 390. § 10 FORM AND INTERPRETATION. 399 Miclngatu.—Fehier v. Babillion, 45 Mich. 384, 8 N. W. 99; People v. Wardner. 104 Mich. 337, 62 N. W. 405; Harmon v. Old Detroit Nat. Bank, 153 Mich. 73, 116 N. W. 617, 17 L. R. A. (N. S.) 514, 126 Am. St. Rep. 467. Missouri.— Equitable Life Assur. Co. of U. S. v. Nat. Bk. of Com- merce (1916) (Mo. App), 181 S. W. 1176; Write Away Pen Co. v. Buckner, 188 Mo. App. 259, 175 S. W. 81. New York. — Egner v. Corn Exchange Bank, 42 Misc. Rep. 552, 86 N Y Supp. 107; Trust Co. of Am. v. Hamilton Bk. (1908), 127 A. D. 515, 112 N. Y. Supp. 84; Shipman v. Bank, 126 N. Y. 318, 27 N. E. 371; Cleary v. DeBeck Co., 54 Misc. Rep. 537, 104 N. Y. Supp. 831; United Cigar Stores Co. v. American Raw Silk Co., 171 N. Y. Supp. 480; Phillips V. Mercantile Nat. Bank, 140 N. Y. 556, 35 N. E. 982, 23 L. R. A. 584, 37 Am. St. Rep. 596; Seaboard Nat. Bk. v. Bk. of America (1908), 193 N. Y. 26, 85 N. E. 829; Fifth National Bank v. Central National Bank, 82 Hun. 559, affirmed 152 N. Y. 636. North Carolina. — Johnson v. Lassiter, 155 N. C. 50, 71 S. E. 23; Newland v. Moore, 173 N. C. 728, 92 S. E. 367. Oklahoma.— Stevens v. Pierce, 193 Pac. 417. Oregon.— Wehhaas v. Pendleton, 73 Ore. 190, 144 Pac. 401; Hill v. McCrow (1918), 88 Ore. 299, 170 Pac. 306. Pennsylvania.— Lincoln Nat. Bank of Pittsburg v. Miller (1917), 100 Atl. 269, 255 Pa. 467; Snyder v. Corn Exchange National Bank, 221 Pa. 599, 70 Atl. 876. Tennessee.— Chism v. Bank, 96 Tenn. 641, 36 S. W. 387, 32 L. R. A. 778; Unaka Nat. Bank v. Butler (1904), 113 Tenn. 574, 83 S. W. 655; Litchfield Shuttle Co. v. Cumberland Valley Nat. Bank, 134 Tenn. 379, 183 S. W. 1006. Vermont.— Hale v. Windsor Sav. Bank (1917), 98 Atl. 993. Virginia.— Colona v. Parksley Bank (1917), 92 S. E. 979. Washington.— GoodieWow v. First Nat. Bank (1913), 71 Wash. 554, 44 L. R. A. (N. S.) 580, 129 Pac. 90. Wisconsin.— Marling v. Fitzgerald (1909), 138 Wis. 93. 120 N. W. 388. United States.—Smith v. Nelson Land & Cattle Co., 212 Fed. Rep. 56 128 C. C. A. 512; Nat. Bank of Commerce v. U. S. (1915), 224 Fed. 679, 140 C. C. A. 219 (9th Ct.) ; U. S. v. Chase Nat. Bk. (1918), 250 Fed. 105 ; State v. Chase Nat. Bank, 241 Fed. 535, 537 ; American Hominy Co. V. Millikin Nat. Bank, 273 Fed. 550. England.— Vinden v. Hughes (1905), 1 K. B. 759; Bank of England v. Vagliano, L. R. (1891), A. C. 107; Clutton v. Attenborough, L. R. (1897), A. C. 90; Royal Bank v. Tottenham (1894), 2 Q. B. 715; North & South Wales Bank Ld. v. Macbeth (1908), 1 K. B. 13, L. R. (1908) A. C. 137. § 10. Terms, when sufficient. The instrument need not follow the language of this act, but any terms are sufficient which clearly indicate an intention to conform to the requirements hereof.i-i» 400 NEGOTIABLE INSTRUMENTS. §11 See text, §40. Cross section : 17. Alabama, Idaho, Iowa, North Carolina and Wyoming insert the word "negotiable" between the words "The" and "instrument" above. The Wisconsin act (No. 1675-10) adds to this section the following words : "Memoranda upon the face or back of the instrument, whether signed or not. material to the contract, if made at the time of delivery, are part of the instrument, and parol evidence is admissible to show the circumstances under which they were made." * Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states: Words sufficient if indicate promise to pay. Lehner v. Roth, — Mo. App. — , 227 S. W. 833. Terms of instrument need not follow statute to be negotiable. Nelson v. Citizens' Bank, 180 N. Y. S. 747. Words denoting that mortgage is assignable do not govern nego- tiability of note otherwise silent in its provisions. Quest v. Ruggles, 72 Wash. 609, 131 Pac. 202. Certificate of deposit payable on its return properly indorsed is negotiable. Forest v Safetv Banking & Trust Co. (E. D. Pa.), 174 Fed. 345. I'The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : Alabama.— Bledsoe v. City Nat. Bank of Selma, 180 Ala. 586, 60 So. 942. Maryland.— Black v. First Nat. Bank (1903), 96 Md. 399, 54 Atl. 88. Missouri.— Oshorne v. Fridrich (1908), 134 Mo. App. 449; Lehner v. Roth, 227 S. W. 833. New ForA-.— Gilbert v. Adams (1911), 131 N. Y. Supp. 787; Nelson V. Citizens' Bank, 180 N. Y. Supp. 747. Washington.— Quest v. Ruggles (1913), 72 Wash. 609, 131 Pac. 202. United States. — Forest v. Safety Banking & Trust Co. (E. D. Pa.), 174 Fed. 345. § 11. 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.^- ^* See text, §43. Construing corresponding provisions of English Bills of Exchange Act: 13 (1). § 12 FORM AND INTERPRETATION. 401 ^ Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states: Condition in note that it is not payable until payee performs certain services destroys negotiability. Spotton v. Dyer, — Cal. App. — , 184 Pac. 23. Burden of proving forgery by alteration of date is on defendant. National City Bank v. Shelton Electric Co., 96 Wash. 74, 164 Pac. 933. I'The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : Ca/(7onn"a.— Mollev v. Pierson (1918), 174 Pac. 98; Spotton v. Dyer, — Cal. App. — , 184 Pac. 23. Kentucky.— Ehey v. People's Bank of Bardwell (1916), 185 S. W. 873. New York.—Sugdir v. Silverman (1919), 173 N. Y. Supp. 182. Washington.— liational City Bank v. Shelton Electric Co., 96 Wash. 74, 164 Pac. 933. § 12. 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, ac- quires the title thereto as of the date of delivery.*- ^^ See text, §43. Missouri act uses word "valid" instead of "invalid," a clerical error. Corresponding provision of English Bills of Exchange Act: 13 (2). * Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states: Drawer can not be garnisheed as payee's debtor after delivery of post- dated check. American Agricultural Chemical Co. v. Scrimger, 130 Md. 389, 100 Atl. 774. Ante-dated or post-dated instruments and effect of. Bank of Hous- ton V. Day, 145 Mo. App. 410, 122 S. W. 756. Post-dating of instrument does not affect negotiability and negotiat- ing prior to date does not put indorsee upon inquiry. Trephonoff v. Sweeny, 65 Ore. 209, 130 Pac. 979. *»The following is a complete list of the cases, arranged alphabetically by states, vv^here this section has been construed : Idaho.—Smhh y. Fields (1911), 19 Ida. 558, 114 Pac. 668. Kentucky.— First Nat. Bk. v. Bickel (1911), 143 Ky. 754, 137 S. W. 790. 402 NEGOTIABLE INSTRUMENTS. § 13 Maryland. — American Agricultural Chemical Company v. Scrimger, 130 Md. 389, 100 Atl. 774. Missouri— Houston v. Day (1909), 145 Mo. App. 410, 122 S. W. 756. New York.— A]hert v. Hoffman (1909), 64 Misc. Rep. 87, 117 N. Y. Supp. 1043. Or^^oM.— Triphonoff v. Sweeney (1913), 65 Ore. 209, 130 Pac. 979. Pennsylvania.— Rathion v. Locher (1906), 215 Pac. 571. Virginia.— Colona v. Parksley Bank (1917), 92 S. E. 979. West Virginia.— Lewis Hubbard & Co. v. Morton (1917), 92 S. E. 252. JVisconsin.— Citizens Nat. Bank of Green Bay v. Harter (1908), 134 Wis. 408. § 13. When date may be inserted. Where an instru- ment expressed to be payable at a fixed period after date is is- sued 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 void the instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted is to be re- garded as the true date.^' ^* See text, §43. Cross section : 14. Construing corresponding provision of English Bills of Exchange Act : Section 12. ^ Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states: Knowingly inserting wrong date in undated instrument will avoid same as to party so inserting date. Bank of Houston v. Day, 145 Mo. App. 410, 122 S. W. 756. ^»The following is a complete hst of the cases, arranged alphabetically by states, where this section has been construed : Iowa.— Booch v. Goochi (1916), 16 N. W. 333. Missouri.— Houston v. Day (1916), 145 Mo. App. 410, 122 S. W. 756. Temiessee.—Ho\man v. Higgins, 134 Tenn. 387, 183 S. W. 1008, L. R. A. 1916F, 1263. r^;ra.y.— Landon v. Foster Drug Co. (1916), 186 S. W. 434. United States.— Richards v. Street (1908), 31 App. D. C. 427. § 14 FORM AND INTERPRETATION. 403 § 14. Blanks, when may be filled. Where the instru- ment is wanting in any material particular, the person in pos- session 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 instrument 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 there- to prior to its completion, it must be filled up strictly in accord- ance with the authority given and within a reasonable time. But if any such instrument after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time. See text, §58. Cross sections: 124, 125, 66, 109. 119-5, 52, 15. In Illinois the words "issued or" arc added before "negotiated" in the last sentence. In South Dakota the following is substituted for this section : "One who makes himself a party to an instrument intended to be negotiable, but which is left wholly or partly in blank, for the purpose of filling afterwards, is liable on 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 Kentucky act says "negotiable" instead of "negotiated." The Wisconsin act (No. 1675-14) reads, "complete it prior to nego- tiation by filling," etc., instead of "complete it by filling," etc. The Wisconsin act reads, "operates as an authority," etc., instead of "operates as a prima facie authority." * Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states: Alteration by inserting legal rate of interest in blank is not material. Crawford v. Simonton, 163 Ala. 609, 50 So. 1024. Payee may be holder in due course. Ex parte Goldberg v. Lewis, 191 Ala. 356, 67 So. 839, L. R. A. 191 5F, 1147. Insertion of more than legal rate in interest blank is material altera- tion. Ayers v. Walker, 54 Colo. 571. 131 Pac. 384. Estoppel is good against one who signs note in blank except name of payee where payee's firm filled in and negotiated it in bank after mdorsing payee's name. Richards v. Street, 31 App. Cas. D. C. 427. Where note given with authority to insert necessary amount of attorney's fees it was not an alteration to do so after services rendered, Kramer v, Scbnitzer, 268 111. 603, 109 N, E. 695, 404 NEGOTIABLE INSTRUMENTS. § 14 Filling in blank after words "payable at" docs not avoid instrument in hands of holder in due course. Johnston v. Hoover, 139 Iowa 143, 117 N. W. 277. Note payable "on or before four after date" is not a demand note. In re Estate of Philpott. 169 Iowa 555, 151 N. W. 825. When can payee be holder in due course. Devoy & Kuhn Coal Co. V. Huttig, 174 Iowa 357, 156 N. W. 413. Note should be reformed which was indorsed prior to payee's learn- ing of the omission of his name by putting in name. Farmers Loan & Trust Co. V. Brown (Iowa), 165 N. W. 70. Plaintiff's right to complete instrument. First Nat. Bank of Hawk- eye V. Patterson, — la. — , 177 N. W. 545. Where defendant signed note in blank for certain purpose and the purpose was carried out plaintiffs were holders for value, as note was filled in in accordance with authority, although done in plaintiff's presence. Herman's Exr. v. Gregory, 131 Ky. 819, 115 S. W. 809. It is not alteration to fill in blank with place of payment either within or without the state. Diamond Distilleries Co. v. Gott, 137 Ky. 585, 126 S. W. 131, 31 L. R. A. (N. S.) 643. Note executed in blank is issued to payee and not negotiated where his name appears as payee. Southern Nat. Life, etc., Co. v. People's Bank (Ky.), 198 S. W. 543. Person in possession of instrument made in blank has prima facte authority to fill in all blanks. Linthicum v. Bagby, 131 Md. 644, 102 Atl. 997. Incomplete instruments put purchaser upon inquiry as to authority to complete. Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N. E. 646, 97 Am. St. Rep. 426. Maker having added another provision note was held in due course by payee, who could sue the prior indorser in blank as indorser. Thorpe V. White, 188 Mass. 333, 74 N. E. 592. An instrument is negotiated when handed for value to the payee named therein. Liberty Trust Co. v. Tilton, 217 Mass. 462, 465, 105 N. E. 605, L. R. A. 191 5B,. 144. Check received by payee thereof from a third person in payment of debt is held in due course, although drawn without authority. National Investment Co. v. Corey, 222 Mass. 453, 111 N. E. 357. Check payable to bank received from third person in payment of his indebtedness, without notice of infirmities, was held in due course. Colonial Fur Co. v. First Nat. Bank, 227 Mass. 12, 116 N. E. 731. Payee can not be holder in due course. Long v. Shafer, 185 Mo. App. 641, 171 S. W. 69. Note in several inks not presumed completed before delivery and signature. Exchange Bank v. Robinson, 185 Mo. App. 582, 172 S. W. 628. Notes providing for interest in blank draw legal rate without filling blank. Hornstein v. Cifuno, 86 Neb. 103, 125 N. W. 136. Plaintiff has burden of showing blanks filled within reasonable time. Madden v. Gaston, 137 App. Div. 294, 121 N. Y. Supp. 951. Testimony of maker that authority to fill in blanks was not given will rebut presumption of authority. Equitable Trust Co. of New York V. Lyons, 72 Misc. Rep. 49, 129 N. Y. Supp. 79. Knowledge of transferee that instrument was incomplete and com- pleted before transfer puts him upon inquiry as much as accepting it uncompleted. Dumbrow v. Geld, 72 Misc. Rep. 400, 130 N. Y. Supp. 182. § 14 FORM AND INTERPRETATION. 405 Drawer can not recover when payee holder in due course. Berg- strom V. Ritz-Carlton Co., 171 App. Div. 776, 154 N. Y. Supp. 959. Delivery of note in blank gives implied authority to fill blanks. Business Man's League v. Sregow, 153 N. Y. Supp. 231. Payee holder in due course. Brown v. Brown, 91 Misc. Rep. 220, 154 N. Y. Supp. 1098. Prima facie authority to fill in blanks is rebuttable. Bloom v. Hor- witz, 100 Misc. Rep. 687, 166 N. Y. Supp. 786. When may payee in note executed in blank become purchaser for value. Miller v. Campbell. 173 App. Div. 821, 160 N. Y. Supp. 834. Plaintiff's right to fill in blank in note. Keister v. Wade, 182 N. Y. S. 119. Plaintiflf takes subject to equities of defendant against payee where signature is forgery. Seymour v. Leyman, 10 Ohio St. 283. Payee entitled to recover although surety induced to sign by fraud of maker. Potts v. First State Bank (Okla.), 151 Pac. 859. Person in possession has prima facie authority to fill blank in note. Simpson v. First Nat. Bank of Roseburg, — Ore. — , 185 Pac. 913. Payee may be holder for value when instrument is negotiated to him. Johnson v. Knipe (Pa.), 103 Atl. 957. Filling in an unauthorized amount is a defense and burden is on indorsee. Massey v. Massey, — Pa. — , 110 Atl. 341. Position of holder for value not necessarily changed because he is also payee. Figures v. Fly, 137 Tenn. 358, 378, 193 S. W. 117. Where note given with authority to cashier to fill in blank before words "after date" not avoided by his doing so four months later by adding words "four months." Howard National Bank v. Arbuckle (Vt.), 102 Atl. 477. Purchasers of incomplete instruments are put upon inquiry as to authority of person intrusted with them. Guerrant v. Guerrant, 7 Va. L. Reg. 639. Where one intrusted with note signed in blank exceeded amount authorized the holder was not a holder in due course against maker, the note being used to pay indebtedness and the holder's name inserted as payee. Herdman v. Wheeler (1902), 1 K. B. 361. Maker of note estopped to deny validity where note executed in blank to have amount inserted and name of designated payee, amount increased above authority. Lloyds Bank v. Cooke (1907), 1 K. B. 794. Payee never holder in due course. Lewis v. Clay, 67 L. T. Q. B. (N S.) 224. ^■The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : Alabama.— Goldberg v. Lewis, 191 Ala. 356, 67 So. 839. L. R. A. 191SF, 1157; Crawford v. Simonton, 163 Ala. 609, 50 So. 1024. Colorado.— Ayers v. Walker, 54 Colo. 571, 131 Pac. 384. Connecticut.— Chvdznd Co. v. Chittenden (1909), 81 Conn. 667, 71 Atl. 935. Illinois.— ManassieT v. Wright (1910), 158 111. App. 214; Kramer V. Schnitzer, 268 111. 603, 109 N. E. 695. Indiana. — Kindler Co. v. First Nat. Bank of Fond du Lac (1915), 109 N. E. 66. 406 NEGOTIABLE INSTRUMENTS. § 14 /owo.— Vander Ploey v. Van Zunk (1907), 135 Iowa 350. 112 N. W. 807 13 L. R. A. (N. S.) 490; Johnston v. Hoover (1908), 139 Iowa 143, 117 N. W. 277; LeClcrc v. Philpotl (1915), 169 Iowa 555, 151 N. W. 825; Devoy v. Kuhn Coal & Coke Co. (1916), 156 N. W. 412; Farmers Loan & Tr. Co. v. Brown (1917), 165 N. W. 70; Builders' Lime & Cement Co. v. Weimer, 170 Iowa 444, 151 N. W. 100, Ann. Cas. 1917C, 1174; Devoy & Kuhn Coal Co. v. Huttig, 174 Iowa 357, 156 N. W. 413; First Nat. Bank of Hawkeye v. Patterson, 177 N. W. 545. Kansas— Iowa City State Bank v. Claypool (1914), 137 Pac. 949. Kentucky.—Stan\ey v. Davis (1908). 32 Ky. L. 1135, 107 S. W. 773; Herman's Excr. v. Gregory (1909), 131 Ky. 819. 115 S. W. 809; Dia- mond Distilleries Co. v. Gott. 137 Ky. 585, 126 S. W. 131, 31 U R. A. (N. S.) 643; Southern Nat. Life, etc., Co. v. People's Bank (Ky.), 198 S. W. 543. Mar.v/CM(/.— Linthicum v. Bagby (1917), 131 Md. 644, 102 Atl. 997. Massachusetts. — Boston Steel & Iron Co. v. Steuer (1903), 183 Mass. 140, 66 N. E. 646, 97 Am. St. Rep. 426; Thorpe v. White, 188 Mass. 333, 74 N. E. 592; Lowell v. Bickford, 201 Mass. 543, 545, 88 N. E. 1 ; J. G. Brill & Co. v. Norton, etc.. Railway, 189 Mass. 431, 437, 75 N. E. 1090; Liberty Trust Co. v. Tilton, 217 Mass. 462, 105 N. E. 605, L. R. A. 19^58, 144; Colonial Fur Co. v. First Nat. Bank. 227 Mass. 12, 116 N. E. 731; Perry v. Pye (1913), 215 Mass. 403, 102 N. E. 653; Stone v. Sergeant (1915), 220 Mass. 445, 107 N. E. 1014; Tower V. Stanley (1915), 220 Mass. 429, 107 N. E. 1010; Munroe v. Stanley, 220 Mass. 438, 107 N. E. 1012. Missouri. — Exchange Bank v. Robinson, 185 Mo. App. 582, 172 S. W. 628; Long v. Shafer, 185 Mo. App. 641, 171 S. W. 69. Nebraska.— Rovr\?,\cm v. Cifuno, 86 Neb. 103, 125 N. W. 136; Hart- ington Bank v. Breslin (1910). 88 Neb. 47, 128 N. W. 659, 31 L. R. A. (N. S.) 130, Ann. Cas. 1912B 1008. New ForA;.— Yonker's Nat. Bank v. Mitchell (1913), 141 N. Y. Supp. 128; First Nat. Bank of the City of Brooklyn v. Bridley (1906), 112 A. D. 398, 98 N. Y. Supp. 445; Madden v. Gaston (1910), 137 A. D. 294. 121 N. Y. Supp. 951; Rodgers v. Baker (1910), 136 A. D. 851, 122 N. Y. Supp. 91; Eq. Tr. Co. of N. Y. v. Lyons (1911), 72 Misc. Rep. 49, 129 N. Y. Supp. 79; Dumbrow v. Gelb (1911), 72 Misc. Rep. 400, 130 N. Y. Supp. 182; Biz Men's League of Harlem v. Sragow (1915), 153 N. Y. Supp. 231; Brown v. Brown. 91 Misc. Rep. 220, 154 N. Y. Supp. 1098; Bergstron v. Ritz-Carlton Co., 171 App. Div. .776, 154 N. Y. Supp. 959; Cole v. Harrison (1915), 153 N. Y. Supp. 200; Flood v. Steinmetz (1915), 153 N. Y. Supp. 192; Bank of Franco-Americine V. Bergstrom (1916), 157 N. Y. Supp. 635; Keister v. Wade, 182 N. Y. Supp. 119; Union Tr. Co. of New Jersey v. McCrum (1911), 145 A. D. 409, 129 N. Y. Supp. 1078, affirmed without opinion, 207 N. Y. 721 ; Miller v. Campbell, 173 App. Div. 821. 160 N. Y. Supp. 834; Bloom v. Horwitz (1918). 100 Misc. Rep. 687, 166 N. Y. Supp. 786; Hathaway Co. v. Co. of Delaware. 185 N. Y. 368. 78 N. E. 153. 13 L. R. A. (N. S.) 273, 113 Am. St.Rep.209. North Carolina.— VhWW^s v. Hensley (1917), 94 S. E. 673. Ohio. — Seymour v. Lej^man, 10 Ohio St. 283. § 15 FORM AND INTERPRETATION. 407 Oklahoma.— Fotts v. First State Bank (Okla.), 151 Pac. 859.^ Oregon. — Simpson v. First Nat. Bank of Roseburg, — Ore. — , 185 Pac. 913 Pennsylvania. — Massy v. Massy, 110 Atl. 341 ; Johnston v. Knipe (Pa.), 105 Atl. 705; Johnston v. Knipe (Pa.), 103 Atl. 957. Tennessee. — Holman v. Higgins, 134 Tenn. 387, 183 S. W. 1008; Figures v. Fly, 137 Tenn. 358, 193 S. W. 117. Vermont.— B.o\i2ir A National Bank v. Arbuckle (Vt.), 102 Atl. 477. Virginia. — Guewant v. Guewant (1902), 7 Va. L. R. 639; Brown v. Thomas (1917), 92 S. E. 977. Washington.— BoviXts v. Frazer, 59 Wash. 336, 109 Pac. 812, 31 L. R. A. (N. S.) 613. West Virginia.— Rvism\ss&\ v. White Oak Co. (1917), 92 S. E. 672. § 15. Incomplete instrument not delivered. Where an incomplete instrument has not been delivered it will not, if com- pleted and negotiated, without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery.^' ^' See text, § 53. In the Wisconsin Act the word "negotiation" is substituted for the word "delivery" at the end of the section. * Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states : Plea must show knowledge of incompleteness to affect its validity. Bass V. Lee (Fla.), 74 So. 7. Maker is not liable where notes in blank were not delivered even in hands of innocent holder. Holzman, Cohen & Co. v. Teague, 158 N. Y. Supp. 211. '" The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : Colorado.— ^ormzin v. McCarthy (1913), 138 Pac. 28. Florida. — Bass v. Lee (Fla.), 74 So. 7. Louisiana.— FoWzotto v. People's Sav. Bank (1910), 125 La. 770, 51 So. 843. MwjOMn.— Burchett v. Fink (1909). 139 Mo. App. 381; Chitwood V. Hatfield (1909), 136 Mo. App. 688; Allen Grocery Co. v. Bank of Buchanan Co. (1916), 192 Mo. App. 476, 181 S. W. 777. New York.— Linick v. Nutting (1910), 125 N. Y. Supp. 93; Holz- man, Cohen & Co. v. Teague (1915), 156 N. Y. Supp. 290; Holtzman, 408 NEGOTIABLE INSTRUMENTS. § 16 Cohen & Co. v. Teague (1916), 158 N. Y. Supp. 211; Rubel v. Honig 0917), 164 N. Y. Supp. 219. Washington.—Seaiik Nat. Bk. v. Becker (1913), 133 Pac. 613. West Virginia.— Rusmissel v. White Oak Stave Co. (1917), 92 S. W. 672. United States. — In re Continental Engine Co. (1916), 234 Fed. 58. §16. Delivery; when effectual; when presumed. Every contract on a negotiable instruinent is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a re- mote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the au- thority of the party making, drawing, accepting or indorsing, as the case may be ; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. 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. •*■ ** See text. § 53. Cross sections: 15, 64-1, 109, 56, 9-5, 56, 124, 191, 51, 187, 52-3, 55. The North Carolina Act (Sec. 16) omits "accepting" in the second sentence. Kansas omits next to the last sentence. In South Dakota the third paragraph beginning with the word "but" and ending with the word "presumed" is omitted and the following sentence substituted : "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 void- able and notwithstanding any defect in the title of the person from whom he acquired it," * Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states: Notice of failure to comply with conditions before delivery must be shown to holder before successful defense on that ground. Ex parte Goldberg & Stone, 191 Ala. 356, 67 So. 839. Conditional delivery contract need not be in writing. Norman v McCarthy, 56 Colo. 290. 138 Pac. 28. Transfer which constitutes delivery. Lewis County v. State Bank of Peck, — Ida. — , 170 Pac. 98. § 16 FORM AND INTERPRETATION. 409 Delivery of note on condition shown by oral evidence. Straus v. Citizens State Bank, 164 111. App. 420. Date of delivery makes note effective and mailing same is sufficient Burr v. Becklar, 264 111. 230, 106 N. E. 206, L. R. A. 1916A, 1049. Where note is negotiated in breach of faith holder has burden of l-roof to show holder in due course. Waukee Sav. Bank v. Jones, 179 Iowa 261, 159 N. W. 691. Agreement before delivery that maker was not to pay cannot be shown. Stevens v. Inch, 98 Kan. 306, 158 Pac. 43. Parol agreement before execution cannot be shown that note was to be extended. Commercial Nat. Bank v. Hutchinson Box Co., 98 Kan. 350, 158 Pac. 44. Surety may show conditional signing if he shows payee's- knowledge before delivery. Goutermont v. Bland, 99 Kan. 431, 162 Pac. 270. Holder in due course may recover on note indorsed in blank by payee from whom it was stolen. Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959. Bill of exchange must be delivered and indorsed by payee before it is in existence when made to the order of the drawer. Stouffcr v. Curtis, 198 Mass. 560, 85 N. E. 180. Holder in due course entitled to recover although check issued without authority. Buzzell v. Tobin, 201 Mass. 1, 86 N. E. 923. Holders in due course are not immediate parties. Libertv Trust Co. V. Tilton, 217 Mass. 462, 464, 105 N. E. 605, L. R. A. 19r5B, 144. Selling of note to payee named therein is a negotiation thereof. National Investment Co. v. Corey, 222 Mass. 453, 111 N. E. 357. No delivery held to be defense against holder in due course. Shef- fer V. Fleischer, 158 Mich. 270, 122 N. W. 543. Where municipal bonds payable to bearer are stolen and negotiated, purchaser takes title in good faith it is valid. Citv of Adrian v. Whitney Central Nat. Bank, 180 Mich. 171, 146 N. W. 654. Checks drawn to order of A, who indorsed them and gave them to drawer to deliver to B, held delivered to A. Behrens v. Kruse, 132 Minn. 69, 155 N. W. 1065. Conditional delivery for special purpose shown as defense against payee. First Nat. Bank v. Miller, — N. D. — , 179 N. W. 997. Failure of performance of condition as part of delivery may be shown by parol evidence. Gamble v. Riley, 39 Okla. 363, 135 Pac. 390. Agreement as to maker's liability to pay one-half is no defense. Bailey v. Lankford (Okla.), 154 Pac. 672. When note transferred by payee before maturity and after payment of maker is good in hands of holder in due course. Critser v. Steeley (Okla.), 162 Pac. 795. Burden of proving conditional delivery of note in blank is on de- fendant. Madden v. Gaston, 137 App. Div. 294, 121 N. Y. Supp. 951 Check stolen by payee and endorsed for value, holder in due course entitled to recover. Schaeffer v. Marsh, 90 Misc. Rep. 307, 153 N. Y. Supp. 16. Conversation at time of making note admissible only to show no contract until a certain event happened. Weinhandler v. Loewenthal, 159 N. Y. Supp. 695. Delivery on unfulfilled condition must be pleaded. Bloom v. Hor- .witz. 97 Misc. Rep. 622, 162 N. Y. Supp. 230, 410 NEGOTIABLE INSTRUMENTS. § 16 Note delivered on condition which was not fulfilled is not shown to have valid inception. Rubel v. Honig, 178 App. Div. 53, 164 N. Y. Supp. 219. Collateral oral agreement cannot be shown unless fraud, accident or mistake pleaded. Cherokee Co. v. Meroney, 173 N. C. 653, 92 S. E. 616. Parol evidence may be admitted to show execution of note upon conditions of a certain contingency happening. Farrington v. McNeill, 174 N. C. 420, 93 S. E. 957. Parol evidence to vary date of falling due not admissible. Home- v;ood People's Bank v. Heckert, 207 Pa. 231, 56 Atl. 431. Maker may show want of consideration and intention of parties as tc delivery. Lee v. Benjamin (R. I.), 102 Atl. 713. When delivery presumed. Commercial Security Co. v. Donnald Drug Co., — S. Car. — , 96 S. E. 529. Defendant has burden of showing conditional delivery. Smith v. Brown (Utah), 165 Pac. 468. When evidence shows no contract or conditioned delivery. Mar- tineau v. Hanson, 47 Utah 549, 155 Pac. 432. Conditioned endorsement before delivery must be shown to have been called to attention of payee before delivery completed. Farmers' & Stockgrowers' Bank v. Pahvent Valley Land Co. (Utah), 165 Pac. 462. Failure of payee to secure additional indorsers as agreed may be set up as defense of conditional delivery. Seattle National Bank v. Becker, 74 Wash. 431, 133 Pac. 613. Oral agreement to pay from certain fund does not control promise to pay in note. Gwinn v. Ford, 85 Wash. 571, 148 Pac. 891. Note stolen from maker held valid in hands of holder for value. Angus V. Downs, 85 Wash. 75, 147 Pac. 630, L. R. A. 19^ 5E, 351. Prior agreement to surrender note upon condition happening is not admissible. Post v. Tamm, 91 Wash. 504, 158 Pac. 91. Contemporaneous oral agreements may be shown between parties other than holders in due course. Hodge v. Smith, 130 Wis. 326, 110 N. W. 192. Parol testimony mav show intent as to delivery. Paulson v. Boyd, 137 Wis. 241, 118 N. W. 841. Where note to bank, an assignment of stock placed with bank con- ditioned that if stock taken note to be collected, delivery held condi- tional. Union Investment Co. v. Epley, 164 Wis. 438, 160 N. W. 175. Conditions of delivery mav be shown between parent and child. Storey v. Storey, 131 C. C. A. 269, 214 Fed. 973. Note handed to payee with understanding that A must sign is not delivered. Continental Engine Co., In re, 234 Fed. Rep. 58, 148 C. C. A. 74. Holder in due course entitled to recover on municipal bonds although indorser had no valid delivery. Town of Newbern v. National Bank, 234 Fed. 209, 148 C. C. A. 111. Terms of note not varied bv parol evidence showing installment privileges. Nalitzky v. Williams, 237 Fed. Rep. 802, 151 C. C. A. 44. Contract not in writing not to very terms of note. Hitchings, etc., Co. V. Northern Leather Co. (1914), 3 K. B. 907. Where payee indorsed bill of exchange and handed to bank for discount the property therein did not pass until discounted. Dawson v, Isle (1906), 1 Ch. 633. § 16 FORM AND INTERPRETATION. 411 la. The following is a complete lists of the cases, arranged alphabetically by states, where this section has been construed: Alabama. — Bank of Tallasee v. Jordan (1917), 75 So. 930; Norwood V. Stinnett (1919), 80 So. 431; Bank of Carterville v. Gunter, 4 Ala. App. 539, 58 So. 757; Stone v. Goldberg & Lewis (1912), 6 Ala. App. 249, 60 So. 744; Bledsoe v. City Nat. Bk. of Sclma (1912). 7 Ala. App. 195. 60 So. 942; Goldberg v. Stone. 191 Ala. 356, 67 So. 839; Haas v. Com- merce Tr. Co. (1915), 69 So. 984; Citizens Nat. Bank v. Bucheit (1916). 71 So. 82. Arizona.— Gray v. Baron (1910), 13 Ariz. 70, 108 Pac. 229; Fidelity Title Guaranty Co. v. Ruby, 16 Ariz. 75, 141 Pac. 117. Arkajtsas.—Ard v. Bowie (1916), 125 Ark. 169, 187 S. W. 1066; Horn V. Brand (1918), 203 S. W. 5. Colorado.—Sayre v. Leonard (1914). 57 Colo. 116, 140 Pac. 196; De- vine V. Western Slope Assn., 27 Colo. App. 368; Norman v. McCarthy, 56 Colo. 290, 138 Pac. 28. Delaware. — Wilmington Trust Co. v. Morgan, 28 Del. 261, 92 Atl. 988. CoM«^c/tVM^— Atwood V. Atwood (1913). 86 At!. 29. F/onrfa.— Bland v. Fidelity Trust Co. (1916). 71 So. 630: Donegan V. Dekle Inv. Co. (1917), 74 So. 11; Williams v. Peninsular Grocery Co. (1917), 75 So. 517. Idaho.— Lewis County v. State Bank of Peck, — Ida. — . 170 Pac. 98. ///mot.y.— Shipley v. Carroll, 45 111. 285; Clarke v. Johnson, 54 III. 296; Strauss v. Citizen's St. Bank of Elmhurst (1911), 164 111. App. 420; Burr v. Beckler, 264 III. 230, 106 N. E. 206, L. R. A. 1916A, 1049. lowa.—Sdma Sav. Bank v. Harlan (1914), 167 Iowa 673, 149 N. W. 882; Roy v. Duff (1915). 152 N. W. 606; Rule v. Carey (1916). 159 N. W. 699; Waukee Sav. Bank v. Jones, 179 Iowa 261, 159 N. W. 691. Kansas.— Wood v. Bank of Whitewater (1914), 91 Kans. 522; Bar- tholomew V. Fell, 92 Kans. 64, 139 Pac. 1016; Goutermont v. Bland, 99 Kan. 431, 162 Pac. 270; Commercial Nat. Bank v. Hutchinson Box Co., 98 Kan. 350, 158 Pac. 44; Stevens v. Inch, 98 Kan. 306. 158 Pac. 43. Kentucky.— Key v. Usher (1907), 30 Ky. L. R. 667, 99 S. W. 324. Massachusetts.— Mass. Nat. Bank v. Snow (1905\ 187 Mass. 159. 72 N. E. 959; Hill v. Hall. 191 Mass. 253, 77 N. E. 831; StoufTer v. Curtis (1908), 198 Mass. 560, 85 N. E. 180; Buzzell v. Tobin (1909), 201 Mass. 1, 86 N. E. 923; Liberty Trust Co. v. Tilton, 217 Mass. 462, 464, 105 N. E. 605, L. R. A. 1915B. 144; National Investment Co. v. Corey. 222 Mass. 453, 111 N. E. 357. Michigan. — Gen. Conf. Assn. etc. v. Mich. Sanitarium (1911). 166 Mich. 504; Sheffer v. Fleischer, 158 Mich. 270, 122 N. W. 543; City of Adrian v. Whitney Central Nat. Bank, 180 Mich. 171, 146 N. W. 654, Minnesota.— Bchrens v. Kruse (1916), 132 Minn. 69, 155 N. W. 1065. Mississippi— Homes Bros, v, McCall (1916), 74 So. 786. 412 NEGOTIABLE INSTRUMENTS. § 16 Missouri— Scmmcs & Co. v. Barnett (1916), 190 S. W. 394; Chand- ler V. Hedrick, 187 Mo. App. 664, 173 S. W. 93. New Jersey. — Borough of Montvale v. People's Bank (1907), 74 N. J. Law 464, 67 Atl. 67; Linbarger v. Board of Education of West N. Y. (1912), 83 N. J. L. 446, 85 Atl. 235. New York.— Greeser v. Sugarman (1902), 76 N. Y. Supp. 922, 37 Misc. Rep. 799; Poess v. Twelfth Ward Bank (1904), 43 Misc. 45, 86 N. Y. Supp. 857; Moak v. Stevens (1904), 45 Misc. Rep. 147, 91 N. Y. Supp. 903; Colburn v. Arbccan (1907), 54 Misc. 623, 104 N. Y. Supp. 926; Madden v. Gaston (1910), 137 A. D. 294, 121 N. Y. Supp. 951; Linick v. Nutting (1910), 125 N. Y. Supp. 93; Pfister v. Heins (1910), 136 A. D. 457; Stoughton v. Chu Fong (1911), 130 N. Y. Supp. 228; Niblock v. Sprague (1911), 200 N. Y. Supp. 390; Smith v. Dotterweich (1911), 200 N. Y. 299, 93 N. E. 985, 33 L. R. A. (N. S.) 829; In re Marine (1912), 140 N. Y. Supp. 230; Yonker's Nat. Bank v. Michell (1913), 141 N. Y. Supp. 128; Senft v. Schaeffer (1913), 142 N. Y. Supp. 380, 81 Misc. 152; Flood v. Steinmetz (1915), 153 N. Y. Supp. 192; Holzman, Cohen & Co. v. Teague (1915), 156 N. Y. Supp. 290; Schaeffer v. Marsh (1915), 90 Misc. Rep. 307, 153 N. Y. Supp. 96; Weinhandler v. Loewenthal, 159 N. Y. Supp. 695; Empire Trust Co. V. Manhattan Co. (1916), 162 N. Y. Supp. 629; Bloom v. Horwitz, 97 Misc. Rep. 622, 162 N. Y. Supp. 230; Holtzman, Cohen & Co. v. Teague (1916), 158 N. Y. Supp. 211; Empire Trust Co. v. President & Directors Man Co. (1917), 162 N. Y. Supp. 629; Dalrymple v. Schwartz (1917), 164 N. Y. Supp. 496; Rubel v. Honig, 178 App. Div. 53 (1917), 164 N. Y. Supp. 219; Grannis v. Stevens, 216 N. Y. 583, 111 N. E. 263; Niblock v. Sprague, 200 N. Y. 390, 93 N. E. 1105. North Dakota.— Vkts v. Silver, 15 N. Dak. 51, 106 N. W. 35; First State Bank of Eckman v. Kelly (1915), 30 N. Dak. 84, 152 N. W. 125; Stockton V. Turner (1915), 152 N. W. 275; Marlatt v. Coulture (1919), 169 N. W. 582 ; First Nat. Bank v. Miller, 179 N. W. 997. North Carolina.— Cherokee Co. v. Meroney, 173 N. C. 653, 92 S. E. 616; Farrington v. McNeil, 174 N. C. 420, 93 S. E. 957. Oklahoma.— Gamble v. Riley (1913*), 39 Okla. 363, 135 Pac. 390; Critser v. Steeley (Okla.), 162 Pac. 795; Bailey v. Lankford (Okla), 154 Pac. 672. Oregon.— Gress v. Wessinger (1918), 172 Pac. 495; Louis County v. Bank of Peck (1918), 170 Pac. 98. Pennsylvania.— First Nat. Bank v. McBride (1911), 230 Pac. 261; Lincoln Nat. Bank of Pittsburg v. Miller (1917), 100 Atl. 269, 255 Pa. 467; Homewood Peoples' Bank v. Heckert, 207 Pa. 231, 56 Atl. 431. Rhode Island.— Lee v. Benjamin (R. L), 102 Atl. 713. South Carolina. — Commercial Security Co. v. Donnald Drug Co. (1918), 96 S. E. 529. South Dakota.— Piper v. Hagen (1914), 146 N. W. 692; Larson v. Sequin (1914), 149 N. W. 174. f//a/j.— Martineau v. Hanson, 47 Utah. 549, 155 Pac. 432; Smith v. Brown (1917), 165 Pac. 468: Bank y, Pahvent Valley Land Co. (Utah), 165 Pac. 462. 1 § 17 FORM AND INTERPRETATION. 413 Washington.— Vo^i v. Tamm, 91 Wash. 504, 158 Pac. 91 ; Angus v. Downs (1915), 147 Pac. 630. 85 Wash. 75, L. R. A. 1915E, 351; Morris- Miller Co. V. Von Pressentin, 63 Wash. 74, 114 Pac. 912; Seattle National Bank v. Becker, 74 Wash. 431, 133 Pac. 613; Gwin v. Ford, 85 Wash 571, 148 Pac. 891. Wisconsin.— Schuhz v. Kosbab (1905), 125 Wis. 157; Hodge v. Smith (1907), 130 Wis. 326, 110 N. W. 192; Paulson v. Boyd (1908), 137 Wis. 241, 118 N. W. 841; U. S. Investment Co. v. Epley (1916), 164 Wis. 438, 160 N. W. 175; Harder v. Reinhardt, 162 Wis. 558, 156 N. W. 959. United States. — Continental Engine Co., In re, 234 Fed. Rep. 58, 148 C. C. A. 74; Nalitzky v. Williams, 237 Fed. Rep. 802, 151 C. C A. 44; United States v. Chase Nat. Bank. (1917), 241 Fed. 535; Storey v. Storey, 131 C. C. A. 269, 214 Fed. 973; Town of Newburn v. National Bank, 234 Fed. 209, 148 C. C. A. 111. § 17. Construction where instrument is ambiguous. Where the language of the instrument is ambiguous, or there are omis- sions therein, the following rules of construction apply : 1. Where the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum de- noted by the words is the sum payable; but if the words are ambiguous or uncertain, reference may be had to the figures to fix the amount. 2. Where the instrument provides for the payment of in- terest, without specifying the date from which interest is to run, the interest runs from the date of the instrument, and if the in- strument is undated, from the issue thereof ; 3. Where the instrument is not dated, it will be considered to be dated as of the time it Vv^as 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 in- tended 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.*' *■ See text, § 299. Cross sections : 64, 63. 414 NEGOTIABLE INSTRUMENTS, § 17 In North Carolina subsection 2 is omitted and transferred to an- other section of the law. The Wisconsin act (No. 1675-17) adds another subdivision, viz.; "8. Where several writings are executed at or about the same time, as parts of the same transactions, intended to accomplish the same object, they may be construed as one and the same instrument as to all parties having notice thereof." * Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states : Purpose for which signature placed on note. Pineland Realty Co. v. Clements, — La. — 88 So. 818. Joint and several note holder may proceed against one in equity and the other at law. Lewenstein v. Forman, 223 Mass. 325, 111 N. E. 962. If doubt whether instrument is a bill or note, holder may treat it as either. Didato v. Coniglio, 50 Misc. Rep. 280, 100 N. Y. Supp. 466. Negotiable if blank left for rate of interest. Franklin Nat. Bank v. Roberts Bros., 168 N. C. 473, 84 S. E. 706. One signing instrument and not otherwise showing is an indorser. Krumm v. El Reno State Bank, — Okla. — , 201 Pac. 364. Parol evidence not admissible to show that one intended to sign as an indorser where he signs in place of maker. Lumbermen's Nat. Bank of Portland v. Campbell, 61 Ore. 123, 121 Pac. 427. Although not signing as an indorser held to be an indorser by in- tendment. Moore v. Carey, 138 Tenn. 332, 197 S. W. 1093. Parol evidence admissible to show corporation signed as surety. Spencer v. Alki Point Transportation Co., 53 Wash. 17, 101 Pac. 509. Where signature does not indicate capacity person intended to sign, it is as indorser. Bank of California v. Starrett, — Wash. — , 188 Pac. 410. One signing in place of maker's name is not an indorser. Ger- mania Nat. Bank v. Mariner, 129 Wis. 544, 109 N. W. 574. Where ambiguity as to written and typewritten the writing pre- vails and note is not uncertain. Acme Coal Co. v. Northrup Nat. Bank, 23 Wyo. 66, 146 Pac. 593, L. R. A. 191 5D, 1084. *' The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : Alabama.— '^tW v. Birmingham (1913), 9 Ala. App. 212, 62 So. 971; Potter . Tucker (1914), 66 So. 922; Turner v. Turner (1915), 69 So. 503; Long V. Givin (1919), 80 So. 440. Colorado. ~V>\\try v. Brohm (1905), 20 Colo. App. 389, 79 Pac. 180; Milnen Bank & Trust Co. v. Whipple (1916), 156 Pac. 1098. Connecixcut.—?xQZ\ox v. Banby, 90 Conn. 251, 96 Atl. 935. 7//mo«.— Illinois v. Lewinger (1911), 252 111. 332, 96 N. E. 837, Ann. Cas. 1912D, 239; Burr v. Beckler (1914), 106 N. E. 206, 264 111. 230. /ozm.— Porter v. Moles (1911), 151 Iowa 279, 131 N. W. 23. Kentucky. — Mechanics & Farmer's Sav. Bank v. Katterjohn (1910), 137 Ky. 427, 125 S. W. 1071. § 18 FORM AND INTERPRETATION. 415 Louisiana.— J. I. Case Threshing Machine Co. v. Bridger (1913), 133 La. 754, 63 So. 319; Pineland Realty Co. v. Clements, — La. — , 88 So. 818. Massachusetts.— Lcwenstcin v. Forinan (1916), 223 Mass. 325, 111 N. E. 962. Minnesota.—Spieving v. Spiering (1917), 164 N. W. 583. Missotiri.— Bank of Houston v. Day (1909), 122 S. W. 756, 145 Mo. App. 410. Nebraska.— Hornstein v. Clifuno (1910), 86 Neb. 103. New Mexico.— mil v. Hart (1917), 167 Pac. 710. New York.— Didato v. Coniglio (1906), 100 N. Y. Supp. 466, 50 Misc. 280; Tanner's Nat. Bank v. Lacs (1909), 136 A. D. 92, 120 N. Y. Supp. 669; Van Vlict v. Kanter (1910), 124 N. Y. Supp. 63. North Caro/ma.— Franklin Nat. Bank v. Roberts Bros., 168 N. C. 473, 84 S. E. 706. O/iio— Dollar Sav. Bank v. Barberton Pottery Co. (1907), 17 Ohio Dec. 539. Oklahoma.— Critsar v. Steley (1917), 162 Pac. 795; Krumm v. El Reno State Bank, — Okla. — , 201 Pac. 364. Or^^ron.— Lumberman's Nat. Bank of Portland v. Campbell (1912), 61 Oreg. 123, 121 Pac. 427; Anderson v. Stayon State Bank (1916), 82 Ore. 357, 159 Pac. 1033. Rhode Island.— De^hey v. Choquet (1907), 28 R. L 338. Tennessee.— Moore v. Carey (1917), 138 Tenn. 332, 197 S. W. 1093. Washington.—Spencer v. Alki Point Transp. Co. (1909), 53 Wash. 77, 101 Pac. 509; Pease v. Syler (1914), 138 Pac. 310; Churchill v. Miller (1916), 90 Wash. 694, 156 Pac. 851; Smith v. Doty (1916), 157 Pac. 881; Bank of California v. Starrett, 188 Pac. 410. Wisconsin.— Germania. Nat. Bank v. Mariner (1906), 129 Wis. 544, 109 N. W. 574. Wyoming.— Acme Coal Co. v. Northrup Nat. Bank of Ida (1915), 23 Wyo. 66, 146 Pac. 593, L. R. A. 1915D, 1084. § 18. Liability of person signing in trade or assumed name. No person is liable on the instrument whose signature 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.^' ^' See text, § 44. Cross sections : 42, 49. Corresponding provisions of English Bills of Exchange Act: 23, (1), (2). 416 NEGOTIABLE INSTRUMENTS. ' § 19 Wyoming omits the word "expressly" in the first sentence." * Digest of some of the decisions in ivhich this section is con- strued, arranged alphabetically by states: Condition in note payable on demand did not affect its negotiability. Goodfellow V. Farnham, — Mass. — , 128 N. E. 776. Liability of person who does not sign note. Young v. Bray, 54 Mont. 415. Only partner who signed held to be liable. Logan v. Parson, 79 Ore. 381, 155 Pac. 365. When a note is signed in the firm name by "A, member of the firm authorized to sign the firm name," all partners are liable. Frazier V. Cottrell, 82 Ore. 614. 162 Pac. 834. Not pertinent to an oral guaranty by the pavee. Swenson v. Stolz, 36 Wash. 318, 78 Pac. 999. *" The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed : Kansas. — New York L. Ins Co. v. Martindale (1907), 75 Kans. 142, 88 Pac. 559, 121 Am. St. 362. Massachusetts. — Goodfellow v. Farnham, 128 N. E. 776. Missouri. — Mineral Belt Bank v. Elking Lead & Zinc Co. (1913), 158 S. W. 1066. Montana.— Kohrs v. Smith (1912), 45 Mont. 467, 124 Pac. 275; Young V. Bray (1918), 170 Pac. 104; First Nat. Bank v. Cottonwood Land Co., 51 Mont. 544, 154 Pac. 582. Oregon. — Logan v. Parson, 79 Ore. 381, 155 Pac. 365; Gardner v. Wiley (1905). 46 Oreg. 96, 79 Pac. 341; Frazier v. Cottrell, 82 Ore. 614, 162 Pac. 834. Washington.—St2it\.\t Shoe Co. v. Packard (1906), 43 Wash. 527, 86 Pac. 845, 117 Am. St. 1064; Swenson v. Stoltz, 36 Wash. 318, 78 Pac. 999. Wisconsin.— YrzWmg v. Sicher (1919), 169 N. W. 607. United States.— In re Robson (1914), 218 Fed. 452 (C. C. A., 2d Ct.) §19. 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 pur- pose; and the authority of the agent may be established as in other cases of agency.*' *' See text. §§ 44, ZZ. The Kentucky act reads : "The signature of any party may be made by an agent duly authorized in writing." § 20 FORM AND INTERPRETATION. 417 Construing corresponding provision of English Bills of Exchange Act: Sec. 91. * Digest of some of the decisions in which this section is construed arranged alphabetically by states: In Kentucky the authority to execute a negotiable instrument must be in writing, but not to execute a non-negotiable instrument. Finley V. Smith, 165 Ky. 445, 177 S. W. 262, L. R. A. 191 5F, 111. Necessary to show authority of the agent to indorse. Scotland County Nat. Bank v. Hohn. 146 Mo. App. 699, 125 S. W. 539. Matter of sufficient proof of authority is left to the common law. Grant Co. State Bank v. N. W. Land Co., 28 N. D. 479, 150 N. W. 736. *' The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: /owa.— Watts V. Savings Bank (1917), 165 N. W. 897. Kansas.— ^t^ York L. Ins Co. v. Martindalc (1907), 75 Kans. 142, 88 Pac. 559, 121 Am. St. 362. Kentucky.— Ym\ty v. Smith, 165 Ky. 445, 177 S. W. 262, L. R. A. 191SF, W. Massachusetts.—Stone v. Sergeant (1915), 107 N. E. 1014. Missouri.— Houston v. Day (1909), 145 Mo. App. 410; Scotland Co. Nat. Bank v. Hohn (1910), 146 Mo. App. 699, 125 S. W. 539; Gage v. Bank of Holcomb (1917), 196 S. W. 1077. Nebraska.— First Nat. Bank of Shenandoah v. Kelgord (1912), 91 Neb. 178. 135 N. W. 548. New For^fe.— Burstein v. People's Tr. Co. (1911), 143 A. D. 165; Burstein v. Sullivan (1909), 134 A. D. 623; Hubbard v. Syemite Trap Rock Co. (1917), 165 N. Y. Supp. 486; Standard Steam Spec Co. v. Corn Exch. Bank (1917), 116 N. E. 386, 220 N. Y. 478. North Dakota.— Grant Co. State Bank v. N. W. Land Co., 28 N. D. 479, 150 N. W. 736. Washington. — Nat. Bank of Commerce of Seattle v. Puget Sound Biscuit Co. (1910), 6 Wash. 192, 112 Pac. 265; Citizens Nat. Bank v. Ariss (1912), 68 Wash. 448; Hanson v. Northern Bank & Trust Co. (1917), 167 Pac. 97. United States. — Nat. Bank of Commerce in St. Louis v. Sancho Pag. Co. (1911), 110 C. C. A. 112, 186 Fed. 257. § 20. Liability of person signing as agent, etc. 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 describ- 418 NEGOTIABLE INSTRUMENTS. § 20 ing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from perr sonal liability.*' *" See text. §§ 33, 125. Cross sections: 17-6, 63. 64. The Virginia act (§ 20) inserts after "capacity," "without disclosing his principal." Construing corresponding provisions of English Bills of Exchange Act: Sec. 26 (1), (2). * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Parties held individually liable contrary to general rule. Briel v. Exchange National Bank, 172 Ala. 475, 55 So. 808. Evidence admitted to show relation. Peabody School Furnlturfe Co. V. Whitman, 6 Ala. App. 182, 60 So. 470. Held liable as individuals. Briel v. Exchange Nat. Bank, 180 Ala. 576, 61 So. 277. Parol evidence admissible. Planters Chemical, etc., Co. v. Stearns, 189 Ala. 503, 66 So. 699. Note with seal of company and signed by ofificers is note of the company. New England Electric Co. v. Shook, 27 Colo. App. 30, 145 Pac. 1002. N^me of company printed on note and signed "A. Pres." held note of company. Second Bank v. Midland Co., 155 Ind. 581. When signature; to note is as agent or individual. Flick v. Jordan, — Ind. — , 129 N. E. 42. Note held individual obligation and not of corporation. Day v. Ramsdell, 90 Iowa 731, 52 N. W. 208. Personal note of maker, as no principal named. Schumaker v. Dolan, 154 Iowa 207, 134 N. W. 624. Oral evidence not admissible to show note that of corporation. McCandless v. Belle Plaine Co., 78 Iowa 161, 42 N. W. 635, 4 L. R. A. 396. Personal and not corporate liability. Exchange Bank v. Schultz, 167 Iowa 136, 149 N. W. 99. Evidence admissible to show note that of company. Western Gro- cer Co. V. Lackman, 75 Kan. 34, 88 Pac. 527. By sections 20 and 58 construed together parol evidence admissible G. C. Riordan & Co. v. Thornsbury, 178 Ky. 324, 198 S. W. 920. Agent of undisclosed principal personally liable. Dayries v. Lindsly, 128 La. 259, 54 So. 791. Proof required In show liabilitv. Belmont Dairy Co. v. Thresher, 124 Md. 320, 92 Atl. 766. Intention of parties to be carried out if possible. Carpenter v. Farnsworth, 106 Mass 561. Note held that of corporation. Miller v. Roach, 150 Mass. 140, 22 N. E. 634, 6 L. R. A. 71. Estate not liable where name does not appear on note. Tuttle v. First Nat. Bank of Greenfield, 187 Mass. 533, 73 N. E. 560. 105 Am. St. Rep. 420. § 20 FORM AND INTERPRETATION. 419 Trustee individually liable if he had no authority to sign for the estate. Dunham v. Blood, 207 Mass. 512, 93 N. E. 804. Under section 20 agent not liable if he describes himself as agent of a disclosed principal. Jump v. Sparling, 218 Mass. 324, 105 N. E. 878. When evidence admissible in support of answer of signature in rep- resentative capacity. Adams v. Swig, — Mass. — , 125 N. E. 857. Officer held liable as an individual. Rudolph Wurlitzer Co. v. Rossman, 196 Mo. App. 78, 190 S. W. 636. Note ambiguous and parol evidence admissible to show whether it was signed as an individual. Myers v. Chesley, 190 Mo. App. 371, 177 S. W. 326. Note signed "A Co., B, Prest.," held note of the corporation. Reeve V. First Bank, 54 N. J. L. 208, 23 Atl. 853, 16 L. R. A. 143. Section 20 does not change the law in New Jersey, Phelps v. Weber, £4 N. J. L. 630, 87 Atl. 468. Note signed by agent and corporation liable. Crandall v. Robbins, 83 App. Div. 618, 82 N. Y. Supp. 317. Depends on knowledge of payee whether trustee is bound indi- vidually or otherwise. Kerby v. Reugamer, 107 App. Div. 491, 95 N. Y. Supp. 408. As note was ambiguous evidence was admitted to show it was that of the company. Dunbar Co. v. Martin, 53 Misc. Rep. 312, 102 N. Y. Sup. 91. Committee and officers not personally liable. Chelsea Exch. Bank v. First United Presbyterian Church, 89 Misc. Rep. 616, 152 N. Y. Supp. 201. Trustee bound unless name of principal appears on note. Megowan V. Peterson. 173 N. Y. 1, 65 N. E. 738. Agent of disclosed principal. Somers v. Hanson, 78 Ore. 429, 153 Pac. 43. Parol evidence held admissible and not contrary to section 20. Birm- ingham Iron Foundry v. Regnery, 33 Pa. Super Ct. 54. Name of company at top of note and signed by secretary and treas- urer is note of company. Chatham Nat. Bank v. Gardner, 31 Pa. Super Ct. 135. Agent of undisclosed principal held to be personally liable. Grange Trust Co. V. Brown, 49 Pa. Super. Ct. 274. Note signed by trustees of church and church liable. Wilson v. Clinton Chapel, etc., Church (Tenn.), 198 S. W. 244. Name of company printed on a receipt form and signed by secretary and treasurer is a note of the two individuals. Daniel v. Glidden, 38 Wash. 556, 80 Pac. 811. Note of a firm when name appears. Citizens Nat. Bank v. Ariss, 68 Wash. 448, 123 Pac. 593. Signature as in a representative capacity does not bind the maker as an individual. First Natl. Bank of Salem v. Jacobs, — W. Va. — , 102 S. E. 491. Joint note of corporation and individuals. Nunnemaker v. Poss, 116 Wis. 444. Ambiguous and parol evidence admissible. Germania Nat. Bank v. Mariner, 129 Wis. 544, 109 N. W. 574. Section 20 is not opposed to parol evidence. American Trust Co. V. Canevin, 184 Fed. Rep. 657, 107 C C. A. 543. 420 NEGOTIAIJLR INSTRUMENTS. § 20 '^" The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : .•I/fl6aw(7.— Bricl v. Ex. Nat. Bank (1911), 172 Ala. 475, 55 So. 808; Briel v. Exchange Nat. Bank, 180 Ala. 576, 61 So. 277 ; Peabody School Furniture Co. v. Whitman (1912), 6 Ala. App. 182, 60 So. 470; Plant- ers Chemical, etc., Co. v. Stearns, 189 Ala. 503, 66 So. 699. Arkansas.— Corning v. Nimnich (1916), 183 S. W. 756. Colorado.— New England Electric Co. v. Shook (1915), 27 Colo App. 30, 145 Pac. 1002. Connecticut.— Fascucci v. Rossi (1917), 101 Atl. 22. India7ia.—Bayh v. Hanna (1919), 122 N. E. 7; Second Bank v Midland Co., 155 Ind. 581 ; FHck v. Jordan, 129 N. E. 42. /owa.— Schumacher v. Dolan (1912), 54 Iowa 207, 134 N. W. 624; Exch. Bank of Marcus v. Schults (1914), 167 Iowa 136, 149 N. W. 99; McCandless v. Bell Plaine Co., 78 Iowa 161, 42 N. W. 635, 4 L. R. A 396; Day v. Ramsdell, 90 Iowa 731, 52 N. W. 208. Kansas. — Weston Grocer Co. v. Lackman (1907), 75 Kans. 34, 88 Pac. 527; Bateman v. Sarback (1914), 89 Kans. 488. Kentucky.— G. C. Riordan & Co. v. Thornsbury, 178 Ky. 324, 198 S W. 920. Louisiana.— Bzyxies v. Lindsly (1911), 128 La. 259, 54 So. 791. Maryland.— F\rs\. Denton" Nat. Bank v. Kenney (1911), 116 Md 124 81 Atl. 227, Ann. Cas. 1913B, 1337; Belmont Dairy Co. v. Thrasher (1914) 92 Atl. 766, 124 Md. 320. Massachusetts.— Czrptnier v. Farnsworth, 106 Mass. 561 ; Miller v. Roach, 150 Mass. 140, 22 N. E. 634, 6 L. R. A. 71; Tuttle v. First Nat. Bank of Greenfield (1905), 187 Mass. 533, JZ N. E. 560, 105 Am. St. Rep. 420; Dunham v. Blood (1911), 207 Mass. 512, 93 N. E. 804; Jump V. Sparling, 218 Mass. 324, 105 N. E. 878; Adams v. Swig, — Mass. — 125 N. E. 857. Missouri.— Mytvs v. Chesley, 190 Mo. App. 371, 177 S. W. 326; Wur- litzer Co. v. Rossman, 196 Mo. App. 78, 190 S. W. 636. Nebraska.— Vxrs^. Nat. Bank of Shenandoah v. Kelgord (1912), 91 Neb. 178, 135 N. W. 548. New Jersey.— Reeve v. First Bank, 54 N. J. L. 208, 23 Atl. 853, 16 L. R. A. 143; Phelps v. Weber (1913), 84 N. J. L. 630. 87 Atl. 468. New York.— Crandall v. Robbins, 83 App. Div. 618, 82 N. Y. Supp. 317; C. N. Bank v. Clark, 139 N. Y. 307; First Nat. Bank v. Wallis, 150 N. Y. 455; Chelsea Exch. Bank v. First United Presbyterian Church, 89 Misc. Rep. 616, 152 N. Y. Supp. 201; Megowan v. Peter- son (1902), 173 N. Y. 1. 65 N. E. 738; Kerby v. Ruegamer (1905), 107 A. D. 491, 95 N. Y. Supp. 408; Dunbar Co. v. Martin (1907), 53 Misc Rep. 312. 102 N. Y. Supp. 91; Burstein v. Sullivan (1909), 134 A. D. 623; The Van Norton Tr. Co. v. L. Rosenberg, Inc. (1909), 62 Misc. 285, 114 N. Y. Supp. 1025; Burstein v. People's Tr. Co. (1911), 143 A. D. 165; International Trust Co. v. Caroline (1912), 137 N. Y. Supp. 932. §§ 21-22 FORM AND INTERPRETATION. 421 Oregon.— Page v. Ford (1913). 65 Ore. 450, 131 Pac. 1013, Ann Cas. 1915A, 1048; Somers v. Hanson, 78 Ore. 429, 153 Pac. 43. Pennsylvania. — Chatham Nat. Bank v. Gardner (1906), 31 Pa. Super. Ct. 135; Birmingham Iron Foundry v. Regncry (1907), 33 Pa. Super. Ct. 54; Grange Trust Co. v. Brown (1911), 49 Pa. Super. Ct. 274. Tennessee. — Wilson v. Clinton Chapel, Zion Church (1917), 198 S. W. 244. IVashington.— Daniel v. Glidden (1905), 38 Wash. 556, 80 Pac. Ill; Citizens Nat. Bank v. Ariss (1912), 68 Wash. 448, 123 Pac. 593. IVest Virginia.— DoWar Sav. & Gr. Co. v. Crawford (1911), 70 S. E. 1089; First Nat. Bank of Salem v. Jacobs, 102 S. E. 491. Wisconsin. — Nunnemaker v. Poss, 116 Wis. 444, 92 N. W. 375; Ger- niania Nat. Bk. v. Mariner (1906), 129 Wis. 544, 109 N. W. 574. United States.— Am. Trust Co. v. Canevin (1911), 184 Fed. Rep. 657, 107 C. C. A. 543; Nat. Bank of Commerce in St. Louis v. Sancho Pack- ing Co. (1911), 110 C. C. A. 112, 186 Fed. 257. §21. Signature by procuration; effect of. A signature by "procuration" operates as notice that the agent has but a Hmited authority to sign, and the principal is bound only in case the agent in so signing acted within the actual limits of his authority.*' *' See text, §§ 44, 33. Construing corresponding provision of English Bills of Exchange Act: Sec. 25. In the Illinois Act the word "only" in the above section is omitted. * Digest of some of the decisions in which this section is con- strued, arranged alphabetically by states: Check drawn in excess of authority and company not bound. Reid V. Rigby & Co. (1894), 2 Q. B. 40. *• The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Arkansas. — Schaap v. State Nat. Bank of Texarkana (1919), 208 S. W. 309. New Jersey.— Ti.. M. Owen & Co. v. Storms & Co. (1909), 78 N. J. L. 154, 72 Atl. 441. § 22. Effect of indorsement by infant or corporation. The indorsement or assignment of the instrument by a corpora- tion or by an infant passes the property therein, notwithstand- 422 NEGOTIABLE INSTRUMENTS. § 23 ing that from want of capacity the corporation or infant may incur no liability thereon.** *" See text, §§ 24, 123. Cross sections : 29, 66. 1 — This section construed: Corresponding provision of English Bills of Exchange Act: 22 (2); 22 (2). In North Carolina this section in a modified form was transferred to another article or chapter. The words "or married woman" are in- serted after the word "infant" in both places. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : When indorsed by a corporation. Willard v. Crook, 21 App. D. C. 237. Infant may disaffirm. Murray v. Thompson, 136 Tenn. 118, 188 S. W. 578, L. R. A. 1917B, 1172. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : ^/a&awa.— Citizens Nat. Bank v. Bucheit (1916), 71 So. 82. Minnesota.— Thorpe v. Cooley (1918), 165 N. W. 265. New ForJfe.— Oppenheim v. Reigal Cigar Co. (1904), 90 N. Y. 355. North Carolina.— Vance v. Bryan (1912), 158 N. Car. 502, 74 S. E. 459. Tennessee. — Murray v. Thompson, 136 Tenn. 118, 188 S. W. 578, L. R. A. 1917B, 1172. United 5"/a /«:.?.— Willard v. Crook (1903), 21 App. D. C. 237. § 23. Forged signature ; effect of. Where a signature is forged or made without authority of the person whose signature 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.*' *" See text, §§ 138, 44, SO. The Illinois act omits the words "of the person whose signature it purports to be." § 23 FORM AND INTERPRETATION. 423 * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Misrepresentation as to identity. Boatsman v Stockmen's Nat. Bank. 56 Colo. 495, 138 Pac. 764, 50 L. R. A. (N. S.) 107. An indorsement with intent to defraud by one who has the same name is a forgery. Beattie v. Nat. Bank. 174 111. 571, 51 N. E. 602. Forgery by bookkeeper. Hamlins Wizard Oil Co. v. U. S. Express Co., 265 111. 156, 106 N. E. 623. Form of using rubber stamp may put one on inquiry as to forgery. Swift & Co. V. Miller, 62 Ind. App. 312, 113 N. E. 447. Note not necessarily avoided as to those whose signatures are genu- ine. Beem v. Farrell, 135 Iowa 670, 113 N. W. 509. Plaintiff being ignorant of prior forgeries may recover. Grand Lodge V. State Bank, 92 Kan. 876. 142 Pac. 974, L. R. A. 1915B, 815. If instruments in suit are negotiable notes it is not material that value be expressly stated. Goodfellow v. Farnham, — Mass. — , 128 N. E. 776. Forged endorsement of payee's name. Miners' & Merchants' Bank V. St. Louis Smelting, etc., Co. (Mo. App.), 178 S. W. 211. The burden of proof is on the one who claims that the signature is genuine. German-American Bank v. Barnes (Mo. App.), 185 S. W. 1194. One estopped to set up forgery by representing that everything was all right when shown the note. Gluckman v. Darling, 85 N. J. L. 457, 89 Atl. 1016. Effect of fraudulent indorsement, by one not payee, upon holder in due course. Montgomery Garage Co. v. Manufacturer's Liability Ins. Co., — N. J. — , 109 Atl. 296. Payment to person intended although a mistaken identity. First Nat. Bank v. American Exch. Nat. Bank, 49 App. Div. 39, 63 N. Y. Supp. 58. False representation as to ownership. Sherman v. Corn Exchange Bank, 91 App. Div. 84, 86 N. Y. Supp. 341. Indorsement held not to be a forgery. Salem v. Bank, 110 App. Div. 636. 97 N. Y. Supp. 361. Designation of payee by his official title. Mercantile Nat. Bank v. Silverman, 148 App. Div. 1. 132 N. Y. Supp. 1017, affirmed. 210 N. Y. 567. Forged check deposited in bank. Burden on plaintiff to prove bank negligent in failing to collect. Stein v. Empire Trust Co., 148 App. Div. 850, 133 N. Y. Supp. 517. Check indorsed without authority. Anglo-South American Bank v. Nat. City Bank, 161 App. Div. 268, 146 N. Y. Supp. 457, affirmed 217 N. Y. 726. Guaranty of indorsements when some of them forged. Catskill Nat. Bank v. Lasher, 84 Misc. Rep. 523, 147 N. Y. Supp. 641. Liability of bank repaying on discovery of forgery. Geering v. Metropolitan Bank, 169 App. Div. 927, 156 N. Y. Supp. 582. Effect of forged indorsement signature. United Cigar Stores Co. v. American Raw Silk Co., 171 N. Y. Supp. 480. Intent of bank when another person intended. First Nat. Bank v. American Exch. Nat. Bank, 170 N. Y. 88, 62 N. E. 1089. Case of a traveler's check. Sullivan v. Knauth, 220 N. Y. 216, 115 N. E. 4^, L. R, A. 1917F, 554. 424 NEGOTIABL?: INSTRUMENTS. § 2Z Authority to stamp with rubber stamp departed from may amount to forgery. Standard Steam Specialty Co. v. Corn Exchange Bank, 220 N. Y. 478, 116 N. E. 386. Forged indorsement does not pass title. Slattery & Co. v. National City Bank of N. Y., 186 N. Y. S. 679. The word "precluded" held to be synonymous with "estoppel." 01s- gard V. Lernke, 32 N. D. 551, 156 N. W. 102. Negligence of bank holding paper under forged indorsement. Na- tional Bank of Commerce v. First Bank of Coweta (Okla.), 152 Pac. 596. Secretly placing carbon paper to obtain signature is a forgery. Maurmair v. Nat. Bank of Commerce (Okla.), 158 Pac. 349. Plaintiff may be liable if he makes a mistake in addressing letter containing commercial paper. Weisberger Co. v. Barberton Savings Bank, 84 Ohio St. 21, 95 N. E. 379, 34 L. R. A. (N. S.) 1101. Imposter. McHenry v. National Bank, 85 Ohio St. 203, 97 N. E. 395, 38 L. R. A. (N. S.) lllln. One obtaining money by representing himself to be another. Tol- man v. American Exch. Bank, 22 R. I. 462, 48 Atl. 480. Defendant precluded from setting up forgery by her son-in-law for Vifhom she had executed a mortgage. Denison-Gholson Dry Goods Co. V Hill, 135 Tenn. 60, 185 S. W. 723. Wrong person but of the same name. Heavey v. Commercial Nat. Bank, 27 Utah 222, 75 Pac. 727. Case of a firm note. Pettyjohn v. Nat. Exchange Bank, 101 Va. Ill, 43 S. E. 203. Forgery on draft. Heim v. Neubert, 48 Wash. 587, 94 Pac. 104. Payment of forged notes to save from disgrace. Murphy v. Estate of Skinner, 160 Wis. 554, 152 N. W. 172. *' The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: District of Columbia. — Central Nat. Bank v. Nat. Met. Bank, 31 A. C. (D. C.) 391, (C. C. Dist. Col.) 35 Wash. Law Rep. 621. Colorado. — Boatsman v. Stockmen's Nat. Bank, 56 Colo. 495, 138 Pac. 764, 50 L. R. A. (N. S.) 107. ///inow.— Beatti v. Nat. Bank, 174 111. 571, 51 N. E. 602, Hamlin's Wizard Oil Co. v. U. S. Express (1914), 184 111. App. 493, 265 111. 156, 106 N. E. 623. Indiana.— Svfih & Co. v. Miller, 62 Ind. App. 312, 113 N, E. 447. Iowa.— Beem v. Farrell (1907), 135 Iowa 670, 113 N. W. 509; State ex rel. Carroll v. Corning St. Sav. Bk. (1908), 139 Iowa 338, 115 N. W. 937; Reints & DeBuhr v. Uhlenhop (1910), 149 Iowa 284; Olsgard y. Lernke (1916), 156 N. W. 102. Kansas.— Grand Lodge v. State Bank, 92 Kan. 876, 142 Pac. 974, L. R. A. 1915B, 815. Kentucky.— Nat City Bank v. Third Nat. Bank (1910), 177 Fed. 136; Jett v. Standafer (1911), 143 Ky. 787, 137 S. W. 513. Massachusetts.— Mnrphy v. Met. Nat. Bank (1906), 191 Mass. 159; Elum Jro Sons v. Whipple (1907), 194 Mass. 253, 120 Am. St. Rep. § 23 FORM AND INTERPRETATION. 425 553, 80 N. E. 501, 13 L. R. A. (N. S.) 211; Boles v. Harding (1909), 201 Mass. 103, 87 N. E. 481 ; Jordan Marsh Co. v. Nat. Shawmut Bank (1909), 201 Mass. 397, 87 N. E. 740; Franklin Sav. Bank v. Fram- ingham (1912). 212 Mass. 92; Newburyport v. First Nat. Bank of Bos- ton (1914), 216 Mass. 304; Munroe v. Stanley (1915), 107 N. E. 1012; Goodfellow V. Farnham (1920), — Mass. — , 128 N. E. 776. Micron.— Lonier v. State Sav. Bank (1907), 149 Mich. 483, 112 N. W. 1119. Missouri.— Rossi v. Nat. Bank, 71 Mo. App. 150; Mo. Lincoln Tr. Co. V. Third Nat. Bank of St. Louis (1910), 154 Mo. App. 89; Miners & Merch. Bank v. St. Louis Smelting & Refining Co. (1915) (Mo. App.), 178 S. W. 211; German-Am. Bank v. Barnes (1916) (Mo. App.), 185 S. W. 1194. Mon/a«a.— First Nat. Bank of Miles City v. Barrett (1916), 57 Pac. 951. Nebraska— UoHman v. Am. Ex. Nat. Bank (1901), 96 N. W. 112. New Jersey.— G\uckman v. Darling (1914), 85 N. J. L. 457, 89 Atl. 1016; Montgomery Garage Co. v. Man, Liability Ins. Co., 109 Atl. 296. New York. — First Nat. Bank of Fort Worth v. Am. Ex. Nat. Bank (1900), 49 A. D. 39, 63 N. Y. Supp. 58; Critten v. Chemical Nat. Bank (1902), 171 N. Y. 219; Casey v. Pilkington (1903), 83 App. Div. 91, 82 N. Y. Supp. 529; Sherman v. The Corn- Ex. Bank (1904), 91 A. D. 84; 86 N. Y. Supp. 341; Kearny v. Met. Trust Co. (1905), 110 A. D. 236; Salen v. Bank of the St. of N. Y. (1906), 110 A. D. 636, 97 N. Y. Supp. 361; Oriental Bank v. Gallo (1906), 112 A. D. 360, 98 N. Y. Supp. 561; Trust Co. of Am. v. Hamihon Bank (1908), 127 A. D. 515, 112 N. Y. Supp. 84; Cluett v. Couture, 14 A D. 830, 125 N. Y. Supp. 813; Seaboard Nat. Bank of America (1908), 193 N. Y. 26, 85 N. E. 829; The Mercantile Nat. Bank of the City of N. Y. T. Silverman (1911), 148 A. D. 1, 132 N. Y. Supp 1017, 210 N. Y 567; Stein v. Empire Tr. Co. (1912), 148 A. D. 850, 133 N. Y. Supp. 517; Kobre v. Corn Exchange Bank (1913), 139 N. Y. Supp. 890; Hart- ford V. Greenwich Bank, 157 A. D. 448, 142 N. Y. Supp. 387; Anglo- South Am. Bank v. Nat. City Bank of N. Y. (1914), 161 A. D. 268, 146 N. Y. Supp. 457; Catskill Nat. Bank v. Lasher, 84 Misc. Rep. 523, 147 N. Y. Supp. 641 ; Standard Steam Specialty Co. v. Corn Ex. Bank. (1914), 146 N. Y. Supp. 181; Wolfin v. Security Bank (1915), 156 N. Y. Supp. 474; Bergstrom v. Ritz-Carlton Hotel Co. (1916), 157 N. Y. Supp. 959; Standard Steam Spec. Co. v. Corn Exch. Bank (1917), 116 N. E. 386, 220 N. Y. 478; Monk v. 23d Ward Bank (1917). 165 N. Y. Supp. 1055; First Nat. Bank v. American Exchange Nat. Bank, 170 N. Y. 88. 62 N. E. 1089 ; Geering vfl Metropolitan Bank, 109 App. D. 927, 156 N. Y. Supp. 582; Cohen v. L. Rittner, Inc. (1918), 171 N. Y. Supp. 312; United Cigar Stores Co. v. American Raw Silk Co., 171 N. Y. Supp. 480; Sullivan v. Knauth, 220 N. Y. 216, 115 N. E. 460, L. R. A. 1917F, 554 ; Slattery & Co. v. National City Bank, 186 N. Y. Supp. 679 ; Gallo v. Brooklyn Savings Bank, 199 N. Y. 222, 92 N. E. 633. North Dakota. — First Nat. Bank of Lisbon v. Bank of Wyndemefe (1906). 15 N. Dak. 299, 108 N. W. 546; Stutsman County Bank v. Jones (1917), 162 N. W. 402; Olsgard v. Lemke, 32 N. D. 551, 156 N. W. 102. Neiraska. — Hofifman v. American Exchange Bank, 2 Nebr. (unoffi- cial) 217, 96 N. W. 112. 426 NEGOTIABLE INSTRUMENTS. § 23 Ohio— Winters Nat. Bank v. Roberts (1909), 20 Ohio Dec. 690; The S. Weishberger Co. v. The Barbeton Sav. Bank Co. (1911), 84 Ohio St. 21. 95 N. E. 379, 34 L. R. A. (N. S.) 1101; McHenry v. The Old Citizens Nat. Bank (1911), 85 Ohio St. 203, 97 N. E. 395, 38 L. R. A. (N. S.) lllln. Oklahoma. — Maurman v. Nat. Bank of Commerce (Okla.), 158 Pac. 349; Turner v. Kimble (1913), 130 Pac. 563; National Bank of Com- merce V. First National Bank of Coweta (Okla.), 152 Pac. 596. Oregon. — First Nat. Bank of Cottage Grove v. Bank of Cottage Grove (1911), 59 Oreg. 388, 117 Pac. 293. Pennsylvania. — States v. First National Bank, 17 Pa. Super. Ct. 256; Land Title & Trust Co. v. Northwestern Bank, 196 Pa. 230, 46 Atl. 420; Tibby Bros. Glass Co. v. Farmers & Mech. Bank of Sharpsburg (1908). 200 Pa. 1; Cunningham v. First Nat. Bank of Indiana (1908), 219 Pa. 310; Falcomi v. Magee (1911), 47 Pa. Super. 560. Rhode Island.— Tolman v. Am. Nat. Bank (1901), 22 R. I. 462, 48 Atl. 480. T^nM^.yj?^.— Knoxville Water Co. v. E. Tenn. Nat. Bank (1910), 123 Tenn. 364; Figures v. Fly, 137 Tenn. 358, 193 S. W. 117; Litchfield Shuttle Co. v. Cumberland Valley Nat. Bank (1916). 134 Tenn. 379, 183 S. W. 1006; Denison-Gholson Dry Goods Co. v. Hill, 135 Tenn. 60, 185 S. W. 723. t7/a/i.— Heavey v. Commercial Nat. Bank (1904), 27 Utah 222, 75 Pac. 727, 101 Am. St. Rep. 966; Warren v. Smith (1909). 35 Utah 455, 100 Pac. 1069; Simpson v. Denver & Rio Grande Co. (1913), 43 Utah 105, 134 Pac. 883, 46 L. R. A. (N. S.) 1164. Firgt«ta.— Pettyjohn v. Nat. Ex. Bank (1903). 101 Va. 111. 43 S. E. 203. Washington. — Jamieson & McFarland v. Heim (1906), 43 Wash. 153, 86 Pac. 165; Heim v. Neubert (1908), 48 Wash. 587, 94 Pac. 104; Good- fellow V. First Nat. Bank (1913), 129 Pac. 90. Wisconsin.— Murphy v. Estate of Skinner, 160 Wis. 554, 152 N. W. 172. United .9fa/^.y.— National City Bank v. Third National Bank, 177 Fed. Rep. 136, 100 C. C. A. 556. ARTICLE II. CONSIDERATION OF NEGOTIABLE INSTRUMENTS. § 24. Presumption of consideration. 25. What constitutes considera- tion. 26. What constitutes holder for value. § 27. When lien on instrument con- stitutes holder for value. 28. Effect of want of considera- tion. 29. Liability of accommodation party. Sections 24 to 29 above are the sections used by the commissioners. See table of corresponding sections of the Law in the various states and territories beginning on page 360. § 24. Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a valu- able consideration ; and every person whose signature appears thereon to have become a party thereto for value.-** ^* See text, § 64. ^ Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : A renewal note is without consideration when the original note was without consideration. Hurley v. Wilky, 18 Ariz. 45, 156 Pac. 83. Indorsement to indemnify against loss on account existing liability of third person as consideration. Griswold v. Morrison, — Cal. App. — , 200 Pac. 62. Maker is not concerned with the consideration for the indorsement. Asiatic Tunnel Co. v. Stephenson (Colo.), 165 Pac. 773. When presumption as to consideration disappears. Holley v. Smalley, — D. C. — 269 F. 694. Delivery of check as gift as affecting consideration. Zehner v. Zehner's Estate, — Ind. App. — , 129 N. E. 244. The presumption in this section is overcome by showing control or duress. Maginnis v. McChesney, 179 Iowa 563, 160 N. W. 50. A renewal note is without consideration when the original note was without consideration, even though such renewal note extends the time of payment. City Nat. Bank v. Mason (Iowa), 165 N. W. 103. Negotiable instrument deemed issued for valuable consideration. Bain \. Ullerich, — la. — 177 N. W. 61. This section applied to a bill of lading. Scheuerman v. Monarch Fruit Co., 122 La. 55, 48 So. 647. The signing and indorsing of a note for his personal debt by the president of a corporation in the name of the corporation shows a prima 427 428 NEGOTIABI-F. INSTRUMENTS. § 24 facie good consideration. Bear Creek Lumber Co. v. Second Nat. Bank, 120 Md. 566, 87 Atl. 1084. Renewal of a previous note which was without consideration is also without consideration. Widger v. Baxter, 190 Mass. 130, 76 N. E. 509, 3 L. R. A. (N. S.) 436n. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration. Jennings v. Law, 199 Mass. 124, 85 N. E. 157. Renewal note without consideration when original note without con- sideration. Seager v. Drayton, 217 Mass. 571, 105 N. E. 461. Presumption is of valid consideration of note. Long v. Conn, — Minn. — , 179 N. W. 644. Valid considertion presumed where note transferred before maturity. Despres, Bridges & Noel v. Hough Drug Co., — Miss. — , 86 So. 359. Consideration as to one joint maker good as to all. First Nat. Bank of Scribner v. Colder, 89 Neb. 377, 131 N. W. 600. Married woman's note for accommodation not validated by this section where statute prohibits her from becoming surety. People's Nat. Bank V Schepflin, 73 N. J. Law 29. 62 Atl. 333. The import of this section is not weakened by the omission of the words "for value received." McLeod v. Hunter, 29 Misc. Rep. 558, 61 N. Y. Supp. 73. This section does not apply to non-negotiable instruments. Deyo v. Thompson, 53 App. Div. 9, 65 N. Y. Supp. 459. "Value received" an acknowledgement of a sufficient consideration. Hamilton v. Hamilton, 127 N. Y. App. Div. 871, 112 N. Y. Supp. 10. The instrument itself is prima facie evidence of consideration. Gilpin V. Savage, 112 N. Y. Supp. 802. The Negotiable Instruments Law by repealing a former statute in New York now makes non-negotiable instruments not to import a con- sideration. Kinsella v. Lockwood, 79 Misc. Rep. 619, 140 N. Y. Supp. 513. An allegation of the making of a note is sufficient without allega- tions of delivery or consideration. First Nat. Bank v. Stallo, 160 App. Div. 702, 145 N. Y. Supp. 747. The words "value received" is an acknowledgment of the receipt of a consideration. Owens v. Blackburn, 161 N. Y. App. Div. 827, 146 N. Y. Supp. 966. Words "value received" an acknowledgment of consideration. Du- Bosque V. Munroe, 168 App. Div. 821, 154 N. Y. Supp. 462. Consideration presumed between depositor and his bank and want of consideration moving from the payees to the bank held immaterial. Bob- rick V. Second Nat. Bank, 175 App. Div. 550, 162 N. Y. Supp. 147. Allegation of consideration is not essential if making is alleged. Abrahamson v. Steele, 176 App. Div. 865, 163 N. Y. Supp. 827. Words "value received" are not necessary to raise presumption of consideration. Lasher v. Rivenburgh, 181 N. Y. S. 818. Guaranty held good though consideration itself not expressed in writing. First Nat. Bank v. Hawkins, 73 Ore. 186, 144 Pac. 131. As to binding party under certain circumstances where no considera- tion. Bank of Monticello v. Dooly, 113 Wis. 590, 89 N. W. 490. Waiver or discharge of a claim is a sufficient consideration. Becker V. Noegel, 165 Wis. 73. 160 N. W. 1055. The burden is thrown upon the defendant not only of introducing some evidence of lack of consideration, but of ultimately establishing such lack of consideration by a preponderance of evidence. § 24 CONSIDERATION. 429 The above proposition is supported in the following cases which cite this section of the law: In re Estate of Chismore, 175 Iowa 495, 157 N. W. 139; First Presbyterian Church v. Dennis, 178 Iowa 1352, 161 N. W. 183, L. R. A. 1917C, 1005; Shaffer v. Bond, 129 Md. 648, 99 Atl. 973; Joveshof V. Rockey, 58 Misc. Rep. 559, 109 N. Y. Supp. 818; Finer v. Brittain, 165 N. C. 401, 81 S. E. 462 ; State Bank v. Morrison, 85 Wash. 182, 147 Pac. 875. The following cases are in accord with the above proposition, but do not cite this section: Harley v. Wilky, 18 Ariz. 45, 156 Pac. 83; George J. Cooke Co. v. Pisano. 174 111. App. 609; Harney v. Lee, 175 111. App. 250; Brokaw v. McElvov, 162 Iowa 288, 143 N. W. 1087, 50 L. R. A. (N. S.) 841; Teutonia Bank & Trust Co. v. Buhler, 137 La. 5, 68 So. 194; Columbian Conservatory v. Dickinson, 158 N. C. 207, 7Z S. E. 990. The following cases are contra to the above proposition and it is sub- mitted that they are incorrect as to the burden of proof: Lombard v. Byrne, 194 Mass. 236, 80 N. E. 489; Seager v. Drayton, 217 Mass. 571, 105 N. E. 461 ; Conners Bros. v. Sullivan, 220 Mass. 600, 108 N. E. 503 ; (the above three cases not citing this section nor section 28) ; Bringman V. VanGlahn, 71 App. Div. 537, 75 N. Y. Supp. 845 ; Hardinge v. U. S. Zinc Co., 171 App. Div. 742, 157 N. Y. Supp. 852; Abrahamson v. Steele, 176 App. Div. 865, 163 N. Y. Supp. 827; Spencer & Co. v. Brown, 143 N. Y. Supp. 994; (these four New York cases cite this section, but not section 28); Holbert v. Weber, 36 N. D. 106, 161 N. W. 560; Ginn v. Dolan, 81 Ohio St. 121, 90 N. E. 141, 135 Am. St. Rep. 761, 18 Ann. Cas. 204; (the last two cases not citing this section) ; Bank of Gorsham v. Welch, 76 Ore. 272, 147 Pac. 534; (merely citing section 28) ; First Nat. Bank v. Paff. 240 Pa. 513. 87 Atl. 841 ; Hudson v. Moon, 42 Utah 377, 130 Pac. 774; (the last two cases not citing section 28). *■ The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Alabama.— "ionts v. Bell (1917), 77 So. 918; Vogler v. Manson (1917), 76 So. 117. Arisom.—Hmlty v. Wilky, 18 Ariz. 45, 156 Pac. 83. Arkansas.—Sms v. Everett (1914), 168 S. W. 559; Buckely v. Collins (1915), 177 S. W. 920. Ca/iYonn'a.— Molley v. Pierson (1918), 174 Pac 98; Griswold v. Mor- rison, — Cal. App. — , 200 Pac. 62. Colorado. — Asiatic Tunnel Co. v. Stephenson, — Colo. — , 165 Pac. 77Z. Connecticut. — American Automobile Co. v. Perkins (1910), 83 Conn. 520, 77 Atl. 954. Delaware.—Stzmhy Trust & Safe Dep. Co. v. Duross (1913), 86 Atl. 209. District of C olumhia.—RoWcy v. Smalley (D. C), 269 Fed. 694. Florida. — Williams v. Peninsular Grocery Co. (1917), 75 So. 517. /(fa/to.— MtFarland v. Johnson (1912), 22 Ida. 694, 127 Pac. 908. 430 NEGOTIABLE INSTRUMENTS. § 24 ///i'«.ow.— George J. Cooke Co. v. Pisano (1912), 174 111. App. 609; Harney v. Lee (1912), 175 111. App. 250. Indiana.^Deher v. Burke (1914), 107 N. E. 304; Zehner v. Zehner's Estate, 129 N. E. 244. /owa.— Zimbelman & Otis v. Finncgan (1909), 141 Iowa 358, 118 N. W 312; Brokaw v. McElvoy (1913), 143 N. W. 1087; In re Estate of Chismore, 175 Iowa 495, 496, 157 N. W. 139, 140; Perry Sav. Bank v. Fitzgerald (1914), 149 N. W. 497; Magcnnis v. McChesney, 179 Iowa 563, 160 N. W. 50; First Presbyterian Church of Mt. Vernon v. Dennis (1917), 161 N. W. 183; Higby v. Bahrenfuss (1917), 163 N. W. 247; City Nat. Bank v. Mason, — Iowa — , 165 N. W. 103 ; Bain v. Ullcrich, 177 N. W. 61. Kansas.— Hawkins v. Windhorst (1910), 82 Kans. 522, 108 Pac. 80S. Louisiana. — Scheuerman v. Monarch Fruit Co. (1909), 122 La. 55, 48 So. 647 ; Teutonia Bank & Trust Co. v. Buhler, 137 La. 5, 68 So. 194. Maryland.— Black v. First Nat. Bank (1903), 96 Md. 399, 54 Atl. 88; Louis Eckels & Sons Ice Mfg. Co. v. Cornell Economizer Co. (1912), 86 Atl 38; Bear Creek Lumber Co. v. Second Nat. Bk. of Cumberland (1913), 120 Md. 566, 87 Atl. 1084; Shaffer v. Bond (1917), 129 Md. 648, 99 Atl. 972. Massachusetts.— Widger v. Baxter, 190 Mass. 130, 76 N. E. 509, 3 L. R. A. (N. S.) 436n; Lombard v. Bryne (1907), 194 Mass. 236, 80 N. E. 489; Jennings v. Law (1908), 199 Mass. 124, 85 N. E. 157; Qemons Elec. Mfg. Co. V. Walton (1910), 206 Mass. 215; North Anson Lumber Co. v. Smith (1911), 209 Mass. 333; Young v. Hayes (1912), 212 Mass. 525; Harvey v. Squire (1914), 105 N. E. 355; Seager v. Drayton (1914), 217 Mass. 571, 105 N. E. 461; Comers v. Sullivan, 220 Mass. 600, 108 N. E. 503. Minnesota.— BsLXter v. Brandenburg (1917), 163 N. W. 517; Long v. Conn, 179 N. W. 644. Mississippi.— Despres, Bridges & Noel v. Hough Drug Co., 86 So. 359. Missouri. — Rhodes v. Guhman (1911), 156 Mo. App. 344; Nelson v. Diffenderffer (1914), 163 S. W. 271; Miller v. Chinn (1917), 195 S. W. 552. Montana.— Vox A v. Drake (1912), 46 Mont. 314. Nebraska.— F\r?,\. Nat. Bank of Scribner v. Colder (1911), 89 Neb. 577, 131 N. W. 600; Stannard v. Orleans Flour & Oat Meal Milling Co. (1913), 93 Neb. 389. New /^rj^y.— People's Nat. Bank v. Schepflin (1905), 73 N. J. L. 29, 62 Atl. 333 ; McCormack v. Williams, 88 N. J. L. 170, 95 Atl. 978 ; Marine Tr. Co. V. St. James African M. E. Church (1913), 88 Atl. 1075; Bank of Roselle v. Dorvall (1916), 98 Atl. 476. New York. — Riverside Bank v. Woodhaven Junction Land Co. (1898), 34 A. D. 359; McLeod v. Hunter (1899), 29 Misc. 558, 61 N. Y. Supp. 73; Deyo v. Thompson (1900), 53 A. D. 9, 65 N. Y. Supp. 459; Bring- man v. Glahn (1902), 71 A. D. 537, 75 N. Y. Supp. 845; Karsch v. Pottier & Stymers Mfg. & Imp. Co. (1903), 81 N. Y. 782, 82 A. D. 230; Packard I § 24 CONSIDERATION. 431 V. Windholz (1903). 40 Misc. 347, affirmed 88 A. D. 365; Moak v. Stevens (1904), 45 Misc. 147, 91 N. Y. Supp. 903; The Royal Bank of 1^. Y. V. Goldschmidt (1906), 51 Misc. 622, 101 N. Y. Supp. 101; Ward V. City Tr. Co. of N. Y. (1907), 102 N. Y. Supp. 50; Cleary v. DeBeck Plate Glass Co. (1907), 54 Misc. 537, 104 N. Y. Supp. 831; Colborn v. Arbean (1907), 54 Misc. 623, 104 N. Y. Supp. 968; Hickok v. Bunting. 92 App. Div. 167, 86 N. Y. Supp. 1059; Benedict v. Kress, 97 A. D. 65, S9 N. Y. Supp. 607; Joveshofif v. Rockney (1908), 109 N. Y. Supp. 818, 58 Misc. 559; Nat. Park Bank v. Saitta (1908), 127 App. Div. 624, 111 N. Y. Supp. 927; Hamilton v. Hamilton, 127 N. Y. App. Div. 871, 112 N. Y. Supp. 10; Pfister v. Heins (1910), 136 A. D. 457; Ferguson v. Netter (1910), 141 A. D. 274; Ryan v. Sullivan (1911), 143 A. D. 471; Kinsella v. Lockwood, 79 Misc. Rep. 619, 140 N. Y. Supp. 513; Glennan V. Rochester Tr. & Safe Dep. Co. (1912), 136 N. Y. Supp. 747; First Nat. Bank of Pittsburg v. Stallo (1914), 160 App. Div. 702, 145 N. Y. Supp. 747; Spencer & Co. v. Brovi^n, 143 N. Y. Supp. 994; Owens v. Blackburn, 161 N. Y. App. Div. 827, 146 N. Y. Supp .966; Gerli v. Doorlv (1915), 151 N. Y. Supp. 574; Schultz v. Cohen (1915), 156 N. Y. Supp. 610; Bobrick v. Second Nat. Bank, 175 App. Div. 550, 162 N. Y. Supp. 147 Abrahamson v. Steel (1917), 176 App. Div. 865. 163 N. Y. Supp. 827; Hardinge v. U. S. Zinc Co., 157 N. Y. Supp. 852, 171 A. D. 742; DuBosque V. Munroe, 168 App. Div. 821, 154 N. Y. Supp. 462; Lasher v. Rivcn- burgh, 181 N. Y. Supp. 818. North Carolina. — Toms v. Jones (1900), 127 N. Car. 464; Myers v. Petty (1910), 153 N. Car. 462; Finer v. Brittain, 165 N. C. 401, 81 S. E. 462; Columbian Conservatory of Music v. Dickenson (1912), 758 N. Car. 207, 7i S. E. 990. North Dakota.— Walters v. Rock (1908), 18 N. Dak. 45, 115 N. W. 511; Holbert v. Weber (1917), 36 N. D. 106, 161 N. W. 560. Ohio.— Ginn v. Dolen (1909), 81 Ohio St. 121, 90 N. E. 141; Pierce V. Harper (1918), 249 Fed. 867. Oklahoma.— Rndson v. Moore (1913), 130 Pac. 774. Or^gron.— Fassett v. Boswell (1911), 59 Oreg. 288, 117 Pac. 302; Long V. Hoedle (1911). 60 Oreg. 377, 119 Pac. 484; Bank of Gresham v. Welch, 76 Ore. 272, 147 Pac. 534; First Nat. Bank of Bangor v. Paff (1913), 87 Atl. 841 ; Adjustment Bureau of Portland Assn. of Credit Men v. Staats (1919), 175 Pac. 847; First Nat. Bank v. Hawkins, 73 Ore. 104, 144 Pac. 131. Pennsylvania.— First Nat. Bank v. Paff, 240 Pa. 513, 87 Atl. 841. South Carolina. — Cannon v. Clarendon Hardware Co. (1916), 88 S. E. 284. Utah.— Cole Banking Co. v. Sinclair (1908), 34 Utah 454, 98 Pac. 411; Utah Nat. Bank of Salt Lake City v. Nelson (1910). 38 Utah 169, 111 Pac. 907; Niles v. U. S. Ozocinte Co. (1911), 38 Utah 367, 113 Pac. 1038; Hudson v. Moon, 42 Utah 377, 130 Pac. 774. Virginia. — Lynchburg Milling Co. v. Nat. Ex. Bank of Lynchburg (1909), 109 Va. 639, 64 S. E. 9; Reid's Admr. v. Windsor (1911), 111 Va. 825, 69 S. E. 1101; Murphy's Hotel Co. v. Herndon's Admrs. (1917), 91 S. E. 634. 432 NEGOTIABLE INSTRUMENTS. § 25 Washington.— Nichohon v. Neavv (1914), 137 Pac. 492; State Bank of Clarkson v. Morrison (1915), 85 Wash. 182, 147 Pac. 875. M^cst Virginia.— DoWar Sav. & Gr. Co. v. Crawford (1911), 70 S. E. 1089. Wisconsin.— MonticeWo v. Dooley, 113 Wis. 590; Becker v. Noegel, 165 Wis. 73, 160 N. W. 1055. Wyoming.— HamWion v. Diefenderfer (1913), 21 Wyo. 26, 131 Pac. 37. United States.— Towles v. Tanner (1903), 21 App. D. C. 530; Nalitsky V. Williams (1917), 237 Fed. 802. § 25. Consideration ; what constitutes. Value is any con- sideration 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.^' ^^ See text, §§ 62, 63. In Illinois the second sentence is as follows: "An antecedent or pre- existing claim, whether for money or not, constitutes value where an instrument is taken either in satisfaction therefor or as security therefor, and is deemed such whether the instrument is payable on demand or at a future time." The Wisconsin act (§§1675-51) inserts after "debt," "discharged, extinguished or extended," and adds at the end of the section : "But the indorsement or delivery of negotiable paper as collateral security for a pre-existing debt, without other consideration, and not in pursuance of an agreement at the time of delivery, by the maker, does not constitute value." The purpose of this section, that is, section 25, was to settle the con- flict of decisions in regard to the value essential to constitute a transferee a purchaser for value or holder in due course. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states: The burden of showing insolvency of the husband's estate held to be on the maker, the wife. Vaughan v. Bass, 10 Ala. App. 388, 64 So. 543. This part of the section applies also to collateral security. Vogler v. Manson (Ala.), 76 So. 117. As to promise to deposit additional security if collateral should cease to be satisfactory. Zadek v. Forchheimer (Ala. App.),_ 77 So. 941. Pre-existing debt as valuable consideration. Davies v. Simpson, — Ala. — , 79 So. 48. Marital rii?hts in lands held in trust is sufficient consideration. Domax V. Colorado Nat. Bank. 46 Colo. 229, 104 Pac. 85. Collateral security for antecedent or pre-existing debt is value. Crys- tal River Lumber Co. v. Consol. Naval Stores Co., 63 Fla. 119, 58 So. 129. Giving of a renewal note waives right of defense as to consideration when maker has full knowledge. Roess Lumber Co. v. State Exch. Bank, 68 Fla. 324, 67 So. 188, Ann. Cas. 1916B, 327. § 25 CONSIDERATION. 433 Credit and withdrawal on the books of a bank as consideration. Bland V. Fidelity Trust Co. (Fla.), 71 So. 630, L. R. A. 1916F, 209. Cancellation of old note makes a good consideration. Fidelity State Bank v. Miller, 29 Idaho W, 162 Pac. 244. Collateral security for antecedent or pre-existing debt is value. Many Blanc & Co. v. Krueger, 153 111. App. 327. Note taken as collateral security is for consideration. Elgin Nat. Bank V. Goecke, — 111. — 129 N. E. 149. Credit of certificate of deposit as a consideration. Commercial Nat. Bank v. Citizens' State Bank, 132 Iowa 706, 109 N. W. 198. Substitution and exchange of collaterals held to be for value. Voss V. Chamberlain, 139 Iowa 569, 117 N. W. 269. Collateral security for antecedent or pre-existing debt is value. Iowa Nat. Bank v. Carter, 144 Iowa 715, 123 N. W. 237. Collateral security for antecedent or pre-existing debt is value. State Bank v. Bilsted, 162 Iowa 433, 136 N. W. 204. Renewal note working an extension of time for payment of an ante- cedent debt is for sufficient consideration. Mohn v. Mohn (Iowa), 164 N. W. 341. Note given in payment of the debt of a third party has good con- sideration. Bridges v. Vann, 88 Kan. 98, 127 Pac. 604. Money can not be recovered from a transferer which was received in payment of a pre-existing debt although originally obtained by fraud. Benjamin v. Welda State Bank, 98 Kan. 361, 158 Pac. 65, L. R. A. 1917A, 704. Holder in due course may waive irregularities and recover on original terms of note. Redfield State Bank of Redfield, Kans., v. Myrick, — Kan. — , 194 P. 648. Collateral security for antecedent or pre-existing debt is value. Wilkins V. Usher, 123 Ky. 696, 97 S. W. 37. Payee gave value for a note who had on receiving said note paid a debt of the maker due to a third person. Hermann's Exr. v. Gregory, 131 Ky. 819, lis S. W. 809. Payment or part payment of a pre-existing debt is value. Lovelace v. Lovelace, 136 Ky. 452, 124 S. W. 400. Bank taking note as collateral security. Campbell v. Fourth Nat. Bank, 137 Ky. 555, 126 S. W. 114. Notes given by lawyer for mistake of opinion supported by considera- tion. Hyman v. Succession of Parkerson, 140 La. 249, 72 So. 953, L. R. A. 1917B, 694. Exchange of notes is supported by a good consideration. Mehlinger V. Harriman. 185 Mass. 245. Wife's note given as security to a third person in payment of her husband's debt is supported by a sufficient consideration. Widger v. Baxter, 190 Mass. 130, 76 N. E. 509, 3 L. R. A. (N. S.) 436. Accommodation note is for value under the second part of this section. Jennings v. Law, 199 Mass. 124, 85 N. E. 157. Taking a demand note as collateral for the pre-existing debt of a husband to a bank made the bank a holder for value of the note as against the wife, who was an accommodation maker. Lowell v. Bickford, 201 Mass. 543, 88 N. E. 1. Accommodation check given to make good the overdraft of another is supported by sufficient consideration. Neal v. Wilson, 213 Mass. 336, 100 N. E. 544. 434 NEGOTIABLE INSTRUMENTS. § 25 Order as to stopping payment and pertain entries on bank book as a consideration. Usher v. A. S. Tucker Co., 217 Mass. 441, 105 N. E. 360, L. R. A. 1916F. 826. Note given for the note of a third person when supported by sufficient consideration. Seager v. Drayton, 217 Mass. 571, 105 N. E. 461. Payment of pre-existing debt is value. Smith v. Johnson, 224 Mass. 50, 112 N. E. 644. Collateral security for antecedent or pre-existing debt is value. Gra- ham v. Smith, 155 Mich. 65, 118 N. W. 726. Collateral security for antecedent or pre-existing debt is value. Bank of Montreal v. Beecher, 133 Minn. 81, 157 N. W. 1070. Collateral security for antecedent or pre-existing debt is value. Snell- ing State Bank v. Clasen, 132 Minn. 404, 157 N. W. 643. A check for a debt outlawed by a statute is supported by a considera- tion. Baxter v. Brandenburg (Minn.), 163 N. W. 516. Transfer of a collateral note a good consideration. First Nat. Bank v. John McGrath & Sons, 111 Miss. 872, 72 So. 701. Collateral security for antecedent or pre-existing debt is value. Nat. Bank of Commerce v. Morris, 156 Mo. App. 43, 135 S. W. 1008. Collateral security for antecedent or pre-existing debt is value. State Bank v. Cape Girardeau Co., 172 Mo. App. 662, 155 S. W. 1111. Extension of time for the payment of a debt of a third person is good consideration. Citizens Bank v. Oaks, 184 Mo. App. 598, 170 S. W. 679. Collateral security for antecedent or pre-existing debt is value. Cen- tral Bank v. Lyda (Mo. App.), 191 S. W. 245. Note transferred in payment of pre-existing debt. Swift & Co. v. Mc- Farland, — Mo. App. — , 231 S. W. 65. The execution of a renewal note for a pre-existing debt is supported by a sufficient consideration although containing some new and different stipulations. Parchen v. Chessman, 49 Mont. 326, 142 Pac. 631, Ann. Cas. '916A, 681. Good consideration given by cancellation of old note. Travis v. Unkart, 89 N. J. L. 571, 99 Atl. 320, Ann. Cas. 1917C, 1031. Accommodation note is for value under the second part of this sec- tion. Citizens Nat. Bank v. Lilienthal, 40 App. Div. 609. 57 N. Y. Supp. 567. Collateral security for antecedent or pre-existing debt is value. Brew- ster v. Shrader, 26 Misc. Rep. 480, 57 N. Y. Supp. 606. Surrender of non-negotiable note makes a good consideration. Petrie v. Miller, 57 App. Div. 17, 67 N. Y. Supp. 1042, affirmed, 173 N. Y. 596. An indorsement by a third person before a note is delivered supported by the consideration of a sale of goods to the maker. Mohlman v. McKane, 60 App. Div. 546, 69 N. Y. Supp. 1046. Promise not to sue is good consideration. Milius v. KauflFmann, 104 App. Div. 442, 93 N. Y. Supp. 669. Payment of pre-existing debt is value. Bigelow Co. v. Automatic Gas Co., 56 Misc. Rep. 389, 107 N. Y. Supp. 894. Payment of pre-existing debt is value. Wallabout Bank v. Peyton, 123 App. Div. 727, 108 N. Y. Supp. 42. Plaintiff gave no value where defendant, by mistake, gave a check to the payee, who indorsed it to the plaintiff as a loan. Rosenthal v. Parsont, ilO N. Y. Supp. 223. Payment of pre-existing debt is value. Mindlin v. Appelbaum, 62 Misc. Rep. 300, 114 N. Y. Supp. 908. Payment of pre-existing debt is value. Albert v. Hoffman, 64 Misc. Rep. 87, 117 N. Y. Supp. 1043. § 25 CONSIDERATION. 435 Accommodation note for antecedent or pre-existing note is a transfer for value. Maurice v. Fowler, 78 Misc. Rep. 357, 138 N. Y. Supp. 425. Accommodation note for antecedent or pre-existing debt is a transfer for value. Martin L. Hall Co. v. Todd, 139 N. Y. Supp. 111. Payment of pre-existing debt is value. Broderick, etc., Co. v. Mc- Grath, 81 Misc. Rep. 222, 142 N. Y. Supp. 49. Notes given by the directors of a bank in order to maintain the value cf their stock is supported by sufficient consideration. Union Bank v. Sullivan, 214 N. Y. 332, 108 N. E. 558. Collateral security for antecedent or pre-existing debt is value. Smathers v. Toxoway Hotel Co., 162 N. C. 346. Collateral security for antecedent or pre-existing debt is value. Brooks V. Sullivan, 129 N. C. 190, 39 S. E. 822. Exchange of notes supported bv a good consideration. Franklin Nat. Bank v. Roberts Bros., 168 N. C 473, 84 S. E. 706. As to extension of time by deposit of collateral. American Nat. Bank V. Dew (N. C), 94 S. E. 708. Transfer of a collateral note for another note is a good consideration. Second Nat. Bank v. Warner, 19 N. D. 485, 126 N. W. 100. Execution of note to a bank under threat of prosecution. State v. Hills, 94 Ohio St. 171, 113 N. E. 1045, L. R. A. 1917B, 684. Payment of pre-existing debt is value. Ogle v. Armstrong (Okla.), 153 Pac. 1139. Promissory note taken as collateral security is for consideration. Southwest Nat. Bank of Commerce of Kansas City v. Todd, — Okl. — , 192 P. 1096. When checks are exchanged each check is a consideration for the other; cash is an independent obligation and not conditional on the pay- ment of the other. Matlock v. Scheuerman, 51 Ore. 49, 93 Pac. 823, 17 L. R. A. (N. S.) 747. Holds contra lo the general rule that a transfer as security for an antecedent or pre-existing debt is not a transfer for value. Raken v. Henry, 16 Pa. Dist. Reports 207. Accommodate note is for value under this part of this section. Stein v. Jacobs, 20 Pa. Dist. Ct. 48. Payee of a note given in payment of a bill has given value. Wilbor V. Hawkins, 38 R. I. 119, 94 Atl. 856. Rule held not to apply where debt was worthless and the obligation of a third party. Citizens Trust Co. v. McDougald, 132 Tenn. 323, 178 S. W. 432, L. R. A. 1917C, 840. Collateral security for antecedent or pre-existing debt is value. Figuers v. Fly, 137 Tenn. 358, 193 S. W. 117. Note taken as security for pre-existing debt is for consideration. Crane & Co. v. Hall, — Tenn. — , 213 S. W. 414. Note given to prevent run on a bank supported by good consideration. Utah Nat. Bank v. Nelson, 38 Utah 169, 111 Pac. 907. Collateral security for antecedent or pre-existing debt is value. Felt V. Bush, 41 Utah 462, 126 Pac. 688. Note signed to enable cashier of bank to borrow money to apply on shortage is supported by sufficient consideration. Helper State Bank v. Jackson (Utah), 160 Pac. 287. Collateral security for antecedent or pre-existing debt is value. Payne v. Zell, 98 Va. 294, 36 S. E. 379. Collateral security for antecedent or pre-existing debt is value. Tru.s- tees of American Bank v, McComb, 105 Va. 473, 54 S. E. 14. 436 NEGOTIABLE INSTRUMENTS. § 25 Collateral security for antecedent or pre-existing debt is value. Ger- man-American Bank v. Wright, 85 Wash. 460, 148 Pac. 769. Taking of note on deht is for value. Guaranty Security Co. v. Coad, — Wash. — , 195 Pac. 22. Bank has given value although failed to deduct amount of note from defendant's balance on deposit. Northfield Nat. Bank v. Arndt, 132 Wis. 383, 112 N. W. 451. Promise to pay money is a valuable consideration although money was never advanced. Marling v. FitzGerald, 138 Wis. 93, 120 N. W. 388. Collateral security for antecedent or pre-existing debt is value. Sam- son V. Ward, 147 Wis. 48, 132 N. W. 629. Wisconsin cases. See the following two decisions in Wisconsin under the form of the statute as adopted in Wisconsin. Badger Ma- chinery Co, V. Columbia Co. Electric Light & Power Co. (Wis.), 163 N. W. 188. Holmes v. Wisconsin Grain, etc., Co. (Wis.), 164 N. W. 1007. Transfer for value must be shown. Jones v. Brandt, — Wis. — , 181 N. W. 813. Accommodation note transferred as collateral security for an ante- cedent debt is for value. In re Hopper-Morgan Co., 154 Fed. Rep. 249. Collateral security for antecedent or pre-existing debt is value. Scherer v. Everest, 168 Fed. 822, 94 C. C. A. 346. Accommodation note is for value under this part of this section. Trust Co. V. Markee, 179 Fed. Rep. 764. Collateral security for antecedent or pre-existing debt is value. Mel- ton V. Pensacola Co., 190 Fed. 126, 111 C. C. A. 166. Nicholas v. Waukesha Canning Co., 195 Fed. Rep. 807. Deposits of checks and drafts upon other banks by one in his bank as consideration. Security Nat. Bank y. Old Nat. Bank, 241 Fed. Rep. 1. England. Deposit of check and drawn upon. National Bank v. Silke (1891), 1 Q. B. 435, 439. England. Deposit of check. Royal Bank v. Tottenham (1894), 2 Q. B. 715. England. Deposit of check and overdrawn. Gaden v. Newfoundland Sav. Bank (1899), A. C. 281. England. Deposit of check. Capital & Counties Bank v. Gordon (1903), A. C. 240. England. Renewal note. Edwards v. Chancellor, 52 J. P. 454. **The following is a complete list of the cases, arranged alpha- tically by states, where this section has been construed : Alabama.— YdiWQihzn v. Bass. 10 Ala. App. 388, 64 So. 543; Boatwright V. Scheuer, Wise & Co. (1914), 66 So. 819; Anders v. Sandlin (1915), 67 So. 684; Orr v. Stewart (1915), 69 So. 649; Sherril v. Merchants, etc., Bank (Ala.), 70 So. 723; Citizens' Nat. Bank v. Bucheit (Ala.), 71 So. 87; Dilworth v. Holmes Furniture & Vehicle Co. (1916). 72, So. 288; Peoples' Bank & Trust Co. v. Floyd (1917), 75 So. 940; Zadek v. Forchheimer (Ala. App.), 77 So. 941; Vogler v. Manson (Ala.), 76 So. 117; Davies v. Simpson, — Ala. — , 790 So. 48. Arkansas.— YiooA v. Robson (1916), 187 S. W. 1059; Arnwell v. Arnold & Co. (1917), 193 S. W. 506; Johnson v. Ankrun (1917), 199 S. W. 897. Ca/;/orn /cr.—Shoenhair v. Jones (1917), 165 Pac. 971; Ballou v. Avery k\9\7), 166 Pac. 1003; Wetzel v. Cole (1917), 165 Pac. 692; Perzoni v. § 25 CONSIDERATION. 437 Greenwell (1918), 174 Pac. 60; Mahana v. VanAlstyne (1919), 178 Pac. 853. Colorado.— Domax v. Colorado Nat. Bank (1909), 46 Colo. 229, 104 Pac. 85; Western Investment & Land Co. v. First Nat. Bank (1918), 172 Pac. 6; Western Slope Fruit Growers' Assn. v. Divine (1918), 173 Pac. 426. Connecticut.— New Haven Mfg. Co. v. New Haven Pulp Co. (1903), 76 Conn. 126, 55 Atl. 604; Russell El. Co. v. Bassett (1907), 79 Conn. 709, 66 Atl. 531; Chittenden v. Carter (1909), 82 Conn. 585; Fairfield Co. Nat. Bank v. Hammer (1915), 95 Atl. 31; Continental Credit Co. v. Ely (1917), 100 Atl. 435. F/on'Jo.— Crystal River Lumber Co. v. Consolidated Naval Stores Co. (1912), 63 Fla. 119. 58 So. 129; Bland v. Fidelity Tr. Co. (Fla.), 71 So. 630, L. R. A. 1916F, 209 ; Roess Lumber Co. v. State Exch. Bank, 68 Fla. 324, 67 So. 188, Ann. Cas. 1916B, 327. /da/io.— Fidelity State Bank v. Miller (1917), 29 Idaho 777, 162 Pac. 244. Illinois.— Many, Blanc & Co. v. Krueger (1910). 153 111. App. 327; McHenry v. Croft (1911), 163 111. App. 426; Elgin National Bank v. Goecke, 129 N. E. 149. Indiana.— Uerch. Nat. Bank v. Nees (1916), 112 N. E. 904. Iowa.— Gooch v. Gooch (1916), 160 N. W. 333; Commercial Nat Bank v. Citizens State Bank (1906), 132 Iowa 706. 109 N. W. 198; Craw- ford Co. State Bank v. Stegman (1908). 137 Iowa 13, 114 N. W. 549 Voss v. Chamberlain (1908), 139 Iowa 569, 117 N. W. 269; Iowa Nat Bank v. Carter, 144 Iowa 715, 123 N. W. 237; Zimbelman v. Finnegan (1909), 141 Iowa 358; Robinson v. Robinson (1910), 147 Iowa 615 Robertson v. United States Live Stock Co. (1914), 145 N. W. 535; Meginnes v. McChesney (1916), 160 N. W. 50; State Bank of Halstad V. Bilstad (1912), 136 N. W. 204; Mohn v. Mohn (1917), 164 N. W. 341. Kansas.— Bkket v. Ellward (1904), 68 Kans. 295. 74 Pac. 1100; Bridges V. Vann (1912), 88 Kans. 98, 127 Pac. 604; Benjamin v. Welda State Bank, 98 Kan. 361, 158 Pac. 65, L. R. A. 1917A, 704; Redfield State Bank v. Myrick, 194 Pac. 648. Kentucky.— WiMns v. Usher (1906). 123 Ky. 696. 97 S. W. 37; Citizens Bank v. Bank of Waddy (1907), 126 Ky. 169. 103 S. W. 249; Herman's Excr. v. Gregory (1909), 131 Ky. 819, 115 S. W. 809; Lovelace v. Lovelace (1910), 136 Ky. 452, 124 S. W. 400; Campbell v. Fourth Nat. Bank of Cincinnati (1910), 137 Ky. 555, 126 S. W. 114; Am. Nat. Bank V. Minor & Son (1911), 135 S. W. 278; Jett v. Standafer (1911), 143 Ky. 787, 137 S. W. 513; Pratt v. Rounds (1914), 169 S. W. 848; Overby v Williams (1916), 185 S. W. 822; Receiver First Nat. Bank of Loudon v. Boreling (1916), 190 S. W. 1106; Ballard v. Ballard (1917), 197 S. W. 661. LoMwmnc— Scheuerman v. Monarch Fruit Co. (1909), 123 La. 59, 48 So. 647; Interstate Trust & Banking Co. v. Irwin (1915), 70 So. 313; Hyman v. Parkerson (1916), 140 La. 249, 72 So. 953, L. R. A. 1917B, 694. Maryland.— Black v. Bank of Westminster, 96 Md. 399, 54 Atl. 88. 438 NEGOTIABLE INSTRUMENTS. § 25 Massachusetts. — Boston Steel & Iron Co. v. Steuer (1903), 183 Mass. 140, 66 N. E. 646; Mehlinger v. Harriman, 185 Mass. 245; Widger v. Baxter (1906), 190 Mass. 130, 76 N. E. 509, 3 L. R. A. (N. S.) 436; Jennings v. Law (1908), 199 Mass. 124, 85 N. E. 157; Lowell v. Bick- ford (1909), 201 Mass. 543, 88 N. E. 1 ; Shawmut Commercial Paper Co. V. Bripham (1912), 211 Mass. 72; Crosier v. Crosier (1913), 215 Mass. 535; Neal v. Wilson, 213 Mass. 336, 100 N. R. 544; Usher v. A. S. Tucker Co. (1914), 271 Mass. 441, 105 N. E. 360; Smith v. Johnson (1916), 224 Mass. 50, 112 N. E. 644; Ajemain v. Robinson (1917), 115 N. E. 749; Seager v. Drayton, 217 Mass. 571, 105 N. E. 461. Michigan.— Graham v. Smith (1908), 155 Mich. 65, 118 N. W. 726; J. D. Gruber Co. v. Smith (1917), 162 N. W. 124. Minnesota.— German-Am. Bank of Ritzville v. Lyons (1914), 149 N. W. 658; Security Nat. Bank v. Pulver (1915), 155 N. W. 641; Snelling State Bank v. Clasen, 132 Minn. 404, 157 N. W. 643; Am. Multigraph Sales Co. V. Grant (1916), 160 N. W. 676; Bank of Montreal v. Beecher (1916), 157 N. W. 1070; Baxter v. Brandenburg (1917), 163 N. W. 516. Mississippi. — First Nat. Bank v. John McGrath & Sons, 111 Miss. 872, 72 So. 701; Sykcs v. Moore (1917), 76 So. 538. Missouri.— Wright v. Miss. Valley Tr. Co. (1910), 129 S. W. 407; Reeves v. Litts (1910), 143 Mo. App. 196, 128 S. W. 246; Dorris v. Cronan (1910), 129 S. W. 1014; Nat. Bank of Commerce in St. Louis v. Morris (1911), 156 Mo. App. 43, 135 S. W. 1008; Golden City Banking Co. V Greisel (1912), 161 Mo. App. 477; State Bank of Freeport v. Cape Girardeau & C. R. Co. (1913), 172 Mo. App. 662, 155 S. W. 1111; Greer V. Orchard (1913), 161 S. W. 875; Citizens Bank of Pomono v. Oaks (1914), 184 Mo. App. 598, 179 S. W. 679; Citizens Nat. Bank v. Bom- bauer (1916), 189 S. W. 651; Central Bank of Columbia v. Lydia (1917), 191 S. W. 245; Shawhan v. Distillery Co. (1917), 197 S. W. 369; Bank of Greentop v. Sloop (1918), 200 S. W. 304; Boatmen's Bank v. St. Louis Union Trust Co. (1918). 205 S. W. 629; First Nat. Bank v. Henry (1918), 202 S. W. 281; Swift & Co. v. McFarland, 231 S. W. 65. Montana.— Farchen v. Chessman (1914), 49 Mont. 326, 142 Pac. 631, Ann. Cas. 1916A, 681. Nebraska.— Benton v. Sikyta (1909), 84 Neb. 808, 122 S. W. 60; Farmers Nat. Bank of Lyons v. Dixon (1912), 91 Neb. 652, 136 N. W. 845; Livestock Nat. Bank v. Bragonier (1915), 153 N. W. 504; Macke v. Jungels (1918), 166 N. W. 191. New Jersey.— Travis v. Unkart (1916), 89 N. J. L. 571, 99 Atl. 320. New York. — Riverside Bank v. Woodhaven Junction Land Co. (1898), 34 A. D. 359; Citizens Nat. Bank v. Lilienthal (1899), 57 N. Y. Supp. 567, 40 A. D. 609; Brewster v. Schrader (1899), 26 Misc. 480; Rosenwald V. Goldstein (1899), 27 Misc. 827; Petrie v. Miller (1901), 57 A. D. 17, 67 N. Y. Supp. 1042, 173 N. Y. 596 (1903) (affirmed without an opinion) ; Sutherland v. Mead (1903), 80 A. D. 103. 80 N. Y. Supp. 504; Levy v. Huwer (1903), 80 A. D. 499; Roseman v. Mahoney (1903), 86 A. D. 377, 83 N. Y. Supp. 749; Bank of Am. v. Waydell (1905), 103 A. D. 25, 92 N. Y. Supp. 666; Sutherland v. Mead, 80 A. D. 103; Milius v. Kauffman (1905), 104 A. D. 442, 93 N. Y. Supp. 669; Hover v. Magley (1905), 48 Misc. 430, 96 N. Y. Supp. 925; Nat. Bank of Barre v. Foley (1907), 54 Misc. 126, 103 N. Y. Supp. 553; Ward v. City Trust § 25 CONSIDERATION. 439 Co., 102 N. Y. Supp. 50, 117 A. D. 130; English v. Schlesinger (1907), 55 Misc. 584, 105 N. Y. Supp. 989; Mohlman Co. v. McKane (1901), 69 N. Y. Supp. 1046, 60 A. D. 546; The Gansevort Bank of N Y. V. Gilday (1907), 110 N. Y. Supp. 271, 53 Misc. 107; Bigclow v. Automatic Gas Producer Co. (1907), 107 N. Y. Supp. 894; The Wall- about Bank V. Peyton (1908), 123 A. D. 727, 108 N. Y. Supp. 42; Joves- boff V. Rockney (1908), 109 N. Y. Supp. 818, 58 Misc. 559; Rosenthal v. Parsont (1908), 110 N. Y. Supp. 223; Valley Dew Distilling Co. v. Ritz- mann (1908), 110 N. Y. Supp. 917; Harris v. Fowler (1908), 110 N. Y. Supp. 987, 59 Misc. 523; Macauley v. Holsten (1909), 114 N. Y. Supp. 611; Mindlin v. Appelbaum (1909), 62 Misc. 300, 114 N. Y. Supp. 908; The VanOrden Tr. Co. v. L. Rosenberg, Inc. (1909), 62 Misc. 285, 114 N. Y. Supp. 1025; Albert v. Hoffman, 117 N. Y. Supp. 1043, 64 Misc. Rep. 87; Uvalde AsphaU Paving Co. v. Nat. Trading Co. (1909), 135 A. D. 391, 120 N. Y. Supp. 11; King v. Bowling Green Trust, 129 N. Y. Supp. 977, 145 A. D. 398; Lehrenkrauss v. Bonnell (1910), 199 N. Y. 240, 92 N. E. 637; Rogonski v. Brill (1911), 131 N. Y. Supp. 589; King 240, 92 N. E. 637; Rogonski v. Brill (1911), 131 N. Y. Supp. 589; Maurice V. Fowler (1912), 138 N. Y. Supp. 424; Broderick & Bascom Rope Co. v. McGrath (1913), 142 N. Y. Supp. 491, 81 Misc. 222 ; Martin L. Hall v. Todd (1912), 139 N. Y. Supp. Ill; Shape v. Shape (1914), 150 N. Y. Supp. 367; Union Bank of Brooklyn v. Sullivan (1915), 108 N. E. 558, 214 N. Y. 332; Brown v. Rowan (1915), 154 N. Y. Supp. 1098; McBee Co. v. Shoemaker (1916), 174 A. D. 291, 160 N. Y. Supp. 251; Miller v. Camp- bell (1916), 160 N. Y. Supp. 834; Stokes v. Sanders (19^8), 168 N. Y. Supp. 409; Lajani v. Abraham Schdala & Sons Corporation (1918), 171 X. Y. Supp. 611; American Brass & Copper Co. v. Pine (1919), 173 N. Y. Supp. 147. North Carolina.— Brooks v. Sullivan (1901), 129 N. Car. 190, 39 S. E 822; Singer Mfg. Co. v. Summers (1906), 143 N. C. 102, 55 S. E. 522; Murchison Nat. Bank v. Dunn Oil Mills Co. (1909), 150 N. Car. 718, 64 S. E. 885; J. L. Smathers & Co. v. Toxaway Hotel Co. (1913), 78 S. E. 224; Am. Ex. Nat. Bank v. Segroves (1914), 166 N. C. 608, 82 S. E. 947; Franklin Nat. Bank v. Roberts Bros. (1915), 168 N. C. 473, 84 S. E. 706; Am. Nat. Bank of Richmond v. Hill (1915), 85 S. E. 209; Cherokee County v. Meroney (1917), 92 S. E. 616; Acme Mfg. Co. v. McCormick (1918), 95 S. E. 555; A. B. Hunter & Co. v. Sherron (1918), 97 S. E. 5. North Daifeofo.— Second Nat. Bank v. Werner (1910), 19 N. D. 485. 126 N. W. 100; Farmers' Bank of Mercer Co. v. Riedlinger (1914), 146 N. W. 556; Sawyer State Bank v. Sutherland (1917), 162 N. W. 696. O/jio.— State v. Hills (1916), 94 Ohio St. 171, 113 N. E. 1045, L. R. A. 1917B, 684; Hamilton Mach. Tool Co. v. Memphis Nat. Bank, 84 Ohio St. 184, 95 N. E. m. Oklahoma.— Cam v. Munger (1915), 149 Pac. 1086; Ogle v. Arm- strong (1915), 153 Pac. 1139; State v. Soliss (1915), 152 Pac. 1114; Purcell Mill & Elevator Co. v. Canadian Val. Const. Co. (1916), 160 Pac. 485; First Nat. Bank v. Harkey (1917), 163 Pac. 273; Starr v. Lone- wolf (1917), 163 Pac. 532; Chandler v. Each (1918), 170 Pac. 516; Levy v. Reed (1918), 170 Pac. 497; Ogle v. Armstrong (Okla.), 153 Pac. 1139; Southwest National Bank of Commerce v. Todd, 192 Pac. 1096. Or^yon.— Matlock v. Scheuerman (1908), 51 Oreg. 49, 93 Pac. 823, 17 L. R. A. (N. S.) 947; Anderson v. Stayton State Bank ('916), 159 Pac. 1033; Wicks v. Metcalf (1917), 163 Pac. 988. 440 NEGOTIABLE INSTRUMENTS. § 26 Pennsylvania— Stem v. Jacobs, 20 Pa. Dist. Ct. 48; Rathfon v. Locher (1906), 215 Pac. 571; Allentown Nat. Bank v. Qay Product Supply Co (1907), 217 Pa. St. 128, 66 Atl. 252; Morrison v. Whitefield (1912) 46 Pa. Super. 103; Levy v. Gilligan (1914), 90 Atl. 647. Rhode Island.— WUhour v. Hawkins (1915), 38 R. I. 119, 94 Atl. 856. Tennessee.— E\gm City Bldg. Co. v. Hall (1907), 119 Tenn. 548, 108 S. W. 1068; Citizens Tr. Co. v. McDougald (1915), 132 Tenn. 323 178 S. W. 432; Crane & Co. v. Hall, 213 S. W. 414. r^.roj.— Magill V. McCamley (1916), 182 S. W. 22; Yantis v. Tones (1916), 184 S. W. 572. Utah.— Utah Nat. Bank of Salt Lake City v. Nelson (1910), 38 Utah 169, 111 Pac. 907; Felt v. Bush (1912), 126 Pac. 688; Miller v. Marks (1915), 148 Pac. 412; Helper State Bank v. Jackson (Utah), 160 Pac. 287; Smith v. Brown (1917), 165 Pac. 468; Hanson v. Harris (1918). 170 Pac. 970. FjV^mia.— Payne v. Zell (1900), 98 Va. 294, 36 S. E. 379; Am. Bank cf Orange v. McComb (1906), 105 Va. 473, 54 S. E. 14; Saunders v. Bank of Mecklenburg (1911), 71 S. E. 714; Ford v. Engelman (1915), 118 Va. 89, 86 S. E. 852; Colley v. Summers Parrott Hardware Co. (1916), 119 Va. 439, 89 S. E. 906; Brenard Mfg. Co. v. Brown (1917). 92 S. E. 850. Vermont.— Bean v. Parker (1916), 96 Atl. 17. Washington.— Pin v. Little (1910), 58 Wash. 355, 108 Pac. 941; Ger- man-Am. Bank of Seattle v. Wright (1915), 148 Pac. 769; Guaranty Security Co. v. Coad, 195 Pac. 22. West Virginia.— Burner v. Nutter (1915), 87 S. E. 359. ^tj(ro;wm.— Hodge v. Wallace (1906), 129 Wis. 84, 108 N. W. 212, 116 Am. St. R. 938; Pelton v. Spider Lake S. & L. Co. (1907), 132 Wis 219, 112 N. W. 29, 122 Am. St. 963; Northfield Nat. Bank v. Arndt, 132 Wis. 383. 112 N. W. 451; Marling v. Fitzgerald (1909), 138 Wis. 93, 120 N. W. 388; Samson v. Ward (1911), 147 Wis. 48, 132 N. W. 629; Holmes V. Wisconsin Grain, etc., Co. (Wis.), 164 N. W. 1007; Becker v. Noegel (1917), 160 N. W. 1055, 165 Wis. 73; Badger Co. v. Columbia Co. (1917), 163 N. W. 188; Jones v. Brandt, 181 N. W. 813. United States.— Barnsdall v. Waltemeyer (1905). 142 Fed. 415, 73 C. C. A. 515 (Colo.) ; Scherer & Co. v. Everest (1909), 168 Fed. 822, 94 C. C. A. 346; In re Hopper-Morgan Co. (1907). 154 Fed. 249 (N. Y.) ; Trust Co. of St. Louis Co. V. Markee (1910), 179 Fed. 764; Milton v. Pensa- cola Bank & Tr. Co. (1911), 190 Fed. 126, 111 C. C A. 166; Nichols v. Waukesha Canning Co., 195 Fed. Rep. 807; Smith v. Nelson Land & Cattle Co., 212 Fed. Rep. 56, 122 C. C. A. 512; Security Nat. Bank v. Old. Nat. Bank, 241 Fed. Rep. 1 ; U. S. Fidelity & Guaranty Co. v. Walker (1918), 248 Fed. 42. § 26. 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,'*' *■ § 26 CONSIDERATION. 441 See text, § 128. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Allegation as to credit on books of a bank and money remaining in bank. Richards v. Street, 31 App. Cas. D. C. 427. Pledgee as holder for value. Harris v. Nicholson-Foley Co., 179 Ky. 513, 200 S. W. 929. An allegation in an -answer that an indorsement was without con- sideration is insufficient as against a complaint alleging consideration. Rogers v. Morton, 46 Misc. Rep. 494, 95 N. Y. Supp. 49. The surrender of an old note and the making of a new one makes the holder a holder for value. Van Norden Trust Co. v. L. Rosenberg, 62 Misc. Rep. 285, 114 N. Y. Supp. 1025. The crediting with amounts in accounts constitutes one a holder for value. Metzger v. Sygall, 83 Wash. 80, 145 Pac. 72. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: Alabama. — Bledsoe v. City Nat. Bank of Selma (1912), 7 Ala. App. 195, 60 So. 942; Miller v. Johnson (1914). 66 So. 486; Armstrong v. Walker (1917), 76 So. 280; Hudson v. Repton State Bank (1917), 75 So. 695; Wilson v. Weaver (1917), 77 So. 238. District of Columbia. — Richards v. Street, 31 App. Cas. D. C. 427. /rfa/io.— Kimpton v. Studebaker Bros. Co. (1908), 14 Ida. 552, 94 Pac. 1039. Iowa.— Highy v. Bahrenfuss (1917), 163 N. W. 247. Kentucky.— Utrman's Excr. v. Gregory (1909), 131 Ky. 819, 115 S. W. 809; Harrison v. Nicholson-Foley Co., 179 Ky. 513, 200 S. W. 929. Maryland.^Black v. First Nat. Bank (1903), 96 Md. 399, 54 Atl. 88. Massachusetts.— Jennings v. Law (1908), 199 Mass. 124. 85 N. E. 157; Nat. Investment & Security Co. v. Carey (1916), 111 N. E. 357. MtV%att.— First Nat. Bank v. Grand Rapids & I. Rv. Co. (1917). 161 N. W. 859; National Bank of Montreal v. Bucher (1916), 157 N. W. 1070. Missouri.— Coleman v. Stocks (1911), 159 Mo. App. 43, 139 S. W. 216; Wright v. Wayland (1916), 188 S. W. 928; Wurlitzer Co. v. Rossman (1916), 190 S. W. 636; Howard v. Int. Bank (1918). 200 S. W. 91. Montana. — State Bank of Moore v. Fursythe (1910), 41 Mont. 249. Nebraska. — Nat. Bank of Commerce v. Bossemeyer (1917), 162 N. W. 503. Nezv York. — Riverside Bank v. Woodhaven Junction Land Co. (1898), 34 A. D. 350; Petrie v. Miller (1901), 57 A. D. 17, 67 N. Y. Supp. 1042, affirmed without an opinion. 173 N. Y. 596; Fleitman v. Ashley (1901), 60 A. D. 201; Sutherland v. Mead (1903), 80 A. D. 103. 80 N. Y. Supp. 504; Rogers v. Morton (1905), 46 Misc. 494, 95 N. Y. Supp. 49; Hover v. Magley (1905). 48 Misc. 430, 96 N. Y. Supp. 442 NEGOTIABLE INSTRUMENTS. § 27 925; Rosenthal v. Freedman (1907), ^Z Misc. 595, 103 N. Y. Supp. 714; Clearv v. DcBeck Plate Glass Co. (1907), 54 Misc. 537, 104 N. Y. Supp. 831; VanNordin Tr. Co. v. L. Rosenberg, Inc. (1909), 62 Misc. 285, 114 N. Y. Supp. 1025; Heimbach v. Doubleday. Page Co. (1909), 130 A. D. 34; King v. Bowling Green Tr. Co. (1911), 145 A. D. 398; Broderick & Bascom Rope Co. v. McGrath (1913), 143 N. Y. Supp. 496, 81 Misc. 222; Lich-und-Spakassa Audorf v. Pfizer (1913), 158 A. D. 505, 143 N. Y. Supp. 744; Munnich v. Jofife (1914), 149 N. Y. Supp. 338, 164 A. D. 30; Sabine v. Paine (1915), 151 N. Y. Supp. 735; Poshkoff v. Bernstein (1916), 159 N. Y. Supp. 206; Republican Art Printer v. David (1916), 159 N. Y. Supp. 1010. North Carolina. — Toms v. Jones (1900), 127 N. Car. 464; Citizens & Marine Bank of Newport News v. Southern R. W. (1910), 153 N. Car. 546. Pennsylvania.—Sf3iit Bank of Pittsburg v. Kirk (1907), 216 Pa. St. 452. Utah.—UcCoTmick v. Swem (1909), 36 Utah 6, 102 Pac. 626; Felt v. Bush (1912), 126 Pac. 688. Washington. — Bradley Engineering & Mfg. Co. v. Hevburn (1910), 56 Wash. 628, 106 Pac. 170; Metzger v. Sigall (1914), 83 Wash. 807, 145 Pac. 72; Wash. Trust Co. v. Keyes (1915), 132 Pac. 1029; Skagit State Bank v. Moody (1916), 150 Pac. 425. United 6"/of^j.— Richards v. Street (1908). 31 App. D. C. 427; Milton V. Pensacola Bank & Tr. Co. (1911), 190 Fed. 126, 111 C. C. A. 166; In re Chas. R. Partridge Lumber Co. (1914), 215 Fed. 973. § 27. When lien on instrument constitutes holder for value. Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien.*' *^ See text, § 128. ^ Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Note indorsed as collateral security held by holder in due course for value. Griswold v. Morrison, — Cal. App. — , 200 Pac. 62. Pledgee although a holder in due course recovered amount of debt cnly because a defense. Continental Credit Co. v. Ely (Conn.), 100 Atl. 434. Full amount recovered. Jett v. Standafer, 143 Ky. 787, 137 S. W. 513. Amount of debt for which pledged recovered. Elk Valley Coal Co. v. Third Nat. Bank of Lexington, 157 Ky. 617, 163 S. W. 766. Pledgee as lien holder is holder for value. Harison v. Nicholson- Foley Co., 179 Ky. 513. Assignee of notes as collateral after maturity subject to defenses by maker. Sparr v. Fulton Nat. Bank. 179 Ky. 755. Full face value of the note recovered. Burnes v. New Mineral Fer- tilizer Co,, 218 Mass. 300, 105 N. E. 1074. § 27 CONSIDERATION. 443 Bank's title held subject to equities where note left for collection but no assignment of note as collateral security. Schneider v. Johnson, 161 Mo. App. 375. 143 S. W. 78. Holder for value to the entire amount of the collateral notes. State Bank v. Cape Girardeau Co., 170 Mo. App. 662, 155 S. W. 1111. No recovery on collateral note if principal note is wholly invalid. Omaha Loan & Bldg. Assn. v. Cocke (Neb.), 165 N. W. 146. Lien on note constitutes holder a holder for value. Southwest Nat. Bank of Commerce of Kansas City v. Todd, — Okla. — , 192 Pac. 1096. It was held that under the pleadings the defendant, not having raised the question of collateral and the amount of the note for which it was pledged, was not entitled to rely on section 27 and full amount was recovered. Bailey v. Inland Empire Co.. 75 Ore. 309, 146 Pac. 991. One having lien- on note held is holder for value. Crane & Co. v. Hall, — Tenn. — , 213 S. W. 414. Whole amount of collateral security recovered. Hillman v. Stanley, 56 Wash. 320, 105 Pac. 816. Interest at legal rate only was recovered in the absence of evidence as to the rate which the principal debt was to bear. Citizens' Bank v. Limpright, 93 Wash. 361. 160 Pac. 1046. Recovery of payments by maker where payee had defaulted and indorsed the note. Dyer v. International Banking Corp., 262 Fed. 292. *' The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: California. — Griswold v. Morrison (Cal. App.), 200 Pac. 62. Connecticut.— Mersick v. Alderman (1905), 77 Conn. 634, 60 Atl. 109; Continental Credit Co. v. Ely, — Conn. — , 100 Atl. 434. ///wou.— Peacock v. Phillips (1910), 155 111. App. 514. Kentucky.— Citizens Bank v. Bank of Waddy (1907), 126 Ky. 169, 103 S. W. 249; Campbell v. Fourth Nat. Bank of Cincinnati (1910). 137 Ky 555. 126 S. W. 114; Am. Nat. Bank v. Minor & Son (1911), 135 S. W, 278; Jett v. Standafer (1911). 143 Ky. 787, 13:^ S. W. 513; Elk Valley Coal Co. V. Third Nat. Bank of Lexington (1914), 157 Ky. 617, 163 S. W. 766; Sparr v. Fulton Bank (1918), 201 S. W. 310; Harrison V. Nichol-- son-Foley Co., 179 Ky. 513 ; Sparr v. Fulton Nat. Bank, 179 Ky. 755. Massachusetfs.—BvLTms v. New Mineral Fertil. Co. (1914), 218 Mass. 300, 105 N. E. 1074. Michigan.— Graham v. Smith (1908), 155 Mich. 65, 118 N. W. 726. Missouri.— Nat. Bank of Commerce in St. Louis v. Morris (1911), 156 Mo. App. 43, 135 S. W. 1008 ; State Bank of Freeport v. Cape Girardeau & C. R. Co. (1913), 170 Mo. App. 662, 155 S. W. 1111; Schneider v. John- son, 161 Mo. App. 375, 143 S. W. 78; Central Bank of Columbia v. Lyda (1917), 191 S. W. 245. New York.— Rogers v. Morton, 46 Misc. Rep. 494, 95 N. Y. Supp 49; Batterman v. Butcher, 95 App. Div. 213, 88 N. Y. Supp. 685; Petrie v. Miller, 67 N. Y. Supp. 1042, affirmed 173 N. Y. 596, 57 A. D. 17. Nebraska.— Brown v. James, 80 Neb. 475, 114 N. W. 591 ; Benton v. Sikyta, 84 Neb. 808, 122 N. W. 60, 24 L. R, A. (N. S.) 1057; Omaha "Loan and Bldg Assn. v. Cooke, 165 N. W. 146. 444 NEGOTIABLE INSTRUMENTS. § 28 North Carolina.— Brooks v. Sullivan (1901), 129 N. Car. 190, 39 S. E. 822; Citizens & Marine Bank of Newport News v. Southern R. W. (1910), 153 N. Car. 346; J. L. Smathers & Co. v. Toxaway Hotel Co. (1913), 78 S. E. 224. North Dakota. — Shuman v. Citizen's State Bank of Rugby (1914), 147 N. W. 388. Oklahoma.— Southwest Nat. Bank v. Todd, 192 Pac. 1096. Or^firon.— Bailey v. Inland Empire Co. (1915), 75 Ore. 309, 146 Pac. 991. Tennessee.— First Nat. Bank of Elgin, III. v. Russell (1911), 139 S. W. 734; Crane & Co. v. Hall, 213 S. W. 414. Utah.— Felt v. Bush (1912), 126 Pac. 688. Virginia.— Payne v. Zell (1900), 98 Va. 294. 36 S. E. 379. Washington. — Bank of Montreal v. Howard (1906), 44 Wash. 10, 86 Pac. 1115; Hillman v. Stanley (1909), 56 Wash, 320, 105 Pac. 816; Cana- dian Bank of Commerce v. Sesnon Co., 68 Wash. 434, 123 Pac. 602 ; German-Am. Bank of Seattle v. Wright (1915), 148 Pac. 769; Crewdson V. Shultz (1919), 254 Fed. 24; Citizens Bank v. Limpright, 93 Wash. 361, 160 Pac. 1046. ^FyowMM^r.— George v. Emery (1909), 18 Wyo. 352, 107 Pac. 1. United States.— Trust Co. of St. Louis Co. v. Markee (1910), 179 Fed. 764 ; Dyer v. International Banking Corp, 262 Fed. 292. § 28. Effect of want of consideration. Absence or fail- ure of consideration is matter of defense as against any person not a holder in due course ; and partial failure of consideration is a defense pro tanto whether the failure is an ascertained and liquidated amount or otherwise.-** ^* See text, § 68. Cross-sections : 52. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Parol evidence admissible as against one not a bona fide holder. Jefferson Co. Bank v. Compton, 192 Ala. 16, 68 So. 261. Death of a stallion making it impossible to return him not a failure of consideration. Monticello State Bank v. Killiam (Ark.), 192 S. W. 369. Extent to which partial failure of consideration operative. Ryan v. Security Savings & Commercial Bank, — D. C. — , 271 Fed. 366. It is error to direct a verdict for the plaintiff where evidence tends to prove a failure of consideration. Gardner Lumber Co. v. Bank of Commerce (Fla.), 74 So. 313. Accord: Glass v. Virginia-Carolina Chemical Co. (Fla.), 74 So. 981. Failure of consideration between the drawee and the drawer is no § 28 CONSIDERATION. 445 defense in an action by the payee against the acceptor. Mt. Vernon Nat. Bank v. KelHng-Karel Co.. 189 111. App. 375. Failure of consideration a defense as to purchaser after maturity. Sparr V. Fulton Nat. Bank, 179 Ky. 755. Failure of consideration not a defense against a bona fide holder. Franz v. Schiro, 136 La. 841, 67 So. 925. Holding in Maryland that under the general issue failure of considx eration may be shown. Morgan v. Cleaver (Md.), 101 Atl. 610. Burden is on party showing want of consideration. Long v. Conn, — Minn. — , 179 N. W. 644. Failure of consideration must be pleaded. Indiana Flooring Co. v. Rudnick, — Mass. — , 127 N. E. 428. Defense by one of two joint-makers. Rowe v. Bowman, 183 Mass. 488, 67 N. E. 636. Accord: Holmes v. Farris, 97 Mo. App. 305, 311, 91 S. W. 116. Burden of proving failure of consideration is on the defendant. Rhodes V. Guhman, 156 Mo. App. 344, 362, 137 S. W. 86. Partial failure may be shown under a plea of total failure. Nat. Tube Co. V. Ice Machine Co., 201 Mo. 30, 98 S. W. 620. Accord; Lebrecht v. Nellist, 184 Mo. App. 334, 171 S. W. 11. Accord: Glasse v. King (Mo. App.), 195 S. W. 521. A sufficient consideration is delivery of goods to another. Rudolph Wurlitzer Co. v. Rossman, 196 Mo. App. 78, 190 S. W. 636. Since a note imports a consideration the burden is thrown upon the defendant to prove lack or failure of consideration. Carter v. Butler, 264 Mo. 306, 174 S. W. 399, Ann Cas. 1917A, 483. Trial judge erred in directing a verdict for the defendant, even though plaintifif introduced the testimony of no witnesses to contradict de- fendant witnesses. McCormack v. Williams, 88 N. J. L. 170, 95 Atl. 978. Defendant has burden of showing want of consideration. Citizens Nat. Bank of Roswell v. Bean, — N. M. — , 190 Pac. 1018. Want of consideration is not a good defense unless pleaded. Sprague V. Sprague, 80 Hun, 285, 30 N. Y. Supp. 162. As between remote parties a defense of no consideration must be sustained by a showing that neither party gave or received consideration. National Park Bank v. Saitta, 127 App. Div. 624, 111 N. Y. Supp. 927, affirmed, 196 N. Y. 548. Defense on ground of want of consideration but defense of duress not good. Weiss v. Rieser, 62 Misc. Rep. 292, 114 N. Y. Supp. 983. Necessary to plead want of consideration. Ryan v. Sullivan, 143 App. Div. 471, 128 N. Y. Supp. 632. Want of consideration must be pleaded. Sharp v. Sharp, 145 N. Y Supp. 386. Burden of proving lack of consideration as a defense is on the de- fendant. Gerli & Co. v. Doorly, 151 N. Y. Supp. 574. Contra: Mechanics & Metals Nat. Bank v. Termini, 93 Misc. Rep. 1. 156 N. Y. Supp. 433. Words in note "value received" do not overcome plaintiff's evidence which shows no consideration. Dougherty v. Salt, 227 N. Y. 200. Maker may urge failure of consideration against payee. Dixon v. Miller, — Nev. — , 184 Pac. 926. Burden of proof to show want of consideration is on the defendant. Finer v. Brittain, 165 N. C. 401, 81 S. E. 462. Where two articles were to be delivered and only one was delivered it shows a partial failure of consideration. International Harvester Co. V. Parham (N. C), 90 S. E. 503. 446 NEGOTIABLE INSTRUMENTS. § 28 Maker of note which was given without consideration cannot recover trom the payee. Dickinson v. Carroll, 21 N. D. 271, 130 N. W. 829. Partial failure of consideration as between original parties. Sharp V. Sharp, 4 Ohio App. 418. Failure of consideration between the maker and the payee is no defense to a surety when sued for contribution. Cummins v. Line, 43 Okla. 575. 143 Pac. 672. The facts need not be stated. Zebold v. Hurst (Okla.), 166 Pac. 99. Parol evidence sometimes admissible to show absence or failure of consideration. Praes v. Vollintine, 53 Wash. 137, 101 Pac. 706. Notice of failure of consideration is a good defense. Washington Trust Co. v. Keyes, 88 Wash. 287, 152 Pac. 1029. Failure of consideration not a defense against a bona fide holder. Interstate Finance Co. v. Schroeder, 74 W. Va. 67, 81 S. E. 552. ^" The follovv^ing is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Alabama. — Jefferson Co. Bank v. Compton, 192 Ala. 16, 68 So. 261 ; United Brothers of Friendship & Sisters of Mysterious Ten v. C. S. Huffman Auditing Co. (1918), 78 So. 864; Conwell v. Rice (1919), 80 So. 406. Arisona.— Hurley v. Wilky (1916), 156 Pac. 83. Arkansas.— WiWizmson v. Miles (1914), 169 S. W. 368; Ozark Dia- mond Mines Co. v. Townes (1915), 174 S. W. 515; Haglin v. Friedman (1915). 177 S. W. 429; Hamburg v. Ahrens (1915), 177 S. W. 14; Dodd V. Axle Nut Sigh Co. (1916). 189 S. W. 663; Monticello State Bank v. Killiam (Ark.), 192 S. W. 369. Connecticut. — St. Paul's Episcopal Church v. Fields (1909), 81 Conn. 670, 72 Atl. 145; Tice v Moore (1909), 82 Conn. 244, 73 Atl. 133. District of Columbia. — Ryan v. Security, etc., Bank, 271 Fed. 366. Delaware. — Security Tr. & Safe Dep. Co. v. Duross (1913), 86 Atl. 209. Florida. — Padgett v. Lewis, 54 Fla. 177, 45 So. 29; Roess Lumber Co. V. State Exchange Bank (1915), 67 So. 188; Odlin v. Stucky (1919), 80 So. 291.; Gardner Lumber Co. v. Bank of Commerce (Fla.), 74 So. 313; Glass V. Virginia-Carolina Chemical Co. (Fla.), 74 So. 981. /rat. Bank, 24 Wyo. 423, 160 Pac. 1170. ^" The following is a complete list of the cases, arranged alpha- tically by states, where this section has been construed : Alabama. — Wilson v. Weaver (Ala. App.), 77 So. 238; Davis v. Florey (Ala. App.), 77 So. 413; Stone v. Goldberg & Lewis (1912), 6 Ala. App. 249, 60 So. 744; Ger.-Am. Nat. Bank v. Lewis (1913), 9 Ala. App. 352, 63 So. 741; Goldberg & Lewis v. Stone (1914), 65 So. 454; Ex parte Goldberg & Lewis, 191 Ala. 356, 67 So. 839, L. R. A. 1915F, 1159; Davis v. First Nat. Bank of Blakely (1915), 192 Ala. 8, 68 So. 261; Sherrill v. Merch. & Mech. Tr. & Sav. Bank (1916), 70 So. 723; Jones V. Bell (1917), 77 So. 998; Slaughter v. Green, 87 So. 358. Arkansas— Tancred v. First Nat. Bank (1916), 187 S. W. 160. Colorado. — Louisville Co. v. International Trust Co., 18 Colo. App. 545, 71 Pac. 898. Florida. — Camp Lumber Co. v. State Sav. Bank (1910). 59 Fla. 455, 51 So. 543; Williams v. Peninsula Grocery Co. (1917), 75 So. 517. Illinois.— First Nat. Bank of Chadwick v. Mackey (1910), 157 111. App. 408; Burr v. Beckler (1914), 106 N. E. 206, 264 111. 230; Trego v. Cunningham Est. (1915), 108 N. E. 350, 267 111. 367. Iowa.— Irwin v. Deming (1909), 142 Iowa 299, 120 N. W. 645; Roy V. Duff (1915), 152 N. W. 606; Young v. Hayes (1917), 165 N. W. 391. Kansas. — State Savings Bank v. Krug, 193 Pac. 899. Kentucky.— Foster's Admr. v. Metcalf (1911), 138 S. W. 314. Massachusetts. — Johnson-Kettell Co. v. Longley Luncheon Co. (1910), 207 Mass. 52 ; Liberty Trust Co. v. Tilton, 217 Mass. 462, 105 N. E. 605, L. R. A. 1915B, 144. M/womW.— Sublette v. Brewington (1909), 139 Mo. App. 410, 122 S. W. 1150; Scotland Co. Nat. Bank v. Hohn (1910), 146 Mo. App. 699, 125 S. W. 539; Cantrell v. Davidson (1914), 168 S. W. 271; Long v. Shafer, 185 Mo. App. 646, 171 S. W. 690; Chandler v. Hedrick (1915), 173 S. W. 93; Miners & Merch. Bank v. St. Louis Smelting & Refining Co. (Mo. App.) (1915), 178 S. W. 211; Am. Union Tr. Co. v. Never Break Range Co. (1917), 190 S. W. 1045; Davis v. McColl (1916), 184 S. W. 920; Carter v. Butler, 264 Mo. 306, 174 S. W. 399, Ann. Cas. 1917 A, 483; American Forest Co. v. Hall (Mo.), 216 S. W. 740. Mon^ano.— Case Medicine Co. v. Simpson (1918), 170 Pac. 12; Mer- chants National Bank of Billings v. Smith. 196 Pac. 523; J. I. Case Threshing Mach. Co. v. Simpson, 54 Mont. 316. 458 NEGOTIABLE INSTRUMENTS. § 31 iV^fcrojJbfl.— Benton v. Sikyta, 84 Neb. 808, 122 N. W. 61, 24 L. R. A. (N. S.) 1057n; Nat. Bank of Commerce v. Farmers & Merchants Bank 0910), 87 Neb. P41, 843, 128 N. W. 522; Aurora State Bank v. Hayes- Fames Elevator Co. (1911), 88 Neb. 187, 129 N. W. 279; Bank of She- nandoah V. Kelgord, 91 Neb. 178, 135 N. W. 548. New Mexico.— RiW v. Hart (1917), 167 Pac. 710. New For/^.— Schlesinger v. Kurzvok (1905), 94 N. Y. Supp. 442, 47 Misc. 634; Rogers v. Morton (1905), 46 Misc. Rep. 494, 95 N. Y. Supp. 49; Seaboard Nat. Bank v. Bank of America (1908), 193 N. Y. 26, 85 N. E. 829; Manufacturer's Commercial Co. v. Blitz (1909), 131 A. D. 17, 115 N. Y. Supp. 402; Smith v. Dixon (1912), 150 A. D. 571; Bark- ley V. Muller (1914), 149 N. Y. Supp. 620, 164 A. D. 351; Sabine v. Paine (1915), 151 N. Y. Supp. 735; Wolfin v. Security Bank of N. Y. (1915), 170 A. D. 519, 156 N. Y. Supp. 474; Dalrymple v. Schwartz (1917), 164 N. Y. Supp. 496. • North Coro/ma.— Steinhilper v. Basinght (1910), 153 N. Car. 293, 69 S E. 222; Meyers v. Petty (1910), 153 N. Car. 462; Woods v. Finley (1910), 153 N. Car. 497, 69 S. E. 502; Elgin City Banking Co. v. McEacheon (1913), 79 S. E. 680; Critcher v. Ballard, 10' S. E. 134. North Dakota.— l^at. Bank of Commerce v. Pick (1904), 13 N. Dak. 74, 99 N. W. 63; Viets v. Silver (1905), 15 N. Dak. 51, 106 N. W. 35; Emerson-Brantingham Co. v. Brennan, 35 N. D. 94, 159 N. W. 700. O/tto.— Thompson v. Citizens Nat. Bank of Adams, N. Y. (1909), 32 O. C. C. 131. Oklahoma. — Stevens v. Pierce, 193 Pac. 417. Oregon. — ^Gardner v. Wiley, 46 Ore. 96, 79 Pac. 341 ; Seaman v. Muir, 72 Ore. 583, 144 Pac. 121. Pennsylvania. — Flanders v. Snare (1908), 37 Pa. Super Ct. 28; Do- minion Trust Co. V. Hildner (1914), 243 Pa. 253, 90 Atl. 69; Lincoln Nat. Bank of Pittsburg v. Miller (1917), 100 Atl. 269, 255 Pac. 467; Johnston v. Knipe (1918), 103 Atl. 957. South Dakota.— Fiper v. Hagen (1914), 146 N. W. 692. Washingtori.—Swenson v. Stoltz, 36 Wash. 318, 78 Pac. 999. Wyomnng.— Capitol Hill St. Bank v. Rawlins Nat. Bank (1916), 24 Wyo. 423, 160 Pac. 1171. United States.— McKee v. District Nat. Bank (1912), 38 A. C. (D. C.) 465. §31. Indorsement; how made. The Indorsement must be written on the instrument itself or upon a paper attached thereto. The sig-nature of the indorser, without additional words, is a sufficient indorsement.^' ^* See text, § 97. Cross sections: 18, 49, 42. R 31 NEGOTIATION. 459 The Illinois Act adds a clause as follows : "and the addition of words of assignment or guaranty shall not negative the additional effect of the signature as an indorsement, unless otherwise expressly stated." ^ Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : A written indorsement on mortgage to which note is pinned is an assignment, not indorsement of note. Clark v. Thompson, 194 Ala. 504, 69 So. 925. . , T r- . Assigning and guaranteeing payment is mdorsement. Jones County Trust & Savings Bank v. Kurt, — Iowa — , 182 N. W. 409. Words "hereby assign" on back of negotiable instrument do not affect the indorsement. Farnsworth v. Burdick, 94 Kan. 749, 147 Pac. 863.^ Authority to indorse for another by rubber stamp. State Savings Bank of Leavenworth v. Krug, — Kan. — , 193 Pac. 899. Contract by officers of company as to note indorsed by one of them is not an indorsement of note. First Nat. Bank of Doherty, 156 Ky. 586, 161 S. W. 211. Evidence of indorsement must be given. Whitman v. Fournier (Mass.), 117 N. E. 3. Rubber stamp indorsement by corporation is good if shown to be ratified. American Union Trust Co. v. Never Break Range Co. (Mo. App.), 190 S. W. 1045. General indorsement passes all title. American Forest Co. v. Hall, — Mo. — , 216 S. W. 740. Proof of indorsement, what sufficient. Congress Tucking Co. v. Alton Dress & Waist Co., 154 N. Y. Supp. 156. Sufficiency of evidence to prove indorsement. Donahue v. Bank of America, 161 N. Y. Supp. 232. Rubber stamp indorsement sufficient where shown to be intention ^of indorser. Mayers v .McRimmon, 140 N. C. 640, 53 S. E. 447, 111 Am. St. Rep. 879. Words guaranteeing payment on back of negotiable instrument are not words of indorsement. Ireland v. Floyd, 42 Okla. 609, 142 Pac. 401, L. R. A. 1915C, 661. Indorsement by rubber stamp sufficient. Flanders v. Snare, 37 Pa. Sup. Ct. 28. *■ The following is a complete list of the cases, arranged alpha- tically by states, where this section has been construed: ^/a&a«tc.— Clark v. Thompson (1915), 194 Ala. 504, 69 So. 925. Co/ora Jo .—Marks v. Munson (1915), 59 Colo. 440, Ann. Cas. 1917A, 766, 149 Pac. 440. District of Columbia.— McKee v. District Nat. Bank, 38 App. Cas. 465. Iowa— Jones County Trust, etc.. v. Kurt, 182 N. W. 409. J^an^^a^.— Offenstein v. Wevgandt (1913), 89 Kans. 739. 132 Pac. 991; Farmsworth v. Burdick (1915), 94 Kan. 749, 147 Pac. 863; State, etc., Bank v. Krug, 193 Pac. 899. Kentucky.— First Nat. Bank v. Doherty. 156 Ky. 386, 161 S. W. 211. 460 NEGOTIABLE INSTRUMENTS. § 32 Massachusetts. — Whitman v. Fournier (Mass.), 117 N. E. 3; May- berry V. Sprague (1908), 199 Mass. 301. Missouri. — Am. Union Tr. Co. v. Never Break Range Co. (Mo. App.), (1916), 190 S. W. 1045; American Forest Co. v. Hall (Mo.), 216 S. W. 740. New York. — Manufacturer's Commercial Co. v. Blitz (1909), 131 A. D. 17, 115 N. Y. Supp. 402; People v. Fowler (1914), 152 N. Y. Supp. 672; Congress Tucking Co. v. Alton Dress & Waist Co., 154 N. Y. Supp. 156; Donahue v. Bank of America, 161 N. Y. Supp. 232. North Carolina. — Commercial Security Co. v. Main St. Pharmacy (1917), 91 S. E. 298, 94 S. E. 208; Tyson v. Joyner, 139 N. C. 69, 51 S. E. 803; Mayers v. McRimmon, 140 N. C. 640, 53 S. E. 447, 111 Am. St. Rep. 879. OM'o.— Thompson v. Citizens Nat. Bank of Adams, N. Y. (1909), 32 O. C. C. 131. Oklahoma,— Ireland v. Flovd. 42 Okla. 609, 142 Pac. 401, L. R. A. 1915 C, 661; Howard v. Kincaid (1916), 156 Pac. 628; Mangold & Glandt Bank v. Utterback (1916), 160 Pac. 713; Met. Discount Co. v. Davis (1918), 170 Pac. 707. Oregon. — First Nat. Bank of Pomeroy v. McCullough (1908), SO Oreg. 508, 93 Pac. 366, 17 L. R. A. (N. S.) 1105, 126 Am. St. Rep. 758. Pennsylvania. — Flanders v. Snare (1908), 37 Pa. Super. Ct. 28. Virginia.— Colonsi v. Parksley Nat. Bank (1917), 92 S. E. 979. Washington.— Swenson v. Stoltz, 36 Wash. 318, 78 Pac. 999. Wisconsin.— Thorpe v. Mindeman, 123 Wis. 149, 101 N. W. 417, 68 L. R. A. 146, 107 Am. St. Rep. 1003. United States.— WoU v. Am. Tr. & Sav. Bank (1914), 214 Fed. 761 (C. C. A., 7th Ct.) § 32. 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 part only of the amount payable or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the in- strument has been paid in part, it may be indorsed as to the residue. ^' -^* See text, §100. . Corresponding provision of English Bills of Exchange Act: 32 (2). * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Part interest assignments do not amount to negotiation. Offenstein v. Weygandt, 89 Kan. 739, 132 Pac. 991. § 33 NEGOTIATION. 461 Assignment of half interest is not an indorsing. Berkley v. Muller, 164 App. Div. 351, 149 N. Y. Supp. 620. A bona fide indorsee is entitled to recover although he holds part as trustee for another. Fleshman v. Bibb, 118 Va. 582, 88 S. E. 64. ^' The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: Kansas.— OHenstem v. Weygandt (1913), 89 Kans. 739, 132 Pac. 991. New For/^.— Barkley v. Muller (1914), 149 N. Y. Supp. 620, 164 A. D. 351. Tennessee.— Ahrens & Ott Co. v. Moore & Sons (1915), 174 S. W. 270. FtV^mio.— Fleshman v. Bibb, 118 Va. 582, 88 S. E. 64. § 33. Kinds of indorsement. An indorsement may be either special or in blank ; and it may also be either restrictive or qualified or conditional. See text, § 101. Arkansas has the word "instrument" instead of "indorsement" in the first line, which is a clerical mistake. Corresponding provision of English Bills of Exchange Act: Sec. 32 (6), 34. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Pleading sufficient if alleges indorsement to plaintiff. Cleveland Co. V. Chittenden, 81 Conn. 667, 71 Atl. 935. Any holder may not sue. Nokomis Nat. Bank v. Hendricks, 205 111. App. 54. When assignment and guaranty of payment becomes indorsement. Jones County Trust & Savings Bank v. Kurt, — la. — , 182 N. W. 409. Indorsement which passes all title is not restricted or conditional. American Forest Co. v. Hall, — Mo. — 216 S. W. 740. ^" The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: Connecticut.— Cleveland Co. v. Chittenden, 81 Conn. 667, 71 Atl. 935. Illinois. — Nokomis Nat. Bank v. Hendricks, 205 111. App. 54. Iowa.— Jones County, etc., Bank v. Kurt, 182 N. W. 409. /:^n/Mc/fe3;.— Goolrick v. Wallace (1913), 157 S. W. 920. Missouri.— Miller v. People's Sav. Bank (1916), 186 S. W. 547; Amer- ican Forest Co. v. Hall (Mo.), 216 S. W. 740. New York. — Standard Steam Spec. Co. v. Corn Exch. Bank (1917), 116 N. E. 386, 220 N. Y. 478. 462 NEGOTIABLE INSTRUMENTS. § 34 § 34. Special indorsement ; indorsement in blank. A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable ; and the indorsement of such indorsee is necessary to the further negotiation of the instru- ment. An indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer, and may be ne- gotiated by delivery.*- *^ See text, § 112, 102. Cross sections: 8, 40, 9. In the Massachusetts act the words "does not specify any indorsee" are used in place of the words "specifies no indorsee." In the Wyoming act the word "made" is placed between the words "be" and "payable." Corresponding provision of English Bills of Exchange Act: 34 (1), (2), (3). 31 (2). * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Blank indorsement not varied by parol evidence. Torbert v. Mon- tague, 38 Colo. 325, 87 Pac. 1145. Proof of indorsement in blank is not a variance where allegation is that of indorsement. Howell v. Commercial National Bank, 40 App. Cas. D. C. 370. Note indorsed "pay to order of," leaving name blank, is payable to bearer. The legal effect of such indorsement is for court. State v. Hinton, 56 Ore. 428, 109 Pac. 24. Note indorsed in blank is transferable by delivery and the purchaser is not obligated to require indorsement. First Nat. Bank v. Gerli, 232 Pa. 465, 81 Atl. 540. Indorsement in blank is not nullified by guaranty following it. Elgin City Banking Co. v. Hall, 119 Tenn. 548, 108 S. W. 1068. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: Co/ora Jo.— Wedge Mines Co. v. Denver Nat. Bank (1903), 19 Colo. App. 182, IZ Pac. 873; Torbert v. Montague, 38 Colo. 325, 87 Pac. 1145. District of Columbia. — Jerman v. Edwards. 29 App. D. C. 535 ; Howell V. Commercial National Bank, 40 App. Cas. D. C. 370. Missouri. — Simpson v. Van Laningham (1916), 183 S. W. 324; Miller V People's Sav. Bank, 193 Mo. App. 499, 186 S. W. 547; Priest v. Garnet (1917), 191 S. W. 1048. New /^r.ycy.— Mackintosh v. Gibbs (1909), 79 N. J. L. 40, 74 Atl. 708. New ForJt.— Seaboard Nat. Bank v. Bank of America (1908), 193 N. Y. 26, 85 N. E. 829; Standard Steam Spec. Co. v. Corn Exch. Bank (1917), 116 N. E. 386, 220 N. Y. 478. §§ 35-36 NEGOTIATION. 463 Oregon.—Stztc v. Hinton (1910), 56 Oreg. 428, 109 Pac. 24. Pennsylvania— First Nat. Bank v. Gerli, 232 Pa. 465, 81 Atl. 540; Lincoln Nat. Bank of Pittsburg v. Miller (1917), 100 Atl. 269, 255 Pac. 467. Tennessee.— E]g\n City Bldg. Co. v. Hall (1907), 119 Tenn. 548, 108 S. W. 1068; First Nat. Bank of Garner v. Smith (1916), 183 S. W. 862; Kanaman v. Gahagan (1916), 185 S. W. 619. Vermont.— Hale v. Windsor Sav. Bank (1917), 98 Atl. 993. United States.— J erman v. Edwards (1907), 29 A. C. (D. C) 535; Howell V. Commercial Nat. Bk. (1913), 40 A. C. (D. C.) 370. § 35. Blank indorsement; how changed to special indorse- ment. The holder may convert a blank indorsement into a special indorsement by writing over the signature of the in- dorser in blank any contract consistent v^ith the character of the indorsement.*' ** See text, §112. Cross section: 48. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Indorsement on mortgage as indorsement of note secured. Slaughter V. Green, — Ala, — , 87 So. 358. *' The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Alabama.— Davis v. First Nat. Bank of Blakeley, 192 Ala. 8, 68 So. 261; Bank of Tallassee v. Jordan (1917), 75 So. 930; Slaughter v. Green, 87 So. 358. California. — Santa Marina Co. v. Canadian Bank of Commerce (1919), 254 Fed. 391; In re Jarmulowsky (1918), 249 Fed. 319. District of Columbia. — Jerman v. Edwards, 29 App. D. C. 535. Oklahoma.— Keisd v. Baldock (1915), 154 Pac. 1194. United States.— Jerman v. Edwards (1907), 29 A. C. (D. C.) 535. § 36. 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. 464 NEGOTIABLE INSTRUMENTS. § 36 But the mere absence of words implying power to negotiate does not make an indorsement restrictive. *• ** See text, § 105. In Montana the word "future" is used for "further" in subdivision 1. This is doubtless a clerical error. Corresponding provision of the English Bills of Exchange Act: Sec. 35 (1). * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Indorsement pay to order of A for credit of account of B charges purchaser with notice of inquiry of defenses. Werner Piano Co. v. Henderson & Rees^. 121 Ark. 165. 180 S. W. 495. Indorsement for collection and remittance is restrictive and creates trusteeship. Lippitt v. Thames Loan & Trust Co., 88 Conn. 185, 90 Atl. 369. . ^ , "Pay to any bank or banker" is indorsement for collection, but bank may sue if it sends the money to the remitter. Citizens Trust Co. v. Ward, 195 Mo. App. 223, 190 S. W. 364. "Pay to any bank or banker" is not restrictive indorsement. National Bank of Commerce v. Bossemeyer (Neb.), 162 N. W. 503. Notes transferred for collection and application of funds collected to debt are held in due course as against transferor and payee. Guaranty Security Co. v. Coad, — Wash. — , 197 Pac. 326. Indorsement "for credit account of" payee's creditor is restrictive in- dorsement. Gulbranson-Dickinson Co. v. Hopkins, — Wis. — , 175 N. W. 93. Indorsement "pay to the order of any bank or banker" is not mdorse- ment for rediscount and sale. First Nat. Bank v. Weitzel, 239 Fed. Rep. 497, 152 C C. A. 375. *» The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Alabama.— Haas v. Commerce Trust Co. (1915), 69 So. 894; Bank of Tallassee v. Jordan, — Ala. — , 75 So. 930. Arkansas.— Werner Piano Co. v. Henderson & Reese (1915), 121 Ark. 165, 180 S. W. 495. Connecticut.— Lippitt v. Thames Loan & Trust Co. (1914), 88 Conn. 185. 90 Atl. 369. Missouri.— Citizens Trust Co. v. Ward, 195 Mo. App. 223 (1916), 190 S. W. 364. Nebraska.— Antdope Co. Bank v. Wright (1912). 90 Neb. 621. 134 N. W. 1123; Nat. Bank of Commerce v. Bossemeyer (1917), 162 N. W. 503. New Korii;.— Standard Steam Spec. Co. v. Corn Exch. Bank (1917) 116 S. E. 386, 220 N. Y. 478. North Carolina.— Murchison Nat. Bank v. Dunn Oil Mills Co. (1909), 150 N. Car. 718. 64 S. E. 885. R 37 NEGOTIATION. 465 North Dakota.—Smith v. Show (1907), 16 N. Dak. 306, 112 N. W. 1062. Ohio. —Peoples, etc., Bank v. Craig, 63 Ohio St. 374, 59 N. E. 102. WashingtOM.— Guaranty Security Co. v. Coad, 197 Pac. 326. IViscoHsin.—Gulhra.nson-Dickinson Co. v, Hopkins (Wis.), 175 N. W. 93. United States.— First Nat. Bank v. Weitzel, 239 Fed. Rep. 497, 152 C. C. A. 375. §37. Effect of restrictive indorsement; rights of indorsee. A restrictive indorsement confers upon the indorsee the right : 1. To receive payment of the instrument; or 2. To bring any action thereon that the indorser could bring ; or 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.^' ** See text, § 105. Cross section : 48. In Illinois the following changes are made : At the end of subdivision 2 the following is added: "Except in 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." In subdivision 3 the word "instrument" is substituted for the words "his rights as such indorsee"; and at the end of the section the following is added : "Specified in section 36, sub-section 1, and as against the prin- cipal or cestui que trust only the title of the first indorsee under the restrictive indorsements specified in section 36 and sub-sections 2 and 3, respectively." * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Terms of indorsement without recourse. Hammond Lumber Co. v. Kearsley, — Cal. App. — , 172 Pac. 404. Indorsement for collection does not destroy the negotiability of instru- ment. Fawsett v. Nat. Life Ins. Co., 97 111. 11. Indorsement not restrictive which indicates intention to negotiate. Jones County Trust & Savings Bank v. Kurt, — la. — , 182 N. W. 409. Indorsement for collection gives indorsee privilege of demanding, receiving and suing for money. Freeman's Nat. Bank v. Nat. Tube Works, 151 Mass. 413. Authority given by indorsement for collection is not affected by death of owner. Moore v. Hall, 48 Mich. 143. 466 NEGOTIABLE INSTRUMENTS. § 37 General indorsement and the giving of credit to depositor transfers the title to the instrument. National Bank of Commerce v. Bossemeyer (Neb.), 162 N. W. 503. Holder of negotiable paper held as collateral for payment of debt due may sue in his own name. Third Nat. Bank v, Exum, 163 N. C. 199, 79 S. E. 498. Indorsee for collection takes subject to all defenses against indorser and maker. Smith v. Bayer, 46 Ore. 143, 79 Pac. 497, 114 Am. St. Rep. 858. Check indorsed without restriction, but understood to be deposited for collection, remains the property of indorser. Morris-Miller Co. v. Von Pressentin, 63 Wash. 74. 114 Pac. 912. Indorsement of note for collection indorsee can sue in own name. Metzer v. Segall, 83 Wash. 80, 145 Pac. 72. Checking privilege allowed upon check deposited for collection only w gratuity privilege only. American Sav. Bank & T. Co. v. Dennis, 90 Wash. 547, 156 Pac. 559. Efifect of unrestricted indorsement upon check deposited for collection only. American Sav., etc.. Bank v. Dennis, 90 Wash. 547, 156 Pac. 559. Words "for credit account of" renders indorsement restricted. Gul- branson-Dickinson Co. v. Hopkins, — Wis. — , 175 N. W. 93. ^' The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : California. — Hammond Lumber Co. v. Kearsley (Cat. App.), 172 Pac. 404. District of Columbia. — Jerman v. Edwards, 29 App. D. C. 535. ///jwoij.— Fawsett v. Nat. Life Ins. Co., 97 111. 11. Iowa.— Jones County Trust, Co. v. Kurt, 182 N. W. 409. Massachtsetts.—Uaskdl v. Avery, 181 Mass. 106, 63 N. E. 15; Free- man's Nat. Bank v. Nat. Tube Works, 151 Mass. 413. Michignn.— Moore v. Hall, 48 Mich. 143. Nebraska.— Ante\ope Co. Bank v. Wright (1912), 90 Neb. 621, 134 N. W. 1123; National Bank of Commerce v. Bossemeyer (Neb.), 162 N. W. 503. Nczv York.— Baruch v. Buckley (1915), 151 N. Y. Supp. 853. North Carolina. — Abrams v. Caveton, 74 N. C. 523; Murchison Nat. Bank V. Dunn Oil Mills Co. (1909), 150 N. C. 718, 64 S. E. 885; Third Nat. Bank v. Exums, 163 N. C. 199, 79 S. E. 498. /no .—Peoples, etc.. Bank v. Craig, 63 Ohio St. 374, 59 N. E. 102. Oregon.— Smith v. Bayer (1905), 46 Ore. 143, 79 Pac. 497, 114 Am. St. 858. Washington. — Morris-Miller Co. v. VonPressentin, 63 Wash. 74, 114 Pac. 912; Metzger v. Sigall (1914), 83 Wash. 80, 145 Pac. 72; American Sav., &c., Bank v. Dennis, 90 Wash. 547, 156 Pac. 559. Wisconsin. — Gulbranson-Dickinson Co. v. Hopkins (Wis.), 175 N. W. 93. § 38 NEGOTIATION. 467 United States.— McKec v. District Nat. Bank (1912), 38 A. C. (D. C.) 465 ; First Nat. Bank v. Weitzel, 239 Fed. Rep. 497, 152 C C. A. 375. § 38. Qualified indorsement. A qualified indorsement con- stitutes the indorser a mere assignor of the title to the instru- ment. It may be made by adding to the indorser's signature the words "without recourse" or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument.-^' ** See text, § 106. Cross section : 65. The Michigan act states: "Such an instrument," instead of "such an indorsement," a clerical error. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Assignment of note is indorsement. Farnsworth v. Burdick, 94 Kan. 749. 147 Pac. 863. Where words "without recourse" followed signature parol evidence admissible to show to whom intended to apply. Leahmer v. McCollough, 99 Kan. 451, 162 Pac. 297. Oral evidence permissible to show to whom without recourse provision applies. Goolrick v. Wallace, 154 Ky. 596, 157 S. W. 920, 49 L. R. A. (N. S.) 789. Oral evidence is inadmissible to show non-recourse agreement. Aron- son V. Nuremburg, 218 Mass. 376, 105 N. E. 1056. When assignee of note can not sue in own name. Gale v. Mayhew, 161 Mich. 96, 125 N. W. 781, 29 L. R. A. (N. S.) 648. Indorsement without recourse or warranty to the order of A is a qualified indorsement. Schmidt v. Pegg, 172 Mich. 159, 137 N. W. 524. Indorsement in blank not controlled by oral proof of without recourse intention. Lake Harriet State Bank v. Miller (Minn.), 164 N. W. 989. Where payee guarantees payment of note he is indorser with enlarged liability. First Nat. Bank v. Baldwin. 100 Neb. 25, 158 N. W. 371. Assignment of right, title and interest is indorsement without recourse. Evans v. Freeman, 142 N. C. 61, 54 S. E. 847. Without recourse indorsement may show indorsee not good faith holder. Merchants Nat. Bank v. Bransom. 165 N. C. ,344, 81 S. E. 410. _ When cause of action arises on an indorsement "By agreement, with recourse after security exhausted." Smith v. Show, 16 N. D. 306, 112 N. W. 1062. Qualified indorsement relieves indorser as to indorsee. Bedcrman v. Otisville State Bank, 5 Ohio App. 178. Transfer of right, title and interest bv payee is ordinary indorsement. Copeland v. Burke (Okla.), 158 Pac. 1162, L. R. A. 1917A, 1165. When owner has title as against all parties. Murphy v. Estle, — Okla. — , 182 Pac. 83. Indorsement without recourse is a qualified indorsement. Cressler V. Brown, — Okla. — , 192 Pac. 417. 468 NEGOTIABLE INSTRUMENTS. § 38 Without recourse indorsement to order of two or more persons does not render instrument non-negotiable. Page v. Ford, 65 Ore. 450, 131 Fac. 1013, 45 L. R. A. (N. S.) 247, Ann. Cas. 1915A, 1048. "Without recourse" indorsement does not put purchaser upon notice of equities. Elgin City Banking Co. v. Hall, 119 Tenn. 548, 108 S. W. 1068. Indorsement without recourse is not evidence against indorsee's good faith. Leavitt v. Thurston, 38 Utah 351, 113 Pac. 11. Parol evidence not admissible to shov/ transfer without recourse. Holt Mfg. Co. V. Brotherton, 91 Wash. 354. 157 Pac. 849. Sell, transfer and assign held an indorsement. Thorp v. Mindeman, 123 Wis. 149, 101 N. W. 417, 68 L. R. A. 146, 107 Am. St. Rep. 1003. *■ The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : /i/a&a«!o.— People's Bank of Mobile v. Moore (1918), 78 So. 789. Arkansas.— \iox(t\\(t^A v. Harris (1916), 182 S. W. 521. California. — Hammond Lumber Co. v. Kearsley (1918), 172 Pac. 404. /wrf/awa.— Colvert v. Harrington (1916), 61 Ind. App. 600, 112 N. E. 249. /owa.— Higby v. Bahrenfuss (1917), 163 N. W. 247. Kansas— Lt?L\m\tx v. McCollough, 99 Kan. 451, 162 Pac. 297; Farns- worth V. Burdick, 94 Kan. 749, 147 Pac. 863 ; Nelson v. Southworth, 93 Kan. 532, 144 Pac. 835. Kentucky.—<:,oo\r\z\i v. Wallace (1913), 154 Ky. 596, 157 S. W. 920, L. R. A. (N. S.) 789. LoMWtanc— Puckett v. Fox Grocer Co. (1910), 127 La. 151, 53 So. 475. Massachusetts. — Aronson v. Nurenburg (1914), 218 Mass. 376, 105 N. E. 1056. Michigan.— Gale v. I\Iavhew (1910), 161 Mich. 96. 125 N. W. 781, 29 L. R. A. (N. S.) 648; Schmidt v. Pegg (1912), 172 Mich. 159, 137 N. W. 524. MinM^.ro/a.— Slimmer v. St. Bank of Halstad (1916), 159 N. W. 795; Lake Harriet State Bank v. Miller, — Minn. — , 164 N. W. 989. Nebraska.— First Nat. Bank v. Baldwin, 100 Neb. 25, 158 N. W. 371. North Carolina.— Evans v. Freeman (1906). 142 N. Car. 61, 54 S. E. 847; Bank of Sampson v. Hatcher (1909), 151 N. Car. 359, 66 S. E. 308; Merchants Nat. Bank of Indianapolis v. Branson (1914), 165 N. Car. 344, 81 S. E. 410. North Dakota.—Smhh v. Show, 16 N. D. 306. 112 N. W. 1062. Ohio. — Bederman v. Otisville State Bank, 5 Ohio App. 178. 0^/a/t<7M!a.— Copeland v. Burke (1916), 158 Pac. 1165, L. R. A. 1917A; Howard v. Kincaid (1916), 156 Pac. 628; Murphy v. Estle, 182 Pac. 83; Crcssler v. Brown, 192 Pac. 417. I §§ 39-40 NEGOTIATION. 469 Irfgon.— Page v. Ford (1913), 65 Ore. 450, 131 Pac 1013, 45 L. R. A. (N. S.) 247, Ann. Cas. 1915A, 1048. Tennessee.— Elgin City Banking Co. v. Hall (1907), 119 Tcnn. 548, 108 S. W. 1068. :7/a/i.— Leavitt v. Thurston (1911), 38 Utah 351, 113 Pac. 77. Washington.— Holt Mfg. Co. v. Brotherton, 91 Wash. 354. 157 Pac. 849. West Virginia.— Dollar Sav. & Tr. Co. v. Crawford (1911), 69 W. Va. 109, 70 S. E. 1089, 33 L. R. A. (N. S.) 587; Marion Nat. Bank v. Harden (1918), 97 S. E. 600. Wisconsin.— Thorpe v. Mindeman (1904), 123 Wis. 149, 101 N. W. 417, 107 Am. St. 1003, 68 L. R. A. 146. § 39. Conditional indorsement. Where an indorsement is conditional, a party required to pay the instrument may disre- gard the condition, and make payment to the indorsee or his transferee, whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated, will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally.^' See text, § 104. Construing corresponding provision of the EngHsh Bills of Exchange Act : 33. ■^" The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Alabama.— Bank of Tallassee v. Jordan (1917), 75 So. 930. Florida. — Williams v. Peninsula Grocery Co. (1917), 75 So. 517. Afmo«n.— Gumby v. Hayden (1914), 168 S. W. 899. New Mexico. — First Nat. Bank of Albuquerque v. Stover (1916), 155 Pac. 905. New York.— Finto v. Pulidora (1917), 162 N. Y. Supp. 736. North £>a)5;o/a.— Smith v. Bradley (1907), 16 N. Dak. 306, 112 N. W. 1062. South Dakota.— Holhart v. Lauritson (1914), 148 N. W. 19. Tennessee— Cohn v. Lunn (1916), 182 S. W. 584. Utah. — Farmers & Stotck Growers' Bank v. Palivant Valley Land Co. (1917), 165 Pac. 462. § 40. 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 470 NEGOTIABLE INSTRUMENTS. § 41 indorsing specially is liable as indorser to only such holders as make title through his indorsement.^' See text, § 112. Cross sections: See 66, 67. The Illinois act changes this section by substituting for "payable to bearer," in line 1, the words "originally payable to or indorsed specially to bearer." *' The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Texas. — ^Johnson v. Mitchell, 50 Tex. 212. United 5"/a^^.y.— Mechanics- Am. Nat. Bank v. Coleman (1913), 204 Fed. 24. § 41. Indorsement where payable to two or more persons. Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse, un- less the one indorsing has authority to indorse for the others.*' ■^* See text, §98. Cross sections : 36. Missouri states "where such an instrument." The Wisconsin Act (Sec. 1676-11) inserts before "indorsees," "joint." * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Note payable to one payee or another payee can be negotiated by either payee. Union Bank v. Spies, 151 Iowa 178, 130 N. W. 928. Assignment by joint payee to another payee carries authority to in- dorse. Kaufman v. State Sav. Bank. 151 Mich. 65, 114 N. W. 863, 18 L. R. A. (N. S.) 630, 123 Am. St. Rep. 259. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : lozva.—The Union Bank of Bridgewater v. Spies (1911), 151 Iowa 178, 130 N. W. 928. Kansas.— Voris v. Schoonover (1914), 138 Pac. 607. ATiV/n^an.— Kaufman v. State Sav. Bank (1908), 151 Mich. 65, 114 N Vv^. 863, 18 L. R. A. (N. S.) 630, 120 Am. St. Rep. 259; Worden Grocer Co. V. Blanding (1910). 126 N. W. 212. Missouri— Market & Fulton Nat. Bank v. Ettenson's Estat (1913), 158 S. W. 448. § 42 NEGOTIATION. 471 New York. — First Nat. Bank of the City of Brooklyn v. Gridley (1906), 112 A. D. 398, 98 N. Y. Supp. 445; Martz v. State Nat. Bank of N. Tonawanda (1911), 131 N. Y. Supp. 1045, 147 A. D. 250. Pennsylvania. — Neyens v. Port (1911), 46 Pa. Super. Ct. 428. Rhode Island.— OdksAaXt Mfg. Co. v. Clarke (1908), 29 R. I. 192, 69 Atl. 681. § 42. 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 officer of a bank or cor- poration, 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.-^' ^^ See text, § 98. Cross section : 18. In South Dakota the words "the indorsement of" are omitted before the words "the bank" in the last part of the section. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : President of bank performing duties of bank cashier, a note payable to him as "Pt" is payable to bank. Griffin v. Erskine, 131 Iowa 444, 109 N. W. 13. Indorsement of certificate of deposit made to cashier of the bank by the cashier is indorsement of bank. Johnson v. Buffalo Bank, 134 Iowa 731, 112 N. W. 165. Note payable only to cashier is not negotiable, but bank may sue thereon. Eades v. Muhlenberg Co. Sav. Bank, 157 Ky. 416, 163 S. W. 494. "Corporation" does not include towns and cities so that treasurer may act as indorser. Franklin Savings Bank v. Framingham, 212 Mass, 92, 98 N. E. 925. Instrument payable to treasurer of town is payable to the town named. Quincy Mut. Fire Ins. Co. v. International Trust Co., 217 Mass. 370, 104 N. E. 845, L. R. A. (N. S.) 1915B, 725. Oral evidence is not admissible to show an indorsement to A to be one to bank of which he was cashier. First Nat. Bank v. McCuUough, 50 Ore. 508, 93 Pac. 366, 17 L. R. A. (N. S.) 1105, 126 Am. St. Rep. 758. Note unindorsed payable to A, who is cashier of B bank, is not proven to belong to bank because of its possession of same. Swanby v. Northern State Bank, 150 Wis. 572, 137 N. W. 763. When treasurer of town or city may not bind corporation as indorser. Capital Savings, etc., Bank v. Framingham, 246 Fed. Rep. 553, 158 C. C. A. 523. **The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: 472 NEGOTIABLE INSTRUMENTS §§ 43-44 //Knozj.— McClenathan v. Davis (1909), 243 III. 87, 90 N. E. 265. Iowa.— Grimn v. Erskine (1906), 131 Iowa 444, 109 N. W. 13; John- son V. Buffalo Bank, 134 Iowa 731, 112 N. W. 165; Watts v. Savings Bank (1917), 165 N. W. 897. Kentucky. — Eades v. Muhlenberg Co. Sav. Bank (1914), 157 Ky. 416, 163 S. W. 494. Massachusetts. — Quincy Mutual Fire Insurance Co. v. International Trust Co., 217 Mass. 370, 104 N. E. 845, L. R. A. (N. S.) 1915B, 725; Franklin Sav. Bank v. Framingham, 212 Mass. 92, 98 N. E. 925. Missouri.— Gage v. Bank of Holcomb (1917), 196 S. W. 1077. Oregon. — First Nat. Bank of Pomeroy v. McCullough (1908), SO Oreg. 508, 93 Pac. 366, 17 L. R. A. (N. S.) 1105, 126 Am. St. Rep. 758. Pennsylvania. — Neyens v. Port (1911), 46 Pa. Super. Ct. 428. Washington.— Hanson v. Northern Bank & Tr. Co. (1917), 167 Pac. 97. Wisconsin.—Swar\y v. Northern State Bank, 150 Wis. 572, 137 N. W. 763. United States. — Capital Savings Bank v. Framingham, 246 Fed. Rep. 553, 158 C. C. A. 523. § 43. Indorsement where name is misspelled, et cetera. Where the name of a payee or indorsee is wrongly designated or misspelled, he may indorse the instrument as therein de- scribed, adding, if he thinks fit, his proper signature.^* See text, § 110. Construing corresponding provision of English Bills of Exchange Act: 32 (4). ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: Arkansas.— Soekland v. Storch (1916), 185 S. W. 262. § 44. 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. *• i* See text, § 110. Cross sections : 20, 38. Construing corresponding provision of English Bills of Exchange Act: 31 (5). § 45 NEGOTIATION. 473 * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Form of indorsement on note to negative personal liability as indorser. Chelsea Exchange Bank v. First U. P. Church, 89 Misc. Rep. 616, 152 N. Y. Supp. 201. ^* The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Nezv ForJ^.— Chelsea Bank v. First Un. Presby. Church (1915), 80 Misc. Rep. 616, 152 N. Y. Supp. 201. §45. Time of indorsement; presumption. Except where an indorsement bears date after the maturity of the instrument, every negotiation is deemed prima facie to have been effected before the instrument was overdue.^- ^* See text, §110. Cross section : 52. ^ Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Indorsing after maturity. Seaboard Nat. Bank v. Belden, — Cal. App. — , 190 P. 1045. Undated indorsement presumed made before maturity. Metropolitan Discount Co. v. Davis, — Okla. — 170 Pac. 707. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: Alabama.— E\tdsoe v. City Nat. Bank of Selma (1912), 7 Ala. App. 195, 60 So. 942. California. — Seaboard Nat. Bank v. Belden, 190 Pac. 1045. District of Columbia. — Catholic Unixersity v. Waggaman, 2)2 App. D. C. 307. New York. — German-Am. Bank v. Cunningham (1904), 97 App. Div. 244, 89 N. Y. Supp. 836; Colborn v. Arbecon (1907), 54 Misc. Rep. 623, 104 N. Y. Supp. 968; Lanning v. Trust Co. of Am. (1910), 122 N. Y. Supp. 485. 0/n"o.— Wehrman v. Beech (1906), 28 O. C. C. 128. Oklahoma. — Cedar Rapids Nat. Bank v. Bashara, 39 Okla. 482, 35 Pac. 1051; Met. Dis. Co. v. Davis (1918), 170 Pac. 707. Wyoming.— RoldsyiorXh. v. Blyth & Fargo (1915), 146 Pac. 603. 474 NEGOTIABLE INSTRUMENTS. §§ 46-47 § 46. 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.*' *• See text, §110. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Indorsement is presumed prima facie to be made at place where instru- ment dated. Walling v. Cushman, — Mass. — , 130 N. E. 175. Presumption as to place of indorsement. Finch v. Calkins, 183 Mich. 298, 149 N. W. 1037. Accommodation indorser estopped as to holder in due course to vary the presumed place of indorsement. Chemical Nat. Bank v. Kellogg. 183 N. Y. 92, 75 N. E. 1103, 2 L. R. A. (N. S.) 299. Ill Am. St. Rep. 717. When indorsement must be before maturity. Jones v. Brandt, — Wis. — , 181 N. W. 813. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: Massachusetts. — Walling v. Cushman, 130 N. E. 175. Michigan.— Finch v. Calkins, 183 Mich. 298, 149 N. W. 1037. New For/t.— Chemical Nat. Bank v. Kellogg (1905), 183 N. Y. 92, 75 N. E. 1103, 2 L. R. A. (N. S.) 299, 111 Am. St. Rep. 717. Wisconsin. — Jones v. Brandt, 181 N. W. 813. § 47. 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. *' ** See text, §§ 13, 110. Cross sections: 36, 37, 119, et seq. Corresponding provision of English Bills of Exchange Act: 36 (1). (2). * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Plea of non-indorsement for value before maturity is insufficient where no equity shown against maker. Barnes v. Carr, 65 Fla. 87. 61 So. 184. Transfer for value without indorsement. Sanderson v. Clark, — Ida. — , 194 Pac. 472. Indorsees after maturity are not relieved from defenses of maker and prior indorsers. Ohio Vallev, etc., Co. v. Great Southern Fire Ins. Co. (Ky.). 197 S. W. 399. Effect of transfer without indorsement signature. Critcher v. Ballard, - N. C. — , 104 S. E. 134. § 48 NEGOTIATION. 475 Note continues negotiable until restrictively indorsed. Union Nat. Bank of Massillon, Ohio, v. Mayfield, — Okla. — , 179 Pac. 1034. Negotiable instrument continues as such until restricted by indorse- ment or payment although overdue. Oakdale Mfg. Co. v. Clarke, 29 R. I. 192, 69 Atl. 681. Restrictive indorsement gives indorsee instrument restricted as to per- son or use. Gulbranson-Dickinson Co. v. Hopkins, — Wis. — , 175 N. W. 93. *^ The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: Connecticut.— Cent Nat. Bank v. Stoddard (1910), 83 Conn. 330, 76 Atl. 472; Lippitt v. Thomas Loan & Trust Co. (1914), 90 Atl. 369. Florida. — Barnes v. Carr, 65 Fla. 87, 61 So. 184. Idaho. — Sanderson v. Clark, 194 Pac. 472. Kentucky. — Ohio Valley, etc., Co. v. Great Southern Fire Ins. Co. (Ky.), 197 S. W. 399. Missouri.— Lane v. Hyder (1912), 163 ^lo. App. 688, 147 S. W. 514. New Jersey.— Gihh-. v. Allen (1915), 94 Atl. 61. New York.— McBee Co. v. Shoem.aker (1916), 160 N. Y. Supp. 251; Crusins v. Siegman (1913), 142 N. Y. Supp. 348; McMill v. Shellito (1919), 173 N. Y. Supp. 810. North Carolina.— Critcher v. Ballard. 104 S. E. 134. Oklahoma. — Union Nat. Bank of Massillon, Ohio, v. Mayfield (1918), 174 Pac. 1034. Rhode Island.— Oa.ksd2i\c Mfg. Co. v. Clarke (1908), 29 R. I. 192, 69 Atl. 681. Wisconsin. — Gulbranson-Dickinson Co. v. Hopkins (Wis.), 175 N. W. 93. United States.— Chmch v. Sweetland (1917), 243 Fed. 289; Emerson V. Fisher (1917), 246 Fed. 642. § 48. 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 liability on the instrument.^' ^* See text, § 110. In the Kentucky Act "owner" is used for "holder" in the first line, v/hich is doubtless a clerical error. * Digest of some of the decisions m which this section is con- strued arranged alphabetically by states: 476 NEGOTIABLE INSTRUMENTS. § 49 Possession of note by indorsee, to whom a note indorsed by him had been returned, can sue without striking out his name as indorser. New Haven Mfg. Co. v. New Haven Pulp Co., 76 Conn. 126, 55 Atl. 604. Words "to account of A" after indorsement in blank by payee may be stricken out in suit by plaintiff. Jcrman v. Edwards, 29 App. D. C. 535. Holder of note indorsed in blank by payee may strike out all subse- quent indorsements. Howell v. Commercial Nat. Bank, 40 App. D. C. 370. When indorsement in blank on note is controlled by erasure of assignment to another on mortgage. King v. Bellamy, 82 Kan. 301, 108 Pac. 117. Holder may at any time strike out unnecessary indorsement. Leavitt V. Wintman, — Mass. — , 125 N. E. 390. ^* The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Connecticut. — New Haven Mfg. Co. v. New Haven Pulp Co. (1903), 76 Conn. 126, 55 Atl. 604. District of Columbia. — Jerman v. Edwards (1907), 29 A. C. (D. C.) 535; Howell v. Commercial Nat. Bank (1913), 40 A. C. (D. C.) 370. Kansas.— King v. Bellamy (1910), 82 Kans. 301, 108 Pac. 117. Massachusetts. — Leavett v. Wintman (Mass.), 125 N. E. 390. Michigan.— Ensign v. Fogg (1913), 143 N. W. 82. Missouri.— Klliott v. Quails (1910), 130 S. W. 474; Nance v. Hay ward (1914), 170 S. W. 429; Carter v. Butler (1915), 174 S. W. 399. New Jersey. — Pohlemus v. Prudential Realty Co. (1907), 74 N. J. L. 570, 67 Atl. 303; Mackintosh v. Gibbs (1909), 79 N. J. L. 40, 74 Atl. 708. § 49. 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 transferee such title as the transferrer had therein, and the transferee ac- quires, in addition, the right to have the indorsement of the trans- ferrer. But for the purpose of determining whether the trans- feree is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.-^' ^^ See text, § 113. Cross sections: 125, 30, 31. 18, 187, 59. In Alabama the words "said holder" are used in place of "transferrer" in the first paragraph, and the words "for the purpose of transferring title only" are added at the end of said paragraph. In Colorado the words "if omitted by mistake, accident or fraud" are added at the end of the first sentence. In Illinois and Missouri the words "to have the indorsement of the transferrer" are struck out and the following used in place thereof: "To enforce the instrument against one, who signed for the accommoda- § 49 NEGOTIATION. 477 tion of the transferrer, and the right to have the indorsement of the transferrer if omitted by accident or mistake." In Wisconsin the following is added at the end of the section : "When the indorsement was omitted by mistake, or there was an agreement to indorse made at the time of the transfer, the indorsement when made relates back to the time of transfer." * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Transferee bound by payment to payee where he received unindorsed rote and gave no notice of transfer. Vann v. Marbury, 100 Ala. 438, 14 So. 273, 23 L. R. A. 325, 46 Am. St. Rep. 70. Transfer without indorsement does not cut off equities before notice of transfer. Barker v. Barth, 192 111. 460, 61 N. E. 388. Evidence necessary to make prima facie showing of transfer without indorsement to possessor. Roy v. Duff, 170 Iowa 319, 152 N. W. 606. When possessor is prima facie owner of unindorsed note. Callahan v, Louisville Dry Goods Co., 140 Ky. 712, 715, 137 S. W. 995. When payment to payee of unindorsed instrument binds transferee. Jones v. Witter, 13 Mass. 304. Possession of unindorsed note not prima facie evidence of ownership. Van Eman v. Stanchfield, 10 Minn. 255. Negotiation of an unindorsed instrument in hands of holder for value takes effect when transferrer indorses same. Kiefer v. Tolbert, 128 Minn. 519, 151 _N. W. 529. Possession is not prima facie evidence of ownership of unindorsed rote payable to order. Dorn v. Parsons, 56 Mo. 601. Plaintiff must prove indorsement where general denial filed ; possession proof insufficient. Nance v. Hayward, 183 Mo. App. 217, 170 S. W. 429. Legal title passes without indorsement. Townsend v. Alewel, — Mo. App. — , 202 S. W. 447. Burden of proving indorsement is on the plaintiff under plea of gen- eral denial. Peoples Trust, etc.. Bank v. Rook, 96 Neb. 415, 148 N. W. 95. When transferee bound by payment to payee. Dunn v. Meserve, 58 N. H. 429. Transferee of note payable to order without indorsement is not holder in due course. Mayers v. McRimmon, 140 N. C. 640, 53 S. E. 447, 111 Am. St. Rep. 879. When transferee without indorsement is not holder in due course of note payable to order. Steinhilper v. Basnight, 153 N. C. 293, 69 S. E. 220. Possession of unindorsed note pa3'able to order is not prima facie evidence of ownership. Shepard v. Hanson, 9 N. D. 249, 83 N. W. 20. Transferee may be vested with equitable or legal title without being holder in due course. Simpson v. First Nat. Bank of Roseburg, — Ore. — , 185 Pac. 913. Mere fact of possession is not evidence of ownership of unindorsed note payable to order. Escamilla v. Pingree, 44 Utah 421, 141 Pac. 103, L. R. A. 1915B, 475. Payment to payee is effective where made before notice of transfer without indorsement. Campbell v. Day, 16 Vt. 558. Title vests in transferee without indorsement. Swenson v. Soltz, Z6 Wash. 318, 78 Pac. 999. Maker estopped to set up equities where note transferred for value although payee did not indorse it. Marling v. Fitzgerald, 138 Wis. 93, 120 N. W. 388. 478 NEGOTIABLE INSTRUMENTS. § 47 Note payable to order unindorsed is not prima fade property of holder. Capitol Hill State Bank v. Rawlins Nat. Bank, 24 Wyo. 423, 160 Pac. 1171. Transferee of unindorsed instrument entitled to have indorsement made and sue thereon. Walters v. Neary, 21 T. L. R. 146. When transferrer for value without indorsement need not have in- dorsement made. Hood v. Stewart, 17 Session Cases (4th Series) 749. Possessor of unindorsed instrument entitled to have same indorsed where he purchased for value before maturity. Day v. Longhurst, Weekly Notes (1893) 3. *■ The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: Alabama. — German-American Nat. Bank v. Lewis, 9 Ala. App. 352, 63 So. 741 ; Vann v. Marbury, 100 Ala. 438, 14 So. 273, 23 L. R. A. 325, 46 Am. St. Rep. 70. Arkansas.— Wmiamson Bank & Tr. Co. v. Miles (1914), 169 S. W. 368. Ca/j/orm"o.— Shoenhair v. Jones (1917), 165 Pac. 971. Colorado.— Bank of Bromfield v. McKinlev, 53 Colo. 279, 125 Pac. 493 ; Lane v. Lane (1914), 57 Colo. 419, 140 Pac. 804. Connecticut.— GoodseU v. The McElroy Bros. Co. (1912), 86 Conn. 402, 85 Atl. 509. F/oncfa.— Barnes v. Carr (1913), 61 So. 184. Illinois— Barker v. Barth, 192 111. 460, 61 N. E. 388. lozva.—Roy v. Duff (1915), 170 Iowa 319. 152 N. W. 606. Kentucky.— CaWahan v. Louisville Dry Goods Co. (1910), 140 Ky. 712, 715. 131 S. W. 993; Foster's Admr. v. Metcalf (1911), 144 Ky. 385, 138 S. W. 314. Minnesota. — VanEman v. Stanchfield, 10 Minn. 255 ; Kiefer v. Tolbert (1915), 128 Minn. 519, 151 N. W. 529. Missouri. — Cavitt v. Thorp, 30 Mo. App. 131 ; Market & Fulton Nat. Bank v. Ettenson's Estate (1913), 158 S. W. 448; Dorn v. Parsons, 56 Mo. 601; Townsend v. Alwel (1918). 202 S. W. 447; Richardson v. Drug Co., 92 Mo. App. 515; Hair v. Edwards, 104 Mo. App. 213, 77 S. W. 1089; Wade V. Boone, 184 Mo. App. 88, 168 S. W. 360; Carter v. Butler, 264 Mo. 306. 174 S. W. 399; Cantrell v. Davidson, 180 Mo. App. 410, 168 S. W. 271; Nance v. Havward, 183 Mo. App. 217. 170 S. W. 429; First Nat. Bank v. Stam. 186 Mo. App. 439, 171 S. W. 567; Wright v. Way- land (Mo. App.), 188 S. W. 928. New Hampshire. — Dunn v. Meserve, 58 N. H. 429. A/'^&roj^a.— Peoples Trust, etc.. Bank v. Rook, 96 Neb. 415, 148 N. W. 95. New York. — Manufacturer's Commercial Co. v. Blitz (1909). 131 A. D. 17, 115 N. Y. Supp. 402; Meuer v. Phoenix Nat. Bank (1904), 94 A. § 50 NEGOTIATION. 479 D. 331, 88 N. Y. Supp. 83; Brown v. James (1911), 130 N. Y. Supp. 333; Martz V. State Nat. Bank of N. Tonawanda (1911), 131 N. Y. Supp. 1045 147 A. D. 250; Hathaway v. Co. of Delaware, 185 N. Y. 368, 78 N. E. 153. 13 L. R. A. (N. S.) 273, 113 Am. St. Rep. 909. North Carolina.— Mayers v. McRimmon (1906), 140 N. Car. 640, 53 S. E. 447, 111 Am. St. Rep. 879; Keel v. Construction Co. (1906), 143 N. Car. 429, 55 S. E. 826; Johnson Co. Sav. Bank v. Scoggin Drug Co. (1910), 67 S. E. 253; Steinhilper v. Basnight (1910), 153 N. Car. 293, 69 S. E. 220; Myers v. Petty, 153 N. Car. 462, 464, 69 S. E. 417, 418; Elgin City Banking Co. v. McEachern, 163 N. C. 333 (1913), 79 S. E. 680. North Dakota.—Shepard v. Hanson, 9 N. D. 249, 83 N. W. 20. Oregon.— First Nat. Bank of Pomeroy v. McCuIlough (1908), 50 Oreg. 508, 93 Pac. 366; Baker v. Moran (1913), 136 Pac. 30; Witt v. Campbell- Lakin Soap Co. (1913). 134 Pac. 316; Simpson v. First Nat. Bank of Roseburg (Ore.), 185 Pac. 913. Pennsylvania.— Nat. Bank of Pittsburg v. Miller (1917), 100 Atl. 269. South Dakota.— Fiper v. Hagen (1914), 33 S. D. 491, 146 N. W. 692. Tennessee.— Landis v. White Bros. (1913), 127 Tenn. 504, 152 S. W. 1031; Allen v. Hayes (1918), 201 S. W. 135. t777 ; Mil- lius V. Kaufman (1905), 104 A. D. 442, 93 N. Y. Supp. 669; Ham- ilton Nat. Bk. V. Upton (1905), 100 A. D. 105; Orr v. So. Amoby Terra Cotta Co. (1905), 94 N. Y. Supp. 524, 47 Misc. 604; Rogers v. Morton (1905), 46 Misc. 494, 95 N. Y. Supp. 49; Hover v. Magley (1905), 48 Misc. 430, 96 N. Y. Supp. 925; Hathaway v. County of Delaware (1906), 185 N. Y. 368, 78 N. E. 153, 13 L. R. A. (N. S.) 273, 113 A. D. 909; Elias v. Whitney (1906), 98 N. Y. Supp. 667, 50 Misc. 326; Schles- inger v. Lehmaire (1906). 99 N. Y. Supp. 389; Rosenthal v. Freedman (1907), 53 Misc. 595, 103 N. Y. Supp. 714; McGehee v. Cooke (1907), 55 Misc. 40, 105 N. Y. Supp. 60; Siegmeister v. Lispenard Realty Co. (1907), 107 N. Y. Supp. 158; The Gansevort Bk. of New York v. Gilday (1907), 110 N. Y. Supp. 271. 53 Misc. 107; Rice v. Eisler (1907), 119 A. D. 132; Arons v. Ziegfeld (1907), 102 N. Y. Supp 898, 52 Misc. 571; Nat. Bk. of Barre v. Foley (1907), 54 Misc. 126, 103 N. Y. Supp. 553; Strauss v. St. Louis Co. Bk. (1908), 126 A. D. 647; Rosenthal v. Par- sont (1908), 110 N. Y. Supp. 223; Valley Dew Distilling Co. v. Ritz- mann (1908), 110 N. Y. Supp. 917; Hunter v. Allen (1908), 127 A. D. 572; Nat. Park Bk. v. Saitta (1908), 127 A. D. 624, 111 N. Y. Supp. 927; Schlesinger v. Lehmaier (1908). 191 N. Y. 69, 83 N. E. 657, 16 L. R. A. (N. S.) 626, 123 Am. St. 591; Joveshoff v. Rockney (1908), 109 N. Y. Supp. 818, 58 Misc. 559; Ward v. City Tr. Co. (1908), 192 N. Y. 61, 84 N. E. 585; Am. Seeding Machine Co. v. Slocum (1908), 58 Misc. 458; The Royal Bk. of N. Y. v. German-Am. Ins. Co. (1908), 58 Misc. 563; Laschinsky v. Margolio (1908), 129 A. D. 529; Wallabout Bk. V. Peyton (1908), 123 A. D. 727, 108 N. Y. Supp. 42; Squire v. Ordemann (1909). 194 N. Y. 394; Heimbach v. Doubleday, Page Co. (1909), 130 A. D. 34; Republic Life Ins. Co. v. Hudson Trust Co. (1909), 130 A. D. 618; Bacon v. Montauk Brewing Co. (1909), 130 A. D. 7Z', Manyfacturer's Commercial Co. v. Blitz (1909), 131 A. D. 17, 115 N. Y. § 52 RIGHTS OF HOLDER. 495 Supp. 402; Horan v. Mason (1910), 125 N. Y. Supp. 668; Frank v. Wolfif (1910), 125 N. Y. Supp. 530; Cluett v. Conture (1910), 140 A. D. 830, 125 N. Y. Supp. 813; Ferguson v. Nctter (1910), 141 A. D. 274; Empire State Surety Co. v. Nelson (1910), 126 N. Y. Supp. 453; Citi- zens Sav. Bk. V. Couse (1910), 68 Misc. 153; Hurst v. Lee (1911), 143 A. D. 614, 127 N. Y Supp. 1040; Buckley v. Lincoln Trust Co. (1911), 131 N. Y. Supp. 105; Eq. Tr. Co. v. Taylor (1911), 131 N. Y. Supp. 475, 12 Misc. 52; Jacobus v. Jamestown Mantel Co. (1912), 149 A. D. 356, 134 N. Y. Supp. 418; Borough Bk. of Brooklyn v. Lamphear (1912). 138 N. Y. Supp. 864; Bass v. Goldstein (1913), 83 Misc. 412, 145 N. Y. Supp. 38; First Bk. of Notasulga v. Jones (1913), 141 N. Y. Supp. 304; Kass V. Blumberg (1913), 142 N. Y. Supp. 544; Laing v. Hudgcns (1913), 143 N. Y. Supp. 1(iZ, 62 Misc. 388; Lich-und-Spakassa Audorf v. Pfizer (1913), 158 A. D. 505, 143 N. Y. Supp. 744; Nat. Discount Co. v. Wil- liam R. Jenkins Co. (1913), 143 N. Y. Supp. 996; Spencer & Co. v. Brown (1913), 143 N. Y. Supp. 994; Cleary v. Dykeman (1914), 146 N. Y. Supp. 611; Clement v. Saratoga Holding Co. (1914), 161 A. D. 898, 145 N. Y. Supp. 628; Coffin v. Tevis (1914), 149 N. Y. Supp. 986, 164 Misc. 314; Rambaut v. Tevis (1914), 149 N. Y. Supp. 993, 164 A. D. 324; Zivendling v. Kitrosser (1914), 148 N. Y. Supp. 99; Brown v. Rowan (1915), 154 N. Y. Supp. 1096; Stoller v. Reichgott (1915), 156 N. Y. Supp. 551; Bergstrom v. Ritz-Carlton Hotel Co. (1916), 157 N. Y. Supp. 959; McBee Co. v. Shoemaker (1916), 160 N. Y. Supp. 251; Thornton v. Netherlands-Amer. Steam Nav. Co. (1917), 165 N. Y. Supp. 682; Ga- rone v. Russo Ludice Realty Co. (1917), 164 N. Y. Supp. 135; Kennedy V. Hyman (1917), 167 N. Y. Supp. 311; Gillevan v. Owens (1918), 169 N. Y. Supp. 958 ; Sabine v. Paine, 223 N. Y. 401 ; Geneva Nat. Bank v. Fox, 190 N. Y. Supp. 747. North Carolina.— Toms v. Jones (1900), 127 N. Car. 464; Manufac- turing Co. V. Summers (1906), 143 N. Car. 102, 55 S. E. 522; Singer Mfg. Co. V. Summers (1906), 143 N. Car. 102, 55 S. E. 522; Am. Nat. Bk. V. Fountain (1908), 62 S. E. 738, 148 N. Car. 590; Am. Nat. Bk. v. Fountain (1908), 148 N. Car. 590, 62 S. E. 738; Murchison Nat. Bk. V. Dunn Oil Mills Co. (1909), 150 N. Car. 718, 64 S. E. 885; Johnston Co. Sav. Bk. V. Chase (1909), 151 N. Car. 108; Bk. of Sampson v. Hatcher (1909), 151 N. Car. 359, 66 S. E. 308; First Nat. Bk. of Kan- sas City V. Griffin (1910), 153 N. Car. 72; Citizens & Marine Bk. of Newport News v. Southern R. W. (1910), 153 N. Car. 346; Myers v. Petty (1910), 153 N. Car. 462; Hardy v. Mitchell (1911), 156 N. Car. 76, 72 S. E. 95, 161 N. Car. 351 (1913), Park v. Exam (1911), 72 S. E. 309; Am. Nat. Bk. of Richmond v. Hill (1915), 85 S. E. 209; Gulf States Steel Co. v. Ford (1917), 91 S. E. 844; Worth Co. v. Interna- tional Sugar Feed Co., 172 N. Car. 335, 90 S. E. 295. North Dakota.— Drenkall v. Movius State Bk. (1901), 118 N. Dak. 10, 88 N. W. 724; Bank v. Garcean (1912), 22 N. Dak. 576, 134 N. W. 882; McCarty v. Kepveta (1913), 139 N. W. 992; Nat. Bk. of Commerce v. Pick (1904), 13 N. Dak. 74, 99 N. W. (iZ; Walters v. Rock (1908), 18 N. Dak. 45, 115 N. W. 511; Farmer's Bk. of Mercer Co. v. Riedlinger (1914), 146 N. W. 556. O/i/o.— Thompson v. Citizens Nat. Bk. of Adams (1909). 2,2 O. C. C, 131; Spring Valley Nat. Bk. v. Somers (1910), 21 Ohio Dec. 772; Ham- ilton Mach. Tool Co. v. Memphis Nat. Bk. (1911), 84 Ohio St. 184, 95 N. E. 777. 496 NEGOTIABLE INSTRUMENTS. § 52 Oklahoma. — Jenkins v. Planters & Mechanics Bk. (1912), 126 Pac. 757; Wood v. Stickle (1912), 128 Pac. 1082; First State Bk. of Okla- homa V. Tobin (1913), 134 Pac. 395; Cedar Rapids Nat. Bk. v. Bashara (1913), 35 Pac. 1051; McPherrin v. Tittle, 36 Okla. 510. 129 Pac. 721, 44 L. R. A. (N. S.) 395; Hudson v. Moore (1913), 130 Pac. 774; Jones V. Citizen's State Bk. (1913), 135 Pac. Z7Z; Western Exchange Bk. of Kansas City v. Coleman (1913), 132 Pac. 488; Nat. Bk. of Commerce V. Armbruster (1914), 142 Pac. 393; City Nat. Bk. v. Kelly (1915), 151 Pac. 1172; Hodgins v. Northwestern Finance Co. (1915), 148 Pac. 717; Keisel v. Baldock (1915), 154 Pac. 1194; Nicholas Co. v. Thomas (1915), 151 Pac. 847; Norman v. Lambert (1915), 153 Pac. 1097; Ogle v. Arm- .strong (1915), 153 Pac. 1139; Barry v. Kinseley (Okla.), 155 Pac. 1168; Ward V. Oklahoma State Bank (1915), 151 Pac. 852; Lambert v. Smith (1916), 157 Pac. 909; Conqueror Trust Co. v. Simmon (1917), 162 Pac. 1098; Critser v. Steelcy (1917), 162 Pac. 795; Murphy v. Estel, 182 Pac. 83 ; Southwest Nat. Bk. of Commerce of Kansas City v. Todd, 192 Pac. 1096; LeRoy v. Meadows (Okla.), 200 Pac. 858. OrrgoK.— Brown v. Felwert (1905), 46 Oreg. 363, 80 Pac. 414; White V. Savage (1906), 45 Oreg. 604, 87 Pac. 1040; First Nat. Bk. of Pom- eroy v. McCulIough (1908), 50 Oreg. 508, 93 Pac. 366; Matlock v. Scheuerman (1908), 51 Oreg. 49, 93 Pac. 823, 17 L. R. A. (N. S.) 747; First Nat. Bk. of Cottage Grove v. Bank of Cottage Grove (1911), 59 Oreg. 388, 117 Pac. 293; Hull v. Agnus (1911), 60 Oreg. 95, 118 Pac. 284; Bailey v. Inland Empire Co. (1915), 146 Pac. 991; Sink v. Allen (1916), 154 Pac. 415; Everding & Parrel! v. Taft (1917), 160 Pac. 1160; Hill V. McCrow, 88 Ore. 299. Pennsylvania. — Homewood People's Bk. v. Heckert (1903), 207 Pa. 231; Neil v. Neil (1904), 25 Pa. Super. Ct. 605; Carman v. Gumbiner (1906), 32 Pa. Super. Ct. 181; Allentown Nat. Bk. v. Clav Product Sup- ply Co. (1907), 217 Pa. St. 128, 66 Atl. 252; Lindsay v. Button (1907), 217 Pa. 148, 66 Atl. 250; Stouffer v. Kelchner (1908), 38 Pa. Super. Ct. 475; Johnson Co. Sav .Bk. v. Kock (1908), 38 Pa. Super. Ct. 553; Lowrv Nat. Bk. v. Hazard (1909), 223 Pa. 520; Bowles v. Frazer (1910), 109 Pa. 812; Grange Trust Co. v. Brown (1911), 49 Pa. Sup. 274; People's Nat. Bk. of Pensacola v. Hazard (1911), 80 Atl. 554; Wolfgang v. Shirley (1913), 86 Atl. 1011. Rhode Island.— Ahram v. Greer (1913), 88 Atl. 884. South Carolina. — Commerce Trust Co. v. Grimes (1914), 82 S. E. 420; Edens v. Gibson (1915), 84 S. E. 1005; Farmer's Bk. v. Crawford (1916), 88 S. E. 13; Farmers Mech. Bk. of Florence v. Whitehead (1916), 89 S. E. 657; Stevens v. Khetter (1918), 96 S. E. 406; Commer- cial Security Co. v. Donald Drug Co., 104 S. E. 312. South Dakota.— Kahney v. Thayer (1915), 154 N. W. 1103; Runely V. Anderson (1915), 150 N. W. 939; Ochsenreiter v. Block, 173 N. W. 736; Britton Milling Co. v. Williams, (S. Dak.), 184 N. W. 265. Tennessee. — Kimbrough v. Hornsby (1904), 113 Tenn. 605; Farmer's Bk. V. Bank of Rutherford, 115 Tenn. 64, 88 S. W. 939, 112 Am. St. Rep. 817; Elgin City Bldg. Co. v. Hall (1907), 119 Tenn. 548, 108 S. W. 1068; Jefferson Bk. of St. Louis v. Champman-Whittee Lyons Co. (1909), 122 Tenn. 415, 123 S. W. 641; Edwards v. Hambly (1915), 180 S. W. 163; Griswold v. Davis, 125 Tenn. 223, 141 S. W. 205; § 52 RIGHTS OF HOLDER. 497 Merrimon v. Parkey (1917), 191 S. W. 121; Madison Tr. Co. v. Stahl- man (1916), 183 S. W. 1012; Bromley v. Chattanooga Co (1917), 198 S .W. 775. T^xaj.— Davis v. Converse (1916), 188 S. W. 697; McCamant v. Mc. Camant (1916), 187 S. W. 1096; Sayles v. First State Bank of Abilene (1917), 195 S. W. 230; Zielinski v. Hernig (1917), 195 S. W. 952. L'/fl/?.— Cole Banking Co. v. Sinclair (1908), 34 Utah, 454, 98 Pac 411; Lcavitt v. Thurston (1911), 38 Utah 351, 113 Pac. 11; Miller v. Marks (1915), 148 Pac. 412; Helper St. Bk. v. Jackson (1916), 160 Pac. 287; Interstate Trust Co. v. Headlund (1918), 171 Pac. 515. Virginia.— Aragon Coffee Co. v. Rogers (1906), 105 Va. 51; Penning- ton v. Third Nat. Bk. of Columbus, Ga. (1913), 11 S. E. 455; Am. Bk. of Orange v. McComb (1906), 105 Va. 473, 54 S. E. 14; Fayette Nat. Bk. V. Sunners (1906), 105 Va. 689, 54 S. E. 862; City Nat. Bk. of Roanoke v. Hundley (1911), 70 S. E. 494; Miller v. Norton & Smith (1913), 11 S. E. 452; Williams v. Liphart (1914), 81 S. E. 11; Ander- son V. Union Bk. of Richmond (1915), 117 Va. 1, 83 S. E. 1080; Flesh- man V. Bibb (1916), 88 S. E. 64; Holdsworth v. Anderson (1916), 87 S. E. 565; Ratcliffe v. Costello (1915), 85 S. E. 469; Colona v. Parksley Nat. Bk. (1917), 92 S. E. 979. W^fl,y/iw^;o».— McNamara v. Jose (1902), 28 Wash. 461, (& Pac. 903, Keene v. Behan (1905), 40 Wash. 505, 82 Pac. 884; Gosline v. Dry- foos (1907), 45 Wash. 396, 88 Pac. 644; Spencer v. Alkali Paint, Etc., Co., 53 Wash. 11, 101 Pac. 509; Reardan v. Cockrell (1909), 54 Wash. 400, 103 Pac. 457; Gray v. Boyle (1909), 55 Wash. 578, 104 Pac. 828; Bradley Engineering & Mfg. Co. v. Heyburn (1910), 56 Wash. 628, 106 Pac. 170; Cedar Rapids Nat. Bk. v. Myhre (1910), 57 Wash. 596, 107 Pac. 518; Bowles v. Frazer (1910), 109 Pac. 812; Hughes & Co. V. Flint (1911), 61 Wash. 460, 112 Pac. 633; Moyses v. Bell (1911), 62 Wash. 134, 114 Pac. 193; Scandinavian Am. Bk. v. Johnston (1911), 63 Wash. 187, 115 Pac. 102; Wells v. Duffv (1912), 69 Wash. 310; Am. Sav. Bk. & Tr. Co. V. Helgesen (1911), 64 Wash. 54, 116 Pac. 837; Barker v. Sartori (1911), 66 Wash. 260, 119 Pac. 611; Parker v. Saxton (1911), 66 V/ash. 260; Canadian Bk. of Commerce v. Sesuon Co. (1912), 123 Pac. 602; Davis v. Hibbs (1913), IZ Wash. 315, 131 Pac. 1135; Fournier v. Cornish (1913), 133 Pac. 9; Union Inv. Co. v. Rosenzweig (1914). 139 Pac. 874; Hamilton v. Mihills, 92 Wash. 675. 159 Pac. 887; Wash. Trust Co. V. Keyes (1915), 152 Keyes, 1029; Schultz v. Crewdson (1917), 163 Pac. 734; Hauson v. Roesch (1919). 176 Pac. 349; Citizens' Bk. v. Limpright, 93 Wash. 361, 160 Pac. 1046; Fisk Rubber Co. of New York V. Pinkey, 170 Pac. 581 ; United Ry. & Logging Supply Co. v. Siberian Commercial Co., (Wash.), 201 Pac. 21. Wisconshi.-^K^\ V. Bk. of Evansville (1905), 124 Wis. 93, 102 N. W. 329, 68 L. R. A. (N. S.) 964,'l09 Am. St. 925; Hodge v. Wallace. 129 Wis. 84, 108 N. W. 212, 116 Am. St. Rep. 938; Hodge v. Smith (1907), 130 Wis. 326, 110 N. W. 192; Aukland v. Arnold (1907), 131 Wis. 64, 111 N. W. 212; Quiggle v. Herman (1907). 131 Wis. 379, 111 N. W. 479; Northfield Nat. Bk. v. Arndt (1907), 132 Wis. 383, 112 N. W. 451; Paulson v. Bovd (1908), 137 Wis. 241, 118 N. W. 841; Kipp v. Smith (1908), 137 Wis. 234, 118 N. W. 848; Bk. of Baraboo v. Laird (1912), 136 N. W. 603; Washburn v. Riener (1912), 149 Wis. 387; Green v. 498 NEGOTIABLE INSTRUMENTS. § 53 Gunsten (1913), 142 N. W. 261; Badger Machinery Co. v. Columbia County Electric Co. (1917), 163 N. W. 188; Union Investment Co. v. Epley, 164 Wis. 438, 160 N. W. 175. Wyoming.— lovf a State Sav. Bk. v. Henry (1913), 136 Pac. 863; Holds- worth V. Blyth & Fargo (1915), 146 Pac. 603. United States— In re Hopper-Morgan Co. (1907), 154 Fed. 249; In re Hill (1911), 187 Fed. 214; First Nat. Bk. of Shenandoah v. Linver (1911), 187 Fed. 16, 109 U. S. C. C. A. 70; Nat. Bk. og Commerce in St. Louis v. Sancho Pag. Co. (1911), 110 C. C. A. 112, 186 Fed. 257; Amalgamated Sugar Co. V. U. S. Nat. Bk. of Portland, Oreg. (1911), 109 C. C. A. 494; First Nat. Bk. of Wilkesbarre v. Barnum (1908), 160 Fed. 245; MiUon v. Pensacola Bk. & Tr. Co. (1911), 190 Fed. 126, 111 C. C. A. 166; Crosby V. Reynolds (1912), 196 Fed. 640; Pensacola State Bk. v. Melton (1913), 370; O'Toole v. Lanson (1914), 41 App. D. C. 276; Smith v. Nelson Land & Cattle Co. (1914), 212 Fed. 56; Pensacola State Bk. v Thornberry (1915), 226 Fed. 611 (C. C. A. 6th Ct.) ; Postal Tel. Cable Co. v. Citizens Nat. Bk. (1916), 228 Fed. 601 (C. C. A., 3d Ct.) ; Nat. City Bk. of Seattle V. Titlow (1916), 233 Fed. 838; Church v. Sweetland (1917), 24 3Fetl. 289. 112 N. W. 918; In re Estate of Phitlpott, 169 Iowa 555, 151 N. W. 825. wold V. Morrison, — Cal. App. — , 200 Pac. 62. § 53. When person not deemed holder in due course. Where an instrument payable on demand is negotiated an unrea- sonable length of time after its issue, the holder is not deemed a holder in due course.-*' ** See text, § 129. Cross sections : 7. Corresponding provision of English Bills of Exchange Act: See 36 (3) bill, 86 (3). South Dakota under another section fixes the maturity of demand instruments. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Note received in due course of business before maturity is held in due course. Lapp v. Merchant's Nat. Bk. of Indianapolis, — Ind. App. — , 123 N. E. 231. Seven months delay a question for jury as to reasonable time on de- mand note. In re Estate of Philpott, 169' Iowa, 555, 151 N. W. 825. Check negotiated two days later not overdue where drawn on Satur- day. Asbury v. Taube, 151 Ky. 142, 152 S. W. 372. Seven months an unreasonable time. American Nat. Bk. v. Patterson, — La. — , 83 So. 218. Check delivered on Sunday is valid in hands of innocent purchaser. Gordon v. Levine, 197 Mass. 267, 83 N. E. 861, 15 L. R. A. (N. S.) 243, 125 Am. Rep. 361. Five days not unreasonable time on check. Singer Mfg. Co. v. Sum- mers, 143 N. C. 102, 55 S. E. 522. § 53 RIGHTS OF HOLDER. 499 One year limit of reasonable time on demand note. McAdam v. Grand Forks, Etc., Co., 24 N. D. 645, 140 N. W. 725, 47 L. R. A. (N. S.) 246. Negotiation of check next day after issue does not give overdue no- tice. Matlock V. Scheuerman, 51 Ore. 49, 93 Pac. 823, 17 L. R. A. (N. S.) 747. Sixteen months not unreasonable where monthly payments of inter- est made. McLean v. Bryer, 24 R. I. 599, 54 Atl. 372. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Idaho.— MUler v. Del Rio Mining & Milling Co. (1913), 136 Pac. 448. /;/mot.y.— Greer v. Downing (1912), 176 111. App. 355. Indiana.— Lapp v. Merchants Nat. Bank, 123 N. E. 231. I ozva.— Anderson v. First Nat. Bk. of Chariton (1909), 144 Iowa 251, 122 N. W. 918; LeClere v. Philpott (1915), 151 N. W. 825; In re Estate of Philpott, 169 Iowa 555, 151 N. W. 825. Kansns.— Doty v. Garfield Township (1913), 89 Kans. 719. Kenfticky.—Ashury v. Taube, 151 Ky. 142, 152 S. W. 372. Louisiana. — American Nat. Bk. v. Patterson, 83 So. 268. Massachusetts.— Gardner v. Beacon Trust Co. (1906), 190 Mass. 27; Gordon v. Levine (1908), 197 Mass. 267, 83 N. E. 861, 15 L. R. A. (N. S.) 243. 125 Am. Rep. 361. Nebraska.— Ostenherg v. Kavka (1914), 145 N. W. 713. New York.— Albany Co. Bk. v. People's Co-op. Ice Co. (1904), 92 A D. 47, 86 N. Y. Supp. 73; Royal Bk. of N. Y. v. Reinschreiber (1911), 126 N. Y. Supp. 749; Stanley v. Franco-American Ferment Co. (1916), 161 N. Y. Supp. 365. North Carolina.—Singer Mfg. Co. v. Summers (1906), 143 N. Car. 102, 55 S. E. 522; Johnson v. Lasseter (1911), 155 N. Car. 47. North Dakota.— McAdam v. Grand Forks, Etc., Co., 24 N. D. 645, 140 N. W. 725, 47 L. R. A. (N. S.) 246. Oregon.— Matlock v. Scheuerman (1908), 51 Greg. 49, 93 Pac. 823, 17 L. R. A. (N. S.) 747. Rhode Island.— McLean v. Bryer, 24 R. I. 599, 54 Atl. 373. South Carolina.— Wmiams v. Weekly (1915), 84 S. E. 299. Tennessee.— Easley v. East Tenn. Nat. Bk. (1917), 198 S. W. 66. Virginia.— Aragon Coffee Co. v. Rogers (1906), 105 Va. 51; Am. Bk. of Orange v. McComb (1906). 105 Va. 473, 54 S. E. 14; Pennington v. Third Nat. Bk. of Columbus, Ga. (1913), 77 S. E. 455; Colona v. Parksley Nat. Bk. (1917), 92 S. E. 979. United States— Fensacoh State Bk. v. Melton (1913), 210 Fed. 57. 500 NEGOTIABLE INSTRUMENTS. § 54 § 54. 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 thereto- fore paid by him.*' ^^ See text, § 129. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Receiving instrument in fraud renders title defective. Ensign v. Cran- dall, — Mo. App. — 231 S. W. 675. When one pays full amount agreed upon prior to notice of defect he may recover. Montgomerv Garage Co. v. Manufacturers Liability Ins. Co., — N. J. — , 109 A. 296. Nonpayment of note when due as notice affecting payment of bal- ance of purchase money. Albany County Bank v. People's Ice Co., 92 App. Div. 47, 86 N. Y. Supp. 773. Where indorsee retained one-half the price for three notes and de- fendant sets up defense to first one, indorsee entitled to receive only half. Rosenbaum v. Roth, 164 App. Div. 617, 150 N. Y. Supp. 396. Notice to agent is notice to principal. Baruch v. Buckley, 167 App. Div. 113, 151 N. Y. Supp. 853. Indorsee entitled only to recover as to portion paid prior to notice of defects. First National Bank v. Buffalo Brev/ing Co., 154 N. Y. Supp. 765. Indorsee not bound to stop payment on check after notice of infirmi- ties of note purchased. Miller v. Marks, 46 Utah 257, 148 Pac. 412. No notice of infirmity of note until after payment of certificate of deposit. Duncan v. Broadway Nat. Bank, — Va. — , 102 S. E. 577. Where no notice of depositor's defective title bank should recover. Bancroft v. McKnight, 11 Richardson (Law) 663; Sering's Appeal, 10 Barr 235. *" The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Arkansas.— l^lorehead v. Harris (1916), 182 S. W. 521. California — Griswold v. Morrison (Cal. App.), 200 Pac. 62. Illinois.— Weh & Craig Mfg. Co. v. Bonus (1913), 177 111. App. 626. Indiana.— Lapp v. Merchants Nat. Bank, 123 N. E. 231. /owa.— Citizen's State Bk. v. Lankin (1912), 134 N. W. 882. Louisiana. — Amer. Nat. Bank v. Patterson, 83 So. 218. Michigan.— People's State Bk. v. Miller (1915), 152 N. W. 257. Missouri.— Ch'itwood v. Hatfield (1909). 136 Mo. App. 688; Link v Jackson (1911). 158 Mo. App. 63, 139 S. W. 588; 53 Nat. Bk. v. Mc- § 55 RIGHTS OF HOLDER. 501 Crory (1915), 177 S. W. 1058; Mount v. Neighbors Imp. & Vehicle Co. (1916), 189 S. W. 614; Ensign v. Crandall (Mo. App.), 231 S. W. 675. Nebraska.— Ostenherg v. Kavka (1914). 145 N. W. 713. New /fr.f<'v.— Montgomery Garage Co. v. Manufacturers Liability Ins. Co., 109 Atl. 296. New ForA'.— Pcrth-Amboy Mut. Loan Assn. v. Chapman (1903), 80 A. D. 556; Albany Co. Bank v. People's Ice Co., 86 N. Y. Supp. 773, 92 A. D. 47; Goetting v. Day (1904), 87 N. Y. Supp. 510; Ferguson v. Natter (1910), 141 A. D. 274; Rosenbaum v. Roth (1914), 150 N. Y. Supp. 396, 164 A, D. 617; Interboro Brewing Co. v. Doyle (1915), 151 N. Y. Supp. 325; Banich v. Buckley, 151 N. Y. Supp. 853, 167 A. D. 113; First Nat. Bk. of Winona v. Buff Brewing Co. (1915), 154 N. Y. Supp. 765; Title Guar. Co. v. Pain (1915), 155 N. Y. Supp. 333. North Carolina.— Johnson v. Lasseter (1911), 155 N. Car. 47. North Dakota.— W'cihers v. Rock (1908), 18 N. Dak. 45, 115 N. W. 511; Bank v. Garcean (1912), 22 ;N. Dak. 576, 134 N. W. 882. 0/izo.— Hamilton Mech. Tool Co. v. Memphis Nat. Bk. (1911), 84 Ohio St. 184, 95 N. E. 777. Oklahoma.— Hudson v. Moore (1913), 130 Pac. 774; Voris v. Bird- sail (1917), 162 Pac. 951; State v. Emery (1918), 174 Pac. 770. P^«n.yy/t/arn'a.— Snyder v. Commercial Ex. Nat. Bk. (1908), 221 Pa. 599, 70 Atl. 876; Bank of Morehead v. Hernig, 220 Pa. 224, 69 Atl. 679. Utah.— Felt v. Bush (1912), 126 Pac. 688; Miller v. Marks (1915), 148 Pac. 412, 46 Utah 257. Virginia.— Aragon Coffee Co. v. Rogers (1906), 105 Va. 51; Pen- nington V. Third Nat. Bk. of Columbus, Ga. (1913), 77 S. E. 455. Washington.— Citizens Bk. & Tr. Co. v. Limpright (1916), 160 Pac. 1046. Wisconsin.— Uodge v. Smith (1907), 130 Wis. 326, 110 N. W. 192; Green v. Gunsten (1913), 142 N. W. 261. Utiited States.— In re Continental Engine Co. (1916), 234 Fed. Rep. 58, 148 C. C. A. 74 ; Duncan v. Broadway Nat. Bank, 102 S. E. 577. § 55. When title defective. The title of a person who negotiates an instrument is defective within the meaning of this act when he obtains the instrument, or any signature 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.*' ** See text, §§ 127, 142. Kansas states "alleged" instead of "illegal," a clerical error. Minnesota adds an additional section as follows: "6015. Instru- ment obtained by fraud.— No person, nor the heirs or personal repre- 502 NEGOTIABLE INSTRUMENTS. § 55 sentatives of any person, whose signature is obtained to any bill of ex- change, promissory note, or other paper negotiable under the law mer- chant, shall be held liable thereon if it be made to appear that the sig- nature was obtained by fraudulent representation, trick or artifice as to the nature and terms of the contract so signed, that at the time of sign- ing he did not believe it to be a bill of exchange, promissory note, or other paper negotiable under the law merchant, and that he was not guilty of negligence in signing such paper without knowledge of its terms. The question of negligence in any suit on such contract shall in all cases be one of fact for the jury, and, the person sought to be charged thereon shall be entitled to have the question of his negligence sub- mitted to a jury." The Wisconsin Act (Sees. 1676-25) adds to this section the follow- ing: "And the title of such person is absolutely void when such instru- ment or signature was so procured from a person who did not know the nature of the instrument and could not have obtained such knowl- edge by the use of ordinary care." * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Note taken as collateral by person without knowledge of defect be- fore maturity is held in due course. Burnham Loan & Investment Co. V. Sethman, — Colo. — , 171 Pac. 884. Former statutes declaring void instruments given for gambling debt or usurious interest repealed. Wirt v. Stubblefield, 17 App. D. C. 283. Proof as to title of holder being defective. Farmers Trust Co. v. Sprowl, — Ind. App. — , 126 N. E. 81. When oral evidence permissible to show agreement not to negotiate. McNight v. Parsons, 136 Iowa 390, 113 N. W. 858, 125 Am. St. Rep. 265, 15 Ann. Cas. 665, 22 L. R. A. (N. S.) 718. Note obtained by duress is voidable only. State v. Wegener (Iowa), 162 N. W. 1040. Confidential adviser of widov/ procuring note by fraud. Lundean v. Hamilton, — Iowa — , 159 N. W. 163. Where endorser's title is defective on account of fraud. Ford v. Ott, — Iowa — , 173 N. W. 121. Question of being a good faith holder is for the jury. Plank v. Swift, — Iowa — 174 N. W. 236. Indorsee has burden of proof when shown that note was procured by fraud. Underwood v. Leichtman, — Iowa — , 176 N. W. 683. Fraud is a defense against subsequent holders not in due course. Rinella v. Faylor, — Iowa — , 180 N. W. 983. Former gambling statute not repealed as to negotiable instruments. Alexander v. Hazelrigg, 123 Ky. Law Rep. 1212, 97 S. W. 353. Whether A embezzled the proceeds or made the negotiation with fraudulent intent is question for jury. Demelman v. Brazier, 198 Mass. 458, 84 N. E. 856. Holder in due course may recover as to part of joint makers when part only were makers by forgery. First National Bank v. Shaw, 157 Mich. 192, 121 N. W. 811. When negligence in not reading instrument renders makers liable to holder in due course. Van Slyke v. Rooks, 181 Mich. 88, 147 N. W. 579. Misrepresentation of fact in procuring note affects title. People's State Bank v. Miller, 185 Mkh. 565, 152 N. W. 257. § 55 ' RIGHTS OF HOLDER. 503 Agreement to return note if maker dissatisfied with land does not throw burden upon holder in due course. Snelling State Bank v. Clasen, 132 Minn. 404, 157 N. VV. 643. Fraud in obtaining signature to instrument which when detached is a note affects title of indorsee. Stevens v. Pearson (Minn.), 163 N. W. 769. Fraudulent misrepresentations of financial standing as affecting note. First Nat. Bank v. Denfeld, — Minn. — , 173 N. W. 661. Knowledge of plaintiff's cashier that notes were not proceeds of col- lections made and that they were taken in bad faith affects right of re- covery. State Bank of Rogers v. Missia, — Minn. — , 175 N. W. 614. Fraud as illegal consideration. Albrecht v. Rathai, — Minn. — , 185 N. W. 259. Assignment of nonassignable saloon license as part consideration does not render note void in hands of holder in due course. Farmers' Sav. Bank v. Reed, 192 Mo. App. 344, 180 S. W. 1002. Notice to make title defective must be actual. Morehead v. Cum- mins, — Mo. App. — 230 S. W. 656. Fraud on part of plaintiff's agent was effective against indorsee of agent who purchased after maturity. Northwestern Improvement Co. v. Rhoades, 52 Mont. 428, 158 Pac. 832. Note failing to state consideration as required by statute is void be- tween parties and indorsees with notice. Benton v. Sikyta, 84 Neb. 808, 122 N. W. 1057, 24 L. R. A. (N. S.) 1057. Former usury statute repealed. Schlesinger v. Kelly, 114 App. Div. 546, 99 N. Y. Supp. 1083. Fraudulent diversion places burden of proving indorsee holder in due course upon indorsee. Peterson v. Alton, 162 App. Div. 21, 147 N. Y. Supp. 280. Failure to read instrument providing for detachment of attached note renders maker liable to holder in due course. Munnich v. Jaffe, 164 App. Div. 30. 149 N. Y. Supp. 338. Notice of effective title transferred. Vogel v. Pyne, 189 N. Y. Supp. 285. Check indorsed in unlawful gambling transaction is good when suit brought by payee although paid to his 'indorsee. Drinkall v. Movius State Bank, 11 N. D. 10. 88 N. W. 724. Breach of warranty is not a defense and must be set up as counter- claim. First National Bank v. Sayer, 35 S. D. 581, 153 N. W. 652. Effect of illegal consideration on title. State v. Emery, — Okla. — , 174 Pac. 770. Defective title as shown by one taking note after others of series due. LeRoy v. Meadows, — Okla. — , 200 Pac. 858. Note given for interest at unlawful rate makes payee's title defec- tive. Keene v. Behan, 40 Wash. 505, 82 Pac. 884. Former usury statute not repealed by negotiable instruments law. Askridge v. Thomas (W. Va.). 91 S. E. 7 (usury). Where fraud makes title defective as to one maker it does so as to all joint makers. Hodge v. Smith, 130 Wis. 326, 110 N. W. 192. Failure to state consideration as required by statute note was void between parties. Quiggle v. Herman, 131 Wis. 379, 111 N. W. 479. Fraud operates as to all makers. Aukland v. Arnold, 131 Wis. 64, 111 N. W. 212. When innocent purchaser of note not stating consideration is holder in due course although statute requires consideration be stated. Samp- son v. Ward, 147 Wis. 48, 132 N. W. 629, 504 NEGOTIABLE INSTRUMENTS. § 55 Intoxication of maker affects negotiability. Green v. Gunster, 154 Wis., 69, 142 N. W. 261. Note given for purchase price of article bought upon fraudulent rep- resentations. Jones V. Brandt, — Wis. — , 181 N. W. 813. Parol to show nonnegotiation agreement between parties not holders in due course. Holdsworth v. Blyth &i Fargo Co., 23 Wyo. 52, 146 Pac. 603. Effect of fraud as to one maker upon other joint makers. Schmidt V. Bank of Commerce, 234 U. S. 64. Bonds made void by prior statute not affected. In re Valecia Con- densed Milk Co., 233 Fed. Rep. 173. Negotiation in breach of faith to one with notice of dishonor renders title defective. Hornby v. McLaren (C. A. March 31, 1908), 24 T. L. Rep. 494. Overdue bill indorsed in blank sold on judicial proceedings may give title. Alock V. Smith, 1 Ch. 238. ■^* The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Alabama. — Hass v. Commerce Trust Co. (1915), 69 So. 89; Peoples' Bank & Trust Co. v. Floyd (1917), 75 So. 940; Jones v. Martin (1917), 74 So. 761; Bernheimer v. Gray (1918), 78 So. 840. ^mono.— Hurley v. Wilky (1916), 156 Pac. 83. Arkansas.— Moore v. Wade (1916), 186 S. W. 828. California. — Merchants Collection Agency v. Roantrue (1918), 173 Pac. 600. Colorado. — Johnson Co. Sav. Bk. v. Gregg (1911), 51 Colo. 358, 117 Pac. 1003; First Nat. Bk. of Iowa City v. Smith (1913), 136 Pac. 460; Burnham Loan and Investment Co. v. Sethman, 171 Pac. 884. Connccfiait.-Johnson Co. Sav. Bk. v. Walker (1909), 82 Conn. 24; s. c, 79 Conn. 348, 65 Atl. 132 (1906), 80 Conn. 509, 60 Atl. 15; Conti- nental Credit Co. v. Ely (1917)', 100 Atl. 435. /rfaAo.— Shellenberger v. Nourse (1911), 20 Ida. 323, 118 Pac. 508; Park v. Johnson (1911), 20 Ida. 548, 119 Pac. 52; Park v. Brandt (1911), 20 Ida. 660, 119 Pac. 877; Winter v. Hutchins (1911), 20 Ida. 749, 119 Pac. 883; Brown v. Miller (1912), 22 Ida. 307, 125 Pac. 981; Southwest- ern Nat. Bk. of Kansas City v. Lindley (1916), 158 Pac. 1082. ////«o/.y.— Black v. Downes (1912), 176 111. App. 358; Christina v. Cuseniano (1912), 129 III. 873, 57 So. 157. Indiana. — Farmers Trust Co. v. Sprowl, 126 N. E. 81. lowa.—Keegan v. Rock (1905), 128 Iowa 39, 102 N. W. 805; Mc- Knight v. Parsons (1907), 136 Iowa 390, 113 N. W. 858, 125 Am. St. 265; Cox v. Cline (1908), 139 Iowa 128, 117 N. W. 48 ; O'Connor v. Kleiraan (1909). 143 Iowa 435, 121 N. W. 1088; Citizen's State Bk. v. Lankin (1912), 134 N. W. 882; Bk. of Bushnell v. Buck Bros. (1913), 142 N. W. 1004: Stotts v. Fawfield (1914), 145 N. W. 61; First Nat. Bk. of Shenandoah v. Hall (1915), 169 Iowa 218, 151 N. W. 120; Perry Sav. § 55 RIGHTS OF HOLDER. 505 Bk. V. Fitzgerald, 167 Iowa 446, 149 N. W. 477 (usury) ; LeClere v. Philpot (1915), 151 N. W. 825; Loos v. Callendar Sav. Bk. (1916), 156 N. W. 712; State v. Wegener (1917), 162 N. W. 1040; German-Am. Bk. V. Kelley (1918), 166 N. W. 1053; Lundean v. Hamilton, 159 N. W. 163; Ford v. Ott, 173 N. W. 121; Plank v. Swift, 174 N. W. 236; Un- derwood V. Leichtman, 176 N. W. 683 ; Rivella v. Faylor, 180 N. W. 983. Kansas. — Underwood v. Quantie (1911), 116 Pac. 361; Bk. of Wilber V. Freeburg (1911), 84 Kans. 235; Murchison v. Nies (1912), 87 Kans. 77; The Stock Ex. Bk. v. Wykes (1913), 88 Kans. 750; Ireland v. Shore (1914). 137 Pac. 926; Farmers Nat. Bk. of Lincoln v. Francis (1917), 164 Pac. 146; Rodgers v. Slaveno (1917), 165 Pac. 655; First Nat. Bk. V. Stroup (1919), 177 Pac. 836. Kentucky. — Laurence v. First Nat. Bank, 31 Ky. Law Rep. 318. 102 S. W.'324; McAfee v. Mercer Nat. Bank, 31 Ky. Law Rep. 863, 104 S. W. 287; Asbury v. Taube (1912). 151 S. W. 372; Aluir v. Edelen (1913), 160 S. W. 1048; Gahren, Dodge & Maltbv v. Parkers- burg Nat. Bk. (1914), 162 S. W. 1135; Harrison v. Ford (1914), 165 S. VV. 663 ; Alexander v. Hazelrigg, 123 Ky. Law Rep. 1212, 97 S. W. 353 ; Holzbog V. Barrow, 156 Ky. 161, 160 S. W. 792, 50 L. R. A. (N. S.) 1023. Maryland.—Stoufier v. Alford (1910), 114 Md. 110, 78 Atl. 387; American Agriculture Chemical Co. v. Scringer (1917), 100 Atl. 774; Spoerer v. Wehland (1917), 100 Atl. 287, 130 Md. 226. Massachusetts.— Caldwell v. Nash (1906), 190 Mass. 507; Demelman V. Brazier (1907), 193 Mass. 588, 79 N. E. 812; demons Elec. Mfg. Co. V. Walton (1910), 206 Mass. 215; Lewiston Trust & Safe Dep. Co. V. Shackford (1913), 213 Mass. 432; Anthony & Cowell Co. v. Brown (1913), 214 Mass. 439; Palmbaum v. Magulsky (1914), 104 N. E. 746. Michigan.— Fh-st Nat. Bk. of Durand v. Shaw (1909), 157 Mich. 192, 121 N. W. 811, Van SIvke v. Rooks, 181 Mich. 88, 147 N. W. 579; J. D. Gruber Co. v. Smith (1917), 162 N. W. 124; Loveland v. Bump (1917). 165 N. W. 855; People's State Bk. v. Miller, 185 Mich. 565, 152 N. W. 257. Minnesota.— Thorpe v. Cooley (1917), 165 N. W. 265: Snclling St. Bank v. Clasen, 132 Minn. 404, 157 N. W. 643; First Nat. Bank v. Denfeld, 173 N. W. 661; State Bank of Rogers v. Missia, 175 N. W. 614; Alhrecht V. Rathai, — ^linn. — , 185 N. W. 259. Missouri. — Whitener v. Scoggins (1910), 152 Mo. App. 343; Jobes v. Wilson (1910), 124 S. W. 548; Link v. Jackson (1911), 158 Mo. App. 63, 139 S. W. 588; Birch Tree State Bk. v. Dowler (1912), 163 Mo. 65, 145 S. W. 843; Hill v. Dillon (1913), 161 S. W. 881; Bank of Polk v. Wood (1915), 173 S. W. 1093; Farmers' Sav. Bank v. Reed, 192 Mo App. 344, 180 S. W. 1002; Newburg State Bk. v. Heflin (1915), 175 S. W. 297; Miller v. People's Sav. Bk. (1916), 186 S. W. 547; Ozark Motor Co. V. Horton (1917), 196 S. W. 395; Pioneer Stock Powder Co. V. Goodman (1918), 201 S. W. 576; Morehead v. Cummins, 230 S W. 656. Montana.—Stzte Bk. of Moore v. Forsythe (1910), 41 Mont. 249; Northwestern Imp. Co. v. Rhoades, 52 Alont. 428, 158 Pac. 832. 506 NEGOTIABLE INSTRUMENTS. § 55 Nebraska.— Benton v. Sikyta, 84 Neb. 808, 122 S. W. 60. 24 L. R. A. (N. S.) 1057, contra; Bothcll v. Miller, 87 Neb. 835, 128 N. W. 628; Bolew V. Wright (1911), 89 Neb. 116, 131 N. W. 185; Ostenberg v. Kavka (1914), 145 N. W. 713. New Jersey.— Benstl v. Anderson (1916), 96 Atl. 910. New Mexico. — Bk of Commerce v. Broyles (1911), 120 Pac. 670; First Nat. Bk. of Albuquerque v. Stover (1916), 155 Pac. 905. New York.—U. Groh's Sons Co. v. Schneider (1901), 34 Misc. 195. 68 N. Y. Supp. 682; Strickland v. Henry (1901), 66 A. D. 23, 73 N. Y. Supp. 121 ; Citizens Bk. of Buffalo v. The Rung Furniture Co. (1902), 76 A. D. 471; Sutherland v. Mead (1903), 80 A. D. 103, 80 N. Y. Supp. 504; Perth-Amboy Mut. Loan Assn. v. Chapman (1903), 80 A. D. 556; Mitchell v. Baldwin (1903), 88 A. D. 265, 84 N. Y. Supp. 1043; Goetting v. Day (1904), 87 N. Y. Supp. 510; Schreyer v. Bailey & Co. (1904), 97 A. D. 185; Hamilton Nat. Bk. v. Upton (1905). 100 A. D. 105; Schlesinger v. Kelly (1906), 114 A. D. 546, 99 N. Y. Supp. 1083; Douglass v. Richards (1906). 116 A. D. 27; Elliott v. Brady (1907), 118 A. D. 208; Peterson v. Alton, 147 N. Y. Supp. 280, 162 A. D. 21; Schlesinger v. Gilhooly (1907), 189 N. Y. 1, 91 N. E. 619; Hor- \vitz V. Wollowitz (1908), 59 Misc. 520, 110 N. Y. Supp. 972; Munnich v. Jaffe, 149 N. Y. Supp. 338, 164 A. D. 30; Schlesinger v. Lehmaier (1908), 191 N. Y. 69, 83 N. E. 657, 16 L. R. A. (N. S.) 626, 123 Am. St. 591 ; Ward V. City Tr. Co. (1908), 192 N. Y. 61, 84 N. E. 585; Packard v. Figlinolo (1909), 114 N. Y. Supp. 753; Klar v. Kostuk (1909), 119 N. Y. Supp. 683, 65 Misc. Rep. 199; Cluett v. Couture (1910), 140 A. D. 830, 125 N. Y. Supp. 813; Kennedy v. Spilks (1911). 129 N. Y. Supp. 390; Broderick & Bascom Rope Co. v. McGrath (1913). 142 N. Y. Supp. 496, 81 Misc. 222; Crusins v. Siegman. 142 N. Y. Supp. 348, 81 Misc. Rep. 357 (usury); Lang v. Hudgens (1913), 143 N. Y. Supp. 763, 82 Misc. 388; Waxberg v. Stappler (1913), 83 Misc. 78, 144 N. Y. Supp. 608; Zivendling v. Kitrosser (1914), 148 N. Y. Supp. 99; Interboro Brewing Co. v. Doyle (1915). 151 N. Y. Supp. 325; Olser Co. v. Behrend, 151 N. Y. Supp. 873, 89 Misc. Rep. 391; Kass v. Maisel (1915). 155 N. Y. Supp. 217; Title Guar. & Tr. Co. v. Pam (1915). 155 N. Y. Supp. 333; Siegel V. Kovinskv (1916). 157 N. Y. Supp. 340; Empire Trust Co. v. President and Directors Manhattan Co. (1917), 162 N. Y. Supp. 629; Aetna Explosives Co. v. Bassick (1917), 163 N. Y. Supp. 917; Garone v. Russo lodice Realty Co. (1917), 164 N. Y. Supp. 135 Saline v. Paine. 151 N. Y. Supp. 735. 166 A. D. 93; affirmed 223 N. Y. 401, 119 N. E. 849; Kennedy v. Heyman, 167 N. Y. Supp. 311; Vogel v. Pyne, 189 N. Y. Supp, 285. North Carolina. — Johnston Co. Sav. Bk. v. Chase (1909), 151 N. Car. 108; Hardy v. Mitchell (1911). 156 N. Car. 76, 72 S. E. 95, 161 N. Car. 351; Merchants Nat. Bk. of Indianapolis v. Branson (1914), 81 S. E. 410; A. B. Hunter & Co. v. Sherron (1918), 97 S. E. 5. North Dakota.— Dr'm\t Nat. Bk. of Pukwana v. Brule Nat. Bk. of Chamberlain (1917), 161 N. W. 616. Tenncssee.—Watanga Co. Bk. v. McQueen (1914), 170 S. W. 1025; First Nat. Bank of Murfreesboro v. First Nat. Bank of Nashville, 154 S. W. 965; Ahrens & Ott Co. v. Moore & Sons (1915), 174 S. W. 270; First Nat. Bk. v. Sanford, 228 S. W. 650. Washington.— 1ilt\soi\ v. Nelson Bennett Co. (1903), 31 Wash. 116, 71 Pac. 749; Wadhams v. Portland V. & Y. R. Co. (1905), 37 Wash. 86, 79 Pac. 597; Seattle Shoe Co. v. Packard (1906), 43 Wash. 527, 86 Pac. 845, 117 Am. St. 1064; Skeets v. Coast Coal Co. (1913), 74 Wash. 327, 133 Pac. 433; Plaza Farmer's Union Warehouse & Elevator Co. v. Ryan (1914), 78 Wash. 124, 138 Pac. 651. Virginia.— B. & O. R. R. Co. v. First Nat. Bk. (1904), 102 Va. 753, 47 S. E. 837. United 5"/af^j.— Barnsdall v. Waltemeyer, 142 Fed. Rep. 415, 20 N. M. 185, 147 Pac. 460; First Nat. Bk. of Dimn, N. C, v. First Nat. Bk. of Massilon, Ohio (1913), 210 Fed. 542; John A. Schmitt's Sons v. Shadrach (1918), 251 Fed. 874. §§ 133-134 ACCEPTANCE OF BILLS. 649 § 133. Holder entitled to acceptance on face of bill. The holder of a bill presenting the same for acceptance may require that the acceptance be written on the bill, and if such request is refused, may treat the bill as dishonored.*' ** See text, § 7Z. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Bill payable at fixed time may be presented for acceptance at any time. National Park Bank v. Saitta, 127 App. Div. 624, 111 N. Y. Supp. 927. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Nebraska. — Swenson Co. v. Commercial State Bk. (1915), 154 N. W. 233. New York.— Nsit. Park Bk. v. Saitta (1908), 127 A. D. 624, 111 N. Y. Supp. 927. Oklahoma. — First Nat. Bk. of Tulsa v. Muskogee Pipe Line Co. (1914), 139 Pac. 1136. § 134. Acceptance by separate instrument. Where an ac- ceptance is written on a paper other than the bill itself, it does not bind the acceptor except in favor of a person to whom it is shown and who, on the faith thereof, receives the bill for value.*' *" See text, §82. In Illinois and South Dakota the following words, "to whom it is shown and," are omitted. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Acceptance on paper other than bill. Iowa State Sav. Bank of Fair- field V. City Nat. Bank of Tipton, — Iowa — , 168 N. W. 148. Letter as accommodation acceptance stating that acceptor was not to pay the draft was not acceptance. Lehnhard v. Sedway, 160 Mo. App. 83, 141 S. W. 430. Defendant answered plaintifif's wire "Will pay M's draft on me, two- fifty for horses," and was liable thereon. State Bank v. Bradstreet, 89 Neb. 186, 130 N. W. 1038, 38 L. R. A. 747. President has no authority to bind bank on past-dated checks. Swen- son Bros. V. Commercial State Bank, 98 Neb. 702, 154 N. W. 233. Bank's telegram that draft "is good" is not acceptance. Colcord v. Banco der Tamaulipes, 181 App. Div. 295, 168 N. Y. Supp. 710. 650 NEGOTIABLE INSTRUMENTS. § 135 Drawee's letter of acceptance of draft is not valid as to anyone who did not see it. Jones v. Clumpier, 119 Va. 143, 89 S. E. 232. Before taking checks payee telegraphed bank to see if checks would be paid. Bank replied "checks will undoubtedly be taken care of" and was held to have accepted them. First Nat Bk. of Dunn v. First Nat. Bk. of Massilon, 210 Fed. 542. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Arkansas.— First Nat. Bk. of Tulsa v. Muskogee Pipe Line Co. (1914), 139 Pac. 1136. lotm.—Wdh v. Western Un. Tel. Co. (1910), 123 N. W. 371; Iowa State Sav. Bank of Fairfield v. City Nat. Bank of Tipton, 168 N. W. 148. Kentucky.—Se\msi Sav. Bk. v. Webster County Bk. (1919). 206 S. W. 870. ikf moim.—Lehnhard v. Sedway (1911), 160 AIo. App. 83, 141 S. W. 430. Nebraska—State Bk. of Beaver Co. v. Bradstreet (1911), 89 Neb. 186, 130 N. W. 1038, 38 L. R. A. 747; Swenson Bros. v. Commercial State Bank, 98 Neb. 702, 154 N. W. 233. New York.— Colcord v. Banco der Tamaulipes, 168 N. Y. Supp. 710, 181 A. D. 295. Oklahoma.— First Nat. Bk. v. Muskogee Pipe Line Co. (1914), 139 Pac. 1136. Virginia.— ]arr\es v. Clumpier (1916), 119 Va. 143, 89 S. E. 232. United States.— BarnsdaW v. Waltemayer (1905), 142 Fed. 415, 73 C. C. A. 515; First Nat. Bk. of Dunn, N. C. v. First Nat. &k. of Massil- on, Ohio (1913), 210 Fed. 542. §135. Promise to accept; when equivalent to acceptance. An unconditional promise in writing to accept a bill before it is drawn is deemed an actual acceptance in favor of every person who, upon the faith thereof, receives the bill for value.'- '^ See text, § 82. The Illinois Act inserts the words "or after" following the word "be- fore." * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states: Telegraphic communication as to future acceptance of certain sum on a certain signature. Iowa State Sav. Bank of Fairfield v. City Nat. Bank of Tipton, — Iowa. — , 168 N. W. 148. Defendants not liable on orders because of oral promise to pay them. Nagle v. Richards, 134 App. Div. 25, 118 N. Y. Supp. 53. § 136 ACCEPTANCE OF BILLS. 651 Collateral written promise to accept bill upon condition is not accept- ance. MuUer v. Kling, 149 App. Div. 176, 133 N. Y. Supp. 614, 209 N. Y. 239, 108 N. E. 138. Letter suggesting that agent draw on principal occasionally is not ac- ceptance Bank of Morgantown v. Hay, 143 N. C. 326, 55 S. E. 811. Telegraphed authority to draw on defendant which was attached to draft and induced bank to cash draft was acceptance. First Nat. Bank of Tulsa V. Muskogee Pine Line Co., 40 Okla. 603, 139 Pac. 1136, L. R. A. 1916B, 1021. Acceptance must be in writing. First Nat. Bank v. Sanford, — Tex. Civ. App. — , 228 S. W. 650. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : ZoTOO.— Wells V. Western Union Tel. Co .(1910), 123 N. W. 371; Iowa State Bk. of Fairfield v. City Nat. Bk. of Tipton (1918), 168 N. W. 148. Missouri.— Ensign v. Clark Bros. Co. (1917), 193 S. W. 961. New York.— Nagle v. Richards (1909), 134 A. D. 25, 118 N .Y. Supp. 53; Muller v. Kling (1912), 133 N. Y. Supp. 614, 149 A. D. 176, 239 N. Y. 239, 108 N. E. 138; Lemon Importing Co. v. Garfield Sav. Bk. (1919), 173 N. Y. Supp. 55. North Carolina.— Bk. of Morgantown v. Hay (1906), 143 N. Car. 326, 55 S. E. 811. Oklahoma.— First Nat. Bank of Tulsa v. Muskogee Pipe Line Co., 40 Okla. 603, 139 Pac. 1136, L. R. A. 1916B, 1021. Texas.— First Nat. Bank v. Sanford, 228 S. W. 650. United States.— BarnsdaW v. Waltemayer (1905), 142 Fed. 415, 75 C. C. A. 515. § 136. Time allowed drawee to accept. The drawee is allowed twenty-four hours after presentment in which to decide whether or not he will accept the bill ; but the acceptance, if given, dates as of the day of presentation.*- ** See text, §90. * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Bank stamped a note paid and rendered itself liable thereon. Nine- teenth Ward Bank v. First Nat. Bank, 184 Mass. 49, 67 N. E. 670. Drawee bank after marking check paid charging depositor's account and crediting the account of the holder cannot change its entries and cancel the paid mark on check. Consolidated Nat. Bank v. First Nat. Bank, 129 N. Y. App. Div. 538, 114 N. Y. Supp. 308, affirmed 199 N. Y. 516. f9a:\ 652 NEGOTIABLE INSTRUMENTS. § 137 Mingling checks and drafts with bank property and forwarding check for amount makes bank owner of checks and drafts sent for collection. German Nat. Bank v. Carnegie Trust Co., 172 App. Div. 158, 158 N. Y. Supp. 222. Charging drawer's account with a check is a paj'ment and entitles payee to the amount. First Nat. Bank v. Nat. Park Bank, 110 Misc. Rep. 31., 165 N. Y. Supp. 15. Where drawee bank merely stamped check paid and neither made de- livery or gave notification it did not make acceptance. First Nat. Bank of Murfreesboro v. First Nat. Bank of Nashville, 127 Tenn. 205, 154 S. W. 965. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Massachusetts. — Nineteenth Ward Bank v. First Nat. Bank, 184 Mass. 49, 67 N. E. 670. New For/c— Consolidated Nat. Bank v. First Nat. Bank, 129 N. Y. App. Div. 538, 114 N. Y. Supp. 308, affirmed 199 N. Y. 516; First Nat. Bank v. Nat. Park Bank, 165 N. Y. Supp. 15, 110 Misc. Rep. 31; German Nat Bank v. Carnegie Trust Co., 158 N. Y. Supp. 222, 172 App. Div. 158. Tennessee. — First Nat. Bk. of Murfreesboro v. First Nat. Bk. of Nashville (1913), 127 Tenn. 205, 154 S. W. 965. § 137. Liability of drawee retaining or destroying bill. Where a drawee to whom a bill is delivered for acceptance de- stroys the same, or refuses within twenty-four hours after such delivery, or within such other period as the holder may allow, to return the bill accepted or non-accepted to the holder, he will be deemed to have accepted the same.*' ^^ See text, § 85. Illinois and South Dakota omit this section. In Pennsylvania the following proviso has been added: "Provided, that the mere retention of such bill by the drawer, unless its return has been demanded, will not amount to an acceptance ; and provided further that this section shall not apply to checks." The Wisconsin act adds: "Mere retention of the bill is not accept- ance." * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Retention as acceptance. St. Louis & S. W. Ry. Co. v. James, 78 Ark. 490, 95 S. W. 804. Accidental destruction not acceptance, but question of purpose of de- struction for jury. Bailey & Co. v. S. W. Veneer Co., 126 Ark. 257, 190 S. W. 430. § 138 ACCEPTANCE OF BILLS. 653 Bank liable as acceptor where it paid the check upon forged in- dorsement of payee's name. Chamberlain Metal, Etc., Co. v. Bank of Pleasanton, 98 Kan. 611, 160 Pac. 1138. Retention not acceptance. Dickinson v. Marsh, 57 Mo. App. 566. Mere retention not acceptance. Matteson v. Moulton, 79 N. Y. 627. Failure to return bill as acceptance. Standard Trust Co. v. Commer- cial Nat. Bank, 166 N. C. 112, 81 S. E. 1074. Delivery of check by bank to notary public does not relieve drawee from liability Provident S. & B. Co. v. First Nat. Bank. Zl Pa. Super. Ct. 17. Failure to return bill within 24 hours is acceptance. Wisncr v. First Nat. Bank, 220 Pa. 21, 68 Atl. 955, 17 L. R. A. (N. S.) 1266. Payment by drawee bank is not acceptance. Union Nat. Bank v. Franklin Nat. Bank, 249 Pa. 375, 94 Atl. 1080. Presentment for payment or acceptance not distinguished. People's Nat. Bank v. Swift, 134 Tenn. 175. 183 S. W. 725. Mere retention of bill is not acceptance without destruction or refusal to return. Westberg v. Chicago Lumber Co., 117 Wis. 589, 94 N. W. 572. Presentment for payment is not delivery for acceptance within this section. First Nat. Bank of Omaha v. Whitmore, 177 Fed. Rep. 397, 101 C. C. A. 401. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Arltayisas.—V>7a\ty & Co. v. Southwestern Veneer Co. (1919), 126 Ark. 257, 190 S. W. 430; St. Louis & S. W. Ry. Co. v. James, 78 Ark. 490, 95 S. W. 804. Kansas. — Chamberlain Metal, Etc., Co. v. Bank of Pleasanton, 98 Kan. 611, 160 Pac. 1138. Missouri. — Dickinson v. Marsh, 57 Mo. App. 566. New For^.— Matteson v. Moulton, 79 N. Y. 627; State Bk. v. Weiss (1904), 46 Misc. 93. 91 N. Y. Supp. 276; Foley v. N. Y. Sav. Bk. (1913), 139 N. Y. Supp. 915. North Carolina. — Standard Trust Co. v. Commercial Nat. Bank, 166 N. Car. 112, 81 S. E. 1074. Pennsylvania.— Wisner v. First Nat. Bk. of Gallitzin (1908), 220 Pa. 21, 68 Ati. 955, 17 L. R. A. (N. S.) 1266; Providence Securities & Bank- ing Co. v. First Nat. Bk. of Gallitzin (1908). 37 Pa. Super Ct. 17; Union Nat. Bank v. Franklin Nat. Bank, 249 Pa. 375, 94 Atl. 1080. Tennessee.— Veovle's Nat. Bk. v. Swift, 134 Tenn. 175, 183 S. W. 725. Wisconsin.— Westherg v. Chicago Lumber Co. (1903), 117 Wis. 589, 94 N. W. 572. United States.— First Nat. Bk. of Omaha v. Whitmore (1910), 177 Fed. Rep. 397, 101 C. C. A. 401. § 138. Acceptance of incomplete bill. A bill may be ac- cepted before it has been signed by the drawer, or while other- 654 NEGOTIABLE INSTRUMENTS. §§ 139-141 wise incomplete, or when it is overdue, or after it has been dis- honored 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.*' ** See text, § 11. Cross sections : See Sec. 14. In South Dakota there is probably a clerical error by inserting the word "payable" between the word "bill" and the word "accepted." * Digest of some of the decisions in which this section is con- strued arranged alphabetically by states: Acceptance before name of drawer is filled in. Stafford v. Hill, — Cal. App. — , 200 Pac. 33. *^ The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed : Co7^orj«"a.— Stafford v. Hill (Cal. App.), 200 Pac. ZZ. § 139. Kinds of acceptance. An acceptance is either gen- eral or qualified. A general acceptance assents without qualifica- tion to the order of the drawer. A qualified acceptance in express terms varies the effect of the bill as drawn. See text, §§ 78, 79. § 140. What constitutes a general acceptance. An accept- ance 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. See text, §79. § 141. Qualified acceptance. An acceptance is qualified, 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 ; § 142 ACCEPTANCE OF BILLS. 655 3. Local, that is to say, an acceptance to pay only at a par- ticular place ; 4. Qualified as to time ; 5. The acceptance of some one or more of the drawees, but not of all.*' ^^ See text, §80. Cross section : See Sec. 140. ^ Digest of some of the decisions in which this section is con- strued arranged alphabetically by states: Acceptance depending on happening of a certain condition is condi- tional. Milwaukee Corrugating Co. v. Traylor, 95 Kan. 562, 148 Pac. 653. Acceptance is conditional when dependent on fulfillment of conditions therein stated. Crane Co. v. Druid Realty Co., — Md. — , 112 Atl. 621. Telegram, "Will honor your draft, telegram attached," is uncondi- tional acceptance although another telegram intended to be attached. En- sign V. Clark Cutlery Co., 195 Mo. App. 584. 193 S. W. 961. "Will pay M's draft on me for two-fifty for horses" is uncondi- tional acceptance. State Bank of Beaver Co. v. Bradstreet, 89 Neb. 186, 130 N. W. 1038, 38 L. R. A. (N. S.) 747. ** The following is a complete list of the cases, arranged alpha- betically by states, where this section has been construed: ivcH^fa^.— Milwaukee, Carrington Co. v. Taylor (1915), 148 Pac. 653. Maryland.— Crane Co. v. Druid Realty Co., 112 Atl. 621. Nebraska— Staie Bank of Beaver Co. v. Bradstreet, 89 Neb. 186, 130 N. W. 1038, 38 L. R. A. (N. S.) 747. § 142. 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 dis- honored by non-acceptance. Where a qualified acceptance is taken, the drawer and indorsers are discharged from liability on the bill, unless they have expressly or impliedly authorized the holder to take a qualified acceptance, or subsequently assent thereto. "Vl^en 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.*' ** See text, §§ 121, 75. 656 NEGOTIABLE INSTRUMENTS. § 142 ^ Digest of some of the decisions in which this section is con- strued arranged alphabetically by states : Payee taking conditional acceptance without notice thereof to drawer discharged the latter. Lewis Hubbard & Co. v. Morton, 80 W. Va. 137, 92 S. E. 252. *'The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed: West Virginia.— Lewis Hubbard & Co. v. Morton (1917), 92 S. E. 252. ARTICLE XI. PRESENTMENT OF BILLS OF EXCHANGE FOR ACCEPTANCE. § 143. When presentment for ac- ceptance must be made. 144. When failure to present re- leases drawer and indorser. 145. Presentment ; how made. 146. On what days presentment may be made. § 147. Presentment ; where time is insufficient. 148. When presentment is ex- cused. 149. When dishonored by non- acceptance. 150. Duty of holder where bill not accepted. 151. Rights of holder where bill not accepted. Sections 143 to 151 above are the sections used by the commissioners. See table of corresponding sections of the Law in the various states and territories beginning on page 360. § 143. 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.*" See text, §§151. 88. Cross section : 147. Corresponding provision of the English Bills of Exchange Act; Sec. 39 (2) (3). *■ The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed: Alabama.— UaW v. First Bk. of Crosville (1916), 72 So. 171 657 658 NEGOTIABLE INSTRUMENTS. §§ 144-145 Colorado.— Vzn Buskirk v. State Bk. of Rocky Ford (1905), 35 Colo. 142, 83 Pac. 778, 117 Am. St. 182. /Winow.— Simonoff v. Granite City Nat. Bk. (1917), 116 N. E. 636. New York.— Gordon v. Benquist (1916), 159 N. Y. Supp. 1; Cham- pion Shoe Machine Co. v. Landin (1917), 162 N. Y. Supp. 346. United States.— First Nat. Bk. of Omaha v. Whitmore (1910), 177 Fed. Rep. 397, 101 C. C. A. 401. § 144. When failure to present releases drawer and in- dorser. Except as herein otherwise provided, the holder of a bill which is required by the next preceding section to be pre- sented for acceptance must either present it for acceptance or negotiate it within a reasonable time. If he fails to do so, the drawer and all indorsers are discharged.** See text, § 153. Cross section : 193. Corresponding provision of the English Bills of Exchange Act: Sec. 40 (1). i»The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed: Illinois.— Simonofi v. Granite City Nat. Bk. (1917), 116 N. E. 636. Kentucky.-Emns v. Cit. Nat. Bk. (1915), 172 S. W. 955. § 145. Presentment; how made. Presentment for accept- ance must be made by or on behalf of the holder at a reasonable hour on a business day, and before the bill is overdue, to the drawee or some person authorized to accept or refuse acceptance on his behalf ; and 1. Where a bill is addressed to two or more drawees who are not partners, presentment must be made to them all, unless one has authority to accept or refuse acceptance for all, in which case presentment may be made to him only ; 2. 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 cred- itors, presentment may be made to him or to his trustees or as- signee. §§ 146-147 PRESENTMENT FOR ACCEPTANCE. 659 See text, §§ 89, 90. Cross sections: 141, Subd. 5; 148, Subd. 1. Corresponding provision of the English Bills of Exchange Act : Sec. 41 (1) (a), 41 (1) (b), 41 (1) (c), 41 (1) (d). Erroneous engrossing omitted the word "his" before the word "be- half" in New York Act. § 146. On what days presentment may be made. A bill may be presented for acceptance on any da}- on which negotia- ble instruments may be presented for payment under the pro- visions of sections 132 and 145 of this act. When Saturday is not otherwise a holiday, presentment for acceptance may be made before twelve o'clock noon on that day.^ ■'■* See text, § 153. Arizona statute omits the last sentence. Kentucky omits the last sentence of this section. The sections above were referred to as sections 72 and 85 by mis- take in the original New York act. In North Carolina the word "otherwise" is omitted after the words "when Saturday is not," and a second section in the amenditory act is added in the following words : "There shall be no difference between Saturday and any other secular or business day, as far as negotiable instruments are concerned." The Wisconsin act (Sec. 1681-3) omits the last sentence, while the Colorado act (Sec. 146) substitutes for the last sentence the following: "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." Corresponding provision of the English Bills of Exchange Act : Sec. 92. § 147. 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 tlie bill foi ac- ceptance before presenting it for payment on the day tliat it falls due, the delay caused by presenting the bill for acceptance be- fore presenting it for payment is excused and does not discharge the drawers and indorsers.-^* See text. § 15". Cross section : 143. Corresponding provision of the English Bills of Exchange Act: Sec. 39 (4). 660 NEGOTIABLE INSTRUMENTS. §§148-149 ** The following is a complete list of the cases, arranged alphabetically by states, where this section has been construed: New Foryfe.— Baldwins Bk. of Pen Yan v. Smith (1915), 215 N. Y. 76, 109 N. E. 138. § 148. Where presentment excused. Presentment for ac- ceptance 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 fic- titious person or a person not having capacity to contract by bill: 2. Where after the exercise of reasonable diligence, present- ment cannot be made; 3. Where although presentment has been irregular, accept- ance has been refused on some other ground.** See text, § 92. Cross section : 145, Subd. 2. Corresponding provisions of the English Bills of Exchange Act : Sec. 41 (2) (a), 41 (2) (b), 41 (2) (c). *' The following is a complete 1 ist of the cases, arranged alphabetically by states, where this section has been construed: Arkansas.— ]&gg 36. Oklahoma Yes No No No Next succeeding day 6 10 Forfeiture of double Inter- est 37. Oregon Yes No No No Next succeeding day 6 10 Forfeiture of principal »nd Interest 38. PennB.vlvanla Yes No No No Next succeeding day 6 6 Forfeiture of excess Interest 39. 40. Rhode Island S. Carolina Yes Yes Yes No No No No No Next succeeding day 6 Next succeeding day 7 No limit 8 Forfeiture of contract Forfeiture of Interest. Twice amount of interest paid may ba recovered by debtor 41. S. Dakota Yes No No No Next succeeding day 7 12 Forfeiture of Interest Mis- demeanor 42. 43. Tennessee Texas Yes Yes No No No No No No Next succeeding day 6 Preceding day 6 6 10 Forfeiture of exceBS Inter- est Forfeiture of all interest Double amount of inter- est paid recoverable 11 Utah Yes No No No Next succeeding day 8 12 Forfeiture of principle and interest "-. Vermont Yes No No No Next succeeding day 6 6 Forfeiture of eoccess interest ,.,- Virginia Yes No No No Next succeeding day 6 6 Forfeiture of all Interest 17 Washington Yes No No No Next succeeding day 6 12 Forfeiture of accrued In- terest. Twice amount paid recoverable •13 West Virginia Yes No No No Next succeeding day 6 6 Forfeiture of excess inter- est 43 Wisconsin Yes No No No Next succeeding day 6 10 Forfeiture of all Interest. Treble paid recoverable. jO . Wyoming Yes No Nc No Nest succeeding day 8 12 Forfeiture of all Interest •Yes If stipulated, but no If not. 710 NEGOTIABLE INSTRUMENTS. TABLE II. Table showing by states and territories the period of the Statute of Limitations on Notes and also on Judgments in Courts of Record; showing whether or not Agreements to Pay Attorney's Fees in case of Default are Enforcible and whether or not such agreements render notes non-negotiable ; showing also whether or not Judgment Notes are used; setting out whether the Contracts of a Married Woman in business are enforcible at law as they would be if she were unmarried ; and also setting out the Jurisdiction of Justices of the Peace as to Amount on Negotiable Instruments. I APPENDIX A. 711 % f i s h- 2 1 . P. 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J3 s R S S 3 § s Z z z z >^ z z ^• 00 c> O -i TJ m mJ in § § o i •DO o o ^•-s rt oi o o o o '='5' = g S « 2 Ol o o »-< s O 3 o ««- -:^ w* «» «/> v> • ^B. -^ •<» «*■ «» «» v* X c^ ^•^ ^ f- _-3 i k^ 1 1 1 a § Sou OS'S S § .a 1- ■So ■3 II 1 g =0 I* Jl 3 '^ s S 3 CD O 5g| s s .=3 s IK ^ 8 S o S •2I «5 8 s 2 0) (H ^ >l tS •<< >-l w (M (H »5 (« t" PH s- tH >< 5" i| h c«^ ct ^ '^ iS C-.2 ^11 "" *■ c o o !S e e O o o o o e 5 5 o o o o oa ^. Z iS ?; 55 55 Z Z Z ?: ?; ?: z z ^; ?< 55 'it (fl-TJ 1 C-= " « ill? ^.2^ g ,^sg *" "".2 o " p».5 O o 2 S'^S-SS s s o 8 S S S o s-S o ^ s M a ^ ^: JH ^^ >^ >< J" '^ >H JH ^ JH 55 >• 55 H >< ^^ O I tt I c ■o .l,'^ ^ igfe£.2 ^ o e i d ■a ^ ■^ ^^ >■ p^ >i 5^ 2 S ii o •^ g 2 S « 00 S'a- n" .^" S <:p S ;i ;; O o C S rt 8> o •a 2 3 « M 3 „• «i c |S » U3 in » to o «D g » " > 1 1 js ^ ^ lO aj fj 00 o> o -h' N CO ^* in o* J^ od oi o* n OT CO « CO ^ ^ ^}< ««t ^ ■*f ^ ^ ^' ** lO APPENDIX B. Digest of Law in Georgia where Negotiable Instruments Law not adopted. Below is given a brief digest of some of the requirements as to negotiable instruments in the State of Georgia which is the only state where the Negotiable Instruments Law has not been adopted. The citations to statutes are to sections of Park's Annotated Code of 1914. A promissory note is a written promise made by one or more to pay to another, or order, or bearer, a specified amount of money, or other article of value. If the payment is in articles other than money, and is not punctually made, the holder may recover to value of such articles at the time the note was due, at the place where it was payable, if a specified place is men- tioned, or at the place where it was made, with lawful interest. Sec. 4270. Days of grace are abolished as to all notes dated on or after October 1, 1913. Sec. 4272. Promissory notes are negotiable by indorsement if payable to order, or by transfer if payable to bearer, but the maker may restrain negotiability. Sec. 4273. No indorsement need be under seal. ^ Sec. 4274. Indorser's liability may be limited by express provision. Sec. 4275. Transfer, of notes secured by mortgage transfers mortgage benefit. Sec. 4276. Transferrer warrants that he is lawful holder, and has a right to sell and that instrument is genuine and that he has no knowl- edge that instrument is worthless. Sec. 4277. Acceptances may be conditioned or payable from designated funds, and the acceptor has lien on drawer's funds or property held by him. Sec. 4278. 714 APPENDIX B. 715 Indorsers are liable if original parties do not pay. Sec. 4279. Notice of non-payment and protest must be given to indorsers within reasonable time but it shall not be necessary to protest in order to bind indorsers, except in the following cases : 1. When a paper is made payable on its face at a bank or banker's ofifice. 2. When it is discounted at a bank or banker's office. 3. When it is left at a bank or banker's offiice for collection. Sec. 4280. Five per cent on principal may be collected as damages on protested note payable out of the state and within United States and ten per cent if without the limits of United States. Sec. 4281-2. Indorsers may be sued in same action with the maker, drawer or acceptor. Sec. 4283. All bills, checks, notes and other evidences of debt maturing or by their terms presentable for acceptance or payment on Sun- day or a public holiday, shall be due or presented on the next business day thereafter. Sec. 4285. Bona fide holder for value of negotiable instrument who re- ceives same before due and without notice of defect or defense is protected from all defenses by maker except, non est factum, gambling, immoral and illegal consideration or fraud in its pro- curement. Sec. 4286. Holder receiving negotiable instrument after due is charged with notice of dishonor and takes subject to equities of original parties. Sec. 4287. Holder is presumed to be bona fide and for value, but if either fact is negatived by proof all defenses are opened. Sec. 4288. Note held as collateral for debt is held as by purchaser. Sec. 4289. Holder's title cannot be inquired into unless for defendant's protection. Sec. 4290. Circumstances which would place a prudent man upon his guard in purchasing negotiable paper are sufficient notice before due. Dec. 4291. Negotiable instruments payable upon demand are due im- mediately, but where time for payment not fixed they are due as soon as presented and accepted. Sec. 4292 716 NEGOTIABLE INSTRUMENTS. All promissory notes, contracts or other evidences of debt, taken by any person, agent company or corporation, for the purchase price of any patent, copy, or property, right or terri- tory for the sale of any such right, or for the sale of any patented or copyrighted article or thing, or where there is a proprietary ownership or right, sold through or by any peddler, agent or traveling salesman, traveling for the purpose of making such sales, shall have expressed on the face of such note, contract or other evidence of debt the consideration of the same, stating the thing or article for which given, and such consideration so expressed shall entitle maker to all equities between original parties as against any holder. This does not apply to merchants or manufacturers selling and delivering directly from their stores. Sees. 4293 and 4294. All promissory notes, contracts, or other evidences of debt, taken by any person, company or corporation, agent or pro- moter for the purchase price of any gold or silver mining, oil well or insurance stock, or any other stock in any incorporated company, domestic or foreign and sold by any peddler, agent or traveling salesman or promoter, traveling for the purpose of making sales, shall have expressed on the face of same the con- sideration, stating for what same was given, and such consid- eration so expressed shall be notice to all holders and entitle maker to all defenses. This does not apply to sales after the original purchase price has been paid and certificates of stcok have been issued. Sees. 4294a and 4294b. Obligations to pay attorney's fees are void and not enforce- able unless the debtor shall fail to pay such debt on or before the return day of the court to which suit is brought for collection of same ; provided the holder of the obligation sued upon, his agent or attorney notifies the defendant in writing ten days be- fore suit of his intention to sue and the term of court to which it will be brought. Sec. 4252. Certification of any check, draft, or order upon the bank is made a misdemeanor unless the drawer has the funds in bank and renders the check, draft or order a valid obligation against the bank. Sec. 2301. All liquidated demands, where by agreement or otherwise, the sum to be paid is fixed or certain, bear interest from the time the party is liable and bound to pay them ; if payable on demand, from the time of the demand. In case of promissory notes pay- able on demand the law presumes a demand instantly and gives interest from date. Sec. 3434. APPENDIX B. 717 The reserving, charging or taking of a rate of interest greater than eight per centum per annum, either directly or indirectly, by way of commission for advances, discount, exchange or by any contract, contrivance or device w^hatever is unlawful anci the ex- ce,ss is forfeited. Sees. 3436, 3438. All actions upon promissory notes, bills of exchange or other simple contracts in writing shall be brought within six years after the same become due and payable. Sec. 4361. All notarial acts may be proved by notary's certificate under hand and seal providing it is filed in the court at its first term, and permitted there to remain until the trial. Sec. 5822. Written acceptance of draft will be treated as an assign- ment pro tanto of funds of the drawer in the hands of acceptor. Sec. 3654. An accommodation indorser is considered merely as a surety. Sec. 3541. A guaranty or an accommodation indorsement is not within legitimate business of ordinary partnerships. Sec. 3541. In Georgia there are decisions holding an irregular or anomal- ous indorser to be an indorser ;* prima facie a second indorser ;^ maker ;^ and surety.^ The reason for this conflict is that the intent governs and parol evidence is admissible to show the in- tent of the parties in the irregular indorsement.® Blank indorsements of negotiable paper may always be ex- plained between the parties themselves, or those taking, with notice of dishonor, or of the actual facts of such indorsements.* Signing by the drawee across the face of a draft without the word "accepted" is a good acceptance.^ 1 Collins V. Everett, 4 Ga. 266. aNeal v. Wilson, 79 Ga. 736, 5 S. E. 54. 3 Hardy v. White, 60 Ga. 454; Quinn v. Sterne, 26 Ga. 223; 71 Am. Dec. 204. 4Rixley V. Hightower, 112 Ga. 476, 37 S. E. 12,?, ; Eppens v. Forbes, 82 Ga. 748, 9 S. E. 72Z; Camp v. Simmons, 62 Ga. 7Z (unless indorsed by payee). SNeal v. Wilson, 79 Ga. 726, 5 S. E. 54; Hardy v. White, 60 Ga. 454. ® Lynch v. Goldsmith, 64 Ga. 62; can be explained. 718 NEGOTIABLE INSTRUMENTS. In case a blank has been filled in with an amount greater than that authorized by the maker, a holder who knew that the authorized limit had been exceeded may recover from the maker the amount actually authorized, the note being void as to the excess only7 ''Cower V. Wynn, 59 Ga. 246; Moody v. Threlkeld, 13 Ga. 55, bona fide purchaser protected. 8 Such complied with the statute. Fowler v. Gate City Natl. Bank, 88 Ga. 29, 13 S. E. 831. INDEX [references are to pages.] ABBREVIATIONS— use of 52, 660. ABSCONDING— as excuse for presentment, 100, 660. of drawee, effect on presentment for acceptance, 100, 660. ABSENCE— effect on notice of dishonor, 199, 604. from home of maker or acceptor, as excuse for non-presentment, etc., 189. of consideration, 81, 179, 444, 446. of words implying power to negotiate, 119. ABSOLUTE INDORSEMENT, 117. ACCELERATION PROVISIONS, purchaser after event which acceler- ates, 386, 489. (See Chattel Note; Collateral Securities; Install- ments; Time, Certainty of.) ACCEPTANCE, see also Acceptance for Honor; Acceptance Supra Protest; Acceptor; Acceptor Supra Protest; Bills gf Exchange; Presentment for Acceptance; Trade Acceptances. absolute and conditional acceptances, 92, 654. after maturity or dishonor, 101. antecedent promise of, 90, 94. applies only to bills of exchange, 86. before completion of bill, 88. by destruction or detention of bill, 96. by one of a partnership, 98. by part of drawees, 92, 98. by refusal to return bill, 96. by separate instrument, 93, 649. by stranger to instrument, 101. by telegram, 89, 94. by what law governed, 88. certification check equals, 239, 684, 687. certification equivalent to, 239, 684, 687. classification of acceptances, 92. collateral or virtual, 649, 650.- completed by delivery, 91. conditional, 654, 655. conformity with terms of bill, 90. consideration, 427, 428. 719 720 INDEX. [references are to pages.] ACCEPTANCE— continued- conditional promise to accept, 93, 650. date of, 100. dates from delivery, and until then is revocable, 91. defined, 85, 86, 87, 646, 695. definition and effect, 85, 646. delivery necessary, 63, 91. delivery to notary for protest does not negative, 653. destruction of bill, 96, 652. detention of bill, 96, 652. dishonor by refusal, 91, 660. dravi^ee has twenty-four hours within which to accept or refuse, 96, 100, 651. drawee not bound until, 86. drawee not liable before, 86. drawee or his authorized agent may, 99. duty and rights of holder, 186, 661. effect of delay of mail on presentment, 99, effect of, oral promise to accept or pay, 86. entry in pass-book, 646. express, 87. express, what amouts to, 87. facts which acceptor admits, or warranties, 141. for honor, see Acceptance for Honor; Acceptance Supra Protest. form and requisites, 87. form of, parol, 95. forms of qualified, 654, 655. form ; words indicating, 93. form of, written, 88, 93. forms and varieties of, as verbal, written and implied, 88, 92. general or qualified, 92, 654. holder entitled to, on face of bill, 87, 649. how made, on bill, writing required, 87, 649. immaterial departures from tenor of bill, 90. implied by retention, 96. from conduct, 96. what will amount to, 96. in what name, 87. is new contract, 90. kinds of, 92, 654. law governing, 95. liability for retention or destruction, 96, 652. liability of acceptor, 89. liability of drawer before and after, 89. local, 92, 655. may be by telegram, 89. may be matie after dishonor, 91. may be on separate paper, 93, 649. may be required in writing, to be on bill, 87, 649. may be revoked before delivery, 97. meaning of term, 85, 646. rnust be in accordance with tenor of bill, 87. INDEX. 721 [references are to pages.] ACCEPTANCE— continued- must be in writing, 87, 646. must be pleaded to be in writing, 87. must be signed, 87, 646. must be for payment in money, 87, 646. nature and effect of, 89. necessity for delivery of acceptance, 91. new contract, 90. notice on nonpaj^ment by acceptor supra protest, 103. off bill of exchange on paper, other than the bill itself, 93, 649. of bills drawn in set, 97. of check, by banker, 234. of foreign bills drawn in sets, 76, 674. of incomplete bill, 91, 653. of incomplete or dishonored or overdue bill, 91, 654. on paper, other than the bill itself, 93, 649. only by drawee, 85. only necessary with bills of exchange, 86. oral, good at common law, 86. parol, 86, 92, 95. parol promise to accept, 87, 95. partial, 92, 654. place of presentment for, 100. presentment for, see Presentment for Acceptance. by whom made, 98, 184, 658. of bill of exchange, how made, 98, 658. of bill of exchange, when excused, lOO, 660. of bills in a set, 70, 674. of non-existing bill, 93, 94. on part holiday of bill of exchange, 99, 186, 658, 659. on Saturday of bill of exchange, 99, 186, 658, 659. time when made, 99, 651, 658. to dead drawee of bill of exchange, how made, 98, 658. to insolvent or bankrupt drawee, 98, 658. to partners, of bill of exchange, 98. to whom made, 98. when must be made, 97, 185, 657. when may be made, 97, 185, 657. when time is sufficient. 99. when excused, 100, 660. presumption that acceptor has funds of drawer, 87. promise to accept must be unconditional. 93, 650. promise to accept, 94, 650. promise to accept equivalent to, 94, 650. qualified, 91, 92, 654. qualified, bill of exchange, when holder may refuse, 90, 655. qualified, of bill of exchange, effect of, 91, 655. qualified, releases drawers and indorsers unless they assent to, 91, 655. qualified, rights of parties, 91. qualified, what constitutes, 654. refusal of, duty of holder, 186, 661. 722 INDEX. [references are to pages.] ACCEPTANCE— continued- refusal of, rights of holder, 186, 661. refused, notice of nonpayment not required, 203. relation of drawee to bill 1>efore and after, 86. rights of drawer and drawee after, 87, rights of parties as to, 87. signature of drawee sufficient, 88. terms of, general acceptance, 87. terms of qualified, 90, 92. time allowed for, 96, 651. time in which it may be matle, 99, 651. time of acceptance, presumption as to, 651. to pay at a particular place, 92. undertaking by drawer, that drawee has capacity to accept, 140. varieties of, 91. verbal, 88. what acceptance admits, 141. what acceptance does not admit, 141. what bills do and do not require, 86. what bills must be protested for nonacceptance, 210, 662. what bills presented for, 97, 185, 657. when acceptance may be made, 91, 653. when acceptance on separate instrument binds acceptor, 93. when date may be inserted, 402. when implied, 96, 652. when overdue, 52. 654. when retention of bill amounts to acceptance, 96, 652. when presentment for, must be made, 97, 185, 657. where drawees are joint parties or partners, 92, 98. whether delivery necessary to complete, 63, 91. whether bound without presentment, 193. while bill is incomplete, 91. while incomplete, overdue, or dishonored, 91, 654. who may accept, 98, 101, 658. writing and signature, 87, 649. written acceptance, must be pleaded, 87. ACCEPTANCE FOR HONOR, see Acceptance; Acceptance Supra Protest — • agreement of acceptor for honor, 102, 668. delay in presentment, when excused, 103, 669. for whom made, 100, 667. for part of sum, 100, 667. for different parties, 100, (i^l. how made, 100, 103, 667. how presentment for payment made to acceptor for honor, 102, 669. in general, 100, 667. liability of acceptor for honor, 100, 668. maturity of bill payable after sight, accepted for honor, 103, 669. presentment for payment, 102. protest of bill, accepted for honor, 103, 669. protest of bill, dishonored by acceptor, 100, 670. when deemed to be for drawer, 100, 668. INDEX. 723 [references are to pages.] ACCEPTANCE FOR HONOR— continued— when may be made, — when, by whom and for what sum may be made, 100. 667. when acceptance does not state for whose honor, 100. ACCEPTANCE SUPRA PROTEST, see Acceptance for Honor— when overdue, 101. ACCEPTED— written across face of bill, 87, 649. ACCEPTOR— admits authority to draw, 141, 541. admits drawee's capacity to draw, 141, 541. admits genuineness of drawee's signature, 141, 541. admits capacity of corporation to draw bill, 141, 541. admits capacity of payee to endorse, 141, 541. by acceptance become principal debtor, 89, 90. charged without presentment, 563, 564. contract of, 141, 541. estopped to deny insane payee's capacity, 30, 31. failure of consideration between him and drawer no defense against holder, 446. liable to indorsee of insane payee, 31. liability of, 541-543. liability if drunk, 31, 32. liability on bills drawn in set. 141, 541. may not set up forgery, 169. may not show that drawer is a lunatic, 31. nature of contract entered into by, 141, 541. negligence in facilitating alteration, 178. of bills in a set, 141, 541. possession by, presumption of payment, 224. subject to law of the place of acceptance, 230. supra protest, liability of, 101, 102, 103. must be made in writing, 101, 102. presentment to drawee at maturity, 101, 102. when bankrupt, protest matle for better security, 211, 212. ACCEPTOR FOR HONOR, see also Acceptor and Acceptor Supra Protest. agreement of, efifect, 102. how made, 103. liability of, 100. nature of his agreement, 102. notice on nonpayment by acceptor supra protest, 103. presentment to acceptor supra protest, 103. presentment to drawee at maturity, 103. presentment to, for payment, how made, 103. protest on nopayment by drawee, 103. steps necessary to consummate liability of, 103. steps necessary to rentier liable, 103. who may be, 101. ACCEPTOR SUPRA PROTEST, see Acceptance for Honor. 724 INDEX. [references are to pages.] ACCIDENT— as excuse for nonprcsentment, etc., 202, 203. effect of, 202, 203. parol evidence as to, 45. persons accommodated, 83, 84, 145. presentment for payment to, 189, 190. revocable until negotiated, 83, 84. successive, order in which liable, 147. to agent, 202, 203. unauthorized diversion, 145, 146. when credit given for a special purpose, 145. ACCOMMODATION, see also Accommodation Pajity; Accommodation Paper. burden of proof, 448, 449, 450. payment by an accommodation party a discharge, 216, 217. signature to satisfy demand for additional collateral consideration for, 433. what is parol evidence admissable to show, 450. ACCOMMODATION INDORSEMENT, see also Accommodation; Accommodated Party; Accommodation Paper — by bank, 145 note, irregular accommodation, 123, 124. liability of, 145, 448. lunatic, 31. presentment for payment, to, 189, 190. ACCOMMODATION INDORSER— entitled to notice of dishonor, 587. liability if irregular or anomalous, 544, 545. negligence in facilitating alterations, 633. remedies against accommodated maker, 448, 449, 450. when may retract indorsement, 84. whether personally liable, 83. ACCOMMODATION INDORSERS— discharge of 618, 619. notice of dishonor inter se, 603. notice of dishonor necessary, 587. ACCOMMODATIVE MAKER, see Accommodation Party. ACCOMMODATION PAPER, see also Accommodation; Accommoda- tion Party. concealed sureties, 272, 273. consi'deration for, 83, 146. corporation can not make or indorse, 147. definition of, 83. discounted at a different bank, 146. effect of, S3. effect of extension of time, on parties, 146, 147. effect of payment by a co-maker, 216. executeti by member of firm, 147. indorser of, entitled to notice of dishonor, 147. issued by corporations, 147. INDEX. 725 [references are to pages.] ACCOMMODATION PAPER— continued- issued by one partner without consent of all, 39, 147. liabilities and rights of parties, to, 145. liability of, 83, 145, 146, 147. making by partner, 39, 147. matters as to, 433, 435. notice of accommodation character, effect of, 83, 145, 146. nature and object, 83, 146. notes mutually exchanged are not, 84. notice of, effect of, 83, 145. of corporation, 147. overdue accommodation papers, 83, 146, 147. partners, 147. power of corporation to issue, 147. parties to, who are, 83, 145. partnership liability, 39, 147. release of, 146. what constitutes, 83. when accommodation paper has inception, as against defense of usury, 83. ACCOMMODATION PARTY, see also Accommodation; Accommoda- tion Indorsement; Accommodation Paper — accommodation maker is primarily liable, 145. corporation has no power to become, 147. defined, 145, 448. discharge of, 618, 619. discharge of by diversion of instrument, 146. knowledge of, no defense, 145. lends his credit only for time specified, 146. liability of, 145, 448, 451. may rescind bill before negotiation, 145. not entitled to notice, 201. not entitled to presentment, 188, 189. partner indorsing for accommodation, 147. payment by accommodated party a discharge, 145, 215, 615. payment by accommodation party, 216, 217. payment by accommodation acceptor or maker a discharge, 216, 217. ACCORD AND SATISFACTION, 221, 222. ACCRUAL OF ACTION, 450, 563. ACTION, see Actions on Negotiable Instruments. ACTIONS ON NEGOTIABLE INSTRUMENTS— acceptor for honor may sue, 295. agent may sue, 293. agent may sue in own name when, 296. all parties sued in one action, 300. anomalous indorser's action not on note, 299. assignees may sue, 293. by executor of holder, 293. by restrictive indorsee, 298. corporation may sue on instrument made to its officer, 297. defined, 345, 695. 726 INDEX. [references are to pages.] ACTIONS ON NEGOTIABLE INSTRUMENTS— continued— delivery constitutes transferee proper plaintiff, 295. donee may sue, 293. drawee may sue, 295. drawer may sue acceptor, 295. effect of transfer upon pending action, 299. form of action governed by lex fori, 227. heirs or personal representative may sue, 293. holder for collection may sue, when, 297. holder may elect to sue one or all, 300. holder may sue in own name, 292. holder may sue in own name and strike out subsequent indorse- ments, 294. holder of as collateral may sue, 293. holder of legal title may sue, 292. joint indorsers sued jointly, 301. maker and guarantor not to be joined in suit, 300. maker and surety may be joined as defendants, 300. maker sued in fictitious or real name, 301. not more than one suit at each term on same instrument, 301. on instruments indorsed in blank, 294. on instruments payable to bearer, 294. on instruments payable to public officials, 297. original payee or indorsee can maintain suit, 294. original holder or payee may sue when, 294. parties defendant, 300. partners must all join in suit, 299. party in interest may sue, 292. payee may strike out his own and subsequent indorsements, 295. payee may sue, 295. possessor may sue, 294. public officers as plaintiffs on instruments made in representative capacities, 297. real party in interest, 293. receivers may sue, 293. restrictive indorsement gives right to sue, 298. right to bring, 295. right to sue cannot be rebutted except, 295. separate actions against each party may be had, 301. suit against persons severally and immediately liable, 301. suit by holder for collection, 293. suit by payee who is a trustee, 296. suit on indorsement to fictitious payee, 295. suit upon note payable to one of several makers, 299. suit when instrument to party in wrong name, 295. suit where indorsement is special, 299. trustees may sue, 293. who may be joined as defendants, 302. who may be sued, 300. who may sue, in general, 292, 293. when party in neither actual or constructive possession, 298. INDEX. > 727 [references are to pages.] ACTIONS ON NEGOTIABLE INSTRUMENTS— continued— when prior party may sue subsequent one, 299. where instrument to officer without naming corporation, 297. ADDITIONAL PROVISIONS— address, notice as to correct, 601. not affecting negotiability, 56, 57, 388. ADMINISTRATORS, see also Executors— as indorser of note, 34. as maker of note, 34. presentment and notice to, 573, 596, 658. situs for purposes of appointing, 227 note. ADMISSIBILITY— of contemporaneous written agreements, 45. verbal agreements, 45. ADMISSIONS— as to transfer, 340. by acceptance, see Acceptance. by drawer, see Drawer. by indorser, see Indorser. by maker, see Maker. effect of, to change burden of proof, 331. evidence, 331. in general, 331. of acceptor for honor, see Acceptor. AFTER DATE— happening of specified event, maturity of instrument payable at a fixed period, 190, 582. maturity of instrument payable at a fixed period, 190, 582. AFTER SIGHT— maturity of instrument payable at fixed period. 190, 582. maturity of, when accepted for honor, 101, 102, 103, 669. meaning of, in bills and notes, 52, 392. AGENCY— how established, 35, 36, 37, 38, 416. how authority established, 37, 416. revocation without notice, 37. AGENT, see also Principal and Agent. acquisition by maker as agent for another, 616. agency must be disclosed, 36. as parties to negotiable instruments, 36, 37, 38. as to filling blanks, 67, 68, authority "by procuration," 37, 421. authority to certify post-dated checks, 684. authority of, how created, 37, 38. authorized in writing to sign, 37. banks as collecting agents, 120, 121. bills and notes, authority to make, 36, 37, 38. burden of proof as to authority, 423. by agents of corporations, 38. cashier or fiscal officer as payee or indorsee, 471. 728 INDEX. [references are to pages.] AGENT — continued — competency, 35, 36. creating by indorsement, 119, 120, 121. delivery through fraud, 175. disclosure of name of principal in body of, 36, Zl. draft by, on principal, effect, 644. effect of delivery by, in violation of instructions, 175. effect of want of authority on principals, liability rights, 421, 422. effect of word "agent" after name, 36. execution of instrument by 35, Zd, 2i7, 38, 416. express authority of, Z7, 416. for collection when able to sue, 121. for prior owner is subject to same defenses, 523. form of agent's indorsement, Z6. form of appointment, Z7. form of signature, 35. general rules as to, 35, 36, Z7, 38. illustrations as to signatures, 36. implied authority of, Z7. indorsee made agent of indorser, 120, 463. indorsee under restrictive indorsements as, 120, 463. indorsement for collection, to, 120, 464. indorsement in representative capacity, see Indorsement. knowledge to agent is knowledge to principal, 154. liability of, Z6, 147, 417. 561. liability of, on negotiation without endorsement, 144, 561. liability of party signing as, Z6, 37, 38, 147, 417. liability of public officers as, 38. liability of where signature unauthorized, 148, 422. may draw on deposit, when authorize'd, 249. may present for acceptance, 99. mere description not sufficient, Z7. mode of signature, 36, 38. negotiation by, 175. negotiation by, liabilities of, 144, 561. negotiating instrument, liable when, 144, 561. notice of dishonor by, 195, 196, 591, 592. notice of dishonor given by, 195, 196, 591, 592. notice of dishonor to, 197, 595. notice of limited authority, Z7, 421. notice to as affecting principal, 154. of a corporation, 40, 41. of undisclosed principal, 36, 144, 417. one may be shown to be, 142. ownership of paper in hands of collecting agent, 121. payment by, see Payment and Discharge. power to endorse, Z7. presentment, see Presentment. presumption as to authority, 38. principal's name on margin, 36, Z7. public, negotiable instruments by, 38. representative capacity, how indicated, Z6, Z7. INDEX. 729 [references are to pages.] AGENT — continued — revocation of agency, 38. rules as to signature by, 418. signature by procuration, efifect, 36, Zl , 48, 421. signature of party made by, 36, 147. signing by, Tifi, 416. signing by own name alone, 36, 417. to collect and apply, 136. unauthorized indorsement of. 148, 418, 422. undisclosed principal not liable, 36, 144, 417. want of authority, warranty of subsequent indorser against, 143, 555. when agent individually bound, Zd, 144, 417. when given by, 36. when personally liable, Zd, 144, 417. whether must be competent to make contract, 35. who indorser agent of, 119, 120. who may act as, 35, 36, Zl . words added to signature describing persons as, Z6, Z7, 417. words indicating representative capacity, 36, Z7, 417. AGREEMENT— between indorsers, evidence admissible to show, 143, 559. controlling operation, kinds, 64. for extension of time of payment, effect of, on party secondarily liable, 225, 621. to renew, 65. ALIEN ENEMIES— as parties to commercial paper, ZZ. contract, void, ZZ. in times of peace, ZZ. in times of war, ZZ. paper executed by, during hostilities, ZZ. transfers by, across line of hostilities, ZZ. who are, ZZ. ALLONGE— defined, 110. indorsement on, 110. indorsement on paper attached to instrument, 110. nature and use, 110. ALTERATION— adding name of witness, 177. addition of accommodating party, 636, 637. addition of indorsee's residence, 637. addition of, or change in, words of negotiability, 223, 637. addition of place of payment, 223, 6Z'7. addition of revenue stamp, 171, 637. affecting negotiability, 223, 631. amount, 176. apparent, efifect of, 6ZZ, 634. as a defense, 176, 631. as to interest, 635, 636. authority and consent of parties, 176. 631. 730 INDEX. [references are to pages.] ALTERATION— continued- bill in equity for relief from, 177. blanks, when may be filled, 67, 68, 403, 404. burden of proof, 631, 632, 633. by agreement of parties, 176, 631. by consent of prior parties, 176,631. by consent, 176, 631. by inserting legal rate of interest, 403. change in consideration, 177. change in number or relation of parties, 176, 636. change of figures, 236. changing amount of principal or interest, 176, 636. changing date, and time of payment, 176, 636. changing medium of payment, 176, 637. changing personality, number, or relations of the parties, 176. changing place of payment, 176, 636. tietaching a memorandum, 178. detaching of note from contract, 633. discharge of instrument, 223, 631. effect of, 178, 223. 631. efifect of a material, 177, 223, 631. effect on original debt, 632, 633. filling in blank space, 178, 637. fraudulent, 169. immaterial, 177, 178, 637. immaterial alterations, illustrations, 177, 178, 637. indorsement of payment, 631. in general, 176, 631, 634, 636. in medium of payment, 176, 637. innocent, 177, 178, 637. innocent, effect, 177, 178, 631, 636. insertion of renewal clause, 176, 631, 636. interest, 176, 631. made by stranger, 177. jnaterial, examples of, 176, 631, 636. material, what are, 176. 631, 636. material, what constitutes, 176, 177, 631, 636. medium of payment, 176, 637. negligence facilitating, 178. not, unless rights are affected, 178, 223. of amount, 176, 636. of check, 241, 242. of date, 176, 636. of effect of instrument, 176, 631, 636. of instrument written in pencil, 178, 631, 636. of overdue instrument, 176, 631, 636. of parties to instrument, 176, 631, 636. of place of pa3'ment, 176, 631, 636. other changes, 176, 636. pleading, 632. 633, 634. prejudicial to holder, 632, 633, 634, ratification what amounts to, 223, INDEX. 731 [references are to pages.] ALTERATION— continued- rights of bona fide holder of altered instrument, 177, 631. rights of holder in due course, 176, 631. through negligence of maker, 178. what amounts to a material, 176, 177, 631, 636. where paper payable to order is made payable to holder, 637. when material, 176. when material, but innocently made, effect of, 177, 178, 631, 636. ALTERNATIVE PARTIES, 61, 643. AMBIGUOUS INSTRUMENT, see Ambiguity. construction of, 413. rules of construction, 413. where two or more sign in the singular, 413. AMBIGUITY— as to signature, 419. as to whether instrument is bill or note, 338, 413. as to writing and typewriting, 414. evidence to explain, 45, 338. in instrument, 45, 413. of negotiable instruments, rules to govern option of holder to treat as note or bill, 45, 338, 413. parol evidence to explain latent, 45. AMOUNT, see also Certain As to Amount. alteration of, 176, 636. abbreviations, 52, 660. blanks for, 52, 403. by installments, 53, 54. certainty, 52, 376. character, 52. discrepancy between words and figures, 52. effect of attorney's fees on, 53, 54, Zll . effect of words "with exchange," 52, 54, Z']!. effect of words "with current exchange on another place," 52, Zll. interest added, 53, 54, Zll . of recovery when less than full value paid, 153, 442. to be paid must be certain, 52, 376. uncertainty as to, 370, Zll . with costs of collection added, 54. ZT] . written in margin, 52. AMOUNT OF RECOVERY, 153, 442. ANNE, STATUTE OF, see Statutue of Anne. ANOMALOUS INDORSEMENT, see also Irregular Indorsement. in general, 109, 124, 137, 548. parol evidence as to, 125, 549. ANTECEDENT DEBT— constitutes value, 12, IZ, 432. as a consideration, 72, IZ, 4Z2. is valuable consideration, 72, 7Z, 432. whether value if worthless, 72, 7Z. ANTECEDENT PARTIES— time allowed to give notice of dishonor to, 199, 603. 732 INDEX. [references are to pages.] ANTECEDENT PROMISE, see also Promissory Note and Purchase FOR Value Without Notice. to accept bill of exchange, 90, 94, 650. ■whether value, 72, 11, 432. ANTE-DATED— ante-dated, if for illegal purpose, 47. 401. instrument not valid because, 47, 401. instrument title acquired on delivery, 47, 401. provisions as to, 47, 401. ANTE-DATING INSTRUMENT, 46, 47, 401. APPENDIX A, 707, 708, 709, 710, 711, 712, 713. APPENDIX B, 714, 715, 716, 717, 718. APPLICATION OF PAYMENTS- rights of parties as to, 224, 225, 626, 627. APPRAISEMENT LAWS, 3. ARGUMENT, 352. ASSIGNABILITY— distinguished from negotiability, 18, 19. notice necessary, 19. rules as to, 19. ASSIGNEE— right of, 134. ASSIGNMENT— action by assignee, 134. as indorsement without lecourse, 467. assignability distinguished from negotiability, 18, 19, 131. assignee takes subject to all equities, 131, 132. bill of exchange not an assignment of funds, 87. by corporation, 29, 421. by corporation or infant, 29, 421. by one joint payee to another, 112, 470. check does not constitute, 248, 687. check is not, 248, 687. equitable, 109, 115, 130. effect, 18, 19, 131, 132. how accomplished, 132, 133. in general, 131. indorsement by, 131, 132. indorsement without recourse equal to an, 134, 467. liability of assignor, 133, 137. non-negotiable instruments, 19, 131. notice of assignment, 19. notice to debtor, 19. of commercial paper, in general, 19, 131. of funds, bill is not, 86. of guaranties, 133. of non-negotiable instruments, 131. on separate instrument, not an indorsement, 132. of mortgage, effect on note, 132, oral, 133. INDEX. 733 [references are to pages.] ASSIGNMENT— continued- right of assignee to sue, 19, 134. rights of parties, 134. subject to equities between prior parties, 134. transfer without indorsement, 18, 19, 131. what transferred by, 131, 132. whether writing an indorsement or assignment, 131. words of, as indorsement, 459. ASSIGNMENT FOR CREDITORS, 598, 658. ASSIGNOR— differs from indorser, 133, 134. of instrument, liability of, 133, 134. warrants genuineness of signatures, 133, 134. warrants his title to instrument, 133, 134. ASSUMED NAME— person signing in, 48, 415. liability under, 48, 415. signature by, 48, 415. AT SIGHT— means payable on demand, 52, 392. ATTACHMENT— transfer by, 135, 136. ATTORNEY'S FEES— amount of, 53, 54, Zll. conflicting authority, 53, 711, 712, 713. effect on negotiability, of stipulation to pay, 53. indorsers liability, 211, 378. endorsers right to recover, Zll , 378. in general, 3, Zll . parol evidence as to, 334. proof of in general, 334. provision for does not render sum uncertain, 53, 54, Zll . stipulation does not effect negotiability, 53, 54, 'm . stipulation in bill or note for payment of, effect, 53, 54, 111, 378. validity of provision for, 53, 54, Zll , 378. when no suit is brought, Zll , 378. whether agreement renders note non-negotiable, laws tabulated by states, 711, 712, 713. whether enforcible, laws tabulated by states, 711, 712, 713. AUTHORITY— how shown, 416. of one partner to bind firm, 38, 39. signature affixed without, 39, 49, 422, 423. to sign, to be in in writing when. Zl. B BAD FAITH, 154, 340, 341. BANK. 695. after Certification, 239. allowed reasonable time to make credit, 250. 734 INDEX. [references are to pages.] BAN K— continued— < as to giving notice by, 588. as to knowledge of signature, 241. authority to pay, when payable at, 66. bill or note payable at, 583. cashier as payee or indorsee, 112, 113, 471, certificate of deposit by, 260. contract with depositor, 249. credit by, in books, 250. custom as to demand note, 187 note. defined, 345, 695. depositor's right to draw on bank, 249, 250. draft by, 264. duty of care owed it by depositor, 633. duty of collecting bank as to notices of dishonor, 209. hours for making presentment, 192. indorsement to, for collection, 121. indorsement to, for deposit, 120, 121. instrument payable at, 583. issue bills of credit, 265. knowledge of the instrument, 242. liable after acceptance of check, 248, 687. liable in tort, 250. liable on certified check, 248, 687. liable only to depositor for failure to honor check, 250. liability as to forged instruments, 423. liability on failure to honor check, 250. liability on certified check, 248, 687. liability on payment of forged check, 241, 242, 244. liability for notary's negligence, 210 note. liability to agent of undisclosetd principal, 250. may give notice, 196. not liable on check unless accepted or certified, 248, 687. not required to make part payment of check, 250. note payable at, effect if no funds, 192. notice by, before maturity, 191. payable at, 66, 191. paying altered check, 241, 242, 244. paying stale check, 243. presentment for payment at, 237, 572. refusing to pay certified check, 239. suit by on collection paper, 121. when instrument is made payable at, 583. what will be considered a bank, 345, 695. BANK BILLS, see Bank Note. BANK CHECKS, see Check. BANK DRAFT, 264. BANK MESSENGER, 350. BANK NOTE— description and characteristics of, 265, 266. how differs from treasury note, 265, 266. INDEX. 735 [references are to pages.] BANK NOTE— continued- how secured, 265, 266. meaning of, 265, 266. presumption as to possession, 265, 266. rights of bona fide holder, 265, 266. stolen, 265, 266. BANKER'S LIEN, 153. on instrument, constitutes bank holder for value, 153. BANKRUPT— as payee, 33. discharged from liability on instrument, 224. drawee, presentment for acceptance to, 101, 658, 659. notice of dishonor to, 198, 598. notice of dishonor in case of, 198, 598. of party to be notified of dishonor, notice to whom, 198, 598. BANKRUPTCY— discharged from liability on instrument, 224. effect on presentment and notice, 101, 198, 598, 658, 659. how transfer when, 33. indorsement after, 33. of holder, transfer by operation of law, 130. of primary party, effect on secondary parties, 623. paper sold before, 33. BEARER— bill or note payable to, SO, 395. defined, 50, 395. indorsement in blank makes instrument payable to, 51, 128, 395, 462. instrument payable to person named or bearer, 51, 395. instrument payable to cash is payable to, 51, 395, 396. instrument payable to sundries is payable, 51, 395, 396. instrument payable to estate, 51. instrument payable to, transferable by delivery, 51, 128, 395, 462. instrument when last indorsement is in blank, 51, 395. payable to, negotiation by delivery, 128, 462. payable to, no indorsement, 128, 462. payable to order of fictitious person, 51, 395. special indorsement on instrument made payable to, 128, 462. to payee who is not a person, 51, 395. when is instrument made payable to, 51, 395. words indicating, 51, 395. BILL, see Bills of Exchange; Complaint. BILL OF LADING— assignment of, 259. attached to bill of exchange, 260. contents, 258. defined, 258, 427. draft attached to, 260. how differs from bill or note, 259. how used, 258, 259. lost, 259. 736 INDEX. [references are to PAGES.l BILL OF LADING— continued- right to stop goods in transitu, 259. sets of, 258. when issued in sets, 258. whether negotiable, 259. BILL OR NOTE— doubt as to whether instrument is, 43, 676, 680, meaning of term, 43, 640, 676, 680. BILLS IN A SET— acceptance by drawer, 70. acceptance of, 70, 674. acceptor of, 70. acceptor paying one part, 70, 673. constitute one bill, 70, 673. copies distinguished, 70. different parts negotiated rights of holder, 70, 673. discharge, 70, 674. effect when one accepted and paid, 71, 673, 674. form, 69. liability of drawee for accepting more than one copy, 70, 674. liability of indorsers, 70, 673. object of, 70. payment of one part, 70, 674. payment of, without surrender of bill, 70, 674. rights of different holders, 70, 674. when drawee accepts more than one part, 70, 674. when holder indorses parts to different persons, 70, 673, when parts held by different persons, 70, 673. when treated as one bill, 70, 673. where acceptance written, 70, 674. which copy negotiated, 70. BILLS OF CREDIT, see Letters of Credit. BILLS OF EXCHANGE— acceptance defined, 85, 86, 87, 646, 695. may be required to be written on, 87, 649. to pay at a particular place, 92. while incomplete, overdue or dishonored, 88, 91, 652. on paper other than the bill itself, 89, 93, 649. accepted for honor, protest or non-payment, 100, 103, 667. acceptor, 90. accommodation parties, see "Accommodation." ambiguous instrument treated as bill or note, 413. antecedent promise to accept, 90, 94, 650. "bill" means bill of exchange, 43, 640, 676, 680, damages for non-payment, 250. defined, 43, 91, 640. destruction or retention by drawee, 96, 652. development of uses of, 11, 12, 15. difference between, and promissory notes, 11. difference between, and checks, 234, 680. difference between foreign and inland, 643. INDEX. 737 [references are to pages.] BILLS OF EXCHANGE— continued- drawee, 11, 85. drawer, 11, 85. duty of holder on non-acceptance, 186, 661. earliest form of negotiable instrument, 11, 12, 15. effect of non-presentment for acceptance of, 97, 98, 186, 187, 657, 660. effect of qualified acceptance of, 90. essentials of, 44. first use of, 15. foreign defined, 44, 643. form of, 11, 87. general acceptance of, 88, 92. general characteristics, 11. how accepted, 88. 90, 93, 649. how drawee becomes acceptor, 11. indorsed in blank, to whom payable, 51, 217, 395. inland, defined, 44, 643. insertion of referee in case of need, 61, 644. is not an assignment, 86. kinds of, 44, ^90, 92. laws codified, 15. may be addressed to two or more drawees — but not to two or more in the alternative, 60, 643. not an assignment of funds, 86, 642. origin and history of, 15. origin in England, 15. origin under law merchant, 15. payee, 11. parties to, 11, 60, 643. presentment for acceptance, see also Acceptance; Presentment. how made. 98. 658. on part holiday, 99, 186, 658, 659. on Saturday, 99, 186. 658, 659. to bankrupt or insolvent drawee, 98, 658. to partners, 98. when drawee dead, 98, 658. when to be made, 97, 185, 657. where time is insufficient, 99, 658, 659. qualified acceptance of, 90, 92. referee in case of neetl, 61, 644. rights of holder on non-acceptance, 103. 669. right of holder to refuse qualified acceptance, 91. three parties, 11. time allowed tirawee to accept, 96, 651. to whom may be addressed, 61, 644. trade transactions in origin, 15. use by merchants of Florence and Venice, 15. use by English merchant, 15. when bill may be treated as promissory note, 61, 644. when dishonored by non-acceptance, 186, 661. when drawer and drawee are same person, 61, 644. when may be presented for acceptance, 97. 185, 657. 738 INDEX. [references are to pages.] BILLS OF EXCHANGE— continued— when payable to bearer, holder entitled to receive payment, 217, 218. when presentment for acceptance is excused, 100, 660. where drawee has not capacity to contract, 61, 644. where drawee is fictitious, 61, 644. BLANK— alterations, 178, 637. agent to fill, 67, 68, 403. as to rate of interest, 403, 414. as to payee's name, 236. authority to fill in, 67, 68, 403, 404, 405. before — "after date," 404. burden of proof on authority to fill, 403, 404. delivery in, 405. filled in by holder, 403, 404. filled without authority, 67, 403, 407. filling in amount, 68, 403, 404. filling in by cashier, 405. for name of payee, 68, 403, 404, 405. for name of indorsee and drawer, 68, 403, 404, 405. indorsement in, 117. indorsement, when may be negotiated by, 117, 462. insertion of wrong date, 47. in place of payment, 67, 403, 404. in provision for interest, 67, 403, 404. in provision for attorney's fees, 67, 403, 404. in provision for extension of time, 67, 403, 404. in date, 67, 403, 404. in date of acceptance, 67, 403, 404. in time of payment, dl , 403, 404. inserting attorney's fees, 403. knowledge of, by purchaser, 67, 403, 404. liability to holder in due course, 68, 403, 404. presumption as to authority, 403. right to fill in, 405. rights of bona fide holder, 68, 403, 404. time for filling, 67, 403. when may be filled, 68. 403. when improperly filled, 67, -^03, 404. whether a new delivery necessary when filled by another, 67. whether payee is protected as holder in due course, 67. BLANK INDORSEMENT— converted into special, 117, 463, 469. effect, when afterward indorsed in full, 117, 463. how converted into special, 117, 463, 469. in general, 117. negotiable by delivery, 117. BLANK SPACE— effect of filling in. 67, 177. 178, 403. fraud in filling, 67, 177, 178, 403. INDEX. [references are to pages.] BOARD OF DIRECTORS— power to issue negotiable paper, 40. BOARD OF TRADE NOTES— 164. BOHEMIAN OATS— Notes exorbitant price for, 181. sale of notes for, when illegal, 181. BONA FIDE HOLDER, see also Holder in Due Course— can recover on accommodation paper issued by corporation, 147. cannot recover when consideration void by statute, 81. consideration, w-ant of, no defense against, 81, 82. defenses against, ISO. defenses available against, 151. elements of, 149, 484. equities, 23, ISO. explained, 22. good faith defined, 150. illegal consideration not a defense against, 180, 181. instrument declared void by law, 180, 181. intoxication as a defense against, 163n. lien on instrument makes one a, 153. must acquire instrument for valuable consideration, 149. must be holder for value, 150. must be holder without notice, ISO, 153. must be holder in due course, ISO. partial failure of consideration not a defense against, 180, 181. rights of, 149. total failure of consideration not a defense against, 180, 181. want of consideration not a defense against, 179, 180, 181. when protected against material alteration, 176, 177, 178. when statute declares instrument voiti cannot recover, 180, 181. where there is want or failure of consideration, 179, 180, 181. who is, 22, 150. BONDS, see also Coupon Bonds ; Municipal Bonds — and coupons, characteristics, negotiability, 262, 'il2. how made non-negotiable, 263. indorsement, 263. negotiable, 262, 263. negotiable, how made non-negotiable, 262, 263. non-negotiable, 262, 263. public or corporate, 262, 263. when negotiable, 262, 263. BRANCH POSTOFFICE— effect of deposit of notice of dishonor in, 200, 601, 602. BREACH OF FAITH— negotiation in, 150, 501, 502. BROKER— liability of, on negotiation, without indorsement, 144, 561, 562. BURDEN OF PROOF— accommodation, 448, 449, 450. absence of consideration, 444, 445. 739 740 INDEX. [references are to pages.] BURDEN OF PROOF^ontinued— alteration, 631, 632, 633. as to consideration, 11 , 527, 528. as to filling blanks, 404. as to fraud and duress, 342, 527, 528, 531. as to holding in due course when title of transferor defective, 342, 342, 527, 528. as to mistake, 342, 527, 528. as to payment, 343. as to presentment, 344. as to promptness in presentment for payment or excuse for delay, 344. as to transfer, 340. as to usury, 343. . as to validity of contracts of married women, 32. authority to fill blanks, 403, 404. changed by evidence, 329. conditional delivery, 63, 339. faifure of consideration, 444, 445. fraud, 342, 527, 528. in general, 330. is on person alleging payment, 343. material allegations to be proved by plaintiff, 330. of diligence, as excuse for non-presentment, etc., 344. of showing payment, 224. on party alleging unintentional cancellation, 221, 630. payment, 343. presentment, notice and waiver, 343, 344. release, 343. to show mistake in cancellation, 221, 630. unintentional cancellation, 221, 630. where title of prior party was defective, 527, 528, 529, 530. whether it means going forward with evidence or establishing by pre- ponderance of evidence, 330. BURNING OF INSTRUMENT OR PARTS— 630. BUSINESS— bona fide holder must acquire paper in usual course of, 149. presentment at place of, 187, 570. CALAMITY— as excuse for non-presentment, etc., 192, 576. CALENDAR MONTH, see Month. CALIFORNIA CIVIL CODE, 15. CANADA CURRENCY, 60. CANADA MONEY, 60— instruments payable in, 60. CANCELLATION— burden of proof, 221, 630. consideration unnecessary, 220. discharges instrument 214, 220, 615. INDEX. 741 [references are to pages.] CANCELLATION— continued- discharge of indorsement by, 214, 220, 615. effect of, 220, 221, 615. how accomplished, 220, 221, 615. intentional, 220, 221, 615. must be intentional, 220, 221, 615, 630. of negotiable instruments, 214, 215, 220, 221, 615. of signature of person secondarily liable, 225, 621. unintentional, 221. 615, 630. unintentional, effect of, 221, 615, 630. when payee tears up intentionally, 217. without authority, 221, 615, 630. CANCELLED CHECKS, 244. CAPACITY— acceptance admits capacity of drawer to draw bill, 141. admission of, 139, 140, 141. in general, 27. incapacity as a defense, 160. lack of mental capacity, 30, 163. law governing, 229. of administrators, 34. of agents, 35. of committees, 33. of drunkards and spendthrifts, 31, 163. of executors, 34. of guardians, 35. of infant, disaffirmance by. 29, 160. of infant, indorsement, 29, 160. of infants, 28, 160. of infants, on instrument given for necessaries, 28, 160, 161. of infants, ratification, 28. of lunatics, 30, 163. of married women, 32, 162. of municipal corporations, 41, 162. of partners, 38. of payee to indorse warranted by drawer, acceptor, and maker, 139. 140, 141. of private corporations, 40, 162. of public corporations, 41, 162. of public officers, 42. of spendthrifts, 32. of trustees, 35. parties not incapacitated, 33. rules governing contracts apply, 27. to indorse, 139, 140, 141. warranty of where negotiation by delivery, 143, 555, warranty of by indorser, 142, 143, 555. CARBON PAPER— forgery by, 424. CASE OF NEED, 61, 644, 742 INDEX. [references are to pages.] CASH— checks payable to, 396. instrument payable to, 396. CASHIER— as payee or indorser, 40, 471. authority of to certify checks, 240. authority to extend time of payment, 40. authority to issue negotiable paper, 40. tlrawn payable to, 40. indorsed payable to, 40. or other fiscal officer, instrument drawn or indorsed to, 471. presumed to be at bank, 344. when so indorsed, to whom payable, 40. CASHIER'S CHECK, 236, 243. CAUSE OF ACTION— cannot be split up, 115. CERTAIN AS TO AMOUNT, see also Amount— effect of words "with exchange," 52, 54, ZIT. effect of words "attorney's fees," 53, 54, Zll . effect of words "with current exchange on another place," 52, Zll. failure to pay an installment, 54, Zll. interest added, 53, 54, Zll . principal and interest, 370. CERTAIN AS TO PLACE OF PAYMENT— purpose of, 55, 391. whether or not necessary, 56, 391. CERTAIN AS TO TIME— effect of payable "on or before," 55, 385. illustrations, where uncertain, 54. indication of fund for reimbursement, 55, 381. must be payable without contlitions, 54, 385. must not be payable on contingency, 54, 385. payable after death, 54. payable at a determinable future time, 54, 385. payable out of a particulai fund, 55, 381, 385. wlien considered so payable, 54, 381, 385. CERTAINTY— as to amount to be paid, 52, 54, ill. as to engagement to pay, 49, 51. as to fact of payment, 51. as to medium of payment, 57, 381. of sum payable not affected by certain provisions, 55, 57, 381, 385. where event is certain to happen, 54, 385. CERTIFICATE— of notary as evidence, 208. CERTIFICATE OF DEPOSIT— conditional payment, 261. definition of, 260. in general, 676, 678. INDEX. 743 [references are to pages.] CERTIFICATE OF DEPOSIT— continued- issue of, as value, 485. meaning of, 260, 400, Z12. negotiability, 260, 370, 371. payable on demand must be presented within reasonable time, 260. when a note in efifect, 260. when must be presented for payment to charge indorsers, 260. whether a check, 680. whether or not payment, 261. CERTIFICATE OF PROTEST— see Protest. seal, 204. CERTIFICATE OF STOCK— defined, 261. description and nature, 261. found, 261. how signed, 261. how transferred, 261. meaning of, 261. not stock, 261. stolen, 261. * title of purchaser, 261. CERTIFICATION OF CHECK— advantages of, 238. by mistake, 689. by telegram, 240. efifect of, when procured by holder, 239, 686. efifect of retention, 651, 652. equivalent to acceptance, 239, 684, 687. form of, 238. holder's right to sue bank, 248. in general, 238. liability of bank, 239, 684. not by parol, 240. not by telephone, 240. raised, 240. rights of bank if raised before certification, 240. set-ofif, 239. where drawer has check certified, 239. where holder has check certified, 239, 686. who may make, 240. CHARGE, 352. CHATTEL NOTE, 383. CHECK— acceptance of, if stated to be in full payment, 686. advantage of certification, 238. amount must be certain, 236. ante-dated, 236. as payment, 235, 246. 744 INDEX. [references are to pages.] CHECK — continued — as payment, 246. in compromise, 246. memorandum on, 246. when full payment, 246. bank cashier's failure to present, 566. bank's liability on failure to honor, 250. bank's refusal to pay certified check, 239. by corporation, 249. by partnership, 249. by trustees, 249. cancelled, 244, see Paid also, cannot be certified before payable, 240. cashier's, 243. defined, 243. payable on demand. 243. certification of, 238, 684. certification of, effect, 238, 684. contract to pay at a future day, 235. crossed, 244. defined, 244. direction of, 244. negotiability not destroyed, 244. object, 244. defined, 234, 680. delivered to an imposter, 244. depositor's right to draw on bank, 249. distinguished from bill of exchange, 234. drawee, 11. drawer or maker, 11. drawer when discharged, 239, 686. drawn by partnership, 249. duty of depositor as to forged check, 241, effect of death of drawer, 688. effect of no funds in bank, 237, 250. effect of retention by bank, 85, 652. effect of payment after countermand, 246, 247. effect of ordering payment subsequent to date, 234, 235. failure of bank cashier to present, 566. figures changed, 236. forgery and alteration of, 241. form of, 11, 236. fraudulent check, 244. delivered to imposter, 244. issuance when criminal, 244. liability of bank for paying, 244. when drawer must suffer loss, 244. general characteristics, 11, 236. holder of certified may sue bank, 248. holder of forged, 242. is not assignment, 249. maker or drawer, 11. INDEX. 745 [references are to pages.] CHECK— continued- may be transferred by indorsement, 235. memorandum in general, 242. need not be presented for acceptance, 234. not an assignment, 248, 687. not an assignment of drawer's funds, 248, 687. oral representation as to funds, 240. overdraft payments, 250. paid or cancelled check, 244. bank has right to keep until account balanced, 244. bank holds as agent, 244. presumed a receipt, 244. receipt for tlebt, 244. payable on demand, 235, 243. payable only in money, 236. payee, 11. payee collecting after death of drawer, 238. payment of forged, 241. payment by charging drawer's account, 651, 652. payment by bank after death of drawer, 238. past-dated, nature, 236. person to whom payable must be certain, 236. presentment, protest and notice of dishonor, 237. presumption as to payment, 330. reasonable time as to, 237. reasonable time of presentment, 566, 682. right to stop payment of note, 246. stale, in general, 243. stolen checks or negotiable instruments, 245. blank check, 245. holder's burden, 246. no .title acquired, 245. when bona fide holder for value without notice may retain, 245. stopping payment of, 246. before certification, 247. form of, in writing, 247. may be oral, 246. must be before payment, 246. notice of dishonor not necessary after, 247. sufficient allegation ot, 247. teller's or cashier, 243. time must be certain, 236. time allowed bank to accept, 96, 237. traveler's, in general, 251. traveler's forged, counter-signature, 252. when delay in presenting discharges drawer, 237. when due, 236. when failure to give notice of dishonor, 682, 683. when must be presented, 237, 682. when statute of limitations begins to run against, 236. whether accepted as payment, 236. whether negligence to send to drawer for collection, 682, 683. 746 INDKX. [references are to pages.] CHECK — continued — who may certify, 240. within what time must be presented, 237, 566, 682. words of negotiability in, 236. CIRCUITY OF ACTION, 115. CIRCULATION— when parties not immediate, 25. CIRCUMSTANCES, see Excuse for Non-Presentment— may amount to notice, etc., 202, 609. CIRCUMSTANTIAL EVIDENCE— as to fraud and duress, 342, 343. as to usury, 343. proof of execution, 339. CITIES— power to execute negotiable paper, 41, 42. CLEARING HOUSE ASSOCIATION, 682. CLEARING HOUSE BALANCE— effect of payment, 249. CLERK— notice may be given to, 595. presentment to, 193, 595. CODE PROCEDURE, 347. CODES— American, 15. continental, 15. English, 15. CODIFICATION, 15 COERCION. 175. COINS— instruments payable in, 59. COLLATERAL ACCEPTANCE, 65, 649. COLLATERAL AGREEMENT— as to effect of delivery, 408, 409. as to use of instrument by payee, 408, 409. authorizing sale of, does not affect negotiability, 57 388. consideration, 65. effect on negotiability, 65. for consideration in addition to that specified, 65. for delay of payment until contingent event, 65. for payment by installments, 410. for renewal on extention, 65. in case of depreciation more added, 390. in general, 65. in writing, 65. not notice, 64, 65. oral, 410. renewal of bill or note, 65. INDEX. 747 [references are to pages.] COLLATERAL AGREEMENT— continued— that endorsement is without recourse, 467. to vary liability of endorser, 467. COLLATERAL FACTS— proof in certificate of protest, 208. COLLATERAL INSTRUMENT, 278, 281, 283. COLLATERAL SECURITIES— application of, to debt, effect on party secondarily liable, 289. deposit of, which may be sold, 285. holder receiving collaterals not required to proceeti upon before suing indorser, 286. instruments taken as, for contemporaneous and pre-existing debts, 281. must be tendered with instrument, 279. parting with, effect of, on surety's liability, 286. promise to furnish additional, 285. promise to keep free from incumbrance, 389. provision for sale of, 65. provision for sale of, see also Value, 285, 432, 433, 434. possession of by holder as defense to indorser, 286. rights when principal obligation due after collateral, 11 . sale of, authorized, 285. surrender of, waiver of effect, 286. surrender of discharges mtiorser, 286. surrender to principal or impairment or failure to use as defense for surety, 286. that holder has is no defense to maker, 286. that indorser has deposited is no defense to maker, 286. to surrender as defense, 542. COLLECTION— as to notice, 209. bill or note pa3'-able with costs of, 54, 2>11 . costs of provision for, 54, Zll . holder for, suing as real party in interest, 340, 48L indorsement for, 120, 340. liability of indorser, 120. v/hether indorser for, entitled to notice, 196, 197. COLLECTING BANK— duty as to notice of dishonor, 209. COLLECTION AGENTS— banks as, 121. COMMERCIAL PAPER, see also Negotiable Instruments — < common forms, 1, 11. metiium for commercial transactions, 1, 11. other kinds, 258. COMMITTEE, see Executors and Administrators. COMMON LAW— prohibitions, 180. whether married woman make negotiable instruments at, 162. whether promissory notes negotiable at, 15. 748 INDEX. [references are to pages.] COMMON LAW PROCEDURE, 346. COMPENSATION— for trouble and expense, not usury, 167. COMPETENCY OF PARTIES AS WITNESSES— drawer, 330. in general, 330. indorscr, 330. maker, 330. payee, 330. COMPLAINT, see Eorms of Common Law and Code Pleading — caption of, 304. meaning of, 304. what is, 304. what it contains, 304. COMPLETION— of negotiable instruments, 63, 108. COMPLIANCE— strict, with terms of act necessary, 45, 399. COMPOUND INTEREST, 167. COMPROMISE— as a consideration, 73. COMPUTATION— of time, 332, 333, 701. CONCEALED SURETIES— American rule. 272, 273. English common law rule, 272, 273. English equitable rule, 272, 273. CONDITION— conflict of laws as to, 341. illustration of, in note, 54, 56. in collateral contract, holder in due course not affected, 64. 65. instrument payable on, not negotiable, 54, 385. memorandum that instrument is given as collateral security, 284. negotiable instrument must not be payable upon, 54, 385. CONDITIONAL ACCEPTANCES, 654, 655. CONDITIONAL DELIVERY-^ when in writing, 64, 409. CONDITIONAL INDORSEMENT— condition in. docs not affect negotiability, 118. def^netl, 117, 118. examples of, 118. indorsee holds subject to rights of indorser, 469. in general, 116, 117, 469. party paying may disregard condition, 469. right of parties liable, 117, 469. CONDITIONAL PAYMENT— effect of, 219. whether payment by negotiable instrument is. 20, 21. INDEX. 749 [references are to pages.] CONFESSION OF JUDGMENT— affidavit required, 58. effect of provision. 57, 388, 389. power of attorney, 57, 58. provision for. 7, 388. provision authorizing, does not affect negotiability, 57, 388. when recognized, 58. CONFLICT— between words and figures, 338, 339, 413. between written and printed provisions, 338, 339, 413. CONFLICT OF LAWS— acceptor governed by laws of place and acceptance, 230. accommodation indorsement by married woman, 32. as to capacity of parties. 229, 230. bill payable in foreign country, 233. bills tirawn in one country and paid in another, 233. by what laws demand of payment determined, 232. capacity, 229. conditions, 341. damages, 233. drawer's contract, 230. grace. 581, 582. indorser, liability of, controlled by law of place where made, 231. interest rate, 231. interpretation, meaning of, 228. interpretation and obligation, what law controls, 228. in general, 227. lex forum governs name, 231. lex loci contractus governs as to validity, interpretation, nature, obli- gation, etc., 228. maker governed by law of place, 230. negotiability. 230. notice of dishonor, 232. oral acceptance, 86. parties may agree as to law to govern, 228. place of performance, 229. presentment, what law controls formalities of, 232. protest, 232. rule in federal courts, 232. rule in U. S. courts, 232. taxation, 227n. usurious interest, 231. validity of instrument, what law determines, 228. when an agreement, 228. CONSIDERATION, see also Valuable CoNSiDERAxroN ; Value — anomalous intlorsement after delivery to payee, 124, 125. antecedent debt is, 72, 432. absence of, failure of, 81. 1/9, 444, 446. accommodation parties. 74. agreement to marry, 75. between immediate parties. 77. 750 INDEX. [references are to pages.] CONSIDERATION— continued- burden of proof, n, 428, 429. collateral agreements, 65. collateral security amount recoverable, 11. cross-notes, 75. defined, 72, 432. examples of valuable, 72, IZ. expenditures based on gift note, 75. failure of, 81, 179, 444, 446. failure of as against one not a bona fide holder, 82. failure of, burden of proof, 11, 111, 528. for patent right notes, 80. fraudulent, efl'ect of, 80, 81. gift, 74. gift notes, 75. illegal, 80, 180. illegal, immoral and fraudulent, 81. illegal and void by statute distinguished, 81, 181. illegal, obtaining for, 80, 180. illegal, what amounts to, 81, 180. illegality of, 81, 180. illustrations of, 81. inadequacy of, 19. instruments taken as collateral security for contemporaneous and pre- existing debts, 151, 152. lack of, when a defense, 82. Hen, 16. love and affection, 74. meaning of, 12, 432. must be valuable, 432. necessity of, 11. not necessary for cancellation, 220. note taken as collateral security, 76. partial failure of, 81, 180, 444. partial failure of, a defense pro ianto, 82, 180, 444. patent right, 80. pledge for establishing church, 75. pledge for hospital, 75. pre-existing debt as, 72, 432. presumed, 11, 78, 427. presumed for acceptance for honor, 102. presumption of, 11 , 427. prohibited by common law, 180. questions of, against whom raised, 82. seal imports, 11, 78. speculative, 705. speculative instrument given for, 705. subscription for school, 75. sufficiency of, IZ. total failure of, 81, 179. value of, not considere'il IZ. void by statute, 169. INDEX. 751 [references are to pages.] CONSIDERATION— continued- want of, 79, 81, 179, 444. want of, as a defense, 79, 81, 179, 444. what is, 432, 436. when must be proved, 336, 337. whether necessary to support guaranty, 269, 270. whether necessary to support intentional cancellation, 220. CONSTRUCTION— of ambiguous instruments, 45, 338, 413. of power of attorney to confess judgment, 57, 58, 338. rules of, 45, 57, 58, 338, 413. where language ambiguous, 45, 338, 413. where omissions, 45, 338, 413. CONSTRUCTIVE NOTICE, see Notice. CONTAGIOUS DISEASE— existence of, as excuse for non-presentment, etc., 202. CONTEMPORANEOUS DEBT— collateral security taken for, 151, 281. CONTEMPORANEOUS WRITINGS, 65. CONTINGENCIES— as to time of payment, 54, 386. indication of particular funds, is not, 55, 382. instruments payable on, not negotiable, 54, 386. note given as collateral, 151. statement of transaction, 57, 381. CONTINUATION— of negotiability, 127. CONTRACT— act discharging simply as discharge of instrument, 615. incorporation of in instrument, 382, 383. note attached to, 382, 383, 632. notice of, 632. of indorser, 4. of married woman, whether enforcible, laws tabulated by states, 711, 712, 713. CONTRACTOR'S ORDER, 640. CONTRIBUTION— equal indorsers- entitled to, 147, 148. none between successive indorsers, 147, 148. COPARTNERSHIP, see Partners. CO-PROMISORS— presentment for payment to, 193, 574. use in protest, 212, 665. when used on which to make protest, 212, 665. CORPORATE SECURITIES, 144. CORPORATION— acceptor admits capacity of to draw, 141, 541. check by, 249. 752 INDEX. [references are to pages.] CORPORATION— continued— form of corporate signature, 41. foreign statute invalidating contracts, 169. fiscal officer of, as payee or indorsee. 112, 471. has no power to become accommodation party, 147. included in word "person," 695. indorsement or assignment by, 142, 421. negotiation of instrument, 142, 421. officers signing for accommodation, 147. officer of, indorsing, 112, 471. power to issue note, 162. power to issue accommodation paper, 147. proof of authority to act as agent of, 38. seal of, dispensed with, 41. securities of, not warranted upon negotiation, 552, 553. want of capacity, 162. COSTS— of collection, stipulations as to, 54, 1)11 . CO-SURETIES, 148. COUNTER-CLAIM— in general, 18, 20. COUPON BONDS, see also Bonds— as to form, 262. defined, 262. how issued, 263. how made non-negotiable, 263. meaning of, 262. must holder of coupon ovin bontl, 262. negotiability, 262. who issues, 262. COURSE OF BUSINESS— bona fide holder must acquire instrument in usual course of business, 149, 484. COVERTURES, see Defenses; Married Women. COVENANT NOT TO SUE— effect of, 221. when instrument discharged by, 221. when sureties released by, 221. CREDIT, see Value. CREDIT, BILLS OF, sec Letters of Credit. CURRENCY— instrument payable in, 59. 60. what term includes, 59, 60 CURRENT FUNDS, 59. CURRENT LEGAL TENDER. 59. 60. CURRENT MONEY— designation of particular kind of does not affect negotiability, 59, 391 effect of designating a particular kind, 59, 391. INDEX. 753 [references are to pages.] CURRENT MONEY— continued- instrument payable in, 59, 391. particular kind may be specified, 59. 391. what constitutes, 59, 391. CUSTOM, 187n, 212. D DAMAGES— for non-payment, of bills of exchange, 141. on failure of bank, 236, 237, 250. pa3'able by secondary parties, 141. recovery of, what law governs, 236, 237, 238. DATE— absence of does not affect validity of jnstrument, 46, 391. alteration of, 176, 636. ante-dated, 47, 401. construction when instrument not dated. 338, 413. evidence to show mistake as to date, 46. 47. from what date law takes effect, 400, 413. from which interest runs, 413. msertion of. in undated instrument, 47, 402. in instrument prima facie true date, 46, 400. insertion of wrong date, 47, 402. instrument not effective at, but at delivery, 47. mistake shown by parol, 46. mistake in. 47. not necessar}'. 46, 391. of acceptance may be inserted in draft. 47. 402. of indorsement, presumption as to, 46, 473. of negotiable instruments. 46. 391. omission of does not affect negotiability, 46, 391. omission of, presumption as to, 46. 400. 413. omission of, when interest runs, 413. place for writing, 46. post-date, instrument may be antedated or post-dated, 47, 401. presumption as to, 46, 400, 473. presumption as to execution. 46. presumption when none. 46, 333, 400. when blank left, 47. 402. when indorsement obtained after transfer, 109. when date may be inserted, 47, 402. DAYS— computation of, 66, 332, 333, 701. DAYS OF GRACE— abolished, 66. 580. how computed, 66, 580. how many, 66. in general, 66, 580. laws of tabulated by states, 708, 709. meaning of, 66. 754 INDEX. [references are to pages.] DAYS OF GRACE— continued— not allowed except in some states on sight drafts, 66. origin of, 66. rule not uniform, 66. whether abolished, 66, 580, DEAD DRAWEE— presentment for acceptance excused, 98, 658. DEATH— negotiation after, 109, 110. notice of dishonor in case of, 196, 198, 596. of agent, 202. of drawee, how bill of exchange presented for acceptance, 98, 658. of drawer of check. 198. of indorsee for collection, 110. of joint payee, 110. , of primary party, effect on presentment for payment or acceptance, 98, 658. of person, primarily liable, how presentment made, 98, 658. DEBT— antecedent or pre-existinj, is valuable consideration, 72, Th, 432. DEBTOR— effect of ability and willingness to pay at place of maturity, 188, 563. primarily liable, death of, how presentment made, 98, 658. secondarily liable, cancellation of signature of, 225, 621. discharge of, 225, 621. efifect of agreement for extension of time of payment, 225, 621. effect of release of principal party, 222, 621. payment by, effect of, 217, 626. DECISION-. should be uniform, 692, 694. DECLARATION, see also Complaint— of payment for honor, 220, 672. DECLARATIONS AND ADMISSIONS, 331. DE FACTO HOLDER, 142. DEFAULT— in presentment, etc., see Excuse for Non-Presentment, Protest and Notice. of payment, 371. DEFECT— in title, notice of what constitutes, 153, 508. notice of, to holder before full amount paid, 153, 500. of title, used as a defense, 79, 501. DEFECTIVE TITLE— what constitutes, 501. DEFENDANTS, see Actions on Negotiable Instruments. DEFENSES, see also Personal Defenses ; Real Defenses. absolute, 159. against bona fide holder for value, 151, 523. INDEX. 755 [references are to pages.] DEFEN S ES — continued — against de facto holder, 142, 523. against transferee without endorsement, 476. against non-negotiable paper, 131. against public policy, 180. against whom available, 150, 523. alteration, 159, 176. classification of, 158. consideration, lack of, 179. coverture, 32, 160, 162. defined, 159. drunkenness, 31, 160, 163. duress, 159, 160, 178. efifect on amount of recovery by pledgee or his transferee, 442. failure to stamp, 171. failure to surrender collateral securities at maturity, 542. forgery, 159, 160, 169. fraud, 159, 175. gaming purposes, 160, 164. good against bona fide holder, 160. good against immediate parties, 159, 174. habitual drunkards, 163. . illegality of contract, 159, 164. incapacity of party, see Parties to Negotiable Instruments, 159. incapacity a real defense, 159 et seq. incapacity, what amounts to, 162 et seq. infancy, 29, 160. insanity, 31, 160, 163. intoxication, 163, 164. issue of corporation instruments ulta vires, 160, 162. kinds, 158. material alteration, see Alteration. nature of, 158. partial failure of consideration, 180. patent right note, 58, 705. payment, 182. personal, 158, 173. personal defined, 158. real or absolute defenses, 158. real and personal, defined, 158, 173. real, what are, 158, 160. set-off against over-due paper, 157. speculative consideration, 164, 179. speculative consideration note, 164, 179. spendthrift, 163. spoliation, 177. statute of limitations, 159, 160. Sunday contract, 160, 164, 168. total failure of consideration, 179. ultra vires, 160. usury, 160, 164, 167, 168. ■ 756 INDEX. [references are to pages.] DEFENSES— continued- void by statute, 160. want of consideration, 159, 179. what instrument subject to in hands of holder not in due course, 149, 523. when statute declares note void, 169. whether the equities of a subsequent party can l^e set up when statute declares note void, 164. DEFENSES, REAL, 158, 160, see also Real Defenses. DEFINITION— acceptance, 85, 86, 87, 646, 695. accommodation party, 145, 448. accommodation parties, 145, 448. action, 345, 695. bank, 345. 695. bank notes, 265, 266. bearer, 345, 695. bill, 345, 695. bill of exchange, 43. bill of lading, 258. bona fides, 150. certificate of tleposit, 260. certificate of stock, 261. check. 234, 680. conditional indorsement, 117, 118. coupon bonds, 262. currency, 59. 60. defenses, 159. delivery, 62, 695. due bill, 264. foreign bill, 44, 643. forgery, 169. foreign bill of exchange, 44, 643. fraud, 175. general acceptance, 85, 86„ 87, 646, 695. guaranty, 267. holder, 345, 695. indorsement, 695. mland bill of exchange, 44. 643. inland bill, 44, 643. instrument, 3, 45, 695. issue, 345, 695. legal tender. 59. letters of credit, 265. material alteration, 176, 177, 631, 636. money, 59. negotiable promissory note, 44, 676. negotiation, 108, 455. note, 43, 345, 695. notice of dishonor, 184, 194. paper money, 265, 266. INDEX. 757 [references are to paces.] DEFINITION— continued- payment, 215. payment in due course, 182, 218, 584. person, 345, 695. person primarily liable. 697. person secondarily liable, 697. personal defenses, 158. pleatlings, 303. presentment, 183. promissory note, 43, 676. protest, 207. qualified acceptance, 654. real defenses, 158. 160. reasonable time, 333, 699. signature, 47. special indorsement, 116, 462. sufficient consideration, 73. suretyship, 267. usury, 167. value, 72, 152, 432, 695. warehouse receipt, 266. written, 45, 345, 695. DELAY— in giving notice when excused, 202, 609. in presentment for payment, when excused, 191, 576. in presentment to acceptor for honor or referee in case of need, when excused, 186, 659. in protest, when excused, 205. DELIVERY— as between parent and child, 410. by notary in person, 205. complete by deposit in mail, 62. conditional delivery, 63. defined, 62, 695, 409, 410. essential to completion, 62, 63, 408. estoppel to deny, 370. how made, 62, 408. in violation of instructions, 62. indorsement not binding until, 63. instrument takes effect on, 63. instrument revocable until, 62, 408. is negotiation of instrument payable to bearer, 51. intent. 62. law of place governs, 228. liability of negotiator by. 142, 559. of instrument on payment, 190, 571. may show conditional, 63, 408. may show for special purpose, 63, 408. meaning of, 62, 695. must be authorized, 62, 408. 758 INDEX. [references are to pages.] DELIVERY— continued^ necessary to complete acceptance, 63, 108. necessary to complete indorsement, 63, 108. necessary to make indorsement complete, 63, 108. necessary to convey title, 63, 108. necessity of, 63, 408. negotiation by, 63, 108. negotiation by, warranties of, 144, 552. on condition, 410. place of execution is where delivery made, 228. possession is prima facie proof of, 63, 408. presumptions as to delivery, 63, 408. transfer by, 51. transferrer by, warranties of, 144, 552. warranty where negotiation by delivery, 552. Avhen once in hands of holder in due course, 63. when presumed, 63, 408. without authority, 62. DEMAND — instruments payable on, 52. instrument expressed to be payable, 52. instrument issued, etc., when overdue is payable on demand, 52. instruments, when presentment must be made, 191, 566. note, negotiation of, an unreasonable time after issue, 149, 484. overdue bill is payable, 52. payable on presentation, 52. payable at sight, 52. when in instrument payable on, 52. when payable on demand, 52. when presentment for payment must be made, 191, 566. when no time expressed, 52. DEMAND INSTRUMENT— demand — unnecessary, 563. eflfect of, interest, 564. given for antecedent debt, 432. may be presented on Saturday, 580. when presentment of demand instrument must be made to charge secondary parties, 566. DEMAND OF PAYMENT— See Presentment for Payment. DEMAND PAPER— laws as to days of grace tabulated by states, 708, 709. DEPOSIT — of negotiable instrument, whether bank is purchaser for value, 487. check purports to be drawn on, 249. indorsement for, 120. of fiduciary instrument to personal account, 510. whether bank gets legal title, 120. DEPOSIT, CERTIFICATES OF— See CFJiTiFiCATE OF Deposit. INDEX. 759 [reff-re.n'cks are to pages.] DEPOSITOR— rights of, 249. DESIGNATION-- of particular kind of current money does not affect negotiability, 59, 391. DESTROYED BILL— protest of, 212, 666. DESTRUCTION— of bill as acceptance, 96, 652. of bill of exchange by drawee, 96, 652. of bill, protest, 212, 666. of bill, whether amounts to implied acceptance, 96, 652. DETACHMENT— of note from contract, 383. DETAINED BILL— protest of, 212, 666. DETENTION— of bill, whether amounts to implied acceptance, 96, 652. DETERMINABLE— instrument must be payable at, 54, 385. fixed period after date or sight is, 54, 385. future time, what constitutes, 54, 385. on or before fixed time, 54, 385. on or after event certain to happen is, 54, 385. DIGEST OF LAWS— where negotiable instruments law not adopted, 714 et seq. DILIGENCE— in presentment for acceptance, 100, 660. in presentment for payment, 192, 576. DISABILITY— See Incapacity. DISAFFIRMANCE— by infant of his indorsement, 29. DISCHARGE— by cancellation, 214, 220. by novation, 222. by other act, 615. by payment, effect on negotiability, 182, 615. by payment on behalf of principal, 214, 615. by payment by party accommodated, 214, 216, 615. by payment supposed to be purchase, 224. by payment, see also Payment, 182, 615. by principal debtor becoming holder, 224. effect on negotiability, 182, 615. effect of stamping it "paid", 216. if held by principal debtor, 214, 615. new notes do not act as a, 218. of bills in a set, 142, 674. of debtor secondarily liable, 182. of guarantor, 274. 760 INDEX. [references are to pages.] DISCHARGE— continued— of guarantor by surrender of collateral, 274, 275. of one part of a bill drawn in a set, 142, 674. of instrument by accommodated party, 216, 615. of instrument by accord and satisfaction, 221. of instrument by alteration, 223, 631. of instrument by cancellation, or renunciation, 220, 630. of instrument by covenant not to sue, 221, 275. of instrument by operation of law, 224. of instrument by payment, 182, 215, 481, 615. of instrument by principal debtor becoming hoWer, 222, 615. of instrument by renunciation by holder, 225, 628. of instrument by substitution of another obligation, 222. of instrument by surrender, 220. of instrument, how made, 216, 615. of negotiable instruments, 216, 615. of note, invalid new note not, 218. of prior party, effect of on person secondarily liable, 216, 225, 621. of surety, 275. of surety by surrender of collateral, 274, 275. payee tearing up paper intentionally, 217. payment in due course, 215, 481, 615. what amounts to, of person secondarily liable, 216, 225, 621. what is, 215. DISCHARGE OF SECONDARY PARTY, 621. DISCHARGE BY PAYMENT— effect on negotiability, 17. DISCOUNT, see also Value. sale at a, not usury, 167. DISCHARGE OF PARTY SECONDARILY LIABLE— by cancellation of signature, 621. by discharge of prior party, 621. by discharge of instrument, 621. by release of principal debtor, 621. by tender by prior party, 621. extension of time, when will discharge, 621. , . DISCREPANCY— between words and figures, 338, 413. between written and printctl provisions, 338, 413. DISEASE— existence of, as excuse for non-presentment, etc., 202. DISHONOR, see also Presentment; Notice; Protest. acceptance after, 101. as between joint indorsers. 197. by non-acceptance what amounts to, 186, 660. by non-acceptance, effect of, 186, 660. by non-payment, 194, 578. by qualified acceptance, 140. effect of use of word "dishonored", 195. liability of drawer, 140, 540. INDEX. 761 [references are to pages.] DISHONOR— continued— of bill of exchange by non-acceptance, 186, 660. notice after, 194. protest after, 207. result of, 207, 661. twenty-four hours delay iii accepting causes, 100. waiver of notice of, on whom binding, 211. 607. when occurs through non-payment, 194, 578. when bj' non-payment, 194, 578. DISHONORED BILL, 186, 654, 660, 661. DISHONOR, NOTICE OF, see also Notice of Dishonor. agent may give, 195, 590, 592. and presentment waived by waiver of protest, 211, 608. by whom given, 195, 590, 592. contents, 194, 593. delay in giving when excused, 202, 609. dispensing with notice of dishonor, 202, 609. dispensing with presentment for payment, 189, 576. dispensing with protest when allowetl, 211. 608. effect of deposit in branch postoffice or letter box, 200, 601, 602. effect of miscarriage in mails, 200, 601, 602. effect on negotiability, 91. effect when given by or on behalf of holder, 203. 591. effect when given by or on behalf of party entitled to give notice, 203, 591.. form of notice of, 194, 594. given by agent, 194, 590, 592. given by holder, 195, 590, 592. in case of death, 198. 596. may be sent through postoffice, 200, 594, 599. may be waived, 201, 605. meaning of term, 196, 197. must be given, 196, 586. place of sending, 199, 604. time allowed to one receiving, 199. 598, 603. time when given, 196. 604. timely receipt of, irregularly sent, 199, 604. to bankrupt or insolvent, 198, 598. to joint parties not partners, 197, 597. to whom given, 595. to whom must be given, 196, 586, 596. waived by waiver of protest, 211, 608. what amounts to, 194, 594. when dispensed with, 200, 609. when failure to give excused, 201, 609. when may be waived, 201, 605. when must be given, 196, 198, 586, 596. when need not be given to drawer, 200, 610. when need not be given to indorser, 200, 611. when sufficient in form, 194, 593, 601. when unnecessary, 200, 201, 605, 609, 611. 762 INDEX. [references are to pages.] DISHONOR, NOTICE OF— continueV]— where addressed, 199,604. where parties reside in same place, 199, 598. where parties reside in different places, 199, 599. notice to partners, 198, 597. DISHONORED BILL— acceptance of, 91, 654. DISSOLUTION OF PARTNERSHIP— effect of, 39. when notice of necessary, 39. DISTURBANCES— military and political, an excuse for non-presentment, etc., 202. DIVERSION— accommodation paper, 146. amounts to, 146. effect of, 146. fraudulent, 146. DOCK RECEIPTS— See Warehouse Receipts. DONEE, see Gift. DOUBTFUL— whether bill or note, 338, 339, 413. rules of construction, 338, 339, 413. DRAFT— effect of, 264. liability of, parties to, 264. rights of parties to, 264. use, 264. DRAWEE— alternative, 61, 643. and drawer same person or drawee fictitious or incapable of con- tracting bill treated as note, 61, 644. bankrupt or insolvent, presentment for acceptance to, 98. bill may be addressed to two or more, but not in alternative or succession, 61, 643. dead, absconded or fictitious, presentment for acceptance excused, 100, 660. death of. how bill of exchange presented for acceptance, 98, 100. destruction or retention of bill of exchange, 96, 652, 660. cfifect of omission of from bill of exchange, 60. fictitious, in bill of exchange, 61, 644. fictitious, or incapable, or absconded, effect on presentment and notice, 100, 576, 610, 611, 660. given twenty-four hours in which to accept, 100, 651. has twenty-four hours within which to accept or refuse, 100, 651. joint drawees, acceptance in case of, 98, 658. may be payee, 394. not bound until acceptance, 86. not liable unless he accepts or certifies, 86, 642, 687. INDEX. 763 [references are to pages,] DRAWEE— continued— of bills in a set, 70, 674. of bills of exchange, allowed twenty-four hours to accept, 100, 651. relation of, to bill before and after acceptance, 86. retaining or destroying bill liable as acceptor, 96, 652, 660. rights of, after acceptance, 89. time allowed in which to accept, 100, 651. when name of, may not appear, 60. when principal debtor, 87. where incapable of contracting, holder may treat bill as dishonored, 61, 644. without capacity to contract in bill of exchange, 61, 649. DRAWEES— acceptance by part of, 92, 98. DRAWEE IN CASE OF NEED— See Referee in Case of Need. DRAWER— may be payee, 394. admission of, 140, 540. and drawee same person in bill of exchange, 61, 644. blanks for name of, 68, 403, 404, 405. contract of, 140, 184. discharged by failure to present, 194. discharged unless bill presented at maturity and notice of dishonor given, 184, 194. duty of care owed bank, 633. efi'ect of qualified acceptance, 655. existence capacity and authority admitted by acceptor, 141, 541. liability if drunk, 31. liability of, 140, 540, 541. liability of, before and after acceptance, 140, 540. limiting liability of, 140, 540. may be payee, 394. may negative liability, 140, 540. must be given notice of non-acceptance, 197, 589. must be given notice of dishonor, 197, 589. nature of contract, 140, 184, 540. need not sign before acceptance, 653. need not record notice of dishonor, when, 201, 610. of check, certification releases, 239, 686. of check when discharged, 239, 686. of check, nature of liability, 239, 686. or maker described, 11. presentment for payment who not required to charge, 189, 574| presentment necessary to charge, 188, 563. re-issue by 217, 626. rights of, after acceptance, 89, 90. secondarily liable, 89, 90. when acceptance deemed to be for honor of, 101, 668. when discharged, 239, 686. when discharged by failure to protest, 194, 210. when discharged by qualified acceptance, 140. when discharged by failure to negotiate or present bill for accept- ance, 184, 194. 764 INDEX. [references are to pages.] DRAWER— continued— when failure to present clicck discharges, 184, 194, 237. when liability accrues, 140. when notice to, not required, 200, 201, 610. when prinarj' debtor, 87. when protest necessary to charge. 662. when unreasonable delay discharges, 111, 682. DRUNKEN PERSONS— contracts of, 31. degree of drunkenness sufficient to constitute valid defense, 31, 163. ratification of contract matle while drunk, Zl. 163. DRUNKENNESS— as a defense, 31, 163. DUE BILL— defined, 264. effect of, 265. form of, 264. where a note, 264. whether a note, 264. DUE COURSE— holder in, rights of, 149, 481, 518. holder in, what constitutes, 149, 484. payment when made in, 218. presumption as to holding in, 150. rights of holder in, descend to subsequent holder, 149, 523. DURESS— instrument or signature obtained by, 170. imprisonment, 179. in general a personal defense, 178. obtaining by. 170, 178, 502. when a personal defense, 171. when amounting to forgery, 170. DWELLING— presentation at. 100. EFFECT— of alteration, 178, 223, 631. of instrument drawn or indorsed to a person as cashier, 471. of non-presentment for acceptance of bill of exchange, 97. 98. 186, 187, 657. 660. payment by party secondarily liable, 217. ELECTION— of holder to require something in lieu of money, 57, 388. to treat instrument as bill or note, 413, 644. ENDORSEE, see Indorsee. ENDORSEMENT, see Indorsement. ENDORSER, see Indorser. INDEX. 765 [references are to pages,] ENTIRE FAILURE— of consideration, 81, 179, 444. parol evidence as to, 81, 179, 444. EPIDEMICS— existence of, as an excuse for non-presentment, etc., 202. EQUITABLE ASSIGNMENT— effect of bills and non-negotiable orders as, 134, 135. EQUITIES— as a defense, 173 et seq. assignee takes subject to, 134. bona fide holder takes discharged of, 150, 152. indorsee of overdue paper takes subject to what equities, 156, 157. EQUITY, COURT OF— restore altered paper, 177. ERASURE— of instrument written in pencil, 178. ESCROW— delivery in, 174, 339. delivery by custodian in violation of instructions, 62, 174. ESSENTIAL REQUISITES OF NEGOTIABLE INSTRUMENTS, see Formal and Essential Requisites of Negotiable Instruments. request not sufficient, 370. ESTATE— instrument payable to, 35. ESTOPPEL-^ as to delivery, 370. in general, 31, 61, 115, 403, 405, 424, 643, 644. of maker, drawer or acceptor to deny existence of payee and ca- pacity to endorse, 538, 540, 542. when operates against parties, 143. EVIDENCE, see also Admission; Burden of Proof; Declarations; Parol Evidence; Presumptions. admissibility of parol evidence, 45. as to acceptance of bills, 339. as to ambiguous or omitted stipulations, 338. as to amount payable, 334. as to bills, 344. as to conditions, 341. * as to consideration, 2)26. as to date, 222. as to delivery, 339. as to demand, 343. as to discharge, 343. as to duress, 45, 341. as to execution, 339. as to frautl and duress. 45, 341. as to interest, 336. as to interest where declaration does not mention interest, 336. as to meaning of certain terms, 345. 7(^ INDEX. [references are to pages.] EVIDENCE— continued— as to mistake, 45, 342. as to mode of payment, 335. as to notes, 344. as to notice, 344. as to parties, ZZl. as to particular characteristics, ZZ2, 345. as to payment, 343. as to place of payment, 335. as to presentment, 343. as to protest, 344. as to a qualifying verbal agreement, 45. as to time, 332. as to transfer, 340. as to usury, 343. bill as evidence, 344. burden of proof, 330. burden of proof in general, 330. certificate of protest as, 344. competency of parties, 330. in general, 329. notary's certificate as, 207, 208. notes as evidence, 344. of agreement to pay interest, stub, 335. parol, 45. place of date prima facie evidence of maker's residence and place of business, 339. possession prima facie evidence of ownership, 266. presumptions in general, 329. protest exclusive of dishonor of foreign bill, 344. questions of, governed by lex fori, 227. rules as to ordinary contract apply, 329. seal and signature of notary, 204. to show agreement between intlorsers, 143, 559. EXCHANGE— provision for, 52, 53, Zll . instrument payable with, 52, 53. EXCHANGE BILLS OF— See Bills of Exchange. EXCHANGE OF COMMERCIAL PAPER— as a consideration, 75. EXCUSE OF STEPS, see also Diligence. for delay in presentment for payment, 191, 576. EXCUSES FOR NON-PRESENTMENT, PROTEST AND NOTICE— epidemics, 202. interdiction of commerce, 202. military disturbances, 202. overwhelming calamities, 202. political disturbances, 202. sudden death or illness of holder, 202. war, 202. when drawer has no right to require, 201. INDEX. 767 [references are to pages.] EXCUSES FOR NON-PRESENTMENT, PROTEST AND NOTICE— continued — when drawer or indorser has received funds to pay instrument or has received security or indemnity, 203. when presentment, protest and notice have been waived, 189. EXECUTION— issuing, as extinguishment of other rights, 224. place of, what constitutes, 339. simultaneous, of several instruments, 338, 413. transfer by, 136. EXECUTOR— as indorser of note, 34. as maker of note, 34. cannot bind estate by negotiable instrument, 34. individually bound, 34. indorsement after death, 34. may transfer instrument payable to order of deceased, 34. notice of dishonor by, 198, 199, 596. notice of dishonor to , 198, 199, 596. presentment for acceptance, 99. presentment for payment by, 193. presentment for payment to, 193. presentment and notice to, 573, 596, 660. signature by, 417, 472. EXHIBITION — of instrument, when necessary, 571. instrument, when presented, 190, 571. EXPRESS ACCEPTANCE— See Acceptance. EXPRESS NOTICE— See Notice. EXTENSION OF TIME— as consideration or value, Ti. contract for, must be enforceable, 275. eflfect to discharge surety if second party, 621. in general, 371. of payment, effect of, on party secondarily liable, 225, 621. reservation of right of recourse against secondary parties, 621. sufficient consideration, 12>. to principal debtor, discharges indorser, etc., 275. EXTINGUISHMENT— See Discharge. by payment by accommodation party, 145. FACULTATIVE INDORSEMENT, 122. FAILURE OF CONSIDERATION, 444, 446. See also Consideration. FAILURE TO PRESENT— after disability removed, 192. effect on maker or acceptor, 194. 768 INDEX. [references are to pages,] FAILURE TO PRESENT— continued- facts not in dispute, 192. where bank fails, 192. where facts disputed, 192. FAILURE TO STAMP— See Stamp. FALSE REPRESENTATIONS— See Fraud. FEAR— obtaining by, 150, 501. FEDERAL COURT— how far bound by statute, 232, 233. rule in, 232, 233. rules of decision of, in respect to negotiable instruments, 232, 233. FEES ATTORNEYS', see Attorneys' Fees. FELONIES— compounding, illegal, 181. FEME COVERT— See Married Women. FICTITIOUS DRAWEE— in bill of exchange, 61, 644. presentment for acceptance excused, 100, 576. 610, 611, 660. FICTITIOUS PAYEE— in general, 396, 397, 398. when drawer estopped to allege that payee is, 61. FICTITIOUS PARTIES— drawee, notice excused, 100, 660. payee, instrument payable to bearer, 61. FICTITIOUS PERSON— as drawee, 644. as payee, 395. instrument made payable to, 51. 395. presentment dispensed with where drawee is, 100, 660. FIDUCIARIES AS PARTIES— See Executors and Administrators ; Guardians ; Trustees. FIGURES— change marginal, 52. conflict with writing, 52, 413. discrepancy between words and, 52, 413. effect of, 52, 413. in instrument, 413. office of, 413. FILLING BLANKS— agent for, 67, 68. in general, 393, 394. in instrument, 68, 403, 404, 405. no authority to insert special agreement, 68. FINDER— of certificate of stock, 261. INDEX. 769 [references are to pages.] FINDER— continued — payment to, 218. whether recover, 156. FISCAL OFFICER— as payee or endorser, 471. instrument payable to, 471. FORBEARANCE— to sue, as a consideration, 12, 7Z. FORCE— obtaining by, ISO, 501. FOREIGN BILLS, sec also Bills in a Set— defined, 44, 643. must be protested, 210. protest required, 210. FOREIGN BILLS OF EXCHANGE— See Bills of Exchange. FOREIGN COIN, 60. FOREIGN LAWS— courts will not take judicial notice of, 349. in another state, 349. proof of, 349, 350. FOREIGN MONEY— whether treated as money, 58, 59. 60. FOREIGN NOTE— when endorsed must be protested. 210. FORGED CHECK— liability of savings bank, 242. liability on, 241. FORGER— of check, 241, 242. FORGERY— acceptance, no admission ol indorser's signature. 170. as a defense, 169. as to rubber stamp, 424. burden of proof. 401. by alteration of amount, 169. by bookkeeper, 423. by carbon paper, 424. defined, 169. duty of depositor as to, 241 note. estoppel to set up, 169, 422. estoppel as to signature, 170. failure to stamp, see Stamp. impostor, 424. intent to defraud, and uttering, essential, 169. of names of drawer and payee, 170. of indorsement, liability of drawee to drawer, 170. of signature, 169, 422. 770 INDEX. [references are to pages.] FORGERY— continued-^ recovery of money paW on forged instrument, 170. signature confers no right, 169, 422. warranty against, 553, 555. when party estopped to allege forgery, 169, 422. wrong person but of same name, 424. FORM, see also Forms of Code Pleading; Forms of Common Law Pleading. acceptance, 88. bills in a set, 69. bill of exchange, 11. certification of check, 241. check, 11. common form of promissory note, 1, 5. no particular form required, 45. notice of protest, 205, 206, 207. of bill of exchange no particular form required, 44. of corporate signature, 41. of firm signature, 39. of indorsement, 116. of notice of dishonor, 194, 195. of partnership signature, 39. of signature by an agent, 38. promissory note, 1, 2, 5. protest, 205, 206, 207. simple form of promissory note, 1, 5. FORMAL AND ESSENTIAL REQUISITES OF NEGOTIABLE IN- STRUMENTS— as to agreement controlling the operation, 64, 65. as to blanks, 67, 68. as to instrument bearing a seal, 68, 391. as to stamps, 67. as to style and material, 46. certain as to amount, stated in instrument, 52, 376. certainty of drawee, 45, 369. date, 369. enumerated, 44, 45. how written, ink, 47. how written, pencil, 47. in general, 43, 44. material on which written, 46, 47. must be certain as to amount, 52, 53, 54, 363, 376. must be certain as to place of payment, 55. must be certain as to time of payment, 54, 55. must be certainty as to engagement to pay, 51, 52. must be in writing, 45, 363. must be necessary parties, 60, 61, 62. must be payable in money, 56, 59, 363. must be payable to order or bearer, 50, 51, 363. must be promise or order to pay, 49, 363. no particular form required, 46, 47. of bill and note, 1. ■ INDEX. 771 [references are to pages.] FORMAL AND ESSENTIAL REQUISITES OF NEGOTIABLE IN- STRUMENTS— continued- payable on demand or at fixed time, 45, 363. signature. 47, 48, 49, 363. stamps, 67. the date, 47, 48. the delivery, 62. the several parts of a foreign bill called a set, 69, 70, 71. the signature, 48, 49, 363. to order or bearer, 50, 51. unconditional promise or order, 50, 51, 363, 381. whole instrument must be in writing, 46, 363. words of negotiability, 49, 50, 51. FORMS OF CODE PLEADING— Answers — alteration, 327. denial of execution of instrument, 325. failure of consideration, 326. false representations, 327. general denial, 325. illegal consideration, 326. partial want of consideration, 325. payment, 327. that acceptance was for accommodation, 328. want of consideration, 325. without consideration as to indorsee, 325. Complaints on Bank Check — drawer against drawee, 324. indorsee against indorser, 324, payee against drawee, 324. payee against drawer, 323. Complaints on Bill of Exchange — drawer against acceptor on non-payment, 319. indorsee against acceptor, payable at particular place, 320. indorsee against acceptor on non-payment, 320. indorsee against drawer, demand and notice waived, 322. indorsee against drawer, excuse for non-presentment, no effects. 322. indorsee against drawer, indorsers and acceptors on inland >bill of exchange, 320. indorsee against drawer, no funds in drawer's hands, failure to notify drawer, 321. indorsee against drawer on non-acceptance, 319. indorsee against drawer when payable at a certain place, 321. indorsee against indorser, non-payment by acceptor, 323. payee against acceptor on non-payment, 318. payee against drawer on non-acceptance, 318. Complaints on Promissory Note — assignee of note by delivery against maker and assignor, 316. executor of payee on note against maker, 316. indorsee against maker, 316. indorsee against indorser, payable in another state, 317. indorsee against maker and indorsers, 317. 772 INDEX. [references are to pages.] FORMS OF CODE PLEADING— continued- payee on note against maker, 313. payee on note against maker, excuse for not setting out copy of note, 315. payee on note against maker, for interest due, 314. payee on note against maker, lost note, 315. payee on note against maker, note providing for attorney's fee, 314. payee on note against maker, payable after sight, demand or notice, 315. payee on note against maker, vvliole amount due on failure to pay, 314. FORMS OF COMMON LAW PLEADING— Answers — affidavit denying execution of instrument, 310. averment of arbitration and award, 311. averment of set-ofT, 311. plea, 309. plea and affidavit of merits, 310. plea of payment by services, 310. statute of limitations, 311. Declarations — ■ drawer of bill against acceptor, 308. indorsee on bill against intiorser for non-acceptance, 309. indorsee on note against maker, 307. indorsee on note against payee or other indorsers. 307. on note by payee against maker, 306. payee on bill against drawer for non-acceptance, 308. FRAUD— a question of negligence, 175. as a defense, 175. as affected by negligence, 176. defense of. generally available only between immediate partie>, 175. defined, 175. cfifect of, 175. fraudulently procuring signature is not forgery, 175. immaterial alteration fraudulently made, effect of. 175. in general, 502, 503. in negotiation in breach of faith. 175. instrument or signature obtained by. 175. material alteration fraudulently made, cfifect of, 178. memorandum easily tletached, 178. negotiating by, gives good title, 142. obtaining by, 175. parol evidence as to, 45. when a good defense against a bona fide holder, 155. wlicn court compels surrender or restrains negotiation of paper obtained by, 81. when price paid by purchaser conveys notice of, 153. 154. FRAUDS, STATUTE OF, see St.\tute of Frauds. FRAUDULENT ALTERATION, see Alteration. INDEX. m [rekekences are to pages.] FRAUDULENT CHECK, 244. FRAUDULENT DIVERSION— burden of proof, when shown. 146, 147. FUNDS— absence of, in drawee's hands as excuse for non-presentment, 189. negotiable instruments must not be payable out of a particular, 55. particular, 55. FURTHER NEGOTIATION— prohibition of 119, 120, 465. FUTURES, see Gambling, Gaming. bills and notes as to, 164. FUTURE TIME— determinable, what constitutes, 54. fixed period after tlate or sight, 54, 55. to pay at a particular place, 55. GAMBLING— as a defense, 164. GAMBLING DEBT— instruments in payment, illegal, 164. note given for, 164. GAMING— instrument obtained through, 164. note given for, 164. GARNISHEE, 401. GARNISHMENT— transfer by, 136. GENERAL ACCEPTANCE— form and effect of, 92, 654. GENERAL DOCTRINE— bona fide holder. 22. consideration, 22. equities, 23. essentials, 2Z. fraud set up between immediate parties, 25. holder for value recover, 26. holder without notice recover, 24. illustration as to negotiable and non-negotiable instrument, 21. imports a consideration, 22. law of contracts controls as between immediate parties, 24. negotiable instuments similar to money, 22, 25. ordinary contract binding, 24. rule as to forgery,24. rule as to non-negotiable instrument, 25. rule as to real defense, 24. GENERAL INDORSER— liability of, 555, 556. 774 INDEX. [references are to pages.] GENUINENESS— of signature of drawer, acceptor admits, 541, 542. warrant of, upon negotiation, 552, 553, 555. warranty of, by indorsement, 142. GEORGIA— Digest of Laws of, 714. GIFT— of donee's obligations, 74, 75. of note of third person, 179. promissory note as, 74, 75. whether instrument as, a good consideration, 175. GIVING TIME— effect of, on surety's liability, 275. GOLD CERTIFICATES, 265, 266. GOOD CONSIDERATION, 73. GOOD FAITH, see also Notice; Holder in Due Course. defined, ISO. part value paid in, effect, 181. GOVERNMENT CHECKS, 398. GOVERNMENT STAMP, see Stamp. GRACE, DAYS OF, see also Days of Grace. number of days allowed, 708, 709. origin and nature, 66. presentment for payment, when last day of grace falls on Sunday or holiday, see Comparative Table, 66, 708, 709. what instruments entitled to, 66, 708, 709. whether abolishetl, 66, 580. GRATUITIES— as consideration, 74. GROSS NEGLIGENCE— See Negligence. GUARANTOR— amount of recovery, 273. as indorser, 272. classes of remedies of, 272, 273. contract of. 111, 272, 273. difference between liability of, and of indorser and surety, 272, 273. distinguished from surety. 111. how discharged, 274. liability in case of insolvency, 272. liability upon a failure to give notice, 272. notice to, on default of principal, 272. obligation of, 267. plea of fraud as discharge, 274. remedy when he pays the debt, 273. upon dishonor must pay within a reasonable time, 272. when proceedings against principal are necessary, 273. INDEX. 775 [RliFliKENCES ARE TO PAGES.] GUARANTY— afterwards committed to writing, 270. alteration by addition, 177. as affected by statute of frauds, 270. by third party upon note after delivery, 269. by third party upon note before delivery, 270. conditional guaranty, 271. consideration, 269. contemporaneous, 270. defined, 267. distinguished from suretyship, 267, 268. guarantor's remedies, 273. how tlischarged, 274. may guarantor be sued jointly, 268. negotiability, 271. notice to guarantor of default, 272. on note, consideration presumed, 269. separate contract, 267. when consideration continuous, 270. whether assignable, 272. whether consideration must be in writing, 270. whether in writing, 270. whether in writing w^hen direct, 270. whether release or extension of time to principal debtor discharges guarantor, 275. whether signature must be obtained, 268. whether negotiable, 271. GUARDIAN— ^mention of on instrument as notice, 35. GUARDIANS— as parties to negotiable instruments, 35. effect of words "as guardian," 35. H HABITUAL DRUNKARD— instruments by, 163. HOLDER, see also Bona Fide Holder; Holder in Due Course; and Holder for Value. after holder, for value, 149, 155. after notice, 154. by assignment, subject to equities, 19. by fraud, 150. by indorsement, 19. de facto, 142. defined, 345, 695. duty on non-acceptance of bill of exchange. 186, 661. effect of notice of dishonor when given by or on behalf of, 174, 591. for collection, 481. indorsee who re-acquires is, 527. of principal debtor discharges instrument, 223, 224, 615. may refuse to take qualified acceptance, 90, 655. not in due course, what defenses instrument subject to, 149, 523. 77 (y INDEX. [references are to pages.] HOLDER— continued- notice of defect before full amount paid, 153, 500. notice of dishonor given, 174, 591. of bills in set, rights of, 70, 674. of certified check, right to sue bank, 248. of uncertified check has no recourse against bank, 248. payment to, discharges instrument, 481. principal debtor becoming, discharges instrument, 223, 224, 615. tr'nna facie a bona fide holder, 149, 481, 527. refusing payment supra protest, 220, 672. renunciation of rights by, 225, 628. rights of where bill dishonored by non-acceptance, 186, 661. right of, to sue in own name, 225, 481. rights of, on dishonor, 186, 661. rights of, on refusal to accept bill of exchange, 186, 661. striking out indorsements, 126, 127, 475. upon dishonor for non-acceptance, 186, 661. who is, 345, 695. HOLDER FOR VALUE, see also Bona Fide Holder. bank by giving credit on deposit account, 151. holder after, 155. liability of accommodation party to, 145, 448. lien holder as, 153, 442. necessity of payment of value, 151. person having lien is, 153. pledgee, 441, 442. value, what constitutes, 151, 432. when lien on instrument protects lienor, 153, 442. when paper transfered for antecedent tlebt, 152. when person deemed, 151, 440. where value has been given, 83. HOLDER IN DUE COURSE, see also Defenses ; Good Faith. cannot take under forged signature, 422. corporation not to set up defense of tiltra vires, 162. delivery conclusively presumed, 408. drunkenness as a defense, 31. 163. explained, 149, 484. for value, lienor is, 153. for value under certain circumstances, 151. has title free from defenses antl defects of title, 149. holder deriving title from, 149, 523. holds instrument free from equities, 149. in general, 484, 490. instrument complete and regular, 149, 484. instrument not overdue, 149. lien holder is, 153. may recover full amount, 149. not afifected by renunciation. 225, 628. not subject to defenses of absence or failure of consideration. 444. omission to give notice of non-acceptance does not prejudice rights of subsequent, 203, 613. INDEX. 177 [references are to pages.] HOLDER IN DUE COURSE— continued— of instrument payable on demand, 153, 498. presumption as to, 150. requisites to constitute, 149. right to sue, 481. rights of, 481, 518. 519. rights of, descend to subsequent holder, 149, 523. rights of one claiming under rights on warranties, 552, 555. rights on an altered instrument, 176, 631. rights of person claiming under holtler in due course, 150. rules to determine who are, 149. taken in good faith and for value, 149, 484. taken without notice of infirmity, 149, 484. transfer of instrument for antecedent debt, 152. validity in hands of, 149, 484. what constitutes, 149, 484. what constitutes notice of equities, 154, 508. when burden of proof on holder, 150, 527. when burden on holder to prove that he took instrument in due course, 150, 527. when paper deemed overdue, 155, 498. when transferee without indorsement becomes, 476. where full payment is not made before notice, 153, 500. where interest is overdue, 156. where installment overdue, 156. where title of transferor defective, 153. 501. whether bank paying note of depositor is. 151. who.is, 484, 527. 531. who not deemed a. 149, 498. 527. HOLDER NOT IN DUE COURSE, 149, 498, 527. HOLDER OF OFFICE FOR TIME BEING— instrument payable to order of, 394. HOLDER WITHOUT NOTICE— not payable to order of maker, 153. purchaser when notice of fraud, 155. HOLIDAY— day following, 191, 581. in part, presentment of bill of exchange for acceptance on, 99, 186, 658, 659. instrument due on, 191, 581. presentment for payment when instrument falls due on, 191, 580. whtn day of maturity falls on. 191, 580. ■when last lay falls on a holiday, 191, 580. when day for doing act falls on, 191, 581. HONOR, see Acceptance for Honor; Acceptor for Honor; Payment FOR Honor — acceptance for, 100, 667. acceptance for, delay in presentment when excused, 103, 669. acceptor for, liability of, 100, 668. for nature of his agreement, 103, 668. 778 INDEX. [references are to pages.] HONOR— continued— how made, 100, 103, 220, 667. presentment to, for payment, how made, 103, 669. protest of bill, 103, 669. when may be made, 219, 220, 671. HONOR, PAYMENT FOR— declaration of intention, 219, 220, 671. effect of refusing to receive, 219, 220, 671. effect on subsequent parties, 219, 220, 671. how made, 219, 220, 671. rights of payor, 219, 220, 671. when may be made, 219, 220, 671. HOUR— at what hour of day presentment for payment should be made, 189, 191. IDIOT— capacity, 30. IDIOTS, see also Insane Persons. IDENTIFICATION OF HOLDER— indorsement for, 450. ILLEGAL CONSDERATION— against whom a defense, 181. by what law legality of consideration determined, 166, 181. examples of, 180. obtaining for, 80, 180. ILLEGALITY— against public policy, 165. as a defense, 166. effect of tlie alloption of Negotiable Instruments Law, 165, 166. illustrations of, 166. immorality, 181. in violation of statute, 165. instrument obtained through, 166. of consideration, what constitutes, 165, 180. of contract, 164. wagers and gaming contracts, 166. warranty against by subsequent indorser, 143. when proven, burden of proof shifts, 181. whether real defense, 165. ILLEGAL STIPULATION— not validated, 388. ILLNESS— of agent, 201, 202. of holder, as excuse for non-presentment, 202. ILLITERACY— as ground for disregarding waiver, 606. INDEX. 779 [references are to pages,] ILLUSTRATIONS, sec also Examples— of equities, 25. of illegal consideration, 80, 81. of non-negotiable instrument, 25. of valuable consideration, 12>, 74, 75. of written acceptance, 93, 94, 95. IMBECILES, see also Insane Persons — capacity, 30. IMMATERIAL ALTERATION, see also Alteration— effect of, 176, 177. illustrations of, 176, 177. IMMEDIATE PARTIES, see also Parties— consideration between, 11, 78. defenses admissible between, 158, 159. delivery necessary as between, 408. law of contracts controls, 24, 25. who are, 25. IMMORALITY— illegality of consideration, 181. IMPANELING JURY, 347. IMPLIED ACCEPTANCE— what will amount to, 97. IMPLIED AUTHORITY— of agents, 35, 36. of corporations, 40, 41. of one partner to bind firm, 35, 36, 37. IMPLIED NOTICE, see Notice. IMPERSONATION— fraudulent, of a named payee, 423, 424. fraudulent, of agent of the named payee, 396, 397, 398. IMPOSSIBILITY— as excuse for steps, 201, 202. IMPRISONMENT— to compel execution of paper, 178. "IN HIS OWN RIGHT"— meaning, 214, 615. INCAPACITY, see also Alien Enemies; Bankrupt; Drunkariis ; In- fants; Insane Persons; Lunatics; Married Women; Spent)- thrifts — defense of, good against bona fide holder, 29, 31, 158, 159, 160. defense of, 29, 31, 158. of married women, 32. INCAPACITY TO CONTRACT, see Defenses. INCOME— instrument payable from, 372. 780 INDEX. [references are to pages.] INCOMPETENCY— good faith contractor protected, 30. INCOMPETENT— note of, for necessaries, 30. INCOMPETENTS— spendthrifts, 31, 32. INCOMPLETE BILL— acceptance of, 88, 91, 653, 654, INCOMPLETE INSTRUMENT— acceptance of, 88, 91, 653, 654. in general, 62, 63, 408, 409. negligence, 632. not delivereti, 407. want of delivery of, a defense, 62, 63. INCORPORATION— of mortgage or other instrument by reference, 372, 373. INDORSEE— blanks for name of, 462. cannot be two or more severally, 61. cashier, payable to bank. 112. for collection, 197, 341. if two or more, all must indorse, 112. in trust, 119, 120. right conferred on by restrictive indorsement, 119, 120. rights of, 134. special, must indorse to transfer, 116. under conditional indorsement, 119, 120. under restrictive indorsement, 119, 120. who agent of, 119, 120. INDORSEES— joint, indorsement by, 470, 559. INDORSEMENT, see also Indorsee; Indor.semrnt in Blank; In- dorser, etc. — absolute and conditional indorsements, 117. accommodation, by bank, 145n. according to tenor, 115. after transfer, effect of, 476-478. after maturity, effect, 392-393. allonge, 110. blank made special, 117, 129. bonds, 706. by bank, how converted into special, 129, 469. by bankrupt, 33. by cashier or other fiscal officer, 112, 471. by corporation or infant, 421. by insane, 31. by payee or indorsee where name misspelled, 112, 472. by rubber stamp, 424. 456, 459. by two or more payees or indorsers not partners, 112, 470. INDEX. 781 [references are to pages.] INDORSEMENT— continued— by whom made, 112, 115. by words of assignment, 459. by maker of note payable to own order, 076-679. by one of several executors, 556. by person of same name as true owner, 424. collateral security, 341. collection, 120, 197. compel when failure by mistake or neglect, 109. conditional, right of party liable, 117, 469. contract made by, 113. contract of insane binding on prior parties, 31, 32. date of, 125, 473. defined, 110, 695. delivery necessary, 108. detached paper not binding, 114. effect of, when negotiable by delivery, 144. facultative, 122. for collection; 465. for identification, 544. forged passes no title, 218. forms of, 116, 137. guaranty as, 111, 122. holder striking out, 127. how blank indorsement converted to special indorsement, 129. how differs from surety and guaranty, 111. how made, 458, 459. if essential to title nuist be proved, 459. infant, 29, 421. infant's right to disaffirm, 29. in full, 116. in representative capacity, 472. indorsee's name wrongfully designated. 472. in blank makes instrument payable to bearer, 117. irregular indorsements, 123. joint indorsement, 122. kinds of, 116, 461. liabilities created by, 115, 124. may be on separate paper, 110, 114. may insist on, 130, 476. meaning of term, 110, 695. methods of, absolute, 116, 117. conditional, 116, 117, 469. in blank, 116, 117. in general, 116, 461. irregular, 116, 123. joint, 116, 122. restrictive, 116, 463, 464. special, 116, 462. successive. 116, 123. without recourse, 116, 121. 782 INDEX. [references are to pages.] INDORSEMENT— continued- miscellaneous matters, 125-127. must be made by payee or subsequent holder, 123. must be of entire instrument, 114, 460. must be on instrument or allonge, 110, 114. must follow tenor of bill, 115. negotiation, 127. need not contain words of negotiability, 464. of a half interest, 115. of instrument payable to two or more, not partners, 112, 122, 470. of transferer not required after blank indorsement, 463. partial, 114, 460. "pay to any bank or banker," 464. place of an instrument immaterial. 111. presentment necessary to charge indorser, 189, 576, 577. presumed to have been affected before paper overdue, 125, 473. presumption as to place of, 125, 473. presumption as to time of, 125. 473. prior equities, 121. qualified, 121, 122, 467. qualified indorsement does not impair negotiable character of instru- ment, 127, 467. qualified indorsement does not throw suspicion on paper, 127, 467. required for negotiation of instrument payable to order, 108. requisite of. 114. restrictive, 119. restrictive indorsement prohibiting further negotiation, 119. restrictive indorsement constituting indorsee mere agent, 119, 463. restrictive indorsement vesting title in trust, 119, 463, 464. restrictive indorsement authorizes indorsee to receive payment. 119. restrictive indorsement authorizes indorsee to transfer his rights as indorsee, 119. restrictive indorsement authorizes indorsee to bring action, 119. restrictive rights conferred by, 119. right to strike out indorsement, 126, 475. rights of transferee, 115. separate paper, 110. 114. signature alone sufhcicnt, 110. 458. special. 116. 462. special on instrument payable to bearer, 469. stamping of name. 110. striking out, 126, 475. striking out, effect of, 127, 475. successive indorsements, 123. to negotiate instrument payable to order, 108. transfer by, 109. transfer without, 109, 126, 476. warranty of title in case of qualified indorsement, 121. warranty where negotiation by qualifieti indorsement, 121. warranty by general indorsement, 113. when assignment and guaranty of payment becomes, 461. when name misspelled, 112, 472. INDEX. 783 [references are to pages.] INDORSEMENT— continued— when obtained subsequent to date, 109. when overdue, 52, 392. when payable to bearer, none necessary, 110. when sufficient, 110, 458. where payee or indorsee wrongly designated, 472. without recourse, 467, 468. INDORSEMENT— QUALIFIED, 467-468. INDORSEMENT IN BLANK— defined, 117. effect of, 117. equals an assignment, 130. in general, 117. to whom payable, 217, 218. INDORSEMENT IN FULL- defined, 116. effect of, 116. INDORSEMENT, RESTRICTIVE— defined, 119. for benefit of a third person, 463-465. not revoked by indorser's death, 465. passes legal title and power to sue, 119. rights of restricted indorsee, 119, warranty by, 553. INDORSEMENT WITHOUT RECOURSE— effect of, 121. in general, 121. liabilities created by, 121. INDORSER, see also Indorsement, etc. — accommodation, liability of, 145, 448. accommodation, presented for payment to, 189, 575. addition of place of residence not alteration, 637. admits capacity of prior party, 142. agent of indorsee, 120. as guarantor, 272. as to title, 142. by delivery, 143. contract of, 142. difference between assignor and, 133. discharged by failure to present, 194. doubt as to whether signature is that of, 48, 49, 413. effect of qualified acceptance, 655, 656. estopped to deny validity, 143. how discharged, 475, 476. in blank, liability of, 128. indorsee made agent of, 120. in representative capacity, 472. irregular accommodation, 124, 548. irregular, liability of, 124, 548. irregular, liability under, 124, 548. 784 INDEX. [references are to pages.] INDORSER— continued- joint and successive indorsers, 143. law controlling liability, 231. liable in order in which he indorses, 143. liability of general indorser, 142. liability, if drunk, 31, 32. liability of, 142, 555, 556. liability of, on bill drawn in set, 70. 673, 674. • liability of, where paper negotiable by delivery, 143, 555. liability for indorsing parts of bills in sets, 673, 674. liability upon dishonor by non-acceptance, 661. liability of unqualified, 143. liability where paper negotiable by delivery, 559. may not set up forgery, 170. must be given notice of dishonor, 184, 196, 197. nature of contract, 142 et seq. of check, certification releases, 239, 248. of check, liability, 235. of check, when discharged by failure to present, 236, 237. of overdue paper, 196, 197. order of liability ,evidence as to, 559, 560. parol evidence to vary liability of, 143. payment by does not discharge instrument, 626-628. presumption as to second, 124. prima facie liable in order of indorsement, 143, 559. qualified, liability of, 144, 552. time limit in which to give notice to antecedent parties, 203. to whom warranty runs, 143. unqualified liability of, 143, 555. warranties by, 143. warrants that instrument is genuine, 143. warrants that instrument will be accepteti or paid, 143. warrants the competency of parties, 143. when certification of check discharges, 686, 687. when discharged, 225, 621. when discharged by failure to protest, 178. when discharged by qualified acceptance, 91, 655. when discharged bv failure to negotiate or present bill of acceptance, 658. when held primar}- party, 698. when liability accrues, 143. when need not receive notice of dishonor, 201, 611. when notice of dishonor required to charge, 586-589. when notice to unnecessary, 201, 611. when person deemed, 544-546. when liot necessary, 575, 576. when presentment for payment necessary to charge, 563-566. when protest necessary to charge, 662, 663. when signer deemetl, 110, 111, 544. whether liable if holder has collateral securities, 467. whether discharged by collateral acceptance, or acceptance by de- struction, or refusal to return, 652. INDEX. 785 [references are to pages.] INDORSER— continued— without recourse, liability of, 143. without recourse, warranties of, 144. INDORSER, ANOMALOUS OR IRREGULAR— liability of. 548-552. INDORSER, QUALIFIED— liability of, 552-555. INFANCY, see also Infant.s — as a defense, 161. INFANTS— acceptor admits capacity to draw, 29. acceptor estopped, 161. cannot bind themselves on negotiable instrument, 28. capacity, 28. capacity to bind themselves, 28. capacity to enforce instrument, 28. caution advised, 29. contracts of, generally voidable, 28. defense of infancy good against bona fide holder, 29. indorsement by, 29. indorsement or assignment by, 29, 421. indorsement passes property, 29. indorsement voidable, 29. may be payee, 28. may bind themselves for necessaries, 28. may disaffirm. 29, 422. may transfer by indorsement, 29. negotiation of instrument, 29. ratification by adult of negotiable instrument executed when an in- fant, 28. right to disaffirm indorsement, 29. staAites governing ratification, 29. verbal ratification by, 29. voidability of contract, 28. when maker or acceptor estopped to deny capacity, 29. INFIRMITY— in instrument, notice of what constitutes, 154, 508. INITIALS— sufficient as signature, 48. INK— several kinds of, on instrument, 404. signature in, preferable but not necessary, 47, 48. INLAND BILLS OF EXCHANGE, see also Bill.s of Exchange— defined, 44, 643. necessity for protest, 210, 211. what treated as, 44, 643. INNOCENT HOLDER FOR VALUE, see Bona Fide Holder; Holder FOR Value — i in general, 24. rights against lunatic accommodation party, 31, 32. 7^ INDEX. [references are to pages.] INSANE PERSONS, see also Lunatics— as payee may compel payment, 31. as payee may compel return of consideration, 31. as payee may indorse, 31. bill of, for necessaries, 30. committee appointed, effect on contracts, 30. contracts of, for necessaries valid, 30. guardian appointed, effect on contracts, 30. ignorance of incapacity, effect of, 30. may be payee, 31. note of, for necessaries, 30. one contracting with in good faith, 30. sanity presumed, 31. what degree of incapacity suffices to render contract void, 30. INSANITY, see also Incompetent Persons; Insane Persons — effect of undue advantage, 30. good defense against bona fide hoMer, 31, 163. is a real defense, 31, 163. when known, contract void, 31. INSECURE— notes payable when holder deems himself, 386. INSOLVENCY, see Insolvent— effect on presentment and notice of dishonor, 598. protest for better security, 665, 666. INSOLVENT— as payee, ZZ. drawee, presentment for acceptance to, 98, 658. notice of dishonor to, 198, 598. INSTALLMENTS— effect of want of notice of unpaid installments on liability for later, 587. instruments payable in, when deemed overdue, 156. overdue renders the whole due, 156. payment in, does not affect negotiability, 54, 2>77. INSTRUMENT, see also Negotiable Instrument; Lost and Destroyed, etc. — defined, 695. given for necessaries, 30. indorsed for discount, 410. made prior to negotiable instruments law, rules of construction, 339. undated, date may be inserted, 47, 402. when issued, 61. when negotiated, 17. INSURANCE— instruments for payment of losses, 383. INSUFFICIENT TIME— when may be pleaded as excuse for non-presentment, 186, 659. INTENT— as to cancellation, 220, 613. INDEX. 787 [references are to pages.] INTENT— continued— : as to delivery, 62. burden of proof, 221, 630. INTEREST— alteration as to, 637-639. blanks in provision for, 404. compound not allowed, 167. conflict of law^s, 168. date from which it runs, 413, 415. default of as dishonor and notice of equities, 489. does not make sum uncertain, 376-381. from when does it run, date being omitted, 47, 338, 413. if not paid entire sum due, 54, 157. in advance not usury, 167. in general, 370. • laws of, tabulated by states, 708, 709. legal rate tabulated by states, 708, 709. limit under contract, tabulated by states, 708, 709. paid, 53. past due does not render the whole due, 157. penalty for usury tabulated by states, 708, 709. provision for increase of, of instrument dishonored, 378. rate in blank, 404. rate recovered in pledged instrument, 442. recovery if not yet accrued after default of installment, Zll . usurious, 231. what law governs payment of, 231. when begins to run, 53. when no rate specified, 53. whether paper deemed overdue when installment of remains un- INTERMARRIAGE, 224. INTERPRETATION— governed by lex loci coniractus. 227. of Negotiable Instruments Law, 692-694. INTOXICATION, see also Drunken Person— as a defense against bona fide holder, 163n. in general, 504. INURE, 101, 142. IRREGULAR INDORSEMENT— conflict of decisions as to, 124. example of, 123. liability created by, 123, 124. . liability of one not payee writing his name on paper before delivery to payee, 123, 124. liability under, 124, 548. meaning of term, 123 et seq. parol evidence of intention admissible between intermediate parties, 125. whether parol evidence of intention admissible between remote parties 125. 788 INDEX. [references are to pages.] IRREGULAR INDORSER, see also Anomalous Indorser- accommodation, 124. liability of, 548, 550. IRREGULARITY— sent notice of dishonor, timely receipt of, 199, 604. ISSUE— defined, 695. of bills of credit by bank, 265. of execution as extinguishment of other rights, 224. of overdue paper, 52, 392. JOINT AND SEVERAL— credit, 249. instruments, 61. liability, 62. two or more signing "I promise to pay," 413. JOINT DEBTORS— presentment for payment to, 197, 198, 597. JOINT DEPOSIT, 249. JOINT DRAWEES— allowed, 643. if drawn on firm, may l>e accepted by one partner in firm name, 658. if not partners, all must accept, 197, 198, 597. in general, 61. JOINT INDORSEES— intiorsement by, 470, 559. JOINT INDORSEMENT, 122. JOINT INSTRUMENT, 61. JOINT MAKERS— whether defense of one is available for others, 504. JOINT OBLIGORS— presentment to when not partners, 193, 658. JOINT PARTIES— consideration moving to one, 428. liability of, 559. 560. not partners, notice of dishonor to. 197, 198, 597. presentment to, 574. suits by, 268. two or more persons signing "I promise to pay," 413. JOINT PAYEES, 470, 559— authorizing confession of, does not aflfect negotiability, 57, 388. liability of, 143, 559. JUDGE— questions for, see Jury. INDEX. 789 [references are to pages.] JUDGMENT— against maker, dispenses with presentment to charge indorser after maturity, 610. authorizing confession of, does not render instrument non-negoti- able, 57, 388. extinguishes bill or note, 224. in general, 352. JUDICIAL NOTICE— courts will not take, of laws of another state or country, 349. of seal of notary public, 351. reasonable business hours, 569. JURISDICTION OF JUSTICES— amount, laws tabulated by states, 711 et seq. JURY, 347, 348— and judge, functions of, as to reasonable time, 700. interpretation of findings as to holder in due course, 486. K KINDS OF COMMERCIAL PAPER, 258. KINDS OF INDORSEMENT, 116, 461. KNOWLEDGE— actual, of defect or infirmity, 153, 154, 500. 508. of bank of general contents, 241. of signature by bank, 241. of solvency of prior parties, 154. to agent is knowledge to principal, 154. LADING, BILLS OF, see Bills of Lading. LAW, see also Conflict of Law — conflict of, 227 et seq. operation of, may discharge instrument, 224. LAW IN GEORGIA, 714, 715, 716, 717, 718. LAW MERCHANT— additions to, 14. administered as customs, 14. administered by King's Court of Common Law, 14. as a custom, 18. code of rules, 13. codified, 15. codified in California, 15. codified in England, 15. codified in France, 15. codifietl in United States, 15. court at the fairs, 14. 790 INDEX. [references are to pages.] LAW MERCHANT— continued- custom or usage, 13. declared law of land, 14. defined, 13. differs from common law, 13. differs from equity and admiralty, 13. engrafted on common law, 18. governs cases not provided for, 703. meaning of term, 13. negotiability in, defined, 17. negotiable instruments law, 15, 16. not part of law of England at first, 13. object of, 13. origin, 14. origin of bill of exchange under, 15. origin of promissory note under, 15. principles of, when applied by Federal courts, 232, 233. rules of, to govern, 339, 703. second stage of development, 14. stages of development, 13. system of law, 13. third stage of development, 14. unwritten law merchant, 15. when to govern, 339, 703. LAW OF FORUM, see Lex Fori. LAW OF PLACE— demand, notice, protest, 232. governing validity, etc., 228, 229. indorsement, effect and enforcement, 231, 232. liability of acceptor, 230. liability of indorser and drawer, 227-233. question of negotiability, 228. question of validity, 228, 229. requisites as to form and execution, 231. validity of indorsement, 231, 232. LEGAL HOLIDAYS— presentment for payment when instrument falls due on, 191, .580. LEGAL TENDER— defined, 59. instrument payable in, 59. what constitutes, 59. what is, 59. whether bank note is, 265, 266. whether gold or silver certificates are, 265, 266. LEGAL TITLE, see Title. LETTER BOX— effect of deposit of notice of dishonor in, 200, 601, 602. LETTERS OF CREDIT— defined, 265. use of, 265. INDEX. 791 [references are to pages.] LETTERS OF CREDIT-Hcontinued— when addressed generally, 265. when addressed to one person, 265. LEX FORI— determines in whose name suit is to be brought, 227 et seq. when controls, 227 et seq. LEX LOCI CONTRACTUS— governs as to validity, 230, 231. when is, 230, 231. LEX LOCI SOLUTIONIS— when governs, 231. LIABILITY, see also Acceptor; Agent; Drawer, etc.— agent, 36, 417. by delivery, 143, 559. limiting drawer's, 140, 540. of acceptor, 141, 541. of acceptor for honor, 100. of acceptor of bill drawn in set, 141. of accommodation party, 145, 448. of administrator, 36. of agent or broker, 147, 561. of agent, when agency is not disclosed, see Agent. of bank to agent of undisclosed principal, 250. of bank for payment of forged check, 241n. of bank in tort, 250. of broker or agent on negotiation without indorsement, 144, 561. of concealed surety, 272, 273. of dormant partner, 39. of drawee retaining or destroying bill, 96, 652. of drawer, 140, 540. of drawer on memorandum check, 242, 243. of executor, 36. of guardian, 36. of indorser, when conflict of laws, 227, 233. of intlorser, when spendthrift, 32. of indorser, where paper negotiable by delivery, 143, 559. of indorser's, on bill of exchange, drawn in set, 70, 673. of indorser's prima facie, that of order of indorsement, 143, 559. of irregular indorser, 124, 548. of maker, 139, 538. of negotiator, by delivery, 144, 559, 561. of officers of government, 38. of officers of public corporations, 38. of parties generally, see Acceptor; Drawer; Indorser; Maker, etc. of partners after dissolution, 39. of partners on accommodation paper, 39. of partnership on firm notes, see Partners. of person whose name is forged, 241n. of principal for acts of agent, 35-37. of public officers, 38. of secret partner, 39. 792 INDEX. [references are to pages.] LIABILITY— continued— of secretary, 36. ' of signing by trade or assumed name, 49, 416. of silent partner, 39. of spendthrift, 32. of transferor by delivery only, 552, 553. of trustee, 36. order in which indorsers liable, 143. primary, 139, 697. qualified indorser, 144, 552, 553. secondary, 139, 697. under assumed name, 49, 416. under trade name, 49, 416. unqualified indorser, 143. without recourse, 144. where paper negotiated by delivery only, 552. LIBERTY BONDS— bad faith purchase, 263. liability of bank for theft, 264. negotiability, 263. payable to bearer, 263. stolen, 263. LIEN— extent of recovery by holder, 153, 442. on instrument constitutes holder for value, 152, 442. on instrument makes one a bona fide holder, 153, 442. on note, 442, 443. LIEN HOLDER— amount of recovery, 442, 443. amount of recovery by transferee from, 442, 443. is hoWer for value, 153, 442. maker as, whether discharged, 616. LIENOR— having lien on instrument a bolder for value, 153, 442. holder for value, 153, 442. LIMITATIONS OF ACTIONS, see St.^tute of Limitation.s. LIMITATIONS, STATUTE OF. see Statute of Limitations. LOST AND DESTROYED NEGOTIABLE INSTRUMENTS- burden of proof as to holder of, 256. contents of, how shown, 256. copy as evidence, 255. demand, protest and notice, 257. demand, protest and notice not excused by loss, 257. diligence of owner upon discovery, 253. form of indemnity bonti, 254. indemnity bond, 254. indemnity rule, 254. in general, 253. owner's diligence, 253. party liable not discharged, 254. INDEX. [references are to pages.] LOST AND DESTROYED NEGOTIABLE INSTRUMENTS— continued- protest, presentment and notice, 666. replevin of, 253. suit upon, 256. title to, 253. LOST OR STOLEN, 173. LOVE AND AFFECTION— as consideration, 74. LUNATIC, see also In.sane; In-sanity; Incompetent; Capacity — capacity of, 30. effect of undue advantage, 31. M MAIL— deposit in completes delivery, 62. deposit in mail chute, 602. miscarriage in effect of, 200, 601, 602. notice of dishonor may be sent by, 200, 594. 599, 601. MAILING— is delivery, 62, 695. MAKER, see also Parties, etc. — admits, 139, 538. admits capacity to contract, 139. admits payee owner, 139. bound without presentment, 193. buying instrument when discharges, 182. by what law liability of, governed, 230. defense as surety, see Surety. estopped to deny capacity of payee, 28, 31. estopped to deny insane payee's capacity, 31. if surety, rights against co-maker, 618. if surety, not entitled to notice of dishonor, 587. liable to indorsee of insane payee, 30, 31. liability. 538, 539. liability, if drunk. 31, 2)2. liability of, 139. 538. liability of anomalous indorser to. 548. 550. liability and admissions of, 139, 538. may be payee, 394. nature of contract entered into by, 139. 538.' note to ortier of not complete until indorsed. 676. possession by, presumption as to payment, 224. presentment for payment not necessary to charge, 563, 564. subject to lex loci contractu, 230. surrender of note to, 616. theft of note, 695. MAKERS— joint and several, 413. 793 794 INDEX. [references are to pages,] MAKER OR ACCEPTOR— estopped to deny capacity of infant, 28, 31. MAKER OR DRAWER— described, 5. MAKER OR INDORSER— doubt as to whether signature is that of, 338, 339, 413. MANAGER OF CORPORATION— power to issue negotiable paper, 40. MARGINAL FIGURES— discrepancy, words to control, 3, 52. effect of, 413. when may be changed, 52. MARGINAL NOTATIONS, 386, 400. MARK— as a signature, 48. MARRIED WOMEN, see also Coverture; Defenses— accommodation contract by, 451. as surety, 33, 162. capacity of, 32, 162. conflict of laws, 32. coverture, defense of good against bona fide holder, 162. incapacity of to contract at common law, 32, 162. indorsement by, 422. marital rights as consideration, 432. motlern statutes as to, 32. statutory changes as to contractual powers of. 32. . whether contracts enforcible, laws tabulated by states, 711, et seq. MARRY— agreement to, as a consideration, 75. MATERIAL ALTERATION, see also Alteration. examples of, 176. what constitutes, 637, 638. MATERIAL OF INSTRUMENT— cloth, 46. leather, 46. parchment, 46. MATURITY, see also Overdue Paper— action may not be l>egun on day of, 582. "after sight" bill accepted for honor, 103, 669. instrument payable "on or before," 385. instrument not overdue on day of, 486. mistake as to, 606. notice of dishonor may be given on day of, 598. time of, 580, 582. whether dishonor to postpone payment till late on day of, 572. MAXIMUM— memorandum as to limit of amount of check, 632. INDEX. 795 [references are to pages.] MEDIUM OF PAYMENT— alteration of, 636, 637. payment must be in money, 56-60. MEMORANDA— in general, 64. on instrument, 64. MEMORANDUM— constructive notice, 64. limiting liability of drawer, 540. of maximum amount of check, 632. on face or back of instrument, 64. to show liability of one who signs on back, 545. wliether part of instrument, 65. written contemporaneously, 65, 118. MEMORANDUM CHECK— in general, 242, 243. liability of drawer, 242, 243. AlERCHANDISE— not equivalent to money, 56. MESSENGER— of bank, 350. MILITARY DISTURBANCES— as excuse for non-presentment, etc., 202. MINOR, see Infanc\'; Inf.'Vnts. MISCARRIAGE IN MAILS— effect of, 200, 601. - MISDESCRIPTION— in notice of dishonor, 195. when does not vitiate notice, 195. MISREPRESENTATION— liability for, 422. MISSPELLING— of payee's or indorsee's name, 472. MISTAKE— in certification of check, 689. in date of maturity, 606. when failure to indorse through, 109. where instrument executed under rights of bona fide holder, 175, 176. MONEY— act in addition to payment of, 388. alteration of medium of payment, 636, 637. current, designation of particular kind of, does not affect negotiabilty, 59, 391. foreign instrument payable in, 59. in alternative, 56. instrument payable in particular kind of, 59 meaning of money, current money, current funds, currency and effect, on negotiability, 59. 796 INDEX. [references are to pages.] MONEY— continued- negotiable instrument must be payable in, 56, 369, 391, 646. of foreign country, 59. payment must be paid in, 56, 218. proceeds of fraudulent instrument, 433. what term includes, 59. MORAL OBLIGATIONS— not sufficient as consideration, 75. AIORTGAGE STIPULATION— effect of, 370, 371. 372, 2,72,. MUNICIPAL BONDS— statute applies to. see Coupon Bonds. MUNICIPAL CORPORATIONS— fiscal officer of, as payee of indorsee, 471. power to execute negotiable paper, 41, power to execute negotiable instruments, 41. securities of, not warranted upon negotiation. 553. unauthorized issue or sale of securities, 510, 511, 616. MUNICIPAL WARRANTS, 372. MUTUAL AGREEMENT— as to ante-dating, 47. as to post-dating, 47. N NAME— how indorse when misspelled. 112, 472^ of holder misspelled, indorsement by, 112, 472. of payee or indorsee wrongly designated, 472. signing in assumed or trade, 415. NECESSARIES— bill for, 30. note for, 30. note given for by infant, 161. NECESSARY PARTIES, see also Parties, etc.— name of drawee must appear, 60. name of maker must appear, 60. should be set out, 60. NEED— case of, 61. NEGLIGENCE— effect of, on bona fides, 175, 176. failure to discover or report forgery, 424. failure to indorse through, 109. fraud, a question of, 175, 176. in collecting instrument, 423. in custody of instrument signed in blank, 633. in facilitating forgery, 424. in facilitating detachment of note from contract, 632. INDEX. 797 [references are to pages.] NEGLIGENCE— continued— in getting intoxicated, 504. in leaving open spaces on instrument which facilitates raising, etc., 6Z2,. in mailing instrument to wrong person of same name as payee, 424. in not ascertaining nature of instrument signed, 502. in paying instrument without requiring its return, 538. in purchase as notice of equities, 508-512. leaving room for alteration, by negligent execution, rentiers party liable to bona fide holder, 178. of drawee in disregarding countermand, bars recovery of payment on forgetl indorsement, 424. of holder whether liable to refund to drawee if drawer's signature forged, 556. sending check to drawee for collection, 682. when contributes to negotiation, 178. NEGOTIABILITY— additional provisions not affecting, 56, 57, 388. all instruments originallj' non-negotiable, 17. conflict of laws as to, 228, 229. continuation of, 18, 127, 474. defined, 17. designation of particular kind of current money, does not affect, 58, 391. distinguished from assignability, 18. effect on, of restrictive indorsement, 17, 382. effect on, of instrument discharged by payment, 17. meaning of term, 17. necessity of promise to pay money, 19. not affected by contingency in mortgage, 371. not necessary that terms follow statute, 400. omission of place where drawn or payable does not affect, 46, 56, 68, 391. omission of value, recital tloes not affect, 44 et seq. origin of, 18. pleading must allege, 370. provision authorizing sale of collateral, does not affect, 57, 388. provision for discount, Z72). provisions in instrument which impair, 381, 388. provisions in instrument which do not impair, 367, 391. provisions of title remaining in vendor, 383. purpose of, 20. requisites of, 43, 44, 369. rules as to, 19. seal does not affect, 68, 391. words of. alteration, 637. words of, necessary, 369. words of, not required in indorsement, 463. words used to denote, 19. what law determines, 228, 229. 798 INDEX. [references are to pages.] NEGOTIABILITY OF PROAilSSORY NOTES, see also Promissory Notes — development of modern times, 15. opposed by common law judges, 15. NEGOTIABLE^ distinguished from non-negotiable, 19. in origin continues until restricted or discharged, 18. order on or promise to pay out of particular fund not, 55, 381. paper, 18. NEGOTIABLE BONDS— how made non-negotiable, 263, 706. indorsement, 262, 263, 706. made non-negotiable, 262, 263, 706. statement thereon, 262, 263, 706. NEGOTIABLE BY LAW MERCHANT— importance of knowing whether, 23. NEGOTIABLE INSTRUMENT— continues negotiable until restrictively indorsed or discharged, 474. constitutes value, 433. formal requisites, 369, 395. "instrument" means, 695. NEGOTIABLE INSTRUMENTS, see also Bills of Exchange; Prom- issory Notes; Coupon Bonds; Municipal Bonds; Bank Bill or Notes ; Certificates of Deposit, etc. bearing seal, 391. designation of particular kind of current money, 391. earliest form of, 15. form of, 1, 11. how discharged, 214 et seq, 615. imports, consideration, 64, 11 . in hands of receiver, 136. indication of particular form does not render non-negotiable, 381. instrument payable on contingency not negotiable, 385. instrument continues negotiable until discharged or restrictively in- dorsed, 474. ■must contain unconditional promise, 369. must be for payment of sum certain, 369. must be for payment of money only, 369. must be in writing, 369. must be signed by maker or drawer, 369. must be payable on demand or at determinable future time, 369. must be payable to order or bearer, 369. not tiated, 391. not specifying value given, 391. not specifying place where drawn, 391. not specifying place where payable. 391. option to require something in lieu of money, 388. omissions not affecting, 391. order to pay out of particular funds not negotiable, 58, 391. origin and development, 11. payment by, 20. INDEX. 799 [references are to pages.] NEGOTIABLE INSTRUMENTS— continued- payable on contingency, not, 54, 385. provision for sale of collateral, 57, 388. provision for confession of judgment, 57, 388. provisions as to collateral, 57, 388. rights of parties to, 134, 135. statement of transaction does not affect negotiable character, 381. waiver of benefits of law, 388. when may be attached, 135-136. NEGOTIABLE INSTRUMENTS LAW— adoption of, 15, 358. American Bar Association's work, 354. articles of, 368. codification of continental countries, 354. confusion before its adoption, 356. corresponding sections in the different states, 360, 361, 362, 363, 364, 365, 366, 367. history of, in U. S., 354. judicial notice of enactment in another state, 582. not adopted in Georgia, 714. object of, 355. origin and history of English Act of, 354. plea for its uniform construction, 692 et seq. purposes. 355. short title, 692. table showing the corresponding sections of the statutes in the dififer- ent jurisdictions, 360. 361, 362, 363, 364, 365, 366, 367. takes effect when, 358, 702. title, 353. what it codifies, 353. what it is, 353. when in effect in various states, 358, 359. where adopted, 358, 359. where failed to pass, 356. where first adopted, 456. where found in state laws, 360 et seq. where in force, 356, 358, 359. whether changes the law, 353. why not a federal statute, 354. NEGOTIABLE INSTRUMENTS WITH COLLATERAL SECURITY— acceptance of collateral security not payment, 285. accommodation paper as collateral security, 289. agreement to rely on collateral security, when payment, 285. amount of debt controls recovery on collateral, 287. collateral instrument should not be overdue, 281. collateral note negotiable, 283. collateral security must be exhibited, 286. defenses between parties privy to collateral security, 290. delay on original note to await maturity of collateral, 284. demand for payment, when sufficient, 286. discharge of indorser by release of collateral, 286. 800 INDEX. [references are to pages.] NEGOTIABLE INSTRUMENTS With Collateral Security— continued- effect of agreement for delay, 284. form of guaranty of collateral note, 291. form of note with collateral security, 280. form of note with transfer account, 291. guarantee may not surrender collateral securities without releasing guarantor, 289. holder may proceed against indorser before collateral, 286. holder of collateral a holder for value, 281. indorser's remedy, 290. indorsee's rights under stipulations in collateral note, 287. meaning of collateral security, 278. memorandum on collateral note, 284. negotiability affected by option to take possession of property, 283. negotiability of collateral note, 283. negotiability of demand note not affected by collateral. 282. negotiability of note with collateral, 282. negotiability of note providing for sale of collateral, 282, 285. negotiability not affected by stipulation as to bank's authority, 282. notice unnecessary when collateral security taken by prior party, 288. ownership of collateral negotiable instrument, 282. pre-exi3ting debt not value, 281. presumption as to ownership, 282. provision authorizing sale of collateral. 285. provision for requiring additional security, 285. satisfaction of debt through payment or sale of security. 290. separate obligations, 279. substitution of collateral securities, 290. surety discharged by release or loss of collateral, 289. surety not released by delay in enforcing collateral, 289. surrender of collateral as discharge, 287. surrender of collateral as Tlischarge of guarantor, 287. surrender of collateral security when releases indorser, 286. tender of collateral when payment demanded, 286. transfer of collateral instrument for pre-existing debt. 281. when accommodation makers and indorsers not liable, 289. when collateral security excuses presentment, protest and notice, 288. when holder of negotiable instrument as collateral is holder for value, 281. when holder receives collateral instrument free from equities, 281. when holder's possession of collateral not a defense in maker's favor, 286. when provision for additional securities renders non-negotiable, 285. when transferer must show damage by failure to present collateral security for payment. 288. when transfer is as collateral for debt not due, 281. NEGOTL^BLE IN ORIGIN— how long negotiable, 17. NEGOTIATE— power to, absence of words implying, 119, 463. NEGOTIATED-^ whether statement of law or fact, 4.57. INDEX. 801 [references are to pages.] NEGOTIATION, see also Indorsement; Delivery; Transfer — after payment by party secondarily liable, 626. an unreasonable time after issue, 155, 498. bill must be negotiated within reasonable time, payable on demand, 566. back to prior party, 127. by assignment, in general, 109. by delivery, 108, 128, 455. by delivery, liability of, 128. by delivery, warranties of, 552. by holder with notice, 153-157. by holder without notice. 153-157. by indorsement, 109, 455. by operation of law, 109, 130. by prior party, 127, 479. by whom may be, 109. discharge of bill by failure to present for acceptance or negotiate, 658. how made, 455. 462. in breach of faith. 150, 174, 175, 501. meaning of term, 17, 108. methotls of, by assignment, 109. by delivery, 108, 552. by indorsement, 108, 552. by operation of law, 109, 130. of parts of bill in set, 67i, 674. of demand note, an unreasonable time after issue. 66, 155, 498. prohibition of further, 119, 463. restrain for fraud, 81. title when by fraud, 142. to and by prior party, 479. what constitutes, 108, 455-457. when prior party may negotiate, 479. when provision for reimbursing payee, 370. when instrument negotiated, 17. / when overdue, 155. when drawer and indorsers released by delay in negotiating hill, 658. NON-ACCEPTANCE— dishonored by, 186, 661. duty of hoMer on, 660. efifect of. 186. omission to give notice of. does not affect rights of subsequent holder in due course, 203, 613. what amounts to, 186, 661. NON-COMPOS MENTIS, see also Lunatics, etc.— capacity, 30, 31. NON-EXISTING BILL— acceptance of, 93, 96. oral acceptance of, 93, 95, 96. NON-EXISTING PERSON— as payee, 395. 802 INDEX. [references are to pages.] NON-NEGOTIABLE INSTRUMENT— assignment of, how accomplished, 131 et seq. authority of agent to execute, 416. distinguished from negotiable, 19. illustration of, 25. in general, imports consideration, 78, 79, 427. indorsement of, 556. indorsed in blank, not negotiable, 396. payable to cashier if paj^able to bank, 471. presumption of consideration, 428. rights of parties to, 134. transferred by assignment, 131. valid between parties, 23. when subject to terms of mortgage, 372. whether affected by act, 471. NON-PAYMENT OF BILLS OF EXCHANGE— damages for, 675. dishonor b}', notice of when unnecessary, 203. "not transferable," renders note non-negotiable, Z12. notice of, where acceptance refused, 203, 613. result of dishonor by, 207, 579. statement of, not sufificient. 194. when dishonored by, 194, 578. when instrument is dishonored by, 194, 578. NOTARY— acceptance for honor made before, 102. as to proof of signature and seal. 204. attests payment for honor, 219, 220. certificate is evidence, 208. demand in person, 205. may act as agent to give, 196. may make protest, 664. minutes of, equivalent to protest, 212. must make demand, 211. must make presentment, 212. notice of dishonor may be made by, 207. protest by, 210. protest, how made, 204, 205. recognition given official, 210. signature may be printed, 204. NOTARY PUBLIC, see Notary; Protest. NOTARIAL ACT OF HONOR— necessary to payment for honor, 220. NOTE, see also Promissory Note and Notes — defined, 695 et seq. drawn to maker's order, not complete until endorsed, 43, 676. negotiable, promissory, defined, 43, 676. not affected by omission of date, 46 et seq. NOTE OR BILU- doubt as to whether instrument is, 338, 413. ' ' INDEX. 803 [references are to pages.] NOTES— new, not payment, 218. promissory, given for patent rights, 705. promissory, given for speculative consideration, 705. NOTICE, see also Notice of Non- Acceptance, etc. — actual, 154. agent giving, 195, 196. as to known solvency of prior parties, 154. before full amount paid, 500. by bank, 196. constructive, 154. defects in, 195. from apparent alteration, 633. from maker's possession of indorsed note, 509. from writing on instrument, 488. holder without, 153, 484. judicial, of seal, 351. memorandum is constructive, 64. must be in writing, 593. negotiation restrained when, 175. of defect to holder before full amount paid, 153, 500. of executory contract or of sale with warranty does not put pur- chaser on inquiry as to breach, 487. of infirmity in instrument or defect in title, what constitutes, 508. of limited authority of agent, 421. of non-payment, law governing contents of, 232. preliminary, when takes place of formal presentment, 1, 14. proof of, 350. to agent, 197, 595. to agent as affecting principal, corporation, etc., 489. to indorser for collection, 197. to indorser of overdue paper, 197. unnecessary to person secured against loss, 203. what amounts to, 154, 508. what constitutes, 154, 508. when only part paid for, 153. whether sufficient by telephone, 594, 596. with private secretary, 198. with wife, 198. written supplemented and validated by verbal, 195, 593. NOTICE OF DEFECT— what constitutes, 508-512. NOTICE OF DISHONOR— see also Dishonor— as between joint indorsers, 197. bank as agent may give, 196. by non-acceptance excuses notice of non-payment, 203, 613. by what mail to be sent, 199, 600. by whom given, 195, 589. contents of, 194. defined, 184, 194. delay in giving when excused, 202, 609. 804 INDEX. [references are to pages.] NOTICE OF DISHONOR— continued- duty as to collecting bank, 209. effect as to prior parties, 203, 591. effect as to subsequent parties, 203, 591. effect of deposit in branch post-office or letter box, 200, 602. effect of miscarriage in mails, 200. effect of notary's certificate, 208. effect of omission to give notice of dishonor by non-acceptance, 203, 613. effect of, when given by or on behalf of party entitled to give notice, 203, 591. enures to whose benefit, 591. failure to give, effect on original debt, 546. form of, 194, 594. given by agent, 195, 590, 592. in case of death, 198, 596. may be given by mail, 200, 594, 599. may be waived, 201, 605. may be given to party or agent, 197, 595. may be written or oral; terms of, 194, 594. may be delivered personally or by mail, 194, 594. may be given as soon as instrument dishonored, 198. miscarriage in mails does not impair validity of notice, 200, 601, 602. must be given, 196, 198, 586, 596. must be given to inVjorser, 197. 589. must be given to drawer, 197, 589. need not be signed ; written may be supplemented by oral, 195, 593. need not be given surety, if maker, 587. notary acts as agent of holder, 196. notice by stranger not sufficient, 196. notice by agent, 196, 592. notice need not be signed, 593. of non-payment after notice of non-acceptance, 613. omission of notice of non-acceptance and eft'ect, 613. pleading, 587. presumption as to delivery, 602. proof of deposit in postoffice, 602. received by purchaser of instrument, 484. sufticiency of description, 194. time in which indorser to give notice to prior parties, 598, 603. to anomalous or irregular intiorser, 544. to antecedent parties, time to give, 603. to assignors for creditors, 198, 598. to bankrupt. 198, 598. to joint parties, not partners. 197, 597. to partners, 198, 597. to whom may be given, 595. to whom must be given, 196, 586. 596, 661. to whose benefit notice enures, 20.^. waiver, 201, 605. waiver embodied in instrument, 607. waiver of after dishonor, 201. 605. INDEX. 805 [references are to pages.] NOTICE OF DISHONOR— continued- waiver of before dishonor, 201, 605. waiver of and of presentment, 570. waiver of protest, what it includes, 211, 608. waiver written over signature, 607. what will constitute reasonable diligence, 202. when cannot be given after reasonable diligence, 201, 576, 609. when delay excused, 202, 609. when dispensed with, 608, 610, 611. when given, 198, 598. when misdescription does not vitiate, 195, 593. when need not be given to drawer, 200, 610. when need not be given to indorser, 200, 611. when notice sufficient, 194, 593, 601. when notice dispensed with, 20O, 609. when notice deemed deposited in postofficc, 200, 601, 602. when part}' adds address to signature, 199, 604. where he is sojourning in another place, 199. 604. where he lives in one place and has office in another, 199, 604. where notice to be sent, 199, 604. where not sent by mail, 600. where must be sent; receipt of within time although mis-sent, 199, 604. where party dead, 196, 198. 596. where parties reside in same place, 199, 598. where parties reside in different places, 199. 599. where party has not given address. 199, 604. where principal obligor is dead, 198. where party bankrupt or an insolvent or assigns for creditors, 198, 598. who deemed agent to receive, 198. NOTICE OF EQUITIES— as bar to recovery, 484. / before full payment of agreed amount, 500. by special indorsement is not, 469. qualified indorsement is not, 467. what constitutes, 527. NOTICE OF NON-ACCEPTANCE, see also Notice, etc.— omission to give, does not prejudice rights of subsequent holder in due course, 203, 613. NOTICE OF NON-PAYMENT— place of sending, 199, 604. time allowed to one receiving, 199, 603. time when given, 198, 199, 203. timely receipt of irregular!}^ sent. 199, 604. to bankrupt or solvent, 198, 598. to be given person liable on investment when acquired by assign- ment. 132. to joint parties not partners, 198, 597. to partners, 198, 597. to whom given. 196, 197, 586, 595. unnecessary after notice of non-acceptance, 203. waived by waiver of protest, 211, 666. 806 INDEX. [references are to pages.] NOTICE OF NON-PAYMENT— continued- waiver of, 201, 605. waiver of, on whom binding, 211, 607, 608. when dispensed with, 202, 609. when failure to give excused, 201. when may be given by agent, 197, 595. when must be given, 198, 199, 578, 603. when need not be given to drawer, 201, 611. when need not be given to indorser, 201, 611. when sufficient in form, 196. when unnecessary, 200, 203. where acceptance refused, 203, 613. where addressed, 200, 601. where parties reside in different places, 199, 604. where parties reside in same place, 199, 604. NOTICE OF PROTEST see also Notice, etc.— effect of, 208. manner of sending, 4, 5, 208. to whom sent, 208. when drawer countermanded pa3rment, 205. NOTING FOR PROTEST, 664, 665. NOVATION— effect of, 222. OBLIGATION— of contract determined by lex loci contractus, 128, 129. OBLIGEES— joint presentment to, when not partners, 193, 574. OCCUPATION OF COUNTRY BY ENEMY— as an excuse for non-presentment, etc., 202. OFFICE— holder of, as payee, 42, 394. OFFICER— fiscal or cashier, instrument drawn or indorsed to, 112, 471. OFFICERS OF CORPORATIONS— implied power to issue negotiable paper, 41. OLD PERSONS— instruments executed by those incapitated, 163. OMISSIONS— construction in case of, 413. not affecting validity or negotiability, 45-56, 391. of date does not affect negotiability, 46, 391. of date, presumption as to, 47, 338, 401, 413. of date, same may be inserted, 47, 338, 401 413. of date, when interest runs, 47, 402. of place, where drawn or payable tioes not affect negotiability, 56, 58, 391. INDEX. 807 [references are to pages.] OMISSIONS— continued— of time of payment, 392. of value recital does not affect negotiability, 56, 58, 391. rules of construction as to, 338, 339, 413. to give notice of non-acceptance does not prejudice rights of sub- sequent holder in due course, 203, 613. ON OR BEFORE CERTAIN DATE— time of payment specified as, 55, 385. "ON PRESENTATION"— means payable on demand, 52, 392. OPENING STATEMENT, 348. OPERATION OF LAW— transfer by, 109. OPTION— of holder to require something in lieu of payment in money, 388. to pay in money or goods, 56. to pay "on or before" maturity, 385. to treat instrument as bill or note, 413, 644. ORAL ACCEPTANCE— good at common law, 86. in general, 86. ORAL AGREEMENTS— as to mode of payment, 336. ORAL ASSIGNMENTS, 133. ORDER— a bill must contain an, 49. 640. conditional, examples of, 49. illustrations and instances, 49, 50. instrument must be payable to or bearer, 369. instruments payable to, 50, 369, 394. instrument payable to order of drawer, 51, 394. instrument payable to order of maker, 51, 394. instrument payable to order of drawee, 51, 394. instrument payable to order of two or more payees, 51, 394. instrument payable to order of one of several payees, 51, 394. instrument payable to order of holder of office, 51, 391. in which indorsers are liable, 143, 559. of civility, as "please pay", etc., 50. out of a particular fund, conditional, 55, 381. payee must be named or indicated, 51. request, not sufficient, 49. statement of transaction, 57, 381. to do an act in atidition to pay, 57. unconditional, is essential, 49. when is instrument payable to, 50. when unconditional, 57, 381. word order unnecessary, 49. words "by paying", 50. words sufficient to express, 49, 50. 808 INDEX. [references are to pages.] ORDER OR BEARER— instrument payable to, 50, 51. words essential to constitute, 51, 395. ORDER TO PAY— see also Order— bill of exchange must contain, 49. ORIGINAL DEFENSES— when instrument subject to, 149, 523. ORIGINAL PARTIES— parol evidence between, 45. OTHER PARTIES— than immediate parties, 25. OTHER KINDS— of commercial paper, 258. OVERDUE — see also Overdue Paper, Etc. — indorsed when, 52, 392. indorsement presumed to be before, 125. in general, 504. rule where installment of principal or interest overdue, 156. when instrument payable on sight or demand deemed overdue, 52, 392. when payable on demand, 52. 392. OVERDUE BILL OF EXCHANGE— acceptance of, 91, 156, 653, 654. OVERDUE INSTRUMENT— acceptance of, 392, 653, 654. accommodation as defense, 449, 524. alteration, 632. equities let in, 489. holder of, not in due course but subject to defense, 404. indorsement of, 392. issued, accepted or indorsed, when, becomes payable on demand, 52, 392. ' not overdue on day of maturit.v, 486. payment of part of purchase price before and part after maturity, 500. payment to assignor with or without notice of assignment, 617. rights of prior owners against bona fide purchaser after maturity, 489. when demand instrument is, 498. when payable on demand, 392. whether made so by default of interest, 488. OVERDUE PAPER— installment, overdue efYcct of, 156. interest past due docs not render whole due, 156. may be transferred, 156. rights of transferee, 157. set-ofif good against transferor, not good against transferee, 157. transferee of, takes subject to what equities, 157. OWNERSHIP— of instrument by princijjal debtor, effect of, 215, 223, 224. 615. presumption as to, when possession, 266. INDEX. 809 [references are to pages.] "PAID"— effect of stamping an instrument with, 583, 617, 647. PAID CHECK, 244. PAPER MONEY— defined, 265. how treasury note differs from others, 265. most common form, 265. PAROL EVIDENCE— admissibilit\ of. to show intention in cases of irregular indorsement, 125. admissible to show suretyship or accommodation, 450. admissible to explain memoranda on instrument, 400. as to acceptance, 339. as to accommodation party, 450. as to ambiguity, 45, 338. as to amount, 334. as to capacity, 419. as to concealed sureties, 272. as to conditions, 341, 410. as to consideration, 336. as to date, 333. as to demand, 343. as to execution and delivery, 339. as to fraud and duress, 45, 341. as to intention, 414. as to interest, 336. as to mistakes, 45, 341. as to mode of payment, 335. as to note itself, 344. as to partial failure of consideration, 446. as to parties, 331. as to place of payment, 335. as to protest and notice, 344. as to reasonable attorney fee, 334. as to transfer, 340. as to usury, 343. generally inadmissible to vary or contradict written instrument 334. in general, 556, 560. not admissible to show principal is payee of instrument payable to agent, 471. to establish agreement as to extension of time. 332. to show order of indorser's liability, 559. to show accident, 45. to show failure of consideration, 45. to show fraud between the original parties, 45. to show intention as to date, 46, 47, 334. to show intention as to time, 332. to show mistake, 45. to show mistake in date, 45. 810 INDEX. [references are to pages.] PAROL EVIDENCE— continued— to show signer an agent, 419. to vary liability of agent who negotiates by delivery, 562. to vary effect of blank indorsement, 462, 545. to vary status of person signing instrument, 419. to vary liability of indorser, 549. when admissible, 332-345. when admissible to supply omissions in certificate of protest, 344. when not admitted as to time, 332, 333. when true time by fraud not stated, 332, 333. PART PAYMENT— in good faith, 181. ordinarily only payment pro tanto, 219. when operates as satisfaction, 219. PARTIAL— failure of consideration. 444-446. failure of consideration, parol evidence as to, 45. indorsement not permitted, 114, 417. PARTICULAR FUND— in general, 55, 381. instrument not negotiable when payable out of, 55. order on or promise to pay out of, not negotiable, 381. payment out of, 55, 381. PARTIES — see also Acceptor; Agent; Capacity, Etc. — change in personality, number or relation of, constitutes material alteration, 176. competency of, as witnesses, 330. defenses admissible between immediate parties, 159, 173, 175. immediate, who are, 173. immediate and remote, who are, 173. immediate, necessity for consideration between, 77. liabilities of, in general, 139. mental capacity lacking, 30. those not incapacitated, 33. warranty of capacity of, 140, 540. PARTIES, PLAINTIFF OR DEFENDANT— see Action on Nego- tiable Instruments. PARTIES TO BILL OF EXCHANGE— drawee, 11, 60. drawer, 11, 60. payee, 11, 60. PARTIES TO CHECK— drawee, 11. drawer, 11. payee, 11. PARTIES AND THEIR CAPACITY— see also, Capacity; Parties, Etc. in general, 27. PARTIES PARTIALLY OR WHOLLY INCAPACITATED— in general, 28. INDEX. 811 [references are to pages.] PARTIES TO NEGOTIABLE INSTRUMENT— see also, Parties, Etc. PARTIES TO ACTION — see Action On Negotiable Instrument. PARTNERS— acceptance by, 98. accommodation paper executed by one partner not binding on firm, 39. check of, effect of withdrawal of funds by partner, 683. dissolution of partnership, 39. dormant, 38-40. doing business in violation of law. instrument payable to, 539. firm not liable on paper issued in firm name for private debt of one partner, 38-40. general authority of one partner to bind firm, 38. implied power to make negotiable paper, 38-40. indorsing firm note, 545. liability of retired partner, 39. liability on accommodation paper, 38-40. liability when credit given to one member, 38-40. notice of dishonor to, 198, 597. one member of non-trading partnership cannot execute negotiable instrument without consent of all, 38-40. one or more may bind firm when, 39. payment to joint obligors when not, 193, 574. presentment for payment by and to, 193. presentment to, 193, 573. presentment to, for acceptance of bill of exchange, 193, 573. secret, 39. silent, 39. signature by agent; 419. trading partnerships, negotiable instruments negotiated by one part- ner bind firm, 38. transfer by one partner of paper held by firm, 510, 511. when notice of dissolution necessary, 39. PARTNERSHIP— see also Partners— check drawn by, 249. PARTS OF FOREIGN BILL— see Bills In a Set. PARTY TO FRAUD OR ILLEGALITY— meaning of, 524. PASS-BOOK, 646. PATENT RIGHT— see Rights ; Patent. instrument given for, 58, 705. negotiable instruments given for, 58, 705. note for purchase price of patented article, 58, 705. note for use of patented article, 58, 705. note given for, when void, 80. notes, 58. words "given for a patent right", 58, 705. PATENT— worthless, 80. PAY TO ANY BANK OR BANKER, 464. 812 INDEX. [refekences are to pages.] PAYABLE AT BANK-^ equivalent to an order, 583. presentment, 192, 572. when instrument is made, 66. PAYABLE IN AIONEY— confession of judgment clause effect, 58. efifcct of adding something else, 56, 57. effect of an alternative, 56. effect of making payable in paper or currency of a particular bank, 59, 391. effect on making payable in work, 56. money and wheat. 390. necessity of, 56. option to receive money or stock, 389. of a foreign country, 59. what is, 59. PAYABLE ON DEMAND— when, 392. PAYABLE TO BEARER— negotiated by delivery, 51. no indorsement necessary, 110. special indorsement on instrument made, 128, 462. when, 51, 395. PAYABLE TO ORDER— negotiated by indorsement. 17, 455. pa\ee named, 50. 394. to whom, 51, 394. when. 50, 394. PAYABLE TO ORDER OR BEARER— effect of wortls "to order of A", 50. effect of words "to the bearer", 50. effect of words "this is and shall be negotiable", 50. pleading must allege, 370. P.AYEE — see also Parties, Etc. — acceptance admits existence, 541. alternative payees, 394. alteration of name before indorsement, purchaser not holder in due course, 632. as holder in due course. 511. blanks for name of, 393. capacity of, to indorse admitted by acceptance, 140, 540. infants as, 28. joint payees, 394, 470, 559. must be designated, 60, 394. must be named or indicated with reasonable certainty, 51, 394. maker, drawer or acceptor admits existence and capacity of payee to indorse, 538, 541. non-existing person, 61, 395. one of several, 394. on payment should surrender instrument to payer, 218. rights against anomalous indorser, 548, INDEX. 813 [references are to pages.] PAYEE — continued — rules concerning nomination of, 60, 61. when fictitious, 61, 395. who must be, 60, 394. whether holder in due course, 511. PAYER— not primarily liable, rights of, 217. presentment of paper should be made to, 207. supra protest rights of, 220. PAYER FOR HONOR— rights of, 220, 672. succeeds to rights of party for whom he pays, 220, 672. PAYMENT— see also Discharge— acceptance of instrument statetl to be in full payment, 686. after notice of defective title, 688. alteration after, 632. applications of instrument to wrong account, 617. as satisfaction of forged instruments, 424. authority to receive, 216. bill protested for non-acceptance mav be protested for non-payment, 665. by another bill or note, not a discharge, 218. . by bank, altered check, 241. by check, note, etc., 20, 21. by fraudulent payee discharges instrument, 627. by guarantor not discharge. 627. by negotiable instrument, 20. 21. by one secondarily liable does not discharge, 182, 626. by party accommodated discharges instrument, 215, 615. by partv secondarily liable does not discharge instrument, 182, 215, 626. by party secondarily liable, effect of. 182. 216, 626. by primary party, discharge, 182, 481, 615. by principal debtor, 182, 215, 615. by stranger presumptively a purchase, 623. by subsequent indorser no defense to prior indorser, 627. by surety maker not a discharge, 618, 627. by surety on appeal bond of prior parties, whether subrogation against subsequent party, 623. by whom made, 215. check may be accepted as, 235. conditional, what amounts to, 218, 219. conditional, negotiable instrument as, 623. debtor's note is conditional, 20. defined. 215. delivery of instrument on, 190. 571. discharge of instrument by, 215, 481. distinguished from sale, 215. effect of payment by indorser, 626-628. effect of stamping "paid" 216. extending time of, effect on party secondarily liable, 621. fact of, must be certain, 54. 814 INDEX. [references are to pages.] PAYA'IENT— continued- indorsement of is not a material alteration, 631. in due course defined, 182, 218, 584. in due course discharges instrument, 182, 215. instrument bought by maker when amounts to, 182. medium of, 235, 636. must be made in money, 218. new notes do not act as, 218. no time for expressed, means payable on demand, 392. not a contract, 215. note cannot be split into parts, 217. of check must be in money, 235. of bill drawn in set without surrender of bill, 141, 674. of forged check, 241n. of negotiable instruments, 214, 615. of one part of bill drawn in set, 71, 674. of antecedent debt as value, 432. of bill in set, 674. of check after countermand, effect, 434. of check by charging drawer's account, 652, 686. of check by certification, 686. of raised check by bank, 240. presumption that not, but purchase, 217. of stale check, 243. ordered in check subsequent to date, 236. option to require som.ething in lieu of payment in money, 388. part payment, 219. partial, extinguishes debt pro tanto, 219. partial, when discharges debt, 219. payer should demand surrender of instrument and take receipt, 218. payer should see that holder's title is genuine, 218. presentment for, 188-194. delay in when excused, 192. effect of failure to make, 193. necessary to charge drawer and indorsers, 184, 188, 563. not necessary to charge principal debtor, 188. place where made, 192. time when made, 191. to person not legal holder of instrument, 434. to accommodation indorscr, 189, 575. unnecessary when acceptance refused, 187, 661. when not required to charge drawer, 188, 574. when dispensed with, 189, 575. tender of made bv prior party, effect on party secondarily liable, 225, 621. through clearing house, 616. time of, need not be definitely ascertained, if sure to come, 54. to whom made, 215. to holder discharges instrument, 481. to transferor without indorsement before notice of transfer, 617. M'ith money obtained by frau^l, instrument not discharged, 617. what bills must be protested for non-payment, 662. what law governs, 231. INDEX. 815 [references are to pages.] PAYMENT-^ontinued— when bill or note of third person payment, 20, 21. when made in due course, 218, 584. when new note payment, 20. when payment may be made, 52, 392. when stranger's note payment, 20, 21. PAYMENT FOR HONOR, see also Payment, Supra Protest— applies only to bills of exchange, 219. attested by notary, 220, 672. by two or more parties, 220, 672. by whom, 219, 671. declaration of, 220, 672. declaration of intention, 220, 672. discharge of parties by, 219, 672. discharge of parties subsequent, 220, 672. effect of, 220, 672. effect of holder refusing to receive, 220, 672. effect of refusal to receive, 220, 672. effect on subsequent parties, 220, 672. for whom, 220, 671. how made, 220, 671. in good faith to holder with defective title, 218, 584. in installments does not affect negotiability, 54, Zld. liability of prior parties, 220, 672. motle of making, 220. 671. notarial act of honor, 220, 671. payer subrogated to rights of party for whose honor payment made, 220, 672. preference among persons offering, 672. prior dishonor and protest, 220, 671. rights of payer for honor. 220, 672. where holder refuses to receive payment, 220, 672. when made, 219, 671. when may be made, 219, 671. when proper, 219, 671. PAYMENT IN DUE COURSE— against prior party, 217. by accommodated part}-, 216. by maker or acceptor, 216, 217. discharge of instrument, 182, 214. effect of, 215. how to be made, 216, 217. made by person secondarily liable, rights on, 216. rights to negotiate, 216, 217. to whom made, 216, 217. what constitutes, 214. PAYMENT IN DUE COURSE— what constitutes, 584. "PAYMENT SUPRA PROTEST"— see also Payment for Honor— in general, 218. when may be made, 219 816 INDEX. [references are to pages.] PEDDLER'S NOTE— consideration required to be stated in, 716. PENALTY FOR USURY— laws tabulated by states, 708, 709. PENCIL— signature in, 46. PER PROC— signature, Z1 . writing may be in, 46. PERSON — see also Persons — defined, 376. fictitious or non-existing, see Fictitious Person. in general, 345. notice as to, when secured, 203. PERSONAL DEFENSES— see also Defenses— admissible between whom, 173. defined, 158. evidence as to, 351. PERSON PRIMARILY LIABLE— meaning of, 697. PERSON SECONDARILY LIABLE— discharged when, 225. meaning of, 697. PERSONAL REPRESENTATIVES, see Executors and Adminis- trators — presentment to, 193, 573. when given notice, 198, 596. PERSONS— alien enemies. 2>2). bankrupt or insolvent payer, ZZ. drunkards, 31. married women, Z2. spendthrifts, 32. PETITION, see Complaint — PLACE>- alteration as to is material, 636. alteration as to place, 636. acceptance to pay at particular, 654. for presentment for acceptance, 657, 659. necessity of specifying, 391. of acceptance, 185, 186. of drawing or payment need not be specified, 56, 39L of drawing instrument, necessity of specifying, 56, 391. of indorsement, presumption as to, 125, 329, 474. of payment — blanks for, 192. of presentment — for payment, 192, 569, 570. of protest, 204, 205, 663, 664. of serving notice, 199, 604. of signing estoppel by misrepresentation, 474. INDEX. 817 [references are to pages.] PLACE — continued — of pa>Tnent of bill, may necessitate presentment for acceptance. 657, 659. omission to specify, immaterial, 56. presumption as to place of indorsement, 474. where drawn or payable, omission of, does not affect negotiability, 56. PLACE OF PRESENTMENT, see also Presentment— alteration in, 176. proper, what is, see Presentment for Payment, 570. to acceptor for honor, 103, 669. PLAINTIFFS, see Acn-ioNs on Negotiablk Instruments— PLEA— of tender must be profcrt. 351, 352. PLEADINGS, sec also Complai.vt; Decl.ar.ation ; Forms of; Common Law, and Code Pleading — acceptance in writing, 87, 646. after complaint or declaration, 304. bank credit as want of value, 441. l>reach of warranty on chattel, 503. classes of. 303. complaint, 304. complaint against indorser, 555. complaint against anomalous indorser, 549, 550. confession and avoildance, 304. conditional delivery, 409. consideration, 444. defenses to reduce recovery by lien holder. 443. defense of want of consideration, 444. delivery, 428. demurrer, 305. effect of failure to plead written acceptance, 87. extension of time, 622. equitable defenses, 474. failure of consideration, 444. holding in due course, 487. in abatement, 304. methoti of transfer. 456. meaning of term, 303. must allege negotiability, 370. note payable to maker's order, 677. notice of dishonor to indorser must be alleged, 587, 588. object of, 303. order of, 303. payable to order or bearer must be alleged, 370. plea in bar, 304. presentment for payment, notice of dishonor and waiver, 612. questions presented by, 303. to the jurisdiction, 303. traverse, 304. when check dishonored, 587. where payment countermanded, 587. 818 INDEX. [references are to pages.] PLEDGE— of negotiable instruments, 153, 442. PLEDGEE— a holder for value, 441. POLITICAL DISTURBANCES— as excuse for non-presentment, etc., 202. POSSESSION— . of unindorsed instruments, whether prima facie evidence of right to sue or ownership, 477. presumption from, 266, 329. whether preferential payment by maker discharges, 617. POST-DATED, 401. POST-DATED INSTRUMENTS— instrument not invalid because post-tlated, 401. is negotiable, 401. negotiation of, 401. provisions as to, 47, 401. POST-OFFICE, see Mail. money order, 266. what constitutes deposit in, 602. POST-DATING INSTRUMENT, 47, 401. efifect of, 393. mutual agreement as to, 47. not invalid because post-dated, 401. not notice of equities, 401. when title passes, 401. POWER OF ATTORNEY— to confess judgment, 57. POWER TO NEGOTIATE— absence of words implying, 119, 463. PRECLUDED, meaning of, 424. PRE-EXISTING DEBT— as a consideration for negotiable instruments, 72, 432. constitutes value, 432; see also Value, is valuable consideration, 72, 432. PREFERENCE— whether preferential payment by maker discharges, 617. PRESENTATION— instrument payable on, is payable on demand, 392. PRESENTMENT, see also Presentment of Check; Presentment for Acceptanck; Presentment for Honor; Presentment for Pay- ment Supra Protest. See Failure to Present. at dwelling, 100, 570. at place of residence, 56, 570. benefit derived from, 185. by agent, 189. by notary in person, 205. by whom made, 189, 568. damages for failure of, by bank, 237. INDEX. 819 [references are to pages.] PRESENTMENT— continued- defined, 183. delay in making excuses, 576. demand over phone, 190. during banking hours, 572. excuses for want of, see Excuses for Non-Presentment, Protest and Notice, exhibition of instrument on, 190, 571. how made, 212, 568. if holder is bankrupt, assignee must make, 198, 598. if holder is dead, representative must make, 198, 596. if no representative, should be made at dwelling of deceased or at place where payable, 198, 596. informal talk not sufficient, 190. instrument must be exhibited, 571, 572. laws of, tabulated by states, 708, 709. may be waived, 184. mode of, 189, 568. not personal, 187. not required where payment stopped, 187. presentment and notice explained, 3. personal demand not necessary, 187 place of, 189, 570, 571. proof of, 350. time for, 189, 566. time of, 190, 5(56, 580. time when made, 189, 566. to acceptor for honor, how made, 101, 667. to agent of drawee, 198. to joint debtors, 574. to persons liable as partners, 573. to whom made, 189, 569, 573. two times, 212. waiver of protest also waives, 211. waiver of exhibition of the instrument, 190. what law controls formalities of, 232. what law governs, 232. what sufficient, 568, 569. when at place of business and when at residence, 570. when dispensed with, 576, 577. when drawer bound without presentment, 574. when indorser holds security, 194. w^hen necessary, 189. when payable at bank, 192, 572. where drawee dead, 193, 573. where drawees joint, 193, 574. where drawees partners, 193, 573. where made, 55, 56. where make, 187, 189, 570, 572. where making of check fraudulent, 189. where not payable on demand, 566, 567. where payable at bank, 572. where payable on demand, 566, 567. g20 INDEX. [references are to pages.] PRESENTMENT— continued— where principal debtor tlead, 573. where several promisors not partners should be made to each, 193, 574. PRESENTMENT FOR ACCEPTANCE, see also Presentment— applies only to bills of exchange, 86. before bill is overdue, 658. effect of failure to make, 658. excused where drawee dead, 100, 660. excused Avhere drawee has absconded, 100, 660. excused where drawee is fictitious person, 100, 660. excused where drawee hati not capacity to contract, 100, 660. excused where cannot be made after reasonable diligence, 100, 660. duty of holder upon nonacceptancc, see Holder. how presentment made, 98, 658. must be by or on behalf of holder, 98, 184, 658. must be at reasonable hour, 185, 658. must be on business day, 185, 658. must be to drawee or some person authorized to act for him on part holidav. 99. 186, 658. 659. on Saturday. 99, 186. 658, 659. on what days may be matle, 186, 659. place of. 100. result of failure in, 98, 186, 658. time when made, 185. to dead drawee, how made, 98, 658. to partners of bill of exchange, 98. to whom made, 98. what bills do and who do not require presentment for acceptance, 185. when essential, 185. when delay excused, 186, 659. when excused, 100, 660. when failure excused, 186, 650 . when made. 185, 657, 658. when may be made, 97, 185. 657. when must be made. 97, 185, 657. when necessary, 185, 657. when time is insufficient. 186, 659. where drawee is bankrupt or insolvent, 98. 658. where drawee is dead. 98, 658. where tlrawer and indorsers released, 658. where bill payable after sight, 185, 657. where bill expressly stipulates for, 185, 657. where bill not payable at drawee's place of business or residence, 185. 657. where there are two or more drawees not partners, 658. where required to fix maturity, 185, 657. PRESENTMENT FOR HONOR, see also Presentment: Present- ment Supra Protest — on referee in case of need, delay in, when excused, 187, 644. PRESENTMENT FOR PAYMENT, see also Presentment— at bank, 192. 572. burden of proof and pleading, 682. INDEX. 821 [refei^nces are to pages.] PRESENTMENT EOR PAYMENT— c.ntimud— certificate of deposit, 567. computation of time, 190, 582. tiate of, 190, 580. delay in when excused, 191, 576. demand over telephone, 190. dispensed with by dishonor, by non-acceptance, 661. drawer and indorsers discharged unless duly made and notice of, 188, 574. efltect of delay, 192, 576. effect of failure to make, 193. effect of failure where instrument payable at a particular place, 187. effect on parties, 563, 564. excuse for does not excuse notice of tlishonor, 572. holder has entire day in which to make, 190. how made, 189, 568. instrument dishonored for nonpayment when, 578. instrument falling due on Sunday, 191, 580. instrument falling due on holiday, 191, 580. instrument falling due on Saturday. 191, 580. instrument should be actually exhibited and delivered, 190, 571. instrument must be cxiiibited. 190. 571. legal holiday, not to he made on, 191, 580. may be waived, 189. 576. must be made on day of maturity, 191, 580. necessary in order to charge drawer or indorsers, 184, 188, 563. not necessary to bind acceptor or maker. 193. not necessary to charge principal debtor, 188, 574. not necessary to charge party primarily liable, 188, 563. not necessary when bill has been dishonored by non-acceptance, not presentment for acceptance, 653. not dispensed with by insolvency of maker, 567. of instrument payable at bank, 192, 572, 583. of instrument payable on demand, time for making, 191, 566. of instrument not payable on demand, 191, 566. place of presentment, 187, 189, 192, 570. proof of, 350. proper place for, 570. Sunday, cannot be made on. 191, 580. time for, how computed. 190, 582. to acceptor for honor, 669. to accommodation indorser, 189. to joint obligators not partners, 193, 574. to joint parties who are not partners, 193, 574. to persons liable as partners. 193, 573. to partnership, 193, 573. to whom made, 189. unnecessary when acceptance refused, 187, 661. want of, effect on original debt, 193. waiver of, 189, 576. waiver of notice of dishonor, 570. . what constitutes sufficient presentment, 189, 568. 822 INDEX. [references are to pages.] PRESENTMENT FOR PAYMENT— continued— what will amount to waiver, 189, 576. what sufficient, 189, 568. what essential, 188, 568. when delay excused, 191, 576. when dispensed with, 189, 576. when made to personal representative, 193, 573. when must be made, 191. when not required to charge tlrawer, 189, 574. when not required to charge indorser, 575. when payable on demand, 191. when person primarily liable is dead, 193, 573. when place of payment specified, 187, 192, 570. when presentment made in person, place unimportant, 187. where cannot be made, 576. where drawee is fictitious person, 189, 576. where indorser holds security, 194. where instrument payable on demand, 191. where instrument payable at bank, 192, 572. where maker or acceptor has abandoned place of business, 187, 192, where made, 187. 570. where no place of paj'ment indicated, 192, 570. where persons primarily liable are partners, 193, 573. where person to make payment has removed, 570. where principal debtor dead, 193, 573. within what time check must be presented, 191, 566. PRESENTMENT OF CHECK, see also Presentment; Presentment FOR Acceptance; Presentment for Payment — must be in reasonable time, 191, 237. when must be made, 191, 236. PRESENTMENT SUPRA PROTEST, see also Presentment for Honor — ■ when and how made, 101, 667, 668. PRESUMPTIONS, sec Evidence also— as to cash at bank, 344. as to conditions, 11, 102. 341, 342. as to consideration, 329, 427, 429. as to continuation of agency. 38. as to date, ZZZ, 400. as to date of acceptance, 329, 400. as to date of drawing, 400. as to date of indorsement, 329, 400, 473. as to date when none appears, 329, 473. as to debt, 330. as to delivery, dZ, 408. as to execution and delivery, 339, 408, 427. as to filling date in blank, 333. as to holding in due course, 149, 527. as to indorsee's authority to fill in date, 333. as to indorsement without date, 334. as to law merchant, 350. as to liability when instrument signed by several, 330. INDEX. 823 [references are to pages.] PRESUMPTIONS^:ontinued— as to ownership when in possession, 266. as to parties, 2iZ7, 338. as to payment of debt, 330. as to payment and discharge, 343. as to payment when possessed by owner, 330. as to place, 329, ZiZ, 474. as to place of indorsement, 125, 329, 474. as to place of payment, 335. as to presentment, 344. as to settlement of accounts, 330. as to second indorser, 125. as to signature, 329, 427. as to time of indorsement, 125. as to title, 348. as to transfer, 340. as to undated indorsement, 349, 473 as to valuable consideration, 329. changed by evidence, 329, 330. delivery, 63, 408. from possession of unindorsed instrument, 477. from several inks and handwritings, 404. importance of, 330. in general, 329. of authority to fill blanks, 403. of capacity, 31, 32. of capacity of married woman, 31, 32. of sanity, 31. order of liability of intiorsers, 559. some, 329. that all terms stated therein, 348. that bill is an inland bill. 44. that holder is owner, 329. that holder entitled to recover full amount, 329. that issued for valuable consideration, 329. that payee a bona fide holder, 329. that regularly issued, 329. what extension of time indorsed on instrument, 329. when instrument is introduced in evidence, 348. where laws in conflict, 349, 350. when notice of dishonor is mailed as to arrival, 601. PRICE OF GOODS AND CHATTELS— notes in payment of, 55. PRIMARILY LIABLE, meaning of term, 697. PRIMARY PARTY, see also Parties— chargeable without presentment for payment, 563. meaning of, 697. who liable as, 139. PRINCIPAL, see also Agent; Principal and Agent — change in amount of, constitutes material alteration, 176. may sign by agent, 416. not liable unless signature on instrument, 415. 324 INDEX. [references are to pages.] PRINCIPAL— continued— liable on instrument with cashier or fiscal officer as uidorser, 471, signature by procuration, 421. signature on behalf of, liability of agent and principal, 417. PRINCIPAL AND AGENT— knowledge to agent is knowledge to principal. 154. PRINCIPAL DEBTOR— effect of ownership of instrument by, 214, 615. effect of release on party secondarily liable, 225, 621. when possession by, discharges instrument, 223, 224, 615. who is, 207. PRINCIPAL AND SURETY, see Surety— PRINT, included in "writing," 695. PRINTED AND WRITTEN— provisions, conflict between, 338, 413. signature of notary, 663. PRIOR PARTY— negotiation by, 127, 479. PRIVATE CORPORATIONS— power to become parties, 40. PRIVY PARTIES, see also Immediate Party— when, 173, 174. PROCEDURE, see Trial Procedure— PROCURATION— authority, Zl, 48, 421. signature by. 48, 421. PRODUCE DRAFT, 383. PROFERT— when must be, 352. PROHIBITION— of further negotiation, 463. PROMISE- to accept bill of exchange, 94, 650. to do an act in addition to pay, 57. 388. unconditional not affected by certain provisions, 57, 381. words of promise required, 49. word promise unnecessary, 49. wortls "on demand," 51. PROMISE TO PAY, see also Order— bare acknowledgment of debt insufficient, 51. conditional, examples of, 58, 381. illustrations of forms of words indicating, 49. must be an express promise, 49, 51. must be contained in promissory note, 49, 51. must be unconditional, 49, 381. out of particular fund, conditional, 58, 381. statement of consideration, 58. statement of transaction, 58. 381. PROMISSORY NOTE, see also Negotiable Instruments— amount. 2, 676. amount in figures, 2. ambiguous instrument may be considered bill or note, 413. another form of, 2. INDEX. b'J5 [references are to paces.] PROMISSORY NOTE— continued— "Bohemian oats," 181. certainty of promise in, 676. date, 2, 676. defined, 43, 676. drawn to maker'.s own order, 394. effect of statute of Anne on, 15. form of, 1, 2. general characteristics, 2, 3, 4, 676. given for patent rights, 58. given for speculative consideration, 164. introtluction into England, 15. may be payable to maker's order, 394. meaning of term, 676. negotiable defined, 43. negotiability of, 15. new notes, when payment, 219. note means, 695. non-negotiable notes, 43. order of, 3. origin and history, IS. origin under law merchant, 15. parties to, 2, 3. payee, 3. place, 2, 3. place of payment, 3. promise, 2. to maker's order, not complete without written indorsement, 676. time, 2. use among Romans, 15. when hill may be treated as, 413, 644. when holder may treat as bill or note, 413, 644. whether negotiable at common law, 15. PROOF— by protest, 207, 208. demand and dishonor must be shown, 587. drawer's refusal when protest, 204. of foreign law, 349, 350. of authority to act as agent of corporation, 3S. of presentment for payment, etc., 350. seal and signature of notary, 204. through special indorsement, 117, 139. PROOF, BURDEN OF. see also Burden of Proof— of agency, 37, 38, 49. 416. of foreign law, 349, 350. of payment, how made, 350. of presentment, how made. 350. of signatures. 349, 350. personal defenses, 351. where defense shows fraud, 351. where defense shows lack of consideration, 351. where laws in conflict, 349, 350. S26 INDEX. [references are to pages.] PROTECTOGRAPH, see Alteration— PROTEST— as between joint indorsers, 197. before maturity where acceptor insolvent, 665. both for non-acceptance and non-payment, 210, 613, 665. by whom made, 205, 664. cause for protesting the bill, 663. certificate of, as evidence, 208. certificate of, not conclusive, 614. certificate of, evidence of dishonor of foreign bills, 208. collateral facts in, 208. conflict of laws as to, 212. contents of, 663. defined, 207. delay in making when excused, 205- ■demand made and answer given, 664. effect of when not required, 210. evidence of what, 208. excuses for want of, see Excuse for Non-Presentment .Protest and Notice. extending protest, 664. for better security, when made, 666. for non-payment, when necessary, 211, 666. form of, 205. form for notice of, 209. how must be made, 204. inland bills may be, 210. manner of, 204. may be made in case of dishonor of any instrument, 210, 613. may be made for both non-acceptance and non-payment, 210, 613. may be made by notary public, 205, 664. may be made by resident, 205, 664. meaning of, 183, 204. minutes of notary equivalent to, 212. miscellaneous matters, 211. must be annexed to bill, 204, 663. must be made for non-acceptance and non-payment, 210, 662. must be made under hand of notary. 204. 663. must be made under seal of notarj-, 204, 663. must specify time and place of presentment, 204, 663. must specify fact that presentment was made. 204, 663. must specify cause or reason for, 663. necessary in case of foreign bills, 210, 613, 662. necessary only on foreign bill of exchange, 210, 613, 662. necessity for, 207. notary must have personal knowledge of presentment and demand of payment, 204. notice, effect of, 208. notice of, 208. notice of, to whom sent, 208. not required except in case of foreign bills, 210, 613. noting and extending time of, 665. of bill accepted for honor, 103, 670. INDEX. 827 [references are to pages.] PROTEST— continued— of bill dishonored b^^ acceptor for honor, 103, 670, of destroyed bill, d^. of foreign note when indorsed, 210. of inland bill or note, 210. of lost bill, now protested, 212, 666. on copy, 204, 663. on written particulars, 210, 212. place of, 205, 665. presentment must be by notary himself, 204. proof by, 208. proof of at trial, 207. purpose of, 207. seal necessary. 204. time within which certificate of must be prepared, 205. unnecessary unless bill appears on its face to be a foreign bill, 210. use of, at trial, 208. validity of, determined by law of place where made, 212. waiver of, 211, 608. waiver of, effect on negotiability, 623. waiver of, upon whom binding, 211. waiver of, waives also presentment and notice of dishonor, 211, 608. what certificate of, must contain, 204. what instruments must or may be protested, 210, 662. what law governs, 210. what waiver of includes, 211. when bill is lost, destroyed or wrongly detained, 212, 666. when delay is excused, 211. when dispensed with, 211, 666. when drawer countermanded payment, 205. when made, 205. when must be made, 205, 664. when may be dispensed with, 211, 666. when necessary, 210, 662. when required, 210. where bill is lost, 212, 662. where made, 205, 665. where to be made, 205, 665. within what time to be made, 205, 664. PROVISIONS— additional not affecting negotiability, 57, 388. as to confession of judgment, 388. as to sale of collateral securities, 388. giving holder an election as to requirements, 388. waiving benefit of certain laws, 388. PUBLIC CORPORATIONS— power to execute negotiable paper, 41. power to issue, 41. presumption as to authority, 42. when personally liable, 42. 828 INDEX. [references are to pages.] PUBLIC OFFICERS— holder of an office for time being, 42. individual liability, 42. negotiable in.struments by, 42. power to execute negotiable paper, 42. PUBLIC POLICY— consideration against, illegal, 81. considerations which contravene, 181. examples of considerations opposed to, 81, 181. PURCHASE— when presumption that purchase and not payment, 217. PURCHASE FOR VALUE WITHOUT NOTICE— see Holder in Due Course. PURCHASE OF INSTRUMENT— see Discharge; Transfer. PURCHASER, BONA FIDE— see Bona Fide Holder; Holder for Value, Etc. PURCHASER FOR VALUE— see also Bona Fide Holder; Holder for Value, Etc. Q QUALIFIED ACCEPTANCE— efifect of, 654. in general, 654. right of holder to refuse, 655. what constitutes. 654. QUALIFIED ENDORSEMENT, see also Indorsement; Conditional and Re.strictive Indorsement — in general. 467. liability of, 467, 553. QUANTUM MERUIT, 28. QUANTUM VALEBAT, 28. QUASI-NEGOTIABLE INSTRUMENTS, sec Other Kinds of Com- merctal Paper. R R.MSED CHECK, see Altfjiation. RATE OF INTEREST, see also Interest. RATIFICATION— by drunkard, 32. married women, 33. of alteration, 223. of contracts made while an infant. 28. of contracts matie while insane or drunk, 32. of forged or unauthorized signature, 459. of forgery, 422. verbal or written, 29. REAL DEFENSES, see Defenses. REACQUISITION— from holder in due course, can not better title, 523. from holder in due course by prior party, subject to equities fol- INDEX, 829 [references are to pages.] REACQUISITION— continued- lowed by negotiation to one not holder in due course, 524. holder suing in own name for benefit of owner, 482. striking out indorsements. 475, 626. title by, 479. REASONABLE DILIGENCE, see Due Diligence. REASONABLE HOUR— circumstances to control, 185. for presentment, 569. in general, 99. what constitutes, 185. REASONABLE TIME— allowed bank to make credit, 250. for filling blanks, 403. for presentment of check, 682. how determined, 699. in general. 699. 700. in case of instrument payable on demand, 498. instrument payable on demand must be presented within, 498, 566. what is, 498, 499, 699. when question of law, 700. when question of fact, 700. when check must be presented, 682. when instrument payable on demand becomes overdue, 498. when instrument payable on demand must be presented, 566. where check in negotiated, 567. RECEIPT— on draft or check. 640, 680. payer should take, 218. RECEIVER^ paper in hands of, 136. RECOURSE. INDORSEMENT WITHOUT, see Indorsement With- out Recourse. RECOURSE, INDORER WITHOUT, see Indorser Without Re- course. RE-EXCHANGE, 675. REFEREE IN CASE OF NEED— defined, 177. 178. 187, 188, 644. delay in presentment to, when excused, 669. excuse for delay in presentment to, 669. insertion of, 644. liability to hoWer, 644. meaning of term, 644. protest before presentment, 669. protest of bill having, 669. REFERENCE IN CASE OF NEED— protest of bill before presentment for payment. 669. REFORMATION— of negotiable instrument, 404. 830 INDEX. [references are to pages.] REFUSAL— to return bill, effect, 652, 666. to accept payment for honor, effect of, 672. REIMBURSEMENT— in general, 618. of maker by payee, 446. RE-ISSUE OF PAPER— when may be, 479. RE-ISSUE OF INSTRUMENT, 479, 626— by drawee after payment of check, 456. by drawer, 626. by endorser, whether fresh indorsement necessary, 524. of accommodation instrument, 451. RELEASE— effect of, 225. effect of assent or request of secondary party, 623. of accommotiating primary party, effect on secondary parties, 621, 622. of one maker as discharge of others, 621, 622. of principal debtor, effect of, on party secondarily liable, 225. reservation of right of recourse against other parties, 621. to principal debtor, whether guarantor discharged, 623. REMEDY— governed by lex fori, 227. REMEDIES OF GUARANTORS, 273. REMOTE PARTIES— who are, 173. REMOVAL— effect upon notice, 192. effect upon presentment, 192. of maker or acceptor as excuse for non-presentment, etc., 192. RE-NEGOTIATION, see Re-Issue of Instrument. RENEWAL— of instrument without consideration, 428. of instrument subject to known equities, 432. of instrument not taken up, 433. of usurious instrument, 449. promise for, as waiver, 605. RENEWAL OF BILL OR NOTE— agreement in writing, 65. collateral agreement, 65. consideration for, 65. proof of extension of time, 332. whether payment of former note, 218. RENEWAL NOTES, see Renewal of Bill or Note. RENEWAL INSTRUMENT— as value, 428. alteration of, effect on original, 616. INDEX. 831 [references are to pages.] RENEWAL INSTRUMENT— continued^ extension of time by, as discharge, 622. governed by act though original instrument before act, 549. if invalid, not a discharge of original, 616. RENUNCIATION— by holder must be in writing, 628. discharge of instrument by, 225, 628. effect of, 225, 628. how made, 616, 629. holders in due course not affected, 628. must be in writing, 215, 628. of rights by holder, 225, 628. requirement of writing may be waived by holder, 629. whether relinquishment upon consideration included, 629. REPEAL OF STATUTES— making certain illegal transactions real defenses, 502, 503, 504. making wortis of negotiability unnecessary, 2)7Z. REPRESENTATIVE CAPACITY— indorsement in, 472. person indorsing in, may negative personal liability, 472. signature in, 417, 472. REQUISITES OF NEGOTIABILITY, 43, 676. RESERVATION, 621. RESIDENCE— notice of dishonor to, 604. presentment at, sufficient when maker or acceptor dead, and no per- sonal representative appointed, 604. presentment for acceptance, at, 186. presentment for payment at, 190. presentment may be made to person found at, 190. RESTORE— altered instrument, by court of equity, 177. RESTRAIN— negotiation for fraud, 175. when notice, 175. RESTRICTIVE INDORSEMENT— defined, 119, 463. effect on negotiability, 17, 119. examples of, 91. holder takes subject to equities, 121. in general, 119, 463, 464. rights conferred by, 119, 463, 464. rights of indorsee under, 119, 464. RESULT OF DISHONOR, 208. RETENTION OF BILL— by drawee, 96. REVENUE STAMP, see also Stamps— addition of, not material alteration, 637. failure to put on a, 130. 832 INDEX. [references are to pages.] REVOCATION— of acceptance, 97. of agency, 38. when permitted, 62. RIGHT OF ACTION, see also Action; Suit, Etc.— in general, 119, 465. RIGHT OF RECOURSE— reserving of, 225. RIGHTS OF HOLDER, see Holder— in due course, 481, 518. 519. in due course, descend to subsequent liolder, 523. of bills drawn in set, 70. of forged check, 241n. RIGHTS OF PAYOR FOR HONOR, 672. RIGHTS, PATENT— instrument given for, 58, 705. RUBBER STAMP— indorsement by, 424, 459. in general, 458. S SALOON LICENSE— instrument given for assignment, 503. SALE— at discount not usury, 167. payment distinguished from, 216. SANITY— presumption, 30. SANS RECOURSE, see Indorsement; Indorsement Without Re- course ; Qualified Indorsement. SATISFACTION, see also Accord and Satisfaction; P.wment — accord and, 221. SATURDAY— instrument falling due on. when payable, 580. presentment of bill of exchange, for acceptance un, 659. when day of maturity falls on, 580. SAVINGS BANK— liability on forged check, 242. when order on payable out of particular fund. 55. SEAL— corporate dispensed with, 41. does not affect negotiability, 69, 391. effect of, 69. effect of, on negotiability, 69, 391. imports a consideration, 22. instrument not affected by, 69, 391. judicial notice of, 351. of notary, unnecessary to prove, 204. of notary, when may be printed, 204. INDEX. 833 [references are to pages,] SECONDARY PARTY, see Parties; Discharge of Surety— meaning of, 697. right of recourse against, 579, 661. whether guarantor is, 623. SECRETARY— notice with, 198. of corporation, power to issue bills and notes, 40. or treasurer of corporation, power to issue negotiable paper, 40. SECURITIES— negotiation of public or corporation, 552. public or corporate, 144, 552. SECURITY, see also Collateral Security — indorse as collateral, 341. in general, 222. when protest made for better, 212, 665. SELLER OF NEGOTIABLE INSTRUMENT— agent's liability as, 144, 561. payment distinguished from sale, 215, 216. SERIES OF NOTES— all due upon default of one, 373. SERVICES— as a consideration, 74. SEPARATE PAPER— indorsement on, 132. SET, see also Bills in a Set — acceptor of, 70. bills drawn in, 70. bills drawn in, acceptance of, 70. bills drawn in, constitute one bill, 70. form of parts, 69. SET-OFF— between parties to action may be relied on, 519. defined, 18. in general, 18, 20. included in "action," 695. not an equity which passes with overdue paper, 157. on certified check, 685. to what actions applicable, 19, 20. SEVERAL INSTRUMENTS— simultaneous execution of, 413. SEVERAL NOTE, 61. SEVERAL PARTS OF A FOREIGN BILL, see Bills in a Set; Set. SHORT TITLE— of negotiable instruments, 692. SICKNESS— as excuse for non-presentment, etc., 202. SIGHT— bill payable after, acceptance after, 653, 654. bills payable at, do not require presentment for acceptance, 97, 98. 834 INDEX. [references are to pages.] SIGHT — continued — instrument payable after, negotiable, 385. instrument payable after, blanks in date of acceptance, 402. instrument payable at, payable on demand, 392. instruments payable at, whether grace allowed, 580. laws as to days of grace tabulated by states, 708, 709. presentment for acceptance, 97, 98. time of presentment for payment where bill payable at or after, 190, 580. whether instrument payable at, entitled to grace, 190, 580. SIGNATURE— acceptor admits genuineness of drawers, 541. affixed without authority, 49. binding on intlividual, 419. bank presumed to know signature of depositors, 241, 242. by agent, 48, 416. by another, 48. by assumed name, 49, 415. by mark, 47, 48, 370. by one not cognizant of nature of instrument, 501. by procuration, 48, 421. by rubber stamp, 48. by trade name, 49, 415. by two or more, construction of, 413. doubt as to whether that of maker, or indorser, 413. effect of "per proc," Zl. engraved, 48. forgery of, 49, 422. how bind corporation, 36. how made, 47. how written, 47. in place of maker, 414. in Roman letters, 48. in script, 48. initials sufficient, 48. in what part, 47. lithographed, 48. made without authority, 49, 422. necessary to liability, 49, 415. of drawer admitted by acceptance, 140. of person secondarily liable, cancellation of, 225. 508. photographed, 48. place of, 47. proof of, 48. printed, 47, 48. rubber stamp, 47, 48. typewritten, 47. uncertain in effect, deemed indorsement, 413. what will suffice for, 47. whether witnesses necessary if by mark. 48. with qualifying or descriptive words, 417. with several inks. 404. INDEX. 835 [references are to pages.] SIGNER-^ when deemed indorser. 544. SIGNING— ■by agent, Zl, 416. in blank before delivery by one not otherwise party to instrument, 548. trade or assumed name, 49, 415. SILVER CERTIFICATES, 265. SIMULTANEOUS EXECUTION— of several instruments, 413. SITUS— as to taxation, 227. SOJOURNER— in general, 199, 604. SPECIAL INDORS'EMENT— definition and effect, 116, 462. how blank indorsement made, 117, 463. in general, 116, 462. on instrument payable to bearer, 469. proof through, 117. SPECIE— note payable in, 391. SPECIFIC FUNDS, 370. SPECULATIVE CONSIDERATION— in general, 164. instruments given for, 164. wortis "given for a speculative consideration," 164. SPENDTHRIFT— guardian for, 22, 163. under guardian, not indorse, 32, 163. SPLITTING INTO PARTS— court can not, 17. SPOLIATION— of instrument, effect on, 177. "STALE CHECK"— in general, 243. status of, 243. when, 243. STAMPS— act of 1862, 67. act of 1898, 67. cancellation of by wrong party, 172. excluding from evidence, 172. failure to put on a, 67, 171. Federal acts, 67. history of, 67. origin, 67. repeal of act of 1898, 67. 836 INDEX. [references are to pages.] STAMPS— continued— whether failure to use. real defense, 171, 172. where omitted fraudulently, 171. STATEMENT— as to deposit of collateral, 57. STATEMENT OF TRANSACTION— does not render bill or note conditional, 57. effect of, 57. set out, 57. STATES— of Union, foreign to each other. 44, 643. where uniform negotiable instruments law has been adopted, 708. 709. STATUTE— act in violation, illegal as consideration. 81. begins to run when, 235. bill void by, effect of, 81. consideration void by. 168. instrument void by. 181. introduction of special in evidence. 227. wagers and gaming contracts, 164-169. STATUTE OF ANNE— established negotiability of promissory notes. 18. in general, 15. passed in, 18. principles of, followed, 18. STATUTE OF FRAUDS— guaranty on note need not allege consideration, 428. not applicable to oral guaranty securetl by note, 416. not applicable to agreement for conditional delivery. 408. whether guaranty within. 270. written or parol evidence admissible as between accommodation in- dorsers, 560. STATUTE OF LIMITATIONS— as a defense, 171. in general, 2. on demand instrument, 373. on negotiable instruments. 663. period on judgments in courts of record tabulated by states. 708. 709. period on notes tabulated by states, 708. 709. when begins to run against check. 235. STEPS IN JURY TRIAL, 347. STIPULATION— limiting liability of tlrawer, 540. STOCK— option of holder to receive, 389. STOCK EXCHANGE NOTES, 164. STOLEN CHECK— effect of. 245. INDEX. 837 [references are to pages.] STOLEN INSTRUMENT— bank notes, 265. certificate of stock, 261. check, 409. in general, 176. liability on, 245. note from maker, 410. paper, 63n. rights of bona fide holder where undelivered instruments stolen and put in circulation. 176. STOPPAGE IN TRANSITU— effect of transfer of bill of lading on, 259. STOPPING PAYMENT— drawer not entitled to notice of dishonor, 610. STRANGER— acceptance by, 101. payment by, 101, 216. to paper, when may make payment, 101, 216. STREET IMPROVEMENT BONDS, 371. STRICT COMPLIANCE— with precise terms of act unnecessary, 399. STRIKING OUT— indorsement, effect, 126, 475, 626. indorsement not necessary on reacquisition, 475. when may be tione, 126, 475. SUBROGATION— of payer supra protest to rights of party for whose honor he pavs, 220. 440. of payee for honor, 672. of surety maker to rights of holder, 618. of surety on appeal bond of prior parties to ohh'gation of subse- quent parties, 623. payer for honor right. 220, 440. SUBSTITUTION— of another obligation acts as a discharge, 222. of another obligation, effect of, 222. of instruments for other pledged collateral as value, 4.33. SUCCESSIVE INDORSEMENT, 116. SUFFICIENCY— in form of notice of dishonor, 195. SUIT, see Action ox Negotiable Instruments. SUM^ certainty of, not affected by certain provisions. 52. to be paid, must be fixed and certain, 52. SUM CERTAIN, see Certainty— what is, 276. SUNDAY— day falling on, 701. instrument due on, 580. 838 INDEX. [references are to pages.] SUNDAY— continued— ' instrument made on, 168. presentment for payment when instrument falls due on, 580. when day of maturity falls on, 580. when day for acts falls on, 701. when last day falls on Sunday, 333, 701. SUNDAY CONTRACT— as a defense, 168. SUPRA PROTEST, see also Acceptance Supra Protest; Acceptor Supra Protest; Payment Supra Protest — acceptance, 101, 667. acceptance for, how made, 101, 667. acceptance for, when may be made, 101, 667. acceptor, liability of, 101, 667. acceptor, nature of his agreement, 101, 668. acceptor, presentment to, how made, 101, 668. delay in presentment when excused, 101, 668. effect of payment on subsequent parties, 220, 672. of bill, 101, 668. of bill accepted, 101, 668. payment by two or more parties, 220, 672. payment declaration of intention, 220, 672. payment how made, 220, 672. payment when may be made, 220, 672. refusing to receive payment, effect of, 220, 672. rights of payer, 220, 672. when deemed to be for drawer, 101,667. SURETIES— contribution between, 276. concealed, 272. SURETY— concealed, 272. contract of. 111. difference between and guarantor, 268. difference between liability of, and of guarantor, 268. discharge by alteration, 274. discharge of, 618, 619, 624. discharged by agreement to give time, 275. extension of time, 275. how discharged, 274. how differs from guarantor, 268. if primary party on instrument not a "secondary" party, 622. if maker not entitled to notice of dishonor, 587. liability of, 273. limit of recovery, 273. married woman as, 32, 162. may be joined with principal in one suit. 111. misrepresentation, duress, diversion, alteration, tender, etc., 274. on appeal bond of prior parties, whether subrogated to obligation of subsequent party, 623. parol evidence to show party signed, 272. parting with security, 275. INDEX. 839 [references are to pages.] SURETY— continued- plea of fraud as discharge, 274. plea of misrepresentation as discharge, 274. released by covenant not to sue, 275. suits by and against, 268. what will discharge, 274. whatever discharges principal debtor will discharge surety, 274. who are, 269. SURETYSHIP, see also Surety, Etc.— defined, 267. distinguished from guaranty, 267, 268. law of, whether recognized by act, 615, 621. may surety and principal be sued jointly, 268. surety bound with principal, 268. trial of, 273. SURRENDER— consideration unnecessarj^, 220. compel for fraud, 80. discharge of instrument by must not be induced by fraud, 220. of instrument, to primary party as discharge, 615, 628. payment of bill, drawn in set without, 70. thinking paid, 221. when notice, 175. T TABULATED LAWS, 708, 709. TAXATION— situs for, 227n. TAXES— provisions, 2>72. TELEGRAM— acceptance by, 89. TELEGRAPH— acceptance by, 89. TELEGRAPH DRAFT— negotiable, 641. TELEPHONE— demand of payment over, 572. notice of dishonor, 594. presentment by, 572. TENDER— ability and willingness to pay at place of maturity equivalent to, 188, 563. plea of, 351, 352. what is a sufficient, 188, 563. TENDER OF PAYMENT— by maker, refusal of is not renunciation, 629. by prior party, effect on party secondarily liable, 225, 621. what amounts to, 188, 563. when having funds special place is, 563. g40 INDEX. [references are to pages.] TENOR— indorsement according to, 113, 114. TERMS OF INSTRUMENT— when sufficient, 399. THEFT— negligence in facilitating, 632. of completed instrument, 409. of certified check, 488. of incomplete instrument, 407. THIEF, see also Stolen Instrument— in general, 156, 176, 218. TIME— certainty of, 369, 376. 385. computation of. 66. 190. 582. 701. determinable future, what constitutes, 54, 55, 385, 699. extended, 370. extension of, effect of, on surety's liability, 274. of indorsement, presumption as to, 125, 473. of negotiation, 473. of maturity, 580, 582, 701. of payment, blanks for. 393. 404. of payment, alteration of, 636. of payment, failure to express. 392. reasonable, 99, 658. when act takes effect, 702. when statute to take effect, 702. TIME OF MATURITY— fixed by statute, 186. 190, 580. 659. general rule, where instrument falls due on Sunday or holiday, 701. how computed, 186, 190, 580, 659. TIME OF PAYMENT, see also Payment; Etc.— after the death of a person, 54. contingency as to. 54, 385. determinable future, what constitutes. 54, 55, 385. event to be one which must happen, 55, 385. fixed period after date or sight, 55, 385, 582. fixed period after specified event, 55, 385, 582. in installments, does not affect negotiability. 54, Z76. instrument expressing no, 47. negotiable instrument to be paid on demand or at fixed hiturc time, 191, 566. on day certain, or on happening of event, 54. 55, 385. on demand, when payable. 191. 566. on or before a certain date, 55. TIME OF PRESENTMENT, see also Presentment— in general. 190. 580. 582. TIME PAPER— laws as to days of grace tabulated by states, 406. INDEX. 841 [references are to pages.] TITLE— burden of proof, 527. burden of proof where title of prior party defective conveyed by operation of law, 130. . defect of, 501, 527. defect of after defendant became bound, meaning of section, notice of defect, 500, 508. of act, 692. of holder in due course, 518. of person negotiating, 501. presumed to be in holder, 149, 527. passes with transfer without indorsement, 476. through forged indorsement. 217, 218. transferred by blank indorsement, 129, 463. through holder in due course, 523. warranty of where negotiation by delivery, 552. warranty of where negotiation by qualified indorsement when tlefec- tive, 150, 175, 501. when negotiated by fraud, 142, 501. whether passed by restrictive indorsement, 466. TORN INSTRUMENT— whether torn with intent, 617. TOWNS— power to execute negotiable paper, 41. TOWNSHIP BONDS, 383. TRADE ACCEPTANCES— by whom presented for discount, 105. clause, "the obligation of the acceptor hereof arises out of the purchase of goods from the drawer" necessary, 106. confined to credit obligations, 104. defined, 104. distinguished from bill of exchange, 104. distinguished from promissory note, 105. drawee, 104. drawer, 104. effect of Federal Reserve Act, Sec. 13, 104. effect on other negotiable instruments, 106. extent of use, 107. Federal Reserve Banks, as purchasers. 106. how accepted. 105. how made, 105. law applicable, 107. meaning of term, 104. nature of transaction in which used, 105. necessary clause, 106. negotiable two name paper, 105. ninety day maturity time, 106. origin, 106. payee, 104. purpose of, 107. when bargain is consummated, 105. where payable, 105. whether payable on tlemand, 393. 842 INDEX. [references are to pages.] TRADE NAME— liability where person signs, 49, 415. liability under, 49, 415. signature of, 49, 415. to designate party to instrument, 49, 415. TRADING PARTNERSHIPS, see also Partners; Etc.— negotiable instrument executed by one partner binding on firm, 39. TRANSACTIONS— statement of set out, 57, 381. TRANSFER, see also Delivery; Indorsement — by assignment, 109, 131. by attachment, 135, 136. by delivery, 128. by execution, 135, 136. by garnishment, 135, 136. by indorsement, 109. by legal process, 109, 135. by operation of law, 109, 130. negotiation by, 108. without indorsement, 109, 115, 130. 476. without indorsement — effect of, 109, 126, 476. without indorsement, failure of consideration as defense, 477. without indorsement, payment to transferor as defense, 477. without indorsement or after maturity, effect of defenses subsequent to transfer, 126. without indorsement, whether transferee is holder, 126. TRANSFEROR BY DELIVERY— of bearer instrument, liability of, 552, 561. TRAVELER'S CHECKS: advantages of, 252. amount of in foreign countries specified, 251. countersigned, 251. forged counter-signature, 252, 423. forged indorsement, 252, 423. holder's signature must correspond, 251. issued by agent, 252. lost, 251. meaning, 251. object, 251. provisions, 251. right of issuing party to refuse payment, 252. unused, 252. when not efifective as draft, check, etc., 252. TREASURER— of corporation, power to issue bills and notes, 40. TREASURY NOTE— how differs from bank note, 265, 266. TRIAL— how prove personal defenses, 351. protest, 207, 208. statement of notary, 4. INDEX. 843 [references are to pages.] TRIAL PROCEDURE— code procedure, 347. common law procedure, 346. essentials of procedure, 346. evidence of defendant, 351. evidence of plaintiff, 348. impaneling the jury, 347. opening statements, 348. steps in a jury trial, 347. the argument, 352. the charge, verdict and judgment, 352. TRUST— created by restrictive indorsement, 463. created in indorsee, 119, 463. indorsements in, effect, etc., 119, 463. mention of on instrument, notice of trust fund, 511. substituted instruments subject to, 456. TRUSTEES— as parties to negotiable instrument, 35. check by, 249. in general. 35, 419. signature by, 417, 419, 472. TYPEWRITING— considered as printing or not, 414. TYPEWRITTEN— in general, 47. ULTRA VIRES— accommodation indorsement by corporation is, 147. defense, corporation not to set up, 162. in general, 162. UNCERTAIN— when agreement to look to mortgage security, 370. UNCERTAINTY— see Certainty. UNCONDITIONAL PROMISE OR ORDER— necessary to negotiability, 54. not affected by certain provisions, 54, 55. order to pay out of particular fund is not what is, 381, 640. when order or promise is unconditional, 54, 56. UNDATED INSTRUMENT— date may be inserted in, 47. UNDISCLOSED PRINCIPAL, see also Agent; Principal; Etc.— agent of, 148. doctrine not applicable to negotiable instruments, 415, 419. except to cashier or fiscal officer, 471. liability of bank to agent, 250. UNIFORMITY— in construction of Act, 692, 693, 694. statute construed so as to produce, 692, 693, 694. UNDUE INFLUENCE— instrument or signature obtained by, 427. 844 INDEX. [references are to pages.] UNIFORM NEGOTIABLE INSTRUMENTS LAW— where adopted, 708, 709. UNINCORPORATED ASSOCIATION— as party to instrument, 396. UNINTENTIONAL CANCELLATION— effect of, 221. UNITED STATES— as party to negotiable instrument, 397, 543. treasury notes, 265. UNITED STATES REVENUE STAMP, see Stamp. UNLAWFUL MEANS— obtaining by, 150. UNQUALIFIED INDORSER— liability of, 143. UNREASONABLE TIME— as notice, 155. bow determined, 333. USAGE— bank custom in determining reasonable or unreasonable time. 699. USUAL COURSE OF BUSINESS, see Business— statutes as to, 167. USURY— as a defense, 166, 167, 168. compensation for trouble and expense not, 167. defined, 167. discount of paper not, 167. interest, 167. in accommodation instrument, 449. in general, 503. no implied warranty, 553. note given for usurious loan, 503. penalty for, 708, 709. V VALIDITY— governed by lex loci contractus, 228. VALUABLE CONSIDERATION, see also Consideration; Value— presumption as to, 78. what is, 72. VALUATION L.AWS, 3. VALUE— accommodation party receives no, 448. antecedent debt, 72, 432. bank credit as, 433. collateral security, 152. credit, 152. defined, 72. 152, 432, 695. discount, 152. discharge of riel)t as, 428. for renewal note, 428. INDEX. S45 [references are to pages.] VALUE— continued- holder after a holder for, 155. holder for, lienor is, 153, 442. holder for, because of lien, 442. holder for, under certain circumstances, 152. holder for, what constitutes, 83, 440. Hen on instrument constitutes lienor, 442. must instrument specifj-, 58. necessity of words "given for a patent right," 5S. negotiable instrument as, 435. need not be specified in instrument, 391. of consideration not considered, 72. payment of, prima facie evidence of good faith, 489. pre-existing debt, 72, 152, 432. promise to lend money as, 434. promise to re-pay money not, 434. recital for value, omission of does not affect negotiability, 79. substitution for other pledged collateral, 433. surrender of forged note not, 631. who holder for, 440. what constitutes, antecedent or pre-existing debt, 12. VALUE RECEIVED— effect of use of words, 64, 79, 81, 427, 445. expression not necessary, 64. important on non-negotiable instrument, 79. in general, 64, 391. omission of words not material, 64, 79. treated as surplusage, 79. what indicate, 79. whether or not necessary, 64. VERBAL— acceptances, 95. notices of dishonor, 194. VERDICT, 352. VIRTUAL ACCEPTANCE, 649. 650. VOID— by statute, 18L where instrument declared void by law, good defense against bona fide holder, 168. l^OID AND VOIDABLE INSTRUMENTS, 161. i^OUCHER— printed on draft or check, 640. VIOLATION— of statutes, act illegal as consideration, 80, 81. w WAGERS, sec Gambling and Speculation. WAIVER— of protest, what it includes, 608. of presentment and of notice of dishonor whether mutually in- clusive, 570. 846 INDEX. [references are to pages.] WAIVER— continued— of presentment for payment, 576. of protest, presentment and notice, effect on negotiability, 4. pleading, 577. when embodied in instrument, 607. when written above signature, 607. WAIVER OF APPRAISEMENT LAWS— effect of, 3. WAIVER OF BENEFIT OF CERTAIN LAWS— does not impair negotiability, effect of provision, 57. WAIVER OF PRESENTMENT FOR PAYMENT, see also Present- ment IN General, 3, 607. WAIVER OF PROTEST, see also Protest— effect of, 4, 608. how made, 211. in general, 3, 608. who bound by, 211. waives also presentment and notice of dishonor, 211, 608. WAIVER OF NOTICE, see also Notice— of dishonor, 201, 605, 607. of dishonor, on whom binding, 211, 607. of non-payment, 3. of protest, 3, 4, 608. WAIVER OF VALUATION LAWS— effect of, 3. WAR, see also Alien Enemies — as excuse for non-presentment, 202. effect of, on intercourse, 33. WAREHOUSE RECEIPTS— attached to bill of exchange, failure to surrender, 542. contents of, 266. defined, 266. description and nature of, 266. how transferred, 266. whether negotiable, 266. WARRANTY, see also Warranties — general indorser warrants, that instrument is genuine, 555. general indorser warrants, that instrument is what it purports to be, 555. that he has a good title, 555. that prior parties had capacity to contract, 555. that instrument is valid and subsisting, 555. in case of instrument indorsed "for collection," 553. in case of public or corporate securities, 552. of genuineness. 553. of validity, 553. to whom warranty runs, 553. v/here negotiation by delivery, 552, 553. where negotiation by qualified indorsement, 552, 553. INDEX. 847 [references are to pages.] WARRANTIES— by acceptance, 89. by acceptance for honor, 101. by agent who signs for principal, 148. by agent who transfers, 148. by assignor, 133. by broker or other agent, by indorsement, 113, 553. by indorsement "without warranty," 467. by indorser for collection, 553. by unqualified indorsement, 555. upon negotiation by delivery or qualified indorsement, 552. WARRANTY OF SELLER— where transfer by delivery, 128. where transfers by indorsement, 142. WHO MAY SUE, 481. WIFE, see also Coverture; Married Women; Etc. notice with, 198. WITH INTEREST— effect of words, 3. "WITHOUT DEFALCATION"— effect, 389. WITHOUT RECOURSE, see also Indorsement Without Recourse; Indorser Without Recourse; Sans Recourse — in general, 121. indorsement, 467. ^ indorser, warranties of, 143, 144. liability of, 143, 144. re-issue by maker, 616. WITHOUT RELIEF— what show, 3. WITNESS— adding name of, is material alteration, when, 177. addition of, alteration, 638. WITNESSES— competency of parties as, 330. to signature by mark, 48. WORDS— effect of "I promise to pay," 338. effect of "This is and shall be negotiable," 50. WORDS AND FIGURES— discrepancy between, 338. WRITING— acceptance must be in, 646. addition to printed provisions as alteration, 414. collateral agreements, 45, 65. conflict with figures, 2. contemporaneously, 45, 118. discrepancy between figures and words, 45. 848 INDEX, [references are to pages.] WRITING— continued- figures for convenience, 45. includes print, 4S. manner of, not material, 46. may be in pencil, 46. meaning of, 45. more accurate tlian figures, 3. necessary for renunciation, unless surrender, 628. negotiable instrument must be in, 45. parol evidence to explain latent ambiguity, 45. renunciation must be in, 215. whether required for release, 628. WRITINGS, CONTEMPORANEOUS— construed as one instrument, 45. WRITTEN AND PRINTED PROVISIONS— conflict between, 338. defined, 695. in conflict, 338. "WRITTEN"— incluties printed and "'writing" includes print, 45. WRITTEN NOTICE— supplemented and validated by verbal, 195. WRITTEN PARTICULARS— protest on, 204. WRITTEN PROVISIONS— prevail over printed, if conflict, 413. WRONG DESIGNATION— of name of payee or indorsee, 472. UC SOUTHERN REGIONAL LIBRARY FACILITY AA 000 819 943 2 '2^ ■-/' ' L V. U ■Aj^Jf. * ' ^'' r »■■ ■.r./^:^ '•■.■»'<-. ."S-i.vWv-