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Full text of "The law of negotiable instruments, including promissory notes, bills of exchange, bank checks and other commercial paper, with the negotialble instrument law annotated, and forms of pleading, trial evidence and comparative tables arranged alphabetically by states"

THE LIBRARY 

OF 

THE UNIVERSITY 

OF CALIFORNIA 

LOS ANGELES 



SCHOOL OF LAW. 






• / 









-ff.K^ 7^'/^^ 



THE LAW 



OP 



NEGOTIABLE 
INSTRUMENTS 



INCLUDING 

PROMISSORY NOTES, BILLS OF EXCHANGE, BANK 
CHECKS AND OTHER COMMERCIAL PAPER 

WITH 

THE NEGOTIABLE INSTRUMENTS 
LAW ANNOTATED 

AND 

FORMS OF PLEADING, TRIAL EVIDENCE AND COM- 
PARATIVE TABLES ARRANGED ALPHABETICALLY 
BY STATES 



BY 

JAMES MATLOCK OGDEN, LL.B., HARVARD 

OF THE INDIANAPOLIS BAR 



SECOND EDITION 



CHICAGO 

CALLAGHAN & COMPANY 

1922 



COPYRIGHT 192a 

BY 

CALLAGHAN & COMPANY 



T 



PREFACE TO FIRST EDITION 

The importance of the Law of Negotiable Instruments, or the 
Law of Bills, Notes and Checks, will be realized when it is con- 
sidered that over ninety per cent, of the work of paying for and 
effecting the exchange of interstate commerce is carried on today 
by means of commercial paper. 

It has been the endeavor of the author to furnish the prac- 
titioner and the student of the law such a practical presentation 
of the elementary principles of negotiable instruments as may 
serve, with the aid of its references to judicial decision, as a 
complete and convenient guide in this important subject of the 
law. 

The law herein set out is the law settled by the authorities 
rather than the writer's own views. The object has been to 
enable one readily to find the law of bills, notes and checks in 
any state or territory in the United States. The peculiarities 
of the law in those states which have adopted the Negotiable 
Instruments Law are set forth and all modifications are pointed 
out. The peculiarities of the law in those states which have 
not adopted the Negotiable Instruments Law are collected and 
arranged alphabetically by states. 

Thus the writer has endeavored to cover the entire field of 
the law of negotiable instruments, citing cases from every juris- 
diction. 

In the text discussing the elementary principles, the Nego- 
tiable Instruments Law is interwoven, distinguished by being 
printed in italics; the text of the law as printed is that of the 
New York Act. A table, however, is inserted to facilitate the 
finding of parallel sections of the acts or laws enacted by all 
other jurisdictions. All decisions construing the Negotiable In- 
struments Law since its adoption by the first state up to July 
1st of the present year are cited ; also all decisions of the English 
law courts which affect corresponding provisions of the Bills 
of Exchange Act of 1882. 

That part of the text relating to the Negotiable Instruments 
Law will be found valuable in those jurisdictions which have 
not adopted that law, since most of its concise statements of 
rules are of application in all jurisdictions, whether the law has 
been adopted or not. 

With the hope that herein the principles of negotiable instru- 
ments, have been made clearer, the writer submits this work and 
asks indulgence for any oversights. 

James Matlock Ogden. 

Indianapolis, Indiana, August 25, 1909. 



618537 



PREFACE TO SECOND EDITION 

More than twelve years have passed since the last edition of 
this book was printed, although in the meantime there have 
been a number of reprints. The writer takes this opportunity 
to show his appreciation for the wonderful cordiality the other 
edition received and for the many requests for a revised edition. 

In 1909, at the time the other edition was published, the 
Negotiable Instruments Law had been adopted in thirty-eight 
states and territories while now it has been adopted in all juris- 
dictions of the United States except Georgia and Porto Rico, 
making a total of fifty-one of our jurisdictions. 

The writer showed his confidence in the ultimate adoption of 
the Negotiable Instruments Law in all jurisdictions of the United 
States by making the Law a part of the text and placing it in 
italics. This helpful plan has been continued in this edition. 

Since 1909 there have been some new phases of the law of 
negotiable instruments which have come to the front, such as 
trade acceptances, traveler's checks, liberty bonds and certain cases 
of illegality. These have all been added to the text and treated 
under the proper heading. Chapters have also been added on 
collateral security, on parties to suits, lost and destroyed nego- 
tiable instruments and sections have been added in various chap- 
ters throughout the book. 

Many citations have been add^d to the text and an endeavor 
has been made to bring the citations as to the Negotiable Instru- 
ments Law down to date, particularly in Part III. 

The text of this book is confined to negotiable instruments. 
Like the Negotiable Instruments Law no attempt has been made 
in it to deal with instruments which are non-negotiable as they 
are not governed by the Law. 

The writer trusts that the treatise may continue to be helpful 
to the student and the practitioner. 

James Matlock Ogden. 

Indianapolis, Indiana, April 1, 1922. 



TABLE OF CONTENTS 



PART I 



ELEMENTARY PRINCIPLES— BILLS, NOTES 
AND CHECKS. 



CHAPTER I. 



GENERAL CHARACTERISTICS AND GENERAL FORM OF 
BILLS, NOTES AND CHECKS. 

SECTION. PAGE. 

1. Introtiuctory 1 

2. Form of Promissory Note 1 

3. General Characteristics of Promissory Note 2 

3a. Other Clauses Added in Different Jurisdictions 5 

4. Form of Bill of Exchange 11 

5. General Characteristics of Bill of Exchange 11 

6. Form of Check 11 

7. General Characteristics of Check 11 

7a. Origin and Development of Negotiable Instruments 11 



CHAPTER II. 
LAW MERCHANT. 

8. Meaning Term 13 

9. Origin 14 

10. Origin of Bill of Exchange under Law Merchant 15 

11. Origin of Promissory Note under Law Merchant 15 

12. Law Merchant Codified 15 



CHAPTER III. 

NEGOTIABILITY. 

13. Meaning of Term 17 

14. Origin of Negotiability 18 

15. Distinction Between Assignability and Negotiability 18 

16. Purpose of Negotiability 20 

17. Payment by Negotiable Instrument , 20 

vii 



viii TABLE OF CONTENTS. 

CHAPTER IV. 
GENERAL DOCTRINE. 

SECTION. PAGE, 

18. Negotiable Instruments Similar to Money— 22 

19. Bona Fide Holder 22 

20. Equities 23 

21. Circulation when Parties not Immetiiate 25 



CHAPTER V. 
PARTIES AND THEIR CAPACITY. 

22. Parties and Their Capacity— In General 27 

23. Parties Partially or Wholly Incapacitated— In General 28 

24. Same— Persons Lacking Mental Capacity— Infants 28 

25. Same— Persons Lacking Mental Capacity— Lunatics and Im- 

beciles "^O 

26. Same— Persons Lacking Mental Capacity— Drunkards and 

Spendthrifts 21 

27. Same— Persons Lacking Legal Capacity Other than Mental— i 

Married Women 32 

28." Same— Persons Lacking Legal Capacity Other than Mental— 

The Bankrupt or Insolvent Payee 33 

29. Same— Persons Lacking Legal Capacity Other than Mental- 

Alien Enemies 33 

30. Parties Not Incapacitated — In General 33 

31. Same— Persons Acting in Fiduciary Capacity— Executors and 

Administrators 34 

32. Same— Persons Acting in Fiduciary Capacity— Trustees and 

Guardians 35 

33. Same— Persons Acting in Representative Capacity— Agent 35 

34. Same— Persons Acting in Representative Capacity— Partners.. 38 

35. Same— Persons Acting in Representative Capacity— Private 

Corporations 40 

36. Same— Persons Acting in Representative Capacity— Municipal 

or Public Corporations 41 

37. Same — Persons Acting in Representative Capacity — Public 

Officers 42 



CHAPTER VI. 
FORMAL AND ESSENTIAL REQUISITES. 

38. Definition of Promissory Note 43 

39. Definition of Bill of Exchange 43 

40. Formal and Essential Requisites in General 44 

41. Must be in Writing 45 

42. As to Style and Material 46 

43. The Date 46 

44. The Signature 47 

45. Must be Promise or Order to Pay 49 

46. Must be Payable to Ortier or Bearer 50 

47. Must be Certain as to Promise or Order to Pay_____- „-,. 51 



TABLE OF CONTENTS. ix 

SECTION'. PAGE. 

48. Must be Certain as to Amount 52 

49. Must be Certain as to Time of Payment 54 

50. As to Place of Payment , 55 

51. Must be Payable in Money 56 

52. Must be Necessary Parties 60 

53. The Delivery 61 

54. Value Received 64 

55. As to Agreements Controlling the Operation 64 

56. Days of Grace 66 

56a. As to Payable at a Bank 66 

57. As to Stamps 67 

58. As to Blanks 67 

59. As to Instruments Bearing a Seal 68 

60. The Several Parts of a Foreign Bill Called a Set- — 69 



CHAPTER VII. 
CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 

61. Meaning of Term 72 

62. Consideration in General 72 

63. Necessity of Consideration 77 

64. Presumption of Consideration 78 

65. Sufficiency of Consideration 79 

66. Inadequacy of Consideration 79 

67. Illegal, Immoral, and Fraudulent Considerations 80 

68. Want or Failure of Consideration 8l 

69. Between Whom Questions of Consideration May Be Raised— 82 

70. As to Accommodation Paper 83 



CHAPTER VIII. 
SUBDIVISION A— ACCEPTANCE OF BILLS. 

71. Meaning of Term 85 

72. Object of Acceptance 86 

73. Form of Acceptance 87 

74. Nature and Effect of Acceptance 89 

75. According to Tenor of Bill 90 

76. Delivery 91 

77. Acceptance of Incomplete Bill 91 

78. Varieties of Acceptance — In General 91 

79. Varieties of Acceptance— lAs to Terms— General Acceptance— 92 

80. Varieties of Acceptance — As to Terms — Qualified Acceptance— 92 

81. Varieties of Acceptance — As to Form — In General 92 

82. Varieties of Acceptance — As to Form — Written 93 

83. Varieties of Acceptance — As to Form — Parol 95 

84. Varieties of Acceptance — As to Mode of Proof — Express 96 

85. Varieties of Acceptance — As to Mode Proof — Implied 96 

86. Acceptance of Bills Drawn in Sets 97 

87. Revocation of Acceptance 97 

88. What Bills Must be Presented for Acceptance 97 

89. By and to Whom Presentment Should be Made™ 98 



X TABLE OF CONTENTS. 

SECTION. PAGE. 

90. Time of Presentment 99 

91. Place of Presentment 100 

92. Presentment Excused 100 

93. Acceptance for Honor, or Supra Protest 101 

SUBDIVISION B— TRADE ACCEPTANCES. 

93a. Meaning of Term 104 

93b. Trade Acceptances Distinguished from Ordinary Bill of Ex- 
change 104 

93c. Trade Acceptances Distinguished from Promissory Note 105 

93d. Nature of Transaction in which Tratie Acceptance Used 105 

93e. Where Payable 105 

93f. By Whom Presented for Discount 105 

93g. Inducements by Federal Reserve System 106 

93h. Effect on Other Negotiable Instruments 106 

93i. Origin 106 

93j. Extent of Use 107 

93k. Decisions 107 



CHAPTER IX. 
NEGOTIATION— BY INDORSEMENT. 

94. Meaning of Term Negotiation 108 

95. Who May Negotiate 109 

96. Methods of Transfer 109 

97. Meaning of Indorsement 110 

98. Who Indorse 112 

99. Nature of Indorsement 113 

100. Requisite of Indorsement 114 

101. Varieties of Indorsement 115 

102. Indorsement in Full or Special Indorsement 116 

103. Indorsement in Blank 117 

104. Absolute and Conditional Indorsements 117 

105. Restrictive Indorsement 119 

106. Indorsement Without Recourse 121 

107. Joint Indorsement 122 

108. Successive Indorsements , 123 

109. Irregular or Anomalous Indorsement 123 

110. Presumptions as to Indorsement 125 

110a. Effect of Transfer without Necessary Indorsement 126 

110b. Indorsement Stricken Out 126 

110c. Negotiable Character Continued 127 

llOd. Negotiation by Prior Party 127 



CHAPTER X. 
TRANSFER— BY DELIVERY AND BY OPERATION OF LAW. 

111. In General 128 

112. By Delivery 128 

113. By Operation of Law , ,_ 130 



TABLE OF CONTENTS. xi 

CHAPTER XI. 
TRANSFER— BY ASSIGNMENT. 

SECTION. PAGE. 

114. Assignment in General 131 

115. Assignment by a Separate Writing 132 

116. Liability of Assignor of Bills and Notes 133 

117. Rights of Parties 134 

118. Transfer by Legal Process 135 

118a. Some Differences as to Liability of Different Transferrers 136 

118b. Several Indorsements in Blank, also Combination of in Blank 

and Special Indorsements 137 



CHAPTER Xn. 
OF THE NATURE OF THE LIABILITIES OF THE PARTIES. 

119. In General 139 

120. Maker 139 

121. Drawer 140 

122. Acceptor 141 

123. Indorser 142 

124. Accommodation and Accommodated Parties 144 

125. Agent 148 



CHAPTER Xni. 

NATURE AND RIGHTS OF A BONA FIDE HOLDER OR A PUR- 
CHASER FOR VALUE WITHOUT NOTICE. 

126. Bona Fide Holder for Value Without Notice— In General 149 

127. Good Faith or Bona Fide 150 

128. Holder for Value 150 

129. Holder Without Notice 153 



CHAPTER XIV. 
REAL OR ABSOLUTE DEFENSES. 

130. Defenses in General 158 

131. Real Defenses — In General 160 

132. Incapacity to Contract — Infancy 160 

133. Incapacity to Contract — Coverture 162 

134. Incapacity to Contract — Where Corporation Prohibited 162 

135. Incapacity to Contract — Insanity 163 

136. Incapacity to Contract — ^Drunkenness 163 

137. Illegality of Contract — Gaming, Usurious and Sunday Notes— 164 

138. Forgery 169 

139. Duress When Amounting to Forgery 170 

140. Statute of Limitations J*- 171 

141. Failure to Stamp 171 



xii TABLE OF CONTENTS. 

CHAPTER XV. 
PERSONAL DEFENSES OR EQUITIES. 

SECTION. PAGE. 

142. In General 173 

1^3. Fraud 175 

144 Alteration 176 

145. Duress 17*5 

146. Want or Defect of Consideration 179 

147. Illegality of Consideration 180 

148. Payment 182 



CHAPTER XVI. 
PRESENTMENT, NOTICE OF DISHONOR AND PROTEST. 

149. Meaning of Terms 183 

150. In General 184 

151. Presentment for Acceptance— When Essential 185 

152. Presentment for Acceptance— Benefit 185 

153. Presentment for Acceptance— Time 185 

154. When Instrument Dishonored by Non-Acceptance 186 

155. Presentment for Payment— In General 187 

156. Presentment for Payment — When Essential 188 

157. Presentment for Payment— When Dispensed With 189 

158. Presentment for Payment— What Sufficient 189 

159. Presentment for Payment — Date 190 

160. Presentment for Payment— When Delay Excused 191 

161. Presentment for Payment — Place 192 

162. Presentment for Payment — To Whom 193 

163. Presentment for Payment — Effect of Failure to Present 193 

164. When Instrument Dishonored by Non-Payment 194 

165. Notice of Dishonor — In General 194 

166. Notice of Dishonor — Contents 194 

167. Notice of Dishonor — By Whom Given and When to be Given__ 195 

168. Notice of Dishonor — To Whom Given 196 

169. Notice of Dishonor — Time 198 

170. Notice of Dishonor — Place of Sending 199 

171. Notice of Dishonor — Notice through Postoffice 200 

172. Notice of Dishonor — When Notice Unnecessary 200 

173. Notice of Dishonor — lExcuse for Failure 201 

174. Notice of Dishonor — Effect of Notice as to Prior and Subse- 

quent Parties 203 

175. Protest— Method of 204 

176. Protest— Purpose 207 

177. Protest— Notice 208 

178. Protest— What Should be Protested and What Not Necessary. 210 

179. Protest— Waiver 211 

180. Protest — Miscellaneous Matters 211 



CHAPTER XVn. 
DISCHARGE OF NEGOTIABLE INSTRUMENTS. 

181. In General 214 

182. By Payment 215 



TABLE OF CONTENTS. xin 

SECTION. PAGE. 

183. By Payment for Honor 219 

184. By Cancellation and Surrender 220 

185. By Covenant Not to Sue 221 

186. By Accord and Satisfaction 221 

187. By Substitution of Another Obligation 222 

188. By Alteration 223 

189. By the Principal Debtor Becoming the Holder in Due Course— 223 

190. By Operation of Law 224 

191. By Renunciation of Holder 225 

192. When a Person Secondarily Liable, Discharged 225 

CHAPTER XVIII. 
CONFLICT OF LAWS, OR WHAT LAW GOVERNS. 

193. In General 227 

194. As to Validity, Interpretation and Effect 228 

194a. As to Capacity and Effect 229 

195. As to Liability of Alaker, Drawer and Acceptor 230 

196. As to Payment, Interest and Damages 230 

197. As to Liability of Indorsers 231 

198. As to Presentment, Protest and Notice 232 

199. Rule in Federal Courts 232 

199a. Damages upon Dishonor of Foreign Bill 233 

199b. Date at Which Rate of Exchange Should be Applied 233 

CHAPTER XIX. 

SUBDIVISION A— CHECKS. 

200. Check Defined and Distinguished from Bill of Exchange 234 

201. The Formalities of a Check 236 

202. Presentment of a Check for Payment 236 

203. Certification of Check 238 

204. Forgery and Alteration of Check 241 

205. Memorandum Check 242 

206. Stale Check 243 

206a. Cashier's Check 243 

206b. Paid or Cancelled Check 244 

206c. Crossed Check 244 

206d. Fraudulent Check 244 

206e. Stolen Checks or Stolen Negotiable Securities 245 

206f. Check as Payment 246 

206g. Stopping Payment 246 

207. Checkholder's Right to Sue the Bank 248 

208. The Depositor's Right to Draw on the Bank 249 

209. Failure of Bank to Honor Check , 250 

SUBDIVISION B— TRAVELERS' CHECKS. 

209a. Meaning of Term and Object 251 

209b. Provisions 251 

209c. Rights and Liabilities ^^ 252 

209d. Advantages 252 

209e. Forgery of Travelers' Checks 252 



xiv TABLE OF CONTENTS. 

CHAPTER XIX— A. 
LOST AND DESTROYED NEGOTIABLE INSTRUMENTS. 

SECTION. PAGE. 

209f. In General 253 

209g. Diligence of Owner 253 

209h. No Title in Finder 253 

209i. When Party Liable not Discharged 254 

209j. Rule as to Indemnity 254 

209k. Form of Bond of Indemnity for Paying Lost Note 254 

2091. Copy Admissible in Evidence 255 

209m. Burden of Proof 256 

209n. Suit at Law or in Equity 256 

209o. Demand, Protest and Notice as to Lost Instrument 257 



CHAPTER XX. 

SOME OTHER KINDS OF COMMERCIAL PAPER. 

210. In General 258 

2n. Bill of Latiing 258 

212. Certificate of Deposit 260 

213. Certificate of Stock 261 

214. Coupon Bonds 262 

214a. Liberty Bonds 263 

215. Draft 264 

216. Due Bill 264 

217. Letters of Credit 265 

218. Paper Money 265 

219. Warehouse Receipt 266 

219a, Miscellaneous 266 



CHAPTER XXL 

SURETYSHIP AND GUARANTY. 

220. Terms Defined and Distinguished 267 

220a. Who are Principals and Who Sureties 269 

221. Consideration as to Guaranties 269 

222. Guaranty as Affected by Statute of Frauds 270 

222a. Conditional Guaranties 271 

223. Negotiability of Guaranties 271 

224. Notice to Guarantor of Default of Principal When Demand 

is Made 272 

225. Liability of Concealed Sureties on Accommodation Paper 272 

226. Remedies of Guarantors 273 

226a. Limit of Surety's Recovery 273 

226b. Trial of Suretyship 273 

227. Discharge of Guarantors and Sureties 274 

227a. Contribution Between Sureties , 276 



TABLE OF CONTENTS. xv 

CHAPTER XXI— A. 
NEGOTIABLE INSTRUMENTS WITH COLLATERAL SECURITY. 

SECTION. PAGE. 

227b. Meaning of Term Collateral Security 278 

227c. Form of Promissory Note with Collateral Security 280 

227ti. Holder of Collateral Security a Holder for Value — When Trans- 
fer is for Debt Created at Time of Transfer 281 

227e. Holder of Collateral Security a Holder for Value — When Trans- 
fer is for a Pre-existing Debt 281 

227f. Holder of Collateral Security a Holder for Value — When Trans- 
fer is as Collateral for a Debt Not Yet Due 281 

227g. Presumption as to Ownership 282 

227h. Whether or Not Note Secured by Collateral is Negotiable 282 

227i. Whether or Not Collateral Note or Bill is Negotiable 283 

227J. Effect of Agreement for Delay 284 

227k. Provision for Deposit of Additional Collateral 285 

2271. Proviso in Note Authorizing Sale of Collaterals 285 

227m. What Amounts to Payment 285 

227n. In Some Jurisdictions by Statute, the Surrender of Collateral 

Discharges Indorser 286 

227o. Holder Receiving Collateral not Required to Proceed upon 

Same Before Suing Indorser 286 

227p. Collateral Security Must Be Exhibited 286 

227q. Right of Maker to Claim a Defense Because Holder has Col- 
lateral Security 286 

227r. Amount of Recovery on Collateral Security 287 

227s. Rights of Indorsee as to Stipulations in Collateral Note 287 

227t. Whether Surrender of Collateral Discharges Surety 287 

227u. Whether Surrender of Collateral Discharges Guarantor 287 

TlTw. Effect upon Necessity of Presentment, Protest, and Notice as to 
Drawer or Indorser When They are in Possession of 

Security 288 

227w. Accommodation Paper as Collateral Security 289 

227x. Collateral Released or Lost 289 

227y. Miscellaneous 289 

227z. Form of Guaranty of Collateral Note 291 

227aa. Form of Note with Transfer of Account 291 



CHAPTER XXI— B. 

WHO MAY SUE— WHO MAY BE SUED. 

227bb. In General 292 

227cc. Party in Interest 292 

227dd. Holder May Sue When Another is Entitled to Proceeds 293 

227ee. Instruments Payable to Bearer or Indorsed in Blank 294 

227ff. Acceptor _ 295 

227gg. Drawee 295 

227hh. Payee 295 

227ii. Drawer 295 

227jj. Agent 296 

227kk. Public Officials . 297 



xvi TABLE OF CONTENTS. 

SECTION. PAGE. 

22711. Holder of Instrument for Collection ___ 297 

227mm. Who May Sue— Miscellaneous 298 

227nn. Parties to Actions — Defendants 300 



PART II 

PLEADINGS, EVIDENCE AND TRIAL PROCEDURE AS 
TO BILLS, NOTES AND CHECKS. 



CHAPTER XXII. 
PLEADINGS— IN GENERAL. 

228. Meaning of Term 303 

229. Classes antl Order of Pleadings 303 

230. The Complaint or Declaration 304 

231. Pleadings After Complaint or Declaration 304 



CHAPTER XXIII. 
FORMS OF COMMON LAW PLEADING. 

232. Forms of Common Law Pleading — In General 306 

DECLARATIONS— NOTE, BILL AND CHECK. 

233. Payee Against Maker 306 

234. Indorsee Against Maker 307 

235. Indorsee Against Payee or Other Indorsers 307 

236. Declaration on Bill of Exchange by Drawer Against Acceptor. 308 

237. Payee Against Drawer for Non-Acceptance 308 

238. Indorsee Against Indorser for Non-Acceptance 309 

ANSWERS NOTE, BILL AND CHECK. 

239. Plea 309 

240. Plea and Affidavit of Merits 310 

241. Affidavit Denying Execution of Instrument 310 

242. Plea of Payment by Services 310 

243. Averment of Set-off'. 311 

244. Statute of Limitations 311 

245. Averment of Arbitration and Award 311 



CHAPTER XXIV. 

FORMS OF CODE PLEADING. 

246. Forms of Codei pleading— In ^General 313 



TABLE OF CONTENTS. xvii 

COMPLAINTS— PROMISSORY NOTE. 

SECTION. PAGE. 

247. Complaint on Promissory Note by Payee Against Maker 313 

248. Same For Interest Due 314 

249. Same — Note Providing for Attorney's Fee 314 

250. Same — "Whole Amount Due on Failure to Pay Part 314 

251. Same — Payable After Sight, Demand or Notice 315 

252. Same Excuse for Not Setting Out Copy of Note 315 

253. Same — Lost Note 315 

254. Complaint on Promissory Note by Executor of Payee Against 

Maker 316 

255. Complaint on Promissory Note — Indorsee Against Maker 316 

256. Same — Assignee by Delivery Against Maker and Assignor 316 

257. Same — Indorsee Against Maker and Indorsers 317 

258. Same — Indorsee Against Indorser — Payable in Another State — ■ 

Negotiable by Foreign Statute 317 

COMPLAINTS— BILLS OF EXCHANGE. 

259. Complaint on Bill of Exchange — Payee Against Drawer on 

Non-Acceptance 318 

260. Same — Payee Against Acceptor on Non-Payment 318 

261. Same — Drawer Against Acceptor on Non-Payment 319 

262. Same — Indorsee Against Drawer on Non-Acceptance 319 

263. Same — Indorsee Against Acceptor on Non-Payment 320 

264. Same — Indorsee Against Acceptor — 'Payable at Particular Place 320 

265. Same — Indorsee Against Drawer — Indorsers and Acceptor on 

Inland Bill of Exchange 320 

266. Same — Indorsee Against Drawer When Payable at a Certain 

Place 321 

267. Same — Indorsee Against Drawer — No Funds in Drawer's Hands 

— Failure to Notify Drawer 321 

268. Same — Indorsee Against Drawer — Excuse for Non-Presentment 

--No Effects... 322 

269. Same — Indorsee Against Drawer — Demand and Notice Waived. 322 

270. Same — Indorsee Against Indorser — Non-Payment by Acceptor 323 

COMPLAINTS— BANK CHECK. 

271. Complaint on Bank Check — Payee Against Drawer 323 

272. Same — Payee Against Drawee 324 

273. Same — Drawer Against Drawee 324 

274. Same — Indorsee Against Indorsor 324 

ANSWERSHNOTE, BILL AND CHECK. 

275. Answer to Complaint on Promissory Note, Bill of Exchange 

or Check — General Denial 325 

276. Same — Denial of Execution of Instrument 325 

277. Same — Want of Consideration 325 

278. Same — Partial Want of Consideration 325 

279. Same — Without Consideration as to Indorsee 325 

280. Same — Illegal Consideration 326 

281. Same — Failure of Consideration 326 

282. Same — False Representations; 327 



XVIU 



TABLE OF CONTENTS. 



SECTION. ^^51^- 

283. Same— Payment ^_^' 

284. Same— Alteration ■327 

285. Same— That Acceptance was for Accommodation 328 

CHAPTER XXV. 
EVIDENCE— IN GENERAL. 

286. In General ^29 

287. Presumptions in General 329 

288. Burden of Proof in General 330 

289. Competency of Parties to Negotiable Instruments as Witnesses 330 

290. Declarations and Admissions 331 

CHAPTER XXVI. 
EVIDENCE AS TO PARTICULAR CHARACTERISTICS. 

291. As to Time 332 

292. As to the Date 333 

293. As to Amount Payable 334 

294. As to Place of Payment 335 

295. As to Mode of Payment 335 

296. As to Interest 336 

297. As to Consideration 336 

298. As to Parties '^'^'^ 

299. As to Ambiguous or Omitted Stipulations 338 

300. As to Execution and Delivery 339 

301. As to Acceptance of Bills •339 

302. As to Transfer 340 

303. As to Conditions 341 

304. As to Mistake 342 

305. As to Fraud and Duress 342 

306. As to Usury 343 

307. As to Payment and Discharge 343 

308. As to Presentment and Demand 343 

309. As to Protest and Notice 344 

310. Bills and Notes as Evidences 344 

311. As to Meaning of Certain Terms 345 

CHAPTER XXVn. 
TRIAL PROCEDURE ON BILL, NOTE OR CHECK. 

312. Essentials of Procedure 346 

313. Common Law Procedure 347 

314. Code Procedure 347 

315. Steps in a Jury Trial 347 

316. Impaneling the Jury 347 

317. Opening Statements 348 

318. Evidence of Plaintiff 348 

319. Evidence of Defendant 351 

320. The Argument 352 

321. The Charge, VerMict and Judgment 352 



PART III 



THE NEGOTIABLE INSTRUMENTS LAW 

ANNOTATED. 

Pages 

Introduction 353-357 

List of States and Territories where Negotiable Instruments Law 

Enacted 358-359 

Table Showing the Corresponding Sections of the Statutes as 

Adopted in the Different States and Territories 360-367 

The Negotiable Instruments Law 368-706 



ARTICLE. PAGE. 

I. Form and Interpretation of Negotiable Instruments— 369-426 

n. Consideration 427-454 

in. Negotiation 455-480 

IV. Rights of Holder 481-537 

V. Liabilities of Parties 538-562 

VI. Presentment for Payment 563-585 

VIL Notice of Dishonor 586-614 

Vin. Discharge of Negotiable Instruments 615-639 

IX. Bills of Exchange — Form and Interpretation 640-645 

X. Acceptance of Bills of Exchange 646-656 

XI. Presentment for Acceptance 657-661 

XII. Protest 662-666 

XIII. Acceptance for Honor 667-670 

XIV. Payment for Honor 671-672 

XV. Bills in a Set 673-675 

XVI. Promissory Notes and Checks 676-691 

XVII. General Provisions 692-704 

XVIII. Notes Given for a Patent Right and for a Speculative 

Consideration 705-706 



APPENDIX A. 

Tabulated Laws of the States and Territories. 



.707-713 



APPENDIX B. 

Digest of Law in Georgia Where Negotiable Instruments Law Not 

Adopted 714-718 



PART I 

NEGOTIABLE INSTRUMENTS 



CHAPTER I. 



GENERAL CHARACTERISTICS AND GENERAL FORM OF BILLS. 
NOTES AND CHECKS. 



§ L Introductory. 

2. Form of promissory note. 

3. General characteristics of 

promissory note. 
3a. Other clauses added in dif- 
ferent jurisdictions. 

4. Form of bill of exchange. 



§ 5. General characteristics of bill 
of exchange. 

6. Form of check. 

7. General characteristics of 

check. 
7a. Origin and development of ne- 
gotiable inatrurnents. 



§ 1. Introductory. The most common forms of commer- 
cial paper used today in commercial transactions are promis- 
sory notes, bills of exchange and bank checks. At present 
these constitute the medium of exchange for about ninety per 
cent of all commercial transactions. In this treatise these three 
instruments will be considered and it is essential in the begin- 
ning that a clear idea should be had in a general way of the 
characteristics and form of such instruments. 

§ 2. Form of promissory note. The following is a simple 
form of a promissory note : 



$200.00 

New York City, New York, 

December 1, 1921. 

Six months after date I 

Tpi'omise to pay to the order of William Redding 

Tivo Hundred Dollars 

at the First National Bank. 
Value received. 

No Due JOHN MORRIS. 



2 NEGOTIABLE INSTRUMENTS. §3 

The following is a form of a promissory note which is com- 
mon in some jurisdictions : 



$200.00 Indianapolis, Ind., December 1, 1921. 

Six months after date I promise 

to pay to the order of William Redding 

at The Eagle National Bank, of Indianapolis, Ind., 
Tzvo Hundred - Dollars 

With five per cent Attorney's f6«s, upon the principal of this 
note. Value received, without any relief w^hatever from Valua- 
tion or Appraisement laws of the State of Indiana. With in- 
terest at the rate of eight per cent per annum after maturity 
until paid. The drawers and endorsers severally waive present- 
ment for payment, protest, notice of protest, and notice of non- 
payment of this note. 

JOHN MORRIS. 



§ 3. General characteristics of promissory note. Let us ex- 
amine the parts of the above instrument in a general way, com- 
mencing with the upper left corner of the instrument, (a) We 
note first the figures, "$200.00." This is to indicate the amount 
of the note and being in figures is more quickly grasped than if 
in writing. If there is a conflict between the figures and the 
writing below on the instrument, the writing will control, 
(b) The place, "Indianapolis, Ind.," shows the place where 
this contract to pay is entered into, and as the laws of the 
various states differ as to the requisites of such a contract and 
as to the enforcement of the same it is generally essential that 
the place of entering into the agreement should be set out 
so that it may be clear just what law governs as to the contract 
or instrument, (c) The date, "December 1, 1921," is likewise 
essential so as to determine when the note is due and from 
what time interest is to be charged and whether or not the 
collection of the instrument is barred by the statute of limita- 
tions, (d) The time, "Six months after date," indicates the 
period of time for which the instrument is to run or indicates 
when the promise on the instrument should be fulfilled, 
(e) The promise, "T promise to pay," is an absolute promise 
to do something, that is, to pay ; it does not read, if so and so 
happens or does not happen I promise to pay, but it is con- 
nected with no conditions of any nature.^ (f) The words "to 

iGrinnison v. Russell, 14 Neb. Am. St. Rep. 166, 11 L. R. A. 559; 

521, 16 N. W. 819, 14 Am. Rep. Neg. Inst. Law, §§ 1 and 4; Bills 

126; Iron City Nat. Bank v. Mc- Exch, Act, § 3. 
Cord, 139 Pa. St. 52, 21 At). 143, 23 



§ 3 GENERAL FORM OF BILLS AND NOTES. 3 

the order of," signify a promise to pay it to the order of any 
who may be designated. We shall consider in a subsequent 
chapter whether such words are absolutely necessary and 
whether they should always be in the form indicated, (g) The 
name, "William Redding," is the person to whose order some- 
thing is to be paid and he is known as the payee, (h) Then 
follow these words, "at the Eagle National Bank of Indianapo- 
lis, Indiana," indicating where the note is to be paid ; however, 
it may be paid at any other place agreed upon by the inter- 
ested parties, (i) The amount "Two Hundred Dollars," indi- 
cates, as the figures did, the sum promised to be paid. The 
same being in writing cannot be so easily altered and since it 
takes longer to write the words than the figures the words are 
more likely to be accurate, (j) The phrase, "with five per 
cent Attorney's Fees," indicates that if William Redding, the 
payee, or any one to whose order he should make it payable, 
shall find it necessary to employ an attorney to collect the 
amount, five per cent additional will be paid by the party to 
the instrument who makes it necessary that an attorney should 
be employed, (k) The words "value received," indicate that 
a consideration was given for the note but most jurisdictions 
hold that these words are not necessary since a consideration 
is presumed. (1) The phrase, "without any relief whatever 
from Valuation or Appraisement Laws," shows that if the 
note is not paid when it should be and suit is brought and 
judgment recovered, then the one against whom judgment has 
been recovered waives any rights that he may have as to 
requiring that the property taken to satisfy the judgment, shall 
be valued or appraised by persons appointed for that pur- 
pose, and the property taken may be sold at any price. Thus 
the delay for a valuation and appraisement is avoided, (m) 
The words, "with interest at the rate of eight per cent per 
annum after maturity until paid," show what interest is to 
be paid by the maker in addition to the two hundred dollars 
if not paid when due. This interest will be calculated from 
June 1, 1922, the date of maturity, up to the time the note is 
paid. The per cent set out is eight per cent and we shall see 
in a later part of this work that different states have different 
laws governing the rate of interest which may be charged, 
(n) By the words "the drawers and endorsers severally waive 
presentment for payment, protest and notice of protest and non- 
payment of this note" is meant that the drawers (or persons who 
make the note) and the endorsers (or persons through whose 
hands the note passes and who write ther names on the back of it) 
waive any rights that they may be entitled to because the instru- 



4 NEGOTIABLE INSTRUMENTS. § 3 

ment when due was not properly presented for payment and the 
proper notice was not given to other parties who should have 
notice of the non-payment and other facts in connection therewith. 

Thus if such rights were not waived and William Redding 
should indorse the note, that is, write on the back of the note 
an order that it be paid to John Graham and John Graham in 
turn should indorse it, that is, order it to be paid to James 
Spencer, and on June 1, 1922, when the note became due 
John Morris, the maker, refused to pay James Spencer, the 
holder, then, in order for James Spencer to recover from John 
Graham on the note it would be necessary for him to present the 
note to John Morris for payment and then notify John Graham 
of the refusal of John Morris to pay and notify him that he, 
James Spencer, expected to look to him for the payment of the 
note. In other words it would be necessary to present the note 
to John Morris for payment unless the indorsers waived pre- 
sentment for payment and it would be necessary to notify the 
indorsers of the non-payment unless notice of non-payment of 
the note was waived. The contract of John Graham is that he 
will pay the note provided it is presented to the maker, John 
Morris, and in case John Morris does not pay it and he, John 
Graham, is notified of that fact, then he, John Graham, will 
pay it. 

In case the law should require the note to be protested in order 
to bind the drawers and indorsers, it would be necessary for a 
notary public to take the instrument to John Morris and John 
Morris would state to the notary public that he refused to pay it ; 
the notary would make out a paper stating that the instrument 
had been dishonored, and that he had protested it for non-pay- 
ment and to this statement he would attach his seal.* This is 
the protest, it is not the notice of the protest. The protest then 
is a solemn declaration in writing made by the notary public that 
the instrument has been dishonored by a refusal to pay it.^ 

At the trial this statement of the protest by the notary would 
be good proof that the instrument had been protested and the 
notice had been given to John Graham. After the instrument 
is protested as above set out, the notary would send notice to all 
those parties on the instrument whom the owner desired to hold 
responsible, which notice would state that the instrument had 
been presented for payment, that payment had been refused, 
and that the instrument had been protested for non-payment. 

SiTevis V. Randall, 6 Cal. 632, 65 3 Townsend v. Lorain Bank. 2 

Am. Dec. 547; Shields v. Farmers Ohio St. 345; Swayze v. Britton, 
Bank, 5 W. Va. 254. 17 Kan. 625. 



§ 3a GENERAL FORM OF BILLS AND NOTES. 5 

The stipulation in this instrument waiving protest and notice 
of protest waives these rights, otherwise it would be necessary 
for James Spencer, the holder, to take these steps in order to re- 
cover from John Graham, an indorser, in case the instrument was 
one which the law required to be protested. The contract of the 
indorser under such circumstances is that he will pay the instru- 
ment provided the maker refuses to pay it and the owner of the 
instrument protests it and gives notice of that fact. 

(0) "John Morris" is the maker or drawer of this note. He 
is the one who promises to pay it in the first instance. The note 
may be signed by more than one as we shall consider more fully, 
in another part of this work. 

§ 3a. Other clauses added in different jurisdictions. In 
some jurisdictions by statute or by court decision certain clauses 
may be added to promissory notes which do not render such 
notes invalid or non-negotiable in those jurisdictions. The holder 
of the instrument should consult the law of the particular jurisdic- 
tion to see whether or not such clauses affect the negotiability of 
the instrument in that jurisdiction. Among these clauses the fol- 
lowing are the most common : 

(1) "For value received, negotiable and payable without 
defalcation or discount." 

(2) "We also agree to waive protest, notice thereof and dili- 
gence in collecting." 

(2) "With interest thereon from until paid, 

at the rate of per cent, per annum payable monthly, both 

principal and interest payable in the like Gold Coin." 

(4) "If this note is not paid when due, and if placed in the 
hands of a attorney for collection, we agree to pay an attorney's 
fee of five per cent of the face of this note." 

(5) "Without defalcation, negotiable and payable at their 

office in , for value received, and they are 

hereby directed to place the proceeds to the credit of " 

(6) "This note and the consideration thereof, are for the 
benefit of my sole, separate and individual estate, which estate 
I expressly hereby charge with the payment thereof. (Married 
woman's negotiable note)." 

(7) "To be discounted at the rate of eight per cent, per 
annum; and if not paid at maturity, to bear interest thereafter 
at eight per cent, per annum, with all costs of collection and 10 
per cent, attorney's fees." 

(8) "We the endorsers, guarantors, assignors and sureties, 
severally waive presentment for payment, protest and notice of 
protest for non-payment of this note and all defense on the 



6 NEGOTIABLE INSTRUMENTS. § 3a 

ground of any extension of time of its payment that may be 
given by its holder or holders to the maker or makers thereof." 

(9) "Value received. The drawer and endorser of this note 

hereby waive the benefit of homestead exemption as to 

this debt." 

(10) "No extension of the time of payment, with or with- 
out our knowledge, by receipt of interest or otherwise, shall 
release us, or either of us, from the obligations of payment. I 
sign this note intending hereby to charge my separate estate with 
the payment of same." 

(11) "Also reasonable attorney's fee in any action brought 
on this note." 

(12) "The drawers and endorsers severally waive present- 
ment for payment, protest and notice of protest and non-payment 
of this note, and all defenses on the ground of any extension of 
the time of its payment that may be given by the holder or hold- 
ers to them or either of them. Witness our hands and seals." 

(13) "And if this note is placed in the hands of an attorney 
for collection or has to be sued on, we, the makers and all en- 
dorsers, agree to pay ten per cent attorney's fees, and all ex- 
penses incurred in its collection, in addition to the principal and 
interest, same to be taxed up in judgment." 

(14) "And if interest is not paid annually, to become as prin- 
cipal and bear the same rate of interest. Makers and endorsers 
hereby waive presentment and notice and protest." 

(15) "All the signers of this note agree to be holden for its 
payment, although the time of payment for the whole or any part 
of this sum should be extended from time to time ; such exten- 
sion not to exceed in the aggregate six years." 

(16) "If this note is not paid when due, or is collected by 
attorney or legal proceedings, we promise to pay an additional 
sum of ten per cent, of the amount of this note as attorney's 
fees. We waive protest and notice of non-payment and all ex- 
emption laws and rights thereunder." 

(17) "In case of the insolvency of the undersigned any in- 
debtedness due from the legal holder hereof to the undersigned 
may be appropriated and applied hereon at any time, as well 
before as after the maturity hereof." 

(18) "We, and each of us, hereby empower any attorney at 
any time hereafter to appear for us, either or any of us, in any 
court, in term time or vacation, and confess judgment against 
us, each or any of us, without process on the above note in favor 
of any legal holder for said sum, interest, costs and $ 



§ 3a GENERAL FORM OF BILLS AND NOTES. 7 

attorney's fees, and to release all errors and consent to imme- 
diate execution." 

(19) "Now, should it become necessary to collect this note 
through an attorney, either of us, whether maker, security, or 
endorser on this note, hereby agrees to pay all costs of such col- 
lection, including a reasonable attorney's fee. 

The drawers and endorsers severally waive presentment for 
payment, protest and notice of protest and non-payment of this 
note." 

(20) "We agree that after maturity this note may be ex- 
tended from time to time, by any one or more of us without 
the knowledge or consent of any of the others of us, and after 
such extension the liability of all parties shall remain as if no 
such extension had been made." 

(21) "We, the endorsers, guarantors and sureties, severally 
waive presentment for payment, protest and notice of protest 
for non-payment of this note, and all defense on the ground of 
extension of time of its payment that may be given by its holder 
or holders to the maker or makers thereof. If this note is not 
paid at maturity and is placed in the hands of an attorney for 
collection, or suit is brought hereon, ten per cent, of the entire 
amount shall be paid as attorney's fee and costs of collection." 

(22) "And if not so paid, the whole sum of principal and 
interest to become immediately due and collectible at the option 
of the holder of this note. And in case suit or action is instituted 

to collect this note, or any portion thereof promise and 

agree to pay, in addition to the costs and disbursements pro- 
vided by statute Dollars in like Gold Coin 

for attorney's fees in said suit or action." 

- (23) "Giving said Bank the right of collecting this note at 
any time, notwithstanding the payment of interest in advance, 
or of extending from time to time, by the reception of interest 
in advance or otherwise, the payment of the whole or any part 
thereof, as may be convenient or agreeable to the Bank." 

(24) "And further agree that in case of default in the pay- 
ment of this note, principal or interest, to pay all costs and ex- 
penses of collecting same, including reasonable attorney's fees, 
to be fixed and determined by the court. Each of the makers 
hereof and the endorsers hereon, waive demand, protest and 
notice of non-payment." 

(25) "Appraisement and all legal exemptions waived. In- 
terest to be paid annually, and if. not so paid to 

become as principal and draw interest at the rate of ten per 
cent, per annum until paid." 



8 NEGOTIABLE INSTRUMENTS. § 3a 

(26) "The makers and endorsers of this note hereby express- 
ly waive all right to claim exemption allowed by the Constitution 
and Laws of this or any other State, and agree to pay cost of 
collecting this note, including a reasonable attorney's fee, for all 
services rendered in any way, in any suit against any maker or 
endorser, or in collecting or attempting to collect, or in secur- 
ing or attempting to secure, this debt, if this note is not paid at 
maturity. Notice and protest on the non-payment of this note 
is hereby waived by each maker and endorser." 

(27) "And if default be made in the payment of the prin- 
cipal at maturity, or of interest when due, this note shall be im- 
mediately due and payable and the interest unpaid shall become 
part of the principal and both shall bear interest at the rate of 
ten per cent, per annum from the date of such default, both 
before and after judgment, and if this note, or any part thereof, 
is collected by an attorney, with or without suit, ten per cent, 
additional for attorney's fees. 

The makers and endorsers hereof each expressly waive de- 
mand, protest, notice of non-payment and suit against the maker ; 
and also agree that date of payment may be extended, in whole 
or in part, without our consent. 

(28) "With interest from date at the rate of ten per cent, 
per annum until paid. Interest payable quarterly. Principal and 
interest payable in U. S. Gold Coin of the present standard of 
weight and fineness; and in case suit or action be instituted to 
collect this note, or any portion thereof, I promise to pay such 
additional lawful sum as the Court may adjudge reasonable as 
attorney's fees." 

(29) "In case of the failure to pay any part of the principal 
or interest when and where due, the legal holder hereof may de- 
clare the full amount of this note then remaining unpaid as im- 
mediately due, and proceed to collect the same at once. If this 
note is collected by an attorney, either with or without suit, or 
if legal proceedings be begun for the collection of any amount due 

hereunder agree to pay a reasonable attorney's fee and 

all other costs and expenses of collection. The makers and en- 
dorsers of this note each expressly waive demand, notice of non- 
payment and protest, and also agree that this note may be ex- 
tended in whole or in part without their consent." 

(30) "For value received, negotiable and payable without 

defalcation or discount, with interest from at 

the rate of _• per cent, per annum, payable 

until paid. 

We, the endorsers, guarantors and sureties, severally waive 
presentment for payment, protest and notice of protest for non- 



§ 3a GENERAL FORM OF BILLS AND NOTES. 9 

payment of this note, and all defense on the ground of extension 
of time of its payment that may be given by its holder or holders 
to the maker or makers thereof." 

(31) ("If not so paid to become a part of the principal, and 
bear the same rate of interest as above specified,) both principal 
and interest payable in Gold Coin in the present standard of 
weight and fineness, and in the event of suit for the collection 
hereof, counsel fees." 

(32) "And do hereby authorize , 

Attorney at Law, to appear for in an action on the above 

note, at any time after said note becomes due, in any Court of 

Record, in or of the State of , to waive the 

issuing and service of process against 

and confess a judgment in favor of the legal holder of the above 

against for the amount that may then 

be due thereon, with interest at the rate therein mentioned, and 
costs of suit; and to waive and release all errors in said pro- 
ceedings, petitions in error, and the right of appeal from the 
judgment rendered. Witness our hands and seals." 

(33> "And if not so paid the whole sum of both principal 
and interest to become immediately due and collectible. In case 
suit is instituted to collect this note, or any portion thereof, I, 
we, or either of us promise to pay, besides cost and disburse- 
ments allowed by law, such additional sum as the Court may ad- 
judge reasonable as attorney's fees in said suit." 

(34) "And we, and each of us, do hereby authorize any at- 
torney of any Court of Record in , to appear 

for us, either or any of us, in any such court, at the suit of the 
holder of this obligation upon the same, at any time after the 
maturity thereof, and waive the issuing and serving of the pro- 
cess, and confess judgment against us, either or any of us, and in 
favor of such holder, for the amount then appearing due there- 
on, and for costs of suit, and release all errors. We and each 
of us hereby agree that the holder of this note may, for any 
valuable consideration, extend the time of payment thereof, with- 
out notifying us, and that we will remain as sureties thereon 
thereafter. Witness our hands and seals the day and year above 
written." 

(35) "The parties to this instrument, whether maker, en- 
dorser, surety or guarantor, each for himself hereby severally 
agrees to pay this note and waives as to this debt, all right of 

exemption under the Constitution and Laws of 

or any other State, and they each severally agree to pay all costs 
of collecting or securing, or attempting to collect or secure this 



10 NEGOTIABLE INSTRUMENTS. § 3a 

note, including a reasonable attorney's fee whether the same be 
collected or secured by suit or otherwise. And the maker, en- 
dorser, surety or guarantor of this note severally waives de- 
mand, presentment, protest, notice of protest, suit and all other 
requirements necessary to hold them." 

(36) "With interest payable semi-annually at the rate of eight 
per cent, per annum from due. Delinquent interest and principal 
after maturity shall draw interest at eight per cent, per annum 
until paid. In case of suit thereon we agree to pay an attorney's 
fee. Makers, payees, endorsers, sureties and guarantors waive de- 
mand for payment, protest and notice of protest of this note and 
consent that any Justice of the Peace may have jurisdiction 
hereon to any amount not over $300, and that time of payment 
may be extended from time to time without notice thereof. Pay- 
able at " 

(37) "Said interest, if not paid as it becomes due, to be 
added to the principal and become a part thereof, and there- 
after bear interest at the same rate as the principal, with ten per 
cent, on the entire amount unpaid if placed in the hands of an 
attorney for collection. We agree that after maturity the time 
of payment may be extended from time to time, by any one or 
more of us, without the consent of the other, and after such ex- 
tension the liability of all parties shall remain as if no such 
extension had been made." 

(38) "And we, the makers, sureties, endorsers and guaran- 
tors and each of us, do hereby authorize and empower any At- 
torney of any Court of Record, at any time after interest or 
principal in this obligation becomes due, to appear for us or 
either of us in any action or suit on this note in any such Court 

in , or elsewhere, and waive the issue 

and ser-vice of summons and confess judgment against us or any 
of us in favor of the payee or any holder of this note for the 
sum appearing to be due thereon, including interest and costs 
and ten per cent additional on the amount unpaid as attorney's 
fees, and thereupon to release all errors in said action and hereby 
agree that any extension of time shall not afYect our liability." 

(39) "For value received, negotiable and payable, without 

defalcation or discount, at the Bank of 

with interest from maturity at the rate of ten per cent, per an- 
num. The makers, signers and endorsers of this note severally 
waive demand notice and protest, and agree to all extensions 
and partial payments, before or after maturity, without prejudice 
to the holder, and if this note is placed in the hands of an at- 
torney for collection, an additional ten per cent, for attorney's 
fees." 



§§ 4-7a GENERAL FORM OF BILLS AND NOTES. 11 

§ 4. Form of bill of exchange. The following is the ordi- 
nar>' form of an inland bill of exchange : 



$120.00 Chicago, III, December 1, 1921. 

Thirty days after date 

Pay to the order of John Matlock 

One Hundred and Twenty Dollars. 

Value received, and charge the same to account of 
To Irving Dean, 
Jamestown, N. Y. 

HENRY HAMILTON. 



§ 5. General characteristics of bill of exchange. Let us ex- 
amine this instrument, considering, however, only those formal 
and essential parts which are not found in the promissory note. 
There are three parties to this instrument ; John Matlock is the 
payee, Henry Hamilton is the drawer and Irving Dean the 
drawee. Irving Dean, the drawee, becomes Irving Dean, the 
acceptor, by writing "accepted" and his name, or words of sim- 
ilar import, across the face of the instrument. 

§ 6. Form of a check. The following is the common form of 
a check 



Detroit, Mich., December 1, 1921. No. 15 
The Eagle National Bank. 

Pay to the order of Albert Carter $200.00 

Two Hundred Dollars. 

JOHN MARSH. 



§ 7. General characteristics of check. A check is the most 
common instrument and in explaining the other two instruments 
all parts of this instrument have been explained. Albert Carter 
is the payee and John Marsh is the maker or drawer and the 
Eagle National Bank is the drawee. 

§ 7a. Origin and development of negotiable instruments. 
It is interesting that we should look into the origin and develop- 



12 NEGOTIABLE INSTRUMENTS. § 7a 

ment of these instruments whose form and general characteris- 
tics we have been considering. In general we may say that this 
development has been through three stages, 

The first stage we may call the barter stage, for at that early 
time money as the term is understood and used today was not 
known. At this stage the evidence of value was grain or skins 
or cattle. In agricultural communities grain served this purpose ; 
among fishing people the products of the sea; and in hunting 
races the skins of animals. This early stage was clearly a stage 
of barter. 

The second stage we may call the metal stage, when metal 
took the place of grain and skins and cattle, for these latter when 
used for purchasing purposes Vvcre open to many objections as 
can be readily understood. It was seen that it was necessary to 
adopt a token to represent value v/hich would be sufficiently port- 
able and durable to fulfill its purpose. Iron and the other com- 
moner metals in turn served their day, and finally of all metals 
gold and silver showed themselves to be the most suitable as 
evidences of value. The gold coin was not successfully intro- 
duced into England until the reign of Edward III. ; 

The third and last stage we may call the commercial paper or 
negotiable instruments stage. This is the present stage when 
credit as evidenced by negotiable instruments is able to pass from 
hand to hand as the representative of value or of money. These 
instruments are valuable or worthless dependent on the financial 
ability of the parties to these instruments. 

It would be impossible to transact business of any magnitude 
today if cash payments were required. We see the truth of this 
when we consider that more than 90% of all commercial trans- 
actions are estimated to be carried on today by the medium of 
commercial paper or negotiable instruments. Were it possible 
to estimate accurately the total sums for which checks, promis- 
sory notes and bills of exchange are annually drawn, the result 
would be so enormous as to be beyond intelligent comprehension. 
The only source of information which we have in this matter is 
concerning the checks and drafts and other negotiable instru- 
ments which pass through the Clearing Houses of the country, 
and from this one source alone it is estimated that the total 
amount of these instruments passing through said Clearing 
Houses of the entire country amount annually to about Four 
Hundred Billion Dollars ($400,000,000,000.00). 

Thus we see the great importance of these small pieces of 
paper known as negotiable instruments in the business and com- 
mercial life of this country. 



CHAPTER 11. 

LAW MERCHANT.! 

§ 8. Meaning of term, § 11. Origin of promissory note 

9. Origin. under law merchant. 

10. Origin of bill of exchange un- 12. Law merchant codified, 
der law merchant. 

§ 8. Meaning of term. The law merchant might be consid- 
ered as a code of rules growing out of the needs of trade which 
the courts administering treated as distinct from the ordinary 
common law of England. 

The law merchant in other words is a system of law which 
does not rest exclusively on the positive institutions and local 
customs of any particular country, but consists of certain prin- 
ciples of equity and usages of trade which general convenience 
and a common sense of justice have established, to regulate the 
dealings of merchants and mariners in all the commercial coun- 
tries of the civilized world.^ 

The law merchant is an example of how a custom or usage 
becomes gradually grafted into the law until it becomes as much 
a part of the system of law as any other principle in that system. 
It was first a mere particular usage which became general in its 
character and finally received the sanction of legal tribunals 
which recognized it as law.^ We must understand that the law 
merchant was no part of the law of England for generations 
after it had followed trade, in a private capacity, to the British 
Islands. Unlike admiralty and equity, it was for centuries a 
sort of tolerated outlaw, living only as the merchants could 
keep it alive. The law merchant is not a modification of the 
common law, it occupies a field over which the common law does 
not and never did extend. 

* On Law Merchant see : Van- troduction to 10th Ed. ; Chalmers 

heath v. Turner, Winch 24 ; Good- on Bills of Exchange, Preface ; 

win V. Roberts, L. R. 10 Ex. 346. Lowndes on Marine Insurance ; 

See also: The Elements of Mer- Scrutton on the Influence of the 

cantile Law by Thomas Edward Roman Law on the Law of Eng- 

Scrutton, Chapters I, II; Street land, Chapter XIII, XIV. 

on Foundations of Legal Liabil- 23 K;erit Com. 2. 

ity; Smith's Mercantile Law, In- 85 y. B. 13 Edw. IV, 9 PI. 5. 

13 



14 NEGOTIABLE INSTRUMENTS. § 9 

§ 9. Origin. The law merchant has gone through three 
stages in reaching the position it now holds in the legal tribunals. 
The first stage extended from the earliest times to the year 
1606. During this time the law merchant was considered as a 
special kind of law for a particular class of people. During this 
period the business of the commercial world was transacted or 
conducted in the great fairs held at certain places at fixed times 
each year, to which merchant and trader came. At each fair there 
sat a Court to administer speedy justice, in accordance with the 
law merchant,"* to the merchants and traders there assembled. 
When any doubt or dispute arose it was settled according to the 
custom among merchants as declared by the merchants present. 

The second stage of the law merchant extends from the year 
1606 when Lord Coke took ofiice as Chief Justice of England un- 
til the year 1756 in which Lord Mansfield became Chief Justice. 
The most noticeable effect upon the law merchant during this 
period was the manner of its administration. The special court 
of the fairs died out and the law merchant was administered by 
the King's Court of Common Law. This court did not admin- 
ister it as law but as a custom.^ As this court only admin- 
istered it as a custom the cases went to the jury without the 
facts and customs separated, in consequence of which very little 
was done in establishing any system of mercantile law in England 
during the period. 

The third stage began with the year 1756 when Lord Mansfield 
became Chief Justice of the King's Bench and extends to the 
present time. The thirty years which Lord Mansfield sat as Chief 
Justice was the period in which a system of mercantile law was 
fully established in the common law courts. This system of 
law has been added to constantly by the addition of new usages 
of the mercantile world which have been proven to the Courts. 

"Bills of Exchange at first extended only to merchant stran- 
gers trafficking with English merchants ; and afterwards to inland 
bills between merchants trafficking the one with the other in 
England ; and afterwards to all traders, and then to all persons 
whether traders or not ; and there was then no need to allege 
any custom of merchants."** 

Thus in its origin the law merchant distinguished the contracts 
of foreign merchants from the contracts of ordinary individuals, 
construing them not according to the tenets of the common law, 
but according to the usages of trade. This custom of regulating 

^Blackstone, Book III. page 32. OBrownich v. Lloyd, 2 Lut- 

^Vanheath v. Turner, 1 Winch. wyche's Rep. 1585. 
24 (T622). 



§§ 10-12 LAW MERCHANT. 15 

dealings between native and foreign merchants was extended to 
dealings between native merchants, but was confined to the per- 
sons of merchants, as apart from those pursuing other vocations. 
And it was not until 1666 that courts declared that "the law 
of merchants is the law of the land, and the custom is good 
enough generally for any man, without naming- him merchant." 

§ 10. Origin of bill of exchange under law merchant. The 
bill of exchange is the earliest form of a negotiable instrument.'' 
Bills of exchange, which were first used by the bankers and 
merchants of Florence and Venice to facilitate the transfer of 
credits between distant points, came to England through France 
early in the fourteenth century, that is, came from the continent 
of Europe where they formed part of the modern Roman or Civil 
law. The English merchant used it as an instrument whereby he 
avoided either sending money out of the country or bringing 
money into the country. To pay a third party he would give 
an order on one of his foreign debtors. Originally a bill of 
exchange was purely a trade transaction which was a means 
whereby one country avoided sending money to another. 

§ 11. Origin of promissory note under law merchant. Prom- 
issory notes are said to be of great antiquity and to have been in 
use among the Romans ; but the negotiability of these instru- 
ments was unknown among the Romans and is a development of 
modern times. The time of the introduction of promissory notes 
into England is not absolutely known but it appears to have been 
about thirty years before the reign of Queen Anne. They 
were in use a considerable time before they became the subject 
of litigation and legislation. The common-law judges were op- 
posed to the negotiability of promissory notes payable to order 
or bearer® and it became necessary for Parliament to legislate 
upon the matter, the result of which was the enactment of a 
statute conferring upon promissory notes the same qualities of 
assignability and negotiability as were possessed by the inland 
bills of exchange.® 

§ 12. Law merchant codified. In the seventeenth century 
the law of Bills of Exchange was codified in France, but in Eng- 
land no general codification took place until 1882 (when the Eng- 
lish Bills of Exchange Act was enacted). In the United States 
the earliest general codification is found in the California Civil 
Code in 1872, but this has been followed within the last decade by 
a more widespread adoption of the Negotiable Instruments Law 

^ Mogodara v. Holt, 1 Show. 318. » Statute of 3 and 4 Anne, Chap- 
SBuller v. Crips, 6 Mod. 30. ter, 9, §§ 1-3. 



15 NEGOTIABLE INSTRUMENTS. § 12 

on the general lines of the English Bills of Exchange Act in all 
but one of the states of the Union. That is, it has been adopted 
in forty-seven out of the forty-eight states of the Union, the 
state of Georgia being the only state which has not adopted the 
law. It has also been adopted in Alaska, District of Columbia, 
Hawaii and the Philippine Islands, but has not been adopted in 
Porto Rico and the Panama Canal Zone.*" 

i« See Introduction to Negotiable Instruments Law Annotated, in 

Appendix. 



CHAPTER III. 
NEGOTIABILITY. 

§ 13. Meaning of term. § 16. Purpose of negotiability. 

14. Origin of negotiability. 17. Payment by negotiable instru- 

15. Distinction between assign- ment. 

ability and negotiability. 

§ 13. Meaning of term. The term negotiability implies a 
transferable quality in the instrument to which it is applied. It 
is that quality of bills of exchange and promissory notes which 
renders them transferable from one person to another, and by 
possessing which they are emphatically termed negotiable paper.-' 

Negotiability in the law merchant is the property whereby a 
bill, note or check passes or may pass from hand to hand like 
money, so as to give the holder in due course the right to hold 
the instrument and collect the sum payable, for himself, free from 
defenses. 

The Negotiable Instrument Law provides : 

"An instnmtent is negotiated when it is transferred from one 
person to another in such manner as to constitute the transferee 
the holder thereof. If payable to hearer it is negotiated by de- 
livery; if payable to order it is negotiated by the indorsement of 
the holder completed by delivery."^ 

Negotiation means the act by which a negotiable instrument is 
put into circulation by being passed by one of the original 
parties to another person. If A gives B a check on C bank, and 
B presents the check at the counter of C, no negotiation is nec- 
essary or had. He simply demands and receives payment ; but if 
B goes to D store and buys a bill of goods and tenders the in- 
dorsed check in payment, he negotiates the check. "^* 

"An instrument negotiable in its origin continues to be nego- 
tiable until it has been restrictively indorsed or discharged by 
payment or otherivise."^^ 

* Kinney's Law Dictionary; cases directly or indirectly bearing 
Odell V. Gray, 15 Mo. 2>2i7, 15 Am. upon or citing the Law are grouped. 
Dec. 147 ; Shaw v. Merchants I^a-?. ^^ Aurora State Bank v. Hayes 
Bank, 101 U. S. 557 ; Anniston Eames Elevator Company, 88 Neb. 
Loan & Trust Co. v. Steckney, 108 187, 190, 129 N. W. 279. 

Ala. 146, 19 So. 63, 31 L. R. A. 234. ** Neg. Inst. Law, § 47, where all 

* Neg. Inst. Law, § 30, where all cases directly or indirectly bearing 

upon or citing the Law are grouped. 

17 



18 NEGOTIABLE INSTRUMENTS. §§ 14-15 

§ 14. Origin of negotiability. Originally all instruments, 
including bills of exchange, promissory notes and bank checks 
were non-negotiable — in the sense that the maker could, when 
asked for payment, deduct from the amount due on the instru- 
ment any just claim that he had against the original owner. Such 
claim was termed a counter-claim, or set-off. In the revival 
of commerce in Italy, in the eleventh century, merchants and 
traders, feeling the need of a commercial instrument, similar 
to a bank bill that could be used in barter and trade and com- 
mercial transactions, and realizing that no such instrument could 
be passed from hand to hand or sold readily, no matter how good 
the financial standing of the maker was, if he, the maker, could 
always insist on adjusting accounts with the original owner — 
adopted a custom later known as the law merchant, under which 
notes, checks, drafts, and bills of exchange, drawn in certain 
prescribed forms, and in the hands of a bona fide purchaser, 
could be enforced to their full extent against the maker, regard- 
less of certain defenses or counter-claims that the maker might 
have against the original holder. Such instruments were nego- 
tiable and such was the origin of negotiability.^ 

In England, embarrassments arose in the application of the 
common law to these forms of contract and it was only after a 
long struggle that the courts engrafted upon the common law 
the law merchant, by which the parties to bills and notes were put 
upon a footing entirely different from that of parties to other 
contracts.^ 

The customs and usages of merchants as to negotiability of 
bills of exchange finally came to be recognized and enforced 
by the courts but were not put upon a firm basis until they 
received the sanction of parliament. Promissory notes were first 
recognized by the courts as negotiable and later they were 
refused that recognition.^ Their negotiability was at last estab- 
lished in 1705 by a statute passed by parliament.^ The principles 
of this statute have been followed in a general way by the various 
states of this country and embodied in statutes. 

§ 15. Distinction between assignability and negotiability. 

Assignability is a more comprehensive term than negotiability. 
Assignability pertains to contracts in general while negotiability 
pertains to only a special class of contracts. Property, rights in 
property and other valuable rights evidenced by a contract are 

3 For a complete discussion of ^ Clerk v. Martin, 1 Salk. 129, 2 
this subject see Street on Founda- Ld. Raymond 757. 

tions of Legal Liability. ^ Statute of 3 and 4 Anne, Chap. 

4 Buller V. Crips, 6 Mod. 29. 9. 



§ 15 NEGOTIABILITY. 19 

transferred by assignment.'' The rights evidenced or created by 
ordinary contractual obligations are usually a kind of property, 
having in themselves a value measured in law by the damages 
assessable upon their breach. This property may at this stage 
of the law pass from person to person just as any other property 
does. But there are well settled rules governing such transfer, 
which are the outgrowth and mingling of early doctrines of the 
courts of common law and of equity. The primitive view was that 
in contracts of this nature that only a party to the agreement 
could sue upon the contract. This was based upon the ground 
that the contract created a personal obligation between the credi- 
tor and debtor.* This doctrine has been greatly modified in the 
various states by statutes which declare that every action must be 
prosecuted by the real party in interest. Title to any property 
or rights in property cannot be completely passed, as to the 
debtor, by assignment without notice to him. The result of this 
rule is that if the debtor performs his contract to the original 
creditor without notice of the assignment he is discharged.* 
These are not the rules as to negotiability. The person who 
takes an instrument by indorsement takes it free from all 
equities.*" While a person who takes an instrument by assign- 
ment takes it subject to the equities incident to it.** This is the 
distinguishing feature between assignability and negotiability. 
Negotiability is applied to instruments which contain a promise 
to pay money. These instruments embodying a promise to pay 
money may be either negotiable or non-negotiable. In order to 
be negotiable under the law merchant they must contain some 
words indicative of negotiability.*^ The usual words employed to 
denote this quality are to "A or order," to "the order of A" or 
"to bearer." 

Thus then the material difference between a non-negotiable 
instrument and a negotiable instrument is that the party to a 
non-negotiable instrument who has agreed to pay money or prop- 

'' Hoag V. Mendenhall, 19 Minn. *" Everston v. Bank, 66 N. Y. 14 ; 

335 ; Andrews v. Nat. Bank of Wilson Sewing Mach. Co. v. Spears, 

North Am., 7 Hun 20; Harlowe v. 50 Mich. 534, 15 N. W. 894. 

Hudgins, 84 Tex. 107, 19 S. W. 364, n Trustees of Union College v. 

31 Am. St. Rep. 21. Wheeler, 61 N. Y. 88; Warner v. 

^Beecher v. Buckingham, 18 Whittaker, 6 Mich. 133; Timms v> 

Conn. 110; McWilliam v. Webb, 32 Shannon, 19 Md. 296. 

la. 577 ; Halloran v. Whitcomb, 43 13 United States v. White, 2 Hill 

Vt. 306. (N. Y.) 59, 37 Am. Dec. 374; Da- 

^Van Buskirk v. Insurance Co., vega v. Moore, 3 McCord (S. C.) 

14 Conn. 141; Merchants' and Me- 482; Putnam v. Crymes, 1 McMuU 

chanics Bank v. Hewett, 3 la. 93; (S. C.) 9, 36 Am. Dec. 250. 
Richards v. Griggs, 16 Mo. 416. 



20 NEGOTIABLE INSTRUMENTS. §§ 16-17 

erty under it, may when the money or consideration is demanded 
by a purchaser, set off against it any claims that he has against 
the original owner, which he could have set off if it had not been 
assigned — while the bona fide purchaser, before maturity, of a 
negotiable instrument can enforce it for its full amount against 
the maker, regardless of any counterclaim or other equities that 
the maker has against the original owner. 

§ 16. Purpose of negotiability. The primary purpose of ne- 
gotiability is to allow bills and notes the effect which money, 
in the form of government bills or notes supplies in the commer- 
cial world.^^ A man does not always have property or valuable 
property rights which he can turn into cash at any moment. 
These things, however, measure his credit, and he avails himself 
of this credit by executing his note to his debtor who in turn 
endorses this to a third person. Thus men in this way without 
cash in hand are enabled by means of credit to conduct and 
carry to completion business and commercial enterprises. The 
sole purpose of negotiability then is to allow men of undoubted 
credit to carry on a business enterprise upon their promissory 
notes knowing that other business men will treat these promises 
as cash. Furthermore the purpose of negotiability is to allow 
bills and notes to go from hand to hand in the commercial mar- 
kets and to take the part of money in commercial transactions. 

§ 17. Payment by negotiable instrument. In the absence of 

an agreement, either express or implied, it is generally held that 
a negotiable instrument is not an absolute and unconditional pay- 
ment of the debt and a discharge of the original obligation. Thus 
it has been held that the debtor's own note given for a precedent 
or contemporary debt is conditional payment.^* But some juris- 
dictions hold that it is absolute payment.*'** 

If, however, a new note is given in renewal of a former note 
and for a less amount it will be considered as a satisfaction ot 
the prior note as all differences are presumed to have been 
adjusted when the new note was given. *^ 

13 Friedlainder v. Railway Co., i-*" Hibben v. Hicks, 26 Ind. App. 
130 U. S. 416. 646, — N. E. — . 

14 Winsted Bank v. Webb, 39 N. i5 pjper v. Wade, 57 Ga. 223 ; 
Y. 325, 10 Am. Dec. 435; Night- Bolt v. Dawkins. 16 S. C. 198; 
ingale v. Chaffee, 11 R. I. 609, 23 Draper v. Hitt, 43 Vt. 439, 5 Am. 
Am. Rep. 531 ; Sheehy v. Mande- Rep. 292. 

ville, 6 Cranch 258. But see, Jenness v. Lane, 26 Me. 

Contra, Ward v. Bourne, 56 Me. 475. 
61 ; Smith v. Bettger, 68 Ind. 254, 
34 Am. Rep. 256. 



§ 17 NEGOTIABILITY. 21 

Nor is a new note executed by only a part of the original 
promisors generally to be considered as payment of the prior 
note in the absence of any agreement to that effect.^^ 

In case the bill or note of a third person is given in payment 
of a precedent debt the payment is generally held to be con- 
ditional.^'' 

But when the stranger's note is payable to bearer or has been 
indorsed in blank by a prior holder so that it may be transferred 
without indorsement it is then considered as absolute payment 
when given for a contemporaneous debt.-^^ 

But it is only as conditional payment when payable to order 
and can be transferred only by indorsement.^^ 

A note is not discharged by giving a new note which proves 
invalid.*** Thus the original note is not discharged even though 
it is surrendered and a new note is accepted in payment without 
knowledge that the nev/ note is a forgery.** 

It is not necessary that the old note be surrendered or can- 
celed before a new note can operate as payment.** 

i«Hill V. Sleeper, 58 Ind. 221; !» Monroe v. Hoff, 5 Denio 360; 

Bates V. Rosekrans, Zl N. Y. 409; Shriner v. Keller, 25 Pa. St. 61. 

Boston Nat. Bank v. Jose, 10 See Day v. Thompson, 64 Ala. 

Wash. 185, 38 Pac. 1026. 269. 

But see, Stanley v. McElrath, 86 20 Williams v. Gilchrist, 11 N. H. 

Cal. 449, 25 Pac. 16, 10 L. R. A. 535; Winsted Bank v. Webb, 46 

545; Bansman v. Credit Guarantee Barb. 177; Edgell v. Stanford, 6 

Co., 47 Minn. Ill, 50 N. W. 496. Vt. 551. 

*'' Gresham v. Morrow, 40 Ga. 21 Athens First Nat. Bank v. 

487; Woods v. Woods. 127 Mass. Buchanan, 87 Tenn. 32, 9 S. W. 

141 ; Gibson v. Tobey, 46 N. Y. 637, 202, 10 Am. St. Rep. 617, 12 L. R. 

7 Am. Rep. 397. A. 199; West Phila. Nat. Bank v. 

But see, Dennis v. Williams, 40 Field, 143 Pa. St. 473, 22 Atl. 829, 

Ala. 633. 24 Am. St. Rep. 562. 

18 Tobey v. Barber, 5 Johns. 68. 22 French v. French, 84 la. 655, 

4 Am. Dec. 326; Day v. Kinney, 57 N. W. 145, 15 L. R. A. 30; Dixon 

131 Mass. n-, Susquehanna Fert. ^ Dixon, 31 Vt. 450, 76 Am. Dec. 

Co. V. White, 66 Md. 444, 7 Atl. i29; East River Bank v. Butter- 

802. worth, 45 Barb. 476. 

But see, Huse v. McDaniel, 33 
la. 406, 4 Am. Rep. 244. 



CHAPTER IV. 
GENERAL DOCTRINE. 

§ 18. Negotiable instruments similar § 20. Equities. 

to money. 21. Circulation when parties not 

19. Bona fide holder. immediate. 

§ 18. Negotiable instruments similar to money. As has al- 
ready been pointed out the peculiarities which attach to negotiable 
paper are the growth of time, and were acceded to for the benefit 
of trade. While all choses in action are now transferable, the ne- 
gotiable instrument is the only species which carries, by transfer, 
a clear title and a full measure ; and like an instrument under seal, 
imports a consideration. Negotiable instruments are thus given 
many of the peculiarities of money — i. e., gold and silver coin 
and bank bills.^ 

§ 19. Bona fide holder. In order to take advantage of the 
special privileges attached to a negotiable instrument, the holder 
must have taken it before it was due,^ and with no notice of any 
irregularity in the instrument, or of any valid defenses that the 
maker had to it,^ and the owner must have parted with some- 
thing of value in acquiring it.^ The consideration need not have 
been money.® It may have been property,® the granting of 
credit,'^ or some disadvantage which the holder assumed in acquir- 
ing it. Such a holder is a bona Ude holder. He is often spoken of 
as a holder in due course, also, as a bona Ude purchaser for value 
without notice. 

ipriedlander v. Railway Co., 4 Webster v. Cobb, 17 111. 459; 

130 U. S. 416; Russel v. Whipple, Tillow v. Britton, 9 N. J. L. 120; 

2 Cow (N. Y.) 536; Durgin v. Bar- Kinkel v. Harper, 7 Colo. App. 45, 

tol, 64 Me. 473. 42 Pac. 173. 

2 Lansing v. Gaine, 2 Johns. (N. ^ In re Great Western Tel. Co., 
Y.) 300, 3 Am. Dec. 422; Lancas- 5 Biss. (U. S.) Z63, 10 Fed. Cas. No. 
ter Bank v. Woodard, 18 Pa. St. 5,740; Mayer v. Heidelbach, 123 n! 
357, 57 Am. Dec. 618; Gordon v. Y. 332, 25 N. E. 416, 9 L. R. A. 850,- 
Wansey, 21 Col. 77. Greenwood v. Lowe, 7 La. Ann. 

3 Ward V. Doane, 77 Mich. 328, 197. 

43 N. W. 980 ; Greneaux v. Wheel- 6 Pond v. Waterloo Agricultural 

er, 6 Tex. 515; Smith v. Florida Works, 50 la. 596. 

Cent. Ry. Co., 43 Fed. 731; Can- 7 Drulling v. Battle Creek First 

ajoharie Nat. Bank v. Diefendorf, Nat. Bank, 43 Kan. 197, 23 Pac. 94, 

123 N. Y. 191, 25 N. E. 402, 10 L. 19 Am. St. Rep. 126. 

R. A 674 

22 



§ 20 GENERAL DOCTRINE. 23 

§ 20. Equities. A makes a certain instrument payable to 
B, promising to pay him a certain amount of money. That instru- 
ment is vaHd regardless of whether or not it is negotiable by the 
law merchant. B can recover from A, providing, of course, there 
has been a consideration, and if B assigns that over to some one 
else, that other person can recover also from A, The instrument is 
valid, then, whether it is negotiable by the law merchant or not. 
The question as to whether or not it is negotiable by the law 
merchant becomes important when there are some equities which 
attach to the instrument, and then, if it is not negotiable by the 
law merchant, the person takes it subject to those equities ; it has 
certain luggage attached to it which the person who gets the in- 
strument must also take — he must take the luggage with the in- 
strument. Therefore, it is important to know whether or not an 
instrument is negotiable by the law merchant. Instruments which 
have this luggage attached to them are binding, but we are con- 
sidering now whether these instruments are negotiable by the law 
merchant for other reasons. 

In general it may be here stated that there are certain essen- 
tials which an instrument negotiable by the law merchant must 
have. The bill must contain an order, not merely a request.® A 
orders you to do so and so ; he does not merely request you to do 
it. A note must contain a promise.® A promises to do. The 
order or promise must be unconditional ; absolutely for the pay- 
ment of money alone.*® Thus an order for 50 bushels of wheat 
or corn is not sufficient because not payable in money. There 
must be a payment in money and nothing else attached to it. 
The amount of money must be certain;** the time of payment 
must be a time certain to arrive,*- and the instrument must be 
specific as to all its parties. In a promissory note it must be spe- 
cific as to all its parties, that is, it must be specific as to the 
maker and the payee. In a bill of exchange the drawer, drawee 
and payee must be specific. 

Now, the question, whether an instrument has all these 
requisites which are required by the law merchant in order to be 
negotiable, becomes important when the instrument is in the hand.. 

SGillilan v. Myers, 31 111. 525; " Neg. Inst. Law, § 2; Hatch 

Knowlton v Cooley, 102 Mass. 233. v. Dexter First Nat. Bank, 94 Me. 

9 Smith V. Bridges, 1 111. 18; 348, 47 Atl. 908, 80 Am. St. Rep. 
Hatch V. Gillettee, 8 N. Y. App. 401. 

Div. 605, 40 N. Y. S. 221. iSHanel v. Marston, 7 Rob. (la.) 

10 South Bend Iron Works v. 34; New Windsor First Nat. Bank 
Paddock, 37 Kan. 510, 15 Pac. 574; v. Brynum, 84 N. C. 24, Zl Am. 
Wainwright v. Straw, 15 Vt. 215, Rep. 604; Neg. Inst. Law, § 20 
40 Am. Dec. 675. (1) ; Bills Exch. Act, §§ 3, 83. 



24 NEGOTIABLE INSTRUMENTS. § 20 

of a bona fide purchaser for value. A person who gets a note 
with equities attached to it, and gives vakie for it, gets that instru- 
ment free from all those equities if it is negotiable by the law 
merchant. For instance, suppose a note has been obtained from A 
by fraud ; he thinks he has been signing a receipt when in fact he 
was signing a negotiable promissory note, and he has been negli- 
gent in signing; it gets into the hands of X, and X transfers it 
to Y. Y can recover against A. That equity does not run against 
a bona Ude holder for value.^^ Suppose it has some of these essen- 
tials lacking in order to make it negotiable. In that case X, Y, or 
the person who holds the instrument for value, would take it sub- 
ject to the equity that the note was obtained from A by fraud. 
If it was not negotiable by the law merchant, A would have a 
right to take advantage of that equity. 

There are some things which even a bona fide holder for value 
without notice can not maintain suit against. Suppose some 
one forges A's name to a note ; now, the good reason of the law 
merchant and merchants generally would hold that that should 
not be held as valid against A, even in the hands of a bona fide 
purchaser for value without notice. A is not a party to it, and 
we shall find out later that that is a real defense; and any per- 
son holding that instrument and tr3'ing to recover against A, A 
would have the right to set up against him that it was a forgery, 
even though it was negotiable by the law merchant and even 
though the person holding it is a holder for value without 
notice.*^ 

Thus we see there is one fact and principle that we must bear in 
mind all the time, and that is, if a person makes an agreement or 
contract of any nature, and it is such a contract as would be bind- 
ing in the law of contracts, then that contract is binding as be- 
tween those parties. So, if a person makes a contract or a written 
instrument of any nature, whether or not that instrument is 
negotiable by the law merchant, he is bound if he would be bound 
by the law of contracts. If one attempts to make a promissory 
note or a bill of exchange but does not do it and makes some 
other paper, he is bound just the same. We must consider the 
difference. The law of contracts, we might say, controls always 
as between the immediate parties. The law of bills and notes 
becomes important when we consider the paper in the hands of 
an innocent holder for value. 

13 Von Windisch v. Klaus, 46 17, 92 Am. Dec. 521; Roach v. 

Conn. 433 ; Strough v. Gear, 48 Ind. Woodall, 91 Tenn. 206, 18 S. W. 

100. 407, 30 Am. St. Rep. 883. 

I'* Foltier v. Schroder, 19 La. Ann. 



§ 21 GENERAL DOCTRINE. 25 

§ 21. Circulation when parties not immediate. As between 
the immediate parties, for example, the drawer and payee on a 
promissory note, circulation has not begun, but when it circu- 
lates in other hands, then it partakes of the nature of money and 
will circulate just as money does, providing it is negotiable by 
the law merchant. ^^ Suppose X promises to pay A $50 and to 
deliver him 50 bushels of wheat. Now, in the absence of any 
fraud or anything of that nature, that is absolutely binding as 
between them, and B can recover from A $50 and 50 bushels of 
wheat. Now, suppose that is assigned by B to C and C to D. 
Now, that is a case where there is a valid contract. Any party 
to the instrument can proceed upon it and can recover. Now, 
suppose this instrument has been procured by fraud ; that A 
believes he is making a receipt for 50 bushels of wheat to B and, 
as a matter of fact, he promises to pay him $50 and deliver him 
50 bushels of wheat, but he is negligent and careless and as a 
result it turns out to be some other instrument. Well, of course, 
between A and B, B could not recover, but suppose B gets it 
and indorses it to C and C to D. Can D recover upon that 
instrument? No. That is an instrument that would be non- 
negotiable by the law merchant and D could not recover on it; 
there were certain equities that went with it, and A can set the 
equities up against anyone who gets that instrument. So, when 
it gets in the hands of anybody else, A has a right to set up 
that defense.^® Now, suppose it is negotiable by the law mer- 
chant, the promise is to pay $50 alone, but suppose the instru- 
ment has been procured by fraud from A and B instead of be- 
ing a receipt it is a promisson,^ note and A thinks he is sign- 
ing a receipt, and the circumstances are like the others. In that 
case B could not recover against A, although it has all the requi- 
sites of a negotiable instrument. As between the immediate par- 
ties the ordinary law of contracts would apply and the fraud 
could be set up.*'' But let us suppose that it is endorsed by B 
to C and by C to D. D has no notice of any equity and gives full 
value for it, and he endeavors to recover against A. A cannot 
set up fraud as a defense because it is an instrument negotiable 
by the law merchant and in the hands of a bona fide holder for 
value without notice. A cannot set up that defense. Now, if D 
knew that that had been procured by fraud he could not collect. 

'^^ Supra, § 18, note 1. 5 Kan. App. 437, 49 Pac. 324; Tur- 

i« Trustees of Union College v. ley v. Bartlett. 10 Heisk. (Tenn.) 

Wheeler, 6 N. Y. 88; Timms v. 221; Kulenkamp v. Grofif, 7 Mich. 

Shannon, 19 Md. 296. 675, 40 N. W. 57. 
*'' Lancaster Nat. Bank v. Mackey, 



26 NEGOTIABLE INSTRUMENTS. §21 

If a person gets a negotiable instrument and he has given value 
and has no notice of wrongdoing, good common sense would say 
that he could recover just like he had gotten a ten dollar bill. 
That is the general doctrine underlying the law of negotiable 
instruments.^'^ 

18 Supra, § 18, note 1. 



CHAPTER V. 



PARTIES AND THEIR CAPACITY. 



§ 22. Parties and their capacity — 

In general. 
23. Parties partially or wholly 
incapacitated — In general. 

24. Same — Persons lacking men- 

tal capacity — Infants. 

25. Same — Persons lacking men- 

tal capacity — Lunatics. 

26. Same — Persons lacking men- 

tal capacity — Drunkards 
and spendthrifts. 

27. Same — Persons lacking legal 

capacity other than mental 
— Married women. 

28. Same — Persons lacking legal 

capacity other than mental 
— The bankrupt or insolv- 
ent payee. 

29. Same — Persons lacking legal 

capacity other than mental 
— Alien enemies. 

30. Parties not incapacitated — In 

general. 



§ 31. Same — Persons acting in 
fiduciary capacity — Execu- 
tors and administrators. 

32. Same — Persons acting in 
fiduciary capacity — Trus- 
tees and guardians. 

23. Same — Persons acting in 
representative capacity — 
Agent. 

34. Same — Persons acting in 

representative capacity — 
Partners. 

35. Same — Persons acting in rep- 

resentative capacity — Private 
corporations. 

36. Same — Persons acting in rep- 

resentative capacity — Mu- 
nicipal or public corpora- 
tions. 

37. Same — Persons acting in rep- 

resentative capacity — Public 
officers. 



§ 22. Parties and their capacity — In general. In this chap- 
ter we shall consider parties to bills, notes and checks and the 
capacity of such parties. It may be stated that the general 
rules governing contracts will apply as to the capacity of persons 
to make and indorse bills, notes and checks,* and also as to the 
effect of the various forms of legal disability, as infancy, in- 
sanity, coverture and alien enmity, upon the rights of the par- 
ties. Paper executed by persons who are under any of the above 
disabilities, is either void or voidable. Others, as partnerships, 
corporations, and agents, who have capacity to make simple con- 
tracts also have capacity, to certain extent, to execute and trans- 
fer bills, notes and checks. We shall consider in turn the capac- 
ity of all these parties to execute negotiable instruments, or bills, 
notes and checks. 



1 Bromwich v. Loyd, Lutw. 1582; 
Hodges V. Steward, 12 Mod. 36 ; 



Sarsfield v. Witherley, 2 Vent. 292. 



27 



28 NEGOTIABLE INSTRUMENTS. §§ 23-24 

For convenience, parties and their capacity may be considered 
under two main divisions or heads, viz., 1st — those parties par- 
tially or wholly incapacitated, and 2nd — those parties not in- 
capacitated. 

§ 23. Parties partially or wholly incapacitated — In general. 

Parties partially or wholly incapacitated may be classified either 
as parties lacking mental capacity, such as infants, lunatics, 
drunkards and spendthrifts; or as persons lacking legal capacity 
other than mental, such as married women, the bankrupt or in- 
solvent payee and alien enemies. 

§ 24. Same — Persons lacking mental capacity — Infants. 

There is a difference of opinion in the decisions of the various 
states as to whether a negotiable instrument made, accepted or 
indorsed by an infant, that is, by one under twenty-one years 
of age, is absolutely void or is merely voidable.^ The better 
opinion is that such note is voidable and may be ratified by the 
minor after reaching his majority^ But before reaching his 
majority and ratifying the instrument the infant cannot bind 
himself absolutely as drawer, indorser, acceptor or maker of a 
bill of exchange or promissory note."* 

If an instrument is given by an infant for necessaries, the bet- 
ter opinion is that the instrument is voidable and if repudiated 
by the infant,^ he may be recovered against not on the note but 
for the value of the articles supplied, or service rendered, that is, 
in actions known technically as "quantum valebat" and "quantum 
meruit," respectively.* 

A note, bill or check made payable to an infant is enforceable 
by the infant against the maker or acceptor, as the privilege of 

3 Tyler v. Gallop, 68 Mich. 185, Mich. 304; Little v. Duncan, 9 

35 N. W. 902, 13' Am. St. Rep. 336; Rich. 55, 64 Am. Dec. 700; Stern 

Little V. Duncan, 9 Rich. (S. C.) v. Meikleham, 56 Hun (N. Y.) 475, 

55, 64 Am. Dec. 700; Askey v. Wil- 10 N. Y. S. 216. 

liams, 74 Tex. 294, 11 S. W. 1101. 5 5 Morton v. Steward, 5 111. App. 

L. R. A. 176. See note 18 Am. St. 533; McCrillis v. How, 3 N. H. 

Rep. 606-611. 348; Swasey v. Vanderheyden, 10 

Contra, Wentworth v. Went- Johns. (N. Y.) Zi. 

worth, 5 N. H. 410; McMim v. But see, Earle v. Reed, 10 Mete. 

Richards, 6 Yerg. (T^^nn.) 9. (Mass.) 387; Aaron v. Harley, 6 

3 Heady v. Boden, 4 Ind. App. Rich. (S. C.) 26; Bradley v. Pratt, 

475, 30 N. E. 1119; Whitney v. 23 Vt. 378. 

Dutch, 14 Mass. 4.^7, 7 Am. Dec. « Guthrie v. Morris, 22 Ark. 411; 

229; Minock V. Shortridge, 21 Mich. Munson v. Washband, 31 Conn. 

304. 303, 83 Am. Dec. 151; Askey v. 

^Fetrow v. Wiseman, 40 Ind. Williams, 74 Tex. 294, 11 S. W. 

148; Minock v. Shortridge. 21 1101, 5 L. R. A. 176. 



§ 24 PARTIES AND THEIR CAPACITY. 29 

avoiding the contract lies with the infant and is for his benefit.'' 
The one who pays should use due care in paying lest payment 
should be made to the guardian rather than to the infant. 

An infant's indorsement, that is, his writing his name on the 
back and making the instrument payable to some one else, is 
voidable, not absolutely void. He may choose to disaffirm it, 
and by returning the consideration received, compel the maker 
or acceptor to pay him, although the money has already been 
paid to the indorsee or the one to whom the infant indorses it ; 
or the infant may disaffirm the indorsement, notify all the par- 
ties, and if payment has not been made to the indorsee, destroy 
his title to the bill or note.^ 

In case of the indorsement of the note or bill by the infant 
payee, the maker or acceptor is liable, as the fact that they make 
the instrument payable to an infant estops or precludes them 
from denying his capacity to indorse the instrument. It would 
be absurd to allow one who has made an instrument payable to 
an infant, or his order, to refuse to pay the money to one to 
whom the infant had ordered it to be paid, in distinct violation 
of his promise.^ 

The Negotiable Instruments Law provides :*** 

'^The indorsement or assignment of the instrument by a cor- 
poration or by an infant passes the property therein, notwith- 
standing that from zmnt of capacity the corporation or infant 
may incur no liability thereon." 

The above section of the law does not take away the infant's 
right to disaffirm his indorsement and recover the instrument 
even against an innocent indorsee for value.*®* 

As the instrument of an infant is not absolutely void, but 
voidable only at his election, it follows that, after reaching full 
age, the then adult may ratify and affirm his bill or note exe- 
cuted while he was an infant. Unless a written ratification is 
required by statute, a verbal ratification is sufTcient. In some 
states by statute it is required that this ratification be in writ- 
ing. 

'"Garner v. Cook, 30 Ind. 331; Hardy v. Waters, 38 Me. 450; 

Dulty V. Brownfield, 1 Pa. St. 497 ; Nightingale v. Withington, IS 

Grey v. Cooper, 3 Dougl. 65 ; Bun- Mass. 272, 8 Am. Dec. 101. 

ker's Cases, 331. ^® Neg. Inst. Law, § 22, where all 

* Hardy v. Waters, 38 Me. 450; cases directly or indirectly bearing 

Nightingale v. Withington, 15 upon or citing the Law are grouped. 

Mass. 272, 8 Am. Dec. 101 ; Story i»* Murray v. Thompson, 136 

Prom. Notes, §80. Tenn. 118, 188 S. W. 578, L. R. A. 

»Frazier v. Massey, 14 Ind. 382, 1917 B, 1172. 



30 NEGOTIABLE INSTRUMENTS. § 25 

§ 25. Same — Persons lacking mental capacity — Lunatics 
and imbeciles. The bill or note of a lunatic, imbecile, idiot, or 
other persons non compos mentis, from age or personal infirmity, 
is, subject to the conditions set out below, not binding on such 
persons during the period of incompetency.-^^ There is a con- 
flict of authority in the various jurisdictions as to whether 
one ignorant of the incompetency of a person with whom he 
contracts will be protected. The better opinion would seem 
to be that he will be protected if he has acted in good faith 
and taken no undue advantage of the afflicted person.*^ 

That is, he will be protected if the note was obtained or the 
contract entered into in good faith, in ignorance of the want of 
capacity of the insane person to contract, and for a full and 
adequate consideration of money paid, or property delivered to 
him. 

As to whether a bill or note given for necessaries binds one 
under such incompetency, the more just rule would seem to be 
to place such an instrument upon the same footing as the bill 
or note of an infant given for necessaries, as discussed in the pre- 
vious section.-*' 

Contracts with a person who has been adjudged judicially to 
be insane and for whom a committee or guardian has been ap- 
pointed to care for his interests are not valid and cannot be en- 
forced if disaffirmed or avoided. If the insanity of a party to a 
contract is known, the contract is absolutely void.^^ 

" 15 Am. Dec. 361 note; Mussle- Boone, 102 Ga. 202, 29 S. E. 182, 66 

man v. Cravens, 47 Ind. 1; Ellars Am. St. Rep. 167, 40 L. R. A. 250; 

V. Mossbarger, 9 111. App. 122 ; Hale Am. Dec. 372. 

V. Browne, 11 Ala. 87; Milligan v. Seaver v. Phelps, 11 Pick. 304, 22 

Pollard, 112 Ala. 465, 20 So. 620; 13 Navasota First Nat. Bank v. 

Burke v. Allen, 29 N. H. 106, 61 McGinty, 29 Tex. Civ. App. 539, 

Am. Dec. 642 ; Carrier v. Sears, 4 69 S. W. 495 ; In re Renz, 79 Mich. 

Allen (Mass.) 336, 81 Am. Dec. 216, 44 N. W. 598; Hosier v. Beard, 

707 ; American Trust Co. v. 54 Ohio St. Rep. 398, 43 N. E. 1040, 

Boone, 102 Ga. 202, 29 S. E. 182, 66 56 Am. St. Rep. 720, 35 L. R. A. 

Am. St. Rep. 167, 40 L. R. A. 250. 161. 

See note 11 Am. St. Rep. 320. Contra, Milligan v. Pollard, 112 

12 Memphis Nat. Bank v. Sneed, Ala. 465, 20 So. 620; Davis v. Tar- 

97 Tenn. 120, 36 S. W. 716, 56 Am. ver, 65 Ala. 98; McKee v. Purnell, 

St. Rep. 788, 34 L. R. A. 274 ; 18 Ky. L. Rep. 879, 38 S. W. 705. 

Snyder v. Lanback, 7 Wkly. Notes '^ American Trust, etc., Co. v. 

Cases (Pa.) 464 note; Mussleman Boone, 102 Ga. 202, 29 S. E. 182, 

V. Cravens, 47 Ind. 1; Hosier v. 66 Am. St. Rep. 167, 40 L. R. A. 

Beard, 54 Ohio St. Rep. 398, 43 250; Hughes v. Jones, 116 N. Y. 

N. E. 1040, 56 Am. St. Rep. 720, 35 67, 22 N. E. 446, 15 Am. St. Rep. 

L. R. A. 161. 386, 5 L. R. A. 637; Schramek v. 

Contra, American Trust Co. v. Shepeck, 120 Wis. 643, 98 N. W.' 



§ 26 PARTIES AND THEIR CAPACITY. 31 

Such persons of unsound mind may be payees of bills or notes 
and may compel payment to them or a return of the considera- 
tion. As payees they may indorse the paper and the indorsee 
may recover of the maker or acceptor, and the latter are estopped 
from denying the payee's capacity to indorse if the payee was 
incompetent when the bill or note was executed.^^ 

It has been held, that the insanity of the indorser may be 
pleaded by the maker of a note in an action brought against him 
by the indorsee.-^® But the better doctrine is as above stated that 
the contract of indorsement by an insane person is voidable and 
not void, and such contract is binding upon all prior parties to 
the instrument who are of sound mind.^'' No action will lie on 
an accommodation indorsement of a promissory note by a luna- 
tic, even in favor of an innocent holder.*^ 

There is a presumption that every person is of sound mind and 
capable in that respect of contracting a liability on a bill, note 
or check until the contrary appears.*'* If a person contracts 
such a liability with a third person whom he knows to be insane, 
it is not valid, for unsoundness of mind would be a good de- 
fense, if it could be shown that the defendant was not of capacity 
and the plaintiff knew it.*® But where a person as above in good 
faith contracts with another, without notice of any such insanity 
as affects his capacity to contract, the ordinary presumption of 
sanity prevails, and the contract is valid, unless undue advantage 
was taken of the lunatic.** 

§ 26. Same — Persons lacking mental capacity — Drunkards 
and spendthrifts. If a person became so drunk as to be de- 
prived of understanding and reason and in such a condition signs 
a bill or note, either as maker, drawer, indorser or acceptor, the 

213; Coleman v. Farar, 112 Mo. 54, 56 Am. St. Rep. 788, 34 L. R. A. 

20 S. W. 441. 274; Bechtel's Appeal, 133 Pa. St. 

But see, Kimball v. Bumgardner, 367, 19 Atl. 412. 

16 Ohio Cir. Ct. 587, 9 Ohio Civ. i» Jackson v. Van Dusen, 5 

Dec. 409. Johns. 144; 1 Parsons on Notes and 

15 Carrier v. Sears, 4 Allen Bills 150. 

(Mass.) 336, 81 Am. Dec. 707. 20 Hannahs v. Sheldon, 20 Mich. 

16 Walker v. Winn (Ala. 1905), 278; Lincoln v. Buckmaster, 32 
39 So. 12; Burke v. Allen, 29 N. H. Vt. 652; Hughes v. Jones, 116 N. 
106, 61 Am. Dec. 642. Y. 67, 22 N. E. 446, 15 Am. St. 

17 Carrier v. Sears, 4 Allen Rep. 386, 5 L. R. A. 637. 

(Mass.) 336, 81 Am. Dec. 707. 3i Mutual Life Ins. Co. v. Hunt, 

18 Van Patton v. Beal, 46 la. 79 N. Y. 541 ; Hosier v. Beard, 54 
62 ; Edwards v. Davenport, 20 Fed. Ohio St. Rep. 398, 43 N. E. 1040, 56 
756 ; Smith v. Mirsack, 6 C. B. 486. Am. St. Rep. 720, 35 L. R. A. 161 ; 

But see, Memphis Nat. Bank v. Behrens v. McKenzie, 23 la. 343. 
Sneed, 97 Tenn. 120, 36 S. W. 716, 



32 NEGOTIABLE INSTRUMENTS. § 27 

instrument as to him is voidable.^^ He may ratify the instru- 
ment when he becomes sober and be bound by it.^"* Many courts 
hold that drunkenness, unless procured by the payee's connivance, 
must be habitual and amount practically to mental unsoundness 
in order that it may be set up as a defense on an instrument.^'' 
The spendthrift, as in cases of infancy, lunacy, or drunkenness, 
may be placed under the care of a guardian.^^ A person who 
has been deprived of his property for any of the above causes 
is considered incompetent to make a negotiable instrument. So 
likewise a spendthrift when placed under the care of a guardian 
is held to be incompetent to make a negotiable instrument. By 
the weight of authority when under the care of a guardian he 
cannot indorse a note made payable to himself, for if he is held 
to be incompetent to make a negotiable instrument in the first in- 
stance he could not consistently be held to incur any liability by 
indorsement.^® 

§ 27. Same — Persons lacking legal capacity other than men- 
tal — Married women. Wherever the common law prevails, a 

married woman cannot bind herself as a party in any way to a 
bill or note and such instruments signed by her are absolutely 
void. There were a few exceptions to this, however, at common 
law, as where the husband was an alien enemy and the like. In 
those states where the common law has been unchanged by legisla- 
tive enactment the common law rules still prevail ; if a special or 
limited power to contract is given them, they are still deemed 
prima facie unable to contract, and the burden is on the persons 
relying on the validity of their contracts to bring them within the 
rule set down in the legislative enactment.*'^ 

Modern statutes in most of the states enlarge the capacity of a 
married woman as to the making of contracts. The general scope 
of this remedial legislation is either to give her power to con- 
tract the same as if single or contract as if single with reference 
to or for the benefit of her separate estate and in either case her 



23Jenners v. Howard, 6 Blackfd 
240; Conant v. Jackson, 16 Vt 
335 ; Miller v. Finley, 26 Mich. 249 
Gore V. Gibson, 13 Mees & W. 623 
State Bank v. McCoy, 69 Pa. St 
204. See note 107 Am. St. Rep. 545 

23 Calkins v. Fry, 35 Conn. 170 
Joest V. Williams, 42 Ind. 565 
Mathews v. Baxter, L. R. 8 Exch 



St. 204, 8 Am. Rep. 246; Hale v. 
Brown, 11 Ala. 87; Smith v. Wil- 
liamson, 8 Utah 219. 

2^ Manson v. Felton, 13 Pick. 
206; Lynch v. Dodge, 130 Mass. 
458. 

26 Lynch v. Dodge, 130 Mass. 458. 

27 Kenworthy v. Sawyer, 125 
Mass. 28; Kenton Ins. Co. v. Mc- 



132. Clelland, 43 Mich. 564; Comings v. 

But see, Berkley v. Canon, 4 Leedy, 114 Mo. 454, 21 S. W. 804; 

Rich. 136. Connor v. Martin, 1 Strange, 516. 

2* State Bank v. McCoy, 69 Pa. See note 3 L. R. A. (N. S.) 145. 



§§ 28-30 PARTIES AND THEIR CAPACITY. 33 

power to execute negotiable instruments would be the same as 
in case of other contracts. In some states she is forbidden to 
execute such instruments as surety and her engagements as surety 
are absolutely void and cannot be ratified by her after coverture is 
terminated, either by death or divorce.^^ 

§ 28. Same — Persons lacking legal capacity other than men- 
tal — Bankrupt or insolvent payee. A bankrupt cannot indorse 
a bill or note, since all his bills and notes receivable are col- 
lectible only by the assignee or trustee in bankruptcy. Any in- 
dorsements which he attempts to make are absolutely void. The 
one exception to the above rule is that when the bankrupt shall 
have sold the paper before his bankruptcy, the title obtained by 
the purchaser will be superior to that of the assignee or trustee 
although the indorsement was made after the bankruptcy.-® 

§ 29. Same — Persons lacking legal capacity other than men- 
tal — Alien enemies. In times of peace aliens may contract with 
each other as other persons may but in times of war alien enemies 
cannot contract with each other when it necessitates communi- 
cation across the line of hostilities; hence they cannot execute 
negotiable paper which is binding either during or after the close 
of hostilities. Alien enemies are those who are subjects of dif- 
ferent sovereignties which are at war with each other. In some 
cases, war simply suspends the contractual powers of aliens and 
does not terminate them. But in no case will communications or 
transfers of property or money across the line of hostilities be 
permitted.^" 

§ 30. Parties not incapacitated — In general. Parties not in- 
capacitated may be classified as. 1st, those acting in a fiduciary 
capacity, such as executors, administrators, trustees, guardians, 
committees, and the like: 2nd, those acting in a representative 

28 The law of the place deter- 28 N J. Eq. (2 Stew.) 547; First 

mines the capacity of married Nat. Bank v Gish, 72 Pa. St. 13; 

women to enter into contracts. Jerome v. McCarter, 94 U. S. 734. 

Bell V. Packard, 69 Mc. 105. 31 3» Woods v. Wilder, 43 N. Y. 

Am. Rep. 251; Bowles v. Field, 164, 3 Am. Rep. 684; Craft v. U. S., 

83 Fed. 886; Robinson v. Queen, 12 Ct. CI. 178; Billgerry v. Branch, 

87 Tenn. 445, 11 S. W. 38, 10 Am. 19 Gratt. (Va.) 393. 100 Am. Dec. 

St. Rep. 690, 3 L. R. A. 214. 679; Ledoux v. Buhlcr, 21 La. Ann. 

But in La., and generally under 130; Russell v. Russell, 1 Mac- 

the civil law, the wife's domicile Arthur (D. C.) 263. 

determines her capacity. Gamier As to transfer in this country 

V. Poydras, 13 La. 177. of a note bv an alien enemy, see 

29Hersey v. Elliot, 67 Me. 526. Morris v. Poillon. 50 Ala. 403; 

24 Am. Rep. 50; Hughes v. Nelson, Morrison v. Lovell, 4 W. Va. 346. 



34 NEGOTIABLE INSTRUMENTS. § 31 

capacity as agents, partners, private corporations, municipal or 
public corporations and public officers. 

§ 31. Same — Persons acting in fiduciary capacity — Execu- 
tors and administrators. In general, the legal representatives 
of decedents, known as executors and administrators succeed to 
all the interests and rights of such decedents. The rights and 
remedies attaching to all their contracts and instruments, v^hether 
negotiable or not, pass to the executors and administrators. The 
assets of the decedent's estate also pass to these legal representa- 
tives. But these rules are subject to the exception that all those 
rights and obligations arising from the decedent's contracts which 
are so personal in their character that no one could take his place 
in the matter, do not pass to his executors or administrators. 

An executor or administrator cannot make or indorse a promis- 
sory note so as to bind the estate of the decedent. By his con- 
tact he can only bind himself and he can in no way bind the 
estate under his control except as to the debts contracted by the 
decedent himself. In case he should make a promissory note or 
accept a bill of exchange and it should be negotiated before due, 
the executor has created a personal liability. 

The fact that the executor in making the instrument describes 
himself as executor does not give him capacity to bind the estate.^^ 
In case a promissory note or bill of exchange which is made pay- 
able to the deceased or his order comes into the hands of the 
executor or administrator there is a conflict of authority as to 
whether either of them may indorse in such a manner as to pre- 
clude a personal liability .^^^ In case the note has been indorsed 
by the payee before his death it is necessary that the note be 
again indorsed in order to pass title. 

31 Rittenhouse v. Ammerman, 64 Brown, 64 la. 425, 20 N. W. 745, 52 
Mo. 197, 27 Am. Rep. 215; Funker- Am. Rep. 446; Bogert v. Hertell, 40 
burg V. Gorham, 46 Ga. 296; Walk- Hill 492. 

er V. Patterson, 36 Me. 273 ; Greg- But see, Smith v. Whiting, 9 

ory V. Leigh, 33 Tex. 813 ; Sneed v. Mass. 334 ; Sanders v. Blain, 6 J. 

Coleman, 7 Gratt. 300. J. Marsh 446, 22 Am. Dec. 86. 

As to liability of administrator Must indorse without recourse. 

or executor as acceptor of bill Foster v. Fuller, 6 Mass. 58; Liy, 

drawn against him as such, see ingston v. Gaussen, 21 La. Ann. 286, 

Tassey v. Church, 4 Watts & S. 141. 99 Am. Dec. 731. 

39 Am. Dec. 65. As to power of a foreign execu- 

But see, Schmiltler v. Simon, 114 tor to transfer bill see, Dial v. Gary, 

N. Y. 176, 21 N. E. 162. 14 S. C. 573, 37 Am. Rep. 737', 

32 Wool ey V. Lyon, 117 111. 244, Stearns v. Burnham, 5 Me. 261, 17 
6 N. E. 867, 57 Am. Rep. 867 ; Wade Am. Dec. 228. 

V. Wade, 36 Tex. 529; Campbell v. 



§§ 32-33 PARTIES AND THEIR CAPACITY. 35 

§ 32. Same^ — Persons acting in fiduciary capacity — Trustees 
and guardians. Trustees and guardians have capacity to trans- 
fer instruments but they can incur only a personal liability. An 
estate is committed to them and they have capacity to hold it and 
keep it intact, not for themselves but for others. They have such 
powers as are necessary for them to exercise in carrying into 
force and efifect the estate which they control. If a trustee or 
guardian executes a bill or note and describes himself as such he 
does not bind the estate but incurs only a personal Hability.^* 

Trustees and guardians, like executors and administrators, can- 
not bind the estate under their control, or the persons for whom 
or for whose benefit they act, by their promissory note, or by 
the acceptance of a bill of exchange; to give any vaHdity to such 
a note or bill they must be deemed personally bound as makers 
or acceptors. 

It has been held that a guardian may indorse a note or bill of 
exchange payable to his order as guardian so as to pass title, the 
reasoning being upon the theory that the words "as guardian" 
are merely descriptive of the payee.^ But the better doctrine 
seems to be that if the indorsee takes such an instrument, the 
words "as guardian" should be sufficient to put him on his 
guard and if the transfer was in fraud of the trust the indorsee 
should be held personally liable.^ 

§ 33. Same — Persons acting in representative capacity — 
Agent. All persons who are themselves competent to become 
parties to a negotiable contract, in their own individual right, 
can do so through the instrumentality of an agent.^* It is not 
necessary that the agent himself should be competent to make a 
contract, as he is the mere instrument of the contracting party, 
who, of course, must be capable.^'' 

The best mode for an agent to sign or indorse a bill or note 
for his principal, so that it may clearly appear that he is the 
mere scribe, as it were, who writes for another, is as follows: 

33Towne v. Rice, 122 Mass. 67; ^5 shaw v. Spencer, 100 Mass. 

McGavock v. Whitfield, 45 Miss. 382, 97 Am. Dec. 107; Smith v. 

452; Shiff v. Shiff, 20 La. Ann. 269; Dibrell, 31 Tex. 239, 98 Am. Dec. 

Conner v. Clarke, 12 Cal. 168. 526 ; Nickerson v. Gilliam, 29 Mo. 

But see, Gandy v. Babbitt, 56 Ga. 456, 11 Am. Dec. 583. 

640. ^* Lea v. Bringier, 19 La. Ann 

** Westmoreland v. Foster, 60 197; Ferguson v. Morris, 67 Ala. 

Ala. 448; Thornton v. Rankin, 19 389. 

Mo. 193 ; Zellner v. Cleveland, 60 37 Governor v. Daily, 14 Ala. 

Ga. 633; Jenkins v. Sherman, 11 469; Felker v. Emerson, 16 Vt. 653, 

Miss. 884, 28 So. 726; McKinney v. 42 Am. Dec. 532. 
Beeson, 14 La. 254. 



36 NEGOTIABLE INSTRUMENTS. § 33 

"X, by his attorney or agent, Y;" or, "X, by Y, agent;" or, 
"Y, for X;" or, "Y, agent for X." It is held competent also 
for the agent to sign simply the principal's name, and to show 
his authority to do so by other evidence.^^ If the agent sign a 
note with his own name, and discloses no principal, he is per- 
sonally bound. And though he write "agent" after his name, 
he is still bound personally unless the name of the principal can 
be found within the four corners of the instrument.^* 

The Negotiable Instruments Law provides: 

"Where the instrument contains or a person adds to his sig- 
nature words indicating that he signs for or on behalf of a prin- 
cipal, or in a representative capacity, he is not liable on the in- 
strument if he was duly authorized; but the mere addition of 
zvords describing him as an agent, or as Ming a representative 
character, without disclosing his principal, does not exempt him 
from personal liability."'*^ 

Thus one is not relieved from liability by adding the descriptive 
term "trustee," "administrator," "guardian," "agent" "secretary" 
or any such term.^"* Unless the promise purports to be by the 
corporation, it is that of the persons who subscribe to it. Unless 
the language creates or fairly implies the undertaking of the cor- 
poration, or if the purpose is equivocal, the obligation is that of 
its apparent makers.^**" 

"A sijinahire by ' procMration' operates as notice that the agent 
has but a limited authority to sign, and the principal is bound 
only in case the agent in so signing acted within the actual limits 
of his authority.'*^ 

The terms "per procuration" and "per proc" are seldom, if 
ever, used in this country. They have a special technical mean- 
ing and are an express intimation of a special and limited author- 

38 First Nat. Bank v. Gay. 63 Mo. Coy v. Stiner, 53 Mich. 42 ; Handy- 

33, 21 Am. Rep. 430; Mechanics' side v. Cameron, 21 111. 588, 74 Am. 

Bank v. Bank of Columbia, 5 Dec. 119. 

Wheat. 326. ^" Negotiable Instruments Law, 

3'J Bryson v. Lucas, 84 N. C. 286, § 20, where all cases directly or in- 

37 Am. Rep. 634; Rodger Williams directly bearing upon or citing the 

Bank v. Groton Mfg. Co., 16 R. I. Law are grouped. 

504, 17 Atl. 170 ; Penn. Mutual Life ^Oa Sumwalt v. Rigsley, 20 Md, 

Ins. Co. V. Conoughy, 54 Neb. 124, 107; Daniel v. Glidden, 38 Wash. 

74 N. W. 422; Peterson v. Honan, 556. 

44 Minn. 166, 46 N. W. 303. 20 Am. 4<»'' Casco National Bank v. Clark, 

St. Rep. 564. 139 N. Y. 307. 

Contra, Keidan v. Winegar, 95 ^^ Negotiable Instruments Law, 

Afich. 430 This decision affirmed §21, where all cases directly or in- 

by statute. directly bearing upon or citing the 

May be authorized by parol. Odd Law are grouped. 
Fellows V. Bank, 42 Mich. 461; 



§ 33 PARTIES AND THEIR CAPACITY. 37 

ity; and a person taking a bill so drawn, accepted, or indorsed, 
is bound to inquire into the»extent of the authority. 

Where an agent accepts or indorses "per proc." the taker of a 
bill or note so accepted or indorsed is bound to inquire as to the 
extent of the agent's authority. But when the agent has the 
authority to do the act in question, his abuse of such authority 
will not affect a bona fide holder for value.^^'^ 

The power to make or indorse negotiable paper must be ex- 
pressly granted or given by the principal. Thus the general 
authority bestowed upon an agent to transact the business of his 
principal and to receive payment of and to discharge debts, will 
not imply an authority to accept or indorse bills so as to charge 
the principal. A power expressly granted is subject to strict 
interpretation, and must be performed in strict conformity with 
the terms thereof.^ Thus it has been decided that a negotiable 
instrument differing in amount from that authorized, or made 
payable at a different time will not bind the principal.^' The 
implied authority of an afrent to bind his principal by a bill or 
note is upheld in some cases, as where the agent has formerly 
made a note or drawn a bill for his principal, and such principal 
has recognized his acts.** It i=; provided in the Negotiable In- 
strument Law that: "The signature of any party may be made 
by a duly authori::ed agent. No particular form of appointment 
is necessary for the purpose, and the authority of the agent may 
be established as in other cases of agency."'^'* 

The Kentucky Act requires the a'zent to be duly authorized in 
writing but it is held that the ni^fhority to execute a non-nego- 
tiable instrument is not required to be in writing.^* 

The above section permits proof of the ostensible authority of 
the agent to act for a corporation in issuing negotiable paper ; 

«a Bryant. Powis & Bryant v. Y. 398; Greenfield Bank v. Crafts 

Quebec Bank (1893) (England), 2 Allen. 269. 

A. C. 170, 179. 45 Neg. Inst. Law, § 19, where 

^^Handyside v. Cameron, 21 III. cases are collected. Odd Fellows v. 

588, 74 Am. Dec. 119; Humphreys Bank, 42 Mich. 461; Sager v. Tuix 

V. Wilson, 43 Miss. 328; Temple v. per, 42 Mich. 605; Kennedy v. Gra- 

Pomroy, 4 Grey 128; Ryhiner v. ham, adm., 9 Ind. App. 624, 35 N. 

Feickert, 92 111. 305, 34 Am. Rep. E. 925, 2,7 N. E. 25. 

130. In case of partnership plaintiff 

But see, Nutting v. Sloan, 59 Ga. must show authorization in case it 

392. is disputed. Gooding v. Underwood, 

43 King V. Sparks, 77 Ga. 285; 89 Mich. 189. 

Blackwell v. Ketcham, 53 Ind. 184. 45a pinley v. Smith, 165 Ky. 445, 

44 Stroh V. Hinchman, Z7 Mich. 177 S. W. 262, L. R. A. 1915 F, 777. 
490; Hammond v. Varian, 54 N. 



38 NEGOTIABLE INSTRUMENTS. § 34 

but what shall constitute sufficient proof of such authority is left 
to the common law."*^"" 

A general authority to an agent is presumed to continue until 
its revocation is generally known. And if A is the agent of B 
to draw bills in his name, B will be liable as drawer to ignorant 
indorsees, who had no knowledge of the change in the relation- 
ship of the parties, or of the revocation of the agency.^® 

It should be noted that officers of the government and other 
public corporations are not held to the same rule of agency 
by which in exceeding their authority they bind themselves; 
everyone having dealings with a public officer is supposed to know 
the legal limitations of his agency, so that when a public officer 
in innocent mistake of the law makes an unauthorized contract 
in the name of the public corporation neither he nor the cor- 
poration is bound.*'' 

The officer of a public corporation acting in his official capacity 
must use care that his official character appears on the face of 
the instrument, and it is held that merely adding his official 
designation to his signature will relieve him of personal liabiHty. 

Below is a form of signature by an agent. 
Signature by an Agent. 



$100.00 Minneapolis, Minn., July 1, 1921. 

Thirty days after date I promise to pay to the order of 

Earl Matlock 

One hundred Dollars 

DONALD S. MORRIS, 

By NATHAN C. REDDING, 

Agent. 



§ 34. Same — Persons acting in representative capacity — 
Partners. Partners only have implied power to make and ne- 
gotiate negotiable instruments in case the firm is a trading part- 
nership, or one whose business necessitates the use of negotiable 
paper. If it is in the nature and scope of the firm's business 

45b Grant County State Bank v. *'' The Floyd Acceptances, 7 

N. W. Land Co., 28 N. D. 479, ISO Wall. 666; Walker v. Christian, 21 

N. W. 736. Gratt. 297; Hodgson v. Dexter, 1 

4« Story on Agency, §§ 470-473. Cranch. 345. 



§ 34 PARTIES AND THEIR CAPACITY. 39 

to issue such paper, any one or more partners may bind the firm 
by executing or accepting a note or bill in a transaction within 
such scope even though the proceeds are for his own benefit if 
the holder of the paper was not a party to the fraud."*^ But if 
money is loaned to a firm on the sole credit of one of its mem- 
bers, and a note is given therefor signed by such member, the 
obligation is that of the individual member and not that of the 
firm, and the fact that the proceeds thereof are used for the 
benefit of the firm is not material. 

As a general rule a secret, silent, or dormant partner, whose 
name does not appear, is bound by notes made or bills drawn, ac- 
cepted, or indorsed by his co-partners in the name of the firm, 
both when they are negotiated for the benefit and when given un- 
der such circumstances as to bind the firm. 

After the dissolution of a partnership, no partner has any 
authority to bind any former partner by giving a promissory 
note in the name of the firm ; the act of dissolution is a revocation 
of all authority to act for and contract in the name of the part- 
nership.^® As between the firm and the world, the authority of 
the ex-partners to bind each other by bills or notes within the 
scope of the former partnership continues until a suffcient notice 
of the dissolution is duly given. 

Biit notice is not necessary when a secret, silent, or dormant 
partner retires, for he has not been held out as a member of the 
firm. If, however, such partner is known to certain individuals to 
have been a partner, he must notify them of his retirement to 
escape liability for future acts of the firm.^** 

The proper form of signing the firm name to any contract 
made by a partner is to write the firm name and nothing else. 
It is permissible but unnecessary to write the name of the part- 
ner after the firm signature, thus : "Smith & Brown, per William 
J. Brown." 

As to accommodation paper, which term will be explained later, 
the following rule has been laid down : No one member of a firm 
can bind it, without the consent of all its members, by signing 
the co-partnership name as drawer, maker, acceptor, or indorser 

48 Bank V. Alden, 129 U. S. 2>7Z; 43 Am. Dec. 168; Hurst v. Hill. 8 
Fulton V. Loughlin, 118 Ind. 286; Md. 399, 63 Am. Dec. 705; Wilson 
Carrier v. Cameron, 31 Mich. ZIZ ; v. Forder, 20 Ohio St. 95, 5 Am. 
Hayward v. Gray, 12 Gray 453 ; Rep. 627. 

Spaulding v. Kelly, 50 N. Y. S. 50 pit^jn y_ Beufer, 50 Kan. 108, 

244; Towle v. Dunham, 76 Mich. 34 Am. St. Rep. 110; Baptist Book 

367. See note 48 Am. St. Rep. 438. Concern v. Carswell, Tex. Civil Ap- 

49 Humphries v. Chastain, 5 Ga. peals, 1898, 46 S. W. 858; Nuss- 
166, 48 Am. Dec. 247; Commercial baumer v. Becker, 87 111. 281, 29 
Bank v. Perry, 10 Rob. (La.) 61, Am. Rep. 53. 



40 NEGOTIABLE INSTRUMENTS. § 35 

of negotiable paper for his private accommodation or for the 
accommodation of a third party, and this for the obvious reason 
that such a transaction is not within the scope of the co-partner- 
ship business, unless expressly or impliedly made so and that it 
would ordinarily be without authority and in fraud of the firm.'** 

§ 35. Same — Persons acting in representative capacity- 
Private corporations. The power of private corporations to be- 
come parties to bills of exchange or promissory notes is co- 
extensive with their power to contract debts.*^ Whenever a 
corporation is authorized to contract a debt it may draw a bill 
or give a note in payment of it. Every corporation, therefore, 
may become a party to bills or notes for some purposes. Thus, a 
mere religious corporation may need fuel for its rooms, and as 
an economical measure may buy a cargo of coal, and give its 
note for it ; and such a note would undoubtedly be valid. 

The cashier of a bank, the president of a corporation or any 
other administrative officer, as secretary or treasurer, may be 
expressly authorized to issue negotiable paper for the corporation, 
or he may have such power from implication by reason of having 
previously exercised the power.^^ 

The Negotiable Instruments Law provides as follows : "Where 
an instrument is dramn or indorsed to a person as 'cashier' or 
other fiscal officer of a bank or corporation, it is deemed prima 
facie to be payable to the bank or corporation of which he is 
such officer; and may be negotiated by either the indorsement of 
the bank or corporation, or the indorsement of the officer."^^ 

The directors of a corporation are in control of its afifairs and 
have the management of its business, subject to the restrictions 
and limitations imposed upon them by the articles of incorpora- 
tion, by-laws and statutes. If the issuing of commercial paper 
is within the power of the corporation itself, such paper may in 
all cases be executed by the directors acting as a board. So the 
sole manager of a corporation intrusted by the officers with its 
entire conduct may bind it by executing a note in its name, 
especially where the officers had previously acquiesced in his 
execution of similar notes.^* 

51 Hendric v. Berkowitz, Z7 Cal. Co., 27 N. Y. 546, 84 Am. Dec. 298. 
113, 99 Am. Dec. 251; Chenowith sSQdd Fellows v. Sturgis First 
V. Chamberlin, 6 B. Mon. (Ky.) Nat. Bank. 42 Mich. 461; Olcott v. 
60, 43 Am. Dec. 145; Fort Madison Tioga R. Co., 27 N. Y. 546, 84 Am. 
Bank V. Alden, 129 U. S. 381. Dec. 298. 

52 Mott V. Hicks, 1 Cow. (N. Y.) 53a Neg. Inst. Law, § 42, where all 
513, 13 Am. Dec. 550; Auerbach v. cases directly or indirectly bearing 
Le Sueur Mill Co., 28 Minn. 291, 41 upon or citing the Law are grouped. 
Am. Rep. 285; Olcott v. Tioga R. 54 American Exch. Nat. Bank v. 



§ 36 PARTIES AND THEIR CAPACITY. 



41 



The power to receive negotiable paper must necessarily be ac- 
companied by a power to transfer it to a third person, in the 
ordinary course of its business.^^ Many of the same rules which 
control indorsement and transfer of negotiable paper by agents 
are also applicable to officers and agents of a corporation. 

We have already seen under the section pertaining to agents 
as parties {^22) the proper form of making the signature of 
a corporation by an agent or officer. In making such paper it 
is generally held that the corporation may dispense with the use 
of its corporate seal. 

Below is a form of signature: 
Corporate Signature. 



$250.00 St. Paul, Minn., July 1, 1921. 

Sixty days after date The Acme Company promises 

to pay to the order of Joseph Thompson 

Two hundred fifty Dollars 

at First National Bank. 

Valued received. THE ACME COMPANY. 

By JAMES STARR, 

Treasurer. 



§ 36. Same — Persons acting in representative capacity — 
Municipal or public corporations. As to municipal or public 
corporations, such as cities, towns and other like corporations 
created by the government as governmental agencies, it is held 
that there is no doubt that they may have the povvcr conferred 
on them to execute negotiable paper, but the better opinion is 
that such power does not exist unless expressed or clearly implied. 
And the extent of the power may be limited by statute, as well 
as the existence of the power.^® 

Oregon Pottery Co., 55 Fed. Rep. 56 Qaiborne Co. v. Brooks, 111 

265 ; Credit Co. v. Howe Mach. Co., U. S. 400 ; Newgrass v. New Or- 

54 Conn. 357, 1 Am. St. Rep. 133. leans, 42 La. Ann. 163, 21 Am. St. 

ssMcIntire v. Preston, 10 111. Rep. 368; Knopp v. Hoboken, 39 

48. 48 Am. Dec. 321; Goodrich v. N. J. L. 394; Merrill v. Alonticello. 

Reynolds, 31 111. 490, 83 Am. Dec. 138 U. S. 673; State v. Smith, 47 

240; Buckley v. Briggs, 30 Mo. 452. N. J. L. 473. 



42 NEGOTIABLE INSTRUMENTS. § '^'^ 

§37. Same — Persons acting in representative capacity — 
Public officers. A negotiable instrument may be drawn pay- 
able to the order of "the holder of an office for the time being."^'^ 
This provision of the law was intended to declare the general 
rule that where an instrument was payable to a person holding 
a position of a representative character that he may be regarded 
as the payee of the instrument in behalf of all the persons whom 
he represents. 

When public officers in good faith contract with parties having 
full knowledge of the extent of their authority, or who have equal 
means of knowledge with themselves, they do not become individ- 
ually liable unless the intent to incur a personal responsibility is 
clearly expressed, although they may through ignorance of the 
law have exceeded their authority. This should be the rule in 
case of the making, drawing, accepting, and indorsing of nego- 
tiable instruments by public officers, but the cases upon this ques- 
tion are not all in accord with the application of this rule to such 
instruments.^^ 

57Neg. Inst. Law, § 8, sub. 6, -"^s Walker v. Christian, 21 Gratt. 

where all cases directly or indi- 297; Hodgson v. Dexter, 1 Cranch 

rectly bearing upon or citing the 345. 
Law are grouped. 



■K^ 



"^JLaJM" 



.An^roi^Jl 



CHAPTER VI. 



FORMAL AND ESSENTIAL REQUISITES. 
§ 38. Definition of promissory note. § 49. Must be certain as to time of 



39. Definition of bill of exchange. 

40. Formal and essential requi- 

sites in general. 

41. Must be in writing. 

42. As to style and material. 

43. The date. 

44. The signature. 

45. Must be promise or order to 

pay. 

46. Must be payable to order or 

bearer. 

47. Must be certain as to promise 

or order to pay. 

48. Must be certain as to amount. 



payment. 

50. As to place of payment. 

51. Must be payment in money. 

52. Must be necessary parties. 

53. The delivery. 

54. As to value received. 

55. As to agreements controlling 

the operation. 

56. As to days of grace. 
56a. As to payable at a bank. 

57. As to stamps. 

58. As to blanks. 

59. As to instruments bearing a 

seal. 

60. The several parts of a for- 

eign bill called a set. 



§38. Definition of promissory note. A satisfactory defi- 
nition of a promissory note is found in the Negotiable Instru- 
ments Law, which states : 

"A negotiable promissory note within the meaning of this act 
is an unconditional promise in writing made by one person to 
another, signed by the maker, engaging to pay on demand, or at 
a iixed or determinable future time, a sum certain in m,oney to 
order or to bearer. Where a note is drawn to the maker's own 
order, it is not complete until indorsed by him."^ 

The above section has changed the old existing law in a num- 
ber of jurisdictions. 

§39. Definition of bill of exchange. The following is a good 
definition of a bill of exchange found in the Negotiable Instru- 
ments Law : 

"A bill of exchange is an unconditional order in writing ad- 
dressed by one person to another, signed by the person giving 
it, requiring the person to whom it is addressed to pay on de- 



1 Neg. Inst. Law, § 184, where all 
cases directly or indirectly bearing 



upon or citing the Law are grouped. 



43 



44 NEGOTIABLE INSTRUMENTS. § 40 

mand, or at a iixed or determinable future time, a sum certain 
in money to order or to bearer."^ 

Bills of exchange are either foreign or inland — foreign, when 
drawn in one state or country, and made payable in another state 
or country ;' inland, when drawn, and made payable in the same 
state or country.* For the purpose of the law of negotiable in- 
struments, the several states of the United States are foreign to 
each other.' Thus, a bill drawn in Pittsburg, Pennsylvania, and 
payable in Columbus, Ohio, is a foreign bill, while one drawn in 
Cincinnati, Ohio, and payable in Cleveland, in the same state, is 
an inland bill of exchange. 

The Negotiable Instruments Law provides: 

''An inland bill of exchange is a bill which is, or on its face 
purports to be, both draimi and payable within this state. Any 
other bill is a foreign bill. Unless the contrary appears on the 
face of the bill, the holder may treat it as an inland bill."^ 

A bill drawn in one state and addressed to the drawee in another 
state, had for a long time prior to the Negotiable Instruments 
Law been held to be a foreign bill.®* 

§ 40. Formal and essential requisites in general. The Nego- 
tiable Instruments Law has the following provisions:'^ 

"An instrument to be negotiable must conform to the following 
requirements: (1) It must be in writing^ and signed^ by the 
maker or drazver. {2) Must contain an unconditional promise 
or order^^ to pay a sum certain'^^ in money^^ (3) Must be 

2 Neg. Inst. Law, § 126, where all upon or citing the Law are grouped. 
cases directly or indirectly bearing ®^ Phoenix Bank v. Hussey, 12 
upon or citing the Law are grouped. Pick. 483. 

3 Armstrong v. Am. Exchange '' Neg. Inst. Law, § 1, where all 
Bank, 133 U. S. 433; Phoenix Bank cases directly or indirectly bearing 
V. Hussey, 12 Pick. 483 ; Holliday upon or citing the Law are grouped. 
V. McDougall, 20 Wend. 81 ; Com- « Brown v. Butchers' Bank, 6 Hill 
mercial Bank of Ky. v. Varnum, 49 443 ; Reed v. Roark, 14 Tex. 325. 

N. Y. 269 ; Mason v. Dousay, 35 111. » McCall v. Taylor, 34 L. J. R. 

424; Ticonic Bank v. Stacpole, 41 C. P. 365; Cadillac State Bank v. 

Me. 302. Cadillac Stave and Heading Co., 

-^Lenning v. Ralston, 23 Pa. 9t. 129 Mich. 15. 

137; Strawbridge v. Robinson, 5 ^^ White v. Cushing, 88 Me. 339 ; 

Gilman (111.) 472; Riggin V. Collier, Iron City Bank v. McCord, 139 

6 Mo. 568 ; Yale v. Ward's Ex'r, 30 Pcnn. St. 52. . 

Tex. 17. 11 Smith v. Clopton, 4 Tex. 109 ; 

' Bank of U. S. v. Daniel, 12 Parsons v. Jackson, 99 U. S. 440. 

Peters, 32 ; Commercial Bank v. ^2 Auerbach v. Prichett, 58 Ala. 

Varnum, 49 N. Y. 269. 451 ; Quincy v. Merritt, 11 Hump. 

6 Neg. Inst. Law, § 129, where all (30 Tenn.) 439; First Nat. Bank 

cases directly or indirectly bearing v. Slette, 67 Minn, 425. 



§ 41 FORMAL AND ESSENTIAL REQUISITES. 45 

payable on demand}^ or at a fixed or determinable future time.^"^ 
(4) Must be payable to order or to bearer ;^^ (5) Where the 
instrument is addressed to a draivec, he must be named or other- 
wise indicated therein zvith reasonable certainty. "'^^ 

This section has some minor changes in it in a few of the 
states. 

There is also another provision in the Law providing that :*'' 
"The instrument need not follouf the language of this act, but 
any terms are sufficient which clearly indicate an intention to 
conform to the requirements hereof." 

§ 41. Must be in writing. As pointed out above, the instru- 
ment must be in writing. When writing is spoken of, it is not 
meant merely that which has been written with a pen or pencil. 
It includes also that which is in print or has been printed. The 
word instrument implies that which has been reduced to writing. 
Therefore, the words negotiable instruments themselves indicate 
that which has been reduced to writing. In order to be nego- 
tiable there must be a writing of some kind, else there would be 
an absence of the thing to be negotiated or passed from hand 
to hand. The reason a promissory note or bill of exchange must 
be in writing is clear, that is, the instrument is currency, and 
''could not run on crutches." 

So the whole of the bill or note must be expressed in writing. 
If it is complete on its face, the general rule is that no evidence 
of a verbal agreement made at the time, qualifying its terms, 
can be admitted. Contemporaneous written agreements are ad- 
missible for the purpose of controlling the effects of the instru- 
ment as between immediate parties and those having notice. 
Parol evidence is generally admissible as between the parties, to 
show their real relations to each other, and if there be a latent 
ambiguity to explain it. And, in general, parol evidence is 
admissible between the original parties to show fraud, accident, 
or mistake in the creation of the instrument, or the failure (entire 
or partial) of consideration.** 

iSAldous V. Cornwell, L. R. 3 Q. 23 Ind. 4, 85 Am. Dec. 445; Smur 

B. 573; Collins v. Trotter, 81 Mo. v. Forman, 1 Ohio 272; Maule v. 

278; Hall v. Toby, 110 Pa. St. 318; Crawford, 14 Hun. 193. 

Messmore v. Morrison, 172 Pa. St. ^® Peto v. Reynolds, 9 Exch. 410; 

300; Porter v. Porter, 51 Me. 376; Watrous v. Halbrook, 39 Tex. 

Jones V. Brown, 11 Ohio St. 601. 572. 

^* Mattison v. Marks, 31 Mich. *'' Neg. Inst. Law, § 10, where all 

421 ; Walker v. Woolen, 54 Ind. cases directly or indirectly bearing 

164. upon or citing the Law are grouped. 

*5 Sherman Bank v. Apperson, 4 ^^ See Chapters XXV and XXVI 

Fed. 25 ; Musselman v. McElhenny, on Evidence. 



46 NEGOTIABLE INSTRUMENTS. §§ 42-43 

It has been decided many times that if any discrepancy or 
ambiguity exists between the figures and the words indicating 
the amount called for by the instrument, the words^** are to con- 
trol. The figures constitute no part of the note or bill, but are 
inserted merely for convenience of reference. 

§ 42. As to style and material. The law does not require 
any particular form or style as to a promissory note or bill of 
exchange, yet it does not seem that it would be wise to depart 
from the approved forms in vogue among merchants. The law 
looks to the substance of the transaction rather than the form, 
and if the intention of the parties as to assuming the obligation 
of drawers and makers of negotiable instruments can be deter- 
mined, the law will give them force and effect regardless of the 
form. There is no arbitrary rule governing the material upon 
which the instrument should be written. It may be written upon 
parchment, cloth, leather or any other substitute for paper. It 
may be written either with a pencil or with ink.^® The perma- 
nence and security of ink as compared to a writing in pencil 
makes the ink preferable. 

§ 43. The date. A date in a bill or note is not necessary.^* 
The Negotiable Instruments Law provides that "the validity mid 
negotiable character of an instrument are not affected by the 
fact that it is not dated."^^ 

It is of no consequence on what portion of the paper a date 
is written, but it is usually written in the upper right-hand corner 
of the instrument. If dated, it will be presumed to have been 
executed on the day it bears date.^^ That is, "-where the in- 
strument or an acceptance or any indorsement thereon is dated, 
such date is deemed prima facie to be the true date of the mak- 
ing, drawing, acceptance, or indorsement, as the case may be."^* 

If there be no date, it will be considered as dated at the time 
it was issued,^^ and parol evidence is admissible to show from 

1^ Saunderson v. Piper, 5 Bing. 23 Anderson v. Weston, 8 Scott, 

N. C. 425 ; Hears v. Graham, 8 583 ; Maybury v. Berkery, 102 Mich. 

Blackf. (Ind.) 144. 126; Hill v. Dunham, 7 Gray 543; 

20 Geary v. Physic, 5 Barn. & Wagner v. Kenner, 2 Rob. (La.) 
Cress. (Eng.) 234; Reed v. Roark, 120. 

14 Tex. 325, 65 Am. Dec. 127. 24Neg. Inst. Law, § 11, where all 

21 Husbrook v. Wilder, 1 Pin cases directly or indirectly bearing 
(Wis.) 643; Mich. Ins. Co. v. Leav- upon or citing the Law are grouped, 
enworth, 30 Vt. 11. 25 Pasmore v. North, 13 East 517; 

22Neg. Inst. Law, § 6, subd. 1, Brewster v. McCardel, 8 Wend, 
where all cases directly or indi- 478; Bayley v, Taber, 5 Mass. 286. 
rectly bearing upon or citing the 
Law are grouped. 



§ 44 FORMAL AND ESSENTIAL REQUISITES. 47 

what time an undated instrument was intended to operate, or 
(if a date appears) to show that there was a mistake in the date. 
So an instrument may be ante-dated or post-dated. 

''The instrument is not invalid for the reason only that it is 
ante-dated or post-dated, provided this is not done for an illegal 
or fraudulent purpose. The person to rvhoni an instrument so 
dated is delivered acquires the title thereto as of the date of 
delivery."^^ 

The above section of the Law contemplates instruments ante- 
dated or post-dated by the parties in accordance with a mutual 
agreement to that effect.^*'* 

Where a blank has been left on the instrument for the date, 
it may in some cases be filled in by the holders. Thus, "where 
an instrument expressed to he payable at a fixed period after 
date is issued undated, or zvhere the acceptance of an instrument 
payable at a fixed period after sight is undated, any holder may 
insert therein the true date of issue or acceptance, and the instru- 
ment shall be payable accordingly. The insertion of a wrong date 
does not avoid the instrument in the hands of a subseque^it holder 
in due course; but as to him, the date so inserted is to be regarded 
as the true date."'^'^ 

The insertion of a wrong date in an undated instrument, by 
one having knowledge of the true date of issue, will avoid the 
instrument as to him, but an innocent third party may enforce 
the same notwithstanding the improper date.^'* 

§ 44, The signature. It is immaterial in what part of the 
instrument the name appears, whether at the top, in the middle, 
or at the bottom. Anything from which it will appear that a 
person intended to make the instrument his own is sufficient.^* 
As long as the signature or emblem of the drawer or maker ap- 
pears anywhere upon the instrument, it is deemed prima facie 
evidence of his intention to be bound by its obligation.*^ 

It is immaterial whether the writing is in pencil or ink, al- 
though as a matter of permanence and security, ink is, of course, 
preferable.^** And the name may be printed or typewritten as 

2« Neg. Inst. Law, § 12, where all 28 Lampkin v. State, 105 Ala. 1, 

cases directly or indirectly bearing 16 So. 575> Irvin v. Sterne, 25 

upon or citing the Law are grouped. Ga. 223, 71 Am. Dec. 204 ; Dow 

26a Bank of Houston v. Day, 145 Law Bank v. Godfrey, 126 Mich. 

Mo. App. 410, 122 S. W. 756. 521, 85 N. W. 1075, 86 Am. St. 

27 Neg. Inst. Law, § 13, where all Rep. 559. 

cases directly or indirectly bearing 29 Neg. Inst. Law, § 17, and cases 

upon or citing the Law are grouped. there cited. 

27a Bank of Houston v. Day, soReed v. Roark, 14 Tex. 329; 

supra. Geary v. Physic, 5 Barn & C. 234. 



48 NEGOTIABLE INSTRUMENTS. § 44 

well as written, though, in such cases, it cannot prove itself, and 
must be shown to have been adopted and used by the party as 
his signature.^^ The name may be written in script or Roman 
letters, and made with a pen or pencil, rubber stamp or type, or 
it may be printed, engraved, photographed or lithographed, in 
fact, in any form so long as the signer has adopted and issued 
the signature as his own.^** If another sign the name of the 
party in his presence and at his request, it is the same as if he did 
it himself ;^^ and if another sign the party's name by verbal or 
other authority, it is suffcient. The full name may be written; 
and at least the surname should appear, and generally does. But 
this is not indispensable — the initials are sufficient, and any 
mark which the party uses to indicate his intention to bind him- 
self will be as effectual as his signature, whether there be a cer- 
tificate of witnesses on the instrument or not.^^ And "the signa- 
ture of any party may be made by a duly authorised agent. No 
particular form of appointment is necessary for this purpose; 
and the authority of the agent may be established as in other 
cases of agency."^* 

The Kentucky Act requires such agent to be authorized in 
writing. 

The above section permits proof of the ostensible authority of 
the agent to act ; but what shall constitute sufficient proof of such 
authority is left to the common law^** 

''A signature by 'procuration' operates as notice that the agent 
has but a limited authority to sign, and the principal is bound 
only in case the agent in so signing acted within the actual limits 
of his authority."^ 

The words "per procuration" have a special technical signifi- 
cance and are seldom if ever used in this country. They are 
an express intimation of a special and limited authority; and a 
person taking a bill so drawn, accepted or indorsed, is bound to 
inquire into the extent of the authority.*** 

31 Pennington v. Baehr. 48 Cal. 443. See note 14 L. R. A. 693. and 
565 ; Lexington v. Union Nat. Bank. 22 L. R. A. 372. 

75 Miss. 1, 22 So. 291 ; Weston v. 34 Neg. Inst. Law, § 19, where all 

Myers, 33 111. 424. cases directly or indirectly bearing 

sia Weston v. Myers, 33 111. 424. upon or citing the Law are grouped. 

Note 7 A. L. R. 672. 34a Grant County State Bank v» 

32 Crumrine v. Crumrine, 14 Ind. N. W. Land Co., 28 N. D. 479, 150 
App. 641 ; 43 N. E. 322 ; Kennedy N. W. 736. 

V. Graham, 9 Ind. App. 624, 35 N. 35 Ngg. Inst. Law, § 21, where all 

E. 925. cases directly or indirectly bearing 

33 Signing by mark. Merchants upon or citing the Law are grouped. 
Bapk V. Spicer, 6 Weiid. (N. Y.) 35a Bj.ym^^^ Purvis & Bryant v. 



§ 45 FORMAL AND ESSENTIAL REQUISITES. 49 

"Where a signature is forged or made without the authority 
of the person whose signature it purports to he, it is wholly in- 
operative, and no right to retain the instrument, or to give a dis- 
charge therefor, or to enforce payment thereof, against any party 
thereto, can be acquired through or under such signature, unless 
the party against whom it is sought to enforce such right is pre- 
cluded from setting up the forgery or ivant of authority.'''^ 

The Negotiable Instrument Law also provides : 

"No person is liable on the instrument whose signature does 
not appear thereon, except as herein otherwise expressly pro- 
vided. But one zvho signs in a trade or assumed name will be 
liable to the same extent as if he had signed in his ozmi name."^^* 

One may become a party to a negotiable instrument by any 
designation he desires, provided it be used as a substitute for 
his name and he intends to be bound by it.^*"* 

§ 45. Must be promise or order to pay. In order that the 
instrument contain a promise it is not necessary to use the word 
promise. But while it is not necessary to use that particular 
word, it has been held that the instrument must contain an ex- 
press promise.^" The instrument contains an express promise 
whenever it contains an expression equivalent to the word promise. 
It has been held that where a certain time for payment has been 
expressed in the instrument, or the words "on demand" are used, 
the instrument contains a promise. Example, "Due A. B. $76.50 
on demand,"38 or "Pay to A. B. $76.50 on Dec. 24, 1922."3» 
The words "Value received,'"*** or "to be accountable,"** do not 
import, nor are they equivalent to a promise to pay. In a bill 
of exchange it is no more necessary that the word order should 
be used than it is that the word promise should be used in a 
promissory note.'*^ Any words which are equivalent to an order 

Quebec Bank (1893) (England), A. Lockwood, 40 Conn. 349, 16 Am. 

C. 170, 179. Rep. 40. 

36 Neg. Inst. Law, § 23, where all 39 Cowan v. Hollack, 9 Colo. 572, 
cases directly or indirectly bearing 13 Pac. 700; Kendall v. Lewis, 10 
upon or citing the Law are grouped. Ky. L. Rep. 362. 

3«« Neg. Inst. Law, § 18, where all 40 st. Vrain Stone Co. v. Den- 
cases directly or indirectly bearing ver, N. & P. R. Co., 18 Colo. 211, 
upon or citing the Law are grouped. 32 Pac. 827. 

ss" Brown v. Butcher's and Dro- « Hyne v. Dewdney, 21 L. J. Q. 

ver's Bank, 6 Hill (N. Y.) 443. B. 278. But see Hegeman v. Moon, 

37 Smith V. Bridges, 1 111. 18; 131 N. Y. 462. 

Hegeman v. Moon, 131 N. Y. 462, 42 Enison v. Collingridge, 67 E. 

30 N. E. 487; Taylor v. Steele, 16 Q L. 570; Rufif v. Webb, 1 Esp. 

M. & W. 665. 129, 5 Rev. Rep. 722, ; Bresenthall 

38 Smith V Allen, 5 Day (Conn.) v. Williams, 1 Dew (Ky.), 329, 85 
337; Kimball v. Huntington, 10 Am Dec 629 

Wend. (N. Y.) 675; Currier v." 



50 NEGOTIABLE INSTRUMENTS. §46 

or which show the drawer's will that the money should be paid 
are sufficient to make the instrument a bill of exchange. A bill 
of exchange is something more than the mere asking of a favor. 
It is in its very nature an instrument demanding a right. Hence 
a mere request or supplication made or authority given to pay 
a certain amount of money has been held not to be a bill.'*^ The 
following would be a good bill: "Mr. Smith will much oblige 
Mr. Jones by paying John Brown, or order, on account $50.00." 
The words by paying are held sufficient to import an order to 
pay.'*^ 

§46. Must be payable to order or bearer. By the Nego- 
tiable Instruments Law "bearer means thf person in possession 
of a bill or note which is payable to bearer."'*^ 

However, it is not essential that the words to order or to 
bearer be used so as to make the instrument negotiable, although 
they are the simplest words and the ones most frequently used.^* 
The words to A or holder and to A and his assigns are equiva- 
lent words which will render the instrument negotiable.*'' These 
words of negotiability may be dispensed with and the expression, 
"This is and shall be negotiable," may be inserted in the instru- 
ment, which expression makes the paper fully negotiable.** The 
instrument may also be made negotiable by using the words "to 
the order of A."*^ But if the instrument reads "to the bearer, 
A/' it is not negotiable, because the expression, "to the bearer," 
is only descriptive of A, and there are no words of negotiability.^® 

The Negotiable Instruments Law sets down certain rules as to 
when an instrument is held payable to order and also when 
held payable to bearer: 

"The instrument is payable to order zuhere it is drawn payable 
to the order of a specified person or to him or to his order. It 

43 Woolley V. Sargent, 8 N. J. L. 47 Putnam v .Crymes. 1 McMuIl 
262, 14 Am. Dec. 419; Little v. 9, 36 Am. Dec. 250; Wilson County 
Slackford, M. & M. 171, 31 Rev. v. Third Nat. Bank, 103 U. S. 770; 
Rep. 726, 22 E. C. L. 498; Russell Dutcliess Co. Ins. Co. v. Hach- 
V. Powell, 14 M. & M. 418, 14 L. field, 1 Hun 676. 

J. Exch. 269. 48 Raymond v. Middleton, 29 Pa. 

44 Ruff V. Webb, 1 Esp. 129, 5 St. 529; Cudahy Packing Co. v. 
Rev. Rep. 723. Sioux Nat. Bank, 75 Fed. 473, 21 

43 Neg. Inst. Law, § 191, where C. C. A. 428. 

all cases directly or indirectly bear- 49 Wittey v. Mich. Mut. etc. Co.. 

ing upon or citing the Law are 123 Ind. 411, 24 N. E. 141 ; Howard 

grouped. v. Palmer, 64 Me. 86; Stevens v. 

46 Wilson County v. Third Nat. Gregg, 86 Ky. 461, 12 S. W. 775. 

Bank, 103 U. S. 770: United States 30 leaver v. Scott, 32 la. 22. 
V. White, 2 Hill (N. Y.) 59, Z7 Am. 
Dec. 374. 



§ 47 FORMAL AND ESSENTIAL REQUISITES. , 51 

may be draum payable to the order of: {!) A payee zvho is 
not maker, drawer or drawee; or (2) the drawer or maker; or 
(3) the drawee; or (4) two or more payees jointly ; or (5) one 
or some of several payees; or (d) the holder of an office for the 
time being. 

"Where the instrument is payable to order, the payee must 
be named or otherwise indicated therein with reasonable cer- 
tainty?^ 

The last clause of the above section of the Law changes the 
old rule of law. Thus, when a note was drawn payable to order, 
but with an unfilled blank for the name of the payee and nego- 
tiated in that condition, any bearer who came by it regularly can 
no longer fill the blank and recover thereon.^^^ The Illinois Act 
adds after subsection 6 the following: "7. An instrument pay- 
able to the estate of a deceased person shall be deemed payable 
to the order of the administrator or executor of his estate." 

As to when an instrument is held payable to bearer, the Nego- 
tiable Instruments Law provides : 

"The instrument is payable to bearer: (1) When it is ex- 
pressed to be so payable; or (2) when it is payable to a person 
named therein or bearer; or (3) when it is payable to the order 
of a fictitious or non-existing person, and such fact was known 
to the person making it so payable ; or (4) when the name of the 
payee does not purport to be the name of any person; or (5) when 
the only or last indorsement is an indorsement in blank."^^ 

The Illinois Act makes some changes in the above section. 

§ 47. Must be certain as to promise or order to pay. If the 
instrument is a bill, it must contain a certain direction to pay^* — 
if it is a note, a certain promise to pay.^^ As stated heretofore, 
a bill is, in its nature, the demanding of a right, not the mere 
asking of a favor, and therefore a supplication made or authority 
given to pay an amount is not a bill. The language: "Please 
to send $10.00 by bearer, as I am so ill I cannot wait upon you," 
is held not to be a bill.*^^ 

A promissory note must contain a certain promise to pay. If 
over and above the mere acknowledgment of debt, there may 

51 Neg. Inst. Law, § 8, where all v. Cook (District of Columbia), 96 
cases directly or indirectly bearing S. E. 484. 

upon or citing the Law are grouped. ^'^ Gillian v. Myers, 31 111. 525 ; 

5i» Tower v. Stanley, 220 Mass. Knowlton v. Cooley, 102 Mass. 233. 

429, 107 N. E. 1010. 54 Smith v. Bridges, 1 111. 18; 

52 Neg. Inst. Law, § 9, where all Forward v. Thompson, 12 U. C. I. 
cases directly or indirectly bearing B. 103 ; Taylor v. Steele, 16 M. & 
upon or citing the Law are grouped. W. 665. 

Union National Bank of Columbia ^^ King v. Ellor, 1 Teach. 323. 



I 



52 NEGOTIABLE INSTRUMENTS. § 48 

be collected from the words used a promise to pay it, the instru- 
ment may be regarded as a promissory note.'* 

The Negotiable Instruments Law provides : 

"An instrument is payable on demand: (1) Where it is ex- 
pressed to be payable on demand, or at sight, or on presenta- 
tion; or (2) in which no time for payment is expressed. Where 
an instrument is issued, accepted or indorsed when overdue, it is, 
as regards the person so issuing, accepting or indorsing it, pay- 
able on demand "^"^ 

§ 48. Must be certain as to amount. It is also a requisite to 
the negotiability of an instrument that it shall call for the pay- 
ment of a definite and certain sum,'^ and not for unliquidated 
damages. The amount to be paid or the amount which the paper 
represents should be stated plainly on the face of the instru- 
ment, and like the denomination of money must be stated in 
the body of the instrument or it will be defective, unless it 
has been left blank and express or implied authority given to 
fill it up. The amount is customarily written in the margin also, 
but this is held to be no part of the instrument, and made simply 
for convenience of reference, and the statement in the body of 
the instrument controls, and should they vary any holder may 
change the marginal figures to conform to the amount as written 
in the body of the paper.''* Unless required by statute to be 
written in words, the amount may be stated in the body of the 
instrument in figures. Abbreviations and characters which have 
well defined meanings may be employed. 

There is some conflict of authority as to whether if there be 
added to the amount, "with exchange,"®" or "with current ex- 
's Smith V. Bridges, 1 111. 18; Smith, 1 R. I. 398, 53 Am. Dec. 
Forward v. Thompson. 12 U. C. I. 652; Rockville Nat. Bank v. Second 
B. 103; Taylor v. Steele, 16 M. & Nat. Bank, 69 Ind. 479, 35 Am. 
W. 665. Rep. 236. 

^~ Neg. Inst. Law, § 7, where all As to when marginal figures may 

cases directly or indirectly bearing be referred to see : Sweetzer v. 

upon or citing the Law are grouped. French, 13 Mete. (Mass.) 262; 

58Gaar v. Louisville Banking Petty v. Fleischel, 31 Tex. 169, 98 

Co., 11 Bush. (K)'.) 180, 21 Am. Am. Dec. 524 

Rep. 209; Kendall v. Galvin, 15 Me. o Clark v. Skeen, 61 Kan. 526, 

131, 32 Am. Dec. 141 ; Port Huron 60 Pac. 327, 78 Am. St. Rep. 337, 
First Nat. Bank V. Carson, 60 Mich. 49 L. R. A. 190; Hastings v. 
432, 27 N. W. 589. As to effect of Thompson, 54 Minn. 184, 55 N. W. 
marginal letters or figures in bill or 968, 40 Am. St. Rep. 315, 21 L. 
note otherwise blank as to amount, R. A. 178. Contra, Culbertson v. 
see note 2 L. R. A. (N. S.) 879. Nelson, 93 la. 187, 61 N. W. 854, 

59 Neg. Inst. Law, § 17, sub. 1, 57 Am. St. Rep. 266, 27 L. R. A. 
and cases there cited; Smith v. 222. 



§ 48 FORMAL AND ESSENTIAL REQUISITES. 53 

change on another place,"** the commercial character of the 
paper is or is not impaired. The weight of authority is that it 
is not, as that is capable of definite ascertainment and so the 
amount to be added is certain, and as set out below the Nego- 
tiable Instruments Law makes such paper negotiable. 

A stipulation as to interest does not make the amount uncer- 
tain.®2 It might be stated here, by way of parenthesis, that it 
is a general rule of commercial law that where a note is made 
payable with interest, without specifying the rate, or the time 
from which the interest is to be computed, the note carries inter- 
est from the date of its complete execution or its issue, at a legal 
rate fixed by law.*^ 

The provisions in notes, payable in part payment or install- 
ments, to the efifect that if any one of the installments is not 
paid as agreed, all installments or the whole sum shall become 
due and payable, does not destroy the negotiability of the note, 
and such notes are quite common.®"* The provision that the in- 
terest shall be paid at stated intervals, and if not paid the entire 
sum shall become due, is also common, and does not afifect the 
negotiability of the paper. There is likewise a conflict as to 
whether by adding the words, "with reasonable attorney's fees," 
the negotiability of an instrument is destroyed. The better 
opinion is that they do not.®^ Instruments with such words are 
not like contracts — to pay money and do some other things. 
They are simply for the payment of a certain sum of money 
at a certain time, and the additional stipulations as to attorney's 
fees can never go into efifect if the terms of the bill or note are 
complied with. They are, therefore, incidental and ancillary to 
the main engagement, intended to assure its performance or to 
compensate for trouble and expense entailed by its breach. 

61 Smith V. Kendall, 9 Mich. 241, ingshead v. Stuart, 8 N. D. 35, 11 

80 Am. Dec. 83. N. W. 89, 42 L. R. A. 659. 

«2 Neg. Inst. Law, § 2, where all «5 Bowie v. Hall, 69 Md. 433, 16 

cases directly or indirectly bearing Atl. 64, 9 Am. St. Rep. 433, 1 L. 

upon or citing the Law are grouped. R. A. 546; Bank of Commerce v. 

Kirkwood v. Hastings First Nat. Fuqua, 11 Mont. 285, 28 Pac. 291, 

Bank, 40 Neb. 484, 58 N. W. 1016, 28 Am. St. Rep. 461, 14 L. R. A. 

42 Am. St. Rep. 683, 24 L. R. A. 444. 588. As to validity of agreement 
See note 2 A. L. R. 139. to pay attorney's fees, see 55 Am. 

«3Salazar v. Taylor, 18 Colo. St. Rep. 438-441, 444; see also notes 

538, 33 Pac. 369 ; Belford v. Beatty, 7 L. R. A. 445, 1 L. R. A. 547, 3 

145 111. 414, 34 N. E. 254. L. R. A. 51. 

64 Roberts v. Snow, 27 Neb. 425, Contra, National Bank of Com- 

43 N. W. 241 ; Wilson v. Campbell, merce v. Feeney, 9 S. D. 550, 70 
110 Mich. 580, 68 N. W. 278; Hoi- N. W. 874, 40 L. R, A. 7Z2. 



54 NEGOTIABLE INSTRUMENTS. § 49 

The Negotiable Instruments Law fully covers all such stipu- 
lations by providing- that "the sum payable is a sum certain 
mthin the meaning of this act, although it is to be paid: 
(i) With interest; or 

"(2) By stated installments; or 

"(3) By stated installments, with a provision that upon de- 
fault in payment of any installment or of interest, the zvhole 
shall become due ; or 

"(4) With exchange, whether at a fixed rate or at the current 
rate; or 

"(5) With costs of collection or an attorney's fee, in case 
payment shall not be made at maturity."^^ 

Some changes have been made in some jurisdictions in some 
of the parts of the above section. 

§ 49. Must be certain as to time of payment. The instru- 
ment must be payable without conditions and at all events in 
order to be negotiable.'^'' 

If the order or promise be payable provided terms mentioned 
are complied with ; as, for instance, that a certain receipt be 
produced by a certain time,^^ it is not a negotiable bill or note ; 
and likewise if payable provided a certain ship shall arrive;®* 
or provided the maker shall live a certain time,^" or upon any 
contingency. "An instrument payable upon a contingency is not 
nei^otiable, and the happening of the event does not cure the 
defectr''^ 

If the time must certainly come, although the particular day 
is not mentioned, the instrument is regarded as negotiable, as 
the fact of payment is certain. If the instrument is payable at, 
or within a certain time after, a man's death, it is sufficient, 
because the event must occur.''^ ''An instrument is payable at a 

66Neg. Inst. Law, § 2, where all (Mass.) 220; The Lykus, 36 Fed. 

cases directly or indirectly bearing 919. 

upon or citing the Law are grouped. ''* Kelley v. Hemmingway, 13 111. 

e^Harrell v. Marston, 7 Rob. 604; Rice v. Rice, 43 N. Y. App. 

(La.) 34; New Windsor First Nat. Div. 458, 60 N. Y. S. 97. 

Bank v. Bynum, 84 N. C. 24, 37 "^^ Neg. Inst. Law, § 4, last part, 

Am. Rep. 604; Mahoney v. Fitz- where all cases directly or indi- 

patrick, 133 Mass. 151, 43 Am. Rep. rectly bearing upon or citing the 

502. Law are grouped. 

<5** Mason v. Metcalf, 4 Baxt. ''2 Garrigus v. Home Frontier 

(Tenn.) 440. etc. Missionary Society, 3 Ind. App. 

But see, Kirkwood v. First Nat. 91, 28 N. E. 1009, 50 Am. St. Rep. 

Bank, 40 Neb. 484, 58 N. W. 1016. 262; Hegeman v. Moon, 131 N. Y. 

42 Am. St. Rep. 683, 24 L. R. A. 462, 30 N. E. 487; Carnwright v. 

444. Gray, 127 N. Y. 92, 27 N. E. 835, 24 

«5> Grant v. Wood, 12 Gray Am. St. Rep. 424, 12 L. R. A. 845. 

See note 2 A. L, R, 1471, 



§ 50 FORMAL AND ESSENTIAL REQUISITES. 55 

determinable future time zvithin the meaning of this act, which 
is expressed to be payable: 

"{!) At a fixed period after date or sight; or 

"{2) On or before a iixed or determinable future time speci- 
fied therein; or 

"(3) On or at a fixed period after the occurrence of a speci- 
fied event which is certain to Imp pen, though the time of hap- 
pening be uncertain.'"*^ 

' In a few decisions a note or bill made payable "on or before" 
a stated date has been held non-negotiable, but the great majority 
of decisions declare such an instrument to be negotiable, since 
the legal rights of the holder are clear and certain, and the 
instrument being due at a time fixed and not before, the maker 
has a mere option to pay in advance of the legal liability if he 
sees fit.'"'* 

If a bill or note is made payable expressly or impliedly out 
of a particular fund it is not negotiable according to the law mer- 
chant, because there may be no such fundJ'^ "An unqualified 
order or promise to pay is unconditional, though coupled zmth an 
indication of a particidar fund out of zvhich reimbursement is 
to be made, or a particular account is to be debited zvith the' 
amount. But an order or promise to pay out of a particidar 
fund is not unconditional."'^ 

An order on a saving bank, "Pay C, or order, three hundred 
dollars, or what may be due on my deposit book No. 1, page 632," 
is payable out of a particular fund, and therefore not negotiable 
under the statute.''** 

§ 50. As to place of payment. The purpose of a certain 
place of payment being set out in the instrument is to fix the 
place at which the holder must present the bill of exchange or 
note for payment. This is a very important feature of the in- 
strument when we come to consider the liability of sureties and 
indorsers. If no place is mentioned, presentment must be made 

'^SNeg. Inst. Law, § 4, where all 41 Am. Rep. 82; Thompson v. 

cases directly or indirectly bearing Wheatland Mercantile Co., 10 Wyo. 

upon or citing the Law are grouped. 86, 66 Pac. 595. As to reference 

'^4 Walker v. Woolen, 54 Ind. to account or fund as affecting ne- 

164; Charlton v. Reed, 61 Iowa 166, gotiability, see note 8 L. R. A. (N. 

16 N. W. 64, 47 Am. Rep. 808; S.) 2.31; see also notes 35 L. R. A. 

Ernst V. Steckman, 74 Pa. St. 13, 647 and 22 U. S. L. Ed. 161. 
15 Am. Rep. 542. See also note 11 ''^Neg. Inst. Law, § 3, where all 

L. R. A. 748. cases directly or indirectly bearing 

"^^ Turner v. Peoria etc. Ry. Co., upon or citing the Law are grouped. 
95 111. 134, 35 Am. Rep. 144 ; Miller ^Ca National Savings Bank v. Ca- 

V. Poage, 56 la. 96, 8 N. W. 799, ble, 73 Conn. 568. 



56 NEGOTIABLE INSTRUMENTS. §51 

at the place of business of the primary obligor.'''^ If he has 
no place of business, presentment must then be made at his resi- 
dence.''** Another purpose of having a certain place of payment 
set out in the instrument is to determine what law shall govern 
as to the condition and manner of payment. As a general rule 
it is not necessary to the negotiability of the instrument that a 
place of payment be designated.'^® But it is now required by 
statute in some of the states. 

The Negotiable Instruments Law provides that "the validity 
and negotiable character of an instrument are not affected by the 
fact that it does not specify the place where it is drawn or the 
place where it is payable. "^^ 

§ 51. Must be payable in money. Another essential requi- 
site of a bill of exchange or promissory note is that the medium 
of payment must be money ; that is, the direction or promise in 
such instrument must be to pay in money.** If the instrument 
calls for the payment of goods, or is in the alternative, as for 
the payment of a sum of money or "to issue stock," it is not 
negotiable and becomes a mere simple contract.** It has been 
held, however, that if the instrument calls for the payment ot 
goods or money, giving the holder the option to choose, it is in 
effect payable in money and so negotiable. So if the instrument 
be expressed to be payable "in work,"*^ or in any other article 
than money, as, for instance, "an ounce of gold,"*^ it becomes a 
special contract, and by the law merchant loses its character as 
commercial paper. Thus it has been held that if the instrument 
be to pay money, and also "to deliver up horses and a wharf,"** 
or "to pay money and take up a certain outstanding note," it is 
not a negotiable note *^ 

77 Biglow V. Kellar, 6 La. Ann. 85 Ind. 503 ; Chandler v. Calvert, 87 

59, 54 Am. Dec. 555; Merrick v. Mo. App. 368. As to payment in 

Burlington etc. Plank Road Co., 11 money only, see note 3 L. R. A. 50. 

la. 74; Haber v. Brown, 101 Cal. 82 Pridgcn v. Cox, 9 Tex. 367; 

445, 35 Pac. 1035. Corbitt v. Stonemetz, 15 Wis. 170; 

7S Stivers v. Prentice. 3 B. Hon. Markley v. Rhodes, 59 la. 57, 12 

(Ky.) 461; Shamburgh v. Cem- N. W. 775. 

magere, 10 Mart. (La.) 18; Pack- 83 Bothick v. Purdy, 3 Mo. 82; 

ard V. Lyon, 5 Duer. (N. Y.) 82. McClelland v. Coffin, 93 Ind. 456; 

79 Kendall v. Galvin, 15 Me. 131, Ransom v. Jones, 2 111. 291. 

32 Am. Dec. 141; Spears v. Bond, 84 Roberts v. Smith, 58 Vt. 492, 

79 Mo. 467. 4 Atl. 709, 56 Am. Rep. 567. 

80Neg. Inst. Law, § 6, sub. div. 85 Martin v. Chantry, 2 Strange 

3, where all cases directly or indi- 1271. 

rectly bearing upon or citing the 86 Cook v. Saterlee, 6 Cow. 108. 

Law are grouped. But see Hodges v. Shulen 22 N. Y, 

81 Killan v. Schoeps, 26 Kan. 310, 114. 
40 Am. Rep. 313 ; Johnson v. Griest, 



§ 51 FORMAL AND ESSENTIAL REQUISITES. 57 

But it is held that "an unqualified order or promise to pay is 
unconditional though coupled with a statement of the transaction 
ivhich gives rise to the instrument."^' 

The most frequent instances of such notes are notes given in 
payment of the purchase price of goods and chattels.*''* 

So also an instrument in terms and form a negotiable promis- 
sory note does not lose that character because it recites that the 
maker has deposited collateral security for its payment, which 
he agrees may be sold in a specified manner.** Thus it seems well 
settled that, although it may appear on the face of the note that 
its payment is secured by collaterals in personal property, or 
mortgage of real property, yet if otherwise in proper form, it 
is negotiable. 

The Negotiable Instruments Law covers this and many similar 
provisions by the following section : 

"An instrument zvhich contains an order or promise to do 
any act in addition to the payment of money is not negotiable. 
But the negotiable character of an instrument otherwise nego- 
tiable is not affected by a provision which: 

",{!) Authorizes the sale of collateral securities in case the 
instrument be not paid at maturity; or 

"(2) Authorizes a confession of judgment if the instrument 
be not paid at maturity; or 

"(3) Waives the benefit of any lazv intended for the. ad- 
vantage or protection of the obligor; or 

"(4) Gives the holder an election to require something to be 
done in lieu of payment of money. 

"But nothing in this section shall validate any provision or 
stipulation otherwise illegal."^^ 

IlHnois, Kentucky, Wisconsin among other states make some 
changes in section 5 of the Law above set out. The object of 
the last sentence of this section is to prevent any inference of 
an intent to validate any agreement or stipulation set out in the 
section, where by any statute or settled policy of the state, the 
same would be illegal. 

It is uniformly held that a power of attorney to confess judg- 

s^Neg. Inst. Law, § 3, subd. 2. Am. St. Rep. 824; De Hass v. 

where all cases directly or indirectly Dibert, 70 Fed. 227, 17 C. C. A. 

bearing upon or citing the Law are 79, 30 L. R. A. 189; Carroll Bank 

grouped. v. Taylor, 67 la. 572, 25 N. W. 

873 Chicago Railway Equipment 810. 
Co. V. Merchants' Nat. Bank, 136 89 Neg Inst. Law, § 5. where all 

U. S. 268. cases directly or indirectly bearing 

88 Vallev Nat. Bank v. Crowell. upon or citing the Law are grouped. 
148 Pa. St. 284, 23 Atl. 1068, 33 



58 NEGOTIABLE INSTRUMENTS. § 51 

merit must be strictly construed, and whether the power can be 
executed for the benefit of a holder of a note other than the 
payee must depend upon the language of the power itself.^* If 
the note is in itself perfect, without conditions, it may remain 
negotiable although the power of the attorney to confess judg- 
ment may not, by its terms, operate in favor of an indorsee or 
transferee of the note.'*^ 

A stipulation authorizing a confession of judgment if the in- 
strument is not paid at maturity is recognized as valid in many 
jurisdictions. In others it is not recognized as valid. It is stated 
by the court in one jurisdiction that it is the acknowledged public 
policy of that state not to recognize powers of confession in 
promissory notes, and that it seemed to be the public policy as 
declared by the statute in that state in respect to confessions of 
judgment requiring that in order to be a valid execution of such 
power, there must at the time of its execution be an affidavit 
made."^* 

"The validity and negotiable character of an instrument are 
not affected by the fact that it does not specify the value given, 
or that any value has been given^ therefor. But nothing in this 
section shall alter or repeal any statute requiring in certain cases 
the nature of the consideration to he stated in the instrument. "^^ 

Thus it is often required when notes are given for a patent 
or some right therein that the instrument should state the nature 
of the consideration. "A promissory note or other negotiable in- 
strument, the consideration of which consists wholly or partly 
of the right to make, use or sell any invention claimed or repre- 
sented by the vendor at the time of sale to be patented, must 
contain the words, 'given for a patent right,' prominently and 
legibly written or printed on the face of such note or instrument 
above the signature thereto ; and such note or instrument in the 
hands of any purchaser or holder is subject to the same defenses 
as in the hands of the original holder ; but this section does not 
apply to a negotiable instrument given solely for the purchase 
price or the use of a patented article."''^ Some states as New 

80 Cushman v. Welsh, 19 Ohio St. cases directly or indirectly bearing 

536; Manufacturers and Mcchan- upon or citing the Law are grouped. 

ics Bank v. St. John, 5 Hill (N. As to a note not indicating the na- 

Y.) 497; Spence v. Emerine, 46 ture of its consideration as required 

Ohio St. 433, 21 N. E. 866, 15 Am. by statute see note 10 L. R. A. (N. 

St. Rep. 634; Marsden v. Soper, 11 S.) 842. 

Ohio St. 503. •»» Neg. Inst. Law, § 330 of N. _Y. 

91 Osborn v. Howley. 19 Ohio law, where all cases directly or in- 

130. directly bearing upon or citing the 

»i» Irose V. Balla. 181 Ind. 491. Law are grouped. 

®* Neg. Inst. Law, % 6, where all 



§ 51 FORMAL AND ESSENTIAL REQUISITES, 59 

York and Ohio have made this provision as to patent notes a 
part of the Negotiable Instruments Law^ while many other states 
have such a law as a separate statute. 

The term money properly includes all legal tender.®'* Though 
the word "currency" includes bank-notes, which are not legal 
tender, yet it is held that certificates of deposit, notes, bills, bonds, 
checks and the like, payable in "currency," or in "current funds 
of this state," "current Ohio bank-notes," etc., constitute good 
commercial paper, and are really payable in money, as the term 
used is but a common expression used to indicate current legal 
tender.'**^ 

The property of being legal tender is not necessarily inherent 
in money ; it generally belongs no more to inferior coin than to 
paper money. Legal tender is that kind of money which the 
law compels a creditor to accept in payment of his debt, when 
tendered by the debtor in the right amount.^^ Foreign gold or 
silver coins are not legal tender.**" The gold and silver coins 
of the United States and the United States notes are lawful money 
and legal tender in the payment of all debts, public and private.®* 

"The validity and negotiable character of an instrument are 
not affected by the fact that it designates a particular kind of 
current tnoney in which payment is to be niade."^^ 

But if the instrument is made payable in the paper or cur- 
rency of a particular bank, specifically and absolutely, and with- 
out reference to the currency or value of the paper, it is held 
not to be for the payment of money and is not negotiable.-^ 

An instrument payable in "current funds" is negotiable.** 

It has been held that it is necessary that the instrument should 
express the specific denomination of money when it is payable 
in the money of a foreign country, in order that the courts may 
be able to ascertain its equivalent value ; otherwise it is not 
negotiable. 



a 



»4 Jones V. Overstreet, 4 T. B. »« United States Revised Stat- 

Mon. (Kv.) 547; Mann v. Mann, utes, § 3585. 

1 Johns Ch. (N. Y.) 236. »» Neg. Inst. Law, § 6, subd. 5 

85 Telford v. Patton, 144 ITI. 611, and cases there cited. 

22> N. E. 1119; Butler v. Paine, 8 i Bonnell v. Covington, 7 How. 

Minn. 324; Phelps v. Town, 14 (Miss.) 322; Whiteman v. Chid- 

Mich. 374; ("Current Ohio Bank ress, 6 Humph. (Tenn.) 303; Fry 

Notes") ; Swetland v. Creigh, 15 v. Rousseau, 3 McLean (U. S.) 

Ohio 118; Bull v. Bank. 123 U. S. 106, 9 Fed. Cas. No. 5,141; Alitchell 

105. There is much conflict on the v. Walker, 4 Ark. 145. 

above point, however. ^^ Millikan v. Security Trust 

'♦^ Black's Law Die; Martin v. Company, — Ind. —, 118 N. E. 568. 

Bolt, 17 Ind. App. 444, 46 N. E. 2 Thompson v. Sloan, 23 Wend. 

151. (N. Y.) 71. But see Hogue v. Wil- 

^ United States Revised Stat- liamson, 85 Te.x. 553. 22 S. W. 580, 

utes, §3584. 34 Am. St. Rep. 823, 20 L. R. A. 



60 NEGOTIABLE INSTRUMENTS. § 52 

Where an instrument is made payable generally in the money 
of a foreign country, without specifying the kind or denomina- 
tion of the coin or money, so that payment may be made in our 
own coin of equivalent value as determined by the par of ex- 
change, it is not negotiable, according to a leading case in New 
York upon this question.^ This is not the invariable rule, for in 
a Michigan case a note payable in "Canada currency" was held 
negotiable, and the New York case already referred to was dis- 
approved."* 

§ 52. Must be necessary parties. The name of the maker of 

a note or the drawee of a bill should appear on the instrument. 
In the case of the note it is important, as it is the maker who is 
liable thereon ;** and in case of the bill the drawee's name must 
be written in order to bind the party accepting." 

The bill must be addressed to some person, except that : 

(a) If the drawee can be otherwise sufficiently identified from 
the bill it is sufficient ; and'^ 

(b) An unaddressed bill accepted or a bill accepted, where 
the drawer and acceptor are one and the same person, probably 
is to be treated as a promissory note, and is negotiable.® 

The bill or note must point out some person to whom the money 
is to be paid.® 

The following are the common rules concerning the nomination 
of payees: 

(a) The payee of an instrument, except one payable to bearer, 
must be a person in being, natural or legal, and ascertained, at 
the time of issue.*® 

481; Black v. Ward, 27 Mich. 193, 35 Ala. 476; Culver v. Marks, 122 

15 Am. Rep. 162. Ind. 554, 23 N. E. 1086, 17 Am. St. 

3 Thompson v. Sloan, 33 Wend. Rep. 377, 7 L. R. A. 489; Rice v. 
(N. Y.) 71. Ragland, 10 Humph. (Tenn.) 545, 

4 Black V. Ward, 27 Mich. 193. 15 53 Am. Dec. 737. 

Am. Rep. 162. sgUss v. Burnes, McCahon 

5 Union Nat. Bank v. Forstall, (Kan.) 97; Funk v. Babbitt, 156 
41 La. Ann. 113, 6 So. 32; Keck v. 111. 408, 41 N. E. 166. 

Sedalia Brewing Co., 22 Mo. App. ® Brown v. Oilman, 13 Mass. 158; 

187; Ferris v. Bond, 4 B. & Aid. Secy. v. Stale Bank, 3 Sneed 

679, 23 Rev. Rep. 443, 6 E. C. L. (Tenn.) 558, 67 Am. Dec. 579. 

651. io\yayman v. Torreyson, 4 Nev. 

«Funk V. Babbitt, 156 111. 408, 124; U. S. v. Coffeyville First Nat. 

41 N. E. 166 ; Watrous v. Holbrook, Bank, 82 Fed. 410 ; New v. Walker, 

39 Tex. 572; McPherson v. John- 108 Ind. 365, 9 N. E. 386, 58 Am. 

ston, 3 Brit. Col. 465. Rep. 40; 7ddy v. Bond, 19 Me. 461, 

7 Ala. Coal Min. Co. v. Brainard, 36 Am. Dec. 767. 



§ 52 FORMAL AND ESSENTIAL REQUISITES. 61 

(b) Where the payee and maker or drawer are the same per- 
son, the instrument is not issued until after its indorsement and 
delivery.** 

(c) The payee may be a fictitious or non-existing person, but 
the instrument is then construed as payable to bearer, and title 
thereto is made by estoppel.*^ 

"A bill may be addressed to two or more drawees jointly, 
whether they are partners or not; but not to two or more drawees 
in the alternative or in succession. "'^^ 

"Where in a bill the drawer and drawee are the same person, 
or where the drazvee is a fictitious person, or a person not having 
capacity to contract, the holder may treat the instrument, at his 
option, either as a bill of exchange or a promissory note."''-* 

"The drawer of a bill and any indorser may insert thereon 
the name of a person to whom the holder may resort in case of 
need; that is to say, in case the bill is dishonored by non-accept- 
ance or non-payment. Such person is called the referee in case 
of need. It is in the option of the holder to resort to the referee 
in case of need or not as he tnay see ftt.^^ 

A bill or note may be executed by one person or by a number 
of persons. When executed by but one, it is called a several 
note. When executed by two or more, it is either joint, or 
joint and several, according to its wording. Thus, if in a note 
signed by two or more, the plural number is used in referring 
to them as "we promise to pay," it is held to be a joint note.** 
While if in the same note the singular number is used, as "I 
promise to pay," then the note is considered as joint and sev- 
eral, since this expression indicates an intention to make it a joint 
and several note." So the expression, "we or either of us," is 
held to make a note joint and several.** 

^* Norfolk Nat. Bank v. Griffin, ing upon or citing the Law are 

107 N. C. 173, 11 S. E. 1049. 22 Am. grouped. 

St. Rep. 868; Ewan v. Brooks-Wa- ^^ Neg. Inst. Law, § 131, where 

terfield Co., 55 Ohio St. 596, 45 N. all cases directly or indirectly bear- 

E. 1014, 60 Am. St. Rep. 719, 35 ing upon or citing the Law are 

L. R. A. 786. grouped. 

iSKohn V. Watkins, 26 Kan. 691, i« Harrow v. Dugan, 6 Dana 

40 Am. Rep. 336; Shaw v. Brown, (Ky.) 341; Lafourche Transp. Co. 

128 Mich. 573. 87 N. W. 757 ; Phil- v. Pugh, 52 La. Ann. 1517, 27 So. 

lips V. Mercantile Nat. Bank, 140 958; Peaks v. Dexter, 82 Me. 85, 

N. Y. 556, 35 N. E. 982, 37 Am. St. 19 Atl. 100. 

Rep. 596, 23 L. R. A. 584. *'' Dow Law Bank v. Godfrey, 126 

. 13 Neg. Inst. Law, § 128, where Mich. 521, 85 N. W. 1075, 86 Am. 

all cases directly or indirectly bear- St. Rep. 559; Warren First Nat. 

ing upon or citing the Law are Bank v. Fowler, 36 Ohio St. 524, 

grouped. 38 Am. Rep. 610. 

i4Neg. Inst. Law, § 130, where 18 Pogue v. Clark, 25 111. 333; 

all cases directly or indirectly bear- Harvey v. Irvine, 11 la. 82; Harris 



62 NEGOTIABLE INSTRUMENTS. § 53 

The Negotiable Instruments Law provides ; "* * * Where 
an instrument containing the words 7 promise to pay is signed 
by two or more persons, they are deemed to be jointly and sever- 
ally liable thereon."^^'^ 

§53. The delivery. By the Negotiable Instruments Law 
"delivery means transfer of possession, actual or constructive, 
from, one person to another."^^ 

An undelivered bill or note is inoperative, because delivery is 
essential to the final completion of every written contract. Until 
delivery, the contract, is revocable. Delivery means transfer of 
possession with intent to transfer title, and is of two kinds: 
(1) The manual passing of the instrument itself ; and (2) some 
act manifesting intent to transfer right of possession while the 
possession of the instrument is actually with another. 

It has been held that by depositing a note in the mail with 
the intent that it shall be transmitted to the payee in the usual 
way the said party will be in control over it and the delivery is in 
legal contemplation completed.*®* 

"Where an incomplete instrument has not been delivered it will 
not if completed and negotiated, tvithout authority, be a valid con- 
tract in the hands of any holder, as against any person whose sig- 
nature was placed thereon before delivery."^** 

A negotiable instrument must be complete and perfect when 
it is issued, or there must be authority reposed in some one after- 
ward to supply anything needed to make it perfect.*®" 

This section of the law rather concerns delivery as between 
immediate parties. Thus we might say that delivery of a nego- 
tiable instrument is essential in order to create any liability as 
between the immediate parties to the instrument. This section 
then does not refer to the delivery to a bona fide purchaser for 
value without notice. This section and the one following in the 
Law and also following in this text should be considered to- 
gether. In order to avoid confusion as to matters relating to 
delivery considered in a later chapter these two sections will be 
briefly discussed. The other section provides as follows: 

V. Coleman etc. White Lead Co., 37 Am. St. Rep. 458, 459; sae also 

58 111. App. 366. note 6 L. R. A. 470. 

18a Neg. Inst. Law, § 17, subdiv. 7, ^^ Canterbury v. Sparta Bank, 91 

where cases directly or indirectly Wis. 53, 64 N. W. 311, 30 L. R. A. 

bearing upon or citing the Law are 845. 

grouped. ^^ Neg. Inst. Law, § 15, where all 

i»Neg. Inst. Law, § 191, where cases directly or indirectly bearing 

all cases directly or indirectly bear- upon or citing the Law are grouped, 

ing upon or citing the Law are 20a Davis Sewing Machine Co. v. 

grouped. As to delivery, see note Best, 105 N. Y. 59. 



§ 53 rORMAL AND ESSENTIAL REQUISITES. 63 

"Every contract on a negotiable instrument is incomplete and 
revocable until delivery of tfie instrument for the purpose of 
giving effect thereto. As between immediate parties, and as re- 
gards a remote party other than a holder in dm course, the deliv- 
ery, in order to be effectual, must be made either by or under the 
authority of the party making, drawing, accepting, or indorsing, 
as the case may be; and in such case the delivery may be shown 
to have been conditional, or for a special purpose only, and not 
for the purpose of transferring the property in the instrument. 
BM where fhe instrument is in the hands of a holder in due 
course, a valid delivery thereof by all parties prior to him so 
as to make them liable to him is conclusively presumed. And 
where the instrument is no longer in the possession of a party 
whose signature appears thereon, a valid and intentional delivery 
by him is presumed until the contrary is proved."^^ 

Some jurisdictions have made some changes in this section of 
the Law. In North Carolina the words "accepting or" between 
the words "drawing" and "indorsing" in the second sentence are 
omitted. In Kansas the third sentence, which provides for a 
conclusive presumption of delivery in favor of a holder in due 
course, is omitted. In South Dakota the sentence beginning with 
the word "But" and ending with the word "presumed" is omitted 
and the following sentence substituted: "An indorsee of a 
negotiable instrument in due course, acquires an absolute title 
thereto, so that it is valid in his hands, notwithstanding any pro- 
vision of law making it generally void or voidable, and not- 
withstanding any defect in the title of the person from whom he 
acquired it." 

The section of the Law is declaratory largely of the preponder- 
ance of authority prior to its adoption in the various jurisdic- 
tions; that is, that one who had purchased for value, in good 
faith, in the usual course of business, and before maturity, a 
negotiable instrument complete upon its face, and rot avoided by 
forgery or statutory prohibition, had good title in the person from 
whom he had taken it, even though such person might have ac- 
quired it by fraud, by theft or by robbery. Some jurisdictions 
had held that a bona fide holder could not recover because taken 
away from the maker without his consent and had never been de- 
livered by him to any one for any purpose ; and others had held 
that the maker or drawer was not liable in any such case, whether 
completed or incompleted, unless it could be shown that the 

21 Neg. Inst. Law, § 16, where all As to stolen paper see note 13 U. S 
cases directly or indirectly bearing L. Ed. 266. 
upon or citing the Law are grouped. 



64 NEGOTIABLE INSTRUMENTS. §§ 54-55 

possession of the undelivered instrument had been obtained 
through his culpable negligence. 

The above section of the Law provides that under certain cir- 
cumstances the delivery may be shown to have been conditional. 
This was the rule in most jurisdictions before the adoption of 
the Law and parol evidence of such a condition was not deemed 
an attempt to vary or contradict the written contract.*^ Neither 
the Negotiable Instruments Law nor the Statute of Frauds re- 
quires that a contract of conditional delivery shall be in writing,^' 

§ 54. Value received. Value received is not necessary to be 
expressed in a negotiable instrument.^* Although these words 
are well nigh universal in negotiable bills and notes, they are in 
no wise necessary to them. Their omission is unimportant, be- 
cause the negotiable instrument itself imports a consideration.** 

"The validity and negotiable character of an instrument are 
not affected by the fact that it does not specify the value given, or 
that any value has been given therefor."^^ 

§ 55. As to the agreement controlling the operation. There 
are two kinds of agreements which control the operation of bills 
and notes, which are designated as memoranda on the face or 
back of the instrument^* and collateral or independent agree- 
ments.^'' The advantage of having a memorandum on the bill 
or note is that it will furnish actual or constructive notice to all 
subsequent holders, whereby it will control the operation or 
character of the instrument,^^ whereas a collateral agreement 
can only control the operation or character of the instrument 
as to those parties who have received actual notice of its exist- 
ence. OInly such memorandum as does actually afifect the char- 

22 Niblack V. Sprague, 200 N. Y. where all cases directly or irtdi- 
390; Hodge v. Smith, 130 Wis. 326. rectly bearing upon or citing the 
Contra, — Ind. — . Law are grouped. 

22a Norman v. McCarthy, 56 Colo. 2« Specht v. Beindorf. 56 Neb, 

290. 553, 76 N. W. 1059, 42 L. R. A. 429; 

23 Carnwright v. Gray, 127 N. Y. Nat. Bank of Commerce v. Feeney, 
92, 27 N. E. 835, 24 Am. St. Rep. 12 S. D. 156, 80 N. W. 186, 76 Am. 
424, 12 L. R. A. 845 ; Hubble v. St. Rep. 594, 46 L. R. A. 732. 
Fogartie, 3 Rich. (S. C.) 413, 45 27 Babbitt v. Moore, 51 N. J. L. 
Am. Dec. 775; Clarke v. Marlow, 229, 17 Ah. 99; Wood v. Ridgeville 
20 Mont. 249, 50 Pac. 713. See College, 114 Ind. 320, 16 N. E. 619; 
note 12 L. R, A. 846. Murphy v. Farley, 124 Ala. 279, 27 

24 Jones V. Berryhill, 25 la. 289; So. 442; Wooters v. Foster, 1 Tex. 
Kendall v. Galvin, IS Me. T31, 32 App. Civ. Cas. 700. 

Am. Dec. 141 ; Carnwright v. Gray. 28 \Yait v. Pomeroy, 20 Mich. 425, 

127 N. Y. 92, 27 N. E. 835, 24 Am. 4 Am. Rep. 345 ; Farmers Bank v. 

St. Rep. 424, 12 L. R. A. 845. Ewing, 78 Ky. 264, 39 Am. Rep. 

25Neg. Inst. Law, § 6, stiM. 2, 231. 



§ 55 FORMAL AND ESSENTIAL REQUISITES. 65 

acter and control the operation of the instrument will be con- 
sidered to be a part of the bill or note. 

Nor can the memorandum be treated as a part of the bill or 
note where it is so ambiguous and repugnant to the other con- 
tents that parol evidence is necessary to explain its import, or 
where the agreement is repugnant to the assignment or transfer 
of the instrument.^® Where the memorandum is added to the 
bill or note after its negotiation, with the consent of both parties, 
it will constitute a part of the instrument, controlling its opera- 
tion, but if it is added without the consent of all the parties, it 
will be an alteration which will invalidate the bill or note.'^ 
Collateral agreements entered into contemporaneously with the 
execution and negotiation of the instrument must be in writing 
in order to be valid and control the operation of such bill or 
note.^^ Subsequent agreements which change the terms of bills 
and notes already delivered must be based upon a sufficient 
consideration and be fully executed or performed in order to 
control the operation of the instrument as to all parties who have 
notice of the collateral agreement.^* The most common collateral 
agreement is that of renewing the bill or note. If the renewal 
is contemporaneous with the instrument it must be in writing; 
and if subsequent it must be supported by a sufficient consider- 
ation.^ 

A note which contains a statement to the effect that the maker 
has deposited collateral security for its payment does not thereby 
lose its character of negotiability nor does the fact that a note 
is received with collaterals afifect such negotiability.^ 

The Negotiable Instruments Law provides ; " * * * But 
the negotiable character of an instrument otherwise negotiable 
is not affected by a provision zvhich: 1. Authorises the sale of 
collateral securities in case the instrument be not paid at ma- 
turity/'^*^ 

This and other matters as to collateral security are more fully 
discussed in a subsequent chapter of this work. 

29 Way V. Batchelder. 129 Mass. 33 Lime Rock Bank v. Mallett, 34 

361 ; Leland v. Parriott, 35 la. 454. Me. 547, 56 Am. Dec. 673 ; Central 

SOTuckerman v. Hartwell, 3 Me. Bank v. Willard, 17 Pick. 150, 28 

147, 14 Am. Dec. 225. Am. Dec. 284. 

31 Noell V. Gains, 68 Mo. 649; ^4 Qjifo^d v. Minneapolis etc. Ry. 

Polo Mfg. Co. V. Parr. 8 Neb. 379, Co., 48 Minn. 560, 51 N. W. 658, 

30 Am. Rep. 830. 31 Am. St. Rep. 694; Valley Bank 

33 Dow V. Tuttle, 4 Mass. 414, 3 v. Crowell. 148 Pa. St. 284, 23 Atl. 

Am. Dec. 226; Allen v. Furbish, 4 1068, 33 Am. St. Rep. 824. 

Gray 504, 64 Am. Dec. 87. *** Neg. Inst. Law, § 5, subd. 1. 



56 NEGOTIABLE INSTRUMENTS. §§ 56-56a 

§ 56. Days of grace. As to days of grace the Negotiable In- 
struments Law provides:^ 

"Every negotiable instrument is payable at the time fixed 
therein without grace. When the day of maturity falls upon 
Sunday, or a holiday, the instrument is payable on the next suc- 
ceeding business day. Instruments falling due or becoming pay- 
able on Saturday are to be presented on the next succeeding 
business day, except that instruments payable on demand may, at 
the option of the holder, be presented for payment before tivelve 
o'clock noon on Saturday when that entire day is not a holiday." *** 

Many of the states have made changes in the above section of 
the Law and the different readings should be consulted in Part III 
of this work v/here all the changes are set out under this section. 

Where such lav/ is not in force grace is a short period of time, 
extended by the written law to instruments not payable on de- 
mand,^^ to enable the parties to provide payment. It arose before 
the age of steam, when communication was slow and often diffi- 
cult. It is said to have been a mere matter of indulgence at 
first, at the holder's election. The rule is peculiar to the law 
merchant ; and since the reason for it has mostly ceased, it has 
been abolished by statute in most jurisdictions. 

Days of grace are days added to the nominal time of payment 
of all bills or notes except those impliedly or expressly payable 
on demand, and are computed by excluding the day of date and 
including the day of payment.^' When granted at all they are 
usually for three days. But as stated above days of grace have 
been abolished by statute in most jurisdictions. 

§ 56a. As to payable at a bank. It is provided in the Nego- 
tiable Instruments Law as follows: "Where the instrument is 
made payable at a bank it is equivalent to an order to the bank 
to pay the same for the account of the principal debtor thereon."^'^'' 

It will be noted that a few of the states have omitted this 
section among them being, Illinois, Kansas, Nebraska and South 
Dakota. In Missouri and New Jersey amendments have been 
made. There was a conflict of authority as :o the right or 

35 Neg. Inst. Law, § 85. where all Thompson v. Ketchum, 8 Johns, 

cases directly or indirectly bearing (N. Y.) 190, 5 Am. Dec. 332. 

upon or citing the Law are grouped ^^ Thomas v. Shoemaker, 6 

See also notes 5 U. S. L. Ed. 215 Watts (Pa.) 179; Tassell v. Lewis, 

and 6 U. S. L. Ed. 512. 1 Ld. Raym. 743. 

.35a Neg. Inst. Law, § 85. ^'^ Neg. Inst. Law, § 87, where all 

3« Davenport First Nat. Bank v. cases directly or indirectly bearing 

Price, 52 la. 750, 3 N. W. 639 ; upon or citing the Law are grouped. 



§§ 57-58 FORMAL AND ESSENTIAL REQUISITES. 6/^ 

authority of a bank to do this before the adoption of the Nego- 
tiable Instruments Law. 

§ 57. As to stamps. It seems that the first stamp duties 
were those levied by Holland in 1624 for the purpose of raising 
revenues for the prosecution of war against Spain. The first 
stamp duties levied in England were in 1694 and were employed 
to wage war against France. Some of the states of the Union 
have at different periods passed an Act imposing stamp duties on 
certain negotiable instruments. The first Act of a similar nature 
passed by the Federal Government was in 1862 during the war 
of the rebellion.** This Act imposed a tax upon deeds, bills, 
notes, checks and other evidences of indebtedness.^® 

This act was subsequently repealed from which time no stamp 
duties on these instruments were required until 1898 when the 
War Revenue Act was passed. This act imposed a stamp tax 
upon bills of exchange, promissory notes, money orders, certifi- 
cates of deposit, warehouse receipts, bills of lading and other 
evidences of indebtedness. In 1901 this act was repealed except 
as to bills of exchange and in 1902 it was repealed as to these. 

The present law is the Act of October 22nd, 1914, and contains 
no provision as in some of the previous acts making an unstamped 
instrument void.*** 

This matter is more fully considered in a later section of this 
work 39" 

§ 58. As to blanks. Frequently bills of exchange and prom- 
issory notes are executed in blank and delivered to another to fill 
in and negotiate, either for his own benefit or that of the maker. 
The person to whom these instruments are delivered in blank 
with authority to fill the blanks is constituted the agent of the 
maker or principal.'*® There is no need of a second delivery by 
the maker after the blanks have been filled because the validity 
of the paper after its completion will relate back to the delivery 
by the maker or drawer. It may be, however, that the authority 
of the person to whom the instrument is delivered is limited to 
filling the blanks in a particular way, and in such case, if he 
exceeds his express authority, of course neither he nor any holder, 
with knowledge that the authority has been exceeded, can re- 

38 U. S. Rev. Stat, at L.. 432. ' 39b See § 141. 

39 Jones V. Jones, 38 Cal. 584; ^ORadlich v. Dall, 54 N. Y. 234; 
Merchants Nat. Bank v. Boston etc. Winter v. Poole, 104 Ala. 580, 16 
Bank, 10 Wall. (U. S.) 604, 19 L. So. 543; Market etc. Nat. Bank v. 
Ed. 1008; Pugh v. McCormick, 14 Sargent, 85 Ale. 349, 27 Atl. 192, 
Wall (U. S.) 361, 20 L. Ed. 789. 35 Am. St. Rep. 376. See also note 

39« Cole v. Ralph, 252 U. S. 286. 1 L. R. A. 648. 



68 NEGOTIABLE INSTRUMENTS. § 59 

cover.'** But any one purchasing the instrument as filled in, in 
reliance upon its terms, would be protected. Moreover, a bona 
fide purchaser is protected, and may enforce the instrument as 
filled in even if he had knowledge that the instrument had been 
delivered in its imperfect state, for he may rely upon the appar- 
ent authority of the person to whom it was delivered to fill in 
the blank as he sees fit, and as against such a holder the fact that 
the actual authority was exceeded is no defense.^ 

The Negotiable Instruments Law states : 

"Where the instrument is zvanting in any material particular, 
the person in possession thereof has a prima facie authority to 
complete it by filling up the blanks therein. And a signature on 
a blank paper delivered by the person making the signature in 
order that the paper may be converted into a negotiable instru' 
ment operates as a prima facie authority to fill it up as such for 
any amount. In order, hozvever, that any such instrument when 
completed may be enforced against any person who became a 
party thereto prior to its completion, it must be Ulled up strictly 
in accordance with the authority given and within a reasonable 
time. But if any such instrument, after completion, is negotiated 
to a holder in due course, it is valid and effectual for all purposes 
in his hands, and he may enforce it as if it had been filled up 
strictly in accordance zvith the authority given and within at 
reasonable time.'"^^ 

The authority under this section is only to complete the in- 
strument, for while there is an authority to fill up blanks in order 
to make the instrument complete as such, there is no authority 
to insert a special agreement not essential to the completeness of 
the instrument.*'* 

§ 59. As to instruments bearing a seal. The mere attaching 
a seal to the instrument does not necessarily make it a sealed 
instrument. In addition to this there must be some reference in 
the instrument, itself, to the seal to bring it within the purview 
of sealed instruments.** 

41 Clower V. Wynn, 59 Ga. 246; 43 Neg. Inst. Law, § 14, where all 
Wagner v. Deidrich, 50 Mb. 484; cases directly or indirectly bearing 
McCoy V. Gilmore, 7 Ohio 268. upon or citing the Law are grouped. 

42 Farmers Bank v. Garten, 34 43a Weyerhouser v. Dunn, 100 N. 
Mo. 119; Merritt v. Boyden, 191 Y. 150. 

111. 136, 60 N. E. 907, 85 A:m. St. 44 Woodman v. York etc. Ry. Co.. 

Rep. 246; Market etc. Bank v. Sar- 50 Me. 549; Royal Bank v. Grand 

gent, 85 Me. 349, 27 Atl. 192, 35 Junction Ry. etc. Co., 100 Mass. 

Am. St. Rep. 376. See notes 16 444, 97 Am. Dec. 115. As to effect 

U. S. L. Ed. 323 and 13 L. R. A. of seal see note 35 L. R. A. 605. 
(N. S.) 490. 



§ 60 FORMAL AND ESSENTIAL REQUISITES. 69 

"The validity and negotiable character of an instrument are 
not affected by the fact that it bears a seal.'"^ 

§ 60. The several parts of a foreign bill called a set. The 
following is a common form of foreign bill of exchange in a set : 



8 



Troy, N. Y., U. S. A., August 31, 1922. 
First. Exchange for London. 

Thirty days after sight of the First of Exchange 
(Second and Third Unpaid) pay to the order of 
JOHN BALES Three Hundred Pounds Sterling, value 
received and charge the same to account of 

ORNAN BARKER. 
To Green & Co., 

London, Eng. 



8 



Troy, N. Y., U. S. A., August 31, 1922. 
Second. Exchange for London. 

Thirty days after sight of this Second of Exchange 
(First and Third Unpaid) pay to the order of JOHN 
BALES Three Hundred Pounds Sterling, value re- 
ceived and charge the same to account of 

ORNAN BARKER. 
To Green & Co.^ 

London, Eng. 



8 



Troy, N. Y., U. S. A., August 31, 1922. 
Third. Exchange for London. 

Thirty days after sight of this Third of Exchange 
(First and Second Unpaid) pay to the order of JOHN 
BALES Three Hundred Pounds Sterling, value re- 
ceived and charge the same to account of 

ORNAN BARKER. 
To Green & Co., 

London, Eng. 



^Neg. Inst. Law, § 6, subd. 4, rectly bearing upon or citing the 
where all cases directly or indi- Law are grouped. 



70 NEGOTIABLE INSTRUMENTS. § 60 

In order to avoid delay and inconvenience which may result 
from the loss or miscarriage of a foreign bill, it is a common 
custom, particularly in bills drawn on Europe and other distant 
countries, for the drawer to issue several copies of the bill as 
above, which are called a set of exchange, and together con- 
stitute one bill. 

"Where a hill is drawn in a set, each part of the set being 
numbered and containing a reference to the other parts, the 
whole of the parts constitute one bill.'"^^ 

Either copy of the bill may be negotiated, and when any one 
of them is accepted and paid, all others are extinguished, even 
against bona Ude purchasers, so far as the drawer is concerned, 
although the payee is liable to each person, to whom he has trans- 
ferred a copy of the bill.'*'^ The drawee should accept only one 
of the copies, and pay the amount of the bill, when the part 
which he has accepted is presented for payment. If he accepts 
more than one copy, he will be liable to bona Ude purchasers on 
as many copies on which he has written his acceptance.** But 
any copy may be presented for acceptance, and the drawee may 
accept any copy. 

"Where two or more parts of a set are negotiated to different 
holders in due course, the holder whose title first accrues is as 
between such holders the true owner of the bill. But nothing in 
this section affects the rights of a person who in due course 
accepts or pays the part first presented to him."^^ 

"Where the holder of a set indorses two or more parts to 
different persons he is liable on every such part, and every 
indorscr subsequent to him is liable on the part he has himself 
indorsed as if such parts were separate bills. "^^ 

"The acceptance may be written on any part, and it must be 
written on one part only. If the drawee accepts more than one 
part, and such accepted parts are negotiated to different holders 
in due course, he is liable on every such part as if it were a 
separate bill."^^ 

"When the acceptor of a bill drazvn in a set pays it iiithout 
requiring the part bearing his acceptance to be delivered up to 

46 Kfeg. Inst. Law, § 178, where all ing upon or citing the Law are 

cases directly or indirectly bearing grouped, 

upon or citing the Law are grouped. ^® Neg. Inst. Law, § 180, where 

4''^ Riggin V. Collier, 6 Mo. 568; all cases directly or indirectly bear- 
Yale V. Ward, 30 Tex. 17. ing upon or citing the Law are 

48 Wright V. McFall, 8 La. Ann. grouped. 

120; Holdsworth v. Hunter, 10 B. ^i Neg. I^st. Law, § 181, where 

& C. 449. all cases directly or indirectly bear- 

49 Neg. Inst. Law, § 179, where ing upon or citing the Law are 
all cases directly or indirectly bear- grouped. 



§ 60 



FORMAL AND ESSENTIAL REQUISITES. 



71 



him and that part at maturity is outstanding in the hands of a 
holder in due course, he is liable to the holder thereon."^^ 

"Except as herein otherwise provided, where any one part of 
a bill drawn in a set is discharged by payment or otherwise the 
whole bill is discharged. "^^ _-^-^ 



MNeg. Inst. Law, § 182, where 
all cases directly or indirectly bear- 
ing upon or citing the Law are 
grouped. 



53Neg. Inst. Law, § 183, where 
all cases directly or indirectly bear- 
ing upon or citing the Law are 
grouped. 



,(!:-' 






^^V 



V 



1 






y 



CHAPTER VII. 
CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 

§61. Meaning of term. §68. Want or failure of considera- 

62. Consideration in general. tion. 

63. Necessity of consideration. 69. Between ^hom question of 

64. Presumption of consideration. consideration may be 

65. Sufficiency of consideration. raised. 

66. Inadequacy of consideration. 70. As to accommodation paper. 

67. Illegal, immoral, and fraudu- 

lent considerations. 

§ 61. Meaning of term. In general, consideration means in- 
ducement to a contract, that is, the cause, motive, price or im- 
pelling influence which induces a contracting party to enter into 
a contract. It means the reason or material cause of a contract.* 

That is, by consideration is meant a benefit or gain of some 
kind to the party making the promise, or a loss, detriment or 
injury of some kind to the party to whom the promise is made.* 

§ 62. Consideration in general. The Negotiable Instru- 
ments Law provides : 

"Value is any consideration sufficient to support a simple con- 
tract. An antecedent or pre-existing debt constitutes value; and 
is deemed such ivhether the instrument is payable on demand or 
at a future time."^ 

Valuable consideration may, "in general terms, be said to con- 
sist either in some right, interest, profit or benefit, accruing to the 
party who makes the contract, or some forbearance, detriment, 
loss, responsibility, or act, or labor, or service, on the other side. 
And, if either of these exists, it will furnish a sufficient valuable 

1 Roberts v. City of New York, Dunan, 91 Md. 144, 46 Atl. 347, 50 
5 Abb. Prac. 41, 49; Streshley v. L. R. A. 401. 

Powell, 51 Ky. (12 B. Mon.) 178, 3Neg. Inst. Law, § 25, where all 

180. cases directly or indirectly bearing 

2 Eastman v. Miller, 113 la. 404, upon or citing the Law are grouped. 
85 N. W. 635 ; St. Marks Church As to antecedent debt as considera- 
V. Teed, 120 N. Y. 583, 24 N. E. tion, see note 1 Am. St. Rep. 136. 
1014, 1015; Chicora Fert. Co. v. 

72 



§ 62 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. IZ 

consideration to sustain the making or indorsing of a promissory 
note in favor of the payee or other holder."* 

So there may be sufficient consideration to support a note, 
although the payee does not actually give anything of value to 
the promisor, it will be sufficient if there is any damage or detri- 
ment to the payee, although no actual benefit accrued to the 
promisor.'*" 

In general a valuable consideration as applied to the law of 
commercial paper is any consideration sufficient to support a 
simple contract. Thus a cross acceptance,^ the forbearance of a 
debt of a third person,^ the compromise of a disputed liability'^ 
or a debt barred by the statute of limitations,^ are held to con- 
stitute a valuable consideration. 

Where a person has a valid and subsisting right or interest in 
property, a waiver or release thereof is a sufficient consideration 
for a promissory note made to such person.^ 

If a claim is clearly illegal and unfounded and no proceedings 
have been instituted thereon, a note given in settlement thereof is 
however without consideration.^** If there be any reasonable 
doubt about the validity of the claim, a compromise thereof is a 
sufficient consideration for a note, and in an action on such a 
note the invalidity of the claim compromised cannot be asserted.** 
Ignorance of the maker's rights in respect to an alleged liability 
will not affect the validity of a note given on account of such 
liability.*^ A note given by the treasurer of a corporation in 
consideration of the discharge of a disputed claim against such 
corporation is valid.*' . 

The Negotiable Instruments Law provides, as above set out, 
that an antecedent or pre-existing debt is a valuable considera- 
tion in support of a bill or note when the bill is received in 
absolute payment of the original debt, yet if received for nothing 

4 Story on Promissory Note, ^ Sykes v. Laferry, 27 Ark. 407; 
§ 186; Currie v. Misa, L. R. 10 Bradbury v. Blake, 25 Me. 397. 
Exch. 153, 162. lo Bullock v. Ogden, 13 Ala. 346; 

4aAbleman v. Haehnel, 57 Ind. Tucker v. Ronk, 43 la. 80; Fuller 
App. 15, 103 N. E. 869. v. Green, 64 Wis. 159, 24 N. W. 907, 

5 Backus V, Spalding, 116 Mass. 54 Am. Rep. 600. 

418 ; Dockray v. Dunn, Z1 Me. 442. " Tyson v. Woodruff, 108 Ga. 

« Thompson v. Gray, (yZ Me. 376 ; 368, 33 S. E. 981 ; Keefe v. Vogle, 

Harris v. Harris, 180 111. 157, 54 36 la. 87; Easton v. Easton, 112 

N. E. 180. Mass. 438. 

'"Wyatt V. Evins, 52 Ala. 285; la Bennett v. Ford, 47 Ind. 264; 

Jones V. Ritterhouse, 87 Ind. 348; Daily v. Jessup, 72 Mo. 144; Mory 

Feeter v. Weber, 78 N. Y. 334. v. Laird, 108 la. 670, 11 N. W. 835. 

^Way V. Sperry, 6 Cush. 238; 13 National Bank v. Foster, 85 

Giddings v. Giddings, 51 Vt. 227. Hun Zl^, 32 N. Y. S. 1031. 



74 NEGOTIABLE INSTRUMENTS. §62 

but a conditional payment, the holder's rights will be determined 
by a subsequent rule governing the bills taken as collateral 
security. In some jurisdictions as in Illinois the above section of 
the statute is changed to read as follows: "An antecedent or 
pre-existing claim, whether for money or not, constitutes value 
where an instrument is taken either in satisfaction therefor or as 
security therefor, and is deemed such, whether the instrument is 
payable on demand or at a future time." 

While in some other jurisdictions, as in Wisconsin, the statute 
provides that the "'antecedent or pre-existing debt" must be dis- 
charged, extinguished or extended" and adds : "But the indorse- 
ment or delivery of negotiable paper as collateral security for a 
pre-existing debt, without other consideration, and not in pur- 
suance of an agreement at the time of delivery, by the maker, 
does not constitute value." A promissory note given by the 
maker, in exchange for a promissory note given by the payee, is 
for a valuable consideration, and is in no sense an accommoda- 
tion paper, although made for the mutual accommodation of the 
parties.^^ A consideration founded on love and affection, as that 
naturally existing between husband and wife, father and son, 
etc., or upon gratitude, is known as a good consideration, as 
distinguished from a valuable consideration, and is not of itself 
sufficient to support the obligation of a bill or note as between 
the original parties thereto,^^ and the promise to pay an already 
existing debt, or the actual payment thereof, is not "value" within 
the meaning of the above section of the statute.-*'^* 

A note may be given for services to be rendered, and upon 
the rendition of the services the consideration becomes complete 
and will be sufficient to sustain the validity of the note even if 
the services are not equal in value to the amount of the note. 
Services rendered out of kindness, and without expectation of 
reward, although of value, are not a sufficient consideration to 
support a note.*® But the consideration is not affected by the 
fact that the services were rendered without an express promise 
to pay.*'^ 

14 Farber v. National Forge Co., ^^a Morris County Brick Co. v. 
140 Ind. 54, 39 N. E. 249 ; Wil- Austin, 79 N. J. Law, 273. 

liams V. Banks, 11 Md. 198; Backus i« Miller v. AIcKenzie, 95 N. Y. 

V. Spalding, 116 Mass. 418. 575, 47 Am. Rep. 85; Coe v. Smith, 

15 Fink V. Cox, 18 Johns. (N. Y.) 1 Smith (Ind.) 88; Mitcherson v. 
145, 9 Am. Dec. 191 ; In re Camp- Dozier, 7 J. J. Marsh (Ky.) 53y 
bell Estate, 7 Pa. St. 100, 47 Am. 22 Am. Dec. 116. 

Dec. 503 ; Kerns' Estate, 171 Pa. ^^ Root v. Strang, 77 Hun 14, 28 

St. 55, 33 Atl. 129. N. Y. S. 273 ; Gramwell v. Mosley. 

11 Gray 173. 



§ 62 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 75 

An. agreement to marry, which is afterward fulfilled, is a suf- 
ficient consideration for a note made by the intended husband ;** 
and notes given for establishing such public institutions as 
churches, schools and hospitals, are supported by a sufficient con- 
sideration.*'^* So when a number of persons subscribe an instru- 
ment, whereby they agree to pay certain sums of money, severally, 
to be expended in the erection of a college building, their mutual 
promises constitute a sufficient consideration for the promise of 
each.*^'' And it has been held that while notes which are given 
by one or more persons to any corporation or other legal person, 
or any trustees by way of voluntary subscription, to raise a fund 
to promote an object, may be open to the defense of want of 
consideration, yet the instruments are enforceable^ if it appears 
that the donee has, prior to any revocation, entered into engage- 
ments or made expenditures based on such promises, so that he 
must suffer loss or injury if the note is not paid.*®" 

Cross-notes, bills or checks are good consideration for each 
other; such are given for the mutual accommodation of the 
parties thereto, or of one of them, in which the maker and payee 
of one are respectively the payee and maker of the other, and a 
similar relationship exists as between acceptors of cross-bills of 
exchange or the makers of cross-checks.**'' 

An agreement or promise to make a gift in the future, not 
being based upon a valuable consideration, is not enforceable, 
even when put in the form of a promissory note ; *** thus gift notes 
are not supported by sufficient consideration ; the donor's own 
note or bill of exchange is not a good subject or gift either infer 
invos or causa mortis. Such a gift is but a promise to pay a sum 
certain at a future day and cannot be enforced either at law or in 
equity.*®* A mere moral obligation is not a sufficient considera- 
tion to support a promissory note between the parties to such 
obligation.^" Forbearance to prosecute a legal claim is a suffi- 
cient consideration to support a promissory note.^* 

IS Wright V. Wright, 54 N. Y. *s«' American National Bank v. 

437; Prescott v. Ward, 10 Allen Patterson, 145 La. — , 82 So. 218, 7 

(Mass.) 203; Blanshaw v. Russell, A. L. R. 1563. 

52 N. Y. S. 963. See note in 7 A. L. R. 1563, at 

*8a Johnston v. The Wabash Col- p. 1569. 

lege, 2 Ind. 555. 19 Williams v. Forbes, 114 111. 

IS" Higcot V. The Trustees of In- 167, 28 N. E. 463 ; Johnston v. 

diana Asbury Universitv, 53 Ind. Griest, 85 Ind. 503 ; Ricketts v. 

326. ' Scothcrn, 57 Neb. 51, 77 N. W. 365. 

Note in 52 L. R. A. (N. S.) 220. i»a Harmon v. James, 7 Ind. 263. 

*^"' Beatty's Estate v. Western -** Nightingale v. Barney, 4 G. 

College of Toledo, Iowa, 177 III. Greene Cla.) 106; Nash v. Russell, 

280. 52 N. E. 432, 69 A. S. R. 242, 5 Barb. (N. Y.) 556. 

42 L. R. A. 797. 21 Anstell v. Rice, 5 Ga. 472 ; Jen- 



76 . NEGOTIABLE INSTRUMENTS. § 62 

Receiving a bill or note as security for a debt^^ or forbearance 
to sue upon a present claim or debt,^^ or the dismissal of a pend- 
ing suit,*'* or the surrender of a prior valid note,*'^ or becoming 
a surety,** or giving an extension of time to an imputed debtor,*'^ 
or doing any act at the request of the drawer, indorser, or ac- 
ceptor, will be sufficient consideration for a bill or note. An 
extension of time upon an indebtedness is sufficient consideration 
for a promissory note given as collateral therefor.** 

A fluctuating balance may form a consideration for a bill or 
note.*** As where bills or notes are deposited as a security for 
the balance of an account current, the successive balances form 
a shifting consideration for the bill or note.^" But where the 
account has been settled or transferred prior to the execution of 
the note, the consideration of course fails, and the note is in- 
valid.^^ ; 

The Negotiable Instruments Law provides: 

"Where the holder has a lien on the instrument, arising either 
from contract or by implication of law, he is deemed a holder 
for value to the extent of his lien.^^* 

One who has taken a negotiable instrument as collateral 
security has a lien upon it and is within the terms of the last 
named section of the statute.^" 

The holder of collateral security, that is, the pledgee is, in 
general, entitled to recover the full amount due on the instru- 
ment, with liability to account for the surpl.us to the pledgor,'^" 

nison v. Stafford, 1 Cush. (Mass.) Burton, 64 Vt. 387, 24 Atl. 769, 16 

168, 48 Am. Dec. 55 ; Lavell v. Frost, L. R. A. 664 ; Whelan v. Swain, 

16 Mont. 93, 40 Pac. 146. 132 Cal. 389, 64 Pac. 560. 

23 Youngs V. Lee, 12 N. Y. 551 ; 28 Ballard v. Burton, 64 Vt. 387, 
Bank of Rochester v. Bentley, 27 24 Atl. 769, 16 L. R. A. 664 ; Brain- 
Minn. 87, 6 N. W. 422; Allaire v. ard v. Harris, 14 Ohio 107, 45 Am. 
Hartshorne, 21 N. J. L. 665. Dec. 525. 

23 Worcester Nat. Bank v. Chee- 29 Perse v. Hirst, 10 B. & C. 

nev, 87 111. 602. (Eng.) 122; Richards v. Macv, 14 

24Wyatt V. Evins, 52 Ala. 285; M. & W. (Eng.) 484. 

Brown v. Ladd, 144 Mass. 310; softwood v. Crowdie, 1 StarE 

10 N. E. 839; Spielberger v. (Eng.) 483. 

Thompson, 131 Cal. 55. 63 Pac. 132. 31 Johnson v. Mitchell, 14 Colo. 

25 Youngs V. Lee, 12 N. Y. 551; 227, 23 Pac. 452; First Nat. Bank 
Stevens v. Campbell, 13 Wis. 375 ; v. Henry, 156 Ind. 1, 58 N. E. 1057. 
Bank of Rochester v. Bentley, 27 3ia jsj^g 1^5^ l^j^^ § 27 and cases 
Minn. 87, 6 N. W. 422; Whelan v. cited. 

Swain, 132 Cal. 389, 64 Pac. 560. 3ib Bruster v. Shrader, 26 Misc. 

26 Harrell v. Tenant, 30 Ark. 684 ; Rep. (N. Y.) 480; Wilkins v. Usher, 
Pauly V. Murray, 110 Cal. 13, 42 133 Ky. 696. 

Pac. 313; Gay v. Mott, 43 Ga. 252. SicCamden National Bank v. 

27 Brainerd v. Harris, 14 Ohio Fries-Breslin Co., 214 Pa. St. 395. 
107, 45 Am. Dec. 525; Ballard v. 



§ 63 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 71 

but if the pledgor could not recover upon the instrument, then 
the extent of the recovery will be limited to the amount of the 
debt due to the pledgee; and even though the principal obliga- 
tion is not due at the time of bringing suit on the collateral, 
the pledgee has a right to enforce the collection of the col- 
latteral.3" 

§ 63. The necessity of consideration. By the common law a 
promise made without consideration was invalid, and in order to 
enforce any contract, it was necessary to aver and prove a con- 
sideration. 

The most ancient exception to this rule was made in reference 
to a promise under seal, the solemn act of the party in attaching 
a seal to the evidence of his contract being regarded as importing 
or excusing a consideration and estopping him from denying it. 
The necessities of trade soon produced another relaxation of 
the rule ; and by the usage and custom of merchants, bills of 
exchange and promissory notes came to be regarded as prima 
facie evidence of consideration : and peculiar qualities were ac- 
corded to them which were possessed by no other securities for 
debt. 

It is presumed that every negotiable instrument was given 
upon a valuable consideration, and words acknowledging receipt 
of consideration are not essential to the validity of the paper. 

If the instrument sued on is negotiable, it is unnecessary to 
aver or prove consideration, for it is imported and presumed from 
the fact that it is a negotiable instrument.*^ But if the paper 
does not possess the quality of negotiability, it does not, per se, 
import a consideration,** and it must be averred and proved 
unless it be stated on its face that it was given for "value re- 
ceived," or contains some other equivalent expression, in which 
case it would be prima facie evidence of consideration.*'* 

As between the immediate parties to a negotiable instrument, 
an actual, valid and valuable consideration cannot be dispensed 
with.**^ In such case the presumption as to the validity and value 

sid Elk Valley Coal Co. v. Third ^* Conrad Seipp Brewing Co. v. 

Nat. Bank, 157 Ky. 617. McKittrick, 86 Mich. 191, 48 N. W. 

32 Germania Bank v. Michaud, 62 1086 ; Averett v. Brooker, 15 Gratt. 

Minn. 459, 65 N. W. 70, 54 Am. Sf 163, 76 Am. Dec. 203 ; Cowee v. 

Rep. 653, 30 L. R. A. 286; Adams Cornell, 75 N. Y. 91, 31 Am. Rep. 



V. HackeU, 27 N. H. 289, 59 Am 
Dec. 376; Perot V. Cooper, 17 Colo 
80, 28 Pac. 391, 31 Am. St. Rep. 258 
*3 Bristol V. Warner, 19 Conn. 7 
Siddle V. Anderson, 45 Pa. St. 464; ran, 55 Pa. St. 59 
Averett v. Booker, 15 Gratt. (Va.) 
163, 76 Am. Dec. 203. 



428; Rowland v. Harris, 55 Ga. 141. 

ssCatlin v. Home, 34 Ark. 169; 

Roberts v. Million, 17 Kv. L. Rep. 

599, 32 S. W. 320: Hildeburn v. Cur- 



78 NEGOTIABLE INSTRUMENTS. ' § 64 

of the consideration only affects the proof ; the burden of proof 
being thereby shifted from the person to whom the instrument 
is payable to the person who is liable thereon.^^ In seeking to 
recover on a simple contract, it is a general rule that the plain- 
tiff must allege and prove that the contract was made on a valu- 
able consideration. But to this rule commercial paper is an 
exception. It would seem then that as between a promisor and 
a promisee of a promissory note, or the drawer and drawee of a 
bill of exchange, a lack of legal consideration would be a good 
defense in an action on such note or bill.^'' As between imme- 
diate parties, the ordinary rules of contracts as to consideration 
prevail, such as that the consideration must be valuable^* as dis- 
tinguished from merely good,^''* that it need not be entirely 
adequate,*** and that it must not be illegal.** 

§ 64. Presumption of consideration. Bills of exchange and 
promissory notes like simple contracts under seal or executed 
pursuant to a statute, import a consideration.*^ The presump- 
tion of a consideration is of much importance in business trans- 
actions, and should not be lightly disregarded in favor of those 
who have carelessly, or by being unduly confiding, set afloat com- 
mercial paper.*^^ There are some decisions which hold that a non- 
negotiable instrument does not import a consideration unless it 
is so declared by statute.*^ Some other decisions hold that a 
non-negotiable instrument also imports a consideration.** 

3« Stevens v. McLachlan, 120 denhack, 48 Ohio St. 177, 26 N. E. 

Mich. 285, 79 Am. Dec. 627 ; New- 979, 29 Am. St. Rep. 540. 

ton V. Newton, 11 Tex. 508, 14 S. *! Ketchum v. Scribner, 1 Root 

W. 157; Dalrymple v. Wyker, 60 (Conn.) 95; Parsons v. Randolph, 

Ohio St. 108, 53 N. E. 713; Perot 21 Mo. App. 353; Brisbane v. Les- 

V. Cooper, 17 Colo. 80, 28 Pac. 391, tarjette, 1 Bay (S. C.) 113. 

31 Am. St. Rep. 258. *2 Brown v. Johnson Bros., 135 

37 Fisher v. Salmon, 1 Cal. 413. Ala. 608, Z2> So. 683; Byrd v. Ber- 
54 Am. Dec. 297; Kelley v. Guy, 116 trand, 7 Ark. 32; Fuller v. Hutch- 
Mich. 43, 74 N. W. 291; Williams ins, 10 Cal. 523. 70 Am. Dec. 746; 
V. Culver, 30 Oreg. 375, 48 Pac. 365. Carnwright v. Gray, 127 N. Y. 92, 

38 Irwin V. Lombard Uni., 56 27 N. E. 835, 24 Am. St. Rep. 424. 
Ohio St. 9, 36 L. R. A. 239, 60 Am. 12 L. R. A. 845. See note 5 U. S. L. 
St. Rep. 239, 46 N. E. 63 ; Holt v. Ed. 87. 

Robinson, 21 Ala. 106 ; Currie v. 42a Lassas v. McCarty, 47 Ore. 

Misa, L. R. 10 Exch. 153. 474. 

3» Pierce v. Walton, 20 Ind. App. "^3 Tibbets v. Thatcher, 14 Ind. 86. 

66, 53 N. E. 309 ; Potter v. Grade, ** Carnwright v. Gray, 127 N. Y. 

58 Ala. 313, 29 Am. Rep. 748. 92, 27 N. E. 835, 24 Am. St. Rep. 

40Cowee v. Cornell. 75 N. Y. 91, 424, 12 L. R. A. 845; Caples v. 

31 Am. Rep. 428 : Whcelock v. Bar- Branham, 20 Mo. 244. 64 Am. Dec. 

ney, 27 Ind. 462 ; Kitchen v. Lou- 183 ; Arnold v. Sprague, 34 Vt. 402. 



§ 65 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 79 

In those jurisdictions where it has been held that these instru- 
ments import a consideration it is unnecessary to use the words 
"Value received."'*® These words are surplusage and their omis- 
sion does not in any way affect the legal import of the paper, or 
weaken the presumption that it was given for value.^®* But in 
case of a non-negotiable instrument, they are important, for they 
amount to a prima facie admission that the instrument was issued 
for a sufficient consideration.'**" If these words are included in 
the bill or note, the maker's or other person's right to defend on 
the ground of want of, failure of, or illegality of consideration is 
not affected.'** 

"Every negotiable instrument is deemed prima facie to have 
been issued for a valuable consideration: and every person whose 
signature appears thereon to have become a party thereto for 
valuer'''^ 

§ 65. Sufficiency of consideration. Any act of the maker 
from which the acceptor derives a benefit or from which the 
maker may sustain any detriment or inconvenience, is a sufficient 
consideration to support a promise.'** If there is no fraud in the 
transaction the fact that the consideration is not equal to the 
obligation incurred is no defense.*** In such case if the consid- 
eration is not wanting at the time the obligation is incurred and 
does not fail in any part thereof afterwards, it is sufficient. If 
that which was given as a consideration for a promissory note is 
worthless it has been held that the maker cannot avail himself of 
it as a defense.'*® But if the worthlessness of the thing given 
in consideration for the note consists in a defect of title it may 
be used as a defense.'^ 

§ 66. Inadequacy of consideration. It is not necessary that 
the consideration should be adequate to the obligation incurred 

45 Salazar v. Taylor, 18 Colo. 538, 49 Miller v. McKcnzie, 95 N. Y. 

2)2, Pac. 369; Stacker v. Hewitt, 2 575; 47 Am. Rep. 85; Boggs v. 

111. 207. Wann, 58 Fed. 681; Root v. 

45aMcLeod V. Hunter, 29 Misc. Strange, 77 Hun 14, 28 N. Y. S. 

(N. Y.) 559. 273, 59 N. Y. St. 258; Kitchen v. 

^^ Owen V. Blackburn, 161 App. Loudenback, 48 Ohio St. 177, 26 

Div. (N. Y.) 827; DuBosque v. N. E. 979, 29 Am. St. Rep. 540. 
Munroe. 169 App. Div. (N. Y.) 821. 50 Bryant v. Pember, 45 Vt. 487; 

46Bruyn v Russell, 60 Hun 290, Lester v. Webb, 5 Allen (Mass.> 

14 N. Y. S. 591; Perley v. Perley, 45; Ried v. Prentiss, 1 N. H. 174, 

144 Mass. 104, 10 N. E. 726. 8 Am. Dec. 50. 

47 Neg. Inst. Law, § 24, and cases 51 Prjsbie v. Hoffnagle, 11 Johns, 
there cited. (N. Y.) 50; Crawford v. Beard, 4 

48 Holt V. Robinson, 21 Ala. 106, J. J. Marsh. (Ky.) 187; Scudder 
56 Am. Dec. 240; Holley v. Adams, v. Andrews, 2 McLean (U. S.) 464, 
16 Vt. 206, 42 Am. Dec. 508. 21 Fed. Cas. No. 12,564. 



80 NEGOTIABLE INSTRUMENTS. § 67 

in order that the parties may be bound.^^ The only essential 
element in this respect is that the consideration must be a valuable 
one.^* Thus in an action upon a promissory note given as the 
price of real or personal property, it will not avail as a defense 
to the note that the property conveyed was inadequate for the 
amount of the note.'^^ The mere fact that a bargain is hard and 
unreasonable will not induce even a court of equity to interfere. 
The law presumes that a man is capable of managing his own 
affairs and the fact as to whether or not his bargains are wise 
or unwise is not a proper question for either a legal or equitable 
tribunal. While inadequacy of consideration is not of itself a 
sufficient ground for either legal or equitable relief yet it may 
be shown as evidence of fraud. Ordinarily the mere fact of in- 
adequacy of consideration has very little weight, when standing 
alone, but coupled with other elements tending to show fraud it 
becomes a very material factor of constructive fraud.'^^ 

It has been generally held that a note for a patent right which 
is of no value, either because it is useless or because the patent is 
void, is without consideration and therefore not enforceable.'** 
The fact that the vendor believed, at the time of the sale, that 
the patent was valid is not material.^'^ It should be noticed, in 
this connection, that an invention which is not useful cannot be 
patented, and therefore a patent for a useless invention is void. 
If an invention is useful, in the sense that it may be applied to 
some practical or beneficial purpose, it is patentable, and the de- 
gree of its utility or practical value does not affect the validity of 
the patent. If there is a valid patent, in this sense, the court 
will not inquire into the adequacy of the consideration.^^ 

§ 67. Illegal, immoral and fraudulent consideration. Where 
the consideration is illegal in whole or in part it is a defense 
against the entire note while in the hands of an immediate party 
or one who is not a bona fide holder for value without notice. 

52Anstell V. Rice. 5 Ga. 472; S. E. 799; Green v. Lowry, 38 Ga. 

Boggs V. Wann, 58 Fed. 681 ; Cowee 548; Abbe v. Newton, 19 Conn. 20. 

V. Cornell, 75 N. Y. 91, 31 Am. Rep. ^Gjilson v. Catling, 60 Ark. 114, 

428. 29 S. W. 35; Mooklar v. Lewis, 40 

53 Holt V. Robinson, 21 Ala. 106, Ind. 1 ; Rowe v. Blanchard, 18 Wis. 

56 Am. Dec. 240; Holley v. Adams, 441, 86 Am. Dec. 783. 

16 Vt. 206, 42 Am. Dec. 508. 57 Lester v. Palmer, 4 Allen 

54 Johnson V. Titus, 2 Hill (N. (Mass.) 145. 

Y.) 606; Barnum v. Barnum, 8 58 Nash v. Lull, 102 Mass. 60, 3 

Conn. 469, 21 Am. Dec. 689 ; Perley Am. Rep. 435 ; Hil^reth v. Turner, 

V. Balch, 23 Pick. (Mass.) 283, 34 17 m. 184; Harmon v. Bird, 22 

Am. Dec. 56. Wend. (N. Y.) 113. 

55 Jones V. Degge, 84 Va. 685, 5 



§ 68 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 81 

Common law considerations are illegal which ( 1 ) violate the rules 
of religion or morality, or (2) are such as contravene public 
policy.'*'*' Many acts in themselves immoral are made by statute 
illegal considerations for the support of commercial paper. A 
note given for future illicit cohabitation is invalid,*® although if 
it be given in consideration of past cohabitation it is enforce- 
able.®^ A note by a husband to his wife, upon the promise of the 
wife to withdraw all opposition to proceedings for divorce insti- 
tuted by him, is founded upon an illegal consideration.®^ 

A distinction is to be made between a consideration simply 
illegal and one which by statute expressly makes the bill void. 
In the former case a bona Ude transferee may recover, though 
not in the latter.®* 

When the consideration for commercial paper is clearly fraudu- 
lent it is a good defense against an immediate party or a remote 
party unless he is an innocent holder for value.®"* If the instru- 
ment is yet in the hands of a party with notice a court of law 
will compel its surrender, or restrain its negotiation until the 
question of fraud is settled.** 

§ 68, Want or failure of consideration. Want or failure of 
consideration is only a defense as against an immediate party or 
as against a remote party who is not a holder for value.®® It is 
not a defense against a remote holder for value. 

As between the original parties to a bill or note want of con- 
sideration then is a good defense, and this is so although the 
words *'for value received" are contained in the instrument.®'' 
This want of consideration may be total or partial ; in the former 
case it affects the entire validity pro fanto.^^ So also a failure 

59 Scott V. Magloughlin, 133 111. ^^ Angier v. Brewster, 69 Ga. 362 ; 

33, 24 N. E. 1030; Hamilton v. Hickson v. Early, 62 S. C. 42, 39 S. 

Scull, 25 Mo. 165, 69 .\m. Dec. 460; E. 782; Von Windisch v. Klaus, 46 

Powell V. Inman, 52 N. C. 28. Conn. 433. 

«OMassey v. Wallace, 32 S. C. «5Zeigler v. Beasley, 44 Ga. 56; 

149, 10 S. E. 937 ; Potter v. Gracie, Moeckly v. Gorton, 78 la. 202, 42 

58 Ala. 303, 29 Am. Rep. 748. N. W. 648; Streissguth v. Kroll, 86 

61 Brown v. Kinsey, 81 N. C. 245; Minn. 325, 90 N. VV. 577; King v. 

People V. Hayes, 140 N. Y. 484, 35 Baker, 1 Yerg. 450. 

N. E. 951. e«Whitt v. Blount, 124 Ga. 671, 

«2 Sayles v. Sayles. 21 N. H. 312, 53 S. E. 205 ; Homer v. Johnston, 

53 Am. Dec. 208; Bend v. Bend, 65 5 Miss. (6 How.) 698; Fellers v. 

Cal. 354, 4 Pac. 229. Penrod, 57 Neb. 463, 77 N. W. 1085. 

«3 Wheeler v. Russell, 17 Mass. 67 Morton v. Stone, 67 N. H. 367, 

258; Vanmeter v. Spurrier, 94 Ky. 29 Atl. 845. 

22, 21 S. W. 337 ; Whitman v. 6S r^ss Lumber Co. v. Muscupi- 

Freese, 23 Me. 185. abe L. & W. Co., 120 Cal. 521, 52 



82 NEGOTIABLE INSTRUMENTS. § 69 

of consideration is, in most jurisdictions, deemed a valid defense 
in an action on a note or bill. But there is more difficulty as to 
a partial failure of consideration ; in such a case the rule seems 
to be that unless the facts are such that the amount to be de- 
ducted because of the partial failure can be definitely computed, 
or unless the amount is liquidated or in the nature of a certain 
debt, such partial failure of consideration will constitute no de- 
fense.®** There are many jurisdictions, however, where a par^ 
tial failure of consideration is permitted as a valid defense, al- 
though the amount be unliquidated,''** and in some jurisdictions 
such partial failure is declared a defense by statute.'^-^ 

"Absence or failure of consideration is matter of defense as 
against any person not a holder in due course; and partial failure 
of consideration is d defense pro tanto, whether the failure ts an 
ascertained and liquidated amount or otherwise.'"''^ 

So under the express terms of the above section of the statute 
failure of consideration is not a defense as against a bona fide 
holder for value but as against any person not a holder In due 
course the question of consideration is always open even though 
the instrument itself is prima facie evidence of the considera- 
tion.''^* 

§ 69. BetrtA^een v^^hom question of consideration may be 

raised. As a general rule the want or failure of consideration 
can only be raised as between the immediate parties.'^^ This 
question may also be raised against any purchaser of the instru- 
ment who takes it with notice of such want or failure of the con- 
sideration,'"'* unless he acquires title from a bona Me purchaser 
for value. In the case of the indorsement of an instrument the 
question of consideration for the indorsement may be raised as 

Pac. 995, 65 Am. St. Rep. 186 ; ^2 Neg. Inst. Law, § 28, and cases 

Journal Printing Co. v. Maxwell, 1 there cited. 

Pennew. (Del.) 511, 43 Atl. 615; 72a -patum v. Commercial Bank, 

Wadsworth v. Smith, 10 Shep. 185 Ala. 249; Anthony v. Valen- 

(Me.) 500; Brown v. Roberts, 90 tine, 130 Mass. 119. 

Minn. 314, 96 N. W. 793. 73 Wynne v. Whisenant. 27 Ala. 

6» Pulsifer V. Hotchkiss, 12 Conn. \6 ; Risley v. Gray, 98 Cal. 40, 32 

234; Allen v. Bank of U. S., 20 Pac. 884; Storm Lake etc. Bank v. 

N. J. L. 620; Lloyd v. Jewell, 1 Me. Felt, 100 la. 680, 69 N. W. 1057; 

352, 10 Am. Dec. 7Z. Fitch v. Redding, 4 Sandf. (N. Y.) 

70Wentworth v. Dows, 117 Mass. 130. 

14. ''4JJUSS Lumber etc. Co. v. Mus- 

71 Schuchman v. Knoebel, 27 111. rupiabe Land etc. Co., 120 Cal. 521, 

175; Webster v. Parker, Ind. 185; 52 Pac. 995, 65 Am. St. Rep. 186; 

Martin v. Iron Works, Fed. Cas. Skinner v. Raynor, 95 la. 536, 64 

No. 9,157. N. W. 601 ; Hale v. Aldafifer, 5 Kan. 

App. 40, 5 Pac. 194. 



§ 70 CONSIDERATION OF NEGOTIABLE INSTRUMENTS. 83 

between the indorser and indorsee.''^ In a bill of exchange the 
want or failure of consideration may be shown in an action 
brought by the payee against the drawer, by the indorsee against 
the payee, or by the drawer against the acceptor, but not in an 
action between the payee and acceptor^* 

The Negotiable Instruments Law states: 

"Where value has at any time been given for the instrument, 
the holder is deemed a holder for value in respect to all parties 
who became such prior to that time.'"^^^ 

§ 70. As to accommodation paper. The following provision 
is found in the Negotiable Instruments Law: 

"An accommodation party is one zvho has signed the instru- 
ment as maker, drawer, acceptor or indorser, without receiving 
value therefor, and for the purpose of lending his name to some 
other person. Such a person is liable on the instrument to a 
holder for value notunthstanding such holder at the time of taking 
the instrument knew him to be only an accommodation party/"''' 

The mercantile credit of parties is frequently loaned to others 
by the signature of their names as drawer, acceptor, maker, or 
indorser of a bill or note, to raise money upon, or to use otherwise 
for their benefit.''^ Such instruments are termed accommodation 
paper. An accommodation bill or note, then, is one to which the 
accommodation party has put his name, without consideration, 
for the purpose of accommodating some other party who is to 
use it, and is expected to pay it.'"'* Between the accommodating 
and accommodated parties, the consideration may be shown to be 
wanting, but when the instrument has passed into the hands of a 
third party for value, and in the usual course of business, it 
cannot be. But if the holder has notice of defenses, the accom- 
modation party may set up any defense which would avail the 
party accommodated, as to set ofif a debt due from the holder 
to the party accommodated. Until an accommodation bill has 

■^5 Shanklin v. Cooper, 8 Blkfd. cases directly or indirectly bearing 

(Ind.) 41 ; Larrabee v. Fairbanks, upon or citing the Law are grouped. 

24 Me. 363, 41 Am. Dec. 389 ; Mar- ^8 Dunn v. Weston, 71 Me. 270 

tin V. Kercheval, 4 McLean (U. 36 Am. Rep. 310; Lenheim v. Wil- 

S.) 117, 16 Fed. Cas. No. 9,163. marding, 55 Pa. St. 73. As to na- 

''6 Hoffman v. Bank of Milwau- ture of contract on accommodation 

kee, 12 Wall. 191 ; Hunt v. John- paper, see note 31 Am. St. Rep. 

ston, 96 Ala. 130, 11 So. 387; Mer- 745. 

rill V. Packer, 80 la. 543, 45 N. W. ''ttjeffeson Co. v. Burlington etc. 

1076. Ry. Co., 66 la. 385, 16 N. W. 561 ; 

76a jsjeg jnst. Law, § 26 and cases Oilman v. Henry, 53 Wis. 465, 10 

there cited. N. W. 692 ; Vitkovitch v. Kleinecke, 

" Neg. Inst, Law, § 29, where all 33 Tex. Civ. App. 20, 75 S. W. 544. 



84 NEGOTIABLE INSTRUMENTS. § 70 

been negotiated the accommodation party may rescind his obliga- 
tion and demand the recall of the instrument or the cancellation 
of his signature. The consideration given by a holder for value 
of accommodation paper makes the paper enforceable against all 
parties to it, and in some jurisdictions this is true even where the 
paper has been negotiated after due.^'* 

It is a well established rule that a promissory note given by 
the maker, in exchange for a promissory note given by the payee, 
is for a valuable consideration, and is in no sense an accommoda- 
tion paper, although made for the mutual accommodation of the 
parties.*^ And this is so though the note given in exchange Is 
worthless.*^ And it has been held that an indorsement of X's 
note by Y to Z is a good consideration for a note from Z to Y, 
and it is no defense to Z's note that he failed to recover against 
X on the note indorsed to him by Y.*^ 

The words "without receiving value therefor" in the section of 
the statute above set out refer to the instrument itself, and not 
to the loan of the name by way of accommodation.^^* 

An accommodation indorser has the right to retract his in- 
dorsement at any time before the paper is negotiated for his 
mdorsement and his continuing to be so are alike voluntary until 
rights arise by the negotiation to third parties.^^'' 

80 French v. Bank of Columbia, ■*^2 j^jce v. Grange, 131 N. Y. 149, 

4 Cranch 141 ; Stephens v. Monon- 30 N. E. 46. 

gahela Nat. Bank. 88 Pa. St. 157, S3 Luke v. Fisher, 10 Cush. 

32 Am. Rep. 438; Pray v. Rhodes, (Mass.) 271. As to power of cor- 

42 Minn. 93, 43 N. W. 838; Clark poration to issue accommodation 

V. Thayer, IDS Mass. 216, 7 Am. paper, see nat in 9 L. R. A. (N. 

Rep. 511. S.) 193. 

s* Backas v. Spalding, 116 Mass. ^^^^ Morris County Brick Co. v. 

418 ; Farber v. Nat. Forge Co., 140 Austin.. 79 N. J. Law, 273. 

Ind. 54, 39 N. E. 249; Williams v. «3b Bg^kley v. Tinsley, 88 Vt 

Banks, 11 Md. 198. 1001. 



CHAPTER VIII. 



SUBDIVISION A— ACCEPTANCE OF BILLS. 



§ 71. Meaning of term. 

72. Object of acceptance. 

73. Form of acceptance. 

74. Nature and effect of accep- 

tance. 

75. According to tenor of bill. 

76. Delivery. 

77. Acceptance of incomplete bill. 

78. Varieties of acceptance — In 

general. 

79. Varieties of acceptance — As 

to terms — General accep- 
tance. 

80. Varieties of acceptance — As 

to terms — Qualified accep- 
tance. 

81. Varieties of acceptance — As 

to form — In general. 

82. Varieties of acceptance — As 

to form — Written. 



83. Varieties of acceptance — As 

to form — Parol. 

84. Varieties ,oi acceptance — As 

to mode of proof — Express. 

85. Varieties of acceptance — As 

to mode of proof — Implied. 

86. Acceptance of bills drawn in 

sets. 

87. Revocation of acceptance. 

88. What bills must be presented 

for acceptance. 

89. By and to whom presentment 

should be made. 

90. Time of presentment. 

91. Place of presentment. 

92. Presentment excused. 

93. Acceptances for honor, or 

supra protest. 



§ 71. Meaning of term. The acceptance of a bill of exchange 
is the act by which the person on whom a bill of exchange is 
drawn (called the drawee) assents to the request of the drawer 
to pay it, or, in other words, engages, or makes himself liable, to 
pay it when due.^ 

As stated in the Negotiable Instruments Law : 

"The acceptance of a bill is the signiiication of the drazvee of 
his assent to the order of the draiver.'^^ 

The presumption is that every bill of exchange is drawn on 
account of some indebtedness from the drawee to the drawer, and 
that the acceptance is an appropriation of the funds of the latter 
in the hands of the former; and the rule of law is not unjust 
that prevents the acceptor from setting up a want of funds of 



1 Swope V. Ross, 40 Pa. St. 186, 
80 Am. Dec. 567; Kimbark v. Car 
etc. Co., 103 111. App. 632 ; Wolcott 
V. Van Santvoord, 17 Johns. (N. 
Y.) 248, 8 Am. Dec. 396. 



2 Neg. Inst. Law, § 132, where all 
cases directly or indirectly bearing 
upon or citing the Law are grouped. 



85 



86 NEGOTIABLE INSTRUMENTS. § 71 

the drawer in his hands, since it was his duty before he accepted 
the bill to find out whether he owed the drawer that amount. 
The payee or other holder of the bill had no means of knowing 
how the fact was as it was in the knowledge of the drawee and 
the payee or holder proceeding on the bill had a right to assume 
that the drawee would not accept the bill unless he had sufficient 
funds of the drawer to make good the acceptance.*' 

§ 72. Object of acceptances. Acceptance applies only to 

bills of exchange, foreign and inland, for the law of presentment 

for acceptance and of acceptance can have no application to a 

, negotiable contract, where, from its nature, there is or can be no 

acceptor. 

The Negotiable Instruments Law provides that: 

"A hill of itself does not operate as an assignment of the funds 
in the hands of the drawee available for the payment thereof, 
and the drawee is not liable on the bill unless and until he ac- 
cepts the same."^ 

Thus the drawee of a bill is not bound as a party to the bill 
until he has accepted it,* or agreed previously to pay it,*^ and 
cannot be sued by the holder of the instrument, though he has 
funds in his hands sufficient to cover the bill,® except where the 
bill constitutes an equitable assignment of" the funds drawn 
against.'' So due presentment for acceptance by the holder is a 
condition precedent to the exercise of rights against the other 
parties to the instrument arising when the bill is dishonored by 
non-acceptance. The object of acceptance then is to^bind the 
drawee and make hirrTan actuaT^iid boun^JPar ty to the inj tr.u- 
metrrwtucinie is nofTi iiLil he lias "accepted. For until t here ha s 
beefrigTrgccept anc e the -dr'awee isrTIg3e£^no_obngaHoir_wl^^ 
iipon the~Wr^itself: — HeThayHiave inliis possession funds be- 
longlhg to th^^itrawer, but that is a different obligation from that 
which appears upon the face of the instrument, and until he 
does accept either in writing or verbally, he is under no obliga- 

2ajarvis v. Wilson, 46 Conn. 90, (U. S.) 66; Lindley v. Waterloo 

Boill V. Tuttle, 81 N. Y. 454. First Nat. Bank, 76 Iowa 629, 41 

3Neg. Inst. Law, §127. where N. W. 381, 14 Am. St. Rep. 254; 

all cases directly or indirectly bear- Dull v. Bricker, 70 Pa. St. 255; 

ing upon or citing the Law are Neg. Inst. Law, §223 (135). 

grouped. ^ Rockville Nat. Bank v. Lafay- 

4 Pickle V. Muse. 88 Tenn. 380. ette etc. Bank, 69 Ind. 479, 35 Am. 

12 S. W. 919, 17 Am. St. Rep. 900. Rep. 236; Schuchardt v. Hall, 26 

7 L. R. A. 93; Poole v. Carhart, 71 Md. 590, 11 Am. Rep. 514. 

la. Z7, 32 N. W. 16; Imp. Co. v. ^ Brill v. Tuttle, 81 N. Y. 454; 

Erwin, 66 Kan. 261, 71 P. 521. Torrance v. Bank of British North 

6 Coolidge V. Payson, 2 Wheat. Am., L. R. 5 P. C. 246. 



§ 73 ACCEPTANCE OF BILLS. 87 

tion to the parties upon the bill of exchange. Thus, the purpose 
of acceptance is to create liability on the part of the drawee of 
the bill. By accepting he agrees to pay according to the terms 
of the bill, that is, his contract, after he writes his acceptance or 
verbally makes the acceptance, is on the bill itself. 

Until the bill has been accepted the drawer is the primary debtor 
and after acceptance the drawee or acceptor is the principal debtor 
and the drawer becomes secondarily liable.''^ 

The presemption arising from acceptance that the acceptor holds 
funds of the drawer may be rebutted.'^'' A complaint which fails 
to allege a written acceptance of a bill of exchange does not state 
a cause of action against the drawee ; '^'^ but a plea that the drawee 
"agreed to pay the order" is sufficient.'^'' 

§ 73. Form of acceptance. By the Negotiable Instruments 
Law the acceptance must be written, signed by the drawee and 
must contain an express or implied promise to pay in money. 
The provisions are as follows : 

"The acceptance must be in writing and signed^ by^JhE^draiii^. 
It must not express that the drawee will perform his promise by 
any other means than the payment of money."^ 

"The holder of a bill presenting the same for acceptance may 
require that the acceptance be written on the bill, and if such 
request is refused, may treat the bill as dishonored."^ 

As the statute requires the acceptance to be in writing, the 
fact that it was so given must be pleaded.'"^^ 

"^^ Clayton Town Site Co. v. Clay- ^ Neg. Inst. Law, § 132, where 

ton Drug Co., 20 N. M. 185, 147 all cases directly or indirectly bear- 

Pac. 460. ing upon or citing the Law are 

T^" Dickerson v. Turner, 15 Ind. 4. grouped. 

7° Wadhams v. Portland Ry. Co., ^ Neg. Inst. Law, § 133, where 
27 Wash. 86, 79 Pac. 597. all cases directly or indirectly bear- 
Contra : Faircloth-Byrd Mercan- ing upon or citing the Law are 
tile Co. V. Adkinson. 167 Ala. 344, grouped. 
52 So. 419. "^^ Wadhams v. Portland Ry. Co., 

'■d Boonsdall v. Waftemeyer, 142 37 Wash. 86, 79 Pac. 597. 
Fed. Rep. 415, 73 C. C A. 515. 



88 



NEGOTIABLE INSTRUMENTS. 



§73 



Below is a form of acceptance written on an instrument 



> 



Chicago, III., December 1, 1922. 

} ,_g !2 Thirty days afterdate- « / 

ijPfl§. t^hc order of John Matlock 

oOm Hundred and Twenty — , Dollars 

g« Valued received, and charge the sam^ to account of 



'iO^ 



^Td^onald Morris, 
14 Jamestozmi, N. Y. 



HENRY HAMILTON. 



The usual mode of making an acceptance is by writing the 
word "accepted" and subscribing the drawee's name as above, 
but the drawee's signature alone is sufficient. 

The acceptance may be made while the bill is still incomplete/® 
but is usually made a reasonable time after execution. The 
holder may require that the date of acceptance be written on the 
bill so it will appear from the face of the instrument when it is 
due.i^ 

An acceptance, if in writing, is constituted by words showing 
an intention to accept and not putting a direct negative upon 
the order contained in the bill ;-^^ but the mere admission of the 
correctness of the amount is not an assent to the order.-^* At 
common law but not under the Negotiable Instruments Law a 
verbal acceptance is allowed and such is constituted by any words 
which evidence such intention clearly and unequivocally, if they be 
addressed to the drawer or holder, and he waive his right to a 
written acceptance.^^ And at common law an acceptance may 
also be implied from conduct evidencing such intention. 



10 Neg. Inst. Law, § 138, where 
all cases directly or indirectly bear- 
ing upon or citing the Law are 
grouped. 

11 Neg. Inst. Law, §133, where 
all cases directly or indirectly bear- 
ing upon or citing the Law are 
grouped. 

*2 Cortelyou v. Maben, 32 Neb. 
697, 36 N. W. 159, 3 Am. St. Rep. 
284; Whilden v. Merchant etc. 



Nat. Bank, 64 Ala. 1, 38 Am. Rep. 
1 ; Block V. Wilkerson, 42 Ark. 253 ; 
Bank v. Bank (Kan.), 87 Pac. 746. 

^2a Plaza Farmers' Union v. Ry, 
an, 78 Wash. 124, 138 Pac. 65L 

13 In re Goddard, 66 Vt. 415, 29 
Atl. 634; Walker v. Lide, 1 Rich. 
(S. C.) 249, 44 Am. Dec. 252; 
Ecker v. Snowden, 2 Miles (Pa.) 
275. For a full discussion see : 
Allen V. Leavens, 26 Oreg. 164, 37 



§ 74 ACCEPTANCE OF BILLS. 89 

Acceptance by telegram has been held sufficient,*^ and such 
acceptance when the bill is properly identified seems entirely un- 
objectionable and accords with the best interests of the business 
world. Such acceptances have almost uniformly been held valid 
under the Negotiable Instruments Law ;*** thus A wires B a tele- 
gram reading : "Will you wire me that you will honor draft for 
$300?" and B telegraphed back: "I will." It was a sufficient 
acceptance under the statute.*^" Under the statutes of some states, 
which make an unconditional promise to accept a bill before it 
is drawn equivalent to actual acceptance in favor of a party, who 
upon the faith thereof receives it for valuable consideration, it 
has been adjudged that a telegram written and sent by the 
promisor operates as an acceptance.-^^ 

Under the English Bills of Exchange Act the acceptance must 
be written on the bill itself which precludes the giving of an 
acceptance by telegraph, either by a bank or by any other 
drawee.*'^* 

This section as to writing doc" not apply to a foreign bill pay- 
able in another state unless the law of that other state is proved 
since the common law rule will be presumed to apply that an 
acceptance may be oral. *'" 

§ 74. Nature and effect of acceptance. The drawer of a bill 
undertakes that when it is presented to the drawee the latter will 
accept it ; and by acceptance is meant an undertaking on the 
drawee's part to pay the bill according to its tenor. Until the 
bill has been accepted, the drawer is the primary debtor. After 
acceptance, the drawer becomes secondarily liable, and his liabil- 
ity is the same as that of a first indorser upon a promissory note. 

The effect of the acceptance of a bill is to constitute the accep- 
tor the principal debtor.-^® The bill becomes by the acceptance 

Pac. 488. 46 Am. St. Rep. 613. 26 i^b oil Well Supply Co. v. Mac- 

L. R. A. 620. See also note 1 Am. Murphy, 119 Minn. 500. 

St. Rep. 137. 15 Henrietta Nat. Bank v. State 

14 Flora etc. Bank v. Clark, 61 Nat. Bank, 80 Tex. 648, 16 S. W. 

Md. 400. 48 Am. Rep. 114; Garrett- 321, 26 Am. St. Rep. IIZ. See also 

son V. North Atchinson Bank. 39 note 2 L. R. A. 709. 

Fed. 163, 7 L. R. A. 428. See also i^^ Appendix C. paragraph 17. 

note 4 U. S. L. Ed. 185. i"'" Bank of Laddonia v. Bright- 

14a In re Armstrong, 41 Fed. 381 ; Coy Commission Co., 139 Mo. App. 

Selma Savings Bank v. Webster 110, 120 S. W. 648. 

County Bank. 182 Ky. 604, 206 S. 1« Jarvis v. Wilson. 46 Conn. 9ft. 

W. 870; Iowa State Savings Bank ZZ Am. Rep. 18; Farmers etc. Bank 

V. City National Bank, 183 Iowa v. Rathbone. 26 Vt. 19, 58 Am. 

1347, 168 N. W. 148. Dec. 200; Ragsdale v. Gresham, 



■% 




^ 



90 NEGOTIABLE INSTRUMENTS. § 75 

very similar to a promissory note — the acceptor being the prom- 
isor, and the drawer standing in the relation of an indorser.*'^ 

The acceptance is a response to the direction contained in the 
bill ; and the language of the bill and the acceptance are but parts 
of one entire contract in writing,^''* but this contract is regarded 
as a new contract.^"'' 

Upon paying the bill the acceptor can charge the amount of 

'v the same to the fund of the drawer in his hands, or if he has 

none, he can recover from the drawer by action.^* If the drawee 

refuses to accept the instrument after he has promised to do so, 

the drawer may sue on the original amount due or on the breach 

\ of his promise to accept the bill.*'* 

Y\ / 

§/75. According to tenor of bill. The acceptance must be 

.^ according to the tenor of the bill to bind all the parties to it. 
The promise must be to pay all the money called for in the bill, 
at the time and place of payment.^" If the acceptance were not 
according to the tenor of the bill there w^ould be two or three 
causes of action divided among the parties. If an acceptor of 
a hundred-dollar bill of exchange accepts for $50, that leaves 
$50 which has not been accepted. There v^'ould be confusion 
when the obligation was paid ; the party paying would be entitled 
to possession of the bill and that would raise the presumption 
that the whole bill was paid. So for these among other reasons, 
the acceptance must be according to the tenor of the bill. When 
the modification of the tenor of the bill is such that it either 
casts no hardship upon the indorser or where the indorser or par- 
ties prior to the acceptor know of the modification and assent to 
it, there the reason for rejecting it as a form of acceptance 
ceases to exist, and so the rule is that a modified or qualified 
acceptance if immaterial, or if known and assented to is a good 
acceptance. 

The Negotiable Instruments Law provides as follows as to a 
qualified acceptance: 

"The holder may refuse to take a qualified acceptance, and if 
he does not obtain art nnqiialiiied acceptance, he may treat the 

141 Ala. 308, Z7 So. W. As to i^b Superior City v. Ripley, 138 U. 

accommodation acceptor see: White S. 93. 

V. Hopkins, 3 Watts & S. (Pa.) 99, is Christian v. Keen, 80 Va. Z77 ; 

Z7 Am. Dec. 542. See Van Alstyne Martin v. Muncy, 40 La. Ann. 190. 

V. Sorley, 32 Tex. 518. See note »» Cooper v. Jones, 79 Ga. 379, 4 

1 Am. St. Rep. 134. S. E. 916; Coursin v. Ledlie, 3 Pa. 

i^Raborg et al. v. Peyton, 2 St. 506 ; Quin v. Han'ev, 5 111. App. 

Wheat (15 U. S.) 385. 51. 

17a Meyer v. Beardsley, 29 N. J. ^o See, however, § 79 on quali- 

L. 236. fied acceptance. 



§§ 76-78 ACCEPTANCE OF BILLS. 91 

bill as dishonored by non-acceptance. Where a qualified accept- 
ance is taken the drazver and indorsers are discharged from 
liability on the bill, unless they have expressly or impliedly au- 
thorized the holder to take a qualified acceptance, or subsequently 
assent thereto. When the drawer or an indorser receives notice 
of a qualified acceptance, he must within a reasonable time express 
his dissent to the holder, or he will be deemed to have assented 
thereto:"'^^ 

If the holder receives such an acceptance he can claim payment 
only according to the condition or qualification.^^* An agent for 
collection as a bank has no authority to receive anything short of 
an explicit and unqualified acceptance .^■^'' 

§ 76. Delivery. The Negotiable Instruments Law provides : 

"Acceptance means an acceptance completed b\ delivery or 
notification."^'^ 

The acceptance is incomplete until delivery or notification.^^* 

§ 77. Acceptance of incomplete bill. While still incomplete 
a bill may be accepted. The Negotiable Instruments Law pro- 
vides : 

"A bill may be accepted before it has been signed by the 
drawer, or zvhile otherwise incomplete, or zvhen it is overdue, or 
after it has been dishonored by a previous refusal to accept, or by 
non-payment. But when a bill payable after sight is dishonored 
by non-acceptance and the drawee subsequently accepts it, the 
holder, in the absence of any different agreement, is entitled to 
have the bill accepted as of the date of the presentment."^^ 

The right of the holder to recover from the acceptor is not af- 
fected by the fact that he discounted the instrument before ac- 
ceptance.*^* A bill does not necessarily lose its negotiable character 
by being dishonored.*^" 

§ 78. Varieties of acceptance — In general. There are sev- 
eral varieties of acceptance. For convenience they may be clas- 

21 Neg. Inst. Law, § 142, where A'^ashville, — Tenn. — , 154 S. W. 
all cases directly or indirectly bear- 965. 

ing upon or citing the Law are 23 jsjgg. Inst. Law, § 138, where 

grouped. all cases directly or indirectly bear- 

2i«Cline V. Miller, 8 Md. 274. ing upon or citing the Law are 

21b Walker v. New York State grouped. 

Bank, 9 N. Y. 582. 23a Bank of Louisville v. Ellery, 

22 Neg. Inst. Law, § 191. where 34 Barb.630. 

all cases directly or indirectly bear- 23b Leavitt v. Putnam, 3 N. Y. 494. 
ing upon or citing the Law are As to acceptance when bill is in- 
grouped, complete see: Bank v. Neal, 22 
22a First Nat. Bank of Murfrees- How C63 U. .S.) 107; Hopps v. 
toro V. First National Bank of Savage, 69 Md. 513. 



92 NEGOTIABLE INSTRUMENTS. §§ 79-80 

sified as to their terms, as to their form, and as to the mode of 
proof. As to their terms acceptances are either general or quah- 
fied; as to their form, they are either written or by parol; as to 
their mode of proof, they are either express or implied. 

§ 79. Varieties of acceptances — As to terms — General ac- 
ceptance. "An acceptance is cither general or qualified. A gen- 
eral acceptance assents without qualification to the order of the 
drawer. A qualified acceptance in express terms varies the effect 
of the bill as drawn."'^'^ 

"An acceptance to pay at a particular place is a general accept- 
ance unless it expressly states that the bill is to be paid there only 
and not elsewhere."^^ 

The above sections of the Negotiable Instrument Law, as a 
general rule, have been the law in this country without statutory 
enactment. 

A bill addressed generally to a drawee in a city may be ac- 
cepted payable at a particular bank in that city ;^^* but where a bill 
is addressed to the drawee in one place, and is accepted payable 
in ^nother, it is a material variation .^•"^'' 

§ 80. Varieties of acceptances — As to terms — Qualified ac- 
ceptance. The Negotiable Instruments Law provides : 

"An acceptance is qualified which is (1) conditional, that is to 
say, which makes payment by the acceptor dependent on the ful- 
fillment of a condition therein stated; (2) partial, that is to say, 
acceptance to pay part only of the amount for which the bill is 
drawn; (3) local, that is to say, an acceptance to pay only at a 
particular place; (4) qualified as to time; (5) the acceptance of 
some one or more of drawees, but not of all."^^ 

The above is a clear statement of the law generally. 

Such acceptances do not become due until the happening of the 
contingency upon which the bill is accepted.^^* 

§8L Varieties of acceptance — As to form — In general. As 

to their form acceptances in the absence of statute are written 
or parol. 

24 Neg. Inst. Law, § 139, where 25b Niagara District Bank v. 
all cases directly or indirectly bear- Fairman etc Mfg. Co., 31 Barb, 
ing upon or citing the Law are 403. 

grouped. 26 Neg. Inst. Law, § 141, where 

25 Neg. Inst. Law, § 140, where all cases directly or indirectly bear- 
all cases directly or indirectly bear- ing upon or citing the Law are 
ing upon or citing the Law are grouped. 

grouped. 26a Marshall v. Burnby, 25 Fla. 

25a Troy City Bank v. Lanwan, 619. 
19 N. Y. 477; Meyers v. Standart, 
11 Ohio St. 29, 



§ 82 ACCEPTANCE OF BILLS. 93 

A written acceptance: (1) may be written on the instrument; 
or (2) it may be written on a separate paper ; and if on a separate 
paper, (a) it may be an acceptance as to an existing bill; or it 
may be (b) an acceptance as to a non-existing bill. 

§ 82. Varieties of acceptance — As to form — Written. Take 
a bill of exchange ; the drawee writes across the face of the bill 
"accepted" and signs his name on the bill itself.^^ That is the 
first form. Now, take the second form of written acceptances : 
A writes B that he has drawn on him for $500 and wants to 
know whether he will accept that, and B writes to A, or to the 
payee C, "y^s, I will accept that bill." That is an acceptance 
of an existing bill.^* Now, suppose A writes to B and says : 'T 
(in the future) am going to draw on you and want to know if you 
are going to accept it," and B writes A and says he will accept it. 
That is the acceptance of a non-existing bill.^** As to the existing 
bill the Negotiable Instruments Law provides : 

"Where an acceptance is written on a paper other than the bill 
itself, it does not bind the acceptor, except in favor of a person to 
whom- it was shown and who, on the faith thereof, receives the 
bill for valuer^'' 

For example, a certain instrument has been drawn and A holds 
the instrument ; it has been drawn upon B, and A writes to B a 
letter and says a certain instrument has been drawn upon him 
and describes it in definite terms or reasonably so, and then 
B writes back and states in his letter that he accepts that bill 
which has been drawn upon him and that he will pay it ; then A 
holds this instrument, he also holds the letter, he shows them to 
X and X says: "I wall take that instrument upon the promise of 
B that he will accept it. I see that he has written that he would 
and he has clearly described the bill of exchange, and I will re- 
ceive it." Such an acceptance is valid and conforms with the 
requirements. 

Thus the acceptance may be on a separate paper, but the 
promise must be clear and unequivocal. And since the acceptance 

27 Spear V. Pratt, 2 Hill (N. Y.) Ct. 83; Coolidge v. Payson, 2 
582, 38 Am. Dec. 600. Not abso- Wheat. 66. 

lutely necessary to use the word 29 Evansville Nat. Bank v. Kauf- 
accepted, Whilden v. Merchants etc. mann, 24 Hun (N. Y.) 612; Barns- 
Nat. Bank, 64 Ala. 1, 38 Am. Rep. dall v. Waltemeyer, 142 Fed. 415, 
1. When insufficient, Cook v. Bald- 7Z C. C. A. 515. 
win, 120 Mass. 317, 21 Am. Rep. so ^gg jng^ l^^^ § 134^ where 
517. all cases directly or indirectly bear- 

28 Cook V. Miltenberger, 23 La. ing upon or citing the Law are 
Ann. Z77 ; Bank of Commerce v. grouped 

J. G. Shaw Band, 54 N. Y. Sup. 



94 NEGOTIABLE INSTRUMENTS. §82 

need not be on the instrument itself, a letter accompanying the 
bill may be used to qualify or limit an acceptance indorsed on the 
bill,^®' but not against a bona Me holder; and a written agree- 
ment modifying the terms of an accepted bill and securely pasted 
thereto, is a part thereof and cannot be lawfully severed there- 
from without the drawer's consent.^"'' 

A telegram agreeing to accept an instrument for a certain sum 
"for stock" is valid as an acceptance and is not a conditional con- 
tract,^®'= for at most the words "for stock" are but an indication 
of the nature of the consideration between the drawer and ac- 
ceptor.^**** 

As to the non-existing bill the Negotiable Instruments Law pro- 
vides : "An unconditional promise in zvriting to accept a bill be- 
fore it is drazvn is deemed an actiiul acceptance in favor of every 
person ivho, upon the faith thereof, receives the bill for valiie."^^ 

If the bill is not in existence, for the convenience of business, 
the acceptance may be on a separate paper. 

The requirements are: 

(1) That the contemplated drawee shall describe the bill to 
be drawn, and promise to accept it.^^ 

(2) That the bill shall be drawn in a reasonable time after 
such promise is written ;^^ and 

(3) That the holder shall take the bill upon the credit of the 
promise.^"* 

Thus A says to B : "I am going to draw upon you for $500 
and I want to know if you will accept the instrument, if I draw 
upon you," and B writes back a letter and says: "I will accept 
that instrument for $500;" and describes the instrument so it 

soaLehnhard v. Sidway, 160 Mo. Burke v. Utah Nat. Bank, 47 Neb. 

App. 83. 247, 66 N. W. 295. 

30b YVait V. Pomeroy, 20 Mich. ^3 Flora First Nat. Bank v. 

425; Gerrish v. Glines, 56 N. H. 9. Clark, 61 Md. 400, 48 Am. Rep. 

30oCoffman v. Campbell, 87 111. 114; Wilson v. Clements, 3 Mass. 

98. 1; Union Bank v. Shea, 57 Minrt. 

30" State Bank v. Bradstreet. 89 180, 58 N. W. 985. 

Neb. 188. What is reasonable. Nimochs v. 

31 Neg. Inst. Law, §135, where Woody, 97 N. C. 1, 2 S. E. 249, 2 
all cases directly or indirectly bear- Am. St. Rep. 268. 

ing upon or citing the Law are 34 Kennedy v. Geddes, 8 Port. 

grouped. (Ala.) 263, ZZ Am. Dec. 289; Ster- 

32 Von Phul V. Sloan, 2 Rob. nan v. Harrison, 42 Pa. St. 49, 82 
(La.) 148, 38 Am. Dec. 207; Few- Am. Dec. 491; Hall v. Emporia 
ler V. McPhee, 13 Colo. App. 185, Nat. Bank, 133 111.' 234, 24 N. E. 
56 Pac. 118; Am. Waterworks Co. 546; Nelson v. Chicago First Nat. 
V. Venner. 18 N. Y. S. 379, 45 N. Bank, 48 111. 39, 95 Am. Dec. 510. 
Y. St. 441 ; Brinkman v. Hunter, See Storer v. Logan, 9 Mass. 55. 

7Z Ma 172, 39 Am. Rep. 492; 



§ 83 ACCEPTANCE OF BILLS. 95 

can be understood. A shows this letter to Y and Y says : "Yes, 
I see you have drawn that instrument as you said you would and 
I will take the instrument, relying upon B's written promise." 
Such an acceptance is valid and conforms with the requirements. 

The last principles also apply to acceptances on a separate 
paper whether the bill is or is not in existence. That is, (1) 
credit must be given to the promise ;^^* (2) the bill must -be de- 
scribed and the terms must be definite, or reasonably so ;**" and 
(3) the bill must have been discounted upon the promise. But 
the promise is exempted if not made with the knowledge of 
some holder of the bill.^^ An acceptance on a separate piece of 
paper is a valid acceptance mainly because it assists in the nego- 
tiation of bills. 

Telegraphic authority to draw is an unconditional power in 
writing under the statute.^^* 

As the Negotiable Instruments Law requires all acceptances to 
be in writing, a bank cannot be held upon the oral promise of 
one of its officers to pay a check.^'" 

A written agreement modifying the terms of an accepted bill 
and securely attached thereto is a part thereof and cannot be 
lawfully detached therefrom without the drawer's consent.^*^ 

§ 83. Varieties of acceptances — As to form — Parol, A parol 
acceptance is not recognized by thei Negotiable Instruments 
Law.^** 

In the absence of a statutory intervention, it is the common 
law rule that an unequivocal parol promise to accept a specific 
existing bill is binding.^' But such a promise to accept a future 
bill, even though the bill be taken by the holder upon the faith 
and credit of such promise, is not binding as an acceptance. Thus 
where A calls up B over the telephone and says : "B, I am going 

34a Bank v. Hay, 143 N. C. 332; Ford, 35 Colo. 142, 83 Pac. 778, 117 

First National Bank v. Muskogee, Am. St. Rep. 182. 

40 Okla. 603. 35o Bothell v. Schweister, 84 Neb. 

341' Bank of Flora v. Clark, 61 271. 

Md. 405. 36Neg. Inst. Law, §132, where 

35 Pollock V. Helm, 54 Miss. 1, all cases directly or indirectly bear- 

28 Am. Rep. 342; Nimochs v. ing upon or citing the Law are 

Woody, 97 N. C. 1. 2 S. E. 249, 2 grouped. 

Am. St. Rep. 268 ; Coolidge v. Pay- 37 Whilden v. Merchants, etc., 

son^ 2 Wheat. (U. S.) 66. Bank, 64 Ala. 1. 38 Am. Rep. 1 ; 

35a Wells V. Western Union Tele- Joyce v. Wing Yet Lung, 87 Cal. 

graph Co., 144 Iowa 605, 123 N. W. 424, 25 Pac. 545 ; Ecker v. Snow- 

371, 24 L. R. A. 1045. den, 2 Miles (Pa.) 275; In re God- 

35" Ewing V. Citizens' Nat. Bank, dard, 66 Vt. 415, 29 Atl. 634. As 

162 Ky. 551, 172 S. W. 955; Van to parol acceptances, see note 26 

Buskirk v. State Bank of Rocky L. R. A. 620. 



96 NEGOTIABLE INSTRUMENTS. §§84-85 

to draw a certain bill of exchange upon you and I want to know 
if you will accept it," and B says, "Yes, I will accept it," and 
A draws the bill and takes it to Z and tells him what was said 
by B, and Z takes it, and Z doesn't wish to rely on the credit of 
A because A has no credit, but takes it because of B's credit; 
the law generally is that such a promise is not a good acceptance 
of a bill not in existence, if made by parol.^ 

§ 84. Varieties of acceptances — As to mode of proof — Ex- 
press. An express acceptance is an acceptance w^-itten upon 
the face of the instrument.^** 

§ 85. Varieties of acceptances — As to mode of proof — Im- 
plied. An implied acceptance is any act which clearly indi- 
cates an intention to comply with the request of the drawer, or 
any conduct of the drawee from which the holder is justified in 
drawing the conclusion that the drawee intended to accept the 
bill, and intended to be so understood.'*'* 

The Negotiable Instruments Law provides : 

"Where a drawee to whom a bill is delivered for acceptance 
destroys the same, or refuses within twenty-four hours after such 
delivery, or within such period as the holder may allow,*to return 
the hill accepted or non-accepted to the holder, he will be deemed 
to have accepted the sa^ne.'"^^ 

In some jurisdictions, as in Illinois and South Dakota, the 
above section is omitted ; in others as in Wisconsin it is pro- 
vided that mere retention of the bill is not acceptance; while in 
some jurisdictions as in Pennsylvania, a proviso as to demanding 
the return of the bill has been added."*^* 

The word "refuses" as used in the statute above, does not 
mean a tortious refusal, nor does it imply that a previous de- 
mand for the return of the instrument to the holder should be 

38 Wakefield v. Greenhood, 29 State v. Weiss, 91 N. Y. S. 276; 
Cal. 597; Mercantile Bank v. Cox, Hough v. Loring, 24 Pick. (Mass.) 
38 Me. 500; Nichols v. Commercial 254; Pickle v. Muse, 88 Tenn. 380, 
Bank, 55 Mo. App. 81. 12 S. W. 919, 17 Am. St. Rep. 900, 

Contra, Nelson v. .Chi. First 7 L. R. A. 93; Dickinson v. Marsh, 

Nat. Bank. 48 111. 36, 95 Am. Dec. 57 Mo. App. 566; Hall v. Emporia 

510; Woodward V. Griffins-Marshall First Nat. Bank, 133 111. 234, 24 

Grain Co., 43 Minn. 260, 45 N. W. N. E. 546. 

433. 41 Neg. Inst. Law, § 137, where 

39 Spear v. Pratt, 2 Hill (N. Y.) all cases directly or indirectly bear- 
582, 38 Am. Dec. 600; Cortelyou v. ing upon or citing the Law are 
Maben, 32 Neb. 697, 36 N. W. 159, grouped. 

3 Am. St. Rep. 284. 4ia g^g j^^g^ i^^^ l^^^ § 137^ 

40Westbnrg v. Chicago L. & C. for changes made in different juris- 
Co., 117 Wis. 589; Overman v. Ho- dictions, 
boken City Bank, 31 N. J. L. 563; 



§§ 86-88 ACCEPTANCE OF BILLS. 97 

made, but is to be construed to cover a failure or neglect to re- 
turn the check.**" 

§ 86. Acceptance of bills drawn in sets. The law as to the 

acceptance of bills drawn in sets is stated in the Negotiable 
Instruments Law as follows : 

"The acceptance may he written on any part, and it must be 
"written on one part only. If the drawee accepts more than one 
part, and such accepted parts are negotiated to different holders 
in due course, he is liable on every such part as if it were a sep- 
arate biiir'^ 

§ 87. Revocation of acceptance. The acceptor or drawee 
who has not communicated his acceptance or the accepted bill 
to the holder, may revoke an acceptance before delivery and 
cancel the written acceptance.'*^ 

§ 88. What bills must be presented for acceptance. The 

Negotiable Instruments Law provides : 

"Presentment for acceptance must be made : 

1. Where the bill is payable after sight or in any other case 
where presentment for acceptance is necessary in order to iix the 
maturity of the instrument. 

2. Where the bill expressly stipulates that it shall be presented 
for acceptance ; or 

3 Where the bill is drazvn payable elsewhere than at the resi- 
dence or place of business of the drawee. 

In no other case is presentment for acceptance necessary in 
order to render any party to the bill liable."'*^ 

Bills payable on demand or at sight without grace, or payable 
at a certain number of days after date, or after any other certain 
event, or payable on a certain day, need not be presented for ac- 
ceptance at all, but only for payment.*^ But it is usual and best, 

41^ State Bank v. Miss., 91 N. Y. 44 Neg. Inst. Law, § 143. where 
276; Westburg v. Chicago Lumber all cases directly or indirectly bear- 
Co., 117 Wis. 589, 94 N. W. 572. ing upon or citing the Law are 

42 Neg. Inst. Law, §181, where grouped. 

all cases directly or indirectly bear- 45 Commercial Bank v. Perry, 10 

ing upon or citing the Law are Rob. (La.) 61, 43 Am. Dec. 168; 

grouped. Carmichael v. Pennsj^Ivania Bank, 

43Robbins v. Lambeth, 2 Rob. 4 How. (Miss.) 567, 35 Am. Dec. 

(La.) 304; Irving Bank v. Weth- 408; House v. Adams, 48 Pa. St. 

erald, 36 N. Y. 335 ; German Nat. ?61, 86 Am. Dec. 588 ; Champion v. 

Bank v. Farmers Dep. Nat. Bank, Gordon, 70 P^. St. 474, 10 Am. Rep. 

118 Pa. St. 294. 12 Atl. 303; Guth- 581. 
rie Nat. Bank v. Gill, 6 Okla, 560, 
54 Pac. 434. 



98 NEGOTIABLE INSTRUMENTS. , §89 

when the bill is payable at a future day, to present it for ac- 
ceptance, in order to ascertain whether it will certainly be hon- 
ored, and to procure the assurance of Hability of the acceptor.*'^'' 

Bills payable at sight or at so many days after sight, or after 
demand, or after any other event not absolutely fixed must be 
presented to the drawee for acceptance and payment, or for ac- 
ceptance only, without unreasonable delay, or the drawers and 
indorsers will be discharged, for they have an interest in having 
the bills accepted immediately in order to shorten the time of 
payment, and thus put a limit to the period of their Hability 
and also to enable them to protect themselves by other means 
before it is too late, if the bill is not accepted and paid within the 
time originally contemplated by them.'*® 

§ 89. By and to whom presentment should be made. Any^ 

person in possession of a bill of exchange may present it for 
acceptance, or may do so through his properly authorized agent.*'" 
The presentment must be made to the drawee personally or to 
some person who has authority to accept or refuse to accept for 
him.48 

The Negotiable Instruments Law provides: 

"Where a hill is addressed to two or more drawees who are not 
partners, presentment must he made to them all, unless one has 
authority to accept or refuse acceptance for all, in which case 
presentment may he made to him only.'"^^ 

"Where the drazvee is dead, presentment way he made to his 
personal representative."^^ 

"Where the drazvee has heen adjudged a hankrupt or an insol- 
vent; or has made an assignment for the benefit of creditors, 
presentment may he made to him or to his trustee or assignee."'^'*- 

If one of the drawers accepts he will of course be bound by 
his acceptance. 

45a National Park Bank v. Saitta, 48 Schuchardt v. Hall, 36 Md. 

127 App. Div. (N. Y.) 624. 590, 11 Am. Rep. 514; Stainback v. 

46 Neg. Inst. Law, §144, where State Bank, 11 Gratt. (Va.) 269; 
all cases direct^ or indirectly bear- Nelson v. Fotterall, 7 Leigh (Va.) 
ing upon or citing the Law are 179. 

grouped ; Nimocks v. Woody, 97 N. 49 jsj-^g^ j^st. Law, § 145, where 

C. 1, 2 S. E. 249, 2 Am. St. Rep. all cases directly or indirectly bear- 

268; Nutting v. Burked, 48 Mich. ing upon or citing the Law are 

241 ; Thornburg v. Emmons, 23 W. grouped. 

Va. 333. 50 See preceding note. 

47 Stainback v. Bank, 11 Gratt. 51 See preceding note. 
269; Walker v. State Bank, 9 N. 

Y. 582. 



§ 90 ACCEPTANCE OF BILLS. 99 

Where the drawee is dead presentment is not necessary and 
the above section of the law merely states some one to whom 
presentation can be made. 

§90. Time of presentment. The Negotiable Instruments 
Law provides : 

"Presentment for acceptance must be made by or on behalf of 
the holder at a reasonable hour on a business day, and before 
the bill is oz'erdue, to the drar^vee or some person authorized to 
accept or refuse acceptance on his behalf ."^^ 

The time within which the holder must present a bill for 
acceptance which requires such presentment, is usually stated to 
be a reasonable time, and this is a mixed question of law and 
fact depending upon the circumstances. 

The Negotiable Instruments Law provides: 

"Except as herein otherwise provided, the holder of a bill which 
is required by the next preceding section to be presented for ac- 
ceptance must either present it for acceptance or negotiate it with- 
in a reasonable time: If he fails to do so, the drawer and all in- 
dorsers are discharged ."^^^ 

This has always been the law in general. 

A delay of the mail is a sufficient excuse for the omission to 
immediately present a bill for acceptance, and a presentation im- 
mediately after its reception is in time to charge the indorser.'^*" 

Presentment should be made during usual and reasonable 
hours. What constitutes reasonable hours of business depends 
upon the custom of the particular place and also upon the trade 
or business. Any hour before the customary hour of retiring will 
be sufficient when presented at drawee's residence.^^ 

As to the days on which presentment may be made the Ne- 
gotiable Instruments Law provides as follows: 

"A bill may be presented for acceptance on any day on which 
negotiable instruments may be presented for payment under the 
provisions of sections seventy-two and eighty-Uve of this act. 
When Saturday is not otherwise a holiday, presentation for ac- 
ceptance may be made before tzvelve o'clock noon on that day."^^'^ 

s^Neg. Inst. Law, § 145, where 146, 11 Am. Dec. 259; Phoenix Ins. 

all cases directly or indirectly bear- Co. v. Allen, 11 Mich. 501. 

ing upon or citing the Law are Rule does not apply to non-nego- 

grouped. liable paper. Briggs v. Persons, 31 

52a Neg. Inst Law, 144. Mich. 400. 

52b Walsh V. Blatchly, 6 Mo. 422. ^sa ^gg ingt. Law, § 146, where 

53 Bolton V. Harrod, 9 Mart, all cases directly or indirectly bear- 

(La.) 326, 13 Am. Dec. 306; Rob- ing upon or citing the Law are 

inson v. Ames, 20 Johns. (N. Y.) grouped. 



100 NEGOTIABLE INSTRUMENTS. §§91-92 

Several jurisdictions as Arizona, Kentucky and Wisconsin omit 
the last sentence of the above section. 

The Negotiable Instruments Law further provides : 

"The drawee is allowed twenty-four hours after presentment 
in which to decide whether or not he will accept the bill; but the 
acceptance if given dates as of the day of presentation"^"^ 

There may be an acceptance after there has been a refusal to 
accept or after protest or after dishonor.^^ So when we say it 
must be in a reasonable time, that means when the instrument is 
first presented for acceptance. It does not mean that after twenty- 
four hours the bill can never be accepted. When the bill is pre- 
sented, it is reasonable that the drawee should be allowed some 
time to deliberate whether he will accept or not ; and by the rule 
of the law merchant he was entitled to demand twenty-four hours 
for this purpose, and the holder was justified in leaving the bill 
with him for that time. 

The time allowed is twenty-four hours after delivery and not 
after demand for a return of the bill and the time for returning 
the bill to the holder does not begin to run from the demand for 
its return, but the date of its delivery .^^^ 

§ 91. Place of presentment. The presentment for accept- 
ance, if the bill is addressed to the drawee at a particular place, 
should be made at that place.^® If the bill is not addressed to 
any particular place, presentment should be made either to the 
drawee personally, or at his dwelling or place of business'*'" at 
the time of presentment. 

§ 92. Presentment excused. "Presentment for acceptance is 
excused and a bill may be treated as dishonored by non-accept- 
ance in either of the following cases: (1) Where the drawee is 
dead or has absconded, or is a fictitious person or a person not 
having capacity to contract by bill. (2) Where, after the exer- 
cise of reasonable diligence, presentment cannot be made. (3) 
Where, although presentment has been irregidar, acceptance has 
been refused on some other ground."^^ 

54Neg. Inst. Law, §136, where (Tenn.) 425; Reynolds v. Chittle, 

all cases directly or indirectly bear- 2 Campb. 596. 

ing upon or citing the Law are '*' Boot v. Franklin, 3 John. (N. 

grouped. Y.) 207; Mason v. Franklin, 3 

55 Wynne v. Raikes. 5 East. 514; Johns. (N. Y.) 202; Anderson v. 

Thompson on Bills, 214. Drake, 14 Johns. (N. Y.) 113. 

55a 3 R. C. L. 1309; Wisner v. 58 ^gg. Inst. Law, §148, where 

Bank of Gallitzin,220 Pa. St. 21. all cases directly or indirectly bear- 

5« Wolfe V. Jewett, 10 La. 383; ing upon or citing the Law are 

Ratcliff V. Planters Bank, 2 Sneed grouped. 



§ 93 ACCEPTANCE OF BILLS. 101 

Presentment for acceptance is excused and the bill should be 
protested as dishonored by non-acceptance: when the drawee is 
discovered to be a fictitious person, or is incapable of making a 
valid contract from legal disabilities, or where, after reasonable 
diligence to ascertain the drawee, the presentment cannot be 
effected, or under any other like circumstances. 

§ 93.-k^cce ptanc es for honor, or supra protest. The Nego- 
tiable InstrumentsTSWprovWesI 

"Where a bill of exchange has been protested for dishonor by 
non-acceptance or protested for better security and is not overdue, 
any person not being a party already liable thereon may, with the 
consent of the holder, intervene and accept the bill supra protest 
for the honor of any party liable thereon or for the honor of the 
person for -whose account the bill is drawn. The acceptance for 
honor may be for part only of the sum for which the bill is 
drawn; and where there has been an acceptance for honor for one 
party, there may be a further acceptance by a different person for 
the honor of another party."^^ 

"An acceptance for honor, supra protest, must be in writing 
and indicate that it is an acceptance for honor, and must be 
signed by the acceptor for honor."^^ 

"Where an acceptance for honor does not expressly state for 
whose honor it is made, it is deemed to be an acceptance for the 
honor of the draiver."^^ 

"The acceptor for honor is liable to the holder and to all par- 
ties to the bill subsequent to the party for whose honor he has 
accepted."^^ 

This is a peculiar kind of acceptance. It most frequently hap- 
pens when the original drawee refuses to accept the bill, in which 
case a stranger may accept the bill for the honor of some one of 
the parties thereto, which acceptance will inure to the benefit of 
all the parties subsequent to him for whose honor it was accepted. 
It is essential that the acceptor for honor appear before a notary 
public and declare that he accepts the protested bill in honor of 
the drawer or indorser, as the case may be, and that he will pay 
it at the appointed time. 

"^Neg. Inst. Law, §161, where ^^Neg. Inst. Law, §163, where 
all cases directly or indirectly bear- all cases directly or indirectly bear- 
ing upon or citing the Law are ing upon or citing the Law are 
grouped. grouped. 

*ONeg. Inst. Law, §162, where *2 jsjeg jnst. Law, §164. where 
all cases directly or indirectly bear- all cases directly or indirectly bear- 
ing upon or citing the Law are ing upon or citing the Law are 
grouped. grouped. 



102 NEGOTIABLE INSTRUMENTS. §93 

An acceptance for honor, then, is properly made by the ac- 
ceptor appearing before a notary pubhc and declaring his inten- 
tion to accept for the honor of some one or more of the parties 
and subscribing to some such expression of his intention as 
"accepted for the honor of A."®^ 

This is done to save the credit of the parties to the instrument, 
or some party to it, as the drawer, drawee, or indorser, or some- 
body else. Some one desires to save the credit of some one on the 
bill, and he does so by writing "accepted" on the bill. The 
court holds that the consideration is presumed, and the presump- 
tion is that he does have funds or money. 

The acceptor for honor has recourse against the party for 
whose honor the acceptance was made and all parties against 
whom the latter would have recourse, for all damages incurred 
by reason of his acceptance.^'* 

But the acceptor for honor of the drawer cannot maintain an 
action thereon against the drawer without proof of its present- 
ment to the drawee and non-acceptance or non-payment by him, 
and notice thereof to the drawer.®'" 

"The acceptor for honor by such acceptance engages that he 
will on due presentment pay the bill according to the terms of his 
acceptance, provided it shall not have been paid by the drawee, 
and provided that it shall hai'e been duly presented for payment 
and protested for non-payment and notice of dishonor given to 
him."^"^ 

The undertaking of the acceptor for honor is not an absolute 
engagement to pay at all events, but only a collateral and condi- 
tional engagement to pay, if the drawee does not.®'* The result 
of this rule is to require that the bill be presented to the drawee 
named therein at its maturity for payment and if payment is 
refused that it be protested and notice of dishonor given to him.®** 
And the rule has been stated that the acceptor of a bill for the 
honor of the drawer cannot maintain an action thereon against 
him, without proof of its presentment to the drawee and non- 
acceptance or non-payment by him, and notice thereof to the 
drawer.*'^ 

*3 Gazzam v. Armstrong, 3 Dana ^^ Schofield v. Bayard, 3 Wend. 

(Ky.) 554. See note 7 U. S. L. Ed. (N. Y.) 488; Mitchell v. Baring, 18 

132. M. & M. 381. 

«3a Swope v. Rose, 40 Pa. St. 186, ee Walton v. Willianns, 4 Ala. 

80 Am. Dec. 567. 347; BarJng v. Clark, 19 Pick. 

«3b Baring v. Clark, 19 Pick 220. (Mas.) 220. 

«4Neg. Inst. law. §165, where ^^ Wood v. Pugh, 7 Ohio, (Pt. 

all cases directly or indirectly bear- 2) 156. 
ing upon or citing the Law are 
grouped, 



§ 93 ACCEPTANCE OF BILLS. 103 

The following miscellaneous provisions relating to acceptances 
for honor are found in the Negotiable Instruments Law : 

"Where a hill payable after sight is accepted for honor, its 
m-aturity is calculated from the date of the noting for non-ac- 
ceptance and not from the date of the acceptance for honor."^^ 

"When a dishonored bill has been accepted for honor, supra 
protest, or contains a reference in case of need, it must be pro- 
tested for non-payment before it is presented for payment to the 
acceptor for honor or reference in case of need."^^ 

"Presentment for payinent to the acceptor for honor must be 
made as folloivs: (1)1 f if is to be presented in the place where 
the protest for non-payment zvas made, it must be presented not 
later than the day following its maturity; (2) If it is presented in 
some other place than the place where it was protested, then it 
must be forwarded within the time specified in section one hun- 
dred and four.'"^^ 

"The provisions of section eighty-one apply where there is de- 
lay in making presentment to the acceptor for honor or referee 
in case of need.'"^^ 

"When the bill is dishonored by the acceptor for honor it must 
be protested for non-payment by him-."'^^ 



68 Neg. Inst. Law, § 166. 


'■1 Neg. Inst. Law, § 169. 


69Neg. Inst. Law, §167. 


"Neg. Inst. Law, §170. 


70 Neg. Inst. Law, § 168. 





SUBDIVISION B— TRADE ACCEPTANCES. 

§ 93a. Meaning of term. § 93e. Where payable. _ _ 

93b. Trade acceptances distin- 93f. By whom presented for dis- 

guished from ordinary bill count. 

of exchange. 93g. Inducements by Federal Re- 
93c. Trade acceptances distin- serve System. 

guished from promissory 93h. Effect on other negotiable in- 

note. struments. 

93d. Nature of transaction in 93i. Origin. 

which trade acceptances 93j. Extent of use. 

. used. , , 93k. Decisions. 

flK L ^ a ^r ,. . / .- I 

^93ar Meaning of term. A trade acceptance is a bill of ex- 
change with a certain maturity drawn by a seller on a buyer for 
a fixed sum of money, representing the purchase price of goods 
payable to order, and bearing across its face the acceptance of 
the buyer. 

In terms of business, it may be defined as a negotiable cer- 
tificate of indebtedness, arising out of a current transaction in 
merchandise. 

§ 93b. Trade acceptances distinguished from ordinary bill 
of exchange. The trade acceptance states upon its face that 
the obligation of the acceptor arises out of purchase of goods 
from the drawer, while the ordinary bill of exchange does not 
state upon its face the transaction out of which the giving of 
the instrument arose. The trade acceptance is confined to credit 
obligations arising from the sale of goods and must have a definite 
maturity, while the ordinary bill of exchange may cover various 
kinds of transactions and may be payable on demand, at sight, or 
at the end of a stated time. 

It has been held that there is nothing in the Federal Reserve 
Act, Sec. 13, or in the regulations made thereunder by the Fed- 
eral Reserve Board, changing the character of trade acceptances 
as bills of exchange, and they are within the rules, that a draft 
may be signed by the acceptor before the name of the drawer is 
filled in, that a drawer may be any one whom the acceptor may 
accept as such, and that a negotiable instrument may be drawn 
payable to the order of a payee who is not a maker, drawer or 
drawee.* 

1 Stafiford V. Hill, — Calif. App. -, 200 Pac. 33. 

104 



§§ 93c-93f TRADE ACCEPTANCES. 105 

§ 93c. Trade acceptances distinguished from promissory 
note. In addition to the usual differences between a bill of 
exchange and a promissory note, a trade acceptance is limited 
to obligations arising from the sale of goods, while the promis- 
sory note may cover not only obligations arising from the sale 
of goods, but also may cover practically any kind of obligation. 
In other words, the promissory note deals with all kinds of busi- 
ness transactions, while the trade acceptance deals with current 
merchandise transactions alone. The trade acceptance, unlike the 
promissory note, is not to be given for borrowed money or past- 
due obligations. 

§ 93d. Nature of transaction in which trade acceptance 
used. The business practice involved in a transaction in 
which the trade acceptance is used is that one buys a bill of 
goods from a wholesaler or jobber and, later, instead of putting 
the account on his books or taking the buyer's promissory note, 
executes a time draft or bill of exchange on the buyer, who 
writes across the face of the instrument, "Accepted," and affixes 
his name. Thus a definite bargain is consummated between the 
seller and buyer of goods, and an amount due with a definite 
term agreed upon ; the seller draws the trade acceptance and 
presents it to the buyer; if the buyer is willing to assume that 
title to goods has passed to him, that the trade acceptance is in 
proper form, and that the conditions of sale have been complied 
with, he accepts by writing across the face of the instrument the 
word, "Accepted," the date and place of payment, and his name, 
and then returns it to the seller or to the bank presenting it ; the 
seller either holds the instrument until maturity or arranges to 
have it negotiated, and, in negotiating it, any of the following 
may be brought into the transaction: that is, the acceptor, the 
bank, the note broker, and the Federal Reserve Bank; for the 
instrument after acceptance becomes a piece of negotiable two- 
name paper which the seller may retain until maturity if he so 
desires, or may take to his bank for discount. The acceptor 
either pays it at maturity or secures an extension of time by 
treating it as a past-due obligation and covering it by a promis- 
sory note. 

§ 93e. Where payable. Ordinarily the trade acceptance is 
paid, preferably at the buyer's bank, and if not there, usually at 
some other place mutually agreed upon at the time of its issue. 

§ 93f. By whom presented for discount. The trade accept- 
ance is ordinarily presented for discount by the seller of the 
merchandise. 



106 NEGOTIABLE INSTRUMENTS. §§ 93g-93i 

§ 93g. . Inducements by federal reserve system. For the 
trade acceptance to be eligible for purchase by Federal Reserve 
Banks, the trade acceptance must have a maturity at the time of 
purchase of not more than ninety days, exclusive of the days of 
grace, and it must be indorsed by a member bank or supported 
by a statement of the financial condition of one or more of 
the parties thereto. It must, of course, also bear the clause 
prescribed by the Federal Reserve Board, "The obligation of the 
acceptor hereof arises out of the purchase of goods from the 
drawer." Then the trade acceptance is entitled to extensive re- 
discount facilities with preferential rates and practical freedom 
from the ten per cent of capital and the surplus limits which 
measure the capacity of banks to loan to one person or concern 
upon single-name paper. 

§ 93h. Effect on other negotiable instruments. The trade 
acceptance does not affect other negotiable instruments as the 
promissory note, since it is not given for borrowed money or 
past-due obligations. 

It may be legally treated as a check chargeable against a 
buyer's balance at his bank without further instructions or au- 
thority. The Negotiable Instruments Law provides that: "Where 
the instrument is made payable at a bank, it is equivalent to an 
order to the bank to pay the same for the account of the person 
debtor thereon."^ 

§ 93i. Origin. The trade acceptance has been used in Eu- 
rope for two centuries and was employed in America before the 
Civil War. It has been brought to life again in this country by 
the Federal Reserve Board, and a joint committee of the Amer- 
ican Bankers Association, the United States Chamber of Com- 
merce, and the National Association of Credit Men who are con- 
sistently promoting the use of the trade acceptance in the settle- 
ment of the obligations arising out of commercial transactions. It 
is urged that a wide use of trade acceptance would release for pro- 
ductive business hundreds of millions of dollars now tied up in 
"accounts receivable," and will supplant the "open book ac- 
count" and the promissory note plan of commercial credit. It 
makes capital more fluid by releasing funds now tied up in open 
book accounts and by substituting readily negotiable paper for 
non-negotiable book accounts ; it enables the buyer to realize 
that credit is as tangible as cash and should be guarded and used 
accordingly, and further helps him by making him deal always 
in current transactions rather than in long-drawn-out book ac- 



§§ 93 j -93k TRADE ACCEPTANCES, 107 

counts and prevents the accumulation of the over-due accounts; 
it relieves the seller from the burden of financing his customers 
and the consequent burdening of his own capital, and puts the 
burden of proving correctness of the details of merchandise 
transactions upon the buyer where it rightly belongs, and it en- 
ables the banker to borrow more easily because the trade accept- 
ance can be so easily rediscounted at the Federal Reserve Bank. 

It is urged that it will limit certain evils in our present com- 
mercial methods, such as those pertaining to discounts, bad debts, 
the secret assignment of book accounts, over-buying and over- 
selling, and the practice of cancelling orders and returning goods 
without sufficient reasons. 

§ 93j. Extent of use. The trade acceptance has now been 
almost universally adopted in almost all lines of trade through- 
out the United States ; they are used by the producer of raw ma- 
terial, manufacturer, jobber and retailer. Banks of the United 
States have become well informed as to the value of trade ac- 
ceptances in place of single name promissory notes and are freely 
discounting them at favorable rates for their customers. During 
the past three years the number of trade acceptances and the 
volume represented by dealers has increased tremendously. It 
is estimated at the present time that more than 25,000 of our large 
concerns are using trade acceptances and are warm advocates of 
this system. 

§ 93k. Decisions. Any legal questions which have arisen 
have been decided by the application of the provisions of the Ne- 
gotiable Instruments Law in force in all but one of the states. 
The same law which would apply to a promissory note or bill of 
exchange would apply to a trade acceptance. 






A ^ CHAPTER IX. 

TRANSFER— NEGOTIATION BY INDORSEMENT. 



94. Meaning of term negotiation. 

95. Who may negotiate. 

96. Methods of transfer. 

97. Meaning of indorsement. 
98- Who indorse. 

99. Nature of indorsement. 

100. Requisites of indorsement. 

101. Varieties of indorsement. 

102. Indorsement in full or spe- 

cial indorsement. 

103. Indorsement in blank. 

104. Absolute and conditional in- 
dorsement. 

105. Restrictive indorsement. 



106. Indorsement without re- 
course. 

107. Joint indorsement. 

108. Successive indorsements. 

109. Irregular or anomalous in- 
dorsement. 

110. Presumptions as to indorse- 
ment. 

110a. Effect of transfer without 

necessary indorsement. 
110b. Indorsement striken out. 
110c. Negotiable character con- 
tinued. 
llOd. Negotiations by prior party. 



§ 94. Meaning of term negotiation. Negotiation is an act 
of the parties or of the law, by which the title to bills and notes 
is conveyed from one person to another.^ 

Negotiation means the act by which a bill of exchange or prom- 
issory note is put into circulation by being passed by one of the 
original parties to another person. If A gives B a check on C 
bank, and B presents the check at the counter of C, no negotia- 
tion is necessary or had. He simply demands and receives pay- 
ment; but if B goes to D store and buys a bill of goods and 
tenders the indorsed check in payment, he negotiates the check. ■^'' 

The Negotiable Instruments Law has the following provision 
as to what constitutes negotiation : 

"An instrument is negotiated zvhen if is transferred from one 
person to another in such manner as to constitute the transferee 
the holder thereof. If payable to bearer it is negotiated by deliv- 
ery ; if payable to order it is negotiated by the indorsement of the 
holder completed by delivery. "^^ 

As a bill or note is a chattel it may be sold as a chattel ; it is 
also a chose in action and may be assigned as a chose in action ; 



1 Odell V. Clyde, 57 N. Y. S. 126, 
38 App. Div. ZZZ; Whitworth v. 
Adams, 5 Rand. (Va.) 2Z?>, 415; 
Shaw V. Merchants Nat. Bank, 101 
U. S. 557, 562, 25 L. Ed. 892. 



1^ Aurora State Bank v. Hayes- 
Eames Elevator Co., 88 Neb. 187, 
190 ; Seaman v. Muir, — Ore. — , 144 
Pac. 121. 

ii^Neg. Inst. Law, §30. 



108 



§§95-96 TRANSFER BY INDORSEMENT. 109 

and as it is also a negotiable instrument it may be transferred by 
indorsement according to the rules of the law merchant.^ 

§ 95. Who may negotiate. In general, a bill or note must 
be negotiated by the de facto holder, that is, the person in pos- 
session of a bill or note and to whom it is payable, whether his 
possession, be lawful or not.^ And in such sense it is broader in 
significance than the term "holder," which customarily means 
lawful holder. If the bill or note is payable to bearer the person 
in possession is the de facto holder, but if the bill or note is 
payable to order, the de facto holder must have possession and 
be the person to whom it is payable.* But if the name is mis- 
spelled, or wrongly designated, the holder may negotiate by writ- 
ing the name as in the bill, and then his true name. So the 
person who obtains title by transfer of act of law is a de facto 
holder.** 

§ 96. Methods of transfer. There are four methods of 
transfer, viz. : by assignment, by operation of law, by indorse- 
ment, and by delivery. 

The holder of a bill or note may transfer it by assignment the 
same as any other chose in action.^ Where the holder of a bill 
payable to order transfers it without indorsement it operates as 
an equitable assignment, and the transferee may compel indorse- 
ment.'^ And when indorsement is subsequently obtained, the 
transfer operates as a negotiation from the time when given,* un- 
less the indorsement was omitted at the time of transfer by fraud, 
accident or mistake, in which case it operates from the time of the 
transfer.® 

The full title to a bill or note passes, without either assign- 
ment, indorsement, or delivery, that is, by operation of law, (a) 
by the death of the holder,*" where the title vests in his personal 

a Willis V. Barrett, 2 Stark. 29; 7 Brown v. Wilson. 45 S. C. 519, 

Bryant v. Eastman, 7 Cush. 111. 23 S. E. 630, 55 Am. St. Rep. 779; 

3 Collins V. Gilbert, 94 U. S. 753 ; Contro v. Rafiferty, 7 Montreal 
Wilson Sewing Mach. Co. v. Spears, Super. Ct. 146'; Schoepfer v. Tom- 
50 Mich. 534, 15 N. W. 894; Ever- mack, 97 111. App. 562. 

ton V. Bank, 66 N. Y. 14. ^ Goshen Nat. Bank v. Bingham, 

4 Jackson v. Love, 82 N. C. 405; 118 N. Y. 349, 23 N. E. 180; Osgood 
Lancaster Nat. Bank v. Taylor, 100 v. Artt, 17 Fed. 575 ; Hays v. Plum- 
Mass. 18, 97 Am. Dec. 70, 1 Am. mer, 126 Cal. 107, 58 Pac. 447, 77 
Rep. 71; Durein v. Moeser, 36 Kan. Am. St. Rep. 153. 

441, 13 Pac. 797. » Beard v. Dedolp, 29 Wis. 136. 
^Earhart v. Grant, Z2 la. 481. lO Wooley v. Lyon. 117 111. 244, 6 
6 Mitchell V. Walker, 17 Fed. Cas. N. E. 885, 57 Am. Rep. 867; Camp- 
No. 9,670; Deshler v. Guy, 5 Ala. bell v. Brown, 64 la. 425, 20 N. W. 
186; Biscoe v. Sneed, 11 Ark. 104. 745, 52 Am. Rep. 446, 



110 NEGOTIABLE INSTRUMENTS. §97 

representative, or (2) by the bankruptcy of the holder/* where 
title vests in his assignee or trustee, or (3) in some jurisdictions, 
v^here the holder is an unmarried woman, on her subsequent mar- 
riage the title vests in her husband,*^ or (4) upon the death of a 
joint payee or indorsee, in which case the general rule is that 
the title vests at once in the surviving payee or indorsee.*^ 

The legal title to an instrument made payable to order can 
regularly be transferred only by indorsement.*'* The transferee 
of an instrument made payable to order without indorsement is 
the equitable owner, and takes it subject to all the equities vested 
in prior parties.*'* The indorsement must be written on the bill 
itself, or on a slip of paper attached thereto called an "Allonge" 
and considered a part of the bill.*^ The indorsement may be on 
the face of the bill. When the note or bill is made or becomes 
payable to bearer, it is transferable by delivery without indorse- 
ment.*® 

§ 97. Meaning of indorsement. The literal meaning of in- 
dorsement is writing on the back, derived from the Latin in dorsa. 
In this connection, the word is used to indicate a legal transaction, 
effected by a writing of one's own name on the back, whereby 
one not only transfers one's full legal title to the paper trans- 
ferred, but likewise enters into an implied guaranty that the note 
or instrument will be duly paid. An acceptance applies to bills 
alone, while indorsement applies to both bills and notes. The in- 
dorsement cannot be by parol and the proper place for writing it 
is on the back of the instrument.*® But the name may be stamped 
on the back of the instrument, by one having authority to do so, 
and with intent to indorse and be a valid indorsement.*®* "The 
indorsement must be written on the instrument itself or upon a 
paper attached thereto. The signature of the indorser, imthout 

" Roberts v. Hall, 2>7 Conn. 205, Bishop v. Chase, 156 Mo. 158, 56 

9 Am. Rep. 308; Billings v. Collins, S. W. 1080. 79 Am. St. Rep. 515. 
44 Me. 271. is Crosby v. Roub, 16 Wis. 645; 

12 Coles V. Davis, 1 Campb. 485. Folger v. Chase 18 Pick. 63 ; French 

13 Draper v. Jackson, 16 Mass. v. Turner, 15 Ind. 59. 

480; Allen v. Tate, 58 Miss. 585; i" Wilton v. Williams. 44 Ala. 

Sanford v. Sanford, 45 N. Y. 723. 347; Haines v. Dubois, 30 N. J. L. 

Some jurisdictions have statutes 259. 

contra. ^''Freund v. Importers Nat. 

"Hopkins v. Manchester, 16 R. Bank, 76 N. Y. 352; Partridge v. 

I. 663. 19 Atl. 243, 7 L. R. A. 387 ; Davis, 20 Vt. 499 ; Gorman v. 

Chadron Bank v. Anderson, 6 Wyo. Ketcham, 3Z Wis. 427. 

518, 48 Pac. 197. 20a Mayers v. McRimmon, 140 

15 Pavey v. Stauffer, 45 La. Ann. N, C 640. 
353, 12 So. 512, 19 L. R. A. 716; 



§97 TRANSFER BY INDORSEMENT. Ill 

additional words, is a sufficient indorsement."^^ An Indorsement 
alone without delivery conveys no title. Indorsement means an 
indorsement completed by delivery .^^ An indorsement is usually 
written on the back of the instrument, but the place is not essen- 
tial. If the payee write his name on any part of the instrument, 
with the intention of indorsing it, that is sufficient indorsement. 
The law looks to the intention of the parties rather than to the 
form as to indorsement.^* A person writes certain words upon 
the back of the instrument: was it the intention to indorse the 
instrument or do something else? And the law is very apt to 
consider any words as an indorsement rather than something 
else.'^ The Negotiable Instruments Law states : "Where a sig- 
nature is so placed upon the instrument that it is not clear in zi'hat 
capacity the person making the same intended to sign, he is 
deemed to be an indorser."^^^ And a further section of the law 
states : "A person placing his signature upon an instrument other- 
wise than as maker, drawer or acceptor is deemed to be an in- 
dorser, unless he clearly indicates by appropriate zvords his inten- 
tion to be bound in some other capacity."^'* There is one excep- 
tion, however, and that is in the case of a guarantor, or a guar- 
antee written on the back of an instrument.^^ And it should 
be noted that there is a difference between a surety and a guar- 
antor. A guarantor promises to account for the debt, default, or 
miscarriage of another person. The surety is bound in his own 
right with his principal and as an original promisor. He is the 
debtor from the beginning and is held to know of the default of 
the principal. On the other hand, the contract of the guarantor 
is his own separate contract. It is in the nature of a warrant by 
himself that the thing to be done by the principal shall be done. 
The contract is not his contract and he is not bound to take no- 
tice of non-performance. A surety obligation is a primary obliga- 
tion. The surety and the principal may be joined as defendants 
in one suit, or the surety may be sued alone. So, we see, then, 
there is that exception as to a guaranty ; when a guarantee is 

21 Neg. Inst. Law, § 31. where Brown v. Butchers etc. Bank, 6 

all cases directly or indirectly bear- Hill (N. Y.) 443, 41 Am. Dec. 755. 

ing upon or citing the Law are 23a ^^g. Inst Law, § 17, sub. 6. 

grouped. 24 Neg. Inst. Law, § 63, where all 

231 Neg. Inst. Law. §2 (191), cases directly or indirectly bearing 

where all cases directly or indi- upon or citing the Law are grouped, 

rectly bearing upon or citing the 25 Eagerly v. Lawson. 176 Mass. 

Law are grouped. 551, 57 N. E. 1020, 51 L. R. A. 432; 

22a Haines v. Dubois, 29 N. J. Ely v. Bibb, 4 J. J. Marsh. (Ky.) 

Law 259. 71. See Chap. XXI on Suretyship 

23 Myers v. Wright, 33 111. 284; and Guaranty. 



112 NEGOTIABLE INSTRUMENTS. §98 

written on the back of an instrument it will not be construed as 
an indorsement, but most any other agreement or arrangement 
will be construed as an indorsement. 

§ 98. Who indorse. The party to whose order the instru- 
ment is made payable should indorse the instrument.^ 

If the name of the payee or indorsee is wrongly designated he 
may indorse the paper as described. The Negotiable Instru- 
ments Law states: 

"Where the name of a payee or indorsee is iv^rongly designated 
or misspelled, he may indorse the instrnment as therein described, 
adding, if he think fit, his proper signature. '"^^^ 

This section also applies to a name assumed in business or 
otherwise. 

"Where an instrument is payable to the orcfer of two or more 
payees or indorsees who are not partners, all must indorse, unless 
the one indorsing has authority to indorse for the others."^'' 

"Where an instrument is drawn or indorsed to a person as 
'cashier' or other fiscal officer of a bank or corporation, it is 
deemed prima facie to be payable to the bank or corporation of 
which lie is such officer: and may be negotiated by either the in- 
dorsement of the bank or corporation, or the indorsement of the 
officer."^^ 

The above section as to the indorsement to a person as "cashier" 
states an old rule of the law, for banks had uniformly indorsed 
paper in this manner when sent for collection. 

And paper made payable to A as cashier of a bank and in- 
dorsed by him as cashier may be recovered upon by the indorsee 
who may show that said cashier was acting in his capacity as such 
in negotiating the paper.'^* 

The provisions of this section are not applicable where the 
cashier uses his individual name without the title of his ofifice i*^" 
and the mere possession by a bank of paper payable to its cashier 
in his individual name does not enable it to maintain an action 
thereon against the maker.^*'' 

26 Cock V. Fellows, 1 Johns. (N. all cases directl}' or indiiectly bear- 
Y.) 143; Freeman v. Perry, 22 ing upon or citing the Law are 
Conn. 617; Woodbury v. Wood- grouped. 

bury, 47 N. H. 11; Ellis v. Brown, 28a Johnson v. Bufifalo Center 

6 Barb. 282. State Bank, 134 Iowa, 731. 

26a Neg. Inst. Law, §43. 28b pjrst National Bank of 

27 Neg. Inst. Law, § 41, where Pomeroy v. McCullough, 50 Ore. 
all cases directly or indirectly bear- 508. 

ing upon or citing the Law are 28o Swanby v. Northern State 
grouped. Bank, 150 Wis. 572. 

*^ Neg. Inst. Law, § 42, where 



§ 99 TRANSFER BY INDORSEMENT. 113 

This section of the law refers to "other fiscal officer of a bank 
or corporation." Under this, paper would be deemed payable to 
the corporation where indorsed payable to the treasurer of a 
savings bank, the treasurer or secretary of a trust company or 
the treasurer of a town.^^** 

§ 99. Nature of indorsement. As to its nature the indorse- 
ment is a contract^** and also a transfer. Every indorser is a new 
drawer and the terms are found on the face of the bill or note. 
There is an exception in case the indorsement is to A and not 
to his order, A could not negotiate it. There is an added obligation 
upon the instrument aside from what appears upon the face 
of the instrument. The person who indorses it says, "Yes, I 
made that contract, but you must present that for payment and 
you must notify me if it is not paid. If that is presented for 
acceptance and not accepted, or presented for payment and not 
paid, then I will pay it." That is the contract that the indorser 
on an instrument makes. He says, "I will pay the instrument 
according to the face of the bill,^" provided you give me notice 
of its non-acceptance or non-payment."^^ So an indorsement 
performs two things : It makes a contract and it transfers the 
instrument ; the indorser says to every person on the face of 
that instrument and to every person who precedes him as an 
indorser of the instrument, *Tf this instrument is not paid by 
the person who is primarily liable on the instrument, and if 
you give me due notice that the instrument has not been paid, 
then I will pay it." That is the contract. He doesn't say that 
he would pay it absolutely, but "if you give me notice that the 
person who is liable on the instrument will not pay or has failed 
in some respect, I will pay the instrument." Of course, if it 
is a bill of exchange, and it is not accepted by the acceptor, 
the indorser says by indorsing it, "If it is not accepted and 
you duly notify me, I will then pay the instrument." In that 
case, if the drawee did not accept it, the drawer would be pri- 
marily liable. In the case of a note, the indorser says, "In case 
that instrument is not paid, and you give me notice of the fact 
that the maker does not pay the note, then I will pay the note 
myself." 

28<i Quincy Mutual Fire Insur- 743 ; Prentiss v. Savage, 13 Mass. 

ance Company v. International 20; Woodward v. Lowry, 74 Ga. 

Trust Company, 217 Mass. 370. 148. 

2»Furgeson v. Stapels, 83 Me. 3i jones v. Robinson, 11 Ark. 504, 

159, 19 Atl. 158, 17 Am. St. Rep. 54 Am. Dec. 212; Beer v. Clifton, 

470; Mudd v. Harper, 1 Md. 110, 98 Cal. 323, 33 Pac. 204, 35 Am. 

54 Am. Dec. 644. St. Rep. 172, 20 L. R. A. 580. 

30 Van Vleet v. Sledge, 45 Fed. 



114 NEGOTIABLE INSTRUMENTS. § 100 

The indorsement of a bill or note implies an undertaking from 
the indorser to the person in whose favor it is made and to every 
other person to whom the bill or note may afterwards be trans- 
ferred, exactly similar to that which is implied by drawing a 
bill, except that in the case of drawing a bill the stipulation with 
respect to the drawer's responsibility and undertaking do not 
apply. 

In the beginning of the course we saw that a note might waive 
presentment and notice. Of course, under such circumstances it 
will not be necessary to make them a part of the contract that 
the indorser makes. 

§ 100. Requisites of indorsement. There are certain requi- 
sites of an indorsement. The customary and mercantile form 
of indorsement is the signature of the indorser. But an indorse- 
ment in such words as : . "For value received, I hereby assign, 
transfer and set over to B all my right, title, interest and claim 
in the within instrument." have been held to pass a legal title to 
the instrument and not to destroy its negotiability. 

We have seen that "the indorsement must be written on the 
instrument itself or upon a paper attached thereto."^^* 

It is not necessary under the law that there should be a physi- 
cal impossibility of writing the indorsement on the instrument 
itself as it may be on an allonge, that is a paper attached to the 
instrument, whenever the necessity or convenience of the parties 
require it. 

It is clear that a detached paper cannot bind one as indorser on 
a negotiable instrument.^*" 

The Negotiable Instrument Law further provides: 

"The indorsement must be an indorsement of the entire instru- 
ment. An indorsement which purports to transfer to the indorsee 
a part only of the amount payable, or which purports to transfer 
the instrument to two or more indorsees severally, does not oper- 
ate as a negotiation of the instrument. But zvhere the instru- 
ment has been paid in part, it may be indorsed as to the 
residue."^ 

Take a bill for $500. Suppose the payee should indorse $250 
to A and $250 to B. That could not be done, for the indorse- 
ment must be in accordance with the bill.^^ But if $250 was 

siaNeg. Inst. Law, § 31. 33 Planters Bank of Tenn. v. 

31" First Nat. Bank v. Doherty, Evans, 36 Tex. 592; Hughes v. Kid- 

156 Ky. 386, 161 S. W. 211. dell. 2 Bay (S. C.) 324; Douglas v. 

33 Neg. Inst. Law, § 42, where all Wilkeson, 6 Wend. 637 ; Hawkins v. 

cases directly or indirectly bearing Cudy, 1 Ld. Raym. 360; Erwin v. 

upon or citing the Law are Lynn, 16 Ohio St, 547. 
grouped. 



§ 101 TRANSFER BY INDORSEMENT. 115 

paid on the bill, the rest could be indorsed to someone else, as 
the indorsement of a partial payment on the instrument does not 
render it non-negotiable.^^* The test then is, does the transfer cut 
up the right of action, or does it vary the rights of the parties. 
If a note for value was transferred and there was a neglect to 
indorse it, the transferrer may be compelled, in equity, to make 
the indorsement.^"* The transferee is the rightful holder of it 
until it is indorsed, and equity would compel that there should 
be an indorsement. Suppose a case where the note was indorsed 
by A to B and then B indorsed it to A, each transfer being for 
value, can A recover from B on that indorsement? No. Because 
of circuity of action. If A sued B, B could turn right around and 
sue A. Consequently, it is held that that could not be done, un- 
less A, in the first instance, should indorse "without recourse," 
and B did not.^ 

The indorsement must follow the tenor of the bill or note. 
A bill or note cannot be divided into two different parts, and 
one cannot accept part and not the other, or pay part of it and 
not pay the other part, providing it divides the cause of action. 
It would not be absolutely void to divide it up in this way ; it 
would be binding between the parties, yet it would not be nego- 
tiable by the law merchant.^^ That means not good by the law 
merchant, and a complaint fails to state a cause of action at law 
where the plaintiff alleges that the payee had indorsed to the 
plaintiff a one-half interest in a note.^^* Then, a second requisite 
is that the indorsement be by the payee or subsequent holder. 
And the third requisite is as to delivery. There can be no ques- 
tion as between the immediate parties but that a delivery is nec- 
essary, and when the instrument gets into the hands of a bona 
iide holder a delivery is necessary unless certain things arise 
whereby the transferrer would be estopped. And there must 
arise something of that nature in order to say that an indorse- 
ment is valid without delivery. 

§ 101. Varieties of indorsement. There are various liabili- 
ties which may be engrafted on a negotiable instrument, evi- 

33a Smith V. Shippey, 182 Pa. St. Wilders v. Stevens. 15 Mecs. & W. 

24. 208. 

34 Schoepf er v. Tommack, 97 111. 36 Co^k v. Fellows, 1 Johns. (N. 
App. 562; Brown v. Wilson, 45 S. Y.) 143; Newman v. Ravenscroft. 
C. 519, 23 S. E. 630. 55 Am. St. Rep. 67 111. 493 ; Pease v. Dwight, 6 How 
779; Couter v. Rafferty, 7 Montreal (U. S.) 190. 

Super. Ct. 146. 36a parklev v. Muller, 164 App. 

35 Bishop V. Hayward. 4 Term R. Div, (N. Y.) 35. 
470; Moore v. Cross, 19 N. Y. 227; 



116 



NEGOTIABLE INSTRUMENTS. 



§102 



denced by the character and terms of the indorsement thereon. 
An indorsement may be (a) special, or (b) in blank; it may 
be (c) absokite, or (d) conditional; it may be (e) restrictive; 
it may be (f) without recourse on the indorser; and there may 
be (g) joint indorsements of the instrument, (h) successive in- 
dorsements, and also (i) irregular indorsements. 

The Negotiable Instruments Law provides : 

"An indorsement may be either special or in blank; and it may 
also be either restrictive or qualified or conditional."^"^ 

Below are given some of the most common forms of indorse- 
ment: 



(Indorsement in full) 
Pay to DONALD S. MORRIS 
or order. 

NATHAN REDDING. 



(Indorsement in blank) 
DONALD S. MORRIS. 



(Qualified Indorsement) 
Without recourse. 
JOSEPH THOMPSON. 



(Conditional Indorsement) 
Pay HENRY HUDER or or- 
der on the completion of the 
Newcastle Road. 

HENRY STEVENSON. 



(Restrictive Indorsements) 
1. Pay only to EARL MAT- 
LOCK for collection for my 
account. 

HENRY HUDER. 



2. Pay to HENRY REEVE or 
order as Trustee for GEORGE 
GRAVES. 

WILLIAM ADDISON. 



(Indorsement by guaranty) 
For value received I hereby 
guaranty the payment of this 
note together with any costs 
incurred in collection. 

LOUIS EWBANK. 



§ 102. Indorsement in full or special indorsement. A spe- 
cial indorsement or an indorsement in full is one which mentions 
the name of the person in whose favor it is made and to whom, 
or to whose order, the sum is to be paid. For instance : "Pay 
to B, or order," signed "A," is an indorsement in full by A, 
the payee or holder of the paper, to B. 

The special indorsement is the saine as an indorsement in full. 
It is an indorsement to someone or order ; that is, "a special in- 
dorsement specifies the person to ivhom, or to whose order, the 
instrument is to be payablc."^^ 

The subsequent indorsee must write his order on the instru- 
ment ; that is. "the indorsement of such indorsee is necessary to 



'^"^ Neg. Inst. Law. §43. where 
all cases directly or indirectly bear- 
ing upon or citing the Law are 
grouped. 

^ Neg. Inst. Law, § 44, where 



all cases directly or indirectly bear- 
ing upon or citing the Law are 
grouped. But see Spence v. Rpjb- 
inson, 35 W. Va. 313, 13 S. ~E. 
1004. 



§§ 103-104 TRANSFER BY INDORSEMENT. 117 

the further negotiation of the instrument ."^'^ And the subse- 
quent holder of the instrument would be required to make more 
proof in order to recover on the instrument when it is indorsed 
in full. When there is a special indorsement, one endeavoring 
to recover from one who has received it by special indorsement 
must prove the signature of two persons ; where it is indorsed in 
blank, one would have to prove the signature of the party only 
against whom he was endeavoring to recover. 

§ 103. Indorsement in blank. An indorsement in blank is 
one which does not mention the name of the indorsee, and gen- 
erally consists simply of the payee placing his name in writing 
on the back of the instrument.^® As the law states : "An indorse- 
ment in blank specifies no indorsee, and an instrument so indorsed 
is payable to bearer, and may be negotiated by delivery."^^^ The 
holder of a bill with a blank indorsement may, by writing a name 
over the indorser's signature, convert it into a special indorse- 
ment,^* but such a bill if originally payable to bearer is not re- 
strained thereby and is payable to bearer, except that the special 
indorser is only liable to parties making title through his indorse- 
ment.^ He cannot, however, write over it any contract inconsist- 
ent with the character of the indorsement, as, for example, he 
could not write over it a contract of guaranty ; for the effect of 
this would be to deprive the indorser of his right to notice in case 
of non-payment.^^* 

§ 104. Absolute and conditional indorsements. An absolute 
indorsement is one by which the indorser binds himself to pay, 
upon no other condition than the failure of prior parties to do 
so, and of due notice to him of such failure. A conditional in- 
dorsement is one by which the indorser annexes some other con- 
dition to his liability ; that is, where there is some condition in 
the indorsement.'*^ Now as to the condition, if it is in the in- 
dorsement, the courts hold that it is valid. There may be a valid 
conditional indorsement and it accomplishes justice, and yet it 

39 Neg. Inst. Law, § 44, where 177 111. 431. 53 N. E. 76, 64 Am. St. 
all cases directly or indirectly bear- Rep. 252 ; Hunter v. Hempstead, 1 
ing upon or citing the Law are Mo. 67, 13 Am. Dec. 468. 
grouped. '^ Habersham v. Lehman, 63 Ga. 

40 Neg. Inst. Law, § 44, where 383 ; Johnson v. Mitchell, 50 Tex. 
all cases directly or indirectly bear- 212. 

ing upon or citing the Law are 43a Belden v. Hann, 61 Iowa 42, 

grouped. See also note 1 L. R. A. 43 McGorray v. Stockton Sav. etc. 

712. Soc, 131 Cal. 321, 63 Pac. 479; 

40a j^gg^ jnst. Law, § 34 last Rowe v. Haines, IS Ind. 445, 77 Am. 

part. Dec. 101 ; Johnson v. Barrow, 12 

41 Illinois Conference v. Plagge, La. Ann, 83, 



118 NEGOTIABLE INSTRUMENTS. § 104 

seems to restrict the circulation of the instrument to some ex- 
tent, because there is some condition attached to it. Yet it does 
not in any way interfere with the face of the instrument as 
such; it is a primary obhgation when it is on the face of the 
instrument, and is invaHd, but il it is an indorsement it is vahd, 
and does not make the instrument a non-negotiable instrument."** 

"Where an indorsement is conditional a party required to pay 
the instrument may disregard the condition and make payment 
to the indorser or his transferee whether the condition has been 
fidfilled or not. But any person to zvhoni an instrument so in- 
dorsed is negotiated icill hold the same, or the proceeds thereof, 
subject to the rights of the person indorsing conditionally.'"^ 

Suppose an indorsement as follows: "Pay to A, or order, if 
he marries before he is 25." This is written on the back of 
the instrument and is not a part of the original instrument. 
Now, that is a conditional indorsement and is held good. It 
is not good if on the face of the instrument, but is held good if 
it is an indorsement. When a condition is written on the face 
of the instrument it is not negotiable,^** but where it is written 
on the back the courts say it is negotiable by the law 
merchant. It is a contract, and the person who makes it is bound 
by it, providing the conditions are fulfilled.*'' We are now con- 
sidering whether it is a good principle. Suppose this condition 
is written on the face of the note, it would apply to every man 
who indorses it, whereas, when it is written on the back by one 
indorser it only applies to him and not to the others. 

Suppose an instrument is worded, "Pay to the order of A," 
and signed "B," "A" being the payee indorses it with a con- 
ditional indorsement and says, "Pay to C, provided he marries 
before he is 25." What is the value of that instrument ? Could 
anybody get anything on that instrument? It means at any 
time he gets married before he is 25 years old. This is an 
exceptional case and really seems to make the note non-negotiable 
at the vei'y first instance, but it does not, if not made contem- 
poraneously with the instrument and a part of it. If a memo- 
randum of agreement of the parties is written upon the bill or 
note contemporaneously wn'th its execution, and intended by the 

*4Tappan v. Ely, 15 Wend. (N. 4G Paimer v. Sargent, 5 Nebr. 223, 

Y.) 362; Scares v. Glyn, 8 Q. B. 25 Am. Rep. 479; Hill v. Nutter, 82 

24, 55 E. C. L. 24. Me. 199. 19 Atl. 170; Swank v. 

45 Neg. Inst. Law, § 39, where Nichols, 24 Ind. 199. 

all cases directly or indirectly bear- 47 Johnson v, Barrow, 12 La. 

ing upon or citing the Law are Ann. 83. 
grouped. 



§ 105 TRANSFER BY INDORSEMENT. 119 

parties to make a part of the note or bill, it is construed in the 
same manner as if in the body of the instrument.'*^ 

By the last sentence of section 39 of the law as above set out 
the rule is somewhat analogous to that which gives to an indorser 
who has paid a note in part an equitable right pro tanto in the 
proceeds, where the holder afterward collects the whole amount 
of the note from the maker."*^* 

One may indorse in such terms as to negative personal lia- 
bility thus, as stated in the Negotiable Instruments Law : 

"Where any person is under obligation to indorse in a repre- 
sentative capacity, he may indorse in such terms as to negative 
personal liability. '"^^^ 

§ 105. Restrictive indorsement. A restrictive indorsement 
is one so worded that it may restrict the further negotiability of 
the instrument ; and it is then called a restrictive indorsement.'*® 
Thus, "Pay the contents to J. S. only," is such an indorsement. 

The Negotiable Instruments Law provides : 

"An indorsement is restrictive which either (1) prohibits the 
further negotiation of the instrument ; or (2) constitutes the in- 
dorsee the agent of the indorser; or (3) vests the title in the 
indorsee in trust for or to the use of some other person. But 
the mere absence of words implying power to negotiate does not 
make an indorsement restrictive."^^ 

"A restrictive indorsement confers upon the indorsee the 
right, (1) to receive payment of the instrument ; (2) to bring 
any action thereon that the indorser coidd bring; (3) to trans- 
fer his right as such indorsee, where the form of the indorsement 
authorises him to do so. But all subsequent indorsees acquire 
only the title of the -first indorsee under the restrictive indorse- 
ment."^^ 

"Pay the contents to J. S. only" is an illustration of an indorse- 
ment which prohibits the further negotiation of the instrument. 

The restrictive indorsement may or may not restrict the cir- 
culation of the instrument, depending on the indorsement. 
There are two classes — collection indorsements and trustee in- 

^ Parsons v. Jackson, 99 U. S. so jjeg. Inst. Law, § 36, where 

434, 25 L. Ed. 457. all cases directly or indirectly bear- 

46a Madison Square Bank v. ing upon or citing the Law are 

Pierce, 137 N. Y. 444. grouped. 

^Sb Neg. Inst. Law, § 44. 51 Neg. Inst. Law, § 37, where all 

^spawsett V. U. S. Nat. L. Ins. cases directly or indirectly bear- 
Co., 97 111. 11, 37 Am. Rep. 95; ing upon or citing the Law are 
Hook V. Pratt, 78 N. Y. 371 ; Fassin grouped. 
V. Hubbard, 55 N. Y. 465. See note 
12 L. R. A. 370. 



120 NEGOTIABLE INSTRUMENTS. § 105 

dorsements. If it is a collection, it is no longer negotiable. 
"Pay to A," and then the words "for collection" written after- 
wards. That would indicate that A no longer had any right 
to negotiate that instrument, but only had a right to collect it.^''* 
But if it is "Pay to A, or order, for the use of B," or "A or 
order, as trustee for B," or words to that effect, then the very 
indorsement itself would indicate that A could place an order 
upon that indorsement, and that certainly would not restrict 
the instrument. A trustee indorsement containing the words "or 
order," or words of similar import, can be passed from hand 
to hand.^^ In the indorsement, "pay to A for account of B," the 
title passes to A, but the indorsement is restrictive and gives 
notice that the paper cannot be negotiated by A for his own debt, 
or for his own benefit.®^* 

An indorsement for collection is not a transfer of the title of 
the instrument to the indorsee, but merely constitutes him the 
general agent of the indorser to present the paper, demand and 
receive payment, and remit the proceeds.®* An indorsement for 
collection made by the payee is cancelled by his subsequent in- 
dorsement to another indorsee for value.®® Where an indorse- 
ment in blank is accompanied by a letter stating that the instru- 
ment is "for collection and credit," the indorsement and letter 
must be read together, and the effect is to make the indorsement 
restrictive, and the same in character as if the contents of the 
letter had been incorporated in the indorsement.®®* 

An indorsement of a bill or draft to a bank for deposit is 
common in business transactions.®® Such an indorsement, like 
an indorsement for collection, constitutes a retention of title in 
the depositor in the absence of any practice or agreement to the 
contrary. It is likely, however, that the title to a check so in- 
dorsed which is credited, according to the practice prevailing 
between the bank and the indorser, to the account of the in- 

53 Peoples etc. Bank v. Craig. 63 S. W. 982, IS L. R. A. 102; Boyer 
Ohio St. 374, 59 N. E. 102, 81 Am. v. Richardson, 52 Neb. 156, 71 N. 
St. Rep. 639, 52 L. R. A. 872 ; Con- W. 981. See also notes 2 L. R. A. 
tinental Nat. Bank v. Weems, 69 699, 7 L. R. A. 852, 8 L. R. A. 42. 
Tex. 489, 6 S. W. 802, 5 Am. St. 14 Am. St. Rep. 793, and 4 Am. St. 
Rep. 85; National City Bank of Rep. 203 

Brooklyn v. Wescott, 118 N. Y. 468, 55 Brook v. Van Nest, 58 N. J. L. 

23 N. E. 900. 162, 33 Atl. 382; Atkins v. Cobb, 

53Leavitt v. Putnam, 3 N. Y. 51 Ga. 86. 

494 ; Leland v. Parriott, 35 la. 454. 55a gan]^ ^^ America v. Waydell, 

53a Hook v. Pratt, 78 N. Y. 371, 187 N. Y. 115. 

375. 56 Barbour v. Bayon, 5 La, Ann. 

54 Northwestern Nat. Bank v. 304, 52 Am. Dec. 593. 
Bank of Commerce. 107 Mo. 402, 17 



§ 106 TRANSFER BY INDORSEMENT. 121 

dorser, will be held to have passed to the bank. In any event a 
restrictive indorsement of an instrument for collection or de- 
posit, or to the use of the indorser and for his benefit, in the 
absence of any other circumstances, will not divest the indorser 
of his title thereto, until the money is paid. 

And the law as above set out enables a bank to sue in its own 
name on paper indorsed to it "for collection. "^^* 

One who takes paper under a restrictive indorsement takes 
the paper subject to all equities that might have been asserted by 
the principal obligor had it not been indorsed.^^" 

§ 106. Indorsement without recourse. An indorsement 
qualified with the words, "without recourse," "sans recourse," or 
"at the indorsee's own risk," renders the indorser a mere as- 
signor of the title to the instrument, and relieves him from all 
responsibility for its payment,^'' though not from certain liabili- 
ties. 

The indorsement without recourse means just as the word 
signifies. A says to B, "I indorse this over to you, but you 
have no recourse on me, providing the parties on the instrument 
are not financially able to pay this instrument. I don't stand 
good for the financial ability of the other parties who have pre- 
ceded me on the instrument." 

The form of the indorsement without recourse is "sans re- 
course," or "without recourse," or "at the indorsee's own risk," 
or such equivalent words. It transfers the legal title to the in- 
strument. "A qualified indorsement constitutes the indorser a 
mere assignor of the title to the instrument. It may he made bv 
adding to the indorser^s signature the word ^without recourse/ 
or any words of similar import. "^^ It does not free him from 
all liability. He warrants (1) that the instrument is in all re- 
spects genuine as to prior parties;^® (2) that he has a good title 
and a right to transfer it ^^ and (3) that he has no knowledge 

se^Mezger v. Sigall, 83 Wash. ing upon or citing the Law are 

80. grouped. 

56b Smith V. Bayer, 46 Ore. 143. 59LobdelI v. Baker. 1 Mete. 

57 Cross V. Hollister, 47 Kan. 652, (Mass.) 193; Birmingham Nat 
28 Pac. 693; Corbett v. F»tzer, 47 Bank v. Bradley, 103 Ala. 109. IS 
Neb. 269, 66 N. W. 417; Drom v. So. 440, 49 Am. St. Rep. 17. 
Sherwin, 20 Colo. 234, 38 Pac. 56; State Exchange Bank v. National 
Rice V. Stearns, 3 Mass. 225, 3 Am. Bank of Commerce, — Okla. — . 174 
Dec. 129. As to effect of indorse- Pac. 796. Note as to undertaking 
ment without recourse see notes 12 of indorser without recourse, 2 A 
L. R. A. 371, and 7 Am. St. Rep. L. R. 216. 

365. ooDumont v. Williamson, 18 

58 Neg. Insf. Law, §38, where Ohio St. 515; Palmer v. Courtney, 
all cases directly or indirectly bear- 32 Neb. 781, 49 N. E. 754, 



122 NEGOTIABLE INSTRUMENTS. § 107 

of any facts to impair its validity .^^ In other words, anyone who 
writes his name on a paper "without recourse" says "all parties 
to that paper are genuine." If it had been forged he would be 
held liable. He says, "I am the lawful holder of that paper, 
and I have title to it and know of no reason why you could not 
recover on it as a valid instrument, but one thing I do not guar- 
antee ; I do not guarantee the financial responsibility of the par- 
ties on that paper, but I do say that I hold the title to it just the 
same as if it were a horse I was selling you." 

The regular indorser guarantees that the instrument will be 
paid by the other parties; that they are financially responsible, 
and if they do not pay it, he will see that it is paid. Indorsers 
"without recourse"' do not make such guarantees as we have 
seen. "Without recourse" only applies to the person who writes 
those words after his name. 

Now, strange to say, this does not interfere with the nego- 
tiability of the instrument. "Such an indorsement does not im- 
pair the negotiable character of the instrument. "^^ Nor does it 
cast any suspicion on the character of the paper. In that way 
the indorser restricts his liability. A party might enlarge his lia- 
bility by writing over his signature an absolute guarantee, waiv- 
ing the usual demand and notice of non-payment; this is a 
facultative indorsement. 

§ 107. Joint indorsement. If a bill or note be made payable 
to several persons not partners, the transfer can only be made 
■ by a joint indorsement of all of them.®* 

The following provision is contained in the Negotiable Instru- 
ments Law : 

"Where an instrument is made payable to two or more payees 
or indorsees who are not partners, all must indorse, unless the 
one indorsing has authority to indorse for the other s."^^"" 

The above section of the law really makes no change in the law 
as the well settled rule of the law merchant was that co-payees, 
not partners, must each indorse, in order to negotiate the instru- 
ment. «*" 

«i Smith V. Corege. 53 Ark. 295. «3pitcher v. Barrows, 17 Pick. 

14 S. W. 93; Hannun v. Richard (Mass.) 361, 28 Am. Dec. 306; 

son, 48 Vt. 508; Challiss v. McCrum. Cooper v. Bailey, 52 Me. 230; Hun- 

22 Kan. 157; Furgerson v. Staples, gcrford v. Perkins, 8 Wis. 267. See 

82 Me. 159, 19 Atl. 158, 17 Am. St. § 98, supra. 

Rep. 470. *** Neg. Inst. Law, § 41. 

62 Neg. Inst. Law, § 38, where «3b Wood v. Wood, 16 N. J. L. 

all cases directly or indirectly bear- 428 ; Foster v. Hill, 36 N. H. 526. 
ing upon or citing the Law are 
grouped. 



§§ 108-109 TRANSFER BY INDORSEMENT. 123 

§ 108. Successive indorsements. When several persons in- 
dorse a bill or negotiable note in succession, the legal effect is to 
subject them to liability as to each other in the order they in- 
dorse.®'* 

§ 109. Irregular or anomalous indorsement. When one not 
a party to an instrument places his name irregularly upon an 
instrument it is known as an irregular or anomalous indorse- 
ment. 

If a note is made payable to A or bearer, and we should see 
indorsements on the back of the note, X, Y and Z, we would 
find no difficulty since the instrument is made payable to bearer ; 
or a blank indorsement would be regular and would be valid. 
But suppose the instrument is made payable to the order of A, 
and instead of the indorsement being A's, the first indorsement, 
we see is the indorsement of Y. Now, Y is not a party to the 
instrument ; the instrument has been made, say by X, and made 
payable to the order of A, while Y is a complete stranger to the 
instrument. What liability did he intend to assume by placing 
his name that way on the instrument? His liability is not gov- 
erned by the law merchant. It does not make provision for 
any such person. Now, suppose that bill or note is made payable 
to the order of A, and A does not write his name upon the 
instrument, but the first name appearing on the back of the 
instrument is the name of B, the note or bill being made or 
drawn by X. X does not pay the note and A proceeds against B. 
It is important to know what the liability of the irregular party 
to the instrument is in order to know whether or not he should 
be given notice of the non-payment or non-acceptance of the in- 
strument. If we hold this person who is irregular or anomalous 
upon the back of the instrument as an indorser, then we must per- 
form the conditions which should be performed toward an in- 
dorser in order to hold him, and one of the conditions is, that he 
shall be given notice. It becomes important to know whether the 
name of B, or rather whether B himself is an indorser, or what 
his obligation is. Now, suppose B's signature was there when 
A took the note. Suppose when A took the note, he didn't know 
the maker; he said to B, "I don't know this man ; I am not will- 
ing to count anything on his financial responsibility, but I tell 
you what I will do. If you will put your name on the back of 
that instrument. I will accept that as payment, because I know 
your responsibility: now, if you will lend credit to this instru- 
ment by putting your name on it, I will take the instrument." 

«4 Camp V. Simmons. 62 Ga. IZ ; 39 N. W. 49 ; Knox v. Dixon. 4 La. 
Brewer v. Boynton, 71 Mich. 254, 466, 23 Am. Dec. 488. 



124 NEGOTIABLE INSTRUMENTS. § 109 

B says, "All right," and does so. But B is a stranger to the 
instrument. What is B's liability ? 

Regularly, A, the payee, should indorse first because the instru- 
ment is made payable to him, and consequently, being the first 
indorser and no one before him on the instrument, he could 
only hold the parties on the face of the instrument liable ; but 
suppose the name of this irregular person precedes him on the 
paper as an indorser. Wouldn't the facts indicate that he took 
that instrument because the name of this irregular indorser is 
there ? In the absence of the Negotiable Instruments Law, differ- 
ent jurisdictions have different rules. 
The Negotiable Law provides: 

"Where a person not othcrzmse ai party to an instrument 
places thereon his signature in blank before delivery, he is liable 
as indorser in accordance with the following rules: (1) If the 
instrument is payable to the order of en third person he is liable 
to the payee and to all subsequent parties. (2) If the instru- 
ment is payable to the order of the maker or drawer, or is payable 
to bearer, he is liable to all parties subsequent to the maker or 
'drazver. (3) If he signs for the accommodation of the payee, he is 
liable to all parties subsequent to the payee."^^ 

As above stated, different jurisdictions have applied different 
rules as to the liability of the irregular or anomalous indorser. 
Some hold him as indorser,®* some as maker,*'^ and some as guar- 
antor;®* different jurisdictions make different liabilities for him. 
We must know what the liability of the anomalous indorser is 
that we may protect ourselves. If an irregular indorser is a 
maker or surety, it is not necessary to give him notice if the 
instrument is not paid, because if he is a joint maker he is pri- 
marily liable and he says absolutely that he will pay it. But 
if he is to be held as an indorser, his contract is to pay provided 
he is given notice, and if we have not given him notice, we can- 
not hold him liable. 

The most general rules in the absence of the Negotiable In- 
struments Law, are as follows: 

A person whose name is on the back of a bill or note, trans- 

®5 Neg. Inst. Law, § 64, where S'" Dow Law Bank v. Godfrey, 126 

all cases directly or indirectly bear- Mich. 521 ; McGraw v. Union Trust 

ing upon or citing the Law are Co. (Mich.), 99 N. W. 758; Union 

grouped. See not«s 18 L. R. A. Bank v. Willis, 8 Mete. (Mass.) 

2>2>, and 72 Am. St. Rep. 676. 504; Childs v. Wyman, 44 Me. 441. 

6« Blakeslee v. Hewett, 76 Wis. 68 Ranson v. Sherwood, 26 Conn. 

341; Phelps V. Vischer, 50 N. Y. 437; Knight v. Dunsmore, 12 la. 

69; Gilbert v. Finkbeiner, 68 Pa. .35; Chandler v. Westfall, 30 Tex. 

St. 243. \.A77; Webster v. Cobb, 17 111. 459. 



§ 110 TRANSFER BY INDORSEMENT, 125 

ferable by delivery, or payable to bearer, is to be deemed an 
indorser. A person signing on the back of a bill or note payable 
to order before the payee is prima facie presumed to be a second 
indorser, and not liable to the payee; but this may be rebutted 
by showing that his indorsement was made to give the maker 
credit with the payee, and he thus becomes Hable as first in- 
dorser, the payee being permitted to indorse to him without 
recourse. 

Parol evidence is always admissible in these cases to show 
what he intended to do under the circumstances.*^ 

The Negotiable Instruments Law provides as follows: 
"A person placing his signature upon an instrument otherwise 
than a maker, drawer or acceptor is deemed to be an indorser, 
unless he clearly indicates by appropriate words his intention to 
be bound in some other capacity. '^^^ 

§ 110. Presumptions as to indorsement. Some matters as 
to presumptions will be treated more fully in the Chapter on Evi- 
dence,''" but for several reasons it is best to consider presump- 
tions as to indorsements at this place. 

The Law provides: 

"Except where an indorsement bears date after the maturity 
of the instrument every negotiation is deemed prima facie to 
have been effected before the instrument was overdue."'^^ 

And where the plaintiff on the trial produced the instrument, 
proved the indorsement of the payee and the signature of the 
maker and introduced it in evidence he established prima facie 
that he became the owner of the note before it became due." 

This presumption is important since that, in order to constitute 
one a holder in due course, he must have taken the instrument 
before it was overdue.'^ 

Another important presumption is that as to the place where 
the indorsement was made. In the absence of evidence to the 
contrary, a note is presumed to have been made at the place 
where it bears date.'^* 

The place where an indorsement was made often becomes 
important where the law in different states varies. An indorse- 
ment in Massachusetts of an instrument executed and payable 

«9Good V. Martin, 95 U. S. 90; 'i Neg. Inst. Law, §45. 

Kohn V. Consolidated Butter & "^^ German American Bank v. 

Egg. Co., 30 Misc. 725, 63 N. Y. S. Cunningham, 97 App. Div. (N. Y.) 

265. See note 18 L. R. A. 36. 246. 

«»a Neg. Inst. Law, § 63. ^3 Neg. Inst. Law, § 52. 

70 Chapter XXV. " Finch v. Calkins, 183 Mich. 298. 



126 NEGOTIABLE INSTRUMENTS. § 110a 

in New York is governed by the law of Massachusetts as to the 
contract of indorsement^' 

§ 110a. Effect of transfer without necessary indorsement. 
One who is the holder of negotiable paper payable to his order 
and who transfers it for value without indorsing it, vests in the 
transferee such title as he had, and in addition to this, the trans- 
feree acquires the right to have the transferer's indorsement. 
Thus such an instrument payable to the order A may be effectu- 
ally transferred by mere delivery, and the assignee takes the legal 
title and may sue in his own name subject to defenses of prior 
parties.'^® The negotiation takes effect as of the time when the 
indorsement is actually made when it is necessary to determine 
whether the transferee is a holder in due course, thus the in- 
dorsement is required to constitute the transferee a holder in due 
course." And an intention by both parties to have the paper 
indorsed is not sufficient, as it is the act of indorsement, not the 
intention, which negotiates the instrument.''^ 

An indorsement after notice of a defense does not relate back 
to the transfer, so as to cut off intervening rights and remedies.'^® 
The holder, however, is protected against everything subsequent 
to delivery, as the indorsement relates back to the time of delivery 
as to any equity outside of the instrument itself.^® 

The Negotiable Instruments Law on these principles of law 
states : 

"Where the holder of an instrument payable to his order trans- 
fers it for value without indorsing it, the transfer vests in the 
transferee such title as the transferrer had therein, and the trans- 
feree acquires, in addition, the right to have the indorsement of 
the transferrer. But for the purpose of determining whether the 
transferee is a holder in due course, the negotiation takes effect 
as of the time ivhen the indorsement is actually made."^^ 

If the holder claims title under the above section he should from 
the special circumstances which bring him within this section of 
the Law, rather than as in the ordinary case, prove the indorse- 
ment of the payee as a part of his case. 

§ 110b. Indorsement stricken out. The holder of a nego- 
tiable instrument may at any time strike out any indorsement 
which is not necessary to his title; he may strike out all inter- 
vening indorsements and aver that the first blank indorser in- 

''^ Glidden v. Chamberlin, 167 ^^ Goshen National Bank v. Bing- 

Mass. 486. ham, 118 N. Y. 349. 

''6 Smith V. Nelson, 212 Fed. Rep. ''^ Meuer v. Phcenix National 

56; Martz v. State National Bank, Bank. 42 Misc. (N. Y.) 341. 

147 App. Div. (N. Y.) 250. so Beard v. Dedolph, 29 Wis. 136. 

'■'■ Mayers v. McRimmon, 140 N. si Neg. Inst. Law, § 49. 
C. 640. 



§§ llOc-llOd TRANSFER P.Y INDORSEMENT. 127 

dorsed immediately to him.^^ The striking out of such indorse- 
ment does not destroy the presumption that the one in posses- 
sion is the holder thereof.^^ Nor is the fact material that one 
or more of the intermediate indorsements is restrictive.^^ 

The striking out of the indorsements may take place at the 
trial and after the plaintiff has finished his case.*'* 

The following is the provision of the Negotiable Instruments 
Law : 

"The holder may at any time strike out any indorsement which 
is not necessary to his title. The indorser whose indorsement is 
struck out, and all indorsers subsequent to him, are thereby re- 
lieved from liability on the instrument."^^ 

Where an instrument is transferred by a special indorsement, 
the holder has no right to strike out the name of the person 
mentioned in such indorsement and insert his own name in the 
place thereof; nor can he strike out such name and convert 
such special indorsement into a blank indorsement. 

§ 110c. Negotiable character continued. As a general rule 
it may be stated that an instrument negotiable in its origin is 
always negotiable, in other words, once negotiable is always nego- 
tiable. But there are exceptions to this, namely, when an instru- 
ment has been restrictively indorsed or has been discharged by 
payment or otherwise. 

The Negotiable Instruments Law provides : 

"An instrument negotiable in its origin continues to be nego- 
tiable until it has been restrictively indorsed or discharged by 
payment or otherwise ."^"^ 

§ nod. Negotiation by prior party, A prior party back to 
whom a negotiable instrument has been negotiated may, under 
certain circumstances, reissue and further negotiate the instru- 
ment, but he is not entitled to enforce payment thereof against 
any intervening party to whom he was personally liable. 

The Negotiable Instruments Law has the following provision 
to such effect: 

"Where an instrument is negotiated back to a prior party, 
such party may, subject to the provision of this act, reissue and 
further negotiate the same. But he is not entitled to enforce 
payment thereof against any intervening party to whom he was 
personally liable."^^ 

82 Preston v. Mann. 25 Conn. 127. ^'^ Neg. Inst. Law, §47, where all 

83 King V. Bellamy, 82 Kans. 301. cases are grouped. As to the dis- 
^'•Jerman v. Edwards, 29 App. charge of negotiable instruments, 

cases (D. C.) 535. see §§ 119-125 of the Law. 

85 Ensign v. Fogg, 177 Mich. 317* 88 Neg. Inst. Law, § 50. 

8' Neg. Inst. Law, §48. 



CHAPTER X. 

TRANSFER— BY DELIVERY AND BY OPERATION OF LAW. 

§ 111. In general. § 113. By operation of law. 

112. By delivery. 

§111. In general. Transfer without indorsement may be 
made by one of two methods, either by delivery^ or by opera- 
tion of law.^ 

§112. By delivery. The law provides: "An instrument is 
negotiated when it is transferred from one person to another in 
such manner as to constitute the transferee the holder thereof. 
If payable to bearer, it is negotiated by delivery. "^^ 

The Negotiable Instruments Law has changed the law in those 
states where it was held that notes made payable to a person 
named therein or bearer must have been indorsed to pass the 
legal title.^" Another provision of the Law is as follows : 

"An indorsement in blank specifies no indorsee. And an instru- 
ment so indorsed is payable to bearer and may be negotiated by 
delivery."^ 

One holding an indorsement in blank may transfer it without 
writing upon the instrument, and in this way he escapes some 
liability which he would otherwise have. He is only liable to 
the party who receives it from him, and as his name does not 
appear on the instrument, he has not added any credit to it.^ 

1 Dunham v. Peterson, 5 N. D. 276; Roberts v. Hall, 37 Conn. 20S, 
414, 67 N. W. 293, 57 Am. St. Rep. 9 Am. Rep. 308 ; Earhart v. Grant, 
556, 36 L. R. A. 232 ; United States 32 la. 481. 

V. Vermilye, 10 Blatchf. (U. S.) ^^Neg. Inst. Law, §30. 

280, 28 Fed. Cas. No. 16,618, af- 2b pavis v. First National Bank 

firmed 21 Wall (U. S.) 138; Mar- of Blakeley, 192 Ala. 8, 68 So. 

skey V. Turner, 81 Mich. 62, 45 N. 261. 

W. 644 ; Kohn v. Watkins, 26 Kan. 3 Neg. Inst. Law, § 34^ where 
691, 40 Am. Rep. 336; O'Conor v. all cases directly or indirectly bear- 
Clarke (Cal., 1896), 44 Pac. 482. ing upon or citing the Law are 
See also note 12 U. S. L. Ed. 399. grouped. 

2 Wooley V. Lynn, 117 111. 244, 6 4 McDonald v. Bailey, 14 Me. 101 ; 
N. E. 885, 57 Am. Rep. 867; Crist Crenshaw v. Jackson, 6 Ga. 509, 50 
V. Crist, 1 Ind. 570; Hendric v. Am. Dec. 361; Smith v. Garden, 1 
Richards, 57 Neb. 794, 78 N. W. Swan. (Tenn.) 28. 

378; Billings v. Collins, 44 Me. 

128 



8 112 TRANSFER BY INDORSEMENT, 



129 



When a person offers you an instrument by delivery when it 
is payable to bearer, you are not obliged to take that instrument 
without indorsement ; if it is not indorsed by the person offering 
it, you need not take it. 

"Where an instrument payable to hearer is indorsed specially, 
it may nevertheless be further negotiated by delivery, but the 
person indorsing specially is liable as indorser to only such 
holders as make title through his indorsement."^ 

"The rule adopted in this section may be inconvenient in prac- 
tice at times as, for example, when paper drawn payable to 
bearer is sent through the mail. But to permit the holder to 
make the instrument payable to a specified person, or to his order, 
would be to allow him to vary the contract of the acceptor or 
maker. Thus, if A makes his note payable to B or bearer, he 
does not assume the obligation of seeing that the instrument is 
properly indorsed ; and upon no rational legal theory would it be 
in the power of the holder to impose upon him a duty which, by 
the express terms of his contract, he refused to take upon himself. 

"The section cannot apply where the paper is originally made 
payable to order and indorsed in blank ; for by section 9 a note 
or bill which, upon its face, is payable to order, becomes payable 
to bearer, only when the last indorsement is in blank ; and 
hence, when a blank indorsement is followed by a special in- 
dorsement the instrument is not within the terms of section 9. 
Thus, if a check drawn to the order of A is indorsed in blank by 
the payee, and delivered to B, and B indorses it to the order of 
C, it is not payable to bearer, for the reason that the last indorse- 
ment, which by section 9 is made the test, is a special indorse- 
ment. The reason for making a distinction in this respect be- 
tween instruments originally drawn payable to bearer and in- 
struments which have become so payable because indorsed in blank 
is obvious. In the one case, the maker or drawer has expressly 
provided that the instrument shall be payable to bearer, and it can- 
not be made payable to order without modifying these terms. 
But where, upon its face, it is payable to order, a transferee, 
taking under a blank indorsement does not. by indorsing it special- 
ly, change its tenor as originally drawn."''* 

Another provision of the Negotiable Instruments Law states: 

"The holder may convert a blank indorsement into a special 

indorsement by zvriting over the signature of the indorser in 

5 Neg. Inst. Law, § 40i, where '^^ Crawford's Annotated Negoti- 

all cases directly or indirectly bear- able Instruments Law. § 40, pp. 83. 

ing upon or citing the Law are 84. 
grouped. 



130 NEGOTIABLE INSTRUMENTS. §113 

blank any contract consistent with the character of the indorse- 
ment.'"^ 

The person who in getting a negotiable note or bill of ex- 
change payable to order, neglects to have the indorsement put 
on it, gets it just as if he had received it by assignment and 
takes it subject to the equities.^ It is his duty to notify the 
parties on the instrument the same as in an assignment. If any 
equities accrue between the time he received the instrument and 
the time he secured the indorsement, the equities would run 
against it.** This is provided for in the Negotiable Instruments 
Law as follows: 

"Where the holder of an instrument payable to his order 
transfers it for value zvithoiit indorsing it, the transfer vests in 
the transferee such title as the transferrer had therein, and the 
transferee acquires in addition the right to have the indorse- 
ment of the transferrer. But for the purpose of determining 
whether the transferee is a holder in due course, the negotiation 
takes effect as of the time zvhen the indorsement is actually 
made."^ 

§ 113. By operation of law. Suppose A becomes a bankrupt 
and has in his possession an instrument calling for $500, payable 
to him. That instrument vests in A's assignee in bankruptcy. 
There is a transfer by operation of law.*® So, if a person dies 
leaving a certain note payable to himself, his administrator or 
executor gets title to that paper by operation of law.** 

The person who gets the paper gets just as good title as the 
dead man had, if it passes or is transferred by operation of law.*^ 

e Neg. Inst. Law, § 35, where all N. Y. 349, 23 N. E. 180. But see 

cases directly or indirectly bear- Beard v. Dedolph, 29 Wis. 130. 
ing upon or citing th0 Law are » Neg. Inst. Law, § 49, where all 

grouped. cases directly or indirectly bearing 

'■ Hopkins v. Manchester, 16 R. I. upon or citing the Law are grouped. 
663. 2Z S .E. 630, 55 Am. St. Rep. lo Roberts v. Hall, 2>7 Conn. 205, 
779; Hersey v. Elliott, 67 Me. 526, 9 Am. Rep. 308. 
24 Am. Rep. 50; Pavey v. Stauffer, " Wooley v. Lyon, 117 111. 244, 6 
45 La. Ann. 353, 12 So. 512, 19 L. N. E. 885, 57 Am. Rep. 867; Crist 
R. A. 716. But see Brown v. Wil- v. Crist, 1 Ind. 570; Rand v. Hub- 
son, 45 S. C. 519. 23 S. E. 630, 55 hard. 4 Mete. (Mass.) 256. 
Am. St. Rep. 779. *^ Billings v. Collins, 44 Me. 271 ; 

s Osgood V. Artt, 17 Fed. 575: Earhart v. Cant, 32 la. 481; Nichols 

Goshen Nat. Bank v. Bingham, 118 v. Hill, 42 S. C. 28, 19 S. E. 1017. 



CHAPTER XL 

TRANSFER— BY ASSIGNMENT. 

§114. In general. § 118a. Some differences as to lia- 

115. Assignment by a separate bility of different transfer- 

writing, rers. 

116. Liability of assignor of bills HSb. Several indorsements in 

and notes. blank, also combination of 

117. Rights of parties. in blank and special in- 

118. Transfer by legal process. dorsements. 

§ 114, Assignment in general. Bills of exchange and prom- 
issory notes are negotiated either by indorsement, transfer by 
delivery without indorsement, by operation of law or by assign- 
ment. Only negotiable instruments can be transferred by in- 
dorsement. An instrument payable to bearer may be negotiated 
by delivery without indorsement.^ A non-negotiable instrument 
is transferred by assignment.^ The difference between the trans- 
fer of a negotiable and a non-negotiable instrument is that the 
latter is transferred subject_to_ all defenses that migh t have been 
set up against the~oi^f^flaT payee,^ while the former is taken free 
from equitable defenses by a bona fide holder. Therefore the 
effect of the assignment of a non-negotiable instrument is that 
the party holding the right drops out of the contract and another 
takes his place. The assignee is substituted in place of the as- 
signor. The assignee and every subsequent person to whom the 
instrument comes by assignment may be considered as the person 
who made the instrument in the first instance, and as having said 
and done everything in making the instrument which the original 
assignor said or did. Hence if the original assignor said or did 
something which under the ordinary law of such contracts would 
prevent him from enforcing the contract, or asserting his right 
against the other party to t he orig inal contract^the assignee, 

although he Imows liOTin^_oOb^ ^^^gi^^^ t^ "^^^ ^^ 

deemed to have said and_don£Jthe_same things. And further, if 
any subsequent assignee from whom, as an assignor, the holder 
in turn derives the contract, has done anything to prevent its 
enforcement against the original party, the said holder cannot 

1 Dunham v. Peterson, 5 N. D. 3 Trustees of Union College v. 

414, 67 N. W. 293, 57 Am. St. Rep. Wheeler, 61 N. Y. 88 ; Warner v. 

556, 36 L. R. A. 232. Whittaker, 6 Mich. 133 ; Tims v. 

a Franklin v. Twogood, 18 la. 515. Shannon, 19 Md. 296. 

131 



132 NEGOTIABLE INSTEUMENTS. §115 

enforce it against the original party. Each assignee takes his 
chances as to the exact position in which any party making an 
assignment of it stands. And as it is called in law, the assignee 
takes the contract subject to equities ; that is, to defenses to the 
contract which would avail in favor of the original party up to 
the time the notice of the assignment is given to the person 
against whom the contract is sought to be enforced. 

A person taking an instrument negotiable by the law merchant 
and writing an assignment of that instrument on a separate 
piece of paper, takes it subject to the rules applying to assign- 
ments ; that is, he takes it subject to the equities the p'JTrtfes had 
on the instrument before the assignment had been made to him. 
One might think that a certain instrument is in the hands of A, 
and that he being indebted to A, say, in the sum of $500, that 
when A comes to him and wants to become indebted to him to the 
extent of that sum, he would be safe in making those advances 
to A. He is, until he gets notice to the contrary. If the original 
instrument has gotten into the hands of someone else by assign- 
ment, it is his duty to notify the obligor instantly of that fact so 
that the conditions existing between him and the party will re- 
main unchanged. In other words, when you get an instrument by 
assignment, it is your duty immediately to notify the person liable 
on the instrument that you hold that instrument and that you 
hold it by assignment.'* But it is not your duty so to do if the 
paper is negotiable by the law merchant. 

§ 115. Assignment by a separate writing. The mode of as- 
signment of non-negotiable instruments differs in no respect 
from that of any other contract.** Although some sort of writ- 
ten assignment is customarily employed, it may be written either 
on the instrument itself or on a separate piece of paper.* The in- 
strument may be assigned on a separate paper so as to authorize 
an action thereon in the name of the assignee.'^ But the assignment 
of a mortgage which was given as security for the payment of a 
promissory note will not operate of itself in some jurisdictions 
as an assignment of the note.^ This is the result of statutes in 

^ Van Buskirk v. Insurance Co., '^Morris v. Poillon, SO Ala. 403; 

14 Conn. 141 ; Merchants & Mechan- Thornton v. Crowther, 24 Mo. 164; 

ics Bank v. Hewett, 3 la. 93 ; Rich- Clapp v. Cedar County, 5 la. 15, 68 

ards V. Griggs, 16 Mo. 416. Am. Dec. 678. 

5 Maxwell v. Goodman, 10 B. ® French v. Turner, 15 Ind. 59; 
Mon. (Ky.) 286; Stiles v. Farrar, Doll v. Hollenbeck, 19 Nebr. 639, 
18 Vt. 444; Halsey v. Dhart, 1 N. J. 28 N. W. 286. But see Coombs v. 
L. 109. Warren, 34 Me. 89; Cortelyou v. 

6 Mitchell V. Walker, 17 Fed. Cas. Jones (Cal., 1900), 61 Pac. 918. 
No. 9,670; Deshler v. Guy, 5 Ala. 

186. 



§116 TRANSFER — BY ASSIGNMENT. 133 

many states which declare that the legal title of the note cannot 
be assigned by a separate instrument. It is presumable that an 
oral assignment, accompanied by a delivery of the instrument, 
would pass a good title to the assignee.^ 

§ 116. Liability of assignor of bills and notes. The assignor 
of bills and notes assumes certain liabilities by way of guaranty. 
But his liability is not so extensive as that of an indorser of nego- 
tiable paper.^® The liability of an assignor and indorser differs 
principally in respect to the guaranty of the solvency of the parties 
to the instrument and in the guaranty that the instrument will be 
honored at maturity.^* The assignor is not responsible for the 
solvency of the parties to a bill or note, neither can he be held 
responsible if the instrument is not paid when due, unless he 
had knowledge of the insolvency of the parties. The assignor 
warrants that the parties to the instrument were competent to 
contract and if any one of them is incompetent, on account of 
infancy, marriage, lunacy and the like, the assignor is responsible 
to his assignee.-^^ There is one exception to this rule, and that 
is in the case of government securities. It is not warranted that 
all prior parties on an instrument had capacity to contract as there 
is an exception in case of "persons negotiating public or cor- 
porate securities, other than bills and notes."^^'- 

The assignor of an instrument warrants that the signatures and 
the body of the instrument are genuine,^^ so that if either proves 
to be a forgery, the money he received for the transfer can be 
recovered back. The assignor also warrants that he does not 
know anything affecting the validity or value of the instrument. 
To attempt to sell an instrument which one knows to be worth- 
less is a fraud upon the purchaser, and naturally vitiates the con- 
tract of sale.^^ 

9 Moore v. Miller, 6 Oreg. 254, 25 Rose, 5 N. J. L. 547, 18 Atl. 748, 

Am. Rep. 518; Sackett v. Mont- 14 Am. St. Rep. 704; Lobdell v. 

gomery, 57 Nebr. 424, 77 N. W. Baker, 3 Mete. (Mass.) 469. 

1083, 73 Am. St. Rep. 522 ; Guy v. I2a Neg. Inst. Law, § 65, last 

Briscoe, 6 Bush. (Ky.), 687. clause. 

1® Cochran v. Strong, 44 Ga. 636 ; ^^ Rhodes v. Jenkins, 18 Colo. 49, 

Boylan v. Dickerson, 3 N. J. L. 24. 31 Pac. 491, 36 Am. St. Rep. 263 ; 

11 Hecht V. Batcheller, 147 Mass. Wood v. Sheldon, 42 N. J. L. 421, 
335, 17 N. E. 651, 9 Am. St. Rep. 36 Am. Rep. 523; Zwazey v. Par- 
708; Lyons v. Miller, 6 Gratt. ker, 50 Pa. St. 441, 88 Am. Dec. 549. 
(Va.) 427, 52 Am. Dec. 129; Milli- i"* Brown v. Montgomery, 20 N. 
gan V. Chapman, 75 Me. 306, 46 Y. 287, 75 Am. Dec. 404; Delaware 
Am. Rep. 486. Bank v. Jarvis, 20 N. Y. 226; May 

12 Butler V. Slocomb, 33 La. Ann. v. Dyer, 57 Ark. 441, 21 S. W. 1064. 
170, 39 Am. Rep. 265; Edmunds v. 



134 NEGOTIABLE INSTRUMENTS. § 117 

The assignor also guarantees to the purchaser that he has a 
good title to the instrument and that he has a right to convey 
it away. If he attempts to transfer property to which he has 
no title he is held to have committed an actual or constructive 
fraud upon the purchaser, according to the knowledge or igno- 
rance of the vendor in respect to his want of title.-^** 

The Negotiable Instruments Law provides: 

"A qualified indorsement constitutes the indorser a mere as- 
signor of^the title to the instrument. It may he made by adding 
to the indorse/s signature the words 'luithout recourse' or any 
words of similar import. Such an indorsement does not impair 
the negotiable character of the instrument. "^^'^ 

§117. Rights of parties. In the transfer of a negotiable in- 
strument by indorsement the indorsee is the holder in due course 
and takes it free from all defenses, while in the transfer of a 
non-negotiable instrument by assignment the assignee takes the 
same subject to any equities between the original parties thereto, 
and any defenses which may be interposed by the maker. The 
assignment of a negotiable instrument confers upon the holder 
only such rights as he would acquire upon the assignment of a 
non-negotiable instrument.^^ The assignee of a non-negotiable 
instrument holds it subject to all equities or counterclaims be- 
tween the original parties existing at the time of the assign- 
ment.^'' The maker of a note may set up the same defenses 
against it in the hands of the assignee that he might set up if 
it were held by the payee. But all such defenses and equities 
must have existed in favor of the maker prior to the assign- 
ment. The equities and defenses which can be asserted against 
the assignee are only such as relate to the contract between the 
original parties, and therefore it has been held that the assignee 
of a non-negotiable note is not bound to inquire whether the 
note was made to defraud creditors.^^ 

The rights of the parties are often provided for by statute in 
the different states. These statutes usually provide that the as- 
signee of such an instrument may in his own name recover 
against the person who made the same and whatever defense or 

I'Furgerson v. Staples, 82 Me. Mon. (Ky.) 122; Cochran v. 

159, 19 Atl. 158, 17 Am. St. Rep. Strong, 44 Ga. 6Z6. 

470; Merchants Nat. Bank v. ^"^ Rockwell v. Daniels, 4 Wis. 

Spates, 41 W. Va. 27, 23 S. E. 681, 432; Young v. South Tredegar Iron 

56 Am. St. Rep. 828. Co., 85 Tenn. 189, 4 Am. St. Rep. 

15a Neg. Inst. Law, § 38. 752. 

i«May V. Dyer, 57 Ark. 441, 21 i* Dalrymple v. Hillenbrand, 62 

S. W. 1064; Johnson v. Welby, 2 B. N. Y. 5, 20 Am. Rep. 438. 



§118 TRANSFER — BY ASSIGNMENT. 135 

set-off the maker of such instrument had, before notice of as- 
signment against an assignor, or against the original payee, he 
shall also have against their assignees. 

The Negotiable Instruments Law provides: 

"Where the holder of an instrument payable to his order trans- 
fers it for value without indorsing it, the transfer vests in the 
transferee such title as the transferrer had therein, and the trans- 
feree acquires in addition the right to have the indorsement of 
the transferrer. But for the purpose of determining whether the 
transferee is a holder in due course, the negotiation takes effect 
as of the time zuhen the indorsement is actually made."^^'^ 

In Alabama the word "holder" and "said holder" are sub- 
stituted for transferrer. But the use of "holder" in this con- 
nection is confusing; for by section 191 "holder" is defined to 
mean the payee or indorsee who is in possession of the instru- 
ment, and where the transfer is without indorsement neither the 
transferrer nor the transferee answers to this description. In 
Colorado the words "if omitted by mistake, accident or fraud" 
are added at the end of the first sentence. In Illinois and Mis- 
souri, the words "to have the indorsement of the transferrer" 
are struck out, and the following substituted therefor: "to en- 
force the instrument against one who signed for the accommo- 
dation of the transferrer, and the right to have the indorsement 
of the transferrer if omitted by accident or mistake." If this is 
to be taken literally, the right of the transferee to enforce the 
instrument against a prior party is limited to cases where such 
prior party has signed for the accommodation of the transferrer. 
This is not very clear. In Wisconsin the following is added at 
the end of the section : "When the indorsement was omitted by 
mistake, or where there was an agreement to indorse made at 
the time of the transfer, the endorsement when made relates 
back to the time of transfer." 

As stated in the previous chapter*^"* a person who in getting 
a negotiable note or bill of exchange payable to order, neglects 
to have the indorsement put on it, gets it just as if he had re- 
ceived it by assignment and takes it subject to the equities. It is 
his duty to notify the parties on the instrument the same as in an 
assignment. If any equities accrue between the time he received 
the instrument and the time he secured the indorsement, the 
equities would run against it. 

§ 118. Transfer by legal process. Property may be trans- 
ferred to a creditor in satisfaction of his claim by attachment, 

18a Neg. Inst. Law, 5 49. is^ Sec. 112 of this work. 



136 NEGOTIABLE INSTRUMENTS. § 118a 

garnishment and execution. These processes are created by 
statute, and whether commercial paper can be transferred by 
them for the satisfaction of the holder's debts depends upon the 
language of the particular statute under which the question 
arises.^® 

It is generally held that promissory notes and other commer- 
cial instruments cannot be garnisheed in the hands of an agent, 
in an attachment proceeding against the payee. Nor is commer- 
cial paper attachable for the debts of the payee, when it is in 
the hands of a receiver for the benefit of creditors, nor when 
it is placed in the hands of an agent to collect and apply the 
proceeds to the payment of a specific debt ; and even when it is 
merely placed in the hands of an agent for collection or for any 
other purpose, resulting in benefit to the payee. It is not even 
subject to attachment, if the agent delivers it up to the attach- 
ing officer. 

§ 118a. Some differences as to liability of different trans- 
ferrers. Since we have now considered the liability as to the 
various transferrers of negotiable instruments, it might be well 
to summarize or set out in outline some of the differences, as fol- 
lows: 

Some differences as to liability of transferrers of negotiable 

instruments. 

1. Indorser in full or special indorser. The liability of such 

transferrer is the complete liability of indorser; and proof 
of at least two signatures is necessary to recover against 
such transferrer unless the parties are immediate parties to 
the instrument. 

2. Indorser in blank. The liability of such a transferrer is the 

complete liability of indorser; proof of one signature is all 
that is necessary before recovery. 

3. Indorser or rather transferrer by delivery. The liability of 

such transferrer is binding only as to immediate parties. 

4. Indorser without recourse. An indorser without recourse (a) 

does not guarantee the financial ability or solvency of any 
of the parties; (b) as distinguished from assignment no 
notice to the original obligor is required to be given by the 
holder to such transferrer, 

10 Sheets v. Culver, 14 La. Ann. Williams, 1 Minn. 54, 55 Am. Dec. 
449, 33 Am. Dec. 593; Hubbard v. 66. 



§ 118b TRANSFER BY ASSIGNMENT. 137 

5. Transferrer by assignment. A transferrer by assignment (a) 

is not responsible for the solvency of the parties, that is, 
he does not warrant solvency; (b) the holder through such 
transferrer takes the instrument subject to equities; and (c) 
the holder must notify the original obligor of the assignment. 

6. Transferrer holding title by operation of law. A transferrer 

holding title by operation of law should use care or he will 
be bound personally when he indorses the instrument. 

7. Anomalous indorser. The rules as to the anomalous indorser 

are laid down in certain cases by the Negotiable Instru- 
ments Law, that is, in those cases where the signature of 
such indorser is written in blank on the instrument before 
delivery. There is a liability by such indorser to the payee 
as follows: (a) There is liability of a first indorser, that 
is to the payee, if the instrument is payable to the order of 
a payee who is a third party; (b) there is liability of said 
indorser not to the payee but as a second indorser if it 
is payable to the order of the maker or drawer, or payable 
to bearer; (c) there is liability not to payee, that is, there 
is a liability as a second indorser if the signature is for 
the accommodation of the payee; (d) no other cases are 
covered by the Negotiable Instruments Law. 

§ 118b. Several indorsements in blank, also combination of 
in blank and special indorsements. By way of summary and 
illustration suppose we have five indorsements in blank upon an 
instrument payable to bearer ; suppose the five blank indorsements 
are by A, B, C, D, and E, respectively, and the instrument is 
now in the hands of X. X may do any one of four things : 

(1) Fill up the first to himself. 

(2) Deduce his title through all. 

(3) Strike out any or all. 

(4) Turn the instrument over to. a stranger without indorse- 
ment by himself. 

Suppose again a case of a combination of in blank and special 
indorsements, that is, suppose X makes a promissory note pay- 
able to A or order, which is now in the hands of Y, the holder, 
and the indorsements are as follows: 

(1) A (in blank; just signs his name). 

(2) B (in blank; just signs his name). 

(3) Pay to order of D (signed) C. 

(4) D (in blank; just signs his name). 

(5) Pay to order of F (signed) E. 

(6) F (in blank; just signs his name). 



138 NEGOTTABT.K INSTRUMENTS. §118b 

In the hands of Y, the holder, and as against X, the maker, 
and A, the payee, the instrument is payable to bearer, because 
indorsed in blank. Also against the indorser B it is payable to 
bearer. As against C the special indorser title must be made 
through D and the holder must prove both C and D's signatures. 



CHAPTER XII. 
OF THE NATURE OF THE LIABILITIE^OF THE PARTIES. 

§ 119. In general. h^^3. Indorser. 

120. Maker. '> 124. Accommodaton and accom- 

121. Drawer. , \^ I S K modated parties. 

122. Acceptor. / ^ I $h ■*■ 125. Agent. 




§JJAr"'Th general. The different parties to Negotiable In- 
struments have different HabiHties. Some parties are primarily 
liable, while others are secondarily liable. 

The Negotiable Instruments Law provides 

"The person primarily liable on an instrument is the person 
who by the terms of the instrument is absolutely required to pay 
the same. All other parties are secondarily liable."'^ This is 
also the law generally. 

§ 120. Maker. As to the liability of the maker of a nego- 
tiable instrument, the Negotiable Instruments Law provides: 

"The maker of a negotiable instrument by making it engages 
that he will pay it according to its tenor and admits the existence 
of the payee and his then capacity to indorse/'^ 

He not only promises the payee to pay it according to its 
tenor, but he promises any subsequent holder who is legally 
entitled to the instrument the same.^ He admits that the payee 
is the real owner^* and as against a bona fide holder he admits 
the legal existence of the payee and his capacity to contract.^'' 
When the instrument is payable to bearer, it is not necessary 
that the name of every one through whose hands it passes should 
appear on the instrument, because it is made payable to bearer.'* 
Anyone bearing the paper can recover against any party on the 
instrument, the maker, the payee or any of the indorsers. In 
order to recover against one who has made it payable specially 

1 Neg. Inst. Law, § 192, where all ^ ggg bona fide holder. Chap, 
cases directly or indirectly bear- XIII. 

ing upon or citing the Law are ^a Wheeler v. Barr, 7 Ind. App. 

grouped. 381. 

2 Neg. Inst. Law, § 60, where 3b gj-ickley v. Edwards, 131 Ind. 
all cases directly or indirectly 3. 

bearing upon or citing the Law '* Bitzer v. Wagar, 83 Mich. 223, 

are grouped. 47 N. W. 210; Goodpaster v. Voris, 

8 la. 334, 74 Am. Dec. 313. 
139 



140 NEGOTIABLE INSTRUMENTS. § 121 

to some one, It is necessary to prove the signature of the one 
who has made it payable and the signature of the one to whose 
order it is made payable, and also the signature of any other 
party you are trying to recover against. The payee, when he 
indorses the instrument, becomes liable to parties who take the 
instrument after his signature is upon it. 

§ 121. Draviter. The general law as to the liability of the 
drawer is clearly set out in the Negotiable Instruments Law in 
the following language : 

"The drazver by drawing the instrument admits the existence 
of the payee and his then capacity to indorse ; and engages that 
on due presentment the instrument will be accepted or paid, or 
both, according to its tenor, and that if it be dishonored and 
the necessary proceedings on dishonor be didy taken, he will pay 
the amount thereof to the holder or to any subsequent indorser 
who may be compelled to pay it, but the drawer may insert in 
the instrument an express stipidation negativing or limiting his 
own liability to the holder."^ 

The Colorado and Illinois Acts omit the word "subsequent" 
before "indorser." The District of Columbia, North Dakota and 
New York Acts read "accepted and paid." 

The drawer by signing the instrument thereby states to the 
payee that if he will take it to the drawee that the latter will 
accept it and pay it, and if he does not and the payee gives notice 
to the drawer of the failure on the part of the drawee, then the 
drawer agrees to pay it himself. He agrees to pay it if the 
drawee does not, provided notice in a reasonable time is given 
him of that fact so that he can make himself safe. 

The Negotiable Instruments Law contains the following pro- 
vision as to the liability of the drawer or indorser in case of a 
qualified acceptance : 

"The holder may refuse to take a qualified acceptance, and if 
he dfes not obtain an unqualified acceptance, he may treat the 
bill as dishonored by non-acceptance. Where a qualified accept- 
ance is taken, the drawer and indorsers are discharged from lia- 
bility on the bill, unless they have expressly or impliedly au- 
thorised the holder to take a qualified acceptance, or subsequently 
assent thereto. When the drawer or an indorser receives notice 
of a qualified acceptance, he must, zvithin a reasonable time, ex- 
press his dissent to the holder, or he will be deemed to hav^ 
assented thereto."^ 

^ Neg. Inst Law, §61. ing upon or citing the Law are 

^ Neg. Inst. Law, § 142, where grouped, 
all cases directly or indirectly bear- 



§ 122 NATURE OF LIABILITIES. 141 

§ 122. Acceptor. The general law as to the liability of 
the acceptor is clearly set out in the Negotiable Instruments 
Law in the following section : 

"The acceptor by accepting the instrument engages that he 
zmll pay it according to the tenor of his acceptance, and admits 

(1) the existence of the drawer, the genuineness of his signature, 
and his capacity and authority to draz0 the instrument; and 

(2) the existence of the payee, and his then capacity to in- 
dorse:"^ 

When the acceptor accepts it, being the drawee, he thereby 
says to the payee, "I recognize that signature as that of the 
drawer ; I have funds in my possession belonging to him to the 
amount of this instrument, and I promise that I will accept this 
and I do accept it, and since it is payable ten days after sight, 
you bring that instrument around in ten days and I will pay it." 
Now, this instrument having been indorsed by the payee to A, 
what is the liability of the acceptor to A? Why, the acceptor 
says to A, "You present that instrument to me and I will pay 
it. I recognize that signature of the drawer, and I will vouch 
for that ; the payee is a party who is capable and has capacity 
to indorse the instrument ; you present the instrument to me 
and I will pay it." That is his contract with the indorser or 
holder, A. What is his contract with the drawer. It is, that 
he has funds in his hands belonging to the drawer, and he says 
to A, the drawer, "You draw upon me any time and I will ac- 
cept and pay the bill. If I don't, then I am liable to you in 
such damages as you may suffer by my refusal to accept and 
pay the instrument."* The liability as to the indorsers on th 
back of the instrument is substantially the same. 

If it appear that the acceptance is made by a person a/ the 
agent of another, such agent is not personally liable.** 

Other provisions as to the liability of the acceptor fou^d in 
the Negotiable Instruments Law are as follows : 

"When the acceptor of a hill drawn in a set pays it zvit 
requiring the part bearing his acceptance to be delivered up 
him, and that part at maturity is outstanding in the hands of 
a holder in due course, he is liable to the holder thereon."^ 

^Neg. Inst. Law, §62, where all (N. S.) La. 301; Drew v. Phelps, 
cases directly or indirectly bearing 18 N. H. 572. 
upon or citing the Law are grouped. ** Tousey v. Taw, 19 Ind. 212 

8 Pilkington v. Woods 10 Ind. » Neg. Ins. Law, § 182. where all 

432 ; Thompson v. Flower, 1 Mart. cases directly or indirectly bearing 

upon or citing the Law are grouped. 




142 NEGOTIABLE INSTRUMENTS. § 123 

"Except as herein otherwise proznded, "where any one part of 
a hill drawn in a set is discharged by payment or othenmse, the 
zuhole hill is discharged."''-^ 

§ 123. The indorser. The indorser engages (a) that the ne- 
gotiable instrument will be accepted or paid, as the case may be, 
according to its purport ;-^^ but this engagement is conditioned 
upon due presentment or demand, and notice ;^^ (b) that it is in 
every respect genuine;*^* (c) that it is the valid instrument it pur- 
ports to be ;^^ (d) that the ostensible parties are competent i^"* 
(e) and that he has good title to it and the right to indorse it.-^® 
And if it turns out that any of these engagements except that 
first named are not fulfilled, the indorser may be sued for re- 
covery of the original consideration which has failed, or be held 
liable as a party, without proof of demand and notice. 

The above rights inure to the bona fide holder of the bill, and he 
can sue upon it or further negotiate it, and though guilty of a 
fraud in parting with it, nevertheless he can give title to a bona 
fide holder for value v/ithout notice who takes it before maturity. 
Any irregularity, as a torn paper, or something similar, patent on 
the face of a bill, is equivalent to notice, and the holder who takes 
such an instrument will not be considered an innocent holder.*® 
In an action by the de facto holder, it may be shown that he holds 
adversely to the true owner, and that he is agent or trustee for 
another person, and then any defense or set-ofif available against 
such person is available against the holder. 

10 Neg. Ins. Law, § 183. where all 159, 19 Atl. 158, 17 Am. St. Rep. 
cases directly or indirectly bearing 470; Thrall v. Newell, 19 Vt. 202, 
upon or citing the Law are grouped. 47 Am. Dec. 682. As to when in- 

11 Van Fleet v. Sledge, 45 Fed. dorser can allege defenses, see note 
743; Prentiss v. Savage, 13 Mass. 7 U. S. L. Ed. 744. 

20; Woodward v. Lowry, 74 Ga. i* By^Jej. v. Slocomb, 33 La. Ann. 

148. As to endorser's liability see 170, 39 Am. Rep. 265; Edmunds v. 

11 Arf. St. Rep. 930. Rose, 51 N. J. L. 547. 18 Atl. 748, 

learner v. Brainerd, 7 Utah 14 Am. St. Rep. 704. 

26 Pac. 299, 12 L. R. A. 434; 15 Purgerson v. Staples, 82 Me. 
^'lie v. Colter, 170 Mass. 356, 49 159, 19 Atl. 158, 17 Am. St. Rep. 
N. E. 746, 64 Am. St. Rep. 305; 470; Merchants Nat. Bank v. 
Nash V. Harrington, 1 Aik. (Vt.) Spates, 41 W. Va. 27, 23 S. E. 681, 
39, 16 Am. Dec. 672 ; McLanahan v. 56 Am. St. Rep. 828. As to war- 
Brandon, 1 Mart. (N. S.) La. 321, ranty implied by indorsement see 
14 Am. Dec. 188. See note 16 U. S. note 7 Am. St. Rep. 365. 
L. Ed. 260. i« Skillman v. Titus, 32 N. J. L. 

12a Baldwin v. Threlkeld, 8 Ind. 96; Chattanooga First Nat. Bank 

App. 312; Clark v. Trueblood, 16 v. Stockwell, 92 Tenn. 252, 21 S. 

Ind. App. 98. W. 523, 20 L. R. A. 605. 

i^Furgerson v. Staples. 82 Me. 



§ 123 NATURE OF LIABILITIES. 143 

"Every indorscr who indorses without qualification warrants 
to all subsequent holders in due course (1) the matter and things 
mentioned in subdivisions one, two and three of the next pre- 
ceding section; and (2) that the ifistrument is at the time of his 
indorsement valid and subsisting. And, in addition, he engages 
thai on due presentmient it shall be accepted or paid, or both, as 
the case may be, according to its tenor, and that if it be dishon- 
ored, and the necessary proceedings on dishonor be didy taken, he 
will pay the amount thereof to the holder, or to any subsequent 
indorser who may be compelled to pay it."^'^ 

The indorser is estopped to deny the legality or validity of the 
note*'^* and he undertakes that if tlie note is not paid at maturity 
and he has due notice of its dishonor, he will pay it.^^" 

"Where a person places his indorsement on an instrument 
negotiable by delivery he incurs all the liabilities of an in- 
dorser."^^ 

"As respects one another, indorsers are liable pritna facie in 
the order in which they indorse; but evidence is admissible to 
shozv that as betzveen or among themselves they have agreed 
othervAse. Joint payees or joint indorsers who indorse are 
deemed to indorse jointly and severally."^^ 

What liability does an indorser have to the preceding in- 
dorsers? He can recover against any who precede him, but 
none who succeed him. 

"The indorsement or assigntnent of the instrument by a cor- 
poration or by an infant passes the property therein, notzmth- 
standing that from tvant of capacity the corporation or infant 
may incur no liability thereon."^^ 

In other words, the parties who have received the instrument 
and passed it on to someone else are estopped to set up that 
the other parties did not have capacity. Of course, a minor has 
a right to set up the defense that he himself did not have the 
capacity. These parties, then, guarantee or warrant the capacity 
of the previous parties to make the instrument, but this does not 
estop the party who is really incapacitated from setting that up. 

There is some conflict as to the liability of an indorser with- 
out recourse, but the general rule is that a person who indorses 

^"^ Neg. Inst. Law, § 66, where all cases directly or indirectly bearing 

cases directly or indirectly bearing upon or citing the Law are grouped, 

upon or citing the Law are grouped. 1» Neg Inst. Law, § 68, where all 

1^' Hoffman v. Hollingsworth, 10 cases directly or indirectly bearing 

Ind. App. 353. upon or citing the Law are grouped. 

i^"* Alleman v. Wheeler, 101 Ind. 20 N^g Inst. Law, § 22. where all 

141. cases directly or indirectly bearing 

18 Neg. Ins. Law, § 67, where all upon or citing the Law are grouped. 



144 NEGOTIABLE INSTRUMENTS. § 124 

without recourse makes all warranties any other indorser does, 
except that he does not warrant the capacity financially of the 
other parties to pay. He does not agree to indemnify the other 
parties on the instrument. The indorser without recourse makes 
this representation and warranty to every person who gets the 
instrument, that the parties had capacity and the instrument is 
a valid instrument as to form, etc.,^* but he does not warrant the 
financial responsibility of the parties. By placing his name there, 
he makes that contract with everybody who takes the instrument. 

When an instrument is made payable to bearer and has passed 
from hand to hand by mere delivery, the indorsee or holder has 
no right to recover from any other party who has passed it on 
by delivery unless that party's name appears on the instrument. 
There can be no recovery against the party whose name is not 
on the instrument, unless the party who is endeavoring to re- 
cover from him has immediately received that instrument from 
him. Those are the liabilities of the indorser without recourse 
and the indorser by mere delivery. 

The Negotiable Instruments Law covers these principles in 
the following section : 

"Every person negotiating an instrument by delivery or by 
a qualified indorsement warrants^^ (1) that the instrument is 
genuine and in all respects what it purports to be; (2) that he 
has a good title to it; (3) that all prior parties had capacity to 
contract; (4) that he has no knoidedge of any fact zvhich wotdd 
impair the validity of the instrument or render it valueless. But 
when the negotiation is by delivery only, the warranty extends 
in favor of no holder other than the immediate transferee. The 
provisions of subdivision three of this section do not apply to 
persons negotiating public or corporate securities, other than 
bills and notes." 

There is the following provision as to the liability of an agent 
or broker who negotiates an instrument without indorsement: 

"Where a broker or other agent negotiates an instrument with- 
out indorsement, he incurs all the liabilities prescribed by section 
sixty- five of this act, unless he discloses the name of his principal, 
and the fact that he is acting only as agent."^^ 

§ 124. Accommodation and accommodated parties. The fol- 
lowing provision is found in the Negotiable Instruments Law: 

21 Lobdell V. Baker, 3 Mete. 22 Neg. Inst. Law, § 65, where all 

(Mass.) 469; Watson v. Cheshire, cases directly or indirectly bearing 

18 la. 202, 87 Am. Dec."' 382; Han- upon or citing the Law are grouped, 

mun V. Richardson, 48 Vt. 508, 21 23 Neg. Ins. Law, § 69, where all 

Am. Rep. 152; Ware v. McCormack, cases directly or indirectly bearing 

% Ky. 139, 28 S. W, 157. upon or citing the Law are grouped. 



§ 124 NATURE OF LIABILITIES. 145 

"An accommodation party is one mho has signed the instru- 
ment as maker, drawer, acceptor or indorser, without receiving 
value therefor, and for the purpose of lending his name to 
some other person. Such a person is liable on the instrument 
to a holder for value, notzvithstanding such holder at the time 
of taking the instrument knezsj him to be only an accommodation 
party."^'* 

Here is a lending of the credit of one person to another for 
accommodation. A wishes to pay an obligation of $500 and he 
has no credit ; he says to B : "Put your name on this paper and 
I will have money by the time it comes due and pay it and I 
will see that you do not suffer any damage." So B signs. When 
that instrument becomes due, if A does not pay and B has to, 
then B can recover from him. But since B has received no con- 
sideration there can be no recovery as against him by A. 

As stated above, an accommodation contract may be described 
as a gift by A to B of A's credit, to be offered to another on 
payment of value. A contract of such a nature may take any 
of the forms of the law merchant ; a promissory note may be 
made or indorsed for accommodation ; a bill of exchange may be 
drawn, accepted or indorsed for accommodation, that is, most 
any party to the instrument may be an accommodation party. 
The accommodation party is the one who has signed for the 
purpose of lending his name to some other person as a means 
of credit — he is also called the accommodating party. The party 
to whom the credit is loaned is called the accommodated party. 

Certain liabilities arise as a result of the relations established. 
The accommodated party is liable to the accommodating or ac- 
commodation party. Thus the drawer may show that he accepted 
and paid the bill for the accommodation of the drawer and then 
the law will imply an undertaking on the part of the drawer, to 
indemnify the acceptor who, on such implied obligation, may have 
an action against the drawer. Such action is not brought upon 
the bill, for when the instrument is paid it is extinguished and 
no longer exists as a valid instrument and consequently the in- 
strument not being in existence, the acceptor cannot recover 
upon the instrument itself.^** 

As already stated, there is no liability of the accommodating 
party or accommodation party to the accommodated party or the 
person for whose accommodation he has given it, as the obliga- 

24 Neg. Inst. Law, § 29, where all R. A. 698, and 31 Am. St. Rep. 745. 

cases directly or indirectly bearing And as to accommodation indorse- 

upon or citing the Law are grouped. ment by bank see note 23 L. R. A.. 

As to liability of accommodation 836. 
maker and indorser see notes 5 L. 24a Dj(.]^gj.son v. Turner, 15 Ind. 4. 



146 NEGOTIABLE INSTRUMENTS. § 124 

tion is without consideration and a nudum pactum. The accom- 
modating party is Hable to all other bona fide holders who take 
the instrument. 

Suppose A lends you his credit for a special purpose and you 
use that credit for some other purpose and the person who takes 
that credit knows that it has been loaned for a particular pur- 
pose, then the person who takes that credit cannot recover. He 
cannot recover because he knows that the credit has been diverted 
from the purpose for which it was given — he has notice. 

Where a bill is drawn or accepted, or a note made or indorsed 
for accommodation, with an agreement that it shall be used for 
a particular purpose, any diversion in its use operates as a dis- 
charge of the accommodation party as to all other parties who 
have knowledge of such diversion.^^ 

It is immiaterial that paper executed or indorsed for accom- 
modation is not used in precise conformity with agreement, when 
it does not appear that the accommodation party had any interest 
in the manner in which the paper was to be applied.^® No change 
in the mere mode or plan of raising the money, though not ap- 
plied to the purpose intended by the accommodation party, will 
constitute a misappropriation. In order to constitute a mis- 
appropriation, there must be a fraudulent diversion from the 
original object and design ; and it is now well settled that where 
a note is indorsed for the accommodation of the maker, to be 
discounted at a particular bank, it is no fraudulent misappro- 
priation of the note, if it is discounted at another bank^^* or used 
in the payment of a debt or otherwise for the credit of the 
maker.^'^ If the note has effected the substantial purpose for 
which it was designed by the parties an accommodation maker 
or indorser cannot object that the accommodation was not effected 
in the precise manner contemplated, where there is no fraud, 
and the interest of the indorser is not prejudiced.^* 

It is the general rule that an accommodation party lends his 
credit only for the period specified in the instrument, that is, 
until its maturity ; and if transferred thereafter such party should 
not be made liable except as an ordinary party to commercial 

25 Stoddard v. Kimball, 6 Cush. 27 Powell v. Waters, 17 Johns. 

(Mass.) 469; Daggett v. Whiting, (N. Y.) 176; Bank of Chenango v. 

35 Conn. 372; Small v. Smith, 1 Hyde, 4 Cow. (N. Y.) 567. 

Denio. (N. Y.) 583. ssj^ckson v. Bank, 42 N. J. L. 

^epelters v. Muncie Nat. Bank, 178; Dum v. Weston, 71 Me. 270; 

34 Ind. 256; Quinn v. Hard, 43 Vt. Briggs v. Boyd, 37 Vt. 538. As to 

375. fraudulent diversion see note 31 



/3. traudulent diver 

2«a Reed v. Trentman, 53 Ind. 438. Am. St. Rep. 748. 



§ 124 NATURE OF LIABILITIES. 147 

paper.*® However, it should be borne in mind that the accom- 
modation indorser's liability may become fixed by presentment 
and notice and so survive maturity, and he would thus continue 
liable ; but of course if not issued until after maturity or until 
overdue, the accommodating indorser is not liatile. 

The presumption is that such an indorser is subject to the 
same liabilities as are imposed by the statute upon general in- 
dorsers. 

And their rights are largely the same. Thus one indorsing 
an instrument for the accommodation of the maker cannot be 
charged without a demand. 

While a corporation has, under certain circumstances, the gen- 
eral power to bind itself by promissory notes and contracts 
of indorsement, made in the general course of its business, it 
has no power to make or indorse notes for the accommodation of 
others.*'** The validity of such paper can also be assailed upon 
the theory that the officer of a corporation who executes it can- 
not so bind the corporation in a matter not connected with its 
business, or in which it has no beneficial interest. But in the 
hands of a bona fide purchaser for value, accommodation paper 
duly executed by the officers of a corporation can be enforced 
against the corporation.^® The rules applicable to the rights 
of bona fide holders of accommodation paper, signed by one of a 
partnership without the consent of his copartners, can also be 
applied in the case of similar paper executed by the officers of 
a corporation. An accommodation bill or note accepted, made 
or indorsed by one member of a firm cannot be enforced against 
the firm by one who took it with knowledge of the accommoda- 
tion character of the firm's signature, unless all the partners 
assented thereto.^**^ 

Successive accommodation parties are liable to each other in 
succession, according to the order in which their names appear 
upon the instrument.^^ The reason for this rule may be found 
in the presumption that each accommodation indorser placed his 
name upon the instrument trusting in the strength of the prior 
accommodation indorsers. Facts may be shown as in the case of 

29 Chester v. Dorr, 41 N. Y. 279; macy Co. v. Trust Co., 97 Ga. 573, 
Bower v. Hastings. 36 Pa. St. 285 ; 25 S. E. 171. 

Battle V. Weems, 44 Ala. 105. soa Beach v. The State Bank, 2 

29' Smead v. Railroad, 11 Ind, 104. Ind. 488. 

30 Nat. Bank v. Young, 41 N. J. 31 Ajj^en v. Barklev. 2 Speers (S. 
L. 531, 7 Atl. 488; Am. Trust & C.) 747, 42 Am. Dec. 317; U. S.' 
Savings Bank v. Gkick, 68 Minn. Bank v. Beirne, 1 Gratt. 234, 42 
129, 70 N. W. 1085 ; Jacobs Phar- Am. Dec. 551 ; Moody v. Findley, 43 

Ala. 167. 



148 NEGOTIABLE INSTRUMENTS. § 125 

Other indorsers to show that the liabiUty is joint because of an 
agreement between them to be bound jointly and not severally. 
If no such agreement is shown such indorsers are not co-sureties 
and there can be no right of contribution among them.^^ 

§ 125. Agent. The general rule as to the liability of an 
agent is found in a section of the Negotiable Instruments Law 
which reads as follows : 

"Whether the instrument contains or a person adds to his 
signature words indicating that he signs for or on behalf of a 
principal, or in a representative capacity, he is not liable^ on the 
instrument if he zms didy authorised ; but the mere addition of 
words describing him as an agent, or as Ulling a representative 
character without disclosing his principal, does not exempt him> 
from personal liability."^^ 

The above section of the statute as to the non-liability of the 
agent who has been duly authorized changes the rule in many 
jurisdictions. The section reaches the right result as individual 
liability should not be imposed upon an agent who, being duly au- 
thorized to sign, discloses the name of a principal on the instru- 
ment, and indicates that he himself is an agent or officer, without 
regard to the form in which this is done. 

It has been argued that an agent signing without authority of 
the principal is, by implication, liable on the instrument under this 
section. In support of this it is stated that the agent should know 
whether he has authority and it increases negotiability and causes 
no confusion as to the amount recoverable. 

The digest of the annotated cases in another part of this work 
should be consulted as to the course of judicial decisions on this 
section. 

32 Kirschner v. Conklin, 40 Conn. 33 Neg. Inst. Law, § 39 (20), 

77 ; Moore v. Gushing, 162 Mass. wher» all cases directly or indirect- 

594, 39 N. E. 177. 44 Am. St. Rep. ly bearing upon or citing the Law 

393 ; U. S. Bank v. Beirne, 1 Gratt are grouped. 
234, 42 Am. Dec. SSL 



CHAPTER XIII. 

NATURE AND RIGHTS OF A BONA FIDE HOLDER OR A PUR- 
CHASER FOR VALUE WITHOUT NOTICE. 

§ 126. Bona fide holder for value § 127. Good faith or bona fide. 
without notice— In gen- 128. Holder for value. 
era!. 129. Holder without notice. 

§ 126. Bona fide holder for value without notice— In gen- 
eral. The following provisions are found in the Negotiable 
Instruments Law and contain a correct statement of the law 
generally : 

"A holder in due course is a holder who has taken the instru- 
ment under the following conditions: 

1. That it is complete and regular upon its face. 

2. That he became the holder of it before it zms overdue, and 
without notice that it had been previously dishonored, if such 
was the fact. 

3. That he took it in good faith and for value. 

4. That at time it ztxis negotiated to him he had no notice 
of any infirmity in the instrument or defect in the title of the 
person negotiating it."^ 

"A holder in due course holds the instrument free from any, 
defect of title of prior parties, and free from defenses available 
to prior parties among themselves, and may enforce payment of 
the instrument for the full amount thereof against all parties 
liable thereon."^ 

"In the hands of any holder other than a holder in due course, 
a negotiable instrument is subject to the same defenses as if it 
were non-negotiable. But a holder who derives his title through 
a holder in due course, and who is not himself a party to any 
fraud or illegality affecting the instrument, has all the rights 
of such former holder in respect of all parties prior to the latter."^ 

"Every holder is deemed prima facie to be a holder in due 
course; but when it is shown that the title of any person who 

1 Neg. Inst. Law, § 52, where all ^ Neg. Inst. Law, § 57, where all 

cases directly or indirectly bearing cases directly or indirectly bearing 

upon or citing the Law are grouped. upon or citing the Law are grouped. 

As to rights of bona fide holder, see ^ Neg. Inst. Law, § 58, where all 

notes 5 U. S. L. Ed. 87, also 10 U. S. cases directly or indirectly bearing 

L ed 473. upon or citing the Law are grouped. 

149 



150 NEGOTIABLE INSTRUMENTS. § 128 

has negotiated the instrument was defective, the burden is on 
the holder to prove that he or some person under whom he claims 
acquired the title as a holder in due course. But the last men- 
tioned rule does not apply in favor of a party who became bound 
on the instrument prior to the acquisition of such defective title."* 

§ 127. Good faith or bona fide. The term "bona Me holder" 
or holder in good faith, means a holder according to the law 
merchant, without knowledge or notice of equities of any sort 
which could be set up against a prior holder of the instrument.** 
Absence of knowledge of the defense, when the instrument was 
taken, is the essential element in the matter of bona fide.^ 

That is, the holder, in order to be entitled to protection against 
offsets and equities and defenses based upon frauds, pleaded by 
prior parties, must have acquired the paper in good faith from 
his predecessor. If the holder's acquisition of the paper be in any 
respect fraudulent he cannot claim the position of a bona fide 
holder.'' 

The Negotiable Instruments Law provides : 

"The title of a person who negotiates an instrument is defect- 
ive within the meaning of this act zvhen he obtained the instru- 
ment, or any signature thereto, by fraud, duress, or force and 
fear, or other unlawful means, or for an illegal consideration, 
or zvhen he negotiates it in breach of faith, or under such circum- 
stances as amount to a fraud."^ 

§ 128. Holder for value. We have taken up the considera- 
tion of the expression "bona fide holder for value without no- 
tice"** and "bona fide purchaser for value without notice."^® This 
expression becomes important in case of equities or personal de- 
fenses. If there are certain equities or personal defenses against 
an instrument a bona fide holder for value without notice may 
nevertheless recover against any party to the instrument. Of 
course, any party to an instrument who had an equity or per- 

4 Neg. Inst. Law, § 59, where all cases directly or indirectly bear- 
cases directly or indirectly bearing ing upon or citing the Law are 
upon or citing the Law are grouped. grouped. 

5 Stephens v. Olson, 62 Minn. 295, ^ Matthews v. Poythress, 4 Ga. 
64 N. W. 898; Whistler v. Forster, 287; Limerick Nat. Bank v. Adams, 
14 C. B. N. S. 248, 108 E. C. L. 248. 40 Atl. 166, 70 Vt. 132. 

OHelner V. Krolick, 36 Mich. 371; lo Young v. Schofield, 132 MoT 

Raphael v. Bank of England, 17 650, 34 S. W. 497; Ten Eyck v. 

C. B. 161, 84 E. C. L. 161. Whitbeck, 135 N. Y. 40, 31 N. E. 

7 Angier v. Brewster, 69 Ga. 362; 994, 31 Am. St. Rep. 809; Scott v. 
Hickson v. Earley, 62 S. C. 42, 39 McGraw, 3 Wash. St ^5. .29 Pac. 
S. E. 782. 260. 

8 Neg. Inst. Law, § 55, where all 



§ 128 RIGHTS OF BONA FIDE HOLDER. 151 

sonal defense can be recovered against by a bona fide holder for 
value without notice, but the bona fide holder for value cannot 
recover against one who has an absolute defense, for such de- 
fense attaches to the thing itself and can be set up against any- 
body. But, if the defense is a personal defense, it cannot be set 
up successfully.^^ There is considerable in the expression "bona 
fide holder for value." What is a "holder for value" and a 
"bona fide holder without notice?" A person is a holder for 
value who has given in return value, just the same as in any con- 
tract, or according to the Negotiable Instruments Law: "Value 
means valuable consideration."-^^ "] 

A bank that has acquired possession of a negotiable instrument 
and given credit to the one who presented it in his deposit ac- 
count for the proceeds has given value so as to be a holder in 
due course.-^^* 

There are two different classes of cases, where there is some 
conflict of authority as to whether or not value has been given. 
One instance is where an instrument is given as collateral secur- 
ity. A not only makes his own note but gives the note of B as 
collateral security, and the better opinion is, that a note given as 
collateral security has been given for value, and a person who 
has an equity or a personal defense which he could set up against 
another could not set it up successfully in such a case, because the 
person who holds the security holds it for value.-^* Some juris- 
dictions hold that the collateral note must be given at the time of 
the loan ;** they say it must be in forbearance to sue, or extension 
of time, in order that some consideration may arise for the 
giving of the security.-^^ By the weight of authority, the better 
rule is to the effect that the holder of a collateral note is a holder 
for value and may recover from the parties liable upon the in- 
strument.*® 

11 As to personal and real de- ^^ Smith v. Bibber, 83 Me. 34, 

fenses see, Chap. XIV. 19 Atl. 89, 17 Am. St. Rep. 464; 

i2Neg. Inst. Law, § 191, where all Porter v. Andrus, 10 N. D. 558, 88 

cases directly or indirectly bearing N. W. 567. 

upon or citing the Law are grouped. ^^Maitland v. Citizens' Nat. 

12a Old National Bank of Spokane Bank, 40 Md. 540, 17 Am. Rep. 

V. Gibson, - Wash. — 179 Pac. 117, 620; Best v. Krell, 23 Kan. 482, 33 

6 A. L. R. 247. See note 6 A. L. Am. Rep. 185; Birket v. Edward, 

R. 252. 68 Kan. 295, 74 Pac. 1100. 

l^Silbley v. Robinson, 10 Shep. Contra, Porter v. Andrus, 10 N. 

(Me.) 70; Swift v. Tyson, 16 Pet. D. 558, 88 N. W. 567; Rosborough 

1 ; Grocers' Bank v. Penfield. 69 N. v. Messich, 6 Ohio St. 448, 67 Am. 

Y. 502, 25 Am. Rep. 231. Dec. 346; Vollertein v. Howell, 37 

i^Vann v. Marbury. 100 Ala. 438, Tenn. (5 Sneed) 441. 
46 Am. St. Rep. 75, 14 So. 273, 23 
L. R. A. 325. 



152 NEGOTIABLE INSTRUMENTa § 128 

It is now settled in those states which have adopted the act" 
.that a note transferred before maturity to a holder in due course, 
as collateral security for a pre-existing debt, is transferred for 
value, and the holder takes it free from defenses or set-offs exist- 
ing between the original parties. 

The Negotiable Instruments Law provides as follows: 

"Value is any consideration sufficient to support a simple con" 
tract. An antecedent or pre-existing debt constitutes value, and 
is deemed such whether the instrument is payable on demand or 
at a future time."^"^^ 

The second class of instruments is where a note is given for a 
pre-existing debt ; for example when an account, or something of 
that kind comes due, a note is given for the debt. What was 
the consideration? All the goods have been bought and used; 
it is a debt ; can we say there has been a consideration ? In some 
jurisdictions, the note itself is enough consideration ; other juris- 
dictions say that there must be some new consideration, forbear- 
ance or something of that nature. Still other jurisdictions hold 
that it must be in extinguishment of the debt. In other words, 
if A had an account of $50 and that account is due and unpaid, 
and A gives a promissory note for $50 and that is taken in 
extinguishment of the debt, and if afterward any proceeding 
is brought on that note, the holder of the note would be a holder 
for value; or, if an extension of time has been given, then the 
holder of the instrument would be a holder for value. 

Conceding that it is an established rule that an antecedent or 
pre-existing debt constitutes value, there can be no question but 
that where paper is transferred in payment of a pre-existing 
debt, the transferee becomes a holder for value, and takes the 
paper free from all defenses and equities existing between the 
original parties.*^ 

Those two classes of cases are the ones upon which there is a 
great diversity of opinion. In all other cases it is whether or not 
value was given, that is, the principles of contract are applied. 

"Where value has at any time been given for the instrument 
the holder is deemed a holder for value in respect to all parties 
who became such prior to that time."'^^ 

i'" Neg. Inst. Law, § 25, where all 243 ; Breckenridge v. Lewis, 84 

cases directly or indirectly bearing Me. 349, 24 Atl. 864, 30 Am. St. 

upon or citing the Law are grouped. Rep. 353 ; Herman v. Gunter, 83 

!''» Neg. Inst. Law, § 25, where all Tex. 66, 18 S. W. 428, 29 Am. St. 

cases directly or indirectly bearing Rep. 312. 

upon or citing the Law are grouped. i» Neg. Inst. Law, § 26, where all 

IS Yellowstone Nat. Bank v. cases directly or indirectly bearing 

Gagnon, 19 Mont. 402, 48 Pac. 762, upon or citing the Law are grouped. 
61 Am. St. Rep. 520, 44 L. R. A. 



§ 129 RIGHTS OF RONA FIDE HOLDER. 153 

If one becomes a bona fide holder for value of a bill of ex- 
change before acceptance, it is not essential to his right to enforce 
it against a subsequent acceptor that any additional consideration 
should proceed from him to the drawer.** 

"Where the holder has a lien on the instrument, arising either 
from contract or by implication of laiv, he is deemed a holder for 
value to the extent of his lien."^^ 

A banker's lien would protect a bank having possession of the 
bills or notes of a customer to the extent of the balance due 
such bank from such customer;'^ and a transfer of such an 
instrument to any other holder as collateral security for the pay- 
ment of a debt due such holder from the person who transfers 
the note, makes the holder a pledgee and gives him a lien to the 
extent of the debt.*^ 

§ 129. Holder vi^ithout notice. The third part of the prin- 
ciple is that the holder must be one "without notice," a bona 
fide holder, a holder for value "without notice." By that we 
mean that the person must not have any notice, either actual or 
constructive, of these defenses.*^ If he does have notice, he 
cannot recover against any one who has these defenses. If a 
person takes an instrument knowing of the equities, they can 
be set up against him. 

That a note is payable to the order of the maker is not suffi- 
cient to excite the suspicion of a purchaser so as to- prevent his 
becoming a bona fide holder.*** 

The Negotiable Instruments Law provides : 

"Where the transferee receives notice of any infirmity in 
the instrument or defect in the title of the person negotiating 
the same before he has paid the fidl amount agreed to- be paid 
therefor, he unll be deemed a holder in due course only to the 
extent of the amount theretofore paid by him."^^ 

An amount paid for an instrument, if a trifling sum, may of 
itself establish notice. But it is difficult to lay down the exact 

20 Heuertematte v. Morris, 101 N. ^^ Limerick Nat. Bank v. Adams, 

Y. 70. 70 Vt. 132, 40 Atl. 168; Stalker v. 

2iNeg. Inst. Law, § 27, where all McDonald, (N. Y.) 6 Hill 93, 40 

cases directly or indirectly bearing Am. Dec. 389. 

upon or citing the Law are grouped. 24a Ochsenreiter v. Block, — S. 

22 Nat. Bank v. Ins. Co., 104 U. Dak. — , 173 N. W. 734. See note 
S. 54 ; Straus v. Tradesman Nat. 6 A. L. R. 458. 

Bank, 122 N. Y. 379; Qark v. 25 Neg. Inst. Law, § 54, where all 

Bank, 160 Mass. 26. cases directly or indirectly bearing 

23 Anderson v. Bank, 98 Mich. upon or citing the Law are grouped. 
543; Stoddard v. Kimball, 6 Cush. 

469. 



154 NEGOTIABLE INSTRUMENTS. § 129 

line of demarcation and state what proportion the amount paid 
must bear to the face of the paper in order to charge the pur- 
chaser prima facie with notice or raise the presumption of bad 
faith on his part.^® But it may be said that the consideration 
should be so utterly trifling as to bear upon its face the impress 
of fraud to leave open no reasonable conjecture but that the 
purchaser must have known, from the very nature of the facts, 
that they could not have originated from any but a corrupt 
source. The known solvency of prior parties would of course 
strengthen the argument of implied notice and bad faith wher- 
ever they were alleged. If the amount paid for the paper were 
not so insignificant as, per se, to charge the transferee with no- 
tice, it might still be so inadequate as to be a pregnant fact, to be 
given due consideration in connection with others in determining 
whether he should be charged with notice or not.^'' 

If the amount v/hich the holder offers to take for a negotiable 
instrument is insignificant as compared to its face value, it might 
be under the circumstances implied notice that there was some- 
thing wrong about it; and taken without inquii*y, one should not 
be protected. For it is obvious that a bona fide owner would not 
throw away his property for a trifle, and that the purchaser 
acted in bad faith when he acquired it for comparatively nothing. 

"To constitute notice of an infirmity in the instrument or 
defect in the title of the person negotiating the same, the person 
to whom it is negotiated must have had actual knowledge of the 
infirmity or defect, or knozvledge of such facts that his action in 
taking the instrument amounted to had faith."^^ 

Actual knowledge of a defect or infirmity in an instrument 
on the part of the indorsee, although purchased by him, for value 
and otherwise in good faith, will destroy the protection which 
the law affords to a holder in due course. The fact that full 
value was given for an instrument will not benefit the holder 
where it appears that he had actual knowledge of the facts which 
impeach the title thereof or prevent a recovery thereon by him. 
Knowledge of the agent acting within the scope of his authority 
is notice to the principal. 

Now, there is one principle that is rather confusing in con- 
nection with a holder for value without notice, and yet it works 

2« Williams v. Huntington, 68 27 Smith v. Jansen, 12 Nebr. 125, 

Me. 590. 13 Atl. 336, 6 Am. St. 10 N. W. 537, 41 Am. Rep. 761; 

Rep. 477; Joy v. Diefendorf, 130 Jordan v. Grover, 99 Cal. 194, 2,2 

N. Y. 6, 28 N. E. 602, 40 N. Y. Pac. 889; Knowlton v. Schultz, 6 

St. 491, 27 Am. Sit. 'Rep. 484; N. D. 417, 71 N. W. 550. 

Kitchen v. Loudenbach, 48 Ohio ^sjyTgg j^gj. l^w, § 56, where all 

St. 177, 26 N. E. 979, 29 Am. St. cases directly or indirectly bearing 

Rep. 540. upon or citing the Law are grouped. 



§ 129 RIGHTS OF BONA FIDE HOLDER. 155 

out justice, and that is this principle: That if A receives an 
instrument from B and B was a bona fide holder for value with- 
out notice, even though A has notice when he receives it, if he is 
a holder for value, he may recover upon the instrument. That 
is, if B secures the instrument, say for $50, and there are certain 
equities against that instrument, as for example, the note has 
been procured by fraud ; B does not have notice of that fraud 
when he gets that instrument, B having that instrument and 
being lawfully entitled to it can pass that on to anybody he 
desires, and if A has notice of the fraud which B did not have 
notice of, A can recover against those parties who did not have 
notice. What good would the instrument do B calling for $50 
in his hands? His hands would be tied and he could not dispose 
of it until he disposed of it to somebody who did not have notice. 
The principle of the law merchant is that it can pass from hand 
to hand the same as money does. The law merchant says, "Yes, 
B can dispose of that instrument to anybody ; it does not matter 
if that person has notice of the fraud ; that person who had notice 
can recover upon the instrument. A bona Ude holder for value 
without notice can dispose of the paper to a bona fide holder for 
value who has notice."^^ 

It is provided in the Negotiable Instruments Law as follows: 
"* * * But a holder zvho derives his title through a holder in 
due course, and who is not himself a party to any fraud ot 
illegality affecting the instrument, has all the rights of such former 
holder in respect of all parties prior to the latter.''-^^ 

The above section of the Law has some slight changes in 
several of the states. By this section a purchaser from a holder 
in due course is entitled to recover against the maker, even 
though he have notice of fraud.^'^'" 

"Where an instrument payable on demand is negotiated an 
unreasonable length of time after its issue, the holder is not 
deemed a holder in due course."^^ 

The same is true as to paper which is overdue. An instrument 
has been received and it is one month overdue. A looks at the 
instrument and says, "Why, that was due the first of Februar}'' 
and this is the first of March ; why does the maker of that prom- 
issory note refuse to pay it? Why do those indorsers refuse to 

29 Butterfield v. Town of Ontario, cases directly or indirectly bearing 

82 Fed. 891 ; Armstrong v. Am. upon or citing the Law are grouped. 

Ex. Nat. Bank. 133 U. S. 433, 33 h. ^'^*' McMurray v. McMurray, 285 

Ed. 747; Fowler v. Strickland, 107 Mo. 405, 167 S. W. 513. 

Mass. 552 ; Bodley v. Emporia Nat. so jsj^g i„gt j^^^^^ g 53_ where all 

Bank, 38 Kan. 59, 16 Pac. 88. cases directly or indirectly bearing 

20a ]sjgg jj^5t L^^^ § 5g^ where all upon or citing the Law are grouped. 



156 NEGOTIABLE INSTRUMENTS. § 129 

pay it? Do not misunderstand, because the instrument is over- 
due, that does not make it void, for if an instrument is all right 
before it is due, it is all right afterguards. If A receives an 
instrument payable to himself at maturity, he has a right to 
transfer that instrument after it is due. If A has good title 
to it, he can transfer it to anybody at any time. But, if A re- 
ceives an instrument before it is due and receives it with notice 
of equities against it, such as fraud, etc., and he has notice of 
that before maturity, and then after the note becomes due and 
is not paid X comes along and A offers it to him, and he says, 
"That instrument is for $500, is it all right?" and A says, "Yes" 
— then X gives $500 for it, he is a bona fide holder for value but 
gets it after maturity. X gets no better title than A had. A had 
notice and X receiving it after maturity gets it also with no- 
tice, because A had notice and A cannot transfer any better title 
than he had.^^ 

After maturity negotiable paper still passes from hand to hand 
ad infinitum until paid. Moreover, the indorser, after maturity, 
wTites in the same form, and is bound only upon the same con- 
dition of demand upon the drawer and notice of non-payment, 
as any other indorser. The paper retains its commercial attri- 
butes, and circulates as such in the community ; but there is 
this vital distinction between the rights of a transferee who 
received the paper before and of one who received it after 
maturity. The transferee of negotiable paper to whom it is 
transferred after maturity, acquires nothing but the actual right 
and title of the transferrer.^^ The transferee takes overdue 
paper subject to all the equities with which it was encumbered 
m the hands of the party from whom he received it.^^ Thus if 
he took it from a thief, or finder, or from a bankrupt incapaci- 
tated by law to make the transfer, he can not recover on it, inas- 
much as the thief, finder, or bankrupt could not. 

Bills payable in installments are considered overdue in toto, 

31 Greenwell v. Haylan, 78 Ky. merely makes it subject to the 

332, 29 Am. Rep. 234; Aver v. equities that may exist against 

Hutchins, 4 Mass. 370, 3 Am. Dec. it and does not permit an attack 

232 ; Comstock v. Draper, 1 Mich. on the purchaser's title. Sanderson 

481, 53 Am. Dec. 78; Lancaster v. Crane, 14 N. J. L. 506. 
Bank v. Woodard, 18 Pa. St. 357, 3a Powler v. Brenbley, 14 Pet. 

57 Am. Dec. 618. As to rights of 318. See note 46 L. R. A. 573. 
holder of instruments transferred ^3 Speck v. Car Co., 121 111. 57, 

after maturity see notes 18 U. S. L. 12 N. E. 213; Church v. Clapp, 47 

Ed. 931 and 46 L. R. A. 753. Mich. 257, 10 N. W. 362 ; Morgan v. 

The purchase of paper overdue U. S., 113 U, §. 500. 



§ 129 RIGHTS OF BONA FIDE HOLDER. 157 

when any installment is past due, but not from the fact that 
interest is past due.** 

The position of a holder who takes a bill when overdue is this : 
He is a holder with notice. He may or may not be a holder for 
value and his rights will be regulated accordingly. He is a holder 
with notice for this reason ; he takes a bill which, on the face of 
it, ought to have been paid. He is therefore bound to make two 
inquiries. 1. Has what ought to have been done really been 
done, i. e., has the bill in fact been discharged? 2. If not, why 
not? Is there any equity attaching thereto? i. e., was the title of 
the person who held it at maturity defective? If his title to the 
instrument was complete, it is immaterial that for some collateral 
reason, e. g., set-off, he could not have enforced the bill against 
some one or more of the parties liable thereon. 

The rule that a party taking an overdue bill or note takes it 
subject to the equities to which the transferrer is subject does 
not extend so far as to admit set-off's which might be available 
against the transferrer.^ A set-off is not an equity, and the 
general rule stated is qualified and restricted to those equities 
arising out of the bill or note transaction itself, and the trans- 
feree is not subject to a set-off which would be good against the 
transferrer, arising out of collateral matters. 

34 Vinton v. King, 4 Allen 562 ; 35 Robinson v. Lyman, 10 Conn. 

Field V. Tibbetts, 57 Me. 358, 99 30; Edney v. Willis, 23 Neb. 56, 36 

Am. Dec. 779; Nat. Bank of Battle N. W. 300; Young v. Shriner, 80 

Creek v. Dean, 86 la. 656, 53 N. W. Pa. St. 463. 
338. 



CHAPTER XIV. 
REAL OR ABSOLUTE DEFENSES. 

§ 130. Defenses — In general. § 136. Incapacity to contract — 

131. Real defenses — In general. Drunkenness. 

132. Incapacity to contract — In- 137. Illegality oi contract — 

fancy. Gaming, usurious and Sun- 

133. Incapacity to contract — day notes. 

Coverture. 138. Forgery. 

134. Incapacity to contract— 139. Duress when amounting to 

Where corporation prohib* forgery. 

ited. 140. Statute of limitations. 

135. Incapacity to contract — 141. Failure to stamp. 

Insanity. 

§ 130. Defenses — In general. The defenses which may be 
interposed to an action upon a negotiable instrument may be 
grouped or arranged into two classes : ( 1 ) real or absolute de- 
fenses, and (2) personal defenses. 

Real or absolute defenses are those which attach to the instru- 
ment itself, and are good against all persons, thus they are good 
against a bona fide holder for value. Real defenses, like real 
actions, are founded upon a right, good against the world. They 
are called real because they attach to the res, i. e., the instrument 
itself, regardless of the merits or demerits of the plaintiff. So a 
purchaser for value without notice is powerless against a real 
defense.-^ 

Personal defenses are those which grow out of the agreement or 
conduct of a particular person in regard to the instrument, which 
renders it inequitable for him, though holding the legal title, to 
enforce it against the defendant, but which are not available 
against bona fide purchasers for value, without notice. They 
are called personal defenses because they are available only 
against that person or a subsequent holder who stands in privity 
with him.^ 

The purpose of our consideration of these defenses on nego- 
tiable paper is to determine whether or not when an instrument 
gets into the hands of a bona fide holder for value without notice, 
there is any right which may be set up against him. We might 

* Ames Cases on Bills and Notes, ^ Ames Cases on Bills and Notes, 

811. As to defenses in general, see 812. 
note 46 L. R. A. 760. 

158 



§ 130 REAL OR ABSOLUTE DEFENSE, 159 

say, as between the immediate parties, all defenses are real de- 
fenses, because as between the immediate parties any defense 
can be set up just as in an ordinary contract* As between you 
and A if the instrument has passed from you to A, you have 
the right to set up any defense you could on any ordinary con- 
tract. But it becomes important to know whether they run when 
it gets into the hands of some third party. 

Now, there is another matter which is confusing in these 
defenses. We see that a real defense is a defense which attaches 
to the thing itself. Now, we must not confuse the idea that that 
instrument in the hands of everybody cannot be recovered upon, 
for the real defense, in many instances, applies only to the 
person who has made the instrument. As a matter of fact, we 
may state it as a general rule, that a real defense is a defense 
which the person against whom you are endeavoring to recover 
may set up, and that person is usually the person primarily 
liable upon the instrument. 

The real defenses are so-called here because they attach to the 
thing irrespective of the parties to it. The right sought to be 
enforced has never existed or ceased to exist ; it is a real or abso- 
lute defense. It is a defense against everybody — against the 
party who receives it immediately from me, against A, B, C, 
or D, holders for value — against everybody. Now, those defenses 
which are absolute are : 

1. Want of capacity to make a binding contract. 
■ 2. Downright illegality of contract. \ / 

3. Forgery — V 

a. Ordinary forgery. 

b. Fraud when it amounts to forgery. 

c. Alteration when material and made by a party and 

not a stranger. 

4. The statute of limitations. 

5. Fraud or duress when amounting to a forgery. 

The personal defenses or those free from which the purchaser 
for value without notice acquires title are : 

1. Alteration. 

2. Simple fraud. 

3. Duress. 

4. Want or failure of consideration. 

5. Illegality, unless the contract is declared void by the statute. 

6. Payment or renunciation, or release before maturity. 

SKulenkamp v. Groff, 71 Mich. Gratt. (Va.) 246; Wright v. Irwin. 
675, 40 N. W. 57; Clark v. Pease, 2>Z Mich. 32; Mills v. Barber, 1 
41 N. H. 414; Voltier v. Zane, 6 Mees. & W. 425. 



160 NEGOTIABLE INSTRUMENTS. § 131 

§ 131. Real defenses — In general. As heretofore set out 
there are five divisions of real or absolute defenses. 

The first is "The incapacity of the defendant to make the 
contract." (1) As infancy,^ which may be a real defense at the 
option of the infant, and in some jurisdictions it is a real 
defense even in case of necessaries. (2) As coverture** — for 
example in some jurisdictions today married women are not 
bound by becoming surety. (3) So ultra vires^ is a real defense ; 
this, however, is an unusual case. It is a real defense to the cor- 
poration only. (4) Insanity'^ is a real defense when the party has 
been adjudged insane. It is a real defense to the insane person 
only. (5) And last is drunkenness.^ It is a real defense to the 
drunkard only. 

The second division is downright illegality of contract as "By 
statute."^ ( 1 ) Where the statute declares the contract void, as a 
gaming contract in some jurisdictions. This is a real defense 
to the maker of the instrument, or to one who has made the in- 
strument to pay a gambling debt. (2) Under the statute as 
when the statute connects a penalty, as notes made on Sunday. 
It would be a real defense as against anybody ; against a bona fide 
holder for value, since he would not be a bona fide holder for 
value, because he would have notice that it was made on Sunday 
by the date upon it. (3) Under the statute as "usury." Usury 
is a real defense in some jurisdictions as to the excess over the 
legal rate and in others as to all the interest and in still other 
jurisdictions as to both principal and interest. 

The third division is "Forgery."^** 

The fourth division is the "Statute of Limitations," which is a 
real defense at the option of the party who is entitled to set up 
that statute. 

The fifth and last is "Duress,"" which is a real defense where 
it amounts to a forgery. 

These will now be considered in their order. 

§ 132. Incapacity to contract — Infancy. Suppose a note 
was made by a minor and you endeavor to recover against him 
and he sets up the defense that he is a minor, that he did not have 
the capacity to make that contract, and is therefore not liable. 
It is a defense which the minor can set up against all the world.** 

4Pojf, §132. 11 Po.y/, § 139. 

^Post,%UZ. i2Des Moines Ins. Co. v. Mc- 

«Po^^§134. Intire, 89 la. 50, 68 N. W. 565; 

7 Post, § 135. Howard v. Simpkins, 70 Ga. 322 ; 

8Poj/,§136. Fitts V. Hall. 9 N. H. 441; Conroe 

^Post. §137. V. Birdsall, 1 Johns. Cas. (N. Y.) 

'^^Post, § 138. 127, 1 Am. Dec. 105. 



§ 131 REAL OR ABSOLUTE DEFENSE. 161 

It is a defense which no one can set up for him but he must set 
it up for himself.^^ Now, if that instrument passes through the 
hands of A, B, and C, the succeeding parties can recover from the 
preceding parties on the instrument, because of these imphed 
warranties which we have considered. If A makes a note pay- 
able to B, a minor, A would be estopped from setting up that B 
could not indorse." And so, the instrument is not void as to 
everybody, but the minor has a right to set up that the instru- 
ment is void as to himself, but the other parties do not have that 
right.^^ In other words, if the minor indorses an instrument 
it does not bind him on the indorsement, but at the same time he 
transfers certain rights; he is not incapacitated to contract and 
transfer those rights.*^ 

The Negotiable Instruments Law provides: 

"The indorsement or assignment of the instrument * * * 
hy an. infant passes the property therein, notzvithstanding that 
from zvant of capacity the * =i^ * iyifant may incur no liabil- 
ity thereon."^^" 

As to a note made by a minor for necessaries different juris- 
dictions have different rules. The law in some jurisdictions is 
that such a note made by a minor is voidable." Of course, if 
he does not set up the fact that he is a minor he can go ahead 
and pay it, and the person w^ho receives the money would be 
entitled to receive it. It is voidable then and not absolutely 
void. In some other jurisdictions the courts hold that a note made 
for necessaries by a minor is valid and he may be proceeded 
against the same as an adult.^^ 

If a bill of exchange is drawn by an infant, the acceptor cannot 
set up as a defense that the minor was without legal capacity 
to draw the bill ^^* 

The Law provides: "The acceptor by accepting the instru- 
ment * * * admits * * * the existence of the payee 
and his then capacity to indorse."^^*' 

13 Nightingale v. Withington, 15 l' Ayers v. Burns. 87 Ind. 245, 
Mass. 272, 8 Am. Dec. 101; 44 Am. Rep. 759; Fenton v. White, 
Hertness v. Thompson, 5 Johns. 4 N. J. L. 115; Swasey v. Vander- 
(N. Y.) 160. heyden, 10 Johns. (N. Y.) 33; Price 

14 Frazier v. Massey. 14 Ind. 382 ; v. Sanders, 60 Ind. 310. 
Nightingale v. Withington, 15 i^ Duboise v. Wheddon, 4 Mc- 
Mass. 271, 8 Am. Dec. 101. Cord (S. C.) 221; Earle v. Reed, 

15 Hastings v. Dollarhide, 24 Cal. 51 Mass. (10 Mete.) 387; Bradley 
195 ; Hardy v. Waters, 38 Me. 450. v. Pratt, 23 Vt. 378 ; Conn v. Co- 

i«Grey v. Cooper, 3 Doug. 54; burn, 7 N. H. 368, 26 Am. Dec. 746. 

Taylor v. Croker. 4 Esp. 187 ; Baker l^** Jones v. Darch, 4 Price 300. 

V. Kennett, 54 Mo. 82. 18" Neg. Inst. Law, § 62. 

16» Neg. Inst. Law, § 22. 



162 NEGOTIABLE INSTRUMENTS. §§ 133-134 

§ 133. Incapacity to contract — Coverture. A second real 
defense growing out of the incapacity to contract, particularly at 
common law, was coverture.^'* A married woman could not make 
that form of contract known as a negotiable instrument.^" There 
is a diversity of the law is to married women's ability to contract 
today, but a married woman generally has the same capacity, 
just as if she were a single woman.^^ In some juris*., ictions the 
contract of a married woman as to surety is void c:nd conse- 
quently on such a contract she would have a real defense.^^ 

§ 134. Incapacity to contract— Where corporation prohib- 
ited. If a corporation has power to make a note for any pur- 
pose, it cannot, against a bona fide holder, set up as a defense 
that it had no power to make a note for a particular purpose.*^ 
Where a corporation is prohibited by its charter or by statute 
from issuing negotiable paper under any circumstances, such 
paper is absolutely void, even in the hands of a bona fide holder 
for value,*^ since what is absolutely void ab initio cannot acquire 
validity by being transferred to a third person any more than a 
forged instrument can acquire validity in that way. When a 
corporation has received the benefit of the proceeds of a bill or 
note it cannot set up the defense of ultra vires in an action on 
such bill or note. 

It is not usual, however, for a corporation to be prohibited by 
its charter or by statute from issuing negotiable paper under any 
circumstances, as above stated. 

19 Dollner, Potter & Co. V. Snow, 413; Vlie't v. Eastburn, 62 N. J. 
16 Fla. 86; Cummins v. Leedy, 114 L. 450, 43 Atl. 741 ; Voreis v. Muss- 
Mo. 454, 21 S. W. 804; Simpson v. baum, 131 Ind. 267, 31 N. E. 70, 
Soan, 5 Cal. 457. 16 L. R. A. 45. 

20 Fernando v. Beshoar, 9 Colo. The common law rule is not 
291, 12 Pac. 196; Lackey v. Boruff, changed except in the particular 
152 Ind. 371, 53 N. E. 412 ; Radican cases provided by statute. Wilcox 
V. Radican, 22 R. I. 405. 48 Atl. 143. v. Arnold, 116 N. C. 708, 21 S. E: 

21 Goar V. Moulton, 67 Cal. 536, 434 ; Rowe v. Kohle, 4 Cal. 285. 

8 Pac. 63; Rodenmeyer v. Rod- 23 Jacobs v. Southern Banking 

man, 5 la. 426; Barrow v. Mitten- Co., 97 Ga. 573, 25 S. E. 171: 

berger. 21 La. Ann. 396 ; McVey v. Monument Nat. Bank v. Globe 

Contrell, 70 N. Y. 295, 26 Am. Rep. Works, 101 Mass. 57, Z6 Am. Rep. 

605; Williamson v. Cline, 40 W. 322; Auerbach v. Le Sueur Mill 

Va. 194, 20 S. E. 917. Co., 28 Minn. 291, 9 N. W. 799, 41 

Note: In order to determine the Am. Rep. 285; Blunt v. Walker, 11 

status of married women reference Wis. 334, 78 Am. Dec. 709. 

must be made to the statutes of the 24 Scott v. Bankers' Union, 73 

several states. Kan. 575, 85 Pac. 604; Chillicothc 

2awiltbank v. Toblcr, 181 Pa. Bank v. Dodge, 8 Barb. (N. Y.) 

St. 103. 2,7 Atl. 188; Stores & Co. 233; Root v. Godard, 3 McLean 102, 

V. Wingate, 67 N. H. 190, 29 Atl. Fed. Cas. No. 12,037. 



§§ 135-136 REAL OR ABSOLUTE DEFENSE. 163 

§ 135. Incapacity to contact — Insanity. If the party sued 
is adjudged insane the obhgation is a non-enforceable one.^^ This 
defense is available not only as between immediate parties, but 
also as against a bona fide holder for value.^^ Some courts hold 
that negotiable paper executed by an insane person, who has 
not been adjudged insane is voidable, but not void.-^^ 

In some jurisdictions guardians may be appointed by statute 
for habitual drunkards, spendthrifts and for old persons incapable 
of transacting business ; instruments executed by any such persons 
who are under guardianship are also non-enforceable.^**" 

§ 136. Incapacity to contract — Drunkenness. If a person 
become so drunk as to be deprived of understanding and reason, 
there is no doubt that while in such a condition, he has no capa- 
city to enter into a contract and if he should sign a negotiable 
instrument either as maker, drawer, indorser or acceptor, it 
would certainly be void as to all parties having notice of the 
condition in which he signed it.^'' If the drunkenness were so 
complete as to suspend all rational thought, the better opinion is 
that any instrument signed by the party would be utterly void 
even in the hands of a bona fide holder without notice, for, al- 
though it may have been the party's own fault that such an 
aberration of mind was produced, when produced it suspends 
for the time being his capacity to consent, which is the first 
essential of a contract.^** 

In some jurisdictions as in Wisconsin an amendment to Section 
55 of the law makes such an instrument absolutely void. This 
amendment declares : "The title of such person is absolutely void 

25 Van Patton v. Beals, 46 la. 62; 28 Caulkins v. Fry, 35 Conn. 170. 

Wirebach v. Easton Bank, 97 Pa. St. As against a bona fide holder, 

543, 39 Am. Rep. 82. however, it has been determined in 

See Carrier v. Sears, 86 Mass. some jurisdictions that intoxication 

(4 Allen) 336, 81 Am. Dec. 707. is no defense. The reason underly- 

28 Rice V. Peet, IS Johns. (N. Y.) ing this rule is that, when a man 

503; Taylor v. Dudley, 5 Dana has voluntarily put himself in such 

(Ky.) 308; Moore v. Hershey, 90 a condition that a loss must fall on 

Pa. St. 196; Hossler v. Beard, 54 one of two innocent persons it 

Ohio St. 398, 43 N. E. 1040, 56 Am. should fall on him who occasioned 

St. Rep. 1040, 35 L. R. A. 161. it. If drunkenness were a defense 

2Sa McClain v. Davis, 77 Ind. 419. it would clog and embarrass the 

2ei> Copenrath v. Kienby, 83 Ind. circulation of commercial paper. 

18. Miller v. Finley, 26 Mich. 248, 

27 Burroughs v. Richman, 13 N. 12 Am. Rep. 306; McSpencer v. 

J. L. 233, 23 Am. Dec. 717; Stigler Neeley, 91 Pa. St. 17; Smith v. 

v. Anderson, — Miss. — , 12 So. Williamson, 8 Utah 219, 30 Pac. 

831 ; Gore v. Gibson, 13 M. & W. 753. 
623. 



164 NEGOTIABLE INSTRUMENTS. § 137 

when such Instrument or signature was so procured from a person 
who did not know the nature of the instrument and could not 
have obtained such knowledge by the use of ordinary care." Un- 
der this amendment an instrument signed by one when so intoxi- 
cated as wholly to destroy the vocational faculties of his mind, 
is absolutely void ; and negligence in getting drunk does not estop 
him and the signing of an instrument is not a usual or probable 
result of drunkenness.^^* 

§ 137. Illegality of contract — Gaming, usurious, Sunday 
and other illegal instruments. A second division of real or ab- 
solute defenses is illegality of contract, where by force of statute 
certain contracts are declared to be absolutely void, e. g., gaming 
notes, usurious notes and Sunday notes. 

The Negotiable Instruments Law in some states provides: 

"If the consideration of a promissory note or other' negotiable 
instrument consists in whole or in part of the purchase price of 
any farm product, at a price greater by at least four times than 
the fair market value of the same product at the time, in the 
locality, or of the membership and rights in an association, com- 
pany or combination to produce or sell any farm product at a 
fictitious rate, or of a contract or bond to purchase or sell any 
farm product at a price greater by four times than the market 
value of the same product at the time in the locality, the words, 
'given for a speculative consideration,' or other words clearly 
showing the nature of the consideration, must be, prominently 
and legibly written or printed on the face of such note or instru- 
ment above the signature thereof; and such note or instrument, 
in the hands of any purchaser or holder, is subject to the same 
defenses as in the hands of the original owner or holder."^^^ 

The maker, indorser, acceptor, or any party to a gaming in- 
strument has a real defense in his favor in some of those juris- 
dictions having a statute to the effect that all notes, bills, checks 
or instruments made hereafter, when the whole or any part of the 
consideration thereof shall be for money or other valuable thing 
won on the result of any wager, or for repaying any money lent 
at the time of such wager for the purpose of being wagered, shall 
be void.^" 

28a Green v. Gunster, 154 Wis. 69, St. Rep. 918, 7 L. R. A. 705 ; Ayer 

142 N. W. 261. V. Younker, 10 Colo. App. 27, 50 

ss^Neg. Inst. Law (New York), Pac. 218; Sondheim v. Gilbert, 11^ 

§ 331, where all cases directly or in- Ind. 71, 18 N. E. 687, 10 Am. St. 

directly bearing upon or citing the Rep. 23, 5 L. R. A. 432; Chapin v. 

Law are grouped. Duke, 57 111. 295, 11 Am. Rep. 15. 

2» Snoddy v. American Nat. Bk., See note 18 U. S. L. Ed. 423. 
38 Tenn. 573, 13 S. W. 127, 17 Am. 



§ 137 REAL OR ABSOLUTE DEFENSE. 165 

There is much conflict of authority as to whether illegality 
ceases to be a real defense under the Negotiable Instruments Law 
unless made so by a subsequent statute and whether the statutes 
previously in force declaring void instruments given for gaming 
or upon usurious interest or other forbidden transactions are im- 
pliedly repealed by the Negotiable Instruments Law. 

These divergent views arise from the fact that some jurisdic- 
tions maintain that the requirements of commerce should be the 
controlling consideration in deciding the rule of law while others 
maintain that the controlling consideration should be the protec- 
tion of the weak and ignorant and the good morals of the matter. 
This question is not specifically covered by the Negotiable Instru- 
ments Law, except in the states of Illinois and Wisconsin ; in those 
states it is expressly referred to and covered in their enactment 
and the defense of gaming is made a real defense. The conflict 
in other jurisdictions is one between morals and commerce ; 
morals, which says that good morals should permit no recovery 
on gaming instruments even when in the hands of a bona fide 
holder, and commerce, which says for the advantage of trade 
and commerce the bona fide holder should be protected and he 
should be entitled to recovery on such an instrument. The weight 
of authority varies from time to time but is usually in favor of 
the commerce side of the question. On behalf of morals it is 
urged that gaming is against the best interests of society and con- 
trary to public policy, and statutes against it should be construed 
to preclude its practice; it is urged that no legislative enactment 
should be construed to have been repealed unless a subsequent 
act so states expressly, or unless the implication is so necessary 
as to be unescapable, and that statutes should be repealed by im- 
plication with great reluctance. And a number of jurisdictions 
decide this question on the side of morals.^"' In one jurisdiction 
the court states: "However, this act (Negotiable Instruments 
Law) applies only to paper that might have been obligatory be- 
tween the parties — that which it was legally possible for the par- 
ties to make. Wliere the parties were never bound because the law 
made the note void, as being contrary to public policy as ex- 
pressed in the statutes, the Negotiable Instruments Act does not 
have any application. That this act was not intended to inject 
life into a written instrument that was by law null and void, ab 

29« Alexander v. Hazelrigg, 123 413, 222 S. W. SIS, 11 A. L. R. 207; 

Ky. 677, 97 S. W. 353; Martin v. Raleigh County Bank v. Toteet, 

Hess, 27 Pa. Dist. Ct. 19S ; Holzbog 74 W. Va. 511, 88 S. E. 187; 

V. Bakrow, 156 Ky. 161, 50 L. R. A. Twentieth Street Bank v. Jacobs, 

(N. S.) 1023; Levy v. Fidelity & C 74 W. Va. 528, 82 S. E. 320. Note 

Trust Co. or Doerhofer, 188 Ky. 8 A. L. R. 314. 



NEGOTIABLE INSTRUMENTS. § 137 

initio, is apparent from the use of the word 'liable' in Section 57 
of this act. The liability is defined to be the situation of one 
who is bound in law and justice to do something which may be 
enforced by action." 

"The maker of a note given in payment of a gambling transac- 
tion is not liable on such instrument, as by law such instrument 
is null and void and of no effect. It is questionable whether such 
a note ever becomes a negotiable instrument."*®" 

The other class of cases proceeds on the theory that the re- 
quirements of commerce should be the controlling consideration, 
holding an instrument given as the result of a wager is not void 
under a statute in force before the adoption of the Negotiable In- 
struments Law. It is urged that the great object sought to be 
accomplished by the uniform law was to free the negotiable in- 
strument as far as possible from all latent or local infirmities 
which otherwise would inhere in it to the prejudice and disap- 
pointment of innocent holders as against all the parties to the 
instrument professedly bound thereby. It is urged that this 
clearly could not be aft'ected so long as the instrument was ren- 
dered absolutely null and void by local statute as against 
the original maker or acceptor.*"" In furtherance of this theory 
it is said the business of the country is done so largely by means 
of commercial paper that the interests of commerce require that 
a negotiable instrument fair on its face should be as negotiable 
as a government bond ; that every restriction upon the circulation 
of negotiable paper is an injury to the state; for it tends to de- 
range trade and hinder the transaction of business and if such 
instruments are void in the hands of the holder for value, then 
not merely is that instrument affected but a doubt is cast upon all 
commercial paper originating in that community.*"'' 

It has been decided, however, that one may estop himself from 
setting up a defense of a gaming consideration under certain cir- 
cumstances even in a jurisdiction holding the instrument as or- 
dinarily void in the hands of a bona fide holder.*"^ 

Usury in some jurisdictions is a real defense by statute.^" 

^Sb Martin v. Hess, 27 Pa. Dist. Montreal Bank v. Griffin, 154 111. 

Ct. 195. App. 616; Pritchett v. Ahrens, 26 

29oWirt V. Stubbelfield, 17 App. Ind. App. 56. 

Cas. D. C. 283 ; Wood v. Babbitt, 30 Pearson v. Bailey. 23 Ala. 537 ; 

149 Fed. 818, 822. Bridge v. Hubbard, 15 Mass. 96, 

^^ti Chemical National Bank v. 8 Am. Dec. 86; Solomons v. Jones, 

Kellogg, 183 N. Y. 92, 75 N. E. 1103. 3 Brev. (S. C.) 54, 5 Am. Dec. 538; 

2 L. R. A. (N. S.) 299, 111 Am. Hamilton v. Fowler, 99 Fed. 18. 

St. Rep. 717. In the absence of a statutory 

29e Holzbog V. Bakrow, supra. provision the better doctrine is 

Kyser v. Miller, 144 111. App. 316; that usury is not a defense which 



§ 137 REAL OR ABSOLUTE DEFENSE. 167 

Usury is defined as an unlawful contract upon the loan of money, 
to receive the same again with exorbitant increase. In other 
words it is the reserving and taking, or contracting to reserve 
and take, either directly or by indirection, a greater sum for the 
use of money than the lawful interest.^^ 

In some jurisdictions a purchaser for value without notice 
cannot recover the sum called for by the instrument from persons 
who were parties to thg instrument at its inception, when the 
instrument was negotiated in its inception at a rate greater than 
the legal rate of interest. 

Interest in advance is not usury ,^2 nor does a sale of notes at a 
discount, in good faith, render the contract usurious.^^ In addi- 
tion to the legal rate of interest lenders of money may take a 
reasonable compensation for trouble and expense.^'* And as a 
general rule compound interest is not allowed,^^ but after simple 
interest is due, it may by contract be allowed in consideration of 
giving time for payment. By the weight of modern authority, it 
is held that when a promissory note is given with a stipulation 
that the interest is to be paid annually or semi-annually, the payee 
or holder is entitled to interest upon the interest if it is not paid 
according o the tenor of the instrument.^® In some states it is 
held that interest may be allowed on interest, if the promise to 
pay it is made after the interest matures, but not if the promise 
was made before the maturity of the interest.^'' In other states in- 
terest is allowed on such interest from the time it becomes payable, 
without any subsequent demand by the creditor, or agreement by 
the debtor, that it shall be paid, giving time for payment. 

is available against a bona fide 265; Hiller v. Ellis, 72 Miss. 701, 

holder although there is much con- 18 So. Rep. 95. 

flict on this point. Cheney v. 33 Bgajg y. Benjamin, 23 N. Y. 

Janssen, 20 Neb. 128. 29 N. W. 61; Borrows v. Cook, 17 la. 436; 

289; Robinson v. Smith, 62 Minn. Geurren v. Cullen, 20 Gratt. 439. 

62, 64 N. W. 90; Tilden v. Blair, 34Beadle v. Munson, 30 Conn. 

21 Wall. (U. S.) 241. 175; McGill v. Ware, 5 111. 21 

SiBrundage v. Burke, 11 Wash. Brummel v. Enders, 18 Gratt. 873. 

679, 40 Pac. 343 ; Wilkie v. Roose- 35 e^. parte Bevan. 9 Ves. 223 

velt, 3 Johns. (N. Y.) 206, 2 Am. Perkins v. Coleman, 51 Miss. 298 

Dec. 149; Newton v. Wilson, 31 3« Preston v. Walker, 26 la. 205 

Ark. 484. As to effect of usury in 96 Am. Dec. 140; Mathews v. Too- 

renewal note on original, see note good, 23 Neb. 536, 37 N. W. 265, 8 

18 U. S. L. Ed. 305. A. S. R. 131 

32 Bank of Newport v. Cook, 60 37 Wheaton v. Pike, 9 R. I. 132, 98 

Ark. 288, 30 S. W. 35, 29 L. R. A. Am. Dec 377, 11 Am. Rep. 227; 

761; Scott V. Safiford, 37 Ga. 384; Enkridge v. Thomas. 79 W. Va. 

English V. Smock, 34 Ind. 115. 322, 91 S. E. 7 L. R. A. 1918C p. 

But see Lemer v. Cox, 65 Ga. 769; Sabine v. Paine, 223 N. Y. 401, 

119 N. E. 849, 5 A. L, R. 1444. 



168 NEGOTIABLE INSTRUMENTS. § 137 

There is the same conflict of opinion in the courts of the 
dififerent states as to the effect the adoption of the Negotiable 
Instruments Law has upon usury statutes as it has upon gambhng 
statutes discussed above. 

Some jurisdictions maintain that such instruments remain void 
as usurious as against a bona fide holder upon the adoption of 
the Negotiable Instruments Law when the state statute made a 
usurious contract void. In many courts usury and gaming are 
placed exactly upon the same footing, the courts frequently say 
that gambling and usury, the two most common objects of statu- 
tory inhibition, are against the best interests of society and con- 
trary to public policy, and statutes against them should be con- 
strued to preclude their practice; and no legislative enactment 
should be construed to have been repealed unless a subsequent act 
so states expressly or unless the implication is so necessary as 
to be unescapable, and statutes should be repealed by implica- 
tion with great reluctance. 

In some other jurisdictions it is urged that for the benefit of 
trade and commerce negotiable instruments under such circum- 
stances should not be void for usury as against a bona fide holder 
for value.^'^^ 

And where the statute as to usury does not expressly make 
the usurious contract void, but where it is construed by the 
court to have this effect, such an instrument is void.^'''' 

In some jurisdictions negotiable instruments made on Sunday 
are void by statute. In such case it may be set up as a real 
defense^^" The reason is that it is a violation of statutes for the 
observance of Sunday to execute contracts on that day, and one 
who has himself participated in a violation of law cannot be 
permitted to assert any right founded on an illegal transaction. 
If the negotiable instrument is delivered not on Sunday but on 
another day, it will not be invalid because it was agreed to and 
signed on Sunday. 

And it may be stated as a general rule that whenever a statute 
expressly declares a consideration void the holder may have a 
real defense set up against him. 

A bona fide holder is entitled to recover on negotiable paper 
given in payment of a subscription to corporate stock in viola- 
tion of law v.'here the statute does not expressly make the note 
void.^^" 

37a See Appendix A, Table I for 37o Reeves v. Butcher, 3 N. J. L. 

the law as to the penalty for usury 224; Wadsworth v. Dunnam, 117 

in the various jurisdictions. Ala. 661, 23 So. 699. 

37b Perry Savings Bank v. Fitz- 37d Washer v. Smyer — Tex. — , 

gerald, 167 Iowa, 446. 149 N. W. 211 S. W. 985, 4 A. L. R. 1320, note 

497, r A. L. R. 1330; Heard v. National 



§ 138 REAL OR ABSOLUTE DEFENSE. 169 

Where the instrument has been executed to a foreign corpora- 
tion within a state where it has not become authorized to do 
business in accordance with the statutory requirements, and where 
such corporation has transferred the instrument to the plaintiff, 
who sues as a holder in due course, the general rule is that the 
plaintiff can recover unless the particular statute makes the note 
and contract void.^'^* 

§ 138. Forgery. By forgery is meant the counterfeit mak- 
ing or fraudulent alteration of any writing, and may consist in 
the signing of another's name, or the alteration of an instrument 
in the name, amount, description of the person and the like, with 
intent thereby to defraud. The intent to defraud distinguishes 
forgery from innocent alterations and spoliation.^* A forgery or 
fraudulent alteration will avoid the instrument and also extin- 
guish the debt which represents the consideration of the instru- 
ment. 

The Negotiable Instruments Law provides .^^ 

"Where a signature is forged or made without authority of the 
person whose signature it purports to he, it is wholly inoperative, 
and no right to retain the instrument, or to give a discharge 
therefor, or to enforce payment thereof against any party thereto, 
can he acquired through or under such signature, unless the 
pa/rty against zvhont it is sought to enforce such right is pre- 
cluded from setting up the forgery or want of authority." 

It does not follow from the provisions of this section that 
proof of one forged signature on an instrument must of neces- 
sity, and in all cases, be given effect to avoid the note in favor 
of those whose signature thereto are found to be genuine, it is 
the forged or unauthorized signature that is declared to be in- 
operative.^^* 

The last clause of the section of the Law above refers to 
estoppel and not to ratification. A forger does not act on behalf 

Bank, 143 Ga. 48, 84 S. E. 129; 55 L. R. A. 408, 88 Am. St. Rep. 

Cornell v. Hichens, 11 Wis. 368. 770. 

37eBank v. Utterbach, L. R. A. 39 Neg. Ins. Law, § 23, where all 

1918 B, 838; McMann v. Walker, cases directly or indirectly bearing 

31 Colo. 26, 72 P. 1055 ; Ensign v. upon or citing the Law are grouped. 

Christiansen, — N. H. — 109 A. As to payment of forged bill by 

g57 drawee or acceptor, see note 6 U. S. 

3« Commonwealth v. Wilson, 89 L. Ed. 335. As to liability of per- 

Ky. 157, 12 S. W. 264, 25 Am. St. son whose signature is forged, see 

Rep. 528 ; Franklin Fire Ins. Co. v. note 36 L. R. A 539. 
Bradford, 201 Pa. 32, 50 Atl. 286, 39a Beam v. Ferrell, 135 Iowa 

670, 113 N. W. 509. 



170 NEGOTIABLE INSTRUMENTS. § 139 

of, nor profess to represent the person whose handwriting he 
counterfeits ; and the subsequent adoption of the instrument can- 
not supply the authority which the forger did not profess to 
have.s"" 

Parties may be estopped, however, to dispute the genuineness 
of their signatures.**" 

An acceptor or an indorser may be precluded from setting up 
the forgery or want of authority as to the drawer or maker. 

It should be remembered that the drawee by accepting a bill, 
warrants the genuineness of the drawer's signature, and the in- 
dorsers likewise guarantee the genuineness of all parties to the 
bill at the time of the indorsement.^" 

Since an acceptor of a bill warrants the genuineness of the 
signature of the drawer he cannot therefore resist payment of the 
bill as against a bona fide holder if the drawer's name be 
forged.^-^ An indorser of a negotiable instrument admits that, 
at the time of his indorsement the instrument was valid and sub- 
sisting, and he is, therefore, bound by his indorsement to subse- 
quent parties.^^ And it has been held that a bank is entitled to 
recover against the second indorser of a note, although the in- 
dorsement of the name of the payee is a forgery, and although the 
note was offered for discount by the maker and not by the second 
indorser.^* The warranty of the acceptor only extends to the 
genuineness of the signature, and not to the matters contained 
in the bill itself. An indorser, by his indorsement, contracts 
with the subsequent bona fide holder of the instrument, that the 
instrument itself, and all the signatures prior to his indorsement, 
are genuine ; and the fact that the name of the maker was forged 
will not affect his liability.** 

§ 139. Duress when amounting to forgery. When duress 
amounts to a forgery it is held in some jurisdictions to be a real 
defense. Thus when the signature of a person is obtained to 

39b Henry Christian Building and '^ Cochran v. Atchinson, 27 Kan. 

Loan Association v. Walton, 181 728; Beattie v. Nat. Bank, 174 111. 

Pa. St. 201. 571, 66 Am. St. Rep. 318, 43 L. 

390 Crout V. DeWolf, 1 R. I. 393 ; R. A. 654. 

Leather Manufacturers' Nat. Bank "^'^ State Bank v. Feaning, 16 

V. Morgan, 117 U. S. 96. Pick. 533, 28 Am. Dec. 265. 

40 Olivier v. Audry, 7 La. 496; 44 QHvier v. Audry, 7 La. 496. 
Rambo v. Metz, 5 Strob. (S. C.) As to effect of forgery of part of 
108. signatures as defense against bona 

41 Hoffman & Co. v. Bank of Mil- fide holder by makers whose sig- 
waukee, 12 Wall. 181, 20 L. Ed. natures were genuine, see note 13 
366; Price v. Neal, 3 Bun. 1354; L. R. A. (N. S.) 426. 
Redington v. Woods, 45 Cal. 406, 13 

Am. Rep. 19. 



§ 140 REAL OR ABSOLUTE DEFENSE. 1/^1 

an instrument under such circumstances as make the instru- 
ment a forgery, the person signing the same will not be liable 
thereon to any one.'*^ 

And so duress might be a real defense in every jurisdiction, 
as where A takes B's hand and forces him to sign his name. In 
such case the duress amounts to a forgery and is a real defense. 

§ 140. Statute of limitations. The statute of limitations is 
a real defense. Holders of negotiable instruments do not neces- 
sarily have notice whether the period of limitation has run out or 
not. The instrument may not be dated, or, what is usual, an in- 
dorsement may not be dated; but the real date of the act, or 
rather of the delivery following it, may be shown, when there is 
nothing, such as subsequent payments of interest or installments, 
to prevent the running of the statute from that time.^ 

§ 141. Failure to stamp."***^ Failure to put a revenue stamp 
on an instrument has been held in some jurisdictions under some 
of the stamp laws to be a real defense, while in others not to be 
a real defense.'*'' 

In construing the Federal Stamp Tax Law of 1898, the pro- 
vision declaring an unstamped instrument invalid was held to 
apply only to instruments from which the stamp had been omitted 
fraudulently;^''* and it has been held that the purchaser is not 
precluded from becoming a bona fide holder when there is no 
intent to defraud the Government.'*^ 

The present law, that is, the Act of October 22, 1914, contains 
no provision to the effect that an unstamped instrument shall be 
void.4» 

Some jurisdictions hold that a promissory note which is not 
stamped as required by the revenue laws is not complete and regu- 
lar on its face and the purchaser of such a note is not a holder 
in due course, and the instrument in his hands is open to any 
defense that the maker had against the original payee.^® Under 
such circumstances the omission of the stamp is relied upon not 

45 Mitchell V. Tomlinson, 91 Ind. 409; Green v. Davies, 4 B. & C. 

167; Webb v. Corbin, 78 Ind. 403; 233; Ebert v. Gitt, 95 Md. 186, 52 

Cline V. Guthrie, 42 Ind. 227. Atl. 900. 

See also Hatch v. Barrett, 34 47a Rowe v. Bowlan, 183 Mass. 

Kan. 223; Loomis v. Rush, 56 N. 488. 67 N. E. 636. 

Y. 462. 48 Ebert v. Gitt 95 Md. 186, 52A. 

46 A.S to their application, see 900. 

statutes of the various states. 49 Cole v. Ralph, 252 U. S. 286. 

4«a See also § 57 of this book. ^o Lutton v. Baker, — Iowa — , 

47 Robinson v. Fair, 31 la. 9; 174 N. W. 599. 
Anderson v. Starkweather, 24 la. 



172 Negotiable instruments. § 140 

as a ground of defense to the note, but as defeating the bona fides 
of the purchaser and thus letting in an independent defense.'* 

Other jurisdictions hold that the want of a revenue stamp on a 
promissory note is not such a circumstance of suspicion as to 
put an endorsee upon inquiry in taking the note, and the note 
is valid and can be enforced without a stamp.'^ 

The cancellation of the revenue stamp by one other than the 
maker whose initials were used is not a suspicious circumstance 
so as to be notice of any equity and prevent the holder from 
being a bona fide holder.** 

Many of the state courts held that the provisions of the Acts 
of 1864, 1865 and 1866, excluding unstamped instruments from 
evidence, did not apply to the said courts ; some denied the power 
of Congress to prescribe a rule of evidence for the state courts.*'* 

f*! Note 6 A. L. R. 1701 and cases. ^'*'Wa\hce v. Cavens, 34 Ind. 

»2 Burson v. Huntington, 21 Mich. 354. See 48 L. R. A. 305 and note 
415, 4 Am. Rep. 497. pp. 305-320. 

53 Martindale v. Stotler, 80 Kans. 
87, 101 P. 629. 



CHAPTER XV. 
PERSONAL DEFENSES OR EQUITIES. 

S 142. In general. § 146. Want or defect of consid- 

143. Fraud. eration. 

144. Alteration. 147. Illegality of consideration. 

145. Duress. 148. Payment. 

§ 142. Personal defenses or equities — In general. The real 
defenses are such, that the party who has a right to set them up, 
can set them up against anybody. Every other person does not 
necessarily have a real defense because the party originally liable 
does. The real defense is one which the person alone who has it 
may set up. So, when we say that a real defense is an absolute 
defense so far as the person who is entitled to the defense is con- 
cerned, we do not necessarily mean that that extends to the 
other parties. A personal defense is of an equitable nature. It 
is a defense which depends upon circumstances, it is a defense 
which a person has a right to set up under certain circum- 
stances, and those circumstances are dependent upon whether or 
not he had notice and whether or not he was a purchaser for 
value. In the real defense, it is not a matter as to whether the 
person is a purchaser for value and had notice, and the like, the 
defense may be set up regardless of these facts ; but a personal 
defense cannot be set up that way since as to such a defense a 
person must show that he has not had notice and that he is a pur- 
chaser for value. 

As to equities or personal defenses it is important to know 
who are to be regarded as the immediate parties, or parties be- 
tween whom there is a privity, to a negotiable instrument, and 
who are remote. Among the former may be classed: (1) The 
drawer and acceptor of a bill;* or (2) the drawer and payee of 
a bill as a general rule;* (3) the maker and payee of a note ;^ 
and (4) the indorser and immediate indorsee* of a bill or note. 

That the bill or note has been lost or stolen^ or was executed 

1 Thomas V. Thomas. 7 Wis. 476. 4 Klein v. Keyes, 17 Mo. 326; 

'McCulloch V. Hoffman, 10 Hun Holliday v. Atkinson, 5 Barn. & C. 

(N. Y.) 133. 501. 

3 Kennedy v. Goodman, 14 Neb. ^ Mills v. Berger, 1 Mees. & W. 

585, 16 N. W. 834; Jeflfries v. 425, 
Austin, 1 Strange 674, 

173 



174 NEGOTIABLE INSTRUMENTS. § 142 

under duress, or under fraudulent misrepresentations, or for 
fraudulent consideration,'' or for illegal consideration,* or has 
been fraudulently obtained from an intermediate holder," or been 
in any way the subject of fraud or felony, or has been misappro- 
priated and diverted, or for a loss for which the party was not 
liable, or that otherwise it was without valuable consideration, 
is a good defense as between the parties privy to it. And in 
some cases it is a good defense that it was given by mistake for 
too great a sum, or when no sum was due, the evidence showing 
fraud or a total or partial want of consideration. As between 
the immediate parties on a bill or note no question arises whether 
the defense is real or personal. Any defense is valid as between 
immediate parties if it would be valid on an ordinary contract. 
But when the parties are not immediate, then the question arises 
as to whether it is a real or a personal defense. Personal de- 
fenses being in the nature of equities, two principles of equity 
apply to them. ( 1 ) One is, he who comes into equity must come 
with clean hands ; he must not be a party to any fraud, to any 
illegality. If he has notice^" of any of these, he does not have 
clean hands. (2) The other is, of two innocent parties, he whose 
act or omission has caused the loss, must stand it. Equity says, 
as between two innocent parties, the one should suffer whose act 
or omission has caused the loss." If a person has no notice and 
he is the party who has made this loss possible there can be a 
recovery against him. 

The rule is the person who enables the fraud to be perpetrated 
must stand responsible-^^ where the instrument is gotten possession 
of in such a manner as to amount to a forgery, it should be a real 
defense and no recovery should be permitted against it. Here, 
however, we find a conflict of authority. The better opinion is 
that if you can show that it amounted to a forgery or was ob- 
tained by duress, there can be no recovery against you if you 
are the person liable on the instrument. 

e Clark v. Pease. 41 N. H. 414. lo Mass. Nat. Bank v. Snow, 187 

7 Wilson V. Ellsworth, 25 Neb. Mass. 159; Cheever v. The Pitts- 
246. 41 N. W. 177; Macomb v. burg etc. R. R. Co., 150 N. Y. 59, 
Wilkinson, 83 Mich. 486, 47 N. W. 55 Am. St. Rep. 646, 34 L. R. A. 
336. 69. 

8 Cummins v. Boyd, 83 Pa. St. ^ Ledwich v. McKim, 53 N. Y. 
372; Bierce v. Stocking, 11 Gray 307. 

(Mass.) 174. 12 Putnam v. Sullivan, 4 Mass. 

^ Rodgers v. Morton, 12 Wend. 45, 3 Am. Dec. 206 ; McCormick 

484; Vither v. Zane, 6 Gratt. (Va) v. Holmes, 41 Kan. 265, 21 Pac. 

246. 108. 



§ 143 PERSONAL DEFENSES OR EQUITIES. 175 

The Negotiable Instruments Law provides: 

"The title of a person who negotiates an instrument is defective 
within the meaning of this act when he obtained the instrument, 
or any signature thereto, by fraud, duress, or force and fear, or 
other unlawful means, or for an illegal consideration or when he 
negotiates it in breach of faith, or under such circumstances as 
amount to a fraud."^^ 

§ 143. Fraud. Where the consideration for a bill is clearly 
fraudulent it is a good defense against an immediate party^* or a 
remote party unless he is an innocent holder for value/^ and 
while the instrument is yet in the hands of a party with notice a 
court of law will compel its surrender, or restrain its negotiation 
until the question of fraud is settled.-^® 

A bill is affected with fraud when the issue or any subsequent 
negotiation of it is obtained by fraud, coercion, or when it is 
negotiated in breach of faith, or in fraud of third parties. 

No holder of a bill subsequent to its being affected with fraud 
can enforce payment from any party thereto, or retain the bill 
against the rightful owner unless he received it from a bona fide 
holder for value without notice. The question of fraud is largely 
one of negligence. Did a person who has signed the instrument 
and let it get into the hands of other parties, or into circulation, 
act with negligence? If he did not, then fraud is a real defense, 
but if he did so act, it is a personal defense.^'' Where a person, 
in case of fraud, signs an instrument believing he is signing a dif- 
ferent instrument, if he was negligent he cannot set up the per- 
sonal defense. Then, in case of delivery through fraud, where an 
instrument has been delivered to an agent or an agent has fraud- 
ulently delivered it to someone else, fraud is not a personal de- 
fense, because the agent was entrusted with it.^^ As to a 
custodian the general law applies the same.^^ The maker 

l^Neg. Inst. Law. 55, where all by fraud in its origin, see note 11 

cases directly or indirectly bear- Am. St. Rep. 309. 

ing upon or citing the Law are i® Hullhorst v. Schamer, 15 Neb. 

grouped. 57, 17 N. W. 259; Hodson v. Eu- 

"Carthers v. Levy, 111 Ga. 740, gene Glass Co., 156 111. 397, 40 N. 

36 S. E. 958 ; Alabama Nat. Bank E. 971 ; Sackett v. Hillhouse, 5 Day 

V. Halsey, 109 Ala. 196, 19 So. 522; 551; Wilcox v. Ryols, 110 Ga. 287, 

Still V. Snow, 66 Vt. 277, 29 Atl. 34 S. E. 575. 

250. 17 Gardner v. Wiley (Ore.), 79 

1^ Russ Lumber Co. v. Muscupi- Pac. 341 ; Howry v. Eppinger, 34 

able Land & W. Co., 120 Cal. 521, Mich. 29. 

52 Pac. 993 ; Nichols v. Baker, 75 i^Hutchinson v. Brown. 19 Dist. 

Me. 334; Hawley v. Hirsch, 2 Col. 136; Jordan v. Jordan, 10 Lea 

Woodw. Dec. (Pa.; 158. Bona fide (Tenn.) 124, 43 Am. Rep. 294. 

holder takes instrument unaffected i® Walker v. Ebert, 29 Wis. 194; 



176 NEGOTIABLE INSTRUMENTS. § 144 

of the instrument would not be entitled to set up the fraud; 
and, where the instrument has been stolen or wrongfully taken, 
then the question becomes largely a question of negligence. If 
the party has been negligent, then he has no right to set up fraud 
as a personal defense. If he has not been negligent, then other 
circumstances not being considered, he could not be recovered 
against.*^* 

§ 144. Alteration.^'"' The following is the provision in the 
Negotiable Instruments Law : 

"Where a negotiable instrument is materially altered without 
the assent of all parties liable thereon, it is avoided, except as 
against a party zvho has himself made, authorised, or assented to 
the alteration and subsequent indorsers. But when an instrii- 
ment has been materially altered and is in the hands of a holder 
in due course, not a party to the alteration, he may enforce pay- 
ment thereof according to its original tenor."^^ 

A material alteration is defined to be any change in the in- 
strument which affects or changes the liability of the parties in 
any way.^^ The alteration avoids the paper regardless of whether 
it is favorable or unfavorable to the party making the altera- 
tion.^^ The following have been held to be material alterations: 
any change in the date of the instrument, but not in the date 
of the indorsement f^ any alteration in the amount of principal 
or interest -^^ any change in the character of the payment, whether 
in the denomination or medium of payment ;^^ any alteration in 
the personality, number and relations of the parties ;^* any change 
in the liability of the parties ;^'^ or any change in the place of pay- 
ment.^* 

Baldwin v. Bricker, 86 Ind. 222; Griffith v. Cox, 1 Tenn. 210; Mers- 

Bedell v. Herring, 77 Cal. 572. man v. Werges. 112 U. S. 139, 28 

i9»As to title of bona fide holder L. Ed. 641. 
to stolen paper, see note 103 Am. 24 Harsh v. Klepper, 28 Ohio St. 

St. Rep. 983, 987. 200; Draper v. Wood, 112 Mass. 

i^" See also section 188 infra. 315; Batchelder v. White, 80 Va. 

20 Neg. Inst. Law, § 124, where 103 ; Nefif v. Horner, 63 Pa. 327, 
all cases directly or indirectly bear- 3 Am. Rep. 555. 

ing upon or citing the Law are 25 Poxworthy v. Colby, 64 Neb. 

grouped. 216, 89 N. W. 800, 62 L. R. A. 393 ; 

21 Foxworthy v. Colby, 64 Neb. Schwalen v. Mclntyre, 17 Wis. 232 
216, 89 N. W. 800, 62 L. R. A. 26 Lamb v. Paine, 46 la. 551; 
393; Organ v. Allison, 68 Tenn. (9 Sneed v. Sabinal Min. & Mill. Co., 
Baxt.) 459. 71 Fed. 493, 18 C. C. A. 213. 

22 Franklin Ins. Co. v. Courtney, 27 Blake v. Coleman, 22 Wis. 415. 
60 Ind. 134; Mersman v. Werges, 28 Codes & St. Or. 1901, §4527; 
112 U. S. 139, 28 L. Ed, 641. Rev. Codes, N. D., § 1053. 

23 Wood V. Steele, 6 Wall, 8; 



§ 144 PERSONAL DEFENSES OR EQUITIES. 177 

The addition of the name of a witness to an instrument re- 
quired by law to be witnessed is a material alteration, but if the 
instrument need not be witnessed or if it already has on it the 
number of witnesses required by law, the alteration is imma- 
terial. An innocent alteration, when material, is held by some 
authorities to avoid the instrument while not cancelling the debt, 
others holding that so long as the alteration has caused no injury 
a court of equity may restore it to its original condition so that 
suit may be brought on it.^* 

The last proposition as set out in Section 124 of the Law above 
that a holder in due course may recover according to the original 
tenor of the instrument changes the law in some jurisdictions.^®' 

What constitutes a material alteration under the Negotiable In- 
struments Law is set out in Section 125 of that law as follows : 

"Any alteration which changes the date; the sum payable, either 
of principal or interest; the time or place of payment; the num- 
ber or the relations of the parties; the medium or currency or 
which adds a place of payment where no place of payment is 
specified, or any other change or addition which alters the effect 
of the instrument in any respect, is a material alteration."^^^ 

When the change in the bill or note is made by a stranger it 
is called a spoliation instead of an alteration. Such a change of 
an instrument is held in most jurisdictions to have no effect 
upon it, if the original meaning can be ascertained. That is, if 
the alteration be made by a stranger to the instrument the rights 
of the parties are not affected.^'' 

Immaterial alterations are those which do not change the legal 
effect of the instrument, as adding words implied by law, making 
marginal figures to correspond to the written statement in the 
body of the instrument, the adding of immaterial memoranda, 
and the like.^* Thus the correcting of a mistake to conform to 
the intention of the parties is an immaterial alteration.^^ 

In those jurisdictions the effect of a material alteration is 
generally as follows : Bona fide holders are only protected 

29 Booth V. Powers, 56 N. Y. 31; Langenberger v. Kroeger, 48 Calif. 
Kountz V. Kennedy, 63 Pa. St. 147. See note 18 U. S. L. Ed. 725. 
187. 31 Smith v. Smith, 1 R. I. 398; 

Contra, Bigelow v. Stephens, 35 Bacheldor v. Priest, 12 Pick. 399; 

Vt. 525. Keene, Adm. v. Miller, 103 Ky. 628, 

29a Tower v. Stanley, 220 Mass. 45 S. W. 1041. As to immaterial 

429. alterations, see note 12 U. S. L. Ed. 

29" Neg. Inst. Law, § 125, where 443. 

all cases directly or indirectly bear- ^2 Bank v. Bank, 13 N. Y. 309; 

ing upon or citing the Law are Shepard v. Whetstone, 51 la. 457, 

grouped. 1 N. W. 753, ZZ Am. Rep. 143. 

30 Buckler v. Huff. 53 Ind. 474. 



178 NEGOTIABLE INSTRUMENTS. § 145 

against material alterations discharging the party liable, when 
some carelessness or negligence on the part of the person whose 
liability has been changed by the alteration, has contributed to 
the negotiation of the paper without suspicion of fraud, as 
where blank spaces have been left,^ or it is written partly in 
pencil so as to be easily erased ; so a memorandum which can 
be detached without affecting the paper will, when detached in 
fraud, not be allowed to avoid the paper in the hands of a bona 
fide holder.^^ 

In those jurisdictions the effect of a material alteration by the 
holder of a bill is to discharge all parties from liability on the 
bill, unless they consented to such alteration.*^ 

§ 145. Duress. Duress, under most circumstances, is con- 
sidered a personal defense.^® 

It is provided in the Negotiable Instruments Law that duress 
is a defense. The Law states : "The title of a person who nego- 
tiates an instrument is defective w-ithin the meaning of this act 
ivhen he obtains the instrument, or any signature thereto by 
duress, or force and fear, or other unlaivful means. * * *"30a 

Threats which induced the execution of a note by old and feeble 
persons amount to duress, even though they would not influence 
ordinary persons,"*®" and where the maker of a note is prevented 
from exercising his free will by reason of payee's threats, the 
maker may repudiate the note for duress whether the threat 
be sufffcient or insufficient to overcome the mind of a man of or- 
dinary courage, and in such cases evidence as to the maker's 
mental or physical health, his condition in life, his experience, 
education and intelligence is admissible.^®" 

Where upon the threatened insolvency of a firm, two of the 
creditors and their attorney went to the home of the aged parents 
of one of the members of the firm, and by indirect threats to 

33Stratlon v. Stone, 15 Colo. 443. As to fraudulent alterations, 

App. 237, 61 Pac. 481 ; Rainbolt v. see note 13 U. S. L. Ed. 266. 

Eddy, 34 la. 440, 11 Am. Rep. 152; 36 Hogan v. Moore, 48 Ga. 156; 

Cannon v. Grigsby, 116 111. 151, 5 Mumly v. Whitmore, 15 Neb. 647. 

N. E. 362, 56 Am. Rep. 769; Isnard 19 N. W. 694; Clarke v. Pease, 41 

V. Tones, 10 La. Ann. 103 ; Zimmer- N. H. 414. 

man v. Rate, 75 Pa. St. 188 ; Har- 3«a Neg. Inst. Law, § 55, where all 

vey V. Smith, 55. 111. 224. cases directly or indirectly bear- 

34 Noll V. Smith, 64 Ind. 511. ing upon or citing the Law are 

35 Burrows v. Klunk, 70 Md. 451, grouped. 

17 Atl. 378, 14 Am. St. Rep. 371, 3«b Anthony v. Brown, 214 Mass. 

3 L. R. A. 576; Mills v. Wilson, 3 439, 101 N. E. 105^ 

Ore. 308; Bank v. Lockwood, 13 3«o (Cornwall v. Anderson, 85 

W. Va. 392. As to authorized al- Wash. 378, 148 Pac. 1. 
terations, see note 12 U. S. L. Ed. 



§ 146 PERSONAL DEFENSES OR EQUITIES. 179 

prosecute their son, induced them to sign a note for his indebted- 
ness, such note was void as having been obtained by duress.^*^** 
The abuse of any process, either civil or criminal, to compel 
a party, by imprisonment, to do any act against his will except 
to pay the debt for which he is arrested, is entirely illegal, and 
the act may be avoided, on the ground of duress.^' Thus where 
an arrest was without any warrant or lawful authority and a 
note was signed under such pressure.^* Duress is a perfect 
defense to an action between the original parties and parties 
having notice of it.*^ 

§ 146. Want or defect of consideration. The largest num- 
ber of defenses concern consideration. Anything which is a 
good consideration in a contract is a good one in a bill or note, 
or a negotiable instrument. If a person has bought something 
and agreed to give something in return, the court will not look 
into whether he has gotten value, the courts do not look into 
that, but the court will look into some other matters. If 
there has been no consideration whatever, the court will look 
into that as between the immediate parties — that is a personal 
defense.'*'* As between the parties, one who has notice of want or 
failure of consideration, that is a defense the maker can set up 
against him. For instance, A makes a promissory note and gives 
it to B as a gift ; there is no consideration ; A only thereby prom- 
ises to give B $50 in the future. As between the parties there 
can be no recovery ; but if A gives B a note of a third person, 
it is held there is sufficient consideration and B can recover from 
that person, but he cannot recover against A in the first case 
on account of the want of consideration. 

By failure of consideration, we mean something which ap- 
parently had a good consideration, but for some cause or other 
the consideration has failed.*-^ A thinks he owns a certain piece 
of property, but there is a judgment against him and execution 
has not been taken and A conveys that property to B for B's 
note. In the meantime, the property is taken on execution — 

36<'-Spoerer v. Wehland, — — , '**' Farmers' Savings Bank v. 

100 A. 287. Hausman, 114 la. 49, 86 N. W. 31; 

37Thurman v. Burt, 53 111. 129; Chicago Title & Trust Co. v. Bary, 

Shauk V. Phelps, 6 111. App. 612; 165 Mo. 197, 65 S. W. 303; Ho^an 

Sheu V. Spooner, 9 N. H. 197, 32 v. Bigler, 5 Okla. 575, 49 Pac. 1011. 

Am. Dec. 348. ^^ Shirk v. Neible, 156 Ind. 66, 

ssOsborn v. Robbins, 36 N. Y. 59 N. E. 281, 83 Am. St. Rep. 150; 

365. Ingersoll v. Martin, 58 Md. 67, 42 

3» Graham v. Marks, 98 Ga. 67, Am. Rep. 322. 
25 S. E. 931. 



180 NEGOTIABLE INSTRUMENTS. § 147 

there has been a failure of consideration and that note could not 
be recovered upon. 

Want of consideration is matter of defense as against any 
person not a holder in due course.*^ 

Partial failure of consideration is a defense pro tanto against 
an immediate party when the failure is an ascertained and 
liquidated amount in money .^^ But it is not a defense against a 
remote party holder for value."*^ A few decisions hold that a 
partial failure of consideration will not constitute a good de- 
fense in any case whether definite or indefinite."*' 

The Negotiable Instruments Law has the following provision: 
"Absence or failure of consideration is matter of defense as 
against any person not a holder in due course; and partial failure 
of consideration is a defense pro tanto, whether the failure is 
an ascertained and liquidated amount or otherwise .'"^^ 

Total failure, as against an immediate party is a good de- 
fense,^*' but not as against a remote party who is a bona fide 
holder for value without notice."*' Thus where the consideration 
of the note was that the payee should act as executor for the 
maker, and the payee died first, the note could not be enforced 
against the maker. So where a bill is drawn by one party on 
another payable to his own order, and is accepted, if the con- 
sideration fails as between these two, an indorsee for value who 
knows that the consideration has failed cannot sue the acceptor. 

§ 147. Illegality of consideration. Under the division "Ille- 
gality of Consideration" there are three classes of cases: 

(1) Those prohibited by statute, unless the statute renders 
the contract absolutely void. 

(2) Common law prohibitions. 

(3) Those against public policy. 

Where the consideration is illegal in whole or in part it is 
a defense against the entire note while in the hands of an imme- 

43 Angler v. Brewster, 69 Ga. *** Edwards v. Porter, 42 Tenn. 

362; Hickson v. Earley, 62 S. C. (2 Cold.) 42. 

42, 39 S. E. 782; Clarion Second 45 Rgddick v. Mackler, 23 Fla. 

Nat. Bank v. Morgan, 165 Pa. St. 335. 2 So. 698; Hinton v. Scott, 

199, 30 Atl. 957, 44 Am. St. Rep. Dud. (Ga.) 245; Stocks v. Scott, 

652. 188 111. 266, 58 N. E. 990. 

43 Russ Lumber Co. v. Muscupi- ^oa -^^g j^gj. l^^^ § 28. 

able L. & W. Co., 120 Cal. 521, 52 •*« r^ss Lumber etc. Co. v. Mus- 

Pac. 995, 65 Am. St. Rep. 186; cupiable L. & W. Co.. 120 Cal. 52; 

Cook V. Mi.x, 11 Conn. 432; Journal Ingersoll v. Martin, 58 Md. 67, 42 

Printing Co. v. Maxwell, 1 Pennew. Am. Rep. 322. 

(Del.) 511, 43 Atl. 615; Wadsworth 47 Morrison v. Farmers' & Mer- 

V. Smith, 10 Shep. (Me.) 500; chants' Bank, 9 Okla. 697, 60 Pac. 

Truesdale v. Watts, 12 Pa. St. 73. 275 ; Trustees v. Hill, 12 la. 462. 



§ 147 PERSONAL DEFENSES OR EQUITIES. 181 

diate party or one who is not a bona fide holder for value with- 
out notice. In general, the consideration for a bill is illegal when 
it is wholly or in part immoral, contrary to public policy, or 
forbidden under penalties by statute.'** 

A distinction is to be made between a consideration simply 
illegal and one which by statute expressly makes an instrument 
void. In the former case a bona fide transferee may recover, 
though not in the latter."*^ 

Where an instrument is given for a consideration which the 
statute expressly makes void, the party wlio gave the paper may 
set it up as a defense against all the holders whether immediate 
or remote, but the holder can sue the indorser.^** It is no longer 
customary by law to make notes expressly void by statute, and 
where such statutes do exist a clause frequently saves the rights 
of innocent holders, but this is not always the case. The holder 
of commercial paper is prima facie presumed to be an innocent 
holder for value, but where there is evidence affecting the bill 
or note with fraud or illegality, the burden of proof is shifted 
to the holder to show that he is an innocent holder for value.^^ 
In case the holder can show that he paid full value the defend- 
ant must then show that the holder had notice of the fraud or 
illegality. So it is held that where the holder has in good faith 
given part value he ma;^ recover to a like amount. 
Commercial paper based upon considerations which contravene 
public policy are void.^^ Among such considerations is that for 
the purchase and sale of so-called "Bohemian Oats" at an ex- 
orbitant price.®^ 

Where one gives a note to another and for the reason that 
the other has committed a crime or will commit a crime — such 

48 Bell v. Putnam, 123 Cal. 134, ningham v. Bank, 71 Ga. 400, 51 
55 Pac. 773; Baker v. Parker, 23 Am. Rep. 266. 

Ark 390; Dickson v. Kittson, 75 ^i Farmers' & Citizens' Bank v. 

Minn. 168, 77 N. W. 820, 74 Am. Noron, 45 N. Y. 762; Davis v. 

St. Rep. 447 ; Irwin v. Margaret, 25 Bartlett, 12 Ohio St. 584, 80 Am. 

Ind. App. 383, 59 N. E. 38. Dec. 375; Nickerson v. Ruger, 76 

49 Robinson v. Coleman, 141 N. Y. 279. 

Mass. 231, 4 N. E. 619, 55 Am. Rep. 53 Yeats v. Williams, 5 Ark. 684; 

471 ; Ferris v. Tavel, 87 Tenn. 386, Ball v. Putnam, 123 Cal. 134, 55 

11 S. W. 93, 3 L. R. A. 414; Wood- Pac. 773; Stoutenberg v. Lyband, 

son v. Barrett, 2 Hen & M. 80, 3 13 Ohio St. 228; Meachem v. Dow, 

Am. Dec. 612; Snoddy v. Bank, 88 32 Vt. 721. 

Tenn. 573, 13 S. W. 127, 7 L. R. 53 Schmueckle v. Waters, 125 Ind. 

A. 705. 265, 25 N. E. 281; Payne v. Rau- 

50 Snoddy v. Bank, 88 Tenn. 573, binck. 82 la. 587, 48 N. W. 995 ; 
13 S. W. 127, 7 L. R. A. 705; Merrill v. Parker, 80 la. 542, 45 
Morton v. Fletcher, 2 A. K. Marsh N. W. 1076. 

(Ky.) 137, 12 Am. Dec. 366; Cun- 



182 NEGOTIABLE INSTRUMENTS. § 148 

note is a violation of the common law and there can be no recov- 
ery on it, that is, it is a personal defense which can be set up.^* 

§ 148. Payment. Payment in due course is the discharge of 
the instrument and is a good defense,^^ but payment by one 
secondarily liable is not a discharge of the instrument.'® 

If a person makes an instrument and it becomes due and pay- 
ment is made, then it is discharged, but if he purchases the in- 
strument and it is not intended as in payment, it is not discharged. 

54 Barker V. Parker, 23 Ark. 390; seMorgan v. Rentzel, 7 Cranch. 

Baker v. Farris, 61 Mo. 389. 273 ; West Boston's Sav. Bank v. 

55Swope V. Ross, 40 Pa. St. 186; Thompson, 124 Mass. 506; Gallon 

Ballard v. Greenbush, 24 Me. 336; v, Lawrence, 3 Maule & S. 95, 
Gardner v- Maynard, 7 Allen 456. 



CHAPTER XVI. 
PRESENTMENT, NOTICE OF DISHONOR AND PROTEST. 



i 149. Meaning of terms. 

150. In general. 

151. Presentment for acceptance 

— When essential. 

152. Presentment for acceptance 

— Benefit. 

153. Presentment for acceptance 

— Time. 

154. When instrument dishonored 

by non-acceptance. 

155. Presentment for payment — 

In general. 

156. Presentment for payment — 

When essential. 

157. Presentment for payment — 

When dispensed with. 

158. Presentment for payment — 

What sufficient. 

159. Presentment for payment — 

Date. 

160. Presentment for payment — 

When delay excused. 

161. Presentment for payment — 

Place. 

162. Presentment for payment — 

To whom. 

163. Presentment for payment — 

Effect of failure to present. 

164. When instrument dishonored 

by non-payment. 



§ 165. Notice of dishonor — In gen- 
eral. 

166. Notice of dishonor — Con- 

tents. 

167. Notice of dishonor — By 

whom given and when to 
be given. 

168. Notice of dishonor — To 

whom given. 

169. Notice of disnonor — Time of. 

170. Notice of dishonor — Place of 

sending. 

171. Notice of dishonor — Notice 

through postoffice. 

172. Notice bf dishonor — When 

notice unnecessary. 

173. Notice of dishonor — Excuses 

for failure. 

174. Notice of dishonor — Effect 

of notice as to prior and 
subsequent parties. 

175. Protest— Method of. 

176. Protest — Purpose. 

177. Protest— Notice. 

178. Protest— What should be 

protested. 

179. Protest— Waiver. 

180. Protest — Miscellaneous mat- 

ters. 



§ 149. Meaning of terms. By Presentment is meant the 
production of a bill of exchange to the drawee for his acceptance, 
or to the drawee or acceptor for payment ; or the production of 
a promissory note to the party liable for payment of the same.-"- 

By Protest is meant a formal statement in writing made by a 
notary under his seal of office, at the request of the holder of a 
bill or note, in which it is declared that the same was on a certain 
day presented for payment (or acceptance, as the case may be), 
and that such payment (or acceptance) was refused, whereupon 

1 Windham Bank v. Norton, 22 Mete. (Mass.) 216; Fiske v. Beck- 
Conn. 213, 56 Am. Dec. 397; Fall with, 19 Vt. 315, 46 Am. Dec. 174. 
River Union Bank v. Willard, 5 

183 



184 NEGOTIABLE INSTRUMENTS. § 149 

the notary protests against all parties to such instrument, and 
declares that they will be held responsible for all loss or damage 
arising from its dishonor.^ 

By Notice of Dishonor is meant a notification to the parties on 
an instrument whom it is desired to hold liable on such instru- 
ment. If such notice were given by a notary it would be called 
a protest. When a negotiable bill or note is dishonored by non- 
acceptance on presentment for acceptance, or by non-payment 
at its maturity, it is the duty of the holder to give immediate 
notice of such dishonor to the drawer, if it be a bill, and to the 
indorser, whether it be a bill or note.^ 

§ 150. In general. We shall now consider the matter of 

presentment and notice of dishonor. What was the contract of 
the drawer and the indorser? He says, "I will pay this instrument 
if you present the instrument to the parties to whom it should 
be presented and by whom it should be accepted, and if they do 
not pay it or accept it, I will pay it, but my contract is that it 
must be presented to them first." Now, if it is not shown that the 
instrument was presented for acceptance or payment then he will 
not be liable on it. These things may be waived by contract, but 
when not waived they must be established. Presentment for 
acceptance or presentment for payment must be made in order to 
hold certain parties on the instrument because that is the con- 
tract they enter into. 

As to presentment for payment the contract of the drawer 
is that he will pay the instrument providing the acceptor does not, 
and he is duly notified of that fact.* The indorser makes the 
same contract with his subsequent indorsers. He says, "You 
notify me of the fact that the drawee does not pay that instru- 
ment and I will pay it." Therefore, if we are going to hold the 
indorsers, we must perform our part of the contract.** The in- 
strument may be dishonored for failure to accept also.* 

^Ocoll Bank v. Hughes, 42 Am. Dec. 707; In re Leeds Bank- 

Tenn. (Coldw.) 52; Williams v. ing Co., L. R. I. Eq. 1. 

Parks, 63 Neb. 747, 89 N. W. 395, * Los Angeles Nat. Bank v. Wal- 

56 L. R. A. 759 ; Anville Nat. Bank lace, 101 Cal. 478, 36 Pac. 197 ; 

V. Keltering, 106 Pa. St. 531, 51 Baxter v. Graves, 2 A, K. Marsh 

Am. Rep. 536. (Ky.) 152, 12 Am. Dec. 374; Cru- 

3Jagger v. Nat. German-Ameri- ger v. Armstrong, 3 Johns. Cas. 

can Bank, 53 Minn. 386; Juniata (N. Y.) 5, 2 Am. Dec. 126. As to 

Bank v. Hale, 16 S. & R. (Pa.) presentment, demand and notice in 

157, 16 Am. Dec. 558; Brown v. general, see note 2 U. S. L. Ed. 102. 

Ferguson, 4 Leigh (Va.) 37, 24 5 Wilmington Bank v. Cooper, 1 

99 la. 162, 68 N. W. 677, 61 Am. Han. (Del.) 10; Leonard v. Olson, 

St. Rep. 230, 35 L. R. A. 381 ; Pis- « Bolton v. Harrod, 9 Mart, 

cataqua Exch. Bank v. Carter, 20 N. (La.) 326, 13 Am. Dec. 300; Turner 

H. 246, 51 Am. Dec. 217. v. Greenwood, 9 Ark. 44; Hymar 



§§ 151-153 PRESENTMENT — NOTICE OF DISHONOR. 185 

§ 151. Presentment for acceptance — When essential. In a 
previous chapter we have discussed acceptance^ 

We shall now consider presentment for acceptance. In certain 
cases presentment for acceptance is not essential, and in others it 
is. In those jurisdictions where days of grace are recognized a 
bill payable at sight must be presented for acceptance. A bill 
payable after sight, say five days after sight, should be presented 
for acceptance and then after that for payment.* So many days 
after demand requires presentment for acceptance. 

The Negotiable Instruments Law provides : 

"Presentment for acceptance must be made: 

1. Where the hill is payable after sight, or in any other case, 
where presentment for acceptance is necessary in order to fix the 
maturity of the instrument ; or, 

2. Where the bill expressly stipulates that it shall be presented 
for acceptance; or, / 

3. Where the bill is drawn payable elsewhere than at the resi- 
dence or place of business of the drawee. 

In no other case is presentment for acceptance necessary in 
order to render any party to the bill liable."^ 

Where a bill is payable at a day certain or at a fixed time after 
its date it need not be presented for acceptance, but the holder 
may so present it, and if acceptance be refused, he may treat 
the bill as dishonored."* 

§ 152. Presentment for acceptance — Benefit. What is the 
benefit of presentment for acceptance? A draws on B in favor 
of C. Well, you can see it is an advantage to A if C notifies 
him that B refuses to accept that instrument. A knows he must 
take care of himself in regard to B, and it helps C because it 
makes him know where he must look for his money, that is, to A. 

§ 153. Presentment for acceptance— Time. The time for 
presentment is in a reasonable time.^** The hour of the day for 

V. Sheldon, 12 Wend. (N. Y.) 439, 640. As to presentment of demand 

27 Am. Dec. 137. notes to hold indorsers, see 28 U. 

» See Chapter VIII, supra. S. L. Ed. 1044. 

8 Oleson V. Wilson, 20 Mont. 544, » Neg. Inst. Law. §143, where 

52 Pac. 272, 63 Am. St. Rep. 639; all cases directly or indirectly bear- 

Aymar v. Beers, 7 Cow. (N. Y.) ing upon or citing the Law are 

705, 17 Am. Dec. 538; Brown v. grouped. 

Turner 11 Ala. 752; Mitchell v. »» National Park Bank v. Saitta, 

Degrand, 1 Mason (U. S.) 176, 17 127 App. Div. (N. Y.) 624, 111 N. 

Fed. Cas. No. 9,661 ; Kampmann Y. Supp. 927. 

V. Williams, 70 Tex. 568, 8 S. W. lo phoenix Ins. Co. v. Allen, 11 
310. As to necessity to present for Mich. 501, 83 Am. Dec. 756; Thorn- 
acceptance, see note 1 U. S. L. Ed. burg v. Emmons, 23 W. Va. 325; 



186 NEGOTIABLE INSTRUMENTS. § 154 

presentment, if you are presenting it to a business man, is at 
his office during his office hours.** You apply your common sense 
as to the time of day for the presentment. 

The Negotiable Instruments Law has the following provisions 
covering this subject: 

"Except as herein otherzvise provided, the holder of a hill 
which is required by the next preceding section to be presented 
for acceptance must either present it for acceptance or negotiate 
it within a reasonable time. If he fail to do so, the drawer and 
all indorsers are discharged. "^^ 

This section also states the rule at common law. 

"A hill may be presented for acceptance on any day on which 
negotiable instruments may he presented for payment under the 
provisions of sections seventy-two and eighty-five of this act. 
When Saturday is not othcrzmse a holiday, presentment for 
acceptance may he made before twelve o'clock, noon, on that 
day."^^ 

In some jurisdictions the last sentence is omitted and in still 
others there are some changes. 

Another section of the Negotiable Instruments Law provides 
as follows: 

"Where the holder of a bill drawn payable elsewhere than at 
the place of business or the residence of the drawee has not time 
with the exercise of reasonable diligence to present the hill for 
acceptance before presenting it for payment on the day that it 
falls due, the delay caused by presenting the bill for acceptance 
before presenting it for payment is excused and does not dis- 
charge the drawers and indorsers."^'* 

§ 154. When instrument dishonored by non-acceptance. As 

to when an instrument is dishonored by non-acceptance the Nego- 
tiable Instruments Law provides : 

"A bill is dishonored by non-acceptance: (1) When it is duly 
presented for acceptance, and such an acceptance as is prescribed 
by this act is refused or cannot be obtained; (2) When present- 
ment for acceptance is excused and the bill is not accepted."^^ 

Bolton V. Harrod, 9 Mart. (La.) ^^'Neg. Inst. Law, §146, where 
326, 13 Am. Dec. 306; Aymar v. all cases directly or indirectly bear- 
Beers, 7 Cow. (N. Y.) 705, 17 Am. ing upon or citing the Law are 
Dec. 538 ; Jordan v. Wheeler, 20 grouped. 
Tex. 698. 14 ^gg. Inst. Law, § 147, where 

** Nelson v. Fotterall, 7 Leigh all cases directly or indirectly bear- 

(Va.) 179; Parker v. Gordon, 7 ing upon or citing the Law are 

East. 385, 6 Esp. 41 grouped. 

12 Neg. Inst. Law. § 144, where *s Neg. Inst. Law, § 149, where all 
all cases directly or indirectly bear- cases directly or indirectly bear- 
ing upon or citing the Law are ing upon or citing the Law are 
grouped. grouped. 



§ 155 PRESENTMENT — NOTICE OF DISHONOR. 187 

"Where a bill is duly presented for acceptance and is not ac- 
cepted within the prescribed time, the person presenting it must 
treat the bill as dishonored by non-acceptance, or he loses the 
right of recourse against the drawer and indorsers."'^^ 

"When a bill is dishonored by non-acceptance an immediate 
right of recourse against the drazvcrs and indorsers accrues to 
the holder, and no presentment for payment is ticcessary."^'^ 

§ 155. Presentment for payment — In general. The engage- 
ment entered into by the acceptor of a bill and the maker of a 
note is, that it shall be paid at its maturity — that is, on the day 
that it falls due, and at the place specified for payment, if any 
place be designated — upon its presentment.-*^^ This engagement 
is absolute, but that of the drawer of a bill and the indorser of a 
bill or note is conditional and contingent upon the true present- 
ment at maturity, and notice in case it is not paid.-^'* 

It is not necessary that a presentment for payment should be 
personal. It is sufficient if made at the place specified in the 
instrument,^** or personally if the maker or acceptor waives his 
right of having it made at the place stipulated in the contract,*^ 
or, if no place is specified in the instrument, then if made at the 
place of business or residence of the maker or acceptor.^^ 

It is provided in the Negotiable Instruments Law as follows : 

"The drazver of a bill and any indorser may insert thereon the 
name of a person to zvhom the holder may resort in case of need, 
that is to say, in case the bill is dishonored by non-acceptance or 
non-payment. Such person is called the referee in case of need. 

18 Neg. Inst. Law, § 150, where grace, see note 6 U. S. L. Ed. 512. 

all cases directly or indirectly bear- 20-Wolfe v. Jewett, 10 La. 383; 

ing upon or citing the Law are Goodloe v. Godley, 13 Sm. & M. 

grouped. (Miss.) 233; Brownell v. Freese, 

17 Neg. Inst. Law, § 151, wliere 35 N. J. L. 285, 51 Am. Dec. 150, 

all cases directly or indirectly bear- 10 Am. Rep. 239; McKenney v. 

ing; upon or citing the Law are Whipple, 21 Me. 98; Freeman v. 

rrrouped. Curran, 1 Minn. 161. 

' 18 Cox V. Nat. Bank, 100 U. S. 21 King v. Crowell, 61 Me. 244, 

712; Jeune v. Ward, 1 B & Aid. 14 Am. Rep. 560; Townsend v. 

653 ; Snope v. Ross, 40 Pa. St. 186, Chas. H. Heer Dry Goods Co., 85 

80 Am. Dec. 567. Mo. 503; King v. Holmes, 11 Pa. 

1^ Johnson v. Zeckendorf (Ariz. St. 456. 
1886), 12 Pac. 65; Jones v. Robin- 22 sharnburgh v. Cemmagere, 10 
son, 11 Ark. 504, 54 Am. Dec. 212; Mart. (La.) 18; Simmons v. Bet., 
Grange v. Reigh. 93 Wis. 552. As 35 Mo. 461 ; Sussex Bank v. Bald- 
to demand as against maker of win, 17 N. J. L. 487; Oxnard v. 
note or acceptor of bill, see note Varnum, 111 Pa. St. 193, 2 Atl. 224, 
6 U. S. L. Ed. 443. As to usage 56 Am. Rep. 255. As to banking* 
or custom as controlling and vary- customs as to demand and notice, 
ing demand, notice and days of sec note 21 L. R. A. 441. 



188 NEGOTIABLE INSTRUMENTS. § 156 

It is in the option of the holder to resort to the referee in case of 
need or not, as he may see fit."^^" 

The usual form is "In case of need, apply to Messrs. C. and 
D. at E." If the referee pays the bill the drawer will be liable 
to him for the amount. The provision is seldom inserted in bills. 

§ 156. Presentment for payment — When essential. As to 

when presentment for payment is essential the law generally is 
as set out in the Negotiable Instruments Law which provides as 
follows : 

"Presentment for payment is not necessary in order to charge 
the person primarily liable on the instrument ; but if the instru- 
ment is, by its terms, payable at a special place, and he is able 
and willing to pay it there at maturity, such ability and willing- 
ness are equivalent to a tender of payment upon his part. But 
except as herein otherivise provided, presentment for payment is 
necessary in order to charge the drawer and indorsers."^^ 

Some jurisdictions have made some changes in the above sec. 
tion of the law, for example, in Illinois the words "except in ca.se 
of bank notes" are interpolated after the words "primarily liable" 
on the instrument ; in Wisconsin all after the words "primarily 
liable" in the first sentence to the end of that sentence are omit- 
ted ; in Kansas, New York and Ohio the words "and has funds 
there available for that purpose" have been interpolated after 
the word "maturity" in the first sentence. The words added by 
these three states seem superfluous, however. 

It has been urged against the above section of the law that it 
changes the law in a number of the states as to certificates of 
deposit and bank notes and that it should be amended to except 
them from under the sections, since as it stands, the statute of 
limitations would begin to run from date, which is contrary to 
business custom and the language of such instruments. 

"Presentment for payment is not required in order to charge 
the drawer where he has no right to expect or require that the 
drawee or acceptor zvill pay the instrument. "^^ 

That the drawer of a bill has no funds in the hands of the 
drawer will not excuse failure to make presentment and notice 
of non-payment, particularly when provision has been made for 

^* Neg. Inst. Law, § 131, where paper held as collateral or condi- 

all cases directly or indirectly bear- tional payment, see note 68 L. R. 

ing upon or citing the Law are A. 487. 

grouped. 24 Neg. Inst. Law, § 79. where 

23 Neg. Inst. Law, §70, where all all cases directly or indirectly bear- 
cases directly or indirectly bear- ing tpon or citing the Law are 
ing upon or citing the Law arc grouped, 
grouped. As to presentment when 



§§ 157-158 PRESENTMENT — NOTICE OF DISHONOR. 189 

payment of any bill drawn by the drawer on the drawee.^' But 
presentment is not required to charge the drawer of a check upon 
which payment has been stopped ;^^* and presentment of a check 
is excused where the making of a check was a fraud upon the 
part of the drawer, he having no funds in the bank, and no ground 
for a reasonable expectation that it would be paid.*^'' 

And "presentment for payment is not required in order to 
charge an indorser where the instrument was made or accepted 
for his accommodation, and he has no reason to expect that the 
instrument will be paid if presented."^^ 

The Illinois act omits everything after the words "for his ac- 
commodation." 

It is not necessary under this section that a loan for which 
notes were given should have been made for the sole accommoda- 
tion of an indorser but it is enough if it was only partly for his 
benefit,.*®* And where the instrument is made for the accom- 
modation of the indorser, and he promises the maker to "take care 
of it," presentment and notice of dishonor are not necessary.**" 

§ 157. Presentment for payment — When dispensed with. 

Presentment for payment may be dispensed with as set out by 
the terms of the Negotiable Instruments Law which provides : 

"Presentment for payment is dispensed with: (1) Where after 
the exercise of reasonable diligence presentment as required by 
this act cannot be made; (2) where the drawee is a fictitious 
person; (3) by waiver of presentment express or implied."^"^ 

§ 158. Presentment for payment — What sufficient. As to 
what constitutes a sufficient presentment the Negotiable Instru- 
ments Law provides : 

"Presentment for payment, to be sufficient, must be made'- 
(1) By the holder, or by some person authorised to receive pay- 
ment on his behalf ; (2) at a reasonable hour on a business day; 
(3) at a proper place as herein defined; and (4) to the person 
primarily liable on the instrument, or if he is absent or inacces- 
sible, to any person found at the place where the presentment is 
mad'e."^^ 

25Simonoff v. Granite City Nat. ^e^ Berger v. Trimble (Md.), 101 

Bank, 279 111. 246, 116 N. E. 6Z6. A. 137. 

25«Sibree v. Thomas, 166 111. 26b Dillon v. Brion, 96 Kan. 189, 

App. 422. 150 P. 553. 

25b Beaureguard v. Knowlton, 27 jsjeg. Inst. Law, § 82, where 

156 Mass. 395. all cases directly or indirectly bear- 

2eNeg. Inst. Law, § 80, where ing upon or citing the Law are 

all cases directly or indirectly bear- grouped. 

ing upon or citing the Law are 28 ^gg. Inst. Law, § 72, where 

grouped. all cases directly or indirectly bear- 



190 NEGOTIABLE INSTRUMENTS. §^59 

"The instrument must he exhibited to the person from whom 
payment is demanded, and when it is paid must be delivered to 
the party paying it."^'^ 

This section does not change the law but states an old estab- 
lished rule of law. The reason of the rule is plain and is neces- 
sary in order that the drawer or acceptor may be able to judge 
of the genuineness of the instrument ; of the right of the holder 
to receive payment ; and that he may immediately reclaim posses- 
sion upon paying the amount.^*** 

A mere informal talk asking payment of a note, not accom- 
panied with a presentment of it or intended as a formal present- 
ment and demand, is not sufficient to put the note in dishonor ;**'* 
and a demand over the telephone is not a sufficient presentment 
to charge the indorser unless the maker waives the right to ask 
for an exhibition of the note.^"° 

Since formal demand is required only in order to charge the 
parties secondarily liable, it follows that any reasonable request 
to pay a demand note with a clause for attorney's fees, is suf- 
ficient to put the maker in default if he fails to discharge the 
obligation ; the maker waives exhibition of the note by not asking 
for it and refusing payment on the ground that he did not have 
the money and needed the sum to support his family.^"" 

§ 159. Presentment for payment— Date. In ascertaining 
the proper date for presentment the day of the date is excluded 
so where the paper is payable one year from date it will mature 
on the first anniversary of that date. The Negotiable Instruments 
Law provides : 

"Where the instrument is payable at a fixed period after date, 
after sight, or after the happening of a specified event, the time 
of payment is determined by excluding the day from zvhich the 
time is to begin to run, and by including the date of payment."^** 

Thus in an instrument payable so many days after sight, or 
after date, the day of sight or date is excluded and the day of 
payment included in the computation.^* 

ing upon or citing the Law are v. Kennedy, 145 App. Div. 669, 

grouped. As to necessity of act- 130 N. Y. Supp. 412. 

ual presentment to effect dishonor, 29o Gilpin v. Savage, 201 N. Y. 

see note 13 L. R. A. (N. S.) 303. 167, 94 N. E. 656. 

2» Neg. Inst. Law, § 74, where all ^Od Hodge v. Blaylock, 82 Ore. 

cases directly or indirectly bear- 179, 161 Pac. 396. 

ing upon or citing the Law are 30 N^g jnst. Law, § 86, where 

grouped. all cases directly or indirectly bear- 

29a Waring v. Betts, 90 Va. 46, ing upon or citing the Law are 

51. grouped. 

s*"* State of New York Nat. Bank »! Mitchell v. Degrand, 1 Mason 



§ 160 PRESENTMENT — NOTICE OF DISHONOR. 191 

A note dated November 8, 1922, and payable twelve months 
after date should be presented November 8, 1923, and not No- 
vember 9, 1923. 

Another provision relating to the date of presentment is the 
following : 

"Where the instrument is not payable on demand, presentment 
must be made on the day it falls due. Where it is payable on 
demand, presentment must be made within a reasonable time 
after its issue, except that in the case of a bill of exchange, pre- 
sentment for payment will be sufficient if made within a reason- 
able time after the last negotiation thereof. "^^ 

Presentment for payment cannot be made on a Sunday or 
legal holiday, and if the note matures on a holiday or Sunday, 
since the maker'* cannot be compelled to pay sooner than he 
had promised, the note or bill will have to be presented on the 
next business day. 

Th Negotiable Instruments Law provides : 

"Every negotiable instrument is payable at the time fixed there- 
in without grace. When the day of maturity falls upon Sunday, 
or a holiday, the instrument is payable on the next succeeding 
business day. Instruments falling due on Saturday are to be 
presented for payment on the next succeeding business day, ex- 
cept that instruments payable on demand may, at the option of 
the holder, be presented for payment before twelve o'clock noon 
on Saturday when that entire day is not a holiday. "^"^ 

Several changes have been made in this section in many juris- 
dictions and these should be read as they are set out in the 
annotations in another part of this treatise. 

By usage the banks in some states give notice to the promisor 
a few days before maturity of the fact that the paper will be 
due on a named day, and it has been held that this preliminary 
notice will take the place of a formal presentment on the day 
of maturity. 

§ 160. Presentment for payment — When delay excused. As 
to when delay in making presentment for payment is excused the 

(U. S.) 176, 17 Fed. Cas. No. 9,661 ; 33 Neg. Inst. Law, § 194 and § 85 

Coleman v. Sayer, 1 Barn. K. B. where all cases directly or in- 

303. directly bearing upon or citing the 

31* Lewry v. Wilkinson, 135 La. Law are grouped. 

105. 64 So. 1003. 34 Neg. Inst. Law, § 85, where all 

S2Neg. Inst, Law, §71, where all cases directly or indirectly bearing 

cases directly or indirectly bear- upon or citing the Law are grouped, 
ing upon or citing the Law are 
grouped. 



192 NEGOTIABLE INSTRUMENTS. §161 

following provision in the Negotiable Instruments Law sets out 
the law in general: 

"Delay in making presentment for payment is excused when 
the delay is caused by circumstances beyond the control of the 
holder and not imputable to his default, misconduct or negli- 
gence. When the cause of delay ceases to operate, presentment 
must be made "with reasonable diligence."^ 

The above section follows the old established law. 

A loss resulting from the failure of the bank at which the 
instrument is payable, and in which the maker or acceptor has 
deposited funds at its maturity to pay it, does not fall upon the 
holder who has failed to present the instrument for payment.*^* 

It must be shown that the proper steps were taken as soon as 
the disability was removed.^*" 

In the excuses set out in the above section of the law where the 
facts are not disputed the question of due diligence is one of law 
for the court; but if there is a dispute as to the facts, the ques- 
tion is for the jury.^^' 

§ 161. Presentment for payment — Place. The following 
provisions are found in the Negotiable Instruments Law, and 
represent the law generally, as to the place of presentment for 
payment : 

"Presentment for payment is made at the proper place: (1) 
Where a place of payment is specified in the instrument and it 
is there presented. (2) Where no place of payment is specified, 
but the address of the person to make payment is given in the 
instrument and it is there presented. (3) Where no place of 
payment is specified and no address is given and the instrument 
is presented at the usual place of business or residence of the 
person to make payment. (4) In any other case if presented 
to the person to make payment wherever he can be found, or if 
presented at his last known place of business or residence."^ 

"Where the instrument is payable at a bank, presentment for 
payment must be made during banking hours, unless the person 
to make payment has no funds there to meet it at any time during 
the day, in which case presentment at any hour before the bank 
is closed on that day is sufficient. "^"^ 

85 Neg. Inst. Law, § 81, where all ^° Belden v. Lamb, 17 Conn. 

cases directly or indirectly bear- 451. 

ing upon or citing the Law are ^^ Neg. Inst. Law, § 73, where 

grouped. all cases directly or indirectly bear- 

35a Note 2 A. L. R. 1381. ing upon or citing the Law are 

35" Wilson V. Senier, 14 Wis. grouped. See also note 12 L. R. A. 

380. 727. 

^'^ Neg. Inst. Law, § 75, where all 



§§ 162-163 PRESENTMENT — NOTICE OF DISHONOR. 193 

§ 162. Presentment for payment to whom. When a bill is 
payable generally or at a particular place no presentment is 
necessary to charge the acceptor, as it is his duty to be on hand 
to pay or seek out his creditor to pay him.** 

The following provisions are in the Negotiable Instruments 
Law: 

"Where the person primarily liable on the instrument is dead, 
and no place of payment is specified, presentment for payment 
must be made to his personal representative if such there be, 
and if with the exercise of reasonable diligence, he can be 
found."'^ 

"Where there are several persons not partners, primarily liable 
on the instrument, and no place of payment is specified, present- 
ment must be made to them all."'*^ 

"Where the persons primarily liable on the instrument arc 
liable as partners, and no place of payment is specified, present- 
ment for payment may be made to any one of them, even though 
there has been a dissolution of the firm."'^^ 

There is no doubt that a clerk found at the counting-room of 
the acceptor or promisor is a competent party for presentment 
for payment to be made to, without showing any special author- 
ity given him.^ But where the protest stated the mere fact 
of presentment "at the office of the maker," it will be con- 
sidered insufficient, as not showing that the paper was presented 
to the party authorized to pay or refuse payment. A demand 
upon the servant of the owner who used to pay money for him 
was held sufficient in England.'*^ 

§ 163. Presentment for payment — Effect of failure to pre- 
sent. The maker and acceptor are bound, although the bill 
or note be not presented on the day it falls due,"*^ and the only 

cases directly or indirectly bear- ing upon or citing the Law are 

ing upon or citing the Law are grouped. 

grouped. As to parol agreement ■*! Neg. Inst. Law, § 77, where all 
as to place of demand, when valid, cases directly or indirectly bear- 
see note 7 U. S. L. Ed. 65. ing upon or citing the Law arc 

^ Cooperstown Bank v. Woods. grouped. 

28 N. Y. 545; Goodloe v. Godley. 42 Stewart v. Eden, 2 Caines CN. 

13 Sm. & M. (Miss.) 233. 51 Am. Y.) 121; Draper v. Clemens. 4 Mo. 

Dec. 150; De Wolf v. Murray, 2 52; Stainback v. Clemens, 11 Gratt 

Sandf. (N. Y.) 166. 260. 

3® Neg. Inst. Law, § 76, where all 43 Bank of England v. Newman, 

cases directly or indirectly bear- 12 Mod. 241. 

ing upon or citing the Law are 44 C(.g|j,(,p ^ Jeflfries, 118 Ala. 

grouped. 573, 24 So. 37 ; Greeley v. White- 

40 Neg. Inst. Law, §78, where head. 35 Fla. 523, 17 So. 643. 48 

all cases directly or indirectly bear- Am. St. Rep. 258 ; Wcstcott v. Pat- 



194 NEGOTIABLE INSTRUMENTS. §§ 164-166 

consequence of a failure to make such presentment is that the 
maker or acceptor, if he was ready at the time and place to make 
the payment, may plead the matter in bar of damages and 
costs ;'*^* but the drawer and indorsers are discharged if such pre- 
sentment be not made, unless some sufficient cause excuses the 
holder for failure to perform that duty.^ 

The fact that the indorser holds security to indemnify him 
against loss upon his indorsement does not make presentment for 
payment and notice of dishonor unnecessary.'*'^* 

§ 164. When instrument dishonored by non-payment. "The 
instrument is dishonored by non-payment when: (1) It is duly 
presented for payment and payment is refused or ca/nnot be ob- 
tained; or (2) presentment is excused, and the bill is overdue 
and tinpaid.'"^^ 

§ 165. Notice of dishonor — In general. Notice of dishonor 
is bringing either verbally or by writing, to the knowledge of 
the drawer or the indorser of an instrument, the fact that a 
specified negotiable instrument, upon proper proceedings taken, 
has not been accepted, or has not been paid, and that the party 
notified is expected to pay it.^'' 

"The notice may be in writing or merely oral, and may be 
given in any terms zuhich sufficiently identify the instrument, 
and indicate that it has been dishonored, by non-acceptance or 
non-payment. It may in all cases be given by delivering it per- 
sonally or through the mails.'"^^ 

§ 166. Contents of notice. In order that the notice may be 
complete, it should contain, (1) a sufficient description of the 
bill or note;"*" (2) a statement that it had been presented for 

ton, 10 Colo. App. 544, 51 Pac. 47 Martin v. Brown, 75 Ala. 442 ; 

1021. Ticonic Bank v. Stackpole, 41 Me. 

44a Moore V. Alton, 196 Ala. 158, 321, 66 Am. Dec. 246. As to notice 

70 So. 681. of demand, lion-payment, and pro- 

45 Jones V. Robinson, 11 Ark. 504, test in general, see note 5 U. S. L. 

54 Am. Dec. 212; Wylie v. Cotter, Ed. 215. 

170 Mass. 356, 49 N. E. 746, 64 Am. 48 Neg. Inst. Law, §96, where 
St. Rep; 305 ; Piscataqua Exch. all cases directly or indirectly bear- 
Bank V. Carter, 20 N. H. 246, 57 ing upon or citing the Law arc 
Am. Dec. 217; Los Angeles Nat. grouped. 

Bank v. Wallace, 101 Cal. 478, 36 49 Brown v. Jones, 125 Ind. 375, 

Pac. 197. 25 N. E. 452, 21 Am. Rep. 227; 

45a Whitney v. Collins, 15 R. L 44. Dodson v. Taylor, 56 N. J. L. 11, 

4«Neg. Inst. Law, §83, where 28 Atl. 316; Alexandria Bank v. 

all cases directly or indirectly bear- Swann, 9 Pet. (U. S.) ZZ, 9 L. Ed, 

ing upon or citing the Law arc 40. 
grouped. 



§ 167 PRESENTMENT — NOTICE OF DISHONOR. 195 

acceptance or payment, and had been dishonored;'^® (3) a state- 
ment that the paper had been protested,®^ and (4) an announce- 
ment of the intention of the holder to look to the party addressed 
for payment.^^ 

A statement of non-payment is not sufficient without a state- 
ment that presentment and demand had been made, but if the 
word "dishonored" is used it is held to be sufficient without 
further statement of presentment and demand. 

Notice is sufficient if the necessary facts can reasonably be in- 
ferred from the terms of the notice. 

"A un-itten notice need not he signed, and an insufficient 
written notice may he supplemented and validated hy verbal 
communication. A misdescription of the instrument does not 
vitiate the notice unless the party to whom the notice is given is 
in fact misled therehy."^^ 

No misdescription of the amount,®* or of the date, or of the 
names of the parties,^ or of the time the paper falls due,''^ or 
other defect vitiates the notice of dishonor, unless it misleads the 
party to whom sent. 

§ 167. By whom given and when to be given. The proper 
party to give the notice is the holder"" or his authorized agent,^^ 
or an indorser who is at the time of giving it liable on the bill 
and who has a right of recourse against the party to whom notice 
is given.**® That is, the notice must be given by a party to the 

'^OTowsend v. Lorain Bank, 2 Renner v. Downer, 23 Wend. (N. 

Ohio St. 345; Sinclair v. Lynch, 1 Y.) 620. 

Speers (S. C.) 244; Newberry v. 55 Brown v. Jones, 125 Ind. 375, 

Trowbridge, 4 Mich. 39L 25 N. E. 452, 21 Am. St. Rep. 227; 

51 Kellogg V. Pacific Box Factory, Mainer v. Spurlock, 9 Rob. (La.) 
57 Cal. 327; Selden v. Washington, 161; King v. Hurley, 85 Me. 525, 
17 Md. 379, 79 Am. Dec. 659; Et- 27 Atl. 463; Carter v. Bradley, 19 
ting V. Schuylkill Bank, 2 Pa. St. Me. 62, Z6 Am. Dec. 735. 

355, 44 Am. Dec. 205; Tevis v. ^e Sahmarsh v. Tuthill, 13 Ala. 

Wood, 5 Cal. 393. 390; Smith v. Whiting, 12 Mass. 

52 U. S. Bank v. Norwood, 1 6,7 Am. Dec. 25; Gates v. Beecher, 
Harr. & J. (Md.) 423; Burgess v. 60 N. Y. 518, 19 Am. Rep. 207. 
Vreeland, 24 N. J. L. 71, 59 Am. 57 Tindal v. Brown, 1 T. R. 167, 
Dec. 408. 1 Rev. Rep. 171 ; e.r parte Barclay, 

53 Neg. Inst. Law, § 95, where 7 Ves. Jr. 597. 

all cases directly or indirectly bear- 5S Lindesborg Bank v. Ober, 31 

ing upon or citing the Law are Kan. 599, 3 Pac. 324; Tevis v. Ran- 

grouped. dall, 6 Cal. 632, 65 Am. Dec. 547 J 

54 King v. Hurley, 85 Me. 525; Waldron v. Turpin, 15 La. 552, 35 
Alexandria Bank v. Swann, 9 Pet. Am. Dec. 210. 

(U. S.) 2Z, 9 L. Ed. 40; McKnight 59Glasgow v. Pratte, 8 Mo. 336, 

V. Lewis, 5 Barb. (N. Y.) 681. See 40 Am. Dec. 142; Stanton v. Bios- 



196 NEGOTIARI.E INSTRUMENTS. § 168 

paper or his a^ent, and a total stranger cannot give proper 
notice of dishonor.®* The notary may give the notice as agent 
for the holder, and so may any bank holding the paper for col- 
lection.** 

"The notice may he given by or on behalf of the holder, or by 
or on behalf of any party to the instrument who might be com- 
pelled to pay it to the holder, and who upon taking it up, would 
have a right to reimbursement from the party to whom notice 
is given."^^ 

"Notice of dishonor may be given by an agent either in his 
own name or in the name of any party entitled to give notice, 
whether that party be his principal or not."^^ 

"Where the instrument has been dishonored in the hands of 
an agent he may either himself give notice to the parties liable 
thereon, or he may give notice to his principal. If he gives notice 
to his principal, he miust do so within the same time as if he zvere 
the holder, and the principal, upon the receipt of such notice, 
has himself the same time for giving notice as if the agent had 
been an independent holder."^^ 

If the holder die before the time for presentment for pay- 
ment, it must be made by his personal representative.*'''' If 
there be no personal representative at the time, presentment and 
demand within a reasonable time after his appointment w^ill be 
sufficient to charge subsequent parties, although presentment and 
demand were not made at maturity. 

§ 168. Notice of dishonor — To whom given. As to vv^hbm 
notice of dishonor should be given the Negotiable Instruments 
Law provides : 

"When a negotiable instrument has been dishonored by non- 
acceptance or non-payment notice of dishonor must be given to 

som, 14 Mass. 116, 7 Am. Dec. 198; ing upon or citing the Law are 

Linn v. Horton, 17 Wis 15L grouped. 

s^'Beal V. Alexander, 6 Tex. 531; ^3 N^g i^gt l^w, §91, where all 

Brailsford v. Wiliams, 15 Md. 150, cases directly or indirectly bear- 

74 Am. Dec. 559; Brower v. Woot- ing upon or citing the Law are 

en, 4 N. C. 507, 7 Am. Dec 692. grouped. 

61 Lindsborg Bank v. Ober, 31 *■* Neg. Inst. Law, § 94, where 
Kan. 599, 3 Pac. 324; Couch v. all cases directly or indirectly bear- 
Sherrill, 17 Kan. 622; Warren v. ing upon or citing the Law are 
Oilman, 17 Me. 360; Blackeslee v. grouped. 

Hewett, 76 Wis. 341, 44 N. W. 65 white v. Stoddard. 11 Gray 

1105. (Mass.) 258, 71 Am. Dec. 711; 

62 Neg. Inst. Law, §90, where all Rand v. Hubbard, 4 Mete. (Mass.) 
cases directly or indirectly bear- 252, 



§168 



PRESENTMENT — NOTICE OF DISHONOR. 



197 



the drazwr and to each indorser, and any drawer or indorser to 
ivhoni such notice is not given is discharged,"^^ and 

"Notice of dishonor may he given either to the party himself 
or to his agent in that behalf ."^"^ 

The proper party or parties to be given notice are the drawer,®"^ 
indorser or indorsers,®^ or their authorized agent or other person 
entitled to receive notice for them.''® That is, the notice must 
be given to all persons secondarily liable whom the holder wishes 
to charge. And notice should be given to indorsers who have 
indorsed for the purpose of collection,''*^ and indorsers of over- 
due paper.''^ Where there are two or more joint drawers or 
indorsers who are not partners, notice of dishonor must be given 
to them all in order to bind either.''^ 

Some jurisdictions hold that absence of protest and notice of 
dishonor is not a defense to an action by one joint indorser of 
negotiable paper to compel contribution by his coindorsers to 
the amount paid by him upon the paper.''^* While other juris- 
dictions decide that if he would hold his coindorsers, he must 
give notice to them.'^'' 

When the note is executed by several joint promisors who are 
not partners, but liable only as joint and several promisors, it 



** Neg Inst. Law, § 89, where all 
cases directly or indirectly bear- 
ing upon or citing the Law are 
grouped. As to sufficiency of no- 
tice to indorser, see note 12 L. R. 
A. 7Z\. 

^^ Neg. Inst. Law, § 97, where 
all cases directly or indirectly bear- 
ing upon or citing the Law are 
grouped. 

«8 Patillo V. Alexander, 96 Ga. 60, 
22 S. E. 646, 29 L. R. A. 616 ; Bax- 
ter V. Graves, 2 A. K. Marsh. (Ky.) 
152, 12 Am. Dec. 374. 

^9 McLanaham v. Brandon, 1 
Mart. (N. S.) La. 321, 14 Am. Dec. 
188 ; Fotheringham v. Price, 1 Bay. 
(S. C.) 291, 1 Am. Dec. 618; Pea- 
body Ins. Co. V. Wilson, 29 W. Va. 
528, 2 S. E. 888. 

70 Crowley v. Berry, 4 Gill. (Md.) 
194; Coffman v. Commonwealth 
Bank, 41 Miss. 212, 90 Am. Dec. 37L 
As to whom given after appoint- 
ment of receiver or assignee, see 
note 61 L. R. A. 900. 



''* Elizabeth State Bank v. A3'ers, 
7 N. J. L. 130, 11 Am. Dec. 535; 
U. S. Bank v. Davis, 2 Hill (N. 
Y.) 451. 

72 Beer v. Clifton, 98 Cal. 323, 
33 Pac. 204, 55 Am. St. Rep. 172, 
20 L. R. A. 580; Grand v. Strutzel, 
53 la. 712, 6 N. W. 119, 36 Am. 
Rep 250. 

73 People's Bank v. Keech, 26 
Md. 521, 90 Am. Dec. 118; Willis 
v. Green, 5 Hill (N. Y.) 232, 40 
Am. Dec. 351. 

See note 36 L. R. A. 703. 

Contra : Williams v. Paintsville 
National Bank, 143 Kv 781, 137 
S. W. 535; Eaves v. Kecton, 196 
Mo. App. 424, 193 S. W. 629. 

73a Williams v. Paintsville Na- 
tional Bank, 143 Ky. 781. 137 S. 
W. 535. 

^Sb Owens V. Greenlee, — Colo. 
— , 188 P. 721. 9 A. L. R. 1184. 

See note 9 A. L. R. 1188. 



198 NEGOTIABLE INSTRUMENTS, § 169 

has been held, that presentment should be made to each, in order 
to fix the liability of an indorser. 

And as provided by the Negotiable Instruments Law : 

"Notice to joint parties who are not partners must be given 
to each of them, unless one of them has authority to receive such 
notice for the others."'^'^ 

"Where the parties to he notified are partners notice to any 
one partner is notice to the Urm, even though there has been 
a dissolution.""^^ 

"Where a party has been adjudged a bankrupt or an insolvent, 
or has made an assignment for the benefit of creditors, notice may 
be given either to the party himself or to his trustee or as- 
signee.""^^ 

Notice left with a clerk or person in charge, at the party's 
place of business, in his absence, or at his place of business,'^ 
without proof as to the person with whom it was left, is sufficient, 
and proof that such person was not the party's agent has been 
held irrelevant, notice being left at the right place. Hence, 
leaving it with his private secretary at his public office is suffi- 
cient. If service be sought on the party at his dwelling, it is 
sufficient to leave notice with his wife, or with any other person 
on his premises.'^^ 

"When any party is dead, and his death is known to the party 
giving notice, the notice must be given to a personal represen- 
tative, if there be one, and if with reasonable diligence he can 
be found. If there be no personal representative, notice may be 
sent to the last residence or last place of business of the de- 
ceased/'"^^ 

§ 169. Notice of dishonor — Time. As to the time In which 

notice must be given the Negotiable Instruments Law provides : 

"Notice may be given as soon as the instrument is dishonored ; 
and unless delay is excused as hereinafter provided, must be given 
within the times fixed by this act."^^ 

'^'* Neg. Inst. Law, § 100, where 194 ; Coffman v. Commonwealth 

all cases directly or indirectly bear- Bank, 41 Miss, 212, 90 Am. Dec. 

ing upon or citing the Law are 371. 

grouped. 78 Mercantile Bank v. McCarthy, 

75 Neg. Inst. Law, §99, where all 7 Mo. App. 318; Colms v. Bank of 
cases directly or indirectly bearing Tenn., 4 Baxt. 422 ; Bank of Ky. 
upon or citing the Law are v. Duncan, 4 Bush. (Ky.) 294; U. 
grouped. S. v. Hatch, 1 McLean (U. S.) 92. 

76 Neg. Inst. Law, § 101, where 79 Neg. Inst. Law, § 98, where all 
fill cases directly or indirectly bear- cases directly or indirectly bear- 
ing upon or citing the Law are ing upon or citing the Law are 
grouped. grouped. 

77 Crowley V. Barry, 4 Gill (Md.) so Neg. Inst. Law, §102., where 



§ 170 PRESENTMENT — NOTICE OF DISHONOR. 199 

The law as to parties residing in the same place is as follows : 
"Where the person giving and the person to receive notice 
reside in the same place, notice must he given zvithin- the folloiv- 
ing times: (1) If given at the place of business of the person 
to receive notice, it must be given before the close of business 
hours on the day following; (2) if given at his residence, it must 
be given before the usual hours of rest on the day folloiving; (3) 
if sent by mail, it must be deposited in the postoffice in time to 
reach him in usual course on the day follozmng."^^ 

And where the parties reside in different places the law is: 
"Where the person giving and the person to receive notice 
reside in different places, the notice must be given zvithin the 
follozving times: (1) If sent by mail, it must be deposited in the 
postoffice in time to go by mail the day follozmng the day of dis- 
honor, or if there be no mail at a convenient hour on that day, 
by the next mail thereafter; (2) if given otherzvise than through 
the postoffice, then within the time that notice would have been 
received in due course of mail, if it had been deposited in the 
postoffice zvithin the time specified in the last subdivision."^^ 
As to time of giving notice to a subsequent party the law is : 
"Where a party receives notice of dishonor, he has, after the 
receipt of such notice, the same time for giving notice to ante- 
cedent parties that the holder has after the dishonor/'^^ 

§ 170. Notice of dishonor — Place of sending. The Nego- 
tiable Instruments Law sets out the law as to the place of send- 
ing the notice of dishonor. It states : 

"Where a party has added an address to his signature, notice 
of dishonor must be sent to that address; but if he has not given 
such address, then the notice must be sent as follozvs: (1) 
Either to the postoffice nearest to his place of residence, or to 
the postoffice where he is accustomed to receive his letters; or 
(2) if he live in one place, and have his place of business in an- 
other, notice may be sent to either place; or (3) if he is sojourn- 
ing in another place, notice may be sent to the place where he is 
sojourning. But zvhere the notice is actually received by^ the 
party within the time specified in this act, it will be sufficient, 

all cases direcctly or indirectly bear- ^^ Neg. Inst. Law, § 104, where 
ing upon or citing the Law are all cases directly or indirectly bear- 
grouped. As to time within which ing upon or citing the Law are 
notice of dishonor must be given, grouped. 

see note 12 L. R. A. 729. ^'-^Neg. Inst. Law, § 107, where 
** Neg. Inst. Law, § 103, where all cases directly or indirectly bear- 
all cases directly or indirectly bear- ing upon or citing the Law are 
ing upon or citing the Law are grouped, 
grouped. 



200 NEGOTIABLE INSTRUMENTS. §§ 171-172 

though not sent in accordance with the requirements of this sec- 
tion."^'* This is also the law generally. 

§ 171. Notice of dishonor — Through postoffice. As to send- 
ing notice through the postoffice the Negotiable Instruments Law 
states : 

"Where notice of dishonor is duly addressed and deposited in 
the postoffice, the sender is deemed to have given notice, notwith- 
standing any miscarriage in the mail."^^ 

"Notice is deemed to have been deposited in the postoffice when 
deposited in any branch postoffice or any letter box under the 
control of the postoffice department. "^^ 

That is, if a notice he given by the holder to an indorser by 
mail, addressed to the indorser at the postoffice nearest his resi- 
dence and deposited in the postoffice at the proper time, the 
indorser will be charged whether he received the notice or not. 
The letter containing the notice must be posted early enough 
to be sent by mail on the day succeeding the dishonor of the 
instrument. 

§ 172. Notice of dishonor — When unnecessary. Notice of 
dishonor is dispensed with: (1) When the drawer or indorser 
sought to be charged is, as between the parties to the bill, the 
principal debtor, and has no reason to expect that it will be 
honored on presentment.^' (2) As regards the drawer, when 
drawer and drawee are the same person, or identical in interest.^ 
(3) When the drawer or indorser sought to be charged is the 
person to whom the bill is presented for payment. (4) When 
the drawee is fictitious and the drawer or indorser sought to be 
charged was aware of the fact at the time he drew or indorsed 
the bill.^^ (5) When the drawer or indorser sought to be 
charged has received an assignment of all the property of the 

84Neg. Inst. Law. §103, where 328, 85 Am. Dec. 309; Culver v. 

all cases directly or indirectly bear- Marks, 122 Ind. 554, 23 N. E. 1086, 

ing upon or citing the Law are 17 Am. St. Rep. 2i77, 7 L. R. A. 489; 

grouped. Merchants Bank v. Easley, 44 Mo. 

85 Neg. Inst. Law, § 105, where all 286, 100 Am. Dec. 287. As to when 

cases directly or indirectly bearing drawer or indorser is not entitled 

upon or citing the Law are grouped. to notice, see note 2 U. S. L. Ed. 

As to service of notice by mail, see 102. 

note 12 L. R. A. 731. ^8 Planters Bank v. Evans, 36 

*^ Neg. Inst. Law, § 106, where Tex. 592 ; New York etc. Co. v. 

all cases directly or indirectly bear- Selma Sav. Bank, 51 Ala. 305; 

ing upon or citing the Law are Gowan v. Jackson, 20 Johns. 176. 

grouped. *" Groth v. Gyger, 31 Pa. St. 271 ; 

*'' Kupfer V. Galena Bank, 34 111. Magruder v. Union Bank, 3 Pet. 87. 



§ 173 PRESENTMENT — NOTICE OF DISHONOR. 201 

acceptor as security against his liability.^® (6) When, after the 
exercise of reasonable diHgence, no notice of dishonor can be 
given to or does not reach the party sought to be discharged.^* 

The Negotiable Instruments Law has the following provisions 
as to when notice of dishonor is unnecessary and they represent 
the law generally: 

"Notice of dishonor is not required to be given to an indorser 
in either of the follotmng cases: 

1. Where the drawee is a fictitious person or a person not 
hazing capacity to contract, and the indorser was aware of the 
fact at the time he indorsed the instrument; 

2. Where the indorser is the person to whom the instrument 
is presented for payment ; 

3. Where the instrument was made or accepted for his ac- 
commodation."^^ 

''Notice of dishonor is not required to be given to the drawer 
in either of the following cases: (1) Where the drawer and 
drawee are the same person; (2) where the drawee is a fictitious 
person or a person not having capacity to contract; (3) zvhere 
the drawer is the person to whom the instrument is presented 
for payment; (4) zvhere the drawer has no right to expect or 
require that the drazvee or acceptor zvill honor the instrument; 
(5) where the drawer has countermanded payment. "^^ 

"Notice of dishonor may be waived, either before the time of 
giving notice has arrived or after the omission to give due notice, 
and the waiver may be express or implied."^* 

"Notice of dishonor is dispensed zvith when, after the exercise 
of reasonable diligence, it cannot be given to or does not reach 
the parties sought to be chargcd."^^ 

§ 173. Notice of dishonor — Excuse for failure to give notice. 
Certain excuses for failure to give notice of dishonor are per- 
mitted, thus : 

80 Prentiss v. Danielson, 5 Conn. ing upon or citing the Law are 

175, 13 Am. Dec. 52; Mead v. grouped. 

Small, 2 Me. 207, 11 Am. Dec. 62; »3 Neg. Inst. Law, § 114. where all 

Perry v. Green, 19 N. J. L. 61, 38 cases directly or indirectly bearing 

Am. Dec. 536. upon or citing the Law are grouped. 

»i Walker v. Stetson, 14 Ohio St. 94 Neg. Inst. Law, § 109, where 
89, 84 Am. Dec. 362 ; Galpin v. all cases directly or indirectly bear- 
Hard, 3 McCord (S. C.) 394, 15 ing upon or citing the Law) are 
Am. Dec. 640; Miranda v. New Or- grouped. 

leans City Bank, 6 La. 740, 26 Am. »5 Neg. Inst. Law, § 112, where 

Dec. 493; Tunstall v. Walker, 2 Sm. all cases directly or indirectly bear- 

& M. (Miss.) 638. ing upon or citing the Law are 

92 Neg. Inst. Law, § 115, where grouped, 
all cases directly or indirectly bear- 



202 NEGOTIABLE INSTRUMENTS. § 173 

"Delay in giving notice of dishonor is exeuscd when the delay 
h caused by circumstances beyond the control of the holder and 
not inipntable to his default, misconduct or negligence. When 
the cause of delay ceases to operate, notice must be given with 
reasonable diligence."^ 

When political disturbances interrupt and obstruct the ordi- 
nary negotiations of trade, they constitute a sufficient excuse for 
want of presentment or notice, upon the same principle that con- 
trols in cases of military operations or interdictions of com- 
merce.®'^ 

So the prevalence of a malignant, contagious, or infectious 
disease, such as the cholera, yellow fever, the plague, or small- 
pox, which has become so extensive as to suspend all commercial 
business and intercourse or to render it very hazardous to enter 
into the infected district, is recognized by the text writers as a 
sufficient excuse for not doing any act which would require an 
entry into such districts."® 

Where presentment or notice of dishonor has been waived by 
express agreement or is implied in the acts of the parties, it is 
unnecessary -^^ when sudden illness or death of, or accident to, 
the holder or his agent prevents the presentment of the bill or 
note in due season, or the communication of notice, the delay 
is excused, provided presentment is made and notice given as 
promptly afterward as the circumstances reasonably permit.* 
This doctrine rests upon the same principle as that which ex- 
cuses want of punctuality when overwhelming calamities or acci- 
dents of a general nature prevent. The sudden illness or death 
of his agent is on the same footing as when these happen to the 
holder himself. If the excuse be illness, it must be of such a 

96Neg. Inst. Law, § 113, where cliffe, 4 Strobh. (S. C.) 296, 53 Am. 

all cases directly or indirectly bear- Dec. 678; Hale v. Damford, 46 Wis., 

ing upon or citing the Law are 554, 1 N. W. 284. As to indorser's 

grouped. promise to pay or acknowledgment 

9'' Peters v. Hobbs, 25 Ark. 67, of liability after maturity as 

91 Am. Dec. 526; House v. Adams, waiver of lack of notice, see note 

48 Pa. St. 261. 86 Am. Dec. 426; 6 U. S. L. Ed. 596. Immaterial 

Ray V. Smith, 17 Wall. (U. S.) 411, whether indorser receives notice if 

21 L. Ed. 666. due diligence used in sending it, 

sSTunno v. Lague, 2 Johns. Cas. see note 11 U. S. L. Ed. 1000. 

(N. Y.) 1, 1 Am. Dec. 141; Han- i White v. Stoddard, 11 Gray 

over V. Anderson, 16 Lea (Tenn.) (Mass.) 258, 71 Am. Dec. 711; 

340. Newbold v. Borsef, 155 Pa. St. 

99 Markland v. McDaniel, 51 Kan. 227, 26 Atl. 305 ; Duegan v. King, 

350, 32 Pac. 1114, 20 L. R. A. 96 ; Rice (S. C.) 239, Z?, Am. Dec. 107; 

Hibbard v. Russell, 16 N. H. 410, Wilson v. Sevier, 14 Wis. 380. 
41 Am. Dec. 72Z; Schmidt v. Rad- 



§ 174 PRESENTMENT — NOTICE OF DISHONOR. 203 

character as to prevent due presentment and notice by the exer- 
cise of due dilgience.^ 

Where the person against whom the bill is sought to be en- 
forced has been fully secured against loss by the person princi- 
pally liable on the instrument, and has promised to see to the 
acceptance or payment of the paper, its presentment is unnec- 
essary.^ 

§ 174. Notice of dishonor — Effect of notice as to prior and 
subsequent parties. "Where notice is given by or on behalf of 
the holder, it enures for the benefit of all subsequent holders and 
all prior parties tvho have a right of recourse against the party 
to whom it is given.'"* 

"Where notice is given by or on behalf of a party entitled to 
give notice, it enures for the benefit of the holder and all parties 
subsequent to the party to whom notice is given."'^ 

That is, notice of dishonor given by or on behalf of the holder 
enures to the benefit of all subsequent holders, and all prior 
indorsers liable on the bill who have a right of recourse agamst 
the party to whom notice is given. And notice of dishonor 
given by or on behalf of an indorser entitled to give notice, 
enures to the benefit of the holder and all indorsers liable on the 
bill who have a right of recourse against the party given notice. 

A party who receives due notice of the dishonor of a bill, as 
an indorser, after the receipt of such notice, has the same time 
in which to give notice to antecedent parties whom he desires 
to hold liable, as the original holder has after the dishonor of the 
bill. 

"Where due notice of dishonor by non-acceptance has been 
given, notice of a subsequent dishonor by non-payment is not nec- 
essary unless in the meantime the instrument has been accepted"^ 

"An omission to give notice of dishonor by non-acceptance does 
not prejudice the rights of a holder in due course subsequent to 
the omission.'"^ 

2 Wilson V. Sevier, 14 Wis. 380; cases directly or indirectly bearing 
Purcell V. Allerr.ong, 22 Gratt. upon or citing the Law are grouped. 
(Va.) 739. 6Neg. Inst. Law, § 116, where all 

3 Prentice v. Danielson, 5 Conn. cases directly or indirectly bearing 
175, 13 Am. Dec. 52 ; Perry v. upon or citing the Law are grouped. 
Green, 19 N. J. L. 61, 38 Am. Dec. '^ Neg. Inst. Law, § 117, where all 
536; Brandt v. Mickle, 28 Md. 436. cases directly or indirectly bearing 

Contra, Watkins v. Crouch, 5 upon or citing the Law are grouped. 

Leigh (Va.) 522. As to effect of omission to give no- 

^ Neg. Inst. Law, § 92, where all tice on paper held as collateral or 

cases directly or indirectly bearing conditional payment, see note G& L. 

upon or citing the Law are grouped. R. A. 482. 

5 Neg. Inst. Law, § 93, where all 



204 NEGOTIABLE INSTRUMENTS. § 175 

§ 175. Protest — Method of. Protest in its popular signifi- 
cation includes all the steps taken to fix the liability of a drawer 
or indorsers,** but its accurate technical meaning is that it is the 
testimony of some proper person, usually a notary, that the 
regular legal steps to fix that liabihty have been taken by the 
holder.*^ Its method is for the notary himself to properly pre- 
sent the instrument, and demand its acceptance or payment. If 
these are refused, to make a minute thereof on the instrument, 
or in his official record ; the minute consisting of his initials, the 
year, month, and day of dishonor, and his charges. This is 
done on the day of the dishonor. And on the same day, or after- 
wards, the notary extends the protest thus noted by embodying 
in a certificate the facts of the protest, and his acts in making 
presentment, demand, and in giving notice of dishonor. To this 
he generally appends his official seal.-^® 

Where a notary cannot be obtained protest may be made by 
any respectable person.-^-"^ 

As to protest the Negotiable Instruments Law provides as 
follows : 

"The protest must he annexed to the hill or must contain a 
copy thereof and must he under the hand and seal of the notary 
making it, and must specify: (1) The time and place of present- 
ment; (2) the fact that presentment zvas made and the manner 
thereof ; (3) the cause or reason for protesting the bill; (4) the 
demand made and the answer given, if any, or the fact that the 
drazvee or acceptor could not he found."^^ 

The signature of the notary may be printed ;^^* and neither the 
seal nor the signature of the notary need be proved.-^^" 

A certificate of the protest of a foreign bill of exchange is no 
proof of the drawer's refusal to accept or pay the bill, unless 
properly authenticated by the seal of the officer before whom the 
protest was made.-^^** 

8 White V. Keith, 97 Ala. 668, 12 Donegan v. Wood, 49 Ala. 242, 20 

So. 611 ; Ayrault v. Pacific Bank, 47 Am. Rep. 275. As to v/rongful pro- 

N. Y. 570, 7 Am. Rep. 489 ; Sprague test, see note 30 Am. St. Rep. 158. 

V. Fletcher, 8 Oreg. 367, 34 Am. ^2 Ngg i^gt. Law, §153. where all 

Rep. 587. cases directly or indirectly bearing 

^ Swayze v. Britton, 17 Kan. 625. upon or citing the Law are grouped. 

As to liability of notaries making ^^^ Fulton v. MacCracken, 18 Md. 

protest, see note 82 Am. St. Rep. 528. 

380. 12b Barrv v. Crowly. 4 Gill (Md.) 

lOLeftley v. Mills, 4 T. R. 170; 194. 

Gale V. Walsh, 5 T. R. 170; Rod- i2o London & River Plate Bank 

gers V. Stephens, 2 T. R. 713. v. Carr, 54 Alisc. Rep. 94, 105 N. Y. 

11 Read v. Commonwealth, 1 T. Supp. 679. 
B. Men. (Ky.) 91, 15 Am. Dec. 86; 



§ 175 PRESENTMENT — NOTICE OF DISHONOR. 205 

"Protest may he made by: (1) A notary public; or (2) by any 
respectable resident of the place where the bill is dishonored, in 
the f>resence of two or more credible witnesses."^^ 

In some states the word responsible is substituted for respect- 
able in the law. 

In the absence of any custom or usage, the presentment and 
demand must be made by the notary in person.^^* 

"When a bill is protested, such protest must he made on the 
day of its dishonor unless delay is excused as herein provided. 
When a bill has been duly noted, the protest may be subsequently 
extended as of the date of the noting."''-'* 

The protest should be commenced on the day on which ac- 
ceptance or payment is refused ; but it may be drawn up and 
completed later. 

The drawer of a check who has countermanded payment is 
not entitled to notice of its protest.*^* 

"A bill must be protested at the place where it is dishonored 
except that when a hill drawn payable at the place of business 
or residence of some person other than the draivee, has been dis- 
honored, by non-acceptance, it must he protested for non-pay- 
ment at the place where it is expressed to be payable, and no 
further presentment for payment to, or demand on, the drawee 
is necessary."''^ 

"A bill which has been protested for non-acceptance may be 
subsequently protested for non-payment."^^ 

Below is given a form of protest: 

FORM OF PROTEST. 

United States of America, 

State of 

County of 

City of 



ss. 



By this Public Instrument of Protest, be it known; That on 

this day of , in the 

*3 Neg. Inst. Law, § 154, where ^^^ First National Bank v. Korn, 

all cases directly or indirectly bear- — Mo. App. — , 179 S. W. 721. 

ing upon or citing the Law are i^ Neg. Inst. Law, § 156, where 

grouped. all cases directly or indirectly bear- 

13a Ocean National Bank v. Will- ing upon or citing the Law are 

iams. 102 Mass. 141. grouped. 

14 Neg. Inst. Law, § 155, where ^^ Neg. Inst. Law, § 157, where 
all cases directly or indirectly bear- all cases directly or indirectly bear- 
ing upon or citing the Law are ing upon or citing the Law are 
grouped. grouped. 



206 NEGOTIABLE INSTRUMENTS. § 175 

year of our Lord 19 , I, a Notary Public in and for the County 

and State aforesaid by lawful authority duly commissioned and 

sworn, residing in , in the County and 

State aforesaid, at the request of , 

holder of the original , did present the 

original - , which is hereunto annexed, 

to , and did demand 

The said did 

refuse to the same (here insert reason, 

if any, why payment or acceptance was refused). 

Whereupon I did protest, and by these presents do publicly 
and solemnly protest as well against the drawer and indorsers 

of the said as against all 

others whom it doth or may concern for exchange, re-exchange 
and all costs, charges, damages and interest heretofore incurred 

or to be hereafter incurred for want of the of the same; 

and I do hereby certify that on the day 

of , one thousand nine hundred , 

I did give due and written notice, signed by me, of the present- 
ment and protest of the foregoing — 

to the respective indorsers of the said instrument, and informing 

that held liable for 

the payment of said ; and on the 

same day, in the evening, I deposited the same in the postoffke 

at , contained in a securely 

sealed postpaid wrapper, duly directed and subscribed to said 
as follows, to-wat: to 



The above-named places and addresses being the reputed place 
of residence and address of the persons to whom such notice was 
so addressed and the postoffice nearest thereto. 

Thus done and protested in the City of , 

in the County and State aforesaid, in the presence of 

and , 

witnesses. 



§176 



PRESENTMENT — NOTICE OF DISHONOR. 



207 



In testimony whereof, I have hereunto set my hand and 

affixed my official seal this day of , 

19 

(seal) 

Notary Public. 
My Commission Expires on 

the day 

of , 19 



fees 



Protest . 
Record 
Notices 
Postage 
Total 



-$- 



Registered Vol Page. 



§ 176. Protest — Purpose. The dishonor must be brought 
to the attention of the person secondarily liable on the instru- 
ment. That is, to the indorsers or drawer. 

For "subject to the provisions of this act, zvhen the instrument 
is dishonored by non-payment an immediate right of recourse 
to all parties secondarily liable thereon accrues to the holder/'^"^ 

By the above section of the law an indorser whose liability has 
become fixed by demand and notice is, as to the holder, a prin- 
cipal debtor.*'^' 

The notice may be made by a notary public.^^ The instru- 
ment is presented for payment and payment is refused, then 
the instrument may be taken by a notary public to the party 
and the party may state that he refuses to pay it ; the notary 
makes a statement to that effect and attaches his seal, that it has 
been dishonored, and that he has protested it for non-payment. 
The notary keeps this or he may send his sworn statement, one 
copy to one person and one to the other.^^ This is the protest, 
it is not the notice of protest. The protest is a solemn declara- 
tion made by the notary public that the paper has been dis- 
honored.*® Now, when suit is brought on the paper, it is abso- 

*'' Neg. Inst. Law, § 84, where all 
cases directly or indirectly bearing 
upon or citing the Law are grouped. 

*''* Pittsburg- Westmoreland Coal 
Co. V. Kerr, 220 N. Y. 137, 115 N. 
E. 465. 

18 Donegan v. Woods, 49 Ala. 242, 
20 Am. Rep. 275 ; Scrider v. Brown, 
3 McLean (U. S.) 481, 21 Fed. Cas. 
No. 12,205.. 



i9LeftIey v. Mills, 4" T. R. 170; 
Gale V. Walsh, 5 T. R. 170; Rod- 
gers V. Stephens, 2 T. R. 713. As 
to what facts certificate of notary 
is evidence, see note 2 U. S. L. Ed. 
102. 

20 Swayze v. Britton. 17 Kan. 625. 
As to protest as sufficient evidence, 
see note 36 Am. St. Rep. 685, 



208 NEGOTIABLE INSTRUMENTS. § 177 

lutely necessary that proof be shown. So when you come to 
prove your case as the holder of an instrument you must prove 
that there has been a protest of the instrument, that it has been 
presented for payment or acceptance to the person liable and that 
it has been refused. That is part of your case. And when 
you come to the trial, this statement of the protest by the notary 
is a part of your case. It is the same as a deposition. It can 
go into evidence anywhere and will prove the case just the same 
as a deposition. 

For this certificate is generally accepted as evidence of the 
facts set forth in its terms, and its production obviates the neces- 
sity of proof of these facts by witnesses in open court. The main 
purpose of the protest, therefore, is to furnish to the holder legal 
testimony of presentment, demand, and notice of dishonor, to be 
used in actions against the drawer and indorsers. 

And the notary's certificate of protest is only evidence of those 
facts which are stated therein and which it is the duty of the 
notary to note in making presenment and demand for payment. 
Collateral facts noted by the certificate must be proved by other 
evidence. 

A protest certificate is only prima facie evidence and all facts 
stated therein may be disproved by competent evidence show- 
ing the statements to be untrue. 

§ 177. Protest — Notice of. After the notary protests the in 
strument he sends notice to all the parties on the instrument.** 
He can do this in several ways. He might send it to the per- 
son who sent the paper in for collection. Then the notary public 
would send his notice of protest for the other parties on the in- 
strument, to the last person on the instrument, and he would say, 
"Notices enclosed herewith to be sent to the other parties." If 
the holder has sent notice to all the parties, he is entitled to come 
in and recover because he has performed his contract. He has 
sent notice to all the parties on the instrument that he intends to 
recover against them. Now, if the indorsee is D and he has sent 
notice to all the other indorsers, he can proceed against all or 
any one of them. C gets the notice and he sends out notices 
to those who preceded him and that holds them, but they will 
be held already by the notices sent them by the other man. It 
is just performing the contract which was entered into in the 
way a merchant would do it. It is performing the contract 

aiTevis v. Randall, 6 Cal. 632, 65 Am. Dec. 547; Ban v. Marsh, 9 

Yerg. (Tenn.) 253. 



§ 177 PRESENTMENT — NOTICE OF DISHONOR. 209 

which was entered into originally so that you may come within 
the terms of the contract.^^ 

It is the duty of a bank undertaking the collection of a bill 
or note to protest the same upon dishonor and give the proper 
notice. Some jurisdictions hold that the notice must be given to 
all prior indorsers while others hold that notice need be given only 
to the collecting bank's immediate indorser or principal. Under 
the latter view when the principal has received notice the col- 
lecting bank is relieved from liability. Thus it is no part of the 
duty of the collecting bank to forward to an indorsee notice of 
dishonor received by it from its correspondent, provided its prin- 
cipal received notice of the dishonor, that is, a bank which col- 
lects through a correspondent bank must see to it that, at least, 
its principal is notified.^** 

Below is given a form of notice: 

FORM OF NOTICE OF PROTEST. 
State dp 



ss 
County of. 

, 19... 

To 



You will please take notice that a for 

dollars, dated 

payable after drawn by 

in favor of on 

(accepted by) endorsed by 

you and due has been protested by me on this 

day for non- after having made legal demand 

for the same. 

I hereby, at the request of , the holder 

thereof, notify you that the said holder looks to you for pay- 
ment, damages, interest and costs as indorser thereof. 

Very respectfully, 



Notary Public. 
My Commission Expires on 

the 

day of , 19__ 

22 Lysaght v. Bryant, 9 C. B. 46 ; People's National Bank, 263 Pa. 

Smith V. Poillon, 87 N. Y. 590, 41 266. 106 A. 311, 4 A. L. R. 531, 3 

Am. Rep. 402 ; Wilson v. Swaberg, R. C. L. 250 and 622. Note 4 A. L. 

1 Stark. 34. R. 534. 

*2a Farmers' National Bank v. 



210 iSTEGOTIABLE INSTRUMENTS. § 178 

§ 178. Protest — What should be protested and what not 
necessary. As to what should be protested and what is un- 
necessary to protest the Negotiable Instruments Law has the fol- 
lowing provisions : 

"Where any negotiable instrument has been dishonored it may 
be protested for non-acceptance or non-payment, as the case may 
be; but protest is not required except in the case of foreign bills 
of exchange."^'^ 

In many states statutes make the certificate of the notary 
prima facie evidence of the facts of presentment, demand, non- 
payment and notice of dishonor. Therefore, while protest is not 
required in cases of promissory notes and inland bills, it is usual 
to protest these instruments also, when dishonored, since the 
notary's certificate of protest is the most convenient and certain 
mode of proving the facts.*^* And under some statutes it has 
been held prima facie evidence that notice was given in com- 
pliance with the Negotiable Instruments Law.^^" 

"Where a foreign bill appearing on its face to be such is dis- 
honored by non-acceptance, it must be didy protested for non^ 
acceptance, and where such a bill zvhich has not previously been 
dishonored by non-acceptance is dishonored by non-payment, it 
must be didy protested for non-payment. If it is not so protested, 
the drazver and indorsers are discharged. Where a bill does not 
appear on its face to be a foreign bill, protest thereof in case 
of dishonor is unnecessary."^* 

A foreign bill must be presented by a notary public, because, 
from the needs of the case, some act of a universally recognized 
authority is called for.*' By force of custom, the official act of 
the notary public is of recognized authority throughout the world. 

Protest by notaries public of a foreign note is unnecessary, 
unless it is indorsed; but, if indorsed, its protest by a notary 
public, according to the weight of authority, is required be- 
cause the indorsement of a note is essentially a bill drawn on 
the maker .20 

23 Neg. Inst. Law, § 118, where all As to protest for non-acceptance, 
cases directly or indirectly bearing see notes 1 U. S. L. Ed. 640 and 2 
upon or citing the Law are grouped. U. S. L Ed. 79. 
As to protest of promissory note or ^5 Commercial Bank v. Barks- 
inland bill under general law mer- dale, 36 Mo. 563; Sussex Bank v. 
chant, see note 5 U. S. L. Ed. 228. Baldwin, 17 N. J. L 476; Cape 

23a Eaves v. Keeton, — Mo. App. Fear Bank v. Stinemetz, 1 Hill (S. 

— . 193 S. W. 629. C.) 44. As to liability of notary 

23" Scott V. Brown, 240 Pa. St. for neglect to protest, and of bank 

.".28, 87 A. 431. employing him, see note 16 U. S. 

2-* Neg. Inst. Law, § 152, where all L. Ed. 466. 
cases directly or indirectly bearing 26 Austin v. Rodman, 8 N. C 194, 

upon or citing the Law are grouped. 9 Am. Dec. 630; Carter v. Union 



§§ 179-180 PRESENTMENT — NOTICE OF DISHONOR. 211 

The convenience of proving the essential facts of dishonor by 
notarial certificate has caused the enactment in some of the 
States of statutes requiring or permitting the protesting of inland 
bills and notes. 

§ 179. Protest — Waiver. Protest is vi^aived by express or 
impHed waiver of a presentment for payment, and protest is 
dispensed with by the same circumstances which would dispense 
with notice of dishonor in the case of an inland bill, and cir- 
cumstances excusing delay in giving notice of dishonor will 
excuse delay in protesting. 

The Negotiable Instruments Law provides : 

"Protest is dispensed ivith by any circumstances which would 
dispense with notice of dishonor. Delay in noting or protesting 
is excused when delay is caused by circumstances beyond the 
control of the holder and not imputable to his defaidt, miscon- 
duct, or negligence. When the cause of delay ceases to operate, 
the bill must be noted or protested zvith reasonable diligence. "^"^ 

"Where the waiver is embodied in the instrument itself, it is 
binding upon all parties; but where it is written above the signa- 
ture of an indorser, it binds him only."^^ 

"A zmiver of protest whether in the case of a foreign bill of 
exchange or other negotiable instrument, is deemed to be a waiver 
not only of a formal protest, but also of presentment and notice 
of dishonor."^^ 

§ 180. Protest — Miscellaneous matters. A foreign bill dis- 
honored for non-acceptance must be protested, but when this is 
done it need not be subsequently protested for non-payment. 

Any holder may present the bill or note for payment and re- 
ceive payment, but in case payment is refused and protest be- 
comes necessary, the notary public who makes the protest is 
obliged, by law to make a second demand, so that he can of his 
own personal knowledge certify to the fact of dishonor.^" 

Bank, 7 Humph. (Tenn.) 548, 46 As to effect of waiver, see note 29 

Am. Dec. 671 ; Carmichael v. Penn- L. R. A. 313. 

sylvania Bank, 4 How. (Miss.) 567, 29 Neg. Inst. Law, § 111, where all 

35 Am. Dec. 408. cases directly or indirectly bearing 

27 Neg. Inst. Law. § 159. where all upon or citing the Law are grouped, 
cases directly or indirectly bearing ^^ Ellis v. Commercial Bank, 7 
upon or citing the Law are grouped. How. (Miss.) 294, 40 Am. Dec. 63; 

28 Neg. Inst. Law, § 110. where all Chenowith v. Chamberlin, 6 B. 
cases directly or indirectly bearing Mon. (Ky.) 60, 43 Am. Dec. 145: 
upon or citing the Law are grouped. Donegan v. Wood, 49 Ala. 242, 20 

Am, Rep. 275. 



212 NEGOTIABLE INSTRUMENTS. § 180 

A bill must be protested at the place where it is dishonored, but 
if the domicile and place of payment are different it may be 
protested at either place.^^ 

When the laws are in conflict, the validity of the protest will 
be determined by the law of the place where it is made.^^ 

The notary's minutes made on the bill or note, such as his 
initials, the date and the like, are made for his convenience, 
since he by the law merchant is required to make the protest the 
same day that the presentment and demand were made, and this 
short form is equivalent to the protest itself, and the more formal 
protest may be made out later from the minutes. 

When the acceptor of a bill becomes bankrupt or makes an 
assignment before its maturity, it may be protested for better 
security.^^ 

"Where the acceptor has been adjudged a bankrupt or an 
insolvent, or has made an assignment for the benefit of creditors, 
before the bill matures, the holder may cause the bill to be pro- 
tested for better security against the drawer and indorsers."^* 

"Where a bill is lost or destroyed or is wrongly detained from 
the person entitled to hold it protest may be made on a copy or 
written particulars thereof f'^ 

The notary public must present the paper, if you desire to 
protest it, either for non-payment or non-acceptance.^* 

The custom in some cities is to make two presentments, twice 
in the same day. If it is not accepted when it is presented in 
the forenoon it is taken back again in the afternoon and is pro- 
tested. 

As the Negotiable Instruments Law makes no provision as to 
the damages which may be recovered on foreign bills of ex- 
change, this matter is to be determined by the law merchant 
under section 196 of the Law or by statute in the dififerent juris- 
dictions. The damages recoverable by the payee of a negotiable 

31 Grigsby v. Ford, 3 How. cases directly or indirectly bearing 
(Miss.) 184; Neeley v. Morris, 2 upon or citing the Law are grouped. 
Head. (Tenn.) 595, 75 Am. Dec. 35 Ngg. Inst. Law, § 160, where all 
753. cases directly or indirectly bearing 

32 Wooley V. Lyon, 117 111. 244, 6 upon or citing the Law are grouped. 
N. E. 885, 57 Am. Rep. 867; Tick- Hinsdale v. Miles, 5 Conn. 331; 
ner v. Roberts, 11 La. 14, 30 Am. Kavanaugh v. Bank, 59 Mo. App. 
Dec. 706; Carter v. Union Bank, 540. 

7 Humph. (Tenn.) 548, 46 Am. 38 Ellis v. Commercial Bank, 7 

Dec. 89. How. (Miss.) 294, 40 Am. Dec. 6Z; 

33 Neg. Inst. Law, § 158, where all Chenowith v. Chamberlain, 6 B. 
cases directly or indirectly bearing Mon. (Ky.) 60, 43 Am. Dec. 145; 
upon or citing the Law are grouped. Donegan v. Wood, 49 AU. 242, 20 

34 Neg. Inst. Law, § 159, where all Am. Rep. 275, 



8 180 PRESENTMENT — NOTICE OF DISHONOR. 213 

foreign bill of exchange protested for non-payment against the 
drawee may be deemed to be made up as follows : (a) The face 
of the bill; (b) interest thereon; (c) protest fees; (d) re- 
exchange, i. e., the additional expense of procuring a new bill 
for the same amount payable in the same place on the day of 
dishonor; or a percentage in lieu of such re-exchange in juris- 
dictions where it is prescribed by statute .*'' 
S7 Pavenstedt v. N. Y. Life Insur ance Co., 203 N. Y. 91. 



io H. 






7^ 



a.-^^ 



CHAPTER XVII. 
DISCHARGE OF NEGOTIABLE INSTRUMENTS. 



§ 181. In general. § 188. By alteration. 

182. By payment. jgg gy ^h^ principal debtor be- 

18J. By payment for honor. ^ .• „ ^.u i i i • u- 

io, r. 11 • 1 commg the holder m hia 

184. By cancellation and surren- ^^^ ^.j^j^^ 

185. By covenant not to sue. ^^^ ^^ operation of law. 

186. By accord and satisfaction. 191. By renunciation of holder. 

187. By substitution of another 192. When a person secondarily 

obligation. liable, discharged. 

§ 181. In general. Some writers treat this subject under 
the head of defense while others treat it as the performance of 
an obHgation contracted. It will be treated here largely in the 
nature of a discharge of a contract. 

The Negotiable Instruments Law provides, as follows : 

"A negotiable instrument is discharged, 

1. By payment in due course by or on behalf of the principal 
debtor. 

2. By payment in du.e course by the party accommodated, 
where the instrument is made or accepted for accommodation. 

3. By the intentional cancellation thereof by the holder. 

4. By any other act which will discharge a simple contract for 
the payment of money. 

(Thus the release of one joint maker will operate to discharge 
the others.)'* 

5. When the principal debtor becomes the holder of the in- 
strument at or after maturity in his ozvn right."^ 

The words "in his own right" exclude the cases where the 
maker or acceptor acquire the instrument in a purely repre- 
sentative capacity as agent, as executor or in some such capacity.** 

The above five provisions of the Law merely designate the acts 
which discharge the instrument and do not purport to describe 

a Case v. Bridger, 133 La. 754, 63 discharging other parties only pro 

So. 319. tanto, see note 2 U. S. L. Ed. 79. 

1 Neg. Inst. Law, § 119, where all l» Schwartzman v. Post, 94 App. 

cases directly or indirectly bearing Div. (N. Y.) 474, 87 N. Y. Supp. 

upon or citing the Law are grouped. 872 ; Peoples State Bank v. Dryden, 

As to part payment by one party 91 Kans. 216, 137 P. 928. 

214 



§ 182 DISCHARGE OF INSTRUMENTS. 215 

the character of proof by which they must be estabhshed. A 
renunciation must therefore be in writing under section 122 of 
the Law, unless the instrument is deHvered up to the party 
primarily liable thereon.^" 

§ 182. By payment. Negotiable instruments may be dis- 
charged by payment.^ This is the most usual way of perfecting 
a discharge of the bill or note. The very nature of the word 
payment indicates that it is a discharge of a contract to pay 
money by giving to the party entitled to receive it the amount 
agreed to be paid by one of the parties to the contract. Pay- 
ment is not a contract but is rather a manner of discharging a 
contract in which one party has a right to demand a sum of 
money and in which the other party has a right to receive the 
money. Then by payment is meant the discharge of a contract 
tO' pay money by giving to the party entitled to receive it, the 
amount agreed to be paid by one of the parties who entered 
into the agreement.^ Payment as stated above is not a contract. 
It is the discharging of a contract in which the party of the 
first part has a right to demand payment, and the party of the 
second part has a right to make payment. A sale is altogether 
different. It is a contract which does not extinguish a bill or 
note, but continues it in circulation as a valid security against 
all parties. And it is necessary to constitute a transaction a 
sale that both parties should expressly or impliedly agree, the 
one to sell and the other to purchase the paper. Whether the 
transaction is a purchase or payment is a question for the jury 
where the facts are in dispute, to be resolved according to the 
intention of the parties, by looking to the substance of the 
matter rather than its form. Payment is usually made by the 
principal debtor and is a complete discharge of the instrument, 
that is, "a negotiable instrument is discharged by payment in due 
course by or on behalf of the principal debtor'"^ because it is 
the performance of a contract according to its terms by the 
person primarily liable. Payment may be made by any other 
person than the principal debtor. But in order that he may in 

l** Whitcomb v. National Ex- to necessity of surrender, see note 

change Bank, 123 Md. 612, 91 A. 1 Am. St. Rep. 184; and as to pre- 

689. sumption of payment from lapse of 

2Ballard v. Gremburch, 24 Me. time, see 18 Am. St. Rep. 882. 

336; Dooley v. Va. Fire & Marine 3 Kendall v. Brownson, 47 N. H. 

Ins. Co., Fed. Cas. No. 3,999, 3 186; Green v. Hughitt School Tp., 

Hughes (U. S.) 221 ; Christman v. 5 S. D. 452. 59 N. W. 224. 

Harmon, 29 Gratt. 494. As to ef- ^ Neg. Inst. Law, § 119, where all 

feet of payment by indorser, see cases directly or indirectly bearing 

note 14 Am, St. Rep. 794 ; and as upon or citing the Law are grouped. 



216 NEGOTIABLE INSTRUMENTS. § 182 

turn recover from the maker it is necessary for him to ascertain 
whether there has been presentment, protest and notice, because 
in default of these steps in this particular case the maker would 
not be liable to him. It is also advisable for him to inform him- 
self as to the identity of the holder and determine as to whether 
or not he has the legal title to the instrument, "and payment 
to him in due course discharges the instrument."^ Payment 
always discharges the instrument when made to the proper party 
but it does not discharge all the parties. The principal debtor 
must pay the amount of the instrument before he is discharged.* 
But it must be understood that not any one who desires may 
pay the instrument and then recover of the maker. He must 
be a person who has in some way made himself liable for the 
payment of the instrument. There is however one exception to 
this, and that is where an instrument has been protested and 
some one comes in and makes "payment supra protest" or "for 
honor." 

The mere fact that the payee stamps the word "paid" upon 
the instrument does not constitute payment.^* 

"A negotiable instrument is discharged: 

By payment in due course by the party accommodated where 
the instrument is made or accepted for accommodation.'"^ 

Thus where a note is made for the accommodation of one of 
the makers and he pays it then it is discharged as to other 
makers. '^^ 

Any party to a bill or note may pay it, and an indorser who 
has been discharged by failure of notice may still sue a prior 
indorser or other parties who were not discharged, because, al- 
though not compelled to pay it, he acquires the right of the holder 
from whom he took the instrument, or is remitted to his own 
rights as indorsee.® 

A mere stranger to the paper cannot make payment without 
the consent of the holder unless he represents a party liable 
thereon, or makes payment supra protest.** And when one who is 

5 Neg. Inst. Law, § 51. where all '^^ Comstock v. Buckley, 141 Wis. 

cases directly or indirectly bearing 228, 124 N. W. 414. 

upon or citing the Law are grouped. ^Ellsworth v. Brewer, 11 Pick. 

*• King V. Hannah, 6 111. App. 495; 316; Comomnwealth Bank v. Floyd, 

Leeke v. Hancock, 76 Cal. 127, 17 4 Mete. (Ky.) 159; Meyer v. Spen- 

Pac. 937 ; Mead v. Small, 2 Me. 207, cer, 9 Mo. App. 590 ; Ticonic Nat. 

11 Am. Dec. 62. Bank v. Bagley, 68 Me. 249. 

6a Hanna v. McCrory, 19 N. Mex. But see Turner v. Leech, 4 B. & 

183, 141 P. 996. Aid 457, 6 E. C. L. 556; Roscow v. 

''Neg. Inst. Law, § 119, subd. 2, Hardy, 2 Campb. 458, 12 East. 434. 

where all cases directly or indi- ® Burton v. Slaughter, 26 Gratt. 

rectly bearing upon or citing the 919. 
Law are grouped. 



§ 182 DISCPIARGE OF INSTRUMENTS. 217 

not a party to negotiable paper pays his money for it and takes 
up the paper, the presumption is that he has bought it and not 
paid it off.^* 

Where some payment is made to the holder of a negotiable 
note by an indorser in discharge of his obligation as an indorser, 
it does not enure to the benefit of the maker of the instrument 
and in an action upon it the maker is liable for the whole amount 
thereof, notwithstanding the payment. The indorser to the extent 
of the money paid becomes equitably entitled to be substituted 
to the rights and remedies of the holder, and becomes, pro tanto, 
the beneficial owner of the debt; so that the maker's obligation 
to pay the note in full, at first due the holder solely in his own 
right, becomes, after the part payment by the indorser, still 
wholly due to the holder, but partly in his own right and partly 
as trustee for the indorser. A court of law cannot split the 
note into parts, and must act upon the legal interest and own- 
lership.^" 

Where payment is made by a party who is not the primary 
obligor or an accommodation party, his payment only cancels his 
own liability, and those who are obligated after him. All prior 
parties, primarily or secondarily liable on the bill, are liable to 
such a payer, and the payer may cancel indorsements subsequent 
to his own and reissue the paper, and it will be valid as against 
the prior parties. 

The Negotiable Instruments Law covers this by the following 
provision : 

"Where the instrument is paid by a party secondarily liable 
thereon, it is not discharged ; but the party so paying it is re- 
mitted to his former rights as regards all prior parties, and he 
may strike out his own and all subsequent indorsements, and\ 
again negotiate the instrument, except: * 

1. Where it is payable to the order of a third person, and has 
been paid by the drawer; and 

2. Where it luas made or accepted for accommodation, and 
has been paid by the party accommodated."'^^ 

Payment of a bill or note should be made to the legal owner 
or holder thereof, or some one authorized by him to receive it.** 
If it be payable to bearer or indorsed in blank, any person having 

»aCantrelI v. Davidson, 180 Mo. " Stuart v. Asher, 15 Colo. App. 

App. 410, 168 S. W. 271. 403, 62 Pac. 1051 ; Walter v. Logan. 

O"" Madison Square Bank v. 63 Kan. 193, 65 Pac. 225 ; Chicago 

Pierce, 137 N. Y. 444. etc. Ry. Co. v. Burns, 61 Neb. 793, 

lONeg. Inst. Law, § 121, where all 86 N. W. 724; Patten v. Fullerton. 

cases directly or indirectly bearing* 27 Me. 58. 
upon or citing the Law are grouped. 



218 NEGOTIABLE INSTRUMENTS. § 182 

it in possession may be presumed to be entitled to receive pay- 
ment, unless the payer have notice to the contrary; and a pay- 
ment to such person will be valid, although he may be a thief, 
finder or fraudulent holder. 

"Payment is made in due course zvhen it is made at or after 
the maturity of the instrument to the holder thereof in good faith 
and zmthout notice that his title is defcctive."^^ 

The maker of a note or the acceptor of a bill must satisfy 
himself, when it is presented for payment, that the holder traces 
his title through genuine indorsements ; for if there is a forged 
indorsement it is a nullity and no right passes by it.*^ 

The party making payment should insist on the presentment 
of the paper by the party demanding payment, in order to make 
sure that it is at the time in his possession, and not outstanding 
in another. And if at the time he makes payment it is out- 
standing, and Held by a bona Me holder for value, he will be 
I liable to pay it again, and a receipt taken will be no protection. 
\ The party making payment of the bill or note should also not fail 
I to insist upon its being surrendered up, as a voucher that the 
I party receiving the money was entitled to do so and also that he 
\has paid it to him. 
\ The party bound to make payment has no right to do so in any 
other medium than that expressed on the face of the instru- 
ment — that is, he must make payment in money.*'* 

When payment of a bill or note is made by giving another 
note or bill, — other than notes treated as legal tender, — as a 
general rule, such payment will not be considered absolute until 
the paper given in payment has been itself paid, except where 
the parties expressly or impliedly agree that the claim shall be 
discharged by such payment.*^ 

A distinction is made by some authorities when the payer 
gives his own note in payment and when he gives the note or bill 
of another. In the first instance it is usually treated as a 
conditional payment.*® When a stranger's note is given in pay- 

12 Neg. Inst. Law, § 88, where all v. Patterson, 13 La. 256, 81 Am. 

cases directly or indirectly bearing Dec. 432 ; Klauber v. Biggerstaff, 

upon or citing the Law are grouped. 47 Wis. 551, 3 N. W. 357, 32 Am. 

i^Harter v. Mechanics Nat. Rep. 772>; Williamson v. Smith, 1 

Bank, 63 N. J. L. 578, 44 Atl. 715, Coldw. (Tenn.) 1, 78 Am. Dec. 478. 

76 Am. St. Rep. 224; Tolman v. 15 Stanley v. McElrath, 86 Cal. 

Am. Nat. Bank, 22 R. L 462, 48 449, 25 Pac. 16, 10 L. R. A. 545; 

Atl. 480, 84 Am. St. Rep. 850, 52 Granite Nat. Bank v. Firch, 145 

L. R. A. 877; Lane v. Nufifer, 5 N-. Mass. 567, 14 N. E. 650, 1 Am. St. 

Y. S. 421, 25 N. Y. St. 823. Rep. 484 ; Cadiz Bank v. Slemmons. 

14 Galena Ins. Co. v. Kupfer, 28 34 Ohio St. 142, 32 Am. Rep. 364. 

111. Zd2, 81 Am. Dec. 284; Graydon le^insted Bank v. Webb, 39 N. 



§ 183 DISCHARGE OF INSTRUMENTS. 219 

ment for a precedent debt it is also generally treated as a con- 
ditional payment.^'' but if given in satisfaction of a contem- 
poraneous debt it is held to be an absolute payment if so trans- 
ferred as to end the transferrer's liability thereon, that is, with- 
out indorsement.-^^ 

A new bill or note given in renewal of an old one retained by 
the payee is also held to constitute but a suspension of the old 
one until the new one is paid. 

The conditional payment operates to suspend the right of action 
on the original paper until the paper taken in payment falls due, 
then the holder can sue, at his election, on either of the obli- 
gations.-^^ 

A part payment of a bill or note which has fallen due only 
extinguishes it pro tanto, and an agreement that it shall be in 
full discharge of the debt does not make such part payment any 
more effectual as to the residue, there being no sufificient con- 
sideration for the discharge of the whole.^® But any agreement 
by way of compromise or composition, into which any new ele- 
ment entered, would be sustained, and if the claim were disputed, 
agreement to receive part payment in full would discharge it.^* 

§ 183. By payment for honor. "Where a hill has been pro- 
tested for non-payment, any person may intervene and pay it 
supra protest for the honor of any person liable thereon or for 
the honor of the person for whose account it zvas drauni."'^'^ 

"The payment for honor supra protest, in order to operate as 
such and not as a mere voluntary payment, must be attested by 
a notarial act of honor zvhich may be appended to the protest or 
form an extension to it."^^ 

Y. 325, 100 Am. Dec. 435 ; Nightin- Mordecai v. Stewart, 36 Ga. 126 ; 

gale V. Chafee, 11 R. I. 609, 23 Am. In re Weeks, 8 Ben. (U. S.) 269, 

Rep. 531 ; Scott v. Gilkey, 153 111. 29 Fed. Cas. No. 17,349. 

168, 39 N. E. 265. 21 Coburn v. Ware, 25 Me. 330 ; 

17 Gibson v. Tobey, 46 N. Y. 6Z1, Robbins v. Cheek, 32 Ind. 328, 2 

7 Am. Rep. 397; Tilford v. Miller, Am. Rep. 348; Price v. Cannon, 3 

84 Ind. 185. Mo. 453. 

IS Tobey v. Barber, 5 Johns. 68, 22 j^Teg. Inst. Law, § 171, where 

' 4 Am. Dec. 326 ; Day v. Kinney, all cases directly or indirectly bear- 

131 Mass. Zl ; Susquehanna Fert. ing uponj or citing the Law are 

Co. V. White, 66 Md. 444, 7 Atl. grouped. As to payment for honor 

802. in general, see note 7 U. S. L. Ed. 

19 Henry v. Conley, 48 Ark. 271, 132. 

Zl S. V/. 181 ; Geib v. Reynolds. 35 23 Neg. Inst. Law, § 172. where 
Minn. 331, 28 N. W. 923; East all cases directly or indirectly bear- 
River Bank v Butterworth, 45 Barb. ing upon or citing the Law are 
(N. Y.) 476. grouped. 

20 Hart V. Freeman, 42 Ala. 567; 



220 NEGOTIABLE INSTRUMENTS. § 184 

"The notarial act of honor must be founded on a declaration 
made by the payer for honor or by his agent in that behalf de- 
claring his intention to pay the bill for honor and for whose 
honor he pays."^* 

"Where two or more persons offer to pay a bill for the honor 
of different parties, the person zvhose payment zvill discharge 
most parties to the bill is to be given the preference/'^^ 

"Where a bill has been paid for honor, all parties subsequent 
to the party for whose honor it is paid are discharged, but the 
payer for honor is subrogated for, and succeeds to, both the 
rights and duties of the holder as regards the party for whose 
honor he pays and all parties liable to the latter."^ 

"Where the holder of a bill refuses to receive payment supra 
protest, he loses his right of recourse against any party who 
woidd haz'e been discharged by such pay^nent."^'^ 

"The payer for honor, on payment to the holder of the amount 
of the bill and the notarial expenses, incidental to its dishonor, is 
entitled to receive both the bill itself and the protest."^^ 

§ 184. By cancellation and surrender. The second method 
by which an instrument may be discharged is by cancellation and 
surrender. Where the person who is entitled to receive pay- 
ment delivers up the instrument which he holds against another 
with the intent and for the purpose of discharging the debt, this 
surrender operates as a release and discharge of the liability 
thereon in the absence of fraud or mistake. It is set out in the 
Negotiable Instruments Law that: 

"A negotiable instrument is discharged by the intentional 
cancellation thereof by the holder."^'^ 

Thus where the payee of a note tears it up, with the intention of 
destroying and cancelling it, this is a discharge of the note.*®* 

No consideration is necessary to support such a transaction 
after it has been executed.^** Where the return or surrender of 

24 Neg. Inst. Law, § 173, where 28 ^gg. Inst. Law, § 177, where all 

all cases directly or indirectly bear- cases directly or indirectly bearing 

iiig upon or citing the Law are upon or citing the Law are grouped, 

grouped. 2» j^eg. Inst. Law, § 119, where all 

35 ivjeg lx\st. Law, § 174, where cases directly or indirectly bearing 

all cases directly or indirectly bear- upon or citing the Law are grouped, 

ing upon or citing the Law are 39a ]v[ontgomery v. Schwal3, 177 

grouped. Mo. App. 75, 166 S. W. 831. 

2« Neg. Inst. Law, § 175, where aTi 30 Hale v. Rice, 124 Mass. 292; 

cases directly or indirectly bearing Booth v. Smith, 3 Woods (U. S.) 

upon or citing the Law are grouped. 19, 2 Fed. Cas. No. 1,649; Ellsworth 

'"^ Neg. Inst. Law, § 176^ where all v. Fogg, 35 Vt. 355. 

cases directly or indirectly bearing See in re Campbell, 7 Pa. St. 100, 

upon or citing the Law ar? grouped, 47 Am. Dec. 503. 



§§ 185-186 DISCHARGE OF INSTRUMENTS. 221 

a note is induced by fraud,^* the maker is not released from 
liability thereon ; and where a note has been surrendered by 
mistake'^ upon the supposition that it was fully paid, the maker 
will remain liable for the balance still unpaid. The holder may 
waive his right to payment by cancellation. Cancellation of an 
instrument may be made by destroying it or by any other means 
by which the intention to cancel the instrument may be evi- 
denced.^^ 

"A cancellation mode unintentionally, or under a mistake, or 
w-ithout the authority of the holder, is inoperative; but where 
ait instrument or any signature thereon appears to have been 
cancelled, the burden of proof lies on the party who alleges that 
the cancellation was made unintentionally, or under a mistake 
or without authority. "^^ 

Cancellation may be made before maturity, but in order to be 
effective in such case against a bona fide holder it must carry 
notice to him of such cancellation upon its face.** 

§ 185. By covenant not to sue. The maker or acceptor may 
be discharged from the payment of the instrument by a general 
covenant not to sue, and, of course, if the maker is discharged, 
the indorsers will also be discharged.^® 

Such a covenant is a discharge of the instrument as to these 
parties, but such a covenant will not discharge another who is 
jointly liable with the covenantee. If the covenant is given by 
one of two creditors it will not operate as a release or a discharge 
of the instrument.*'^ A covenant not to sue for a limited time 
will not discharge the instrument as between the parties, but 
it does release the sureties.*^ 

§ 186. By accord and satisfaction. In considering the ques- 
tion of accord and satisfaction a distinction should be made be- 

SiPindley v. Cowles, 93 la. 389, ssDod y. Edwards, 2 Car. & P. 

61 N. W. 998; Liesemer v. Burg, 602; Morley v. Culverwell, 7 Mees. 

106 Mich. 124. 63 N. W. 999; Rey- & W. 174. 

nolds V. French, 8 Vt. 85, 30 Am. 36 Gordon v. Third Nat. Bank, 

Dec. 456. 144 U. S. 97, 36 L. Ed. 360 ; Hall v. 

32 Mfg. Nat. Bank v. Thompson, Capitol Bank of Macon, 71 Ga. 715; 
129 Mass. 438, 37 Am. Rep. 376; Scott v. Saffold, Z7 Ga. 384; Mc- 
Blodgett V. Bickford, 30 Vt. 731, 7Z Lemore v. Powell, 12 Wheat. (U. 
Am. Dec. 334. S.) 554. 

33 Booth V. Smith, 3 Woods (U. 37 Williams v. Scott, 83 Ind. 405. 
S.) 19, 2 Fed. Cas. No. 1,649; Blade 38 Hine v. Bailey, 16 la. 213, 35 
V. Noland, 12 Wend. (N. Y.) 173. Am. Dec. 214; Hamilton v. Prowty, 

34Neg. Inst. Law, § 123, where 50 Wis. 592, 7N. W. 659, 36 Am. 

all cases directly or indirectly bear- Rep. 866 ; Okie v. Spencer, 2 Whart. 

ing upon or citing the Law are 253, 30 Am. Dec. 251. 
grouped. 



222 NEGOTIABLE INSTRUMENTS. § 187 

tween an extinguishment and a satisfaction of a bill or note. 
This has been very clearly stated by Justice Story in the follow- 
ing words : "Taking a security of a higher description, such as 
a bond or judgment, will extinguish the claim of the holder upon 
the note against the party given the security ; but it will not 
amount to a satisfaction thereof, so as to discharge the other 
parties upon the note."^'** Any person to whom the maker is 
liable on an instrument who makes an agreement with the maker 
not to sue has caused the instrument to be extinguished as to 
himself, but there is no satisfaction as to the other parties to the 
note."*** Whatever the payee of the instrument receives from the 
maker in full satisfaction of his claim is a satisfaction as to all 
other parties who might have been held liable."*^ Where the debt 
or demand is liquidated, that is, where it is a sum certain, the 
payment of a less sum by the debtor and a receipt therefor by 
the creditor is not an accord and satisfaction of the debt, although 
the creditor agrees to accept it as such.'*^ Such would not be the 
case, however, if the sum was in dispute or was an unliquidated 
sum. 

§ 187. By substitution of another obligation. A bill of ex- 
change or promissory note may be discharged by the substitution 
of a new obligation for the pre-existing one.'*^ Some writers treat 
this subject under the head of novation. In these cases the ex- 
tinguishment of the old debt is sufficient consideration for the 
new obligation. It is essential that the new obligation be such 
as may legally take place in order that it may extinguish or 
discharge the prior obligation. There may be a sufficient con- 
sideration and competent parties to the substitution obligation, 
but if the new obligation is one whch cannot legally take place 
the prior instrument is not discharged.^ It is permissible at 
any time before the contract of substitution is complete, for the 
parties to withdraw from the arrangement, but after such com- 
pletion, none of them, without the consent of all the others, 
may withdraw from or rescind or in any way modify the new 
contract existing between them. The entire doctrine of substi- 

39 Story on Promissory Notes, Hun 459, 10 N. Y. S. S8; Hart v. 
§ 409; Tradesmen's Nat. Bank v. Freeman, 42 Ala. 567; Mordecai v. 
Looney, 99 Tenn. 278, 42 S. W. 149, Stewart, 36 Ga. 126. 

38 L. R. A. 837. 43 McDonnell v. Ala. Gold Life 

40 Dean v. Newhall, 8 T. R. Ins. Co., 85 Ala. 401, 5 So. 120. 
(Eng.) 168; Fowell v. Forrest, 2 Note 10 L. R. A. 369; Note 5 L. 
Saund. (Eng.) 47n. R. A. 414. 

41 S.tory on Promissory Notes, 44 Henry v. Nubert (Tenn.), 35 
§402. S. W. 44; Pope v. Vajen, 121 Ind. 

43 People V. Hamilton County, 56 317, 22 N. E. 308, 6 L. R. A. 688. 



§§ 188-189 DISCHARGE OF INSTRUMENTS. 223 

tution and the legal effect thereof depend upon the agreement 
between the parties and is governed by the general laws of con- 
tracts. 

§ 188. By alteration. The general rule as to whether or not 
the alteration of a bill or note will operate as a discharge of the in- 
strument depends upon the effect produced upon the instrument 
by such alteration. If the alteration is immaterial it is held 
not to be a discharge, while, if it is a material alteration it is held 
to be a discharge of the instrument as to all the parties liable 
except as to the party who has himself made, authorized or as- 
sented to the alteration. 

"Where a negotiable instrument is materially altered imthout 
the assent of all parties liable thereon, it is avoided, except as 
against a party who has himself made, authorised or assented to 
the alteration and subsequent indorsers. But when an instru- 
ment has been materially altered and is in the hands of a holder 
in due course, not a party to the alteration, he may enforce pay- 
ment thereof according to its original tenor.""*^ 

"Any alteration zvJiich changes: (1) The date; (2) the sum 
payable either for principal or interest; (3) the time or place 
of payment; (4) the number or the relations of the parties; (5) 
the medium or currency in which payment is to be made; or which 
adds a place of payment zuhere no place of payment is specified, 
or any other change or addition which alters the effect of the in- 
strument in any respect, is a material alteration."'^ 

If the alteration is made before the delivery of the instrument 
it will not operate as a discharge of it. If a person after full 
knowledge of an alteration unconditionally promises to pay the 
instrument, it is considered a sufficient ratification and will not 
be construed as a discharge of the instrument to this particular 
party.'*'' Where the alteration is made by a stranger to the in- 
strument the rights of the parties are not affected and there is 
not sufficient ground for a discharge."** 

§ 189. By the principal debtor becoming the holder in due 
course. The instrument is discharged if, when it matures, the 
acceptor or maker is or becomes the holder, since the right to 

45Neg. Inst. Law, § 124, where ^7 Canon v. Grigsby, 116 HI. 151, 

all cases directly or indirectly bear- 5 N. E. 362; Bell v. Makin, 69 la. 

ing upon or citing the Law are 408, 29 N. W. 331 ; Camden Bank v. 

grouped. • Hall, 14 N. J. L. 583. 

4« Neg. Inst. Law, § 125, where ^^ Paterson v. Higgins, 5 111. App. 
all cases directly or indirectly bear- 268; Piersol v. Grimes, 30 Ind. 129; 
ing upon or citing the Law are White Sewing Machine Co. v. Da- 
grouped, kin, 86 Mich. 581, 49 N. W. 583. 



224 NEGOTIABLE INSTRUMENTS. § 190 

recovery upon the instrument and the liabiHty to pay the instru- 
ment are coincident in one and the same person. In order that 
payment or coincidence of right and liabiHty should operate as 
a discharge, it is essential that the instrument should have ma- 
tured. "A negotiable instrument is discharged zvhen the prin- 
cipal debtor becomes holder of the instrument at or after ma- 
turity in his own right/''*''* An acceptor or maker may acquire 
it before maturity, as purchaser, and may then further nego- 
tiate it. The possession of a bill of exchange by the acceptor 
after it has been in circulation is prima facie evidence that it has 
been paid by him.*'-** And the possession of a promissory note 
by the maker is prima facie evidence that it has been paid by 
him.'*'*'' But where he admits the execution of the note, the bur- 
den of showing payment is on him."*^" 

§ 190. By operation of law. An instrument may be dis- 
charged by operation of law. If a judgment is obtained on a 
bill or note, the bill or note is thereby extinguished and merged 
in the judgment.^** The judgment alone, without actual satis- 
faction, is no extinguishment as between the plaintiff and other 
parties not jointly liable with the original defendant, whether 
those parties be prior or subsequent to the defendant.^^ The 
issuing of execution against the person or property of one party 
to a negotiable instrument does not extinguish the plaintiff's 
remedy against the other parties.^* The intermarriage of the 
maker of a note with the payee or holder formerly discharged the 
maker from all liability thereon,^^ but this rule has now been 
changed by statute in most jurisdictions. A discharge in bank- 
ruptcy, unless, otherwise provided by statute, releases a bankrupt 
from all his provable debts, and therefore will discharge the bank- 
rupt, on all bills accepted, or notes made by him, but will not 
discharge the other parties.®* 

^^Neg. Inst. Law, § 119, where 51 Qaxton v. Swift, 2 Show, 

all cases directly or indirectly bear- (Eng.) 441 . 

ing upon or citing the Law are ^^ Porter v. Ingraham, 10 Mass. 

grouped. 88; Hayling v. Mulhall, 2 W. Bl. 

49a Raring v. Clark, 19 Pick. 220. (Eng.) 1235. 

49i> Perez v. Bank of Key West, ^3 Curtis v. Brooks, 37 Barb. (N. 

36 Fla. 467. Y.) 476 

49" Swan V. Carawan, 168 N. C. ^4 Dean v. Justice's Munic. Ct., 

472, 84 S. E. 699. 173 Mass. 453, 53 N. E. 893, 2 Am. 

50 Claxton V. Swift, 2 Show. B. R. 163. 
(Eng.) 441; Nor r is v. Aylett, 2 
Campb. (Eng.) 329. 



§§ 119-192 DISCHARGE OF INSTRUMENTS. 225 

§ 191. By renunciation by holder. The Negotiable Instru- 
ments Law provides that : 

"The holder may expressly renounce his rights against any 
party to the instrument, before, at or after its maturity. An 
absolute and unconditional renunciation of his rights against the 
principal debtor, made at or after the maturity of the instrument, 
discharges the instrument. But a renunciation does not affect the 
rights of a holder in due course without notice. A renunciation 
must be in writing, unless the instrument is delivered up to the 
person primarily liable thereon."^^ 

§ 192. When a person secondarily liable discharged. "A 

person secondarily liable on the instrument is discharged: 

"By any act which discharges the instrument ; 

"By the intentional cancellation of his signature by the holder; 

"By the discharge of a prior party; 

"By a valid tender of payment made by a prior party; 

"By a release of the principal debtor, unless the holder's right 
of recourse against the party secondarily liable is expressly re- 
served; 

"By any agreement binding upon the holder to extend the time 
of payment, or to postpone the holder's right to enforce the in- 
strument, unless made with the assent of the party secondarily 
liable, or unless the right of recourse against such party is ex- 
pressly re served. ''^^ 

Certain changes have been made in the above section of the law 
in some of the states. In IlHnois subdivision three is omitted ; 
at the end of subdivision five the following is added: "or unless 
the principal debtor be an accommodating party;" and subdi- 
vision six reads: "By an agreement in favor of the principal 
debtor binding upon the holder to extend the time of payment, or 
to postpone the holder's right to enforce the instrument, unless 
made with the assent prior or subsequent of the party secondarily 
liable or unless the right of recourse against such party is ex- 
pressly reserved, or unless the principal debtor be an accommo- 
dating party." In Maryland and New York the words "unless 
made with the assent of the party secondarily liable, or" are 
omitted in subsection 6. In Missouri the words "except when 
such discharge is had in bankruptcy proceedings," are added at 
the end of subdivision three. In Wisconsin the words "or unless 
he is fully indemnified," are added at the end of the section ; and 

55Neg. Inst. Law, § 122. where 56 Neg. Inst. Law. § 120, where 
all cases directly or indirectly bear- all cases directly or indirectly bear- 
ing upon or citing the Law are ing upon or citing the Law are 
grouped. grouped. 



226 NEGOTIABLE INSTRUMENTS. § 192 

a new subdivision numbered 4a, is interpolated, as follows "By 
giving up or applying to other purposes collateral security ap- 
plicable to the debt, or, there being in the holder's hands or with- 
in his control, the means of complete or partial satisfaction, the 
same are applied to other purposes." 



CHAPTER XVIII. 
CONFLICT OF LAWS, OR WHAT LAW GOVERNS. 

§ 193. In general. 197. As to liability of indorser. 

194. As to validity, interpretation § 198. As to presentment, protest 

and effect. and notice. 

194a. As to capacity. 199. Rule in federal courts. 

195. As to liability of maker, 199a. Damages upon dishonor of 

drawer and acceptor. foreign bills. 

196. As to payment, interest and 199b. Date at which rate of ex- 

damages, change should be applied. 

§ 193. In general. Suppose a note is made in Pennsylvania, 
payable in Ohio, indorsed in Kentucky, and suit is brought upon 
it in Illinois ; and suppose each of these states has a different 
law, which law will govern? 

As a general rule if the instrument is made in one state to be 
performed in another its negotiability will be governed by the 
laws of the state in which it is to be performed.''^ The formalities 
essential to the validity of a contract and the interpretation there- 
of and the matter as to the capacity of the parties are by the 
weight of authority to be governed by the laws of the country 
where it is made. Suppose a note is made in one jurisdiction 
and suit brought in another jurisdiction, what rule governs as lO 
the bringing of the suit? The law of the latter state. A man 
cannot come from another state and sue on a note under that 
state's method of procedure, but must proceed according to the 
law in the place where he sues. All matters respecting the 
remedy to be pursued including the bringing of suits, service of 
process, and admissibility of evidence, depend upon the law of 
the place where the action is brought.^ 

In some states in order for a note to be negotiable by the law 
merchant it must be payable at a bank. Now suppose some one 
gets such a note in another state where such is not the law and 

1 National Bank of America v. R. A. 801, and as to situs for pur- 
Indiana Banking Co., 114 111. 483, poses of administration, see note 24 
2 N. E. 401 ; Shae etc. National L. R. A. 689. 

Bank v. Wood, 142 Mass. 563, 8 N. 2 Garrigue v. Kellar, 164 Ind. 

E. 753. See note 61 L. R. A. 193. 676. 
As to where taxable, see note 2 L. 

227 



228 NEGOTIABLE INSTRUMENTS. § ISH 

he endeavors to recover upon that note. In order to show the 
law of that state he must introduce the special statute, because 
the court would presume that the common law prevailed. In or- 
der to show that the formalities were different in that state 
from what they are in another state, that special statute would 
have to be produced and introduced in evidence in another state 
to prove that, and if it is not introduced in evidence, then the 
common law would prevail.^ In order to have the statute to 
govern, the statute must be produced in another state to make it 
supersede the common law there, for if a note is executed in one 
state and suit is brought on it in another state, in the absence 
of the statute of the first state being pleaded, the common law 
prevails. 

If a bill on its face is an inland bill, the fact that it was 
actually drawn and delivered in a foreign state will not divest 
it of its inland character. The principle is that it is competent 
for the parties to provide, by agreement, that it shall be governed 
by the laws of any particular state or country.^* 

§ 194. As to validity, interpretation and effect. The valid- 
ity of a bill or note as regards requisites in form is determined 
by the law of the place of its issue."* As a negotiable instru- 
ment is not binding upon the parties until it is delivered, the 
place of contract is, therefore, the place where the instrument is 
delivered and not where it is written, dated and signed.'^ But in 
the absence of evidence to the contrary it will be presumed that 
the instrument was executed and delivered at the place where it 
bears date.* Where the instrument specifies a place of payment 
in a different state from that in which it was executed and de- 
livered it is governed by the laws of the state in which it is made 
payable as to its execution.''^ 

The question of the negotiability of a bill or note is to be deter- 
mined by the law of the state where it is made payable. A note 
payable generally and negotiable in the state where executed 
will be governed by the law of that state in case suit is brought 
there on the note after it has been indorsed in another state 

aWhidden V. Seelye, 40 Me. 247; ^Austed v. Sutter, 30 111. 164; 

Hunt V. Adams, 44 N. Y. 27; Fran- Ford v. Buckeye Ins. Co., 6 Bush, 

cis V. Ocean Ins. Co., 6 Cow. (N. 133. See also note 3 U. S. L. Ed. 

Y.) 404; Mason v. Dousay, 35 111. 205. 

424, 85 Am. Dec. 368. 5 Freese v. Brownell, 35 N. J. L. 

3a As to state statutes declaring 286; Bell v. Packard, 69 Me. 105. 

contracts executed by foreign corpo- ^ Lernig v. Ralston, 23 Pa. St. 

rations void under certain condi- 139. 

tions see cases cited under § 60, '' Strieker v, Tinkham, 35 Ga. 176. 
Neg. Inst. Law. 



§ 194a CONFLICT OF LAWS. 229 

where it is not negotiable. But it has been held that when a note 
is executed in one state and made payable in another that it will 
be governed for the purposes of negotiability by the law of the 
state where payable. 

Some jurisdictions state the rule to be that every contract as 
to its validity, nature, interpretation and effect — the right, in 
contradistinction to the remedy — is governed by the law of the 
place where made, unless to be performed iu another place when 
it is governed by the law of the place of performance.''* 

§ 194a. As to capacity. As a general rule the capacity of 
the parties is, with some few exceptions, determined by the law 
of the place with reference to which the contract is made. 

There is a conflict among the authorities, however, when the 
instrument is made in one state and is to be performed in another 
state. Some jurisdictions hold that when parties make contracts 
which upon their face are to be discharged in a state other than 
that in which they are executed, they are presumed, in the absence 
of anything to the contrary, to have intended the law of the state 
of performance, the les loci solutionis, to control, and thus, if 
intention can do so, to have voluntarily constituted the law of 
that state the law of the contract, or, the governing law ;'"'' and 
matters connected with the performance of the contract are regu- 
lated by the law prevailing at the place of performance.'^'^ 

The question as to capacity, where there is a conflict of laws, 
has often arisen as to the disability of coverture. In jurisdic- 
tions holding that the law prevailing at the place of performance 
controls it is stated that the disability of coverture arising from 
the law of the married woman's domicile does not follow her into 
other states, and where she goes into another state, and makes 
a contract valid by and to be performed in accordance with the 
laws of such state, she will be bound thereby, and such contract 
will be enforced wherever suit is brought, even in the state of 
her domicile, subject only to exception on ground of public policy 
in states where married women are totally incapacitated to con- 
tract.''" In other jurisdictions it is held that questions pertaining 
to the capacity of the party are determined by the lex loci con- 
tractus, that is, the law of the state where it was executed and 
not by that of the state wherein it is payable.''*' 

7a Poole V. Perkins, — Va. — '""Poole v. Perkins, supra. 

101 S. E. 240. 7« Garrigan v. Kellar, 164 Ind. 

''b Poole V. Perkins, supra. 676, 74 N. E. 523, 67 L. R. A. 870, 

70 Scudder v. Union Nat. Bank, 108 Am. St. Rep. 324. 

91 U. S. 1106, 23 L. Ed. 245. 



230 NEGOTIABLE INSTRUMENTS. § 195 

In jurisdictions which maintain the view that the formal 
validity of the contract or the capacity of the parties is deter- 
mined not by the place of performance but by the place of con- 
tract it is stated that where a contract is made in one state and, by 
its terms provides for its performance in another, and the laws of 
the two states differ, no fixed rule can be announced by which 
it can be determined in every case which law shall apply. Where 
the parties have manifested an intention in good faith to make 
their contract subject to the laws of one or the other of such 
states such intention will be given effect in construing the con- 
tract and determining the reciprocal rights and duties of the 
parties thereunder; but if the question to be decided relates to 
the capacity of the parties such question is to be determined in 
accordance with the lex loci contractus without regard to the 
intention of the parties.''* 

§ 195. As to liability of maker, drawer and acceptor. The 

obligation of the maker of a note is governed by the law of the 
place where the note is made or to be performed.* If a nego- 
tiable note is made in one state and payable there, and it is after- 
wards indorsed in another state, and by the law of the former, 
equitable defenses are let in, in favor of the maker, and by the 
latter excluded, what rule is to govern as to the holder? The 
answer is, the law of the place where the note was made ; for 
there the maker undertook to pay; and the subsequent negotia- 
tion did not change his obligation or right.® The contract of the 
drawer of a bill of exchange is governed by the law of the place 
where the bill is drawn,^** in regard to the rights of the payee 
and any subsequent holder, and not by the law of the place where 
accepted. This is so since the contract of the drawer is to pay 
the bill in the place where it is drawn, in case of the failure of 
the drawee to accept it,, and not to pay it at the place where the 
drawee resides. The liability of an acceptor of a bill of ex- 
change is governed by the law of the place of his acceptance,** 
as to the drawer, payee, and each subsequent holder, provided 
payment is to be made in the state where the acceptance was 
made. 

§ 196. As to payment, interest and damages. The obliga- 
tion of the maker to pay and that of the acceptor to accept is 

"^^2 Wharton, Conflict of Laws ^ Raymond v. Holmes, 11 Tex. 60. 

(3rd Ed.), sees. 427e-427n. Scud- i® Bank of U. S. v. U. S.. 2 How. 

der V. Union Nat. Bank, supra. 711, 11 L. Ed. 439; Raymond v. 

^Lawrence v. Bassett, 5 Allen Holmes, 11 Tex. 55. 
140; Wilson v. Lazier, 11 Gratt. 482. "Bissell v. Lewis, 4 Mich. 459. 



§§ 196-197 CONFLICT OF LAWS. 231 

governed by the law of the place of performance. Therefore the 
rate of interest will likewise be governed by the same law. And 
if the different parties to the instrument reside in different juris- 
dictions the law of the place where each is required to perform 
his obligation will govern.^^ In respect to interest, the maker of 
a note or the acceptor of a bill has a right to elect whether the 
legality of the rate shall be determined by the law of the place 
of payment, or of the place of execution. If a rate of interest is 
expressly provided for, which is usurious according to the law of 
the place of execution, and lawful according to the law of the 
place of payment, or vice versa, it will be lawful interest, and 
may be recovered anywhere, even in the place where the rate is 
declared to be usurious. ^^ But if the provision of the law, which 
applies in the determination of the legality and rate of interest 
and damages, is not established by proper testimony, the law of 
the place where suit is brought will govern.*'' 

The rate of interest payable as damages is determined by the 
law of the place of performance ; thus, in case of the acceptor or 
maker where the instrument is payable ; and in case of the drawer 
and indorser, where the contract of indemnity is to be performed, 
that is, at the place of drawing and indorsing. 

§ 197. As to liability of indorser. The liability of the in- 
dorser is said to be governed by the law of the place where the 
indorsement is made.*^ It is the new liability created by the 
indorsement in favor of the indorsee and subsequent indorsers 
that causes this law to govern. This law governs only as to the 
new liability created between the indorsee or subsequent indorsers 
and the prior indorsers. The rights of the transferee or indorsee 
against the original parties to the instrument are determined by 
the law of the place where the contract was made or is to be 
performed. Each successive holder of a commercial instrument 
has the same rights against the acceptor or maker, it matters not 
where the transfer was made.*^ These rights are determined by 
the lex loci contractus vel solutionis. The law of the forum de- 
termines always in whose name the suit may be brought, and to 
that extent governs the determination of the title of the in- 
dorsee.-*'^ 

laschofield v. Day, 20 Johns. 15 Lee v. Selleck. ZZ N. Y. 615; 
102 ; Summers v. Mills, 21 Tex. 77. Canton v. Barnes, SO Ala. 403. See 

13 Richards v. Globe Bank, 12 note 61 L. R. A. 212, 222. 

Wis. 692 ; Potter v. Tallman, 35 i® Robertson v. Burdekin, 1 Ross. 

Bash. 182. Lead. Cas. 812. 

14 Wood V. Cerl, 4 Met. 203 ; Ay- i^ Walsh v. Dart, 12 Wis. 635. 
mar v. Sheldon, 12 Wend. 221. 



232 NEGOTIABLE INSTRUMENTS. §§ 198-199 

§ 198. As to presentment, protest and notice. The required 
formalities in respect to presentment are determined by the law 
of the place of acceptance or payment or, as sometimes called, 
the law of the place of performance.^^ Thus where a draft is 
drawn in the state of A, by one residing there, upon a person 
residing in the state of B, any legal question in reference to pres- 
entation and demand for payment is to be determined by the laws 
of the state of B.^^^ This needs no explanation, as no other law 
could govern as to presentment except the law of the place of 
performance. The law of the place of payment governs as to 
the requirements in respect to protest.^'* If a bill is protested for 
non-acceptance the law of the state where the bill was presented 
for acceptance will govern, while if it is presented for non-pay- 
ment the law of the place of payment will govern. The necessity 
of making a demand and protest, and the circumstances under 
which the same may be required or dispensed with, are incidents 
of the original contract which are governed by the law of the 
place where the bill is drawn, rather than the place where it is 
payable.-^*** The authorities are divided as to what law governs 
the requirements in respect to notice, but the weight of American 
decision is to the efifect that the notice must conform to the law 
of the place where the contract of the maker or indorser is to be 
performed.^" 

§ 199. Rule in federal courts. In the courts of the United 
States, the decisions are in general in conformity with those of 
the state courts of last resort in respect to the liability of parties 
to bills and notes, but not uniformly .^^ In a late case a federal 
court held that where a question is governed by a Negotiable 
Instruments Law adopted by the state the federal court is bound 
to give force and efifect to the statute if applicable.**^ Where 
any controversy arises as to the liability of a party to a bill of 
exchange, promissory note, or other negotiable paper, in one of 
the federal courts of the United States, which is not determined 
by the positive words of a state statute, or by its meaning as con- 
strued by the state courts, the federal courts will apply to its so- 

18 Todd V. Neal's Admrs., 49 Ala. 21 Moses v. Laurence Co. Nat 
266. Bank, 149 U. S. 298, . 13 S. Ct. 90a 

18a Sylvester v. Crohan, 138 N. Y. 37 L. Ed. 743 ; Burgess v. Selig- 
494. man, 107 U. S. 20-33, 2 S. Ct. 10, 

19 Raymond v. Holmes, 11 Tex. 27 L. Ed. 359. 

54. 21a Smith V. Nelson Land and 

is^Amsick v. Rogers, 189 N. Y. Cattle Company, 212 Fed. Rep. 56, 
258. 122 C. C. A. 512. 

20 Lee V. Selleck, 33 N. Y. 32 ; 
Williams V. Putnam, 14 N. H. 543. 



§§ 199a-199b conflict of laws. 233 

lution the general principles of the law merchant, regardless of 
any local decision.** 

§ 199a. Damages upon dishonor of foreign bills. In some 
jurisdictions the statutes provide the amount of damages which 
may be recovered upon foreign bills upon their dishonor. These 
statutes often provide that said rules do not apply to promissory 
notes discounted by a bank and protested for non-payment. 

These statutes ordinarily provide that damages payable on pro- 
test for non-payment or non-acceptance of a bill of exchange 
drawn or negotiated within the state, shall be, if drawn upon any 
person at any place out of the state but within the United States, 
S% on the principal of the bill and that beyond such damages no 
interest or charges accruing prior to protest shall be allowed but 
interest from the date of protest may be recovered; and when 
such bills are payable within the United States the rate of ex- 
change shall not be taken into account. These statutes usually 
further provide that no damages beyond cost of protest shall be 
chargeable against the drawer or indorser if upon notice of pro- 
test and demand of the principal sum the same is paid, and that 
no holder of a bill of exchange shall recover damages thereon if 
he has not given a valuable consideration for the same or have 
some interest thereunder ; and that on any bill drawn or nego- 
tiated in the state and payable at any place without the state, or 
in regard to which it shall appear that it was not to be presented 
for acceptance or payment at that place, if means were provided 
for its discharge within the state, that no damages or charges for 
protest shall be allowed. 

§ 199b. Date at which rate of exchange should be applied. 
•Whenever money is due in a foreign country it becomes neces- 
sary to determine its equivalent in domestic currency. The ques- 
tion arises as to whether or not it should be at the date of the 
breach or the date of the judgment. The date of the breach has 
been adopted in England.*^ And the late American decisions 
point in the same direction.** 

23 Swift V. Tyson. 16 Pet. 1 ; see 23 Scott v. Bevan, 2 B. & Ad. 78. 

Hughes (W. T.) Prac. 1214, for 34simonoff v. Granite City Na- 

full statement and bibliography; tional Bank, 279 111. 248, 116 N. E. 

Brooklyn City, etc. Railroad Co. v. 636; Pavenstedt v. New York Life 

Nat. Bank, 102 U. S. 14, 26 L. Ed. Ins. Co., 203 N. Y. 91, 96 N. E. 104. 
61. 



CHAPTER XIX. 



SUBDIVISION A— CHECKS. 



\ 200. Check defined and distin- 
guished from bill of ex- 
change. 

201. The formalities of a check. 

202. Presentment of a check for 

payment. 

203. Certification of check. 

204. Forgery and alteration of 

check. 

205. Memorandum check. 

206. Stale check. 
206a. Cashier's check. 

206b. Paid or cancelled check. 



§ 206c. Crossed check. 
206d. Fraudulent check. 
206e. Stolen checks or stolen ne- 
gotiable securities. 
206f. Check as payment. 

206g. Stopping payment. 

207. Chcckholder's right to sue 

the bank. 

208. The depositor's right to draw 

on the bank. 

209. Failure of bank to honor 

check. 



§ 200. Check defined and distinguished from bill of ex- 
change. The Negotiable Instruments Law defines a check as 
follows: "A check is a bill of exchange drawn on a bank, pay- 
able on demand." To this definition is added the following pro- 
vision : "Except as herein otherzvise provided, the provisions of 
this act applicable to a bill of exchange payable on demand apply 
to a check "^ 

In other words a check is a commercial instrument which is in 
the form and nature of an inland bill of exchange, payable on 
demand.^ 

A check unlike a bill of exchange, is always drawn upon a 
bank or banker and is always payable on demand without days 
of grace.^ It is not necessary that a check be presented for ac- 
ceptance as in case of a bill of exchange.^ However, if the 
holder requests it and the banker desires he may accept it. 

13 L. R. A. (N. S.) 211. As to 
nature of checks, see note 7 L. 
R. A. 595 and as to what are 
checks, see note 7 L. R. A. 489. 

^ McDonald v. Stokey, 1 Mont. 
388; In re Brown, 2 Story (U. S.) 
502, 4 Fed. Cas. No. 1.985 ; Hawley 
V. Jette, 10 Oreg. 31, 45 Am. Rep. 
129. 

^ In re Brown, 2 Story (U. S.) 
502, 4 Fed. Cas. No. 1,985; Bowen 
V. Newell, 5 Sandf. (N. Y.) 326. 



"^ Neg. Inst. Law, § 185, where 
all cases directly or indirectly bear- 
ing upon or citing the Law are 
grouped. 

2 Exchange Bank v. Sutton Bank, 
78 Md. 577, 28 Atl. 563, 23 L. R. 
A. 176; Minot v. Russ, 156 Mass. 
458, 31 N. E. 489, 32 Am. St. Rep. 
472, 16 L R. A. 510. As to remedy 
of payee of a check against one 
who has taken it on indorsement 
of unauthorized agent, see note 



234 



§200 SUBDIVISION A— CHECKS. 235 

The whole theory and use of a check points to its immediate 
payability. A depositor places money with his bank or banker, 
where it is subject at any time to his order ; and by his check or 
order he desires to appropriate so much of it to another person, 
and the bank or banker, in consideration of its temporary use 
of the money, agrees to pay it in whole, or in parcels, to the 
depositor's order when demanded. Biit he does not agree to con- 
tract to pay at a future day by acceptance and the depositor can 
not require it.^' 

A check is similar to a bill of exchange in that it is a nego- 
tiable instrument,® if negotiable in form, and is subject to the 
same rules regarding its transfer. A check may be transferred 
by indorsement and the indorser incurs the same liability as the 
indorser of a promissory note or bill of exchange. Like a bill, 
a check must contain an order ; the order must be for the payment 
unconditionally and at all events ; and it must be for a certain 
sum of money.® If an instrument is drawn in all respects as a 
check except that it orders payment at a day subsequent to its 
date, it is then a bill of exchange and not a check, being subject 
to all the rules governing bills of exchange.'^ 

Unless a specific date of payment is mentioned, a check is pay- 
able upon demand under Section 7 of the Law.''" 

The drawer of a bill of exchange is discharged by default of 
the payee or holder in making due presentment to the drawee 
and in giving notice in case of dishonor, while in case of a check 
the drawer is not discharged by the failure of the payee or holder 
to take the above steps unless the delay was unreasonable.^ A 
check is due when demand is made for payment and the 
statute of limitations begins to run after that time. A check 
may be accepted as payment.^' 

^^Mt. Sterling National Bank v. ''» Riddle v. Bank of Montreal, 

Green, 99 Ky. 262, 35 S. W. 911. 145 App. Div. (N. Y.) 207. 

5 Gate City Bldg. etc. Assn. v. « Bull v. Bank, 123 U. S. 105, 

Nat. Bank of Commerce, 126 Mo. 31 L. Ed. 97; Stewart v. Smith, 17 

82, 28 S. W. 633, 47 Am. St. Rep. Ohid St. 82; Serle v. Norton, 2 

633, 27 L. R. A. 401. IMoody & R. 401. As to release 

® Grisson v. Commercial Nat. of indorser of check by delay in 

Bank, 87 Tenn. 350, 10 S. W. 774, presenting it, see notes 22 L. R. A. 

10 Am. St. Rep. 669, 3 L. R. A. 785 and 17 Am. St. Rep. 810. As 

273. to recovery by holder from drawer 

'' Whitehouse v. Whitehouse, 90 or indorser, see 17 Am. St. Rep. 

Me. 468, 38 Atl. 374, 60 Am. St. 807. 

Rep. 278; Harrison v. Nicollet Nat. Sa ^g ^q pavment bv check, see 

Bank, 41 Minn. 488, 43 N. W. 336, note in 7 L. R. A. 442, and as to 

16 Am. St. Rep. 718, 5 L. R. A. effect of acceptance of check as 

746. payment, see note 9 L. R. A. 263. 



236 NEGOTIABLE INSTRUMENTS. §§201-202 

, A cashier's check, whether certified or not, is classed with bills 
of exchange payable on demand.^'' 

§ 201. The formalities of a check. A check as to its form 
and formalities differs but little from that of a bill of exchange. 
All the various requisites of negotiable paper must be complied 
with in case of a check ; there must be certainty as to amount, 
time and the person to whom payment shall be made and the 
payment must be in money.** In order that the check may be 
negotiable it must contain words of negotiability, but the absence 
of such words does not affect the character of the check other 
than that it is non-negotiable. The signature may be in pencil 
as well as in ink, it may be stamped or even printed if adopted as 
one's signature; and it may be by mark. Usually a check does 
not contain the address of the drawee, while in a bill of exchange 
it is almost invariably written in the lower left hand corner. The 
address of the bank is usually written or printed in large letters 
across the top, just below the date and place of execution. A blank 
space may be left for the payee's name, which would indicate 
authority to any bona fide holder to insert his name as payee.®' 

A check may bear its actual date, or be ante-dated or post- 
dated. The Negotiable Instruments Law provides : "The instru- 
ment is not invalid for the reason only that it is ante-dated or 
post-dated, provided this is not done for an illegal or fraudulent 
purpose. The person to whom an instrument so dated is delivered 
acquires the title thereto as of the date of delivery."^** 

Under the above section an indorsee of a post-dated check is 
not put upon inquiry merely because of the negotiability of the 
check prior to the day of its date.'"' 

The sum should be distinctly and carefully expressed in figures 
and in words to avoid any dispute. While either words or figures 
are sufficient, if they differ, the words control. A change of the 
figures, so as to conform them to the words made by the holder, 
without the knowledge or consent of the drawer, is not a material 
alteration or forgery."" 

§ 202. Presentment of a check for payment. The main pur- 
pose of presentment for payment being made in due time is to fix 

8»» Singer Mfg. Co. v. Summers, 9» Mcintosh v. Lytic. 23 Minn. 

143 N. C. 103. 2^6. 

» Ridgely Nat. Bank v. Patton, 9" Neg. Inst. Law, § 12. 

109 III. 479; Industrial etc. Bank 9o Albert v. Hoffman, 64 Misc. 87, 

of Chi. v. Bowers. 165 111. 70, 46 117 N. Y. Supp. 1043. 

N. E. 10, 56 Am. St. Rep. 228 ; Od Smith v. Smith, 1 R. I. 398. 
State V. Warner, 60 Kan. 90, 55 
Pac. 342. 



§ 202 SUBDIVISION A — CHECKS. 2Z7 

the liability of the drawer in case the bank fails before payment is 
made. The Negotiable Instruments Law provides that : 

"A check fnust be presented for payment within a reasonable 
time after its issue or the drawer zvill be discharged from liabil- 
ity thereon to the extent of the loss caused by the delay."^^ 

This is simply the enactment of a general principle of law 
which existed prior to the passage of the act. Simply the want 
of due presentment of a check will not discharge the drawer, 
unless he has suffered some loss or injury thereby.^* The only 
injury which would be sustained by the drawer in case present- 
ment was not made within a reasonable time would be caused by 
the failure of the bank subsequent to the delivery and prior to 
the presentment of the check. Justice Story states the rule in 
the following language : 'Tf a bank or banker still remains in 
good credit and is able to pay the check, the drawer will still re- 
main liable to pay the same, notwithstanding many months may 
have elapsed since the date of the check, and before the pre- 
sentment for payment and notice of the dishonor. So if the 
drawer at the date of the check or at the time of the present- 
ment of it for payment had no funds in the bank or banker's 
hands, or if, after drawing the check and before its presentment 
for payment and dishonor, he had withdrawn his funds, the 
drawer would remain liable to pay the check, notwithstanding 
the lapse of time."" 

As to what is a reasonable time the Negotiable Instruments Law 
provides: "In determining what is a 'reasonable time' or an 'un- 
reasonable time/ regard is to be had to the nature of the instru- 
ment, the usage of trade or business (if any) with respect to such 
instruments, and the facts of the particular case."^^" 

Thus far we have only discussed the effect of delay in pre- 
sentment as to the drawer. Now we will consider its effect upon 
an indorser. We have already seen that delay in presentment 
does not discharge the liability of the drawer unless he has sus- 
tained a loss thereby, but we find that a different rule applies as 
to an indorser. As between the holder and an indorser the rule 

i»Neg. Inst. Law, §186, where 25 L. R. A. 200; Bull v. Bank, 123 

all cases directly or indirectly bear- U. S. 105 ; Little v. Bank, 2 Hih 

ing upon or citing the Law are (N. Y.) 425; Henshaw v. Root, 60 

grouped. As to necessity of de- Ind. 220; Stewart v. Smith, 17 

mand, see note 7 L. R. A. 490 and Ohio St. 82 ; Alexander v. Burch- 

as to the time of presenting a check, field, 7 Mon. & G. 1061. As to pre- 

see note 13 L. R. A. 43. As to sentment and notice, see note 41 

when check must be presented for U. S. L. Ed. 855. 

payment, 17 Am. St. Rep. 807. 12 gtory on Promissory Notes, 

"Anderson v. Gill, 79 Md. 312. §498. 

Z9 Atl. 527, 47 Am. St. Rep. 402, ia» Neg. Inst. Law, § 193, 



238 NEGOTIABLE INSTRUMENTS. § 203 

is that the check must be presented within the time prescribed 
by the law merchant, which is usually the following day, and if 
such presentment is not made within a reasonable time the in- 
dorser will be discharged from any liability.^^ The question 
that now arises is what constitutes a reasonable time. The law 
merchant has established the rule that where the parties all re- 
side in the same place the holder must present it not later than 
the next day.*^ This is not, however, an absolute and iron-clad 
rule. What is a reasonable rule will depend upon circumstances 
and will in many cases depend upon the time, the mode, and the 
place**^ of receiving the check and upon the relation of the par- 
ties between whom the question arises.^^' 

If a bank pays a check after the death of a depositor, but before 
the bank has received knowledge of that fact, it is a valid pay- 
ment and the bank is not Hable for the amount to the personal rep- 
resentative of the depositor, for on principles of necessity incident 
to the banking business, if the bank pays in good faith and without 
notice of the death of the drawer, it is protected.^^" But if a bank 
pays a check with knowledge of the drawer's death it is liable for 
the amount to his estate. 

Where the payee of a check collects it after the death of the 
drawer, he must refund the amount to the drawer's estate.^'" 

§ 203. Certification of check. Certification of a check is an 
agreement whereby the bank agrees to pay the check at any 
future time when presented for payment. The certification of 
checks is an expedient and outgrowth of modern commerce quite 
recent in its origin, but now of daily and extensive occurrence. 
It enables persons not well acquainted to deal promptly with 
each other, and it avoids the delay and risks of receiving, count- 
ing and passing from hand to hand large sums of money.*'" No 
particular form of words is necessary, but the usual method of 

13 Miller v. Moseley, 26 La. Ann. Buckhannon Bank, 80 Md. 475, 31 
667; Wymore First Nat. Bank v. Atl. 302, 21 L. R. A. 332; Parker 
Miller, 43 Neb. 791, 62 N. W. 195; v. Reddick, 65 Miss. 242, 3 So. 575, 
Smith V. Jones, 20 Wend. (N. Y.) 7 Am. St. Rep. 646; Wymore First 
192, 32 Am. Dec. 527. As to duty Nat. Bank v. Miller, 43 Neb. 791, 
of holder to present, see note 17 62 N. W. 195. 

Am. St. Rep. 807. isa Merchants' Bank v. State 

14 Morris v. Eufaula Nat. Bank, Bank, 10 Wall. 648 (U. S.). 

122 Ala. 580, 25 So. 499, 82 Am. i5b Qigrman v. Rochester Trust 

St. Rep. 95; Hamilton v. Winona etc. Co., 209 N. Y. 12, 102 N. E. 

Salt etc. Co., 95 Mich. 436, 54 N. 537, 53 L. R. A. (N. S.) 302. 

W. 903; Grange v. Reigh, 93 Wis. i-"'" /n re Adamson, 154 N. Y. 

552, 67 N. W. 1130. Supp. 667. 
1* Grafton First Nat. Bank y, 



§ 203 SUBDIVISION A — CHECKS. 239 

certification is by stamping or writing- upon the check the word 
"certified" and adding the date of the certification. After a check 
is once certified at the request of the holder, the drawer is released 
from all liability and all subsequent indorsers are discharged from 
their obligations. 

The Negotiable Instruments Law provides : 

"Where the holder of a check procures it to he accepted or cer- 
tified the drawer and all indorsers are discharged from liability 
thereon."^^ 

But the drawer is not discharged when the check is certified at 
the procurement of said drawer, even if he has the check certi- 
fied at the request of the one to whom it is payable. So if the 
drawer has the check certified and then delivers it, the certifica- 
tion does not discharge the drawer. 

The bank, after the certification, will not be allowed to dispute 
the genuineness of the drawer's signature or to question the suf- 
ficiency of the funds in its hands to pay, as against a bona fide 
holder.*'' Neither will the bank be allowed to deny the validity 
of the check on the ground that no payee is named therein, be- 
cause in such case it will be held payable to bearer. A bank can 
not refuse to pay a check which it has certified in order that the 
drawer may enforce a right of set-off against the payee.*''* The 
above section of the law applies where a bank, which has taken 
its customer's check on another bank and given him credit there- 
for, has the check certified by the drawer.*'" 

The efifect of certification is that the bank by certifying the 
check becomes the principal and only debtor, and the holder by 
taking a certificate of the check from the bank, instead of re- 
quiring payment, discharges the drawer, that is, "Where a check 
is certified by the bank on which it is drazvn the certification is 
equivalent to an acceptancef^^ The check then circulates as the 
representative of so much cash in bank, payable on demand to the 
holder. 

i« Neg. Inst. Law. § 188, where ation of check, 19 U. S. L. Ed. 

all cases directly or indirectly bear- 1008. 

ing upon or citing the Law are But see Marine Nat. Bank v. 

grouped. As to effect of certifica- Nat. City Bank, 59 N. Y. 67. 

tion, see note 12 L. R. A. 492, and i^a Ca^negie Trust Co. v. First 

as to effect on liability of drawer, National Bank, 213 N. Y. 301, 107 

see note 16 L. R. A. 510. N. E. 693, L. R. A. 1916C, 186. 

*^ Farmers & Mechanics Bank v. *'''' Lyons v. Union Exchange Na- 

Rutchers & Drovers Bank, 16 N. Y. tional Bank, 150 App. Div. (N. Y.) 

125; Espy v. Bank, 18 Wall. 621. 493, 135 N. Y. Supp. 121. 

21 L. Ed. 947 ; Louisiana Nat. Bank 18 Ngg ipsj l^^^ § jg;^ ^^ j ^ases 

V. Citizens Bank, 28 La. Ann. 189. cited. As to parol certification see 

As to liability of bank on certific- note 7 L. R. A. 428. 



240 NEGOTIABLE INSTRUMENTS. §203 

And a bank which certifies a raised check and afterwards pays 
it is entitled to recover the amount from the bank to which it 
was paid as opportunity of discovering the alteration was equally 
open to the collecting bank.^*** 

We shall next notice who may certify a check. The board of 
directors as the governing body of the corporation or bank may 
delegate to other officers who have not implied power, the power 
to certify checks. The officers having implied power are the 
president, cashier and teller.*" The assistant cashier has not this 
power and if he certifies a check, signing his name with his official 
title, "Asst. Cashier," without authority, it is generally held that it 
is not binding on the bank even in the hands of a bona -fide holder. 

A check cannot be certified before it is payable. Thus if a 
check is post-dated, the bank would not be bound by a certifica- 
tion made before the date on which the check is payable.*® Such 
check carries notice to all that the certification was beyond the 
officer's authority. If the commercial character of the check has 
been destroyed in any manner the officer of the bank is not au- 
thorized to certify it. If the officer certifies a check of a person 
who has no funds there, the bank is not bound by it except as to 
a bona fide holder without notice.** 

Of course a certification must be in writing, thus a bank is not 
liable on equitable grounds to the holder for the amount of an 
unaccepted check which it has refused to pay though the holder 
acquired the check on the oral representation of the bank that 
the drawer had funds on deposit to meet the check, and that the 
check was good, and that the holder might safely take it in pay- 
ment for goods sold the drawer.*** And so a telephone message 
is not a good certification but a telegram sent by a bank that it 
would pay a certain check has been held to be a certification.**'' 

li^' National Reserve Bank v. ^OQari^g Nat. Bank v. Bank of 

Coon Exchange Bank, 171 App. Div. Albion, 52 Barb. 592. 

195, 157 N. Y. Supp. 316; Jackson ai Atlantic Bajik v. Merchants 

Paper Co. v. Commercial Bank, 199 Bank, 10 Gray 532; Cooke v. State 

111. 151. Nat. Bank, 52 N. Y. 96, 11 Am. Rep. 

1^ Merchants Bank v State 667. 

Bank, 10 Wall. 604, 19 L. Ed. 1008 ; **" Rambo v. First Nat. State 

Cooke V. State Nat. Bank, 52 N. Bank of Argentine, 88 Kans. 257, 

Y. 96, 11 Am. Rep. 667. 128 Pac. 182. 

But see Atlantic Bank v. Mer- **'' Henrietta Bank v. State Bank, 

chants Bank, 10 Gray 532. — Tex. — , 16 S. W. 321 ; Atchison 

Bank v. Garretson, 51 Fed. 168. 



204 SUBDIVISION A — CHECKS. 241 

Below is a form of certification: 



^ Detroit, Mich., December 1, 1922. 

THE %^LE NATIONAL BANK. 

Pay to the % % 

order of Albert^rte?^ , $200.00 

l^xvo^Mundrcd Dollars 

% V JOHN MARSH 



204. Forgery and alteration of check. The rules g-overn- 
ing forgeries and alterations to commercial paper in general 
are applicable to checks.^*'' The bank is under a peculiar obli- 
gation, however, to know the signatures of its depositors 
on the checks drawn against it. But the bank is not 
presumed to have any peculiar knowledge of the gen- 
uineness of the contents of the checks. It is very com- 
mon now that a check is filled out by a clerk and then signed by 
the maker. Therefore a bank is not charged with as great a 
degree of knowledge as to the genuineness of the contents of the 
checks as of the signature of the drawer. If the bank pays a 
check which has been altered in any material respect it may re- 
cover the money so improperly paid, since the holder of the 
check guarantees the genuineness of its contents. The general 
rule therefore is that the bank is strictly held to know the signa- 
ture of its depositors and money paid on forged checks cannot 
be recovered.** In some jurisdictions there are statutes pro- 
viding that no bank shall be liable to a depositor for the pay- 
ment by it of a forged or raised check, unless within one year 
after the return to the depositor of the voucher of such pay- 
ment, such depositor shall notify the bank that the check so paid 
was forged or raised.*** A mutilated check puts one on in- 
quiry; thus a bank is guilty of negligence and is responsible to 

210 As to liability of person whose 327, 27 L. R. A. 635. As to draw- 
name is forged, see note 36 L. R. ee's duty to know signature, see 
A. 539. As to rights of holder of note 27 L. R. A. 635. As to bank's 
forged check, see notes 17 Am. St. liability to depositors for payment 
Rep. 890 and 94 Am. St. Rep. 645. of forged check, see notes 2 L. R. 

22 First Nat. Bank of Danvers v. A. 96, 7 L. R. A. 596, 849 and 12 

First Nat Bank of Salem, 151 L. R. A. 793. As to duty of deposi- 

Mass. 280, 24 N. E. 44; First Nat. tor as to forged check, see notes 27 

Bank v. Northwestern Nat. Bank, L. R. A.. 426, 36 L. R. A. 539. 

152 111. 296, 38 N. E. 739, 26 L. R. 22« Leather Mfgrs. Bank v. Mor- 

A. 289; Germania Sav. Bank v. gan, 117 U. S. 96. 
Boutell, 60 Minn. 189, 62 N. W. 



242 NEGOTIABLE INSTRUMENTS, § 205 

the drawer in paying without inquiry a check which has been 
torn in pieces and pasted together again.^^" A savings bank is 
not liable for payments made upon a forged draft unless negli- 
gence can be imputed to it; that is, unless the discrepancy be- 
tween the signature is so marked and plain that an ordinary 
competent clerk should detect the forgery. Thus the liability 
differs from that of ordinary banks of deposit, which, as we 
have seen, are absolutely liable for payments on forged checks 
no matter how skillful the forgery may be.^^" But the bank is 
not held to so strict a knowledge of the contents of the check 
because they are not charged with knowledge of the handwrit- 
ing in the body of the check, since it may or may not be the 
handwriting of the drawer. The bank is still liable to a payee 
or indorsee on whose • indorsement alone the check is payable, 
although the money has been paid on a forged indorsement. 
But the bank is not supposed to know the signature of indorsers, 
and if any of them be forged the bank can recover back the 
money paid out on the check. 

Where a drawee bank paid and charged to the account of the 
drawer checks indorsed by an agent of the payee who had no 
authority to indorse or collect the checks and who appropriated 
the money, said drawee bank is liable in conversion, if upon de- 
mand for their surrender the bank should refuse to deliver the 
checks. The bank is not liable to the payee in assumpsit for 
money had and received under such circumstances. And should 
the bank deliver the checks, a plaintiff could present them to the 
bank for payment, and should payment be refused, the plaintiff 
could notify the drawer and recover from him. 

§ 205. Memorandum check. A memorandum check has 
been described to be a contract by which the drawer engages 
to pay the bona fide holder absolutely, and not upon a condition 
to pay upon presentment at maturity, and if due notice of the 
presentment and non-payment should be given.*^ The word 
"memorandum" written or printed upon the check describes the 
nature of contract with precision. In form and appearance a 
memorandum check does not differ from an ordinary check ex- 
cept that the words "memorandum," "mem" or "memo" are 
written upon the face of the check. Such a check is given by the 

22b Scholey v. Ramsbottom, 2 23 Turnbull v. Osborne, 12 Abbott 

Camp. (Eng.) 485. Prac. (N. S.) 200; Franklin Bank 

22c Noah V. Bank of Savings, 171 v. Freeman, 33 Mass. (16 Pick.) 

App. Div. (N. Y.) 191; Kelly v. 535. 
BuflFalo Savings Bank, 180 N. Y. 
171. 



§§ 206-206a subdivision a — checks. 243 

drawer to the payee more in the nature of a memorandum of in- 
debtedness than as payment.^'* In the case of a regular check 
demand for payment and a refusal on the part of the bank are 
necessary steps before the holder can maintain an action against 
the drawer, while in the case of a memorandum check the drawer 
may be sued the same as upon a promissory note.^^ If such a 
check is presented for payment, and the drawer has sufficient 
funds to meet it, the bank must honor it like any ordinary check. 
If the agreement between the drawer and payee is that it shall not 
be presented for payment, any remedy of the drawer for the 
breach of such agreement is solely against the payee.^® If a 
memorandum check has been indorsed to a bona fide holder for 
value the check then presents all the features of other negotiable 
instruments. 

§ 206. Stale check. A stale check is one where there has 
been unreasonable delay by the holder in presenting for pay- 
ment. It is always unsafe to delay the presentment for the 
double reason that the drawer or indorser may be discharged by 
loss occasioned by the failure of the bank and because a stale 
check is looked upon with suspicion since custom has established 
the fact that checks are not supposed to remain long in circula- 
tion. Some jurisdictions hold that if the bank pays a stale check 
which for any reason may be invalid, the bank will be held to 
have done so at its peril, as the fact that the check was stale was 
sufficient to put the bank upon inquiry.*^ It has also been held 
that a purchaser is put upon notice as to the genuineness of a 
check by the fact that it is stale. There is no absolute rule which 
may be laid down in determining when a check is stale.^'^* 

§ 206a. Cashier's check. A cashier's check is one drawn 
by a bank upon itself. It is a bill of exchange drawn on the 
bank upon itself, and is accepted by the act of issuance. The 
right of countermand, as applied to ordinary checks, does not 
exist as to it. 

A cashier's check, whether certified or otherwise, is classed 
with bills of exchange payable on demand.^^ 

24 United States v. Isham, 17 294; Estes v. Shoe Co., 59 Minn. 

Wall. 496. 21 L. Ed. 728. 504, 61 N. W. 674 ; First Nat. Bank 

asVan Schaack, Bank Checks, v. Needham, 29 la. 249; Bull v. 

184. Bank, 123 U. S. 105. As to when a 

2« Morse, Banks, 313. check is considered stale, see note 

27 Lancaster Bank v. Woodward, 13 L. R. A. 44. 

18 Pa. St. 357. 28 Singer Mfg. Co. v. Summers, 

27a Ames V. Merriam, 98 Mass. 143 N. C. 102, 55 S. E. 522. 



244 NEGOTIABLE INSTRUMENTS. §§ 206b-206d 

§ 206b, Paid or cancelled check. A check if payable to 
order when paid or cancelled is presumed to be a receipt for 
the debt or obligation. 

A bank has the right to keep a cancelled check until the de- 
positor's account is balanced. But after debiting it against the 
drawer in account with the bank, it is the duty of the bank to 
return the check to its depositor, who has the better right to its 
permanent possession as it is to him a voucher of payment of his 
debt to the payee named in it ; and the bank, until it returns the 
check, has been said to hold it only as agent of the drawer.*®* 

§ 206c. Crossed check. A crossed check is one which in 
addition to the ordinary check contains also the name of a cer- 
tain banker through whom it must be presented for payment. 
The name of the banker is usually stamped across the face of 
the check. This does not destroy the negotiability of the check. 

Such checks are used in Canada and in England but not often 
in the United States. 

The statute in England provides that the object of the crossed 
check is to provide that drawers or holders of drafts, payable to 
bearer or order on demand, may be enabled efifectually to direct 
the payment of the same only to or through some banker, and 
that the crossing shall have the force of a direction to the bank- 
ers upon whom the check is drawn, that it is to be paid to or 
through some banker, and that the same shall be payable only 
to or through some banker.*^"* 

§ 206d. Fraudulent check. It is usually provided by stat- 
ute in the different jurisdictions that one issuing a check or other 
negotiable instrument without having a deposit in bank to meet 
said instrument and thereby obtaning credit or something of 
value thereon is guilty of a crime. 

Under many of these statutes if the check is issued and pay- 
able at a future date, it is not fraudulent.*®" A bank is not liable 
to a minor or infant depositor for the payment of checks ob- 
tained by fraud by the payee thereof.*®*" 

If the drawer delivers his check to an impostor or wrong per- 
son and the bank pays the check the drawer must suffer the loss 
and not the bank.*®® Thus when a depositor signed a check in 
blank and it was stolen and a scoundrel filled in the blank with 
his own name and the amount, the bank has a right to pay the 

28a Morse on Banking, 291. 28d Smalley v. Central — Ind. 

28b Simmons v. Taylor, 2 C. B. App. — , 125 N. E. 789. 

(N. S.) 528, 27 L. J. C. P. 45. 248. 28e Meyer v. Indiana National 

28'= Brown v. The State, 166 Ind. Bank, 27 Ind. App. 354. 
85. 



§ 206e SUBDIVISION a — checks. 245 

money to such scoundrel and the depositor is the loser. But 
where the scoundrel filled the name as "A. B.'' and not his own 
name and the bank paid it without identification of the scoundrel, 
the bank is liable.^""' 

Where the drawer of a check delivers it to an impostor, be- 
lieving him to be the payee named in the check, the indorsement 
thereof by the impostor is not a forgery, and the drawer is liable 
to any subsequent bona fide holder.^*' And where a check is en- 
closed in a letter which is directed by mistake of the drawer of 
the check, and the letter is delivered to another person of the 
same name as the payee, who indorses and negotiates the check, 
which is finally received by the drawer bank and paid and 
charged to drawer's account, the latter cannot recover from the 
bank.^sh 

§ 206e. Stolen checks or stolen negotiable securities. The 

thief acquires no title to the negotiable security which he steals 
and neither does any one who has notice that the instrument was 
stolen. The owner may trace the instrument or its proceeds so 
long as it or its substitute can be identified in the hands of the 
thief or holder with notice.^^' 

If however the instrument is indorsed in blank, or payable or 
indorsed to bearer, a bona fide holder for value and without notice 
may retain the instrument as against the true owner, upon whom 
the loss falls, and enforce payment by any party liable thereon.^**^ 

Under Section 57 of the Law a bona fide holder of a check pay" 
able to bearer can acquire a good title thereto from one who has 
stolen it.^'^'' But this section is to be construed in connection 
with Section 15 of the Law and if the check is incomplete when 
stolen, it is not valid in the hands of any holder.^'^' 

When a blank check left by the drawer with his bookkeeper 
is stolen by an employee, filled out and collected, the payment 
of the drawer bank is valid as against the drawer, since the 
drawer is under a duty to see that his checks do not get into 
the hands of those for whom they are not intended.^^"* 

Where a check, complete in every respect, except as to de- 

28* Citizens National Bank v. 28j Jefferson Bank v. Chapman- 
Reynolds — Ind. App. — , 126 N. E. White-Lvons Co., 122 Tenn. 415, 
234. 123 S. W. 641. 

28b Burrows v. Western Union 2Sk Massachusetts National Bank 

Telegraph Co., 86 Minn. 499, 90 N. v. Snow, 187 Mass. 160; Jefferson 

W. 1,111 ; Meyer v. Indiana National Bank v. Chapman, 122 Tenn. 415. 

Bank, 27 Ind. App. 354, 61 N. E. 28i Linick v. Nutting, 140 App. 

596. Div. (N. Y.) 265. 

28h Weisberger v. Bank, 84 Ohio 28m Trust Company of America 

St. 21. V. Conklin, 65 Misc. Rep. (N. Y.) 

28i Newton v. Porter, 69 N. Y. 1,119 N. Y. Supp. 367. 
133. 



246 NEGOTIABLE INSTRUMENTS. § 206f 

livery, is stolen from the drawer by the payee and negotiated by 
the latter to a holder in due course, the holder is entitled to re- 
cover thereon. ^'^" 

When an instrument is stolen and negotiated, the burden is 
upon the holder to show that he himself is a holder in due course, 
or that he claims under such a holder ; and there is no presump- 
tion that the thief negotiated the instrument before it became due. 

§ 206£. Check as payment. In some jurisdictions the giv- 
ing of a check to a creditor is not in itself a satisfaction of the 
debt unless the check is paid;^^" in some other jurisdictions a 
check when delivered is presumed to be in payment of the obli- 
gation or debt, but this presumption may be rebutted by the 
facts. A question which frequently arises is whether a check 
given for a less amount than the debt or obligation and marked 
in full payment or with words to that effect, or accompanied by 
a letter stating that it is sent in full payment, is, as a matter of 
fact a full payment, that is, may such check pay a less amount 
for a larger amount. 

The general rule is that if the debt or obligation is unliqui- 
dated the acceptance of the smaller amount is good as an accord 
and satisfaction, thus where there is a controversy, and the 
debtor claims to owe less than the amount paid, while the credi- 
tor claims more, the acceptance of a check in compromise is bind- 
ing on both parties. Where there is no dispute as to the amount 
owing by the debtor, and he only seeks to set off an alleged 
indebtedness in another transaction, the acceptance of a portion 
of the amount admitted to be due is not a satisfaction of the 
balance of the accovmt.^^" 

A memorandum on a check that it was for a balance due is 
not conclusive, but is subject to be explained by parol.*^' 

§ 206g. Stopping payment. The order to stop payment 
must be communicated to the bank before the check to which 
it refers has been paid ; and in the absence of a rule of the bank 
that stop orders must be in writing, a verbal notice is suf- 
ficient."*"" If a bank pays a check after payment has been 

28" Schaefer v. Marsh, 90 Misc. App. 300; Cox v. Hayes, 18 Ind. 

Rep. 307, 153 N. Y. Supp. 16; North- App. 220. 

hampton National Bank v. Kidder, 2Sp Carton & Jeffrey v. Wm. 

106 N. Y. 221 ; Hinckley v. Mer- Thackberry Co., 139 Iowa 586, 117 

chants' National Bank, 131 Mass. N. W. 953. 

147. 38q Bade v. Hibberd, 50 Ore. 501, 

280 Burkhalter v. Second National 93 Pac. 364. 

Bank, 42 N. Y. 538; Union Biscuit 2Sr Brandt v. Public Bank, 139 

Company v. Grocery Co., 143 Mo. N. Y. App. Div. 173, 123 N. Y. 

Supp. 207. 



§ 206f SUBDIVISION A — CHECKS. 247 

stopped, it cannot charge the amount against the depositor's ac- 
count.^**' 

The certification of a check by the drawee bank terminates 
the drawer's right to stop payment.^^* And so notice to a bank 
by a depositor that his certified check, indorsed in blank, had 
been lost and to stop payment, will not justify the bank in re- 
fusing payment to a holder in due course.^^" 

The Negotiable Instruments Law provides: "Notice of dis- 
honor is not required to he given to the drawer * * where 
the drawer has countermanded payment.'"^^'' 

And under the above section it has been held that an allega- 
tion that payment of a check had been countermanded is suf- 
ficiently set out vi^here the check was set forth with the indorse- 
ment across the face, "Pyt. Stopped."*^* 

The drawer of a check, who has countermanded payment, is 
not entitled to notice of its protest.^^" 

Below is given a form of request frequently required by banks 
for stopping payment on negotiable instruments. 

CITY TRUST BANK, 

INDIANAPOLIS: 

Please endeavor to stop payment of my check or draft 

Number dated 

for DOLLARS 

($ ) and payable to the order of 

My reasons for wishing payment stopped are: 

/ hereby agree to hold yoiu harmless for said amount, 
and all expenses and costs incurred by you on account of your 
refusing payment of said check or draft, and agree further not 
to hold you liable on account of payment contrary to this re- 
quest if same occurs through inadvertence or accident only. 

Dated 

this day of 19 



Depositor. 

IMPORTANT. — Do not issue duplicate check or draft 
until your pass-book or statement has been received and exam- 
ined. When issuing duplicates, please notify us, 

28» People Savings Bank & Trust 43 Misc. Rep. 45, 86 N. Y. Supp. 

Co. V. Lacey, 146 Ala. 688, — So. 857. 

Rep. 346; German National Bank ^Svjyjgg^ j^st. Law, § 114, subd. 5. 

V. Farmers' Deposit National Bank, ^Sw National Copper Bank v. 

118 Pa. St. 294, 12 Atl. Rep. 303. Davis Co. Bank, 47 Utah, 236 152 

28t National Commercial Bank v. Pac. 1180. 

Miller, 77 Ala. 168. 38" pjrst National Bank v. Korn, 

28" Poess y. Twelfth Ward Bank, — Mo. App. — , 179 S. W. 721. 



248 NEGOTIABLE INSTRUMENTS. § 207 

§ 207. Checkholder's right to sue the bank. Let us first 
consider when the holder of a certified check may sue the bank 
and then consider when the holder of an uncertified check may 
sue the bank. The great weight of authority is that where the 
bank has certified a check any holder of the check may sue the 
bank to compel payment.^** The certification creates a new and 
binding obligation on the part of the bank. Delay in presenting 
a certified check does not discharge the bank from this obliga- 
tion. It has been said that the obligation of the bank after cer- 
tifying a check is simply and unconditionally to pay upon de- 
mand, and in all such cases the demand may be made whenever 
it suits the convenience of the party entitled to the stipulated 
payment. When the business of a bank is properly conducted, it 
is not possible that it can sustain any loss or prejudice from this 
interpretation of the contract which it makes in certifying a 
check; and it is only where delay may be prejudicial that the 
want of due diligence may be legally imputed and operates as a 
bar to a claim which the holder could otherwise maintain against 
the bank.^" The effect of a certification as to the right of action 
which may be maintained by the holder simply shifts from the 
drawer and indorsers to the bank. His right to sue is transferred 
from a right against the drawer to a right against the bank. A 
certification does not become effective when made at the instance 
of the drawer until the delivery of the check to the payee.^**" 

The rule as to the right of a holder of an uncertified check to 
sue the bank is denied by the great weight of authority. To en- 
able the holder of such a check to successfully maintain an action 
against the bank it would be necessary for the check to operate as 
an assignment of the drawer's funds. This, it is plain, an un- 
certified check does not do, since it is but an order to pay and not 
an absolute assignment of anything. 

The Negotiable Instruments Law provides: 

"A check of itself does not operate as an assignment of any 
part of the funds to the credit of the drawer with the hank, and 
the hank is not liable to the holder, unless and until it accepts 
or certifies the check."^^ It would seem on principle that there 

29Willits V. Bank, 2 Duer (N. 30 Andrews v. German Nat. Bank, 

Y.) 121; Merchants Nat. Bank v. 9 Heisk (Tenn.) 211, 24 Am. Rep. 

State Nat. Bank, 10 Wall 604; Nat. 300; Robson v. Bennett, 2 Taunt. 

Commercial Bank v. Miller, 77 Ala. 388, 11 Rev. Rep. 614. 
168; Meads v. Merchants Bank, 25 **** Anglo South American Bank 

N. Y. 143, 82 Am. Dec. 331. As to v. National City Bank, 161 App. 

liability of bank on certification Div. (N. Y.) 268, 146 N. Y. Supp. 

of check, see note 19 U. S. L. Ed. 457. 
1008. 



§ 208 SUBDIVISION A — CHECKS. 249 

is no assignment to the holder nor privity of contract betw^een 
the bank and the holder of an uncertified or unaccepted check, 
either at law or in equity. The holder's remedy is against the 
drawer, and to the drawer only is the bank liable if its refusal to 
pay was a breach of its contract. A check is clearly not an as- 
signment of money in the hands of a banker. The banker is 
bound by his contract with his customer to honor the check, when 
he has sufficient assets in his hands. If he does not fulfill his 
contract, he is liable to an action by the drawer.^ 

The payment of a clearing house balance is not a payment of 
any particular check, and does not become so until the time 
within which the check may be returned has expired.^^* 

§ 208. The depositor's right to draw on the bank. The 

implied contract between the banker and the depositor is that the 
banker will honor his checks to the amount of his deposits. 
Therefore it is a plain proposition that only the depositor or his 
duly authorized agent can draw against the deposits. In case 
the deposit is made by a partnership the check must be signed by 
the partnership name and may be issued by any one of the active 
partners. Where the check is not signed by the partnership 
name, but instead all the partners sign their individual names 
the bank may honor the check. Where several persons not a 
partnership make a joint deposit it is necessary that all their 
names appear on the check unless they make the deposit a joint 
and several credit, in which case any one of them may draw on 
the deposit. 

As to corporations it is incumbent upon the bank to ascer- 
tain from the charter or by-laws of the corporations what officers 
are authoried to draw on the deposits of the corporation. But if 
a check is drawn by an unauthorized officer and the corporation 
accepts the proceeds of the check, it is estopped to set up the 
officer's want of authority. Where a number of trustees de- 
posit trust funds the general rule is that all their names must 
be signed to the check in drawing on the bank, but a court of 
equity may sanction the drawing of a check by a less number 
than all. 

31 Neg. Inst. Law, § 189, where ^^ Hopkinson v. Foster, L. R. 19 

all cases directly or indirectly bear- Eq. 74. As to liability of bank 

ing upon or citing the Law are upon check drawn upon it, see 

grouped. As to a check as an note 19 U. S. L. Ed. 897. 

equitable assignment, see notes in 32a Hentz v. Nationaal City Bank. 

7 L. R. A. 596. 9 L. R. A. 109: and 159 App. Div. (N. Y.) 743, 144 >J. 

as to checkholder's right to sue bank Y, Supp. 979- 
for refusal to pay, see note 41 U. S. 
L. Ed. 207. 



250 NEGOTIABLE INSTRUMENTS. § 209 

An agent who has put to his private account funds of an un- 
disclosed principal may recover damap:es from the bank for re- 
fusal to honor his check upon them, although he had improperly 
obtained them. 

§ 209. Failure of bank to honor check.— Where the bank 
possesses funds of a depositor it is bound to honor his checks to 
the amount of his deposits. If a check is properly drawn and 
presented for payment and the bank fails to honor it when 
there are sufficient funds, the depositor may maintain an action 
against the bank not only for a breach of contract, but also for a 
tort; in the latter case he would be entitled to recover damages 
for injury to his credit or any other injury that he might have 
suffered.^ 

The drawer must have sufficient funds in the bank to meet the 
check in full to entitle him to maintain an action against the 
bank for a failure to honor his check, because the bank cannot 
be required to make a part payment.^ After the deposit is made 
the bank is allowed a reasonable time in which to enter the credit 
upon its books. But if a reasonable time has elapsed between 
the deposit and the presentment of the check the bank will be 
liable although the credit was not entered because it is the duty 
of the bank to properly keep its books and to properly conduct 
its business. 

A bank is not supposed to make a partial payment on a check 
if it has not sufficient funds to pay the entire amount. In prac- 
tice the holder of the check sometimes deposits sufficient of his 
own funds to the drawer's account in order to have sufficient on 
deposit in the drawer's name so that the latter's check will be 
honored by the bank. 

Overdraft payments are considered as loans made to deposi- 
tors and if the loan is not made good the bank may then sue for 
the repayment of the loan upon the implied promise on the part 
of the person to whom the loan was made to repay the same. 

33 Mt. Sterling Nat. Bank v. 15 L. R. A. 134. As to right to 

Greene, 99 Ky. 262, 35 S. W. 911, stop payment of check, see note 

32 L. R. A. 568 ; Svendsen v. State 30 L. R. A. 845. 

Bank, 64 Minn, 40, 65 N. W. 1086, 34 pgnner v. Smith, 3 Neb. 107, 

31 L. R. A. 552. As to liability 47 N. W. 632, 11 L. R. A. 528. 
of bank for refusal to pay, see note 



SUBDIVISION B— TRAVELERS' CHECKS. 

§ 209a. Meaning of term and ob- § 209c. Rights and liabilities, 
ject. 209d. Advantages. 

209b. Provisions. 209e. Forgery of travelers' checks. 

§ 209a. Meaning of term and object. A travelers' check 
is a negotiable instrument upon which the holder's 
signature must appear twice in order to be a complete in- 
strument. It is issued by a bank to a holder who must place 
his signature upon the instrument at the time it is issued, and the 
instrument must be countersigned by the holder before it is paid. 

Checks of this character have come into very general use, 
especially by travelers. They are an ingenious, safe and con- 
venient method by which the traveler may supply himself with 
funds in almost all parts of the civilized world without the 
hazard of carrying the money on his person. The bank or com- 
pany issuing the instrument has the right to refuse to pay it 
when it does not bear the countersign agreed upon. The owner 
of the check also has the right to insist it shall not be paid when 
it is not countersigned as agreed.-^ It is a safe and yet con- 
venient way in which to carry funds in addition to the well- 
known and reliable letter of credit. 

§ 209b. Provisions. In order to insure himself against 
loss, the traveler or holder is required at the time of purchase to 
sign his name to the checks in a space reserved for "Holder's 
signature." Travelers' checks can not be cashed unless they are 
countersigned, and then only if "holder's signature" and "coun- 
tersignature" correspond, and the countersignature must be af- 
fixed to the instrument in the presence of the correspondent of 
the bank or company issuing the same. 

The amount paid in European or foreign countries is specified 
on each check, so that the holder knows exactly how much for- 
eign money he is to receive, and it is provided that the fixed 
amounts will be paid without deduction, excepting for the gov- 
ernment stamp tax, if any. In countries not specially designated, 
it is provided that the equivalent of the dollar-amount will be 
paid at regular market rates. 

It is usually provided that if the instrument is lost, the amount 
will be refunded upon the execution of a satisfactory bond of 

1 Samberg v. American Express 879, L. R. A. 1917F, p. 558 note. 
Company, 136 Mich. 639, 99 N. W. 

251 



252 NEGOTIABLE INSTRUMENTS. §§ 209c-209e 

indemnity, and that unused checks will be redeemed at their 
face value. 

If the instrument is issued by an agent of the issuer of the 
instrument, such agent receives from the holder a certain amount 
of money for the issuer, not as a deposit or for safe-keeping, 
but upon a contract vi^herein the issuer undertakes that he will, 
within one year from the date of the checks when countersigned, 
pay the amount stated in the check to the order of the payee 
therein named.^ It will be seen that identification is easily es- 
tablished by means of two of the travelers' signatures, one being 
placed on the check at the time of purchase and the other at the 
time of payment in the presence of the bank officer, that is, the 
paying agent. 

§ 209c. Rights and liabilities. The company or issuer of 
the check has the right to refuse to pay when the check does 
not bear the countersign agreed upon. The owner of the check 
also has the right to insist it shall not be paid when it is not 
countersigned as agreed. 

The instrument is not effective as a draft or check, or order 
for the payment of money, until the purchaser, who, in the 
presence of the agent of the issuer, has signed his signature, has 
also countersigned it.^ 

§ 209d. Advantages. These travelers' checks are payable 
all over the world, being cashed by banks, bankers, and tourists' 
agents ; they are also readily taken in settlement of travelers' 
bills by steamship companies and the principal hotels and stores. 

§ 209e. Forgery of travelers' checks. One issuing travelers' 
checks under the agreement to pay them when countersigned 
by the signature placed on their face is liable to the purchaser 
for checks paid on a forged signature.^ 

a Sullivan v. Knauth. 220 N. Y. 4 Sullivan v. Knauth. 220 N. Y. 

216. 115 N. E. 460 L. R. A. 1917F. 216, 115 N. E. 460, L. R. A. 1917F, 

p. 554. p. 554 ; Samberg v. American Ex- 

3 Sullivan v. Knauth, 161 App. press Company, 136 Mich. 639, 99 

Div. 148, 146 N. Y. Supp. 583. N. W. 879. 



CHAPTER XlX-a 

LOST AND DESTROYED NEGOTIABLE INSTRUMENTS. 

§ 209f. In general. § 209k. Form of bond of indemnity 

209g. Diligence of owner, for paying lost note. 

209h. No title in finder. 2091. Copy admissible in evidence. 

209i. When party liable not dis- 209m. Burden of proof. 

charged. 209n. Suit at law or in equity. 

209j. Rule as to indemnity. 209o. Demand, protest and notice 

as to lost instrument.' 

§ 209f. In general. There are certain duties and rights of 
the loser, finder and holder of lost and destroyed negotiable in- 
struments which should be given separate consideration. The 
duties and rights as to ordinary chattels differ from those as to 
coins, bank bills and negotiable paper. Negotiable paper takes 
the place and performs to a large extent the office of money and 
it would be embarrassing if every taker of such instruments was 
bound to inquire into the title of the holder and if he were 
obliged to take it with all the imperfections and subject to all 
the defenses which attach to it in the hands of the holder. So a 
bona fide holder for value without notice may obtain good title 
to certain negotiable instruments, such as those negotiable by 
delivery against the parties thereto, as well as against the true 
owner ; this rule applies to negotiable instruments negotiable by 
delivery such as those payable to bearer or indorsed in blank. 

§ 209g. Diligence of owner. As soon as the owner discov- 
ers that he has lost a negotiable instrument he should instantly 
give notice of the loss to all the parties on such paper and inform 
them not to pay the amount to any one but to the loser or his 
order. Thus, if an unaccepted bill of exchange be lost the 
drawee should be advised not to accept the same. 

§ 209h. No title in finder. No title to a lost bill or note 
vests in the finder and the owner when he has identified it may 
maintain trover against the finder. If the finder has received 
payment of the bill or note an action for money had and received 
for his use may be maintained against him. The owner may like- 
wise maintain an action of replevin against the finder.* And it 
has been held that the finder has no lien on the bill or note for his 
expenses on account of finding the instrument. 

1 Halbert v. Rosenbalm, 49 Neb. 498, 68 N. W. 622. 

253 



254 NEGOTIABLE INSTRUMENTS. §§ 209i-209k 

§ 209i. When party liable not discharged. A party liable 
will not be discharged if he pay the amount to the holder of the 
lost instrument before maturity as such a payment is not made 
in the usual course of business.^ Neither will the party liable 
be discharged if he had notice of the loss unless the holder is a 
bona fide holder for value and entitled to enforce payment. 

§ 209j. Rule as to indemnity. Ordinarily where a writing 
is merely evidence of a contract, the loss or destruction does not 
destroy the cause of action but in case of negotiable instruments 
where the parties liable are entitled to have the writings deliv- 
ered up to them for their security or to enable them to enforce 
their rights under them when they are called on to perform 
their obligations, in case such instruments are lost or destroyed, 
an action can not be maintained unless their rights can be fully 
secured by a bond of indemnity or other sufficient security. As 
the parties liable upon a negotiable instrument are entitled to the 
instrument at time of payment and as this is not possible with a 
lost instrument, the owner should tender a sufficient indemnity in 
some form against any future claim by the finder or holder upon 
a lost instrument. This indemnity should be offered to every 
party of whom payment is demanded. 

There are some exceptions, however, as to the requirement of 
a bond of indemnity as where a note is payable to order and is 
unindorsed or where it has been specially indorsed, or where 
the lost instrument has been traced to the defendant's custody, 
or where it is shown that the defendant is protected' by the 
Statute of Limitations against future liability.^ 

§ 209k. Form of bond of indemnity for paying lost note. 
The following is a form of indemnity bond for paying a lost 
note: 

INDEMNITY BOND FOR PAYING LOST NOTE. 

Know All Men By These Presents, That we, AB, prin- 
cipal, of and CD, surety, of 

, are held and firmly bound 

unto EF, of , in the penal sum of 

, lawful money of the United 

States, to be paid to the said EF, his executors, administrators 
or assigns, for which payment well and truly to be made, we 

2 Hinckley v. Union Pacific Rail- ^ Moore v. Fall, 42 Maine 450. 

road Co., 129 Mass. 52. 



§ 2091 LOST AND DESTROYED. 255 

bind ourselves, our heirs, executors and administrators, firmly 
by these presents. 

Sealed with our seals and dated the day of 

19 

THE CONDITION of this obligation is such that where- 
as AB, principal, is the owner of a certain promissory note, dated 

the day of , for $ , 

and payable days after date, signed and made 

by and payable to the order of 

, due and which 

said note has been lost and cannot now be produced by him, and 

Whereas, said EF has this day paid to said AB the full 
amount due thereon upon the agreement that this bond of in- 
demnity would be given and that said AB, principal, and CD, 
surety, will indemnify and save EF harmless, and will deliver 
up said note to EF when found. 

Now, THE CONDITION of this obligation is such that 
the above bounden AB, principal, and CD, surety, their heirs, 
executors, administrators, or any of them shall well and truly 
indemnify and save harmless the said EF, his executors and ad- 
ministrators from and against any claim on said note and any 
and all damages, costs, charges, actions or suits by reason there- 
of, and also deliver or cause said note to be delivered to said EF, 
if found, then this obligation to be void, otherwise to remain 
in full force and virtue. 

(SEAL) 

(SEAL) 

State of 1 

County of > ss. 

City of J 

On this day of , 19 , 

before me, the subscriber, personally appeared 

and , to be known to be the same 

persons who executed the foregoing instrument, and they each 
acknowledged to me that they executed the same. 



Notary Public. 
My commission expires 

§ 2091. Copy admissible in evidence. An affidavit by the 
plaintiff addressed to the court is admissible to prove the loss of 
a bill or note and to lay the foundation for secondary evidence 
of its contents.* 

^Katzenberg v. Lehman, 80 Ala. 513. 



256 NEGOTIABLE INSTRUMENTS. §§ 209m-209n 

The original existence, genuineness, identity and loss or de- 
struction of the instrument must be proved if disputed in a suit 
against the maker, otherwise a copy will not be received in ev- 
dence.** 

The contents and terms of a note cannot be shown by parol 
nor the character in which it had been signed by the makers, 
whether as principal or sureties, when there has been no showing 
that the note was lost or destroyed or not within the reach of 
the court's process.® 

The loss must usually be proved by circumstantial evidence 
and the courts are less exacting as to proof where the maker is 
safe against any future claim of a bona fide transferee. Where 
the circumstances are suspicious or the maker is not protected 
and safe the courts are more exacting; and where the note is 
not negotiable the proof need not be so strong as in case of 
negotiable paper.'' 

And it should be remembered that it must be affirmatively 
shown that the lost instrument was negotiable since that fact 
will not be presumed.* 

Should the negotiable instrument be lost after suit is brought 
upon the same, the court still has jurisdiction and there may be 
recovery, as in case of lost notes.* 

§ 209m. Burden of proof. When the loss of a negotiable 
instrument by the original owner is proven the burden of proof 
is said to shift and the holder must show that he acquired the 
instrument as a bona fide purchaser or from some one who held 
title as a bona fide holder.*** 

Neglect to offer indemnity to the maker or acceptor on de- 
mand before payment does not deprive the payee of his right 
of action but it will deprive him from recovering costs.** 

§ 209n. Suit at law or in equity. There is a conflict as to 
whether or not a proceeding upon a lost or destroyed negotiable 
instrument should be at law or in equity. In those jurisdictions 
which have separate proceedings at law and in equity the pro- 
ceeding is usual in equity. And in such jurisdictions there are 
usually certain exceptions so that the proceeding may be at law 
in certain cases as where the lost negotiable instrument is proved 

5 Field V. Anderson, 55 Ark. 546, » Beoteler v. Dexter, 20 D. C. 

18 S. W. 1038. Rep. 26. 

« Merrill v. Timbrell, 123 Iowa !« Warren v. Smith, 35 Utah 455, 

879. 100 Pac. 1069, 136 A. S. R. 1071. 

'' Nagel V. Mignot. 8 Mart. 488. ^^ Commercial Bank v. Benedict, 

s Hough V. Barton, 20 Vt. 455. 18 B. Mon. 307. 



§ 209o LOST AND DESTROYED, 257 

to have been destroyed, or if a negotiable instrument transferable 
by delivery be traced to the defendant's possession after it is 
lost or where the debt would be barred by the Statute of Limi- 
tations if a third party were to demand payment of the instru- 
ment.*" 

§ 209o. Demand, protest and notice as to lost instrument. 

The Negotiable Instruments Law in Section 160 of the Law pro- 
vides : 

"When a bill is lost or destroyed or is wrongly detained from 
the person entitled to hold it, protest may he made on a copy or 
■mrittcn particulars thereof." 

The loss of a negotiable instrument is no excuse for want of a 
demand, protest or notice because it does not change the contract 
of the parties and the drawer and indorsers on such failure will 
be discharged.*^ 

12 Torey v. Foss, 40 Maine 74. ^^ Kavanaugh v. Bank. 59 Mo. 

App. '540. 



CHAPTER XX. 
SOME OTHER KINDS OF COMMERCIAL PAPER. 

§210. In general. §215. Draft. 

211. Bill of lading. 216. Due bill. 

212. Certificate of deposit. 217. Letters of credit 

213. Certificate of stock. 218. Paper money. 

214. Coupon bonds. 219. Warehouse receipt. 
214a. Liberty Bonds. 219a. Miscellaneous. 

§ 210. In generaL Among the most common species of 
commercial paper other than bills of exchange, promissory notes 
and bank checks are bills of lading, certificates of deposit, cer- 
tificates of stock, coupon bonds, drafts, due bills, letters of credit, 
paper money and warehouse receipts.-^ 

§211. Bill of lading. A bill of lading is an instrument is- 
sued by a common carrier to any person desiring to have goods 
transferred from one place to another. It contains a receipt 
acknowledging the receipt of the goods and also an agreement to 
carry them to a certain destination to a party designated in the 
instrument as the consignee.-** In commercial transactions it is 
regarded as the symbolical representative of the goods which it 
describes ; and its assignment carries with it such rights as the 
party in possession of the goods could transmit by actual cor- 
poral transfer of the goods themselves.-*'' It should contain a 
description of the quantity and condition of the goods received, 
the marks on the same, the names of the consignor and consignee., 
the place of shipment, the place of discharge, and the price of the 
freight.^ 

The bill of lading is generally issued in sets of three and some- 
times in sets of four, yet there need not be more than one copy as 
the number is immaterial.^ When issued in sets of three, one is 

1 As to what instruments are ne- tie to the property, see note 22 L. 

gotiable, see notes 7 L. R. A. 537 R. A. 423. 
and 8 L. R. A. 393. i"" Yergen v. Northern Pacific 

la Knox V. The Nevella, Crabbe Railway Co., 19 N. D. 70, 121 N. W. 

534; 1 Smith Lead. Cas. 879; Haille 205. 

V. Smith, 1 Bos. & Pul. 564; How- ^ Gage v. Morse, 12 Allen 410; 
ard V. Shepard. 19 L. J. C. B. 248; Germania Fire Ins. Co. v. Mem- 
Sanders V. Vanzellcr, 12 L. J. Exch. phis etc. R. R., 72 N. Y. 90; Belger 
497. As to effect of attaching draft v. Diasmore, 51 N. Y. 166. 
to bill of lading upon passing of ti- SDo^s v. Perrin, 16 N. Y. 325. 

258 



§211 OTHER KINDS OF COMMERCIAL PAPER. 259 

retained by the common carrier, a second by the consignor, and 
a third is to be sent to the consignee. A bill of lading in the 
strict commercial sense of the term is not negotiable in like man- 
ner as bills of exchange and promissory notes.* Yet they are 
assignable and pass from hand to hand as other non-negotiable 
instruments. It is more correct to speak of a bill of lading as a 
quasi negotiable instrument since it is rather like, than of them.** 
It differs from the promissory note, bill of exchange and check, 
in that it calls for a delivery of goods instead of the payment of 
money. It is held that goods shipped by a bill of lading drawn 
to the order of the shipper may be transferred by delivery of 
the bill. 

The character of bills of lading is now regulated in many 
jurisdictions by statute, and in some, bills of lading are declared 
to be negotiable like other commercial paper. But the United 
States Supreme Court has declared that it does not follow under 
such statutes that all the consequences incident to the assignment 
of bills and notes ensue or are intended to ensue from such nego- 
tiations ; and that the rule that a bona Ude purchaser of a lost or 
stolen bill or note is not bound to look beyond the instrument 
has no application to the case of a lost or stolen bill of lading.*" 

If the owner should lose or have stolen from him a bill of 
lading assigned in blank, the finder or thief could confer no 
title upon an innocent third person.** 

If the consignee has received the bill of lading of the goods, 
deliverable to him or his assigns, or assigned to him or his 
assigns, and assigned it to a bona Me third party, then the vefi- 
dor's right to stop the goods in transitu and hold them as security 
for the purchase money is defeated, and the assignee of the bill 
acquires as perfect a title to the goods, although they have not 
reached the buyer's hands, as if they had actually passed through 
his hands and been delivered bodily to him.^ But a sale of 
goods not yet received by the vendee, without a transfer of the 
bill of lading, would not divest the right of stoppage in transitu. 

4 Gurney v. Behrend, 3 E. & B. 4b ghaw v. Railroad Co., 101 U. S. 

622, 22 L. J. Q. B. 265; Blanchard 557. 

V. Page, 8 Gray 297 ; Davenport *> Raleigh & Gaston v. Lowe, 101 

Nat. Bank v. Homeyer, 45 Mo. 145 ; Ga. 320, 28 S. E. 867. 

National Bank v. Merchants Nat. ^Lickbarrow v. Mason, 1 Smith 

Bank, 91 U. S. 98, 23 L. Ed. 208; Lead. Gas. 895; Dows v. Greene, 

Barnard v. Campbell, 55 N. Y. 462. 24 N. Y. 641 ; Becker v. Hallgarten, 

4a National Bank of Bristol v. 86 N. Y 167; Newhall v. Cent. P. 

Baltimore & O. R. Co., 99 Md. 661, R. R. Co., 51 Cal. 345; Gurney v. 

59 Atl. 134, 105 Am. St. Rep. 321. Behrend, 2 El. & B. 622; Emery v. 

Irving Nat. Bank, 25 Ohio St. 360. 



260 NEGOTiAnr.E instruments. §212 

And after goods have reached the consignee, the right of stop- 
page in transitu, as its very terms import, is at an end.*^" 

Sometimes for the protection of the vendor the bill of lading 
for the goods shipped is sent to the vendee, attached to a bill 
of exchange for the purchase money; the purpose of this is to 
make the passing of title to the goods contingent upon the hon- 
oring of the bill of exchange." A party discounting a bill of 
exchange on the faith of the indorsement of a bill of lading 
for goods has such security for the draft as he would acquire if 
the goods themselves w^ere delivered to him instead of the bill 
of lading.®" 

§ 212. Certificate of deposit. A certificate of deposit is an 
instrument in the form of a receipt given by a banker for a cer- 
tain sum of money. When the time of payment is specified and 
the words of negotiability are used it is in effect, then, a promis- 
sory note. Otherwise it only circulates as a negotiable instru- 
ment by assignment. 

In general negotiability of such an instrument depends upon 
its wording and is controlled by the same rules that govern 
promissory notes.'' 

It has been held that Section 66 of the Negotiable Instruments 
Law applies to one who indorses in blank a certificate of deposit; 
and if the paper is dishonored owing to the insolvency of the 
bank he can be held as indorser'^* 

So also it has been held that Section 71 of the Negotiable In- 
struments Law as to presentment applies to a certificate of de- 
posit payable upon demand, and presentment of such a certificate 
within a reasonable time after its issue must be made in order 
to charge an indorser thereon.'^" However, an indorsee may not 
be held to the same degree of diligence in presenting it for pay- 
ment as the law requires in other cases.'^" 

A certificate of deposit is payable on demand upon return 
of the certificate properly indorsed. If the money is to remain 
in the bank for ninety days or more it usually draws interest, 

5a Louisville & Nashville R. Co. v. Lindsay v. McClelland, 18 Wis. 481 ; 

Barkhouse, 100 Ala. 543, 13 So. 534. London (S. C.) v. Hagerstown S. 

® Shepard v. Harrison, L. R. 4 Bank, 12 Casey 498; Easton v. 

Q. B. 197, 5 H. L. 116; Indiana etc. Hyde, 13 Minn. 90. 

Bank v. Colgate, 4 Daly 41; Marine ''* Jensen v. Wilslef, 36 Nev. 37 

Bank V. Wright, 48 N Y. 1. 132 Pac. 16. 

*3 Mather v. Gordon Bros., 77 '''' Anderson v. First Nat. Bank of 

Conn. 341, 59 Atl. 424. Charlton, 144 Iowa 251, 122 N. W 

' Huse V. Hamblin, 29 la. 501 ; 918. 

Rindskoff v. Barrett, 11 la. 172; ^o Ljndsel v. McCIellan, 18 Wis 

Ford V. Mitchell, 15 Wis. 304; 481. 



§ 213 OTHER KINDS OF COMMERCIAL PAPER. 261 

but such arrangements must be made at the time of the deposit. 
Certificates of deposit for a definite period of time arc known 
as time certificates of deposit. 

An ordinary deposit slip signed by the cashier of the bank in 
which the deposit is made is not a certificate of deposit. 

The certificate of deposit is used instead of drawing a check 
on the fund deposited, whenever the depositor desires a continu- 
ing security, drawing interest, and payable on demand or at some 
time in the future. 

A certificate of deposit is prima facie a conditional payment 
only if transferred in payment of a debt. 

§213. Certificate of stock. A certificate of stock is a sim- 
ple certification that a certain person is the owner of so many 
shares of the stock of the company mentioned. It is signed 
and sealed by the president and secretary of the company. It is 
not regarded as coming within the classification of negotiable 
instruments, but subject to certain rules, it inures to the benefit 
of the bearer. It is one of that class of instruments, while not 
negotiable in the sense of the law merchant, it is so framed and 
so dealt with, as frequently to convey as good a title to the trans- 
feree as if it were negotiable. A share in the capital stock of a 
corporation is not a debt, nor money, nor a security for money, 
but it is a species of incorporeal personal property. The capital 
stock of the corporation is so much money, or property assessed 
at money valuation, which is divided into a number of shares, 
which shares are the holders 'interest in the corporate estate.'^'' 
A certificate of stock is a muniment of title of the same nature 
as the note or bond of a private person, ordinarily called a "chose 
in action" or of a State or United States bond, or certificate of 
debt.^" 

It is not the stock itself but only evidence of the stock, and 
not money, therefore it is not as fully negotiable as a promissory 
note or check. The certificate is passed from hand to hand by 
assignment of the certificate and by the rules of most corpora- 
tions there must be an assignment on the books of the company 
in order that the person holding the certificate may be entitled 
to all the rights of an owner of a certificate of stock in the first 
instance. 

The general rule is that the purchaser of the certificates of 
stock gets no better title than his vendor had ; and if stock which 
is payable to bearer or assigned in blank is stolen or found, and 

'^*' Allen V. Pegram, 16 Iowa 173. ^e Hutchins v. State Bank, 12 

Mete. (Mass.) 421. 



262 NEGOTIABLE INSTRUMENTS. § 214 

unlawfully transferred to an innocent purchaser for value, the 
real owner may nevertheless recover it.** 

§214. Coupon bonds. A coupon bond is a primary obliga- 
tion, in the nature of a promissory note, promising to pay a sum 
of money on a day certain in the future, to which are attached 
certain other obHgations called coupons, or interest certificates, 
and of which there are usually as many as there are payments to 
be made. The term "coupon" is derived from the French 
"cotiper" — to cut, and is so called because it is cut off when it is 
presented for payment. They may be severed and negotiated 
before the maturity of the interest they represent, and thus pass 
as separate and independent securities, like other commercial 
instruments. In their form coupon bonds usually resemble prom- 
issory notes more than they do bank notes, checks or bills of 
exchange. They are fully negotiable if they contain words of 
negotiability. Each coupon is in itself a separate instrument con- 
taining a distinct and independent promise to pay the sum named. 
The holder of a coupon bond does not necessarily have to own 
the bond to recover on the coupon and he can sue on the coupon 
without producing the bonds to which they were attached.^ 

They are issued by the federal and state governments, by mu- 
nicipal and other public corporations ; and by all sorts of private 
corporations, such as railroads, canal companies and the like. 
A large portion of the wealth of this country is represented in 
these bonds. The signature to these instruments is generally 
written by the president of the corporation, or the chief executive 
of the municipality issuing them ; and there is generally a counter 
signature by the secretary, or treasurer, or chief clerk of the 
corporation or municipality. The signature to the coupons, 
where the bonds are properly signed and sealed, need not be 
written, but may be printed in facsimile, or otherwise. 

Coupon bonds are generally made payable to the party to 

^Bereich v. Marye, 9 Nev. 312; Commonwealth, 18 Gratt. 776; 

Burton's Appeal, 93 Pa. St. 214; Com'rs of Knox Co. v. Aspinwall, 

Howard v. Howard, 7 Wall. 415, 21 How. 589; Town v. Culver, 19 

19 L. Ed. 122. Wall. 84 ; Beaver Co. v. Armstrong, 

9 Clark V. Iowa City, 20 Wall. 44 Pa. St. 63; Maddox v. Graham, 

584, 22 L. Ed. 427; Thompson v. 2 Mete. (Ky.) 56; Brainard v. N. 

Lee County, 3 Wall. 327; City v. Y. & H. R. R. Co., 25 N. Y. 496; 

Lamson, 9 Wall. 477, 19 L. Ed. Evertsen v. Nat. Bank, 11 N. Y. 

725; Clarke v. Janesville, 10 Wis. S. C. (4 Hun) 694; Langston v. 

136; Rose v. City of Bridgeport, 17 S. C. R. R. Co., 2 S. C. 249; Nat. 

Conn. 243 ; R. R. v. Cleway, 13 Ind. Ex. Bank. v. Hartford R. R. Co., 

161 ; Commonwealth v. Industrial 8 R. I. 375. As to negotiability of 

Assn., 98 Mass. 12; Spooner v. coupon bonds, see note 1 L. R. A. 

Holmes, 102 Mass. 503; Arents v. 299. 



§ 214a OTHER KINDS OF COMMERCIAL PAPER. 263 

whom they are issued, or bearer, and in such cases are trans- 
ferable by delivery. Sometimes they are payable to order, and 
then pass by indorsement; sometimes they are payable to the 
holder, which term is regarded as equivalent to bearer; some- 
times they are payable to a certain party "or his assign," in 
which case the party's assignment is necessary to pass title, but 
if he makes an assignment in blank, the title then passes by 
delivery. 

The rights of the purchaser or holder of a coupon bond are 
determined by the same principles which control those of the 
purchaser or holder of a bill or note. 

The Negotiable Instruments Law in some states has the fol- 
lowing provision : 

"The owner or holder of any corporate or municipal bond or 
obligation (except such as are designated to circulate as money, 
payable to bearer) heretofore or hereafter issued in and payable 
in this state, but not registered in pursuance of any state law, 
may make such bond or obligation, or the interest coupon accom- 
panying the same, non^negotiable, by subscribing his name to a 
statement indorsed thereon, that such bond, obligation or coupon 
is his property; and thereon the principal sum therein mentioned 
is payable only to such owner or holder, or his legal representa- 
tives or assigns, unless such bond, obligation or coupon be trans- 
ferred by indorsement in blank, or payable to bearer, or to order, 
with the addition of the assignor's place of residence." 

§ 214a. Liberty bonds. Liberty bonds are negotiable paper 
and the purchaser of such bonds, although they have been stolen, 
acquires a good title thereto, as against the true owner, providing 
he purchased in good faith, and for a valuable consideration. 
This rule is limited in its application to bonds which are not 
mature at the time they are stolen and placed in circulation. 

But the purchaser of Liberty Bonds is liable to the real owner 
if he purchases the same in what amounts to bad faith. Such 
bonds, being negotiable instruments, payable to bearer, are subject 
to the provisions of the Negotiable Instruments Law. One of 
the provisions of that statute, Section 56, declares that one who 
takes a negotiable instrument with "knowledge of such facts 
that his action in taking the instrument amounted to bad faith" 
is not a holder in due course and does not acquire a valid title, 
and the purchaser in such circumstances is liable to the real 
owner of the bonds for their value.-^* 

lOArnd v. Aylesworth, 145 Iowa 185; Ward v. City Trust Co., 117 

App. Div. 130 (N. Y.). 



264 NEGOTIABLE INSTRUMENTS. §§215-216 

Where circumstances showed that a bank had kept "in an 
insecure place government liberty bonds payable to bearer, which 
could not be readily identified," the bank was held liable for 
the theft of the bonds.^* 

It has been held that the class of securities generally designated 
as municipal bonds are subject to the provisions of the Nego- 
tiable Instruments Law.*^ 

§ 215. Draft by bank. It is customary in the transaction of 
banking business for one bank to issue drafts upon a bank located 
in another state. It has been decided that such drafts are checks 
and the parties thereto are subject to the same liabilities and pos- 
sess the same rights as though such drafts were drawn upon a 
particular bank or banker by an individual.*^ By the weight of 
authority a draft upon a bank not payable immediately is a bill 
of exchange rather than a check.*"* 

§ 216. Due bill. A due bill is an instrument whereby one 
person acknowledges his indebtedness to some other party in 
form as follows: "Due B two hundred dollars, payable to his 
order, (signed A)." Thus it is in substance a promissory note. 
If the bill contains words importing a promise to pay and ren- 
dering the instrument negotiable it is generally treated as a prom- 
issory note.*^ 

A particular kind of due-bill is the clearing-house due-bill or 
clearing-house certificate. It is a device of clearing-house asso- 
ciations to save inconveniences and labor incident to the settling 
of balances between the members of the association. A clearing- 
house is a place or institution where the settlement of mutual 
claims, especially of banks, is effected by the payment of differ- 
ences called balances. Clerks from each bank attend the clear- 
ing-house with checks and drafts on the other banks belonging 
to the clearing-house. These exchanges are distributed by mes- 
sengers among the clerks of the banks that must pay them. The 
exchanges which a bank takes to the clearing-house are called 

11 Merchants' National Bank of Pa. St. 474. As to nature of bank 

Vandervoort v. Affholter, — Ark. draft, see note 23 L. R. A. 173. 

— , 215 S. W. 648. 15 Sackett v. Spencer, 29 Barb. 

i2Neg. Inst. Law, § 332 (New 180; Russell v. Whipple, 2 Conn. 

York) ; Laws of N. Y. 1871, ch. 81; 536; Carver v. Hayes, 47 Me. 257; 

Laws of N. Y. 1873, ch. 595. Hussey v. Winslow, 59 Me. 170; 

13 Borough of Monvale v. People's Franklin v. March, 6 N. H. 364 ; 
Bank, 74 N. J. L. 464, 67 Atl. 67. Cummings v. Freeman, 2 Humph. 

14 Bowen V. Newell. 8 N. Y. 190. 144; Huych v. Meador, 24 Ark. 
Contra: Champion y. Gordon, 70 192; Marrigan v. Page, 4 Humph, 

?47, 



§§217-218 OTHER KINDS OF COMMERCIAL PAPER. 265 

creditor exchanges ; the exchanges which it receives from the 
Other banks represented there are called debtor exchanges. The 
balances are paid by the debtor banks to the clearing-house for 
the creditor banks. The certificates or due-bills are issued, in- 
stead of the actual payment of money, by one member of the 
association to another. They are not merely certificates of deposit 
creating a contract of bailment but are as negotiable as checks 
payable to bearer, or as promissory notes payable to order or 
bearer. 

Some jurisdictions have by statutory enactment extended the 
law of bills of exchange and promissory notes to all instruments 
in writing whereby any person acknowledges any sum of money 
to be due to any other person. 

§ 217. Letters of credit. Letters of credit, sometimes called 
bills of credit, are open instruments of request from some person, 
usually a merchant or banker, to any other person to advance 
money or give credit to some third party and promising that he 
will repay the same to the party advancing it or will accept bills 
drawn upon himself for a like amount. If addressed to some par- 
ticular person, that person alone can advance money upon them 
and then recover of the writer,^® but if they are addressed to 
any person in general then anybody can advance money upon 
them and recover of the writer. Bills of credit are usually issued 
by banks or merchants. 

These letters are often used by travelers and agents to obviate 
the risk and burden of carrying about money. In such cases a 
deposit is made by the bearer of the letter with the banker as an 
indemnity. 

§ 218. Paper money. Paper money in its most common 
form is that of United States treasury notes. United States silver 
and gold certificates and bank notes. United States treasury 
notes differ very little from promissory notes payable on demand 
except as to the texture of the paper on which they are printed. 
The purpose of the quality of the paper used is to prevent counter- 
feiting. Treasury notes differ from other paper money in that 
they have been made a legal tender by the federal government. 
Gold and silver certificates circulate as money. They specify on 
their face that there has been placed or deposited in the treasury 
of the United States a sum of gold or silver as indicated by the 
certificate which is payable to the bearer on demand. These 
certificates are not a legal tender. Bank notes or bank bills are 

1* Robins v. Bingham, 4 Johns. to what a letter of credit' is, see note 
476 ; Walsh v. Bailie, 10 Johns. 180 ; 7 L. R. A. 209. 
Taylor v. Wilmore, 10 Ohio 490. As 



266 NEGOTIABLE INSTRUMENTS. §§ 219-219a 

the promissory notes of an incorporated bank and are intended to 
circulate as money. They are not legal tender, but may be tendered 
in payment of debts the same as other money, if not objected to. 
They are payable to bearer on demand and are negotiable. It has 
been held that a bona fide holder can compel payment to him al- 
though they are proven to have been stolen from the rightful 
owner. The mere possession of the note is prima facie evidence of 
bona fide ownership and this presumption is so strong that it can 
not be overturned by showing the holder was negligent in taking 
the notes without inquiry. All that it is necessary. to show in this 
connection is that they were obtained in the usual course of 
business. 

The payment of bank notes is secured by the deposit of gov- 
ernment bonds, and the banks issuing said notes being so closely 
supervised by the government, the said notes circulate without 
regard to the banks which gave them life. The financial stand- 
ing of the national bank note differs in nothing from the treasury 
note, except that the treasury note is a legal tender and the bank 
note is not. 

§ 219. Warehouse receipt. A warehouse receipt is a receipt 
showing the acceptance of grain or other goods which are to be 
delivered to the bearer. As to grain, upon its receipt by the ware- 
houseman or elevator company an instrument is issued which sets 
out that a certain quantity of grain and kind has been received 
and a promise is made to deliver it to the order of the depositor. 
Such warehouse receipts are taken by the depositor or the ex- 
changes of the cities as the representative of the grain itself and 
when the latter is sold the receipts are transferred by assignment 
and delivery, or by delivery alone. In such manner the title 
to the grain will be transferred just as if the grain itself had 
been delivered. 

These receipts represent goods and not money and so are not 
negotiable as promissory notes and bills of exchange.-^'' 

§219a. Miscellaneous. Post ofifice money orders are not 
negotiable instruments. The restrictions and limitations which 
the postal laws and regulations place on money orders are in- 
consistent with the character of negotiable instruments.-^^ 

17 Second Nat. Bank v. Wall- Bank v. Boyce, 78 Ky. 42; Gris- 

ridge, 19 Ohio St. 419; Burton v. wold v. Haven, 25 N. Y. 595. 

Curyea, 40 111. 320; Canadian Bank See also, Allen v. Maury, 66 Ala. 

V. McCrea, 40 111. 281; Spanglcr v. 10; Fourth Nat. Bank v. St. Louis 

Butterfiest, 6 Colo. 356; Solomon Compress Co., 11 Mo. App. 333. 

V. Bushnell, 11 Oreg. 272, 50 Am. ^^ Bolognesi v. United States, 189 

Rep. 475; Durr v. Hervey, 44 Ark Fed. 335, 111 C. C. A. 67, 36 L. R. 

301, 51 Am. Rep. 594; Louisville A. (N. S.) 143 and notes. 



CHAPTER XXI. 

SURETYSHIP AND GUARANTY. 

§ 220. Terms defined and distin- § 225. Liability of concealed sure- 
guished. ties on accommodation pa- 

220a. Who are principals and who per. 

sureties. 226. Remedies of guarantors, 

221. Consideration as to a guar- 226a. Limit of surety's recovery. 

222. Gua'lS.ty as affected by 226b. Trial of suretyship. 

statute of frauds. 227. Discharge of guarantors and 
222a. Conditional guaranties. sureties. 

223. Negotiability of guaranties. 227a. Contribution between sure- 

224. Notice to guarantor of de- ties. 

fault of principal when de- 
mand is made. 

§220. Terms defined and distinguished. Guaranty is an 
undertaking by one person that another shall perform his contract 
or fulfill his obligation, and in case he does not do so the guar- 
antor promises to answer in damages. A guarantor of a bill or 
note is one who engages that the note shall be paid. A contract 
of suretyship is a contract by which the surety becomes bound 
as the principal or original debtor is bound. It is a primary obli- 
gation, and the creditor is not required to proceed first against 
the principal before he can recover from the surety. 

The surety is bound with his principal as an original promisor, 
that is, he is a debtor from the beginning and must see that the 
debt is paid and is held ordinarily to know every default of his 
principal, and cannot protect himself by the mere indulgence of 
the creditor, nor by want of notice of the default of the principal, 
however such indulgence or want of notice may, in fact, injure 
him.* Being bound with the principal his obligation to pay is 
equally absolute. One who signs a promissory note on the face 
thereof, and who in that way becomes a surety for the principal 
maker is, under the Negotiable Instruments Law, primarily liable 
for the payment of such note.** On the other hand, the con- 
tract of a guarantor is his own separate contract; it is in the 
nature of a warranty by him that the thing guaranteed to be 

1 Millan v. Bull's Head Bank, 32 la Rouse v. Wooten, 140 N. C. 
Ind. n. See note 13 L. R. A. (N. 557, 53 S. E. 430, 111 Am. St. Rep. 
S.) 204. As to signing by surety 875. 
for surety, see note 21 L. R. A. 247. 

267 



268 NEGOTIABLE INSTRUMENTS. §220 

done by the principal shall be done, and is not merely an en- 
gagement jointly with the principal to do the thing.^ A guaran- 
tor, not being a joint contractor with his principal, is not bound 
to do what the principal has contracted to do, like a surety, but 
only to answer for the consequences of the default of the prin- 
cipal. 

The guarantor has to answer for the consequences of his prin- 
cipal's default. A surety is an insurer of the debt. A guarantor 
is an insurer of the solvency of the debtor. A surety may be sued 
as promisor, but a guarantor cannot. The surety and the princi- 
pal being equally bound may be joined as defendants in one suit 
or the surety may be sued alone, without any effort having been 
made to recover the debt from the principal ; but a guarantor, be- 
ing bound by a separate contract, must be sued separately. 

The Negotiable Instruments Law provides: 

"A person placing his signature upon an instrument otherwise 
than as maker, drawer or acceptor is deemed to be an indorser, 
unless he clearly indicates by appropriate words his intention to 
be bound in some other capacity."^^ 

The intention must be by appropriate language used for that 
purpose; and such intention may not be inferred from conduct, 
or from language that is not clear. But where one wrote upon 
the back of a note the words : "I hereby guarantee payment of 
the within note," the word "guarantee" indicated his intention 
not to be bound as mdorser.^'' 

By way of summary some of the differences between a surety 
and guarantor may be stated as follows : 

Some Differences Between Surety and Guarantor. 

1. A surety is a co-maker with the principal; a guarantor is 
not. 

2. A surety agrees to do the thing itself ; a guarantor agrees 
that the principal will do it, and if he does not, he will pay the 
damages. 

3. The entire contract of the surety does not have to be in 
writing; the entire contract of the guarantor, except in some 
jurisdictions as to the statement of the consideration, must be 
in writing. 

4. The surety is primarily liable ; the guarantor is secondarily 
liable as he agrees to act if the principal does not. 

2 La Rose et al. v. Logansport 2a Ngg i^st. Law, § 63. 

Bank, 102 Ind. 332 ; Reigert v. 2b Noble v. Beeman-Spaulding 

White, 52 Pa. St. 438; Harris v. Co., 65 Ore. 93, 131 Pac. 1006, 46 

Newell, 42 Wis. 687. L. R. A. (N. S.) 162. 



§§ 220a-221 suretyship and guaranty. 269 

5. The surety and principal may be sued jointly, but the guar- 
antor and principal must be sued separately. 

6. An extension of time ordinarily releases the surety, whether 
he is damaged or not, but a guarantor is released only in case he 
is damaged by the extension. 

7 . A surety is not released by failure to receive notice, as there 
is no legal duty resting upon a holder of paper to notify the 
surety of default; the guarantor is discharged if he has been 
damaged by failure to receive notice of the default of the prin- 
cipal. 

8. The surety's contract is negotiable; the guarantor's con- 
tract is not negotiable in most jurisdictions but is assignable. 

9. In some jurisdictions by statute a creditor upon receiving 
notice from the surety to sue upon an instrument must do so to 
preserve his rights ; the guarantor does not have this right against 
a creditor. 

§ 220a. Who are principals and who sureties. The ac- 
ceptor of a bill of exchange and the maker of a note are prin- 
cipals as to the other parties thereto. And to the holder of such 
bill or note the drawer of such bill and the indorsers of such 
bill or note are sureties of the acceptor or maker.^'^ 

The fact that the liability of the drawer or indorser is fixed 
by due demand and notice, does not change their relation as 
sureties of the debt ; it only fixes their liability as sureties for 
its payment, provided nothing is done by the creditor to relieve 
them from liability.^** 

If a final judgment has been entered against the drawer or 
indorser, the relation of suretyship ceases, and his liability is 
merged in that of a principal judgment debtor unless the statutes 
should otherwise provide.^^ 

§ 221. Consideration as to guaranties. The general doctrine 
upon this subject is that a consideration is necessary to support a 
guaranty.^ In some instances the consideration of the note or bill 
is of itself sufficient, while in other cases an independent con- 
sideration is required. A guaranty of the payment of a negotiable 
promissory note, written by a third person upon the note before 
its delivery, requires no other consideration to support it, and 
need express none other than the consideration which the note 

^oGunnis v. Welgley, 114 Pa. St. 3e Bray v. Manson, 8 M. & W. 

194. 668. 

SdPriest v, Watson, 7 Mo. App. 3 Davis v. Wells, 104 U. S. 159, 
578, 26 L. Ed. 686; Rause v. Glissman, 

29 111. App. 321. 



270 NEGOTIABLE INSTRUMENTS. § 222 

upon its face implies to have passed between the original parties.* 
In such a case the credit is given to both, and not to one alone, 
although only one may derive any substantial benefit from the 
transaction. But a guaranty written upon a promissory note, 
after the note has been delivered and taken effect as a contract, 
requires a distinct consideration to support it, and if such a 
guaranty does not express any consideration, it is void, where the 
Statute of Frauds of the state requires the consideration to be 
expressed in writing as a contract of guaranty not entered into 
at the same time as the original obligation or its acceptance by 
the guarantee must be supported by a consideration distinct from 
that of the original obligation.^* There seems to be an excep- 
tion to this requirement, as in the case where the guaranty was 
agreed upon at the time of making the principal contract, and it 
was merely committed to writing afterwards. If the considera- 
tion is a continuous thing, running along at the time both of the 
principal contract and of the guaranty, it is considered a con- 
temporaneous guaranty and does not require a distinct considera- 
tion. 

§ 222. Guaranty as affected by statute of frauds. Guaranty 
is an undertaking to answer for the debt or default of another 
within the meaning of the Statute of Frauds, and must accord- 
ingly be in writing and signed by the party to be bound or by his 
lawful agent. That statute provides that no action shall be 
brought to charge any person, upon any special promise to answer 
for the debt, default or miscarriage of another, unless the prom- 
ise, contract or agreement, upon which such action shall be 
brought, or some memorandum or note thereof, shall be in 
writing and signed by the party to be charged therewith, or b> 
some person thereunto by him lawfully authorized; and the 
consideration of any such promise, contract or agreement need 
not be set forth in such writing, but may be proved. 

Since a guaranty is a promise or an undertaking by one person 
to answer for the debt, default or miscarriage of another person 
the question arises as to whether or not a writing setting out the 
consideration and signed by the person to be charged thereby is 
necessary. The courts in this country are agreed that the signa- 
ture of the party to be charged must be obtained, but the de- 
cisions are at a variance as to whether the consideration for the 
guaranty should also be set out in full.'* If the statute only 

4 Moses V. Lawrence Co. Bank, See also note 44 L. R. A. (K. S.) 

149 U. S. 298, Zl L. Ed. 743. 481. 

4" Clements v. Jackson County Oil ^ Nichols v. Allen, 23 Minn. 543 ; 

and Gas Company, — Okla. — , 161 Rigbey v. Norwood, 34 Ala. 129; 

Pac. 216, L. R. A. 1917C, p. 437. Reed v. Evans, 17 Ohio 128; Gil- 



§§ 222a-223 suretyship and guaranty. 271 

requires the promise to be in writing^ it seems that the considera- 
tion need not be in writing.^ This is estabHshed upon the prin- 
ciple that the promise is not the entire agreement and therefore 
does not inckide the consideration. In order that the agreement 
may be controlled by the statute it must contain a promise to 
answer for the debt of another both in form and in fact/ It 
has been held that if the transaction be nothing more than an 
indirect way of guaranteeing the payment of one's transfers to 
his creditor, such as giving the note of another which is payable 
to himself with a guaranty that this third person's note will be 
paid, the guaranty is substantially that the guarantor's original 
debt will be paid by the collection of this third person's note; 
and for this reason the guaranty need not be in writing. 

§ 222a. Conditional guaranties. A conditional guaranty is 
one which depends upon some condition, for example a guaranty 
of the collectibility of an instrument, in which case there is no 
right of recourse against the guarantor until the holder has first 
made proper effort to collect from the principal debtor. 

The Negotiable Instruments Law provides as follows: 

"Subject to the provision of this act, zvhen the instrument is 
dishonored for non-payment, an immediate right of recourse 
to all parties secondarily liable thereon, accrues to the holder/"^* 

This section does not change the law as to conditional guar- 
anties for the express terms of such contract exclude the idea 
of an intention to incur the liability prescribed by said section.''* 

§ 223. Negotiability of guaranties. Whether a guaranty on 
a negotiable bill or note is itself negotiable is a question concern- 
ing which there is much confusion. It is held by some cases that 
the guaranty does not fall within the rule of negotiability, and 
can inure only to the benefit of the person to whom it was given. 
On the other hand, it is held in some jurisdictions that the guar- 
anty passes with the instrument, and inures to the benefit of the 
holder. Some of those cases, holding that it passes with the in- 
strument as being negotiable, treat it in the nature of an indorse- 
ment, while still others hold that it is not negotiable on the 
ground that it is a contract of the common law and not of the law 
merchant, and consequently is incapable of negotiability by any 
intention of the guaranty. Authorities, however, are not wanting 

lighan v. Boardman, 29 Me. 79. '^* The question as to when a 

^ Violett V. Patten, 5 Cranch 142, guaranty is a continuing one is dis- 

3 L. Ed. 61. cussed in the note 39 L. R. A. (N. 

^Birkmyr v. Darnell. 3 Ld. Ray- S.) 724. 

mond 1085, 6 Mod. 248, 1 Salk. 27. 'b ^eg. Inst. Law, § 84. 



272 NEGOTIABLE INSTRUMENTS. §§ 224-225 

evidence as against all parties except a bona fide holder without 
which decline to take this view where the guaranty is by a third 
person, and not by the holder of the instrument, and, while not 
readily allowing negotiability to a guaranty, allowing it to the 
guaranty if the language of the guaranty does not restrain it. 
The better doctrine seems to be to hold the guaranty as non- 
negotiable, since it is a common law contract and is not properly 
considered an indorsement. It may be transferred with the in- 
dorsement by assignment and the assignee can then maintain an 
action upon the guaranty in his own name under statutes of 
most of the states.''" 

§ 224. Notice to guarantor of default of principal when de- 
mand is made. The guarantor's contract is more rigid than 
that of an indorser and he is bound to pay the amount upon a 
presentment made and notice given to him of dishonor, within a 
reasonable time.* And in the event of a failure to make present- 
ment and give notice within such reasonable time, he is not abso- 
lutely discharged from all liability, but only to the extent that 
he may have sustained loss or injury by the delay. The same per- 
son may be a guarantor and also an indorser of a note ; and in 
such case the failure to give him due notice of demand and non- 
payment will discharge him as indorser, but he will still be bound 
as a guarantor, as the rule as to notice does not apply to guar- 
antors.** In case the principal is insolvent at and before ma- 
turity of the bill or note, the guarantor is liable, because it is 
presumed that the guarantor has suffered nothing in that case 
from the failure to give notice of the default.® 

§ 225. Liability of concealed sureties on accommodation 
paper. If a person signs an instrument as an accommo- 
dation for another party and writes the word surety after his 
signature, he must be treated as such by all subsequent holders 
whether he be the drawer or acceptor of a bill of exchange, the 
maker of a promissory note or the indorser of either.*" But in 
case the instrument does not disclose his real character as a surety 
the question then arises, can such relation be shown and the liabil- 
ity fixed in accordance therewith. The English equitable rule is 
that the character of a concealed surety who appears on the in- 
strument as a regular acceptor or indorser may be shown by parol 

70 Cowles V. Peck, 55 Conn. 251 ; *" Brown v. Curtiss, 2 N. Y. 225. 

Summers v. Barrett, 65 Iowa 292. '-* Wolfe v. Brown, 5 Ohio St. 304. 

SQay V. Edgerton, 19 Ohio St. lo Hunt v. Adams, 5 Mass. 358; 

553; Montgomery v. Kellog, 43 Robison v. Lyle, 10 Barb. 512; 

Miss. 486. Sayles v. Sims, 73 N. Y. 552. 



§§ 226-226b suretyship and guarantV. 273 

notice.-^* However, the great weight of judicial opinion denies 
the admissibility of parol evidence to prove the party's real char- 
acter where it would materially change the party's liability to the 
paper and follows the English common law rule, which permits 
all subsequent holders to a bill or note to treat all the prior par- 
ties according to their ostensible character.^* But if the con- 
cealed surety is a co-maker or drawer and proo. of his character 
would not reverse the evident intention of the parties as to his 
relation to the paper, the general trend of judicial opinion in this 
country is to admit such proof.-^' 

§ 226. Remedies of guarantors. The remedies which are 
available to guarantors are of two classes. The first and most 
common is that by which the guarantor pays the debt and re- 
covers of the principal and all other parties whom the holder 
may have held liable.^* But he can only recover a sum equal 
to the amount he was compelled to pay with interest on the 
same.^" The second method which he may pursue is to file a 
bill in equity making as parties thereto the creditor and the 
principal parties, to enjoin proceedings against himself until the 
resources of the principal have first been exhausted.*** The credi- 
tor may demand the guarantor to indemnify him against loss.^'^ 
This is a very unusual proceeding and the interests of the guar- 
antor can always be fully protected by the former proceeding. 

§ 226a. Limit of surety's recovery. The limit of the surety's 
recovery who pays a bill or note, or other obligation of his prin- 
cipal is the amount with legal interest necessary to indemnify 
him.-*''* So if he compromises the debt he can only recover back 
the amount accepted by the creditor in compromise of it. 

A surety who makes payment is subrogated to all the rights of 
the holder and to the enjoyment of all the securities which his 
principal w^as entitled to for the payment of the debt.*'^'' 

§ 226b. Trial of suretyship. The statutes in some states 
provide that when any action is brought against two or more de- 

11 Erwin v. Lancaster, 6 Best & 524 ; Edgerly v. Emerson, 23 N. H. 
S. Q. B. 572; Hollier v. Eyre, 9 555. 

CI. & P., 1, 45; Strong v. Foster, 15 Pgtre v. Duncombe, 20 L. J. Q. 

17 C. B. 201. B. 242. 

12 Farmers etc. Bank v. Rath- i« Humphrey v. Hitt, 6 Gratt. 524. 
hone, 26 Vt. 19; Stephens v. Mo- i'' Humphrey v. Hitt, 6 Gratt. 524. 
nongahela, 88 Pa. St. 157. i^a Smith v. Mason. 44 Neh. 611, 

13 Hubbard v. Gurney, 64 N. Y. 6Z N. W. 41. 

460 ; Sayles v. Sims, 43 N. Y. 552 ; i''" Sheahan v. Davis, 27 Oreg. 

Stillwell V. Aaron, 69 Mo. 539. 279. 40 Pac. 405, 50 Am. St. Rep. 

14 Humphrey v. Hitt, 6 Gratt. 722. 



274 NEGOTIABLE INSTRUMENTS, §227 

fendants upon a contract, any one or more of the defendants 
being surety for the others, the surety may, upon written com- 
plaint to the court, cause the question of suretyship to be tried 
and determined upon the issue made by the parties at the trial 
of the cause, or at any time before or after the trial, or at a 
subsequent term; but such proceedings shall not affect the pro- 
ceedings of the plaintiff. And if the finding upon such issue 
be in favor of a surety, the court shall make an order directing 
execution to be levied, first upon the property of the principal 
exhausting his property, before levy shall be made upon the prop- 
erty of the surety. 

§ 227. Discharge of guarantors and sureties. Guarantors 
and sureties may be discharged in any one of the following three 
ways: (1) By a discharge of the principal, as anything which 
discharges the principal will discharge the guarantor or surety ;*** 
(2) by the signature having been obtained by fraud ;-^^ and (3) 
lastly by the surrender to the principal or other party to the paper 
of the collateral securities.^® Any alteration of the written in- 
strument which will discharge the principal will also discharge 
the surety. The surety may be released by an alteration which 
does not release the principal debtor. In the case where a cred- 
itor receives from the principal debtor payment of interest in ad- 
vance on a past due note an agreement to give time is necessarily 
implied and the creditor thereby debars himself in the meantime 
of suing on the note, and the surety is therefore discharged, un- 
less the creditor can show mistake, or possibly an agreement that 
the right of suit should not be suspended.^^ Another classifica- 
tion of matters which will discharge a surety is as follows :*^* 

(1) Misrepresentation or concealment to induce his becoming 
surety. The contract is voidable from the beginning as between 
the surety and all parties privy to such misrepresentation or con- 
cealment ;^" if a principal signed under duress, the holder guilty 
of the duress could not enforce the obligation against a surety.*^" 

(2) Diversion of the instrument from the agreed purpose. As 
where accommodation paper is signed that it shall be used for 
a particular purpose and diversion in its use operates a discharge 

IS Broadway Sav. Bank v. Wheat. 554 ; Galbraith v. Fullerton, 

Schmucker, 7 Mo. App. 171; Glous- 53 111. 126; Muirhead v. Kirkpat- 

ter Bank v. Worcester, 10 Pick. rick, 9 Harris 237. 

528. ^** Daniel on Negotiable Instru- 

i« Melick V. First Nat. Bank, 52 ments. 

la. 94. sibLe^ls ^ Brown, 89 Ga. 115, 

20 Dillon V. Russell, 5 Neb. 484; 14 S. E. 881. 

Kirkpatrick v. Hawke, 80 111. 122. 2io Griffith v. Sitgravcs, 90 Pa. St. 

21 McLemore v. Powell, 12 161. 



§ 227 SURETYSHIP AND GUARANTY. 275 

of the accommodation party as to all other parties who have 
knowledge of such diversion.^^'' (3) Alteration. Any material 
variation in the instrument without the consent of the surety 
will discharge him.^^* (4) Payment. Thus payment by the 
parties primarily liable discharges parties secondarily liable as 
payment by the maker or acceptor discharges the drawer and in- 
dorsers ; and a tender of payment which the holder refuses to 
accept will discharge a surety .^^' (5) Release. A release of the 
acceptor or maker discharges the drawer and indorsers.*^' 
(6) Satisfaction. The holder's claim may be extinguished as to 
an indorser or drawer, and the debt not be satisfied, but if there 
is a satisfaction by one, it operates as to all.^^'' (7) Covenant 
not to sue a prior party. This discharges the surety because 
it disables him from suing should he pay the debt. (8) Parting 
with security for the debt. Thus if any collateral security which 
the creditor held be released, or a judgment lien given up or a 
levy withdrawn, the surety is discharged.^^' (9) Agreement to 
indulge prior party by extension of time or forbearance of suit. 
The weight of authority seems to be against this last proposi- 
tion.*^' It is held by the weight of authority that the plea of 
fraud or misrepresentation will not avail to discharge a guarantor 
or surety as against a bona fide holder. The surety or guarantor 
is discharged if the holder surrenders the collateral securities to 
the principal or any other party to the paper ;*^ if the holder 
enters into a binding contract for the extension of time they are 
discharged.*^ Under the principle of subrogation, the guarantor 
or surety has a vested interest in the collateral security, which 
can not be jeopardized or destroyed without his discharge from 
his liability. The agreement for an extension of the time of 
payment in order to be a discharge must not only be based upon 
a valuable executed consideration of some sort, but the agree- 
ment must be absolute and for an extension of payment for a 
definite period of time.*^ 

21" Haworth v. Crosby, 120 Iowa 21" Story on Note, § 403. 

612. 94 N. W. 1098. 2li state Bank of Lock Haven v. 

2ie Stutts V. Strayer, 60 Ohio. St. Smith, 155 N. Y. 185, 49 N. E. 680. 

384, 54 N. E. 368, 71 Am. St. Rep. 2ij Wolstenhohne v. Smith, 34 

723. Utah 300, 97 Pac. 329. 

21' Hudson Bros. Commission Co. ** Muirhead v. Kirkpatrick, supra. 

V. Glencoe Sand and Gravel Co., ^speHo^vs v. Prentiss, 3 Denio 

140 Mo. 103, 41 S. W. 450, 62 Am. 512. See also Fanning v. Murphy, 

St. Rep. 722. 126 Wis. 538. 105 N. W. 1056, 4 

2i9 Montgomery v. Sayre, 100 Cal. L. R. A. (N. S.) 666. 

182, 34 Pac. 646, 38 Am. St. Rep. 24 Norris v. Cumming, 2 Rand. 

271. 323 ; Smith v. Sheldon, 35 Mich. 42. 



276 NEGOTIABLE INSTRUMENTS. § 227a 

It has been held, however, that payment of interest in advance 
on a past due note operates to extend the time of payment and 
releases the sureties.^* 

§ 227a. Contribution between sureties. The right to con- 
tribution arises out of an implied promise amongst co-sureties 
to share equally the burdens of co-suretyship,^^ and, therefore, 
does not exist where there is an express understanding to the 
contrary.^* 

If one co-surety be required to pay the whole debt, the others 
are bound to contribute in equal proportions, and the co-surety 
may recover of the others their aliquot shares.*'^ The liability 
of co-sureties to each other for contribution is not joint but sev- 
eral. ^^ 

The right of contribution arises between co-sureties though 
the same debt be secured by different instruments, executed by 
different sureties ; and though one portion of the debt be secured 
by one instrument, and one portion by another ; and even though 
the surety demanding contribution did not at the time of the 
contract know that he had any co-sureties.^ 

Where the debt is paid by several sureties in equal propor- 
tions, the equities between them as co-sureties cease, and each 
becomes an independent creditor of the principal for the amount 
he may have paid ; so that if one of them subsequently re- 
ceived indemnity from the principal for his own debt, the others 
are not entitled to participate therein, such indemnity not pro- 
ceeding from securities held by the surety or creditor previous 
to the payment of the debt, although the general rule is that a 
co-surety is entitled to participate in any indemnity which any 
of his co-sureties may obtain from the principal, directly or in- 
directly.^'' 

The co-surety, in order to maintain his suit for contribution, 
must have made payment under a legal and fixed obligation, 
but not necessarily under compulsion of suit or legal process.^* 

One of two co-sureties on a note paid the note at maturity to 
a holder in due course and sued his co-surety for contribution 

24aMatchett v. Winona, 113 N. 29 Craythorn v. Swinburne, 14 

E. 1. Ves. 169; McBride v. Potter Lovell 

25 Hedges v. Mehring, — Ind. Co., 169 Mass. 7, 47 N. E. 242, 61 

App. — . 115 N. E. 433. Am. St. Rep. 265. 

2« Chappell V. McKeough, 21 Colo. 30 joUe y. Boeckeler, 12 Mo. App. 

277, 40 Pac. 769. 55. 

27 Caldwell v. Hurley. 41 Wash. 31 Nixon v. Beard. Ill Ind. 140; 

296, 83 Pac. 318. Afarch v. Barnet, 114 Cal. 375, 46 

28VOSS V. Lewis, 126 Ind. 155, 25 Pac. 152. 
N. E. 892. 



§227a SURETYSHIP AND GUARANTY. 277 

who pleaded failure of consideration between the principal maker 
and the payee, but this was held to be no defense to his claim 
for contribution.^ 

To give credit to a note, A and B agreed to become accom- 
modation co-makers on a note payable to C ; A signed as a 
co-maker and there being no more room on the face of the note, 
B wrote his name on the back and no notice of dishonor of the 
note was given to B. C sued and recovered of A, and A sued 
B for contribution and recovered, oral evidence being admitted 
to show that they were co-sureties.^* 

A surety indorser who pays the note can not recover contribu- 
tion from other indorsing sureties without showing presentment 
and notice of dishonor.*'* 

While the drawer and indorsers of a bill are sureties of the 
acceptor as to the holder of said bill, they are not as between 
themselves co-sureties, liable for contribution to each other in the 
event that any one should pay the amount for the acceptor ; for 
each prior party is a principal as between himself and each sub- 
sequent party. 

32 Cummins v. Line, 43 Okla. 575, 34 Bennett v. Kistler, 163 K. Y. 
143 Pac. 672. Supp. 555. 

33 Hunter v. Harris, 63 Ore. 505, 
127 Pac. 786. 



CHAPTER XXI— A. 



NEGOTIABLE INSTRUMENTS WITH COLLATERAL SECURITY. 



8 227b. Meaning of term collateral 
security. 

227c. Form oi promissory note 
with collateral security. 

227d. Holder of collateral security 
a holder for value — when 
transfer is for debt cre- 
ated at time of transfer. 

227e. Holder of collateral security 
a holder for value — when 
transfer is for a pre-exist- 
ing debt. 

227f. Holder of collateral security 
a holder for value — when 
transfer is as collateral for 
a debt not yet due. 

227g. Presumption as to owner- 
ship. 

227h. Whether or not note secured 
by collateral is negotiable. 

227i. Whether or not collateral 
note or bill is negotiable. 

227j. Effect of agreement for de- 
lay. 

227k. Provision for deposit of ad- 
ditional collateral. 

2271. Proviso in note authorizing 
sale of collaterals. 

227m. What amounts to payment. 

227n. In some jurisdictions by 
statute, the surrender of 
collateral discharges in- 
dorser. 



§ 227o. Holder receiving collateral 
not required to proceed 
upon same before suing in- 
dorser. 

227p. Collateral security must be 
exhibited. 

227q. Right of maker to claim a 
defense because holder 
has collateral security. 

227r. Amount of recovery on col- 
lateral security. 

227s. Rights of indorsee as to stip- 
ulations in collateral note. 

227t. Whether surrender of col- 
lateral discharges surety. 

227u. Whether surrender of col- 
lateral discharges guaran- 
tor. 

227v. Effect upon necessity of 
presentment, protest, and 
notice as to drawer or in- 
dorser when they are in 
possession of security. 

227w. Accommodation paper as 
collateral security. 

227x. Collateral released or lost. 

227y. Miscellaneous. 

227z. Form of guaranty oi col- 
lateral note. 

227aa. Form of note with trans- 
fer of account. 



§ 227b. Meaning of term collateral security. Collateral se- 
curity in its broad sense means any security in addition to the 
original obligation or security.^ Accepted bills of exchange^ and 
promissory notes^ may be held as collateral security; they may 

3 Wright v. Ross, 36 Calif. 414; 
Polhemus v. Prudential Realty Cor- 
poration, 74 N. J. L. 570, 67 Atl. 
303. 



* Schnitzler v. Wichita Fourth 
National Bank, 1 Kan. App. 674, 42 
Pac. 496. 

^ Cornwell v. Baldwin's Bank, 12 
N. Y. App. Div. 227, 43 N. Y. Supp. 
77L 



278 



§ 227b WITH COLLATERAL SECURITY. 279 

be given to secure the payment of another bill or note being an 
additional obligation, that is, a separate obligation attached to 
another obligation to guarantee its payment * As applied to the 
law of negotiable instruments collateral security in its perfect 
state is said to be a separate obligation, as the negotiable bill of 
exchange or promissory note of a third person, or other repre- 
sentative of value, indorsed, where necessary, and dehvered by 
a debtor to his creditor, to secure the payment of his own obli- 
gation, represented by an independent instrument.'* Collateral 
security is a concurrent security to the holder of the original 
obligation whether antecedent or newly created and is designed 
only to increase the means of the holder to realize the principal 
debt which it is given to secure.^ It has been stated that the use 
of the term "collateral security" is intended to express, that it 
is not received in payment of the principal debt, and that it is 
not an additional right to which the creditor is absolutely en- 
titled.'^ 

Thus, collateral security is a separate obligation, as the nego- 
tiable bill of exchange or promissory note of a third person, 
delivered by a debtor to his creditor to secure the payment of his 
own obligation represented by an independent instrument as a 
bill of exchange or promissory note;^ it is security for the ful- 
fillment of a pecuniary obligation or payment of money in addi- 
tion to the principal security; the collateral security stands with 
the principal promise as a cumulative means for securing the 
payment of the obligation -^ it is subsidiary to the principal debt 
— running parallel with it — collateral to it — and when collected, 
is to go to the credit of the principal debt ; or if the principal 
debt be paid ofif, the debtor is usually entitled to a restoration 
of the collateral security.^® 

Interpreted in the terms of negotiable instruments, a nego- 
tiable bill or note given as collateral security to another nego- 
tiable bill or note, known as the principal obligation, is concur- 
rent security for said principal bill or note and is designed to 
increase the means of the holder of said principal bill or note to 
realize on said bill or note which it is given to secure ; it is sub- 

4 Butler V. Rockwell, 14 Colo. 125, 57 Fed. 107, 110, 9 U. S. App. 203, 6 
136, 23 P. 462 ; Schnitzler v. Wichita C. C. A. 683. 

Fourth National Bank, 1 Kan. App, * International Trust Company v. 

674, 42 P. 496, 500. Union Cattle Co., 3 Wyo. 803, 804; 

5 International Trust Company v. 31 Pac. 408, 19 L. R. A. 640. 
Union Cattle Company, 3 Wyo. 803. » Moffatt v. Corning, 14 Colo. 104, 

« Osborne v. Stringham, 4 S. D. 123, 24 Pac. 7. 
593, 598, 57 N. W. 776. lo Munn v. McDonald, 10 Watts 

''McCormick v. Falls City Bank, (Pa.) 270, 273; McCormick v. Falls 

City Bank, 57 Fed. 107. 



280 NEGOTIABLE INSTRUMENTS. § 227c 

sidiary to said principal bill or note, that is, collateral to it and 
when collected is to go to the payment of said principal bill or 
note. 

§ 227c. Form of promissory note with collateral security. 

The following is a form of promissory note with collateral 
security : 

$ No Due 

INDIANAPOLIS, IND 

days after date 

promise to pay to the order of the CITY TRUST BANK 

of Indianapolis, Indiana. 
Dollars, 

Negotiable and Payable at the office of the CITY TRUST BANK 

of Indianapolis, 

With five per cent. Attorney's fees upon the principal of this 
note. Value received, without any relief whatever from Valua- 
tion or Appraisement laws of the State of Indiana. With interest 
at the rate of eight per cent, per annutn after maturity until 
paid. The drawers and endorsers severally waive presentment 
for payment, protest, notice of protest and notice of non-payment 
of this note. 

Address 

have transferred and delivered to the CITY TRUST 

BANK of Indianapolis, Ind., as Collateral Security for the pay- 
ment of this and of any other liabilities of the undersigned to said 
payee, or assigns, due or to become due, or that may hereafter 
be contracted, the folloiving property, the value of which is 

Dollars, 

vis: 

And the Undersigned hereby gives the said Payee and Assigns 
authority to sell and to transfer and assign the said property, or 
any part thereof, or any substitutes therefor, and all additions 
thereto, on the maturity of the above note, or any time there- 
after, or before in the event of the said security depreciating 
in value, at any public or private sale without advertising the 
.■ante, or demanding payment or giving notice, with the right 
lo said payee and assigns themselves to be the purchasers, when 
sale is made at any broker's board or public sale. And, after 
■ Jeducting all costs and expenses to apply the residue to the 
•Kiyment of any, either or all liabilities as aforesaid, as said 
■ayee or assignee shall elect, returning the overplus to the under- 



§§ 227d-227e with collateral security. 281 

signed, and in case the proceeds of the sale of said property shall 
not cover the principal, interest and expenses, the undersigned en- 
gages to pay the deficiency forthwith after such sale, with legal 
interest. 



§ 227d. Holder of collateral security a holder for value — 
When transfer is for debt created at time of transfer. The 
holder of a negotiable instrument as collateral security for a 
debt contracted at the time of the transfer is a bona fide holder 
for value, provided the bill or note transferred as collateral secur- 
ity is itself not overdue at the time, thus the indorsee of a col- 
lateral instrument executed by a third party is a holder for value, 
if said instrument is indorsed as collateral security for a debt 
contracted at the time of such indorsement ; this is true whether 
the bill or note of said third party is payable to order or is pay- 
able to bearer. But in no case, however, should the collateral 
instrument be overdue at the time of its transfer.** 

A creditor who receives the bill or note of a third party from 
his debtor as collateral security for his debt is entitled to the 
full protection of a bona fide holder for value, free from all equi- 
ties which might have been pleaded between the original parties.*^ 

§ 227e. Holder of collateral security a holder for value — 
When transfer is for a pre-existing debt. Prior to the adoption 
of the Negotiable Instruments Law in the various jurisdictions 
there was much conflict of authority as to whether one who takes 
a note merely as collateral security for a pre-existing debt is a 
holder for value. Since the adoption of the Law such holder is 
generally regarded as a holder for value.*^ 

Under the Wisconsin negotiable instruments law, however, 
"the indorsement or delivery of negotiable paper as collateral 
security for a pre-existing debt, without other consideration, and 
not in pursuance of an agreement at the time of delivery by the 
maker, does not constitute value."^'* 

§ 227f. Holder of collateral security a holder for value- 
When transfer is as collateral for a debt not yet due. If the 
debt is not due and the collateral bill or note is indorsed as 

** Texas Banking Co. v. Turnley, 13 Melton v. Pensaloca Bank & 

61 Tex. 369; Best v. Crall, 23 Kan. Trust Co., 190 Fed. 126, 111 C. C. 

482; Miller v. Boykin, 70 Ala. 476. A. 166; Voss v. Chamberlain, 139 

12 Bank of Commerce v. Wright, Iowa 569, 117 N. W. 269, 19 L. R. 

63 Ark. 604, 40 S. W. 81. Contra, A. (N. S.) 106, 130 A. St. Rep. 331. 

Thompson v. Maddux, 117 Ala. 468, ^^Neg. Inst. Law (Wis.), §§ 

23 So. 157, 1675-71, 



282 NEGOTIABLE INSTRUMENTS. §§ 227g-227h 

security and there is an agreement for delay until the collateral 
matures, such agreement constitutes a consideration and makes 
the holder a holder for value. 

But if the debt is due and there is no agreement for delay, 
the holder will not be protected against equities.^'* 

§ 227g. Presumption as to ownership. If the collateral nego- 
tiable instrument is transferable by delivery, that is, by being 
payable to bearer or having a blank indorsement, the holder is 
prima facie proprietor and owner. But if it is payable to order 
and unindorsed, the holder has only the equitable title and cannot 
claim the rights of an indorsee.-^® 

§ 227h. Whether or not note secured by collateral is nego- 
tiable. A promissory note M^hich contains a statement to the 
effect that the maker has deposited collateral security for its 
payment does not make it non-negotiable ; although it may appear 
on the face of the note that its payment is secured by collateral 
consisting of personal property or a mortgage on real property, 
yet if otherwise in proper form, it is negotiable.-^'^ And a note is 
negotiable which contains a recital that on non-payment, the 
holder may sell the collateral and apply the proceeds to "pay- 
ment and necessary charges." So a stipulation in a note whereby 
the legal title to the property for which it was given, as security 
for payment, is in the holder of the collateral, has been held 
not to make the note non-negotiable ;** and also the negotiability 
of a note made payable to a bank is not affected by a stipula- 
tion therein authorizing the bank to appropriate to the payment 
of the note any money that the maker may have in the bank,^® 
and it has been held that a stipulation in a note payable on de- 
mand, giving the bank power to sell the collateral before the 
maturity of the note, in the event the securities depreciate in 
value, does not change the promise to pay "on demand" so as 
to make the note non-negotiable. 



20 



15 Bone V. Tharp, 63 Iowa 224. ter, 98 Ala. 602 14 So. Rep. 545, 39 

1* Bank of Chadron v. Anderson, Am. St. Rep. 88; Heard v. Dubuque 

6 Wyo. 520, 48 Pac. 197. Co. Bank, 8 Neb. 10, 30 Am. Rep. 

1'' Valley National Bank v. Crow- 811; Third National Bank v. Bow- 
ell, 148 Pa. St. 284. 23 Atl. Rep. man-Spring Co., 50 App. Div. 66. 64 
1068; Farmer v. First National N. Y. Supp. 410. 
Bank of Malvern, 89 Ark. 132, 115 i'' Louisville Banking Co. v. Grav, 
S. W. 1141, 131 A. S. R. 79; Dor- 123 Ala. 251, 26 So. 205, 82 A. S. R. 
sey V. Wolff, 142 111. 589, 32 N. E. 120; Louisville Banking Co. v. 
495, 34 A. S. R. 99, 18 L. R. A. 428 ; Howard, 123 Ala. 380, 26 So. 207. 
Albertson v. Laughlin, 173 Pa. St. 82 A. S. R. 126. 
525, 34 Atl. 216, 51 A. S. R. 177, 20 prinden v. Muskegon Savings 
Ann. Cas. 1912D 9 note. Bank (Mich.), 140 N. W. Rep. 549. 

18 First National Bank v. Slaugh- 



§ 227i WITH COLLATERAL SECURITY. 283 

A Statement that the collateral security has been deposited for 
the performance of the promise contained in the note has been 
held not to affect its negotiability ^^ but, a stipulation in a note 
that the title to property for which the note is given shall re- 
main in the payee, and he shall have the right to declare the 
money due and take possession of the property whenever he 
may deem himself insecure, "even before the maturity of the 
note" renders the note non-negotiable -^^ so, also a stipulation that 
the payee may sell certain warehouse receipts given as collateral, 
and if they depreciate in value, may sell them before the in- 
strument would otherwise become due makes the note non-nego- 
tiable because such alternative introduces elements of uncer- 
tainty.^^ 

And a promissory note is not certain as to terms and there- 
fore non-negotiable which contains an agreement to pay a sum 
certain as the purchase price o^ property sold, with an option on 
the part of the payee to take possession of the property in case 
of default in payment;** and if a mortgage note incorporates 
by reference provisions of the mortgage requiring something to 
be done in addition to the payment of money it is non-nego- 
tiable.25 

§ 227i. Whether or not collateral note or bill is negotiable. 
Securities given as collateral to negotiable paper are held in most 
jurisdictions to partake of the' negotiability of the instrument 
secured to the exclusion of defenses by the maker as against bona 
fide purchasers of the note and security ;-^ in some jurisdictions, 
however, a different rule maintains,^'' and notes which are them- 
selves given as collateral security are held non-negotiable.*^ 

The effect on the negotiabih'ty of a note of a reference therein 
to another instrument, collateral thereto, securing it, often de- 
pends on whether the note and security are to be construed to- 
gether.2» 

21 Wise V. Charlton, 4 A. & E. 450; Craft v. Buiister, 9 Wis. 503: 

486; Fancourt v. Thorne, 9 Q. B. Hamilton v. Fowler, 99 Fed. 18. 40 

312. C. C. A. 47 ; Thompson v. Maddux. 

22Kimpton V. Studebaker Broth- 117 Ala. 468, 23 So. 157. 

ers Co., 14 Idaho 552, 94 Pac. 1039, 27 Baily v. Smith, 14 Ohio St. 

125 Am. St. Rep. 185. 396. 84 Am. Dec. 385 ; Watkins v. 

23 Continental National Bank v. Gocssler, 65 Minn. 118, 67 N. W. 
Wells, 72> Wis. 332, 41 N. W. 409 ; 796 ; Butler v. Slocomb, Z2, La. Ann. 
Cushman v. Haynes, Z7 Mass. (20 170. 39 Am. Rep. 265. 

Pick.) 132. 28 Arnj^rican National Bank v. 

24 Wright V. Traver, 73 Mich. 493, Sprague, 14 R. I. 410; Costelo v. 
41 N. W. 517. 3 L. R. A. 50. Crowcll, 127 Mass. 293, 34 Am. Rep. 

25 Bright V. Offield, 81 Wash. 443. 367. 

2«Gabbert v. Schwartz, 69 Ind. 2932 l. R. A. (N. S.) 858, note. 



284 NEGOTIABLE INSTRUMENTS. § 227j 

A memorandum on a note that the same was issued as collat- 
eral to A's draft accepted by B has been held to make the note 
non-negotiable because not payable at all events since payment 
of the draft would discharge the maker and indorsers of the note 
and render the note null and void ;^*' so also is a promissory note 
which states that it is to be held as collateral security for the 
payment of certain debts of a third person ;^^ and a statement 
that the note is "given as collateral security with agreement" has 
been held to make the note non-negotiable.^^ 

§ 227j. Effect of agreement for delay. There is no exten- 
sion of a bill or note, so as to postpone suit or as to discharge 
indorsers or sureties, whether another bill or note, either of 
the maker or a third person, is taken merely as collateral secur- 
ity, and there is no agreement postponing the remedy, although 
indulgence may in fact be granted ;^^ it is otherwise, however, 
if there is an agreement for delay.^* 

If a bill, note or check taken as collateral security is payable 
at a future day to the original obligation, there arises an implica- 
tion of agreement for delay until its maturity. The holder may 
show, however, that it was agreed that there should be no delay, 
or that the remedy against the drawer or indorser was reserved \^'^ 
but when the debt is not yet due and the collateral instrument 
is indorsed as security with an agreement that there shall be a 
delay until the collateral shall mature, such agreement by the 
creditor constitutes a consideration and makes the indorsee a 
<bona fide holder for value,^*' and has been held to create an 
■extension of time so as to discharge sureties or indorsers; the 
receipt of collateral security by the holder, from the maker or 
acceptor, with agreement to apply the proceeds to payment of 
the bill or note will not in anywise affect the rights of the holder 
against the drawer or indorsers, provided it is not accompanied 
,by any stipulation for indulgence or delay.^^ 

30 American National Bank v. 34 Martin v. Bell, 18 N. J. L. 167. 
Sprague. 14 R. I. 411 ; Gibson v. 35 Pomeroy v. Tanner, 70 N. Y. 
Hawkins, 69 Ga. 354; Haskell v. 547 

Lambert, 16 Gray 592. 36 Daniel, § 825. 

31 Haskell v. Lambert, 16 Gray 37 Cary v. White, 52 N. Y. 138; 
(Alass.) 592; American National Bank v. Matson, 99 Tenn. 390, 41 
Bank v. Sprague, 14 R. I. 410. S. W. 1062 ; Hoover v. McCormick, 

32 Costello V. Crowell, 127 Mass, 84 Wis. 215, 54 N. W. 505 ; Dodson 
293. V. Taylor, 56 N. J. L. 11, 28 Atl. 

33 Gary v. White, 52 N. Y. 138; 316. 
Cooper V. Gibbs, 4 McLean (U. S-) 

396. 6 Fed. Gas. No. 3,194. 



§§ 227k-227m with collateral security. 285 

§ 227k. Provision for deposit of additional collateral. Some 
jurisdictions hold, that a promissory note with an agreement 
therein that if there is any depreciation before the note matures, 
in the collateral security, the holder may require further security, 
is not negotiable.^^ And it has been held that when there is a 
stipulation in a note, that in case of depreciation the maker shall 
deposit additional securities and in the event of default of such 
deposit, the principal obligation shall become due and payable, 
the stipulation makes the note non-negotiable.^* 

§ 2271. Proviso in note authorizing sale of collaterals. The 

Negotiable Instruments Law provides as follows : 

"The negotiable character of an instrument otherwise nego- 
tiable is not affected by a provision ivhich authorizes the sale of 
collateral securities in case the instrument be not paid at ma- 
ttirity."*^ 

It often happens that notes of this character are non-negotiable 
because of provisions as to the time of payment, or because of 
provisions requiring something to be done in addition to the 
payment of money ; but a statement that collateral security has 
been deposited for the performance of the promise contained in 
the instrument is only a recital which does not affect its nego- 
tiability. And a provision merely authorizing the sale of the 
collateral, if the note is dishonored, does not make the note non- 
negotiable.** 

Thus a promissory note does not lose its negotiable character 
because it recites that the maker has deposited collateral secur- 
ity for its payment which he agrees may be sold in a certain 
manner.^ 

§ 227m. What amounts to payment. The mere acceptance 
of collateral security does not operate as a payment,"** but pay- 
ment and satisfaction of the security operates as a payment of 
the instrument secured.** 

An agreement to rely on the collateral security may amount 
to a payment ; thus where a bank, at which an instrument secured 

38 Lincoln National Bank v. ^i Perry v. Bigelow, 128 Mass. 
Perry, 32 U. S. App. 15, 66 Fed. 887, 129. 

14 C. C. A. 273. 42 Bank of Carroll v. Taylor, 67 

39 Holiday State Bank v. Hofif- Iowa 572, 25 N. W. 810; Duncan v. 
man, 85 Kans. 71 ; Hibernia Bank & City of Louisville, 13 Bush (Ky.) 
Trust Co. V. Dresser, 132 La. 532. 378. 26 Am. Rep. 201. 

Contra, Finley v. Smith, 165 Ky. 43 Hook v. White, 36 Cal. 299. 

445 ; Kennedy v. Broderick, 216 Fed. ^4 Sampson v. Fox, 109 Ala. 662, 

Rep. 137, 132 C. C. A. 381. 19 So. 896, 55 Am. St. Rep. 950; 

40 Neg. Inst. Law, § 5, subd. 1. Kent v. May, 13 Mich. 38. 



286 NEGOTIABLE INSTRUMENTS. §§ 227n-227q 

by chattel mortgage was payable, agreed that it would look to 
the mortgaged property alone, the maker was released, if at the 
date of such agreement such property was sufficient to pay the 
note, notwithstanding it had depreciated in value at the time the 
mortgage was foreclosed."*^ 

§ 227n. In some jurisdictions by statute, the surrender of 
collateral discharges indorser. In at least one jurisdiction, 
namely, that of the state of Wisconsin, the Negotiable Instru- 
ments Law provides that "a person secondarily liable on the in- 
strument is discharged by giving up or applying to other pur- 
poses collateral security applicable to the debt."'*^ 

By judicial interpretation of the above statute it has been de- 
termined that the surety is discharged only to the extent cor- 
responding with the value of the security given up or applied 
to other purposes.^'^ 

§ 227o. Holder receiving collateral not required to proceed 
upon same before suing indorser. The holder who has re- 
ceived collateral from the maker is not required to proceed on 
, the collateral before suing the indorser."*^ 

§ 227p. Collateral security must be exhibited. The col- 
lateral security must be exhibited to the person from whom pay- 
ment is demanded, and when it is paid must be delivered up to 
the party paying it. That is, the maker is entitled to require that 
the collateral be tendered with the note or the demand of pay- 
ment will not be sufficient and the maker may require that the 
collateral be delivered with the note.** 

§ 227q. Right of maker to claim a defense because holder 
has collateral security. Although the holder may have other 
collateral securities for the same debt more than sufficient to 
cover it, from which, however, the debt had not been realized, 
yet, such fact does not furnish a good defense that the maker 
may take advantage of .^® 

And if the indorser has deposited with the holder security 
for the payment of the note the maker can not claim it as a 
defense when proceeded against by the holder.^* 

45 First National Bank v. Wat- 48 Buck v. Freehold Bank, Z7 N. 

kins, 154 Mass. 385, 28 N. E. 275. J. Law 307. 

46Neg. Inst. Law (Wis.), §1679 49 Ocean National Bank v. Fant, 

—1, Sub. Div. 4A. See also Rogers 50 N. Y. 474. 

V. School Trustees, 46 111. 428 ; ^o Lord v. Ocean Bank, 20 Pa. St. 

Union National Bank v. Cooley, 27 384. 

La. Ann. 202. ^^ People's National Bank v. Rice, 

47 State Bank of La Crosse v. 149 App. Div. (N. Y.) 18. 
Michel, 152 Wis. 88. 



§§ 227x-227\\ WITH collateral security. 2S7 

§ 227r. Amount of recovery on collateral security. The 
holder is limited as to the amount he may recover on the co1 
lateral security to the amount of the debt which it secures,''* and 
even though the debt secured by the collateral is less in amount 
than the collateral, yet if there is no defense to the collateral 
note, the holder is generally entitled to recover the full amount 
holding the balance in trust,^^ and if the instrument has been 
fraudulently pledged to a holder in good faith, the real owner 
may pay that debt and be entitled to receive the instrument.^'* 

§ 227s. Rights of indorsee as to stipulations in collateral 

note. A provision in a collateral note that the collateral secur- 
ity was deposited for the payment of the original obligation or 
any other liability of the maker to the holder runs in favor of 
the indorsee and the security may be applied to the payment of 
an indebtedness due from the maker to an indorsee, as such a 
provision tended to facilitate the negotiation of the paper.'* 

§ 227t. Whether surrender of collateral discharges surety. 
If any collateral security which the creditor held be released, it 
is held that the surety is discharged ;'* but the surety will not 
be discharged in any case where it can be clearly established that 
the parting with the security has worked no real injury. And 
he is discharged only to the extent that he would be injured 
if held bound.'^'' 

§ 227u. Whether surrender of collateral discharges guar- 
antor. In some jurisdictions it is held that a guarantor is dis- 
charged if the holder surrenders to the principal debtor, or other 
party to the paper, collateral securities which he holds as security 
for the guaranteed debt. The theory of this rule is that by sub- 
rogation, the guarantor has a vested interest in the collateral 
security, which cannot be jeopardized or destroyed without his 
discharge from his liability.*^* 

In other jurisdictions it is held that the guarantor will be dis- 
charged to the extent of the value of the collaterals surrendered 
or the security released.'*^* 

52 Hardy v. Sibley, 46 Ohio St. 539 ; Allen v. O'Donald, 23 Fed. 573 ; 

15; Duncan & Sherman v. Gilbert, Mayhew v. Boyd, 5 Md. 102. 

30 N. J. L. 527; Fisher v. Fisher, 98 5'' Payne v. Commercial Bank, 6 

Mass. 303. Smedes & M. 24. 

'^S Toole V. Newman, 75 111. 215. ^spjolland v. Johnson, 51 Ind. 

54 Stoddard v. Kimball, 6 Cush. 346 ; Hayes v. Ward, 4 Johns. Ch. 

469; Chicopee Bank v. Chapin, 8 123, 8 Am. Dec. 554. 

Mete. (Mass.) 40. 5Sa poerderer v. Moors, 91 Fed. 

sSQleon V. Rosenbloom, 247 Pa. 476, ZZ C. C. A. 641; Holmes v. 

St. 250. Williams, 177 111. 386, 53 N. E. 93. 

5«Shutts V. Fingar, 100 N. Y. 



288 NEGOTIABLE INSTRUMENTS. § 227v 

§ 227v. Effect upon necessity of presentment, protest and 
notice as to drawer or indorser when they are in possession of 
security. The weight of authority is to the effect that the pos- 
session before maturity of security or the possession of the prop- 
erty of the primary obHgor by the drawer or an indorser excuses 
the holder of the instrument from presentment, protest and 
notice, as to such drawer or indorser ; thus if the indorser re- 
ceives collateral security from the maker or other party for whose 
benefit the instrument was executed he is bound without demand 
and notice, provided, however, the security received was full 
or comprised all the maker's property;'*'* and notice of dishonor 
is waived when the indorser, before maturity, has taken col- 
lateral security sufficient to cover his contingent liability or has 
taken an assignment of all the estate of the maker for the pur- 
pose of meeting his responsibilities ;®" but the taking of insuffi- 
cient security is not a waiver of notice.** 

In some jurisdictions an indorser is entitled to notice regard- 
less of the collateral taken, so long as the maker of the note 
remains primarily liable.*^ 

If the bill or note has been transferred to the holder by mere 
delivery without indorsement, as collateral security, the transferer 
is not entitled to insist on a strict presentment at maturity to 
the maker or acceptor; nor will he be released from the debt 
for which the bill or note is delivered as collateral security unless 
he can show that he has actually sustained damage or prejudice 
by such non-presentment.®* 

There is a conflict among the authorities as to whether when 
a transferrer indorses a bill or note merely as collateral security 
for or on account of a precedent debt, without any new considera- 
tion therefor, he is entitled to require strict presentment and 
notice as an indorser. Some jurisdictions maintain that the re- 
sponsibility of the creditor is limited to the loss occasioned by 
his negligence in respect to presentment and notice;®"* the con- 
trary view is better, that is, the indorsee of a collateral bill or 
note should discharge a holder's duties, for the legal effect of 
taking a bill or note as collateral security is, that if, when the 

59 Daniel, § 1428. negan, 1 McLean (U. S.) 309, 4 

*0 Prentiss v. Danielson, 5 Conn. Fed. Cas. 2,205. 

175, 13 Am. Dec. 52 ; Mead v. Small, «a Kramer v. Sandford, 4 Watts 

2 Me. 207, 11 Am. Dec. 62; Perry & S. (Pa.) 328, 331, 39 Am. Dec. 92; 

V. Green, 19 N. J. L. 61, 38 Am. Dec. Wilson v. Senier, 14 Wis. 38. 

536. 63 Van Wart v. Wooley, 3 B. & 

61 Olendorf v. Swartz, 5 Cal. 480, C. 439. 

63 Am. Dec. 141 ; Burrows v. Han- 64 Westphal v. Ludlow, 6 Fed. 

348, 2 Am. Lead. Cas. 260. 



§§ 227w-227y with collateral security. 289 

bill or note arrives at maturity, the holder is guilty of laches, 
and omits duly to present it, and to give notice of its dishonor, 
the bill becomes money in his hands, as between him and the 
person from whom he received it.*'* 

§ 227w. Accommodation paper as collateral security. Ac- 
commodation paper may be used as collateral security and un- 
less the transferrer in addition to knowing that it is accommo- 
dation paper, knows also that such use is restricted, he can re- 
cover upon it.®* 

Accommodation makers or indorsers of negotiable paper are 
not liable to a holder thereof, where the same has been fraudu- 
lently diverted from the purpose for which it was made or the 
indorsement given, and the holder has received it solely as col- 
lateral security for an antecedent debt.*'' 

The maker of an accommodation note cannot set up the want 
of consideration as a defense against it in the hands of a third 
person, though it be there as collateral security merely.*^ 

§ 227x. Collateral released or lost. If a creditor, having in 
his hands collateral security, relinquishes or loses it by his wilful 
acts or through his negligence, the surety will be discharged.*^ 

A surety is not released by delay on the part of the creditor 
in enforcing collateral security for the debt ; and the creditor 
or obligee is not required to resort to such other security to 
enforce the payment of his claim.'^* 

§ 227y. Miscellaneous. A guarantee has no right to sur- 
render to the debtor, collateral securities held by him, and if he 
does so without the guarantor's consent or if he releases other 
security, the guarantor will be discharged to the extent of the 
value of the collaterals surrendered or the security released.'^^ 

«5 Peacock v. Pursell. 14 C. B. 122, 32 S. E. 1002; Otis v. Von 

(N. S.) 728; Rumsey v. Laidley, Starch, 15 R. I. 41, 23 Atl. 39; Grif- 

34 W. Va. 721. 12 S. E. 866, 26 Am. feth v. Moss, 94 Ga. 199, 21 S. E. 

St. Rep. 935. 463. 

e«Dunn V. Western, 71 Me. 270; ''» Thorn v. Pinkham, 84 Me. 101. 

Continental National Bank v. 24 Atl. 718, 30 Am. St. Rep. 335; 

Townsend, 87 N. Y. 8. Jones v. Tincher, 15 Ind. 308, 11 

67 Sutherland v. Mead, 80 N. Y. Am. Dec. 92 ; Osborne v. Smith, 18 

S. 504, 80 App. Div. 103. Fed. 126, 5 McCrary 487. 

*S Lord V. Ocean Bank, 20 Pa. St. '^^ Foerderer v. Moors, 91 Fed. 476, 

384; Miller v. Earned, 103 111. 579. ZZ C. C. A. 641; Holmes v. Will- 

Contra, Boykin v. Bank of Mobile, lams, 177 111. 386, 53 N. E. 93; Lan- 

72 Ala. 262, 47 Atl. Rep. 411. caster First National Bank v. Shrei- 

6» Parsons v. Harrold, 46 W. Va. ner, 110 Pa. St. 188, 20 Atl. 718. 



290 NEGOTIABLE INSTRUMENTS. § 227y 

A transferree taking collateral by way of substitution for other 
collateral surrendered becomes a holder for value7^ 

Though the holder have in his hands collateral security for the 
payment of the instrument, the indorser cannot compel him to 
sue the maker or to enforce his security. If the indorser desires 
the benefit of any security held by the creditor, he must pay the 
debt, fulfill the contract and enforce his right of subrogation to 
such securities.''^ 

Where one security is accepted by the creditor in satisfaction 
of another, the debt evidenced by the latter is discharged ;'^'* but 
one merely taking a security as collateral for a pre-existing debt 
does not discharge the debt unless it is paid or the debtor is in- 
jured by the laches of the creditor ;^^ payment to the creditor of 
collateral held as security for the debt, or a sale of it and the 
appropriation of the proceeds by the creditors, operates as a satis- 
faction of the debt ; and where the amount received is less than 
the debt it will be considered as satisfaction pro tanto;"^^ and if 
the creditor converts the security so as to be unable to deliver 
it when the debtor is willing to pay, the amount thereof must be 
credited upon the debt.'^^ 

The fact that plaintifif holds collateral security for the note in 
suit or that he has been so negligent in disposing of such col- 
lateral that the maker would have a cause of action against him 
therefor, is not a good defense to an action at law f^ that a bill 
or note was given as collateral security and without valuable con- 
sideration is a good defense as between the parties privy to it, 
that is, the consideration is open to inquiry. 

TaVoss V. Chamberlain, 139 Iowa 158 111. 88. 42 N. E. 129, 30 L. R. A. 

569. 117 N. W. 269. 380; Farn.sley v. Anderson Foundry 

73 First National Bank v. Wood, etc. Works, 90 Ind. 120; Hunt v. 

71 N. Y. 405; German- American Nevers. 15 Pick. 500, 26 Am. Dec. 

Bank v. Milliman, 31 N. Y. Misc. 616; Dismukes v. Wright, 20 N. C. 

87, 65 N. Y. Supp. 242. 74. ^ 

'''* Fidelity Insurance etc. v. Shen- ''^ Ashton's Appeal, 73 Pa. St. 153. 

andoah Valley Railroad Co., 86 Va. ''^ Taggard v. Curtenius, 15 Wend. 

1. 9 S. E. 759, 19 Am. St. Rep. 858. 155 ; Ambler v. Ames. 1 App. Cas. 

''5 Dugan V. Sprague, 2 Ind. 600; (D. C.) 191; Carson v. Buckstaff, 

Day V. Neal. 14 Johns. 404 ; Dickin- 57 Neb. 262, 77 N. W. 670. 

son V. King, 28 Vt. 378. '"» Leighton v. Bowen, 75 Me. 

"^^ Levy V. Chicago National Bank, 504. 



§§ 227z-227aa with collateral srcltrity. 291 

§ 227z. Form of guaranty of collateral note. The following 
is a form of a guaranty of a collateral note: 

GUARANTY OF COLLATERAL NOTE. 

IN CONSIDERATION of One Dollar ($1.00) and other val- 
uable consideration paid to the undersigned, the receipt of which 
IS hereby acknowledged, and of the making, at the request of the 
undersigned, of the loan evidenced by the within note and con- 
tract, the undersigned hereby jointly and severally guarantee to 
the CITY TRUST BANK, of Indianapolis, its successors, en- 
dorsers or assigns, the punctual payment, at maturity, of the said 
note and contract and of the said loan, and hereby assent to all 
the terms and conditions of the said note and contract, especially 
agreeing that so long as the maker is bound by the said note 
and contract and the conditions therein contained, that he will 
remain bound — waiving any defenses that the maker or makers 
could not maintain as maker. 

The undersigned hereby waives demand of payment, and also 
waives the protest, and notice of protest of the within note. 



§ 227aa. Form of note with transfer of account. The fol- 
lowing is a form of a promissory note with collateral security 
in the form of the transfer of an account: 

NOTE WITH TRANSFER OF ACCOUNT. 

$ (Race) Date 

On demand after date we promise to pay to the order of 

THE CITY TRUST BANK 

of Indianapolis 

DOLLARS 

at the office of the CITY TRUST BANK, of Indianapolis, value 
received with interest. 

Per 

To secure the payment of this note and for value received we 
hereby sell, transfer and assign to the CITY TRUST BANK, 
our right, title and interest in the account mentioned herein, 

viz.: , and we 

hereby constitute ourselves as the Agents for the said CITY 
TRUST BANK, for the purpose of collecting this account, and 
agree to turn over to the said CITY TRUST BANK, of In- 
dianapolis, the proceeds of said account as soon as collected. 



CHAPTER XXI— B. 

WHO MAY SUE— WHO MAY BE SUED. 

§ 227bb. In general. § 227hh. Payee. 

227cc. Party in interest. 227ii. Drawer. 

227dd. Holder may sue when an- 227jj. Agent. 

other is entitled to pro- 227kk. Public officials. 

ceeds. 22711. Holder of instrument for 

227ee. Instruments payable to collection. 

bearer or indorsed in 227mm. Who may sue — Miscella- 

blank. neous. 

227ff. Acceptor. 227nn. Parties to actions — Defend- 

227gg. Drawee. ants. 

§ 227bb. Who may sue — In general. The statutes today 
largely determine as to who may sue on negotiable instruments. 
Those states which have adopted the Negotiable Instruments 
Law are governed by provisions of that law and in it there is an 
express provision that the holder of a negotiable instrument may 
sue in his own name and it defines the holder as the payee or the 
indorsee of a bill or a note in possession thereof or its bearer.* 

These provisions are as follows : "The holder of a negotiable 
instrument may sue thereon in his own name."^ 

"Holder means the payee or indorsee of a bill or note, who is 
in possession of it or bearer thereof."^ 

Thus a holder is one to whom a negotiable instrument is nego- 
tiated, or to whom it is transferred by operation of law. 

Possession of a negotiable instrument is prima facie evidence 
of the right of the holder to sue,'* and as the term holder is now 
statutory and means the payee or indorsee of a bill or note who 
is in possession of it, or bearer thereof,^ the holder may sue on 
it in his own name, that is, the payee or indorsee of negotiable 
paper who is entitled to receive the sum for which it calls, may 
sue on it in his own name.® 

§ 227cc. Party in interest. One holding a full legal title to 
a negotiable instrument by transfer may maintain an action there- 
on against the maker notwithstanding he has no beneficial in- 

1 Schmidt v. Pegg, 172 Mich. 159, 440, 55, p. 124, 68 Am. St. Rep. 46. 

137 N. W. 524; Dennis v. Coffin, 16 ^ Qlson v. Rosenbloom, 247 Pa. 

Pa. Dist. 311. St. 250. 

a Neg. Inst. Law, § 90. <* Olson v. Rosenbloom, 247 Pa. 

3 Neg. Inst. Law, § 191, sub. 7. St. 250. 

^Brennan v. Brennan, 122 Cal. 

292 



§ 227dd WHO MAY SUE OR BE SUED. 293 

terest in the proceeds the transfer having been made to enable 
him to reaHze on the claim in the interest of the original payee.' 

Where an instrument is payable to bearer or is indorsed in 
blank, proceedings may be had in the name of any person who 
is the holder of the instrument without being required to show 
an interest in it.* 

Agents, receivers, assignees, trustees, heirs or personal repre- 
sentatives may sue on a note or bill payable to bearer, or in- 
dorsed in blank.^ 

In some jurisdictions there are statutes that every action must 
be prosecuted in the name of the real party in interest, except 
that an executor, administrator, or trustee of an express trust 
may sue without joining with him, the person for whose benefit 
the action is brought. These statutes have been construed as a 
rule so as to permit no defense to a party suing upon negotiable 
paper in order to show that the transfer, under which the party 
proceeding holds it, is without consideration or subject to equity 
between him and his assignor, or merely for purpose of collec- 
tion or other like defense.-^® 

§ 227dd. Holder may sue when another is entitled to pro- 
ceeds. The owner and holder of a negotiable instrument may 
maintain an action to enforce collection thereof even though a 
third party may be entitled to the proceeds.^^ 

Thus, where a promissory note was indorsed by the payee to a 
third party "for collection" for the account of the payee, the 
indorsee has such legal title as to authorize him to proceed in his 
own name, subject, however, to the same defenses that could 
be made to it in the hands of the original payee.** 

However, some jurisdictions apparently limit the right of re- 
covery to the real owmer.*' 

Some jurisdictions maintain that an action may be had in the 
name of a person who is the beneficial owner of a part only of 
the instrument sued on, provided he holds the legal title.*^ 

Since the legal title passes by gift regardless of the question 
of consideration, a donee may sue ;^^ and a person holding col- 

' Johnson v. Catlen, 27 Vt. 87, 62 N. Haven Mfg. Co. v. N. Haven 

Am. Dec. 622. Pulp Co., 79 Conn. 127. 

8 Sterling v. Bender, 7 Ark. 201, 12 Wilson v. Tolson, 79 Ga. 137. 

44 Am. Dec. 539; Hovey v. Selring, ^^ Rich v. Starbuck, 51 Ind. 87. 

24 Mich. 232, 9 Am. Rep. 122. ^^ Allensworth v. Moore, 3 

» Perry v. Wheeler, 63 Kan. 870, Greene (Iowa) 273. 

66 Pac. Rep. 1007. i5 pHtchard v. Hirt, 39 Hun (N. 

10 Hays V. Hathorn, 74 N. Y. 488. Y.) 378. 

11 Stanley v. Penny, 75 Kan. 179; 



294 NEGOTIABLE INSTRUMENTS. § 227ee 

laterals for the benefit of creditors may sue ;** also a receiver 
may sue ;^^ and where a promissory note was attached and sold 
under an execution, the purchaser was entitled to sue in his own 
name without an indorsement to him.-^* The holder of a note 
although not the beneficial owner may sue in his own name by 
consent of the owner, and to do so may strike out his own as 
well as subsequent indorsements.*" And the Negotiable Instru- 
ments Law has been construed to permit an action on a note by 
the party holding the legal title to it, although other parties 
are beneficially interested in it.*" 

§ 227ee. Instruments payable to bearer or indorsed in blank. 
A holder of a negotiable instrument payable to bearer or payable 
to order and indorsed in blank can sue on it in his own name.** 

Any holder of a bill or note who can trace a good legal title 
to it may sue upon it in his own name whether or not he holds 
the beneficial interest in it. And the defendant can question the 
title of the holder only when necessary to preclude further lia- 
bility upon the instrument or to let in a defense which he de- 
sires to set up.** 

The holder may sue in his own name on an instrument which 
has been indorsed in blank regardless of the fact that subsequent 
indorsements appear on the instrument as these may be stricken 
out as unnecessary to make title.*' 

Where a negotiable instrument is payable to bearer, the original 
holder or someone to whom the legal title has been transferred 
by delivery must bring suit on the instrument.*^ 

Where a negotiable instrument is in efifect, payable to order, 
and has not been indorsed in blank, only the original payee or 
the person to whom the instrument has been indorsed can main- 
tain an action upon it.*® 

The person in possession of a negotiable instrument is pre- 
sumed to be the owner and holder thereof, and may sue thereon.** 

1* Nelson v. Edwards, 40 Barb. herd, 13 D. C. 66; In re Wagner, 11 

(N. Y.) 279. D. C. 395; Jump v. Leon 192 Mass. 

"Merchants Loan and Trust Co. 511, 78 N. E. 532, 116 Am. St. Rep. 

V. Clair, 36 Hun (N. Y.) 362. 265. 

18 Fishburn v. Londershonsen, 50 ^^Ray v. Anderson, 119 Ga. 962, 
Ore. 363, 92 Pac. 1060, 4 L. R. A. 47 S. E. 205; BoHne v. Wilson, 75 
(N. S.) 1234, 15 Ann. Cas. 975. Kan. 829, 89 Pac. Rep. 678. 

19 Owens V. Storm, 78 N. J. L. ^spjabersham v. Lahman, 63 Ga. 
154, 72 Atl. 441. 380. 

20 Owens v. Storms, 78 N. J. L. 24 Moore v. Maple, 25 III. 341. 
154, 72 Atl. 441; Chaffee v. Sjai^e 25 Spence v. Robinson. 35 W. Va. 
(Okl.), 148 Pac. 686. 313, 13 S. E. 1,004. 

21 Bank of British N. A. v. Bar- 26 n. L L., Sees. 16, 37, 51, 59, 
ling, 46 Fed. 356; Keyser v. Shep- 191. 



§§ 227fif-227ii who may sue or be sued. 295 

Delivery to enable the transferee to sue is enough to constitute 
him a proper plaintiff.^'^ 

The right to sue cannot be rebutted by proof that he has no 
beneficial interest, or by anything else but proof of bad faith.^ 
Thus, if it were shown that a party suing upon such an instru- 
ment has no interest in it and is proceeding against the desire of 
the party beneficially interested, his conduct would be in bad faith 
and he could not recover.^ 

§ 227ff. Acceptor. An acceptor for honor of the drawer or 
indorser may sue them upon the bill itself.^® 

If an acceptor or maker for accommodation pays the bill, he 
cannot sue the drawer or indorser upon the bill, because, ac- 
cording to its terms, he is liable to them. But he may sue the 
accommodation party not upon the bill but for money paid at 
his request.^^ 

§ 227gg. Drawee. The drawee of a bill of exchange may 
sue the drawer and indorser before the bill has been dishonored 
if he receives the same by indorsement.^^ 

§ 227hh. Payee. A payee or indorsee may strike out his 
own and subsequent indorsements and sue in his own name,^ as 
he may maintain an action for an instrument payable to his order 
without indorsing it as this is the same as making the instru- 
ment payable to the payee.^ 

A negotiable instrument payable to a fictitious payee is gen- 
erally treated as payable to bearer and an action may be brought 
in the name of any person,^ so also an instrument made payable 
to a person by a wrong name may be proceeded upon by such 
person in his right name.^* And a payee may sue although he 
is only a part owner of the instrument.^'^ 

§ 227ii. Drawer. A drawer of a bill of exchange may sue 
the acceptor if he has had to pay the bill.^* But the drawer 

2^Brigham v. Marean, 7 Pick. 33 Qwen & Co. v. Storms & Co., 

(Mass.) 40; French v. Jarvis, 29 — N. J. — 72 Atl. 441. 

Conn. 347. 34 purgin v. Bartol, 64 Me. 473; 

2S Keenan v. Blue, 240 111. 177, 88 Davis v. Baker, 71 Ga. 33. 

N. E. 553. 35 Smith v. Clapp, 15 Pet. 125, 10 

29 Towne v. Mason, 128 Mass. 517. L. Ed. 684. 

30 Parsons. 36 Porter v. Kapiolane, 18 Hawaii 

31 Bell V. Norwood, 7 La. 95; 299: Neil v. Dillon, 3 Mo. 59. 
Stark V. Alford, 49 Tex. 260. 37 Lundberg v. N. W. Elevator 

32 Swope V. Ross, 40 Pa. 180, 80 Co., 42 Minn. 37, 43 N. W. 185. 
Am. Dec. 567. 38 Thurman v. Van Brunt, 19 

Barb. 410. 



296 NEGOTIABLE INSTRUMENTS. § 227jj 

cannot sue the acceptor on a refusal to accept, for in such case 
the proceeding must be special on the contract to accept. And 
in general a drawer of a bill of exchange which is payable to 
his own order, or which has been taken up by him, may main- 
tain an action thereon against the acceptor without an indorse- 
ment or after striking out the payee or any subsequent indorse- 
ment.^® 

§ 227jj. Agent. Where a negotiable instrument is made to 
an agent or a private corporation or association with the addi- 
tion of any agency or office, he may sue upon it in his own 
name. The addition being merely descriptio personae^^ Thus 
an agent may sue in his own name upon a negotiable instrument 
indorsed in blank.^* 

Indorsement of a negotiable instrument to an agent transfers 
title thereto as to all parties except his principal, and the agent 
may maintain an action thereon in his own name,^ but when 
an express contract is made with an agent by a third person, the 
agent may maintain an action upon it, though he may be known 
to act as agent and though his principal may not be entitled to a 
like action on the contract.^^ 

When a negotiable instrument is payable to a certain person 
by name, but describing him as agent of another person, as "Jo^" 
Wilson, agent for William Jackson," either the agent or prin- 
cipal may sue ; but there are decisions to the contrary ; and proof 
that the party suing is the mere agent of the holder, having 
neither title nor possession, but having before action brought, 
returned the instrument to his principal, will defeat the action 
though the agent sued in his own name by order of the prin- 
cipal.'*^ 

In case of a pledgee, the indorsement and delivery of a nego- 
tiable instrument passes the legal title to the holder with power 
to collect by suit or otherwise, subject to the rights of the in- 
dorser as to the application of proceeds.^^ The payee named 
in a negotiable instrument, or the holder of such instrument, 
may bring suit on it in his own name, although he holds such 
instrument as trustee for another and is expressly named in his 

^'^ Cooper V. Jones, 79 Ga. 379, Z7 Am. Dec. 602 ; Poorman v. Mills, 

4 S. E. 916; Pilkington v. Woods, 10 35 Cal. 118, 95 Am. Dec. 90. 

Ind. 432. 43 Poor v. Guilford, 10 N. Y. 273, 

40 Johnson v. Catlin, 27 Vt. 87, 61 Am. Dec. 749. 

62 Am. Dec. 622. 44 Whitford v. Burchmyer, 1 Gill 

4iPearce v. Austin, 4 Whart. (Md.) 127, 39 Am. Dec. 640. 

(Pa.) 489, 34 Am. Dec. 523. 45 Lamberton v. Windon, 12 Minn. 

42 Chase y. Burnham, 13 Vt. 447, 232, 90 Am. Dec. 301, 



§§ 227kk-22711 who may sue or be sued. 297 

representative capacity as receiver, assignee in bankruptcy or 
insolvency or as guardian."*® 

§227kk. Public officials. A negotiable instrument made 
payable to a corporate officer or agent may be proceeded upon 
by the corporation as plaintiff;*'' and where a bill or note is made 
payable or is indorsed to a certain person, designated by his 
official title, suit may be brought in his name, or it may be 
brought in the name of the principal whom he officially repre- 
sents, when the principal is named ■,'*^ and if the principal be not 
named, evidence is admissible to show who the principal is.*" 

The government, federal, state or county, may bring suit in 
its own name on negotiable instruments belonging to it although 
it is made payable to one of its officers.'*® 

When an instrument is made payable to a treasurer or cashier 
without the name of the corporation, and the corporation sues 
upon the instrument, it should be averred that it was made pay- 
able to the corporation by the name of the official, and then the 
production and possession of the instrument by the corporation 
is sufficient prima facie evidence for maintaining the suit.*** 

Where the negotiable instrument is made payable to desig- 
nated officer without naming him, the action should be brought 
in the name of the holder of the office at the time the suit is 
brought.*^^ 

It is a general rule that public officers can not proceed in their 
individual capacity on a negotiable instrument made payable to 
them in their representative capacity.^^ 

§ 22711. Holder of instrument for collection. The holder of 
a negotiable instrument, transferred for collection, may sue on 
the same in his own name ;^* one who is the holder of a nego- 
tiable instrument under a restrictive indorsement "for collection," 
or "without recourse and without warranty of any character," 
or as the pledgee of a note held as collateral, in each instance is 

4«Rice V. Rice, 106 Ala. 636, 17 4 L. Ed. 362; Rogers v. Gibson, 15 

So. 628; Collier v. Barnes, 64 Ga. Ind. 218. 

484; Wheelock v. Wheelock, 5 Vt. ^* Southern Life Ins. etc. Co. v. 

433. Gray, 3 Fla. 262. 

'*^ Friedllne v. " Carthage College, ^* Tainter v. Winter, 33 Me. 348. 

23 111. App. 494; Morristown Look- ^^ State v. Torinus, 26 Minn. 1, 49 

out Bank v. Aull, 93 Tenn. 645, 27 N. W. 259, 37 A. R. 395; Oconta 

S. W. 1014, 42 Am. St. Rep. 934. County v. Hall, 42 Wis. 59. 

48 Young V. Murray, 3 Ga. App. ^4 Qrr v. Lacy, 18 F. Cas. 10, 589, 
204. 59 S. E. 717. 4 McLean 243 ; Meyer v. Foster, 147 

49 Pratt V. Topeka, 12 Kan. 570. Cal. 166, 81 Pac. 40; Conference 
SODugan v. U. S., 3 Wheat. 170, Evangelical Assn. v. Plaggc, 177 111. 

431, 53 N. E. 76. 



298 NEGOTIABLE INSTRUMENTS. § 227mm 

presumed to be the owner and holder thereof and may sue on 
the same f'^ and the authority to collect is not revoked by the 
death of the owner.^® 

Under the Negotiable Instruments Law, the indorsee for col- 
lection may sue by the express provision that a restrictive in- 
dorsement confers upon the indorsee the right to bring any action 
that the indorser could bring.®'^ 

Some jurisdictions maintained that, before the adoption of the 
Negotiable Instruments Law, a holder for collection was not 
the real party in interest and was not entitled to sue .** 

§ 227mm. Who may sue — Miscellaneous. A restrictive in- 
dorsement confers upon the indorsee the right to bring any action 
thereon that the indorser could bring. The Negotiable Instru- 
ments Law provides as follows: 

"A restrictive indorsement confers upon the indorsee the right 
* * * /o bring any action thereon that the indorser could bring. "^^ 

And it has been decided that an indorsee of a negotiable in- 
strument who takes it under a qualified indorsement as "with- 
out recourse" may sue thereon in his own name ; and the holder 
of a negotiable instrument may maintain an action on it in his 
own name although it is not payable to him nor assigned or in- 
dorsed to him, unless his ownership is overcome by proof.*® 

Where the holder of a bill which had been indorsed in blank 
dies, and his executor, not wishing his own name to appear, 
procured another to bring action in his, the other person's name 
against the acceptor, but did not deliver the bill until after the 
suit was filed, the court said that the plaintiff was neither in 
actual nor constructive possession and could not maintain the 
action.*^ 

When an instrument made to raise money is made payable to 
a certain bank which never had any interest in it, and is then 
discounted by another party, the latter may proceed upon it as 
payable to him by the name of the bank.*^ 

A person for whom a note is intended may sue on it even 
though there is a mistake in the name, as well as when the name 
is merely fictitious and intended to be such.*' 

55 Mersick v. Alderman, 77 Conn. ®<* Callahan v. Louisville Dry 
634, 60 Atl. 109. Goods Co., 140 Ky. 712, 131 S. W. 

56 Moore v. Hall, 48 Mich. 143, 11 995. 

N. W. 844. «i Emmett v. Tottenham, 8 Exch. 

57 Smith V. Bayer, 46 Ore. 143, 884. 

79 Pac. 497, 114 A. S. R. 858. *^'^'E\\\o\.i v. Abbot. 12 N. H. 549. 

58 Rich V. Starbuck, 51 Ind. 87; «3 Porter v. Kapielani, 18 Hawaii 
Andrews v. McDaniel, 68 N. C. 385. 299. 

59Neg. Inst. Law, § Z7, sub. 2. 



§ 227mm who may sue or be suejd. 299 

When a negotiable instrument is specially indorsed to an- 
other, he can not strike out his name and insert that of another, 
and thus give the latter a right to maintain a suit ;*"* for if an in- 
strument be indorsed specially to a particular person without fur- 
ther transfer, no one but such person or his representative can 
sue on the same; but one who is the holder of an instrument 
under an indorsement in blank may fill it in his own name before 
bringing suit, or at the trial or after the trial under certain con- 
ditions ;®^ and a holder may always strike out a special indorse- 
ment when there are blank indorsements preceding it and bring 
suit under any indorsement in blank.®" 

As a general rule a prior party on a negotiable instrument 
cannot proceed against a subsequent party. However, in case 
a plaintiff had originally indorsed an instrument to a defendant 
without recourse or without consideration, and the latter had 
indorsed back to him for value, the plaintiff may maintain his 
action and it would not be objectionable on the ground of cir- 
cuity of action.*"' 

When an anomalous indorser under Section 64 of the Nego- 
tiable Instruments Law pays an instrument, he has an action 
against the maker, but such action is not on the note as it has 
been paid and extinguished.®^ 

An action at law can not be maintained upon a negotiable in- 
strument made by several persons and payable to one of their 
number, but if indorsed to a third party he may maintain an ac- 
tion upon it.®* 

The holder of the legal title to a negotiable instrument may 
sue alone on an instrument in which there are other persons in- 
terested with him. 

A proceeding on a negotiable instrument transferred pending 
suit thereon can not be maintained even though it was agreed 
at time of transfer that action should be continued in the name 
of the plaintiff and though the note being indorsed in blank was 
transferred by delivery only f^ if the plaintiff for a valuable con- 
sideration paid him by a third person and while suit is still pend- 
ing agrees to transfer on demand, the note and any judgment 
thereon, but no demand is made before judgment, the plaintiff 

64 Grimes v. Piersol, 25 Ind. 246. ®» Pitcher v. Barrows, 17 Pick. 

«5Whittier v. Hayden, 9 Allen (Mass.) 361, 28 Am. Dec. 306. 
408. '■* Curtis V. Sprague, 51 Cal. 239; 

®®Wetherell v. Ela, 42 N. H. 295. Rosemond v. Graham, 54 Minn. 323, 

S'' Bishop V. Hayward, 4 T. R. 56 N. W. 38, 40 Am. St. Rep. 336. 
470. "^^ Curtis V. Bernis, 26 Conn. 1, 68 

«8 Quimby v. Varnum, 190 Mass. Am. Dec. 377 ; Cooper v. Poston, 1 

211, 76 N. E. 671. Duv. (Ky.) 92, 85 Am. Dec. 610. 



300 NEGOTIABLE INSTRUMENTS. § 227nn 

"till retains the legal title and may maintain the suit in his own 
name ;''* so when the point is raised the plaintiff must show that 
he had title when suit was commenced, as an action can not be 
maintained by a title acquired after suitJ^ 

It is a general rule under statutes that an assignee of non- 
negotiable instruments may sue in his own name.'"'* 

In partnership cases all the partners must join in the suit 
when the bill or note is made payable to or indorsed specially 
to a firm. If one party conducts business under the name of a 
firm, he cannot recover on an instrument indorsed to the firm un- 
less he shows that he alone composed the nominal firm. If 
negotiable paper be indorsed in blank to a firm, either partner 
may fill it up in his own name and sue even though one of the 
partners be dead. While a partner cannot sue a firm of which 
he is a member, upon a negotiable instrument payable by it 
to himself, a firm may indorse to one member who may sue 
upon the instrument. 

§ 227nn. Parties to actions — Defendants. In equity and 
under the statutes, all persons who have or claim an interest 
in the subject matter of the action or who are necessary parties 
to a complete determination of the proceedings are proper 
parties.'^'* 

It is a general rule by statute that makers and indorsers may 
be joined as defendants,''" and under Section 57 of the Nego- 
tiable Instruments Law it has been held that the holder in due 
course has an election to sue any one or all the makers and in- 
dorsers thereon.'^'' The better rule is that sureties may be joined 
but not a guarantor for, independently of statutes, the maker and 
guarantor should not be joined, as the contract of guaranty is 
not a primary obligation to pay but is an undertaking that the 
debtor shall pay. The guarantor is not a promisor with the 
maker as is the case with the surety .'^^ 

''2 Camp V. First National Bank ''6 Burdette v. Bartlett, 95 U. S. 

Df Ocalo, 44 Fla. 497, 33 So. 241, 103 637, 25 L. Ed. 534; Hamil v. Ward, 

A. S. R. 173. 14 Colo. 277, 23 P. 330; Hoffecker 

73 Burch V. Daniel, 109 Ga. 256, v. Moon, 21 D. C. 263. 

34 S. E. 310. 77 Bank of California v. Union 

74 Smyth V. Strader, 4 How. 404, Packing Co., 60 Wash. 456, 111 Pac. 
11 L. Ed. 1031 ; Mussetman v. Mac- 573. See contra, Hough v. State 
Elhenny, 23 Ind. 4, 85 Am. Dec. 445 ; Bank of New Smyrna, 61 Fla. 290, 
Lowrey v. Danforth, 95 Mo. App. 55 S. 462. 

441, 69 S. W. 39; Thorn v. Myers, 78 Mowery v. Mast, 9 Neb. 445, 4 

36 S. C. L. 210. N. W. 69. 

75 Sullivan v. Sullivan Mfg. Co., 
14 S. C. 494. 



WHO MAY SUE OR BE SUED. 301 

Joint indorsers may be sued jointly. The Negotiable Instru- 
ments Law provides that joint indorsers who indorse are deemed 
to do so jointly and severally, and, consequently, they may be 
sued jointly, or one of them may be sued alone."* 

The general rule is that on a joint and several note a suit 
may be had against any one of such makers severally or against 
them all jointly f^ and while as a general rule all the joint mak- 
ers are necessary parties, yet where a joint maker is a non- 
resident and has no property in the state, or is without jurisdic- 
tion of the court, he is not a necessary party defendant.^^ 

It is a general rule by statute that the personal representative 
of a deceased joint party may be sued jointly with the sur- 
vivors.®* 

In some jurisdictions a defendant when sued on a negotiable 
instrument which he has paid or which has been assigned after 
maturity, may give notice to the assignor to defend in a suit 
by the holder where a privity exists between the plaintiff and 
the person to whom notice is given.*' 

A maker may be sued in a fictitious name used by him or by 
his real name. And when the wrong name of payee is used, 
such payee is not a necessary party upon a proceeding by the 
real owner.** 

By statute in some jurisdictions, the holder of a negotiable 
promissory note may maintain separate actions and recover sep- 
arate judgments, against each party liable thereon. The recovery 
of a judgment by such holder, against an indorser on such in- 
strument, is no bar to a subsequent action thereon against the 
maker.*^ Such statutes usually provide that persons severally 
and immediately liable upon the same instrument may, all or 
any of them, be included in the same action, at the option of the 
plaintiff. Often in such jurisdictions the statutes further pro- 
vide that the holder may institute one suit against the whole or 
any number of the parties liable to such holder, but shall not. 
at the same term of court, institute more than one suit on such 
instrument, provided, however, that no judgment shall be ren- 
dered in such suit against any maker of a promissory note, 

''^Hodgens v. Jenings, 148 App. 334; Goodwin v. Burton, 57 Fed. 

Div. 879, 133 N. Y. S. 584. Civ. App. 586, 118 S. W. 587. 

80 Chase v. Evoy, 58 Cal. 348; s^Pruitt v. Jones. 14 Fed. Civ. 
Stevens v. Caten, 152 111. 56, 37 N. App. 84, 36 S. W. 502. 

E. 1,023. 84Vigan v. Mandel, 167 Ind. 586, 

81 Dennett v. Chick, 2 Me. 191, 79 N. E. 899, 119 A. S. R. 515; 
11 Am. Dec. 59. Tuggle v. Cave Spring Bank, 8 Ga. 

82 Bostwick V. McEvoy, 62 Cal. App. 291, 68 S. E. 1070. 

496; Davis v. Wildinson, 2 N. C. 85 Morrison et al. v. Fishel, 64 

Ind. 177, 



302 NEGOTIABLE INSTRUMENTS. 

drawer, or acceptor of a bill, unless suit is brought in the county 
where one or more of such makers, drawers, or acceptors reside 
at the time such suit is begun. 

Many jurisdictions have enacted statutes permitting actions 
and judgments given jointly against all the parties to a nego- 
tiable instrument, whether makers, drawers, indorsers, or ac- 
ceptors, or against any one, or any intermediate number of 
them.^' 

An action to enforce a joint instrument must be brought 
against all the joint parties.**" 

88 Lowell V. Bickford, 201 Mass. ^7 Sharpe v. Baker, — Ind. App. 

543. 88 N. E. 1 ; Hoffecker v. Moon, — , 99 N. E. 44. 
21 D. C. 263; Young v. Warner, 6 
App. D. C. 433. 



PART II. 

PLEADINGS, EVIDENCE AND TRIAL PROCEDURE AS 
TO BILLS, NOTES AND CHECKS. 



CHAPTER XXII. 

PLEADINGS— IN GENERAL. 

§ 228. Meaning of term. § 230. The complaint or declaration. 

229. Classes and order of plead- 231. Pleadings after complaint or 
ings. declaration. 

§ 228. Meaning of term. The mutual formal allegations of 
the parties in court, in affirmance or denial of the cause of action, 
are called the pleadings.^ Thus, if a party desires to collect a 
note, bill or check by suit, his attorney prepares for him a state- 
ment of his case in writing. The attorney of the party proceeded 
against prepares a statement of the defense relied on. These 
two statements would constitute the pleadings in the case. Their 
object is to apprise the court of the exact point or points con- 
cerning which its judgment is desired. In order to secure this 
object numerous technical rules have been from time to time 
adopted, tending to certainty, clearness and brevity, in the state- 
ment of the real material issue. 

§ 229. Classes and order of pleadings. The questions, pre- 
sented to the court in an action on a bill, note or check, or, in 
fact, in any action at law, may be grouped in three classes : 
( 1 ) Has the court to which the process has been returned author- 
ity to hear and determine the points in controversy? (2) Has 
the action itself been properly instituted? (3) Upon the merits 
of the controversy which of the parties is entitled to a judgment, 
and for what amount shall such judgment be rendered? Plead- 
ings on a bill, note or check may, therefore, be grouped into three 
corresponding classes: (1) Pleadings which raise the question, 
whether the court has the requisite authority, called pleadings 
to the jurisdiction. (2) Pleadings which raise the question, 
whether the action has been properly instituted, called pleadings 

1 Bowman v. McLaughlin, 45 States, 151 U. S. 164, 38 L. Ed. 112; 
Miss. 461, 489; Tucker v. United Desmoyer v. Hereux, 1 Minn. 17. 

303 



304 NEGOTIABLE INSTRUMENTS. §§230-231 

in abatement. (3) Pleadings which raise the question whether, 
on the merits of the controversy, the plaintiff or defendant should 
have judgment, and which embrace all other pleadings than those 
previously named. These three classes of questions must be 
raised, when raised at all, in the foregoing order. 

§ 230. The complaint or declaration. The plaintiff begins 
his suit on the bill, note or check by filing in the proper court a 
statement in writing showing the facts upon which he bases his 
claim for redress. This is called a declaration, complaint, peti- 
tion or bill. 

The first in order then of those pleadings, which raise the 
question whether on the merits of the controversy the plaintiff 
or defendant should have judgment, is the complaint, declaration, 
petition or bill. As above stated, this is the plaintiff's statement 
of his cause of action. It must contain, in legal form and with all 
the necessary technical averments, a clear and concise description 
of the facts of which he complains, of the damage which he has 
sustained, and of the remedy for which he seeks.^ 

The caption specifies the state, county, court and term, the 
name of the parties and of the action. Then follows a full and 
formal description of the cause of action, which forms the main 
body of the complaint or declaration, and, of course, varies ac- 
cording to the circumstances of each case. The conclusion states 
the damages as laid in the praecipe and writ. The declaration 
thus framed is signed by the plaintiff's attorney, and filed in the 
clerk's ofl5ce. The time within which pleadings must be filed is 
regulated by certain rules which the courts are authorized to es- 
tablish ; and which become the law of the court establishing them. 

§231. Pleadings after complaint or declaration. To the 

complaint or declaration on the note, bill or check the defendant 
may demur, denying that the facts alleged concerning the bill, 
note or check constitute a cause of action ; or he may plead in 
bar,^ either by traverse,"* or by confession and avoidance.*^ Upon 

2 As to form and essentials of 4 DJci^inson v. Gray (Ky.), 9 S. 
complaint, see, Beggs v. Arnotte, W. 281, 282. As to sufficiency of 
80 Ala. 179; Hardee v. Lovette, 83 answers denying ownership of 
Ga. 203, 9 S. E. 680; Baldwin v. plaintiff, see note 66 L. R. A. 513; 
Humphrey, 75 Ind. 153; Adams v. and as to right to plead incon- 
Kerns, 11 Ind. 346; Parry v. Hen- sistent defenses, see note 48 L. R. 
derson, 6 Blackf. 72. As to amend- A. 194. 

ments to pleadings, see note 51 ^ Staten v. Hammer, 121 la. 499, 

Am. St. Rep. 426. 96 N. W. 964; Le Lissa v. Fuller 

3 Norton v. Winter, 1 Oreg. 47, Coal etc. Co., 59 Kan. 319, 52 Pac. 
48, 62 Am. Dec. 297. 886. 



§ 231 PLEADINGS — IN GENERAL. 305 

a traverse or demurrer, issue is immediately joined; but to a 
confession and avoidance the plaintiff may reply by traverse, or 
demurrer, or a new confession and avoidance, until, by final 
traverse or demurrer issue is at last attained. 



CHAPTER XXIII. 



FORMS OF COMMON LAW PLEADING. 



§ 232. Forms of common law plead- § 238. Indorsee against indorser 



ing — In general. 

DECLARATIONS — NOTE, BILL AND 
CHECK. 

233. Payee against maker. 

234. Indorsee against maker. 

235. Indorsee against payee or 

other indorsers. 

236. Declarations — Bills of ex- 

change — Drawer against ac- 
ceptor. 

237. Payee against drawer for 

non-acceptance. 



for non-acceptance. 

ANSWERS — NOTE, BILL AND CHECK. 

239. Plea. 

240. Plea and affidavit of merits. 

241. Affidavit denying execution of 

instrument. 

242. Plea of payment by services. 

243. Averment of set-off. 

244. Statute of limitations. 

245. Averment of arbitration and 

award. 



§ 232. Forms of common law pleading — In general. The 

following are the most usual common law forms of declarations 
and answers on promissory notes, bill of exchange and bank 
checks. Should any other forms be desired they can be formu- 
lated by reference to those forms herein set out. 

§ 233. Declaration on promissory note by payee against 
maker. 

In the Court of County. 

To the -Term, A. D. 19 

A. B. 
vs. 

C. D. 

A. B., plaintiff, by his attorney, complains of C. D., the de- 
fendant, in a plea of trespass on the case upon promises: 

For that, whereas, the defendant on 

at , made his promissory note in writing, 

delivered the same to the plaintiff and thereby then and there 

promised to pay to the plaintiff, or order, 

dollars, months after date thereof; (recite 

according to the terms of the note), which period hath now 
elapsed. And being so indebted the defendant in consideration 
thereof then and there promised the plaintiff to pay him the said 
sum of money, at his request. 

Yet the defendant, though requested, has not paid the same, 
nor any part thereof, to the plaintiff, but neglects and refuses 
so to do. 

306 



§§ 234-235 COMMON law pleading. 307 

To the damage of the plaintiff of dol- 
lars, and therefore he brings suit. 

Donald S. Morris, 

Attorney for Plaintiff. 

(Attach in some jurisdictions a copy of the instrument sued 
con.) 

§ 234. Indorsee against maker. (Caption and commence- 
ment same as § 233.) 

For that, whereas, the defendant, heretofore, to-wit, on 

at , made his promissory 

note in writing and thereby promised to pay to one E F 

or order, dollars in 

months after date, which period has now 

elapsed; and the said E F then and there indorsed the 

said note to the plaintiff, whereof the defendant then and there 
had notice, and by reason and by force of the statute in such 
case made and provided, the said defendant became liable to pay 
the said plaintiff the said sum of money in said note specified, 
according to the tenor and effect of the said note and of the 
said endorsement so thereon made. And being so indebted, the 
defendant, in consideration thereof, then and there promised the 
plaintiff to pay him the said sum of money, at his request. 

Yet the defendant, though requested, has not paid the same, 
nor any part thereof, to this plaintiff, but neglects and refuses 
so to do. 

To the damage of the plaintiff of dol- 
lars, and therefore he brings suit. 

Donald S. Morris, 

Attorney for Plaintiff. 

(Attach in some jurisdictions copy of instrument and indorse- 
ment.) 

§ 235. Indorsee against payee or other indorsers. (Caption 
and commencement same as § 233.) 

For that, whereas, heretofore, to-wit, on 

at , one E F made his promissory 

note in writing and thereby promised to pay to the defendant. 

C. D., or order dollars 

months after the date thereof, which period has now elapsed. 
And the defendant, C. D., then and there indorsed the said 

note to the said plaintiff ; and the said E F did not pay 

the amount of said note, although the same was duly presented 
to him, of all which the defendant then and there had notice. 
And being so indebted, the defendant, in consideration thereof, 



308 NEGOTIABLE INSTRUMENTS. §§ 236-237 

then and there promised the plaintiff to pay him the said sum of 
money, at his request. 

Yet the defendant, though requested, has not paid the same, 
nor any part thereof, to the plaintiff, but neglects and refuses so 
to do. 

To the damage of the plaintiff of dol- 
lars, and therefore he brings suit. 

Donald S. Morris, 

Attorney for Plaintiff. 

(Attach in some jurisdictions copy of instrument and indorse- 
ments.) 

§ 236. Declaration on bill of exchange by drawer against 
acceptor. (Caption and commencement same as § 233.) 

For that, whereas, the plaintiff, on at 

made his bill of exchange in writing and 

directed the same to the defendant and thereby required the de- 
fendant to pay him, the plaintiff, dollars 

months after date (or after sight) thereof, 

which period has now elapsed ; and the defendant then and there 
accepted the said bill and promised the plaintiff to pay the same 
according to the tenor and effect thereof and of the acceptance 
thereof. 

Yet the defendant, though requested, has not paid the same, 
nor any part thereof, to the plaintiff, but neglects and refuses 
so to do. 

To the damage of the plaintiff of dol- 
lars, and therefore he brings suit. 

Donald S. Morris, 

Attorney for Plaintiff. 

(Attach in some jurisdictions copy of instrument.) 

§ 237. Payee against drawer for non-acceptance. (Caption 
and commencement same as § 233.) 

For that, whereas, the defendant, heretofore, to-wit, on 

at made his bill of ex- 
change in writing and directed the same to one E F and 

thereby required the said E F to pay to the plaintiff, or 

order, dollars, 

months after date thereof, which period has now elapsed ; and 
then and there delivered the said bill to the plaintiff; and the 

same was then and there presented to the said E F for 

acceptance, and said E F then and there refused to ac- 
cept the same; of all which the defendant had due notice. 



§§238-239 COMMON law pleading. 309 

Yet the defendant, though requested, has not paid the same, 
nor any part thereof, to the plaintiff, but neglects and refuses 
so to do. 

To the damage of the plaintiff of dol- 
lars, and therefore he brings suit. 

Donald S. Morris, 

Attorney for Plaintiff. 
(Attach in some jurisdictions copy of instrument.) 

§ 238. Indorsee against indorser for non-acceptance. (Cap- 
tion and commencement same as §233.) 

For that, whereas, one E F , heretofore, to-wit, on 

at , made his bill 

of exchange in writing and directed the same to one G H 

and thereby required the said G H to pay to the said 

E F , or order dollars 

months after date thereof, which period has now 

elapsed; and the said E F then and there indorsed the 

said bill to the defendant, who then and there indorsed and de- 
livered the same to the plaintiff, when the same was then and 

there presented to the said G H for acceptance, and the 

said G H then and there refused to accept the same; 

of all of which the defendant then and there had due notice. 

Yet the defendant, though requested, has not paid the same, 
nor any part thereof, to the plaintiff, but neglects and refuses 
so to do. 

To the damage of the plaintiff of dol- 
lars, and therefore he brings suit. 

Donald S. Morris, 

Attorney for Plaintiff. 

(Attach in some jurisdictions copy of instrument.) 

§ 239. Plea — Answers — Note, Bill and Check. 

In the Court of County. 

To the Term, A. D. 19 

State of- 



County of ' 
A. B. 

vs. 
C. D. 

The defendant, by J S , his attorney, comes and de- 
fends and says that he did not promise as in the plaintiff's 
declaration alleged. 

And of this he puts himself upon the country. 

By J__-_ S-_.-, 
Attorney for Defendant. 



310 NEGOTIABLE INSTRUMENTS. §§ 240-242 

§ 240. Plea and affidavit of merits. (Same caption as 
§239.) 

The defendant, by J S , his attorney, comes and de- 
fends and says that he did not promise as in the plaintiff's dec- 
laration alleged. 
And of this he puts himself upon the country. 

By J__-_ S__-_, 
Attorney for Defendant. 

In the Court of County. 

State 
County 
A. B. 

vs. 
C. D. 

C D , being duly sworn, says that he is the defendant 

named in the above entitled suit, and that he verily believes he 
has a good defense to said suit upon the merits to the whole of 
the plaintiff's demand. 

C D 

Subscribed and sworn to before me, this 

day of __ , A. D., 19 



of- \ 



(Official character.) 

§ 241. Affidavit denying execution of instrument. (Same 
caption as § 239.) 

C D on oath deposes and says that he is the defendant 

in the above entitled cause and that he did not make and de- 
liver the instrument in writing in the said declaration mentioned, 
in manner and form as the plaintiff as above in that behalf al- 
leged. 

And further affiant sayeth not. 

C D 

Subscribed and sworn to before me, this 

day of , A. D., 19 



(Official character.) 

§242. Plea of payment by services. (Same caption as 
§239.) 

The defendant, by J S , his attorney, comes and de- 
fends and says, 

That, after the said promissory note became payable, and be- 
fore this action was commenced, to-wit, on , 

the plaintiff agreed to receive and the defendant agreed to ren- 



§§243-245 COMMON law pleading. 311 

der to the said plaintiff his services as 

to the amount of said note, and that the defendant afterwards, 
according to said agreement, rendered such services to the plain- 
tiff to the full amount due and payable on said note. 
And of this he puts himself upon the country. 

By J..__ S— -, 
Attorney for Defendant 

§ 243. Averment of set-off. (Same caption as § 239.) 
The defendant, by J S , his attorney, comes and de- 
fends and says that at the commencement of this suit, to-wit, on 

the - day of , A. D. 1922_ 

he, the plaintiff, was, and still is, indebted to the defendant in 

the sum of dollars. 

And of this he putS himself upon the country. 

By J_— S— ., 
Attorney for Defendant, 

§ 244. Statute of limitations. (Same caption as § 239.) 

The defendant, by J S , his attorney, comes and de- 
fends and says, 

That the supposed cause of action in the declaration mentioned 
was for articles charged in a store account, and that the same did 

not accrue to the plaintiff at any time within 

years next before the commencement of this suit. 

And of this he puts himself upon the country. 

By J____ S_— , 
Attorney for Defendant. 

§ 245. Averment of arbitration and award. (Same caption 
as §239.) 

The defendant, by J S , his attorney, comes and de- 
fends and says. 

That on the plaintiff and defendant 

mutually submitted the demand set forth in the plaintiff's dec- 
laration to the arbitration of and 

, which submission was never revoked ; and that on 

'. at , the said 

and made and pub- 
lished their award by which they declared the plaintiff entitled 
to One Hundred ($100.00) Dollars, which has been paid him. 

And of this he puts himself upon the country. 

By J_-__ S_-_-, 
Attorney for Defendant. 



CHAPTER XXIV. 

FORMS OF CODE PLEADING. 



§246. Forms of code pleading— In § 
general. 

COMPLAINTS — PROMISSORY NOTE. 

247. Complaint on promissory 

note by payee against 
maker. 

248. Same— For interest due. 

249. Same — Note providing for 

attorney's fee. 

250. Same— Whole amount due 

on failure to pay part. 

251. Same— Payable after sight, 

demand or notice. 

252. Same — Excuse for not set- 

ting out copy of note. 

253. Same— Lost note. 

254. Complaint on promissory 

note by executor of payee 
against maker. 

255. Complaint on promissory 

note — Indorsee against 
maker. 

256. Same — Assignee by delivery 

against maker and as- 
signor. 

257. Same — Indorsee against 

maker and indorsers. 

258. Same — Indorsee against in- 

dorser — Payable in an- 
other state — Negotiable by 
foreign statute. 

COMPLAINTS — BILLS OF EXCHANGE. 

259. Complaint on bill of ex- 

change — Payee against 
drawer on non-acceptance. 

260. Same — Payee against accep- 

tor on non-payment. 

261. Same — Drawer against ac- 

ceptor on non-payment. 

262. Same — Indorsee against 

drawer on non-acceptance. 

263. Same — Indorsee against ac- 
ceptor on non-payment. 

264. Same — Indorsee against ac- 

ceptor — Payable at particu- 
lar place. 

312 



265. Same — Indorsee against 

drawer, indorsers and ac- 
ceptor on inland bill of ex- 
change. 

266. Same — Indorsee against 

drawer when payable at a 
certain place. 

267. Same — Indorsee against 

drawer — No funds in 
drawer's hands — Failure to 
notify drawer. 

268. Same — Indorsee against 

drawer — Excuse for non- 
presentment — No effects. 

269. Same — Indorsee against 

drawer — Demand and no- 
tice waived. 

270. Same — Indorsee against in- 

dorser — Non-payment by 
acceptor. 

COMPLAINTS — BANK CHECK. 

271. Complaint on bank check — 

Payee against drawer. 

272. Same — Payee against drawee. 

273. Same — Drawer against 

drawee. 

274. Same — Indorsee against in- 

dorsee 

ANSWERS — NOTE, BILL AND CHECK. 

275. Answer to complaint on 

promissory note, bill of ex- 
change or check — General 
denial. 

276. Same — Denial of execution 

of instrument. 

277. Same — Want of considera- 

tion. 

278. Same — Partial want of con- 

sideration. 

279. Same — Without considera- 

tion as to indorsee. 

280. Same — Illegal consideration. 

281. Same — Failure of considera- 

tion. 

282. Same — False representations. 



§§ 246-247 CODE pleading. 313 

283. Same— Payment. 285. Same— That acceptance was 

284. Same — Alteration. for accommodation. 

§ 246. Forms of code pleading— In general. The following 
are the most common code forms of complaints and answers on 
promissory notes, bills of exchange and bank checks. Should 
any other forms be desired they can be formulated by reference 
to those forms herein set out : 

§ 247. Complaint on promissory note by payee against 
maker. 



u 
Q 
<! 



« 

o 

M 

m 



State of- 



- County. 



ss. 




In the Superior Court. 
January Term, 19 



Complaint. 



The plaintiff complains of the defendant, and alleges: 
That the defendant, by his note, a copy of which is 
% filed herewith, and made a part of this complaint, promised 

^ to pay the plaintiff Two Hundred Dollars. 

That said note is now due and unpaid. 
Wherefore, the plaintifif demands judgment for Two 
Hundred Dollars. 

Donald S. Morris, 



Attorney for Plaintiif. 





Indianapolis, Indiana. 


n 


December 30, 19— 


f. 

M 


One day after date, I promise to pay to J S 


Oh 


or order Two Hundred Dollars. 


O 

o 


Value received. 

M S 



314 NEGOTIABLE INSTRUMENTS. §§ 248-250 

§ 248. Complaint on promissory note by payee against 
maker — For interest due. 

(Caption and commencement same as §247.) 

That on the day of , 

19 , the defendant, by his promissory note, a copy of which 

is filed herewith, and made a part of this complaint, promised to 

pay the plaintiff dollars, 

years after date, with per cent per annum 

interest, payable annually. 

That the first annual installment of said interest is now due 
and unpaid. 

Wherefore, plaintiff demands judgment for 

dollars. 

(Copy of note.) (Signature same as in § 247.) 

§ 249. Same — Note providing for attorney's fee. 

(Caption and commencement same as § 247.) 

That on the day of , 

19 , defendant, by his promissory note, a copy of which is 

filed herewith, and made a part of this complaint, promised to 

pay the plaintiff, months after date, the 

sum of dollars and 

per cent attorney's fee (or a reasonable attorney's fee), for col- 
lecting the same. (That a reasonable fee for plaintiff's attorney 
in this action is dollars.) 

That said note is now due and unpaid. 

Wherefore, etc. 

(Copy of note.) (Signature same as in § 247.) 

§ 250. Same — Whole amount due on failure to pay part. 

(Caption and commencement same as §247.) 

That on the day of , 

19 , the defendant, by his promissory note, a copy of which 

is filed herewith, and made a part of this complaint, promised to 

pay the plaintiff dollars, 

^ years after date, with per cent per annum 

interest, payable annually, the whole sum of principal and in- 
terest to become due and payable upon failure to pay any of said 
installments of interest, or parts thereof. 

That the defendant has failed to pay the second installment 

of said interest, which fell due on the day 

of , 19 

That said note is now due and unpaid. 

Wherefore, etc. 

(Copy of note.) (Signature same as in § 247.) 



§§ 251-253 CODE PLEADING. 315 

§ 251. Same — Payable after sight, demand or notice. 

(Caption and commencement same as §247.) 

That on the day of — — , 

19 , the defendant, by his promissory note, a copy of which is 

filed herewith, and made a part of this complaint, promised to pay 

the plaintiff dollars, days 

after sight (or, days after demand), (or 

days after notice). 

That on the day of — , 19 , 

said note was duly presented to defendant, with notice that pay- 
ment would be required according to its terms. 

That said note is now due and unpaid. 

Wherefore, etc. 

(Copy of note.) (Signature same as in § 247.) 

§ 252. Same — Excuse for not setting out copy of note. 

(Caption and commencement same as §247.) 

That on the day of , 

19 , the defendant, by his promissory note, promised to pay 

the plaintiff, six months after date dollars, 

with per cent per annum interest from date until 

paid, waiving valuation and appraisement laws. 

That plaintiff is unable to set out a copy of said note, or give 
a fuller description thereof, for the reason that the same is wrong- 
fully in the possession of the defendant, who refuses to deliver it 
to the plaintiff, although requested so to do (or, is in the hands of 
A. B., who refuses to surrender the same to the plaintiff, or give 
him a copy thereof), (or, has been destroyed without the fault 
of plaintiff). 

That said note is now due and unpaid. 

Wherefore, plaintiff demands judgment for 

dollars. 

(Signature same as in §247.) 

§ 253. Same — Lost note. 

(Caption and commencement same as §247.) 

That on the day of , 

19 , the defendant, by his promissory note, promised to pay 

the plaintiff, six months after date, dollars, 

with per cent per annum interest from date until 

paid, waiving valuation and appraisement laws. 

That he is unable to set out a copy of said note or to file an ex- 
hibit of the same herewith, for the reason that said note is lost 
and the plaintiff is unable to find the same and does not now know 
where it is ; that said note was lost after the maturity thereof ; 
that the plaintiff never assigned, indorsed, or otherwise trans- 



316 NEGOTIABLE INSTRUMENTS. §§ 254-256 

ferred said note, but always has been, and still is the owner there- 
of ; that said note is due and unpaid. 

Wherefore, the plaintiff demands judgment for 

dollars. 

(Signature same as in §247.) 

§ 254. Complaint on promissory note by executor of payee 
against maker. 

(Caption.) 

The plaintiff complains of the defendant, and alleges : 

That on the day of , 

19 , defendant, by his promissory note, a copy of which is 

filed herewith, and made a part of this complaint, promised to 

pay C. D. dollars, on or before the 

day of , 19 

That on the day of , 

19 , in the county of , State of , 

C. D. died, testate, and by his last will and testament appointed 
the plaintiff the executor thereof. 

That on the day of , 

19 , the plaintiff duly qualified and received his letters as such 

executor. 

That said note is now due and unpaid. 

Wherefore, etc. 

(Copy of note.) (Signature same as in § 247.) 

§ 255. Complaint on promissory note — Indorsee against 
maker. 

(Caption and commencement same as §247.) 

That on the day of , 

19 , the defendant, by his promissory note, a copy of which 

is filed herewith, and made a part of this complaint, promised 
to pay A B , or order, dollars. 

That the said A B indorsed the same to the plaintiff. 

That said note is now due and unpaid. 

Wherefore, etc. 

(Copy of note and indorsement.) 

(Signature same as in §247.) 

§ 256. Same — Assignee by delivery against maker and 
assignor. 

(Caption and commencement.) 

That on the day of , 

19 , the defendant, by his promissory note, a copy of which 

is filed herewith, and made a part of this complaint, promised to 

pay the defendant, — , 

dollars. 



§§257-258 CODE pleading. 317 

That defendant, , assigned and deliv- 
ered said note to the plaintiff without indorsement, and said 

is made a defendant, to answer as to said 

assignment. 

That said note is now due and unpaid. 

Wherefore, etc. 

(Copy of note.) (Signature same as in §247.) ,.■ 

§ 257. Same — Indorsee against maker and indorsers. ^ 

(Caption and commencement.) 

That on the day of , 

19 , the defendant, A B , by his promissory note, a 

copy of which is filed herewith, and made a part of this com- 
plaint, promised to pay the defendant, C D , or order, 

dollars, at the First National Bank of In- 
dianapolis, Indiana. 

That the defendant, C D , indorsed said note to the 

defendant, E F , who indorsed the same to the plaintiff, 

copies of which indorsements are filed herewith, and made parts 
of this complaint. 

That the plaintiff presented said note for payment at its ma- 
turity', and payment was refused, of which all the defendants 
then had due notice. 

That said note is now due and unpaid. 

Wherefore, the plaintiff demands judgment for . 

dollars. 

(Copy of note and indorsements.) 

(Signature same as in §247.) 

§ 258. Same — Indorsee against indorser — Payable in an- 
other state — Negotiable by foreign statute. 

(Caption and commencement.) 

That on the , — day of , 

19 , at Buffalo, New York, A B , by his promissory 

note, a copy of which is filed herewith, and made a part of this 

complaint, promised to pay C D , or order, 

dollars, months after date, at 

the First National Bank of Buffalo, New York. 

That the defendant, C D , indorsed said note to the 

plaintiff before maturity. 

That on the day of , 

19 , (or at the maturity thereof), said note was duly pre- 
sented at said bank, and payment demanded, which was refused, 
of which the defendant, on said day, had notice. 

That, by an act of the legislature of the. said State of New 
York, a copy of which is filed herewith, and made a part of this 



318 NEGOTIABLE INSTRUMENTS. §§ 259-260 

complaint, and which was at the time said note was executed 
and ever since has been in force, said note was and is negotiable 
as an inland bill of exchange. 

That said note is now due and unpaid. 

Wherefore, etc. 

(Copy of note and indorsement.) 

(Signature same as in § 247.) 

(Copy of act of legislature.) 

COMPLAINTS— BILLS OF EXCHANGE. 

§ 259. Complaint on bill of exchange — Payee against 
drawer on non-acceptance. 

(Caption same as §247.) 

The plaintiff complains of the defendant, and alleges : 

That on the day of , 

19 , the defendant, by his bill of exchange, a copy of which 

is filed herewith, and made a part hereof, directed to D 

G , requested the said D G to pay the plaintiff, or 

order, dollars, 

months after date, and the same was, on the 

day of , 19 , at , 

presented to said D G , and acceptance thereof de- 
manded, which was refused. (If a foreign bill, add: and said 
bill of exchange was then and there protested for non-accept- 
ance), of which defendant had due notice, but did not pay the 
same. 

That there is now due and unpaid thereon the sum of 

dollars, for which plaintiff demands judgment. 

(Signature same as in §247.) 



$120.00 Chicago, III., December 1, 19 

Thirty days after date 

Pay to the order of J. S _ 

One Hundred and Twenty Dollars 

Value received, and charge the same to the account of 
To D. G. M. S. 

Jamestown, N. Y. 



§ 260. Same — Payee against acceptor on non-payment. 
(Caption and commencement same as § 247.) 

That on , at , E 

F , by his bill of exchange, a copy of which is filed here- 



§§ 261-262 CODE PLEADING. 319 

with, and made a part hereof, requested the defendant to pay 

plaintiff dollars, 

days after date. 

That on the day of , 

19 , the defendant accepted the same. 

That on the day of , 

19 , the plaintiff presented said bill to the defendant for pay- 
ment, which was refused. 

That the same is now due and wholly unpaid. 

Wherefore, etc. 

(Copy of bill.) (Signature same as in § 247.) 

§ 261. Same — Drawer against acceptor on non-payment. 

(Caption and commencement same as § 247.) 

That on the day of , 

19 , plaintiff, by his bill of exchange, a copy of which is filed 

herewith, and made a part hereof, requested the defendant to 

pay E F , , dollars 

days after date. 

That the defendant, on the day of 

, 19 , accepted said bill. 

That he did not pay the same when due, although payment 
was demanded at the maturity thereof. 

That said bill was returned to the plaintiff, and he has been 
compelled to pay the same to the said E F 

That the same is due and unpaid. 

Wherefore, etc. 

(Copy of bill.) (Signature same as in §247.) 

§ 262. Same — Indorsee against drawer on non-acceptance. 

(Caption and commencement same as §247.) 

That on , at , the 

defendant, by his bill of exchange, a copy of which is filed here- 
with, and made part of this complaint, requested G H to 

pay E F , dollars 

months after date. 

That E F , on , assigned the 

same to plaintiff by indorsement. 

That plaintiff, on , presented said bill to 

G H , who refused to accept the same, of which the de- 
fendant, at the time, had due notice. 

That the same is due and unpaid. 

Wherefore, etc. 

(Copy of bill and indorsement.) 

(Signature same as in §247.) 



320 NEGOTIABLE INSTRUMENTS. §§ 263-2G5 

§ 263. Same — Indorsee against acceptor on non-payment. 

(Caption and commencement same as § 247.) 

That on , 19 , at , 

E. F., by his bill of exchange, a copy of which is filed herewith, 
and made a part hereof, requested the defendant to pay G. H., 

or order, dollars, days after 

sight. 

That the defendant, on the day of 

, 19 , accepted said bill. 

That the said G. H. indorsed the same to plaintiff. 

That on the day of , 

19 , plaintifif presented said bill to the defendant for pay- 
ment, which was refused. 

That the same is now due and unpaid. 

Wherefore, etc. 

(Copy of bill and indorsement.) (Signature same as in §247.) 

§ 264. Same — Indorsee against acceptor — Payable at par- 
ticular place. 

(Caption and commencement same as §247.) 

That on the day of , 

19 , E. F., by his bill of exchange, a copy of which is filed 

herewith, and made a part hereof, requested the defendant to 

pay E F dollars, 

days after date. 

That the defendant, on the day of 

, 19 , accepted the same, payable at the First 

National Bank of South Bend, California, and not elsewhere. 

That the said E. F. indorsed said bill of exchange to the 
plaintifif. 

That the same was, on the day of 

, 19 , (or, on the day of its maturity), pre- 
sented for payment at the said First National Bank of South 
Bend, California, and payment refused. 

That said bill was then and there protested for non-payment, 
of all which the defendant then and there had due notice. 

That the same is now due and unpaid. 

Wherefore, etc. 

(Copy of bill.) (Signature same as in §247.) 

§ 265. Same — Indorsee against drawer, indorsers and ac- 
ceptor on inland bill of exchange. 

(Caption and commencement.) 

That on the day of , 

19 , the defendant, C. D., by his bill of exchange, a copy of 



§§ 266-267 CODE pleading. 321 

which is filed herewith, and made a part hereof, requested the 

defendant, E. F., to pay the defendant, G. H., or order, 

dollars, ^^days after date. 

That on the day of , 

19 , the said E. F. accepted the same. 

That the defendant, G. H., by indorsement in writing, a copy 
of which is filed herewith, and made part hereof, assigned said 
bill of exchange to the plaintiff. 

That on the day of the maturity of said bill, the same was 
presented to the defendant, E. F., for payment, which was re- 
fused, of all which the defendants then had notice. 

That the said bill is now due and unpaid. 

Wherefore, etc. 

(Copy of bill and indorsement.) (Signature same as in § 247.) 

§ 266. Same — Indorsee against drawer when payable at a 
certain place. 

(Caption and commencement same as § 247.) 

That on the day of , 

19 , the defendant, by his bill of exchange, a copy of which 

is filed herewith, and made a part hereof, requested E. F. to pay 

G. H. dollars, days 

after date, payable at Indianapolis, Indiana. 

That the said G. H. indorsed the same to the plaintiff. 

That on the day of , 

19 , (or on the day of its maturity), said bill was presented 

(at the said National Bank of Indianapolis, Indiana), and pay- 
ment demanded, which was refused, of which the defendant then 
and there had notice. 

That said bill is now due and unpaid. 

Wherefore, etc. 

(Copy of bill and indorsement.) (Signature same as in § 247.) 

§267. Same — Indorsee against drawer — No funds in 
drawee's hands — Failure to notify drawer. 

(Caption and commencement same as §247.) 

That the defendant, on the day of . 

19 , by his bill of exchange, of which a copy is herewith filed, 

and made a part hereof, requested E. F. to pay the defendant, or 

order, dollars, days 

after date. 

That defendant indorsed said bill to the plaintiff. 

That the same was, on the day of 

, 19 , presented to said E F. for ac- 
ceptance, which was refused. 



322 NEGOTIABLE INSTRUMENTS. §§ 268-269 

That at the time when said bill was drawn, and from thence 
until payment thereof was refused, the defendant had no moneys 
or effects in the hands of the said E. F., nor did he expect to 
have, or that said bill would be accepted or paid on presentment. 

That defendant has sustained no damage by a failure to give 
notice of the refusal to accept or pay said bill. 

That the same is now due and unpaid. 

Wherefore, etc. 

(Copy of bill and indorsement.) (Signature same as in § 247.) 

§ 268. Same — Indorsee against drawbar — Excuse for non- 
presentment — No effects. 

(Caption and commencement same as §247.) 

That the defendant, on the day of 

, 19 , by his bill of exchange, of which 

a copy is herewith filed and made a part hereof, requested E. F. 

to pay the defendant, or order, dollars, 

days after date. 

The defendant indorsed said bill to the plaintiff. 

That said bill was not presented for acceptance or payment, 
for the reason that the defendant had no effects in the hands of 
said E. P., either at the time of drawing said bill or at any time 
thereafter. 

That said bill is now due and unpaid. 

Wherefore, etc. 

(Copy of bill and indorsement.) (Signature same as in § 247.) 

§ 269. Same — Indorsee against drawer — Demand and notice 
waived. 

(Caption and commencement same as §247.) 

That the defendant, on the day of 

, 19 , by his bill of exchange, a copy of 

which is herewith filed and made a part hereof, requested E. F. 

to pay the defendant, or order, dollars, 

days after date. 

That defendant indorsed said bill to the plaintiff. 

That the defendant (drawee or indorser), before presentment 
for acceptance (or, before the bill became due), waived the pre- 
sentation of the same for acceptance (or, payment), and notice 
of non-acceptance (or, non-payment) thereof. 

That said bill is now due and unpaid. 

Wherefore, etc. 

(Copy of bill and indorsement) . (Signature same as in § 247.) 



§§ 270-271 CODE PLEADING, 323 

§ 270. Same — Indorsee against indorser — Non-payment by 
acceptor. 

(Caption and commencement.) 

That on the day of , 

19 , one G. H., by his bill of exchange, a copy of which is 

filed herewith, and made a part of this complaint, requested I. J. 

to pay C. D., or order, dollars, two months 

after date. 

That the said C. D., by his indorsement thereon, a copy of 
which is filed herewith, and made a part hereof, assigned said bill 
to the plaintiff. 

That on the day of , 

19 , the said drawee accepted said bill. 

That on the day of , 

19 , (or, at its maturity), the same was duly presented for 

payment and refused (if a foreign bill, add: and said bill was 
thereupon duly protested), of all which the defendant then had 
due notice, but did not pay the same. 

That said bill is now due and unpaid. 

Wherefore, plaintiff demands judgment for 

dollars. 

(Copy of bill and indorsement.) (Signature same as in § 247.) 

COMPLAINTS— BANK CHECK. 

§ 271. Complaint on bank check — Payee against drawer. 

(Caption and commencement same as §247.) 

That on the day of , 

19 , the defendant, by his check, a copy of which is filed 

herewith, and made a part of this complaint, requested the 

Bank to pay to plaintiff, or bearer 

dollars, and delivered the same to plaintiff. 

That plaintiff, on the day of 

, 19 , presented said check to said bank, and 

demanded payment, which was refused, of which the defendant, 

on the day of , 19 , 

had notice. 

That said check is now due and unpaid. 

Wherefore, etc. 

(Copy of check.) (Signature same as in § 247.) 

Detroit, Mich., December 1, 19 

THE A. B. BANK. 

Pay to the order of J. S $200.00 

Two Hundred Dollars 

M. S. 



324 NEGOTIABLE INSTRUMENTS. ^ ^% 272-274 

§ 272. Same — Payee against drawee. 

(Caption and commencement same as § 247.) 

That on the day of , 

19 , one M. S., by his check, a copy of which is filed herewith, 

and made a part of this complaint, requested the defendant to 
pay the plaintiff the sum of dollars. 

That on the . day of , 

19 , plaintifif presented the same to the defendant, and de- 
manded payment thereof, which was refused. 

That said check is now due and unpaid. 

Wherefore, etc. 

(Copy of check.) Signature same as in §247.) 

§ 273. Same — Drawer against drawee. 

(Caption and commencement same as §247.) 

That on the day of , 

19 , plaintifT had on deposit in the defendant's bank 

dollars. 

That on the day of , 

19 , he drew his check on the defendant, requesting it to 

pay C. D., or bearer, dollars. 

That C. D. indorsed the said check to E. F., who indorsed the 
same to G. H. 

That on the day of , 

19 , the said G. H. presented said check to the defendant 

for payment, which was refused, whereby plaintiff was com- 
pelled to pay the same, to his damage dol- 
lars, for which he demands judgment. 

(Signature same as in §247.) 

§ 274, Same — Indorsee against indorser. 

(Caption and commencement same as §247.) 

That on the day of , 

19 , A. B., by his check, a copy of which is filed herewith, 

and made a part of this complaint, requested the National Bank 

of Indianapolis, Indiana, to pay the defendant, or order, 

dollars. 

That on the day of , 

19 , the defendant, by his indorsement thereon, a copy of 

which is filed herewith, and made a part hereof, assigned said 
check to the plaintiff. 

That on the day of , 

19 , the plaintiff presented the same to said bank for pay- 
ment, which was refused, of which the defendant then had notice. 



§§ 275-278 CODE pleading. 325 

That said check is now due and unpaid. 
(Copy of check and indorsement.) 
Wherefore, etc. 

(Signature same as in §247.) 

ANSWER— NOTE, BILL AND CHECK. 

§ 275. Answer to complaint on promissory note, bill of ex- 
change or check — General denial. 

(Caption and commencement same as § 247.) 
The defendant, for answer to plaintiff's complaint, alleges: 
that he denies each and every allegation thereof. 

H. Nathan Swaim, 

Attorney for Defendant. 

§ 276. Same — Denial of execution of instrument. 

(Caption and commencement same as §247.) 
The defendant, for answer to plaintifif "s complaint, alleges : 
That he did not execute the note (bill of exchange) (check) 
sued on in this action. 

Wherefore, he demands judgment for costs. 

(Jurat.) (Signature same as in § 275.) 

§ 277. Same— Want of consideration. 
(Caption and commencement same as §247.) 
That the note (bill of exchange), (writing sued on) was given 
without any consideration. 

Wherefore, defendant demands judgment. 

(Signature same as in §275.) 

§ 278. Same — Partial want of consideration. 

(Caption and comment same as § 247.) 

The defendant, in answer to all of the amount sued on in ex- 
cess of dollars, alleges: 

That the note sued on as to such excess was given without any 
consideration therefor. 

Wherefore, etc. 

(Signature same as in §275.) 

§ 279. Same— Without consideration as to indorsee. 

(Caption and commencement same as § 247.) 

That the note sued on herein was given without any considera- 
tion, and the plaintiff took the same after it fell due (or, with 
knowledge that the same was given without consideration). 

Wherefore, etc. 

(Signature same as m §275.) 



326 NEGOTIABLE INSTRUMENTS. §§280-281 

§ 280. Same — Illegal consideration. 

(Caption and commencement same as §247.) 

That the consideration for the note sued on was illegal, in this : 
(state the facts showing its illegality, e. g.) That the defendant 
was, at the time of executing the note, charged with the crime of 

(state what) and had been indicted therefor 

in the Circuit Court; and plaintiff, to in- 
duce defendant to execute said note, represented that he could 
suppress and prevent said prosecution ; and, in consideration of 
plaintiff's promise to suppress said prosecution, and cause the 
same to be dismissed, and for no other consideration, defendant 
executed to him said note. 

(Or, that at the time this note was given, a suit by the de- 
fendant against the plaintiff for divorce was pending in the 

Circuit Court and the same was given in 

consideration of the promise that plaintiff would not appear and 
defend said action, and for no other consideration.) 

Wherefore, defendant says that the consideration for said note 
was illegal and void, and he demands judgment. 

(Signature same as in § 275.) 

§ 281. Same — Failure of consideration. 

(Caption and commencement same as §247.) 

That the note sued on was given in consideration of the promise 
of plaintiff that he would sell and deliver to defendant goods and 
merchandise from the store of the plaintiff, then in business at 

, as the same might, from time to time, be 

ordered by defendant during the year , not exceeding 

the r.mount of said note. 

That thereafter defendant, during the year , ordered 

goods from plaintiff to the amount of said note ; but plaintiff 
failed and refused to deliver the same, or any part of them. 

(Or, if there is only a partial failure, say: For answer to all 
of said note in excess of dollars, the defend- 
ant says that: (allege facts, as above, to*) That on the 

day of , 19 , on defend- 
ant's order, plaintiff delivered to defendant goods to the amount 
of dollars. 

That defendant thereafter, during said year, gave orders to 
plaintiff, at various times, for goods amounting in the aggregate 

to dollars, the balance of the amount of said 

note ; but plaintiff failed and refused to deliver the same, or any 
part of them, and defendant has received no more than said 
amount of dollars. 



§§ 282-284 CODE pleading. 327 

And this was the only consideration for said note. 

Wherefore, defendant says the consideration of said note has 
failed (to the extent of dollars), and he de- 
mands judgment. 

(Signature same as in §275.) 

§ 282. False representations. 

(Caption and commencement same as §247.) 

That the note sued on was given by defendant in consideration 
of the sale, by plaintiff to defendant, of a certain horse. 

That to induce defendant to purchase said horse and execute 
said note, plaintiff falsely and fraudulently represented to de- 
fendant (set out the representations, e. g.) that said horse was 
sound, and quiet in harness, and was only years old. 

That said representations were false, and known to be so by 
plaintiff at the time. 

That said horse was not sound; but was (state how diseased), 
and would not work in harness, and was years old. 

That defendant was ignorant of the fact, and believed and re- 
lied upon said representations, and was thereby induced to pur- 
chase said horse and execute the note sued on. 

That on the day of , 

19 , defendant first discovered that said representations 

were false, and he thereupon (or, on the 

day of , 19 ,) tendered said horse to 

plaintiff and demanded said note ; but plaintiff refused to accept 
the horse or deliver the note. 

That said horse, if he had been as represented by plaintiff, 

would have been of the value of dollars; but 

he was, in fact, of the value of not exceeding 

dollars, and, for defendant's use, was wholly worthless. 

Wherefore, defendant demands judgment. 

(Signature same as in §275.) 

§ 283. Same — Payment. 

(Caption and commencement same as in § 247.) 
That he fully paid the note (bill of exchange) (check) sued 
on before the bringing of this action. 

(Signature same as in §275.) 

§ 284. Same — Alteration. 

(Caption and commencement same as § 247.) 

The defendant, , for separate answer to 

plaintiff's complaint, admits that he signed a note payable to 
plaintiff, but alleges that he signed and executed the same, to- 
gether with the defendant, , and thereafter, 



328 NEGOTIABLE INSTRUMENTS. § 285 

without the knowledge or consent of this defendant, the plaintiff 
materially altered and changed said note, in this: (state in what 
the alteration consists, e. g., he procured the same to be signed 

by one ) (or, raised said note from the sum 

of dollars, the amount for which it was 

given, to dollars) (or, erased therefrom the 

name of , who signed the same, as a joint 

maker, with this defendant) without the knowledge or consent of 
this defendant. 

(Signature same as in §275.) 

§ 285. Same — That acceptance was for accommodation. 

(Caption and commencement same as in § 247.) 

The defendant, for answer to plaintiff's complaint, alleges : 

That he accepted the bill mentioned in the complaint for the 

accommodation of (plaintiff), and that 

there was no consideration for the acceptance or payment of said 
bill by defendant. 

(If the action is by an indorsee, say: That plaintiff received 
said bill after maturity without consideration, and with full 
knowledge that defendant accepted the same without considera- 
tion.) 

Wherefore, defendant demands judgment for costs. 

(Signature same as in §275.) 



CHAPTER XXV. 

EVIDENCE— IN GENERAL. 

§ 286. In general. § 289. Competency of parties to ne- 

287. Presumptions in general. gotiable instruments as 

288. Burden of proof in general. witnesses. 

290. Declarations antl admissions. 

§ 286. In general. An action on a promissory note or bill 
of exchange is an action upon a contract and the rules and prin- 
ciples of evidence applying to an action upon a contract apply 
generally to an action on a promissory note or a bill of exchange. 
The general rules apply as to presumptions, burden of proof, 
parol evidence^ and witnesses. There are, however, some excep- 
tions to the general rules and where these occur they will be 
pointed out. 

§ 287. Presumptions in general. It is presumed that nego- 
tiable paper was regularly issued for a valuable consideration, 
and that the payee or the one who has purchased it before ma- 
turity is a bona Me holder and entitled to recover the full 
amount.** But if the defendant can show that the note was orig- 
inally obtained by duress, secured through fraud, or that it was 
lost or stolen, the burden is changed and the presumption then 
arises that the guilty person will part with the instrument for 
the purpose of enabling some third party to recover for his bene- 
fit.^ There is also a presumption that an indorsement, made by a 
payee or indorsee without date, was before maturity and that the 
holder acquired the note or bill before maturity, and in the ab- 
sence of proof the indorsement will be presumed to have been at 
the time of execution of the note,^ and at the place where the 
instrument is dated; and a bill of exchange is presumed to have 
been accepted before maturity and within a reasonable time aftef 
its date. The holder of a note payable to bearer is presumed to 
be the owner. The drawee of a check is presumed to know the 

1 As to parol evidence to vary W. 819; Beer v. Clifton, 111 Cal. 51, 

contract of party to negotiable pa- 43 Pac. 411. 
per, see note 8 U. S. L. Ed. 316. 2 Pritchett v. Sheridan, 29 Ind. 

la Swift v. Smith, 102 U. S. 442, App. 81, 63 N. E. 865. 
26 L. Ed. 193 ; Wayland Univer- 3 Collins v. Gilbert, 94 U. S. 753, 

sity v. Boorman, 56 Wis. 657, 14 N. 24 L. Ed. 170; Bradford v. Pres- 

cott, 85 Me. 482, 27 Atl. 461. 

329 



330 NEGOTIABLE INSTRUMENTS. §§ 288-289 

signature of the drawers.* When a party draws a check on a 
bank which is paid, it is not presumed to have been made for the 
payment of a debt to the bank but that it was drawn against 
funds of the drawer. Payment of a note is presumed from its 
possession by the maker.^ The execution and dehvery of a note 
raises the presumption of a settlement of accounts previous to its 
date. Where several persons sign a note they are presumed to 
be equally liable. 

The instrument, v^hen its execution is not denied, is prima 
facie evidence of the debt. If the plaintiff produces the paper, 
proves the signature and indorsements, he may usually recover, 
unless the defendant is able to overthrow the presumptions by 
satisfactory proof. 

These presumptions are merely prima facie and are not abso- 
lute or conclusive and must be received with caution, sometimes 
being entitled to considerable weight and sometimes to very lit- 
tle; generally their chief importance is to determine the burden 
or order of proof. 

§ 288. Burden of proof in general. There are five material 
allegations which as a general rule the plaintiff must prove in 
order to win his case unless the same are admitted. These are, 
first, the existence of the instrument, as described in the declara- 
tion or complaint ; second, that the defendant was a party to it ; 
third, the nature of the defendant's contract ; fourth, the plaint- 
iff's interest in and right of action upon the instrument ; fifth, the 
breach of the contract by the defendant.'* 

§ 289. Competency of parties to negotiable instruments as 
witnesses. In some jurisdictions the testimony of parties to 
negotiable instruments in actions upon them between other par- 
ties is as a general rule admissible or not, like the testimony of 
any other witnesses, depending upon whether such witnesses 
are interested or are not interested in the event of the suit. 

Thus in an action against one of several makers of a note, an- 
other maker of the same note is a competent witness for the 
plaintiff as he stands indifferent.® The maker may testify for the 
plaintiff, in an action by the indorsee against the indorser.'^ If 

4 White V. Continental Nat'l 5a ^s to burden of proof as to 
Bank, 64 N. Y. 316, 21 Am. R. 612; bona fide ownership, see note 11 
United States Bank v. Bank of Am. St. Rep. 323. 

Georgia, 10 Wheat. (U. S.) 333, 6 « Hillebrant v. Ashworth, 18 Tex. 

L. Ed. 334. 307. 

5 Love V. Dilley, 64 Md. 238, 1 '' Adams v. Moore, 9 Port. 406. 
Atl. 59; Emerson v. Mills, 83 Tex. 

385, 18 S. W, 805. 



§ 290 EVIDENCE IN GENERAL. 331 

the indorsee proceeds against the drawer, the payee is competent 
to testify as to the consideration for the indorsement.^ 

As a general rule the payee after having indorsed the note, is 
competent to prove any matters arising after the making of the 
note, which may affect the right of the holder to recover against 
the maker.** 

The payee of a note who has indorsed it without recourse, is 
also a competent witness to prove its execution by the maker. *** 

In a proceeding against the acceptor, the drawer may testify 
for either party. And in an action by the indorsee against the 
drawer or acceptor, an indorser is in general a competent witness 
for either party. The testimony of an indorser standing indif- 
ferent is admissible to prove payment ; time of negotiation by in- 
dorsement ; alteration of date by fraud; want of interest in the 
indorsee ; usury ; and the fact of his own indorsement." 

In several of the states all the parties liable on a bill or note 
may be sued in one action, in which case, however, the parties 
are respectively entitled to the testimony of any other parties 
defendant in the suit, in the same manner as if they had been 
sued in several actions. 

§ 290. Declarations and admissions. Declarations and ad- 
missions made by the owner of the note against his interest and 
before he has parted with title are admissible against him. But 
if he has parted with title and possession and is no longer in- 
terested in the instrument, then his declarations cannot be used 
as against a bona fide holder, who has purchased for value, be- 
fore maturity and without notice.-*^ 

8 State Bank v. Seawell, 18 Ala. " Knights v. Putnam, 20 Mass. 

616. 184. 

^Curtis V. Marrs, 29 111. (19 i* As to effect of admission to 

Peck) 508. change burden of proof, see note 

10 Davis V. Sawtelle, 30 Me. (17 61 L. R. A. 535. 
Shep.) 389. 



CHAPTER XXVI. 



EVIDENCE AS TO PARTICULAR CHARACTERISTICS. 



291. 


As to time. 


§302. 


As to transfer. 


292. 


As to date. 


303. 


As to conditions. 


293. 


As to amount payable. 


304. 


As to mistake. 


294. 


As to place of payment. 


305. 


As to fraud and duress. 


295. 


As to mode of payment. 


306. 


As to usury. 


296. 


As to interest. 


307. 


As to payment and discharge. 


297. 


As to consideration. 


308. 


As to presentment and de- 


298. 


As to parties. 




mand. 


299. 


As to ambiguous or omitted 


309. 


As to protest and notice. 




stipulations. 


310. 


Bills and notes as evidences. 


300. 


As to execution and delivery. 


311. 


As to meaning of certai© 


301. 


As to acceptance of bills. 




terms. 



§291. As to time. Parol evidence is admissible to show 
the intention of the parties when the time of payment is ambigu- 
ous.^ If an agreement is made subsequent to the execution of the 
instrument whereby an extension of time is agreed upon, parol 
evidence is admissible to establish such fact.^ A renewal by ad- 
vanced payment^ or the giving of a renewal note,"* is proof of an 
extension of time. Where an extension of time for a definite 
period has been indorsed upon an instrument pursuant to agree- 
ments, a consideration is to be presumed.^ If an agreement is 
entered into at the same time as the execution of the bill or note, 
modifying, enlarging or extending the time of payment, parol 
evidence will not be admitted to show such agreement.* But if 
the instrument either by fraud, mistake or accident does not 
contain the true conditions or stipulations of the contract the 



iMcGhee v. Alexander, 104 Ala. 
116, 16 So. 148; Des Moines Co. v. 
Hinkley, 62 Iowa 637, 17 N. W. 
915; Union Bank v. Meeker, 4 La. 
Ann. 189, 50 Am. Dec. 559. 

2 Pierce v. Goldsberry, 31 Ind. 
52 ; Ferguson v. Hill, 3 Stewart 485, 
21 Am. Dec. 641 ; Merchants' Bank 
of Port Townsend v. Bussell, 16 
Wash. 546, 48 Pac. 242; Bank of 
Horton v. Brooks, 64 Kans. 285, 62 
Pac. 675. 

3 Mariners Bank v. Abbott, 28 



Me. 280; Lime Rock Bank v. Mal- 
lett, 34 Me. 547, 56 Am. Dec. 673. 

4 Williams v. Wright, 69 Ga. 759; 
First Nat'l Bank of Hastings v. La- 
ment, 5 N. D. 393, 67 N. W. 145. 

^ St. Joe & Mineral Farm Con- 
sol. Min. Co. v. First Nat'l Bank, 
10 Colo. App. 339, 50 Pa. 1055. 

® Foglesong v. Wickard, 75 Ind. 
258; Clark v. Allen, 132 Pa. St. 40, 
18 Atl. 1071; Hall v. First Natl. 
Bank, 173 Mass. 16, 53 N. E. 154, 
44 L. R. A. 319. 



332 



§ 292 EVIDENCE — PARTICULAR CHARACTERISTICS. 333 

time of payment may, in such case, be prolonged by parol evi- 
denced 

* The following provisions as to time are found in the Negotiable 
Instruments Law : 

"In determining what is a 'reasonable time,' or an 'unreason- 
able time' regard is to be had to the nature of the instrument, the 
usage of trade or business (if any) with respect to such instru- 
ments, and the facts of the particular case."^ 

"Where the day, or the last day, for doing any act herein re- 
quired or permitted to be done falls on Sunday or on a holiday, 
the act may be done on the next succeeding secular or business 
day."^ 

§ 292. As to date. A presumption arises that the date upon 
a negotiable instrument is the time when the instrument was exe- 
cuted in case there is no evidence to the contrary.^® The Ne- 
gotiable Instruments Law provides : 

"Where the instrument or an acceptance or any indorsement 
thereon is dated, such date is deemed prima facie to be the true 
date of the making, drawing, acceptance or iiidorsement, as the 
case may be."^^^ 

A presumption likewise arises that the instrument was made 
at the place where it is dated and that the maker resides at that 
place.** A presumption arises that the payee or holder in pur- 
suance of his implied power to do so filled in the space by placing 
therein the date of the execution of the instrument** And if the 
note circulates further with the date remaining blank the pre- 
sumption arises that the indorsee is authorized to fill in the true 
date.*^ But the maker may fill in the blank date after the indorse- 
ment without discharging the indorser. In all the preceding cases 
parol evidence is admissible to show that the note was executed 
differently. In case a note is secured and the note described in 

''Wallace v. Richards, 16 Utah lOa ^gg i^gt. Law, § 11. 

52, 50 Pac. 804; Campbell v. Up- n Rudolph v. Breener, 96 Ala. 

shaw. 7 Humph. (Tenn.) 185, 46 189, 11 So. 314; Bronte v. Leslie, 30 

Am. Dec. 75. 111. App. 288 ; Hall v. Harris, 16 

SNeg. Ins. Law, § 193, where Ind. 180. 

all cases directly or indirectly bear- ^^ Overton v. Matthews, 35 Ark. 

ing upon or citing the Law are 146, 37 Am. Rep. 9. Contra, Inglish 

grouped. V. Breuneman, 9 Ark. 122, 47 Am. 

y Neg. Ins. Law, § 194, where Dec. 735 ; Emmons v. Carpenter, 55 

all cases directly or indirectly bear- Ind. 329. 

ing upon or citing the Law are ^3 jjepler v. Mt. Carmell Sav. 

grouped. Bank, 97 Pa. St. 420, 39 Am. Rep. 

lOKnisely v. Sampson, 100 111. 813. 
573; Elyton Co. v. Hood, 121 Ala. 
373, 25 So. 745. 



334 NEGOTIABLE INSTRUMENTS. §293 

the security contains a different date than that of the note itself, 
parol evidence is admissible to identify the note and the security 
and to show that they were delivered together and that they 
formed one transaction.** 
The Negotiable Instruments Law further provides: 
"Except where an indorsement bears date after the maturity of 
the instrument every negotiation is deemed prima facie to have 
been effected before the instrument was overdue."^'*'^ 

§ 293. As to amount payable. The general rule of evidence 
is that a note which calls for an amount certain and definite can- 
not be varied as to the amount payable by means of parol evi- 
dence. But in case the note was given in settlement of mutual 
accounts parol evidence is admissible to show that the amount 
expressed in the note was greater than the amount due, by com- 
putation subsequently made by the party receiving the note on 
the basis of the original accounts showing a less amount due.-^*^ 
Where a note is given for purchase money and includes illegal 
attorney's fees parol evidence is admissible to show that the note 
included such illegal fees.*^ In case of a written contract to give 
a note for a certain amount and the note is made for a larger 
amount, parol evidence is allowed to show an oral agreement to 
insert the larger amount.*'' 

Where the amount of a bill or note expressed in the marginal 
figures is inconsistent with that expressed in the body of the 
note parol evidence is inadmissible to show that the instrument 
was negotiated for the amount expressed in figures.*® So also 
parol evidence is not admissible to show that a note given abso- 
lutely to the payee was to be held by him merely as security for 
an amount to be found due upon an accounting.*® Where the 
note provides for attorney's fees, without stating any amount, 
the value of the attorney's services may be proved though not 
averred within the limits of the amount claimed.*** In case the 
attorney of the holder of the note agreed to take one-fourth of 
the attorney's fees such fact is admissible and limits the amount 
necessary to be paid by the maker.** If the amount of the attor- 

14 Brown v. Holyoke, 53 Me. 9. ^^ Poorman v. Mills & Co., 39 Cal. 
See also, Ohio Life Ins. & Trust 345, 2 Am. Rep. 451. 

Co. V. Winn, 4 Md. Ch. 253. *» Ives v. Farmers Bank, 2 Allen 

i-ia Neg. Inst. Law, § 45. 236 ; Wilson v. Wilson, 26 Ore. 251, 

15 Law V. Freeman, 117 Ind. 341, 38 Pac. 185. 

20 N. E. 242. 20 Harney v. Baldwin, 124 Ind. 

i« Macomb v. Wilkinson, 83 Mich. 59, 26 N. E. 222 ; Starnes v. Scho- 

486, 47 N. W. 336. field, 5 Ind. App. 4. 31 N. E. 480. 

17 Davidson v. Bodley, 27 La. 21 Harvy v. Baldwin, supra. 

Ann. 149. 



§§ 294-295 EVIDENCE — PARTICULAR CHARACTERISTICS. 335 

ney's fee is not expressed in the body of the note evidence is ad- 
missible to show the amount of a reasonable fee.^ 

§ 294. As to place of payment. It is presumed unless there 
is evidence to the contrary, that a note or bill of exchange is to 
be paid or accepted at the place where dated.** But parol evi- 
dence is admissible to make certain the designation of the place 
of payment.*"* If a note is made in one state and dated in an- 
other the presumption is that it is payable at the place where 
dated and that it is to be governed by the laws of that place.*'^ 
If no special place or locality is set out the presumption is that 
it is payable at the place of business of the maker or payee.'* 
If the note does not state a place of payment it is deemed pay- 
able anywhere upon demand being made after it matures and it 
is not necessary that it be payable at the office of the maker.*'^ 
But if the note or bill is made payable at a certain place desig- 
nated in the instrument itself it is to be presumed payable at that 
place.*® If made payable at a bank it is presumed to be subject 
to the known lawful usages and customs of such bank.*® If the 
place of payment does not appear upon the instrument parol evi- 
dence may be introduced to show that there was an agreement as 
to the place of payment.^" If the place of payment is not clearly 
set out in the bill or note parol evidence is admissible to make 
the place of payment clear and certain.^* But parol evidence 
cannot be introduced to change or vary the terms of the instru- 
ment or to show that a bill or note payable generally is to be 
paid at a particular bank.** 

§ 295. As to mode of payment. If the mode of payment is 
not definitely expressed in the instrument parol evidence may 
be introduced to show the intention of the parties as to the mode 
of payment in dollars or any other kind of money or to show that 
the mode of payment was omitted by mistake.** Where the par- 

22 Glenn v. Porter, 12 Ind. 525. 28 A^t y American Trust & Sav- 

23Biglow V. Burnham, 83 Iowa ings Bank, 159 111. 407, 42 N. E. 

120, 49 N. W. 104; Bullard v. 856; Davis v. McAlpine, 10 Ind. 

Thompson, 35 Tex. 313. 137 ; Way v. Butterworth, 106 Mass. 

24 Comstock V. Savage, 27 Conn. 75. 

184; Lane v. Union Natl. Bank of 29 Mills v. Bank of U. S., 11 

Massillon, 3 Ind. App. 299, 29 N. E. Wheat. 431, 6 L. Ed. 512; Marrett 

613. V. Brackett, 60 Me. 524. 

25 Tillotson V. Tillotson, 34 Conn. *® McKee v. Boswell, ZZ Mo. 567. 
335. *^ Comstock v. Savage, 27 Conn. 

2« Equitable Life Ins. Co. v. Glea- 184. 
son, 56 Iowa 47, 8 N. W. 790 ; Hart- saAlden v. Barbour. 3 Ind. 44; 

ford Bank v. Greene, 11 Iowa 476; Faulkner v. Faulkner, IZ Mo. 327. 
Holtz v. Boppe, 37 N. Y. 634. 33 Cook v. Lillo, 103 U. S. 792, 

a^Engler v. Ellis, 16 Ind. 475. 26 L. Ed. 460; Williams v. Arnis. 



336 NEGOTIABLE INSTRUMENTS. §§ 296-297 

ties used the words current funds intending thereby money, 
parol evidence is admissible to show such intention.** If the word 
currency was used and it was known to the parties at the time 
that this word had a local significance different from its usual 
meaning, parol evidence will be admissible to show that they con- 
tracted with reference to this meaning.^** But if the mode of 
payment is sufficiently designated in the bill or note parol evi- 
dence will not be admissible to show a different mode of pay- 
ment.^® All oral agreements or stipulations between the parties, 
as to the mode of payment, which preceded or accompanied the 
execution of the instrument, are to be regarded as merged in it, 
and the latter is to be treated as the exclusive medium of ascer- 
taining the agreement to which the parties bound themselves. 

§ 296. As to interest. Parol evidence is admissible to prove 
that the rate of interest expressed in the note is a mistake^'' or to 
show an agreement as to an increased rate of interest indorsed on 
the note upon a consideration granting an extension of time.^ If 
there was a parol agreement upon a sufficient consideration to 
change the rate of interest this may be shown.^ If the principal 
of a note has been paid but the interest still remains unpaid, the 
note may be used as evidence in an action to recover interest on 
it."*® A stub from which a certificate of deposit was taken con- 
taining a memorandum of agreement to pay interest on the cer- 
tificate, is admissible in evidence to show such agreement.** 

Where the declaration describing a note makes no mention of 
interest the note bearing interest is inadmissible and is consid- 
ered to be a material variance with the pleading.^ 

§ 297. As to consideration. A presumption arises in all ne- 
gotiable instruments as to a consideration being given*' and the 
burden of proof is upon the maker to show a want or failure of 
consideration.** But in case the maker was insane or under some 

30 Tex. Zl ; Calbreath v. Va. Co. 40 Mensing v. Ayres, 2 Willson 

22 Gratt. (Va.) 697; Juskoe v. (Tex. Cir. Ct. App.) 563. 

Proctor. 6 T. B. Mon. (Ky.) 311. 4i Thomson v. Beal, 48 Fed. 614. 

34 Haddock v. Woods, 46 Iowa 42 Beach v. Curie, 15 Mo. 105; 
433. Sawyer v. Patterson, 11 Ala. 523; 

35 Pilmer v. Branch of Des Gragg v. Frye, 32 Me. 283. 
Moines State Bank, 16 Iowa 321. 43 Halsted v. Lyon, 2 McLean 

38 Tucker v. Talbott, 15 Ind. 114; 226; Louisville E. & St. L. R. Co. v. 

Stein V. Fogarty (Idaho), 43 Pac. Caldwell, 98 Ind. 245; Sollenberger 

681. V. Stephens, 46 Kans. 386, 26 Pac. 

37 Hathaway v. Brady, 23 Cal. 690; Perley v. Parley, 144 Mass. 

121. 104. 10 N. E. 726. 

38Bradshaw v. Combs, 102 111. 4433 Ala. 213, 3 So. 422; Beeson 

428. V. Howard, 44 Ind. 413; Armstrong 

39Huntv. Hall, 37 Ala. 702. v. Davis, 41 Cal. 494. 



§ 298 EVIDENCE — PARTICULAR CHARACTERISTICS. 337 

legal disability at the time of the execution of the instrument the 
holder must prove consideration.^'^ The instruments themselves 
are admissible in evidence when the question of consideration is 
raised and circumstantial evidence is admissible to show a want 
of consideration or usury.'*® Parol evidence may be introduced 
to explain^'' or impeach the consideration of a negotiable instru- 
ment.'** But parol evidence cannot be introduced to establish a 
consideration which will vary the terms of the instrument.^* 

§ 298. As to parties. The instrument is presumed to cor- 
rectly exhibit the character in which the parties signed the bill 
or note.*^" If the name of the maker and payee are the same 
they will be presumed to be different persons as to the rights of 
the assignee.*^* Where the maker draws an instrument payable to 
his own order, bearing the indorsement of another person, the pre- 
sumption is that the indorsement was for the maker's accommoda- 
tion.'** Where a person signs an instrument and adds to his sig- 
nature any words as executor, guardian, trustee, receiver, agent 
or officer it will be presumed that he signed as a principal and 
not in a representative capacity.'*^ But this presumption may be 
overcome by evidence to the contrary. Where two or more per- 
sons sign a note as maker the presumption is that they are equally 
bound as such and that the debt evidenced by the note was cre- 
ated for the benefit of the joint m.akers unless a different show- 
ing could be made.'^ The order in which the makers sign a note 
does not in and of itself create a presumption of suretyship.'*' 
If a note is given by a member of a firm as a partnership note 
it is presumed that it is given for a partnership debt.'® But if 

45 Hosier v. Beard, 54 Ohio St. so Brunswick Balke-Collender Co. 
398, 43 N. E. 1040. v. Bautell, 45 Minn. 21, 47 N. W. 

46 Nicholls V. Van Valkenburgh, 261. 

15 Hun 230; Vogt v. Butler, 105 5i Cooper v. Poston, 1 Duval 

Mo. 479, 16 S. W. 512; Guenther v. (Ky.) 92. 85 Am. Dec. 610. 

Amsden, 162 N. Y. 601, 57 N. E. 52 Hendrie v. Berkowitz, Zl Cal. 

1111. 113, 90 Am. Dec. 251; Overton v. 

47 First Natl. Bank v. Nugent, 99 Hardin, 6 Cald. (Tenn.) 375. 

Ind. 160; Walker v. Sherman, 11 53 Carter v. Thomas, 3 Ind. 213; 

Mete. 170; Post v. Brown, 55 111. Germania Bank v. Minchand, 62 

App. 355. Minn. 459, 65 N. W. 70, 30 L. R. A. 

48 Colt V. McConnell, 116 Ind. 186; Wood v. Truax, 39 Mich. 628. 
249; Daw v. Niles (Cal.), J3 Pac. 54 McClelland v. McClelland, 42 
1114. Mo. App. 32. 

49 Hubbard v. Marshall, 50 Wis. 55 Summerhill v. Tapp, 52 Ala. 
322, 6 N. W. 497; Langan v. Lan- 227; McPherson v. Andes, 75 Mo. 
gan, 89 Cal. 186, 26 Pac. 764. As App. 204. 

to admissibility of parol evidence 56 Trader's Bank v. Brodner, 43 

to prove relation of parties, see note Barb. (N. Y.) 379. 
1 L. R. A. 817. 



338 NEGOTIABLE INSTRUMENTS. § 299 

the note given by one member of the partnership appears to be 
given for an individual debt it is presumed that the firm did not 
consent to the note unless it can be affirmatively shown that they 
did.®'^ Where a person signs a note under a representative de- 
scription, parol evidence is admissible to show that he made the 
note in a representative capacity;'^** but the personal liability of 
persons signing with such description cannot be disproved by 
parol evidence.'^^ Where the note is signed by one member of a 
firm, parol evidence is admissible to show that the note repre- 
sents a firm obligation.®* 

A note payable to a person whose name is used as a firm name 
is presumed to be given to him individually and not to the firm 
unless it can be shown that they were the intended payees.®* If 
a note is payable to a person designating him in a representative 
capacity, the presumption is that it was payable to him individu- 
ally.®^ If a note is payable to a cashier, parol evidence is admissi- 
ble to show that he received the note as cashier and agent for a 
particular bank.®* Parol evidence is also admissible to show that 
a note payable to a person designated in an official capacity was 
received by him in an official capacity for a corporation.®* 

§ 299. As to ambiguous or omitted stipulations. The Nego- 
tiable Instruments Law provides, as follows, as to ambiguous 
stipulations : 

"Where the language of the instrument is ambiguous, or there 
are omissions therein, the following rules of construction apply: 
(1) Where the sum payable is expressed in words and also in 
figures and there is a discrepancy between the two, the sum de- 
noted by the words is the sum payable; but if the words are am- 
biguous or uncertain, reference may be had to the figures to fix 
the amount; (2) where the instrument provides for the payment 
of interest, without specifying the date from which interest is to 
run, the interest runs from the date of the instrument, and if 
the instrument is undated, from the issue thereof; (3) where the 
instrument is not dated, it will be considered to be dated as of 
the time it zms issued; (4) where there is a conflict between the 
zvritten and printed prozisions of the instrument, the written pro- 
visions prevail; (5) where the instrument is so ambiguous that 

57 Allen V. Carey, 33 La. Ann. ®*> Holmes v. Porter, 39 Me. 157. 

J455 ®i Boyle v. Skinner, 19 Mo. 82. 

ssLaSalle Nat. Bank v. Tolu 62 Beach v. Peabody, 188 111. 75, 

Rock & Rye Co., 14 111. App. 141 ; 58 N. E. 679. 

Kraniger v. Peoples Bldg. Soc, 60 6* Nave v. First Natl. Bank, 87 

Minn. 94, 61 N. W. 904. Ind. 204. 

5» Prescott V Hixson, 22 Ind. *■* Southern L. Ins. & Trust Co. 

App. 139, 53 N. E. 391. v. Gray, 3 Fla. 262. 



§§ 300-301 EVIDENCE — PARTICULAR CHARACTERISTICS. 339 

there is doubt zvhcther it is a bill or note, the holder may treat 
it as either at his election; (6) where a signature is so placed up- 
on the instrument that it is not clear in what capacity the person 
making the same intended to sign, he is to be deemed an in- 
dorser; (7) where an instrument containing the words 'I promise 
to pay' is signed by tzi'O or more persons they are deemed to be 
jointly and severally liable thereon/'^ This is the law generally. 

And the Negotiable Instruments Law provides as follows as 
to instruments executed before its passage and as to matters not 
provided for in the act : 

"The provisions of this act do not apply to negotiable instru- 
ments made and delivered prior to the passage hereof ."^^ 

"In any case not provided for in this act the rules of the laiv 
merchant shall govern."^"^ 

§ 300. As to execution and delivery. The general rule of 
evidence is that the instrument is presumed to have been exe- 
cuted and delivered at the maker's residence^^ and at the time in- 
dicated by the date thereof.®" The possession of the instrument 
by the holder is presumptive evidence of delivery -^^ and the hold- 
er must prove the execution of the instrument 7^ execution may 
also be proved by circumstantial evidence.'^^ The fact that one 
person signed a note for another at his direction in his presence 
may be shown by parol evidence.''^ Parol evidence may be used 
to show that a note in the hands of the payee was not intended 
to be delivered/'* but it cannot be used to show that it was de- 
livered to him as an escrow.'^' 

§ 301. As to acceptance of bills. The presumptions as to 
the acceptance of bills of exchange is that the acceptor knows the 
signature of the drawer,''® and that he (the acceptor) has sufficient 

*5 New. Ins. Law, § 17, where 27o, 25 So. 745 ; Hopkins v. Miller, 

all cases directly or indirectly bear- 17 N. J. Law 185. 

ing upon or citing the Law are '^^ Pastcne v. Pardini, 135 Cal. 

grouped. 431, 67 Pac. 681. 

«»Neg. Ins. Law, § 195, where ''i McRae v. Handeshell, 88 111. 

all cases directly or indirectly bear- App. 428. 

ing upon or citing the Law are '^^ Victor v. Swisky, 87 111. App. 

grouped. 583. 

C^Neg. Ins. Law. § 196, where 73 Morton v. Alurray, 176 111. 54, 

all cases directly or indirectly bear- 51 N. E. 767. 

ing upon or citing the Law are ''"* Scaife v. Byrd, 39 Ark. 568. 

grocped. 75 Garner v. Fite, 93 Ala. 405. 9 

«8 McAuliff V. Reuter, 61 111. App. So. 367. 

32 ; Strawberry Point Bank v. Lee, ^c U. S. v. Bank of Georgia, 10 

117 Mich. 122, 75 N. W. 444. Wheat. 32,2,, 6 L. Ed. 334; White 

^9 Ely Law Co. v. Hood. 121 Ala. v. Continental Natl. Bank, 64 N. 

Y. 316, 21 Am. Rep. 612. 



340 NEGOTIABLE INSTRUMENTS. §302 

funds of the drawer in his hands with which to meet the de- 
mand ;'''' however, evidence may be introduced to show the con- 
trary. If the acceptance is not plain and clear but is ambiguous 
the same may be explained by parol evidence.''** If there has 
been an oral acceptance of a bill the same may be shown by parol 
evidence.'^'* Where a person who has accepted a bill for accom- 
modation sues the drawer he must prove both the acceptance and 
the payment by him.^" But the fact that the acceptance was for 
the accommodation of the drawer cannot be shown by parol evi- 
dence as against the payee.** 

§ 302. As to transfer. The presumption is that a transferee 
or holder has procured the instrument in good faith for value 
and without notice of equities.**^ The party alleging the want of 
good faith, value or notice has the burden of proof showing the 
same.** But where the instrument in its inception was obtained 
by fraud or upon an illegal consideration the burden of proof is 
upon the holder to show that he is a bona Ude purchaser.*'* 

The indorsee wdio sues upon a note and produces the instru- 
ment need not give other evidence of ownership to make out a 
prima facie case.*' A testator has been held to be the owner of 
an instrument where the payee's day book showed a transfer to 
the deceased.*® A transfer of a note may be proven by the 
payee's admission without proof of his signature.*'' 

All acts w^hich show a wilful failure of inquiry and gross neg- 
ligence in purchasing are admissible as tending to show bad faith 
on the part of the purchaser.** 

Evidence is admissible to show that an indorsee suing upon a 
note had notice that the payee usually loaned money at a usuri- 

'"' Turner v. Browder, 5 Bush. 83 Goodman v. Simonds, 20 How. 

216; Trego v. Lowrey, 8 Neb. 238. 343. 15 L. Ed. 934; Credit Co. v. 

78 Gallagher v. Black, 44 Me. 99: Home Mach. Co., 54 Conn. 357, 8 
Laften & Rand Powder Co. v. Sin- Atl. 472. 

sheimer, 48 Md. 411. 30 Am. Rep. 84 Kniss v. Holbrook (Ind. App.). 

472. 40 N. E. 1118; Galbraith v. Mc- 

79 Pierce v. Kittridge, 115 Mass. Laughlin, 91 Iowa 399, 59 N. W. 
374. 338. 

80 Nichols v. Morgan, 9 La. Ann. 85 Dawson Town & Gas Co. v. 
534. Woodhull, 67 Ind. 451. 14 C. C. A. 

81 Noevak v. Excelsior Stone Co., 464. 

78 111. 307. 86 Macomb v. Wilkinson, 83 

82Leening v. Wise, 64 Cal. 410; Mich. 486, 47 N. W. 336. 

Forbes v. National Forge & Iron 87 McKown v. Mathes, 19 La. 

Co., 50 111. App. 503; Challiss v. (O. S.) 542. 

Woodburn, 2 Kans, App. 652, 43 88 Rowland v. Fowler, 47 Conn. 

Pac. 792. 347. 



§ 303 EVIDENCE — PARTICULAR CHARACTERISTICS. 341 

ous rate.^ The fact that the purchaser had knowledge of the 
fraudulent manner in which similar notes were procured by the 
payee may be shown by evidence as tending to show bad faith on 
the part of the purchaser.''* If the note was merely indorsed for 
collection®* or as collateral security®^ or for any particular pur- 
pose the same may be shown by parol evidence.**' 

§ 303. As to conditions. If the conditions are written on 
the note, either at the bottom or on the margin, before delivery 
they are presumed to be a part of the original obligation .^'^ But 
if these conditions are in the form of a memorandum and con- 
tradictory in themselves they are deemed no part of the note.** 
If the conditions on the note are executed in one state and the 
note is payable in another state the presumption is that they were 
expressed with reference to the law of the state where the in- 
strument is payable.*® Where an instrument for the payment of 
money was delivered pursuant to an oral agreement that it should 
become binding only upon a future condition or contingency, 
parol evidence is admissible against the payee or holder with no- 
tice to show such agreement.** Where a bill of exchange was 
drawn for the purpose of canceling the drawer's funds on condi- 
tion that it should take effect only in case of an attachment such 
fact may be shown by parol evidence.*'' Parol evidence is admissi- 
ble to show that at the time of making a note, it was orally agreed 
that it should be payable from the proceeds of a mill and that if 
there were no proceeds it was to be returned and destroyed.*^ An 
agreement entered into at the time the note was executed, to the 
effect that the note should be returned upon a certain day if de- 
manded, may be shown by parol evidence.** But the general 
rule is that parol evidence is inadmissible to show that an instru- 
ment, absolute in its terms, was to be paid only on a condition or 
contingency.* Thus parol, evidence is not admissible to prove an 

89Blackwell v. Wright, 27 Neb. 94 Way v. Batchelder, 129 Mass. 

269, 43 N. W, 116, 20 Am. St. Rep. 301. 

662. 95 Farmers Trust Co. v. Schen- 

»o Bowman v. Metzger, 27 Or. nit, 83 111. App. 267. 

23, 39 Pac. 3, 44 Pac. 1090. »« Smith v. Mussetter, 58 Minn. 

»i Church V. Barlow, 9 Pick. 547. 159, 59 N. W. 995. 

See note 17 L. R. A. (N. S.) 838. 97 Stevens v. Parker, 7 Allen 361. 

92 Stack V. Beach, 74 Ind. 571, 98 Roberts v. Greig, 15 Colo. App. 

39 Am. Rep. 113. 378. 62 Pac. 574. 

92a As to parol evidence to explain 99 McFarland v. Sikes, 54 Conn, 

indorsement. See note 4 A. L. R. 250, 7 Atl. 408. 

764. 1 Brown v. Wiley, 20 How. 442, 

»3Edelen v. Worth, 69 Mo. App. 15 L. Ed. 965; Kempshall v. Ved- 

124. der, 79 111. App. 368. As to ad- 



342 NEGOTIABLE INSTRUMENTS. §§304-305 

oral agreement entered into contemporaneous with a note, pro- 
viding that the note which is absolute and payable at a time cer- 
tain, was not to be paid if certain land was not paid for;^ neither 
can it be shown that a parol agreement providing that a note was 
not to be operative or collected until certain other securities for 
the same debt had been exhausted.^ But if the conditions of the 
note or other obligation for money have been reduced to writ- 
ing contemporaneously with the instrument, such writing will be 
admissible as evidence as being part of the same contract.* In 
an action by the indorsee of a note, which is negotiable in form, 
against the maker, an oral agreement between the maker and 
payee that the note was not to be negotiated cannot be shown.** 

§ 304. As to mistake. The burden of proving that there is 
a mistake in an instrument is on the party alleging the mistake,® 
but this, in general, can only be proved as between the original 
parties, or those having notice. 

Parol evidence may be introduced to show a mistake between 
the parties upon an instrument in settlement, or to show the 
amount of actual indebtedness upon a note held by written agree- 
ment as collateral security for the balance due on settlement.'^ 

§ 305. As to fraud and duress. Parol evidence may be in- 
troduced in a proper case to show that the execution or indorse- 
ment of a note was obtained through fraud or misrepresenta- 
tions f but in order to relieve the maker it must be clearly estab- 
lished. The defense of fraud or duress can be established by a 
mere preponderance of evidence.^ Any evidence which will tend 
in any manner to establish a defense of fraud or duress is ad- 
missible.** Fraud in obtaining a negotiable instrument may be 
established by the circumstantial evidence tending to prove the 
same.-^* Where relief is sought in equity for alleged fraud or 
duress in procuring a negotiable instrument the same may be 
shown by parol evidence.*^ But parol evidence is not admissible 

missibility of parol evidence of con- App. 166, 178 111. 182, 52 N. E. 957; 

dition to vary or contradict, see note Stout v. Judd, 10 Kans. App. 579, 

3 L. R. A. 363. 63 Pac. 662. 

2 Gliddens v. Harrison, 59 Ala. ^ Sherwood v. First Natl. Bank, 
481. 17 III. App. 591; Rossiter v. Lae- 

3 Fisher v. Briscoe, 10 Mont. 124, ber, 18 Mont. 372, 45 Pac. 560. 

25 Pac. 30. 10 Maples v. Browne, 48 Pa. St. 

4Gerrish v. Glines, 50 N. H. 9; 458; Behl v. Schuett, 104 Wis. 76, 

Munro v. King, 30 Col. 238. 80 N. W. 73. 

s McSherry v. Brooks, 46 Md. n Maxson v. Llewelyn, 122 Cal. 

103. 195, 54 Pac. 732. 

® Sheby v. Brooks, 114 -Mich. 11. 12 pjt^maurice v. Mosier, 116 

''Thomas v. Thomas. 7 Wis. 476. Ind. 563. 16 N. E. 175, 19 N. E. 

8 Blake v. State Bank, 78 111. 180, 9 Am. St. Rep. 854. 



§§ 306-308 EVIDENCE — PARTICULAR CHARACTERISTICS. 343 

to show a fraudulent promise to surrender a note or bill." Pay- 
ment may be proven by a preponderance of evidence and any 
evidence is admissible which tends to corroborate or rebut a pre- 
sumption of payment. Parol evidence may be introduced to ex- 
plain or contradict a receipt of payment. Parol evidence can be 
used to show that indorsements on a note were for one and the 
same sum. 

§ 306. Usury. It is not necessary to establish usury by di" 
rect evidence, but facts and circumstances which will tend to 
establish usury may be proved. The burden of proving usury is 
upon the party setting it up as a defense and a mere prepon- 
derance of the evidence will establish usury. Parol evidence may 
be admitted to show an agreement for usurious interest, and to 
prove that it was paid. 

§ 307. As to payment and discharge. The possession of a 
note by the payee is prima facie evidence of non-payment*"* while 
the possession of the instrument by the maker creates a rebut- 
table presumption of payment.-^^ The presumption is that a note 
or other instrument has been paid when due.^* 

If there is no evidence to the contrary the presumption is in 
some jurisdictions that the taking of a negotiable instrument for 
a debt is a payment of the debt.*'' The presumption as to a check 
is that it is in payment of money due rather than for a loan.*® 
Although the language of a check imports full payment, it is 
only prima facie, and not conclusive evidence of that fact.*® 

The person having possession of a negotiable instrument is 
prima facie entitled to receive payment,^® and anyone alleging 
payment to a person who is not in possession of the instrument 
must also show that this person was authorized to receive pay- 
ment.** 

§ 308. As to presentment and demand. Parol evidence is 
admissible to prove demand,^^ to show an agreement for demand 
at a particular place*^ and to show a waiver of demand.*^ 

^^3 Henderson v. Thomson, 52 Ga. '^^ Yates v. Shepardson, 39 Wis. 

149. 173. 

14 Pastene v. Pardini, 135 Cal. *® Greer v. Laws, 56 Ark. 37, 18 
432, 67 Pac. 681 ; Ritter v. Schenk, S. W. 1038. 

101 111. 387. 20Pau]man v. Claycomb, 75 Ind. 

15 Lipscomb v. Le Lemos, 68 Ala. 64 ; Whelan v. Reilly, 61 Mo. 565. 
592; Callahan v. Bank of Ky., 82 ^i Hall v. Smith, 3 Kans. App. 
Ky. 231. 685, 44 Pac. 908; Loy v. Hovey 

i« Richardson v. Cambridge, 2 (Neb.), 89 N. W. 998. 
Allen 118, 79 Am. Dec. 767. -^ Hunt v. ^felbee. 7 N. Y. 266. 

17 Bunker v. Barron, 79 Me. 62, ^^ Meyer v. Hibsher, 47 N. Y. 265. 

8 Atl. 253, 1 Am. St. Rep. 282. ^* Porter v. Kimball, 53 Barb. 

467. 



344 NEGOTIABLE INSTRUMENTS. §§ 309-310 

A note payable at a bank, which remains there, is presumed to 
have been presented there for payment when due,^'* and the 
casKTer of the bank is presumed to have done his duty to be at the 
bank to receive payment during business hours of the last day of 
payment.^® 

It has been held sufficient evidence of demand and refusal that 
no funds were provided to meet a note payable at a bank when 
properly presented when due, at the bank within banking hours.*^ 

It is presumed when a bill of exchange is drawn that it is 
drawn against funds sufficient to meet it; but it has been held 
that where there are no funds to meet it, then it is presumed that 
the drawer knew this and that he did not expect it to be paid, and 
that therefore it is not necessary to present and give notice, as he 
could not be injured by such a failure. 

The burden of explaining delay, or cause of failure to present 
when due, is on the holder. 

§ 309. As to protest and notice. The question of notice of 
dishonor may be supplemented or explained by evidence of the 
notary in addition to his certificate of protest.^^ Notice of pro- 
test, however, may be proved by any other competent evidence.*® 
In case of a foreign bill of exchange it has been held that no evi- 
dence can be given of the protest for non-acceptance without 
producing the protest itself or showing that both the original and 
the books are lost.^" The certificate of protest may be contra- 
dicted and a waiver of notice may be shown by parol.^* 

§ 310. Bills and notes as evidences. If the signature to the 
instrument is not properly denied a bill or note is admissible in 
evidence without proof of the signature.^* A note ofifered in evi- 
dence as being one secured by a mortgage or deed of trust may 
be identified by parol evidence.^^ When the action is upon an 
old note which has been renewed, the renewed note must be pro- 
duced in court, if not previously delivered.^'* A suit cannot be 
maintained upon negotiable instruments which have been exe- 
cuted in lieu of outstanding negotiable notes of the same maker 

25 Dykman v. Northridge, 1 App. 31 Applegarth v. Abbott, 64 Cal. 
Div. 26, 36 N. Y. Supp. 962. 459, 2 Pac. 43. 

26 Folger v. Chase, 18 Pick. 3^ Richardson v. Comstock, 21 
(Mass.) 63. Ark. 69; Talbott v. Kennedy, 76 

27 Gillett V. Averill, 5 Denio Ind. 282. 

(N. Y.) 85. 33Kiser v. Carrollton D. G. Co., 

28 Bliss V. Paine, 11 Mich. 92; 96 Ga. 76, 22 S. E. 303; Cutter v. 
Wetherall v. Clagett, 28 Md. 465. Steele, 93 Mich. 204, 53 N. W. 521. 

29 Eddy V. Peterson, 22 111. 535. 34 Miller v. Woods, 21 Ohio St. 

30 Ky. Com. Bank v. Barksdale, 485, 5 Am. Rep. 71. 
36 Mo. 563. 



§311 EVIDENCE — PARTICULAR CHARACTERISTICS. 345 

unless these outstanding obligations are produced and surren- 
dered.^ At the hearing of a suit upon any negotiable instru- 
ment the instrument must be produced or there must be an excuse 
for its non-production.*® 

§ 311. As to meaning of certain terms. As to the meaning 
of certain terms the Negotiable Instruments Law makes the fol- 
lowing provisions: 

"Action" includes counterclaim and set-off. 

"Bank" includes any person or association of persons carrying 
on the business of banking, whether incorporated or not. 

"Bill" means bill of exchange, and "note" means negotiable 
promissory note. 

"Holder" means the payee or indorsee of a bill or note, who 
is in possession of it, or the bearer thereof. 

"Instrument" means negotiable instrument. 

"Issue" means the first delivery of the instrument, complete in 
form, to a person who takes it as a holder. 

"Person" includes a body of persons, whether incorporated or 
not. 

"Written" includes printed, and "writing" includes print.^"^ 

35 Garner v. Cohen, 99 Ga. 78, 24 3' Neg. Ins. Law, § 191, where 
S. E. 851. all cases directly or indirectly bear- 

36 O'Neil V. O'Neil, 123 111. 361, ing upon or citing the Law are 
14 N. E. 844. grouped. 



CHAPTER XXVII. 
TRIAL PROCEDURE ON BILL, NOTE OR CHECK. 

§ 312. Essentials of procedure. § 318. Evidence of plaintiff 

313. Common law procedure. 319. Evidence of defendant. 

314. Code procedure. 320. The argument. 

315. Steps in a jury trial. 321. The charge, verdict and 

316. Impaneling the jury. judgment. 

317. Opening statements. 

§ 312, Essentials of procedure. In a proceeding on a note, 
bill or check, the following steps are essential whether the pro- 
cedure is the common law or the code : 

(a) An application to the courts for recovery on the note, 
bill or check. 

(b) The process. 

(c) Appearance of the adverse party, 

(d) Readings, 
(ej A trial. 

(f) A decision. 

(g) Its enforcement.* 

§ 313. Common law procedure. When the procedure is un- 
der common law, the following steps appear: 

(a) Suit is commenced by the filing of a praecipe and the 
issuing of an original writ. 

(b) The defendant appears either in person or by attorney. 

(c) The pleadings are as follows : 

(1) The plaintiff's declaration on the bill, note or check, 

(2) The defendant's plea, or when he wishes to raise a 
question of law, his demurrer. 

(3) The plaintifif's replication to the plea. 

(4) The defendant's rejoinder. 

(5) The plaintiff's surrejoinder. 

(6) The defendant's rebutter. 

(7) The plaintiff's surrebutter. 

(d) The trial is usually by jury. 

(e) The decision of the jury is called a verdict, upon which 
the court renders a judgment. 

(f) The judgment is enforced by means of an execution.* 

1 Perry on Common Law^ Plead- ^ Perry on Common Law Plead- 

ing, Chapt. vii ; Smith's Elemen- ing, Chapt. vii ; Smith's Elemen- 
tary Law. tary Law. 

346 



\ 



§§ 314-316 TRIAL PROCEDURE. 347 

§ 314. Code procedure.^ When the procedure is under a 
code, the following steps usually occur : 

(a) Suit is commenced by filing a complaint or petition on 
the bill, note or check. 

(b) The writ by which the defendant is notified that a suit 
has been filed against him on the bill, note or check is usually 
called a summons. 

(c) The defendant may appear either in person or by at- 
torney. 

(d) The only pleadings usually allowed are: 

(1) The complaint or petition on the bill, note or check. 

(2) The answer or demurrer of the defendant to the com- 
plaint or petition. 

(3) The reply of the plaintiff to the answer or demurrer to 
the answer. 

(4) The demurrer by defendant to the reply. 

(e) The trial may be with or without jury. 

(f) The court's decision may take the form of a judgment 
or a decree, according to whether the action is of a legal or equi- 
table nature. 

(g) If the action is legal in its nature the judgment is en- 
forced by execution ; if equitable, by contempt of court proceed- 
ings. 

§ 315. Steps in a jury trial. For convenience a jury trial 
may be divided into seven different steps as follows : 

(a) Impaneling the jury. 

(b) Opening statements on behalf of plaintiff and defendant. 

(c) Evidence produced on behalf of plaintiff and defendant. 

(d) Argument on behalf of plaintiff and defendant. 

(e) Charge by the court to the jury. 

(f) Verdict of jury. 

(g) Judgment rendered by the court.'* 

§316, Impaneling the jury. The first step in the trial is 
the impaneling of the jury. Almost universally in the states 
the jury consists of 12 men."* These men should be disinterested 
in the matter in litigation and should be entirely impartial.'* 
Each party has the right to object to a certain person's sitting 
as a juror in his case, and, if proper reasons for the objection 
are given, the person so objected to cannot sit on the jury; this 

3 Bliss on Code Pleading, Chapt. 2 Wis. 22 ; Cooley's Const. Lim. 
X, et seq; Smith's Elementary Law. (5th Ed.) 391. 

3a Smith's Elementary Law. ^ Ensign v. Harney, IS Neb. 330, 

4 Work V. State, 2 Ohio St. 296, 48 Am. Rep. 344; Melson v. Dick^ 
59 Am. Dec. 671 ; Nerval v. Rice, son, 63 Ga. 683, 36 Am. Rep. 128. 



348 NEGOTIABLE INSTRUMENTS. §§317-318 

is called a challenge for cause.® It is customary for each party 
to be allowed to challenge from two to five persons perempto- 
rily as jurors without assigning cause.'^ After each party has 
made his challenges or had an opportunity to do so, those men 
remaining are sworn in as the jury to try the case. 

§ 317. Opening statements. Ordinarily as the second step, 
each party gives an outline of what he proposes to prove in what 
is known as an opening statement of the case to the jury.® The 
plaintiff makes his statement first and then the defendant makes 
his.» 

§318. Evidence of plaintiff. Following this is the produc- 
tion of the testimony. In a proceeding on a promissory note, 
a bill of exchange or bank check some of the testimony exists 
in the form of documents, that is, in the form of written instru- 
ments and in such case the instruments themselves are intro- 
duced. Upon the bill, note or check being introduced in evi- 
dence the following six presumptions arise : 

(a) A presumption of consideration or that a consideration 
was given for it by the plaintiff.^® 

(b) A presumption that there was the necessary delivery.** 

(c) A presumption that all the terms of the instrument are 
stated therein.*^ 

(d) A presumption of title on a good consideration from th^ 
fact of possession.*^ 

(e) A presumption that the debt is unpaid; and*"* 

Barrett v. Long, 3 House of Rep. 653, 30 L. R. A. 286; Niblack 

Lords Cases 395, 415; Gilliam v. v. Champeny, 10 S. D. 165, 72 N. 

Brown, 43 Miss. 641 ; Loeffler v. W. 402. 

Keokuk etc. Co., 7 Mo. App. 785. ^^ McFarland v. Sikes, 54 Conn. 

7 Hayes v. Missouri, 120 U. S. 68, 250, 7 Atl. 408, 1 Am. St. Rep. Ill ; 

30 L. Ed. 578; O'Neil v. Lake Su- Schallehn v. Hubbard, 64 Kan. 601, 

perior Iron Co., 61 Mich. 560, 35 N. 68 Pac. 61 ; Woodford v. Dorwin, 

W. 162 ; Gulf etc. Rv. Co. v. Keith, 3 Vt. 82, 21 Am. Dec. 573. 

74 Tex. 287, 11 S. W. 1117. 12 Hill v. Shields, 81 N. C. 250, 

SKley V. Healy, 127 N. Y. 555. 28 31 Am. Rep. 499; Rice v. Ragland, 

N. E. 593; Vawter v. Hultz, 112 10 Humph. (Tenn.) 545, 53 Am. 

Mo. 633, 20 S. W. 689; Elwell v. Dec. IZI ; Dwiggins v. Mercliants' 

Chamberlin, 31 N. Y. 611. Nat. Bank (Tex. Civ. App.), 27 S. 

» Elder v. Oliver, 30 Mo. App. W. 171. 

575; Cortelyou v. Hiatt, Zd Neb. ^3 Borgess Invest. Co. v. Vetts, 

584, 54 N. W. 964 ; Bates v. Forcht, 142 Vio. 560, 44 S. W. 754, 64 Am. 

89 Mo. 121, 1 S. W. 120. St. Rep. 567; Middleton v. Griffith, 

10 Perot V. Cooper, 17 Colo. 80, .57 N. J. L. 442, 31 Atl. 405, 51 Am. 

28 Pac. 391. 31 Am. St. Rep. 258; St. Rep. 617; Smith v. Lawson, 18 

Germania Bank v. Michand, 62 W. Va. 212, 41 Am. Rep. 688. 

Minn. 459, 65 N. W. 70, 54 Am. St. ^^ Sampson v. Fox, 109 Ala. 662. 



§ 318 tSlAL PROCEDURE. 349 

(f) If the indorsement is undated, a presumption arises that 
it was made before maturity.*^ 

These are well established principles. But proof of certain 
facts becomes necessary. It is necessary in the first instance to 
prove the signatures of all parties necessary to prove plaintiff's 
title.-^* This is usually done by witnesses, who after being sworn 
to testify to the truth, the whole truth, and nothing but the 
truth, are questioned with regard to what they know as to the 
signatures on the note, bill or check. The party producing the 
witness, or his attorney, first examines the witness, bringing out 
the testimony desired. This is called the "direct examination." 
The opposite party may then cross-examine the witness, asking 
him questions pertaining to the matter brought out on the direct 
examination. There is then usually a redirect examination, and 
usually a recross-examination is allowed. 

If the bill, note or check sued upon is governed by the law of 
some state other than the one in which the action is pending 
that law must be alleged and proved. It is a general principle 
that the courts of a state or country cannot take judicial notice 
of the laws of a foreign state or country ; and when such laws 
are sought to be appHed, they must be alleged and proved.-^'^ 
•When relied upon, they must be proved as facts,^^ otherwise it 
will be presumed that they are the same as the laws of the state 
in which suit is brought ; or what is the same in effect, when the 
laws of the foreign country are not put in proof as facts, the 
court will apply to the transaction in suit the laws of the state 
in which suit is brought.-*^ Thus the law as to the rate of dam- 
ages will be presumed to be the same where the bill is drawn in 
one country, and is sued on in another ;^® so it will be presumed 
where the law of the place where suit is brought authorizes an 
indorsee to sue before exhausting recourse against the maker,** 

19 So. 896, 55 Am. St. Rep. 950; 377, 76 Am. St. Rep. 779. Note 67 

Morehead Banking Co. v. Walker, L. R. A. 33 et seq. 

121 N. C. 115, 28 S. E. 253. is Owen v. Boyle, 15 Me. 147, 32 

1^ Snyder v. Riley, 6 Pa. St. 164, Am. Dec. 143 ; Nashua Savings 

47 Am. Dec. 452; McDowell v. Bank v. Anglo-American Co., 189 

Goldsmith, 6 Md. 319, 61 Am. Dec. U. S. 221, 47 L. Ed. 782. See notes, 

305; Smith v. Lawson, 18 W. Va. 11 Am. Dec. 779 and 113 Am. St. 

212, 41 Am. Rep. 688. Rep. 868. 

16 Chafifee v. Taylor, 3 Allen 598; i» McBride v. The Farmers Bank, 

First Nat. Bank of Houghton v. 26 N. Y. 450; Crake v. Crake, 18 

Robert, 41 Mich. 709. Ind. 156. 

1^ Birmingham Water Works Co. 2® Kuenzi v. Elvers, 14 La. Ann. 

V. Hume, 121 Ala. 168, 77 Am. St. 391. 

Rep. 43; Murtey v. Allen, 71 Vt. 21 Beauer v. Briggs, 4 La. 467; 

Bernard v. Barry, 1 Gr. 388. 



350 ■ NEGOTIABLE INSTRUMENTS. § 318 

that the law of the place of the contract is the same ; and so, 
where by the law of the place where suit is brought a party sign- 
ing in a certain way is regarded as an indorser the foreign law 
will be presumed to be the same.** But where the question is 
one relating to the law merchant, which is of general applica- 
tion, as for instance, the number of days of grace, it will be 
presumed that they were fixed by the law merchant — the law 
merchant being regarded as part of the common law.** 

In case the instrument is one which must be protested in order 
for the plaintiff to recover then the fact of protest must be 
proved. 

In a proceeding by the holder against the drawer or indorser 
of a bill, or the indorser of a note, the obligation of the defend- 
ant being to pay in the event the party primarily liable does not, 
it is necessary to prove the default of such party unless the proof 
be in some manner waived or dispensed with.** One who re- 
ceives a bill or note is understood thereby to enter into an agree- 
ment with every other party, who would be entitled to bring an 
action on paying it, that he will present it in proper time to the 
drawee for acceptance,*'* when acceptance is necessary, and to 
the acceptor for payment, when the bill has matured;**' and to 
give notice in a reasonable time, and without delay, to every such 
person, of a failure in the attempt to procure a proper accept- 
ance or payment.*^ Thus in an action by the payee of a bill, or 
the indorsee of a bill or note, against the drawer or indorser, it 
is necessary to prove a presentment to the drawee for payment. 

Presentment for payment as well as notice of dishonor may 
be proved by entries in the books of a deceased notary,*^, clerk*® 
messenger of a bank, or other person, whose duty or ordinary 
course of business it was to make such entries. 

In an action against the drawer or indorser of a foreign bill 
(and even of an inland bill, if a protest is alleged) the plaintiff 
must prove dishonor, a protest for non-acceptance or non-pay- 

22 Dubois V. Mason, 127 Mass. Z7. 68 N. W. 677, 61 Am. St. Rep. 230, 

23 Reed V. Wilson, 12 Va. 29; Lu- 35 L. R. A. 381 ; Hamer v. Brain- 
cas V. Ladew, 28 Mo. 342. erd, 7 Utah 245, 26 Pac. 299, 12 

24 Lockett V. Howze, 18 Ala. 613 ; L. R. A. 434. 

Rushworth v. Moore, Z6 N. H. 188 ; 27 Aldine Mfg. Co. v. Warner, 96 
Crane v. Trudeau, 19 La. Ann. 307 ; Ga. 370, 23 S. E. 404 ; Stix v. Math- 
Mudd V. Harper, 1 Md. 110, 54 Am. ews, 63 Mo. 371 J Beale v. Par- 
Dec. 644. rish, 20 N. Y. 407, 75 Am. Dec. 114. 

25Neg. Inst. Law. §§ 240, 241; 28 Homes v. Smith, 16 Me. 181; 

Schuchardt v. Hall, 36 Md. 590, 11 Bell v. Perkins (Peck), Tenn. 261, 

Am. Rep. 514; Sharpe v. Drew, 9 14 Am. Dec. 745; Wilmington Bank 

Ind. 281. V. Cooper, 1 Harr. (Del.) 10. 

20 Leonard v. Olson, 99 la. 162, 29 Gawtry v. Doane, 51 N. Y. 84. 



§ 319 TRIAL PROCEDURE. 351 

ment. This is done by introducing the statement made out by 
the notary.^" 

The official seal of the notary attached to the certificate of 
protest is everywhere received as a sufficient prima facie proof 
of its authenticity. The courts take judicial notice of the seal, 
and it proves itself by its appearance upon the certificate. But 
it may be controverted as false, fictitious, or improperly an- 
nexed.^* 

§319. Evidence of defendant. After the plaintiff has pro- 
duced the testimony necessary to establish his case, the defend- 
ant then introduces his testimony. This testimony in defense 
on a bill, note or check, is governed by the rules as applied to 
ordinary contracts between the purchaser for value and prior 
parties. If the defense is a real defense the question is solely 
whether the defense does exist, and any evidence tending to prove 
such fact is admissible. If the real defense does exist, the plain- 
tiff cannot recover against one who has that defense.^^ Where 
it is a question of a personal defense, there are two classes of 
cases : 

1. Where the defense shows lack of consideration, or release, 
or payment of a bill or note. 

2, Where the defense shows fraud, duress, or illegality in the 
inception of the instrument. 

In the first class it is not so much the question of wrong 
doing as merely a question of lack or failure of consideration, and 
where there is a lack or failure of consideration, the first thing 
to be proved by the defendant is that the plaintiff had notice of 
the fact that there was a want of consideration or failure of con- 
sideration. He does not prove that there was a failure of con- 
sideration, but notice and after that he proves the facts of want 
or failure of consideration. In the other cases, that is, those of 
fraud or illegality, the defendant does not prove notice but 
proves the fraud or illegality, itself. And when the fraud or 
illegality is proved the presumption of notice arises without any 
proof of notice and the burden of proof is on the plaintiff to 
prove he did not have notice.^* When a plea of tender is made 

so Clough V. Holden, 115 Mo. 336, 32 As to real and personal de- 

21 S. W. 1071, 37 Am. St. Rep. 393 ; fenses see supra, Chapts. 13 and 14. 

Rosson V. Carroll, 90 Tenn. 90, 16 33 Alabama Nat. Bank v. Halsey, 

S. W. 66, 12 L. R. A. 727 ; Kellam 109 Ala. 196, 19 So. 522 ; Wood- 

V. McKoon, 31 Hun (N. Y.) 519. ward v. Rodgers, 31 la. 342; Capi- 

31 Pierce v. Indseth, 106 U. S. 546, to! etc. Co. v. Montpelier etc. Co., 

27 L. Ed. 254; Nichols v. Webb, 8 (Vt. 1905), 59 Atl. 827. 
Wheat. 326; Bradley v. Northern 
Bank, 60 Ala, 258. 



352 NEGOTIABLE INSTRUMENTS. §§ 320-321 

it must be pleaded with a profert of the money.** To constitute 
a legal tender, money must have been offered and the offer must 
have been absolute and unconditional. 

The Negotiable Instruments Law provides: 

"Every holder is deemed primn facie to he a holder in due 
course ; but when it is shoum that the title of any person tvho has 
negotiated the instrument was defective, the burden is on the 
holder to prove that he or some person under whom he claims 
acquired the title as holder in due course. But the last-men- 
tioned ride does not apply in favor of a party who became bound 
on the instrument prior to the acquisition of such defective 
title/'^'' 

§ 320. The argument. As the next step each party may in 
person or by his attorney, address the jury and the court in 
support of his side of the controversy. Usually the plaintiff 
makes the first address and in it he points out the evidence he 
has produced which shows or tends to show why he should re- 
cover on the bill, note or check. The defendant follows the 
plaintiff with his address or argument showing why from the 
evidence there should not be recovery by the plaintiff. After 
this the plaintiff has the right to close the discussion.** 

§ 321. The charge, verdict and judgment. At the close of 

the argument, the judge instructs the jury on the law of the 
case,^* after which the jury retire and decide whether the plain- 
tiff or defendant is entitled to a verdict. Upon the verdict re- 
turned by the jury the court renders a judgment. 

34 Caldwell v. Cassidy, 8 Cow. 34 Barb. (N. Y.) 198. But see Kent 
271 ; Adams v. Hackensack Co., 15 v. Mason, 79 111. 540. 

Vroom 638. 36 Pottle v. Thomas, 12 Conn. 

34a Neg. Inst. Law, § 59. 565 ; Wolf v. Troxell, 94 Mich. 573, 

35 Pate V. Aurora First Nat. 54 N. W. 838 ; Galloway v. Hicks, 
Bank, 63 Ind. 254 ; Kenny v. Lynch, 26 Nebr. 531, 42 N. W. 709. 

61 N. Y. 654; Slauson v. Englehart, 



PART III. 

NEGOTIABLE INSTRUMENTS LAW 
ANNOTATED 

INTRODUCTION. 

The Negotiable Instruments Law is the name given to the 
statute which contains within narrow compass all the funda- 
mental principles and essential definitions of the law of nego- 
tiable instruments or commercial paper. It provides one stand- 
ard for such instruments as to their formal requisites of negotia- 
bility; and it provides a uniform rule as to methods of their 
transfer, as to the rights of the holder and as to the liabilities of 
the parties. It is the result of a concerted effort to have the 
legislatures of the States to harmonize and make uniform the 
rules and principles governing the use of such instruments in 
the different states throughout the United States because it was 
realized that commercial paper does* over 90% of the work of 
paying for and effecting the exchange of interstate commerce. 
Such uniformity could not be secured without codification ; so 
this law is a codification of existing laws, that is, a codification 
of laws which were scattered through some ten thousand reported 
cases, and hundreds of statutory enactments. In other words, it 
is a codification of the common law of negotiable instruments 
clearly and concisely condensed into less than two hundred sec- 
tions and contained in less than thirty-five pages. In this law 
the disputed points and variant laws, whose discussion occupies 
so large a share of two and three volumed treatises on the sub- 
ject, are decided and harmonized. The law is in the main de- 
claratory in its effect but makes a few changes; it necessarily 
changes the law in some jurisdictions on points concerning which 
a conflict of laws has existed; but it may safely be said that 
there is not an important provision in the act which is not sup- 
ported by some well considered decision of an American court 

353 



354 NEGOTIABLE INSTRUMENTS. 

of high authority or by some American statute which has been 
tested and proved by experience. 

The easiest and best manner to have had such an uniform law 
throughout the United States would have been to have had the 
Congress of the United States to have enacted it as a Federal 
statute, but the Supreme Court of the United States in 1868, held 
that contracts (and, in consequence, negotiable instruments), be- 
tween the states, did not constitute interstate commerce. From 
this decision the lawyers have concurred in the view that a Fed- 
eral law regulating negotiable instruments, or commercial paper 
would be unconstitutional. Thus it became necessary in order to 
bring about uniformity that the different states should unite on 
the same law and enact it separately. 

Most of the continental countries have codified the law of 
negotiable instruments. The French code was enacted about a 
century ago, and no substantial alteration has been made in it 
by subsequent legislation. The German General Exchange Law 
was adopted in 1849, and slightly modified in 1869. Other con- 
tinental codes modeled upon one or the other of the above codes 
(but usually in later years modeled on the German code) have 
been adopted. 

In the common law countries the first attempt at a codifica- 
tion was a digest of the laws of bills of exchange by Judge Cham- 
bers, of England, published in 1878, after a review by him of 
over 2,500 cases then reported in the English courts dealing with 
the subject of bills of exchange. In 1880, the Institute of Bank- 
ers and the Associated Chambers of Commerce instructed Judge 
Chambers to prepare a bill on the subject. He did so, putting 
into a few words the results of the decisions of the courts for 
three hundred years. This bill was introduced in Parliament 
and adopted practically as presented. It has been in force since 
that time and is known as the ''English Bill of Exchange Act 
of 1882" and has thus operated successfully for forty years. 
It has been adopted by practically all of the various colonies and 
dependencies of the British Empire. 

In the United States there was, prior to the drafting of the 
Negotiable Instruments Law, a codification of the law in some 
states but there was nothing looking toward a codification for all 
the states of the Union. The earliest codification for an in- 
dividual state, in a strict sense, is found in the California Code 
of 1872. 

The history of the act looking to a uniformity of laws in all 
the states dates back to several years ago. Then, at the request 
of the American Bar Association and through its co-operation, acts 



INTRODUCTION. 355 

were passed in many states providing for the appointment by 
the governor of "Commissions for the Promotion of Uniformity 
of Legislation in the United States." It was provided that these 
should meet in joint conference, frame and adopt statutes which 
they would recommend to their respective Legislatures for all 
of the states and thus endeavor to eliminate as much as possible 
the confusing conflict in the commonest principles and provisions 
of private law. At a conference of commissioners from nineteen 
states, held in 1895, a resolution was adopted requesting the 
committee on commercial laws to procure a draft of a bill- relat- 
ing to commercial paper, based on the English Bill of Exchange 
Act, and on such other sources of information as the committee 
might deem proper to consult and to prepare a codification of the 
law relating to bills and notes. The matter, as stated by Mr. 
John J. Crawford, was referred to a sub-committee consisting 
of Lyman D. Brewster, of Connecticut ; Henry C. Willcox, of 
New York, and Frank Bergen, of New Jersey ; and Mr. Craw- 
ford was employed by the sub-committee to draw the proposed 
law. In drafting this law when the decisions of the state courts 
were conflicting the rules of the Supreme Court of the United 
States were adopted and the decisions of that high tribunal were 
followed. When completed the draft was submitted to the sub- 
committee who printed it and sent copies to each member of the 
conference, and also -to many prominent lawyers and law pro- 
fessors and to several English judges and lawyers, with an invi- 
tation for suggestions and criticisms. The draft was submitted 
to the conference which met at Saratoga in August, 1896; and 
the commissioners who were in attendance, being twenty-seven in 
all, and representing fourteen different states, in a session of 
three days by the entire conference went over it section by sec- 
tion, and made amendments therein. The draft as thus amended 
was adopted by the conference and recommended for general 
enactment by the state Legislatures. It also met with the ap- 
proval of the American Bar Association, and in such form was 
unanimously recommended by said association to the Legislatures 
of the several states and territories of the Union for adoption. 
The law Is the result of two purposes ; the first and chief pur- 
pose was to produce uniformity in the laws of the different 
states upon this important subject, so that the citizens of each 
state might know the rules which would be applied to their notes, 
checks and other negotiable paper in every other state in which 
the law was enacted, since it was an absolute impossibility for 
the commercial purchaser in any state to know all the details 
affecting the negotiability of paper governed by the laws of all 



356 NEGOTIABLE INSTRUMENTS. 

the Other states. The second purpose was to preserve the law as 
nearly as possible as it then existed. And it may be said prob- 
ably without question that in the enactment of this statute no 
essential feature of the law of negotiable instruments as there- 
tofore determined has been eliminated. While the bill is sim- 
ple and intelligible in its expression, great care was taken to pre- 
serve the use of words which had had repeated legal construc- 
tions and had become recognized terms in the law merchant. 

New York was the first state to enact the law. The law is 
now in force in all the states and territories of the Union except 
Georgia. The bill has been introduced annually in the Legisla- 
ture of Georgia for years but has failed to pass. 

Before the enactment of the law in any states the situation 
induced by conflicting decisions and statutes embarrassed busi- 
ness and interrupted the free circulation of commercial paper. 
What was- a promissory note in one State was a simple contract 
in another ; what was an indorsement in one jurisdiction was 
only an assignment in another ; in some States a note was not 
negotiable unless the words "Value received" were written in 
the body of the note, while in others such words were unneces- 
sary; some jurisdictions permitted exchange to be added while 
others held that such addition made the note non-negotiable ; days 
of grace were permitted in one State and not in another; what 
was a contract of an indorser in one State was a contract of a 
maker in another, or of a guarantor or maker in still another, 
as oral proof of the circumstances attending the making of the 
contract might determine ; and there were other similar conflicts. 

So long as trade and commerce were mainly confined to trans- 
actions between the citizens of a single State within its own 
borders, the State regulations operated fairly well and it did 
not matter materially that the laws of one State differed from 
those of another upon these subjects. But now the country has 
outgrown such conditions and in innumerable cases more business 
is done by the people or corporations of a State with the people 
of other States than with their own, and commercial paper is 
almost universally the medium of exchange in these transactions. 
As our commercial activity is ever expanding and as interstate 
commerce has assumed such vast proportions, the necessity be- 
comes imperative that the commercial currency of payment shall 
be uniform, and not variable, in its essential characteristics. 
The enactment of the law has tended to facilitate trade between 
the States, and make the transactions of business less complicated 
and more certain and sure, as whatever legislation tends to 
sustain credit helps commerce. The law of negotiable instruments 



INTRODUCTION. 



357 



affects all classes of merchants throughout the country since, as 
has been pointed out, negotiable instruments are the medmm for 
the payment and settlement of 90% of all trade transactions. 

The law has had the test of twenty-five years' experience and 
the testimony is all one way as to its efficiency. It should be 
realized that a statute, which has been adopted after due delibera- 
tion by so many legislative bodies and adopted by the Congress 
of the United States, must exercise a beneficial mfluence on all 
and be productive of good results. 



THE NEGOTIABLE INSTRUMENTS LAW. 



Below is given a list of the States and Territories where the 
Negotiable Instruments Law has been enacted : 

Alabama— Laws 1907, Chap. 722, in effect Jan. 1, 1908. 
Alaska — Laws 1913, Chap. 64, approved April 28, 1913. 
Arizona— Rev. Stat. 1901, p. 852, in effect Sept. 1, 1901. 
Arkansas— Acts 1913, No. 81, approved Feb. 21, 1913. 
California— Laws 1917, Chap. 751, p. 1531, in effect July 31, 1917. 
Colorado— Laws 1897, Chap. 64, approved April 20, 1897. 
Connecticut — Laws 1897, Chap. 74, approved April 5, 1897. 
Delaware — Laws of 1911, Chap. 191, approved April 4, 1911. 
District of Columbia— Laws U. S. 1899, in effect April 3, 1899. 
Florida— Laws 1897, Chap. 4524, approved June 1, 1897. 
Hawaii— Laws 1907, Act 89, in effect April 20, 1907. 
Idaho— Laws 1903, p. 380, in effect March 10, 1903. 
Illinois — Laws 1907, p. 403, approved June 5, 1907. 
Indiana— Acts 1913, Chap. 63, in effect April 30, 1913. 
Iowa — Laws 1902, Chap. 130, approved April 12, 1902. 
Kansas— Laws 1905, Chap. 310, in effect June 8, 1905. 
Kentucky — Laws 1904, Chap. 102, approved March 24, 1904. 
Louisiana — Laws 1904, Chap. 64, approved June 29, 1904. 
Maine — Laws 1917, Chap. 257, approved April 7, 1917. 
Maryland— Laws 1898, Chap. 119, approved March 29, 1898. 
Massachusetts — Laws 1898, Chap. 533, in effect Jan. 1, 1899. 
Michigan — Laws 1905, Chap. 265, approved June 16, 1905. 
Minnesota — Laws 1913, Chap. 272, in effect July 1, 1913. 
Mississippi — Laws 1916, Chap. 244, p. 355, in effect July 7, 1916. 
Missouri — Laws 1905, p. 243, approved April 10, 1905, in effect 

June 16, 1905. 
Montana— Laws 1903, Chap. 121, in effect March 7, 1903. 
Nebraska— Laws 1905, Chap. 83, in effect August 1, 1905. 
Nevada— Laws 1907, Chap. 62, in effect May 1, 1907. 
New Hampshire — Laws 1909, in effect January 1, 1910. 
New Jersey — Laws 1902, Chap. 184, p. 283, approved April 4, 

1902. 
New Mexico — Laws 1907, Chap. 83, approved March 21, 1907. 
New York— Laws 1897, Chap. 612, became a law May 19, 1897. 

358 



NEGOTIABLE INSTRUiMENTS LAW. 359 

North Carolina— Laws 1899, Chap. 7?>Z, in effect March 8, 1899. 
North Dakota — Laws 1899, Chap. 113, approved March 7, 1899. 
Oliio— Laws 1902, p. 162, in effect January 1, 1903. 
Oklahoma— Laws 1909, in effect June 10, 1909. 
Oregon — Laws 1899, p. 18, approved February 16, 1899. 
Pennsylvania — Laws 1901, No. 162, in effect September 2, 1901. 
Philippine Islands — Acts of Philippine Commission 1911, No. 

2031, enacted Feb. 3, 1911, in effect 90 days after publication. 
Rhode Island— Laws 1899, Chap. 674, in effect July 1, 1899. 
South Carolina— Acts 1914, Act 396, p. 668 (in effect March, 

1914?). 
South Dakota — Compiled Laws 1913, Chap. 279, approved 

March 4, 1913. 
Tennessee— Laws 1899, Chap. 94, in effect May 16, 1899. 
Texas — General Laws 1919, p. 190, in effect June 17, 1919. 
Utah— Laws 1899, Chap. 83, in effect July 1, 1899. 
Vermont— Laws of 1912, Act 99, in effect June 1, 1913. 
Virginia— Laws 1898, Chap. 866, approved March 3, 1898. 
Washington— Laws 1899, Chap. 149, in effect March 22, 1899. 
West Virginia — Laws 1907, Chap. 81, in effect January 1, 1908. 
Wisconsin— Laws 1899, Chap. 356, in effect May 15, 1899. 
Wyoming — Laws 1905, Chap. 43, in effect February 15, 1905. 



360 



NEGOTIABLE INSTRUMENTS. 



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TABLE OF CORRESPONDING SECTIONS. 



361 



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362 



NEGOTIABLE INSTRUMENTS. 



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TABLE OF CORRESPONDING SECTIONS. 



363 






6 



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364 



NEGOTIABLE INSTRUMENTS. 



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TABLE OF CORRESPONDING SECTIONS. 



365 



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366 



NEGOTIABLE INSTRUMENTS. 



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TABLE OF CORRESPONDING SECTIONS. 367 



Uniform Act 






Commission 






No. 


Wisconsin 


Wyoming 


1-23 


1675-1-1675-23 


3934-3956 


24-29 


1675-50-1675-55 


3957-3962 


30-50 


1676-1676-20 


3963-3984 


51-59 


1676-21-1676-29 


3985-3993 


60-69 


1677-1677-9 


3994-4003 


70-88 


1678-1678-18 


4004-4022 


89-118 


1678-19-1678-48 


4023-4352 


119-125 


1679-1679-6 


4353-4359 


126-131 


1680-1680e 


4360-4365 


132-142 


1680-f-1680p 


4366-4376 


143-151 


1681-1681-8 


4377-4385 


152-160 


1681-9-1681-17 


4386-4394 


161-170 


1681-18-1681-27 


4395-4404 


171-177 


1681-28-1681-34 


4405-4411 


178-183 


1681-35-1681-40 


4412-4417 


184-189 


1684-1684-5 


4418-4423 


190-196 


1675 


4424-4430 



368 NEGOTIABLE INSTRUMENTS. 



THE NEGOTIABLE INSTRUMENTS LAW. 



Article 

1. Form and Interpretation of Negotiable Instruments. 

(§§ 1-23.) 

II. Consideration. (§§ 24-49.) 

III. Negotiation. (§§30-50.) 

IV. Rights of Holder. (§§51-59.) 

V. Liabilities of Parties. (§§ 60-69.) 

VI. Presentment for Payment. (§§70-88.) 

VII. Notice of Dishonor. (§§89-118.) 

VIII. Discharge of Negotiable Instruments. (§§ 119-125.) 
IX. Bills of Exchange — Form and Interpretation. (§§ 126- 

131.) 

X. Acceptance. (§§132-142.) 

XI. Presentment for Acceptance. (§§ 143-151.) 

XII. Protest. (§§152-160.) 

XIII. Acceptance for Honor. (§§ 161-170.) 

XIV. Payment for Honor. (§§171-177.) 

XV. Bills in a Set. (§§178-183.) 

XVI. Promissory Notes and Checks. (§§ 184-189.) 

XVII. General Provisions. (§§ 190-196.) 



ARTICLE I. 



FORM AND INTERPRETATION. 



1. Form of negotiable instru- 

ment. 

2. Certainty as to sum ; what 

constitutes. 

3. When promise is uncondi- 

tional. 

4. Determinable future time ; 

what constitutes. 

5. Additional provisions not af- 

fecting negotiability. 

6. Omissions ; seal ; particular 

money. 

7. When payable on demand. 

8. When payable to order. 

9. When payable to bearer. 

10. Terms, when sufficient. 

11. Date, presumption as to. 

12. Ante-dated and post-dated. 

13. When date may be inserted. 



§ 14. Blanks, when may be filled. 

15. Incomplete instrument not de- 

livered. 

16. Delivery ; , when effectual ; 

when presumed. 

17. Construction where instru- 

ment is ambiguous. 

18. Liability of persons signing in 

trade or assumed name. 

19. Signature by agent; authority; 

how shown. 

20. Liability of person signing as 

agent, etc. 

21. Signature by procuration; ef- 

fect of. 

22. Effect of indorsement by in- 

fant or corporation. 

23. Forged signature ; effect of. 



Sections 1 to 23 above are the sections used by the commissioners. 
See table of corresponding sections of the Law in the various states 
and territories beginning on page 360. 



§ 1 Form of negotiable instrument. An mstrument to be 
negotiable must conform to the following requirements : 

1. It must be in writing and signed by the maker or drawer. 

2. Must contain an unconditional promise or order to pay a 
sum certain in money. 

3. Must be payable on demand, or at a fixed or determinable 
future time. 

4. Must be payable to order or to bearer. 

5. Where the instrument is addressed to a drawee, he must 
be named or otherwise indicated therein with reasonable cer- 
tainty. *■ *^ 

See text, §40. 

Cross sections: 191 "written," 3, 2, 7, 126, 9, 4, 56, 184, 123, 137, 8, 
6, 131. 

The Michigan Act says : "Certain sum" instead of "sum certain." 

369 



370 NEGOTIABLE INSTRUMENTS. § 1 

The Arizona, Idaho, Iowa, Kentucky, North Carolina and Wyoming 
acts read: "Must be payable to the order of a specified person or to 
bearer," instead of as in sub-division 4 above. 

The Wisconsin act (No. 1675-1) adds: "But no order drawn upon 
or accepted by the treasurer of any county, town, city, village or school 
district, whether drawn by any officer thereof or any other person, and 
r.o obligation nor instrument made by any such corporation or any officer 
thereof, unless expressly authorized by law to be made negotiable, shall 
be, or shall be deemed to be, negotiable according to the custom of mer- 
chants, in whatever form they may be drawn or made. Warehouse 
receipts, bills of lading and railroad receipts upon the face of which the 
words 'not negotiable' shall not be plainly written, printed or stamped, 
shall be negotiable as provided in section 1676 of the Wisconsin Statutes 
of 1878, and in sections 4194 and 4425 of these statutes, as the same have 
been construed by the supreme court." 

1. Digest of some of the decisions in which this section is 
construed arranged alphabetically by states: 

Plaintifif must allege the negotiability of note before recovery can be 
had. Whateley v. Muscogee Bank (Ala.), 12 So. 1018. 

Plaintiff must allege note payable to bearer or order either in com- 
plaint or replication in order to recover. Oneonta Trust & Banking 
Co. v. Box (Ala.), IZ So. 759. 

When negotiability of note must be set up. Jones v. Martin (Ala. 
App.), 74 So. 761. 

Certificates of deposit are negotiable when payable upon return or 
surrender properly indorsed. Johnson v. Blackman (Ala.), 78 So. 891. 

Note containing provision for reimbursing payee is non-negotiable. 
Sacred Heart Church Building Committee v. Manson, — Ala. — , 82 So. 
498. 

Estopped to deny valid delivery when notes allowed to get into cir- 
culation. Cannon v. Dillehay, — Ala. App. — , 84 So. 549. 

Written order to individual requesting payment of sum certain is not 
negotiable instrument. Ex parte E. C. Payne Lumber Co., 203 Ala. 668. 

Signature on note by mark. Smith v. Vaughn, — Ala. App. — , 89 
So. 302. 

Instrument payable from specific fund not negotiable if fund is in- 
sufficient. Rector v. Strauss,— Ark. — , 203 S. W. 1024. 

Stipulation as to principal and interest being due upon default does 
not render note uncertain. Arnett v. Clack, — Ariz. — , 198 P. 127. 

The clause "or what may be due on my deposit book" makes con- 
ditional the direction to pav A. or order $300.00. National Sav. Bank v. 
Cable, 12, Conn. 568, 48 Atl. 428. 

Note not made payable on demand or fixed date is not negotiable 
Sanderson v. Clark, — Ida. — . 194 P. 472. 

Effect of provision "the time of payment may be extended from time 
to time by any one or more of us without even the knowledge or consent 
of the other or others of us" upon negotiability. Wayne County Nat. 
Bank v. Cuok. 127 N. E. IIZ, — Ind. App. — . 

Agreement of payee to look to mortgage security for payment of note 
noted on back of the note makes it non-negotiable. Allison v. Hollen- 
beak, 138 Iowa 479, 114 N. W. 1059. 

ATrw For/^.— Bennett v. Kisler (1917), 163 N. Y. Supp. 555. 



§ 1 FORM AND INTERPRETATION. 371 

A contingency set out in a mortgage does not affect the negotiability 
of the note, but if the same were made a part of the note it would. Des 
Moines Sav. Bank v. Arthur, 163 Iowa 205, 143 N. W. 556, Ann. Cas. 
1916C, 498. 

A note providing for an extension of time pending outcome of a 
suit, but not exceeding a definite period, is negotiable. Jewett Lumber 
Co. V. Martin Conroy Co., 171 Iowa 513, 152 N. W. 493. 

Certificates of deposit are negotiable when made payable to order. 
Kushner v. Abbott, 156 Iowa 598, 137 N. W. 913. 

A provision as to allowing taxes to become delinquent and making 
r.ote due at an earlier date in a mortgage does not affect the negotiability 
of the note and would not if placed in note also, it being a definition of 
default of payment and authority to foreclose. Lundean v. Hamilton 
(Iowa), 159 N. W. 163. 

Note not non-negotiable for uncertainty. Commercial Sav. Bank v. 
Schaffer, — la. — , 181 N. W. 492. 

Waiver of presentment and notice of non-payment or extension of 
time as affecting negotiability. Nat. Bank of Webb City, Mo. v. 
Dickinson, 102 Kan. 564. 

The words "to order" or "to bearer" or their equivalent must be 
used to make note negotiable. Wettlaufer v. Baxter, 137 Ky. 362, 125 
S. W. 741, 26 L. R. A. (N. S.) 804. 

Street improvement bonds, payable to bearer, are made negotiable by 
the statute under which issued. Citizens' Trust, etc., Co. v. Hays, 167 
Ky. 560, 180 S. W. 811. 

Necessary requirement for a negotiable instrument. Lynchburg Shoe 
Co. v. Hensley, — Ky. — , 218 S. W. 243. 

An instrument directing the payment of a certain sum of money to a 
given person and reciting that it is "due Oct. 1st" is a bill of exchange 
payable on Oct. 1st. Torpey v. Tebo, 184 Mass. 307, 68 N. E. 223. 

Where the drawee is directed, on acceptance, to pay to the order of 
the payee a sum in satisfaction of all claims, the instrument is condi- 
tional and non-negotiable and holds neither the drawer nor drawee. 
Berenson v. London & Lancashire Fire Ins. Co., 201 Mass. 172, 87 N. E. 
687. 

Default of payment provisions in note does not render it uncertain as 
to time. Schmidt v. Pegg, 172 Mich. 159, 137 N. W. 524. 

Note restraining title of goods in paj'ee with default provision is not 
negotiable. Polk County State Bank of Crookston v. Walters, — Minn. 
— , 176 N. W. 496. 

Certificates of deposit pavahle to order of payee are negotiable. Dickey 
V Adler, 143 Mo. App. 326, 'l27 S. W. 593. 

An installment note is not rendered non-negotiable by a provision for 
a discount if paid in fifteen days. Farmers' Loan & Trust Co. v. Planck, 
98 Neb. 225, 152 N. W. 390, L. R. A. 1915E, 564. 

Check payable one day after death of maker is valid if for considera- 
tion. Keeler v. Hiles Estate, — Neb. — , 172 N. W. 363. 

A certificate of deposit is not negotiable which is payable to "A" or 
his assigns on return of this certificate. Zander v. N. Y. Security & 
Trust Co., 39 Misc. R. 98, 78 N. Y. Supp. 900, affirmed 81 App. Div. 635, 
81 N. Y. Supp. 1151, affirmed 178 N. Y. 208. 

Additional words in a draft used to notify payee of the shipment of 
certain articles by certain method and that bill of lading went direct do 
not make it unconditional and non-negotiable. Waddell v. Hanover Nat. 
Bank, 48 Misc. R. 578, 97 N. Y. S. 305. 



372 NEGOTIABLE INSTRUMENTS. § 1 

Any equivalent of the words "order" or "bearer" should be sufficient. 
Fulton V. Varney, 117 App. Div. 572. 575. 102 N. Y. Supp. 608. 

A note to be paid when a certain contingency happens is non-negotiable. 
Wray v. Miller. 120 N. Y. Supp. 787. 

Written portion of note controls and the words "not transferable" 
render non-negotiable a note otherwise negotiable. Tanners* Nat. Bank 
V. Lacs, 136 App. Div. 92, 120 N. Y. Supp. 669. 

An instrument is not a promissory note which says, "Four months 
after date I promise to pay" a fixed sum and the transferror is not an 
indorser. Hillborn v. Penn. Cement Co., 145 A. D. 442, 129 N. Y. Supp. 
957. 

A note is non-negotiable which provides that "this note is payable 
when Post Office Department accepts my building." Devine v. Price, 152 
N. Y. Supp. 321. 

A note providing for the same becoming due and payable upon the 
default of any of the provisions of a trust agreement was held to contain 
an absolute obligation to pay at maturity, there being no evidence that 
the agreement contained any postponement of the maturity of the note. 
Osborne v. M.. K. & T. Ry. Co., 92 Misc. Rep. 166. 155 N. Y. Supp. 236. 

Allegation of execution of note for value received is not sufficient; 
must show that note was payable to order or bearer to be negotiable. 
Martial Armand & Co. v. Creighton, 167 N. Y. Supp. 333. 

Provisions in bonds negotiable in form limiting liability to assets in 
hands of a trustee do not render the bonds or their coupons non- 
negotiable. Hibbs v. Brown, 190 N. Y. 167, 82 N. E. 1108. 

Certificate of deposit providing for payment on return properly in- 
dorsed is negotiable instrument. Nelson v. Citizens' Bank, 180 N. Y. S. 
747. 

Note payable " after date, without grace," is negotiable demand 

note. Keister v. Wade, 182 N. Y. S. 119. 

A note showing upon its face that it is for purchase of timber and 
that the title to the timber is retained as security as shown by the pro- 
visions of deed is conditional and not negotiable. Pope v. Righter, etc.. 
Lumber Co., 162 N. C. 206, 78 S. E. 65. 

Where a line was drawn through the words "to the order" before 
Signature and the line was afterwards erased the note was non-negotiable 
and proof of alteration and want of consideration should be admitted 
against a holder in due course. Aamoth v. Hunter, 33 N. D. 582, 157 
N. W. 299. 

Municipal warrants may be transferred by delivery or assignment, but 
are non-negotiable. Logan County Bank v. Farmers' Nat. Bank, 55 Okla. 
592, 155 Pac. 561. 

^The rule under the law Merchant that a provision for discount if 
paid in fifteen days is not changed by Negotiable Instruments Law in 
Oklahoma, and the note is non-negotiable. First Nat. Bank v. Watson 
(Okl.), 155 Pac. 1152. 

Provisions in mortgage as affecting negotiability of note. Westlakc 
v. Cooper, — Okla. — 171 Pac. 859. 

Provision for different rates of interest under several conditions 
affects promise to pay. Union Nat. Bank of Massillon, Ohio v. Mayfield. 
—Okla. — , 174 Pac. 1034. 

Where a note by its provisions is subject to terms of mortgage which 
provides different modes of settlement the note is not negotiable. Hull 
V. Angus, 60 Ore. 95, 118 Pac. 284. 



§ 1 FORM AND INTERPRETATION. 373 

Mortgage provisions as to taxes do not govern negotiability of note. 
Page V. Ford, 65 Ore. 450, 131 Pac. 1013, Ann. Cas. 191SA, 1048, 45 L. 
R. A. (N. S.) 247. 

Words "due if ranch is sold or mortgaged" do not render non- 
negotiable. Nickell V. Bradshaw, — Or. — , 183 P. 12. 

Statutes making notes not payable to order or bearer are repealed by 
Negotiable Instruments Law. Gilley v. Harrell, 118 Tenn. 115, 101 S. W. 
424. 

Series notes do not become non-negotiable by reason of default pro- 
visions. White V. Hatcher, 135 Tenn. 609, 188 S. W. 61. 

The Negotiable Instruments Law repealed former conflicting statutes. 
Dobbins v. Carroll, 137 Tenn. 133, 192 S. W. 166. 

A provision for discount if paid within a specified time does not 
affect negotiability of note. Farmers* Loan & Trust Co. v. Devear, 2 
Tenn. C. C. A. 366. 

Contingencies in a mortgage securing a negotiable note do not change 
tile negotiability of the note. Barker v. Sartori, 66 Wash. 260, 119 Pac. 
611. 

A note which on its face implies that the maker must pay taxes 
assessed is uncertain in amount and non-negotiable. Bright v. Oflfield, 
81 Wash. 442, 143 Pac. 159. 

Mortgage stipulations as to insurance, taxes and attorney's fees do not 
affect the negotiability of the note secured. Moore & Co. v. Burling, 93 
Wash. 217, 160 Pac. 420. 

Provision in a note for payment of taxes assessed upon same is non- 
negotiable. Coolidge V. Saltmarsh (Wash.), 165 Pac. 508. 

Note where and when presented for payment. Hastings v. Gump, — 
W. Va. — 108 S. E. 600. 

Provisions in a mortgage securing a negotiable note for certain con- 
tingencies are not imported to the note. Thorp v. Mindeman, 123 Wis. 
149. 101 N. W. 417, 68 L. R. A. 146, 107 Am. St. Rep. 1003. 

Contract and notes given for purchase money should be construed 
together to determine negotiability. Bank of Evansville v. Kurth, 167 
Wis. 43, 166 N. W. 658. 



la. The following is a complete list of the cases arranged 
alphabetically by states, where this section has been construed : 

Alabama. — Ex parte Bledsoe (1913), 61 So. 813: Sherrill v. Merch. & 
Mech. Tr. & Sav. Bk. (1916), 70 So. 723; Whateley v. Muscogee Bank 
(Ala.), 72 So. 1018; Oneonta Trust & Banking Co. v. Box (1917), 73 
So. 759; Jones v. Martin (Ala. App.), 74 So. 761; Johnson v. Blackman 
(1918), 78 So. 891; Cannon v. Dillehay, 84 So. 549; Ex parte E. C. 
I'ayne Lumber Co., 203 Ala. 665 ; Sacred Heart Church Building Com- 
mittee v. Manson, 82 So. 498; Smith v. Vaughn, 89 So. 302. 

/iW^roMfl.— Slaughter v. Bk. of Bisbee (1916), 154 Pac. 1040; Arnett v. 
Clack, 198 Pac. 127; 

Arkansas.— MoTgzn v. Center (1918), 202 S. W. 235: Rector v. 
Strauss, 203 S. W. 1024. 

California.— Nawajo Co. Bk. v. Dolson (1912). 126 Pac. 153; Wetzel 
V. Cole (1917), 165 Pac. 692; Chinn v. Penn (1919), 175 Pac. 687. 



374 NEGOTIABLE INSTRUMENTS. § 1 

Colorado.— Normcin v. McCarthy (1913), 138 Pac. 28; Ayers v. Walker 
(1913), 54 Col. 571; Johnson v. Engstone (1916). 155 Pac. 1095; Florence 
Oil & Refinmg Co. v. Hiawatha Gas, Oil & Refining Co. (1913), 55 Col. 
App. 378. 

Connecticut.— Nat. Sav. Bk. v. Cable (1901), 73 Conn. 568, 48 Atl. 428; 
St. Paul's Episcopal Church v. Fields (1909). 81 Conn. 670, 72 Atl. 145. 

F/onc/o.— Gamble v. Malsby (1914), 64 So. 437. 

Idaho.— R'mker v. Lauer, 13 Ida. 163, 88 Pac. 1057; Kimpton v. Stude- 
baker Bros. Co. (1908), 14 Ida. 552, 94 Pac. 1039; Union Stock Yards 
Nat. Bk. V. Bolan (1908), 14 Ida 87, 93 Pac. 508; Home Land Co. v. Os- 
born (1910), 19 Ida. 75, 112 Pac. 764. 

Illinois.— Stitzel v. Miller (1910), 157 111. App. 390; Sanderson v. 
Clark, 194 Pac. 472; Peterson v. Emery (1910), 154 111. App. 294; First 
Nat. Bank v. Garland, 160 111. App. 407; Bcrtolet v. Stomer (1911), 164 
111. App. 605; Laumn v. Harrington (1915), 107 N. E. 826, 267 111. 57. 

Indiana. — Essig v. Porter (1916), 112 N. E. 1005; Bingham v. New 
Town Bank (1918), 118 N. E. 318; Millikan v. Security Trust Co. (1918), 
118 N. E. 568; Wayne Co. Nat. Bank v. Cook, 127 N. E. 779. 

Iowa.— Allison v. HoUembeak (1908), 138 Iowa 479, 114 N. W. 1059; 
Des Moines Sav. Bk. v. Arthur (1913), 143 N. W. 556; Blumer v. 
Schmidt (1914), 146 N. W. 751; Jewett Lumber Co. v. Martin Conroy 
Co. (1915). 152 N. W. 493; Manhard v. First Natl. Bk. (1917), 165 N. 
W. 185; Quinn v. Bane (1917), 164 N. W. 788; Kushner v. Abbott, 156 
Iowa 598, 137 N. W. 913 ; Commercial Sav. Bank v. Schafifer, 181 N. W. 
492. 

Kansas.— The Holliday St. Bk. v. Hoffman (1911), 85 Kans. 71, 115 
Pac. 239; The Rossville State Bk. v. Heslet (1911), 84 Kans. 315, 113 
Pac. 1052; Brown v. Cruce (1913), 133 Pac. 865; National Bank of Webb 
City v. Dickinson, 102 Kan. 564. 

Kentucky.— Citizens' Trust, etc., Co. v. Hays, 167 Ky. 560, 180 S. W. 
811; Wettlaufer v. Baxter (1910). 137 Ky. 326, 125 S. W. 741; Lynch- 
burg Shoe Co. v. Hensley, 218 S. W. 243. 

Louisiana. — Continental Bank & Trust Co. v. Times Pub. Co. (1917), 
76 So. 612; Donart v. Rabeto (1917), 76 So. 166. 

Maryland. — Vandeford v. Farmers' & Mech's Nat. Bk. of Westminster, 
105 Md. 164. 66 Atl. 47; Harper v. Davis (1911), 115 Md. 349, 80 Atl. 
1012; First Denton Natl. Bk. v. Kenney (1911), 116 Md. 24, 81 Atl. 227. 

Massachusefts.—Shepard v. Abbott (1901), 179 Mass. 300, 60 N. E. 
782; Torpey v. Tebo (1903), 184 Mass. 307, 68 N. E. 223; Mass. Nat. 
Bk. V. Snow (1905), 187 Mass. 159, 72 N. E. 959; Berenson v. London, 
etc., Ins. Co. (1909). 201 Mass. 172. 87 N. E. 687; Brvne v. Bryne (1911), 
209 Mass. 179; Union Tr. Co. v. McGinty (1912), 212 Mass. 205, 98 N. E. 
679; Pierce v. Talbott (1913), 213 Mass. 330. 100 N. E. 553. 

Michigan.— Schmidt v. Pegg (1912). 172 Mich. 159. 137 N. W. 524; 
White V. Wadhams (1919), 170 S. W. 60. 

Minnesota. — Polk County State Bank of Crookston v. Walters, 176 
N. W. 496. 



§ 1 FORM AND INTERPRETATION. 375 

Mississippi.—S'ivley v. Williamson (1916), 72 So. 1008. 

Missouri.—Suhlette v. Brewington (1909), 139 Mo. App. 410, 122 S. 
W. 1150; Dickey v. Adler, 143 Mo. App. 326, 127 S. W. 593; Nelson v. 
Diffcndcrffcr (1914), 163 S. W. 271; Hawkins v. Wiest (1912), 167 Mo. 
App. 439; Val Blatz Brewing Co. v. Interstate Ice & Cold Storage Co. 
(1912), 143 S. W. 542; Mudd v. Farmers' & Merchants' Bk. of Hunne- 
well (1914), 162 S. W. 314. 

Mo»/a«a.— Cornish v. Wolverton (1905), 32 Mont. 456, 81 Pac. 4. 

Nebraska. — Aurora State Bk. v. Hayes Fames Elevator Co. (1911), 88 
Neb. 187; Fisher v. O'Hanlon, Rowan, Appt. (1913), 93 Neb. 529, 141 
N. W. 157; First Nat'l Bk. v. Greenlee (1918), 166 N. W. 559; Heeler v. 
Hiles Estate (1919), 172 N. W. 363. 

New Jersey. — Borough of Montvale v. Peoples Bank (1907), 67 Atl. 67. 

New York. — Deyo v. Thompson (1900), 53 A. D. 9 ; Izzo v. Ludington 
(1903), 79 A. D. 272, 79 N. Y. Supp. 744; Benedict v. Kress, 97 App. 
Div. 65, 89 N. Y. Supp. 607; Young v. Am. Bk. No. 2 (1904), 44 Misc. 
308, 89 N. Y. Supp. 915; Waddell v. Hanover Nat. Sav. Bk. (1905), 48 
Misc. 578, 97 N. Y. Supp. 305; Hibbs v. Brown (1907), 190 N. Y. 167, 
affirming 112 A. D. 214, 82 N. E. 1108, 98 N. Y. Supp. 353; Fulton v. 
Varney (1907), 117 A. D. 572, 102 N. Y. Supp. 608; Alartial Armand & 
Co. v. Creighton, 167 N. Y. Supp. 333 ; Haddock, Blanchard & Co. v. 
Haddock (1908), 192 N. Y. 499, 82 N. E. 682, 103 N. Y. Supp. 584; 
Zander v. N. Y. Security & Tr. Co. (1902), 39 Misc. 98, 78 N. Y. Supp. 
900; Tanner's Nat. Bk. v. Lacs (1909), 136 A. D. 92, 120 N. Y. Supp. 669; 
Wray v. Miller (1910), 120 N. Y. Supp. 787; Eq. Tr. Co. of N. Y. v. 
Were (1911), 132 N. Y. Supp. 351; Rosenburg v. Schoenwald (1911), 126 
N. Y. Supp. 615; Eq. Tr. Co. of N. Y. v. Howe (1911), 129 N. Y. Supp. 
112; Czerney v. Hass (1911), 144 A. D. 430; Hilborn v. Penn. Cement 
Co. (1911), 145 A. D. 442; Ryan v. Sullivan (1911), 143 A. D. 471; Eq. 
Tr. Co. V. Taylor (1911), 131 N. Y. Supp. 475, 72 Misc. 52; Eq. Tr. Co. 
of N. Y. V. Newman (1911), 129 N. Y. Supp. 259, 72 Misc. 502; St. 
Lawrence Co. Nat. Bk. v. Watkins (1912), 135 N. Y. Supp. 461; Owens 
v. Blackburn (1914), 161 A. D. 827, 146 N. Y. Supp. 966; Merchants 
Nat. Bk. of St. Paul v. Sante Maria Sugar Co. (1914), 147 N. Y. Supp. 
498; Kinsella v. Lockwood (1913), 140 N. Y. Supp. 512; Eq. Tr. Co. of 
N. Y. V. Harger (1913), 102 N. E. 209; Kerr v. Smith (1913), 156 A. D. 
807, 142 N. Y. Supp. 57; Crosby v. Bank of Niagara (1915), 154 N. Y. 
Supp. 883; Hubbard v. Syemite Trap Rock Co. (1917), 165 N. Y. Supp. 
486, 178 A. D. 531; Standard Steam Spec. Co. v. Corn Exch. Bk. (1917), 
116 N. E. 386, 220 N. Y. 478; Lazarowitz v. Stafford (1917), 167 N. Y. 
Supp. 910; Shubert Theat. Co. v. Dalton (1917), 167 N. Y. Supp. 332; 
Osborne v. M., K. & T. Ry. Co., 155 N. Y. Supp. 236, 92 Misc. Rep. 166; 
Keister v. Wade, 182 N. Y. S. 119; Nelson v. Citizens' Bank, 180 N. Y. 
S. 747. 

North Carolma.— Myers v. Petty (1910), 153 N. Car. 462; Pope & 
Ballance v. Righter-Parry Lumber Co. (1913), 78 S. E. 65; Newland v. 
Moore (1917), 92 S. E. 367. 

North Dakota.— Aamoth v. Hunter, 33 N. D. 582, 157 N. W. 299; 
Fleming v. Sherwood (1912), 139 N. W. 101; Stutsman County Bank v. 
Jones (1917), 162 N. W. 402. 



376 NEGOTIABLE INSTRUMENTS. § 2 

0/ito.— Rockficld V. First Nat. Rk. of Springfield (1907). 11 Ohio St. 
311, 83 N. E. 392; Miller v. Kyle (1911), 85 Ohio St. 186, 97 N. E. 372. 

Oklahoma.— Lon^mor\\. Nat. Bk. v. Loukoncn (1912), 127 Pac. 947; 
Voris V. Anderson (1915), 153 Pac. 291; DeGroat v. Frccht (1913), Zl 
Okla. 267, 131 Pac. 172; Logan Co. Bank v. Farmers' Nat. Bank. 55 
Okla. 592, 155 Pac. 561; Iowa State Sav. Bk. v. Wigmall (1916), 157 
(1918), 171 Pac. 859; Union Nat. Bank, etc., v. Mayfield, 174 Pac. 1034. 

Oregon.— ViwW v. Angus (1911), 60 Oreg. 95, 118 Pac. 284; Bailey v. 
Inland Empire Co., 75 Ore. 309, 146 Pac. 991 ; Triphonoff v. Sweeney 
(1913), 130 Pac. 979; Page v. Ford, 65 Ore. 450. 131 Pac. 1013, Ann. Cas. 
1915A, 1048. 45 L. R. A. (N. S.) 247; Nickell v. Bradshaw (1919), 183 
Pac. 12. 

Pennsylvania. — Volk v. Shoemaker (1911), 229 Pac. 407. 

South Carolina.— YoW v. Moore (1916), 88 S. E. 18. 

South Dakota.— Coleman v. Valentin (1917), 164 N. W. 67. 

Tennessee.— Gilley v. Harrell (1906), 118 Tcnn. 115, 101 S. W. 424; 
First Nat. Bk. of Elgin, 111., v. Russell (1911). 139 S. W. 734; Ahrens & 
Ott Co. V. Moore & Sons (1915), 174 S. W. 270; White v. Hatcher (1916), 
188 S. W. 61; Bank of Whitehouse v. White (1917), 191 S. W. 332; 
Weems v. Neblett (1918), 202 S. W. 930. 

Utah.—Smhh v. Brown (1917), 165 Pac. 468. 

Virginia. — Williams v. Liphart (1914), 81 S. E. 77; Colley v. Sum- 
mers Parrott Hardware Co. (1916), 89 S. E. 906. 

Washington. — Nelson v. Spokane Grain Co. (1907), 47 Wash. 85, 91 
Pac. 570; Thomson v. Koch (1911), 62 Wash. 438, 113 Pac. 1110; Parker 
V. Saxton (1911), 66 Wash. 260; Barker v. Sartori (1911), 66 Wash. 260, 
119 Pac. 611; First Nat. Bk. of Snohomish v. Sullivan (1911), 66 Wash. 
375; Quest v. Ruggles (1913), 72 Wash. 609, 131 Pac. 202; Peninsula 
Nat. Bk. V. Pederson (1916), 158 Pac. 246; Coolidge & McClaine v. Salt- 
marsh (1917), 165 Pac. 508; Bright v, Ofield, 81 Wash. 442, 143 Pac. 159. 
Curry (1917), 91 S. E. 801. 

West Virginia. — Pomeroy Nat. Bk. v. Huntington Nat. Bk. (1913), 
79 S. E. 662; Eskridge v. Thomas (1917), 91 S. E. 7; Thompson v. 
Curry (1917), 91 S. E. 801; Hastings v. Gump, 108 S. E. 600. 

Wisconsin (Section on Municipal Orders and Warehouse Receipts 
added).— Westberg v. Chicago Lumber Co. (1903), 117 Wis. 589, 94 N. 
W. 572; Thorpe v. Mindeman (1904), 123 Wis. 149, 101 N. W. 417, 107 
Am. St. 1003. 68 L. R. A. 146; Bank of Evansville v. Kurts (1918), 166 
N. W. 658 ; Clarke v. Tallmadge, 176 N. W. 906. 

United Sfates.—Forest v. Safety Banking & Tr. Co. (1909), 174 Fed. 
345 (E. D. Pa.) ; Klotz Throwing Co. v. Manufacturers' Commercial Co. 
(1910), 103 C. C. A. 305 (N. Y.), 179 Fed. Reu. 397; Smith v. Nelson 
Land & Cattle Co. (1914), 212 Fed. 56. 

§ 2. Certainty as to sum ; what constitutes. The sum 

payable is a sum certain within the meaning of this act, although 
it is to be paid : 



§ 2 FORM AND INTERPRETATION. 377 

1. With interest; or 

2. By stated installments ; or 

3. By stated installments, with a provision that upon default 
in payment of any installment or of interest, the whole shall 
become due; or 

4. With exchange, whether at a fixed rate or at the current 
rate; or 

5. With costs of collection or an attorney's fee, in case pay- 
ment shall not be made at maturity. ^' *" 

See text, §§11, 48. 

Cross sections: 1, 64-1, 109. 

The Idaho, Iowa, North Carolina and Wyoming acts omit : "Or of 
interest," in subsection 3. 

See section 197 of the North Carolina act. Nebraska adds : "Pro- 
vided that nothing herein contained shall be construed to authorize any 
court to include in any judgment on an instrument made in this state 
any sum for attorney's fees or otlier costs not allowable in other cases." 

In South Dakota the following takes the place of subsection 5: ''Pro- 
vided that nothing herein contained shall be construed to authorize any 
court to include in any judgment or instrument made in this state any 
sum for attorney's fees, or other costs not now taxabJe by law." 

*■ Digest of some of the decisions in which this section is con- 
strued arranged alphabetically by states : 

Stipulated attorney's fees are recovered as a part of contractual obliga- 
tion. Schillinger v. Leary (Ala.), 77 So. 846. 

When objection made only actual attorney's fees are collectible in suit 
on note. Florence Oil, etc., Co. v. Hiawatha Gas, etc., Co., 55 Colo. 378, 
135 Pac. 454. 

Attorney's fees sued for in action are included in amount claimed in 
fixing jurisdiction of court. Ring v. Merchants' Broom Co., 68 Fla 515, 
67 So. 132. 

Stipulation as to default in payment will not cover interest not accrued 
on the principal. Tyston v. Ellsworth, 18 Idaho 207, 109 Pac. 134. 

A reasonable sum may be inserted in blanks where authority is given 
to fill same without avoiding instrument. Kramer v. Schnitzer, 268 111. 
603. 109 N. E. 695. 

Failure to pay interest within thirty days after due provision rendering 
note collectible does not make note non-negotiable. Commercial Sav. 
Bank v. Schaffer, — la. — , 181 N. W. 492. 

When place of performance does not govern validity of attorney fee 
provision. Carscy v. Swan, 150 Ky. 473, 150 S. W. 534. 

When attorney's fees collectible without proof of incurring same. 
First Nat. Bk. of Vicksburg v. :\Iayer, 129 La. 891, 57 So. 308. 

Attorney fee provision passes to indorsee with note. Winn Parish 
Bank v. Wliite Sulphur Co., 133 La. 282, 62 So. 907. 



378 NEGOTIABLE INSTRUMENTS. § 2 

Attornej's fees accrue after services rendered and are not part of the 
action on note, but are determined on application to court. First State 
Bank v. Cohasset Wooden Ware Co. (Minn.), 161 N. W. 398. 

Attorney's fees due as soon as unpaid note placed with attorney for 
collection. Morrison v. Ornbaun, 30 Mont. Ill, 75 Pac. 953. 

When attorney's fees recoverable as costs of suit. Bovee v. Helland, 
52 Mont. 51, 156 Pac. 416. 

When ten per cent collection charges and attorney's fees are not 
usurious. 
Gate City Nat. Bank v. Strother (Mo. App.), 196 S. W. 447. 

Reasonableness of attorney's fees need not be proven where no con- 
tention made. First Nat. Bank v. Stam, 186 Mo. App. 439, 171 S. W. 567. 

Guaranty as to attorney's fees in note. Townscnd v. Alcvvel, — Mo. 
App. — , 202 S. W. 447. 

Where attorney employed to collect note fees are due regardless of 
manner of payment. Williams v. Dockwilcr (N. M.), 145 Pac. 475. 

When attorney fee provision will not be enforced in state where in- 
valid, although made and payable in another state. Exchange Bank v. 
Appalachian Land, etc., Co., 128 N. C. 193, 38 S. E. 813. 

Jurisdiction of court determined by amount demanded, including attor- 
ney's fees. Exchange Bank v. Appalachian Land & Lumber Co., 128 N. 
C. 193, 38 S. E. 813. 

Where attorney fee is valid in state where made and payable it will be 
enforced. First Nat. Bank v. Fleitman, 168 App. Div. 75, 153 N. Y. Supp. 
869. 

The provisions of the statute as to attorney fees do not change the 
law where the states previously held such provisions against public policy. 
Miller v. Kyle, 85 Ohio St. 186, 91 N. E. 372, 74 Cent. Law J. 289. 

When attornev's fees become due. Security State Bank v. Fussell, 36 
Okl. 527, 129 Pac. 746. 

Note payable on given date providing for interest from date if not 
paid when due and interest at given rate from date on which made pay- 
able is negotiable. Citizens' Savings Bank v. Landis, Zl Okl. 530, 132 
Pac. 1101. 

Court may add stipulated attorney's fees although jury omits them 
from verdict. Continental Gin Co. v. Sullivan, 48 Okl. 332, 150 Pac. 209. 

Note providing for attorney's fees and an additional amount in case 
of suit is negotiable. Seton v. Exchange Bank (Okl.), 150 Pac. 1079. 

Attorney's fees added although not submitted by court to jury not 
error. Fatoransky v. Pope (Okl.), 157 Pac. 905. 

Attorney's fees may be recovered whether suit is to foreclose note and 
chattel mortgage or in replevin. First Nat. Bank v. Howard (Okl.), 158 
Pac. 927. 

Provision for payment of "all costs of collection" authorizes only 
leasonable attorney's fees. Letcher v. Wrightsman (Okl.), 158 Pac. 1152. 

Note containing two interest provisions is not an unconditional promise 
to pay a certain sum of money. Union Nat. Bank v. Mayfield (Okla.), 
169 Pac. 626. 

Attorney's fees governed by making demand on note prior to suit on 
a demand note. Hodges v. Blaylock, 82 Ore. 179, 161 Pac. 396. 

Ten per cent attorney's fees and all expenses of collection provisions 
are valid, but only reasonable amount is recoverable. Holstrom Nat. 
Bank v. Wood, 125 Tenn. 6, 140 S. W. 31. 

When indorser is liable for attorney's fees. Franklin v. The Duncan, 
133 Tenti. 472, 182 S. W. 230, Ann. Cas. 1917C. 1080. 



§ 2 FORM AND INTERPRETATION. 379 

Provisions for attorney's fees are a part of contract and can not be 
collected in separate action. Merriinon v. Parkey, 136 Tenn. 645, 191 S. 
W. 327. 

Attorney's fees in blank is an agreement to pay reasonable fees. Mc- 
Cormick v. Swem, 36 Utah 6, 102 Pac. 626. 

Provision for attorney fees in case of suit does not make note non- 
negotiable. McCormick v. Severn, 36 Utah 6, 102 Pac. 626, 20 Ann. Cas. 
1368. 

Stipulated attorney's fees are deemed proper unless shown otherwise. 
Utah Nat. Bank v. Nelson, 38 Utah 169, 111 Pac. 907 

Place of performance governs attorney fee provisions in some cases. 
Oglesby V. Bank of New York, 114 Va. 663, 11 S. E. 468, 19 Va. Law 
Reg. 122. 

Attorney fee stipulation regarded as valid although question unsettled. 
Colley V. Summers, etc., Co., 119 Va. 439, 89 S. E. 906. 

Court may reduce attorney's fees if provision be found unreasonable. 
Triplett v. Second Nat. Bank, 121 Va. 189, 92 S. E. 897. 

No attorney's fees recoverable when printed blank not filled in. Scan- 
dinavian-American Bank v. Long, 75 Wash. 270, 134 Pac. 913. 

Indorser can not recover attorney's fees from maker when indorsee 
did not sue for same. Balkema v. Grolinund, 92 Wash. 326, 159 Pac. 127. 

Provision for payment of attorney's fees after dishonor does not 
render note non-negotiable. First Natl. Bank of Shawano v. Miller, 139 
Wis. 126, 120 N. W. 820. 

Provision for attorney's appearance and confessing judgment for 
amount due at any time renders non-negotiable. Clark v. Tallmadge, 
— Wis. — , 176 N. W. 906. 

Courts must enforce foreign judgments although attorney's fees are 
included as a part of the judgments. Westwatcr v. Murray, 245 Fed. 
427, 157 C. C. A. 589. 

Agreement to pay five per cent commission for collection means the 
amount incurred up to that amount in collecting. Chestertown Bank v. 
Walker, 163 Fed. 510, 90 C. C. A. 140. 

^* The following is a complete list of the cases arranged 
alphabetically by states, where this section has been construed: 

/i/afcawa.— Bledsoe v. City Nat. Bk. of Selma (1912), 7 Ala. App. 195. 
60 So. 942; Ex parte Bledsoe (1913), 61 So. 813; Brooks v. Greil Bros. 
(1915), 68 So. 874; Schillinger v. Leary, 11 So. 846. 

^n^owa.— People's Nat. Bk. v. Taylor (1915), 149 Pac. 763. 

Arkansas.— ^^n\i of Holly Grove v. Sudbury, 121 Ark. 59, 180 S. W. 
470. 

Co/i7ormo.— Navajo Co. Bk. v. Dolson (1912), 126 Pac. 153; Stoddart 
V. Goldin (1919), 178 Pac. 707. 

Colorado. — The Firestone Coal Co. v. McKissick (1913), 24 Colo. App. 
294; Florence Oil & Refining Co. v. Hiawatha Gas, Oil & Refining Co. 
(1913), 55 Colo. App. 378, 135 Pac. 454. 

Florida. — Baumeister v. Kuntz, 53 Fla. 340, 42 So. 886; Taylor v. Am. 
Nat. Bk. of Florida (1912), 63 Fla. 631. 57 So. 678; Holder Turpentine 
Co. v. Kiser Co. (1915), 67 So. 85; Ring v. Merchants' Broom Co., 68 
Fla. 515, 67 So. 132. 



380 NEGOTIABLE INSTRUMENTS. § 2 

/cTa/io— Union Stock Yards Nat. Bk. v. Bolan dQOR). 14 Ida. 87, 93 
Pac. 508; Tyston v. Ellsworth (1910), 18 Ida. 207, 109 Paa 134. 

Illinois. — Pitzer V. McCunc, 152 111. App. 144; Graves v. Neeves (1913), 
183 111. App. 235 ; Kramer v. Schnitzer, 268 111. 603, 109 N. E. 695. 

/nrfiono.— Milliken v. Security Trust Co. (1918). 118 N. E. 568; Easley 
V. Deer (1919), 121 N. E. 542. 

/oTtvi.— Farmers' Loan & Tr. Co. v. Planck (1915), 152 N. W. 390; 
State Bk. of Halstad v. Bilstad (1912). 136 N. W. 204; Commercial Sav. 
Bank v. Schaffer. 181 N. W. 492. 

Kansas.— Smi\.\\ v. Nelson Land & Cattle Co. (1914), 212 Fed. 56. 

Kentucky.— C^rscy v. Swan. 150 Ky. 473, 150 S. W. 534. 

Louisiana. — First Nat. Bk. of Vicksburg v. Mayer (1912), 129 La. 
981, 57 So. 308; Winn Parish Bk. v. White Sulphur Lumber Co. (1913), 
62 So. 907. 

Mory/a«<f. —Chestertown Bk. v. Walker (1908). 163 Fed. 510, 90 C. C. 
A. 140. 

Missouri.— Tizsh v. McColl. 176 Mo. App. 198, 166 5. W. 1113; Bank 
of Neelyville v. Lee (1914). 168 S. W. 7%; First Nat. Bk. v. Stam 
(1914), 171 S. W. 567; Gate City Nat. Bank v. Strother. 196 S. W. 447; 
Townsend v. Alewel, 202 S. W. 447; American Sav. Bk. v. Sutton (1918), 
402 S. W. 572. 

Montana. — Bovce v. Helland, 52 Mont. 51, 156 Pac. 416; Morrison v. 
Ornbaun (1904), 30 Mont. Ill, 75 Pac. 953; Cornish v. Wolverton (1905). 
?>2 Mont. 456, 81 Pac. 4; First Nat. Bank v. Berritt, 52 Mont. 359, 157 
Pac. 951. 

Nctv /^r^rv.— Mackintosh v. Gibbs, 81 N. J. L. 577, 80 Atl. 554, Aim. 
Cas. 1912D 163. 

Neiv Mexico. — Williams v. Dockwiler (1914), 145 Pac. 475. 

New ForA'.— First Nat. Bank v. Fleitman, 153 N. Y. Supp. 869, 168 
A. D. 75. 

North Carolina. — Exchange Bk. v. Apalachian L. & L. Co. (1901), 
128 N. Car. 193; Newbern Banking & Trust Co. v. Duffy (1910). 153 
N. Car. 62, 68 S. E. 915; Franklin Nat. Bk. v. Roberts Bros. (1915), 84 
S. E. 706. 

O/iio.— Miller V. Kyle (1911). 85 Ohio St. 186, 97 N. E. 372. 

Oklahoma. — Continental Gin Co. v. Sullivan. 48 Okla. 332, ISO Pac. 
209; Citizens' Savings Bank v. Landis, Z7 Okla. 530, 132 Pac. 1101; Ran- 
dolph V. Hudson, 12 Okla. 516, 74 Pac. 946; First Nat. Bk. of Stigler v. 
Howard (1916). 158 Pac. 927; Security State Bank v. Fussell, 2,6 Okla. 
527, 129 Pac. 746; Scton v. Exchange Bk. (1915). 150 Pac. 1079; Potts 
V. Crudup (1915), 150 Pac. 170; Tr. & Sav. Bk. of Charles City v. 
Gleichman (1915), 50 Okla. 441. 150 Pac. 908; First Nat. Bk. v. Muskogee 
Pipe Line Co. (1914). 139 Pac. 1136; Citv Nat. Bk. v. Kelly (1915). 151 
Pac. 1172; Voris v. Anderson (1915), 153 Pac. 291; Union Bank v. Mav- 
field (1917), 169 Pac. 626; Letcher v. Wrightsman (Okla.), 158 Pac. 
1152. 



§ 3 FORM AND INTERPRETATION. 381 

Oregon— Hodges v. Blaylock, 82 Ore. 179, 161 Pac. 396. 

Pennsylvania.— WdskkchcT v. Connelly (1917), 100 Atl. 965. 

South Carolina.— Smith v. Phifer, 104 S. C. 396, 89 S. E. 323. 

Tennessee.— Uohtron Nat. Bk. v. Wood (1911), 125 Tenn. 6, 140 S. 
W. 31; First Nat. Bk. of. Elgin, 111., v. Russell (1911), 139 S. W. 734; 
Franklin v. The Duncan, 133 Tenn. 472, 182 S. W. 230, Ann. Cas. 1917C 
1080; Merrimon v. Parkey (1917), 191 S. VV. 327. 

Texas.— Sugg v. Smith (1918), 205 S. W. 363; Drinkard v. Jenkins 
(1919), 207 S. W. 353. 

Utah.— McCormkk v. Swem (1909), 36 Utah 6, 102 Pac. 626, 20 Ann. 
Cas. 1368; Utah Banking Co. v. Newman (1914), 138 Pac. 1146; Utah 
Nat. Bank v. Nelson, 38 Utah 169, 111 Pac. 907. 

Virginia.— Ogleshy Co. v. Bk. of N. Y. (1913), 114 Va. 663, 19 Va. 
L. Reg. 122, 77 S. E. 468; Colley v. Summers Parrott Hardware Co. 
(1916), 89 S. E. 906; Triplett v. Second Nat. Bk. of Culpepper (1917), 
92 Va. 897; Sands v. Roller, 118 Va. 191, 86 S. E. 857. 

Washington. — Parker v. Saxton (1911), 66 Wash. 260; Barker v. Sar- 
tori (1911), 66 Wash. 260, 119 Pac. 611; First Nat. Bk. of Snohomish v. 
Sullivan (1911), 66 Wash. 375; Puget Sound State Bank v. Wash. Paving 
Co. (1917), 162 Pac. 870; Davis v. Hibbs (1913), 73 Wash. 315, 131 Pac. 
1135; Harris v. Johnson (1913), 134 Pac. 1048; Scandinavian-American 
Bk. V. Long (1913), 134 Pac. 913; Pease v. Syler (1914), 138 Pac. 310; 
Bright V. Offield, 81 Wash. 442, 143 Pac. 159; Balkema v. Giolimund 
(1916), 159 Pac. 127. 

West Virginia.— First Nat. Bk. of Pineville v. Sanders (1916), 88 S. 
E. 187; Raleigh Co. Bk. v. Poteet (1914), 82 S. E. 332; First Nat. Bk. 
V, Sanders (1916), 88 S. E. 187. 

Wisconsin.— Thorpe v. Mindeman (1904), 123 Wis. 149, 101 N. W. 
417, 107 Am. St. 1003, 68 L. R. A. 146; First Nat. Bk. of Shawano v. 
Miller (1909), 139 Wis. 126, 120 N. W. 820; Clark v. Talmadge, 176 N. 
W. 906. 

United 5'/flf^.y.— Chestertown Bank v. Walker, 163 Fed. 510, 90 C. C. 
A. 140; Mechanics' American Nat. Bank v. Coleman, 204 Fed. Rep. 24, 
122 C. C. A. 338; Smith v. Nelson Land & Cattle Co. (1914), 212 Fed. 56; 
Kennedy v. Broderick (1914), 216 Fed. 137 (C. C. A., 7th Ct.) ; West- 
water V. Murray, 245 Fed. 427, 157 C. C. A. 589. 



§ 3. When promise is unconditional. An unqualified 
order or promise to pay is unconditional within the meaning of 
this act, though coupled with : 

1. An indication of a particular fund out of which reim- 
bursement is to be made, or a particular account to be debited 
with the amount; or 

2. A statement of the transaction which gives rise to the in- 
strument. 



382 NEGOTIABLE INSTRUMENTS. § 3 

But an order or promise to pay out of a particular fund is 
not unconditional. *' ** 

1. Digest of some of the decisions in which this section is 
construed, arranged alphabetically by states : 

See text, §§ 49, 51. 
Cross sections : 1-2. 

Provision retaining title of chattel in payee of note does not render it 
non-negotiable. Ex parte Bledsoe, 180 Ala. 586, 61 So. 813. 

Retention of title to property does not destroy negotiability of note. 
Citizens' Nat. Bank v. Bucheit (Ala.), 71 So. 82. 

Conditional indorsement. Peoples Bank of Mobile v. Moore, — Ala. 
— , 78 So. 789. 

Word "reimburse" renders promise conditional and note non-negotiable. 
Sacred Heart Church Building Committee v. Manson, — Ala. — , 82 So. 
498. 

Effect of words "as per contract" in the corner of note upon nego- 
tiability. Strand Amusement Co. v. Fox, — Ala. — , 87 So. 332. 

Notation under signature of maker did not impair negotiability. 
Slaughter v. Bank of Bisbee, 17 Ariz. 484, 154 Pac. 1040. 

Conditional promise to pay. Rector v. Strauss, — Ark. — , 203 S. W. 
1024. 

Letter as note prior to Negotiable Instruments Law. Equitable Trust 
Co. V. Harger, 258 111. 615, 102 N. E. 209. 

Instrument containing provisions as to correspondence course render 
note non-negotiable. Midwest Collection Bureau v. Greenwald, 214 111. 
App. 468. 

A note providing for deduction from insurance policy in case of death 
before maturity is not conditional. Union Bank v. Spies, 151 Iowa 178, 
130 N. W. 929. 

Order directing payment "on account of contract" is negotiable. First 
Nat. Bank v. Lightner, 74 Kans. 736, 88 Pac. 59, 8 L. R. A. (N. S.) 231, 
118 Am. St. Rep. 353. 

Unconditional promise to pay qualified by words "as per contract dated 
March 24, 1913." Continental Bank, etc., v. Times Pub. Co., 142 La. 
209, 76 So. 612. 

Provision in note that it is subject to approval of payee makes it non- 
negotiable. Sloan V. McCarty. 134 Mass. 245. 

The words "value received as per contract" do not destroy negotia- 
bility of note. Nat. Bank of Newbury v. Wentworth, 218 Mass. 30, 105 
N. E. 626. 

Direction to charge to a certain payment a definite order to pay is 
not conditional. Shepard v. Abbott, 179 Mass. 300, 60 N. E. 782. 

Note given subject to approval of payee bv its provision is not nego- 
tiable. Worden Grocer Co. v. Blanding, 161 Mich. 254, 126 N. W. 212. 

Where contract was transferred with note on back of which the words 
"per contract" appeared the purchaser is not charged with provisions of 
some other contract giving defense. Snelling State Bank v. Clasen, 132 
Minn. 404, 157 N. W. 643. 

Effect of retention of title and default provisions in note. Polk Coun- 
ty State Bank of Cropkston v. Walters, — Minn. — , 176 N. W. 496. 

Question of negotiability not considered where tried on another theory. 
Lebrecht v. Nellist, 184 Mo. App. 335, 171 S. W. 11. 



§ 3 FORM AND INTERPRETATION. 383 

Note given to "secure" difference between two sums does not destroy 
negotiability. Morehead v. Cummins, — Mo. App. — , 230 S. W. 656. 

Notation "To be used in part renewal of note" on back of check as 
afifecting negotiation. R. S. Howard Co. v. International Bank of St. 
Louis, 198 Mo. App. 284. 

Detachment of promissory note from order for specified goods held not 
to render the instrument, which attached was non-negotiable, negotiable. 
State V. Mitton, Zl Mont. 366, 96 Pac. 926. 

Provisions in an instrument for delivery of property for installment 
payments and attorney fees in case of suit do not render it non-negotiable. 
First Nat. Bank v. Barrett, 52 Mont. 359, 157 Pac. 951. 

Note otherwise negotiable is not changed by provisions as to title 
remaining in vendor. Whitlock v. Auburn Lumber Co., 145 N. C. 120, 
58 S. E. 909, 12 L. R. A. (N. S.) 1214. 

Township bonds negotiable in form are not affected by tax provisions 
in relation to paj^ments in statute authorizing their issue, the amount 
finally to be realized being definite. Cleveland Co. v. Bank of Gastonia, 
157 N. C. 191, 72 S. E. 996. 

Note given for purchase of animal which is warranted does not destroy 
negotiability. Critcher v. Ballard. — N. C. — 104 S. E. 134. 

Condition contained in note that it does not affect the ownership of 
goods sold renders non-negotiable. Fleming v. Sherwood, 24 N. D. 144, 
139 N. W. 101, 43 L. R. A. (N. S.) 945. 

Direction to pay from certain insurance draft, the same being balance 
of account, is not payable from particular fund so as to render promise 
to pay conditional. Hanna v. McCrory, 19 N. M. 183, 141 Pac. 996. 

Conditional sale provision in negotiable note. Welch v. Owenby, — 
Okla. — , 175 Pac. 746. 

Provision for holding notes due at any time payee feels security not 
sufficient is conditional. Reynolds v. Vint, IZ Ore. 528, 144 Pac. 526. 

Note is non-negotiable where it contains provision that payee may upon 
certain conditions declare it due. Western Farquahar IMachine Co. v. Bur- 
nett, 82 Ore. 174, 161 Pac. 384. 

Promise to pay if order is accepted is not negotiable. Neylus v. Port, 
46 Pa. Supr. Ct. 428. 

Letter promising to pay "A" if "A" advances monev is non-negotiable. 
Equitable Trust Co. of N. Y. v. Howe, 72 Misc. 46, 129 N. Y. Supp. 112. 

A letter promising to pay a definite sum in certain items is negotiable. 
Equitable Trust Co. v. Taylor, 146 App. Div. 424, 131 N. Y. Supp. 475. 

"I shall pay to order of" held to be negotiable although containing 
added statements as to transaction. Merchants' Nat. Bk. v. Santa Maria 
Sugar Co., 162 App. Div. 248, 147 N. Y. Supp. 498. 

Words referring to transaction on which note is based do not render 
note non-negotiable. Waterbury- Wallace Co. v. Ivey, 99 Misc. 260, 163 
N. Y. Supp. 719. 

Draft attached to bills of lading is not conditional because of word 
"cotton" on face of draft. Springs v. Hanover Nat. Bk., 209 N. Y. 224, 
103 N. E. 156, 52 L. R. A. (N. S.) 241. 

A note providing for payment and the application of certain moneys 
thereto is negotiable. First Nat. Bk. of Snohomish v. Sullivan, 66 Wash. 
375, 119 Pac. 820, Ann. Cas. 1913C, 930. 

A promise is unconditional where the note is accompanied with an 
?dditional instrument designating fund from which payment is to be made. 
VanTassel v. McGrail, 93 Wash. 380, 160 Pac. 1053. 



384 NEGOTIABLE INSTRITMENTS. § 3 

Erasure from nolo containing unconditional promise to pay the words 
"This note to fulfill a certain agreement." Mason v. Shaffer, — W. Va. 
— 96 S. E. 1023. 

The order to pay is absolute where object for which drawn is stated. 
Brown v. Cow Creek Sheep Co., 21 Wyo. 1, 126 Pac. 886. 

Bill of exchange accepted against indorsed bills of lading held condi- 
tional. Guaranty Trust Co. v. Grotian, 114 Fed. Rep. 433, 52 C. C. A. 235. 

Words, "charge to account of X, 100 bales cotton," in a draft, with 
bills of lading attached, held to render conditional the promise to pay. 
Hannay v. Guarantee Trust Co., 187 Fed. Rep. 686. 

Direction to pay and credit according to letter is not conditional so as 
to affect negotiability. In re Boyse, 33 Ch. Div. 612. 



^* The following is a complete list of the cases, arranged 
alphabetically by states, where this section has been construed : 

Alabama.— Ex parte Bledsoe, 180 Ala. 586, 61 So. 813; Citizens' Nat. 
Bank of Bucheit, 71 So. 82; People's Bank of Mobile v. Moore (1918), 
78 So. 789; Strand Amusement Co. v. Fox, 87 So. 332; Sacred Heart 
Building Com. v. Manson (1919), 82 So. 498. 

Arkansas.— Rector v. Strauss (1918), 203 S. W. 1024. 

^n.?o?;a.— Slaughter v. Bank of Bisbee (1916), 17 Ariz. 484, 154 Pac. 
1040. 

Colorado. — Johnson v. Engstone (1916), 155 Pac. 1095. 

Connecticut.— Nat. Sav. Bk. v. Cable (1901), 73 Conn. 568, 48 Atl. 428. 

7;/iwo/.y.— Equitable Trust Co. v. Harger, 258 111. 615, 102 N. E. 209; 
Midwest Collection Bureau v. Greenwald, 214 111. App. 468. 

Iozva.~The Union Bk. of Bridgwater v. Spies (1911), 151 Iowa 178, 
130 N. W. 929. 

Kansas. — First Nat. Bk. of Hutchinson v. Lightener (1906), 74 Kans. 
736, 88 Pac. 59, 8 L. R. A. (N. S.) 231, 118 Am. St. Rep. 353. 

Louisiana. — Bonart v. Rabito, 141 La. 970, 76 So. 166; Continental 
Bank v. Times Pub. Co., 142 La. 209, 76 So. 612. 

Maryland.— Tirst Denton Nat. Bk. v. Kenney (1911), 116 Md. 24; 
Denton Nat. Bk. v. Kenney (1911), 116 Md. 124, 81 Atl. 227. 

Massachusetts.-Shepard v. Abbott (1901), 179 Mass. 300, 60 N. E. 
782; Nat. Bk. of Newberry v. Wentworth (1915), 218 Mass. 30, 105 N. 
E. 626. 

Michigan. — Worder Grocer Co. v. Blanding, 161 Mich. 254, 126 N. W. 
212; White v. Wadhams (1919), 170 N. W. 60. 

Minnesota.— SmlVmg State Bank v. Clasen, 132 Minn. 404, 157 N. W. 
643; Polk County State Bank of Brookston v. Walters, — Minn. — , 176 
N. W. 496. 

Missouri.— Lehrecht v. Nellist, 184 Mo. App. 335, 171 S. W. 11; R. S. 
Howard Co. v. International Bank of St. Louis (1918), 198 Mo App. 284, 
200 S. W. 91 ;Morehead v. Cummins, 230 S. W. 656. 

Montana.— States v. Mitton (1908), 37 Mont. 366, 96 Pac. 926; First 
Nat. Bk. of Miles City v. Barrett (1916), 52 Mont. 359, 157 Pac. 95J 



§ 4 FORM AND INTERrRETATION. 385 

New Mexico.— Rznnd^ v. McCrory, 19 N. M. 183, 141 Pac. 996. 

New For/;.— Hibbs v. Brown (1907). 190 N. Y. 167, affirming 112 A. 
D. 214, 82 N. E. 1108, 98 N. Y. Supp. 353; Fulton v. Varncy (1907). 117 
A. D. 572, 102 N. Y. Supp. 608; Eq. Tr. Co. of N. Y. v. Newman (1910). 
69 Misc. 494, 127 N. Y. Supp. 243 ; Eq. Tr. Co. v. Howe, 72 Misc. 46, 129 
N. Y. Supp. 112; Eq. Tr. Co. v. Taylor (1911), 146 App. Div. 424, 131 
N. Y. Supp. 475. 72 Misc. 52; Eq. Tr. Co. of N. Y. v. Were (1911), 74 
Miss. 469. 132 N. Y. Supp. 351 ; Merchants Nat. Bk. of St. Paul v. Sante 
Maria Sugar Co. (1914). 162 App. Div. 248. 147 N. Y. Supp. 498; Water- 
bury Wallace Co. v. Ivey (1917), 99 Misc. 260. 163 N. Y. Supp. 719; 
Springs V. Hanover Nat. Bank, 269 N. Y. 224. 103 N. E. 156. 52 L. R. A. 
(N. S.) 241. 

North Caro/n/a.— Whitlock v. Auburn Lumber Co. (1907). 145 N. 
Car. 120. 58 S. E. 909. 12 L. R. A. (N. S.) 1214; Bk. of Sampson v. 
Hatcher (1909), 151 N. Car. 359. 66 S. E. 308; Commrs. of Cleveland Co. 
V. Bk. of Gastonia (1911), 157 N. Car. 191, 72 S. E. 996; Critcher v. 
Ballard, 104 S. E. 134. 

North Dakota.— Fleming v. Sherwood, 24 N. D. 144, 139 N. W. 101, 
43 L. R. A. (N. S.) 945. 

Oklahoma.— ^e\ch. v. Owenby (1919), 175 Pac. 746. 
Oregon. — Western Farquhar Machine Co. v. Burnett, 82 Ore. 174, 161 
Pac. 384. 

Pennsylvania. — Neylus v. Port, 46 Pa. Superior Ct. 428. 

South Dakota. — Coleman v. Valentine, — S. D. — . 164 N. W. 67. 

Texas:— M.Qi. Nat. Bk. v. Vanderpool (1917), 192 S. W. 589. 

Tennessee.— First Nat. Bk. of Elgin. 111., v. Russell (1911). 139 S. 
W. 734. 

Washing'ton. — First National Bank of Snohomish v. Sullivan, 66 Wash. 
375. 119 Pac. 820, Ann. Cas. 1913C, 930; Peninsula Nat. Bk. v. Pederson 
(1916), 158 Pac. 246; VanTassel v. McGrail. 93 Wash. 380. 160 Pac. 1053. 

West Virginia.— Mason v. Shaffer, — W. Va. — , 96 S. E. 1023. 

Wyoming. — Brown v. Cow Creek Co. (1912), 21 Wyo. 1, 126 Pac. 886. 

United States. — Guaranty Trust Co. v. Grotian, 114 Fed. Rep. 433, 52 
C. C. A. 235; Hannay v. Guaranty Trust Co., 187 Fed. Rep. 686. 



§ 4. Determinable future time ; what constitutes. An 
instrument is payable at a determinable future time, within the 
meaning of this act, which is expressed to be payable : 

1. At a fixed period after date or sight; or 

2. On or before a fixed or determinable future time specified 
therein ; or 

3. On or at a fixed period after the occurrence of a specified 
event, which is certain to happen, though the time of happening 
be uncertain. 



386 NEGOTIABLE INSTRUMENTS. § 4 

An instrument payable upon a contingency is not negotiable, 
and the happening of the event does not cure the defect. 

See text, § 49. 

Cross sections: 1, 184, 1-3, 7-1, 71, 7Z. 

The Wisconsin act (No. 1675-4) substitutes, for the last paragraph, the 
following: "4. At a fixed period after date or sight, though payable 
before then on a contingency. An instrument payable upon a contingency 
is not negotiable, and the happening of the event does not cure the defect, 
except as herein provided." 

Corresponding provision of English Bill of Exchange Act: 11 (1), (2). 

1. Digest of some of the decisions in which this section is 
construed, arranged alphabetically by states : 

If payment of note is liable to happen it is not a contingency. Arnett 
v. Clack, — Ariz. — , 198 Pac. 127. 

Promise to pay on happening of a contingency certain to happen does 
not affect negotiability. McClenathan v. Davis, 243 111. 87, 90 N. E. 265, 
27 L. R. A. (N. S.) 1017. 

Extension for indefinite period does not prevent demand after note due. 
Lanum v. Harrington, 267 111. 57, 107 N. E. 826. 

Uncertainty as to time of payment renders note non-negotiable even 
though in mortgage. Iowa Nat. Bank v. Carter, 144 Iowa 715, 123 N. 
W. 237. 

Note containing conditional extension for definite period is nego- 
tiable. State Bank of Halsted v. Bilstad, 162 Iowa 433, 136 N. W. 204, 49 
L. R. A. (N. S.) 132. 

Provision for declaring debt due for breach of stipulations of mort- 
gage does not render note non-negotiable. Des Moines Sav. Bank v. 
Arthur, 163 Iowa_205, 143 N. W. 556, Ann. Cas. 1916C, 498. 

Waiver of notice of extension of time as time certain. Nat. Bank of 
Webb City, _Mo., v. Dickinson, 102 Kan. 564. 

Anticipating payment privilege in note held not to affect negotiability 
under^ statute. Lowel Trust Co. v. Pratt, 183 Mass. 379, 67 N. E. 363. 

Privilege of anticipating payment renders note non-negotiable. Ne- 
gotiable instruments law overlooked. Pierce v. Talbot, 213 Mass. 330, 
100 N. E. 553. 

Default of payment provision in note does not render it uncertain 
as to time. Schmidt v. Pegg, 172 Mich. 159, 137 N. W. 524. 

Check payable on a contingent date which is certain to happen is 
good. Keeler v. Hiles' Estate, — Neb. — , 172 N. W. 363. 

Postdated check accepted in good faith. Kuflik v. Vaccaro, 170 N. Y, 

Marginal notations as to payment did not control body of note. 
Union State Bank v. Benson, 38 N. Dak. 396, 165 N. W. 509. 

Privilege of declaring due when pavee feels insecure renders note 
non-negotjable._ Reynolds v. Vint, 73 Ore. 528, 114 Pac. 526. 

Provisions in mortgage for accelerating time of payment of note. 
Westlake v. Cooper, — Okla. — , 171 Pac. 859. 



§ 4 FORM AND INTERPRETATION. 387 

Provision that note is "due if ranch is sold or mortgaged" does not 
affect negotiability. Nickell v. Bradshaw, — Ore. — , 183 Pac. 12. 

Provisions for advancing date on account of non-payment of taxes 
does not render time uncertain. Bright v. Officld, 81 Wash. 442, 143 
Pac. 159. 

When due date changed by contingency note is non-negotiable. Pugct 
Sound State Bank v. Washington Paving Co., 94 Wash. 504, 162 Pac. 
870. 

Note's negotiability not controlled by contingencies in mortgage. Smith 
V. Nelson Land & Cattle Co., 212 Fed. 56, 128 C. C. A. 512. 



**The following is a complete list of the cases, arranged 
alphabetically by states, where this section has been construed : 

Arisona.—Arnen v. Clack, 198 Pac. 127. 

California.— Blake v. Craig (1918), 173 Pac. 1005. 

Colorado.— DrakQ v. Pueblo Nat Bk. (1908), 96 Pac. 996. 

Idaho. — Union Stockyards Nat. Bank v. Bolan, 14 Idaho 87, 93 Pac. 
508, 125 Am. St. Rep. 146. 

///iHou.— McClenathan v. Davis, 243 111. 87, 90 N. E. 265, 27 L. R A 
(N. S.) 1017; Lanum v. Harrington, 267 111. 57, 107,N. E. 826. 

Iowa. — Des Moines Saving Bank v. Arthur, 163 Iowa 205. 143 N. W. 
556, Ann Cas. 1916 C. 498; Iowa Nat. Bk. v. Carter (1909), 144 Iowa 
715, 123 N. W. 237; State Bank of Halsted v. Bilstad, 162 Iowa 433, 
136 N. W. 204, 49 L. R. A. (N. S.) 132. 

Kansas.— The Rossville State Bk. v. Heslet (1911), 84 Kans 315, 
113 Pac. 1052; The Holliday St. Bk. v. Hoffman (1911), 85 Kans. 71, 
116 Pac. 239, 35 L. R. A. (N. S.), 390 Ann. Cas. 1912 Dl ; Brown v. 
Cruce (1913), 133 Pac. 865; Nat. Bank of Webb City, Mo., v. Dickinson, 
102 Kan. 564. 

LoMmano.— Hibernia Bk. & Tr. Co. v. Dresser (1912-1913), 61 So. 
561 ; Bonart v. Rabito, 141 La. 970, 76 So. 166. 

Afary/oMC?.— Agricultural Chem Co. v. Stringer (1917), 100 Atl. 774. 

Massachusetts.— LoweW Trust Co. v. Pratt, 183 Mass. 379, 67 N. E. 
363; Torpey v. Tebo (1903), 184 Mass. 307, 68 N. E. 223; McQueen v. 
Spalding (1919). 120 N. E. 850; Pierce v. Talbot, 213 Mass. 330, 100 
N. E. 553. 

Michigan.—Schmidt v. Pegg (1912), 172 Mich. 159. 137 N. W. 524; 
White V. Wadhams (1919), 170 N. W. 60. 

Nebraska— Keder v. Hiles' Estate, 172 N. W. 363. 

New Mexico. — First Nat. Bk. of Albuquerque v. Stover (1916), 155 
Pac. 905. 

New Forfe.— Schlesinger v. Schultz (1905), 110 A. D. 356. 96 N. Y. 
Supp. 383; Usefof v. Herzenstein (1909), 65 Misc. 45. 119 N. 



388 NEGOTIABLE INSTRUMENTS. § 5 

Y. Supp. 290; Wray v. Miller (1910), 120 N. Y. Supp. 787; 
Eq. Tr. Co. of N. Y. v. Were (1911), 132 N. Y. Supp. 351; Devine v. 
Trice (1915). 152 N. Y. Supp. 321; Osl)orne v. M., K. & T. Ry. Co. 
(1915), 155 N. Y. Supp. 236; Kerr v. Smith (1913), 156 A. D. 807, 142 
N. Y. Supp. 57; Powell v. Began (1917), 167 N. Y. Supp. 770; Kulflik 
V. Vaccaro (1918), 170 N. Y. Supp. 13. 

North Dakota— Union State Bank v. Benson, 38 N. Dak. 396, 165 
N. W. 509. 

Oldahojm.—DeGroat v. Focht (1913), 131 Pac. 172; Westlake v. 
Cooper (1918), 171 Pac. 859. 

Oregon.— ReynoMs v. Vint, 73 Ore. 528. 144 Pac. 526: Western Far- 
quhar Mch. Co. v. Burnett (1916), 82 Ore. 174, 161 Pac. 384; Nickell v. 
Bradshaw (1919), 183 Pac. 12. 

Pennsylvania. — Empire Nat. Bk. of Clarksburg W. Va. v. High Grade 
Oil Refining Co. (1918), 103 A 602. 

r^««^.y,y^^.— First Nat. Bk. of Elgin. 111. v. Russell (1911), 139 S. 
W. 734; White v. Hatcher (1916), 188 S. W. 61. 

Washington — Puget Sound State Bank v. Washington Paving Com- 
pany, 94 Wash. 504, 162 Pac. 820; Bright v. Offield, 81 Wish. 442, 143 
Pac. 159. 

West Virginia.— Huhhard v. Morton (1917), 92 S. E. 252. 

Wisco7tsin.— Thorpe v. Mindeman (1904), 123 Wis. 149, 101 N. W. 
417, 107 Am. St. 1003, 68 L. R. A. 146. 

United States.— Kohey v. Hoffman (1916), 229 Fed. 486; Smith v. 
Nelson Land & Cattle Co., 212 Fed. 56, 128 C. C. A. 512. 



§ 5. Additional provisions not affecting negotiability. 

An instrument which contains an order or promise to do any act 
in addition to the payment of money is not negotiable. But the 
negotiable character of an instrument otherwise negotiable is 
not affected by a provision which, 

1. Authorizes the sale of collateral securities in case the in- 
strument be not paid at maturity ; or 

2. Authorizes a confession of judgment if the instrument be 
not paid at maturity ; or 

3. Waives the benefit of any law intended for the advantage 
or protection of the obligor ; or 

4. Gives the holder an election to require something to be 
done in lieu of payment of money. 

But nothing in this section shall validate any provision or 
stipulation otherwise illegal.*' ** 

See text, § 51. 



§ 5 FORM AND INTERPRETATION. 389 

In Illinois the words "under this Act," arc added at the end of the 
first sentence and the words "if the instrument be not paid at maturity" 
are omitted in subsection 2. And the following words are added to 
the last paragraph : "Or authorize the waiver of exemptions from exe- 
cution." 

The North Carolina act (No. 197) contains the following as re- 
lating to subdivision 2 above: "That nothing in this act shall authorize 
tiie enforcement of an authorization to confess judgment or a waiver 
of homestead or personal property exemptions or a provision to pay 
counsel fees for collection incorporated in any instrument mentioned in 
this act; but the mention of such provision in such instrument shall not 
affect the other terms of such instruments or the negotiability thereof." 

Kansas adds to subsection 1 the following": "Or in case the security 
should depreciate in value or in case the holder for reasonable cause 
deems himself insecure." A subsection 5 is added as follows : "Provi- 
sions or agreements in concurrent writings or mortgages given to secure 
payment of such instruments." 

Kentucky omits subdivision 3 above. 

The Wisconsin act (No. 1675-5) adds: "or authorize the waiver of 
exemptions from execution." 

* Digest of some of the decisions in which this section is con- 
strued, arranged alphabetically by states : 

Words "without defalcation" are surplusage. First Nat. Bank of 
Pocky Ford v. Lewis, 57 Colo. 125, 139 Pac. 1102. 

Note giving right to take possession of property when insecure held 
not negotiable. Kimpton v. Studebaker Bros. Co., 14 Idaho 552, 94 
Pac. 1039, 125 Am. St. Rep. 185. 

Promise to do an act in addition to payment of money and failure 
therein default only hastens date of»payment and does not afifect nego- 
tiability. Finley v. Smith, 165 Ky. 445, 177 S. W. 262, L. R. A. 1915F, 

m. 

Promise to give added security in case collateral declines and in de- 
fault due date advanced renders note non-negotiable. Hibernia Bank 
V. Dresser, 132 La. 532, 61 So. 561. 

Option to receive money or stock does not affect negotiability. Pratt 
v. Higginson (Mass.), 119 N. E. 661. 

Agreement to pay money and keep certain securities unincumbered 
renders note non-negotiable. Strickland v. National Salt Co., 79 N. 
J. Eq. 182, 81 Atl. 828. 

Confession of judgment provision affects negotiability. Yankolivitz 
V. Wernick, 20 Pa. Dist. Rep. 223, 59 U. of P. Law Rev. 573. 

Provision for confession of judgment at any term is not negotiable. 
Milton Nat. Bank v. Beaver, 25 Pa. Super Ct. 494. 

Time of payment not so uncertain as to affect negotiability where 
promise of added security or default. Empire Nat. Bank v. Highgrade 
Oil. etc., Co. (Pa.), 103 Atl. 602. 

"At any time after note becomes due" does not affect negotiability. 
Green v. Dick & Shope, 72 Pa. Super Ct. 266. 

Note authorizing confession of judgment at anvtime is not nego- 
tiable. First Nat. Bank v. Russell, 124 Tcnn. 618, 139 S .W. 739, Ann. 
Cas. 1913A 203. 



390 NEGOTIABLE INSTRUMENTS. ' § 5 

Promise to pay money and wheat renders note non-negotiable. 
Thomson v. Koch, 62 Wash. 438, 113 Pac. 1110. 

Provision to pay taxes is one which renders note non-negotiable as 
addition to payment of money. Bright v. Offield, 81 Wash. 442, 143 
Pac. 159. 

Words "at any time hereafter" are not definite enough to render note 
negotiable. Clark v. Tallmadge, — Wis. — , 176 N. W. 906. 

Provision for giving added collateral in case of depreciation does not 
destroy negotiability. Railway Equipment Co. v. Merchants Nat. Bank, 
136 U. S. 268, 10 Sup. Ct. 999, 34 L. ed. 349. 

Question as to effect of added promises not considered. National 
Salt Co. v. Ingraham, 143 Fed. 805, 74 C. C. A. 479. 

^* The following is a complete list of the cases, arranged alpha- 
betically by states, where this section has been construed : 

Alabama. — Ex parte Bledsoe (1913), 61 So. 813. 

California. — Navajo Co. Bk. v. Dolson (1912), 126 Pac. 153. 

Colorado. — First Nat. Bank of Rocky Ford v. Lewis, 57 Colo. 125, 
139 Pac. 1102. 

7<fa/to.— Kimpton v. Studebaker Bros. Co. (1908), 14 Ida. 552, 94 
Pac. 1039, 125 Am. St. Rep. 185. 

Iowa. — Council Bluffs v. Cuppey, 41 Iowa 104; The Union Bk. of 
Bridgewater v. Spies (1911), 151 Iowa 178; Steel v. Ingraham (1915), 
155 N. W. 294. 

Kansas.— The Rossville State Bk. v. Heslet (1911), 84 Kans. 315, 
113 Pac. 1052; The Holliday St. Bk. v. Hoffman (1911), 85 Kans. 71, 
116 Pac. 239, 35 L. R. A. (N. S.) 390, Ann. Cas. 1912D 1. 

Kentucky.— Finley v. Smith (1915), 165 Ky. 445, 177 S. W. 262, 
L. R. A. 1915F 777. 

Louisiana. — Hibernia Bank v. Dresser, 132 La. 532, 61 So. 561 ; Bon- 
art v. Rabito, 141 La. 970, 76 So. 166; McDonald v. Leis Admr., 12 
La. 435. 

Maryland.— Whitcomh v. Nat. Exchange Bk. (1914), 91 Atl. 689, 
123 Md. 612. 

Minnesota.—SneWmg State Bank v. Clasen (1916), 157 N. W. 643. 

Nebraska.— First Nat. Bk. of Sydney v. Baldwin (1916), 158 N. W. 
371. 

New 7^r.rry.— Strickland v. Nat. Salt Co. (1911), 77 N. J. Eq. 328, 
81 Atl. 828, affirmed 79 N. J. Eq. 182 (1911). 

North Carolina.— Sykes v. Everett (1914), 83 S. E. 585. 

Oklahonta.—lowsi State Sav. Bk. v. Wignall (1916), 157 Pac. 725; 
Williams v. TurnbuU (1917), 162 Pac. 770. 

P^nnjy/z^ania.— Milton Nat. Bk. v. Beaver (1904), 25 Pac. Super. 
Ct. 494 ; Volk v. Shoemaker, 229 Pa. 407, 78 Atl. 933 ; Empire Nat. Bank 
v. Highgrade Oil, etc., Co. (Pa.), 103 Atl. 602; Yankolivitz v. Wernick, 



§ 6 FORM AND INTERPRETATION. 391 

20 Pa. Dist. Rep. 223, 59 U. of P. Law, Rev. 573; Green v. Dick & 
Shope, 72 Pa. Sup. St. 266. 

Tennessee.— First Nat. Bank v. Russell, 124 Tenn. 618, 139 S. W. 739, 
Ann. Cas. 1913A, 203. 

Washington.— Thomson v. Koch (1911), 62 Wash. 438, 113 Pac. irO; 
Bright V. Offield, 81 Wash. 442, 143 Pac. 159; Moore & Co. v. Burling 
(1916), 160 Pac. 420. 

IVest Virginia. — Greenbrier Valley Bk. v. Bair (1913), 77 S. E. 274. 

Wisconsitt. — Wisconsin Meeting of Baptists v. Bablcr (1902), 115 
Wis. 289, 91 N. W. 678 ; Clark v. Tallmadge, 176 N. W. 906. 

United States.— Lincoln Nat. Bank v. Perry, 66 Fed. 287, 14 C. C. A. 
273; Kennedy v. Broderick, 216 Fed. 137, 132 C. C. A. 381; Kobey v. 
Hoffman, 229 Fed. 486, 143 C. C. A. 554; Railway Equipment Co. v. 
Merchants National Bank, 136 U. S. 268, 10 Sup. Ct. 999, 34 L. ed. 349; 
National Salt Co. v. Ingraham 143 Fed. 805, 74 C. C. A. 479. 



§ 6. Omissions ; seal ; particular money. The validity 
and negotiable character of an instrument are not affected by the 
fact that 

1. It is not dated; or 

2. Does not specify the value given, or that any value has 
been given therefor; or 

3. Does not specify the place where it is drawn or the place 
where it is payable ; or 

4. Bears a seal; or 

5. Designates a particular kind of current money in which 
payment is to be made. 

But nothing in this section shall alter or repeal any statute 
requiring in certain cases the nature of the consideration to be 
stated in the instrument.^* ** 

See text, §§ 51, 54. 43, 50, 58. Cross sections : 13,24,65,17,3.93,225. 

In Illinois subsection 5 begins as follows : "Is payable in currency 
or current funds : or" and the last paragraph of said subsection is 
omitted. 

** The following is a complete list of the cases, arranged alpha- 
betically by states, where this section has been construed : 

^/a6ama.— Bledsoe v. City Nat. Bk. of Selma (1912), 7 Ala. App. 
195, 60 So. 942. 

California. — Eastman v. Sunset Park Land Co., — Cal. App. — , 170 
Pac. 642. 

Colorado.— UUtry v. Brohm (1905), 20 Colo. App. 389, 79 Pac. 180. 



392 NEGOTIABLE INSTRUMENTS. § 7 

Connecticut. — St. Paul's Episcopal Church v. Fields (1909), 81 Conn. 
670, 72 Atl. 145. 

Florida. — Williams v. Peninsular Grocery Co. (1917), 75 So. 517. 

/«djana.— Hubbard v. First Nat. Bk. (1916), 114 N. E. 642; Dieter 
V. Burke (1914), 107 N. E. 304. 

/owv7.— Dille V. White (1906), 132 Iowa 327, 109 N. W. 909, 10 L. R. 
A. (N. S.) 510; Allison v. Hollembeak (1908), 138 Iowa 479, 114 N. W. 
1059; LcClere v. Philpott (1915), 151 N. W. 825. 

Maryland.— Arnd v. Heckert (1908), 108 Md. 300, 70 Atl. 416. 

Massachusetts.— Chrke v. Pierce (1913), 215 Mass. 552, 102 N. E. 
1094. 

Missouri— Bk. of Houston v. Dav (1909), 145 Mo. App. 410, 122 S. 
W. 756: Milbank-Scampton Milling Co. v. Parkwood (1911), 133 S. W. 
667; Nelson v. Diffenderffer (1914), 163 S. W. 271. 

New York.-McLeod v. Hunter (1899), 29 Misc. Rep. 558, 61 N. 
Y. Supp. 73; Didato v. Coniglio (1906), 100 N. Y. Supp. 466, 50 Misc. 
280; Church v. Stevens (1907), 56 Misc. Rep. 572, 107 N. Y. Supp. 310; 
Amsinck v. Rogers (1907), 189 N. Y. 252, 82 N. E. 134, 12 L. R. A. 
(N. S.) 875, 121 Am. St. 858; Hebbelthwaite v. Flint (1919), 173 N. 
Y. Supp. 81. 

North Carolina.— Burns v. Starr (1914), 81 S. E. 929; Aycock Sup- 
ply Co. V. Windlez (1918), 96 S. E. 664. 

Tennessee.— Easley v. East Tenn. Nat. Bk. (1917), 198 S. W. 66. 

Texas.— Met. Nat. Bk. v. Vanderpool (1917), 192 S. W. 589. 



§ 7. When payable on demand. An instrument is pay- 
able on demand : 

1. Where it is expressed to be payable on demand, or at sight, 
or on presentation ; or 

2. In which no time for payment is expressed. 

Where an instrument is issued, accepted or indorsed when 
overdue, it is, as regards the person so issuing, accepting or 
indorsing it, payable on demand.*' •*' 

See text, § 47. 

Cross sections : 71, 73. 17-5, 24. 

* Digest of some of the decisions in which this section is con- 
strued, arranged alphabetically by states : 

Statement on face of note that it was not to be paid unless payee per- 
formed certain services destroyed negotiability. Spotton v. Dyer, — Cal. 
App. — , 184 Pac. 23. ' 

Presentment for payment must be within time fixed in instrument, 
Torgerson v. Ohnstad, — Minn. — . 182 N. W. 724. 



§ 7 FORM AND INTERPRETATION. 393 

Authority to fill blanks with dates docs not make demand note. 
Usefof V. Herzenstein, 65 Misc. Rep. 45. 119 N. Y. Supp. 290. 

Note payable on demand after date is a demand note and demand 
in reasonable time is sufficient. Hardon v. Dixon, 11 App. Div. 241, 
78 N. Y. Supp. 106. 

Statute of limitations on note payable on demand after date. Schles- 
inger v. Schultz, 110 App. Div. 356, 96 N. Y. S. 383. 

Effect of postdating of check. Kutlik v. Vaccaro, 170 N. Y. S. 13. 

Where time of payment is not specifically mentioned it is a demand 
note. Keister v. Wade, 182 N. Y. S. 119. 

Trade acceptances expressed as payable on Nov. 1 and Dec. 1, re- 
spectively, are not payable on demand. United Ry. & Logging Supply Co. 
V. Siberian Commercial Co., — Wash. — , 201 Pac. 1. 

^" The following is a complete list of the cases, arranged 
alphabetically by states, where this section has been construed : 

Califorma— Wetzel v. Cale (1917), 165 Pac. 692; Spotton v. Dyer, — 
Cal. App. — , 184 Pac. 23. 

Iowa.— City Dep. Bk. v. Green (1908), 138 Iowa 156, 115 N. W. 893; 
Anderson v. First Nat. Bk. of Chariton (1909), 144 Iowa 251, 122 N. 
W. 918. 

A'fl«.ya.f.— Doty v. Garfield Township (1913), 89 Kans. 719. 

Maryland. — American Agricultural Chemical Co. v. Scrimger (1917), 
100 Atl. 774. 

Michigan. — First Nat. Bk. v. Coharset Woodenware Co. (1917), 161 
N. W. 398. 

Minnesota. — Forgerson v. Ohnstad, 182 N. W. 724. 

Missouri. — Hawkins v. Wiest (1912), 167 Mo. App. 439. 

New York.— McLeod v. Hunter (1899), 29 Misc. Rep. 558, 61 N. Y. 
Supp. 73; Hardon v. Dixon, 77 App. Div. 241, 78 N. Y. Supp. 
106; Schlesinger v. Schultz (1905), 110 A. D. 356. 96 N. Y. Supp. 
383; Didato v. Coniglio (1906). 50 Misc. Rep. 280, 100 N. Y. 
Supp. 466; Usefof v. Herzenstein (1909), 65 Misc. Rep. 45, 119 N. Y. 
Supp. 290; Riddle v. Bk. of Montreal (1911), 145 A. D. 207, 130 N. Y. 
Supp. 15; Gilbert v. Adams (1911), 131 N. Y. Supp. 787; Kuflik v. 
Vaccaro (1918), 170 N. Y. Supp. 13; Keister v. Wade, 182 N. Y. S. 
119. 

North Dakota.— First Nat. Bk. of Pomerov v. Buttery (1908), 17 
N. D. 326, 116 N. W. 341. 168 L. R. A. (N. S.) 878; Shuman v. Citizens 
State Bk of Rugby (1914), 147 N. W. 398. 

Pennsylvania. — Rhone v. Keystone Coal Co. (1915), 95 Atl. 930, 

Washington. — United Rv. & Logging Supplv Co. v. Siberian Commer- 
cial Co., — Wash. — , 201 Pac. 21. 

West Virginia.— Lewis Hubbard & Co. v. Morton (1917), 92 S. E. 

252. 

United States.—SnUi\an v. Ellis (1915), 219 Fed. 694 (C. C. A., 8th 
Ct.). 



394 NEGOTIABLE INSTRUMENTS. § 8 

§ 8. When payable to order. The instrument is payable 
to order where it is drawn payable to the order of a specified 
person or to him or his order. It may be drawn payable to the 
order of : 

1. A payee who is not maker, drawer or drawee; or 

2. The drawer or maker; or 

3. The drawee ; or 

4. Two or more payees jointly ; or 

5. One or some of several payees ; or 

6. The holder of an office for the time being. 

Where the instrument is payable to order the payee must be 
named or otherwise indicated therein with reasonable cer- 
tainty.*' ** 

See text, §§ Zl , 46, as to holder of office. 

Cross section, 184. Sub. Sec. 2 "Drawee" by mistake in original 
New York Act. 

Corresponding provision of English Bills of Exchange Act. 8 (4). 

In Illinois after subsection 6 the following is inserted : "7. An in- 
strument payable to the estate of a deceased person shall be deemed 
payable to the order of the administrator or executor of his estate :" 

* Digest of some of the decisions in which this section is con- 
strued, arranged alphabetically by states: 

Pavee may be any one not a maker, drawer or drawee. Stafiford v. 
Hill, — Cal. App. — 200 Pac. Z2>. ^ 

Note payable to order of A or B is negotiable. Bank v. Spies, 151 
Iowa 178, 130 N. W. 928. 

Negotiable instrument indorsed bv either of two joint payees is 
sufficient. Voris v. Schoonover, 91 Kan. 530, 138 Pac. 607, 50 L. R. A. 
(N. S.) 1097. 

Note payable to order of maker is negotiable when indorsed by maker. 
Doplh V. Stubblefield, — Md. — , 108 Atl. 448. 

Payment to survivor of joint payees discharges negotiable instru- 
m.ent. Park v. Parker, 216 Mass. 405, 103 N. E. 936. 

Note payable to order of blank cannot be filled in by any bearer. Tower 
V. Stanley, 220 Mass. 429, 107 N. E. 1010. 

Who may bring suit on note payable to two persons in alternative. 
Passut V. Heubner, 81 Misc. Rep. 249, 142 N. Y. Supp. 546. 

Indorsement to order of blank, bearer may not fill blank. State v, 
Hinton, 56 Ore. 428, 109 Pac. 24. 

Note indorsed to order of C or D does not affect negotiability. Page 
V. Ford, 65 Ore. 450, 131 Pac. 1013, 45 L. R. A. (N. S.) 247, Ann. Gas. 
1915B 1048. 

Note payable to A or wife is construed to pass to survivor if one 
died before maturity. Smith v. Haire, 133 Tenn. 343, 181 S. W. 161. 



§ 9 FORM AND INTERPRETATION. 395 

** The following is a complete list of the cases, arranged 
alphabetically by states, where this section has been construed : 

Ca/i/omia.— Stafford v. Hill, — Cal. App. — , 200 Pac. 33. 

Colorado. —Sca\3i v. M. & M. Bank (1918), 171 Pac. 752. 

///i;zow.— Peterson v. Emery (1910), 154 111. App. 294. 

Jowa.— The Union Bk. of Bridgewater v. Spies (1911), 151 Iowa, 
178, 130 N. W. 928. 

Kansas.— Voris v. Schoonover (1914), 91 Kans. 530, 138 Pac. 607, 
50 L. R. A. (N. S.) 1097. 

Maryland.— Dolph v. Stubblefield, — Md. — , 108 Atl. 448. 

Massachusetts.— Mass. Nat. Bk. v. Snow (1905), 187 Mass. 159, 72 
N. E. 959 ; Park v. Parker, 216 Mass. 405, 103 N. E. 936 ; Tower v. Stan- 
ley. 220 Mass. 429, 107 N. E. 1010. 

New York.— Uilhorn v. Penn. Cement Co. (1911), 145 A. D. 442; 
Passut V. Heubner, 81 Misc. Rep. 249, 142 N. Y. Supp. 546. 

North Dakota.— Aarnoth v. Hunter (1916), 157 N. W. 299. 

Or<'^OH.— State v. Hinton, 56 Ore. 428, 109 Pac. 24; Page v. Ford 
(1913), 65 Ore. 450, 131 Pac. 1013, 45 L. R. A. (N. S.) 247, Ann. Cas. 
1915A, 1048. 

Tennessee.—Sm\th v. Haire, 133 Tenn. 343, 181 S. W. 161 ; Moore v. 
Carey (1917), 197 S. W. 1093. 

Virginia. — Guewant v. Guewant (1902), 7 Va. L. R. 639. 

United States.— MWion v. Pensacola Bk. & Tr. Co. (1911), 190 Fed. 
126, 111 C. C. A. 166. 

England— Chamherlain v. Young (1893), 2 Q. B. 206. 

§ 9. When payable to bearer. The instrument is pay- 
able to bearer: 

1. When it is expressed to be so payable; or 

2. When it is payable to a person named therein or bearer ; or 

3. When it is payable to the order of a fictitious or non-ex- 
isting person, and such fact was known to the person making it 
so payable; or 

4. When the name of the payee does not purport to be the 
name of any person ; or 

5. When the only or last indorsement is an indorsement in 
blank.*- 1" 

See text, § 46. 

Cross sections: 30, 34, 16, 56, 124, 191. 



396 NEGOTIABLE INSTRUMENTS. § 9 

In Illinois the following is substituted for subsection 3: "3. When 
it is payable to the order of a person known by the drawer or maker 
to be fictitious or non-existent, or of a living person not intended to 
have any interest in it," and for subsection 5 the following: "5. When, 
although originally payable to order, it is indorsed in blank by the payee 
or a subsequent indorsee." 

^ Digest of some of the decisions in which this section is con- 
strued, arranged alphabetically by states: 

Indorsement in blank shown makes prima facie case. Kaladner v. 
First Nat. Bk., — Ala. — 84 So. 562. 

Note payable to order indorsed in blank is thereafter negotiable by 
delivery. Davis v. First Nat. Bank of Blakley, 192 Ala. 8, 68 So. 261. 

Note payable to assumed name of payee can be enforced in true 
name of payee. Lockland v. Storch, 123 Ark. 253, 185 S. W. 262. 

Drafts made payable to fictitious persons by agent authorized to 
issue same are payable to bearer. American Hominy Co. v. National 
Bank of Decatur, — 111. — , 128 N. E. 391. 

Drafts are payable to bearer although made payable to payees who 
exist but whose names are forged and draft transferred. Bartlett v. First 
Nat. Bank, 247 111. 490, 93 N. E. ZZ7. 

Note payble to fictitious person or bearer is payable to bearer. Lane 
V. Krekle, 22 Iowa 404. 

Draft payable to fictitious payee by drawer without his knowledge 
is not payable to bearer. American Exp. Co. v. People's Sav. Bank, 
— la. — , 181 N. W. 701. 

Maker of note to fictitious person estopped to assert the fiction 
against ignorant holder. Kohn v. Watkins, 26 Kan. 691. 

Non-negotiable note does not become negotiable by indorsement in 
blank. Wettlaufer v. Baxter, 137 Ky. 362, 125 S. W. 741, 26 L. R. A. 
(N. S.) 804. 

Indorsement in blank by payee of promissory note renders payable 
to bearer. Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959._ _ 

Failure to pay to person authorized by check, although a fictitious 
name appears thereon, renders drawee bank liable to drawer. Jordan 
Marsh Co. v. Nat. Shawmut Bank, 201 Mass. 397, 87 N. E. 740, 22 L. 
R. A. (N. S.) 250. 

Recovery on instrument made to fictitious payee depends upon show- 
ing that maker knew the same to be true. Boles v. Harding, 201 Mass. 
103. 87 N. E. 481. 

Indorsement of note in blank makes it payable to bearer. Leavitt v. 
Wintman, — Mass. — , 125 N. E. 390. 

Indorsement of fictitious payee's name is a forgery. People v. 
Wardner, 104 Mich. Z2,7, 62 N. W. 405. 

Knowledge of agent that checks are drawn to fictitious persons by 
request of drawer's agent makes check payable to bearer. Equitable 
Life Assurance Societv v. Nat. Bank of Commerce (Mo. App.), 181 
S. W. 1176. 

Instrument payable to estate of deceased person is payable to bearer. 
In re Ziegenheim (Mo. App.), 187 S. W. 893. 

Firm name under which several persons are doing business is not a 
fictitious name in note. Write Away Pen Co. v. Buckner, 188 Mo. 
App. 259, 175 S. W. 81. 



§ 9 FORM AND INTERPRETATION. 397 

Where drawer of check has no knowledge of fictitious payee check 
is not payable to bearer. Egner v. Corn Exchange Bank, 42 Misc. Rep. 
552, 86 N. Y. Supp. 107. 

Production of check payable to cash is prima facie evidence of 
ownership. Cleary v. DeBeck Co., 54 Misc. Rep. 537, 104 N. Y. Supp. 
831. 

Where checks are forged and payable to payees, known by the forger 
to have no interest therein, they are payable to bearer. Trust Company 
of America v. Hamilton Bank, 127 App. Div. 515, 112 N. Y. Supp. 84. 

Instrument unknowingly made payable to a fictitious bearer gives 
holder no rights. United Cigar Stores Co. v. American Raw Silk Co., 
171 N. Y. S. 480. 

Instrument must knowingly be made by maker to fictitious person 
to render it payable to bearer. Shipman v. Bank, 126 N. Y. 318, 27 
N. E. 371. 

Regulations of Treasury Department that funds are payable only 
upon checks payable to order control, and fictitious payees do not render 
them payable to bearer. Phillips v. Mercantile Nat. Bank, 140 N. Y. 
556, 35 N. E. 982, 23 L. R. A. 584, Z7 Am. St. Rep. 596. 

A requested draft payable to B and then indorsed B's name. C 
endorsee collected from B. Held B could collect from C as not payable 
tc bearer. Seaboard Nat. Bank v. Bank of America, 193 N. Y. 26, 85 
N. E. 829. 

Indorser in blank of non-negotiable note becomes liable only as 
assignor. Johnson v. Lassiter, 155 N. C. 50, 71 S. E. 23. 

Instruments are payable to bearer only when knowingly made to 
fictitious persons by maker. Armstrong v. Bank, 46 Ohio St. 512, 22 N. 
E. 866, 6 L. R. A. 625, 15 Am. St. Rep. 655. 

Drawer of check bound by knowledge of his agent that check was 
procured to be drawn to fictitious persons by fraud. Jones v. People's 
Bank Co., 95 Ohio St. 253, 116 N. E. 34. 

Indorsement in blank makes note payable to bearer. Stevens v. 
Pierce, — Okla. — , 193 Pac. 417. 

Presumption of knowledge of maker that payee of note was fictitious 
after judgment and verdict. Weishaas v. Pendeton, 7Z Ore. 190, 144 
Pac. 401. 

Note payable to W. E. D. & Co. indorsed by W. E. D. in the former 
name under which he did business was not to fictitious person so as to ren- 
der it payable to bearer. Hill v. McCrow, 88 Ore. 299. 

Checks drawn by A, who was authorized to draw same by employer, 
to person who did not know and was not intended to know thereof, 
were to fictitious payee and payable to bearer. Snyder v. Corn Exchange 
Nat. Bank, 221 Pa. 599, 70 Atl. 876. 

Principal precluded from setting up forgery where manager forged 
checks and also payees' names. Litchfield Shuttle Co. v. Cumberland 
Valley Nat. Bank, 134 Tenn. 379, 183 S. W. 1006. 

Drawer does not vouch for authority of agent to indorse name of 
payee where agent fraudulently procures checks to be issued. Good- 
tellow V. First Nat. Bank, 71 Wash. 554, 129 Pac. 90, 44 L. R. A. (N. 
S.) 580. 

Government bound by act of officer in making checks to fictitious 
persons. Smith v. Nelson Land & Cattle Co., 212 Fed. Rep. 56, 128 C. 
C. A. 512. 

Distinction between government and person as drawer. National 
Bank of Commerce v. United States, 224 Fed. 679, 140 C C. A. 219. 



398 NEGOTIABLE INSTRUMENTS. § 9 

Drawee of government checks has notice that only checks paj^able 
to order should be paid, whether payable to bearer by construction or 
so written. United States v. Chase Nat. Bank, 241 Fed. 535, 537. 

Draft made payable to fictitious payee by drawer who knew is payable 
to bearer. American Hominy Co. v. Millikin Nat. Bank, 273 Fed. 5^0. 

Check payable to M. or order is not to a fictitious person although 
issued for a forged note. Vinden v. Hughes (1905), 1 K. B. 795. 

Acceptor's ignorance of the fact that the bill was made payable to A. 
who was to have no interest therein does not prevent bill being payable 
to bearer. Bank of England v. Vagliano L. R. (1891), A. C. 107. 

Drawer's ignorance as to payee's existence is immaterial. Clutton v. 
Attenborough L. R. (1897). A. C. 90. 

Post-dated check may be stamped bill payable on demand. Royal 
Bank v. Tottenham (1894), 2 Q. B. 715. 

Plaintiffs entitled to recover for moneys had and received where 
check issued by them on forged note was intercepted and cashed, it be- 
ing made to H. or order. North & South Wales Bank, Ld., v. Macbeth 
(1908), 1 K. B. 13, L. R. (1908) A. C. 137. 

*'The following is a complete list of the cases, arranged 
alphabetically by states, where this section has been construed : 

^/afcawa.— Bledsoe v. City Nat. Bank, 180 Ala. 586, 60 So. 942; 
Davis v. First Nat. Bank of Blakeley, 192 Ala. 8, 68 So. 261 ; Kaladner v. 
First Nat. Bank, 89 So. 562. 

Arisona.—PeopWs Nat. Bk. v. Taylor (1915), 17 Ariz. 215, 149 Pac. 
763. 

Arkansas.— Lockland v. Storch. 123 Ark. 253, 185 S. W. 262; Wil- 
liamson Bk. & Tr. Co. v. Miles (1914), 169 S. W. 368. 

Ca/i/ornwi.— Hatton v. Holmes, 97 Cal. 208, 31 Pac. 1131. 

District of Columbia.— Union Nat. Bank of Columbia v. Cook (1918), 
96 S. E. 484. 

Illinois.— '^od V. Security Bk. of Chicago (1911), 163 111. App. 82; 
Bartlett v. First Nat. Bank. 247 111. 490, 93 N. E. 337; American Hom- 
iny Co. v. National Bank, 128 N. E. 391. 

lozm. — American Express Co. v. People's Sav. Bank, 181 N. W. 701. 

Kansas.— Grand Lodge v. State Bank, 92 Kan. 876. 142 Pac. 974, L. 
R. A. 1915B, 815; Grand Lodge v. Emporium Bank (1917), 101 Kan. 
369, 166 Pac. 490; Kohn v. Watkins, 26 Kan. 691. 

Kentucky.— Ohio Vallev Bk. & Tr. Co. v. Gt. Southern Fire Ins. Co. 
(1917), 197 S. W. 399; Wettlaufer v. Baxter, 137 Ky. 362, 125 S. W. 
741, 26 L. R. A. (N. S.) 804. 

Louisiana.— Rose v. Shaw (1919), 80 So. 727. 

Massachusetts.— Shavj v. Smith, 150 Mass. 166, 22 N. E. 887, 6 L. 
R. A. 348; Mass. Nat. Bank v. Snow, 187 Mass. 159, 72 N. E. 959; 
Murphy v. Met. Nat. Bk. (1906), 191 Mass. 159; Boles v. Harding 
(1909), 201 Mass. 103, 87 N. E. 481; Jordan Marsh Co. v. Nat. Shawmut 
Bank, 201 Mass. 397, 87 N. E. 740, 22 L. R. A. (N. S.) 250; Leavett v. 
Wintman, — Mass. — , 125 N. E. 390. 



§ 10 FORM AND INTERPRETATION. 399 

Miclngatu.—Fehier v. Babillion, 45 Mich. 384, 8 N. W. 99; People v. 

Wardner. 104 Mich. 337, 62 N. W. 405; Harmon v. Old Detroit Nat. 

Bank, 153 Mich. 73, 116 N. W. 617, 17 L. R. A. (N. S.) 514, 126 Am. 
St. Rep. 467. 

Missouri.— Equitable Life Assur. Co. of U. S. v. Nat. Bk. of Com- 
merce (1916) (Mo. App), 181 S. W. 1176; Write Away Pen Co. v. 
Buckner, 188 Mo. App. 259, 175 S. W. 81. 

New York. — Egner v. Corn Exchange Bank, 42 Misc. Rep. 552, 86 
N Y Supp. 107; Trust Co. of Am. v. Hamilton Bk. (1908), 127 A. D. 515, 
112 N. Y. Supp. 84; Shipman v. Bank, 126 N. Y. 318, 27 N. E. 371; 
Cleary v. DeBeck Co., 54 Misc. Rep. 537, 104 N. Y. Supp. 831; United 
Cigar Stores Co. v. American Raw Silk Co., 171 N. Y. Supp. 480; Phillips 
V. Mercantile Nat. Bank, 140 N. Y. 556, 35 N. E. 982, 23 L. R. A. 584, 
37 Am. St. Rep. 596; Seaboard Nat. Bk. v. Bk. of America (1908), 
193 N. Y. 26, 85 N. E. 829; Fifth National Bank v. Central National 
Bank, 82 Hun. 559, affirmed 152 N. Y. 636. 

North Carolina. — Johnson v. Lassiter, 155 N. C. 50, 71 S. E. 23; 
Newland v. Moore, 173 N. C. 728, 92 S. E. 367. 

Oklahoma.— Stevens v. Pierce, 193 Pac. 417. 

Oregon.— Wehhaas v. Pendleton, 73 Ore. 190, 144 Pac. 401; Hill v. 
McCrow (1918), 88 Ore. 299, 170 Pac. 306. 

Pennsylvania.— Lincoln Nat. Bank of Pittsburg v. Miller (1917), 
100 Atl. 269, 255 Pa. 467; Snyder v. Corn Exchange National Bank, 
221 Pa. 599, 70 Atl. 876. 

Tennessee.— Chism v. Bank, 96 Tenn. 641, 36 S. W. 387, 32 L. R. A. 
778; Unaka Nat. Bank v. Butler (1904), 113 Tenn. 574, 83 S. W. 655; 
Litchfield Shuttle Co. v. Cumberland Valley Nat. Bank, 134 Tenn. 379, 
183 S. W. 1006. 

Vermont.— Hale v. Windsor Sav. Bank (1917), 98 Atl. 993. 

Virginia.— Colona v. Parksley Bank (1917), 92 S. E. 979. 

Washington.— GoodieWow v. First Nat. Bank (1913), 71 Wash. 554, 
44 L. R. A. (N. S.) 580, 129 Pac. 90. 

Wisconsin.— Marling v. Fitzgerald (1909), 138 Wis. 93. 120 N. W. 
388. 

United States.—Smith v. Nelson Land & Cattle Co., 212 Fed. Rep. 
56 128 C. C. A. 512; Nat. Bank of Commerce v. U. S. (1915), 224 
Fed. 679, 140 C. C. A. 219 (9th Ct.) ; U. S. v. Chase Nat. Bk. (1918), 250 
Fed. 105 ; State v. Chase Nat. Bank, 241 Fed. 535, 537 ; American Hominy 
Co. V. Millikin Nat. Bank, 273 Fed. 550. 

England.— Vinden v. Hughes (1905), 1 K. B. 759; Bank of England v. 
Vagliano, L. R. (1891), A. C. 107; Clutton v. Attenborough, L. R. (1897), 
A. C. 90; Royal Bank v. Tottenham (1894), 2 Q. B. 715; North & South 
Wales Bank Ld. v. Macbeth (1908), 1 K. B. 13, L. R. (1908) A. C. 137. 



§ 10. Terms, when sufficient. The instrument need not 
follow the language of this act, but any terms are sufficient which 
clearly indicate an intention to conform to the requirements 
hereof.i-i» 



400 NEGOTIABLE INSTRUMENTS. §11 

See text, §40. 

Cross section : 17. 

Alabama, Idaho, Iowa, North Carolina and Wyoming insert the 
word "negotiable" between the words "The" and "instrument" above. 

The Wisconsin act (No. 1675-10) adds to this section the following 
words : "Memoranda upon the face or back of the instrument, whether 
signed or not. material to the contract, if made at the time of delivery, 
are part of the instrument, and parol evidence is admissible to show 
the circumstances under which they were made." 

* Digest of some of the decisions in which this section is con- 
strued, arranged alphabetically by states: 

Words sufficient if indicate promise to pay. Lehner v. Roth, — Mo. 
App. — , 227 S. W. 833. 

Terms of instrument need not follow statute to be negotiable. Nelson 
v. Citizens' Bank, 180 N. Y. S. 747. 

Words denoting that mortgage is assignable do not govern nego- 
tiability of note otherwise silent in its provisions. Quest v. Ruggles, 
72 Wash. 609, 131 Pac. 202. 

Certificate of deposit payable on its return properly indorsed is 
negotiable. Forest v Safetv Banking & Trust Co. (E. D. Pa.), 174 
Fed. 345. 

I'The following is a complete list of the cases, arranged 
alphabetically by states, where this section has been construed : 

Alabama.— Bledsoe v. City Nat. Bank of Selma, 180 Ala. 586, 60 So. 
942. 

Maryland.— Black v. First Nat. Bank (1903), 96 Md. 399, 54 Atl. 88. 

Missouri.— Oshorne v. Fridrich (1908), 134 Mo. App. 449; Lehner 
v. Roth, 227 S. W. 833. 

New ForA-.— Gilbert v. Adams (1911), 131 N. Y. Supp. 787; Nelson 
V. Citizens' Bank, 180 N. Y. Supp. 747. 

Washington.— Quest v. Ruggles (1913), 72 Wash. 609, 131 Pac. 202. 

United States. — Forest v. Safety Banking & Trust Co. (E. D. Pa.), 
174 Fed. 345. 



§ 11. Date, presumption, as to. Where the instrument 
or an acceptance or any indorsement thereon is dated, such date 
is deemed prima facie to be the true date of the making, drawing, 
acceptance or indorsement, as the case may be.^- ^* 

See text, §43. 

Construing corresponding provisions of English Bills of Exchange 
Act: 13 (1). 



§ 12 FORM AND INTERPRETATION. 401 

^ Digest of some of the decisions in which this section is con- 
strued, arranged alphabetically by states: 

Condition in note that it is not payable until payee performs certain 
services destroys negotiability. Spotton v. Dyer, — Cal. App. — , 184 
Pac. 23. 

Burden of proving forgery by alteration of date is on defendant. 
National City Bank v. Shelton Electric Co., 96 Wash. 74, 164 Pac. 933. 

I'The following is a complete list of the cases, arranged 
alphabetically by states, where this section has been construed : 

Ca/(7onn"a.— Mollev v. Pierson (1918), 174 Pac. 98; Spotton v. Dyer, 
— Cal. App. — , 184 Pac. 23. 

Kentucky.— Ehey v. People's Bank of Bardwell (1916), 185 S. W. 
873. 

New York.—Sugdir v. Silverman (1919), 173 N. Y. Supp. 182. 

Washington.— liational City Bank v. Shelton Electric Co., 96 Wash. 
74, 164 Pac. 933. 



§ 12. Ante-dated and post-dated. The instrument is not 
invalid for the reason only that it is ante-dated or post-dated, 
provided this is not done for an illegal or fraudulent purpose. 
The person to whom an instrument so dated is delivered, ac- 
quires the title thereto as of the date of delivery.*- ^^ 

See text, §43. 

Missouri act uses word "valid" instead of "invalid," a clerical error. 

Corresponding provision of English Bills of Exchange Act: 13 (2). 

* Digest of some of the decisions in which this section is con- 
strued, arranged alphabetically by states: 

Drawer can not be garnisheed as payee's debtor after delivery of post- 
dated check. American Agricultural Chemical Co. v. Scrimger, 130 
Md. 389, 100 Atl. 774. 

Ante-dated or post-dated instruments and effect of. Bank of Hous- 
ton V. Day, 145 Mo. App. 410, 122 S. W. 756. 

Post-dating of instrument does not affect negotiability and negotiat- 
ing prior to date does not put indorsee upon inquiry. Trephonoff v. 
Sweeny, 65 Ore. 209, 130 Pac. 979. 

*»The following is a complete list of the cases, arranged 
alphabetically by states, vv^here this section has been construed : 

Idaho.—Smhh y. Fields (1911), 19 Ida. 558, 114 Pac. 668. 

Kentucky.— First Nat. Bk. v. Bickel (1911), 143 Ky. 754, 137 S. W. 
790. 



402 NEGOTIABLE INSTRUMENTS. § 13 

Maryland. — American Agricultural Chemical Company v. Scrimger, 
130 Md. 389, 100 Atl. 774. 

Missouri— Houston v. Day (1909), 145 Mo. App. 410, 122 S. W. 756. 

New York.— A]hert v. Hoffman (1909), 64 Misc. Rep. 87, 117 N. Y. 
Supp. 1043. 

Or^^oM.— Triphonoff v. Sweeney (1913), 65 Ore. 209, 130 Pac. 979. 
Pennsylvania.— Rathion v. Locher (1906), 215 Pac. 571. 
Virginia.— Colona v. Parksley Bank (1917), 92 S. E. 979. 
West Virginia.— Lewis Hubbard & Co. v. Morton (1917), 92 S. E. 252. 

JVisconsin.— Citizens Nat. Bank of Green Bay v. Harter (1908), 134 
Wis. 408. 

§ 13. When date may be inserted. Where an instru- 
ment expressed to be payable at a fixed period after date is is- 
sued undated, or where the acceptance of an instrument payable 
at a fixed period after sight is undated, any holder may insert 
therein the true date of issue or acceptance, and the instrument 
shall be payable accordingly. The insertion of a wrong date 
does not void the instrument in the hands of a subsequent holder 
in due course; but as to him, the date so inserted is to be re- 
garded as the true date.^' ^* 

See text, §43. 

Cross section : 14. 

Construing corresponding provision of English Bills of Exchange 
Act : Section 12. 

^ Digest of some of the decisions in which this section is con- 
strued, arranged alphabetically by states: 

Knowingly inserting wrong date in undated instrument will avoid 
same as to party so inserting date. Bank of Houston v. Day, 145 Mo. 
App. 410, 122 S. W. 756. 

^»The following is a complete hst of the cases, arranged 
alphabetically by states, where this section has been construed : 

Iowa.— Booch v. Goochi (1916), 16 N. W. 333. 

Missouri.— Houston v. Day (1916), 145 Mo. App. 410, 122 S. W. 756. 

Temiessee.—Ho\man v. Higgins, 134 Tenn. 387, 183 S. W. 1008, L. 
R. A. 1916F, 1263. 

r^;ra.y.— Landon v. Foster Drug Co. (1916), 186 S. W. 434. 

United States.— Richards v. Street (1908), 31 App. D. C. 427. 



§ 14 FORM AND INTERPRETATION. 403 

§ 14. Blanks, when may be filled. Where the instru- 
ment is wanting in any material particular, the person in pos- 
session thereof has a prima facie authority to complete it by 
filling up the blanks therein. And a signature on a blank paper 
delivered by the person making the signature in order that the 
paper may be converted into a negotiable instrument operates 
as a prima facie authority to fill it up as such for any amount. 
In order, however, that any such instrument, when completed, 
may be enforced against any person who became a party there- 
to prior to its completion, it must be filled up strictly in accord- 
ance with the authority given and within a reasonable time. But 
if any such instrument after completion, is negotiated to a holder 
in due course, it is valid and effectual for all purposes in his 
hands, and he may enforce it as if it had been filled up strictly 
in accordance with the authority given and within a reasonable 
time. 

See text, §58. 

Cross sections: 124, 125, 66, 109. 119-5, 52, 15. 

In Illinois the words "issued or" arc added before "negotiated" in 
the last sentence. 

In South Dakota the following is substituted for this section : "One 
who makes himself a party to an instrument intended to be negotiable, 
but which is left wholly or partly in blank, for the purpose of filling 
afterwards, is liable on the instrument to an indorsee thereof in due 
course, in whatever manner and at whatever time it may be filled, so 
long as it remains negotiable in form." 

The Kentucky act says "negotiable" instead of "negotiated." 

The Wisconsin act (No. 1675-14) reads, "complete it prior to nego- 
tiation by filling," etc., instead of "complete it by filling," etc. 

The Wisconsin act reads, "operates as an authority," etc., instead of 
"operates as a prima facie authority." 

* Digest of some of the decisions in which this section is con- 
strued, arranged alphabetically by states: 

Alteration by inserting legal rate of interest in blank is not material. 
Crawford v. Simonton, 163 Ala. 609, 50 So. 1024. 

Payee may be holder in due course. Ex parte Goldberg v. Lewis, 
191 Ala. 356, 67 So. 839, L. R. A. 191 5F, 1147. 

Insertion of more than legal rate in interest blank is material altera- 
tion. Ayers v. Walker, 54 Colo. 571. 131 Pac. 384. 

Estoppel is good against one who signs note in blank except name 
of payee where payee's firm filled in and negotiated it in bank after 
mdorsing payee's name. Richards v. Street, 31 App. Cas. D. C. 427. 

Where note given with authority to insert necessary amount of 
attorney's fees it was not an alteration to do so after services rendered, 
Kramer v, Scbnitzer, 268 111. 603, 109 N, E. 695, 



404 NEGOTIABLE INSTRUMENTS. § 14 

Filling in blank after words "payable at" docs not avoid instrument 
in hands of holder in due course. Johnston v. Hoover, 139 Iowa 143, 
117 N. W. 277. 

Note payable "on or before four after date" is not a demand 

note. In re Estate of Philpott. 169 Iowa 555, 151 N. W. 825. 

When can payee be holder in due course. Devoy & Kuhn Coal Co. 
V. Huttig, 174 Iowa 357, 156 N. W. 413. 

Note should be reformed which was indorsed prior to payee's learn- 
ing of the omission of his name by putting in name. Farmers Loan 
& Trust Co. V. Brown (Iowa), 165 N. W. 70. 

Plaintiff's right to complete instrument. First Nat. Bank of Hawk- 
eye V. Patterson, — la. — , 177 N. W. 545. 

Where defendant signed note in blank for certain purpose and the 
purpose was carried out plaintiffs were holders for value, as note was 
filled in in accordance with authority, although done in plaintiff's 
presence. Herman's Exr. v. Gregory, 131 Ky. 819, 115 S. W. 809. 

It is not alteration to fill in blank with place of payment either 
within or without the state. Diamond Distilleries Co. v. Gott, 137 Ky. 
585, 126 S. W. 131, 31 L. R. A. (N. S.) 643. 

Note executed in blank is issued to payee and not negotiated where 
his name appears as payee. Southern Nat. Life, etc., Co. v. People's 
Bank (Ky.), 198 S. W. 543. 

Person in possession of instrument made in blank has prima facte 
authority to fill in all blanks. Linthicum v. Bagby, 131 Md. 644, 102 
Atl. 997. 

Incomplete instruments put purchaser upon inquiry as to authority 
to complete. Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N. 
E. 646, 97 Am. St. Rep. 426. 

Maker having added another provision note was held in due course 
by payee, who could sue the prior indorser in blank as indorser. Thorpe 
V. White, 188 Mass. 333, 74 N. E. 592. 

An instrument is negotiated when handed for value to the payee 
named therein. Liberty Trust Co. v. Tilton, 217 Mass. 462, 465, 105 N. 
E. 605, L. R. A. 191 5B,. 144. 

Check received by payee thereof from a third person in payment of 
debt is held in due course, although drawn without authority. National 
Investment Co. v. Corey, 222 Mass. 453, 111 N. E. 357. 

Check payable to bank received from third person in payment of his 
indebtedness, without notice of infirmities, was held in due course. 
Colonial Fur Co. v. First Nat. Bank, 227 Mass. 12, 116 N. E. 731. 

Payee can not be holder in due course. Long v. Shafer, 185 Mo. 
App. 641, 171 S. W. 69. 

Note in several inks not presumed completed before delivery and 
signature. Exchange Bank v. Robinson, 185 Mo. App. 582, 172 S. W. 
628. 

Notes providing for interest in blank draw legal rate without filling 
blank. Hornstein v. Cifuno, 86 Neb. 103, 125 N. W. 136. 

Plaintiff has burden of showing blanks filled within reasonable time. 
Madden v. Gaston, 137 App. Div. 294, 121 N. Y. Supp. 951. 

Testimony of maker that authority to fill in blanks was not given 
will rebut presumption of authority. Equitable Trust Co. of New York 
V. Lyons, 72 Misc. Rep. 49, 129 N. Y. Supp. 79. 

Knowledge of transferee that instrument was incomple