(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "Selected cases on the law of negotiable instruments"

LAW BOOKS 



/' 




Cornell University Library 
KF 957.A4B94 



Selected cases on the law of negotiable 




3 1924 018 854 293 




Cornell University 
Library 



The original of this book is in 
the Cornell University Library. 

There are no known copyright restrictions in 
the United States on the use of the text. 



http://www.archive.org/details/cu31924018854293 



SELECTED CASES 



ON 



THE LAW OF 

NEGOTIABLE 
INSTRUMENTS 



BY , :^ \ 

ROBERT E. BUNKER 

PROFESSOR OF THE LAW OF BILLS AND NOTES 
IN THE UNIVERSITY OF MICHIGAN 



CHICAGO : 

CALLAGHAN & COMPANY 
1906 




Copyright 1906 



BY 



CALLAGHAN & COMPANY 



PREFACE 



The cases appearing in this volume have been selected 
primarily for the use of students pursuing the study of Negotiable 
Instruments and particularly for students of the Law Department 
of the University of Michigan. They are arranged in an order 
to conform to the plan of instruction now pursued in that 
Department. The plan to which reference is made is sufficiently 
indicated by the Table of Contents infra. In brief, it involves a 
study of the law of Negotiable Instruments on the basis of the 
contract of the several parties as that law has been declared by 
the courts and, incidentally only, a study of the "Negotiable 
Instruments Law." The cases will be found to illustrate the 
several phases of the negotiable contract and to be arranged, I 
believe, in such an order as to show, in sequence, the liabilities 
and rights of parties to Negotiable Instruments. As to selection 
and arrangement they are submitted to the test of actual use. It 
is my hope, if not my expectation, that when the plan exemplified 
by this volume is put to the test of actual use it will be found of 
service to all who seek to acquire a comprehensive knowledge of 
the law of Negotiable Instruments. 

I am under obligations to Mr. H. Gerald Chapin of New 
York City, for valuable suggestions, and to Mr. Oscar E. Waer 
of the Michigan Bar, and Mr. Ralph M. Tate of the law class of 
1907, University of Michigan, for valuable assistance in the prep- 
aration of this work, obligations which I acknowledge with 
grateful appreciation. 

ROBERT E. BUNKER. 

Ann Arbor, Michigan, 
October 1, 1906. 



TABLE OF CONTENTS 



TITLE I— HISTORY OF THE LAW MERCHANT. 

TITLE. II— THE NEGOTIABLE INSTRUMENT A CONTRACT. 

Sec. i — In General — 

Sec. 2 — General Requisites — 

The Instrument Must be in Writing. 

The Instrument Must be Signed. 

Must Contain an Unconditional Promise or Order. 

Signing in Representative Capacity. 

Indication of a Particular Fund Out of Which Reimbursement is 

to be Made. 
Statement of the Transaction Which Gave Rise to Instrument. 
The Sum Must be Certain. 
May be Payable by Stated Instalments. 
Instrument Payable in Exchange is Not Negotiable. 
The Sum is Certain Though Payable With Costs of Collection or 

an Attorney's Fee. 
Instrument Must be Payable in Money. 
Must be Payable on Demand or at a Fixed or Determinable Future 

Time. 
^ Instrument May be Payable On or Before a Fixed Time. 

May be Payable After the Occurrence of a Specified Event Which 

is Sure to Happen, Though the Time of Happening be Uncer- 
tain. 
Must be Payable to Order or to Bearer. 
Drawee Must be Named or Otherwise Indicated. 
Provision Giving the Holder an Election to Require Something to 

be Done in Lieu of Payment of Money. 
-' Presence of Seal On Instrument. 
Indorsement After Dishonor Makes Instrument Payable on 

Demand as to Such Indorser. 
Payee Must be Indicated With Reasonable Certainty. 
Instrument Payable to Order of Fictitious Person. 
Filling up Blanks. 

Incomplete Instrument Not Delivered. 
Signing In Trade or Assumed Name. 
Signature by Procuration. «/ 
Effect of Indorsement By Infant. 
Forged Signatures. ■> 
Bills In a Set. 

v 



v i Table of Contents 

Sec. 3 — Delivery- 
Delivery Essential to Completion of Contract. 
Presumption of Delivery. 

See. 4 — Consideration — 

Presumption of Consideration. 

What Constitutes Consideration. 

What Constitutes Holder for Value. 

When Lien On Instrument Constitutes Holder for Value. 

Sec. 5 — Contract of Primary Parties — 
Contract of the Maker. 
Admissions of the Maker. 
Contract of the Acceptor. 
Admissions of the Acceptor. 
Contract of the Certifier. 

Where Holder Procures Check to Be Certified. 
Where Drawer Procures Check to Be Certified. 
Contract of the Drawer When He Draws On Himself. 
Contract of Drawer as Executor or Trustee of Drawee's Estate. 
Contract of Drawer Without Right to Expect Acceptance. 

Sec. 6 — Of Negotiation in General — 
Indorsement and Delivery. 
Irregular Forms of Indorsement. 
Indorsement Must Be of Entire Instrument. 
Instrument Indorsed in Blank and Later Indorsed Specially. 
Changing a Blank Into a Special Indorsement. 
The Qualified Indorsement. 
The Conditional Indorsement. 
The Restrictive Indorsement. 

Indorsement Constituting the Indorsee the Agent of the Indorser. 
Indorsement Vesting Title In indorsee In Trust. 
Indorsement Without Words of Negotiability. 
Indorsement by Partners. 
Indorsement by Joint Payees Not Partners. 
Indorsement by Cashier of Bank. 
Continuation of Negotiable Character of Instrument. 
Transfer of Instrument Without Indorsement. 
Transfer by Delivery. 

Sec. 7— Contract of Secondary Parties- 
Contract of the Drawer. 
Admissions of the Drawer. 
Contract of the General Indorser. 
Warranties of the General Indorser. 
Contract of the Irregular Indorser. 



Table of Contents vii 

Sec. 8 — Presentment and Demand — 

Presentment to Principal Debtor Not Necessary. 

Time of Presentment. 

Where and to Whom Presentment Should be Made. 

Presentment Where Person Primarily Liable is Dead. 

Presentment to Partners. 

Presentment to Joint Debtors. 

Presentment by Whom. 

Instrument Must be Exhibited. 

Presentment Where Instrument Payable at Bank. 

When Presentment Not Required to Charge Indorser. 

Excuse for Failure to Make Presentment in Due Time. 

Waiver of Presentment and Demand. 

Sec. 9 — Protest — 

General Requisites of the Protest. 

Sec. 10 — Notice of Dishonor — 
Form of the Notice. 
By Whom Notice Given. 
Notice by Agent. 
Notice to Whom. 
Notice by Inurement. 
Notice to Partners. 
Notice to Bankrupt. 
Notice by Telegraph. 
Where Motice Must be Sent. 
Notices to One Indorser for Distribution and Delivery to Co- 

indorsers. 
Time Within Which Notice Must be Sent. 
Seasonable Notice. 
Where Notice Must be Sent. 
Waiver of Notice Contained in Instrument. 
Oral Waiver. 

When Notice Dispensed With. 
Waiver by Implication. 
Agreements to Waive Strictly Construed. 
Excuse of Notice Permanently or Temporarily. 
Where Notice Need Not be Given to Indorser. 
Due Course, Takes Free From Equities. 

Sec. ii — Contract of the Vendor — Qualified Indorser and Transferrer by 
Delivery. 

Sec. 12 — Contract of Accommodation Parties. 

Sec. 13— Contract of Surety or Guarantor. 



ii Table of Contents 

TITLE III— RIGHTS OF THE HOLDER. 

Right to Sue and Receive Payment. 

Holder in Due Course. 

What Constitutes Notice of Defect. 

Payee as Holder in Due Course. 

When Person Not Deemed Holder in Due Course. 

Notice Before Full Amount Paid. 

Fraud Amounting to Want of Contract; When Title Defective. 

Holder in Due Course Takes Free From Equities. 

Holder Deriving Title Through Holder in Due Course Takes 

Free From Equities. 
Payee Deriving Title From Holder in Due Course Does Not Take 

Free From Equities. 
Holder Presumed to be Holder in Due Course. 

TITLE IV— DISCHARGE OF NEGOTIABLE INSTRUMENTS. 

Discharge of Party Primarily Liable. 
Discharge of Party Secondarily Liable. 
Rights of Party Paying Instrument. 
Renunciation by Holder. 
Effect of Alteration. 

TITLE V— CONFLICT OF LAWS. 

What Law Governs the Contract — In General. 
What Law Governs Contract of Maker or Acceptor. 
What Law Governs Contract of Drawer or Indorser. 
What Law Governs Procedure and Remedy. 



SECTIONS OF THE STATUTE 



CASES ILLUSTRATIVE OF THE LAW OF NEGOTIABLE INSTRUMENTS AS 

EXPRESSED IN THE FOLLOWING SECTIONS OF THE STATUTE: 

SEC. PAGE SEC. PAGE 

3-1 38, 4°, 41 61 566 

3-2 43, 63, 75 62 207, 209, 210 

3-3 80 63 259, 261, 321, 324, 330, 331 

3^4. 86, 460 64 212, 215, 219 

4-3 64 64-1 224, 227, 236 

4-4 66 65 498, 500 

4-5 67 66 209 

5-2 ' 59 67 465, 467, 471, 480, 481 

6-2 82 68 344, 345 

6-3 84 68-2 332, 335 

7-4 9° 72 347 

8-4 96 74 350, 351, 355, 358, 369 

9-2 97 75 35i, 355, 358 

10-6 99 76 377 

ii-3 r--- I0 5 77 380 

16 116 78 363 

17 125, 130 79 365 

18 153, 159, 160 80 367 

20 136 82 420 

22 46, 52, 56 83 384, 392 

23 138 84-3 396, 400 

24 141 91 418 

25 : 143, 148 92 413, 415, 435 

26 165 93 415 

27 171, 176, 186 g4 413 

28 193 95 413 

29 202, 203 98 407, 426 

31 420, 484, 487, 492, 49S, 497 101 365 

32 266, 268, 320 103 420 

33 270, 274 104 437, 438 

34 276 104-6 369 

36 277 107 384 

37 280 no 431, 444 

38 293 1 10-3 426 

38-2 296, 297 in 449, 452, 456 

38-3 97, 301 112 447 

40 287 114 384, 392,454 

41 291 115 ■ 384, 392 

43 305, 307 116-1 259 

44 3°8 "6-3 '■ ., 261 

49 97 "6-4 264 

51 311, 315 "7 400, 420 

53 507 121 571, 574, 576, 578, 580, 584 

54 510, 513, 5i6, 535 122 588, 593, 596, 600, 602 

54-3 534 123 606, 611, 612 

55 54 1 124 614, 618 

56 546 126 . .549, 624, 627 

57 549 139 460 

58 520, 525, 53i, 534 180-185 150 

59 556 189 240 

60 561, 564 190 253, 256 



TABLE OF CASES 



Arnold v. Dresser 367 

Attwood v. Munnings 138 

Averett's Adm'r v. Booker 165 

Aymar v. Sheldon 649 

Bacon v. Hanna 45 \ 

Bank v. Baldwin 369 

Bank v. Bingham. . . , 315 

Bank v. Carter 215 

Bank v. Clark 52 

Bank v. Cumings 492 

Bank v. Fearing 345 

Bank v. Heuschen 365 

Bank v. Johnson 593 

Bank v. Jones 415 

Bank v. Junk Bros 420 

Bank -v. Kettering 449 

Bank v. Lange 510 

Bank v. Leach 253 

Bank v. Neal 116 

Bank v. Norton 384 

Bank v. Pierce 580 

Bank v. Sleight 600 

Bank v. Slette 66 

Bank v. Snow 160 

Bank v. Toplitz 484 

Bartlett v. Robinson 431 

Baxendale v. Bennett 125 

Beattie v. Bank 143 

Bickf ord v. Gibbs 498 

Bitzer v. Wagar 320 

Blaine v. Bourne 301 

Blenn v. Lyford 612 

Boston St'l & Iron Co. v. Steuer 535 

Brown v. Bank 268 

Brown v. Jordhal 96 

Brown v. Montgomery 481 

Burson v. Huntington 153 

Carroll v. Sweet 59° 

Cathell v. Goodwin 264 

Caunt v. Thompson 261 

Challis v. McCrum 467 

Cheever v. 'Railroad Co 525 

Chicopee Bank v. Phil. Bank. ... 380 

Choteau v. Webster 444 

Coddington v. Bay I7 1 

Collins v. Manville 654 

Conine v. Railroad Co 33 

Cook v. Horn 64 

Corbett v. Fetzer 287 



Day v. Longhurst 268 

Dennistoun v. Stewart 404 

DeWitt v. Perkins 534 

Dodge v. Emerson 63 

Dresser v. Missouri R. R. Con. 

Co 546 

Dunlop v. Silver 1 

Dwight v. Pease 307 

Edie & Laird v. East India Co. . . 293 

Erwin v. Downs 480 

Estabrook v. Smith 305 

Everett v. Vendryes 647 

Fairchild v. Railroad Co 259 

Farnsworth v. Allen 350 

Ferguson v. Staples 344 

Fielding v. Corry 426 

First Nat. Bank v. Greenville 

. Nat. Bank 75 

First Nat. Bank v. Northwestern 

Nat. Bank 227 

Fisher v. Leland 513 

Folger v. Chase 308 

Freeman v. O'Brien 456 

French v. Jarvis 606 

Gardner v. Maynard 611 

Geary v. Physic 266 

George, In re 614 

Glidden v. Henry 80 

Goodwin v. Robarts 18 

Gordon v. Bank 99 

Gove v. Vining 452 

Gower v. Moore 363 

Grey v. Cooper 331 

Gumz v. Giegling 209 

Habersham v. Lehman 277 

Hagey v. Hill 602 

Hamilton v. Vought 520 

Hamlyn & Co. v. Talisker Distil- 
lery Co 629 

Hannum v. Richardson 465 

Harrisburg Trust Co. v. Shuf eldt 347 

Hays v. Hathorn 507 

Head v. Hornblower 256 

Heuertematte v. Morris 236 

Hills v. Place 347 

Hodges v. Shuler 00 

Hoffman v. Bank 193 

Hughes v. Kiddell 276 



Table of Cases 



Jennings v. Carlucci 563 

Jones v. Home Furnishing Co. . . 136 
Junction R. R. Co. v. Bank 642 

Kelley v. Hemmingway 84 

Kelley v. Whitney 516 

King v. Crowell 358 

Kinyon v. Wohlford 159 

Kohn v. Watkins 324 

Kost v. Bender 564 

La Due v. Bank 541 

Lancy v. Clark 574 

Larkin v. Hardenbrook 576 

Leask v. Dew 618 

Leavitt v. Putnam 97 

Ledwich v. McKim 130 

Linn v. Horton 418 

Littauer v. Goldman 471 

Locke v. Leonard Silk Co 296 

Lysaght v. Bryant 413 

Maffat v. Greene 487 

Markey v. Corey 270 

Martin v. Cole 280 

Mattison v. Marks 82 

McCall v. Taylor 41 

McNamara v. Jose 531 

Mills v. Bank 407 

Minot v. Russ 256 

Mt. Mansfield Hotel Co. v. Bailey 335 

Moskowitz v. Deutsch 627 

Munger v. Shannon 56 

Nat. Park Bk. v. Ninth Nat. Bk. 224 
Nelson v. Grondahl 351 

Obear v. Bank 657 

Oppenheimer v. Bank 67 

Osgood's Adm'r v. Artt 311 

Page Woven Wire Fence Co. v. 

Poole 571 

Paton v. Coit 565 

Phillips v. Dippo 447 

Pier v. Heinrichshoffen 392 

Phillips v. Im Thurn 330 

Phipps v. Harding 634 

Porter v. Hardy 545 



Raborg v. Paton 212 

Redfern v. Rosenthal 203 

Reg. v. Harper 40 

Roberts v. Hawkins 500 

Robertson v. Coleman 148 

Robertson v. Kensington 291 

Ross v. Hurd 396 

Schmittler v. Simon 46 

Schwartzman v. Post 584 

Shaw v. Pratt 578 

Shipman v. Bank 105 

Shutts v. Fingar 588 

Siegel v. Bank 59 

Simon v. Merritt 561 

Simpson v. Stackhouse 624 

Simpson v. Turney 437 

Smith v. Bayer 297 

Smith v. Poillon 438 

Soltykofif, In re 141 

Spencer v. Halpern 274 

Stoddard v. Kimball 202 

Sutherland v. Mead 186 

Swift, In re 400 

Swift v. Tyson 176 

Thatcher v. Bank 495 

Thomas v. Bishop 38 

True v. Bullard 332 

Tucker Mfg. Co. v. Fairbanks. .. 219 

Union Trust Co. v. Bank 240 

Van Brunt v. Vaughn 435 

Wallace v. Crilley 355 

Walsh v. Blatchley. 150 

Walton v. Mascall 207 

Waring v. Betts 377 

Watrous v. Halbrook 88 

Westberg v. Chicago L. & C. Co. 460 

White v. Cushing 43 

Whitehead v. Walker 321 

Whittier v. Eager 497 

Wirt v. Stubblefield 556 

Wohlke v. Kuhne 210 

Woodruff v. Hill 633 

Zander v. Trust Co 86 



CASES 

ON 

NEGOTIABLE INSTRUMENTS 



TITLE I. 

HISTORY OF THE LAW MERCHANT. 
Dunlop v. Silver, i Crunch (App'x), (1801), 367. 

The case was this : James Cavan made a promissory note, by 
which he promised to pay to Silver et al., or order, sixty days 
after date, $600 for value received, negotiable at the Bank of 
Alexandria. Silver et al. indorsed the note to Downing & Dowell 
in these words, "pay the contents to Downing & Dowell," who 
indorsed, "pay the contents to John Dunlop or order." Dunlop 
had obtained judgment on the note against Cavan, the maker, who 
was taken upon the execution, and took the oath of an insolvent 
debtor. 

The declaration had two counts. 1st. A special count stating 
the making and indorsing the note, the suit, judgment, execution 
and insolvency of Cavan, by reason whereof the defendant became 
liable, etc. 2d. Indebitatus assumpsit for money had and received. 
The plea was non assumpsit, and a verdict was taken for the 
plaintiff subject to the opinion of the Court, upon the point, 
whether the holder could maintain an action against the remote 
indorser of a promissory note. * * * * The principal question 
then is whether this action could have been supported in England 
before the Statute of Anne. 1 

I. In order to ascertain how the law stood before that statute, 
it may be necessary to examine how far the custom of merchants, 

1 See text of this statute— Intro. Bunker's Neg. Ins. 18-20. 



2 History of the Law Merchant 

or the lex mercatoria, was recognised by the courts of justice and 
by what means the common-law forms of judicial proceedings 
were adapted to its principles. 

A distinction seems to have been made, very early, between 
the contracts of merchants (especially of foreign merchants) and 
those of other people. Nearly six hundred years ago we find 
their "old and rightful customs" protected by the great charter of 
English liberties. (Magna Charta, c. 30.) Peculiar privileges 
were also granted them more than 500 years ago by the Statute 
of Acton Burnel, de mercatoribus 11 Edw. I., and the Statute of 
Merchants, 13 Edw. I. And in the reign of Edw. III., many 
statutes were made for their encouragement, in some of which, 
particularly 27 Edw. III., c. 19 and 20, the law merchant is 
expressly recognised. In 13 Edw. VI., 9, 10 (cited by Malloy, 
book 3, c. 7, § 15), it is said, that "a merchant stranger made suit 
before the king's privy council, for certain bales of silk, feloniously 
taken from him, wherein it was moved that this matter should be 
determined at common law; but the lord chancellor answered, 
that this suit is brought by a merchant who is not bound to sue 
according to the law of the land nor to tarry the trial of twelve 
men." The custom of merchants is mentioned in 34 Hen. VIII., 
cited in Bro. Abr., tit. Customs, pi. 59, where it was pleaded, as 
a custom between merchants throughout the whole realm, and 
the plea was adjudged bad, because a custom throughout the 
whole realm was the common law. And for a long time, it was 
thought necessary to plead it as a custom between merchants of 
particular places, viz., as a custom among merchants residing in 
London and merchants in Hamburg, &c. By degrees, however, 
the courts began to consider it as a general custom. Co. Litt. 182, 
2 Inst. 404. And in the time of James I., Ch. J. Hobart, in the 
case of Vanheath v. Turner, Winch 24, said that "the custom of 
merchants is part of the common law, of which the judges ought 
to take notice." It was still, however, deemed necessary to set 
forth the custom specially; and in that form the precedents con- 
tinued, for some time after. Indeed, the pleadings continued in 
that form, long after the courts had decided it to be unnecessary. 
Lord Coke in his Commentary on Littleton (first published in 
1628), folio 182a, speaking of the lex mercatoria says, "Which, 
as hath been said, is part of the laws of this realm." See also 
2 Inst. 404. 

But after this, in the year 1640, in Eagle child's case reported 
in Hetly 167 and Litt. 363, 6 Car. I (it was said to have been 



Dunlop v. Silver 3 

ruled in B. R.), that upon a bill of exchange between party and 
party, who were not merchants, there cannot be a declaration 
upon the law merchant, but there may be a declaration upon 
assumpsit, and give the acceptance of the bill in evidence." This 
decision seemed to confine the operation of the law merchant, not 
to contracts of a certain description, but to the persons of mer- 
chants : whereas, the custom of merchants is nothing more than 
a rule of construction of certain contracts. Jac. Law Diet. (Toml. 
edit.), tit. Custom of Merchants. Eaglechild's case, however, was 
overruled in 18 Car. II B. R. (1666), in the case of Woodward 
v. Rowe, 2 Keb. 105, 132, which was an action by the indorsee 
against the drawer of a bin of exchange. "The plaintiff counted 
on the custom and law of the realm that if any man writes a bill 
to another, then if he to whom the bill is directed do not pay for 
the value received by the maker, the maker of such bill should 
pay." "It was moved in arrest of judgment, that this count is ill, 
the general custom being the law ; and it doth not appear to the 
court that there is any such law. Sed curia, contra, that by the 
common law, a man may resort to him that received the money, 
if he to whom the bill was directed refuse." It was afterwards 
moved again, that this "is only a particular custom among mer- 
chants, and not common law; but, per curiam, the law of 
merchants is the law of the land ; and the custom is good enough, 
generally, for any man without naming him merchant ; judgment 
pro plaintiff, per totam curiam, and they will intend that he, of 
whom the value is said to be received by the defendant, was the 
plaintiff's servant. 

The same principle was, two years afterwards, recognised in 
an Anonymous case (but believed to be Milton's Case, vide 1, 
Mod. 286) in the Exchequer, reported in Hadres 485, Mich. 20 
Car. II (1668), where the plaintiff declared on the custom of 
England, and after verdict, Offley moved in arrest of judgment, 
because the "plaintiff had declared that per consuetudinem Ang- 
li<e, &c, which he said was naught, because the custom of England 
is the law of England, and what the judges are bound to take 
notice of; and that, therefore, the consuetudo Anglia ought to 
have been omitted." But the Chief Baron said, "but for the 
plaintiff's inserting the custom of the realm into his declaration 
here, I hold that to be mere surplusage and redundancy, which 
does not vitiate the declaration." And again he says, "it were 
worth while to inquire, what the course has been amongst mer- 
chants; or to direct an issue for trial of the custom among 



4 History of the Law Merchant 

merchants ; yet, all their customs we cannot know, but by inform- 
ation." Afterwards, in declaring their opinions, the court said 
"that this course of accepting bills being a general custom amongst 
all traders, both within and without the realm, and having every- 
where that effect to make the acceptor subject to pay the contents, 
the Court must take notice of that custom.'' 

Notwithstanding these decisions, the question was again 
made, about twenty years afterwards, in the case of Carter v. 
Downish (i W. & M. Anno 1688), 1 Show. 127, in the Exche- 
quer, on a writ of error from the king's bench. The defendant 
had covenanted to pay all bills which should be drawn on him, 
in favor of the plaintiff, on account of 1000 kentals of fish, and 
the breach assigned was, the non-payment of a certain bill. The 
defendants pleaded, that the plaintiff by indorsement on the bill, 
according to the custom of merchants, appointed the payment to 
Herbert Aylwin, or his order, who indorsed it to Tassel, to whom 
the defendant paid it. To this plea there was a demurrer and 
joinder. One of the errors assigned was, that the defendant had 
not set forth a particular custom, to warrant the indorsement. To 
which it was answered "that the law and custom of merchants 
warrant the indorsement of foreign bills of exchange, and for 
that, all the book cases on foreign bills are a proof ; and that such 
indorsement doth really transfer the property of the money, or 
contents, in such bills to the indorsee, and that all this law of 
merchants is part of the law of the land, and the judges are 
obliged to take notice of that as well as of any other law." * * * 

Three years after this, however, the point was again made, 
in the case of Mogadara v. Holt (3 W. & M.), 1 Show, 318 and 
12 Mod. 15, 16 {Anno 1699), where it was held by Holt, Chief 
Justice, and the whole court, "that the law of merchants is jus 
gentium, and a part of common law, and ergo, we ought to take 
notice of it when set forth in pleading." And "though the plain- 
tiff hath alleged a custom contrary to fact, yet that is but surplus- 
age ; and he needed not to have alleged a custom." Jud. pro quer. 

Not satisfied with these adjudications, the question was 
again agitated two years afterwards, in the exchequer, on a writ 
of error from the king's bench, in the case of Williams v. Wil- 
liams, Carth. 269 (Pasch. 5 W. & M., Anno 1693) where "the 
only error insisted on was that the plaintiff had not declared on 
the custom of merchants in London, or any other particular place 
(as the usual way is) but had declared on a custom through all 
England, and if so, 'tis the common law, and then it ought not to- 



Dunlop v. Silver 5 

be set out by way of custom ; and if it is a custom, then it ought 
to be laid in some particular place from whence a venue might 
arise to try it. To which it was answered, that this custom of 
merchants, concerning bills of exchange, is part of the common 
law of which the judges will take notice ex officio, as it was 
resolved in the case of Carter v. Downish; and therefore, it is 
needless to set forth the custom specially in the declaration, for it 
is sufficient to say, that such a person secundum usum et consue- 
tudinem mercatorum, drew the bill ; therefore, all the matter in the 
declaration concerning the special custom was merely surplusage 
and the declaration good without it. The judgment was affirmed." 
* * * Again, in Hilary term (B. R. 8 and 9, Wm. Ill, Anno 
1697) Pinkney v. Hall, 1 Ld. Raym. 175, the exception was taken, 
"that the declaration being per consuetudinem Anglice, &c, was 
ill, because the custom of England is the law of England, of which 
the judges ought to take notice, without pleading. Sed non allo- 
catur. For the custom is not restrained to any particular place." 

The same principles were, in the same term, in the common 
pleas, held, in the case of Bromwich v. Loyd (Hilary term, 8 Wm. 
Ill) 2 Lutw., 1585, where Treby, Chief Justice, said, "That bills 
of exchange, at first were extended only to merchant strangers, 
and afterwards to inland bills between merchants trading one 
with another here in England; and after that, to all traders and 
dealers, and of late, to all persons trading or not; and there was 
no occasion to allege any custom : and that was not denied by any 
of the other justices." 

In 10 Wm. Ill, Anno 1698 B. R., Hawkins v. Cardy, 1 Ld. 
Raym. 360, an action was brought on a promissory note, made by 
the defendant, and indorsed by the payee to the plaintiff for part 
only, who declared on the custom of merchants for such an 
indorsement. But on demurrer it was adjudged ill. "For a man 
cannot apportion such personal contract, for he cannot make a 
man liable to two actions, where by contract he is liable but to 
one." And Holt, Chief Justice, said, "This is not a particular 
local custom, but the custom of merchants, of which the law takes 
notice; and therefore the court cannot take the custom to be so. 
Judgment for defendant. 

Four years after this, in the case of Buller v. Crips, 6 Mod. 
29 (B. R. 2 Ann., Anno 1702) Lord Holt said, "I remember 
when actions upon inland bills of exchange did first begin; and 
there they laid a particular custom between London and Bristol, 
and it was an action against the acceptor * * * And in my 
Lord North's time it was said, that the custom in that case was 



6 History of the Law Merchant 

part of the common law of England, and the actions since became 
frequent as the trade of the nation did increase ; and all the differ- 
ence between foreign and inland bills is, that foreign bills must 
be protested before a public notary, before the drawer may be 
charged ; but inland bills need no protest." 

In the year 1760 (1 Geo. III.), in the case of Edie v. The 
East India Company, 2 Burr. 1226, Mr. Justice Foster said, 
"Much has been said about the custom of merchants; but the 
custom of merchants or law of merchants, is the law of the king- 
dom, and is part of the common law." * * * And in the same 
case,' p. 1228, Mr. Justice Wilmot says, "The custom of merchants 
is part of the law of England ; and courts of law must take notice 
of it as such." * * * In the case of Pillans & Ross v. Van 
Mierop & Hopkins, 3 Burr. 1669, Lord Mansfield says, "The 
law of merchants and the law of the land is the same." * * * 

This chronological list of authorities tends to elucidate the 
manner in which the custom of merchants gained an establishment 
in the courts of law, as part of the common or general law of the 
land; and shows that it ought not to be considered as a system 
contrary to the common law, but as an essential constituent part 
of it, and that it always was of co-equal authority so far as sub- 
jects existed for it to act upon. The reason why it was not 
recognized by the courts, and reduced to a regular system, as soon 
as the laws relating to real estate, and pleas of the crown, seems 
to be, that in ancient times, the questions of a mercantile nature, 
in the courts of justice, bore no proportion to those relating to 
the former subjects. Before the time of James I., we have 
scarcely a mercantile case in the books ; and yet, long before that 
time, the laws respecting real estates and the criminal code were 
nearly as well understood as they are at this day. * * * 

Another reason, perhaps, why we see so much tardiness in 
the courts in admitting the principles of commercial law in prac- 
tice, has been the obstinacy of judicial forms of process, and the 
difficulty of adapting them to those principles which were not 
judicially established, until after those forms had acquired a kind 
of sanctity from their long use. * * * It required the tran- 
scendant talents, and the confidence in those talents, which were 
possessed by Lord Mansfield to remove those obstructions. When 
he ascended the bench he found justice fettered in the forms of 
law. It was his task to burst those fetters and to transform the 
chains into instruments of substantial justice. From that time a 
new era commenced in the history of English jurisprudence. His 
sagacity discovered those intermediate terms, those minor propo- 



Dunlop v. Silver 7 

sitions, which seemed wanting to connect the newly-developed 
principles of commercial law with the ancient doctrines of the 
common law, and to adapt the accustomed forms to the great and 
important purposes of substantial justice in mercantile tran- 
sactions. 

II. Forms of pleading often tend to elucidate the law. By 
observing the forms of declarations, which have, from time to 
time been adapted, in actions upon bills of exchange, we may per- 
haps discover the steps by which the courts allowed actions to be 
brought upon them as substantive causes of action without 
alleging any consideration for the making or accepting them. 
The first forms which were used take no notice of the custom of 
merchants as creating a liability distinct from that which arises at 
common law ; but by making use of several fictions, bring the case 
within the general principles of actions of assumpsit. The oldest 
form which is recollected is to be found in Rastell's Entries fol. 10 
(a), under the head, "Action on the case upon promise to pay 
money." Rastell finished his book, as appears by his preface, on 
the 28th of March, 1564, and gathered his forms from four old 
books of precedents, then existing. This declaration sets forth 
that A complains of B, &c, for that whereas the said A, by a 
certain I C, his sufficient attorney, factor and deputy in this 
behalf, on such a day and year, at L., at the special instance and 
request of the said B, had delivered to the said B, by the hand of 
the said I C, to the proper use of the said B, 1 10/ 8 s 46, lawful 
money of England; for which said 110/ 8s 4d, so to the said 
B delivered, he the said B, then and there, to the said I C 
(then being the sufficient attorney, factor and deputy of the said 
A in this behalf) faithfully promised and undertook, that a certain 
John of G. well and faithfully would content and pay to Reginald 
S. (on such a day and year, and always afterwards, hitherto the 
sufficient deputy, factor and attorney of the said A in this behalf) 
443 2-3 ducats, on a certain day in the declaration mentioned. 
And if the aforesaid John of G. should not pay and content the said 
Reginald S. the said 443 2-3 ducats, at the time above limited, that 
then the said B would well and faithfully pay and content the said 
A 110/ 8s 4d lawful money of England, with all damages and 
interest thereof, whenever he should be thereunto by the said A 
requested. It then avers, that the said 443 2-3 ducats were of the 
value of 110/ 8s 4d, lawful money of England, that John of G. 
had not paid the ducats to Reginald S. and that if he had paid 
them "to the said R, I, B. and associates or to either of them, then 



8 History of the Law Merchant 

the said 443 2-3 ducats would have come to the benefit and profit 
of the said A." * * * 

This declaration seems to have been by the indorsee of a bill 
of exchange against the drawer. For although nothing is said of 
a bill of exchange, or of the custom of merchants, yet the facts 
stated will apply to no other transaction. It appears that ducats 
were to be given for pounds sterling; this was in fact an 
exchange. Again the defendant promised to repay the original 
money advanced, with all damages and interest ; this is the precise 
obligation of the drawer of a bill of exchange according to the 
law merchant. Besides, the transaction, if literally true, as set 
forth in the declaration, was, at least, a very uncommon one. A 
is supposed to make I. C. his attorney for the purpose of paying 
110/ to B, and to receive a promise from B, that John of G. 
should pay to Reginald S. 443 ducats. And A is also supposed to 
have made Reginald S. his attorney for the purpose of recovering 
the ducats. Such a transaction must certainly be very rare, 
especially, as it was so much easier to have done the same thing in 
substance, by a simple bill of exchange. * * * 

In the declaration of payee v. acceptor, fol. 338a, the foreign 
merchant who paid the 1400 crowns to the drawer of the bill in 
France, to be remitted to the plaintiff (the payee), in England, 
is stated to be the plaintiff's factor ; and the drawer of the bill is 
stated to be the factor of the defendant (the acceptor), so that 
the plaintiff, by his factor, is supposed to pay to the defendant, 
through the medium of the defendant's factor, the 1400 crowns, 
in consideration of which it is averred that the defendant in 
England promised the plaintiff to pay him 414J 3s 4d, lawful 
money of England. 

This declaration sets forth, that whereas, the plaintiff, on the 
10th of June, 37 Eliz., at Rochelle, in France, in parts beyond 
seas, by the hands of a certain T. S., then the factor of the plain- 
tiff, at the request of a certain R. W., then the factor of the 
defendant, delivered and paid to the said R. W., then factor of 
the defendant, to the use of the defendant, as much ready money 
as amounted to 1400 French crowns, of the money of France, in 
parts beyond sea, at the rate of 5s nd, lawful money of England, 
for each French crown. And thereupon, the said R. W., at 
Rochelle aforesaid, then delivered to the said T. S. three bills of 
exchange, viz., first, second and third. In the first of which bills 
of exchange, the said R. W. requested the defendant to pay to 
the plaintiff at L. 414? 3s 4d lawful money of England at the end 
of thirty days next after sight of that bill of exchange (the second 



Dunlop v. Silver 9 

and third bills to the plaintiff not paid). It then sets forth the 
tenor of the second and third bills and then avers that the defend- 
ant, on the day and year first aforesaid, at the city of E. * * * 
in consideration thereof, undertook and to the plaintiff then and 
there and faithfully promised, that he, the defendant, well and 
faithfully would pay to the plaintiff, to the plaintiff's use, at 
the City of E. aforesaid * * * by way of exchange accord- 
ing to the usage of merchants, the aforesaid 414/ 3s 4d lawful 
money of England, at the end of thirty days next after sight of 
any of the bills of exchange aforesaid; and the plaintiff in fact 
saith, that afterwards, viz., on the 1st of September, in the year 
aforesaid at &c, the first of said bills came to the sight of, and 
was then and there shown to, the defendant, yet the defendant not 
regarding, &c, but contriving, &c, did not pay the said 414I 3s 4d, 
&c, at the end of said thirty days, &c. * * * In this declar- 
ation, it will be perceived that the custom of merchants is not 
alleged as the foundation of the action or the cause of liability of 
the defendant ; nor is it stated that the defendant accepted the bill. 
But the plaintiff grounds his action upon the defendant's promise 
to pay the amount mentioned in the bill, in consideration of 1400 
crowns paid to his use in France; and in consideration that his 
factor had drawn and delivered the bills to the plaintiff's factor. 
This idea of factorage is probably a fiction, introduced for the 
purpose of adapting the custom of merchants to the common law 
forms, and to show a sufficient consideration for the assumpsit. 
The question of factorage was not traversable; as the facts of 
drawing the bill, and the drawee's acceptance, were sufficient evi- 
dence of the drawer's being the acceptor's factor quoad hoc. This 
fiction might, perhaps, be considered as part of the custom of 
merchants; but at any rate, it seems to have been considered 
necessary, in order to create that degree of privity between the 
payee and the acceptor which, at that time, was supposed neces- 
sary to support the action of assumpsit. 

Both this and the former are declarations at common law ; that 
is neither of them is aided by the custom of merchants, unless the 
custom may be considered as supporting the fiction of factorage. 
They show, also, that if privity of contract was necessary at com- 
mon law, to support the action of assumpsit, the law would pre- 
sume a privity or at least would presume facts which constituted 
a privity, between the payee and acceptor or between an indorsee 
and a drawer of a bill of exchange. 

III. It is not ascertained exactly at what time inland bills 
first came into use in England or at what period they were first 



JO History of the Law Merchant 

considered as entitled to the privileges of bills of exchange, under 
the law merchant. But there was a time when the law merchant 
was considered as "confined to cases where one of the parties was 
a merchant stranger", 3 Woodeson, 109; and when those bills of 
exchange only were entitled to its privileges, one of the parties to 
which was a foreign merchant. * * * And in Buller v. 
Crips, 6 Mod. 29 (2 Ann.) Lord Chief Justice Holt said he 
remembered "when actions upon inland bills of exchange first 
began." 

Perhaps Lord Holt might have been correct as to the time 
when actions upon inland bills first began, or rather when the first 
notice was taken of a difference between inland and foreign bills ; 
but it appears probable that inland bills were in use much before 
Lord Holt's remembrance. * * * 

The time when inland bills and promissory notes began to be 
in general use in England was probably about the year 1645 or 
1646. * * * Indeed we know that to be the fact, from the 
cases in the books; upon examining which, we shall find, that 
there was no distinction made between inland bills of exchange 
and promissory notes ; they were both called bills ; they were both 
called notes ; sometimes they were called "bills or notes." Neither 
the word "inland" nor the word "promissory" was at this time in 
use as applied to distinguish the one species of paper from the 
other. The term "promissory note" does not seem to have 
obtained a general use, until after the statute. There was no dis- 
tinction made either by the bench, by the bar or by merchants, 
between a promissory note and an inland bill, and this is the cause 
of that obscurity in the reports of mercantile cases during the 
reigns of Charles II, James II and King William, of which Lord 
Mansfield complained so much in the case of Grant v. Vaughan, 3 
Burr. 1525 and 1 W. Bl. 488; where he says that in all the cases 
in King William's time "there is great confusion; for without 
searching the record, one cannot tell whether they arose upon 
promissory notes or inland bills of exchange. For the reporters 
do not express themselves with sufficient precision, but use the 
words 'note' and 'bill' promiscuously." This want of precision is 
apparent enough to us who now (since the decision of Lord Holt 
in the case of Clerk v. Martin) read the cases decided by him 
before that time ; but at the time of reporting them, there was no 
want of precision in the reporter, for there was not, in fact, and 
never had been suggested, a difference in law between a promis- 
sory note and an inland bill. They both came into use at the same 



Dunlop v. Silver 11 

time, were of equal benefit to commerce, depended upon the same 
principles and were supported by the same law. 

IV. The case of Edgar v. Chut, or Chat. v. Edgar, reported 
in i Keb. 592, 636 (Mich. 15 Car. II, Anno 1663), seems to be the 
first in the books which appears clearly to be upon an inland bill 
of exchange. Without doubt, many had preceded it, and passed 
sub silentio. The case was this: A butcher had bought cattle of 
a grazier, but not having money to pay for them, and knowing 
that the parson of the parish had money in London, he obtained 
(by promising to pay for it) the parson's order or bill on his cor- 
respondent, a merchant in London, in favor of the grazier. The 
parson having doubts of the credit of the butcher, wrote secretly 
to his correspondent, not to pay the money to the grazier, until 
the butcher had paid the parson. In consequence of which the 
London merchant did not pay the draft, and the grazier brought 
his suit against the parson, and declared on the custom of 
merchants. It was moved in arrest of judgment, that neither the 
drawer nor the payee was a merchant ; but it was held to be suffi- 
cient, that the drawee was a merchant. 

Next came the case of Woodward v. Row (Mich., 18 Car. II, 
Anno 1666) 2 Keb. 105, 132, in which the court said, 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; 
and they will intend that he of whom the value is said to be 
received by the defendant, was the plaintiff's servant." 

The next is Milton's case (Mich., 20 Car. II) Hardr. 485, 
of which it may be necessary to take notice, as it has been consid- 
ered as a leading case, and as having established some principles 
upon which a number of subsequent cases have been decided. It 
was an action of debt, in the exchequer, upon a bill of exchange 
accepted. The plaintiff declared, that by the custom of England, 
if a merchant send a bill of exchange to another merchant, to pay 
money to another person, and the bill be accepted, that he who 
accepts the bill does thereby become chargeable with the sum there- 
in contained ; and that a certain merchant drew a bill of exchange 
upon the defendant, payable to the plaintiff, which bill the defend- 
ant accepted ; per quod actio acrevit. Upon nil debet pleaded, the 
verdict was for the plaintiff. A motion was made in arrest of 
judgment, and one of the reasons assigned was, that there was 
"no privity between the plaintiff and defendant," "nor any contract 
in deed or in law." 

The Chief Baron, among other things, said, that "without 



12 History of the Law Merchant 

doubt, if the common law, or the custom of the place, create a 
duty, debt lies for it ; as in the case of a toll due by custom. * * * 
But the great question here is, whether or no a debt or duty be 
hereby raised : for if it be no more than a collateral engagement, 
order or promise, debt lies not, as in the case that has been cited, 
of goods delivered by A to B, at the request of C, which C prom- 
iseth to pay for, if the other does not ; for in that case a debt or 
duty does not arise betwixt A and C, but a collateral obligation 
only. In our case, the acceptance of the bill amounts clearly to 
a promise to pay the money ; but it may be a question whether it 
amounts to a debt or not." 

Precedents were ordered to be searched ; but none being 
found, the court, afterwards, in Hilary term, 20 & 21 Car. II., 
declared their opinions, "that an action of debt would not lie upon 
a bill of exchange accepted, against the acceptor ; but that a special 
action upon the case must be brought against him. For the accept- 
ance does not create a duty, no more than a promise made by a 
stranger to pay, &c, if the creditor will forbear his debt. And 
he that drew the bill continues debtor, notwithstanding the accept- 
ance, which makes the acceptor liable to pay it. And this course 
of accepting bills, being a general custom among all traders, both 
within and without the realm, and having everywhere that effect 
as to make the acceptor liable to pay the contents, the court must 
take notice of that custom ; but the custom does not extend so far 
as to create a debt; it only makes the acceptor onerabilis to pay 
the money. Though custom may give an action of debt, as in the 
case of toll; and so in case of a fine for a copyhold. Where- 
fore, and because no precedent could be produced that an action 
of debt had been brought upon an accepted bill of exchange, 
judgment was arrested." 

The ground of this judgment seems to be, that the drawer is 
the original debtor, and that the undertaking of the acceptor is 
only to pay the drawer's debt ; and therefore, is a collateral and 
not an original engagement. If the court were mistaken in this 
position, the case is not law ; or, at least, the reason of the case 
fails. It may be true, that the drawer is the original debtor, until 
the bill is accepted ; but after the bill is accepted, the acceptor is 
the original debtor, and the undertaking of the drawer is collat- 
eral, viz., to pay in case the acceptor does not. * * * 

(After commenting upon numerous cases, the court con- 
tinues) : We have now examined all the reported cases upon 
promissory notes, from the time of the first introduction of inland 



Dunlop v. Silver 13 

bills, to the time of Lord Holt's decision in the case of Clerke v. 
Martin. At least, if any others are to be found, they have escaped 
a diligent search. They form a series of decisions for a period of 
more than thirty years, in which we discover an uncommon degree 
of unanimity as well as of uniformity. We find the law clearly 
established to be the same upon promissory notes as upon inland 
bills; and we find no evidence that the latter were in use before 
the former. There is not a contradictory case, or even dictum, 
unless we consider as such the doubt expressed in the case of 
Butcher v. Swift, cited by Comyns ; but that case is not reported, 
and therefore, it is impossible to say, upon what ground the doubt 
was suggested. The cases upon promissory notes and inland bills 
go to establish not only their likeness in every respect, but even 
their identity ; for the former are almost uniformly called inland 
bills. 

V. Upon examining the printed books of precedents, during 
the above period, we shall find that the common usage was, to 
declare upon a promissory note, as upon an inland bill of 
exchange. * * * (After commenting upon various prece- 
dents, the court continues) : Upon a review of this list of 
authorities and precedents, we are at a loss to imagine from what 
motive, and upon what grounds, Lord Holt could at once under- 
take to overrule all these cases, and totally change the law as to 
promissory notes; and why he should admit inland bills of 
exchange to be within the custom of merchants, and deny that 
privilege to promissory notes ; when the same evidence which 
proved the former to be within the custom, equally proved that it 
extended to the latter. By examining the books, it will be found, 
that most of the points which have been decided respecting inland 
bills of exchange, have been decided upon cases on promissory 
notes. If he considered promissory notes as a new invention, 
when compared with inland bills of exchange, he seems to have 
mistaken the fact; for the probability is, that the former are the 
most ancient, or, to say the least, are of equal antiquity. 

But let us proceed to examine the case of Clerke v. Martin 
(Pasch., i Anne, B. R., 2 Ld. Raym. 757; 1 Salk. 129), upon which 
alone is founded the assertion in modern books "that before the 
statute of Anne, promissory notes were not assignable or indor- 
sable over, within the custom of merchants, so as to enable the 
indorsee to bring an action in his own name against the maker." 
The case is thus reported by Lord Raymond : 

"The plaintiff brought an action upon the case, against the 
defendant, upon several promises ; one count was upon a general 



14 History of the Law Merchant 

indebitatus assumpsit for money lent to the defendant; another 
was upon the custom of merchants, as upon a bill of exchange; 
and showed that the defendant gave a note subscribed by himself, 

by which he promised to pay to the plaintiff, or his order, 

&c. Upon non assumpsit, a verdict was given for the plaintiff, 
and entire damages. And it was moved in arrest of judgment 
that this note was not a bill of exchange, within the custom of 
merchants, and therefore, the plaintiff, having declared upon it as 
such, was wrong; but that the proper way, in such cases, is to 
declare upon a general indebitatus assumpsit for money lent, and 
the note would be good evidence of it. 

"But it was argued by Sir Bartholomew Shower, the last 
Michalmas term, for the plaintiff, that this note being payable to 
the plaintiff or his order, was a bill of exchange, inasmuch as, by 
its nature, it was negotiable ; and that distinguishes it from a note 
payable to I. S., or bearer, which he admitted was not a bill of 
exchange, because it is not assignable nor indorsable by the Intent 
of the subscriber, and consequently, not negotiable, and there- 
fore, it cannot be a bill of exchange, because it is incident to the 
nature of a bill of exchange to be negotiable; but here this bill 
is negotiable, for if it had been indorsed payable to I. N., I. N. 
might have brought his action upon it, as upon a bill of exchange, 
and might have declared upon the custom of merchants. Why 
then should it not be, before such indorsement, a bill of exchange 
to the plaintiff himself, since the defendant, by his subscription, 
has shown his intent to be liable to the payment of this money to 
the plaintiff or his order ; and since he hath thereby agreed that it 
shall be assignable over, which is, by consequence, that it shall be 
a bill of exchange. That there is no difference in reason, 
between a note which saith, T promise to pay to I. S., or order,' 
&c, and a note which saith, 'I pray to pay to I. S., or order,' 
&c, they are both equally negotiable, and to make such a note a 
bill of exchange can be no wrong to the defendant, because he, 
by the signing of the note, has made himself to that purpose a 
merchant (2 Vent. 292, Sarsiield v. Witherly), and has given his 
consent that his note shall be negotiated, and thereby has 
subjected himself to the law of merchants." 

But Holt, Chief Justice, was totis viribus against the action, 
and said that this could not be a bill of exchange. That the 
maintaining of these actions upon such notes were innovations 
upon the rules of the common law; and that it amounted to a 
new sort of specialty, unknown to the common law, and invented 
in Lombard Street, which attempted, in these matters of bills of 



Dunlop v. Silver 15 

exchange, to give laws to Westminster Hall. That the continuing 
to declare upon these notes, upon the custom of merchants, pro- 
ceeded upon obstinacy and opinionativeness, since he had always 
expressed his opinion against them, and since there was so easy 
a method as to declare upon a general indebitatus assumpsit for 
money lent, &c. As to the case of SarsMd v. Witherly, he said, 
he was not satisfied with the judgment of the king's bench, and 
that he advised the bringing of a writ of error. * * * 

As four other cases are reported upon this subject, prior to 
the statute of Anne, all of which were dependent upon this of 
Clerke v. Martin, it may be proper to notice what fell from the 
court in each, before any comments are made on that case. 

(After discussing the four cases, viz., Potter v. Pearson, i 
Ld. Raym. 774 ; Williams v. Cutting, 2 Ld. Raym. 825 ; Burton 
v. Souter, 2 Ld. Raym. 825, and Buller v. Crips, 6 Mod. 29, the 
court continues.) These five cases, viz., Clerke v. Martin, Potter 
v. Pearson, Burton v. Souter, Cutting v. Williams, and Buller v. 
Crips, are the only reported cases in which the former decisions 
were overruled, and it may be observed, that the four last were 
decided upon the authority of the first, which is to be considered 
as the leading case; and it is in that case, therefore, that we are 
to look for the grounds upon which so great a change of the 
established law was founded. We shall, however, consider the 
reasons that are scattered among the whole, as having concurred 
in the formation of Lord Holt's opinion. In the first place, we 
find an assertion of his lordship, in Clerke v. Martin, "that this 
note could not be a bill of exchange," but he seems to have been 
too much irritated, at that time, to give a reason for the assertion, 
or to recollect that in the case of Hill v. Lewis, upon promissory 
notes, he had said, "that goldsmiths' bills were governed by the 
same laws and customs as other bills of exchange," and that the 
verdict in that case would be good, "if found upon bills of 
exchange." His next assertion is, "that the maintaining these 
actions upon such notes, were innovations upon the rules of the 
common law." But if, as we have shown, the custom of mer- 
chants is a part of the common law; if promissory notes had 
always, from the time of their first introduction, been adjudged 
to be as much within the custom of merchants as inland bills of 
exchange, then an action on a promissory note founded on 
the custom was not more an innovation than a like action upon 
an inland bill of exchange. Besides that could hardly deserve 
the name of innovation, which had been sanctioned by all the 



15 History of the Law Merchant 

judges of England, on a demurrer, as was the case in Williams 
v. Williams. 

His next assertion is, "that it amounted to the setting up a 
new sort of specialty, unknown to the common law, and invented 
in Lombard Street." To this, it may be answered, that it did not 
amount to the setting up a specialty, because the consideration of 
a specialty is not examinable at law; but between immediate 
parties to a bill of exchange, or a promissory note, the defendant 
might always have availed himself of the want of consideration. 
It only amounted, at most, to the setting up a promissory note as 
a bill of exchange. The assertion that promissory notes were 
invented in Lombard Street is certainly not correct, for Malynes 
mentions them as in use in foreign countries, and as being 
assignable by the custom of merchants, long before they appear 
to have been introduced into England. The other assertions of 
his lordship only tend to show a degree of irritation which dero- 
gates from the respect which the decision might otherwise 
deserve. * * * 

Hence then, we find, from an examination of all the cases 
before the statute of Anne, that it never was adjudged, that a 
promissory note for money, payable to order, and indorsed, was 
not an inland bill of exchange. But we find, that the contrary 
principle had been recognised, in all the cases, from the time of 
the first introduction of inland bills and promissory notes, to the 
first year of Queen Anne, and that in one of them it had been 
expressly adjudged, upon demurrer in the king's bench, and the 
judgment affirmed upon argument, in the exchequer chamber, 
before all the judges of the common pleas and barons of the 
exchequer, so that it may truly be said to have been solemnly 
adjudged by all the judges of England. Principles of law so 
established are not to be shaken by the breath of a single judge,- 
however great may be his learning, his talents or his virtues. 
That Lord Holt possessed these in an eminent degree will never 
be denied ; but he was not exempt from human infirmity. * * * 

Lord Hardwicke, in the case of Walmsley v. Child (Anna 
J 749)> I Ves. 346, says, "The reason of making the statute 3 
and 4 Anne arose from some determinations, in the beginning of 
her reign, by Holt, Chief Justice, that no action could be main- 
tained on a promissory note, nor declaration thereupon, viz., 
Clerke v. Martin, and Potter v. Pearson, 1 Salk. 129, which 
cases produced the act, as the act itself recites; but that act of 
parliament did not alter, but that still an indebitatus assumpsit 
may be brought, and the note given in evidence, or proved if 



Dunlop v. Silver 17 

lost." From this concurrent testimony it is apparent, that the 
case of Clerke v. Martin was a hasty, intemperate decision of 
Lord Holt, which was acquiesced in by the other judges, in con- 
sequence of his overbearing authority, "which made others yield 
to him"; and that he so "pertinaciously" adhered to his opinion, 
as to render it necessary to apply to parliament to overrule him. 

This, it is believed, is the true origin of the statute of Anne, 
which did not enact a new law, but simply confirmed the old; 
the authority of which had been shaken by the late decision of 
Lord Holt. * * * 

It follows, therefore, that it was passed simply to restore the 
old order of things, which had been disturbed by Lord Holt. 

The only real effect of the statute was to alter a few words 
in the declaration. The old forms allege that the defendant 
became liable by reason of the custom of merchants, the new 
say that he became liable by force of the statute. Even Lord 
Holt himself always admitted, that an indebitatus assumpsit for 
money had and received, or money lent, would lie, and the note 
would be good evidence of it. His objections were only to the 
form of the action, and not to the liability of the parties. 

A promissory note was always as much a mercantile instru- 
ment as an inland bill of exchange, and there certainly seems to be 
more evidence that the former is within the custom of merchants 
than the latter, and that it was so at an earlier period, on the con- 
tinent of Europe, from whence it was introduced into England; 
and when introduced, it came attended with all the obligations 
annexed, which the custom had attached to it. 

We, sometimes, in modern books, meet with an assertion 
that a promissory note was not negotiable at common law ; this 
may be true, because a promissory note was not known at com- 
mon law, if from the term common law we exclude the idea of 
the custom of merchants. It was a mercantile instrument, intro- 
duced under the custom of merchants. But if the custom of 
merchants is considered, as it really is, a part of the common law-, 
then the assertion that a promissory note was not negotiable at 
the common law, is not correct. 



18 History of the Law Merchant 



Goodwin v. Robarts, L. R. 10 Exchequer (18/5), 337. 

The facts are sufficiently stated in the opinion 
Benjamin (Q. C), for the plaintiff. 
Brown (Q. C), for the defendant. 

July 7. The judgment of the Court (Cockburn, C.J., Mel- 
lor, Lush, Brett, and Lindley, JJ.) was delivered by 

Cockburn, CJ. The question for our decision in this case is 
whether certain scrip issued by the authority of the Russian Gov- 
ernment, and certain other scrip issued by the authority of the 
Austro-Hungarian Government, is a negotiable security for money, 
so that the transfer of it by a person not being the true owner to 
a bona fide holder, for value, can confer a good title on the latter. 

The scrip in question was bought by the plaintiff through one 
Clayton, a stockbroker, and was allowed to remain in Clayton's 
hands, who unlawfully pledged it with the defendants, who are 
bankers, as security for a loan of money. Clayton having become 
bankrupt and having absconded, the defendants sold the scrip at 
the market price of the day, and the plaintiff brings his action to 
recover the amount realised on such sale. 

The scrip in question was in the following form : — 

"1873 . C. 1873. Imperial Government of Russia. 
Issue of 15,000,000/. sterling nominal capital in 5 per cent, con- 
solidated bonds of 1873. Negotiated by Messrs. N. M. Roth- 
schild & Sons, London, and Messrs. de Rothschild Brothers, Paris. 
Bearing interest half-yearly, payable in London from 1st of De- 
cember, 1873. Scrip for one hundred pounds stock, No. . 

"Received the sum of twenty pounds, being the first instal- 
ment of 20 per cent, upon one hundred pounds stock, and on 
payment of the remaining instalments at the period specified, the 
bearer will be entitled to receive a definitive bond or bonds for one 
hundred pounds after receipt thereof from the Imperial Govern- 
ment. 

"London, 1st December, 1873. The instalments are to be 
paid at our office as follows: 15/. per cent., or 15/., on the 5th 
February, 1874; 15/. per cent., or 15/., on the 9th of March, 1874; 
20I. per cent., or 20/., on the 2nd May, 1874; 23/. per cent, or 23/., 
on the 9th June, 1874. Subscribers may pay the same, under a 
discount at 3 per cent, per annum, on any Monday or Thursday 
after the 16th instant. 



Goodwin v. Robarts 19 

"In default of payment of these instalments at the proper 
dates, all previous payments will be liable to forfeiture." Then 
follow four other receipts for 20I. each, making up the 100L, for 
which the bond is afterwards to be given. 

The scrip issued by the authority of the Austro-Hungarian 
Government was in a precisely similar form. 

The scrip in question was issued by Messrs. de Rothschild as 
the agents of the Russian and Austro-Hungarian governments, 
they being employed by these governments to negotiate and raise 
a loan for them respectively on government bonds, bearing 
interest, to be afterwards issued in exchange for the scrip when all 
the instalments of the sum for which the scrip was issued should 
have been paid up. No question is raised as to the fact of Messrs. 
de Rothschild having acted in the matter as agents of the two 
governments, or of the .scrip having been issued by the authority 
of the latter. 

The contention on the part of the plaintiff was that, scrip of 
this description not coming under the category of any of the 
securities for money which, by the law merchant, are capable of 
being transferred by indorsement or delivery — indeed, not being a 
security for money at all, but only for the future delivery of a 
bond — the right of the true owner could not be divested by the 
fraudulent transfer of the chattel by a person who had no title as 
against the owner. 

Strenuous efforts were made by Mr. Benjamin in his able 
argument on behalf of the plaintiff to distinguish the present case 
from Gorgier v. Mieville., 3 B. & C. 45. He insisted, first, that 
although it must be admitted that, if a bond had been given in lieu 
of this scrip, the bond would have been a negotiable instrument, 
as the case would then have come within Gorgier v. Mieville, 3 
B. & C. 45, here there was no engagement on the part of the for- 
eign government. The only party signing the scrip, or who could 
be held bound by it, were the Messrs. de Rothschild; and the 
persons advancing their money, and taking the scrip, could look 
only to them. Secondly, that even assuming that the issuing of 
the scrip was to be taken to be the act of the foreign government, 
yet that as it had been issued in London, and the parties taking it 
had advanced their money in this country, the contract must be 
taken to have been made here, and must be subject to the law of 
England. That when a foreign sovereign negotiated a loan in 
this country, through his agent, it was in effect the same thing as 
though such sovereign had himself come to this country and 
entered into the contract in person. That, consequently, in either 



20 History of the Law Merchant 

view, the contract arising on the scrip must be taken to have been 
made here, and must be dealt with according to English law. 
That this being so, the case of Crouch v. The Credit Fonder of 
England, Law Rep. 8 Q. B. 374, was an authority which estab- 
lished that it was not competent to anyone, by the law of England, 
to give to a security, not negotiable by the law merchant, the 
character of negotiability, by making it payable to bearer, even 
though such security were a security for money. That, a fortiori, 
this scrip, not being a promise to pay money, but only to give a 
bond when all the instalments should have been paid up, could 
not have the character of negotiability given to it by being made 
payable to bearer. That choses in action not being assignable 
by the general common law, it was only by the law merchant, 
which was recognized by the common law and adopted by it, that 
a particular class of securities for money could be made negotiable, 
either by indorsement, or by being made payable to bearer ; and 
that this class of securities was confined to bills of exchange, 
promissory notes, and drafts payable to bearer. That this scrip 
did not coincide with either of the securities for money to which 
by the law merchant, the quality of being so rendered negotiable 
had been conceded ; the more so as in fact it was not a security 
for money at all, but only an agreement to give such a security 
in the shape of a bond. That the bonds of foreign governments 
had been held to be negotiable by the Courts of this country, not 
because they were negotiable by the law of the country in which 
they were made, but because they were in substance and effect 
promissory notes. 

We entirely dissent from the contention that the contract in 
question is one in which the Messrs. de Rothschild can be looked 
upon as principals. And though our decision on that head may 
not be essential to the conclusion we have arrived at on the case, 
we think it desirable in a matter in which the public are so much 
interested that our view should be made known. It is plain on 
the face of the document that the Messrs. de Rothschild only 
profess to be acting as the agents of the foreign governments. 
The law on this subject is correctly laid down in Story on Agency, 
in the chapter on the Liabilities of Public Agents, s. 302. Col- 
lecting the English and American authorities in a note, the learned 
jurist writes as follows: "In the ordinary course of things, an 
agent, contracting on behalf of the government, or of the public, 
is not personally bound by such a contract, even though he would 
be by the terms of the contract, if it were an agency of a private 
nature. The reason of the distinction is, that it is not to be pre- 



Goodwin v. Robarts 21 

sumed, either that the public agent means to bind himself per- 
sonally in acting as a functionary of the government, or, that the 
party dealing with him in his public character, means to rely on 
his individual responsibility. On the contrary, the natural pre- 
sumption in such cases is that the contract was made upon the 
credit and responsibility of the Government itself, as possessing 
an entire ability to fulfil all its just contracts, far beyond that of 
any private man, and that it is ready to fulfil them not only with 
good faith, but with punctilious promptitude, and in a spirit of 
liberal courtesy. Great public inconvenience would result from a 
different doctrine, considering the various public functionaries 
which the governmen,t must employ in order to transact its ordi- 
nary business and operations; and many persons would be 
deterred from accepting of many offices of trust under the govern- 
ment, if they were held personally liable upon all their official 
contracts. This principle not only applies to simple contracts, both 
parol and written, but also to instruments under seal, which are 
executed by agents of the government in their own name, and 
purport to be made by them on behalf of the government ; for the 
like presumption prevails in such cases, that the parties contract 
not personally, but merely officially, within the sphere of their 
appropriate duties." 

Chancellor Kent lays down the law to the like effect (2nd 
Commentaries, p. 810, 7th ed.), "There is a distinction in the 
books between public and private agents on the point of personal 
responsibility. If an agent, on behalf of government, makes a 
contract and describes himself as such, he is not personally bound, 
even though the terms of the contract be such as might, in a case 
r of a private nature, involve him in a personal obligation. The 
reason of the distinction is, that it is not to be presumed that a 
public agent meant to bind himself individually for the govern- 
ment, and the party who deals with him in that character is justly 
supposed to rely upon the good faith and undoubted ability of the 
government. But the agent in behalf of the public may still bind 
himself by an express engagement, and the distinction terminates 
in a question of evidence. The inquiry in all the cases is, to 
whom was the credit, in the contemplation of the parties, intended 
to be given. This is the general inference to be drawn from all 
the cases, and it is expressly declared in some of them." 

It is true these authors are speaking of persons acting as 
agents for their own governments; but the reasoning applies 
equally to persons acting as agents for a foreign government, and 
the same presumption must arise in both cases. Nor can we sup- 



22 History of the Law Merchant 

pose that the persons taking this scrip did so otherwise than 
through their faith in the honour of the foreign government, just 
as they would have had to trust to it on their afterwards receiving 
the bonds in lieu of the scrip. They would then be equally with- 
out legal redress against the foreign government and must have 
trusted to its honour in the fulfilment of its engagements. 

We think it unnecessary to enter upon the question whether 
the contract thus entered into is to be considered as a Russian or 
an English contract, as we agree in thinking that its negotiable 
character, if it exists at all, must depend on what might be its 
negotiability by the foreign law, but on how far the universal 
usage of the monetary world has given it that character here. 
"The question," says Tindal, C.J., in Lang v. Smyth, 7 Bing. 284, 
at p. 293, "is not so much what is the usage in the country whence 
the instrument comes, as in the country where it passed. The 
substance of Mr. Benjamin's argument is, that, because the scrip 
does not correspond with any of the forms of the securities for 
money which have been hitherto held to be nogitiable by the law 
merchant, and does not contain a direct promise to pay money, 
but only a promise to give security for money, it is not a security 
to which, by the law merchant, the character of negotiability can 
attach. 

Having given the fullest consideration to this argument, we 
are of opinion that it cannot prevail. It is founded on the view 
that the law merchant thus referred to is fixed and stereotyped, 
and incapable of being expanded and enlarged so as to meet the 
wants and requirements of trade in the varying circumstances of 
commerce. It is true that the law merchant is sometimes spoken 
of as a fixed body of law, forming part of the common law, and as 
it were coeval with it. But as a matter of legal history, this view 
is altogether incorrect. The law merchant thus spoken of with 
reference to bills of exchange and other negotiable securities, 
though forming part of the general body of the lex mercatoria, is 
of comparatively recent origin. It is neither more nor less than 
the usages of merchants and traders in the different departments 
of trade, ratified by the decisions of Courts of law, which, upon 
such usages being proved before them, have adopted them as 
settled law with a view to the interests of trade and the public 
convenience, the Court proceeding herein on the well-known prin- 
ciple of law that, with reference to transactions in the different 
departments of trade, Courts of law, in giving effect to the con- 
tracts and dealings of the parties, will assume that the latter have 
dealt with one another on the footing of any custom or usage 



Goodwin v. Robarts 23 

prevailing generally in the particular department. By this process, 
what before was usage only, unsanctioned by legal decision, has 
become engrafted upon, or incorporated into, the common law, 
and may thus be said to form a part of it. "When a general usage 
has been judicially ascertained and established," says Lord Camp- 
bell, in Brandao v. Barnett, 12 CI. & F., at p. 805, "it becomes a 
part of the law merchant, which Courts of justice are bound to 
know and recognise." 

Bills of exchange are known to be of comparatively modern 
origin, having been first brought into use, so far as is at present 
known, by the Florentines in the twelfth, and by the Venetians 
about the thirteenth, century. The use of them gradually found 
its way into France, and, still later and but slowly, into England. 
We find it stated in a law tract, by Mr. Macleod, entitled "Speci- 
men of a Digest of the Law of Bills of Exchange," printed, we 
believe, as a report to the government, but which, from its 
research and ability, deserves to be produced in a form calculated 
to insure a wider circulation, that Richard Malynes, a London 
merchant, who published a work called the Lex Mercatoria, in 
1622, and who gives a full account of these bills as used by the 
merchants of Amsterdam, Hamburg, and other places, expressly 
states that such bills were not used in England. There is reason 
to think, however, that this is a mistake. Mr. Macleod shows that 
promissory notes, payable to bearer, or to a man and his assigns, 
were known in the time of Edward IV. Indeed, as early as the 
statute of 3 Rich. 2, c. 3, bills of exchange are referred to as a 
means of conveying money out of the realm, though not as a pro- 
cess in use among English merchants. But the fact that a 
London merchant writing expressly on the law merchant was 
unaware of the use of bills of exchange in this country, shews 
that that use at the time he wrote must have been limited.. 
According to Professor Story, who herein is, no doubt, perfectly 
right, "the introduction and use of bills of exchange in England," 
as indeed it was everywhere else, "seems to have been founded 
on the mere practice of merchants, and gradually to have acquired 
the force of a custom." With the development of English com- 
merce the use of these most convenient instruments of commer- 
cial traffic would of course increase, yet, according to Mr. Chitty, 
the earliest case on the subject to be found in the English books 
is that of Martin v. Boure, Cro. Jac. 6, in the first James I. Up 
to this time the practice of making these bills negotiable by 
indorsement had been unknown, and the earlier bills are found 
to be made payable to a man and his assigns, though in some 



24 History of the Law Merchant 

instances to bearer. But about this period, that is to say, at the 
close of the sixteenth or the commencement of the seventeenth 
century, the practice of making bills payable to order, and trans- 
ferring them by indorsement, took its rise. Hartmann, in a very 
learned work on Bills of Exchange, recently published in Ger- 
many, states that the first known mention of the indorsement of 
these instruments occurs in the Neapolitan Pragmatica of 1607. 
Savary, cited by Mons. Nouguier, in his work "Des lettres de 
change,'' had assigned to it a later date, namely 1620. From its 
obvious convenience this practice speedily came into general use, 
and, as part of the general custom of merchants, received the 
sanction of our Courts. At first the use of bills of exchange 
seems to have been confined to foreign bills between English and 
foreign merchants. It was afterwards extended to domestic bills 
between traders, and finally to bills of all persons, whether traders 
or not: see Chitty on Bills, 8th ed., p. 13. 

In the meantime, promissory notes had also come into use, 
differing herein from bills of exchange that they were not drawn 
upon a third party, but contained a simple promise to pay by the 
maker, resting, therefore, upon the security of the maker alone. 
They were at first made payable to bearer, but when the practice 
of making bills of exchange payable to order, and making them 
transferable by indorsement, had once become established, the 
practice of making promissory notes payable to order, and of 
transferring them by indorsement, as had been done with bills of 
exchange, speedily prevailed. And for some time the courts of 
law acted upon the usage with reference to promissory notes, as 
well as with reference to bills of exchange. 

In 1680, in the case of Sheldon v. Hentley, 2 Show. 160, an 
action was brought on a note under seal by which the defendant 
promised to pay to bearer 100/., and it was objected that the note 
was void because not made payable to a specific person. But it 
was said by the Court, "Traditio facit chartam loqui, and by the 
delivery he (the maker) expounds the person before meant; as 
when a merchant promises to pay to the bearer of the note, any- 
one that brings the note shall be paid." Jones, J., said that "it 
was the custom of merchants that made that good." In Brom- 
wich v. Lloyd, 2 Lutw. 1582, the plaintiff declared upon the 
custom of merchants in London, on a note for money payable on 
demand, and recovered; and Treby, C.J., said that "bills of 
exchange were originally between foreigners and merchants trad- 
ing with the English; afterwards, when such bills came to be 
more frequent, then they were allowed between merchants trading 



Goodwin v. Robarts 25 

in England, and afterwards between any traders whatsoever, and 
now between any persons, whether trading or not ; and, therefore, 
the plaintiff need not allege any custom, for now those bills were 
of that general use that upon an indebitatus assumpsit they may 
be given in evidence upon the trial." To which Powell, J., added, 
"On indebitatus assumpsit for money received to the use of the 
plaintiff the bill may be left to the jury to determine whether it 
was given for value received." 

In Williams v. Williams, Carth. 269, where the plaintiff 
brought his action as indorsee against the payee and indorser of 
a promissory note, declaring on the custom of merchants, it was 
objected on error, that the note having been made in London, the 
custom, if any, should have been laid as the custom of London. 
It was answered "that this custom of merchants was part of the 
common law, and the Court would take notice of it ex officio; 
and, therefore, it was needless to set forth the custom specially 
in the declaration, but it was sufficient to say that such a person 
secundum usum et consuetudinem mercatorum, drew the bill." 
And the plaintiff had judgment. 

Thus far the practice of merchants, traders, and others, of 
treating promissory notes, whether payable to order or bearer, on 
the same footing as bills of exchange had received the sanction of 
the Courts, but Holt having become Chief Justice, a somewhat 
unseemly conflict arose between him and the merchants as to the 
negotiability of promissory notes, whether payable to order or to 
bearer, the Chief Justice taking what must now be admitted to 
have been a narrow-minded view of the matter, setting his face 
strongly against the negotiability of these instruments, contrary, 
as we are told by authority, to the opinion of Westminster Hall, 
and in a series of successive cases, persisting in holding them not 
to be negotiable by indorsement or delivery. The inconvenience 
to trade arising therefrom led to the passing of the statute of 
3 & 4 Anne, c. 9, whereby promissory notes were made capable of 
being assigned by indorsement, or made payable to bearer, and 
such assignment was thus rendered valid beyond dispute or 
difficulty. 

It is obvious from the preamble of the statute, which merely 
recites that "it had been held that such notes were not within the 
custom of Merchants," that these decisions were not acceptable to 
the profession or the country. Nor can there be much doubt that 
by the usage prevalent amongst merchants, these notes had been 
treated as securities negotiable by the customary method of assign- 
ment as much as bills of exchange properly so called. The Stat- 



26 History of the Law Merchant 

ute of Anne may indeed, practically speaking, be looked upon 
as a declaratory statute, confirming the decisions prior to the 
time of Lord Holt. 

We now arrive at an epoch when a new form of security for 
money, namely, goldsmiths' or bankers' notes, came into general 
use. Holding them to be part of the currency of the country, as 
cash, Lord Mansfield and the Court of King's Bench had no diffi- 
culty in holding, in Miller v. Race, i Burr. 452, that the property 
in such a note passes, like that in cash, by delivery, and that a 
party taking it bona fide, and for value, is consequently entitled 
to hold it against a former owner from whom it has been stolen. 

In like manner it was held, in Collins v. Martin, 1 B. & P. 
648, that where bills indorsed in blank had been deposited with a 
banker, to be received when due, and the latter had pledged them 
with another banker as security for a loan, the owner could not 
bring trover to recover them from the holder. 

Both these decisions of course proceeded on the ground that 
the property in the bank-note payable to bearer passed by deliv- 
ery, that in the bill of exchange by indorsement in blank, provided 
the acquisition had been made bona. fide. 

A similar question arose in Wookey v. Pole, 4 B. & Aid. 1, 
in respect of an exchequer bill, notoriously a security of modern 
growth. These securities being made in favour of blank or order, 
contained this clause, "If the blank is not filled up the bill will be 
paid to bearer." Such an exchequer bill, having been placed, 
without the blank being filled up, in the hands of the plaintiffs' 
agent, had been depositd by him with the defendants, on a bona 
fide advance of money. It was held by three judges of the 
Queen's Bench, Bayley, J., dissentiente, that an exchequer bill 
was a negotiable security, and judgment was therefore given for 
the defendants. The judgment of Holroyd, J., goes fully into the 
subject, pointing out the distinction between money and instru- 
ments which are the representatives of money, and other forms 
of property. "The Courts," he says, "have considered these 
instruments, either promises or orders for the payment of money, 
or instruments entitling the holder to a sum of money, as being 
appendages to money, and following the nature of their principal." 
After referring to the authorities, he proceeds : "These author- 
ities shew, that not only money itself may pass, and the right to 
it may arise, by currency alone, but further, that these mercantile 
instruments, which entitle the bearer of them to money, may also 
pass, and the right to them may arise, in like manner, by currency 
or delivery. These decisions proceed upon the nature of the 



Goodwin v. Robarts 27 

property (i. e., money), to which such instruments give the right, 
and which is in itself current, and the effect of the instruments, 
which either give to their holders, merely as such, a right to 
receive the money, or specify them as the persons entitled to 
receive it." 

Another very remarkable instance of the efficacy of usage is 
to be found in much more recent times. It is notorious that, 
with the exception of the Bank of England, the system of banking 
has recently undergone an entire change. Instead of the banker 
issuing his own notes in return for the money of the customer 
deposited with, him, he gives credit in account to the depositor, and 
leaves it to the latter to draw upon him, to bearer or order, by 
what is now called a cheque. Upon this state of things the gen- 
eral course of dealing between bankers and their customers has 
attached incidents previously unknown, and these by the decisions 
of the Courts have become fixed law. Thus, while an ordinary 
drawee, although in possession of funds of the drawer, is not 
bound to accept, unless by his own agreement or consent, the 
banker, if he has funds, is bound to pay on presentation of a 
cheque on demand. Even admission of funds is not sufficient to 
bind an ordinary drawee, while it is sufficient with a banker ; and 
money deposited with a banker is not only money lent, but the 
banker is bound to repay it when called for by the draft of the 
customer (see Pott v. Clegg, 16 M. & W. 321). Besides this, a 
custom has grown up among bankers themselves of marking 
cheques as good for the purposes of clearance, by which they 
become bound to one another. 

Though not immediately to the present purpose, bills of lad- 
ing may also be referred to as an instance of how general mer- 
cantile usage may give effect to a writing which without it would 
not have had that effect at common law. It is from mercantile 
usage, as proved in evidence, and ratified by judicial decision in 
the great case of Lickbarrow v. Mason, 2 T. R. 63, that the effi- 
cacy of bills of lading to pass the property in goods is derived. 

It thus appears that all these instruments which are said to 
have derived their negotiability from the law merchant had their 
origin, and that at no very remote period, in mercantile usage, 
and were adopted into the law by our Courts as being in confor- 
mity with the usages of trade; of which, if it were needed, a 
further confirmation might be found in the fact that, according 
to the old form of declaring on bills of exchange, the declaration 
always was founded on the custom of merchants. 

Usage, adopted by the Courts, having been thus the origin 



28 History of the Law Merchant 

of the whole of the so-called law merchant as to negotiable secur- 
ities, what is there to prevent our acting upon the principle acted 
upon by our predecessors, and followed in the precedents they 
have left to us ? Why is it to be said that a new usage which has 
sprung up under altered circumstances, is to be less admissible 
than the usages of past times ? Why is the door to be now shut 
to the admission and adoption of usage in a matter altogether of 
cognate character, as though the law had been finally stereotyped 
and settled by some positive and peremptory enactment? It is 
true that this scrip purports, on the face of it, to be a security not 
for money, but for the delivery of a bond ; nevertheless we think 
that substantially and in effect it is a security for money, which, 
till the bond shall be delivered, stands in the place of that docu- 
ment, which, when delivered, will be beyond doubt the represen- 
tative of the sum it is intended to secure. Suppose the possible 
case that the borrowing government, after receiving one or two 
instalments, were to determine to proceed no further with its 
loan, and to pay back to the lenders the amount they had already 
advanced ; the scrip with its receipts would be the security to the 
holders for the amount. The usage of the money market has 
solved the question whether scrip should be considered security 
for, and the representative of, money, by treating it as such. 

The universality of a usage voluntarily adopted between buy- 
ers and sellers is conclusive proof of its being in accordance with 
public convenience; and there can be no doubt that by holding 
this species of security to be incapable of being transferred by 
delivery, and as requiring some more cumbrous method of assign- 
ment, we should materially hamper the transactions of the money 
market with respect to it, and cause great public inconvenience: 
No doubt there is an evil arising from the facility of transfer by 
delivery, namely, that it occasionally gives rise to the theft or 
misappropriation of the security, to the loss of the true owner. 
But this is an evil common to the whole body of negotiable securi- 
ties. It is one which may be in a great degree prevented by pru- 
dence and care. It is one which is counterbalanced by the general 
convenience arising from facility of transfer, or the usage would 
never have become general to make scrip available to bearer, and 
to treat it as transferable by delivery. It is obvious that no injus- 
tice is done to one who has been fraudulently dispossessed of 
scrip through his own misplaced confidence, in holding that the 
property in it has passed to a bona, fide holder for value, seeing 
that he himself must have known that it purported on the face 
of it to be available to bearer, and must be presumed to have been 



Goodwin v. Robarts 29 

aware of the usage prevalent with respect to it in the market in 
which he purchased it. 

Lastly, it is to be observed that the tendency of the Courts, 
except only in the time of Lord Holt, has been to give effect to 
mercantile usage in respect to securities for money, and that 
where legal difficulties have arisen, the legislature has been prompt 
to give the necessary remedy, as in the case of promissory notes 
and of the East India bonds. 

The authorities relied on on the part of the plaintiff do not 
appear to us materially to conflict with this view. In Glyn v. 
Baker, 13 East. 509, which was an action to recover India Bonds, 
and in which it was held that such bonds did not pass by delivery, 
the bonds were not made payable to bearer, and there was a total 
absence of proof that they passed by delivery, though it was 
asserted by counsel in argument that when these bonds, which in 
the first instance were made payable to the treasurer of the com- 
pany, had been indorsed by him, they were afterwards negotiable 
and passed by delivery from one to another. The inconvenience 
which would have arisen from this decision was remedied by the 
immediate passing of 51 Geo. 3, c. 64, by which bonds of the 
East India Company were made transferable by delivery. 

The case of Partridge v. Governor and Company of the Bank 
of England, 9 Q. B. 396; 15 L. J. Q. B.. 395, and which, amongst 
other things, turned on the negotiability of dividend warrants of 
the Bank of England, is not, so far as that expression is concerned, 
altogether satisfactory, as the decision turned also upon other 
points. The bank were in the habit of paying dividends to those 
entitled to them by warrants, and it was pleaded and proved that 
by a usage of sixty years standing of the bankers and merchants 
of London, these warrants, which are not made to bearer, were 
nevertheless negotiable so soon as the party to whom they were 
made payable had annexed to them the receipt which the bank 
required before payment would be made. Such a warrant had 
been obtained by an agent of the plaintiff authorized to receive 
his dividends, and had been made over to the defendants for 
good consideration, in fraud of the plaintiff, so far as the agent 
was concerned, but without knowledge of such fraud on the part 
of the defendants. The warrant had been delivered by the 
defendants to the bank, with whom they had an account, to be 
carried to their credit, and the amount had been entered to their 
credit in the cash book of the defendants, but had not been carried 
to their drawing account. The Court of Queen's Bench held 
this proof of the custom to be a good defence. The Court of 



30 History of the Law Merchant 

Exchequer Chamber reversed their judgment, on the ground, 
among others, that the custom relied on was "rather a practice 
of trade than a custom properly so-called, and that such a practice 
could not alter the law according to which such an instrument con- 
ferred no right of action on an assignee." We quite feel the force 
of this distinction, though it is not quite so clear in what sense it 
was here intended to be applied. Possibly what was meant was, 
that the custom applied to the warrants of a particular company, 
and therefore could not form the subject of any general mercan- 
tile usage. 

In Dixon v. Bovill, 3 Macq. 1, where the note was "to deliver 
so much iron when required to the party lodging this document 
with me," there was neither a promise to bearer, nor was there 
any proof whatever of any usage whereby such notes were dealt 
with as negotiable. The case has therefore, with reference to its 
facts, no bearing on the present. 

In Crouch v. The Credit Fonder of England, Law Rep. 8 Q. 
B. 374, the defendants, a limited company, had issued bonds pay- 
able to bearer, "subject to the conditions indorsed on this deben- 
ture ;" and by the conditions so indorsed the bonds were to be 
paid off by a certain number being drawn at stated periods ; in 
which respect, it may be observed, they bore a close resemblance 
to the bonds of foreign governments when loans are thus raised 
by way of bond. A bond thus made having been stolen from the 
lawful owner, and having been purchased bona fide by the 
plaintiff from the thief, was drawn for payment. The plaintiff 
claimed payment, which was refused, whereupon the action was 
brought. It was there held by three judges of the Court of 
Queen's Bench that the plaintiff could not recover ; first, because, 
even assuming that a promise to pay under seal could be con- 
sidered a promissory note, here the conditions annexed to the 
promise took away that character from the instrument. No evi- 
dence had been offered at the trial as to whether these or similar 
documents were in practice treated as negotiable, nor was any 
expressed admission made as to the point; but it was assumed, 
from the report of the learned judge before whom the cause was 
tried, that this had been tacitly admitted. But it was said that 
these instruments having been only of recent introduction, it fol- 
lowed that such custom, to whatever extent it had gone, must 
also have been quite recent. Under these circumstances the Court 
held that, while it was incompetent to the defendants, as an indi- 
vidual company, to give to that which was not a negotiable instru- 
ment at law the character of negotiability by making it payable to 



Goodwin v. Robarts 31 

bearer, the custom could not have that effect, because, being 
recent, it formed no part of the ancient law merchant. For the 
reasons we have already given we cannot concur in thinking the 
latter ground conclusive. While we quite agree that the greater 
or less time during which a custom has existed may be material 
in determining how far it has generally prevailed, we cannot think 
that, if a usage is once shewn to be universal, it is the less entitled 
to prevail because it may not have formed part of the law mer- 
chant as previously recognised and adopted by the Courts. It is 
obvious that such reasoning would have been fatal to the negotia- 
bility of foreign bonds, which are of comparatively modern origin, 
and yet, according to Gorgier v. Mieville, 3 B. & C. 45, are to be 
treated as negotiable. We think the judgment in Crouch v. The 
Credit Fonder, Law Rep. 8 Q. B. 374, may well be supported on 
the ground that in that case there was substantially no proof 
whatever of general usage. We cannot concur in thinking that if 
proof of general usage had been established, it would have been 
a sufficient ground for refusing to give effect to it that it did not 
form part of what is called "the ancient law merchant." 

In addition to the cases we have already referred to, in which 
usage has been relied on as making mercantile instruments nego- 
tiable, the case of Lang v. Smyth, 7 Bing. 284, was cited as shew- 
ing that the question with reference to instruments of this descrip- 
tion turns upon how far the particular instrument has by usage 
acquired the quality of negotiability. The action had reference 
to Neapolitan bonds with coupons attached to them, which latter 
referred to a certificate. The plaintiff's agent being in possession 
of the coupons belonging to the plaintiff, but not of the certificate, 
fraudulently pledged the coupons with the defendant, who took 
them bona. fide. On an action by the plaintiff to recover the 
amount received by the defendant on the coupons, Tindal, C.J., 
left it to the jury to say whether the coupons without the certifi- 
cate "passed from hand to hand like money or bank notes," in 
other words, "whether they had acquired, from the course of 
dealing pursued in the City, the character of bank notes, bills of 
exchange, dividend warrants, exchequer bills, or other instru- 
ments which formed part of the currency of this country." The 
jury, indeed, found in the negative, but it was held by the Court 
of Common Pleas that the question had been rightly left to them. 
If the usage had been found the other way, and the Court had 
been satisfied with the verdict, it would no doubt have been 
upheld. 

We must by no means be understood as saying that mer- 
cantile usage, however extensive, should be allowed to prevail if 



32 History of the Law Merchant 

contrary to positive law, including in the latter such usages as, 
having been made the subject of legal decision, and having been 
sanctioned and adopted by the Courts, have become, by such 
adoption, part of the common law. To give effect to a usage 
which involves a defiance or disregard of the law would be obvi- 
ously contrary to a fundamental principle. And we quite agree 
that this would apply quite as strongly to an attempt to set up a 
new usage against one which has become settled and adopted by 
the common law as to one in conflict with the more ancient rules of 
the common law itself. Thus, it having been decided in the two 
cases of More v. Manning, I Comyns' Rep. 311, and Acheson v. 
Fountain, 1 Str. 557, that when a bill of exchange was indorsed 
to A. B., without the words "or order," the bill was nevertheless 
assignable by A. B., by further indorsement, Lord Mansfield and 
the Court of King's Bench, in the case of Edie v. The East India 
Company, 2 Burr. 1216, held that evidence of a contrary usage 
was inadmissible. In like manner in Grant v. Vaughan, 3 Burr. 
1516, where a cash note, payable to bearer, had been lost by 
the owner, but had been taken by the plaintiff bona fide for value, 
on an action on the note by the latter against the maker, Lord 
Mansfield having left it to the jury to say "whether such drafts 
as this, when actually paid away in the course of trade dealing 
and business, were negotiable or in fact and practice negotiable," 
and the jury, influenced no doubt by the natural desire to protect 
the owner of the note, having found for the defendant, Lord 
Mansfield and the Court here again set the verdict aside, on the 
ground that, the law having been settled by former decisions that 
notes payable to bearer passed by delivery to a bona, fide holder, 
the judge ought to have directed a verdict for the plaintiff. 

If we could see our way to the conclusion that, in holding the 
scrip in question to pass by delivery, and to be available to bearer, 
we were giving effect to a usage incompatible either with the 
common law or with the law merchant as incorporated into and 
embodied in it, our decision would be a very different one from 
that which we are about to pronounce. But so far from this 
being the case, we are, on the contrary, in our opinion, only 
acting on an established principle of that law in giving legal effect 
to a usage, now become universal, to treat this form of security, 
being on the face of it expressly made transferable to bearer, as 
the representative of money, and as such, being made to bearer, 
as assignable by delivery. This being the conclusion at which 
we have arrived, the judgment of the Court of Exchequer will 
be affirmed. 

Judgment affirmed. 



TITLE II. 

THE NEGOTIABLE INSTRUMENT, A CONTRACT. 
Section I — In General. 

Conine v. The Junction and Breakwater R. R. Co. (1866), 3 
Houst. (Del,), 288, 8p Am. Dec. 230. 

Action on the following instrument: 

Gentlemen, — Eighteen months after date please pay to my 
own order, six thousand nine hundred dollars, for value received, 
that being the amount which will be due from said State of Dela- 
ware to the Junction and Breakwater Railroad Company, January 
1st, 1862, out of the semi-annual instalments, which will on that 
day, be due to said State from Richard France under the pro- 
visions of the act of the General Assembly of said State, entitled 
"An Act for the encouragement of Internal Improvements in the 
State of Delaware," passed at Dover, January 26th, 1859, and 
your receipt indorsed hereon for the share of said corporation of 
said instalment, shall be good against said Corporation. 

H. W. McColley, 
Treasurer of the Junction & Breakwater R. R. Co. 
To Messrs. France, Broadbent & Co., 

Baltimore, Md. 

This instrument was indorsed by said company by the name 
of H. W. McColley, Treasurer, and accepted upon the face 
thereof thus: "Accepted, France, Broadbent & Co." The firm 
of France, Broadbent & Co. was composed of Richard France, 
Stephen Broadbent, Sr., Stephen Broadbent, Jr., and William C. 
France. After acceptance the instrument was negotiated with 
Stephen Broadbent, Sr., who afterwards indorsed and negotiated 
the same with the said plaintiff. Afterward the said draft was 
duly presented for payment in Baltimore and payment demanded 
and refused, of which presentment, demand and refusal the 
defendant had due notice. Further facts appear in the opinion. 

Gilpin, Chief Justice, delivered the opinion of the Court. Con- 
sidering the third ground of defence taken by the defendant as 



34 The Negotiable Instrument, A Contract 

fatal to the plaintiff's right to recover in this action, I do not pro- 
pose to express any opinion on the question as to whether the 
-draft, which is the subject of controversy, was or not, according 
to its terms and meaning, made payable out of a particular fund, 
nor the other question as to the legal effect of the draft's having 
been held by Stephen Broadbent, one of the acceptors as an 
indorsee. Much has been said and well said on this point, but 
for the reason just suggested, I do not deem it at all material to 
pass upon them. 

By agreement of the parties the original draft is made a part 
of the case stated, and upon examination of the draft we find that 
the corporate seal of the company is affixed or impressed upon the 
paper upon the left of the signature of H. W. McColley, Treas- 
urer of the Company. The usual terms indicating the affixing 
of the seal, are not found at the end of the draft — they are 
omitted altogether. If the case had been tried at the bar of the 
Superior Court before a jury, the fact of, whether the seal had 
been rightfully affixed to the draft, might have been controverted, 
notwithstanding the well established legal presumption arising 
from the presence of the corporate seal affixed to the instrument 
produced, that it was placed there by competent authority; the 
rule being, that, when the common seal of a corporation appears 
to be affixed to an instrument and the signature of a proper officer 
is proved or admitted, the Court is bound to presume that the 
officer did not exceed his authority, and the seal itself is prima 
facie evidence that it was affixed by proper authority; and the 
burden of showing that it is wrongfully there rests upon the party 
objecting to it. Lovit v. The Steam Sazv Milt Association, 6 Paige 
54. The President, Manager and Company of the Berks and 
Dauphin Turnpike Road v. Myers, 6'Serg. & Rawle 12. Baptist 
Church v. Mulford, 3 Halst. (N. J.) 183. The case of St. Mary's 
Church, 7 Serg. & Rawle 530. The proprietors of the Mill Dam 
Foundry v. Hovey, 21 Pick. 417. Phillips v. Coffee, 17 Illinois 
154. Johnson v. Crawley, 25 Ohio 316. Potter et al. v. Andros- 
coggins & Kennebec R. R. Company, 37 Maine 316. 

But in this case, the question as to whether the seal is right- 
fully or wrongfully on the draft cannot be raised. For the parties 
have made the seal itself, just as much as the body of the draft 
or the signature of the Treasurer, a part of the case stated, with- 
out suggesting the slightest doubt of it being there properly. 
Indeed, it is alleged in the case stated that the draft, after it was 
indorsed by H. W. McColley, Treasurer of the Junction and 
Breakwater Railroad Company, was sent by a duly appointed 



Conine v. The Junction and Breakwater R. R. Co. 35 

committee of said company to Baltimore for acceptance, and was 
there accepted by France, Broadbent & Co. It passed from the 
hands of the Treasurer to the committee, (of course with the 
seal on it — for it does not appear that it ever afterwards returned 
to the hands of the Treasurer) — was sent by them to Baltimore, 
was accepted by the drawees, was negotiated by the company, and 
is now produced by the plaintiff with the seal on it and made a 
part of the case stated. All this amounts to an admission that 
the seal was placed on the draft rightfully and not surreptitiously, 
improperly or fraudulently. But aside from this admission, the 
presence of the seal on the draft, in the absence of evidence or 
statement impeaching its correctness, concludes the question here, 
as to its having been affixed by proper authority. 

The more approved mode of executing a deed by a corpora- 
tion, is to conclude the instrument by saying "In testimony 
whereof the common seal of the said corporation is hereunto 
affixed." But this is not necessary to the validity of the instru- 
ment. Nor is it necessary to name or refer to the seal at all. 
Mill Dam Foundry v. Hovey 21. Pick. 417. Godard's Case 5 
Co. R. 5. Com. Dig. Fait a 2. 2 Serg. & Rawle R. 504. In the 
case of Mill Dam Foundry v. Hovey, the instrument concluded 
in the words, "In witness whereof we have hereunto set our 
hands ;" and the seal consisted of a wafer and a small bit of paper 
stamped with a common desk seal of a merchant. And it was 
contended that this was not the seal of the corporation, the words 
of in testimonium being, "we have hereunto set our hands" merely. 
But the Court thought otherwise, and decided that it was the 
deed of the parties, declaring that it had been settled that words 
indicating that the parties had affixed their seals, were not abso- 
lutely necessary. 

The question reserved for the decision of this Court is this : 
whether the instrument of writing sued on and described as a 
bill of Exchange, does in fact and in law constitute a valid bill 
of exchange, so as to entitle the present indorsee and holder, Wil- 
liam C. Conine, the plaintiff, to sue and recover upon it as such. 
In other words, is it transferable by mere indorsement, so as to 
entitle the holder by force of such indorsement, to maintain an 
action upon it, in his own name. 

At the common law, choses in action could not be assigned, 
so as to give the assignee a right of action in his own name. Bills 
of Exchange, however, have always constituted an exception to 
this rule. 

The origin of the latter is involved in some obscurity. It 



36 The Negotiable Instrument, A Contract 

is very questionable whether they were known to the nations of 
antiquity. But whether they were invented by the Jews and 
Lombards, (as some writers have supposed) during the thirteenth 
century, and after their banishment, in order the more readily to 
draw their effects out of France and England ; or by the Gibelins, 
upon their expulsion from Italy by the Guelphs, in order to avoid 
confiscation of their effects by their enemies, certain it is that we 
find them to have been in use among the maritime and com- 
mercial communities, inhabiting the shores of the Mediterranean 
as early as the fourteenth century ; from which region, it is most 
probable, they were introduced into England about the year 1381. 

The facilities which they afforded for the safe transmission 
of money, or values, from one country to another, soon brought 
them into general use among merchants ; and the use of them 
becoming an established custom, it is believed they received judi- 
cial recognition at a very early day, although no authentic 
decision in regard to the custom, can be found prior to the time 
of James the First, 1603. The first case of which we have any 
knowledge, is that of Marten v. Boure reported Cro. Jac. 6 — 7. 
The declaration in the case, which is set out in the report, 
describes the cause of action as a bill of Exchange, "signed with 
his hand secundum usum mercatorum." And from that day to 
this, no case can be found in the books, of a bill of exchange with 
a seal affixed to it. 

The most solemn and authentic act, as matter of contract,. 
for finally and conclusively binding men to the observance of good 
faith toward each other, known to the civil law, was called a 
stipulation ; it was entered into before the civil magistrate upon 
questions and answers, carefully propounded and taken in writing, 
intended to explain the nature and character of the transaction, 
and to show that there was no surprise, and that the contract of the 
parties was their maturely considered and deliberate act. It could 
only be impeached by fraud. 

Deeds, by the common law, are strikingly analogous to the 
ancient stipulation of the Civilians. The ancient forms and cere- 
monies prescribed by the common law, for proper authentication 
and establishment of a deed, were writing, sealing and delivery, 
and if the parties were illiterate, also reading of the instrument, 
all indicating a solemn and deliberate act, intended to be final and 
conclusive between the parties. Sealing was an essential element 
though signing was not. 

Authentic history informs us, that seals come down to us 
from the most remote antiquity, and were originally derived from 



Conine v. The Junction and Breakwater R. R. Co. 37 

the nations of the far East. The scriptures declare that the "writ- 
ing that is written in the King's name, and sealed with the King's 
seal, can no man reverse." Writings under seal constituted part 
of the formalities of a Jewish purchase, of land. "And I bought 
the field of Hanameel, and weighed him the money, and subscribed 
the evidence and sealed it, and took witnesses." see Jeremiah, 
chap. 32, 1 Kings, chap. 21, Esther, chap. 8. Daniel, chap. 8, 9. 

Seals, however, did not come into general use in England 
until after, or about the time of, the conquest; indeed, prior to 
that time, they were almost entirely unknown to our English 
ancestors; and, probably, the most ancient authentic sealed docu- 
ment in England, is the charter granted by Edward the Confessor 
to Westminister Abbey. A. D. 1017. 

Deeds or sealed instruments, are not only of much higher 
antiquity than bills of exchange, but they are of a totally different 
origin. They cannot be said to be made secundum usum merca- 
torum, since they find their recognition and validity in the more 
ancient rules of the common law. On the other hand, bills of 
exchange find their origin and sanction in the usage and custom 
of merchants, the lex mercatoria, a particular or peculiar system, 
which, being in the interest of commerce, became at length gradu- 
ally ingrafted into, and established as a part of the common law 
itself. By the common law, contracts are distinguished into two 
kinds, — contracts under seal, which are specialties, and contracts 
not under seal, which are simple contracts. It can hardly be nec- 
essary to say, that a bill of exchange is not a specialty, for no 
contract, by that law, is held to be a specialty unless it be 
under seal, or a matter of record. But notwithstanding a bill 
of exchange is only a simple contract, it nevertheless differs from 
other simple contracts in two very important particulars, namely, 
its negotiability, and its presumed valuable consideration. At 
common law no chose in action was assignable, until bills of 
exchange became by force of the custom of merchants, the excep- 
tion to the general rule. Notes were made assignable in 1704 by 
the statute 3 and 4 Anne. Bonds and specialties, as well as notes, 
are made assignable by our statute; — the last by simple 
indorsement, the two former "under hand and seal and before at 
least two credible witnesses." Chap. 63, sec. 8. Revised statutes. 
If a specialty had been assignable by mere indorsement, where 
would have been the necessity for this statutory provision? The 
distinction between a bill of exchange and a specialty, is found 
noticed in almost all elementary works on contracts — Chitty on 
Contracts 3. 4. Chitty on Bills 12. 13. Story on Bills, sec. 16. 



38 General Requisites of the Contract 

2 Blac. Com. 465. 466. All contracts under seal are specialties, 
sealing and delivery being the particular form and ceremony which 
alter the nature and operation of the agreement. Forms, conse- 
crated by time and usage, become substance. The seal is sub- 
stance and changes the nature and operation of the contract. It 
seems to me therefore, that the question which I have been con- 
sidering, is settled upon principle against the plaintiff. But how- 
ever this may be, it has been held as settled upon authority for 
more than thirty years past. 

In the case of Warren v. Lynch, 5 Johns. 239, it was con- 
ceded by counsel on both sides, and by the court, Chancellor Kent, 
then Chief Justice, presiding and delivering the opinion, that a 
sealed note is not negotiable. 

In the case of Clark v. The Farmers' Woolen Manufacturing 
Company of Benton, 15 Wendell R. 256, it was held by the 
Supreme Court of the State of New York, first, that a note for 
the payment of money under seal, though in all other respects 
like a promissory note, was not negotiable, and that an action 
could not be obtained upon it in the name of a person to whom it 
had been transferred ; secondly, that the effect of affixing the 
seal of a corporation to a contract, is the same as when a seal 
is affixed to .the contract of an individual ; it renders the instru- 
ment a specialty. 

I am not aware that this decision has ever been overruled, or 
even doubted. 

We are therefore of opinion that the plaintiff is not entitled 
to recover on this action. 



Section II — General Requisites, 
the instrument must be in writing. § 3 — I. 

Thomas et at. v. Bishop (1734), 2 Strange, P55. 

The plaintiffs were indorsees of a bill of exchange drawn 
from Scotland upon the defendant, in these words, "At thirty days 
" S1 ght pay to /. 5. or order 200/. value received of him, and place 
" the same to account of the York Buildings company, as per 
"advice from Charles Mildmay. To Mr. Humphrey Bishop, 
"^ cashier of the York Buildings company, at their house in Win- 
" chester-street, London. Accepted 13 June 1732. per H. Bishop." 

This bill not being paid, an action was brought against the 



Geary v. Physic 39 

defendant upon his acceptance. And the defendant proved, that 
the letter of advice was addressed to the company; and that the 
bill being brought to their house, he was ordered to accept it, 
which he did in the same manner as he had accepted other bills. 
But Mr. J. Page, who had tried the cause, directed the jury to 
find for the plaintiff, which they did accordingly. 

And now upon motion for a new trial, the court held, .that 
the direction was right. For the bill on the face of it imports to 
be drawn upon the defendant, and it is accepted by him generally, 
and not as servant to the company, to whose account he had no 
right to charge it till actual payment by himself. And this being 
an action by an indorsee, it would be of dangerous consequence 
to trade, to admit of evidence arising from extrinsic circum- 
stances, as the letter of advice. And they said, this differed widely 
from the case of a bill addressed to the master, and under-wrote 
by the servant; where undoubtedly the servant would not be 
liable, but his acceptance would be considered as the act of his 
master. A bill of exchange is a contract by the custom of mer- 
chants, and the whole of that contract must appear in writing. 
Now here is nothing in writing to bind the company, nor can any 
action be maintained against them upon the bill ; for the addition 
of cashier to the defendant's name is only to denote the person 
with more certainty, and the York Buildings house is only to 
inform the order, where the drawee is to be found ; and the direc- 
tion whose account to place it to, is for the use of the drawee only. 
And they compared it to the case in Carth. 5. 2 Ven. 307. where 
a bill was drawn payable to Price, for the use of Calvert, and held 
that the legal property was in Price, which is stronger than the 
present case. They said it might be otherwise if the action had 
been by J. S. who was privy to the transaction, and it had 
appeared he tendered the bill as a bill on the company. But this 
plaintiff being a stranger, they could not consider those circum- 
stances. The plaintiffs had their judgment. 



Geary v. Physic {page 266). 



40 General Requisites of the Contract 

the instrument must be signed. §3 1. 

Reg. v. Harper, L. R., 7 Q. B. D. {188 1), 78. 

The following case was stated by Stephen, J : — 
John Harper was convicted of forgery before me at Durham 
assizes under the following circumstances: Messrs. Watson & 
Son, of Kilmarnock, having supplied Harper with some machin- 
ery, drew a bill upon him for the price, and forwarded it to him 
for acceptance, unsigned by the drawers. It had been arranged 
that Harper should procure the indorsement of a solvent person, 
and should himself accept the bill. Harper returned it accepted 
by himself, and purporting to be indorsed by one Hunt. It was 
proved that Hunt's indorsement had been forged by Harper. On 
getting the bill back, Watson & Son indorsed it and paid it into 
the bank for collection when due. They did not at any time sign 
it as drawers. 

The following is a copy of the bill of exchange : — 

" £22 10s. 4^. " Kilmarnock, 2 Nov. 1880. 

" One month after date pay to me or order the sum of 
£22 10s. &,d., that being for value received in machinery. 

"Indorsed, 
" Mr. J. Harper, " John Hunt. 

" Contractor and Builder, " John Watson & Son. 

" Rutland Street, Pallion, 
"Sunderland." 

Across the bill was written "Accepted payable at the Union 
Bank of London. John Harper." 

The indictment contained six counts, which charged Harper : 

1. With feloniously forging a certain indorsement to and on 
a bill of exchange. 

2. With feloniously forging an indorsement to and on a cer- 
tain paper writing, which said paper writing is in the form of, and 
purports to be, a bill of exchange, unsigned by any drawer 
thereof. 

3. Feloniously forging a crtain indorsement to and on a 
certain paper writing. 

In the 4th, 5th, and 6th counts he was charged with felon- 
iously uttering the documents described in the 1st, 2nd, and 3rd 
counts. 



McCall v Taylor 41 

I was of opinion that all the counts were bad, except the ist 
and 4th, but I left the whole matter to the jury. 

The jury returned a general verdict of guilty, and I sentenced 
Harper to be imprisoned with hard labour for nine months, but 
suspended the execution of the sentence till the decision of this case 
hy the Court for Crown Cases Reserved. 

The question for the Court is, whether, under the circum- 
stances stated, Harper was properly convicted of either of the) 
offences charged in the ist or 4th counts of the indictment, and 
whether any of the other counts charge a felony ? 

No counsel appeared upon either side. 

Lord Coleridge, C.J. The conviction cannot be sustained. 
The instrument was not a bill of exchange; it was an inchoate 
hill of exchange. The point requires no authority, though it has 
the authority of the cases of McCall v. Taylor, 34 L. J. (C.P.) 
365 ; Stoessinger v. South Eastern Ry. Co., 3 E. & B. 549 ; Peto 
v. Reynolds, 23 L. J. (Ex.) 98; 9 Ex. 410; 11 Ex. 418, and Rex 
v. Pateman, Russ. & Ry. 455. 

Stephen, J. Though I entirely agree with the opinion ex- 
pressed by my Lord, I cannot help observing that the act of the 
prisoner had all the effect of a forgery punishable under the 
statute as a felony; the prisoner could, however, have been 
indicted, and ought to have been indicted, for forgery at common 
law. 

Grove, Hawkins, and Lopes, JJ., concurred. 

Conviction quashed. 



McCall v. Taylor, 34 L. J. R. C. P (1865), 365. 

Suit on an instrument in the words and figures following : 
£300 Four months after date pay to my order the sum of 

three hundred pounds for value received. 

To Captain Taylor, 
Ship Jasper. 

There was no date to this instrument nor the signature of 
any drawer ; but there was written across it by the defendant these 
words : "Accepted,' William Taylor." 

The first count was against the defendant and as the accep- 
tion of a bill of exchange for £300. The second count was on 
the same instrument as a promissory note, of which the defendant 



42 General Requisites of the Contract 

was alleged to be the maker. There were counts also for goods 
sold and delivered and on an account stated. 

Pleas to the first count — a traverse of the acceptance ; to the 
second — a traverse of the making ; and to the residue of the dec- 
laration — never indebted. 

The learned Judge was of opinion that the instrument 
could not be declared on either as a bill of exchange or promissory 
note, and a verdict was accordingly entered for the defendant; 
but leave was reserved to the plaintiff to move to enter a verdict 
on either the first or second counts, if the instrument could be 
declared on as either a bill or note. A rule nisi to that effect having 
been subsequently obtained by Hannen, for the plaintiff, — 

Day now shewed cause. 

Hannen and Lord, in support of the rule. 

Erle, C.J. — I am of opinion that this rule should be dis- 
charged. The declaration is on a bill of exchange, and also on 
the same instrument described as a promissory note. The instru- 
ment in question was in this form — [The learned Judge read it]. 
— It has no date and no drawer's name; but the defendant wrote 
his acceptance across it ; and the question is, has the holder of 
such an instrument a right to declare on it either as a bill of 
exchange or promissory note? It certainly is not a bill of 
exchange, nor is it a promissory note ; and there has been no case 
cited as an authority for its being considered as either a bill or a 
note. It is, in fact, only an inchoate instrument, though capable 
of being completed. Let the party who has the authority to make 
it a complete instrument do so; but if he will not do this, he 
cannot sue on it. The case of Stoessiger v. the South-Eastern Rail- 
way Company, 3 El. & B. 549; 23 Law J. (N. S.) (Ex.) Q. B. 
293, is directly in point. In the other cases which have been 
referred to, where effect was given to the instrument, nothing 
more had to be done to make the instrument complete ; and so 
those cases are distinguishable from the present. The captain 
may possibly have given his acceptance for the necessaries sup- 
plied to the ship, and the plaintiff may have had authority to put 
his name as drawer; but that should have been shewn by his 
doing so. As it is, he seeks to sue on it without putting his name 
to it as drawer ; and it may be that the reason is, because he never 
had authority to insert a drawer's name. It is, however, sufficient 
for us to say that the instrument is inchoate and imperfect ; and 
therefore there is no ground for making this rule absolute. 

Willes, J., Byles, J., and Smith, J., concurred. 

Rule discharged. 



White v. Cushing 43 

must contain an unconditional promise or order. § 3 — 2. 

White v. Cushing (1896), 88 Me. 339, 51 Am. St. Rep. 402. 

T. W. Vose, for plaintiff. 
/. B. Peaks, for defendant. 

Foster, J. The plaintiff sues as indorsee of an order signed 
by the defendant of the following tenor: 

"$120. Dover, Oct. 27th, 1893. 

Piscataquis Savings Bank. 
"Pay James Lawler, or order, one hundred and twenty dol- 
lars, and charge to my account on book No. . 

J. N. Cushing." 
"Witness— 

"The bank book of the depositor must accompany this order." 

The order was indorsed in blank on the back by James 
Lawler and Samuel Lewis, and the plaintiff claimed to recover 
against the defendant as upon a negotiable instrument. The 
real question presented is whether the instrument declared on 
is negotiable, so that an action may be maintained upon it in the 
name of the indorsee. 

To constitute a negotiable draft or order, it must be a written 
order from one party to another for the payment of a certain 
sum of money, and that absolutely, and without any contingency 
that would embarrass its circulation, to a third party or his order 
or bearer. 

It has often been held that a bill or note is not negotiable if 
made payable out of a particular fund. But there is a distinc- 
tion between such instruments made payable out of a particular 
fund, and those that are simply chargeable to a particular account. 
In the latter case, the payment is not made to depend upon the 
adequacy of that fund, the only purpose being to inform the 
drawee as to his means of reimbursement, and the negotiability 
of the instrument is not affected by it. 

The objection that is raised to the negotiability of this instru- 
ment is, not that it is made payable out of a particular fund, but 
that it is subject to such a contingency as necessarily embarrasses 
its circulation and imposes a restraint upon its negotiability, by 
means of these words contained upon the face of the order : "The 
bank book of the depositor must accompany this order." Although 
these words are upon the face of the order below the signature 



44 General Requisites of the Contract 

of the drawer, they were there at the time of its inception, 
became a substantive part of it and qualified its terms as if they 
had been inserted in the body of the instrument. Littlefield v. 
Coombs, yi Maine, no; Cushing v. Field, 70 Maine, 50, 54; 
Johnson v. Heagan, 23 Maine, 329 ; Barnard v. Cushing, 4 Met- 
calf, 230; Heyzvood v. Perrin, 10 Pick. 228; Benedict v. Cowden, 
49 N. Y. 396; Costelo v. Crowell, 127 Mass. 293, and cases there 
cited. 

Was the order negotiable ? The answer to that depends upon 
the effect of the words "The bank book of the depositor must 
accompany this order." If not negotiable, the plaintiff as indorsee 
can not maintain an action upon it. Noyes v. Gilman, 65 Maine, 
589. If their effect is such as constitute a contingency in relation 
to the payment of the order, dependent upon the production of the 
.drawer's bank book by the holder or indorsee of the order, then 
they must be regarded as such an embarrassment to the negotia- 
tion of the order, and such a restriction upon its circulation for 
commercial purposes as to render it non-negotiable. 

Without these words the order is payable absolutely, and 
there is no apparent uncertainty affecting its negotiability. With 
them, the order is payable only upon contingency, or condition, 
and that is upon the production of the drawer's bank book. This 
is rendered imperative from the language employed, and the bank 
upon which the order is drawn, would have the right to insist upon 
such production of the book in compliance with the terms of the 
order; and the case shows that it has refused payment upon 
presentation of the order for the reason that it was not accom- 
panied by the bank book. It cannot, therefore, be regarded as 
payable absolutely and without any contingency that would embar- 
rass its circulation. The drawer has it in his power to defeat its 
payment by withholding the bank book. Certainly the bank book 
of the depositor is within his own control rather than that of the 
indorsee of this order. 

It was the necessity of certainty and precision in mercantile 
affairs and the inconveniences which would result if commercial 
paper was incumbered with conditions and contingencies, that led 
to the establishment of an inflexible rule that to be negotiable they 
must be payable absolutely and without any conditions or contin- 
gencies to embarrass their circulation. American Ex. Bank v. 
Blanchard,^ 7 Allen, 333. In that case the words, "subject to the 
policy," being included in a promissory note, were held to render 
the promise conditional and not absolute, and so the note was 



White v. Cushing 45 

held not to be negotiable. Noyes v. Gilman, 65 Maine, 589, 591 ; 
Hubbard v. Mosely, 11 Gray, 170. 

A case in every essential like the one we are considering was 
before the Supreme Court of Pennsylvania in 1891. A fac simile 
of the order is given in the opinion. No two cases could be 
nearer alike. There, as here, the order was drawn on a savings 
bank. The suit was by the indorsee against the drawer as in this 
case. There, as here, the order contained a statement upon its 
face, but below the signature of the drawer, that the "Deposit 
book must be at bank before money can be paid." In discussing 
the question of its negotiability cases are cited from the courts of 
Maine, Vermont, Massachusetts and New York, as well as from 
Pennsylvania. In the course of the opinion the court say: "It 
sufficiently appears from the memoranda on its face that it was 
drawn on a specially deposited fund held by the bank subject to 
certain rules and regulations, in force between it and the depositor, 
requiring certain things to be done before payment could be 
required, viz: previous notice of depositor's intention to draw 
upon the fund, return of the notice ticket with the order to pay, 
and presentation of the deposit book at the bank, so that the pay- 
ment might be entered therein." * * * "It is, in substance, merely 
an order on the dollar savings bank to pay J. W. Quinn, or order, 
nine hundred dollars in nine weeks from date, or February 1, 
1888, provided he or his transferee present to the bank, with the 
order, the notice ticket, and also produce at and before the time 
of payment the drawer's deposit book. As already remarked, 
these are undoubtedly pre-requisites which restrain or qualify the 
generality of the order to pay as contained in the body of the 
instrument. They are also pre-requisites with which it may be 
difficult, if not sometimes impossible, for the payee, transferee, or 
holder of such an order to comply." Iron City Nat. Bank v. 
McCord, 139 Pa. St. 52 (23 Am. State Rep. 166). 

The order in question was drawn upon a savings bank, and it 
is common knowledge that all such banks in this State have a 
by-law which all depositors are required to subscribe to, that 
"no money shall be paid to any person without the production 
of the original book that such payment may be entered therein." 

This court in the case of Sullivan v. Lewiston Inst, for Sav- 
ings, 56 Maine, 507, has considered the purpose and necessity of 
these salutary regulations. We should be slow to countenance 
any departure from this rule needed for the protection of depos 
itors in our savings banks now numbering more than 160,000, and 
where deposits aggregate nearly $60,000,000. 



46 General Requisites of the Contract 

Inasmuch as this order is not negotiable and no suit can be 
maintained upon it by the plaintiff as indorsee, it becomes 
unnecessary to consider the other exceptions. 

Exceptions sustained. 



SIGNING IN REPRESENTATIVE CAPACITY. § 22. 

INDICATION OF A PARTICULAR FUND OUT OF WHICH REIMBURSE- 
MENT IS TO BE MADE. § 5 1. 

Schmittler v. Simon (1886), 101 N. Y 554, 54 Am. Rep. 737. 

Wm. W. Jenks, for appellant. 

Joseph B. Reilly, for respondent. 

Ruger, Ch.J. The plaintiff claimed to recover as the holder 
of a draft, drawn upon and accepted by the defendant, reading 
as follows : 

"New York, February 26, 1877. 

"Mr. Adam Simon, executor, will please pay to Johannes 
Schmittler or his order, on the first day of July, which will be 
in the year 1879, the sum of $900, with seven per cent interest, 
to be paid besides this amount yearly, July month, and charge the 
amount against me and of my mother's estate. 

"William J. Scharen." 

Written upon the face : "Accept, Adam Simon, executor," 
and indorsed, "Pay to the order of Mary Schmittler, the amount 
of note. "Johannes Schmittler." 

Upon the trial, after proving the execution of the draft, its 
acceptance and transfer, and offering to prove the payment of 
a consideration by the plaintiff to the payee, which was objected 
to by defendant, and excluded by the court, the plaintiff rested. 
The defendant thereupon moved to nonsuit upon the ground that 
the obligation was not binding upon the defendant personally, 
but he was liable thereon, if at all, in his representative character 
alone, and that it was payable out of a specific fund, and a recovery 
thereon, could not be had without proving the existence and 
extent of such fund. The court thereupon nonsuited the plaintiff, 
to which decision she excepted. The General Term having 
affirmed the determination of the trial court, the plaintiff took 
this appeal. 



SCHM1TTLER V. SlMON 47 

We think the court below erred as to both of the grounds 
upon which their judgment proceeded. That the defendant was 
.liable upon the draft, if liable at all, in his individual capacity 
alone, seems under the authorities to admit of no doubt. 

Neither executors nor administrators have power to bind the 
estate represented by them through an executory contract, having 
for its object the creation of a new liability, not founded upon the 
contract or obligation of the testator or intestate. They take the 
personal property as owners and have no principal behind them 
for whom they can contract. The title vests in them for the 
purposes of administration, and they must account as owners 
to the persons ultimately entitled to distribution. In actions 
upon contracts made by them, however they may describe them- 
selves therein, they are personally liable, and in actions thereon 
the judgment must be de bonis propriis. Not so, however, upon 
contracts made by their testator or intestate; in such case the 
judgment is always de bonis testatoris. (Gillet v. Hutchinson's 
Adm., 24 Wend. 184; Ferrin v. Myrick, 41 N. Y. 315; Austin v. 
Monroe, 47 id. 360, 366.) 

The action here is exclusively upon the undertaking of the 
defendant, importing a promise to pay the sum of $900 on the 
1st day of July, 1879, to the payee of the draft or his order for a 
consideration received by the promisor. No facts are alleged or 
proved, showing any liability on the part of the defendant's tes- 
tator to the drawee of the draft, or any legal demand existing in 
his favor, against the estate represented by the defendant. 

It follows that the obligation must be held to be the indi- 
vidual contract of the defendant, and enforceable as such by a 
judgment against him, and execution to be levied de bonis pro- 
priis, or it is nudum pactum creating no liability whatever. 

The cases are very numerous to the effect that the addition 
of an official character, to the signatures of executors and admin- 
istrators, in executing written contracts and obligations has no 
significance, and operates merely to identify the person and not 
to limit or qualify the liability. Thus it was held in Pinney v. 
Administrators of Johnson (8 Wend. 500), that a bond given by 
administrators in their representative capacity to a creditor for a 
debt of their intestate, was the individual obligation of the admin- 
istrators and enforceable against them de bonis propriis only; 
that the description of the obligors in the bond as administrators, 
and their promise in that character was surplusage, and they were 
chargeable upon such a bond only in their personal capacity. 
(See, also, Gould v. Ray, 13 Wend. 633.) Parsons on Bills and 



48 General Requisites of the Contract 

Notes, vol. I, page 161, lays down the rule that "an administrator 
or executor can only bind himself by his contracts ; he cannot bind 
the assets of the deceased. Therefore, if he' make, indorse or 
accept negotiable paper, he will be held personally liable, even if 
he adds to his own name the name of his office. Signing a note 
for example, 'A. as executor of B.' for this will be deemed only 
a part of his description or will be rejected as surplusage." To 
similar effect are Pumpelly v. Phelps (40 N. Y. 59), Taft v. 
Brewster (9 Johns. 334), Forster v. Fuller (6 Mass. 58), Hills 
v. Banister (8 Cow. 31), Thatcher v. Dismore (5 Mass. 299), 
Comthwaite v. First Nat. Bank (57 Ind. 268). 

Being of the opinion, therefore, that the defendant is liable 
upon the draft in question in his individual capacity alone, the 
question still remains as to the extent of such liability. He 
was undoubtedly competent to enter into a personal contract in 
reference to the funds in his possession, and in such case would 
be bound to perform according to the tenor and legal effect of 
the obligation assumed by him, and entitled to be allowed the 
amount paid upon an accounting, as executor. Such instruments 
are subject to the rules of construction applicable to other con- 
tracts, and must be interpreted upon consideration of the language 
used by the parties, with a view of arriving at their intention in 
executing them. The court below held that the draft in question 
was payable only from a particular fund, and was, therefore, 
non-negotiable, and enforceable only to the extent of the fund 
referred to. 

Considering the question as we are compelled to do from the 
language of the instrument alone, we are unable to agree to the 
interpretation thus put upon it. It is not claimed that there is 
any distinction between the instrument in question and an ordi- 
nary bill of exchange except that made by the clause referring to 
the mother's estate. Unless that clause deprives the paper of its 
commercial character, the rights and liabilities of the parties 
thereto must be governed by the rules pertaining to negotiable 
securities, which would render the defendant liable for the amount 
named in the draft, upon the theory that his acceptance was an 
admission by him of assets applicable to its payment. 

The distinction between a fund from which the draft or order 
is directed to be paid, and one referred to as the means of reim- 
bursement to its drawee, is a material one and cannot be disre- 
garded in the construction of such instruments. Thus it is said : 
"When a reference is made to a special fund merely as a direc- 
tion to the drawee how to reimburse himself, and the payment 



SCHMITTLER V. SlMON 49 

is not made to depend upon the adequacy of the fund, it will not 
vitiate the bill." (Edw. on Bills and Notes, § 158.) See, also, 
Parsons on Merc. Law, 87; Chitty on Bills, 158. Dwight, Com., 
in Munger v. Shannon, 61 N. Y. 255, says: "A bill is an order 
drawn by one person on another to pay a third a certain sum of 
money absolutely and at all events. Under this definition the 
order cannot be paid out of a particular fund, but must be drawn 
on the general credit of the drawer, though it is no objection, 
when so drawn, that a particular fund is specified from which 
the drawee may reimburse himself." Judge Rapallo, in Brill v. 
Tuttle (81 N. Y. 457), says : "If a draft be drawn generally upon 
the drawee, to be paid by him in the first instance, on the credit 
of the drawer and without regard to the source from which the 
money used for its payment is obtained, the designation by the 
drawer of a particular fund, out of which the drawee is to sub- 
sequently reimburse himself for such payment, or a particular 
account to which it is to be charged, will not convert the draft 
into an assignment of the fund, and the payee of the draft can 
have no action thereon against the drawee unless he duly accepts." 
In that case the drawee refused to accept and the action was 
sought to be maintained upon the theory of an equitable assign- 
ment. It was held under the peculiar circumstances of the case, 
and the form of the instrument, that it did transfer the fund. 

It is thus seen that the mere mention of a fund in a draft, 
does not necessarily deprive it of the character of commercial 
paper, but it must further appear in order to have that effect, 
that it contains either an express or implied direction to pay it 
therefrom, and not otherwise. 

The question, therefore, to be determined here is, whether 
the fund in question is referred to as the measure of liability or 
the means of reimbursement. While the point is not free from 
doubt, we think a reasonable construction of the draft favors 
the conclusion that it is mentioned only as the source of reim- 
bursement. No express language in it can be pointed out as 
requiring its payment from the fund mentioned, and none from 
which that requirement can be implied, except such as exists, in 
all drafts where a fund is referred to. Its language is to "charge 
the amount against me and of my mother's estate" and contains 
no provision for delay until the amount is realized from the estate, 
or for payment pro tanto in case the estate should prove insuffi- 
cient to pay the whole amount. There is no language importing 
a transfer of the fund to the payee, and nothing from which such 
an intention can be inferred. The draft contains an absolute direcr 



50 General Requisites of the Contract 

tion to pay a fixed sum, at a specified date, with interest. It 
imports a present indebtedness of a sum named, from the drawee 
to the payee, and an absolute direction to pay that sum at a fixed 
date, subject to no contingency either as to time or amount. In 
express language he directs the amount when paid to be charged 
against him individually, and adds the words, plainly implying, as 
we think, that the fund for the acceptor's reimbursement would 
be found in an amount eventually, or immediately payable to the 
drawer from his mother's estate. 

We think, also, that the insertion of words expressly making 
the paper negotiable, was quite significant and indicated an inten- 
tion on the part of all parties, that it should be transferable, and 
partake of the character of commercial paper. Any contingency 
inferable from the language of the draft, making the amount pay- 
able thereon indefinite and uncertain, would tend largely to depre- 
ciate its value for such purpose, and defeat the intention with 
which it was apparently made. 

If the language of the paper could be considered at all 
ambiguous, it was the duty of the defendant to limit his liability 
by apt words of acceptance when it was presented to him, but 
as it is, he has unqualifiedly promised to pay a fixed and definite 
sum at a specified time, and we think, should be held to the con- 
tract which other parties were authorized by his acceptance to 
infer he intended to make. The case of Tassey v. Church (4 
Watts & Sergeant, 346) seems quite in point. The instrument 
there read: 

"$55548 Allegheny, 1st July, 1840. 

"Please pay Church, McVay & Gordon $555.48 and charge 
the estate of Thomas C. Patterson. 

"Adam Flemming, Trustee." 
"To John Tassey, Administrator. 
Indorsed : "Accepted, John Tassey, Administrator." 

Fleming was the trustee of Mrs. Patterson, who was the heir 
at law of Thomas C. Patterson ; Tassey was the administrator of 
Patterson's estate. It was held that the promise of the acceptor 
was unconditional and bound him absolutely. In Clulds v. Monins 
(6 Eng. C. L. 228), the defendants, as executors of the estate of 
Thomas Taylor, promised to pay £200 on demand with interest, 
signing as executors. It was held that they became personally 
liable, and that the plea of plene administravit was no defense: It 
was further held that the promise to pay interest made the debt 
that of the administrators personally. In Kelly v. Brooklyn (4 



SCHMITTLER V. SlMON 51. 

Hill, 263), the action was upon an order drawn by the mayor 
upon the treasurer of defendant in the following words: "Pay 
Alexander Lyon or order $1,500 for award No. 7, and charge to 
Bedford Road Assessment." It was held that it was a bill of 
exchange and not payable from a particular fund. For further 
illustration of the point under discussion we would refer to Hol- 
lister v. Hopkins (13 Hun. 210) ; Redmond v. Adams (51 Me. 
429; Luff v. Pope (5 Hill, 413). The case of Tooker v. Arnoux 
(76 N. Y. 397) is referred to by the respondent as sustaining the 
views of the court below ; but we are of the opinion that it cannot 
be so regarded. The order there directed the drawee to pay a 
certain sum out "of the money to be realized from the sale" of 
certain houses. This order was accepted, and it was held that a 
sale of the houses was a condition precedent, to any liability on the 
part of the acceptor. This was the plain language of the contract. 

In all the cases examined by us where an order has been held 
to operate as an equitable assignment of a fund, there were either 
special phrases contained in the instrument, indicating an intent 
to have it so operate, or ambiguous language used, which, con- 
strued in the light of surrounding circumstances, justified the 
inference of a limitation of liability. {Parker v. Syracuse, 31 
N. Y. 376; Alger v. Scott, 54 id. 14; Munger v. Shannon, 61 id. 
251 ; Ehrichs v. DeMill, 75 id. 370; Brill v. Tuttle, supra.) Here, 
however, there is no such language, and this contract is to pay a 
fixed amount at a specified date, absolutely and unconditionally. 

We are, therefore of the opinion that the instrument in ques- 
tion is a bill of exchange and rendered the parties executing it 
liable absolutely for the amount stated therein. 

The judgment of the courts below should be reversed and a 
new trial ordered, with costs to abide the event. 

All concur. 

Judgment reversed. 



52 General Requisites of the Contract 



Casco Nat' I Bank v. Clark et al. {1893), 139 N. Y. 307. § 22. 

Appeal from judgment of the General Term of the Supreme 
Court in the second judicial department, entered upon an order 
made May 9, 1892, which affirmed a judgment in favor of plain- 
tiff entered upon a decision of the court on trial at Special Term. 

The nature of the action and the facts, so far as material, 
are stated in the opinion. 

Henry Daily, Jr., for appellant. 
Edward B. Merrill, for respondent. 

Gray, J. The action is upon a promissory note, in the 
following form, viz.: 



o 
U 



•a 
o 
o 

<L> 

bo 

c5 



Brooklyn, N. Y., Aug. 2, 1890. 
$7,500. Three months after date, we promise to 

pay to the order of Clark & Chaplin Ice Company, seventy- 
five hundred dollars at Mechanics' Bank: value received. 

John Clark, Prest. 
E. H. Close, Treas. 



It was delivered in payment for ice sold by the payee com- 
pany to the Ridgewood Ice Company, under a contract between 
those companies, and was discounted by the plaintiff for the 
payee, before its maturity. The appellants, Clark and Close, 
appearing as makers upon the note, the one describing himself 
as "Prest." and the other as "Treas.," were made individually 
defendants. They defended on the ground that they had made 
the note as officers of the Ridgewood Ice Company and did not 
become personally liable thereby for the debt represented. 

Where a negotiable promissory note has been given for the 
payment of a debt contracted by a corporation, and the language 
of the promise does not disclose the corporate obligation, and 
the signatures to the paper are in the names of individuals, a 
holder, taking bona fide and without notice of the circumstances 
of its making, is entitled to hold the note as the personal under- 
taking of its signers, notwithstanding they affix to their names 
the title of an office. Such an affix will be regarded as descrip- 
tive of the persons and not of the character of the liability. Unless 
the promise purports to be by the corporation, it is that of the 
persons who subscribe to it; and the fact of adding to their 



Casco National Bank v. Clark et al. 53 

names an abbreviation of some official title has no legal significa- 
tion as qualifying their obligation, and imposes no obligation upon 
the corporation whose officers they may be. This must be 
regarded as the long and well-settled rule. (Byles on Bills, §§ 36, 
17, 71 ; Pentz v. Stanton, 10 Wend. 271 ; Taft v. Brewster, 9 
Johns. 334; Hills v. Bannister, 8 Cow. 31; Moss v. Livingston / 
4 N. Y. 208 ; De Witt v. Walton, 9 id. 571 ; Bottomley v. Fisher, 
1 Hurlst. & Colt. 211.) It is founded in the general principle that 
in a contract every material thing must be definitely expressed, 
and not left to conjecture. Unless the language creates, or fairly 
implies, the undertaking of the corporation, if the purpose is 
equivocal, the obligation is that of its apparent makers. 

It was said in Briggs v. Partridge, 64 N. Y. 357, 363, that 
persons taking negotiable instruments are presumed to take them 
on the credit of the parties whose names appear upon them, and 
a person not a party cannot be charged, upon proof that the 
ostensible party signed, or indorsed, as his agent. It may' be per- 
fectly true, if there is proof that the holder of negotiable paper 
was aware, when he received it, of the facts and circumstances 
connected with its making, and knew that it was intended and 
delivered as a corporate obligation only, that the persons signing 
it in this manner could not be held individually liable. Such 
knowledge might be imputable from the language of the paper, 
in connection with other circumstances ; as in the case of Mott 
v. Hicks, 1 Cowen, 513, where the note read, "the president and 
directors promise to pay," and was subscribed by the defendant 
as "president." The court held that that was sufficient to dis- 
tinguish the case from Taft v. Brewster, supra, and made it 
evident that no personal engagement was entered into or intended. 
Much stress was placed in that case upon the proof that the plain- 
tiff was intimately acquainted with the transaction out of which 
arose the giving of the corporate obligation. 

In the case of the Bank of Genesee v. Patchin Bank, 19 N. Y. 
312, referred to by the appellants' counsel, the action was against 
the defendant to hold it as the indorser of a bill of exchange, 
.drawn to the order of "S, B. Stokes, Cas.," and indorsed in the 
same words. The plaintiff bank was advised, at the time of dis- 
counting the bill, by the president of the Patchin Bank, that 
Stokes was its cashier, and that he had been directed to send it 
in for discount, and Stokes forwarded it in an official way to the 
plaintiff. It was held that the Patchin Bank was liable, because 
the agency of the cashier in the matter was communicated to 
the knowledge of the plaintiff as well as apparent. 



54 General Requisites of the Contract 

Incidentally, it was said that the same strictness is not 
required in the execution of commercial paper as between banks, 
that is, in other respects, between individuals. 

In the absence of competent evidence showing or charging 
knowledge in the holder of negotiable paper as to the character 
••of the obligation, the establised and safe rule must be regarded 
to be that it is the agreement of its ostensible maker and not of 
some other party, neither disclosed by the language, nor in the 
manner of execution. In this case the language is "we promise 
to pay," and the signatures by the defendants Clark and Close 
are perfectly consistent with an assumption by them of the com- 
pany's debt. 

The appearance upon the margin of the paper of the printed 
name "Ridgewood Ice Company" was not a fact carrying any 
presumption that the note was, or was intended to be, one by 
that company. 

It was competent for its officers to obligate themselves per- 
sonally, for any reason satisfactory to themselves, and, apparently 
to the world, they did so by the language of the note ; which the 
mere use of a blank form of note, having upon its margin the 
name of their company, was insufficient to negative. 

In order to obviate the effect of the rule we have discussed, 
the appellants proved that Winslow, a director of the payee com- 
pany, was also a director in the plaintiff bank, at the time when 
the note was discounted, and it was argued that the knowledge 
chargeable to him, as director of the former company, was 
imputable to the plaintiff. But that fact is insufficient to charge 
the plaintiff with knowledge of the character of the obligation. 
He in no sense represented, or acted for the bank in the transact 
tion, and whatever his knowledge respecting the note, it will not 
be imputable to the bank. (National Bank v. Norton, i Hill, 572, 
578; Mayor, etc., v. Tenth National Bank, 111 N. Y. 446, 457; 
Farmers', etc., Bank v. Payne, 25 Conn. 444.) He was but one 
of the plaintiffs' directors, who could only act as a board. 
(National Bank v. Norton, supra.) If he knew the fact that these 
were not individual but corporate notes, we cannot presume that 
he communicated that knowledge to the board. An officer's 
knowledge, derived as an individual, and not while acting 
officially for the bank, cannot operate to the prejudice of the 
latter. (Bank of U. S. v. Davis, 2 Hill, 451.) The knowledge with 
which the bank as his principal would be deemed chargeable, so 
as to affect it, would be where, as one of the board of directors 
and participating in the discount of the paper, he had acted 



Casco National Bank v. Clark et al. 55 

affirmatively, or fraudulently, with respect to it; as in the case 
of Bank v. Davis {supra), by a fraudulent perversion of the bills 
from the object for which drawn; or as in H olden v. New York 
& Erie Bank (72 N. Y. 286), where the president of the bank, who 
represented it in all the transactions, was engaged in a fraudulent 
scheme of conversion. It was said in the latter case that the 
knowledge of the president, as an individual or as an executor, 
was not imputable to the bank merely because he was the pres- 
ident, but because, when it acted through him as president, in 
any transaction where that knowledge was material and appli- 
cable, it acted through an agent. 

The rule may be stated, generally, to be that where a direc- 
tor or an officer has knowledge of material facts respecting a 
proposed transaction, which his relations to it, as representing 
the bank, have given him, then, as it becomes his official duty to 
communicate that knowledge to the bank, he will be presumed 
to have done so, and his knowledge will then be imputed to the 
bank. But no such duty can be deemed to have existed in this 
case, where the appellants have made and delivered a promissory 
note, purporting to be their individual promise. If one of the 
plaintiff's officers did have knowledge, whether individually or 
as a director of the Clark & Chaplin Company is not material, 
that the paper was made and intended as a corporate note, his 
failure to so state to the bank could not prejudice it. It was in 
no sense incumbent upon him, assuming that he actually partici- 
pated in the discount (a fact not shown), to explain that the note 
was the obligation of the Ridgewood Company and not of the 
persons who appeared as its makers. He was under no duty to 
.these persons to explain their acts, and the law would not imply 
any. At most, it would be merely a case of knowledge, acquired 
by a director, of facts not material to the transaction of discount 
by the plaintiff, and which he was under no obligation to com- 
municate. No other questions require discussion, and the judg- 
ment rendered below should be affirmed, with costs. 

All concur. 

Judgment affirmed. 



56 General Requisites of the Contract 



Munger v. Shannon {1874), 61 N. Y. 251. § 5 — 1. 

Appeal from judgment of the General Term of the Supreme 
Court in the fourth judicial department, affirming a judgment 
and order of Special Term, granted upon summary application 
for judgment against defendant. 

The complaint alleged in substance that Livonia A. Gulick, 
on the 31st day of December, 1868, at Starkey, Yates county, 
made her promissory note, by which, for value received, she 
promised to pay to her own order $2,000, three months after 
date, at the Central National Bank in the city of New York. 
There were additional allegations to the effect that the note was 
indorsed by Nathan Randall and Herrick Munger, and thereupon 
discounted and held by Wilkin & Hair, bankers, at Dundee, in 
the same county. That on the 26th day of January, 1869, and 
before the note came due, L. A. Gulick, by her agent, made her 
bill of exchange, addressed to the defendant, as follows : "Mr. 
Harrison Shannon. You will please pay to Messrs. Wilkin & 
Hair the amount of a note for $2,000, dated December 31st, 1868, 
and deduct the same from my share of the profits of our partner- 
ship business in malting. Note made by myself as principal 
to the order of myself, and indorsed by Nathan Randall and 
Herrick Munger. L. A. Gulick, per E. Gulick. January 26, 1869." 
That said bill or order was thereupon duly transferred and deliv- 
ered to the said Wilkin & Hair ; and afterward, on the 6th day 
of February, 1869, the defendant duly accepted said bill or order 
by writing upon the back of it these words : "Accepted February 
6, 1869. H. Shannon;" and therefore became liable upon said 
bill or order as accepted. It was further alleged that before the 
commencement of the action the note and bill, or order, were 
transferred to the plaintiff for a valuable consideration ; that the 
note was due and payable before action brought; and that pay- 
ment of it, as well as of the bill, etc., was demanded of the defend 
ant, but that no part of the same, or either of them, had ever been 
paid ; and that there was due to the plaintiff thereon $2,000, with 
interest from April 3, 1869. 

The defendant, in his answer, alleged that, after the accept- 
ance of the order mentioned in the complaint, and before the note 
matured, L. A. Gulick countermanded the order, and directed the 
defendant not to pay it; and that before such maturity she 
requested the holders not to call upon the defendants to pay ; and 
that she then made arrangements to take up and pay the note at 



Munger v. Shannon 57 

its maturity; and that said note was either paid by the maker at 
maturity or renewed by another note for the same amount, with 
the same indorsers; and that the note was thereby paid by the 
maker. 

David B. Prosser, for the appellant. 
E. G. Lapham, for the respondent. 

Dwight, C. It will be necessary to consider whether the 
instrument on which the action is brought is a bill of exchange. 
A bill is an order drawn by one person on another to pay a third 
a certain sum of money, absolutely and at all events. Under this 
definition the order cannot be paid out of a particular fund, but 
must be drawn on the general credit of the drawer, though it is 
no objection, when so drawn, that a particular fund is specified 
from which the drawee may reimburse himself. The difficulty is 
in determining whether the bill is to be paid out of the fund or 
not. The cases are very numerous, and do not appear to proceed 
on any very well defined distinction. The true test would seem 
to be whether the drawee is confined to the particular fund, or 
whether, though a specified fund is mentioned, he would have 
the power to charge the bill up to the general account of the 
drawer, if the designated fund should turn out to be insuffi- 
cient. In the final analysis of each case, it must appear that the 
alleged bill of exchange is drawn on the general credit of the 
drawer. For example, if he were an accommodation drawer, it 
must be of such a nature that the amount paid under it could be 
charged against him as a debt, or if the transaction were business 
paper, it must be of such a character as to be entered as a debit, 
on the debtor side of the account. 

The remarks in Dawkes v. De Lorane (3 Wils. 207), are 
worthy of approval: "The instrument or writing which consti- 
tutes a good bill of exchange is not confined to any certain form, 
or set of words, yet it must have some essential qualities, without 
which it is no bill of exchange ; it must carry with it a personal 
and certain credit given to the drawer, not confined to credit upon 
any thing or fund; it is upon the credit of a person's hand, as on 
the hand of the drawer, the indorser, or the person who nego- 
tiates it ; he to whom such bill is made payable, or indorsed, takes 
it upon no particular event or contingency, except the failure of 
the general personal credit of the persons drawing or negotiating 
the same." Whatever is said of a bill here is equally applicable 
to a promissory note. Under this rule, an order drawn payable 
"out of one's growing subsistence" is not a good bill (Josselyn v. 



58 General Requisites of the Contract 

Lacier, 10 Mod. 294) ; nor one payable "out of rents" (Jenney v. 
Herle, 2 Lord Raym. 1361) ; nor out of money in the hands 

of ; "nor out of a certain payment when due." {Hay dock 

v. Lynch, 2 Lord Raym. 1563.) On the other hand, the statement 
of a particular fund in a bill of exchange does not vitiate it, if it 
be inserted merely as a direction to the drawee how to reimburse 
himself. Thus, an order requesting the defendant to pay to the 
plaintiff, or order, £9 10s., "as my quarterly half-pay, to be due 
from the twenty-fourth of June to twenty-seventh of September 
next, by advance," was held to be a bill of exchange. The court 
said : "The mention of the half-pay is only by way of direction 
how he shall reimburse himself, but the money is still to be 
advanced on the credit of the person." (Macleod v. Snee, i 
Strange, 762.) The direction in the case at bar is equivalent to 
an order to pay out of the profits. It is to deduct the amount paid 
from the drawer's share of "the profits." This is equivalent to a 
direction to subtract the amount from a particular fund. If the 
language had been "please pay Wilkes and Hare $2,000 out of 
my share of the profits of the partnership," it would have been a 
clear case of assignment and not a bill of exchange. The actual 
direction was in substance the same. {Cook v. Satterlee, 6 Cowen, 
108), is in point. The words there were: "Ninety days after date 
pay plaintiff or bearer $400, and take up their note given to Wm. 
and H. B. Cook for that amount, dated April 19th, 1825." On 
demurrer it was held that this was not a bill of exchange. The 
words "pay and take up," &c, were held to be equivalent to pay 
on taking up. Applying the same construction to the present 
case, "pay and deduct" would be equivalent to "pay on deduct- 
ing," or "pay by deducting." Either construction must take away 
negotiability. Cook v. Satterlee is not at all weakened by Leonard 
v. Mason (1 Wend. 522). The opinion is given by the same 
judge in both cases. The language in Leonard v. Mason was, 
"pay a specified note, and hold it against me in our settlement." 
The court said the note was thus referred to merely to ascertain 
the amount. The language was equivalent to the words "charge 
to my account." In Leonard v. Mason there was no independent 
act to be performed other than paying the note. In Cook v. Sat- 
terlee, and in the case at bar, there are two wholly distinct acts 
to be done, besides payment ; in the one to take up a note, and in 
the other to deduct from profits of a firm. The order, accord- 
ingly, is not drawn on the general credit of the drawer. {Low- 
ery v. Steward, 25 N. Y. 239.) The order there was: "Please 
pay to the order of Archibald H. Lowery the sum of $500 on 



Siegel, Cooper Co. v. Chicago Trust Savings Bank 59 

account of twenty-four bales cotton shipped to you as per bill of 
lading by steamer Colorado, inclosed to you "in letter." It was 
held that this was not a bill of exchange, requiring acceptance 
to bind the drawers, but a specific draft or order upon a partic- 
ular fund. ( Pp. 242-244 ; Morton v. Naylor, 1 Hill, 583 ; Parker 
v. City of Syracuse, 31 N. Y. 376.) The present order, it should 
be observed, is payable out of an uncertain fund, from profits, 
and of course, none may be realized. This fact, of itself, deprives 
it of an element essential in a bill of exchange, which is, that it 
be payable absolutely, and not upon a contingency. (Cook v. 
Satterlee, 6 Cow. 108 ; W or den v. Dodge, 4 Denio, 159 ; 1 Parsons 
on Notes and Bills, 42.) 

I think that the true construction of the present order is, 
that it was an equitable assignment of a certain amount of the 
profits of the business of L. A. Gulick. 

The judgment of the Supreme Court should be reversed. 

All concur; except Earl, C, dissenting. Lott, Ch.C, con- 
curs on the ground that the answer should not have been held 
frivolous. 

Judgment reversed and motion denied. 



statement of the transaction which gave rise to instru- 
ment. § 5 — 2. 

Siegel, Cooper & Co. v. Chicago Trust & Savings Bank (1890), 
131 III. 569, 19 Am. St. Rep. 51. 

Mr. John C. Richberg, for the appellants. 

Messrs. Flower, Smith and Musgrave, for the appellee. 

Mr. Chief Justice Shope delivered the opinion of the court : 

This was an action of assumpsit, by appellee, against appel- 
lants, upon the following instrument : 

"$300. Chicago, March 5, 1887. 

"On July 1, 1887, we promise to pay D. Dalziel, or order, the 
sum of three hundred dollars, for the privilege of one framed 

advertising sign, size x inches, one end of 

each of one hundred and fifty-nine street cars of the North Chi- 
cago City Railway Co., for a term of three months, from May 15, 
iS8y. Siegel, Cooper & Co." 

—which was indorsed by Dalziel, the payee, to appellee, for value, 
on the day of its execution. 



60 General Requisites of the Contract 

The first question presented is, is this instrument negotiable? 
—and this question has been answered affirmatively by the Circuit 
and Appellate courts. The Appellate Court having affirmed the 
judgment in favor of the plaintiff, the case is brought here by 
appeal, upon certificate of importance granted by that court. 

It appears, that before the time when the privilege of adver- 
tising was to commence, Dalziel forfeited any right he may have 
acquired to use the cars in the manner indicated, and the privilege 
specified never was furnished appellants ; and it is insisted that the 
instrument is a simple contract, only, and that therefore the same 
defense — failure of consideration — is available against the indor- 
see of the paper for value, and before due, as might be interposed 
against such paper in the hands of the payee. It is also insisted, 
that the instrument shows, on its face, that payment depended 
upon a condition precedent to be performed by the payee, and 
therefore the indorsee took it with notice, and by the failure of the 
payee to perform the condition, no right of recovery exists in the 
indorsee. It is not contended that the indorsee had any other 
notice than that contained in the instrument itself, and it is appar- 
ent that at the time of its indorsement, which was the day of its 
execution, no right to the consideration had accrued to the makers. 
It is a promise to pay a certain sum of money at a day certain, for 
a consideration thereafter to be rendered, and depends for its 
validity upon the implied promise of the payee to furnish the con- 
sideration at the time and in the manner stipulated, — that is, it is 
a promise to pay a sum certain on a particular day, in considera- 
tion of the promise of the payee to do and perform on his part. A 
promise is a valuable consideration for a promise. 

But the question remains, whether the statement or the 
recital of the consideration on the face of the instrument impairs 
its negotiability, and, in this instance, amounts to a condition pre- 
cedent. The mere fact that the consideration for which a note is 
given is recited in it, although it may appear thereby that it was 
given for or in consideration of an executory contract or promise 
on the part of the payee, will not destroy its negotiability, unless 
it appears, through the recital, that it qualifies the promise to pay, 
and renders it conditional or uncertain, either as to the time of 
payment or the sum to be paid. Daniel on Neg. Inst. sees. 790- 
797; Davis v. McCready, 17 N. Y. 320; State Nat. Bank v. 
Casson, 39 La. Ann. 865; Goodloe v. Taylor, 13 N. C. 458; 
Stevens v. Blunt, 7 Mass. 240. 

In State Nat. Bank v. Casson, supra, it is said: "Plaintiff- 
received the note before maturity, and before a failure of the 



Siegel, Cooper Co. v. Chicago Trust Savings Bank 61 

consideration. Even if it were known to him that the considera- 
tion was future and contingent, and that there might be offsets 
against it, this would not make him liable to the equities between 
the defendant and the payee. It can not affect the negotiability 
of a note that its consideration is to be hereafter realized, or that, 
from contingency, it may never be enjoyed." 

The most that can be said of a recital in the instrument itself, 
of the consideration upon which it rests, is, that the indorsee, 
taking it before maturity, is chargeable with notice of the recital. 
Such recital, however, is not sufficient, of itself, to advise him that 
there was, or would necessarily be, a failure of consideration, but 
if, at the time of the indorsement, the consideration has in fact 
failed, the recital might be sufficient to put him upon inquiry, and, 
in connection with other facts, amount to notice. (Henneberry v. 
Morse, 56 111. 394.) The case at bar does not, however, fall within 
the rule just stated, for the assignment was made the same day 
the note was made, and by the terms of the recital it was appar- 
ent the payee was required to do no act till the 15th of May 
following, — an interval of seventy days. 

There is a distinction, clearly recognized in the authorities, 
between an instrument payable at a particular day, and one 
payable upon the happening of some event; and the rule is, that 
where the parties insert a specific date of payment, the instrument 
is then payable at all events, — and this, although, in the same 
instrument, an uncertain and different time of payment may be 
mentioned, as, that it shall be payable upon a particular day, or 
upon the completion of a house, or the performance of other 
contracts, and the like. (McCarthy v. Howell, 24 111. '341, and 
authorities supra.) But the doctrine of this and kindred cases, 
where there are both a certain day of payment and one more 
or less contingent, need not be here invoked, for the time of 
payment in the instrument under consideration is not made to 
depend upon the happening or not happening of any event, but 
is specific and certain, and must occur by the efflux of time, alone. 

If, therefore, it be conceded, as it must, that a condition 
inserted in a promissory note, postponing the day of payment 
until the happening of some uncertain or contingent event, will 
destroy its negotiability and render the instrument a mere agree- 
ment, yet under the authorities, if by the instrument the maker 
promises to pay a sum certain at a day certain to a certain person 
or his order, such instrument must be regarded as negotiable, 
although it also contains a recital of the consideration upon which 
it is based, and although it further appear that such consideration, 
if executory, may not have been performed. Here, the money 



62 General Requisites of the Contract 

was payable, absolutely, on the first day of July, 1887, — a time 
when the contract for the advertising could not have been com- 
pleted. If the instrument had remained the property of the payee, 
and upon its maturity and performance to that time, suit had been 
brought, it is clear that no plea of partial failure of consideration 
could have been sustained, for the reason that the entire term had 
not then expired. No analysis of the instrument itself is neces- 
sary. The most careful examination of it will fail to disclose a 
condition precedent to the payment of the money at the time stip- 
ulated. Nor is there anything in the recital of the consideration 
to put the indorsee upon inquiry at the time the indorsement was 
made. Indeed, it is clear that at that time no inquiry would have 
led to notice that Dalziel would fail to comply with his contract 
on the 15th of May thereafter, when the term' was to commence. 
All that the recitals would give notice of was, that the note was 
given in consideration of an agreement on the part of the payee 
that the privilege of advertisement named should be enjoyed by 
the makers for three months, from May 15, 1887. Giving to 
the language employed its broadest possible meaning, it can not 
be construed as notice to the indorsee of the future breach of the 
contract by Dalziel. The presumption of law would be, that the 
contract would be carried out in good faith, and the consideration 
performed as stipulated. The makers had put their promissory 
note into the hands of Dalziel upon an expressed consideration 
which they were thereafter to receive, and for the performance 
of which they had seen fit to rely upon the undertaking of Dalziel, 
and we are aware of no rule by which they can hold this indorsee 
for value, before due and before the time of performance was to 
begin, chargeable with notice that the promise upon which the 
makers relied would not be kept and performed. Wade on Notice, 
sec. 94 a; Loomis v. Maury, 15 N. Y. 312; Davis v. McCready, 
supra. 

It is also contended that the court erred in giving the eighth 
instruction in behalf of appellee, as to the meaning of the words 
"good faith." Without pausing to discuss the instruction, we 
think it clear that appellants were not prejudiced thereby, and that 
no inference unfavorable or prejudicial to them could have been 
drawn therefrom by the jury. While, therefore, the instruction 
may be regarded as inaccurate, it worked no injury, and appellants 
can not complain. See Comstock et al. v. Hannah, 76 111. 530. 

Other minor objections are urged, which, it is sufficient to 
say, we have examined with care, but find no prejudicial error. 

The judgment of the Appellate Court will be affirmed. 

Judgment affirmed. 



Dodge v. Emerson 63 

the sum must be certain. § 3 2. 

Dodge v. Emerson (1852), 34 Me. 96. 

Assumpsit, by the indorsee against the makers of a note pay- 
able to the Protection Insurance Company or order, for "$271.25, 
with such additional premium as may arise on policy No. 50, 
issued at the Calais agency." 

The opinion of the court, Shepley, C.J., Wells, Rice, 
Hathaway and Appleton, J. J., was drawn up by 

Appleton, J. — No principle of law is more fully established 
by authority and the universal concurrence of the commercial 
world, than that to make a written promise a valid promissory 
note, it must be for a fixed and certain, and not for a variable 
amount. In France it is so determined by the provisions of the 
Code Napoleon. It is the recognized mercantile law of con- 
tinental Europe. In England and in this country, it has received 
the sanction of repeated and well considered adjudications. Story 
on Promissory Notes, § 20. Without this essential requisite, a 
written promise, though in terms payable to order, is to be 
regarded as a simple contract and not negotiable. 

The defendants in this case have promised to pay two several 
sums ; one certain and definite, the other uncertain and contingent. 
The defendants' liability being for both these sums, is obviously 
for an unascertained and indefinite amount. 

It is insisted in argument, that the plaintiff may abandon all 
claim for the additional premium, which is uncertain, and proceed 
only for the certain sum expressed in the contract. Undoubtedly 
he may take judgment for any sum less than the amount due, 
and in that mode abandon a portion of his legal claims, but that 
still leaves the contract in its original state, and can in no way 
affect its legal construction. He could not erase the clause relating 
to the additional premium, without thereby making such an alter- 
ation in the instrument declared on, as would discharge the 
defendants. 

In Smith v. Nightingale, 2 Stark. R. 375, the promise was 
to pay the payee sixty-five pounds and all other sums that may be 
due him, and it was claimed for the plaintiff, to whom the interest 
in the contract had passed by indorsement, that he might disre- 
gard the latter clause and recover on the certain sum set forth in 
his contract as indorsee, but the Court decided otherwise. Davis 
v. Wilkinson, 10 Adol. & El. 98. 



64 General Requisites of the Contract 

The inquiry is made by the counsel for the plaintiff, whether 
the clause providing for the payment of an additional sum, intro- 
duced after the promise to pay the sum fixed and certain, controls 
that sum so as to make it in any event uncertain. The amount 
due to the plaintiff is uncertain. Whether the contract is to be 
regarded as a promise to pay one sum, which shall be the aggre- 
gate composed of a certain and of an uncertain sum, the amount 
of which is to be ascertained at some subsequent time, or as a 
promise to pay two sums, one fixed and the other uncertain, is 
perfectly immaterial. In either case there is no precise and ascer- 
tained amount due by the contract, and it cannot be regarded as 
a promissory note. If it was not in its origin, it cannot be made 
one by any abandonment, which the plaintiff may deem it advisable 
to make of any portion of the sum due him. The contract declared 
on not being in its character negotiable, the action cannot be main- 
tained by the present plaintiff. Plaintiff nonsuit. 



MAY BE PAYABLE BY STATED INSTALMENTS. § 4 — 3. 

Cook v. Horn (Q. B.) (1873), 2 9 L. T. (N. S.) 369. 

This was an action upon a promissory note, tried before 
Honyman, J., at the York Summer Assizes. A verdict of 175/. 
5-y. lod. was found for the plaintiff, leave being reserved to the 
defendant to move to enter a verdict for him, on the ground that 
the note was not good. 

The form of the note was as follows : 

£170. 25th April, 1872. 

We promise to pay to Messrs. M. H. Cook and Co. 170/., 
with interest thereon at the rate of 5/. per cent, per annum, as 
follows: the first payment, to wit, 40/., or more, to be made on 
the 1st Feb. 1873, and 5/. on the first day of each month following 
until this note and interest shall be fully satisfied. And in case 
default shall be made in payment of any of the said instalments, 
the full amount then remaining due in respect of the said note 
and interest shall be forthwith payable. 

The note was signed by the defendant and one John Horn, 
since deceased. 

J. W. Mellor, on behalf of the defendant, moved in pursuance 
of the leave reserved. — This instrument cannot be considered a 



Cook v. Horn 65 

promissory note, for it is not made for the payment of a certain 
sum at a particular day. If the defendant paid more than 40/. on 
the 1st Feb., which would be in accordance with the terms of his 
promise, there could be no certainty as to his liability for the 
remaining instalments concerning either the amount or the day. 
In Smith v. Nightingale, 2 Starkie, 375, the promise was to pay 
on a particular day a certain sum, with interest, "and also all 
other sums which may be due to him." Lord Ellenborough was 
of opinion (p. 376) "that the instrument was too indefinite to be 
considered as a promissory note; it contained a promise to pay 
interest for a sum not specified, and not otherwise ascertained 
than by reference to the defendant's books, and that since the 
whole constituted one entire promise, it could not be divided into 
parts. He also held, that since the instrument contained an agree- 
ment to pay the money, it could not be receivable in evidence as 
an acknowledgment without a stamp." Similarly, this note con- 
tains a promise to pay interest for a sum the amount of which, 
after the 1st Feb., is not specified. Moreover, the day of final 
payment depends upon the contingency of the defendant's first 
payment; and it has been held that a promissory note cannot be 
so indefinite, e. g., to pay so many days after marriage. {Beardsley 
v. Baldwin, 2 Stra. 11 51.) [Blackburn, J. — That is only when the 
event may never happen ; if the period of payment be inevitable, 
as upon a death, it need not be definite.] Here there is no state- 
ment of the sum upon which interest is to be paid. 

Blackburn, J. — I do not think there should be any rule in 
this case. The objection to the note is, that if the first payment 
were more than 40/., which the note provides it might be, the 
subsequent instalments and the final time for payment would be 
indefinite. The amount of the note, however, is certain, and any 
variation in the time will depend only upon the defendant. No 
case has been cited which is an authority against this note; and 
by analogy with other objections, this one, as it seems to me, 
ought not to prevail. I do not see why a stipulation which enables 
the maker of a note to reduce his liability for interest, should 
prevent the instrument containing it from being a promissory 

note. 

Quain and Archibald, JJ., concurred. 

Rule refused. 



General Requisites of the Contract 



INSTRUMENT PAYABLE in EXCHANGE IS NOT NEGOTIABLE. § 4 \. 

First Nat. Bank v. Slette {1897), 67 Minn. 425, 64 Am. St. Rep. 

429. 

Carmody & Leslie and F. H. Peterson, for appellants. 
Calkins & Sharpe, for respondent. 

Start, C.J. This action is based upon an obligation, which 
is substantially in these words : 

"$1,673. Halstad, Minn., July 26th, 1894. 

"For value received, we promise to pay to the order of the 
John Good Cordage & Machine Company the sum of sixteen 
hundred and seventy-three dollars, as follows : Payable by New 
York or Chicago exchange. $560, Nov. 15th, 1894; $560, Dec. 
1st, 1894; $560, Dec. 15th, 1894. Without interest, if paid as due ; 
if not, then legal rate from date until paid." 

The only question on this appeal is whether this is a nego- 
tiable instrument under the law merchant. It is absolutely essen- 
tial, in order to constitute a promissory note under the law mer- 
chant, that the promise be to pay in money. If this instrument 
can be construed as an absolute promise to pay in money $1,673, 
with exchange, it is negotiable ; otherwise, not. Hastings v. 
Thompson, 54 Minn. 184, 55 N. W. 968. 

The case of Bradley v. Lill, 4 Biss. 473, Fed. Cas. No. 1,783, 
is the only one to which our attention has been called, where the 
language of the instrument was similar to the one under consid- 
eration. In the case referred to the note was made in Chicago, 
and was payable at New York, "in" exchange ; and it was held 
that the note was negotiable, upon the ground that the promise 
was to pay the sum named in the note, "with" exchange, which 
was a mere incident to the debt. 

In the case at bar the note is not payable at any particular 
place, and the promise is, not to pay a given number of dollars 
in money "with" — that is, plus — the current rate of exchange, 
but it is to pay the sum named in the note by New York or 
Chicago exchange. The holder of this instrument cannot demand 
in payment thereof $1,673 m money, plus the cost of exchange; 
for the maker is not bound to discharge his obligation except by 
means of inland bills on New York or Chicago. Nor can the 
maker tender in payment $1,673 m money, with the cost of 
exchange; for his promise is to make payment by inland bills, 



Oppenheimer v. Bank 67 

which he must purchase in the market. The instrument, then, is 
not payable in money, and is, therefore, not a promissory note, 
within the law merchant. Easton v. Hyde, 13 Minn. 83 (90) ; 
Jones v. Fales, 4 Mass. 245; Irvine v. Lowry, 14 Pet. 293; 1 
Daniel, Neg. Inst. §§55, 56; Tied. Com. Paper, §29; 1 Rand. 
Com. Paper, § 90. In reaching this conclusion we have not been 
unmindful of the fact that, in commercial usage, bills of exchange 
are regarded as substitutes for money ; but this usage cannot make 
them such. 

Order reversed, and a new trial granted. 



THE SUM IS CERTAIN THOUGH PAYABLE WITH COSTS OF COLLEC- 
TION OR AN ATTORNEY'S. FEE. § 4 — 5. 

Oppenheimer v. Bank (1896), 97 Tenn. 20, 56 Am. St. Rep. 778. 
Appeal in Error from Chancery Court of Gibson County. 

McAllister, J. Complainants filed this bill to enjoin the 
defendant bank from prosecuting three several suits before a Jus- 
tice of the Peace, for the collection of certain promissory notes. 
It is charged in the bill that said notes were procured by fraud 
and are without consideration, and that the bank received the notes 
from the payees with actual or constructive notice of the fraud. 
It is further charged said notes were not negotiable, for the reason 
that each contained a stipulation for the payment of reasonable 
attorney's fees, and that said bank is not protected in its title to 
said notes as an innocent holder for value in due course of trade. 
The Chancellor, upon final hearing, was of opinion that the 
defendant bank purchased said notes without actual or construc- 
tive knowledge of the fraud, but held that the stipulation in 
respect of attorney's fees, destroyed the negotiability of said instru- 
ments, and thereby defeated the claim of said bank; that it was 
an innocent holder for value within the meaning of the law mer- 
chant. The Court decreed that said notes had been procured by 
fraud and were void in the hands of defendant bank, and perpetu- 
ally enjoined their collection. The bank appealed, and has 
assigned as error the action of the Chancellor in adjudging said 
notes non-negotiable on account of the stipulation in respect of 
attorney's fees. 

The facts out of which the present controversy has arisen 
may be briefly stated. The record discloses that Curtis Bros, were 



(jb General Requisites of the Contract 

the proprietors of a patent churn, which they were engaged in 
selling in Gibson County. Complainants purchased of Curtis Bros, 
the exclusive right to sell this churn in the State of Louisiana and 
certain counties of Mississippi, for which they agreed to pay the 
sum of $2,000, evidenced by four notes, each for the sum of $500, 
and payable, respectively, in seven, eight, nine, and ten months 
from date. The following is a specimen of the notes in controv- 
ersy, viz. : 

"Trenton, Tenn., June 3, 1889. 
"Nine months after date we promise to pay to the order of 
Curtis Bros., or bearer, the sum of five hundred dollars, negoti- 
able and payable at the Exchange Bank of Trenton, Tenn., for 
value received. The drawers and indorsers severally waive pre- 
sentment for payment, protest, and notice of protest and nonpay- 
ment of this note, and, in case of suit, agree to pay all reasonable 
attorney's fees for collecting the same. 
"$500 due February 3, 1890. 

"L. Oppenheimer, 
"C. T. Love, 
"R. F. Ross, 
"H. R. Camp." 

On the twenty-seventh and twenty-eighth of June, 1889, three 
of these notes were purchased by the defendant bank at a discount 
of twenty per cent. — that is to say, the bank paid twelve hundred 
dollars for the three notes of the aggregate face Value of fifteen 
hundred dollars. H. R. Camp, one of the signers of the notes, 
was in the employment of Curtis Bros, in the capacity of salesman, 
and negotiated the sale to Oppenheimer of the exclusive right to 
sell this churn in Louisiana and Mississippi. If was agreed be- 
tween the original parties, at the time the notes were executed, 
they were not to be transferred, and were alone payable out of 
the profits of the new business. Curtis Bros., Camp, and Ames, 
soon after the execution of the notes, left the state clandestinely, 
and their whereabouts is unknown. The proof abundantly shows 
that Curtis Bros, were in collusion with Camp, and that said notes 
were procured to be executed upon false and fraudulent repre- 
sentations, and as between the original parties there was a total 
failure of consideration. The defendant bank, however, relies 
upon the plea of innocent purchaser for value before maturity, in 
due course of trade, and without notice. Defendant's counsel 
insist that, complainant not having appealed from the ruling of 
the Chancellor that the bank had no actual or constructive notice 
of the fraudulent conduct of the payees in procuring the execution 



Oppenheimer v. Bank 69 

of the notes, this question cannot be reopened in this court. But ] 
this position is manifestly erroneous, since, upon the appeal of the 
bank, the whole case is open for re-examination, and if the decree 
in favor of complainant is found correct upon any ground, 
although incorrect upon the ground assigned by the Chancellor, 
we should affirm it. 

The contention of learned counsel for complainant is that the 
purchase of the notes in suit from strangers at a discount of 
twenty per cent., when the bank knew that Oppenheimer, one of 
the makers, was perfectly solvent, indicates knowledge of the 
fraud, or that the bank had such constructive notice as to put it 
upon inquiry. As said by this court: "When the indorsee takes 
negotiable paper before maturity under circumstances which might 
reasonably create a suspicion that it was not good — as, where he 
buys a note on a solvent man, having less than one year to run, 
for $333.33 at $125, with an agreement to pay $25 more if col- 
lected without suit, he takes it at his peril and subject to the 
equities between the original parties." Hunt v. Scmford, 6 Yer., 
387; 7Heis., 163. 

Says Mr. Tiedeman, in his work on Commercial Paper, Sec. 
291 : "It is said that inadequacy of price paid for negotiable paper 
may be so gross as to justify the conclusion that the purchaser is 
charged with notice of a fraudulent or defective title on the part 
of the vendor. And it has been held there was constructive notice 
of fraud or of some other equally effective defense to the paper 
where the purchaser paid $125 for a note of $333.33, $50 for a 
note of $300, $5 for a note of $300. On the other hand, it has 
been held that the purchaser of a commercial instrument was a 
holder for value, and hence took it free from equitable defenses, 
when he paid $100 for a note of $250, $50 for a note of $100, or 
$12.50 for a note of $25. It is certain -that a purely nominal 
consideration would not make the purchaser a holder for value. 
And it may be stated, subject to an explanation of terms, that 
an inadequate price always puts the person upon inquiry and 
may, certainly, along with other suspicious circumstances, charge 
him with notice of existing defenses. But every price is not 
inadequate which is less than the face value of the instru- 
ment purchased. Commercial paper of every kind has its com- 
mercial value, rising above or falling below par, according to 
the financial credit of the person liable on it. Only that price is 
inadequate which falls below the market value, and if the dispro- 
portion between the price paid and the market value be very 
great, it is fair and just to presume that the purchaser had rea- 



70 General Requisites of the Contract 

sonable grounds for suspecting fraud or some other defense to the 
instrument. Each case must, therefore, stand on its own merits. 
One-half the face value may, under some circumstances, be a 
grossly inadequate price, while, under different circumstances, it 
may be greatly in excess of what the instrument is worth on the 
market." Tiedeman, Sec. 291. 

We think the rule laid down by Mr. Tiedeman is sound, and 
furnishes an intelligible basis for the determination of what con- 
stitutes inadequacy of price in the purchase of commercial paper. 
We cannot say, however, in view of this rule and the proof in the 
record, that there was any such gross disparity between the com- 
mercial value of the notes and the price actually paid, as to 
awaken suspicion in the minds of the officers of the bank of any 
infirmity in the paper. The proof shows that this bank was accus- 
tomed, during this time, to discount paper at rates varying from 
twelve to twenty-five per cent, per annum, and that it had, prior 
to this time, discounted paper held by these payees on other sol- 
vent parties at such rates. It was also insisted in argument that 
H. R. Camp, one of the makers of the notes, negotiated the sale 
of this paper to the bank, and that this fact was sufficient to put 
the purchaser upon inquiry. Nothing can be predicated upon this 
position, for the reason that it does not distinctly appear from the 
record whether it was Ames or Camp who sold the notes to the 
bank. The officers of the bank who purchased the paper, are 
unable to state which of these parties conducted the transaction, 
and there is no other proof in the record on the subject. We hold, 
however, this feature unimportant in this case. We find no facts 
or circumstances in the record fixing the bank with knowledge, 
actual or constructive, of the fraudulent character of the paper, 
and the holding of the Chancellor in respect of this proposition 
is correct. 

The next question presented is whether the stipulation in 
respect of payment of attorney's fees, written in the face of the 
note, destroys its negotiability and thus dismantles the note, allow- 
ing proof of fraud in its execution. The question presented has 
given rise to much judicial controversy, and the decisions an- 
nounced in different states and jurisdictions are by no means 
reconcilable, and, since the question is one of first impression in 
this state, we shall, after a review of the authorities, adopt that 
view which most commends itself to our reason and judgment. 

Mr. Tiedeman, in the work already cited, Commercial Paper, 
Sec. 28 (b), says: "Bills and notes, particularly the latter, some- 
times contain stipulations that, if not paid voluntarily, the drawer 



Oppenheimer v. Bank 71 

or maker will pay the attorney and collection fee. It has been 
much discussed what is the effect of such a stipulation upon the 
legal character of the instruments to which they are added. 

"A few decisions maintain that the stipulation is in the 
nature of a usurious charge and avoids the whole transaction 
under the laws prohibiting usury." Citing State v. Taylor, 10 
Ohio, 378; Shelton v. Gill, 11 Ohio, 417; Dow v. Updike, n Neb., 
95- 

It may be remarked under this head that, in the case of Par- 
ham v. /. /. Pulliam, Exr. etc., 5 Cold., 497, this court held that 
a stipulation in a note to pay attorney's commission for collecting 
is not usurious. Other decisions hold the stipulation to be void 
because it is in the nature of a penalty and tends to the oppression 
of impecunious debtors. But the avoidance of the stipulation on 
such grounds enables the courts to treat the stipulation as mere 
surplusage and hold the instrument to be negotiable notwithstand- 
ing." Citing TJ Pa. St., 131 ; 84 Pa. St., 410; 92 Pa. St., 227; 
84 N. C, 24; 63 Mo., 23; 64 Mo., 477; 71 Mo., 618, 622, 627; 53 
Wis., 599; 27 Minn., 240; 14 Bush, 814; Meyer v. Hart, 40 Mich., 
517; Bulloch v. Taylor, 39 Mich., 138; Garr v. Louisville Bank- 
ing Co., 11 Bush, 182. 

"In a large number of cases the stipulation is held to be valid, 
but because it renders the gross sum to be recovered on the instru- 
ment uncertain, its insertion in a bill or note is declared to destroy 
its negotiability." Citing Sweeney v. Thickstrew, JJ Pa. St., 131 ; 
Woods v. North, 84 Pa. St., 410; Johnston v. Spear, 92 Pa. St., 
227; First National Bank v. Bynum, 84 N. C, 24; First National 
Bank v. Gay, 63 Mo., 33 ; Samstag v. Conley, 64 Mo., 477 ; First 
National Bank v. Marlow, 71 Mo., 618; Storr v. Wakefield, 71 
Mo., 622 ; First National Bank v. Gay, 71 Mo., 627 ; Morgan v. 
Edwards, 53 Wis., 599; Jones v. Radtiz, 27 Minn., 240. 

"There are also other cases which not only recognize the 
validity of the stipulation, but also the negotiability of the paper 
in which it appears." Citing Dietrich v. Baylie, 23 La. Ann., 767 ; 
Overton v. Matthews, 35 Ark., 147; Smith v. Muncie National 
Bank, 29 Ind., 159; First National Bank v. Canatsey, 34 Ind., 
149; Johnston v. Crossland, 34 Ind., 344; Smith v. St. Silvers, 
32 Ind., 321; Wyant v. Parttorff, 37 Ind., 512; Hubbard v. 
Harrison, 38 Ind., 325; Wilkes v. Woollen, 54 Ind., 164; 
Sperry v. Harr, 32 Iowa, 184; Seatin v. Scoville, 18 Kan., 435; 
Howestien v. Barnes, U. S. C. C, Kansas, 28 Am. Rep., 406 (S. 
C, 5 Dillon, 482) ; Heard v. Dubuque Bank, 8 Neb., 10; Farmers' 
National Bank v. Rasmusson, 1 Dakota, 60 ; Wilson Sewing Ma- 



72 General Requisites of the Contract 

chine Co. v. Moreno, 7 Fed. Rep. 806 ; Storieman v. Pyle, 35 Ind., 
103. Indiana now prohibits by statute such stipulations in notes 
unless unconditional. Rev. Stat. (1876), 149. 

Mr. Tiedeman remarks that where the amount to be recov- 
ered as attorney's fees is explicitly stated in the instrument, it 
would seem that the sum of money to be recovered on the paper, 
with the attorney's fees added to the principal and interest, would 
be as certain as the principal and interest would be alone, for the 
interest continues to accumulate if the paper is not honored at 
maturity. When the exact amount of the fee is not stated, only 
reasonable fees can be recovered, and there may be some ground 
for objecting to the negotiability of such an instrument. But it 
would seem that even such an instrument ought to be held nego- 
tiable, for the stipulation for reasonable attorney's fees renders 
the amount no more uncertain than the addition by the law mer- 
chant to the principal sum of the costs of protest and the taxed 
cost of the suit. 

Mr. Randolph, in his work on Commercial Paper, Vol. I., 
Sec. 205, in treating this subject, says : "The effect of a stipula- 
tion for attorney's fees or costs of suit contained in a note has 
been the subject of much consideration, more especially in our 
Western States. As an agreement and irrespective of usury laws 
and other statutory prohibitions, such a stipulation is in itself 
valid." Citing Meacham v. Penrose, 60 Miss., 217; Brown v. 
Barber, 59 Ind., 533 ; First Nat. Bank v. Breese, 39 Iowa, 640 ; 
Garver v. Pontorris, 66 Ind., 191 ; 42 Ind., 176; 61 Ind., 276; 47 
Ind. 559 ; 85 Ind., 317 ; Miner v. Paris Exchange Bank, 53 Texas, 
559. "And the fees so stipulated for may be recovered by the 
holder of the notes, although not the original payee." Citing 
Johnson v. Crossland, 34 Ind., 334. "And where a stipulation of 
this sort is contained in a bill of exchange, it has been held to be 
embraced in the liability assumed by the acceptor." Bank of 
British North America v. Ellis, 2 Fed. Rep., 44; 29 Ind. 158. 

"It may be said in general," says the author, "that such a 
stipulation for fees does not affect the negotiability of the note 
containing it, even though the stipulation be restricted to the case 
of suit being brought on the instrument." Citing 1 Daniel Neg. 
Instrument, 66 ; 2 Parson's Bills and Notes, 147 ; Dietrich v. Bay- 
lie, 23 La. Ann., 767; Heard v. Dubuque Co. Bank, 8 Neb. 10, 
24; Sperry v. Horr, 32 Iowa, 184; Seaton v. Scoville, 18 Kan. 
433; 7 Fed. Rep., 806; 16 Fed. Rep., 89; Trader v. Chicester, 41 
Ark., 242; Gaar v. Louisville Banking Co., 11 Bush, 180; Nicher- 
son v. Sheldon, 33 III, 372; and citing also the Indiana cases; 



Oppenhkimer v. Bank 73 

Davidson v. Vorse, 52 Iowa, 384 ; McGill v. Griffin, 32 Iowa, 445 ; 
Randolph on Com. Paper, Vol. III., §§ 1717, 1718; Chitty, 770. 

Says Mr. Daniel, in his work on Negotiable Instruments, 
Sec. 62 (a) : "Such instruments should, we think, be upheld as 
negotiable. They are not like contracts to pay money and do some 
other thing. They are simply for a payment of a certain sum of 
money at a certain time, and the additional stipulation as to 
attorneys' fees can never go into effect if the terms of the note 
or bill are complied with. They are, therefore, incidental and 
ancillary to the main engagement, intended to assure its perform- 
ance or to compensate for trouble and expense entailed by its 
breach. At maturity negotiable paper ceases to be negotiable in 
the full commercial sense of the term, as heretofore explained, 
though it still passes from hand to hand by the negotiable forms 
of transfer, and it seems paradoxical to hold that instruments evi- 
dently framed as bills and notes are not negotialbe during their 
currency because, when they cease to be current, they contain a 
stipulation to defray the expenses of collection. Such stipula- 
tions do not, we think, render such instruments usurious. The 
additional amounts are in consideration of additional trouble and 
expense inflicted on the holder, and not excessive interest for the 
loan or forbearance of money." The author states further that 
the cases sustaining the negotiability of such instruments consider 
that the stipulation in respect of attorneys' fees is valid because 
it is an indemnification assured by the maker against the conse- 
quences of his own act, for, unless in default, he will not have to 
pay the additional amount ; that it is consonant with public policy, 
because it adds to the value of the paper ; has a tendency to lower 
the rate of discount, not only because it promises less expensive 
collection, but bears evidence of a greater degree of confidence on 
the part of the maker in his ability to pay without suit, and that it 
<loes not impair the negotiability of the instrument, for the reason 
that the sum to be paid at maturity is certain ; that commercial 
paper is expected to be paid promptly ; that, if so paid, no element 
of uncertainty enters into the contract ; that it ceases to be negoti- 
able in the full sense of the term if not paid at maturity, and that 
"the additional agreement relates rather to the remedy upon the 
note, if a legal remedy be pursued, than to the sum which the 
maker is bound to pay," etc. 2 Daniel on Neg. Ins. (3d Ed.), 
Sec. 62. 

This doctrine has received the indorsement of such eminent 
jurists as Mr. Justice Brewer, now an Associate Justice of the 
United States Supreme Court, who said, in the case of Seaton v. 



74 General Requisites of the Contract 

Scoville, 18 Kan., 781, viz.: "It seems to us, therefore, a just 
conclusion that paper otherwise negotiable is not rendered non- 
negotiable by a stipulation for the payment of costs of collection, 
including attorneys' fees, in case suit is brought thereon." Justice 
Brewer cited with approval the case of Guar v. Louisville Banking 
Co., 11 Bush (Ky.), 180 (S. C, 21 Am. Rep., 709), in which it 
was said, viz. : "The reason for the rule, that the amount to be 
paid must be fixed and certain, is that the paper is to become a 
substitute for money, and this it cannot be unless it can be ascer- 
tained from it exactly how much money it represents. As long, 
therefore, as it remains a substitute for money, the amount which 
it entitles the holder to demand must be fixed and certain ; but 
when it is past due, it ceases to have that peculiar quality denom- 
inated negotiability, or to perform the office of money ; and hence, 
anything which only renders its amount uncertain after it has 
ceased to be a substitute for money, but which in nowise affected 
it until it had performed its office, cannot prevent its becoming 
negotiable paper." 

Upon a careful review of the authorities, we can perceive no 
reason why a note, otherwise endowed with all the attributes of 
negotiability, is rendered non-negotiable by a stipulation which is 
entirely inoperative until after the maturity of the note and its dis- 
honor by the maker. The amount to be paid is certain during the 
currency of the note as a negotiable instrument, and it only be- 
comes uncertain after it ceases to be negotiable by the default of 
the maker in its payment. It is eminently just that the creditor 
who has incurred an expense in the collection of the debt, should 
be reimbursed by the debtor by whose default the action was ren- 
dered necessary and the expense entailed. So far from such a 
stipulation discounting the negotiability of the instrument, we 
think, with Mr. Daniel, that it is an indemnification assured by 
the maker against the consequences of his own act ; that it is con- 
sonant with public policy because it adds to the value of the 
paper ; has a tendency to lower the rate of discount, not only 
because it promises less expensive collection, but bears evidence 
of a greater degree of confidence on the part of the maker in his 
ability to pay without suit. 

We are, therefore, of opinion the decree of the Chancellor 
adjudging said notes non-negotiable was erroneous. We hold, 
however, that these notes being fraudulent in their inception and 
without consideration between the original parties, the bank will 
only be entitled to recover to the extent of the sum actually paid 
by it, to wit, the sum of $1,200 and interest. In other words, we 



First National Bank v. Greenville National Bank 75 

hold there was a negotiation of the notes in due course of trade 
only in extent to the amount actually paid. Petty v. Hannum, 2 
Hum., 102 ; Holeman v. Hobson, 8 Hum., 127 ; May v. Campbell, 
7 Hum., 450; Green v. Stuart, 7 Baxter, 422. 

The reason of this rule is thus stated by Mr. Daniel, viz. : 
"When the execution of a bill or note has been induced by fraud, 
a different rule applies. The bona fide holder of it, for value and 
without notice, is undoubtedly entitled to be protected against a 
loss which would befall him if the party defrauded were permitted 
to set up the defense of fraud on the part of the payee against him. 
But it does not, therefore, follow that he may recover of such 
party the whole amount, when he has paid a less sum. For his 
protection and security against loss, it is only necessary that he 
should be paid back the amount which he was induced to give for 
the instrument by its appearance of validity, and, therefore, such 
amount is the limit of his recovery against the drawer or maker 
who was defrauded into the execution of the instrument. * * * 
The paper derives its validity wholly from the circumstances that 
it has been obtained for value without notice by an innocent pur- 
chaser. For his protection, it is maintained in his hands as a 
legal obligation. The object of the law is to save him from loss, 
and, to do that, a recovery of the amount he may advance is all 
that can be required. To go beyond it would be inequitable and 
unjust to the party after that equally entitled to be protected from 
loss." Daniel on Negotiable Instruments, Vol. I., Sec. 758. 



instrument must be payable in money. § 3 — 2. 

First Nat. Bank v. Greenville Nat. Bank {1892), 84 Tex. 40. 

John Church and Garnet & Muse, for appellant. 
Mathew & Newland and Craig & Wolfe, for appellee. 

Stayton, Chief Justice. This action was brought, by ap- 
pellee to recover on the following instrument : 

"First National Bank, 
"$2180. "Farmersville, Texas, April 21, 1887. 

"Thomas Wilkerson has deposited in this bank twenty-one 
hundred and eighty and 00/100 dollars in cks., payable to the 
order of himself, on the return of this certificate properly indorsed, 
one day after date. 

"L. E. Bumpass, Cashier." 



76 General Requisites of the Contract 

This instrument was executed by the cashier of the bank, 
appellant. It is admitted that the abbreviation "cks." means 
checks, and that the paper came into the hands of appellee under 
such circumstances as to entitle it to recover if the paper be nego- 
tiable. This is the entire case as it is presented to this court. 

It is claimed that the instrument sued on is a negotiable cer- 
tificate of deposit ; and if this is true, we are of opinion that plain- 
tiff was entitled to recover ; for, notwithstanding some conflict of 
authority, it seems to us that in accordance with the great weight 
of authority, as well as reason, such paper when negotiable in 
form should be considered negotiable in fact and law. 

A certificate of deposit is ordinarily defined to be a written 
acknowledgment by a bank or banker of the receipt of a sum of 
money on deposit, which the bank or banker promises to pay to 
the depositor, to the order of the depositor, or to some other per- 
son or to his order, and its form must determine its negotiability. 
For the purposes of this case this definition is sufficiently accurate 
and comprehensive, and the first question is, whether the instru- 
ment sued on can be deemed, within the meaning of the law, or 
the understanding of mercantile men, a certificate of deposit. To 
give to an instrument the character of a "'certificate of deposit," 
the deposit on which it is based must be one of money; and where 
this appears to be the case, from the face of the paper, the word 
"payable" becomes certain as to the mode or medium in which 
payment must be made ; for the law implies, under such a state 
of facts, a promise to pay money for money deposited, and to pay 
a sum equal to the deposit. 

The instrument before us has the usual form of a certificate 
of deposit in all respects, except that it shows upon its face that 
checks, and not money, were deposited. When money is depos- 
ited with a bank, not merely for safe keeping, it becomes the 
property of the bank, and the relation of creditor and debtor arises 
between them ; but when the deposit is of something else than 
money, this relation can not arise from the mere fact of deposit 
as on an implied contract. The paper itself informs us that the 
things deposited were checks ; but we are not advised by it whether 
the sum named in the paper is the sum called for on the face of 
the checks or their estimated value, but were this otherwise, that 
would be unimportant in determining the true character of the 
instrument. 

If the word "checks" were used in the sense attributed to it 
by mercantile men and law writers — "an order upon a bank or 
banking house purporting to be drawn upon a deposit of funds 



First National Bank v. Greenville National Bank 77 

for the payment at all events of a certain sum of money to a 
person named therein, to his order or bearer, and payable instantly 
on demand" — the inference would perhaps be, that the checks 
deposited were checks on some bank other than that issuing the 
paper sued upon, and for the purpose of safe keeping or collection ; 
but in neither event would the relation of debtor and creditor 
arise from such a deposit. But for the determination of this case 
we can not indulge in inferences or presumptions other than such 
as arise as matter of law. 

It has frequently . been said that certificates of deposit have 
most of the characteristics of promissory notes, and this seems 
to be true ; but a paper to be entitled to the force and effect which 
paper of these classes have, whether negotiable or non-negotiable, 
must contain a promise "in writing by one person to pay another 
person therein named, or to his order, or to bearer, a specified 
sum of money absolutely and at all events." Dan. on Neg. Inst., 
28. A paper not having these characteristics can not be a certifi- 
cate of deposit or promissory note. The promise to pay must be 
either an express promise or such a promise as must necessarily 
be implied from words used in the instrument ; but this implication 
wil-1 not arise simply from the fact that the paper may evidence 
the indebtedness of its maker to the person to whom it is given. 

In certificates of deposit there is sometimes an express prom- 
ise to pay, but the promise is most frequently implied from the 
word "payable" used in connection with the acknowledgment of 
the deposit or receipt of a named sum of money by or for the 
benefit of the persqn to whom or to whose order the payment is 
to be made. The acknowledgment by a banker of the deposit 
of money by another, nothing further showing that it was a 
special deposit, is sufficient to show the relation of debtor and 
creditor between the banker and depositor or person for whose 
benefit the deposit is made, and the word "payable" used in such 
a connection must be understood to be used with reference to that 
relation, and can mean nothing less than that the maker of the 
paper intends thereby to be understood to promise to pay the sum 
acknowledged to have been received. The word "payable" in 
such a connection can have no other application. 

If the acknowledgment of the receipt of the money showed 
that the deposit was made only for safe keeping— as a special 

deposit then the word "payable" used in connection with such 

acknowledgment would certainly not be construed into an abso- 
lute promise to pay money, but would be deemed only an agree- 



78 General Requisites of the Contract 

ment to deliver the special deposit, and the paper could not be 
held to be either a certificate of deposit or promissory note. 

The instrument sued on shows clearly that the paper styled 
"checks" was deposited, and does not show that money was ; and 
it is unimportant whether the sum named in the instrument be 
the face value of the checks or their estimated value, for the word 
"payable," used in connection with the acknowledgment of the 
deposit of something else than money, can not be held necessarily 
to be the equivalent of any express promise to pay any sum of 
money. It becomes a promise to pay only when used in connection 
with words showing an obligation to pay. 

Literally, the words "payable to the order of himself on the 
return of this certificate properly indorsed" are descriptive of the 
checks received, but the words could never be so considered when ; 
they have application to a sum of money deposited generally, and 
to which they relate. We do not think, however, that these words 
were used as descriptive of the checks deposited ; for the original 
certificate, made part of the transcript, shows that it was written 
on a blank form intended for certificates of deposit, and we refer 
to this matter only to show that the word "payable," when used in 
such papers, does not always import a promise to pay. The word 
"payable" is a descriptive word, meaning "capable of being paid ; 
suitable to be paid ; admitting or demanding payment ; justly due ; 
legally enforceable" (Webster) ; and "to pay" means to discharge 
one's obligation to another. If the obligation be to deliver specific 
articles or a package of money left on deposit, although the obli- 
gation arises from an express promise, this would not, although 
reduced to writing, constitute a promissory note, ; nor would a 
like promise, coupled with an acknowledgment of the deposit of 
such things, constitute a certificate of deposit ; but if the obligation 
be to pay a certain sum of money absolutely, the maker of the 
instrument so obligated to pay ought to be held to have promised 
to pay when he executes such an instrument as that before us 
would be if the words "in cks." were not in it. 

If a promise to pay something could be implied from the 
instrument, could a promise to pay a certain sum of money be 
implied? If money had been delivered to the bank by Wilkerson, 
in the absence of something showing that the parties did not so 
intend, the money would have become the property of the bank, 
and the relation of debtor and creditor would have arisen, and the 
amount of the debt and credit would thus have been fixed ; but 
the instrument shows that checks, and not money, were deposited. 
Whether mercantile paper passes to a bank on deposit depends 



First National Bank v. Greenville National Bank 79 

upon the intent of the parties evidenced by their acts; but there 
is nothing in the record before us, except the instrument sued on, 
from which the intent of the parties may be ascertained. 

If we assume that the checks became the property of the 
bank, which is the most favorable presumption for appellee, then 
may or must we imply a promise, if a promise could be implied, 
to pay the sum named in the paper sued on. Unless we are 
required by the instrument itself to assume this, no person dealing 
with the depositor could safely make such assumption. From the 
words, "Thomas Wilkerson has deposited in this bank twenty-one 
hundred and eighty and 00/100 dollars in checks," even if it be 
conceded that title to the paper passed to the bank, we can not 
assume that the bank became obligated to pay him that sum in 
money, as must we, did the certificate show that he had deposited 
that amount of money. The instrument does show that the bank 
assumed some obligation to Wilkerson; and if it could be held 
that from it a promise to pay some sum in money might be 
implied, this would not be sufficient to sustain plaintiff's case ; 
for he must, in order to maintain this action, show not merely that 
the bank promised to pay something, but that it promised abso- 
lutely to pay a certain sum of money to Wilkerson or to his order, 
That is not shown ; hence the instrument is not one which could 
be made negotiable by any form of words. 

In determining whether paper is negotiable, it alone can be 
looked to; for it is to that alone which persons dealing with it 
must and have the right to look ; and were it shown by extrinsic 
evidence that the bank bought from Wilkerson checks on another 
bank for which it agreed to pay him the sum of $2,180, and that 
it executed the instrument sued on as the evidence of that debt, 
still we would be compelled to deny to the instrument the char- 
acter of a certificate of deposit as well as negotiability. 

It may seem that a bank that would put out such paper ought 
to pay it, on the ground that the form it gave to it may have 
misled a purchaser; but such considerations can have no weight 
in determining the liability of parties, for all persons are pre- 
sumed to know what is negotiable paper and what not ; and there 
are no rules affecting the business of a country which it is more 
necessary to rigidly enforce than those which relate to mercantile 
paper. The paper was not negotiable, and the judgment of the 
court below will be reversed and judgment will be here rendered 
for appellant. 

It is so ordered. 

Reversed and rendered. 



80 General Requisites of the Contract 

must be payable on demand or at a fixed or determinable 

future time. § 3 3- 

Glidden v. Henry (1885), 104 Ind. 278, 54 Am. Rep. 316. 

From the Henry Circuit Court. 

/. H. Mellett and E. H. Bundy, for appellant. 
/. M. Morris, for appellee. 

Zollars, J. For value and before maturity, appellee became 
the owner of two promissory notes, executed by appellant, one 
of which is as follows: 

"$750. Newcastle, Ind., April 14, 1883. 

"Twelve months after date we, or either of us, promise to 
pay to the order .of George W. Nugen, Jr., seven hundred and 
fifty dollars, with interest at the rate of seven per cent per annum 
after date until paid, and attorney fees, value received, without 
any relief whatever from valuation or appraisement laws, with 
eight per cent interest from maturity. The drawers and endorsers 
severally waive presentment for payment, protest, and notice of 
protest, and non-payment of this note ; and further expressly 
agree that the payee, or his assigns, may extend the time of pay- 
ment thereof from time to time indefinitely, as he or they may 
see fit, and receive interest in advance, or otherwise, from the 
maker or endorsers, for any extension or forbearance so made. 
Negotiable and payable at the Citizens' State Bank of Newcastle. 

"J. W. Glidden." 

So far as is material here, the other note is the same. Appel- 
lee brought this action to recover the amount of the notes, and to 
foreclose the mortgage given by appellant to secure them. 

The questions for decision are presented by the ruling of the 
court below in sustaining a demurrer to appellant's answers, and 
the assignment here that that ruling was erroneous. 

If the notes are negotiable as inland bills of exchange, the 
demurrer was properly sustained, because the defences set up 
in the answers are such as can not be made as against the bona 
fide holder of such paper. We are, therefore, met at the threshold 
with the question, are these notes negotiable as inland bills of 
exchange? In section 5506, R. S. 1881, it is provided that "Notes 
payable to order or bearer in a bank in this State shall be nego- 
tiable as inland bills of exchange, and the payees and endorsees 
thereof may recover, as in case of such bills." 



Glidden v. Henry 81 

This statute does not provide what shall constitute a promis- 
sory note. The term "note" is used, as it was then and still is 
defined by the authorities, and well understood under the law 
merchant in the commercial world. Melton v. Gibson, 97 Ind. 
158. 

The sole purpose of the section was to put a limitation upon 
section 5503, and provide for commercial paper that might circu- 
late free from defences in favor of the maker. This is accom- 
plished by the provision, that if the note be payable at a bank in 
this State, it shall be negotiable as inland bills of exchange. 

The note, then, with the addition prescribed by the statute, 
must be such as would have been negotiable under the law mer- 
chant without any statutory provision. Are the notes in suit 
such as would have been thus negotiable? A standard author 
has said: "To learn what qualities are essential to a negotiable 
promissory note, we must bear in mind the purpose of the note, 
and of the law in relation to it. This is simply that the note may 
represent money, and do all the work of money in business tran- 
sactions. For this purpose, the first requisite, that, indeed, which 
includes all the rest, is certainty. This means certainty, * * * 
Second, as to the person or persons who are to make this pay- 
ment, and the order and conditions of their liability. * * * 
Fourth, as to the time when payment is to be made. * * * 
It will be seen that the law endeavors to enforce, define, and pro- 
tect all these certainties as far as possible." 1 Parsons Notes 
and Bills, p. 30. See, also, 1 Daniel Neg. Inst., section 41. This 
same general doctrine of the books is recognized by this and all 
other courts. Walker v. Woollen, 54 Ind. 164 (23 Am. R. 639). 
In this case it was said : "A note, in order that it be negotiable 
in accordance with the law merchant, must be payable uncon- 
ditionally and at all events, and at some fixed period of time, 
or upon some event which must inevitably happen." 

Were it necessary, we might cite numerous decisions by this 
court asserting the general doctrine of certainty as necessary to 
a promissory note under the law merchant. The difficulty is not 
as to the general doctrine, but the application of it to each case 
as it arises. 

In the case before us, all parts of the note must be looked to 
in determining the quality of the paper. There is a promise to 
pay in twelve months, but that promise is not certain and uncon- 
ditional. The other clause is, that the time of payment may be 
extended indefinitely, as the parties may agree. From an inspec- 
tion of the note, it is impossible to tell when it may mature, 



82 General Requisites of the Contract 

because it is impossible to know what extension may have been, 
or may hereafter be, agreed upon. No definite time is fixed, nor 
is the maturity of the note dependent upon an event that must 
inevitably happen. The condition is not that something may 
happen, or be done, that will mature the note before the time 
named, thus leaving that time as fixed and certain, if the thing 
do not happen, or be not done ; but the condition is that the time 
named may be displaced by another, uncertain and indefinite time, 
as the parties may agree. 

This distinguishes the case from some of the cases cited by 
appellee, which hold that so long as a definite time of payment, 
as fixed in the note, remains fixed and certain, the note retains 
its negotiability, although by certain agreed conditions it may 
be matured before that time. The case here is, also, distinguish- 
able from another class of cases which hold that the time of pay- 
ment may be dependent upon an event that must inevitably 
happen, such as the death of the maker, the coming of the seasons, 
etc. The precise question involved here has been passed upon by 
the Supreme Courts of Iowa and Michigan, and in each case it 
was held that the condition destroyed the negotiability of the 
note. Woodbury v. Roberts, 59 Iowa, 348 (44 Am. R. 685) ; 
Smith v. Van Blarcom, 45 Mich. 371. See, also, as in point, Cook 
v. Satterlee, 6 Cow. 108; GHlilan v. Myers, 31 111. 525 ; Costelo v. 
Crowell, 127 Mass. 293 (34 Am. R. 367). 

We conclude from the foregoing that the notes in suit are 
not negotiable under the statute as inland bills of exchange, and 
that, therefore, whatever defences appellant might have set up 
and made available as against Nugen, the payee, he may set up 
and make available as against appellee. * * * 

The judgment is reversed, with costs. 



INSTRUMENT MAY BE PAYABLE ON OR BEFORE A FIXED TIME. § 6 2. 

Maitison v. Marks {1875), 31 Mich. 421, 18 Am. Rep. 197. 

Newton Foster, for plaintiff in error. 
Richards & Barnum, for defendants in error. 

Cooley, J. The view of the circuit judge, that the evidence 
introduced on the part of the defendant tended to show the note 
in suit to have been paid by Almanson M. Mattison, appears to us 
untenable. This person, it appears, had a mortgage which cov- 



Mattison v. Marks 83 

ered the same premises as the mortgage which secured the note 
in suit. His mortgage he had foreclosed, and had become the 
purchaser of the property, but to protect his title it was necessary 
that the prior mortgage should be taken care of. This he could 
only do by purchasing it, or paying it off; but whichever form 
the transaction assumed, he would be entitled to be subrogated 
to the rights of the former holder, and might enforce payment 
from the parties who were responsible therefor. There is no 
ground on which the maker and endorser of the note secured by 
the first mortgage can claim that the taking up of that note by 
a second mortgagee with whom they were in no way in privity, 
can operate to release them from their obligation to pay it. 
Whether the second mortgagee takes a formal assignment or not, 
such a transaction makes him in equity an assignee, and he is 
entitled to resort to all suitable remedies to enforce payment. 
Russell v. Howard, 2 McLean, 489; Downer v. Fox, 20 Vt. 388. 
This view will dispose of the case, unless the defendant is 
correct in the position he takes, that the paper sued upon is not 
a promissory note. If it is not, the suit must fail, because the 
declaration has treated it as such, and is not adapted to the case 
of any other special contract. The objection to this instrument 
is, that it promises to pay a certain sum of money "on or before" 
a day named ; and this, it is said, is not a promise to pay on a day 
certain, and consequently cannot be a promissory note. We are 
referred to Hubbard v. Mosely, 11 Gray, 170, in support of this 
view. That case certainly seems to support the position of 
defendant, and it is to be regretted, perhaps, that the learned 
judge who delivered the opinion did not deem it important to 
present more fully the reasons that led him to his conclusions, 
instead of contenting himself with a simple reference to the gen- 
eral doctrine that a promissory note must be payable at a time 
certain. It seems to us that this note is payable at a time 
certain. It is payable certainly, and at all events, on a day par- 
ticularly named ; and at that time, and not before, payment might 
be enforced against the maker. It is impossible to say that this 
paper makes the payment subject to any contingency, or puts it 
upon any condition. The legal rights of the holder are clear and 
certain ; the note is due at a time fixed, and it is not due before. 
True, the maker may pay sooner if he shall choose, but this 
option, if exercised, would be a payment in advance of the legal 
liability to pay, and nothing more. Notes like this are common 
in commercial transactions, and we are not aware that their nego- 
tiable quality is ever questioned in business dealings. It ought 



84 General Requisites of the Contract 

not to be questioned for the sake of any distinction that does not 
rest upon sound reason, and we can discover no sound reason for 
the distinction here insisted upon. 

The judgment must be reversed, with costs, and a new 
trial ordered. 

Graves, Ch.J., and Campbell, J., concurred. 



MAY BE PAYABLE AFTER THE OCCURRENCE OF A SPECIFIED EVENT 
WHICH IS SURE TO HAPPEN, THOUGH THE TIME OF 

HAPPENING BE UNCERTAIN. § 6 3. 

Kelley v. Hemmingway (1852), 13 III. 604. 

Farnsworth and Ferguson and T. L. Dickey, for appellant. 
Glover & Cook, for appellee. 

Treat, C.J. This was an action brought by Hemmingway 
against Kelley before a justice of the peace, and taken by appeal 
to the Circuit Court. On the trial, in the latter court, the plain- 
tiff offered in evidence an instrument in these words : 

"Castleton, April 27th, 1844. 
"Due Henry D. Kelley fifty-three dollars when he is twenty- 
one years old, with interest. David Kelley." 

On the back of which was this indorsement. 

"Rockton, May 21st, 1849. 
"Signed the within, payable to Moses Hemmingway. 

"Henry Kelley." 

The plaintiff proved that the payee btvame of age in August, 
1849. The defendant objected to the introduction of the instru- 
ment, because it was not negotiable, but the court admitted it" 
in evidence, and rendered judgment for the plaintiff. 

Our statute makes promissory notes assignable by indorse- 
ment in writing, so as absolutely to vest the legal interest in the 
assignee. Was the instrument in question a promissory note? 
To constitute a promissory note, the money must be certainly 
payable, not dependent on any contingency, either as to event, 
or the fund out of which payment is to be made, or the parties 
by or to whom payment is to be made. If the terms of an instru- 
ment leave it uncertain whether the money will ever become 
payable, it cannot be considered as a promissory note. Chitty on 



Kelley v. Hemmingway 85 

Bills, 134. Thus, a promise in writing to pay a sum of money 
when a particular person shall be married, is not a promissory 
note, because it is not certain that he will ever be married. 
Pearson v. Ganet, 4 Mod. 242 ; Beardsley v. Baldwin, 2 Strange, 
1 151. So of a promise to pay when a particular ship shall return 
from sea, for it is not certain- that she will ever return. Palmer 
v. Pratt, 2 Bing. 185; Coolidge v. Ruggles, 15 Mass. 387. In all 
such cases, the promise is to pay on a contingency that may never 
happen. But if the event on which the money is to become pay- 
able must inevitably take place, it is a matter of no importance 
how long the payment may be suspended. A promise to pay a 
sum of money on the death of a particular individual, is a good 
promissory note, for the event on which the payment is made to 
depend will certainly transpire. Colehan v. Cooke, Willes, 393 ; 
S. C. 2 Strange, 1217. 

In this case, the payment was to be made when the payee 
should attain his majority — an event that might or might not 
take place. The contingency might never happen, and therefore 
the money was not certainly and at all events payable. The 
instrument lacked one of the essential ingredients of a promissory 
note, and consequently was not negotiable under the statute. 
The fact that the payee lived till he was twenty-one years of age 
makes no difference. It was not a promissory note when made, 
and it could not become such by matter ex post facto. The plain- 
tiff has not the legal title to the instrument. If it presents a cause 
of action against the maker, the suit must be brought in the 
name of the payee. The case of Goss v. Nelson (1 Burr. 226), is 
clearly distinguishable from the present. There, the note was 
made payable to an infant when he should arrive at age, and the 
day when that was to be was specified. The court held the instru- 
ment to be a good promissory note, but expressly on the ground 
that the money was at' all events payable on the day named, 
whether the payee should live till that time, or die in the interim ; 
and it was distinctly intimated, that the case would be very differ- 
ent had the day not been stated in the note. It was regarded as 
an absolute promise to pay on the day specified, and no effect was 
given to the words that the payee would then become of age. 

The judgment must be reversed. Judgment reversed. 



86 General Requisites of the Contract 



MUST BE PAYABLE TO ORDER OR TO BEARER. § 3 — 4. 

Zander v. New York Security & Trust Co. (ipo2), "j8 N. Y. 
Supp. poo; Affirmed, App. Div. 81 N. Y. Supp. 1151, with- 
out opinion; Affirmed 178 N. Y. 208. 

Action by Caroline Zander against the New York Security 
& Trust Company. Demurrer to complaint overruled. 

Wilson, Barker & Wilson, for plaintiff. 
Homblower, Byrne, Miller & Potter, for defendant. 

Scott, J. It is alleged by the complaint, and admitted by the 
demurrer, that on or about July 11, 1901, the plaintiff deposited 
with the defendant the sum of $500, and received therefor the 
following certificate or receipt: 

"The New York Security and Trust Company, New York, 
July 11, 1 90 1, has received from Caroline Zander the sum of five 
hundred dollars, of current funds, upon which the said company 
agrees to allow interest at the annual rate of three per cent, from 
this date, and on five days' notice will repay, in current funds, 
the like amount, with interest, to the said Caroline Zander or her 
assigns, on return of this certificate, which is assignable only on 
the books of the company." 

Then followed provisions as to the reduction or discontin- 
uance of interest, not material here. 

Plaintiff always remained the owner of the certificate ; has 
never assigned it, or any part thereof, or in any way indorsed or 
transferred it, or any interest therein. Before August 9, 1901, 
she lost or inadvertently destroyed the certificate, and, though 
she has diligently searched, she has been unable to find it, and 
on August 9, 1901, she notified defendant of the loss of the 
certificate. She has duly demanded of defendant the issue of a 
new certificate, or the payment of the amount of the deposit. The 
demurrer is stated to be interposed merely for the purpose of 
enabling the defendant to insist that the plaintiff shall be required 
to give the security specified in section 1917, Code Civ. Proc. 
That section refers to lost negotiable paper, and the question 
which presents itself is, therefore, whether or not the certificate 
of deposit given by defendant is negotiable. Section 20, c. 612, 



Zander v. New York Security & Trust Co. 87 

Laws 1897, known as the "Negotiable Instruments Law," declares 
that an instrument, to be negotiable, "must be payable to order 
or to bearer," and in this respect is merely declaratory of the law 
of negotiable paper as it existed before the passage of the statute. 
The papers which were before the court in the cases principally 
relied upon by defendant conformed to the foregoing definition, 
and in each case the decision turned upon the fact that the lost 
receipts were payable to "order," which circumstance was held to 
render them negotiable instruments, and to require that indemnity 
be given before judgment upon them could be rendered. Frank 
v. Wessels, 64 N. Y. 155 ; Read v. Bank, 136 N. Y. 454, 32 N. E. 
1083, 32 Am. St. Rep. 758. The receipt or certificate in the 
present case is not negotiable. The money represented by it is 
payable, not "to order or bearer," but to the plaintiff "or her 
assigns." It is therefore what is known to the law as a "non- 
negotiable instrument." In an action upon a lost or destroyed 
instrument of this description, it is not necessary that the plaintiff 
should give or tender indemnity. Wright v. Wright, 54 N. Y. 
437; Mills v. Bank, 28 Misc. Rep. 251, 59 N. Y. Supp. 149. The 
distinction between actions on negotiable and non-negotiable 
instruments, and the reason for the different rules respecting the 
necessity for indemnity in such actions, are too obvious, and too 
clearly stated in the authorities cited, to require restatement here. 
The demurrer admits that the plaintiff never parted with or 
assigned the certificate, and that it has been lost or destroyed. 
Even if the plaintiff had not lost or destroyed the certificate, and 
has assigned it, the defendant would assume no risk in paying her 
the amount represented thereby. Section 1909 of the Code of 
Civil Procedure provides that, except in the case of a negotiable 
instrument, the transfer of a claim or demand passes an instru- 
ment which the transferee may enforce by an action or special 
proceeding, or interpose as a defense or counterclaim, in his own 
name, as the transferror might have done, "subject to any defense 
or counterclaim, existing against the transferror, before notice of 
the transfer." Payment to the plaintiff would be a complete 
defense to any claim or action by her upon the certificate of 
deposit, and equally be a defense of any action or claim by a trans- 
feree from her, if made before notice of the transfer ; and it does 
not appear, and is not suggested, that defendant has received any 
notice of a transfer by her. The demurrer must be overruled, 
with costs and an extra allowance of $25, with leave to the 
defendant to withdraw the demurrer and answer within 20 days 
upon payment of costs. 



88 General Requisites of the Contract 

Demurrer overruled, with costs and extra allowance, with 
leave to withdraw demurrer and answer within twenty days upon 
payment of costs. 



Westberg v. Chicago Lumber & Coal Co. (1903), 117 Wis. 589. 
(See page 460). 



DRAWEE MUST BE NAMED OR OTHERWISE INDICATED. § 3 — 5. 

Watrous v. Halbrook (1873), 39 Tex. 573. 

Appeal from Travis. 

The facts sufficiently appear in the opinion of the court. 

Hancock & West, for appellant. 
Moore & Shelley, for appellee. 

Ogden, P.J. This suit was brought by the heirs of John 
S. Storrs against the estate of D. E. Watrous, on the following 
instrument of writing, viz. : 

"$2,771.62. Montevallo, June 1, 1858. 

"Ten months after date pay to the order of John S. Storrs 
two thousand seven hundred and seventy-one and 62-100 dollars, 
value received, and charge to the account of 

"D. E. Watrous. 

"To , Mobile, Ala." 

The petition charged that for a valuable consideration from 
John S. Storrs to him thereunto moving, said Daniel E. Watrous 
executed and delivered to said Storrs the instrument of writing 
above set out, and that thereby said Watrous undertook, and 
bound himself, and became liable to pay said sum therein 
specified. 

To this petition the defendants filed a general and special 
demurrer, which were both overruled by the court, and judgment 
was rendered for the plaintiffs, and the defendants took their bills 
of exception to the ruling of the court, and brought the case 
here by appeal. 

The only question now presented for decision is, does this 
instrument, independent of any allegations of ownership for a 



Watrous v. Halbrook 89 

valuable consideration, or promise to pay, give the holder any 
cause of action. 

This instrument is not a promissory note in its ordinary 
form, nor can it be treated as such, since there is no promise 
to pay in any event. The instrument is directed to no one, and 
therefore cannot be considered a draft or bill of exchange. Had 
it been accepted by any one, that acceptance would have consti- 
tuted a promise to pay in the acceptor, and then the maker might 
have become liable as surety or guarantor; but as there is no 
drawee or acceptor, the maker cannot, without allegations and 
proof of other facts setting forth and establishing his liability, 
be held responsible. The instrument, with the exception of the 
want of a drawee, is in the ordinary form of an accommodation 
bill or draft, on which the maker cannot be held liable until after 
an acceptance or non-acceptance. We think the instrument, as 
it is, is an imperfect bill or draft, for the payment of which no 
one is liable. With proper averments, showing the objects and 
purpose of the parties, and that the maker intended to bind him- 
self in the first instance to pay the same, he might possibly be 
held responsible without a drawee or acceptor, but not otherwise. 

We can see no material difference between the writing here 
sued on and the one in Ball v. Allen, 15 Mass. 433, in which the 
court says : "But the mere possession of a paper drawn in the 
form of an order, there being no drawee in existence, we think 
cannot entitle the possessor to an action in any form." 

The same doctrine may be drawn from Petro v. Reynolds, 
9 Exch. 414, and in Davis v. Clark, 47 Eng. C. L. 177. From 
these authorities, and the reason of law governing instruments 
of this or the like character, we are clearly of the opinion that 
the petition in this case did not set out a good cause of action, 
and that the court erred in overruling defendants' special demur- 
rer to the same. We think the demurrer should have been sus- 
tained and the plaintiffs permitted to amend their pleadings, that, 
if desired, they might, by proper averments and proof, establish 
the liability of the maker or drawer in the first instance, without 
an acceptance or non-acceptance. 

The judgment of the district court is reversed and the cause 
remanded. 

Reversed and remanded. 



90 General Requisites of the Contract 



PROVISION GIVING THE HOLDER AN ELECTION TO REQUIRE SOME- 
THING TO BE DONE IN LIEU OF PAYMENT OF THE MONEY. § 7 4. 

Hodges v. Shaler (i860), 22 N. Y. 114. 

Appeal from the Supreme Court. The action was against the 
defendants as indorsers of the following instrument or note : 

"RUTLAND AND BURLINGTON RAILROAD COMPANY. 

"No. 253. $I.OOO. 

"Boston, April 1, 1850. 
"In four years from date, for value received, the Rutland 
and Burlington Railroad Company promises to pay in Boston, to 
Messrs. W. S. and D. W. Shuler, or order, $1,000, with interest 
thereon, payable semi-annually, as per interest warrants hereto 
attached, as the same shall become due ; or upon the surrender 
of this note, together with the interest warrants not due to the 
treasurer, at any time until six months of its maturity, he shall 
issue to the holder thereof ten shares in the capital stock in said 
company in exchange therefor, in which case interest shall be 
paid to the date to which a dividend of profits shall have been 
previously declared, the holder not being entitled to both interest 
and accruing profits during the same period. 

"T. Follett, President. Sam. Henshaw, Treasurer." 

At the time the suit was brought there was an unpaid interest 
warrant attached, and which was attached at the time of indorse- 
ment. 

The answer of the defendants put in issue none of the alle- 
gations in the complaint except those in respect to presentment, 
notice and protest. 

It was admitted on the trial that on the 4th of April, 1854, 
a notary public in Boston, at the request of the Bank of Com- 
merce of that city (to which bank the plaintiff had sent for col- 
lection the note mentioned in the complaint in this action), did 
present the note at the office, in Boston, of the treasurer of the 
Rutland and Burlington Railroad Company, the place of business 
in Boston of said company, and there demanded payment of the 
same of the treasurer, which was refused ; and thereupon notified 
the defendants thereof by depositing, on the same day, in the 
postoffice in Boston, a written notice, of which the following is a 
copy: 



Hodges v. Shuler 91 

"City of Boston, April 4, 1854. 

To Messrs. W. S. and D. W. Shuler: 

"Please take notice that a promissory note made by S. Hen- 
shaw, treasurer, for $1,000, dated April 1st, 1850, payable in four 
years, in favor of yourselves, and indorsed by you, has been pre- 
sented by me to the office of the treisurer, and payment being 
duly demanded was refused, whereupon, by direction of the 
holder, the same has been protested, and payment thereof is 
requested of you. 

"Adolphtjs Bates, Notary Public." 

This notice was inclosed, and directed to the defendants at 
Amsterdam, N. Y., their place of residence, and the post office 
at which they received their letters; and the notice was received 
by them in due course of mail, and the post mark thereon was 
"Boston, April 5." 

It was further admitted that for some time immediately pre- 
ceding the date of the note, the defendants were engaged as con- 
tractors in building the road of the said railroad company, and 
on or about the date of said note received from the company, in 
satisfaction of their contract and work, the said note together 
with four other notes, each of the same date and amount, and in 
every respect corresponding with said note, except that the num- 
bers of all the said notes marked thereon, were different each 
from the other; that the transfer by said defendants of the note 
mentioned in said complaint was in the city of Boston, and State 
of Massachusetts, and that each of said notes was transferred 
by said defendants shortly after the date of the said notes, in the 
same manner as the note set forth in the complaint ; and that Sam. 
Henshaw (whose name is signed as treasurer to the note men- 
tioned in said complaint) never signed as treasurer or otherwise, 
any note in which the said defendants were named as payees, 
except the notes above mentioned. 

The court decided that the plaintiff was entitled to recover 
against the defendants, and gave judgment accordingly. The 
defendants excepted to the decision as follows : 

1st. The court erred in deciding that the defendants . were 
liable upon the instrument set forth in the complaint by their 
indorsement. 

2d. The court erred in deciding that the notice of demand 
and refusal to pay, served upon the defendants, was sufficient to 
charge the defendants as indorsers. 



92 General Requisites of the Contract 

3d. The court erred in deciding that the plaintiff was 
entitled to recover in the action. 

The Supreme Court affirmed the judgment, and the defend- 
ants appealed to this court. 

John K. Porter, for the appellant. 
John B. Gale, for the respondent. 

Wright, J. The single question is, whether the defendants 
can be held as indorsers. It is insisted that they cannot, for the 
reasons, 1st. That the instrument set out in the complaint, is 
neither in terms nor legal effect a negotiable promissory note, but 
a mere agreement ; the indorsement in blank of the defendants, 
operating, if at all, only as a mere transfer, and not as an engage- 
ment to fulfill the contract of the railroad company in case of its 
default; and 2d. That if it be a note, the notice of its dishonor 
was insufficient to charge the defendants as indorsers. 

Whether the blank indorsement of the defendants imports 
any binding contract, depends on the law of Massachusetts ; in 
which state it is to be assumed, from the facts in the case, that 
the original instrument and indorsement were made. But the 
law of Massachusetts does not differ from that of this state or 
of England in any particular material to the present inquiry. In 
Massachusetts there has been apparently a relaxation of the com- 
mon law rule so far as to extend the remedy against indorsers to 
notes payable absolutely in a medium other than cash ; but in all 
other respects the legal rules applicable to negotiable paper, are 
the same in that state as in our own. 

The instrument on which the action was brought has all the 
essential qualities of a negotiable promissory note. It is for the 
unconditional payment of a certain sum of money, at a specified 
time, to the payee's order. It is not an agreement in the alter- 
native, to pay in money or railroad stock. It was not optional 
with the makers to pay in money or stock and thus fulfill their 
promise in either of two specified ways ; in such case, the promise 
would have been in the alternative. The possibility seems to 
have been contemplated that the owner of the note might, before 
its maturity, surrender it in exchange for stock, thus canceling it 
and its money promise ; but that promise was nevertheless abso- 
lute and unconditional, and was as lasting as the note itself. In 
no event could the holder require money and stock. It was only 
upon a surrender of the note that he was to receive stock ; and 
the money payment did not mature until six months after the 



Hodges v. Shuler 93 

holder's right to exchange the note for stock had expired. We 
are of the opinion that the instrument wants none of the essential 
requisites of a negotiable promissory note. It was an absolute 
and unconditional engagement to pay money on a day fixed : and 
although an election was given to the promisees, upon a surrender 
of the instrument six months before its maturity, to exchange it 
for stock, this did not alter its character, or make the promise in 
the alternative, in the sense in which that word is used respecting 
promises to pay. The engagement of the railroad company was 
to pay the sum of $1,000 in four years from date, and its promise 
could only be fulfilled by the payment of the money, at the day 
named. 

We are next to inquire whether the notice was sufficient. A 
notice, that in terms, or by necessary implication or reasonable 
intendment, informs the indorser that the note has become due, 
and has been presented to the maker, and payment refused, is 
sufficient. The party to whom the notice is addressed should not 
be misled by an indefinite or uncertain description of the note 
and, from the imperfection of the notice itself, be unable to deter- 
mine to what particular note it refers. A notice which omits an 
essential feature of the note, or misdescribes it, is an imperfect 
one, but is not necessarily invalid. It is invalid only when it fails 
to give that information which it would have given but for its 
particular imperfection ; and even in case the notice in itself be 
defective, if, from evidence aliunde of the attendant circum- 
stances, it is apparent that the indorser was not deceived or mis- 
led as to the identity of the dishonored note, he will be charged. 
A note is well described when its maker, payee, date, amount, and 
time and place of payment, are stated ; and when a notice sets 
forth these particulars, with reasonable accuracy, together with 
the facts of presentment and dishonor, it cannot be rendered 
invalid by showing aliunde that notes similar as to parties, date, 
amount, and time, and place of payment were outstanding, and 
were only distinguishable from each other by their numbering. 
This notice, which was dated at Boston, informed the indors- 
ee that a promissory note made by S. Henshaw, treasurer, for 
$ 1,000, dated April 1st, 1850, payable in four years, in favor of 
themselves, and indorsed by them, had been presented on the 4th 
of April, 1854, at the office of the treasurer, and payment being 
duly demanded, was refused. The notice contained no allusion 
to the number of the note, and described it as made by "S. Hen- 
shaw, Treasurer." The date, amount, payees, indorsees and time, 
and, inferentially, the place of payment, were accurately described. 



94 General Requisites of the Contract 

But it is urged that there was a failure to charge the defendants 
as indorsers, for the reason that there was a misdescription as to 
the maker, and the notice contained no reference to the number 
by which the note was designated and distinguished from four 
others of a similar description, given and transferred by the 
defendants simultaneously. I think both of the reasons are with- 
out force, and that the notice, construed in the light of its attend- 
ing and surrounding circumstances, was sufficient. At least, 
from the contents of the notice itself, and the extrinsic facts 
admitted in the case, it was a question not of law, but of fact, 
whether knowledge was actually brought home to the indorsers 
of the dishonor of the note in suit; and that question of fact 
has been found against the defendants in the court below. Exam- 
ine, for a moment, the objections to the notice, separately. It 
describes the note to have been made by "S. Henshaw, treasurer.'' 
This was a misdescription, as it was, in fact, made by the rail- 
road company, Henshaw acting as its agent, and signing the 
instrument in his capacity as treasurer. But did this misdescrip- 
tion deceive or mislead the defendants as to the identity of the 
dishonored paper? It is very apparent that it did not. Henshaw 
never signed, as treasurer or otherwise, any note in which the 
defendants were named as payees, except the five notes given 
to the defendants on the ist April, 1850, for $1,000 each, payable 
in four years from date, for labor performed as contractors in 
constructing the road of the company. It is admitted that these 
five notes were given in satisfaction of their contract with the 
railroad company. They knew its financial officer, the treasurer, 
and that the five notes dated April ist, 1850, became due and 
payable in Boston on the 4th April, 1854; and they are to be 
presumed not to have indorsed any like notes of the company, 
or have had any indorsement outstanding on any note, except 
the five, which resembled them in any one important feature. 
Upon the receipt, therefore, by due course of mail, of the notice 
dated and mailed at Boston on the 4th April, 1854, and 
describing the note accurately as to date, amount, payees, and 
time and place of payment, and giving the name of one of its 
signers, whom the defendants knew was the treasurer of the 
railroad company, they were fully informed that such notice 
referred to one of the five notes. At all events, it was a question 
of fact, whether the information had been actually given to them, 
and whether they were reasonably apprised of the particular 
paper upon which they were sought to be charged. 

Secondly, as to the objection founded on an omission in the 



Hodges v. Shuler 95 

notice to designate the number of the note sued on. It seems 
that the note designated in its margin as No. 253, and the notice 
omitted to describe it by the number. But this did not render the 
notice per se fatally defective. The number was not a part of 
the note, and there was a complete description of it without the 
number. It cannot be, that when a notice actually describes every 
essential feature of a dishonored note, such notice may be invali- 
dated, by an indorser showing, aliunde, that there were similar 
notes indorsed by him simultaneously, and distinguishable only 
by their different numbers. All that the holder of a note is bound 
to do is, to give the indorser a complete description of it, and if 
from such description it cannot be identified, it is the fault or 
misfortune of the indorser in having indorsed several notes alike 
in every essential feature. Showing, in this case, that there were 
four other notes given to the defendants by the railroad company, 
on the 1st April, 1850, and shortly afterwards transferred by them 
by indorsement, like the one in suit except that they were differ- 
ently numbered, did not, as matter of law, stamp the notice as a 
defective and insufficient one. Indeed, these extrinsic facts were 
quite immaterial, without showing further that the four notes 
were transferred to persons other than the holder of the note in 
suit, and that they were outstanding in April, 1854. The latter 
facts were not to be presumed, with the view of invalidating the 
notice, or imposing the onus upon the plaintiff to identify, by 
extraneous evidence, the note in suit to the defendants as the one 
referred to in the notice as dishonored. 

I am of the opinion that the action was well brought against 
the defendants as indorsers of a negotiable promissory note, and 
that the notice of its dishonor was sufficient. 

The judgment of the Supreme Court should be affirmed. 

All the judges agreed that the instrument in suit was a prom- 
issory note; Denio and Welles, Js., dissented on the ground 
that the notice of non-payment was insufficient in omitting the 
number upon the margin of the note. 

Judgment affirmed. 



96 General Requisites of the Contract 

presence of seal on instrument. § 8—4. 

See Conine v. The Junction and Breakwater R. R. Co., p. 33. 

Brown v. Jordhal {1884), 32 Minn. 135, §0 Am. Rep. 560. 

Plaintiff brought this action in the district court for Free- 
born County, as holder of the following instrument: 

"Township of Manchester, Feb'y 23, 1881. 
"$120. Six months after date, (or before, if made out of the 
sale of Drake's horse hay fork and hay carrier,) I promise to pay 
James B. Drake or bearer one hundred and twenty dollars. 

"Negotiable and payable at the Freeborn County Bank, 
Albert Lea, Minn., with ten per cent, interest after maturity until 
paid. 

"Ole J. Jordahl. [Seal.] 
"Witness: J. Williamson." [Seal.] 

At the trial before Farmer, J., the plaintiff, having intro- 
duced evidence that he bought the note from Williamson for 
value, before maturity, in good faith and without notice of anv 
defence to it, admitted that the note was obtained from defendant 
by Williamson by fraud, and that as between those parties the 
note was without consideration and fraudulent. The court there- 
upon directed a verdict for defendant; a new trial was denied, 
and the plaintiff appealed. 

Dr. R. P. Hibbs and John Whytock, for appellant. 
Lovely & Morgan, for respondent. 

Gilfillan, C.J. (Dickinson, J., because of illness, took no 
part in the decision.) The defendant executed an instrument in 
the form of a negotiable promissory note, except that after and 
opposite the signature were brackets, and between them the word 
"seal," thus, "[Seal.]" The question in the case is, is this a nego- 
tiable promissory note, so as to be entitled to the peculiar privi- 
leges and immunities accorded to commercial paper? The rule 
that an instrument under seal, though otherwise in the form of a 
promissory note, is not (certainly when executed by a natural 
person, however it may be when executed by a corporation) a 
negotiable note, entitled to such privileges and immunities, is 
universally recognized, and is not disputed in this state. But the 
appellant contends that merely placing upon an instrument a 



Leavitt v. Putnam 97 

scroll or device, such as the statute allows as a substitute for a 
common-law seal, without any recognition of it as a seal in the 
body of the instrument, does not make it a sealed instrument. 
Undoubtedly, where there is a scroll or device upon an instru- 
ment, there must be something upon the instrument to show that 
the scroll or device was intended for and used as a seal. The 
scroll or device does not necessarily, as does a common-law seal, 
establish its own character. Such words in the testimonium 
clause as "witness my hand and seal," or "sealed with my seal," 
would establish that the scroll or device was used as a seal. No 
such reference in the body of the instrument was necessary in 
the case of a common-law seal. Goddard's Case, 2 Coke Rep. 5a; 
7 Baa Abr. (Bouvier's Ed.) 244. Nor is there any reason to 
require it in the case of the statutory substitute, if the instrument 
anywhere shows clearly that the device was used as and intended 
for a seal. It would be difficult to conceive how the party could 
express that the device was intended for a seal more clearly than 
by the word "seal," placed within and made a part of it. This 
was an instrument under seal. 

Order affirmed. 



INDORSEMENT AFTER DISHONOR MAKES INSTRUMENT PAYABLE ON 
DEMAND AS TO SUCH INDORSER. § 9 2. 

Leavitt v. Putnam {1850), 3 N. Y. 494, 53 Am. Dec. 322. 

Appeal from the superior court of the city of New York, 
where the action was against Putnam and others, as the indorsers 
of a promissory note. The plaintiff was nonsuited on the trial, 
and after judgment he appealed to this court. 

J. W. Gerard, for appellant. 
5 1 . Sherwood, for respondent. 

Hurlbut, J. On the 29th day of August, 1844, Messrs. J. 
W. & R. Leavitt made their note for $1570.52, payable to the 
order of T. Putnam & Co. (the defendants) eight' months after 
date. A few days after the maturity of the note, the defendants 
indorsed it as follows: "Pay the within to A. Thacher, value 
received, May 21, 1845. T. Putnam & Co." Thacher indorsed 
without recourse, and delivered the note for a valuable considera- 
tion to the American Exchange Bank, in whose behalf this action 
is brought. 



98 General Requisites of the Contract 

On the trial the defendants urged, among other grounds of 
objection to the plaintiff's recovery, that the defendants' indorse- 
ment was in effect a new draft payable to Thacher only, and not 
negotiable, so that no action could be maintained upon it in the 
name of the plaintiff. In this they were sustained by the court, 
and the plaintiff was nonsuited. 

The other objections taken by the defendants on their motion 
for a nonsuit were not considered by the court below, and under 
the circumstances of the case can not be noticed on this appeal ; 
so that the only thing for us to consider is, whether the indorse- 
ment of a note made after due, differs from one made before 
maturity in respect to its negotiability? It was conceded on the 
argument that no express authority could be found sustaining the 
distinction upon which the decision of the superior court was 
based, but it was urged that the defence could be sustained upon 
the principle that a dishonored note loses its mercantile character, 
and its indorsement becomes an original contract which must be 
made expressly negotiable in terms, or it could not be held to 
possess the character of negotiability. There is unquestionably a 
difference between the indorsement of a note after due and one 
while it is running to maturity, but this relates only to a single 
point arising from the necessity of the case, to wit, the time of 
payment, which, in the latter indorsement, is fixed at a future day 
by the express agreement of the parties, while in the former, it is 
declared by law to be within a reasonable time, upon demand. 
But in all other respects the contract is the same as an indorse- 
ment in the usual course of trade ; and it is difficult to perceive 
how the single difference referred to can at all affect the negotia- 
bility of the indorsement. A bill or note does not lose its nego- 
tiable character by being dishonored. If originally negotiable it 
may still pass from hand to hand ad infinitum until paid by the 
drawer. Moreover the indorser after maturity writes in the same 
form and is bound only upon the same condition of demand upon 
the drawer and notice of non-payment as any other indorser. 
Thus the paper preserves its mercantile existence and retains the 
main attributes of a proper bill or note, and circulates as such 
in the commercial community. Exceptions to a general rule affect- 
ing so important and numerous a class of transactions as the one 
under consideration must be productive of great inconvenience, 
and will not be indulged except for urgent reasons ; and nothing 
has been made to appear in the argument or seems to exist in the 
case, which warrants the court in treating the ordinary indorse- 
ment of a dishonored bill or note as without the law merchant and 



Gordon v. Lansing State Bank 99 

not negotiable. While it was questioned whether such a note was 
negotiable, and whether the indorser was chargeable except upon 
the usual condition of demand and notice, there was perhaps rea- 
son enough to sustain the decision of the court below. But since 
both the note and its indorsement, by a long course of decisions, 
have been treated as within the law merchant in respect to their 
main attributes, the indorsement ought to be regarded as negoti- 
able to the same extent as an indorsement before maturity. The 
latter follows the nature of the original bill and is equally nego- 
tiable. (Edie v. The East India Co. 2 Burr. 1216; Milford v. 
Wolcott, 1 Ld. Raym. 574; Allwood v. Haselton, 2 Baylies' S. C. 
R. 457 ; Bishop v. Dexter, 2 Conn. R. 419 ; Berry v. Robinson, 9 
John. 121.) 

The note in the present case was upon its face transferable, 
and its character in respect to negotiability could only have been 
changed by an indorsement containing express words of restric- 
tion. The defendants' indorsement was a full one, containing the 
name of the person in whose favor it was made, but omitting the 
words "or order," the legal effect of which was, nevertheless, to 
make the note payable to him or his order, and his endorsement 
therefore was effectual to transfer the note to the plaintiff. ( Chitty 
on Bills, 136; Story on Prom. Notes, § 139.) 

I am of opinion that the judgment of the superior court 
should be reversed, and a new trial awarded. 

Judgment reversed. 



PAYEE MUST BE INDICATED WITH REASONABLE CERTAINTY. 

§IO-6. 

Gordon v. Lansing State Bank (1903), 133 Mich. 143. 

Error to Ingham; Wiest, J. Submitted December 2, 1902. 
(Docket No. 125.) Decided May 12, 1903. 

Assumpsit by John R. Gordon against the Lansing State Sav- 
ings Bank to recover the balance of a deposit. From a judgment 
for plaintiff, defendant brings error. Affirmed. 

Charles F. Hammond, for appellant. 
Russell C. Ostrander, for appellee. 

Moore, J. This case was tried by the circuit judge without' 
a jury. At the request of the defendant, he made a finding of 
facts, which is as follows: 



100 General Requisites of the Contract 

"Monday morning, December 9, 1901, at about 9 o'clock, 
there was presented at the bank of defendant at the City of Lan- 
sing for payment the following check, made upon the printed 
form of check supplied by defendant to its patrons, and signed by 
plaintiff, viz. : 

" 'Lansing, Mich., . . . ., 190. . No 

" 'Lansing State Savings Bank of Lansing. 

" 'Pay to the order of 

Nine Hundred and Seventy Dollars. $970.00. 

"John R. Gordon." 

"The check was indorsed by Charles P. Downey, and was 
presented by an employe of Mr. Downey, and cash was paid at 
the time of its presentation. 

"The plaintiff had been a depositor at defendant's bank at 
periods for three or four years, and at the opening of the bank on 
the morning of December 9, 1901, his balance or credit upon the 
books of the bank was $3.40, but during the day $2,997.50 was 
added to plaintiff's credit. The day defendant cashed the check 
plaintiff was at the bank, and was informed that the check for 
$970 had been cashed by payment to Mr. Downey, and he then 
notified defendant he would not accept that check as a voucher 
for the money paid. 

"December 14, 1901, plaintiff prepared and presented to 
defendant his check, payable to himself, for $970, being the 
amount he claimed to then have on deposit in the bank. Payment 
on this check was refused by defendant upon the ground that 
plaintiff had no funds in the bank." 

The Circuit Judge rendered a judgment in favor of the plain- 
tiff for $970 and interest. The case is brought here by writ of 
error. 

Two questions are discussed by counsel : First, the effect of 
not dating the check ; second, has the check a payee ? We do not 
deem it necessary to discuss the first question. As to the second 
question, it will be noticed the drawer of the check did not name 
a payee therein, nor did he leave a blank space where the name of 
a payee might be inserted, nor did he name an impersonal payee. 
In the case of Mcintosh v. Lytle, 26 Minn. 336 (3 N. W. 983), 
the court used the following language : 

"A check must name or indicate a payee. Checks drawn pay- 
able to an impersonal payee, as to 'Bills Payable' or order, or to a 
number or order, are held to be payable to bearer, on the ground 
that the use of the words 'or order' indicates an intention that the 
paper shall be negotiable, and the mention of an impersonal payee r 



Gordon v. Lansing State Bank 101 

rendering an indorsement by the payee impossible, indicates an 
intention that it shall be negotiable without indorsement, — that is, 
that it shall be payable to bearer. So, when a bill, note, or check 
is made payable to a blank or order, and actually delivered to take 
effect as commercial paper, the person to whom delivered may 
insert his name in the blank space as payee, and a bona fide holder 
may then recover on it. 

"These cases differ essentially from the one at bar. In the 
latter case the person to whom delivered is presumed, in favor of 
a bona fide holder, to have had authority to insert a name as payee. 
In the former cases the instrument is, when it passes from the 
hands of the maker, complete, in just the form the parties intend. 
But in this case there is neither a blank space for the name of the 
payee, indicating authority to insert the payee's name, nor is the 
instrument made payable to an impersonal payee, indicating a fully 
completed instrument. It is claimed that the words 'on sight' 
are such impersonal payee. They were inserted, however, for 
another purpose, — to fix the time of payment, — and not to indi- 
cate the payee. It is clearly the case of an inadvertent failure 
to complete the instrument intended by the parties. The drawer 
undoubtedly meant to draw a check, but, having left out the 
payee's name, without inserting in lieu thereof words indicating 
the bearer as payee, it is as fatally defective as it would be if the 
drawee's name were omitted." 

See, also, Rush v. Haggard, 68 Tex. 674 (5 S. W. 683) ; 
Prewitt v. Chapman, 6 Ala. 86; Brown v. Gilman, 13 Mass. 160; 
Rich v. Starbuck, 51 Ind. 87; Norton, Bills & N. (3d Ed.) p. 59, 
and notes ; 1 Daniel, Neg. Inst. § 102. 

The case differs from the one at bar in some respects, but the 
important part of the decision is that a payee is necessary to make 
a complete instrument, and, even though the maker of the check 
may have intended to name a payee, if he has not in fact done so 
the check is incomplete. In the case at bar the failure to name a 
payee was not an oversight, if we may judge from what Mr. Gor- 
don did, as will appear more in detail later. 

Our attention has been called to Crutchly v. Mann, 5 Taunt. 
529. In this case the bill of exchange was made payable to the 

order of The court found that, under the 

facts shown, the conclusion was irresistible that the name was 
filled in with the consent of the drawer. The same case was pre- 
viously reported in 2 Maule & S. 90 (Crutchley v. Clarance), 
where, as the case then stood, it appeared the bill of exchange had 
been sent out, the defendant leaving a blank for the name of the 



102 General Requisites of the Contract 

payee. One of the judges was of the opinion that the defendant, 
by leaving the blank, undertook to be answerable for it, when filled 
up in the shape of a bill of exchange; another judge was of the 
opinion that it was as though the defendant had made the bill pay- 
able to bearer; while the third judge was of the opinion that the 
issuing of the bill in blank without the name of the payee was an 
authority to a bona fide holder to insert the name. 

In the case of Harding v. State, 54 Ind. 359, a promissory 
note was drawn, leaving a blank space for the name of the payee ; 
and it was held : 

" 'So the name of the payee may be left blank, and this will 
authorize any bona fide holder to insert his own name.' Pars. 
Notes & B. 33." 

In the case of Brummel v. Enders, 18 Grat. 873, promissory 
notes, blank as to the names of the payees, has been put in the 
hands of an agent to be sold for the benefit of the makers. The 
agent sold them, at a greater discount than the legal rate of inter- 
est, to purchasers who did not know they were sold for the benefit 
of the makers. At the time of the sale the names of the pur- 
chasers were inserted, either by the purchasers or by the agent, 
in the blank left for the payee. When the notes were sued, the 
makers pleaded usury. The court, following the cases already 
cited, held that any bona fide holder of a bill or note which is 
blank as to the name of the payee may insert his own name, and 
thus acquire all the rights of the payee. 

It will be observed that the case at bar differs from all of 
these cases. As before stated, not only did Mr. Gordon- fail to 
insert the name of a payee, or to leave a blank where the name of 
the payee might be inserted, but he did more ; he drew a line 
through the blank space, making it impossible for any one else to 
insert therein a name, indicating very clearly that he not only 
declined to name a payee, but intended to make it impossible for 
any one else to do so. Had Mr. Gordon issued a check otherwise 
perfect, but with the blank space for the amount of the check 
unfilled, and delivered it to a third person, it would be presumed 
the third person was given authority to fill the blank space. But 
had he, instead of leaving the space a blank, filled it by drawing a 
line through it, would any one say the third person might then 
insert a sum of money in that space? If not, upon what principle 
may the name of a payee be inserted when the space was filled in 
the same way, or upon what theory may it be presumed there was 
an impersonal payee when the maker has not made the check 
payable to cash, or some other impersonal payee? In order to 



Gordon v. Lansing State Bank 10S 

construe the check as a complete instrument, we must read into it 
an intention not only not expressed by its language, but contrary 
to the act of the maker. The check, as it appears today, is without 
any payee. The record is silent in relation to whom it was deliv- 
ered, or whether the person who presented it at the bank or the 
person whose indorsement it bears was a bona fide holder. 

Judgment is affirmed. 

Hooker, C. J., concurred with Moore, J. 
»■ 

Carpenter, J. I regret that I cannot concur in the opinion 
of my Brother Moore. I agree with him that the check in ques- 
tion is not governed by the authorities which hold that, where a 
blank is left for the insertion of the name of a payee, the instru- 
ment is to be treated as payable to bearer. I cannot agree, how- 
ever, that the case of Mcintosh v. Lytle, 26 Minn. 336 (3 N. W. 
983), is controlling. That case resembles this in many particu- 
lars. There is, however, a difference which, in my judgment, 
renders the reasoning of that case inapplicable. The fact that the 
plaintiff in the case at bar used the ordinary blank, and drew a 
line through the space intended for the name of the payee, pre- 
vents our assuming, as did the court there, — and its decision was 
based on this assumption, — that it is "the case of an inadvertent 
failure to complete the instrument intended by the parties." The 
instrument under consideration is obviously complete, in just the 
form the maker intended. 

In my judgment, the authorities which hold a check payable 
to the order 1 of an impersonal payee to be valid and negotiable 
control this case. I quote from the case of Willets v. Bank, 2 
Duer, at page 129 : 

"One of the checks was payable to the order of 1658, the 
other three to the order of bills payable ; and, as the required order 
could not in either case possibly be given, the checks, unless trans- 
ferable by delivery, were payable to no one, and were void upon 
their face. The law is well settled that a draft payable < to the 
order of a fictitious person, inasmuch as a title cannot be given by 
an indorsement, is, in judgment of law, payable to bearer. Vere 
v. Lewis, 3 Term R. 183 ; Minet v. Gibson, Id. 481 ; Gibson v. 
Minet, 1 H. Black. 569, affirmed in the House of Lords. And it 
seems to us quite manifest that in principle these decisions embrace 
the present case. At any rate, the bank, by certifying the checks 
as good, is estopped from denying that they were valid as drafts 
upon the funds of the maker, and, consequently, were payable to 



104 General Requisites of the Contract 

bearer. The giving of such a certificate, if otherwise construed, 
would be a positive fraud." 

In Mechanics' Bank v. Straiton, 3 Abb. Dec. 269, a check 
payable to bills payable or order was held payable to bearer, the 
court saying: 

"By naming the persons to whose order the instrument is 
payable, the maker manifests his intention to limit its negotiability 
by imposing the condition of indorsement upon its first transfer. 
But no such intention is indicated by the designation of a ficti- 
tious or impersonal payee, for indorsement under such circum- 
stances is manifestly impossible ; and words of negotiability, when 
used in connection with such designations, are capable of no rea- 
sonable interpretation except as expressive of an intention that the 
bill shall be negotiable without indorsement, — i. e., in the same 
manner as if it had been made payable to bearer." 

We must decide that the check in the case at bar, like those 
in the cases cited, is either altogether void, or is transferable by 
delivery. I submit that we should follow those cases, and decide 
that it is transferable by delivery. To quote the language of Lord 
Ellenborough, in Cruchley v. Clarance, 2 Maule & S. 90 : 

"As the defendant has chosen to send the bill [check] into 
the world in this form, the world ought not to be deceived by his 
acts." 

This view of the case compels me to notice the fact that the 
check under consideration is not dated. According to the weight 
of authority, this omission does not invalidate it. See Zane, Banks, 
§ 152; 2 Daniel, Neg. Inst, § 1577; Norton, Bills & N. (3d Ed.), 
p. 405, note. 

I think the judgment of the court below should be reversed, 
and a judgment entered in this court for the defendant. 

Grant, J., concurring with Carpenter, J. 

Montgomery, J., did not sit. 



Shipman v. Bank 105 

instrument payable to order of fictitious person. § ii 3. 

Shipman v. Bank (1891), 126 N. Y. 318, 22 Am. St. Rep. 821. 

The nature of the action and the facts, so far as material, are 
stated in the opinion. 

William Allen Butler, for appellant. 
Elihu Root, for respondents. 

O'Brien, J. This appeal brings here for review a judgment 
of over $223,000, recovered by the plaintiffs against the defendant, 
upon a state of facts fully found and stated by the referee in his 
report, and in regard to which there is little, if any, serious dispute 
between the parties _ The form of the action is for the recovery 
of a sum of money which, it is claimed, the defendant undertook, 
when accepting the plaintiffs' deposits, to pay to them or upon 
their order and direction. It has been found, and is admitted on 
both sides, that on the 7th of April, 1884, the plaintiffs had upon 
deposit to their credit with the defendant the sum of $14,499:08. 
That from this date to the close of business, on the 3d day of 
October, 1888, the defendant had and received, to and for the use 
of the plaintiffs, various other sums of money deposited from time 
to time between these dates by the plaintiffs with the defendant 
amounting in the aggregate to six million, two hundred and thir- 
teen thousand, five hundred and eighty-six dollars and seventy-one 
cents. That between the 7th day of April, 1884, and the close of 
husiness, on the 3d day of October, 1888, the defendant paid ,to 
the order of the plaintiff on their checks, drawn against the bal- 
ance above stated and the deposits subsequently made, various 
sums of money amounting in the aggregate to six million, thirty 
thousand and forty dollars and twenty-nine cents. This would 
leave a balance due to the plaintiffs by the defendant of one hun- 
dred and ninety-eight thousand and forty-five dollars and fifty 
cents, which, with interest, is the sum that constitutes the subject 
of this controversy. The defendant alleged in its answer that all 
moneys deposited with it by the plaintiffs were fully paid upon 
their order and by checks drawn upon it by them, and in order 
to meet and disprove the plaintiffs' claim that there was due to 
them from the defendant at the close of business, on the 3d day 
of October, 1888, the sum of one hundred and ninety-eight thou- 
sand and forty-five dollars and fifty cents, the defendant produced 
twenty-seven checks, all signed by the plaintiffs and drawn upon 



106 General Requisites of the Contract 

the defendant, directing the payment of sums respectively aggre- 
gating the total balance above mentioned, and to recover which 
the plaintiffs brought the action. That the defendant actually paid 
these checks is not disputed, and the case is thus made to turn 
upon the question whether they are available to the defendant as 
lawful vouchers, establishing the fact that the moneys claimed 
by the plaintiffs were paid out by the defendant upon these checks 
according to the order and direction of the plaintiffs. A clear 
understanding of the question involved requires a brief statement 
of the facts and circumstances under which the twenty-seven 
checks were signed by the plaintiffs and presented to and paid by 
the defendant. The plaintiffs are a well known law firm in the 
city of New York, engaged in an extensive business which, in 
its organization, had a department known as the "Real Estate 
Department." In this branch of their business they examined 
titles for clients who were lenders of money on bond and mortgage, 
carried out and completed such loans, and occasionally examined 
titles for clients who were purchasers of real estate. One of the 
members of the firm had general charge of this department, but 
the details of the business and the execution of the work was 
entrusted to subordinates. One James E. Bedell, a lawyer who 
had been admitted to the bar in the year 1868, and had been in 
the employ of the plaintiffs since 1873, assisting in the real estate 
department, was, in the year 1881, practically put in charge of 
the work of this department under the direction of the member 
of plaintiffs' firm who had general charge. Bedell was an experi- 
enced and capable lawyer. The plaintiffs believed that he was 
honest and trustworthy, and, prior to the discovery of the very 
extraordinary crimes in connection with these checks, they had 
no reason whatever to suspect or distrust him. During the period 
covered by the transactions in question the plaintiffs employed one 
Dodge, a competent expert bookkeeper, who took charge of the 
plaintiffs' books and acted as cashier. He kept the account 
between the plaintiffs and defendant. He filled out all the checks 
and made all the entries in the check-books, and the checks, when 
paid by defendant, came to him with the pass-book, which was 
balanced by the defendant, and the vouchers, including the checks 
in question, returned with the book, from time to time, at frequent 
intervals. The course of the business in which the checks in ques- 
tion were issued was substantially as follows : The plaintiffs' client 
who wished to make a loan through them, furnished the money, 
which went directly into the plaintiffs' general bank account with 
the defendant. Against the sum to be loaned and thus put to the 



Shipman v. Bank 107 

plaintiffs' credit checks were filled up by Dodge, the cashier, from 
a written statement made by Bedell, showing the amount required 
to pay liens or charges on the property to be mortgaged, the 
amount of the plaintiffs' charges, and any other items entering 
into the transaction, and the balance to be paid the borrower. 
After filling up the checks Dodge would take the check-book, 
with the filled-up checks, to a member of the firm for signature, 
showing him the entries in the check-book of the deposit of the 
client's money and the statement of Bedell as to the payments to 
be made, and thereupon the check would be signed by the plain- 
tiffs, in the name of the individual partner to whom it was pre- 
sented by Dodge, the firm name being engraved on each- check 
and the individual signature underwritten. Dodge would then 
take away the check-book and deliver the several checks to Bedell. 
In this manner the twenty-seven checks in question were entrusted 
by the plainiffs to Bedell, their clerk, for delivery to the payees, 
respectively, therein named, who were in good faith believed by 
the plaintiffs to be real persons, entitled to receive the amount of 
said checks, respectively, from them or their clients. The defend- 
ant paid the checks to a third person, upon an indorsement there- 
on of the payees named, forged by Bedell, who converted the pro- 
ceeds to his own use. The names of the payees written in sixteen 
of the twenty-seven checks, drawn for sums aggregating $112,- 
818.72, were not the names of real but ficititious persons. The 
remaining eleven checks, drawn for sums aggregating $85,227.08, 
were made payable to the order of real persons, whose indorse- 
ments were in every case forged by Bedell. Only three of the 
checks, drawn for less than $2,400, were paid to Bedell by defend- 
ant. All the others were deposited, from time to time, in various 
other banks in the city of New York, and the money thereon 
received by Bedell from these banks, and the checks all ultimately 
paid by defendant through the exchanges in the clearing house, 
in the due and regular course of business. As to the sixteen 
checks payable to the order of ficititious persons, the plaintiffs 
were led by fraudulent contrivances and representations on the 
part of Bedell, the details of which appear in the record, to believe, 
and they did in fact believe, until the discovery of the forgeries, 
that such payees were real persons ; and as to all the checks, the 
plaintiffs did not intend that any of them should go into circulation 
or should be paid by the defendant otherwise than through a 
delivery to and indorsement by the payee named therein. The 
checks were paid in every case by the defendant, without any 
inquiry as to the genuineness of the indorsements, and in reliance 



108 General Requisites of the Contract 

upon the responsibility of the parties presenting the same, and not 
in reliance upon anything done or forborne by the plaintiffs, 
except that they were signed by them. There is no claim that, at 
the time the defendant paid the checks, it had any knowledge or 
suspicion or reason to suspect that any of the indorsements were 
forged, or that any of the names were fictitious, or that there was 
any fraud or irregularity in respect to any of the checks or any 
indorsement or writing thereon. The plaintiffs' confidence in 
Bedell and his representation of them in all their dealings with 
clients, concerning loans on real estate, continued without inter- 
ruption, until one of these clients, upon examining a fabricated 
mortgage sent to him by Bedell, had his attention arrested by the 
faintness of the impression of the seal of the register on the certi- 
ficate of record that he sent the mortgage to the register's office 
for a better sealing. This led to the discovery of all the frauds, 
forgeries, fabrications of documents, attestations and official certi- 
ficates carried on by him in the plaintiffs' office for more than four 
years. The plaintiffs did not discover that the indorsements on 
the checks had been forged, or that the amount thereof had not 
been paid to them or their order, until nearly four months after 
May 22, 1888, which was the date of the last check so forged. 
On the discovery of the facts and before the commencement of 
this action, the plaintiffs tendered the checks to the defendant, 
and demanded that the amount of the same should be paid to 
them, or credited in their account by the defendant, which tender 
and demand was refused. 

The various deposits of money made from time to time by 
the plaintiffs with the defendant created the relation of debtor and 
creditor, and the law implies a contract on the part of the defend- 
ant to disburse the money standing to the plaintiffs' credit only 
upon their order and in conformity with their directions. The 
defendant is not entitled to charge against the plaintiffs' account 
any sums as payments unless they have been made to such persons 
as the plaintiffs directed. Such payments as were made without 
the order of the plaintiffs of their funds by the defendant, afford 
to it no protection when called upon by the plaintiffs to account 
for the money deposited. Payments made upon forged indorse- 
ments are at the peril of the bank unless it can claim protection 
upon some principle of estoppel or by reason of some negligence 
chargeable to the depositor. These rules are so familar and so 
well established and illustrated by the adjudged cases that a bare 
reference to them is all that is needful here. {Crawford v. West 
Side Bank, 100 N. Y. 53 ; Mtna Nat. Bank v. Fourth Nat. Bank, 



Shipman v. Bank 109 

46 id. 86; Corn Exchange Bank v. Nassau Bank, 91 id. 80; 
Phcenix Bank v. Risky, in U. S. 125; Bank of British North 
America v. Merchants' Nat. Bank, 91 N. Y. 106 ; Marine Bank v. 
Fulton Bank, 2 Wallace, 256; First Nat. Bank v. Whitman, 94 
U. S. 347; Citizens' Nat. Bank v. Importers & Traders' Bank, 
119N. Y. 195.) 

The statement of the account made by the defendant to the 
plaintiffs from time to time, the balancing of the bank pass-book 
and the return of the same to the plaintiffs with the vouchers, 
including, as they did, the checks in controversy, with the forged 
indorsements thereon, constitute no obstacle to the maintenance 
of this action by the plaintiffs as they were ignorant of the facts 
and circumstances under which the checks were issued and put in 
circulation. An account thus stated can always be opened upon 
proof of mistake or fraud, and the only effect of the plaintiffs' 
silence as to the correctness of the account rendered by the defend- 
ant is to put upon them, in this action, the burden of showing that 
the account, as stated, was the result of fraud or mistake, a burden 
which they have fully assumed and met, as the referee has found. 

It is urged that the plaintiffs owed the duty to the defendant 
of examining the vouchers returned to them with the balanced 
pass-book from time to time, and that a careful examination of 
the same would have disclosed the fact that the money was 
received upon the checks by Bedell and his forgeries thus detected. 
The duty of examining the returned vouchers was delegated by 
the plaintiffs to their cashier and bookkeeper, who was a faithful 
and competent person for many years in plaintiffs' employ. The 
referee found as a fact, from all the circumstances of the case, 
that the failure to discover the forgeries sooner than they were 
was not, in any case, caused by any neglect on the part of the 
plaintiffs or their cashier, of any duty that the plaintiffs owed to 
the defendant. The examination of the checks would, of course, 
enable the plaintiffs to ascertain whether their own signature was 
genuine, and whether the amount, date or name of the payee had 
been changed, but would not necessarily enable them to detect the 
forgery of the payee's name. The law imposed no duty upon the 
plaintiffs to do more than they did to ascertain whether the 
indorsements on the checks were genuine. The defendant's con- 
tract was to pay the checks only upon a genuine indorsement. 
The drawer is not presumed to know, and in fact seldom does 
know, the signature of the payee. The bank must, at its own peril, 
determine that question. It has the opportunity, by requiring 
identification when the check is presented, or a responsible guar- 



110 General Requisites of the Contract 

anty from the party presenting it, of ascertaining whether the 
indorsement is genuine or not. When it returns the check to the 
depositor, as evidence of a payment made by his direction, the 
latter has the right to assume that the bank has ascertained the 
fact to be that the indorsement is. genuine. (Weisser v. Denison, 
10 N. Y. 68; Welsh v. German American Bank, 73 id. 424; Frank 
v. Chemical Nat. Bank, 84 id. 209 ; First Nat. Bank v. Whitman, 
94 U. S. 347; Leather Mfg. Bank v. Morgan, 117 id. 107.) The 
plaintiffs committed the examination of the vouchers when 
returned from the bank to a faithful and competent cashier, who 
failed to discover the forged indorsements. There is not the 
slightest reason to believe that if the checks had been examined 
by one of the plaintiffs themselves the results would have been 
any different. We are unable to see that anything was done or 
omitted by the pla'intiffs with respect to the examination of the 
indorsements upon the vouchers that excuses the defendant from 
its obligation to pay upon a genuine order only. Nor can we 
perceive anything done or omitted by the plantiffs in the general 
conduct and management of their business, or in the employment 
of and confidence reposed in Bedell that estops them from alleging 
that the twenty-seven checks were paid without their authority. 
Whether the plaintffs were guilty of any negligence in that 
regard was a question of fact and the finding is that they were, 
in so far as the defendant was concerned, reasonably prudent and 
careful and that the payment of the checks was not caused by 
any negligence on their part and we do not think it can be said 
that the finding is without evidence. Moreover, it is found that 
the defendant paid the twenty-seven checks, in each case, without 
any inquiry as to the genuineness of the indorsements, and in 
reliance upon the responsibility of the persons presenting the same 
for payment, and not in reliance upon anything done or forborne 
by the plaintiffs, except the fact that the checks had been drawn 
by them; and, further, that all the checks except the three paid 
directly to Bedell,, and amounting to less than $2,400, were pre- 
sented to the defendant by, and paid to banks perfectly solvent, 
and liable to respond to the defendant for all moneys paid upon 
the forged indorsements. These findings, supported as they are 
by the evidence, dispose of much of the argument upon which it 
is sought to establish the proposition that the plaintiffs are, by 
reason of their own acts and omissions, estopped from claiming 
that the checks were paid by the defendant without their authority. 
The facts upon which an estoppel must always be based are found 
against the defendant. Bedell in issuing the false checks and 



Shipman v. Bank 111 

fabricating the false papers to conceal his crime, did not act as 
the plaintiffs' agent and his acts in this regard are not binding 
upon them nor are they in any manner affected by his knowledge 
of the facts. The questions that arise in this case and are so ably 
and elaborately discussed in the briefs of counsel, with respect to 
the examination of the returned checks and pass-book, the man- 
ner in which the plaintiffs' business was conducted and the degree 
of care and supervision that was exercised over their subordinates, 
how far the plaintiffs are bound by the criminal acts and knowl- 
edge of their clerk as well as the general rule of estoppel, when 
applied to this class of cases, are not new. They have been fre- 
quently and fully discussed in the numerous cases in this court, 
involving the rights and duties of banks and depositors, and it 
would extend this opinon beyond reasonable limits, and serve no 
useful purpose, to go over the ground again. (Frank v. Chemical 
Nat. Bank, supra; Welsh v. German American Bank, supra; 
Weisser v. Denison, supra; People v. Bank of N. A., 75 N. Y. 
547; Leather Mfg. Bank v. Morgan, supra; Mayor, etc., v. Bank 
of England, L. R. [21 Q. B. D.], 160.) 

It is enough to state our general conclusion that, with respect 
to all these points, the defendant has failed to establish any defense 
to the' action. 

It is claimed by the defendant that the sixteen checks made 
payable to the order of persons having no existence were, in legal 
effect, payable to bearer. It is provided by statute that paper 
made payable to the order of a fictitious person and negotiated by 
the maker has the same validity "as against the maker and all 
persons having knowledge of the facts, as if payable to bearer." 
1 R. S. 768, § 5. 

We are of the opinion, upon examination of the authorities 
cited by counsel on both sides, that this rule applies only to paper 
put into circulation by the maker with knowledge that the name 
of the payee does not represent a real person. The maker's inten- 
tion is the controlling consideration which determines the char- 
acter of such paper. It cannot be treated as payable to bearer 
unless the maker knows the payee to be fictitious and actually 
intends to make the paper payable to a fictitious person. (Irving 
National Bank v. Alley, 79 N. Y. 536; Turnbull v. Bowyer, 40 
id. 456; Vagliano v. Bank of England, L. R. [22 Q. B. D.], 103; 
S. C., on app. 23 id. 243 ; Armstrong v. Pomeroy National Bank, 
46 Ohio St. 512; [7 Railway & Corporation Law Journal, 114] ; 
Gibson v. Minet, 1 H. Black. 569.) 

The findings of the referee that the plaintiffs in good faith 
believed that the names of the payees represented real persons, 



112 General Requisites of the Contract 

entitled to receive from them the amount of the check in each case, 
having been led to believe this by the fraudulent contrivances of 
Bedell, and that they intended that Bedell should deliver the check 
to a real payee therein named and that they did not intend that 
they should go into circulation or be paid by defendant otherwise 
than through a delivery and indorsement by the payee named; 
and that plaintiffs gave no authority to Bedell to indorse the name 
of the payee, or to put the checks into circulation, and that no one 
in fact relied on any appearance of authority, derived from the 
plaintiffs, in Bedell to indorse the payee's name upon the checks 
or to put them in circulation, disposes of the question. The 
indorsement of the names of the fictitious payees upon the checks, 
with intent to deceive and to put the checks in circulation, con- 
stituted the crime of forgery by means of which, and without any 
fault of the plaintiffs, payment was obtained thereon. The defend- 
ant does not occupy any different position with reference to the 
checks payable to fictitious payees than it does with reference to 
those payable to real parties whose indorsements were forged. 

Bedell of course knew that the payees were fictitious, but 
he was not acting within the scope of his employment, but in 
carrying out a scheme of fraud upon the plaintffs, and under such 
circumstances his knowledge cannot be imputed to his principals. 
(Frank v. Chemical Nat. Bank, supra; Weisser v. Denison, supra; 
Welsh v. German American Bank, supra; Cave v. Cave, L. R. 
[iS Ch. Div.],643, 644.) 

The case presents another and peculiar question. It seems 
that ten of the eleven checks which were made payable to the 
order of real persons were made good by Bedell to the several 
payees, and the defendant has set up these facts in its answer as 
a partial equitable defense. The referee made no findings on 
the subject, but Bedell so testified and was not contradicted, and 
the question arises upon a request by the defendant to find in 
substance that the amount of these ten checks having been made 
good by Bedell to the several payees, the plaintiffs having sus- 
tained no loss by reason of the payment thereof, are not entitled 
to recover in this action against the defendant any sum on account 
of or by reason of the payment by defendant of the same. The 
request was refused and the defendant excepted. Keeping in 
view the theory of this action and regarding the evidence before 
the referee, we cannot perceive that there was any error in 
refusing the request. 

Bedell testified, in substance, that at the time of the com- 
mencement of the action the plaintiffs were liable to clients to the 



Shipman v. Bank 113 

extent of $264,000 on account of his frauds. There were $200,000 
in fabricated mortgages which had been delivered by Bedell to 
clients on account of an equal sum of money paid by the clients 
to plaintiffs for investment, and which Bedell had converted to his 
own use. The $64,000 was obtained through other frauds upon 
clients which the plaintiffs were liable to be called upon to make 
good. One of the plaintiffs testified that his firm had actually 
paid to clients on account of Bedell's frauds over $242,000. It 
was not shown by what funds or in what manner Bedell made 
good to the payees the amount of the checks intended for them. 
None of the money paid by him was traced to the defendant. The 
plaintiffs' action was not upon the checks, nor for damages by 
reason of their payment, but on defendant's implied promise to 
pay the money deposited to the plaintiffs or upon their order. The 
plaintiffs' case was made out without the checks at all, except so 
far as they were necessary as proof to open the account stated. 
In substance the referee was asked to hold that by reason of the 
payment by Bedell of the amount of the checks to the persons 
named therein, without any reference to the source from which 
the money came, they were to be charged to the plaintiffs the 
same as if paid by their authority. The proof given did not jus- 
tify this conclusion. As it was not shown that such payment was 
made at the expense or to the injury of the defendant, or that the 
plaintiffs were benefited by it, beyond their whole loss, the cause 
of action stated in the complaint was not affected by the fact. 
It is, no doubt, true that payment or indemnity to the payees of 
checks diverted as these were, made by the wrong-doer, might, 
under certain circumstances, constitute a basis for equitable relief 
in an action of this kind, but the proof did not go far enough to 
warrant it in this case. 

The very recent case of Vagliano v. Bank of England occu- 
pied such a prominent place in the discussion of the questions 
involved in this appeal by the courts below, and it is now so 
earnestly pressed upon our attention by the learned counsel for 
the defendant as a controlling authority in support of his views 
that we consider it necessary to refer to it and point out, so far as 
we can, the rule or principle which it decides. In the magnitude 
of the sum involved, the boldness and ingenuity with which a 
clerk perpetrated a stupendous fraud upon his employer, and, in 
many other respects, that case, doubtless, bears a very strong 
resemblance to this. The question there was whether the defend- 
ant was -entitled to debit the plaintiff, one of its depositors, with 
forty-three forged bills of exchange, amounting in the aggregate 



114 General Requisites of the Contract 

to 71,500 pounds, which it had paid, upon a genuine acceptance 
by the plaintiff, but procured by fraud under substantially the 
following circumstances : Vagliano, the plaintiff, was a merchant 
and foreign banker in London, with correspondents in various 
parts of the world and transacting an enormous business with the 
defendant, his general banker. He employed in his office a con- 
siderable number of clerks, and among them one Glyka, who had 
charge of the foreign correspondence. One Vucina, a merchant 
and banker at Odessa, was, and for thirty years had been, one of 
Vagliano's correspondents, transacting with him a large business 
and having practically unlimited credit. For many years he had 
drawn drafts for large amounts, when necessary, upon the plain- 
tiff, payable sometimes to his own order, but more frequently to 
the order of a payee named therein. The course of business in 
the office was well known to Glyka, who procured specimens of 
Vucina's letters of advice, which always preceded the drafts, and 
specimens of the drafts themselves. Having done so he had 
paper prepared identical in general appearance and texture with 
that upon which Vucina's genuine letters and bills were written. 
This enabled him to forge letters of advice and drafts with 
Vucina's name as drawer, which he executed with extraordinary 
skill, and in each case he wrote upon the face of the bill, as payees, 
the name of C. Petridi & Co., a firm who carried on business at 
Constantinople, and had business relations with Vucina, but had 
no connection whatever with the fabricated drafts. Glyka caused 
these forged letters of advice and drafts to be laid before Vagliano, 
his principal, who, being deceived by the skillful manner in which 
the papers were prepared and the confidence he reposed in his 
clerks, wrote a genuine acceptance on the face of each bill as it 
was put before him from time to time during a period of some 
four months, payable in every case at the Bank of England. 
These fabricated bills, having been thus accepted, were placed 
with the other and genuine bills in a box in the office to be deliv- 
ered according to the usual course of business to the proper party 
when called for. Glyka stole the bills from the box, forged the 
indorsement of the payees thereon, presented them at the counter 
of the bank and received the money thereon. By the English 
Bills of Exchange Act of 1882 (45 and 46 Vict., Ch. 61, § 7, 
subd. 3), it was enacted with reference to bills of exchange, that 
"where the payee is a fictitious or non-existing person, the bill 
may be treated as payable to bearer." The bank defended upon 
two grounds — first, that they were protected by this statute, and 
secondly, that the plaintiff was guilty of such negligence as pre- 



Shipman v. Bank 115 

eluded him from claiming that the payment made upon these bills 
were without authority. On the trial of the action before Mr. 
Justice Charles, the plaintiff recovered. (L. R. [22 Q. B. D.], 103.) 
On appeal, the judgment was affirmed, the master of the rolls 
alone dissenting, on the ground that the bank was protected by 
the Bills of Exchange Act. (L. R. [23 Q. B. D.] 243.) Thus far 
the view of the courts in both hearings were in harmony with the 
contention of the plaintiffs in the case at bar, both as to the con- 
struction of the statute and the facts bearing on the question of 
negligence. The judgment, however, has recently been reversed 
by the House of Lords, and we have been furnished with copies 
of the opinions given upon the final decision of the appeal, and 
have given to them the careful consideration which the high 
authority of the tribunal from which they emanate and the 
importance of the case seems to demand. The main point upon 
which the case turned in the review by the House of Lords, as 
we understand the opinions, was the construction to be given to 
the Bills of Exchange Act. It was held, contrary to the opinions 
below, that whenever the name inserted as payee is without any 
intention that payment shall be made only in conformity there- 
with, the payee then becomes a fictitious person within the mean- 
ing of the act, and, therefore, the forty-three bills were within the 
statute, though Petridi & Co. were in fact existing and real per- 
sons. When this conclusion was reached, the plaintiff's case 
necessarily failed, as it was but another way of stating that the 
bank paid the fabricated bills according to their legal tenor and 
effect, and according to the plaintiff's directions, that is, to bearer. 
It is hardly necessary to add that if we could follow that case 
in giving construction to our statute, the same result would follow 
in this case. But it is quite obvious that we cannot. The language 
is different. Our statute is a codification of the common law, 
while the English statute is, and was intended to be, a departure 
from it. In so far as the opinions deal with the facts of the case 
upon the question of negligence, it is difficult to deduce from them 
any abstract rule or principle. Moreover, there is, as it seems to 
us, a material difference in some respects between the facts of 
that case and the one at bar. Vagliano, through the contrivances 
of his clerk, had put before him a fabricated bill, the spurious 
character of which he failed to detect, and he fixed to it a genuine 
acceptance, thereby accrediting it to the bank as a genuine instru- 
ment. He left the bill thus accepted in a place where the dis- 
honest clerk could easily purloin it. The manner in which the 
business was conducted was such as to enable the clerk to possess 



116 General Requisites of the Contract 

himself of the means whereby the fraud was successfully carried 
out without check or detection. The view of the case taken in 
the opinions delivered in the House of Lords, aside from the 
question of the construction of the statute, may very well be 
attributed to a different shading in the facts, and to the further 
consideration which can be inferred from the record, that that 
tribunal is not confined, as we are, to a review of the courts below 
upon questions of law only. For these reasons, the Vagliano case 
cannot be regarded as authority adverse to the conclusion at 
which we have arrived in this. We have examined the other 
exceptions appearing in the record to which our attention has been 
directed, and we are of the opinion that none of them can be 
sustained. 

The judgment should be affirmed. 

All concur, Gray, J., in result.. 

Judgment affirmed. 



FILLING UP BLANKS. § 1 6. 

The Bank of Pittsburg v. Neal et al. {1859), 22 How. (63 U. S). 

96. 

This case was brought up by writ of error from the Circuit 
Court of the United States for the district of Indiana. 

It was an action brought by the bank upon two bills of 
exchange, one dated on the 18th of August, 1857, at Pittsburgh, 
drawn by L. O. Reynolds & Son upon J. S. & R. E. Neal, at 
Madison, Indiana, requesting them to pay, four months after date 
of this second of exchange, (first unpaid,) to the order of L. O. 
Reynolds, at the Ohio Life Insurance and Trust Company, at 
Cincinnati, in the State of Ohio, two thousand one hundred and 
sixty-eight dollars. Reynolds endorsed this bill to L. Wilmarch 
& Co., who endorsed it to the bank. The bill was accepted by J. 
S. & R. E. Neal. 

The other bill sued upon was similar in all its circumstances, 
except that it was dated on the 1st of August, 1857, payable four 
months after the date of this second of exchange, (first Unpaid,) 
for thirteen hundred and fifty dollars. It was endorsed and 
accepted like the other. 

In order to present a distinct view of the transactions which 
led to this suit and the nature of the defence, it seems necessary 



The Bank of Pittsburg v. Neal et al. 117 

to state particularly all the bills mentioned in the proceedings, 
designating each bill by a letter, which is the reporter's mark, and 
used for easy reference. 

In June, 1857, J. S. & R. E. Neal, residents of Madison, 
Indiana, for the purpose of raising money, delivered to L. O. 
Reynolds, of Pittsburgh, the four following bills, viz.: 

Exchange for $ . 

after of this first of exchange, (second unpaid,) 

pay to the order of L. O. Reynolds dollars, value received, 

without any relief from valuation or appraisement laws. 

To . 

Accepted : J. S. & R. E. Neal. 

(This bill we will call A.) 

Exchange for $ . 

after of this first of exchange, (second unpaid,) 



pay to the order of L. O. Reynolds dollars, value received, 

without any relief from valuation or appraisement laws. 

To . 

Accepted : J. S. & R. E. Neal. 

(This bill we will call B.) 

Exchange for $ . 

after of this second of exchange, (first unpaid,) 



pay to the order of L. O. Reynolds dollars, value received, 

without any relief from valuation or appraisement laws. 

To . 

Accepted : J. S. & R. E. Neal. 

(This bill we will call C.) 

Exchange for $ . 

after of this second of exchange, (first unpaid,) 



pay to the order of L. O. Reynolds dollars, value received, 

without any relief from valuation or appraisement laws. 

To . 

Accepted : J. S. & R. E. Neal. 

(This bill we will call D.) 

With these bills, instructions were sent to Reynolds to have 
them filled up for sums not less than $1,500, nor more than $3,000 
each, to have them discounted at Pittsburgh, and remit the pro- 
ceeds to J. S. & R. E. Neal, at Madison, Indiana. 

In July, 1857, four other bills like the preceding were sent 
to Reynolds. These last bills were sent to Reyolds at his request, 
and intended for his use, as accommodation acceptances of the 
Neals. 

These bills we will call E, F, G, H. 



118 General Requisites of the Contract 

A was filled up by Reynolds as follows: Date, July ist; 
amount, $1,965; time, four months; drawers, L. O. Reynolds & 
Son; drawees, J. S. & R. E. Neal. Thus filled up, it was nego- 
tiated by Reynolds to the Mechanics' Bank of Pittsburgh. Reyn- 
olds failed to remit the proceeds according to instructions. When 
the paper matured, the defendants, as acceptors, paid it. 

B was filled up as follows: Date, July 10th; time, four 
months ; amount, $2,035 > drawers, L. O. Reynolds & Son ; 
drawees, J. S. & R. E. Neal. Thus filled up, it was negotiated 
by Reynolds to the Merchants and Manufacturers' Bank of Pitts- 
burgh. The proceeds of this bill were remitted by Reynolds to 
the defendants. Before the commencement of this suit, the 
Merchants and Manufacturers' Bank, as holder and owner of the 
bill, recovered judgment on it against the acceptor in the Jeffer- 
son Circuit Court of the State of Indiana. C and D were for 
the present retained by Reynolds in his own possession. 

E, being similar to A, was filled up as follows : Date, July 
30th ; time, four months ; amount, $2,450 ; drawers, L. O. Reynolds 
& Son ; drawees, J. S. & R. E. Neal. Thus filled up, it was nego- 
tiated by Reynolds to the Merchants and Manufacturers' Bank of 
Pittsburgh, Reynolds retaining the proceeds. The holders of this 
bill brought suit against the defendants, as acceptors, in the Jef- 
ferson Circuit Court, Indiana, which action was still pending when 
the pleas in this case were filed. 

F, being similar to B, was filled up by Reynolds as follows : 
Date, July 24th ; time, four months ; amount, $2,750 ; drawers, 
L. O. Reynolds & Son ; drawees, J. S. & R. E. Neal. Thus filled 
up, it was negotiated by Reynolds to the Citizens' Bank of Pitts- 
burgh, Reynolds retaining the proceeds. John Black & Co. became 
the holders, and after its maturity, and before the commencement 
of this suit, they recovered judgment against the acceptors of 
the bill for its full amount in the Jefferson Circuit Court of 
Indiana. 

Thus the bills A, B, E, F, being the first of exchange, (sec- 
ond unpaid,) are accounted for. What became of G and H, the 
record did not show. Let us now account for C and D. 

C was filled up as follows: Date, August ist; time, four 
months; amount, $1,350; drawers and drawees, as above. 

D was filled up as follows: Date, August 18th; time, four 
months; amount, $2,168; same drawers and drawees. These bills 
were both negotiated to the Bank of Pittsburgh, and were the 
ones sued on in this case. It will be observed that they were both 
second of exchange, (first unpaid,) and that the sums of money 



The Bank of Pittsburg v. Neal et al. 119 

did not correspond in amount with any of those for which the first 
of exchange had been filled up, nor in date, time, or place of 
payment. 

There were four counts in the declaration, and eight pleas, 
which were all demurred to except the plea of the general issue. 
It is not necessary to state these pleadings, because they were 
only intended to raise the questions of law which arise from the 
statement of facts given above. The court overruled the plaintiffs' 
demurrers, so that judgment went for the defendant; and upon 
this ruling upon the demurrers, the case was brought up by the 
plaintiff to this court. 

Mr. Stanton and Mr. Walker, for plaintiff in error. 
Mr. Thompson and Mr. Dunn, for defendants. 

Mr. Justice Clifford delivered the opinion of the court. 

This is a writ of error to the Circuit Court of the United 
States for the district of Indiana. All of the questions presented 
in this case arise upon the pleadings and the facts therein dis- 
closed. It was an action of assumpsit, brought by the plaintiff in 
error as the holder of two certain bills of exchange, against the 
defendants as the acceptors. An amendment to the declaration 
was filed after the suit was commenced. As now exhibited in the 
transcript it contains four counts. Two of the counts were drawn 
up on the respective bills of exchange, and are in the usual form 
of declaring in suits, by the holder of a bill of exchange against 
the acceptor. Those contained in the amendment are special in 
form, setting forth the circumstances under which the respective 
bills of exchange were drawn, accepted, and negotiated, and 
averring that these acts were subsequently ratified by the defend- 
ants. To the merits of the controversy the defendants pleaded the 
general issue, and filed seven special please in bar of the action. 
Demurrers were filed by the plaintiff to each of the special pleas, 
which were duly joined by the defendants, and after the hearing, 
the court overruled all of the demurrers. Those filed to the pleas 
responsive to the first and second counts were overruled upon the 
ground that the pleas were sufficient, and constituted a good bar 
to the action; but those filed to the fifth, sixth, seventh, and 
eighth pleas were overruled, upon the ground that the third and 
fourth counts, to which those pleas exclusively applied, were each 
insufficient in law to maintain the action. Whereupon, the plain- 
tiff abiding his demurrers, the court directed that judgment be 
entered for the defendants, and the plaintiff sued out a writ of 
error, and removed the cause into this court. It being -very prop- 



120 General Requisites of the Contract 

erly admitted, by the counsel of the defendants, that the first and 
second counts of the declaration are in the usual form, it is not 
necessary to determine the question as to the sufficiency of the 
third and fourth, and we are the less inclined to do so, from the 
fact that the counsel on both sides expressed the wish, at the 
argument, that the decision of the cause might turn upon the ques- 
tion, whether the plaintiff, on the facts disclosed in the pleadings, 
was entitled to recover against the defendants. That question is 
the main one presented by the pleadings ; and inasmuch as it might 
well have been tried under the general issue, we think it quite 
unnecessary to consider any of the incidental questions which do 
not touch the merits of the controversy. Special pleading in 
suits on bills of exchange and promissory notes ought not to be 
encouraged, except in cases where by law the defence would 
otherwise be excluded or rendered unavailing. Full and clear 
statements of the facts as disclosed in the pleadings, were pre- 
sented to the court, at the argument, by the counsel on both 
sides. They are substantially as follows: In June, 1857, the 
defendants, residents of Madison, in the State of Indiana, being 
desirous of procuring a loan of money, made their certain accept- 
ances in writing of two blank bills of exchange, in sets of two 
parts to each bill, and transmitted the four blanks, thus accepted, 
to their correspondent, Lot O. Reynolds, then and still residing 
at Pittsburgh, in the State of Pennsylvania. Both sets of blanks 
were in the form of printed blanks usually kept by merchants for 
bills of exchange in double sets, except that each of the four was 
made payable to the order of the correspondent to whom they 
were sent, and was duly accepted on its face by the defendants, 
in the name of their firm. They were in blank as to the names 
of the drawers and the address of the drawees, and as to date, 
and amount, and time, and place of payment. When the defend- 
ants forwarded the acceptances, they instructed their correspond- 
ent to perfect them as bills of exchange, by procuring the signa- 
tures of the requisite parties, as accommodation drawers and 
endorsers, and to fill up each with the appropriate date, and with 
sums not less than fifteen hundred nor more than three thousand 
dollars, payable at the longest period practicable, and to sell and 
negotiate the bills as perfected, for money, and remit the proceeds 
to the defendants. Afterwards, in the month of July, of the same 
year, the defendants, at the request of the person to whom those 
acceptances were sent, made four other similar acceptances, and 
delivered them to him, to be sold and negotiated as bills of 
exchange, in double sets, for his own use, and with power to retain 



The Bank of Pittsburg v. Neal et al. 121 

and use the proceeds thereof for his own benefit. They were in 
all respects the same, in point of form, as the four • acceptances 
first named, and, like those, each of the four parts were made 
payable to the order of the person at whose request they were 
given, and was duly accepted by the defendants in the name of 
their firm. When they delivered the sets last named, they author- 
ized the payee to perfect them as bills of exchange, in two parts, in 
reasonable amounts, and with reasonable dates. Eight acceptances 
were thus delivered by the defendants to the same person, corre- 
sponding in point of form to four bills of exchange, but with 
blanks for the names of the drawers and the address of the 
drawees, and for the respective amounts, dates, and times and 
places of payment. Four contained, in the printed form of the 
blanks, the words, "first of exchange, second unpaid;" and the 
other four contained in the corresponding form the words, "second 
of exchange, first unpaid ;" but in all other respects they were 
alike. All of the first class were perfected by the correspondent 
as bills of exchange of the first part, and were sold and negotiated 
by him at certain other banks in the City of Pittsburgh. He per- 
fected them by procuring L. O. Reynolds & Son to become the 
drawers, addressed them to the defendants, endorsed them him- 
self in blank, and procured another individual or firm to become 
the second endorser. They were filled up by him for sums vary- 
ing from about two thousand to three thousand dollars, with 
dates corresponding to the times when they were negotiated, and 
were respectively made payable in four months from date. Con- 
trary to his instructions, he retained the proceeds of the one first 
negotiated, which he had been directed to remit; and he also 
retained in his possession, but without inquiry or complaint on 
the part of the defendants, the other four acceptances, consti- 
tuting the second class. On the first day of August, 1857, he 
perfected and filled up as a separate bill of exchange one of the 
last-named acceptances, and sold and negotiated it to the plaintiff 
for his own use and benefit. He also perfected and filled up, on 
the eighteenth day of the same month, another of the same class, 
in the same manner, and for the same purpose, and on the same 
day sold and negotiated it to the plaintiff. Both of these last- 
mentioned bills of exchange vary from those of the first class, 
not only in dates and amounts, but also as to time and place of 
payment, and are in all respects single bills of exchange. They 
were each received and discounted by the plaintiff, without any 
knowledge whatever that either had been perfected and filled up 
by the payee without authority, or of the circumstances under 



122 General Requisites of the Contract 

which they had been intrusted to his care, unless the words, "sec- 
ond of exchange, first unpaid," can be held to have that import. 

In all other respects, the bills must be viewed precisely as 
they would be if they had been perfected and filled up by the 
defendants, and for two reasons, deducible from the decisions of 
this court : 

First. Because, where a party to a negotiable instrument 
intrusts it to the custody of another with blanks not filled up, 
whether it be for the purpose to accommodate the person to whom 
it was intrusted, or to be used for his own benefit, such negotiable 
instrument carries on its face an implied authority to fill up the 
blanks and perfect the instrument; and as between such party 
and innocent third parties, the person to whom it was so intrusted 
must be deemed the agent of the party who committed such 
instrument to his custody — or, in other words, it is the act of the 
principal, and he is bound by it. Goodman v. Simonds, 20 How., 
361 ; Violet v. Patton, 5 Cran., 142. 

Secondly. Because a bona fide holder of a negotiable instru- 
ment, for a valuable consideration, without notice of the facts 
which impeach its validity between the antecedent parties, if he 
takes it under an indorsement made before the same becomes due, 
holds the title unaffected by these facts, and may recover thereon, 
although, as between the antecedent parties, the transaction may 
be without any legal validity. Swift v. Tyson, 16 Peters, 15; 
Goodman v. Simonds, 20 Howard, 363. 

Applying these principles, it is obvious that the only ques- 
tion that arises on this branch of the case is as to the effect of 
the words, "second of exchange, first unpaid," which appear on 
the face of the bills. That question, under the circumstances of 
this case, is a question of law, and not of fact for the jury. Three 
decisions of this court sustain that proposition ; and in view of 
that fact, we think it unnecessary to do more than refer to those 
decisions, without further comment in its support. Andrews v. 
Pond and al., 13 Pet., 5; Fourier v. Brantly, 14 Pet., 318; Good- 
man v. Simonds, 20 How., 366. 

Another principle, firmly established by this court, and closely 
allied to the question under consideration, will serve very much 
to elucidate the present inquiry. In Downes and at. v. Church, 
13 Pet., p. 207, this court held, that either of the set of bills of 
exchange may be presented for acceptance, and if not accepted, 
that a right of action presently arises, upon due notice, against 
all the antecedent parties to the bill, without any others of the set 
being presented ; for, say the court, it is by no means necessary 



The Bank of Pittsburg v. Neal et al. 123 

that all the parts should be presented for acceptance before a right 
of action accrues to the holder. 

Now, if either of the set may 'be presented, and when not 
accepted a right of action immediately ensues, it is difficult to 
see any reason why, if upon presentation the bill is accepted, it is 
not competent for the endorsee to negotiate it in the market ; and 
clearly, if the endorsee may properly negotiate the bill, a bona tide 
holder for value, without notice, may acquire a good title. In 
this connection, Mr. Chitty says, that "unless the drawee has 
accepted another part of a bill, he may safely pay any part that 
is presented to him, and that a payment of that part will annul 
the effect of the others ; but if one of the parts has been accepted, 
the payment of another unaccepted part will not liberate the 
acceptor from liability to pay the holder of the accepted part, and 
such acceptor may therefore refuse to pay the bearer of the 
unaccepted part ;" from which he deduces the rule, that a drawee 
of a bill drawn in sets should only accept one of the set. Chitty 
on Bills, (10 Am. ed., by Barb.,) 155. 

Mr. Byles says : "The drawee should accept only one part, 
for if two accepted parts should come into the hands of different 
holders, and the acceptor should pay one, it is possible that he 
may be obliged to pay the other part also;" which could not be, 
unless it was competent for the holder of a second part to nego- 
tiate it in the market. Byles on Bills, p. 310. 

Where the drawee accepted and endorsed one part to a cred- 
itor, as a security, and afterwards accepted and endorsed another 
part for value to a third person, but subsequently substituted 
another security for the part first accepted, it was held, in Holds- 
worth v. Hunter, 10 Barn, and Cress., 449, that, under these cir- 
cumstances, the holder of the part secondly accepted was entitled 
to recover on the bill ; and Lord Tenterden and Baron Parke held 
that the acceptor would have been liable on the part secondly 
accepted, even if the first part had been endorsed and circulated 
unconditionally. 

Judge Story says, in his work on bills of exchange, that the 
bona fide holder of any one of the set, if accepted, may recover 
the amount from the acceptor, who would not be bound to pay 
any other of the set which was held by another person, although 
he might be the first holder. Story on Bills, sec. 226. 

No authority is cited, for the defendant, to impair the force 
of those already referred to; but it is not necessary to express 
any decided opinion upon the point at the present time. Suffice 
it to say, that in the absence of any authority to the contrary, we 



124 General Requisites of the Contract 

are strongly inclined to think that the correct rule is stated by 
Mr. Chitty, and that such is the general understanding among 
mercantile men. 

But another answer may be given to the argument for the 
defendant, which is entirely conclusive against it; and that is, 
that the bills described in the first and second counts were not 
parts of sets of bills of exchange. They were perfected, filled up, 
and negotiated, by the correspondent of the defendants, to whom 
the blank acceptances had been intrusted as single bills of 
exchange ; and for the acts of their correspondent, in that behalf, 
the defendants are responsible to a bona fide holder for value, 
without notice that the acts were performed without authority. 

When the transaction is thus viewed, as it must be in con- 
templation of law, it is clearly brought within the operation of 
the same rule as it would be if the defendant himself had improvi- 
dently accepted two bills for the same debt. In such cases, it is 
held, that the acceptor is liable to pay both, in the hands of inno- 
cent holders for value. Davidson v. Robertson, 3 Dow. P. C, 228. 

Lord Eldon said, in that case : "Here were two bills for the 
same account, and supposed to be for the same sums ; they who 
were to pay them had a right to complain that there were two, 
and yet they were bound to pay both, in the hands of bona fide 
holders, if accepted by them or by others for them, having author- 
ity to accept." 

To suppose, in this case, that the words "second of exchange, 
first unpaid," import knowledge to the plaintiff that the bills were 
drawn in sets, would be to give them an effect contrary to the 
averments of the defendants' pleas, as well as contrary to the 
admitted fact that they were not so drawn ; and for those reasons 
the theory cannot be sustained. 

In view of all the facts as disclosed in the pleadings, we think 
the case clearly falls within the operation of the rule, generally 
applicable in cases of agency, that where one of two innocent 
parties must suffer, through the fraud or negligence of a third 
party, the loss shall fall upon him who gave the credit. Fitzher- 
bert v. Mathen, 1 Term., 16, per Buller; Androscoggin Bank v. 
Kimball, 10 Cush., 373; Montague v. Perkins, 22 Eng. L. and 
Eq., 516. 

Business men who place their signatures to blanks, suitable 
for negotiable bills of exchange or promissory notes, and intrust 
them to their correspondents, to raise rnoney at their discretion, 
ought to understand the operation and effect of this rule, and not 



Baxendale v. Bennett 125 

to expect that courts of justice will fail in such cases to give it 
due application. 

According to the views of this court, the demurrers to the 
several pleas filed to the first and second counts of the declaration 
should have been sustained. Having come to that conclusion, it 
is unnecessary to examine the other propositions submitted on 
behalf of the defendants. 

The judgment of the Circuit Court is therefore reversed, 
with costs, and the cause remanded, with directions to enter judg- 
ment for the plaintiff, as upon demurrer, on the first and second 
counts of the declaration. 



INCOMPLETE INSTRUMENT NOT DELIVERED. § 17. 

Baxendale v. Bennett (1878), L. R. 3 Q. B. D. 525. 

Action commenced on the 10th July, 1876, on a bill of 
exchange, dated the nth of March, 1872, for 50/. drawn by W. 
Cartwright and accepted by the defendant, and of which the 
plaintiff was the holder, and for interest. 

At the trial before Lopes, J., without a jury, at the Hilary 
Sittings in Middlesex, the following facts were proved: The 
bill, dated on the nth of March, 1872, on which the action was 
brought, purported to be drawn by one W. Cartwright on the 
defendant, payable to order at three months' date. It was indorsed 
in blank by Cartwright, and also by H. T. Cameron. The plain- 
tiff received the bill from Cameron on the 3d of June, 1872, and 
was the bona fide holder of it, without notice of fraud, and for 
a valuable consideration. 

One J. F. Holmes had asked the defendant for his acceptance 
to an accommodation bill, and the defendant had written his 
name across a paper which had an impressed bill stamp on it, and 
had given it to Holmes to fill in his name, and then to use it for the 
purpose of raising money on it. Afterwards Holmes, not requir- 
ing accommodation, returned the paper to the defendant in the 
same state in which he had received it from him. The defendant 
then put it into a drawer, which was not locked, of his writing 
table at his chambers, to which his clerk, laundress, and other 
persons coming there had access. He had never authorized Cart- 
wright or any person to fill up the paper with a drawer's name, 
and he believed that it must have been stolen from his chambers. 

On these facts the learned judge found that the bill was stolen 



126 General Requisites of the Contract 

from the defendant's chambers, and the name of the drawer after- 
wards added without the defendant's authority; but that the 
defendant had so negligently dealt with the acceptance as to have 
facilitated the theft; he therefore ruled upon the authority of 
Young v. Grote, 4 Bing. 253, and Ingham v. Primrose, 7 C. B. 
(N. S.) 82; 28 L. J. (C. P.) 294, that the defendant was liable, 
and directed judgment to be enacted for the plaintiff for 50/. and 
costs. 

Bittleson (Rolland, with him), for the defendant. 
Jeune, for the plaintiff. 

July 2. The following judgments were delivered: — 

Bramwell, LJ. I am of opinion that this judgment cannot 
be supported. The defendant is sued on a bill alleged to have 
been drawn by W. Cartwright on and accepted by him. In 
very truth he never accepted such a bill ; and if he is to be held 
liable, it can only be on the ground that he is estopped to deny 
that he did so accept such a bill. Estoppels are odious, and the 
doctrine should never be applied without a necessity for it. It 
never can be applied except in cases where the person against 
whom it is used has so conducted himself, either in what he has 
said or done, or failed to say or do, that he would, unless estopped, 
be saying something contrary to his former conduct in what he 
had said or done, or failed to say or do. Is that the case here? 
Let us examine the facts. The defendant drew a bill (or what 
would be a bill had it had a drawer's name) without a drawer's 
name, addressed to himself, and then wrote what was in terms 
an acceptance across it. In this condition, it, not being a bill, 
was stolen from him, filled up with a drawer's name, and trans- 
ferred to the plaintiff, a bona fide holder for value. It may be 
that no crime was committed in the filling in of the drawer's 
name, for the thief may have taken it to a person telling him it 
was given by the defendant to the thief with authority to get it 
filled in with a drawer's name by any person he, the thief, pleased. 
This may have been believed and the drawer's name bona fide 
put by such person. I do not say such person could have recov- 
ered on the bill ; I am of opinion he could not, but what I wish 
to point out is that the bill might be made a complete instrument 
without the commission of any crime in the completion. But a 
crime was committed in this case by the stealing of the document, 
and without that crime the bill could not have been complete, 
and no one could have been defrauded. Why is not the defendant 
at liberty to shew this? Why is he stopped? What has he said 



Baxendale v. Bennett 127 

or done contrary to the truth, or which should cause any one to 
believe the truth to be other than it is ? Is it not a rule that every 
one has a right to suppose that a crime will not be committed, 
and to act on that belief ? Where is the limit if the defendant is 
estopped here? Suppose he had signed a blank cheque, with no 
payee, or date, or amount, and it was stolen, would he be liable 
or accountable, not merely to his banker the drawee, but to a 
holder? If so, suppose there was no stamp law, and a man simply 
wrote his name, and the paper was stolen from him, and some- 
body put a form of a cheque or bill to the signature, would the 
signer be liable ? I cannot think so. But what about the authori- 
ties? It must be admitted that the cases of Young v. Grote, 4 
Bing. 253, and Ingham v. Primrose, 7 C. B. (N. S.) 82; 28 
L. J. (C. P.) 294, go a long way to justify this judgment; but 
in all those cases, and in all the others where the alleged maker 
or acceptor has been held liable, he has voluntarily parted with 
the instrument; it has not been got from him by the commission 
of a crime. This, undoubtedly, is a distinction, and a real dis- 
tinction. The defendant here has not voluntarily put into any 
one's hands the means, or part of the means, for committing a 
crime. 

But it is said that he has done so through negligence. I 
confess I think he has been negligent; that is to say, I think if 
he had had this paper from a third person, as a bailee bound to 
keep it, with ordinary care, he would not have done so. But 
then this negligence is not the proximate or effective cause of 
the fraud. A crime was necessary for its completion. Then the 
Bank of Ireland v. Evans 1 Trustees, 5 H. L. C. 389, shews under 
such circumstances there is no estoppel. It is true that was not 
the case of a negotiable instrument ; but those who complained 
of the negligence were the parties immediately affected by the 
forged instrument. 

Brett, L.J. In this case I agree with the conclusion at which 
by Brother Bramwell has arrived, but not with his reasons. The 
defendant signed a blank acceptance and gave it to a person who 
wanted money that he might get it discounted ; that person sent 
the blank acceptance back to the defendant, who put it into a 
drawer in his room ; the room was not a place of general resort, 
and the drawer into which the acceptance was put was left 
unlocked ; somebody, not a servant of the defendant, stole it, and 
it was filled up by a different person from him to whom the 
acceptance was originally given and who had returned it. On 
these facts, Lopes, J., held that the defendant had been guilty of 



128 General Requisites of the Contract 

negligence, and was therefore liable on the bill to the plaintiff. 

Bramwell, L.J., says that the defendant is not liable, because 
if he be guilty of negligence, the negligence is not the proximate 
or effective cause of the fraud. It seems to me that the defendant 
never authorized the bill to be filled in with a drawer's name, and 
he cannot be sued on it. I do not think it right to say that the 
defendant was negligent. The law as to the liability of a person 
who accepts a bill in blank, is that he gives an apparent authority 
to the person to whom he issues it to fill it up to the amount that 
the stamp will cover; he does not strictly authorize him, but 
enables him to fill it up to a greater amount than was intended. 
Where a man has signed a blank acceptance, and has issued it, 
and has authorized the holder to fill it up, he is liable on the bill, 
whatever the amount may be, though he has given secret instruc- 
tions to the holder as to the amount for which he shall fill it up ; 
he has enabled his agent to deceive an innocent party, and he is 
liable. Sometimes it is said that the acceptor of such a bill is 
liable because bills of exchange are negotiable instruments, cur- 
rent in like manner as if they were gold or bank notes ; but 
whether the acceptor of a blank bill is liable on it depends upon 
his having issued the acceptance intending it to be used. No case 
has been decided where the acceptor has been held liable if the 
instrument has not been delivered by the acceptor to another per- 
son. 

In this case it is true that the defendant after writing his 
name across the stamped paper sent it to another person to be used. 
When he sent it to that person, if he had filled it in to any amount 
that the stamp would cover the defendant would be liable, because 
he sent it with the intention that it should be acted upon ; but it 
was sent back to the defendant, and he was then in the same con- 
dition as if he had never issued the acceptance. The case is this : 
the defendant accepts a bill and puts it into his drawer, it is as 
if he had never issued it with the intention that it should be filled 
up; it is as if after having accepted the bill he had left it in his 
room for a moment and a thief came in and stole it. He has 
never intended that the bill should be filled up by anybody and 
no person was his agent to fill it up. 

Then it has been said that the defendant is liable because he 
has been negligent ; but was the defendant negligent ? As observed 
by Blackburn, J., in Swan v. North British Australasian Com- 
pany, 2 H. & C. 175; 32 L. J. (Ex.) 273, there must be the 
neglect of some duty owing to some person — here how can the 
defendant be negligent who owes no duty to anybody — against 



Baxendale v. Bennett 129 

whom was the defendant negligent, and to whom did he owe a 
duty? He put the bill into a drawer in his own room; to say 
that was a want of due care is impossible; it was not negligence 
for two reasons, first, he did not owe any duty to any one, and, 
secondly, he did not act otherwise than in a way which an ordi- 
nary careful man would act. 

As to the authorities that have been cited ; in Schultz v. Ast- 
ley, 4 Bing. N. C. 544, the blank acceptance had been filled up 
by a stranger and a fraud had been committed; nevertheless, the 
acceptor was held to be liable. There, however, the acceptance 
had been issued and it was intended that it should be filled up by 
someone; but Crompton, J., in Stoessiger v. South Eastern Ry. 
Co., 3 E. & B. at p. 556, said that case had gone to the utmost 
extent of the law. I do not think that the doctrine there laid 
down ought to be extended. In Ingham v. Primrose, 7 C. B. (N. 
S.) 82 ; 28 L. J. (C. P.) 294, the acceptor of a bill of exchange, with 
the intention of cancelling it, tore it into two pieces and threw 
them into the street, they were picked up by the indorser, joined 
together, and the bill was put into circulation. The acceptor was 
held liable because, said the court, although he did intend to 
cancel it, yet he did not cancel it. It seems to me to be difficult 
to support that case, and the correct mode of dealing with it is to 
say we do not agree with it. In Young v. Grote, 4 Bing. 253, 
Young left a blank cheque with his wife and in filling up the 
cheque for fifty pounds the word fifty was written in the middle 
of the line, ample space being left for the insertion of other words. 
By a forgery, before the word fifty, the words "three hundred 
and" were inserted. Notwithstanding the forgery the court held 
Young liable. It is said that the case may be upheld on the 
ground that Young owed a duty to his own bankers, and that 
he was guilty of negligence in not drawing his cheques on them 
with ordinary care, but that case does not govern the present, it 
only applies to cases between bankers and mere customers. In 
Bank of Ireland v. Evans' Charity Trustee, 5 H. L. C. 389, Parke, 
B., in delivering the opinion of the judges in the House of Lords 
remarks, with reference to Young v. Grote, 4 Bing. 253, "In that 
case it was held to have been the fault of the drawer of the 
cheque that he misled the banker on whom it was drawn by want 
of proper caution in the mode of drawing the cheque, which 
admitted of easy interpolation, and consequently that the drawer, 
having thus caused the banker to pay the forged cheque by his 
own neglect in the mode of drawing the cheque itself, could not 
complain of that payment." He then gives instances in which a 



130 General Requisites of the Contract 

person would not be liable and which govern the present case. 
"If a man should lose his cheque book or neglect to lock his desk 
in which it is kept and a servant or stranger should take it, it is 
impossible, in our opinion, to contend that a banker paying his 
forged cheque would be enabled to charge his customer with that 
payment. Would it be contended that, if he kept his goods so 
negligently that a servant took them and sold them, he must be 
considered as having concurred in the sale and so be disentitled 
to sue for their conversion on a demand and refusal?" Lord 
Cranworth, speaking of Young v. Grote, 4 Bing. 253, says that 
case went upon the ground, whether correctly arrived at in point 
of fact is immaterial, that in order to make negligence a good 
answer there must be something that amounts to an estoppel or 
ratification — "that the plaintiff was estopped from saying that he 
did not sign the cheque," and then he says the doctrine of ratifi- 
cation is well illustrated by Coles v. Bank of England, 10 A. & E. 
437. I think the observations made by the Lords in the case of 
Bank of Ireland v. Evans' Charity Trustees, 5 H. L. C. 389, have 
shaken Young v. Grote, 4 Bing. 253, and Coles v. Bank of Eng- 
land, 10 A. & E. 437, as authorities. In the present case I think 
there was no estoppel, no ratification, and no negligence, and that 
the defendant is entitled to our judgment. 

Baggallay, L.J., concurred that the judgment ought to be 
entered for the defendant. 

Judgment for the defendant. 



Ledwich v. McKim {1873), 53 N. Y. 307. 

Appeal from judgment of the General Term of the Superior 
Court of the city of New York in favor of plaintiff, entered upon 
an order denying motion for a new trial and directing judgment 
on a verdict. 

This action was brought to recover back the purchase-money 
alleged to have been paid to defendants by plaintiff's assignor, 
William B. Scranton, upon the purchase of certain railroad 
bonds, upon the ground of failure of title. 

On the 16th of October, 1865, William B. Scranton, plain- 
tiff's assignor, bought of defendants ten instruments, purporting 
to be bonds of the Vicksburg, Shreveport and Texas Railroad 
Company, each bearing date September 1st, 1857, and professing 
to bind the company to pay to bearer "the sum of either two 



Ledwich v. McKim 131 

hundred and twenty-five pounds sterling, or one thousand dollars, 
lawful money of the United States of America, to wit: two 
hundred and twenty-five pounds sterling, if the principal and 
interest are payable in London, and one thousand dollars, lawful 
money of the United States of America, if the principal and 
interest are payable in New York or New Orleans." To each 
of the instruments were attached forty interest warrants or 
coupons for the payment of "nine pounds sterling" each if pay- 
able "in London," or forty dollars if payable in "New York or 
New Orleans," the first of said coupons falling due on the ist of 
March, 1858, and one falling due every six months thereafter. 
In the body of each instrument it is provided that "the president 
of the company is authorized to fix by his indorsement the place 
of payment of the principal and interest, in conformity with the 
tenor of this obligation." Indorsed on each instrument were the 
words : 

"I hereby agree that the within bonds and the interest 

coupons thereto attached shall be payable in . 

"C. G. Young, President." 

Scranton on the same day on which he purchased the bonds 
of defendants sold them to Scott, Zerega & Co. It subsequently 
transpired that the bonds had never been issued by the railroad 
company; that during the war, viz., in April, 1864, the company's 
office, at Monroe, Louisiana, had been forcibly entered by United 
States soldiers, its safe broken open, and the contents, including 
the bonds in question, carried off. As soon as practicable the 
company advertised the loss of the bonds, giving notice of the 
manner of their abstraction, and warning the public that they 
would not be paid. On learning these facts Scranton, as he tes- 
tified, called on defendants, tendered them the bonds (which 
Scott, Zerega & Co. had placed at his disposal), and demanded 
a return of the consideration money, which tender and demand 
defendants refused to accept or comply with. Recognizing his 
liability to refund to Scott, Zerega & Co. the price which they 
had paid him for the bonds, Scranton assigned to plaintiff his 
claim against defendants arising out of the facts above mentioned. 

Other facts appear in the opinion. 

Plaintiff recovered a verdict for the amount paid for the 
bonds and interest. Exceptions were ordered to be heard at first 
instance at General Term. 

Samuel Hand, for the appellants. 
James Clark, for the respondent. 



132 General Requisites of the Contract 

Folger, J. The plaintiff puts his right of action upon the 
ground, that the defendants sold to his assignor these instru- 
ments, being personal property, without having any title thereto, 
and that hence they are liable upon their implied warranty of 
title. It is not to be disputed that, if these papers are other than 
negotiable instruments, there was in the sale of them by the 
defendants an implied warranty of their title to them, and that 
on a failure of title they are liable. The defendants insist, how- 
ever, that they only impliedly warrant the genuineness of the 
execution of the instrument. In this they err. (Murray v. Judah, 
6 Cow. 484.) The seller warrants the genuineness of the instru- 
ment, and that it is what it purports to be. ( Gurney v. Womers- 
ley, 28 Eng. L. & Eq. 256; see Thrall v. Newell, 19 Vt. 202.) 

It is established by the proofs and verdict, that the instru- 
ments were stolen from the railroad corporation, whose obliga- 
tions they purport to be. It follows that the defendants could 
acquire no title to them, unless they bring them and bring them- 
selves, within the rules which protect the bona fide holder for 
value of commercial paper. The bonds of a railroad corporation, 
if they possess the requisites for negotiable paper, fall into that 
class of instruments, and are to be dealt with and disposed of by 
an application of the same legal principles. But a negotiable 
instrument must be a complete and perfect instrument when it is 
issued, or there must be authority reposed in some one, afterward 
to supply anything needed to make it perfect. (The Norwich 
Bank v. Hyde, 13 Conn. 279; Exon v. Russell, 4 M. & S. 505; 
Woodworth v. Bank of America, 19 J. R., 391.) It is evident 
upon the face of these papers that they were meant to have a 
specific place of payment, and that the kind of national money 
in which they were to be paid and the amount thereof were also 
to be specific, and that all of this was yet to be specified when 
they came into and out of the hands of the defendants. Now an 
exact place of payment, when a place of payment is meant to be 
fixed, and an exact amount to be paid, are essential parts of a 
negotiable instrument. (See cases last cited, supra.) In Welch 
v. Sage (47 N. Y. 143), cited by the defendants, the bonds were 
perfect and negotiable without the certificate which had been 
detached. (See page 148.) These instruments were not perfect 
when they passed from the possession of the defendants to that 
of the plaintiff's assignor. It was not then determined where 
they were to be paid nor in what national money they were to be 
paid, neither the principal nor the interest. This was uncertain, 
until by lawful authority, a space left for the purpose, was filled 



Ledwich v. McKim 133 

with the name of the place of payment. The corporation had 
given power to their president to fill this blank, which power he 
had not exercised in fact. This was apparent to the defendants 
and to all others dealing with them. It was plain that the instru- 
ments were still imperfect and incomplete, and that they were so 
when they left the possession of the railroad corporation. It is 
incumbent then upon the defendants, to show that there is right- 
ful authority elsewhere than in the corporation or its president 
to fill the blanks and make these bonds perfect instruments. The 
defendants contend that they or any holder of these instruments, 
seeing the indorsement of the president in blank, would undoubt- 
edly and justly regard themselves as authorized to fill the blank. 
Cases are cited to sustain this proposition. In all of them, how- 
ever, there is an authority from the party to be bound, to him to 
whom the paper was intrusted, for the filling of the blank, or an 
actual intrusting of it to him upon some confidence as to its use 
or disposition. This authority is either express, or it is implied 
from an actual delivery for future use, of the instrument, though 
still in its imperfect condition. As to an express authority there 
can be no question or doubt. The implied authority is found in 
the fact of delivery for use. For as it is not to be presumed that 
the delivery for use was meant to be a nugatory and unavailing 
act, and as it is apparent that it would be, if the instrument may 
not be perfected before put to use, the law implies an intention and 
hence an authority, that he to whom it is thus delivered, may 
supply all needs for making it a perfect and binding negotiable 
instrument. But this authority is not implied from the fact alone, 
that the paper is in hands other than those of him who is to be 
bound, but from the fact joined with this other fact, that it has 
been by him intrusted to those hands for the purpose and with 
the intent that it shall go into use and circulation. And an express 
authority, though it be limited, if it be exceeded by the one in 
whom confidence has been reposed, renders the party to the 
instrument liable to a bona fide holder for value, on the principle 
that of two, one of whom must suffer by the wrongful act of a 
third, it should be he who has enabled the wrongful act to be 
done. But there cannot be an enabling of the wrongful act, unless 
there be assisting action of the party to the instrument who is 
sought to be bound, and there must be that in his conduct, in 
relation to the paper, which shows a parting with the possession 
of it for use, or with a confidence in him to whom it is delivered. 
The liability of the maker of the instrument is put upon his 
act in sending it into the world in its imperfect form ( Cruchley v. 



134 General Requisites of the Contract 

Clarance, 2 M. & S., 90), or upon an authority given or confidence 
reposed in the one put into possession of the instrument, that he 
should do that with it which should set it afloat on the currents 
of business. (Van Duzer v. Howe, 21 N. Y., 531.) In the last 
case cited, Denio, J., says, that the principle which lies at the 
foundation, is that the maker, who by putting his paper in circula- 
tion has invited the public to receive it of any one having it in 
possession with apparent title, is estopped to urge the actual defect 
of title against a bona fide holder. So far has this gone, that it 
has been held that this authority is revoked by the death of the 
party sought to be bound, so that one taking paper indorsed by 
him, and intrusted by him to another for use while yet in an imper- 
fect state, may not recover on it against the estate of the deceased 
indorser. (Mich. Ins. Co. v. Leavenworth, 30 Vt, 11.) And this 
court has held that when a negotiable instrument is in hands 
to which, prima facie, it has not come in the regular course of bus- 
iness, it is taken by a third party at his peril. (Central Bank v. 
Hammett, 50 N. Y., 158.) No authority has been cited, which 
decides that the maker of an instrument, negotiable but for some 
lack susceptible of being supplied, so that it is yet imperfect, who 
has not by his own act, or by the act of another authorized or 
confided in by him, put it in circulation, confers a power upon even 
a bona fide holder to supply that lack. He must have been himself 
instrumental in its leaving his possession and control and passing 
into that of another, and have been so with the purpose of its 
becoming effectual for circulation, or with some trust in the per- 
son to whom committed, before he can be held liable. He must 
in some way and for some purpose have created an agency in some 
one to act with or to hold the paper ; and to find an authority in 
a subsequent holder to make perfect the imperfect paper, this 
agency must first be established. The remarks of Byles, J., in 2 
Hurlst. & Colt., 184, cited and relied upon by the defendants, are 
qualified by him in Foster v. MacKinnon (4 L. R. Com. PL, 709), 
where he says, that if they be right, it can only be with reference 
to a complete instrument. There was no such instrumentality 
on the part of this railroad corporation. On the contrary, it 
appears that it had no part in the bonds going out of its possession, 
but was despoiled of them by superior force. 

The defendants claim that there was a failure of the proof 
to sustain the allegations of the complaint, and that their motion 
to dismiss the complaint should have been granted. The com- 
plaint, they say, substantially averred a cause of action arising 
from false representations, which is an action ex delicto; and that 



Ledwich v. McKim 135 

proof of a breach of an implied warranty of title, being matter of 
contract, will not sustain a complaint for the cause averred. It 
is true that the complaint avers that the defendants represented 
these instruments to be the bonds of the railroad corporation, 
issued by and binding upon it, and that the plaintiff's assignor 
relied upon these representations. But the summons is not for 
relief. It is for money. The complaint avers the facts which 
were proven and which make out a cause of action in contract. 
The presence of the averment as to the representations, even were 
they averred to have been false and fraudulent, do not make the 
action one ex delicto. (See Conaughty v. Nichols, 42 N. Y., 83.) 

The defendants also moved to dismiss the complaint, on the 
ground that no damages had been proven to have been sustained 
by the plaintiff. Whatever other answer might be made to this 
motion, it did appear that the mortgage, given by the railroad 
company as a security for the bonds of which these instruments 
were supposed to be a part, had been foreclosed, and the property 
covered by it sold and moneys realized thereon. If these instru- 
ments had been genuine, the plaintiff or his assignor would have 
had a right to share in a division of this sum among the bond- 
holders. It would doubtless have been a small dividend which 
would have been received ; but however small, if appreciable, the 
plaintiff was entitled to it, and entitled to a verdict for that 
amount. So that a motion to dismiss, for the reason stated, was 
properly denied. And whatever the damages were, the plaintiff 
had a right to them, as assignee (see Bor dwell v. Collie, 45 N. 
Y., 494), and though he should receive them not for himself, but 
for others, represented by him, who were the real parties in inter- 
est, he being a trustee of an express trust. To the rule of dam- 
ages, as stated to the jury in the charge of the court, there was 
no exception taken. 

The defendants offered to read in evidence, certain papers 
which it was claimed would show a submission of this contro- 
versy to arbitration, and an award in favor of the defendants. 
These were not competent to be admitted in bar of the plaintiff's 
action. The jury have found, upon the question being submitted 
to them, that the plaintiff's assignor bought the instruments for 
himself. As it was not claimed that he was a party to the sub- 
mission, the papers were not competent evidence against him in 
direct bar of his action. They were not competent as admissions 
of a party in interest, until it was established that he by whom 
they were made was such ; nor could they until then be received 
to assist in establishing the fact of his interest. The immediate 



136 General Requisites of the Contract 

issue was, what were the mutual rights of the plaintiff's assignor 
and of Zarega & Co. at the time of the purchase by the former 
of these instruments, neither of them being parties on the record 
in this action. The rule is, that this inquiry lets in such evidence 
as would have been receivable between those persons. ( I Phil, 
on Ev., 465, [490], chap. 8, § 10.) The declarations of Zarega 
would' not have been competent in his favor against the plaintiff's 
assignor, and were not admissible. 

But it is claimed that, if not competent in bar of the plain- 
tiff's action, they were admissible on the collateral issue of the 
credibility of the witness Zarega. ' He had testified that his house 
did not buy the bonds from the defendants, but did buy them of 
Scranton, the plaintiff's assignor. One defence set up in the 
answer was that the bonds were sold by the defendants to that 
house, and that afterward, on claim by it, there was a submission 
to arbitrators and award in the defendants' favor. It was material 
to this issue, the testimony he had given, and it was on a material 
point that the defendants now claim that they sought to contradict 
him. And the papers offered, if shown to have been signed by 
or with the knowledge of Zarega, or to have come to his knowl- 
edge, were pertinent for that purpose ; but there was no proof of 
this. 

The defendants' request to charge, it was not error for the 
court to refuse. There was testimony by Scranton from which 
the jury could find that he tendered a return to the defendants 
of the same instruments purchased of them. 

The judgment should be affirmed, with costs to the 
1 espondent- 

All concur. Judgment affirmed. 



SIGNING IN TRADE OR ASSUMED NAME. § 20. 

Jones v. Home Furnishing Co. (1896), 9 App. Div. Rep. (N. Y.) 
103, 41 N. Y. Supp. 71. 

Appeal by the defendant, the Home Furnishing Company, 
from three judgments of the County Court of the County of 
Kings, entered in the office of the clerk of the County of Kings on 
the 1st day of April, 1896, upon the decision of the court affirm- 
ing three judgments rendered by a justice of the peace of the 
City of Brooklyn. 

R. W. Newhall, for the appellant. 
John B. Green, for the respondent. 



Jones v. Home Furnishing Co. 137 

Hatch, J. : Separate actions were brought upon three prom- 
issory notes. The notes, which were made payable to the order 
of "National Publishing Company," and were signed by the 
defendant through its president, were each in the same form, 
excepting the dates and amounts. The defendant is a domestic 
corporation, having its place of business in Brooklyn. The Na- 
tional Publishing Company is a name assumed by plaintiff in 
carrying on his business, and represents nothing beyond that 
assumption. It is conceded that the notes were each given for a 
valuable consideration received by the defendant from the plain- 
tiff, but the claim is made that the notes were made payable to a 
company that had no existence, and that, therefore, the paper was 
fictitious; and that as the indorsement was fictitious and spuri- 
ous no title passed to the notes. This defense savors of delay 
and the use of legal remedies to prevent collection of a bona 
fide debt. The notes were as much payable to Jones when they 
were made payable to the name under which he carried on his 
business as though he had been named therein. It was not in 
legal contemplation a fiction, but it was the plaintiff under this 
business name and represented him. When the notes were made 
and delivered to plaintiff under these conditions they created a 
liability against the defendant in plaintiff's favor ; and had the 
complaint set out the fact that the payee was the plaintiff's busi- 
ness name, and that the notes were so made payable on account 
thereof, there would be little doubt that defendant would not have 
had the temerity to interpose a defense. At the most, the question 
now here is one of pleading, as plaintiff has made the usual alle- 
gation of delivery to the payee and indorsement by it to the 
plaintiff. But the facts were all known before issue was joined 
and when the trial was had. The complaint, therefore, will be 
deemed amended in accordance with the facts. The notes in 
plaintiff's hands are subsisting liabilities against the defendant in 
his favor. (Mechanics' Bank v. Straiton, 3 Keyes, 365 ; Maniort 
v. Roberts, 4 E. D. Smith, 83.) These notes having been given 
for bona fide debts, and delivered to the plaintiff, defendant is 
estopped from setting up as against plaintiff that they were made 
payable to a fictitious payee, if by such averment the notes would 
be defeated in plaintiff's hands. (Irving Nat. Bank v. Alley, 79 
N. Y. 536.) 

The judgments appealed from should be affirmed, with costs. 

All concurred. 

Judgments affirmed, with costs. 



138 Signature by Procuration 



SIGNATURE BY PROCURATION. § 23. 

Attwood et al. v. Mannings (1827), 7 B. & C. 2j8, 4 Eng. Rul. 

Cos. 364. 

Assumpsit by the plaintiffs, as indorsees, against the defend- 
ant, as acceptor of a bill of exchange for 1560/. Plea, the general 
issue. At the trial before Lord Tenderden, C. J., at the Lon- 
don sittings after Michaelmas term, 1823, a verdict was found 
for the plaintiffs, subject to the opinion of this court on the fol- 
lowing case: 

The plaintiffs were bankers carrying on business in the city 
of London ; the defendant was a merchant engaged in extensive 
mercantile business, and also, in joint speculations to a consider- 
able amount, with Thomas Burleigh, Messrs. Bridges and Elmer, 
S. Howlett, and W. Rothery. In the year 181 5 the defendant went 
abroad on the partnership business, and remained abroad till after 
the bill upon which this action was brought became due. By a 
power of attorney, dated the 18th of May, 1816, the defendant 
granted power to W. Rothery, T. Burleigh, and S. Munnings, his 
wife, jointly and severally for him, and in his name, and to his 
use, to sue for and get in monies and goods, to take proceedings, 
and bring actions, to enforce payment of monies due, to defend 
actions, settle accounts, submit disputes to arbitration, sign receipts 
for money, accept compositions ; "indorse, negotiate, and discount, 
or acquit and discharge the bills of exchange, promissory notes, 
or other negotiable securities which were or should be payable to 
him, and should need and require his indorsement;'' to sell his 
ships, execute bills of sale, hire on freight, effect insurances ; 
"buy, sell, barter, exchange, export and import all goods, wares, 
and merchandises, and to trade in and deal in the same, in such 
manner as should be deemed most for his interest ; and generally 
for him and in his name, place, and stead, and as his act and deed, 
or otherwise, but to his use, to make, do, execute, transact, per- 
form, and accomplish all and singular such further and other acts, 
deeds, matters, and things as should be requisite, expedient, and 
advisable to be done in and about the premises, and all other his 
affairs and concerns, and as he might or could do if person- 
ally acting therein." By another power of attorney, dated the 
23d of July, 1817, and executed by the defendant when abroad, 
he gave to his wife, S. Munnings, power to do a variety of acts 
affecting his real and personal property ; "and also for him and 



Attwood et al. v. Munnings 139 

on his behalf, to pay and accept such bill or bills of exchange as 
should be drawn or charged on him by his agents or correspond- 
ents as occasion should require, &c. ; and generally to do, nego- 
tiate, and transact the affairs and business of him, defendant, 
during his absence, as fully and effectually as if he were present 
and acting therein." T. Burleigh corresponded with the defend- 
ant, and acted as his agent, both before and after the receipt of 
this power. The defendant, while abroad, employed part of the 
produce of the joint speculations in his individual concerns, and 
during his absence, T. Burleigh, for the purpose of raising money 
to pay creditors of the joint concern, who were become urgent, drew 
four bills of exchange for 500/. each upon the defendant, dated May 
22d, 1819. The proceeds of those bills were applied in payment 
of partnership debts; they were accepted by the defendant by 
procuration of S. M., his wife. The bill in question was after- 
wards, in order to raise money to take up those bills, drawn and 
accepted in the following form : — "Six months after date pay to 
my order 1560/., for value received: T. Burleigh. Accepted per 
procuration of G. G. H. Munnings. — S. Munnings." This bill 
was discounted by the plaintiffs. The defendant returned to Eng- 
land in October, 1821, and he, and each of the partners to the 
joint speculations, claimed to be a creditor on that concern. 

Bayley, J. This was an action upon an acceptance import- 
ing to be by procuration, and, therefore, any person taking the 
bill would know that he had not the security of the acceptor's 
signature, but of the party professing to act in pursuance of an 
authority from him. A person taking such a bill, ought to exer- 
cise due caution, for he must take it upon the credit of the party 
who assumes the authority to accept, and it would be only reason- 
able prudence to require the production of that authority. The 
plaintiff in this case relies on the authority given by two powers 
of attorney, which are instruments to be construed strictly. By 
the first of the powers in question the defendant gave to certain 
persons authority to do certain acts for him, and in his name, and 
to his use. It is rather a power to take than to bind ; and, looking 
at the whole of the instrument, although general words are used, 
it only authorizes acts to be done for the defendant singly; it 
contains no express power to accept bills, nor does there appear 
to have been an intention to give it: the first power, therefore, 
did not warrant this acceptance. The second power gave an 
express authority to accept bills for the defendant and on his 
behalf. No such power was requisite as to partnership transac- 
tions, for the other partners might bind the firm by their accept- 



140 Signature by Procuration 

ance. The words, therefore, must be confined to that which is 
their obvious meaning, viz., an authority to accept in those cases 
where it was right for him to accept in his individual capacity. 
Besides, the bills to be accepted are those drawn by the defend- 
ant's agents or correspondents ; but the drawer of the bill in ques- 
tion was not his agent quoad hoc. The bills are to be accepted, 
too, "as occasion shall require." It would be dangerous to hold 
that the plaintiff in this case was not bound to enquire into the 
propriety of accepting. He might easily have done so by calling 
for the letter of advice ; and I think he was bound to do so. For 
these reasons, I am of opinion that judgment of nonsuit must be 
entered. 

Holroyd, J. I agree in thinking that the powers in question 
did not authorize this acceptance. The word procuration gave due 
notice to the plaintiffs, and they were bound to ascertain, before 
they took the bill, that the acceptance was agreeable to the authority 
given. The case does not state sufficient to show that this bill 
was drawn by an agent in that capacity, but rather the contrary; 
for it appears that it was drawn to raise money for the joint con- 
cern in which the drawer was a partner; it does not, therefore, 
come within the special power. Then, as to the general powers. 
These instruments do not give general powers, speaking at large, 
but only where they are necessary to carry the purposes of the 
special powers into effect. 

Littledale, J. I am of the same opinion. It is said that 
third persons are not bound to enquire into the making of a 
bill ; but that is not so where the acceptance appears to be by 
procuration. The question then turns upon the authority given. 
The first power of attorney contains an authority to indorse, but 
riot to accept bills ; the latter, therefore, seems to have been pur- 
posely omitted. Neither is this varied by the general words, for 
they cannot apply to any thing as to which limited powers are 
given. The second power gives authority "to accept for me and 
in my name, bills drawn or charged on me by my agents or corre- 
spondents, as occasion shall require." The latter words, as to the 
occasion, do not appear to me to vary the question; and, reading 
the sentence without them, it authorizes the acceptance of bills 
drawn by an agent. The present bill was not drawn by Burleigh 
in his character as agent, and therefore the acceptance was with- 
out sufficient authority, and the plaintiff cannot recover upon it. 

Postea to the defendant. 



In re Soltykoff 141 

EFFECT OF INDORSEMENT BY INFANT. § 24. 

In re Soltykoff (1891), 1 Q. B. Div. 413. 

Appeal against the dismissal of a bankruptcy petition pre- 
sented against Prince Alexis Soltykoff. 

The petitioner was the indorsee for some bills of exchange 
which had been accepted by the Prince when he was an infant. 
There was evidence that the bills had been given in payment for 
goods supplied to the Prince by the drawer. It was assumed for 
the purpose of the argument that the goods were necessaries. 

The registrar held that an infant could not make himself 
liable for accepting a bill of exchange, even though he accepted 
the bill in order to pay for necessaries supplied to him by the 
drawer. 

The petitioner appealed. 

Bigham, Q. C, and Henry Kisch, for the appellant. 
Finlay, Q. C, and Herbert Reed, for the respondent, were 
not called upon. 

Lord Esher, M. R. The claim of the petitioning creditor is 
founded upon a debt alleged to be due to him as the indorsee of 
some bills of exchange accepted by the respondent, who at the 
time of the acceptance was an infant. The petitioner is not a per- 
son who supplied necessaries to the respondent when he was an 
infant. He supplied no necessaries to the infant; he is only the 
indorsee of some bills of exchange accepted by him. As regards 
an indorsee of a bill of exchange it is immaterial whether there 
was any consideration for the bills as between the drawer and the 
acceptor ; he can sue the acceptor as the indorsee of the bills, and 
nothing else. The question, therefore, whether necessaries were 
supplied to the infant by the drawer of the bill, is immaterial. 

It has been held in a long series of cases that an infant can- 
not make himself liable by the custom of merchants either by a 
bill of exchange or by a promissory note. It is said that those 
decisions are not binding on this Court. That may be so. But, in 
my opinion, it would be absolutely wrong at the present day to 
overrule those cases, which have been so long accepted as law. 
But I do not wish to rest my decision solely upon case law. The 
principle long established by English law is this — that an infant 
cannot make himself liable upon any contract whatever, except a 
contract for a supply of necessaries. I will go further and say this, 



142 Effect of Indorsement by Infant 

that the principle of the cases goes to this extent, that, if an infant 
accepted a bill of exchange or gave a promissory note for the 
price of necessaries supplied to him, and he were sued upon the 
bill or the note by the man who had supplied the necessaries, and 
the plaintiff relied only on the bill or note, and gave no evidence 
of the supply of necessaries, the infant would not be liable. He 
is not liable upon a bill of exchange or a promissory note under 
any circumstances. It is not necessary for the protection of per- 
sons dealing with an infant that he should be liable on such a 
contract. The person who has supplied an infant with necessaries 
can always sue on that contract for the price of what he has sup- 
plied. Whether such a debt would support a bankruptcy petition 
I will not decide at present. The cases cited are against the 
appellant, and so is the established principle of English law. I 
think the Infants' Relief Act is also against him ; it seems to me 
to assume that an infant is not liable upon a bill of exchange or a 
promissory note. I think this is a necessary implication from that 
Act, and also from the Bills of Exchange Act. In my opinion, 
the decision of the registrar was quite right. 

Bowen, L. J. I am entirely of the same opinion. The peti- 
tion is founded on the contract created by the bills ; not on the 
original contract for the supply of goods, even if that were a 
contract for the supply of necessaries. The Infants' Relief Act is 
clear that an infant cannot be made liable on such a contract, and 
the Bills of Exchange Act assumes the same thing. 

Lopes, L. J. The petitioner is suing by virtue of the custom 
of merchants as indorsee of some bills of exchange. The question 
whether necessaries were supplied to the infant does not arise. 
But, even if the proceedings were between the original parties to 
the bills, the answer to the claim would be, that an infant cannot 
render himself liable upon a bill of exchange or a promissory note. 
This is no hardship upon a person who supplies necessaries to 
an infant, for he is entitled to sue the infant upon the original 
contract. All the authorities are in favour of this view of the law, 
and both the Infants' Relief Act and the Bills of Exchange Act 
point in the same direction. 

Appeal dismissed. 



Beattie v. National Bank 143 



FORGED SIGNATURES. § 25. 



Beattie v. National Bank {1898), 174 III. 571, 66 Am. St. Rep. 

318. 

There is no controversy as to the facts. The case was tried 
upon a stipulation as to the facts, which were substantially as 
follows: On September 15, 1891, one George P. Bent of No. 
223 Canal Street, Chicago, sent for collection to the First National 
Bank of Council Bluffs, Iowa, a note for $133.50, made by a man 
by the name of Max .Bournicus. On September 28, 1891, the 
First National Bank of Council Bluffs collected the note, and on 
the same day made its draft for $133.25 on the National Bank of 
Chicago, Illinois, to the order of George A. Bent, Chicago. The 
draft was made payable to the order of George A. Bent, instead of 
George P. Bent, by mistake. It was mailed to George A. Bent, Chi- 
cago, Illinois. George P. Bent was intended to be made the payee in 
the draft ; George A. Bent never had any business transactions with 
appellee, the drawee, or with the First National Bank of Council 
Bluffs, the drawer of the draft. The latter bank was never indebted 
to George A. Bent. A man, named George A. Bent, received the 
draft from the postoffice, and endorsed upon it his own name, 
George A. Bent, and sold it to the appellant. The facts tend to show, 
that the appellant purchased the draft in good faith, relying upon 
one Beach, a broker, whom he knew, although he was not acquain- 
ted with George A. Bent, the supposed payee in the draft. After 
purchasing the draft the appellant deposited it for his own account 
in the Bank of Commerce in Chicago, which cleared through the 
Union National Bank of Chicago. The draft was paid by the appel- 
lee bank through the Union National Bank. The appellee returned 
the draft to the National Bank of Council Bluffs, and it was there 
discovered that George A. Bent had received the draft intended 
for George P. Bent. Affidavits, setting up the facts and the mis- 
take which had occurred, were made and attached to the draft ; and 
the draft, with the affidavits so attached, was returned to the appel- 
lee. The appellee returned the draft to the Union National Bank, 
which redeemed it under the rules of the clearing house. The Union 
National Bank presented it to the Bank of Commerce, and the 
latter bank took it up, and required the appellant to make the same 
good. The appellant took the draft to the appellee bank, and, 
ascertaining that the appellee had funds in its hands belonging 
to the First National Bank of Council Bluffs, the drawer of the 
draft, demanded payment; but payment was refused by appellee 



144 Forged Signatures 

on the alleged ground that the endorsement of the payee was a 
forgery. 

Six propositions were submitted by the appellant, the plain- 
tiff below, to the trial court to be held as law in the decision of 
the case. Two of these were marked held, two were marked 
refused, and two were modified. The trial court, of its own 
motion, made in writing and held affirmatively a proposition, hold- 
ing that no right of action existed against the appellee, the Na- 
tional Bank of Illinois, and declined to hold whether or not the 
First National Bank of Council Bluffs was liable. Proper excep- 
tions were taken to the action of the court. 

Harry Vincent, for appellant. 
Arnold Heap, for appellee. 

Mr. Justice Magruder delivered the opinion of the court: 

The question, presented by this record, is within a very nar- 
row compass. It is, whether a party, holding a draft under a 
forged endorsement of the payee therein, or what amounts to a 
forged instrument, can compel the drawee to pay him the draft. 

It is established clearly by the evidence, that the George A. 
Bent, who took the draft from the postoffice and endorsed his name 
upon the back of it, was not the real payee, to whom the drawer 
of the draft intended to make it payable. It is true, that the real 
and intended payee and real owner of the draft was named George 
P. Bent ; but the fact, that the name of the real owner and the 
name of the fraudulent possessor of the draft differ, so far as the 
middle letter of the name is concerned, does not make the case 1 
other than a case, where the name of the real payee and the name 
of the assumed payee are the same. This is so, because the law 
does not regard the middle initial letter as a part of a person's 
name, but only recognizes one Christian name of a party. 
(Thompson v. Lee, 21 111. 241; Erskine v. Davis, 25 id. 251; 
Miller v. People, 39 id. 457; Bletch v. Johnson, 40 id. 116; Hum- 
phrey v. Phillips, 57 id. 132). 

Where a bill is payable to the order of a person, and another 
person of the name of the payee gets hold of it, and endorses it 
to a party who takes it in good faith and for value, such party 
acquires no title to the bill. Cochran v. Atchison, 27 Kan. 728. 
If the endorsement so made by a person who is not the real 
payee, but has the same name as the real payee, is made by such 
person with full knowledge that he is not the real payee, and 
with intent to perpetrate a fraud, his endorsement cannot be 
regarded otherwise than as a forgery. 



Beattie v. National Bank 145 

In Barfield v. State, 29 Ga. 127, it was held that, where 
there were two persons of the same name, and one of them 
signed that name to certain notes with the intention that the 
notes might be used in trade as the notes of the other, it was a 
forgery. 

Blackstone (4 Com. 247) defines forgery to be the fraud- 
ulent making or alteration of a writing to the prejudice of another 
man's right. "One may be guilty of forgery if he fraudulently 
signs his name, although it is identical with that of the person 
who should have signed. Thus, if a bill of exchange is payable 
to A B, or order, and it comes to the hand of a person named 
A B who is not the payee, and who fraudulently endorses it for 
the purpose of obtaining the money, this is a forgery." {United 
States v. Long, 30 Fed. Rep. 678.) Where an endorsement is made 
for the purpose of being fraudulently used as the endorsement 
of another person, it is falsely made. The falsity of the act con- 
sists in the intent that the endorsement shall pass and be received 
as that of some other party, and in such case, the charge of 
forgery can be maintained, although the signature is of a name, 
which might lawfully be used by the person, who put it on the 
draft or bill of exchange. Commonwealth v. Foster, 114 Mass. 

3"- 

In People v. Peacock, 6 Cow. 73, where certain coal was 

consigned to George Peacock of New York, and arrived there, 
and was claimed by another of the same name, who resided in 
the same city, but was not the true consignee ; and he, knowing 
this, obtained an advance of money on endorsing the permit for 
the delivery of the coal with his own proper name, it was held 
that this was forgery. 

Nothing is better settled than that a forged endorsement 
does not pass title to commercial paper negotiable only by endorse- 
ment, and does not justify the payment of such paper. Here, 
whether the endorsement of the payee's name was technically a 
forgery, or was merely a spurious and false endorsement, in either 
case it was inoperative to change the title to the instrument. 
{Graves v. American Exchange Bank, 17 N. Y. 205.) In Graves 
v. American Exchange Bank, supra, it was held that the drawee 
of a bill of exchange is bound to ascertain that the person to 
whom he makes payment is the genuine payee, or is authorized 
by him to receive it ; that it is no defense against such a payee, 
that the drawee, in the regular course of business with nothing to 
excite suspicion, paid the bill to a holder in good faith and for 
value under an endorsement of a person bearing the same name 



146 Forged Signatures 

as the payee. There it was said by the court : "The defendants, 
on whom the draft was drawn, paid it upon the endorsement of 
another Charles F. Graves, residing at or near LaSalle, who 
wrongfully took it from the postoffice at Mendota. Such a pay- 
ment, although made in good faith, did not divest or impair the 
title of the true owner, who had not seen or endorsed the paper." 

In Mead v. Young, 4 Term Rep. 28, the action was brought 
by the endorser of a bill of exchange against the acceptor, the 
bill having been drawn by one Christian on the defendant in Lon- 
don, payable to Henry Davis or order; and, having been put into 
the foreign mail enclosed in a letter from Christian, it got into 
the hands of another Henry Davis than the one in whose favor 
it was drawn ; the defendant accepted the bill, and it was dis- 
counted by the plaintiff; it was held, that it was competent for 
the defendant to prove that the person, who endorsed to the 
plaintiff, was not the real payee, though he was of the same name, 
and though there was no addition to the name of the payee on 
the bill ; and it was also held that, if a bill of exchange payable to 
A or order got into the hands of another person of the same 
name with the payee, and such person, knowing that he was not 
the real person in whose favor it was drawn, endorsed it, he was 
guilty of a forgery. In that case, Ashhurst, J., said: "In order 
to derive a legal title to a bill of exchange it is necessary to 
prove the handwriting of the payee, and, therefore, though the 
bill may come by mistake into the hands of another person though 
of the same name with the payee, yet his endorsement will not 
confer a title." In the same case, Bullard, 'J., said: "I am of 
opinion that it is incumbent on the plaintiff, who sues on a bill 
of exchange, to prove the endorsement of a person to whom it is 
really payable. * * * Now here it is clear, that the endorse- 
ment was not made by the same H. Davis to whom the bill was 
made payable ; and no endorsement by any other person will give 
any title whatever." 

In the case at bar, when the appellant presented the draft 
for payment to the appellee, the latter had a right to know that 
the appellant held the draft under a genuine endorsement. When 
the appellant presented the draft for payment, it had been ascer- 
tained that the endorsement was forged, or at all events spurious 
and false, and was therefore void. No title passed by it, and if 
the appellee had made payment to the appellant, appellee could 
have been compelled again to pay the draft to the true owner 
thereof. Daniel, in his work on Negotiable Instruments, says: 
"The maker of a note or the acceptor of a bill must satisfy him- 



Beattie v. National Bank 147 

self, when it is presented for payment, that the owner traces his 
title through genuine endorsements; for if there is a forged 
endorsement, it is a nullity, and no right passes by it. And pay- 
ment to a holder under a forged endorsement would be invalid 
as against the true owner, who might require it to be paid 
again. * * * The payor should also satisfy himself of the 
identity of the holder; for he cannot defend himself against the 
real payee by showing, that he paid the amount of the bill or note 
to another person of the same name in good faith and in the usual 
course of business." (2 Daniel on Neg. Inst., 4th ed., sec. 1225.) 
So, also, Randolph, in his work on Commercial Paper, says: 
"Where a bank holds a note or bill for collection under a forged 
endorsement and collects and pays it over to its principal, it will 
still be liable to the real owner for the amount collected. * * * 
So, if a bill is endorsed by another person in the payee's name 
and paid to the holder under such endorsement, the payee may 
recover such payment." (3 Randolph on Com. Paper, sec. 1469). 

It follows from the authorities thus referred to, that the 
appellant, having no title to the draft, was not entitled to recover 
the amount thereof from the appellee. 

If, without knowledge of the real character of the endorse- 
ment of the draft by the supposed payee named therein, the 
appellee had paid the amount of the draft to the appellant, it 
could have recovered such amount back from the appellant. 
This results from the fact that "the endorser contracts that the 
bill or note is in every respect genuine, and neither forged, ficti- 
tious nor altered." (1 Daniel on Neg. Inst., 4th ed., sec. 672.) 
Tiedeman, in his work on Commercial Paper, says : "Inasmuch 
as the endorser also warrants that he has a perfect title to the 
paper by endorsement, and is liable if his title proves defective, 
and since no title passes on a forged endorsement, it follows as 
a necessary consequence that the endorser must warrant the gen- 
uineness of the prior endorsements." (Sec. 259.) Randolph, in 
his work on Commercial Paper, says : "Since the endorser war- 
rants the genuineness of prior endorsements, payment, made by 
the drawee to an endorser holding under a forged endorsement, 
may be recovered from such holder." (Sec. 1469.) It was 
held in Chambers v. Union Nat. Bank, 78 Pa. St. 205, that the 
holder of a draft, which is endorsed and passed by him, guaran- 
tees the prior endorsements. In Cochran v. Atchison, supra, 
where a bill was payable to W. W. Owens and one W. W. Owen 
obtained possession of it and wrongfully endorsed it, it was held 
that a subsequent endorser could not relieve himself from liability 



148 Forged Signatures 

to his immediate endorsee on the ground that the latter was 
guilty of negligence in taking the paper without the name of the 
actual payee endorsed thereon, upon the grounds that the endorser 
guarantees the genuineness of the signature of the payee, and 
that the difference in pronunciation between Owens and Owen 
was so slight as not to amount to a variance. The court held 
generally in that case, that an endorser warrants the genuineness 
of endorsements on a bill of exchange. If, therefore, it be true 
that, upon payment of the amount of the draft to appellant by 
appellee, a recovery could be had by appellee from the appellant 
of the amount so paid, upon the ground that appellant by his 
endorsement had guaranteed the genuineness of the previous 
endorsement by George A. Bent, it would be useless to hold that 
a right of recovery exists in favor of the appellant against the 
appellee. To require the appellee to pay an amount, which it 
could hereafter recover back again, would be an idle ceremony. 

Counsel for appellant claims, that he has a right of action 
for negligence against the First National Bank of Council Bluffs, 
Iowa, because of the alleged carelessness of that bank, which was 
the drawer of the draft, in not mailing it properly to the payee 
named therein. In other words, it is said that, instead of address- 
ing the letter enclosing the draft to George A. Bent of Chicago, 
it should have addressed it to George P. Bent of 223 South Canal 
Street, Chicago. We do not deem it necessary to decide, whether 
or not an action will lie in favor of the appellant against the Iowa 
bank. This action is against the appellee bank, and it is sufficient 
to say that, so far as this record shows, the appellee was guilty 
of no negligence. 

The judgment of the Appellate Court, affirming the judg- 
ment of the Circuit Court, is affirmed. 

Judgment affirmed. 



Robertson v. Coleman et al. (1886), 141 Mass. 231. 

Contract to recover the amount of a bank check for $91.08, 
signed by the defendants, dated March 31, 1883, and payable to 
the order of Charles Barney. Trial in the Superior Court, before 
Knowlton, J., who reported the case for the determination of this 
court, in substance as follows : 

On March 27, 1883, a young man went to the Metropolitan 
hotel in Boston, of which the plaintiff was the proprietor, and 
registered his name as Charles Barney. On that or the next day 



Robertson v. Coleman et al. 149 

he took to the place of business of the defendants, who sold prop- 
erty as auctioneers, a team, of which he represented himself to be 
the owner, and which he desired them to sell on his account. He 
gave his name there as Charles Barney. In reply to an inquiry 
regarding him, they received a message by telegraph that Charles 
Barney, of Swanzey, was a responsible and trustworthy man. 
Believing him to be Charles Barney, of Swanzey, they sold the 
horse and carriage for him, and three days afterwards gave him, 
in payment of the money received, the check declarei on. On 
March 31, he left the plaintiff's hotel, where he had been staying 
in the mean time under the name of Charles Barney, and, before 
going, he gave the check to the plaintiff in payment of his board 
bill of $16.75, an d received the balance of its amount in cash from 
the plaintiff At the same time he indorsed it in blank with the name 
of Charles Barney. It turned out that Charles Barney was not 
his true name, and there was no evidence that he had ever gone 
by that name before registering at the plaintiff's hotel. The 
defendants discovered that he had stolen the team which he left 
with them, and, by their order, the bank upon which the check 
was drawn refused to pay it. It was in evidence that there was 
a person in existence by the name of Charles Barney, of Swanzey. 
It appeared that the plaintiff made no further inquiry as to the 
identity of the payee than for information which was founded 
upon the representations of his said lodger. 

Upon these facts, the judge instructed the jury as follows: 
"If the person who took the team to the defendants' place of bus- 
iness left it there under the name of Charles Barney, and the 
defendants, in receiving it, dealt with him as Charles Barney, and 
sold the team for him, and three days afterwards gave him the 
check in the belief that he was Charles Barney, of Swanzey, and 
was the owner of the team, and said person had in the mean time 
been boarding at the plaintiff's hotel under that name, and had 
gone by that name while at said hotel, the plaintiff, upon the 
receipt from him of said check in good faith, for a valuable con- 
sideration, with his indorsement upon it, acquired a good title to 
it as against the defendants." 

The jury returned a verdict for the plaintiff. If the instruc- 
tion was correct, judgment was to be entered upon the verdict ; 
otherwise, such order to be made as law and justice might require. 

6". /. Thomas & C. P. Sampson, for the defendants. 
C. F. Kittredge, for the plaintiff. 



150 Bills in a Set 

Field, J. The name of a person is the verbal designation by 
which he is known, but the visible presence of a person affords 
surer means of identifying him than his name. The defendants, 
for a valuable consideration, gave the check to a person who said 
his name was Charles Barney, and whose name they believed to 
be Charles Barney, and they made it payable to the order of 
Charles Barney, intending thereby the person to whom they gave 
the check. The plaintiff received this check for a valuable con- 
sideration, in good faith, from the same person, whom he believed 
to be Charles Barney, and who indorsed the check by that name. 
It appears that the defendants thought the person to whom they 
gave the check was Charles Barney, of Swanzey, a person in 
existence, but it does not appear that they thought so from any 
representations made by the person to whom they gave the check, 
although this, perhaps, is immaterial. It is clear from these facts, 
that, although the defendants may have been mistaken in the sort 
of man the person they dealt with was, this person was the person 
intended by them as the payee of the check, designated by the 
name he was called in the transaction, and that his indorsement of 
it was the indorsement of the payee of the check by that name. 
The contract of the defendants was to pay the amount of the 
check to this person or his order, and he has ordered it paid to 
the plaintiff. If this person obtained the check from the defend- 
ants by fraudulent representations, the plaintiff took it in good 
faith and for value. (See Samuel v. Cheney, 135 Mass. 278; 
Edmunds v. Merchants' Transportation Co., 135 Mass. 283.) 

Judgment on the verdict. 



BILLS IN A SET. §§ l8o 185. 

Walsh v. Blatchley (1853), 6 Wis. 413. 

Appeal from Marquette Circuit Court. 

The plaintiff declared in trespass on the case upon promises, 
for money lent ; money laid out and expended ; money paid and 
received by the defendants for the use of the plaintiff, &c. ; also 
gave notice of the cause of action, the indorsement by defendants 
upon the bill of exchange, copied, and served with the declaration, 
as follows : 



Walsh v. Blatchley 151 

"Express Exchange Office, 
"Adams & Co. "Downieville, San Francisco. 

"Exchange for $250. Oct. 6, 1854. 

"No. 9,917." 

"At sight of this 2d of exchange — first and third unpaid — 
" pay to the order of Phcebe Blatchley, two hundred and fifty 
" dollars value received, and place to account of exchange. 

"Adams & Co. 

"To Messrs. Adams & Co., New York, 
(Countersigned,) 
"S. W. Langworthy, C. B. Macy, Agents." 

Indorsed by Phcebe Blatchley to Henry Dart or order, and 
by J. Henry Dart to P. O. Strang or order, and by Strang to P. 
Walsh or order. 

The defendants plead the general issue ; and by mutual agree- 
ment of counsel, the cause was tried before the circuit judge, 
without the intervention of a jury, who found, and reported in 
writing with his decision, the facts and conclusions, and recited 
in full in the opinion of the court therein. 

Orton, Hopkins and Firman, for appellant. 
Smith and Keyes, for respondent. 

By the Court, Cole, J. This case was tried by the court 
without the intervention of a jury, and the judge found the 
following facts: 

First. That the action is brought upon the bill of exchange 
introduced in evidence, and described in the plaintiff's declara- 
tion. That this bill, which is the second of the set, was indorsed 
by the defendants on a Sunday. 

Second. That the first of the set was sold by defendants to 
plaintiff about the 1st of January, 1855. That the plaintiff with- 
out delay, sent the same by mail to his correspondent in New 
York city, the residence of the drawee, for presentation and pay- 
ment. That by some delay in the mail the letter did not reach 
New York until the 9th of April following, at which time, the 
letter with inclosure, was duly received by the said correspondent. 
That the bill was not presented for payment. 

Third. That in the last of March, the plaintiff, fearing the 



152 Bills in a Set 

said first bill was lost, procured the defendants to indorse and 
deliver to him the second of the set, and had it presented on the 
third day of April following for payment, to the drawee, and 
payment was refused. The bill was duly protested, and proper 
notice given to the defendants who were indorsers. 

The conclusions of law which the court drew from these 
facts, were, "ist. That the liability in this action, if any at all, 
is upon the second bill of the set, and not on the first; 2d. That 
because the said bill was indorsed on Sunday, that therefore such 
indorsement was absolutely void." 

We have examined with considerable care the authorities, 
and have not been able to find a case precisely like the present, 
although it would seem as if the point must have frequently arisen 
in the courts in this country, and in England. The case of 
Perreira v. Jepp et al., cited in a note on page 449, 11 B. and C, 
would seem to have a strong bearing upon the case at bar. It 
was there held that he to whom any part of the set is first trans- 
ferred, acquires a property in all the other parts, and may main- 
tain trover even against a bona fide holder, who subsequently, 
by transfer, or otherwise, gets possession of another part of the 
set. That is, deciding that the first indorsement of one of the- 
set vests in the indorsee the absolute right to the possession of 
the whole set. And we suppose it would follow, from this doc- 
trine, that the indorsement of the second in this case was entirely 
unnecessary. The liability of the indorser arose from indorsing 
the first of the set for value. We think her liability was not 
increased one jot or tittle by indorsing the second of the set. 
Suppose she had indorsed all of them in January, at the time she 
indorsed the first, is it not obvious that her liability would not 
have been different from what it is? It is conceded that the 
indorsement of the first was good, and this indorsement was 
entirely adequate to carry with it the second and third. (See 
Edwards on Bills, 304 and 162; Holdworth v. Hunter, 10 B. & C. 
449; Kcntworthy v. Hopkins, 1 Johns. Cas. 107.) Either of the 
set may be presented for acceptance, and, if not accepted, a right 
of action arises upon due notice, against the indorser. Downes 
and Co. v. Church, 13 Peters, 205. The bill upon which the pro- 
test was made was declared on and produced, and it also appeared 
that the first had not been presented for payment. The court 
says, and we think properly and correctly, that if the first had 
been presented for payment and protested, even as late as April 
9th, that upon proper notice the indorser would have been held, 
for the delay in the mail would have been a sufficient excuse for 



Burson v. Huntington 153 

the apparent neglect in not presenting it for acceptance before. 
The case might have been relieved from all doubt and difficulty, 
had the indorsee declared upon the first of the set, and produced 
on the trial the second, which had been presented for acceptance 
and dishonored. Wells v. Whitehead, 15 Wend. 527. This he 
did not see fit to do, but we think he was entitled to recover even 
as the facts appeared before the court. 

The judgment is reversed, and a new trial ordered. 



Section III — Delivery. 

DELIVERY ESSENTIAL TO COMPLETION OF CONTRACT. § l8. 

Burson v. Huntington {1870), 21 Mich. 415, 4 Am. Rep. 497. 
Action on the following instrument: 

"Schoolcraft, Mich., Apr. 12th, 1866. 
"Ninety days from date, for value received, I promise to pay 
A. N. Goldwood, or order, one hundred and twelve dollars, and 
fifty cents, with interest. John W. Burson." 

Indorsed on the back, — "A. N. Goldwood." 

It appeared on the trial that Goldwood had come to the 
house of Burson to finish some negotiations in respect to which 
the note in suit was to be given ; that the note was there written 
by Goldwood and signed by Burson ; that the arrangement was 
that some other person should sign the note as surety with Bur- 
son; that Burson left the room with the avowed purpose of get- 
ting his uncle as surety, telling Goldwood as he went out not to 
touch the note till he came back because the negotiations were not 
finally settled; that while Burson was out Goldwood took the 
note and went away with it in spite of the remonstrance of Bur- 
son's sister, who was present when Burson said to Goldwood not 
to take the note; that Goldwood subsequently indorsed the note 
to Huntington, who sues as a holder in due course ; that the note 
was not stamped when Goldwood took it. Judgment for plaintiff. 

The further facts sufficiently appear from the opinion. 

Christiancy, J. (after passing upon questions of evidence 
and practice) As a general rule, a negotiable promissory note, 



154 Delivery Essential to Completion of Contract 

like any other written contract, has no legal inception or valid 
existence, as such, until it has been delivered in accordance with 
the purpose and intent of the parties. See Edwards on B. & N., 
ijfj, and authorities cited, and i Pars, on B. and N., 48 and 49, 
and cases cited, and see Thomas v. Watkins, 16 Wis. 549 ; Mahon 
v. Sawyer, 18 Ind. 73; Carter v. McClintock, 29 Mo. 464. 

Delivery is an essential part of the making or execution of 
the note, and it takes effect only from delivery (for most pur- 
poses) ; and if this be subsequent to the date, it takes effect from 
the delivery and not from the date. 1 Pars., ubi supra. This is 
certainly true as between the original parties. 

But negotiable paper differs from ordinary written contracts 
in this respect: that even a wrongful holder, between whom and 
the maker or indorser the note or indorsement would not be valid, 
may yet transfer to an innocent party, who takes it in good faith, 
without notice and for value, a good title as against the makef 
or indorser. And the question in the present case is, how far 
this principle will dispense with delivery by the maker. 

When a note payable to bearer, which has once become oper- 
ative by delivery, has been lost or stolen from the owner, and has 
subsequently come to the hands of a bona fide holder for value, 
the latter may recover against the maker, and all indorsers on 
the paper when in the hands of the loser ; and the loser must sus- 
tain the loss. In such a case there was a complete legal instru- 
ment; the maker is clearly liable to pay it to some one; and, the 
question is only to whom. 

But in the case before us, where the note had never been 
delivered, and therefore had no legal inception or existence as a 
note, the question is whether he is liable to pay at all, even to an 
innocent holder for value. 

The wrongful act of a thief or a trespasser may deprive the 
holder of his property in a note which has once become a note, 
or property, by delivery, and may transfer the title to an innocent 
purchaser for value. But a note in the hands of the maker before 
delivery is not property, nor the subject of ownership, as such ; 
it is, in law, but a blank piece of paper. Can the theft or wrong- 
ful seizure of this paper create a valid contract on the part of the 
maker against his will, where none existed before? There is no 
principle of the law of contracts upon which this can be done, 
unless the facts of the case are such that, in justice and fairness, 
as between the maker and the innocent holder, the maker ought 
to be estopped to deny the making and delivery of the note. 

But it is urged that this case falls within the general prin- 



Burson v. Huntington 155 

ciple which has become a maxim of law, that when one of two 
innocent persons must suffer by the acts of a third, he who has 
enabled such third person to occasion the loss must sustain it. 
This is a principle of manifest justice when confined within its 
proper limits. But the principle, as a rule, has many exceptions ; 
and the point of difficulty in its application consists in determining 
what acts or conduct of the party sought to be charged, can prop- 
erly be said to have "enabled the third person to occasion the 
loss," within the meaning of the rule. If I leave my horse in the 
stable, or in the pasture, I cannot properly be said to have enabled 
the thief to steal him, within the meaning of this rule, because 
he found it possible to steal him from that particular locality. 
And upon examination it will be found that this rule or maxim 
is mainly confined to cases where the party who is made to suffer 
the loss, has reposed a confidence in the third person whose acts 
have occasioned the loss, or in some other intermediate person 
whose acts or negligence have enabled such third person to occa- 
sion the loss ; and that the party has been held responsible for the 
acts of those in whom he had trusted upon ground analogous 
to those which govern the relation of principal and agent ; that 
the party thus reposing confidence in another with respect to 
transactions, by which the rights of others may be affected, has, 
as to the persons to be thus affected, constituted the third person 
his agent in some sense, and having held him out as such, or 
trusted him with papers or indicia of ownership which have 
enabled him to appear to others as principal, as owner, or as pos- 
sessed of certain powers, the person reposing this confidence is, 
as to those who have been deceived into parting with property 
or incurring obligations on the faith of such appearances, to be 
held to the same extent as if the fact had accorded with such 
appearances. 

Hence, to confine ourselves to the question of delivery, the 
authorities in reference to lost or stolen notes which have become 
operative by delivery, have no bearing upon the question. If the 
maker or indorser, before delivery to the payee, leave the note 
in the hands of a third person as an escrow, to be delivered upon 
certain conditions only, or voluntarily deliver it to the payee, or 
(if payable to bearer) to any other person for a special purpose 
only, as to be taken to, or discounted by a particular bank, or to 
be carried to any particular place or person, or to be used only 
in a certain way, or upon certain conditions not apparent upon 
the face of the paper, and the person to whom it is thus entrusted 
violate the confidence reposed in him, and put the note into cir- 



156 Delivery Essential to Completion of Contract 

culation ; this, though not a valid delivery as to the original 
parties, must, as between a bona fide holder for value, and the 
maker or indorser, be treated as a delivery, rendering the note 
or indorsement valid in the hands of such bona fide holder; or if 
the note be sent by mail, and get into the wrong hands ; as the 
party intended to deliver to some one, and selects his own mode 
of delivery, he must be responsible for the result. These prin- 
ciples are too well settled to call for the citation of authorities, 
and manifestly it will make no difference in this respect, if the 
note or indorsement were signed in blank, if the maker or indorser 
part with the possession, or authorize a clerk or agent to do so, 
and it is done. I Parsons on Bills and Notes, log to 114, and 
cases cited, especially Putnam v. Sullivan, 4 Mass. 45, which was 
decided expressly upon the ground of the confidence reposed in 
the third person, as to the filling up, and in the clerks as to the 
delivery. 

And when the maker or indorser has himself been deceived 
by the fraudulent acts or representations of the payee or others, 
and thereby induced to deliver or part with the note or indorse- 
ment, and the same is thus fraudulently obtained from him, he 
must, doubtless, as between him and an innocent holder for value, 
bear the consequences of his own credulity and want of caution. 
He has placed a confidence in another, and by putting the papers 
into his hands, has enabled him to appear as the owner, and to 
deceive others. Cases of this kind are numerous, but they have 
no bearing upon the wrongful taking from the maker, when he 
never voluntarily parted with the instrument. Much confusion, 
however, has arisen from the general language used in the books 
and sometimes by judges, in reference to cases where the maker 
has voluntarily parted with the possession, though induced to do 
so by fraud ; when it is laid down as a general rule, that it is no 
defense for a maker, as against a bona fide holder, to show that 
the note was wrongfully or fraudulently obtained, without 
attempting to distinguish between cases where the maker has 
actually and voluntarily parted with the possession of the note, 
and those where he has not. 

We do not assert that the general rule we are discussing — 
that "where one of two innocent parties must suffer," etc. — must 
be confined exclusively to cases where a confidence has been placed 
in some other person (in reference to delivery) and abused. 
There may be cases where the culpable negligence or recklessness 
of the maker in allowing an undelivered note to get into circula- 
tion, might justly estop him from setting up non-delivery; as if 



Burson v. Huntington 157 

he were knowingly to throw it into the street, or otherwise leave 
it accessible to the public, with no person present to guard against 
its abduction under circumstances when he might reasonably 
apprehend that it would be likely to be taken. 

Upon this principle the case of Ingham v. Pnmrose (7 C. B. 
(N. S.), 82) was decided, where the acceptor tore the bill into 
halves (with the intention of canceling it) and threw it into the 
street, and the drawer picked them up in his presence, and after- 
wards pasted the two pieces together and put them into circula- 
tion. See also bv analogy Foster v. Mackinnon, Law Rep., 4 
Com. B., 704. 

But the case before us is one of a very different character. 
No actual delivery by the maker to any one for any purpose. 

The evidence tends to show that when he left the room in 
his own house, the note being on the table, and his sister remain- 
ing there, he did not confide it to the custody of the payee, but 
told him not to take it, and no final agreement between them had 
yet been made, and no consideration given. Under such circum- 
stances he can no more be said to have trusted it to the payee's 
custody or confidence, than that he trusted his spoons or other 
household goods to his custody or confidence; and there was no 
more apparent reason to suppose he would take and carry off 
the one, than the other. 

The maker, therefore, cannot be held responsible for any 
negligence ; there was nothing to prove negligence, unless he was 
bound to suspect, and treat as a knave, a thief or a criminal, the 
man who came to his house apparently on business, because he 
afterwards proved himself to be such. This, we think, would be 
preposterous. 

We, therefore, see no ground upon which the defendant could 
be held liable on a note thus obtained, even to a bona fide holder 
for value. He was guilty of no more negligence than the plaintiff 
who took the paper, and the plaintiff shows no right or equities 
superior to those of the defendant. 

Such, we think, must be the result upon principle. We have 
carefully examined the cases, English and American, and are sat- 
isfied there is no adjudged case in the English courts, so far as 
their reports have reached us, which would warrant a recovery 
in the present case. Some dicta may be found, the general lan- 
guage of which might sustain the liability of the maker ; such as 
"hat of Alderson, Baron, in Marston v. Allen (8 M. & W., 494), 
cited by Duer, J., in Gould v. Segee, 5 Duer, 260, and that used 
by Williams, J., in Ingham v. Primrose, 7 C. B. (N. S.), 82. But 



158 Delivery Essential to Completion of Contract 

a reference to the cases will show that no such question was 
involved, and that these remarks were wholly outside of the case. 

On the other hand, H all v. Wilson, 16 Barb., 548, 555, and 
556, contains a dictum fully sustaining the views we have taken. 

There are, however, two recent American cases, where the 
note or indorsement was obtained without delivery, under cir- 
cumstances quite as wrongful as those in the present case, in one 
of which the maker, and in the other the indorser, was held liable 
to a bona fide holder for value : Shipley v. Carroll et al., 45 111., 
285 (case of maker) and Gould v. Segee, 5 Duer., 266. But in 
neither of these cases can we discover that the court discussed or 
considered the real principle involved ; and we have been unable 
to discover anything in the cases cited by the court to warrant the 
decision. It is possible that the case in Illinois may depend some- 
what upon their statute, and the note being made as a mere matter 
of amusement, and the making not being justified by any legiti- 
mate pending business, the maker might perhaps justly be held 
responsible for a higher degree of diligence, and therefore more 
justly chargeable with negligence under the particular circum- 
stances, than the maker in the present case. 

There is another case {Worcester Co. Bank v. Dorchester & 
Milton Bank, 10 Cush., 488), where bank bills were stolen from 
the vault of the bank, which though signed and ready for use, 
had never been yet issued, and on which a bona Me holder for 
value was held entitled to recover. This, we are inclined to think, 
was correct. The court intimated a doubt whether the same rule 
should apply to bank bills as to ordinary promissory notes, and as 
to the latter, failed to make any distinction between the question 
of delivery and questions affecting the rights of the parties upon 
notes which have become effectual by delivery. But we think 
bank bills which circulate universally as cash, passing from hand 
to hand perhaps a hundred times a day, without such inquiries 
as are usual in the cases of ordinary promissory notes of indi- 
viduals, stand upon quite different grounds. And, considering 
the temptations to burglars and robbers, where large masses of 
bank bills are known to be kept, and the much greater facility of 
passing them off to innocent parties, without detection or identi- 
fication of the bills or the parties, and that the special business 
of banks is dealing in, and holding the custody of, money and 
bank bills ; it is not unreasonable to hold them to a much higher 
degree of care, and to make them absolutely responsible for their 
safe keeping. We do not therefore regard this case as having 
any material bearing upon the case before us. 



KlNYON V. WOHLFORD 159 

We think the Circuit Court erred in refusing to charge upon 
this point, as requested by the defendant below. 

We do not think there was any error in refusing to charge 
that the want of a stamp on the note would be such circumstance 
of suspicion as to put the indorsee upon inquiry in taking the note. 
Under our decisions the note would be valid and could be enforced 
in our courts without a stamp. 

Some other minor questions were raised, but we do not think 
they will be likely to arise upon a new trial. 

The judgment must be reversed with costs, and a new 
trial awarded. 
The other justices concurred. 



Kinyon v. Wohlford {187 1), 17 Minn. 239, 10 Am. Rep. 165. 

Action on a promissory note. Judgment on a verdict for the 
defendant. Appeal by plaintiff from order denying a new trial. 

Wheelock & Cogswell, for appellant. 
Gordon E. Cole, for respondent. 

Berry, J. This is an action upon a promissory note payable 
by its terms to C. W. Stevens, or bearer, and signed by defendant. 

There was plenary evidence showing that the plaintiff is a 
bona fide holder of the note, having purchased the same before 
maturity, in good faith, without notice and for value. 

The only defense urged here is that there was no delivery 
of the note to any person by or on behalf of the defendant; that 
for want of delivery it is not the note of defendant, and he is not 
liable thereon even to a bona fide holder. "A bona fide holder for 
value, without notice, is entitled to recover upon any negotiable 
instrument which he has received before it has become due, not- 
withstanding any defect or infirmity in the title of the person from 
whom he derived it; as, for example, even though such person 
may have acquired it by fraud, or even by theft, or by robbery." 
Story on Prom. Notes, § 191 ; 2 Gr. Ev., § 171 ; Swift v. Tyson, 
16 Pet. 1 ; Goodman v. Simonds, 20 Howard, 365 ; Raphael v. 
Bank of England, 17 C. B. 162 ; Wheeler v. Guild, 20 Pick. 545 ; 
Magee v. Badger, 34 N. Y. 249; Powers v. Ball, 27 Vt, 662; 
Catlin v. Hause, 1 Duer, 325 ; Gould v. Segee, 5 Duer, 268 ; Mars- 
ton v. Allen, 8 Mees. & Welsby, 494 ; Smith's Lead. Cases, 597 
et. seq. ; 1 Ross Lead. Cases 205 et. seq. 



160 Presumption of Delivery 

The fact that there has been no delivery of the instrument by 
or for the maker, or by or for an indorser through whom the 
holder must claim, is a defect or infirmity of title within the 
meaning of the rule above cited, a rule which is said to be laid 
up among the fundamentals of the law. Worcester County Bank 
v. Dorchester & Melton Bank, 10 Cushing, 488 ; Edwards on Bills 
and Notes, 188; Gould v. Segee, supra; Ingham v. Primrose, 7 
C. B. (N. S.) 82; Shipley v. Carroll, 45 111. 285; Clark v. John- 
son, 54 111. 296. 

The order denying a new trial must be reversed. 



PRESUMPTION OF DELIVERY. § l8. 

Mass. Nat. Bank v. Snow (1905), 187 Mass. 159. 

Contract on three promissory notes, each for $2,432.33, dated 
December 9, 1899, payable to and indorsed by the defendant and 
discounted by the plaintiff, as described in the first paragraph of 
the opinion. Writ dated April 25, 1900. 

At the trial in the Superior Court before Harris, J., the jury 
returned a verdict for the defendant; and the plaintiff alleged 
exceptions, raising the questions stated by the court. 

E. P. Carver & F. H. Smith, Jr., for the plaintiff. 
6". L. Whipple & E. M. Brooks, for the defendant. 

Knowlton, C.J. This is an action of contract on three 
promissory notes, signed H. G. and H. W. Stevens, payable to 
the order of the defendant, indorsed by him in blank and dis- 
counted by the plaintiff. They severally bear date December 9, 
1899, and the rights of the parties are accordingly governed by 
the St. 1898, c. 533, sometimes called the negotiable instruments 
act, which is now embodied in R. L. c. 73, §§ 18 to 212, inclu- 
sive. In referring to different provisions of this statute it may 
be convenient to cite the sections of the Revised Laws, rather 
than those of the original act. 

The maker of the notes, H. W. Stevens, who did business 
under the name of H. G. and H. W. Stevens, has deceased, and 
the defendant introduced evidence tending to show that, after 
the defendant had indorsed the notes, they were taken from his 
possession by the maker, without his knowledge or consent, and 



Massachusetts National Bank v. Snow 161 

discounted at the plaintiff bank, and that they were altered by 
the insertion of the words "seven per cent" after the words 
"with interest." The defence is founded on this evidence. The 
defendant's counsel stated that he made no contention that the 
bank had actual knowledge of any infirmity in the instruments, 
or defect in the title to them, or that it took them in bad faith. 
Nor was it contended by the defendant that in discounting the 
notes the bank acted otherwise than in the regular and usual 
course of business. But upon the defendant's testimony it might 
be found that the notes were given to him by the maker in pay- 
ment of indebtedness, that after he had indorsed them in blank 
and put them in his desk for collection or discount he was called 
out of his office, leaving the maker Stevens there, and that 
Stevens then took them without right, and three days later car- 
ried them to the plaintiff bank and caused them to be discounted 
for his own benefit. The plaintiff made many requests for rulings, 
which were refused subject to its exception, among which were 
the following : 

"First. That on all the evidence judgment should be for the 
plaintiff for the full amount declared upon in its declaration, with 
interest at seven per cent from December 9, 1899." 

"Fourth. That if the plaintiff shows it took the notes declared 
upon in its declaration as a holder in due course, judgment should 
be entered for the plaintiff for the full amount of said notes with 
interest at the rate stated in the same from December g, 1899." 

"Fifth. That when an 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." 

"Eighth. That the notes declared upon by the plaintiff in its 
declaration are complete and regular, and were taken before they 
were due, and for value." 

"Ninth. That a holder of a note is deemed prima facie to be 
a holder in due course and that to constitute notice of an infirmity 
in the instrument or defect in the title of the person negotiating 
the same, the person to whom it is negotiated must have had 
actual knowledge of the infirmity or defect, or knowledge of such 
facts that his action in taking the instrument amounted to bad 
faith." 

"Fifteenth. That there is no evidence in the case to warrant 
a jury in finding that the plaintiff was possessed of facts which 
put it upon its guard as to the tile of the person delivering the 
notes declared upon or which ought to have led the plaintiff to 
inquiry concerning the same." 



162 Presumption of Delivery 

"Nineteenth. That when an instrument has been materially 
altered and is in the hands of a holder in due course, not a party 
to the alteration, he may enforce payment thereof according to 
its original tenor." 

"Twenty-third. That even if the jury should find that the 
words 'seven per cent' were added to the face of said notes after 
they were indorsed by the defendant, and without his authoriza- 
tion or ratification, yet, on all the evidence in the case, the verdict 
must be for the plaintiff for the full amount of said notes, with 
interest at six per cent from December 9, 1899." 

The plaintiff also excepted to the following instructions, given 
at the request of the defendant: 

''Fourth. If the jury find that the notes were taken from the 
defendant wrongfully and that the same were never delivered 
by the defendant to Stevens, the plaintiff gained no title to the 
notes by the negotiation of the same by Stevens, and the plaintiff 
cannot recover. 

"Fifth. The burden is upon the plaintiff to show that the 
notes were delivered by the defendant to Stevens or some other 
person authorized to negotiate them at the plaintiff bank." 

"Seventh. Or in the alternative, if the jury find that the 
notes in question were altered by the addition of the words 'seven 
per cent' thereto after the same were indorsed by the defendant, 
such an alteration is a material and wrongful one, destroying the 
validity of the notes, and upon the notes or any one of them thus 
altered the plaintiff cannot recover." 

The notes, being indorsed in blank, were payable to bearer 
within the meaning of the statute. R. L. c. 73, § 26, cl. 5. When 
the notes were taken to the plaintiff for discount Stevens was the 
bearer. R. L. c. 73, § 207. The presentation of such notes for 
discount raised a presumption of fact that the bearer was the 
owner of them. Pette v. Prout, 3 Gray, 502. Upon the undis- 
puted evidence and upon the defendant's admission that the plain- 
tiff took them in good faith and discounted them without knowl- 
edge of any infirmity in them or defect of title in Stevens, the 
plaintiff became a holder in due course, within the definition of 
the statute. R. L. c. 73, §§ 69, 76. Boston Steel & Iron Co. v. 
Steuer, 183 Mass. 140. There was not even anything to put the 
plaintiff upon inquiry, for the rate of interest was the same that 
Stevens had been paying on his loans from the bank for two 
years. The uncontradicted evidence, as well as the defendant's 
admission, makes it plain that the plaintiff had no notice of any 
infirmity in the instruments or defect in the. title of Stevens, under 



Massachusetts National Bank v. Snow 163 

the rule prescribed by the statute. R. L. c. 73, § 73. This rule, 
namely, that to constitute such notice the person to whom the note 
is negotiated must have had actual knowledge of the infirmity or 
defect, or knowledge of such facts that his action in taking the 
instrument amounted to bad faith, is the same as prevailed in 
this Commonwealth before the enactment of the statute. Smith 
v. Livingston, 1 1 1 Mass. 342 ; Lee v. Whitney, 149 Mass. 447 ; 
International Trust Co. v. Wilson, 161 Mass. 80, 90. 

The defendant's contention that after the notes had been deliv- 
ered to the defendant and endorsed by him they were stolen by 
Stevens, brings us to the question whether, under the negotiable 
instruments act, a holder in due course of a note payable to 
bearer, that has been stolen, can acquire a good title from the 
thief. Even before the enactment of the statute, while the deci- 
sions were not uniform, the weight of authority was in favor 
of an affirmative answer to the question. Wheeler v. Guild, 20 
Pick. 545, 550, 553 ; Worcester County Bank v. Dorchester & 
Milton Bank, 10 Cush. 488 ; Wyer v. Dorchester & Milton Bank, 
11 Cush. 51, 53; Spooner v. Holmes, 102 Mass. 503; London 
Joint Stock Bank v. Simmons, [1892] A. C. 201, and cases cited. 
Smith v. Union Bank of London, 1 Q. B. D. 31 ; Goodman v. 
Simonds, 20 How. 343, 365; Murray v. Lardner, 2 Wall, no; 
Hotchkiss v. National Shoe & Leather Bank, 21 Wall. 354; Kin- 
yon v. Wohlford, 17 Minn. 239; Clarke v. Johnson, 54 111. 296; 
Seybel v. National Currency Bank, 54 N. Y. 288; Evertson v. 
National Bank of Newport, 66 N. Y. 14; Kuhns v. Gettysburg 
National Bank, 68 Penn. St. 445. 

The following specific language of the statute touching this 
question, as well as its provisions in other sections, was intended 
to establish the law in favor of holders in due course. "But 
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." R. L. c. 73, § 33. 
This conclusive presumption exists as well when the note is 
taken from a thief as in any other case. Of course this rule 
does not apply to an instrument which is incomplete. But in 
reference to a complete, negotiable promissory note payable to 
bearer, it is a wholesome and salutary provision. See Greeser v. 
Sugarman, 76 N. Y. Supp. 922. Upon the defendant's state- 
ment and the counsel's theory of the case, the rule is applicable. 
The note not only was complete in form and in execution, but, 
upon his testimony, it had been delivered to him by the maker- 
as a binding instrument, and had afterwards been indorsed by 



164 Presumption of Delivery 

him. Therefore the first sentence of the R. L. c. 73, § 33, "Every 
contract on a negotiable instrument is incomplete and revocable 
until delivery of the instrument for the purpose of giving effect 
thereto," was inapplicable. The instrument had taken effect, and 
subsequently was negotiated by the bearer to the plaintiff as a 
holder in due course. That the bearer was also the maker was 
immaterial after the instrument had been so indorsed as to become 
payable to bearer. 

Upon the plaintiff's theory of the facts, there was no theft, 
but an ordinary accommodation indorsement by the defendant for 
the benefit of the maker, and none of these questions arise. 

We are of opinion that the judge erred in giving the fourth 
and fifth instructions requested by the defendant, and in refusing 
other instructions requested by the plaintiff, founded upon a dif- 
ferent view of the statute. 

There also was error in the instructions given as to the 
alleged alteration of the notes. By the R. L. c. 73, § 141, it is 
provided that "when an instrument has been materially altered 
and is in the hands of a holder in due course, not a party to the 
alteration, he may enforce payment thereof according to its 
original tenor." This language is directly applicable to the pres- 
ent case. See Scholfield v. Earl of Londesborough, [1894] 2. Q. 
B. 660; [1895] 1 Q. B. 536; [1896] A. C. 514; Schwartz v. 
W ilner, 90 Md. 136, 143. 

We understand that the instructions were given independ- 
ently of any question of pleading, and we therefore do not deem 
it necessary to determine, at this stage of the case, whether the 
plaintiff should amend its declaration by inserting counts upon 
the notes as they were before the alleged alteration, if it wishes 
to recover upon them as notes bearing interest at only six per 
cent. See Mutual Loan Association v. Lesser, 78 N. Y. Supp. 
629. Nor do we consider other questions which are not likely 
to arise upon a second trial. 

Exceptions sustained. 



Averett's Administrator v. Booker 165 

Section IV — Consideration. 

PRESUMPTION OF CONSIDERATION. § 26. 

Averetfs Adm'r v. Booker {1859), 15 Graft. 163, 76 Am. Dec. 203. 

This was an action of assumpsit in the Circuit Court of the 
city of Lynchburg, brought by William T. Booker against Wil- 
liam B. Averett's administrator. The plaintiff declared upon the 
following paper, which he averred was made for value received. 

$1,080.59 Lynchburg, December 8, 1852. 

The trustee of Norvell and Averett will pay to William T. 
Booker the sum of one thousand and eighty dollars and fifty-nine 
cents, with interest from 1st of March, 1850, out of any moneys in 
his hands belonging to me. 

Wm. B. Averett. 

On the trial of the cause, the plaintiff introduced in evidence 
the foregoing paper, and also proved that it was presented and 
not paid; and that there were no effects out of which the order 
could, at the time of the trial, be paid. And this being all the 
evidence in the cause, the court, at the instance of the plaintiff, 
instructed the jury that they might infer from the paper afore- 
said, a consideration moving from the plaintiff to the defendant's 
intestate, which entitled him, without further evidence than the 
paper itself, to recover in this case. 

To this opinion of the court the defendant excepted: And 
there having been a verdict and judgment against him, he applied 
to a judge of this court for a supersedeas; which was allowed. 

Green, for the appellant. 
Garland, for the appellee. 

Lee, J. The only question in this case is that raised by the 
instruction asked for by the defendant in error upon the trial. 
The declaration unlike that in Jackson v. Jackson, 10 Leigh 448, 
sufficiently avers a consideration for the draft or order which it 
describes, but as when it was produced at the trial no considera- 
tion was expressed upon its face and it was not stated to have 
been made "for value received," the question made was whether 
the jury could from the paper alone infer such a consideration 
moving from the defendant in error to the plaintiff's intestate 
as would entitle him to recover without further evidence. 



166 PRESUMiTION OF CONSIDERATION 

If the order in question were good as a bill of exchange it 
cannot be questioned that the party might have recovered upon 
it without averring in his declaration or proving at the trial that 
any value had been received for it, as such a bill is presumed to 
stand on valuable consideration and prima facie to import it. 
(Bayly on Bills, ch. i, § 13, p. 40; Mocked v. Sne-e, 2 Str. R. 762 ; 
Poplewell v. Wilson, 1 Id. 264 ; Philliskirk v. Blackwell, 2 Maule 
& Sel. 395 ; Wilson v. Codman's ex'or, 3 Cranch's R. 193, 207 ; 
Hatch v. Trayes, 1 1 Adolph & El. 702 ; 39 Eng. C. L. R. 207 ; 
Jones v. Jones, 6 Mees. & Welsb. 84; Bayly on Bills, ch. 9, p. 
390; Coombe v. Ingram, 4 Dowl. & Ryl. 211.) But I think it 
clear that this paper cannot be regarded as a bill of exchange, 
nor as carrying with it the exemption pertaining to that class of 
securities from the necessity of both averring and proving a 
sufficient consideration as the condition of recovering upon it. 
To constitute a good bill of exchange, the sum to be paid must 
not only be in money and certain in amount, but it must be pay- 
able absolutely and at all events. If it be payable out of a par- 
ticular fund or upon an event which is contingent, or if it be 
otherwise conditional, it is not in contemplation of law a bill of 
exchange. {Roberts v. Peake, 1 Burr. R. 323 ; Carlos v. Fancourt, 
5 T. R. 482; Chitty on Bills, ch. 5, p. 152, et seq.; Bayly on Bills, 
ch. 1, § 6, p. 16, et seq.; Story on Bills, §46; Crawford v. Bully, 
Wright's R. 453; Van Vactcr v. Flack, 1 Smedes & Marsh. R. 
393; Hamilton v. Myrick, 3 Pike's R. 541.) Here the sum to be 
paid is not payable absolutely and at all events. It is payable out 
of a particular fund, to wit, the moneys, if any, in the hands of 
the drawee belonging to the drawer. The draft therefore cannot 
be treated as a bill of exchange, nor can a recovery be had upon 
it as such. 

So, again, if the paper in question contained an express 
promise to pay the sum mentioned upon which an action of debt 
might be maintained under our statute, I incline to think that the 
recovery might be had without further proof of consideration. If 
debt would lie upon the paper, it would be evidence of such 
indebtedness as would be a sufficient consideration for the pur- 
pose to pay in the action of assumpsit. The case of Jackson v, 
Jackson, above cited, so far as it is of any authority, having been 
decided by a court equally divided, shows that it is not necessary 
in such a case even to aver a consideration. For the declaration 
without averring such consideration was sustained by the court 
below, and that judgment was affirmed by the division of this 
court. But it is unnecessary to go into this question in this case, 



Averett's Administrator v. Booker 167 

because whilst the declaration in all its counts sufficiently avers 
a consideration, it is not pretended that the paper offered in evi- 
dence contained any thing that could by any construction be held 
to be an express promise to pay the sum of money mentioned in 
it. And not being a bill of exchange, no promise is raised by law 
in favor of the payee against the drawer from the failure of the 
drawee to accept or to pay. (Josceline v. Lasserre, Fortesc. R. 
281 ; S. C. 10 Mod. R. 294, 316; Jenny v. Herle, 1 Stra. R. 591 ; 
S, C. 2 Ld. Raym. R. 1361 ; Haydock v. Lynch, 2 Ld. Raym. R. 
1563; Banbury v. Lisset, 2 Stra. R. 121 1 ; Dawkes v. DeLorane, 
3 Wils. R. 207; S. C. 2 Wm. Black. R. 782; Nichols? adm'r v. 
Davis, 1 Bibb's R. 490 ; Mershon v. Withers, Id. 503 ; Carlisle v. 
Dubree, 3 J. J. Marsh. R. 542.) 

The case of Jolliffe v. Higgvns, 6 Munf. 3, might seem at 
first blush from the reporter's syllabus of the point decided, to 
be somewhat in conflict with the principles above stated; but 
upon closer examination, I think the decision will be found to 
be in perfect harmony with them and to be abundantly sustained 
upon the case itself. No reasons are assigned by the court for 
affirming the judgment, but upon the report of the case, I think 
we can see ample grounds on which to vindicate its correctness 
without disturbing any of the principles to which I have averted. 
The action was assumpsit and the declaration counted specially 
on the draft or order set out, and also for money had and received 
by the defendant to the use of the plaintiff. The plea was the 
general issue; and at the trial, the defendant demurred to the 
evidence. This consisted of the draft or order described in the 
declaration by which the drawer (the defendant) directed the 
drawee (Waite) to pay to the plaintiff the sum of one hundred 
and eight dollars and eighty-five cents which the order stated he 
(the drawer) had lodged in the hands of the drawee and was the 
property of the payee as guardian &c, with proof of non-payment 
by the drawee, and protest therefor, and notice to the drawer; 
and also that the drawer had never deposited any such funds or 
other funds whatsoever with the drawee. Now, I do not think 
it by any means clear that the order was not good as a bill of 
exchange. Mr. Wickham for the plaintiff in error, it is true, 
contended .that it was not because it was not made payable to 
order, and was drawn on a particular fund ; and this Mr. Leigh 
appears to have conceded. Formerly it was doubted whether it 
was not essential to the character of a bill of exchange that it 
should be payable, e. g., to A or his order or to bearer. But it is 
now well settled that it is not essential to the character either 



16b Presumption of Consideration 

of a bill of exchange or of a promissory note that it should be 
negotiable. {Chadwick v. Allen, Str. R. 706; Smith v. Kendall, 
6 T. R. 123 ; The King v. Box, 6 Taunt. R. 325 ; Burchell v. Slo- 
cock, 2 Ld. Raym. R. 1545; Bayly on Bills, ch. 1, § 10, p. 33; 
Chitty on Bills, ch. 5, p. 181 ; Story on Bills, § 69.) And it may 
with great force be contended that the order to pay was neither 
conditional nor restricted to any particular fund, but as well as 
can be ascertained from the statement of the case, was absolute 
and unconditional to pay the amount. It is true it was added 
that the drawer had lodged the amount in the hands of the drawee 
and that it was the property of the payee. Whether this state- 
ment was true or false would not affect the character of the 
order. The theory of every bill of exchange is that the drawer 
has funds in the hands of the drawee subject to his order, and 
whether this be true or false the character of the bill is the same. 
(See Story on Bills, § 13.) The reason given for making the draft 
would not necessarily change the absolute character of the order, 
or whether true or false, affect its legal character and incidents. 
It would seem to fall rather within a class of cases which are 
carefully distinguished from those in which the order is to pay 
out of a particular fund, although at first glance they might seem 
to be of them. Thus a bill drawn by a freighter payable to a 
person entitled to receive the freight "on account of freight," is 
good, for it is not payable out of a particular fund but merely 
shows to what account it' is to be applied or what is the value 
that has been received. (Pierson v. Dnnlop, Cowp. R. 571.) So a 
bill for money as "the drawer's quarter's half pay by advance" 
is good ; for it is not payable out of a particular fund but is to be 
paid in advance ; and will be payable whether the half pay ever 
become due or not. (Macleed v. Snee, 2 Stra. R. 762.) And so 
specifying the fund in any other manner out of which the value 
was received for which the bill is drawn will not vitiate the bill; 
thus stating "value received out of the premises in Rosemary 
Lane,'' or "being a portion of a value, as under, deposited in 
security of payment hereof ;" or "on account of wine had by me" 
( the drawer) ; or "being so much due by me to A. at Lady-day 
next." In these cases the bill is not payable out of a particular 
fund, but it only specifies the value received, and the occasion of 
the draft. (See Haussoullier v. Hartsinck, 7 T. R. 733. Bayly 
on Bills, p. 18; Story on Bills, § 47.) 

But if the order could not be treated as a bill of exchange, 
certainly from its terms it might be fairly and legitimately 
inferred that the defendant had had in his hands money belong- 



Averett's Administrator v. Booker 169 

ing to the plaintiff which he had failed to pay over to him and 
which he falsely pretended by the order he had lodged in Waite's 
hands for him. The amount therefore would clearly be recover- 
able in an action for money had and received and the demurrer 
to the evidence could not avail the defendant. 

The court may therefore have thought either that the order 
in this case was good as a bill of exchange, or that the evidence 
was sufficient to sustain the second count of the declaration, and 
that the judgment was therefore right, and should be affirmed. 

All contracts by our law must be either contracts by specialty 
or contracts by parol. If not by sealed instrument, they are 
parol whether verbal or in writing, and if in writing, whatever 
may be the rule of the civil law, or whatever the doubt created 
by the remarks of Lord Mansfield and Justice Wilmot in Pillans 
v. Mierop, 3 Burr. R. 1668, et seq., there must be in general a 
sufficient consideration to support them, just as if they were 
proved by parol evidence only. The authorities for this propo- 
sition are numerous and familiar, and I deem it unnecessary to 
stop to cite any. Commercial paper and perhaps promises in 
writing for the payment of money on which debt would lie under 
our statute, constitute exceptions to the rule, but otherwise it is 
universal and pervading. Accordingly, the defendant in error 
recognizing the rule and its applicability to this case, asked the 
court to instruct the jury that they might infer the consideration 
from the paper itself, and the court gave the instruction asked. 
The whole case then is resolved into the enquiry whether the 
paper does of itself, furnish proof of a legal promise and a suffi- 
cient consideration? 

Now I apprehend that a paper of this character can only be 
said to furnish such proof, where the consideration is stated in it ^ 
or it is stated to be for value received, or some equivalent, or 'i 
where the terms in which it is expressed are inconsistent with 
any other theory than that it was upon a consideration. If those 
terms are just as consistent with the theory of a total want of 
consideration as they are with that of its existence, it would seem 
impossible to say that they afford such a legal presumption that 
the paper was founded on a consideration as would justify the 
jury in finding it as a fact. In the paper in question, no consider- 
ation is stated nor is the draft stated to be made "for value 
received," nor are any equivalent terms used showing that it 
was made for a consideration. And taking all the terms of the 
paper together they are at least as consistent with the theory of 
an absence of all consideration as they are with that of any value 
received. The terms of the order would admit equally well of 



170 Presumption of Consideration 

several different constructions. The drawer might have known 
that he had just such a sum in the hands of the drawee and 
intended merely to give authority to the latter to deliver the same 
to the payee for him. Or without knowing whether the trustee 
had received funds for him or not, might have merely given the 
order if he had, to authorize the payee to receive them for him 
as his agent. The counsel for the defendant in error, it is true, 
asserts that the order was drawn at a time and at a place at which 
the plaintiff's intestate might have as conveniently drawn his 
funds from the hands of the drawee himself as Booker the payee 
could do it for him. Nothing of this however appears in the 
record nor does it appear, as is also alleged, that the intestate 
was a partner of the firm of Norvell & Averett. If these facts 
would have influenced the case they were not before the jury, 
there being, as has been stated, no evidence whatever except the 
order itself, and proof of non-payment, and that there were no 
effects out of which it could be paid. So, it is perfectly in con- 
sistence with the terms of the order, that it may have been drawn 
for the purpose of loaning the amount to the payee if the drawer 
had the funds in the hands of the drawee, or of making a gift 
to him of the amount if it could be had. Either of these hypoth- 
eses and others that might be suggested are just as reasonable 
as that insisted on by the defendant in error that the order was 
given in discharge of a debt due him from the payee ; and I 
cannot think the circumstance that the order calls for interest 
on the sum named from a given day is of such conclusive import 
as is attributed to it by the counsel. Whilst it is strictly consis- 
tent with the existence of a debt that was thereby settled, it is 
not inconsistent with either of the oher hypotheses suggested. 

The court having given the instructions asked for, ignored 
all the other hypotheses than that of a debt due to the payee from 
the drawer or of value received by the latter; and as the jury 
were told they might infer a consideration from the paper itself, 
they could only regard it as peremptory to them to make that 
inference, because if they might infer it, it was their duty to infer 
it; and to say that they might infer it was equivalent to saying 
that they must infer it because it was a matter not depending on 
the weight of evidence or force of circumstance but simply upon 
the legal import of the paper itself. 

I think the Circuit Court erred in giving the instruction 
asked for, and am of opinion to reverse the judgment. 

Allen, P. and Daniel J. concurred in the opinion of Lee, J. 

Moncure, J., concurred in the result. 

Judgment reversed. 



CODDINGTON V. BAY 171 

WHAT CONSTITUTES CONSIDERATION. § 2"J. 

Coddington v. Bay (1822), 20 Johns. 636, 11 Am. Dec. 342. 

Appeal from the Court of Chancery. The bill, filed June 15, 
1819, by the respondent against the appellants, stated, that in 
April, 1819, being the owner of a vessel called the Express, he 
employed R. & S., who were merchants and copartners in trade, 
in New York, to sell her, on a credit, and instructed them to take 
good approved notes in payment,, and to transmit them forthwith 
to him, with an account of their charges, which should be immedi- 
ately paid, with which instructions R. & S. engaged to comply. 
That R. & S. sold the vessel for 3,875 dollars, and on the 3d of 
June, 1 819, received from the purchaser, six promissory notes, 
dated May 5, 1819, at two, four and six months, payable to R. & 
S., or order, which they refused to deliver to the respondent. 
That R. & S. became insolvent, and delivered the notes to the 
appellants, J. J. & J. C. Coddington, who were under large 
advances and responsibilities for R. & S. The bill charged, that 
the appellants, when they received the notes of R. & S., knew 
that they had been given in payment for the vessel belonging to 
the respondent, which had been sold for his account by R. & S. 
The bill prayed, that the appellants might be decreed to deliver 
up, and account to the respondent for the notes. The answer 
admitted that R. & S. had stopped payment when they delivered 
the notes to the appellants, who admitted, that when they received 
the note's, R. & S. were not actually indebted to them, otherwise 
than that they were under large gratuitous responsibilities for R. 
& S., as endorsers of notes for their accommodation, payable at 
different times, but subsequent to the 12th of June, 1819, and 
which they were, afterwards, obliged to take up as they fell due. 
The appellants denied all knowledge of the manner in which the 
notes had come to the hands of R. & S., and they alleged, that 
they believed them, at the time, to be the exclusive and bona Me 
property of R. & S., and received them, with others, to indemnify 
them, as far as they would avail, for their responsibilities. That 
three days after the notes were delivered to them, they disposed 
of some of them for cash ; and did not know, until several days 
afterwards, that they belonged to the respondent, as stated in his 
bill. R. & S., in their answer, say, that when they received the 
notes of the purchasers of the vessel, they gave their guaranty 
against any demands existing against the vessel previous to the 



172 What Constitutes Consideration 

sale, and paid her bills in New York, amounting to 48 dollars and 
14 cents, and that their commissions on the sale amounted to 96 
dollars and 87 cents, and that they had received no counter secur- 
ity for their guaranty. Replications were filed to the answers, 
but no proofs were taken in the cause, which was brought to a 
hearing on the pleadings; and on the 8th of January, 1821, the 
chancellor decreed, that the appellants were not entitled to the 
notes, or the proceeds thereof, as against the respondent, who 
was the lawful owner of them when they were transferred to the 
appellants; inasmuch as they did not receive the notes in the 
course of business, nor in payment, in whole, or in part, of any 
then existing debt, nor for cash, or property advanced, or debt 
created, or responsibility incurred on the credit of the notes ; 
and he directed a reference to a master to compute the amount 
of the notes, with interest; and that the appellants, and R. & S., 
or some, or one of them, pay to the respondent the sum that should 
be reported as the amount of the notes and interest, in thirty days 
after the report was filed, and notice thereof, &c. ; and that R. & 
S. pay to the respondent his entire costs of suit, to be taxed, and 
that he give credit upon those costs for the charges and commis- 
sions due from him to R. & S., on the sale of the vessel, and that 
the respondent have execution for the balance; but that no costs 
be allowed to the respondent, or the appellants, J. J. & J. C. Cod- 
dington, as against each other. From this decree an appeal was 
entered to this court. 

Van Buren, for the appellants. 
S. Jones, contra. 

Woodworth, J. Randolph & Savage were the agents of the 
respondent, and, as such, held certain promissory notes belonging 
to him, which they, on the 12th of June, 1819, fraudulently, and 
without authority, passed to the appellants. It is stated, in the 
answer, that at the time the notes were received by the appellants, 
Randolph & Savage were not, in a strict legal sense, indebted to 
them in any amount whatever ; but that the appellants were under 
engagements and responsibilities for them, having endorsed cer- 
tain notes for R. & S., and lent them their own notes to a large 
amount, none of which had then fallen due. That the appellants 
received the notes in question as a guaranty and indemnity against 
the responsibilities they were under, (all of which were then con- 
tingent,) and without notice of any interest, right or title of the 
respondents. 



CODDINGTON V. BAY 173 

The prayer of the bill is, that the notes so received be deliv a 
ered to the respondent, or the amount paid to him. 

This brief statement presents a case of hardship, let the loss 
fall as it may, inasmuch as no fraud is imputable to either of the 
parties concerned in this appeal. The question is one of strict 
law, in the decision of which, the community at large, and more 
especially the commercial part, have a deep interest. Any fluctua- 
tion in the law relating to bills of exchange and promissory notes, 
would be a serious evil, and necessarily affect the circulation of 
this species of paper: distrust, and want of confidence, would 
embarrass mercantile operations, unless the rule to be applied be 
stable and uniform. With this view, I have carefully examined 
the cases cited on the argument. The general rule laid down 
seems to be this, that where negotiable paper is transferred for a 
valuable consideration, and without notice of any fraud, the right 
of the holder shall prevail against the true owner; all the 
cases substantially agree in this. In the application of the rule, 
this question arises, What is that valuable consideration intended, 
which shall protect the holder as against the drawer of the note? 
Is the rule satisfied, if enough is shown to make out a considera- 
tion, as between the holder and the agent, who assigned or trans- 
ferred the paper? If nothing more is required, the appellants 
must prevail; for the notes were passed for the indemnity of the 
appellants, and, so far as Randolph & Savage are concerned, that 
formed a valid consideration. The right to hold against the 
owner, in any case, is an exception to the general rule of law ; it 
is founded on principles of commercial policy. The reason of 
such a rule would seem to be, that the innocent holder, having 
incurred loss by giving credit to the paper, and having paid a 
fair equivalent, is entitled to protection. But what superior equity 
has the holder, who made no advances, nor incurred any respon- 
sibility on the credit of the paper he received, whose situation will 
be improved, if he is allowed to retain, but, if not, is in the condi- 
tion he was before the paper was passed? To allow such a state 
of facts as sufficient to resist the title of the real owner, would be 
productive of manifest injustice, and is not required by any rule 
of policy; it is enough if the holder be secure when he advances 
his funds, or makes himself liable on the credit of the paper he 
receives. In coincidence with this principle, it appears to me, 
all the cases have been decided ; for, although the rule is laid down 
generally, and the holder will be protected where the bill or note 
is taken in the usual course of trade, and for a fair and valuable 
consideration without notice, in every case I have met with, where 



174 What Constitutes Consideration 

the owner failed to recover, it appeared that the holder gave credit 
to the paper, received it in the way of business, and gave money 
or property in exchange. In Miller v. Race (i Burr. Rep. 452) 
it is stated, that the mail was robbed, a bank note taken out, and 
afterwards passed to the plaintiff, an inn-keeper, who took it bona 
fide, in his business, for a valuable consideration, and without 
notice; it was held, that the plaintiff was entitled to the note. 
In Grant v. Vaughan, (3 Burr. Rep, 1526) the plaintiff took a bill 
of exchange that had been lost, and paid the value of it; it 
was held that he was entitled to the bill. Mr. Justice Wilmot, 
in that case, observes, "Though both the claimants were innocent, 
yet, as Grant took the note in the course of trade, bona fide, and 
upon a valuable consideration, Grant has the better equity." Upon 
what is this better equity founded? Because Grant parted with 
his property for the bill, and was an innocent holder. In Peacock 
v. Rhodes, (Doug. Rep. 633) it was held, that- an innocent endor- 
see might recover on a bill of exchange with a blank endorsement, 
which had been stolen and negotiated ; but it appeared, that the 
person who transferred the bill, bought cloth and other articles in 
the way of the plaintiff's trade, as a mercer, and received the 
value. Lord Mansfield says, "The jury have found that the bill 
was received in the course of trade, and, therefore, the case is 
clear, and within the principle of all the cases, from that of Mil- 
ler v. Race, downwards." So, also, in the case, of Collins v. Mar- 
tin, (1 Bos. & Pull. 648) it was held, that if A. deposit bills 
endorsed in blank with B., his banker, to be received when due, 
and the latter raises money on them, by placing them with C., 
and, afterwards, becomes bankrupt, A. cannot maintain trover 
against C. for the bills. In that case, as in all the preceding, the 
holder paid value for the bill ; an advance was made in money ; 
had that not been made out, it is evident to my mind that the 
holder would not have been protected. Chief Justice Eyre, in 
giving the opinion of the court, observes, "If the holder gave no 
value for the bill, he would be affected by everything which would 
affect the first holder." What is meant by giving value for the 
bill, must be collected from the whole case of which he is speak- 
ing. The holder, in that case, advanced his money on the credit 
of the bill. The language of the court cannot be mistaken : some- 
thing must have been paid in money or property, or some existing 
debt satisfied thereby, or some new responsibility incurred in con- 
sequence of the transfer ; this would be paying value, and making 
out a good consideration within the reason and meaning of the 
rule. In such a case, the holder of a bill of exchange or promis- 



CODDINGTON V. BAY 175 

sory note, is not to be considered in the light of an assignee of 
the payee, and bound to take the thing assigned, subject to 
all the equity to which the original party was subject; but he 
stands on the ground of an innocent purchaser of negotiable 
paper, who, having parted with his property, is entitled to the 
benefit resulting from his purchase, in opposition to the right 
owner. So, also, in Lawson v. Weston, (4 Esp. N. P. Rep. 56) 
where a lost bill had been discounted, the plaintiff recovered. 
Lord Kenyon considered the point settled by the case of Miller v. 
Race, and observed, "If there was any fraud in the transaction, 
of if a bona fide consideration had not been paid for the bill by 
the plaintiffs, they could not recover." The general rule is to be 
understood as applicable to cases of this description; there does 
not seem to be any necessity to go further. The credit of bills and 
notes cannot be impaired, or their circulation impeded, if the 
right of the holder is limited and restricted in this manner. He 
still retains all the rights that the law intended to confer on him, 
or that commercial policy can reasonably require. To deny the 
relief prayed for by the respondent, would introduce a new rule, 
not warranted by any of the adjudged cases. 

Every man who takes negotiable paper, is supposed to know, 
that he does not acquire an indefeasible right. A note given for 
money won at play, or upon a usurious consideration, may be 
inquired into in the hands of an innocent endorsee. Does this 
obstruct the circulation of bills or notes ? So every holder knows, 
or is presumed to know, that the title of the right owner cannot 
be divested, unless value has been given, or liability incurred. The 
rule, then, as I conceive, is well established, and must govern the 
present case. The question is, whether the appellants are within 
its provisions. Randolph & Savage had stopped payment, and 
were insolvent, which was known to the appellants at the time 
they received the notes. They were not then indebted to the 
appellants, for none of the notes were due; the liability of the 
appellants was still contingent, although it was admitted there 
was good reason to believe it would soon become absolute. No 
responsibility was incurred in consequence of taking the notes; 
they were received as an indemnity; the situation of Randolph 
and Savage was desperate, and no doubt the appellants were 
anxious to get hold of anything that had the semblance of 
security. If the notes became effectual in their hands, then so 
much was gained ; if not, they remained in statu quo. The mere 
probability that the notes would be valid in their hands, was 
inducement enough to seize on them with avidity ; it might be the 



176 What Constitutes Consideration 

means of rescuing something from the shipwreck. Very different 
is the case of a holder for value paid; he makes the advance on 
the credit of the paper ; if that fails, his loss is certain. But it has 
been urged, that if the appellants had not reposed themselves on 
the rule now contended for, they might have obtained other secur- 
ity, and, consequently, they are prejudiced by the decree. This 
argument cannot be listened to ; it only proves that the appellants 
may sustain an injury in consequence of mistake as to the rule 
of law. With this the court has no concern. The true question 
is. Have they paid value for the notes, or made any new engage- 
ments as the consideration of the transfer ? This is not pretended. 
I am, therefore, of opinion, that the decree of his honor the chan- 
cellor ought to be affirmed. 
Platt, J., concurred. 

Decree of affirmance. 



Swift v. Tyson (1842), 16 Pet. (41 U. S.), 1. 

On a certificate of division from the Circuit Court of the 
United States for the Southern District of New York. 

This action was instituted in the Circuit Court upon a bill 
of exchange, dated at Portland, in the State of Maine, on the 
first day of May, 1836, for one thousand five hundred and thirty- 
six dollars and thirty cents, payable six months after date, drawn 
by Nathaniel Norton, and Jairus S. Keith, upon and accepted by 
the defendant, the bill having been drawn to the order of Nathan- 
iel Norton, and by him endorsed to the plaintiff. The principal 
and interest on the bill, up to the time of trial, amounted to one 
thousand eight hundred and sixty-two dollars and six cents. The 
defence to the action rested on the answers to a bill of discovery 
filed by the defendant against the plaintiff; by which it appeared 
that the bill had been received by him from Nathaniel Norton, 
with another draft of the same amount in payment of a protested 
note drawn by Norton and Keith, and which had been paid by 
him to the Maine Bank. When the draft was received by the 
plaintiff, it had been accepted by the defendant, who resided in 
New York. The plaintiff had no knowledge of the consideration 
which had been received for the acceptance, and had no other 
transaction with the defendant. He had received the drafts and 
acceptances in payment of the protested note, with a full belief 
that the same were justly due, according to their tenor ; and he 
had no other security for the payment of the protested note except 



Swift v. Tyson 177 

the drafts, nor had he any knowledge of any contract or dealing 
between the defendant and Norton, out of which the said draft 
arose. 

The defendant then offered to prove that the bill of exchange 
was accepted by him as part consideration for the purchase of 
certain lands in the State of Maine, of which Keith and Norton, 
the drawers of the bill, represented themselves to be the owners, 
and represented them to be of great value, made certain estimates 
of them which were warranted by them to be correct, and also 
contracted to convey a good title to the land ; all of which repre- 
sentations were in every respect fraudulent and false; and that 
said Keith and Norton have never been able to make a title to 
the lands : whereupon the plaintiff, by his counsel, objected to the 
admission of said testimony, or any testimony, as against the 
plaintiff, impeaching or showing the failure of the consideration 
on which said bill was accepted, under the facts aforesaid admit- 
ted by the defendant, and those proven by him, by reading said 
answers in equity of the plaintiff in evidence. And the judges 
of the Court divided in opinion on the point or question of law, 
whether, under the facts last mentioned, the defendant was 
entitled to the same defence to the action as if the suit was 
between the original parties to the bill, that is to say, the said 
Norton, or the said Norton and Keith, and the defendant. And 
whether the evidence so offered in defence and objected to was 
admissible as against the plaintiffs in this action. 

And thereupon the said point or question of law was, at the 
request of the counsel for the said plaintiff, stated as above 
und«r the direction of the judges of this Court, to be certified 
under the seal of this Court to the Supreme Court of the United 
States, at the next session thereof to be held thereafter; to be 
finally decided by the said last mentioned Court. 

Fessenden, for the plaintiff. 
Dana, for the defendant. 

Story, J., delivered the opinion of the court. 

This cause comes before us from the Circuit Court of the 
southern district of New York, upon a certificate of division of 
the judges of that Court. 

The action was brought by the plaintiff, Swift, as endorsee, 
against the defendant, Tyson, as acceptor, upon a bill of exchange 
dated at Portland, Maine, on the first day of May, 1836, for the 
sum of one thousand five hundred and forty dollars, thirty cents, 
payable six months after date and grace, drawn by one Nathaniel 



178 What Constitutes Consideration 

Norton and one Jairus S. Keith upon and accepted by Tyson, at 
the city of New York, in favour of the order of Nathaniel Norton, 
and by Norton endorsed to the plaintiff. The bill was dishon- 
oured at maturity. 

At the trial the acceptance and endorsement of the bill were 
admitted, and the plaintiff there rested his case. The defendant 
then introduced in evidence the answer of Swift to a bill of dis- 
covery, by which it appeared that Swift took the bill before it 
became due, in payment of a promissory note due to him by 
Norton and Keith ; that he understood that the bill was accepted 
in part payment of some lands sold by Norton to a company in 
New York ; that Swift was a bona fide holder of the bill, not 
having any notice of anything in the sale or title to the lands, or 
otherwise, impeaching the transaction, and with the full belief 
that the bill was justly due. The particular circumstances are 
fully set forth in the answer in the record; but it does not seem 
necessary farther to state them. The defendant then offered to 
prove, that the bill was accepted by the defendant as part con- 
sideration for the purchase of certain lands in the State of Maine, 
which Norton and Keith represented themselves to be the owners 
of, and also represented to be of great value, and contracted to 
convey a good title thereto; and that the representations were in 
every respect fraudulent and false, and Norton and Keith had 
no title to the lands, and that the same were of little or no value. 
The plaintiff objected to the admission of such testimony, or of 
any testimony, as against him, impeaching or showing a failure 
of the consideration, on which the bill was accepted, under the 
facts admitted by the defendant, and those proved by him, by 
reading the answer of the plaintiff to the bill of discovery. The 
judges of the Circuit Court thereupon divided in opinion upon 
the following point or question of law : Whether, under the 
facts last mentioned, the defendant was entitled to the same 
defence to the action as if the suit was between the original 
parties to the bill, that is to say, Norton, or Norton and Keith, 
and the defendant; and whether the evidence so offered was 
admissible as against the plaintiff in the action. And this is the 
question certified to us for our decision. 

There is no doubt, that a bona fide holder of a negotiable 
instrument for a valuable consideration, without any notice of 
facts which impeach its validity as between the antecedent parties, 
if he takes it under an endorsement made before the same 
becomes due, holds the title unaffected by these facts, and may 
recover thereon, although as between the antecedent parties the 



Swift v. Tyson 179 

transaction may be without any legal validity. This is a doctrine 
so long and so well established, and so essential to the security 
of negotiable paper, that it is laid up among the fundamentals of 
the law, and requires no authority or reasoning to be now brought 
in its support. As little doubt is there, that the holder of any 
negotiable paper, before it is due, is not bound to prove that he is 
a bona fide holder for a valuable consideration, without notice; 
for the law will presume that, in the absence of all rebutting 
proofs, and therefore it is incumbent upon the defendant to estab- 
lish by way of defence satisfactory proofs of the contrary, and 
thus to overcome the prima facie title of the plaintiff. 

In the present case, the plaintiff is a bona fide holder without 
notice, for what the law deems a good and valid consideration, 
that is, for a pre-existing debt ; and the only real question in the 
cause is, whether, under the circumstances of the present case, 
such a pre-existing debt constitutes a valuable consideration in 
the sense of the general rule applicable to negotiable instru- 
ments. We say, under the circumstances of the present case, for 
the acceptance having been made in New York, the argument on 
behalf of the defendant is, that the contract is to be treated as a 
New York contract, and therefore to be governed by the laws of 
New York, as expounded by its courts, as well as upon general 
principles, as by the express provisions of the thirty-fourth sec- 
tion of the judiciary act of 1789, ch. 20. And then it is further 
contended, that by the law of New York, as thus expounded by 
its courts, a pre-existing debt does not constitute, in the sense of 
the general rule, a valuable consideration applicable to negotiable 
instruments. 

In the first place, then, let us examine into the decisions of 
the courts of New York upon this subject. In the earliest case, 
Warren v. Lynch, 5 Johns. R. 289, the Supreme Court of New 
York appear to have held, that a pre-existing debt was a sufficient 
consideration to entitle a bona fide holder without notice to 
recover the amount of a note endorsed to him, which might not, 
as between the original parties, be valid. The same doctrine was 
affirmed by Mr. Chancellor Kent in Bay v. Coddington, 5 Johns. 
Chan. Rep. 54. Upon that occasion he said, that negotiable paper 
can be assigned or transferred by an agent or factor or by any 
other person, fraudulently, so as to bind the true owner as against 
the holder, provided it be taken in the usual course of trade, and 
for a fair and valuable consideration without notice of the fraud. 
But he added, that the holders in that case were not entitled to 
the benefit of the rule, because it was not negotiated to them in 



180 What Constitutes Consideration 

the usual course of business or trade, nor in payment of any 
antecedent and existing debt, nor for cash, or property advanced, 
debt created, or responsibility incurred, on the strength and credit 
of the notes ; thus directly affirming, that a pre-existing debt was 
a fair and valuable consideration within the protection of the 
general rule. And he has since affirmed the same doctrine, upon 
a full review of it, in his Commentaries, 3 Kent. Comm., sec. 44, 
p. 81. The decision in the case of Bay v. Coddington was after- 
wards affirmed in the Court of Errors, 20 Johns. R. 637, and the 
general reasoning of the chancellor was fully sustained. There 
were indeed peculiar circumstances in that case, which the Court 
seem to have considered as entitling it to be treated as an excep- 
tion to the general rule, upon the ground either because the 
receipt of the notes was under suspicious circumstances, the 
transfer having been made after the known insolvency of the 
endorser, or because the holder had received it as a mere security 
for contingent responsibilities, with which the holders had not 
then become charged. There was, however, a considerable diver- 
sity of opinion among the members of the court upon that occa- 
sion, several of them holding that the decree ought to be reversed, 
others affirming that a pre-existing debt was a valuable consid- 
eration, sufficient to protect the holders, and others again insist- 
ing, that a pre-existent debt was not sufficient. From that period, 
however, for a series of years, it seems to have been held by the 
Supreme Court of the state, that a pre-existing debt was not a 
sufficient consideration to shut out the equities of the original 
parties in favour of the holders. But no case to that effect has 
ever been decided in the Court of Errors. The cases cited at the 
bar, and especially Roosa v. Brotherson, 10 Wend. R. 85 ; The 
Ontario Bank v. Worthington, 12 Wend. R. 593; and Payne v. 
Cutler, 13 Wend. R. 605, are directly in point. But the more 
recent cases, The Bank of Salina v. Babcock, 21 Wend. R. 490, 
and The Bank of Sandusky v. Scoville, 24 Wend. R. 115, have 
greatly shaken, if they have not entirely overthrown those deci- 
sions, and seem to have brought back the doctrine to that promul- 
gated in the earliest cases. So that, to say the least of it, it admits 
of serious doubt, whether any doctrine upon this question can at 
the present time be treated as finally established ; and it is certain, 
that the Court of Errors have not pronounced any positive 
opinion upon it. 

But, admitting the doctrine to be fully settled in New York, 
it remains to be considered, whether it is obligatory upon this 
Court, if it differs from the principles established in the general 



Swift v. Tyson 181 

commercial law. It is observable that the courts of New York 
do not found their decisions upon this point upon any local statute, 
or positive, fixed, or ancient local usage ; but they deduce the doc- 
trine from the general principles of commercial law. It is, how- 
ever, contended, that the thirty-fourth section of the judiciary 
act of 1789, ch. 20, furnishes a rule obligatory upon this Court to 
follow the decisions of the state tribunals in all cases to which 
they apply. That section provides "that the laws of the several 
states, except where the Constitution, treaties, or statutes of the 
United States shall otherwise require or provide, shall be 
regarded as rules of decision in trials at common law in the courts 
of the United States, in cases where they apply." In order to 
maintain the argument, it is essential, therefore, to hold, that the 
word "laws," in this section, includes within the scope of its 
meaning the decisions of the local tribunals. In the ordinary use 
of language it will hardly be contended that the decisions of 
courts constitute laws. They are, at most, only evidence of what 
the laws are; and are not of themselves laws. They are often 
re-examined, reversed, and qualified by the courts themselves, 
whenever they are found to be either defective, or ill-founded, or 
otherwise incorrect. The laws of a state are more usually under- 
stood to mean the rules and enactments promulgated by the 
legislative authority thereof, or long established local customs 
having the force of laws. In all the various cases which have 
hitherto come before us for decision, this Court have uniformly 
supposed, that the true interpretation of the thirty-fourth section 
limited its application to state laws strictly local, that is to say, to 
the positive statutes of the state, and the construction thereof 
adopted by the local tribunals, and to rights and titles to things 
having a permanent locality, such as the rights and titles to real 
estate, and other matters immovable and intraterritorial in their 
nature and character. It never has been supposed by us, that 
the section did apply, or was designed to apply, to questions of a 
more general nature, not at all dependent upon local statutes or. 
local usages of a fixed and permanent operation, as, for example, 
to the construction of ordinary contracts or other written instru- 
ments, and especially to questions of general commercial law, 
where the state tribunals are called upon to perform the like 
functions as ourselves, that is, to ascertain upon general reason- 
ing and legal analogies, what is the true exposition of the contract 
or instrument, or what is the just rule furnished by the principles 
of commercial law to govern the case. And we have not now 
the slightest difficulty in holding, that this section, upon its true 



182 What Constitutes Consideration 

intendment and construction, is strictly limited to local statutes 
and local usages of the character before stated, and does not 
extend to contracts and other instruments of a commercial nature, 
the true interpretation and effect whereof are to be sought, not 
in the decisions of the local tribunals, but in the general principles 
and doctrines of commercial jurisprudence. Undoubtedly, the 
decisions of the local tribunals upon such subjects are entitled to, 
and will receive, the most deliberate attention and respect of this 
Court; but they cannot furnish positive rules, or conclusive 
authority, by which our own judgments are to be bound up and 
governed. The law respecting negotiable instruments may be 
truly declared in the language of Cicero, adopted by Lord Mans- 
field in Luke v. Lyde, 2 Burr. R. 883, 887, to be in a great meas- 
ure, not the law of a single country only, but of the commercial 
world. Non erit alia lex Roma, alia Athenis, alia nunc, alia 
posthac, sed et apud omnes gentes, el omni tempore, una eadem- 
que lex obtenebit. 

It becomes necessary for us, therefore, upon the present occa- 
sion to express our own opinion of the true result of the commer- 
cial law upon the question now before us. And we have no 
hesitation in saying, that a pre-existing debt does constitute a 
valuable consideration in the sense of the general rule already 
stated, as applicable to negotiable instruments. Assuming it to 
be true, (which, however, may well admit of some doubt from 
the generality of the language,) that the holder of a negotiable 
instrument is unaffected with the equities between the antece- 
dent parties, of which he has no notice, only where he receives it 
in the usual course of trade and business for a valuable consid- 
eration, before it becomes due; we are prepared to say, that 
receiving it in payment of or as security for a pre-existing 'debt, 
is according to the known usual course of trade and business. 
And why upon principle should not a pre-existing debt be deemed 
such a valuable consideration? It is for the benefit and conve- 
nience of the commercial world to give as wide an extent as 
practicable to the credit and circulation of negotiable paper, that 
it may pass not only as security for new purchases and advances, 
made upon the transfer thereof, but also in payment of and as 
security for pre-existing debts. The creditor is thereby enabled 
to realize or to secure his debt, and thus may safely give a pro- 
longed credit, or forbear from taking any legal steps to enforce 
his rights. The debtor also has the advantage of making his 
negotiable securities of equivalent value to cash. But establish 
the opposite conclusion, that negotiable paper cannot be applied 



Swift v. Tyson 183 

in payment of or as security for pre-existing debts, without letting 
in all the equities between the original and antecedent parties, 
and the value and circulation of such securities must be essentially 
diminished, and the debtor driven to the embarrassment of 
making a sale thereof, often at a ruinous discount, to some third 
person, and then by circuity to apply the proceeds to the payment 
of his debts. What, indeed, upon such a doctrine would become 
of that large class of cases, where new notes are given by the 
same or by other parties, by way of renewal or security to banks, 
in lieu of old securities discounted by them, which have arrived 
at maturity? Probably more than one-half of all bank transac- 
tions in our country, as well as those of other countries, are of 
this nature. The doctrine would strike a fatal blow at all dis- 
counts of negotiable securities for pre-existing debts. 

This question has been several times before this Court, and 
it has been uniformly held, that it makes no difference whatso- 
ever as to the rights of the holder, whether the debt for which the 
negotiable instrument is transferred to him is a pre-existing debt, 
or is contracted at the time of the transfer. In each case he 
equally gives credit to the instrument. The cases of Coolidge v. 
Payson, 2 Wheaton, R. 66, 70, 73, and Townsley v. Sumrall, 2 
Peters, R. 170, 182, are directly in point. 

In England the same doctrine has been uniformly acted 
upon. As long ago as the case of Pillans and Rose v. Van MeirQp 
and Hopkins, 3 Burr. 1664, the very point was made and the 
objection was overruled. That, indeed, was a case of far more 
stringency than the one now before us ; for the bill of exchange, 
there drawn in discharge of a pre-existing debt, was held to bind 
the party as acceptor, upon a mere promise made by him to accept 
before the bill was actually drawn. Upon that occasion, Lord 
Mansfield, likening the case to that of a letter of credit, said, that 
a letter of credit may be given for money already advanced, as 
well as for money to be advanced in future ; and the whole court 
held the plaintiff entitled to recover. From that period downward 
there is not a single case to be found in England in which it has 
ever been held by the court, that a pre-existing debt was not a 
valuable consideration, sufficient to protect the holder, within the 
meaning of the general rule, although incidental dicta have been 
sometimes relied on to establish the contrary, such as the dictum 
of Lord Chief Justice Abbott in Smith v. De Witt, 6 Dowl. & 
Ryland, 120, and De la Chaumette v. The Bank of England, 9 
Barn. & Cres. 209, where, however, the decision turned upon very 
different considerations. 



184 What Constitutes Consideration 

Mr. Justice Bayley, in his valuable work on bills of exchange 
and promissory notes, lays down the rule in the most general 
terms. "The want of consideration," says he, "in toto or in part, 
cannot be insisted on, if the plaintiff or any intermediate party 
between him and the defendant, took the bill or note bona fide 
and upon a valid consideration." (Bayley on Bills, p. 499, 500, 
5th London edition, 1830.) It is observable that he here uses 
the words "valid consideration," obviously intending to make 
the distinction, that it is not intended to apply solely to cases, 
where a present consideration for advances of money on goods 
or otherwise takes place at the time of the transfer and upon the 
credit thereof. And in this he is fully borne out by the author- 
ities. They go farther, and establish, that a transfer as security 
for past, and even for future responsibilities, will, for this pur- 
pose, be a sufficient, valid, and valuable consideration. Thus, in 
the case of Bosanquet v. Dudman, 1 Starkie, R. 1, it was held by 
Lord Ellenborough, that if a banker be under acceptances to an 
amount beyond the cash balance in his hands, every bill he holds 
of that customer's, bona fide, he is to be considered as holding for 
value ; and it makes no difference though he hold other collateral 
securities, more than sufficient to cover the excess of his accept- 
ances. The same doctrine was affirmed by Lord Eldon in Ex 
parte Bloxham, 8 Ves. 531, as equally applicable to past and to 
future acceptances. The subsequent cases of Haywood v. Wat- 
son, 4 Bing. R. 496, and Bramah v. Roberts, 1 Bing. New Ca. 
469, and Percival v. Frampton, 2 Cromp. Mees. & Rose, 180, are 
to the same effect. They directly establish that a bona fide holder, 
taking a negotiable note in payment of or as security for a pre- 
existing debt, is a holder for a valuable consideration, entitled to 
protection against all the equities between the antecedent parties. 
And these are the latest decisions, which our researches have 
enabled us to ascertain to have been made in the English courts 
upon this subject. 

In the American courts, so far as we have been able to trace 
the decisions, the same doctrine seems generally but not univer- 
sally to prevail. In Brush v. Scribner, 11 Conn. R. 388, the 
Supreme Court of Connecticut, after an elaborate review of the 
English and New York adjudications, held, upon general prin- 
ciples of commercial law, that a pre-existing debt was a valuable 
consideration, sufficient to convey a valid title to a bona fide 
holder against all the antecedent parties to a negotiable note. 
There is no reason to doubt, that the same rule has been adopted 
and constantly adhered to in Massachusetts ; and certainly there 



Swift v. Tyson 185 

is no trace to be found to the contrary. In truth, in the silence 
of any adjudications upon the subject, in a case of such frequent 
and almost daily occurrence in the commercial states, it may fairly 
be presumed, that whatever constitutes a valid and valuable con- 
sideration in other cases of contract to support titles of the most 
solemn nature, is held a fortiori to be sufficient in cases of nego- 
tiable instruments, as indispensable to the security of holders, and 
the facility and safety of their circulation. Be this as it may, we 
entertain no doubt, that a bona fide holder, for a pre-existing 
debt, of a negotiable instrument, is not affected by any equities 
between the antecedent parties, where he has received the same 
before it became due, without notice of any such equities. We 
are all, therefore, of opinion, that the question on this point, pro- 
pounded by the Circuit Court for our consideration, ought to be 
answered in the negative; and we shall accordingly direct it so 
to be certified to the Circuit Court. 

Mr. Justice Catron said: 

Upon the point of difference between the judges below, I 
concur, that the extinguishment of a debt, and the giving a post 
consideration, such as the record presents, will protect the pur- 
chaser and assignee of a negotiable note from the infirmity affect- 
ing the instrument before it was negotiated. But I am unwilling 
to sanction the introduction into the opinion of this court, a doc- 
trine aside from the case made by the record, or argued by the 
counsel, assuming to maintain, that a negotiable note or bill 
pledged as collateral security for a previous debt, is taken by the 
creditor in the due course of trade ; and that he stands on the foot 
of him who purchases in the market for money, or takes the 
instrument in extinguishment of a previous debt. State courts of 
high authority on commercial questions have held otherwise; 
and that they will yield to a mere expression of opinion of this 
court, or change their course of decision in conformity to the 
recent English cases referred to in the principal opinion, is 
improbable: whereas, if the question was permitted to rest until 
it fairly arose, the decision of it either way by this court, prob- 
ably, would, and I think ought to settle it. As such a result is not 
to be expected from the opinion in this cause, I am unwilling to 
embarrass myself with so much of it as treats of negotiable instru- 
ments taken as a pledge. I never heard this question spoken of 
as belonging to the case, until the principal opinion was presented 
last evening ; and therefore I am not prepared to give any opinion, 
«ven was it called for by the record. 



186 What Constitutes Consideration 

This cause came on to be heard on the transcript of the 
record from the Circuit Court of the United States, for the south- 
ern district of New York, and on the point and question on which 
the judges of the said Circuit Court were opposed in opinion, and 
which were certified to this court for its opinion, agreeably to the 
act of Congress in such case made and provided, and was argued 
by counsel. On consideration whereof, it is the opinion of this 
court, that the defendant was not, under the facts stated, entitled 
to the same defence to the action as if the suit was between the 
original parties to the bill ; that is to say, the said Norton, or the 
said Norton and Keith and the defendant: and that the evidence 
offered in defence and objected to, was not admissible as against 
the plaintiff in this action. Whereupon it is now here ordered 
and adjudged by this court, that an answer in the negative be 
certified to the said Circuit Court. 



Sutherland v. Mead et al. (xpoj), 80 App. Div. (N. Y.) 103, So 
N. Y. Supp. 504. 

Appeal from Special Term, -New York County. 

Action by George R. Sutherland against Charles H. Mead 
and Thomas Taft, impleaded. From an order denying a motion 
to vacate and set aside the judgment, or, in the alternative, to 
modify it by reducing it to $150, with interest, defendants Mead 
and Taft appeal. Reversed. 

Argued before Van Brunt, P. J., and Hatch, McLaugh- 
lin, O'Brien, and Ingraham, JJ. 

A. H. F. Seeger, for appellants. 

Edward Hassett, for respondent. 

Hatch, J. This action was brought to recover upon a prom- 
issory note made by the defendant Deshong, upon which the 
appellants were accommodation indorsers. It appeared upon the 
hearing of the motion that the defendant Palleske was indebted 
to the appellants upon a promissory note for the sum of $1,000; 
that as such note was about falling due, and on the 15th day of 
April, 1902, Palleske requested the appellants to accept in pay- 
ment of such note the promissory note executed by Deshong, set 
forth in the complaint in the action ; that they refused so to accept 
the same unless Palleske could procure it to be discounted, and 
would deliver the proceeds thereof to the appellants, and for such 



Sutherland v. Mead et al. 187 

purpose the appellants indorsed said note in their firm name, and 
the defendant Palleske took the same, and agreed to return the 
proceeds thereof to the appellants. Instead of discounting the 
note, Palleske transferred the same to the plaintiff in the action, 
who paid thereon the sum of $150 cash, and, as further con- 
sideration, took and held the same as collateral security for an 
indebtedness then due and owing by Palleske to the plaintiff in 
a sum exceeding $3,000, the whole of which still remains due and 
unpaid. This action was brought by the plaintiff to enforce the 
note. All of the defendants made default in answering. Judg- 
ment was thereupon entered by the plaintiff for the full amount 
secured to be paid by the note, with interest. Thereafter the 
accommodation indorsers, the appellants herein, made a motion 
to open the default, and for leave to serve an answer. The court 
denied such motion upon the ground that the answer which accom- 
panied the motion papers, and which was proposed to be served 
as a defense to the note, was insufficient for such purpose, in that 
it failed to aver the fraudulent diversion of the note in suit, and 
for this reason the motion was denied. It is clear that the court 
made a correct disposition of such motion, and placed the denial 
upon a proper ground. There was no statement in the answer 
which raised any issue of a fraudulent diversion. Consequently 
the plaintiff would have been entitled to judgment thereunder. 
The fraudulent diversion of the note constituted an affirmative 
defense, and the defendants, in order to avail themselves of it, 
were required to plead the same. (Met. Nat. Bank v. Loyd, 90 
N. Y. 530; Grant v. Walsh, 145 N. Y. 502, 40 N. E. 209, 45 Am. 
St. Rep. 626.) Thereupon, without obtaining leave so to do, the 
appellants made a motion to set aside the judgment, or, in the 
alternative, to modify the same by reducing the recovery upon 
the note in suit to the sum of $150, with interest thereon from the 
day of its date. This motion was based upon the facts and cir- 
cumstances connected with the delivery of the note to Palleske, 
as has been previously stated, and also upon an affidavit made by 
the plaintiff in the action that he had only paid to Palleske for 
the note $150 in cash, and held the same as collateral security 
for the payment of a pre-existing debt. It was made to appear 
by the moving papers that the appellants herein were ignorant of 
the consideration paid by the plaintiff for the note prior to the 
time when the application was made to open the default, when 
the affidavit was read. Upon learning these facts, the appellants 
caused an answer to be prepared, setting up the facts and circum- 
stances connected with the delivery of the note, the indorsement 



188 What Constitutes Consideration 

by the appellants, the fraudulent diversion of the same by Pal- 
leske, and the consideration paid therefor by the plaintiff. This 
motion, upon these papers coming on to be heard, was denied, 
and from the order entered thereon, this appeal is taken. 

The motion to vacate or reduce the judgment was an entirely 
different motion from the one made to open the default. That 
was based solely upon the fraudulent diversion of the note, and 
upon an insufficient answer to raise such question. The present 
facts were wholly unknown to the appellants at the time when 
the motion was made. The present motion is for an entirely dif- 
ferent purpose, viz., to set aside the judgment, based upon a state 
of facts, showing that the plaintiff was only entitled to enforce 
the payment of the note to the extent to which he had parted with 
value therefor, and, upon the conceded facts, he was not entitled 
to the judgment which had been entered, unless entitled to enforce 
the note for the full amount. These facts did not before appear, 
and were unknown to the moving party. This application was 
accompanied by a verified answer setting up these facts. It is 
evident, therefore, that the motion was entirely different from the 
first motion, made for entirely different relief, and was based 
upon papers which fully and completely set forth the appellants' 
defense. It was therefore properly made, and the former motion 
was no bar to the court's entertaining the same. It is said, how- 
ever, that the negotiable instrument law has changed the rule in 
respect to what constitutes consideration for a promissory note; 
it being claimed that a pre-existing indebtedness is a good con- 
sideration, and renders the holder thereof a holder for value of a 
note taken as security therefor, as against accommodation indors- 
ers, even though the note has been fraudulently diverted from the 
purpose for which it was given, and the indorsers have received 
no value. Since 1822, when Coddington v. Bay, 20 Johns. 636, 
1 1 Am. Dec. 342, was decided, it has been the settled law of this 
state that accommodation makers or indorsers of negotiable paper 
were not liable to a holder thereof, where the same had been 
fraudulently diverted from the purpose for which it was made, 
or the indorsement given, and the holder had received it solely 
as collateral security for an antecedent debt. (Comstock v. Hier, 
73 N. Y. 269, 29 Am. Rep. 142.) In other words, the surety has 
the right to impose such liability upon his obligation as he sees 
fit, and he is not to be made liable outside of the terms of his 
engagement, in the case of negotiable paper, except for the benefit 
of a bona fide holder, who parted with value, and was misled to 
his prejudice. (United States Nat. Bank v. Ewing, 131 N. Y. 



Sutherland v. Mead et al. 189 

506, 30 N. E. 501, 2j Am. St. Rep. 615.) Whatever may have 
been the rule with respect to this question in other jurisdictions, 
it has been the law of this state, uniformly enforced during this 
period of time, and still is the law, unless the negotiable instru- 
ment law has changed the same. Section 51 of such act provides : 

"Value is any consideration sufficient to support a simple 
contract. An antecedent or pre-existing debt constitutes value; 
and is deemed such whether the instrument is payable on demand 
or at a future time." 

Standing alone, this provision has not changed the existing 
law. It was always the law of this state that a consideration suffi- 
cient to support a simple contract constituted a good consideration 
for the instrument. This declaration, therefore, upon this sub- 
ject, added nothing whatever to the law as it existed and had 
existed from time immemorial. So, also, an antecedent or pre- 
existing debt constituted value, and was sufficient in considera- 
tion of an .instrument, either negotiable or otherwise, as between 
the parties thereto. Moreover, it was always the law that the 
actual payment and discharge of a pre-existing debt constituted 
the same a valuable consideration for the transfer of commercial 
paper, and shut off prior equities existing against it. Such was 
the rule announced in Coddington v. Bay, supra, and has since 
been enforced by the courts of this state. {Mayer v. Heidelbach, 
123 N. Y. 332, 25 N. E. 416, 9 L. R. A. 850; Spring Brook Chem- 
ical Co. v. Dunn, 39 App. Div. 130, 57 N. Y. Supp. 100; Blair 
v. Hagemeyer, 26 App. Div. 219, 49 N. Y. Supp. 965.) There 
is nothing contained in this enactment, therefore, which has 
changed the rule of law respecting the consideration of commer- 
cial paper, as it had previously existed; and the language of the 
statute is quite insufficient to annul the rule which has obtained 
with respect to the fraudulent diversion of commercial paper, as 
against accommodation indorsers thereon. Such rule, therefore, 
cannot be considered as changed, unless it be by virtue of the 
other provisions of the statute, showing that such defense is cut 
off, and indicating a clear intent to change the rule. 

Section 52 of the negotiable instruments law defines what 
constitutes a 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." 

And by section 55 an accommodation party is made liable 
on the instrument to a holder for value, although such holder at 
the time of taking the instrument knew him to be only an accom- 



190 What Constitutes Consideration 

modation party. Section 91 defines a holder in due course to be 
a person who has taken the instrument under the following con- 
ditions : 

"(1) That it is complete and regular upon its face; (2) that 
he became the holder of it before it was overdue, and without 
notice that it had been previously dishonored, if such was the 
fact; (3) that he took it in good faith and for value; (4) that 
at the time it was negotiated to him he had no notice of any 
infirmity in the instrument or defect in the title of the person 
negotiating it." 

Section 94 defines when the title is defective in the person 
who has negotiated the instrument as follows : 

"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." 

Section 95 provides that the holder must have "actual knowl- 
edge of the infirmity or defect, or knowledge of such facts that 
his action in taking the instrument amounted to bad faith." By 
section 96 the rights of a holder in due course are defined to be : 

"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." 

"By section 98 it is provided: 

"Every holder is deemed prima facie to be a holder in due 
course; but when it is shown that the title of any person who 
has negotiated the 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." 

It is evident from these provisions that the Legislature did 
not intend to wipe out the defenses to a promissory note where 
the same had been procured from the maker by fraud, or where 
the indorsement has been given for a specific purpose, and a fraud- 
ulent diversion of the paper has been had. If the holder took 
the same with notice of such facts or circumstances as charged 
him with notice, or if he parted with no value, it constitutes a 
good defense to such note. As the definition of value for a prom- 
issory note has not added anything to the law upon that subject 
beyond such as was previously recognized, we ought not to con- 
clude that the Legislature intended to change the rule with respect 
thereto, nor to permit frauds to be perpetrated thereunder. When 



Sutherland v. Mead et al. 191 

the Legislature defines a defective title, it states in express terms 
that a fraudulent diversion is such. All of these sections can be 
harmonized, in their entirety, without any subtle refinement of 
reasoning, by construing section 51 to mean that, to constitute 
an antecedent or pre-existing debt a valuable consideration in 
support of a promissory note that has been fraudulently diverted, 
as valid in the hands of a bona fide holder, the latter must have 
canceled, and, in legal effect, paid and discharged, the antecedent 
or pre-existing debt. By still holding the debt, he in fact parts 
with no value. It was not intended thereby that where a debt 
continued to remain in existence, and enforceable as such, and 
the note is taken as collateral security for its payment, such debt, 
undischarged, constitutes a valuable consideration, or the holder 
of the note one in due course, as against the accommodation 
maker or indorser who has been defrauded by the negotiation 
of the instrument. We are not to impute to the Legislature an 
intent to change a rule of law which has existed in uniform 
course of enforcement for over three-quarters of a century, with- 
out a clear and unequivocal expression so to do. The rules of 
law which have been laid down in England, covering such ques- 
tion, or the reasons assigned for a different rule in other juris- 
dictions in this country, do not furnish controlling reasons for 
changing the law of this state so as to bring it into harmony with 
such views, in face of the fact that in the commercial center of 
this country these rules have been applied for this length of time 
without damage to business interests or harm to commercial 
usages, and during its operation a period of commercial activity 
and prosperity has existed, heretofore unknown in the world's 
history. We may take judicial notice that the commission 
appointed to revise and codify the statutes was created, in the 
main, to codify existing laws, and not make new rules ; and cer- 
tainly it was never intended that settled usages in respect of com- 
mercial paper, founded upon decisions covering a period of 80 
years, and uniform in application, should be overthrown in the 
construction of ambiguous and obscure expressions used by such 
body. The harmony of these provisions of the statute is in no 
measure disturbed by a construction which causes them to read 
that an antecedent and pre-existing debt must be paid and dis- 
charged, in order to constitute the holder of commercial paper, 
which has been fraudulently diverted, a bona fide holder, and, as 
such, capable of enforcing the same, as against the accommoda- 
tion maker or indorser. Merely taking such paper as collateral 
security for the payment of a pre-existing or antecedent debt does 



192 What Constitutes Consideration 

not constitute such debt value, within the meaning of this statute. 
This matter does not seem to have been the subject of discussion, 
beyond that had at Special Term in the case of Brewster v. 
Shrader, 26 Misc. Rep. 480, 57 N. Y. Supp. 606, where a different 
rule was laid down. The authority cited therefor in the opinion 
is contained in the reviser's note by the author of the law, in 
which it is stated that section 51 was designed to change the rule 
in Coddington v. Bay, supra, and the opinion of James W. Eaton, 
Esq., instructor upon the law of bills and notes in the Albany Law- 
School, wherein he says, in his published edition of the negotiable 
instruments law, in referring to section 51, "It is to be inferred 
that the above statute extends the New York rule to include 
instruments given merely as collateral security." We are not 
disposed to adopt this construction of the law. Settled principles 
ought not to be overturned by imputing a legislative intent where 
the language upon which it is based is equivocal in expression, 
and when the language used which it is claimed changes the rule 
may be naturally harmonized with the decisions of the courts, 
which have settled the law plainly and conclusively, and with 
respect to which commercial dealings have been governed in this 
state for over 80 years. But even though we should be wrong 
in our construction of this statute, nevertheless it does not change 
the rule of law to be applied in the particular case. As we have 
seen by section 98, above quoted, the burden is placed upon the 
holder of every promissory note, fraudulently diverted, to show 
that he acquired title thereto as a holder in due course. Nothing 
which appears in these papers tends to controvert the fact that the 
note in question was fraudulently diverted. The proof upon such 
subject, submitted in the moving papers, is clear and unequivocal. 
The answer sets it up as a defense. Before the plaintiff, there- 
fore, could recover, he must show that he acquired the paper in 
due course, and without knowledge of any infirmity attending 
upon it. Under the pleadings an issue of fact upon this question 
may be presented, and these appellants are not to be made to 
suffer through the fraud that has been perpetrated upon them, 
if the plaintiff had notice of such fact, and the appellants ought 
to have an opportunity to be heard upon this subject. The doc- 
trine of estoppel, based upon the certificate that the note was a 
genuine business note, given for value received, and that there 
was no defense to the same, either in law or in equity, does not 
estop the appellants from interposing the defense of fraudulent 
diversion. The certificate was in harmony with the facts. It 
was genuine business paper, executed for a particular purpose, 



Hoffman & Co. v. Bank of Milwaukee 193 

and, in the hands of a holder in due course, may be enforced. In 
order to constitute an estoppel in pais, it must appear that the act 
which concludes the party was expressly designed to influence 
the conduct of another, and did so influence him, and when a 
denial of the act will operate to the injury of the holder. {Payne v. 
Burnham, 62 N. Y. 69.) Such is the doctrine of the cases cited 
by the respondent. They are without application in the present 
case, for the reason that the certificate can add nothing to the 
rights of the present holder of the note. If the note had been 
delivered to him without consideration, he could not have enforced 
it against these accommodation indorsers, as he would not have 
been misled or injured by the certificate which was given. To 
the extent that he parted with value, he is entitled to enforce the 
note, with or without the certificate. In holding it as collateral 
security for the payment of his pre-existing debt, the certificate 
in no wise prejudices him, as he has suffered nothing thereby, 
and parted with no value on account thereof. 

If these views be correct, it follows that the order should be 
reversed, and the judgment set aside, upon payment of costs and 
disbursements of the action, and $10 costs of the motion, to the 
respondent, and defendants allowed to answer. As the defendant 
appellants, however, admit liability to the extent of $150 interest 
and costs, the plaintiff in the action may, if he so elects, stipulate 
to reduce the judgment to such amount, in which event the judg- 
ment, to that extent, should be permitted to stand, and be enforced. 
Ten dollars costs and disbursements of this appeal to the appel- 
lants. All concur. See Crawford's Ann. Neg. Inst. Law, p. 32 ; 
Roseman v. Mahony, 86 App. Div. (N. Y.) 377. Until a deci- 
sion of the Court of Appeals on the point involved, the construc- 
tion of the statute adopted by this case will be open to question. 



WHAT CONSTITUTES HOLDER FOR VALUE. § 28. 

Hoffman & Co. v. Bank of Milwaukee {1870), 12 Wall (7p 

U. S.) 181. 

Error to the Circuit Court for the District of Wisconsin ; the 
case being thus : 

Chapin & Miles, a forwarding and commission firm in Mil- 
waukee, were engaged in moving produce to Hoffman & Co., of 
Philadelphia, for sale there. The course of their business was 
thus : They first shipped the produce, obtaining a bill of lading 



194 What Constitutes Holder for Value 

therefor, to which they attached a draft drawn by them on their 
consignee for about the value of the grain, and then negotiated the 
draft with bill of lading attached, to some bank in Milwaukee, 
and obtained the money. It was understood that the draft was 
drawn upon the credit of the property called for by the bill of 
lading, and would be paid by the consignee upon receipt of the 
bill of lading; and — with perhaps a single exception where the 
bills of lading, not being obtained during bank hours, was sent 
otherwise than with the draft — the drafts were accompanied by 
such bills. The Philadelphia firm, however, rarely knew what 
flour belonged to any particular bill of lading; not being obliged 
by the railroad clerks at Philadelphia, where they were known, 
to exhibit any bill of lading in order to get the flour, and their 
custom being, on getting notice from the railroad office that flour 
had arrived for them, to pay the charges, give receipts, and send 
their drayman for it, and bring it away. It was the practice of 
the Milwaukee firm to advise their Philadelphia correspondents 
by letter of shipments made and drafts drawn, which advisements 
were acknowledged with a promise "to honor the drafts." When 
flour was "slow" in going forward they corresponded with the 
Milwaukee house about it, but did not on that account refuse 
acceptance or payment of any bill. 

Having been thus dealing for about sixteen months, Chapin 
& Miles drew three drafts on Hoffman & Co., in the ordinary 
way, and attaching to them bills of lading which they had forged, 
negotiated, in the ordinary course of business, the drafts, with the 
forged bills of lading attached, to the City Bank of Milwaukee, 
getting the money for them. The bank knew nothing of the for- 
gery of the bills of lading. The ordinary correspondence between 
the two houses took place. That in regard to one draft will 
exhibit its character. 

"Milwaukee, February 26th, 1869. 
"Messrs Hoffman & Co., Philadelphia. 

"Dear Sirs : We ship to you today 200 bbls. 'Prairie Flour,' 
and draw at s't for $1100, which please honor. Will draw for $5 
only when we can, but must crowd $S>4 part of the time. 

"Yours truly, 

"Chapin & Miles." 



Hoffman & Co. v. Bank of Milwaukee 195 

"Philadelphia, March 2d, 1869. 

"Messrs. Chapin & Miles. 

"Gentlemen: Yours 26th ult. here. Your draft $1100, 
mil be paid, but we think you should try to keep them down to $5 
per barrel. We advise sale of 100 Prairie, at $7, and 54, at $7.25. 

"Yours respectfully, 

"Hoffman & Co." 

No flour was forwarded. The Milwaukee bank forwarded the 
drafts, however, with the forged bills of lading attached, to their 
correspondent, the Park Bank in New York, for collection. The 
Park Bank forwarded the same to its correspondent, the Common- 
wealth Bank of Philadelphia, for the same purpose, and the latter 
bank presented the draft and bill of lading to the drawees, Hoff- 
man & Co., who, knowing the drafts to be genuine, and not sup- 
posing that the bills of lading were otherwise, paid the drafts to 
the Philadelphia bank, which remitted the money back to the 
Park Bank to the credit of the Bank of Milwaukee. 

No flour "coming forward, Hoffman & Co. discovered that 
the bills of lading were forged, and Miles & Chapin being insol- 
vent, they sued the Bank of Milwaukee to recover the amount 
paid, as above stated. 

The declaration in the case contained the common counts in 
assumpsit, with a notice, attached, to the defendant, "that he 
action was brought to recover $3100, money paid by the plaintiff, 
under mistake of fact, upon drafts and bills of lading (of which 
copies were annexed), the mistake being that the plaintiffs paid 
the money upon the belief that the said bills of lading were genu- 
ine instruments ; whereas, in fact, they were forged ; the amount 
of money paid being the amount called for by the drafts, which 
was paid upon the credit and inducement of the bills of lading." 

Neither the name of the defendant, the Milwaukee bank, nor 
of any of its officers or agents, appeared in or upon the bills of 
lading in question, and had it not been for extrinsic evidence, it 
could not have been told from those bills that the bank had had 
anything to do with them. Nor had the bank had any dealings 
or correspondence of any kind with the Philadelphia house, rela- 
tive to the shipments of flour by Chapin & Miles, or relative to 
the drafts drawn by them. 

On this case the court below directed the jury to find for the 
bank, defendant in the case, and the plaintiffs brought the case 
here. 

Mr. M. H. Carpenter, for the plaintiff in error. 

Mr. J. W. Cary, contra. 



196 What Constitutes Holder for Value 

Mr. Justice Clifford delivered the opinion of the court. 

Acceptors of a bill of exchange, by the act of acceptance, 
admit the genuineness of the signatures of the drawers, and the 
competency of the drawers to assume that responsibility. Such 
an act imports an engagement, on the part of the acceptor, to the 
payee or other lawful holder of the bill, to pay the same, if duly 
presented, when it becomes due, according to the tenor of the 
acceptance. He engages to pay the holder, whether payee or 
indorsee, the full amount of the bill at maturity, and if he does 
not, the holder has a right of action against him, and he may also 
have one against the drawer. Drawers of bills of exchange, how- 
ever, are not liable to the holder under such circumstances, until 
it appears that the bill was duly presented, and that the acceptor 
refused or neglected to pay the same according to the tenor of the 
instrument, as their liability is contingent and subject to those 
conditions precedent. 

Three bills of exchange, as exhibited in the record, were 
drawn by Chapin, Miles & Co., payable to the order of the defend- 
ants, and the records show that they, the defendants, received 
and discounted the three bills at the request of the drawers. 
Attached to each bill of exchange was a bill of lading for two 
hundred ' barrels of flour, shipped, as therein represented, by 
the drawers of the bills of exchange, and consigned to the plain- 
tiffs; and the record also shows that the drawers, in each case, 
sent a letter of advice to the consignees apprising them of the 
shipment, and that they would draw on them as such con- 
signees for the respective amounts specified in the several bills of 
exchange. Prompt reply in each case was communicated by the 
plaintiffs, acknowledging the receipt of the letter of advice sent 
by the shippers, and promising to honor the bills of exchange, as 
therein requested. Evidence was also introduced by the plaintiffs 
showing that the defendants indorsed the bills of exchange and 
forwarded the same, with the bills of lading attached, to the 
National Park Bank of the city of New York, their regular cor- 
respondent; that the same were subsequently indorsed by the 
latter bank, and forwarded to the Commonwealth Bank of Phila- 
delphia for collection; that the Commonwealth Bank presented 
the bills of exchange, with the bills of lading attached, to the' 
plaintiffs, as the acceptors, and that they paid the respective 
amounts as they had previously promised to do, and that the 
Commonwealth Bank remitted the proceeds in each case to the 
National Park Bank, where the respective amounts were credited 
to the defendants. Proof was also introduced by the plaintiffs 



Hoffman & Co. v. Bank of Milwaukee 197 

showing that each of the bills of lading was a forgery, and that 
the plaintiffs, before the commencement of the suit, tendered the 
same and the bills of exchange to the defendants, and that they 
demanded of the defendants, at the same time, the respective 
amounts so paid by them to the Commonwealth Bank. Payment 
as demanded being refused, the plaintiffs brought an action of 
assumpsit against the defendants for money had and received, 
claiming to recover back the several amounts so paid as money 
paid by mistake, but the verdict and judgment were for the 
defendants, and tlje plaintiffs sued out a writ of error, and 
removed the cause into this court. Testimony was also introduced 
by the defendants tending to show that the shippers were millers ; 
that they made an arrangement with the plaintiffs to ship flour 
to them at Philadelphia for sale in that market, the plaintiffs 
agreeing that they, the shippers, might draw on them for advances 
on the flour, to be reimbursed out of the proceeds of the sales,' 
that for more than a year they had been in the habit of shipping 
flour to the plaintiffs under that arrangement and of negotiating 
drafts on the plaintiffs to the banks in that city, accompanied by 
bills of lading in form like those given in evidence in this case; 
that the drafts, with the bills of lading attached, were sent for- 
ward by the banks, where the same were discounted, and that the 
same were paid by the plaintiffs ; that the drawers of the drafts in 
every case notified the plaintiffs of the same, and that the plain- 
tiffs, as in this case, answered the letter of advice and promised 
to pay the amount. They also proved that the drawers of the 
drafts in this case informed their cashier that the same would 
always be drawn upon property, and that the bills of lading would 
accompany the drafts, and that they had no knowledge or intima- 
tion that the bills of lading were not genuine. Instructions were 
requested by the plaintiffs, that if the jury found that the respec- 
tive bills of lading were not genuine, that they were entitled to 
recover the several amounts paid to the Commonwealth Bank, 
with interest; but the court refused to give the instruction as 
prayed, and instructed the jury that if they found the facts as 
shown by the defendants, the plaintiffs could not recover in the 
case, even though they should find that the several bills of lading 
were a forgery. 

Money paid under a mistake of facts, it is said, may be recov- 
ered back as having been paid without consideration, but the 
decisive answer to that suggestion, as applied to the case before 
the court, is that money paid, as in this case, by the acceptor of 
a bill of exchange to the payee of the same, or to a subsequent 



198 What Constitutes Holder for Value 

indorsee, in discharge of his legal obligation as such, is not a 
payment by mistake nor without consideration, unless it be shown 
that the instrument was fraudulent in its inception, or that the 
consideration was illegal, or that the facts and circumstances 
which impeach the transaction, as between the acceptor and 
drawer, were known to the payee or subsequent indorsee at the 
time he became the holder of the instrument. (Fitch v. Jones, 
5 Ellis & Blackburn, 238; Arbouin v. Anderson, 1 Adolphus & 
Ellis, N. S. 498; Smith v. Braine, 16 Id., N. S. 244; Hall v. 
Featherstone, 3 Hurlstone & Norman, 287). 

Such an instrument, as between the payee and the acceptor, 
imports a sufficient consideration, and in a suit by the former 
against the latter the defence of prior equities, as between the 
acceptor and drawer, is not open unless it be shown that the 
payee, at the time he became the holder of the instrument, had 
knowledge of those facts and circumstances. 

Attempt is made in argument to show that the plaintiffs 
accepted the bills of exchange upon the faith and security of the 
bills of lading attached to the same at the time the bills of 
exchange were discounted by the defendants. Suppose it was so, 
which is not satisfactorily proved, stilt it is not perceived that the 
concession, if made, would benefit the plaintiffs, as the bills of 
exchange are in the usual form and contain no reference what- 
ever to the bills of lading, and it is not pretended that the defend- 
ants had any knowledge or intimation that the bills of lading were 
not genuine, nor is it pretended that they made any representation 
upon the subject to induce the plaintiffs to contract any such 
liability. They received the bills of exchange in the usual course 
of their business as a bank of discount and paid the full amount 
of the net proceeds of the same to the drawers, and it is not even 
suggested that any act of the defendants, except the indorsement 
of the bills of exchange in the usual course of their business, 
operated to the prejudice of the plaintiffs or prevented them from 
making an earlier discovery of the true character of the transac- 
tion. On the contrary, it distinctly appears that the drawers of 
the bills of exchange were the regular correspondents of the 
plaintiffs, and that they became the acceptors of the bills of 
exchange at the request of the drawers of the same and upon 
their representations that the flour mentioned in the bills of lading 
had been shipped to their firm for sale under the arrangement 
before described. 

Beyond doubt the bills of lading gave some credit to the bills 
of exchange beyond what was created by the pecuniary standing 



Hoffman & Co. v. Bank of Milwaukee 199 

of the parties to the same, but it is clear that they are not a part 
of those instruments nor are they referred to either in the body 
of the bills or in the acceptance, and they cannot be regarded in 
any more favorable light for the plaintiffs than as collateral 
security accompanying the bills of exchange. 

Sent forward, as the bills of lading were, with the bills of 
exchange, it is beyond question that the property in the same 
passed to the acceptors when they paid the several amounts there- 
in specified, as the lien, if any, in favor of the defendants was 
then displaced and the plaintiffs became entitled to the instru- 
ments as the muniments of title to the flour shipped to them for 
sale and as security for the money which they had advanced under 
the arrangement between them and the drawers of the bills of 
exchange. Proof, therefore, that the bills of lading were forgeries 
could not operate to discharge the liability of the plaintiffs, as 
acceptors, to pay the amounts to the payees or their indorsees, as 
the payees were innocent holders, having paid value for the same 
in the usual course of business. (Leather v. Simpson, Law 
Reports, n Equity, 398). 

Different rules apply between the immediate parties to a 
bill of exchange — as between the drawer and the acceptor, or 
between the payee and the drawer — as the only consideration as 
between those parties is that which moves from the plaintiff to 
the defendant; and the rule is, if that consideration fails, proof 
of that fact is a good defence to the action. But the rule is other- 
wise between the remote parties to the bill, as, for example, 
between the payee and the acceptor, or between the indorsee and 
the acceptor, as two distinct considerations come in question in 
every such case where the payee or indorsee became the holder 
of the bill before it was overdue and without any knowledge of 
the facts and circumstances which impeach the title as between 
the immediate parties to the instrument. Those two considera- 
tions are as follows : First, that which the defendant received for 
his liability, and, secondly, that which the plaintiff gave for his 
title, and the rule is well settled that the action between the 
remote parties to the bill will not be defeated unless there be an 
absence or failure of both these considerations. (Robinson v. 
Reynolds, 2 Q. B. 202; Same v. Same, in error, lb. 210; Byles on 
Bills [5th Am. Ed.], 124; Thiedemann v. Goldschmidt, 1 De Gex, 
Fisher & Jones, Ch. App. 10) . 

Unless both considerations fail in a suit by the payee against 
the acceptor, it is clear that the action may be maintained, and 
many decided cases affirm the rule, where the suit is in the name 



200 What Constitutes Holder for Value 

of a remote indorsee against the acceptor, that if any intermediate 
holder between the defendant and the plaintiff gave value for the 
bill, such an intervening consideration will sustain the title of 
the plaintiff. (Hunter v. Wilson, 4 Exchequer 489; Boyd v. Mc- 
Cann, 10 Maryland, 118; Howell v. Crane, 12 Louisiana Annual, 
126; Watson v. Flanagan, 14 Texas, 354). 

Where it was arranged between a drawer and his corres- 
pondent that the latter would accept his bills in consideration of 
produce to be shipped or transported to the acceptor for sale, 
the Supreme Court of Pennsylvania held, (Craig v. Sibbett et al., 
15 Pennsylvania, 240), that the acceptor was bound to the payee 
by his general acceptance of a bill, although it turned out that 
the bill of lading forwarded at the same time with the bill of 
exchange was fraudulent, it not being shown that the payee of 
the bill was privy to the fraud. Evidence was introduced in that 
case showing that the payee knew what the terms of the arrange- 
ment between the drawer and the payee were, but the court held 
that mere knowledge of the fact was not sufficient to constitute 
a defence, as the payee was not a party to the arrangement and 
was not in any respect a surety for the good faith and fair dealing 
of the shipper. 

Failure of consideration, as between the drawer and acceptor 
of a bill of exchange, is no defence to an action brought by the 
payee against the acceptor, if the acceptance was unconditional in 
its terms, and it appears that the plaintiff paid value for the bill, 
even though the acceptor was defrauded by the drawer, unless it 
be shown that the payee had knowledge of the fraudulent acts 
of the drawer before he paid such value and became the holder 
of the instrument. (United States v. Bank of Metropolis, 15 
Peters, 393). 

Testimony to show that the payees were not bona fide holders 
of the bills would be admissible in a suit by them against the 
acceptors, and would constitute, if believed, a good defence, but 
the evidence in this case does not show that they did anything 
that is not entirely sanctioned by commercial usage. They dis- 
counted these bills and they had a right to present them for 
acceptance, and having obtained the acceptance they have an 
undoubted right to apply the proceeds collected from the acceptors 
to their own indemnity. (Thiedemann v. Goldschmidt et al., 1 
De Gex, Fisher & Jones, Ch. App. 10; Robinson v. Reynolds, 2 
Q. B.2ii). 

Forgery of the bills of lading would be a good defence to an 
action on the bills if the defendants in this case had been the 



Hoffman & Co. v. Bank of Milwaukee 201 

-drawers, but they were payees and holders for value in the reg- 
ular course of business, and the case last referred to, which was 
decided in the Exchequer Chamber, shows that such an accept- 
ance binds the acceptor conclusively as between them and every 
bont fide holder for value. 

Very many cases decide that the drawee of a bill of exchange 
is bound to know the handwriting of his correspondent, the 
drawer, and that if he accepts or pays a bill in the hands of a 
bona fide holder for value, he is concluded by the act, although 
the bill turns out to be a forgery. If he has accepted he must pay, 
and if he has paid he cannot recover the money back, as the 
money, in such a case, is paid in pursuance of a legal obligation 
as understood in the commercial law. (Goddard v. Merchants' 
Bank, 4 Comstock, 149; Bank of Commerce v. Union Bank, 3 Id. 
234 ; Bank of the United States v. Bank of Georgia, 10 Wheaton, 
348; Price v. Neal, 3 Burrow, 1355). 

Difficulty sometimes arises in determining whether the plain- 
tiff, in an action on a bill of exchange, is the immediate promisee 
of the defendant, or whether he is to be regarded as a remote 
party, but it is settled law that the payee, where he discounts 
the bill at the request of the drawer, is regarded as a stranger 
to the acceptor in respect to the consideration for the acceptance ; 
consequently, if the acceptance is absolute in its terms and the 
bill is received in good faith and for value, it is no answer to an 
action by him that the defendant received no consideration for 
his acceptance or that the consideration therefor has failed; and 
it is immaterial in that behalf whether the bill was accepted while 
in the hands of the drawer and at his request, or whether it had 
passed into the hands of the payee before acceptance and was 
accepted at his request. (Parsons on Bills, 179; Munroe v. Bor- 
dier,8C. B. 862). 

Certain other defences, such as that the payments were volun- 
tarily made, and that the title to the bills at the time the payments 
were made was in the National Park Bank, were also set up by 
the defendants, but the court does not find it necessary to exam- 
ine those matters, as they are of the opinion that the payments 
if made to the payees of the bills, as contended by the plaintiffs, 
were made in pursuance of a legal obligation and that the money 
•cannot be recovered back. Judgment affirmed. 



202 Lien on Instrument 

when lien on instrument constitutes holder for value, 

§29- 

Stoddard v. Kimball (1850), 6 Cush. (Mass.) 469. 

O. P. Lord, for the plaintiffs. 
N. J. Lord, for the defendant. 

Shaw, CJ. This was a suit brought by the plaintiff as 
indorsee of a promissory note, against the defendant as indorser. 
The defence relied on was, that the defendant indorsed the note, 
at the request and for the accommodation of the maker, for a 
special purpose, that of taking up another note on which he was 
indorser, and that it was not so applied, but was negotiated to the 
plaintiffs, as collateral security for a debt due to them. The 
defendant also contended, that the plaintiffs, at the time of taking 
the note, had notice of the misapplication of the same, as above 
stated; but this fact was left to the jury, who found that the 
plaintiffs had no such notice. 

It further appeared, that some payments had been made by 
the maker of the note to the plaintiffs, towards the discharge of 
the debt, for securing which to the plaintiffs this note was 
received, and also that the maker being insolvent, the plaintiffs 
proved this debt against his estate, and received a dividend. 

The defendant contended, that if liable at all, he was liable 
only for the balance of the debt due the plaintiffs, if less than 
the amount of the note, and the judge, who tried the cause, so 
ruled, subject to the opinion of the whole court, and in case they 
should be of opinion that the plaintiffs are entitled to recover 
the whole amount, the verdict is to be altered and amended 
accordingly. 

We think the direction was right. An indorser of an accom- 
modation note, passed by indorsement to a bona fide holder, in 
due course of business, is effectually bound to all the liability, to 
which, by law, the indorser of a business note is liable. He stip- 
ulates to take on himself the qualified obligation of one, who 
indorses and puts in circulation a note taken by himself for value 
in the course of business. 

If indeed an accommodation note is obtained from another, 
by fraud, deception, or false practices, or having been obtained for 
one purpose, is fraudulently misapplied to another, and it is nego- 
tiated to one, even for value, with full notice of the fraud in obtain- 
ing or misusing it, he cannot recover ; he is not a bona fide holder ; 
an attempt to recover it would make him a partaker in the fraud ;. 
and the same would be true of a business note. 



Redfern et al. v. Rosenthal et al. 203 

In the present case, it appearing that the note was negotiated 
to the plaintiffs before it was due, for a valuable consideration, 
and the jury having found that they took it without notice of 
the misapplication by the maker, it is clear that they have a right 
to recover; and the only remaining question is, for what amount 
they may recover. In general, the holder of an indorsed note 
will be entitled to recover the whole amount of the face of the 
note, because the presumption of fact, in the absence of counter 
proof, is, that he gave the full value for it, or that he took it 
from some other holder for value, to collect the amount, receive 
a certain part to his own use, and account to the party from whom 
he took it for the surplus. Having taken it to secure a pre- 
existing debt, of a less amount, he is a holder for value in his 
own right, only to the amount of the debt due him. If therefore 
it appears in proof, that the plaintiff is not accountable to any 
third person for any surplus, then there is no reason why he 
should recover any more than the balance of the debt, for which 
he is a bona fide holder for value. Here, it appears that the 
plaintiff received this note of the maker, for whose accommoda- 
tion the defendant indorsed it. It being obvious, that the plaintiff 
can recover nothing as trustee for the party from whom he 
received it, he is liable over to nobody for the surplus, and there- 
fore can have judgment only for the amount due to himself, for 
his own use and in his own right, which is so much of the note 
as may be necessary to satisfy the balance of the debt, for the 
security of which he received it. 

Judgment on the verdict for the plaintiff for the smaller sum. 



Redfern et al. v. Rosenthal et al. (1902), 86 L. T. R. 855. 

This was an appeal by the defendants from a judgment of 
the King's Bench Division (Channell and Bucknill, JJ.), affirm- 
ing a decision of the judge of the Birmingham County Court. 

The action was brought against the acceptors of a bill of 
exchange, dated the 23d June, 1899, for 200/., payable four 
months after date. 

The facts appear in the judgment of the Master of the Rolls. 

It may further be added that, on the 7th Oct., 1899, it 
appeared that the plaintiffs first learnt that the bill was an accom- 
modation bill. 



204 Lien on Instrument 

The judgment of the King's Bench Division is reported 85 
L. T. Rep. 313. 

The Bills of Exchange Act 1882 (45 and 46 Vict. c. 61 ) pro- 
vides as follows : 

Sect. 27, sub-sect. 3. Where the holder of a bill has a lien on 
it, arising either from contract or by implication of law, he is 
deemed to be a holder for value to the extent of the sum for which 
he has a lien. 

Collins, M.R. This is an appeal from a judgment of the 
Divisional Court, consisting of Channell and Bucknill, JJ., who 
affirmed a decision of the judge of the Birmingham County Court, 
but on different grounds. The transaction which gave rise to 
the action is somewhat complicated, but the facts are shortly these : 
Rosenthal Brothers were desirous of raising some money, and 
for this purpose sent to Bischoffswerder a bill of exchange, dated 
the 23d June, 1899, payable four months after date accepted by 
them, and they requested him to fill in his name as drawer, and 
get the bill discounted for them. Bischoffswerder filled in his 
name as drawer, indorsed the bill in blank, and handed it to a man 
named Lewis, who agreed to get it discounted. Lewis then 
claimed a right to keep the bill, on the ground of Bischoffswerder 
being in debt to him. The bill in Lewis' hands being a fully nego- 
tiable instrument, Bischoffswerder at once in July instructed his 
solicitors, Messrs. Redfern and Son, who are the plaintiffs in the 
present action, to commence an action against Lewis in order to 
stop him from negotiating it, and to get it back from him. An 
interlocutory injunction was obtained, restraining Lewis until the 
trial of the action from negotiating the bill. The action came on 
for trial at Birmingham Assizes in Dec, 1899, so that by that 
time the bill was overdue. Bischoffswerder obtained a verdict 
and judgment for the recovery of the bill. At the end of the 
trial the bill was handed over by Lewis to the managing clerk of 
Messrs. Redfern and Son. The clerk showed the bill to Bischoff- 
swerder and to Rosenthal Brothers, who were present in court, 
but after looking at it they handed it back to the clerk, who said 
that Messrs. Redfern and Son had a right to retain it as they 
had a lien on it for their costs. The present action was then 
brought by Messrs. Redfern and Son to recover the amount of 
their costs in Bischoffswerder's action against Lewis. The action 
is brought not only against Bischoffswerder, who is clearly liable 
for the costs, but also against Rosenthal Brothers as acceptors of 
the bill, for so much of the amount due upon the bill as will sat- 
isfy the plaintiffs' claim for costs. The County Court judge held 



Bedfern et al. v. Rosenthal et al. 205 

that Rosenthal Brothers were liable upon the bill, under sect. 27, 
sub-sect. 3, of the Bills of Exchange Act 1882, and that judg- 
ment was affirmed by the King's Bench Division. Rosenthal 
Brothers have appealed against this decision. Bischoffswerder is 
no party to the appeal. Now, sect. 27, sub-sect. 3, provides that 
where the holder of a bill has a lien on it, arising either from 
contract or by implication of law, he is deemed to be a holder for 
value to the extent of the sum for which he has a lien. The plain- 
tiffs' argument was that they were holders of the bill, and as 
they had a lien on it, they were holders for value, and were there- 
fore entitled to recover in this action. Now, there was some 
evidence at the trial of the action that Rosenthal Brothers and 
Bischoffswerder, after some discussion with the plaintiffs' clerk, 
had handed the bill to him for the purpose of Messrs. Redfern 
and Son's lien so as to make him holder for value. A contro- 
versy arose as to this evidence, and thereupon the plaintiffs said 
that they did not wish to rely upon that ground, and that they 
relied solely upon their common law rights of lien and on the 
Bills of Exchange Act 1882. Now, upon these facts I am of 
opinion that the plaintiffs have no right of action against Rosen- 
thal Brothers. The bill was handed by Rosenthal Brothers to 
Bischoffswerder for a specific purpose — namely, to get it dis- 
counted — and that purpose failed. When the bill came into the 
plaintiffs' hands it was overdue. It was not a negotiable instru- 
ment. As between the plaintiffs and the defendants the bill never 
was a living instrument. The plaintiffs when they first got pos- 
session of the document as Bischoffswerder's solicitors knew all 
these facts about it. Yet it was contended that by getting the 
physical custody of this piece of paper and having done work as 
solicitors they had acquired the rights of a holder for value under 
the Bills of Exchange Act 1882 and could sue the acceptors of 
the bill. It seems to me impossible to say that by getting hold of 
an overdue bill such as this they became holders for value. The 
bill should have been re-issued in order to give them any rights 
upon it. They have misconceived their position. Their rights 
against the defendants in respect of their lien were no greater 
than the rights of Bischoffswerder on the bill against the defend- 
ants. Bischoffswerder, under the circumstances that I have men- 
tioned, could not, with the plaintiffs' knowledge of the facts, give 
them any rights on the bill qua bill. The instrument when they 
received it was dead, and they could not treat it as a living one. 
That is enough to decide this case. It is not necessary to give 
any opinion as to what the plaintiffs' rights would have been if 



206 Lien on Instrument 

the document had been a living bill. The appeal must therefore 
be allowed. In the Divisional Court Channel, J., seems to have 
given judgment with great hesitation, and I think he accepted an 
inference of fact which was not supported by the evidence. The 
court seems to have lost sight of the view that at the time when 
the plaintiffs' supposed lien came into existence, the instrument 
had, under the circumstances, ceased to be a negotiable instru- 
ment. 

Mathew, LJ. I am of the same opinion. It is said that 
the effect of the judgment in the action by Bischoffswerder against 
Lewis to restrain the negotiation of the bill was to restore a nego- 
tiable character to the bill and give the plaintiffs a right to sue 
upon it. That would be a very extraordinary result. When the 
bill was given up it was a security for nothing. It was mere 
waste paper. It was dead in law, as the plaintiffs must have 
known. Yet it is contended that the document by being handed 
to the plaintiffs acquired a new lease of life, and became a nego- 
tiable instrument. The plaintiffs obtained no more right against 
the defendants than Bischoffswerder had ; and that was none at 
all. The only difficulty in the case has been caused by some 
uncertainty as to what were the actual findings of the County 
Court judge. I agree that the appeal must be allowed. 

Cozens-Hardy, L.J. I am of the same opinion. Many 
interesting points have been raised, but on the actual facts of the 
case I see no great difficulty. The solicitors had a lien on their 
client's interest in the bill, but when they got possession of the 
bill Bischoffswerder had no rights against the defendants. The 
document had ceased to be a real bill. It was recovered by 
Bischoffswerder in his action against Lewis for the very purpose 
of preventing its being negotiated. The plaintiffs are in no better 
position than Bischoffswerder, who had no rights on the bill 
against the defendants. It is unnecessary to give my opinion on 
what the rights of the plaintiffs might have been if the bill had 
not been overdue when they got possession of it. 

Appeal allowed. 



Walton v. Mascall 207 

Section V. — Contract of Primary Parties. 

CONTRACT OF THE MAKER. § 62. 

Walton v. Mascall (1844), *3 M. & W. 452. 

This was an action on an agreement in writing, whereby the 
defendant in consideration that the plaintiff would accept the 
promissory note of one Johnson, payable six months after date, 
for a debt due from Johnson, guarantied and undertook to pay 
the amount to the plaintiff, provided the note was not duly hon- 
oured and paid by Johnson at maturity. 

The defendant, being under terms to plead issuably, pleaded 
a plea denyingjgresentment to Johnson, and a plea denying notice 
of the dishonour of the note to him the defendant. 

Pollock, C.B. I am of opinion that the plaintiff is entitled 
to the judgment of the Court. With respect to the last objection, 
the declaration shows expressly, not only that the plaintiff did 
give time by receiving the note, but that he took it under circum- 
stances which compelled him to give time. The case of Kearslake 
v. Morgan, 5 T. R. 513, establishes, that a creditor who receives 
a negotiable instrument "for and on account of" his debt is taken 
to have received it in present satisfaction, and the receipt of it 
operates as a suspension of the remedy upon the debt. As to the 
other question, it turns a good deal' upon what the parties are 
to be taken to have meant by the words "duly honoured and 
paid" ; and it seems to me that those words, if they be any thing 
more than mere tautology, must mean, honoured by being paid on 
the day when the note became due, or paid at any time afterwards. 
I cannot help thinking that the word "honoured" meant that the 
note should be presented at any time, and, if paid at any time, 
then the defendant should be discharged from liability. The real 
question we have to decide is , wheth erj he averment of a requ est 
to pay hara~differehTmeaningjin^d^h_ratk2n _ against jthejnaker 
oFanbte, aficTiinr declaration^ajjajnst a guamitoxJorJhe jnaker . 
It~~sliems~to me that if means the same thing in both cases; it 
would lead to much inconvenience to hold the contrary. Now, 
against the maker of the note, that allegation would be mere form ; 
it must be sufficient to say that he had not paid the sum of money 
in the note specified according to the tenor and effect thereof. 



208 Contract of the Maker 

And if that would be sufficient as against him, it must be equally 
so against the guarantor. The real contract is, that the makers 
of the note shall pay it according to its tenor and effect ; and it is 
clear that they are bound to find out the holder and pay him the 
amount, when the note becomes due. It appears to me, therefore, 
that a presentment and request are immaterial; and £EaT~our 
judgment must be for the plaintiff." 

Parke, B. I am of the same opinion. The first question 
which arises in this case is as to the validity of the plea. The 
declaration is on a guarantie, which states that, in consideration 
that the plaintiff would receive the promissory note of two per- 
sons therein mentioned, and thereby give time for the payment of 
a debt due from one of those persons, the defendant promised to 
pay the plaintiff the amount of the debt, if the note were not 
"duly honoured and paid." The declaration then avers, that, 
before the commencement of the suit, the note became due and 
payable according to its tenor and effect, and that the makers, 
although requested so to do, have not paid it, of which the defend- 
ant had notice. The plea traverses the allegation of the request 
to pay ; and to that there is a general demurrer. Now, it is clear 
that a request for the payment of a debt is quite immaterial, unless 
the parties to the contract have stipulated that it shall be made : 
if they have not, the law requires no notice or request ; but the 
debtor is bound to find out the creditor and pay him the debt 
when due. It is clear, therefore, that the defendant was bound 
to pay the amount of the promissory note when it had become due 
and was dishonoured, unless there was some condition precedent 
to be performed by the plaintiff, which has not been performed. 
It is argued, that this condition precedent is that the note shall 
be presented for payment when due. But it seems to me that the 
words "duly honoured and paid" are merely tautologous, and mean 
simply that the note shall be paid when it becomes due. What I 
am reported to have said in the case of Lewis v. Gompertz, when 
taken in connexion with the facts of that case, I hold to be per- 
fectly correct. There can be no doubt that a mercantile man, 
reading the notice of dishonour which was given in that case, 
would necessarily infer that the bill had been duly presented for 
payment when it became due. But no request or presentment is 
necessary to charge the acceptor of a bill or the maker of a note ; 
he is bound to pay it at maturity, and to find out the holder for 
that purpose. Upon this contract of guarantie, therefore, it seems 
to me that the word "honoured" means no more than the words 
"duly paid," and that, inasmuch as this note has not been paid,, 



GUMZ V. GlEGLING 209 

the defendant is chargeable. With respect to the other point, the 
giving of a negotiable security for and on account of a debt 
operates prima facie to suspend payment of the debt until it 
becomes due. I think the declaration is perfectly sufficient, and 
that the plaintiff is entitled to judgment. 
Gurney, B., and Rolfe, B., concurred. 

Judgment for the plaintiff. 



Gumz v. Giegling (i8p6), 108 Mich. 295. 

Error to Manistee. McMahon, J. 

Assumpsit by Rudolph Gumz and others, as copartners, doing 
business under the firm name of R. Gumz & Co., against Henry 
J. Giegling and Cornelius A. Waal, on a promissory note. From 
a judgment for plaintiffs on verdict directed by the court, defend- 
ant Waal brings error. Affirmed. 

This suit was brought upon a promissory note for $700 
dated August 14, 1893, payable to the order of R. Gumz & Co., 
one year from date, indorsed by defendant Waal. The defendant 
Waal pleaded the general issue, with notice that the note was 
given for a prior indebtedness of defendant Giegling; that Waal, 
when applied to by plaintiffs to indorse the note, refused to do 
so, and was induced to indorse the same on the representation 
of plaintiffs that his signature was to be a matter of form, and 
not for the purpose of creating any liability on his part, but was 
to be used only to enable them to have an additional argument 
and lever to use upon Giegling to induce him to pay the note; 
and that plaintiffs promised that no claim or demand should be 
made on him for payment, and that his signature should not be 
considered as creating any liability. At the conclusion of the 
proofs, the court directed a verdict in plaintiffs' favor. 

George L. Hilliker, for appellant. 
Dovel & Smith, for appallees. 

Grant, J. (after stating the facts). Plaintiffs had sold meat 
to defendant Giegling, who kept a meat shop in Manistee. The 
account was an open one, and had been running between four and 
five months previous to the date of the note. They refused to 
sell him any more goods unless the account was paid or secured. 
Giegling was unable to pay, and Mr. Schaaf, plaintiffs' agent, 



210 Admissions of the Maker 

asked him to give a note with an indorsement. Mr. Giegling 
suggested that they see defendant Waal, and that he might indorse 
a note for him. The two went together to Mr. Waal's office. 
Mr. Waal gave evidence to sustain the facts set up in his notice. 
It, however, conclusively appears from his own testimony, as 
well as that of Mr. Schaaf and Mr. Giegling, that all the con- 
versation upon which he relies as a defense occurred before the 
note was made out and signed. It is therefore sought to vary 
the terms of a plain written contract by parol evidence of what 
took place before its execution. Mr. Waal himself testified, 
"After the talk was had all around, we all came in there ; and the 
note was drawn up and signed at once, and handed over to Mr. 
Schaaf." Time for the payment was extended one year. Gieg- 
ling told Mr. Waal that, if plaintiffs got this note, they would 
sell him more meat. 

Waal was not the payee upon the note, and indorsed it before 
it was uttered, and before the payee had indorsed it. He is there- 
fore a joint maker. Rothschild v. Grix, 31 Mich. 150. If the 
note had been executed by Giegling, and delivered to plaintiffs, 
and they had afterwards secured the indorsement of Waal, with- 
out consideration, this defense would have been open to him, 
under the authority of Kulcnkamp v. Groff, 71 Mich. 675. That 
decision, however, expressly holds that under the facts of this 
case the defense cannot be sustained. See, also, Aultman & Tay- 
lor Co. v. Gorham, 87 Mich. 233. 

The learned circuit judge was correct in directing a verdict 
for plaintiffs. 

The other Justices concurred. 

The judgment is affirmed. 



ADMISSIONS OF THE MAKER. § 62. 

Wohlke et al. v. Kuhne (1886), 109 Ind. 313. 

From the Allen Superior Court. 

W. G. Colerick, H. Colerick, W. S. Oppenheimer and P. B. 
Colerick, for appellants. 

T. E. Ellison, for appellee. 

Elliott, C.J. Wohlke, as principal, and Trentman, as 
surety, executed the promissory note in suit, payable to the order 
of "T. W. Woollen, Attorney General." 



WOHLKE ET AL. V. KUHNE 211 

There is evidence very* satisfactorily showing that Kuhne 
became the owner of the note in good faith, for value, and with- 
out notice of any defence, before its maturity. 

We incline to the opinion that the words added to the name 
of the payee are merely descriptive of the person, and can not, 
in any event, trammel the rights of a bona fide holder. Jackson 
School Tp v. Farlow, 75 Ind. 118; Hayes v. Matthews, 63 Ind. 
412; Hays v. Crutcher, 54 Ind. 260; Means v. Swormstedt, 32 
Ind. 87 (2 Am.'R. 330) ; Kenyon v. Williams, 19 Ind. 44; Hobbs 
v. Cowden, 20 Ind. 310; Shepherd v. Evans, 9 Ind. 260. 

We are clearly of the opinion that the appellants are not in 
a situation to dispute the authority of the payee to accept and 
transfer the note executed by them. Whatever may be the right 
of the State, it is certain these appellants can not successfully 
present the question of the authority of T. W. Woollen to take 
or transfer the note executed to him. That is a question between 
him and the State, with which these appellants have no concern, 
for they have executed a commercial note, fair on its face and 
complete in all its parts, and they can not defeat it in the hands 
of a bona fide holder. New v. Walker, 108 Ind. 365. 

The makers of a note negotiable under the law merchant 
warrant the capacity of the payee to transfer it in the usual course 
of business. Mr. Bigelow thus states the rule: "The execution 
of a negotiable note is a warranty of the existing capacity of the 
payee to endorse the paper." Bigelow Estop. 512. Another 
author says : "The person to whose order a bill or note is made 
payable, is generally vested with the right to transfer the same 
by endorsement; and it does not lie with the maker or acceptor 
to dispute the power of the payee to endorse and transfer the 
instrument. By making the note or accepting the bill, and issuing 
it, the maker and acceptor assert to the world the competency of 
the payee to negotiate and assign the paper; and they are not 
afterwards permitted to gainsay the assertion so made." Edwards 
Bills and Notes, section 363. An English author, whose work 
has long been recognized as authority, in speaking of the acceptor 
of a bill, says : "He moreover admits, and so does the maker of 
a promissory note, the then capacity of the payee, to whose order 
the bill or note is made payable, to endorse." Byles Bills, 202. 

This well established principle rules the case against the 
appellants. The decision in Union School Tp. v. First Nat'l 
Bank, 102 Ind. 464, expresses the law correctly upon the case 
then before the court, but it has no application to such a case 
as this. 



212 The Contract of the Acceptor 

The only error in the instructions is, that they are more 
favorable to the appellants than the law warrants. 

We are inclined to think that the objection of the appellee, 
that, as the complaint on which the case was tried is not in the 
record, no question is properly presented, is well taken, but, as 
the merits of the case are plain and decisive, we have not put 
our decision upon that objection. 

Judgment affirmed. 



THE CONTRACT OF THE ACCEPTOR. § 64. 

Raborg et al. v. Peyton {1817), 2 Wheat. (15 U. S.) 385. 

Error to the Circuit Court for the District of Columbia. 

Jones, for plaintiffs in error. 
Taylor, for defendant in error. 

Story, J., delivered the opinion of the court : 
This is an action of debt brought against the defendant in 
error, as acceptor of a bill of exchange by the plaintiffs in error 
as indorsees. The declaration alleges that the bill was drawn, 
accepted, and indorsed, for value received. The only question is, 
whether debt lies in such a case. 

The general principle has been very correctly stated by Lord 
Chief Baron Comyn, that debt lies upon every express contract 
to pay a sum certain ; and he adds, also, that it lies though there 
be only an implied contract. (Com. Dig. debt, a. 8, a. 9.) But it 
has been supposed that this principle does not apply to an action 
on a bill of exchange, even where the suit is brought by the payee 
against the acceptor, and a fortiori not where it is brought by the 
indorsee. It is admitted that in Hardres, 485, the court held that 
debt does not lie by the payee of a bill of exchange against the 
acceptor. The reasons given for this opinion were, first, that 
there is no privity of contract between the parties; and, second, 
that an acceptance is only in the nature of a collateral promise 
or engagement to pay the debt of another, which does not create 
a duty. It is very difficult to perceive how it can be correctly 
affirmed that there is no privity of contract between the payee 
and acceptor. There is, in the very nature of the engagement, a 
direct and immediate contract between them. The consideration 
may not always, although it frequently does, arise between them ; 



Raborg et al. v. Peyton 213 

but privity of contract may exist if there be an express contract, 
although the consideration of the contract originated aliunde. 
Besides, if one person deliver money to another for the use of a 
third person, it has been settled that such a privity exists that the 
latter may maintain an action of debt against the bailee. (Harris 
v. De Bervoir, Cro. Jac. 687.) And it is clear that an acceptance 
is evidence of money had and received by the acceptor for the use 
of the holder. (Tatlock v. Harris, 3 T. R. 174; Vere v. Lewis, 
3 T. R. 182.) It is also evidence of money paid by the holder 
to the use of the acceptor. (Ibid, and Bailey on Bills, 164, 3d 
edition.) A privity of contract, and a duty to pay, would seem, 
in such case, to be completely established ; and wherever the com- 
mon law raises a duty, debt lies. The other reason would seem 
not better founded. An acceptance is not a collateral engagement 
to pay the debt of another; it is an absolute engagement to pay 
the money to the holder of the bill ; and the engagements of all 
the other parties are merely collateral. Prima facie, every accept- 
ance affords a presumption of funds of the drawer in the hands 
of the acceptor, and is, of itself, an express appropriation of those 
funds for the use of the holder. The case may, indeed, be other- 
wise ; and then the acceptor, in fact, pays the debt of the drawer ; 
but as between himself and the payee it is not a collateral, but an 
original and direct undertaking. The payee accepts the acceptor 
as his debtor, and he cannot resort to the drawer but upon a 
failure of due payment of the bill. The engagement of the 
drawer, therefore, may more properly be termed collateral. Yet 
it has been held that debt will lie in favor of a payee against the 
drawer in case of non-payment by the acceptor. (Hard's case, 
Salk., 23 ; Hodges v. Steward, Skinn. 346 ; and see Bishop v. 
Young, 2 Bos. & Pull. 78.) 

The reasons, then, assigned for the decisions in Hardres are 
not satisfactory; and it deserves consideration that it was made 
at a time when the principles respecting mercantile contracts were 
not generally understood. 

The old doctrine upon this subject has been very considerably 
shaken in modern times. An indebitatus assumpsit will now lie 
in favor of the payee against the acceptor ; and it is generally true 
that where such an action lies, debt will lie. And a still stronger 
case is, that an acceptance is good evidence on a count upon an 
insimul computassent (Israel v. Douglas, 1 H. Bl. 239), which 
can only be upon the footing of a privity of contract. 

But the most important case is that of Bishop v. Young (2 
Bos. & Pull. 78). It was there held, in opposition to what was 



214 The Contract of the Acceptor 

supposed to have been the doctrine of former cases, that debt 
would lie by the payee of a note against the maker, where the note 
was expressed to be for value received. That decision was given 
with measured caution, and the court expressly declined to give 
any opinion upon any but the case in judgment. The case in 
Hardres was there discussed, and although its reasoning was not 
impugned, an authoritative weight was not attempted to be given 
to it. In general, the legal predicament of the maker of a note 
is like that of the acceptor of a bill. Each is liable to the payee 
for the payment of the note or bill in the first instance ; and after 
indorsement, each bears the same liabilities. And if an action of 
debt will lie in favor of the payee of a note against the maker, 
it is not easy to perceive any sound principle upon which it ought 
to be denied against an acceptor of a bill. The acceptance of a 
bill is just as much an admission of a debt between the immediate 
parties as the drawing of a note. 

The case has been thus far considered as if the action were 
brought by the payee against the acceptor. And this certainly 
presents the strongest view in favor of the argument. But in 
point of law every subsequent holder, in respect to the acceptor 
of a bill, and the maker of a note, stands in the same predicament 
as the payee. An acceptance is as much evidence of money had 
and received by the acceptor to the use of such holder, and of 
money paid by such holder for the use of the acceptor, as if he 
were the payee. (3 T. R. 172; Id., 184, Grant v. Vaughan, 3 
Burr. 1515.) 

Upon the whole, we do not think that the authority in 
Hardres can be sustained upon principle ; and we see no incon- 
venience in adopting a rule more consonant to the just right of 
the parties as recognized in modern times. In so doing, we apply 
the well-settled doctrine that debt lies in every case where~the 
common law creates a duty for the payment of money, and 
in every case where there is an express contract for the payment 
of money. We are therefore of opinion that debt lies upon a bill 
of exchange by an indorsee of the bill against the acceptor, when 
it is expressed to be for value received. The case at bar is some- 
what stronger; for the declaration expressly avers that the bill 
was drawn, indorsed, and accepted for value received, and the 
demurrer admits the truth of the averment. 

This opinion must be certified to the Circuit Court for the 
District of Columbia. 

From the view which has been taken of the case it is unneces- 
sary to consider whether the statute of Virginia applies to it or 
not. Certificate accordingly. 



Fort Dearborn Nat. Bank v. Carter Co. 215 

Fort Dearborn Nat. Bank v. Carter, etc., Co. (1890), 152 

Mass. 34. 

Contract against the acceptor of a bill of exchange for $625. 
Trial in the Superior Court, without a jury, before Mason, J., 
who allowed a bill of exceptions in substance as follows : 

The plaintiff is a national bank, having its usual place of 
business in Chicago, where also the Clark & Longley Company, 
an Illinois corporation, has its usual place of business. The 
defendant is a Massachusetts corporation, having its place of 
business in Boston. Before January 1, 1889, the defendant had 
sold merchandise to the Clark & Longley Company, and on Jan- 
uary 17, 1889, the Clark & Longley Company was indebted to 
the defendant in the sum of about $1,400, for merchandise pre- 
viously sold and delivered. On January 10, 1889, the Clark & 
Longley Company wrote, requesting the defendant to accept a 
draft for its accommodation, which request the defendant refused. 
On January 17, the Clark & Longley Company again wrote to 
the defendant, saying that it had been obliged to pay unusually 
heavy bills for the months of November and December; that it 
regretted that it had been obliged to make drafts upon the defend- 
ant so frequently of late; that its collections had been slow, but 
were much easier ; that it would not need to trouble the defendant 
after that day ; and requested the acceptance of a draft for $625 
for its accommodation, which it had drawn upon the defendant. 
The defendant had within a short time previously accepted and 
paid several accommodation drafts for the Clark & Longley 
Company, which, like this, had been discounted before acceptance. 

The Clark & Longley Company presented this draft for $625 
to the plaintiff, in Chicago, on January 17; and the plaintiff 
placed the amount of the draft, less the discount thereof, to its 
credit. The amount thereof was on the same day drawn out by 
check by the Clark & Longley Company; and the draft was 
forwarded, through the Freeman's National Bank of Boston, for 
acceptance and collection. The draft was presented to the 
defendant for acceptance on January 19, at its place of business, 
and about 3 o'clock p. m. on January 21 the defendant accepted 
the draft, dating the acceptance January 19, 1889, and relying 
upon the representations contained in the letter of the Clark & 
Longley Company of January 17, 1889. After 4 o'clock p. m. of 
January 21, the Clark & Longley Company suspended, and con- 
fessed judgment to the plaintiff in the sum of $22,000, which was 



216 The Contract of the Acceptor 

intended to cover certain indebtedness from the Clark & Longley 
Company to the plaintiff, but did not cover all of the plaintiff's 
claims, and did not cover the draft for $625. On the same day 
an execution issued upon this judgment, and the plaintiff levied 
upon the property of the Clark & Longley Company. On the 
morning of January 22 the defendant first learned by telegram 
from Chicago that the Clark & Longley Company had suspended, 
and had confessed judgment to the plaintiff. The treasurer of 
the defendant corporation at once went to the Freeman's National 
Bank, where the draft was then held awaiting collection at matu- 
rity, and asked the cashier to be permitted to cancel and with- 
draw the defendant's acceptance of the draft. The cashier of the 
bank refused to permit the treasurer to cancel and withdraw the 
acceptance, but at his request telegraphed to the plaintiff that, 
although the draft had been accepted, it would not be paid at 
maturity. This telegram was the first intimation the plaintiff had 
received that the draft had been accepted, and it made no advance 
to the Clark & Longley Company on account of the draft after 
it had been forwarded to the Freeman's National Bank. The 
defendant had never promised either the Clark & Longley Com- 
pany or the plaintiff to accept this draft. The plaintiff did not 
know that it was to be an accommodation acceptance, but beiieved 
that the draft was a just claim of the Clark & Longley Company 
against the defendant. 

The defendant requested the judge to rule as follows: 

"1. Upon the evidence in this case, there was no considera- 
tion for the defendant's acceptance of the draft declared on. 

"2. The plaintiff's action cannot be maintained unless there 
was a valuable consideration for the defendant's acceptance. 

"3. If the defendant accepted the draft without consideration 
and for the accommodation of the drawer, and relying on the 
drawer's representation that it was solvent and its affairs pros- 
perous, and in ignorance of the fact that the drawer was insol- 
vent, and had after the draft was drawn and before presentment 
confessed judgment to the plaintiff, the defendant could revoke 
its acceptance, unless the plaintiff had after the acceptance and 
before notice of the defendant's revocation made an advance on 
the draft to the drawer. 

"4. The defendant could revoke its acceptance at any time 
before notice of its acceptance had been given to the plaintiff." 

The judge refused so to rule in terms, but ruled as follows: 

"1. Upon the evidence, there was no consideration as between 
the drawer and drawee, and no new consideration as between 



Fort Dearborn Nat. Bank v. Carter Co. 217 

the plaintiff and any party to the bill at or subsequent to the 
acceptance, but prior to and at the time of the acceptance the 
plaintiff was a bona fide holder for value, and want of consid- 
eration as between drawer and drawee does not prevent its 
recovery. 

"2. The defendant could revoke its acceptance at any time 
before the communication of such acceptance to the plaintiff or 
to the plaintiff's agent, but could not revoke the acceptance after 
delivering the same to the Freeman's National Bank, the agent 
of the holder." 

The judge found for the plaintiff; and the defendant alleged 
exceptions. 

W. B. French, for the defendant. 
W. A. Knowlton, for the plaintiff. 

Field, J. It is clear that the first ruling made by the court 
is correct, and that the first and second rulings requested were 
rightly refused. (Arpin v. Owens, 140 Mass. 144; Heuertematte 
v. Morris, 101 N. Y. 63.) 

When the draft with the defendant's acceptance upon it was 
delivered by the defendant to the Freeman's National Bank, 
which was the agent of the plaintiff, the contract of acceptance 
between the plaintiff and the defendant became complete, and 
the acceptance could not after that be revoked unless the defend- 
ant had the right to rescind the contract. The second ruling, 
therefore, is correct, and the fourth ruling requested was rightly 
refused, if these rulings relate to the revocation as distinguished 
from a rescission. 

The third ruling requested suggests that possibly the defend- 
ant's counsel had it in mind to contend that the letter of the 
17th of January from the Clark & Longley Company to the 
defendant corporation, upon which it relied in accepting the draft, 
contained a representation that the company was solvent; that 
this representation was false ; and that therefore, when the 
defendant discovered that the representation was false, it had 
the right to rescind the contract of acceptance, unless the plain- 
tiff had after the acceptance "made an advance on the draft to 
the drawer." Although the Clark & Longley Company suspended 
payment on the 21st of January, the exceptions do not state that 
the company was not solvent on the 17th of January, and it is 
doubtful if the letter can be construed as containing any positive 
representation of solvency, assuming that its contents are cor- 
rectly stated in the bill of exceptions. This third request, more- 



218 The Contract of the Acceptor 

over, does not distinctly assume that the defendant was deceived 
by any representations which the drawer made, and was thereby 
induced to accept the draft. We have some doubt whether the 
judge, who tried the case without a jury, understood that any 
question of law was raised concerning the right of the defendant 
to rescind the contract of acceptance on account of any fraud- 
ulent misrepresentations of the drawer of the draft; still we will 
consider the question. 

Whatever may be the distinction between such a case as the 
Merchants' National Bank v. National Bank of the Common- 
wealth, 139 Mass. 513, and the case of Merchants' Ins. Co. v. 
Abbott, 131 Mass. 397, it is manifest that the making of a con- 
tract, or the payment of money under a mistake of fact, as these 
words are used in the law, is not always followed by the same 
consequences as the making of a contract, or the payment of 
money, by reason of the fraudulent misrepresentations of a third 
person. Certainly the general rule is, that a contract made 
between two persons on a valuable consideration cannot be 
rescinded by one of the parties on the ground that a third person, 
at whose request the party entered into the contract, made fraud- 
ulent misrepresentations to him on which he relied, if this third 
person was not an agent of the other party, and the other party 
had no knowledge of the fraud. See Fairbanks v. Snow, 145 
Mass. 153. The contract of acceptance was made by the defend- 
ant with the plaintiff on what the law considers a valuable 
consideration ; namely, the consideration paid by the plaintiff to 
the Clark & Longley Company in anticipation of the acceptance. 
The Clark & Longley Company in inducing the defendant to 
accept the draft acted on its own account and for its own ben- 
efit, and the plaintiff is innocent of any knowledge of or par- 
ticipation in any fraud of that company. There are practical 
reasons of great weight why the rule we have stated should be 
applied to negotiable paper. Acceptors of bills of exchange 
should not be permitted to vary their liability from that which 
is apparent on the face of the bills, by setting up against bona 
fide holders for value, who took the bills before maturity, state- 
ments made by the drawers to the drawees whereby they were 
induced to accept the bills ; and we have been unable to find 
that any distinction has been taken in this respect between 
holders of bills who took them before acceptance and those who 
took them afterwards. 

Exceptions overruled. 



Tucker Manufacturing Co. v. Fairbanks et. al. 219 

Tucker Mfg. Co. v. Fairbanks et al. {1867), 98 Mass. 101. -f- 

See also § 22. 

Contract against David Fairbanks & Co. as drawers of the 
following bill of exchange: 

"$4,469.76. "Boston, March 23, 1866. 

"Two months after date pay to the order of Messrs. Hiram 
Tucker & Co. four thousand four hundred and sixty-nine 76/100 
dollars, value received, and charge the same to the account of 

"David Fairbanks & Co., 
"Agts. Piscataqua F. & M. Ins. Co. 
"To Piscataqua F. & M. Ins. Co., So. Berwick, Me." 

Across the face of the draft was written, "Accepted for the 
Treasurer, David Fairbanks, President;" and on the back, 
"Payable in Boston, Hiram Tucker & Co." 

Trial by jury was waived, and the case heard by Foster, J., 
who found the following facts : The signatures of all the parties 
to the bill were proved or admitted. It was actually made and 
delivered to the officers of the plaintiff corporation, and accepted 
by them on the 3d of April, 1866, in payment and satisfaction 
of the amount of a loss by fire, due on a policy of insurance 
effected by Hiram Tucker & Co. in the Piscataqua Fire and 
Marine Insurance Company, which had been ascertained on the 
23d of March, and was payable sixty days afterwards, and had 
been assigned by Hiram Tucker & Co. to the plaintiffs on the 
26th of March. The plaintiffs had full knowledge of all the 
circumstances under which the bill was made. The insurance 
company, at the time of delivering it, took from the plaintiffs' 
treasurer this receipt : 

"Piscataqua Fire and Marine Ins. Co., 

"Treasurer's Office, 
"$4,469.76. "So. Berwick, Me., April 3, 1866. 

"Received of the Piscatauqua Fire and Marine Insurance 
Company forty-four hundred and sixty-nine and 76/100 dollars, 
in full for loss and damage to my property by fire on the 19th of 
March, 1866, insured by policy No. 16,907 in said company. 

"Tucker Manufacturing Co. 
"R. S. Fay, Treas." 

No evidence was offered of any fraud attending the making 
of the bill. The defendants offered parol evidence tending to 



220 The Contract of the Acceptor 

show that it was not expected or intended that they should be 
liable on the bill, that it was given only to settle the loss, and 
was supposed and expected by both parties to create a debt 
against no one but the insurance company. But the judge 
excluded such evidence, and held that the question of the defend- 
ants' liability must be determined by the instrument itself. 

The insurance company were a corporation established by 
the laws of Maine, having their office at South Berwick in that 
state. The bill was never presented to them there for acceptance, 
and no regular notice of its nonpayment was given to the defend- 
ants. The defendants had no funds in the hands of the insurance 
company when the bill was made or ever afterwards. It was 
proved that the draft was made and delivered in Boston at the 
office of the defendants, who were the general agents of the 
insurance company, and one of them, David Fairbanks, its pres- 
ident, and the agent appointed to receive service of process in 
Massachusetts, under the Gen. Sts. c. 58, §68; that at the time 
of its execution one of the defendants was asked where it would 
be paid, and replied "in Boston," and requested the plaintiff to 
keep it there and not send it to Maine for collection ; that before 
it came due one of the defendants told the plaintiff that it would 
not be paid at maturity, but he hoped it would be paid eventually ; 
that on the last day of grace the defendants were informed by 
the plaintiff that it was in the Union Bank in Boston, and one 
of them answered that it would not be paid. 

Upon these facts the presiding judge found that due present- 
ment and notice had been waived by the defendants ; and reserved 
the questions, whether the facts warranted this finding, whether 
the defendants were liable personally as drawers on the face of 
the bill, and whether the parol evidence offered by them should 
have been received, for the consideration of the full court, accord- 
ing to whose opinion judgment was to be entered for the plaintiff, 
or for the defendant, or a new trial ordered. 

C. Brozvne, for the plaintiffs. 

H. A. Scudder, for the defendants. 

Gray, J. 1. The facts proved at the trial were amply suffi- 
cient to warrant the finding that presentment for acceptance and 
notice of nonpayment had been waived. The defendants knew 
that the bill would not be paid at maturity, and so informed the 
plaintiffs; and the plaintiffs had the right to rely upon the 
information so received and omit a useless ceremony which could 
be of no benefit to themselves or to the defendants. (Brett v. 



Tucker Manufacturing Co. v. Fairbanks et al. 221 

Levett, 13 East, 213; Barker v. Parker, 6 Pick. 80; Spencer v. 
Harvey, 17 Wend. 489.) 

2. It is equally clear that the liability of the defendants as 
drawers of a negotiable instrument must be determined from the 
instrument itself. This is too well settled to admit of discussion. 
There is no distinction in this respect between the drawer of a 
bill of exchange and the maker of a promissory note. (Bank of 
British North America v. Hooper, 5 Gray, 567 ; Bass v. O'Brien, 
12 Gray, 481; Slawson v. Loring, 5 Allen, 342; Barlow v. Con- 
gregational Society in Lee, 8 Allen, 460; Arnold v. Sprague, 34 
Verm. 402; Met. Con. 108.) 

3. The question whether the defendants are liable upon the 
face of the bill requires more consideration. The difficulty is 
not in ascertaining the general principles which must govern 
cases of this nature, but in applying them to the different forms 
and shades of expression in particular instruments. In order to 
exempt an agent from liability upon an instrument executed by 
him within the scope of his agency, he must not only name his 
principal, but he must express by some form of words that the 
writing is the act of the principal, though done by the hand of 
the agent. If he expresses this, the principal is bound,, and the 
agent is not. But a mere description of the general relation or 
office which the person signing the paper holds to another person 
or to a corporation, without indicating that the particular signa- 
ture is made in the execution of the office and agency, is not 
sufficient to charge the principal or to exempt the agent from 
personal liability. Amid the great variety of language which 
may be used by merchants in haste or thoughtlessness, ignorant 
or unmindful of legal rules, or not anticipating the importance 
of holding one party rather than the other responsible, it must 
often happen that cases fall very near the dividing line; and, in 
order to maintain uniformity of decision, it is necessary for the 
court to refer to the cases already adjudicated, especially within 
its own jurisdiction. 

The authority which at first sight seems most strongly to 
support the position of the defendants is that of Ballou v. Talbot, 
16 Mass. 461, in which a note signed "Joseph Talbot, agent for 
David Perry," was held not to bind Talbot personally. That 
case has since been recognized and followed in this Common- 
wealth. (Jefts v. York, 4 Cush. 372 ; Page v. Wight, 14 Allen, 
182.) But the important and effective word in Ballou v. Talbot 
was not the word "agent," nor the name of the principal, but the 
connecting word "for," which might indeed indicate merely the 



222 The Contract of the Acceptor 

relation which the agent held to the principal; but which was 
equally apt to express the fact that the act was done in behalf 
of the principal, in the same manner as if the words had been 
transposed thus: "For David Perry, Joseph Talbot, agent." 
(See Deslandes v. Gregory, 2 El. & El. 602.) This is made man- 
ifest by considering that if the word "agent" had been wholly 
omitted, and the form of the signature had been simply "Joseph 
Talbot, for David Perry," or "For David Perry, Joseph Talbot," 
it would have been well executed as the contract of the principal, 
even if it had been under seal, and of course not less so in the 
case of a simple contract. {Long v. Colburn, 11 Mass. 97; Emer- 
son v. Providence Hat Manufacturing Co., 12 Mass. 237; Mussey 
v. Scott, 7 Cush. 215; Met. Con. 105, no.) 

On the other hand, in Hills v. Bannister, 8 Cowen, 31, a note 
signed by two persons, with the addition "Trustees of Union 
Religious Society, Phelps," (Who were a legal corporation,) was 
held to bind the signers personally; and in Barker v. Mechanic 
Insurance Co., 3 Wend. 94, a note signed "John Franklin, Pres- 
ident of the Mechanic Fire Insurance Company," was held on 
demurrer not to be the note of the company, although alleged 
to have been made within the authority of the president and the 
scope of the legitimate business of the corporation; the court 
saying: "In this case, there is an averment that the president 
was lawfully authorized; but it does not appear that he acted 
under that authority ; he does not say that he signs for the 
company; he describes himself as president. of the company, 
but to conclude the company by his acts he should have con- 
tracted in their name, or at least on their behalf." The variation 
between the words "for" and "of" seems at first view slight; 
but in the connection in which they are used in signatures of 
this kind the difference is substantial. "Agent of" or "president 
of" a corporation named simply designates a personal relation 
of the individual to the corporation. "Agent for" a particular 
person or corporation may designate either the general relation 
which the person signing holds to another party, or that the 
particular act in question is done in behalf of and as the very 
contract of that other; and the court, if such is manifestly the 
intention of the parties, may construe the words in the latter 
sense. But even "agent for" has been held under some cir- 
cumstances a mere descriptio persona of the agent, as in 
De Witt v. Walton, 5 Selden, 570, in which the name following 
these words was not the proper name of the principal, but the 
name of a newspaper which the agent carried on in the principal's 



Tucker Manufacturing Co. v. Fairbanks et. al. 223 

behalf, and a note signed "David Hoyt, agent for The Church- 
man," was held to be the note of Hoyt and not of his principal; 
and in Shattuck v. Eastman, 12 Allen, 369, in which it was held 
that a paper in the form of a receipt, signed "Robert Eastman, 
Agent for Ward 6, Lowell, Mass.," if executed under such cir- 
cumstances as to amount to a contract, might be binding on the 
agent personally. In Fiske v. Eldridge, 12 Gray, 474, in a care- 
ful review of the cases by Mr. Justice Dewey, the New York 
decisions above mentioned were quoted with approval, and a note 
signed "John T. Eldridge, Trustee of Sullivan Railroad," was 
held to be the personal note of Eldridge. In Haverhill Insurance 
Co. v. Newhall, 1 Allen, 130, a note signed "Cheever Newhall, 
President of the Dorchester Avenue Railroad Company," was 
held to bind Newhall personally, although given by him to an 
insurance company (as was expressed in the note itself) in con- 
sideration of a policy issued to the railroad corporation, which he 
was in fact authorized to obtain and sign the note for. See also 
Fullam v. West Brookfield, 9 Allen, 1 ; Morrell v. Codding, 4 
Allen, 403 ; Tanner v. Christian, 4 El. & Bl. 591 ; Parker v. Wins- 
low, 7 El. & Bl. 942 ; Price v. Taylor, 5 H. & N. 540 ; Bottomley 
v. Fisher, 1 H. & C. 211. 

This case is not distinguishable from those just stated. It 
differs from Ballou v. Talbot, in omitting the word "for," (the 
only evidence, contained in the note there sued on, that it was 
made in behalf of the principal) leaving the words "Agts. Pisca- 
taqua F. & M. Ins. Co." as a mere description of the persons 
signing this bill. The cases of Mann v. Chandler, 9 Mass. 335, 
Despatch Line of Packets v. Bellamy Manufacturing Co., 12 N. 
H. 205, and Johnson v. Smith, 21 Conn. 627, cannot avail the 
defendants against the latter decisions of this court. See 12 Gray, 
476; 8 Allen, 461, 462. The name of the principal does not 
appear in the body of the bill. The address of the bill to the 
corporation and the request to them to charge the amount to the 
account of the drawers have certainly no tendency to show that 
the drawers are the same as the corporation, the drawees. The 
fact that the bill was delivered to the plaintiffs by the insurance 
company, as shown by the contemporaneous receipt, does not 
make it the less the promise of the signers. The defendants must 
therefore tye held personally responsible as the drawers of the bill. 

Judgment for the plaintiffs. 



224 Admissions of the Acceptor 

admissions of the acceptor. § 64 1. 

Nat. Park Bank v. Ninth Nat. Bank; Same v. Fourth Nat. Bank 
(18; 1), 46 N. Y. 77, 7 Am. Rep. j/o. 

The first case is an appeal from judgment of the late Gen- 
eral Term, of the first judicial district, reversing order of Special 
Term sustaining demurrer to complaint, and also judgment 
entered upon said order. 

The last is an appeal from judgment of General Term; New 
York Common Pleas, affirming judgment of Special Term of that 
court overruling demurrer to complaint. 

The complaint in the first case states in substance, that 
on the 25th March, 1867, the Ridgely National Bank, of Spring- 
field, Illinois, drew its draft, or bill of exchange on plaintiff, for 
the sum of fourteen dollars and twenty cents, payable to the order 
of Ely Shirly, and delivered the same to the payee. That after- 
ward the amount of said draft was fraudulently changed to $6,- 
300.00, and the name of the payee to E. G. Fanchon, Esq. That 
the name of Wm. Ridgely, cashier, signed to said draft was 
erased, and afterward re-written by the person making the eras- 
ure. That the same was then discounted by the Lexington 
National Bank, and by it was endorsed to defendant. That after- 
ward, and on or about April 12th, 1867, defendant presented said 
draft to plaintiff, and said plaintiff paid thereon the sum of $6,300. 
That plaintiff discovered the forgery May 10th, 1867, and forth- 
with notified defendant thereof, and demanded re-payment of said 
sum, less fourteen dollars and twenty cents, which was refused. 
Defendant demurs, "that the complaint does not state facts suffi- 
cient to constitute a cause of action." 

In the last case the facts are similar, save as to amount and 
names. 

/. H. V. Arnold, for appellant, Ninth Nat. Bank. 
S. K. Miller, for appellant, Fourth Nat. Bank. 
F. C. Barlow, for respondent. 

Allen, J. The checks paid by the plaintiffs, the drawees, 
were forgeries throughout, as well the signatures, as the bodies. 

The name of the signer, the cashier of the Ridgely Bank, was 
not the genuine signature of that officer, and was not written by 
his authority. The fact that a genuine check had been drawn, 
and signed by the proper party, upon the same piece of paper, 
does not affect the character of the instrument in its altered, and 



National Park Bank v. Ninth National Bank 225 

forged condition. The forger, by skillfully obliterating the gen- 
uine signature, together with the words and figures indicating 
the amount payable thereon, effectually destroyed the instrument, 
and it was incapable of being restored to its original condition, 
in the form of a check, and made available for any purpose. 

It was but a blank form of a draft or bill, and the act of 
signing the name of the cashier as drawer, with intent to utter and 
pass the same as genuine, was a crime, and the signature a for- 
gery, whether the check was for the same, or a different amount 
from that for which the original and genuine bill had been drawn. 

Whether the forger used the same paper on which the orig- 
inal instrument had been written and signed, and manipulated it 
to suit his purposes, or made and forged a check on another, and 
different piece of paper is not material, so long as the signature 
of the drawer was counterfeit. 

The drafts paid by the plaintiff were not merely raised 
checks, that is, forged and altered by the obliteration and removal 
of one sum, and the insertion of another, but were forged instru- 
ments in every sense. ¥ 

The drafts signed by the cashier are not in existence in any 
form as drafts. The genuine signature was wanting, to make the 
instruments the checks of the nominal drawer, for any amount. 
The money was then paid by the plaintiff upon bills drawn upon 
it, to which the name of its correspondent had been forged. 

For more than a century it has been held and decided, with- 
out question, that it is incumbent upon the drawee of a bill, to be 
satisfied that the signature of the drawer is genuine, that he is 
presumed to know the handwriting of his correspondent; and if 
he accepts or pays a bill to which the drawer's name has been 
forged, he is bound by the act, and can neither repudiate the 
acceptance nor recover the money paid. 

The doctrine was broached by Lord Raymond in Jenys v. 
Fawler (2 Strange, 946), the chief justice strongly inclining to 
the opinion, that even actual proof of forgery of the name of the. 
drawer, would not excuse the defendants against their acceptance. 
In 1762 the principle was flatly, and distinctly decided by the 
Court of King's Bench, in the leading case of Price v. Ned (3 
Burrows, 1354), which was an action to recover money, paid by 
the drawee to the holder of a forged bill. Lord Mansfield stopped 
the counsel for the defendant, saying that it was one of those 
cases that never could be made plainer by argument ; that it was 
incumbent on the plaintiff, to be satisfied that the bill drawn 
upon him was the drawer's hand, before he accepted and paid it, 



226 Admissions of the Acceptor 

but it was not incumbent for the defendant to inquire into it. This 
case has been followed and the doctrine applied, almost without 
question or criticism, in an unbroken series of cases, from that 
time to this, and it has been distinctly approved in very many 
cases, which have not been within the precise range of the principle 
decided. (See Archer v. Bank of England, 2 Doug., 639; Smith 
v. Mercer, 6 Taunt., 76; Wilkinson v. Johnson, 3 B. & C, 428; 
Cook v. Mastermam, 7 B. & C, 9x12 ; Cooper v. Meyer, 10 B. & C, 
468; Saunderson v. Coleman, 4 M. & G., 209; Smith v. Chester, 
1 D. & E. R., 655 ; Bass v. Clive, 4 M. & S., 15 ; Bank of Com- 
merce v. Union Bank, 3 Comstock, 230; Goddard v. Merchants' 
Bank, 4 Comstock, 149; Canal Bank v. Bank of Albany, 1 Hill, 
287.) 

Cases have been distinguished from Price v. Neal, and its 
applicability to a transfer to a forged instrument, between persons 
not a party to it, has not been extended to forgeries of indorse- 
ments or handwriting of parties to negotiable instruments, other 
than the drawer. But, as applied to the case of a bill to which 
the signature of a drawer is forged, accepted or paid by the 
drawee, its authority has been uniformly and fully sustained, and 
the rule extends as well to the case of a bill paid upon present- 
ment, as to one accepted and afterward paid. {Bank of St. 
Albans v. Farmers' and Mechanics' Bank, 10 Vermont, 141 ; Levy 
v. Bank of the U. S., 4 Dallas, 234; Bank of U. S. v. Bank of 
Georgia, 10 Wheat., 333 ; Young v. Adams, 6 Mass., 182 ; Glou- 
cester Bank v. Bank of Salem, 17 Mass. 41.) 

A rule so well established, and so firmly rooted and grounded 
in the jurisprudence of the country, ought not to be overruled or 
disregarded. 

It has become a rule of right and of action among commer- 
cial and business men, and any interference with it would be 
mischievous. Judge Ruggles in Goddard v. Merchants' Bank, 
supra, well says, "it should not be departed from, or frittered 
away by exceptions resting on slight grounds, and cannot be 
overruled, without overthrowing valuable, and well settled prin- 
ciples of commercial law." In the first above entitled action, the 
judgment of the General Term should be reversed, and that of 
Special Term affirmed, and judgment absolute for the defendant 
with costs; and in the other, the Judgment of the General and 
Special Term should be reversed, and judgment for the defendant 
with costs. 

All concur. 

Peckam, J., not voting. Judgment accordingly. 



First Nat. Bank v. Northwestern Nat. Bank J227 



First Nat. Bank v. Northwestern Bank (1894), 132 III. 296. 

Appeal from the Appellate Court for the First District; — 
heard in that court on appeal from the Superior Court of Cook 
county ; the Hon. Elliott Anthony, Judge, presiding. 

The bank checks involved in this suit purported to be drawn 
by the Central Union Telephone Company upon the Northwestern 
National Bank of Chicago. Four of these checks were made 
payable to the order of "F. P. Ross, Manager," and one was 
drawn payable to the order of "C. H. Wilson, A. G., Supt." 
These checks were received by appellant, the First National Bank, 
in the regular course of business, being deposited with it by Cha- 
pin & Gore, who were regular depositors. Appellant endorsed 
them, "Pay through Chicago Clearing House only to First 
National Bank," and they being by the clearing house presented 
to appellee, were paid by it. Afterwards, it was discovered that 
the signatures of the maker, the telephone company, and that of 
the payees, Wilson and Ross, were forgeries. Thereupon the 
Northwestern National Bank brought this suit against the First 
National Bank. The other important facts are stated in the 
opinion. 

Messrs. Remy & Mann, for the appellant. 
Mr. Charles M. Sturges, for the appellee. 

Mr. Justice Baker delivered the opinion of the court : 

In this action of assumpsit brought by the Northwestern 
National Bank of Chicago, against the First National Bank of 
Chicago, the issues were tried before the Superior Court of Cook 
county without a jury, and the court found the issues for che 
plaintiff, and assessed its damages at $2,454, and rendered judg- 
ment therefor against the defendant. Upon an appeal to the 
Appellate Court for the First District the judgment was in all 
things affirmed, and thereupon the First National Bank of Chi- 
cago prosecuted this further appeal. 

(Omitting questions of practice). 

It may be well, in order to clearly understand the nature of 
the case upon which appellee relies, to briefly state the substance 
of its declaration. The declaration contains ten counts, nine of 
which are special, and each of these special counts describes a 
different instrument in writing, and the tenth count is a common 
indebitatus assumpsit count for interest. The first count avers 



228 Admissions of the Acceptor 

that on May 17, 1887, "a certain person" made and drew, by and 
under the name and style of "W. S. Chapman, Treas.," a certain 
draft or order, in writing, for the payment of money, commonly 
called a check on a bank, with the heading "Central Union Tele- 
phone Company," and said check being numbered with the number 
13,006, and caused said check to be countersigned by and under the 
style of "Geo. L. Phillips, Prest.," and directed said check to the 
appellee, and thereby requested it to pay $300 to C. H. Wilson, who 
was described therein as "C. H. Wilson, A. G. Supt.," and that 
afterwards some one to plaintiff unknown, intending to defraud C. 
H. Wilson, and without the consent, knowledge or ratification of 
Wilson, and without the knowledge of plaintiff, forged on said 
check the name of "C. H. Wilson, A. G. Supt.," and caused said 
check, so indorsed, to be placed in the hands of Chapin & Gore, 
who in turn endorsed it "For deposit in the First National Bank 
to the credit of Chapin & Gore," and delivered it to the appellant, 
who in turn endorsed it "Pay through Chicago Clearing House 
only to First National Bank," and through said clearing house 
presented said check to appellee for payment, and thereby vouched 
and warranted to appellee that the endorsement of C. H. Wilson 
on said check was the genuine endorsement of said Wilson, and 
that appellee, confiding in said warranty of appellant, and in con- 
sideration thereof, and being ignorant that said endorsement was 
forged, paid said check to appellant and took up the check ; that 
appellee did not discover the fact of such forgery until July 25, 
1887, when it notified appellant, tendered to it the check, and 
demanded that appellant should make good its warranty, and 
should repay to appellee the amount of the check, by means 
whereof appellant became liable to pay, promised to pay, and 
afterwards refused, etc. The averments of the second count are 
substantially the same as those of the first count, except that the 
check is dated May 31, 1887, is numbered 13,051, and is for 
$250. The averments of the third count are substantially the 
same as those of the first count, except that the check is dated 
June 13, 1887, is numbered 13,086, and is for $200. The aver- 
ments of the fourth count are substantially the same as those of 
the first count, except that the check is dated June 13, 1887, is 
numbered 13,087, and is for $200, and except, further, that the 
count contains the additional averment that on June 30, 1887, 
appellee accepted said check and wrote on the face thereof these 
words: "Accepted payable through Chicago Clearing House, 
June 30, 1887. — Northwestern National Bank. — Sheahan, Teller." 
The averments of the fifth count are substantially the same as 



First Nat. Bank v. Northwestern Nat. Bank 229 

those of the first count, except that the check is dated July 5, 1887, 
is numbered 13,145, and is for $200, and except, also, that there 
is no averment that it is countersigned by and under the style 
of "Geo. L. Phillips, Prest." The averments of the sixth count 
are substantially the same as those of the first count, except that 
the payee named in the check is "F. P. Ross, M'gr.," and except 
that the check is dated May 31, 1887, is numbered 13,049, and is 
for $200. The seventh count is the same as the sixth count, 
except that date of check is May 1, 1887, and its number is 13,050, 
and it is for $300.10. The eighth count is the same as the sixth 
count, except that date of check is June 18, 1887, and its number 
is 13,085, and it is for $200. The ninth count is the same as the 
sixth count, except that date of check is July 5, 1887, and its 
number is 13,147, and its amount is $200, and except, also, that 
it contains an additional averment that on July 13, 1887, appellee 
accepted said check, and wrote on the face thereof: "Accepted 
payable through Chicago Clearing House July 13, 1887. — North- 
western Nat'l Bank.— Sheahan, Teller." 

The only plea filed to the declaration was that of the general 
issue, and issue was joined thereon. But at the trial a stipulation 
was made that appellant might, under that plea, introduce evi- 
dence to prove that the checks were otherwise forged, prior or in 
addition to the endorsements alleged to have been forged, and 
that such prior and other forgeries were on said checks when they 
came to the hands of appellant, and without its knowledge, pro- 
vided the court should hold proof of such matter competent as a 
defense, and provided appellee might introduce, in reply, all mat- 
ters in evidence, and provided the rulings of the court admitting 
or rejecting such evidence should be subject to exception by 
either party, other than on the point of its admissibility under the 
pleadings. 

The declaration proceeds upon the theory that it is imma- 
terial, as between the parties to this suit, who, in fact, drew the 
checks. The allegation in each of the special counts is, that "a 
certain person" drew the check. >In 2 Chitty's Pleading, (10th 
Am. ed.) *I50, it is said that it is not necessary to state the names 
of the parties to a bill of exchange, unless they be plaintiffs or 
defendants. It may also be said that the declaration virtually 
admits that the several checks were genuine checks of the tele- 
phone company, and that the endorsements of the payees alone 
were forgeries. 

At the trial the court admitted evidence to show that the 
signatures of the drawers of the checks were forgeries. That 



230 Admissions of the Acceptor 

evidence was introduced over the objections and exceptions of 
appellee, appellee specifying as grounds of objection that such 
inquiry was irrelevant to the issues in the cause, and that under 
the issues, and as between the plaintiff and defendant, the signa- 
tures of the drawers of the checks were conclusively presumed 
to be genuine. Appellee was right in its contentions. A check 
payable to order is a bill of exchange payable to order on demand. 
The drawee of a bill of exchange or of a bank check is conclu- 
sively presumed to know the signature of the drawer, and if he 
accepts or pays, in the usual course of business, a bill or check 
whereon the signature of the drawer is a forgery, he will be 
estopped to afterward deny the genuineness of such signature. 
(First Nat. Bank of Qiiincy v. Ricker, yi 111. 439; Bigelow on 
Estoppel, (4th ed.) 498; 2 Herman on Estoppel and Res Judicata, 
Sees. 1006, 1008.) But the operation of an estoppel is reciprocal, 
for there can be no estoppel unless it be mutual. It must bind 
both parties, and one who is not bound by it can not take advan- 
tage of it. (2 Herman on Estoppel, Sec. 1295 ; Co. Lit. 352a; Grif- 
fin v. Richardson, N. C. 11 Ired. L. 439; Gaunt v. Wainman, 3 
Bing. N. C. 69, and 32 Eng. C. L. 42 ; Bentley et al. v. Cleaveland, 
22 Ala. 814; Wetland Canal Co. v. Hathaway, 8 Wend. 480.) And 
so, as, in respect to the transactions involved in the present litiga- 
tion, appellee is precluded from questioning the genuineness of 
the signatures of the treasurer and president of the telephone 
company to the nine checks, so also is appellant estopped from so 
doing. The case stands, as between the parties to this suit, just 
as though the signatures of the drawers of the checks were 
authentic. To rule otherwise would be to disregard the maxim of 
the law, allegans contraria non est andiendus, and to permit appel- 
lant to blow both hot and cold with reference to the same transac- 
tions. 

In the present case, the admission of the incompetent testi- 
mony seems to have worked no injury, for when the trial court 
came to make its findings upon the issues, it manifestly disre- 
garded such testimony, as being irrelevant. 

The estoppel, however, of which we have spoken, applies 
only to the case of the signature of the drawer, and of the drawer, 
alone. A drawee is bound to know the signature of his own cus- 
tomers, and a bank is bound to know the signatures of those who 
deposit with it and draw checks against such deposits. But the 
drawee or bank is not chargeable with knowledge of any other 
signature on the bill of exchange or bank check, and by accepting 
or paying the bill or check does not admit the genuineness of any 



First Nat. Bank v. Northwestern Nat. Bank 231 

endorsement on it. (2 Daniel on Neg. Inst., Sees. 1364, 1365 ; 
Marine Nat. Bank v. Nat. City Bank, 59 N. Y. App. 67 ; Canal 
Bank v. Bank of Albany, 1 Hill, 287 ; Vagliano v. Bank of Eng- 
land, L. R. 22 Q. B. Div. 103 ; Vagliano v. Bank of England, (on 
appeal) L. R. 23 id. 243.) And even if a drawer draws a bill or 
check payable to himself or his own order, and at once endorses 
it, an acceptance or payment of it by the drawee admits only 
the genuineness of the drawer's original signature, but not the 
genuineness of his endorsement. (2 Parsons on Notes and Bills, 
483 ; 2 Daniel on Neg. Inst., Sec. 1365 ; Beeman v. Duck, 11 Mees. 
& Wels. 251 ; Williams v. Drexel, 14 Md. 566). 

At the trial, C. H. Wilson testified for appellee, as follows: 
"I lived in Columbus in May, June and July, 1887, and was assist- 
ant general superintendent of the Central Union Telephone Com- 
pany. That company, during those months, was accustomed to 
draw checks on the Northwestern National Bank to my order, 
under the designation of 'A. G. Supt.' The signature to the 
endorsement of the checks mentioned in the first five counts of 
the declaration, and now shown me, are not my signatures. They 
are forgeries, — every one of them. I never authorized any one to 
sign my name to those checks, nor did I know they were signed, 
nor have I ratified or approved the endorsements, or either of 
them." And F. P. Ross testified as follows : "I reside at Colum- 
bus, Ohio. Was manager of the Central Union Telephone Com- 
pany Exchange there in May, June and July, 1887. Was accus- 
tomed to receive, from time to time, checks drawn by the Central 
Union Telephone Company to my order, as manager, on the 
Northwestern National Bank of Chicago, generally resembling 
the checks now shown me, described in the sixth, seventh, eighth 
and ninth counts of the declaration. The endorsements on the 
back of them are not my endorsements. They are forgeries. I 
never authorized, consented, ratified or approved such endorse- 
ments." 

It is urged that the forgery of the endorsements is not suffi- 
ciently proven. The claim, as we understand counsel, is, that it 
does not appear that the checks were really drawn in favor of 
Wilson and Ross, respectively, in the sense that they thereby 
became the owners, respectively, of them, or that it was the inten- 
tion of the drawer or drawers, by means of the checks, to pay them 
money, or that the checks were delivered to them, but that, on the 
contrary, it is logically deducible from the declaration and the 
evidence that the checks were delivered to some person whose 
name is not disclosed, and that it was the intention of the drawer 



232 Admissions of the Acceptor 

or drawers that such person should in fact receive the money, and 
it is submitted, that in such state of the case it was not forgery 
on the part of the holder of the checks to endorse the name of 
Wilson, or that of Ross, on the checks payable to them, respect- 
ively. The contention seems to be, that there can be no real payee 
of a forged instrument, and no such thing as a forged endorse- 
ment of the name of the ostensible payee of a check to which the 
name of the drawer is forged. This argument is more specious 
than sound. It is a complete answer to it to repeat what we have 
already said in another connection : that, as between appellee and 
appellant, both parties are estopped from claiming that the origi- 
nal checks are not genuine, or that the name of the drawer signed 
to them is forged. 

If further authority upon that point is desirable, it is afforded 
by the recent (1889) judgment of the Court of Appeals in the 
case of Vagliano v. Bank of England, L. R. 23 Q. B. Div. 243. 
The amount there involved was about $350,000. In the bills of 
exchange there in question, both the signatures of the drawer and 
the endorsements of the payee were forged. In this respect it 
was like the case at bar, and in respect to the questions at issue 
it was also singularly like it. It may be well to remark, by way 
of explanation of some of the language that we shall quote, that 
one of the questions under examination was whether a certain 
sub-section 3 of a statute of 1882 was a mere codification of exist- 
ing law or an alteration of it. The court there said : "The bank 
can only justify the payment that has been made, by showing that 
the documents were to be considered in the light of bills originally 
payable to bearer, in which case the bank would be authorized to 
pay the amount to the person who was the holder. Counsel for 
the bank contended before us that the payee named, C. Petridi & 
Co., were fictitious payees. A real and existing firm of that name 
were, in fact, carrying on business at Constantinople, and had 
been on previous occasions payees of genuine bills drawn by 
Vucina upon Vagliano Bros. It was unquestionably intended by 
Glyka that the acceptor should believe, and the acceptor in each 
case did believe, that the payees indicated were the C. Petridi & 
Co. in question, but it was urged by the appellant's counsel that as 
Glyka, the forger, intended to forge C. Petridi & Co.'s names, and 
never meant that they should have anything to do with the bills, 
the payees were fictitious. * * * Before accepting such a 
construction of the sub-section it is desirable to state with pre- 
cision what was the previous commercial law upon the subject. 
The law merchant seems to have been clear, and to have been 



First Nat. Bank v. Northwestern Nat. Bank 233 

based throughout on the principle of the law of estoppel, which, 
in its turn, is conformable with reason and business principles. 
The genuineness of the endorsement of the payee was a matter 
as to which, except in one special instance, no estoppel prevailed. 
The one exception to the rule was the case described in Story on 
Bills of Exchange, Sections 56 and 200. This exceptional rule in 
the case of fictitious bills is based, as has been stated, on a special 
application to a particular case of the principle of estoppel, which 
plays so important a part in the law merchant." Then, after a 
review of the cases, the court added : "Down, therefore, to the 
date of the passing of the recent statute, the exception that bills 
drawn to the order of a fictitious or non-existing payee might be 
treated as payable to bearer, was based uniformly upon the law of 
estoppel, and applied only against the parties who, at the time they 
became liable on the bill, were cognizant of the fictitious character 
or of the non-existence of the supposed payee. The principle that 
lies at the root of the exception is, that a reasonable effect must be 
given, in favor of bona fide holders, to the act of acceptance, 
and that where it appears that although there was a named payee 
he was so completely fictitious or non-existing that the acceptor 
could not have intended to restrict payment to such payee or his 
order, the acceptor, who must be taken to have intended that his 
acceptance should have some commercial validity, was estopped 
from saying that the bill was not a bill payable to bearer. If the 
exception is to be extended beyond this, it will rest upon no prin- 
ciple at all, and this strange result would follow : that where, for 
purposes of fraud, a payee's name is introduced, (whose signature 
it is intended to forge) the acceptor, though innocent and ignorant, 
will be bound to pay, and his bankers will be justified in paying 
without any endorsement at all. The acceptor, in such cases, will 
be a helpless victim. Ignorant, himself, of the fraud, believing 
from first to last that he has accepted a bill payable only to a partic- 
ular payee or to his order, he will be held, in law, nevertheless to 
have accepted a bill payable to bearer. The word 'fictitious' must in 
each case be interpreted with due regard to the person against 
whom the bill is sought to be enforced. If the obligations of the 
acceptor are in question, and the acceptor is the person against 
whom the bill is to be so treated, fictitious must mean fictitious as 
regards the acceptor, and to his knowledge. Such an interpretation 
is based on good sense and sound' commercial principle. * * * 
Petridi & Co. of Constantinople did not cease to be real persons 
because Glyka meant to suggest, falsely, that they were to be the 
payees, and meant himself to forge their names. According to the 



234 Admissions of the Acceptor 

ordinary sense of the English language the payees of these bills 
were not fictitious, but real, persons, from first to last, and to con- 
strue the law otherwise would be to render it the source of needless 
disorder and confusion in business transactions. The instruments 
in question were not, therefore, payable to bearer, and the bank 
having paid upon forged endorsements, must, in the absence of 
any other ground of defense, take the consequences." 

When appellant endorsed the nine checks, and collected from 
appellee the sums of money called for by them, it warranted the 
genuineness of all the preceding signatures endorsed on the respec- 
tive checks, including the endorsements on the checks of the names 
of the respective payees named in such checks. (2 Parsons on 
Notes and Bills, 588 ; Williams v. Tishomingo Samngs Institution, 
57 Miss., 633 ; Story on Bills of Exchange, Sec. 225.) And where 
a drawee or a bank pays a bill of exchange or a bank check to an 
endorser who derives title through a prior forged endorsement, 
he may recover back the money so paid, on discovery of the 
forgery, provided he makes demand for repayment within a rea- 
sonable time after the discovery of such forgery. (2 Daniel on 
Neg. Inst., Sees. 1364, 1372; Canal Bank v. Bank of Albany, 1 
Hill, 287; Williams v. Tishomingo Savings Institution, supra.) 

The evidence shows that appellee accepted two of the checks, 
"payable through Chicago Clearing House," prior to the time that 
they were transferred to Chapin & Gore. This makes no differ- 
ence. . An acceptor is bound to look only at the face of the bill or 
check, and an acceptance never proves an endorsement ; and even 
if the supposed endorsements of the payees of said two checks 
were on them at the times when they were respectively accepted, 
yet such acceptances did not admit the handwriting of the endors- 
ers. (Smith v. Chester, 1 Term Rep. 654; Robinson v. Yarrow, 
7 Taunton, 455 ; 2 Eng. Com. Law, 445.) In this case, the accept- 
ance or certification of the two checks simply warranted the genu- 
ineness of the signatures of the drawer, and that it had funds suffi- 
cient to meet them, and engaged that those funds should not be 
withdrawn from the bank by the drawer, and that the bank would 
pay through the agency of the Chicago clearing house the amount, 
if any, actually due on the check, to the person legally entitled to 
receive it. The acceptance or certification did not warrant the 
genuineness of the bodies of the checks, either as to the payees or 
the amounts, or warrant the genuineness of the endorsements on 
the checks. ( Marine Nat. Bank v. Nat. City Bank, 59 N. Y. App. 
67; Security Bank v. Nat. Bank, 67 id. 458.) 

The case made by the evidence introduced by appellee was in 



First Nat. Bank v. Northwestern Nat. Bank 23& 

substance as follows : Nine several checks, of different dates and 
amounts, were made by some person, and signed and counter- 
signed in manner and form as stated in the nine special counts 
of the declaration, five of which were made payable to C. H. 
Wilson, A. G. superintendent, and the remaining four to F. P. 
Ross, manager, and directed said checks to the appellee bank. All 
of these checks, each of them purporting to be endorsed by the 
payee therein named, were transferred, for value, to Chapin & 
Gore, who endorsed each of them "For deposit in the First 
National Bank to the credit of Chapin & Gore," and delivered 
them to appellant, and appellant also endorsed each of them "Pay 
through Chicago Clearing House only to First National Bank," 
and through said clearing house presented them, so endorsed, to 
appellee for payment, and received from it, in payment thereof, 
the full amounts called for by said checks. None of said checks 
were in fact endorsed by the payees therein respectively named, 
but all of the endorsements purporting to be made by the payees 
were forgeries, and appellee paid said checks in ignorance of such 
forgeries. After business hours on Saturday, July 23, 1887, 
appellee made discovery of the forgeries, and on the following 
Monday, July 25, 1887, it tendered the checks back to appellant 
and demanded repayment of the money paid by it on the same, 
but appellant refused to make such repayment. Two of said 
checks, before they came into the hands of Chapin & Gore, had 
been accepted by appellee, it writing on the face of each of them 
these words: "Accepted payable through Chicago Clearing 
House." 

In our opinion these facts established, prima facie, a right of 
action in appellee as against appellant, and it follows that the trial 
court, in refusing to hold the eighth proposition submitted by 
appellant, to the effect that under the evidence the finding and 
judgment should, as a matter of law, be for appellant, committed 
no error. 

The judgment of the Appellate Court is affirmed. 



Judgment affirmed. 



4 



236 Admissions of the Acceptor 

Heuertematte v. Morris {1885), 101 N. Y. 63. 
The material facts are stated in the opinion. 

F. R. Coudert, for appellants. 
C. E. Coddington, for respondent. 

Ruger, Ch.J. In the discussion of this case it is unneces- 
sary to consider particularly the agency of Hourquet & Poylo in 
the transaction, as they acted solely as the gratuitous agents of 
the plaintiffs, and had no interest in the subject of the business. 
It may, therefore, be treated as a transaction occurring directly 
between the plaintiffs and Ran Runnels, and concisely described, 
was to the following effect : The plaintiffs were merchants doing 
business at Panama, and one Christof el was a customer and debtor 
of theirs, residing at San Juan del Sur, near Rivas, in the State 
of Nicaraugua. Christofel was desirous of discharging his obli- 
gations to the plaintiffs, but was embarrassed in doing so by the 
infrequency of communication between Rivas and Panama, and 
the want of a system of exchange enabling him to transmit funds 
safely and expeditiously from one place to the other. Under these 
circumstances the plaintiffs consulted Hourquet & Poylo, a busi- 
ness firm at Panama, as to the best manner of collecting the debt. 
The plaintiffs were informed by Hourquet & Poylo that Ran Run- 
nels was a correspondent of theirs residing at Rivas, and that the 
collection could probably be made through him, and offered to 
transmit a draft on Christofel to Runnels, for that purpose. There- 
upon the plaintiffs made their draft on Christofel at sixty days 
for $1,000 payable to Hourquet & Poylo, who indorsed the same 
to Runnels and forwarded it to him at Rivas for collection. In 
due time it was received by Runnels, and at its maturity was paid 
to him, in Columbian currency. 

It becomes important now to determine the legal obligations 
and duties of the parties toward each other at this stage of the 
transaction. In the collection of the draft Runnels acted as the 
mere agent of the plaintiffs, and had no interest in the proceeds 
except, perhaps, a lien thereon for the value of his services in mak- 
ing the collection. He had no right or authority to use such funds 
for his individual purposes, and his sole duty in relation to them, 
was that of their transmission to his principals. The nature of 
the business impliedly authorized him, to make such transmission 
according to the usages of trade, and in the absence of such usages 
to do so by some other method which should, in the exercise of 



Heuertematte v. Morris 237 

reasonable care and prudence, promise to accomplish the object 
intended. It was, therefore, open to him to transmit the funds 
received in specie as they were collected, or he could have pur- 
chased a bill of exchange, if opportunity served, at that place, and 
transmitted that ; or he could remit them in any other way deemed 
most safe, convenient and desirable to him, subject to the approval 
by his principals, of the method adopted. It does not appear in 
the case but that Runnels was a merchant or banker and accus- 
tomed to sell exchange upon foreign places. However that may 
be, he in fact sent to the plaintiffs, February 4, 1879, immediately 
upon collection, the proceeds thereof, less cost of collection and 
exchange, by the draft in suit. This was his own draft upon the 
defendant Morris, at New York, at ninety days' sight. Upon the 
receipt of this draft by the plaintiffs, it was accepted by them and 
remitted to New York, for presentation to, and acceptance by the 
drawee, and the same was accepted by him February 26, 1879. 

The sole question in the case is whether the plaintiffs were 
bona fide holders for value of the draft. We cannot doubt but 
that they were. If on receiving the funds in question Runnels 
had purchased with them a bill of exchange draft from a mer- 
chant, or banker, according to the usages of trade, and trans- 
mitted the same to the plaintiffs, no question could arise but that 
he acted as their agent in the transaction, and they would have 
been bona fide holders of such paper within all definitions of that 
character, and we are unable to see the difference in principle 
between such a case and the transaction in question. The funds 
collected by Runnels were, until they consented to their appropria- 
tion by him, at all times the property of the plaintiffs. Runnels' 
sole duty in relation to them was that of transmission to the plain- 
tiffs, and until that duty was legally performed he held them in 
a fiduciary capacity for a specified purpose. His duty of trans- 
mission could not be performed by remitting his own obligation, 
payable at a future day, except by the consent and approval of the 
plaintiffs. Until this consent and approval was given the funds 
remained the property of the plaintiffs, and any use of them by 
Runnels before that time would have constituted a violation of his 
duty to his principals, which it cannot be presumed he committed. 

Doubtless the lack of adequate facilities of exchange between 
Rivas and Panama induced Runnels to offer, and the plaintiffs to 
accept, the mode of remittance adopted, and it was entirely com- 
petent for Runnels to propose, and for the plaintiffs. to accept such 
a solution of the inconveniences of the situation; but no title to 
the funds collected passed to Runnels, .until the acceptance of the 



238 Admissions of the Acceptor 

draft by the plaintiffs. After that and not till then he was author- 
ized to use those funds as his own. 

By the original employment the plaintiffs contemplated no 
credit to Runnels and he had no right to, and it does not appear 
that he even supposed, he acquired any right to use the funds in 
question for his own purposes, or that he ever did so use them. 
The conventional relation of debtor and creditor never existed 
between Runnels and the plaintiffs until the acceptance of his 
draft upon Morris, and then those relations were governed by the 
liabilities existing by force of the draft alone. 

In accordance with the rule which precludes a court from 
presuming a violation of duty by an individual, we must assume 
that Runnels performed his duty, and his whole duty, to the plain- 
tiffs as their agent. This required him to safely keep their funds 
until he had transmitted them according to the usage of trade, or 
in some other mode approved by them. The legal effect of the 
method adopted was to transfer the title to the funds collected, 
to Runnels simultaneously with the acceptance by the plaintiffs of 
Runnels' draft upon Morris, and was the precise equivalent of the 
payment of so much money in the immediate purchase of a draft 
or bill of exchange by one person from another. We are, there- 
fore, of the opinion that the plaintiffs were the bona fide holders 
for value of the draft in suit and are entitled to recover thereon. 

The General Term conceded that the plaintiffs were bona fide 
holders for value of the bill before acceptance, but deny them that 
character after acceptance as against the acceptor. We think the 
concession is fatal to the conclusion reached by that court. 

It is said that the Farmers & Mechanics' Bank v. Empire 
Stone Dressing Co. (5 Bosw. 290) is authority for the position. 
It is true that some expressions of the learned judge writing in 
that case may justify the citation, yet it should be considered that 
those remarks were unnecessary to the decision of the case, and 
the same court have twice since then refused to follow it. 

We conceive the rule there laid down finds no support in the 
doctrines of the text-writers or the reported cases. (Philbrick v. 
Dallett, 2 J. & S. 370 ; First Nat. Bank of Portland v. Schuyler, 
7 id. 440; Parsons on Bills and Notes, 323 ; Daniels on Neg. Inst., 
§ 534; Edwards on Bills [2d ed.], 410.) 

If a party becomes a bona fide holder for value of a bill before 
its acceptance, it is not essential to his right to enforce it against 
a subsequent acceptor, that an additional consideration should 
proceed from him to the drawee. The bill itself implies a repre- 
sentation by the drawer that the drawee is already in receipt of 



Heuertematte v. Morris 239 

funds to pay, and his contract is that the drawee shall accept and 
pay according to the terms of the draft. (Parsons on Bills, 323, 
544; Arpin v. Chapin, Mass. Sup. Ct, Oct., 1885.) The drawee 
can of course upon presentment refuse to accept a bill, and in that 
■event the only recourse of the holder is against the prior parties 
thereto ; but in case the drawee does accept a bill, he becomes pri- 
marily liable for its payment, not only to its indorsees but also to 
the drawer himself. 

The delivery of a bill or check by one person to another for 
value implies a representation on the part of the drawer that the 
drawee is in funds for its payment, and the subsequent acceptance 
of such check or bill constitutes an admission of the truth of the 
representation, which the drawee is not allowed to retract. (Dan- 
iels on Neg. Inst., 534; Parsons on Bills, 323, 544, 545.) By such 
acceptance the drawee admits the truth of the representation, and 
having obtained a suspension of the holder's remedies against the 
drawer, and an extension of credit by his admission, is not after- 
ward at liberty to controvert the fact as against a bona fide holder 
for value of the bill. 

The payment to the drawer of the purchase-price furnishes a 
good consideration for the acceptance which he then undertakes 
shall be made, and its subsequent performance by the drawee is 
only the fulfillment of the contract which the drawer represents 
he is authorized by the drawee to make. 

The rule that it is not competent for an acceptor to allege as 
a defense to an action on a bill that it was done without considera- 
tion, or for accommodation, as against a bona fide holder for value 
of such paper, flows logically from the conclusive force given to 
his admission of funds, and is elementary. (Daniels on Neg. Inst., 
§§ S3 2 -534; Edwards on Bills, 410; Harger v. Worrall, 69 N. Y. 
371 ; Com. Bk. of Lake Erie v. Norton, 1 Hill, 501 ; Robinson v. 
Reynolds, 2 Q B. 196, 211; Hoffman v. Bank of Milwaukee, 12 
Wall. 181.) 

Of course the case determined upon the ground that the payee 
of such paper received it to apply upon an antecedent debt, or that 
it had been unlawfully diverted from the purpose for which it was 
designed, have no application to the circumstances of this case. 

The judgments of the courts below should, therefore, be 
reversed and a new trial ordered, with costs to abide the result. 

All concur. 

Judgment reversed. 



240 ' Contract of the Certifier 

' J contract of the certifier. § 189. 

Union Trust Co. v. Preston Nat. Bank (1904), 136 Mich. 460, 

Error to Wayne; Donovan, J. 

Assumpsit by the Union Trust Company, receiver of the City 
Savings Bank of Detroit, against the Preston National Bank of 
Detroit, to recover the amount of a deposit. From a judgment 
for plaintiff on verdict directed by the court, defendant brings 
error. Reversed. 

Geer, Williams & Halpin, and H. R. Martin, for appellant. 

Walker & Spalding, for State Savings Bank (contending 
with appellant). 

Bowen, Douglas, Whiting & Murfin {John C. Donnelly and 
Frederick W. Whiting, of counsel), for appellee. 

Carpenter, J. Plaintiff brought this suit to recover a con- 
ceded balance of $21,585.11 owing by defendant to the City Sav- 
ings Bank at the time plaintiff was appointed receiver. Defend- 
ant sought to set off against this indebtedness the sum of $100,000, 
represented by a check drawn on said City Savings Bank January 
24, 1902, by F. C. Andrews, payable to defendant's order, and 
certified in due form by the teller of the insolvent bank. It 
appeared that, at the time this check was certified, its maker, 
Andrews, instead of having funds to his credit in said bank, had 
overdrawn his account, as shown by the bank's books, "to the 
amount of $405,000." The defendant offered to prove that it 
received said check, after certification, on the day it was drawn, 
in the usual course of business, and paid to said Andrews, the 
maker, full value therefor, and at that time had no notice or 
knowledge of any infirmity in said check, or of the fact that the 
account of said Andrews was overdrawn. This evidence was 
excluded, on the ground that said check was invalid in the hands 
of a bona iide holder, and a verdict directed for the plaintiff for 
the amount of the deposit in defendant's hands. The sole ques- 
tion presented by this record relates to the correctness of this 
holding. 

It is authoritatively settled and conceded that at common law 
the fact that the maker of a certified check had no funds in the 
bank affords no defense, if the check, negotiable in form, as in 
this case, has passed into the hands of a bona iide holder. See 
Merchants' Bank v. State Bank, 10 Wall. 604; Farmers' & 



Union Trust Co. v. Preston National Bank 241 

Mechanics' Bank v. Butchers' & Drovers' Bank, 16 N. Y. 125 
(69 Am. Dec. 678). This case is not, however, to be determined 
solely by common-law principles. The correctness of the holding 
of the trial court depends upon the proper construction of certain 
statutory provisions in our banking act relative to the certification 
of checks. Section 6108, 2 Comp. Laws, being section 19 of the 
general banking act, reads: 

"It shall not be lawful for any officer, clerk, agent, or 
employee of a bank to certify a check, unless the amount thereof 
actually stands to the credit of the drawer upon the books of the 
bank or to resort to any device, or receive any fictitious obliga- 
tions, direct or collateral, in order to evade the provisions of this 
prohibition ; and any officer, clerk, agent, or employee who shall 
attempt any such evasions shall, upon conviction thereof, be 
deemed guilty of a misdemeanor, and punished as provided in 
section fourteen of this act." 

Other sections of the banking act, viz., section 14 (section 
6103, 2 Comp. Laws), section 18 (section 6107, 2 Comp. Laws), 
and section 58 (section 6147, 2 Comp. Laws), make the violation 
of section 19 a crime. 

In construing this act, we have not the benefit of decisions 
of other courts construing a precisely similar act, for, with the 
exception of the national banking act, which will be hereafter 
referred to, there is no similar act. 

It will thus be seen that the certification in question was for- 
bidden by law, and punishable as a crime. The statute does not, 1 
however, expressly declare that the check so certified shall be 
void in the hands of a bona fide holder. Indeed, it does not ' 
expressly declare that it shall be void in the hands of one who 
is not a bona fide holder. The fact, however, that the certification 
is forbidden and made a crime, compels the inference that the 
legislature intended to avoid such certification between the origi- 
nal parties (see Heffron v. Daly, 133 Mich. 613 [95 N. W. 714] ) ; 
and this, it is almost unnecessary to say, avoids it in the hands 
of every one not a bona fide holder. It by no means follows, how- 
ever, because a contract made in violation of law, common or 
statutory, is void between the original parties, that, if given the 
form of negotiable paper, it is void in the hands of a bona fide 
holder. Indeed, it is the distinguishing characteristic of the law 
of negotiable paper that, when a contract takes that form, it is 
not, in the hands of a bona fide holder, subject to the defense 
which avoided it in the hands of the original parties. Negotiable 



242 Contract of the Certifier 

paper in the hands of a bona fide holder is not open to the defense 
that the contract from which it arose was illegal or forbidden by 
the principles of the common law. A note given to compound a 
felony is good in the hands of a bona fide holder. (Clark v. 
Ricker, 14 N. H. 44; Wentworth v. Blaisdell, 17 N. H. 275.) 
Nothing less than a statutory enactment will subject negotiable 
paper in the hands of a bona fide holder to the defense of illegality 
in its inception. 

What, then, is the effect of a statute which merely prohibits 
the making of a particular contract, and punishes its making as a 
crime? How shall we determine what consequences the legis- 
lature intended should follow a violation of this law? Manifestly 
by applying in its construction the principles of the common law. 

"Statutes are not, and cannot be, framed to express in words 
their entire meaning. They are framed, like other compositions, 
to be interpreted by the common learning of those to whom they 
are addressed, — especially by the common law, in which it 
becomes at once enveloped, and which interprets its implications 
and defines its incidental consequences. That which is implied 
in a statute is as much a part of it as what is expressed." (2 
Suth. Stat. Constr. §334). 

In accordance with these principles, we would assume, and, 

as heretofore stated, we do assume, that the legislature intended 

to make such contract void between the parties ; and we would 

likewise assume that it did not intend, if the contract took the 

form of negotiable paper, to affect its validity in the hands of a 

bona fide holder. But plaintiff's counsel contend that it is settled 

C by authority that, when a contract is prohibited and made a crime 

\ by statute, such a contract, if it takes the form of . negotiable 

fpaper, is void in the hands of a bona fide holder; and they rely 

?upon the following authorities: 1 Clark & M. Priv. Corp. §225; 

"Endl. Interp. Stat. §449; 2 Suth. Stat. Constr. §336; Anson, 

Cont. 172; Heffron v. Daly, 33 Mich. 613 (95 N. W. 714) ; State 

Life-Ins. Co. v. Strong, 127 Mich. 346 (86 N. W. 825) ; Loranger 

v. Jardine, 56 Mich. 518 (23 N. W. 203) ; Bowditch v. Insurance 

Co., 141 Mass., at page 293 (4 N. E. 798, 55 Am. Rep. 474) ; 

Union Nat. Bank v. Railway Co., 145 111. 208 (34 N. E. 135) ; 

Cincinnati Mut. Health Assur. Co. v. Rosenthal, 55 111. 85 (8 

Am. Rep. 626) ; Borough of Milford v. Milford Water C, 124 

Pa. St. 610 (17 Atl. 185, 3 L. R. A. 122) ; Edgerly v. Hale, 71 N. 

H. 138 (51 Atl. 679) ; Woods v. Armstrong, 54 Ala. 152 (25 Am. 

Rep. 671) ; McConnell v. Kitchens, 20 S. C. 430 (47 Am. Rep. 



Union Trust Co. v. Preston National Bank 243 

845) ; Texarkma, &c, R. Co. v. Lumber Co., 67 Ark. 542 (55 S. 
W. 944) ; Snoddy v. Bank, 88 Tenn. 573 (13 S. W. 127, 7 L. R. 
A. 705, 17 Am. St. Rep. 918). 

None of these authorities, except Texarkana, etc., R. Co. v. 
Lumber Co. and Snoddy v. Bank, which will receive attention 
later in this opinion, related to a case of negotiable paper in the 
hands of a bona fide holder. All that can justly be claimed for 
these authorities, with the exceptions above referred to, is that 
they hold that, when the making of a contract is prohibited and 
made a crime by statute, it is void as between the original parties, 
or — what is the same thing — as between parties who do not stand 
in the attitude of a bona fide holder of negotiable paper arising 
therefrom. It is true that many of these decisions say that such 
a contract is void, and one of them (see Borough of Milford v. 
Milford Water Co. ) says that it "is utterly void, and there is no 
power that can breathe life into such a dead thing." This lan- 
guage must, however, in accordance with every just principle of 
construction, be understood as applying to the case before the 
court. It may not be improper to describe the particular contracts 
under consideration as void, and as utterly void. But it by no 
means follows that negotiable paper issued on such contract would 
be void in the hands of a bona fide holder for value. These 
authorities cannot be regarded as authority for the proposition 
for which plaintiff's counsel cite them. They are not inconsistent 
with the rule (which we deem it our duty to undertake to show 
is well settled by authority) that, though a contract is prohibited 
and made a crime by statute, that contract, if it takes the form of 
negotiable paper, is valid and enforceable in the hands of a bona 
fide holder. Says Mr. Daniel, in his work on Negotiable Instru- 
ments, § 197: 

"The bona fide holder for value, who has received the paper 
in the usual course of business, is unaffected by the fact that it 
originated in an illegal consideration, without any distinction 
between cases of illegality founded in moral crime or turpitude, 
which are termed 'mala in se,' and those founded in positive stat- 
utory prohibition, which are termed 'mala prohibita.' The law 
extends this peculiar protection to negotiable instruments because 
it would seriously embarrass mercantile transactions to expose 
the trader to the consequences of having the bill or note passed to 
him impeached for some covert defect." 

In Vinton v. Peck, 14 Mich. 287, defendant was an accom- 
modation maker of a negotiable promissory note dated on Monday, 
but in fact made the preceding Sunday, contrary to the statute 



244 Contract of the Certifier 

expressly prohibiting, under penalty of a fine, "any manner of 
labor, business, or work, except only works of necessity and 
charity." (See i Comp. Laws 1857, § 1574.) It was held that 
the note was valid and enforceable in the hands of a bona fide 
purchaser, because "the statute has not declared that notes made 
contrary to the Sunday law shall be void under all circumstances. 
Their invalidity is only to be implied from the prohibition of 
Sunday business, and under such a statute a bona fide holder is 
protected." 

State Capital Bank v. Thompson, 42 N. H. 369, is almost 
precisely like the above case. 

In New v. Walker, 108 Ind. 365 (9 N. E. 386, 58 Am. Rep. 
40), a negotiable note was taken in violation of a statute requir- 
ing, under a penalty, to be stated therein, "Given for a patent 
right." The court held this note valid in the hands of a bona fide 
holder, saying (pages 374, 375) : 

"Our opinion is that a statute making it a crime to take prom- 
issory notes in a prohibited transaction does not make the notes 
void in the hands of innocent purchasers, although the person who 
violates the statute commits a crime. This conclusion is well 
sustained by authority," — citing, among other cases, Palmer v. 
Minor, 8 Hun. 342, and Cook v. Weirman, 51 Iowa, 561 (2 N. 
W. 386), which are similar to the principal case. 

In Smith v. Bank, 9 Neb. 31 (1 N. W. 893), the court 
expressed its disapproval of a statement in Kittle v. DeLamater, 
3 Neb. 325: 

"Or, if the note be founded upon an illegal consideration, 
prohibited by some positive statute, no recovery can be had, even 
though the indorsee may not be privy to the original transaction." 

In Hart v. Machine Co., 72 Miss. 809 (17 South. 769), it 
was held that negotiable paper issued in violation of the statute 
of Tennessee forbidding corporations doing business in that State 
without compliance with its provisions was valid in the hands 
of a bona fide holder, the court saying (pages 833, 834) : 

"The statute, while forbidding foreign corporations from 
doing business in the State without compliance with its conditions, 
does not declare, by express terms, that any contracts made with 
delinquent corporations shall be void, nor does it denounce as 
invalid any securities given by or to it under such contracts. 
The English and some of the American statutes against usury 
and gaming declared that all assurances and securities given in 
consideration thereof should be void. Under such declarations, 



Union Trust Co. v. Preston National Bank 245 

it has very generally been held that negotiable paper, even in the 
hands of a bona fide holder, is void, because of the language of 
the law. But where only the contract is declared void, and there 
is no declaration of nullity against securities, it is held that while, 
as between the parties, and those taking with notice or after 
maturity, no recovery can be had, a bona fide holder will be 
protected." 

In Press Co. v. Bank, 7 C. C. A. 248, 58 Fed. 321, notes 
issued in violation of a statute forbidding foreign corporations 
doing business except in compliance with its terms were held 
valid in the hands of a bona fide holder, the court saying (page 
249, 7 C. C. A., page 322, 58 Fed.) : 

"It is urged that public policy forbids a recovery; that to 
hold otherwise will nullify the statute. We do not think so. If 
the legislature intended the consequences claimed, we would 
expect it to say so." 

In Lynchburg Nat. Bank v. Scott, 91 Va. 652 (22 S. E. 487, 
29 L. R. A. 827, 50 Am. St. Rep. 860), it was contended that a 
note obligating the maker to pay usurious interest was void in 
the hands of a bona fide holder. The court answered that con- 
tention by saying (page 659) : 

"If the maker of a negotiable note contests the right of one 
who has acquired it by indorsement, for value, before maturity, 
and without notice of any defense, to recover of him the amount 
of the note, he must, to prevail, be able to show a statute that in 
express terms, or by necessary implication, declares the note to 
be void." 

So it has been held : 

"If a statute declares a security void, it is void in whoseso- 
ever hands it may come. If, however, a negotiable security be 
founded on an illegal consideration, — and it is immaterial whether 
it be illegal at common law or by statute, — and no statute says 
it shall be void, the security is good in the hands of an innocent 
holder, or of any one claiming through such a holder." (Glenn v. 
Bank, 70 N. C. 191 ; Smith v. Bank, 9 Neb. 31 [1 N. W. 893] ; 
Grimes v. Hillenbrand, 4 Hun. 354 ; Hill v. Northrup, 4 Thomp. 
& C. 120 ; Converse v. Foster, 32 Vt. 828 ; Lauter v. Trust Co., 29 
C. C. A. 473, 85 Fed. 894; Hatch v. Burroughs, 1 Woods, 439 
[Fed. Cas. No. 6,203]). 

Other authorities hold that "when a statute, expressly or by 
necessary implication, declares the instrument absolutely void, it 



246 Contract of the Certifier 

gathers no vitality by its circulation, in respect to the parties 
executing it." (i Daniel, Neg. Inst., § 197; Pope v. Hanke, 155 
111., at page 625 et seq. [40 N. E. 839, 28 L. R. A. 568] ; Thomp- 
son v. Samuels, [Tex.] 14 S. W. 143). 

We have already referred to the fact that two of the author- 
ities cited by plaintiff's counsel, viz., Snoddy v. Bank, 88 Tenn. 
573 (13 S, W. 127, 7 L. R. A. 705, 17 Am. St. Rep. 918), and 
Texarkana, etc., R. Co. v. Lumber Co., 67 Ark. 542 (55 S. W. 
944), arose upon negotiable paper in the hands of a bona fide 
holder. Snoddy v. Bank is authority for this proposition : "Notes 
given in consideration of a contract against morals, public policy, 
and public statutes are void in any hands." This, as we have 
already shown, and as we understand plaintiff's counsel to con- 
cede, is opposed to almost unanimous authority, and cannot, there- 
fore, be accepted as a correct declaration of the law. In Texar- 
kana, etc., R. Co. v. Lumber Co., suit was brought upon a negoti- 
able promissory note made by the plaintiff corporation, contrary 
to the constitution and statutes of the State of Texas, for the 
accommodation of its president. It was held that this note was 
void in the hands of a bona fide holder. The argument of the 
court in support of this contention is this : 

"A contract prohibited by the constitution or statute of a 
state, although negotiable in form, is not so in fact, and no inno- 
cence or ignorance on the part of the holder will make it enforce- 
able. It is an absolute nullity," — citing 1 Daniel, Neg. Inst., § 807, 
and decisions of the Supreme Court of the United States and the 
Supreme Court of Texas. 

The decisions referred to do not sustain the proposition for 
which they are cited. The section of Daniel cited has reference 
to cases where an express statutory provision declares a note void. 
We cannot follow this authority without repudiating our own 
decision of Vinton v. Peck, 14 Mich. 287, and the almost unani- 
mous authority of other courts. 

Plaintiff's counsel assert that the case at bar is not ruled by 
decisions which hold that negotiable paper based upon an illegal 
consideration is valid in the hands of a bona fide holder. They 
insist that such cases are not authority, because the statute under 
consideration in this case did not merely make the consideration 
'illegal ; it actually "prohibited and penalized" the making of the 
contract itself. We are unable to see that this circumstance, if it 
affords a sound distinction, distinguishes the case at bar from 
several of the cases above referred to. In Vinton v. Peck, supra, 



Union Trust Co. v. Preston National Bank 247 

the particular act which was prohibited and punishable by fine 
was the making of the note in suit. It is true that the statute 
did not in express terms prohibit the making of the note, but, 
when it prohibited "the doing of any business, it did prohibit the 
making of the note, for, as was expressly said by the supreme 
court of New Hampshire in State Capital Bank v. Thompson, 
42 N. H., at page 370,— 

"Under the construction of our statute prohibiting unneces- 
sary labor on Sunday, the execution and delivery of a promissory 
note upon Sunday has been declared 'business of a person's secu- 
lar calling;' * * * and, as such, is prohibited under a penalty." 

So, in New v. Walker, 168 Ind. 365 (9 N. E. 386, 58 Am. 
Rep. 40), a bona fide holder was allowed to recover on a note 
given for a patent right in violation of a statute which prohibited, 
under a penalty, the delivery of the note without the insertion of 
the clause that it was "given for a patent right." It is idle to say 
that the making of this note was not prohibited by a penal statute. 
See, also, Palmer v. Minor, 8 Hun. 342; Cook v. Weirman, 51 
Iowa, 561 (2 N. W. 386). The only distinction that can be drawn 
between those cases and the case at bar is in the nature and extent 
of the punishment for making the contract prohibited by law. 
Such an inconsequential distinction will not change a rule of law. 

We conclude, therefore, that, though the making of a con- 
tract is prohibited and made a crime by statute, yet that contract, 
if it takes the form of negotiable paper, is valid in the hands of 
a bona fide holder for value. We think it also settled that nego- 
tiable paper in the hands of a bona fide holder for value is not 
subject to any defense which would avoid it in the hands of the 
original holder, unless some statute, either expressly or by neces- 
sary implication, so declares. We affirm the proposition, denied by 
plaintiff's counsel, that though the statute, "by necessary implica- 
tion, make the contract made in violation thereof absolutely void as 
to non-negotiable contracts, and as to negotiable contracts in the 
hands of persons having knowledge of the defects, yet * * * the 
statute will not be considered to have that effect should the con- 
tract be negotiable in form, and be found in the hands of a bona fide 
holder." No strength is added to the foregoing proposition by say- 
ing that the statute, by implication, makes void all non-negotiable 
contracts, and negotiable contracts in the hands of persons having 
knowledge of the defect ; for it follows from elementary legal prin- 
ciples that all such contracts are unenforceable if the original con- 
tract in the hands of the first parties thereto cannot be enforced. 



248 Contract of the Certifier 

Nor is strength added to the proposition by saying that such con- 
tracts are "absolutely void." If they cannot be enforced in the 
hands of the original holders, we see no reason for quarreling with 
a person who chooses to call them absolutely void, though others 
might describe them as voidable. See Thompson v. Samuels, 
(Tex.) 14 S. W. 143. It follows that plaintiff's counsel deny 
that negotiable paper can be enforced in the hands of a bona 
fide holder for value, if it arises from a contract which, by 
implication of law, is void or unenforceable between the original 
parties. In our judgment, the principle so denied is a correct 
statement of the law. If it were otherwise, all negotiable paper 
arising out of illegal and forbidden transactions would be void in 
the hands of bona fide holders for value, and yet nothing is better 
settled, by principle and authority, as we have already shown, 
than that such paper is valid. 

There remains to be considered this question : Does the stat- 
ute, by necessary implication, or by implication, -even, make the 
check™void in the hands of a bona fide holder for value? We 
have already seen that such implication cannot be found from the 
circumstance that the certification is prohibited and made a crime. 
It is insisted, however, that the intent of the legislature to make the 
check void in the hands of a bona fide holder is indicated by other 
circumstances. It is contended that the purpose of the legislature 
in enacting this law was "to protect the citizens, depositors, and 
stockholders against such an act as was committed in the case at 
bar," viz., an attempt to withdraw the funds of the bank by means 
of a check falsely certified, and that, to make this purpose effect- 
ual, the check must be held void in the hands of a bona fide pur- 
chaser. If it were true that the sole purpose of the statute was 
to protect the depositors and stockholders of a bank against the 
criminal acts of its own officials, this argument would be very 
forcible. Are we warranted in declaring that the sole purpose of 
the legislature in passing this statute was to protect banks and 
their depositors from the consequences of criminal misconduct 
of their officials, and that there were not other purposes, which 
would fail if plaintiff's construction of the act prevails? We 
must bear in mind that the legislature, in passing this statute in 
1887, had not learned the lessons taught by the disastrous failure 
of the City Savings Bank in 1902, which occasions this litigation, 
though counsel do not agree as to precisely what lessons are 
taught by this failure. We shall not, therefore, be materially 
aided — indeed, we are rather likely to be misled — if we look to 
that disaster to throw light upon the legislative purposes. The 



Union Trust Co. v. Preston National Bank 249 

legislature has not, by this statute, expressly declared its purpose. 
Its purpose, then, is to be inferred. While we are bound to infer 
that one of its purposes was to protect the bank and its depositors 
from the criminal conduct of its officials, it is likewise to be 
inferred that there was a broader purpose, viz., to protect safe 
banking generally. We may infer the legislative purpose on the 
assumption that the law was made to be observed, as well as on 
the assumption that it would be violated. If the law is observed, 
we can readily see that it will benefit, and thus infer the legislative 
purpose to benefit, not merely the depositors and stockholders of 
banks whose officers are called upon to certify checks, but all 
persons taking such checks. In other words, the observance of 
this law tends to increase the certainty of the payment of certified 
checks and to promote safe banking. 

In the case at bar, the allowance of the certified check will 
inure to the benefit of the stockholders of defendant bank, and 
to the damage to the depositors of the City Savings Bank, repre- 
sented by plaintiff. But the law we declare in this case will cer- 
tainly apply to a case, if such a case should, as it may, arise, where 
the allowance of such a check inures to the benefit of the depos- 
itors of the bank which takes it, and damages no one but the 
stockholders of the bank whose officials criminally certified it. 
Such a case would be presented here if the payment of the check 
under the consideration would not sensibly impair the capital of 
the City Savings Bank, and if the funds withdrawn by its means 
from defendant had rendered it impossible for the latter to pay its 
depositors. And in such a case, under plaintiff's contention, the 
court should say that the legislature intended to prefer the interest 
of the stockholders of the bank whose officers were guilty of 
criminal misconduct, to that of the depositors of another bank 
damaged by such misconduct. We do not think we are warranted 
in imputing to the legislature such an intent. We think it not 
improper to infer that it was the legislative purpose to protect the 
interests of the stockholders and depositors of all banks, and not 
merely the stockholders and depositors of particular banks whose 
officials might be guilty of criminal misconduct. 

The language of the statute prohibiting the certification does 
not compel the conclusion that its sole purpose was to protect the 
bank and its depositors against the criminal misconduct of its 
officials. Certification of a check is prohibited and made a crime 
""unless the amount thereof actually stands to the credit of the 
drawer upon the books of the banks." It will thus be observed 
that certification is forbidden even though the drawer has funds. 



250 Contract of the Certifier 

in the bank which do not stand to his credit upon the bank's 
books, and certification is not forbidden if the amount of the 
certified check is credited upon the books, though that .credit is 
fictitious. In making the last statement, we have not forgotten 
that plaintiff contends that the statute does forbid certification 
where the entry upon the books is fictitious ; but, as stated above, 
we do not agree with this contention. The statute in such case 
forbids the fictitious entry; it does not forbid the false certifica- 
tion resulting therefrom. In many cases the distinction might be 
unimportant ; in others it might be very important. Suppose the 
bookkeeper or cashier of the bank made the fictitious entry, and 
the teller, acting in the best of faith, relying thereon, certified a 
check. No reasonable construction of the act would make this 
certification a crime, or bring it within the statutory prohibition. 
It will thus be seen that certification is prohibited in a class of 
cases where the depositors and stockholders of the bank whose 
officers violated the law cannot be injured, and it is permitted in 
a class of cases where they are injured. If the sole purpose of the 
act has been to protect the depositors and stockholders of the bank 
whose officers were guilty of this misconduct, different language 
would have been used. We are not, therefore, warranted in saying 
that this act was passed solely for the purpose of protecting the 
bank and its depositors from the criminal misconduct of its offi- 
cers. We are warranted in declaring that there was a legislative 
purpose in passing this act which would be defeated by the con- 
struction contended for by plaintiff. 

If the section is construed as the plaintiff contends, — if checks 
duly certified are void in the hands of bona fide holders because 
the amount thereof did not stand to the credit of the drawer on 
the books of the bank, — this consequence follows : Certified 
checks, instead of being, as heretofore, the negotiable paper of 
the bank, and passing as current upon the faith of the bank's 
credit, will pass, if at all, only upon the credit of the particular 
bank official who certified it. Every person to whom a certified 
check is offered will be called upon to determine, not the credit 
of the certifying bank, not the authority of the certifying official, 
but the integrity and diligence of that official. Though one may 
have all confidence in such integrity and diligence, he may hesitate 
to take the check, because he fears that others to whom he may 
wish to transfer it lack such confidence. It will result, therefore, 
that certified checks, instead of being regarded in commercial 
circles with credit and favor, as heretofore, will be regarded with a 
degree of suspicion, and are likely to be discredited. If the legis- 



Union Trust Co. v. Preston National Bank 251 

lature intended this consequence, — and they must have intended it 
if they intended that the act should receive the construction con- 
tended for by plaintiff, — it seems strange that they left their intent 
to be ascertained as a matter of doubtful inference; it seems 
strange that they still left to banks the power of certifying checks, 
without any clear suggestion that such power was so greatly lim- 
ited. "If the legislature intended the consequences claimed, we 
should expect it to say so." {Press Co. v. Bank, 7 C« C. A., at 
page 249, 58 Fed. 322). 

It is suggested, rather than urged, by plaintiff's counsel, that 
on the authority of Spitzer v. Village of Blanchard, 82 Mich. 234 
(46 N. W. 400), the statute under consideration should be con- 
strued as denying to the teller authority to bind his principal, the 
bank, by the certificate under consideration. In Spitzer v. Village 
of Blanchard it was held that bonds issued by a village in excess 
of the amount authorized by its incorporation act are void in the 
hands of a bona fide holder, the court saying (page 246) : 

"The amount of the bonds to be issued was known, and 
appears upon the face of the bonds. The assessed valuation and 
the vote of the electors are matters of public record, and are open 
to all the world for inspection and ascertainment, and are as acces- 
sible to intending purchasers as other persons. The limitation 
of power upon the common council appears in the public statute, 
and is presumed to be known by all dealing with corporate author- 
ities or in corporate bonds." 

To show the distinction between that case and the case at bar, 
we quote from other language in that opinion (page 244) : 

"Where there is a total want of power, under the law, in the 
officers or board who issue the bonds, then the bonds will be void 
in the hands of innocent holders; the distinction being between 
questions of fact and questions of law. If it is a question of fact, 
and the board of officers are authorized by law to determine the 
fact, then their determination is final and conclusive." 

If it were necessary to further distinguish that case from the 
case at bar, we cannot do better than quote the language of dis- 
tinguished jurists. Said Mr. Justice Selden in Farmers' & 
Mechanics' Bank v. Butchers' & Drovers' Bank, 16 N. Y. 135 
(69 Am. Dec. 678) : 

"It is, I think, a sound rule that where the party dealing with 
an agent has ascertained that the act of the agent corresponds in 
every particular in regard to which such party has, or is presumed 



252 Contract of the Certifier 

to have, any knowledge, with the terms of the power, he may take 
the representation of the agent as to any extrinsic fact which rests 
peculiarly within the knowledge of the agent, and which cannot 
be ascertained by a comparison of the power with the act done 
under it." 

Said Justice Davis in New York, etc., R. Co. v. Schuyler, 34 
N. Y., at page 73 : 

"Where the principal has clothed his agent with power to do 
an act upon the existence of some extrinsic fact necessarily and 
peculiarly within the knowledge of the agent, and of the existence 
of which the act of executing the power is itself a representation, 
a third person dealing with such agent in entire good faith pur- 
suant to the apparent power may rely upon the representation." 

If authority is needed for the proposition, which seems obvi- 
ous, that the certification in question related to an act peculiarly 
within the teller's knowledge, we refer to Oakland County Sav. 
Bank v. State Bank of Carson City, 113 Mich. 284 (71 N. W. 
453, 67 Am. St. Rep. 463). 

It is also urged that it was the intention of the framers of the 
general banking act to follow generally the provisions of the 
national banking law, and that we are warranted in inferring an 
intent to avoid a check falsely certified, in the hands of a bona fide 
holder, from certain changes, — particularly from the fact that, 
when section 19 (2 Comp. Laws, § 6108) was framed, language 
was omitted which in the corresponding section of the national 
banking law, viz., section 5208, Rev. Stat. U. S., clearly indicated 
the purpose of Congress to make such checks valid. This conten- 
tion deserves attention. Section 5208, Rev. Stat. U. S., makes it 
unlawful to certify any check, not, as provided in section 19, 
unless the amount actually stands to the credit of the drawer on 
the books of the bank, but unless the drawer "has on deposit 
* * * an amount of money equal to the amount specified in 
such check." Then follows the provision omitted from section 
19 : "Any check so certified by duly authorized officers shall be a 
good and valid obligation against the association." It will be 
observed that the language omitted in framing section 19, in form, 
at least, and possibly in reality (see 1 Morse, Banking [4th Ed.], 
§ 414), makes the prohibited check valid, even though not in the 
hands of a bona tide holder. The omission of this sentence, there- 
fore, in section 19, may well be attributed to some other purpose 
than the intent to make such checks void in the hands of a bona 
tide purchaser. We can well understand the reluctance of a legis- 



First National Bank v. Leach 253 

lature to use language which, even by inference, made such checks 
valid in whosesoever hands they might be. 

It results from these views that the trial court erred in deny- 
ing defendant the right to prove that it received this check after 
certification, on the day it was drawn, in the usual course of bus- 
iness, and paid full value therefor, without notice or knowledge 
of any infirmity, or of the fact that the account of the drawer was 
overdrawn. 

The court has received unusual aid from the excellent argu- 
ments and briefs of counsel representing the parties interested in 
this litigation. Without such aid, we could not have reached so 
speedy a decision. 

Judgment reversed', and new trial ordered. 

Moore, C.J., Montgomery and Hooker, JJ., concurred. 
Grant, J., did not sit. 



where holder procures check to be certified. § 190. 
First Nat. Bank v. Leach (1873), 52 N. Y. 350. 

Appeal from judgment of the General Term of the Supreme 
Court in the first judicial department, affirming a judgment in 
favor of defendant, entered upon a verdict. 

This action was brought upon a check drawn by defendant. 
The check was drawn upon the Ocean National Bank, was dated 
November 21st, 1871, for $1,410, payable on the 12th December, 
1 87 1, to the order of James Dolby. It was delivered to the payee 
and discounted for him by plaintiff. At eleven o'clock a. m. of 
the 12th December, plaintiff caused the same to be presented to 
the drawee for certification, and it was certified as good. The 
drawer had at that time on deposit sufficient to pay the check, and 
the amount thereof was charged to him. Within an hour or two 
thereafter the Ocean National Bank, the drawee, suspended, and 
a receiver was appointed, who took possession afterward; upon 
the same day the check was presented for payment, and payment 
being refused, the same was duly protested. 

Upon this state of facts the court directed a verdict for 
defendant, to which plaintiff's counsel duly excepted. 

William F. Shepard, for the appellant. 
Louis C. Waehner, for the respondent. 



254 Holder Procuring Check to be Certified 

Peckham, J. The defendant drew the check in controversy, 
it was discounted by the plaintiff, and on the day it was due it 
was presented by plaintiff to the drawee, the Ocean Bank, for 
certification, was certified as good, and in the afternoon of the 
same day was presented for payment, which was refused, because 
between the time of its certificate and its second presentment the 
drawee, the Ocean Bank, had failed and gone into the hands of 
a receiver. Did this certification operate as a payment of the 
check as between these parties? 

The theory of the law is, that where a check is certified to< 
be good by a bank, the amount thereof is then charged to the 
account of the drawer in the bank certificate account. Every well 
regulated bank adopts this practice to protect itself. 

The reason therefor is so strong that the law presumes it is 
adopted by the banks. (Smith v. Miller, 43 N. Y. 171 ; Meads 
v. The Merchants' Bk. of Albany, 25 id. 148; The Fanners' & 
Mechanics' Bk. v. Butchers' & Drovers' Bk., 16 id. 125 ; Mer- 
chants' Bk. v. State Bk., 10 Wall. 647.) It is found to have been 
done in this case. 

If a bank failed to keep such account and to make such 
entries, it would necessarily incur the peril of the failure of its 
customers whose checks it certified, without any account of their 
number or amount, although it would be liable to pay its certified 
checks to bona fide holders, whether it had funds or not. (Farm- 
ers' & Mech. Bk. v. Butchers' & Drovers' Bk., supra.) 

It follows that, after a check is certified, the drawer of the 
check cannot draw out the funds then in the bank necessary to 
meet the certified check. That money is no longer his. 

If he apprehended danger from the suspected failure of the 
bank, he could not draw out that money, because it had already 
been appropriated by means of the check thus certified ; as to him, 
it was precisely as if the bank had paid the money upon that 
check instead of making a certificate of its being good. 

For that reason, the drawer could have no remedy against 
the bank, by any legal proceeding, to secure himself for the 
amount of that check. Hence, if the drawer should get the 
check back, he would strictly be entitled to get that money, not 
by virtue of its original deposit, but solely by surrender of the 
certified check, like any other holder. 

But all that has been yet stated applies with equal force to 
the acceptance of a time bill of exchange before due. Then, 
when the drawee accepts, it is an appropriation of the funds, 
pro tanto, for the service and use of the payee or other person 



First National Bank v. Leach 255 

holding the bill, so that the amount ceases henceforth to be the 
money of the drawer, and becomes that of the payee or other 
holder in the hands of the acceptor. (Story on Bills of Ex., 
§ 14; i Pars, on Notes and Bills, 323.) 

It is entirely clear that the acceptance of a time draft, before 
due, does not operate as a payment as respects the drawer. Its 
only effect is to make the acceptor the primary party to pay the 
draft. 

But the parties to a certified check, due when certified^ 
occupy a different position. There the money is due and payable 
when the check is certified. The bank virtually says that check 
is good ; we have the money of the drawer here ready to pay it. 
We will pay it now, if you will receive it. The holder says no. 
I will not take the money; you may certify the check and retain 
the money for me until this check is presented. 

The law will not permit a check, when due, to be thus pre- 
sented and the money to be left with the bank for the accommo- 
dation of the holder, without discharging the drawer. 

The money being due and the check presented, it is his own 
fault if the holder declines to receive the pay, and for his own 
•convenience has the money appropriated to that check, subject 
to its future presentment at any time within the statute of 
limitations. 

The acceptance of a time draft before due is entirely dif- 
ferent; there the holder has then no right to the money, and the 
acceptor no authority to pay until the maturity of the bill. There 
is no necessity for presenting a check for acceptance, like a time 
bill, no authority for such presentment, although the holder has 
the right to do it. The authority and the duty are to present 
for payment. 

If, however, the holder choose to have it certified instead of , 
paid, he will do so at the peril of discharging the drawer. < 

He cannot change the position and increase the risk of the 
drawer without discharging him. (Smith v. Miller, supra.) 

This would not discharge the drawer of a check, who him-' 
self procured it to be certified and then put it in circulation. The 
reason of the rule fails to apply to him in such case. 

I am not aware of any direct authority upon this question ; 
but upon principle it must be held that the bank holds the money, 
after certification to the holder, not at the risk of the drawer, but 
of the holder of the check. 

The judgment must be affirmed. 

All concur. Judgment affirmed. 



256 Drawer Procuring Check to be Certified 



WHERE DRAWER PROCURES CHECK TO BE CERTIFIED. § IOX>. 

Minot v. Russ ) (1892), 156 Mass. 458, 32 Am. 

Head et al. v. Hornblower et al. j St. Rep. 472. 

Field, CJ. The first case is an appeal from a judgment 
rendered by the Superior Court for the defendant, on his demur- 
rer to the declaration. The defendant, on October 29, 1891, drew 
a check on the Maverick National Bank, payable to the order of 
the plaintiff, and, being informed by the plaintiff that the check 
must be certified by the bank before it would be received, the 
defendant on the same day presented the check to the bank for 
certification, and the bank certified it by writing on the face of 
the check the following: "Maverick National Bank. Pay only 
through Clearing-House. J. W. Work, Cashier. A. C. J., Paying 
Teller." After it was certified, the check was, on Saturday, Octo- 
ber 31, 1891, delivered by the defendant to the plaintiffs, for a 
valuable consideration. The declaration alleges that the bank 
stopped payment on Monday morning, November 2, 1891, "before 
the commencement of business hours on said day," and that on 
that day payment was duly demanded of the bank, and notice of 
non-payment was duly given to the defendant. 

The second case is an appeal from a judgment rendered for 
the defendants by the Superior Court, on an agreed statement 
of facts. On Saturday, October 31, 1891, the defendants drew 
their check on the Maverick National Bank, payable to the order 
of the plaintiffs, and delivered it to them in payment of stocks 
bought by the defendants of the plaintiffs. The check was 
received too late to be deposited by the plaintiffs for collection 
in season to be carried to the clearing-house on that day, but 
during banking hours on that day the plaintiffs presented the 
check to the Maverick National Bank for certification, and the 
bank certified it by writing or stamping on its face the following : 
"Maverick National Bank. Certified. Pay only through Clear- 
ing-House. C. C. Domett, A. Cashier. , Paying Teller." 

At that time the defendants had on deposit sufficient funds 
to pay the check, and the bank on certification charged to the 
defendant's account the amount of the check, and credited it to 
a ledger acqount called certified checks, in accordance with their 
uniform custom. After certification, the plaintiffs, on the same 
day, deposited the check in the Hamilton National Bank for 
collection. It is agreed that if the check had been presented. 



Minot v. Russ 267 

for payment on Saturday, in banking hours, it would have been 
paid; but the Maverick National Bank transacted no business 
after Saturday, and on Sunday the Comptroller of the Currency 
placed a national bank examiner in charge, and the bank was 
put into the hands of a receiver. The clearing-house on Novem- 
ber 2 refused to receive checks on the Maverick National Bank, 
and the check was on that day duly presented for payment, and 
due notice of non-payment was given to the defendants. 

Each of the checks was in the ordinary form of checks on a 
bank, and was payable on demand, and no presentment for accept- 
ance or certification was necessary. In a sense, undoubtedly, a 
check is a species of bill of exchange, and in a sense also it is a 
distinct commercial instrument; but according to the general 
understanding of merchants, and according to our statutes, these 
instruments were checks, and not bills of exchange. "A check is 
an order to pay the holder a sum of money at the bank, on pre- 
sentment of the check and demand of the money; no previous 
notice is necessary, no acceptance is required or expected, it has 
no days of grace. It is payable on presentment and not before." 
Bullard v. Randall, i Gray, 605, 606. The duty of the bank 
was to pay these checks when they were presented for payment, 
if the drawers had sufficient funds on deposit. The bank owed no 
duty to the drawers to certify the checks, although it could certify 
them if it saw fit, at the request of either the drawers or the 
holders, and if it certified them it became bound directly to the 
holders, or to trie persons who should become the holders. In 
eitrieFc'ase, the~Dank would charge to the account of the drawer 
the amount of the check, because by certification it had become 
absolutely liable to pay the check when presented. When a 
check payable to another person than the drawer is presented 
by the drawer to the bank for certification, the bank knows that 
it has not been negotiated, and that it is not presented for pay- 
ment, but that the drawer wishes the obligation of the bank to 
pay it to the holder when it is negotiated, in addition to his own 
obligation. But when the payee or holder of a check presents 
it for certification, the bank knows that this is done for the 
convenience or security of the holder. The holder could demand 
payment if he chose, and it is only because, instead of payment, 
the holder desires certification, that the bank certifies the check 
instead of paying it. In one case the bank certifies the check for 
the use or convenience of the drawer, and in the other for the 
use or convenience of the holder. In the present case the checks 
were seasonably presented to the bank for payment, and on the 



258 Drawer Procuring Check to be Certified 

facts stated the defendants would be liable unless the certification 
discharged them from liability. 

It is argued that the certification of a check, whereby the bank 
becomes absolutely liable to pay it at any time on demand, dis- 
charges the drawer, because it is saidjhat the check then becomes 
in effect a certificate oFdeposit; and it is also argued that the 
certification is lrT'effect only an acceptance of a bill of exchange, 
and that if payment is duly demanded of the bank and refused, 
and notice of non-payment duly given, the drawer is held. So 
far as the question has been considered, it has been decided that 
the certification of a bank check is not, in all respects, like the 
making of a certificate of deposit, or the acceptance of a bill 
of exchange, but that it is a thing sui generis, and that the 
effect of it depends upon the person who, in his own behalf, or 
for his own benefit, induces the bank to certify the check. The 
weight of authority is, that if the drawer in his own behalf, or 
for his own benefit, gets his check certified, and then delivers it 
to the payee, the drawer is not discharged; but that if the payee 
or holder, in his own behalf or for his own benefit, gets it cer- 
tified instead of getting it paid, then the drawer is discharged. 
(Born v. First National Bank, 123 Ind. 78; Rounds v. Smith, 42 
111. 245 ; Brown v. Leckie, 43 111. 497 ; Andrews v. German 
National Bank, 9 Heisk. 211; First National Bank v. Leach, 
52 N. Y. 350; Boyd v. Nasmith, 17 Ont. 40; Essex County 
National Bank v. Bank of Montreal, 7 Biss. 193; First National 
Bank v. Whitman, 94 U. S. 343, 345 ; Metropolitan National Bank 
v. Jones, 2j N. E. Rep. 533 ; Continental National Bank v. Com- 
hauser, 37 111. App. 475 ; National Commercial Bank v. Miller, 
7J Ala. 168; Larsen v. Breene, 12 Col. 480; Mutual National 
Bank v. Rotge, 28 La. An. 933 ; Morse on Banking, §§ 414, 415.) 
We are of opinion that this view of the law rests on sound 
reasons. If it be true that the existing methods of doing business 
make the use of certified checks necessary, the persons who receive 
them can always require them to be certified before delivery. If 
they receive them uncertified and then present them to the bank 
for certification instead of payment, the certification should be 
considered as discharging the drawer. 

f It may also be said, that in the second case the certification 
/amounted to an extension of the time of payment at the request 

' of the payees, without the consent of the drawers. Before the 
certification the drawers could have requested the payee to pre- 
sent the check for payment on Saturday, or could themselves 
have drawn out the money and paid the check. After certifica- 



Fairchild v. Ogdenseurgh R. R. Co, 259 

tion the amount of the check no longer stood to the credit of the 
drawers, and the payees had accepted an obligation of the bank 
to pay only through the clearing-house, which could not happen 
before the following Monday. The result is that in the first case 
the judgment is reversed, and the demurrer overruled, and in 
the second case the judgment is affirmed. 

So ordered. 

F. Brewster, for the plaintiff in the first case. 

F. R. Jones, for the defendant in the first case. 

W. C. Loring, for the plaintiffs in the second case. 

C. A. Williams, for the defendants in the second case. 



CONTRACT OF THE DRAWER WHEN HE DRAWS ON HIMSELF. 

§§6 3) II6-I. 

Fairchild v. Ogdensburgh R. R. Co. {1857), 15 N. Y. 237 > $9 

Am. Dec. 606. 

Appeal from a judgment of the Supreme Court in favor of 
the plaintiff . The action was upon certain orders for the pay- 
ment of money, the contention for the defense being that the 
instruments, were bills of exchange and were_ not enforceable 
without proof of presentment tojthe_drawee, demand of payment 
and refusal. Other facts are stated in the opinion. 

T. Jenkins, for the appellant. 

/. H. Reynolds, for the respondent. 

Denio, C. J. The complaint contains a distinct averment 
of an indebtedness by the defendant to the plaintiffs, for work 
and labor to an amount equal to the sum claimed. The paper 
which it is alleged was given for this indebtedness was not a 
bill of exchange. The idea of a bill, under the law merchant, 
supposes the existence of a party other than the drawee, to whom 
the bill is addressed, and who is therein requested to pay the 
amount to the holder on account of the drawer. Here the party 
with whom the plaintiffs dealt was the corporation which, being 
an artificial person, could only act by agents. The president was 
one agent, and the treasurer was another, and as a convenient 
method of keeping the accounts, the former, whose duty it was 
to adjust the claims for labor, made his warrant in favor of the 
plaintiffs on the treasurer, who was entrusted with the duty of 



260 Contract gf Drawer 

keeping the money and paying it out on proper vouchers. Both 
the drawee of the order and the party to whom it was addressed 
represented the corporation; and neither incurred, or were 
expected to incur, any personal obligation. The default of either, 
in performing any duty respecting the order, would be the default 
of the corporation, and would not subject either of them to any 
individual liability. The giving of the order for the debt of the 
corporation, was a method suggested by motives of convenience 
for transacting its business and keeping its accounts. To require 
of the holder of such a draft, the kind of diligence which the 
law exacts of the holder of commercial paper, would be a per- 
version of its object. It is argued by the defendant's counsel, 
that the plaintiffs having taken a draft on the defendant's treas- 
urer, for his debt, they must be understood to have assented to 
their forms of doing business, and should be holden to make a 
presentment of the draft before suing the company. It would 
certainly be wrong to allow the creditor in such a case to subject 
the company to costs, when the funds are ready, and when the 
money would be paid upon the presentation of the paper. But 
the answer to the argument is, that the creditor will be defeated 
in his action, as to damages and costs, if the company are able 
to show that its treasurer was furnished with funds, and would 
have paid the demand if he had been called on. It becomes, then, 
a question as to the onus probandi. In Wolcott v. Van Santvoord, 
17 John. 248, it was settled, upon much consideration, that in an 
action against the acceptor of a bill, or the maker of a note, pay- 
able at a particular place, it is not necessary for the palintiff to 
aver or prove a demand of payment at the time and place 
appointed. This has been considered the unquestioned law ever 
since the judgment in that case, a period of nearly forty years. 
After such an acquiescence in a principle of such constant appli- 
cation, and which relates to the most practical of subjects, the 
effect of commercial paper, we cannot listen to the suggestion of 
the defendant's counsel, that the prior cases in England are the 
other way. If, upon examination, we found them to be so, we 
should not depart from the rule as we find it settled and univer- 
sally acted on in this state. The drafts which the plaintiffs 
received for their debt against this corporation, are in the nature 
of promissory notes, payable at the office of the treasurer of the 
company. Though in the form of bills, they contain an acknowl- 
edgment in writing of their indebtedness to the plaintiffs in the 
amounts mentioned in them, and an undertaking, in effect, to pay 
these amounts at the treasurer's office. In Miller v. Thomson (3 



Caunt v. Thompson 261 

Manning & Gr., 576), the Court of Common Pleas, in England, 
determined that an instrument in the form of a bill of exchange, 
drawn upon a joint stock bank, by the manager of one of its 
branches, by order of the directors, might be declared upon as a 
promissory note. The chief justice said there was the absence of 
the circumstance of there being two distinct parties, as drawer 
and drawee, which, he said, was essential to the constitution of 
a bill of exchange. That being so, he added, the only alternative 
is that this instrument is a promissory note, and is properly 
declared upon as such. We adopt the principle of this case, which 
is strictly applicable to the one before us. The issue, therefore, 
which was joined upon the question whether these orders had been 
presented for payment, was an immaterial one, and the Supreme 
Court was right in its judgment. 

Shankland, J., delivered an opinion to the same effect, and 
all the judges concurred, except Comstock and Brown, who not 
having heard the argument took no part in the decision. 

Judgment affirmed. 



CONTRACT OF DRAWER AS EXECUTOR OR TRUSTEE OF DRAWEE S 

ESTATE. §§63,116 — 3. 

Caunt v. Thompson (1849), 7 M. G. & S. 400, 62 E. C. L. 399. 

Cresswell, J., now delivered the judgment of the court. 

This was an action of assumpsit by the endorsee, against the 
drawer, of a bifl~6T exchanged 

The declaration alleged that the bill was drawn by the defend- 
ant on J. Whitley, payable to the order of the drawer two months 
after date, that the bill was accepted by Whitley, and endorsed 
by the drawer to Tomlin, and by Tomlin to the plaintiff, and that 
the bill, when due, was presented to Whitley, and dishonoured, 
of which the defendant had notice. 

The defendant pleaded,— first, that the bill was not duly pre 
sented to Whitley, — secondly, that the defendant had no notice / 
of the dishonour of the bill. 

At the trial before Wilde, C. J., at the sittings in Middlesex 
after Michaelmas term, 1847, it appeared in evidence, that, before 
the bill became due, the acceptor died, having made the defendant 
(the drawer) his executor, and that he had proved the will; that, 
when the bill became due, the plaintiff sent one of the witnesses 



1 



262 Drawer as Executor or Trustee 

to the house of the acceptor, to present the bill ; that the witness 
there saw the defendant, to whom he presented the bill, saying, — 
"I have brought a bill from Caunt's : you know what it is ;" and 
that thereupon the defendant said, — "I am executor of Whitley: 
you must persuade Caunt to let the bill stand over a few days, 
because Whitley has only been dead a few days : I shall see the 
bill paid." 

Upon this evidence, the plaintiff applied for leave to amend 
his declaration, by averring the death of the acceptor, the appoint- 
ment of the defendant as his executor, and the presentment of the 
bill to him. 

The lord chief justice allowed the amendment to be made, 
and said that the proof of presentment to the executor was not 
sufficient proof of notice of dishonour. 

A verdict was thereupon taken for the plaintiff on the first 
issue, and for the defendant on the second ; leave being reserved 
to the plaintiff to move to enter a verdict on that issue in his 
favour, or for judgment non obstante veredicto ; and leave being 
likewise reserved to the defendant to move on the ground that 
the amendment ought not to have been made. 

Cross rules were accordingly obtained in Hilary term, 1848. 

At the argument, we disposed of the defendant's rule, think- 
ing the amendment properly allowed: and now, after considera- 
tion, we think that the plaintiff's rule, to enter a verdict in his 
favour on the second issue, must be made absolute. 

It may be assumed to be a settled rule, that knowledge of 
the probability, however strong, that a bill of exchange will be 
dishonoured, cannot operate as a notice of dishonour, or dispense 
with it. Pothier, Contrat de Change, Part I. c. 5, § 147, (citing 
Savary, parer. 45) lays down the same rule with reference to 
foreign ("Foreign" as opposed to "English," not as opposed to 
"inland") bills, viz., that the notorious insolvency of the acceptor 
of a bill does not dispense with protest for non-payment, and 
notice to the prior parties, because the insolvency of the acceptor, 
however notorious, may not be known to them, or, in the absence 
of notice, they may suppose that the acceptor, though insolvent, 
has found means to take up the bill. So also it may be considered 
as settled, that information that a bill has been dishonoured, 
derived from a person not having authority to give it, does not 
supply the place of notice. Hence it has become usual to say that 
knowledge of the dishonour of a bill is not equivalent to notice. 
In such cases as those above mentioned, it certainly is not. 

The law has not been so well settled as to the nature of the 



Caunt v. Thompson 263 

notice to be given. In Hartley v. Case, 4 B. & C 339, Abbott, 
C. J., said : "There is no precise form of words necessary to be 
used in giving notice of the dishonour of a bill of exchange ; but 
the language used must be such as to convey notice to the party 
what the bill is, and that payment of it has been refused by the 
acceptor." Since that case was decided, there has been some fluc- 
tuation of opinion on the subject. In Solarte v. Palmer, 7 Bingh. 
530, 5 M. & P. 475, 1 Tyrwh. 371, 1 C. & J. 417, which was finally 
decided in the House of Lords (1 N. C. 194, 1 Scott 1, 8 Bligh. 
N. S. 874) , a very strict rule was adopted ; but that has not been 
adhered to. In Burgh v. Legge, 5 M. & W. 418, Parke, B., says : 
"There must be proof of a notice given from some party entitled 
to call for payment of this bill, and conveying in its terms intelli- 
gence of the presentment, dishonour, and parties to be held liable 
in consequence." But, in Furze v. Sharwood, 2 Q. B. 388, and 
King v. Bickley, 2 Q. B. 419, it was decided that the notice need 
not, in terms, inform the party to whom it is given, that he is 
looked to for payment: and, in Miers v. Brown, 11 M. & W. 372, 
these latter decisions were followed. 

The rule does not differ in substance from that given by Ash- 
hurst, J., in Tindal v. Brown, 1 T. R. 167 : — "Notice means some- 
thing more than knowledge ; because it is competent to the holder 
to give credit to the maker. (The action was on a promissory 
note.) It is not enough to say that the maker does not intend to 
pay, but that he, the holder, does not intend to give credit." In 
substance, these cases seem to establish, that, in order to make a 
prior holder responsible, he must derive, from some person entitled 
to call for payment, information that the bill has been dishonoured, 
and that the party is in a condition to sue him, from which he 
may infer that he will be held responsible. In Miers v. Brown, 
Alderson, B., describes what is needful, in these terms : "Knowl- 
edge of the dishonour obtained from a communication by the 
holder of the bill, amounts to notice." 

In the present case, the defendant knew that the bill was dis- 
honoured; and he knew it from the best source, namely, his own 
personal act in dishonouring it when presented by the holder : and^ 
he knew, from the same source, that time had not been given to 
the acceptor. He had, therefore, all the information which, 
according to Ashhurst, J., the notice ought to convey : and, know- 
ing that, he would know also that the holder had placed himself 
in a situation to call upon him (the drawer) for payment, from 
which, — to adopt the view of modern decisions, — he might infer 
that he would be called upon. This is very different from that 



264 Drawer Without Right to Expect Acceptance 

knowledge which has been spoken of as not equivalent to notice, 
and is at least as much notice as the knowledge spoken of by 
Alderson, B., in Miers v. Brown. Indeed, there would be some 
absurdity in requiring that the plaintiff should have stated to the 
defendant at the time when he dishonoured the bill, "Take notice 
that this bill has been dishonoured by you." Lord Ellenborough 
seems to have been of that opinion in the case of Porthouse v. Par- 
ker, i Camp. 82, an action by the payee against the drawer of a 
bill. It was drawn by one Wood as agent of George James and 
John Parker, upon John Parker. There was no proof that Wood 
had authority to draw : but evidence being given that the bill was 
accepted by a duly-authorized agent for John Parker, Lord Ellen- 
borough held that it was evidence of the bill having been regularly 
drawn ; and that, the acceptor being likewise a drawer, there would 
be no occasion for the plaintiff to prove that the defendants had 
received express notice' of the dishonour of the bill, as this must 
necessarily have been known to one of them ; and the knowledge 
of one was the knowledge of all. 

Upon the authority of that case, and upon principle, we think 
that the notice to the defendant in this case was established, and 
that the verdict should be entered for the plaintiff on the issue on 
the second plea. 

Plaintiff's rule absolute. 
Defendant's rule discharged. 



CONTRACT OF DRAWER WITHOUT RIGHT TO EXPECT ACCEPTANCE. 

§Il6—4. 

Cathell v. Goodwin (1827), 1 H. & G. (Md.) 468. 

Assumpsit on an instrument, of which the following is a 
copy: 

Mr. Jno. Gooding— 

Pay to the order of Mrs. Cathell five hundred dollars and 
charge the same to your ob. st. Robt. M. Goodwin. 

$500, June 24th, 1818. 

Verdict and judgment for the defendant. 
Plaintiff appealed. 

Dorsey, J., at this term delivered the opinion of the court. To 
support the opinion of the court below, the appellee's counsel have 
relied on three positions, (either of which, if tenable, would be 



Cathell v. Goodwin 265 

sufficient for their purpose) viz., i. That Mrs. Matilda Cathell 
was not competent to demand payment of the bill. 2. That she 
consented to receive a conditional acceptance, and thereby gave 
time to the acceptor. 3. That the drawer had reasonable grounds 
to expect that his bill would have been honoured. 

There is nothing to sustain the first position. The defendant 
has in express terms, authorised Mrs. Cathell to receive the 
amount of the bill. To deny her the right to demand it, would be 
sanctioning an absurdity for the mere purpose of working injus- 
tice. 

The second position is equally untenable. The facts stated in 
the bill of exceptions would not have warranted the jury in finding 
Mrs. Cathell's acceptation of a conditional acceptance of the bill, 
much less are they of that conclusive, resistless character which 
would authorise the court to assume the fact, to the ascertainment 
of which a jury only were competent. 

The third position was that most obstinately contended for, 
which was conceived to be impregnably forfeited by that part of 
the rule established in Eichelberger v. Finley & Van Lear, 7 Harr, 
& Johns. 381, which dispenses with notice only where the drawer 
had no reasonable grounds to expect that his bill would be hon- 
oured. The reasonableness of such expectation is matter for the 
court, and not for the jury, to decide. If the facts, upon which 
the question arises, be admitted or be undeniable, then the ques- 
tion becomes exclusively a matter of law to be pronounced by the 
court ; but if the facts be controverted, or the proof be equivocal 
or contradictory, then it becomes a mixed question both of law 
and fact, in which case, the court hypothetically instruct the jury 
as to the law, to be by them pronounced accordingly as they may 
find the facts. What are the facts to be found in this case justi- 
fying the drawer's expectation that his draft would have been 
paid? So far from having funds in the drawer's hands, he was 
his debtor — no proof of such a commercial intercourse between 
them as would imply a mutual credit — no previous promise by the 
drawee to accept this or any other draft for the drawer's accom- 
modation — no consignment of goods to the drawee, which the 
drawer had any reason to expect would be received in time to 
meet his bill, but the only proof is, that the drawee informed the 
payee, that he expected funds of the drawer would shortly come 
to his hands, with which, when received, he would pay. That 
funds afterwards did arrive, but whether in one month, or five 
years after, does not appear. What may have been the expecta- 
tions of the drawee, as to the receipt of funds from the drawer, 



266 Indorsement and Delivery 

is immaterial ; they are not even admissible evidence in this cause. 
But if they were, they can have no influence on those of the drawer 
— into whose expectations only is the enquiry to be made. The 
facts in the cases of Legge v. Thorpe, 12 East, 170, and Claridge 
v. Dalton, 4 Maule & Selw. 226, afford much stronger evidence 
of a reasonable expectation in the drawers that their bills would 
be honoured, than those in the present case; yet there they were 
adjudged insufficient. The "reasonable grounds" required by law 
are not such as would excite an idle hope, a wild expectation, or 
a remote probability, that the bill might be honoured, but such as 
create a full expectation, a strong probability of its payment ; such 
indeed as would induce a merchant of common prudence and ordi- 
nary regard for his commercial credit, to draw a like bill. The 
facts in this case constitute no such reasonable grounds. We 
therefore think that the county court erred in instructing the jury 
that the plaintiff was not entitled to recover, and consequently 
reverse their judgment. 

Judgment reversed, and procedendo awarded. 



Sec. VI. — Of Negotiation in General. / 

V . 

indorsement and delivery. ' § 32. 

Geary v. Physic (1826), 5 B. & C. 234; n E. C. L. 442. 

Assumpsit by the plaintiff as indorsee against the defendant 
as maker of a promissory note for the sum of 30/. payable two 
months after date to the order of one Folder, and indorsed by him, 
Folder, to one Kemp, who subsequently indorsed the note to the 
plaintiff. At the trial before Abbott, C. J., at the London sittings, 
after Hilary term, 1825, it appeared that the indorsement by 
Kemp, to the plaintiff was in pencil, and it was thereupon objected 
that the plaintiff could not recover ; an indorsement in pencil not 
being such an indorsement as the law and custom of merchants 
recognizes to be sufficient to pass the interest in a bill of exchange, 
and promissory notes being by the statute 3 & 4 Ann. c. 9, s. 1, 
assignable or indorsable in the same manner as unpaid, bills of 
exchange are according to the custom of merchants. The Lord 
Chief Justice, thought it sufficient, and directed the jury to find a 
verdict for the plaintiff, reserving liberty to the defendant's coun- 



Geary v. Physic 267 

sel to move to enter a non-suit, if the court should be of opinion 
that the indorsement of the promissory note in pencil, was not a 
good and valid indorsement. F. Pollock, in last Easter term, 
obtained a rule nisi to enter a nonsuit. 

Thesiger, now showed cause. 

Abbott, C. J. There is no authority for saying that where^ 
the law requires a contract to be in writing, that writing must be 
in ink. The passage cited from Lord Coke, shows that a deed 
must be written on paper or parchment, but it does not show tha t 
it_must be written in ink. That being so, I am of opinion that an/ 
indorsement on "a "bill of exchange may be by writing in pencil. , 
There is not any great danger that our decision will induce indi- 
viduals to adopt such a mode of writing in preference to that in 
general use. The imperfection of this mode of writing, its being so 
subject to obliteration, and the impossibility of proving it when it 
is obliterated, will prevent its being generally adopted. There being 
no authority to show that a contract which the law requires to be 
in writing should be written in any particular mode, or with any 
specific material, and the law of merchants requiring only that an 
indorsement of bills of exchange should be in writing (see the 
custom stated in Lutwidge, 878), without specifying the manner 
with which the writing is to be made, I am of opinion that the 
indorsement in this case was a sufficient indorsement in writing 
within the meaning of the law of merchants, and that the property 
in the bill passed by it to the plaintiff. 

Bayley, J. I think that a writing in pencil is a writing within 
the meaning of that term at common law, and that it is a writing 
within the custom of merchants. I cannot see any reason why, 
when the law requires a contract to be in writing, that contract 
shall be void if it be written in pencil. If the character of the 
handwriting were thereby wholly destroyed, so as to be incapable 
of proof, there might be something in the objection; but it is not < 
thereby destroyed, for, when the writing is in pencil, groof of the 
character of the Jiand writing may still be given. I think, there- 
fore, that tKis~is a valid writing at common law, and also that it 
is an indorsement according to the usage and custom of mer-' 
chants ; for "that usage only requires that 'the indorsement should 
be in writing, and not that that writing should be made with any 
specific materials. 

Holroyd, J., concurred. 

Rule discharged. 



268 Indorsement and Delivery 

Brown v. The Butchers' & Drovers' Bank (1844), 6 Hill (N. Y.) 

443- 

On error from the superior court of the city of New York, 
where the Butchers & Drovers' Bank sued Brown as the endorser 
of a bill of exchange, and recovered judgment. The endorsement < 
was made with a lead pencil, and in figures, thus, "1. 2. 8.," no 
name being written. Evidence was given strongly tending to 
show that the figures were in Brown's handwriting, and that he 
meant they should bind him as endorser; though it also appeared 
he could write. The court below charged the jury that, if they ; 
believed the figures upon the bill were made by Brown, as a sub- 
stitute for his proper name, intending thereby to bind himself as 
endorser, he was liable. Exception. The jury found a verdict 
for the plaintiffs below, on which judgment was rendered, and 
Brown thereupon brought error. 

C. De Witt, for the plaintiff in error. 
A. Schell, for the defendants in error. 

By the court, Nelson, Ch. J. It has been expressly decided 
that an endorsement written in pencil is sufficient; {Geary v. 
Physic, 5 Barn. & Cress. 234;) and also that it may be made by 
a mark. {George v. Surrey, 1 Mood. & Malk. 516). In a recent 
case in the K. B. it was held that a mark was a good signing 
within the statute of frauds; and the court refused to allow an 
enquiry into the fact whether the party could write, saying that 
would make no difference. {Baker v. Dening, 8 Adol. & Ellis, 
94~fand see Harrison v. Harrison, 8 Ves. 186; Addy v. Grix, id. 

504)- 

These cases fully sustain the ruling of the court below. They 
show, I think, that a person may become bound by any mark or 
designation he thinks proper to adopt, provided it be used as a 
| substitute for his name, and he intend to bind himself. 

Judgment affirmed. 



Day v. Longhurst {1893), Ch. Div. 41 W. R. 283. 

Motion. 

This was a motion to commit the defendant Longhurst and / 
his solicitor, Young, for contempt of court. 

On the 1 st of July, 1892, an order was made in this action 
restraining the defendant over the 8th of July from "negotiating, 



Day v. Longhurst 269 

pledging, or disposing of" certain bills of exchange. This interim 
order was from time to time continued down to the 22nd of^ 
November, 1892. Previously to the commencement of the action \, 
the bills in question (which were payable to the defendant's order)! 
had been deposited by him with Young by way of security for a 
debt, but had not been indorsed, and they had since continued in 
Young's possession. On the 5th of October, 1892, while the ? 
interim order was in force, the defendant, at the request of Young, / 
indorsed one of them ; and the motion to commit the defendant ( 
and his solicitor for contempt of court was thereupon made. 
The Bills of Exchange Act, 1882, provides, as follows : — 
Section 2. — "Bearer" means the person in possession of a bill 
or note which is payable to bearer. "Holder" means the payee 
or indorsee of a bill or note who is in possession of it, or the 
bearer thereof. 

Section 31 (1). — A bill is negotiated when it is transferred 
from one person to another in such a manner as to constitute the 
transferee the holder of the bill. Sub-section (3).— A bill pay- 
able to order is negotiated by the indorsement of the holder 
completed by delivery. Sub-section (4). — Where the holder of a 
bill payable to his order transfers it for value without indorsing it, 
the transfer gives the transferee such title as the transferor had in 
the bill, and the transferee, in addition, acquires the right to have 
the indorsement of the transferor. 

Hastings, Q.C., and Swinfen Eady, for the plaintiff. 
Buckley, Q.C., and Lewis Edmunds, for the respondents. 

Stirling, J., after referring to the definition of "bearer" and 
"holder" in the Bills of Exchange Act, 1882, s. 2, continued : — 
Previously to the 5th of October, 1892, Young was neither 
"bearer" nor "holder" of the bills in question. The former term I 
applies only to the person in possession of a bill or note payable 
to bearer, which this was not, and the latter to a payee or indorsee 
of a bill or note, which Young was not. [His lordship then read 
section 31, sub-sections 1 and 3, and said: — ] Previously to the 
5th of October, 1892, the bill had not been transferred to Young 
so as to constitute him the holder of the bill, for he was not 
"payee" or "indorsee," therefore the bill was not up to that date 
negotiated. On the 5th of October, 1892, the bill, being in the 
possession of Young, was for the first time indorsed by the defend- 
ant. Young, who up to that time had been merely the transferee 
of the bill, now for the first time became the "holder" of it within 



270 Irregular Forms of Indorsement 

the meaning of the Bills of Exchange Act, and the bill was for 
the first time "negotiated" within the meaning of sub-section I 
of section 31 ; consequently the defendant by his act on the 5th 
of October, 1892, converted Young from a mere transferee into 
a holder of the bill, and, in my opinion, negotiated the bill, con- 
trary to the interim order which had been made. 

On behalf of the respondents reliance was placed on sub- 
section 4 of section 31. No doubt that sub-section shows that 
Young had, prior to the 5th of October, 1892, the right to have 
the indorsement of the defendant, and, consequently, to sue the 
defendant if he refused to indorse the bill. That, however, did 
not justify the defendant in violating the order of the court. If 
proceedings were taken or threatened by Young, the defendant 
ought to have applied either that the injunction might be removed, 
so as to enable him to give effect to Young's rights, or else to 
have Young made a party to the action. The latter alternative, 
however, the defendant actually declined, in the course of the 
hearing of the motion. In my opinion the defendant has violated 
the order of the court. I do not, however, regard the case as one 
of serious contempt, and as regards costs I think justice will be 
met if I order the defendant to pay those of the applicant and 
leave Young to pay his own. 

Motion dismissed. 



IRREGULAR FORMS OF INDORSEMENT. § 33. 

Markey v. Corey (1895), 108 Mich. 184, 36 L. R. A. 117, 6s Am. 

St. Rep. 698. 

Error to Wayne; Lillibridge, J. 

Assumpsit by Matthew M. Markey and Catherine Sundars 
against Lorenzo Corey, impleaded with George H. Waldo and 
Alden M. Varney, on a promissory note. From a judgment for 
plaintiffs, defendant brings error. Affirmed. 

Edgar Weeks (Moore & Moore, of counsel), for appellant. 
Ervin Palmer, for appellees. 

Long, J. Defendant Corey entered into a written contract 
with Waldo and Varney for the sale of certain personal property 
at the sum of $2,500, payable $200 the first year, $500 the second, 
and $600 each year thereafter, until the whole amount should be 



Markey v. Corey 271 

paid, according to five promissory notes executed at the same 
time. The contract also provided that certain stock should be 
deposited by the purchasers as further security for the payments. 
It was then provided : 

"But in case said payments shall not be made as above pro- 
vided, and in case either or any of said payments shall remain 
unpaid for the period of 90 days, then the party of the first part 
shall, at his option, have the right to declare the whole remaining 
amounts represented by said notes to have become due and pay- 
able." 

On the face of each of the promissory notes was written : 

"This note is given in accordance with the terms of a certain 
contract under the same date, between the same parties." 

Subsequently the plaintiffs received from defendant Corey an 
assignment of all his right, title, and interest in and to the con- 
tract, stock, and notes. On the back of the note in suit was 
indorsed : 

"I hereby assign the within note to Matthew M. Markey and 
Catherine Sundars." 

This $500 note was not paid, and was protested, and the 
plaintiffs brought this suit upon it against Waldo and Varney as 
makers, and Corey as indorser. The declaration was upon the 
common counts in assumpsit, with a copy of the note attached. 
On the trial, however, the court permitted the plaintiffs to amend 
the declaration by averring the assignment of the contract and 
note. The case proceeded to trial, and plaintiffs' counsel offered 
in evidence the note and indorsement of assignment on it, together 
with the certificate of protest. Defendant's counsel objected to 
their introduction as against defendant Corey, claiming (1) that 
the note in question was not a promissory note, and that plaintiffs 
could not recover upon it against Corey as indorser, but that, if 
they took any title to it, it was under the assignment; (2) that 
the contract was evidenced by the note and the other writing, — 
the contract of sale. Plaintiffs' counsel then put in evidence, 
under objection, the contract of the sale. The court thereupon 
directed a verdict in favor of plaintiffs for the amount of the note 
and interest, from which judgment defendant Corey alone appeals. 
It is insisted here, by counsel for defendant Corey : 
1. That, if the plaintiffs took title to the note, it was under 
the assignment, and that, therefore, they could not sue in their 



272 Irregular Forms of Indorsement 

own names, but, if they had a right of action, it must be brought 
in the name of the original party to the contract. 

2. That the two papers must be taken as constituting the 
contract, and that the note was not, therefore, a promissory note, 

3. That Corey, by making the assignment to the plaintiffs, 
was not the indorser of the note, and could not be held liable as 
such. 

The usual mode of transfer of a promissory note is by simply 
writing the indorser's name upon the back, or by writing also over 
it the direction to pay the indorsee named, or order, or to him or 
bearer. An indorsement, however, may be made in more enlarged 
terms, and the indorser be held liable as such. In Sands v. Wood, 
1 Iowa, 263, the indorsement was, "I assign the within note to 
Mrs. Sarah Coffin." In Sears v. Lantz, 47 Iowa, 658, the indorse- 
ment on the note was, "I hereby assign all my right and title to 
Louis Meckley." And in each case the party so assigning was 
held as indorser, the court in the latter case saying of Sands v. 
Wood: "He used no words that, in and of themselves, indicated 
that he had bound or made himself liable in case the maker, after 
demand, failed to pay the note. But it was held the law, as a 
legal conclusion, attached to the words used the liability that fol- 
lows the indorsement of a promissory note." See, also, Duffy's 
Adm'r v. O'Connor, 7 Baxt. 498; Shelby v. Judd, 24 Kan. 166; 
Brotherton v. Street, 124 Ind. 599. 

The rule of the American cases is well stated in Daniel on 
Negotiable Instruments (section 688c) as follows: 

"The question arising in such cases is a nice one, and depends 
upon rules of legal interpretation. The mere signature of the 
payee, indorsed on the paper, imports an executed contract of 
assignment, with its implications, and also an executory contract 
of conditional liability, with its implications. The assignment 
would be as complete by the mere signature as with the words of 
assignment written over it. The conditional liability which is 
executory is implied by the executed contract of assignment, and 
the signature under it, which carries the legal title ; and the ques- 
tion is, does the writing over a signature an express assignment, 
which the law imports from the signature per se, exclude and 
negative the idea of conditional liability, which the law also 
imports if such assignment were not expressed in full ? We think 
not. * * * When the thing done creates the implication of 
another to be done, we cannot think that the mere expression of 
the former in full can be regarded as excluding its consequence^ 
when that consequence would follow if the expression were 
omitted." 



Markey v. Corey 273 

The language used in the assignment to the note in suit does 
not negative the implication of the, legal liability of the assignor 
as indorser, and as the words are to be construed, as strongly as 
their sense will allow, against the assignor, he must be held as 
indorser. This rule is fully supported in Hatch v. Barrett, 34 
Kan. 230. See, also, Adams v. Blethen, 66 Me. 19. 

In the case of Aniba v. Yeomans, 39 Mich. 171, the assign- 
ment read as follows : "I hereby transfer my right, title, and 
interest of the within note to S. A. Yeomans." Mr. Justice Mars- 
ton said in that case : 

"The right or interest passing, therefore, under the usual and 
customary indorsement, is much greater than the mere right, title, 
and interest of the payee; and where the transfer,. as made, only 
attempts to pass the title and interest of the payee of the note, no 
greater right or interest than he then held can pass." 

In other words, the learned justice seemed to think that the 
words used limited the transfer to the right and title he then held. 
While this holding appears to be at variance with the cases else- 
where, we think it readily distinguishable from the present, as 
here the words are, "I hereby assign the within note to Matthew 
M. Markey and Catherine Sundars," and do not purport to limit 
the liability of Corey as an indorser. 

In Stevens v. Hannan, 86 Mich. 307, the note sued upon was 
negotiable in form, and made payable to Batchelder, and he 
assigned it before maturity, as follows: "For value received, I 
hereby assign all interest in and to this note to Ralph E. Watson." 
Defendant insisted in that case that the plaintiff could not sue in 
his own name, but should have sued in the name of the payee. It 
was said by Justice McGrath : "I do not think the point is well 
taken. * * * If Batchelder's indorsement 'did not affect its 
negotiability, then Watson's indorsement entitled the plaintiff, as 
holder of the note, to sue in his own name." 

It must be held, therefore, that the memorandum on the note 
did not relieve Corey from his liability as indorser. 

The court was not in error in admitting the contract in evi- 
dence, as its purpose was to show that the note was not in fact 
limited by its provisions, and those provisions of the contract cited 
did not destroy the negotiability of the note. (Daniel Neg. Inst., 

§48). 

The judgment must be affirmed. 

The other justices concurred. 



274 Irregular Forms of Indorsement 



Spencer v. Halpern (i8p6), 62 Ark. 595, 36 L. R. A. 120. 

W. J. Mayo, N. W. Norton, and /. M. Prewitt, for appellant. 
M. J. Manning, for appellee. 

The facts are sufficiently stated in the opinion. 

Wood, J. Appellant made the following indorsement on two 
promissory notes held by him, viz. : "For value received I hereby 
transfer my interest in the within note to Isaac Halpern. (Signed) 
Geo. Spencer." The maker having failed to pay at maturity upon 
demand, is appellant bound as indorser after due notice? 

Where a negotiable instrument is indorsed in blank, or in 
full, the indorser contracts to pay the amount called for by the 
instrument if it is not paid by the principal on demand at matur- 
ity, provided notice of demand and non-payment is duly given. He 
also contracts that the instrument is genuine, that it is valid, that 
the parties are competent to make it, and that he has the title and 
right to transfer it. (1 Dan. Neg. Inst., sec. 66911; Tiedeman, 
Com. Paper, sec. 259). These rights of the indorsee and obliga- 
tions of the indorser, under an indorsement in blank or in full in 
the common form, are not expressed, but fixed by implication, 
under the rules of the law merchant ; and when there is such an 
indorsement, there is nothing for construction. But when the 
indorsement is in irregular form, and the contract is expressed, 
it may become, says Mr. Daniel, "a nice question for legal inter- 
pretation." But we cannot agree to his interpretation that an 
indorsement containing an express assignment of "my interest" 
over one's signature does not "exclude and negative the idea of 
conditional liability, which the law also imports, if such assign- 
ment were not expressed in full." (1 Dan. Neg. Inst., sec. 688c). 
That would be true only if the effect of the signature per se did 
nothing more than transfer the interest of the signer. But, as we 
have seen, the indorsement in blank not only transfers the title 
and interest of the indorser in the instrument, but it does more. 
It confers the absolute title upon the indorsee, and gives him 
rights against the maker which the payee himself might not have, 
and imposes upon the signer all the legal obligations of an indorser 
mentioned supra. (Aniba v. Yeomans, 39 Mich. 171). 

We fail to see the application of the maxim "Expressio eorum 
quae tacite insunt nihil operatur" in a case where all the implica- 
tions of the law following an indorsement in blank, or in full, in 
the regular form, are not expressed. On the contrary, it seems 



Spencer v. Halpern 275 

clear to us that the payee, by expressing one only of the implica- 
tions which the law attaches to an indorsement in blank or in full, 
in the regular way, and that one, too, not imposing any personal 
liability upon him, excludes every other. And the maxim "Expres- 
sio unius," etc., does apply. (Hailey v. Falconer, 32 Ala. 536). 

In Michigan the indorsement was "I hereby transfer my 
right, title, and interest of the within note to S. A. Yeomans," 
signed by the payee. The Supreme Court held that such an' 
indorsement gave the transferee the same rights that the payee 
had, "but none other or greater." (Aniba v. Yeomans, 39 Mich., 
supra). Mr. Tiedeman says: "The declaration that the payee 
assigns or transfers all his right, title and interest in the paper 
would seem to limit in a most effective way the rights acquired by 
the transferee to those which the transferrer had therein, and thus 
prevent the writing from operating as an indorsement." (Tiede- 
man, Com. Paper, sec. 265). 

To avoid the necessity for construction, and the probability 
of misconstruction, it would always be better for the one desiring 
to escape the liabilities of an indorser to add the words "without 
recourse." But the question here is not what the appellee should 
have done, but what did he actually dot Why should we not let 
the contract mean and have the effect that is plaintly expressed by 
the terms "my interest" in their ordinary acceptation ? 

Had the payee intended to be bound as indorser, why use so 
many words ? Had the transferee expected more than the "inter- 
est" of the transferrer, why did he accept the instrument trans- 
ferring only his "interest?" We must accept and interpret the 
completed contract as the parties made it. They have seen proper 
to express it at length, and have used unambiguous terms. Con- 
struing the terms "my interest" most strongly against the trans- 
ferrer, we do not feel authorized to say they mean anything more 
than simply "my interest." They are clearly terms of limitation, 
when used in an indorsement on a negotiable instrument. Com- 
pare Reynolds v. Shaver, 59 Ark. 299. 

Counsel for appellee cite us to cases which seem to hold the 
contrary, but we find in some of these the language of the indorse- 
ment is different from that under consideration, and, where sim- 
ilar, the cases are not satisfactory. With due respect to these, 
and to Mr. Daniel, we must conclude that their conclusions are 
illogical, and the doctrine they announce unsound. 

Reversed and remanded, with directions to sustain the demur- 
rer to appellee's set-off. 

Battle, J., absent. 



276 Indorsement of Entire Instrument 

indorsement must be of entire instrument. § 34- 
Hughes v. Kiddell (1801), 2 Bay (S. C.) 324. 

Motion for a new trial. 

This was an action against defendant as endorser on a note 
of hand, in which there was a verdict for defendant. The note of 
hand in question was given by David Bush, of Camden, to the 
defendant Kiddell, for 473/. sterling. Kiddell afterwards made 
the following endorsement, viz. : "I assign over to Hudson 
Hughes, the sum of 1,930 dollars and 50 cents, as part of this 
note of hand. 

"Signed, "Benjamin Kiddell." 

Afterwards he made another endorsement, and assigned over 
the residue of said note. (Signed, Benjamin Kiddell.) 

Mr. Ford, for the motion, contended, that both these endorse- 
ments ought to be taken together, and considered as one endorse- 
ment, as it appeared to be one transaction, done at the same time, 
on the same day, and made to the same person. He admitted, 
that an endorsement of part was not good, but that the two parts 
in this case, to the same person, made the whole good; and as 
such, the court was bound to give it a reasonable and liberal con- 
struction, as it would not subject the party to different actions; 
which was the reason, why the law of merchants would not admit 
of the splitting up contracts, and allow of different endorsements 
on bills and notes. 

Mr. Pringle, in reply, contended, that from the very nature 
of the transaction, it must have been the intention of the defendant 
to restrain the negotiability of this note, as well as to exempt him- 
self from responsibility ; taking these endorsements either sever- 
ally or jointly, they amount to no more than a bare authority to 
receive the money, or a relinquishment of the defendant's right 
to the note. It is not expressed for value received, so as to raise 
an implied assumption at law ; but the law is clear that an endorse- 
ment for part is bad. (Bailey on Bills, 34). 

For if it were allowable for a man to endorse for part, he 
might endorse 100 dollars to A, another 100 to B, and so on; 
and by that means, defendant might become liable to twenty dif- 
ferent actions on the same bill. For these reasons, and to guard 
against this monstrous inconvenience, the law of merchants has 
established it as a rule, that a bill cannot be endorsed for part. 
(Cunn. on Bills, 57). 



Habersham v. Lehman 277 

Now it is clear, from the gentleman's own acknowledgment, 
that the first endorsement for 1,930 dollars and 50 cents in part, 
is bad ab initio; and if so, then the subsequent endorsement for 
the residue never can give the first, legal validity; as it is most 
evident to reason and common sense, that two vitious or bad 
endorsements can never constitute a good whole endorsement. 

The court, after hearing the arguments, refused to grant a 
new trial, on the ground that an endorsement for part of a note 
or bill is bad. (Lex Mercatoria, 445; Carth. 466). And if so 
then two vitious endorsements can never constitute a good one. 

Rule discharged. 

Present, Grimke, Waites, Bay and Johnson. 



INSTRUMENT INDORSED IN BLANK AND LATER INDORSED SPECIALLY. 

S36. 

Habersham v. Lehman {1879), 63 Ga. 380. 

Lehman brought complaint against Habersham on a note for 
$300.00 payable to the order of Eppinger & Russell, dated June 
1 2th, 1878, and due at ninety days. It was indorsed as follows : 
"Eppinger & Russell, by A. Cyraix, Attorney." "Pay C. H. 
Dexter, cashier, or order, for collection on account of Atlanta 
Savings Bank of Georgia. (Signed) Lodovick J. Hill, Cashier." 
The defendant pleaded the general issue, and specially the follow- 
ing facts: The note sued on was fraudulently procured from 
defendant in place of a non-negotiable note previously given by 
him to the payees for certain improvements made on property of 
his rented by the payees. At the time said payees obtained the 
first note from defendant, a distress warrant against them in his 
favor for $400.00 was pending, for the rent of certain wharf 
property. The said note was given for improvements placed by 
the payees upon this property, it being agreed that it should 
remain in the hands of the payees until the termination of the 
litigation on the distress warrant, so that if they were held liable 
for the rent they could apply it in part payment of the judgment 
which would be obtained. It was contracted that in no event 
should they transfer the note, and to secure this end it was made 
non-transferable. The litigation arising on the distress warrant 
is still pending; but said payees, tired of keeping their contract, 
came to defendant, and, by fraud, obtained the note sued on in 
place of the first, and immediately transferred it to the plaintiff. 



278 Instrument Indorsed in Blank 

Defendant further says that the plaintiff is only an agent of 
the payees, who are thus seeking to avoid their contract under 
the willing complicity of plaintiff as an innocent and bona fide 
holder. 

When the plaintiff offered the note sued on in evidence, 
objection was taken on the ground that it showed no title out of 
Eppinger & Russell, unless a power from them to "A. Cyraix, 
attorney," be shown; and further, that the second indorsement 
showed the note to be the property of the Atlanta Savings Bank. 
The objections were overruled and defendant excepted. 

Mr. Goodyear, of counsel for plaintiff, testified to the follow- 
ing facts : In taking the first note defendant remarked that he 
desired it made with time enough to reach over the approaching 
May term of the court when the distress warrant would be tried. 
Witness supposed it to be a negotiable note, and under this 
impression delivered it to Russell, one of the payees. A few 
weeks after, he returned it to witness and said he could do nothing 
with it as it was not negotiable, though given as negotiable paper. 
Witness told him that he had no doubt it was an oversight of 
defendant's, and he would undertake to procure a negotiable 
instrument in its place. Defendant wanted additional time, so 
witness drew the note sued on at three months and defendant 
signed it. He had full opportunity to read it. The first note was 
destroyed. The plaintiff had no knowledge of the conversations 
or transactions referred to. 

The jury found for the plaintiff. The defendant moved 
for a new trial on the following grounds : 

ist. Because the verdict was contrary to law and evidence. 

2d. Because the court refused to charge as follows : "If the 
jury find, from an inspection of the note, an indorsement of the 
original payees' names, and also the following indorsement : 'Pay 
to the order of C. H. Dexter, Esq., cashier, for collection on 
account of Atlanta Savings Bank of Georgia. (Signed) Lodo- 
vick J. Hill, Cashier,' and found no other indorsement on the note, 
then the note without further evidence, would be presumed to be 
the property of the said Atlanta Savings Bank and the plaintiff 
could not recover from the defendant." 

3d. Because the court erred in charging that when a plaintiff 
in this class of cases, introduces a promissory note in evidence, 
he is entitled to recover unless the defendant introduces evidence 
to rebut the prima facie case thus made out. 

4th. Because the court overruled the objections to the intro- 
duction of the note sued on, as stated above. 



Habersham v. Lehman 279 

5th. Because the court charged the jury that the defendant's 
plea of fraud in the procurement could not avail him unless his 
evidence showed that the plaintiff was a party to, or was cognizant 
of, the fact of the fraud ; that fraud in the procurement, as con- 
templated by law, related only to the original maker and payee, 
or that notice of the fraud was brought home to him. 

The motion was overruled, and defendant excepted. 

Mabry & Crovatt, for plaintiff in error. 
Goodyear & Harris, for defendant. 

Beckley, Justice. 

i. There were two grounds of objection to the introduction 
of the note in evidence, one of them being that the second indorse- 
ment showed the instrument to be the property of the Atlanta 
Savings Bank, whose cashier had indorsed it over to one C. H. 
Dexter for collection. On the effect of an indorsement by the 
payee in blank, followed by an indorsement in full by another per- 
son, see I Daniel on Neg. Inst., § 696. Where a promissory note 
is payable to a named person or order, or to the order of a named 
person, and is indorsed in blank, it is then, until the blank is filled, 
payable to the holder, and any holder may receive payment, or 
sue and collect. The payee's order to pay to any holder is not 
revoked or canceled by the order of some other person to pay to 
a particular individual. 

2. The other ground of objection was that the indorsement 
of the payees purported to be executed by an attorney, and no 
power of attorney or other evidence of authority to indorse was 
produced. The Code, in section 2855, declares that "an indorse- 
ment or assignment of any bill, bond or note, when the same is 
sued on by the indorsee, need not be proved unless denied on 
oath." A plaintiff who derives his title through an indorsement in 
blank, is an indorsee, for he has the right to fill the blank and 
takes the place of indorsee in express words, so long as he holds 
the instrument. In strictness, the blank ought to be filled when, 
or before, the instrument is tendered in evidence, but the prac- 
tice is to treat that as done which can be done, and so a blank 
indorsement is considered, for most purposes of the suit, as an 
express indorsement to the plaintiff, if the latter has possession of 
the paper. We think, too, the Code applies, and that proof of 
the indorsement is dispensed with, as well where the payees seem 
to have indorsed by agent or attorney as where they purport to 
have indorsed in person. And if an agent or attorney can indorse 
for the payees (than which nothing is more certain), to take the 



280 Changing Blank into a Special Indorsement 

indorsement for granted without proof, is to take the authority 
of the agent or attorney for granted without proof; for the 
indorsement could not, when executed by an agent or attorney, 
be the act of the payees unless it was duly authorized. We are 
further of opinion, in the light of the known practice under the 
Code, and under the statute prior to the Code, that the section 
which 'we have quoted dispenses with the proof of the indorse- 
ment, whether the action be against the indorser, upon the 
indorsement itself, or against the maker, upon the note. Indeed, 
this provision is more applicable in the latter than in the former 
case; because, in the former, the general rule, found in sections 
2851, 3454 and 3472, as to pleas of non est factum, would be 
directly applicable, and would be enough to entitle the plaintiff 
to go on against the indorser without proof of the indorsement, 
unless it was denied on oath. In the present case, the plea, so 
far from denying the indorsement, seems to admit it. We think 
it does admit it, and then goes forward and makes a point upon 
the motive and purpose of it. 

3. The evidence did not rebut the legal presumption that 
the plaintiff was entitled to the standing of a bona fide holder for 
value ; nor do we see that it made out any defense to the action 
on the merits. The evidence of fraud in procuring the note orig- 
inally, amounted to nothing. The plea was wholly unsustained. 

Judgment affirmed. 



CHANGING A BLANK INTO A SPECIAL INDORSEMENT. § 37. 

Martin v. Cole (1881), 104 U. S. 30. 

Error to the Supreme Court of the Territory of Colorado. 
The facts are stated in the opinion of the court. 

Mr. Henry M. Teller, for the plaintiff in error. 
No counsel appeared for the defendant in error. 

Mr. Justice Matthews delivered the opinion of the court. 

The defendant in error was plaintiff below, and brought his 
action of assumpsit against the plaintiff in error, as indorser of a 
promissory note, in the District Court of the First Judicial Dis- 
trict of Colorado Territory, for the County of Arapahoe, the plain- 
tiff below being the immediate indorsee. 

A copy of the note sued on, with the indorsements, filed with 
the declaration, is as follows : — 



Martin v. Cole 281 

"$1,414.15. Georgetown, C. T., July 17, 1868. 

"On or before eighteen months after date, I promise to pay 
to John H. Martin, or order, the sum of fourteen hundred and 
fourteen 15/100 dollars, for value received, at George I. Clark & 
Co.'s bank at Georgetown, with interest at the rate of three per 
<cent per month from date until paid. 

(Signed) "John Webb." 

[Indorsed on back.] 

"Pay to the order of Luther A. Cole. Value received. 
(Signed) "John H. Martin." 

The declaration, besides the common money counts, contained 
five special counts. 

The plaintiff in error, in addition to the general issue, filed 
a special plea to the first and second counts of the declaration, the 
substance of which is as follows : — 

"And the said defendant avers that he made the said indorse- 
ment when it was so made, in blank, that is to say, by writing his 
name across the back of said promissory note, and that he made 
said indorsement with the express agreement by and between him 
and the said plaintiff, the said Luther A. Cole, that the said 
indorsement should never be filled up so as to make this defendant 
liable in any manner upon the said indorsement, but only to enable 
the said plaintiff to sue the said note in his own name, if suit 
therein should become necessary. And this defendant avers that, 
relying upon the assurance of the said plaintiff that his indorse- 
ment should not be filled up so as to render him liable as indorsee 
[indorser] thereon, he signed his name upon the back of said 
note, which without said assurance he would not have done." ' 

To this plea there was filed a general demurrer, which was 
-sustained. 

Afterwards, on June 6, 1874, the cause was submitted, by 
consent of parties, without the intervention of a jury, when the 
court found the issues in favor of the plaintiff, and rendered 
judgment against the defendant for $2,478.17 damages and costs. 

A bill of exceptions was taken, which sets out all the evidence 
given and offered in the trial of the case. From that it appears 
that the defendant below, Martin, being on the stand as a witness 
in his own behalf, was asked to state under what circumstances 
the note in suit was transferred by him to the plaintiff, Cole. 
Objection being interposed, the defendant then stated to the court 
that he offered to prove in defence a parol promise contempora- 
neous with the indorsement of the note ; that he proposed to prove 



282 Changing Blank into a Special Indorsement 

by the witness that the parol agreement set forth and stated in 
the defendant's second plea was made by the parties. The court 
sustained the objection, and the defendant excepted. 

Thereupon the defendant offered to prove that at the time 
the note was transferred by Martin to Cole it was expressly 
agreed between them that Martin should indorse his name on 
the note in blank to enable Cole to collect it in his own name, 
and that Cole agreed then, in consideration of what he had given 
for the note, that he (Martin) was never to be called upon as 
indorser or guarantor of its payment in the event he failed to col- 
lect it from the maker of the note; to which offer an objection, 
interposed by the plaintiff, was sustained, and the defendant 
excepted. 

The defendant had previously testified that his name on the' 
back of the note was written by him, but that the words "Pay 
to the order of Luther A. Cole, value rec'd," were not written at 
the time of the indorsement and delivery of the note, nor by him 
at any time. 

The plaintiff below read in evidence the depositions of Wil- 
liam L. Campbell, Levi H. Shepperd, and John T. Harris, tending 
to prove the insolvency of Webb, the maker of the note, at and 
after its maturity. Objections were made to their depositions, 
and overruled ; to which an exception was taken. The objections, 
however, do not appear to be of sufficient importance to require 
further notice. 

The plaintiff also read in evidence the transcript of the record, 
judgment, and proceedings in the action of Luther A. Cole against 
John Webb, the maker of the note, together with the execution, 
levy, and return, being the same referred to in the first count of 
the declaration. From that it appears that the execution was 
issued on May 9, 1870, returnable in ninety days from date, and 
actually returned on June 7, 1870, showing the levy and sale 
referred to in the pleadings. 

There was other testimony, also, tending to prove the insol- 
vency of Webb, the maker of the note, at and after its maturity, 
and at the time of the bringing of this action. 

An appeal was taken from the judgment of the District Court 
of the First Judicial District of the County of Arapahoe to the 
Supreme Court of Colorado Territory, in which, at the February 
Term, 1875, errors were assigned, and the judgment was affirmed 
in that court on March 28, 1876. 

To reverse that judgment is the object of the present writ of 
error. 



Martin v. Cole 283 

The agreement set out and relied on in the plea was that , 
"the said indorsement should never be filled up so as to make / 
this defendant liable in any manner upon the said indorsement/ / 
but only to enable the said plaintiff to sue the said note in his ' 
own name, if suit thereon should become necessary." And the 
defendant averred that "he, relying upon the assurance of the 
said plaintiff that his indorsement would not be filled up so as to 
render him liable as indorser thereon, signed his name upon the 
back of said note, which without said assurance he would not 
have done." As the indorsement in blank, admitted by the defend- 
ant to have been made by him, without being filled up by the 
plaintiff at all, rendered him liable for the payment of the note 
as an indorser, the breach by the plaintiff of the alleged agree- 
ment was inconsequential, and could not, in law, result in any 
actionable injury; for filling up the blank indorsement in the 
manner in which it was done neither added to nor subtracted from 
the liability which the defendant assumed by merely writing his 
name on the back of the note. 

The defendant below, however, further offered at the trial 
to prove that at the time the note was transferred by Martin to 
Cole it was expressly agreed between them that Martin should \ 
indorse his name on the note in blank, to enable Cole to collect / 
it in his own name, and that Cole agreed then, in consideration 
of what he had given for the note, that he (Martin) was never 
to be called upon as indorser or guarantor of its payment in 
the event he failed to collect it from the maker of the note. No 
question was made at the time, nor has been raised since, as to 
the admissibility of such proof under a plea of the general issue ; 
and waiving any objection on that account, the rejection by the 
court below of this offer fairly raises the issue intended to have 
been made by the special plea, whether it is competent, in an 
action against an indorser by his immediate indorsee, upon an 
indorsement made in blank of a negotiable promissory note, to 
prove, as a defence, that as part of the transaction it was agreed 
between the parties, but not in writing, that it should merely have 
the legal effect of an indorsement expressed to be without 
recourse. 

It has never been contended that such a defence, based on 
dealings between prior parties, could be maintained to defeat the 
title of a bona fide holder for value of negotiable paper, acquired 
before maturity, in the usual course of business, and without 
notice; for the protection of such a title is of the essence of the J 
policy of the law merchant, and inheres in the very definition of 



284 Changing Blank into a Special Indorsement 

negotiability. Hence, in that case, a collateral but contempora- 
neous written agreement between two prior parties to a bill or 
note woulijipJj^ectJ^vaHdity in the hands of the holder, more 
than if the agreement were unwritten. Whereas, between the 
immediate parties, if the agreement relied on were in writing, its 
terms would fix and determine their rights and obligations, as 
was decided by this, court in Davis v. Brown, 94 U. S. 427. The 
question is between them alone; and is, whether the same effect 
will be given to such an agreement, not reduced to writing. 

The ground of decision must be found in some other prin- 
ciple or policy of the law than that which protects the title of a 
remote innocent holder of negotiable paper. 

Accordingly, Mr. Justice Washington, in Susquehanna 
Bridge & Bank Co. v. Evans, 4 Wash. 480, after admitting proof 
of such an agreement, in an action by the holder of a promissory 
note against his immediate indorser, said, in his charge to the 
jury: 

"The reasons which forbid the admission of parol evidence 
to alter or explain written agreements and other instruments do 
not apply to those contracts implied by operation of law, such as 
that which the law implies in respect to the indorser of a note 
of hand. The evidence of the agreement made between the plain- 
tiffs and defendants, whereby the latter were to be discharged on 
the happening of a particular event, was, therefore, properly 
admitted." 

It is upon this distinction between contracts express and 
implied that those judicial tribunals have proceeded, in which 
such proof is held to be admissible. It is declared, for example, 
by the Supreme Court of Pennsylvania, in Ross v. Epsy, 66 Pa. 
St. 481, 483, that "the contract of indorsement is one implied 
by the law from the blank indorsement, and can be qualified by 
express proof of a different agreement between the parties, and is 
not subject to the rule which excludes the proof to alter or vary 
the terms of an express agreement." 

So in an early case in New Jersey, Johnson v. Martinus, 
9 N. J. L. 144, it was held by the Supreme Court of that state 
that parol evidence was competent to overcome the implied con- 
tract which results from a blank indorsement, on the ground that 
such indorsement is an inchoate or imperfect contract and not a 
written instrument, nor entitled to its effect, protection, or 
immunity. 

This case, however, was expressly overruled by the same 
court in Chaddock v. Vanness, 35 id. 517, in Which it is plainly 



Martin v. Cole 285 

indicated that the distinction attempted to be made, in some of 
the cases, between indorsements in full and those which are in 
blank, is untenable. 

The contract created by the indorsement and delivery of a 
negotiable note, even between the immediate parties to it, is a 
commercial contract, and is not in any proper sense a contract 
implied by the law, much less an inchoate or imperfect contract. 
It is an express contract, and is in writing, some of the terms of 
which, according to the custom of merchants and for the conveni- 
ence of commerce, are usually omitted, but not the less on that 
account perfectly understood. All its terms are certain, fixed, 
and definite, and, when necessary, supplied by that common knowl- 
edge, based on universal custom, which has made it both safe and 
convenient to rest the rights and obligations of parties to 'such 
instruments upon an abbreviation. So that the mere name of the 
indorser, signed upon the back of a negotiable instrument, con- 
veys and expresses his meaning and intention as fully and com- 
pletely as if he had written out the customary obligation of his 
contract in full. 

It is spoken of by Wharton, Law of Evidence, &c, Sec. 
1059, as a contract at short-hand. The same view is taken in 
Daniels on Negotiable Instruments, Sec. 718, where the author 
states, as a resulting conclusion that embodies the true principle 
applicable to the subject, that, "in an action by immediate indorsee 
against an indorser, no evidence is admissible that would not be 
admissible in a suit by a party in privity with the drawer, against 
him." If the commercial contract of indorsement is treated as a 
contract in writing, this conclusion is undoubtedly correct. If it 
is not, we have the anomaly of applying one rule between maker 
and payee, and a different one between payee becoming indorser 
and his immediate indorsee, without any difference to justify it, 
in the relation of the parties to each other in the two cases. 

The rule is tersely stated in Benjamin's Chalmer's Digest of 
the Law of Bills of Exchange, &c, Art. 56, p. 63. 

"The contracts on a bill, as interpreted by the law merchant, 
are contracts in writing. Extrinsic evidence is not admissible 
to contradict or vary their effect." Citing Abrey v. Crux, 5 Law 
Rep. C. P. 37. 

The rule as declared by Mr. Justice Washington in the case 
cited was expressly rejected by this court in Bank of the United 
States v. Dunn, 6 Pet. 51, one distinct ground of its opinion being 
that parol evidence is not admissible to vary a written agreement ; 
citing the language of the court in Renner v. Bank of Columbia, 



286 Changing Blank into a Special Indorsement 

9 Wheat. 581, 587: "For there is no rule of law better settled or 
more salutary in its application to contracts, than that which pre- 
cludes the admission of parol evidence to contradict or substan- 
tially vary the legal import of a written agreement." 

The authority of this case on this point has never been ques- 
tioned in this court, the explanation and qualification in Davis 
v. Brown, supra, having reference only to the rule as to the com- 
petency of an indorser as a witness to impeach the validity of a 
negotiable instrument to which he is a party. In the case last 
referred to, the agreement relied on to qualify the instrument was 
admitted because it was in writing and part of the transaction. 

The case of Bank of the United States v. Dunn, supra, is cited 
as an authority upon the point in Phillips v. Preston, 5 How. 278, 
291, "because, in an action on a note, parol testimony is not com- 
petent to vary its written terms, and probably not to vary a blank 
indorsement by the payee from what the law imports." 

It is also referred to in terms and followed in Brown v. 
Wiley, 20 id. 442. In delivering the opinion of the court in that 
case Mr. Justice Grier used this language: 

"When the operation of a contract is clearly settled by gen- 
eral principles of law, it is taken to be the true sense of the con- 
tracting parties. This is not only a positive rule of the common law, 
but it is a general principle in the construction of contracts. Some 
precedents to the contrary may be found in some of our states, 
originating in hard cases ; but they are generally overruled by the 
same tribunals from which they emanated, on experience of the 
evil consequences flowing from a relaxation of the rule. There 
is no ambiguity arising in this case which needs explanation. By 
the face of the bill the owner of it had a right to demand accept- 
ance immediately, and to protest it for non-acceptance. The 
proof of a parol contract, that it should not be presentable till a 
distant, uncertain, or undefined period, tended to alter and vary, in 
a very material degree, its operation and effect. (See Thompson 
v. Ketchum, 8 Johns. 192)." 

The action in this case, it is true, was between the payee and 
drawer, upon a bill of exchange; but the obligation on which it 
was founded, that the drawer would pay in the event of non- 
acceptance by the drawee, notice of dishonor and protest, is one 
not actually expressed in terms in the bill itself, but imported by 
construction of law, as constituting the operation and effect of 
the contract. 

In Specht v. Howard, 16 Wall. 564, Mr. Justice Swayne, 
delivering the opinion of the court, quotes from Parsons on Notes 



Corbett v. Fetzer 287 

and Bills, 501, that "It is a firmly settled principle that parol 
evidence of an oral agreement alleged to have been made at the 
time of the drawing, making, or indorsing of a bill or note, can- 
not be permitted to vary, qualify, or contradict, to add to or 
subtract from, the ahsolute terms of the written contract." 

The same quotation forms part of the opinion in Forsythe v. 
Kimball, 91 U. S. 291, with the addition that, in the absence of 
fraud, accident, or mistake, the rule is the same in equity as* at 
law. 

The same principle, upon the authority of these cases, was 
affirmed by this court in Brown v. Spofford, 95 id. 474, and is 
assumed to be the law in Cox v. National Bank, 100 id. 704, and 
Brents Ex'rs v. Bank of the Metropolis, 1 Pet. 89. 

In view of this line of decisions, the question, as it arises in 
this case, cannot now be considered an open one in this court. 

It coincides with the rule adopted and applied in most of the 
states, but the cases are too numerous for citation. They will be 
found collected, however, in Bigelow, Bills and Notes, 168 ; Byles, 
Bills (6th Am. ed.), Sharswood's note, 157; 1 Daniel, Negotiable 
Instruments, Sees. 80, 717 et seq. ; 2 Wharton, Evidence, Sec. 
1058 et seq.; Benjamin's Chalmer's Digest of the Law of Bills 
of Exchange, Art. 56, p. 63. 

Of course there are many distinctions which, upon the cir- 
cumstances of cases, determine the applicability of the rule, and 
classes of cases which form apparent exceptions to it. It is not 
necessary to refer to them here, further than to say that the limit- 
ations of the rule ar perfectly consistent with it, and its application 
in this, as in other proper cases, will not be considered as encroach- 
ing upon them. 

We find no error in the record. 

Judgment affirmed. 

THE QUALIFIED INDORSEMENT. \/ § 40. 

Corbett v. Fetzer (1896), 47 Neb. 269. 

Error from the District Court of Douglas county. Tried 
below before Irvine, J. 

B. G. Burbank, for plaintiffs in error. 

/. /. O'Connor, contra. 

Post, C. J. This was a proceeding by Fetzer, the defendant 
in error, in the District Court for Douglas county to foreclose 
fifty-seven different mortgages executed by William B. Cowles 



288 The Qualified Indorsement 

and wife to Editha H. Corbett, upon certain property in North' 
Side Addition to the city of Omaha, to secure payment of as many 
notes of even date therewith, payable by said Cowles to the order 
of the mortgagee named. It is alleged in the petition that the 
said Editha H. Corbett, Charles Corbett, Day & Cowles, and R. 
W. Day, who were made defendants, indorsed said notes and thus 
became liable thereon. The prayer is for a foreclosure of the 
mortgages and for personal judgment against Day & Cowles, R. 
W. Day, and the Corbetts for any balance remaining due on their 
said indebtedness, after applying thereon the proceeds of the 
mortgaged property. Of the defendants named the Corbetts 
(husband and wife) only answered, admitting the allegations of 
the petition, except as to their personal liability, and charging 
that the notes above described were indorsed without recourse 
upon them. The reply is a general denial. The district court, 
upon the issues joined, found generally for the plaintiff, accom- 
panied by a special finding that the Corbetts were liable as 
indorsers of said notes, and a decree was entered in accordance 
therewith, which has been removed into this court for review. 

Practically the only question presented by the motion for a 
new trial and the petition in error relates to the liability of the 
Corbetts as indorsers of the notes above described. On the back 
and near the top of each of said notes appears the following: 
"E. H. Corbett. Chas. Corbett. Without recourse on us. Day 
& Cowles. R. W. Day." Said notes, according to the claim of 
the Corbetts, had been pledged to Samuel R. Johnson, bearing 
their indorsement in blank, as collateral security, and shortly 
before the consummation of the sale thereof to Fetzer the words 
immediately following their names, as shown above, were added' 
in order to limit their liability thereon. The transaction which 
resulted in the purchase of the notes by Fetzer was conducted 
on the part of the Corbetts by R. W. Day, one of the defendants 
named, who testified that the indorsements "Day & Cowles" and 
"R. W. Day" were made during such negotiations at the request 
of the plaintiff, and that previous to such indorsement the words 
"without recourse on us" were written thereon in his presence 
by C. W. Johnson, a clerk in the office of Mr. Corbett, and in 
which he is corroborated by both Johnson and Corbett. There 
are observable from the records facts which tend strongly to sus- 
tain the contention that the words of limitation were intended to 
apply to the indorsement of the Corbetts rather than to that of 
Day & Cowles or R. W. Day. They were in the first place written 
with different ink, apparently at a different time, and certainly in 



Corbett v. Fetzer 289 

a different hand from that employed in the subsequent indorse- 
ments. They were also written by Corbett's clerk, by his order 
and direction, pending the negotiations for the sale of the notes 
and at a time when the question of their liability upon paper of 
like character would naturally be uppermost in the minds of 
solvent indorsers, as the Corbetts are shown to have been. John- 
son was asked on cross-examination why the words "without 
recourse" were not written over the names of the indorsers, to 
which he answered, in substance, that Mrs. Corbett's name was 
written so near the upper margin of the note as to leave no room 
therefor, — an explanation which is shown by the record to be 
entirely consistent with the facts. Again, the claim that the sub- 
sequent parties, instead of the Corbetts, indorsed without quali- 
fication finds support in the fact that both R. W. Day and the 
firm of Day & Cowles were beneficially interested in the sale of 
the notes, and the further fact that their absolute liability thereon 
is established by the personal judgment entered against them in 
this case by default, as also by the admission under oath of Day, 
who testified in behalf of the defendants. On the part of the 
plaintiff below, Fetzer, it is shown that when the notes were first 
exhibited to him by Day, four or five days previous to the close 
of the transaction, they bore no indorsements aside from the 
names of the Corbetts, and that when next seen by him they were 
indorsed as now, except the name of Mr. Day, which was added 
in his, Fetzer's, presence at the time they were delivered to him. 
He testified also that he purchased the notes described, relying 
upon the indorsements of the Corbetts, paying therefor seventy- 
eight per cent of their face value, and that at the same time he 
purchased other notes executed by Cowles and indorsed by the 
Corbetts without recourse, at fifty-four per cent of the amount 
due thereon. He is also corroborated to some extent by his 
brother, William Fetzer, and Mr. Martin, who were present 
during the several interviews with Day. A final analysis of the 
evidence shows the following facts, as to which there is no sub- 
stantial controversy: (i.) When the notes were first offered for 
sale to Fetzer they bore the blank indorsement of the Corbetts. 
(2.) Afterward, pending negotiations for the sale thereof, Charles 
Corbett, for the purpose of limiting the liability of himself and 
wife as indorsers of said notes, caused to be written thereon imme- 
diately below their names the words "without recourse on us." 
(3.) The names of the said Editha H. Corbett and Chas. Corbett 
were written so near the margin of said notes and each of them 
as to leave no room for the words quoted above their names. 



290 The Qualified Indorsement 

(4.) R. W. Day, one of the subsequent indorsers, has expressly 
admitted his liability on said notes, and the absolute liability of 
the firm of Day & Cowles thereon is established by the decree in 
this case entered by default. (5.) That said notes, when finally 
purchased by Fetzer, bore all the indorsements now appearing 
thereon, except the name of R. W. Day, and were at said time 
indorsed by said Day at his, Fetzer's, request. (6.) Fetzer pur- 
chased said notes, paying therefor seventy-eight per cent of their 
face value, relying upon the indorsement of the Corbetts, who 
were then solvent. 

The remaining questions merely involve the application of 
the law to the facts above stated. A case in point is President of 
Fitchburg Bank v. Greenwood, 84 Mass. 434. Upon the back of 
the note produced at the trial of that case there appeared in three 
successive lines the following indorsements : "Greenwood & 
Nichols — without recourse — Asa Perley, 2d." Parol evidence 
was offered by Greenwood & Nichols tending to prove that the 
words "without recourse" were written by them for the purpose 
of limiting their liability as indorsers and rejected in the absence 
of an offer to prove notice by the plaintiff, a remote indorsee and 
alleged bona fide holder. In reversing the judgment of the lower 
court Bigelow, C. J., said : "There is no rule of law which 
requires a party to limit or qualify his indorsement by any writing 
preceding his signature. Such qualification may and often does 
follow the name of the party. Text-writers of approved authority 
recognize this mode of limiting the liability of an indorser as 
regular and appropriate." The doctrine of that case is sustained 
by the following authorities therein cited : Chitty, Bills ( 10th 
Am. ed.), 234, 235; Story, Promissory Notes, Sec. 138 and note; 
and in 2 Randolph, Commercial Paper, Sec. 720, we observe it 
is approved in the following emphatic language: "The words 
'without recourse,' following the name of an indorser, A, and 
preceding the name of indorser B, may be shown by A to apply 
to his indorsement, even against a bona fide holder who supposed 
it to apply to B's." It may be, as intimated, that there existed a 
purpose, shared by Day and Corbett, to deceive the plaintiff by 
inducing him to purchase the notes in the belief that the Corbetts 
were liable thereon. Such a contention has, however, no founda- 
tion either in the pleadings or the proofs, which show that he, 
Fetzer, throughout the entire transaction, relied upon his own 
judgment respecting the value of the paper in question; nor is 
there any force in the objection that the evidence explanatory of 
the indorsement of the notes by the Corbetts tends to change or 



Robertson v. Kensington 291 

vary their written obligation. As bearing upon that question, we 
quote further from the opinion above cited: "It [the evidence 
offered] had no tendency to vary or control the written contract, 
or to change the legal effect of the indorsement. It only proved 
what the contract really was, at the time it was entered into by 
the defendants. * * * The attempt in this case is not merely 
to hold the defendants on a contract according to its meaning and 
legal effect, but to fasten on them a contract into which they 
never entered. If the plaintiffs mistook the application of the 
words which were written for the purpose of qualifying the 
indorsement of the defendants on the note, this fact furnishes 
no ground for enlarging or changing their liability on the con- 
tract into which they in fact entered." It will be remembered, too, 
that this cause presents no question of fraud or estoppel, nor is 
the action one between the indorser and a bona fide holder of 
commercial paper, but between the parties to the contract of 
indorsement, and, therefore, within the rule recognized in Holmes 
v. First Nat. Bank of Lincoln, 38 Neb. 326. It was held in the 
case last cited that, as against a subsequent bona fide holder, the 
liability created by the indorsement in blank of a bill or note can- 
not be varied by parol evidence ; but that, as between the original 
parties thereto, the precise terms of such contract is always a 
subject of inquiry, and that parol evidence is admissible for that 
purpose. The conclusion we reach is that the provision of the 
decree of the district court for a deficiency judgment against Cor- 
bett and wife is unsupported by the evidence, for which it should 
be reversed and the cause dismissed as to the plaintiffs in error. 

Reversed. 
Irvine, C, not sitting. 



THE CONDITIONAL INDORSEMENT. §41. 

Robertson v. Kensington (1811), 4 Taunt. 30. 

This was an action of assumpsit, and the first count in the 
declaration was on a bill of exchange, of which the following is 
a copy, viz. : 

"Edinburgh, 18th Nov. 1808. £180. sterling. At 45 days 
after date, pay this first of exchange, to the order of Mr. Robert 
Robertson, ii8o. sterling, value received, which place to account, 
as advised, W. Forbes. J. Hunter and Co." "To Messrs. Ken- 
sington, Styan, and Adams, bankers, London." "Accepted, Ken- 



292 The Conditional Indorsement 

sington and Co. Entered, P. J. Raeburn. Indorsed, Edinburgh, 
19 Nov. 1808. Pay the within sum to Messrs. Clerk and Ross, 
or order, upon my name appearing in the Gazette, as ensign in 
any regiment of the line, between the 1st and 64th, if within two 
months from this date. R. Robertson. Clerk and Ross. J. Tin- 
dale. Thomas Eyre and Sons. Thomas Nelson. Dudding and 
Nelson. Bank of England." 

The Plaintiff declared as payee, against the Defendants as 
acceptors. The declaration also contained counts for money had 
and received by the Defendants to the use of the Plaintiff, for 
money paid by the Plaintiff to the use of the Defendants, on an 
account stated, and for interest. 

The plea was, the general issue. At the trial of this cause 
before Mansfield C. J., and a special jury, at the sittings after 
Hilary term 181 1, at Guildhall, a verdict was entered by consent 
for the Plaintiff for the sum of 180Z., subject to the opinion of the 
Court on the following case. The bill, which was for 180/., was 
drawn at Edinburgh on the 18th November 1808, by Sir Wm. 
Forbes, J. Hunter and Co., upon the Defendants, who are bankers 
in London, payable to the order of the Plaintiff, at 45 days date, 
for value received. The indorsements by the Plaintiff, and by 
Clerk and Ross, as above set forth, were made before the bill was 
presented to the Defendants for acceptance. The bill was deliv- 
ered to Clerk and Ross, army agents in Edinburgh, being persons 
then employed by the Plaintiff to procure for him by purchase 
the commission of ensign above referred to. The bill, with those 
indorsements upon it, was afterwards presented to the Defend- 
ants for acceptance, and accepted by them in the usual course of 
their business as bankers. It was afterwards indorsed and nego- 
tiated by the other persons whose names appear as indorsers, and 
finally with the Bank of England, who discounted it. At the 
expiration of the 45 days specified in the bill as originally drawn, 
and the days of grace, the Defendants paid the contents to the 
Bank of England, who presented it to them for payment. The 
Plaintiff, at the time of drawing the bill, paid the full value of 
the same to Sir Wm. Forbes, J. Hunter and Co., the drawers, but 
did not ask, or obtain, their consent, or that of the Defendants, 
the acceptors, to make any alteration in the tenor of the bill by 
indorsement, either as to the condition of the payment, or the 
extension of time. The Plaintiff's name had never appeared in 
the Gazette as ensign in any regiment of the line. The question 
for the opinion of the Court was, whether the Plaintiff was 
entitled to recover: if he was, the verdict was to stand; if he 



Edie & Laird v. East India Co. 293 

was not entitled to recover, a verdict was to be entered for the 
Defendants. 

This case was argued by Lens Serjt. for the Plaintiff, who 
contended, that it was competent for the Plaintiff by this special 
indorsement to make only a conditional transfer of the absolute 
interest in the bill, which he had purchased for a full considera- 
tion, and had vested in him by the delivery of the drawer. The 
Defendants, by subsequently accepting the bill, had become parties 
to that conditional transfer, and as the condition had never been 
performed, the transfer was defeated, and they became liable, 
after the expiration of the two months, to pay the Plaintiff, to 
whom the property then reverted, the contents of the bill, of 
which none of the indorsers could enforce payment against the 
Defendants at the 45 days end, because they had all received the 
bill subject; to the condition, and were bound thereby. He cited 
Ancher v. Bank of England, Doug. 638. 

Shepherd Serjt. for the Defendant, contended that it was 
immaterial whether the acceptance was before or after the con- 
ditional indorsement. The acceptance admitted the hand-writing 
of the drawer, but it did not mix itself with the conduct of the 
indorsers : it admitted nothing which was on the back of the bill. 
The whole practice of the courts was accordingly ; for in an action 
against the acceptor, it became unnecessary to prove the hand- 
writing of the drawer, but it was necessary to prove the hand- 
writing of the indorser. 

The Court gave judgment for the Plaintiff. 



THE RESTRICTIVE INDORSEMENT. § 38. 

Edie & Laird v. East India Company (1761), 1 Wm. Blackstone, 

295- 

Action on two Bills of Exchange of 2000/. each, drawn by R. 
Clive on the East-India Company, at three hundred and sixty-five 
Days after Date, payable to R. Campbell or Order. Campbell 
indorsed one to Ogleby, or Order, the other to Ogleby, without 
adding the Words or Order. But at the Trial, the Words or 
Order appeared upon the Endorsement in another Hand- Writing. 
The East-India Company accepted both Bills. Ogleby then 
endorsed them to the Plaintiffs, and soon after became Insolvent. 
The Company then refused Payment. The Jury found a Verdict 
for the Plaintiffs on the first Bill, but for the Defendants on the 



294 The Restrictive Indorsement 

second ; apprehending, that by the Usage of Merchants it was not 
assignable, without the Words or Order in Campbell the Payee's 
Endorsement. 

Lord Mansfield Chief Justice. There can be no Dispute, 
where the Indorsement is in Blank. There, you may write over 
it, whatever you please. And it has been permitted to be done 
even in Court. But for this there is no Occasion. Every thing 
shall be intended upon such a blank Indorsement. The Point 
relied on at the Trial for Defendants was, that where a special 
Indorsement was made to A. B. and the Indorser omitted the 
Words, or Order, this was equivalent to the most restrictive 
Indorsement. Many Witnesses were examined by Defendants to 
prove this Usage ; but it did not appear that in any one Fact, the 
Indorsee of such special Indorsement, ever lost the Money, by 
such Omission. The Evidence was only Matter of Opinion. 

I told the Jury that upon the general Law (laying Usage out 
of the Case) the Indorsement carried the Property to Ogleby; 
and that the Negotiability was a Consequence of the Transfer. 

But if they found an established Usage among Merchants, 
that where the Words or Order were omitted, the Bill was only 
negotiable on the Credit of the Indorsee, they should find for the 
Defendants. If otherwise, or they were doubtful, then either for 
the Plaintiffs, or make a Case of it. They found for the Defend- 
ant on the Bill in question ; for the Plaintiff on the other, con- 
cerning which there was no Dispute. 

Now upon the best Consideration I have been able to give 
this Matter, I am very clear of Opinion, that at the Trial, I ought 
not to have admitted the Evidence of Usage. But the Point of 
Law is here settled ; and, when once solemnly settled, no particular 
Usage shall be admitted to weigh against it : This would send 
every thing to Sea again. It is settled by two Judgments in 
Westminster-Hall, both of them agreeable to Law and to Con- 
venience. The two Cases I go upon are, Moore and Manning in 
Comyns, and Acheson and Fountain in Strange. These Cases go 
upon a general Proposition in Law, that an Indorsement to A. 
implies or Order, and is negotiable. 

The main Foundation is, to consider what the Bill was in its 
Origin. The present Bill, in its original Creation, was not a bare 
Authority, but a negotiable Draught. There are no restrictive 
Words in it. And whatever carries the Property, carries the 
Power to assign it. 

It were absurd, if the Merchants Opinion should prevail, that 
this is now converted into a personal Authority. If it be such, 



Edie & Laird v. East India Co. 295 

that the Indorsee dies, it could not go to his Executors and 
Administrators; in whom most clearly the Property of the Bill 
does vest. 

Upon this Ground, that the Point is settled both by King's 
Bench and Common Pleas, and well settled, I think there should 
be a new Trial. Otherwise also, I should be of the same Opinion. 
Certainly, the Suggestion of Surprize, is not in all Cases a Reason 
for a new Trial; but in particular Cases, such as the present, it 
may be. — The Question of Costs is very peculiar. There is a 
Verdict in part for the Plaintiff, which already carries Costs for 
him. But, for Form's Sake, we must set aside the whole Ver- 
dict, which is usually done on Payment of Costs. But this will 
be giving Defendants Costs, which they could not otherwise have, 
merely because they have obtained an improper Verdict. There- 
fore I think, that under these particular Circumstances, the Ver- 
dict should be set aside without Costs. 

Denison Justice. I am of the same Opinion. If the Words 
to A. B. only were inserted, I should think it would not be restric- 
tive : At least it should be left to a Jury. In Rawlinson and Stone, 
M. 20 Geo. 2. An Inland Bill of Exchange was drawn payable to 
A. or Order, who indorsed it to B. without adding any thing 
more. The Question was, Whether there was such an Interest in 
the Executor of the Assignee, as that he might assign it. The 
Court held, upon Enquiry from Merchants, that it might be 
indorsed thus: "C. Executor or Administrator of B." When a 
Man says, "Pay to A." the Law says, it is "to A. or Order." He 
then says, I intend it should not be so. What signifies what you 
intend ? The Law intends otherwise ? Same Opinion as to Costs. 

Foster Justice. I am of the same Opinion. This is now the 
settled Law, and ought not to have been left to a Jury, People 
talk of the Custom of Merchants. This Word Custom is apt to 
mislead our Ideas. The Custom of Merchants, so far as the Law 
regards it, is the Custom of England; and therefore Lord Coke 
calls it, very properly, the Law-Merchant. We should not con- 
found general Customs with special local Customs. I think there 
should be no Costs. 

Wilmot Justice. There are two Questions. Whether the 
Law is fully settled, and upon what Principles? It is certainly 
now settled, and upon these Principles. The Original Contract 
between the Drawer and Payee, is to pay to the Payee and his 
Assigns, and the Assigns of such Assigns, in inHnitum. There is 
the same Privity, between the Drawer and the last Assignee, as 
the first. The first assigns over that Chose in Action, which, in 



296 Indorsee the Agent of Indorser 

its Nature and by the express Permission of Law, is assignable, 
with the same Privileges and Advantages, that it had when he 
received it. It might be a considerable Question, whether a man 
can limit and modify the Property or not, even by express Words 
of Restriction, so as to check its Currency. By giving a bare 
Authority, he may do it; as "Pay to A. for my Use;" — But if he 
indorses it generally, I should have a great Doubt; supposing it 
purchased by a subsequent Indorsee, for a valuable Consideration. 
In the present Case, I think assigning it to A. carries the Prop- 
erty, with all its Qualities. It implies a Consideration to have 
been given. I have a Note of Acheson and Fountain. Mr. 
Wearg then cited a Case so determined in Common Pleas, prob- 
ably that of Moore and Manning. Another Case shews the lib- 
erality, with which Indorsements have been construed. Carth. 403. 

The Question was, Whether Indorsement to the Order of A. 
will enable A. to maintain an Action. Determined, that it will. 
If so, a fortiori, an Indorsement to A. will enable him to indorse 
it. Custom of Merchants is the general universal Law. Facts 
must be reiterated to make such a Custom. The Opinion of Mer- 
chants is nothing. Special Custom of Merchants has been con- 
trolled in a Case, where an Indorser had divided a Note and 
indorsed it to several Persons. Carth. 466 Salk. 

Held, that the Indorsor cannot vary the original Contract, 
and split one Note into Twenty. Determined to be a void Custom, 
though allowed to be the Custom of Merchants. Same Opinion 
as to Costs. 

New Trial was granted without Payment of Costs. 



INDORSEMENT CONSTITUTING THE INDORSEE THE AGENT OF THE 

INDORSER. § 38 2. 

Locke v. Leonard Silk Company ( 1877) , 37 Mich. 479. 

Error to Wayne. 

Assumpsit. The facts are stated in the opinion. 

Moore & Moore, for plaintiff in error. 

E. Y. Swift and Hoyt Post, for defendant in error. 

Marston, J. Defendant in error commenced an action of 
assumpsit in justice's court to recover the amount due on a prom- 
issory note given by Locke to the company. * * * On the 



Smith v. Bayer et al. 297 

trial, the plaintiff recovered judgment. The cause was then 
removed by certiorari to the circuit court, where the judgment of 
the justice was affirmed. The case comes here on writ of error. 

The note offered in evidence was endorsed "Pay H. A. 
Redfield, cashier, or order, for collection," and it is claimed that 
by this endorsement the plaintiff parted with all title and inter- 
est in the note and was not therefore entitled to recover. This 
position is not well taken; the endorsement is for a special 
purpose, that of collection only. If paid, the proceeds would have 
belonged to the plaintiff; the title to the note, and the proceeds 
thereof, when collected, remained in the plaintiff. Sutherland 
v. First National Bank, 31 Mich. 232. 

Judgment reversed, but only on matters of practice. 

Judgment reversed. 

The other Justices concurred. 



Smith v. Bayer et al. {1905) {Ore.), 79 Pac. Rep. 497. 

Appeal from Circuit Court, Multnomah county. 
M. C. George, Judge. 

Action by Milton W. Smith against J.. C. Bayer and another. 
From a judgment in favor of plaintiff, defendants appeal. 
Reversed. 

This is an action on a promissory note for $290, executed 
and delivered by the defendants to the Concordia Loan & Trust 
Company of Kansas City, Mo., on January 30, 1896, due on or 
before August 1st following. The complaint alleges the execu- 
tion of the note, its indorsement to the plaintiff before maturity, 
the making of certain payments thereon by defendants, and prays 
judgment against them for the balance. The answer admits the 
genuineness of the note, denies that it was indorsed to the plain- 
tiff before maturity or at all, and affirmatively alleges that it 
remained the property of the payee named therein until after 
maturity, when it was transferred to the Fidelity Trust Company, 
and that thereafter the defendants paid the note to the trust com- 
pany and satisfied it in full. The reply denies the allegations of 
the answer, and affirmatively pleads that at all the times men- 
tioned the plaintiff was and now is the owner in his own right of 
two-sevenths of the note, and since the 21st day of July, 1896, 
has been and now is the owner of the remaining five-sevenths 
for collection. Upon the trial plaintiff produced the note, with 



298 Indorsee the Agent of Indorser 

an indorsement thereon as follows : "Pay to the order of Milton 
W. Smith for collection and return to Concordia Loan & Trust 
Company, A. D. Rider, treasurer, OK, F. Amelung." He 
testified that he received the note in due course of mail from 
the loan and trust company, inclosed in a letter which the witness 
produced, and which stated, in substance, that the note was 
remitted for collection; that he knew the signature to the letter, 
had seen the handwriting, and knew that it was the signature of 
the Concordia Loan & Trust Company, and the person signing it 
had authority to represent the company; that such person was 
and had been employed by the company for a good many years, 
doing business for it and exercising such authority; that witness 
knew that he had the right to make contracts in the name of and 
for the company; that he (witness) knew the indorsement on the 
note to be that of the payee; that Rider, who made it, was the 
treasurer of the company, and had done business for it as such 
for a good many years ; that witness knew him personally, had 
seen him write, and knew that his signature to the indorsement 
was genuine ; that the other name to the indorsement was simply 
an "O. K." or ratification by some one ; that Rider is the treas- 
urer of the company, and has always done its business. The note 
was then admitted in evidence over defendants' objection on the 
ground that the indorsement did not transfer such title to the 
plaintiff as would support an action thereon in his own name, 
and because the genuineness of the indorsement had not been 
sufficiently proved. The witness was also permitted to testify, 
over defendants' objection and exception, that he was in fact the 
owner in his own right of two-sevenths of the note, and the 
court instructed the jury that any settlement made by the defend- 
ants with the payee or owner of the note after the indorsement 
thereof to the plaintiff would not be a defense against the plain- 
tiff's two-sevenths interest therein, although it would be such 
defense against the other five-sevenths. The verdict and judg- 
ment were in favor of the plaintiff, and the defendants appeal. 

Ralph R. Duniway, for appellants. 
Milton W. Smith, in pro. per. 

Bean, J. (after stating the facts). The record bristles with 
assignments of error. Indeed, it would seem that almost every 
step in the progress of the trial was objected to by the defend- 
ants, and exceptions saved to the rulings of the court. The 
questions thus raised are embodied in the record and discussed 
more or less in the brief. They are, however, mostly technical 



Smith v. Bayer et al. 299 

and without merit. There was, in our opinion, sufficient proof 
of the genuineness of the indorsement on the promissory note 
offered in evidence to make a prima facie case in favor of the 
plaintiff. The plaintiff, testifying in his own behalf, said that 
he was familiar with the signature of the loan and trust company, 
knew that the man who signed the indorsement was an officer of 
the company and had been doing business for it for many years, 
and that his signature to the indorsement was genuine. The 
weight to be given to this testimony was, of course, for the jury. 
The only points of real importance on this appeal are: (i) 
Whether the indorsement, being on its face "for collection and 
return" to the payee, vested plaintiff with such a title as will 
enable him to maintain an action thereon in his own name ; and, 
if so, (2) whether the court erred in admitting parol testimony 
tending to show that plaintiff was in fact the owner of two- 
sevenths of the note, and in instructing the jury that, if such was 
the case, any settlement with the payee or assignee subsequent 
to the date of the indorsement to plaintiff would be no defense 
as against plaintiff's two-sevenths. The indorsement of a prom- 
issory note by the payee with the words "for collection," or the 
like, is not strictly a contract of indorsement, but rather the 
creation of a power, the indorsee being the mere agent of the 
indorser to receive and enforce payment for his use. The title 
to the note and the proceeds thereof remain in the payee, and he 
may maintain suitable actions and proceedings to enforce his 
right. White v. National Bank, 102 U. S. 658, 26 L. Ed. 250; 
Commercial Bank of Pennsylvania v. Armstrong, 148 U. S. 50, 
13 Sup. Ct. 533, 37 L. Ed. 363 ; Sweeney v. Easter, 1 Wall. 166, 
17 L. Ed. 681 ; Williams, Deacon & Co. v. Jones, jj Ala. 294; 
People's Bank of Lewisburg v. Jefferson County Savings Bank, 
106 Ala. 524, 17 South. 728, 54 Am. St. Rep. 59; Central Rail- 
road v. First National Bank of Lynchburg, Virginia, 73 Ga. 383. 
There is, in the absence of a statute, some conflict in the decisions 
as to whether such an indorsee can sue in his own name. The 
weight of authority seems to be in favor of his right to do so. 
4 Am. & Eng. Ency. Law (2d Ed.) 274; Freeman v. Exchange 
Bank, 87 Ga. 45, 13 S. E. 160; Roberts v. Parrish, 17 Or. 583, 22 
Pac. 136; Falconio v. Larsen, 31 Or. 137, 48 Pac. 703; Selover, 
Bank Collections, § 28. And it is now so provided by statute in 
this state. B. & C. Comp. §4439; Selover, Negotiable Instru- 
ments Law, §155; Crawford, Neg. Inst. Law,. §67. We are 
therefore of the opinion that the present action was rightfully 
brought in the name of the plaintiff. It was open, however, as 



300 Indorsee the Agent of Indorser 

against him, to all defenses which could have been made if the 
notes had remained in the hands of the indorser, and the action 
had been brought by it. Wilson v. Tolson, 79 Ga. 137, 3 S. E. 
900; Leary v. Blanchard, 48 Me. 269. The indorsement did not 
pass the title, nor did it deprive the defendants of any defense 
they may otherwise have against the note. It merely created the 
plaintiff the agent of the payee for collection with the right to 
sue in his own name. The plain meaning of such an indorse- 
ment, as said by Mr. Justice Miller {White v. National Bank, 
102 U. S. 658, 26 L. Ed. 250), is that the maker of the note "is 
to pay it to the indorsee for the use of the indorser. The indorsee 
is to receive it on account of the indorser. It does not purport 
to transfer the title of the paper or the ownership of the money 
when received. Both these remain, by the reasonable and almost 
necessary meaning of the language, in the indorser." Such being 
the effect of the restrictive indorsement and the character of the 
title acquired by the plaintiff by reason thereof, it necessarily 
follows that the court was in error in admitting evidence to con- 
tradict the contract of indorsement by showing that the note was 
not transferred to the plaintiff for collection as shown on its face, 
but that he actually owned two-sevenths thereof in his own right, 
and in instructing the jury that a settlement made with the payee 
after the indorsement to plaintiff would be no defense against 
plaintiff's two-sevenths. The contract of indorsement is in 
writing. The terms thereof are plain and unambiguous, and 
parol evidence is not admissible to vary or contradict it. White 
v. National Bank, 102 U. S. 658, 26 L. Ed. 250 ; Leary v. Blanch- 
ard, 48 Me. 269; Howe v. Taylor, 9 Or. 288. The plaintiff's 
action is based on the indorsement, and not on any interest he 
may have in the note. He is made by the indorsement the mere 
agent of the payee for its collection. The defendants' obligation, 
notwithstanding the indorsement, is to the payee or subsequent 
owner of the note, and not to the plaintiff. If they settled and 
paid the note to the payee or assignee, such settlement is a com- 
plete defense to an action thereon by plaintiff as a mere agent 
for collection. It may be suggested that, because the jury found 
a verdict in favor of plaintiff for the entire amount sued for, 
they must have found that the settlement alleged as a defense 
was never made, and therefore the error of the court in charging 
the jury in relation thereto was harmless. The ruling of the 
court upon this point and its instructions to the jury injected 
into the case an issue not proper to be tried, the result of which 



Blaine et al. v. Bourne et al. 301 

was to confuse and mislead the jury, and we do not think it can 
be said that the error was harmless. 

From these views it follows that the judgment of the court 
below must be reversed, and a new trial ordered. Many of the 
other questions argued in the briefs will probably not arise on a 
retrial, and need not, therefore, be noticed at this time. 



INDORSEMENT VESTING TITLE IN INDORSEE IN TRUST. § 38 — 3. 

Blaine et al. v. Bourne et al. (1875), 11 R. I. up. 

Browne & Van Slyck, for plaintiffs. 
James M. Ripley, for defendants. 

Assumpsit on a bill of exchange, heard by the court. 

March 6, 1875. Potter, J. The draft in question was as 
follows : 

"Banking House of Blaine, Gould & Short, 

"North East, Pa., August 16, 1873. 
"Thirty days after date pay to the order of Frank Thayer 
seven hundred dollars. "Frank Thayer. 

"To Messrs. B. G. Chace & Co., Providence, R. I. 

"Due September 18." 

Thayer was the agent in Pennsylvania to make purchases for 
Chace & Co., of Providence, and he drew on them for payment. 

This draft was indorsed by Thayer in blank, and was dis- 
counted by the plaintiffs before acceptance. The plaintiffs 
indorsed it as follows: 

"Pay Jay Cooke & Co. or order on account of Blaine, Gould 
& Short, North East, Pa. "Alfred A. Short, Cash'r." 

By Jay Cooke & Co. it was sent to the defendants in Provi- 
dence for collection, indorsed as follows: 

"Pay to the order of Messrs. Bourne & Co. 

"Jay Cooke & Co." 

The draft was paid by Chace & Co. to the defendants about 
noon of September 18. Jay Cooke & Co. stopped payment about 
eleven a. m. of that day, and about one p. m. of the same day their 
failure was generally known in Providence. 

The draft was never the property of Jay Cooke & Co.. and 



302 Indorsement Vesting Title in Indorsee 

was never credited by them to the plaintiff, but was merely 
received by them for collection. ' 

Jay Cooke & Co. were owing the defendants, and the defend- 
ants credited it in their account with them, and claim that they 
had a right so to do. 

The rights of parties to bills forwarded for collection have 
been a fruitful source of litigation. Questions of this sort have 
generally arisen where some party becomes insolvent, and the 
contention is who shall bear the loss. 

When is the last holder of paper sent for collection bound to 
look beyond the last remitter? 

We are referred by defendants' counsel to one case only, Bank 
of Metropolis v. New England Bank, ij Pet. 174; also in 1 How. 
U. S. 234. In that case a bank had forwarded for collection 
paper with a general or unrestricted indorsement to another bank, 
which, with its own similar indorsement, had sent it to a third 
bank for collection. The second or intermediate bank failed, and 
on the day of its failure notified the third bank that the paper 
was the property of the first bank. In a suit by the first against 
the third bank to recover the proceeds, the court, while admitting 
that if it was a case of two banks acting as collecting agents for 
each other, and where no consideration was paid or money 
advanced, the paper would remain the property of the sender, 
holds that in this case the third bank, which held the paper, not 
having notice by the indorsement or otherwise that the paper 
was not the property of the second bank, had a right to treat it 
as theirs, and was not bound to inquire; and that where two 
banks dealt together in this way for several years, kept an account 
current, and mutually credited the collections, there was a lien 
upon the paper so transmitted for the balance without regard to 
who might be the real owner. The first bank, by indorsing the 
paper in such a manner as to make it appear prima facie the prop- 
erty of the failing bank, had no particular equity in its favor. 

But this came again before the United States Supreme Court 
in Bank of Metropolis v. New England Bank, 6 How. U. S. 212, 
where the court lays down its propositions more definitely ; that 
if the collecting bank, at the time of the dealings, had notice that 
the bill was not the preporty of the intermediate remitting bank, 
but had been merely sent by them for collection as agent for 
some other bank, then the collecting bank had no right to retain 
for any balance due from the intermediate bank which had failed ; 
even if the collecting bank had no notice, they could not retain as 
against the real owner, unless credit had been given to the inter- 



Blaine et al. v. Bourne et al. 303 

mediate remitting bank, or what was equivalent, balances suf- 
fered to remain to be met by such paper; but if the latter was 
the case, and they had treated the intermediate bank as the owner, 
and had no notice, then they might retain. 

And there are further explanations of the decision in Wilson 
v. Smith, 3 How. U. S. 763, 769. And see it criticised and 
restricted in McBride v. Farmers' Bank of Salem, 25 Barb. S. C. 
657, 661, which case was affirmed on appeal in McBride v. Farm- 
ers' Bank, 26 N. Y. 450. See also Reeves et al. v. State Bank, 
8 Ohio St. 465; Jones v. Milliken & Son, 41 Pa. St. 252; Dick- 
erson v. Wasson, 54 Barb. S. C. 230 ; also in 47 N. Y. 439. There 
are some cases going still further in favor of the original remit- 
ting bank, and allowing parol evidence to show the fact. Law- 
rence v. Stonington Bank, 6 Conn. 521, and cases there cited; 
Bank of Washington v. Triplett & Neale, 1 Pet. 25 ; Commercial 
Bank of Clyde v. Marine Bank, 3 Keyes, 337 ; also in 1 Ab. Ct. 
App. Dec. 405. 

A general indorsement of bills is prima facie evidence of 
property in the indorsee, and even where it is subject to any equity 
or trust between former parties, may change the legal property 
as to bona fide holders for value. Collins v. Martin, 1 B. & P. 
648. But even where there is a general indorsement of paper 
sent only for collection, it will still remain the property of the 
sender as to all persons having notice. 

The counsel for the plaintiffs say that the present case would 
come under the head of what is in some places denominated a 
"short entry." It would seem that in London it was a custom 
(Giles et al. v. Perkins, et als., 9 East, 12, and counsel arguendo 
in Ex parte Thompson, 1 Mont. & Mac. 102, no) for bankers to 
receive bills for collection and to enter them immediately in their 
customers' accounts, but never to. carry out the proceeds in the 
column to their credit until actually collected ; and this was called 
a "short entry," or "entering short." And such bills always 
continued the property of the customer, unless the contrary was 
to be inferred from some course of dealing. Whereas country 
bankers in England generally credited to their customers at once 
all bills considered good, and generally allowed drafts upon the 
proceeds. And even in the latter cases Lord Ellenborough held 
such bills did not pass to the assignees in bankruptcy, if there 
was a balance in favor of the customer over and above the bills. 
(Giles et al. v. Perkins et als., 9 East 12; Ex parte Harford, 2 
Rose, 163.) But Lord Eldon held that where they were with the 
.knowledge of the customer entered as cash, and the customer was 



304 Indorsement Vesting Title in Indorsee 

entitled to draw against them, he could not claim the specific bills, 
(Ex parte Sargeant, i Rose, 153; Ex parte Thompson, 1 Mont. 
\& Mac. 102, A. D. 1828.) But even where the custom was to 
enter short and it was not done, this would not change the prop- 
erty, unless some act of the customer concurred. (Ex parte Sar- 
geant, 1 Rose, 153; Ex parte Pease, 1 Rose, 232; and the Vice- 
Chancellor's opinion in Ex parte Thompson, 1 Mont. & Mac. 
102, 112). 

But besides the ground that this was equivalent to a short 
entry, and that the cases decided upon that point apply to it, 
it is contended that in this case the effect of the restriction in the 
indorsement was to give all subsequent holders express notice 
of the trust, and we think this view of the plaintiff's counsel is 
correct. 

The indorsee is rather an agent of the indorser with power of 
substitution, and the bill is still in the possession of the indorser 
by his agent. (Ex parte Sargeant, 1 Rose, 153.) The very mode 
of indorsement in this case shows that it is not a case of ordi- 
nary indorsement, and that no consideration has been paid for it. 
(Eadie & Laird v. E. India Co., 1 W. Bla. 295 ; also in 2 Burr. 
1216.) The bill must be taken by the holder subject to the trust; 
and, says Judge Story (On Agency, §211), if he voluntarily 
consents to or aids in any other appropriation he is responsible ; 
and says Judge Byles (On Bills, *I57), he holds the bill or 
money as trustee for the restraining party, and is liable to the 
party making the restriction. The words are notice that the 
restricted indorsee has no property in the bill; that he is a mere 
trustee, and that he can appoint no sub-agent except for the pur- 
pose of holding the bill or money on the same trust, and if the 
holder pays it to the intermediate agent, he becomes responsible 
for its misapplication. 

In the case of Sigourney v. Lloyd et als., 8 B. & C. 622 ; also 
in 3 M. & R. 58, and in Dan. & LI. 132; 2 Chitty Jun. on Bills, 
1412, 1439, it was contended that an indorsement, "Pay to B. 
for my use," was a mere direction to B. as to the application of 
the money; but Lord Tenterden said that if it meant no more 
the words were useless; as he would be so liable without those 
words. 

In that case the payee indorsed generally to A. A., the plain- 
tiff, indorsed, "Pay B. or order for my use;" the defendants 
discounted it and applied it to the credit of B. B. failed, and 
it was held that the indorsement was sufficient notice to prevent 
its transfer for the benefit of any other person; that all subse- 



Estabrook v. Smith 805 

quent indorsees were trustees for the plaintiff; and that whoever 
advanced any money on it did it at his peril. And on appeal 
this judgment was confirmed by the Exchequer Chamber, the 
court holding that the money to whomsoever paid was in trust 
for the indorser. {Lloyd et al. v. Sigourney, 5 Bing. 525 ; also 
in 3 M. & P. 229, and 3 You. & Jer. 220, and Dan. & LI. 213). 

This custom of restricted indorsing is not of late origin, but 
is spoken of as .usual in Snee et al. v. Prescott et als., 1 Atk. 245, 
249, A. D. 1743; the object being, as there stated, to prevent 
the indorsement being filled up in such a manner as to pass the 
interest in the bill. 

If the defendants in the present suit had paid the cash to Jay 
Cooke before hearing of the failure, it would have presented a 
different question. But they had no right to apply the money of 
the plaintiffs to the payment of a debt due to them (the defend- 
ants) from Jay Cooke. This is not such a payment as can pro- 
tect them against a suit by the plaintiffs, the real owners. ( Truei- 
tel v. Barandon, 2 Chitty Jun. on Bills, 1002 ; also in 8 Taunt. 
100, and 1 Moore, 543; Thompson v. Giles, 2 Chitty Jun. on 
Bills, 1 190; also in 2 B. & C. 422, and 3 D. & R. 733; Lloyd's 
note to Paley, quoted in full in Story on Agency, § 228, n. ; 1 
Bell's Comm. *2jo, which work is praised by Mr. Warren as 
being a "mine of commercial law." 

Judgment for plaintiffs. 



INDORSEMENT WITHOUT WORDS OF NEGOTIABILITY. § 38 3. 

Leavitt v. Putnam. {See page 97. ~) 



INDORSEMENT BY PARTNERS. § 43. 

Estabrook v. Smith {1856), 6 Gray, 570, 66 Am. Dec. 443. 

Action of contract upon a promissory note, made by the 
defendant, payable to "Estabrook & Richmond or order," and 
indorsed by Richmond in his own name, for the purpose of trans- 
ferring his interest therein to his copartner, Estabrook, the plain- 
tiff. The parties submitted to the decison of the court the 



306 Indorsement by Partners 

question, whether this indorsement was sufficient to enable the 
plaintiff to maintain an action thereon in his own name. 

D. Foster, for the plaintiff. 

E. Washburn, for the defendant. 

Dewey, J. We take the rule to be uncontroverted, that a 
promissory note payable "to A. B. or order" cannot be trans- 
ferred, so as to give a right of action in the name of a holder, 
not the original party, without an indorsement by the payee. 
The application of this principle seems to be decisive against 
the right of the plaintiff alone to maintain this action. The 
action is brought by Estabrook upon a note made to a copartner- 
ship, Estabrook & Richmond, promising them, by the name of 
their copartnership, to pay them or order a certain sum of money. 
That this action cannot be maintained by the plaintiff, as payee 
of the note, is obvious ; as that would at once present a case 
where there was an omission to join all the payees as plaintiffs, 
which would be fatal to the action. The only question therefore, 
is, whether this note is legally indorsed, so as to enable the plaintiff 
to maintain the action as indorsee ? 

The payees of the note are Estabrook & Richmond, who 
compose a partnership. An indorsement of the note by the 
payees would therefore be an indorsement by Estabrook & Rich- 
mond, and this would correspond with the form of the note, and 
transfer the same to their indorsee. One partner might properly 
transfer the note by indorsement, but he must do it by indorsing 
the partnership name. Any thing less than this seems to be an 
irregularity, and a departure from the legitimate mode of transfer 
of a negotiable note or bill, payable to the order of a copartnership. 

It is not contended that the indorsement by Richmond alone 
would have been sufficient to authorize an action in the name of 
a third person as indorsee ; but it is urged that such indorsement 
is sufficient to authorize an action by the other partner, Estabrook, 
as indorsee. The position taken is, that Richmond, by his 
indorsement, has parted with all his interest, and so vested the 
entire note in Estabrook. This may be all true as between Rich- 
mond and Estabrook, and might be quite sufficient to settle, as 
between them, to whose use this money was to be held when 
collected. But the question still recurs, as to the effect of such 
an indorsement as against the maker of the note, and whether it 
creates the legal relation of indorsee. As already remarked, the 
present action, if maintainable at all, is maintainable by Estabrook 
as indorsee of the note. To constitute a legal indorsement, the 



Dwight v. Pease 307 

payees, Estabrook & Richmond, must be the indorsers. But no 
such indorsement has ever been made. No one has professed to 
indorse the note in the partnership name. The only indorsement 
is that of Richmond individually ; and although it might be quite 
competent for the payees, Estabrook & Richmond, in their part- 
nership name, to have indorsed it to Estabrook, yet they have 
not done so. 

We have found no authority for maintaining an action by an 
indorsee under such circumstances. The case of Goddard v. 
Lyman, 14 Pick. 268, which seems to be the most favorable case 
cited to sustain the position taken by the plaintiff, was widely 
different from the present case. In that case, although the origi- 
nal indorsement was by two only of three payees, and made to 
the other payee and a third person, yet it was subsequently 
indorsed by the third payee, and came to the hands of the plain- 
tiff, who instituted the suit with the indorsement of all the payees. 
That case, upon its facts, does not therefore furnish any pre- 
cedent for this case ; although some of the remarks, as found in 
the opinion of the court, might seem to indicate a broader doctrine 
than the case required. 

The plaintiff then had leave to amend, on terms, by 

joining the other partner, and had judgment for the 

amount of the note. 



INDORSEMENT BY JOINT PAYEES NOT PARTNERS. § 43. 

Dwight v. Pease (1842), 3 McLean, 94, Fed. Cos. No. 4217. 

Mr. Talbot, for defendants. 

Opinion of the Court. This action was brought upon the 
following promissory note: 

"Detroit, January 1st, 1837. 
"Two years after date, I promise to pay to the order of 
Walter Chester, and Pease, Chester & Co. one thousand and five 
hundred dollars, for value received, at the Farmers' & Mechanics' 
Bank of Michigan, with interest. 

"[Signed] John Chester." 

Indorsed: "Pease, Chester & Co. and also D. E. Jones in 
blank." 

The declaration contained three counts, to the first of which 
there was a demurrer. This count states that one John Chester, 



308 Indorsement by Cashier of Bank 

on the i st of January, 1837, made his note payable to order of 
Walter Chester, and Pease, Chester & Co., and that Pease, Ches- 
ter & Co., under their partnership name, indorsed and delivered 
the said note to the plaintiff. John Chester, the maker, was a 
member of the firm of Pease, Chester & Co. Demand of the 
note when due, and notice to the defendants, was proved. Walter 
Chester, one of the promisees in the note, seems not to have 
indorsed it, and this is fatal to the right of the plaintiff. The 
interest of the promisees is joint in the note, and not being in 
partnership, they must each transfer the note. (Chit. Bills, 123; 
Tayl. 55, Carvick v. Vickery, 2 Doug. 653 ; Jones v. Radford, 1 
Camp. 83, note, 21 E. C. L. 41.) Only one-half of the note was 
transferred by the indorsement of Pease, Chester & Co., and this 
does not give a right to their or any subsequent assignee to sue on 
the note. Recourse against the maker cannot thus be divided and 
suits multiplied. The plaintiff seeks by this action to recover the 
full amount of the note against the defendants, as indorsers. But 
as he holds but one-half of the note under the assignment, the 
indorsement, at most, can only be evidence of that amount. The 
declaration is defective in not averring that Walter Chester, one 
of the payees, did indorse the note. 

Demurrer sustained. The plaintiff dismissed his action. 



INDORSEMENT BY CASHIER OF BANK. § 44. 

Folger et al. v. Chase et al. (1836), 18 Pick. (Mass.) 63. 

This was assumpsit against the executors of Joseph Chase 
to recover the amount of three promissory notes. 

The first note, dated April nth, 1825, was made by E. Dixon, 
for the sum of $867, payable to the order of the testator at the 
Pheenix Bank in Nantucket, on demand, with interest, and was 
indorsed by the testator to the President, Directors and Company 
of the Phoenix Bank, the testator expressly waiving all right to 
notice as such indorser. Upon a separate paper, annexed to this 
note by a wafer, was the following indorsement : "P. H. Folger, 
Cashier." 

The second note, dated January 18th, 1830, was made by 
James Barker, for the sum of $1,235.92, and was payable to the 
order of the testator, at the Phoenix Bank, on demand, with inter- 
est. The third note, dated September 21st, 1832, was made by the 
testator, for the sum of $358.31, payable to the order of Edward 
Chase, at the Phoenix Bank, on demand, with interest. These 



FOLGER ET AL. V. CHASE ET AL. 309 

two notes were indorsed by the respective payees and by "P. H. 
Folger, Cashier," the payees expressly waiving all right to notice 
as indorsers. 

Wilde, J., delivered the opinion of the Court. 

This was an action on three promissory notes of hand, on two 
of which the defendants are sued as executors Of an indorser, and 
they object to the plaintiffs' recovery on these notes, on the ground 
that no demand has been made on the makers and no diligence 
used to collect the debts of them. These notes, however, were 
made payable at the Phoenix Bank, and were the property of the 
bank. No demand was necessary except at the bank; and 
although there is no express proof that the notes were there, and 
some officer of the bank in attendance, at the time the notes fell 
due, yet this must be presumed, and it was for the defendants to 
show that the makers called at the place appointed, for the purpose 
of making payment. The testator, by his indorsements, guaran- 
tied that the makers would respectively be at the bank and pay 
the notes according to their tenor. (Berkshire Bank v. Jones 6 
Mass. R. 525). 

In the next place it is objected, that the bank had no author- 
ity to indorse the notes in question, as the indorsement was made 
after the charter of the bank had expired by its own limitation ; 
and that the bank had no power to sell or indorse their notes by 
virtue of St. 1819, c. 43. That statute provides, that all bodies 
corporate and politic, whose powers would expire, either by 
express limitation in their charters of incorporation, or otherwise, 
should be continued bodies corporate and politic, for the term of 
three years from and after the day on which their powers would 
expire, for the purpose of prosecuting and defending all suits, 
and of enabling them to settle and close their concerns and divide 
their capital stock; but not for the purpose of continuing their 
business. 

This is a just and wise remedial law, and ought to be liberally 
expounded. By the principles of the common law, upon the civil 
death of a corporation, all its real estate remaining unsold, reverts 
back to the original grantor and his heirs ; and the debts due to 
and from the corporation are extinguished. The object of the 
statute was effectually to guard against the inequitable conse- 
quences of this rule of the common law. Now it appears, that 
within three years after the expiration of the charter of the bank 
these notes were indorsed, and we think the bank had competent 
authority, by virtue of the statute, to make the indorsements. The 



310 Indorsement by Cashier of Bank 

notes not having been collected, the bank had clearly a right to 
sell them, or to dispose of them in any other reasonable and proper 
manner, so as to wind up their concerns. The bank clearly had 
a right to transfer the notes to the plaintiffs, and it is no concern 
of the defendants how the money, when collected, is to be disposed 
of. 

As to the objection, that the indorsement is not made in .the 
name of the corporation, we think the indorsement by the cashier 
in his official capacity sufficiently shows, that the indorsement was 
made in behalf of the bank, and if that is not sufficiently certain, 
the plaintiffs have the right now to prefix the name of corporation. 

The last objection is, that the indorsement on one of the notes 
was not made on the back of the original note, and therefore 
amounted only to an equitable transfer. The indorsement was 
made on a paper attached to the back of the note by a wafer, and 
it had been before thus attached for the purpose of entering 
thereon indorsements of payments, the back of the original note 
having been before covered with indorsements ; and several pay- 
ments had been indorsed on the attached paper, before the note 
was transferred by indorsement to the plaintiff. This paper thus 
attached had become a part of the note, and no good reason can 
be given why an indorsement made thereon should not be held a 
valid and legal transfer. The objection is, that such an indorse- 
ment is not sanctioned by custom ; but we think it is supported by 
the reasons on which the custom was originally founded. Bills 
of exchange and promissory notes were indorsed on the back of 
the bills and notes, because it was a convenient mode of making 
the transfer, and in order that the evidence thereof might accom- 
pany the note. Such an indorsement as this will rarely happen, 
and no authority to support it could reasonably be expected ; but 
there is no authority against it. 

If a person write his name on a blank paper, to be used as an 
indorsement of a note to be written on the other side, and it be 
filled up as intended, the party would be held liable as indorser of 
the note, although such indorsements are infrequent, and are not 
according to the customary form of making a transfer; but they 
have been held to be within the reason of the custom, and are 
supported by principle. (Bayley on Bills, 92; Violett v. Patton, 
5 Cranch, 142). 

So in the present case, as there is no authority against the 
validity of the indorsement, we think we shall violate no principle 
in holding it to be a legal transfer of the note. 

Judgment for the plaintiffs. 



Osgood's Administrators v. Artt 311 

continuation of negotiable character of instrument. § 49. 
Leavitt v. Putnam.. (See page 97.) 



TRANSFER OF INSTRUMENT WITHOUT INDORSEMENT. §51. 

Osgood's Adm'rs v. Artt (1883), 17 Fed. 575. 

At Law. 

W. H. Swift, for plaintiffs. 

Edsall, Hawley & Edsall, for defendant. 

Harlan, Justice. On the fourteenth day of May, 1856, the 
defendant, Artt, executed and delivered to the Racine & Missis- 
sippi Railroad Company his note, whereby, for value received, he 
promised to pay to that company or order, at the expiration of five 
years from May 10, 1856, the sum of $2,500, together with interest 
at the rate of 10 per cent per annum, payable annually on the 
tenth day of May of each year, — principal and interest payable at 
the office of the company in the city of Racine, Wisconsin. At 
the same time, Artt, to secure the payment of the note, executed 
to the company his mortgage upon certain real estate in Carroll 
county,in this state. Subsequently, the company made its bond, 
under date of June 10, 1856, acknowledging its indebtedness to 
and promising to pay Charles Osgood, or bearer, $2,500 on the 
tenth of May, 1861, at its office in the city of New York, together 
with interest from and after the tenth day of May, at the rate of 
10 per cent per annum, payable semi-annually on each tenth day 
of November and May, upon the presentation and surrender of 
the interest coupons at the said office. That bond contained these 
clauses : 

"To the payment whereof the said company hereby bind 
themselves firmly by these presents ; and, for the better security 
of such payments being made to the holder thereof, the said com- 
pany have assigned and transferred, and by these presents do 
assign and transfer, to the said holder of this bond a certain note 
for the sum of $2,500, executed by Robert Artt, of Carroll county, 
together with a mortgage given collateral to and for the purpose 
of securing the payment of the same, dated on the fourteenth day 
of May, 1856, payable in five years from the tenth day of 
May, 1856, with interest at the rate of 10 per cent per annum, 
which said note and mortgage are hereto appended, and are trans- 



312 Transfer of Instrument Without Indorsement 

ferable in connection with this bond, and not otherwise, to any 
parties or purchasers whomsoever. And the said company do 
hereby authorize and empower the holder of this bond at any time, 
in case said company shall fail to perform any of the foregoing 
stipulations by neglecting to pay either principal or interest on 
this bond when the same shall become due, to proceed and fore- 
close the said mortgage, or take such other legal remedy on said 
note and mortgage against said mortgagor, or against this com- 
pany on this present bond, or on both, as shall seem proper and 
expedient to said holder hereof." 

Some time in the summer of 1857 the railroad company sold 
the bond, delivering therewith the note and mortgages to plaintiffs' 
intestate, — the bond, note, and mortgage being attached firmly 
together with eyelets in the order in which they are named, the 
bond on the top, next the note, and then the mortgage. The bond, 
note, and mortgage each bears the number 1,964 written thereon 
in ink. At the time of such purchase and delivery Osgood had no 
notice of any defense to the note, nor of any of the matters alleged 
in defendant's third plea. That plea states facts which are con- 
ceded to show a good defense as between Artt and the railroad 
company, viz., an entire failure of consideration, and also fraud, 
upon the part of the company, in procuring the execution of the 
note and mortgage. The note, bond, and mortgage, after their 
delivery to deceased, remained attached in the manner just stated. 
Upon the back of the note are the words "Racine & Mississippi 
Railroad Company, by H. S. Durand, President," which is the 
indorsement of the railroad company, placed thereon by its author- 
ity. It had not, however, been placed there when Osgood pur- 
chased and received the note, bond, and mortgage, but was made 
at some date subsequent to June, 1859. Before the indorsement 
was, in fact, made on the note, but after the purchase by Osgood, 
he had notice as well of the fraud practiced by the railroad on 
Artt, as of the failure of consideration in the note, as set out 
in the defendant's third plea. 

These facts have been specially found by a jury, and the sole 
question for determination is whether, upon this finding, the plain- 
tiffs are entitled to judgment. The only issue of fact made on the 
third plea is whether Osgood, prior to the indorsement of the note, 
had notice of the alleged fraud and failure of consideration. 

1. It is a settled doctrine of the law-merchant that the bona 
fide purchaser for value of negotiable paper, payable to order, if 
it be indorsed by the payee, takes the legal title unaffected by any 
equities which the payor may have as against the payee. 



Osgood's Administrators v. Artt 313 

2. But it is equally well settled that the purchaser, if the 
paper be delivered to him without indorsement, takes, by the law- 
merchant, only the rights which the payee has, and therefore takes 
subject to any defense the payor may rightfully assert as against 
the payee. The purchaser in such case becomes only the equitable 
owner of the claim or debt evidenced by the negotiable security, 
and, in the absence of defense by the payor, may demand and 
receive the amount due, and, if not paid, sue for its recovery, in 
the name of the payee, or in his own name, when so authorized by 
the local law. 

3. As a general rule the legal title to negotiable paper, pay- 
able to order, passes, according to the law-merchant, only by the 
payee's indorsement on the security itself. The only established 
exception to this rule is where the indorsement is made on a piece 
of paper, so attached to the original instrument as, in effect, to 
become part thereof, or be incorporated into it. This addition is 
called, in the adjudged cases and elementary treatises, an allonge. 
That device had its origin in cases where the back of the instru- 
ment had been covered with indorsements, or writing, leaving no 
room for further indorsements thereon. But, perhaps, an indorse- 
ment upon a piece of paper, attached in the manner indicated, 
would now be deemed sufficient to pass the legal title, although 
there may have been, in fact, room for it on the original instru- 
ment. 

4. But neither the general doctrines of commercial law, nor 
any established exception thereto, make words of mere assignment 
and transfer of such paper — contained in a separate instrument, 
executed for a wholly different and distinct purpose — equiva- 
lent to an indorsement within the rule, which admits the payor 
to urge, as against the holder of an unindorsed negotiable 
security, payable to order, any valid defense which he has 
against the original payee. 

5. The transfer of the note in suit, by words of assignment 
in the body of the railroad company's bond, did not, in the judg- 
ment of the court, amount to an indorsement of the note, although 
the bond, note, and mortgage were originally fastened together by 
eyelets. The facts set out in the third plea, and sustained by the 
special finding, constitute, therefore, a complete defense to the 
action, unless, as contended by plaintiffs, the subsequent indorse- 
ment, in form, by the railroad company, after Osgood was 
informed of Artt's defense, has relation back to the time when 
the former, without notice of such defense, purchased the note 
for value then paid. If, at the time of Osgood's purchase, it had 



314 Transfer of Instrument Without Indorsement 

been agreed that the company should indorse the note, but the 
indorsement was omitted by accident or mistake or fraud upon 
the part of the company, a different question would have been 
presented. In such case, the company might, perhaps, have been 
compelled to make an indorsement which would have been deemed 
effectual as of the time when, according to the intention of the 
parties, it should have been made. But no such case is presented 
by the special finding. It is entirely consistent with the facts 
found that the indorsement by the company was an afterthought, 
induced by notice of Artt's defense, and was not within the con- 
templation or contract of the parties when Osgood purchased the 
bond. Moreover, and as a circumstance significant of an inten- 
tion to restrict, in some degree, the assignability of the note and 
mortgage, it is expressly stipulated, in the company's bond, that 
they are transferable in connection with the bond, and not other- 
wise. 

I am of opinion that the facts which came to Osgood's knowl- 
edge prior to the indorsement, and which, in substance, constitute 
the defense set out in the third plea, furnished notice that the 
company had, by reason of fraud and failure of consideration, 
lost its right to demand payment of the note from Artt. By the 
indorsement, after such notice, Osgood could not acquire any 
greater rights than the company possessed. He did not become 
the holder of the note by indorsement, as required by the law- 
merchant, until after he had notice that the company could not 
rightfully pass the legal title, so as to defeat Artt's defense. 

While the adjudged cases are not in harmony upon some of 
these propositions, the conclusions indicated are, in the opinion 
of the court, consistent with sound reason, and are sustained by 
the great weight of authority. (Chief Justice Marshall, in Hop- 
kirk v. Page, 2 Brook. 41 ; Sturges' Sons v. Met. Nat. Bank, 49 
111. 231 ; Melendy v. Keen, 89 111. 404; Haskell v. Brown, 65 111. 
2,7 ; Lancaster Nat. Bank v. Taylor, 100 Mass. 24 ; Bacon v. Cohca, 
12 Smedes & M. 522 ; Grand Gulf Bank v. Wood, Id. 482 ; Clark 
v. Whitaker, 50 N. H. 474; Haskell v. Mitchell, 53 Me. 468; 
Franklin v. Twogood, 18 Iowa 515; French v. Turner, 15 Ind. 
59; Folger v. Chase, 18 Pick. 63; Whistler v. Forster, 14 C. B. 
246, [108 E. C. L. 248] ; Harrop v. Fisher, 10 C. B. [N. S.] 196; 
Gibson v. Minet, 1 H. Bl. s. p. 606 ; Story, Notes, § 120 ; Story, 
Bills, §201; Chitty, Bills, [12th Amer. from 9th Lond.] 252; 2 
Pars. Notes & Bills, 1, 17, 18; 1 Daniel, Neg. Inst. [3d Ed.] 
§§ 664a, 689a, 690, 741, and 748a). 

The facts specially found do not authorize a judgment for the 
plaintiffs. 



Goshen National Bank v. Bingham et al. 315 

The Goshen Natl Bank v. Bingham et al. (1890), 118 N. Y. 349. 
Bingham et al. v. The Goshen Nat'l Bank. 

Appeals from judgments rendered by the General Term of 
the Supreme Court in the first judicial department, entered upon 
orders made March 31, 1887, which affirmed a judgment in the 
action first above entitled in favor of defendants and a judgment 
in action second above entitled in favor of plaintiffs, both of 
which were entered upon the reports of a referee. 

On November 27, 1884, Benjamin D. Brown applied to the 
cashier of the Goshen National Bank, appellant, at Goshen, N. Y., 
to cash a sight draft for $17,000, drawn by him upon the firm of 
William Bingham & Co., of New York, the individual members 
of which firm are the respondents, accompanied by a quantity of 
the bonds of the West Point Manufacturing Company, of the face 
value of $17,000. Brown represented that he had negotiated a 
sale of these bonds at their face value with William Bingham & 
Co. ; that they had directed him to draw upon them at sight for 
$17,000, the draft to be accompanied by the bonds, and that the 
draft would be paid upon presentation. Such representations 
were absolutely false. The bonds had no market value. Brown 
was a bankrupt and had no funds in the bank except such as 
resulted from the credit given him upon the faith of the draft 
on Bingham & Co., accompanied by the bonds. The cashier of 
the Goshen National Bank, relying upon such representations, 
cashed the draft of $17,000, and placed the proceeds to the credit 
of Brown upon the books of the bank. He gave Brown sight 
drafts on New York for $12,000, and certified a check drawn by 
Brown to his own order, dated November 26, 1884, for $5,000. 
On the morning of November twenty-eight, Brown called at 
the office of William Bingham & Co., and stated that he wanted 
to get some currency. Mr. Bingham passed the check to the 
firm's cashier directing him to give Brown currency for the 
amount. The cashier gave him a check drawn on the Corn 
Exchange Bank for $5,000. Brown had the check cashed at the 
Corn Exchange Bank. He also had the New York drafts cashed, 
amounting to $12,000, which he had obtained from the Goshen 
National Bank. After procuring the checks and drafts to be 
cashed, he fled to Canada, where he remained at the time of the 
trial of these actions. When Bingham & Co. took from Brown 
the check certified by the Goshen National Bank it was not 
indorsed. 

The referee found in the action second entitled that "at the 



316 Transfer of Instrument Without Indorsement 

time of the transfer of the said certified check by Brown to the 
plaintiffs, it was intended both by Brown and the plaintiffs that 
said certified check should be indorsed by Brown, and it was 
supposed by both parties that he had so indorsed it, and if the 
plaintiff had known that it was not indorsed they would not have 
paid the consideration therefor." 

He found, in the action second entitled, "that Brown made 
no statement to the defendants, or either of them, at the time of 
the trensfer of the check that such check was indorsed." 

And "prior to the commencement of the action of replevin 
the defendants never requested Brown to indorse said check." 

While Bingham & Co. held the check in question unindorsed, 
a demand for its return to the bank, accompanied by a full expla- 
nation of the circumstances under which the certification was 
obtained, was made upon Bingham & Co., in behalf of the bank, 
and upon their refusal to return it, an action to recover its pos- 
session was commenced by the bank against Bingham & Co. 

That action is, firstly, above entitled. 

Subsequently, and on December sixteenth, Bingham & Co. 
obtained from Brown a power of atterney to indorse the check. 
Pursuant thereto the check was indorsed and payment thereafter 
demanded of the bank. 

This was re'fused, and thereupon the action, secondly, above 
entitled, was commenced by Bingham & Co., to recover the 
amount of the check. 

Henry Bacon, for appellant. 
Joseph F. Mosher, for respondents. 

Parker, J. As against Brown, to whose order the check 
was payable, the bank had a good defense. But it could not 
defeat a recovery by a bona fide holder to whom the check had 
been indorsed for value. By an oversight on the part of both 
Brown and Bingham & Co. the check was accepted and cashed 
without the indorsement of the payee. Before the authority to 
indorse the name of the payee upon the check was procured and 
its subsequent indorsement thereon, Bingham & Co. had notice 
of the fraud which constituted a defense for the bank as against 
Brown. Can the recovery had be sustained? 

It is too well settled by authority, both in England and in 
this country, to permit of questioning, that a purchaser of a 
draft, or check, who obtains title without an indorsement by the 
payee, holds it subject to all equities and defenses existing 
between the original parties, even though he has paid full con- 



Goshen National Bank v. Bingham et al. 317 

sideration, without notice of the existence of such equities and 
defenses. (Harrop v. Fisher, 30 L. J. [C. L., N. S.] 283; Whist- 
ler v. Forster, 14 C. B. [N. S.] 246; Savage v. King, 17 Me. 301 ; 
Clark v. Callison, 7 111. 263; Haskell v. Mitchell, 53 Me. 468; 
Clark v. Whitaker, 50 N. H. 474; Colder v. Billington, 15 Me. 
398; Lancaster Nat. Bank v. Taylor, 100 Mass. 18; Gilbert v. 
Sharp, 2 Lans. 412; Hedges v. Sealy, 9 Barb. 214-218; Franklin 
Bank v. Raymond, 3 Wend. 69; Raynor v. Hoagland, 7 J. & S. 
11; Muller v. Pondir, 55 N. Y. 325; Freund v. Importers &■ 
Traders' Bank, 76 id. 352; 7>w.s£ Co. v. A/"o?. Sawfc, 101 U. S. 
68; Osgood v. ^4r«, 17 Fed. Rep. 575.) 

The reasoning on which this doctrine is founded may be 
briefly stated as follows: The general rule is that no one can 
transfer a better title than he possesses. An exception arises out 
of the rule of the law-merchant, as to negotiable instruments. 
It is founded on the commercial policy of sustaining the credit 
of commercial paper. Being treated as currency in commercial 
transactions, such instruments are subject to the same rule as 
money. If transferred by indorsement, for value, in good faith 
and before maturity, they become available in the hands of the 
holder, notwithstanding the existence of equities, and defenses, 
which would have rendered them unavailable in the hands of a 
prior holder. 

This rule is only applicable to negotiable instruments which 
are negotiated according to the law-merchant. 

When, as in this case, such an instrument is transferred but 
without an indorsement, it is treated as a chose in action assigned 
to the purchaser. The assignee acquires all the title of the 
assignor and may maintain an action thereon in his own name. 
And like other choses in 'action it is subject to all the equities 
and defenses existing in favor of the maker or acceptor against 
the previous holder. 

Prior to the indorsement of this check, therefore, Bingham 
& Co. were subject to the defense existing in favor of the bank 
as against Brown, the payee. 

Evidence of an intention on the part of the payee to indorse 
does not aid the plaintiff. It is the act of indorsement, not the 
intention, which negotiates the instrument, and it cannot be said 
that the intent constitutes the act. 

The effect of the indorsement made after notice to Bingham 
& Co. of the bank's defense must now be considered. Did it 
relate back to the time of the transfer, so as to constitute the 
plaintiffs holders by indorsement as of that time ? 



318 Transfer of Instrument Without Indorsement 

While the referee finds that it was intended both by Brown 
and the plaintiffs that the check should be indorsed, and it was 
supposed that he had so indorsed it, he also finds that Brown 
made no statement to the effect that the check was indorsed; 
neither did the defendants request Brown to indorse it. There 
was, therefore, no agreement to indorse. Nothing whatever was 
said upon the subject. Before Brown did agree to indorse the 
plaintiffs had notice of the bank's defense. Indeed, it had com- 
menced an action to recover possession of the check. 

It would seem, therefore, that having taken title by assign- 
ment, for such was the legal effect of the transaction, by reason 
of which the defense of the bank against Brown became effectual 
as a defense against a recovery on the check in the hands of the 
plaintiffs as well, that Brown, and Bingham & Co., could not, 
by any subsequent agreement or act, so change the legal charac- 
ter of the transfer as to affect the equities and rights which had 
accrued to the bank. That the subsequent act of indorsement 
could not relate back so as to destroy the intervening rights and 
remedies of a third party. 

This position is supported by authority. (Harrop v. Fisher; 
Whistler v. Forster; Savage v. King; Haskell v. Mitchell; Clark 
v. Whitaker; Clark v. Callison; Lancaster Nat. Bank v. Taylor; 
Gilbert v. Sharp, cited, supra.) 

Watkins v. Maule (2 Jac. & Walk. 243) and Hughes v. Nel- 
son (29 N. J. Eq. 547) are cited by the plaintiff in opposition to 
the view we have expressed. 

In Watkins v. Maule, the holder of a note, obtained without 
indorsement, collected it from the makers. Subsequently the mak- 
ers complained that the note was only given as a guarantee to the 
payee who had become bankrupt. Thereupon the holder refunded 
the money and took up the note upon the express agreement that 
the makers would pay any amount which the holders should fail 
to make out of the bankrupt payee's property. The makers were 
held liable for the deficiency. Hughes v. Nelson did not involve 
the precise question here presented. The views expressed, how- 
ever, are in conflict with some of the cases cited but we regard it 
in such respect as against the weight of authority. Freund v. 
Importers & Traders' Bank {supra) does not aid the plaintiff. In 
that case it was held "that the certification by the bank of a check 
in the hands of a holder who had purchased it for value from 
the payee, but which had not been indorsed by him, rendered the 
bank liable to such holder for the amount thereof. By accepting 
the check the bank took, as it had a right to do, the risk of the 



Goshen National Bank v. Bingham et al. 319 

title which the holder claimed to have acquired from the payee. 
In such case the bank enters into contract with the holder by 
which it accepts the check and promises to pay it to the holder, 
notwithstanding it lacks the indorsement provided for, and it was 
accordingly held that it was liable upon such acceptance upon the 
same principles that control the liabilities of other acceptors of 
commercial paper." (Lynch v. First National Bank of Jersey 
City, 107 N. Y. 183). But one question remains. 

The learned referee held, and in that respect he was sustained 
by the General Term, that the bank by its certification repre- 
sented to every one that Brown had on deposit with it $5,000; 
that such amount had been set apart for the satisfaction of the 
check, and that it should be so applied whenever the check should 
be presented for payment, and that Bingham & Co., having acted 
upon the faith of these representations and having parted with 
$5,000 on the strength thereof, the bank is estopped from assert- 
ing its defense. 

The referee omitted an important feature of the contract of 
certification. The bank did certify that it had the money ; would 
retain it and apply it in payment, provided the check should be 
indorsed by the payee. (Lynch v. First National Bank of Jersey 
City, supra). 

If the check had been transferred to plaintiffs by indorsement 
the defendant would have had no defense, not because of the doc- 
trine of estoppel, but upon principles especially applicable to nego- 
tiable instruments. (Mechanics' Bank v. N. Y. & N. H. R. R. 
Co., 13N.Y.638). 

If the maker or acceptor could ever be held to be estopped 
by reason of representations contained in a negotiable instrument 
he certainly could not be in the absence of a compliance with the 
provisions upon which he had represented that his liability should 
depend. 

But it is well settled that the maker or acceptor of a negoti- 
able instrument is not estopped from contesting its validity, 
because of representations contained in the instrument. In such 
cases an estoppel can only be founded upon some separate and 
distinct writing or statement. (Clark v. Session, 22 N. Y. 312; 
Bush v. Lathrop, 22 id. 535 ; Moore v. Metropolitan Bank, 55 id. 
41 ; Fairbanks v. Sargent, 104 id. 108; Mechanics' Bank v. N. Y. 
& N. H. R. R. Co., supra). 

The views expressed especially relate to the action of Bing- 
ham & Co. against the bank and call for a reversal of the judg- 
ment. 



320 Transfer by Delivery 

We are of the opinion that the action brought by the bank 
against Bingham & Co. to recover possession of the check cannot 
be maintained, and in that case the judgment should be affirmed. 

All concur, except Haight J., not sitting. 

Judgments accordingly. 



. TRANSFER BY DELIVERY- § 32. 

Bitzer v. Wagar (1890), 83 Mich. 223. 

Error to Oceana. Dickerman, J. 

Assumpsit. Defendant brings error. Affirmed. The facts 
are stated in the opinion. 

W. E. Ambler, for appellant. 
Fred J. Russell, for plaintiff. 

Eong, J. This action was brought in the circuit court for 
Oceana county, upon a promissory note reading as follows : 

"$100.00. Hart, Mich., March 20, 1889. 

"Eight months after date I promise to pay to the order of 
Marget A. Bitzer (or bearer) one hundred dollors, at the Oceana 
County Savings Bank, value received, with interest at the rate of 
6 per cent. "Bert Spellman. 

'«G. A. Wagar." 

On the trial the plaintiff had judgment. Defendant brings 
error on the ground : 

2. That the court erred in admitting in evidence the note 
in question, for the reasons — 

a — That the note is payable to the order of Marget A. Bitzer, 
and has never been indorsed or transferred by her to plaintiff, and 
.the title and ownership is still in Marget A. Bitzer, and not in 
plaintiff. 

b — That said note is not competent evidence, for the reason 
that plaintiff has not shown that he owns or has property in said 
note. 

The note is plainly payable to bearer, and suit could be main- 
tained thereon in the name of any holder. 

The judgment must be affirmed, with costs. 

The other justices concurred. 



Day v. Longhurst. (See page 268.) 



Whitehead v. Walker 321 

Section VII — Contract of Secondary Parties. 

CONTRACT OF THE DRAWER. § 63. 

Whitehead v. Walker {1842), 9 M. &W. 505. 

Assumpsit by the endorsee against the endorser of a foreign 
bill of exchange. The declaration stated, that heretofore, to wit, 
on the 8th of August, 1834, and before the bankruptcy of Ben- 
bow, in parts beyond the seas, certain persons made their bill of 
exchange in writing directed to Messrs. Grayhurst and Company, 
and thereby requested them to pay to the defendant, ninety days 
after sight, 72 il. os. 3 d. value received: that the defendant en- 
dorsed the said bill to W. Swainson, who endorsed it to Willis & 
Co., who endorsed it to Benbow; and that the said Grayhurst & 
Co. had sight of the said bill, but had not paid the same. To this 
declaration there were various pleas, the 8th of which was as 
follows : 

8th. — That before the said bill became due, or was presented 
for payment, and after the endorsement to Willis & Co., and 
before the endorsement to Benbow, the bill was presented to 
Grayhurst & Co. for their acceptance, but that they refused to 
accept the same, and the bill was thereupon protested for non- 
acceptance; and that the defendant had not due notice of the 
non-acceptance of the bill, or of its having been so protested; 
and that Benbow, as well as Willis & Co., at the time of the said 
endorsement to Benbow, had notice that the bill had been so pre- 
sented for acceptance, and refused and protested for non-accept- 
ance. 

Verification — 

To the 8th plea, the plaintiff replied de injuria. 

The judgment of the court was pronounced by 
Parke, B. The question raised by the pleadings in this case 
is, whether, ifjbe endorsee of a foreign bill of exchange has pre- 
sented it for acceptance, and (acceptance having been refused) has 
duly-presented j t anc j given notice to the drawer, (for the defend- 
ant, the endorser, is In the same situation), and so has acquired 
a right of action against him by reason of the non-acceptance, a 
new "right of action afterwards accrues to him on the subsequent 
presentment of the bill for payment, and non-payment according 
to itstenor. The plaintiffs, indeed, are not the endorsees who 



322 Contract of the Drawer 

presented the bill, but they are averred to have taken the bill with 
notice of the fact of presentment and dishonour, and therefore 
stand in the same situation, and are not to be considered as, having 
a title as innocent endorsees. (Dunn v. O'Keefe, 5 M. & Selw. 
282). The practical importance of the point in the present case 
arises from the delay of the holder in bringing his action. The 
non-acceptance and the protest thereon occurred in September, 
1834. The bill, according to its tenor, would not be payable till 
the subsequent month of December, and this action was com- 
menced in November, 1840; so that if a right of action accrued in 
December, 1834, the Statute of Limitations cannot be successfully 
pleaded ; whereas, if there was no right of action accruing subse>v 
quently to the protest for non-acceptance in September, 1834, the--' 
statute is a bar. 

On the part of the plaintiff it was contended, that although 
he undoubtedly might have brought an action in the month of 
September, 1834, founded on the non-acceptance, yet it was 
optional with him to do so or not; that he might, if he thought 
fit, waive that action, and proceed merely on the ground of theT) 
subsequent non-payment in December, 1834. For the drawer of a 
bill, it was contended, enters into a double engagement with the 
payee, and through him with the successive holders of the bill, 
namely, first, that the drawee shall accept the bill when regularly) 
presented to him for acceptance ; and secondly, that he shall pay") 
the bill when regularly presented to him for payment. And if this'' 
be a correct representation of the engagement entered into by the 
drawer, the conclusion seems unavoidable, that whatever right of 
action the holder might have acquired by the non-acceptance, he 
certainly is not precluded from suing in respect of the default of/ 
payment. But we are of opinion that the contract entered into by 
the drawer is not such as is contended for by the plaintiff, and 
that he in fact enters into one contract only; namely in the case 
of a bill made payable after sight, that the drawee shall, on the 
bill being presented to him in a reasonable time from the date, 
accept the same, and having so accepted it, shall pay it when duly 
presented for payment according to its tenor ; and in the case of a 
bill payable after date, that the drawee shall accept it if it is pre- 
sented to him before the time of payment, and having so accepted 
it, shall pay it when it is in due course presented for payment ; or 
if it is not presented for acceptance at all, then that he shall pay 
it when duly presented for payment. 

The counsel for the plaintiff, in support of his view of the law, 
relied mainly on some passages which he cited from the work of 



Whithhead v. Walker 828 

Marius on Bills of Exchange, some of which are adopted in Com- 
yns' Digest, tit. "Merchant," (F. 8.) & (F. 9). But with respect 
to those passages, we must remark that the work of Marius, 
though undoubtedly one of authority in its way, is scarcely to be 
looked at as a legal treatise on the subject of bills of exchange. It 
is, as its title imports, a work giving good practical advice from 
a practical man to persons receiving and negotiating bills of 
exchange. The author was a public notary, who lived in the mid- 
dle of the seventeenth century, when questions of mercantile law 
were much less perfectly understood than they are now. In some 
of his notions he was clearly mistaken ; as for instance, he con- 
siders the holder of a bill of exchange to be in all cases bound to 
present it for acceptance ; and it seems very doubtful whether he 
supposed the effect of non-acceptance to be anything more than of 
rendering it incumbent on the drawer to find better security for 
the satisfaction of the holder. It is not, however, absolutely nec- 
essary to decide that Marius is wrong, for he nowhere lays down 
the proposition now insisted on, namely, that after a protest for 
non-acceptance, a second right of action accrues to the holder on 
the non-payment. He speaks, indeed, of the holder retaining the 
bill after non-acceptance, and applying for payment, and suing on 
default of payment ; and this, as a matter of prudence, may prob- 
ably be the wisest course which a party can pursue. In spite of 
the non-acceptance, the drawer still may pay the bill when at 
maturity, and the holder having by protest and notice on non- 
acceptance put himself in a condition to sue the drawer, may very 
reasonably, as a matter of prudence, retain the bill, and endeavour 
to obtain payment when the bill is at maturity, and not involve 
himself in litigation until there has been a failure of payment as 
well as of acceptance. It by no means, however, follows, because 
this is spoken of as being, what probably it still is, the usual course, 
that any second right of action arises on the second default. For 
let us consider what is the nature of the right which the holder 
acquires on the default of the drawee to accept. It is clear (what- 
ever might formerly have been considered on the subject) that by 
the non-acceptance, followed by the protest and notice, the holder 
acquires an immediate right of action against the drawer — a right 
of action, be it observed, not in respect of any special damage from 
the non-acceptance, but a right of action on the bill, i. e., a right 
of action to recover the full amount of the bill. The effect of the 
refusal to accept is, (according to the language of the Court of 
King's Bench in Macarty v. Barrow, as quoted by C. J. Wilmot, 
in 3 Wils. 16), that the drawee says to the holder, "I will not pay 



324 Admissions of the Drawer 

your bill ; you must go back to the drawer, and he must pay you." 
The holder thus acquires by the non-acceptance the most complete 
right of action against the drawer which the nature of the case 
admits, and no subsequent act or omission of the drawee can give 
him a more extensive right against the drawer than he has already 
acquired. But further, on failure of acceptance, the holder is bound 
to give immediate notice to the drawer, and if he omits to do so, he 
forfeits all right of action against him, not only in respect of the 
default of acceptance, but also in respect of the subsequent non- 
payment. Now it is very difficult to reconcile this doctrine with 
the notion that a new right of action arises from the non-payment ; 
for if that were so, it could hardly be that such new right of action 
could be destroyed by the previous neglect to give notice of a 
matter unconnected with that out of which the second right of 
action is supposed to arise. The argument of the plaintiffs must 
be, that a second right of action on the bill arises from the default 
of payment in those cases only in which the holder has duly given 
notice of the non-acceptance, i. e., in those cases only in which the 
holder, by the hypothesis, must have already acquired a right of 
action precisely similar to and co-extensive with that which is 
thus supposed to vest in him by the default of payment. This 
seems to us to be a proposition so much fraught with inconsis- 
tency, and so entirely destitute of principle and authority, that we 
cannot hold it to be law. It may be added, that if the law were as 
is contended for the plaintiffs, this inconvenience would follow, 
that the holder of a bill might at the same time be prosecuting two 
actions on the same bill against the same party, for the recovery 
of precisely the same sum. 

On these grounds we are of opinion that there must be judg- 
ment for the defendant on the demurrers to his 7th and 9th pleas. 
With regard to the 8th plea, we think the replication de injuria is 
good, and judgment on that plea will therefore be for the plain- 
tiffs. Judgment accordingly. 



ADMISSIONS OF THE DRAWER. § 63. 

Kohn et al. v. Wat kins (1882), 26 Kan. 6pi. 

Error from Douglas District Court. 

Action brought by Solomon H. Kohn, Morris Kohn, and M. 
W. Levy, partners as Kohn Brothers & Company, against Wat- 
kins, upon certain drafts, copies of which are as follows: 



Ko'hn et al. v. Watkins 325 

No. 6639. Office of J. B. Watkins & Co., 

Lawrence, Kas., April 20, 1880. 
Pay to the order of Geo. W. Cobb, three hundred and fifty- 
five dollars. J. B. Watkins & Co. 
$355- To Merchants' Bank, Lawrence, Kas. 
[Indorsements:] Pay to the order of R. G. McLain. 

Geo. W. Cobb. 
R. G. McLain. 

No. 6652. Office of L B. Watkins & Co., 

Lawrence, Kas.; April 21, 1880. 

Pay to the order of Michael A. Becker, three hundred and 

fifty-five dollars. J. B. Watkins & Co. 

$355- To Merchants' Bank, Lawrence, Kas. 

[Indorsements:] Pay to the order of R. G. McLain. 

Michael A. Becker. 
R. G. McLain. 

No. 6656. Office of J. B. Watkins & Co., 

Lawrence, Kas., April 21, 1880. 
Pay to the order of Henry Greer, four hundred and forty- 
four dollars. J. B. Watkins & Co. 
$444. To Merchants' Bank, Lawrence, Kas.. 
[Indorsements :] Pay to the order of R. G. McLain. 

Henry Greer. 
R. G. McLain. 

Plaintiffs alleged in their petition that they are the bona fide 
holders and owners of said drafts ; that they paid a valuable con- 
sideration therefor, and that they are wholly unpaid. 

The further facts sufficiently appear from the opinion. 

Sluss & Hatton, for plaintiffs in error. 

R. J. Borgholthaus, W. J. Patterson, and John Hutchings, for 
defendant in error. 

The opinion of the court was delivered by 

Horton, C. J. Upon the record of this case two different 
questions are presented for our decision. The first is, whether a 
draft or bill of exchange payable to a real person known at the 
time to exist, and present to the mind of the drawer when he 
made it, as the party to whose order it is to be paid, must bear 
the genuine indorsement of such payee in order that a bona fide 
indorsee may recover thereon, when such bill has been drawn 
without the knowledge or consent of the person named therein 
as payee through the false representations of a party forging the 



326 Admissions of the Drawer 

indorsement, who obtains it from the drawer by fraud and without 
consideration? Second, if a drawer be induced by the fraudu- 
lent representations of a party seeking to defraud him, to make 
a draft or bill of exchange payable to a fictitious person, not 
knowing the payee to be fictitious when he makes the bill and 
intending that such bill shall be payable to a real person, may 
the bona fide holder thereof recover on it against a drawer as 
upon a bill payable to a fictitious payee ? 

The first inquiry arises upon the findings of the trial court 
in relation to the bill payable to the order of Michael A. Becker. 
It appears that he was a former resident of Kingman county, and 
therefore a person in esse; that his name was forged to an appli- 
cation transmitted to Watkins by R. G. McLain without the 
knowledge or consent of Becker, asking for a loan of money 
upon premises purporting to be situated in Kingman county. It 
further appears that the defendant accepted the application trans- 
mitted by McLain, believing it to be genuine, and undertook to 
loan thereon the sum of $400, less commissions, and sent McLain 
a blank note and mortgage together with the draft ; that McLain 
forged the name of Becker upon the draft, indorsed thereon his 
own name, and negotiated the same, and received from the plain- 
tiffs the money therefor. The plaintiffs received the draft in the 
usual course of trade, and paid full value. It is argued by counsel 
for plaintiffs, that as to this draft Becker is to be deemed a 
fictitious person, because he had no knowledge of the draft, and no 
interest or concern in it. We do not think the position sound. 
The statute prescribes that to make a bill of exchange drawn pay- 
able to order negotiable, it must contain the indorsement of the 
person therein named as the payee. (Comp. Laws 1879, ch. 14, 
§1). And we suppose that counsel for defendant will concede, 
as a general rule, that the plaintiffs could not recover as the 
indorsees of the note without proving the indorsement of the 
payee. Now while the authorities hold that when the drawer or 
maker of a bill of exchange knows that the payee is a fictitious 
person at the time he makes the draft, that a bona fide holder may 
recover on it against him as upon a bill payable to bearer ; and, 
while some of the authorities hold that it will be no defense 
against a bona fide holder for the maker or drawer to set up that 
he did not know the payee to he fictitious, yet none of these 
authorities sustain the doctrine that if the payee be a real person, 
and such person was present to the mind of the maker or drawer 
when he made the draft as the party to whose order it is to be 
paid, a recovery can be had thereon without the genuine indorse- 



Kohn ETAL. v. Watkins 327 

ment of the payee upon the mere indorsement of the party who 
induced the drawer to make the bill by fraudulent representations. 
Nor can such bill be considered as one running to a fictitious 
payee, and as if drawn payable to bearer. If the principle con- 
tended for by counsel be adopted, it would be wholly immaterial 
whether the indorsement is genuine or not, so far as to give to 
the instrument the character of negotiable paper when the indorser 
himself is not actually sued. For it would always be open to 
the dilemma, if he is a party, it is a genuine indorsement; if he 
is not, he is a fictitious payee and no indorsement is necessary. 
(Dana v. Underwood, 19 Pick. 99; Rogers v. Ware, 2 Neb. 29). 
In our opinion, the indorsement on the draft to Becker is a clear 
forgery, and the holders, however innocent, cannot recover from 
the drawer. 

The second inquiry presents more difficulty. No such per- 
sons as Henry Greer or Geo. W. Cobb, the payees mentioned in 
two of the drafts, resided in Kingman county, or owned land as 
purported by the applications transmitted by McLain. These 
payees are fictitious. The finding upon this matter is, that these 
applications (for loans) are wholly false and fraudulent, and were 
manufactured by McLain with the design and for purpose of 
obtaining money thereon fraudulently. In the draft to Becker, a 
real person was inserted as payee at the instance of McLain ; but 
in the drafts to Greer and Cobb, fictitious names were transmitted 
by McLain, and such names adopted by the drawer from the 
applications so received by him from McLain; and these drafts, 
therefore, are not payable to persons in esse.. Although the 
defendant made the bills in ignorance of the fact that these parties 
named as payees had no existence, yet, taking all the circum- 
stances of the transaction together, we think the drafts to Greer 
and Cobb are controlled by the line of decisions respecting bills 
and notes made payable to fictitious payees. Daniel on Negotiable 
Instruments, § 139, says : 

"In the case of a note payable to a fictitious person, it appears 
to be well settled that any bona fide holder may recover on it 
against the maker as upon a note payable to bearer. It will be 
no defense against such bona fide holder for the maker to set up 
that he did not know the payee to be fictitious. By making it 
payable to such person he avers his existence, and he is estopped, 
as against the holder ignorant of the contrary, to assert the 
fiction." 

The authority to sustain the rule announced is, Lane v. 
Krekle, 22 Iowa, 399. This authority, so far as the actual points 



328 Admissions of the Drawer 

necessary to have been decided in that case, hardly goes so far as 
the text of the author, because the note in that action was made 
payable to bearer, and Dillon, J., remarks at the commencement 
of the opinion, "That this fact relieves the case of some difficul- 
ties that would arise were it payable to the person named, or 
order." Yet that learned judge, in the opinion, presents a strong 
argument in support of the proposition stated by Daniel. He 
says: 

"Upon reason and principle we are clear that, if the plaintiff 
is a bona fide holder for value and without notice, the fact that the 
note is made payable to a fictitious person, is no defense. In such 
case, the defendant would be estopped, as against the plaintiff, 
from setting up the fact. It was the defendant who made the 
note. By making it payable, as he did, he affirmed the existence 
of such a person as the payee therein named ; and he should not, 
against a person ignorant of that fact — one who may reasonably 
be presumed to have acted upon the faith of the fact thus rep- 
resented — be allowed to assert the contrary. This principle of 
estoppel in pais has a very extended and just application in the 
law of bills and notes, the doctrines of which are designed to 
give credit and circulation to negotiable paper, and to that end 
throw its protection around the honest and fair holders thereof. 
In respect to such a holder, the maker is bound to know that the 
payee is a real person, or thereafter hold his peace." 

In the case of Phillips v. Im Thurn, 1 14 Eng. C. L. 694, the 
defense was that the payee was a fictitious person, in ignorance 
of which fact the drawer drew the bill. It was decided by the 
court that since the drawer would be estopped to set up the fact 
that the payee was a fictitious name, the like estoppel would 
apply to an acceptor for the honor of the bill. In Forbes v. Espy, 
21 Ohio St. 474, the defendants drew upon their correspondents 
in New York city in favor of Cochran, Holmes & Co., and by 
them indorsed to Charles Clark (a fictitious name assumed by one 
William Mara), and in that name indorsed in blank. Forbes & 
King became the bona fide holders of the draft. It was presented, 
payment refused by previous directions of the defendants, pro- 
tested, and due notice given to the defendants. Mr. Justice Mc- 
Ilvaine, speaking for the court, says that the defendants were 
estopped from denying plaintiffs' title. In Chalmers' late Digest 
of the Laws of Bills of Exchange, p. 144, the law is thus stated : 
"B., at the request of X., makes a note payable to C.'s order. C. 
is a fictitious person, but B. does not know this. X. indorses the 



Kohn ET AL. v. Watkins 329 

note in C.'s name, and it is negotiated to D., a bona fide holder for 
value, without notice. D. can sue B. , Cooper v. Mayer (1830), 
10 B. & C. 468; Beeman v. Duck (1843), 11 M. & W. 251; 
Schults v. Astley (1836), 2 Bing. (N. C.) 544." 

Passing from these cases, and the authorities therein cited, 
to the reasons for these two drafts being held as payable to 
fictitious payees, we add, that of course if Watkins had not 
intended that such payees should become parties to the transac- 
tion, or, in other words, had knowledge of their non-existence, 
there could be no question as to error in the judgment of the 
court below. (1 Parsons on Bills, 32, 560, 591, 592, and notes; 
2 Parsons on Bills, 40, 50; Story on Bills, §§ 56, 200; 4 E. D. 
Smith, 83). Ought the defendant, who made the bills in ignor- 
ance of the fact that the persons named as payees are fictitious, 
and thus parted with them to a correspondent, be permitted to 
aver and prove this as against the innocent holders for value? 
Either plaintiffs or defendant must lose in this transaction. Wat- 
kins transmitted these drafts to his correspondent McLain, and 
McLain was thereby enabled to fraudulently put them in circu- 
lation. If the payees had been known to defendant as fictitious, 
they could have been treated by McLain as well as the plaintiffs, 
as bills payable to bearer. Now when a drawer issues a bill to a 
fictitious payee, although ignorant of that fact at the time, and 
parts with the possession thereof, ought he in fairness and justice 
to be allowed to say that such bill is void? "Where one of two 
innocent parties must suffer from the wrongful or tortious acts 
of a third party, the law casts the burden or loss upon him by 
whose act, omission or negligence such third party was enabled 
to commit the wrong which occasions the loss." (Bank v. Rid. 
Co., 20 Kas. 520). While the finding is, that the defendant was 
not negligent in making and sending these drafts, and that Mc- 
Lain was not the agent of the defendant in these transactions, it 
fully appears from the other findings that the drafts were sent 
to McLain, and that only for the act and conduct of the defendant, 
induced by the wrongful acts of McLain, these bills would not 
have been issued and sent forth as commercial paper. To some 
extent, it must be conceded, defendant, by his conduct as to these 
bills, placed himself in the hands of his correspondent. For 
instance, if Greer and Cobb had been in existence, and McLain 
had passed over to them these drafts without taking back any 
note or mortgage, it will not be questioned that after Greer and 
Cobb had indorsed and negotiated them to innocent holders, the 
defendant could not. set up the fraud of these parties as any 



380 Admissions of the Drawer 

defense. In this way, if such parties were insolvent, the defend- 
ant would have been also absolutely defrauded of his money. So 
we think that, having relied upon the application received from 
McLain for the names of the payees in the drafts issued by him, 
and two of the payees being fictitious, and then having trans- 
mitted these drafts to McLain, and thus given him the oppor- 
tunity to put them in circulation, the defendant is not now in a 
condition to claim that the drafts are void, and to set up as a 
defense that he did not know such payees to be fictitious. He 
acted upon the information derived from McLain ; he is bound by 
McLain's knowledge, and must be conclusively presumed, as 
against the innocent holders for value, to have known that these 
two drafts are payable to fictitious payees. He can no more set 
up the fraud of McLain as to these two drafts, than he can the 
fraud of Greer and Cobb, had there been such persons actually 
existing in Kingman county, and they had obtained these drafts 
from McLain without complying with the request of the drawer 
as to the execution of the notes and mortgages, and then indorsed 
and negotiated them to innocent holders. 

Counsel for defendant refer to cases making the indorsement 
by McLain upon the bills at the time he delivered them to plain- 
tiffs a forgery. Even if this be so, we do not think it prevents 
the recovery by plaintiffs, because the principle of estoppel in pais 
is to be applied to the defendant, and as between the plaintiffs and 
the defendant these drafts are to be treated as if drawn payable to 
bearer. 

The case will be remanded, with directions for the court 
below to render, judgment upon the findings of fact 
for plaintiffs upon the drafts payable to Greer and 
Cobb, and judgment for the defendant upon the draft 
payable to Becker. 
All the justices concurring. / 

\ '*' 

V 

Phillips v. Im Thurn (1865), 18 C. B. (N. S.) 694, 114 E. C. L. 

6p2. 

This was an action against the acceptor for honour of a bill 
of exchange. 

To the 6th plea, — that, when the bill of exchange in the first 
count mentioned was made, there was no such person as Carlos 
Raffo, the supposed payee named in the said bill, but the said name 
of Carlos Raffo was and is merely fictitious, whereof the defendant 



Grey v. Cooper 331 

at the time of his acceptance of the said bill had no notice or 
knowledge, — the plaintiffs demurred; the ground of demurrer 
stated in the margin being, "that the defendant is by his said 
acceptance estopped from saying that there was no such person as 
Carlos Raffo, the person named in the said bill." Joinder. 

Erle, C. J. — I am of opinion that our judgment in this case 
should be for the plaintiff. The action is brought by the holder 
of a bill accepted by the defendant supra protest for the honour of 
the drawer, acceptance having been refused by the drawee. At 
the maturity of the bill all things were done which were necessary 
to fix the defendant with liability as an acceptor for honour : and 
the defence relied on, is, that the bill was drawn payable to a fic- 
titious payee, of which fact the defendant had no notice at the 
time of his acceptance of the bill. I take it to be clear, that, if 
the defendant had not intervened, and the action had been brought 
by the holder of the bill against the drawer, the drawer would 
have been by law compelled to admit that the bill was a valid bill 
payable to bearer, or, in other words, that he would have been 
estopped from denying the endorsement of the payee. It seems to 
me that there is good reason for saying that that which the drawer 
would be estopped from denying the acceptor for honour should 
also be estopped from denying. I think he is equally bound to 
admit that the bill is a valid bill. The acceptor supra protest pay- 
ing the bill has all the rights against the drawer that an ordinary 
holder would have. I find no authority which contravenes this 
view ; and it seems to me that it receives confirmation from the 
passages cited from Story on Bills. 

Judgment for the plaintiff. 



\y 

Grey v. Cooper (1782), 3 Doug. (K. B.) 65. 

This was an action on a bill of exchange, by the indorsee 
against the drawer. The declaration stated, that the defendant 
drew the bill payable to one Walker, who indorsed it to Holbrook, 
who indorsed it to Shipden, who indorsed it to the plaintiff. Pleas : 
1. Non assumpsit; 2. That Walker, at the time of the indorsement 
by him, was an infant. Demurrer to the second plea. 

Lord Mansfield. The ground on which the drawer is 
charged is, that he drew a bill by which he engaged to pay accord- 
ing to the order of the payee, whoever that payee might be. He 



332 Contract of the General Indorser 

might give the infant an authority which the law itself does not 
give him. In the same manner he may give a bill to his own wife. 
The drawer says, "let anybody trust the payee on my credit." The 
acts of an infant are void, or not, accordingly as they are for his 
benefit. The privilege of an infant is personal, and there is no 
question here as between the infant and another person. The 
infant sets up no claim, and the drawer is liable to pay. 

Judgment for the plaintiff. 



CONTRACT OF THE GENERAL INDORSER. § 68 2. 

True v. Bullard (1895), 45 Neb. 409. 

Error from the district court of Hitchcock county. Tried 
below before Welty, J. 

/. W. Cole and Wm. 0. Woolman, for plaintiff in error. 
L. H. Blackledge, contra. 

Ragan, C. The material facts in this case are : On the 9th 
of December, 1889, one R. W. Boston made his certain promissory 
note of that date for $265, due September 9, 1890. This note was 
payable to the order of and delivered to one S. L. True. Before 
the maturity of this note True sold and delivered it to W. C. Bul- 
lard & Co., and indorsed it in blank. Before the note matured 
Bullard & Co. sold it to a bank, and it not being paid at maturity, 
the bank sued the maker of the note and True as an indorser 
and obtained a judgment against them. True then brought this 
suit in the district court of Hitchcock county against Bullard & 
Co., reciting the foregoing facts, and alleging that at the time 
he sold the note to Bullard & Co. and indorsed it, it was orally 
agreed between him and Bullard & Co. that the sale and indorse- 
ment of the note to them should be and was without recourse on 
him, True ; or, in other words, notwithstanding that he indorsed 
the note in blank, he was not to be or become liable thereon as an 
indorser. True in his petition did not aver that he had paid the 
• judgment rendered on the note or any part thereof. The district 
court sustained objections to the evidence offered by True to sup- 
port the allegations of his petition on the ground that the petition 
did not state facts sufficient to constitute a cause for action, and 
directed a verdict for Bullard & Co., on which judgment of dis- 



True v. Bullard 333 

missal of True's action was rendered, and he prosecutes to this 
court a petition in error. 

The record presents two questions : May the payee of a 
promissory note, who has indorsed his name on the back thereof 
and delivered said note to a purchaser, show by parol, in a suit 
between himself and said purchaser, that by so indorsing and 
delivering said note, that the liability created thereby was a 
different liability from that which the law implies against a 
party by reason of such an indorsement of commercial paper? 
Or, applied to the facts in the case at bar, is it competent for True 
to prove by parol that at the time he indorsed and delivered the 
note in question to Bullard & Co. that the agreement between them 
was that he, True, should not be liable on said note as an indorser 
by reason of such indorsement and delivery? When the payee 
of a note indorses his name thereon in blank and delivers said 
note to a purchaser thereof, the law in effect writes over the sig- 
nature of said indorser an agreement on his part that if the holder 
of said note shall present it to the payor thereof at its maturity 
for payment and it be dishonored, and that if such holder shall 
then give such indorser notice in a reasonable time of the dishonor 
of said note, that he, the indorser, will pay it; and on the part of 
the indorsee of said note, the contract created by the law is that 
he will present said note at its maturity to the payor thereof for 
payment, and if it be dishonored, that he will within a reasonable 
time notify the indorser of said note of such dishonor. It must 
be admitted that many eminent authorities hold that parol evidence 
is not admissible to contradict or vary the contract which the law 
raises by reason of the indorsement in blank and delivery of com- 
mercial paper, either on the part of the holder or the indorser ; but 
in Holmes v. First Nat. Bank of Lincoln, 38 Neb., 326, this court 
held that between the original parties a blank indorsement might 
be modified by parol ; that the entire transaction might be shown 
by reason of which the indorsement was made, and that parol 
evidence was admissible for the purpose of proving the actual 
contract made between the indorser and indorsee at the time of 
the blank indorsement. On the authority of that case we hold 
that it was competent for True to show by parol that at the time 
he indorsed and delivered the note to Bullard & Co. that, not- 
withstanding such indorsement and delivery, he, True, was not 
to be held liable as an indorser of the note ; and that Bullard & 
Co. in effect purchased the note without recourse on True. But 
we must not be understood as deciding that the payee of a prom- 
issory note, who indorses it in blank and delivers it before 



334 Contract of the General Indorser 

maturity, could set up the defense that he in fact sold and indorsed 
without recourse, as against a subsequent indorsee of said note 
who purchased it before maturity, in the usual course of business, 
and without knowledge of the contract between the indorser and 
first indorsee. 

As already stated, True in his petition did not aver that he 
had paid any part of the judgment which had been rendered 
against him on said note in favor of the bank to whom it had been 
sold and assigned by Bullard & Co. So far, then, as the petition 
shows, True has not been damaged. Under no view of the case 
can he have any cause of action against Bullard & Co. until he 
shall have paid the judgment rendered on said note or some part 
thereof. (Churchill v. Moore, 15 Kan., 255; Lott v. Mitchell, 32 
Cal., 24; Jeffers v. Johnson, 21 N. J. Law, 73). 

But what was the contract between True and Bullard & Co. ? 
The petition avers that Bullard & Co. "expressly agreed, and it 
was understood and made a part of the consideration of the sale 
and transfer of said note, that said defendants Bullard & Co. were 
to accept and take said note without any liability or recourse 
whatever on the part of this plaintiff on account of the non- 
payment of said note at maturity." The most that can be said for 
this language is that by it Bullard & Co. agreed that so far as 
they were concerned as holders of the note they would not look 
to True for payment thereof ; that he was not to be liable to them 
as an indorser. But Bullard & Co. did not agree, so far as the 
pleadings show, not to sell and indorse this note, nor did they 
agree that if they did sell and indorse the note they would advise 
the purchaser of the contract existing between them and True. 
The mere fact that Bullard & Co. transferred this note before 
maturity to the bank, and that as against the bank True could 
not set up as a defense the contract under which he indorsed it 
to Bullard & Co., does not invest True with a right of action 
against Bullard & Co. In other words, Bullard & Co. have not 
violated their contract with True. The petition does not state 
a cause of action. The judgment of the district court is right and 

is Affirmed. 



Mt. Mansfield Hotel Co. v. Bailey 335 

Mt. Mansfield Hotel Co. v. Bailey (1891), 64 Vt. 151, 16 L. R. A. 

295- 

Special assumpsit for the annual interest due on five prom- 
issory notes endorsed by the defendant. Plea, the general issue. 
Trial by court at the April term, 1890, Lamoille county, Munson, 
J., presiding. Judgment for the defendant. The plaintiff excepts. 

The case appears in the opinion. 

P. K. deed, for the plaintiff. 
Geo. Wilkins, for the defendant. 

The opinion of the court was delivered by 

Tyler, J. It appears by the statement of facts that Geo. Doo- 
little and Mrs. E. J. Doolittle promised to pay the defendant, Wil- 
liam P. Bailey, or order, five thousand dollars, as their five promis- 
sory notes should respectively become due, and the interest thereon 
annually. The notes are dated April 1, 1886, are for $1,000 each, 
and payable 16, 17, 18, 19 and 20 years from their date. 

The plaintiff, as the indorsee of the notes, seeks to recover 
of the defendant, as indorser, the first three years' interest upon 
them without demand of the makers and notice to the defend- 
ant of the makers' default of payment. The defendant's counsel 
contends, 1st, that the indorser cannot in any event be compelled 
to pay the interest as it annually falls due, that his conditional 
liability does not become absolute until the notes respectively 
mature, and then only after demand and notice; 2d, that if the 
interest is collectable of the indorser as it annually accrues it is 
after the usual measures have been taken to make him chargeable. 

The general rule of law relative to the respective liabilities of 
the maker and indorser of a promissory note is well defined. The 
promise of the maker is absolute to pay the note upon presentment 
at its maturity. The promise of the indorser is conditional that if, 
when duly presented, it is not paid by the maker, he, the indorser, 
will, upon due notice given him of the dishonor, pay the same 
to the indorsee or other holder. 

It seems clear that the indorser is not liable for the annual 
payment of the interest without performance of the conditions by 
the holder. If he were thus liable his relation to the note would 
be like that of a surety or a joint maker, and his promise, instead 
of being conditional, would be absolute as to the payment of the 
interest. This is contrary to the general statement of the law that 



336 Contract of the General Indorser 

his liability is conditional. The relation of principal does not 
exist between him and the maker. They are not co-principals. 
Their contracts are separate and they must be sued separately, at 
common law. (Randolph Com. Paper, s. 739). The maker has 
received the money of the indorser and in consideration thereof 
promises to repay it according to the terms of the note, and if he 
fails to pay, his contract is broken and he is liable for the breach. 
The contract of the indorser is a new one, made upon a new con- 
sideration moving from the indorsee to himself. His undertak- 
ing is in the nature of a guaranty that the maker will pay the 
principal and interest according to the terms of the note. His 
liability is fixed upon the maker's default upon demand, and 
notice to him of such default. This new contract cannot be con- 
strued as an absolute one to pay the interest without default of 
or demand upon the maker. The promise cannot be absolute as 
to the payment of interest when it is clearly conditional as to the 
payment of the principal. 

It is held that though the annual interest upon a promissory 
note may be collected of the maker as it falls due, it is not separ- 
ated from the principal so that the recovery of it is barred by the 
statute of limitations until the recovery of the principal is thus 
barred. {Grafton Bank v. Doe et al., 19 Vt. 463). The holder 
of a note with interest payable annually loses no rights against 
the parties to it, whether makers or indorsers, by neglecting to 
demand interest, and he has the election to do so, or wait and 
collect it with the principal, for it is regarded as an incident of the 
principal. {National Bank of North America v. Kirby, 108 Mass. 
497). But it is so far an independent debt that he may maintain 
an action against the makers for it as it annually accrues, or 
allow it to accumulate and remain as a part of the debt until the 
note matures. {Catlin v. Lyman, 16 Vt. 44). In the latter course 
the makers would be chargeable with interest upon each year's 
interest from the time it was due until final payment. (1 Aik. 
410; Austin v. Imus, 23 Vt. 286). It was said by the court in 
Talliaferro's Ex'rs. v. King's Admr., 9 Dana 331, (35 Am. Dec. 
140) : "The interest, by the terms of the covenant, is made pay- 
able at the end of each year, and is as much then demandable as if 
a specific sum equal to the amount of interest had been promised ; 
and, in default of payment, as much entitles the plaintiff to 
demand interest upon the amount so due and unpaid. The fact 
that the amount so promised to be paid is described as interest 
accruing upon a larger sum, which is made payable at a future 
day, cannot the less entitle the plaintiff to demand interest upon 



Mt. Mansfield Hotel Co. v. Bailey 337 

the amount, in default of payment, as a just remuneration in dam- 
ages for the detention or non-payment." 

It is true that at the maturity of the notes the defendant would 
be liable, as indorser, for both principal and interest, upon due 
demand and notice, although these measures had not been taken 
to make him chargeable as the interest fell due each year. Notice 
of the maker's default of payment of interest need not be given 
annually to the indorser in order to charge him with liability for 
interest when the note matures. This is so stated by the court in 
National Bank' of North America v. Kirby, supra. In Home v. 
Bradley, 19 Me. 31, it is held that when a note is made payable 
at some future period, with interest annually till its maturity and 
no demand is made for the annual interest as it becomes due, or 
if made, no notice thereof is given, the indorser, if duly notified 
of the demand and non-payment when the note falls due, is liable 
for the whole amount due, both principal and interest ; that the 
obligation imposed by the law upon the holder is only to demand 
payment and gives the required notice when the bill or note 
becomes payable. It is not held in this country that interest is, 
subject to protest and notice, according to the law merchant, in 
order to charge indorsers with it when the note matures. The 
usual consequence of omission to notify the indorser of the maker's 
default, namely, the release of the indorser, would not follow the 
omission to give him annual notice of such default. A note is not 
dishonored by a failure of the maker to pay interest. First Na- 
tional Bank v. County Commissioners, 14 Minn. JJ, (100 Am. 
Dec. 196, note). 

The defendant's counsel argues that it would be inconsistent 
to hold the indorser liable for interest, which is a mere increment 
of the principal, until his liability is established to pay the sum 
out of which the interest springs ; that there may be defences to the 
note at its maturity which will release the maker and consequently 
the indorser, or that the indorser may then be released by neglect 
of demand and notice. On first impression it might seem incon- 
sistent that the maker should be compelled to pay interest before 
his liability has been fixed to pay the principal, but that is his 
contract. It is also argued that the fact that the interest, when 
uncollected, is an incident of the debt so that as it annually falls 
due, demand and notice are not necessary in order to charge either 
the maker or the indorser with liability to pay it when the note 
matures, is ground for holding that the indorser is not liable for 
interest until he is made liable for the principal. 

The question is whether the indorser, by the act of indorse- 



338 Contract of the General Indorser 

ment, promises to pay anything on the note till its maturity, at 
which time he clearly may be liable for both principal and interest. 
The note bears upon its face an absolute promise by the maker 
to pay the principal when it becomes due and the interest thereon 
annually. His promise is two-fold. It is as absolute to pay the 
interest at the end of each year as to pay the principal at the end 
of the time specified. Now what is the nature of the contract 
which the indorser makes with the indorsee? His contract is not 
in writing, like that of the maker, but his name upon the note is 
evidence that he has received value for it, and also of an under- 
taking on his part that it shall be paid according to its tenor. 
When he indorses it and delivers it to the indorsee he directs the 
payment to be made to the latter, and in effect represents that 
the maker has promised to pay certain sums of money according 
to the terms of the note, that is,- the principal at maturity and the 
interest annually; that if the maker fails to pay on demand, he, 
the indorser, will pay on due notice. His conditional promise is 
concurrent with the absolute promise of the maker. His liability 
to pay interest and principal, as each respectively falls due, arises 
from his contract. It is his contract that he will make payment 
whenever the maker is in default and he, the indorser, is duly noti- 
fied thereof. 

It is true that interest is an incident, an increment of the 
principal, and that the holder may wait for it until his note matures 
and then collect it with the principal. He may, however, by the 
contract, collect it as it falls due, of the maker, and upon the lat- 
ter's default, of the indorser. 

The courts of England have never recognized the American 
doctrine that interest is a mere incident, an outgrowth of the prin- 
cipal, and in many cases follows and is recoverable as such without 
an express contract. Until 37 Hen. 8, c. 9, it was unlawful to 
demand interest even upon a contract to pay it. Since the case of 
DeHavilland v. Bowerbank, 1 Campb. 50, interest has been allowed 
in England upon express contracts therefor, and not otherwise. 
Where there is such a contract interest stands like the principal 
in respect to the rights and liabilities of an indorser. (Sedg. on 
Dam., 383; Selleck v. French, 1 Conn. 32, [6 Am. Dec. 189, 
note] ). In Jennings v. Napanee Brush Co., reported in Ca. Law 
Jour., Vol. 20, No. 19, in a learned opinion by McDougall, J., it 
was held that where there was an express contract to pay interest 
annually or semi-annually, it was not different from a contract 
to pay an installment of the principal itself, and that notice to the 
indorser of the maker's default was necessary to charge the 



Mt. Mansfield Hotel Co. v. Bailey 339 

indorser with it. In that case the indorser was released from pay- 
ment of the first two half-yearly instalments of interest for want 
of demand and notice. 

While we adhere to the doctrine laid down in Grafton Bank 
v. Doe, et al., supra, that interest is in general an incident of the 
debt, it is consistent to hold that where the indorser is himself a 
party to the original contract to pay interest annually, as in the 
case at bar, by his indorsement he guarantees the performance of 
that contract. Any other holding would make the indorser liable 
for only a part of the maker's contract. 

The case of Codman v. The Vt. and Ca. Railroad Co., 16 
Blatch. 165, has been brought to our attention. The trustees and 
managers of the Vermont Central Railroad Co. and the Vt. and 
Ca. Railroad Co., issued notes to the amount of $1,000,000 in 
sums of $1,000 each, payable to the defendant company, in twenty 
years from their date, with interest semi-annually on presentation 
of the interest coupons made payable to bearer and attached to the 
notes. On each note was this indorsement, signed by the treasurer 
of the defendant, under its seal: "For value received, the Ver- 
mont and Canada Railroad Company hereby guarantee the pay- 
ment of the within note, principal and interest, according to its 
tenor, and order the contents thereof to be paid to the bearer." 
The coupons were not indorsed. The notes were put on the mar- 
ket and the plaintiff purchased fifty of them, and subsequently, 
after due demand, notice and protest, brought this suit to recover 
the amount of two coupons on each of his notes, the notes them- 
selves not having matured. Without passing upon the question 
whether the guaranty was negotiable and available to the plaintiff, 
as a remote holder, Wheeler, J., among other questions that arose 
in the case, decided that the indorsement was a contract of indorse- 
ment running to the bearer, and that demand, notice and protest 
fixed the the liability of the indorser to pay the coupons, and gave 
judgment for plaintiff for the amount of the coupons. 

The Supreme Court of the United States has repeatedly held 
that the statute of limitations begins to run upon interest coupons 
payable annually or semi-annually, from the time they respectively 
mature, although they remain attached to the bonds, which rep- 
resent the principal debt. {Amy v. Vubuque, 98 U. S. 470). 
Where the indorser is the payee of the note there would seem to 
be no difference in his liability in respect to interest whether the 
maker's promise to pay it is contained in the body of the note or in 
interest coupons not indorsed, the notes to which they are attached 



340 Contract of the General Indorser 

being indorsed, and the coupons being mentioned in the notes; 
but it is unnecessary to decide that question here. 

Upon the facts found by the County Court this action can- 
not be maintained for the reason that the plaintiff never fixed the 
defendant's liability to pay the three years' accrued interest. It 
does not even appear that the makers refused payment of it or 
that they were requested to pay it before this suit was brought ; 
therefore nothing is due from the defendant to the plaintiff. 

Judgment affirmed. 
Ross, Ch.J., dissents. 

Ross, Ch.J. I concur in the disposal made of this case; 
and in most of the grounds and reasoning of the opinion. But I 
do not see my way clear to concur in holding, that an indorser 
upon a promissory note, payable on time, with the interest 
annually, can be made chargeable for the payment of the inter- 
est, before he can be, and is, charged with the payment of the 
principal. By placing his name on the back of the note as an 
indorser, without making any limitation upon his indorsement, he 
guarantees its payment, upon condition that the indorsee, when 
the time named in the note for its payment arrives, shall present 
it to the maker and demand its payment, and, if the maker fails 
to make payment, shall seasonably notify him of such failure. 
When this is done, the indorser promises to pay whatever of 
principal and interest, is then due upon the note. This condi- 
tion attaches primarily to the principal of the note. I think it 
attaches to the interest only as it becomes a part of the principal. 
It seems to me to be illogical, and pressing the indorser's condi- 
tional undertaking beyond its proper scope and office, to hold 
that he can have his liability fixed to pay for the use, or legal 
rental of the principal, before his liability to pay the principal 
is fixed. Interest is legal damage, fixed usually by statute, for 
the detention and use of money. As soon as the money is due 
and payable, the law implies damage for its detention and use. 
It may also arise from the contract, for the detention and use of 
the principal before it is payable by the terms of the contract. 
When stipulated to be paid annually, it may be collected from 
the maker of the note at the end of each year, because such is 
his contract. It is an incident, and outgrowth from the prin- 
cipal. The promise to pay it, whether implied or expressed, is a 
dependent promise. It is attached to and arises from the prom- 
ise to pay the principal. When the interest is stipulated to be 
paid annually, and before the principle is payable, the maker 



Mt. Mansfield Hotel Co. v. Bailey 341 

when sued for the annual interest, because his promise to pay it 
is dependent upon his promise to pay the interest, may set up 
any defence to the suit for recovering the annual interest, which 
he could if the suit were for the recovery of the principal such 
as fraud in the inception of the note ; or want, or failure of con- 
sideration, or duress, or that his liability for the principal is con- 
ditional, the terms of which have not been complied with. If 
he defeats the action, it will estop the holder from recovering 
the principal when due, and vice versa. In I Herman on Estop- 
pel and Res Judicata 231, it is said, "So in an action for interest 
due on a bond, a judgment for the plaintiff for the amount of 
interest claimed will be conclusive evidence in an action on the 
bond, and estop the defendant from alleging fraud, for the reason 
that it was a defence which was available in the former suit, and 
the presumption is that it was so used." Citing French v. How- 
ard, 14 Ind. 455 ; Van Dolsen v. Abendroth, 43 N. Y. Super. Ct. 
470; Preble v. Supervisors, 8 Bis. 358, and Edgell v. Sigerson, 
26 Mo. 583 ; Cleveland v. Creviston, 93 Ind. 31, (47 Am. R. 367.) 
The opinion recognizes this intimate, attached and depend- 
ent relation of the promise to pay the interest annually to the 
promise to pay the principal, from which the interest springs. It 
recognizes that the statute of limitations does not begin to run on 
such promise to pay interest annually until the principal falls 
due, in accordance with Grafton Bank v. Doe, et al., 19 Vt. 463. 
This must be because, until severed by enforced collection or pay- 
ment, interest is but an incident, and dependent of the principal. 
It also recognizes this relation in holding that the indorsee may 
allow the interest to accumulate, and may fix the indorser's liabil- 
ity to pay it, by a proper demand, default and notice in regard to 
the principal when that falls due. That is because liability for the 
principal carries its dependencies. I concur in these holdings. 
They are supported by the decisions cited in the opinion. But 
they rest, and, in my judgment, can rest only on the basis that 
the promise to pay the interest annually, both' for its consideration 
and enforcement is dependent upon the promise to pay the prin- 
cipal. The opinion also holds that the liability incurred by the 
indorsement is conditional, that that condition attaches to the 
entire note, and that the liability of the indorser must be fixed 
by demand, default and notice, in regard to the interest payable 
from the maker yearly, as well as in regard to the principal. It 
then seems to conclude, that, because the indorsee can lawfully 
demand and collect of the maker, whose promise to pay the prin- 
cipal is absolute, upon his dependent, but yet absolute promise to 



342 Contract of the General Indorser 

pay the interest annually, he can by proper demand, default and 
notice, collect such annual interest of the indorser whose promise 
and liability to pay the principal is conditional, and cannot as yet 
be made absolute, and whose promise to pay the annual interest, it 
has already held is dependent upon his promise to pay the prin- 
cipal, and therefore, in my judgment, takes the condition attached 
to his liability to pay the principal. It is at this point that I fail 
to follow the reasoning of my associates. Here they assume, — 
as I think — and proceed upon the basis, that, the indorser's implied 
promise to pay the annual interest, is not dependent, but inde- 
pendent, as it would be, if it were an instalment of the principal. 
The holdings in the opinion, that the indorser's liability for the 
accrued annual interest may be made absolute by a proper demand, 
default and notice in regard to the principal when it falls due, 
and that it may also be made absolute by a proper demand, default 
and notice yearly, result in holding that the maker's promise to 
pay the interest annually which he indorses, is both dependent 
upon, and independent of, his promise to pay the principal. I 
do not think that it has this double and inconsistent character, 
but only the former. If it be independent, must not demand and 
default be made, and notice given yearly, or the indorser become 
discharged? And if demand and default be made, and notice 
given annually, must not the statute of limitation begin to run 
from date of such demand? I think so. The result of giving 
this double character to the promise to pay interest annually will 
lead, I think, to some difficult legal problems. If the note is to 
mature at the end of twenty years, and the payee holds it and 
allows the interest to accumulate for ten years, and then having 
indorsed it, sells it, the indorsee must wait for the accumulated 
interest until the note falls due, because the maker's promise and 
the indorser's liability in regard to that interest is dependent upon 
the indorser's liability for the maker's promise to pay the prin- 
cipal, which is still conditional, and for that reason the indorser's 
liability to pay the accumulated interest is conditional, and will 
remain so until it is made absolute for the principal; but when 
the eleventh year's annual interest falls due, the indorsee may at 
once, by due demand, default and notice, fix the indorser's liabil- 
ity to pay that year's interest, and may enforce its payment by 
suit, while the indorser's liability for the payment of the principal 
from which the year's interest springs, cannot for years be made 
absolute and may never be. After the indorser's liability for the 
payment of the year's interest has thus become fixed by suit, on 
what legal principles governing res judicata, could the indorser 



Mt. Mansfield Hotel Co. v. Bailey 343 

defend, in a suit brought, without further demand, default and 
notice, at the maturity of the note, for the enforcement of the 
payment of the principal and the ten years accumulated interest ? 
The only decision relied upon for the holding of my asso- 
ciates is from 6 Blatchford. I do not regard that in point. The 
guarantee was written instead of implied. The relation of the 
indorser to the obligation was exceptional, it haying been given 
by its receivers and managers. The interest was expressed in 
separate coupons, which, for some purposes, are treated as inde- 
pendent obligations. The statute of limitations runs on them 
generally from their maturity. (Amy v. Dubuque, 98 U. S. 470, 
[25 L. C. P. Co. 228] ) . In this respect they are unlike the promise 
in the note to pay the interest annually, as held in Grafton Bank 
v. Doe et al., 19 Vt. 463. I do not think that the indorsee has 
the election to fix the indorser's liability for, and recover of him 
annually such yearly interest, or to wait and fix it by proper 
demand, default and notice in regard to the principal. I think 
his liability can only become absolute for the. payment of the 
incident or outgrowth of the debt, when it becomes absolute for 
the payment of the principal from which that incident or out- 
growth springs. The opinion on this branch of the case is made 
to rest upon the ground that the indorser's undertaking, on due 
demand and notice, is to make good to the indorsee any failure 
of the maker to perform the contract, and, in that the maker has 
promised to pay the interest at the end of each year, the indorser 
has likewise so undertaken upon proper demand and notice. But 
his implied contract being conditional in regard to the payment 
of the principal, I think is conditional also to any incident or out- 
growth of the principal, so long as it is conditional in regard to 
the payment of the principal, and that he only becomes absolutely 
bound to pay the interest at the end of each year, when he becomes 
bound absolutely to pay the principal. When so bound for the 
payment of the principal, then this obligation to pay the interest 
at the end of each year attaches, in respect both to the interest 
then accrued, and the interest which may thereafter accrue. I 
would modify the opinion in the particular indicated. 



344 Warranties of General Indorser 

warranties of general indorser. § 68. 

Ferguson v. Staples (i88p), 82 Me. 159, 77 Am. St. Rep. 4/0. 

This was an action by the plaintiff, as surviving partner of 
the firm, Samuel Otis & Co., to recover the consideration paid by 
said firm to the defendant for three overdue town 'orders, which 
were afterwards adjudged by this court to be void. The orders 
were indorsed by the defendant. 

W. H. Folger, for plaintiff. 
N. H. Hubbard, for defendant. 

Haskell, J. The defendant, upon payment of $3,000 to the 
municipal officers of the town of Stockton, received from them 
three town orders for $1,000 each, dated November 17, 1877, 
payable to his own order, with interest annually, and already 
accepted by the treasurer of the town. 

On the 17th of January, 1879, the defendant indorsed one 
year's interest upon each of the orders and indorsed and delivered 
the orders to the plaintiff for value, and in good faith, both 
parties believing them to be legal obligations of the town. 

The orders have been held by this court as issued without 
authority from the town, and, therefore, of no binding validity 
upon it. The plaintiff sues in assumpsit to recover the consid- 
eration that he paid the defendant for the orders, as money had 
and received, and interest. 

Town orders, although not commercial paper to the extent 
that transfer to an innocent holder shuts out equitable defenses, 
may be negotiable in form, and become transferable under the 
same rules of law that would 'be applicable to commercial paper. 
(Parsons v. Monmouth, 70 Maine, 262) . 

The indorsement of a note is a new contract. The indorser 
engages that the note shall be paid according to its tenor ; that is 
upon proper presentment, demand and notice; he engages that 
it is genuine and the legal obligation that it purports to be, and 
that he has title to it, and a right to indorse it. (Sto. Pr. Notes, 
§135; Dan. Neg. Inst. §669; Bank v. Fearing, 16 Pick. 533; 
Bank v. Caverly, 7 Gray, 217). 

All engagements of the indorser, except payment, conditioned 
upon demand and notice, and possibly the validity of the note 
when it is voidable only, are absolute warranties and not depend- 
ent upon any condition whatever. If the note transferred by 



State Bank v. Fearing 345 

indorsement be a forgery, or absolutely void for any other reason, 
the indorser may be sued for the orignal consideration paid him, 
or he may be held as a party without deman d an d notice . (Dan. 
Neg. Ins. §§ 669, 675, 1 1 13; PaT7!OrBr444 ; Copp v. McDou- 
gall, 9 Mass. 1 ; Burrill v. Smith, 7 Pick. 291). 

The indorsement and transfer by the payee, of a dishonored 
promissory note, for value, must create all the engagements on 
the part of the indorser that an indorsement of the note before 
maturity would create, except as to demand and notice. To 
charge the indorser of a dishonored note, demand and notice are 
required within a reasonable time after the indorsement. The 
indorsement in such case is like the indorsement of the demand 
note of the maker of that date, or the drawing of a bill upon the 
maker of the note payable to the transferee. (Greely v. Hunt, 21 
Maine, 455 ; Hunt v. Wadleigh, 26 Maine, 271 ; Sanborn v. 
Southard, 25 Maine, 409; Goodwin v. Davenport, 47 Maine, 112; 
2 Par. N. & B. 13). 

The plaintiff has elected to sue for the consideration that he 
paid the defendant for the worthless orders. The plaintiff has 
already recovered from the town by an action for money had and 
received, brought in the defendant's name, the part of the money 
defendant loaned upon the order that went to the use of the 
lown. This sum the plaintiff must deduct from the amount that 
he paid the defendant for the orders and have judgment for the 
balance and interest. 

Defendant defaulted. Damages to be assessed at nisi 
prius. 

Peters, C.J., Walton, Virgin, Emery and Foster, JJ., 
concurred. 



State Bank v. Fearing (1835), 16 Pick. 533, 28 Am. Dec. 265. 

Assumpsit on a promissory note for the sum of $2,000, dated 
April 15, 1833, payable to the order of Thomas Jackson, junior, 
in six months, made by Charles Brown, and indorsed with the 
names of the payee, and of the defendant. 

By an agreed statement of facts, it appeared that the signa- 
tures of Brown and the defendant were genuine, but that the 
defendant could prove, if such evidence was admissible, that the 
indorsement of the name of the payee was a forgery; that the 
note was presented by Brown to the plaintiffs for discount, in the 
usual course of business, and discounted by them for him ; that 



346 Irregular or Anomalous Indorser 

at the time of such discount, the plaintiffs and the defendant were 
ignorant of the forgery; and that due notice of the non-payment 
of the note was given to Brown, Jackson and the defendant. 

If upon this statement of facts the court should be of opinion, 
that the plaintiffs were entitled to judgment, the defendant was 
to be defaulted, otherwise, the plaintiffs were to be nonsuited. 

Austin, for the plaintiffs. 

Parsons and Stearns, for the defendant. 

Shaw, C.J., delivered the opinion of the court. 

The peculiar features of this action are, that the plaintiffs 
claim of the second indorser, from whom they immediately took 
the note. The question is, whether the forgery of the indorse- 
ment of the name of a prior party, is a good defence to the note ; 
and the Court are of opinion that it is not. 

In general it is not necessary for the holder to prove the 
signature of any party prior to the party whom he sues. The 
reason seems to be obvious, that the party defendant, by his 
indorsement, has admitted the ability and the signature of all 
prior parties. (Bayley on Bills, 313; Critchlow v. Parry, 2 
Campb. 182.) The effect of the engagement of the indorser is, 
that if the prior parties do not pay the note according to its tenor 
upon due presentment, upon notice to him, he will. It is there- 
fore a rule upon this subject, that a plaintiff is under no obligation 
to prove the signature of those prior to the party intended to be 
charged. It is very different where he claims against the acceptor 
of a bill or maker of a note. They respectively promise to pay to 
the payee or his order, and until he has made such order by his 
indorsement, the plaintiff can establish no title, and to prove such 
order, he must prove the genuineness of his signature. {Smith 
v. Chester, 1 T. R. 654; Lambert v. Pack, 1 Salk. 127.) So an 
acceptor is bound, though the bill be forged. (Jengs v. Fowler, 
2 Strange, 946). 

The circumstance that this bill was offered for discount, by 
Brown, makes no difference ; the plaintiffs had a right to look to 
their immediate indorser, and if satisfied to take the note on his 
credit, he is liable to them ; and it was for him to see that he has 
a good remedy over against those who purport to be prior parties. 

Defendant defaulted. 

CONTRACT OF THE IRREGULAR OR ANOMALOUS INDORSER. § 66. 

Gums v. Giegling. (See page 209.) 



Hills v. Place 347 

Section VIII. — Presentment and Demand. 

PRESENTMENT TO PRINCIPAL DEBTOR NOT NECESSARY. § J2. 

Harrisburg Trust Co. v. Shufeldt {1897), 78 Fed. 292. 

Strudwick & Peters, for plaintiff. 
Hastings & Steadman, for defendant. 

Hanford, District Judge. This is an action to recover a bal- 
ance due after deducting partial payments upon a negotiable prom- 
issory note, made payable on demand. The defendant has 
demurred to the complaint, his contention being that the same is 
insufficient, for failure to allege a demand prior to the commence-/ 
ment of the action. There is a rule of long standing, and sup- 
ported by the weight of authority in this country, that the com- j 
mencement of an action is itself a^dfimand, and that failure to J 
request payment, prior to the commencement of the action, affords ' 
no ground of defenseT '(Bank \7~Fox, FectTCas. N67~2,683 ; 5 
Am. & Eng. Enc. Law, 528Z 46 . It is insisted, however, that the 
courts and the text-books in this country have fallen into error by 
following early decisions, which were controlled by peculiar facts, 
and which are insufficient of themselves to establish a general 
rule upon the subject. It is unwise to depart from business cus- 
toms and practices which have been sanctioned by repeated deci- 
sions of courts, and acquiesced in for a considerable time, and 
which may fairly be supposed to have been contemplated by the 
parties at the time of making their contract. This contract must 
be construed as one having been made the subject to the rule 
above stated, and the maker of the note is, by the terms of his 
contract, liable without any demand, prior to the commencement , 
of an action. Demurrer overruled. 



Hills v. Place (1872), 48 N. Y. 520. 

Appeal from judgment of the General Term of the Superior 
Court of the city of New York, affirming a judgment entered in 
favor of the plaintiff on a verdict. 

The action was brought to recover the amount of a promis- 
sory note, made by the defendant, payable one month after date, 
at the Hanover National Bank of the city of New York, to the 
order of D. Russel, and by him indorsed to the plaintiff. 



,348 Presentment to Principal Debtor 

The judge, on the trial, after the testimony was closed, 
directed the jury to find a verdict for the plaintiff for the amount J 
of the note and interest, to which direction an exception was taken I 
by the defendant. 

The facts material to the decision of the case in this court 
are sufficiently stated in the opinion. ,!) 

H. C. Place, for the appellant. 

/. R. Hills, for the respondent, in person. 

Lott, Ch.C. The evidence given on the trial, most favor- 
ably construed to the defendant, does not prove payment, or 
establish facts sufficient to bar a recovery for damages and costs, 
as well as the principal of the note. 

It shows that the note was presented for payment on behalf 
of the plaintiff at the Hanover National Bank, where it was made 
payable, about n o'clock of the day it fell due, and that it was 
not then paid ; that the defendant, on being notified of the fact by 
the cashier, immediately thereafter, between eleven and twelve 
o'clock, "put funds in the bank and gave instructions to have itl 
paid on presentation." 

It was not presented for payment to or at the bank or to the - ; 
plaintiff, at any time or place after the funds were so left, before^ 
the commencement of this action. ^ 

The cashier of the said bank, on being asked, "what is the 
custom of banks in the city of New York in reference to present- 
ing notes?" answered, "that the custom is to present a note for^ 
payment between ten and three o'clock, but a man has until three 
o'clock to pay his note, and it cannot be_ protested until after' 
three o'clock." He also stated that ordinarily notes are presented 
between ten and three o'clock, and if a note is not paid on the first^ 
presentation thereof, that it is necessary to present it again or 
the second time, according to custom, and that "the notary never . 
goes until three o'clock." 

It is clearly established, by the preceding statement, that the 
note in question was never in fact paid to the plaintiff, but it is 
shown, on the contrary, that the funds which were left at the N 
bank, to be applied to its payment on presentation, were shortly 
thereafter actually withdrawn by the defendan^himseff. / 

There is no ground "for the theoTy-or claim of the defend- 
ant's counsel, that "the parties agreed in the note to make the 
Hanover Bank the mutual receiving agent, and a payment to that 
agent on the third day of grace of the $230 to pay the note, and_ 
an acceptance of that by the agent, was a payment of the note, 



Hills v. Place 349- 

and the maker had then discharged his obligation, and the holder 
had only to go to the common agent, the bank, and receive the 
money." 

The bank was in no sense the plaintiff's agent for the col-\ 
lection of the note, or the receipt of the amount due thereon, or ) 
otherwise. / 

It was named, in the connection in which it was used, merely 
jisjhe^ />£o££_arhere its business was transacted, for the purpose 
of making payment of the note there, without conferring or 
intending to confer any power, authority or duty on the associa- 
tion itself in reference thereto. 

Such designation did not make it incumbent, as a precedent 
condition, to create a liability or obligation by the maker of the 
note to pay it or to give a right of a recovery thereon, that it 
should be presented at that particular place for payment. The 
effect or consequence of an omission or failure to make such pre-"" 
sentment was not to exonerate the maker from his promise to . 
pay what he had agreed, butjonly to relieve him from damages - 
in case he was ready at the time and place appointed to pay it,^ 
and there was no one there to receive the money. Such readiness 
is considered equivalent to a tender of the sum payable, and an 
answer pleading that fact, and a payment of the money due into 
court, would be a bar to a recovery of interest and costs, but not 
to the cause of action. 

This principle is settled by the decisions in Wolcott v. Van 
Santvoord (17 John., 248) and Caldwell v. Cassidy (8 Cow.,. 
271). 

The custom referred to by the cashier does not interfere with 
that principle. It evidently does not affect the maker's liability. 
It only shows that the usual banking hours are allowed him to 
makehis_payment, and that his note cannot bTprotested fill" they 
have parsed. 

•^"""Xssuming that the leaving of the money in the bank, after , 
the demand made by the plaintiff, was sufficient proof of his read- ; 
iness to pay the note, and is to be considered as a tender of pay- ' 
ment in due time, ye t he , h as_entirelY faile d to_show th at he ever 
brought the money into court ; and as a protest is never necessary 
to cnarge or GoTa f ~tne*"fnaker, it follows;" from the views above 
expressear, "tfiaT the"pl!1nW"was entitled Jo ; recover the amount 
of theT ToteT^thTnte^el irand, there being no disputed questions 
oFfactTthe courtlvaTauthorized'to^rve a direction to the "jury 
to~firidlT~verdict in favor of'the plaintiC for both principal andl 
interest.*"" 



350 Time of Presentment 

It is, therefore, unnecessary to consider the sufficiency of the 
exception to that direction, so far as it related to the right t<f) 
recover interest, or what was the effect of the presentment of the 
note and the refusal to pay it before the deposit of the funds to 
meet it. The judgment appealed from must be affirmed with 
costs. 

All concur. 

Judgment affirmed/ 

' / 

TIME OF PRESENTMENT. v/ § 74- 

Farnsworth v. Allen (1855), 4 Gray (Mass.), 453. 

Action of contract against the indorser of the following prom- 
issory note : 

"Boston, May 23, 1853. 
"Three months after date I promise to pay to the order of 
Walter M. Allen one hundred and fifty dollars, value received. 

"Francis Freeman." 

At the trial in the court of common pleas, a witness testified 
that he received the note, a t the cl ose of bank hours on the last 
day of grace, from the Grocers' Bank in Boston, whoTiad received 
the note for collection from the Cambridge Market Bank, but did 

vnot know the residence of the maker or indorser ; that he inquired 
of a director of the Cambridge Market Bank, and learned that 
the maker lived at Winchester and the indorser at North Cam-_ 
bridge ; and the same afternoon carried the note to a notary public ) 
in Charlestown, and told him where the parties resided. 
, The notary public testified that, as soon as he could after 

/ receiving the note for protest, he went to the house of the maker, 
(about ten miles from Boston,) and arrived there about nine 
o'clock in the evening; that there was no light in the house, and 
theTnmates appeared to have retired for the night; that he rung 
the bell, and after some time the maker came to the door with a 
light ; and he presented the note, stated its contents, and demanded 
payment, which the maker refused, saying that he could not, or 
should not," or would not pay it; that he returned "with the note 
to Charlestown, and on the same evening put in the post office a 
proper notice of dishonor, addressed to the"~3efendant at T^Torth 
Cambridge. 

f The defendant contended that the demand proved was not 

k sufficient to charge the indorser. But Hoar, J., ruled otherwise, 



Nelson v. Grondahl 351 

the jury returned a verdict for the plaintiff, and the defendant 
.alleged exceptions. 

/. G. Abbott, for the defendant. 
C. R. Train, for the plaintiff. 

Bigelow, J. The note declared on, not being payable at a 
bank, or at any place where business was transacted during cer- 
tain stated hours in each day, was properly presented to the maker 
at his place of residence. It was also the"duty "of the holder to 
present "it within reasonable hours on the day of its maturity. - 
No fixed rule can be established, by which to determine the hour 
beyond which a presentment, in such case, will be unreasonable 
and insufficient to charge an indorser. Generally, however, it\ 
should be made at such hour that, having regard to the habits 
and usages of the community where the maker resides, he may , 
be reasonably expected to be in a condition to attend to ordinary 
business. In the present case, taking into consideration the dis- 
tance of the place of residence of the maker from Boston, where 
the note was dated, and where it was held when it became due ; 
the means that were taken to ascertain the residence of the maker, 
and the season of the year at which the note fell due, we are of 
opinion that a presentment at nine o'clock in the evening was^ 
seasonable and sufficient. If is quite immaterial that the maker 
and his family had retired for the night ~~*iTie question whether 
a presentment is within reasonable time cannot be made to depend 
on the private and peculiar habits of the .maker of a note, not 
known to the holder ; but it must be determined by a consideration 
of the circumstances which, in ordinary cases, would render it 
seasonable or otherwise. (Barclay v. Bailey, 2 Campb. 527 ; Triggs 
v. Newnham, 10 Moore, 249, and 1 Car. & P. 631 ; Wilkins v. 
Jadis, 2 B. & Ad. 188; Cayuga County Bank v. Hunt, 2 Hill, 
N. Y. 635). 

Exceptions overruled. 

WHERE AND TO WHOM PRESENTMENT SHOULD BE MADE. §§ 74, 75. 

Nelson v. Grondahl (1904), (N. D.) 100 N. W. 1093. 

Appeal from District Court, Cass county ; Charles A. Pollock, 
Judge. 

Action by Peter Nelson against Olaf Grondahl. Judgment 
lor defendant, and plaintiff appeals. Reversed. 

H. R. Turner, for appellant. 

Benton, Lovell & Holt, for respondent. 



352 Where Presentment Should be Made 

Morgan, J. This action is brought against the defendant as> 
indorser of a promissory note of which he was the payee. The 
plaintiff, in his complaint, alleges that one Steffes made and deliv- 
ered such promissory note to the defendant, and that the defend- 
ant duly indorsed and transferred it to the plaintiff for value, and 
that the note was duly presented for payment when due, and pay- 
ment refused. The defense attempted to be proven at the trial 
was that the note was not presented for payment in the manner 
provided by law. At the close of the taking of the testimony the 
district court directed a verdict for the plaintiff for the sum of 
$339.84, the amount claimed to be due in the complaint, and 
denied defendant's motion to direct a verdict. The defendant 
thereafter made a motion for judgment notwithstanding the ver- 
dict, on grounds stated, or for a new trial on account of errors 
occurring at the trial and the insufficiency of the evidence to sus- . 
tain the verdict. The motion for judgment notwithstanding the 
verdict was granted by the court, and the appeal is from the judg- 
ment entered on such verdict. A statement of the case was settled, 
specifying the errors relied on. 

The only specification of error made on this appeal is that the 
court erred in granting the motion for judgment notwithstanding 
the verdict. The question raised by such specification is that there 
is no evidence showing that the note was presented for payment 
when it became due, as is required by the statute, before an 
indorser can be held liable under his indorsement. Section 76, 
c. 100, Rev. Codes 1899. The certificate of the notary who pro- 
tested the note for non-payment is in evidence, and recites that 
"I, * * * did present the note hereto attached, * * * 
and demanded payment thereof, which was refused." The cer- 
tificate is silent as to the place of presentment and as to the 
person to whom presentment was made. The note was, by its 
express terms, made payable to Grondahl, the defendant, "at his 
store in Fargo, North Dakota." The respondent contends that 
the certificate of the notary is of itself insufficient to show a 
proper presentment of the note for payment to the maker, and 
that the evidence, outside of the certificate, is not competent to"' 
prove that the note was presented for payment as required by the 
terms of the statute. Section 73 of the Negotiable Instruments 
Law of 1899 (Civ. Code, p. 1048) provides that "presentment for 
payment is made at the proper place where a place of payment is 
specified in the note and it is there presented." Section 72 of the 
same law provides that presentment for payment is sufficient when 
made at the proper place to the person primarily liable on the 



Nelson v. Grondahl 358 

instrument, or, if he is absent or inaccessible, to any person found 
at the place where presentment is made. The trial court granted 
the motion for judgment notwithstanding the verdict on the 
ground that the notary's certificate did not show presentment of 
the note for payment at the place where the note was, by its 
terms, made payable, and that the notary's evidence of that fact 
was not competent to prove such presentment, he having stated 
that he had no independent, recollection of the fact of such pre- 
sentment. If the fact of presentment for payment, as required 
by the statute, is supported by any competent evidence that reason- 
ably tends to show due presentment, the granting of the motion 
for judgment was erroneous. The notary was called as a witness, 
and testified that he recollected that the note was by him presented 
for payment; that he had no independent recollection of the fact, 
but that he so testified from an inspection of his certificate stating 
the fact. He further testified that in cases where notes specified 
the place where payment was to be made he presented them at 
that place, and that he did so in every instance. Whether this 
evidence, in addition to the certificate, is competent, and sufficient 
to show presentment for payment at the proper place in accord- 
ance with the statute, is the only question arising on the appeal. 
It is first claimed that there is no evidence that the note was 
presented to the person primarily liable on the note; that is, the 
maker. The certificate does not state the name of the person to 
whom it was presented, and the notary does not give the name of 
the person in his testimony. A presentment at the bank where a 
note is payable is a sufficient presentment to the maker, although 
the name of the person to whom presented is not given. It is 
held to have been made to some person connected with the bank. 
This is expressly held in Ashe v. Beasley, 6 N. D. 191, 69 N. W. 
188. If the notary's evidence is receivable, it brings the evidence 
in this record within the rule stated in Ashe v. Beasley, supra, and 
is sufficient to show presentment at the store where the note was 
made payable, and to a person connected with such store. See 
Douglas v. Bank of Commerce (Tenn.), 36 S. W. 874; 1 Daniel, 
Neg. Inst. (5th Ed.), §635. In such cases no personal demand 
on the maker is necessary. He is primarily liable on his promise 
to pay. Section 70, Neg. Inst. Law 1899 (Civ. Code, p. 1048). 
A presentment is necessary in order to fix the liability of the 
indorser, which is a conditional obligation to pay the note if not 
paid at maturity by the maker. If a maker stipulates to pay at 
maturity at a specified place, and the note is there presented for 
payment at its maturity, and payment refused or not made, the 



354 Where Presentment Should be Made 

liability of the indorser is fixed after notice to him, although 

there was no personal demand made on the maker. (Pearson v. 
Bank of the Metropolis, i Pet. 89, 7 L. Ed. 65; State Bank v. 
Hurd, 12 Mass. 172; Whitwell v. Johnson, 17 Mass. 449, 9 Am. 
Dec. 165; Meyer v. Hibsher, 47 N. Y. 265.) A presentment at 
the store was therefore sufficient to bind the indorser after notice 
to him of the fact. It remains to be determined whether the 
evidence of the notary was admissible to supply facts that occurred 
in reference to the presentment that were omitted from the recitals 
of this certificate. It is well settled that the facts stated in the 
certificate of protest of promissory notes may be supplemented 
by other facts that transpired, and that such other facts may be 
shown by the oral testimony of the notary or by other testimony. 
(Ashe v. Beasley, supra; Seneca County Bank v. Neass, 5 Denio, 
334; Daniel, Neg. Inst. [5th Ed.], §969, and cases cited.) On 
this question the respondent does not contend that the defects of 
notary's certificate may not be supplied, but he earnestly contends 
that there is no evidence of presentment at the proper place, 
because the notary testifies that he has no independent recollection 
of such factsaside from the certificate. Respondent contends that 
the notary's evidence that he presented notes for payment in 
every instance at the place where payable is inadmissible merely 
as a statement of his custom unaccompanied by some recollection 
of the fact. We agree that on authority and principle the evidence 
should be held admissible in cases like the one under consideration. 
The evidence objected to in this case is not merely the statement 
of the notary's custom only. He had his certificate of protest 
before him, from which he was able to say that a presentment 
was made by him of the note described. The fact of a present- 
ment was established by the certificate in a general way, but not 
definitely. Whether the presentment was made at a right place 
was not stated nor established thereby. The certificate showed 
some kind of a presentment, but one not necessarily legal or 
proper under the statute. The bare allegation that the note was 
presented for payment is not equivalent to certifying that the note 
was presented at the place where it should have been done. The 
certificate of the notary is evidence only of facts stated therein, 
and it will not be enlarged by indulging in presumptions. The 
facts must be stated, and, if stated, the certificate is prima facie 
evidence that the facts properly a part of such certificate are 
true. (People's Bank v. Brooke, 31 Md. 7, 1 Am. Rep. 11 ; Duck- 
ert v. Von Lileinthal, 11 Wis. 56; Magonn v. Walker, 49 Me. 419; 
Insurance Co. v. Wilson, 29 W. Va. 528, 2 S. E. 888.) The wit- 



Wallace v. Crilley 355 

ness' invariable practice was proper evidence to sustain and to 
supplement the statements of the certificate that presentment had 
been made. In Eureka Ins. Co. v. Robinson, 56 Pa. 256, 94 Am. 
Dec. 65, it is said : "We think it not uncommon in practice to cor- 
roborate the defective memory of a witnesss by proof of what 
was his habit in similar circumstances. Thus a subscribing wit- 
ness to a will or bond, if unable to recollect whether he saw the 
testator or obligor sign the instrument, or heard it acknowledged, 
is often permitted to testify to his own habit never to sign as a 
witness without seeing the party sign whose signature he attests, 
or hearing that signature acknowledged. And it seems to be 
persuasive and legitimate 'supporting' evidence." See, also, 
Flack v. Green, 3 Gill & J. 474 ; Miller v. Hockley, 5 Johns. 375, 
4 Am. Dec. 372 ; Gillette on Indirect & Collateral Ev. § 68 ; Mar- 
tin v. Smith [Mich.], 66 N. W. 61 ; Seneca County Bank v. Neass, 
supra; Lindenberger v. Beall, 6 Wheat. 104, 5 L. Ed. 216; State 
v. Rawls, 2 Nott. & McC. 331. The testimony was therefore 
competent to support or corroborate the notary's evidence that he 
recollected presenting the note for payment, and, together with 
the certificate, was sufficient to take the case to the jury on the 
question of due presentment of the note to the maker for payment. 

The defendant included in his motion for judgment notwith- 
standing the verdict an alternative motion for a new trial, and 
gave notice of intention to move for a new trial, and therein 
specified the grounds thereof. Having prevailed in the court 
below on his motion for judgment notwithstanding the verdict, 
the motion for a new trial was not perfected. Leave to do so 
after filing the remittitur in the clerk of the district court's office 
is granted. (Kreatz v. St. Cloud School District [Minn.], 81 
N. W. 533.) If such motion is not made, judgment is directed 
to be entered on the directed verdict for the plaintiff. 

The judgment is reversed, and the cause remanded for 
further proceedings. 

All concur. 

Wallace v. Crilley, imp. (1879), 46 Wis. 577. 

Appeal from the County Court of Milwaukee County. 
The case is stated in the opinion. The defendant, Crilley, 
appealed from a judgment in favor of the plaintiff. 

Brief for the appellant by Johnson, Rietbrock & Halsey, and 
oral argument by Mr. Johnson. 

Brief for the respondent by G. C. Markham and E. P. Smith, 
and oral argument by Mr. Smith. 



356 Where Presentment Should be Made 

Taylor, J. This action is brought upon a promissory note, 
given by the defendant Sears, and indorsed by the defendant and 

appellant Crilley. Neither of the defendants appeared or put in 
any answer or demurrer in the court below, and judgment for 
the amount of the note and costs of suit was rendered against both 
defendants. Crilley appealed from the judgment, and assigns as 
error, that the complaint does not state facts sufficient to consti- 
tute a cause of action against him. 

The point made is, that the complaint does not show that the 
note was presented to the maker thereof for payment, and pay- 
ment thereof demanded, at the maturity of said note. The fol- 
lowing are the allegations of the complaint upon that subject: 
"And the plaintiff further says that, when said note became due 
and payable, the same was presented at the office of the maker 
of said note, the defendant William G. Sears, in the Chamber of 
Commerce building in the city of Milwaukee, Wisconsin, for pay- 
ment, and that payment was then and there duly demanded upon 
said note, and payment thereof was then and there refused." The 
complaint contains a proper allegation of protest for non-payment, 
and notice of such non-payment given to the said defendant Cril- 
ley. 

The appellant insists that a presentation and demand of pay- 
ment at the place of business of the maker is not sufficient ; that 
the demand must be made personally of the maker, and, if not so 
made, the excuse for not making such presentment must be set 
out in the complaint. 

We think the learned counsel for the appellant misapprehends 
the rule. Story, in his work on Bills of Exchange, says : "When 
it is said that the 'bill must be presented for acceptance, at the 
place of the domicil of the drawee,' we are to understand by this 
expression, the town, city, village, or other municipality, within 
which he has his residence. But in many cases the holder will 
have an election as to the place of presentment. Thus, for exam- 
ple, if the drawee has his home or domestic establishment in one 
town, and his place of business is in another town, a presentment 
made at either place will be good. So, if the drawee has his 
dwelling house or home in one part of the same town, and his 
place of business in another part, a presentment may be made at 
either, at the option of the holder." (Sec. 236, and notes). 

The same rule applies to the presentation of promissory notes, 
when such presentation and demand of payment are necessary to 
charge an indorser. See Shed v. Brett and Trustees, 1 Pick., 413 ; 



Wallace v. Crilley 357 

Williams v. Bank of the United States, 2 Peters, 96; Ogden v. 
Cowley, 2 Johns. R., 274. 

In the case at bar, the complaint alleges that the note in ques- 
tion was presented at the office of the maker, Sears, in the city 
of Milwaukee; and, there being no answer, it must be taken as 
true that the maker had an office or place of business in the city of 
Milwaukee, and that the presentation of the note for payment at 
such office was a proper presentation. 

The learned counsel also insists that the complaint is defec- 
tive in not stating that the note was presented to the maker, and a 
demand of payment made of him, or of some other person who 
was authorized by such maker to receive and answer such present- 
ment and demand. We think this objection is answered by the 
allegation in the complaint, "that payment was then and there 
duly demanded upon said note, and that payment was then and 
there refused." It having been shown that the office was the 
proper place to present and demand payment of the note, the 
above allegation that payment was then and there duly demanded 
and refused, is equivalent to an allegation that the same was pre- 
sented within the usual business hours, and, if it be necessary to 
show that it was presented to the maker, or to some one author- 
ized to answer for him (which we very much doubt), that it was 
so presented. 

This court held in the case of Bank v. Countryman, 1 1 Wis. 
399, that, in an action against an indorser of a promissory note, 
it was sufficient if the complaint alleged in general words, "that 
payment of the note was duly demanded at maturity," without 
any further statement as to the time or place of demand, or of the 
person of whom such payment was demanded. In that case the 
court say : "This manner of stating the demand of payment, and 
notice of the demand and non-payment to the indorser, has been 
held to be sufficient in New York since the adoption of the code, 
and we have no doubt that those decisions are in conformity to the 
spirit of that enactment. We are disposed to follow these decis- 
ions upon this point, and to hold that such a general statement of 
the performance of the conditions precedent to a party's right to 
recover against the indorser is sufficient." The rule laid down in 
this case has been followed and approved in Smith v. Railway Co., 
19 Wis., 326-331 ; Cutler v. Ainsworth, 21 Wis., 381 ;• Town of 
Pine Valley v. Town of Unity, 40 Wis., 682. In the last case, 
which was an action brought to recover for the support of a 
pauper, in which it was necessary, in order to entitle the plaintiff 
to recover, to prove that a written notice had been given by the 
supervisors of the complaining town, to one or more of the super- 



358 Where Presentment Should be Made 

visors of the defendant town, before suit brought, stating therein 
certain matters as prescribed by law, it was held that an averment 
in the complaint that the plaintiff duly notified the defendant, was 
a sufficient averment of legal notice in all respects. These cases 
clearly show that the objections taken by the learned counsel for 
the appellant in this case cannot be supported, and that the com- 
plaint states a good cause of action against the appellant. 

The cases above cited are not in conflict with the decision in 
Duckert v. Von Lileinthal, n Wis., 57, cited by the learned coun- 
sel for the appellant, and relied upon by him to sustain his objec- 
tions to the complaint in the case at bar. In that case there was 
no evidence given on the trial of any demand of payment of the 
maker of the note, except what was contained in the certificate 
of the notary. The court held that such certificate was not evi- 
dence of the contents of the notice served, and the judgment was 
reversed on that ground. What was said further in the case by 
the late learned Justice Paine, was not necessary to the determina- 
tion of the case. The statement made by Justice Paine, that "the 
certificate should show presentment to the maker, or its legal 
equivalent, and should not be left to intendment or presumption," 
was clearly not intended by him to apply to the allegations neces- 
sary in a complaint. He was speaking of the proof necessary to 
be given on the trial, to prove the truth of the allegation that 
presentment had been duly made and payment duly demanded.. 
That he intended to limit this statement to the proof to be made, 
and not to the allegations necessary to be embodied in the com- 
plaint, is clear from the fact that he assented to the decision made 
in Frankfort Bank v. Countryman, supra, decided at the same 
term. 

By the Court — The judgment of the county court is affirmed. 



King v. Crowell (1873), 61 Me. 244. \ / 

On facts agreed. 

Assumpsit against the defendant as indorser of the following 
promissory note, his signature admitted to be genuine. 
"$150.00. "April 8, 1871. 

"Four months after date I promise to pay to the order of A. 
J. Crowell one hundred and fifty dollars. Value received. 

"H. E. Morton." 

Endorsed, "A. J. Crowell, Jeremiah Glidden, C. H. Glidden." 

Writ dated Feb. 17, 1872. Plea, general issue. 



King v. Crowell 359 

This note was negotiated to the plaintiff for a full considera- 
tion a short time after its date. 

The maker and the indorsers resided in Winthrop village, and 
the plaintiff in Monmouth. H. E. Morton, at the time of the 
making of the note in question, was a manufacturer of boots and 
shoes, and a dealer in boots, shoes, hats, and caps, and had a 
store and place of business in said Winthrop village. On the 
third day of July, 1871, the maker failed in business. His real 
estate and goods were attached on that day, and his place of busi- 
ness closed, the attaching officer taking possession of the keys 
and the goods. On Friday, the morning of August 11, 1 871, the 
plaintiff went to Winthrop for the purpose of collecting this note, 
or of taking the necessary steps to hold the indorsers. He went 
to the store recently occupied by the maker of the note, and find- 
ing it closed he went directly to Morton's house, with the note in 
his possession, for the purpose of making a demand of payment. 
Morton was not at the house, but the plaintiff was informed he 
was on the street, where the plaintiff found him about ten o'clock, 
A. m., and then and there requested payment of the note of said 
Morton, which was refused. About two hours afterwards, on the 
same day, the plaintiff sought the defendant, told him he had 
demanded payment of the note of Morton, that he refused to pay 
it, and informed him (defendant) that he should look to him, as 
indorser, for the payment of the note. The defendant replied that 
he would look into the matter, and, if he found that he was holden, 
would see the note paid in two or three weeks. In two or three 
weeks the plaintiff called on the defendant again for payment, 
when the defendant refused to pay, saying that he had inquired 
cafefully into his liability as indorser of this note, and was 
advised that he was not liable, and should not pay the same. 

It was agreed that upon the above facts the full court should 
enter such judgment as the law required. 

If the action could be maintained, defendant to be defaulted ; 
otherwise, plaintiff to become nonsuit. 

E. Kemp ton, for the plaintiff. 
/. H. Potter, for the defendant. 

Virgin, J. When the defendant indorsed and put into circu- 
lation the note in suit, he thereby ordered the maker to pay the 
amount therein specified to the plaintiff; and he also thereby 
promised that if the note were duly demanded of the maker and 
not paid, then he himself would, upon receiving due notice of the 
demand and non-payment, pay it to the plaintiff. 



360 Where Presentment Should be Made 

And now, in this suit upon his promise, the defendant declines 
to pay the note on the following alleged grounds: 

i. That the demand was not lawful inasmuch as it was made 
on the street. 

The general rule of law is that the holder must use diligence 
to find the maker and demand payment of him; and the inquiry 
will be, whether, under the circumstances of the case, due dili- 
gence has been used. (3 Kent's Com. 129). 

It is familiar law that when a promissory note payable gener- 
ally, and not at a specified place, is seasonably demanded at the 
maker's known and settled place of business for the transaction 
of his moneyed concerns, it is sufficient to hold the indorser. And 
the same may be said of a like demand made at his place of resi- 
dence. Neither does it make any difference whether the maker be 
personally present or temporarily absent at the time of the 
demand. In either case, the law has for many years been constant 
in declaring that the evidence afforded by such a demand consti- 
tutes full proof of due- diligence on the part of the holder. 

But in the case at bar the plaintiff went still further than the 
technical exactions of the law required. He was a resident of 
Monmouth. On the day the note became due he went to Win- 
throp village, where both the maker and the defendant resided, 
"for the purpose of collecting this note, or of taking the neces- 
sary steps to hold the indorser." On going to the store which had 
been occupied by the maker as his place of business, he found 
it had been closed and in the possession of an officer more than 
thirty days; that the maker had failed in his business, and that 
all his property was under attachment. Thereupon the plaintiff 
went to the maker's place of residence, where he was informed 
that the maker was not at the house, but had gone out on the 
street. Had he gone through the ceremony of demanding pay- 
ment of the note at the house, while the maker was out on the 
street, the law would pronounce the plaintiff's diligence ample. 
But not finding the maker at home the plaintiff trebled his dili- 
gence, sought and found him on the street in that country village, 
and then and there requested payment of the note of the maker 
personally, which was refused. 

It does not appear (as it would be likely to, if true) that any 
objection to the place of demand was made by maker. If he had 
had funds with which to pay, not with him, but at his house, he 
would at once have said so. If he had objected to the place and 
requested the plaintiff to accompany him to his house and receive 
the money due on the note, and the plaintiff had declined so reas- 



King v. Crowell 361' 

onable a request, the legal aspect of this branch of the case might 
thereby have been materially changed. But no such facts exist. 
He simply refused payment, and, in all human probability, for 
the real, though to him, perhaps, unpleasant, reason that all his 
property was in the custody of the law, and he had in fact nothing 
wherewith he could pay. 

It would seem that such a demand would be more satisfactory 
to all concerned than a mere formal ceremony of a demand gone 
through at his place of residence during the maker's absence. 
And we have no hesitation in declaring the demand sufficient 
under the circumstances, so far as the place is concerned, to charge 
the defendant. 

We are aware that Byles on Bills, 196, declares that a demand 
made on the street is not sufficient. Such is the doctrine 
expressed, too, in the author's notes in Leading Cases on Bills, 
327, 328. And there are several cases containing the dictum in 
general terms that a demand must be made either at the maker's 
place of business or place of residence. But pur attention has 
been called to no case, neither have we, after considerable research, 
been able to find any wherein the court having the question before 
it decided adversely to a demand made on the street, under cir- 
cumstances similar to those in this case. 

On the other hand, Judge Story, in discussing the law appli- 
cable to notes like this, uses the following language : "The general 
rule is, that the presentment for payment may be made to the 
maker personally, or at his dwelling house or other place of abode, 
or at his counting house or place of business. It seems a present- 
ment may always be made personally to the maker, wherever he 
may be found, although he may not be either at his domicil, or at 
his place of business." And he cites quite a large number of 
cases, in a note, as authority. (Story on Prom. Notes, § 235) . 

In Edwards on Bills (2 ed.), 150, is found the following: 
"Being made payable at large, it is due at any and every place ; 
but for the purpose of charging the indorser, it must be presented 
for payment to the maker personally, or at his residence or place 
of business. If it be made payable at a particular place in the city, 
it is necessary to present the note there for payment, for the pur- 
pose of charging the indorser. But even in this case, if a personal 
demand is made upon the maker, and no objection is made by him 
as to the place, it is sufficient." 

So in 3 Kent's Com. 128. "Demand of payment must be 
made by the holder or his agent upon the acceptor at the place 
appointed for payment, or at his house or residence, or regular 



362 Where Presentment Should be Made 

known place of his moneyed business, or upon him personally, if 
no particular place be appointed." And again, on page 96, "If 
demand be made upon the maker elsewhere than the place 
appointed, and no objection be made at the time, it will be deemed 
a waiver of any future demand." 

And Prof. Parsons says: "In general a personal demand 
would be sufficient, if made at any place where the maker may 
reasonably be expected to be in condition to pay ; and if made in 
any other place — such, for instance, as in the street — it would 
usually be good, unless objection were made to payment because 
the place was an improper one, or some similar reason were given 
for the refusal. (1 Parsons on Notes and Bills, 421). And he 
uses somewhat similar language on p. 372. 

The doctrine as stated above by Judge Story is approved in 
Taylor v. Snyder, 3 Denio, 145, Sup. Ct. N. Y., published as a 
leading case in Leading Cases on Bills, 313, 316. 

Finally, our own court held, that where a note signed by two, 
made payable at their dwelling houses, was demanded of them, 
together, at the barnyard of one of them, and no objection was 
made as to the place of the demand, the demand was sufficient. 
{Baldwin v. Farnsworth, 10 Maine, 414). 

2.. But the defendant further objecting to the sufficiency of 
the demand says : "As the payer has a right to require its delivery 
up to him before he pays, and may insist that the holder produce 
it, the note should have been exhibited." 

It is true that the rule requiring the person making the 
demand to exhibit the evidence of debt is well settled, and well 
grounded in reason; and, although applicable to all written con- 
tracts on which a demand is necessary, it is, as has been well said, 
especially applicable to negotiable securities, which may be legally 
transferred to another at the very time the original payee makes 
the demand. But the reasons applicable to cases in which the 
maker offers to pay cannot apply to cases in which he not only 
does not offer, but absolutely refuses, to pay, and does not even 
express any desire to see the note. 

The idle ceremony of producing the note when the maker 
unqualifiedly refuses to pay is well illustrated by C. J. Shaw, in 
Gilbert v. Dennis, 3 Met. 497, where he says : "Even under the 
law of tender, which is extremely strict, it is held that where a 
party to whom a tender is to be made declares that he will not 
accept it, an actual production and offer of the money is not nec- 
essary." 

The case finds expressly that the maker had the note in his 



Gower v. Moore 36S 

possession when he made the demand. We think the objection 
cannot prevail. (Arnold v. Dresser, 8 Allen, 435; Freeman v. 
Boynton, 7 Mass. 485; Etheridge v. Ladd, 44 Barb. 69). 

3. The defendant finally contends. that the notice having 
been given to the defendant on the last day of grace was prema- 
ture, for the reason that the maker had the whole day in which to 
pay. 

We presume, however, that the defendant predicated this 
objection upon the alleged insufficiency of the demand. For long 
before, and certainly ever since, the review of the cases by C. J. 
Shaw in Staples v. Franklin Bank, 1 Met. 43, the rule applicable 
to notes like the one in question has been that the note is due on 
actual demand at any such hour on the last day of grace that, 
having regard to the habits and usages of the community where 
the maker resides, he may be reasonably expected to be in condi- 
tion to attend to ordinary business ; and if upon such demand pay- 
ment is not made, the maker is in default, and notice of dishonor 
may forthwith be given to the indorser. But if no such demand 
be made, and the maker does nothing amounting to a waiver, he 
has the whole of the day in which to make payment, and is not in 
default until the expiration of the business day within which such 
demand might have been made. (Greeley v. Thurston, 4 Greenl. 
479; Flint v. Rogers, 15 Maine, 67; Lunt v. Adams, 17 Maine, 
230; Farnsworth v. Allen, 4 Gray, 453 ; Estes v. Tower, 102 Mass. 
65; Gordon v. Parmelee, 15 Gray, 413; Manchester Bank v. Fel- 
lows, 28 N. H. 303 ; Crosby v. Grant, 36 N. H. 418) . 

Defendant defaulted. 
Appleton, C. J.; Cutting, Dickerson, Danforth, and 
Peters, JJ., concurred. 



presentment where person primarily liable is dead. § 78. 
Gower v. Moore (1845), 25 Me. 16. 

The suit was against Moore, as indorser of a note given by 
Robert . Wither spoon to him, and indorsed by the defendant, 
dated August 12, 1841, and payable on August 15, 1843. 

Witherspoon, the maker of the note, died in February, 1842 ; 
administration was taken out on his estate, and it was rendered 
insolvent; one Freeman, then the holder of the note, proved it 
before the commissioners as a claim against the estate, and noti- 
fied the defendant, after the death of Witherspoon and before 



364 Presentment Where Person is Dead 

the note became payable, that the maker of the note being dead, 
he should look to the defendant for payment ; and that the defend- 
ant, about a month after the day of payment, was notified by the 
then holder of the note, that it was unpaid, and that he should 
look to the defendant for payment. 

This was the plaintiff's case; and thereupon Goodenow, the 
district judge presiding, directed a nonsuit. To this the plaintiff 
filed exceptions. 

/. C. Woodman, for the plaintiff. 
Dunn, for the defendant. 

The opinion of the court was by 

Shepley, J. This is a suit by the indorsee against an indor- 
ser of a promissory note, made on August 12, 1841, and payable 
in two years. Before it became payable the maker had deceased, 
an administrator had been appointed, the estate had been repre- 
sented to be insolvent, commissioners of insolvency had been 
appointed and the holder of the note had proved it before them. 
When the maker of a note dies, before it becomes payable, the 
holder should make inquiry for his personal representative, if 
there be one, and present the note on its maturity to him for 
payment. The case of Hale v. Burr, 12 Mass. R. 86, may be con- 
sidered as presenting an exception to this rule; but doubts have 
been expressed, whether it could be considered as either correct 
in principle, or founded upon sufficient authority. 

In this case the indorser may be considered as knowing, that 
the note would not be paid on presentment; and that the estate 
was insolvent. But such knowledge does not relieve the holder 
from his obligation to make presentment and give due notice of 
its dishonor. The promise of the indorser is a conditional one 
to pay, if the note be duly presented to the maker and seasonable 
notice be given to him of its dishonor. 

The holder connot assume the right to decide, that his per- 
formance of the condition will be of no service to the indorser, 
and thus put that matter in issue to relieve himself from the 
performance of the condition imposed upon him by law. (Nichol- 
son v. Gouthit, 2 H. Bl. 609; Clegg v. Cotton, 2 B. & P. 239; 
Prideaux v. Collier, 2 Starkie's R. 57). 

The various relations, which the parties, whose names are 
upon negotiable paper, sustain towards other persons, whose 
names are not upon it, cannot be anticipated. 

The real debtors, who may feel obliged to pay, may not wish 
to exhibit themselves as such. A deceased party may possibly 



Fourth National Bank v. Heuschen et al. 365 

have held a contract of some responsible person to pay in case 
the note should be duly presented for payment. So may an 
indorser. To hold an indorser liable and yet deprive him of the 
benefit of such a contract could not be justified. It is best for a 
commercial community that the rules be simple, subject to few 
exceptions, and not liable to be varied to meet the apparent 
injustice of particular cases. The notices given to the defendant 
in this case were either too early or too late to be of any avail. 

Exceptions overruled. 



PRESENTMENT TO PARTNERS. § 79. 

Fourth Nat. Bank v. Heuschen et al. (1873), 53 Mo. 207. 
Appeal from St. Louis Circuit Court. 

Hitchcock, Lubke and Player, for appellants. 
Finkelnburg and Rassieur, for respondent. 

Adams, Judge, delivered the opinion of the court. 

This was an action on a negotiable promissory note, by the 
plaintiffs, as holders for value before maturity, against the makers 
and indorsers. 

The note was made by a partnership composed of the defend- 
ants, Frederick W. Heuschen, Frederick Krite and Frederick 
Perschbacker, whose firm name was "Heuschen, Krite & Co." 
It was executed to the defendant, John H. Schaales, who indorsed 
the same to Wilhelm Ricke, and Ricke to the defendant, Frederick 
W. Heuschen, and he to the plaintiff. 

At the close of the evidence the plaintiff asked the following 
instructions, which were refused by the court and exceptions duly 
saved : 

"1. The court declares the law to be that service of notice 
of protest by a notary, through the hands of a clerk, is sufficient 
to charge the indorsers, and the notarial certificate verified by 
affidavit is evidence of such service." 

"2. If the court, sitting as a jury, believe from the evidence 
that at the maturity of the note it was placed in the hands of a 
notary public who during business hours of that day presented 
the same for payment at a place of business bearing the sign 
of Heuschen, Krite & Co., a place where said firm had been doing 
business for several years and which a person in charge thereof 
then and there represented as the place of business of Heuschen, 



366 Presentment to Partners 

Krite & Co., to which place plaintiff had been directed by one of 
the partners as their place of business about ten days previously, 
and which the same partner designated to the notary as their 
place of business on the day of maturity, and that furthermore 
said notary presented said note for payment to F. W. Heuschen, 
a member of said firm, in person on the same day, then there was 
sufficient demand to charge the indorsers although the court 
may believe that a dissolution of said firm had in fact taken place 
previous to the maturity of said note." 

The court then at the instance of the defendants and against 
the objections of the plaintiff gave the following declaration: 

"If the makers of the note sued on in this cause had a place 
of business in the city of St. Louis, but the individuals, or either 
of them, composing the firm of Heuschen, Krite & Co., resided 
in the said city of St. Louis, it was the duty of the notary to 
demand payment of said note of the makers thereof or either of 
said makers or at their place of residence or the place of business 
of any one of them." 

The case had been submitted for trial to the court sitting as 
a jury, and when the court refused the plaintiff's instructions 
and allowed those of defendants, the plaintiff took a nonsuit and 
by leave moved to set it aside, which motion being overruled he 
appealed to general terms when the judgment at special term 
was reversed and the cause remanded, and the defendants have 
appealed to this court. 

On the trial at special term the plaintiff gave evidence tend- 
ing to prove the facts as set forth in the second instruction, but 
failed to give any evidence in regard to the notice by the notary's 
clerk, and it will be unnecessary to pass upon the plaintiff's first 
instruction. The bill of exceptions shows that there were two 
similar cases tried by the court at the same time and the first 
instruction may have had reference to the other case. 

The indorsers of a negotiable note are only liable in case due 
diligence has been used to make a demand of payment from the 
makers and due notice given to them in case the note is dis- 
honored. 

Where the facts are agreed on, due diligence in making a 
demand is a question of law ; but when the facts are not agreed 
on, the question of due diligence becomes a mixed question of 
law and fact. That is, the jury are to find the facts and the 
court is to pronounce the law upon the facts as they may be 
found by the jury. The usual way is to state in the instruction 
hypothetically the facts to be found from the evidence by the 



Arnold v. Dresser 367 

jury, and to pronounce upon those facts so to be found, the con- 
clusion of law resulting therefrom. This mode was pursued in 
the second instruction asked by the plaintiff. The evidence 
strongly tended to prove the facts as hypothetically put in that 
instruction. Those facts, if found to be true, in my judgment, as 
a matter of law, constituted due diligence in making a demand 
of payment on the makers of the note so as to fix their responsi- 
bility so far as such demand was necessary. A personal demand 
of payment on one of the parties was sufficient, although such 
demand may have been made after the dissolution of the firm; 
or a demand made in good faith at the late place of business of 
such firm, made on information, whether true or false, received 
from a member of the firm that such place was the proper place 
to make the demand, would constitute due diligence. A partner- 
ship, although dissolved, must be treated as still in existence so 
far as the question of demand, protest and notice is concerned, 
and the acts of one partner in such case must be considered as 
binding on all the others. Therefore the facts indicated in plain- 
tiff's second instruction constituted not simply due, but extra- 
ordinary diligence in making demand of payment of the makers 
of the note. 

The instructions given at the instance of the defendants did 
not cover the whole case as made by the plaintiff. The plaintiff 
had the right to have his case as made by the evidence presented 
by a proper instruction. 

The judgment at General Term will therefore be affirmed. 

The other judges concur. 



PRESENTMENT TO JOINT DEBTORS. § 80. 

Arnold v. Dresser (1864), 8 Allen {Mass.) 435. 

Contract against the indorser of a joint promissory note. 

At the trial in the superior court, before Morton, J., it 
appeared that on the day when the note became due, Theodore 
S. Stratton, in behalf of the plaintiff, demanded payment thereof 
of the two promisors, but did not have the note in his possession 
at the time; and the note was not paid. The plaintiff testified 
that on the same day he called upon the defendant, and gave 
notice to him that demand had been made on the makers; that 



368 Presentment to Joint Debtors 

one of the makers called during the interview, and both he and 
the defendant said that the note should be paid soon. 

Upon this evidence, the judge ruled that the plaintiff was not 
entitled to recover, and directed a verdict for the defendant, 
which was accordingly rendered, and the plaintiff alleged excep- 
tions. 

H. W. Bishop, for the plaintiff. 
/. E. Field, for 'the defendant. 

Bigelow, C. J. The defendant is not liable as indorser of 
the note declared on. In order to charge him it was necessary 
for the plaintiff to show due presentment and demand of the note 
on both the promisors ; Union Bank of Weymouth, &c. v. Willis, 
8 Met. 504; or a waiver thereof by the defendant. There were 
no such presentment and demand. If a note is made payable at 
a particular place, the holder must have it at that place on the day 
of its maturity, in order to make due presentment ; if it is not 
payable at a designated place, the note must be presented to the 
promisor at his usual place of business or at his dwelling house. 
But no valid presentment and demand can be made by any person 
without having the note in his possession at the time, so that the 
maker may receive it in case he pays the amount due, unless 
special circumstances, such as the loss of the note or its destruc- 
tion, are shown to excuse its absence. {Shaw v. Reed, 12 Pick. 
132; Freeman v. Boynton, 7 Mass. 483). 

Nor was there any waiver of due demand by the defendant. 
No such waiver is made, where an indorser promises to pay the 
note in ignorance of the fact that he has been discharged by the 
laches of the holder, in not making due demand of the promisor, 
or where such promise is made under a misapprehension or mis- 
take of facts concerning the due presentment and demand of 
the note. {Low v. Howard, 11 Cush. 268; Kelley v. Brown, 5 
Gray, 108). In the case at bar, the defendant made the statement 
on which the plaintiff relies to show a waiver, not only in igno- 
rance of the fact that the note had not been duly demanded of one 
of the promisors, but under a mistaken belief that it had been so 
demanded, induced by the false statement to that effect made to 
him by the plaintiff. Exceptions overruled. 



Sussex Bank v. Baldwin et al. 369 



PRESENTMENT BY WHOM. § 74- 

Sussex Bank v. Baldwin et al. (1840), 17 N. J. L. 

See §§ 96, 104-107. 

Armstrong and Williamson, for rule. 
/. W. Miller and P. D. Vroom, contra. 

Dayton, J. This ca'se was tried at the Sussex Circuit of 
May, A. D. 1838, and verdict had for the plaintiff. Sundry rea- 
sons are now relied upon to set the same aside, and I will consider 
them in their order. 

The defendants are the indorsers of a promissory note made 
by Conrad Teese, October 24, 1836, for five hundred and five 
dollars and sixty-one cents, payable six months after date to the 
order of Wm. A. Baldwin & Co., (the defendants) and by them 
indorsed to the plaintiff. The first reason assigned is, that the 
note was not duly presented to the maker, for payment. That it 
was presented at an improper place, to wit, the office of Teese, 
the maker, and by an improper person, to wit, one Dennis, who 
swears that he acted as the clerk and under the directions of 
Wm. Tuttle, who was himself merely the agent of James Hedden, 
the notary public. 

As to the place of presentment, the objection may be disposed 
of very briefly. It is a point not properly arising under the evi- 
dence in the case. Dennis, the witness, swears that Teese, the 
maker of the note told him, Dennis, to present his notes for pay- 
ment at that place, and that he had been in the habit of doing so. 
This estops Teese from objecting to the place of presentment; 
and that which is good against the drawer, is good against the 
indorser. (State Bank v. Hurd, 12 Mass. 172 ; Whitwell v. John- 
son, 17 Mass. R. 449). But it is thought advisable that this point 
be put at rest in this state, by an expression of opinion by this 
court. 

It appears by the evidence, that the office in question was the 
regular place of business of the maker; and I have no doubt 
where a person has an office or known and settled place of busi- 
ness for the transaction of his moneyed concerns — whether he be 
a banker, broker, merchant, manufacturer, mechanic, or dealer in 
any other way, a presentment and demand at that place, (as well 
as a presentment and demand at his residence) is good in law. 
It must not, however, be a place selected and used temporarily for 
the transaction of some particular business, as settling up some 



370 Presentment by Whom 

old books or accounts merely, but his regular and known place 
of business for the transaction of his moneyed concerns. The 
counting room of a banker or merchant, may be a proper place 
for a demand, though the manufactory or work shop would not. 
Yet if the manufacturer or mechanic have an office, or known 
place of business for the purpose aforesaid, a good demand may 
be made there. (Bank of Columbia v. Lawrence, i Peters, 582 ; 
Williams v. The Bank of U. States, 2 Peters, 100; Byles on B. 
118; State Bank v. Hurd, 12 Mass. 173). 

Nor is there any thing in the objection that the presentment 
was made by an improper person. It appears by the evidence 
that Tuttle did the business of Hedden, the notary public, and it 
must have been with the consent and knowledge of the Bank, that 
he employed and directed Dennis, who was his clerk, to present 
the note in question to the drawers, and put him in possession 
of the note for that purpose. If the note had been paid on pre- 
sentment, he could and would have delivered it up to the drawers, 
and that would have exonerated them from further liability. An 
authority to make a demand, may be created by parol, and the mere 
possession of the paper, is evidence enough of such authority. (3 
Kent C, 108 ; Bank of Utica v. Smith, 18 J. R. 230 ; Shed v. Brett, 
1 Pick. 401 ; Morris v. Foreman, 1 Dal. 193 ; Freeman and others 
v.Boynton, 7 Mass. 487). 

There is an impression current in some degree, even with the 
bar, that a presentment of a note, must be by a notary, or at 
least on his behalf, and that he must protest it upon non-payment, 
before the indorser is liable. But this is not so. The record of 
a demand and notice &c. by a notary, entered in his book, accord- 
ing to our statute, of 21st February, 1829, Harr. C. 249, may 
serve to refresh his memory, or in case of his absence or death, 
it may be used as evidence of the facts contained in it; but such 
demand and protest by a notary, are not essential to a recovery 
against the indorser. It was not so by the common or commer- 
cial law, nor is it required by our statute. If a notary act in 
the premises, and make the protest, although sanctioned by gen- 
eral custom, it is not strictly an official act. (Nichols v. Webb, 
8 Wheat. 326 ; 3 Kent C. 93-4 ; 1 Saund. on PI. & Ev. 295). 

Any person may present at its maturity, a promissory note of 
which he is put in possession, and if paid in the ordinary course 
of business, and taken up, the payment is good; and if not paid, 
the demand is good as a groundwork for notice to the indorsers, 
and that without any protest. The rule is otherwise as to foreign 
bills of exchange, which must be protested by a notary, and their 



Sussex Bank v. Baldwin et al. 371 

official seal is plenary evidence in all foreign courts and countries, 
of the dishonor of the bill, (vide cases above cited). 

2. The next objection, is to the notice to the indorsers. 
The name of James Hedden, the notary public, was printed at the 
foot of the notice, not written; and this is assigned for error. 
There is nothing in this objection. The law prescribes no form 
of notice, its object is merely to apprise the party of the non- 
payment — to put him upon inquiry, that he may protect his rights. 
This is as well done by a notice with a printed, as with a written 
name. 

The signature of the notary, would carry with it in a large 
majority of cases, no higher degree of certainty than the printed 
name, for it must in most cases be unknown to those to whom 
notices are sent. The notice in this case, came from a proper 
source, and stated the proper facts ; that is enough. It is needless 
to cite authorities upon this point. 

3. The next objection is, that the notice was not sent in 
proper time. 

The Sussex Bank was the owner of the note, and had sent it 
indorsed to the Newark Bank for collection. The demand of 
payment was made on Teese, the maker, at Newark, where he 
resided on the 27th April, 1837, and on the same day, notice of 
non-payment was directed to S. D. Morford, the cashier of the 
Sussex Bank, at Newton. In this notice to Morford, was 
inclosed another directed to the defendants in this suit, with the 
name "James Hedden, notary public," printed thereto, and none 
other. It appeared that Tuttle, who forwarded the notices for 
the notary, did not know that the defendants resided in Newark, 
but supposed them to reside in Sussex. Morford swears that on 
the notice thus directed to the defendants, he wrote "Newark, 
New Jersey," and "thinks he sent it by the next mail." But 
upon cross examination, he said "he distinctly recollected putting 
the notice of protest directed to the defendants into the postoffice 
at Newton, but could not recollect at what time he did so. Could 
not tell precisely what was at that time the course of mail between 
Newton and Newark, but thought that it was carried each way, 
three times a week." And upon a re-examination, he said "he 
seldom received such notices, but when he did, was in the habit 
of sending them by the next mail : that he had no doubt he put 
the notice for the defendants, into the postoffice at Newton, the 
day after he received it, but could not say whether it was in time 
for the next mail." And upon this branch of the case, the judge 
charged the jury, that if Mr. Morford, the cashier, placed the 



372 Presentment by Whom 

notice in the postoffice, directed to the defendants, on the day 
after he received it, it was sufficient and legal evidence of notice to 
the defendants. 

It is admitted that every bona tide indorser who may receive 
a notice of non-payment, has a day to notify his immediate 
indbrser; but it is contended that this rule extends only to real 
holders and indorsers, not to such as are mere agents. That the 
Sussex Bank had no right by appointing the Newark Bank its 
agent, to extend the time allowed it by law for notifying the 
indorsers, of the non-payment of the note really held and owned 
by it. It would appear reasonable that the holder of a note should 
not for his own accommodation, thus vary the rights of an 
indorser: but the authorities grounded I presume upon commer- 
cial convenience, are the other way. 

It has long been settled that a banker who holds a bill for a 
customer, is entitled to a day to give him notice, and the cus- 
tomer or principal is entitled to another day to give his indorser 
notice; Firth v. Thursh, 15 Eng. C. L. 244-5; Robson v. Bennett, 
2 Taunt. 388; Haynes v. Birks, 3 Bos. & P. 599; Longdate v. 
Trimmer, 15 East, 291 ; Bray v. Hadwen, 5 M. & S. 68; Scott v. 
Litford, 9 East, 347 ; Daly v. Slatter, 4 Carr. and P. 200 ; but in 
this last case, certain points were reserved, for which, see case; 
and the same principle is laid down in Mead v. Engs, 5 Cowen, 
303, where it is held that one to whom a bill or note has been 
indorsed merely as agent to collect, (e. g. a bank) is considered 
as a holder for the purpose of giving and receiving notice of non- 
payment. See also, Colt v. Noble, 5 Mass. 167; Tunno v. Lague, 
2 J. C. 1. It was said on the argument that no case could be 
found where this rale had been applied unless the notice was from 
one indorser notifying another; and that in the case now under 
consideration, the notice was not from the Sussex Bank, which 
was the indorser, but from the notary public of the Newark Bank, 
whose name was attached to it. Admitting this for the sake of 
argument to be so, yet the case of Tunno v. Lague, lays down 
the rule (which is founded in reason too) that if the agent under- 
takes to give notice to the other indorsers, as well as his principal, 
the notice will be good if given as early as it could have been 
received from the principal. If therefore this is to be considered 
a notice from the notary, and not from the Sussex Bank, it is 
good if given as early as the Sussex Bank was bound to give it. 
But admitting this to be so, an important question yet remains. 
Was the notice in time, supposing it to have come from the 
Sussex Bank? There is nothing wherein greater strictness is 



■Sussex Bank v. Baldwin et al. 373 

required, than upon this point. It is laid down that notice of 
non-payment, cannot be left to inference; without positive proof. 
(Chitty on B. 314; Assignees of Schiffner v. Sherwood, 2 Eng. 
C. L. R.405). 

There is certainly no positive proof that the letter containing 
the notice of non-payment was put in the postoffice for the 
defendants, in time for the mail of the day next after it was 
received by the Sussex Bank. Morford says in substance, that he 
thinks he sent the letter by the next mail; but upon a further 
examination, he says he does not recollect the course of the mails 
at that time, and although he has no doubt he mailed it next day, 
he cannot say whether it was in time for the mail. There is 
therefore no positive proof of that fact, and we cannot infer it. 
Nor was it even submitted as a question of fact to the jury ; on 
the contrary the charge of the court was, that the indorser had 
the entire day to put the notice in the postoffice, without reference 
to departure of the mail. 

Does the law require that the notice be put in the postoffice 
in time for the mail of the day next after the indorser receives 
it, or has he the whole of that day to prepare it ? 

Kent in his commentaries, 3 Vol., p. 105, says, the modern 
doctrine is, that the notice must be given by the first direct and 
regular conveyance; meaning thereby "the first convenient and 
practicable mail that goes on the day next to the third day of 
grace ; so that if the third day of grace be on Thursday, and the 
drawer or indorser reside out of town, the notice may indeed be 
sent on Thursday, but must be sent by the mail that goes on Fri- 
day." Kent says in a note, that the case of Hawkes v. Salter, 4 
Bing. 715, is a relaxation of the strictness of that rule; and yet 
that case does not appear on examination, to militate against the 
general rule that the notice must go by the first convenient and 
practicable mail, on the day next after the third day of grace. 
In the case of Hawkes v. Salter, the notice should have been sent 
on Monday, but the only mail on Monday went out at half past 
nine in the morning, and one of the grounds taken was that the 
party was not bound to get up at an unseasonable hour, to send 
his notice. The court held that notice sent on Tuesday morning 
was in time. The general principle undoubtedly is, that a party 
is bound to exercise reasonable diligence only, not excessive. If 
therefore the only mail- of the day, leave at an early hour in the 
morning— before a party in the exercise of reasonable diligence 
could mail his notice, he may properly send it by the next oppor- 
tunity. The case of Firth v. Thursh, 8 B. and Cress. 387, was 



374 Presentment by Whom 

decided on entirely different grounds : an attorney after receiving 
information of the indorser's place of residence, was allowed in 
that case one day to consult his principal, upon the ground that 
he stood in the light of a banker who holds paper for his prin- 
cipal. These cases of relaxing, cannot be considered as conflicting 
with the general rule laid down by Kent. In Lenox v. Roberts, 
2 Wheat. 373; Chief Justice Marshall, in delivering the opinion 
of the court, says "a demand of payment should be made on the 
last day of grace, and notice of the default of the maker, be put 
in the postofRce early enough to be sent by the mail of the 
succeeding day." The same point substantially was ruled in The 
U. States v. Adm'x. of Barker, 4 Wash. C. C. R. 464; Mead v. 
Engs, 5 Cowen, 303 ; Bank of Alexandria v. Swann, 9 Peters, 45 ; 
and in Whitwell v. Johnson, 17 Mass., 454, it was ruled that if 
there be two mails on the day after the note falls due, it is good 
if the notice go by either of them. 

The English cases, more particularly those of a late date, are 
to the same point. In Smith v. Mullet, 2 Camp. 208, the same 
rule was applied between indorsers. The fourth indorser having 
received notice of non-payment, on the 20th of the month, he 
mailed a notice to his immediate indorser, on the evening of the 
2 1st, but so late that it was not delivered until the morning of the 
22d. This was held by Lord Ellenborough to discharge not only 
the defendant, but the other indorsers, although they actually 
received notice of the dishonor during the day of the 22d ; and it 
was said that although a party has an entire day, yet he must send 
his letter within post-time of that day. That if he retain it 
until after the mail is gone, he might just as well retain it until 
the next day : the consequence is, that an entire day is lost. 

The opinion of Chief Justice Abbott, in Geill v. Jeremy and 
Blagg, 1 Moody and M. 225 ; as cited and reported in Chitty on 
B. 7 Am. Ed. 316; is but a reiteration of the same rule. He says 
it is well settled, that a party who receives notice of the dishonor 
of a bill, is not bound to forward notice to the prior party, till the 
next day, and it then suffices if he puts a letter in the post on 
any following day, so that it be forwarded by the next practicable 
post. See this case 22 Eng. C. L. R. 249; or M. and M., 61, 
not. ( ?) 225. See, also, Hilton v. Fair dough,, 2 Camp. 633 ; Wil- 
liams v. Smith, 2 B. and A. 500; Byles on B. 160. 

It would certainly simplify this matter to lay down the rule, 
that a party has the next day entire to prepare and mail his notice, 
without reference to the time of the departure of the mail. But 
this would be in violation of the authorities and against the gen- 



Sussex Bank v. Baldwin et al. 375 

eral principle which requires the exercise of at least reasonable 
diligence. Many of the authorities say, the party has an entire 
day to give the notice ; and so he has, but not an entire day to pre- 
pare it. He must give or send his notice on the next day if he 
can; if he neglect it, until after the departure of the mail, he 
does not give or send his notice the next day, but in point of 
fact, the day after the next, or at some other and perhaps more 
distant day. It is safe therefore to adhere to the rule, that the 
notice must be sent on the day next after the third day of grace, 
unless the mail of that day go out at so early an hour as to render 
it impracticable by the exercise of a reasonable diligence. (4 
Bing. 715; 1 Mood P. 750; 5 M. and S. 68; 2 B. and A. 501). 
No precise hour can be named, particularly in the country, where 
the term "business hours," has a somewhat vague and indefinite 
meaning. Cases will occassionally arise, where it will become 
necessary for the court to direct the jury whether due diligence 
has been exercised, supposing certain facts to be proved. (Aymer 
v. Beers, 7 Cowen, 705 ; Bank of Columbia v. Lawrence, 1 Peters, 
578). 

Applying the above rule to the evidence in this case, the 
plaintiff ought not to recover ; it certainly is not shown that the 
notice was sent the next day after it was received. It was mailed, 
but whether in time for the post, the witness does not pretend to 
say, and that is a fact which he must make out. The importance 
of sustaining this rule, is evident from the facts of this case. The 
mail between Newton and Newark, being only tri-weekly, if the 
letter were mailed after the post left, it was not one day only 
lost, but two or perhaps three. The charge of the court upon 
this point was clearly erroneous; and for this reason, if there 
were no other, the verdict must be set aside, unless there has been 
a waiver of notice, on the part of the defendants, as is contended. 

Mr. Morford swears "that a week or two before the note of 
Teese came due, he received a private letter from Baldwin, one 
of the defendants, in which he (Baldwin) stated that Teese could 
not pay it, and requested to have it renewed." John Young, 
another witness, swears that Baldwin "handed him a note of 
Conrad Teese, indorsed by the defendants, and wished him to 
try and get the plaintiff to take it in renewal of a note they then 
held: he (Baldwin) stated that the note of Teese which they 
wished to take up, had been protested, and that he had received a 
notice of protest through the bank." 

I was at first doubtful whether this evidence might not be 
considered as showing an implied waiver of demand and notice. 



376 Presentment by Whom 

But upon looking into the authorities, I am satisfied that it cannot 
be so considered. We are to bear in mind, that the defendants 
are not drawers of a bill of exchange, but indorsers of a promis- 
sory note, and as against them, a clear case of waiver must be 
made out. Nothing short of an unconditional promise to pay, 
made with a full knowledge of the laches of the holder of the 
note, is sufficient. A knowledge that the maker could not pay, 
does not dispense with strict proof of demand and notice. In 
Esdaile v. Sowerby, n East, 117, Lord Ellenborough said, that 
a knowledge of the insolvency of the drawer, and acceptor of a 
bill, and that it must be dishonored when it became due, does 
not dispense with proof of actual notice of the dishonor. And 
this principle may likewise be found in many other cases, as well 
as in the elementary books. (2 H. Blac. 609; Doug. 496; 8 East, 
245 ; 2 Bos. and P. 277 ; 6 B. and C. 373 ; Chitty on B., 7 Am. Ed. 
246 ; 1 Saund. on PI. and Ev. 292 ; Thornton v. Wynn, 12 Wheat. 
183). 

The admission therefore that Teese could not pay the note, 
does not affect the defendants' right to strict proof of notice. 
Nor does the offer to substitute a new note, drawn by Teese, and 
indorsed by' the defendants, affect this right. It was not an 
unconditional promise to pay, made by the defendants. Nor if it 
were, has it been shown to have been made with a full knowledge 
of the laches of the holder, by which they were legally discharged 
from all liability. All this it is necessary to prove, before we 
can imply a waiver of notice. 1 Harr. 402; 1 D. and E. 712; 12 
Wheat. R. 183; 5 Burrow 2670; U. S. Bank v. Southard, decided 
at the present term of the court, ante, 473. 

An admission that notice of protest, had been received 
through the bank, is nothing. It does not appear when it was 
received. It has never been disputed that a notice was received ; 
but the allegation is that it was not received in time, and it was 
the plaintiff's duty to show that it was received or rather that it 
was mailed in time, which it has failed to do. 

There was another point made on the argument, upon which 
I shall do little more than express an opinion, referring to the 
opinions of my brethren, for the authorities. It was alleged that 
there was usury in discounting this note, by the Sussex Bank. 
It appears by the evidence of Morford, the cashier, that in making 
his calculation, he considered thirty days, a month, and 12 
months, a year; and that pursuant to a proposition of the defend- 
ants, he deducted from the net proceeds of the note, one per cent 



Waring v. Betts 377 

for a draft upon Newark, where at the defendants' request, the 
proceeds of the note were to be paid. 

The mode of calculation adopted, might certainly have pre- 
sented a serious question for the court, had it stood alone, but 
Morford swears that he was not aware that the bank received by 
that mode of calculation, more than six per cent, that he intended 
to take no more. If this be so, the taking of more than legal 
interest was a mistake ; as much so as if it had been a mistake in 
adding or substracting figures. This is the view taken by Savage, 
C. J., in the case cited from 3 Wend. 369. Had Morford known 
that he was taking more than six per cent (even though he had 
supposed that he was legally entitled to make his calculation in 
that way) would present a very different question. The law will 
infer a corrupt intent, where the fact of taking more than six 
per cent, knowingly is proved, but it cannot infer such intent 
where it is done in ignorance and mistake of facts. 

As to the charge of one per cent for a draft, it was fairly put 
-to the jury by the judge who tried the cause, and their finding is 
conclusive upon that question. They were told that if the charge 
of one per cent were unreasonable, and a part of the original 
agreement to discount the note, and if it were made corruptly, as 
a contrivance and with a design to evade the statute, it was 
usurious. This was doubtless the law, and the jury have, it is to 
be presumed, rightly applied the law thus given them, to the facts 
of the case. For reasons before stated, this rule must be made 
absolute. 

Hornblower, C. J., FoRp and Nevins, JJ., concurred. 
Wh^te, J., did not hear the argument, and gave no opinion. 

Rule made absolute. 



INSTRUMENT MUST BE EXHIBITED. § 76. 

Waring v. Betts (1893), go Va. 46, 44 Am. St. Rep. 800. 

Action on a negotiable note against J. L. Waring, W. L. 
Waring, Jr., and J. D. Blair, maker and indorsers of the said note, 
by E. Betts, the owner of the same. The note was negotiable and 
payable at the Business Men's Bank, but at its maturity the bank 
had gone out of existence and had distributed its assets. Demand 
for payment was made on W. L. Waring, Jr., one of the indorsers 
and manager of the said bank, at his place of business at 2:30 
p. m. of August 29, 1892. He refused to pay on the ground that 



378 Instrument Must be Exhibited 

he was not authorized to represent said Business Men's Bank; 
that the funds of the band had all been distributed; that he had 
no assets in his hands belonging to the bank. 

Later in the day, at 5 130 p. m., the note was taken by a notary 
to the office of W. L. Waring, Jr., but that being closed it was 
taken to the residence of Waring and presentment sought to be 
made there. Failing to find Waring at either place, the note was 
duly protested and notice was given to the indorsers. Judgment 
was rendered for the plaintiff and defendant applied for and 
obtained a writ of error. 

Berkeley & Harrison, for plaintiffs in error. 
E. E. Bouldin, for defendant in error. 

Lacy, J., (after stating the case) delivered the opinion of the 
court. 

The first question arising here is that raised by the demurrer. 
The declaration states a good case, and sets forth that on its due 
day it was duly presented for payment of the sum of money 
therein specified, required, payment refused, and that it was duly 
protested, &c. 

And the defendants' demurrer to the plaintiff's declaration 
was properly overruled. 

The claim of the defendants is that there was no presentment 
of the note, because when payment was demanded of the indorser, 
W. L. Waring, Jr., manager of the late Business Men's Bank, 
Mr. Glenn did not have the note in his possession, and could not 
have presented it, but as has been seen from the facts found by 
the jury, payment was refused by Waring, and the note not asked 
for, but payment refused, and the statement made that he was 
not authorized to represent the bank which had ceased to do bus- 
iness and had distributed its assets. 

Presentment of the bill or note and demand of payment 
should be made by an actual exhibition of the instrument itself; 
or at least the demand of payment should be accompanied by some 
clear indication that the instrument is at hand ready to be deliv- 
ered, and such must really be the case. This is requisite in order 
that the drawer or acceptor may be able to judge ( 1) of the genu- 
ineness of the instrument; (2) of the right of the holder to 
receive payment; and (3) that he may immediately reclaim pos- 
session of, upon paying the amount. If, on demand of payment 
the exhibition of the instrument is not asked for, and the party 
of whom demand is made decline on other grounds, a formal 
presentment by actual ■ exhibition of the paper is considered as 



Waring v. Betts 379 

waived. (Dan. on Neg. Inst., p. 485, §654; citing Lockwood v. 
Crawford, 18 Conn., 361, and Fall River Union Bank v. Willard, 
5 Metcalf, 216). 

All the parties subsequent to the principal payer are bound 
only as his guarantors, and promise to pay only on condition 
that a proper demand of payment be made, and due notice be 
given to them in case the note or bill is dishonored. And we 
repeat this as one of the fundamental principles of the law of 
negotiable paper; and the infrequency and the character of the 
circumstances which will excuse the holder from making this 
demand, and still preserve to him all his rights as effectually 
as if it were made, will illustrate the stringency of the rule 
itself. Parsons on Notes and Bills, Vol. I., 442. The question 
of excuse, then, will depend upon whether due diligence has 
been used, and presents the ordinary inquiry as to negligence. 
The principal excuses resolve themselves into two classes — 

First. The impossibility of demand. 

Second. The acts, words, or position of a party, proving that 
he had no right, or waived all right to the demand of the waiver 
of which he would avail himself. 

That impossibility should excuse non-demand is obvious, for 
the law compels no one to do what he cannot perform. But it 
must be actual and not merely hypothetical ; and though it need 
not be absolute, no slight difficulty will have this effect. Id. 

The circumstances which will excuse a demand are such 
generally as apply to a faliure to present and demand payment 
within the required time, not absolutely. Parsons, 444, 445. 

In this case the presentment of the note was not made at 
bank within the usual bank hours, with the note in possession, 
but as we have seen, this was excused in this case (1) by the 
fact that there was no bank to present it at, and (2) because 
payment was refused upon the ground that the bank had ceased 
to do business, and its assets distributed, and the note was not 
asked for, nor required, payment being refused on other grounds, 
the right to have it produced must be considered as waived. 

The note, however, was carried, during the day, to the place 
of business of the late manager of the bank, and the indorser 
sought to be charged, and this being closed, it was carried to his 
residence, and that being also closed, it could not be presented to 
him, and although it was not in banking hours, it was during the 
day time and before the 'hours of rest. 

When the note is payable at a bank, it is to be presented 
during banking hours ; and the payer is allowed until the expira- 



380 Presentment at Bank 

tion of banking hours for payment. But when not to be made at 
bank, but to an individual, presentment may be made at any 
reasonable time during the day during what are termed business, 
hours, which, it is held, range through the whole day to the 
hours of rest in the evening. ( Parsons, 447, citing Cayuga County 
Bank v. Hune, 2 Hill, 635 ; Nelson v. Fotterall, 7 Leigh, 194). 

And in the case of Fainsworth v. Allen, 4 Gray, 453, a pre- 
sentment made at 9 p. m. at the maker's residence, ten miles from 
Boston, when he and his family had retired, was held sufficient. 

And in Barclay v. Bailey, 2 Camp. 527, Lord Ellenborough 
sustained a presentment made as late as 8 p. m. at the house of a 
trader. 

It is only when presentment is at the residence that the time 
is extended into the hours of rest. If it is at the place of business, 
it must be during such hours when such places are customarily 
open, or, at least, while some one is there competent to give an 
answer. (Parsons, 448). 

In this case there was no presentment to the maker, who 
could not be found, which, however, was unnecessary under sec- 
tion 2842 of the Code of Virginia. The protest was in due form, 
and duly protested, which was authorized by section 2849 of the 
Code, although the said note was payable at a bank in this 
State. And under section 2850 is prima facie proof of the facts 
stated therein, and are substantially in accordance with the find- 
ing of the jury. It therefore appears that such presentment as 
was requisite was made to the indorser and late manager of the 
bank, and that it was impossible to present the same at the bank 
named therein, as it had ceased to exist. We must, therefore, 
conclude that there has been sufficient diligence on the part of 
the plaintiff, and that the judgment of the court below in his 
favor was right, and should be affirmed. 

Judgment affirmed. 

PRESENTMENT WHERE INSTRUMENT PAYABLE AT BANK. § ^J. 

Chicopee Bank v. Philadelphia Bank {1869), 8 Wall. 641. 

This was a suit by the Seventh National Bank of Phila- 
delphia against the Chicopee Bank of Springfield, Massachusetts, 
founded upon the allegation, that by reason of the neglect of the 
latter bank, the former lost its remedy against the prior parties on 
a bill of exchange, to wit, the drawer and payee. 

The bill was drawn by one Coglin, of Philadelphia, on Mon- 



Chicopee Bank v. Philadelphia. Bank 381 

tague, of Springfield, payable to one Rhodes, of Philadelphia, 
for $10,000, and accepted by Montague specially payable at the 
Chicopee Bank. The day of payment was Saturday, February 
18th, 1865. On the 13th, Rhodes, the holder, indorsed the bill 
for value to the Philadelphia Bank, which sent it at once by mail, 
inclosed in a letter, to the Chicopee Bank, to receive payment. 
The course of the mail between Philadelphia and Springfield, is 
two days. On the 15th, this letter with other letters and papers, 
was duly delivered by the postman, and placed on the cashier's 
table; but (as was afterwards ascertained), this letter slipped 
from the pile, through a crack in the table, into a drawer of loose 
papers, and its presence in the bank was not known to the cashier, 
and as the two banks had no previous dealings, he was not expect- 
ing anything from the other bank. On the 18th, Montague, the 
acceptor, made no attempt to pay the bill, either by calling for it,. 
or depositing funds, and subsequently, at the trial, made oath 
that he intended not to pay the bill, and had a defence against it. 
The cashier of the Philadelphia bank, not receiving, on the 17th, 
an acknowledgment of the letter which he had sent on the 13th, 
felt somewhat anxious; and on the 18th consulted the president. 
On Monday, the 20th, he telegraphed to the cashier of the Chico- 
pee Bank as follows : 

"Did not you receive ours of 13th instant, with Montague's 
acceptance, $10,000?" 

The dispatch did not indicate either the time or place of 
payment of the draft ; and the reply was sent, 

"Not yet received." 

This dispatch was received by the cashier of the Philadelphia 
bank, at noon of the 20th. He testified at the trial, that he wrote 
to Mr. Rhodes the same day, informing him of what he had 
learned, that he had no recollection of writing to Coglin, but, as 
he knew they were jointly concerned in dealings in petroleum 
lands, he presumed Rhodes would inform him. This was the 
only step the cashier took toward charging the prior parties. 
They both did business at that bank ; Coglin was a director ; both 
were frequently there, and well known to the cashier. As the 
mail required two days, and the 19th was Sunday, there was no 
question but the cashier had until and including the 24th, to give 
notice to Rhodes and Coglin. After the receipt of the reply of 
the 20th, at noon, he took no steps, by post or telegraph, to 
ascertain from the Chicopee Bank whether the acceptor had or 
had not been ready to pay on the 18th. The Philadelphia bank 



382 Presentment at Bank 

brought no suit against Rhodes or Coglin, but sued the Chicopee 
Bank for the amount of the note, on the ground that by its negli- 
gence, they had lost the power to charge the prior parties. 

The court below instructed the jury, that the prior parties 
were absolutely discharged by what took place at the Chicopee 
Bank, on the 18th; that where a bill is accepted payable at a 
particular bank, the bank need not seek the acceptor, but that 
there must still be a presentment, in order to charge prior parties ; 
that the presence of the bill at the bank, ready to be delivered to 
the acceptor upon his tendering payment, was equivalent to a 
presentment; but that if the bill is not at the bank on the day of 
payment, ready to be delivered as aforesaid, there is a failure of 
presentment, and the prior parties are discharged, although the 
acceptor made no attempt to pay ; that in this case, therefore, 
the prior parties could not be held by any notice of whatever 
description, whenever or by whomsoever given; and that if the 
loss or mislaying of the bill during the whole of the 18th, was 
owing to the negligence of its cashier, the Chicopee Bank was 
liable for the amount of the note. 

After the charge was fully delivered, the court was asked 
by the counsel of the Chicopee Bank, to instruct the jury as to 
the burden of proof. This the court refused to do, considering 
that it had already sufficiently instructed the jury. 

The verdict and judgment were accordingly for the plaintiffs. 

R. H. Dana, Jr., for the Chicopee Bank, plaintiffs in error. 
Mr. George Putnam, contra. 

Mr. Justice Nelson delivered the opinion of the court. 

The case was put to the jury, whether or not the loss of 
the bill, and consequent inability of the collection bank to take 
the proper steps against the acceptors to charge the prior parties, 
was attributable to negligence, and want of care on the part of 
the Chicopee Bank, and that, if it was, the bank was responsible. 
The jury found for the plaintiffs. 

In cases where the drawee accepts the bill, generally, in 
order to charge the drawer or indorser, the holder must present 
the paper, when due, at his place of business, if he has one, if 
not, at his dwelling or residence, and demand payment; and, if 
the money is not paid, give due notice to the prior parties. If 
he accepts the bill, payable at a particular place, it must be pre- 
sented at that place, and payment demanded. In these instances, 
as a general rule, the bill must be present when the demand is 
made, as in case of payment the acceptor is entitled to it as his 



Chicopee Bank v. Philadelphia Bank 383 

voucher. When the bill is made payable at a bank, it has been 
held that the presence of the bill in the bank at maturity, with 
the fact that the acceptor had no funds there, or, if he had, were 
not to be applied to payment of the paper, constitute a sufficient 
presentment and demand; and, if the bill is the property of the 
bank, the presence of the paper there need not be proved, as the 
presumption of law is, that the paper was in the bank, and the 
burden rests upon the defendant to show that the acceptor called 
to pay it. (Chitty on Bills, p. 365 a, 353, Springfield ed. 1842; 1 
Parsons on Notes and Bills, pp. 363, 421, 437; Byles on Bills, p. 
251 and note; Fullerton v. Bank of United States, 1 Peters, 604; 
Bank of United States v. Corneal, 2 Id. 543 ; Seneca Co. Bank v. 
Neas, 5 Denio, 329 ; Bank v. Napier, 6 Humphry, 270 ; Folgar v. 
Chase, 18 Pickering, 63. 

In the present case, it is argued that the bill was in the 
Chicopee Bank at the time of its maturity, and, as the acceptors 
had no funds there, a sufficient presentment and demand were 
made, according to the law merchant. It is true the bill was there 
physically, but, within the sense of this law, it was no more pres- 
ent at the bank than if it had been lost in the street by the mes- 
senger on his way from the post-office to the bank, and had 
remained there at maturity; and this loss, which occasioned the 
failure to take the proper steps, or, rather, in the present case, to 
furnish the holder with the proper evidence of the dishonor of 
the paper, so as to charge the prior parties, and enable him to 
have recourse against them, is wholly attributable, according to 
the verdict of the jury, to the collecting bank. In the eye of the 
law merchant there was no presentment or demand against the 
acceptors; and, as a consequence of this default, the holder has 
lost his remedy against the drawer and indorser, which entitles 
him to one against the defendant. The radical vice in the defence 
being the failure to prove a presentment and demand upon the 
acceptors at the maturity of the bill, the question of notice is 
unimportant. 

But, if it had been otherwise, the notice itself was utterly 
defective. That relied on is the answer of the defendant to 
the telegram of the plaintiff of the 20th February, which was, 
that the bill had not yet been received. This was after its matu- 
rity, and it simply advised the holder and payee indorser, to 
whom the information was communicated the same day, that the 
drawer and indorser were discharged from any liability on the 
paper. It showed that the proper steps had not been taken against 
the acceptors to charge them. 



384 Failure to Make Presentment 

Some criticism is made upon the refusal of the court below 
to charge, as to which side the burden of proof belonged, in 
respect to the question of negligence and want of care, after the 
paper came into the hands of the defendant. No objection is 
taken to the charge itself, upon this question, and, indeed, could 
not have been, as the point was submitted to the jury as favorably 
to the defendants as could have been asked. We think the 
court, after having submitted fairly the evidence on both sides 
bearing upon the question, had a right, in the exercise of its dis- 
cretion, to refuse the request. 

If, however, the court had inclined to go further, and charge 
as to the burden of proof, it should have been that it belonged 
to the defendant. The loss of the bill by the bank carried with 
it the presumption of negligence and want of care ; and, if it was 
capable of explanation, so as to rebut this presumption, the facts 
and circumstances were peculiarly in the possession of its officers, 
and the defendant was bound to furnish it. Where a peculiar 
obligation is cast upon a person to take care of goods intrusted 
to his charge, if they are lost or damaged while in his custody, 
the presumption is that the loss or damage was occasioned by his 
negligence, or want of care of himself or of his servants. This 
presumption arises with respect to goods lost or injured, which 
have been deposited in a public inn, or which had been intrusted 
to a common carrier. But the presumption may be rebutted. 
(Dawson v. Chamney, 5 Q. B. 164; Coggs v. Bernard, 2 Lord 
Raymond, 918; Day v. Riddle, 16 Vermont, 48; 1 Phillips on 
Evidence, Cowen's & Hill's Notes, p. 633). 

Judgment affirmed. 

WHEN PRESENTMENT NOT REQUIRED TO CHARGE INDORSER. § 82. 

Am. Nat. Bank v. Junk Bros. (See page 420.) 



EXCUSE FOR FAILURE TO MAKE PRESENTMENT IN DUE TIME. § 83. 

Windham Bank v. Norton et at. (1852), 22 Conn. 213, 56 Am. 

Dec. 397. See § 107. 

This was an action of assumpsit, brought by the Windham 
Bank, as holders of a bill of exchange, against the defendants, 
as indorsers. 

The bill of exchange referred to was drawn by George 
Hobart, of Norwich, in this state, upon Mansfield, Hall & Stone, 



Windham Bank v. Norton et al. 385 

of Philadelphia, and by them accepted, for $417.26; dated Jan- 
uary 31, 1849, a "d payable four months after date, to the order 
of the defendants. 

The declaration was in the common form, and contained the 
usual averments of a due presentment of the bill in question, and 
notice of its non-payment. The defendants pleaded the general 
issue, and the cause came on for trial, at Brooklyn, October term, 
1851. The facts were found by the court, by agreement of the 
parties, as follows : Said bill of exchange was, on the day of its 
date, accepted by said Mansfield, Hall & Stone "payable at the 
Farmers and Mechanics' Bank," in the city of Philadelphia. On 

the day of February, 1849, the defendants procured said 

draft to be discounted by the plaintiffs, and then indorsed and 
delivered it to them. During the same month of February, the 
plaintiffs forwarded said draft, by the United States' mail, to the 
Ohio Life and Trust Co., a banking corporation in the city of 
New York, for collection, and indorsed the same to their cashier, 
as follows: ""Pay G. S. Coe, Esq., cashier, or order;" signed, 
"Samuel Bingham, cashier." The bill, so indorsed, was, in a day 
or two thereafter, and in due course of mail, received by said 
Ohio Life and Trust Co. The third day of grace, June 3d, 
being Sunday, — the draft was actually due and payable on Sat- 
urday, June 2. During the year 1849, there were two mails per 
day, each way, between New York and Philadelphia, — those for 
the latter place, leaving New York, one at nine a. m., the other 1 
at four and a half p. m., and both due at Philadelphia, in five I 
hours from their departure. The Farmers and Mechanics' Bank 
were the Philadelphia correspondents of the Ohio Life and Trust 
Co., and communications, by mail, passed between them daily. 
On the morning of June 1st, the cashier of the Ohio Life and 
Trust Co., inclosed this draft with others, addressed, in the 
proper and usual mode, to the Farmers and Mechanics' Bank, 
and deposited said letter in the United States' post-office, at the 
city of New York, in season for the afternoon mail of that day, 
for Philadelphia. That letter was duly deposited in said mail, 
and said mail left New York, and arrived at Philadelphia,Jn_due 
and usual time; but the mail-bags, containing the letters for 
Philadelphia, were, by the post-office clerks in the office at New 
York, marked to be forwarded to Washington, and were, there- 
fore, not_delivered at Philadelphia, but carried to Washington. 
At Washington the mistake^ was discovered, and said mail-bags 
forwarded to Philadelphia, which" place they reached~in the 
course^oT Sunday, June 3d. On the morning of the next day, 



386 Failure to Make Presentment 

said letter, with the draft inclosed, was delivered from the post- 
office at Philadelphia, to said Farmers and Mechanics' Bank, 
who, by their cashier, refused payment of the same, and between 
the hours of nine and ten a. m., of the day, placed said draft in 
the hands of a notary public, for protest. Said notary, between 
the hours of nine a. m. and three p. m v of said day, presented said 
draft at the counter of said bank for payment, and received for 
answer from said cashier, that he was ordered by the acceptors 
npj: to pay it, and that had he presented it on Saturday, June 2nd, 
he should have given him the same answer. Said notary there- 
upon, on said 4th day of June, in due and proper form, protested 
said draft, and made out written notices to the drawer, and the 
several indorsers, of the non-payment of said draft, and inclosed 
said notices, with the notice of protest, in a letter, and on the 
same day, deposited the same in the post-office in said Philadel- 
phia, duly addressed to George S. Coe, cashier of Ohio Life and 
Trust Co., New York, who had indorsed said draft to the Farm- 
ers and Mechanics' Bank, and by whom said letter was, in due 
course of mail, received. Said Coe, on the same day in which he 
received them, inclosed said letter of protest and said notices, 
except the one to himself, in a letter duly addressed to the plain- 
tiffs, and deposited the same in the city of New York, in season 
for the next mail. The same was, in due course of mail, received 
by the plaintiffs, who, on the day of the receipt thereof, inclosed 
said notices to the defendants, as indorsers, and said notice to 
said drawer (his residence being unknown), in a letter duly 
addressed to the defendants, and deposited it in the post-office at 
Windham, in season for the next mail, and the same was, in due 
course of mail, received by the defendants. Mansfield, Hall & 
f Stone became insolvent, and suspended payment on the 12th day 
of April, 1849, and on the next day, sent to the Farmers and 
Mechanics' Bank, the following notice in writing: 

"E. N. Lewis, Esq., Cash. 

"You will please pay no more notes or drafts drawn by us, 
and payable at your bank, until further notice, as they will not 
be provided for. Very respectfully yours, 

"Mansfield, Hall & Stone." 

No further notice was sent, and said bank, from that time 

( forward, acted upon this order, and refused payment of all notes 

or drafts payable at the bank, by said firm. The business hours 

of the Philadelphia banks were, in 1849, f rom mne A - M - to three 

p. m. Owing to the miscarriage of the United States' mail, as 



Windham Bank v. Norton et al. 387 

above stated, said draft was not presented for payment, on Sat- 
urday, June 2d, when it became due, and was never presented for 
payment at any otfier time than on said 4th day of June. 

It has been the usage of the banks and merchants of the 
country, for the last forty years, to make use of the United States) 
mail, in forwarding negotiable notes and bills of exchange, for 
collection or acceptance. It is the custom of the Windham Bank, 
and the four Norwich banks, to forward all paper in their hands, 
payable abroad, within five or eight days after it comes into their 
hands, without reference to the length of time it has to run. 

The questions of law arising upon these facts, and on such 
further facts as the jury might rightfully infer, were reserved for 
the advice of this court. 

Edmund Perkins, for the plaintiffs. 
Strong & Foster, for the defendants. 

Storrs, J. The defendants first insist, that the averments in 
this declaration, of a due presentment of the draft in question 
and notice of its non-payment, must be strictly proved, and that 
they are not sustained, by proof of the facts set up by the plain- 
tiffs, by way of excuse. Whatever may be the course of author- 
ities elsewhere, it is well settled here, that those allegations are 
supported by evidence of matter of excuse, or a waiver of demand 
and notice. Norton v. Lewis, 2 Conn. R., 479, and Camp v. 
Bates, 1 1 id., 478, are decisive on this point. 

The other and more important question in this case is, 
whether the plaintiffs are excused for the non-presentment of this 
draft for payment, on the day when it became due. The iast day 
of grace being Sunday, it was payable on the preceding Satur- 
day, which was the second day of June, 1849. This question 
depends on whether the plaintiffs are chargeable with negligence, 
in not presenting it on that day. 

If the agent of the plaintiffs, to whom they sent it, to be 
forwarded for presentment and collection, and who transacted 
this business for them, was guilty of such negligence, it is, of 
course, imputable to the plaintiffs. And it is not important to 
this question,"either that the defendants in fact sustained no dam- 
age, by the draft not having been presented for payment, when 
it fell due, or that it would not have been paid by the acceptor, 
if it had then been presented. The indorser, on a question of 
due presentment for payment, is not affected by either of these 
circumstances. Nor indeed do the plaintiffs claim to recover, 
on either of these grounds. 



388 Failure to Make Presentment 

The question of negligence here presented depends on the 
inquiry, whether, under the circumstances of this case,~the delay 
of the plaintiffs' agent, in not forwarding this draft to Philadel- 
phia, until the last mail left New York for that place, on the day 
next preceding that on which the draft fell due, constituted a 
want of reasonable or due diligence, in regard to its presentment. 
We say, under the circumstances, because there is no positive or 
absolute' rule of law, which determines within what precise time 
the holder of a bill of exchange must, in all cases whatever, or 
at all events, avail himself of the authorized mode of transmis- 
sion adopted in this instance, to forward such paper for present- 
ment. The general principle, established by all the adjudged 
cases, as well as the approved elementary writers, is, that reason- 
able diligence in the presentment of a bill for payment, is required 
of the holder, and that, therefore, if there has been no want of 
such diligence, he is excused. Story on Bills, ch. 10; Chitty on 
Bills, ch. 9, 10 ; Story on Prom. Notes, ch. 7, § 368 ; Patience v. 
Townley, 2 Smith's R., 223, 224. 

In applying this principle, the general rule is, that it must be 
presented for payment, on the very day in which, by law, it 
becomes due, and that, unless the presentment be so made, it is 
a fatal objection to any right of recovery against the indorser. 
But, although this is the general rule, it is not an universal one, 
and prevails only under the qualification, which is really a part 
of the rule itself, that there is no negligence or want of reasonable 
diligence, in not making such presentment. The whole rule, 
therefore, more properly stated, is, that the presentment must be 
on the day on which the bill becomes due, unless it is not in the 
power of the holder, by the use of reasonable diligence, so to 
present it. By the very statement of this rule, as thus fully 
expressed, it is plain that, on the question, whether the holder 
is excused on this ground, for not thus presenting it, or, in other 
words, whether there was negligence on his part, or a want of 
reasonable diligence, no absolute or positive rule can, from the 
nature of the case, be laid down, which shall apply under all 
circumstances. We have no evidence of any general custom of 
merchants, in regard to the precise time, within which mercantile 
paper is usually forwarded, in order to be presented for payment, 
so that the law merchant furnishes us no guide on this point. 
And it is clear, that the strict rule of the common law, by which 
an inability to perform the terms or condition of a contract, by 
reason of inevitable accident or casualty, constitutes generally no 
excuse for their non-performance, is not applicable to mercantile 



Windham Bank v. Norton et al. 389 

instruments of this description. Therefore, the excuse for non- 
presentment in this case, presents the ordinary question of negli- 
gence. That question may, and often does, depend on such a 
variety of circumstances, or those of such a peculiar character, 
that it is very difficult, if not impossible, to reduce them to any 
fixed or invariable rule. But, in regard to such a question, as 
applicable to the non-presentment of a bill or note, when it is 
due, it is considered a well settled rule, that such want of pre- 
sentment is excused, by any inevitable or unavoidable accident 
not attributable to the fault of the holder, provided there is a 
presentment by him, as soon afterward as he is able ; by which is 
intended that class of accidents, casualties or circumstances which 
render it morally or physically impossible to make such present- 
ment. Judge Story, in speaking of this ground of excuse, says : 
"It has been truly observed, by a learned author," referring to 
Mr. Chitty, "that there is no positive authority in our law, which 
establishes any such inevitable accident to be a sufficient excuse 
for the want of a due presentment. But it seems justly and nat- 
urally to flow from the general principle, which regulates all 
matters of presentment and notice, in cases of negotiable paper. 
The object, in all such cases is, to require reasonable diligence 
on the part of the holder; and that diligence must be measured 
by the general convenience of the commercial world, and the 
practicability of accomplishing the end required, by ordinary skill, 
caution and effort." And he cites the remark of Lord Ellen- 
borough in Patience v. Townley (2 Smith's R., 223, 224,) that 
due presentment must be interpreted to mean, presented accord- 
ing to the custom of merchants, which necessarily implies an 
exception, in favor of those unavoidable accidents, which must 
prevent the party from doing it within regular time. (Story on 
Bills, § 258.) 

Applying these principles to this case, we are of opinion that 
the plaintiffs are not chargeable with a want of reasonable dili- 
gence. 

No fault or impropriety is imputable to them, by reason of 
their having selected the public mail, as the mode of forwarding 
the draft in question, to the bank in Philadelphia, where it was 
payable. It is properly conceded by the defendants, that such 
mode of transmission was in accordance with the general com- 
mercial usage and law, in the case of paper of this description. 
Indeed, it is recommended in the books, as the most proper mode 
of transmission, as being the least hazardous, and therefore prefer- 
able to a special or private conveyance. But, although the public 



390 Failure to Make Presentment 

mail was a legal and proper mode by which to forward this 
paper, it was their duty to use it in such a manner, that they 
should not be chargeable with negligence, or unreasonable delay. 
If, therefore, they put the draft into the post-office, at so late a 
period that, by the ordinary course of the mail, it could not, or 
there was reasonable ground to believe that it would not, reach 
the place of its destination, in season for its presentment, when 
due, we have no doubt that there would be, on their part, a want 
of reasonable diligence, which would exonerate the indorser. On 
the other hand, to throw the risk of every possible accident, in 
that mode of forwarding the draft, upon the holder, where there 
has been no such delay, would clearly be most inconvenient, 
unreasonable and unjust, as well as contrary to the expectation 
and understanding of the indorser, who is presumed to be aware 
of the general usage and law, in regard to the transmission, by 
mail, of this kind of paper, and must therefore be supposed to 
require only reasonable diligence in this respect, on the part of 
the holder ; and would, indeed, be inconsistent with the rule itself, 
which sanctions its transmission in that manner. It has been 
suggested, that the principle should be adopted, that when the 
holder resorts to the public mail, he should be required to forward 
the presentment, at so early a period, that if by any accident it 
should not reach the place of its presentment, in the regular 
course of the mail, there should be time to recall it, and have it 
presented when and where it falls due ; or that, at least, it should 
be forwarded in season to ascertain whether it reached there by 
that time, and to make such a demand or presentment for pay- 
ment, as is required in the case of lost bills. We find no author- 
ity whatever for any such rule, nor would it, in our opinion, com- 
port with the principle now well established, requiring only 
reasonable diligence, on the part of the holder, or with the policy 
which prevails in regard to such commercial instruments. It 
would, in the first place, be the means of restraining the transfer 
of such paper within such a limited time as to impair, if not to 
destroy, its usefulness and value, arising out of its negotiable 
quality ; and, in the next place, it would, in many cases, be wholly 
impracticable. The casualties, incident to this mode of transmis- 
sion, are most various in their character, and can not, of course, 
be foreseen ; and they might, in the case of forwarding mercantile 
paper, be such as to render it impossible to ascertain its miscar- 
riage, or to recall it, in season to remedy the difficulty. In the 
case of the draft now before us, for example, if it had been 
placed, by the plaintiffs, in the post-office at Windham, where 



Windham Bank v. Norton et al. 391 

they were located, and transacted their business, for transmission, 
direct from thence to Philadelphia, on the very day when they 
became the holders of it, which was between three and four 
months before it became due, and, by an accident or mistake of 
the postmaster in the former place, similar to that which occurred 
in this case, at New York, it had been mailed to one of the most 
distant parts of our country, or to a foreign country, (which 
would not have been more singular, than that it should have been 
mistakenly mailed, as in the present case, for Washington,) it 
might not have been practicable for the plaintiffs to learn the 
accident, or obviate its effect, before the paper fell due. In short, 
such a rule as that suggested, would be merely artificial in its 
character, productive of great inconvenience and injustice in par- 
ticular cases, without any corresponding general benefits, and 
change the whole course of business, in regard to a most exten- 
sive and important class of mercantile transactions. Nor has any 
other arbitrary or positive rule been suggested, which is not 
equally obnoxious to the same or similar objections. 

The only remaining enquiry is, whether the plaintiffs are 
chargeable with negligence, for not forwarding the draft in ques- 
tion, by an earlier mail from New York to Philadelphia. It was 
sent by the usual, legal, and proper mode. It was deposited in 
the post-office, in season to reach the place where it was payable, 
before it fell due, by the regular course of the next mail; and 
there was no reason to believe, that it would not be there duly 
delivered. It was actually sent by that mail, and, but for the 
mistake of the postmaster where it was mailed, in misdirecting 
the package containing it, would have reached its proper destina- 
tion, and been received there in season for its presentment, when 
due. It in fact reached that place, when it should have done; 
but was carried beyond it, in consequence of that mistake. As 
that mistake could not be foreseen or apprehended by the plain- 
tiffs, it is not reasonable to require them to take any steps to 
guard against it. Indeed, they could not have done so, as they 
had no control or supervision over the postmaster. They had a 
right to presume, that the latter had done his duty. They could 
not know, that he had misdirected the package, until it was too 
late to remedy the consequences. The occurrence of the draft 
being sent beyond its place of destination, was, therefore, so far 
as the plaintiffs were concerned, an unavoidable accident. It 
happened, not in consequence of any delay of the plaintiffs, in 
putting the draft into the post-office, at so late a period that it 
could not, or probably would not, reach its destination in 'due 



392 Failure to Make Presentment 

season, but merely in consequence of the act of the official to 
whom it was properly confided, done after it was properly in his 
charge, by the plaintiffs, for transmission. The accident, more- 
over, was of a very peculiar and extraordinary character, and 
quite different from those which are ordinarily incident to that 
mode of transmission, and against which it would be extremely 
difficult, if not impossible, to guard. It would have been equally 
liable to occur, at any time, when the draft should have been 
placed in the post-office. It was not owing, in any sense, to the 
fault of the plaintiffs, but solely to that of the postmaster. Under 
these circumstances, we do not feel authorized to impute any 
blame or negligence to the plaintiffs. We are, therefore, of 
opinion, that judgment should be rendered for the plaintiffs. 
In this opinion, the other judges concurred. 

Judgment for the plaintiffs. 



Pier et al. v. Heinrichshoffen (1877), 67 Mo. 163, 29 Am. Rep. 

501. 

Appeal from St. Louis Circuit Court. 

Fisher & Rowell and Botsford & Williams, for appellants. 
Slayback & Haeussler, for respondents. 

Hough, J. This was an action brought by the plaintiffs, as 
holders of a negotiable promissory note, against the defendants, 
as indorsers thereof. The questions presented for determination 
are, whether the plaintiffs used due diligence in making demand 
of payment, and gave the requisite notice of non-payment to the 
defendants. The facts are as follows : The note in question 
matured on the 4th day of July, 1861, and was payable at the 
banking house of F. & G. Willins, in the city of St. Paul, Min- 
nesota. Some time in April, 1861, the plaintiffs delivered the 
same to the bank of Cooperstown, at Cooperstown, New York, 
for collection. At that time a letter, in due course of mail, would 
reach St. Paul from Cooperstown, in about six days. The 
cashier of the bank of Cooperstown sent the note by mail to its 
regular correspondent, the Bank of St. Paul, in the city of St. 
Paul, for collection, in ample time, as the cashier stated, for it to 
reach its destination by ordinary course of mail, before the matur- 
ity of the note. When the letter reached St. Paul, the Bank of St. 
Paul had made an assignment, and the envelope having printed on 



Pier et al. v. Heinrichshoffen 393 

■it the words "From the Bank of Cooperstown," the postmaster at 
once returned it to the Bank of Cooperstown, with the indorse- 
ment "bank failed." The letter was received by the Cooperstown 
Bank in the original envelope, unopened, on the 9th day of July, 
1861, and on the same day the note was returned by mail to St. 
Paul in a letter directed to F. & G. Willins, who caused it to be 
presented and protested on the 15th day of July, 1861, the day on 
which it was received. 

The defendants contend that there was a want of diligence 
in not sending the note in time to guard against such contin- 
gencies as the evidence discloses, and that the action of the post- 
master in the premises, is no sufficient excuse for the failure to 
present for payment on the day of the maturity of the note. 
Professor Parsons, in his treatise on Notes and Bills, says: 
"Ordinarily any failure to present a note at the proper time, by 
reason of the negligence of an agent, would discharge an indorser, 
but where the holder makes use of the public mail for the pur- 
pose of transmitting the note to the proper place in season to 
have a legal demand made, and without any negligence on his 
part, we should say that he would not lose his remedy on an 
indorser, if through any accident or disorder, or the negligence 
or mistake of the postoffice clerks, the note does not reach the 
destined place in season to make demand on the very day of 
maturity." Vol. 1, p. 461. In support of his text he cites the 
case of Windham Bank v. Norton, 22 Conn. 213, the leading 
features of which bear such a striking resemblance to the case 
at bar, that we think it proper to present them. The draft in that 
case was drawn upon and accepted by Mansfield, Hall & Stone, 
of Philadelphia, payable at the Farmers' & Mechanics' Bank, in 
said city, on the 2d day of June, 1849, an ^ was indorsed by the 
defendants to the plaintiffs in the month of February, 1849. 
During the same month the bill was indorsed and delivered to 
the Ohio Life and Trust Co., a banking corporation, in the city 
of New York, for collection. At that time there were two mails 
per day from New York to Philadelphia ; one leaving at 9 A. m. 
and one at 4 p. m., both of which were due at Philadelphia five 
hours after their departure. The Farmers' and Mechanics' Bank 
was the Philadelphia correspondent of the Ohio Life and Trust 
Co. On the morning of June 1st, the cashier of the Ohio Life 
and Trust Co. inclosed this draft with others, properly addressed 
to the Farmers' and Mechanics' Bank, and deposited said letter 
in the postoffice at the city of New York, in time for the afternoon 
mail, of that day for Philadelphia. This mail arrived at Phila- 



394 Failure to Make Presentment 

delphia in due time, but the mail bags containing the letters for 
Philadelphia were, by the postoffice clerks in New York, marked 
to be forwarded to Washington, and were therefore carried to 
the latter place. The mistake was discovered at Washington, 
and the mail returned to Philadelphia, reaching there on the 3d 
of June, and on the next day, June 4th, payment was demanded 
and refused, protest made and notice given. In discussing the 
question of negligence, or reasonable diligence, the court said : 
"The only remaining inquiry is, whether the plaintiffs are charge- 
able with negligence for not forwarding the draft in question, 
by an earlier mail from New York to Philadelphia. It was sent 
by the usual, legal and proper mode. It was deposited in the 
postoffice in season to reach the place where it was payable, before 
it fell due, by the regular course of the next mail, and there was 
no reason to believe that it would not be there duly delivered. 
It was actually sent by that mail, and, but for the mistake of the 
postmaster where it was mailed, in misdirecting the package con- 
taining it, would have reached its proper destination, and been 
received there in season for its presentment when due. It in 
fact reached that place, when it should have done, but was car- 
ried beyond it, in consequence of that mistake. As that mistake 
could not have been foreseen or apprehended by the plaintiffs, it 
is not reasonable to require them to take any steps to guard 
against it. Indeed they could not have done so, as they had no 
control or supervision over the postmaster. They had a right to 
presume that the latter had done his duty. They could not know 
that he had misdirected the package, until it was too late to 
remedy the consequences. The occurrence of the draft being sent 
beyond its place of destination, was, therefore, so far as the plain- 
tiffs were concerned, an unavoidable accident." 

We have been referred by defendants' counsel to the case of 
Schofield v. Bayard, 3 Wend. 488, as being in direct conflict with 
the case just cited from Connecticut ; but a careful examination 
of the facts in Schofield v. Bayard will show that there is no con- 
flict whatever between the two cases. The latter case contains 
an element of negligence on the part of the holder, which was 
absent from the case of Bank v. Norton, and which is wanting in 
the case at bar. The facts were, that a bill drawn by a firm in 
New York on a house in Liverpool was accepted supra protest, 
by a house in London. The bill was sent by the holder, who 
resided at Birmingham, to Liverpool for payment, instead of 
London, where it was payable. The holder's correspondent at 
Liverpool returned the bill in a letter to the holder, with advice 



Pier et al. v. Heinrichshoffen 395 

that the presentation should be made in London, and the letter 
was put in the postoffice, but by some oversight of the clerks in 
the postoffice, it did not get to Birmingham in time for the holder 
to forward it to London and have a regular demand made. It 
was held that the drawers were discharged. The court said: 
"This case presents no impossibility, if due diligence had been 
used. The plaintiff should not have sent the bill to Liverpool at 
all. It is true that after the leter containing it had been left at 
Liverpool, on the ioth of November, it could not have reached 
London in season; but it was the fault of the plaintiffs to have 
parted with the bill in the manner they did. Instead of sending 
it to Liverpool, they should have sent it to London, and then it 
would have been in season, and probably would have been paid. 
I am of the opinion that, by the law merchant payment should 
have been demanded in London on the 12th of November, and 
that not having been done, and there being no impossibility to 
prevent it but what is attributable to the want of due diligence 
on the part of the holders, the defendants are legally discharged, 
and are entitled to judgment." It will be seen that the court 
places its judgment expressly upon the ground that the holder 
was guilty of negligence in sending the bill to Liverpool, and 
this fault of his produced the impossibility by virtue of which he 
claimed to be discharged. In the present case the letter contain- 
ing the note was not misdirected ; it was properly directed ; it 
actually reached St. Paul in time, and but for its unauthorized 
return by the postmaster, the probabilities are that some agent 
or representative of the suspended bank would have received it 
in time to make due presentment, as the testimony tends to show 
that the representatives of the bank continued to receive letters 
addressed to it, after its suspension. The holders therefore exer- 
cised due diligence in sending the note when they did ; its arrival 
in time demonstrates that fact; and they were not required to 
make provision in advance for a possible, but unanticipated sus- 
pension of the bank of St. Paul before arrival of their letter, 
or for an unwarrantable interference with the same by the public 
officer in charge of the mails, after its arrival. We are of the 
opinion, therefore, that under the circumstances of this case, the 
demand was seasonably made. 

Objections are also made to the notice which was given by 
the notary. The certificates of protest are as follows: "Due 
notices of the foregoing presentment, demand, refusal and pro- 
test were put into the postoffice at St. Paul, as aferosaid, and 
directed as follows: Notice for Katharina Ambs, directed St. 



396 Waiver of Presentment and Demand 

Louis, Mo. : Notice for W. and R. Heinrichshoffen, directed St. 
Louis, Mo." And the notary testified, "I personally mailed such 
notices in the postoffice on the 15th day of July, A. D. 1861." 
The objection is that he did not say that he had prepaid the 
postage; and the court instructed the jury that this was neces- 
sary. This objection is rather hypercritical. The word mailed, 
as applied to a letter, means that the letter was properly prepared 
for transmission by the servants of the postal department, and 
that it was put in the custody of the officer charged with the duty 
of forwarding the mail. Indeed the words "put into the post- 
office," as used by the notary, have a technical significance which 
is well defined ; and they are commonly employed to designate 
the duty of the holder in giving notice. Since the enactment of 
the laws requiring all mail matter to be prepaid, these words have 
been used by this court in the sense of mailed. Renshaw v. 
Triplett, 23 Mo. 220; Sanderson v. Reinstadler, 31 Mo. 485. In 
Story on Promissory Notes, § 328, (Ed. 1859,) it is said, "all 
that the law requires of the holder is due diligence to send the 
notice within the proper time ; and he has done his whole duty, 
when he puts it into the proper postoffice in due season, and it 
is properly directed. The holder has no control over the acts, 
or operations, or conduct of the officers of the postoffice, and is 
not responsible for the accident or neglect which may prevent a 
due delivery of the notice to the party entitled to notice." It 
sufficiently appears in the present case that the notice was prop- 
erly directed. The evident and only meaning of the notary's 
certificate is that the notice was mailed to the defendants at St. 
Louis, Mo. 

The judgment will be reversed and the cause remanded. 

All concur. Reversed. 



WAIVER OF PRESENTMENT AND DEMAND. § 84 — 3. 

Ross v. Hurd, imp. (1877), 71 N. Y. 14. 

Appeal from judgment of the General Term of the Supreme 
Court, in the third judicial department, entered upon an order 
denying a motion for a new trial, and directing judgment on a 
verdict. 

This was an action upon a promissory note made by defend- 
ant Kingsbury